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Friday, August 22, 2014

Brem ... Cheaper Entry For Property Development In Segambut.

A property and construction player expects strong demand for its properties especially in prime locations like Segambut Dalam in KL to boost its financial performance in the new fiscal year ending March 31 2015.
 
Property development will underpin its growth for 2014 to 2015.

Brem has a total of 13.56ha of freehold land in Segambut Dalam as of March 31 2013 for the development of Bukit Prima Pelangi, which could generate a GDV of rm2.56 billion. This development is expected to sustain its operations for six to eight years from 2014.

It had also bought a parcel of land in Segambut to replenish its landbank. The latest purchase raises its land reserves in the area to almost 15ha.

In total, it has 30.1ha in KL and PJ, including in Ulu Klang. These land are under the purview of its 75% owned subsidiary.

The property segment made up almost 60% of the group’s revenue in FY2014.

Brem will focus on condominium and apartment development after having complted its terrace components for its Bukit Prima Pelangi development.

Brem is also involved in construction, water concessions as well as property investment and holding activities. All divisions are profitable.

Its construction division has an order book of rm260 million as of March 31 2013. As for property investment, it owns and operates Kepong Brem Mall.

Brem participated in a water concession business in Papua New Guinea some 17 years ago prior to 2014. It has a 22 year agreement with PNG’s government to supply water to the Pacific island nation. The concession will expire in June 2019.

Its net asset value per share stood at rm2.79. It was earlier reported its real net asset could be worth about three times its NAV.

Brem acquired most of the Segambut Dalam land at an average price of rm65 psf from 1995 to 2005. This is substantially lower than the purchase price of rm185 psf Brem paid for its latest transaction in July 2014.

The company will be a cheaper entry to property development than other property players like Keladi which had land near Bukit Prima Pelangi.

Aside from the prime land in KL and PJ, it owns 182.02ha of development land in the Klang Valley including Bukit Raja and in Kedah. They are earmarked for long term development. These parcels were purchased at low prices … like the 1.88ha in Mukim Bukit Raja which has low book value of rm3000 as of March 31 2013.

Brem does not adopt a policy of regular revaluation for its landed properties.

It had disposed of its 32.89% stake in Bertam Alliance Bhd in July 2014 for rm80.24 million. It will channel the sale proceeds into other, more attractive and higher yield investments when opportunity arise.



Friday, August 15, 2014

IPO - Reach Energy ('Well-Known' Cornerstone Investors)


Lembaga Tabung Haji (LTH), Koperasi Permodalan Felda Malaysia Bhd and Pelaburan Mara Bhd have taken stakes In Reach Energy Bhd.

Prior to this, GLICs do not have the mandate to invest in Spacs. Spacs are shell companies with no operations or income-generating business at its point of listing.

Spacs undertake the listing for the purpose of raising funds to acquire businesses or assets, otherwise known as the qualifying acquisition (QA).

It appears that LTH, Felda and Mara obtained the mandate to invest in Reach, an oil and gas Spac, after the new guidelines were released earlier 2014, as they took comfort mainly in the investor protection clause.

Malaysian oil and gas services firm Daya Material Bhd is only an initial investor in Reach Energy. Daya’s ownership will be only 1.74% after the IPO.

Some of the other cornerstone investors include tycoon Tan Sri Chua Mah Yu’s son Chua Sai Men, Lembaga Tabung Haji, fund managers CIMB-Principal Asset Management Bhd and Hong Leong Asset Management Bhd, MKW Jaya Sdn Bhd, MTD Capital Bhd and Paul Poh, a close associate of Hong Leong Group chairman Tan Sri Quek Leng Chan.

The investors, who are not subject to a lock-up period, will take up a combined 210 million shares and warrants, or 16.45% of Reach’s enlarged share base.

Poh is a lieutenant of banking tycoon Tan Sri Quek Leng Chan. Quek and Poh have been heavily investing in oil and gas companies. Meanwhile, Sai Men is the son of tycoon and savvy investor Tan Sri Chua Ma Yu.

MTD Capital is a listed bumiputra investment holding company with interests in infrastructure development.

