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Malaysia
IOI Corp (IOI MK, Hold, TP: RM3.90) said palm oil yields would fall by 5% due to warm weather, which may push prices to RM3,000 in the near term, if there is an uptick in overseas demand. Oil palms continue to suffer biological stress after last year’s strong harvests and low fertiliser use, said IOI executive chairman Tan Sri Lee Shin Cheng. He added that crude palm oil prices should remain comfortably above RM2,500 in 2H09, despite higher production levels. (Financial Daily)
*****
Vietnam’s An Binh Bank (ABBank), 15%-owned by Malayan Banking Bhd (MAY MK, Hold, TP: RM4.80), said its January – April net profit nearly tripled to 113.7bn dong (RM22.56m). Partly-private ABBank made a net profit of 26bn dong in April alone, well above its 23bn dong in combined net earnings for the first 2 months of the year, the Ho Chi Minh city- based lender said. Outstanding loans at end-April were 6.89trn dong, and the bank has projected gross profit this year to jump to 400bn dong from a gross profit of just 70.2bn dong in 2008, when it suffered from high operating costs and losses from trading foreign currencies and securities. (Financial Daily)
*****
Genting Singapore Plc, a unit of Genting Bhd (GENT MK, Buy, TP: RM5.30), swung to a net loss of S$31.9m (RM76.8m) for 1Q09 from a profit of S$6.02m in the corresponding period last year. The loss was on the back of lower revenue and a fair value loss on derivative financial instruments and increase in pre-operating expenses incurred for the integrated resort in Singapore. Revenue for the quarter was lower at S$105.4m, down from S$164.1m a year ago. The gaming firm said the reduction was mainly due to a fall in revenue of S$58.4m from its UK casino operations. (Financial Daily)
*****
MAS Aerospace Engineering Sdn Bhd (MAE), a unit of Malaysian Airline (MAS MK, Sell, TP: TM2.44), has teamed up with EADS SECA to jointly set up a maintenance, repair and overhaul (MRO) facility to mainly cater for the servicing of turbo-prop plane engines. The facility, scheduled to be operational by 2010, is positioned as a one-stop centre for engine, airframe and component support for PW100 series engines that are currently fitted into ATR turbo-props, Bombardier Dash 8 planes and Fokker 50s. (Financial Daily)
*****
Astro All Asia Networks Plc (Astro) received mixed results on an arbitration and legal suit against the Lippo Group of companies in Indonesia, which include PT Ayunda Prima Mitra (PT APM), over a failed joint venture (JV) to provide satellite television services there. The arbitration tribunal ruled that it has the jurisdiction to try the matter, that PT APM discontinue the civil suit against Astro, and that PT APM is prohibited from bringing further legal proceedings against Astro. In Astro’s civil suit brought by PT APM, the South Jakarta District Court rejected Astro’s challenge of the court’s jurisdiction, and decided it has jurisdiction over the dispute. Astro is considering an appeal against the court’s decision, on the basis of, among others, that the South Jakarta district court has no jurisdiction to hear the matter, in light of the arbitration tribunal’s award. (Financial Daily)
*****
Petroliam Nasional Bhd (Petronas) filed a suit claiming RM85.8m from Perwaja Holdings Bhd in disputed supply charges for natural gas to the steelmarker. Perwaja said the difference is due to Perwaja’s natural gas price computation based on the negotiations with the government, and Petronas’ own price. The steel manufacturer said it had been in negotiations with the government to reduce the natural gas price, in line with international price, with the applicable discount. Perwaja has made full payment to Petronas based on market international price less the government discount. Perwaja said the suit will not impact the company’s earnings, and will continue to defend the suit. (Financial Daily)
*****
It is still too early to say if Malaysia' palm oil output this year will be affected by the current dry weather and some industry players even think that last year' record production could be repeated. Planters with estates in Sabah, Sarawak, Johor and Perak all agree that it is too early to forecast a big drop in crop output. According to the Malaysian Palm Oil Board, oil palm trees produced 5.08m tonnes of crude palm oil in the first four months of this year, 4% less than a year ago. (BT)
