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Posted on: 2014-03-06

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        Toyota Tsusho ¡®offer¡¯ a welcome surprise

        PETALING JAYA: The manner in which Toyota Tsusho Corp (TTC) used publicly available information to make a tentative maximum price per share offer of RM3.74 for a 51% stake in Kian Joo Can Factory Bhd's shares is deemed "unusual" but the offer, which is closer to a more palatable valuation of Kian Joo, is a "welcome surprise". 

Yesterday Kian Joo announced that it had received a letter of interest from TTC for a possible purchase of a 51% stake in aluminium and tin can packaging company Kian Joo. Kian Joo is already the target of a takeover offer by Aspire Insight Sdn Bhd.

Public Invest Research analyst Ching Weng Jin told SunBiz TTC's methodology in valuing Kian Joo is unusual but it is not unusual for TTC to make a competing offer.

"It's unusual in the sense that it was done through reviewing publicly available information. TTC studied the company (Kian Joo) and did their own valuation and came up with the price. Subject to satisfactory due diligence undertaken, they can revise the price if they want to," he said yesterday.

TTC's offer values Kian Joo at RM1.7 billion while the current offer on the table by Aspire Insight Sdn Bhd at RM3.30 per share values it at RM1.5 billion. Kian Joo's shares surged 6% or 20 sen to RM3.41 yesterday with some 2.3 million shares traded on news of the offer.

On Nov 26 last year, Aspire Insight, jointly-owned by the Employees Provident Fund and Kian Joo executive director Freddie Chee Khay Leong offered to acquire all of Kian Joo's assets and liabilities for RM1.5 billion in cash. It has until Friday to complete its due diligence exercise and sign definitive agreements in relation to this offer.

"This is certainly a welcome surprise, though extremely preliminary in nature, and values the company higher than the current offer on the table by Aspire Insight and closer to what we have always deemed a more palatable valuation of the company (in the range of RM3.50 to RM3.70)," Ching said in his report.

The offer is valid for 10 calendar days from the date of its letter to Kian Joo (until March 17, 2014). TTC is the trading arm of the Toyota Group and has a history dating back to 1948.

"Considering its pedigree, financing of this cash-based transaction, should it materialise, will not be an issue," Ching said.

Traditionally automotive-related, TTC has diversified into new business areas like infrastructure, chemicals, food, aquaculture and overseas hotel management amongst others, spanning a global network of more than 60 countries. TTC's non-binding interest will be undertaken with a yet-to-be identified possible partner.

"However, even when TTC wants to buy 51%, who is going to sell them 51%? Note that three of Kian Joo's major shareholders own 49.2% of the company.

"Our outperform call is retained, now more fervently than before on account of a potential tussle for the company, with an unchanged target price of RM3.52. A rollover to FY15's earnings will see a fair value of RM3.71 per share on similar multiples, closer to this surprise RM3.74 expression of interest," he added.

"It is now left to be seen if an extension will be sought in light of this recent development, to facilitate a higher competing offer perhaps. Or will Can-One Bhd (substantial shareholder) and EPF opt to cash out?"]]>
Business Tue, 11 Mar 2014 21:37:04 +0000 244126 at
Etiqa is lead local insurer for MAS PETALING JAYA: Etiqa Insurance & Takaful Bhd, the insurance unit of Malayan Banking Bhd (Maybank), is said to be the leading local insurer covering Malaysian Airline System Bhd's (MAS) fleet of aircraft, including the still-missing Boeing 777-200ER jet.

SunBiz was made to understand that Etiqa along with several Malaysian insurer and reinsurers are involved in insuring the aircraft, which is now the object of a major search and rescue operation by eight countries.

Industry sources say reinsurer Malaysian Reinsurance Bhd (Malaysian Re), a unit of MNRB Holdings Bhd, is one of the local players exposed to the risk.

It was reported that Germany's Allianz is the lead insurer covering the jet that disappeared over the Pacific Ocean, while Willis is its broker.

