Reports » Malaysia

Malaysia stock market and companies daily report (January 14, 2013)

Contributed by Shares Investment

HLC Likely To Be Privatised
Hong Leong Capital (HLC) is likely to be taken private by Hong Leong Financial Group (HLFG) following the suspension of both counters last Friday, a source said. The corporate exercise could be a streamlining one and is possibly partly driven by the requirement in the soon to be implemented new Financial Services Act, the source added. Furthermore, the exercise would also mean a simplified corporate structure for the Hong Leong group, which is controlled by Tan Sri Quek Leng Chan. Shares of HLFG dipped six sen to RM14.42 while HLC climbed eight sen to RM1.42 before the suspension. Based on these closing prices, the privatisation of HLC would imply that HLFG have to fork out at least RM69.7 million for the remaining stake which it does not own in HLC. HLC’s total market capitalisation based on last Friday’s closing prices stood at RM333.1 million.
Significance: The privatisation could be priced at a level of at least 1.5 to 1.8 times book value based on HLC’s previous price to book value of 0.8 times. Further upside could also be expected, should HLC’s enterprise value and the earnings growth potential be taken into consideration.

SapuraKencana Eying The Samarang CPP Contract
SapuraKencana Petroleum, the country’s largest oilfield services provider is likely to win part of the 10 central processing platform (CPP) contracts at Samarang, Sabah from Petroliam Nasional (PETRONAS) this year, according to a prominent oil and gas publication. Samarang is a mature oilfield off Sabah and the contract involves engineering, procurement, construction and commissioning for CPP. The turnkey project which involves the construction and installation of a CPP that has a 10,000 deck is likely to come equipped with gas compression and water injection modules. According to an analyst, the news did not come as surprise as the company had factored in its orderbook of RM3 billion to RM5 billion for the year. More projects are also expected to flow in since it is only the beginning stage of the year, the analyst added. On the other hand, AmResearch analyst Alex Goh said that the phased Samarang re-development was aimed at doubling the field output by lifting its oil recovery rate from 41 percent to 51 percent, and expected the oilfield’s production life to be extended by another 15 years.
Significance: Analysts are optimistic about SapuraKencana’s recent US$2.9 billion rig acquisition from Seadrill. Through the deal, SapuraKencana could emerge as a leader in the global tender rig business, which controls more than 50 percent of the market.

Sunway REIT Expects Another REIT Listing
Sunway real estate investment trust (REIT), the country’s largest REIT is planning to establish another REIT through strategic mergers and acquisitions. Rumor has been rife that Sunway REIT is seeking a dual listing in Singapore, after its total assets under management surpassed RM4 billion. However Sunway REIT Management chief executive officer Datuk Jeffrey Ng expressed his opinion that currently the company has no intention for a dual listing. Sunway REIT’s assets stood at RM4.95 billion upon the acquisition of Sunway Medical Centre, December last year. Ng is positive about the Malaysian Real Estate Investment Trusts (M-REITs), underpinned by several factors including the entry of new REITs. From a relatively small and unknown market in Asia, M-REITs are now ranked fourth by market capitalisation in Asia after Japan, Singapore and Hong Kong. In Southeast Asia, M-REITs are ranked second after Singapore.
Significance: Sunway REIT will focus on its asset enhancement and asset management initiatives, as well as acquisitions leading to new income streams to continuously attract its investors and also to enhance its competitive edge.