Morning Commentary 060112

Good morning,

1) SapCrest: announced that TL Offshore SB, a wholly owned subsidiary, has finalized, executed and formalized 2 separate contracts with Cosco (Nantong) Shipyard Co Ltd for the construction of 2 units pipelay cum heavylift offshore construction vessel at a combined contract value of US227m (RM712m). One of the vessels was scheduled to be delivered in Q4 2013 whilst the other to be delivered in Q1 2014; +ve, this contract win to add to healthy existing OB of RM10.6b. Catalyst for stock remains it's merger with Kencana Petroleum which will create one of the largest O&G service provider in south-east Asia with a 4-year CAGR of about 23%, backed by many long-term contracts. Also, the merged entity's potential mid 2012 inclusion in the FBMKLCI component stock.

2) BHIC: Boustead Heavy Industries Corp yesterday denied being part of any on-going privatization talks. In a statement to Bursa to clarify media reports following the rise of it's share price, BHIC said it had not received any indication or direction from it's shareholders with regards to any major acquisition of shares in the company which might include a privatization. BHIC also reiterated that it's major shareholder Boustead Holdings had on Dec 21, 2011 publicly announced it was not considering any proposal to privatize BHIC - May dampen speculative interest in stock which price has added almost 20% over the last 3 trading days.

3) Construction: Tenders for the beautification portion of the River of Life (RoL) programme, potentially worth up to RM1b, could be called in the second half of this year, upon completion of the project's master plan. KL Mayor said a total of RM4b has been earmarked by the federal govt for the RoL programme, a project identified under the ETP, that involves cleaning of 110km stretch of river basin and beautification along a 10.7km stretch within the city centre. Of the amount, RM3b will be for river cleaning (which is already underway) and the remaining RM1b is for beautification works. Mayor said the master plan for the beautification portion would be ready within 6 months ; +ve. Last December, Ekovest-MRCB JV SB, a 60:40 JV between Ekovest Bhd & MRCB, announced that it had been appointed the project delivery partner (PDP) of the RM2.2b river rehabilitation & beautification project, and stands to receive 1% of the project's estimated value, or about RM22m, as compensation for managing/coordinating the project for 3 years.

4) Mkt: situationals & plantation counters expected to be the main focus in a positive bias market.

Morning Commentary 050112

Good morning,

1) JCY: JCY International Bhd has guided that net profit for the 1st quarter ended Dec 2011 (1QFY12) would likely jump 19 folds yoy from the RM7.5m booked in 1QFY11 or up 460% from the RM26.4m booked in the immediate preceding quarter, as sales benefited from a supply shortage caused by the floods in Thailand. This means JCY may report a net profit of about RM140m (accounting for about 83% of FY12 cons RM168m). Group’s finance director said Co wanted the public & minority shareholders to know and have access to factors surrounding JCY’s profitability. JCY & others in the industry saw an increase in ASP of about 10-20% after the Thai floods, and also benefited from an effective product mix, efficient cost management and the USD’s appreciation versus the ringgit. He added that to cater to the increased demand from it’s major customers, JCY’s board had approved a RM300m capex to expand it’s facilities in Malaysia, Thailand & China over the next 24 months. Since Oct, shares in JCY, from a level of around 40s, has been on the uptrend on optimism that it could benefit from the Thai floods.

2) Proton: Proton Holdings chairman Datuk Mohd Nadzmi has confirmed that he has put in a bid for Khazanah’s 42% stake in Proton, making him the only person to publicly indicate his interest. However he declined to reveal the offer that he had put in for Proton due to the sensitivity of the deal, but he deemed an offer for the NTA price of Proton to be too high as Proton will not be an easy project. He said the management approached him a few months ago after rumors of a few parties being interested in Proton surfaced, and asked him to make a bid because of his experience in setting up Proton & leading the group in the past. It is a management buy-out (MBO) in a sense; Neutral. Meantime, DRB-Hicom & Naza are believed to have offered RM6 per share for Proton while Detroit-based General Motors Corp (GM) is eyeing a stake in Proton’s state-of-the-art plant.

3) BHIC: Share price rose for the 2nd straight day, driven by renewed speculation that it’s largest shareholder LTAT will take the company private soon. Rumour is that BHIC will be taken private at above RM5 per share, said market players. According to reports, while BHIC’s parent Boustead Holdings denied talks that it was planning to privatize the former, it then emerged that LTAT could be the vehicle to be used. LTAT holds a direst 8.15% in the company and an indirect stake of 65% via Boustead. While one may be puzzled as to why LTAT may choose to privatize BHIC at a premium, analyst said that the temptation could be driven by the jobs it is expected to secure over the medium to long term, especially after it was awarded a RM9b Defence Ministry contract to design, build & deliver 6 second generation patrol vessels.

4) Mkt: KLCI index to consolidate with rotational play on situationals & laggard lower liners.