Tuesday, July 11th, 2017
HONG KONG, July 11 —Sunac China Holdings’s planned US$9.3 billion (RM39.97 billion) deal to buy Dalian Wanda’s tourism projects and hotels is a bargain even though it could become China’s most indebted developer, analysts said, a view that…
NEW YORK, July 11 — Oil futures were little changed in New York, trading near US$44 a barrel following a report that Saudi Arabia exceeded its agreed-upon output limits last month. The world’s biggest oil exporter told Opec it raised output…
CHANGZHOU, July 9 — Global sewage and water treatment firms are eyeing opportunities in an unsavoury place: a growing pile of waste in China, the world’s most populous nation. The country has been for years battling contamination from…
KUALA LUMPUR: Lotte Chemical Titan Holding Bhd is only one of two listings this year which saw its stock end its first trading day below the issue price.
The stock ended 1.85% or 12 sen lower at RM6.38 against the initial public offering (IPO) price of RM6.50 in its debut on the Main Market of Bursa Malaysia yesterday, despite stabilising action by IPO manager Maybank Investment Bank.
The bank acquired 17.1 million Lotte Chemical Titan shares at an average price of RM6.4718 each, which represented 37.6% of the group’s total trading volume of 45.48 million shares. The market debutante was the second most actively traded counter for the day.
Volume on Bursa Malaysia totalled 1.73 billion shares at the closing bell yesterday.
Year to date, the only other company to fall short on its debut is KIP Real Estate Investment Trust, which fell 0.5% on the first day of trading. It closed yesterday at 92.5 sen, still below its IPO price of RM1.
Commenting on Lotte Chemical Titan’s disappointing debut, Inter-Pacific Research Sdn Bhd head of research Pong Teng Siew said he believes that low market liquidity led to the group’s weak performance.
“The (market) liquidity is quite low. At this point (4pm yesterday), we got (only) 1.35 billion shares (being) traded. That is low (in terms of) the regular standards,” Pong told SunBiz.
In addition, he said, the undersubscription of the IPO’s retail tranche displayed “chances that the demand would be low”.
Nevertheless, he said, the downward trend is anticipated to be temporary, noting that “things in the stock market go in cycles”.
“When it is very weak, there will come a time when it will recover; when it is very strong, there will come a time when it will weaken. Nothing is permanent in the stock market,” Pong said.
Speaking at the listing ceremony yesterday, Maybank Investment Bank regional head, equity capital markets Ramesh Manimekalanandan made it clear that it was the group’s decision to buy back all shares allotted to the retail and non-cornerstone bumiputra investors following the IPO revisions.
“So both of the regulators Securities Commission and Bursa Malaysia Securities Bhd have approved this and it will be implemented from July 12 to 18,” he said.
Maybank Investment is the principal adviser for the group’s IPO.
Given the lukewarm response to its listing exercise, the polyolefins producer had reduced its final IPO price to RM6.50, which was 18.7% or RM1.50 sen below the initial retail price of RM8.
The group also reduced the size of the issuance by 21.7% to 580 million shares, from around 740.5 million planned earlier. It raised RM3.77 billion from the IPO, compared with its earlier target of RM5.92 billion.
Currently it has four on-going projects, three of which are in Malaysia and Indonesia, which will be partially funded via the IPO proceeds over the next 12 to 36 months.
The group’s senior vice-president corporate planning Philip Kong said despite the lower proceeds from the IPO, the group is confident that it will be able to fund all of these expansion projects, given its strong financial position.
“As at first quarter of this year, we have RM425 million in cash, and with the IPO proceeds and our future generated funds, we are confident that we will be able to fund all these projects,” he said.
Lotte Chemical Titan’s listing is the tenth on Bursa Malaysia this year, and is the largest IPO in the country since 2012.
PETALING JAYA: The Ministry of Defence is claiming damages of RM147.7 million from Boustead Heavy Industries Corp Bhd’s joint-venture company Boustead DCNS Naval Corporation Sdn Bhd (BDNC) for “breach of obligations” under the contract for in-service support for the Royal Malaysian Navy Scorpene submarines.
BDNC is 60% owned by BHIC Defence Technologies Sdn Bhd, a wholly owned subsidiary of BHIC, and the rest is held by France's DCNS SA.
BHIC told Bursa Malaysia that it received a letter from the ministry claiming liquidated damages amounting to RM53.2 million and €19.3 million (RM94.5 million), being 10% of the total contract value.
