Published July 30, 2009

Malaysia keeps policy rate unchanged at 2%

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(KUALA LUMPUR) Malaysia's central bank held interest rates steady for a third straight meeting amid signs that the global economy is recovering from the worst recession since the Great Depression.

Bank Negara Malaysia kept its overnight policy rate unchanged at 2 per cent, it said in Kuala Lumpur yesterday. The decision was widely expected. The benchmark is at its lowest level since it was introduced in April 2004.

'Signs of stabilisation of the global economy have emerged whilst conditions in the international financial markets have generally improved,' the central bank said. 'The assessment is that with the current low interest rates and with the fiscal stimulus gaining traction, the prevailing policy measures are sufficient to provide support to economic activity.'

Central banks from India to South Korea have stopped lowering borrowing costs as unprecedented rate cuts and more than US$2 trillion in stimulus plans help the world's economies emerge from the slowdown. Malaysia halted in April after cutting the key rate by 1.5 percentage points since mid-November, as policy makers predicted that growth will resume later this year.

The economy has 'shown signs of stabilising in the second quarter, with several indicators such as the industrial production index and retrenchments recording a slower pace of decline,' Bank Negara said.

'Accelerated implementation' of the government's RM67 billion (S$27.5 billion) of stimulus measures, continued access to financing and slower inflation will contribute to an improving economy in the second half of this year, it said.

Malaysia's gross domestic product shrank 6.2 per cent in the three months to March as exports of semiconductors and other goods slumped.

Malaysia's consumer prices fell 1.4 per cent last month from a year earlier, the first decline in more than 22 years, as the shrinking economy hurt demand for goods and services and commodities costs eased from last year's record highs.

'The decline in inflation is largely a statistical outcome reflecting the sharp rise in inflation in June 2008, when fuel prices increased following the reduction in fuel subsidies,' Bank Negara said. 'The negative inflation is expected to be temporary and is projected to turn positive as domestic economic conditions improve.'

Malaysia's ringgit fell to as low as 3.5365 to the US dollar yesterday from near a four-week high on speculation that the central bank will stem gains as the nation's recovery lags behind other economies in the region. The central bank has said that GDP probably contracted last quarter, putting the country in a recession that neighbouring Indonesia avoided while Singapore's slump abates. -- Bloomberg

Published July 30, 2009

Boustead plans to raise up to RM1.3b this year

Group to sell stake in insurance unit, Sumatra plantation; rights issue gets nod

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(KUALA LUMPUR) Malaysia's Boustead Holdings Bhd plans to raise as much as RM1.33 billion (S$543 million) from stock and asset sales this year to repay debt and fund expansion.

The plantations and property group hopes to conclude talks to sell its stake in an insurance unit and 17,000 hectares of plantations on the Indonesian island of Sumatra, raising as much as RM600 million, managing director Lodin Wok Kamaruddin said in Kuala Lumpur yesterday.

'We're talking with several parties who are quite serious' about acquiring the assets, Mr Lodin said. 'We hope to complete' the stake and land sales by the end of the year.

A separate plan to raise RM729.1 million through a rights offer was approved by shareholders yesterday, he added.

Boustead joins Malayan Banking Bhd and Axiata Bhd in raising funds through share sales, capitalising on a rebounding Malaysian stock market that has recovered most of its 39 per cent loss last year.

Paying down debt and reducing the debt ratio would give Boustead a greater flexibility to raise borrowings for future expansion, said James Ratnam, an analyst at TA Securities Holdings Bhd.

The cost of equity has become cheaper than the cost of borrowing after the stock market rebounded, he said.

Boustead shares have risen 4.2 per cent since July 10, when the company first announced the rights offer plan. It closed unchanged at RM4 yesterday.

The company expects to complete the rights offer by the third quarter and will use the proceeds by the end of next year, it told shareholders.

Boustead may use as much as RM400 million from the rights offer to repay debt, lowering its debt-to-equity ratio to 0.7 times, Mr Lodin said.

The move would also cut the company's interest costs by RM24 million annually. Boustead has about RM3.61 billion in bank borrowings, he said.

Up to RM328 million of the proceeds will be used for working capital and asset acquisitions, the company said.

Boustead plans to buy more land for its property division and expand its shipbuilding activities, Mr Lodin said, declining to be specific. It also plans to buy plantation land in the Malaysian eastern states of Sabah and Sarawak on Borneo after selling the one in Sumatra.

