Published September 28, 2009

US$1,000 a tonne possible for palm oil

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(SINGAPORE) Palm oil may reach US$1,000 a tonne if a global economic recovery pushes crude oil up to US$95 a barrel, said James Fry, managing director of LMC International Ltd, which tracks the world's main oilseeds.

Good crop: Palm oil may average US$650 a tonne this year and next year due to threats to production, say Citigroup analysts

Vegetable oils, which are used as biofuels, usually gain alongside crude. Oil has risen 48 per cent this year, averaging US$57 a barrel, amid speculation that the worst recession since the Great Depression is easing. Palm oil has increased 29 per cent.

'Markets are looking well ahead at a recovery that is not yet revealed in the US statistics,' Mr Fry said in an e-mailed presentation for a three-day conference in Mumbai that concluded yesterday.

Governments worldwide, including in Europe, have ordered the use of ethanol or vegetable oils in petrol and diesel to boost supplies. Diesel in Brazil, the world's second-largest soyabean grower, will contain 4 per cent biofuel from July, Energy Minister Edison Lobao said on May 14.

'Biofuels have created a link between mineral and vegetable oil prices,' Mr Fry said.

Palm oil for December delivery in Malaysia, the second-biggest producer, rose 3.4 per cent to RM2,186 (S$891) on Sept 25. Futures peaked at RM2,799 a tonne on May 13 amid speculation that production is expanding as oil palms recover from tree stress after record 2008 output.

The commodity, the world's most consumed oil, will climb above US$750 a tonne in Rotterdam if crude remains at the current level of about US$65 a barrel, Mr Fry said. The price may reach US$675 if oil drops by US$10, he said.

Speaking in Istanbul in August, Mr Fry predicted that palm oil may top this year's peak of US$800 a tonne by December, driven by higher crude oil prices and tight Malaysian inventories.

'Stocks no longer drive palm oil,' Mr Fry said. 'Instead of stocks acting as the main driver of prices, the Brent crude price band is now the major influence.'

Reserves in Malaysia reached a six-month high last month after production climbed to the second-highest level on record and exports declined the first time in four months. Inventories climbed 6.2 per cent to 1.42 million tonnes in August from July, the Malaysian Palm Oil Board said on Sept 10.

Palm oil may average US$650 a tonne this year and next year on threats to production, Citigroup Inc analysts Penny Yaw and Margaret Go said on Sept 17. They had previously estimated the average price for this year to be US$610 a tonne, and next year, US$550 a tonne. -- Bloomberg

Published September 28, 2009

MALAYSIA INSIGHT

Stakes are high for Lotus F1

By PAULINE NG
KL CORRESPONDENT

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IT'S an audacious idea that still attracts fierce debate. Not surprisingly, the plan bears the hallmark of maverick tycoon Tony Fernandes who, with his best buddy and AirAsia partner Kamarudin Meranun, has convinced other private sector individuals and the government to pitch in.

But launching a Malaysian-owned F1 team when other established entities such as Honda and BMW are seen fit to quit?

The AirAsia duo are convinced the opportunity is there and the timing right. And because Malaysia already has an F1 track, it will be better utilised, while at the same time allowing for the development of design and engineering skills and the rest that goes with making F1 a commercial enterprise.

Incidentally, that was much the same argument for the birth of Proton. The national car project was to serve as the nucleus attracting a cluster of supporting industries so that Malaysia's design and engineering skills could be developed.

Some local parts and component players have benefited and today are globally competitive. But even after more than two decades, the same can't be said of Proton.

It is through Lotus - Proton's subsidiary - that the government intends to collaborate in the F1 project, in the belief that the teamwork would enhance the spirit of 1Malaysia while augmenting the nation's global exposure. Lotus's success could also rub off on Proton.

In terms of annual budgets, teams reportedly spent a sum ranging from US$45 million to 10 times more last year, although the FIA has since capped the expenditure for 2010 at £pounds;40 million (S$90.7 million) so as to better level the playing field.

The Lotus F1 team will have founding capital of RM168 million (S$68.5 million) while the base annual expenditure for the team is estimated at RM308 million. The government will also not hold any equity in the project, its participation is through the licensing of Lotus technology and brandname to the team.

