Published August 14, 2009

M'sian activists hail Internet filter climbdown

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(KUALA LUMPUR) Malaysian rights activists yesterday welcomed the government's decision not to implement a controversial plan to create an Internet filter blocking 'undesirable' websites.

The proposal had been described as a 'horror of horrors' by the opposition which said it would destroy the relative freedom of the Internet in Malaysia, where the mainstream press is tightly controlled.

A senior official with the National Security Council (NSC) last week confirmed AFP reports that the ruling coalition was considering the controls, effectively scrapping a 1996 guarantee that it would not censor the Internet.

However Information Minister Rais Yatim said on Wednesday that the government did not intend to introduce online censoring, telling state media it would instead directly target cases of sedition, fraud and child pornography on the Internet.

'The government has taken a positive step not to implement it. I don't think censoring will make any sense in this globalised world,' said N Siva Subramaniam, a commissioner from the government- backed Human Rights Commission.

'Even if you block certain websites, readers still can get the news from other sources,' he told AFP.

Activists, however, remained cautious about Mr Rais's comments, saying that while the government appeared to have backed away from the plan for a formal filter, it could still be intent on curtailing freedom of expression.

'We are happy if they are dropping the idea, but we would also like to see what is their approach on what should be available on the Internet,' said V Gayathry from the Centre for Independent Journalism. 'The government seems to be determined to monitor and control online content. It creates fear among the people - it is an implied threat and that itself will make people practise self-censorship.'

Malaysia's lively blogosphere has been a thorn in the side of the Barisan Nasional government, which was been in power for more than half a century but was dealt its worst ever results in elections a year ago.

Internet news portals and blogs, which escape tight controls on the mainstream media, were credited as a key element in the swing towards the opposition which has been adept at using new media to communicate its ideas. -- AFP

Published August 14, 2009

Sime Darby in need of big overhaul

Najib has singled out conglomerate for reform, including listing plantation biz

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(KUALA LUMPUR) When is it a good time for a company to shape up? Maybe when the prime minister himself orders it.

Spreading itself thin? Shackled by an unwieldy gamut of businesses, the group risks losing its No 1 slot

Malaysian conglomerate Sime Darby needs a big overhaul, including possibly listing its prized plantations business and selling its underperforming motor unit, to boost valuations and compete better with fast-growing rivals.

Just as some investors clamour for Sime Darby to consider these options, Prime Minister Najib Razak has promised reforms of huge government-linked companies and singled out Sime Darby as the country aims to boost investments.

Singapore-listed Wilmar and Indonesian Astra Agro Lestari are emerging as the key beneficiaries of recovering palm oil prices driven by better growth potential and a greater focus on commodity businesses.

Shackled by an unwieldy gamut of businesses from property in China to selling BMW cars in Malaysia, Sime Darby risks losing its No 1 slot, unless it overhauls its sprawling empire to focus on boosting palm oil yields, a key determinant of profitability.

Plantations accounted for about 74 per cent of Sime Darby's 2008 profit with the rest coming from property, motor, heavy equipment and energy, according to company data.

'They are still a plantation company, however much they try to diversify,' said Choong Khuat Hock, research director at Kuala Lumpur-based fund manager KSC.

'If they don't focus enough on plantations, soon they will be overtaken.'

Majority-owned by the state asset manager and the employees provident fund, Sime Darby's business model bundles the cash-generating plantations operations with other less profitable divisions such as the motor unit.

Investors are already taking note. Wilmar's shares have surged 120 per cent and Indonesia's top planter, Astro Agro is up 86 per cent versus a 60 per cent rise in Sime Darby's stock. Wilmar is valued at US$27 billion, while Sime has a valuation of US$14 billion.

Earnings per share at Sime Darby, whose financial year ends in June, is expected to fall 44 per cent in fiscal 2009.

Wilmar's EPS is set to shrink 35 per cent in January-December 2009 and Astra Agro's EPS is expected to drop 25 per cent, according to Reuters data.