Since no single insurer has the resources to take on a substantial portion of the risk associated with a major airline, let alone all the risk associated, therefore aviation insurance is typically sold to a syndicate of insurers with one taking the lead and several other companies sharing the rest.

"Etiqa is the lead local underwriter covering MAS. Etiqa together with a small number of other local insurers provides the cover," the source told SunBiz yesterday.

However, he said, total exposure by Etiqa and the other local insurance players collectively is minimal and would not affect them significantly.

Etiqa also provide travel insurance and medical assistance to MAS passengers. It won the five year contract in late 2012 together with Cover-More Group, a leading travel insurance and assistance company.

Etiqa, Malaysian Re and MAS did not respond to queries sent via-email, as at press time.

It is learnt each insurer involved, including Etiqa, has made provision for any loss arising from the jet disappearance. The amount of provision made by Etiqa for the expected claim could not be immediately determined.

"Etiqa is currently awaiting data to estimate the company's risk exposure in the disaster," the source said.

Allianz as the lead insurer has the largest portion of the risk.

Aviation insurance protects aircraft hulls and spares, and associated liability risks, such as passenger and third-party liability.

It is considered a specialised class of business and in Malaysia's case, it is insured or reinsured in international markets such as the London insurance market where the market is made up of the traditional Lloyd's of London syndicates and numerous other traditional insurance markets.

The source said it could take months to determine who is at fault for the missing MH370 jet let alone settling the claims.

Commercial airlines carry between US$1 billion and US$2 billion per plane in liability insurance. The list price for a Boeing 777-200ER aircraft is US$261.5 million.

The source said while it is true that premium rates could go up in the case of a mishap, this may not be the case for MAS which has a good track record thus far. This assumption is made in the instance that the aircraft which is currently missing, is found to have crashed.

"Rates for airline insurance coverage has been soft. There is plenty capacity, high levels of competition and limited loss activity. Hence, due to demand and supply principle, insurers' desire to participate (in insuring) airlines," the source said.

It is learnt that the quantum of payment made by airlines to crash victims vary, with the sum widely depending on the nature of their injuries, their personal circumstances, and the state or federal laws or international treaties that govern the flight.

Under the Montreal Convention, which governs claims arising from disasters on international flights, passengers are automatically entitled to any proven damages up to a fixed amount. The Montreal treaty determines only how much carriers, not other defendants, pay.]]>
Business Tue, 11 Mar 2014 21:37:04 +0000 244127 at
WSIA invoked, Selangor water concessionaires will be 'forced' to sell PETALING JAYA: The federal government and the Selangor government have decided to invoke Section 114 of the Water Services Industry Act (WSIA) 2006, forcing the takeover of four state water assets, after the latest attempt to consolidate the state water assets by the state government failed.

The Act allows for the compulsory acquisition of Syarikat Bekalan Air Selangor (Syabas), Puncak Niaga Sdn Bhd (PNSB), Syarikat Pengeluar Air Selangor Sdn Bhd (Splash) and Konsortium ABASS Sdn Bhd (Abass) based on the compensation model detailed in the concession agreements.

Both parties said it will now proceed with the necessary steps to facilitate the implementation of the Selangor water restructuring, as set out in the terms of the memorandum of understanding (MoU) signed on Feb 26, 2014.

"In line with the terms of the MoU, the federal government through the Ministry of Energy, Green Technology and Water (KeTTHA) shall now pursue the exercise of its rights and powers under the Water Services Industry Act 2006 (WSIA) as well as any other relevant acts, statutes or regulations to assist the state government in implementing the proposed restructuring and consolidation of the Selangor water supply industry," said KeTTHA and the Selangor Mentri Besar's Office in a joint statement yesterday.

"This includes invoking Section 114 of WSIA in order to address issues of national interest to ensure security, sustainability and viability of the water supply industry in Selangor, Kuala Lumpur and Putrajaya," it added.

