Published March 13, 2009

High-level bribery probe jolts Malaysia ruling party

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(KUALA LUMPUR) The ruling party was rocked yesterday by a high-level investigation involving bribery allegations and a prominent minister preparing to run in a party election that will shape Malaysia's next administration.

In a vaguely worded statement yesterday, the Tourism Ministry said that 'some of its personnel have been asked to provide statements' to assist the Malaysian Anti-Corruption Commission in its investigations.

It denied that any offence has occurred, but said that the ministry will 'extend its cooperation in all investigations', including a probe into misuse of ministry funds.

The New Straits Times daily reported last week that 11 people have been questioned. Among them is Tourism Minister Azalina Othman Said's political secretary, who was allegedly found with RM70,000 (S$29,000) cash - purportedly ministry funds - in his car, it said.

The probe puts Ms Azalina in the spotlight as she prepares to contest a post in the ruling party's powerful Supreme Council during the March 24-28 elections. The Supreme Council makes all major party decisions.

The investigation has revived complaints that elections to the top posts in the ruling United Malays National Organisation party are usually tainted by bribery, with contestants paying huge sums of money to delegates to win votes.

The anti-corruption commission has not commented on the case.

The opposition dismissed the probe as the result of a power struggle in the ruling party.

The probe is simply 'a tool for the ruling clique to engage in their own games and power struggle', said Tian Chua of the opposition People's Justice Party.

The Umno elections will choose top officer bearers, who hold important positions in the government. Deputy Prime Minister Najib Razak is contesting the post of party president unopposed. - AP

Published March 13, 2009

Maybank in for longest share slide in 22 years

Financial stocks hard hit by fears of more capital raisings

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(KUALA LUMPUR) Malayan Banking (Maybank), Malaysia's biggest bank, was set for its longest losing streak in 22 years on speculation bad debts will increase and capital-raising plans will erode earnings.

Maybank, which last month announced a RM6 billion (S$2.5 billion) rights offer to boost capital, slid for an 11th day, losing 6.45 per cent yesterday to close at RM4.06. Public Bank fell 3.4 per cent to RM7.05, the lowest since Nov 24, 2006. The Kuala Lumpur Finance Index slid 2.6 per cent to the lowest since Oct 6, 2003.

'Financial stocks are under a lot of pressure, there's a lot of fear in the market on capital raisings; as long as that fear is around, you have to be mindful of it,' said Scott Lim, who oversees about US$800 million as chief executive of MIDF Amanah Asset Management Bhd in Kuala Lumpur. 'Investors are fearful of coughing up more money.'

Finance Minister Najib Razak this week unveiled a RM60 billion stimulus plan and warned that the economy may contract this year for the first time in a decade as exports slide.

After the rights offer, Maybank stock 'hasn't found the bottom yet,' said Keith Wee, an analyst at OSK Research Sdn. In addition, the market has yet to 'price in' the prospects of an increase in bad loans by banks in Malaysia, he said.

More Malaysian companies may choose to raise funds by selling new shares to existing investors as they find it increasingly difficult to obtain loans amid the credit crunch, the Malaysian Business Times reported yesterday.

Widening yields will also make it more expensive for companies to sell bonds, the newspaper said, citing the Securities Commission chairman Zarinah Anwar. Bank loans are getting harder to get as lenders become more stringent, the report said.

Malaysia's borrowing costs rose from a record low at a five-year note auction yesterday on concern that debt sales will increase to fund the government's stimulus spending.

There is no risk Public Bank will implement a rights offer, though there is concern the slowing economy will fuel an increase in bad debts and hurt the lender's ability to pay higher dividends, Mr Lim said. Public Bank has fallen for eight straight days, the longest slide since 1991.

Public Bank last month proposed a final cash dividend of 25 sen a share and a payment of one share for every 35 held.

'You might have to forecast a less optimistic outlook on the banking sector and the NPL provisioning could creep up,' Mr Lim said. 'There is a risk there, naturally your earnings will be affected, and therefore you cannot give as much dividends.'

