gsg_stock discussion

Stockwatch- FJ Benjamin, $0.87

2007-04-26T22:21:00.000+08:00

Goldman Sachs initiate coverage on FJ Benjamin, target price $1.10

Report dated 3 April 2007

Making a come-back; initiating coverage with Buy

Source of opportunity
FJ Benjamin (FJB) has restructured for better profitability by exiting unprofitable brands and de-leveraging its balance sheet. This high-end fashion retailer is now embarking on a rapid store expansion plan which could grow retail space three-fold over FY2006-FY2008E. An underresearched stock, we believe it also offers rare exposure to discretionary consumer spending in Singapore which we estimate accounts for 60% of group revenues. We initiate coverage on the stock with a Buy rating and 12-month price target of S$1.10/share, offering 54% potential upside.

Catalyst
1) Strong earnings growth – our forecasts indicate a 2 year FY2006- 2008E fully diluted EPS CAGR of 33%; 2) Capital management – capex requirements are minimal, and we believe the company may return excess cash to shareholders (S$0.22/share net cash at FY2007E); 3) New
earnings accretive brands could drive potential earnings upside.

Valuation
Our S$1.10/share 12 month price target is based on a SOTP valuation valuing FJB’s retail business at 16X FY2008E P/E. In our view, this is reasonable compared to FJB’s recent 7X-17X trading range, the Singapore market average of 16X and the regional retail (apparel) sector average of 18X.

Key risks
1) Earnings disappointment – FJB has an inconsistent profitability track record, and new brands may disappoint; 2) Share price outperformance and profit taking from warrant conversions, 3) Franchise agreements may potentially be re-called by brand owner – but we see this as unlikely as the brand principals are more likely to focus their attention on larger Asian markets like China.

Stockwatch: OKP (S'pore) $0.25

2007-03-11T20:00:00.000+08:00

Announcements:

8 Jan 2007- Award of Tender

The Board of Directors of OKP Holdings Limited ("the Company") wishes to announce that the Company's wholly-owned subsidiary company, Eng Lam Contractors Co (Pte) Ltd had been awarded contract no: CPS/821/06 for (A) Car Park Improvement Works at Tampines Car Parks No. T37(Part), T41 and T42, and (B) Repair of Existing Service Roads, Car Parks and other Civil Engineering Works within HDB Estates Contract No. 5 (East Zone) ("the Contract") by the Housing & Development Board.The amount of the Contract is SGD2,647,000.00 and the Contact period is from 17 January 2007 to 16 May 2008. The Contract is expected to contribute positively to, but has no material impact on, the earnings per share or net tangible assets per share of the Company and its subsidiary companies for the current financial year ending 31 December 2007.

31 Jan 2007- Rotary Engineering and OKP Holdings in joint venture to do civil engineering works in local Oil & Gas Sector

Rotary and OKP will each take a 45% and 55% stake respectively in the S$1 million joint venture company -- to be named OKP (Oil & Gas) Infrastructure Pte Ltd, subject to approval from the relevant authorities.

Mainboard-listed Rotary is a leading provider of engineering, procurement, construction and maintenance services supporting the oil-and-gas and petrochemical industry.

OKP is a leading home-grown infrastructure and civil engineering company in the region, specialising in the construction of airport runways and taxiways, expressways, flyovers, vehicular bridges, urban and arterial roads. The company has recently taken on projects in the oil and gas sector, providing civil construction work for petrochemical plants and oil storage terminals.

Both Mr Chia Kim Piow, Rotary’s Chairman and Managing Director, and Mr Or Toh Wat, Group Managing Director of OKP, were excited about their tie-up.

Said Mr Chia: “We have worked with OKP on various projects. Both our companies boast different strengths and we believe that we can synergise the existing capabilities in both our companies to tap on a rapidly-expanding sector. It’s a winwin situation.”

His positive sentiments were clearly shared by Mr Or. “OKP’s strength and core business have traditionally been in road construction and maintenance. This is an excellent opportunity to capitalise on our existing capabilities and track record to break into the rapidly expanding oil and gas sector. Rotary is well-known in that industry and is the perfect partner for us. We are confident that this joint venture will reap us good results,” he said.

The most notable project on which OKP and Rotary have worked together is the Jurong Island oil terminal project that Rotary is building for Universal Terminal (S) Pte Ltd (“UT”). At S$535million and slated for completion by end 2007, this EPC contract is Rotary’s biggest to date. OKP was in turn awarded a contract by Rotary for part of the civil and related works for the UT project.

When completed, Universal Terminal will be one of the world’s largest independent oil terminals, with 2.3 million cubic metres of storage capacity in 73 custom-built tanks. The Universal Terminal will be the first oil terminal in this region to have its own 12 berths, including two VLCC berths. The terminal will have dedicated inner basin with six berths for coastal and bunker vessels of up to 15,000 DWT, while the outer berths are designed with the flexibility to handle vessels up to 320,000 DWT.

Following the award of the UT contract, OKP landed a number of deals to carry out civil works in this sector, including the New Polymer Storage for Exxonmobil Chemical Asia Pacific, the Singapore Parallel Train (“SPT”) Project by Foster Wheeler Asia Pacific Pte Ltd and WorleyParsons Pte Ltd (“FWP”). Indeed, OKP was one of the first civil contractors to be awarded a contract by FWP to provide support for ExxonMobil’s SPT, an expansion project for a new world-scale steam cracker that would be integrated with its existing refinery and chemical plant on Jurong Island.

Rotary has been active in the oil and gas and petro-chemical sectors in Singapore and the region. Last month, it inked a S$126 million deal in Thailand and in November, it announced a total of S$25.8million worth of contracts that its whollyowned subsidiary, Rotary IMC Pte. Ltd, had secured from Shell Eastern Petroleum (Pte) Ltd for its Bukom Shell Houdini Project.

Last year, Rotary also started participating in projects involving biofuels. In August 2006, it was awarded a S$24million contract to undertake the Engineering, Procurement and Construction of a bio-diesel process plant and its related facilities to produce biofuel and other downstream derivatives for Nexsol (Singapore) Pte. Ltd., a subsidiary company of Peter Cremer (Singapore) GmBH.

OKP Management Q & A 8 March 2007

Dear Investors,
Thank you very much for the questions and the opportunities to clarify them. We hope you have a better understanding of our business through this online exchange.Your questions will be reposted in blue followed by our replies in black.
Rgds, The Management Team OKP Holdings Ltd

Dear Brandon Koh, you wrote:
I notice the following facts:
In view of a competitive & challenging environment, what plans do you have in risk management & what are your key differentiating factors?
We have always been prudent in the way we manage our business and have various mechanisms in place to help manage and mitigate risk. These include:
Business risk: In the light of the finite size of the Singapore market, OKP is aware of the need to manage this risk. It does this by actively looking for overseas opportunities to diversify geographically and, more recently, it has diversified into the oil and gas/petrochemical industry.
Credit risk: We carefully assess each business opportunity that comes our way, and choose to tender for and secure projects by creditworthy customers.
Liquidity risk: Internally, we have strong and prudent financial controls, and monitor our cashflow carefully.
Investment risk: To mitigate this risk, not only do we seek a good understanding of the markets we enter. Where possible and appropriate, we will grow our business through strategic alliances and/or joint ventures. An example of the latter is our 55%-45% JV last month with mainboard-listed Rotary Engineering Ltd to tap on the oil and gas sector in Singapore.
Key differentiating factors:
Management's hands-on approach: Our management team adopts a hands-on approach to all their projects. This way, they are constantly in touch with their customers and are kept abreast of all developments in a project. They will be in a position to manage cost and provide the highest level of customer service.
Close relationship with customers and suppliers: One of the guiding principles at OKP is valued collaborations. The company takes pride in the maintenance of close relationships with its clients as well as suppliers, forging goodwill and close links that often go a long way to get work done faster and more efficiently.
Experienced management team: Established in 1966, OKP has a strong and capable team with the highest level of professionalism.
Specialised teams: OKP is structured according to specialist capabilities. We believe that this gives us an extra edge as the special industry knowledge would enable us to handle projects more efficiently. Currently we have three such teams:
Oil & Gas/Petrochemical
Airport infrastructure
Roads construction and road maintenance
Dear DanielXX, you wrote:
1) Of your current $150M-odd order book, how much of it is oil-and-gas related? Is it possible to provide a breakdown of the order book currently?
2) How affected will OKP be by the current problems with sand? I understand road construction is one of the most intensive users of cement.
3) Would you be able to reveal the current Section 44 status post-1.5ct dividend?
1) For competitive reasons, it is not our practice to give a break-down of our order book.
2) Progress in some projects has been affected somewhat due to the sand shortage. However, we foresee that this situation will be resolved soon.
3) We do not have any Section 44 credits, so our dividend is a one-tier tax exempt dividend.
Dear Tony, you wrote:
Going forward, what is the future plan for the company?
Going forward, we will:
Stay focused on our core competencies: this means that we will concentrate on construction and maintenance projects; this is our area of expertise and it is where we have built up a distinctive track record over the years. We believe this is a prudent business strategy for OKP.
Diversify into Oil and Gas: To spread our risk, we will actively look to grow our niche in the expanding Oil and Gas Sector over the next three to five years. In so doing, we will not only be looking to grow our earnings base, but also ensure that we do not become overly-dependent on a single revenue source. In so doing we would also further strengthen our Oil & Gas project team; this will hold us in good stead as we prepare to tap the numerous opportunities in this sector.
Explore overseas opportunities: While keeping a firm grip on the local market, we will also continually look for opportunities to grow our business overseas.
We believe that engaging in the above strategies will help us to expand our earnings base.
Dear Investors,
Thank you for all your questions and the interest in OKP Holdings Ltd. We have come to the end of this Q&A session.
We have enjoyed and learnt much from your questions and we hope that you have a better insight of our Company and know more about our operations.
Rgds, The Management Team OKP Holdings Ltd.

Stockwatch: Spindex 1H2007 Result

2007-03-10T12:38:00.000+08:00

Spindex 1H 2007 results announced on 13 Feb 2007:

The Group is a highly integrated solution provider of precision-machined components and assemblies for use in imaging & printing equipment, automotive systems, domestic appliances, consumer electronics and data storage equipment.

In 1H FY2007, the Group achieved healthy broad-based growth in turnover and profitability across all business sectors. Turnover increased 23% to S$33.9 million and net profit jumped 59% to S$2.1 million.

Turnover
Turnover by Business Sectors
1HFY2007 S$ ‘000 1HFY2006S$ ’000 Change (%)
Imaging & Printing (IP) 16,325 13,809 18%
Machinery & Automotive Systems(MA) 9,624 6,564 47%
Others 7,912 7,219 10%
Total 33,861 27,592 23%

Turnover from IP rose 18% to S$16.3 million with increasing sales to major customers. As a result, the higher production volume contributed to an improvement in the overall machinery utilization.

The MA sector recorded significant turnover growth of 47% to S$9.6 million. In this sector, the Group received increased orders and secured new projects from existing and new customers as a result of our market focus strategy.

Under Others sector, lower demand for telecommunication was offset by higher sales of components for tape drives, medical products and consumer-related industries. Turnover for the sector grew 10% to S$7.9 million.

Profitability
In line with higher turnover and improved operating efficiency, gross profit for 1H FY2007 grew 27% to S$6.5 million. Together with bulk purchasing from long-term suppliers to manage material costs, gross profit margin improved from 18.5% in 1H FY2006 to 19.1% in 1H FY2007.
Other operating income increased 106% due to higher scrap income and additional interest income from fixed deposits. While the weaker US dollar resulted in higher foreign exchange losses, the Group managed to moderate this negative impact with more effective cost controls and currency hedging. Included in other operating expenses was a payment of machinery import duty and value-added tax incurred by the Suzhou plant.

With reinvestment allowance enjoyed by our Malaysia plant as well as tax-free incentives for Suzhou and Hanoi plants, the Group’s effective tax rate declined from 19% to 13%. Underpinned by stronger performances in all business sectors, net profit rose 59% to S$2.1 million.

Balance Sheet & Cash Flow
With a higher level of business activities, stocks and trade debtors were correspondingly higher as at 31 December 2006. Although the Group generated positive cash flow from operations, investment in fixed assets resulted in higher bank borrowings and a reduction in fixed deposits, cash and bank balances.

Notwithstanding the lower cash balances, the Group maintained a healthy net cash position of approximately $6.3 million as at 31 Dec 2006.

Outlook
Business conditions are expected to remain challenging in the second half of FY2007. Any further weakness in the US dollar will be partially mitigated by purchases in US dollars and currency hedging. To better manage the prices of raw materials, the Group undertakes bulk purchasing from long-term suppliers.

With generally improved market demand for the Group’s services, the business sectors are expected to maintain their high level of activities. Under our major market sectors, IP and MA, the expected commencement of new projects with existing customers in early 2007 will contribute to higher sales.

All manufacturing plants in the Group will benefit from the growth in business volume and higher economies of scale. The Group will continue with its strategy of targeting key customers. Full year investment in machinery is expected to reach $5 million to support further business growth.

Barring unforeseen circumstances, the Group is cautiously optimistic of its performance for FY2007.

Key positive points:

1. High operating leverage- as the Suzhou plant just turn profitable in 2HFY2006, while the Hanoi plant is expected to breakeven in FY2007, according to its 2006 Annual Report.

2. Expected commencement of new projects with existing customers in early 2007.

3. Single-digit PE at current price of $0.22.

4. Large discount to NAV of $0.37.

5. Strong balance sheet, with net cash position of about $0.055.

6. Stock still not crowded, as few people are noticing it at the moment as evidenced by the difficulty of accumulating it at good price; however, this can turn into a negative if its fundamentals turn for the worst as it will be difficult to unload if one has built up a position of reasonable size.

Stockwatch- SBS Transit (Singapore) Goldman Sachs raised target price to $3.21

2007-02-15T22:05:00.000+08:00

Today SBS closed at $2.75......

Goldman Sachs report:

Results above expectations; reiterate Conviction Buy

What's changed
SBS Transit (SBST) reported 4Q06 and full year 2006 net profit of S$16mil (+8% qoq and +14% yoy) and S$56mil (+9% yoy) respectively, which came in about 9% ahead of our estimates on a full year basis. The stronger than expected performance was mainly due to higher bus and NEL ridership volumes, and advertising revenue. SBST had also proposed a gross final and special dividend of S$0.065 and S$0.17 respectively; SBST will trade ex-dividend on 11 May 07 and the final and special dividends will be payable on 28 May 07.

Implications
In response to the better than expected results, we have revised our 2007E and 2008E earnings estimates by +8% and +10% respectively. We have raised our share price target by 3% to S$3.21 due to (1) higher free cash flow estimate arising from ridership adjustments; and (2) a lower cost of equity assumption of 8.5% (from 9%) for our DCF-based valuation. Note that we have not taken into account the proposed 2% GST hike, increase in CPF employer contribution and reduction in corporate income tax rate; details of these proposals are expected to be unveiled in the 2007 Singapore Budget.

Valuation
We have raised our 12-month share price target marginally to S$3.21 (vs previous S$3.13), implying 18% potential upside. Our DCF-based share price target is derived by adding the present value of SBST’s potential upcoming dividend streams (S$0.49) to our estimated value of its core bus and train operations (S$2.72). Maintain stock on Conviction Buy list.

Key risks
The key risk to our positive view is that management does not fully utilize SBST’s available balance of Section 44 tax credits for distribution of dividends.

Stockwatch- MMC (Malaysia)

2007-01-28T18:19:00.000+08:00

Future catalysts:

1. If Gas Malaysia receive an increase allocation of gas from Petronas
2. Approval from the government to Gamuda-MMC's new proposal to double-tracking project,
which would only involve the northern portion of Peninsular Malaysia (expected in mid 2007)
3. Award of any potential long-term concession-type earnings from the doubletracking
project
4. Injection of the port and power plant concessions within the Jizan project into MMC

Stockwatch- MMC (Malaysia) RM5.25 Macquarie initiate coverage

2007-01-28T18:14:00.000+08:00

Spicy infrastructure play

Event

We initiate coverage on MMC Corp with an Outperform rating and a RM6.75 target price, providing a 47% upside from current levels.

Impact
1. Malaysia’s largest infrastructure play. MMC will likely become Malaysia’s largest infrastructure play with 75-80% of its earnings coming from power, gas distribution and ports. The inclusion of Malakoff’s (MAL MK, RM10.00, Neutral, TP: RM10.35) assets from mid-1Q07, implies that 50% of pretax earnings will likely be derived from power generation. Further upside to infrastructure earnings could come from the award of port and power plant projects within the Jizan Economic City project in Saudi Arabia.

2. Earnings boost from local and foreign construction projects. MMC should be a beneficiary of increased construction-based spending under the 9th Malaysia plan (9MP). At the very least we see MMC together with joint – venture partner Gamuda (GAM MK, RM5.75, Outperform, TP: RM6.30) winning the RM10bn northern section double-tracking rail project, which would
contribute about RM444m to earnings between FY07-10. The US$30bn Jizan project meanwhile should provide more construction-based earnings although at this time they are not incorporated into our estimates.

3. IPP restructuring – room for valuation upside. We believe the conclusion of the IPP restructuring process by mid-2007 should allow for further upside to our valuation of MMC. While every 10% reduction in capacity payments to Gen-1 plants would lead to a 3% reduction in MMC’s FY08 earnings, we believe the extension of PPA concessions would provide NPV upside.

Earnings revision
1. We are currently establishing base forecasts.

Price catalyst
1. 12-month price target: RM6.75 based on a PER methodology.
2. Catalyst: Resolution of the IPP restructuring process and award of the doubletracking project to MMC would be major catalysts over the next 12 months.

Action and recommendation
1. We initiate on MMC with an Outperform recommendation.
2. At 9x FY08E PER and 6x EV/EBITDA, MMC trades at a discount to its various peer groups (13-17x PER and 8-12x EV/EBITDA) as well as the Malaysian market at 14x FY0-8 PER. The company meanwhile offers a 44% FY06-09 EPS CAGR.
3. MMC fits in well with our key Hunting Stock themes of increased government spending and increased domestic demand. As spending under the 9MP takes off, expect MMC’s earnings and valuations to follow suit.

Stockwatch- SBS Transit (Singapore) $2.47

2007-01-20T23:10:00.000+08:00

1. beneficiary of lower energy price
2. final/special dividend coming soon, year end result mid February 2007
3. loads of s44 credit to be released
4. improving NorthEast Line ridership with vivocity
5. impact of fare hike in oct shd surface in the coming result
6. last goldman sachs target price is around $3

Stockwatch- Technics Oil & Gas $0.79

2007-01-07T14:43:00.000+08:00

CORPORATE PROFILE

Singapore-headquartered Technics Oil & Gas Limited is a one-stop, fully integrated specialist
services provider catering to MNC companies in the upstream oil and gas sector.

The Group designs, concept engineers and fabricates process modules and equipment, including gas compression packages, which are integrated to form the operating system for production operations and storage applications in offshore and onshore oil and gas exploration and production activities. (“O&G”)

From a modest start-up in 1990 with only 12 staff, Technics became a listed entity on the Singapore Exchange SESDAQ in April 2003 and embarked on a multi-pronged expansion programme to maximise leverage on the robust demand in the O&G sector.

With a current strength of 240 full-time employees and still expanding, Technics has now emerged as one of the leading premier supply vendors for topside process modules and equipment required for FPSO (Floating Production, Storage and Offloading) ships and MOPUs (Mobile Offshore Production Units), as well as oil rigs and semi-submersibles.

The Group has been synonymous with safety, quality and reliability and is an authorised integrator of gas compression systems for two world-leading USA gas compressor manufacturers, Ariel Corporation and Cameron.

Main business segments are:
• Engineering, Procurement, Construction and Commissioning (“EPCC”):
Design, procure, construct, install and commission process modules and equipment for O&G exploration and production on a turnkey project basis;

• Contract Engineering (“CE”):
For customers who do not require the full turnkey services, Technics customizes the oil or gas flow and fabricates according to their specifications;

• Procurement and other services (“PS”):
After-sales maintenance service and supply of spare parts and equipment; as well as the Group’s new leasing business for gas compression systems.

The Group’s expanded facilities comprise two waterfront yards extending over approximately
17,000 sqm and 22,500 sqm respectively, in Singapore and Indonesia’s Batam Island.

Business coverage now encompasses Singapore, Malaysia, Thailand, Vietnam, Indonesia, USA, Dubai, Bangladesh and the People’s Republic of China; operating through offices in Singapore, Batam and Vietnam.

Fuelled by a strong commitment to excel and backed by a network of leading MNC customers, major equipment principals and strategic partners, Technics is now poised to embark on a new dimension of growth.

2 Alliances (announced 5 Sep 2006) to springboard into new market segments (Mgmt is optimistic that this generation of new earnings streams will kick in strongly from FY2007):

(i) Strategic partnership with Global Process System (GPS); leased to GPS certain equipment that are typically utilised in the construction and supply of production and process modules to FPSOs and MOPUs. GPS owns and operates jack-ups and MOPUs in this region while partnering others to exploit the booming turnkey business for FPSOs. GPS has accorded Technics the first right of refusal to undertake contract engineering project work for the MOPU/FPSO process topsides, e.g. the supply of gas compression systems; electrical, controls and instrumentation systems; and process equipment vessels. This alliance has quickly ramped up the activities and output of our new Batam Island yard.

Global Process Systems Inc (GPS) provides turnkey services in all areas of process equipment and Process Engineering Solutions for customers in the Oil & Gas industry. GPS is strategically located in Dubai , UAE, Kuala Lumpur, Malaysia, Moscow and Houston, with branch and affiliate corporate offices throughout Europe, Asia and Middle East. GPS is 70% owned by Al Jaber Group, a multi-billion USD conglomerate headquartered in Abu Dhabi with diversified businesses ranging in infrastructure to integrated logistics. For more information about GPS, please visit the company’s website at : www.globalprocesssystems.com

(ii) 51% Joint Operation with an Indonesian partner, namely PT. Promatcon Tepatguna; able to secure EPCC gas c0mpression systems contracts in Indonesia for on both outright purchase by customers or term leasing basis.

Outlook:

a. Management is optimistic: There has never been a better time in the history of Technics when our prospects will be brighter than the present.

b. KeppelFELS, a subsidiary of Keppel Offshore & Marine, a global leader for the design and production of jack-up rigs and a leading player for the conversion of old tankers into FPSO/FSO/MOPU vessels, has been one of Technics' key long term customers.

c. Batam is fast-assuming the mantle as a hub for FPSO process modules benefiting from the spillover effect as customers face long queues for Singapore yards. Large MNC players such as Halliburton and J Ray McDermott have commissioned major projects to yards on Batam Island.

d. Technics' new yards in both Singapore and Batam Island have been qualified by our MNC O&G customers.

e. Technics is focussing on extending the growth of EPCC business for gas compression systems to ride on the strongly emerging demand for natural gas as an alternative energy source to oil.

f. 2 main growth drivers in FY2007:
(i) FPSO market- based on discussion with customers, there are 10 FPSO conversion projects that are scheduled to be awarded by the oil majors in 2007 to leading FPSO players.

With several of Technics' partner-customers in the front-running for these large scale projects, it is optimistic of maintaining our historical participation or strike rate, given its current available capacity as well as proven safety and on-time delivery track records. In particular Technics stand a good chance for EPCC gas compression systems, in view of our authorised integrator status for Ariel and Cameron, which serve as barriers to entry by non-qualified competitors.

(ii) Leasing of Gas Compression Systems- Technics is excited at the upside potential of an emerging leasing trend that has caught on strongly in Indonesia. Its Joint Operation in Indonesia has received indicative demand amounting to about 15 gas compression systems in the short-term from its customer base, either for leasing arrangement or outright purchase.

Technics anticipates that leasing will soon catch on in Malaysia and Thailand, paving the way for Technics' 2nd stage development for this new business to expand beyond Indonesia.

There are 3 drivers for the strong emerging leasing trend. Firstly,

Stockwatch- Sunway City announces JV agreememt to develop condo project in Hyderabad

2007-01-06T17:03:00.000+08:00

Subject

SUNWAY CITY BERHAD ("SUNCITY") - JOINT DEVELOPMENT AGREEMENT BETWEEN SUNWAY CITY INDIA PRIVATE LIMITED AND PRAJAY ENGINEERS SYINDICATE LIMITED

Contents :

1. INTRODUCTION

We wish to announce that Sunway City India Private Limited ("SCIPL"), a wholly-owned subsidiary of SunCity, had on 28 December 2006, entered into a Joint Development Agreement ("JDA") with Prajay Engineers Syndicate Limited ("PESL") to jointly undertake a residential condominium development on all that piece of land situated in Survey No. 78/B, Hafeezpet Village, Serilingampally Mandal, Ranga Reddy District, Hyderabad measuring approximately 5 acres ("the Land") [hereinafter referred to as "the Proposed Joint Development"]. 2. INFORMATION ON SCIPL AND PESL

2.1 SCIPL

SCIPL is a company incorporated in India and having its registered office at No. 20, Uniworth Plaza, Sankey Road, Bangalore 560 020. The authorised and paid-up share capital of SCIPL are Rs100,000,000/- and Rs100,000/- respectively. The principal activities of SCIPL are property development and investment.
2.2 PESL

3. SALIENT TERMS OF THE JDA

Option 1

No.	Sale Price	PESL's share	SCIPL's share
a.	If the average sale price realised is equal to or less than Rs3,500/- per sq. ft.	45%	55%
b.	If the average sale price is equal to Rs4,000/- per sq. ft.	50%	50%
c.	If the average sale price is more than Rs3,500/- but less than Rs4,000/- per sq. ft.	Proportionate adjustment	Proportionate adjustment

Option 2

4. RATIONALE

The Proposed Joint Development represents the first entry of SunCity in the booming real estate market in India and is expected to be the pioneering project for SunCity to secure future possible property projects in India. The Proposed Joint Development affords SunCity the opportunity to develop prime land in India without investment in land acquisition and gain direct access to local property development experience via strategic partnership with PESL.
5. FEASIBILITY STUDY

6. PROSPECTS

7. RISK FACTORS

8. SOURCE OF FUNDS

SunCity will fund its participation in the Proposed Joint Development through internally generated funds and borrowing. SCIPL plans to undertake the development via its capital investment, funds generated from the Proposed Joint Development and borrowing from the local financial institutions in India.
9. EFFECTS OF THE JDA

9.1 On Share Capital and Substantial Shareholders' Shareholding

There will be no effect on the share capital and substantial shareholders' shareholding of SunCity as the JDA does not involve any allotment or issuance of new shares by SunCity. 9.2 On Earnings Per Share and Net Tangible Assets Per Share

The JDA is not expected to have any immediate material effect on the earnings per share and net tangible assets per share of SunCity for the current financial year ending 30 June 2007 but is expected to contribute positively to the future earnings of SunCity.
10. APPROVALS REQUIRED

The JDA does not require approval from the shareholders of SunCity or any government authorities in Malaysia.
11. DIRECTORS' AND MAJOR SHAREHOLDERS' INTERESTS

Insofar as the directors are aware, none of the directors or major shareholders of SunCity or persons connected with them has any interest, direct or indirect, in the JDA.
12. STATEMENT BY THE BOARD OF DIRECTORS

The Board of Directors of SunCity is of the opinion that the JDA is in the best interests of SunCity.
13. DOCUMENT AVAILABLE FOR INSPECTION

The JDA is available for inspection at the registered office of SunCity at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 46150 Petaling Jaya, Selangor Darul Ehsan during normal business hours (9.00 a.m. to 6.00 p.m.) from Monday to Friday (except public holidays) for a period of 3 months from the date of this announcement.

This announcement is dated 4 January 2007.

Stockwatch- Rotary Engineering, OCBC 5 Jan 2007 report up target price to 95ct

2007-01-06T16:47:00.000+08:00

OCBC report today on Rotary, target 95ct:

Exciting times ahead

Record new contracts secured in 2006. Rotary won a new S$126m engineering, procurement and construction (EPC) project in late December 2006. We believe that this win is significant in a number of aspects: 1) the contract value is slightly bigger than Rotary's typical project size of
Revisiting our contract win assumptions. We have raised our new contract win assumptions in the FY07/08 forecast periods to S$303m per annum (vs. S$194m previously). This represents a 40% increase in new orders secured vis-à-vis in 2006, which we believe is achievable. First, Rotary has proven its ability to secure about S$200m worth of small-mid sized projects over the past two years. Second, Rotary is having a growing exposure to the overseas markets, like China and Thailand. Indeed, its two new joint ventures in Saudi Arabia have only begun to bid for contracts in 2H 2006. Third, Rotary has a strong track record in the fast expanding local market in Jurong Island. Specifically, the award of piecemeal contracts from the mega US$3b Bukom Shell Houdini project are expected to gain momentum in 1H 2007, and Rotary is one of the leading contenders.

Upward re-rating of Rotary. We believe that Rotary's share price is now poised to retest its upper historical Price to Book ratio (P/B) of 3.2x. The catalysts for a re-rating of Rotary's valuation are likely to come from the market's growing recognition of its inroads made for downstream EPC projects, and the anticipated stronger new orders flow in 2007. Rotary's share price is thus expected to move to a higher P/B trading band of 2.5x to 3.5x, as compared to the 1.5x to 2.5x historical P/B trading band in the past two and a half years.

Higher fair value. We have raised our fair value for Rotary to S$0.95 (vs. a previous post-bonus estimate of S$0.63), using a higher 3.2x P/B (vs. 2.2x previously) and on a higher revised FY07 book value forecast of S$0.30.

The implied 13.7x FY07 PER ratio is also in line with its local oil and gas peers. Maintain BUY.

Stockwatch- Rotary Engineering, Kim Eng 5 Jan 2007 report up target price to a conservative 86ct

2007-01-06T16:44:00.000+08:00

Kim Eng report today on Rotary, says 86cts conservative:

Rising Contract Flows

♦ Winning sizeable contracts in Thailand
Rotary Engineering (Rotary) recently secured Engineering, Procurement & Construction (EPC) contracts worth $126m from Map Ta Phut Olefins (MOC), a joint venture between Siam Cement Group and DOW Chemicals. The contracts involve the construction of its off-site process plant facility in Map Ta Phut, Rayong Province. The project involves the construction of the process plant unit consisting of 15 spherical and atmospheric tanks for the storage and handling of various petrochemical products, as part of the New Naphtha Cracker Complex to be built in Map Ta Phut. The contract is expected to be executed over a 24-month period from mid-2007 onwards.

♦ Upgraded earnings forecasts
This is clearly a positive development for Rotary and underscores the group’s growing influence in the Thai market. (In FY05, Thailand contributed 21% to total turnover) Orderbook now stands at $651m. We have upgraded our earnings for FY07 and FY08 by 10% and 9% respectively to reflect growing order flows in the course of the year.

♦ Expected increase in downstream spending bodes well
Shell is building a US$3b petrochemical cracker in Singapore, while ExxonMobil is also looking to increase capacity and plans to add a second comparable cracker unit. The investment is expected to be confirmed in FY07. A total of US$6-8b in capex could be pumped into the Singapore oil refinery sector over the next few years. International Energy Agency (IEA) estimates that new-build cracking refinery cost has risen from around US$3.0b to approximately US$4.0b for a 200 kb/d refinery. The IEA also reckons that refinery construction firms have full orderbooks for the next three years. Although a total of some 15.1 mb/d (equivalent of US$302b) of new capacity has been announced for completion before 2011, there is the risk of delays. Refinery capacity growth is centred on Asia (4.6 mb/d), the Middle East (2.6 mb/d), and North America (1.4 mb/d). Rotary is poised to benefit from these flows.

♦ An affordably priced O&G play; maintain BUY
Rotary remains a relatively under-researched stock and one of the better proxies to the region as well as Singapore’s increasing refinery/oil terminal capex cycle. We believe Rotary deserves a minimum ex-cash multiple of 10.9x 2007 PE (low end of peers’), which translates to a target price of $0.86.

Stockwatch- Rotary Engineering, 26 December, secures S$126m global EPC contracts

2007-01-06T16:33:00.000+08:00

Rotary Engineering secures S$126m global EPC contracts in Thailand

Contracts for process plant off-site tank farm unit project speak of Rotary’s regional capability

SINGAPORE, 26 December 2006 – Mainboard-listed Rotary Engineering Limited (“Rotary”), in collaboration with its Thai unit, Thai Rotary Engineering Ltd. (TREL), has secured global Engineering, Procurement & Construction (EPC) contracts worth S$126million from Map Ta Phut Olefins Co. Ltd. (“MOC”), a joint venture between Siam Cement Group and DOW Chemicals, for the construction of its process plant off-site facility in Map Ta Phut, Rayong Province, Thailand.

Rotary is a leading provider of engineering, procurement, construction and maintenance services supporting the oil-and-gas and petrochemical industry.

This project involves the construction of the process plant off-site tank farm unit consisting of fifteen spherical and atmospheric tanks. These are for the storage and handling of various petrochemical products, as part of the related facility for the New Naphtha Cracker Complex to be built in RIL Industrial Estate in Map Ta Phut area. MOC plant is scheduled to be in operation in 2010.

Said Mr Chia Kim Piow, Rotary’s Chairman and Managing Director at the contract award ceremony: “We are indeed honoured to be entrusted with this prestigious project. This is a recognition of Rotary’s track record in the petroleum and petrochemical storage capabilities to deliver projects of this scale. Rotary has broadened its scope, from building storage terminal for independent terminal operators to building the Offsite and Utilities packages for process plants in the oil and gas industry.”

Rotary Engineering’s biggest contract to date is the S$535million EPC contract to build an oil terminal in Jurong Island for Universal Terminal (S) Pte Ltd. Upon its completion by end 2007, Universal Terminal will be one of the world’s largest independent oil terminals, with 2.3 million cubic metres of storage capacity in 73 custom-built tanks. The Universal Terminal will be the first oil terminal in this region to have its own 12 berths, including two VLCC berths. The terminal will have dedicated inner basin with six berths for coastal and bunker vessels of up to 15,000 DWT, while the outer berths are designed with the flexibility to handle vessels up to 320,000 DWT.

Rotary Engineering turned in a net profit after tax and minority interest of S$16million for its first half ended 30 June 2006, an increase of 395% over the S$3.2million it made in the same period the previous year. Group turnover for the first six months of 2006 stands at S$202million, an increase of 150% over the S$80.7million it achieved in the previous corresponding period

Stockwatch: Spindex (Singapore) $0.18

2006-12-24T15:13:00.000+08:00

Spindex is the listed comparable of Innovalues Precision (Singapore).

