Wednesday December 31, 2008
‘Overweight’ call for steel sector on cheap valuations
By EDY SARIF and LEE KIAN SEONG
PETALING JAYA: OSK Investment Bank Research has maintained its “overweight” call on the steel sector going into 2009 due to the cheap valuations of steel stocks and their oversold positions.
OSK said the “real demand for steel products were expected to recover gradually in the next few months on domestic and international pump priming.”
“With their manageable gearing levels, we do not expect the local mills to experience a credit crunch at least in the medium term,” said analyst Ng Sem Guan.
However, the research house said it had “toned down” their fair values based on “new earnings estimates and parameters.”
“We keep our ‘buy’ recommendation on Lion Industries, (at target price of RM1.86); Southern Steel, (RM2.24) and Malaysia Steel Works, (Masteel) (RM1.08),” OSK said in its Investment Strategy 2009 report. It also recommended a “trading buy” for Ann Joo (RM1.54); and Kinsteel, (64sen).
Ng said the sluggish demand over the last three months had led to a buildup in inventory but noted that most of the mills had taken measures to trim production by 20% to 50% in the near future to pare down the inventory.
He projected “some inventory write-downs” following the sharp plunge in average selling prices and acknowledged that some steel mills might register a loss in the forth quarter due to sluggish demand and weak selling price.
“Although the losses could possibly extend into the following quarter should average selling prices weaken further, we expect both demand and average selling prices to recover gradually,” he said.
Saturday, January 3, 2009
When will our stock market recover?
Wednesday December 31, 2008
Personal Investing
By OOI KOK HWA
THE world’s stock markets, including Malaysia’s, have recovered lately.
Some analysts have viewed this recovery as window dressing activities while others have called it bear market rallies.
And there are those who wonder whether we have seen the worst.
They are eager to know whether the current stock market level has reflected all the negative news, like the sharp drop in consumer spending, higher unemployment rates or lower sales and lower profits for most of the listed companies in the coming corporate result announcements.
Every investor wants to know when will the market recover.
Some investors may be excited about the current stock market level as a lot of good quality stocks have been hammered down to attractive levels, and are keen to start accumulating them.
However, if the stock market continues to dip for long periods, certain investors may run out of “bullets” to average down their purchasing prices.
Then, they will start losing interest in the stock market as they do not have cash to purchase further and their earlier purchases also start to show losses.
We need to prepare ourselves for the market turnaround.
However, we need to be patient and wait for the right time to invest.
In this article, we will look into the past two major downcycles: the 1998 crash and 2000 crash versus the current 2008 crash.
From the table, it can be seen that the Kuala Lumpur Composite Index (KLCI) tumbled by almost 80% in a period of 18 months during the 1998 crash versus a drop of 45% in a period of 13 months during the 2000 crash.
The percentage drop and duration of the 2000 crash were much less severe and shorter compared to the 1998 crash.
For the current 2008 crash, our KLCI has plunged by 47% to its lowest level of 801 points on Oct 28.
If investors believe that the current crash is quite similar to the 2000 crash, then we may have seen the worst as the current percentage drop of 47% is near the 2000 crash of 45%.
However, if the 2008 crash mirrors the 1998 crash, then we may have to wait until the KLCI touches about the 300-point level (assuming the same 79.4% drop in the 1998 crash) before we can see any real recovery.
Hence, we may have to wait for another nine months or until September 2009 (assuming the same duration of 18 months).
We do not think the 2008 crash is similar to the 1998 crash.
Our current economic situation, like central bank reserves, the health of the banking sector as well as economic fundamentals, are much better compared to 1998. However, as mentioned earlier, we need to prepare ourselves for the worst.
What to expect from here on?
Our market will try to absorb all the negative news.
As long as the market continues to drop as a result of negative news, we know we have not seen the bottom yet.
We have to wait for the day when the stock market refuses to come down even when it is loaded with massive negative news; that should be the right time to buy.
Unfortunately, based on our past observations, by then most investors may not have any more cash to purchase or they will still worry about the economic situation.
Investors need to understand that stock market cycles are always ahead of economic cycles.
Normally, when the stock market hits the bottom, the economic situation is uncertain or is still getting worse.
l Ooi Kok Hwa is an investment adviser licensed by the Securities Commission and managing partner of MRR Consulting.
Personal Investing
By OOI KOK HWA
THE world’s stock markets, including Malaysia’s, have recovered lately.
Some analysts have viewed this recovery as window dressing activities while others have called it bear market rallies.
And there are those who wonder whether we have seen the worst.
They are eager to know whether the current stock market level has reflected all the negative news, like the sharp drop in consumer spending, higher unemployment rates or lower sales and lower profits for most of the listed companies in the coming corporate result announcements.
Every investor wants to know when will the market recover.
Some investors may be excited about the current stock market level as a lot of good quality stocks have been hammered down to attractive levels, and are keen to start accumulating them.
However, if the stock market continues to dip for long periods, certain investors may run out of “bullets” to average down their purchasing prices.
Then, they will start losing interest in the stock market as they do not have cash to purchase further and their earlier purchases also start to show losses.
We need to prepare ourselves for the market turnaround.
However, we need to be patient and wait for the right time to invest.
In this article, we will look into the past two major downcycles: the 1998 crash and 2000 crash versus the current 2008 crash.
From the table, it can be seen that the Kuala Lumpur Composite Index (KLCI) tumbled by almost 80% in a period of 18 months during the 1998 crash versus a drop of 45% in a period of 13 months during the 2000 crash.
The percentage drop and duration of the 2000 crash were much less severe and shorter compared to the 1998 crash.
For the current 2008 crash, our KLCI has plunged by 47% to its lowest level of 801 points on Oct 28.
If investors believe that the current crash is quite similar to the 2000 crash, then we may have seen the worst as the current percentage drop of 47% is near the 2000 crash of 45%.
However, if the 2008 crash mirrors the 1998 crash, then we may have to wait until the KLCI touches about the 300-point level (assuming the same 79.4% drop in the 1998 crash) before we can see any real recovery.
Hence, we may have to wait for another nine months or until September 2009 (assuming the same duration of 18 months).
We do not think the 2008 crash is similar to the 1998 crash.
Our current economic situation, like central bank reserves, the health of the banking sector as well as economic fundamentals, are much better compared to 1998. However, as mentioned earlier, we need to prepare ourselves for the worst.
What to expect from here on?
Our market will try to absorb all the negative news.
As long as the market continues to drop as a result of negative news, we know we have not seen the bottom yet.
We have to wait for the day when the stock market refuses to come down even when it is loaded with massive negative news; that should be the right time to buy.
Unfortunately, based on our past observations, by then most investors may not have any more cash to purchase or they will still worry about the economic situation.
Investors need to understand that stock market cycles are always ahead of economic cycles.
Normally, when the stock market hits the bottom, the economic situation is uncertain or is still getting worse.
l Ooi Kok Hwa is an investment adviser licensed by the Securities Commission and managing partner of MRR Consulting.
KLCI - 2008 IPOs
Wednesday December 31, 2008
IPOs at lowest level in 8 years
By IZWAN IDRIS
PETALING JAYA: The number of initial public offerings (IPOs) on Bursa Malaysia sank to its lowest level in eight years in 2008, as companies delayed plans to sell shares to investors amid a rout in equity markets worldwide.
