Goldman share issue raises $5 billion

By Anette Jönsson 25 September 2008
The share price responds positively to the dilutive sale, raising the question of what the outcome may have been if it - and other recent confidence-building measures - had come much earlier?
The news last night that Goldman Sachs had raised $5 billion from the public share offering it announced after the close of US trading on Tuesday shows investors are confident that this is a Wall Street institution that will survive the current crisis. Goldman sold 40.65 million new shares at $123 apiece, which translates into a discount of only 1.6% to Tuesday's closing price. Even so, it was able to raise twice the amount flagged in the initial announcement.
Investors were likely comforted by the fact that Warren Buffett's Berkshire Hathaway had agreed to invest $5 billion in the company - a move that was announced at the same time as the equity offering. Buffett, a seasoned investor and savvy negotiator, has clearly secured an attractive deal for his investment firm - it is buying perpetual preferred stock with a 10% annual dividend and will receive warrants to acquire another $5 billion worth of stock at a price of $115 per share at any time within the next five years - but even so, the fact that the firm is getting involved is a strong sign of support.
In a written comment, Buffett described Goldman as an "exceptional institution" and went on to say that that it has "an unrivalled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance". Strong words of praise indeed, although one would hardly expect otherwise from someone who has just forked out $5 billion to buy shares in the company in question.
Goldman's share sale, which includes an over-allotment option of 6.1 million shares that could take the total proceeds to $5.75 billion, also came amid hopes that Congress will pass this week a bill that will enable the creation of the $700 billion bail-out vehicle proposed by Treasury secretary Henry Paulson. The vehicle will be charged with buying toxic assets off the balance sheets of US banks in order to allow them to improve the quality of their overall assets and bring more certainty to the valuation of their holdings. The fund is modelled on the Resolution Trust Corporation that was set up to take over bad loans following the savings and loan crisis in the late 1980s, but details of how it will actually work are still sparse. For example, it is not known at which price the vehicle will buy these illiquid assets from the banks, what types of assets it will buy and whether it will start to sell them off immediately or act primarily as a warehousing facility for the next few years.
The purchase price is a tricky issue because if it is set at what is perceived to be the current "market" price it may result in more write-downs for the banks, causing further losses and potentially a renewed sell-off of financial sector shares. And if the price is perceived to be set above market, the government may be accused of using taxpayers' money to subsidise bank profits.
Until these issues become clear and the bail-out vehicle is actually approved, the financial markets are unlikely to stage a significant and sustainable recovery.
Goldman's share sale was the latest in a series of measures orchestrated by it and Morgan Stanley over the past few days to assure investors they have adequate capital and liquidity to stay in business. The measures, which have been announced at an almost frantic pace, include substantial infusions of capital from third parties - apart from Buffett's investment in Goldman, Morgan Stanley has struck a deal that will see Mitsubishi UFJ Financial Group buy up to 20% of the bank at a maximum cost of ¥900 billion ($8.4 billion). Earlier in the week, the two investment banks also received approval to transform themselves into bank holding companies.
The latter will give them permanent access to liquidity provided by the Federal Reserve and the ability to broaden their funding sources, putting them on an equal footing with the commercial banks. They will even have the ability to set up their own deposit-taking banks under the holding company or indeed buy an existing bank, although it isn't clear whether they will actually take the transformation that far at this point. In return they will come under the supervision of the Fed (and various other bodies) which will mean stricter regulations in certain areas, including the amount of leverage they can take on.
As noted, there are still a number of uncertainties keeping Wall Street on edge but the forceful actions by the two remaining standalone investment banks (or whatever they ought to be called in their new guises) appear to have helped to halt the rapid slide in financial stocks. Sure, the decision by the US Securities and Exchange Commission to ban short-selling of financial stocks at the end of last week (believed to be a temporary measure) can take some of the credit for removing the panic element out of the selling, but the impact of the quick actions taken by Goldman and Morgan Stanley in terms of calming the overall market, should not be underestimated.
However, their performances were mixed over night amid the ongoing wrangling in Congress over the $700 billion bail-out programme. Goldman's share price was up 6% following a 3.5% gain on Tuesday, while Morgan Stanley fell 11.5% after adding 3.4% on Tuesday. The Dow Jones Industrial Average index spent the session hovering both sides of the previous close before finishing down 0.3%.
On the other hand, one could argue that both banks - as well as their industry peers - should have acted much earlier and that the courting of potential strategic investors took place only as they were being pushed ever closer to the edge by events partly out of their control. This means neither bank was able to negotiate a deal out of a position of strength, despite both of them having reported third quarter earnings last week that exceeded expectations.
True, Morgan Stanley did secure a $5 billion investment from China Investment Corporation in December last year, which gave the recently created sovereign wealth fund a stake of up to 9.9%. The investment came as Morgan Stanley announced a $9.4 billion mortgage-related write-down for the fourth-quarter. Since then it has attempted to ride out the storm on its own and Goldman hasn't sought a capital injection from any external parties until this week.
While clearly hypothetical now, the question remains whether the crisis over the past couple of weeks, which has wiped billions of dollars in market capitalisation from the US market as a whole and sent most financial stocks to multi-year lows, could have been avoided had the industry taken more forceful action to boost their capital and remove toxic assets from their books in March when the takeover of Bear Stearns by J.P. Morgan through a Fed-brokered deal was offering real proof of the seriousness of the situation.
It isn't clear whether the lack of more widespread action in terms of securing capital had anything to do with the fact that Bear Stearns was bailed out rather than allowed to go into bankruptcy, but it is certainly not inconceivable that some players got the impression that the Fed would step in as a last resort should any other banks end up in similar trouble.
Earlier this week CLSA's chairman, Rob Morrison, told reporters at the annual CLSA Investors' Forum that a different response from the Fed could well have elicited a more pro-active response from the investment banking industry.
"In my view," Morrison said, "they should have let Bear Stearns go bust as that may have evoked a much quicker response from some of the other investment banks who may then have felt that 'boy, we really do need to sort this out quickly because there is no lifeline from the Fed anymore'."
As it were, the Fed appeared to have little choice but to set the record straight by refusing to do the same for Lehman Brothers, forcing the 158-year old investment bank to file for Chapter 11 two weeks ago. In recent days, Treasury secretary Paulson has said there had been sufficient warnings about the situation at Lehman to allow parties holding Lehman debt and various other instruments issued by it to reduce their exposure, thus there ought to be little systemic risk in allowing market forces to prevail.
In theory perhaps, but in reality the bankruptcy sent ripples through the financial markets and led to an even tighter credit situation which ultimately resulted in the US government having to step in and take over mortgage lenders Freddie Mac and Fannie Mae. The government also extended a lifeline credit facility to insurance giant American International Group to prevent it from going the same way as Lehman (although the terms of the facility were quite onerous). And now, Paulson and Fed chairman Ben Bernanke are ferociously arguing that the $700 billion buy-out emergency vehicle is crucial for putting out what they describe as a fire ripping through the entire financial system.
It is possible that events would have unravelled in much the same way had Bear Stearns been allowed to collapse. Indeed, the fact that Merrill Lynch CEO John Thain was ultimately forced to negotiate a sale of the investment bank to Bank of America despite a series of pro-active capital injections and even a sale of collateralised debt obligations to US private equity firm Lone Star Funds for $6.7 billion, suggests that little could have been done to retain investor confidence and prevent the meltdown of the past couple of weeks.
But we will never know for sure.