*****
Lembaga Tabung Haji (LTH) is in favour of Ramunia disposing of its fabrication assets and liabilities as a way to stave off financial distress. The fund is hoping that with the proceeds, the loss making Ramunia can fare better by entering another business. According to LTH’s Chief Investment Officer, problems in the company included tight working capital, halted orders and high staff turnover which stemmed from the global financial crisis and the proposed RTO with MISC. Tabung Haji owns close to 30% of Ramunia’s paid-up capital. The controlling shareholder is chairman Datuk Azizul Rahman Abd Samad, who (along with his brother, Ahmad Rizal) has a direct and indirect interest of just over 33%. (Starbiz)
*****
EON Capital Bhd (EON Cap) has clarified that its higher net non-performing loan (NPL) ratio for 1Q09 at 3.1% from 2.5% last quarter was mainly due to 2 lumpy loans. However, it was not a concern for the banking group as it had set aside adequate provisions to manage the 2 loans which had become NPLs. The banking group stated that it had anticipated that the 2 accounts may become non-performing and hence had provided for these loans. (Financial Daily)
*****
Mudajaya Group Bhd said its associated company in India, RKM Powergen Private Ltd (RKM), has entered into another power purchase agreement (PPA) with PTC India Ltd (PTC) for the supply of 700MV round-the-clock electricity from phase two of the independent power plant (IPP) project in Chhattisgarh, India. Phase 2 of the IPP project consisted of 1,080MW and was expected to commence commercial operations by September 2011. The PPA is for a period of 12 years. PTC will pay RKM a yearly average tariff rate of 3 rupees (RM0.214) per kilowatt hour (kWh) for the power supply on a ‘take or pay’ basis. The balance of the nominal capacity, amounting to 380MW, would be sold through tariff bids to capture short term market rates. (Financial Daily)
*****
INVESTMENT RESEARCH
Global
Stocks tumbled Wednesday, with the Nasdaq and S&P 500 falling for a third straight session, after a weaker-than-expected retail sales report gave investors a reason to retreat. The Dow Jones industrial average lost 2.2% (-184.2 pts, close 8,284.9). The Standard & Poor' 500 index lost 2.7% (-24.4 pts, close 883.9) and the Nasdaq composite lost 3.0% (-51.7 pts, close 1,664.2). In currency trading, the dollar gained versus the euro and the yen. U.S. light crude oil for June delivery fell 83 cents to settle at US$58.02 a barrel on the New York Mercantile Exchange. (CNNmoney)
*****
Retail sales in the U.S. unexpectedly dropped in April for a second month, indicating that rising unemployment is prompting consumers to conserve cash. The 0.4% decrease followed a revised 1.3% drop in March that was larger than previously estimated, the Commerce Department said yesterday. Other reports showed companies continued to cut stockpiles as demand slowed, and climbing oil costs pushed up prices for imported goods. A separate report from Commerce showed inventories at U.S. businesses fell 1% in March, a seventh consecutive drop as slumping sales forced companies to pull back. The streak of decreases is the longest since 2001-2002. (Bloomberg)
*****
The Federal Reserve considers the recent jump in Treasury yields more as a reflection of a better economic outlook than a signal it needs to step up purchases of U.S. government debt, according to central bank officials who declined to be identified. It’s too early to judge the effectiveness of the Fed’s US$300bn plan to buy Treasuries even after 10-year yields climbed 0.65 percentage point since the initiative began in March, the officials said. They added that the goal is to stimulate private lending, rather than to target government-bond rates. The Fed officials’ stance contradicts the view of firms including BlackRock Inc. that have predicted the rise in yields will prompt the central bank to announce an increase in the size of the program as soon as next month. Chairman Ben S. Bernanke said May 11 that the danger of deflation, or prolonged declines in consumer prices, is “receding” and earlier this month cited evidence the economy’s contraction is easing. (Bloomberg)
