Saturday, April 25, 2009

IRDA's next phase to improve services sector

Published: 2009/03/02
THE Iskandar Regional Development Authority (IRDA), which oversees development of the Iskandar Malaysia region in Johor, said the second phase of investments there will be focused on improving the services sector.As highlighted in the Comprehensive Development Plan (CDP), it aims to attract total investments of RM73 billion between 2011-2015 in phase two.Under the first phase (2006-2010), it had secured RM40.25 billion from the initial RM47 billion.While it continues to promote the manufacturing sector given its strong base, it believes the second phase will remain to intensify its effort to boost the six services clusters in Iskandar, its former chief executive officer Datuk Ikmal Hijaz Hashim said.

This provides Iskandar with added resilience to weather cyclical downturns in any particular sector," Ikmal told Business Times."We expect most of the committed investments from 2006-2010 to start their operations when we enter phase two, hence, further boosting the economic activities in the region," he added.

IRDA has so far not received any official information of pullout or delay in any project by Arabs, or other investors in the region, Ikmal said.From the RM40.25 billion in investments secured, 52 per cent is from manufacturing, and 20.3 per cent is real estate based.

Middle East companies have committed RM4.8 billion in real estate."The projects they are investing in are in various stages of implementation. For example, physical works in Medini have begun for the development of the basic infrastructure. Other projects are in the master plan design stage," he said.

The 888ha Medini, located within Iskandar, is Malaysia's single largest urban development. It is divided into three distinct clusters - lifestyle and leisure, culture and heritage, and financial.

Projects in the pipeline include the Legoland Theme Park. A Newcastle University UK Medical University Campus is also being set up in Nusajaya in Iskandar.

Monday, April 20, 2009

Govt ramping up construction sector

Tuesday April 14, 2009
Govt ramping up construction sector

PETALING JAYA: The construction industry, which saw a dearth of jobs last year, has caught a glimpse of up-coming jobs from the stimulus spending this year.

This will be counter-cyclical in the sense that while the industry shrank last year, it may expand in a year of economic slowdown as the Government ramps up construction to offset negative growth in other sectors.

Analysts sense this impending recovery.

CIMB Research last week said IJM Corp Bhd was eyeing nine major contracts worth at least RM9.4bil in total.Eight are domestic projects. These include
the job to build a hospital in Putrajaya,
two packages involving the Pahang-Selangor interstate water project,
the West Coast Expressway,
the new low-cost carrier terminal in Sepang,
work related to the Penang Second Bridge project and
upcoming contracts to extend the existing two light rail transit (LRT) lines in the Klang Valley.
Contracts to extend the existing two LRT lines in the Klang Valley are among the upcoming projects.

All these contracts are in various stages of negotiations, and tenders for some of these projects are yet to be called. Other companies were also reported to be in the running for some of the projects being targeted by IJM. The prospective IJM job list gave some insight into the value of big domestic construction works that are in the pipeline. Recently, WCT Bhd was reported to be in the process of finalising some RM500mil worth of jobs in Sabah.

There is also talk about a new LRT line being planned to link Kota Damansara and Cheras that is estimated to cost RM30bil. This project, like some of the other upcoming jobs, should attract fierce bidding from the big contractors when it becomes available.

While the prospect of big projects coming in has fuelled investors’ imagination in the past weeks, an analyst at RHB Research Institute has a more sober view of the sector.“Generally, we continue to find it difficult to be positive on the sector over the short term,’’ the firm said in report yesterday. The key reasons for its lack of enthusiasm centred on the argument that the projects planned under the two stimulus packages were mostly small in size. The lack of availability of funds at the right price also remained a major hurdle for most private financing initiatives to take off.

RHB Research said that as focus shifted to rolling out projects under the two stimulus packages, it “believed certain highly anticipated mega projects” under the Ninth Malaysian Plan might be put on the backburner, or postponed to the 10th Malaysia Plan. The firm, however, acknowledged increased investors’ appetite for risk, and had assigned higher target prices for construction stocks under its coverage to reflect this. Fund managers are aware of this mood of recovery. Hence, share prices of the big contractors which have been rising, continued to edge higher yesterday, as they shrugged off concerns that prices of counters like IJM, Gamuda Bhd and Malaysian Resources Corp Bhd (MRCB) might have gone up too fast and too soon.
A key factor in driving up investors’ buying binge in recent weeks was high expectation that the pump-priming agenda of the new administration of Prime Minister Datuk Seri Najib Tun Razak would result in increased big construction job flow in the coming months.

