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ASEAN STOCK WATCH 12  August  2010

ASEAN Markets Offer Bargains Today

Shayne Heffernan

ASEAN Markets held up well yesterday with the exception on Singapore, today they will come under additional pressure and there will be some great buying to be had, my favorites this week are, UOB Singapore, BANPU and IVL in Bangkok, AirAsia and Genting in Kuala Lumpur.

Indonesia dropped 0.7 percent, cutting its gain this year to 19.8 percent. Jakarta also recorded net inflows for a fifth straight session, adding just $1.3 million on the day but a total $63.4 million over the past five days.

The Asian Development Bank (ADB) issued a brighter outlook on the Indonesia economy Tuesday, with a senior executive predicting that the country’s gross domestic product would grow more than 6 percent this year.

ADB senior country economist Edimon Ginting said in Jakarta on Tuesday that he believed with the strong economic growth of 5.9 percent recorded in the first half, this year’s GDP growth may accelerate to between 6.2 and 6.3 percent, exceeding the government’s target of 5.6 percent.

“We registered 5.9 percent economic growth in the first half, which was very respectable compared to our neighbors. With such an achievement, I think our GDP growth can reach between 6.2 and 6.3 percent this year,” Ginting said after the launch of a report titled “Indonesia: Critical Development Constraints”.

The report, compiled by the ADB, the International Labour Organization (ILO) and the Islamic Development Bank (IDB), outlines key obstacles and solutions to achieving higher, socially inclusive and environmentally sustainable growth in the medium term.

“In the next few years, economic growth of 7 percent or 8 percent will no longer be a dream as long as we accelerate reforms in various sectors,” he said, emphasizing that the improvement of infrastructure such as roads, ports and power plants would be a key factor to spurring overall economic activities.

The International Monetary Fund (IMF) also forecast Indonesia’s GDP would grow at 6 percent this year on the back of strong domestic consumption and a surge in investment. A report issued by the Central Statistics Agency (BPS), said Indonesia’s economy grew 5.9 percent in the first half thanks to increased investment, government spending and consumer spending.

Indonesia’s economy grew 4.5 percent in 2009, one of the few countries in Asia that recorded economic growth during a period of global recession. The better-than-expected first-half economic growth has attracted an inflow of foreign funds that have become major contributors to the sharp strengthening of the country’s stock exchange and rupiah.

The stock exchange’s main composite index has increased 19.69 percent since early January, making it one of the best performers in Asia. The rupiah has appreciated 4.8 percent in the same period.

Meanwhile, the deputy minister of the National Development Planning (Bappenas), Lukita Dinarsyah Tuwo, acknowledged that the country’s lack of adequate infrastructure hampered economic development in many parts of the country.

For this reason, infrastructure development had become a priority for the government, he said, adding that a number of programs, including a private partnership program, had been introduced to attract private sector involvement in infrastructure development projects.

ADB principal economist Muhammad Ehsan Khan said the Indonesian economy performed well in recent years and recorded the highest growth rate in Southeast Asia in 2009. “Recent development performance has been good, but challenges remain,” he said. Recent growth, for example, did not reach the average rate achieved between 1967 and 1997, and private investment had not fully recovered.

The Stock Exchange of Thailand (SET) composite index went down 1.87 points or 0.22% to close at 860.08 points at the end of trading session on Wednesday morning. The trade value was 11.74 billion baht.

The Thai stock market is still very attractive for investment despite the recent sharp rally of the benchmark index, a Stock Exchange of Thailand executive said Wednesday. Thailand’s fast economic growth and the trend of rising interest rates across Asia will likely attract fund inflows, said Yanyong Thaicharoen, director of the SET’s Research Institute for Capital Market.

The SET Index has rallied 22% from late May, when political unrest ended with casualties and a loss of business opportunities. The index peaked last Friday at 878.63, the highest since May 2008.

The average trading volume in July was THB30 billion while the year-to-date average is THB22.95 billion, beating the bourse’s forecast of THB18.5 billion, Yanyong told reporters. The average trading volume in 2009 was THB17.85 billion.

Market capitalization stood at THB6.9 trillion in July, the largest size in 31 months, he said.

Last week Shayne Heffernan of Ebeling Heffernan put a target on the Thailands SET of 1000pts by March 2011.

Yanyong said brokerage firms expect the combined earnings of listed firms to grow 19% this year and 14% in 2011 while fund inflows are still projected to be directed to Asian bourses because of the low interest rate environment in the U.S.

