20100304 0949 Malaysia Corporate News.

The government has deferred announcing an increase in electricity tariffs pending a program to educate the public on the need to raise rates. However, a proposal for a review of the rates has been submitted to the Economic Planning Unit of the Prime Minister’s Department, Energy, Green Technology and Water Minister Datuk Peter Chin said. “We have also come up with a structure. We were going to announce a hike in electricity tariff but that has been deferred to get our public relations going first. There will be dissatisfaction among our population. They will not be happy. We have to explain to them why there will be a hike,” he added. (BT) Please refer to our note on Tenaga today for more comments.

Supermax announced a 1-for-4 bonus issue yesterday. Based on the company’s issued and paid-up share capital of 271.2m shares and assuming full exercise of all outstanding ESOS, a maximum of 71.4m new shares will be issued pursuant to the bonus Issue exercise. The proposal is due to be completed by 1H10. (BMSB) This news is not a surprise as the company indicated during its recent analyst briefing that it is looking at a bonus issue exercise to reward its shareholders. We view this announcement positively as it would boost liquidity further and enhance the stock’s affordability in terms of absolute cost.

Star Publications announced a proposed joint development with Jaks Island Circle to develop a mixed residential and commercial on a 24,568 sq m land in Petaling Jaya. The land is owned by Star and previously housed the group's printing facilities among others. All cost, expenses and funding shall be borne by the Jaks Island Circle while Star exposure would be from its 30% share of the estimated RM370m GDV. The project is expected to complete in 60 months. (BMSB) This new is a surprise as it is a venture beyond Star's media business but would be long term positive for Star. Star's 30% share of the GDV works out to be RM111m in new revenue stream from 2012, and would add RM11-17m to pretax profits assuming a 10-15% pretax margin. Using our FY12 pretax profit as a gauge, this would enhance pretax profit by less than 5% as the earnings are likely to be recognised throughout the progress of project.

The Employees Provident Fund (EPF) has made an offer to buy the rest of Malaysian Resources Corp (MRCB) at RM1.50 each after it triggered the general offer (GO) rule.

• The EPF triggered the GO after it bought shares not taken up by existing MRCB shareholders under a renounceable rights issue to raise up to RM566m. 
• However, the GO will only happen if the pension fund gets more than half of MRCB.
• EPF said it does not intend to delist MRCB.
• The fund would also rectify MRCB's public shareholding spread if it plunges below the minimum 25% requirement as a result of the offer. If this happens, EPF stressed that it will still maintain a more than 50% interest in the construction and property firm. (BT)

Edaran Tan Chong Motor (ETCM) said all its models sold in Malaysia are not affected by the recall in the United States (US). It said Nissan Motor Co had officially confirmed the fuel-gauge component issue did not affect the Frontier models in Malaysia. It also said this is due to different components being used, compared to the models in the US, adding that the parts are supplied by different component manufacturers. On the recall issue of brake pedal pin and fuel gauge components on the Nissan Titan, Armada, Quest, Pathfinder and Xterra and Infiniti QX56, ETCM confirmed that these models are not sold in the country. "I would like reassure our customers that the recalls do not affect the Nissan vehicles sold by ETCM," said ED, Datuk Dr Ang Bon Beng. (Bernama)
This news came hot on the heels of Toyota’s massive recall exercise recently. Apart from the Nissan Frontier, the other Nissan models affected are currently not sold in Malaysia. While both UMW Toyota and ETCM have assured consumers that the vehicles sold in Malaysia are not affected by the recalls in the US, we think that the news on the recall exercises will still dent some consumers’ confidence in the Japanese makes, which have always been associated with quality. That said, we do not expect a significant impact on vehicle sales in the country.

Malaysia will miss its output target of 18.1m tonnes because of a shortage of foreign labour even as yields recover, a top industry official said. Industry regulator Malaysian Palm Oil Board (MPOB) chairman Sabri Ahmad said that Indonesian plantation workers make better pay at home as more palm oil estates start up there while employers in Malaysia have trouble hiring because of a stricter work-permit process.

• Mr Sabri added that while concerns about hot weather caused by the El Nino weather phenomenon weigh on the industry, labour is the main issue now. 'The hot weather from El Nino is not the problem now because its effect can be seen 12-18 months later. 
• The bigger issue is the labour shortage and if that is resolved, then 18.1 million tonnes is possible,' he added. According to immigration department statistics, the number of registered Indonesian plantation workers slumped 42% to 166,570 last year from 287,786 in 2008. (Reuters)

Axiata is considering paying a dividend from 2011 as improving business conditions have helped bolster its balance sheet, its CEO Jamaludin Ibrahim said. “We have not made any decision ... However given the strength of our balance sheet, especially our cash and debt position, we are in good position to consider it from 2011 onwards."

• "We believe we could maintain the EBITDA margin, of course the pressure point would come from the competition and also our own investment in mobile broadband." 
• Jamaludin said the Axiata will always review the possibility of increasing the free float of XL Axiata but declined to comment further on the timeline. "We have said back at the end of 2008 that we are open at possibility in increasing the float up (to) 15-20%. It is something that we are always looking at, and right now we also looking at it, perhaps more seriously." (Reuters)

Public Bank has no plans to raise capital this year in anticipation of the Basel 3 framework which, among other proposals, will require banks to beef up their tier-1 core capital ratio with predominantly common shares and retained earnings. COO Leong Kwok Nyem said there would not be any capital raising this year as the Basel 3 proposals were still at their initial stages of consultation. He said banks right now are only required to provide feedback to the Basel Committee on Banking Supervision. “There will be further consultation by the committee and it’s only by the end of this year that they’re going to come up with the next draft proposal,” Leong said following the company AGM. He said the Basel 3 framework was only scheduled for implementation by end-2012.