Petra Energy (RM2.05) - RM1.1bn Shell contract

Petra Perdana : RM1.1bn Shell contract Outperform
Company Update
- Petra Perdana’s 60%-subsidiary Petra Energy announced that it had been awarded a RM1.1bn contract for the hook-up, commissioning and major maintenance services on Shell Sarawak/Sabah offshore platforms. The contract is for a period of four years commencing 23 September 2008. With this latest contract, Petra Energy’s orderbook now stands at RM1.4bn. As a result, our Petra Energy FY08-10 net profit forecasts are raised by 58%, 57% and 121% respectively.

- However, we are concerned about the liquidity crunch in US and Europe caused by bankrupties in the financial services sector that may derail Petra Perdana’s plan to finance its new vessels in FY08-10 via off-balance sheet schemes. While we concur with management that liquidity crunch is less of a concern the oil & gas sector, we believe cost of borrowing (i.e. lease rate) will likely to spiral up given increased yield spread globally. We have thus assumed that the financing cost will be 15% higher than previously arranged US$1/HP/day.

- We have raised our FY08 and FY10 EPS forecasts for Petra Perdana by 13.0% and 4.4% respectively but trimmed our FY09 EPS marginally after factoring in: 1) RM1.1bn contract secured by its 60%-subsidiary Petra Energy; and 2) higher effective interest rate for its new vessel financing. Accordingly, our fair value is trimmed slightly to RM4.64 (from RM4.79/share previously). Reiterate Outperform.-RHB

IJM Plantation (RM1.98)- aggressively on forward selling

Top Story : IJM Plantations – Treading Cautiously Now Market Perform
Visit Note
- We garnered five main key takeaways from our recent company visit to IJMP, namely that: (1) IJMP is currently selling forward quite aggressively; (2) FFB production growth is expected to moderate from high single digit in FY09 to low single digits for subsequent two FYs; (3) OER is on declining trend; (4) Cost of production to rise by RM200/tonne in FY09; and (5) updates on IJMP’s Indonesian land planting schedule and plans for its biodiesel plant.

- All in, we revise our forecasts downward by 1-2% p.a. for FY09-10, and by 3.8% for FY11.

- Post-earnings revision, our fair value is RM2.05 (from RM2.10 previously). Despite our negative view on the sector and negative earnings growth projections for IJMP, we believe IJMP’s share price has largely reflected this already, and is more likely to trade in line with the market going forward. In addition, IJMP’s decent gross dividend yields of 5-6% p.a. will help support share price. No change to our Market Perform recommendation.-RHB

Last week support at RM1.58

CTRM- Another sick investment

Only RM25m recovered from investment in US firm

KUALA LUMPUR: After investing RM537.04mil in the US-based Columbia Aircraft Manufacturing Corporation (CAMC) through Composites Technology Research Malaysia Sdn Bhd (CTRM), the Government only managed to get back RM25mil.
The 2007 Auditor-General’s Report stated that CTRM, owned by the Finance Ministry Incorporated and Petronas, invested and lent RM537.04mil to CAMC as of September last year.
CAMC, which produced four-seater light aircraft suffered an accumulated loss of US$132.28mil (RM480.18mil) at the end of 2006 and filed a bankruptcy notice at an Oregon court on Sept 24 last year.

On Nov 27 last year, Cessna, which produces two-seater light aircraft, bought over CAMC for US$16.50mil (RM56.27mil).

The US court then awarded the Finance Ministry of Malaysia loan and interest of US$4.29mil (RM14.63mil) and US$3.04mil (RM10.37mil) to CTRM as payment for debtors in possession.
The A-G's Report said CTRM’s investment failure was due to unscrupulous spending by its senior management officers, CAMC’s board of directors being unable to tackle production of aircraft quickly and the Finance Ministry Incorporated's lack of monitoring of CAMC.

CTRM, set up in 1990 with the aim of expanding into the aerospace and the composite industry, recorded an unusual sum of profit in 2006. The A-G's Report stated that the profit recorded was not generated from its business activities but due to the government’s decision to waive interests on the loan given to CTRM.

From 1999 to 2003, CTRM received government loans amounting to RM362.10mil.
In 2006, CTRM recorded a pre-tax profit of RM191.19mil but in 2005, it suffered losses of RM38.18mil. In 2007, its pre-tax profit was RM1.44mil.

In its reply to points raised in the A-G's Report, it said the profit in 2006 was due to loan restructuring from the Government where interest was waived and CAMC shares, bought with funds from the Government, was transferred back to the Government.
It said pre-tax profit in 2006 without taking into consideration CAMC shares and the interest waiver was RM2.1mil.

