Friday, November 12, 2010

A matter of time before Maybank woos OSK?

THERE are compelling reasons for top lender Malayan Banking Bhd (Maybank) to take over OSK Holdings Bhd (5053) and analysts wonder if it may just be a matter of time before Maybank officially starts courting the regional investment banking and brokerage group.

Maybank has long wanted to grow its investment banking business regionally and OSK offers it the platform to do so.

A takeover will also enable Maybank to go regional with its brokerage business.

Unlike its closest rival CIMB Group Holdings Bhd, Maybank does not have a brokerage business outside Malaysia.
OSK has quietly but aggressively expanded beyond Malaysia in recent years, and now has a presence in Cambodia, Singapore and Indonesia.

Maybank's investment banking business including brokerage, contributes less than 5 per cent to the group's overall earnings and this is something it needs to improve on.

Maybank has neither confirmed nor denied a recent report that it is keen to buy OSK, saying only that it is always on the lookout for opportunities to be a regional player.

OSK, meanwhile, said it had not entered into any serious or exclusive talks with any party on equity or strategic partnerships.

"This is still preliminary at this stage as there are no formal approvals to commence negotiations, but at face value, the deal looks compelling for Maybank if it intends to spruce up its broking business regionally," noted HwangDBS Vickers Research' banking analyst, Lim Sue Lin, in a report yesterday.

A takeover would also immediately catapult Maybank to become the country's top broker by value and volume.

OSK ranked top in terms of trading volume as at October this year with an 11 per cent market share, compared with Maybank's 5.5 per cent share.

OSK booked a RM112 million net profit last year, and while the earnings enhancement to Maybank would be relatively small, in terms of ranking and regional presence, "Maybank would be charting new territories," Lim noted.

Still, while there are strong reasons for Maybank to buy OSK, it remains to be seen if the latter's controlling shareholder and group managing director Ong Leong Huat, who has a 31.5 per cent stake, will want to sell.

Given that he has steadily built up the business and is grooming his son, who already works with OSK, to takeover and grow it further, indications are that he will not let go unless there is an irresistible offer.

If the transaction is priced at two times the book value, the total price tag for OSK would be around RM2.2 billion, said Lim. (OSK's book value as at June this year was RM1.68 a share.)

OSK's share price, which has been on the rise of late, surged 5.4 per cent to RM1.97 yesterday, its highest close in 39 months. Maybank fell 1.8 per cent to RM9.10.

The last investment banking transaction in Malaysia, in 2007, was done at one-time book value. This was when Hong Leong Investment Bank bought Southern Investment Bank from CIMB for RM65 million.

Investment banking transactions before that were done at between 1.2 times and 1.4 times book value, analysts said. But the targets, including Southern Investment Bank, were small whereas OSK is a regional franchise.

Apart from Ong's 31.5 per cent stake, OSK's shareholding structure is fragmented, with shareholders each holding less than5 per cent.

Analysts believe a hostile bid for OSK is unlikely. "It isn't Maybank's style. Also, it does not make sense to make a hostile bid for an investment bank as it is the people that you want, not the assets and liabilities," said one, pointing out that OSK's staff may leave in the event of a hostile takeover.

Read more: A matter of time before Maybank woos OSK? http://www.btimes.com.my/Current_News/BTIMES/articles/mayosk/Article/#ixzz15370G4Oq

ECONOMIC HIGHLIGHTS

  • Malaysia: Seeks world bank help to cut spending, trim deficit
  • China: Inflation surge prompts expectations of rate hike: Reluctance to take yuan ‘medicine’ hampers G-20 progress
  • Japan: Growth probably peaked as yen gains weighed on expansion
  • Australia: October jobless rate unexpectedly jumps
  • Jakarta stocks loss 12.3 points or 0.3%, closed at 3,744.6 on Thursday led by
    loss in Astra International, Bank Central Asia, and United Tractors. 

