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Monday, June 28, 2010

KUALA LUMPUR (Dow Jones)--Investors beat shares of Berjaya Corp. Bhd. (3395.KU) down as much as 9% Monday, after the company said it has abandoned plans to buy 70% of Ascot Sports Sdn. Bhd. following the government's decision over the weekend to retain a ban on sports betting.

The government's decision is the latest in a series of bad news for the Malaysian diversified group, which has been publicly pinning its hopes on its venture into sports betting to boost growth.

In a statement, Berjaya Corp. said it has also scrapped a proposed rights issue to raise funds to buy the stake in Ascot.

The move comes after the government announced it won't issue a licence to Ascot to operate sports betting despite having earlier granted approval in principle to the company that is privately held by the family of tycoon Vincent Tan, who is also the chairman of Berjaya Corp. Berjaya Corp. planned to buy the stake worth MYR525 million from Tan.

The decision deals a major blow to Tan, who was counting on Ascot to be the first sports betting company in Malaysia and to, in turn, be a key earnings growth driver for his flagship listed holding company Berjaya Corp.

Berjaya Corp. said it was "extremely disappointed" that its sports betting ambitions have been "frustrated" by the government and sought to allay investor concerns over the group's growth prospects.

"Notwithstanding this backtracking by the government, the board remains resolute in its efforts to expand the company's portfolio of core business activities. The gaming sector will remain one of its primary focus for its high yielding potential," Berjaya Corp. said.

Prime Minister Najib Razak's administration had in recent months considered allowing legalized sports betting in a bid to curb illegal bookmaking in the country, which some estimates indicate is worth up to MYR10 billion a year. However, the move drew intense criticism from politicians from within the prime minister's own party and in the opposition, and from civil society organizations in this mainly Muslim country.

Najib was quoted by state news agency Bernama as saying that the government was maintaining its ban on sports betting after a survey showed most Malaysians were opposed to the activity.

At 0328 GMT, Berjaya Corp shares were down 7.4% at MYR1.26, after hitting an intraday low of MYR1.23, the lowest since Feb. 9. The benchmark Kuala Lumpur Composite Index was unchanged.

Analysts largely blamed the company for the dive in the share price, saying investors were likely punishing the company for raising market hopes that a venture into sports betting was imminent.

Such was Tan's confidence in clinching the licence that when Berjaya Corp. first announced the planned acquisition of a stake in Ascot in May, the tycoon made a guarantee that Ascot would make a profit of no less than MYR375 million in the first three years of operations.

"The group should not have drawn so much attention to itself without first securing a formal licence. This, coupled with other disappointing developments at the group recently, is hurting investor sentiment on the stock," said a gaming analyst, who asked not to be named, at a local bank-backed brokerage.

Last week, Berjaya Land Bhd. (4219.KU), the group's property arm, said it was no longer proceeding with an ambitious commercial and retail development project in Jeju island, South Korea, which it earlier estimated to be worth at least $200 million.

That announcement came just days after Berjaya Sports Toto Bhd. (1562.KU), the group's number forecasting games arm, reported a 25% year-on-year drop in its fiscal fourth quarter earnings, below market expectations.

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Thursday, June 24, 2010

News Highlights

Thursday, June 24, 2010 0 Comments
BToto: To issue RM800m debt notes

Berjaya Sports Toto Bhd (BST MK, Hold, TP: RM4.91) announced that its unit Sports Toto Malaysia Sdn Bhd has proposed to undertake a medium term notes (MTNs) programme of up to RM800m and it has received the approval of the Securities Commission. The anticipated initial drawdown of the MTNs is expected to be sized at approximately RM500m, of which the proceeds will be used principally towards the refinancing of BToto Group’s existing bank borrowings and for working capital. BToto said MARC had on 14 Jun assigned a AA-rating with stable outlook on the MTN programme. (Financial Daily)

KNM: Open to possibility of another privatisation

Lee Swee Eng, MD of KNM Group (KNMG MK, Hold, TP: RM0.55), said he would not rule out the possibility of a future privatisation exercise. He said the stumbling block was the funding issue and that if the opportunity arises, they will look into it. Despite the setback, Lee has been plodding along and he said he was looking to replace the current low to mid-end process equipment with higher-end products and services. Lee also said that KNM increased its order book to RM2.1bn from RM1.5bn a year ago. The order book, which consists mainly of Middle Eastern and Australian orders, is expected to last 18 months. The commissioning date of KNM’s plant in Saudi Arabia is estimated to be a further two months later than the original target of mid-2010, as the company has yet to obtain full approvals. (Financial Daily)