The company also hopes to get a new contract to build more offshore patrol vessels, part of a plan to supply 27 vessels to the Malaysian navy, he said. -- Bloomberg

Published July 30, 2009

Rowsley proposes rights issue with warrants

By CHEN HUIFEN

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INVESTMENT company Rowsley has proposed a rights issue to raise net proceeds of up to $14.9 million. The issue comes with free warrants which could potentially raise another $38 million.

The renounceable, non-underwritten issue will be on the basis of two rights shares with three warrants for every five existing shares held. This involves the issue of up to 253.3 million rights shares at 6 cents each.

The issue price of six cents represents a 37 per cent discount to the closing price of 9.5 cents yesterday. The issue comes with up to about 380 million three-year warrants, each convertible to one share at an exercise price of 10 cents.

Apart from general corporate and working capital purposes, Rowsley said the net proceeds of up to $14.9 million from the rights issue will be used to provide financial support to San Technology Holding and for investments, if opportunities arise. The company did not provide more details on San Technology, but according to its website, San Technology is 51 per cent owned by Rowsley and is in the business of developing renewable energy and lubricating oil recycling businesses in China. Proceeds from exercise of warrants will provide the company with future liquidity.

'STH leverages on leading edge nano-technology based membrane-separation technology to process used lubricating oil into high quality base oil which refinery blenders can use as raw material to produce their lubricating oils for the consumer market,' Rowsley's website said.

Rowsley is 22.88 per cent owned by former remisier Peter Lim Eng Hock. The substantial shareholder has given an undertaking to subscribe in full his entitlement of the rights share with warrants. Rowsley said it has received in-principle approval from the Singapore Exchange for the listing of the proposed shares and warrants.

In recent years, Rowsley is most remembered for a high-profile reverse takeover that did not materialise. In 2007, the company dropped its plan for a highly-publicised $2.7 billion reverse takeover deal with Chinese solar energy firm Perfect Field.

Published July 30, 2009

Rowsley proposes rights issue with warrants

By CHEN HUIFEN

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INVESTMENT company Rowsley has proposed a rights issue to raise net proceeds of up to $14.9 million. The issue comes with free warrants which could potentially raise another $38 million.

The renounceable, non-underwritten issue will be on the basis of two rights shares with three warrants for every five existing shares held. This involves the issue of up to 253.3 million rights shares at 6 cents each.

The issue price of six cents represents a 37 per cent discount to the closing price of 9.5 cents yesterday. The issue comes with up to about 380 million three-year warrants, each convertible to one share at an exercise price of 10 cents.

Apart from general corporate and working capital purposes, Rowsley said the net proceeds of up to $14.9 million from the rights issue will be used to provide financial support to San Technology Holding and for investments, if opportunities arise. The company did not provide more details on San Technology, but according to its website, San Technology is 51 per cent owned by Rowsley and is in the business of developing renewable energy and lubricating oil recycling businesses in China. Proceeds from exercise of warrants will provide the company with future liquidity.

'STH leverages on leading edge nano-technology based membrane-separation technology to process used lubricating oil into high quality base oil which refinery blenders can use as raw material to produce their lubricating oils for the consumer market,' Rowsley's website said.

Rowsley is 22.88 per cent owned by former remisier Peter Lim Eng Hock. The substantial shareholder has given an undertaking to subscribe in full his entitlement of the rights share with warrants. Rowsley said it has received in-principle approval from the Singapore Exchange for the listing of the proposed shares and warrants.

In recent years, Rowsley is most remembered for a high-profile reverse takeover that did not materialise. In 2007, the company dropped its plan for a highly-publicised $2.7 billion reverse takeover deal with Chinese solar energy firm Perfect Field.

Published July 30, 2009

Starhill Global DPU rises 6.7% in Q2

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STARHILL Global Reit has announced a distributable income of $18.4 million for the second quarter of 2009 with a distribution per unit (DPU) of 1.90 cents, 6.7 per cent higher than for the previous corresponding period.

The latest distribution represents a yield of 12 per cent on an annualised basis, said YTL Pacific Star, the manager of the Reit, which has a large presence in Orchard Road.

About $0.4 million of income available for distribution for the second quarter, comprising mainly overseas income, has been retained to satisfy certain legal reserve requirements in China and for prudency, it added.