National oil company Petronas - a current sponsor of the BMW-Sauber team will be invited to participate - as would other Malaysian big names such as Malaysia Airlines and Genting. Given the government's participation in the project, these firms are likely to oblige.

What is less certain is the footing of the costs for the establishment of a team headquarters at the Sepang International Circuit and the testing facilities such as wind tunnel and the like which could amount to hundreds of millions if not a billion ringgit.

Going by comments in the press and especially blogosphere, most are scornful that the returns would be worth the amounts needed to compete at the pinnacle of motor-sports racing.

The benefits of such a project are less tangible as opposed to better public transport or infrastructure in, say, East Malaysia's rural areas where kids walk hours to get to school. To many, it is another prestige project that the country can do without, especially when so many other areas need improvements. The number of failed infrastructure projects amounting to billions of ringgit over the years has also fuelled public scepticism.

Although no one expects the team to make in-roads in the first few races, there is another fear: that of the team getting lapped and limping home race after race, which brand specialists have stressed would be deleterious for Lotus and Proton.

This will not have been lost on brand guru Mr Fernandes. Indeed supporters of the project cite his involvement as reason for optimism, given that he overcame far greater odds with AirAsia.

A risk taker who believes in living his dreams without regrets, the perpetual optimist - and now Lotus F1 team principal - has emerged as one of Malaysia's biggest cheerleaders.

'What keeps me up (at night) is that as Malaysians, we focus on the negative. We focus on bringing people down rather than praising success,' he said recently in an interview with Malaysia Business.

For multi-racial Malaysia, sports have always been a great unifier. But the stakes will undoubtedly be that much higher next year when the Lotus F1 car takes to the starting grid.

Published September 28, 2009

More investment value in Noble than Olam

By OH BOON PING

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SO the state-owned enterprises are on the hunt for value investments again. Just last week, China Investment Corp (CIC) took strategic stakes in Indonesia's Bumi Resources and commodity trader Noble Group, while PetroChina completed its buyout of Singapore Petroleum Company.

Singapore's Temasek Holdings also recently bought stakes in commodity firm Olam International and Brazil oil services firm San Antonio.

In all the cases, the intention seems clear: to diversify their portfolios by getting exposure to the resources industry.

What is curious, however, is the fact that Temasek which could have similarly bought into Noble, chose to park its money with its peer Olam instead.

Both are global supply chain managers. Olam is in the agriculture, food and logistics space, and Noble has interests in agriculture, logistics, chartering, metal and ores, coal and carbon credits.

The latter's assets range from Brazilian sugar mills to Australian iron ore to oilseed-processing facilities in China and India and its access to export markets is supported by port facilities it owns in South America.

It is precisely for this reason that CIC agreed to spend US$850 million, with a view to investing in 'infrastructure assets and supply-chain management related to agricultural commodities'.

And both stocks should similarly benefit from the growing middle-class consumption of food products, which will keep sales volume buoyant. All of which means, the diversification benefits from agricultural exposure should be similar for both Olam and Noble.

However, what makes Noble stand out is the fact that its exposure to the cyclical components - metals, minerals and ores, and energy - allows the stock to ride on the nascent economic recovery.

Since the onset of the financial crisis, undervalued assets have emerged, and both companies have been quick to use inorganic growth to support business expansion.

But Noble's stronger cash balance (US$748.5 million as at June 30, versus Olam's $266.2 million), means that the company generally has the resources to fund acquisitions without having to do a massive share issue that will dilute existing shareholding.

On this point, OCBC Investment noted that 'Noble's prudent balance sheet management has allowed it to fund acquisitions without needing to raise additional capital'. In contrast, 'its peer Olam has recently raised additional capital to fund inorganic expansion, at the expense of diluting existing shareholders' interests'.

Of course, Temasek had earlier pointed out, as its investment managing director David Heng said, that investment in Olam 'fits well with our investment theme of supporting emerging global champions'.

But from an investment standpoint, Noble's value proposition is certainly not inferior to Olam's, as seen from the diversity of its portfolio - and a stake in Noble does not even come at a substantial cost relative to Olam.

