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The Star Online: Business

MISC rated an 'underperform'

Posted: 24 Mar 2014 09:00 AM PDT


By Kenanga Research

Target price: RM6.87


ON March 21, MISC Bhd entered into an agreement for the sale and purchase of shares to dispose of its unit MISC Integrated Logistics Sdn Bhd (MILS) to Golden Age Logistics Sdn Bhd, a special purpose vehicle wholly owned by Utusan Printcorp Sdn Bhd for RM250mil.

As at Dec 31, 2013, the net assets of MILS stood at RM246.5mil, which implies a price-to-book value of 1.0x based on selling price.

This disposal, said Kenanga Research, was not surprising as MISC had been looking to divest their non-core businesses and focus on their core shipping business.

Kenanga Research said it believed that MISC had exited the integrated logistics business at a favourable price.

Based on the offer price of RM250mil, the research house said the implied trailing price earnings ratio was 21.8x based on estimated earnings of RM11.5mil on the assumptions of US dollar versus ringgit exchange rate of 3.12 and an effective tax rate of 25%.

It said the implied valuation was at a premium compared with MILS' industry peers, which were trading at a price earnings ratio range of between 10.0x and 16.0x.

Kenanga Research said it was positive on this disposal, as it allowed MISC to cash out from their logistics business at a favourable price which also freed up more cash for investments in energy and petroleum-related shipping business in, which the operating conditions may improve in the medium-term.

It said the completion date of this disposal was still uncertain at the moment as the finalisation of the deal was conditional upon approvals from relevant authorities, letter of consent from MILS financiers, and letter of confirmation from Petroliam Nasional Berhad.

Kenanga Research said the management expected the delivery of vessels for the global petroleum market in 2014 to be similar with 2013, but the overall outlook had improved as the demand for vessels had actually improved.

It said the chemical tanker segment was expected to be fairly stable in 2014 but the removal of sanctions on Iran was positive for longer-term chemical exports.

With one of the Puteri class LNG vessels going out of charter and coupled with significantly higher vessel deliveries expected in 2014, Kenanga Research said it anticipated the LNG segment to remain flattish or even slightly worse off in 2014 due to its relatively old fleet age and oversupply of vessels.

As a result of the disposal, it has its core earnings forecast for financial year 2014 (FY14) and FY15 by 0.5% and 0.6%, respectively, to account for the loss of income from the logistics business.

It increased price-to-book ratio-derived target price to RM6.87 from RM6.34 previously, pegged at 1.2x to FY14 book value of equity per share due to some housekeeping adjustments.


By PublicInvest Research

Fair value: RM1.30

MALAYSIA Aica, with the emergence of new controlling shareholder Datuk Ter Leong Yap, who now holds 50.1% post general offer, is expected to transform the company into a property developer from a wood-based manufacturer currently.

PublicInvest Research said three major developments – 300 acres in Salak Tinggi within Xiamen University, 82 acres in Medini and 21 acres in Setia Alam with estimated GDV of RM10bil (effective GDV of RM5.9bil) had been identified to be injected and likely to be financed by a combination of equity and debt.

It said the land costs appeared to be fair, averaging 10% of the estimated gross development value in its estimates.

It believed with proper execution, the land could provide consistent growth and wealth creation for Malaysia Aica for the next few years.

The company is 50.12%-owned by Datuk Ter (after the new block of shares sold to him prior to the general offer that raised his stake from 17.7%) after acquiring 39.3mil shares for RM33.4mil or 85 sen per share.

It said the stock price had since risen by 56% from 96 sen, in anticipation of assets injection which was seen to transform the wood-based manufacturing company into a property developer.

PublicInvest Research said the three developments were strategically located within up-and- coming areas such as Medini, Johor, Salak Tinggi (South of Putrajaya) and Setia Alam. The combined gross development value for these projects are estimated to be circa RM10bil.

Hence, it added the estimated land cost of RM1bil at about 10% of total gross development value appeared to be attractive. It said total investment by Datuk Ter (50.12% stake) were totalling RM47mil after the general offer (completed in Jan 14).

Assuming three-for-one rights issuance needed to fund the land injection, it said a further RM167mil is required to maintain the stake.

Nonetheless, it said the total investments could be partially offset by land sale gains.

Coincidentally, PublicInvest Research estimated Datuk Ter's gain from land sale was about RM 218mil, roughly equivalent to the total of his investments in Malaysia Aica.

It estimated the three plots of land which has gross development value of about RM10bil with development period ranging from five to eight years, will generate circa RM700mil (or RM1.10 per share) in net surplus value to the group.

