20100524 1415 Malaysia Corporate News.

Close to three years after the much-hyped mega-merger that created the world's largest listed plantation company, the unthinkable has happened. Instead of creating value, value has been destroyed. Massive write-downs from engineering projects gone awry, from a cost standpoint, has hurt the giant. If not for the huge earnings from its core business of plantations, Sime Darby could easily have been crushed by the size of these write-offs. All is not lost though, according to its newly appointed acting group chief executive Datuk Azhar Abdul Hamid. “We need to create value again for shareholders to make up for what we have lost,” he says. While admitting that the “hole” created by the overruns is challenging to fill because of its size, Azhar says Sime Darby has “unlocked values” within the group. “We've not been too visible or focused enough on real value generation,” he adds. The plantations division, Sime Darby's single largest profit contributor, makes up more than half of profits, and which Azhar himself has headed since the group's 2007 mega-merger, has much room for growth. (Starbiz)

Sime Darby has clarified that an internal probe it is conducting over losses incurred in the Middle East and the Bakun hydroelectric dam project remains confined to its energy and utilities division. It was reported on Friday in the New Straits Times that Sime Darby chairman Tun Musa Hitam had said that the probe had been extended to all the group's six business divisions. What Musa said at the press conference on Thursday was that the huge losses incurred by the energy and utilities division had provided the group an opportunity to look also at its other business units. Sime Darby also clarified that external professionals and its own management were looking into the energy and utilities division at present and not the entire group. (BT)

Sarawak Hidro, the owner of the Bakun Dam, is believed to have agreed in principle to sell power to Sarawak Energy for less than 10 sen per kWh, according to sources. However, no PPA has been draw up yet. Based on a transmission cost of 5-6 sen, the aluminium smelters would have to buy power at 15-16 sen per kWh – higher than the 9 sen that Sarawak Aluminium is looking at. The rate is also higher than the 6.42 sen per kWh rate that other aluminium smelters around the world are sourcing hydropower, experts say. (The Edge Weekly)

EON Capital will recommend that shareholders accept a RM5.06bn takeover bid from Hong Leong Bank to create the country's fourth largest banking group. EONCap, in a filing to the stock exchange yesterday, said all but one of its board members felt that the takeover offer is credible and in the company's best interest. The board took into consideration Credit Suisse's independent advice that the offer was "unfair from a financial perspective", as well as international adviser Goldman Sach's views, and decided to take "a holistic approach", it said.

• It plans to let shareholders vote on the offer, which works out to RM7.30 a share, an improvement from a previous offer of RM7.10 a share, at an extraordinary general meeting (EGM). It is believed that the meeting is being targeted for end-June. 
• The views of Credit Suisse and Ng Wing Fai, the board member who is opposing the deal, will be included in a circular to shareholders. Ng is the MD of EONCap's single largest shareholder, Hong Kong's Primus Pacific Partners Ltd, which holds a 20.2% stake.
• EONCap plans to use the disposal proceeds to pay its shareholders a special dividend of RM3.3bn and capital repayment of RM1.76bn. If all approvals are obtained, the special dividend exercise is expected to be completed within one month of the disposal, while the capital repayment will be done by the end of this year. (BT)

Maybank, which currently commands 82% market share of the debit card market, is hopeful of billings surpassing RM3bn this year. "A year ago, we were seeing an average of RM220m debit card transactions. But as our client base expands, we see monthly billings at RM250-300m," said Maybank consumer banking head Lim Hong Tat.

• Maybank debit cards will now be accepted for Auto Paybills by a number of corporations like Telekom Malaysia, Astro, Tenaga Nasional, Sarawak Electricity, Celcom and Maxis. 
• "We are targeting at 30% growth in debit card billings to RM3bn this year compared to the last financial year, as a result of the new e-Commerce initiative," Lim said. (BT)

Berjaya Corp’s tycoon, Tan Sri Vincent Tan, has defended legalisation of sports betting, calling on all parties to look at the broader picture. “The government has made it really clear that Muslims are not in any way allowed to bet with us. So my question is why are these groups so unhappy,” he said. Tan said those opposing were not being sensible as the government would earn an extra few million ringgit in revenue through legalised sports betting. (The Star)