While it is true that Temasek paid US$303 million for 13.76 per cent of Olam - compared with CIC's US$850 million for 14.5 per cent of Noble - Noble's stock returns have generally outperformed Olam's. Therefore, it is conceivable that the returns per unit of dollar invested is higher for Noble than Olam.

And this brings us to the second point: the comparative valuations between the stocks. Prior to Temasek's investment in Olam in June, the stock traded at an average of $1.70, while Noble's price averaged $1.36.

And although Olam concentrates mainly on agricultural products, it generally trades at a far higher price-earnings ratio (PE) compared with Noble.

Higher return

'Noble is the only peer with a higher return on equity and yet lower price-to-book value ratio,' Kim Eng noted in an earlier report.

Given that Noble is substantially larger than Olam in terms of earnings per share, while cumulative returns are higher, its lower stock price suggests that a stake in Noble offers more value than a comparable one in Olam.

As at Friday, Noble's price-earnings multiple stood at 9.53 (versus Olam's 16.24) - which means there is still plenty of upside for CIC's Noble stake. Or perhaps at least more so compared with Temasek's stake in Olam.

Published September 28, 2009

Delays at CapitaLand Macau project

By JAMIE LEE

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CAPITALAND'S joint casino project partner in Macau said that disagreements with its business partner New Cotai had led to delays in getting land-use approval.

CapitaLand - which owns a 20 per cent stake in the US$2 billion Macao Studio City through a joint venture firm with eSun Holdings Ltd known as EAST Asia Satellite Television (East) - said last Saturday that it will work with eSun on solutions to enable the project to progress.

It also said that it has the option to 'put back' its shares to eSun if certain conditions are not met by September 2011 'or such other date as may be mutually agreed'.

In a statement last Friday, Hongkong-listed eSun said that progress for Macao Studio City has stalled due to differences of opinion between East and its US partner New Cotai, which has a 40 per cent stake in the joint venture company in charge of the project, Cyber One.

The Macau government had not given permission for Cyber One to make modifications to the land and raise the developable gross floor area of the site to about six million square feet.

The Macau government has asked for information from the joint venture about the project plans, and both East and New Cotai 'have yet to formulate an agreed response'.

East said that it is ready to present updated proposals on prospective financing and construction to the government, but New Cotai, it claimed, has refused to make 'any substantive response'.

The partners are looking at possible solutions, which include bringing in new investors, a sale of all or part of its interest by New Cotai, or a restructuring of the parties' existing interests.

'However, East recognises that a solution to the differences may necessarily involve litigation,' it said.

Cyber One, with contributed capital of US$200 million, has not secured enough funding to develop the project yet. eSun believes that the funds would come in once the differences are resolved.

Published September 28, 2009

Pssst, want to buy 'fraction' of a condo?

Firm marketing shares in apartments; industry watchers still wary

By EMILYN YAP

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(SINGAPORE) A new way of selling condominium units here has emerged amid the recent resurgence in the property market.

Registered three months ago, Primespace Investments Pte Ltd is marketing 'shares' in apartments to investors with at least $62,000 to spare.

It has two studio units available - one at One-North Residences in Buona Vista and the other at One Shenton near Raffles Place.

While Primespace says it is selling 'fractional ownership', investors will not own the properties directly. The apartments will be bought and held by other private limited companies, and what investors pay for are shares in those vehicles. BT understands investors will not lodge caveats on the properties.

Each of these companies' share capital will be split into 15 lots. An investor has to pay $62,000 for one lot in the company which owns the One-North unit, or $110,000 for one lot in the company that owns the One Shenton unit.

After the share capital is allotted to investors, Primespace will continue to manage and rent out the properties. It says it will distribute rental income to investors every year, and it is offering a guaranteed yield of 5 per cent for the first year of investment. If an apartment's value increases by 'a certain level (usually 40 per cent)', Primespace will sell it and share the profit among investors.

Investors who wish to cash out before the homes are sold can sell their shares to other people. Or they can turn to Primespace, which says on its website that it guarantees repurchase of the shares 'after a minimum commitment period (two years for most projects)... at fair market value less a re-marketing fee.'

The idea of pooling funds to invest in property is not new here - many friends and relatives already do it. But Primespace's business is uncommon in that it lets strangers invest jointly in condominium units. It works like an unlisted property trust, which is more familiar to investors in countries such as Australia.