The submarines service support deal was awarded to BDNC on Aug 12, 2010 for a total contract value of €193 million and RM532 million. It included a full submarine integrated logistics support package, consisting of a comprehensive spare parts package as well as the outfitting of workshop equipment, respective yard facilities and equipment, submarine safety conditioning facilities and their corresponding maintenance.
The contract also covered tugboat services and the operation and maintenance of the shiplift, transfer system and submarine “umbilical services”.
BHIC said BDNC is responding to the letter of claim and has adequate basis to defend itself and appeal against the claim, which is expected to have a material financial and operational impact on the BHIC Group for the financial year ending Dec 31, 2017.
BHIC shares fell one sen to close at RM2.19 on some 15,300 units traded, giving it a market capitalisation of RM544.12 million.
PETALING JAYA: QES Group Bhd is en route to an initial public offering (IPO) on the ACE Market of Bursa Malaysia Securities Bhd with an issue of 151.66 million new shares and offer for sale of 75.83 million existing shares.
QES is principally involved in the distribution of inspection, test and measurement equipment, materials and engineering solutions. It also manufactures optical inspection equipment, automated handling equipment as well as advanced wafer measurement system.
Their customers belong to the electrical & electronics, automotive and semiconductor industries.
Its principal markets cover the Asean region. Malaysia contributed 47.7% of its RM127.28 million revenue for the financial year ended Dec 31, 2016, followed by its largest foreign contributor, Vietnam which accounted for 14.2%, while Singapore and the Philippines contributed 11.1% and 10.1% respectively. The group has been around since 1991.
Proceeds from the IPO will be used for development of three key products – general working capital requirements, repayment of bank borrowings, and capital expenditure & estimated listing expenses.
“We plan to utilise up to RM4.3 million from the proceeds to develop three key products, namely the fully automated vision inspection system, automatic wafer packing system and automatic wafer ID under our manufacturing division. These products are advanced equipment aimed at reducing cost and improving product yield in their respective test and measurement processes through higher precision, integrated processes and automation. They are targeted at customers from the semiconductor industry,” QES said in its prospectus exposure.
It plans to expand its distribution business by expanding its recurring income segment and diversifying into new market segments for its product line-up.
“In order to better capitalise on our large customer base, we will implement a customer relationship management software to better monitor our customers’ equipment status and initiate service calls to grow our recurring revenue from repair and maintenance services and supply of spare parts.
“We are seeking new market segments for our products to penetrate into in the near future, particularly the higher education institutions, petrochemical and pharmaceutical industries,” said QES.
PETALING JAYA: RAM Ratings has revised to stable from negative the outlook on the AA3(s) rating of Country Garden Real Estate Sdn Bhd’s RM1.5 billion ireedemable medium-term note programme.
The move reflects the improvement in the credit metrics of its ultimate parent – China-based Country Garden Holdings Co Ltd – and its expectation that these metrics will be sustained on the back of a strong property sales and solid cashflow generation.
The rating of the note programme reflects unconditional and irrevocable corporate guarantees extended by Country Garden, Bright Start Group Ltd and Top Favour Holdings Ltd on a joint and several basis. Therefore, the rating mirrors that of Country Garden (as the strongest obligor) and its credit fundamentals.
“While we believe the overall Chinese property market will continue to soften in the near term, the group’s sales performance is envisaged to remain sturdy, supporting its robust debt coverage and leverage profile,” RAM Ratings said in a statement yesterday.
In FY Dec 2016, Country Garden’s sales more than doubled from the previous corresponding period to RMB309 billion (RM195.1 billion) as the group scaled up property launches. From being the third-largest property developer by total sales in 2016, Country Garden moved to first place in 2017, with its sales increasing three-fold to RMB204 billion in the first four months of the year. As at end-December 2016, the group expanded its presence to 185 cities in China from 147 cities a year earlier, enlarging its geographical footprint while minimising concentration risk.
Lifted by lofty advance property sales receipts, Country Garden’s operating cashflow debt cover rebounded strongly in fiscal 2016 to a 5-year high of 1.28 times, after underperforming in fiscal 2015 at 0.24 times. Likewise, the group’s adjusted net gearing – which is adjusted for pre-sales profit yet to be recognised and excludes restricted cash – improved to 0.49 times as at end-December 2016 (end-December 2015: 0.92 times).
