Thursday, April 27, 2017

Yinson nets FPSO charter contract valued up to RM4.35bil

Wednesday, 26 April 2017 | MYT 7:40 PM

KUALA LUMPUR: Yinson Holdings Bhd has clinched a bareboat charter contract worth up to US$1bil (RM4.35bil) from Madrid-listed Repsol SA’s unit Talisman Vietnam 07/03 BV (TLV).

In a statement, the integrated offshore services provider said its indirect unit Yinson Clover Ltd received the contract for the supply, operation and maintenance of a floating production storage and offloading (FPSO) facility for Ca Rong Do field development at block 07/03 offshore Vietnam.

TLV is the operator of Ca Rong Do field.

Yinson said the contract, comprising the bareboat scope of work (bareboat SOW) and operation and maintenance of the FPSO. was for a firm period of 10 years with five yearly extension options exercisable by TLV.

The contract’s estimated total aggregate value of US$1bil is for the entire 15-year charter inclusive of all five yearly extension options.

According to, three companies were believed to be competing for the leased FPSO for the Ca Rong Do project — Yinson Holdings, Bumi Armada and UK-listed Petrofac.

Yinson said that as required under the bid for the contract, Yinson Clover entered into a novation agreement with TLV and PetroVietnam Technical Services Corp for the novation of all rights and liabilities under the contract to PetroVietnam.

Both PetroVietnam and Yinson Clover will subsequently form a 51:49 joint-venture company which will enter into a bareboat charter contract with PetroVietnam for the bareboat SOW under the contract.

“This event marks a new milestone for us by adding another strong contract to the group’s order book. Based on Yinson’s current track record, we will ensure a successful execution of the bareboat scope of work under the contract and expect a positive contribution to the group’s bottom-line starting from the financial year ended Jan 31, 2020,” said Yinson group executive chairman Lim Han Weng.

The signing ceremony was held in conjunction with the signing of three other contracts between Repsol Group, the parent company of TLV and other parties which are involved in the Ca Rong Do field project.

Yinson is the world’s 6th largest FPSO company, having a wide geographical presence in West Africa, Europe and South-East Asia.


IGB board to let shareholders decide on privatisation proposal

Wednesday, 26 April 2017 | MYT 11:56 PM

IGB owns a majority stake in IGB Real Estate Investment Trust, which in turn owns Mid Valley Megamall (above).

KUALA LUMPUR: IGB Corp Bhd will present a proposal to take the company private to its shareholders.

In an announcement to Bursa Malaysia on Wednesday, IGB said the proposal by its biggest shareholder Goldis Bhd, which seeks to acquire the remaining shares in IGB not already owned by it, would be forwarded to its shareholders to decide.

Goldis currently holds 73.43% of IGB’s share capital, excluding treasury shares.

IGB said the board of directors, minus interested directors, had deliberated on the offer by Goldis and had decided to put forward the offer to the eligible shareholders for consideration based on the preliminary opinion of independent adviser Kenanga Investment Bank Bhd.

Goldis, which submitted a formal proposal on Feb 23, had asked IGB to revert by March 30 on its decision whether to put forward the proposal to its shareholders for consideration. At the end of March, IGB’s board asked for more time - until April 28 - to evaluate the offer, which Goldis agreed to give.

IGB shareholders are offered RM3 for each IGB share held, but they can choose to be paid in one of three ways: 100% cash, a mixture of cash (30%) and Goldis shares (70%), or a combination of cash (20%) and new Goldis redeemable convertible preference shares (80%).

Goldis will be paying a total consideration of about RM1.06bil.

IGB has prized assets such as Mid Valley City, which comprises 2.7 million sq ft of retail mall space, 3.2 million sq ft of prime office space in Kuala Lumpur and over 5,500 hotel rooms across the globe, according to a note by AllianceDBS Research.

IGB also owns a 52.3% stake in IGB Real Estate Investment Trust, which in turn owns Mid Valley Megamall and The Gardens Mall.

On completion of the proposed scheme, Goldis intends to rename the group IGB Bhd, which stands for “Ipoh Goldis Bersatu”.


Bursa net profit surges on higher trading revenue

Thursday, 27 April 2017

PETALING JAYA: Bursa Malaysia Bhd saw its net profit for the first quarter ended March 31 rising by 13.4% year-on-year to RM56.6mil due to higher trading revenue.

The stock exchange operator said in its financial statements that trading revenue rose by 17.7% to RM67.2mil in the first quarter compared to the same quarter in the previous year.

Bursa Malaysia noted that the quarter saw a higher average daily trading value for on-market trades and direct business trades of RM2.54bil compared with RM2.07bil in the same quarter of the previous year.