Only 21 companies went public this year, raising RM1.236bil, preliminary data by Bloomberg showed.
The biggest IPO in 2008 was steel maker Perwaja Holdings Bhd with RM367mil in proceeds underwritten by RHB Investment Bank Bhd.
The combined capital raised by companies through IPOs, additional offerings and rights issues shrunk by a massive 74.39% in 2008 to just RM2.778bil, compared with RM10.846bil last year.
The plunge in volume was largely due to a reduction in additional offerings, which totalled only RM355mil from RM6.61bil in 2007, a 94.63% decrease, the data showed.
And only RM66mil were raised by four companies which went public in the last quarter.
The dismal performance by new listings this year was a refelection of the overall weak stock market condition.
The benchmark KL Composite Index was down 39% for the year as at yesterday’s close of 881.63 points.
The worst performing new listing was Winsun Technologies Bhd, down 82.3% from its adjusted IPO price of 28.3 sen to yesterday’s close of 5 sen.
At least three other companies – Fibon Bhd, TFP Solutions Bhd and Asia Bioenergy Tecnologies Bhd – issued free shares ahead of their listings that effectively reduced their respective IPO prices.
Only four companies managed to stay above their IPO prices as at yesterday’s close.
The top performer was Ewein Bhd, up 20.7% from its IPO price at yesterday’s closing price of 84.5 sen.
The biggest IPO for the year, Perwaja, closed at 73.5 sen yesterday, a plunge of 75% from its listing price.
KLCI - 2008
Thursday January 1, 2009
Losers far outnumber gainers on Bursa
The local bourse left investors more battered and bruised than happy in 2008. Here are some of the stocks which rattled the nerves of many investors and one which overcame it all
MMC Corp Bhd
MMC Corp Bhd came under pressure in August after investors felt that its proposed acquisition of airport operator Senai Airport Terminal Services Sdn Bhd (SATS) for RM1.95bil and a general offer for water utility firm Aliran Ihsan Resources Bhd at 90 sen a share were too pricey.
The stock plunged 22%, or 61 sen, to RM2.12 following the announcement on Aug 4 – its biggest one-day tumble in almost a decade.
Analysts said then that both deals, which totalled RM2.2bil mostly in shares, would reduce its earnings per share and was not worth the price it was planning to pay.
Senai Airport is the only airport in Malaysia not operated by Malaysia Airports Holdings (MAHB). It was sold by MAHB to SATS in 2003 for RM80mil when its book value was only RM76.8mil.
MMC later revised the terms for its proposed acquisition of SATS and said that it would be financed via cash. The proposed acquisition price was also revised to RM1.7bil.
But once again, analysts viewed this as negative development as it involved the sale of MMC’s assets to fund the acquisition.
“MMC may end up swapping a profitable business with a currently loss-making airport operation on top of a huge undeveloped land, which will take years to mature,’’ an analyst said.
MMC-Gamuda Joint Venture Sdn Bhd, a joint venture between MMC Corp and Gamuda Bhd, also hit headlines after Gamuda said their RM12.5bil electrified double-tracking railway project linking Ipoh to Padang Besar would be delayed.
KNM Group Bhd
Far from its heydays as the darling of stock investors, KNM plummeted in October after foreign funds dumped its shares amid the global economic and financial volatility.
Market talk then also cast KNM, one of the country’s biggest oil and gas fabricators, in a bad light, with some saying that the company would write down its intangible assets totalling RM1.6bil, that it faced cancellation of outstanding orders and would suffer as a result of margin calls by its major shareholder.
KNM has lost about 80% in market capitalisation from its peak in May, when market cap was about RM8bil.
Based on analysts’ guidance, the company’s net profit for the year ending Dec 31, 2008 (FY08) has been lowered by 4.7% to RM400mil.
KNM has called off its 20 million euro (about RM91mil) acquisition of Belgium’s Ellimetal International NV.
Additionally, its plans to add 10,000 tonnes capacity to its Canada operations have been shelved due to the cancellation of oil sand projects by Suncor Energy Inc and Syncrude Canada Ltd.
KNM’s orderbook has dropped to RM4.3bil from RM4.7bil in August, according to RHB Research, after the removal of Ellimetal’s orders and the factoring in of a slowdown in orders from Canada and the Middle East.
Malayan Banking Bhd
The country’s biggest lender came under the spotlight this year for its decision to buy stakes in Indonesia’s PT Bank Internasional Indonesia (BII) and MCB Bank of Pakistan in deals deemed too expensive.
Maybank first proposed to acquire PT Bank Internasional Indonesia (BII) in March and a 20% stake in MCB Bank of Pakistan in May.
The BII and MCB purchases, at 4.3 times and 5.1 times book values respectively, had analysts sore not only over the valuations but also over the country risk factor, particularly in Pakistan.
Shareholders reacted positively when Bank Negara in July revoked its approval for the proposed acquisition of BII. But both deals have since been sealed.
These issues, coupled with the global financial turmoil, caused Maybank’s stock to be bashed from a high of RM10.20 in January to RM5.10 now, a plunge of 50%.
AirAsia Bhd
Shares in AirAsia Bhd sank to a record low of 79 sen on June 24 after worried foreign funds trimmed their stakes in it, largely due to concerns of skyrocketing crude oil prices which reached their peak on July 11.
It hit the headlines again sometime in October when news that Tune Air, which owns 30.8% of the budget airline, would take it private.
When news that the privatisation had hit a snag, its share price came under pressure once again.
Earlier in the year, AirAsia also came under scrutiny because of its fuel-hedging mechanisms which caused analysts to suggest possible losses of up to RM100mil for the company.
Analysts remain bearish on the aviation sector, citing the weak global economic outlook which could dampen demand for travel as a major concern.
IOI Corp Bhd
IOI Corp Bhd sent shivers down the spines of the investing fraternity in October when its shares took a big fall amid talk that a senior executive had resigned to take responsibility for foreign exchange losses incurred by the company.
Its share price plunged 18% to RM2.45 on Oct 24 but has since made quite a powerful run to close at RM3.56 as of yesterday, an indication that price falls can be an opportunity.
The plantation heavyweight had suffered severe hedging losses in the first quarter of financial year 2009, incurring realised foreign exchange losses of RM100.6mil and unrealised exchange losses of RM212.2 million – its largest loss to date.
Additionally, it was not spared the brunt of tumbling crude palm oil prices, which had seen a slide of 70% in the past seven months from its peak of RM4,486 a tonne.
In November, IOI Corp was heavily criticised over the RM73.3mil deposit that it forfeited when it called off its proposal to buy Menara Citibank in Kuala Lumpur.
Nevertheless, it remains the top plantation stock for some research houses, given that its business is well diversified, especially in downstream activities.
It is also one of the most efficient plantation players in the country due to its high fresh fruit bunches yields and low production costs.
TM International Bhd (TMI)
TMI emerged in April when Telekom Malaysia Bhd (TM) undertook one of the largest corporate deals of 2008 that saw the telecommunications giant separate its operations into two entities – with TM managing the fixed-line business and TMI, the mobile business.
On its listing on April 28, TMI shares made a lukewarm debut, opening strongly at RM8.10 a share from its reference price of RM7.85 but finishing 30 sen lower at RM7.55.
