The Star Online: Business |
- FBM KLCI is up, bucks regional bearish trend
- Muhibbah Eng outlook intact
- Union Investment RE plans to grow portfolio
FBM KLCI is up, bucks regional bearish trend Posted: 23 Oct 2012 06:55 PM PDT Published: Wednesday October 24, 2012 MYT 9:55:00 AMKUALA LUMPUR: The local bourse bucked the regional bearish trend in early Wednesday morning trade, as Asian stocks dropped after investor confidence was rattled by weaker corporate results in the United States and concerns about further deterioration in the euro-zone economy. At 9.17am, the FBM KLCI was up by 1.50 point to 1,666.40. Scomi Group Bhd and Astro Malaysia Holdings Bhd were the most active in early morning trade. At 9.20am, Scomi lost 1.5 sen to 41 sen while Astro gained 3 sen to RM2.75. Among top gainers were UMW Holdings Bhd which gained 12 sen to RM10.10, Country View Bhd which rose 8 sen to 90 sen and DiGi.com Bhd which rose 5 sen to RM5.53. |
Posted: 23 Oct 2012 06:49 PM PDT Muhibbah Engineering (M) Bhd We are neutral on the news that Asia Petroleum Hub Sdn Bhd (APH) had been wound up on Oct 19 and that the court had appointed an official receiver as a provisional liquidator. As at the first half of 2012, the amount due from APH was up to RM400mil for the work done duly certified, of which Muhibbah Engineering had already made a RM160mil provision in the past years. Going forward, the recoverable amount from APH is still too early to be estimated. Nonetheless, we think that the liquidation will somewhat be speeded up. We are unsure of the amount to be recovered from the liquidation process. However, the legal move above is expected to address the creditors' interests in the next 21 days, which include the debt to share swap exercise. The management sees this news as positive as it will speed up the decision-making to solve the overhang issue in APH. To recap, Muhibbah Engineering had previously proposed the debt-to-equity swap as part of the settlement of the outstanding amount. We do not discount that the liquidator will revisit this debt-to-equity swap settlement with the creditors. Muhibbah Engineering's long-term prospect remains intact, underpinned by its ongoing projects, which are worth about RM2.2bil, with the order book lasting up to the next three years. We are maintaining our numbers at this juncture pending further development on this news, such as the possible write-off of the remaining outstanding amount due from APH. We have increased our target price on Muhibbah Engineering to 92.5 sen from 83 sen as we are lowering the rate of the write-off on the RM395mil receivables due from APH to 50% from 60% previously. The risks include delays in project execution and a spike in building material prices. Axis Real Estate Investment Trust AXIS REIT (AXRB)'s nine month to Dec 31, 2012 results (RM59mil net profit; +23% year on year (YoY)) came in as expected, accounting for 71% of our and consensus full-year estimates. The proposed 4.3 sen dividend per unit for the third quarter (Q312) (year-to-date DPU: 13sen) was also in line. We fine-tune our financial year 2012 to FY14 earnings forecasts by -0.4% to 1.4% and discounted cash flow-based target price to RM3.04 (+24sen) as we roll forward the base year for our valuation and lower our interest cost assumption to 4.6% (-5basis points). Axis REIT's Q312 net profit of RM19.2mil (+18% YoY) took the nine-month earnings to RM58.9mil (+23% YoY). The YoY growth in earnings was mainly due to: 1) full-year contributions from assets acquired in 2011, 2) new assets in 2012 such as its Seberang Perai Warehouse 3, Bayan Lepas Distribution Centre and Emerson Industrial Facility Nilai and 3) positive rental reversions. Q312 net profit declined by 3% quarter on quarter due to lower occupancy rates in Kayangan Depot (KP) and Wisma Bintang (WB). The disposal of KP is expected to be completed by year-end, whilst WB is undergoing some enhancement exercises. However, we expect fourth-quarter earnings to pick up, boosted by full-quarter contributions from newly-acquired Wisma Academy, the annex (Oct 2012) and Emerson Industrial Facility Nilai (Aug 2012). More assets to come. To retain its financial flexibility, AXRB has proposed a placement of up to 90.8m new units. Assuming an issue price of RM2.87 (a 5% discount to the current price), we expect AXRB's gearing to drop to 0.21 times (x) from 0.34x as at Sep 2012. To mitigate the dilution impact on earnings, Axis Reit normally matches the placement with new acquisitions. Negotiations for the injection of industrial assets worth RR608mil are currently underway, we understand. We fine-tune our FY12 to FY14 earnings forecasts to factor in: 1) the acquisitions of Wisma Academy and the annex, completed in Oct 2012 instead of Jan 2013, 2) lower occupancy rates at Wisma Bintang due to refurbishment works and 3) a larger unit base due to its income distribution reinvestment plan. Telecommunication Sector AN empowered group of ministers headed by India's Finance Minister has recommended to the Indian Cabinet that telcos be charged a one-time fee for their 2G spectrums exceeding 4.4MHz in all circles. Details such as the timeline and pricing have not been ironed out. The Cabinet was scheduled to take up this issue on Oct 16. Meanwhile, the government has also decided to hold an auction for 1,800MHz spectrum on Nov 12. The reserve price for nationwide coverage has been set at US$2.7bil (RM8.3bil) with an annual 3% revenue-sharing component. We view any such fee as negative for Bharti Airtel (Bharti), India's largest telecom operator as well as for another Indian player Idea Cellular (Idea) as it will put pressure on their cashflows, with Bharti and Idea having to pay US$732mil (RM2.25bil) and US$443mil (RM1.36bil) respectively. As for the 2G auction, we expect Idea to fork out US$380mil (RM1.17bil) and foresee intense bidding