Friday, 24 February 2012


MOL created vibes when the people got to know of the windfall the company, and its major shareholder Tan Sri Vincent Tan, stands to make from the listing of Facebook. But despite the vast amount of money MOL will get when Facebook shares are publicly traded, MOL did not rest idly waiting to cash out from it's prized investment.

It leveraged off Friendster, which it bought in 2009, by not continuing solely on its social networking business but one that gets people transacting on its website. After getting privatised in 2008 by Tan, the company has been on a rapid expansion into countries in the region, making its presence not only known across the causeway in Singapore, but also Thailand, India, the Philippines, and Indonesia.

Its revenue has climbed steadily and by financial year ended June 30, 2011, MOL recorded RM465.3mil in revenue, a 24% increase from a year ago. While revenue for its first half ended Dec 31, 2011 climbed to RM352mil, almost matching the RM374mil in revenue it achieved for 2010, and is on course to achieve its full-year revenue target of RM750mil this year, deriving its revenue mainly from mobile reloads, online games and social payments.

It is eyeing avenues in e-commerce and physical non-cash payments as its next phase of growth. The company ambitious plans are to potentially become a regional online social gaming portal and potentially re-listing the company.

It is looking at a listing early 2013.

The rationale for listing would not be so much for capital raising but to raise the profile of the company, and allow the public to share the company's growth story.

MOL's a small stake in Facebook currently is valued at about RM450mil. It got those shares in exchange for selling off some patents it owns in Friendster, the pioneer social networking site MOL bought for US$39mil in 2008, to Facebook.

The revamped Friendster has become a social gaming website. MOL has provided a platform for game publishers to promote their wares but also leverages on its payment system to provide users and publishers a medium to transact. Now, MOL has collaborations with over 140 game publishers including big names like Electronic Arts and Zynga.

The company achieved RM135.3mil in social gaming revenue for its financial year ended June 30, 2011, a 93% increase in revenue compared to 2010, and will be targeting to hit the RM300mil mark for its financial year ending June 30, 2012.

Despite having a clear direction for the company's future, analysts are questiong the viability of MOL's business model. Acting as a medium for games and users, what will happen if the popularity of the games die down. Although MOL might look strong right now (Feb 2012) with the Facebook shares as a core asset, investors still need to delve deeper into the books of MOL to scrutinise its financial standing.
Its next phase of growth would be in the digital payment collection area particularly e-commerce and social shopping.

The company is currently regulated by Bank Negara after getting approval in 2002 as an e-money operator for its core product, MOLPoints, the online micropayment service.

Thursday, 23 February 2012

WahSeong ... Feb12

Its planned venture into oil palm cultivation in the Republic of Congo is considered risky as the company has no experience in this field. It is also the first listed company to do so in the republic.

The concerned is due to sociopolitical risks in the country. Market observers do not see any catalysts in the short term coming from this venture as it will take some time before Wasco can reap the harvest. If it succeeds in this, the oil palm venture will be good recurring income for the long term.

On Feb 3, 2012, it had entered into an agreement with Silvermark Resources Inc and Ginat Dragon Group Ltd to subscribe for up to 51% equity interest in Atama Resources Inc (ARI) for US$25 million. Silvermark and Giant will hold the remaining 49%.

ARI has a 30 year oil oil palm plantation concession agreement with the government of the Republic of Congo. Under the concession, ARI has the right to occupy 470000 ha to develop oil plam plantations and compexes.

At this juncture, 180000ha or 38% of the concession land has been identified as highly suitable for plantation. ARI will begin planting by 2QFY2013 and the development of the 180000ha is expected to be completed in 10 phases over 15 years.

Wasco will raise half the rm75 million share subscription in ARI via bank borrowings while the rest will com from internally generated funds. As at end Sept 30, 2011 Wasco had rm515 million in cash and rm726 million in borrowings. It has a net gearing of 0.2 times based on its shareholders’ funds of rm987 million.

Although the bank borrowings portion for the share subscription in ARI will only raise Wasco’s gearing to 0.25 times, the venture might become a financial burden in the future. Estimate that it will cost between US$4000 – US$6000 per hectare to develop oil palm to maturity.

Based on the initial 180000ha that have been identified and the US$4000 per hectare development cost, the capex is estimated to be at least US$48 million per year. Wasco will also need to pay RM15 per hectare to the government.

