Market Roundup 130112

FBM30 1523.07 -2.49 points (-0.16%)  Vol 1,766mil Value 1,608mil

1) KLCI was mostly traded in the red throughout the day contrary to firmer regional markets reacting to signs that Europe's debt crisis is easing. Select situationals hogged the limelight: Pos +5.1%, DRB +3.8%, whilst recent outperformers were sold down at close: MAS -3.7%, Proton -5.13%. TENAGA (gained as much as 2.7% after announcing co received an advanced payment of RM1bn from the govt on behalf of Petronas as compensation for additional costs arising from a gas supply shortage). Market breadth was mixed with losers edging gainers 397:373. Futures closed 1525.5 (2 points premium).

2) Heavyweights: IOICORP-1.1% RM5.43, GENTING-0.7% RM10.88, CIMB-0.4% RM7.27, DIGI-0.5% RM3.90, PBBANK-0.2% RM13.16, YTL-0.7% RM1.49, SIME-0.1% RM9.15, GENM+0.8% RM3.88, MMCCORP+2.6% RM2.80, MAYBANK+0.1% RM8.26

3) DBT: FRONTKN 59.5mil @ RM0.12, SUBUR 21.5mil @ RM1.99, BJLAND 10.7mil @ RM0.92.

4) Situationals:

FABER-2.2% RM1.78: Shares retreated on concerns over the increasing legal disputes the company is facing involving its projects in the Middle East. On Thursday, the company said that its subsidiary Faber Ltd Liability Company was facing a suit from sub-contractor, Sweet Home Technical Works Ltd Liability Company, for services provided for housing projects in Abu Dhabi. The claim dated Jan 10 was for RM11.21mil.

CANONE+5.6% RM1.88, KIANJOO+7.5% RM2.16: Shares climbed on market expectations that Can-One would likely launch a general offer for KJCH after securing the 32.9% block. Last Thursday, Jan 5, Can-One won the legal tussle to acquire the 146.13 mil KJCF shares held by Kian Joo Holdings Sdn Bhd after a Federal Court ruled in its favour. The Court had allowed Can-One's appeal to proceed with the completion of the acquisition of the 32.9% stake for RM241.1mil. Market talk was that Can-One could then launch a GO for the remaining shares in KJCF.

5) Mitrajaya: Co announced that it's wholly owned subsidiary Pembinaan Mitrajaya SB has on Jan 13 accepted a LOA from Putrajaya Holdings SB for the proposed construction & completion of a) 63 units 2-storey terrace houses in Precinct 11, Putrajaya for a contract sum of RM20.5m and b) 25 units 2-storey shop office, 4 units 3-storey shop office & associated works at Precinct 8, Putrajaya for contract sum of RM12.9m. Both the contract are to be completed within a period of 22 months from the date of possession of site & are expected to contribute positively to Mitrajaya group's future earnings; +ve.

6) Mkt - continue with range trading and rotational play amongst sectors.

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.

Morning Commentary 090112

Good morning,

1) CanOne/KianJoo: Can One Bhd has received the Federal Court's go-ahead to proceed with the purchase of 32% of Kian Joo Can Factory Bhd (KJFC) for RM241.12m. In a Bursa statement, Can One said that the Federal Court had on Jan 5 allowed the liquidator's appeal to proceed with the completion of the sale of 146.1m shares of 25s each held by Kian Joo Holdings in Kian Joo at RM1.65 per share for RM241.1m to Can One International Bhd. The acquisition of the 32.9% stake will likely happen over the next few days, after which it may consider taking over the rest of Kian Joo, said a source. Can One is paying RM1.65 per Kian Joo share while the latter is currently trading at RM2.20. There is a possibility of Can One raising funds via a placement exercise of it's own shares, added the source - The battle between Can One & KJFC has been on-going in the last few years. Share price of Can One has skyrocketed, gaining some 50% over the last 2 trading days, while Kian Joo added 6%. However, whether it will be the end of the long drawn battle between Can One and KJCF's founding See family remains to be seen. Already, speculation is rife that the Sees may utilize part of the RM241.1m sale proceeds to launch a counter attack against Can One.

2) Proton: The Proton Holdings saga continues with DRB-Hicom group MD coming out to confirm that the group has put in a bid for the national carmaker. Speaking at a media retreat, MD did not provide details of the bid but admitted Proton would not be an easy project due to the stiff market competition. MD said the group submitted the proposal to Khazanah a few months ago when it first got wind that the stake was up for sale. In filings to Bursa last Dec, DRB-Hicom denied any knowledge of a bid for Proton and of plans to sell a stake in Proton to Volkswagen AG. Meanwhile over the weekend, a business weekly reported that more suitors were vying for the Proton stake, with the largest being businessman TS Arumugam Apavoo & Gerald Lopez of Genii Capital. Arumugam is said to be an associate of former Prime Minister Tun Mahathir (currently an advisor to Proton) while Genii Capital is the owner of the Renault F1 team. It is not known whether the duo had formally put in a bid.

3) Harvest Court: Bursa has lifted it's nearly 2 months old designation status on Harvest last Friday. Bursa also warned that it would continue to monitor the trading in the stock. To recap, in mid-November, Bursa declared Harvest Court's shares & warrants as "designated securities" after the share price rose as much as 20 times in a matter of weeks. Since then, the stock price has halved from a peak of RM2.14 to RM1.08 last Friday, although it's still well above the below 10s level the stock traded at prior to it's run up - Clearly, the restrictions had worked and taken away some froth, but will be closely watched again today on the normalization of it's trading status.

4) Mkt: expect market to be well supported despite the cautious sentiment of retailers in view of the events surrounding the Opposition Leader's court verdict.