2Q08 results round-up - Stunningly poor set of numbers

Overall, the Aug results season was a major letdown. The number of
underperformers overwhelmed outperformers by more than a factor of 3. Since
the May results season, 2008 EPS growth has been chopped from 15% to 9%.
2009 EPS growth is unchanged at around 7% but bear in mind the lower base in
2008. There is further downside risk to our earnings forecasts as the 3Q
results in Nov will incorporate a full three months of the higher petrol
prices and the 18-26% electricity tariff hike as well as two rounds of price
increases for building materials. As the fundamental outlook continues to
deteriorate and the political uncertainty shows no sign of ebbing, we are
cutting our KLCI targets from 1,290 to 1,140 points for end-08 and from
1,400 to 1,240 points for end-09. Our target basis has been lowered from
13.2x to 12.2x P/E as we widen the discount to the 3-year moving average P/E
from 10% to 15%. We remain cautious about the outlook and maintain our
NEUTRAL weighting on Malaysia. -CIMB

2008 Auction Calendar

Highlights:
There are another 11 issuances of MGS and GII (5 of them are private placements) scheduled for the rest of 2008. This works out to about RM2.0b size for each of the remaining auctions.
Stripping out the private placements, the total MGS and GII (which will be issued in 2008) will amount to RM45.7b, slightly lower than the RM48.0b (which we originally expected prior to the announcement of Budget 2009).

While the larger than expected budget deficit for 2008 is expected to push yields higher, the impact will be largely negated by a number of factors. Firstly, by allocating some of the coming government bond issuances to private placements, the government is able to control the net supply of bonds to the market. Secondly, the recent 15 sen cut in petrol prices will help contain the rise in yields.

Therefore, given our view that the OPR will remain unchanged until the end of the year, we think the current sell-off in the bond market will be temporary, and expect yields to start trending downwards in 4Q08. We advise investors to start picking bonds for their portfolio in anticipation of a stronger market later in the year.

For 2009, the total gross issuance of government bonds is expected at RM65.9b. Of the 23 auctions that are scheduled in 2009, we expect 3 of them to be callables with an individual issue size of RM500m, while the remaining 20 auctions should average at RM3.0b each. Again, the large supply of government bonds will exert further pressure on the bond market in 2009. Similar to 2008, we advise investors to keep the duration of their bond portfolios short.

Over in the PDS market, the government plans to compensate toll road concessionaires a total of RM45m a year in return for a 50% cut in toll charges for buses over the next 2 years. We view this to be cash flow neutral and will not have any significant impact on the credit strength of toll operators.

Elsewhere, new PDS issuances next year should see more infrastructure/construction related bonds as the government’s 5 regional growth corridors and the 9MP kick into full swing. The RM35b allocation through 2014 to upgrade public transportation works out to about RM5b a year. As such, we can expect more Prasarana bond issuances in the next few years.

Financial sector funds swim against the outgoing tide in late August

August 29, 2008
Funds saw plenty of redemption activity during the fourth week of August. But investors were in no hurry to reallocate the money they pulled out. Of the 24 major equity, sector and fixed income fund groups tracked by EPFR Global, 17 posted outflows totaling $7.6 billion while only three of the seven that absorbed fresh money took in over $150 million. Emerging markets equity funds posted outflows for the 11th time in the past 12 weeks, US Equity Funds saw their four-week winning streak snapped and redemptions from Europe Equity Funds hit an eight week high.

One fund group, Financial Sector Funds, accounted for nearly 60% of the inflows posted by the seven fund groups that did attract new money. The other six were Consumer Goods, Real Estate, Utilities and Healthcare/Biotechnology Sector Funds and US and High Yield Bond Funds. Meanwhile flows in an out of Money Markets Funds, which have served as the sidelines for most of year, were essentially neutral for the second week running.
At the country and sub-regional level Middle East and Africa Funds and China Equity Funds resumed their winning runs while Russia and Brazil Equity Funds extended their losing streaks to nine and 12 weeks respectively.

US, Global, Europe and Japan Equity Fund Flows
Some better than expected US capital expenditure, 2Q GDP and durable goods data did not translate into positive flows for US Equity Funds or those funds geared to markets that depend heavily on their ability to export to the world's largest economy. Investors pulled $2.52 billion out of US Equity Funds, $1.23 billion out of Europe Equity Funds and $128 million from Japan Equity Funds during the week ending August 27.

In the case of Japan, the optimism that rising prices would chase domestic savings into Japanese equity markets has given way to pessimism about the risk of stagflation. Economic growth during the second quarter was negative while wholesale and headline inflation rates have climbed to 27 and 10 year highs respectively. In addition, a stimulus package being mooted by Japan's government is being interpreted by many foreign investors as an unwelcome return to pre-reform retail politics. Japan Equity Funds have now posted outflows for five straight weeks.
Growth in the 15-member Eurozone is also slowing sharply as tighter credit squeezes domestic demand. Inflationary pressures, meanwhile, have prompted hawkish rhetoric from the European Central Bank. Redemptions from Europe Equity Funds in late August accelerated to levels last seen in early July and year-to-date outflows are now within striking distance of $45 billion versus $50 billion for the much larger group of US Equity Funds.

The US Equity Funds experienced outflows for the first time in five weeks as modest flows into Mid Cap Funds were more than canceled out by redemptions from Large Cap Blend ETFs. The pendulum swung away from growth stocks during this week, with Value oriented funds outperforming their Growth peers in both flow and performance terms across all capitalizations.
The two diversified fund group geared primarily to developed markets, Global and Pacific Equity Funds, recorded their third straight week of outflows respectively. The $835 million removed from Global Equity Funds pushed year-to-date outflows from last year's most successful fund group in terms of attracting new money to nearly $8 billion.

Emerging Market Equity Fund Flows
All four of the major emerging market fund groups recorded outflows during the fourth week of August with EMEA Equity Funds hit the hardest in percentage terms. Investors pulled money out of the diversified Global Emerging Markets (GEM) Equity Funds for a fifth straight week and extended Latin America Equity Funds' losing run to 12 weeks and $4.1 billion. Since the second week of June EPFR Global-tracked emerging market funds have surrendered a net $23.1 billion.
Appetite for exposure to emerging markets has been eroded by a sharp correction in commodity prices during 3Q08, a string of downward revisions to economic growth forecasts and painfully high inflation rates in several key markets including Russia, India, South Africa and Argentina. Investors still have appetite for direct exposure to China, although the $175 million they committed to China Equity Funds was more than offset by redemptions from Asia ex-Japan Equity Funds, Greater China Equity Funds, India Equity Funds and Taiwan Equity Funds.
EMEA Equity Funds remain the only major emerging markets fund group to post inflows year-to-date, but the $2.9 billion they had absorbed by the end of 1H08 has dwindled to under $230 million going into September. The abrupt loss of enthusiasm for Russia, fueled by state pressure on firms in "strategic" sectors and the recent incursion into Georgia, has played a role with outflows from Russia Equity Funds since late June exceeding $800 million. And since late June investors have pulled nearly $4 billion out of the Emerging Europe Equity Funds, which currently maintain a 42% weighting to Russian equities.