As for state-owned Pelaburan Mara, it came into the limelight in April 2014 when it bought a 27% stake in shipping firm PDZ Holdings Bhd for RM41mil.

The cornerstones make up some 20% of Reach Energy’s share base while institutions make up some 15%. The remainder shareholders are made up of corporate and individuals.

Other asset managers that have taken up stakes in Reach Energy include Kenanga Investors, Norway’s sovereign fund Norges, Areca Asset Management and Allianz Investment.

What attracted the bumi funds was the investor protection. Reach was putting in 94.75% of its funds into the trust fund, instead of the stipulated 90%. Should a QA not be executed in 3 years time, the 75 sen per share put in by the investors actually becomes 76 sen, based on the existing interest rate.

The fact that Reach was a syariah-compliant company, also helps the investing case.  Certainly, Reach is the first Spac to be listed under the Securities Commission’s new strict guidelines, with many people touting it to be the safest Spac.

The management of Reach, led by Shahul Hamid Mohd Ismail has put in a significantly higher amount of money than the three previous Spacs – Hibiscus Petroleum Bhd, Cliq Energy Bhd and Sona Petroleum Bhd.

Under the new guidelines, it is stipulated that the management team’s shares should be issued at no less than 10% of the IPO price. The subscription price per share for the management of Hibiscus, Cliq and Sona was 1 sen, while Reach had to put in 7.5 sen based on the IPO price of 75 sen.

The management of Reach ended up putting in a total of RM20mil for its management shares. The management of the other Spacs put in between RM1mil and RM3mil, while is significantly lesser. With the kind of money the management of Reach was putting in, there is certainly a greater urgency to make the business work.

Furthermore, Shahul and team will not be able to cash out their shares even after they make their QA. Another new guideline of the SC is that Reach Energy’s moratorium on the shares held by management will be in place up to one full year of audited operating revenue. Following that, the management will be allowed to dispose its shares up to a maximum of 50% per annum on a straight line basis.

Reach’s IPO comprises 1 billion shares at an issue price of 75 sen each. The offer comes with 1 billion free detachable warrants on the basis of one warrant for one share subscribed.

SPACs are shell companies with no operations or income-generating business at the point of listing.

SPACs undertake an IPO to raise funds to acquire businesses or assets, otherwise known as QA.

Reach Energy aims to clinch a brownfield asset in the Asia-Pacific region with the ability to generate early revenue within two years of acquisition.

Reach Energy can raise a further RM958mil when the warrants are exercised in full. The free warrants are issued on a one-for-one basis per Reach Energy share.

Thursday, August 14, 2014

Trader Corner - GMutual


GMutual: Strong resistance at rm0.55 of which a successful breakout would the stock price targeting rm0.74 resistance. Support is at rm0.49 and rm0.46.
 
Gromutual Bhd, a Johor-based property developer, aims to launch projects with a gross development value (GDV) of RM700 million in the next few years from 2013 in Johor Baharu.
It plans is to further tap into opportunities in the vibrant property market of the Iskandar Malaysia region.
To date, Gromutual has completed RM600 million in residential and commercial properties in Johor and Melaka, since its incorporation in 2003.
It is undertaking residential and commercial property projects with RM376 million GDV in Melaka and Johor.
Gromutual has also invested RM45 million in land acquisition over the past two years (2012-2013).

Friday, August 8, 2014

MAS To Privatize at rm0.27 per share

Khazanah Nasional will offer 27 sen for each share in the company it does not own, amounting to nearly 1.4 billion ringgit ($435 million) to take the troubled airline private.

Wednesday, August 6, 2014

NEXT For KLCI ... Still Bearish Trend But Lower Liners Continue In Play


The KLCI continued to stay below the short term 30 day MA despite the rebound in the past two days, indicating that market sentiment is still bearish. The immediate support is at 1862 pints while the next support level is at 1840 points which is where the long term 200 day MA currently (06 Aug 2014) is.
 
Momentum indicators like the RSI and Momentum Oscillator rebounded towards the mid level, indicating a weak bearish trend. The index broke below the bottom band of the Bollinger Bands indicator last week and remained below the middle band. This indicated that the momentum was still bearish in the short term. All these are indications that the market is currently (early Aug 2014) at a trend reversal.