On March 10, Public Bank had its stock rating cut to 'sell' from 'outperform' by CLSA Asia Pacific Markets because of 'weak' capital ratios. - Bloomberg

Published March 13, 2009

Malaysian output falls a sharper 20% in January

Electrical and electronics sector leads slide with 45% plunge

By PAULINE NG
IN KUALA LUMPUR

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MALAYSIA'S industrial output continued its sharp deceleration in January, the pace of its output falling by 20 per cent from a year ago after stumbling 16 per cent in December. On a monthly basis, the contraction was 4.5 per cent.

Relief for tough times: Initial reaction to this week's RM60b stimulus package has been tepid. It is aimed at averting a deep recession

The poor start to 2009 was led by steep falls in the manufacturing index of nearly 27 per cent, in itself weighed down by the electrical & electronic products sub-sector careening 45 per cent as overseas demand all but evaporated. The pace of deterioration was also reflected in the sub-sector's month-on- month shrinkage by 17.6 per cent.

The sizeable 12.4 per cent contraction in the electricity index was another telling indication of lower manufacturing output. The mining component meanwhile declined 6.1 per cent.

Compared to December, January's manufacturing output was 7.3 per cent lower, with declines posted in all seven of its sub-sectors.

None were spared hefty reductions, including the food, beverage and tobacco sub-sector which fell 15 per cent compared to a year ago; F&B was lower by 13 per cent and tobacco products by an astonishing 65.5 per cent.

Huge double-digit drops were also registered in the basic metal, transport equipment, wood products, textiles & footwear sub-sectors.

The statistics are bound to raise more red flags as to the rapidly worsening state of the economy which is believed to be on the brink of a recession after expanding a mere 0.1 per cent in the last quarter.

Although a whopping RM60 billion (S$24.9 billion) stimulus package amounting to 9 per cent of gross domestic product was announced this week in the hopes of averting a deep recession, the initial reaction has been tepid.

Analysts question its ability to boost confidence and flagging consumer demand because the programme did not offer tax cuts or other measures which would put direct cash in consumers' hands. 'Big but hollow', was how one analyst described it.

Others think it lacks specific details, could be prone to leakages, and that it comes too late in the day given the bureaucratic tendency for stifling red tape as was demonstrated by the lack of urgency displayed in disbursing the initial RM7 billion funds injection announced in November.

However, speedy implementation of infrastructure projects and private finance initiatives worth billions of ringgit proposed in the package, such as the building of a new budget terminal in Sepang, could provide some relief to building material and transport equipment manufacturers.

Published March 13, 2009

Raffles Edu needs to tighten checks on investments

By OH BOON PING

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THE accounting scandal at Oriental Century Ltd has undoubtedly struck a blow at Raffles Education, which owns a 29.9 per cent stake in the China-based education provider.

Oriental Century shocked the market yesterday when it said its chairman and CEO Wang Yuean had confessed to having - over several years - inflated sales and cash balances and had diverted unspecified sums to an interested party.

But what's also surprising is Raffles's hands-off approach to Oriental Century.

So what is so special about Oriental Century that its biggest shareholder Raffles Education did not insist on board representation or carrying out its due diligence?

During a teleconference yesterday, Raffles' chief executive Chew Hua Seng admitted that the group had relied primarily on Oriental's IPO prospectus, without conducting separate checks when it bought a significant stake in 2006. Even more surprisingly, Raffles is not represented on the management, even though it now owns nearly 30 per cent in Oriental.

When queried, Mr Chew said that 'Oriental Century is a listed company with its own set of prospectus, governance and auditors. Even if we are shareholders, we cannot just go in and carry out the due diligence'. Plus, the business model at Oriental is sound, as the China-based education provider runs three colleges and provides other ancillary courses catering to the rising education demands in China. 'If the business model is working, why fix it?' he added.