Sector Funds
Once again it was Financial Sector Funds that caught the eye. Following two weeks of strong outflows totaling $2.3 billion these funds absorbed a net $813 million during the fourth week of August as faith in the US government's willingness top rescue mortgage giants Freddie Mac and Fannie Mae, allied to better news about house prices and sales, rekindled optimism that the worst is over for this sector. Real Estate Sector Funds also benefited from this shift in sentiment, absorbing a net $175 million for the week, and flows into Consumer Goods Sector Funds hit a 12 week high.
Also among the winners were Healthcare/Biotechnology Sector Funds, which extended their winning streak to seven weeks and $2.3 billion, and Utilities Sector Funds. Investors removed money from Energy Sector Funds for a fifth straight week despite their improved performance ahead of the Northern Hemisphere's heating season, pulled another $114 million out of Commodities Sector Funds and snapped Technology Sector Funds' five week inflow streak.

Commodities Funds losses continue

By Rita Raagas De Ramos 19 August 2008

Lipper data shows commodities funds are continuing to weigh on the performance of mutual funds in Malaysia, bringing average year-to-date losses to more than 11%.

Mutual funds registered for sale in Malaysia posted an average loss of 1.64% in July, extending their average 4.47% decline in June, according to data from Lipper. That brings the average mutual fund losses in Malaysia to 11.24%.

Commodities funds were the worst performers, posting an average loss of 9.93% last month. Such portfolios suffered sharp draw downs because many natural resources prices collapsed in July. Crude oil futures plunged 11.4% on reports of declining consumption in the US and Asia as well as OPEC increasing exploration and Brazil resuming production. News that the US and Iran had engaged in dialogue over the latter's nuclear energy program eased the geopolitical tension in the Middle East and further drove down crude oil prices.

Equity funds posted an average loss of 2.58% last month, mainly due to heavy losses suffered by portfolios that invest in gold and precious metals and natural resources, which posted average losses of 15.27% and 7.9%, respectively. Only portfolios that invest in emerging markets Far East (+8.25%), pharmaceuticals and health (+5.45%), banks and financials (+0.79%), and China (+0.33%) reported gains for the month.

HLG Vietnam posted a return of 8.25% last month, outperforming all other equity funds in July. It was followed by HLG Global Healthcare (+5.45%) and two equity China funds - ING China Access (+3.39%) and OSK-UOB Big Cap China Enterprises (+2.67%).

"China equity funds were supported by better-than-expected second quarter bank earnings in the mainland and by the Beijing Summer Olympic Games," says EricWong, Lipper's Hong Kong-based head of research. "However, a government report showing the country's GDP growth decelerating to 10.1% in the second quarter restricted their intra-month gains."

The worst performing equities funds last month were AmPrecious Metals (-15.27%), OSK-UOB Resources (-7.90%), and PRUglobal basics (-10.63%).

Bond funds posted an average loss of 0.46% in July. The three best performing bond funds in July were: RHB Islamic Bond (+1.90%), RHB Asian Total Return (+0.89%),

and AUTN Bond (+0.75%). The three worst performing bond funds were Avenue

IncomeEXTRA (-10.50%), Avenue BondEXTRA (-8.96%), and AmanahRaya Unit Trust (-4.66%).

Islamic funds, meanwhile, posted an average loss of 2.16% last month.

With the US corporate earnings reporting season closing, market attention is no now returning to the economy, Wong says. The latest reports on economic parameters such as GDP growth, manufacturing and service industry activities, retail sales, and unemployment rates continue to depict a withering global economy with no signs of bottoming out. Inflation has yet to retreat from the government's target in many countries, rendering their central banks reluctant to lower interest rates to revive their economies. Property markets are still lacklustre in many countries, with weak home sales and non-abating property foreclosures.

Looking at the bright side, Wong notes that an opportunity has recently emerged for the global economy to end its contraction and for corporate earnings to resume growth. Crude oil prices have retreated sharply from a record-high of $147.27 per barrel in mid-July. Also, corn and soybean prices have slid 36% and 25%, respectively, since the beginning of July.

"Falling food and energy prices will ease inflationary pressures in many countries, allowing central banks to resume lowering interest rates," Wong says. "Lower interest rates should trigger more families to refinance their mortgage loans and reduce property foreclosures, which can stabilize the property market and reduce the risk of a credit crunch in the financial markets.

On the local front, many Malaysian companies are scheduled to release their quarterly earnings in the coming weeks, which may trigger some sparkle in the financial market, Wong says. However, lingering political uncertainty may nevertheless cause investors to remain cautious about investing in Malaysia, he notes.

The arrest of opposition leader Anwar Ibrahim in July triggered selling in the equity market. But his subsequent release restored some confidence. This is the second time such an accusation has been brought against him since 1998. The same charge 10 years ago was eventually struck down by Malaysia's Supreme Court, but only after Anwar served six years in prison on a related abuse of power charge.

Sapuracrest(RM1.27) - Seadrill up stakes to 21.05%

Maybe the sentiment is not good at the moment but i believe Seadrill sees something valuable in.

52-w hi: RM2.10, lo: RM1.02

Malaysia Consumer Price Index - Up 3.8% YoY in May as food index shot up

· Malaysia's Consumer Price Index (CPI) jumped to 3.8% in May, the strongest reading in 22-months, as the cost of food and non-alcoholic beverages shot up by 8.2% YoY. It was higher than expected.

· Following the recent fuel price hike, we may not be surprise if the inflation rate may spike up to above 6.0% in June. Inflationary pressures will be stoked further in July, when power companies introduce new electricity tariffs. Hence, we expect the CPI to remain above 5.0% for the rest of the year. Given the surprisingly higher May base, we are adjusting our CPI forecast to 5.1% from our earlier projection of 4.1% for 2008.

· The current situation may have put BNM in a difficult spot to maintain its monetary policy stance and try to hold its policy rate steady at 3.50%. However, following BNM Governor's press statement, it provides us with more reason to allocate higher probability that BNM may raise the OPR by at least 25 basis points this year.

