Tuesday, June 23, 2009

IJM-LFE joint venture secures Abu Dhabi job

Published: 2009/06/20

THE joint venture between IJM Corp Bhd and LFE Corp Bhd has received a AED318.38 million (AED100 = RM99.28) contract from Tamouh Investments LLC of United Arab Emirates for reinforced concrete substructure and superstructure works.

The project, under the first phase of Plot 1, Zone E2 hotel development at Al Reem Island, Abu Dhabi, is expected to be completed on February 28 next year.The joint-venture company is 70 per cent owned by IJM Corp’s wholly-owned subsidiary, IJM Construction Sdn Bhd (Abu Dhabi Branch), and 30-per cent owned by LFE Corp's wholly owned subsidiary, LFE Engineering Sdn Bhd (Abu Dhabi Branch).

Wednesday, June 17, 2009

Noriyah appointed EPU director-general

Published: 2009/06/17

THE government yesterday appointed Datuk Noriyah Ahmad as director-general of the Economic Planning Unit (EPU) at the Prime Minister's Department.

The appointment, to be effective from tomorrow, is to replace Tan Sri Dr Sulaiman Mahbob who completes his service today.In a statement released yesterday, Chief Secretary to the Government Tan Sri Sidek Hassan said Noriyah, 57, was appointed based on her wide experience in the economic field during her time in public service.She was involved in Malaysia's economic planning and development while holding various posts.

Among others, she was deputy director-general of strategic programme and allocation in the EPU from August 1 2007.Noriyah was also deputy director-general (macro) in the EPU from 2005 to 2007, apart from holding other strategic posts prior to that.She holds a master's degree in economics from the University of Kent and also a graduate in economics from the Universiti Malaya. Noriyah started work in the civil service in August 1975."I believe her wide experience and deep knowledge in developmental economics and management will enable her to lead the EPU in advising the government on socio-economic issues and ensure that the EPU contributes towards achieving the '1Malaysia' concept, Nasional Mission and also Vision 2020," Sidek said in the statement.

Wednesday, June 10, 2009

Malaysian construction sector makes comeback

KUALA LUMPUR, June 10 — Malaysia’s construction sector is coming back with a vengeance as the government accelerates spending to counter the downturn. According to Jon Oh, an analyst with CLSA here, the sector could have outperformed the broader market index by as much as 30 per cent over the last three months.

There are other reasons for the rekindled interest including the fact that construction firms have returned to the black: infrastructure builder IJM, for example, posted RM290 million in net profit for its 2008 financial year from a loss of RM421 million the year earlier. In addition, falling materials’ prices also imply larger margins.

But the key driver is the accelerated spending which seems to be driven by Prime Minister and Finance Minister Datuk Seri Najib Razak. In late May, for example, the government awarded a RM1.3 billion tunnelling project to a Japanese-Malaysian consortium of companies, including IJM, to kick-start the Pahang-Selangor interstate water transfer project that was first announced five years ago.

The RM5-8 billion project is an ambitious, and environmentally contentious, project to transfer water from a newly created dam in Pahang through a tunnel in the Main Range of mountains and piped from a newly created water treatment plant to end-users in Selangor.

It was deemed necessary in 2004 after studies showed that the demand for water in the Klang Valley, Malaysia’s most industrialised hub, would outstrip supply by 2014.

Malaysia’s poor fiscal situation put the project on ice but the downturn and the ascendancy of Najib, who is from Pahang, seems to have given the project a new urgency.

The new emphasis on accelerated spending is partly driven by the need to prevent a hard economic landing for Malaysia which entered recession in its first quarter.

But it’s also political: the ruling Barisan Nasional is under severe pressure from the opposition and needs to shore up public support by demonstrating a firm hand on the economy ahead of general elections in 2013.

On the water project, the construction industry is interested because only the tunnelling works have been awarded.

The Pahang portion of the contract — the dam, piping and the tunnelling — are likely to be dominated by Japanese contractors as it is being funded by a US$1 billion (RM3.51 billion) loan from the Japan Bank for International Cooperation. Even so, AMMB Banking Group picked Loh and Loh (a Malaysian dams’ specialist) and JAKS Resources (a pipes supplier) as likely beneficiaries for sub-contract work.

There is an estimated RM2.3 billion worth of contracts still to be handed out on the Pahang portion of the works.