Sounds well and good. Except that these are no reasons for not doing the proper checks, not when the company has since pumped in over $30 million worth of investment.

And it seems odd that the biggest shareholder did not even ask for board representation, if only to ensure that its investment is safe.

Plus, as Raffles is now painfully aware, even listed companies also have their fair share of 'fraud' cases. Names such as Auston International and China Aviation Oil immediately come to mind.

True, a strong corporate governance structure certainly helps to mitigate the risk of accounting scandals, but this is of minimal use if there isn't sufficient oversight at the ground level.

A case in point was CAO which appeared to have a proper risk management system in place. However, a clear lack of enforcement allowed the former CEO Chen Jiulin to override the system and he nearly brought down the company with his heavy trading losses.

A second issue concerns the adverse impact the scandal will have on Raffles.

Yes, Oriental's contribution to the group's $99.4 million net profit last year amounted to just two per cent and the group said it will not be materially affected by the latest development.

However, it is clear that should Oriental eventually cease to be a going concern, Raffles may have to write off its entire $34.6 million stake - potentially wiping off a big chunk of its FY09 earnings.

In addition, Raffles' brand name among the investment community can be expected to take a hit by the entire saga.

For a group that has grown rapidly largely through acquisitions, the latest news also raises investors' concerns about Raffles' many other investments in China.

In this regard, Mr Chew assured reporters that the Oriental incident is a one-off case, as it carried out its due diligence and staggered the payments according to pre-set milestones, while retaining management and cash control of its other China-based schools.

But regardless of the soundness of those investments, one thing is clear: Raffles will now have to tighten its investment checks as its shareholders deserve no less.

Published March 13, 2009

ComfortDelGro, SMRT to be included in STI

They replace property counters Keppel Land and Yanlord Land Group

By JAMIE LEE

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TRANSPORT operators ComfortDelGro Corporation and SMRT Corporation will replace property counters Keppel Land and Yanlord Land Group in the Straits Times Index (STI).

This follows the latest half-yearly review of the index component stocks, said a joint statement yesterday from FTSE Group, Singapore Exchange and Singapore Press Holdings. FTSE ST indices also saw changes.

Half-yearly reviews are carried out to ensure that the indices remain an accurate reflection of the market that they represent, they said, adding that the changes will take effect on March 23.

The STI is made up of the biggest 30 companies by market capitalisation but their inclusion also encompasses other criteria such as free float and liquidity.

The latest review comes as the share prices of property counters have been hit by fears of dwindling sales and asset write-downs.

On the flip side, analysts prefer land transport stocks because they are seen as defensive during an economic slowdown.

'Transport counters are seen to be more resilient,' said a local bank analyst. 'But the property sector is going through a rough patch in terms of visibility and outlook.'

The changes were expected by some analysts. Nomura said in a March 6 report that the two transport counters were likely to nudge Keppel Land and Yanlord out of the index.

A Kelive report yesterday said that Keppel Land's 7 per cent fall in share price on Wednesday, which reduced it to below $1, could have been caused by the expected exclusion of the stock from the STI.

'There is no apparent reason for the 7 per cent plunge in share price, save for Keppel Land's potential exclusion from the index,' the report said.

The stock regained some ground yesterday. After touching a six-year low of 98.5 cents, it closed at $1.04, up 4.5 per cent.

Yanlord has lost 3.16 per cent since Wednesday, closing at 76.5 cents yesterday.

SMRT closed 1.3 per cent higher at $1.61 yesterday, while ComfortDelGro lost 2.2 per cent to finish at $1.32.

Published March 13, 2009

UOL sells 70 more units in Double Bay over weekend

By UMA SHANKARI

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UOL Group and Kheng Leong sold about 70 units of their new Simei condominium Double Bay Residences over the past weekend - fewer than what it was aiming for, sources said.

UOL said last Friday after it sold over 80 units on the first day of the project's soft launch that it expected to sell at least 200 units in all by the end of the weekend.

But so far, the developers have sold about 150 apartments in the 646-unit project.

