Published February 27, 2009

Genting posts Q4 loss of RM120.8m

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(KUALA LUMPUR) Malaysian conglomerate Genting reported a RM120.8 million (S$50.4 million) net loss in the fourth-quarter, hit by an impairment loss at its cruise business.

It earned RM514.44 million in the year-ago period.

The company expects the global economic crisis to hit its casino businesses in Malaysia and the United Kingdom, as well as its power utility operations in China, it said in an earnings statement yesterday.

Full-year net profit more than halved to RM569.3 million from RM1.99 billion a year ago, much worse than the RM1.351 billion market consensus compiled by Reuters Estimates.

A deepening economic crisis in Asia and Europe will hit Genting hard.

The company owns Genting Highlands, the sole casino resort in mainly Muslim Malaysia where the economy is heading for its steepest downturn in eight years.

Stanley Leisure, Britain's largest casino operator, which the Malaysian company controls, will have a tough time too with the UK economy now engulfed by the worst recession that has not been seen in decades.

Genting is going to launch a new casino resort in neighbouring Singapore in 2010.

Genting's power utility operations in China and oil palm plantations in Malaysia and Indonesia are expected see sharp slow down in business too due to weakening demand from factories and consumers.

Genting shares slid 29.52 per cent during the October to December quarter, underperforming the benchmark share index's loss of 13.93 per cent.

The stock ended down 1.67 per cent to RM3.54 before the release of the results. -- Reuters 

Published February 27, 2009

Federal-state battle looms for Selangor's water assets

At stake are billions for concessionaires and higher tariffs

By PAULINE NG
IN KUALA LUMPUR

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A BATTLE appears to be looming between the federal government and the state government of Selangor over the takeover of privatised water concessions in the state. At stake are billions of ringgit for the concessionaires and higher water tariffs for consumers.

The move to restructure the sector could also become a political flash point with the Pakatan Rakyat accusing the Barisan Nasional of bailing out its cronies to the detriment of the public.

In spite of its own designs to consolidate the sector, the central government had 'gone off on its own tangent', rather than work with the state, a panel set up for the reorganisation exercise said yesterday.

This 'sabotage' occurred when a central government agency - which had agreed to state-led talks earlier - inexplicably announced on Feb 18 that it would take over the negotiations and deal directly with the concessionaries.

This about-turn came two days before a deadline for the companies to accept an offer by the state of RM4.6 billion (S$1.9 billion) for their assets (treatment plants and pipes), and another RM1.1 billion for their equity.

The offer was subsequently rejected by the four concessionaires - Puncak Niaga (M) Sdn Bhd, Syarikat Pengeluar Air Selangor Holdings Bhd (Splash), Konsortium Abass Sdn Bhd and Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) - in the belief that the federal government would revert with a more attractive option.

At a press conference yesterday, panel member and parliamentary lawmaker Tony Pua said that being a regulated industry, Selangor was prepared to give the companies 12 per cent return on capital annually starting from the concession period.

'We are not nationalising at zero cost. But they have excessively leveraged their assets and have problems paying off their loans, and now expect the state to help out.'

Together, the four players have total debts of RM6.4 billion, mainly in outstanding bonds, the net debts of Puncak Niaga and Syabas - both controlled by businessman Rozali Ismail - amounting to some RM4.2 billion.

While the state holds a stake in the concessionaires through its agencies, their shareholders include Puncak Niaga Holdings and Gamuda Bhd - listed companies which minorities bought into on the strength of earnings from their concessions. In turn, the companies have returned cash amounting to hundreds of millions of ringgit to shareholders over the years.

Pointing to major breaches of concession terms by Syabas, the panel questioned why the federal government had seen fit not to take action.

Malaysia saw a wave of privatisation projects in the 1990s, but as with highway and power concessions, the current issue with water concessionaires is now a sore point as terms and conditions become known.

The federal government has come under fire for the lop-sided agreements favouring concessionaires. But varying the terms now or buying over the assets could spook investors if it were not properly managed.

The panel assured that water tariffs could be lowered beyond the current RM0.77 per cubic metre for domestic users if it were to handle the takeover.

Associate professor at Nottingham University Subramaniam Pillay observed that the state owned 70-80 per cent of all water assets and the federal government's plan to take over the assets and capital expenditure and to license the distributors goes against the plan of having a central body manage the whole system.

