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Reports Malaysia

Malaysia stock market and companies daily report (December 04, 2013)

December 4, 2013, Wednesday, 05:56 GMT | 00:56 EST | 10:26 IST | 12:56 SGT
Contributed by Shares Investment

Inflation Likely To Cross 3% Mark On New Tariff

- According to Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz, the inflation rate next year is expected to reach above 3 percent in January, as a result of the new electricity tariff. Based on early assessment, the tariff adjustment may cause a rise in inflation by 0.4 percent and given the existing inflation rate of about 2.8 percent, it could touch just over 3 percent.

- Zeti opines the effect on inflation would be temporary as demand for energy is growing at a modest rate, thus it would not induce a price increase. There would also be significant potential for businesses to enhance their level of efficiency and productivity to have cost savings, and not pass on everything to the consumer.

- She pointed out that the government needs to improve efficiency in distribution and food production among others so that sufficient supply would not lead to higher prices.

Significance: Zeti said the tariff adjustments needed to be done to ensure sustainability as the market price of the commodity changes. This provides an incentive to conserve energy and this is important to change behaviours. She pointed out that the adjustments were done in a manner that affects only 30 percent of the users, leaving 70 percent of households unaffected by the tariff.

Bumi Armada Bags Charter Agreements; Aims To Expand In African Region

- Bumi Armada had won a charter agreement from OOO Lukoil-Nizhnevolzhskneft for the use of six offshore support vessels (OSVs) in the Filanovsky field in the Caspian Sea, valued at some RM903 million. The win is Bumi Armada’s third contract with Lukoil and it had previously bagged transport and installation-related works to lay 90 kilometres of pipelines in the Filanovsky and Korchagin fields.

- Three of the OSVs will be newbuild ice-class vessels comprising two supports and one rescue vessel. The newbuilds are to be deployed in November 2015 for an initial term of 10 years plus up to 20 years in extensions. The fixed 10-year term would see Bumi Armada pocketing US$262 million (RM844 million) and a further US$483 million (RM1.56 billion), if the 20 years of extensions are exercised in full by Lukoil.

- Another interim agreement was also inked for the provision of three OSVs for delivery in November 2014, pending the completion and mobilisation of the newbuild vessels. This award is worth US$18million (RM59 million) for a one-year term.

Significance: With the new OSV contracts, Bumi Armada’s order book will swell close to RM9 billion, minus extension options and the Kraken floating production, storage and offloading vessel. It is also hoping to continue its long-term partnership with Russian oil major, Lukoil, and ride on the robust oil and gas sector with more jobs in the African region.

Kossan Scoops Up More Land In Klang

- Kossan Rubber Industries announced that its wholly-owned subsidiary, Ideal Quality, had entered into a sale and purchase agreement with Panorama Positif for the acquisition of a 3.8 hectares piece of freehold industrial land in Klang.

- AmResearch views Kossan’s latest land banking move positively, as it is in line with the group’s strategy to continuously replenish its land bank to generate long-term sustainable income and to be ready for the future. However, the group has not list out any plans for the land but based on our assumption the land is good for the construction of a nitrile glove plant that may contribute up to two billion pieces per annum.

- This is the group’s second land purchase this year following its acquisition of a 23 hectares tract in Selangor in February. Kossan plans to build six to eight high productivity plants there to achieve an installed capacity of 32 billion pieces per annum by 2018 as part of its medium-term growth plan.

Significance: AmResearch believes this latest development will provide further bounce to the group’s share price which has surged 119 percent year-to-date. The brokerage house reaffirmed their “Buy” rating on Kossan at a fair value of RM3.80.