Sources also said that prices are higher than what the developers had previously quoted.

The companies said last Friday that units in the 99-year leasehold development will be sold for $600-650 per square foot (psf). However, BT understands that most of the units sold so far are either smaller apartments, and/or apartments on the higher floors - which means that they were sold for higher than average prices. For example, a one-bedroom apartment in the development sold for more than $800 psf, BT understands.

UOL and Kheng Leong released 250 units during the soft launch over the weekend, and hundreds of people turned up at the showroom in Simei. The project will be officially launched on Saturday.

One market observer said that the two developers could be pricing units higher to ensure a respectable profit margin. UOL and Kheng Leong paid some $296 psf per plot ratio for the site in January 2008.

Elsewhere, boutique developer Hiap Hoe Group has sold just a few units of its 118-unit The Beverly at Toh Tuck Road since the project was soft-launched at the end of February.

The units sold for an average price of $730-$740 psf, BT understands. Hiap Hoe released just 31 units in the project, and is aiming to sell enough homes to start construction.

Published March 13, 2009

SIAS: Rights issue is Chartered's best option

By JOYCE HOOI

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CHARTERED Semiconductor Manufacturing has moved to assure the Securities Investors Association of Singapore (SIAS) that its US$300 million rights issue is a sound move.

At Chartered's request, Chartered chief executive Chia Song Hwee met SIAS president David Gerald yesterday.

'SIAS discussed with Mr Chia the availability of other options, and after hearing the management, SIAS is satisfied that the rights issue was the best option for the company,' said Mr Gerald.

'SIAS also understands that Chartered fully considered the impact on its shareholders in the current economic environment, and that the rights issue was only decided on after exhausting all other options.'

At yesterday's meeting, Chartered explained the need to strengthen its balance sheet, increase financial flexibility and preserve customer confidence, said Mr Gerald.

'SIAS is pleased to note Mr Chia's assurance that there will not be another rights issue in the near future.'

The meeting took place after the beating Chartered's shares took on Monday's news of the rights issue, in which it proposes to issue 27-for-10 shares at seven cents apiece.

The share price closed one cent lower yesterday, at 10.5 cents. Since the start of the week, the stock has lost 58.8 per cent of its value from its opening price of 25.5 cents on Monday. The most dramatic fall was on the day after the rights offer was announced - the shares plunged 39 per cent to close at 12.5 cents.

Despite the fears of a jittery market, SIAS is satisfied with the outcome of its meeting with Chartered. 'SIAS applauds Chartered's proactive steps in reaching out to its investors and seeking to address their concerns,' Mr Gerald said. SIAS and Chartered plan to jointly hold a forum to address investors' concerns in the coming weeks.

Published March 13, 2009

Pay cut to reduce SPH staff cost by an estimated 20%

By TEH SHI NING

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SINGAPORE Press Holdings (SPH) yesterday announced staff pay cuts and reductions in profit-related bonuses that are expected to lower the wage bill for its core businesses by about 20 per cent. 'The move is the latest cost-cutting measure in response to the sharp deterioration in business conditions,' said the media group, which has also instituted other cost-cutting measures, including a recruitment freeze and a reduction in operating expenses.

'We need to bring our costs down in the face of a weaker advertising market and uncertain business environment,' said SPH chief executive Alan Chan.

From April 1, monthly pay for 3,000 staff will be cut by 2-10 per cent. The actual cut will depend on each staff member's current pay package, with higher paid staff taking the brunt. Mr Chan will lead with a 10 per cent cut. Those earning $2,000 or less will not have any cut in monthly pay.

SPH said that the wage revisions were concluded after talks with the two unions representing SPH employees - the Singapore Press Holdings Employees' Union and the Singapore National Union of Journalists. SPH's subsidiaries will implement their own wage cuts, which will vary according to their respective situation.

Profit-related staff bonuses are also set to fall, in line with a decline in newspaper profits. Here again, senior management will take the largest reduction, expected to be about 30 per cent of their total annual remuneration.