To break the legal impasse over who ultimately calls the shots, Consumers Association of Subang & Shah Alam president Jacob George suggested that the state seek a legal remedy 'as the issue has significant implications for Selangor and the rest of the states'. 

Published February 27, 2009

Businessman pleads for political truce

His newspaper ad urges warring politicians to focus on economy, jobs

By S JAYASANKARAN
IN KUALA LUMPUR

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A MALAYSIAN businessman has taken a full-page advertisement in a major daily newspaper asking warring political parties to call a truce and focus on the shaky economy and jobs.

'Take the nation to heart. That's why you are in politics in the first place. Focus on the people. Focus on the economy' - Anas Zubedy

Consultant Anas Zubedy shelled out more than RM36,000 (S$15,008) for his advertisement yesterday in The Star, the country's biggest-selling English-language newspaper.

In the ad, he spoke of the challenges faced by his 20 staff, their fears for the future - and how the country's leaders seem oblivious to the anxiety that he feels is gripping the nation.

'Whether (the governing) Barisan Nasional or (opposition) Pakatan Rakyat (PR) leads is meaningless . . . if Malaysians have no job to go to, no money to pay rent and no means to put food on the table,' he wrote.

'Pakatan Rakyat, please stop your attempts to take over the federal government and just let go. The nation can wait until the next general election if they want change.

'Barisan Nasional, please stop any attempts to take over PR states and win over PR lawmakers. You have proved your point with Perak. The nation can wait for the next general election if they want your party.'

Mr Anas called on politicians from all sides to 'get together and compromise', telling them: 'Someone has to give in. Take the nation to heart. That's why you are in politics in the first place. Focus on the people. Focus on the economy.'

The last time an individual placed a full-page newspaper ad about their political feelings was in 1998, when the late social scientist Noordin Sopiee attacked former US vice-president Al Gore for praising Malaysia's 'reformasi' movement at an international banquet hosted by former prime minister Mahathir Mohamad.

The reformasi movement supported Anwar Ibrahim, who Dr Mahathir had just sacked as deputy premier. Dr Noordin felt that it was rude of Mr Gore to attack Dr Mahathir at a banquet attended by many foreign leaders.

In the ad, Mr Anas may have articulated what many Malaysians, frustrated over the constant political bickering, really feel - that the government has been distracted from more important matters.

For instance, a second economic stimulus package, mooted by Deputy Prime Minister Najib Razak in December last year, is only being tabled on March 10 this year.

Some observers say that Mr Anas's message - and his willingness to pay more than RM36,000 to get it across - could galvanise mass support.

'He is echoing what many of us are thinking - that enough is enough, and that everyone needs to get down and get back to work,' activist and writer Marina Mahathir wrote in her blog on Wednesday.

But whether Mr Anas will move politicians is anyone's guess.          

Published February 27, 2009

Parkway posts $21m Q4 loss

By CHEN HUIFEN

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DRAGGED down by falling foreign patient numbers and a one-off provision for impairment loss on receivables, Parkway Holdings has posted a fourth quarter loss of $21.1 million, from a net profit of $26.7 million for the year-ago period.

The provision, to the tune of $34.4 million, is a result of unsettled payment of fees from patients who were admitted based on letters of guarantee from their employers.

'We can't provide further details because that will compromise our legal provisions as we are in the recovery process of this balance,' said group CFO Tan See Haw at a media briefing last evening.

For the three months ended December 2008, topline revenue edged up 4 per cent to $241.2 million. This was despite a 3 per cent dip in revenue at its Singapore hospitals, which accounted for the lion's share of its business.

Managing director and CEO Lim Cheok Peng said the group suffered a 7-8 per cent decline in foreign patients, mainly from the Indonesia market.

'But there is some increase in traffic coming from Bangladesh, Vietnam, Cambodia and Russia, so that sort of mitigates some of the downturn,' he added.

For the full year, revenue edged up 9 per cent to $945.4 million, despite a 3.8 per cent drop in inpatient admissions. This was buffered by a 10.6 per cent rise in day surgeries.

Within its international operations, revenue rose 15 per cent to $312.2 million, driven largely by the Pantai group of hospitals in Malaysia. Parkway is planning to open another five new hospitals under the Pantai brand over the next five years.

