Published May 1, 2009

Tenaga to tap debt for US$2b project

RM loans to be used to finance undersea cable from Sarawak

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(KUALA LUMPUR) Malaysia's biggest power producer, Tenaga Nasional, plans to raise ringgit-denominated loans to finance a US$2 billion submarine transmission line carrying electricity from Sarawak on Borneo to the peninsula, a senior company official said.

Mr Che Khalib: 'We certainly don't need financing over the next 12 months.'

'We are looking at ringgit financing for the transmission line,' CEO Che Khalib Mohamad Noh told Reuters in an interview late on Wednesday, but said that financing was not expected in the next 12 months.

'We will raise it tranche by tranche because the Bakun project will be spread out over seven years. We certainly don't need financing over the next 12 months,' he said.

The cable project involves laying a 730km high-voltage direct current (HVDC) transmission line and a 670km undersea cable for the 2,400MW Bakun hydroelectric dam.

Tenaga, the Ministry of Finance and Sarawak Energy, a unit of the Sarawak state government, are still working out the shareholding structure of the consortium tasked with the cable project, said Mr Che Khalib. 'We are negotiating but we will definitely not own more than 50 per cent (in the consortium). It will only be at the associate level,' he said.

Tenaga Nasional recently swung back into the black, posting a RM675 million (S$280 million) net profit for its second quarter to end-February despite a 7 per cent quarter-on-quarter decline in revenue to RM6.9 billion.

The result was achieved on an 11 per cent drop in operating expenses and a much smaller foreign exchange translation loss of RM97 million.

In the preceding quarter, the national utility registered a RM944 million loss after taking a RM1.44 billion forex translation hit.

Tenaga anticipates profit for the next two quarters to come in at around RM600 million. -- Reuters

Published May 1, 2009

Changes in store for M'sian equity market

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(PETALING JAYA) There may be some changes in store for the Malaysian equity market as the year-long review of the regulatory framework for listings and fund raising has been completed, according to a report in a Malaysian paper.

'People wanted more time, but it is felt that the new framework should not be delayed any more.' - StarBiz source

After some tweaking following a consultation period that ended last month, the proposals have been finalised, reported StarBiz.

Next week, the Securities Commission (SC) and Bursa Malaysia are expected to unveil a set of new rules that revolve around the merger of the main and second boards. The Mesdaq market too will have an expanded role, as it will be open to all kinds of businesses.

In the consultation papers published in February to seek public feedback on the proposed guidelines and listing requirements, the single board is referred to as the unified board (UB), while the repositioned Mesdaq market is called the New Mesdaq. Their new names will be announced next week as well.

'This shift in the regulatory framework makes capital raising simpler and more efficient for issuers and investors. Also, Bursa needs to keep up with the best practices in other markets,' a source familiar with the revamp process told StarBiz.

'With the UB, investors have a clear choice based on their risk appetite. And if you want to invest in a start-up, you go to the New Mesdaq.'

Currently, to qualify for a mainboard listing based on its profit track record, a company must have an aggregate after-tax profit of RM30 million (S$12.4 million) or more over three to five financial years, and an after-tax profit of at least RM8 million for the most recent financial year.

For second board aspirants, the minimum aggregate after-tax profit over three to five financial years is RM12 million, while the minimum after-tax profit for the most recent financial year is RM4 million, reported StarBiz.

For the UB's entry requirements, the SC has proposed an aggregate after-tax profit over three to five financial years of RM20 million or more, and an after-tax profit for the most recent financial year of RM6 million or more.

Said the regulator in the consultation paper, 'The new entry requirement under the profit test is now more comparable with other markets in the region and, at the same time, would still allow Bursa to maintain the quality of corporations seeking listing on the UB.'

The SC has also proposed some easing of the rules for those seeking listing via the market capitalisation/profit test route, according to StarBiz.

To allow issuers more flexibility, it has been proposed that underwriting and balloting would be optional in initial public offerings (IPOs).

Another big change is that the SC intends to allow the listing of special-purpose acquisition companies (SPACs) on Bursa. A SPAC is a shell company that has no operations but goes public with the intention of merging with or acquiring operating companies or businesses with the proceeds of its IPO.

The SC will no longer approve IPO applications for the New Mesdaq. However, the regulator will still look out for the interests of investors by continuing to be responsible for the registration of prospectuses.

Under the new rules, a company seeking a listing on the New Mesdaq is only required to appoint a sponsor to submit the prospectus to the SC and to file an application with the exchange. It is therefore the sponsor's duty to assess the suitability of the company.

It is not known when the new rules will take effect but it appears that the authorities are keen to get things going as soon as possible.

Initially, the consultation period had been three weeks but was extended another two weeks to March 15. Even so, there were requests for another extension.