In recognition of the sacrifice that the employees will be making, SPH said it will grant special leave to staff affected by the pay cuts, with the number of days granted based on the percentage of pay cut.

For the first quarter ended Nov 30, 2008, SPH's net profit fell 34.8 per cent to $73 million, owing to weaker advertising income and a slump in investment portfolio. SPH shares closed yesterday at $2.32.

Published March 13, 2009

Lenders demand Beauty China to pay up

By LYNETTE KHOO

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BEAUTY China has been slapped with a statutory demand from its syndicated lenders to repay the entire principal and interest outstanding on a loan of HK$134 million (S$26.54 million).

The deadline is March 27, and 'a failure to successfully reschedule the loan will raise a going concern issue', it said yesterday.

The cosmetics firm yesterday asked for a share trading suspension pending the announcement. Beauty China said it had requested the lenders to extend the deadline of the first instalment of the loan of about HK$27 million since January.

'This request was made due to slow collection of trade receivables from distributors and the accelerated payments to suppliers and contractors who have shortened their credit terms to the company and its subsidiaries during the last quarter,' the group added.

The group had informed the lenders at a meeting on Tuesday on the prospect of getting a fund injection from potential investors and requested a 'standstill' till April 27 to allow the negotiations with the potential investors, due diligence or conclusion of any transaction to proceed.

Beauty China said it is in talks with a potential financial investor who will bring in a cosmetics industry player as strategic investor and expects the proposed cash injection to be adequate to meet its immediate obligations to the lenders.

A non-binding term sheet was signed on Feb 25 and two supplement agreements were also signed, granting the potential investor the 'most favoured investor' status for six months from March 2 and an exclusivity period of six weeks from March 11 to conduct due diligence.

This is a separate matter from the potential shares sale by Beauty China chairman and founder Wong Hon Wai. The group said that Mr Wong has entered into an agreement to sell 50 million shares or a 14 per cent stake in Beauty China to a subsidiary of a Hong Kong-listed firm, and a call option to buy another 41 million shares or 11.5 per cent stake at $0.12825 per share.

But this transaction is subject to Beauty China's syndicated loan being favourably restructured. The group said that it does not expect this condition to be met by the March 13 deadline.

Meanwhile, the outstanding sum of $800,000 that Mr Wong owed to a financier has been fully settled through a further forced-sale of Beauty China shares that he pledged. This cut his stake from 32.28 per cent to 30.51 per cent.

Published March 13, 2009

Sino-Env bondholders refrain from redemption

For now, they are seeking information on group, chairman

By LYNETTE KHOO

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SINO-ENVIRONMENT Technology said that its convertible bondholders have agreed to refrain from seeking early redemptions until certain information they are seeking from the company is provided to them.

But the counter still nose-dived yesterday when it resumed trading, plummeting 73 per cent to eight cents. It was unclear if there was forced-selling by institutions or retail investors, dealers said. It could also be a case of pent-up selling pressure, said an observer.

Sino-Environment said yesterday that the group had held discussions with the bondholders on Tuesday. During the discussions, the bondholders requested certain information about the group and its majority shareholder and chairman Sun Jiangrong.

Last week, it was disclosed that Thumb (China) Holdings Group, the investment firm through which Mr Sun owns his Sino-Environment stake, had defaulted on certain financial obligations and his pledged shares could be force-sold.

He had pledged his shares and other personal assets to some hedge funds managed by Stark Investments (Hong Kong) Ltd, Singapore Branch Asia as securities for original notes worth $120 million. An outstanding $65 million became due on Feb 16.

Force-selling of Mr Sun's shares may result in a change in control of the group, which can trigger early conversion or redemption of the $149 million worth of CBs, and crystallise defaults on a corresponding swap arrangement. Some of Mr Sun's pledged shares were transfered out of his account to Bank of New York Mellon, the security-trustee of the hedge funds on Tuesday, which cut his stake in the group to 51.23 per cent from 56.29 per cent. A filing yesterday confirmed that Stark has emerged a substantial shareholder with a deemed stake of 5.057 per cent resulting from this transfer.