Sime Darby, created through a merger between three plantation groups in 2007, holds 844,000 hectares of plantation land spread over Asia and Africa, making it the world's largest by its land bank.

Indonesian plantation firms, equipped with vast land resources, are growing fast and could overtake Sime.

Sime Darby is trading on a 2009 forecast price to earnings multiple of 25, the same as rival IOI Corp and lower than Wilmar's 28. Its return on equity at 9.2 per cent is lower than 14 for IOI and 13.6 for Wilmar and 33 for Astra Agro.

Many investors want Sime Darby to list its crown jewel division to enhance its appeal as a pure play plantations firm.

'Sime should consider an IPO next year because valuations will be attractive, while equity and crude palm oil markets would be on a better footing,' said Kaladher Govindan, head of research at TA Securities.

'That is what Wilmar seems to be gunning for,' said Mr Kaladher, referring to Wilmar's planned US$3 billion IPO to float its China business in Hong Kong.

Sime Darby, however, does not expect to immediately list its plantation business as part of a detailed review of its operations, a source with direct knowledge of the plan, told Reuters yesterday.

'Not really. It (the listing) is not on the cards. People are just talking. People have asked us about this but no,' said the source, who did not want to be identified due to the sensitivity of the matter.

Last year, Sime Darby exited a US$2 billion submarine cable job carrying electricity from Borneo island to mainland Malaysia.

Some analysts say that Sime Darby could follow in the footsteps of Indonesia's finance-to-automobiles conglomerate PT Astra International Tbk , which separately listed its plantations business Astra Agro more than a decade ago.

Astra Agro stands as a pure oil palm estate owner, offering investors a direct exposure to its lucrative plantation cashflows and into the global palm oil industry worth US$45 billion annually or even more.

'Something like Astra . . . would be positive for Sime in terms of a purer plantation play. Of course, investor interest would be more on the plantation, rather than its holding company,' said an analyst at a foreign brokerage in Kuala Lumpur.

Despite its size, Sime benefits the least from a positive crude palm oil (CPO) price trend, Morgan Stanley said.

A 10 per cent rise in CPO prices adds only 5 per cent in Sime earnings, while such a swing would raise Astra Agro's earnings by 13 per cent, the investment bank said in a note.

But a spin-off of the plantations business, may not go down well with Sime Darby, which has said that it wants the company to remain a conglomerate.

It has recently added to its diverse portfolio with new acquisitions in energy and healthcare. -- Reuters

Published August 14, 2009

Noble's Q2 profit doubles to US$248.8m

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NOBLE Group Ltd, a Hong Kong-based supplier of raw materials from soybeans to coal, said second-quarter profit more than doubled, helped by a one-time gain from the acquisition of Gloucester Coal Ltd.

Net income rose to US$248.8 million, or 7.45 US cents a share, in the three months to June 30, from US$122.5 million, or 3.64 US cents, a year earlier, the company said yesterday in a statement to the Singapore Exchange. Sales fell 31 per cent to US$7.17 billion.

Noble won control of Sydney-based Gloucester Coal in May after raising its cash bid to A$460 million (S$557 million) for shares it didn't already own in the coal miner.

First-half net profit margin rose to 1.4 per cent, after adjustments for one-time gains, compared with 1.2 per cent a year earlier.

'In what remained a difficult economic environment, Noble's first-half performance represents a very solid result,' chairman David Eldon said in a statement yesterday. 'We have been particularly encouraged by the fact that our net profit margins widened as our pipeline strategy gains traction.'

The Reuters/Jefferies CRB Index, which tracks 19 raw materials including soybeans, sugar, nickel and aluminium, gained 13 per cent in the second quarter, after falling 4 per cent in the previous three months. The Baltic Dry Index, a measure of shipping costs for commodities, more than doubled to 3,757 at the end of the second quarter from the previous three months, boosted by shipments to China.

