SINOTOP

Borrowing costs likely to stay low

Bank Negara Malaysia (BNM) is likely to leave borrowing costs unchanged today, preferring to wait for economic growth to pick up momentum and the global economy to have a sustained recovery.

Economists think the central bank will keep the Overnight Policy Rate (OPR) at 2.75 per cent when its monetary policy committee meets today.

Low borrowing costs have kept the economy buzzing with corporate deals, which in turn fuelled the stock market's rise to fresh records.

Consumer spending was also strong in big-ticket items. Malaysia is set to post record car sales in 2010, while lending curbs were introduced to rein in speculative buying of properties.

But economists polled by the Business Times expect BNM to start raising the OPR at the next meeting on March 11. Central banks typically raise interest rates to curb inflation.

Kit Wei Zheng, an economist with US bank Citi, said prices of goods and services are likely to continue rising.

He expects the Consumer Price Index (CPI), the measure of inflation, to breach 3 per cent by year-end.

"With oil prices likely to head north and expectations for oil at US$100 (RM305) per barrel by the end of the year, there will be greater urgency to cut the RON95 subsidy further to maintain the subsidy bill at current levels.

"With RON97 no longer subsidised and subject to an automatic pricing mechanism since July 2010, there could be a somewhat swifter and more direct pass-through from crude prices to petrol prices," he commented.

But Malaysia's 2.2 per cent CPI level would be the envy of regional nations like China, India, Vietnam and Indonesia, said DBS Bank economist Irvin Seah.

"Credit should be given to the policymakers in BNM for taking decisive and pre-emptive tightening move in early 2010 despite the risks associated with the European debt crisis then," Seah said.

When central banks across the region put on hold their plans to raise interest rates, BNM went ahead with 75 basis points rate hikes to nip inflation in the bud and to prevent financial imbalances.

That best explains the current modest inflation that the economy is enjoying, said Seah.

"The appreciation in ringgit has also an important role in keeping imported inflation at bay."

The local currency was one of the best performing emerging Asia currencies last year. It appreciated by 10.6 per cent against the greenback in 2010.

Alvin Liew of Standard Chartered Bank expects BNM to prepare the markets for another round of OPR hikes given the central bank's proactive approach to monetary policy formulation.

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IOI to set up own broadband services

IOI Properties Bhd plans to come up with its own broadband services for its townships in order to provide faster and better broadband connection to home owners.

By the second quarter of the year, the developer plans to come up with its own application called One IOI Net for some 150,000 households and 2,500 businesses in IOI townships in the Klang Valley and Johor.

"With this high-speed broadband, our townships will become one of the most connected places to live and work in.

"This presents a good opportunity for us and other businesses to provide value added mobile applications and services to our community."

"For example, residents will be able to get first hand information on the promotions available in IOI Mall and also get updated information on the estimated time of arrival of the IOI free shuttle service buses on their mobile phones," said IOI Properties Bhd senior general manager for marketing and business development Lee Yoke Har at a press conference in Putrajaya yesterday.

The first stage of this broadband services will be rolled out at the Bandar Puteri and Bandar Puchong Jaya commercial areas in Puchong.

The area includes Puchong Financial and Corporate Centre and the IOI Boulevard.

With this plan in mind, IOI Properties has entered into a partnership with Observation Sdn Bhd and Wi-Net Telecoms Sdn Bhd to collaborate and deliver the most advanced broadband network and related services to all IOI township developments within the next three to five years.

"The investment (to roll out the broadband services to all IOI townships) is RM20 million for the next three to five years," said Wi-Net Telecoms Sdn Bhd chief executive officer Lee Wai Tuck.

In recent months, there has been a surge in the number of developers offering similar broadband services in their townships such as Sunrise Bhd, which had entered into a partnership with Time dotCom Bhd to provide free and fast broadband services..

Besides Sunrise, UEM Land Holdings Bhd is also offering broadband services at its recently launched residential property in Symphony Hills, Cyberjaya.

Read more: IOI to set up own broadband services http://www.btimes.com.my/Current_News/BTIMES/articles/jr101/Article/index_html#ixzz1C8pIn6mM

Wall St mixed despite positive Q4 earnings

NEW YORK: US stock markets closed mixed on Friday despite positive fourth-quarter earnings reported by major companies like eBay, Google and General Electric.

The Dow Jones Industrial average finished 49.04 points higher (0.41 per cent) at 11,871.84, while the S&P 500 rose 3.09 per cent (0.24 per cent) to 1,283.35.

But the tech-heavy Nasdaq dropped 14.75 (0.55 per cent) to 2,689.54, as key components like Apple, Google and Microsoft all lost ground.

The Dow got propulsion from GE, which posted banner fourth-quarter profit of US$3.9 billion and said its order backlog was at "a record US$175 billion."

GE closed the day up 7.11 per cent to US$19.74.

Bank of America, the country's largest bank, fell 1.99 per cent after reporting a net loss of US$1.2 billion for the fourth quarter, far worse than analyst forecasts.

