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Malaysia stock market and companies daily report (January 31, 2012)

Contributed by Shares Investment

Bank Negara Malaysia To Leave Borrowing Costs Unchanged
Economists note that with external uncertainties still looming, Bank Negara Malaysia (BNM) is likely to leave borrowing costs unchanged and should not be in any rush to cut rates of the overnight policy rate (OPR) at 3% or the statutory reserve ratio at 4%. Most research houses felt that the Consumer Price Index, which eased to 3% in Dec-11 from 3.3% in Nov-11, indicates lower inflation readings in the months ahead, allowing BNM to hold the rates steady and room for monetary easing. Bank Islam chief economist said the current OPR level is accommodative enough at this juncture to support domestic demand without stoking inflationary threats. Nomura Research and Citi economists also share the view that there are few reasons for an immediate cut given prospects of just a mild economic slowdown and not a devastating recession although there is some flexibility for rate cuts in view of sluggish economic outlook.
Significance: Against the weak global economic backdrop and continued uncertainty in Europe, demand has notably remained solid on the domestic front, supported by favourable labour market conditions, although confidence and credit growth have eased in recent months.

Public Bank Posts Record Profit
For the full year ended 31 Dec-11, Public Bank recorded an all-time high net profit of RM3.48 billion last year, which is 14.3% more than the RM3.05 billion recorded in 2010, on the back of a 15.6% rise in revenue to RM12.8 billion. The bank’s founder and chairman Tan Sri Dr Teh Hong Piow credits growth to higher income generated from Islamic banking business, which recorded a 9% increase, as well as an 8% growth in net fee and commission income. This is despite the bank having to contend with operational cost swelling 5% to RM108.4 million from hiring more people to cope with higher business volume. The third largest domestic bank by capitalisation has been supported by a large domestic depositor base of more than 4.5 million customers, where both fixed and savings deposits outperformed the Malaysian banking industry’s growth rate of 9.8% and 7.9% respectively. Meanwhile, the bank has announced an interim dividend of 28 sen, bringing the total dividend for 2011 to 48 sen.
Significance: While global economic conditions are likely to be increasingly challenging, the growth momentum in Asia, including Malaysia, would be supported by resilient domestic demand. Public Bank is also not expected to be susceptible to foreign exchange fluctuations, having hedged its foreign exchange exposure.

Malaysia Airports Holdings To Raise RM600m Through Private Placement
Malaysia Airports Holdings (MAH) has proposed private placement of up to 110 million new shares, to raise around RM600 million. The bulk of proceeds will be primarily used to part finance the additional capital expenditure (capex) incurred for the enhancements to its Kuala Lumpur International Airport (KLIA2) low-cost carrier terminal. However, MAH pointed out that the actual proceeds to be raised from the proposed private placement would be dependent on the actual issue price and number of placement shares issued. In the event that a lesser amount of proceeds was raised, the proposed utilisation would reduce proportionately. MAH had announced previously that KLIA2 had to double its original size to cater to the government requirement to segregate domestic and international passengers.
Significance: The proposed private placement is the best mean of raising funds quickly and would allow MAH to meet its obligations in the construction of KLIA2 while maintaining the fast track nature of the construction of the terminal, which is scheduled to be completed in Apr-13.