Morning Commentary 160112

Good morning,

1) Proton: DRB Hicom is understood to have secured Khazanah's 42.7% equity interest in Proton, according to sources close to the deal. It's said that the price range may be higher than market expectation of about RM5.50 per share. The announcement of the sale may be made anytime now. However it is not clear if DRB has obtained an exemption from making a general offer, or will go ahead and privatize Proton. At RM5.50, DRB would end up paying RM1.28b for the Khazanah block & RM3.02b for the entire 549.2m shares in Proton -  Disappointing, the price of RM5.50 lower than the initial speculated price of between RM6-7 per Proton share.

2) Takaso/GPharos: Takaso Resources is said to be diversifying into the mining sector with Trengganu state owned Golden Pharos Bhd as it's partner, sources said. Golden Pharos, which is 61% owned by Trengganu Inc SB, was likely to form a collaboration with Takaso and together, both parties obtain a state-related iron mining project. The parties have had serious discussions, but it is unclear at this stage how a collaboration will pan out. Takaso is a condom maker but is looking to diversify it's business. It recently said it would acquire Kayu Mas(PNG)     Ltd which holds the rights to a net loggable area of 40,000 ha of timber, possibly worth up to RM500m, in Papua New Guinea. It said this was to  diversify it's core business due to increasing competition in the condom industry.

3) Redtone: Redtone International Bhd has entered into a 4G/LTE network collaboration & partnership agreement with members of 2 local telecommunication consortiums, according to it's MD. He said Co has entered into an arrangement with the individual companies rather than the consortium & will make the announcement on the matter once the Multimedia Commission finalises the positioning of each spectrum block. The 2 consortiums are the partnership of Maxis Bhd/U-Mobil and Digi/Celcom. Although MD did not reveal who exactly it will be tying up with, he said that it will be with more than 1 telco; Partly expected, given Redtone's relatively small size & that funding may eventually prove to be an issue. Market talk has been rife over the past 2 weeks about Redtone entering into a tie-up in order to rent out portions of it's bandwidth. Sources have named Digi & Celcom as being Redtone's possible partners.

4) Mkt: consolidate in view of S&P's downgrade of EU nations' credit ratings and as players wind down this week ahead of the CNY.

Market Roundup 120112

 FBM30 1525.56, +3.27 points (+0.21%), Volume 1,515mil, Value 1,579mil

1) KLCI continued to track higher recording 4 straight days of gains, ignoring regional markets which closed in -ve territory as easing inflation in China failed to overcome worries over fresh worries in Europe's economy. Index managed to close at day's high due to firm buying seen in select bluechip names: GENTING+1.9%, TENAGA+1.1%, Gamuda +1.9%, Bursa 2.48%, MISC +1.6%, Proton +3.4%. TECHNOLOGY (-1.6%) led the losers with JCY-4.2%, DATAPRP-5.4%, GPACKET-1.7% as profit taking set in on recent outperformers. Market turning 2 tiered as losers edged gainers 418:351. Futures closed 1524.5 (1 point discount).

2) Heavyweights: GENTING+1.9% RM10.96, TENAGA+1.1% RM6.23, MAYBANK+0.4% RM8.25, MISC +1.65% RM6.15, PETGAS+0.5% RM15.44, DIGI+0.3% RM3.92, GENM-1.3% RM3.85, KLK-0.7% RM24.52, PBBANK-0.2% RM13.18.

3) DBT: SCOMI 14.8mil @ RM0.15 (1.2% PUC, 47% discount), TMS 12.4mil @ RM0.09 (2.5% PUC, 14% discount), IPMUDA 10mil @ RM0.54 (13.8% PUC, 21%discount).

