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Reports Malaysia

Malaysia stock market and companies daily report (December 26, 2013)

December 26, 2013, Thursday, 06:00 GMT | 01:00 EST | 10:30 IST | 13:00 SGT
Contributed by Shares Investment

Hibiscus Petroleum Finds Oil, But Commercially Unviable

- Hibiscus Petroleum announced that it has discovered oil in its Oman assets, but the first well is not commercially viable. Meanwhile, it has suspended its first exploration oil well, Masirah North North 1 in Block 50 Oman for further evaluation due to safety reasons and is moving on to the second well, Masirah North East 1.

- Analysts pointed out there could be two main reasons why Hibiscus found oil which was not commercially viable: one, it could have been a drilling mistake, and two, it could boil down to undesirable oil properties. In Hibiscus’ case, it was the latter. Given that its two wells are in close vicinity, there could be a possibility that the company may not strike oil as oil quality for the whole reserve may not commercially viable.

- Separately, this episode will also impact investors’ perception towards Rex Technology, proving that it is able to detect oil although another analyst is less optimistic as this venture is a test case for the company.

Significance: According to an analyst, Hibiscus was said to be spending some RM100 million to drill the two wells in Oman. This implied the company would have to write off some RM50 million from its books for the non-produceable well.

RHB Research: IHH Healthcare To Preserve Profits For Reinvestment

- RHB Research expects IHH Healthcare to conserve the bulk of its profits for reinvestment as the firm may leave some room for mergers and acquisitions while it formalises its dividend policy in February 2014.

- Notably, if IHH and Columbia Asia (30 percent owned by Employee Provident Fund) seeks to boost their presence in Malaysia, their combined hospitals in Malaysia would come to 22, just behind KPJ Healthcare’s 26 hospitals.

- IHH is boosting bed capacity, with plans for an 80 percent increase by 2017 by adding more than 4,000 new beds to its current capacity of more than 5,000 beds. IHH will also be entering four new markets – China, Vietnam, Hong Kong and the United Arab Emirates.

Significance: The house noted that despite being positive on IHH and KPJ’s upcoming expansion plans, it is less enthusiastic on KPJ’s delay in hospital openings, slower overseas expansion and choice of target markets compared to IHH. IHH offers strong operating performance, greater exposure to medical tourism and its stock consistently enjoys institutional buying.

BIMB Acquires Remaining Stake In Bank Islam For RM2.9 billion

- BIMB Holdings acquired the remaining 49 percent stake in Bank Islam that it does not own for RM2.9 billion from Dubai Financial Group (30.5 percent) and Lembaga Tabung Haji (18.5 percent). The price is 3 percent lower than the top end pricing for the deal given that the transacted US dollar to ringgit rate was RM3.232 versus the upper limit of RM3.35.

- Maybank IB Research is positive on the price BIMB paid for the acquisition as it translates into a decent September 2013 price-to-book value of 1.8 times for a bank that offers a return on equity of 15 percent to 16 percent. Moreover, the deal is also earnings per share accretive by about 10 percent to 11 percent.

- The house also notes that BIMB’s group financing to deposit ratio is just 64 percent, providing room for net interest margin management and ample liquidity to support top line growth.

Significance: Maybank IB Research upgrades BIMB to buy with a 14 percent upside to the stock and target price of RM4.80, noting that fundamentals remain intact and project a strong two-year EPS compound annual growth rate of 29 percent, given the earnings accretion from Bank Islam.