It has plants in Singapore, Johor (Malaysia), Shanghai, Suzhou (China) and Hanoi (Vietnam). Hanoi plant
- commenced operations in December 2005
Suzhou plant
- started operations in October 2004, will focus on new projects with existing customers in MAT sector
- turned profitable in 2H FY2006

Major shareholders
- Choo Heng Thong, Founding Shareholder & MD
- Tan Choo Pie @ Tan Chang Chai, Exec Chairman, also
Non-Exec Chairman of MMI

Key customers:
Imaging & Printing
- HP, Brother, Canon
Machinery, Automotive systems & telecommunications
- Robert Bosch, Makita, Black & Decker, Texas Instruments, Delphi, Motorola
Domestic Appliances, Consumer Electronics & Others
- Phillips, General Electric
Data Storage
- Maxtor, Quantum, Jabil

Extracted from its 2006 Annual Report:

The business environment is expected to remain competitive in FY2007. Volatile raw material prices will add an element of uncertainty to input costs and high oil prices continue to be an area of concern. Nevertheless, the Group will continue to monitor and manage its operating costs closely so as to minimise any negative impact on its profit margin.

Business expansion and new product launches by customers will underpin strong demand for the Group’s products in the current financial year. Better performance at the Malaysian plant is expected with the commencement of new projects to support existing IP and automotive customers.

In Hanoi, we expect to breakeven in FY2007 as the new plant benefits from greater economies of scale with increased production from existing customers and new business generated from new foreign investments in the IP sector.

The Suzhou facility turned profitable in 2HFY2006. Our exit from the telecommunications segment has allowed us to focus resources on our key customers and market sectors.

Stockwatch: Sunway City sees better FY07

2006-12-23T09:04:00.000+08:00

29-11-2006: SunCity sees better FY07 By Isabelle Francis

Sunway City Bhd (SunCity) expects to perform better in its year ending June 30, 2007 (FY07) driven by hefty unbilled sales and property projects with up to RM1 billion slated for launch, said its senior managing director Datuk Wong Choon Kee.
“Last year (FY06), we did launches of about RM650 million. This year it is RM1 billion. We will work towards that target of better profitability,” he said at a media briefing on SunCity's roadmap in Petaling Jaya on Nov 29.
For the 18-months to June 30, 2006, SunCity posted a net profit of RM166.72 million on the back of RM1.57 billion revenue. It has changed its year-end to June 30 from Dec 31.
Wong said that as of Sept 30, 2006 SunCity had unbilled sales of RM726 million, mainly from Kiara Hills and Sunway Damansara projects, which would be realised in FY07 and FY08.
He said that of the RM1 billion property launches, about RM800 million or 80% would be from its four major projects - Sunway South Quay, Sunway SPK Damansara, Sunway Damansara and Sunway Hartamas.
He said its 50ha integrated-resort, Sunway South Quay, was slated for launch in the first quarter of next year, starting with a few units of high-end bungalows.
SunCity holds 60% of Sunway South Quay, which has a gross development value (GDV) of RM3.6 billion, and is mainly targeted at Middle Eastern property investors.
The Employees Provident Fund and Kuwait Finance House (Malaysia) Bhd each holds a 20% stake in the project, which is scheduled for completion in the next eight to 10 years.
With regards to the heads of agreement with Fawanis Sdn Bhd on a joint venture for a RM1.5 billion commercial development in Jalan Cheras, Wong said it hoped to finalise the deal and start construction by the end of next year.
On another matter, he said SunCity was keen on launching a real estate investment trust (REIT), and was evaluating assets to be injected into the REIT.
He added that SunCity was looking at a REIT with a value of between RM1 billion and RM2 billion, which could emerge as the largest REIT in the country.
“We plan (to launch the REIT) not far from 2008. Sunway Pyramid (shopping mall), when extended and tenanted, will be a major asset in that REIT,” he said adding that the Sunway Pyramid expansion was on track to be completed by September next year.

Stockwatch- Rotary Engineering (S'pore) Kim Eng Initiate Coverage 5 December 2006, Buy Target Price $1.10

2006-12-07T02:33:00.000+08:00

- Rotary well positioned to ride the coming wave Rotary ranks as one of Singapore’s most established home grown engineering companies – with a track record of more than 30 years. Over the years, it has evolved from a sub-contractor into a multi discipline, regional turnkey, Engineering, Procurement & Construction (EPC) player in the oil & gas industry with 3000 employees under its wing. It is also a preferred engineer on the panel of leading refinery players like Shell and Exxon Mobil and looks set to benefit from the impending increase in downstream and oil terminal capital expenditures in Singapore and the region.

- Expected increase in downstream spending augurs well for Rotary In Singapore, Shell is building a US$3b petrochemical cracker with the start up of the new facilities expected by 2009/2010. ExxonMobil is also looking to increase capacity and is planning to add a second comparable cracker unit to the current one. Investment is expected to be confirmed probably in FY07. A total of US6-8b in capex could be added to the Singapore oil refinery sector over the next few years. International Energy Agency (IEA) estimates that new-build cracking refinery cost has risen from around US$3.0bn to approximately US$4.0bn for a 200 kb/d refinery and that the refinery construction firms have full order books for the next three years. Although a total of some 15.1 mb/d (equivalent of US$302b) of new capacity has been announced for completion before 2011, there is risk of delays. Refinery capacity growth is centred on Asia (4.6 mb/d), the Middle East, (2.6 mb/d) and North America, (1.4 mb/d). Rotary is poised to benefit from these flows.

- Operating leverage will expand margin Rotary’s operations offer good scalability and affords the group strong operating leverage. Implication is that orders and revenue can be scaled up rapidly while keeping overheads fairly constant. We are forecasting pretax margins to expand from 6.5% in FY05 to 10.1% in FY06.

- An affordably priced O&G play; initiate with BUY Rotary remains a relatively under researched stock and one of the better proxies to the region and Singapore’s increasing refinery/oil terminal capex cycle. We believe Rotary deserves a minimum ex-cash multiple of 10.9x 2007 PE, (low end of peers) which translates to a target price of S$1.10. We initiate coverage with a BUY recommendation.

Stockwatch- Media Prima buying UPD, The Right Channel

2006-12-03T11:22:00.000+08:00

The Edge Malaysia
30-11-2006: Media Prima buying UPD, The Right Channel By Alfean Hardy

Media Prima Bhd is expanding its outdoor advertising segment by acquiring a company each from Utusan Melayu (Malaysia) Bhd and The New Straits Times Press (Malaysia) Bhd (NSTP).

Media Prima announced on Nov 30 it was acquiring UPD Sdn Bhd from Utusan and The Right Channel (TRC) from its associate company, NSTP, for RM1 each. UPD recorded a net loss of RM2.52 million and had net liabilities of RM14.8 million as at Dec 31, 2005. TRC recorded a net loss of RM1.94 million and had net liabilities of RM4.42 million as at Dec 31, 2005.

UPD owns 2,400 active outdoor advertising panels mainly in the Klang Valley and has a long-term concession on the STAR light rail transport system. TRC manages, sells and maintains outdoor advertisements from billboards to transit advertising.

“Both acquisitions are to be undertaken at nominal value but with the vendors of the two companies being assured of certain level of repayment for previous advances made to the companies,” it said.

Media Prima managing director and chief executive officer Abdul Rahman Ahmad said: “We believe UPD and TRC have many strategic assets that can be unlocked and represent a considerable opportunity to generate significant value going forward.”

Media Prima had earlier announced it was acquiring outdoor media advertising company Big Tree Outdoor Sdn Bhd (BTO).

“Using Big Tree Outdoor as the anchor entity for our outdoor operations, Media Prima will have the opportunity to enjoy economies of scale through streamlining the backroom functions and operations of Big Tree Outdoor, UPD and TRC,” he said.

In a separate statement, Utusan said Media Prima would ensure advances amounting to RM9.2 million as at June 30, 2006 — which Utusan had advanced to UPD — would be paid back by UPD over two years.

Stockwatch- Rotary Engineering (S'pore) Smart Investor December 2006 magazine article: Rosy Future for Rotary

2006-12-02T11:55:00.000+08:00

Key highlights:

1. About 2 mths ago, Prime Minister Lee Hsien Loong said that Singapore would reinforce its position as one of the world's top 10 petrochemical hubs with Shell's largest investment here to date- a multi-billion-dollar petrochemicals complex spanning Pulau Bukom and Jurong Island. Shell has announced the expansion of its current facilities to include a new world-scale ethylene cracker, modifications and additions to the Pulau Bukom refinery and a mono-ethylene glycol plant.

2. Other multinational oil companies have also announced several major projects. ExxonMobil is planning for its second ethylene cracker, which will be comparable or slightly larger in capacity than its existing 900,000-tonne cracker on Jurong Island.

3. Rotary Engineering Limited through its wholly owned subsidiary Rotary IMC Pte Ltd, has secured 2 contracts from Shell Eastern Petroleum (Pte) Ltd. One is worth $15.5 million and the other $10.3 million for a part of works at its Bukom Shell Houdini Project.

4. Rotary is poised to capitalise on the abundance of opportunities in the Middle East.

Stockwatch- Rotary Engineering (S'pore) OCBC 1 Dec 2006 Maintain BUY Mega Project running on schedule

2006-12-02T11:38:00.000+08:00

Rotary Engineering Ltd
Mega project running on schedule

1 December 2006

Positive feedback on recent site visit. We brought institutional investors along for a site visit to Rotary's S$535m Universal Terminal project on Jurong Island yesterday. Investors' feedback is generally positive, especially on the demonstration of Rotary's capability to handle its first mega-sized engineering, procurement and construction (EPC) project. All the 73 custom built storage tanks are concurrently being constructed using automated machineries and a smaller than usual site workforce, and the project is on target for completion by end 2007.

Rush of investment activities on Jurong Island. We estimate that the Bukom Shell Houdini project carries an average annual investment value of about S$1.6b in the 2007-09 periods, while ExxonMobil's planned second petrochemical complex may contribute another S$1.0b per annum in the 2008- 10 periods if its ongoing feasibility study is favourable. Together with other announced investments like Iran's participation in an S$465m refinery project, the recent developments on Jurong Island has dwarfed the S$1.5b to S$2.0b total investment commitments per annum in Singapore's Chemicals Industry Cluster in the 2002-05 periods. Rotary's hit rate for contracts that it tendered for on Jurong Island has historically been 60-70%.

Getting ready to pounce on contracts in the Middle East. Rotary's current geographical focus for EPC projects is in Singapore, Middle East, and Thailand. Rotary's two new joint ventures in Saudi Arabia have already begun to bid for contracts, and will be supported by the expected commissioning of its fabrication facility in the Kingdom in 2007.

Our new contract wins assumption is not aggressive. Our earnings model assumes the absence of mega EPC contract win in the 2007-08 period, while the total value for staggered new bread-and-butter EPC deals (typically S$300m per annum. Maintain BUY.

Stockwatch- E&O Property (Malaysia) Citigroup Maintain BUY, 2Q In Line, Raising FY08-09E Forecasts and Target Price from RM1.80 to RM2.00

2006-12-02T10:24:00.000+08:00

E & O Property Development Bhd (EOPD.KL)
29 November 2006
Buy: 2Q In Line. Raising FY08-09E Forecasts and Target Price

2Q in line, stronger performance ahead — 2Q net profit of RM21m lifted net profit to RM41m (+97% YoY), helped by earnings recognition from high-margin projects (EBIT margins expanded 2.8pp to 17.5%) such as Dua Residency, Idamansara & Seri Tanjung Pinang. 1H07E net profit accounted for 44% of our full-year estimates but we expect stronger 2H, boosted by gains from its land disposal at Seri Tanjung Pinang (estimated at RM15m).
Raising forecast and target price — We have raised FY08-09E net profit by up to 10% to factor in higher margins and sales volume. Hence, we raised our P/Ebased target price 11% to RM2.00, offering an attractive 21% ETR. FY08E P/E of 8x looks attractive against 26% 3-year EPS CAGR, backed by RM299m in unbilled sales.
Leading position in growth markets — The group’s strategy is to focus on welllocated landbank and leveraging on its strong branding and track record. ENOP is well-regarded for its innovative designs and lifestyle products that complement the excellent location of its projects in Klang Valley and Penang.
Prime developments — ENOP has a residual landbank of 1,701 acres in prime locations around Klang Valley and Penang. This would easily sustain its development efforts over the next 10-15 years.
Catalysts — Possible catalysts to drive the share price closer to our target price include: (1) more land transactions at higher prices in Penang, (2) strong demand for new launches in Penang and Klang Valley, (3) better-than-expected earnings.

Investment thesis
We have a Buy/Medium Risk (1/M) rating on ENOP, a well-regarded Malaysian developer that focuses on developments in prime locations in the Klang Valley and Penang. The group's strong branding, through its association with the E&O Hotel and a good track record with innovative projects, positions it well for firm demand for premium residential development.

Valuation
Based on a target PE of 10x, we arrive at a target price of RM2.00/share. Our P/E benchmark values ENOP on a similar basis to Mah Sing (MAHS.KL - RM3.44; 1L). We believe the comparable valuations are reasonable since these are two small cap companies that strong growth profiles and manageable debt.

Our secondary valuation is based on a 10% discount to RNAV of RM2.23/share. This suggests a fair value of RM2.00/share. We believe a small 10% discount is justified since: 1) We expect property prices in Penang to appreciate. Penang properties account for 71% of its RNAV, 2) The group's landbank in Klang Valley is strategically located allowing management to develop these properties quickly, 3) We believe demand risk, particularly for its Klang Valley projects, is contained given its strategy of focusing on urban areas (15km radius from city centre) where demand is resilient. In addition, these projects would benefit from spillover demand from the established developments.

Risk
We have a Medium Risk rating on the stock based on our quantitative risk rating system, which tracks 260-day historical share price volatility. In our view, some of the key risks that could prevent the share price from reaching our RM2.00 target price include:

1) An unfavorable macro economic environment, which would affect upgrading demand and sales of premium housing project, a segment to which ENOP has significant exposure
2) Regulatory risk as longterm demand for its Penang project is contingent on favorable regulations for foreign buyers
3) Corporate restructuring risk. Being part of a conglomerate (E&O Berhad) (ENOB.KL - RM1.39; NR), there is always risk of possible changes and restructuring of its holding company, which might have implications for ENOP 4) Delays in securing approvals for landbank.

Stockwatch- Innovalues Precision (Singapore) CIMB report 28 Nov 2006

2006-11-30T22:34:00.000+08:00

Innovalues Precision Ltd
Outperform Target Price= S$ 1.52

On course for record earnings

• Company is on track to achieve our full-year figures. Our recent conversations with the company suggest that it is on track to attain our forecasts and hit record earnings this year, driven by continuous strength in the automotive and OA segments. The only weakness is the HDD component business.

• Both Malaysia and China facilities are still operating at full capacity. The Malaysia plants are busy with printer-related and automotive programmes, while the China plant is boosted by the automotive business. Utilisation rate for the Thailand plant, on the other hand, continued to hover at about 80% due to a slowdown in the HDD components business.

• Maintain Outperform with unchanged target price of S$1.52. We have kept our FY06 numbers. Our FY07-08 numbers are also intact, though we believe there could be upside surprises if the entire automotive components business takes off as planned. Our target P/E of 13x CY07 earnings, translating into a S$1.52 target price offering 79% upside, is pegged at a slight premium to its historical average P/E in view of its healthy 34% earnings CAGR projected for FY05-08. Maintain Outperform, and we see catalysts from a solid set of full-year results (to be announced by end-Feb 07).

Record earnings within reach

Malaysia operating at full capacity.
The Malaysia plants are still operating at full capacity in 4Q06, underpinned by robust demand for printer-related and automotive products. In the OA segment, we believe Innovalues, being one of the largest printer shaft and rubber roller suppliers for Hewlett Packard’s (HP) inkjet printers, has benefited from the latter’s marketshare gains. HP recently reported a second consecutive quarter of double-digit hardware volume growth (up 17% yoy during August-October; 15% yoy growth in the previous quarter). It will also start to support HP’s wide-format printers, which are programmes HP is gradually transferring from Europe to Asia in a bid to lower its production costs. Mass production is expected to begin 2Q07, a slight delay from end-2006. Additionally, demand from the new customer (a major player in the printer business) for laser toner cartridge shafts remains very strong, and Innovalues has not been able to fully fulfil the customer’s request at this moment due to constraints in capacity. As such, the group is accelerating its expansion in Malaysia. The new printer customer could potentially become a major customer of the Malaysia plants from 2007. Innovalues is still in active discussions with the customer to expand into shafts and rubber rollers for printer products.

In the automotive segment, Innovalues continues to see good volume growth for Sensata’s braking sensors, driven partly by greater allocations from the customer. It has also completed trial production for Siemens VDO’s diesel engine fuel injector components, and is awaiting the customer’s go-ahead for mass production.

China facilities are also running at full steam.
During our visit to the China facility, which focuses on its OA and automotive segments, we noted that business activities remained robust, and understand that this site has been operating at full capacity since the beginning of 2H06. It has started mass production for Sensata’s auto pressure transducer (APT) components, programmes transferred from Japan. Monthly volume has increased from less than 100,000 units to more than 200,000 units currently, and we believe volume will continue to grow as Sensata also plans to transfer programmes from Holland to Shanghai next year. These two sites account for about 40% of Sensata’s annual requirements of about 80m sets. The Shanghai unit has also started plating services for LUK, and is in advanced discussions with Robert Bosch for fuel pump components. The OA business, mainly shafts and rubber rollers to HP and Samsung, is also enjoying good loading, though volume has started to taper off in mid-November. This is in line with historical trends. The company is also on track to expand its China facilities from 88,000 sf to 161,000 sf in 2007 to support rising demand.

Thailand affected by slowdown in HDD component business.
The Thailand plant, on the other hand, is still operating at only 80% utilisation, affected by cutbacks in HDD component orders from Minebea as the latter decided to bring more production in-house.

According to Innovalues, sales of HDD components have declined by more than 40% from 1H06. Fortunately, the slowdown in HDD components business has been partially offset by continuous strength in occupant weight sensors. Also, it has started to supply HDD components to a new Korean customer, though volume is still insignificant. However, we understand that volume may pick up strongly in 2007 when the Korean customer starts to expand its HDD components business.

Risks
Slower-than-expected ramp for new automotive programmes, which is quite common in the automotive components industry. Our forecasts are already conservative, assuming 86% and 54% yoy growth for automotive components for FY07 and FY08 respectively, vs. its customers’ indication of more than 200% and 80% yoy jumps in requirements.

Margin pressure from rising material costs, which affected its bottom line in FY04. The company, however, has taken initiatives to provide alternative materials (switching from C1214 to C1215) for its OA customers in 2H05. We understand it is now working closely with its suppliers to lower costs further in 2007, which should cushion future material price increases, if any.

Valuation and recommendation
Maintain Outperform; unchanged target price of S$1.52. We have kept our FY06 numbers. Our FY07-08 numbers are also intact, though we believe there could be upside surprises if the entire automotive components business takes off as planned. Our target P/E of 13x, which translates into a target price of S$1.52 for 79% upside, is pegged at a slight premium to its historical average P/E in view of the healthy 34% earnings CAGR projected for FY05-08. Maintain Outperform, and we see catalysts from a solid set of fullyear results (to be announced by end-Feb 07).

Stockwatch- KLCC Property (Malaysia) JP Morgan initiate coverage 21 Nov 2006 Target Price RM3.30

2006-11-25T16:29:00.000+08:00

KLCC Property Holdings
Initiation Overweight

Best of class assets with boost from tourism

• Initiate with OW, PT of M$3.30: We initiate with overweight and a Dec-07 PT of M$3.30, a potential upside of 22%. With premier quality assets in Klang Valley, we believe KLCCP will be a stock hard to ignore given improving trends in commercial properties; its high quality, secured earnings stream from rentals and hotel income; and with an added boost from rising tourist arrivals.

• Share price drivers: We see good upside prospects in the group’s asset values with the positive outlook for commercial properties, a strengthening ringgit, Malaysia’s cheap capital values regionally and increased traffic from new surrounding developments (i.e. KLCC Convention Centre, and high-end condos). KLCCP’s hotel and retail mall operations account for 40% of operating profit and will benefit from rising tourist arrivals spurred further by Visit Malaysia Year 2007. Our forecast is ahead of consensus by 4% for FY07E, and 11-12% for FY08-09E.

• Valuations and risks: Our Dec-07 PT of M$3.30 is a 20% discount to RNAV in line with regional average for property investors. But, KLCCP's asset values are 50% below average capital values for the region and with attractive regional net yields. A 5% rise in asset values raises its RNAV by 7%. Risks to PT are: oversupply of commercial properties (although unlikely for prime assets).

Positive price drivers

High quality, secured earnings, with boost from rising tourist arrivals: This is due to KLCCP’s long-term tenancy agreements expiring no earlier than 2012 for its key office properties (i.e. Petronas Towers, Menara Exxon-Mobil, Menara Maxis) and high occupancy rates of 84-100% for its properties. Rental hikes are locked in at 9% once in three years for Petronas Towers (50% of operating profit) as well as Menara Maxis; and at a base rental plus a profit share with tenants for the Suria KLCC retail mall. Mandarin Oriental Hotel and Suria KLCC mall, together account for 40% of operating profit and should benefit from rising tourist arrivals and Visit Malaysia Year 2007. We forecast a 2-year EPS CAGR of 13% over FY08-09E. Our forecast is ahead of consensus by 4% for FY07E, and 11-12% for FY08-09E.

Discount to RNAV; upside from rising, attractive capital values/yields: KLCCP trades at a discount of 33% to its RNAV/share of M$4.03 versus the regional average of 20%. Malaysia's capital values are 76% cheaper than the regional average (50% cheaper for KLCCP given its prime assets), with attractive net yields of 6-8% for office and 7-10% for retail space. This, rising demand among local and foreign investors from REITs, and recent new and upcoming projects around the KLCC area (i.e. KLCC Convention Centre, high-end condos) will help enhance KLCCP’s asset values. A 5% rise in asset values raises KLCCP's RNAV by 7%.

Long-term growth from future developments or potential acquisitions: The development of Lot C involving the extension of Suria KLCC mall and new office space will raise net lettable area by 16%. Lot C will come on-stream from end-2008 with the full impact on earnings by FY10 estimated at M$24 million pa (13% of FY07E profits). Development of Lot D1 offers growth potential beyond FY10, and existing prime assets of parent, Petronas in the KLCC area and Putrajaya also offers acquisition opportunities for KLCCP, but valuations here would be the key.

Negative price drivers and risks to thesis

Low ROEs and high gearing: KLCCP should generate single digit ROEs of 8-9% for FY07-09E, but this is still slightly ahead of the 2007E regional average of 7% for property investors. KLCCP’s net gearing of 78% may limit ability to grow via asset acquisitions. But, gearing is forecast to decline to 56% by FY09E. Cash flows are also strong with positive FCFs of M$126-164 m pa after M$500m capex for LotC.

Lower yields than REITs: KLCCP’s net yield of 3-4% is lower than the average of 6% for Malaysian REITs. If KLCCP were to raise its pay-out ratio from the current 38% to 90-95% in line with REITs, its yield would work out to 8.5-9.0%, but this is unlikely given its geared balance sheet and development plans. But, KLCCP offers investors a larger and more liquid exposure to the commercial segment. Total market cap of all Malaysian REITs of US$550m is less than KLCCP’s US$689m.

The main risk to our thesis is an oversupply of commercial properties putting pressure on asset values and rentals. However, currently there is a shortage of good quality offices in the Klang Valley, and established retail space and hotels in prime areas like KLCCP’s has and we believe will continue to experience strong demand.

Valuation and rating analysis
Our RNAV of M$4.03/share factors in a rise of 9% in value for KLCCP’s office assets, and 27-40% in value for its retail mall Suria KLCC, and Mandarin Oriental Hotel, relative to the 2004 open market values by independent valuers for the respective assets. These are in line with the overall rise in rentals for KLCCP’s office and retail assets since 2004, and also reflect the value of recent transactions for hotels. Our market values for these assets translate to a net rental yield of 6-8%, in line with the implied yields for recent asset transactions in Klang Valley. We believe key share price catalysts are: 1) Improving commercial property trends which will provide strong support/upside to KLCCP'a asset values. 2) Rising tourist arrivals spurred further by Visit Malaysia Year 2007 as 40% of KLCCP's operating earnings are exposed to tourism. 3) Long-term growth from development of Lot C and Lot D1 to come on-stream from end-2008. We set our PT at M$3.30, a 20% discount to its RNAV in line with the regional average discount for property investors.

Commercial property trends improving, hence strong upside in asset values
Malaysia’s commercial capital values and rental yields remain one of the most attractive regionally (see Table 3). Malaysia's capital values are about 76% cheaper than the regional average (50% cheaper for KLCCP given its higher value prime assets), with attractive net yields of 6-8% for office space and 7-10% for retail malls.

The completion of the KLCC Convention Centre in mid-2005 and Traders Hotel in 2006 under the ownership of parent, Petronas, and new high-end residential developments in the area in the next two to three years will help enhance KLCCP's asset values. In view of this, and the increasing interest/demand among local and foreign property investors as well as from REITS, there is a potential upward pressure in capital values, which augurs well for KLCCP given its prime assets. (As it is, values of recent office and hotel transactions have been on the rise as shown in Table 4). Every 5% rise in asset values would raise KLCCP’s RNAV by 7%.

Boost from tourism
KLCCP should also benefit from rising tourist arrivals, forecast to rise 7% Y/Y to a new record of 17.5 million in 2006. Tourism is expected to be spurred further by Visit Malaysia Year 2007. KLCCP’s operating earnings (40%) are exposed to tourism via its retail mall, Suria KLCC and the Mandarin Oriental Hotel. Suria KLCC has a patronage of 40.8 million per annum, and KLCCP has a profit sharing deal with tenants at 5-15% of revenue above a threshold level on top of the base rent.

The profit sharing portion has risen to 7% of rental revenue versus 2-3% in 2004, and a further 5ppt rise will raise FY08E net profit by 4%. In line with the overall rise for KL hotels (see Figure 2), occupancy rates for Mandarin Oriental have risen from 75-80% in 2004 to 83-85% currently. This is despite rising average room rates (ARR), which will be raised to US$164 by 1Q07, a 25% rise from 1Q06, and a 38% rise from 2005. These rates are cheap when compared regionally i.e. versus ARR of US$200 for 5-star hotels in Philippines and US$240 for 5-star hotels in Singapore. A 5% rise in Mandarin Oriental's ARRs will raise FY08E EPS by 2%.

Long-term growth from Lot C and Lot D1
KLCCP’s development plans for Lot C with a net lettable area of 0.16 million sq ft of retail space and 0.74 million sq ft of office space, will raise its total net lettable area by 16%. The new retail space will first come on-stream by end-2008, followed by the offices by end-2009. Full impact on earnings from Lot C hence is expected by FYE Mar-10E estimated at M$24 million per annum (13% of FY07E profits).

Management indicates that there is a firm interest for 80% of the new office space from a single customer at premium rental rates of 50% to the market. KLCCP may look to sell the remaining 20% of the office space, and if this materializes it will raise an estimated M$144 million (M$0.11/share), which will help reduce FY09E net gearing from 56% to 51%. Total development cost for Lot C is M$500 million. Beyond FY10, growth will come from Lot D1, where there are still no details on development plans. However, in our RNAV, we have assumed the development potential and cost for Lot D1 is similar to Lot C, although the former sits on a larger piece of land at 1.41 acres versus the latter’s 1.01 acres.

Earnings are driven by: 1) High occupancy rates of 85-100% for office properties and 83-85% for hotels. 2) Longterm lease expiring no earlier than 2012 for three key office properties (Petronas Towers, Menara Maxis, Menara Exxon-Mobil). 3) Locked in rental hikes at 9% per annum once in every three years for Petronas Towers and Menara Maxis. Given its prime location, the rental rates of M$6.60-8.50/sqft for KLCCP’s office space is 50-90% higher than the market. Lease tenures for the retail mall are no less than 10 years for anchor tenants (Isetan, Parkson, Cold Storage, Tanjung Golden Village), but are on differing expiry periods of 1.5-3 years for remaining tenants. Overall rental revenue (base rent plus profit share) from Suria KLCC has been rising by 10-12% per annum.

Stockwatch- Sunway City (Malaysia) corporate profile

2006-11-19T13:13:00.000+08:00

Corporate Profile of Sunway City Berhad, extracted from its 2006 Annual Report:

Sunway City Berhad (SunCity) is a member of The Sunway Group, a well-diversified conglomerate in Malaysia. SunCity commenced operations in 1986 and was listed on the main board of Bursa Malaysia Securities Berhad in 1996, principally to develop the Bandar Sunway township in Petaling Jaya. Following the success of the development of Bandar Sunway, SunCity has grown and diversified into property investment, hospitality, leisure and entertainment, as well as healthcare. However, property development remains as SunCity’s core business and contributes significantly to SunCity’s profitability. Its property development portfolio comprises commercial, residential and industrial developments.

SunCity’s strength and stability in the Malaysian property industry has attracted its current partner, Government of Singapore Investment Corporation Pte Ltd (GIC), the Government of Singapore’s wholly-owned real estate investment arm. GIC now owns 24% of SunCity, as well
as a 48% stake in Sunway Pyramid Shopping Mall and Sunway Resort Hotel & Spa respectively. This strategic partnership will propel SunCity’s growth into the regional and global property arenas.

Property Development
SunCity’s most outstanding flagship development is Bandar Sunway, a multi-billion ringgit township in Petaling Jaya. Situated just 20 minutes from the bustling Kuala Lumpur city centre, it is developed based on the signature SunCity lifestyle concept, “Resort Living Within
The City.” This 800-acre fully-diversified and selfcontained township stands as a testament to SunCity’s reliability and expert capability as a property innovator. The well-planned township structure and the superlative architectural designs of the magnificent edifices in the
township herald SunCity’s forte as a developer.

SunCity’s developments are met with great successes as they are built upon the foundation of strategic location and quality materials. SunCity endeavours to be the “Property Developer of Choice”. The SunCity brand has been awarded the Superbrands status and ranked fourth
in The Edge’s “Top Property Developers Awards 2005”. SunCity was also top 3 in the Euromoney Real Estate Awards 2006 among 82 property developers in Malaysia.

Among SunCity’s prominent developments is the Kiara Hills residential development. This RM800 million project is the pride of SunCity as it demonstrates the superiority and marks SunCity’s foray into the high-end market. Kiara Hills has garnered the prestigious label of
the “Beverly Hills of Kuala Lumpur”. Other noteworthy projects include Sunway Damansara, Sunway SPK Damansara, Sunway Rahman Putra, Sunway Kinrara and Sunway Semenyih in the Klang Valley, Sunway Bayan in Penang and Sunway City Ipoh in Tambun, Perak.

SunCity’s most prestigious project in the pipeline is the Sunway South Quay development that will feature more than 4,000 residential and commercial units including luxury lakeside villas, high-end condominiums, serviced apartments, lakeside boutiques, retail spaces and offices.

Property Investment
SunCity’s property investment arm comprises the various components of Sunway Lagoon Resort. The resort is the winner of the prestigious World FIABCI Prix d’ Excellence Award 2002 in the Leisure category. It consists of Sunway Resort Hotel & Spa, Sunway Pyramid Shopping Mall, Sunway Lagoon Theme Park, Sunway University College, Monash University Sunway Malaysia and Sunway Medical Centre. This 7-million square feet world-class facility integrates the finest in leisure and entertainment, hospitality, conventions, shopping malls, healthcare services and tertiary education facilities.

Hospitality
Sunway Resort Hotel & Spa is SunCity’s flagship hotel development at Bandar Sunway. It is situated within the 800-acre "Resort Living Within The City", built based on an overall thematic concept - combining modern design with an ambience and personalised warmth that is uniquely Malaysian.

Sunway Resort Hotel & Spa comprises the Main Tower, Pyramid Tower Hotel, Resort Suites, The Villas and The Duplex. With a total of 1,234 guestrooms and complete with 10,000 square metres of meeting space, Sunway Resort Hotel & Spa is now the single largest hotel development in Kuala Lumpur.

Healthcare
Sunway Medical Centre (SMC) is a private hospital offering specialised tertiary healthcare services. The Medical complex is an 8-level building with 240 beds and 45 specialist consultation suites. SMC offers professional clinical expertise provided by a team of qualified and experienced consultants, welltrained and dedicated nursing staff and supported by the
latest in medical technologies and equipment. Patients have access to a wide range of inpatient and outpatient specialised healthcare facilities, health promotion programmes and 24-hour emergency services.

Leisure
The Sunway Lagoon Theme Park is the main attraction that draws visitors, both local and foreign, to Sunway Lagoon Resort. It is strategically located in the heart of the Bandar Sunway township in Petaling Jaya. Spanning 80 acres, the theme park draws fun seekers from all over
with its reputation as a fascinating place of fun and excitement.

In Ipoh, The Lost World of Tambun water park has proven to be a hit with the locals in the North. Set against a backdrop of the magnificent limestone hills, and boasting a natural hot spring pool, the park is a tourist destination like no other in the country.

Stockwatch- Sunway City (Malaysia) featured in article on The Edge Singapore 20 Nov 2006

2006-11-19T11:46:00.000+08:00

4th Stockwatch on Malaysian property companies- Sunway City, featured in The Edge Singapore 20 Nov 2006.

Key highlights of the article:

1. Euromoney, the leading international journal of the world's capital and money markets, ranked Sunway third among 82 developers in Malaysia that competed for the Euromoney Real Estate Awards 2006.

2. Sunway City is an established, listed property developer noted for the transformation of 800 acres of derelict mining land into its flagship project, the multi-billion dollar Bandar Sunway township in the Klang Valley.

3. Its other admired development is Kiara Hills in Mont'Kiara, often described as "the Beverly Hills of Kuala Lumpur," which offers 88 luxurious bungalows and 34 courtyard villas.

4. An upcoming launch by Sunway City Bhd and Amisia Sdn Bhd is Casa Kiara II in the prime Mont'Kiara area. It offers 206 units housed in a 37-storey tower.

5. Also to be launched in the Mont'Kiara area are Sunway's Kiara Hills phase 3 and Sri Hartamas, which are both high-end condo projects. Sunway also has other condo projects in the Klang Valley, including Sunway Damansara and Sunway SPK.

6. Although it is primarily a residential developer, it has the expertise to develop integrated developments such as Bandar Sunway township in Petaling Jaya, which includes the Sunway Lagoon Resort incorporating the Sunway Pyramid mall, Sunway Lagoon Hotel and theme park; the Sunway Medical Centre; and Sunway College & Monash University, among others.