Accordingly, PublicInvest Research said earnings should also improve as property sales started to kick in. It said it understood that the group had plans to accelerate its launches to sell at least RM1bil per annum in the next one to two years.

With that, it estimated the group's net earnings could potentially hit RM150mil (implying circa 4x price earnings ratio of PublicInvest Research's ex-all last price) in the next two to three years from average of more than RM2mil per annum currently.

It added that if the asset injection was partly funded by a three-for-one rights issuance at 70 sen per share, the ex-all fair value was RM1.30, based on 40% discount to PublicInvest Research realized net asset value estimates, providing circa 46% upside to the ex-all last price of 90 sen.

Key risks according to PublicInvest Research include slower than expected launches, delay of Xiamen University and more punitive property cooling measures.


By PublicInvest Research

Fair value: RM1.04


NTPM's third quarter of financial year 2014 (Q3FY14) revenue grew 4.2% year-on-year to RM132.9mil while earnings increased 2.6% year-on-year to RM14.2mil, adding up to a cumulative revenue and net profit of RM384.5mil (+6.5% year-on-year) and RM42.2mil (+16.2% year-on-year) respectively.

The growth is supported by the increase in tissue sales and baby diapers in the domestic market, with bottom-line margins enhanced from higher margin for tissue products and higher sales contribution from the personal care segment.

PublicInvest Research said it was maintaining its "outperform" call with an unchanged target price of RM1.04 premised on 16x price earnings multiple valuation on FY15F earnings, supported by its 55% Malaysian tissue market share position, emergence as a promising diaper and personal care manufacturer, regional expansion of operations into Indochina, and earnings boost from capacity and higher margins through product diversification including new paper products such as wet tissue and packaging wraps.

A first interim dividend of 1.45 sen was declared, which was in line with PublicInvest Research's full year dividend per share estimate of 2.9 sen.

Revenue recorded RM277.4mil (+3.9% year-to-date year-on-year), from higher domestic tissue products demand. Profit before tax increased 6.3% from higher sales margin for tissue products.

Asia Forex: Taiwan dollar Singapore dollar, ringgit rupiah Rise

Posted: 24 Mar 2014 06:49 PM PDT

March 25: The following table shows rates for Asian currencies against the dollar at 0130 GMT Tuesday.

    Change on the day at 0130 GMT
  Currency    Latest bid   Previous day    Pct Move
  Japan yen       102.24         102.24       +0.00
  Sing dlr        1.2676         1.2713       +0.29
  Taiwan dlr      30.508         30.622       +0.37
  Korean won     1076.40        1077.80       +0.13
  Baht             32.42          32.44       +0.06
  Peso             45.02          45.11       +0.20
  Rupiah        11345.00       11375.00       +0.26
  Rupee            60.78          60.77       -0.01
  Ringgit         3.2910         3.3000       +0.27
  Yuan            6.1800         6.1888       +0.14
  Change so far in 2014
  Currency    Latest bid  End prev year    Pct Move
  Japan yen       102.24         105.28       +2.97
  Sing dlr        1.2676         1.2632       -0.35
  Taiwan dlr      30.508         29.950       -1.83
  Korean won     1076.40        1055.40       -1.95
  Baht             32.42          32.86       +1.36
  Peso             45.02          44.40       -1.39
  Rupiah        11345.00       12160.00       +7.18
  Rupee            60.78          61.80       +1.69
  Ringgit         3.2910         3.2755       -0.47

  Yuan            6.1800         6.0539       -2.04- Reuters

SEC probes banks and companies in loan securities dealings

Posted: 24 Mar 2014 06:44 PM PDT

NEW YORK: The U.S. Securities and Exchange Commission has launched an investigation into the increasing number of complex bond deals on Wall Street that may create new opportunities for fraud, the Wall Street Journal reported on Monday.

Investigators with the SEC are examining if banks and companies are using the bond deals to hide risks illegally, the newspaper reported, citing sources close to the matter.

The securities are packages of corporate loans and debts that are assembled and sold by Wall Street Banks to investors. They have gained in popularity after the financial crisis as investors chase riskier investment products. (WSJ story:

The SEC is also investigating whether a number of banks including Barclays , Citigroup , Deutsche Bank AG, Goldman Sachs Group, Morgan Stanley, Royal Bank of Scotland and UBS AG have been cheating their clients by mispricing certain bond deals.

The SEC was not immediately available for comment outside of normal business hours.- Reuters


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