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Friday, March 20, 2009

Bursa Chat News Highlights (20.03.2009)

DiGi (DIGI MK, Hold, TP: RM22.60) intends to maintain its dividend payout. The firm is confident of keeping its free cash flow levels, despite tougher economic conditions and investments in broadband this year. Cash flow is expected to be equal to last year’s levels of RM1.28bn or higher. Capex this year is expected to be between RM200m to RM400m less from
management’s guidance of RM1.1bn to RM1.3bn. DiGi’s dividend policy pays out at least 50% of its net profit, but in recent years the firm has been paying dividends in excess of 90%. DiGi’s CEO, Johan Dennelind, stated that the firm’s long-term ambition is to be a key player in the broadband space. DiGi plans to invest RM300m to RM400m annually over the next 3 years on its 3G broadband rollout. (Financial Daily)

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Malaysia Airlines (MAS MK, Sell, TP: RM2.44) has secured a charter deal worth RM18.7m with the Defence Ministry to move some 36,000 national service (NS) trainees between Peninsular Malaysia and Sabah and Sarawak within two years. Its chairman, Tan Sri Dr Munir Majid said the national carrier has formed a dedicated unit to manage the NS trainees’ movement in order to ensure that all aspects of the process are taken care of. They would include seat reservations, check-in, meals and other necessities. (Financial Daily)

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Sime Darby (SIME MK, Buy, TP: RM6.40) leads the race for Tata franchise. Sime Darby Bhd has emerged the frontrunner to bag the Tata Motors franchise in Malaysia, according to sources familiar with the matter. The conglomerate, via its motor division, Sime Darby Motors, had placed a bid at the eleventh hour, amidst speculation that Naza Group and DRB-HICOM had been in talks with India’s largest carmaker. Tata’s marques includes Jaguar, Land Rover, Aston Martin and Daweoo, and it is scheduled to launch its Nano, touted to be the world’s cheapest car (Rp100,000 or RM 7,158), on Monday. Sime Darby has the capacity to assemble the Tata range of cars at its plants in Shah Alam and Kulim. DRB-HICOM group’s Tata franchise expired in the middle of 2008, and the group was reported as re-evaluating holding it. (Financial Daily)

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Celcom (M) Bhd aims to strengthen its dominance in mobile broadband services with the introduction of the first-ever data only prepaid mobile broadband services and targets a 120% growth in subscriber base for this year. Celcom’s chief operating officer for new business, Chee Pok Jin, said the mobile operator had the widest broadband coverage, reaching 71% of the total populated areas in the country and was the only one with service coverage in every state. (Financial Daily)

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The government does not intend to further reduce the corporate and individual tax as tax exemptions of up to RM1.5bn had been given under the mini-budget tabled last week. Deputy Prime Minister and Finance Minister Datuk Seri Najib Razak said this was to spur economic activities and the government needs to collect tax to sustain expenditure for salaries, pension and at the end of the year, the bonus awaited by civil servants. (Financial Daily)

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The Government will not hesitate to withdraw licences or forfeit bonds of WiMAX licensed companies should they fail to roll out services according to their respective business plan. Energy, Water and Communications Minister Datuk Shaziman Abu Mansor said the Malaysian communications and Multimedia Commission (MCMC) was currently monitoring iMAX licence holders to see if they had met their business plan. (StarBiz)

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Malaysia’s manufacturing sales in January fell by 22.7% y-o-y to RM36.7bn, according to the Statistics Department. Compared with December 2008, sales value was down by RM564.5m or 1.5%, while December sales value was RM37.3bn. The decline in January’s sales value followed a drop in sales for 90 of 116 industries covered in the survey the Statistics Department said in a statement. The 5 major industries impacted were computer and computer peripherals manufacture, manufacture of basic iron and steel products, manufacture of refined petroleum products, manufacture of semi- conductor devices and manufacture of other basic industrial chemicals, except fertilisers and nitrogen compounds. (StarBiz)

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INVESTMENT RESEARCH
Global
Stocks slipped Thursday as rising oil and gold prices, a weaker dollar and more dour reads on the economy gave investors a reason to step back after the recent rally. The Dow Jones industrial average lost 1.2% (-85.8 pts, close 7,400.8). The Standard & Poor' 500 index lost 1.3% (-10.3 pts, close 784.0) and the Nasdaq composite lost 0.5% (-7.7 pts, close 1,483.5). In currency trading, the dollar fell against the euro and the yen. U.S. light crude oil for April delivery settled up US$3.47 to settle at US$51.61 a barrel on the New York Mercantile Exchange. (CNNmoney)