for the seven circles for which it had lost its licences in February. On the bright side, we do not expect cash calls by Bharti and Idea for both the one-time fee and 2G auction as they should be able to fund them via internal cashflow and new debt. What you should do is stay invested in Malaysia's Axiata Group Bhd, where India contributes only 6% of our target price versus 18% for Singapore's Singapore Telecommunications Ltd. We like Axiata for its resilient earnings despite regional currency weakness. Catalysts are earnings surprises. Axiata is also the cheapest Malaysian telco and one of our regional telco top picks. UEM LAND HOLDINGS BHD WE expect the Iskandar region to keep up with its news flow after the opening of Legoland, Lifestyle Mall, Marlborough College as well as other key infrastructure and highways in the recent months. Based on our recent conversation with the management, we believe Gerbang Nusajaya is ready to set in to maintain the growth of Iskandar and hence UEM Land. We have earlier mentioned that a reputable Singapore-based industrial player will soon take part in an industrial property development which is as big as 500 acres, out of the entire 4,500 acres land at Gerbang Nusajaya. While we were unsure with the timing earlier as it could be hindered by the general election, we understand that the negotiations have largely been substantiated. The entrance of this renowned industrialist is a promising catalyst to create job opportunities, business activities and hence population, which is now the key to fill in the newly developed properties in Iskandar. Substantial spillover can be expected for the properties located near to Gerbang Nusajaya, namely Nusajaya, Medini and Leisure Farm. (Editor's note: UEM Land yesterday signed a joint-venture agreement with Singapore's Ascendas Land International Pte Ltd to develop a tech park in Nusajaya.) UEM Land has also made considerable progress since the sluggish first half. With a gross development value of RM1bil (higher than the original RM900mil), Teega @ Puteri Harbour (formerly known as CS2) is slated for launch next month. The management has guided good margins for this project given its design which will not incur high construction cost. We expect this project to receive a positive response considering the sell-out of Somerset as well as the 90% take-up rate of Imperia at Puteri Harbour. Both push and pull factors are working in favour to Iskandar and hence UEM Land. While more projects will be spearheaded by reputable Singapore players, and amenities and infrastructure are all in place, the influx of liquidity driven by low interest rate as well as strong Singapore dollar and stringent regulations on home purchases in Singapore are the key drivers to pull the Singaporeans over to Iskandar. According to Urban Redevelopment Authority, new private home sales rebounded strongly by 84% month-on-month in September, signaling the significance of quantitative easing (QE3) that props up demand for properties. Our forecast remain unchanged. We turn more positive on UEM Land. Strong news flow is likely over the next two to three months, and the announcement of the big names should lift the entire Nusajaya (plus Gerbang Nusajaya) to the next level. We upgrade our call to "trading buy". Our fair value is raised to RM2.18 (from RM2.05), at 15% discount to revised net asset value. |
Union Investment RE plans to grow portfolio Posted: 23 Oct 2012 06:40 PM PDT Kuala Lumpur: Union Investment Real Estate (Union Investment RE) plans to grow its portfolio of property investments by one billion euros over the next five years with interest in Seoul, South Korea and Singapore. It first entered Malaysia in 2007 when it purchased Cap Square Tower from Bandar Raya Development Bhd (BRDB) for RM440mil. The building is currenlty 40% leased. Union Investment RE Asia Pacific managing director Ulrich Dischler told StarBiz the German fund made global investments amounting to 2.5 billion euros this year. The Hamburg-based asset management firm said most of its allocation will be for purchases in Europe and the United States although there have an interest in Singapore despite the slower growth expectations and a lack of of investment opportunities in the city state as prices have gone up considerably. "While Malaysia is more stable, and offers a better yield compared with Singapore's 3.5% currently, when measured against its three-year fixed terms of between 2% and 2.5%, there is still a positive yield in Singapore," he said. The annual yield for Grade A buildings in Kuala Lumpur is 5% but the interest rate is a lot higher by comparison, he said. The fund currently has over 300 properties. It has assets under management of some 21 billion euros in eight real estates funds. Dischler said the fund's interest is in Grade A green buildings with certification, be it from Singapore, Malaysia or from the United States and with ready tenants. "Multinational companies, if they were to rent, will need buildings which come with green certification," he said. Bloomberg News reported on Oct 18 that Union Investment GmbH, Germany's second-largest property fund manager, started a 500 million-euro (US$655mil) fund to buy offices, shops and hotels. The UniInstitutional German Real Estate, aimed at institutional investors, will acquire properties valued at about 20 million euros to 50 million euros, the company said in a statement. German property has been one of the biggest beneficiaries of the European debt crisis as investors seek a safe place to put their money. Investors poured about 2.6 billion euros into open-ended German real-estate funds in the first eight months of this year, more than three times as much as in the same period a year ago, according to data compiled by the German Funds Association BVI. |
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