'The east coast of Malaysia is at this point of time looking very attractive,' said Dr Lim. 'So is East Malaysia in the states of Sabah and Sarawak.'

Net profit slumped to $34.8 million for 2008, from $298 million for 2007. The huge difference is due to a $226.7 million gain in 2007 from disposal of property to Parkway Life Reit.

Excluding the exceptional items and effect of the Reit transaction, earnings would have climbed 19 per cent to $104.2 million.

Basic earnings per share for the year went down to 3.45 cents, from 34.21 cents in 2007. 

Published February 27, 2009

Sembcorp Q4 net falls 33.6%

But full-year net profit dips just 3.6% while revenue rises a healthy 15.2%

By VINCENT WEE

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SEMBCORP Industries yesterday reported a 33.6 per cent fall in net profit to $100.85 million for the fourth quarter ended Dec 31, 2008 despite a 6.6 per cent rise in turnover to $2.69 billion.

Related links: Click here for SembCorp's news release Financial statements

But for the full year, net profit dipped just 3.6 per cent to $507.1 million from $526.2 million the preceding year while revenue still showed a healthy 15.2 per cent rise to $9.93 billion.

The full year saw an exceptional charge of $26.9 million due to Sembcorp's share of the forex losses of offshore and marine unit Sembcorp Marine stemming from the settlement of unauthorised transactions in the fourth quarter. FY08 basic earnings per share likewise fell to 28.5 cents from 29.57 cents. A final dividend of 11 cents per share has been proposed.

For Q4, share of losses of associate came to $24.73 million, against a profit share of $28.9 million for Q4'07. For the full year, the profit share was $80.87 million, down from $96.85 million. The changes were mainly due to Cosco Shipyard Group.

For FY08, income tax expense rose by half to $131 million as the group had enjoyed a tax write-back of $48 million the previous year. The utilities and marine businesses continued to be Sembcorp's main profit drivers, together accounting for 92 per cent of group net profit. For the full year, net profit from marine rose 32 per cent to $290.6 million, mainly due to higher revenue (12 per cent up to $5.06 billion) and operating margins from its rig building and ship repair businesses.

Utilities' net profit, however, fell 13 per cent to $200.3 million although turnover rose 20 per cent to $4.48 billion for FY08. The Singapore and UK operations contributed $130.8 million and $67.6 million respectively but profits from UK operations fell 37 per cent from $106.8 million, impacted by lower profit margins and depreciation of sterling which further eroded its contribution in Singapore dollar terms. This translation impact amounted to around $10 million, Sembcorp said.

The other two businesses continued to struggle. The environment business' FY08 turnover rose 4 per cent to $213.8 million, mainly due to higher turnover at its paper recycling division, but net profit plunged 84 per cent to $2.1 million due to higher operational costs and lower recyclables. Full-year turnover at the industrial parks business fell 30 per cent to $16.2 million mainly due to the divestment of Wuxi Garden City Mall in May 2007. Net profit was 7 per cent lower at $31.5 million.

'Sembcorp delivered a credible set of results for the year despite the rapid deterioration of the global economic environment in the last few months of 2008,' said group president and CEO Tang Kin Fei. 'The year ahead will not be easy with the global economic slowdown and tightening credit markets,' he added.

Sembcorp shares closed five cents higher at $2.14 yesterday.

Published February 27, 2009

Dividend-rich story is waning

By JAMIE LEE

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IT MAY be a nag but a mother's reminder of 'safety first' to her kids is pretty good advice.

And in such uncertain times, people are turning maternal. They are looking for investments that they can nestle into and sleep soundly over.

Ordinarily, this would refer to dividend-rich stocks such as those in the banking, oil and gas, and the telecommunications sectors.

Which explains why several blue chips tend to find favour among analysts. Besides the assumption that shareholders are buying into an established and stable business, the stocks yield attractive dividends for shareholders.

This is despite (or a consequence of) them typically being more expensive in dollar terms compared with other stocks on the market.

But the dividend-rich story that some analysts still keep up is waning.

Oil and gas kingpin Keppel Corporation slashed its dividend payout ratio last month to 51 per cent from 99 per cent a year ago, despite posting a slight 3 per cent dip in full-year net profit to about $1.1 billion.