Once ARI becomes a 51% subsidiary of Wasco, its borrowings will need to be capitalized or consolidated in the latter’s balance sheet to develop oil palm plantations. This will undermine Wasco’s ability to seek new borrowings for its oil and gas ventures. This will become a burden unless it manages to hive off its oil and gas business soon, which is currently its bread and butter.

The venture will have a long gestation period. Wasco and its partners are looking at an unplanted area, which may take about five years to see first harvest.

The foray could be a move by management to seek recurring income after hiving off the oil and gas segment. Currently, all of Wasco’s six business divisions are parked under its wholly owned subsidiary Wasco Energy Ltd (WEL).

Under thr proposed demerger exercise, the non oil and gas pipe manufacturing, renewable energy and trading businesses will be parked under Wasco, while WEL will run the oil and gas business. The demerger exercise had been slated for mid 2011, but it was postponed. However, with the new venture, Wasco may be able to complete the demerger soon as the share subscription in ARI is expected to be completed in 2012.

Once Wasco completes the share subscription, it will appoint four of the eight directors in ARI. A director of IGB is also a director in ARI. IGB’s group MD Robert Tan is also the chairman of Wasco, and his family holds a 40% direct and indirect stake in the latter.

Wednesday, 22 February 2012

IOICorp ... Feb12

IOI Corp Bhd is mulling a relisting of its property arm that would see the group unlock values in that segment and enhance the attractiveness of the parent company to investors as a more plantation-focused company.

The group is in discussion with two investment banks on this to get feedback, especially on the right timing of the exercise.

The relisting of its property division would increase the stature of IOI Corp as a pure plantation play which would likely have higher valuations. It will reduce the conglomerate discount and transform IOI Corp into a pure plantation play, with a controlling stake in a valuable property company IOI Properties. Sole industry companies usually tend to fetch higher valuations.

IOI Corp may wish to also time the relisting of its property arm in line with a more bullish view on the property sector.

IOI Corp had privatised its arm in 2009. Then known as IOI Properties Bhd, IOI Corp had on Februuary 2009 launched a takeover offer at RM2.60 per share. The takeover was successful and IOI Properties was subsequently delisted on April 28, 2009. It is today wholly-owned by IOI Corp. IOI Corp has been actively growing its property business since.

In January 2012 it acquired six acres of land in Singapore for RM995.5mil to build high-end condominums and will have to settle the entire amount to the government of Singapore within 90 days from the date of the tender acceptance letter.

Presently, it has seven projects which it is developing locally with estimated gross development values (GDVs) of almost RM20bil.

Properties can testify to its track record in building property projects that have sold well. Excluding the latest land buy in Singapore, it is also presently developing high-end projects in the southern neighbouring island state with GDVs close to RM6bil.

IOI Properties has completed property development projects in Puchong, Putrajaya, southern Johor and Singapore before.

Meanwhile, IOI Corp was in talks with banks to raise more funds. It is in a good position to do so, considering its huge cash flows from its plantation side of the business.

The funds raised should give IOI Corp sufficient funds to not only pay for the Singapore land acquisition but also ready funds in the event it chooses to buy more assets such as plantation land.

Based on its results for the first quarter ended Sept 30, 2011, IOI Corp had total short and long-term borrowings of RM688.24mil and RM4.87bil respectively. Most of these debts are denominated in the US dollar, the Singapore dollar and the yen. IOI Corp had cash and cash equivalents of RM3.22bil as at Sept 30, 2011.

Tuesday, 21 February 2012

HSL ... Feb12

There will be a flurry of job announcements from Feb 2012 onwards relating to the SCORE and in particular the Samalaju Industrial Park.

Sarawak Hidro Sdn Bhd is a ramping up the 2400 MW Bakun bydroelectricity dam. SEB is looking at spending over rm6 billion to develop over rm3 billion coal fired power station in Mukah and a 500kV transmission network linking Bintulu to Kuching in 2012.

HSL will be a direct beneficiary of the massive and rapid developments within SCORE, given its expertise in infra and construction, and specially in land reclamation, considering Sarawak’s large areas of swamps and marshland.

HSL currently has rm1.6 billion worth of projects in hand, of which rm1 billion is outstanding. HSL is actively bidding for energy related projects as well.

Other potential projects include the remaining packages of the Kuching central sewerage worth about rm1.7 billion, additional flood mitigation packages worth rm250 million in Sibu, the development of a port and additional water treatment plants at Samalaju and various road and rural water supply jobs.