Then on Dec 5, TMI shares plunged 8.4%, or 28 sen, to RM3.04, the lowest since it was listed, triggered by foreign funds’ selling, and no thanks to a slew of stock downgrades and hedge fund redemptions.
It continues to be plagued by rising competition in the sector and its high-debt position.
Gamuda Bhd
Who can forget the day when Gamuda Bhd’s shares went all the way south to RM4.20, down 15.66% or 78 sen, after falling to as low as RM4.12 in afternoon trading?
The plunge on Feb 21, which wiped off 21.3% of its market value, was the company’s biggest fall in 10 years. It came after managing director Datuk Lin Yun Ling decided to cut his stake in the company to 1.7% from 5.2%.
Investors were not comfortable with Lin’s decision as he had helmed Gamuda for more than 20 years and they showed their discomfort with the stock continuing to lose ground in the following weeks.
The company is now plagued by project delays. The RM12.5bil double-tracking railway project, which it is building with MMC Corp Bhd, is likely to be delayed by another year due to land acquisition issues.
In Vietnam, its key commercial development project also faces some delays.
However, some brokerages still like the stock due to Gamuda’s ability to secure large-scale projects.
KFC Holdings Bhd
Shareholders of KFC must be heaving a huge sigh of relief amid all the turmoil in the equity market.
The best performer of the year with a year-to-date share price appreciation of about 15%, the cash-rich company plans to invest RM25mil next year to open at least 36 KFC outlets in South-East Asia, of which 30 will be in Malaysia.
The consumer sector in general remains one of the top picks of analysts who believe in its resilience.
Losers far outnumber gainers on Bursa
The local bourse left investors more battered and bruised than happy in 2008. Here are some of the stocks which rattled the nerves of many investors and one which overcame it all
MMC Corp Bhd
MMC Corp Bhd came under pressure in August after investors felt that its proposed acquisition of airport operator Senai Airport Terminal Services Sdn Bhd (SATS) for RM1.95bil and a general offer for water utility firm Aliran Ihsan Resources Bhd at 90 sen a share were too pricey.
The stock plunged 22%, or 61 sen, to RM2.12 following the announcement on Aug 4 – its biggest one-day tumble in almost a decade.
Analysts said then that both deals, which totalled RM2.2bil mostly in shares, would reduce its earnings per share and was not worth the price it was planning to pay.
Senai Airport is the only airport in Malaysia not operated by Malaysia Airports Holdings (MAHB). It was sold by MAHB to SATS in 2003 for RM80mil when its book value was only RM76.8mil.
MMC later revised the terms for its proposed acquisition of SATS and said that it would be financed via cash. The proposed acquisition price was also revised to RM1.7bil.
But once again, analysts viewed this as negative development as it involved the sale of MMC’s assets to fund the acquisition.
“MMC may end up swapping a profitable business with a currently loss-making airport operation on top of a huge undeveloped land, which will take years to mature,’’ an analyst said.
MMC-Gamuda Joint Venture Sdn Bhd, a joint venture between MMC Corp and Gamuda Bhd, also hit headlines after Gamuda said their RM12.5bil electrified double-tracking railway project linking Ipoh to Padang Besar would be delayed.
KNM Group Bhd
Far from its heydays as the darling of stock investors, KNM plummeted in October after foreign funds dumped its shares amid the global economic and financial volatility.
Market talk then also cast KNM, one of the country’s biggest oil and gas fabricators, in a bad light, with some saying that the company would write down its intangible assets totalling RM1.6bil, that it faced cancellation of outstanding orders and would suffer as a result of margin calls by its major shareholder.
KNM has lost about 80% in market capitalisation from its peak in May, when market cap was about RM8bil.
Based on analysts’ guidance, the company’s net profit for the year ending Dec 31, 2008 (FY08) has been lowered by 4.7% to RM400mil.
KNM has called off its 20 million euro (about RM91mil) acquisition of Belgium’s Ellimetal International NV.
Additionally, its plans to add 10,000 tonnes capacity to its Canada operations have been shelved due to the cancellation of oil sand projects by Suncor Energy Inc and Syncrude Canada Ltd.
KNM’s orderbook has dropped to RM4.3bil from RM4.7bil in August, according to RHB Research, after the removal of Ellimetal’s orders and the factoring in of a slowdown in orders from Canada and the Middle East.
Malayan Banking Bhd
The country’s biggest lender came under the spotlight this year for its decision to buy stakes in Indonesia’s PT Bank Internasional Indonesia (BII) and MCB Bank of Pakistan in deals deemed too expensive.
Maybank first proposed to acquire PT Bank Internasional Indonesia (BII) in March and a 20% stake in MCB Bank of Pakistan in May.
The BII and MCB purchases, at 4.3 times and 5.1 times book values respectively, had analysts sore not only over the valuations but also over the country risk factor, particularly in Pakistan.
Shareholders reacted positively when Bank Negara in July revoked its approval for the proposed acquisition of BII. But both deals have since been sealed.
These issues, coupled with the global financial turmoil, caused Maybank’s stock to be bashed from a high of RM10.20 in January to RM5.10 now, a plunge of 50%.
AirAsia Bhd
Shares in AirAsia Bhd sank to a record low of 79 sen on June 24 after worried foreign funds trimmed their stakes in it, largely due to concerns of skyrocketing crude oil prices which reached their peak on July 11.
It hit the headlines again sometime in October when news that Tune Air, which owns 30.8% of the budget airline, would take it private.
When news that the privatisation had hit a snag, its share price came under pressure once again.
Earlier in the year, AirAsia also came under scrutiny because of its fuel-hedging mechanisms which caused analysts to suggest possible losses of up to RM100mil for the company.
Analysts remain bearish on the aviation sector, citing the weak global economic outlook which could dampen demand for travel as a major concern.
IOI Corp Bhd
IOI Corp Bhd sent shivers down the spines of the investing fraternity in October when its shares took a big fall amid talk that a senior executive had resigned to take responsibility for foreign exchange losses incurred by the company.
Its share price plunged 18% to RM2.45 on Oct 24 but has since made quite a powerful run to close at RM3.56 as of yesterday, an indication that price falls can be an opportunity.
The plantation heavyweight had suffered severe hedging losses in the first quarter of financial year 2009, incurring realised foreign exchange losses of RM100.6mil and unrealised exchange losses of RM212.2 million – its largest loss to date.
Additionally, it was not spared the brunt of tumbling crude palm oil prices, which had seen a slide of 70% in the past seven months from its peak of RM4,486 a tonne.
In November, IOI Corp was heavily criticised over the RM73.3mil deposit that it forfeited when it called off its proposal to buy Menara Citibank in Kuala Lumpur.
Nevertheless, it remains the top plantation stock for some research houses, given that its business is well diversified, especially in downstream activities.
It is also one of the most efficient plantation players in the country due to its high fresh fruit bunches yields and low production costs.
TM International Bhd (TMI)
TMI emerged in April when Telekom Malaysia Bhd (TM) undertook one of the largest corporate deals of 2008 that saw the telecommunications giant separate its operations into two entities – with TM managing the fixed-line business and TMI, the mobile business.
On its listing on April 28, TMI shares made a lukewarm debut, opening strongly at RM8.10 a share from its reference price of RM7.85 but finishing 30 sen lower at RM7.55.
Then on Dec 5, TMI shares plunged 8.4%, or 28 sen, to RM3.04, the lowest since it was listed, triggered by foreign funds’ selling, and no thanks to a slew of stock downgrades and hedge fund redemptions.