The decision was jointly made at a meeting between KeTTHA Minister Datuk Seri Dr Maximus Johnity Ongkili and Selangor Mentri Besar Tan Sri Abdul Khalid Ibrahim yesterday.

At the meeting, Ongkili reaffirmed his commitment to facilitate the state government in taking over the Selangor water industry from the four concessionaires as agreed in the MoU, the statement said.

The invocation of WSIA leaves the water concession holders only with the option of seeking international arbitration to get a better offer for their assets.

On Feb 26, 2014 Selangor's subsidiary Kumpulan Darul Ehsan Bhd (KDEB) made an official offer amounting to RM9.65 billion to purchase the equity and debts of four water concession companies namely, Syabas, PNSB, Splash and Abass.

At the 5pm deadline yesterday, three companies Syabas, Puncak and Splash had declined the offer while Abass had accepted.

Meanwhile, in a research note yesterday, Maybank Research said any forced takeover will have implications on the sanctity of contracts where the government is the counter party. Its analyst opined that negotiations should continue until a willing-buyer/willing-seller outcome is reached.

Puncak Niaga Holdings Bhd had set certain conditions for acceptance, which included the removal of the arbitration clause in the latest offer, among others.

Gamuda, which outright declined the offer calling it too low, is open to abitrating the pricing of the deal but stated that it would only submit to arbitration only if the valuation is based on internationally accepted methodologies, decided by the arbitration panel. Gamuda disputes the current formula used by KDEB.

HongLeong Investment Bank pointed out that Gamuda may incur a huge disposal loss of RM920 million, if it accepts the latest offer from KDEB to purchase its 40% stake in Splash for RM1.83 billion.

It said that if Gamuda were to accept the offer, it will translate to proceeds of only RM100.2 million and result in losses of about RM920 million for the company.

Yesterday, news of Gamuda's rejection of the offer by the state government pushed its stock up 5 sen to RM4.70 with 4.74 million shares traded. Puncak Niaga's shares however fell 12 sen to RM3.35 with 1.298 million shares changed hands.]]>
Business Tue, 11 Mar 2014 21:37:04 +0000 244128 at
Yap is back as Bright Packaging exec director PETALING JAYA: Bright Packaging Industry Bhd has reappointed Yap Kok Eng executive director, after ousting him early last year in a hostile takeover led by Datuk Seri Syed Ali Alhabshee.

Yap, who was general manager of the company prior to his reappointment, joined the company in 1996 and has responsibilities in the areas of sales and marketing, quality system and operations of the company which is involved in tobacco packaging and recently diversified into liquor and confectionary packaging.

Yap was removed at the company's EGM in February 2013 along with the previous managing director Wong See Yaw and independent non-executive directors Wong Siew Yoong and Yeap Cheng Chuan.

The four were ousted by a requisition party of four shareholders led by Syed Ali who was redesignated last month to chairman from non-executive director previously.

Meanwhile, another executive director Ang Lay Chieng resigned yesterday, citing personal reasons.]]>
Business Tue, 11 Mar 2014 21:37:05 +0000 244129 at
Destini to complete Samudra Oil purchase by end of the month PETALING JAYA: Destini Bhd expects to complete the purchase of Samudra Oil Services Sdn Bhd from Kejuruteraan Samudra Timur Bhd for RM80 million by end of the month.

In a statement, Destini said Kejuruteraan Samudra Timur had received approval from its shareholders for the disposal of Samudra Oil at an EGM held yesterday.

The acquisition will be fully satisfied via the issuance of 228.6 million Destini shares at an issue price of 35 sen per Destini share.

Group managing director Datuk Rozabil Abdul Rahman said the acquisition is also timely as the oil and gas industry is expected to be robust led by the potential investments into the oil and gas exploration and production activities.

"Samudra Oil's track record and global client base puts us in good stead in capturing these opportunities," he said.