Healthcare- Recession-proof industry

A couple went to a sex therapists office at ABC Hospital.
The doctor asked, "What can I do for you?"
The man said, "Will you watch us having sex, give your expert analysis?"
The doctor looked puzzled, but agreed. When the couple finished, the
doctor said, "There's nothing wrong with the way you have intercourse"
and charged them RM60.00.
This happened several weeks in a row. The couple would make an
Appointment, have intercourse with no problems, pay the doctor and then
leave.
Finally the doctor asked, "Just exactly what are you trying to find
out?"
The man said, "We're not trying to find out anything. She's married and
we can't go to her house - I'm married and we can't go to my house.
Shangri-la Putrajaya charges RM250.00, Mandarin Oriental charges
RM280.00, Le Meridian charges M230.00. We do it here for RM60.00 and I
get that back from "Medical Claim".......!

Pak Lah: "Oil price hike for the best benefit of rakyat"

CIMB downgrade CI to 1,290 - NEUTRAL

Petrol prices have been raised 41%, along with the price of gas sold to Tenaga. However, Tenaga will get a 18-26% electricity tariff hike from 1 Jul. IPPs will have to pay 30% windfall tax on earnings above ROAs of 9%. Plantation companies will incur 7.5-15% levies on CPO sold above RM2,000/tonne but this will be sweetened by the scrapping of the cess tax. The petrol and electricity price hikes are negative for most sectors as it will raise costs and dampen consumer sentiment. The windfall tax on IPPs is clearly negative but the impact is minimal while the net impact on plantation companies is mixed but marginally positive. Tenaga appears to be the main beneficiary as higher tariff rates should easily offset the hike in gas prices. These simultaneous price hikes and windfall taxes on investor-favoured sectors are unprecedented. We expect the market to be rattled in the short term and are lowering or end-08 KLCI target from 1,350 points to 1,290 points. Maintain NEUTRAL weighting.

Oil Price Hikes Unevitable : Life must goes on...

I'll continue to favour the following stocks despite last week's goodies from Faklah to all Malaysians:

1- KHSB - Should be a good buy at RM0.61-0.62, RM0.74 resistance
2- KUPS - Buy below RM2.20, also worth holding longer
3- Oil & Gas - Selective, theme play - i.e Ramunia, Sapcres, Kencana
4- Plantation - Tradewinds, others
5- REITS, Investment Property Players - IGB, KLCC Prop; despite weaker consumer spending ahead, rental yields would remain high.

KHSB(RM0.66)- going private?

Kumpulan Hartanah Selangor Berhad (KHSB)- the Selangor State listed-entity, 57%-held by KPS while KPS is 60.2% held by KDEB. With property-related matters mainly dealt at PKNS level, i believe that having KHSB continue to be listed may be seems as duplication of function, unless S'ngor MB has other plans for the Company.

Current NAV stood at RM1.00.
Trading range from RM0.66-RM0.73.
Support:RM0.66, Resistance:RM0.75

Banking-updates by RHBRI

¨ Industry underlying loan growth continued to accelerate. Mar 08 underlying loan growth accelerated to +10% yoy (Feb 08: +9.8%) after resuming normal service post the festive season and a short month in Feb 08. This was underpinned by both the business and household segments. We are not changing our 2008 loan growth projection of 7% as we expect loan growth to slow down in the latter part of 2008.

¨ Leading loan indicator still robust. The 3-month moving average loan approvals decelerated to +35.6% yoy (Feb 08: +53.7%). Despite the significant higher base in Mar 07 (mainly from the business sector), this is still a robust growth, underpinned by double-digit growth from the household (+39.3% yoy) sector and SMEs (+10.5% yoy).

¨ As expected, average lending rate (ALR) declined to 6.21% (Feb 08: 6.27%). We continue to hold the view that domestic economic activities, consumption and rising loan base will more than offset the pressure on margin.

¨ Asset quality continues to improve while absolute gross NPL reverted back to mom reduction. The Mar 08 three-month gross and net NPL ratios (post-GP8 adjustment) improved by 18bps and 20bps mom to 5.29% and 2.97% (Feb 08: 5.47% and 3.18%), respectively. After snapping an 18-month winning streak in Feb 08 (where absolute gross NPL increased mom), this number reverted back to a mom reduction.

¨ Risks: 1) slower-than-expected loan growth; 2) deterioration in asset quality; and 3) changes in market conditions that may adversely affect investment portfolios.

¨ Forecasts. No changes to our earnings forecasts for the banks.

¨ Investment case. We like the sector for its resilient yet growing earnings, high liquidity and dividend yield (all defensive qualities amidst global uncertainties) as well as good proxy for an expected market recovery in 2H08. Stocks in our universe also have their respective catalyst(s). Our top picks (in order of preference) are Public Bank, Maybank, BCHB, HL Bank and AMMB.

Public Warned To Stop Using "Pronoton"

KUALA LUMPUR, April 22 (Bernama) -- The Health Ministry Tuesday warned the public to stop using "Pronoton", a traditional product, as it contains the scheduled poison analog sildenafil, which is not allowed to be used in traditional medicine.Its pharmaceutical services division director Eisah A. Rahman said the registration of the product had been revoked by the Drug Control Authority."Medicine containing sildenafil can only be prescribed by a doctor or bought with a doctor's prescription," Eisah said in a statement here Tuesday.Traditional products containing sildenafil can cause side effects like low blood pressure and other cardiovascular problems.All sale of the product must also stop with immediate effect and anyone caught doing so can be prosecuted under the Cosmetics and Drug Control Regulations 1984, which provides for fines up to RM100,000 or jail up to three years or both, if convicted.

My One Cent:

I use to take this "Pronoton" before, under "MayFirst" label which currently the main sponsor of Astro's Akademi Fantasia 6. Visit www.mayfirst.com.my for details.

Kencana (RM2.00): LOI for Shell platform in Sabah

CIMB reported that Kencana hv been received LOI from Shell to construct platforms in offshore Sabah. Contract worth would be in the region of RM100m with deliveries scheduled in 4QCY09-1QCY10.

Target Price (TP): CIMB:RM2.80

My One Cent:
Maintain BUY

SapuraCrest(RM1.55)-BUY!

Seadrill continue to increase its shareholding from 17.4% to 18.5%. SapCrest-WA currently traded at 1.6% discount to the mother (RM0.825+ex-price of RM0.71=RM1.535). The WA expiring on 18 Feb 2009, exercisable on 1:1 ratio. As oil price close at US$117 this morning, ppl will continue to favour O&G players.