It continues to be plagued by rising competition in the sector and its high-debt position.
Gamuda Bhd
Who can forget the day when Gamuda Bhd’s shares went all the way south to RM4.20, down 15.66% or 78 sen, after falling to as low as RM4.12 in afternoon trading?
The plunge on Feb 21, which wiped off 21.3% of its market value, was the company’s biggest fall in 10 years. It came after managing director Datuk Lin Yun Ling decided to cut his stake in the company to 1.7% from 5.2%.
Investors were not comfortable with Lin’s decision as he had helmed Gamuda for more than 20 years and they showed their discomfort with the stock continuing to lose ground in the following weeks.
The company is now plagued by project delays. The RM12.5bil double-tracking railway project, which it is building with MMC Corp Bhd, is likely to be delayed by another year due to land acquisition issues.
In Vietnam, its key commercial development project also faces some delays.
However, some brokerages still like the stock due to Gamuda’s ability to secure large-scale projects.
KFC Holdings Bhd
Shareholders of KFC must be heaving a huge sigh of relief amid all the turmoil in the equity market.
The best performer of the year with a year-to-date share price appreciation of about 15%, the cash-rich company plans to invest RM25mil next year to open at least 36 KFC outlets in South-East Asia, of which 30 will be in Malaysia.
The consumer sector in general remains one of the top picks of analysts who believe in its resilience.
Commodities - Gloomy Outlook
Thursday January 1, 2009
Gloomy outlook for commodities
By LOONG TSE MIN
PETALING JAYA: Commodities were the flavour of the month for some time, bringing huge profits to commodity players worldwide, but with the credit crisis hitting global markets in March last year, that came to a quick end.
The price of crude palm oil (CPO), one of the country’s major commodities exports, dropped from an all-time high of RM4,330 per tonne on March 3 to a low of RM1,390 per tonne on Oct 24. However, it has been above RM1,500 last month.
Meanwhile, crude oil, which had on July 3 hit a high of US$145.29 per barrel in New York trading, recently fell to a four-year low of US$33.87 on Dec 19 and was at about US$38 a barrel yesterday.
TA Securities, in its 2009 market strategy report, said: “On the back of a doom-and-gloom outlook, demand for our commodities will take a backseat and significant price recoveries in CPO and crude oil could be delayed until the fourth quarter of 2009.”
The research house expects CPO prices to average RM2,000 per tonne and crude oil to average US$45 a barrel for 2009. Last year, CPO prices averaged RM2,800 per tonne and crude oil prices US$104 per barrel.
It said any upswing in the benchmark KL Composite Index (KLCI) had to be driven by upward movements in the price of banking and plantation stocks.
OSK Securities, which has a short-term “neutral” but long-term “overweight” call on the oil and gas (O&G) sector, said in its year-end report: “With the recent drastic pullback in crude oil prices to below US$50 a barrel, we remain neutral on the O&G sector in 2009.”
OSK Securities believes there wil be a slowdown in exploration and production activities owing to the weakening overall global economy.
However, over the long term – beyond 2009 – the research house sees Malaysia’s O&G industry recovering “given that oil and gas are scarce commodities without real substitutes at reasonable cost”.
Besides the economic slowdown, uncertainty over the direction of crude oil price will also be a major cause for weaker growth in the O&G sector next year.
“We believe that most of the oil majors and their supporting industries will reduce capital expenditure and adopt a wait-and-see attitude until a clearer picture emerges,” the report said.
Apart from the commodity superstars, another important export commodity, timber, fared somewhat differently over the last year.
An analyst at a brokerage told StarBiz that the price of concrete forming panel (CFP) and structural forming panel (SFP) made of plywood had shot up to between US$450 and US$500 per cu m from lows of US$300 to US$350 in November 2007.
However, he pointed out that due to the sector having too many product varieties, it makes it not feasible to create a trading market for timber anywhere in the world.
Listed downstream timber players like Ta Ann Holdings and WTK Holdings are expected to see better margins, going forward.
Despite the weakening global economy, the analyst believes housing demand in Japan and, therefore, Malaysian plywood exports would remain stable.
As for the upstream segment, he said log prices had always been quite stable as there was limited supply, with prices now at US$200 per cu m. Rubber remains a major commodity traded in Malaysia.
Tyre-grade Standard Malaysian Rubber No. 20 (SMR 20) followed pretty much the same path as CPO and crude oil, falling from a high of RM10.52 per kg on July 2 to a low of RM3.92 per kg on Dec 12.
SMR 20 was trading at about RM4.45 per kg in yesterday’s thin year-end market.
Meanwhile, OSK Securities expected Malaysian rubber glove makers that used latex to see continued growth in demand for their products despite the economic slowdown. This is due to the increasing awareness in hygiene globally.
Malaysian glove makers command 55% to 65% of the world’s rubber glove market.
Gloomy outlook for commodities
By LOONG TSE MIN
PETALING JAYA: Commodities were the flavour of the month for some time, bringing huge profits to commodity players worldwide, but with the credit crisis hitting global markets in March last year, that came to a quick end.
The price of crude palm oil (CPO), one of the country’s major commodities exports, dropped from an all-time high of RM4,330 per tonne on March 3 to a low of RM1,390 per tonne on Oct 24. However, it has been above RM1,500 last month.
Meanwhile, crude oil, which had on July 3 hit a high of US$145.29 per barrel in New York trading, recently fell to a four-year low of US$33.87 on Dec 19 and was at about US$38 a barrel yesterday.
TA Securities, in its 2009 market strategy report, said: “On the back of a doom-and-gloom outlook, demand for our commodities will take a backseat and significant price recoveries in CPO and crude oil could be delayed until the fourth quarter of 2009.”
The research house expects CPO prices to average RM2,000 per tonne and crude oil to average US$45 a barrel for 2009. Last year, CPO prices averaged RM2,800 per tonne and crude oil prices US$104 per barrel.
It said any upswing in the benchmark KL Composite Index (KLCI) had to be driven by upward movements in the price of banking and plantation stocks.
OSK Securities, which has a short-term “neutral” but long-term “overweight” call on the oil and gas (O&G) sector, said in its year-end report: “With the recent drastic pullback in crude oil prices to below US$50 a barrel, we remain neutral on the O&G sector in 2009.”
OSK Securities believes there wil be a slowdown in exploration and production activities owing to the weakening overall global economy.
However, over the long term – beyond 2009 – the research house sees Malaysia’s O&G industry recovering “given that oil and gas are scarce commodities without real substitutes at reasonable cost”.
Besides the economic slowdown, uncertainty over the direction of crude oil price will also be a major cause for weaker growth in the O&G sector next year.
“We believe that most of the oil majors and their supporting industries will reduce capital expenditure and adopt a wait-and-see attitude until a clearer picture emerges,” the report said.
Apart from the commodity superstars, another important export commodity, timber, fared somewhat differently over the last year.
An analyst at a brokerage told StarBiz that the price of concrete forming panel (CFP) and structural forming panel (SFP) made of plywood had shot up to between US$450 and US$500 per cu m from lows of US$300 to US$350 in November 2007.
However, he pointed out that due to the sector having too many product varieties, it makes it not feasible to create a trading market for timber anywhere in the world.