Monday, 20 February 2012

HekTar ... Feb12

Results highlights
• Broadly in line; maintain BUY. Hektar REIT’s FY11 core net profit of RM38.9m was spot on at 99.7% of our full-year forecast. It declared a final DPU of 3.0 sen, bringing full-year DPU to 10.5 sen, slightly lower than our forecast of 10.8 sen. We maintain our BUY recommendation, earnings forecasts and DDM-based target price of RM1.50. We like Hektar’s above-industry-average yields of >8%, which are an attraction in volatile market conditions. Another catalyst could be upward rental reversions for one-quarter of its NLA in 2012.

• Healthy rental reversions. Hektar enjoyed a healthy average rental reversion of 20% for 124 new tenancies (35% of total NLA) in 2011, led by Subang Parade, which saw the renewal of 68 tenancies at rates that were 31% higher, primarily because of the new retail space for Cube and Rosette. Wetex Parade also benefited
from a 20% increase in rentals for 24 tenancies in 2011, a result of the new entertainment outlet at Quadrix. Mahkota Parade’s rental rates started stabilising, registering a positive rental reversion of 3% in 2011, a change from 9M11’s -1%. • 9.0% rise in 2011 shopper traffic. Total shopper traffic for the overall portfolio rose by 9.0% yoy to 22.1m visitors. After 3 consecutive years of negative growth, Mahkota Parade’s visitor traffic showed a strong 14.0% growth in 2011 to 8.2m visitors due to the completion of major refurbishments in May 2010. Subang Parade and Wetex Parade too reversed the negative growth trend in 2010 to register a
5.8% and 7.6% growth in shoppers in 2011, respectively.

• Further rental reversions in 2012. About a quarter of Hektar’s NLA (24% of total rental income) will be up for renewal this year. We believe there is a high chance of further upward rental revisions.

Maintain BUY. We maintain our BUY recommendation, earnings forecasts and DDMbased target price of RM1.50. We like Hektar’s above-industry-average yields of >8%, which are an attraction in volatile market conditions. Another catalyst could be upward rental reversions for one-quarter of its NLA in 2012.

Friday, 17 February 2012

EPMB ... Feb12

 It is diversifying to reduce dependence on its automotive parts manufacturing business. The company is looking into real estate development, road construction, and more water concessions in Indonesia to safeguard its revenue stream.

Its project in Kota Serang in Indonesia will serve as a platform for the company to undertake more infra jobs.

While it is now venturing into water concession, it is worth noting that EPMB is also a contract manufacturer of water meters for Elster Group.
Its auto business is seeing falling sales.

As at Sept 30, 2011 it had cash of rm76.19 million against debt of rm200.35 million, translating into a net debt of rm124.16 million.

It may raise more funds in the form of bonds, rights issue or bank loans to finance the diversification plans.

Its net assets per share stood at rm1.68.

Proton and Perodua contributed some 80% of its revenue. Its dependence on these two automobile producers could pose a risk to its earnings should rival component manufacturers secure a slice of business from these two automotive players. It is worth nothing that DRBHicom (owns Proton) also manufactures automotive parts and components.

Nonetheless, the broadly positive review for Perodua’s replacement MyVi augurs well for EPMB. This is in tandem with the greater upstream localization policy by Perodua.

It also supplies components for Toyota vehicles in the Middle East.

Thursday, 16 February 2012

Kencana ... Feb12

Kencana Petroleum and SapuraCrest Petroleum are the likely candidates to secure licences to develop the new marginal oilfields.

More brownfield services jobs worth between RM3 billion and RM4 billion are projected to be awarded to local oil and gas services providers in 2012.

Given their strong financial asset backing and job experiences, Kencana Petroleum Bhd and SapuraCrest Petroleum Bhd, which are in the midst of consolidation, are the likely candidates to secure licences to develop the new marginal oilfields.

The two companies, together with Petrofac of Britain, were the first recipient of the newly introduced risk service contract (RSC) licence to develop the Berantai oilfield offshore Peninsular Malaysia, as announced in January 2012.

Kencana Petroleum and SapuraCrest Petroleum are on the verge of a merger, slated to be concluded in the first quarter of 2012.

In August 2011, Petronas also awarded the RSC licence to a group comprising Dialog Group Bhd, Australia-listed ROC Oil and its exploration and production arm, Petronas Carigali Sdn Bhd, to develop the Balai cluster oilfield offshore Sarawak. These fields are fast-track projects that are expected to commence oil and gas production in one or two years versus the more sophisticated deepwater fields, which may take three to five years to kick start.

There will be the listing of a merger entity between SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd called SapuraCrest Kencana Petroleum in March 2012.