7. Sunway has a proposed mixed-use development called Sunway South Quay, which is to be developed on 123 acres in Bandar Sunway. Its JV partners in Sunway South Quay are Kuwait Finance House and more recently, the Employees Providend Fund, which announced it is pumping RM69.6mil into the project.

8. Sunway has also spread its wings to develop a RM1 billion, 1,400-acre integrated township in the city of Ipoh, Perak that is slated for completion by 2010.

9. In November last year, it also launched a high-end residential project in Penang called Sunway Bukit Gambier, which is to be built on a 9.4ha site and will have 238 terraced houses, 34 semi-detached homes, and three bungalows. The RM230 mil mixed-development project, which includes the Sunway Carnival Shopping Centre, is next to Universiti Sains Malaysia's Minden campus.

10. The developer also recently announced plans to construct two-storey linkhouses on its existing landbanks in Banyan Lepas and Sungai Batu that will be targeted at the middle-income group.

11. Sunway started actively looking abroad for development opportunities in hot markets like India, Vietnam and China last year. Its maiden residential development joint-venture project there is Toul Kork City in Phnom Penh, which it is undertaking with a local landowner.

The US$30mil project is on 28.9 acres, and the plan is to build 398 detached medium- to high-end units there. It will be launched in phases over three years. It already owns the 140-room Sunway Phnom Penh Hotel in Cambodia.

12. In July, the property player also signed a memorandum of understanding to manage a new high-end mall in Shenzhen that's expected to be completed next year.

13. Sunway is also planning a RM1.5 billion to RM2 billion real estate investment trust (REIT) to be launched by 2008. The diversified REIT portfolio could include the entire Sunway Pyramid Mall and its annex, totally 1.6 million sq ft of net lettable space, as well as the sprawliing 12-acre Monash University campus it is building 25km outside Kuala Lumpur.

Sector Watch- Property companies in Malaysia

2006-11-18T17:30:00.000+08:00

I have been bullish about the malaysian property companies recently and I am happy to know that my views and stockpicks turn out well afterall.

Stockwatch- E&O Property on 9 Nov 2006, stock price was RM1.40, currently (17 Nov 2006) at RM1.55, positive return of 10%.

Stockwatch- IGB on 28 Oct 2006, stock price was RM1.41, currently at RM1.75, positive return of 24%.

Stockwatch- KLCC Property on 25 Oct 2006, stock price was RM2.27, currently at RM2.57, positive return of 13%.

The 3 stocks happen to move up strongly in a period in which the KLCI move strongly above 1000pts, during a period in which all regional stock markets performed strongly. It also shows the importance of institutional support for stock price as all 3 companies move up strongly on initiation report by Foreign brokerages: E&O Prop by Citigroup, IGB by JP Morgan, KLCC property by Deutsche Bank.

If you are interested to receive such initiation reports through email, contact me.

Stockwatch- Rotary Engineering (S'pore) on 7 Nov 2006 proposes bonus dividend of $0.10 per share and 2-for-5 rights issue

2006-11-12T13:09:00.000+08:00

Rotary Engineering proposes bonus dividend of S$0.10 per ordinary share and two-for-five rights issue at S$0.20 per Rights Share

Shareholders can choose to use the Bonus Dividend to subscribe for Rights Issue

Initiatives are intended to reward shareholders and to strengthen capital base

SINGAPORE, 7 November 2006 – Mainboard-listed Rotary Engineering Limited ("Rotary") today declared a bonus dividend of S$0.10 less tax of 20% per ordinary share, and proposed a renounceable, non-underwritten rights issue on the basis of two Rights Shares for every five shares held. Rotary is a leading provider of engineering, procurement, construction and maintenance services supporting the oil-and-gas and petrochemical industry.

Shareholders may elect to use all or part of their Bonus Dividend to pay for the Rights Shares, and if they use their entire Bonus Dividend for this purpose, no further cash outlay is required for the rights subscription.

Based on Rotary’s current issued ordinary share capital, the aggregate amount of the Bonus Dividend is approximately S$32.4m. Rotary expects the Rights Issue to be well subscribed, such that shareholders’ equity will remain largely unaffected by these initiatives.

The Company’s issued share capital is 405,585,000 shares as at 7 Nov 2006. Assuming all vested employees’ share options of 35,000 share options are exercised at Book Closure date, the issued share capital of the company would comprise 405,620,000 shares and up to 162,248,000 Rights Shares would be issued. With the additional shares issued, the company hopes to further increase the liquidity of its shares traded.

Each of the five substantial shareholders -- REL Investments Pte Ltd, Chia Kim Piow, Wong Oi Moi, Wong Liang Feng and Chaung Swee Khim – who hold direct interests representing a total of 55.78% of the company, has irrevocably undertaken to subscribe for the whole of its direct entitlement of Rights Shares under the Rights Issue.

Rationale for the two exercises
The Bonus Dividend is intended to reward shareholders with a cash dividend and allow the company to pass on its Section 44 tax credits to shareholders. At the same time, the Bonus Dividend will provide shareholders with an option to re-invest their Bonus Dividend by subscribing for Rights Shares.

The Rights Issue seeks to strengthen the capital base of the company following the payment of the Net Bonus Dividend. Together with the Bonus Dividend, the Rights Issue will in effect transform a portion of the Company’s retained earnings into permanent share capital.
Commenting on the exercise, Mr Chia Kim Piow, Rotary’s Chairman and Managing Director, said: "As a listed company, we are mindful of our obligation to our shareholders and we continually look for ways to create shareholder value. By paying a bonus dividend, we are able to pass on Section 44 tax credits to our shareholders."

Mr Chia is optimistic about market outlook, and is excited about the opportunities that Rotary can enjoy. He added: "Indeed, our enhanced capital position will hold us in good stead as we continue to grow our business in Singapore, the region and as we move into new markets such as the Middle East."

Rotary’s recent corporate developments
Just two weeks ago (25 October), Rotary announced S$ 15.5m worth of contracts that its wholly-owned subsidiary, Rotary IMC Pte. Ltd, had secured from Shell Eastern Petroleum (Pte) Ltd for part of the early works at its Bukom Shell Houdini Project.

In August 2006, Rotary won a S$24m contract to undertake the Engineering, Procurement and Construction (EPC) of a biodiesel process plant and its related facilities on Jurong Island to produce biofuel and other downstream derivatives for Nexsol (Singapore) Pte. Ltd., a subsidiary company of Peter Cremer (Singapore) GmBH.

Its biggest contract to date is the S$ 535million EPC contract to build an oil terminal in Jurong Island for Universal Terminal (S) Pte Ltd. Upon its completion by end 2007, Universal Terminal will be one of the world’s largest independent oil terminals, with 2.3 million cubic metres of storage capacity in 73 custom-built tanks. The Universal Terminal will be the first oil terminal in this region to have its own 12 berths, including two VLCC berths. The terminal will have dedicated inner basin with six berths for coastal and bunker vessels of up to 15,000 DWT, while the outer berths are designed with the flexibility to handle vessels up to 320,000 DWT.

The company turned in a net profit after tax and minority interest of S$16.0m for its first half ended 30 June 2006, an increase of 395% over the S$ 3.2m it made in the same period the previous year. Group turnover for the first six months of 2006 stands at S$202m, an increase of 150% over the S$80.7m it achieved in the previous corresponding period.

Stockwatch- IGB Corp (Malaysia), Deutsche Bank report 3 Nov 2006 Window to unlock values

2006-11-11T23:47:00.000+08:00

Window to unlock values

Demand for commercial properties heating up. The pick up in commercial property transactions recently confirmed that demand for commercial properties is strong. The latest two transactions - Westin Hotel and Crown Princess Hotel - were done at DB estimated cap rates of between 2.5-3.9%. We believe this is positive for IGB (IGB MK RM1.54, BUY, TP RM2.08) given its large portfolio of hotel assets in Malaysia. IGB owns 7 hotels in Malaysia
including 100% owned Cititel Hotel, Boulevard Hotel, Micasa Hotel Apartments, Pangkor Island Hotel, Stanfard Hotel and associate holdings in Renaissance Hotel (50%) and SuCasa Service Apartment (40%).

Low yielding hotels may be up for sale. IGB has earlier announced plan to divest its 40% stake in SuCasa Service Apartment for RM21.2m cash. Given flush liquidity in the market and strong interests for commercial assets in Kuala Lumpur, we believe the window is now open for IGB to unlock value, especially property investments that are low yielding and not fully
controlled by IGB. This may include 50% owned Renaissance Hotel which has a book value of RM286.4m or RM629,450 per room. Based on recently transacted cap rates of 2.5-3.9%, we estimate this asset could be worth between RM529 and RM826m (100%).

RNAV discount should narrow. The compressing asset yield should eventually translate into a narrower RNAV discount, we believe. We reiterate our BUY recommendation on IGB and TP of RM2.08, valuing the company at 30% discount to RNAV or implied asset yield of 6%, tracking some recent transactions. Key risks include rising interest rates, sharp economic
downturn that affects occupancy and future rental rate revision.

Stockwatch- E&O Property (Malaysia) Citigroup initiate at Buy target RM1.80, currently RM1.40

2006-11-09T12:07:00.000+08:00

E & O Property Development Bhd (EOPD.KL)
8 November 2006
Initiate at Buy with 39% ETR. Undervalued Quality Niche Developer

P/E-based target of RM1.80 — Our ENOP target price (based on 10x end-Mar 08E EPS) translates to an expected total return of 39%, the highest in our Malaysia property universe. Potential share price catalysts include earnings delivery and rising RNAV. ENOP's major shareholder is E&O Berhad, in which ENOP’s MD Dato’ Terry Tham and GK Goh Holdings have a stake.

Solid prospects and firm financials — Within our property coverage, ENOP has the strongest EPS growth outlook, at a 3-year CAGR of 24%, backed by RM299m unbilled sales. Financials are solid: FY07E net gearing of 61% and 8x interest cover. We see net gearing falling to 50% in FY08E and 36% in FY09E.

Leading position in growth markets — ENOP’s strategy is to focus on welllocated landbank and leverage off its track record and a strong brand image, which is partly built on innovative designs and lifestyle products. Projects are in excellent locations in Klang Valley and Penang.

Prime developments — The group has 1,701 acres of land in Klang Valley and Penang, which should easily sustain its development efforts over the next 10-15 years. Most of its landbank is in prime and established areas, which allows ENOP to benefit from spillover demand from these developments.

Attractive quantitative view — ENOP is in the Attractive quadrant of our quants screen, scoring well on both valuation and momentum.

Stockwatch- Innovalues Precision (Singapore) featured in Smart Investor magazine

2006-11-05T05:20:00.000+08:00

I just received the November edition of Smart Investor magazine. Pleasantly surprised to find that Innovalues is featured in an article following an interview with Mr Goh Leng Tse, founder and CEO of Innovalues. The key highlights are summarised as follows:

1. Innovalues Precision looks set to capitalise on the growing opportunities in the automotive industry.

2. In 2003, Automotive segment generates revenue of $300,000, which represented less than one percent of group revenue. A year later, this segment contributed about four percent or about $3mil of group's revenue and last year, the proportion rose to 10%, contributing about $10mil.

3. "This year, we expect the automotive segment to more than double the revenue contribution to about $25mil," said Mr Goh.

4. Innovalues is now supply brake sensors to the diesel-engine cars in European markets. According to Mr Goh, there is a brake sensor in each of the four wheels as well as the central processing unit. He said:" These sensors can sense the road conditions when you are driving and the wheels will adjust by themselves. This is especially useful during the cornering process or wet weather as the wheels will not skid away from the road." The system is known as electronic stability control system (ESC) , and its acceptance level amongst drivers is gaining popularity, said Mr Goh.

5. Diesel-engine cars use fuel injectors that can save petrol by up to 50%, and are environmentally friendly. The demand for fuel injectors is set to rise, and with more than 80% of the drivers using diesel engine cars in Europe, this presents a good opportunity for Innovalues, Mr Goh added.

6. Because of the success with brake sensors, Innovalues later introduced the occupant weight sensors that could sense the weight of the person seated at the front passenger seat. According to Mr Goh, the United States has announced that by 2007, all the new cars in the US must be installed with the occupant sensor.

7. Asia is becoming an increasing important place for European and US car parts manufacturers to source for automotive components. Mr Goh said, "Going forward, our automotive segment will continue to be one of the key growth drivers for the group and we see great opportunities in this segment." Over the past few months, the group has received an increasing number of enquiries from interested parties for possible strategic business alliances, he added.

Stockwatch- Innovalues Precision (Singapore) Investors Seminar Presentation

2006-11-05T01:01:00.000+08:00

Today I attended an investor seminar that featured Innovalues Precision. Innovalues Precision's CFO, Soh Wai Kong, did the presentation. The highlights of the presentation are as follows:

Business Outlook

Automotive
- sales from 2003 till date mainly from Sensata, 2 projects Occupant Weight Sensor (OWS) and Brake Sensor only
- OWS and Brake Sensor expects volume in 2007 to grow
- Hilite product in qualification stage, mass run in 2007
- Siemens, Bosch, Luk and APT products already qualified, mass run in 2007

Office Automation
- have a new high volume customer, started manufacturing for them in September 2006 only
- Wide Format Plotter already qualified, mass run in Q2 2007
- X-ray printer for new customer
- Increase in volume for certain customers

Overall
* Presence in China provides business opportunities
- many customers and their contract manufacturers have presence in China to take advantage of lower manufacturing costs and to be near the potential market
- have plating license which the issue of license in Shanghai is currently being restricted
- China government is encouraging sourcing of car components from local market and may impose custom duties for components imported into China starting mid 2007

* Diversification
- 3 major business segments
- Automotive business is stable and not seasonal
- within each segment there a few major existing or potential customers
- some of our machinery can be switched for different business segments

Challenges
* There are indeed competition and price pressure, but:
- its size and volume give advantage to bring in major players and projects
- well positioned for Automotive segment which have high quality requirement, long qualification period and high cost of qualification
- Automotive market is big and many function critical and safety related components in a car
- good business relationship with customers

* Material prices are volatile and manufacturing costs are rising but strive to improve our margins:
- its size and volume allow us to get materials at cheaper price
- will continue to source for cheaper material
- work on internalising certain processes & supplies
- constant process improvement to increase productivity and yield
- lock in material price over long period of time
- Automotive segment is of higher margin & pricing is cost plus
- have cost reduction initiatives and drives

Summary
- high growth company in automotive and technology sector
- experience management
- ultra high precision technology & know-how
- provide one stop solution
- proven profitability and sales growth track record
- strong financial backing and shareholders
- its size provides advantage

Stockwatch- Rotary Engineering (S'pore), volume breakout close at 52 week high

2006-11-02T18:03:00.000+08:00

Today Rotary broke above its 52 week high of 62.5cts and close at day of 64.5ct. Its time has arrived.

Stockwatch- Rotary Engineering (S'pore), Contracts Secured From Shell Eastern Petroleum announced 25 Oct 2006

2006-11-02T01:47:00.000+08:00

The Directors of Rotary Engineering Limited are pleased to announce that the Company has secured contracts worth S$15.5m from Shell Eastern Petroleum (Pte) Ltd for part of the early works at its Bukom Shell Houdini Project (the "Project).

The contracts are expected to last 12 months.Positive contribution is expected from this Project but the Company does not expect any material impact on the net tangible assets and earnings per share of the Company for the financial year ending 31 December 2006.

Kuala Lumpur, the cheapest city on Earth

2006-10-29T22:44:00.000+08:00

Food for thought, get a good discount on RNAV of companies that owns prized properties on the cheapest city on Earth. Have a read:

http://malaysiafinance.blogspot.com/2006/10/kl-cheapest-city-on-earth-according-to.html

6 Month Milestone since this blog was started

2006-10-29T17:35:00.000+08:00

I am surprised that 6 month has already passed since I started this "blog", not exactly a typical blog. Did not intend this as a typical blog, but more of a online notebook for my own purpose.

However, I realise that there are probably some of you that find some use of my "notebook", if you read this posting, thank you for sharing the special moment of this 6 month milestone with me.

Feel free to feedback or share your thoughts with me....... :)

Cheers
gsg

Stockwatch- Adampak (Singapore), Westcomb research update

2006-10-28T19:13:00.000+08:00

Westcomb Research Update on Adampak, 23 Oct 2006

Adampak Limited
Upside potential remains

Essential part of Seagate’s Supply Chain
Adampak plays an important role in Seagate’s supply chain, by providing labels, seals and other die-cut components to Seagate. Seagate was their biggest customer in FY03, taking up 31.9% of revenue. The breakdown of revenue in the subsequent financial years were not disclosed due to non-disclosure requirements but we believe that Seagate remains by far Adampak’s biggest customer.

Adampak has become one of Seagate’s main suppliers because of its ability to achieve flexibility in production and yet maintain quality. For example, Seagate could suddenly ramp-up production because of better-than-expected end-market demand and component suppliers (such as Adampak) would have to be able to meet Seagate’s production requirements.
Seagate is very active in this region and has recently announced that it will invest 1.3 billion Singapore dollars to build a third recording-disk plant in Singapore. The plant will produce recording media disks, which are key components of hard disk drives.

Key supplier for computer-related products and other consumer electronics products
Other main customers in FY03 include HP (20.0%), Western Digital (7.6%) and Maxtor (8.7%). Maxtor has been acquired by Seagate and correspondingly Adampak has seen increased orders from Seagate. HP and Western Digital remain Adampak’s major customers. Fujitsu is also one of Adampak’s customer.

Below is an excerpt from the Nikkei Electronics Asia (August 2006 issue) describing changes in the competitive positioning of component/materials vendors (such as Adampak) in the electronics industry:

In the past, equipment manufacturers could select the components and materials they wanted from a wide range of suppliers, but the slump in the electronics industry from the mid-1990’s to around 2005 saw prices plunge for components and materials. The number of suppliers in the business dropped rapidly, resulting in rising demand for the survivors, and creating chronic component/materials shortages for a variety of equipment. This trend was further accelerated by the need for improved functionality and performance in equipment, resulting in higher technical and capital barriers to developing new components and materials. Natural selection continued in the component/materials industry, leaving a few firms in monopolistic command for the markets."

In many ways similar to Unisteel
Adampak is in many ways similar to Unisteel. Both are making seemingly trivial components for HDD manufacturers. However, both Companies play an important role in the supply chain of HDD manufacturers such as Seagate. In much the same way that HDD manufacturers cannot do without screws, Adampak’s products such as labels, seals and die-cut components are also essential components for HDDs.

Company
Product
Market Share
Market Cap (S$m)
Hist. PER (x)
Forw. PER (x)
Rev.
(S$m)
Net Profit (S$m)
Unisteel
Screws
Approx 50% of the HDD market*
653.3
14.8
13.7
184.3
41.1
Adampak
Labels, seals and die-cut components
Approx 20-30% of the HDD market*
42.2
7.1
4.9
43.9
5.9

Fast-growing HDD industry
In-stat recently reported that the HDD will be a key component in more and more consumer electronics products through the rest of the decade, and expects HDD worldwide shipments to almost double from 380 million in 2005 to 748 million in 2010. Below is an excerpt of the research:

"While hard drives have become small enough to embed in most portable CE devices, competitive storage solutions, such as increasing flash capacities, continue to threaten this market. However, at multi-gigabyte capacities, flash becomes cost-prohibitive. HDDs will more effectively address portable multimedia devices that offer a wide range of capabilities requiring higher storage capacities."

Other than mobile devices, growth in HDDs would also likely come from digital video recorders which are set to replace conventional tape-based video recorders. Imagine the demand for HDDs if all households eventually replace their conventional tape-based video recorders with digital video recorders. This is likely to happen as more and more media Companies are shifting towards digital high-definition technology. HDDs are also increasingly used in automotive applications.

Well-certified in other industries
For FY05, the HDD sector contributed 55.8% of the revenue. The rest of the revenue came mainly from the electronics industry (e.g. computer and peripherals, consumer electronics, etc). Adampak also supplies to Companies dealing with pharmaceuticals/medical equipment, industrial products, and consumer products.

Other than obtaining the usual ISO Certifications, Adampak has also obtained numerous safety agencies approvals from UL (Underwriters Laboratories) and CSA (Canadian Standards Association). UL is a trusted source across the globe for product compliance in public safety.

Long-standing relationship with Suppliers
Adampak’s key supplier is 3M contributing approximately half of the Group’s label stocks. Other key suppliers include Fasson, Raflatac and Lintec.

We believe that Adampak has nurtured good relationships with their key suppliers. Despite the recent surge in oil prices which should have affected the cost of resin-based label stocks, Adampak has still managed to contain the cost of raw materials and even improve margins. According to Management, this is because of their long-standing relationship with suppliers such as 3M.

Proven track record and quality
Adampak’s extensive customer base of MNCs including HP, Seagate, Western Digital, Maxtor, Motorola, Baxter Healthcare, etc, demonstrates their established track record and quality of their product and services; MNCs being known for their stringent quality criterion. Adampak has been awarded "Ship-to-Stock" or similar status by many of their customers, including Western Digital, Seagate, etc. This means that Adampak’s labels can be used directly in customers’ production operations without having to undergo further quality assurance inspections. Furthermore, Adampak has been awarded the "Supplier Appreciation Award" by Hewlett-Packard (S) Pte Ltd and the "Autonomous Quality Control Approval" by Sony International (Singapore) Ltd.

Adampak provides services to pharmaceutical companies such as Baxter Healthcare and Stiefel Laboratories and this is testament of their product quality and hygiene standards.
Major customers, Seagate, Maxtor and Western Digital have been using Adampak’s services for over 10 years.

Good geographical network of manufacturing facilities
Adampak has manufacturing operations in Singapore, Philippines, Thailand and PRC. Through its associated companies, Adampak also has manufacturing presence in Malaysia and PRC. Adampak’s wide network of manufacturing facilities enables them to be in close proximity to their customers, thereby enabling them to provide their services to customers in a timely and cost-effective manner.

Integrated services provider
Adampak is an integrated label converter, with capacity in pre-press and production aspects of the label conversion process. They provide one-stop services from design to production of labels. With such integration, Adampak can better manage the quality of the final products, as well as be more responsive when customers require any rectification to the design.

Wild cards that can provide positive surprises
There are a few wildcards that can provide positive surprises:

(1) Growth in the usage of RFID for baggage handling at airports and logistics and inventory management in the general supply chain. As technology improves and the price of RFID chipsets declines, there will be wider usage of RFID technology in the tracking of items. These RFID chipsets require converters such as Adampak to insert them into labels, which requires sophisticated expertise. Adampak should benefit as the usage of RFID becomes more widespread.

(2) The Group’s new production facilities in Suzhou give them access to the vast PRC electronics market that is growing very rapidly. The Suzhou plant commenced operations in July 2006. Even though at this point we do not expect the Suzhou Plant to contribute positively in FY06, production may ramp-up unexpectedly and make some contribution.

(3) Adampak has a strong balance sheet with net cash of US$4.3 million (or
S$6.8 million equivalent) as of 30 June 2006. Adampak has signalled their intent to purchase the additional 50%-stake in its associate, Aident, for RM20.9 million (approximately S$9.1 million). The consideration represents 6.4x PER (based on earnings for the 12 months ended 31 December 2005). This is still awaiting regulatory approval and we are not certain whether it will go through – hence we have taken out the impact of the purchase from our forecasts. If the acquisition takes place, it will likely be EPS accretive as the purchase consideration will be funded by internal resources and bank borrowings. Even if this acquisition does not take place, Adampak has the financial muscle to purchase other label converters that provide a strategic fit, as well as boost the EPS of the Group, if the opportunity arises.

Attractive dividend yield
1H05
FY05
1H06
Gross Dividend (cents)
0.625
0.9375
0.625
Net Dividend less 20% tax (cents)
0.5
0.75
0.5
Yield (after tax)
2.1%
3.1%
2.1%

Competition
Adampak operates in a competitive environment where there are many small players. However, most of these small players are unable to meet the more stringent requirements of customers such as Seagate. Larger players (with more sophisticated expertise) include Adampak, Singapore-based Zephyr Co and USA-based Brady Corp. Zephyr is a private limited company of larger scale than Adampak. Brady Corp is listed on NYSE with sales of US$1018m in FY06 (July year-end). In 2004, Brady acquired ID Technologies, also a Singapore Company of similar scale to Adampak. Terms of the transaction were not disclosed.

Risks

Over-dependence on electronics sector
Any slowdown in the electronics sector, in particular, the HDD sector, would result in a decrease in demand for Adampak’s products from these customers and would likely affect their financial performance.

Loss of major customers
Any loss of major customers such as Seagate, HP and Western Digital would significantly affect the financial performance of the Group.

Increase in prices of raw materials
Label stocks account for more than 60% of the cost of production. Any increase in cost of label stocks may impact margins.

Currency fluctuations
About three quarters of revenue is denominated in US$ while about half of costs is denominated in US$. Any decline in US$ against S$ will result in decline in profits due to transaction costs. There will also be related translation costs.

Forecasts and valuation
We increase our target price from S$0.33 to S$0.39 based on 8x FY06 PER. Previously, we imposed a 15% discount due to its poor trading liquidity. We have removed this discount due to its recent surge in volume. Maintain BUY.

Stockwatch- CHT Holdings (Singapore) S$0.615

2006-10-28T17:31:00.000+08:00

SBI-E2 Capital Not Rated Report on CHT Holdings 23 Oct 2006

CHT: All set for strong recovery

Key points:
*CHT is one of the world’s leading producer of PVC adhesive tapes for the automotive, industrial and consumer markets.
*CHT is the largest producer in the PRC, accounting for estimated 60% of all domestic production capacities.
*Strong customer base with end-customers consist of leading MNCs in automotive and electrical appliance segments.
*Strong profit growth expected in 2H, led by turnaround in Shanghai JV, lower raw material costs and new capacities.
*FY06 results are likely to beat consensus. Based on our initial estimates, CHT is deeply undervalued at 5.4x FY06 and 4.3x FY07 P/E given its dominant position in PRC.

Company background. Listed in 2003, CHT is one of the world’s leading producer of PVC adhesive tapes for the automotive, industrial and consumer markets. CHT is believed to be the only integrated adhesive tape producer in the PRC to manufacture from machinery and equipment for the production of adhesive tapes, PVC film, pressure sensitive adhesives (PSA) to the adhesive tapes. CHT derived close to 40% of revenue from automotive segment while the remaining from industrial and consumer segments. In FY05, 66% of revenue was derived from the PRC markets. CHT’s production facilities are based in Hebei province and Shanghai, PRC.

The largest PVC adhesive tape producer in the PRC. Based on management’s estimates, of the total 40 PVC adhesive tape production lines in the PRC, 24 lines (or 60%) are owned by CHT. Other PRC producers are much smaller in size and have less than 3-4 production lines each.

Strong customer base. CHT’s products are sold through 63 sole distributors and more than 300 dealers in 30 provinces in the PRC with more than 1,000 customers. CHT’s customers in the automotive industry are manufacturers of component parts for automobiles, including MNCs such as Lear, Vistaone and Delphi. The adhesive tapes are being used to insulate and color-code the different wires and cables that are used in automobile wire harness. The end-customers are auto makers such as DaimlerChrysler, Volkswagon, General Motors and Ford. In the PRC market, management believes that CHT has giant market share (>90%) of PVC adhesives tapes used by all Chinese auto makers. CHT’s industrial customers include electrical appliance manufacturers such as the Lenovo Group, Haier and TCL.

Strong profit growth in 2H. CHT made net profit (ex. exceptionals) of RMB 52m (+22% YoY) in 1H06, partly affected by RMB6.3m losses in its 75%-owned Shanghai JV with US-based Plymouth and higher costs of its oil-based raw materials. 2H profit recovery will be led by four factors:
*turnaround in its Shanghai JV, which is expected to contribute strongly with estimated RMB5m net profit/quarter from 3Q06;
*turnaround in its 39%-owned BOPP (Biaxially Oriented Polypropylene) associate which has been loss-making since 2003;
*5-6% QoQ drop in raw material costs, which accounted for 65% of COGS; and
*maiden contribution from 2 new production lines added in Aug06.

4Q is expected to see sequential growth from 3Q as the 2 new production lines will be ramped up quickly with current utilization rate already high at 85%.

FY06 results to beat consensus. We believe CHT will beat FY06 consensus profit estimate of RMB 129m. Given the strong turnaround in 3Q and strong sequential momentum in 4Q, we expect CHT to make net profit of RMB 140-150m. For FY07-09, management also targets 20-30% net profit growth per annum. Assuming RMB150m net profit for FY06 and 25% profit growth for FY07, CHT is currently trading at undemanding 5.4x FY06 and 4.3x FY07 P/E. We believe CHT is undervalued given its dominant position in the PRC’s PVC adhesive tapes market and strong earning recovery momentum.

Stockwatch- IGB Corp (Malaysia) Share Buyback on 20 Oct 2006

2006-10-28T13:00:00.000+08:00

Company Name: IGB CORPORATION BERHAD
Stock Name: IGB
Date Announced: 20/10/2006
Date of buy back: 20/10/2006
Description of shares purchased: Ordinary Shares of RM0.50 each
Total number of shares purchased (units): 600,000
Minimum price paid for each share purchased (RM): 1.360
Maximum price paid for each share purchased (RM): 1.360
Total consideration paid (RM): 816,000.00
Number of shares purchased retained in treasury (units): 600,000
Number of shares purchased which are proposed to be cancelled (units): 0
Cumulative net outstanding treasury shares as at to-date (units): 17,319,800
Adjusted issued capital after cancellation (no. of shares) (units): 0

Stockwatch- Media Prima BHD (Malaysia), Buys bear fruit

2006-10-28T12:26:00.000+08:00

Buys bear fruit at Media Prima
4 Sep 2006, The Edge
By Lim Ai Leen

Swallowing two television channels and two radio stations within 12 months is no mean feat, yet Media Prima Bhd has managed to do that and cough up higher earnings as well. "Things are progressing, we're sure we're on track to achieve our aggressive growth targets that we have set ourselves," says Abdul Rahman Ahmad, Media Prima's group managing director and CEO.

Last Wednesday, the group posted revenue of RM232.7 million for the six months ended June 30, 2006, a 35% growth from the RM172 million earned for the same period last year. Net profits (excluding an exceptional item) grew 29% to RM18.37 million over the same period. However, taking into account the exceptional item — a RM12.5 million share of cost incurred for a voluntary separation scheme at 43% associate New Straits Times Press (M) Bhd (NSTP) — net profit only came in at RM9.5 million.

This performance places the group firmly on the growth path, three years after its debt restructuring plan was implemented. And it looks like better numbers are in store as Media Prima's new acquisitions start to break even and it consolidates its monopoly position in the free-to-air (FTA) TV sector.

Media Prima owns 100% of TV3, its flagship mass-market channel, and recent additions NTV7 and TV9. It also owns 80% of 8TV, which targets the urban youth market. The government owns the remaining FTA stations, RTM 1 and RTM2.

"TV earnings will be the earnings driver in the short term," observes Rahman. He notes however that radio will start contributing strongly in the future, though this will be small relative to the entire group. Media Prima owns Fly FM and Hot FM, both bought last year.

Some media analysts, however, have been sceptical of the group's ability to command monopoly ad prices from the time Media Prima embarked on its aggressive shopping spree. These critics did not like the fact that despite TV3's already dominant position with 55% of adex (advertising expenditure) share, the group still had to buy up its competitors in order to stamp out rampant discounting and up its ad revenue. Media Prima's TV stations now control 80% of ad spend amongst the FTA networks.

Rahman concedes that one of the reasons for consolidating was to better manage discounting, which stood at between 55% and 60% of reported industry ad rates. But he doesn't believe that the focus should be on rates per se, as evidenced by the group's earnings.

"... our strategy internally is not rate-focused, it's revenue-focused. To us it's more important for us to grow our revenue faster and larger, rather than being very focused on what level of rates are in a particular slot. On that score, I think we've been very successful in terms of going to advertisers and agencies to provide them better value. With that, they're willing to commit a higher level of revenue to us and I think that the revenue focus strategy is working very well," he explains.

Analysts were also concerned that stubborn advertisers could run to other media like print and pay TV operator Astro if Media Prima started hiking up rates. Unlike other countries, Malaysia's print sector is stronger than TV, commanding some 60% of total adex, while TV garners just under 30%. Meanwhile, Astro is more dependent on subscriptions, not ads, for its revenue, and can thus offer attractive packages to advertisers. But Rahman believes he has his bases covered.

First off, the group is an integrated media company with businesses in TV, radio and print. He explains: "We admit we have quite a big share of the TV market but we no longer look at the adex market as purely TV. We look at the adex market as a total and while we may have large share of the TV pie, TV adex in Malaysia is one of the lowest in the region as a proportion of total adex."

Hence the group embarked on its TV-print cross-media bundling exercise four months ago. "It's led by the print, NSTP, side because the market we were targeting are those more on the print side — automotive, consumer, electronics and corporate profiling market. I think it's been very encouraging and we hope to do more and expand it further going forward," says Rahman.

Also, latest figures indicate that advertisers may be migrating from print to TV, albeit very slowly. "Structurally if you look at most recent Nielsen data, newspaper growth declined by 3% for the first six months. Of course, Nielsen figures are to a certain extent influenced by discounting, but TV adex did grow by 2% to 5%," he points out.

Competing against the likes of Astro however requires a different and costlier strategy —pending on brand-building and content or programmes to attract viewers. Media Prima spends about RM200 million yearly on content, and is expected to announce a higher content budget this Friday when it unveils its schedule to advertisers and media buyers.

Potential upside
All these efforts, and their bottom line results, seem to have assuaged the analysts somewhat. Six of the seven analysts listed on Bloomberg have "buy" calls on Media Prima stock, with target prices in the RM2.20-range. The counter ended at RM1.72 last Wednesday.

More earnings should flow to the bottom line once TV9 and NTV7 start showing profits, as soon as this year for NTV7 if it hits its cost saving target of RM30 million. The standard gestation period for new TV stations to be up and running and profitable is two years, and Media Prima has a track record of doing it faster. "8TV did it within 18 months, ahead of our expectations," declares Rahman.

He is also proud of the fact that Chicago-based foreign fund, Harris Associates LP, has been accumulating shares in the company and holds 70.5 million shares or a direct interest of 9.5%as at July 21. He points out that Harris is a long-term value investor, "not a hedge fund that goes in and out".

"Our group is more appreciated by foreign fund managers than local investment community. We are one of the few corporates which foreign fund managers find very appealing. They benchmark us against other media companies internationally in HK, Australia, Indonesia. There are not many media companies they believe are well-run, corporate governance-wise and in terms of strong future growth value," he says.