“The first quarter results registered growth supported by strong performance in the securities market where we saw heightened trading activities with strong participation from retail and domestic institution segments,” CEO Datuk Seri Tajuddin Atan said in a statement.

“We recorded a daily average trading value for securities market’s on-market trades of RM5bil on March 17. We also saw foreign funds returning to the market, with a net inflow for the quarter of RM5.7bil,” he added.

The quarter also saw average daily contracts for the derivatives market growing by 7.3% to 62,076 contracts, driven largely by an increase in trading activities of the crude palm oil futures contracts.

The company said its annualised return on equity remained stable at 26% while its cost-to-income ratio improved by 2 percentage points to 45% for the period under review compared to 47% recorded in the first quarter of 2016.

Tajuddin said Bursa would continue to create a vibrant and sustainable capital market.

“The focus will be on improving the market ecosystem to provide more opportunities for fund-raising and trading activities, and also on improving investor experience via more engagement activities and connectivity to the exchange. Efforts will also be intensified in developing new products and services, in line with our aim to diversify reliance on trading income,” he said.


Sunsuria buys stake in Prosperspan to expand into construction

Thursday, 27 April 2017

Sunsuria unit Sunsuria Builders Sdn Bhd inked a share sale and purchase agreement (SSA) yesterday with Prosperspan director Chuah Peak San to buy 408,000 ordinary shares, representing the 51% equity interest in Prosperspan.

PETALING JAYA: Property developer Sunsuria Bhd has acquired a 51% stake in construction firm Prosperspan Construction Sdn Bhd for RM408,000 to expand into the construction business.

Sunsuria unit Sunsuria Builders Sdn Bhd inked a share sale and purchase agreement (SSA) yesterday with Prosperspan director Chuah Peak San to buy 408,000 ordinary shares, representing the 51% equity interest in Prosperspan.

The remaining 49% stake is held by Spanway Construction Sdn Bhd.

In a filing with Bursa Malaysia, Sunsuria said the proposed share acquisition was in line with its venture into construction-related businesses.

Prosperspan holds a Construction Industry Development Board licence to undertake construction works in Malaysia.

The SSA is subject to the completion of legal, business and financial due diligence exercise on Prosperspan and approval from Sunsuria’s board.

The SSA is not expected to have any material impact on Sunsuria’s earnings or net assets for the financial year ending Sept 30, 2017.

Separately, Sunsuria executive chairman Datuk Ter Leong Yap said it was a timely opportunity to strengthen its capabilities and gain access to new business growth areas.

“Through Prosperspan, Sunsuria will now have the expertise and access to future infrastructure and development projects for the government and private sectors.

“Prosperspan will also be used to engage in future construction, engineering and similar ancillary services and activities in Malaysia,” said Ter.

In the meantime, Sunsuria will be launching projects with total gross development value in excess of RM1.55bil this year.


RHB Research: HLI to ride on motorcycle businesses in Vietnam, Malaysia

Thursday, 27 April 2017

PETALING JAYA: Hong Leong Industries Bhd (HLI) motorcycle businesses in Vietnam and Malaysia will continue to contribute significantly to the company’s profitability going forward backed by strong consumer demand, according to RHB Research.

“HLI continues to prosper thanks to impressive contributions from its 24%-owned associate, Yamaha Vietnam.

“Yamaha Vietnam continued to churn out strong earnings following new product offerings that enjoy better margins, helped by a stronger local economy.

“Associate contributions in the nine-month financial results ended March 31 rose 37.2% year-on-year

“The good set of results were also contributed by the gradual improvement in sales volumes while cost pass-through helped recoup margins at Yamaha Malaysia,” the research house said while maintaining a “buy” call with a target price of RM11.10 on HLI in a report yesterday.

The Yamaha motorcycle franchise in Malaysia and Vietnam contributed more than 60% of HLI’s financial year 2016 earnings and RHB Research believed there was still room for growth, given the youthful 90 million population in Vietnam.

HLI associate companies are involved in the manufacture, assembly and distribution of motorcycles, motorcycle engines and spare parts, as well as the manufacture and sale of newsprint and related paper products.

However, RHB Research noted that higher production costs at the company’s fibre cement unit and weaker performance at its ceramic tiles unit had resulted in lacklustre performance at its building materials division in the recently announced nine-month results.

“Overall, the company reported decent earnings for nine months in the financial year ending June 30, despite flat earnings at most of its local operations.

“HLI nine-month results ended March 31 were within our expectations, making up 78% of our full-year earnings estimates.

“Apart from that, HLI’s building materials unit also has room for cost improvements and higher exports due to the weaker ringgit,” it said.

Following the commendable nine-month results, HLI has declared a dividend of 45 sen per share year-to-date.