*****
The Bank of England said the U.K. economy faces a “slow” recovery and inflation will probably stay below its target for the next three years as the country struggles to escape the worst recession since the 1980s. Gross domestic product will contract on an annual basis for the rest of this year before growth resumes in 2010, the central bank’s quarterly forecasts published yesterday showed. Inflation will slow to as low as 0.4% this year. (Bloomberg)
*****
Japan’s current-account surplus narrowed at the slowest pace in six months in March as a decline in exports eased. The surplus shrank 48.8% to 1.486trn yen (US$15.5bn) from a year earlier, the Ministry of Finance said yesterday. Exports fell 46.5% after declining a record 50.4% in February. Imports slid 37.8%, compared with an unprecedented 44.9% drop the previous month. Economists don’t expect shipments abroad to resume rising soon given that they have plunged at an unprecedented pace since last year. The International Monetary Fund says the global recession will be deeper and the recovery slower than earlier predicted as financial markets take longer to stabilize. (Bloomberg)
*****
Growth in China' industrial production slowed in April even as the government continued to ramp up stimulus efforts, showing that a rapid recovery in the world' third-largest economy isn' yet ensured. China' industrial output in April rose7.3% y-o-y, the National Bureau of Statistics said yesterday. Although slower than March' 8.3% growth and beneath market expectations for an 8% rise, the April growth rate was still much faster than the 3.8% rise for the January-February period. While the government' stimulus spending and massive expansion of bank lending have helped to boost new investment, China' exports continue to decline sharply. Economists say that with many projects just getting on stream, the stimulus spending is likely to have a bigger impact on industrial demand in months to come. Meanwhile, China' retail sales in April rose 14.8% y-o-y, the National Bureau of Statistics said separately, holding steady with March' 14.7% rise. (WSJ)
*****
IOI Corp (IOI MK, Hold, TP: RM3.90) said palm oil yields would fall by 5% due to warm weather, which may push prices to RM3,000 in the near term, if there is an uptick in overseas demand. Oil palms continue to suffer biological stress after last year’s strong harvests and low fertiliser use, said IOI executive chairman Tan Sri Lee Shin Cheng. He added that crude palm oil prices should remain comfortably above RM2,500 in 2H09, despite higher production levels. (Financial Daily)
*****
Vietnam’s An Binh Bank (ABBank), 15%-owned by Malayan Banking Bhd (MAY MK, Hold, TP: RM4.80), said its January – April net profit nearly tripled to 113.7bn dong (RM22.56m). Partly-private ABBank made a net profit of 26bn dong in April alone, well above its 23bn dong in combined net earnings for the first 2 months of the year, the Ho Chi Minh city- based lender said. Outstanding loans at end-April were 6.89trn dong, and the bank has projected gross profit this year to jump to 400bn dong from a gross profit of just 70.2bn dong in 2008, when it suffered from high operating costs and losses from trading foreign currencies and securities. (Financial Daily)
*****
Genting Singapore Plc, a unit of Genting Bhd (GENT MK, Buy, TP: RM5.30), swung to a net loss of S$31.9m (RM76.8m) for 1Q09 from a profit of S$6.02m in the corresponding period last year. The loss was on the back of lower revenue and a fair value loss on derivative financial instruments and increase in pre-operating expenses incurred for the integrated resort in Singapore. Revenue for the quarter was lower at S$105.4m, down from S$164.1m a year ago. The gaming firm said the reduction was mainly due to a fall in revenue of S$58.4m from its UK casino operations. (Financial Daily)
*****
MAS Aerospace Engineering Sdn Bhd (MAE), a unit of Malaysian Airline (MAS MK, Sell, TP: TM2.44), has teamed up with EADS SECA to jointly set up a maintenance, repair and overhaul (MRO) facility to mainly cater for the servicing of turbo-prop plane engines. The facility, scheduled to be operational by 2010, is positioned as a one-stop centre for engine, airframe and component support for PW100 series engines that are currently fitted into ATR turbo-props, Bombardier Dash 8 planes and Fokker 50s. (Financial Daily)