He believes that a key attraction is the group's ability to generate cash flow, or Ebitda (earnings before interest, tax, depreciation and amortisation). He says: "When I came in, our Ebitda was roughly RM50 million. Last year we closed at RM107 million, which is doubling of Ebitda in three years ... we hope to deliver 15% growth every year for the next three years. We've been exceeding that by far every year and hope to continue to do that."

Investors are also promised a dividend pay out ratio of 20% for the next three years, which should grow up to 50% thereafter. Now that this group has pretty much bought up the media assets up for sale locally, it appears that regional expansion is the next step.

Rahman responds: "We are always looking for investment opportunities; we are interested in anything that adds shareholder value. But at the moment our focus is to make sure all our acquisitions are digested, to create value and show the value."

Media Prima 2Q net profit soars 127% to RM16m
By Tamimi Omar, The Edge 30 Aug 2006

Media Prima Bhd's net profit jumped 127% to RM16.41 million for its second quarter (2Q) ended June 30, 2006 from RM7.23 million a year earlier on the back of strong performances from its television networks operations.

Revenue rose 41.31% year-on-year (y-o-y) to RM132.817 million from RM93.98 million previously.

“TV3, the group flagship network, maintained its leadership position in terms of advertising revenue and viewership share, while 8TV continued its exceptional revenue growth,” Media Prima group managing director and chief executive officer Abdul Rahman Ahmad said.
According to AC Nielsen, Media Prima, which has four TV networks, TV3, NTV7, 8TV and Ch-9, maintained its leadership position with 48% share of TV viewership against 38% in the previous corresponding period.

However for the first six months, Media Prima’s net profit fell 23.47% to RM9.47 million from RM12.38 million, while revenue rose to RM232.69 million from RM171.97 million.
The lower net profit was due to the one-off exceptional cost from the voluntary separation scheme (VSS) undertaken by the group’s associate company, The New Straits Times Press Bhd, in the first quarter this year, which was partly offset by writeback of long-standing accruals in certain subsidiaries.

Reviewing Media Prima’s second quarter results at a media conference in Petaling Jaya yesterday, he said the group was on track to surpass its previous target of 20% growth on both the bottom line and revenue this year.

“We announced last year that we wanted to maintain the level of growth that we have been delivering, which is a 20% growth target in terms of revenue as well as bottom line in the last three years.”

“I think the results today have shown that not only have we met that target but on track to exceed it,” Abdul Rahman said.

He said Media Prima would also unveil its 2007 content programme investment next week.
“We mentioned last year that we are going to spend between RM170 million and RM200 million of investment in content, I think we are on track to invest in that amount and hope to be able to increase it for next year,” he said.

Stockwatch- IGB Corp (Malaysia) RM$1.41 JP Morgan initiate coverage 28 Oct 2006

2006-10-28T11:27:00.000+08:00

IGB Corporation
Attractive piece of real estate

• Initiate with OW, PT of M$1.90: We initiate on IGB with Overweight and a Dec-07 target of M$1.90. Its earnings profile and growth is set to improve due to the M$1.3bn new commercial project launch ‘The Gardens’ by Sept-2007. We expect recurring property investment income and hotel earnings to rise from 65% to 76% of profit in FY06-08, and EPS growth to rise from 8% in FY06 to a CAGR of 18% in FY07-08 vs the sector’s 8%.

• Share price drivers: Commercial property trends continue to improve with rising activity levels fueled by the set up of REITS, expectation of a stronger Ringgit, and Malaysia’s attractive capital values (the cheapest in the region) and yields (8% for prime office space vs Singapore’s 4%). IGB is well positioned given its prime, expanding commercial asset base. Higher dividends and/or a shift in focus to capital management are also possible from FY08 as ‘The Gardens’ nears completion and with rising free cash flows.

• PT and risks: IGB trades at a 50% discount to RNAV of M$2.71. The discount should narrow as assets generate stronger earnings from FY07. Our PT of M$1.90 is at a 30% discount to RNAV and implies an FY07E P/E of 18x versus the Malaysian average of 9x, and regional average of 29x for property investors. Risks: earnings disappointments from residential segment, and oversupply of commercial property (though unlikely for prime assets).

Commercial property industry trends improving
The residential property segment is moderating after the strong growth since 2004 and due to oversupply in certain segments. However, activities in the commercial segment have picked up over the last two years with commercial transactions in the Klang Valley rising from 30% of residential transactions in 2002 to 45% in 2005.

Capital values for commercial property have also been on the rise. Our basket of office property transactions in the Klang Valley shows an average rise in value of 17% Y/Y in 2006 to M$479/sqft as well as higher value for recent hotel transactions (see Table 3). In Kuala Lumpur, hotel occupancy rates have also improved from 63% in 2003 to 70% in 1Q06, while the average room rate for top tier hotels rose by 12% Y/Y in 1H06. Prospects for hotels, especially in prime locations, remain good given the rising tourist arrivals (projected to rise 7% Y/Y in 2006), the ‘2007 Visit Malaysia Year’ drive and the continued healthy economic growth.

Malaysia’s capital value/yields remain attractive regionally (see Table 4), with average Klang Valley net rental yields at 6-8% for office space (8% for prime space) and at 7-10% for retail complex. Considering this and the increasing interest/demand among foreign property investors as well as from REITS, there is potential upward pressure in capital values, which augurs well for IGB given its prime commercial assets. Every 1% rise in commercial asset values would increase our RNAV estimate by 0.8%.

Prime commercial assets—Key prized asset, MVC
IGB owns combined office space of 0.95 million sq ft in KL with occupancy rates of 76-100%. The company also has interest in 10 hotels—five in KL, one in Pangkor island resort, and four overseas—with occupancy rates of 60-88%. Its key prized commercial asset however is its MVC retail mall (Phase 1) with a net lettable space of 1.7 million sq ft and operating at a 100% occupancy rate, situated in a prime location in Klang Valley between the business area of Kuala Lumpur and Petaling Jaya residential area. The retail mall caters largely to middle-income consumers and commands a patronage of about 30 million visitors annually, versus 40 million for the Suria KLCC Mall in the heart of KL.

IGB is developing ‘The Gardens’ development, which will entail a high-end retail mall (MVC-Phase 2) with a net lettable area of 0.8 million sqft. The mall will come onstream by September 2007, followed by two new office towers and two hotels in the same area by end-2008 and end-2009, respectively. The project will raise IGB’s total net lettable area of retail and office space by 83% to 4.85 million sq ft by end-2008, versus KLCC’s current 5.6 million sq ft. Rentals at MVC- Phase 2 are being negotiated at a 20-25% premium to MVC—Phase 1's M$8/sqft. To date, the group has leased out 50% of space for MVC—Phase 2 (anchor tenants: Isetan and Robinsons), and is on track to achieve 70% by September 2007. The total development cost stands at M$1.3 billion, which includes M$150 million for infrastructure upgrades and additional parking bays. Discussions are also being held with the authorities for connections with the Monorail and Putra LRT via ‘The Gardens’.

Property development
IGB’s sales continued to rise amid the softer residential market, up 94% Q/Q in 2Q06, aided by the group’s niche strategy and branding in the mid-high end segments in Klang Valley’s prime areas. The group has estimated unbilled sales of M$260 million as of end-1H06 (0.9x of historical property revenue), and cumulative planned launches in the Klang Valley total about M$700-750 million over FY06-07, at M$0.3-2.5 million per unit. We believe this will help sustain earnings up to FY08. Beyond this, IGB can tap onto its remaining land bank of 240 acres in the Klang Valley for at least the next three to four years.

Stockwatch- KLCC Property (Malaysia) RM$2.27 Deutsche Bank initiate coverage 16 Oct 2006

2006-10-25T00:45:00.000+08:00

Deutsche Bank - Equity Research

KLCC Property Holdings {Ticker: KCCP.KL, Closing Price: 2.22 MYR, Target Price:2.90 MYR, Recommendation: Buy}

* Most sought after commercial address at 10% implied yield; initiate with Buy

KLCC Property (KLCCP) offers investors an opportunity to co-own the world's tallest Twin Towers and other prime commercial assets at a 10% asset yield vs the market transacted yield of 5%. In addition, it offers 10-15% pa earnings growth in FY07-09E, a net div yield of 3.6% as well as potential upside from the growing pipeline of assets from its parent company. Our RM2.90 price target values the company at 9% implied yieldor 22% discount to RNAV. Buy.

* Defensive rental stream plus leverage to uptrend in property cycle

39% of KLCCP's rental revenue has locked-in rental growth of 3% cagr, at least until 2012. The rest is leveraged to the current uptrend in the commercial property cycle. We project a 5-10% pa growth in office rental and capital value in 2007 due to tightening supply and growing demand. We estimate that every 10% rise in hotel ARR and retail rental increases FY07E net profit by 2.6% and 4%, respectively.

* Rising free cash flow + opportunity to make value-accretive acquisition

KLCCP's projected rising free cash flow, from RM133m in FY07E to RM531min FY2011E, provides it with great financial flexibility to pay higher dividends and/or make acquisitions, especially after FY09.Opportunities are plenty given the parent company's growing asset portfolio.

* Trading at 40% discount to RNAV; TP offers >30% upside

At TP of RM2.90, we value KLCCP at 9% implied asset yield, pricing it at the lower end of the 9-10.7% historical range. The discount reflects the low possibility of it divesting its assets, and regulatory restriction on foreigners to invest in property. Key risks include a sharp downturn in the domestic economy, interest rate hikes and sustainability of current premium rental rate.

Stockwatch- CK Tang, some earlier articles on its Orchard Road property

2006-10-24T22:50:00.000+08:00

Singapore's CK Tang may consider sale of Orchard Road property
9/28/2006 3:29:00 PM

SINGAPORE (XFN-ASIA) - CK Tang may consider selling its property on Orchard Road here, which houses its flagship Tangs department store, if the price is right, said CK Tang executive chairman Tang Wee Sung. "We have been approached, but nothing is worked out," Tang told XFN-Asia. Tang did not identify the prospective buyer. He said offer was not viable. Asked whether CK Tang will redevelop its flagship store, Tang said there were plans to do so but that they were still being drawn up. At the moment, the retailer is focussing on preparations to open its new store at VivoCity here early next month. The new store will embody a new Tangs identity. "What we would like to portray is a retail establishment that is modern, stylish, personable and confident," Tang said. Tang said CK Tang would look for other expansion opportunities here and in Malaysia. (1 usd = 1.58 sgd)

STOCK ALERT - Singapore's CK Tang up on hopes it will sell Orchard Rd property 9/28/2006 4:03:00 PM SINGAPORE (XFN-ASIA) - Shares in CK Tang were higher on renewed hopes that the retailer will sell the property in Orchard Road here that houses its flagship Tangs retail store, dealers said. In late afternoon trading, CK Tang stock was up 0.02 sgd or 3.85 pct at 0. 54, with 169,000 shares having changed hands. CK Tang executive chairman Tang Wee Sung said the sale might be considered if the price is right. "We have been approached, but nothing is worked out," Tang told XFN-Asia. Tang did not identify the prospective buyer. He said offer was not viable. Investors have long speculated that owners of property on Orchard Road will be approached by prospective buyers, in view of the high bids the government received for three Orchard Road sites that it auctioned last year and this year. (1 usd = 1.58 sgd)

Singapore unlikely to see shopping mall glut despite new malls - CK Tang 9/28/2006 6:11:00 PM -

SINGAPORE (XFN-ASIA) - Singapore is not likely to experience a glut of shopping mall space despite the increasing number of new shopping malls set to mushroom across the city-state in the next three years, executives from top retailer CK Tang said. Asked whether he thinks there is a threat of an oversupply situation in the retail industry, CK Tang chief executive officer Foo Ting Sooi said: "The answer is no." Foo said the new malls being built on Orchard Road for instance will make the shopping belt more vibrant. Some 1.2 mln square feet of additional shopping mall space are expected to be built in Orchard Road shopping belt here three new shopping malls are under conmstruction, according to a recent report by BNP Paribas. The biggest of these shopping mall is being built by CapitaLand right across CK Tang's flagship department store at the corner of Orchard Road and Scotts Road. The CapitaLand mall will have some 690,000 square feet of retail space when completed in 2008. Not too far from the CapitaLand mall are two shopping malls being built by Australia's Lend Lease and local developer Far East Organization near the Somerset MRT station. Both malls will have 300,000 square feet of retail space each. CK Tang executive Tang Wee Sung said he also does not believe that the new shopping malls will create a glut of mall space. "We (Singapore) are positioning ourselves for the future. Plans for Orchard Road are very exciting," Tang said. Tang said the Orchard Road developments will basically establish the shopping belt as the place for branded fashion items, while other places like Little India and Chinatown will have the niche of their own. "It gives Singapore a certain flavor," Tang said. Tang said the recovery in that the retail sector has seen in the last few years looks sustainable and this will ensure continued robust demand for retail space. Apart from the new shopping malls on Orchard Road, new shopping malls are veing built in Marina Bay, Serangoon Road, Ang Mo Kio, Jurong, Tampines and HarbourFront. The VivoCity at HarbourFront, which will have some 1.1 mln square feet of retail space, will open next month. CK Tang will have a new store there. As part of the integrated resort project of Las Vegas Sands at Marina Bay, a 1 mln square feet of shopping space will start operating in 2009. Suburban malls are also being built. Next year, a 350,000 square feet shopping mall will open at the Ang Mo Kio bus interchange and in 2008, a 400,000 square feet mall will be open to expand Jurong Point in the west and a new 300,000 square feet mall in Tampines in the east will start operating as well. (1 usd = 1.58 sgd)

Stockwatch- Rotary Engineering (S'pore) says to double order book

2006-10-18T22:13:00.000+08:00

Rotary says to double order book

SINGAPORE - Singapore's Rotary Engineering, an oil and gas infrastructure services firm, said on Wednesday that it plans to double its order book and headcount thanks to strong demand for petrochemical facilities in Asia. Rotary - which has contracts to build oil and chemical storage tanks, terminals and processing facilities in Singapore, China, Thailand, and the Middle East - had an order book of $525 million (US$332.7 million) at the end of June and a 3,000-strong work force.

Rotary's chairman Chia Kim Piow said he expects the headcount to double in the next two years but declined to give a time frame for the increase in order book, adding that the firm was using only half its capacity. 'We are soliciting for more contracts because we have the capacity to execute them, both in terms of available work force and fabrication capacity,' he added.

Mr Chia said new contracts were expected in petrochemical plants planned to be set up by oil majors in Singapore, including a 800,000 tonnes per year ethylene cracker by Royal Dutch Shell Plc, as well as in Thailand and the Middle East where Rotary is a pre-qualified contractor for state oil firm Saudi Aramco. 'We are actively pursuing tenders in Singapore, Saudi Arabia and Thailand,' he said. Rotary is building a new fabrication facility in the Jubail industrial zone in Saudi Arabia which will produce 50,000 tonnes of steel plates for storage tanks and 300,000 diameter inch of piping starting end 2007. -- REUTERS

Stockwatch- Innovalues Precision (Singapore) BNP report 5 Oct 2006 target price $1.40

2006-10-16T11:42:00.000+08:00

We paid another visit to Innovalues’ Pasir Gudang facilities which was bustling with activity, suggesting that its office automation and automotive businesses remain strong. The HDD segment, which is manufactured in Thailand, is the only weak spot. We have raised our target price to SGD1.40 as we rollover our valuation to 2007. Maintain BUY.

OA and automotive in full ramp
*OA and automotive progressing as expected.
*HDD segment is weaker than expected.
*Maintain BUY with revised target price of SGD1.40.

OA and automotive progressing as expected
We recently paid our second visit (first visit in June 2006) to Innovalues’ manufacturing facilities in Pasir Gudang (Malaysia). To recap, this plant manufactures brake sensor parts for Sensata (formerly TI’s sensor unit) and printer parts for Hewlett Packard (HP) and other office automation (OA) customers. As expected, the facilities were bustling with activity in this seasonally strong period.

For its office automation business, we understand that Innovalues has begun work for another printer customer in August 2006. The group manufactures shafts for laser cartridges for this customer with volumes expected to ramp up significantly next year. We estimate that this customer could potentially contribute some SGD10-12m to group sales next year. However, Innovalues has seen a delay in the production of rollers and shafts for HP’s wide format printers which is now scheduled for 2Q07. We understand that HP currently purchases about USD20m worth of such parts from Spain and has decided to source from Asia due to obvious cost reasons.

Innovalues’ automotive business continues in full swing and the group is set to begin production for several new customers. As shown in the table below, Innovalues has a healthy pipeline of new projects ready for ramp, which includes parts for Siemens VDO, Bosch, Hiliite, Luk and a new part for Sensata. This new part was initially scheduled to start production in 3Q06 in China but has since been pushed to next year. All in, we believe Innovalues’ automotive business will remain the major driver for the group going forward. Note that we have not included contribution from new automotive customers such as Hilite and Luk, given the risks of project delays. Hence, we believe there could be upside to our 2007 and 2008 automotive sales projections should the ramp commence as planned.

Stockwatch- Innovalues Precision (Singapore) on IES publication Oct 2006

2006-10-15T19:27:00.000+08:00

Innovalues focuses on automotive sector

Within just a decade of its establishment, Innovalues Precision, a precision parts supplier, has achieved a string of accolades from the industry. The company, founded by Goh Leng Tse as a four-man set-up, is today a Mainboardlisted regional fi rm with a market capitalisation of more than $100 million. Innovalues has identifi ed the automotive industry to drive itself to greater heights.

“Judging from the industry trend, over the last three years, automotive suppliers from the US and Europe are doing more outsourcing from Asia,” says Steven Pung, the company’s business director. “Since we are in the precision-engineering business, we see opportunities. We can value-add to the industry, and our focus is on ‘critical-to-function, critical-to-safety’ components.”

Innovalues got its first big break from the automotive industry in 2003, when the company was introduced to Texas Instruments (TI), to supply parts that go into sensors used in brakes and airbags. These parts are then supplied to marquee names like Mercedes and BMW — a testament to their quality.

It is not easy being an automotive-parts supplier. The qualification process takes about a year and can cost the customer up to $1 million to do the necessary tests and processes, says Pung. Besides TI, the company has won a few more German customers, like Bosch and Siemens VDO. Pung says introductions by International Enterprise Singapore’s officers stationed overseas have been very helpful in opening doors. “Some of them can’t even differentiate between China and Singapore, but IE’s introduction and pre-marketing has made all the difference,” he adds.

In the financial year ended December 2005, the automotive segment contributed 10% of total revenue, up from a mere 3% in 2004. This year, analysts are expecting this proportion to hit 18%, and the company’s target is for automotive parts to generate half of its turnover by 2008. “We want the automotive business to be the core,” says Pung.

The company’s optimism is not without basis. US and European companies are relatively new in outsourcing to Asian manufacturers, which have helped them to enjoy costs savings of about 20%. Furthermore, Asia as a car market is probably the world’s fastestgrowing.

“They want to be near where the action is,” says Soh Wai Kong, Innovalue’s chief financial officer. To cater for this projected growth in the business, the company is adding capacity to its plants in Thailand, Malaysia and China. The total factory fl oor space is about 30,000 sq m, and will be increased to 47,000 sq m by the end of 2008, says Soh.

Stockwatch- Innovalues Precision (Singapore) CIMB report 5 Oct 2006 target price $1.52

2006-10-15T19:11:00.000+08:00

Innovalues Precision - Turning steel into cash

• Our recent Malaysian plant visit reinforced our positive view on Innovalues. The Malaysian plants represent 65% of group capacity, focusing mainly on office automation (OA) and automotive components. All three plants are operating close to full capacity on the back of seasonal demand and new customers and programmes.

• Cost-cutting exercise and yield improvements to bear fruit in 2007. The company has been cutting costs and improving yields and efficiency, which we believe will start to bear fruit in 2007.

• Thailand and China plants also busy with automotive and OA businesses, respectively. The Thai plant is operating at about 80% capacity due to a slowdown in the HDD components business. However, the slowdown has been partially compensated by a surge in the automotive segment. The China facility, which focuses on OA and automotive, is running close to full capacity.

• Maintain Outperform; raising target price from S$1.18 to S$1.52. We have kept our FY06-08 forecasts unchanged but continue to believe that there could be upside to our numbers if the automotive components business takes off. We have also raised our target price from S$1.18 to S$1.52 as we roll over our 13x target P/E from CY06 to CY07. Our target P/E is pegged at a slight premium to its historical average P/E band in view of the healthy 34% earnings CAGR projected for FY05-08. Maintain Outperform, and we see catalysts from evidence of accelerated sales in the automotive sector and potentially solid full-year results.

Stockwatch- Innovalues Precision (Singapore) Prospect and Business Outlook presented in 1H Results

2006-10-15T15:01:00.000+08:00

Extracted from the press release on Innovalues' 1H results:

Prospects and Future Plans
The industry outlook for the automotive industry is bright and Asia is becoming an increasingly important place to source for automotive components by the European and US car parts manufacturers. According to a report by consulting firm KPMG on the automotive components industry, the market value of the sector in China alone is expected to reach USD 13 billion by 2007. This trend is expected to be sustained as Asia begins to export higher value-added components for the automotive sector.

Mr Goh commented, “Going forward, our AU segment will continue to be one of the key growth drivers for the Group and we see great opportunities in this segment. Over the past few months, we have received an increasing number of enquiries from interested parties for possible strategic business alliances. We also see potential in our OA segment as we continue to secure projects with higher value-add. As for our HDD segment, we are currently working with other major players in the industry to increase our sales from this segment.”

As part of the Group’s plans to enhance its market presence in the region and to cope with the increasing orders, Innovalues expects to invest an estimated S$13 million in property, plant and machinery in China, Malaysia and Thailand in the current financial year. Some S$8 million and S$2 million will be used to spur the growth of the AU and OA segments respectively. To cut down on the volatility of the raw material prices, Innovalues will also be constantly sourcing for and working closely with its steel suppliers to monitor the steel market conditions.

Barring unforeseen circumstances, the Group expects its performance for FY06 to exceed its FY05 results.

From Innovalues' slide presentations on its 1H results:

Business Outlook

Automotive (AU)....
1. Expect to contribute abt 20% of Group's FY2006 revenue (up from 10% in FY2005)
2. AU sales from 2003 to 1H 2006 was for Sensata (formerly unit of Texas Instrument) only
3. Sensata
- expect high double digit growth for growth for existing 2 projects (Braking sensors and Occupant weight sensors) up to FY2008
- new projects transferring to this region being awarded
4. Other AU customers
- Siemens VDO
- selective plating technology know how transfer from customer
- Other US and Europe car component manufacturers with high market shares outsourcing to this region
- a few projects in qualification or advanced discussion stage

Office Automation (OA)....
1. Healthy growth in OA segment
2. Hewlett Packard (HP)
- expected increasing orders from HP's new printer platform, which requires 3 times as many rollers as before
- new projects
3. Other major players- continue to see growth and new projects from various customers
4. New high volume customer- for their laser printers which require more rollers

Hard Disk Drive (HDD)....
1. expect sales and profit contribution to reduce yoy of about 25%
2. major customer drops in sales volume and cut down of outsourcing requirement
3. already start supplying to a new major HDD player, however, contribution not significant this year
4. Group to target other major HDD players
5. switch existing HDD machinery to run OA and AU parts

China....
1. Our presence in China provides business opportunities
2. Many customers and their CMs have presence in China to take advantage of the lower manufacturing costs and to be near the potential market
3. We have plating license which the issue of license in Shanghai is restricted
4. China Government is encouraging sourcing of car components from the local market and may impose custom duties for components imported into China starting mid 2007

Diversification....
1. Innovalues' business is well diversified
2. 3 major business segments- AU, OA & HDD
3. AU business is stable and not seasonal
4. Within each segment there are a few major existing or potential customers
5. Some of our machinery can be switched for different business segments

Challenges

Competition....
1. There is indeed competition and price pressure, but....
2. our size and volume give advantage to bring in major palyers and projects
3. we are well positioned for HDD and AU which have high quality requirement, long qualification period and high cost of qualification
4. AU market is big and many function critical and safety related components in a car
5. we have good business relationship with customers

Others....
1. weakening US$ against asian currencies
- our assets and liabilities are naturally hedged
- we actively entered into forward and currency structures for transaction requirement
2. rising cost of borrowing
- we have favourable machinery and material purchase terms
- we manage our working capital and stock holding

Summary

1. We are growth business supply components for AU, OA and HDD
2. We are positive in the next few years' outlook
3. The Group will continue our drive to improve margin and control our costs
4. FY06 expected to be better than FY05, barring any unforeseen circumstances

Stockwatch- Innovalues Precision (Singapore) S$0.855

2006-10-15T11:26:00.000+08:00

I have been following Innovalues Precision with interest in recent weeks as I am looking for outperformers in the manufacturing sector which has been a laggard in the recent market rallies. Innovalues come to my mind as I noted with interest that Lion Capital become a substantial shareholder. And with a recent plant visit, with analysts raising their target price, Innovalues broke out of its trading range.

And on receiving this week's The Edge Singapore, I read an interesting articles on Innovalues. After reading it, I made up my mind Innovalue is really worth watching.

Highlights of the article on Innovalues Precision on this week's The Edge Singapore:

1. Lion Capital has a 6.03% stake in Innovalues.

2. Innovalues has made a profitable shift to manufacturing components for the automobile industry from the traditional office automation (OA) industry.

3. Several US and European automotive component manufacturers have been outsourcing work to Asia. Innovalues has been able to ride this boom.

4. Innovalues looks forward to winning new customers as automobile companies increase emphasis on safety and seek out more safety components for their cars. And Innovalues founder and CEO Goh Leng Tse hopes turnover from automotive will overtake OA to make up 50% of total revenues by 2008.

5. Innovalues currently produces 3 components for Sensata Technologies, a former unit of Texas Instruments:

(Website of Sensata Technologies- http://www.sensata.com/about/index.htm)

i. Braking sensors- provide enhanced safety features, especially for nagivating along winding roads; so far used only in luxury cars in Europe, but which will be used in luxury and mass market cars in the US by next year. Strong growth expected in this component. Innovalues manufactures it out of its Malaysian plants.

ii. Occupant weight sensors- Occupant weight sensors measure the weight of an occupant. An advanced air bag system might use this information to prevent the air bag from deploying at all in the presence of children. The Federal Motor Safety 208 rule in the US made it mandatory this year for all passenger cars to have an advanced airbag deployment system based on the physical weight of passengers to increase the level of protection. Demand is therefore growing. Innovalues currently manufactures 95% of the components used in these sensors at its Thailand plant on behalf of Texas Instruments.

iii. Automotive pressure transducer (APT) sensors- activate the fan in the car according to temparature changes. Innovalues started the production of APT sensors at its China plant under a pilot programme by Texas Instruments in May. Currently, the bulk of these sensors are still being produced by other manufacturers in Japan and Mexico. But production would eventually be entirely relocated in China. Innovalues may garner a bigger order book as worldwide demand for APT sensors is expected to reach 70 mil units this year.

6. Apart from Texas Instruments, Innovalues has also secured new automotive component manufacturing customers like:

i. Siemens VDO (fuel injector) - after trial runs for Siemens VDO diesel engine fuel injector components, mass production is expected to start at the end of Oct 2006. In CIMB research report, it states that Siemens could become a major customer of innovalues' Malaysian operations as the company is in talks for more projects.

ii. Bosch (fuel pump)

iii. HILITE International (engine valve and transmission valve)

iv. LUK (clutch disc)- production is expected to start next year for LUK's clutch discs, which would be used in General Motors, Audi and BMW cars.

7. Despite growth potential in automotives, Innovalues is not scaling down its OA business.

i. Goh says the company is in talks with a major printer customer to manufacture laser printer shafts. If successful, this potential customers could contribute 20% to Innovalues' total OA revenues next year.

ii. Innovalues has also benefited from Hewlett-Packard's recent volume growth- 15% y-o-y between May and July. As a result, it has widened its product offerings to HP to include components for wide-format printers, the production of which HP is gradually moving away from Europe to Asia.

8. Innovalues' Malaysia and China plants are running at almost full capacity, but the existing Thailand plant, which produces mostly automotive and hard disk drive (HDD) components and represents about 20% of total group capacity, is operating at about 80%.

9. (Negatives and risks) Innovalues' HDD business and therefore its HDD production in its Thailand plants has been impacted by a decision by a key HDD customer, Minebea, to allocate more production in-house following a management reshuffle last October. Previously, Minebea outsources 75% of the production to Innovalues but has since reduced this to 70% this year. And the volume could drop further.

10. While CIMB analyst says Innovalues may no longer focus on this area but will increase its focus on the stable automotive components sector, Goh says Innovalues is in talks with a potential HDD customer who could invest US$200 mil to develop the business regionally. If things go as planned, this would provide Innovalues an opportunity to deal directly with a HDD original equipment manufacturer. For now, the weakness in the Thailand plant has been partially compensated for by a surge in the automotive components business as volume for occupant weight sensors remains robust.

11. Capex. Innovalues has budgeted for a total of $16.5 million in capital expenditure, up from $15.8 million in 2005. It will be financed through internal funds and bank borrowings. To date, it has spend $7 mil this year.

12. Its second plant in Thailand, which is under construction, is on track to commence production in 4Q2007. This plant will triple its production floor area in Thailand from 41,000 sq ft to 108,000 sq ft.

13. Innovalues will also expand its China facilities from 88,000 sq ft to 161,000 sq ft next year to support rising demand.

Stockwatch- Adampak (Singapore) Directors purchase while Significant Shareholders sell

2006-10-14T12:49:00.000+08:00

Adampak ends this week at 24ct, up from 22ct on the first posting.

Interesting to note that this stock move up amidst 2 significant shareholders, who are not involved in the business of Adampak, paring down their stakes, while 3 executive directors, including the CEO, purchase via married deal with one of the significant shareholders who are paring down his stake.

Stockwatch- CIMA (Malaysia) Vicat offer for CIMA stake valid until Dec 5

2006-10-08T22:25:00.000+08:00

Vicat offer for CIMA stake valid until Dec 15

French cement manufacturer VICAT's offer for to acquire controlling interests in Cement Industries of Malaysia Bhd (CIMA) subsidiaries, remains valid until Dec 15, 2006.
CIMA said on Oct 6 that both parties were still in discussion and had not concluded any agreement in respect of VICAT's offer to acquire equity interest in the subsidiaries.
"However, both parties have now agreed that VICAT's offer shall remain valid until Dec 15, 2006," it said.

VICAT intends to acquire controlling interests in Negeri Sembilan Cement Industries Sdn Bhd, Pemasaran Simen Negara Sdn Bhd, Unipati Concrete Sdn Bhd, Cimaco Edar Sdn Bhd and Cimaco Quarry Sdn Bhd.

Stockwatch- China Sky (Singapore): Merrill Lynch initiate coverage with $1.82 price target

2006-10-07T01:21:00.000+08:00

Merrill Lynch initiate coverage on 6 Oct 2006 and China Sky closes at $1.17 up from $1.07 the closing price on the first posting:

China’s leading nylon fiber producer, set to stay ahead

Doubling of market share in three years
We initiate coverage on China Sky with a Buy and price objective of S$1.82. Nylon fiber consumption is expected to continue growing at more than 15% pa in China. As the largest producer, China Sky is well-positioned to outpace industry growth by grabbing market share from both foreign imports and domestic competition.

EPS CAGR and ROE of more than 30% in FY05-09E
China Sky is expanding through new products and capacities. It increased its nylon FDY/HOY capacity by 85% to 72,000 tpa in June 2006. Its new 16,000 tpa nylon ATY/DTY facility is on track for completion by 1Q07. We also expect the launch of 30,000 tpa nylon SR fiber capacity to contribute significantly from FY08.

Potential M&A to accelerate earnings growth
China Sky has identified potential acquisition targets to help it break into new markets. It is also considering moving upstream into caprolactam/nylon chips over the medium term to become an integrated nylon player. These prospects have not been factored into our earnings forecasts.

Our PO suggests 63% potential upside
China Sky was listed at S$0.55 in October 2005 and reached a high of S$1.32 in May 2006. It is now trading at an attractive 6.3x FY07E earnings, implying a low PEG of 0.2x. Our PO is based on a blended valuation approach using P/E, EV/EBITDA and DCF. We also project China Sky to grow 3Q06 earnings by 50-60% YoY and see the strong result delivery as a price catalyst in the near term.

Risks to growth and our PO
China Sky has been able to pass on higher raw material costs to customers but failure to do so in the future would hurt margins. An unexpected decline in selling price would also dent profit margins.

Stockwatch- Adampak (Singapore) S$0.22

2006-10-06T03:18:00.000+08:00

I found Adampak to be a micro-cap company with exposure to the electronic/manufacturing sector with a reasonable PE and dividend yield, plus very decent cash generation. Seagate is its largest customer.

One negative- one of its founder, Tham Kim Par, who retires in 2004, has been consistently trimming down his stake.

Company website: http://www.adampak.com.sg/

Since its incorporation in 1979, Adampak has grown to become one of South East Asia’s leading converters, producing all types of high-end labels, nameplates and die-cut parts for the electronic, pharmaceutical, computers/peripherals, petroleum and consumer industries. Today, it has wholly owned subsidiaries in Philippines and Thailand and associate companies in Malaysia and China to serve its worldwide customers. From a staff of 5 in 1979, Adampak currently employs more than 300 staff in total.

Here's some recent research reports after its recent strong 1H results:

WestComb- maintain BUY and target price of 33ct

Revenue growth of 25.7% and net profit growth of 51.0%
As a substantial part of the Group’s operating activities are in US$, the Group has changed the functional and presentation currency from S$ to US$ with effect from 1 January 2006.

1H06 results were in line with expectations. Revenue grew 25.7%, from US$ 12.08 million in 1H05 to US$ 15.18 million in 1H06. Average US$/Sing$ exchange rate was approximately 1.647 in 1H05 and 1.609 in 1H06. This was a decline of 2.3%. Revenue growth would have been correspondingly lower if the results had been reported in Sing$.

After review of the useful economic lives of assets, the Group has also changed the depreciation rate for plant and machinery from 20% per annum to 10% per annum with effect from 1 January 2006. The effect is that PBT for the period under review had been inflated by US$ 0.27 million.

Gross profit margin improved from 26.7% in 1H05 to 31.2% in 1H06 (29.4% if you exclude the effects of the change in depreciation rate). The improvement was due to better economies of scale and better performance from all operating units.

Other operating income increased US$ 0.41 million mainly because of exchange rate gains of US$ 0.27 million and gain on disposal of plant and equipment of US$ 0.14 million.
Income from associates declined 57.0% to US$ 0.27 million, as 1H05 contribution was inflated by write-backs, and gain on asset disposal, and 1H06 contribution was affected by start-up losses in a subsidiary.