Primespace says its model allows those who 'could not otherwise afford or choose to purchase' property to still invest in it. Property consultants BT spoke to agree this is an advantage, especially in light of the downturn. But they also point out the drawbacks of investing in such private vehicles. For instance, investors may not have much say over the management, leasing and maintenance of the apartments, and they may find it hard to trade their shares.

Market watchers also urge investors to do thorough research. 'Reputation, years of related experience and the track record of the offering company is critical,' said Cushman & Wakefield Singapore managing director Donald Han. 'Investors are depending on its capability and experience to generate maximum returns,' said Mr Han.

Primespace's website offers no details about its management. The firm is registered with the Accounting and Corporate Regulatory Authority and records show its director is Trisha Suresh, who could be 24.

The Consumers Association of Singapore (Case) executive director Seah Seng Choon said the investment model is not regulated and investors need to be cautious. For example, they should ensure that companies offering 'fractional ownership' cannot sell more than the agreed number of shares.

Chesterton Suntec International research and consultancy director Colin Tan says there are more safeguards for investors in listed real estate investment trusts. Those invested in private vehicles 'may have to resort to costly litigation if things don't pan out the way they expected,' he says.

BT contacted Primespace to find out more about its business, but the firm declined to comment.

Published September 26, 2009

MediaRing to lay off over 50 staff

Exercise part of '100-day action plan' developed by the company's new management

By WINSTON CHAI

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MORE than 50 MediaRing employees will be axed under a new restructuring plan put forth by the company's new management team.

MediaRing saw a sea change in its upper ranks after Spice bought a $60 million stake in the company.

'The new management intends to run MediaRing as one large cohesive entity where people work together efficiently towards achieving targeted objectives,' the Singapore-based Internet telephony services company's new management said in an announcement yesterday on its '100-day action plan'.

To achieve this goal, the company is embarking on a 'rationalisation/rightsizing exercise' and 'certain positions became redundant'.

BT understands that the layoff exercise, which affects more than 50 workers, is still in progress.

The affected employees will be given appropriate severance packages.

These retrenchments form part of the '100-day action plan' that was developed after an in-depth operational study by MediaRing's new top brass.

Besides consolidation, market and geographic expansion are also on the list of immediate priorities identified by the leadership team.

This could lead to MediaRing's expansion into new markets such as India and the Middle East, as well as a better integration of its core Internet telephony technology with mobile devices.

'The new management is confident that through execution of these measures and action plan, MediaRing will move forward with rejuvenated energy and vigour towards achieving its targeted goals,' said new CEO Ashok Goyal.

MediaRing saw a sea change within its upper ranks after India's Spice Group - owned by flamboyant billionaire Bhupendra Kumar Modi - bought a $60 million stake in the company and became its largest shareholder last month.

As a result of the buy-in, Mr Modi became MediaRing's new chairman, Mr Goyal the new CEO and Suramya Gupta the chief financial officer.

Mr Modi, his daughter Divya Modi and Mr Goyal were also appointed as directors.

Mr Goyal and Mr Gupta replaced MediaRing's former chief Khaw Kheng Joo and chief financial officer Yeo Siew Chai as their services have been terminated following the stake deal with Spice Group.

Besides stepping down as its CEO, Mr Khaw also resigned as the firm's director, along with Walter Sousa (who was executive chairman) and Thomas Ng.

Koh Boon Hwee's status has also been changed from an executive director to a non-executive non-independent director.

MediaRing is no stranger to corporate mergers and acquisitions in recent years, having been involved since 2006 in a lengthy tussle with Vantage Corp for the control of Nasdaq-listed PacNet.

The protracted battle eventually nearly ended in January 2007 after Vantage sold its PacNet shareholding to US-based Connect Holdings. MediaRing sold its PacNet stake six months later to Connect for US$10 a share.

Published September 26, 2009

OCBC drops winding-up petition against FibreChem

By LYNETTE KHOO

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OVERSEA-Chinese Banking Corporation (Hong Kong Branch) has dropped its winding-up application against FibreChem Technologies to give the company some breathing space to work out a restructuring plan.