*****
Astro All Asia Networks Plc (Astro) received mixed results on an arbitration and legal suit against the Lippo Group of companies in Indonesia, which include PT Ayunda Prima Mitra (PT APM), over a failed joint venture (JV) to provide satellite television services there. The arbitration tribunal ruled that it has the jurisdiction to try the matter, that PT APM discontinue the civil suit against Astro, and that PT APM is prohibited from bringing further legal proceedings against Astro. In Astro’s civil suit brought by PT APM, the South Jakarta District Court rejected Astro’s challenge of the court’s jurisdiction, and decided it has jurisdiction over the dispute. Astro is considering an appeal against the court’s decision, on the basis of, among others, that the South Jakarta district court has no jurisdiction to hear the matter, in light of the arbitration tribunal’s award. (Financial Daily)
*****
Petroliam Nasional Bhd (Petronas) filed a suit claiming RM85.8m from Perwaja Holdings Bhd in disputed supply charges for natural gas to the steelmarker. Perwaja said the difference is due to Perwaja’s natural gas price computation based on the negotiations with the government, and Petronas’ own price. The steel manufacturer said it had been in negotiations with the government to reduce the natural gas price, in line with international price, with the applicable discount. Perwaja has made full payment to Petronas based on market international price less the government discount. Perwaja said the suit will not impact the company’s earnings, and will continue to defend the suit. (Financial Daily)
*****
It is still too early to say if Malaysia' palm oil output this year will be affected by the current dry weather and some industry players even think that last year' record production could be repeated. Planters with estates in Sabah, Sarawak, Johor and Perak all agree that it is too early to forecast a big drop in crop output. According to the Malaysian Palm Oil Board, oil palm trees produced 5.08m tonnes of crude palm oil in the first four months of this year, 4% less than a year ago. (BT)
*****
Lembaga Tabung Haji (LTH) is in favour of Ramunia disposing of its fabrication assets and liabilities as a way to stave off financial distress. The fund is hoping that with the proceeds, the loss making Ramunia can fare better by entering another business. According to LTH’s Chief Investment Officer, problems in the company included tight working capital, halted orders and high staff turnover which stemmed from the global financial crisis and the proposed RTO with MISC. Tabung Haji owns close to 30% of Ramunia’s paid-up capital. The controlling shareholder is chairman Datuk Azizul Rahman Abd Samad, who (along with his brother, Ahmad Rizal) has a direct and indirect interest of just over 33%. (Starbiz)
*****
EON Capital Bhd (EON Cap) has clarified that its higher net non-performing loan (NPL) ratio for 1Q09 at 3.1% from 2.5% last quarter was mainly due to 2 lumpy loans. However, it was not a concern for the banking group as it had set aside adequate provisions to manage the 2 loans which had become NPLs. The banking group stated that it had anticipated that the 2 accounts may become non-performing and hence had provided for these loans. (Financial Daily)
*****
Mudajaya Group Bhd said its associated company in India, RKM Powergen Private Ltd (RKM), has entered into another power purchase agreement (PPA) with PTC India Ltd (PTC) for the supply of 700MV round-the-clock electricity from phase two of the independent power plant (IPP) project in Chhattisgarh, India. Phase 2 of the IPP project consisted of 1,080MW and was expected to commence commercial operations by September 2011. The PPA is for a period of 12 years. PTC will pay RKM a yearly average tariff rate of 3 rupees (RM0.214) per kilowatt hour (kWh) for the power supply on a ‘take or pay’ basis. The balance of the nominal capacity, amounting to 380MW, would be sold through tariff bids to capture short term market rates. (Financial Daily)
*****
INVESTMENT RESEARCH
Global