Konsortium Logistik: Seeks strategic partner for Pos

Konsortium Logistik Bhd (KLB), which is eyeing the entire 32% stake held by Khazanah Nasional Bhd in Pos Malaysia Bhd, is looking for a strategic partner to manage the company if it qualifies for the bidding process. Chairman Ismett Azyze Hamad Abdul Azyze said KLB had submitted its profile to Khazanah and added that the strategic partner would add value to Pos Malaysia’s service. Ismett said the potential tie-up between KLB and Pos Malaysia could benefit both parties as Pos Malaysia has an extensive network in the country, while KLB has years of experience in logistics. He said KLB had hoped to emulate the success of courier services rovider DHL, unit of Deutsche Post, which transformed itself from a postal group to the world’s leading logistics company. Meanwhile, Ismett said that KLB is on the lookout to buy four vessels, two bulk carriers and two car carriers as part of its expansion plans. (Financial Daily)

Sunway City: Mulling RM1bn university hospital development

The Sunway construction (SCITY MK, Buy, TP: RM5.00) and property group may build a RM1bn university hospital to expand its education and healthcare businesses. Targeted to be completed in 2015, the hospital is likely to be named Sunway Academic Health Sciences Centre, sources said. Sources said the group plans to expand the outdoor car park next to Sunway Medical Center to accommodate a 700-bed teaching hospital. There are some 2.7ha available on which to build the new hospital. The site is understood to be the last piece of land left for the hospital expansion. Together with the new facility, the hospital will take up 5.27ha. (BT)

Berjaya Land: Proposes share split with bonus issue

Berjaya Land Bhd has proposed a share split coupled with a bonus issue that would see its paid up share capital balloon to 5.0bn shares from 1.26bn shares in a move to enhance the liquidity and marketability of its shares. The share split will see shareholders getting two Berjaya Land shares with a reduced par value of 50sen from RM1 while the proposed bonus issue will provide investors with two additional shares for the two subdivided new shares from the proposed split. Berjaya Land is proposing to use all of its share premium account and RM1.2bn from retained earnings to facilitate the bonus issue. (Malaysian Reserve)

Crest Builder: Targets to double revenue to RM658m

Crest Builder Holdings Bhd targets to double its revenue from the RM329m achieved in FY09. The group has a few major jobs and projects lined up and is all set to meet the task ahead, said its managing director Yong Soon Chow. “We are still confident about the prospects of the construction industry and hope to double the numbers by next year,” he said. In FY09, the company managed to secure two prestigious construction projects namely the Green Mark certified Chua Tower Office development along Jalan Ampang and Setia Sky Residence along Jalan Raja Muda Abdul Aziz. (Malaysian Reserve)

HeiTech Padu: Aims to double overseas revenue this year

HeiTech Padu Bhd targets to double its overseas revenue this year, eyeing public sector projects abroad even as governments worldwide plan spending cuts. Within the next five years, the company is looking at a five-fold increase of international revenue particularly from developing markets such as Indonesia and United Arab Emirates. “We believe the need for computerisation is increasing as governments will spend to improve public service delivery,” said Chairman Datuk Mohd Hilmey Mohd Taib. HeiTech Padu plans to introduce solutions such as e-government to developing countries. (Malaysian Reserve)

Economy: Steel consumption forecast to grow at slower pace

Domestic steel usage is projected to grow at oly 5% to 7.5m tonnes this year – lower than an earlier forecast of 8 – 10% growth, Malaysian Iron and Steel Industry Federation (Misif) president said. “There will be growth but the rate will be subdued. In the last two months, the government has been indicating impending rise in natural gas and electricity prices,”he said. “Also, the implementation of government projects is not as consistent as we had anticipated,” he added. (BT)

Economy: Malaysia listed as China’s QDII destination

The ample investment funds in China can now flow into Malaysia capital markets as the country as been approved as an investment destination under the republic’s Qualified Domestic Institutional Investor (QDII) scheme. Malaysia is the 11thmember of a small group of approved investment destinations which comprises Australia, Canada, Hong Kong, Germany, Japan, Luxembourg, Singapore, South Korea, UK and US. Securities Commission chairman Tan Sri Azrinah Anwar said the QDII programme presents a major opportunity for Malaysian capital market intermediaries to gain access to the Chinese market in reaching a new pool of investors. At present, the quota for funds investing offshore under the QDII scheme sits at some US$47.69bn. Of that quota, 41% has yet to be invested. (Financial Daily)

Economy: No FX intervention after yuan policy

Bank Negara Malaysia governor said she did not expect to intervene in foreign exchange markets following China’s
announcement of a more flexible policy on the yuan. She said that this is not expected to have implications on the region in terms of impact on financial markets including the foreign exchange markets. Tan Sri Zeti Akhtar Aziz further added that eurozone debt woes had not posed a threat to market stability and only when there was a potential disruption or disorderly market conditions would BNM consider intervening in the currency market. (Financial Daily)