Analysts, however, seem to prefer to wait and see if some of these “highly anticipated” projects materialise first. “We maintain our ‘neutral’ call (on the construction sector) as there is a lack of re-rating catalysts in sight,’’ ECM Libra Investment Research said in an update. “Key risks going forward include below-trend order book replenishment as well as implementation risks.’’
But investors are already betting that companies like IJM, Gamuda, MRCB and WCT will emerge winners.

IJM’s share price climbed six sen to RM4.70 yesterday – its highest level since mid-September last year. The stock has risen 67% since the start of the year, but is still a long way off its peak of RM8.82 reached in February 2007. Shares in Gamuda and MRCB advanced yesterday, with both stocks now chalking up year-to-date gains of 29% and 45% respectively. WCT, whose shares were clobbered in January, has also recovered strongly.

Monday, April 13, 2009

Building materials sector’s rise depends on strength of economic recovery

Monday April 13, 2009

THE newly formed Cabinet is expected to expedite the roll-out of construction projects under the stimulus packages and the Ninth Malaysia Plan.

IJM Corp Bhd CEO Datuk Krishnan Tan told a news wire service on Friday he was positive the new government would push forward the implementation of the fiscal stimulus packages. There are grounds for optimism in the rising supply of deals coming on stream. In view of the improved construction sector outlook, IJM intended to focus on its home turf, instead of in the Middle East and India, he added.

Fund managers share his optimism. Their buying support enabled IJM’s share price to gain
54% this year to RM4.64 on Friday, one of the best performing big cap stocks.
That is a partial but significant recovery from IJM’s high of RM8.25 last year.

As fund managers glimpse a light at the end of the smart tunnel, they have been buying up construction stocks, principally the Big Three – Gamuda Bhd, IJM and WCT Bhd.

This interest has also extended to the stocks of companies that manufacture building materials. In particular, fund managers poured into Lafarge Malayan Cement Bhd, the biggest player in the industry, leading it to rise to RM4.40, close to its 52-week high of RM4.76. The company is highly profitable, earning a net profit of RM119mil in just one quarter (Oct-Dec 2008). That helped Lafarge to rise to a total market value of RM3.7bil. Interestingly, as the biggest cement company, its market value is more than five times that of the biggest steel company, Southern Steel Bhd (RM680mil).

Lafarge commands a valuation premium in the industry, which is common for the biggest player in a sector. Hence, its share price exceeds that of YTL Cement Bhd (RM2.66) which is a sizeable number two in the industry.

The premium of Lafarge is all the more larger as YTL Cement’s earnings estimate is 55 sen a share for its financial year ending June 30 as against Lafarge’s 37 sen for the year ending Dec 31, according to consensus compiled by Bloomberg. This is not a spot that YTL is used to. Group holding company YTL Corp Bhd is itself near its 52-week high of RM7.60 as the stock closed at RM7.15 on Friday. In contrast, YTL Cement is far from its 52-week high of RM4.80.

While the profitability of cement producers is buoyant, that of steel producers sank into heavy losses, mainly inventory losses, in the Oct-Dec quarter.
It helps the cement producers that their main raw material – limestone – is mined locally at a time of volatile prices for natural resources in the global market.

Eventually, the steel producers will make profits again, but in the meantime, their market values have been bashed down with, sometimes plunging further than, their losses.

In the case of Lion Industries Corp Bhd, the market accords no value to its four steel mills at Bukit Raja, Banting (both in Klang), Pasir Gudang and Labuan.
Lion Industries has a market value of RM540mil and borrowings of about RM1.5bil which are less than the combination of its shares and convertible loan stocks in Parkson Holdings Bhd that are worth over RM1.3bil, its cash of RM600mil and steel inventories of RM440mil. On paper, investors in Lion Industries are getting its steel mills free. Alternatively viewed, it could repay all its borrowings if it sells its Parkson shares. That can be done with the Lion group’s chief Tan Sri William Cheng maintaining his reins over Parkson in which he holds a major direct stake.