The net effect was a 51.0% improvement in net profit from US$ 1.65 million in 1H05 to US$ 2.49 million in 1H06. We estimate that without the effect of accounting changes and exceptional gains, growth in operating profit could still have been more than 40%.

The purchase of the additional 50%-stake in Aident is still awaiting regulatory approval and we are not certain whether it will go through – hence we have taken out the impact of the purchase from our forecasts.

We expect revenue and net profit to grow in double digits in both FY06 and FY07, driven by continued optimism in the HDD industry and the Group’s new production facilities in Suzhou that gives them access to the vast PRC market. The Suzhou plant has commenced operations in July 2006, but is not expected to contribute positively in FY06.

The potential wildcard is the growth in the usage of RFID for baggage handling at airports and logistics and inventory management in the general supply chain. As technology improves and the price of RFID chipsets declines, there will be wider usage of RFID technology in the tracking of items. These RFID chipsets require converters such as Adampak to insert them into labels. Adampak should benefit as the usage of RFID becomes more widespread.

Interim dividend
Adampak has declared an interim dividend of 0.625 cents per ordinary share (less tax), which equates to a yield of 3.2%. This highlights the Management’s optimism of the Group’s operating cash flow and future prospects.

Forecasts and valuation
We maintain our target price at S$0.33, which is at a 15% discount to fair valuation of S$0.39 (8x FY06 PER) due to its poor trading liquidity. Maintain BUY.
Key risks include downturn in electronics (HDD) sector, loss of major customers, increasing raw material prices, price pressure from customers, unfavourable currency fluctuations and increasing competition on the basis of price.

Net Research Asia- Maintain BUY and target price raised from 29 to 31ct

Adding Excitement to the Stable Fundamentals
· Adampak reported strong revenue and profit growth for 1H06. Revenue grew 25.7% to US$15.2m and gross profit grew 46.5% to US$4.7m, backed by a higher gross margin of 31.2%.

· Two accounting policy changes have been adopted wef FY06. Functional currency has been changed from SGD to USD and depreciation rate has been reduced from 20% per annum to 10% per annum.

· Net profit grew by an impressive 51.0% to US$2.5m. Taking out the impact of the change in
depreciation rate, net profit and net profit margin would be US$2.2m and 14.6% respectively.

· Another year of strong growth is expected. Positive outlook in the electronics sector and HDD industry will continue boosting the demand for label, seals and other die-cut components.

· Impact of Seagate’s acquisition is likely to be felt in FY07. Management views this as a positive development as Seagate is the biggest customer of Adampak.

· New RFID (Radio Frequency Identification) tag business adds new life to the stable underlying business. RFID tags provide more attractive margins and management indicated that they were getting more enquiries on their RFID tag from potential customers.

· Target price has been raised from S$0.29 to S$0.31, backed by the strong fundamentals of the underlying business and potential new growth catalyst from the RFID tag business and Aident acquisition. The stock is currently priced at an attractive 4.2x current year earnings. Maintain BUY.

Stockwatch- Synear Food Hldgs: Deutsche Bank up target price from $1.08 to $1.34

2006-09-29T00:39:00.000+08:00

2Q results review; target price
raised and reiterate Buy

A stellar set of 2Q06 results - 16% above expectation; Buy

2Q06 net profit surged 83% yoy to Rmb107m and 1H06 net profit of Rmb215m (+46% yoy), easily beat our forecast by 16%. Tax savings, better-than-expected sales and margins were the key contributors for this quarter. Securing more distributors and the launch of higher-margins new products certainly enhance its growth prospects. Target price is raised from S$1.08 to S$1.34. Reiterate Buy.

20% yoy growth in 2Q06 sales

2Q06 and 1H06 sales grew by a reputable 20% yoy and 15% yoy, respectively. The Dragon Boat Festival in 2Q helped to lift the sales of glutinous rice dumpling products, thus raised the overall group’s gross margin from 32.8% in 1Q06 to 33.1% in 2Q06. Synear also appointed 22 new distributors in 1H06, bringing the number of distributors to 486. It currently offers more than 213 product varieties.

Prospect is better than ever

We are now more positive on Synear, following its success in the SGX-listing and the appointment as the exclusive supplier of quick freeze food products to the Beijing 2008 Olympics Games. Growing number of distributors, more new product launches and improving spending power of Chinese bode well for the group.

Valuation/risk

We have raised our NP estimates by 11-14% on the back of higher margins and better sales growth. Our target price is upgraded from $1.08 to S$1.34 following our earnings revision and alignment with recent sector upgrade (15x to 17x).

Maintain Buy rating as upside potential has increased to 33%. Risks: margin compression from rising ingredient costs and outbreak of epidemic diseases.

Stockwatch- Synear Food Hldgs: Interim Net Profit rises 46%

2006-09-23T19:20:00.000+08:00

NEWLY-LISTED SYNEAR FOOD’S INTERIM NET PROFIT RISES 46.0% TO
RMB214.8 MILLION

-Interim Net profit rises 46.0% to RMB214.8 million on the back of a 15.0% improvement in Group revenue to RMB1.0 billion
Strong sales for the Group’s glutinous sweet dumpling products and other quick freeze food products
Distributors increase from 454 in 1HFY2005 to 486 in 1HFY2006

-Profit margins improved due to launch of new products and higher sales for other quick freeze food products

1HFY2006 Performance
Group Results (RMB’ million) 1HFY2006 1HFY2005 % Change
Revenue 1,002.0 871.1 +15.0
Gross Profit 329.7 276.0 +19.5
Gross Profit Margin (%) 32.9 31.7 +1.2 % point
Profit Before Tax 269.4 223.0 +20.8
Net Profit 214.8 147.2 +46.0
2QFY2006 Performance
Group Results (RMB’ million) 2QFY2006 2QFY2005 % Change
Revenue 412.6 343.8 +20.0
Gross Profit 136.5 112.5 +21.3
Gross Profit Margin (%) 33.1 32.7 +0.4 % point
Profit Before Tax 107.0 88.9 +20.3
Net Profit 106.9 58.5 +82.7

Singapore, September 22, 2006 – Synear Food Holdings Limited, one of the PRC’s leading quick freeze foods producers, today announced a double-digit growth in its top and bottom lines for the six months ended June 30, 2006 (“1HFY2006”).

The Group registered a 46.0% increase in its net profit to RMB214.8 million for 1HFY2006 on the back of a 15.0% improvement in Group revenue to RMB1.0 billion.

For the three months ended June 30, 2006 (“2QFY2006”), Group revenue rose 20.0% from RMB343.8 million in 2QFY2005 to RMB412.6 million in 2QFY2006. Net profit surged 82.7% from RMB58.5 million in 2QFY2005 to RMB106.9 million in 2QFY2006.

Commenting on the Group’s interim results, Mr Li Wei, Executive Chairman of Synear, said: “We are delighted to deliver a sterling set of financials for our maiden results announcement after the Group’s listing. Our continuous efforts to launch new products and increase the number of distributors have paid off. We are currently on track to expand our production capacity to meet the increased demand for our products. Going forward, we will continue to strengthen our capabilities and focus on growing our business to yield better results that will ultimately enhance shareholders’ value.”

Newly-listed Synear made its debut on the Main Board of the SGX-ST on August 18, 2006. It launched its Initial Public Offer (“IPO”) of 375.0 million shares at an issue price of S$0.54 per share.

Performance Review
The Group’s strong 1HFY2006 topline performance was driven by higher sales for all its three main product segments. These increases are attributable mainly to the increase in the number of distributors as well as an increase in demand for the Group’s new products.

Sales of savoury dumpling products increased by 4.5% to RMB393.3 million in 1HFY2006, while sales of glutinous sweet dumpling products rose 12.6% to RMB388.8 million. The Group’s quick freeze food products posted a strong growth in sales, surging 47.2% to RMB219.9 million during the period under review. This was mainly due to the Dragon Boat Festival which took place in 2QFY2006, which boosted the Group’s sales of its glutinous rice dumpling products.

The Group has recently launched new products, which include pan-fried dumpling series) and Shoudatianxia series of savoury dumpling products; Shoudatianxia series of sweet dumplings products; vacuumed-packed glutinous rice dumpling series steamed milk buns, pickled vegetable pork bun and onion flavoured crispy pancake of other quick freeze food products.

Mr Li elaborated: “Our new products are targeted at the mid-to-higher end markets. Demand for these new products in the half-year under review has been encouraging and we plan to focus our marketing efforts on promoting these new products for the rest of the year.”

The Group also expanded its presence in the PRC with the appointment of 32 new distributors, bringing the total number of distributors to 486 as at June 30, 2006. New distributors were appointed to deepen the Group’s market penetration in second tier cities and rural areas in the Hunan Province, Shaanxi Province and Guangxi Province within the PRC.

“We continued to appoint new distributors to expand our distribution channels and strengthen our presence in the second tier and smaller cities in the PRC. This strategy will enable us to broaden our customer base as our products are now available in more geographical areas,” added Mr Li.

Synear’s higher gross profit margin of 32.9% in 1HFY2006 was due to the launch of new products and its change in sales mix leading to higher sales of the Group’s other quick freeze food products, which generally command higher margins. In line with the higher revenue, both selling and distribution expenses as well as administrative expenses have increased 21.5% to RMB49.4 million and 32.4% to RMB10.2 million respectively for the same period.

The Group reported a 46.0% surge in its net profit to RMB214.8 million in 1HFY2006, which was mainly due to lower tax expenses.

Outlook
The Group recently completed the first phase of its production capacity expansion programme. New freezing machinery was installed to increase capacity by 28,800 tons per annum, raising the Group’s total annual production capacity to 316,000 tons as at August 31, 2006. The Group is currently on track for the second phase of its capacity expansion, which is due for completion in October 2006. When completed, its total annual production capacity for its existing plant is expected to increase to 360,000 tons.

In addition, the Group announced in early September 2006 that Synear has been selected by the Beijing Organising Committee for the Games of the XXIX Olympiad (BOCOG) to be the exclusive supplier of quick freeze food products to the Beijing 2008 Olympic Games. The total cost of the sponsorship program is RMB41 million.

Stated Mr Li: “This unique marketing platform will enable us to strengthen our brand visibility and strengthen Synear’s position as a leading brand name in the quick freeze food industry. We are planning to unveil a new marketing and advertising campaign which will incorporate the Olympics logos in our new TV commercials and frozen food packaging materials.”

To penetrate into new markets and reach out to more customers, the Group is also exploring the possibility of setting up production facilities outside Henan Province, which will increase the Group’s annual production capacity by an additional 300,000 metric tonnes. The Group will also continue to expand its distribution network and focus on its product development efforts to broaden its product range.

Stockwatch- Synear Food Hldgs: Zhengzhou Synear Food Co., Ltd becomes the Frozen Dumplings Exclusive Supplier of the Beijing 2008 Olympic Games

2006-09-17T01:54:00.000+08:00

(BEIJING, Sept. 4) -- The Beijing Organizing Committee for the Games of the XXIX Olympiad(BOCOG) today announced Zhengzhou Synear Food Joint-Stock Co., Ltd as the Frozen Dumplings Exclusive Supplier of the Beijing 2008 Olympic Games at a joint press conference held in Beijing.

As an exclusive supplier, Zhengzhou Synear Food Co., Ltd will provide funds and frozen dumplings to the Beijing 2008 Olympic Games, BOCOG, the Chinese Olympic committee and the Chinese sports delegation to compete at the Beijing 2008 Olympic Games. The Marketing Director of BOCOG Mrs. Yuan Bin, expressed her congratulations to Synear, saying: The Olympic Games is both a grand sport event and a friend gathering for people around the globe. It is well known that China has a long and rich culture on cuisine. Synear is one of the best selling frozen dumplings producers in China. AS an exclusive supplier, Synear will showcase the charm and taste of Chinese food and bring some of the best Chinese Cuisine to friends from across the world.

Yuan hoped that Synear would take advantage of its status as BOCOG exclusive supplier and reinforce its corporate image and enhance business opportunities. "Synear's effort to get involved in Beijing Olympic Games began just after the success of Beijing's bidding for the 2008 Olympic Games. In order to become a member of the Olympic Family, tremendous preparation has been done within Synear. Some Olympic ideas have been integrated into the company's business operation and are being carried out in R&D, production, management, marketing and all fields. Becoming an exclusive supplier of BOCOG will mark the start of a new era for SYNEAR." said Mr. Wang Peng, the Vice Chairman of Board-Executive of SYNEAR.
Zhengzhou Synear Food Joint-Stock Co.Ltd. is a large company specialized in frozen dumplings production, whose major products is Chinese frozen dumplings including dumpling, sweet dumpling, pyramid-shaped dumplings and bakery.

Since the Beijing 2008 Olympic Marketing Plan was launched on September 1, 2003, 11 enterprises namely Bank of China, China Network, Sinopec, CNPC, China Mobile, Volkswagen(China), adidas, Johnson & Johnson, Air China, PICC P&C and State Grid, have been selected as Beijing 2008 Partners.

The nine Beijing 2008 Sponsors designated to date are UPS, Haier, Budweiser, SOHU, Yili, Tsingtao Beer, Yanjing Beer, BHP Billiton, and Heng Yuan Xiang. The eight Beijing 2008 Exclusive Suppliers announced to date are COFCO Wines & Spirits (Greatwall Wine), Mengna, Beifa, Vantage, YADU, Effem Foods (Beijing), Qianxihe and Synear. And the one Beijing 2008 Supplier selected so far is Crystal CG.

The 11 IOC Worldwide Olympic Partners Coco-Cola, Atos Origin, General Electric, Kodak, Lenovo, Manulife, McDonald's, Omega, Panasonic, Samsung and Visa, will also provide financial, product, technical and service support for the staging and operation of the Beijing 2008 Olympic Games.

Stockwatch- Synear Food Hldgs $0.935

2006-09-17T01:26:00.000+08:00

Deutsche Bank report 21 August 2006

Preserving the Chinese heritage; Buy dumplings

Initiating with Buy and TP of S$1.08
We are initiating coverage of Synear with a Buy rating. Our target price of S$1.08 implies >25% total return potential from its current price of S$0.86. As a manufacturer of quick-freeze food products, Synear aims to preserve the Chinese heritage by promoting products related to traditional themes. Thanks to its brand equity and strategic location in China, Synear believes that it currently holds at least 15% of the PRC’s market share in similar quick-freeze food products.Valuation still looks cheap to us now.

Steady growth underpinned by robust economic development
Several factors have facilitated the availability of quick-freeze food in second-tier cities. We note strong economic growth and rising affluence among Chinese consumers, together with deeper penetration of supermarkets/hypermarkets and increasing ownership of refrigerators. The food processing industry has become an important force in China's national economy, Euromonitor projects the nation’s frozen food consumption to grow >7% pa.

Net profit expected to grow at CAGR of 23%
Earnings momentum for Synear should be enhanced by its continual marketing efforts, expanding distribution network and production capability. We expect revenue and earnings for FY05-08 to grow by 15% and 23% CAGR, respectively, led by growth in all product segments. The commencement of tax holidays in April 2006 and Synear’s resilient business model will also empower its balance sheet.

Appetizing upside of >25%
Based on the current price of S$0.86, we think Synear looks cheap (implied CY07 PER of 12x) compared with its peers. Our TP of S$1.08 is based on 15x P/E, an average of its peers, which offers 26% upside before dividend yield. Risks to our forecast are mainly rising competition; possibility of epidemic diseases, which affects demand for meat products; and any fluctuations in its raw ingredients cost.

Stockwatch- Rotary Engineering (S'pore) 2 article on Business Times Singapore on 14 September 2006

2006-09-16T15:31:00.000+08:00

Article 1- Rotary shines among smaller marine stocks

More brokers are taking notice of this EPC service providers, which has won major contracts at home and hopes to bag some in Mid-East, writes Teh HooiLing.

Article 2- Lessons from the brink

Rotary spreads risks by putting bets in many markets, writes Chuang Peck Ming.

If you do not have the 14 September Business Times, leave me your email.

Stockwatch- Rotary Engineering (S'pore), OCBC 4 Aug 2006 report

2006-09-10T23:34:00.000+08:00

The best is yet to come

Net profit jumped 5-fold in 1H06. Rotary Engineering (Rotary) booked in 150% YoY jump in revenue to S$202.1m in 1H06, while gross profit rose 81% YoY to S$31.7m. EBIT margin increased 4.5ppt YoY to 10.3% in 1H06, pushing operating profit by 345% YoY higher to S$20.8m. After delivering a consistent 60% net profit CAGR in the FY03-05 period, Rotary's net profit still managed to catapult 395% YoY to S$16.0m in 1H06, beating our estimate of S$14.9m.

Expect a stronger 2H06. Rotary is expected to deliver a stronger 2H06 due to the higher percentage completion recognition for major oil storage terminal projects in Jurong Island. We have raised our FY06 net profit forecast for Rotary by 12.9% to S$37.8m, due to a higher net profit margin estimate of 6.9% (vs. 6.1% previously). Our FY06 revenue projection is relatively unchanged at S$544.1m, supported by the great 267% HoH leap in Rotary's net order book to S$525m as of end June.

More contracts win in 2H06? Oil giant Shell has announced the setting up of its Shell Eastern Petrochemicals Complex on Pulau Bukom last Friday. This project will be kicked off in late 2006 with the construction of the ethylene cracker. In our opinion, given Rotary's illustrious track record on Jurong Island, it is likely to be one of the main contenders for a bite at part of this US$3b project. We note that Rotary is one of the leading providers of engineering, procurement and construction (EPC) and maintenance services on Jurong Island, and is also currently providing maintenance works for Shell's petroleum refinery on Pulau Bukom. Also,
Rotary will almost reach the halfway mark for the S$535m Universal Terminal project by end 2006, which should serve as a good resume on its capability to do mega sized EPC projects.

Significant price upside potential. We have raised our fair value estimate to S$0.88 (vs. S$0.745 previously), which gives a price upside potential of 45%. Our fair value is derived from the similar 2.2x P/B ratio and the switch to FY07 book value (vs. FY06 previously). We believe that this is reasonable due to closer proximity to the Universal Terminal project completion date in FY07, and Rotary's flawless execution of this mega contract year-todate in 2006. The implied forward PERs are 9.4x in FY06 and 11.3x in FY07. On the back of Rotary's proven project execution capability and the strong outlook for Singapore's Chemicals Industry Cluster, we reiterate our BUY rating on Rotary.

Stockwatch- CK Tang, Strong tourist arrivals shd be beneficial to the retail industry......

2006-09-10T16:41:00.000+08:00

Strong tourist arrivals shd be beneficial to the retail industry......

http://app.stb.com.sg/asp/new/new03a.asp?id=5703

Record highs and strong growth in the tourism sector expected in 2006 Singapore, 31 August 2006 – Singapore’s tourism industry hit record highs this July for monthly visitor arrivals and Average Occupancy Rates. Reviewing its half-year progress, the Singapore Tourism Board projects the industry will see historical highs for annual visitor arrivals compared to last year.

“The first half of 2006 has been very positive for the tourism industry. Each month this year has shown a record number of visitor arrivals over the same months in previous years. The People’s Republic of China, South Korea and the Philippines have consistently shown high visitor arrival growth over the same period last year thanks to successful marketing efforts and attractive carrier deals,” said Mr Lim Neo Chian, Chief Executive and Deputy Chairman of the STB. In July, the tourism industry not only broke the 900,000 barrier, setting a record of 913,000 visitor arrivals, but also saw Average Occupancy Rates reaching a record high of 91% and Average Room Rates increasing by 18.7% over July 2005 to S$160. “Due in part to school holidays and the Great Singapore Sale, July’s figures exceeded all historical monthly records for visitor arrivals in Singapore and Average Occupancy Rates. The higher room and occupancy rates we have enjoyed this year will certainly give confidence to hotel investors who want to develop hotels in Singapore,” said Mr Lim.

The STB set annual targets for 2006 visitor arrivals at 9.4 million and tourism receipts at S$12 billion. The Board is confident the visitor arrival targets will be met, due to potentially higher visitor arrivals in the school holiday months of July, August and December and the Singapore 2006 meetings in September, which include the International Monetary Fund and World Bank Group Boards of Governors Annual Meetings. “From January to June this year we welcomed 4.7 million visitors – this is 11.8% growth over the same period last year. We expect to meet our 2006 visitor arrivals target, and if we do, it will be another historical high for annual visitor arrivals,” said Mr Lim. There were 8.9 million visitor arrivals recorded in 2005 and 8.3 million in 2004. Higher visitor arrivals in the first half of 2006 resulted in higher visitor days – visitor days for January to June 2006 were estimated at 15.7 million, showing an 8.5% increase over the same period last year. Tourism receipts are also higher than last year. They hit S$5.5 billion in the first half of 2006, representing a 5.2% increase over January to June 2005.

Commenting on whether tourism receipts would be on target by the end of 2006, Mr Lim said: “The average length of stay for January to June 2006 was slightly lower than the same period in 2005 and this might pose some challenges to achieving our target for tourism receipts. Much will depend on the second half of the year, which we expect to perform better than the first half. We will likely end the year with higher tourism receipts than last year.” - End -

Stockwatch- Rotary Engineering (S'pore), role in $1 billion underground oil storage cavern at Jurong Island?

2006-09-10T14:30:00.000+08:00

I wonder if this is a potential project for Rotary Engineering, any views or insights from all of you out there?

Business Times - 22 Jul 2006
Work To Start Soon On $1b Oil Storage Cavern
Phase 1 will have the capacity to store about 9.2m barrels of crude oil

By Ronnie Lim

ACTUAL deep tunnelling work for an underground oil storage cavern at Jurong Island - estimated to cost $1 billion - is set to start soon. JTC Corporation has just this week called a pre-qualifying tender for design and construction of access shafts and 'start-up galleries' for the first phase of the Jurong Rock Cavern (JRC) project. These will help facilitate actual construction of the JRC proper.

For full article, read the following:

http://app.mfa.gov.sg/pr/read_content.asp?View,4887,

Sector Watch- Lingkaran Trans Kota (KLSE) RM2.77

2006-09-09T21:47:00.000+08:00

To read latest The Edge Malaysia articles on Lingkaran Trans Kota, click here:

http://www.theedgedaily.com/cms/search.jsp?query=%22lingkaran+trans+kota%22&sort=date

28-08-2006: Litrak expects single-digit traffic growth from now

By Isabelle Francis

Lingkaran Trans Kota Holdings Bhd (Litrak) expects a single-digit growth in traffic volume and foresees toll revenue growth to be underpinned by higher toll rates moving forward, said its chief executive officer Sazally Saidi.

Sazally said the Damansara-Puchong highway saw about 460,000 vehicles passing through its four toll plazas every day. He said traffic growth this year would likely be less than the 7%achieved last year.

“We will be looking at single-digit growth from now onwards as the highway matures. That is the trend for highways," he told reporters after Litrak's AGM and EGM in Shah Alam on Aug 29.

He added that discussions with the government on revising toll rates were still ongoing and are expected to be finalised before Jan 1, 2007.

“If there’s an increase, you’d see a reduction in volume but our total toll revenue should increase. From our experience, traffic would eventually come back again in six to 12 months."
Moving forward, Sazally said that Litrak would only see minimal capital expenditure in the immediate term.

He added that it plans to carry out its major upgrade works in the next 10 months. This will be financed by the RM30 million capital expenditure announced earlier this year.

Its chief operating offier Richard Lim said its toll plazas alignment was strategic, enabling it to benefit from township developments especially in Puchong and Damansara. “We expect traffic to grow once these townships are established. We have not reached our capacity yet, especially the toll plazas in the Southern side near Putrajaya.”

03-08-2006: Gamuda continues to raise Litrak stake

Gamuda Bhd continued to raise its stake in Lingkaran Trans Kota Holdings Bhd (Litrak), acquiring another 4.49 million shares on July 27.

A filing to Bursa Malaysia showed that after the acquisition, Gamuda owned 41.88% or 203.96 million shares. Litrak share price closed at RM2.72.

In January this year, Gamuda managing director Datuk Lin Yun Ling said the construction company wanted to increase its equity interest in Litrak to up to 50% but it will be done at an average market price of RM2.80.

He was quoted saying that based on Litrak share price at around RM2.80 “we will have a rate of return of between 17% and 18%, which we think is a good investment”.

11-July-2006 Toll concessionaires in the limelight

By Risen Jayaseelan

A number of highway concessionaires are slated for a scheduled toll hike beginning next year, as stipulated in their agreements with the government. These include Lebuhraya Damansara-Puchong (LDP), which is slated for a 60-sen hike, and the two toll gates at the Kuala Lumpur-Karak Highway, which will see an increase from a total of RM6.50 to RM8. The Cheras-Kajang Highway is due for a hike of more than 40% while Lebuhraya Shah Alam’s (Kesas highway) scheduled increase is from RM1.50 to RM2.20. The operator of the LDP is Lingkaran Trans Kota Holdings Bhd (Litrak), which is 38.4% owned by Gamuda. The LDP, which runs on a 33-year concession, is one of the most heavily used and lucrative highways in the Klang Valley.

However, the government has been subsidising 50 sen for every passenger car unit (PCU) since tolling on the highway started in January 1999. Stripping out the government subsidy and considering the new schedule hike, the new rate could be RM2.10. If the 50- sen subsidy continues, motorists will have to fork out RM1.60 or an additional 60 sen. GK Goh Research expects Litrak’s profits to jump more than 50% year-on-year in FY2007 and FY2008 as the toll increase, if approved, will flow directly into its bottom line. The report adds that Litrak’s dividends should double from current levels by FY2008. Litrak also operates the SPRINT Highway, which is scheduled for a rate hike although only in 2008. The 60km KL-Karak

Highway is operated by MTD Infraperdana Bhd. The Gombak stretch of the highway charges a RM4 toll while the toll rate on the Bentong stretch is RM2.50. The toll rates are scheduled to rise to RM5 and RM3 respectively. Unlisted Grand Saga Sdn Bhd is the concessionaire for the Cheras-Kajang Highway. There are two tolls on the 11.5km road. Current toll rates (for private passenger cars) are 70 sen at the ninth-mile toll plaza and 60 sen at the 11th-mile toll plaza. The scheduled increases for these tolls come January are RM1 and 90 sen respectively. The Kesas highway is operated by Kesas Sdn Bhd, in which Gamuda has a 30% stake. It is also scheduled for a rate hike to RM2.20 from RM1.50 currently. Although these increases have been scheduled, it is left to be seen whether they will take place as planned. In the past, the government has sought to renegotiate terms with concession holders for what have been deemed as social and political reasons. Explains an analyst, “As a result of the widespread opposition encountered each time toll rates are raised, the government has renegotiated with nearly every toll concessionaire for toll increases to be staggered over a longer period of time in return for a lower rate hike.” Toll rates are typically raised every three to five years at a compound rate that commensurates with inflation and operations and maintenance costs.

However, road users and other parties tend to resist toll increases. In the event a toll rise falls in an election year, there is the strong likelihood that the government will not want to approve it. If the government does not approve the toll hike, it has to compensate toll concessionaires for the difference. This is the case with the LDP, where the government is subsidising 50 sen per PCU. Analysts say in such cases, concessionaires actually benefit as low toll rates keep traffic volume higher than if rates are raised. “Revised concession terms are typically worked out in such a way that there is no impact on the net present value and any shortfall is compensated either through a lump sum cash payment or an extension to the life of the concession,” explains an analyst. The government could also ask the concessionaire to defer a toll hike and in return, the concession period is extended. In the case of PLUS Expressways Bhd, the biggest player in the toll road business, the government has lengthened its concession by eight years and seven months to end-2038 in lieu of certain toll hikes. Also recall that in 2003, the government revised the concession terms of the KL-Karak Highway. To compensate for a reduced toll rate, the government wrote off RM183 million in soft loans given to the concessionaire. The government also compensated the concessionaire RM97 million in cash and extended the concession by six years. Still, analysts point out that delays in toll rate increases tend to have a negative impact on earnings. “Earnings in the near term will be [negatively] affected and this in turn could push up the price-earnings multiple of the company,” notes an analyst. He adds that investors are also wary of revisions to concession agreements because of uncertainties. There is also a point of view that toll road concessions could be called into more serious negotiations by the government because of the discussions that are going on with the independent power producers (IPPs). The government is taking a second look at the terms of IPP agreements because many quarters feel that the IPPs are making excessive profits. However, although no decision has been reached, it is unlikely that the terms of the IPPs and those of toll concessionaires can be changed drastically. This is because any negative impact on the sanctity of the agreements relating to IPPs and toll concessionaires can have repercussions. A key issue would be financing as lenders are likely to shy away from such concession holders if it is discovered that their agreements can be revoked by the government.

29-May-2006 Investing Ideas: Litrak a strong cash generator

By Cindy Yeap

Its profits are growing. It will generate about RM160 million of free cash flow over the next three years. It is scheduled to get a 40% toll rate hike come January 2007 and be compensated if that does not materialise. That’s three reasons why analysts are calling a “buy” on Lingkaran Trans Kota Holdings Bhd, better known as Litrak. At last look, shares of Litrak, the concessionaire of Lebuhraya Damansara-Puchong (LDP), are already up 14% from the beginning of this year and 41% more than their price a year ago. But at least three analysts say there is still upside to the stock. The highest 12-month price target is from BNP Paribas at RM3.96, according to Bloomberg data. This represents a 55% potential upside going by last Friday’s RM2.56 close. “We like Litrak for its strong cash flow generation capability. We estimate FCF/EV [free cash flow over enterprise value] of 10.5%, which is 1.8 times that of PLUS Expressways Bhd. At current levels, we believe the market is undervaluing its cash flow,” a local analyst told clients earlier this month. Last Tuesday, the stock gained 12.15% ahead of the entitlement date of its 25 sen cash distribution and the release of its earnings for its fiscal year ended March 2006. Last Thursday, the company reported fourth quarter numbers that beat street estimates by 17%, helped by the taking in of lower than expected losses from its associate company, Sistem Penyuraian Trafik KL Barat Holdings Sdn Bhd (Sprint). “Losses from Sprint narrowed considerably this quarter… that was a [positive] surprise for the market… If you look at the traffic [volume] loss to LDP due to the partial closure of the MRR2 [Middle Ring Road 2], the same amount went to Sprint and that helped cut [associate] losses significantly,” says one analyst.

Net profit for the year ended March 31, 2006, rose 42.7% to RM79.74 million from RM55.88 million year-on-year on the back of a 7% topline growth to RM242.97 million. It is uncertain if analysts will be revising their earnings forecast for the company upwards due to the stronger than expected showing. Current consensus net profit forecast of RM84.08 million for fiscal year ending March 2007 (according to Bloomberg data) indicates a 5.4% growth this year. One analyst explained that his price target for the stock is derived from the company’s strong cash generation capability, which essentially translates to good dividend and cash distributions for its shareholders. Worth noting is the fact that Litrak’s controlling shareholder, Gamuda Bhd, has been raising its stake in Litrak. Analysts see the move as a strategy to help absorb the contraction in Gamuda’s earnings from its construction business. Gamuda in January increased its shareholding in the company, although the latter’s top management has said there are no plans to make Litrak a subsidiary for the time being. Gamuda now owns 40.25% of Litrak, after acquiring just under 2% of the latter’s shares on the open market at around RM2.80. (The RM2.80 is equivalent to RM2.24 now after a 25 sen cash distribution via a one-for-four bonus issue. The bonus shares were later cancelled.) Gamuda managing director Datuk Lin Yun Ling on Jan 12 had told reporters that buying Litrak shares was “a good investment” which gave them some 17% to 18% rate of return. At last Friday’s close of RM2.56, Gamuda has made a 14% paper gain on the money it spent to buy Litrak shares in January. One analyst reckons Gamuda would eventually want to consolidate Litrak into its books. This is not contrary to Lin’s statement to stay shy of 50% shareholding in Litrak. “I believe Gamuda would continue to absorb Litrak shares from the open market at prices they believe is right, and without triggering a mandatory offer… Litrak is generating strong cash and once debt levels fall in about five years, consolidating Litrak would be good for Gamuda’s books,” says the analyst. According to rules governing listed companies, Gamuda can buy up to 2% of Litrak shares every six months without triggering a mandatory general offer obligation. Meanwhile, Litrak (in its notes to accounts) says the partial closure of the MRR2 since February 2006 has had a negative impact on traffic volume at its Penchala Toll Plaza. However, the company says it “will not significantly affect” the overall results of the group in the current financial year. The closed section of MRR2 is expected to re open this August. Although its net dividend yields (excluding the recent 25 sen cash distribution) is only around 3% due to its lack of Section 108 tax credits, analysts are bullish on the company’s ability to change that due to its strong cash generation capability. “Litrak should have sufficient Section 108 tax credits in five years… around 2011. In the mean time, the company can also choose other means to boost yields such as capital repayments,” says one analyst. In fact, gross yields are expected to pick up to around 8.6% in fiscal 2008. Previously, losses from its 50%-owned Sprint highway were the dampener to Litrak’s earnings performance. “Sprint is expected to still be loss-making over the next few years due to interest expense and amortisation charges, but the market is beginning to see positive signs. If they continue to successfully cut Sprint’s losses, the market is bound to give them more recognition,” says one analyst. Litrak holds a 33-year concession with the Malaysian government for constructing the LDP, based on an agreement signed on April 26, 1996. Sprint manages the Damansara Link, Kerinchi Link and Penchala Link.

25-01-2006: Litrak to spend RM30m-35m on road upgrade

By Kevin Tan

Lingkaran Trans Kota Holdings Bhd (Litrak) is allocating between RM30 million to RM35 million this year to upgrade roads and other related-facilities, its chief executive officer Sazally Saidi said.

Of that, more than RM20 million would be used to resurface the Damansara-Puchong Highway (LDP), he told reporters after Litrak’s EGM in Shah Alam on Jan 25.
He said the company was spending a considerable amount for the LDP upgrade works this year considering it only spent about RM10 million for such works in the past.
Sazally said Litrak planned to start the upgrade works by the first quarter of the year. Litrak is still identifying the areas for upgrading and staggering them for work in stages. Besides LDP,

Litrak also holds a 33-year concession for the 26.5 kilometre-long Sprint Highway, which consists of Kerinchi, Penchala and Damansara links.
Litrak chief operating officer Richard Lim Kim Ong said while the Sprint highway contributed a positive cashflow, the returns had yet to match the investment.
He was however confident of Sprint’s contribution to the company over the long run. “Overall, the project will give us a positive return in the concession period,” he said.
12-01-2006: Gamuda wants to up Litrak stake to 50% By Doreen Leong

Gamuda Bhd wants to increase its equity interest in Lingkaran Trans Kota Holdings Bhd (Litrak) to up to 50% but it will be done at an average market price of RM2.80, its managing director Datuk Lin Yun Ling said.
He said: “Based on the current share price of Litrak at around RM2.80 now, we will have a rate of return of between 17% and 18%, which we think is a good investment.
“At the current price, it is something we would like to do - increasing our stake. But if it goes up to RM5, we will stop and think about it."
Speaking to reporters after the company's AGM in Shah Alam on Jan 12, Lin said Gamuda, which was the single largest shareholder with a 38.44% stake in Litrak, had recently acquired an additional 1.5% stake.