Gross revenue in Q2 2009 was $33.4 million, or 10.5 per cent higher than the $30.2 million in Q2 2008, due primarily to higher rates achieved for office renewals and new leases in Singapore, rent review of the master lease in Ngee Ann City, as well as higher revenue from its Chengdu property.

Net property income was higher at $27 million, an increase of 16.4 per cent, mainly attributed to higher gross revenue.

Said Francis Yeoh, executive chairman of YTL Pacific Star: 'Starhill Global Reit's strong performance, despite difficult market conditions during the quarter, has been underpinned by its quality portfolio and the manager's robust capital and asset management strategies.'

'Our focus continues to be creating more value for our unitholders by driving asset performance and building long-term growth prospects for Starhill Global Reit.'

Occupancy for retail space in both Wisma Atria and Ngee Ann City remains high at around 98 per cent, while occupancy for office space in the two Singapore properties is still healthy at above 90 per cent, the Reit said.

It added it will continue to concentrate on tenant retention and sustaining the appeal of its retail properties in terms of trade mix and offerings.

Published July 30, 2009

Coal, sand and stone spell good times for Marco Polo

By VINCENT WEE

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TO THE casual investor, there may seem little connection between an El Nino-related prolonged dry season in Indonesia and the marine industry. But if one looks closely at specific segments, there may be interesting opportunities to be discovered.

For example, Marco Polo Marine, which bills itself as an integrated shipping group, is one company that could benefit significantly from this seasonal variation. The company specialises in the transportation of coal in Indonesia.

Indonesian coal mining is somewhat unique in that many mines are located far inland and the commodity needs to be transported by barges to deeper waters off the coast before it can be loaded onto the dry bulk carrier ships that take it to the export markets. This is where Marco Polo's forte lies.

It is one of the biggest players in the tug and barge market for the transportation of coal, sand and granite with a fleet of 55 vessels, which will increase to 80 vessels by year-end.

Demand for Indonesia's coal has remained relatively constant despite the economic slowdown, with the only impediment to export volumes being production capability. The dry season in the second half of the year enables coal mines to increase production and the longer the season, the better production will be.

As an indication, China last week said coal imports more than doubled year-on-year in the first half to nearly 50 million tonnes. This will benefit Marco Polo as demand for its services will also rise in line with increased production. By some estimates, Indonesian coal production is expected to achieve annual growth of 8.5 per cent till 2012. Marco Polo sees a gradual pick-up in coal exports of 10-15 per cent over the next six months.

In addition, Marco Polo is also active in the transport of sea sand and granite used in reclamation works. According to the company, demand for these services has more than doubled over the past year as Indonesia's ban on sand exports kicked in and contractors had to switch to other sources. With these new sources being further away in Vietnam, Myanmar and Cambodia, the voyage length increases, meaning that Marco Polo's vessels are used for longer periods.

Indeed, the charter revenue mix has become slightly biased towards the construction market, which now makes up about 60 per cent of revenue with coal transportation accounting for the remaining 40 per cent. This in turn could provide further positive surprises as the group's overall revenue mix itself has changed.

Following the completion of its first drydock in H1 FY09, the percentage of revenue from shipbuilding and repair increased to 55 per cent with chartering taking up the remaining 45 per cent - a reversal from the previous corresponding period. This is set to increase as the second drydock is completed in the second half.

Looking ahead, Marco Polo expects revenue from ship repairs, which are less cyclical in nature relative to that from shipbuilding, to contribute significantly to the shipyard operations while recurring income will be underpinned by sustainable time charter income and the underlying rates.

'With the addition of 25 new vessels and the two new drydocks for the ship repair business going operational by October and the sale of an AHTS vessel, Marco Polo's earnings are projected to accelerate in FY10 by 86 per cent and FY11 by 25 per cent,' said CIMB-GK Research as it initiated coverage with a 'buy' rating and a target price of 51 cents.

'The ship repair business will be Marco Polo's wild card that could spring positive surprises,' said CIMB-GK, adding that 'current valuations are attractive, given Marco Polo's growth potential'.

The stock was last traded at 37.5 cents.

Published July 30, 2009

Negative bonuses for Temasek staff for second year running

Ho Ching hints at possible changes to current pay structure

By CONRAD TAN

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(SINGAPORE) Temasek Holdings staff will be paid 'negative bonuses' for the second year in a row after its investment return fell below its risk-adjusted cost of capital, chief executive Ho Ching said yesterday.