TRUE closed at 6.15 baht, down 0.10 baht (1.60%)

ITD closed at 3.18 baht, up 0.04 baht (1.27%)

CPF closed at 25.25 baht, up 0.35 baht (1.41%)

LOXLEY closed at 2.72 baht, down 0.10 baht (3.55%)

TPIPL closed at 12.20 baht, down 0.60 baht (4.76%)

The PSI traded flat Wednesday as investors locked in gains from the recent market run-up to multi-year highs.

The main-share Philippine Stock Exchange index lost 3 points or 0.09 percent to finish at 3,522.72.

There were only 53 advancers as against 81 decliners and 35 unchanged stocks. Value turnover amounted to P4.5 billion.

After trading mostly in the positive, the bellwether Philippine Stock Exchange index finished the session 0.08 percent or 3.17 points lower to 3,522.72, while the broader all-share index slipped by 0.16 percent or 3.80 points to 2,233.47.

Trading volume slipped to 971 million shares worth P4.5 billion ($100 million). Decliners swamped advancers 81 to 53 while 35 stocks did not move.

Of the six counters, only the financial and the service sectors bucked the decline, gaining 0.26 percent and 0.02 percent, respectively.

“The lack of inspiring moves in the US markets show that investors remain wary of the pace of US economy’s recovery. Thus, investors (in the Philippines) were kept wanting for reasons to push the market higher,” Justino Calaycay of Accord Capital Equities Corp. said in his daily stock market comment.

But the Philippine market’s “tepid decline” today left local investors doubting whether this is the correction long- awaited or just a temporary breather.

Technical indicators were also suggesting a number of things: hesitation by investors to make aggressive moves either way and a near balancing-of-forces between the bulls and the bears with the former keeping a slight lead.

He noted that even the generally more-than-decent financial and operating results of companies for the first half was not enough to convince investors to continue to stay in the market.

“That said, this becomes a critical time for the market to decide where to push prices. If the outlook for the third quarter remains robust, this could just be a temporary breather, and give investors enough time to re-evaluate positions, take profits and reposition funds,” Calaycay said.

“A few more retreats, maybe of a bigger magnitude, may be a welcome development and signal to pick up stocks,” he added.

Stocks in the 30-company index closed mixed. Lopez-related issues were the favorites and most of them finished higher. Heavyweight Philippine Long Distance Telephone Co. (PLDT) also closed in the positive.

Great buying in Singapore today as the market fell on USA concerns but local companies outperformed on earnings.The Straits Times Index ended down 1.2 percent.

Singapore shares have pulled back around 3 percent from a year-high of 3,043.28 set on Aug. 3 as quarterly earnings and GDP numbers are now mostly out and the market is sizing up the possibility of a global economic relapse.

UOB 2Q10 Net Profit Up 28%, Slightly Ahead Of Estimates

United Overseas Bank’s (UOB) net profit grew 28% YoY to $602m in 2Q10 due to a sharp drop in bad-loan charges. But revenue from its main lending business dropped, as the group took a cautious approach to making new loans, while loan margins were hurt by intensifying competition among banks. Net interest income fell 3% to $884m.

Trading and investment income also fell sharply as non-interest income slid 31% to $382m. Impairment charges for loans and other assets fell to $52m from $465m a year earlier and $108m in 1Q10. For 1H10, UOB’s net profit was $1.3b, up 48% YoY. UOB’s asset quality continued to improve with non-performing assets declining further to $2.5b and its non-performing loans ratio dropping to 1.9%.

KSH Records 54% Jump In 1Q11 Profits To $4.2m

KSH Holdings (KSH) posted a 54% YoY leap in net profit to $4.2m for 1Q11. Revenue was also up 21% at $72.4m, propelled by its construction segment. A 54% drop in finance costs to $625k also helped to boost its net profit. But EPS fell to 1.44 cents from last year’s 1.49 cents because of a bigger share capital base.

KSH’s core construction segment contributed $71m to total revenue – up by 21% YoY attributable to ‘new projects and other ongoing projects that have progressed into advanced stages of construction’. It had an order book of more than $312m as at June 30. Rental income from investment properties rose 19% to about $1.3m, while rental income from development property fell 42% to $106k. KSH maintained a healthy balance sheet, with cash and cash equivalents and fixed deposits of $90m.

Yangzijiang announced 31.8% year-on-year growth in 2Q10 net profit to RMB 800.5 million.

Sound Global announced 3.5% year-on-year decrease in 2Q10 net profit to RMB 74.5 million.