Ah Beng- NEW STUFF

Ah Beng - NEW STUFF
********************
Ah Beng bought a new mobile.
He sent a message to everyone from his Phone Book & said,
"My Mobile No. Has changed.
Earlier it was Nokia 3310. Now it is 6610"
====================================
Ah Beng : I am a Proud, coz my son is in Medical College.
Friend: Really, what is he studying.
Ah Beng: No, he is not studying, they are Studying him.
==========================================
Ah Beng : Doctor, in my dreams, I play football every night.
DR: Take this tablet, you will be ok.
Ah Beng : Can I take tomorrow, tonight is final game.
===========================================
Ah Beng : If I die, will u remarry?
Wife: No! I'll stay with my sister. But if I die will u remarry?
Ah Beng : No, I'll also stay with your sister.
=========================================
Ah Beng : People consider me as a "GOD"
Wife: How do you know??
Ah Beng : When I went to the Park today, everybody said,
Oh GOD! U have come again.
===========================================
Ah Beng complained to the police: "Sir, all items are missing,
except the TV in my house."
Police: "How the thief did not take TV?"
Ah Beng : "I was watching TV news..."
=========================================
Ah Beng comes back 2 his car & find a note saying "Parking Fine"
He Writes a note and sticks it to a pole "Thanks for complement."
=============================================
How do you recognize Ah Beng in School?
He is the one who erases the notes from the book when the teacher erases
the board.
===============================================
Once Ah Beng was walking he had a glove on one hand and not on other.
So the man asked him why he did so. He replied that the weather forecast
announced that on one hand it would be cold and on the other hand it would
be hot.
==================================================
Ah Beng in a bar and his cellular phone rings. He picks it up and
Says "Hello, how did you know I was here?"
===================================================
Ah Beng : Why are all these people running?
Man - This is a race, the winner will get the cup
Ah Beng - If only the winner will get the cup, why others running?
===================================================
Teacher: "I killed a person" convert this sentence into future tense
Ah Beng : The future tense is "u will go to jail"
=====================================================
Ah Beng told his servant: "Go and water the plants!"
Servant: "It's already raining."
Ah Beng : "So what? Take an umbrella and go."
=====================================================
A man asked Ah Beng why Ahmad Badawi goes walking in the Evening and not
in the morning Ah Beng replied Ahmad Badawi is PM not AM

SapuraCrest (RM1.33)- BUY!

Seadrill awarded US$4.1b contract

OSLO: Brazilian oil group Petrobras has awarded the Norwegian oil services company Seadrill a contract that could be worth up to US$4.1 billion (US$1 = RM3.16), Seadrill said yesterday. The order covers the six-year lease of three semi-submersible drilling platforms, currently being constructed in South Korea and Singapore, it said in a statement. The contract brings Seadrill's order book to US$12 billion. Seadrill is registered in Bermuda and listed on the Oslo stock exchange. - AFP

My one cent:
BUY SapCrest on the newsflow- despite this news is not totally directed to SapCrest, i believe that Seadrill as a major shareholder with 17.44% stake, will sub-con some to SapCrest. Nonetheless, execution risks remain.

􀂃 Sarawak-based Dayang offers direct exposure to lucrative brownfield oil & gas activities and marine charters services in East Malaysia.

􀂃 Dayang should deliver a 27% EPS CAGR in FY08-09, riding on its RM627m orderbook and marine contracts, with upside potential if it develops its marine assets and/or takes the M&A route.

􀂃 Dayang’s 11x FY09 EPS, based on its RM1.45 IPO price, is higher than closest peer Petra Energy’s 7x and small-cap’s 8x average, but its share price may open higher, riding on its major shareholders’ clout.

Direct proxy to East Malaysia’s oil & gas play. Sarawak-based Dayang Enterprise Holdings, 74% owned by Naim Cendera (NCH MK; Not Rated) (34%) and its promoters - Harry Bujang (16%), Tengku Yusof (15%) and Ling Suk Kiong (10%), offers direct exposure to the rewarding brownfield oil & gas segment and marine chartering services in East Malaysia. Offshore topside maintenance and marine vessel chartering are Dayang’s core businesses (accounting for 98% of gross profit in FY07), while minor fabrication, and hookup and commissioning works play complementary roles.

Orders are Sabah-Sarawak centric. Not surprisingly, its RM627m brownfield oil & gas contracts, stretching into 2012 (see table overleaf), are for Sarawak and Sabah fields. Petronas Carigali (PCSB) is its largest customer to-date, accounting for 48% of total orders. Dayang’s tenders for new contracts worth RM600m are a testament to increasing brownfield activities in Malaysia, as the
country seeks to optimize production from the existing oil platforms.

27% EPS CAGR in FY08-09. Dayang is financially healthy, cash-rich and has consistently generated decent EBIT margins and teen ROEs. Dayang should deliver 27% EPS growth p.a. in FY08-09, riding on its existing RM627m orderbook and marine contracts. There is further room for growth as Dayang will take delivery of a new workboat/barge by end-08, and as new contracts are
awarded (not incorporated into forecasts). We are also not ruling out Dayang eyeing the M&A route for inorganic growth and/or growing its marine fleet as Dayang, with its light financials, has the capacity to gear up. On the flip side, we are concerned that superior 30% pretax margin (2x of Petra Energy’s) may be under pressure due to higher operating expenses (i.e. wages, steel, etc).

Not Rated; greater values lie elsewhere. Dayang’s 11x FY09 EPS, based on its RM1.45 IPO price, is above closest peer Petra Energy’s 7x and small-caps’ 8x average, but its share price may find support from its shareholders’ clout.

Wah Seong (RM2.23)- gets RM390m job

Wah Seong Corp Bhd has clinched a RM390m contract for the manufacture, supply, coating and storage of pipes for the Sabah-Sarawak Gas Pipeline (SSGP) project, boosting its order book to a whopping RM1.7b. Wah Seong told Bursa Malaysia yesterday that its unit Petro-Pipe (Sabah) Sdn Bhd signed the contract with Petronas Carigali Sdn Bhd on Tuesday.