And while competitor Sembcorp Marine is prepared to push out a dividend of 11 cents per share for the full year, 26 per cent higher than the 8.73 cents paid in 2007, the company has noted that the dividend policy is not cast in stone. This signals that future dividends for the company could be shaved to explore mergers and acquisitions (M&A) opportunities or as a precaution against the credit crunch, as banks turn coy on lending.

Over in the US, JPMorgan Chase became the latest bank to cut dividend payout. It lopped dividend payout by 87 per cent to five US cents per share from 38 US cents, saving US$5 billion in capital per year from the reduction, reported Bloomberg. This is despite the bank expecting a profit in the first quarter in 2009 that is aligned with analysts' estimates.

Banks at home - which are assumed to be stronger than their Western counterparts - have maintained their payouts so far. But OCBC has plans to introduce a scrip dividend scheme that allows shareholders to receive the latest dividend in the form of shares instead of cash, which is seen as a means to conserve capital.

Even the real estate investment trusts (Reits) sector, which rests on a stable income distribution as its selling point, is not as resilient as some analysts make them out to be.

Saizen Reit yanked distribution payout for its fiscal second quarter and has proposed a scrip-only dividend scheme, under which it would pay dividends in the form of Reit units instead of cash.

CDL Hospitality Trusts also said that it would distribute 90 per cent of its taxable income - the minimum amount of distribution - for the second-half 2008, compared with off-loading 100 per cent of its taxable income. This would save the company about $4 million.

Analysts say that the 'scrip-only' scheme and other dividend reinvestments schemes are being mulled by other Reits as well to hoard cash. This is especially as the situation of debt maturity appears 'more acute' here compared to other Reits in the region, said DBS Vickers Securities in a recent report, with about $3.2 billion or 24 per cent of the total sector indebtedness being due for refinancing this year.

The bottom line is that stocks that paid out generous dividends in past may not necessary do so now.

Measures to crimp dividend payouts are understandable. While there is little doubt that shareholders will lose out in the short term, it would be unwise for companies to pay out cash, or worse, to borrow (at much higher costs now) and risk future operations by weakening its cash position.

But this means that stocks that were once lauded as safe, resilient or defensive based simply on their dividend yields, may no longer be seen as such. 

Published February 27, 2009

CDL Q4 profit dives to $100m

Full-year earnings down 19.9%; group expects to stay profitable this year

By KALPANA RASHIWALA

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CITY Developments Ltd (CDL) yesterday said it expects to continue being profitable this year, after posting a dive in fourth quarter 2008 net earnings to about $100 million, less than half the $235 million net profit it booked in Q4 2007.

Full-year net earnings slipped 19.9 per cent to $580.9 million, with revenue easing 5.2 per cent to $2.95 billion.

CDL said the weaker full-year bottomline was largely due to lower contribution from the group's subsidiary Millennium & Copthorne Hotels' (M&C) operations as a result of the strength of the Singapore dollar, particularly against the British pound which had a significant impact when the exchange rate translation was factored in consolidation at group level. M&C also took in impairment charges relating to its joint-venture investments in Beijing and Bangkok and some assets in Asia, UK and US.

Unlike other listed property groups here, CDL group states the value of its investment properties at cost less accumulated depreciation and impairment losses, instead of revaluing them and recording fair value gains or losses for investment properties. As a result, the group's 'profit is not subject to volatility arising from anticipated lower valuations due to the current economic downturn', CDL said in its results statement.

'The group had no impairment on development properties and landbank in 2008,' it added. CDL also said a recent external valuation for the South Beach project was done and the conclusion is that no provision is required for impairment on this development.

Full-year profit before income tax from hotel operations shrank 14.2 per cent to $245 million; earnings from property development dipped 6 per cent to $476.1 million while profit from rental properties edged up 2 per cent to $136.3 million. These profit figures include share of after-tax profit of associates and jointly controlled entities.

Profits have yet to be recognised fully from pre-sold residential developments as these are still in the early stages of construction, CDL said. 'These healthy gains have been locked in and will be booked in progressively, based on the construction progress,' it added.

The group argued there is no reason to be alarmed about defaults by buyers who purchased units in the group's projects on Deferred Payment Scheme.

It said its exposure is limited as only 30 per cent of units sold were under this scheme. It also stressed that buyers cannot breach their contractual obligations. For properties presold prior to 2007, the group believes there is hardly any risk of DPS buyers being unable to fulfil their commitments for the properties.