The KLCI is not out of the short term bearish trend. The market may continue to be bearish this week if the rebound fails to break above the immediate resistance level of 1880 points. The short term 30 day MA is at 1882 points.

However low and mid cap stocks may continue to be in play but a bearish sentiment could limit gains.

The KLCI is expected to trade at between 1860 points and 1880 points coming week.

Friday, August 1, 2014

NEXT For Barakah, Harrisons

Barakah: In 2009, only 10% of Barakah’s revenue came from installation and construction work with the bulk coming from pipeline and commissioning works. The balance of its order book has shifted over the years as the projects grow in size and complexity, with installation and construction works making up 41% of its revenue.
 
As at May 2014, its order book stands at rm2.38 billion with the majority of its projects to be undertaken over the next three to five years from 2014 in installation and construction.

Pipeline and commissioning works are the foundation of what it does. That segment will continue to bring in a small and steady stream of income. It will take on more pipeline and commissioning works as well.

A niche segment under installation and commissioning which it entered into is the design and development of biodiesel tanks. Petronas continues its efforts to revive Malaysia’s carbon footprint, it is taking advantage of the fact it is already licensed in the area and is ready to take up into opportunities.

It had secured a rm29 million job from Petronas Dag for the EPCC of biodiesel storage and blending facilities and its associated accessories.

Its installation and construction segment is ripe for the picking having undergone the transition phase.

In April 2014 it had bagged a rm260 million contract for the RAPID project. The Pengerang pipeline project is also expected to open up new opportunities for Barakah involving both onshore and offshore projects once the trunk line is set.

Its borrowings are relatively small and its capex requirement is low. Its short and long term borrowings amount to rm244 million.

It will need to only replenish capex at rm15 million unless big project comes the way.

Its prospects will be bright if Barakah paired down its debts and a lean balance sheet.


Harrisons: It has the distinction of being one of the oldest and largest sales, marketing, warehousing, distribution and services companies in Malaysia.

The company is now on a growth path as it continues to expand its distribution business while actively seeking for new growth areas.

Its share price has been weighed down by a tax payment issue with the Royal Malaysian Customs Department since Feb 2012. It posted a net loss of rm25.18 million in 1QFY2014 ended March 31 compared with a net gain of rm6.36 million in the same period a year ago, following the payment of rm31.5 million as an amicable settlement between its unit and Customs for alleged unpaid import duty, excise duty and sales tax.

Industry observes points out that competition among trading houses has intensified and margins are narrowing and players are facing the risk of a termination of contracts when consumer spending slows.

The 1Q loss was due to the one off tax payment. Excluding the tax it would have made a pre tax profit of rm8.36 million.

There are only three agency houses listed on Bursa dealing in products from MNCs in Malaysia – Harrisons, DKSH and Yee Lee Corp. Their common denominators are steady financial performance, consistent dividends and a generally stable share price.

Following a settlement of the tax issue, its share price reached a year’s high of rm3.72 on 01 July 2014.

However, its profit margins has been trending down since 2010.

The company had formed a JV with Watts Japan and a potential expansion to other SEA countries.

Distribution is still its core business and dominates 80% of its revenue.

It had established a JV to open Komonoya shops, a chain which sells discount goods from Japan, with Osaka based Watts. Harrisons holds a 30% stake.

Following the tie up with Watts, its focus now is Japanese products.

Major shareholder Bumu Raya Intl Holding Company Ltd holds close to 41% stake in Harrisons Holdings Bhd.

The company has its roots in Indonesia. Previous news reports had linked the company to the Bumi Raya Utama Group as well as ex president Suharto’s daughters including Silti Hediati Haryadi.

Bumi Raya has tried to take the company private in 2008 but failed. So could there be another attempt to take the company private? Harrisons MD Chan said it is always a possibility but this has to depend on the major shareholder.

Chan feels there is room for corporate exercises to improve the liquidity such as bonus issues, new share, finding a solid investor or asset injection!

As at end of FY2013 the company was holding rm111 million in cash.

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