US: Stocks end volatile session mixed

Stocks ended mixed Wednesday as investors struggled to balance the Federal Reserve's statement, a weak housing
market report and a sell off in commodity prices amid the stronger euro. The central bank opted to hold the fed funds rate, a key overnight banking rate, steady at historic lows near zero. In its closely-watched statement, the bankers said the economic recovery is proceeding and the labour market is "improving gradually." But the bankers also cautioned about the weakness in the housing market and the "less supportive" financial conditions as a result of the "development abroad," meaning the European debt crisis. The Dow Jones industrial average gained 0.1% (+4.9 pts, close 10,299.4). The Nasdaq lost 0.3% (-7.6 pts, close 2,254.2) and the S&P 500 lost 0.3% (-3.3 pts, close 1,092.0). U.S. light crude oil for August delivery fell US$2.40 to settle at US$76.35 a barrel on the New York Mercantile Exchange. (CNNmoney)

US: Fed keeps rate pledge, says markets ‘less supportive’

Federal Reserve officials retained a pledge to keep the benchmark interest rate at a record low for an “extended period” and signalled that Europe’s debt crisis may harm American growth. “Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad,” the Fed’s Open Market Committee said in a statement in Washington. Central bankers cited slowing inflation and said the recovery is “proceeding,” altering April language that the economy has “continued to strengthen,” while reaffirming they foresee a “moderate” pace of growth. The
Fed said the labour market is “improving gradually,” changing April’s assessment that it was “beginning to improve.” Consumer spending still “remains constrained” by joblessness and “tight credit,” the Fed said. The central bank, at a two-day meeting, left the overnight interbank lending rate target unchanged in a range of zero to 0.25%, where it’s been since Dec 2008. (Bloomberg)

US: Sales of new homes plunged in May to record low

Purchases of U.S. new homes fell in May to the lowest level on record after a tax credit expired, showing the market remains dependent on government support. Sales collapsed an unprecedented 33% from April to an annual pace of 300,000, less than the median estimate of economists surveyed by Bloomberg News and the fewest in data going back to 1963, figures from the Commerce Department showed in Washington. Sales were projected to drop 19% to a 410,000 annual pace, according to the median estimate of 76 economists surveyed. Forecasts ranged from 300,000 to 530,000. The government revised April’s purchase rate down to 446,000 from a previously reported 504,000. The median price decreased 9.6% from the same month last year, to US$200,900, the lowest since Dec 2003, report showed. (Bloomberg)

UK: BOE splits on rate hike as Sentance pushes for increase

Bank of England policy maker Andrew Sentance made the first push for an interest-rate increase in almost two years this month, opening a split among officials on the strength of the economic recovery. The Monetary Policy Committee voted 7-1 to keep the benchmark interest rate at 0.5%, according to minutes of the June 10 decision released in London. Sentance favoured an increase to 0.75%, arguing that inflation was proving to be “resilient” after the recession. Governor Mervyn King cautioned last week that the bank shouldn’t react to faster inflation based solely on energy-cost and exchange-rate fluctuations, after the annual pace of consumer-price increases reached a 17-month high in April. (Bloomberg)

Germany: Consumer confidence to hold steady in July

Consumer confidence in Germany will hold steady next month as a drop in unemployment and the soccer World Cup encourage spending, GfK AG said. The Nuremberg-based market research company said its sentiment index, based on a survey of about 2,000 people, will remain at 3.5 points in July. Economists forecast a decline to 3.3 points, the median of 27 estimates in a Bloomberg News survey shows. Germany’s economy is showing few signs of discomfort from Europe’s sovereign debt crisis, which has forced governments across the 16-nation euro region to make spending cuts. While tighter fiscal policy may damp economic growth, the crisis has also pushed the euro down 13% against the dollar this year, boosting German exports outside the currency bloc. Unemployment fell to 7.7% last month as companies added workers and ramped up production to meet booming orders. (Bloomberg

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Wednesday, June 23, 2010

SINGAPORE (Dow Jones)--Asian markets mostly fell Wednesday after a drop in U.S. existing home sales hurt sentiment, with softer commodity prices dragging on material stocks while Chinese steelmakers were hurt by Beijing's decision to scrap an export tax rebate.

Japan's Nikkei Stock Average fell 1.9% and Australia's S&P/ASX 200 lost 1.6%, China's Shanghai Composite gave up 0.7%, Hong Kong's Hang Seng Index rose 0.2%, South Korea's Kospi lost 0.3% and Taiwan's Taiex slid 0.4%. India's Sensex and Singapore's Straits Times index were both flat by afternoon.