For units presold especially during the second-half of 2007, the percentage of the group's exposure is relatively low. 'Notwithstanding the current market conditions, and considering the land cost of those presold developments, the group believes the situation has not arisen to warrant any alarming concern on DPS buyers defaulting,' the group added.

CDL had net borrowings of $3.378 billion as at end-Dec 2008, up $50 million from a year earlier. Net gearing remained unchanged at 48 per cent, with interest cover of 11 times last year compared with 10.5 times in 2007.

CDL's full-year earnings per share fell from 78.3 cents to 62.5 cents. Net asset value per share stood at $5.97 as at Dec 31, 2008, up from $5.72 as at end-Dec 2007.

The group also revealed it has sold 16 of the 30 additional units released at its Livia condo in Pasir Ris on Valentine's Day weekend.

'Singapore remains an excellent city to live, work, play and invest,' group executive chairman Kwek Leng Beng said. He advised investors to 'spread your portfolio as much as possible, and don't condemn real estate, because it is real'.

CDL also said: 'Real estate in Singapore is likely to outperform other classes of assets when viewed with a medium- to long-term perspective. The group believes that as the property market turns more active, confidence will increase which augurs well for the economic recovery.'

Published February 27, 2009

Yen slides, BoJ being nudged to buy ETFs

By ANTHONY ROWLEY
IN TOKYO

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THE yen continued to slide yesterday to a three-month low against the US dollar reflecting the 'sell-Japan' mood that has begun to take hold among Japanese and foreign investors.

The yen sank to 97.98 against the US dollar in Tokyo yesterday. It also continued its slide against the euro, the pound, the Australian dollar and other currencies.

Meanwhile, Japanese media speculated that the Bank of Japan could be pushed by the government to buy exchange traded funds (ETFs) in order to lift the Tokyo stock market above its current quarter-century low.

Reports suggested that the government would guarantee the central bank against any losses it might make by such an unorthodox move. But BoJ Policy Board member and former banker Tadao Noda warned that 'too much intervention could backfire', and that BoJ purchases of financial assets were already 'crippling' the function of financial markets.

Foreign investors have become major net sellers of Japanese equities, figures released yesterday showed. They sold a net 451 billion yen (S$7.1 billion) worth of stocks last week. Meanwhile, Japanese domestic investors have become net buyers of foreign stocks and bonds.

This portfolio capital flight from Japan, along with the fact that the Japanese trade and current account have moved into deficit with collapsing exports, is exerting strong downward pressure on the yen, analysts noted. The yen sank to 97.98 against the US dollar in Tokyo yesterday, where it was more than 10 per cent down from the 13-year high of 87.10 that it hit last month.

The yen also continued its slide against the euro, the pound, the Australian dollar and other currencies.

'I am no longer bullish on the yen compared to before,' chief foreign exchange strategist Tohru Sasaki at JPMorgan Chase Bank in Tokyo told The Business Times. In the short term the yen could fall back to around 100 to the dollar, added Mr Sasaki, a former foreign exchange dealer for the Bank of Japan.

He cited the deterioration in Japan's trade balance as one factor behind the slide. Data issued on Wednesday showed that Japan's exports crashed by nearly 46 per cent in January compared with their level a year earlier while Japan suffered a trade deficit of 953 billion yen. But Mr Sasaki added that he expected to see the yen strengthen again - perhaps to 95, and even 92, to the dollar - after the end of the Japanese financial year on March 31. Other analysts agreed, saying that the recent strengthening of the US dollar versus the yen was due to technical factors rather than fundamentals.

Investor sentiment has turned firmly against Japanese stocks for the time being, however, and yesterday the benchmark Nikkei 225 stock average lost a fractional 3.3 points to 7,456.93 - where it remains close to a 26-year low.

The BoJ has announced a scheme to buy up to one trillion yen of stocks from Japanese banks and the government has also proposed a plan to buy up to 20 trillion yen of stocks from Japanese bank portfolios to help ease the capital strains that they face.

This proposal has become a victim of political gridlock in parliament, however. Prime Minister Taro Aso's government is trying a new tactic now to support collapsing share prices by having the BoJ purchase exchange trading funds tracking the Tokyo market, media reports said.