Reports » Malaysia
Malaysia stock market and companies daily report (December 03, 2013)
BST Retracts On Business Trust Listing On SGX
- Due to the current challenging market environment and the poor performances of real estate investment trusts (REITs) and other business trusts in Singapore, Berjaya Sports Toto (BST) has decided to cancel plans to list its wholly-owned subsidiary Sports Toto Malaysia as a business trust on the Singapore Exchange.
- In September, the firm announced changes to its proposed business trust listing by reducing the offer size and introduced a distribution of dividend-in-specie in conjunction with a secondary listing in Malaysia. The listing would have raised RM173.9 million for the company, based on an assumed offer price of RM1.28 per unit. The bulk of the net proceeds would have been used to pay the special dividend over a three-month period.
- BST previously proposed to undertake a dividend-in-specie exercise of up to 2.81 billion units. This would see a distribution of 21 business trust shares to shareholders of BST for every 10 BST shares held.
Significance: CIMB Research Singapore maintained its “Neutral” rating on Singapore REITs in a 18 November report. It listed the positives such as inexpensive valuations, high yields, sticky rental rates, high occupancy, low gearing and the lack of immediate refinancing needs. But, it noted these are offset by the lack of clear growth drivers and the backdrop of interest rates having to rise eventually.
Electricity Tariff Rate Increase Will Benefit TN, Says Alliance Research
- The government is expected to announce that electricity tariff will be hiked by 15 percent of RM0.049 per kilowatt hour. Tenaga Nasional (TN) reckons that the actual implementation of the rate hike may take place in 1Q14, with January 2014 being a strong possibility. The hike is likely to encompass certain factors, namely pipeline gas, liquefied natural gas (LNG), coal price and a base tariff hike.
- A tariff hike to account for the cut in gas subsidies will be earnings neutral for TN. However, the tariff hike portion to account for LNG is positive for TN. TN recognises one-third of the incremental cost of LNG in its income statement, therefore, a tariff hike would help TN mitigate some of this incremental cost.
- Alliance Research does not think a coal price portion of the tariff hike would take place as coal price tariff is currently above its trading price (US$85 per tonne versus US$82.80 per tonne). A base tariff hike would be earnings positive for TN.
Significance: Alliance Research suggests that structural reforms in the power sector are panning out as expected and reckons this will reduce the overall cost of equity for TN in the long run. Thus, it lowers TN’s weighted average cost of capital from 8 percent to 7.5 percent which raises its target price from RM10.42 to RM11.86. Maintain “Trading Buy” rating.
Conglomerate Sime Darby Cuts FY14 Capital Spending
- Sime Darby Motors, the automotive arm of Sime Darby, has through its indirect wholly-owned subsidiary, Sime Darby Motors Wholesale Australia (SDMWA), clinched its first BMW dealership in Australia worth A$80.7 million.
- The conditional share and unit sale deed saw SDMWA acquiring a 70 percent stake in Brisbane BMW Group, consisting of LMM Holdings and Brisbane BMW Unit Trust, for A$22.7 million, as well as 100 percent ownership of land and buildings for A$58 million.
- The acquisition will allow Sime Darby Motors to further consolidate its position in the luxury segment in Australia. The group has been exploring expansion opportunities in new and existing markets.
Significance: The acquisition of the BMW dealership in Australia will expand Sime Darby Motor’s geographical reach as a BMW distributor and dealer in the Asia Pacific region, where it already has a strong presence in eight countries. Its BMW dealership network spans Singapore, China, Thailand, Macau, Hong Kong, Australia, New Zealand and Vietnam.
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