20100505 1002 Malaysia Corporate News.

Sime Darby has incurred more than RM1bn in total cost overruns from carrying out the civil works contract for the Bakun hydroelectric project, sources said. One estimate puts the total cost overrun figure at RM1.7bn, almost the same size as Sime Darby’s actual Bakun contract of RM1.8bn.

• The cost overrun discovery is believed to be among the findings of the special taskforce within the group that was set up late last year to probe losses in its energy and utilities division. 
• It is understood that the government has agreed to reimburse Sime Darby for around RM700m, leaving the group with around RM1bn to deal with. When contacted, SIme Darby did not deny or confirm this. (Starbiz) 

If true, this news is negative for Sime Darby. Sime's effective stake in the consortium that carried out the civil work for the Bakun project is 35.7% and the group has provided RM132m for its share of costs overrun on this project in mid-2000. As such, we estimate that the consortium has already provided for cost overrun of RM367m for the project. If the RM1bn cost overrun number is true, it suggests to us that the consortium has to provide another RM630m in cost ovverun for the project. Sime's 35.7% share on the cost overruns work out to be RM225m and if provided in this financial year, it will dent our net profit forecast by 8% and SOP by 4sen per share.

The tariff structure for the feed-in-tariff (FiT) scheme for renewable energy is still in the process of finalisation, said Energy, Green Technology and Water Minister Datuk Seri Peter Chin. He said the government would table the FiT Bill during the October Budget session, adding that it was expected to take effect by year-end.

• Chin hoped that Malaysia would implement the FiT mechanism for renewable energy by next year. He said the government expected renewable energy to contribute about 6% by 2015 and in 2020 about 11% of electricity generation mix in Malaysia. (Bernama)

The first nuclear power plant is expected to start operations in 2021, Energy, Green Technology and Water Minister Datuk Seri Peter Chin. He said his ministry has been given approval by the Economic Council to start identifying suitable sites.

• The final decision on whether the plant would be built was up to the International Energy Agency, Chin said. “Nuclear energy is the only viable option towards our long-term energy needs. Our energy generation mix is rather unhealthy at the moment because we are using too much gas and coal,” he said. (Bernama, Malaysian Reserve)

DiGi says it is ready to push its post-paid business after cleaning up its customer base in the segment. DiGi CEO Johan Dennelind said, "We are ready to push the post-paid segment again, driven by our new handset strategy. We are seeing positive results from the handset strategy, but they are nowhere near the real potential yet. There's still room for improvement in that segment."

• "There's good momentum in the company now. Our first quarter revenue grew 6%, which is higher than what we expect the industry to grow this year (about 5%). "If things continue to go well, we should see the momentum continue. 
• I think we are taking market share in first quarter, but we will have to wait and see the others' results," said Dennelind. DiGi has declared the first interim DPS of 35 sen, payable on June 18. (BT)

The bid price for 3G spectrum in India continues to rise as it touched Rs 10,749 crore (US$2.4bn) for pan-India operations on the 21st day of auction, assuring the government of Rs 43,372 crore (US$9.7bn) in terms of revenue.

• According to sources in the Department of Telecom (DoT), the auction may go on for few more days indicating further hike in bid prices. With all leading mobile operators like Bharti Airtel, Vodafone Essar, Idea, Reliance and Tatas, among others, in the fray for procuring spectrum, the bid has surpassed all estimates. 
• Mumbai and Delhi continued to witness most aggressive bids with quotations going beyond the Rs 1,700 crore (US$0.4bn) each for both circles against the reserve price of Rs 320 crore (US$71m) each. (Economic Times of India)

Bank Negara Malaysia is seeking public feedback on the new basic motor insurance coverage for third-party bodily injury and death (TPBID). The central bank is working with the relevant authorities to formulate the scheme following the government's announcement under the 2010 Budget on the need for adequate access to reasonably priced basic motor insurance coverage. Bank Negara said that it was also in consultation with consumer and transport associations, the Bar Council and the insurance industry to obtain feedback on the guiding principles, objectives and proposed features to be considered. (BT)

Etika International Holdings, one of the world's largest makers and distributors of sweetened condensed milk, has signed a RM368m syndicated loan with a consortium of three banks. The consortium comprises AmBank Group, EON Bank Group and Maybank Group.

• Of the total loan, RM159m will be used for working capital, while the balance will be used to refinance existing bank borrowings in Malaysia as well as fund future capital expansion and merger and acquisition (M&A) plans of the company. The funding facilities can only be tapped for use in the Asean region, China, Australia, New Zealand and India. 
• The RM368m syndicated financial facilities are made up of RM363m Islamic term financing and trade lines under the Bai'Inah concept and RM5m conventional foreign exchange contract facility. (BT)

Bahraini Islamic lender Al Baraka expects to buy a stake in Bank Muamalat Malaysia by the year-end, its chief executive said, as it seeks growth outside of its home market. DRBHICOM holds a 70% stake in Bank Muamalat, while state investment agency Khazanah Nasional owns the rest. (BT)

Dubai Group may no longer be keen to sell its 30.5% stake in Bank Islam Malaysia, sources said. "They may not sell after all because they see value in the bank," a source said. News reports in Jan indicated that it may have been looking to sell the Bank Islam stake for RM1bn. Dubai had in 2006 bought a 40% stake in Bank Islam from BIMB Holdings (BIMB) for RM828m. (BT)

Standard Chartered Saadiq (SCS), which has over 40 financial products, is coming out with 12 more this year. CEO Azrulnizam Abdul Aziz said the products include wealth management, small and medium enterprises and corporate transactional banking products and investments. "Our best-selling products are treasury products, asset-backed, financing/leasing, and personal financing," he said.