Telcos, chipmaker Qualcomm and mobile internet companies are all expected to bid aggressively in the Indian broadband auctions starting today, squaring off against each other to win crucial airwaves, which can be used for offering broadband as well as future technologies. Analysts have billed the broadband wireless spectrum auctions (BWA) to be as fiery as that of 3G because at stake are 20 MHz of airwaves — four times that of 3G — with also the possibility that these frequencies can be used for voice services in the future. The reserve price for a pan-India broadband licence is Rs17.4bn (US$0.4bn). India, with about 600m mobile users, has over 50% tele-density as against less than 1% broadband penetration, offering a huge potential for successful winners. As per data compiled by the telecom regulator, India had a mere 8.75m broadband users as of Mar 2010. Poor broadband penetration is seen a roadblock impacting the country’s ambitious economic expansion and social justice programmes. (Economic Times of India)

Indonesia will keep its crude palm oil (CPO) export tax at 4.5% in June and maintain its cocoa export tax at 10%, an official at the industry ministry said on Friday. "Average prices of CPO and cocoa have been relatively at the same level compared with the last month, so we didn't see any reasons to raise the export tax in June," said Faiz Achmad, director of food industry at the industry ministry. Indonesia, the world's top palm oil producer, relies on overseas markets, mainly China and India, to buy nearly 70% of its palm oil output. Exports of palm oil products in the first quarter rose 7% to 3.62m tonnes against the same period last year, according to the Indonesian Palm Oil Association. The export tax on crude palm oil is aimed at ensuring the domestic requirement for cooking oil is met and to help reduce volatility in domestic cooking oil prices. (Reuters)

The move by Indonesia and Malaysia, the top two palm oil producers, to take up the industry trade dispute against the European Union (EU) will clear the name of the commodity, says Malaysian Palm Oil Council (MPOC) CEO Tan Sri Yusof Basiron. There are currently too many exaggerated figures being used to "bash" palm oil from making its mark in the European market, he said. "We have done a study and there is a case against the EU for the way it has formulated the Renewable Energy Directive and that is already against the WTO guidelines," he said. There was also a recent report stating that the EU, through its environmental ministries and commissions, is funding up to 70% of the operating budgets of environmental NGOs. Such funding implicates the EU for creating barriers to trade for agricultural products from developing countries. (BT)

The sustainability criteria in the European Union (EU) Renewable Energy Directive (RED), due to come into force on December 5, will not affect Malaysia's palm oil exports to the region. EU ambassador and head of delegation to Malaysia Vincent Piket said there will be no change for crude palm oil (CPO) imports. "The EU will not block any Malaysian CPO exports. Exports into the EU can continue just as they are today, with no new tariffs, quotas, restrictions or conditions," he said. (BT)

Shin Yang Shipping Corp is confident of strong growth for its shipping business, backed by increasing demand for the group's services and expansion to the Middle East. Growth is also expected to come from its other core activities of shipbuilding and ship repair. Shin Yang, which is seeking a listing by the middle of 3Q10, expects to expand its fleet size to 300 vessels by 2015. At present, it has 245 vessels. (BT)

Stainless steel tubes and pipes maker K Seng Seng Corporation (KSSC), which is undertaking a listing exercise, will use the funds to acquire new machinery as it seeks to expand its range of products and find new markets. According to a draft prospectus posted on the Securities Commission website, its listing exercise will involve the sale of 42.3m 50 sen shares, comprising 20.1m new shares, while the shareholders will offer 22.2m existing shares for sale. (Financial Daily)

Goodway Integrated Industries aims to boost the manufacturing capacity at its two local plants by 50% over the next three years to ramp up production to 40,000 retreaded tyres a month, said CEO Tai Boon Wee. In the near term at least, growth will likely be in double digits in terms of output at the Shah Alam plant, he said. With regard to prices of raw materials, Tai said reasonably low commodity prices worked in favour of Goodway. Moving forward, Tai said Goodway's focus would be on increasing its market presence and rebuilding its presence in China's rubber compound segment. (Financial Daily)

Talam Corp is hopeful of getting out of the Practice Note 17 (PN17) list if auditors give it a clean bill of health. The company, which has been on the PN17 list since Sept 1, 2006, has taken longer than expected to exit from the troubled companies list because of prolonged negotiations on asset disposals. It plans to dispose land and buildings to pay off its outstanding loans. Its debt restructuring exercise involves three parts - a capital reduction and a share split, the issuance of new convertible instruments to address certain defaulted debts and a proposed asset divestment programme. (Starbiz)