"Furthermore, this acquisition is in-line with our goal of making Destini a one-stop centre for integrated engineering solution services. The acquisition is synergistic with our marine division as we would be able to offer the oil and gas customers with our other marine products and services namely life boats and rafts, and maintenance, repair and overhaul services in the safety, survival and rescue equipment," he said.

Rozabil said Samudra Oil has a healthy order book, which will keep the company busy for the next five years.

Currently, he said Samudra Oil has on-going contracts with global oil majors such as Petronas Carigali Sdn Bhd, ExxonMobil Exploration and Production Malaysia Inc, MDC Oil & Gas Ltd and JX Nippon Oil & Gas Exploration (Malaysia) Limited.

Samudra Oil provides tubular handling equipment and running services, which is a very niche and specialised segment directly in support of upstream oil and gas drilling activities, particularly in the exploration, development and workover activities.

"We believe our acquisition of Samudra Oil augurs well for the group moving forward. The tubular handling services business plays a vital role to the oil and gas industry," he said.]]>
Business Tue, 11 Mar 2014 21:37:05 +0000 244130 at
Sime Darby signs new JV for China port venture PETALING JAYA: Local conglomerate Sime Darby Bhd has set up a new joint venture (JV) with two China-based companies for the construction, management and maintenance of the sea channel, anchorage and other port infrastructure within the Weifang Central Port region, China.

In a filing with Bursa Malaysia yesterday, Sime Darby said its 99%-owned indirect subsidiary, Weifang Sime Darby Port Co Ltd (WFSDP), has on last Thursday (March 6, 2014) signed a shareholders' agreement with Weifang Port Co Ltd (WFP) and Shandong Hi-speed Transport & Logistics Investment Co Ltd (SHTLI) to establish a JV company, dubbed Weifang Port Services Co Ltd.

Sime Darby said the rationale for the JV is to separate the responsibilities of public infrastructure development with commercial profit driven operations. At the same time, the JV is also expected to accelerate the development of Weifang Port's capabilities and improve its competitiveness.

The JV will undertake the formation and lease of port shoreline and port land, as well as the operation of port engineering and port services.

The total registered capital of the JV shall be RMB1 billion (about RM536 million), out of which 37% stake will be taken by WFSDP, while WFP and SHTLI will hold 38% and 25% stakes in the JV, respectively.

WFSDP, which will contribute RMB370 million (about RM198.3 million) to the JV, plans to fund its share of the equity through contribution of the 10,000 tonne class sea channel and wave breaker, as well as from internally generated funds.]]>
Business Tue, 11 Mar 2014 21:37:05 +0000 244131 at
Islamic banking growing at fast pace KUALA LUMPUR: The Islamic banking industry in Malaysia is expected to achieve a market share of more than 25% of total banking assets in 2014, before it reaches 40% of the entire banking sector by 2020, Standard Chartered Saadiq Bhd (StanChart Saadiq) CEO Wasim Saifi said, adding that market demand and support from the government will drive the industry forward.

"As the (Islamic banking) industry grows further, you will see more and more people beginning to use Islamic banking services, while the government-linked companies and large corporations will also see the value of Islamic finance," Wasim told a press conference after launching the Saadiq-branded window at Standard Chartered Bank's main branch here yesterday.

Market demand could come from the corporate sector, small and medium enterprises (SMEs), as well as the retail customers, he said, while the industry will see growth across all market segments, including sukuk, personal finance, mortgages and corporate finance.

"Retail customers will be very important to the growth, but as the industry grows bigger and the product range wider, the corporate and SMEs will start using the Islamic banking service," said Wasim.

As for StanChart Saadiq, the Islamic banking subsidiary of Standard Chartered Bank Malaysia Bhd, it is tackling both retail customers as well as corporate clients, he said.

"For us, the bigger contribution still comes from retail customers, but the contribution of corporate clients is expected to grow substantially," he added.

Wasim said the Islamic banking industry in Malaysia is expected to grow by 18% annually from 2018. Thus far it has grown twice as fast as its conventional counterpart with a compounded annual revenue growth of 22%.

