Synergy to buy 60% of Sarawak Hidro

PETALING JAYA: Sime Darby Bhd says Synergy Drive Bhd has obtained the Government's approval to acquire a 60% stake in Sarawak Hidro Sdn Bhd, owner of the 2,400-megawatt Bakun dam project.

"Synergy Drive will proceed to commence negotiations with the Government of Malaysia on the terms of the acquisition,'' the company said in a statement to Bursa Malaysia yesterday.

Trading in the shares in Sime Darby, the main contractor for the RM6bil hydro-electric dam project, is currently suspended to facilitate the listing of Synergy Drive on Nov 30.

Sime Darby, Golden Hope Plantations Bhd, Kumpulan Guthrie Bhd and their subsidiaries have agreed to combine their businesses under Synergy Drive to create a conglomerate that is estimated to have a market value of more than RM60bil.

It would be the biggest company listed on Bursa Malaysia, with five core operations: plantations, property, heavy equipment, motor and power and utilities.

"With the letter of intent (LOI), we can start work with all our vendors,'' Synergy Drive chief executive Datuk Seri Ahmad Zubir Murshid said at a press briefing yesterday.

He said Synergy Drive, with its healthy balance sheet post-listing, would have the financial muscle to undertake such massive projects.

It was reported earlier that Sime Darby had expressed its intention to the Government to take up a key interest in Sarawak Hidro. It also wanted to play a leading role in the proposed undersea power cable project.

Analysts said the power and utilities business could emerge as a major contributor to Synergy Drive if it managed to secure both projects.

The 700km submarine cable is said to cost RM9bil. The project is likely to be undertaken by a consortium that may include Tenaga Nasional Bhd.

The Government, however, has yet to formally decide on the project.

Zubir said Synergy Drive hoped to bring electricity generated from Bakun to the peninsula beginning 2013, assuming the Government accepted its proposal.

Construction works on the Bakun dam were expected to be completed by 2009, Zubir said, with equipment testing and other works expected to take another year.

Sarawak Hidro was set up by the Finance Ministry to take over the Bakun dam project after it was temporarily shelved in 1997 due to the Asian economic crisis. The mega project was revived in 2000.

URL: http://biz.thestar.com.my/news/story.asp?f...23&sec=business

MPHB may offer to take Magnum private

PETALING JAYA: Multi-Purpose Holdings Bhd (MPHB) is believed to be working out an offer to take Magnum Corp Bhd private, analysts said yesterday. MPHB currently owns 55.45% of Magnum.

"One reason for MPHB's plan to own 100% of Magnum would be a conviction that it can raise Magnum's profitability after it's been taken private," they said.

MPHB has shown such interest in the numbers forecast operator (NFO) through its purchase of additional shares on the open market periodically.

Both MPHB and Magnum were suspended from trading at 10.41am yesterday. They will remain suspended till 5pm Wednesday. Shares in MPHB rose 18 sen to RM2.58 while Magnum gained four sen to RM3.08 before the suspension.

MPHB said the suspension was pending an announcement relating to "a very substantial corporate exercise involving MPHB and Magnum".

The speculated MPHB offer is believed to involve a share swap with a cash option for Magnum shareholders.

ECMLibra Avenue Research believes MPHB may undertake another corporate exercise, which might include privatisation, in view of its unsuccessful attempt barely a year ago.

The research outfit said the idea of privatisation was not a surprise. The exercise would give MPHB direct access to Magnum's huge cash hoard of about RM786mil (including investments).

It added that the cost of privatisation for the rest of shares in Magnum not owned by MPHB worked out to about RM1.98bil.

"Taking into account the cash reserve, it takes only RM1.19bil for MPHB to privatise Magnum and the investment could be recovered with its recurring annual free cashflow of RM300mil.

"Shareholders could be offered a minimum price of RM3.44 a share if MPHB were to choose the privatisation route in the near term," ECMLibra Avenue said.

Analysts pointed out that a second attempt at making an offer or privatisation could only come a year after the first attempt on Nov 23, 2006.

"But to ensure that a listed company is taken private successfully, the offer price must be attractive enough for minority shareholders," an analyst said.

"The NFO sector is not going to be as exciting as in the past. It's a mature, slow growth industry in this country. We still prefer the casino sector," he said.

An analyst at a foreign research house said Magnum was currently evaluating regional possibilities in the numbers forecast sector.

"Magnum intends to grow via expansion either domestically or regionally. Some of the country names being thrown around are Vietnam, Cambodia and Laos," he said.

He added that the company had been continuously looking to unlock the value of its non-core assets and taking a more proactive approach in terms of capital management.

"Magnum is still in a net cash position, estimated at RM300mil as of the third quarter (ended Sept 30)," he said.

In a filing with Bursa Malaysia yesterday, MPHB said it posted a net profit of RM47.9mil on revenue of RM806.4mil for the third quarter.

For the nine months ended Sept 30, MPHB registered a net profit of RM338.9mil on turnover of RM2.42bil.