Said the source to StarBiz: 'People wanted more time, but it is felt that the new framework should not be delayed any more.' 

Published May 1, 2009

Abdullah to be offered important advisory posts

By S JAYASANKARAN
IN KUALA LUMPUR

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MALAYSIA'S former prime minister Abdullah Ahmad Badawi, 68, who stepped down in early April, is likely to be offered some key advisory positions, officials close to Prime Minister Najib Razak said yesterday.

New chapter: Retired PMs like Dr Mahathir and Mr Abdullah are traditionally treated with respect and deference. Besides being given a pension, they are also offered positions as advisers to government corporations

The officials said that the Cabinet on Wednesday was informed that Mr Abdullah was likely to become adviser to Malaysian Airline System (MAS), the national air carrier, and the Institute of Islamic Understanding, a progressive think-tank on Islam that was set up during the tenure of Mahathir Mohamad, Mr Abdullah's predecessor.

In addition, Mr Abdullah is likely to be adviser to the three growth corridors he had proposed during his tenure as the fifth Malaysian prime minister - namely, the Iskandar Region in southern Johor, and the Northern and Eastern Growth Corridors.

Retired prime ministers are traditionally treated with respect and deference. Besides being given a pension, round-the-clock security and overseas travel on official jets twice a year, they are also offered positions as advisers to various government corporations. Hussein Onn, the third premier, was adviser to national oil corporation Petronas until his death in 1990.

Dr Mahathir, 83, set up his own think-tank, the Perdana Foundation. But he is also adviser to Petronas and national car company Proton although he has sarcastically jibed that 'neither ask me for any advice'.

According to the officials, Mr Najib told his ministers that he had no problem with anyone of them calling on either Dr Mahathir or Mr Abdullah for advice, stressing that 'we are all family'.

The counsel was probably meant to stave off any impression that any of the former premiers should feel slighted.

In 2006, after keeping silent for three years, Dr Mahathir went on a rampage against Mr Abdullah - a two-year tirade that went a long way in ensuring that the Barisan Nasional suffered badly during the last general election.

Published May 1, 2009

Bank Negara keeps rate unchanged

But consensus among private economists was for cuts between 25 and 50 basis points

By S JAYASANKARAN
IN KUALA LUMPUR

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A SECURITIES house based in Singapore has predicted that although Malaysia's central bank, Bank Negara or BNM, elected not to raise rates on Wednesday, it was not 'quite the end of the easing cycle' and that BNM could still cut rates by another 50 basis points in May.

On Wednesday, BNM opted to keep rates unchanged at 2 per cent although the consensus among private economists was for cuts between 25 and 50 basis points.

Since November last year, BNM has cut rates by 150 basis points and the current rates are at historic lows.

In its statement, BNM seemed to say that the prognosis for the economy was improving with an impending recovery in the second half of the year.

It acknowledged that the international financial system had yet to stabilise and the near term outlook was still weak but, at the same time, it noted that the pace of decline was slowing.

In addition, it expected the world economy to improve in the second half buoyed by the fiscal stimuli packages adopted by various countries.

On the local front, BNM said that it expected the economy to contract sharply in the first quarter and would remain weak throughout the second.

But it said that things would improve in the latter half because of greater government spending and an improved global economy.

For its part, BNM concluded that the current monetary measures would be sufficient to support domestic demand.

In a report yesterday, Morgan Stanley said that the statement 'suggests to us that BNM is unlikely to bring rates down to the sub-one per cent levels that we had originally envisaged'.

Even so, the house said it believed that BNM would still cut rates given that growth could be worse than expected.

'The triple whammy of manufacturing recession, commodity price reversal, and a change in political climate has not been fully factored into growth expectations,' Morgan Stanley said.

Indeed, the house view is that Malaysia's growth in real gross domestic product terms would contract by 3.5 per cent.

That is pessimistic compared to the consensus forecast of minus-0.7 per cent and the official view of flat growth. 

Published May 1, 2009

CCT distributable income climbs 27% for Q1 2009

Contributions from recently acquired properties help push DPU up 25%

By UMA SHANKARI

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CAPITACOMMERCIAL Trust (CCT) said yesterday that its first-quarter distributable income rose 27 per cent to $45.4 million - from $35.9 million previously - on contributions from recently acquired properties One George Street and Wilkie Edge.

Related articles: Click here for CCT's news release Financial statements

Distribution per unit (DPU) rose 25 per cent to 3.24 cents, from 2.59 cents in Q1 2008.

CCT secured a three-year term loan facility of up to $160 million during the quarter.

The loan, secured against HSBC Building and with an all-in margin of 3 per cent per year, will be used to repay the trust's $156 million short-term loan maturing in June.

With this, CCT has no more refinancing requirements for this year.