  • US stocks fell on Thursday after Ciscco Systems warned that profit will miss analyst estimates sending its stock down 16%, the most in more than 16 years. The DJIA tumbled 73.94pts (-0.65%) to 11,283.10 while the S&P500 slid 5.17pts (0.42%) to 1,213.54. Cisco’s forecast triggered a sell-off in other technology stocks, the group that has propelled the S&P500 to a 16% rally since end August. Disney also fell 2.9% after reporting fourth quarter profit that missed analyst expectations. 
  • Hong Kong shares rose 0.82% as traders welcomed data showing inflation rose at its fastest pace in more than two years in October. The benchmark Hang Seng Index added 199.69 points to 24,700.30 on turnover of HK$122.79bn. Offshore oil producer CNOOC (883 HK) rose 3.4% to 17.84 Hong Kong dollars and PetroChina (857 HK) rose 3.3% to 10.50. Chinese lenders rose on bargain hunting after the previous day’s losses caused by the central bank in Beijing hiking lenders’ reserve requirement ratio. China Construction Bank (939 HK) rose 0.8% to 7.72, and Bank of China (3988 HK) gained 0.6% to 4.67.
FBMKLCI: 1513.70 DJ: -73.94 CRUDE OIL: 87.56

Khazanah Nasional has sold 6% of its shareholding in Malaysia Airports Holdings (MAHB) for RM396m. The exercise cuts Khazanah Nasional's holding in MAHB to 54%, maintaining its controlling stake. The statement did not identify the buyers of the placed out shares. HSBC and Nomura Singapore Ltd were agents of the deal too. MAHB's shares were sold for RM6 a piece, representing a 2.9% discount to the three-day volume weighted average price. (BT)

Proton offers Mitsubishi platform to widen tie-up. It is understood that the Japanese carmaker will then use the platform to build and sell cars for its export markets. While the Persona and Exora were among several models built from ground up by Proton, the national carmaker is developing a brand new car to replace the current Persona. Mitsubishi was the strategic foreign partner for Proton when the national car project was set up in the mid-1980s. (BT)

Boustead Holdings plans to sell for RM189.23m its Sabah’s Sutera estate, Taiping rubber plantation and Trong oil mill to Al-Hadharah Boustead REIT, and then lease back these assets. The move will result in a cash inflow for the group and its subsidiaries, which will be used to reduce bank borrowings by the group and potentially save RM9.5m interest expense per annum for the group. This exercise will expand the fund’s plantation assets by 3,580ha to 19,984ha with a gross asset value of more than RM1bn. (Starbiz)

MBMR earnings rose 52% to RM34.2 million from a year ago, underpinned by stronger vehicle sales. Revenue rose 30.3% to RM388.7 million on-year.

Thursday, November 11, 2010

Latexx partners Bhd reported a set of stronger earnings in the third quarter at RM17.62 million, up 23.5% from RM14.27 million a year ago. It said on Wednesday, Nov 10 revenue rose 60.7% to RM129.87 million from RM80.84 million. Profit before tax rose 41.3% to RM20.16 million from RM14.27 million. Earnings per share were 8.19 sen compared with 7.33 sen. It declared an interim dividend of 2.5 sen per share.

Symphony House Bhd posted net loss of RM4.57 million in the third quarter ended Sept 30, 2010 when compared with net profit of RM2.23 million a year ago. It said on Wednesday, Nov 10 that revenue dipped 2% to RM40.36 million compared with RM41.17 million mainly due to the lower transaction volume in the cheque processing business unit further to client attrition in 2009. Loss per share was 0.72 sen.

Kulim, which controls KFC HOLDINGS (M) BHD [] and QSR BRANDS BHD, could continue to see trading interest following the surge in crude palm oil prices. Kulim has interests in PLANTATION via a 50% stake in London-listed New Britain Palm Oil Ltd which owns 6,300ha of matured palm oil plantations in Papua New Guinea.

OSK Holdings has not entered into any serious and exclusive negotiations with any party for any form of equity and strategic partnerships.