• Public Bank’s core capital ratio stood at 9.9% as at 31 Dec 09 compared with 7.7% in the previous year, while the risk-weighted capital ratio stood at 14.2%, an improvement from the 13.1% in 2008. 
• Leong said the ROE would also have to be reviewed should the Basel 3 framework require the bank to keep more equity capital. “We’ll have to review those ROE targets because as capital requirements are increased then the ROE will correspondingly be lower although we’ll still be looking at positive flows.” (StarBiz)

After taking over BH Insurance, the enlarged entity of AXA Affin General Insurance hopes to be among the top five insurers in the country by 2012. AXA Affin, a joint-venture company between Affin Holdings and France-based AXA SA, has signed an agreement to  buy over BH Insurance from Boustead Holdings and Felda Marketing Services. Boustead Holdings and Felda Marketing hold 80% and 20% stake in BH Insurance respectively.

• Affin Holdings chairman Gen (R) Tan Sri Mohd Zahidi Zainuddin said the merger of the two insurance companies was to strengthen the business and it was also in line with the group’s decision to streamline its insurance operations. “Currently, the merged entity of AXA Affin and BH Insurance is in sixth place with a 6% market share. 
• Meanwhile, Boustead Holdings – which will gain RM363m from the disposal of its stake in AXA Affin – will use the proceeds to further reduce its gearing to between 0.8% and 0.7% this year from just below 1% currently.
• The corporate exercise, which is expected to be completed in the second quarter of this year, will see a new shareholding of AXA Affin where AXA will hold 42.4%, Affin Holdings 33.6%, Felda Marketing 16% and the rest will be held by minority shareholders. (StarBiz)

OCBC Bank Malaysia chalked up a 6% increase of RM998m in its operating profit for the FY12/09, against the RM942m registered previously. "Despite 2009 being a difficult year due to the global financial crisis, we are pleased to have turned in a strong performance, underscored by a well-balanced credit underwriting framework.

• "We are particularly pleased with the broad-based growth in net interest income arising from higher loans growth across various industries," OCBC Director and CEO, Jeffrey Chew said. 
• Net profit in 2009 experienced a 1% marginal decline to RM608m from RM617m in the previous year, due to higher net loan provisions. In 2008, OCBC's net profit benefited from larger one-off loan recoveries.(Bernama)

Maxis will build over 180 new sites this year to enhance its network coverage in Sabah and raise its subscriber’s base by 50%. The upgrading efforts will also include extending its 3G coverage in major towns such as Kota Kinabalu, Labuan and Sandakan. (BT)

SP Setia is projecting RM2bn sales this year, driven by the improved economy and ongoing product launches in addition to its financial package campaign offerings. The group has 10 ongoing projects and some 1,578 hectares. of landbank with a total gross development value of RM26bn, sustainable over the next 12 years. President and CEO Tan Sri Liew Kee Sin said continuous strong sales are projected in its key locations namely Klang Valley, Penang and Johor. (BT)

Malaysian Bulk Carriers (Maybulk) plans to acquire modern second-hand vessels in line with the improving global economic situation. Its chief executive officer, Kuok Khoon Kuan, said the company was eyeing the opportunities as the market was back to normal and would focus on acquiring modern second-hand vessels until the outlook improved further for the sector. "Since the resale value has declined by about 60 to 70%, the company will be able to buy them at a fraction of what they were previously sold for," he told a media briefing on the company's 2009 results here on Wednesday. Its executive chairman, Teo Joo Kim, said the company was also looking at investment opportunities in the coming months, though not aggressively. Meanwhile, Maybulk said although there were indications of increased spending in exploration and production activities, they had yet to be translated into higher rates due to current oversupply in the offshore segment. (Bernama)

Pharmaniaga says the manufacturing licence of its subsidiary Pharmaniaga Manufacturing was revoked by the Health Ministry effective March 1. This follows a routine audit conducted by the ministry’s pharmaceutical services division, Pharmaniaga said. The company was taking necessary steps to have the licence reissued, it added. (BT)

Steel prices are expected to move up further by 5-10%, said the Master Builders Association Malaysia (MBAM). Its deputy president, Kwan Foh Kwai, said the international steel prices had moved up last month by the same quantum. "We expect them to move up further albeit steadily. They will not be substantial but sustainable and manageable," he said. (Bernama)

Integrated facilities management (IFM) and property developer Faber Group is looking at growing its venture in Abu Dhabi and India to expand its revenue base. At the same time it is looking at several merger and acquisition proposals in facilities management to expand its business, its MD Adnan Mohammad said. Adnan said that talks with the local players in this business began last year and a deal is likely be sealed in the next 18 months. Meanwhile, the group's property division will see launches totalling RM495m in gross development value this year. (BT)

Malaysia Steel Works (Masteel) has fixed the first tranche of its placement comprising 4.9m shares of 50 sen each at an issue price of RM1.015 per share. (Financial Daily)