A restructuring proposal, being crafted by nTan Corporate Advisory, could be ready in the next couple of months, according to a source familiar with the matter. BT understands that this could take the form of a combination of equity and debt.

There was no objection from supporting creditors yesterday when OCBC, represented by Allen & Gledhill, requested withdrawing the winding-up petition at the High Court, and the court granted the request. FibreChem was represented by Drew & Napier.

OCBC, which withdrew its application without prejudice to its rights, was petitioning for liquidation of FibreChem after the China-based fibre-maker defaulted on a US$35 million facility loan agreement. The default was a result of the trading suspension of its shares since Feb 25.

The OCBC branch, one of the syndicated lenders of this facility, demanded a repayment of an outstanding sum of US$5.66 million, as stated in its statutory demand dated April 2. FibreChem owed an outstanding principal sum of US$26.25 million under the loan facility, with accrued interest of US$115,581.78 as at March 12.

Meanwhile, the investigation by nTan of FibreChem's financial position is still on. This prompted the Singapore Exchange (SGX) last month to grant FibreChem a series of extensions to report its 2008 and 2009 financial results as well as to hold its FY2008 annual general meeting.

The company has been given a three-month extension to Nov 30 to report its FY2008 results; another three months to Jan 31, 2010 to hold its FY2008 AGM; a further three months to Feb 15, 2010 to report its Q1 2009 financial results; and a six-month extension to Feb 15, 2010, to announce its Q2 2009 results.

Once a market darling, beleaguered FibreChem almost joined the queue of Singapore-listed Chinese companies or S-chips that face winding up. FerroChina's subsidiaries in China are in the process of liquidation while Beauty China has recently been ordered by the High Court in Hong Kong to wind up.

But FerroChina, which has up to Oct 10 to submit an acceptable proposal to SGX to resume trading of its shares, has not been able to gain access to the financial information of its Chinese subsidiaries, which are under PRC court bankruptcy administration.

Published September 26, 2009

Port Klang Authority sues main contractor

It seeks total damages of RM1.64b as it tries to salvage some value from the development

By S JAYASANKARAN
IN KUALA LUMPUR

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THE Port Klang Authority (PKA), the owner of the scandal-plagued Port Klang Free Zone (PKFZ) project, yesterday filed a RM920 million (S$376 million) suit against three entities including the PKFZ, its main contractor Kuala Dimensi and BTA Architect.

This is the second suit filed by the port authority and brings the total damages it is seeking to a staggering RM1.64 billion. Last week, the port authority filed a RM720 million suit against Kuala Dimensi.

The suits indicate the authority's determination to use any means at its disposal to salvage some value from the development, whose costs could reach RM12 billion from its original RM2 billion.

Three weeks ago, it filed police reports alleging criminality against three individuals including the former general manager of the PKFZ and the owner of Kuala Dimensi.

The suits are also significant in that they come before the findings of a 'super' task force announced recently by Prime Minister Najib Razak to investigate the matter. Even so, two earlier reports - one by an international accounting firm and another by a group of eminent persons - found serious irregularities with the project.

A large part of the damages sought by the authority in its second suit consists of RM837 million worth of claims allegedly made by Kuala Dimensi for various works.

The authority is also seeking to rescind previous development agreements and a declaration that Kuala Dimensi is entitled to only reasonable compensation. Alternatively, it is asking for a declaration that all invoices and bills issued by Kuala Dimensi be made null and void.

The authority has so far paid Kuala Dimensi RM1.8 billion but still owes the developer over RM2.5 billion, which it cannot afford without government help.

The authority is also applying for a court order that work done by Kuala Dimensi be reassessed by an independent consultant. It is also seeking RM34 million in costs for remedial work and separate damages from the loss of use of 2.4ha of land that was turned into a hotel car park due to Kuala Dimensi's alleged failure to build an underground carpark.

BTA Architect, meanwhile, is being sued for damages relating to alleged fraud and negligent misrepresentation. Both Kuala Dimensi and BTA Architect are also being sued for damages arising from alleged conspiracy.

The agreements that the authority is disputing in this lawsuit were signed between February 2003 and November 2006.