URL: http://biz.thestar.com.my/news/story.asp?f...50&sec=business

HAP SENG IPO share holders ... this might be a good news:

Hap Seng makes strong debut on main board

KUALA LUMPUR: Hap Seng Plantations Holdings Bhd yesterday made a strong debut on the Bursa Malaysia main board as the year's biggest listing this year in terms of market capitalisation of RM2.45bil.

The largest initial public offering (IPO) to date this year opened at RM3.20 and hit a high of RM3.34 before closing at RM3.06 for a 41 sen, or 15.5% premium over its offer price of RM2.65

It was the most active counter with 66.59 million shares traded and the second top gainer for the day.

Managing director Edward Lee Ming Foo attributed the share performance to the support and confidence of institutional and retail investors locally and overseas.

"Our recent roadshow in the US attracted a lot of interest from institutional investors, such as pension and asset management funds, and 13% of our public issue has foreign ownership," he told reporters after the listing yesterday.

He said institutional investors were impressed by Hap Seng's plantation profile because, besides producing the highest yield and the lowest cost compared with other local plantations, more than 95% of its oil palm trees had reached maturity.

"This allows the company to capitalise on the high palm oil price now compared with those that had just acquired more land and would have to wait at least seven years for their oil palm to mature," he said.

Investors are also attracted to the company's long-term dividend policy, which is to pay 60% of annual profits, resulting in about 5% dividend yield based on yesterday's price.

"If you look at current crude palm oil price trends, there is a potential upside to the share price as well," Lee said.

Besides trimming its borrowings, Hap Seng will focus on expanding its landbank in Sabah using the listing proceeds.

"There are lots of opportunities for growth in Sabah as many plantations there are operating at higher costs and with lower yields compared with Hap Seng.

"So we may take over some of them which are not efficiently run," Lee said, adding that Hap Seng would increase its landbank by 50% within two years.

He added that it was in talks with several parties on this matter but declined to comment further.

URL: http://biz.thestar.com.my/news/story.asp?f...02&sec=business

Keep on cutting the rate is not a briliant solution.

It's merely a temporary excitement and it wears off faster than you could imagine. No much forward momentum gain during each previous cut.

Guys, want to ask ... what're the difference in term of business orientation between IOICORP and IOIPROP?

By the way, DiGi closed RM 26.00 after gained 0.75. DiGi is being aamong the most active counters due to their buy over on TIME.

Do you mean or conclude that playing contra is strongly not encourageable?

^DJI starts the day with:

At 2:32PM : 13,113.06 -63.73 (-0.49%)

It's already lost more than 100 points now:

At 3:35PM : 13,052.74 -124.05 (-0.95%)

DJIA closed the day below 13k:

At 9:05PM : 12,958.44 -218.35 (-1.66%)

Any reliable source for this?

DJIA starts the day with:

9:30am ET: 12,963.57 +5.13 (+0.04%)

Couldn't agree more. Not much forward momentum yet. Still hovering at +60 points.

At 2:40PM : 13,024.53 +66.09 (+0.50%)

DJIA close the day with:

At 8:59PM : 13,010.14 +51.70 (+0.40%)

Magnum to be taken private at RM3.45 a share

PETALING JAYA: Multi-Purpose Holdings Bhd (MPHB) has proposed to form a special purpose vehicle (SPV) with private equity fund CVC Asia Pacific Ltd to take Magnum Corp Bhd private at RM3.45 per share.

Magnum said in a statement to Bursa Malaysia that it had received a letter from its major shareholder MPHB proposing the privatisation of the gaming company via a selective capital reduction and repayment exercise.

The deal is estimated to be worth RM2.25bil, given that MPHB intends to waive its entitlement to the capital repayment of RM3.45 a share.

MPHB holds a 55.5% stake, or 793.78 million shares, in Magnum, which contributes over 70% to the group's pre-tax profit.

The statement said the proposal would allow shareholders to realise their investment in Magnum, which generated more than RM300mil in cash annually, at a premium.

The offer price represents a 13.5% premium over Magnum's last traded price before the counter's suspension from trading on Friday.

At RM3.45, the numbers forecast operator is valued at a price/earnings ratio of 21.5 times and book value of 4.2 times based on its balance sheet as of Sept 30.

Yesterday, MPHB signed a heads of agreement with Hong Kong-based CVC on the proposed privatisation.

MPHB and CVC will hold 51% and 49% equity interest respectively in the SPV that will own Magnum.

The proposed privatisation will be funded with both interest-free loans provided by the SPV and borrowings by Magnum.

On completion of the deal, Magnum will become a wholly owned subsidiary of MPHB and will be delisted from Bursa.

MPHB will then dispose of Magnum (by then its subsidiary) to the SPV for a consideration translating to RM3.45 per share.

Being the promoter of the proposal, MPHB will abstain from voting on the resolution for the exercise.

Magnum chairman and major MPHB shareholder Datuk Surin Upatkoon and executive director Lim Teong Leong, who also has shares in MPHB and Magnum, will also refrain from voting on the proposal.

The proposal is expected to be completed by the second quarter next year.

URL: http://biz.thestar.com.my/news/story.asp?f...37&sec=business

Today's market is mostly in mixed mood.