On the outlook for the current financial year ending July 31, 2006, Lin warned that its net profit was expected to drop by 30% from RM265.78 million last year, as reflected by the similar drop in the first quarter.
However, he expected Gamuda to see more overseas contracts flowing in to replenish its existing order book to overcome setbacks faced in FY06.
He said: "What happened this year was a reflection of events that took place more than two years ago where jobs don’t get implemented as planned. However, we have doubled our efforts to get ready for the overseas markets.

“You can see from the results and the share price, we are not exactly growing as we would like. But the management is quite excited about prospects for this calendar year.”
Last year, Gamuda's share price hit the year’s low at RM3.12 on Dec 28 after analysts downgraded the counter on less-than-optimistic earnings outlook following a 33.44% fall in 1Q profit to RM46.6 million from RM70.02 million in the previous corresponding period.
Lin said Gamuda was confident of "jobs flowing in from overseas at more rapid pace". The group has been invited or tendered for overseas infrastructure jobs worth over RM20 billion.
He said Gamuda had been pre-qualified and invited for mega construction projects in the Middle East, Indo-China and Thailand.

“Given the slimmer margins overseas, we expect to at least double our turnover to be able to make the construction profits that we are used to make in our good years,” Lin said.
Together with recently secured two new projects in the Middle East, its current order book stood at RM3.8 billion.

Lin said it also hoped to secure overseas jobs for build-operate-transfer jobs and property development this year.
On its proposed acquisition of another 10% stake in Syarikat Pengeluar Air Selangor Holdings Bhd, he said the price tag of RM135 million was “not unfairly high”. He said the water concessionaire was expected to give a return on investment of above 16%.

Stockwatch- Rotary Engineering (S'pore) S$0.59

2006-08-26T21:15:00.000+08:00

Rotary Engineering recently presented at a Citigroup small cap conference and last friday some conference participants visited its Jurong worksite. I believe it is in the right sector and will benefit from the short supply of terminal storage facilities for the next few years.

The risk is if Rotary is not able to continue to win contracts to continue its growth in its order book and also Rotary has not been institutionalised yet, i.e. shares are not in strong hands and it may not performed as well as we wish; currently only OCBC has a coverage on it, its fair value for Rotary is 88cts, but note it estimates a dip in profit in 2007 relative to 2006.

If Rotary can win enough contracts to continue to keep its growth momentum in its order book and as a result allow analysts to project a higher profit in 2007 and 2008 year on year, in my view, Rotary will be "discovered" then.

Here's an write up in a blog that I follow that talk abt the sector for yr reference:

http://hottrendswatch.blogspot.com/2006_07_01_hottrendswatch_archive.html

Extracts from The Edge Singapore 7 Aug 2006:

1. Rotary recently set up 2 joint ventures with the Rafid Group, a Saudi company that provides services to the oil and gas and petrochemical industries. Aided by Rafid Group, the company is hoping to make inroads into the Saudi Kingdom.

2. Representatives from Saudi Aramco, the national oil and gas company, recently visited Rotary's work sites in Jurong Island and pre-qualified Rotary within 48 hours.

3. According to management, the upswing in the industry is so strong that there are too many jobs chasing after too few service providers.

4. On Jan 4 2006, Rotary announced a contract worth $535 million to build an oil terminal in Jurong Island for Universal Terminal Pte Ltd- its biggest contract ever. Universal Terminal is a subsidiary of Singapore's biggest oil trader Hin Leong Trading and Chinese oil and gas giant PetroChina.

When completed in Oct 2007, Universal Terminal will be the single largest independently owned oil terminal in the world. All other storage terminals of this scale are owned by oil and gas multinationals like Shell and ExxonMobil.

The big independent terminal operators, include Vopak of the Netherlands and Oiltanking of Germany. These tanks are used to store products like crude oil, jet fuel and diesel.

5. Chairman and Managing Director, Chia Kim Piow, says, "I have gone through many cycles, maybe 4 or 5 times. And demand for terminals this time around is very strong."

As Chia sees it, the rapid development in India and China is making the difference. With more exploration and production taking place in and around these countries, the need for storage will rise in tandem. Also, China is intently building up its strategic stockpiles of oil, adding to the demand for storage facilities.

Moreover, to reach less developed interior areas and communities, China and India are building smaller tanks and infrastructure inland. So the nest step for Rotary is to start building depots. These depots or smaller storage tanks will be connected to larger terminals by rail or pipeline.

6. With the surge of investments in alternative fuels like biodiesel, such plant will need storage tanks and pipelines as well.

7. Further down, Rotary hopes to get into the offsite and utilities business. Refineries and petrochemical complexes typically have extensive networks of pipelines transporting fuel, gas, steam, water and the like to and fro. Rotary is in talks to co-own these pipes, which will give it a lease income and throughput fee.

Citigroup, 24 Aug 2005 (Not Rated)

Corporate Day Takeaways: A Regional EPCM Specialist

 Business — Rotary is a provider of engineering, procurement, construction and maintenance services, supporting the oil and gas and petrochemical industries. Established in 1972, the group has a total workforce of 3,000 employees and has strong client base that includes companies such as Oiltanking, Vopak, Thai Tank Terminal, Hin Leong, BP and Tankstore to name a few.

 Key ratios and 1H06 results — Mkt cap S$237m. Consensus PER: 6.3x FY06E and 7.5x FY07E. 1HFY06 results: revenues up 150% yoy to S$202m, gross profits up 81% yoy to S$31.7m and net income up 395% yoy to S$16m. Net cash: S$47.9m. 1H06 revenue split: 84% Singapore (due largely to Universal Terminal), 11% China, 4% Thailand, and 1% Others.

 Record order book — Group order book as at 30 Jun 06 stands at a historical record of S$525m, the bulk of which comes from the construction of Universal Terminal, which is one of the largest independent oil terminals in the world. The new terminal will house 73 storage tanks for crude and petroleum products. PetroChina has invested US$160m to take a 35% stake in Universal Terminal.

 Prospects I — Management appears optimistic on the outlook. Strong growth in oil consumption for emerging Asia (accounting for 45% of total world increase) should drive the continued need for related facilities. The International Energy Agency estimates that oil consumption in Emerging Asia should more than double to 33.6m bbl/day by 2025 from 15.1m in 2002.

 Prospects II — According to management, there is strong growth potential in China for storage terminals as the government builds up the nation’s strategic stockpile of petroleum resources. In Singapore, tankage capacity is set to grow with storage for 41mbbls in the pipeline. This is up from 22m bbl of current storage capacity, which has been running at 90% for the past five years.

 Prospects III — Further, Shell and Exxon-Mobil are planning to invest in Singapore for two major petrochemical facilities. Management expects other supporting plants to be set up which could provide opportunities. Rotary is also optimistic on the Middle East and Thailand.

 Industry implications — Management said it has a 50-60% hit rate in Singapore for projects from multinational companies and independents. The group’s optimism reinforces our positive view on the offshore and marine industry.

Some recent company announcements/events by Rotary engineering:

21 Aug 2006- awarded a S$24mil contract by Nexsol (Singapore) Pte. Ltd, a subsidiary company of Peter Cremer (Singapore) GmBH for the Engineering, Procurement and Construction (EPC) of a biodiesel process plant and its related facilities on Jurong Island (the "Project") to produce biofuel and other downstream derivatives, targeted to be completed by end June 2007.

3 Aug 2006- post first half 2006 net profit of S$9.3mil, up 395% from previous year

8 May 2006- secures S$41mil contract for petroleum storage project (Oiltanking phase 7 involves construction of nine storage tanks, one jetty topside facilities, piping, civil, structural, equipment installation and electrical & instrumentation. It is scheduled for completion in December 2006.)

10 May 2006- incorporation of a 50/50 JV in Saudi Arabia, Petrol Steel Company Limited (Saudi Arabian parties named ABDUL AZIZ ABDUL MEHSON ABDUL WAHAB AL MANDIL(25%) and ADEL ABDUL MEHSON ABDUL WAHAB AL MANDIL (25%))

23 Feb 2006- post full year 2005 net profit of S$16mil, up 70% from previous year, 1 cts dividend less tax (up from 0.8ct previous year)

2 Feb- dispose its leasehold property located at No. 2, Gul Street 2, Singapore 629287 (the "Property") to its 70% owned subsidiary, Supermec Pte Ltd ("Supermec") at a cash consideration of $530,000 due to restructuring of businesses within the Group as well as expansion of business by Supermec

20 Jan 2006- entered into a Sale and Purchase Agreement ("the Agreement") to acquire the balance of the 50% equity interest in IMC Heavy Equipment Pte Ltd ("IMCH"), from its existing shareholder, Tiong Woon Crane & Transport Pte Ltd, for a consideration of S$521,843.8313 Jan 2006- disposed of the entire equity interests in Paper Dimension ("Disposal") to a non-related third party (the "Purchaser") on 13th January 2006, for the purpose of streamlining the Rotary's Group business

4 Jan 2006- awarded its biggest contract to date to build an oil storage terminal, worth S$535 million, in Jurong Island

22 Dec 2005- listing of associated company, TRC Construction Public Company Limited ("TRC"), TRC has officially commenced trading on the Stock Exchange of Thailand ("SET") on

22 December 2005 ("Listing"). Rotary's stake has been reduced from 37.5% to 30% as a result of the expanded paid up capital.

14 Dec 2005- entered into a Joint Venture Agreement with the Saudi Arabian parties namely ABDUL AZIZ A. AL MANDIL (20%), RIYADH AL NASSAR (10%) and AL TA'AFUF COMPANY FOR ELETRICAL WORKS (20%) and has incorporated a company in the Kingdom of Saudi Arabia known as Rotary Arabia Company Private Limited ("JVCO") on December 11, 2005 to pursue potential business opportunities and projects in the Kingdom of Saudi Arabia; will engage in the business of engineering and procurement services with primary focus in the electrical and instrumentation aspects supporting the oil and gas, petrochemical, water and waste treatment industries in Saudi Arabia.

5 Sep 2005- appointment of CFO Alex Goh

4 Aug 2005- post first half 2005 net profit of S$3.2mil, up 7% from previous year

Some useful news links:

http://www.iss-shipping.com/news/item.asp?niid=3280

Stockwatch- China Sky Chemical Fibre Co., Ltd (Singapore) $1.07

2006-08-06T22:16:00.000+08:00

2005 Annual Report:

COMPANY OVERVIEW

Established in 2002, the China Sky Group is a manufacturer and supplier of chemical fi bres, mainly quality high-end nylon fibres, to the textile and garment manufacturers in Fujian and the surrounding Zhejiang, Jiangsu and Guangdong provinces in the People’s Republic of China (“PRC”).

Marketed under the “Tianyu” trademark and brand name, the Group’s nylon fi bres have a wide and diverse range of commercial applications. They can be found in high-end sportswear, casual wear, shoes, bags, travel appliances and
in consumer durables like upholstery and nylon webbings used in the home furnishing industry.

The Group’s principal product lines are the nylon Full Drawn Yarn (“FDY”) and the nylon High Oriented Yarn (“HOY”).
Having commenced the commercial production of the nylon (lustrous) FDY in FY2005, it has plans to develop another four new product lines during 2006 and 2007.

The Group operates a 27,000 square metre production facility in Quanzhou City, Fujian province, which is strategically located amongst clusters of textile manufacturers in the region. As at the end of FY2005, the Group operated seven units of automated production equipment in commercial production with a total production capacity of approximately 39,000 metric tonnes of nylon yarns per annum.

Competitive Strengths

The performance of the past year is the result of successful and careful execution of growth strategies by a dedicated team, driven by a strong vision of China Sky and of the nylon industry in China.

Instrumental to the Group’s success are several factors, including the strategic location of our facilities which keep us close to our customers while reducing transportation costs and delivery times. The strong management team is led by the Group CEO and Executive Director, Huang Zhong Xuan, and Executive Director, Song Jian Sheng, who heads the Research and Development Team with his expertise in chemical fi bres in the PRC. Both men have more than 20 years of industry experience between them. The Research and Development Team has also been infl uential in identifying new commercial products, developing and improving production techniques and processes to raise the overall efficiency.

Having established a track record for producing quality high-end chemical and nylon fi bres, the Group’s “Tianyu” trademark and brand name is synonymous with quality and good personalised after-sales service support. The Group was a recipient of a “Gold Medal of Quality New Chemical Fibre Product of China” from the China Chemical Fibre Association in 2004.
To further improve our work processes, we have invited Dr Yu Yang Ming, Director of the Chinese Institute of Strategic Planning, to be stationed at our facilities for one month. Dr Yu will provide his assessment and recommendations to help improve our operation workflow procedures.

Expansion Plans and Strategies For Growth

The Group is confident about the potential of the nylon fibre business in the PRC as growing affl uence and better living standards will spur demand for high-quality nylon via use for
higher-end apparel. As PRC textile manufacturers improve their technologies in dyeing, fabric-treatment and other pre-production services, these improvements will also stimulate the demand for chemical fibres.

There are currently about 50 to 60 domestic competitors with capacity of 5,000 to 10,000 tonnes per year each; many of them producing lower-quality nylon. Nylon consumption in the PRC reached an estimated 1.0 to 1.2 million tonnes, with imports accounting for a third of PRC nylon usage. Such is the demand that nylon producers such as China Sky have been able to pass on increases in raw material prices to customers.

With the European Union and the USA increasing the PRC export quotas for garments after rounds of talks in the past year, sentiment in the industry has greatly improved and has led to
higher demand for our yarns.

China Sky currently commands an estimated 3% to 4% share of the PRC market for nylon fibre. The Group intends to raise this to 6% to 7% in FY2006 and further to 10% by the end of
FY2007. The capacity expansion, which was outlined in its IPO prospectus, had begun in FY2005 with the increase in machinery or orders for equipment. Production capacity will increase from 39,000 tonnes in FY2005 to 72,000 tonnes by installing two new lines (six units of production equipment) before the second quarter of FY2006, at least two month ahead of the July 2006 deadline we had previously outlined in the prospectus. This expansion will
involve capital expenditure of about RMB 100 million and is being met by IPO proceeds or internal resources, without having to incur borrowings.

Beyond capacity expansion, the Group is also seeking to offer higher-value products. Out of total new capacity of 33,000 tonnes earmarked for FY2006, 30,000 tonnes will comprise FDY and the balance 3,000 tonnes HOY.

The Group plans to produce two new products, Nylon Super Resilient Full Drawn Yarn (“SR-FDY” which has extra resilient capability while maintaining its softness, making it suitable for
outdoor sports clothing) and Nylon Super Resilient High Oriented Yarn (“SR HOY” which has same qualities as SR-FDY but is of medium strength with stronger stretchability). When these
production capabilities are in place, China Sky will be the first in China, and only the second such factory in the world, to offer such quality products.

China Sky is also on the lookout for growth opportunities beyond organic means. The textile sector has received support from the PRC Government as it seeks to develop rural areas and increase employment rates. However, China Sky remains focused on its core competency within the nylon sector as it believes it will continue to have a competitive edge in this sector.

OUTLOOK AND FORWARD STRATEGY

The Board is confident of the outlook for the nylon industry in China. To tap the opportunities in this sector, the Group has embarked on a two-pronged strategy.

The first is to increase its share of nylon fi bre market in China from 3% to 4% in 2005, to 10% in 2007, starting with an increase in production capacity from 39,000 tonnes in 2005 to 2,000 tonnes by the second quarter of 2006.

The second is to offer products of higher-value. China Sky is moving further up the value chain to produce Nylon Super Resilient Full Drawn Yarn (“SR-FDY”) and Nylon Super Resilient High Oriented Yarn (“SR HOY”). When these production capabilities are in place, China Sky will be the fi rst in the PRC and only the second such factory in the world to offer such quality products.

Over the longer term, we are seeking to grow beyond organic means and we are on the lookout for suitable M&A opportunities.

2006 1H Result Announcement:

Outlook commentaries

The demand for nylon fibre remained strong in second quarter of FY2006 mainly due to the growing demand for high nylon content products in the domestic PRC market and exports to overseas markets.

In second quarter of FY2006, we have completed the installation of six new production units,
increasing our production capacity from the current 39,000 tonnes to 77,000 tonnes of nylon per year. Commercial production commenced towards the end of the second quarter of FY2006 and is expected to contribute to our financial performance from the second half of FY2006 onwards.

We have commenced the initial groundwork on the construction of a new factory building at our existing location which will be used to house our new production facility to produce our two new products: ATY and DTY. ATY and DTY have a wide range of applications in textile and fabric manufacturing, and are suitable for higher end and higher value apparels that require very high tensile strength and resilience. The planned facility will comprise two production lines with an expected total capacity of 16,000 tonnes per annum and is targeted to commence operations by the end of FY2006.

We are also in the evaluation and design stages of a proposed new production facility for the
production of another two new products, namely SR-FDY and SR-HOY. The construction of the new factory, which will be sited at our existing location, is targeted to commence by the end of FY2006 or the early part of FY2007.

We are confident of our performance for the rest of FY2006 and we expect the growth momentum achieved in 2Q FY2006 to continue in view of the growing demand for high nylon
content products in the domestic PRC market and exports to overseas markets. Apart from
growing our business operations organically, we are constantly on the lookout for suitable
companies to acquire, which would complement our business strategies and to bring additionalvalue to our shareholders.

Production for Q12006 was affected as the plant has to be shut down for two weeks to facilitate the installation of the newly expanded production equipment and facilities which were expected to enter commercial production towards the end of Q2. Consequently, revenue and profitability has been affected as compared to Q1 2006.

Stockwatch- Media Prima BHD (Malaysia) RM$1.66

2006-08-06T13:56:00.000+08:00

Media Prima now controls Malaysia's commercial free-to-air sector, owning all 4 private channels: TV3, 8TV, TV9 (target the mass Malay market) and NTV7.

It controls New Straits Times Press (NSTP), operating the biggest-selling Malay-language newspaper, as well as the eponymous English-language paper.

It also runs 2 national radio channels, including Hot Fm, the 2nd highest-rated channel.

Cross-media capability should make an impact: marketing costs are starting to fall, as it can now promote TV programming through its own radio stations; the company also now embarks on more multi-platform promotions, broadening impact across the stable of media platforms.

Media Prima will benefit from a stronger ringgit as it will pay less from imported content.

For The Edge articles on Media Prima Bhd, read :

http://www.theedgedaily.com/cms/search.jsp?query=%22media+prima%22&sort=date&page=1

Media Prima Bhd hopes to list its 70%-owned subsidiary TV3 Network Ltd (TV3 Ghana) on the Ghana Stock Exchange by year-end to realise its investment and to expand its operations in Malaysia.

CEO Abdul Rahman said Media Prima aims to maintain its strong performance this year after reporting a 28% growth in turnover to RM99.87 million in the first quarter from a year earlier.
On its recently acquired television network, ntv7, Abdul Rahman said it was showing signs of financial recovery boosted by its position as a licensed host broadcaster of the current World Cup. He said TV9 was also garnering increasing viewership, with 6% of total audience of 23 million just two months into its full broadcast, comparable with the average viewership of its two-year old 8TV.

Media Prima also hopes to progressively increase its dividend payout ratio in the future following a maiden dividend of two sen or a payout of more than 20% of its net profit.

(The Edge 28 June 2006)

Media Prima Bhd’s HOT FM and FLY FM, targeted at listeners between the ages of 15 and 29, have gained a total of 3.4 million listeners, according to a recent survey conducted by Nielsen Media Research.

In a statement on June 6, Media Prima said HOT FM had attracted 2.92 million listeners since it started operations on Feb 6, 2006, making it the second biggest radio station in Malaysia in eight weeks.

It said having been on air for six months, FLY FM had managed to accumulate a listernership of 434,000 bringing it to the position of the second biggest English radio station for listeners between the ages of 15 and 30.

Media Prima’s head of radio, Ahmad Izham Omar, said extra efforts were taken to attract a core group of listeners. “All our efforts will be in recognition of the listeners’ tastes and changing lifestyles. "There will be definite emphasis on the effort to extend and concentrate radio listenership in the future, as we strive further to be an essential part of our listeners’ lives,” he said.

Media Prima said both stations were placed in a competitive environment and would continue to build and improve its network to ensure all areas as well as programmes appealed to its listeners.

(The Edge 6 June 2006)

Media Prima Bhd posted a 27% increase in operating profit to RM12.24 million in the first quarter ended March 31, 2006 from RM9.64 million a year earlier as a result of strong revenue growth and prudent cost management.

However, it recorded a net loss of RM6.9 million due to losses incurred by its 43%-owned associate, The New Straits Times Press (Malaysia) Bhd (NSTP), arising from a one-off exceptional voluntary separation cost of RM29 million undertaken to improve the cost efficiency of NSTP.

In a statement on May 18, Media Prima said revenue rose 28% to RM99.87 million from RM77.98 million previously due to strong quarter-on-quarter growth registered by TV3 and 8TV, and additional revenue from NTV7 and two radio stations, Hot.FM and Fly.FM.
It said TV3 maintained its position as the nation’s leading free-to-air TV station in Malaysia, while both 8TV and NTV7 continued growth in viewership.

It said all three networks now collectively held a 48% of total Malaysia television viewership, up from 44% a year earlier.

(The Edge 18 May 2006)

TV9, the nation’s new free-to-air TV station, which will begin transmission from on April 22, has targets to reach seven million viewers in the country, with Malays as its target audience.
Ch-9 Media Sdn Bhd chief operating officer Bukhari Che Muda said its prime-time programmes would be aired to cater to Malay audiences aged between six to 14 years old, and 15 to 34 years old.

He said the television station, the fourth under the Media Prima Bhd stable, had invested about RM20 million in programming and transmission. “Our strength is content and branding; we’ve done extensive research on the audience’s profile and their needs.
“We’re very confident about TV9; we believe we’ll reach seven million viewers, including those who seldom or never watch TV,” Bukhari said after the signing ceremony between Ch-9 Media and Senheng Electric (KL) Sdn Bhd in Petaling Jaya on April 21 to provide nationwide frequency-tuning and antenna-fixing services.

Citing a research by Nielsen Media, Bukhari said 96% of the country’s Malay population watch TV. “The TV station (TV9) positions itself as a Malay-focussed station, with 85% of the programmes aired in the Malay language, 10% in English and 5% in other languages. Some 45% of our programmes are local content and the rest are foreign programmes imported from the US, the Philippines, Indonesia, India, Korea, Thailand and Hong Kong,” he said.
TV9 will broadcast a two-hour live interactive talk show "Salam di 9" to launch its official transmission in the peninsula at 8.30pm on April 22.

On the revenue it expected from TV9, Bukhari said: “We do have a forecast, but it’s too early to reveal it.” Bukhari said it would extend TV9’s coverage to Sabah and Sarawak later.

(The Edge 21 Apr 2006)

Other would-be winners flagged by CLSA include the motor sector, airline stocks and the media companies. Imported car parts and jet fuel should cost less, while television operators like Astro All Asia Networks plc and Media Prima Bhd will pay less for imported content. "…programming costs make up about 30% of total costs", says CLSA.

(The Edge 12 April 2006 on Stronger Ringgit)

Media Prima, MediaCorp team up to create Chinese programmes By Isabelle Francis

Media Prima Bhd has teamed up with Singapore-based MediaCorp Pte Ltd to co-produce Chinese programmes in Mandarin for the local and regional markets, Media Prima adviser Amrin Awaluddin said.

Media Prima subsidiary Natseven Sdn Bhd will produce the programmes at MediaCorp Studios in Malaysia for the Chinese urban-focussed channel, ntv7, and for other Media Prima TV channels.

The first local Mandarin drama from the venture will be screened starting October. The 50:50 collaboration is for a period of three years.

Amrin, who is the CEO of Natseven, the operator of ntv7, hoped that the partnership would replicate the success of its Malay programmes that were now exported overseas.
He said the collaboration would be part of Natseven's RM20 million to RM30 million budget for content development this year.

“This is the first time we combine forces to collaborate and produce Chinese television programmes. Previously, we would buy the contents, which was cheaper.
“This is a long-term investment for us. We would have to focus on the local market first, then only export.

"This collaboration is a springboard for us to go regionally,” he told reporters after announcing the partnership with MediaCorp in Petaling Jaya on March 30.

Amrin said ntv7 was expected to grow its 24% share of some 145,000 Chinese audience aged six years and above across all free-to-air TV and pay-TV Chinese channels on prime time. It also holds a 36% share of viewers aged from 25 years.

Citing that 90% of Media Prima’s revenue came from advertising expenditure (adex), Amrin said the group's Chinese adex contributed 30% to 40% of its total adex last year.
Amrin added that ntv7 targeted to reduce its foreign contents to between 50% and 55% from 60% now by year end.

Meanwhile, MediaCorp deputy group CEO (television) Chang Long Jong said the alliance with Natseven would open opportunities for production experience exchange.
"We believe our experiences can play a crucial role in helping Natseven achieve its goal in becoming a leading Chinese content provider," he added.

(The Edge 30 Mar 2006)

Media Prima launches ad packages to boost revenue

Media Prima Bhd has introduced an integrated cross-sell and cross-market campaign to boost its advertising revenue by combining its network of television and radio stations with its print subsidiary, The New Straits Times Press (Malaysia) Bhd (NSTP).

The six-month campaign seeks to attract advertisers to tap its four television networks, two radio stations and NSTP’s stable of publications.

Speaking to reporters after the launch of the Media Combo packages on March 3, Media Prima group managing director and CEO Abdul Rahman Ahmad said it was providing advertisers a single platform to reach an audience close to 20 million people. “This includes 11.2 million television viewers, 6.8 million newspaper readers and 1.9 million potential listeners,” he said.
NSTP chief executive officer Datuk Syed Faisal Albar said the Media Combo package was a strategic step forward, involving cross marketing of the various media vehicles.

He said combining the publications under the NSTP group and Media Prima’s television and radio stations offered a varied range of market segments. The Media Combo packages are initially targeted at three markets – property, technology and corporate.

Abdul Rahman said the packages might be offered to other markets in the future, adding that the group's advertising revenue for last year was RM700 million.

(The Edge 3 Mar 2006)

Stockwatch- CIMA (Malaysia) The French continue to woo Cima

2006-08-06T13:35:00.000+08:00

Corporate: The French continue to woo Cima

By Risen Jayaseelan

The new offer by France's Vicat Group for the assets of Cement Industries of Malaysia Bhd (Cima) is for a 49% stake in the latter's assets, sources say. This is in line with what Cima had counter proposed to Vicat after the latter (Vicat) had in early March made an offer to buy 51% of Cima's assets. "This means that there is little reason why Cima should not accept this offer from a conceptual standpoint. Things, however, could go wrong if there is no agreement on valuation," says a source. It is understood that Vicat has also agreed to Cima's terms on the issue of management control. It is believed that Vicat is asking for three key management positions in Cima and is fine with not having the position of managing director. Vicat is also asking for directorships at Cima's subsidiaries — another point which Cima's board had no problem with earlier. Two other terms are believed to be that if the Cima/Vicat joint venture does agree to go overseas, then Vicat will be allowed to have a majority stake in the foreign venture. And the other is the first right of refusal clause: In the event Cima's shareholders wish to sell more of their shares, Vicat will be given the first right to buy them. The new offer by Vicat is indicative of its seriousness in acquiring Cima.

for rest of article, read http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_c8519ce5-cb73c03a-29d65b00-a749fb1b

Stockwatch- CIMA (Malaysia)

2006-07-26T10:15:00.000+08:00

Company Name: CEMENT INDUSTRIES OF MALAYSIA BERHAD
Stock Name: CIMA
Date Announced: 25/07/2006
Type: Announcement
Subject: OFFER TO ACQUIRE EQUITY INTEREST IN SUBSIDIARIES OF CIMA

Contents :Further to the last announcement dated 19 June 2006 in respect of the offer from VICAT which lapsed on 1 June 2006, we are pleased to announce that CIMA has received a fresh offer today from VICAT through its local solicitors to acquire equity interest in the subsidiaries of CIMA. The offer has no validity period.The offer is being considered by the Board of CIMA and further announcement will be made in due course.This announcement is dated 25 July 2006.

Dreadful Stocks to Avoid

2006-07-22T13:39:00.000+08:00

Below is an article that could be useful to avoid losses :)

Dreadful Stocks to Avoid
By Richard Gibbons July 21, 2006

Warren Buffett's first rule of investing is "Never lose money." To this, he often adds rule No. 2: "Never forget rule No. 1." Of course, following these rules is easier said than done. But Buffett's done pretty well, so it seems unwise to simply dismiss his advice as the semi-coherent ramblings of a man who's read way too many 10-Ks.

I take those rules to heart in my investment strategy. I try to focus my investment dollars on sustainable, undervalued businesses that I can easily understand. Buffett has made more than $40 billion for himself using that strategy, and he's made even more for his partners and shareholders over the years. Do you really need to assume a lot of risk to make more than $40 billion? My answer, and the answer of my colleagues at Motley Fool Inside Value, is "Heck, no!" If I make only $40 billion, I'll be perfectly satisfied.
People spend a lot of time discussing the companies Buffett buys. But in the spirit of not losing money, it's equally worthwhile to understand the types of businesses that Buffett does not buy, in order to steer clear of potential duds. I see five main categories:

1. Businesses that bet the farm

In some industries, companies occasionally have to make critically important decisions. If the company makes the wrong choice, it will be dealt a crippling blow. This is terrible for a shareholder, because even if the company makes the right decision one month, it might fail to do so the next. There is no "three strikes and you're out" policy. One strike, and it's game over -- your money's gone.

Consider Boeing's conundrum in the superjumbo jet market. Developing a new jet costs billions of dollars, which can be recouped only if the jet proves to be a huge success. Boeing's competition, Airbus, already has more than 150 orders for its A380 superjumbo. But Boeing's research shows that airlines are moving away from a hub-and-spoke model. Thus, Boeing is betting the farm against the superjumbo, opting instead to develop the 787, a smaller, long-range jet that it expects to better address the market's needs. But if Boeing's analysis is incorrect and the market moves toward the superjumbos, it will lose customers. Either way, it's a tough decision, with potentially terrible consequences for Boeing.

2. Businesses dependent on research

It's quite reasonable to believe that research can be a competitive advantage for certain companies. In fact, one reason Juniper Networks (Nasdaq: JNPR) has been successful is that it has been able to continually develop new networking hardware. Nevertheless, there is a downside to research. Often, innovative companies are required to do research simply to maintain their competitive positions. And if the research dries up, a company suffers.

For instance, consider the plight of Pfizer (NYSE: PFE). Like many of the huge pharmaceutical companies, Pfizer had an impressive history of earnings growth because of new drug discoveries. But now Pfizer's struggling. Not only is it facing lawsuits over Celebrex and Bextra, but its labs are laboring to find new drugs to replace the old. And in 2011, its biggest drug, Lipitor, is coming off patent. As a large pharmaceutical, it still has many dominating competitive advantages, but fears about its pipeline have kept investors away from the stock.
Thus, tech firms, pharmaceuticals, and other companies dependent on research constantly have to be wary of their innovation failing. This is in stark contrast to a company such as American Express (NYSE: AXP), which could develop nothing for a decade and still have a healthy business. While I don't think this is sufficient reason to sell off all your technology or pharmaceutical stocks, I can understand why Buffett tends to avoid such investments.

3. Debt-burdened companies

In general, Buffett avoids companies with a lot of debt. This makes sense. During the best of times, large amounts of debt mean that cash that could be put toward growing the business or rewarding shareholders is instead servicing the debt. In a crisis, debt greatly limits a company's options and can sometimes lead to bankruptcy.
A more subtle point is that great businesses throw off piles of cash. Great businesses generally don't need to use huge amounts of debt leverage to achieve an acceptable return for shareholders. So if a company needs debt to achieve reasonable returns, it's less likely to be a great business. You can see this with airlines like AMR (NYSE: AMR) and UAL (Nasdaq: UAUA). Both have billions of dollars of debt because they needed to take on that debt to build out their routes and pay the bills during hard times. But when the travel cycle hits a trough, the debt is frequently too large to service, and airlines can be forced into bankruptcy, as UAL was recently.

4. Companies with questionable management

Management has incredible power. If executives want to enrich themselves at the expense of shareholders, either directly or by misrepresenting the company's prospects, individual shareholders have almost no hope of stopping them. I strongly recommend avoiding companies where there's even a hint that management lacks integrity. Some clues to look for here include excessively optimistic press releases, overly generous compensation or options grants, and frequently blaming external circumstances for operational shortcomings. WorldCom and Enron shares may have risen for years, but at the end of the day, shareholders received almost nothing. That's why I think questionable management is the worst flaw a company can have.

5. Companies that require continued capital investment

Over the long term, shareholders make spectacular returns by buying businesses that are able to achieve extraordinary returns on capital. This leads to excess capital that the company can use to repurchase shares, pay dividends to shareholders, or reinvest in further growth. Companies that constantly need to make additional capital investments to keep the business going are the antithesis of this ideal -- the main beneficiaries will be employees, management, suppliers, and government. In other words, everyone except shareholders.

Semiconductor companies, because of the huge expense of building and maintaining chip-fabrication facilities, also suffer from this disadvantage. Chartered Semiconductor Manufacturing (Nasdaq: CHRT) for example, has found profits and free cash flow hard to come by while spending the majority of its revenue over the past few years on capital expenditures.

The upshot

These characteristics don't necessarily make a company a bad investment. Intuitive Surgical (Nasdaq: ISRG), for instance, has been a great investment over the past few years, despite ongoing R&D and capital expenditures. But a solid understanding of why these types of companies may be undesirable can help you identify whether a company that looks good on the surface might actually cost you money later.

This article was originally published on Oct. 7, 2005. It has been updated.
Fool contributor Richard Gibbons has forgotten what rule No. 2 is. He does not have a position in any of the companies mentioned in this article. Pfizer is an Inside Value recommendation. Intuitive Surgical is a Rule Breakers recommendation. The Motley Fool has a disclosure policy.

