20100222 1012 Malaysia Corporate News.

Sime Darby's 2QFY10 numbers to be released this week may show more losses in the oil and gas sub-segment of its energy and utilities division, arising from one of its Qatar projects. Sources say the sub-segment is expected to make a provision of more than RM100m for the Qatar Petroleum project. The division also recently saw the earlier-thanexpected departure of its head Datuk Mohamad Shukri, who resigned in January. His post has been filled by Hisham Hamdan. (theedgeweekly)

The dry spell over Sabah that has triggered numerous farm and bush fires is expected to continue for another two months. Sabah Meteorological Department director Abdul Malik Tusin said that the dry spell in the state was due to the tail end of the Northeast monsoon that usually begins in November and ends by March.

• I expect the dry conditions to continue till April in Sabah, he said, adding that the northeast monsoon during December and January had brought severe flooding to Sabah. ''This month, we only recorded 0.4millimetre of rainfall compared to 210mm in the whole of January (when floods hit Sabah),” he said. He said the dry spell was part of the El Nino phenomenon that was being globally felt since June. (NST) 

If prolonged, the dry spell could lead to lower-than-expected palm oil output for the country. Sabah accounted for 31% of total palm oil output in 2009.

Maybank’s subsidiary Bank Internasional Indonesia (BII) has proposed a rights issue amounting to 1.4tr rupiah (RM513m) to strengthen its balance sheet and to enable it to meet its investment and longer-term growth goals in Indonesia. The fund-raising exercise will involve the issue of 6.2bn new shares on a one-for-eight basis at 225 rupiah apiece, or at a discount of nearly 23%.

• As the 97.5% shareholder, Maybank has agreed to subscribe to its full entitlement. Maybank said it would also take up any excess rights shares not subscribed to or renounced by other entitled shareholders.
• The proposal is subject to BII shareholder approval. It is expected to be completed in the second quarter of the year. (Business Times) 

We see limited impact of the above as it is akin to injecting additional capital into its subsidiary, in which Maybank has a controlling stake of 97.5%. Furthermore, the RM513m additional investment only accounts for about 2% of Maybank’s shareholders’ funds. The above could even be positive if BII can beef up its loan growth and keep the credit cost low as the return on the lending business in Indonesia is more lucrative with net interest margin of 6%+ compared to only 2.3% in Malaysia.

Peninsular Malaysia and Sarawak appears to be tussling yet again for power from the soon-to-be completed 2,400MW Bakun hydroelectric dam. Sources suggested that the bone of contention is that instead of Tenaga getting power solely from Bakun, it will draw power from the Sarawak state grid. Meanwhile, another competing source for Bakun’s hydropower is plans to set up several power-guzzling aluminium smelter plants in Sarawak. (The Edge Weekly) For more details and comments, please refer to our QT on the power sector today.

The heat wave has resulted in an unprecedented spike in electricity usage with Tenaga revealing that two records were set in less than a week recently. On Feb 4, power demand stood at 14,384MW. Six days later, that record was broken when a new peak maximum demand of 14,417MW was recorded. (NST)

Malaysia expects to attract at least three more big foreign investments involved in solar energy this year. The three FDIs, averaging RM1bn each, are expected to come from the US, Japan and Europe. So far, Malaysia has attracted a few large firms like solar panel makers First Solar, Q-Cells and Sunpower.

• Malaysian Industrial Development Authority DG Datuk Jalilah Baba said Malaysia can take the lead of being the solar hub in the Asean region. However, what is crucial is how much Tenaga would pay for solar power. (BT)

Malaysia is not destroying its forests to plant oil palm trees, said Sabah Finance Assistant Minister Datuk Tawfiq Abu Bakar Titingan. He said any allegation pertaining to it was absolutely not true because the country adopted a firm policy and forestry laws that clearly state that forest reserves should remain untouched.

• "Our government has identified agriculture and plantation areas. The government has already gazetted those areas," he said, commenting on a campaign by Marks & Spencer against palm oil in the United Kingdom. (Bernama)

CIMB Group Holdings plans to buy a 32.2% stake in Touch N' Go (TnG) from UEM Group and UEM Builders for RM53.8m. Once completed, the deal will bring CIMB's total stake in TnG to 52.2% from 20%. UEM Group will retain a 20% stake in TnG, while MTD Capital owns the balance 27.8%t. TnG, the electronic toll collection operator, posted a net profit of RM15.6m for the FY12/09. (BT)

Alliance Bank Malaysia's lawyers have completed their assessment of the answers CEO Datuk Bridget Lai provided in an internal probe. It is now up to the board to consider the lawyers' legal advice, sources said, declining to elaborate on what the legal advice entailed. It is understood that the board will make a decision on what to do soon, either at a monthly board meeting late next month or at an earlier special meeting.

• Lai, as well as COO Shim Kon Teck, had each been required to answer a set of questions as part of the board's probe. They provided their answers on 25 Jan, and these were then evaluated by the bank's lawyers and an independent external auditor. (BT)

Genting Group’s chairman Tan Sri Lim Kok Thay expects Resorts World Genting to have the edge over Resorts World Sentosa (RWS) because of the cool weather. Meanwhile, Lim also announced that the Genting theme park would be improved and upgraded with more exciting rides. He expressed confidence that the opening of RWS would not affect tourist arrivals at Genting Highlands as both IRs had their own attractions and strengths. (The Star)

Tiger Airways will provide a chartered aircraft that will exclusively fly foreign guests visiting Genting Singapore’s Resorts World Sentosa (RWS). Under the agreement, RWS will take over the lease of the aircraft. The plane will be staffed by pilots and cabin crew from Tiger Airways. The service is scheduled to commence late this year. (AFP)

The Baltic Dry Index stayed positive on Friday with hopes that cargo demand would pick up after China returned from holiday. The index, which gauges the cost of shipping resources including iron ore, cement, grain, coal and fertiliser, rose 0.37% or 10 points to 2,714 points.