StanChart Saadiq has recorded a growth rate of 10% to 20% over the last two to three years, said Wasim, who is also the global head of Islamic consumer banking for Standard Chartered Group.

To date, the international banking group has set up Islamic banking units in seven countries, namely Kenya, the UAE, Bangladesh, Bahrain, Indonesia, Pakistan and Malaysia. The local business now contributes some 25% of the total Islamic banking assets under the group, Wasim said, adding that the banking group is exploring new market opportunities in the African region.

Currently, syariah-compliant solutions are offered at 10 StanChart Saadiq branches. Islamic banking windows have been introduced at eight StanChart branches in the Klang Valley and other parts of the country with plans to cover all 33 conventional branches over the next two years.

"This latest move to leverage our existing infrastructure is aimed at increasing our Islamic banking penetration especially in high traffic areas where the conventional branches are located. It complements our Saadiq branches very well as our main delivery channel," said Wasim.

Meanwhile, Standard Chartered Bank Malaysia country head of consumer banking Sonia Wedrychowicz-Horbatowska said the introduction of Islamic banking windows fits with the bank's overall consumer banking strategy in its aspiration to be the main bank for customers by enhancing their banking experiences.

"As it is, various innovations that we introduced in conventional banking have also been replicated in our syariah-compliant offerings," she said.]]>
Business Tue, 11 Mar 2014 21:37:05 +0000 244132 at
IPO delay has no immediate impact on Malakoff Power debt ratings: MARC PETALING JAYA: The delay in the planned initial public offering (IPO) by Malakoff Corp Bhd will have no immediate impact on the debt ratings on its subsidiary Malakoff Power Bhd's RM5.4 billion sukuk murabahah and RM300 million Islamic commercial papers (ICP) programme, said the local credit rating agency Malaysian Rating Corp Bhd (MARC).

In a press statement yesterday, MARC said it kept the 'AA-IS/Stable' and 'MARC-1 IS/Stable' ratings unchanged on Malakoff Power's sukuk murabahah and ICP programme.

The ratings, which were assigned on Dec 4, 2013, had anticipated Malakoff's planned IPO on Bursa Malaysia by first half of this year, with proceeds raised from the exercise to mainly fund the early redemption of Malakoff's RM1.8 billion unrated junior sukuk due in 2042.

"MARC views the IPO deferment would not have an immediate impact on the group's financial metrics so long as the new listing date provides sufficient buffer for timely implementation of Malakoff's refinancing exercise," it said.

Reuters last week reported that MMC Corp Bhd is expected to defer the US$1 billion Malakoff Bhd IPO to 2015, quoting sources with knowledge of the deal. MMC Corp is yet to comment on the report.

The rating agency will continue to monitor the developments on Malakoff's IPO progress and will take appropriate rating action if further elements of uncertainty are introduced into the group's risk profile.

MARC however cautioned that the deferment of the planned IPO would result in a delay in the junior sukuk's early redemption date.

"While the additional financing costs are expected to be met with available cash allocated for dividend payments from Malakoff to its wider base of shareholders post IPO, MARC is mindful of the potential impact from any prolonged delay of the IPO plan on Malakoff's ability to refinance its RM1.3 billion equity bridging loan (EBL)," it said.

The EBL, which will mature in 2017, is provided to its wholly-owned subsidiary Tanjung Bin Energy Issuer Sdn Bhd.

Meanwhile, MARC also reiterated its earlier view that the completion of the IPO is key to improving the group's capital structure which in turn would support its refinancing exercise of the EBL.

As Tanjung Bin Power Sdn Bhd, the concessionaire for the 3 x 700-megawatt coal-fired power plant in Tanjung Bin, Johor, is the main cash flow contributor to Malakoff Group and the main catalyst for Malakoff's IPO plan, the success of its major maintenance plan commenced in July 2013 is critical towards maintaining the current ratings, said MARC.