The trust also said that its three-year secured term loan to refinance $580 million of commercial mortgage-backed securities (CMBs) due in March 2009, which it announced in January, has been fully drawn down to repay the CMBs.

CCT's gearing stood at 38.3 per cent in Q1.

The office trust, partly owned by Singapore's largest developer CapitaLand, saw net property income grow 41 per cent to $69.9 million in Q1 on income contributions from properties acquired during the past year, as well as higher rental contributions from other office properties in its portfolio.

In the first four months of this year, CCT signed new or renewed leases for an aggregate area of about 335,800 sq ft.

Rental reversion remains positive on a weighted average basis at about 49 per cent higher than previous rents, the trust said.

Occupancy is also healthy - CCT's portfolio committed occupancy was 97.7 per cent as of yesterday.

Despite these encouraging signs, the trust expects 2009 to be a difficult year.

'We have also been actively working on renewing tenants' leases way ahead of their expiry dates,' said Richard Hale, chairman of the trust's manager.

'As a result, 89 per cent of our forecast gross rental income for 2009 had been locked-in under committed leases as at March 31, 2009. Nonetheless, 2009 is still expected to be a challenging year.'

CCT reiterated that it is committed to paying 100 per cent of its distributable income for the financial year ending 2009.

Analysts are positive on CCT's Q1 results but warned that equity raising could be on the cards.

'CCT is our preferred office pick at a 15.8 per cent yield, though we think there is a risk of equity issuance in the next six to nine months to bring gearing down ahead of expected falls when assets are revalued at the end of this year,' Macquarie Research analysts Tuck Yin Soong and Elaine Cheong said in a note yesterday.

Macquarie has an 'outperform' call on the stock.

CCT gained four cents, or 4.9 per cent, to close at 85.5 cents yesterday.

Published May 1, 2009

Venture Q1 net profit tumbles 51% to $28m

Soft end-market demand takes toll even though revenue rises q-o-q

By OH BOON PING

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VENTURE Corporation yesterday reported a 50.8 per cent plunge in net profit to $27.7 million on a 23 per cent drop in turnover for the three months to March 31.

Watchful: Venture expects the remaining nine months of its financial year to stay challenging, as sentiment among customers remains cautious

First quarter sales were $725.5 million, while diluted earnings per share dropped to 10.1 cents from 20.5 cents a year earlier.

At March 31 the group had $588.2 million in cash and cash equivalents - up from $414.58 million a year ago.

The contract manufacturer was hit by soft end-market demand, even though revenue improved quarter-on-quarter.

The decline in revenue was broad-based and relatively even across key segments. One exception was printing and imaging (P&I), where revenue rose 6 per cent year-on-year due to 'a shift to a full-product configuration model by a major P&I customer during the reporting quarter'.

Venture also took a fair- value loss of $12.6 million on its derivative instruments.

During Q1, subsidiary VIPColor successfully launched a new label printer that offers high-end print quality, speed and flexibility. 'This product has been well received in the marketplace,' Venture said.

The group also has several ongoing original design manufacturing (ODM) projects in collaboration with customers in all the market segments it operates in.

Its medical segment registered double-digit growth quarter-on-quarter and year-on-year. 'The group has built further traction in this segment and anticipates its current activities engendering stronger interest from existing and potential partners,' Venture said.

In Q1, the group made its maiden foray into the aerospace sector, with the addition of a reputable new customer.

Looking ahead, chief executive Wong Ngit Liong said Venture will focus on expanding its market share and value chain, and capturing new customers through differentiation and innovation.

The group aims to enhance its partnerships with customers, while building on its technology and a leaner cost structure.

Mr Wong said price-cutting will not be adopted because this is not a sustainable approach to growing the business. Instead, Venture will channel its efforts into value creation and new products. These new products include a barcode printer and a Micro PDA, among others.

Venture expects the remaining nine months of its financial year to stay challenging, as sentiment among customers remains cautious.

Its shares dropped 25 cents to close at $5.96 yesterday.

Published May 1, 2009

Market cap rises 12.6% to $434.9b in April

But broking firms warn that the rally may be running ahead of fundamentals

By TEH SHI NING

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THE Singapore stock market gained weight in April as 'green shoots' emerged in global economic indicators.

But analysts say that the near-term outlook hinges on the swine flu outbreak.

The combined market capitalisation of the 781 companies listed here rose 12.6 per cent to $434.9 billion at the close of trade yesterday, from $386.2 billion at end-March.

The latest figure is the highest end-of-month market cap since last September's $514.9 billion, when the Lehman Brothers collapse triggered a plunge in international stock markets.

The 20 biggest firms listed here all posted gains in market cap in April, as tentative signs of recovery in global economic indicators led to improvements in stock markets worldwide.