Stockwatch- Century Sunshine (8276.HK)

2006-07-22T12:14:00.000+08:00

A eco-agricultural play in organic fertilisers

Company website:

http://www.centurysunshine.com.hk/

2006 1Q financial report:

http://www.hkgem.com/listedco/listconews/gem/20060512/GLN20060512084.pdf

2005 annual report:

http://www.hkgem.com/listedco/listconews/gem/20060322/GLN20060322020.pdf

2004 annual report:

http://www.hkgem.com/listedco/listconews/gem/20050331/GLN20050331123.pdf

Announcements on HKSE:

http://www.hkex.com.hk/listedco/listconews/sehk/ByStockCode.asp

Yahoo articles:

http://hk.search.yahoo.com/search/news?p=tic%3A8276&s=-ut&ei=BIG5&n=15

Based in Fujian province in China, Century Sunshine Ecological Technology Holdings (CS) is engaged in the research and development (R&D), production and sale of organic fertilisers and organic compound fertiliser products that can be used in organic, green and pollution-free
agricultural products. The products are sold under CS’ “Lu Di” brand. CS targets farmers from various provinces, including Fujian and Jiangxi.

Established in 1998, patent of its organic fertiliser processor registered in 2002, listed in HKSE in 2004.

1. All of its products are registered with the Ministry of Agriculture

2. It is the only producer that has gained recognition from the EU

3. Beneficiary of favourable government policies

- rescinding the agricultural tax
- encourages the use of organic fertilisers to lend support to environmental protection and sustainable farming

4. While there are pricing regulations for chemical fertilisers, there are no pricing regulations for organic fertilisers

5. Launch of new business – bio-pesticides

Century Sunshine commenced its bio-pesticides business in the first half of this year. In the first quarter of 2005, it acquired a pesticide producer in Jiangxi province and subsequently expanded its production facility to 1,800 tons of bio-pesticides products per annum. The new facility commenced operation in December 2005. Its pesticides products are currently sold to 12 provinces in China and have become a new source of income of the Group.

6. Acquisition of land for future capacity expansion

In October 2005, Century Sunshine acquired a parcel of land with a site area of 126,700 square meters in Yunxiao, Fujian province. It plan to build on this site a new production plant (the “Yunxiao Plant”) with a total annual capacity of 400,000 tons of organic fertilizers. The Yunxiao Plant is to be completed in two phases: phase I is expected to be completed by the end of 2006 with a capacity of 200,000 tons and phase II is expected to be completed by the end of 2007 with a capacity of another 200,000 tons. The Yuanxiao Plant is strategically located in the South-western Fujian province in order to serve the customers in the southern Fujian and Guangdong province.

7. Share placement

In December 2005, the Company completed a share placement and raised net proceeds of
HK$121 million. All placing shares were subscribed by five independent institutional investors at a price of HK$2.20 per share. The net proceeds will be applied for building the Yunxiao Plant.

This was the company first share placement after the listing in February 2004. The capital expenditure for building the Yunxiao Plant will be fully satisfied by such net proceeds and our internal resources.

PROSPECT (2004 Annual Report)

During the year, the average prices of agricultural products increased sharply across the country. It was also announced that the agricultural tax will be exempted in Fujian province and Jiangxi province starting from 2005. These favorable government policies will provide farmers with further incentives to grow crops. As such, we believe that the future prospects for organic fertilizer industry are promising.

In order to take advantage of the growing market opportunities, we are going to carry out the following plans:–

Firstly, we plan to build a new plant in Jiangxi province with a planned annual capacity of 100,000 tones of organic fertilizers and organic compound fertilizers. Upon completion, our total annual production capacity will increase by 1.8 times to 155,000 tones. The new plant is expected to start operation in May 2005.

Secondly, we plan to commence the production and distribution of our new eucalypt trees fertilizers. The new product will broaden our product lines from agricultural fertilizers to forestry fertilizers. It is expected that the new product will make significant contribution to the Group’s profit next year.

Thirdly, we plan to extend our market coverage to Jiangxi, one of the major agricultural provinces in China. This will significantly enlarge our potential customer base thus contribute to future profit growth.

BUSINESS OUTLOOK (2005 Annual Report)

1. Chinese Government’s favorable agricultural policies

During the year, the Chinese central government announced a series of new policies in favor of the Chinese farmers and the agricultural industry as a whole. Such policies include a 14% increase of spending on the rural world in 2006 and the promotion of the use of organic fertilizers in China's “11th Five-Year Plan”. It is expected that such favorable policies will further stimulate Chinese farmers incentive to use organic fertilizers. As a result, we expect that the market demand for organic fertilizers will continue to grow in the coming years and that the future prospects for our business are promising.

2. Future capacity expansion

Production capacity will remain as a major bottleneck for our development in the foreseeable future. Therefore, we plan to progressively increase our capacity in the next two years. By the end of 2006 and 2007, we plan to increase additional capacity by 200,000 tons in each year. As a result, our total capacity (excluding subcontractors) in 2008 is expected to reach 555,000 tons. It is our objective to maintain our position as a leading producer of organic fertilizers in China.

3. Expansion of sales network

Following the capacity expansion, we also plan to expand our sales network in China. Our primary markets are Fujian and Jiangxi at the present with a secondary network extending to Guangdong, Zhejiang, Anhui, Hubei and Hunan. Our bio-pesticides are already sold to 12 provinces. It is our strategy to progressively increase our penetration into the neighbouring provinces, in particular, Guangdong and Zhejiang in the next two years.

BUSINESS OUTLOOK (2006 1Q financial report)

1. Production increase

We expect that the market demand for organic fertilizers to remain strong for the rest of the year. Our three factories are to contribute their full capacities this year. The Yunxiao plant is currently under construction as scheduled. The first phase of the plant with 200,000 tons capacity is expected to be completed by December 2006.

2. Selling price rise

Starting from 1 May 2006, we raised the selling prices of two types of our products, premium organic fertilizer and organic compound fertilizer, by 12% and 15% respectively. As a result, our sales and profit will be affected positively.

DIFFICULTIES AND CHALLENGES LYING AHEAD (2004 Annual Report)

Although we achieved satisfactory results for the year, we also realized that we are facing certain difficulties and challenges ahead.

1. Current capacity not enough to satisfy the rapidly increasing market demand

During the year, we had fully utilized our production capacity but were still unable to meet the growing demand in Fujian province. The total plantation area of crops in Fujian province is estimated to be about 38 million mu (about 2.5 million hectares). If we assume that all these plantations choose to use organic fertilizers at an annual consumption rate of 150 kilogram per mu, the total consumption will be about 5.7 million tones of organic fertilizers. Although it is unlikely that all the arable land in Fujian province would apply organic fertilizers, our current capacity of 55,000 tones is significantly small as compared to the potential demand. We need to expand our production capacity soon.

2. Shortage of talents in eco-technology and organic fertilizer industries

As eco-technology and organic fertilizers are relatively new in the PRC, there are not as many experienced professionals in these fields as in other industries. With the successful listing of the Group and the rapid development of our business, we urgently need to expand our professional team by both new recruitments and internal training.

Risk factors (UOB Initiation report):

1. Slow acceptance by farmers

2. High gross margin may be unsustainable as new entrants are attracted by the organic food products' high margin

3. Unexpected bad weather and flooding

Source- UOB Kayhian initiation report on 11 July 2006

Highlights of Marc Faber's July 10 2006 GBD report- Patience is also Action

2006-07-16T11:11:00.000+08:00

1. We are living through a paradoxical situation in which it isn't the Fed that is dictating its monetary policies but, rather, the asset markets.

If S&P 500 moves up to around 1350, a further Fed fund rate hike in August is likely. Conversely, if the S&P 500 remains in a trading range of between 1240 and 1300, a pause is the most likely scenario. And if the S&P 500 were to decline by another 5% or so, rate cuts would be - if not implemented immediately - certainly discussed among Fed officials and, thereafter, implemented within a short period of time.

Marc Faber believes that the Fed is already a total write-off, given that it no longer sets monetary policies; instead, the asset markets guide the Fed's monetary policies.

2. "Really" tight monetary policies are simply unthinkable in today's highly leveraged and debt-and asset inflation-addicted United States.

3. Consequently, the trend towards higher inflation, higher interest rates, a lower US dollar against precious metals, and stagflation will likely sustained for a very long time.

4. Whereas the value of the US dollar (its purchasing power) will remain in a downtrend, other currencies' loss of purchasing power may be even greater. As a result, the US dollar, while weakening further against precious metals, could appreciate against some currencies whose appreciation in the last few years was driven by interest rate spreads- among them the Turkish Lira, the Brazilian Real, the New Zealand Dollar, and the South African Rand.

5. In the present environment of "relative" global tightening, US assets will outperform foreign assets in the intermediate term (3 to 6 months). International investors have reaped huge gains from foreign markets in the last 3 years and significantly outperformed the returns from US assets.

Therefore, no matter how promising some countries' long-term economic prospects may appear (he is thinking of India, Brazil, and Russia here), profit taking could continue to weight on these countries' stock market.

(Interestingly, there is no mention of China.....)

This would also include Japan, whose stock market more than doubled from its April 2003 low to its recent peak at 17,563 in early April 2006. Following a rebound, a further decline to around 13,000 would not surprise him.

6. Marc believes that the period from May to October would be challenging for financial assets. He continue to believe that it will be difficult for the S&P 500 to break through the overhead resistance between 1290 and 1330 for that index. So the upside would seems to be rather limited and not only for S&P 500 but for foreign markets as well.

For equity-dedicated portfolios, Marc would be positioned in relatively depressed big market capitalisation stocks, such as pharmaceutical shares including Merck (MRK), Schering Plough (SGP), Pfizer (PFE), Bristol-Myers (BMY), and Johnson & Johnson (JNJ); as well as Citigroup (C).

Among developed markets, investments in Canada may offer superior opportunities for currency-adjusted capital gains than in the US.

7. Mar is positive towards Singapore economy and its rock-solid financial condition. Its government, while certainly not perfect, is far more enlightened than those in developed world and in emerging markets. Marc also thinks that Singapore is the world's richest country if we consider the quality of its educational system, splendid infrastructure, modern healthcare facilities, perfect security, the diversity of the economy, and its financial reserves.

8. Recently, the Bank Credit Analyst published 2 intriguing figures.

a. One figure showed how Asian real estate prices had underperformed real estate prices in Anglo-Saxon countries.

b. The other showed how the Singapore stock market had underperformed other emerging markets in the last few years.

While Marc do not consider Singapore shares to be the bargain of one's lifetime, he believes that Singapore shares offer relative value for equity-dedicated funds. Singapore shares in a buying range are as follows:
i. Mobile One
ii. Singapore Post
iii. Comfort Delgro
iv. Singapore Press
v. Singapore Telecom
vi. Singapore Telecom
vii. SIA Engineering
viii. Singapore Airport Terminal Services (SATS)
ix. UOB Bank

Marc also favour Singapore REITs such as:
i. Suntec REIT
ii. MEAG Prime REIT
iii.Ascendas REIT
iv. CapitaMall Trust

Most of these REITs have yields of around 6% and have significantly underperformed US and Australian REITs over the last 12 months.

9. Aside from Singapore shares, Marc believes that relatively good-value and high-yielding stocks can be found in the Thai, Malaysian, and Taiwanese stock markets.

10. Given that we recently experienced the highest volatility in commodity markets since the early 1980s, and very frequently such high volatility occurs near market peaks, Marc would be careful in assuming that the uptrend in industrial commodities and precious metals will resume in the immediate future.

(Does the recent volatility in regional stock markets suggest market peaks too?)

In the case of gold, Marc would prefer to see a successful retest of the recent lows and ideally buy gold at between US$480 and US$550.

Stockwatch- CIMA (Malaysia)

2006-07-09T19:45:00.000+08:00

From 2005 Annual Report:

Corporate Profile

Cement Industries of Malaysia Berhad (“CIMA Group” or “the Group”) has been involved in the manufacturing and distribution of cement and related activities since 1975. The Group effectively combines people skills and technological capabilities to become the third largest cement manufacturer in Malaysia, enjoying approximately 17% of the country’s cement market share.

The Group also ventures into international markets, such as Singapore, Indonesia and the Middle East. CIMA was listed on the Main Board of the Bursa Malaysia Securities Berhad (formerly known as Malaysia Securities Exchange Berhad) in June 1984. It became a part of one of the largest construction conglomerate in Malaysia when United Engineers (Malaysia) Berhad (“UEM”) acquired a majority stake of 53.9% in 1990. At present, the Group has staff strength of approximately 1,000 employees. Its subsidiaries, associates and a joint venture company are involved in the manufacturing of cement, limestone and shale quarrying, distribution and sale of cement, production and sale of readymixed concrete, investment
holding, and the manufacture and sale of cement bags.

The Group is divided into three main divisions of Manufacturing, Quarrying and Readymixed Concrete, and Trading. Negeri Sembilan Cement Industries Sdn Bhd leads the Manufacturing Division with its cement plants in Bukit Ketri, Perlis and Bahau, Negeri Sembilan. The two plants combined, make up a total clinker production capacity of 2.8 million tonnes per annum and a total cement production capacity of 3.4 million tonnes per annum, comprising Ordinary Portland Cement (“OPC”), Type II OPC and Masonry Cement.

In the Quarrying and Readymixed Concrete Division, Cimaco Quarry Sdn Bhd provides the required limestone for the Manufacturing Division, whilst Unipati Concrete Sdn Bhd manufactures the readymixed concrete for sale in the Peninsular Malaysia. Pemasaran Simen Negara Sdn Bhd as the Trading Division of the Group, co-ordinates customer-oriented services such as the marketing, selling and distribution of the Group’s cement, under the brand names of ‘Blue Lion’ and ‘NS Cement’.

The Group commands a strong market presence with two strategically located plants in the north and south of Peninsular Malaysia. Moreover, its extensively developed distribution networks of marketing offices and packing depots nationwide, further strengthens the Group’s standings.

OUTLOOK
The Malaysian economy will generally remain favourable in
2006. The strong fundamentals, high domestic demand and
broad-based growth will support the forecast expansion at
above 5% in 2006. Given this scenario as well as the
increasingly competitive business outlook, the Board is positive
about CIMA’s prospects in achieving its performance target
in 2006.
The Ninth Malaysia Plan which has been announced recently
brings positive growth prospects for the country’s economy.
CIMA shall position itself to take advantage of this, with a
view of strengthening its market position. CIMA will concentrate
on the development and enhancement of its capabilities in
the cement and cement related activities.

Sector Watch- Malaysian Cement

2006-07-09T14:30:00.000+08:00

In feb 2006, I read an research report on the Malaysian cement industry. Bought into 1 of the Malaysian cement company and sold subsequently with some profit when it rose on some M&A news. However, I am still bullish in the Malaysian cement sector as I see the ability and the need of the regional economies in infrastructural spendings.

Just spoken with an friend in the construction industry in Malaysia, he sees stability in cement price in Malaysia. And when ask the risk is in the downside or the upside, he see upside risk in cement price.

Separately, I also read the following: "No new capacity has been built in the last five years. And UOB-Kay Hian's Yee does not expect new capacity in the next five years, citing difficulty in getting government approval, financing and rising replacement cost as strong disincentives."

It is my opinion that with the government-imposed ceiling selling price of 198/MT, it will take a lot of foresight and courage to invest in new capacity.

Summarised below the key points of the February report on Malaysian cement industry:

1. We believe the cement sector is bottoming out as sector dynamics continue to improve. The end of the price war in Jun 05 has resulted in the sector returning to profitability after two quarters of severe losses.

2. Oligopolistic market. Since the 1997 financial crisis, the number of big cement players has reduced from seven to four who now control 97% of the market. The current cartel has successfully doubled cement prices in the past six months and organised plant shutdowns to maintain better demand-supply balance. Cement prices rebounded 80% after price war ended. The price war, which has characterised the sector for the past five years, climaxed when cement average selling prices dropped by 37% from RM158/tonne to RM100/tonne in 1H05. This resulted in the sector suffering its first loss in five years. Cement prices have since rebounded to RM185/MT and are gradually rising on better supply-demand balance.

3. 9th Malaysia Plan (9MP) may surprise on the upside. The market currently has very low expectations of a construction sector revival fuelled by the 9MP as allocation is expected to be similar or even potentially lower than the 8MP (RM150b-170b). However, newsflow in the construction sector has improved in the past two weeks. The government plans to proceed with the new Johor-Singapore bridge (estimated cost RM1.1b). A second bridge in Penang (estimated cost RM2.6b) or major road infrastructure upgrade is also likely as the Prime Minister has promised Penang, his home state, some goodies in the 9MP.

We think the 9MP may surprise on the upside given the looming UMNO and general elections in 2007 and 2008 respectively. This could be a catalyst for the construction sector which has suffered a downcycle in the past nine years.

5. Some business drivers to watch out for:
a. utilisation rate (Sector capacity utilisation has increasedfrom a low of 60% in 2001 to 72% currently)
b. coal price (coal constitutes about 15% of total all-in cost)
c. electricity tariff (Electricity constitutes only about 14% of total all-in cost, compared to coal’s 15%)
d. transportation cost (expected to rise as the government cuts back on diesel subsidy to reduce the country’s budget deficit)
e. government-imposed ceiling price of RM198/MT

6. Investment strategy:

Bottom of the cycle. The cement sector has fallen by a massive 68% from the peak in 1994. It has turned attractive as: a) earnings have returned to profitability in 3Q05 after severe losses in 1H05, with profits from 4Q05 onwards likely to be stronger as average price is rising, and b) downside risk mitigated by all-time low valuations and high dividend yield (FY06: 4.3% vs regional’s 3.0%). We believe cement companies’ share prices have yet to reflect the strong earnings recovery, which opens up a great buying opportunity. We think the cement
sector is more attractive than the construction sector as the latter suffers from: a) too many players, b) continued losses, and c) rising building material prices globally.

Valuations at all-time low. The cement sector P/BV has fallen from a peak of 3.8x in 1993 to a severely depressed 0.6x currently, a massive 84% plunge. Current valuations match 1998 post-financial crisis level of 0.6x. A recovery to mid-cycle valuation of 0.7x P/BV suggests a 20% upside for the sector.

Attractive compared to regional peers. The Malaysian cement sector currently trades at a 33% discount to regional peer’s FY06 EV/EBITDA (5.8x vs 8.7x). Using EV/tonne, Malaysian cement sector still looks attractive at RM247/MT, a huge 43% discount to regional peers’ RM434/MT (ex-Siam Cement) and 54% below replacement cost of RM539/MT (US$145/MT). Average P/BV and P/CF are also undemanding, at just 0.8x and 8.1x compared to regional’s 2.9x and 13.2x respectively.

Stockwatch- CK Tang, an article on Business Times 6 Jul 2006 $0.485

2006-07-09T11:54:00.000+08:00

CK Tang back on expansion path

Group says it's mindful of painful lessons from past expansion failures, writes WONG WEI KONG

Key highlights:

1. SHAREHOLDERS who kept faith with CK Tang, one of Singapore's oldest retailers, were finally rewarded when the company paid its first dividend after 12 long years. And if things go well, they can look forward to more dividends, and perhaps, an improvement in the stock price.

2. Mr Foo: Previously the chief operating officer, the seven-year CK Tang veteran took over from Tang Wee Sung, the second son of the group's founder Tang Choon Keng, as chief executive officer last month After more than a decade of losses, CK Tang has not only turned around but is expanding again. Net profit for the full year ended March 31, 2006 more than tripled to $3.82 million from $1.14 million the year before, while operating profit rose 84 per cent to $7.4 million. Revenue increased 5.9 per cent to $179.7 million. On the back of that performance, CK Tang proposed to pay a final dividend of 0.3 of a cent a share.

3. 'Our existing business, the flagship store, has continued to produce decent operating profits. We have gone into a major re-configuration of our Orchard Road store. All that was a result of a lot of detailed planning and understanding the lifestyle wants of our customers,' Mr Foo told BT in an interview.

4. The revamp saw CK Tang move from being a department store to a 'manager of brands' aimed at a customer segment that is slightly above mass market. The reconfiguration and improved merchandising mix has led to better performance, said Mr Foo. For the past two years, sales productivity - that is, sales per sq ft - at the Orchard Road store have averaged an increase of about 5 per cent per annum, while gross margin dollars psf have averaged increases of 8 per cent.

5. While less eye-catching than the opening of new stores, the company has been strengthening its management to support its growth strategy. Last month, Mr Tang, the second son of the group's founder Tang Choon Keng, relinquished his role as CEO to Mr Foo, previously the company's chief operating officer and a seven-year veteran of the company. New talent at management levels has also been brought in.

6. 'We see retailing just like any other business. You need good structures and good policies. We see this as a time to re-energise so that we can go forward with a better framework. We see the need for us to be fully innovative,' Mr Foo said. 'We are prepared to bring in people from other industries.'

7. With the company resuming dividend payments and ready to expand again, things appear to be looking better than they have for a long time for CK Tang shareholders, who have largely been a resilient lot. In response to suggestions by some groups of investors, Mr Tang offered to privatise the company at 42 cents per share in 2003. The proposal was turned down in 2004 when it was time for shareholders to vote.

8. Asked if the market is still undervaluing CK Tang shares, Mr Foo noted that net tangible assets (NTA) per share is over 50 cents. 'If you look at that in terms of market rating, it's not even up to NTA.'

Stephen Roach, Morgan Stanley- Venting global tensions

2006-07-09T11:40:00.000+08:00

Venting global tensions

By Stephen Roach 11:13AM (05-07-2006)

I continue to believe that the global economy is now in better shape than financial markets. The stewards of globalisation have finally woken up to theperils of ever-mounting global imbalances — the major macro issue that has concerned me for nearly four years. But the policy requirements of rebalancing are not without risks — especially since they entail a withdrawal of excess liquidity. In my view, the risk aversion trade that began in early May should be seen as a venting of the tension between global rebalancing and a potential shift in the liquidity cycle.

Financial markets may not have seen the end of this adjustment. The linkage between liquidity-driven asset bubbles and global imbalances is at the heart of this venting. Aided and abetted by its bubble-prone central bank, the US has taken the lead in driving this insidious process. By substituting asset-based savings for traditional income-based savings, America has pushed its domestic savings rate down to unprecedentedly low levels; in the second half of 2005, the net national savings rate was essentially “zero”. Lacking in domestic saving, the US then imports record surplus savings from abroad — which, of course, requires it to run massive current account and trade deficits in order to attract the foreign capital. America’s current account deficit, which soared to a record US$791 billion in 2005, was, by far, the largest imbalance in an unbalanced global economy, absorbing about 70% of all the surplus savings in the world last year. It is a direct outgrowth of bubble-driven dissaving that has taken the personal savings rate into negative territory for the first time since 1933.

April was a critical turning point on the global rebalancing watch. After years of denial, the stewards of globalisation, namely the G-7 finance ministers and the International Monetary Fund (IMF), finally sounded the alarm over the threat of mounting imbalances. The rebalancing fix that was endorsed has three key ingredients — the adoption of a multilateral global architecture of surveillance and consultation, general agreement on dollar depreciation and a global tightening of monetary policies.

This latter piece of the rebalancing fix is key to the liquidity withdrawal that now appears to be underway in world financial markets. One by one, all of the world’s major central banks — in the US, Europe, Japan and China — have moved to the tightening side of the monetary policy equation since late April. While there is still considerable disagreement over how far this global tightening may yet run, there can be little doubt over the implications of what has transpired so far. As measured either by price (real interest rates) or quantity (the excess of money over nominal gross domestic product) the global liquidity cycle has now shifted decisively to the downside for the first time since 2000. For liquidity-driven financial markets and the steady stream of asset bubbles they have spawned in recent years, this represents a major about-face.

In response to this turn in the global liquidity cycle, the adjustments in world financial markets have been painful but orderly. Developed world equity markets have stayed within the 10% correction band that market historians have long judged to be the norm of most mature bull markets. The biggest moves have occurred in the assets that went furthest to excess, namely emerging market equities and commodities. From their early May highs, corrections in these markets have ranged in the 20% to 30% zone — significant by any standards but all the more so in the light of the extraordinary run-ups of the past several years.

Traditionally among the riskiest of assets, emerging markets and commodities had become priced for a veritable absence of risk. I have argued that while there are, indeed, constructive fundamentals in both areas, there are good reasons for investors to remain engaged in an active two-way debate on the macro outcome for risky assets. To the extent that was increasingly less the case, the risks of corrections were high and rising in both commodities and emerging markets. In fact, that’s pretty much the way it has since played out.

I don’t think it’s a coincidence that the near parabolic increases in commodity prices in late March and April occurred just when an already vigorous Chinese economy surprised to the upside. Investors and speculators quickly became convinced that China would do little to arrest its “commodity-heavy” growth model that had drawn disproportionate support from fixed investment and exports for the past 27 years. This ignored altogether the possibility that China might tighten its policies to contain another wave of overheating and embark on a major structural transformation of its economy that would see growth shifting away from its commodity-intensive investment and export sectors to more of a commodity-efficient consumer-led outcome. And yet there is now good reason to believe that both such shifts are now underway.

The same can be said for the emerging market debate. As seen from the standpoint of the problems that created the last crisis in the developing world — the wrenching adjustments of 1997/98 — today’s fundamentals look nothing short of superb. The outperformance of emerging market equities over the past three years and the extraordinary compression of debt spreads in the developing world suggest investors had become comfortable with the notion that the days of crisis were all but over for this traditionally risky asset class.

Here, as well, I have argued that the debate needs to be more even-handed. After all, the proverbial “next” crisis never looks like the last one. While the developing world has, indeed, reduced its external financial vulnerability dramatically over the past nine years, it has done little to reduce the external vulnerability of its real economies. Lacking in support from internal private consumption, a faltering of the long over-extended American consumer could well do serious damage to these still export-led economies. We debate endlessly the fate of the American consumer. But with the US property cycle now turning, it seems foolish to ignore the possibility that there will be a significant consolidation in US consumer demand that would have major implications for externally dependent developing economies such as China, Mexico and even Brazil. With liquidity withdrawal now hitting a critical threshold, it seems equally reasonable to price emerging market securities for a more reasonable assessment of such a possibility. And that’s exactly what appears to have happened (see last week’s article “Putting the risk back into emerging markets”).

The key question, of course, is whether the risk aversion trade of the past several weeks has gone far enough in pricing in a more realistic assessment of risks. There are three reason I believe the answer is “no”. First of all, from the standpoint of the recent history of risk-reduction adjustments, the current shift is on the short end of historical experience. This is evident in scanning the record of our proprietary “global risk demand indicator (GDRI)”. Since 1997, major downside moves in the GDRI have had an average duration of about 15 weeks; as such, the six-week move in the current cycle is not even halfway there.

Second, I believe that the Chinese authorities will have to up the ante on their recent tightening moves in order to slow a white-hot investment sector; so far, this year’s approach has been a carbon copy of the efforts deployed in 2004 — incremental adjustments in lending rates, a modest increase in reserve requirements and administrative controls on selected overheated industries. With the Chinese economy overheated for the second time in two years, it is clear that if the incremental approach didn’t work back then, it stands even less chance of working today. I agree with my colleague Andy Xie that more Chinese tightening now lies ahead in the not-so-distant future.

Third, I think the Federal Reserve will continue to surprise the markets with more rather than less monetary tightening; its chairman Ben Bernanke has both a credibility problem and the foil of an inflation scare to justify such a policy bias. And a now-softening housing market will be hit in response, as will the asset-dependent American consumer. If the US consumer finally capitulates — a possibility the consensus has all but dismissed out of hand — commodity markets and the developing world will be the first to feel it.

The good news is that none of this speaks of a terribly disruptive endgame for global rebalancing. Had global policymakers ignored the problem, a dollar crisis at some point in the not-so-distant future was a distinct possibility, in my view. But now the combination of architectural reform, currency adjustments and monetary tightening points towards a more orderly, and hopefully benign strain of global rebalancing. However, it is important to stress that such orderly adjustments in the real economy are no guarantee for orderly adjustments in liquidity-driven markets, especially those risky assets that have gone to excess. The risk aversion trade is a clear reminder of that possibility. In the end, global rebalancing can’t occur without a shift in the global liquidity cycle — a withdrawal of the high-octane fuel that has given rise to a multitude of asset bubbles since the late 1990s. If central banks have the wisdom and courage to stay this course, asset-driven saving imbalances will finally be addressed. Investors have long presumed this day of reckoning would be postponed indefinitely. They had become hooked on the now infamous “Greenspan put” — the seemingly perpetual willingness of the world’s dominant central bank to bail out disorderly markets. Yet this approach was ultimately destined to fail — it was a breeding ground for the systemic risks of ever-mounting global imbalances and a moral hazard that could only end in tears.

In my view, that’s what this debate is actually all about — whether the world’s major central banks are finally about to close the book on the Greenspan era. The tension between global rebalancing and the liquidity cycle could well be key to rendering this verdict for world financial markets.

Stephen Roach is chief economist at Morgan Stanley Dean Witter based in New York

BCA Research- How To Play The Commodity Cycle

2006-07-08T07:56:00.000+08:00

BCA Research- How To Play The Commodity Cycle

July 04, 2006

We advise investors to position for outperformance of oil versus base metals prices.

Our view is that the overall commodity complex is in a secular bull market. However, with central banks tightening and global growth in a cooling phase, cyclical commodity demand is easing.

Against this backdrop, the crude oil price is likely to outperform base metals. Chinese trends buttress the case. Chinese imports of base metals have already started to cool, and could moderate further as the authorities target a slowdown in select capital spending industries and real estate. Meanwhile, Chinese oil imports are still in an uptrend and should stay strong. Gasoline demand is a key driver of energy imports, and we expect sales to remain firm as the Chinese authorities encourage consumer spending.

Finally, technical indicators highlight that there is more froth in the base metals market compared to crude oil.

BCA Research- The Metals Price Correction Is Not Over

2006-06-24T18:34:00.000+08:00

10:00:00, June 22, 2006

Base metals prices have more downside as global growth slows. Base metal prices have corrected significantly in recent weeks, with copper prices shedding about 20% in the past six weeks. However, technically they still look highly vulnerable. Metals prices are still about 30% above their 40-week moving averages—corrections typically drive prices to or below their moving averages, implying there is substantially downside risk in the near term. Moreover, bullish sentiment is still high compared with levels seen in past commodity price corrections, which from a contrarian standpoint signals more price weakness lies ahead. With the global economy beginning to decelerate, cyclical demand conditions are also bearish for commodity prices.

Bottom line: the correction in metals prices has further to go.

Barron's Online: Marc Faber's views

2006-06-19T21:11:00.000+08:00

MARC FABER

What's next for the U.S. economy?

Faber: The Fed's policy options are limited. Since Bernanke was appointed Fed chairman in October, he has lost a lot of credibility. In November the price of gold was $480. It subsequently topped $720, and is now $620. [Gold fell to $580 after our conversation.] Commodity prices went up sharply, the dollar went down and bond prices sold off, reflecting concern in the investment community that he is a money printer. The economy probably already is significantly weaker than the statistics would show, particularly housing.

Bernanke could either keep increasing rates, which would support the dollar and lead to a bond-market rally and further stock weakness. Or he could recognize the economy is weakening, and pause or begin to cut interest rates. In that case, the stock market might have a modest recovery, but the dollar would get hit hard.

Which option will he choose?

The first, to regain credibility. From now until October or November, we will have unattractive asset markets. Commodity prices will continue to fall. Emerging markets, which have significantly outperformed the U.S. stock market since 2003, are especially vulnerable. It's payback time. As for the U.S., the S&P 500 now has huge resistance, between 1290 and 1320. The highs we've seen may well be the highs for the year. But U.S. assets have grossly underperformed assets in emerging economies and Europe since 2002, so for the next few months they could modestly outperform foreign assets.

What happens after November?

Mine is a short-term call, but you never know, when markets begin to go down, how serious the downturn will be. Two-year U.S. Treasuries are not a bad alternative in this market. You're not going to become rich, but you're not going to lose money, either. Lots of stocks are modestly valued, but even these can go lower still as money flows out of emerging economies. If you must be in equities, you want very defensive stocks with relatively low valuations.

In January I mentioned several Singapore real-estate investment trusts, Suntec REIT and Macquarie MEAG Prime REIT. The Singapore dollar is strong, and the financial condition of Singapore is rock solid. You don't have large downside risk. I also recommended two Thai real-estate companies, Rojana Industrial Park and Ticon Industrial Connection. They've had big moves and now have sold off. The Thai market has been weak because the political situation looks bad, so stocks could be under further pressure. But these two companies are attractive at current levels.

What about gold?

If gold sells down to $540-$580, start accumulating it again.

And other commodities?

Industrial commodities have had huge moves. As the economy weakens, they are not attractive. The price of copper more than doubled since Mr. Bernanke became Fed chairman. From their recent peaks, prices easily could drop 40%. I would short copper, using the futures contracts.

On a relative basis, gold will do better than the Dow Jones industrials. On the one hand, if the Dow falls to 5,000 and home prices in America sink 30% and there are massive problems in the credit system, the price of gold will stay around $500-$600 an ounce. On the other, if Bernanke prints money in earnest and the Dow triples to, say, 33,000, we'll see gold prices between $5,000 and $6,000.

You have an active imagination.

Paper money has lost a lot of its purchasing power. It buys fewer goods than it did 20 years ago, and there are more losses to come. In the long run, with its exploding debts, the U.S. has no other option but to print money.

Going back to stocks, Thai Reinsurance shares recently eased by about 15%, and are in buying range. The Vietnamese market at one stage was up 100%. It's still up 77%. If it declines another 30%, I would consider increasing exposure.

For the full article, click http://online.barrons.com/public/article/SB115049901746182945-uo58sdtP2Q_K7gIKNDu5uBQsPzY_20060719.html?mod=9_0002_b_free_features

Marc Faber says......

2006-06-17T12:39:00.000+08:00

Arab bourses may bounce, otherwise take a holiday

"For our Middle Eastern friends, I believe that for the next few weeks, their extremely over-sold stock markets could rebound around 20% to 30%. New highs are, however, out of the question......... http://www.ameinfo.com/88675.html for rest of article..."

BCA Feature Stories - Week of May 26, 2006

2006-05-27T19:45:00.000+08:00

BCA Feature Stories - Week of May 26, 2006

[05-26-2006] Copper Prices Set To Come Off The Boil

[05-25-2006] How To Hedge Emerging Markets Exposure

[05-24-2006] Extend Duration and Sell Inflation Protection

[05-23-2006] Asian Currencies: Rally Due For A Pause

[05-19-2006] Capital Market Correction Nearing An End

Stockwatch- 3 parties interested in G&W's Oakwell stake

2006-05-23T23:45:00.000+08:00

Highlights of Lianhe Zaobao today 23 May 2006:

1. G&W confirms market talk that there are interested parties in G&W's stake in Oakwell Engineering, however, it says that there are no agreement reached so far.

