Published November 13, 2008

Stocks slump after MSCI review

By LYNETTE KHOO

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(SINGAPORE) Shares of Keppel Land, Venture Corp, CapitaCommercial Trust (CCT) and Yanlord Land slumped on news that they will be dropped from the MSCI (Morgan Stanley Capital International) Singapore Index as of the close of Nov 25.

No new stocks will be added to the index, according to MSCI Barra, which provides the MSCI indices.

The market reacted negatively to the news yesterday. Shares of Keppel Land lost 4.9 per cent to $1.93, while Venture Corp shed 10 per cent to $5.03. CCT slipped 1.6 per cent to 94.5 cents.

As many fund managers track the MSCI Singapore index more than the benchmark Straits Times Index, their removal from the MSCI Singapore index may lift them off the radar screen of these fund managers, brokers said.

Securities in the MSCI country indices are free-float adjusted, and screened by size, liquidity and minimum free float.

MSCI Barra had also announced changes to the MSCI Global Investable Market Indices - including the MSCI Global Standard and MSCI Global Small Cap Indices as well as the MSCI Large Cap, MSCI Mid Cap, and MSCI Investable Market Indices - in its semi-annual index review on Tuesday.

Some 131 securities will be removed from the MSCI Global Standard Indices, while 67 securities will be added as of the close of Nov 25. For the MSCI AC Asia Pacific Index, a total 49 securites will be delected and only 18 added.

Changes will also be made to other MSCI indices. For instance, the MSCI All Country World Index (ACWI) Value Index, will see 435 additions or upward changes in Value Inclusion Factors (VIFs), and 351 deletions or downward changes in VIFs.

Such across-the-board changes were likely triggered by the drastic drop in market turnover and values in equities worldwide as no market was spared.

A dealer with a European brokerage said that these adjustments to index components could also be driven by the need to improve the performance of these indices by shedding off underperforming stocks.

Since MSCI Barra's previous review released on May 6, nervous trading has cost Keppel Land some 68 per cent of its market value, and shaved 55 per cent off Venture Corp's market cap.

CCT lost 59 per cent, while Yanlord's market value dived 70 per cent.

Published November 13, 2008

Wilmar Q3 net soars, says funding healthy

A bank said to have withdrawn credit line due to exit from commodity financing

By EMILYN YAP

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WILMAR International's funding situation remains healthy despite a bank having withdrawn its credit line, the palm-oil group said yesterday as it unveiled a more than doubling in third-quarter net profit.

Oiling the margins: For the nine months ended Sept 30, Wilmar's net profit more than trebled to US$1.2b, driven by a 134% surge in revenue to US$23.3b

According to Wilmar's chief financial officer Francis Heng, HSH Nordbank pulled its funding following a strategic decision to exit from commodity finance. The move was not a reflection of Wilmar's credit standing, he said at the results briefing.

'We are very happy that our bankers continue to support us strongly. As of today, we only have one bank that has cancelled our lines,' Mr Heng pointed out.

BT understands that HSH Nordbank's credit line withdrawal is unlikely to have significant impact on Wilmar. Its 2007 annual report lists 16 principal bankers which include DBS Bank and OCBC Bank.

As at Sept 30, when HSH Nordbank's funding was still available, the palm oil giant had access to credit facilities totalling US$11.4 billion. Around US$3.9 billion was unutilised.

'The group has minimal refinancing risk as most of its borrowings are short- term trade financing facilities which are backed by inventories and receivables,' said Wilmar.

But the company remains watchful about the financial turmoil today. 'A strong financial position is beneficial in a tight credit environment,' said chairman and chief executive Kuok Khoon Hong.

Wilmar had a net gearing ratio of 0.4x as of Sept 30. This was an improvement from Dec 31 last year because of improved cashflows and smaller working capital requirements as commodity prices fell.

News of the credit line pullback did little to dampen high spirits at the briefing, as Wilmar posted strong results for the third quarter ended Sept 30.

Net profit for the group more than doubled to US$482.6 million from the year-ago period's US$195 million as sales volume and margins rose. The merchandising and processing business alone accounted for 82 per cent of pre-tax profit and was the largest profit contributor among other segments.

Wilmar attributed the growth in net profit to 'timely purchases of raw materials and sales of products, prudent hedging of raw materials inventories as well as significant cost advantages from its integrated business model'.

Revenue for the group was US$8.3 billion, up 67 per cent from Q3 2007. The strong showing allowed Wilmar to declare an interim dividend of 2.8 Singapore cents per share for the quarter.

For the nine months ended Sept 30, Wilmar's net profit more than trebled to US$1.2 billion from US$346 million a year ago. This was driven by a 134 per cent surge in revenue to US$23.3 billion.

'We are confident that through the strengths of our balance sheet and integrated business model, as well as the relative resilience in the demand for staple food commodities, we will be able to weather this period of uncertainty to deliver credible performance,' said Mr Kuok.

Published November 13, 2008

Bumpy ride ahead for M'sian banking sector

Maybank hurt by impairment losses of RM242m at its Pakistan associate

By PAULINE NG
IN KUALA LUMPUR

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MARRED by its overseas investments, Malayan Banking's first-quarter earnings could presage a bumpy ride for the banking group in a slumping economy.

Not bullish: Maybank's unfortunate aggressive foray overseas amid a global financial meltdown is expected to haunt the group in the coming quarters

The country's biggest banking group posted a net profit of RM572 million (S$240 million) for the quarter ended September, 22 per cent lower than a year ago, and 19 per cent less than the previous quarter.

In comparison, two other local banking groups, AmBank and Hong Leong, posted an increase in earnings for the same period. Hong Leong's earnings were 29 per cent up, while AmBank's second quarter was nearly double last year's.

Hong Leong's earnings received a boost mainly from higher forex gains and treasury activities, banking analysts said, while AmBank's better showing could be traced to its adoption of the central bank's revised guidelines for the reclassification of securities into a held-for-trading category.

Even so, Maybank's unfortunate aggressive foray overseas amid a global financial meltdown is expected to haunt the group in the coming quarters.

Its first-quarter bottom line was hurt by impairment losses of RM242 million at its associate Pakistan bank MCB, along with lower non-interest income, lower recoveries and higher overhead expenses.

Impairment losses arising from its controversial acquisition of Bank Internasional Indonesia (BII) are bound to add further weight.

'I don't think the market is surprised because Maybank had said it would be making impairment charges this year,' said AmResearch banking analyst Fiona Leong, who is more concerned about the bank's inability to translate its robust loans growth of about 13 per cent y-o-y into stronger net interest income. Year-on-year, net interest income dropped 4 per cent, and 6 per cent q-on-q.

Although non-interest income is also below par, nearly all banks are in the same boat given capital market-related activities have been hit by the financial meltdown.

The expansion in consumer loans is already flattish for the sector, and analysts expect overall loans growth to moderate next year.

Hong Leong's results show that lending to securities, construction and working capital have shrunk, observed Ms Leong. 'It's a given loans growth will moderate, but it's a question of how much.'

Many remain sceptical Maybank will see returns over the next few years on the RM7 billion-plus it agreed to pay for Indonesia's sixth largest bank. The price amounts to a still pricey 4.2 times book instead of the original 4.8 times, thanks to a discount thrown in by the vendors after convoluted negotiations.

Not only will financing costs for BII's acquisition be elevated by the current credit crunch, Maybank's tight-rope walk in an increasingly tougher operating environment would invariably include an increase in loan loss provisions for BII.