Pressed by reporters, Lee Hwa Beng, the head of the authority, denied that the lawsuits' timing was aimed at enhancing the image of Transport Minister Ong Tee Keat.

Mr Ong, president of the Malaysian Chinese Association (MCA), is currently embroiled in a power struggle with his former deputy in the MCA, Chua Soi Lek.

'If I don't file the lawsuits, people will accuse me of not acting on behalf of PKA,' Mr Lee told reporters. 'PKA does not belong to me. It is a government agency and our funds come from the public and taxpayers.'

Published September 25, 2009

Current interest rate level appropriate: KL

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(KUALA LUMPUR) Malaysia's central bank said the country's interest rates are 'appropriate' as government stimulus and improving overseas demand help the economy recover from the global slump.
Dr Zeti: External demand will improve in this quarter; GDP will expand in the next three months

The current interest rate level 'is supporting the demand for access to financing', central bank governor Zeti Akhtar Aziz told reporters in Kuala Lumpur yesterday. 'Going forward, unless there are any significant changes, this rate remains the appropriate rate.'

Bank Negara Malaysia, which has cut its key rate from 3.5 per cent in mid- November to 2 per cent to spur growth, has become more confident that the South-east Asian nation is recovering from its recession, Credit Suisse Group said on Wednesday, citing deputy governor Ooi Sang Kuang. Trade Minister Mustapa Mohamed said yesterday exports will resume growth next quarter.

'We've seen the worst,' Dr Zeti said, predicting an improvement in external demand this quarter and an expansion in gross domestic product (GDP) in the next three months. 'At the initial stage we expect growth will be modest and as we go into next year it will improve more significantly.'

Malaysia will revise its growth forecast in the 2010 budget, to be tabled in parliament next month, Dr Zeti said.

The government, which usually gives an updated forecast for the current year's GDP and unveils its first estimate for the coming year in the annual budget, expects the economy to shrink as much as 5 per cent in 2009.

The country's export and manufacturing slump has abated as economies from Singapore to China emerge from the world's deepest recession since the Great Depression. Overseas sales fell 22.8 per cent in July from a year earlier, easing from a 29.7 per cent drop in May.

Malaysia's electrical and electronics industry is getting more orders and some companies are considering hiring more workers, Mr Mustapa told reporters in Kuala Lumpur yesterday.

'Their orders have gone up,' he said. 'This is a good sign but it's not immediate.'

Malaysia's economic contraction eased to 3.9 per cent last quarter from a 6.2 per cent decline in the first three months of the year.

The central bank kept interest rates unchanged for a fourth straight meeting last month. -- Bloomberg

Published September 25, 2009

Boom time for builders as KL steps up works

Devt spending could rise to hit RM58b next year: analysts

By PAULINE NG
IN KUALA LUMPUR

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ONE of the year's notable stock performers, construction companies are expected to continue to shine in the coming year when the government step-ups its award of infrastructure contracts to meet development and fiscal stimulus targets.

Pump it up: The construction sector grew 2.8% in Q2 compared with 1.1% in Q1, helped by RM22b in fiscal injection, of which RM10b has yet to be awarded

Analysts estimate the development spending for this year under the 9th Malaysia Plan would amount to about RM52 billion (S$21.2 billion), increasing to between RM55 billion and RM58 billion next year.

In addition, an estimated RM10 billion of the total RM22 billion set aside for fiscal injection has yet to be awarded.

Because of its big multiplier effect on the economy, the sector is invariably singled out for additional funds.

Earlier this week Prime Minister Najib Razak said nearly RM8 billion had been paid out to contractors who had completed some 41,000 projects or about half of the total awarded.

The stimulus packages were 'on track', he said, pointing to the construction sector's growth of 2.8 per cent in the second quarter from 1.1 per cent in the first, as evidence the fiscal injection was beginning to have a favourable impact on the economy.

Because 2010 marks the last year of the 9th Malaysia Plan (2006-2010), the forthcoming national budget scheduled to be tabled in Parliament at the end of October is expected to focus on implementation, given that as at the middle of this year an estimated RM139 billion or only 60 per cent of the RM230 billion allocated for the five-year period had been spent.

Contractors expect the pump to remain open and believe there would be 'a flurry of contracts in 2010,' HwangDBS Vickers, which is overweight the sector, said in a report this week.