The bank cited falling revenue and a hefty US$2.0 billion writedown on its home-loan business, saying that excluding the writedown, it would have earned a profit of US$756 million in the quarter.

The Nasdaq got hit by Apple's 1.79 per cent drop, Google's 2.38 per cent fall, and Microsoft paring 1.17 per cent.

Google started the day in positive area after having turned in strong results after the bell on Thursday, and simultaneously announcing that company co-founder Larry Page would replace Eric Schmidt as chief executive.

"This is the third straight session that participants have pushed harder against the Nasdaq than either of its counterparts. Most of that is due to a rejection of large-cap tech issues," said analysts at Briefing.com.

"A lot of investors were expecting more," said Owen Fitzpatrick, of Deutsche Bank. -- AFP

SP Setia plans project, in talks with govt on KL site

SP Setia Bhd (8664)plans to undertake a mixed residential and commercial project in Bangsar, Kuala Lumpur, giving the government a 20 per cent share of its net profit from it.

The 16.3ha of prime land along Jalan Bangsar, where it proposes to undertake the project, is owned by the government.

SP Setia is currently in talks with the government to be given that land in exchange for building an integrated health and research complex for the Ministry of Health (MoH) on 22.4ha of land it owns in Setia Alam, Shah Alam.

It told the stock exchange yesterday that its unit, Sentosa Jitra Sdn Bhd (SJSB), has the government's in-principle approval for the land swap proposal.

The proposal was mooted by SJSB to the government along the lines of the public-private partnership concept.
The land in Bangsar currently houses five National Institute of Health agencies under the MoH's purview, which will be relocated to Setia Alam.

SP Setia said SJSB had finalised its design and costing for the new complex, to be known as the 1National Institute of Health (1NIH), and is now ready to commence negotiations with the MoH and the Public-Private Partnership Unit in the Prime Minister's Department.

The proposed new 1NIH will serve as a hub and centre of excellence for health research, training and consultation at both the local and global level.

"The land swap nature of the deal means that the MoH/government will not have to fund any part of the cost for the construction of the new 1NIH complex."

This, it said, will be paid for by the difference between the current market values of the Bangsar and the land in Setia Alam.

SP Setia told the stock exchange in a separate filing later that it plans to place out up to 15 per cent of its issued and paid-up capital. The issue price will be determined by way of book-building.

http://www.btimes.com.my/Curre

Priceworth set to seal foreign deal

Priceworth Wood Products Bhd (7123)is in final leg of negotiations to manage two timber concessions overseas that have a combined land size in excess of 100,000 hectares, says its executive director Michael Chok Syn Vun.

"The concessions are in Papua New Guinea (PNG) and Solomon Islands," Chok told Business Times in an interview at his office in Sandakan, Sabah, yesterday.

He said Priceworth would have to spend as much as RM2 million in the first phase to help move machinery and other related assets to these places if the deal goes through.

Chok did not want to provide a timeline on when a decision will be known.
However, it is reliably understood that Priceworth could make an announcement on the matter before the month is over.

On the financing, Chok said the company has several options. These include tapping its own cash holdings, which stood at RM12 million as at end of its 2010 financial year, or proceeds of its planned warrant exercise.

Priceworth is proposing one warrant for every two mother shares at a conversion price of 50 sen a share. The book value per share of Priceworth as at end June last year was RM1.55 a share.

The Sabah-based timber company is banking on the overseas ventures to help expand its revenue base above the RM500 million mark in the coming financial year ending June 30 2012.

Priceworth posted revenue of RM446.08 million last year against RM457.28 million in the year before.

If the deal to manage the two concessions comes through, it will be a blessing for Priceworth as the company has been absorbing the effects of the stronger ringgit against the US dollar.

"About 85 per cent of our revenue comes from abroad, namely from Japan and the US," said Chok, adding that the lower value of the export currency had crippled its margins.

In 2010, Priceworth registered a pre-tax profit of RM3.2 million, while in the year, before its pre-tax profit stood at RM7.14 million.

"It is a capital-intensive business," said Chok, adding that the company has more than 3,000 people on its payroll to help manage its seven factories located within the Sandakan district.

Maybank to buy Kim Eng for RM1.9b

Maybank through its wholly-owned subsidiary, Aseam Credit Sdn Bhd (ACSB), has proposed to acquire a 44.6 per cent stake in Kim Eng Holdings Ltd today at S$3.10 per share, amounting to S$798 million (approximately RM1.90 billion).

It entered into conditional sale and purchase agreements with Ronald Anthony Ooi Thean Yat and Yuanta Securities Asia Financial Services Ltd for the acquisition of 15.4 per cent and 29.2 per cent stakes respectively in Kim Eng.

Kim Eng is a leading stock broker in ASEAN with a top five position in Singapore, Thailand, Indonesia and the Philippines.
It also has a presence in global financial centres, including Hong Kong, London and New York.