2. G&W owns 28% of Oakwell Engineering.

3. There are 3 potential buyers, including one local listed company and overseas companies.

4. G&W is interested to divest its stake in Oakwell Engineering at above market price, and the sales price is likely not lower than $10 mil.

For full article, read http://www.zaobao.com/cj/cj060523_519.html

"市场传出说有第三者有意收购青白集团(G & W Group)旗下的挂牌公司固惠工程(Oakwell Engineering)，针对这点，青白集团受询时证实目前正在就此事进行谈判，不过仍未达成任何协议"

Stockwatch: G&W Group featured in The Edge Singapore, still trading below net cash

2006-05-21T10:32:00.000+08:00

Key highlights of The Edge Singapore article:

1. MD and CEO, Koh Tiak Chye, was conferred the title of Honorary Citizen of Shenyang in 1997, in recognition of his efforts to promote the city as an investment destination to Singapore companies

2. In 2004, Koh was appointed the regional representative of the Liaoning/Shenyang Steering Committee Member of Network China, a trade promotion unit of International Enterprise Singapore

3. In 2004, G&W launched its maiden property development project in Shenyang, called Sentosa Garden, reminiscent of the company's Singapore roots. The 940 apartment units catering to low- to middle-income buyers were sold very quickily, mostly in 2004

4. To further burnish its reputation as a property developer, G&W has set up a management company to maintain Sentosa Garden, with funding from conservancy fees payable by unit owners

5. Meanwhile, G&W is gunning for a far more ambitious project- the development of "Singapore town" in a prime area in Shenyang. Changbai New Town, covering a land area of one sq km with a gross floor area of one million sq m.

6. G&W has signed an agreement with district government to develop the land as well as to resettle about 3,000 individuals from the area. There are no fees payable under the agreement, but the resettlement costs will count towards the cost of land-use rights.

7. As approvals are yet to be secured from the provincial and central governments, which could be granted this year, it is too early to announce the land cost and potential gross development value.

8. The project will be subject to a tender exercise later, but Koh believes they has the edge. Koh is quite confident of getting the project as they have been working closely with the government planner for the township and have engaged the former chief planner of Singapore's Urban Redevelopment Authority

9. Koh expects the township will be developed in six phases over nine years.

10. Koh's plans for the township also include the establishment of higher-level education centres by Singapore institutions. G&W has set up an overseas education centre in Shenyang, in partnership with Ngee Ann Polytechnic. The centre is targeting an intake of 200 in September for its first programme on logistic management. It hopes to boost its enrolment number to 1,200 students by the third year.

11. G&W is actively seeking a joint-venture partner for the project.

12. Koh expects G&W to take up half of the equity stake in each phase of the project, with the balance to be held by its existing local partner and the new partner. The new partner has to be a Singaporean investor, given the project's "Singapore town" billing.

13. Last year, Koh Brothers and G&W set up a JV firm called Construction Consortium, which boasts an order book of $842 million, was done in anticipation of further consolidation in the construction industry; over time, the company could go on to acquire other construction-related companies and take on other shareholders, but no plans to list the company in the near future

14. Last year, G&W sold half its stake in sesdaq-listed Oakwell Engineering to Draka Group, a cable manufacturer listed in Amsterdam, for $8.9 mil. G&W is looking to sell its remaining stake in Oakwell, which is worth $9 mil at its current market price of 5.5 cts per share.

15. G&W is proposing to change its name to "Brothers (Holding) Ltd". The new name reflects the "kinship" he has developed with the people of Shenyang over the years, and at the same time, the name also bears a reference to the Koh brothers.

16. Koh is unfazed about a slowdown in China's already inflated property market. Koh believes that Chinese tend to buy a house first, before acquiring other assets; despite price increase, they will want to buy their houses first.

17. G&W is working on another property project (15% stake) further south in the Zhonglu district of Changzhou in Jiangsu province. The project was introduced by Super Coffeemix, a Singapore-listed maker of instant coffee that counts Sam Goi and Oei Hong Leong among its major shareholders. Details are still being hammering out. Beside Super Coffeemix, the other investors include Goi and two other Singaporeans.

18. At 22 cts, G&W is trading at a seemingly high 29 times 2005 earnings. But that is less than half the company's net assets value per share of 52.5cts, and a 16% discount to the company's net cash holding of 26.3cts per share.

Some thoughts on Singapore first listed Business Trust- Pacific Shipping Trust

2006-05-20T23:01:00.000+08:00

If anyone of you follows Singapore Shipping Corporation Ltd listed in Singapore Exchange, you will know that the boss Ow Choo Kiat sold all its container ships and make Singapore Shipping a very cash rich company, it looks like a smart thing to cash out as it is probably at the peak or very close to the peak Now a while after cashing out, we have samudera issuing profit warning and NOL's profit on the decline and people start to talk more clearly abt the down cycle.......

Probably the best time to invest in container shipping assets opportunistically will be to watch Ow Choo Kiat, if he ever gets back into container ships (he has mentioned he will be focussing on car-carriers, but if he ever decides to buy container ships, we will know there are money to be made)

This may not be the best time to invest in container shipping assets, but PST may be suitable for some (but make sure you know what you are getting into and not focus too much on the yield)

I will not subscribe to it as I think there will be better time to buy into PST for the following reason:
a. I do not think that 4% over US$ risk free rate is adequate
b. shipping cycle is clearly not on PST side, even though 8 years of charter already fixed
c. IPO priced above NAV of US$0.43
d. Container ships is not exactly a good store of value in the current environment as supply is theoretically unlimited since ships are movable and shipyard will keep churning out ships (unlike real estate, which is a better store of value as there is a limit to the supply and immovable)

Also I would like to make an distinction between Government Link companies, like Capitaland & Keppel Land and those owner-managed companies like UOL & Citydev

Even though launching REITs will surely improve the share price of UOL or CityDev, they are not willing to do so, as the owner do not care abt their share price but more on the value they will get for their properties on REITing them, this is as opposed to manager-managed companies, whose incentives may include options and performance shares and bonus somewhat indirectly linked to share price, profit on sales, etc

In my view, no right and wrong, but companies like UOL & CityDev will be more willing to REIT their properties asset closer to the peak of the property cycle

To a certain extent it is a zero sum gain, the investors of UOL and CityDev's REITs if they ever do a REIT will not have much of an upcycle to ride

It may or may not be an coincidence that PIL, a privately-owned company, took this step of list PST at this juncture

Some additional useful information on PST, wonder if 4% management fee is the typical fees in overseas shipping trust, I also wonder how 4% is arrived at for the service of the trustee-manager, which manages a business trust that bareboats out all its container ships:

Certain Fees

The following is a summary of certain fees payable by PST in connection with the establishment and on-going management and operation of PST:

Payable by PST Amount payable
(a) Trustee-Manager’s trustee fee 0.02% per annum of the value of the Trust Property subject to a minimum fee of US$10,000 in each calendar quarter.
(b) Trustee-Manager’s Management Fees 4.0% per annum of the Charter Income in the relevant calendar year. The Trustee-Manager may elect to receive the fees in cash or Units or a combination of cash and Units (as it may in its sole discretion determine), subject to the Trust Deed.
(c) Any other substantial fee or charge (i.e. 0.1% or more of PST’s asset value)
(i) Acquisition fee (payable to the Trustee-Manager) 1.0% of the acquisition price of the vessel acquired directly or indirectly through one or more special purpose vehicles, pro-rated if applicable to the proportion of PST’s interest. The Trustee-Manager may elect to receive the fees in cash or Units or a combination of cash and Units (as it may in its sole discretion determine), subject to the Trust Deed. No acquisition fee is payable for the acquisition of the Vessels.
(ii) Disposal fee (payable to the Trustee-Manager) 0.5% of the sale price of the vessel disposed, pro-rated if applicable to the proportion of PST’s interest.

Not sure if the management fee payable is high or not, but for full year 2007, charter income is US$34.5mil, mgmt fee at 4% will be abt US$1.4mil for a trustee-manager, which currently directly employs 4 full-time employees

Also notesworthy is one of the many risk factors:It is more difficult to remove a trustee-manager of a registered business trust than a director of a public company

The BTA requires the removal of a trustee-manager of a registered business trust to be by way of a resolution approved by not less than three-fourth of the voting rights of all the unitholders of the registered business trust present and voting. In comparison, the Companies Act requires the removal of a director of a public company to be by way of an ordinary resolution approved by more than 50.0% of the voting rights of all the shareholders of the company present and voting.

As the Sponsor will hold more than 30.0% of the Units upon Listing, it may be difficult for the Trustee-Manager (being a wholly-owned subsidiary of the Sponsor) to be removed.

The case of buying Bursa Malaysia, read Salvatore Dali's blog

2006-05-20T11:55:00.000+08:00

check out http://malaysiafinance.blogspot.com/

sneak preview of Salvatore Dali's blog: "I cannot tell you how many times I have wanted to make this stock as a Top Buy for 2006 but the share price just runs and runs. I have never read ONE report calling this stock a buy, but I have read many credible research reports calling this stock a Strong Sell or Avoid. Currently, Standard & Poor's has the stock as a rare "Strong Sell". I don't think I can wait anymore. I was thinking that the overall global equity pullback for the last two days may see a more decent entry price... but NO. Funny thing is, I have attacked this company many times in my blogs. Want a scathing report, read my blog on 10 March 2006 on this company. For an even more scathing critique, take a peek at the 16 February 2006 blog.... lol. Then you will understand better my liking for the stock."

BCA Feature Stories - Week of May 19, 2006

2006-05-20T11:46:00.000+08:00

Feature Stories - Week of May 19, 2006

[05-19-2006] Capital Market Correction Nearing An End

[05-18-2006] U.S. Equity Sector Strategy: Favor Non-Cyclicals

[05-17-2006] Commodity Prices: Following Natural Gas Prices Up, And Down?

[05-16-2006] Signs That Global Growth Momentum Is Peaking

[05-15-2006] (Part I) Gold: Mania Phase

For details, click on the link to BCA Research on the right.

Marc Faber: Poor Mr. Bernanke can't win!

2006-05-15T22:24:00.000+08:00

Marc Faber latest writeup.......Poor Mr. Bernanke can't win!

Check it out http://www.ameinfo.com/86026.html

Marc Faber says sharp correction in all asset markets probable

2006-05-15T00:08:00.000+08:00

From the latest May 2006 The Gloom, Boom & Doom Report:

"However, with the exception of the stock and property markets of Taiwan, Malaysia , and Thailand, there are practically no assets markets that don't evoke in my mind the characteristics of "too much money chasing too few assets", "overtrading', and "a larger and larger group of people seeking to become rich without a real understanding of the process involved". Moreover, if we look at credit growth in the US and at Foreign Official Reserve growth, it would seem that global liquidity , while still expanding at - by historical standards - relatively high rates, has been decelerating.

Therefore, a sharp correction in all asset markets, à la the Middle East since the end of last year, should be considered very probably."

"Finally, it is my belief that in future investors will have to become used to using "real" returns and not nominal returns. Under a monetary regime - the Fed - which has no option but to print money, all assets could rise in value in nominal terms, but some will obviously depreciate against "sound money" whose supply cannot be increased at liberty."

BCA Feature Stories - Week of May 12, 2006

2006-05-14T11:45:00.000+08:00

Feature Stories - Week of May 12, 2006

[05-12-2006] U.S. Consumer Slowdown On Its Way
[05-11-2006] Critical Juncture For Global Bond Yields
[05-10-2006] Asian Equities: Currency Strength Not Biting Yet
[05-09-2006] China: Still No Landing
[05-08-2006] Asia-Pacific Real Estate: Laggard Poised To Outperform
Key highlight: Looking forward, fundamentals suggest that Asian
property markets are set to deliver solid gains in the years to come,
outperforming those in the Anglo-Saxon world.

For details, click on the link to BCA Research on the right.

Oil sector braces for hurricane season

2006-05-07T04:07:00.000+08:00

Just read the above captioned article

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B15F98987%2DA344%2D46FF%2D9E39%2D63A456DF95D1%7D&source=blq%2Fyhoo&dist=yhoo&siteid=yhoo

"HOUSTON (MarketWatch) -- Even as coastal residents from Louisiana to Alabama were rebuilding lives and homes shattered by the deadliest U.S. hurricane season on record, one of the nation's top forecasters warned Friday that 2006 is shaping up to be another brisk year of storms."

Take a peek of this article, if there are any truth in it, it does not bode well for the market as oil price is likely to spike as per last year especially if Texas, which was spared last year get hit this year. Texas is home to 26 refineries that account for a fourth of the nation's refining capacity.

"Speaking to a room packed with energy executives in Houston, AccuWeather's Joe Bastardi predicted that one tropical storm and five hurricanes -- at least three at Category 3 or worse -- will slam into the nation's shores between now and late November, the unofficial end of the season.
Bastardi, the weather service's chief hurricane tracker, accurately predicted last August that New Orleans would bear the brunt of Hurricane Katrina as it grew to a top-level Category 5 storm. Katrina, and later Hurricane Rita, spared most of the refineries along the low-lying Texas coastline. Texas is home to 26 refineries that account for a fourth of the nation's refining capacity.
But that could change this year, with warmer water temperatures and atmospheric conditions resembling those found during previous major storms in the region raising the likelihood of a direct strike. "

Latest weekly update from BCA Research

2006-05-06T21:14:00.000+08:00

Feature Stories - Week of May 5, 2006

[05-05-2006] Energy Producers: Lack Of Production Growth Is A Double-Edged Sword

[05- 04-2006] Be Wary Of Materials Stocks

[05-03-2006] Euro Area: Manufacturing Sector Firing On All Cylinders

[05-02-2006] Global Bond Yields: Near A Peak?

[05-01-2006] U.S. Core Inflation: Benign Outlook Remains Intact

For details, click on the link to BCA Research on the right.

3 Interesting Articles on Malaysia (Market)

2006-05-06T21:07:00.000+08:00

3 Interesting Articles on Malaysia (Market)

1. Today, Singapore's Straits Times reports that "During his visit to America last week, Malaysian PM Datuk Seri Abdullah Badawi received a welcoming phone call from US President George W. Bush. Bush-Abdullah phone call reflects better ties. Straits Times also reports "Bush may visit Malaysia after he attends November's APEC summit in Hanoi."

2. http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_3ee51cb0-cb73c03a-1c79dfc0-a301568b

Buying momentum accelerated on May 5, with the KLCI reaching a new six-year high on very heavy volume. Investor interest appears to have been buoyed by news that Tenaga Nasional Bhd may get its long awaited electricity tariff revision soon, and a sharp overnight drop in crude oil prices.

3. http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_3d438c30-cb73c03a-1c79dfc0-7eb7588a

Ringgit at fresh 8-year high, others steady The ringgit scaled an eight-year high on May 5 as foreign investments poured into local equities and short-term deposits on signs the central bank was allowing a faster pace of appreciation for the currency.

The above bodes well for Malaysian stock market.

May 2006 Edition of Market Observations from ContraryInvestor.com

2006-05-03T20:47:00.000+08:00

Here's the link for the May 2006 edition of Market Observations from ContraryInvestor.com: http://www.contraryinvestor.com/mo.htm

Would like you to read the extracted paragraph below, stay invested in commodities related assets for the long term:

Before leaving this subject, just a few last thoughts. It's absolutely clear in our minds that large institutional money is not heavily invested in these hard asset classes in a very meaningful manner. For now, the interest in commodity ETF's, the run up in the stocks that represent the hard asset trading exchanges such as CME and ICE, and the growing volume of hard asset derivatives, as you can clearly see above, are showing us that institutional demand for commodity oriented asset classes is growing at the margin, not diminishing. And from our perch there is still a very long way to go before broader institutional demand is sated. Just think back on the continued allocation into tech issues at the institutional level that started in the early to mid 1990's and just how long that took to fully play out over the entire cycle period of the prior decade. Will there be commodity class price corrections ahead? Sure, and some may be more than violent. But at least for now, we'd continue to view these as buying opportunities as we believe the Fed and the central bankers are trapped. They are trapped in a set of circumstances they themselves spawned. Unwilling to allow prior period misallocations of capital (stock and housing bubble) to reconcile themselves, they have implicitly committed to facilitating ever larger amounts of liquidity support to the financial markets and theoretically real economy. But it seems to us that they have worked themselves into a corner now being that the harder they push on the liquidity accelerator, the harder they will have to yet push in the future to offset the real world inflationary costs of commodity prices their hedge, prop desk and momentum trading former friends are now supporting with the very liquidity the Fed and their central banking brethren create in the first place. The veritable Catch-22? As the data above tell us, this liquidity is now squarely finding its way into the commodity complex and that process is accelerating. Can it continue on forever? Of course not. We continue to believe that US consumers will slow ahead, especially given our viewpoint that US household financial well being is inversely correlated with commodity prices, but anticipate that the Fed will ultimately panic and up the liquidity creation ante even further as they have in the past out of fear as consumers slow, again, playing right into the expectant hands of the financial sector who has been conditioned time and again to expect this very response from the FOMC. Who is the best friend of the current commodity bull, who is for now the longer term supporter of this trend, and who in public refuses to acknowledge what is plain for the entire planet to see in terms of forward inflationary pressures? The Fed and the US credit markets. Who else? Until this changes, stay long assets that benefit from inflationary trends, particularly those assets that have not already been significantly levered. Some day the Fed will change tactics. Some day they will realize the speculative financial community has played them for the fool. But we're not there yet. For now, the hedge, prop desk and momentum trading crowd are betraying their liquidity benefactors out of natural self interest as they pile into hard assets and hard asset related investments. We can only believe the Fed and their global central banking brethren are watching this in horror. Paralyzed and reverting to the only trick left in their bag - liquidity facilitation. But after all, the hedge, prop desk and momentum traders are only doing what the Fed has taught them to do for literally years now - put the Fed into a box of being forced to create and facilitate ever larger amounts of liquidity and credit. The financial sector servant of old has now firmly assumed the role of master. You better believe it's different this time.

Stockwatch- G&W Group (Holdings) Ltd listed on SGX

2006-04-30T18:56:00.000+08:00

Stockwatch: G&W Group (Holdings) Ltd listed on SGX

Currently, trading at 22cts, which is a 15% discount to net cash per share of 26cts, and 58% discount to NAV per share of 52.5cts (based on 31 Dec 2005 balance sheet). The fact that it is trading below net cash per share catches my eyes as it fits my description of a value stock.

CORPORATE PROFILE
Established in 1979, G & W Group (Holdings) Limited, today focuses on the Property Development and Management, Education and other businesses in the People’s Republic of China (“PRC”).

It also has businesses in the Construction and Building Materials segment as well as in the Oil & Gas segment.

Over the years, the Group has built up a strong business network and presence in Asia.

A quick review of its 2005 annual report shows that G&W is remain profitable for the last 3 years:

Net Profit EPS
2003 S$0.506m 0.41cts
2004 S$0.853m 0.69cts
2005 S$0.944m 0.76cts

A very recent announcement on MASNET on 12 Apr 2006 for reference:

G & W Group Rides On PRC’s
Property Market Boom
-Maiden Residential Property Development, Sentosa Garden was a sell-out success
-Targets two new property development projects in PRC
-Expects solid earnings potentials from its property ventures in PRC

Singapore, 12 April 2006 – Mainboard-listed G & W Group (Holdings) Limited (“G & W” or the “Group”), an established property development group expects solid potential earnings streams from its property development projects in PRC due to its continued strong economic growth, huge population base with strong aspirations of home ownership and rapid urbanization.

The Group expects an improvement in its financial performance due to the robust economic growth in the region, especially Singapore and PRC. The recovery in the Singapore construction industry * coupled with the strong growth in the oil & gas sector have enhanced the profitability of its two associate companies namely, Construction Consortium Pte. Ltd. and Oakwell Engineering Limited.

G & W Managing Director, Mr Koh Tiak Chye said,” We are pleased to update our shareholders and the public about the improving performance of the Group. The sell-out success of our Sentosa Garden project has clearly supported the Group’s strategic focus on the PRC property market. Our focus on the property business in PRC will be a key growth driver for the Group in the coming years. ”

Leveraging on G & W’s expertise and experience in PRC, the Group has embarked on two new property development projects through various joint venture partners. The first project is Changbai New Town in Heping District in Shenyang while the second project is in Zhonglu District of Changzhou, Jiangsu Province.

The Changbai New Town project has the potential to be developed into mixed residential and commercial properties and other amenities. The project will be spread over approximately six phases and will extend over a period of approximately nine years.

When asked to comment on the plans for the future, Mr Koh responded optimistically,” We have been in the China market since the early nineties and have established strong working relationship with our PRC partners. This has given the Group a good head start into the booming China’s residential and commercial property market which still has a lot of growth potential in view of China’s growing affluence.”

Mr Koh continued, “ The Group is currently waiting for approval from the local authorities with regards to our two property development projects. More details would be revealed when we have obtained the necessary approval. ”

Mr Koh concluded, “ The Group has a strong balance sheet of some S$59 million cash and cash equivalents as at 31 December 2005. We intend to continue building up our war chest in view of the current opportunities in the booming PRC property market. Going forward, we anticipate the PRC property market to be the main growth driver for G & W Group.”

* Based on the report by Building & Construction Authority (“BCA”), the total construction demand is likely to reach between S$12.0 billion and S$13.5 billion in 2006 as oppose to S$11.3 billion in 2005.

Latest weekly update from BCA Research

2006-04-30T12:38:00.000+08:00

Feature Stories - Week of April 28, 2006

[04-28-2006]
China: Strong Growth Does Not Equal Monetary Tightening

[04-27-2006]
U.S. Consumers Face Triple Whammy

[04-26-2006]
Oil Prices And Cyclical Stocks

[04-25-2006]
The Root Of Global Disinflation Is Intact

[04-24-2006]
Material Sector Shakeout Ahead?

For details, click on the link to BCA Research.

苏黎士投机定律

2006-04-29T23:38:00.000+08:00

Below is an article on the chinese version of The Zurich Axioms

赚钱有没有方法?事实上，这个问题一直令许多想要发财的人感到困扰。台湾股市已经飘涨三、四个年头，您是否赚到了钱?您对自己操作的表现感到满意吗?是不是有改善的方法?
　　您能击败股市吗?或是说，您操作股票所获得的投资报酬率，会比股市的表现好吗?如果是，那么你已经称得上专家，甚至可说是赢家，不必再另请高明，而大可我行我素按照自己的方法去操作，否则就不妨平心静气的反省自己为什么无法击败股市。
　　但是什么是股市的表现呢?简单的说就是股市的涨幅。以1989年台湾股市为例，1月5日台湾股价加权指数是4873.01点，12月28日封关时指数涨到了9624.18，年涨幅约为97％，这就是股市的表现。如果你的操作成绩低于97％，这就表示你已经被当了。
　　这种说法的理由是，如果你在元月1日将资金投入，经过一年的时间，你的本金也应该和服市同步增长，根本无庸费心，因为股市的浪潮自然会将你的钱往上推，只要你搭上了这条船。或许你不认为这是合理的说法，但我们也无须争论。这里所要说的是，如果你对自己的操作成绩不满意，或是认为自己的表现比股市差，那就不妨看看苏黎士投机定律的教导是否能改善你的投资成绩?
　　苏黎士投机定律(Zurich Axiom)是早期在华尔街股市从事股票投机，并希望因此而致富的一群瑞士人所使用的术语。它包括一套实用且相关的定律，可提供任何投资者或投机者(投机和投资根本是一回事，因此以下投机和投资会交互使用)，从事金钱游戏并控制风险的法则。
　　这里要注意的是，它是陈述有关控制风险的方法，而不是要你．避免风险，因为任何投资都有风险，对吗?用这些定律检讨自己的得失并身体力行，你可能就会在今天大展鸿图。
定律1．如果你对自己从事的投机不感到忧虑，那么你冒的风险肯定不够。
　　这句话是说，投资的资金一定要足，切勿听信专家所谓的“用闲置资金投资”的建议。当然问题在于多少钱才算足．但是我们不妨从反面来思考。如果你用所谓的闲钱十万元来投资股票，请问今年你可能赚多少?赚了一两倍又能增加自己多少财富?干脆直截了当的说，赌小钱绝对赚不到大钱，你以为如何?但这并非要你去大赌，而是要告诉你，投机的金额要大到让自己很在意或忧虑才行，而这就是合理或足够的投资金额。当然每个人所能承受的忧虑程度不同，因此投机的金额亦因人而异。
　　这条定律也涵盖了两项次要原则，一是在你认为已经发掘了好投机机会时，尽量下足额的资金，二是切勿相信所谓的“不要把所有钱放在一个篮子”分散风险的建议，因为你不是大玩家。过份分散资金同样也分散获利的机会。
　　总之，要学习下大赌注，不要怕赔钱，不要怕让自己心理受到创伤。事实上只要控制得当，最差的状况也不过是使自己再穷些而已。但相反地，获利的机会也将无可限量，或许甚至可以让自己脱难穷困。
定律2．尽早获利了结。
　　这个定律要求你要节制自己的贪婪心理。在操作股票时，贪婪会表现在股价持续飘涨时的惜售，而原因是伯后悔。这也就是说，害怕在卖掉股票之后，股票会继续上涨。的确每个人都有这种经验，有时候它会令人懊恼得寝食难安。甚至会让有些人到了口中念念有词的地步。但是华尔街一直流行一句话是：“当股票卖掉之后，别再过问股价的涨跌。”
　　华尔街老手的做法是，在进场买进股票一段时间，不管是赚还是赔，到了自己认为应该结束的时候就强迫自己结束，然后让自己好好轻松一番，完全不再过问股市。根据统计，这段轻松时间认一两周到一两个月后不等。
　　至于游戏结束的时间如何决定呢?通常的作法是，事先决定自己希望达到的获利率，只要目标一达成就立即脱身。这条定律要告诉你的就是，要求自己在股价攀升到顶点之前脱手，不要期望命运之神会持续赐福予你。
　　由于股票游戏并没有明订的起点或终点，一切都要靠自己决定，因此自己就是自己的裁判。当预定目标达成后，立即脱手，甚至退场后股价持续在攀升，也要压抑自己的贪念，不要被胜利冲昏头，又再进场。
定律3．当船开始下沉时，不要祷告，赶快脱身。
　　换句话说，当股市走势趋于恶化时，就要立即脱身，甚至立即停损认赔，不要让自己套牢。在这方面投资人要克服的心理障碍，不只是除了怕股票卖掉之后的立即反弹，另外两大心理障碍是，不愿承受小额损失，以及始终盼望股市会反弹而死不承认自己眼光错误。事实上，买错或卖错是很普通的事，不足大惊小怪，只是要避免错得太离谱。
　　欣然接受多次的小额损失，但是要设法候机扳回来。华尔街交易员曾经表示，金融操作赚赔的机会都是二分之一，只要能控制在赔小钱，而设法赚大钱，这才是赚钱赚在刀口上的道理。这个定律告诫你，当事态转坏时，不要再心存侥幸心理，希望情况会好转。希望是心理创伤的治疗剂，但决不是从事投机活动的有效工具。任何从事股票投机的人最好接受停损做为必要的操作技巧。
定律4．人类行为是无法预测的，绝对不能相信任何能预测未来的未先知。
　　分析师或股市名嘴经常到处谈论并预测股市走势和个股股价的涨跌，但是一般投资人很少会去检定这些预测的准确度。检验准确度最好的方法就是照着他们的话去做，看看成功的次数如何?获利性如何?当然谁也不能否认有些预测是准确的，但这也不能保证你一定能赚得到钱，是吗?
　　不过这个定律要表达的是，不要相信任何人的预测，甚至不要以此做为自己从事股票投机操作的准绳。长远来说，这不会发生效用，金钱游戏纯属人类行为的范畴，根本无法预测。华尔街人士的建议是，价格涨跌变化的盘面永远是最正确的参考。不要根据任何对未来的预测的来决定投机行动的方针，最好是面对事实迅速地做出反应，决定行动的方向。
　　因此，比较正确的心态是：“我有理由相信这样做会成功”，而不是“根据分析师的预测，我认为这样做一定会成功。”当事与愿违时，别忘了定律3棗立即停损。
定律5．混乱并不危险，相信规律才危险。
　　简单的说，任何金融工具的走势绝对不存在所谓的规律、也没有可以绝对保证获利的公式可循。过份相信或依赖某种公式或诀窍，长远来看也不会有效。
　　相信股市走势有规律存在的心理是假定了历史会重演。许多专家经常研究以往造成涨跌的原因，而后期待只要这些原因重复出现，大势也会因此涨跌。不过在你接受任何这类说法时不妨自问，为什么成千上万的聪明人，穷数十年之精力研究，却未因此而致富?或许这样就能让自己的脑筋清醒一点，不轻易相信这种说法。
　　此外也别太相信技术分析。事实上技术分析也只不过是研究过去价格走势所形成的技术形态，如头肩顶、三角型，来决定买进卖出的操作技巧而已。事实上，你不妨照着做看看，试试准确性如何?其实成功的机会仍然是二分之一，各种走势形态事后看来或解释起来都头头是道。
　　另外也不可轻信以下两说法：其一是认为股价走势必然是某些前因所造成，其二是认为自己运气来临了。总之，投机活动决无公式可循。在从事任何投机活动前，你都必须深思熟虑，只要自己确定这有潜力的机会，便慷慨下注。记住，投机决不可能在有规律的情况下进行，你一定会面临无数混乱的局面。只要自己保待清醒，就能避免受创过深。
定律6．不要让资金陷在某个投机工具上。随时得保持机动性。
　　只要资金陷入某项投机工具上，机会成本就会很高，因为资金被卡死会让你失去投入其他获利更高的机会。一般经验显示，一个人越钟情于某项投机工具，就越不可能成为一个杰出的投机者。
　　在这方面，任何人要克服的心理障碍是，不要因为个人的偏好，而将资金陷在已经没有希望的投机工具上。另一方面，只要发觉有吸引你的投机机会横在眼前，就要毫不犹豫的脱掉原来的樊笼。
　　这个定律是希望你随时提高警觉，看看周遭的一切，不要因为自己的偏好而阻碍了其他的投机活动。所有的投机机会都要经过审慎的思考，切勿因为一些无谓的理由而阻碍了个人的行动。情势对自己不利时要勇于脱身，不要让自己陷得太深，无法全身而退。
定律7．只要是能够合理解释的直觉或预感,就可以作为投机活动的依据。
　　这个定律相信直觉可能会是从事投机活动时有效的指导，决不可以因为它听起来有点愚蠢而等闲视之。当直觉或预感降临时,不妨自忖它从何而来?如果你的确在平常时间对某些投机工具曾寄予相当程度的关切或研究，甚至对它有某种程度的掌握时，就不妨相信自己的直觉。当然它也不会百分之百正确。
　　但是要注意的是，不要把希望和直觉混为一谈。通常人在对某件事怀有相当程度的渴望时就会产生希望，而轻易相信这件事一定会发生。比较值得参考的辨别方法是，只要你认为自己渴望的事将会发生时，这种心理就应该以怀疑的态度看待。相反地，当直觉告诉你，事态的发展会和你希望的方面相反时，这种直觉往往很可靠.
　　这是一个非常有趣的原理，它告诉你不要忽视直觉或预感在投机活动中所扮演的角色，而你必须以怀疑和谨慎的态度对待它。通常直觉都是从你个人以往经验所衍生而来的，只是你不知道它真正的来历。当强烈的直觉指引你时，只要能合理的加以解释，不妨相信它，试试看。
定律8．迷信股市的涨跌受超自然力支配，这是不可能的。
　　这个定律要你别过份相信具有神秘色彩的预言。从78年开始、流行用紫微斗数判断股市走势，但是到底准确性如何，似乎也没有人在意。一般投资人在这方面所犯下的偏颇都是“宁可信其有，不可信其无”。其实，你自己做预测也不见得会很离谱。如果这些预言家的预言的确有效．那么他们早就发了。因此别对求神问卦的结果估计得太高。不过如果能淡然处之，你也可以从中享受一些乐趣。
　　圣经上有句话说：“撒旦的归撤旦，上帝的归上帝。”最好还是把金钱世界和信仰世界分得清楚些，毕竟它不会带来太大的用处。有时候，当许多人都迷信某天股市行情会崩盘时，也确实是会有影响的，但仍不致会坏到无可收拾的残局。过份迷信的坏处是它会让你失去投机的警觉性，而在毫无提防的情况下让自己陷入绝境。投机最值得依赖的伙伴仍然是自己的智慧。
定律9．预期最佳状况会发生就是乐观，而信心则是知道如何处理最坏的状况。决不要因为乐观而采取投机活动。
　　乐观的入经常受人赞美，但是在金钱世界里，过份乐观不会令你有所斩获。以78年的选举行情为例，利多与长红的极端乐观带来的是什么?当每个人都陷于极端乐观的情绪之中时，不妨做反向思考，或许反面才是对的。
　　当每个人都很乐观时，自己也很容易因此而丧失独立的判断力。在从事投机活动时，不妨先思考好，当事态恶化时要如何处理?如果能找到答案，你就成了一个有信心的投机者。
定律10．不要跟着群众走，他们也会犯错。
　　持这种态度的人经常会被指为过于自负。在金钱世界里，自负并不是一个人的缺点。不过当个人的看法和群众相异时，的确会为自己造成相当的压力。
　　在自负方面有一个原则是可以确立的，亦即最佳的进场时机经常是当群众都不愿进场的时刻。回想78年台湾股市于11月14日的指数高峰l0499.58点跌到12月l1日的8176.08点，当时悲观气氛最浓烈的时候，是否就是最佳的进场时机.
定律11．失败时别气馁，设法忘掉失败的痛苦，重新再来。
　　用俗话说就是要有毅力。从事投机活动决不可以心存一次成功的心理。华尔街许多杰出交易员早年都曾数度破产，但是他们却能不断的尝试、学习并且改变自己的个性，终于出类拔萃。
　　但是毅力不可以和顽固混为一谈。典型的顽固是不承认自己投机所犯的错误，甚至设想要逢低承接，拉低平均成本。这种作法在情势转坏时会显得特别吃重，甚至会损失不赀。注意它和定律3的差别。
定律12．长期计划会让人产生未来完全在掌握之中的幻觉，决不要为自己做长期计划。
　　事实上，你真正需要的长期计划应该以钱本身做为关切的焦点。也就是要致富的意愿。要尽量避免从事长期投资，只要有好机会就大胆投入，事态转坏就立即抽身。人要随时保持致富的高度企图心。
　　如何致富是无法事先了解或计划的，你需要知道的事只是，总之有一天你会发财。套一句英国经济学家凯因斯的话说：“长期我们都死了”。