Cosco’s subsidiary secured contracts valued over US$ 55 million to build two carriers of 57,000 dwt each. The carriers are scheduled for deliveries in Sep 11 and Mar 12 respectively.

Malaysia ended lower for the day with the benchmark index falling 6.80 points to 1,352.91.

At Bursa Malaysia, 207 counters were up, 464 were down while 279 remained unchanged. There were 769.9 million shares done at a total value of RM1.17 billion. Among the heavyweights, CIMB lost 6 sen to RM7.30, Genting shed 10 sen to RM7.78 and Axiata slipped 4 sen to RM4.25.

Plus Expressways fell 11 sen to RM3.70, DiGi.Com shed 36 sen to RM24.36 and Maybank lost 3 sen to RM7.70.

Crude palm oil third-month futures was RM13 higher at RM2,683 per tonne.

The ringgit was quoted at 3.1730 to the US dollar.

RAM Ratings has reaffirmed the AAA rating of British American Tobacco (M) Berhad’s (BAT Malaysia) RM700mil Medium-Term Notes Programme (2007/2020).

At the same time, the AAA/P1 ratings of the Group’s RM100mil Commercial Papers/Medium-Term Notes Programme (2007/2014) have also been reaffirmed.

All the long-term ratings have a stable outlook.

BAT Malaysia is involved in the manufacturing, marketing and distribution of cigarettes.

Its portfolio encompasses global drive brands (Dunhill, Pall Mall and Kent) as well as other well-established international names such as Rothmans and Benson & Hedges. RAM Ratings said BAT Malaysia’s credit profile was supported by its entrenched market position and superior financial profile.

Although its share of domestic sales contracted 1.8 percentage points year-on-year in 2009, the group remained the clear leader with a 60.3%-share of the market.

Given BAT Malaysia’s strong brand equity, it has been enjoying healthy margins on operating profit before depreciation, interest and tax of 27% to 30% for the past five years. “Looking ahead, we expect BAT Malaysia’s cashflow-protection measures to stay superior,” opined Kevin Lim, Head of Consumer & Industrial Ratings.

Telekom Malaysia Bhd (TM) stands to book a one-off profit of around RM100mil if it chooses to part with its 15% stake in satellite service provider Measat Global Bhd, analysts said. This was based on estimates that TM had written down its investment in Measat to around RM2.50 per share since 2003. TM owns about 60 million shares in Measat.

Measat’s major shareholders have announced plans to take the company private at a price of RM4.20 per share. If TM sells its Measat stake, it would gain a gross figure of RM252mil. Compared with the written-down price of RM2.50 per share, or RM150mil, this gives a gain of over RM100mil.

TM declined to comment on how much it had written down the value of its Measat shares. The offer price is close to TM’s original entry cost.

TM had paid RM4.165 per share for its investment in Measat, which it acquired through a private placement by a T. Ananda Krishnan vehicle in December 2003. Ananda had injected Measat into Malayan Tobacco Co via a reverse takeover in December 2003.

An AmResearch analyst reckoned that the profit and cashflow from the Measat share sale could enhance TM’s dividend payments. “The sale of TM’s Measat shares to Ananda would free up more cashflow for the company to use elsewhere,” he said.

However, he said the profit TM stood to gain from the sale of its Measat stake would not be substantial in relation to its earnings. “Otherwise, TM would have made an announcement to Bursa Malaysia to this effect,” he said.

Another analyst said: “If you add up the opportunity and holding costs, then it is a negative for TM. This could be their way of getting out of Measat, which has not given dividends thus far, nor does TM have control in the company.”

The analyst said there was little upside for TM to retain its Measat stake, and that it was a mistake for TM to have bought into Measat in the first place.

TM still has the choice of not accepting Ananda-linked Measat Global Network Systems Sdn Bhd’s general offer. TM could scupper the plan to take Measat private by not subscribing for the general offer. A 15% block is substantial enough to prevent Measat Global from delisting Measat.

However, insiders said that TM was unlikely to reject the offer as the promoters were inclined to have approached the company before the deal was announced to get their buy-in due to the 90% acceptance condition.

“It would be rather inappropriate for us to comment on our intention as we have yet to receive the offer document from the offerer stating their rationale as well as the finalised terms and conditions of the proposed takeover offer,” TM said in an email reply to StarBiz.

It said that subsequent to receiving the offer document of Measat shares, it would await the independent adviser’s circular advising all minority shareholders of Measat.

“It is currently premature to comment. The interests of all shareholders of Measat are best served if we were to await for these documents first before making a decision on the proposed takeover offer,” TM said.


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