As of Sept 30, 2010, Kim Eng''s total assets and shareholders' equity amounted to S$2.697 billion and S$938 million, respectively.

Upon completion of the acquisition, Maybank will be required to make a mandatory general offer for the remaining 55.4 per cent shares in Kim Eng, with an intention to privatise the company.

The total consideration for the acquisition of 100 per cent of Kim Eng would amount to S$1.79 billion (RM4.26 billion).

The proposed transaction represents an acceleration of Maybank''s investment banking and equities platform in ASEAN, addressing an important gap in Maybank''s footprint, said Maybank Chairman Tan Sri Megat Zaharuddin Megat Mohd Nor in a statement today.

"Kim Eng gives us the immediate platform to aggressively build up our global wholesale banking capabilities in Asean and beyond.

"Immediately, Kim Eng, gives us an entry into Thailand,"he said.
-- Bernama

IJM Land falls, MRCB up after merger off

IJM Land Bhd fell to a six-week low in Kuala Lumpur trading after scrapping plans for a RM6.4 billion (US$2.1 billion) merger with MRCB to form the Southeast Asian nation’s second-biggest property developer.

The stock dropped 3.2 per cent to RM2.77 at 11:01 a.m. local time, set for its lowest close since Nov 16. Malaysian Resources rose 0.5 per cent to RM2.00, after initially losing 1 per cent in opening trade.

“The aborted merger is a major disappointment,” Wong Chew Hann, an analyst at Maybank Investment Bank Bhd, said in a report today.

“Expectations have been built in for a much stronger outlook under an enlarged group.”

This was one of three separate tie-ups proposed in November by Malaysian developers, keen to take advantage of improving economic conditions to grow in hopes of winning bigger projects.

IJM Land and MRCB said on Dec 30 they aborted their merger after failing to agree on terms.

IJM Land’s fair value was cut to RM3.50 from RM3.65 at RHB Research Institute Sdn Bhd, according to a report today. RHB maintained its “outperform” rating on the stock. Malaysian Resources’s share price estimate was reduced to RM2.05 from RM2.30 at OSK Research Sdn Bhd, which said in a separate report it kept its “neutral” rating on the stock.

Bulking Up

The two companies first announced plans for a share swap on Nov. 23. A union would have created a group with 9,000 acres of land bank and assets worth more than RM3 billion, Rafidz Rasiddi, head of investment banking at RHB Investment Bank Bhd, one of the advisers on the deal, said at the time.

A merged group would have boosted share trading liquidity and improved the chances of winning key government land development projects, including one at Sungai Buloh outside Kuala Lumpur, said Maybank’s Wong.

The government plans to develop Malaysian Rubber Board land in Sungai Buloh at an estimated cost of RM10 billion, Prime Minister Najib Razak said on June 10. The land covers an area of 3,300 acres, he said.

IJM Land is primarily involved in township developments, while Malaysian Resources is known for its high-rise office projects.

Malaysian Resources is controlled by the Employees Provident Fund, the country’s biggest pension fund, while IJM Land is a unit of IJM Corp, a construction and plantations group.

UEM Land Holdings Bhd, the biggest publicly traded developer in Malaysia, made a RM1.4 billion takeover offer for smaller rival Sunrise Bhd on Nov 4. Malaysian businessman Jeffrey Cheah said on Nov 24 that he plans to merge Sunway Holdings Bhd and Sunway City Bhd, two property and construction companies he controls, in a transaction valued at US$2 billion.

Malaysian Resources gained 1 per cent to RM2.01, after initially shedding 1 per cent in opening trade. -- Bloomberg

CPO futures may test new highs next week

Crude palm oil (CPO) futures on Bursa Malaysia Derivatives may test new highs next week as they move into the New Year, fuelled by renewed interests from traders and concerns over tight
supplies, dealers said.

A dealer said although it would be tough to predict the direction of the prices next week, they definitely would be on the uptrend.

"We expect the uptrend for the first two weeks of January, which may potentially push prices pass the psychological RM4,000 resistance," he said.

He said the supporting level would be at RM3,700 with resistance at RM3,800 next week.

Another dealer said CPO price would increase further after profit-taking on Wednesday on the overall sentiments of the global grain market and supply concerns due to the local wet weather.

For the holiday-shortened week, CPO futures hit a 33-month high on Tuesday on the strength from other vegetable oils markets.

The feat was repeated on Thursday with the third month contract hitting a high of RM3,792.

The seven-day rally extended from last week was snapped on Wednesday when traders decided to take profits before year-end.

On a weekly basis, January 2011 rose RM84 to RM3,814 per tonne, February 2011 climbed RM124 to RM3,820, March 2011 gained RM123 to RM3,788 and April 2011 increased RM122 to RM3,768.

Volume for the week declined to 55,382 lots from 80,204 last week while open interest was lower at 87,737 contracts from 91,035 previously.

On the physical market, January shipment rose to RM3,820 per tonne from RM3,675 last Friday. -- Bernama