• Standard Chartered Saadiq expects better growth this year with continuous double-digit expansion. The bank also plans to open two more branches this year. 
• Azrulnizam Abdul Aziz said last year, the bank's revenue grew 32%, while financing asset expanded 40%. He said the first three months of this year has been good for the bank.
• "We anticipate positive growth in our Islamic finance portfolio, driven by customer demand. We are sharpening our customer value proposition, improve our ability to produce innovative products to serve their needs, advance our delivering channels and build our brandname," he told Business Times in an interview.
• SCS has low non-performing loan ratios, which Azrulnizam attributes to a robust credit compliance framework at the group level. Azrulnizam said SCS was not affected by the global economic crisis last year. "In fact, there was a silver lining as more customers were becoming more interested in Islamic finance ... as it proved to be a viable solution," he added.
• Currently, SCS employs 60 people and 30 more will be on the payroll with the additional two branches. Over two-third of the staff are involved in sales, while the rest are in the customer service, product development, risks, syariah and operational divisions. (BT)

Top Malaysian investment banks are increasingly eyeing a bigger slice of the initial public offering (IPO) action in Singapore, bringing onto the table not just their home-market expertise but more diversity in their pool of listing candidates. After launching its maiden Singapore IPO, Global Palm Resources, AmFraser Securities is looking to introduce at least two other mainboard candidates in marine-related businesses this year. AmFraser Securities director Tony Lim said that its pipeline of IPO mandates is likely to come from shipbuilding, oil and gas, offshore and marine sectors in Malaysia and Indonesia.

• CIMB Bank Singapore Branch is also expected to introduce more Singapore IPOs this year than in 2009, according to its Singapore head of corporate finance, Mah Kah Loon. CIMB has no geographical or sectoral preference for its IPO pipeline as its focus is on servicing its clients and bringing them to markets that will offer the best value, he added. 
• Last year, CIMB introduced four out of the total 23 IPOs in Singapore. So far this year, CIMB Bank has already brought two IPOs to the mainboard, namely China Hu An Cable and TTJ Holdings, and a Catalist IPO - Malaysian metal engineering firm Mann Seng Metal International (MSM) - that will commence trading on Friday. (BT)

Tengku Zafrul Aziz is set to be the new chief executive officer of Maybank Investment Bank (Maybank IB), a move that will allow him to do bigger corporate deals, backed by the country's biggest banking group Malayan Banking. Zafrul has tendered his resignation as group director of K&N Kenanga Holdings sometime last week, sources said. He will start his new job next month. (BT)

PT Semen Gresik said that it is in talks to acquire a Malaysia cement maker this year and has set aside more than 3.5 trillion rupiah (US$388m) for the deal. Semen Gresik declined to name its acquisition target, but two sources involved in the deal said it is in talks with Cement Industries of Malaysia (CIMA), a unit of Malaysia's UEM Group, which has an 18% market share in Malaysia.

• "We want to be a regional player and plan to acquire a Malaysian cement producer with a capacity of about 2m-3m tonnes a year," said Dwi Soetjipto, Semen Gresik's president director who declined to name the acquisition target. "It depends on the willingness and pricing of the company that we are targeting as we want a controlling stake in order to create synergy with our group," Soetjipto said. (Reuters)

Loh & Loh Corp will focus its resources on water and energy projects like building hydroelectric dams for renewable energy, having bid for RM1.5bn worth of jobs, says CEO Jason Loh. The company wants to build hydro dams, which are more sustainable.

• "We are looking at several hydro projects in Malaysia," he said. Loh & Loh and its Chinese partner Sinohydro Corp Ltd have a letter of intent for civil works worth RM828m for the Hulu Terengganu hydroelectric project awarded in March by Tenaga Nasional. 
• It is believed that the JV is expected to get the letter of award for the project in August. This will be Loh & Loh's maiden hydro dam project. It has built 15 dams in the past to retain water.(BT)

KNM Group said the deviation in its unaudited and audited financial statements for FY09 amounting to RM4.79m was due to provision for labour compensation cost for an Italian subsidiary, adjustment of contract costs, additional allowance for doubtful debts and other adjustments. (Star)

Crest Builder's JV company secured a RM284.9m 23-year concession with the Ministry of Education and UiTM to build and maintain a new UiTM campus in Tapah, Perak. Financial Daily)

Handal Resources’s unit Handal Engineering Sdn Bhd has won a RM3.24m contract from Telekom Malaysia (TM) to supply and install audio conferencing replacement. The work is for a duration of two years. (BT)