Morning Commentary 110112

Good morning,

1) QSR: Kulim (M) Bhd has received an offer from the Malay Chamber of Commerce to buy it's strategic 58.7% stake in QSR Brands for RM6.90 per share, rivalling an earlier RM6.80 offer bt Massive Equity SB (the SPV of Johor Corp- the ultimate parent of Kulim with 57% interest). At RM6.90 a share, the Malay Chamber will be looking to fork out some RM1.12b for the stake. However,in Kulim's announcement on the offer, there is no mention of KFC Holdings in which QSR has a 50.6% equity interest. ; expected. To recap, the board of QSR & KFCH had previously stated that they were not seeking alternative bids for the sale of their  assets & liabilities after both companies accepted a joint takeover offer     by Massive Equity at the end of last year. Kulim said it would now convene     a board meeting to deliberate on the offer.

2) Yinson: Yinson yesterday announced that it has fixed the 1st call price for it's 3 for 2 rights issue at 75s apiece, representing a discount of 40.9% from the theoretical ex-rights price of it's shares of RM1.27. The board is of the view that a discount of more than 30% will provide shareholders with an attractive opportunity to increase their participation in the company. It has decided that the second call of 25s per rights share shall be capitalized from it's share premium and retained earnings account ; +ve & partly expected. Yinson's rights issue involves a proposed renounceable two-call rights issue of up to 113.02m rights share at an issue price of RM1 a piece, on the basis of 3 rights share for every 2 existing Yinson share. In an earlier filing, Co said it expects to raise gross proceeds of up to RM84.8m, assuming an indicative first call of 75s per rights share. It plans to utilize the proceeds to fund it's investment obligations related to it's consortium agreement (with Petro Vietnam Technical Services Corp to execute a bare boat charter contract).

3) Topglove: is targeting to achieve 30% of total global market share by end-2012, said it's chairman. He said this target is achievable if latex prices falls to RM6 per kg and forex remains stable. Group MD meanwhile predicted latex prices would come down further (at RM6.37/kg as at Jan 6, 2012), and thus the migration of capacity from natural latex to nitrile  gloves would slow down. Compared to it's peers, Topglove produces more latex gloves than nitrile. On it's upstream ventures, chairman said Co is looking to acquire land in Malaysia, Cambodia & Indonesia for rubber plantations. On capex, it is targeting RM100m for it's expansion plan this year, similar to capex of RM100-120m last year. Chairman stressed that demand would continue to be strong this year as countries increased their rubber gloves inventory; neutral as industry is very competitive & operating environment is volatile.

4) Mkt: continued positive sentiment to grind market higher.

Market Roundup 291211

FBM30 1506.69, +2.58 points (+0.17%), Volume 1,588.8mil, Value 1,163mil       

1) KLCI continued its recent upward trend on thin volumes despite weaker markets in the US and Europe overnight. Tech (+1.7%) stocks led the gainers with UNISEM+6.7%, MPI+3.7%, NOTION+5.8%, ENG+4.6% while select lower liners hogged the limelight with gains on active trade: SANICHI+16.7%, MULPHA+2.7%, KNM+5.8%. Market breadth was healthy with gainers doubling losers 492:254. Futures closed 1510 (4 points premium).

2) Heavyweights: AXIATA+1.2% RM5.05, CIMB+0.8% RM7.16, PBBANK+0.5% RM13.18, PETGAS+0.7% RM15.20, RHBCAP+2.4% RM7.30, PPB+0.7% RM17.12, BAT+0.8% RM49.60, KLK+0.4% RM22.68, YTL-2% RM1.48, MAYBANK-0.2% RM8.32.

3) DBT: BPURI 2.5mil @ RM0.84, MENANG 1.7mil @ RM0.20

4) Situationals: 

BOXPAK-9.7% RM2.23: Share price fell as low as RM2.21 (-10.5%) in the afternoon session, erasing early gains as the company denied a news report of a planned buyout by major shareholder Kian Joo Can Factory. The company says in an exchange filing it isn't aware of any formal discussions and hasn't appointed any investment bank for the purported buyout. Kian Joo also denied the news report in a separate filing. KIANJOO-1.42% RM2.09.

TCUBES-14.3% RM0.18: Shares fell in active trade after the company revealed that its accumulated losses for the FY ended March 31, 2011 was RM17.24mil and not RM7.3mil as stated in its Annual Report. Tricubes said there were typo errors on the accumulated losses as stated in pages 49, 61, and 98 of the 2011 Annual Report. The announcement followed an audit of its 2011 Annual Report which was submitted to Bursa on Sept 7.

5) KFC/QSR

The President of the Malay Chamber of Commerce (M) has come out to say that they would make a counter offer of RM6.90/share for the controlling stake in QSR. He further commented that the offer letter would be presented either later today or tomorrow. Recall that Massive Equity a SPV JV between Johor Corp (51%) and CVC Capital Partners Ltd (49%) had earlier tabled an offer for KFC (RM4) and QSR (RM6.80) which was duly accepted by the respective board of directors. The Malay Chambers of Commerce had earlier objected to this sale as it could result in both companies ending up in the hands of foreigners.

The offer by Massive Equity is still pending an EGM for minority approvals.

6) Market - Maintain short term bullish trend which could last into late Jan for the traditional CNY rally. 

Morning Commentary 221211

Good Morning,

1) DRBHCOM: Company had entered into an agreement to swap the Malay Reserve (MR) status of a plot of land in Langkawi with non-MR status of a piece of land in Kedah for RM76mil. Its MR land is located on Pulau Rebak Besar and spans 333 acres while the non-MR 350 acres land is an agricultural land which sits in the Northern Gateway Free Zone (NGFZ) at Bandar Kota Perdana, Kedah. The consideration pf RM76mil works out to RM5.23 psf to convert the MR to non-MR land.

2) QSR/KFC: The boards of QSR and KFC have accepted the joint takeover offer by Johor Corp and CVC Capital Partners Asia III Ltd and are not seeking any alternative bids for the sale of their assets and liabilities. This puts a rest to speculations on possible counter bids. However both companies noted that the takeover offers are subjected to "further negotiations and mutual agreement on terms and conditions to be incorporated into the definitive sale and purchase agreement". 

3) JTIASA: 1H Oct 2011 Tover +32% RM499.5m, Net+84.7% RM97.07m, EPS 36.36sen, 18% above cons (f) RM163.67mil.

Yoy revenue rose 32% while its net jumped 84.7% mainly due to 21% improvement in logs average selling price, 45% increase in FFB sales volume with 17% rise in average selling price and 80% growth in CPO sales volume with 23% improvement in average selling price. QoQ, the pre-tax reduced by 24% to RM57.3 million from RM75.3 million. The decline was mainly due to 11%, 7% and 10% decrease in the average selling prices of logs, plywood and FFB respectively. 

Going forward the oil palm segment remains bullish with higher FFB and CPO production volume while the performance for the timber segment will be challenging given the volatile operating environment and uncertain global economic environment. 

4) Mkt: relatively quiet, range trading with firm undertone as it approaches the Christmas holidays.