Around RM4-5 billion worth of work is up for grabs on the Selangor side, which will have to be awarded soon, so that both sides can meet the 2014 deadline seamlessly. This portion, however, is to be government-funded so all the work will go to local contractors. For this, AMMB picks infrastructure specialist IJM, Gamuda, Loh and Loh and, once again JAKS as the major beneficiaries.
But water isn’t the only thing Malaysian construction firms are eyeing.

Under government plans to improve urban transport, state agency Prasarana has been tasked with spending RM35 billion to improve public transport in the Kuala Lumpur area by extending Light Rail Transit and bus networks.
So far it is still in the design state but Prasarana has announced that it will go to the market to raise an initial RM4 billion to kick things off. Cumulatively, the news-flow has caused a buzz in the industry. — Business Times Singapore

Friday, June 5, 2009

The surprising strength of Southeast Asia

KUALA LUMPUR, June 5 — Painful economic slowdowns are nothing new to Southeast Asia. The region went through its own gut-wrenching financial crisis more than a decade ago in what now seems like a dress rehearsal for today's turmoil. Companies defaulted, banks collapsed, stock markets tanked, and economies shrank at double-digit rates as foreign investment slowed to a trickle. But Southeast Asia dutifully swallowed the bitter pill of austerity, devaluing currencies and working off debt while banks restructured and companies patched up balance sheets.
Now Southeast Asia is getting whacked again, a victim of sins on the other side of the globe. Last autumn the region's exports plunged as the US, and then China, slumped. Foreign investment, meanwhile, has plummeted as multinationals rein in spending. "It's frustrating that we are in a crisis that is not of our own making," says Thai Prime Minister Abhisit Vejjajiva.
Yet this downturn is hardly a full-blown repeat of the Asian crisis. That's testament to the surprising strength of the 10 countries that belong to Asean. The region's banks are virtually free of toxic assets and haven't needed government bailout money. Years of trade surpluses and high savings rates have contributed to record foreign reserves. Debt loads — for governments, corporations, and consumers — are a fraction of those in the US and Europe, and inflation and interest rates have fallen dramatically. "Of course there is a slowdown, but [these countries] are well prepared to weather the storm," says Mark Mobius, president of Templeton Emerging Market Funds. "They have outperformed global markets, which is telling us they are going to do quite well." Asean bourses have led the recovery in emerging-market stocks, with Jakarta's benchmark index up 70 per cent and Vietnam's up 80 per cent from recent lows.
Some companies operating in the region continue to do well, as demand for everything from computers to discount airline tickets remains strong. Unilever Indonesia has sold so much Pepsodent toothpaste, Lifebuoy shampoo, and other goods that its first-quarter revenue jumped 18 per cent, to US$412 million (RM1,442 million), boosting earnings 9 per cent, to US$70 million. "The impact from the global crisis is minimal," says Franky Jamin, Unilever Indonesia's corporate secretary. And London's Standard Chartered Bank, which gets two-thirds of its revenue in Asia, says first-quarter profits were its best ever, indicating that the region's slump will be shallower and shorter than elsewhere. Consumer banking and lending to small companies are strong, while the mortgage business continues to grow, says Ray Ferguson, the bank's CEO for Southeast Asia. Foreclosures, he adds, "are not a feature of the market."
Southeast Asia's strength is an encouraging sign that the region is still a player. Though it may have been half-forgotten by many investors since the crisis, its educated workers, natural resources, and — in some countries, at least — first-class infrastructure make it worth paying attention to. Asean has a total population of 560 million, and its combined gross domestic product of US$1.3 trillion is greater than India's.
Indonesia, Thailand, Malaysia, the Philippines, Vietnam, and Singapore — which account for about 95 per cent of the region's economy — attracted nearly US$50 billion in foreign direct investment last year, vs China's US$92 billion.
General Electric, for instance, has committed more than US$1 billion to Southeast Asia in the past 18 months. Those investments include expanded aircraft maintenance facilities in Kuala Lumpur and a water-technology research centre in Singapore. And in May, GE broke ground on its first project in Vietnam, a US$61 million plant in the port city of Haiphong to produce wind turbine generators for export. "We wanted to put the GE footprint into a high-potential country," says Stuart Dean, the company's Southeast Asia president.
That's not to say the region doesn't pose significant challenges for investors. Red tape and corruption are rampant; Indonesia is ranked 126 out of 163 by Transparency International, behind Nigeria and Nepal. Jakarta's opaque laws have prevented a country rich in gold and copper from attracting a single new foreign mining project in a decade. In Vietnam, traffic moves at a snail's pace along roads that can barely handle motorbikes, let alone the growing number of cars. And in Thailand, tourists and investors alike have been spooked by instability as anti-government demonstrators in recent months have forced the cancellation of an Asean summit and closed Bangkok's airport for days.