The pipes were scheduled for delivery within a year from September, it said, adding that the contract was expected to contribute positively to group earnings for the financial years ending Dec 31, 2008 and 2009. Managing director and group chief executive officer Chan Cheu Leong told StarBiz that the group was in the midst of setting up an integrated pipe coating and manufacturing facility in Kimanis, Sabah. CEO Chan sees good prospects for the group as investments in O&G infrastructure such as pipelines and process equipment would continue to grow, driven by increased demand and the under-investment in O&G infrastructure over the past decade. “The Asia-Pacific and Central Asia are the immediate areas of focus of the group,” he said. Wah Seong rose eight sen to RM2.23 yesterday on volume of 1.7 m shares. (StarBiz)

Fuel Subsidies and Prices

The Two RON-nies…
The Government is reportedly considering a proposal to introduce RON95/RON99 petrol, an "upgrade" from RON92/RON97 currently on sale at pump stations, as the means to address its growing burden of maintaining heavily subsidised fuel prices.

The principle here is "two-tier product and pricing" and "cross-subsidisation". This is workable IF low income and high income fuel consumers are effectively segregated via the consumption of different petrol grades, hence different prices, with the latter group "subsidizing" the former group.

However, we noted that virtually all cars on the roads these days can run on RON95 petrol, which means a mechanism that involves subsidized RON95 price and partially-subsidised or non-subsidised RON99 price is virtually ineffective in containing the Government’s fuel subsidy costs. Reading between the lines, we suspect the real motive is to raise fuel prices, with RON95 cheaper than RON99, creating the "price subsidy illusion" on the part of the public, with the ultimate objective being cutting or containing the amount of fuel subsides incurred by the Government.- Aseambankers

Hiap Teck gears for new markets

By Sharen Kaur
The main board firm is talking to a few parties in Europe to sell oil and gas pipes as well as structural pipes to the UK, Germany and Belgium.

HIAP Teck Venture Bhd, which makes steel pipes, plans to utilise its production capacity to the fullest by moving towards new markets, such as the US and Europe, and targeting the oil and gas industry.It wants to increase its profit base and is planning its first shipment to the US in May, executive director Law Sook Teng said.The main board firm with a market capitalisation of RM600 million is also talking to a few parties in Europe to sell oil and gas and structural pipes to the UK, Germany and Belgium in the second half-year."We have excess capacity and it is about marketing and selling that. We are moving into the US, which is a relatively new market for us. Our next target is Europe," Law told Business Times in an interview.

Hiap Teck is the largest electric resistant welding (ERW) pipe-maker and exporter in the Asean region.Its annual capacity from nine production lines in Meru, Klang, is 580,000 tonnes. Out of that, 300,000 tonnes will go towards making big-diameter (six to 18 inches) oil and gas, water, and infrastructure pipes.Currently, only 35 per cent capacity is being utilised to make gas and infrastructure pipes. The company wants to increase this to 60 per cent by the next financial year by selling more oil and gas pipes.The remaining 280,000 tonnes, of which about 80 per cent is being utilised, are for making optimum and mid-range pipes (two to six inches).

Hiap Teck is targeting double-digit growth in revenue and net profit for its fiscal years ending July 31 2008 and 2009, driven by capacity increase and utilisation, Law said.It made net profit of RM71.4 million on revenue of RM1.28 billion in the fiscal year ended July 31 2007.Law expects new markets and higher-grade pipes to contribute towards better earnings."We had shipments for commodity pipes to the US two years ago, but stopped because of competition from China. Now, we are shipping high-grade oil and gas pipes," she said.The company expects the US and Europe to be its next biggest markets, after Australia and Singapore which are currently contributing up to 35 per cent each to revenue.Law also said that Hiap Teck's new market, Indonesia, is poised be its fifth biggest, contributing around 15 per cent of revenue in one to two years.

Hiap Teck is bullish that the oil and gas, water, manufacturing, and infrastructure industries will remain significant contributors to its bottom line.

Kencana- Quek now 2nd largest shareholder

It was reported that Quek Leng Chan has emerged as a substantial shareholder- after bought additional 5.1% from the market. Before this, he hold 4.8%.

Trading range between 1.40-1.60.

Kencana to up marine-based contribution to 20pc

KENCANA Petroleum Bhd, an integrated solutions and services provider for the petroleum industry, aims to increase contribution from its marine-based business to 20 per cent by 2011.

Its executive chairman Datuk Mokhzani Mahathir said he is confident of increased demand for the group's products."We have proved that we can produce technological structures that are cost-effective. "People are more aware of such facilities here," he told reporters after the Maari sail-away ceremony in Lumut yesterday.

Maari is the world's largest and tallest wellhead platform structure ever built by Kencana HL, a subsidiary of Kencana Petroleum. The technology is from Norway while the project owner is from Australia.The Maari wellhead platform was fabricated in Kencana HL's fabrication yard in Lumut and it will operate out of New Zealand by September this year.

Mokhzani said there are only two similar structures in the world, and Maari that stands at 150m is the taller of the two. Weighing 10,000 tonnes, the Maari is also the tallest offshore structure to be built vertically, in Malaysia."It is self-elevated, relocatable and cost-effective," he added.While the overall cost of the Maari development - including construction of a floating, production, storage and offload vessel - amounts to US$450 million (RM1.4 billion), Kencana Petroleum was given 10 per cent of the jobs, worth about US$45 million (RM143 million)."We are also eager to start our second project on such wellhead structure soon," he said, adding that the Maari platform is expected to reach its final destination within two weeks.

He said Kencana Petroleum has also secured drilling and fabrication of drilling rig licences from Petronas, boosting the group's marine-based business.Mokhzani said Kencana Petroleum had launched the first steel-cutting to mark the construction of its first drilling rig, the Kencana Mermaid-1, last month."We expect the rig to start servicing by the end of next year," he said.

Kencana (RM1.30) - still good bet for upstream O&G

Good:

1- Oil hit USD110/brl

2- Higher dd for oil rigs

3- Australian contracts i.e to Cameron Ltd- BHP Pyrenees Project

Not so good:

1- Project delays

2- Deteriorating orderbook

3- Outsourcing of installation - execution risk

Trading range from RM1.30-1.41.