Noble shares have gained 96 per cent this year, valuing the company at $6.7 billion. The stock rose four cents to close at $2 on the Singapore stock exchange yesterday. -- Bloomberg

Published August 14, 2009

Rougher waters for Keppel, SembMarine

By VINCENT WEE

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WITH both of the big offshore and marine-based conglomerates Keppel Corp and Sembcorp Marine having reported their second-quarter results, the focus must now move to the remaining half of the year.

Keppel expectedly had Q2 profits boosted by a $422.2 million exceptional gain from the sale of Singapore Petroleum Company as net profit more than doubled to $739.5 million. Less exceptionals, however, net profit saw a more sedate 6 per cent rise to $317.3 million. SembMarine, meanwhile, saw a 7.6 per cent increase in net profit to $138 million.

The bulk of Keppel's and obviously all of SembMarine's profits still comes from the offshore and marine sectors and it must be here that investors must look for clues to future performance.

In terms of current orders, both groups are practically neck and neck. Keppel reported a $7.7 billion net orderbook with deliveries stretching into 2012 while SembMarine has orders worth $7.9 billion as at August with completions and deliveries till early 2012.

In terms of new orders, however, SembMarine seems to have a slight advantage with new orders of $1.2 billion secured to-date since the end of last year. Keppel, in contrast, is lagging with just $345 million in contracts announced for the first two quarters. The second quarter, in particular, has been especially dry for the rig builders with Keppel announcing just $30 million of contracts. Keppel, on the other hand, announced on Tuesday another $85 million worth of contracts.

Most notably, however, neither of them has secured a single rig newbuilding contract since the start of the year, although SembMarine does have the edge with two semi-submersible jobs that it is taking over from another builder. This contributed significantly to its new order tally.

Analysts also seem slightly more upbeat on SembMarine. In maintaining her 'buy' call and raising target price to $3.74, DMG's Serene Lim said: 'We continue to like SembMarine and believe that order momentum in H209 may surprise on the upside. While the market seems excited about the plentiful orders from Petrobras, we believe investors have yet to factor in other potential non-Petrobras contracts in the offing.'

The report went on to add that industry checks show that SembMarine is currently bidding for jack-up newbuilds from national oil companies in Saudi Arabia, Vietnam and even China.

What is key to the two companies' fortunes must be the price of oil and the resultant ability and willingness of companies to commission newbuilds. This, in turn, will be dependant on the fortunes of the global economy which drives the demand for oil.

Investors know this and react accordingly. The share price of both Keppel and SembMarine are closely linked to the fluctuations of the oil price. For example, Keppel shot up 28 cents and SembMarine rose five cents yesterday amid an optimistic outlook for oil. Yet, only the day before, the shares were down as the view of the day on oil turned negative.

If the highly fluctuating oil price forecasts are anything to go by, the second half of the year can be expected to be no different for the rig builders.

Overall though, unless sure signs of economic recovery emerge and new orders come in, the second half looks weak for the two groups and the situation will get a little grimmer as the offshore and marine orderbook starts to wind down.

Published August 14, 2009

Fed does right by bullish market

Markets shoot to highs on Fed's Wednesday decision to leave funds rate at zero to 0.25%

By ANDREW MARKS
NEW YORK CORRESPONDENT

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THE jitters preceding the Wednesday afternoon conclusion of the US central bank's interest rate policy meeting may have surprised some investors. With the health of the US economy still fragile and the strength of recovery a matter of great concern, it seemed highly unlikely that the voting members of the US Federal Reserve's body responsible for setting all-important short-term interest rates would choose this as the time to shift from a near-zero federal funds rate.

But with the recession ending, investors have begun to wonder and fret over when the Fed will raise rates - and what that will mean for the recovery. So while the Fed's decision on Wednesday to leave the funds rate at zero to 0.25 per cent was a yawner on Wall Street, the market was on high alert for any other signals that the Fed might send on its view of the economy and when it might judge the financial system strong enough to allow it to return to normality.

On Wednesday, the Fed offered signals on both - and investors liked very much what it had to say.

'You really couldn't have asked for more,' said Joel Naroff, president of Naroff Economic Advisors. 'The Fed gave the market exactly what it wanted to hear - that the economy is levelling out, but that the stance on interest rates will remain in place until growth is on a sustainable basis.