RAM Ratings however did caution that Country Garden’s total debt inflated to RMB136 billion, as a result of persistently aggressive land acquisitions in the past two years, making it less flexible to withstand changes in market conditions.
“While its leverage is expected to stay manageable under this scenario, we remain cautious in view of the group’s tendency to deviate from its stated plans due to changing market conditions, as exhibited in the past few years,” it concluded.
PETALING JAYA: AmBank Research is unperturbed by WCT Holdings Bhd's legal suit in Doha as it believes the reality is that the arbitration could drag on for years, and when a decision is finally handed down, it remains to be seen if the award is enforceable, or if the counterparty will honour the award.
AmBank said a case in point is WCT's arbitration proceeding against client Meydan Group LLC in relation to the cancellation of the Nad Al Sheba Racecourse project in Dubai, UAE. First commenced in 2009, WCT only received an award of AED1.15 billion (RM1.2 billion) six years later in 2015.
“However, at present, two years after the award, Meydan Group LLC has yet to pay up. Therefore, we are unperturbed by the latest development,” the research house said in a report yesterday.
WCT has received a request for arbitration from the Court of Arbitration of the International Chamber of Commerce, filed by its mechanical, electrical and plumbing subcontractors for the Ministry of Interior headquarters project in Doha, Qatar for 181.57 million riyals (RM214.1mil).
“We are unable to determine if WCT has a strong case (in the absence of the facts of the case and legal expertise). However, if WCT is to lose the latest arbitration, the amount claimed RM214.1 million, will erase the entire and 70% of our FY17 and FY18 forecast earnings for WCT respectively.
The total loss per share is 12 sen on a fully diluted basis,” AmBank said.
This is the second major arbitration claim WCT has been served with this year. To recap, In Feb 2017, a 50:50 WCT – Arabtec Construction LLC JV received a request for arbitration from the Dubai International Arbitration Centre, filed by its steel work subcontractor for the Nad Al Sheba Racecourse project in Dubai, UAE. It is claiming AED107.7 million (RM130.6 million) for works done, plus costs.
It maintained its forecasts on WCT with a fair value of RM1.88 and hold call.
Meanwhile, PublicInvest Research said the new development comes as a negative surprise and proves that these surprise contingent liabilities, especially from WCT's overseas projects, could potentially wipe out its yearly earnings in the event that it loses this particular arbitration case.
It said the impact to WCT's net assets is estimated at 8% only and would be mitigated by its impending arbitration award of totaling AED1.15 billion (RM1.4 billion).
“As expected, WCT will defend and oppose the claims and it would probably take a long time to resolve based on precedent cases. All told, our target price remains unchanged at RM2.00, and we maintain our neutral call,” PublicInvest said.
HLIB Research also said the suit is a negative surprise and gathered that RM538 million (68%) of WCT's RM791 million receivables as at 1QFY17 is from the Middle East, majority of which is related to the Ministry of Interior headquarters project.
“Should the abovementioned risk factor pan out (the worst case scenario), this would reduce our FY17 earnings forecast of RM121 million to a loss of RM93 million. However, we would treat this arbitration claim as an exceptional item and hence, leave our core earnings forecast unchanged,” said HLIB.
It added that arbitration proceedings are usually a long drawn affair, maintaining a hold call on WCT with a target price of RM2.15.
WCT closed 6.7% lower at RM1.95 yesterday, with 3.04 million shares traded.
KUALA LUMPUR, July 11 — Boustead Heavy Industries Corp Bhd’s (BHIC) indirect unit, Boustead DCNS Naval Corp Sdn Bhd (BDNC), has received a letter from the Ministry of Defence claiming against BDNC a liquidated damages amounting to RM53.2…
PETALING JAYA: MESB Bhd is proposing to place out up to 30% stake, or 12.6 million new shares, in the company to raise RM9.2 million for working capital and business expansion.
The new shares are to be issued at 73 sen a share to independent third party investors to be identified at a later date.
The issue price represents a discount of 8.22% to the five-day volume-weighted average market price of MESB shares traded on Bursa Malaysia Securities up to and including July 10, 2017, being the last market day prior to the date of the announcement of 79.54 sen.
The board has appointed KAF Investment Bank Bhd as the adviser and the sole placement agent for the proposed private placement.
MESB closed 3.77% higher at 82.5 sen yesterday with 29,000 shares traded, for a market capitalisation of RM34.65 million.