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
Wednesday, September 24, 2008
Tuesday, September 2, 2008
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.
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
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.
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.
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.
Monday, August 18, 2008
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.
Wednesday, August 13, 2008
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
52-w hi: RM2.10, lo: RM1.02
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