Stocks tumbled Wednesday, with the Nasdaq and S&P 500 falling for a third straight session, after a weaker-than-expected retail sales report gave investors a reason to retreat. The Dow Jones industrial average lost 2.2% (-184.2 pts, close 8,284.9). The Standard & Poor' 500 index lost 2.7% (-24.4 pts, close 883.9) and the Nasdaq composite lost 3.0% (-51.7 pts, close 1,664.2). In currency trading, the dollar gained versus the euro and the yen. U.S. light crude oil for June delivery fell 83 cents to settle at US$58.02 a barrel on the New York Mercantile Exchange. (CNNmoney)
*****
Retail sales in the U.S. unexpectedly dropped in April for a second month, indicating that rising unemployment is prompting consumers to conserve cash. The 0.4% decrease followed a revised 1.3% drop in March that was larger than previously estimated, the Commerce Department said yesterday. Other reports showed companies continued to cut stockpiles as demand slowed, and climbing oil costs pushed up prices for imported goods. A separate report from Commerce showed inventories at U.S. businesses fell 1% in March, a seventh consecutive drop as slumping sales forced companies to pull back. The streak of decreases is the longest since 2001-2002. (Bloomberg)
*****
The Federal Reserve considers the recent jump in Treasury yields more as a reflection of a better economic outlook than a signal it needs to step up purchases of U.S. government debt, according to central bank officials who declined to be identified. It’s too early to judge the effectiveness of the Fed’s US$300bn plan to buy Treasuries even after 10-year yields climbed 0.65 percentage point since the initiative began in March, the officials said. They added that the goal is to stimulate private lending, rather than to target government-bond rates. The Fed officials’ stance contradicts the view of firms including BlackRock Inc. that have predicted the rise in yields will prompt the central bank to announce an increase in the size of the program as soon as next month. Chairman Ben S. Bernanke said May 11 that the danger of deflation, or prolonged declines in consumer prices, is “receding” and earlier this month cited evidence the economy’s contraction is easing. (Bloomberg)
*****
The Bank of England said the U.K. economy faces a “slow” recovery and inflation will probably stay below its target for the next three years as the country struggles to escape the worst recession since the 1980s. Gross domestic product will contract on an annual basis for the rest of this year before growth resumes in 2010, the central bank’s quarterly forecasts published yesterday showed. Inflation will slow to as low as 0.4% this year. (Bloomberg)
*****
Japan’s current-account surplus narrowed at the slowest pace in six months in March as a decline in exports eased. The surplus shrank 48.8% to 1.486trn yen (US$15.5bn) from a year earlier, the Ministry of Finance said yesterday. Exports fell 46.5% after declining a record 50.4% in February. Imports slid 37.8%, compared with an unprecedented 44.9% drop the previous month. Economists don’t expect shipments abroad to resume rising soon given that they have plunged at an unprecedented pace since last year. The International Monetary Fund says the global recession will be deeper and the recovery slower than earlier predicted as financial markets take longer to stabilize. (Bloomberg)
*****
Growth in China' industrial production slowed in April even as the government continued to ramp up stimulus efforts, showing that a rapid recovery in the world' third-largest economy isn' yet ensured. China' industrial output in April rose7.3% y-o-y, the National Bureau of Statistics said yesterday. Although slower than March' 8.3% growth and beneath market expectations for an 8% rise, the April growth rate was still much faster than the 3.8% rise for the January-February period. While the government' stimulus spending and massive expansion of bank lending have helped to boost new investment, China' exports continue to decline sharply. Economists say that with many projects just getting on stream, the stimulus spending is likely to have a bigger impact on industrial demand in months to come. Meanwhile, China' retail sales in April rose 14.8% y-o-y, the National Bureau of Statistics said separately, holding steady with March' 14.7% rise. (WSJ)
*****
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