Among the local banks, UOB and OCBC saw their market values fall in March but gained 18.3 per cent and 21.5 per cent respectively in April.

Related link: Click here for the market cap of all SGX-listed companies

DBS advanced 12.4 per cent too, after a marginal lift in March.

Macquarie Research believes 'the recent surge in share prices may have run ahead of fundamentals', as the weaker operating environment is yet to show signs of improvement.

All three banks are due to report first-quarter earnings next week.

Macquarie expects net profits to be lower year on year but higher quarter on quarter.

Property stocks also showed improved market caps in April.

Among them, City Developments rose 27.1 per cent to $5.89 billion, while Wheelock gained 22.2 per cent to $1.31 billion and Keppel Land, 18.6 per cent to $1.24 billion.

Last month, property data releases showed a sharp depreciation in prices across all segments in the first quarter.

'At this point, we are still mid-way through the physical market correction,' DBS Research said this week in a report on the property sector, 'The good thing is that equity prices have moved ahead and are reflecting more-than- trough valuations.'

Of the top 20 listed companies by value, Singapore Exchange posted the biggest rise in market cap last month - up 22.9 per cent to $6.7 billion.

SingTel, which is still the largest company by market cap, gained 1.2 per cent in market value to $40.75 billion.

But rival telcos StarHub and MobileOne saw their market caps fall.

StarHub shed 7.1 per cent to $3.13 billion, while MobileOne lost 1.3 per cent to $1.32 billion.

Still, a recent OCBC report cited the telco sector as one that could benefit if swine flu turns out to be a worldwide headache, saying that such a situation could 'translate into higher demand or usage of IDD services and even broadband services as corporations and consumers shy away from physical travel'.

If the spread of swine flu worsens, stocks expected to be hit include travel-related and retail-related businesses.

But the OCBC report said: 'The extent of the impact may be lessened by the fact that many of these companies have already been sold down sharply due to the economic downturn.

'In fact, current valuations are already relatively close to the valuations seen during the height of the Sars scare.'

Published May 1, 2009

SIA pilots accept 1 day's unpaid compulsory leave per month

Interim agreement is in line with deal for SIA senior officials

By VEN SREENIVASAN

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(SINGAPORE) Singapore Airlines pilots have agreed to one day's compulsory unpaid leave per month under an interim deal brokered by the Ministry of Manpower (MOM).

The decision comes after more than a week of tough negotiations between the Air Line Pilots Association-Singapore (Alpa-S) and SIA over the latter's call for captains to take three days' compulsory unpaid leave per month and first officers to take four days a month.

The pilots refused, saying cost-cutting was a company-wide issue and the burden should not fall disproportionately on them. They insisted that however many days' leave they were asked to take should be in line with what was asked of SIA senior officials.

SIA managers and administrative officers are taking one day a month - either as unpaid leave or from their annual leave.

In-principle agreement has also been reached with two unions - Singapore Airlines Staff Union and the Airline Executive Staff Union - for other ground workers and cabin crew to go on on the shorter work month scheme from today.

'Cost cuts should not be borne by the pilots alone,' said Alpa-S president Captain P James. 'No one is to blame for what has happened and no one could have foreseen the severity of the financial storm. There is no doubt we have excess capacity and things are tough. But that said, the whole company has to pull together to face the challenge.'

MOM appears to have bridged the gulf - albeit temporarily - between SIA and its 1,800 pilots.

'We accepted this to show our solidarity with the rest of the company,' said Capt James. 'But this is just an interim solution, and we hope a final solution which is acceptable to all is found in due course.'

Alpa-S held an extraordinary council meeting last night to endorse the MOM proposal.

SIA, which is parking planes and slashing capacity amid a sharp downturn in which passenger loads have fallen to almost 70 per cent and cargo loads to less than 60 per cent.

It has already put 50 cargo pilots on unpaid leave and is grounding 17 planes, cutting some 11 per cent of capacity this year.

SIA carried just 1.28 million passengers in March - a 23 per cent drop from March last year.

Having forced staff to take unpaid leave, analysts believe SIA may have to resort to layoffs if operating conditions continue to deteriorate.

Separately, on the swine flu front, SIA said it is closely monitoring the situation.

As a gesture of goodwill, it is waiving cancellation and itinerary change fees on a worldwide basis. The waiver is valid for tickets issued prior to April 28 for travel up to and including May 27 on SIA flights only.

Customers may change the routing of their journey, defer the date of travel until Oct 31 or cancel, without penalty. Any change of date or routing will be charged at the new fare for that journey less the fare for the journey paid, with no amendment fee. For example, if travel is in a higher class, or deferred to a higher season, the seasonal fare difference will still apply.

The same conditions will apply to KrisFlyer redemption tickets.