Maybank+Bumi-Commerce

Merger of the two could be a win-win for both banks as they complement each other.
Maybank's strengths - Strong deposit and retail franchise - Strong presence in Singapore and Phillipines - Good fee income stream from transactions and insurance - Good asset quality - Strong capital position
Maybank's weaknesses - Could face top mgt vacuum if Amirsham retires in mid-2008 - Lacks presence in Indonesia and looking out for acquisition - Weak IB franchise and lack of capital market presence - Starting to lose consumer loan share , particularly in mortgage loans Bumi-Commerce's strengths -
Leading IB with growing regional presence - Strong presence in Indonesia with option to further expand with Lippo acquisition - Strong mgt team led by Nazir Razak - Good wealth mgt product
Bumi-
Commerce's weaknesses - Weak retail deposit franchise - Lacks banking presence in other ASEAN markets other than Malaysia+Indonesia - No insurance product - Less room to further gear up compared to Maybank
Benefits of a merger :
- Addresses Maybank's management vacuum should Amirsham leave
- Much larger entity and cements top domestic position (close to 40% market share) and emerge as possibly top 3 ASEAN bank
- Good combination of Maybank's strong retail franchise and BCHB's dominant IB
- Combined entity will have better regional footprint (Malaysia, Singapore, Indonesia, Phillipines)
- Room for capital mgt post-merger
- Dispels concerns over Maybank's acquisition plans in Indonesia
- BCHB can tap Maybank's low cost funds and strong retail deposit franchise
- Good cross-selling opportunities : bancassurance (Maybank's), credit card (both equally strong), IB (BCHB), wealth mgt (BCHB), offer trade finance solutions (Maybank), structured products (BCHB) , unit trust and asset mgt (BCHB).

BURSA-CF (RM0.47) BUY

Bursa Malaysia - Super-monopolistic play
Key drivers:
1- Potential 10% stake sale to CME/foreigners at RM20/share;
2- Huge trading volume/value;
3- US Dollar palm oil futures contract;
4- Generous cash pay-out (i.e special cash,dividend yield >5%p.a)
Risks:
1- Slower local economic activities in 2008;
2- Global market sell-down +recession
Recommendation:
Trading BUY on Bursa-CF, best entry price:RM0.40-0.44, sell at RM0.51 or higher. (premium:<6%, expiry date: 4 Apr'08, ex-price:RM10.30, ex-ratio:1m for 10w), assuming Bursa to reach RM20 before April'08, Bursa-CF should be fairly valued at RM0.97.

Strong run-up towards election.

Bursa Malaysia is in a bullish tone this week, underpinned by strong feeling that general election is just around d corner. Few election stocks worth looking for:
1- MRCB: To secure more projects under 9MP, i.e Penang Monorail;
2-Equine: Trading stock with wide interest in NCER;
3-UEMWorld: IDR, UEMBuilder
4-Tebrau: IDR
5-GLCs: Maybank, TM, MAS, Timecom, MAHB
6- Construction: Gamuda, WCTEng
7-Water play: KPS, JAKS
8- Steel: Kinstel,Mastel
9- Plantation: Sime, IOICorp, KLK, Kulim, etc
To date- Oil n gas ctrs has yet to gain in a big way despite recent huge jump in global oil price. Some believe that oil may hit $200/brl by end of this yr- as fresh statements by OPEC (not upping production) and problems at a couple of the biggest wells sent oil prices skywards. Taking into account inflation and a weaker USD for 2008 (as the Fed would be pressed to reduce rates by a bigger quantum), traders piled into oil futures. There were significant big bets for oil to hit US$200 in 2008 options as well. My pick for oil n gas: Kencana (RM2.50-affordable, net cash position), forget abt KNM and UMW.

Telekom - Sale n Leaseback (Outperform- RHB)

Telekom: Enters Into Agreement For Sale and Leaseback Of Its Buildings Ou
- TM announced yesterday that it had entered into a conditional SPA and Master Ijarah Agreement with Menara ABS Berhad (MAB) for the proposed sale and leaseback transaction of four buildings.
- These buildings will be disposed for RM1bn and leased back to TM for up to 15 years. The proposed transaction is expected to be completed by end-Jan 2008.
- This proposed transaction would facilitate TM’s strategy in monetising its non-core assets. In addition, the amount raised would also facilitate the payment of the special gross dividend of 65 sen/share (or RM1.6bn) that was announced last month.
- RHB maintain an Outperform recommendation on TM with a SOP-derived fair value of RM12.90.

Hiaptek - Best Yet to Come (BUY!)

Hiaptek (HTVB MK)

Its price has yet to move in a big way despite of hitting RM2.02 yesterday (2/1/08). I believe Hiaptek will go higher once it starts to generate income from the oil n gas pipes segment.

Key drivers:

1- Demand from domestic infra projects;

2- Higher margin for O&G pipes;

3- Higher plant utilisation rate.

Risks:

1- Slow implementation of 9MP;

2- Unexepected d/turn in steel price (which is unlikely at d moment);

3- High inventory level;

4- Highly-geared.

Recommendation:

BUY

Target Price:

RM1.94 (RHB), RM3.13 (Affin), RM3.36 (OSK), RM1.75 (Alliance), RM2.82 (AM),RM2.66 (Merill)

Welcome 2008

Its been a not so good 2007 for me as i've failed to beat KLCI's +30% return...2007 also saw commodities price continue to surge, benefiting those holding plantation stocks, 9MP stories- construction, bulding materials, steel as well as oil and gas players...we also see lot of china dolls in d market (i.e petroch,cnooc,sinopec,ccc,angang,zijin) as well as american babes (i.e google,exxon and apple) being actively underwritten and traded. As for 2008, i see some trading restriction on my side as RM40 vs RM15 minimum brokerage fee can be regarded as too much for me, small trader. Nonetheless, prospect for this yr would be less interesting, as KLCI oredi at its peak of 1,445+ and upside seems to be limited. I see more risks than opportunities at this juncture. Some key points in Malaysia market to consider this yr:

Key drivers:
1- Pre-election rally on GLCs, and politically-run Companies;
2- Stable CPO prices;
3- W/drawal of EPF Acc 2;
4- 9MP, again?
5- GLCs reform, again?

Risks:
1- Revision of fuel,electricity,gas tariff, building materials;
2- Rising inflation;
3- Political instability;
4- Regional sell-down to continue on subprime issue;
5- Higher minimum brokerage fee;
6- Softer consumer spending (also impact from GST in 2009?)

My picks (which oredi in d portfolio) include Kencana, Hiaptek, Jaks, Bursa-cf and looking for some undervalued ctrs...