Morning Commentary 100112

Good morning,

1) Jaks: Jaks Resources Bhd’s wholly owned subsidiary Jaks Power Holdings Ltd (JPH) has entered into several agreements to formalize its proposed JV with Meiya Power (HD) Ltd and Island Circle Investment Holdings Ltd to invest in two 600MW coal-fired power plants projects in Vietnam. Meiya Power is an indirect subsidiary of China Guongdong Nuclear Power Holdings while Island Circle is a subsidiary of Island Circle Development (M) SB, whose principal activities are property development. Upon completion of the proposed JV, the effective equity interest of JPH, Meiya Power & Island Circle in JPP (Jaks Pacific Power Ltd – the company licensed to undertake the design, engineering, construction, operation & Maintenance of the two 600MW coal fired power plant) would be 50:40:10. Construction of the plant was expected to begin mid-year; +ve and expected.

2) Gamuda: Media reported that Gamuda has been roped in to be part of a group which is the front runner for the construction of the Gemas-Johor Baru electrified double–track railway line. A source said Gamuda was in a consortium led by China Railways Construction Co (CRCC) and another local party linked to the Johor royal family and that this group is the current front runner for the RM8b project, known as the Gemas-JB electrified double-tracking project (EDTP). Two other China firms are also in the running for the job, namely China Railway Engineering Co & China Communication Construction Co; +ve if true. Should the CRCC group be chosen, Gamuda could redeploy it’s machinery from the on-going Ipoh-Padang Besar EDTP for the southern rail upgrade link. It can save on capital expenditure & the Chinese partner would not have to spend extra for ferrying huge equipments to Malaysia. The RM12.5b Ipoh-Padang Besar EDTP is expected to be completed by the end of this year.

3) Can One/ Kian Joo: Can One Bhd’s major shareholders & friendly parties are considering a privatization or merger exercise with Kian Joo Can Factory Bhd (KJCF), reliable sources said. The move is related to Can One’s acquisition of a 32.9% stake in Kian Joo, which should be completed today, after a lengthy court battle. Can One may be getting the funding from Kuwait Finance House, added the source. However, it isn’t clear how Can One’s major shareholder would raise funds for the privatization exercise. According to sources, Can One, upon getting the KJCF shares, is set to call for an EGM to install it’s own directors. However, it is believed the See family would not give in easily should such a boardroom tussle occur, as family may feel that KJCF shares is worth much more than what it is trading now & they have the resources to buy back a substantial block by utilizing the sale proceeds to be received from Can One.

4) Mkt: situationals & lower liners to continue their outperformance on index-linked stocks.

Market Roundup 090112

FBM30 1521.73, +7.6 points (+0.5%), Volume 1,643mil, Value 1,706mil

1) KLCI was firmer tracking gains from SHCOMP+3%, HSI+1.5% as regionals recovered from earlier weakness on eurozone funding concerns to close higher after China's new lending and money supply increased indicating the government is taking steps to improve liquidity as the economy slows. Index jumped 4points at close on markup of heavyweights led by CIMB and TENAGA. Penny names dominated volume led by KHSB+37%, SANICHI+15% and NEXTNAT+8.7% while HARVEST+31% reached limit up after Bursa lifted its designated securities status. Market breadth was positive with advancers nearly doubling decliners 491:264. Futures closed 1524.5 (3 points premium).

2) Heavyweights: CIMB+1.53% RM7.29, TENAGA+2.18% RM6.09, PETGAS+2.03% RM15.10, MAXIS+1.63% RM5.62, AXIATA+0.6% RM4.98, BAT+2.21% RM49.84, TM+1.04% RM4.86, GENTING-0.89% RM11.14

3) DBT: BJCORP 618mil @ RM0.925 (14.5% PUC, 2% discount), SUNREIT 13.1mil @ RM1.22 (1.1% PUC, 10.5% discount), XDL 5.9mil @ RM0.32.

4) Situationals:

KHSB+37% RM0.50, KPS+12.4% RM1.18: KHSB topped the volume after Kumpulan Perangsang Selangor Bhd (KPS) was reported to be looking for ways to restructure the group with a possibility of privatizing its subsidiary KHSB. KPS owns 56.7% of KHSB whom is in the property development and mining business. KHSB's net asset per share is around 80sen.

JAKS+5.8% RM0.635: Share price surged to RM0.635 before trading was suspended as JAKS intends to make a material announcement on the proposed joint venture for the independent power plant project in Vietnam.

INARI+6.67% RM0.40: entered into a MOU with the existing shareholders of Amertron Inc (Global) Limited (Amertron), represented by Richard Ta-Chung Wang to enter into negotiations for the proposed acquisition of 100% equity interest in Amertron. Amertron is an investment holding company incorporated in the Cayman Islands in 2001 with subsidiaries involved in the provision of electronics manufacturing services.

5) DRBHCM/ POS

DRB is currently looking into the pre acquisition transformation plans structured by its 32.2% held POS Malaysia to blend in with the group. POS (M) had a 39 point transformation plan before it was acquired by DRB.  The new direction will include identifying new areas of businessto guarantee the company remains competitive.

DRB has identified 17 new businesses that it could tap into via POS. POS current sales mix comprised of 70% mail, 20% courier and 10% retail. +ve

6) Market - Uptrend still intact with focus remaining firmly on situationals and 2nd liners, Trading Buy TimeCom, Lion Div, and Glomac. TNB broken psychological resistance of RM6, looking to test RM6.50, buy