Proton Holdings Bhd plans to export Inspira components next year, says managing director Datuk Syed Zainal Abidin Syed Mohamed Tahir.
FBMKLCI 1528.01  DJ:+10.29 CRUDE OIL: 87.90 RM: 3.09
Syabas sues Selangor govt for RM471.6m
 Puncak Niaga Holdings’ subsidiary, Syarikat Bekalan Air Selangor SB (Syabas), has sued the Selangor state government for RM471.64m. Puncak Niaga claimed that the RM471.64m was due to it as compensation for the period between 1 January 2009 and 31 December 2009 in return for not raising water tariffs

HSL wins RM67m Sarawak road job
 Hock Seng Lee (HSL) has been awarded the RM67.3m Tuie/Supa/Manggut Road construction project in Betong, Sarawak by Adiqa Engineering SB. The scope of works included earthworks, road, drainage and other related works. The project is due to be completed by May 2013. (Starbiz)

MAS signs up maintenance support for B737-800s
 Malaysia Airlines Engineering and Maintenance (MAS E&M) and Air France Industries and KLM Engineering and Maintenance (AFI KLM E&M) have signed a 10-year component support contract for 35 if the carrier’s fleet of B737-800s, with an option for a further 20 aircraft. The 737 Component Services Programme was operated in partnership with Boeing.  The contracts also provide AFI KLM E&M to create a component spares pool in the company’s facility to exclusively support the airline’s B737-800s. Simultaneously, a regional component pool would be set up in Kuala Lumpur to provide services to MAS and other customers. (Starbiz)

Khazanah  to let fly stake in MAHB for RM404m
Khazanah Nasional, Malaysia’s sovereign wealth fund, plans to sell a second tranche of shares in Malaysia Airports Holdings (MAHB) for as much as RM404m. According to a wire report yesterday, the government owned investment arm plans to place out 66m shares, or a 6% stake, at an indicative price range of RM6-RM6.12. The report said Khazanah which sold a 7.7% stake in MAHB in March, has an upside option to sell an additional 22m shares. This latest sale is being managed by Nomura Holdings Inc, HSBC Holdings plc and RHB Capital. (MalaysianReserve)  

Wednesday, November 10, 2010

Today's company notes: fbmklci 1526.98

  • IJM bags RM690m cancer institute contract
  • Salcon secures RM52m contract in Kelantan 
  • Biport hires boats for two companies 
  • PLUS accepts UEM-EPF offer
  • SUPERMX  Shifting to Higher Margin Gloves 
  • YTL Power’s 11% share price spike yesterday reflects excitement ahead of its WiMAX network launch next week rather than privatisation speculation. Earnings impact of this venture is still difficult to quantify, thus we make no changes to our FY11-13 EPS forecasts which already factor in RM60m-80m WiMAX start-up losses.   
  • The Edge FinancialDaily reported on Wednesday Maybank is rumoured to be keen on acquiring OSK Holdings Bhd, which is on an expansion trail in the Asean region, in a move to beef up the former's investment banking arm.
  • Hartalega posted net profit of RM47.09 million in the second quarter ended Sept 30, 2010 from RM33.1 million a year ago as it benefited from an increase in demand and larger production capacity.

Tuesday, November 9, 2010

Today's Company Notes; fbm klci 1519.84

· F&N's 4QFY10 earnings surged to RM462.3mn from RM61.08mn  a year ago and it announced a final single tier dividend of 38 sen per share and a special interim dividend of RM1.10 per share.

·  AZRB is disposing 21.26% equity interest in Eastern Pacific Industrial Corporation Berhad to Lembaga Tabung Amanah Warisan Negeri Terengganu for a total cash consideration of RM111.5mn.

·  Dayang proposed  bonus  issue  and renounceable  rights issues on the basis of 1-for-4 Dayang shares held and after the proposed bonus issue respectively.

·  Uemland has no plans to raise its bid for Sunrise Bhd after the latter's share price jumped above the offer price yesterday. 

·  Mas's  unit  will  introduce jet aircraft operations  with  a  fleet of Boeing 737-800 aircraft operating out of the  Main  Terminal  Building of Kuala Lumpur International Airport in 2011.

·  HWGB  is  proposing  a private placement of up to 41.36mn  new ordinary shares of RM0.20 each to independent third party investor(s)  to  be  identified later at an issue price which is to be determined later.

·  Lonbisc  has served a notice to voluntarily buy all the remaining 54.4mn shares in TPC Plus Bhd it does not already own for 30sen a share.

·  Malaysia's GDP may expand 4.8% next year, slowing from a 7.4% gain in 2010  following  last  year's  recession,  the  World Bank said in its Malaysia Economic Monitor report.

·  More  U.S.  executives  than  ever  are increasing earnings forecasts compared  with  those  lowering  them, helped by almost $2 trillion of Federal Reserve spending and a recovery in the global economy.