The firm's wealth added - what Temasek calls its return in excess of its risk-adjusted cost of capital - was negative for the year to end-March, she said, though she did not disclose the size of the shortfall.

'Returns below our risk adjusted cost of capital hurdle means we have negative bonuses to be distributed,' Ms Ho said.

'In the previous financial year, which ended on March 31, 2008, Temasek's wealth added was minus $6.3 billion - the first time in the five years since it started publishing its annual Temasek Review that its investment return fell below the cost-of-capital hurdle. That was despite Temasek generating a positive return of 7 per cent for its shareholder, the Ministry of Finance.

'And so, from CEO to office attendants, all our staff were allocated negative bonuses last year, and will be allocated more negative bonuses this year,' Ms Ho said.

A Temasek spokesman said that an undisclosed portion of the wealth added each year forms a bonus pool that is then allocated to 'bonus banks' maintained for individual staff. When bonuses are positive, staff can withdraw just part of the bonus in cash; the rest is retained in various co-investment schemes that can be cashed in only after three years or more.

When the wealth added is negative, a 'negative bonus' is then charged against the balance in the staff's bonus bank, potentially wiping out the medium- and long-term incentives paid in previous years.

'While we are certainly not happy with the negative wealth added in March last year, as well as March this year, this has enabled us to test our compensation framework through at least one very difficult market cycle,' Ms Ho said.

One of Temasek's key principles, she said, 'is for our employees to share in the institution's performance, both for positive and negative results'.

'This is in essence having an owner's approach to our business and operations.'

Senior managers have the bulk of their incentives deferred for 3-12 years, she said. Some of these deferred pay components are subject to market risks, and vary with the returns that Temasek earns for the Finance Ministry.

The remaining components are subject to a 'no-floor claw-back', she added, meaning that they may be 'wiped out if and when we deliver well below our cost of capital target'.

'This clawback feature is tied to the principle of rewarding only for sustainable performance,' she said.

She also hinted at possible changes to Temasek's current pay structure. 'Some say it's too long,' she said, of the 3-12-year period for deferred pay. 'But we'll see.'

Published July 30, 2009

Investors' body hits out at Tangs' exit offer

CK Tang minority investors should have been offered a higher price, it says

By JAMIE LEE

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(SINGAPORE) The Securities Investors Association (Singapore), or SIAS, has hit out at the delisting proposal by the Tang brothers, saying that the exit offer has ignored the interests of minority shareholders.

SIAS's call: At a meeting with minority shareholders, Mr Gerald (right) said minority investors have been treated with no dignity and urged all shareholders to attend tomorrow's EGM and be 'one-minded' in opposing the delisting of CK Tang

The investor rights watchdog has requested a meeting with the board of directors before tomorrow's extraordinary general meeting (EGM), after attempts by a vocal minority shareholder, Alan Goei, late last week to meet the directors failed.

'This is a legitimate protest that must be taken into account,' said SIAS chief executive David Gerald at a meeting with some 15 shareholders yesterday.

'Minority shareholders have been treated with no dignity,' he said, while urging all shareholders to attend the EGM and be 'one-minded' in opposing the delisting.

Mr Goei presented a property valuation done by a professional valuer that prices the flagship store at $394 million, beating the earlier valuation of $340 million.

He declined to reveal the valuer's company as the valuation was done as personal favour and the valuer was from a rival firm of Jones Lang LaSalle, which did the valuation for CK Tang's board of directors.

The valuation was based on the property's existing use but assumes a monthly rental of $12.30 per square foot that is based on the rental charged at Isetan and Takashimaya, Mr Goei said.

Taking this rental rate would also assume that part of the department store is sub-leased to other tenants.

The current lease amount for the department store was not revealed in the valuation report requested by the directors.

The Tang brothers - Tang Wee Sung and Tang Wee Kit - have maintained that there are no plans to redevelop the property or to evolve from the department store concept as these are the wishes of their father, who founded the business.

But Mr Goei said that while he is running a private real estate business set up by his father, there should be a 'different treatment' from family-run companies that went public.

Based on Mr Goei's valuation report, Mr Gerald said that the exit price of 83 cents per share could have been higher and urged board members to reconsider the exit price.

The board showed poor corporate governance by not maximising shareholders' value in considering such rental ideas from the shareholders, he added.