4) Situationals:

BPURI+5% RM0.945: Stock gained as much as 10% after company confirmed it is finalizing terms with the National Highway Authority of Pakistan for a concession to upgrade and operate the Hyderabad-Karachi highway. Executive Director Matthew Tee said, "Our team is currently negotiating with the authorities on finalizing the concession agreement," in a telephone interview today, confirming an Edge Financial Daily report. Bina Puri aims to conclude negotiations before the Lunar New Year holidays which start this year on Jan. 23. The construction cost is estimated at 18.2 billion Pakistani rupees ($202m).

5) Takaso: Takaso Resources (TRB) today announced that it had executed a Heads Of Agreement (HOA) with Kayu Emas (PNG) Ltd to set forth the general understanding reached between the 2 parties & they are desirous of entering into more detailed definitive Agreements to formalize the arrangements. Among the terms of the general understanding, TRB shall conduct it's independent due diligence findings to verify the presentation by Kayumas ( so far including it's concession timber licence and a representation of loggable area of up to 40,000 ha of timber in Papua New Guinea), including the projected profits from the said concession. The 2 parties also aim to enter into formal agreements within 3 months from the date of the HOA. TRB may acquire 100% of Kayumas if it so wishes; +ve but expected.

6) Mkt - upward momentum to continue as mkt heads towards CNY with rotational interest amongst lower liners and sectors. Sime-heavyweight laggard and cheapest big cap plantation stock, trading at PER'12 14x against industry average of 16x. Expectations of higher CPO and possible spillover interest from FELDA listing in April to buoy interest in stk-BUY.

Market Roundup 100112

FBM30 1521.99, +0.26 points (+0.02%), Volume 1,858mil, Value 1,872mil

1) KLCI ended mixed trading in a 5 points range as market was sluggish despite the positive region which rose on positive US data and speculations slowing China export data could encourage monetary easing policies. Malaysia's industrial production growth was also lower than estimates as manufacturing growth slows. Construction+1.2% outperformed in anticipation of jobs being awarded from the ETP program. Market breadth was positive with advancers outpacing decliners 416:330. Futures closed 1527 (5 points premium).

2) Heavyweights: DIGI+1.04% RM3.90, PETGAS+1.59% RM15.34, KLK+1.06% RM24.84, TM+1.03% RM4.91, PCHEM+0.47% RM6.36, GENTING-2.15% RM10.90, GENM-0.77% RM3.88, MHB-1.91% RM5.65

3) DBT: SCOMI 16.3mil @ RM0.15 (46% discount), BJCORP 12mil @ RM0.94 (10.5% discount),

4) Situationals:

TAKASO+2.08% RM0.245: TAKASO topped volume today with share price reaching a high of RM0.28 after news reported that company will be acquiring Kayumas Plantation PNG Ltd which has a timber license and concession in a bid to diversify its business. The company holds the rights to a net loggable area of 40,000ha of timber possibly worth up to RM500mil with length of extraction up to 9 years.

MBSB+4.12% RM2.02: Bank Negara has granted permission for MBSB to participate in its Central Credit Reference Information System (CCRIS) effective this month. This information is collected by the central bank's credit bureau from participating lending institutions to assit them in making informed decisions on credit applicants.

GAMUDA+3.52% RM3.53: Gamuda in response to news reports confirmed they have been invited by China Railway Construction corp to be its local partner in a group bidding for the Gemas-Johor Bahru railway project that is worth RM8bil.

5) SAPURACREST

Announced that SapuraAcergy Sdn Bhd has been awarded a contract for a subsea construction project, offshore Vietnam. SASB is a joint venture company equally owned by SapuraCrest Petroleum Berhad and Subsea 7 S.A. The scope of work requires the installation of 28km of 12" diameter pipeline, a 28km umbilical, Pipeline End Terminations and Subsea Isolation Valve , Structures, spools and pre-commissioning.

The value of the Contract awarded is approximately USD100 million, with the offshore work expected to be performed in mid 2012.

+ve the merger exercise with Kencana expected to be finalized by the 1Q this year will be the major re rating catalyst for both companies.

6) Market - Current bullish trend to continue with situationals and 2nd liners continuing to take center stage in the run up to CNY.