'And then it made overseas investors very happy with the announcement that it will phase out the purchases of Treasury securities by the end of October.'

The major US stock indices, which had risen early on Wednesday, hesitated only briefly as investors digested the Fed's words, before shooting to closing highs. The Dow Jones Industrials added 120.16 points or 1.3 per cent to 9361.61, and the S&P 500 up 11.46 points or 1.2 per cent to 1005.81. The Nasdaq Composite edged up 28.99 points or 1.5 per cent to 1998.72.

On Thursday, the market kicked off in rally mode due to the Fed's upbeat comments, traders said. But the early gains were more modest than expected and soon turned to losses due to retail sales and jobless claims reports that fell short of expectations.

After opening with a 20-point gain, the Dow slipped into negative territory as investors fretted over 558,000 new unemployment claims and a 0.1 per cent decline in July retail sales - a much worse performance than the 0.7 per cent gain that economists expected.

Economists also expected slightly fewer claims - 545,000. But in the midst of such a big rally, investors appear ready to take profits at even the slightest indication of bad news.

By 10 am, the Dow was off 44 points or 0.47 per cent at 9,317.63. The S&P 500 was down four points or 0.4 per cent to 1,001.73, while the Nasdaq Composite had slipped eight points or 0.41 per cent to 1,990.56.

The key change in the Fed's statement was an alteration in its description of the economy. In the June statement, it said: 'The pace of economic contraction is slowing.' This time around, it said that while 'the economy is likely to remain weak for some time', it believes that 'the economy is levelling out'.

Mr Naroff said: 'That may not seem like a lot, but it is. It tells us the Fed believes the recession is basically over. At the same time, it made clear that the need to be certain of a sustainable recovery means we will not be seeing a rate hike soon. That's nothing but a positive for investors.'

For analysts and stock traders such as Nick Colas, who runs several funds for BNY Convergex Group, the Fed's announcement that it may end the programme to buy up to US$300 billion in long-term government securities by October was just as important. 'Many investors have viewed this quantitative easing policy as the single most destructive practice undertaken by the Fed or Treasury in terms of confidence since the whole crisis began,' he said.

'It is virtually impossible for the Fed to prove that it isn't just buying Treasuries directly from the government, and such a breach of central bank independence is very damaging to long-term global confidence in the US banking system.'

Mr Colas pointed out how upset China has been with the way that the US has been monetising its debt to spend its way out of the recession.

That the Fed is prepared to end this programme means that it is ready to turn over the operation of the financial system back to the markets, said Mr Naroff. 'It means we're ready to get back to normal, and that's a big confidence booster.'

Published August 14, 2009

SingTel snaps losing streak, bodes well for economy

Q1 net income up 7.7%; 1st quarterly rise in 12 months

By WINSTON CHAI

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(SINGAPORE) Singapore Telecom has added weight to hopes of economic recovery by posting a rise in quarterly profit for the first time in 12 months.

Related links: Click here for SingTel's news release Financial statement Appendix

'If you look at the economic numbers that have been announced, I think we are probably quite comfortable that the worst is over,' said SingTel Group CEO Chua Sock Koong.

'However, the question of how quick the recovery will be and how sustainable it is, is something we are closely monitoring,' she told reporters at the company's first-quarter earnings briefing yesterday.

Strong performances in Singapore and Australia, coupled with higher contributions from key regional associates Bharti and Telkomsel, lifted SingTel's Q1 net income to $945 million, up 7.7 per cent from $878 million a year earlier.

Earnings per share rose 7.6 per cent to 5.94 cents, while operating revenue edged up 1.9 per cent to $3.85 billion for the three months ended June 30.

SingTel, which derives 72 per cent of its Ebitda - earnings before interest, tax, depreciation and amortisation - from overseas, is finally seeing regional currency movements swing in its favour after battling adverse fluctuations for a year.