• Brokers said there was better interest in the Pacific for vessels especially capesize ships, which typically haul 150,000 tonne cargoes such as iron ore and coal. Ship queues at ports in China and at other major terminals in Australia and Brazil remained high, helping to bolster freight rates, brokers said. 
• Analysts said freight rates could come under pressure due to worries over the rising number of new ships set to hit the market this year, despite indications of some vessel cancellations and delays. (Reuters, BT)

Qantas Airways forecast an increase in business class fares as demand recovers after a global travel slump. "We are seeing the business market demand improve," Alan Joyce, chief executive officer of Sydney-based Qantas, told Sky News Business yesterday. "The economics will have to change and fares, particularly in business class, will have to increase. It's basic supply and demand. As you get more demand for that capacity, it brings back pricing power for the airlines," according to Joyce. (Bloomberg, BT)

The Malaysia Airlines Travel Fair 2010 (MATF’10) until March 7 is dangling attractive offers to customers including a 75% discount to 49 destinations worldwide. The travel period starts from March 24 until Jan 14 next year. MAS will also be extending these offers to its customers in Singapore, Thailand, Brunei, Cambodia, Vietnam and Myanmar, where the fair will run concurrently.

• Customers can purchase one-way air tickets to any destination in Asia; starting from as low as RM133 to Medan, RM213 (Phuket) and RM359 (Hong Kong). Those planning on flying down south can fly at only RM639 to Perth one-way, and RM1,069 to Melbourne (one-way). 
• Customers heading to Europe can opt to fly one-way to London, Paris or Rome for only RM1,549. A trip to Bangkok will cost RM264; Beijing (RM487), Sydney (RM754) and the Gold Coast (RM816). (Star)

Felda Holdings is putting in place strategic Clean Development Mechanism (CDM) projects encompassing 56 biogas plants, six compost plants, one pellet plant and two independent power producer (IPP) plants nationwide. The CDM projects will use biomass waste such as empty fruit bunches (EFB) and palm oil mill effluent (POME) derived from 70 palm oil mills owned by Felda unit Felda Palm Industries Sdn Bhd (FPI).

• FPI senior GM Mokhtar Mat Min said: “It is ideal for a big plantation operator like Felda to fully tap its abundant biomass waste and convert it into renewable green energy, which can also be a new income generating source for the group.” 
• “Despite our focus to become a dynamic global conglomerate, we recognised the important need to be a socially responsible group practising environmentally friendly methods in every aspect of our operation,” Mokthar added. (Starbiz)

The increase in the number of broadband providers will put pressure on prices, prompting providers to focus on the quality of service to win customers over, said the Michael Lai, CEO of Packet One. "The increasing number of competitors will put pressure on margins, but we believe that customers are willing to pay for quality of service and value-added services." (Financial Daily)

Tune Talk's CEO Jason Lo dismissed rumours of a possible IPO once it achieves 1m subscribers. Tune Talk expects to achieve the target by August this year, which will be within its first year of operation. This will be achieved by boosting its distribution channels, innovative marketing and communications strategies and Web-based approach.

• "The decision to list (on local bourse) lies in the hands of the shareholders. For the moment, there are no such plans although Celcom can increase its stake to 51% under the shareholders' agreement. 
• "Despite the company recording some 600,000 subscribers within six months of its launch in August last year, its active subscribers are roughly 200,000 or more. (BT)

Tanjung Offshore plans to raise funds to refinance existing loans, buy new vessels and for working capital, say MD Omar Khalid. The company is looking at various financing packages to take advantage of the current low interest rate. "We have quite a few options on the table. We'd like to explore these options because the interest rate is low and it makes more economic sense in the long term," he said. (BT)

The Sunway Pyramid Shopping Mall plans to be Malaysia's biggest mall by size within the next five years as it adds two new phases to the mall. Called "SP3" and "SP4", the two phases form part of Sunway City's planned development on a 2.35ha open car park land adjacent to the existing Sunway Pyramid and the Sunway Lagoon Theme Park.

• Currently, Sunway Pyramid has a total gross floor area of 4.5m sf and net lettable area (NLA) of 1.7m sf. CEO Sunway Group of Shopping Malls, H.C. Chan, said SP3 will see 0.5m sf added to the gross floor area of the mall.He did not say what the NLA will be, but typically 65-70% of a mall's gross floor area makes up the NLA. (BT)

Sunway Pyramid S/B, Sunway Group's retail arm that operates its flagship shopping mall Sunway Pyramid, hopes to see its pretax profit and revenue improve by at least a tenth this year, as consumers loosen their purse strings. In FY Dec-09, the mall chalked up a pre-tax profit of RM120m, from RM100m a year ago.

• "We target about 10-12% growth in both pre-tax profit and revenue this year," its CEO H.C. Chan said. Chan's confidence stems from the positive economic trend since 4Q09, particularly in the month of December. (BT)

KPJ Healthcare will remain focused on its healthcare business and not look to pick up government concession businessess, says MD Datin Paduka Siti Sa'diah Sheikh Bakir. The company has no plans to buy foreign worker health check company Fomema Sdn Bhd from its rival Pantai Holdings.

• Pantai Holdings is believed to be looking to sell its Malaysian government concession businesses, Pantai Medivest S/B and Fomema, to focus on growing its hospital business, according to the daily last Thursday. 
• Fomema, which has a 15-year concession ending in 2012, was created to implement, manage and supervise nationwide mandatory health screening programme for all legal foreign workers in Malaysia. (BT)