Published August 13, 2009

BNP upgrades banking industry on policies

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(KUALA LUMPUR) Malaysia's banking industry was upgraded at BNP Paribas, which said positive government initiatives and an improving economy are helping to curb bad debts and revive lending growth.

BNP raised its ratings for Bumiputra-Commerce Holdings Bhd, Malaysia's second-biggest bank, AMMB Holdings Bhd, and EON Capital Bhd to 'buy' from 'reduce'. It increased the rating on the industry to 'positive' from 'negative'.

'A sharp credit deterioration scenario is unlikely to play out, aided by coordinated and targeted assistance by the government,' BNP analyst Ng Wee Siang said in a report yesterday. 'The coast is clear on credit quality' and loan growth is set to strengthen in the coming months, he added.

Malaysia's government has unveiled RM67 billion (S$27.4 billion) of stimulus measures to counter an economic slump and the central bank held interest rates steady at 2 per cent for a third straight meeting last month, saying the economy showed 'signs of stabilising' in the second quarter.

Shares of Bumiputra-Commerce have jumped 83 per cent this year and AMMB 73 per cent, outpacing the FTSE Bursa Malaysia KLCI Index's 35 per cent gain. Bumiputra-Commerce is the second-best performer on the benchmark index this year.

BNP raised its target price on Bumiputra-Commerce to RM14.30 from RM7.50 while AMMB was increased to RM5.20 from RM2.30. EON Capital's target price was raised to RM6.30 from RM2.90, the report said.

It lowered Hong Leong Bank Bhd and Malayan Banking Bhd to 'reduce' from 'hold'. Loan applications in Malaysia jumped 18.3 per cent in June, the biggest monthly gain since August 2008, according to central bank data released on July 31. Approvals gained 10 per cent, it said.

Since September, the Malaysian bank industry's gross non-performing loan ratio has fallen to its post-Asian financial crisis low of 3.9 per cent, BNP's Mr Ng said.

The central bank cut borrowing costs by 1.5 percentage points between November and February to revive growth as gross domestic product shrank 6.2 per cent in the first three months of 2009. The benchmark is at its lowest level since it was introduced in April 2004. -- Bloomberg

Published August 13, 2009

Ex-Cabinet minister Kasitah acquitted in graft case

He faced up to 25 years in jail on charges of cheating and corruption

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(KUALA LUMPUR) A Malaysian court acquitted a former Cabinet minister yesterday of graft charges in a prominent case that had briefly become the showcase of the government's fight against corruption.

Mr Muhammad Shafee: Says there was no evidence against his client

Kuala Lumpur High Court Judge Suraya Othman found the prosecution had failed to establish a case against Kasitah Gaddam, the former land and cooperative development minister, said his lawyer Muhammad Shafee Abdullah.

Judge Suraya ruled that the prosecution had failed to call material witnesses and its star witness was of 'questionable character', Mr Muhammad Shafee said. It was not clear immediately if the prosecution will appeal the ruling.

Mr Kasitah had faced up to 25 years in jail on charges of cheating and corruption. His case began in 2004, shortly after then-prime minister Abdullah Ahmad Badawi took over office with a pledge to crack down on endemic corruption.

Mr Kasitah owed a bank about RM11.5 million (S$4.7 million) in the mid-1990s, and is alleged to have attempted to repay the loan through a series of transactions via the Sabah Land Development Board (SLDB), a state government agency, of which he was then chairman.

The board is tasked with government land development projects in Sabah state.

The prosecution alleged that Mr Kasitah misused his position to force SLDB to sell 40 per cent of its shares in a plantation company in 1996 by convincing the government that failure to do so would cause losses to the board.

The shares were subsequently bought cheaply by Mr Kasitah through a front company, according to prosecutors.

Mr Muhammad Shafee said Mr Kasitah should never have been charged 'because there was no evidence against him'.

He said Mr Kasitah was made a scapegoat in the government's anti-corruption drive, adding that the court verdicts restored his credibility.

Mr Kasitah's case was a rare instance of a high- ranking official being taken to court for alleged corruption.

The pledge to end corruption was the main election platform of Mr Abdullah before he assumed the prime minister's office in 2003. But it yielded few results during the six years he was in office until April this year.

Apart from Mr Kasitah, the only other prominent catch was tycoon Eric Chia Eng Hock, charged with criminal breach of trust in connection with RM76.4 million missing from government-controlled Perwaja Steel.

Mr Chia was, however, acquitted in 2007 and died a year later at the age of 75. -- AP

Published August 13, 2009

UOL posts $20.1m loss for Q2

Its subsidiary Pan Pacific Hotels reports 64% year-on-year decline in Q2 earnings to $5.9m

By KALPANA RASHIWALA

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UOL Group has posted a $20.1 million net loss for the second quarter ended June 30, 2009, against a $144.96 million net profit a year earlier.

The reversal was due partly to a $76.96 million fair-value loss on investment properties, due mainly to a drop in the value of offices, chiefly at Novena Square and United Square.

Operationally, the group was profitable, with property development revenue rising 48 per cent year on year and property investment revenue rising 16 per cent over the same period.

But income from hotel operations fell, dividend income was lower following the reclassification of United Industrial Corporation (UIC) as an associated company, interest expenses rose and profit share from associated companies dropped.

The last item reflects UIC's net loss for the period.

For the first half, UOL's net profit rose 66 per cent year on year to $311.6 million, thanks to a $277.7 million negative goodwill item from the acquisition of UIC shares.

UOL subsidiary Pan Pacific Hotels Group - formerly Hotel Plaza - posted a 64 per cent year-on-year decline in Q2 net earnings to $5.9 million.

Q2 revenue slipped 18 per cent to $65.8 million, due to a weaker performance from the group's hotels, though this was partly offset by the inclusion of revenue from hotel management services following the acquisition of the Pan Pacific operations in October 2008.

H1 net profit was down 45 per cent year on year to $16.9 million on a 16 per cent drop in revenue.

Pan Pacific Hotels' net asset value (NAV) per share was $1.26 at June 30, 2009, up two cents from Dec 31, 2008. The counter closed unchanged at $1.45 yesterday.

UOL ended four cents lower at $3.42. Its NAV per share rose from $4.26 at end-2008 to $4.93 at end-June 2009.

The increase was due mainly to fair-value gains on available-for-sale financial assets and the recognition of negative goodwill and capital reserves arising from the acquisition of an additional interest in UIC, offset by adjustments for share buy-back and dividends declared.

The group's interest in UIC increased from 14.3 per cent at Dec 31, 2008 to 31.6 per cent as at June 30, 2009.

UOL and Pan Pacific Hotels maintained their policies of not paying an interim dividend.

'With substantial new supply of office space in the pipeline in Singapore, rentals are likely to face further downward pressure. Retail rentals may be affected by new mall completions,' UOL said.

'Sentiment in the residential property market has improved following the surge in buying activity in recent months, especially for the mass and mid-market category.

'The outbreak of H1N1 flu and the global slowdown will continue to affect the hospitality industry in Singapore and the Asia-Pacific region,' UOL added

The group has sold 322 units at its freehold Meadows @ Peirce condo on Upper Thomson Road this quarter. The project has a total of 479 units.