Magnum shares surge on privatisation deal

PETALING JAYA: Magnum Corp Bhd shares surged yesterday after major shareholder Multi-Purpose Holdings Bhd (MPHB) proposed to take the cash-rich gaming company private at a premium price of RM3.45 per share.

The stock gained 20 sen, or 6.5%, to finish at a four-month high of RM3.28, which was 5% lower than the offer price. Volume swelled to 15.2 million shares, the highest since May 17.

The proposal to take Magnum private did not come as a surprise to the investing community. Speculation over such an exercise arose even after the company completed a hefty special dividend payment of 70 sen in August as many observers believed Magnum was ripe to be taken private.

Some quarters, however, were disappointed with the offer price, saying the premium was "rather thin'' for a cash-cow that generates a steady flow of about RM300mil a year.

Magnum currently has net cash of RM233mil. The numbers forecast operator's non-core assets, including investments, are worth about RM527mil. It also owns land.

"Based on our revised net asset value valuation for Magnum, we derive a fair value of RM2.74 for its core gaming business and RM1.24 for its non-core assets," OSK Research said.

The gaming stock, which had seen waning investor interest amid concerns over corporate governance, grabbed the headlines when it declared a 70 sen special dividend after posting record profit for its first quarter ended March 31.

Some analysts had expected Magnum to follow the footsteps of its peer Berjaya Sports Toto Bhd (BToto) in adopting a generous dividend policy to reward shareholders following a windfall profit.

They said then that there was a good chance of Magnum continuing to declare good dividends because its parent company, MPHB, needed funds to finance its property development projects.

Though the privatisation spells the end of high dividends for minority shareholders, some analysts think the deal was a fair one for shareholders and MPHB.

"While no value was tagged to Magnum's properties, we think the offer price is reasonable given that realisation of the value of these assets will take some time," said ECM Libra Avenue equity research, which recommended its clients accept the offer.


Analysts said at RM3.45, Magum's gaming business was priced at a higher valuation than that of BToto and Tanjung Plc, which paid better dividends.

"It is a fair deal given the fact that Magnum has never been generous in paying dividends, except for the special dividend declared earlier this year,'' a senior analyst said. "The share price would probably not go higher than RM3 if not for the

URL: http://biz.thestar.com.my/news/story.asp?f...28&sec=business

Happy Thanksgiving ... US market is closed.

Wondering how KLCI and regional markets will perform.

How sure are you? I have not much faith on this. If regional markets are weak, I doubt that KLCI could escape for the nearby drought.

KLCI down 16 points on slowdown worries

PETALING JAYA: Stock declines on Bursa Malaysia accelerated yesterday, with local sentiment weighed down by steep losses in overseas markets amid growing worries that record high crude oil prices and mounting subprime mortgage losses in the United States would lead to a global economic slowdown.

The crude oil price stayed above US$97 per barrel yesterday, up 67% year-to-date.

"There are a lot of uncertainties in the market and people are getting more concerned about taking risks,'' a senior fund manager at local investment bank said.

The KL Composite Index (KLCI) slumped 15.69 points, or 1.2%, to 1,344.16 yesterday, extending its losing streak to five days in a row.

Shares in Gamuda Bhd and AMMB Bhd were down 5% each, and were the bigger losers among the larger capitalised stocks.

Declining stocks outnumbered advancers by 692 against 176, while 241 counters were unchanged. Market turnover stood at 932 million shares valued at RM1.56bil.

The ringgit yesterday bounced back from a six-week low to 3.3825 against the US dollar.

The fund manager said the ongoing third-quarter earnings reporting season had little influence on share trading currently as investors were focused on the outlook for next year. "(The year) 2008 would be challenging one,'' he said.

A slowdown in the world's biggest economy means American consumers would probably spend less on Malaysian exports such as home electronics appliances and computer chips.

The United States is Malaysia's biggest trading partner and main export market.

The turmoil in the US credit market would also curb international investors' appetite for riskier assets like equities in smaller stock markets like Malaysia.

Meanwhile, analysts said domestic inflation was likely to rise next year on higher transport and food costs.

Recent press reports suggested that the Government would have to increase the retail price of essentials such as fuel and flour in the near future, as it could no longer afford to keep up with spiralling subsidies.

Inflation averaged 1.9% in the first 10 months this year, hitting 4.8% in March the last time the Government increased the price of petrol.

Elsewhere, the most active crude palm oil (CPO) futures contract on Bursa Derivatives took another stab at the RM3,000 level, before closing RM22 higher at RM2,992 a tonne.

The price of palm oil, which is used to make cooking oil and cosmetic products, has gone up 60% in the international market over the past one year.

Across Asia, share prices continued to retreat yesterday on Wall Street's steep fall overnight.

Hong Kong's Hang Seng Index was down 2.3% to 26,004 points after prices in China's red-hot Shanghai and Shenzhen markets plunged by more than 4% each.

Singapore's Straits Times Industrial slipped 1% while the South Korea's main Kospi Index eased 0.44%.

Stock market measures in Japan, Taiwan, Thailand and Indonesia, however, ended slightly higher.

URL: http://biz.thestar.com.my/news/story.asp?f...09&sec=business

Why stay away?