CSC Steel Holdings Bhd is a smaller steel milling company but its parent is the very large China Steel Corp of Taiwan. Although CSC also incurred inventory losses the Oct-Dec quarter, it held net cash of over RM160mil. This too will be a company that will survive to benefit in the recovery cycle that will come sometime in the future.

Malaysia Steel Works Bhd, a unit of the Soon Seng group, is another depressed steel stock which traded at 71 sen or about a third of its net assets. While investors fretted over potential losses, the company has been consistently profitable over the last five years, including the Oct-Dec quarter last year when the rest of the industry was in the red. In that quarter, it earned a net profit of RM5.5mil.
Stainless steel FACB Industries Bhd is the smallest in the industry after its share price fell to 29.5 sen, giving it a market value of just RM25mil, an unlikely figure for a steel company. It suffered a large loss of RM41mil in the Oct-Dec quarter but that was almost entirely due to inventory losses.

Building materials are in a cyclical sector but as the Government’s stimulus spending accelerates, the worst should be over in this industry.The industry’s step-up to the next stage of its cycle will, of course, depend on the strength of the economic recovery.

Contractors awarded jobs worth RM1.4b

Friday April 10, 2009
Contractors awarded jobs worth RM1.4bil
Government provides details of stimulus packages on Internet

PUTRAJAYA: The Government has todate awarded contractors RM1.39bil worth of projects planned under the second economic stimulus package, according to the its newly launched website

Of the RM60bil package tabled in Parliament on March 10, only RM15bil was actual extra fiscal spending by the Government.
Of this amount, the Education Ministry gets the biggest chunk – RM2.09bil.

Meanwhile, a total of RM5.59bil of the RM7bil allocated under the first stimulus package announced on Nov 4 last year, had been disbursed as at April 2. All 38,000 projects under the first package would be rolled out by the end of this month, the website said.

“The website carries a comprehensive breakdown of allocations, progress reports on spending and current status of all projects under the two economic stimulus packages,’’ said Datuk Mohamad Othman Zainal Azim, chief oper ating officer at the Finance Ministry’s project management unit (PMU).“The English version of the website will be available next week,” he told reporters at a briefing yesterday.The PMU together with the Prime Minister Department’s implementation coordination unit (ICU) and other relevant agencies have been tasked to monitor the progress of the economic stimulus packages.Othman said the website would be regularly updated, at least once a week. Feedback and queries from the public were welcomed, he said.

Thursday, April 9, 2009

Penang Airport Expansion ready by 2010

Penang airport expansion slated for completion by end-2010
By Marina Emmanuel
Published: 2009/04/09

THE RM250 million expansion of the Penang International Airport is slated for completion by the end of 2010, Transport Minister Datuk Seri Ong Tee Keat says.

He said work on the project, which is part of the RM60 billion economic stimulus package unveiled last month, is due to begin in July. "Malaysia Airports (Holdings) Bhd is currently at the planning stage of the expansion exercise and the contract is yet to be awarded," he told Business Times in an e-mail interview. He said the expansion plans for the airport, located in Bayan Lepas on the island, were conveyed to Chief Minister Lim Guan Eng last August when Ong called on him in Penang.

Apart from the expansion of the Penang airport, the RM60 billion second stimulus package, or mini-budget, also provides for the construction of a new low-cost carrier terminal at the Kuala Lumpur International Airport.

Ong said the main components for the Penang airport upgrading works will include upgrading and expansion of the existing passenger terminal, a new multi-storey car park, a new central utility building, security fencing, main infrastructure works, and extension to the aircraft parking apron.

"The scope of work mentioned will also cater for low-cost carrier operators," Ong noted. The Penang International Airport was last expanded in 2001 to accommodate an annual capacity of five million passengers. In reality, the airport can accommodate only slightly more than three million passengers a year because space meant for transit passengers has been leased to duty-free shops. Apart from Malaysia Airlines, which offers direct international flights from Penang to selected destinations, other carriers using the airport include AirAsia, Cathay Pacific, Thai Airways International, Lion Air, Singapore Airlines, China Southern Airlines, China Airlines, Firefly, Kartika Airlines and Sriwijaya Air.

About Me

A seeker of success (whatever that means) treading on a path, searching, to return to the wholesomeness that was him when he was launched into this big school called Earth.