Listed downstream timber players like Ta Ann Holdings and WTK Holdings are expected to see better margins, going forward.
Despite the weakening global economy, the analyst believes housing demand in Japan and, therefore, Malaysian plywood exports would remain stable.
As for the upstream segment, he said log prices had always been quite stable as there was limited supply, with prices now at US$200 per cu m. Rubber remains a major commodity traded in Malaysia.
Tyre-grade Standard Malaysian Rubber No. 20 (SMR 20) followed pretty much the same path as CPO and crude oil, falling from a high of RM10.52 per kg on July 2 to a low of RM3.92 per kg on Dec 12.
SMR 20 was trading at about RM4.45 per kg in yesterday’s thin year-end market.
Meanwhile, OSK Securities expected Malaysian rubber glove makers that used latex to see continued growth in demand for their products despite the economic slowdown. This is due to the increasing awareness in hygiene globally.
Malaysian glove makers command 55% to 65% of the world’s rubber glove market.
Commodities may lag recovery
Friday January 2, 2009
Commodities may lag recovery
Comment by LEWA PARDOMUAN
COMMODITIES, until six months ago the darling of investors and an outperforming asset class, sealed their worst year on record with accelerating losses in the fourth quarter of the year, data showed yesterday.
Industrial metals, crude oil and even grains took it on the chin as the world fell into recession and investors sold anything liquid or risky to cover deepening losses elsewhere or sock away cash for a brighter day, wiping out six years of nearly unbroken gains in the space of months.
Commodities led the charge lower over the second half of the year with more than 50% plunge since July, double the decline in the US. Dow Jones stock index, and some analysts say they will probably lag a recovery that is now expected to materialise only in the second half of next year.
“At the moment, confidence in the commodity market is short, definitely short. That confidence would start to be restored when we start to see a rebound in equity markets again,” said Mark Pervan, head of Australia & New Zealand Bank Research.
“There are a lot of nervous investors, who in some cases probably are not prepared to wade back in until they see more signs of things recovering.”
The five commodity indexes used most heavily by investors to gain exposure to raw material prices – tracking energy, metals and agriculture markets – showed an average 40.5% dive in the fourth quarter, taking the full-year fall to 42.35%.
Indices collapsed by more than two-thirds from their record highs in early July, suffering a 25% average loss in the third quarter – the first negative performance for commodities after four straight positive quarters that had handed investors some of their best returns in 35 years.
With key equity indexes also posting their biggest quarterly drop ever – the Dow Jones suffered a 34% fall, its third worst ever – investors are now banking on a major economic stimulus package from US president-elect Barack Obama to minimise the severity of a global economic downturn.
“For the first quarter, I feel that commodity prices will stabilise as we prepare for a number of changes,” said Adrian Koh, analyst at Phillip Futures in Singapore.
“Crude oil is becoming increasingly cheap as compared to other commodities and in the long term, it should move higher. However, it’s still on a sharp downtrend.”
Obama has said signing a economic stimulus package will be his priority when he takes office on Jan 20, while one of his top economic advisers said financial policy should address both immediate job creation and longer-term investment needs.
The broad-based Reuters-Jefferies CRB index of 19 mostly US-traded commodity markets including oil, coffee, gold, corn and copper shed one-third of its value in the fourth quarter, its worst quarterly showing ever.
At its early July peak, the CRB had surged 250% since the start of 2002; by year end, it was up only 20%.
Still considered an alternative to mainstream investments, commodities’ losses were mild compared to the trillions of dollars sucked out of stocks, but no less unpleasant.
Institutional funds who shunned commodities until earlier this decade flooded into the sector since 2003, increasing investment 20-fold to a peak above US$200bil by the middle of this year, a shift often blamed for the rally in prices.
Those funds fell sharply as prices collapsed by the fourth quarter, commodity assets under management had fallen by about a third to US$144bil, according to Barclays Capital estimates.
But it also said that only a small portion of that drop was caused by active withdrawals, suggesting most of pension funds and investors are sticking with the sector, for now.
Among the commodity markets, oil and copper stood out as the biggest major losers, both falling by just over 50% on the year. The biggest winner by a stretch was London cocoa, which surged 66%.
Gold, which rallied to a record high above US$1,000 an ounce in March before slipping to around US$880, fared better than most to squeeze out a more than 5% rise in 2008, and could be a bright light if the economy darkens more in coming months.
“I think in the short to medium term, in the next few months, gold will probably hold a lot better than most of its peers,” said Darren Heathcote of Investec Australia. – Reuters
Commodities may lag recovery
Comment by LEWA PARDOMUAN
COMMODITIES, until six months ago the darling of investors and an outperforming asset class, sealed their worst year on record with accelerating losses in the fourth quarter of the year, data showed yesterday.
Industrial metals, crude oil and even grains took it on the chin as the world fell into recession and investors sold anything liquid or risky to cover deepening losses elsewhere or sock away cash for a brighter day, wiping out six years of nearly unbroken gains in the space of months.
Commodities led the charge lower over the second half of the year with more than 50% plunge since July, double the decline in the US. Dow Jones stock index, and some analysts say they will probably lag a recovery that is now expected to materialise only in the second half of next year.
“At the moment, confidence in the commodity market is short, definitely short. That confidence would start to be restored when we start to see a rebound in equity markets again,” said Mark Pervan, head of Australia & New Zealand Bank Research.
“There are a lot of nervous investors, who in some cases probably are not prepared to wade back in until they see more signs of things recovering.”
The five commodity indexes used most heavily by investors to gain exposure to raw material prices – tracking energy, metals and agriculture markets – showed an average 40.5% dive in the fourth quarter, taking the full-year fall to 42.35%.
Indices collapsed by more than two-thirds from their record highs in early July, suffering a 25% average loss in the third quarter – the first negative performance for commodities after four straight positive quarters that had handed investors some of their best returns in 35 years.
With key equity indexes also posting their biggest quarterly drop ever – the Dow Jones suffered a 34% fall, its third worst ever – investors are now banking on a major economic stimulus package from US president-elect Barack Obama to minimise the severity of a global economic downturn.
“For the first quarter, I feel that commodity prices will stabilise as we prepare for a number of changes,” said Adrian Koh, analyst at Phillip Futures in Singapore.
“Crude oil is becoming increasingly cheap as compared to other commodities and in the long term, it should move higher. However, it’s still on a sharp downtrend.”
Obama has said signing a economic stimulus package will be his priority when he takes office on Jan 20, while one of his top economic advisers said financial policy should address both immediate job creation and longer-term investment needs.
The broad-based Reuters-Jefferies CRB index of 19 mostly US-traded commodity markets including oil, coffee, gold, corn and copper shed one-third of its value in the fourth quarter, its worst quarterly showing ever.
At its early July peak, the CRB had surged 250% since the start of 2002; by year end, it was up only 20%.
Still considered an alternative to mainstream investments, commodities’ losses were mild compared to the trillions of dollars sucked out of stocks, but no less unpleasant.
Institutional funds who shunned commodities until earlier this decade flooded into the sector since 2003, increasing investment 20-fold to a peak above US$200bil by the middle of this year, a shift often blamed for the rally in prices.
Those funds fell sharply as prices collapsed by the fourth quarter, commodity assets under management had fallen by about a third to US$144bil, according to Barclays Capital estimates.
But it also said that only a small portion of that drop was caused by active withdrawals, suggesting most of pension funds and investors are sticking with the sector, for now.