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A measure of the economy’s future performance dropped and the number of Americans collecting unemployment benefits surged to a record, evidence the recession is deepening as policy makers try to unfreeze credit markets. The Conference Board’s index of leading indicators, a gauge of the economy’s direction over the next three to six months, fell 0.4% in February, less than forecast. The Labour Department said 5.47m Americans are getting jobless benefits. (Bloomberg)

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German Deputy Economy Minister Walther Otremba said there’s a lack of progress in identifying ways to shift toxic assets from banks’ books, making it unlikely the government will announce measures soon. A government-led panel charged with untying the knot that’s frozen bank lending has “gone right round in a circle again,” Otremba said. The panel’s most promising recommendation to date, a proposal that envisaged banks and taxpayers sharing potential losses on the assets, is making no headway, he said. The government set up a 500bn-euro (US$683bn) bank-rescue fund comprising loans and guarantees in October. As much as 300bn euros in toxic assets still lurk on banks’ balance sheets, according to the regulator BaFin. (Bloomberg)

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The Bank of Japan said the world’s second-largest economy is worsening “significantly,” maintaining its evaluation for a second month. The central bank forecasts the sharpest economic contraction in more than 60 years as an unprecedented decline in exports forces companies to cut production and fire workers. “Exports are expected to continue to decrease due to the deterioration in overseas economic conditions and the appreciation of the yen,” the central bank said. Spending by businesses and consumers is likely to weaken as profits worsen, funding remains difficult and the job market “becomes increasingly severe,” the bank said. Declines in industrial output will “moderate gradually” as companies replace stockpiles they managed to offload when they left factories idle, the bank said. (Bloomberg)
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Russia won’t resort to printing money to cover budget deficits that Prime Minister Vladimir Putin said are likely to continue for the “next few years.” The government should tackle the deficit “by using the reserves that have been accumulated in recent years, or if necessary by borrowing under market conditions,” Putin told the Cabinet yesterday, adding that Russia doesn’t yet need to borrow and won’t seek loans abroad. “Resorting to a printing press would be unwise and extremely dangerous.” he said. Russia’s revised 2009 budget contains a deficit of 2.98trn rubles, or 7.4% of planned GDP of 40.4trn rubles. Kudrin said on March 14 that the deficit may exceed 8% of GDP. The deficit will be reduced to 3% of GDP in 2011, according to a draft of the government’s anti-crisis plan. The government approved the plan and the revised budget with Russia’s first deficit in a decade as it attempts to stabilize the economy with a 1.6trn ruble bailout modelled on plans developed by the U.S. and U.K. (Bloomberg)

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India’s inflation slowed to a two-decade low, providing room for the central bank to cut interest rates to protect the economy from the global recession. Wholesale prices rose 0.44% y-o-y in the week to March 7 after gaining 2.43% the previous week, the commerce ministry said yesterday. That’s the lowest inflation rate on record, according to data available since 1990 on Bloomberg. The International Monetary Fund said this week India should rely more on monetary policy to support the economy as high public debt makes fiscal efforts difficult. Governor Duvvuri Subbarao on March 4 cut the Reserve Bank of India’s key repurchase rate to an all-time low of 5%, having reduced the measure by 400 basis points since October. Still, India has more room to lower rates than other economies, with the Bank of England’s benchmark at 0.5% and the U.S. Fed’s target interest- rate range at 0% to 0.25%. (Bloomberg)
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Asia-Pacific airlines are at ‘tipping point’. The Centre for Asia Pacific Aviation (CAPA) predicted that airlines in the Asia Pacific region are only weeks away from grounding as much as 10% of their aircraft as they grapple with weak revenues, falling load factors and excess capacity. This prediction came a day after Singapore Airlines recorded one of its worst monthly falls in passenger loads, which dropped more than 20% or by nearly 300,000 passengers in February y-o-y. Cathay Pacific, which reported the biggest annual loss in its 63 year history, had cut capacity, grounded flights, delayed the construction of a cargo terminal and offered staff unpaid leave. According to Peter Harbison, executive chairman of CAPA, airlines in Asia were particularly vulnerable because of their heavier reliance on the premium market. Within Asia, the International Air Transport Association (IATA) found that premium travel was down 23.4%, and a decline of 24.7% across the Pacific. Premium travel between Europe and Asia was down 21.2%. (Financial Daily)
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