Reports » Malaysia

Malaysia stock market and companies daily report (September 25, 2012)

Contributed by Shares Investment

IJM To Buy Stake In Scomi
Construction specialist IJM Corporation is believed to be buying some 10 percent stake in Scomi Group via a private placement, giving it access to the lucrative oil and gas sector. Trading in Scomi’s securities was suspended in the afternoon session from 2.30pm on 24 September. The share price rose 1.5 sen to 35 sen at mid-day and was the most active with 25.52 million shares done. Scomi is one of the world’s leading providers of oilfield drilling fluids solutions and drilling waste management services. Currently, the group is in the midst of a restructuring exercise involving a merger between the Eastern Hemisphere business of oilfield services and its associate company, Scomi Marine’s offshore support services. Furthermore, the group has also been reportedly to be the front-runner for two risk-service contracts (RSCs) estimated at between US$200 million to US$400 million each. The RCSs are to be awarded by Petroliam Nasional (Petronas) for the Tembikai and Cenang marginal fields off Peninsular Malaysia.
Significance: IJM Corporation is one of the country’s largest construction companies with significant exposure in plantation, infrastructure, property development and industrial services. Together with IJM’s expertise and experience in construction, the synergies generated between the two would allow Scomi to easily obtain larger portions of construction jobs that it tenders for.

Budget 2013 Expected To Keep Deficit Below 5% of GDP
UOB Economic-Treasury Research anticipates that government is to mostly keep the fiscal deficit below five percent of gross domestic product (GDP) when it unveils the Budget 2013 proposals this Friday, 28 September. With the current estimation approximately at 4.2 percent of GDP coupled with slow progress in fiscal consolidation, UOB Economic Research believes achieving the country’s medium-term deficit target would be challenging.  High fiscal deficits have been a main concern for several years due to the government’s inability to broaden its tax base and cut back its fuel subsidies. According to its research, based on recent projections, government’s public debt is expected to hit the ceiling of 55 percent of GDP within the next five years from the present 53 percent. UOB Research predicts the government will provide more cash hand-outs and possibly tax relief measures in the Budget 2013 proposals. It is also unlikely that any fresh stringent measures will be introduced to curb property speculation in this budget.
Significance: During periods of weak global economic conditions, the government would pursue an expansionary budget to boost spending and investments in order to keep up the growth momentum as seen in the first half of 2012.

JCY Falls 6% On Force-selling And Market-maker Activity
JCY International continues to drop in afternoon trade on force-selling and market-maker activity after opening lower in early trade. Four trading days ago when the stock had been sold down to 94 sen, many traders had misjudged the timing of a rebound, said one dealer. This lead many contra players being forced to sell the stock in advance based on the T+3 settlement rule. Under this rule, traders who had not paid to pick up the shares or had not sold their shares within the specified cut-off period would have their holdings be force-sold by the respective stockbroking firms. The leading Hard Disk Drive (HDD) closed at a new low of 80.5 sen after being the third most active stock on Monday, 24 September. There were also indications that market-making activities by institutions had led to the sell down of the share in order to profit from a fall in the company’s warrant. It is presumed that these institutions had sold warrants at higher prices few days prior to picking up the much cheaper warrants now.
Significance: Earlier in August, JCY saw the dumping of its shares by funds due to weaker results, bleak outlook for the HDD sector and a downgrade in its recommendation. Despite receiving a lower target price of between RM1.20 to RM1.45 by leading stockbroking houses, JCY has since continued to decline.