Among the commodity markets, oil and copper stood out as the biggest major losers, both falling by just over 50% on the year. The biggest winner by a stretch was London cocoa, which surged 66%.
Gold, which rallied to a record high above US$1,000 an ounce in March before slipping to around US$880, fared better than most to squeeze out a more than 5% rise in 2008, and could be a bright light if the economy darkens more in coming months.
“I think in the short to medium term, in the next few months, gold will probably hold a lot better than most of its peers,” said Darren Heathcote of Investec Australia. – Reuters
Stocks picks for 2009
Stocks picked for 2009 include IOI, Tan Chong, AirAsia, PPB Group, Petronas Dagangan, Fraser & Neave, Resorts, Petronas Gas and Public Bank.
IOI Corp Bhd
For exposure to one of the best managed conglomerates in Malaysia and a proxy to a recovery in crude palm oil (CPO) prices, there are few better stocks than IOI Corp Bhd.
The catalysts for a recovery in this include CPO prices increasing to a more reasonable range of between RM2,000 to RM2,500 per tonne, and the launch of its Sentosa Cove projects.
IOI was the worst casualty during the recent sell-off in the plantation sector due to its high level of foreign shareholding, recent foreign exchange losses and departure of key management personnel. It is trading some 20% lower than early 2007 but given the estimates that this plantation heavyweight is due to earn 25.2 sen, it is trading above the forecast price/earnings ratio for Bursa Malaysia in 2009 but that could be pinned to the premium the stock has commanded of late.
Tan Chong
Motor Bhd
Tan Chong’s nine months to September 2008 net profit of RM217.6mil beat the market’s estimates and its performance among motor firms is to be admired.
Its third-quarter revenue also hit the RM1bil mark for the first time in a single quarter, or a 69% increase to RM1bil, thanks to higher car sales driven by more launches of new models.
Despite a more challenging year, Tan Chong is expected to guard its margins in the range of 8% to 10% underpinned by higher efficiencies in production and yearly increase in autoparts localisation (from 20% now to a targeted 50% by 2012).
This will lead to further improvement in costs which will also be the company’s competitive edge to hedge against the strengthening of yen against the ringgit moving forward.
Tan Chong will continue to launch three new models every year for the next three to four years given its strategy to garner more market share going forward. And while its profit for 2009 is projected to be lower – it is expected to earn 26.2 sen a share – Tan Chong’s valuations will be at a deep, and somewhat unwarranted, discount.
AirAsia Bhd
Airline shares have had a rough few years as one woe after another has hit this sector. From sky-high oil prices to cut-throat competition, airlines have had to manoeuvre to stay aflot during these trying times.
AirAsia has not been spared as it, too, took a financial hit in 2008 but clearer skies might be just over the horizon for this counter.
A merger between Qantas Airways Ltd’s Jetstar and AirAsia Bhd, if talks end up with the airlines having some form of cooperation, will be a positive for AirAsia.
The other benefit for AirAsia is that despite the economic slowdown, demand for short-haul services remains resilient and low-cost travel is benefiting from downtrading from full-service carriers.
Costs will also be much lower for AirAsia as fuel prices have collapsed. AirAsia will be paying spot prices – US$40 – from January.
The risk of a cash call has also dissipated with the successful financing for a further 37 aircraft, and the airline is projected to post a profit to the tune of 10.2 sen a share in 2009.
PPB Group Bhd
In times of uncertainty, it is always good to look at a company that goes back to basics and PPB Group, a diversified palm oil-based company, offers investors exposure to a number of industries that would benefit in this downturn. This is a steady consumer-oriented stock maybe well known for its exposure to plantation giant Wilmar International Ltd but its other less glamorous businesses will be pulling in the profits as crude palm oil prices remain depressed.
PPB has a sizeable operations in flour milling, sugar refining and feedmills to go with an increasingly profitable cinema operations. These commodity processing businesses will see margins improve as commodity prices remain low and would offset a decline in CPO-related earnings from associate company Wilmar.
Estimates have this stock earning 81.3 sen a share this year and the dividend is forecast to be a healthy 30.3 sen a share.
Petronas Dagangan Bhd
It’s not a sexy stock but its steady earnings and rock-solid business model is something investors might want to have a look at during a period of economic uncertainty.
Petronas Dagangan is the leading petrol station operator in the country and its margins, even though they fluctuate, and its nature of business give investors the security of investing in a profitable business.
Its gross profit may take a hit with the decline in pump prices but volume growth, from an ever growing number of petrol stations in the country and lower fuel prices, will offer stability of earnings.
For its 2010 financial year (its 2009 year ends in March), the company is forecast to post higher profit of 75 sen a share and dividend of 44 sen a share.
Petronas
Gas Bhd
This is another stock that has a boring label tattooed onto itself but its defensive nature will offer investors protection during times of market and economic volatility. Deriving earnings from the volume of gas sold, the risk to its earnings is small even though an economic slowdown may lead to lower a consumption of gas. That is because there is already a shortage of gas in the country.
The shuttering of petrochemical plants in the east coast may see lower demand for industrial gasses from its centralised utility facilities but the impact is expected to be small. Helping future earnings will be the company’s foray into the power generation business via its maiden power plant in Sabah.
The steady nature of Petronas Gas’s business is reflected in its forecast earnings, as estimates derived from Bloomberg has pegged the company earning 54.5 sen a share for its 2010 financial year and declaring a dividend of 47.7 sen a share.
Public Bank Bhd
It may be among the most expensive banking stocks in the world but that does not mean the stock should be ignored. The fact that it has attained such a status when banking stocks around the world are looked at with more suspicion means there is something worth looking out for in this bank. The high valuation is also a sign of confidence in this counter, signalling the market is putting a high degree of certainty that this bank will survive.
The strength of Public Bank makes it a stock worth watching out for. Its business is deeply consumer and small business centric and it has ridden the wave of lending activity in those two segments for nearly the past decade, chalking up strong double-digit growth rates and super low non-performing loans along the way.
Whether this will continue bears watching but it will be tough picking against the most defensive-natured banking stock heading into 2009. It has a forecast earnings of 72.2 sen a share for 2009 and a dividend of 69.5 sen a share.
Fraser & Neave Holdings Bhd
One look at the stock chart of this counter and it’s almost a no-brainer pick. This stock has gained year-on-year for the past five years and the company’s profits continued to rise during the time.
It has without much fanfare done the business of giving growth while maintaining the hallmarks of good management. Expansion into neighbouring countries plus the steady defensive nature of its business - the company is a major bottler of soft drinks in the country - augur well for shareholders of this company.
As one analyst remarked, the major shareholders of this company are long-term investors and for good reason. The company is forecast to post earnings of 51.6 sen a share for its 2009 financial year ending Sept 30 while dividends are strong at 50.8 sen a share.
Resorts
World Bhd
With a net cash per share of 78 sen, Resorts World Bhd will still be viewed by investors as a safe stock to own during troubled times.
Resorts’ image was recently blemished by related-party transaction issues when it acquired 10% of Walker Digital Gaming (WDG) and 100% of Digital Tree (which earns royalties from WDG) for RM250.5mil.
If investors are willing to see beyond this “dishonour”, Resorts actually offers a cheap exposure to the solid domestic gaming operations, which continue to do well even in trying times.