The Indian rupee narrowed its depreciation against the Sing dollar sequentially to a mere 0.3 per cent in Q1, boosting earnings from Bharti, SingTel's most profitable regional unit.

Bharti's contribution to SingTel's pre-tax earnings climbed 16 per cent to $272 million.

The Indian operator is looking to boost its earnings further through geographic expansion. It has extended merger talks with South Africa's MTN Group to Aug 31.

A successful union will create a telecom titan with more than 200 million subscribers and over US$20 billion in annual revenue. It could also slash SingTel's 30.4 per cent stake in its Indian associate to around 19 per cent, but market watchers expect the operator to top up its Bharti stake if this occurs.

'Discussions are ongoing,' Ms Chua said, declining further comment on its unit's merger plan.

SingTel's Indonesian associate Telkomsel also turned in a strong Q1, with the Indonesian rupiah climbing 7.1 per cent against the Sing dollar during the quarter. As a result, Telkomsel's share of SingTel's pre-tax profit rose 11 per cent to $245 million.

After factoring in the scorecards of its four other associates - Thailand's AIS, Globe in the Philippines, Pakistan's Warid Telecom and PBTL in Bangladesh - pre-tax profit from SingTel's six regional units rose 12 per cent to $624 million in Q1.

The group's Singapore operations registered a 0.3 per cent increase in net income in Q1 to $338 million on a 10.3 per cent improvement in sales to $1.38 billion.

Revenue increased across most key businesses except international telephony, as mobile roaming and IDD income were hit by the economic downturn.

Sales from local IT and engineering spiked almost 50 per cent due to a maiden contribution from SingTel's latest local acquisition, Singapore Computer Systems.

The operator also netted Q1 revenue of $14 million in Singapore from a fibre-optic rollout contract with OpenNet, a SingTel-linked consortium tasked with building the new broadband highway.

'We expect that (revenue from installing fibre) to increase as the pace of the rollout starts to peak between 2010 and 2011,' said SingTel Singapore CEO Allen Lew.

The new nationwide fibre-optic network is expected to be fully operational by end-2012. Besides installing the new fibre-optic links, SingTel will pocket additional income over the coming years by divesting some of its Internet assets to OpenNet.

SingTel's Australian subsidiary Optus saw a 13.4 per cent jump in net profit in Q1 to A$139 million (S$166.5 million), but its earnings fell 0.8 per cent when converted to Sing-dollar terms due to currency depreciation.

SingTel shares closed unchanged at $3.18 yesterday.

Published August 7, 2009

NOL Q2 losses hit US$146m

Revenue down 38%; group expects loss for full year to be significant

By NISHA RAMCHANDANI

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(SINGAPORE) Shipping giant Neptune Orient Lines (NOL) registered a net loss of US$146 million for the second quarter ended June 26 against a profit of US$76 million in the corresponding quarter last year, as the global economic recession continued to take its toll on performance.

Mr Widdows: Business conditions still depressed, will affect performance

And while the third quarter is traditionally stronger for the group, NOL still 'expects to post a significant full year loss', it said.

Revenue for Q209 slid 38 per cent to US$1.39 billion, down from US$2.24 billion previously, as revenue from its container shipping business took a hit.

For H109, net loss came in at US$391 million, versus a profit of US$196 million in H108, while revenue fell 37 per cent to some US$2.93 billion.

'Although volumes and operating performance improved in the latter months of the first half, business conditions remained depressed, and this continued to impact our financial performance,' said CEO Ronald Widdows.

During the quarter, revenue from its container shipping unit APL took a 39 per cent tumble year on year to US$1.2 billion as volumes declined by 19 per cent year on year to 489,000 forty-foot equivalent units (FEUs) and freight rates worsened in key trade lanes.

Related links: Click here for NOL's news release Financial results Presentation

Average revenue per FEU declined 24 per cent to US$2,277/FEU from US$3,014/FEU in Q208, on the back of lower bunker fuel cost recovery and continued decline in freight rates, especially for Asia-Europe and Intra-Asia long haul.