“As HLI continues to deliver impressive financial performance thanks to a superb performance at Yamaha Vietnam, and satisfactory growth recorded at most of its local operations, it has declared a second interim single-tier dividend of 20 sen and special single-tier dividend of 10 sen.

“This brings the year-to-date dividend to 45 sen per share higher than 42 sen per share in the previous corresponding period,” it said.

The generous dividend payout was in line with RHB Research estimates, and translated to a decent yield of 4.6%.

Supported by healthy growth at Yamaha Vietnam, RHB Research made no changes to its original projections.

“Key downside risks are lower-than-expected sales that may reduce HLI’s topline and bottomline, while weakness in the US dollars could dampen export sales,” it said.


CIMB Research maintains Add for Syarikat Takaful Malaysia

Thursday, 27 April 2017 | MYT 8:32 AM

KUALA LUMPUR: CIMB Equities Research is maintaining its Add recommendation for Syarikat Takaful Malaysia (STM) due to the positive growth prospects in the takaful market.

It said on Thursday it was positive on STM’s move to embark on technology to market its products online, which will lead to wider market reach and cost efficiency.

“We retain our FY17-19F earnings per share (EPS) forecasts and dividend discount model-based target price of RM4.52. Also intact is our Add call, predicated on the positive prospects for the takaful market and strong return on equity (ROE) of more than 20%.

“The downside risks to our call are a drastic slowdown in premium growth due to weaker expansion in the industry and increased competition,” it said.

CIMB Research said STM held an analyst briefing on Wednesday which was hosted by group managing director Datuk Seri Mohamed Hassan Kamil.
The key highlights of the briefing were the regulatory changes in the industry and STM’s digital initiatives.

There are three new regulatory changes in the takaful market including the requirement for takaful operators to split their businesses into two entities (for general and family takaful). This would be negative for STM as it would lead to higher operating costs.

“For this, we have factored in additional costs of RM8mil in FY17F and RM5m in FY18-19F, in accordance with management’s guidance.

“Bank Negara plans to implement the detariffication by Jul 17, starting with the motor insurance (MI) (including takaful) segment. This would lead to greater price competition, but the MI rate may not necessarily drop given the thin margins for these products.

“However, there is a risk of a decline in fire insurance (FI) rates following the detariffication given the much better margins for FI products. Comparatively, the claims ratios for FI are about 40-50%, considerably lower than the 60-70% for MI,” it said.

CIMB Research noted that despite being perceived as a traditional takaful operator, STM is serious in growing its digital takaful business, management said.

It started to market motor takaful products over the Internet in November 2016 and will roll out more products online, including personal accident takaful and travel takaful in 2017-18.

“We are positive on these initiatives as they will expand STM’s market reach and lower its operating costs.

“STM had a solid total surplus of RM977.3mil as at end-Dec 16 for its takaful funds – RM742.8mil for family takaful and RM234.5mil for general takaful.

“This would help to support the future growth of its businesses and enable STM to continue to pay out the 15% no-claim cash rebate to its general takaful policyholders,” it said.


Maybank IB maintains buy on Yinson, raises target price

Thursday, 27 April 2017 | MYT 9:59 AM

KUALA LUMPUR: Maybank Investment Bank Research has maintained its “buy” call on Yinson Holdings with a higher target price by 6% to RM4.30.

Yinson, with its partner PTSC, has secured the floating production storage and offloading (FPSO) CRD bare-boat charter (from LOI previously) worth US$1bil (10+5-year charter).

“This job will provide earnings visibility beyond FY20, adding RM45mil to RM80mil net profit per annum in FY21-30 and increase our sum-of-parts-based target price by 6% (24sen/shr) to RM4.30,” Maybank said.

It said Yinson’s valuations were undemanding vis-à-vis its long-term earnings growth prospect, cashflow strength and for its lean management.

Additionally, Yinson’s likely admission as a Shariah compliant stock come May is a major positive.

Based on Maybank’s estimate, the bare-boat charter equates to an average DCR of US$218,000 (on firm) and US$110,000 (on extension).

“We understand that Yinson has identified FPSO OSX-1 for this job. OSX-1 is a distressed, offhire asset, previously owned by OGX that operated in Brazil and is ready for re-deployment.

“On a firm charter basis, we estimate this job to add RM45mil to RM80mil per annum to Yinson’s net earnings over FY21-30 (averaging RM58m per annum.) and 24 sen per share to NPV (US$550mil capex, 80:20 debt-equity financing; 7% WACC), based on Yinson’s 49% stake,” Maybank said.

Meanwhile, the research house estimated that the market has largely priced in the impact of the recent contract termination of FPSO Lam Son.