It is also for this reason, that during market upturns, the stock tends to outperform the broader market, rendering it a firm favourite among foreign investors.
One broker said Resorts’ net cash hoard of more than RM4.3bil could be used for more acquisitions and capital management initiatives.
A check showed that 66% of analysts polled by Bloomberg have a buy call on the stock and have forecast the company earning 22 sen a share and declaring a dividend of 7.2 sen a share.
IOI Corp Bhd
For exposure to one of the best managed conglomerates in Malaysia and a proxy to a recovery in crude palm oil (CPO) prices, there are few better stocks than IOI Corp Bhd.
The catalysts for a recovery in this include CPO prices increasing to a more reasonable range of between RM2,000 to RM2,500 per tonne, and the launch of its Sentosa Cove projects.
IOI was the worst casualty during the recent sell-off in the plantation sector due to its high level of foreign shareholding, recent foreign exchange losses and departure of key management personnel. It is trading some 20% lower than early 2007 but given the estimates that this plantation heavyweight is due to earn 25.2 sen, it is trading above the forecast price/earnings ratio for Bursa Malaysia in 2009 but that could be pinned to the premium the stock has commanded of late.
Tan Chong
Motor Bhd
Tan Chong’s nine months to September 2008 net profit of RM217.6mil beat the market’s estimates and its performance among motor firms is to be admired.
Its third-quarter revenue also hit the RM1bil mark for the first time in a single quarter, or a 69% increase to RM1bil, thanks to higher car sales driven by more launches of new models.
Despite a more challenging year, Tan Chong is expected to guard its margins in the range of 8% to 10% underpinned by higher efficiencies in production and yearly increase in autoparts localisation (from 20% now to a targeted 50% by 2012).
This will lead to further improvement in costs which will also be the company’s competitive edge to hedge against the strengthening of yen against the ringgit moving forward.
Tan Chong will continue to launch three new models every year for the next three to four years given its strategy to garner more market share going forward. And while its profit for 2009 is projected to be lower – it is expected to earn 26.2 sen a share – Tan Chong’s valuations will be at a deep, and somewhat unwarranted, discount.
AirAsia Bhd
Airline shares have had a rough few years as one woe after another has hit this sector. From sky-high oil prices to cut-throat competition, airlines have had to manoeuvre to stay aflot during these trying times.
AirAsia has not been spared as it, too, took a financial hit in 2008 but clearer skies might be just over the horizon for this counter.
A merger between Qantas Airways Ltd’s Jetstar and AirAsia Bhd, if talks end up with the airlines having some form of cooperation, will be a positive for AirAsia.
The other benefit for AirAsia is that despite the economic slowdown, demand for short-haul services remains resilient and low-cost travel is benefiting from downtrading from full-service carriers.
Costs will also be much lower for AirAsia as fuel prices have collapsed. AirAsia will be paying spot prices – US$40 – from January.
The risk of a cash call has also dissipated with the successful financing for a further 37 aircraft, and the airline is projected to post a profit to the tune of 10.2 sen a share in 2009.
PPB Group Bhd
In times of uncertainty, it is always good to look at a company that goes back to basics and PPB Group, a diversified palm oil-based company, offers investors exposure to a number of industries that would benefit in this downturn. This is a steady consumer-oriented stock maybe well known for its exposure to plantation giant Wilmar International Ltd but its other less glamorous businesses will be pulling in the profits as crude palm oil prices remain depressed.
PPB has a sizeable operations in flour milling, sugar refining and feedmills to go with an increasingly profitable cinema operations. These commodity processing businesses will see margins improve as commodity prices remain low and would offset a decline in CPO-related earnings from associate company Wilmar.
Estimates have this stock earning 81.3 sen a share this year and the dividend is forecast to be a healthy 30.3 sen a share.
Petronas Dagangan Bhd
It’s not a sexy stock but its steady earnings and rock-solid business model is something investors might want to have a look at during a period of economic uncertainty.
Petronas Dagangan is the leading petrol station operator in the country and its margins, even though they fluctuate, and its nature of business give investors the security of investing in a profitable business.
Its gross profit may take a hit with the decline in pump prices but volume growth, from an ever growing number of petrol stations in the country and lower fuel prices, will offer stability of earnings.
For its 2010 financial year (its 2009 year ends in March), the company is forecast to post higher profit of 75 sen a share and dividend of 44 sen a share.
Petronas
Gas Bhd
This is another stock that has a boring label tattooed onto itself but its defensive nature will offer investors protection during times of market and economic volatility. Deriving earnings from the volume of gas sold, the risk to its earnings is small even though an economic slowdown may lead to lower a consumption of gas. That is because there is already a shortage of gas in the country.
The shuttering of petrochemical plants in the east coast may see lower demand for industrial gasses from its centralised utility facilities but the impact is expected to be small. Helping future earnings will be the company’s foray into the power generation business via its maiden power plant in Sabah.
The steady nature of Petronas Gas’s business is reflected in its forecast earnings, as estimates derived from Bloomberg has pegged the company earning 54.5 sen a share for its 2010 financial year and declaring a dividend of 47.7 sen a share.
Public Bank Bhd
It may be among the most expensive banking stocks in the world but that does not mean the stock should be ignored. The fact that it has attained such a status when banking stocks around the world are looked at with more suspicion means there is something worth looking out for in this bank. The high valuation is also a sign of confidence in this counter, signalling the market is putting a high degree of certainty that this bank will survive.
The strength of Public Bank makes it a stock worth watching out for. Its business is deeply consumer and small business centric and it has ridden the wave of lending activity in those two segments for nearly the past decade, chalking up strong double-digit growth rates and super low non-performing loans along the way.
Whether this will continue bears watching but it will be tough picking against the most defensive-natured banking stock heading into 2009. It has a forecast earnings of 72.2 sen a share for 2009 and a dividend of 69.5 sen a share.
Fraser & Neave Holdings Bhd
One look at the stock chart of this counter and it’s almost a no-brainer pick. This stock has gained year-on-year for the past five years and the company’s profits continued to rise during the time.
It has without much fanfare done the business of giving growth while maintaining the hallmarks of good management. Expansion into neighbouring countries plus the steady defensive nature of its business - the company is a major bottler of soft drinks in the country - augur well for shareholders of this company.
As one analyst remarked, the major shareholders of this company are long-term investors and for good reason. The company is forecast to post earnings of 51.6 sen a share for its 2009 financial year ending Sept 30 while dividends are strong at 50.8 sen a share.
Resorts
World Bhd
With a net cash per share of 78 sen, Resorts World Bhd will still be viewed by investors as a safe stock to own during troubled times.
Resorts’ image was recently blemished by related-party transaction issues when it acquired 10% of Walker Digital Gaming (WDG) and 100% of Digital Tree (which earns royalties from WDG) for RM250.5mil.
If investors are willing to see beyond this “dishonour”, Resorts actually offers a cheap exposure to the solid domestic gaming operations, which continue to do well even in trying times.
It is also for this reason, that during market upturns, the stock tends to outperform the broader market, rendering it a firm favourite among foreign investors.
One broker said Resorts’ net cash hoard of more than RM4.3bil could be used for more acquisitions and capital management initiatives.
A check showed that 66% of analysts polled by Bloomberg have a buy call on the stock and have forecast the company earning 22 sen a share and declaring a dividend of 7.2 sen a share.