Maybank IB is also positive, noting infrastructure projects worth some RM33.5 billion under the 9th Malaysia Plan were currently at various stages of being constructed with most expected to continue into the coming 10th Malaysia Plan (2011-2015).

A number of new infrastructure projects have already been earmarked for the new 5-year development plan.

These are likely to exceed RM30 billion and include the electrified double-tracking rail job for the southern portion of West Malaysia, a new light rail transit line linking Kota Damansara to Cheras, and the Pahang-Selangor interstate water transfer project.

However, the pick-up in local construction jobs isn't the only reason to be positive. Vietnam - where a number of Malaysian builders have invested heavily - has also turned the corner.

Companies like Gamuda and WCT are looking to accelerate their planned billion-dollar mixed-developments to ride on the economic upturn and to cash in on the desire and better purchasing power of young Vietnamese to own a home.

A number of construction stocks have more than doubled year-to-date, including Sunway, Hock Seng Lee, and IJM Corporation.

Even so, the construction bulls noted because 'pump-priming remains a cornerstone to drive economic growth' further upside is possible, with share prices supported by positive news flow.

Published September 25, 2009

Critics blast plan to privatise NSTP

Umno-linked Media Prima's plan to delist publishing group likely to go ahead

By S JAYASANKARAN
IN KUALA LUMPUR

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CRITICISM in Malaysia's cyberspace is mounting against a plan to privatise the country's most established publishing company, the New Straits Times Press (NSTP).

Mr Kadir: Calls the plan a 'plot' to use the 'goodwill and stronger financial position of NSTP to shore up' Media Prima

The plan which was presented to NSTP's board a month ago proposes that free-to-air television station Media Prima completely take over NSTP through a share swap. In the process, NSTP will be delisted from the stock exchange.

Media Prima is NSTP's single largest shareholder with a 43.3 per cent interest. The other large shareholders include the Employees Provident Fund (EPF), a private pension plan, and another state agency which together hold around 13 per cent.

The sticking point could be Media Prima's ownership. Its single largest shareholder is private company Gabungan Kasturi, which is owned by business nominees of the United Malays National Organisation, the dominant political party in the ruling National Front coalition. As a result, top editors of the paper have always been appointees of the prime minister of the day.

Writing in his blog on Wednesday, Kadir Jasin, a former editor-in-chief of NSTP who still has strong Umno links, called the plan a 'plot' to use 'the goodwill and stronger financial position of NSTP to shore up' Media Prima.

Mr Kadir argued that the publisher's brand name 'must never be allowed to be destroyed or undermined.'

Blogger Ahiruddin Atan, the editor of the Malay Mail tabloid, wrote yesterday that the move could provoke a political backlash against Prime Minister Najib Razak. He said that the plan 'would provide his detractors with the firepower to accuse Najib Razak of trying to put the media under his direct control.'

For all the criticism, however, the deal is likely to go through as Mr Najib is said to be amenable to the idea. More to the point, the main minority shareholders - the EPF and the other state agency - have endorsed the plan. The only remaining hurdle remains consent from Umno's powerful political bureau which will meet sometime this week to consider the plan.

Analysts generally agree that the deal favours Media Prima as the underlying value of the newspaper group is more than twice the value of its debt-heavy controlling shareholder. Even so, NSTP has not been performing: its share price (RM2.15 yesterday) has been below its net asset value (RM4.52) for the longest time.

The deal would also transform Media Prima, which owns all of the country's free-to-air television stations into Malaysia's most powerful media company and allow it unhindered access to all of NSTP's earnings.

The newspaper group has relatively low debt but has increasingly seen its fortunes flagging. Once the premier English-language daily, its flagship publication the New Straits Times has seen its circulation plummet amid declining advertising revenues. The NST's circulation is just under 120,000 now from its peak of 280,000 in the 1980s.

Indeed, NSTP's earnings are now largely driven by its Malay publications, Berita Harian and Harian Metro, a racy tabloid with the highest audited circulation in the country. The group reported a net profit of RM47.4 million for the year to December 31, 2008.

Media Prime, meanwhile, reported a net profit of RM86 million for the same period.