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Reports Malaysia

Malaysia stock market and companies daily report (April 04, 2014)

April 4, 2014, Friday, 05:14 GMT | 01:14 EST | 09:44 IST | 12:14 SGT
Contributed by Shares Investment

BHIC Considering O&G Exploration And Extraction Work

- Boustead Heavy Industries Corporation (BHIC) is eyeing the exploration and extraction segment of the oil and gas (O&G) business, which is capital intensive and comes with higher risks.

- The group is looking to form joint ventures with parties who have the expertise and experience in the O&G exploration and extraction business.

- Nonetheless, BHIC will continue to capitalise on the potential of the offshore O&G sector through its chief competency of shipbuilding by servicing the industry in the area of building floating production storage and offloading vessels, barges as well as offshore support vessels.

Significance: BHIC is looking to tap on Petronas’ large capital expenditure on putting up infrastructure as well as the potential growth in the O&G sector in the region, especially Vietnam, Thailand and Myanmar.

Pharmaniaga Ventures Into Saudi Arabia

- Pharmaniaga is planning to set up a manufacturing plant in Saudi Arabia to produce various types of drugs to cater to the Middle East and North African markets via a 50:50 joint venture with Saudi-based Modern Healthcare Solutions Company. The initial investment will amount to about RM60 million over three years.

- Finalising the feasibility studies on the venture and given an average commissioning period of about three years, the plant is expected to be operational in 2017. The plant will be constructed in a special industrial zone in Riyadh and is entitled to incentives from the Saudi government.

- The company has been actively expanding and has recently completed the acquisition of pharmaceutical products manufacturer in Indonesia, to tap into the large market potential for pharmaceutical products in the country.

Significance: The group’s expansion plans will help to boost its growth. Furthermore, it has budgeted a minimum of 5 percent for research and development on phyto-medicine and could be the first company to produce this medication if successful.

AmResearch: “Hold” MAH With Target Price Of RM8.40

- AirAsia and AirAsia X are said to keep their airline operations at the current low-cost carrier terminal (LCCT) in Sepang and have not made the necessary preparations to move into KLIA2, despite the transport ministry saying the LCCT will be shut down by 9 May.

- This is due to a number of underlying issues such as the security and safety of the airport, coupled with the potential rise in airport charges and passenger service charge.

- Significantly, China accounted for 7 percent of total tourist arrivals in 2013. With the recent MH370 incident, a drop in tourist arrivals would impact the airport. AmResearch estimates that a 1 percent drop in international passenger movements will result in a 1.4 percent decline in FY14 earnings for Malaysia Airports Holdings (MAH), while a 1 percent drop in LCCT will cause a 0.5 percent decline in earnings.

Significance: AmResearch expects MAH’s share price performance to be muted in the near term. Maintain “Hold” with unchanged fair value of RM8.40.