Based on the latest update, the power plant has returned to normal operations, while the third and final generating unit to undergo major maintenance works completed its capacity testing on March 7, 2014.]]>
Business Tue, 11 Mar 2014 21:37:06 +0000 244133 at
Brahim's inks MoU to develop food factory in Saudi Arabia PETALING JAYA: Brahim's Holdings Bhd has entered into a memorandum of understanding (MoU) with Dhyafat Albalad Alameen Co Ltd (Dhyafa) to collaborate on and establish a joint venture company to develop food manufacturing, production and services in Makkah, Saudi Arabia.

Dhyafa is a private development company owned by the Municipality of Makkah. Its role is to identify, assess and develop business opportunities with private partners to improve hospitality and tourism services in Makkah especially in the areas of food and beverages, Islamic historic sites, transportation, information technology and media, Makkah gifts and food safety and hygiene.

"The MoU will allow the initiation of the required procedures and collaborative works in order for the project to commence immediately," Brahim's said in a filing with Bursa Malaysia yesterday.

Both parties will collaborate and cooperate to bring to fruition the project of setting up a food factory in Makkah to produce, sell and distribute food products to interested parties.

The project company will be open to other opportunities in trading, food services, restaurant operations, industrial catering including in-flight catering, logistics and warehouse management including cold storage, and consultancies.

Dhyafa will facilitate sourcing a suitable land area for lease on a long term basis, located within the Makkah suburb, for the construction of the project company.

It will also be responsible for identifying available plots of land, negotiating the lease rate and finalising the land lease process. It shall collect all necessary information regarding local laws and regulations required to be complied with for the intended activities from local authorities.

"The board of directors of Brahim's, having considered the rationale and terms of the MoU, is of the opinion that the MoU is in the best interest of the company."

Brahim's will contribute its expertise in the setting up of the food factory, as well as in the areas of operation management, food production and processing, food packaging and food quality management.]]>
Business Tue, 11 Mar 2014 21:37:06 +0000 244134 at
Astral Supreme bags RM105m Malacca housing contracts PETALING JAYA: Astral Supreme Bhd, which saw a shift in its boardroom recently with the entry of Datuk Eddie Chai Woon Chet, has secured letters of award (LOAs) worth a total of RM105 million for housing projects in Malacca.

In a filing with Bursa Malaysia yesterday, the group said its wholly-owned subsidiary Astral Supreme Construction Sdn Bhd received the LOAs from Gemawan Bina Sdn Bhd (RM57 million) and Permata Rebana Sdn Bhd (RM48 million).

Astral Supreme Construction will undertake the sub-contract for design, build and associated works for the housing development projects and is expected to complete the works in two years by March 10, 2016.

"These projects are expected to contribute positively to the future consolidated earnings and enhance the net assets of Astral Supreme group for the financial years ending Dec 31, 2014 (FY14) and Dec 31, 2015.

"The contracts will have a positive effect on the earnings per share. Nevertheless, the contracts will not have material effect to the substantial shareholders' shareholdings of the company for FY14," it said, adding that the projects will be funded with internally generated funds and borrowings.

At a press conference last week, Chai said Astral Supreme Construction was looking to participate in a RM600 million government housing project known as Projek Perumahan Rakyat (People's Housing Programme or PPR), in a bid to turn around the loss-making group. He also said that the project would help the subsidiary company turnaround the whole group within a year.

The subsidiary company currently has one other potential project on its plate, namely, the joint venture (JV) with Zenith PMC Sdn Bhd to undertake the Penang undersea tunnel job. The JV agreement was signed in August last year to begin feasibility studies on the undersea tunnel job, of which Chai said the company needs more time to consider.

Chai, 36, who was appointed executive director last Wednesday, was redesignated as managing director last Friday while non-executive director Wong Kwai Wah was redesignated as executive director. Wong, 57, is also the executive director of Consortium Zenith BUCG Sdn Bhd.]]>
Business Tue, 11 Mar 2014 21:37:06 +0000 244135 at


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