Asia’s Economic Slump Deepens as Manufacturing, Exports Shrink
Jan. 2 (Bloomberg) -- Singapore said its economy may shrink more than previously forecast in 2009, foreshadowing a deepening slump throughout the region as exports and manufacturing contracted further in China, South Korea and Australia.
China’s manufacturing declined for a fifth month in December, South Korea’s exports fell by more than 15 percent for a second month, and Australian manufacturing shrank, reports today showed. Singapore’s economy may contract as much as 2 percent this year, worse than a November prediction, the government said today.
“Asia is facing a growth shock with indicators suggesting the contraction will be as sharp as during the depth of the Asian financial crisis,” said Frederic Neumann, an economist at HSBC Holdings Plc in Hong Kong. “There will be more fiscal pump-priming and monetary-policy loosening forthcoming over the next three to four months.”
Public spending packages and interest-rate cuts by governments and central banks around the world have failed to reverse a worldwide economic slump and the worst credit crunch in seven decades. Asia’s export-driven economies are slowing as demand for their products diminishes amid recessions in the U.S., Japan and Europe.
Overseas shipments by India are also falling, and Vietnam this week said its 2008 economic expansion was the weakest in nine years. Among Southeast Asia’s three biggest economies, Thailand says it’s at risk of falling into a recession this quarter, while Indonesia and Malaysia expect growth this year to be the slowest since 2001.
‘Tough Time’
The World Bank last month predicted international trade will shrink in 2009 for the first time in more than 25 years. Exports account for about 32 percent of Asia’s gross domestic product, according to the World Bank. Japan, Hong Kong, Singapore and New Zealand are already in recession.
Singapore’s recession this year may be the worst in its 43- year history, Citigroup Inc. economist Kit Wei Zheng wrote in a note today.
“It’s going to be a tough time across Asia,” said Alvin Liew, an economist at Standard Chartered Plc in Singapore. “We don’t see any bright spots in the Singapore economy, especially in the first half.”
Singapore’s Chartered Semiconductor Manufacturing Ltd. and Taiwan Semiconductor Manufacturing Co., two of the world’s three largest custom-chipmakers, last month lowered their earnings projections amid delayed orders and a slump in demand.
In South Korea, President Lee Myung Bak today pledged to help bring down interest rates amid concern the economy may enter its first recession since 1998 by June as exports slow and consumer spending weakens. Overseas shipments fell 17.4 percent in December, after a 19 percent decline the month before.
Worst to Come
“We won’t waste a minute or a second in examining economic conditions every day and coming up with measures,” Lee said. “Most of all, we have to ensure money flow in the markets.”
The worst global financial crisis since the Great Depression in the 1930s will deteriorate further, New York University Professor Nouriel Roubini wrote in a commentary published on Bloomberg News yesterday.
“The entire global economy will contract in a severe and protracted U-shaped global recession that started a year ago,” Roubini said. “A hard landing for emerging-market economies may also be at hand.”
In China, where manufacturers in industries from metals to toys are reducing production or closing down, Roubini predicted growth will slow to 5 percent or less this year, and said India will face a “sharp slowdown.”
Government Help
Still, HSBC’s Neumann forecasts a rebound in Asian growth in the second half of 2009 as government spending boosts domestic consumption.
China in November unveiled a 4 trillion-yuan ($586 billion) economic stimulus plan, while South Korea revealed a 14 trillion-won ($11 billion) package of extra spending and corporate tax breaks, adding to almost $20 billion in income-tax reductions announced in September. Malaysia’s government on Nov. 4 unveiled public projects valued at 7 billion ringgit ($2 billion) to spur growth.
“Governments across the region have promised a very significant fiscal stimulus,” Neumann said. “We believe that Asia will be able to generate enough domestic demand to lead a recovery in growth.”
To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net
Last Updated: January 1, 2009 23:16 EST
China’s manufacturing declined for a fifth month in December, South Korea’s exports fell by more than 15 percent for a second month, and Australian manufacturing shrank, reports today showed. Singapore’s economy may contract as much as 2 percent this year, worse than a November prediction, the government said today.
“Asia is facing a growth shock with indicators suggesting the contraction will be as sharp as during the depth of the Asian financial crisis,” said Frederic Neumann, an economist at HSBC Holdings Plc in Hong Kong. “There will be more fiscal pump-priming and monetary-policy loosening forthcoming over the next three to four months.”
Public spending packages and interest-rate cuts by governments and central banks around the world have failed to reverse a worldwide economic slump and the worst credit crunch in seven decades. Asia’s export-driven economies are slowing as demand for their products diminishes amid recessions in the U.S., Japan and Europe.
Overseas shipments by India are also falling, and Vietnam this week said its 2008 economic expansion was the weakest in nine years. Among Southeast Asia’s three biggest economies, Thailand says it’s at risk of falling into a recession this quarter, while Indonesia and Malaysia expect growth this year to be the slowest since 2001.
‘Tough Time’
The World Bank last month predicted international trade will shrink in 2009 for the first time in more than 25 years. Exports account for about 32 percent of Asia’s gross domestic product, according to the World Bank. Japan, Hong Kong, Singapore and New Zealand are already in recession.
Singapore’s recession this year may be the worst in its 43- year history, Citigroup Inc. economist Kit Wei Zheng wrote in a note today.
“It’s going to be a tough time across Asia,” said Alvin Liew, an economist at Standard Chartered Plc in Singapore. “We don’t see any bright spots in the Singapore economy, especially in the first half.”
Singapore’s Chartered Semiconductor Manufacturing Ltd. and Taiwan Semiconductor Manufacturing Co., two of the world’s three largest custom-chipmakers, last month lowered their earnings projections amid delayed orders and a slump in demand.
In South Korea, President Lee Myung Bak today pledged to help bring down interest rates amid concern the economy may enter its first recession since 1998 by June as exports slow and consumer spending weakens. Overseas shipments fell 17.4 percent in December, after a 19 percent decline the month before.
Worst to Come
“We won’t waste a minute or a second in examining economic conditions every day and coming up with measures,” Lee said. “Most of all, we have to ensure money flow in the markets.”
The worst global financial crisis since the Great Depression in the 1930s will deteriorate further, New York University Professor Nouriel Roubini wrote in a commentary published on Bloomberg News yesterday.
“The entire global economy will contract in a severe and protracted U-shaped global recession that started a year ago,” Roubini said. “A hard landing for emerging-market economies may also be at hand.”
In China, where manufacturers in industries from metals to toys are reducing production or closing down, Roubini predicted growth will slow to 5 percent or less this year, and said India will face a “sharp slowdown.”
Government Help
Still, HSBC’s Neumann forecasts a rebound in Asian growth in the second half of 2009 as government spending boosts domestic consumption.
China in November unveiled a 4 trillion-yuan ($586 billion) economic stimulus plan, while South Korea revealed a 14 trillion-won ($11 billion) package of extra spending and corporate tax breaks, adding to almost $20 billion in income-tax reductions announced in September. Malaysia’s government on Nov. 4 unveiled public projects valued at 7 billion ringgit ($2 billion) to spur growth.
“Governments across the region have promised a very significant fiscal stimulus,” Neumann said. “We believe that Asia will be able to generate enough domestic demand to lead a recovery in growth.”
To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net
Last Updated: January 1, 2009 23:16 EST
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