Fifteen ships are currently laid up - which represent some 12-14 per cent of NOL's fleet - and there are no concrete plans to bring these ships back into service right now, said Eng Aik Meng, president of APL, in response to questions at a briefing yesterday morning.

However, where volume mix is concerned, the intra-Asia trade mix grew as demand from other East/West trades dropped. Intra Asia trade contributed 39 per cent of total volumes in 2Q09, as opposed to 34 per cent in Q208.

Revenue from its logistics business dropped 39 per cent year on year to US$195 million due to both lower volumes across the various logistics services and lower freight rates in the forwarding business segment.

Its terminals business segment posted a 28 per cent fall in revenue to US$100 million for the quarter as a result of weaker global container trade worldwide.

Meanwhile, the company is using a portion of the US$960 million raised from its rights issue to repay debt, while the remainder will be channelled towards acquisitions.

However, NOL said that it does not have specific investment opportunities in mind at this point.

The funds from the rights issue have also helped strengthen the balance sheet by lowering pro-forma net gearing to 0.08x as at June 26, 2009, compared to 0.33x as at December 26, 2008.

NOL rose to an intra-day high of $1.73 at 9.01 am yesterday, before sinking to a low of $1.66 at 10.58am and finally closing, unchanged, at $1.69.

Published August 7, 2009

Homes from sold-out projects back on market

Speculators a minority as they shoot for small flipping gains

By EMILYN YAP

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(SINGAPORE) Some buyers who managed to lay their hands on units at projects sold out recently are trying to get lucky for the second time - by selling what they snapped up, for a profit.

This brings to mind the government's warning last week - that some element of speculation is back in the property market. Industry watchers say, however, that subsales are common for fully sold projects and speculation still remains mild.

Advertisements for subsales at Optima@Tanah Merah have surfaced in the last few days - with owners seeking prices which are at least 5 per cent more than what they paid.

This comes less than a week after all 297 units at the 99-year-leasehold project were taken up in just three days.

Developer TID sold the units at an average price of about $810 per square foot (psf). It had to conduct two rounds of balloting as home seekers descended upon the showflat in droves.

There are also offers for subsales at 8@Woodleigh. Frasers Centrepoint sold all 330 units at the 99-year-leasehold project over a few weeks in June.

According to industry watchers, sellers in the subsale market need to charge a premium of at least 5 per cent to break even. This would cover stamp duty, legal fees and any agent's commission. To earn more, some may set prices which are up to 10 per cent more than what they paid.

But given the market today, those flipping properties would be glad to come out of the deal with $50,000 to $80,000, said ERA Asia Pacific associate director Eugene Lim.

He pointed out, though, that speculation today is 'not excessive'. Every new project will attract a small number of speculators but most buyers today are ready to keep and lease out the property, he explained.

It is when the project is sold out that these buyers may change their minds, he added. 'While some people buy with a medium-term view, because the project is sold out, it presents an opportunity for them to make a quick gain.'

Savills Residential director Phylicia Ang also believes that most buyers do not plan to 'flip' their properties initially. But she noted that if there is profit to be made, some are willing to hear out the offer and may sell later.

She also suggested that not all advertisements may be placed by owners - some property agents may take the initiative to promote units, test market interest and 'gather more leads'.

Both Mr Lim and Ms Ang highlighted that speculation is nowhere as feverish as it was some two years ago. According to Mr Lim, buyers in the subsale market today are more particular - probably looking out for specific units they could not get during the launch.

Rising optimism in the property market seems to be benefiting older projects as well. Casa Merah - which is near Optima and will receive Temporary Occupation Permit soon - has seen prices at its units rise in the last few months. While caveats lodged for units there in February reflected prices of $631-$665 psf, those in July showed prices of $699-$751 psf.

Meanwhile, new launches continue to do well. The 70-unit Airstream at St Michael's Road, for instance, was fully sold through balloting on Wednesday. Previews for Keppel Land's 56-unit Madison Residences have begun, while previews for Allgreen's Viva in Novena will start this weekend.