Meanwhile, the sharp fall in Sunshine Holdings yesterday, down 33.3 per cent to one cent on active volumes of 35.15 million shares drew a query from the SGX on the trading activity.

In response, Sunshine said it has completed the disposal of three subsidiaries Henan Zhong Cheng Jia Sheng Property Management Co, Henan Ding Sheng Real Estate Co and Beijing Chengguo Hotel Management Co.

But these transactions are not deemed to be material and the company is of the view that they are not the cause of the trading activity yesterday, it added.

The group has also started talks with a third party on various options to improve its business, which include collaborations to jointly develop projects and restructuring of assets.

Published March 13, 2009

Billionaires' net worth tumbles; Asia-Pac tycoons fare worse

By UMA SHANKARI

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(SINGAPORE) The world's richest people have got poorer - just like the rest of us. The number of billionaires in Forbes magazine's annual ranking has plunged 30 per cent.

The world has just 793 billionaires now, down from 1,125 a year ago. And their average net worth is US$3 billion - a drop of 23 per cent in the past 12 months.

Singapore has only two billionaires now - property tycoon Ng Teng Fong and veteran banker Wee Cho Yaw - down from five in 2008.

Worldwide, Microsoft chairman Bill Gates has regained the top spot, even though he lost US$18 billion which dragged his net worth down to US$40 billion.

World runner-up Warren Buffett - last year's No. 1 - saw his wealth plummet US$25 billion to US$37 billion, as shares of his Berkshire Hathaway investment company sank almost 50 per cent in the past 12 months.

Mexican telecom titan Carlos Slim Helu also lost US$25 billion, and dropped one spot to No. 3 worldwide.

In Singapore, Far East Organization's Mr Ng and UOB's Mr Wee have seen their net worth fall significantly. Mr Ng and his family are now worth US$5.5 billion, down from US$7 billion a year ago. Likewise, Mr Wee and his family have seen their net worth shrink to US$1.9 billion, from US$2.9 billion.

Three locals failed to make the cut this year - Yanlord Land chief Zhong Sheng Jian, palm oil giant Wilmar International's chief Kuok Khoon Hong and investor Peter Lim.

The carnage spared few billionaires, regardless of whether their source of wealth is stocks, commodities, real estate or technology. But those with ties to Wall Street were hit particularly hard. Worldwide, 80 of the 355 people who dropped off the list this year had fortunes derived from finance or investments.

Former American International Group head Maurice Greenberg saw his US$1.9 billion fortune virtually wiped out after the insurance giant was bailed out by the US government. Today he is worth less than US$100 million. Former Citigroup chairman Sandy Weill has also said goodbye to the billionaires' club.

Last year, there were 39 American billionaire hedge fund managers - this year there are 28. And 12 American private equity tycoons have lost their billionaire status.

Compared with overall numbers, billionaires in Asia Pacific fared worse. The number of billionaires in the region fell 38 per cent to 130. And the combined net worth of Asian billionaires plunged 55 per cent to US$357 billion.

The richest person in Asia - and the seventh richest worldwide - is India's Mukesh Ambani, who heads Reliance Industries. His net worth has fallen US$23.5 billion to US$19.5 billion. But that still puts him ahead of last year's richest Asian Lakshmi Mittal, who lost US$25.7 billion to come in eighth this year with US$19.3 billion.

The third-richest Asian billionaire is Hong Kong's Li Ka-shing, who heads Cheung Kong Holdings and Hutchison Whampoa. He is ranked 16th this year, down from 11th last year, and is more than US$10 billion poorer with US$16.2 billion.

The year's biggest loser in dollar terms is India's Anil Ambani, head of Reliance Communications. His net worth sank a staggering US$31.9 billion to US$10.1 billion, and he dropped from sixth place to 34th on the list.