Dow Jones Industrial Average futures gained 55 points in screen trade. The Dow Jones fell 149 points overnight, after U.S. May home sales unexpectedly fell 2.2% as high joblessness in the U.S. offset the fading benefits of a tax credit for buyers.

"The optimism we saw a few days ago has been snuffed by that weak U.S. home sales data," said BBY senior institutional trader Peter Copeland in Sydney. "But if you believe the container volumes data coming out of China, they suggest the global consumer is back. I think we will be in a holding pattern before tonight's [Federal Open Market Committee] decision and policy statement."

Energy stocks declined, weighed down by weaker crude oil prices and losses for their U.S. counterparts. U.S. energy stocks led Wall Street lower on expectations of legal wrangling between the industry and the Obama administration over the deepwater drilling moratorium. A federal judge in Louisiana Tuesday ruled against the ban, but the White House responded by saying it would immediately appeal the injunction.

Oil Search fell 2.2% and Santos gave up 3.0% in Sydney, Inpex Corp. lost 2.9% in Tokyo, PetroChina Co. slid 0.7% in Hong Kong and Energy Development Corp. dropped 1.1% in Manila.

Woodside Petroleum fell 1.4% after the company flagged a possible timetable delay and cost increases at its A$13 billion ($11.3 billion) Pluto liquefied natural gas development in Western Australia. A dozen crane and forklift workers have been on strike over pay and conditions since April 28 and Woodside said in late March that its first LNG target could be missed if the action continued.

Weaker base metal prices also hurt mining and metal companies, with BHP Billiton dropping 1.3% and Rio Tinto losing 2.2% in Sydney and Sterlite Industries dropping 1.7% in Mumbai trading. But gold miners advanced on firmer spot prices, with Newcrest Mining adding 0.8% in Sydney and Zhaojin Mining Industry Co. gaining 1.4% in Hong Kong.

Chinese steelmakers came under selling pressure after the Ministry of Finance said Tuesday it would scrap an export tax rebate on a variety of commodities, including steel and non-ferrous goods.

"The cancellation of the export tax rebate effectively raises the export tax on these products, hurting the prospects of the metal firms, but the impact would be capped as companies start to limit volume growth," said Wang Junqing, an analyst from Guosen Securities.

Baoshan Iron & Steel Co. dropped 2.7% in Shanghai, while Angang Steel Co. shares fell 2.4% in Shenzhen and 3.3% in Hong Kong.

In Seoul, "the market is returning some of the recent gains after it overreacted on Monday to China's calls for greater yuan flexibility," said Min Sang-il, an analyst at E*Trade Securities.

Most technology and auto stocks were weaker with Samsung Electronics down 1.4% and Hyundai Motor Co. shedding 3.1%, while Korean Air Lines rose 1.1%, extending Tuesday's gains on hopes for strong overseas travel demand in the summer.

Japanese exporters also dropped after the decline on Wall Street, with Honda Motor Co. dropping 1.5%, Nissan Motor Co. off 1.8% and Fanuc 1.9% lower.

Elsewhere, New Zealand's NZX 50 ended flat and Philippine shares declined 0.3%, while Indonesian shares lost 1.1% and Thailand's SET Index inched up 0.1% by late afternoon.

In foreign exchange markets, the euro was at $1.2296, compared with $1.2277 in late New York trade Tuesday, and at 111.26 yen from 110.98 yen. The dollar was at 90.50 yen from 90.39 yen.

The greenback was caught in a "sideways shuffle," said Bank of New Zealand Strategist Mike Jones. He said that the initial euphoria surrounding China's decision to relax the yuan's exchange rate has "faded noticeably" and a "wealth of worrying credit news rekindled fears over the European banking sector, weighing on the euro."

Earlier Wednesday, the People's Bank of China set the dollar central parity rate at 6.8102 yuan from 6.7980 yuan Tuesday, suggesting that Beijing's weekend decision to allow greater exchange rate flexibility didn't mean it's a one-way bet on the yuan. The dollar was at 6.8033 yuan from 6.8136 yuan late Tuesday in Shanghai.

Mr. Jones added that the markets were firmly focused on the upcoming Fed rate decision. "We suspect a downbeat statement from the Fed would actually support the U.S. dollar, owing to its safe-haven status."

Japanese government bonds were higher, lifted by the Tokyo stock market's losses as well as U.S. Treasurys' gains Tuesday. The yield on the cash 10-year JGB was down 1.5 basis points at 1.170%. Lead September JGB futures were up 0.10 at 140.92 points.

August Nymex crude-oil futures were down 36 cents at $77.49 per barrel on Globex, after losing 76 cents Tuesday. Spot gold was at $1,242.80 per troy ounce, up $4.20 from late New York trade.

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