Mr Goei told other shareholders yesterday that he had written to chief executive Foo Tiang Sooi last Friday for a meeting with the directors. He said he has not received a reply.

During the meeting, Mr Goei flashed some of the 104 photos he took of Orchard Road on Saturday night, reiterating that with the revamp of the shopping belt, CK Tang should command a higher value.

A group of shareholders - including Mr Goei - have also written to the Securities Industry Council through their lawyers to seek clarification on the delisting. Mr Goei declined to elaborate.

Meanwhile, acceptance level for the de-listing has reached 89.51 per cent. Once the Tang brothers hold control of 90 per cent of the shares, their third privatisation attempt would become a sure win.

One observer noted that if minority shareholders are still unhappy with the exit price, they can choose to hold on to the untraded shares and demand for a higher buyback price privately if the Tangs redevelop the property later and raise its net asset value.

CK Tang has declined comment. The board had earlier said that it would ask regulators if more information needs to be presented and is likely to address this, as well as the valuation report, tomorrow.

Published July 30, 2009

Speculation creeping back into market: Mah

Govt will act if housing market overheats; supply pipeline is strong

By EMILYN YAP

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(SINGAPORE) Speculation is trickling back into the property market and the government is watching the situation closely, National Development Minister Mah Bow Tan said yesterday.

The authorities will take action should the market overheat but home seekers should also be careful about making purchases, he underlined.

'I wouldn't say that there is excessive speculation at the moment but there is some element of speculation involved,' Mr Mah told the press after the topping-out ceremony for Tower One at Marina Bay Financial Centre (MBFC).

'Some of the practices and habits that you saw in the last property boom are beginning to come back.'

Queues have started forming outside some showflats and property agents are reportedly armed with blank cheques from clients.

Median prices have also gone up at some launches - by up to 7 per cent a month in a handful of cases. This has stemmed the fall in private home prices, with the Urban Redevelopment Authority's (URA) price index sliding 4.7 per cent in Q2 from a quarter ago - much less than the 14.1 per cent tumble it took in Q1.

The question, though, is why a buying wave is forming when economic waters remain tepid. The slowdown has moderated but a contraction is still on Singapore's books, Mr Mah said.

The official forecast now points to the economy shrinking 4-6 per cent this year.

It is therefore unclear if the buying momentum is sustainable, he said. 'I'm not so sure whether the demand is due to pent-up demand, or whether it is due to buyers responding to lower prices by developers or even to the current low interest rates.'

While it is premature to call it the start of a property bubble, the government is monitoring the market closely and will take 'whatever action is necessary', Mr Mah said.

He also urged home seekers to research the property market thoroughly and seek affordable units.

'Don't panic - because there is a lot of supply in the market.'

According to URA, there were 62,350 uncompleted private homes from projects in the pipeline at the end of Q2. Of these, 38,482 units were still unsold.

The government can also inject supply through the Government Land Sales (GLS) programme, Mr Mah said. It is considering whether it should reintroduce the confirmed list (suspended last October) for the first half of 2010.

Responding to Mr Mah's comments, the Real Estate Developers Association of Singapore (Redas) said that developers share a 'common desire to see a steady growth, for greater stability and sustainability in the property market'.

It also highlighted that not all property launches have been snapped up.

'Only a selected few launches have been highly successful for various reasons. This could also be a result of pent-up demand.'

Industry watchers saw Mr Mah's message as a signal against excess exuberance in the market. The move could have contributed to a fall among major property counters yesterday: City Developments lost 10 cents to close at $9.94, while CapitaLand shed six cents to $4.00.

Colliers International's research and advisory director Tay Huey Ying felt that there is 'genuine concern' about the sustainability of current demand. Some buying has been driven by accumulated wealth from the boom years and when the funds dry up, it will take strong economic fundamentals to generate new demand, she said.

But she also believes that the government will 'tread cautiously' when it comes to tempering market sentiment, because the pick-up has only begun and is fragile.

Developer sales of private homes started to recover in February - interest first poured into mass-market projects and gradually filtered into mid- and high-end ones.

Over the last month, for example, KOP Group sold 11 units at its luxury site The Hamilton Scotts, at prices ranging from $2,500 to $3,000 psf.

Across liquidity-flush Asia, several economists have flagged the risk of property bubbles forming. However, many do not believe that policymakers will aggressively tighten measures when economic recovery remains nascent.