Those troubles, combined with the global crisis, are weighing on growth. Singapore and Thailand — which depend on exports — are contracting. The Asian Development Bank expects Vietnam to expand 4.5 per cent this year, Indonesia 3.6 per cent, and the Philippines 2.5 per cent — near-recession levels for those countries. And new foreign investment in Malaysia fell 79 per cent, to US$931 million, in the first quarter, while in Vietnam investment inflows dropped 71 per cent, to US$2.8 billion.
Governments are fighting back by formulating stimulus plans. In Thailand, where the economy could shrink as much as 4 per cent, retail sales have held up thanks to US$58 cheques mailed to 10 million low-income workers as part of a three-year, US$45 billion stimulus package. Chipmaker Intel expects stimulus-driven spending on health care and education to boost sales of computers that use its chips. Retail PC sales for the five biggest economies in Asean grew 17 per cent year-on-year in the first quarter, more than twice as fast as in China, research firm GFK Asia estimates.
The region is also growing fast as an outsourcing centre. In the Philippine city of Cebu, nestled between emerald hills and luminous coral reefs, the seven-year-old Asiatown IT Park is home to two dozen call centres and software outsourcing shops. "It's not an easy job, but the salary is pretty good," says 29-year-old Leyland Canoy, who earns US$470 a month at locally owned eTelecare, where he provides tech support to customers of Internet phone company Vonage.
The Philippine outsourcing industry has been operating for years, but now it has big plans to grab as much as 10 per cent of the global IT outsourcing market. Wipro, Accenture, HSBC, and others have opened scores of new back-office and tech-support centres in the country, helping to build an industry that saw US$6 billion in revenue and employed more than 370,000 in 2008. "We are growing like crazy," says Marife Zamora, Philippines chief for Cincinnati-based Convergys, which hopes nearly to double its Philippines staff, to 20,000, this year. By 2010, industry leaders expect the sector to employ 900,000 and generate sales of US$13 billion.
That's an ambitious target, but the country is just starting to move up from call centres. "There's work in finance and accounting, and corporate back offices have yet to be tapped," says Oscar Sanez, CEO of the Business Process Association of the Philippines. Accenture, which employs about 16,000 in the country, is helping clients upgrade IT systems to keep up with financial regulatory changes in the recession-racked US. JPMorgan Chase, S.C. Johnson & Sons, and Siemens are expanding their back-office work there. And Wipro is doubling its Philippine staff, to 1,550, by October. "The talent is really good," says Sanjeev Bhatia, vice-president for international operations at Wipro BPO. "We are really bullish."
Global corporations still come to Southeast Asia-to find manufacturing alternatives to China. First Solar, of Tempe, Arizona, has chosen Kulim, Malaysia, for a US$680 million solar panel manufacturing plant. British motorcycle maker Triumph is building a US$73 million plant in Thailand. And Volkswagen this summer is launching a joint venture to produce Touran minivans in Indonesia.
Vietnam, though, is the primary beneficiary of the move to diversify away from China. Its proximity to the mainland and the low tariffs it enjoys in Southeast Asia thanks to Asean trade agreements are big pluses, as are its productive labour force and entrepreneurial culture. In April, Samsung Electronics opened a US$50 million mobile-phone plant outside Hanoi. Some 700 miles to the south near Ho Chi Minh City, Jabil Circuit is building a US$100 million circuit board plant in the Saigon Hi-Tech Park. Nearby, across former rice paddies muddied by afternoon rains, workers are readying a US$1 billion Intel plant that will open next year. "We expect more high-tech companies to follow," says Rick Howarth, general manager of Intel Products Vietnam. "The global crisis may have dampened companies' desire to invest, but they are also being forced to look at new markets for growth."
One of the region's greatest strengths is also a weakness: a growing reliance on exports, especially to China. The mainland's coastal factories use countless parts made in Southeast Asia for goods that are ultimately destined for the US and Europe. When those Chinese exports get slammed, Asean economies suffer. "The region is excessively dependent on China, which does assembly, while Asean does components," says Charles Adams, a professor at Singapore's Lee Kuan Yew School of Public Policy. "What's needed is more intraregional trade in final goods."
There are few signs Southeast Asia will wean itself from that dependence anytime soon. Philippine outsourcers work primarily with US customers. Intel plans to export most of its production from Ho Chi Minh City, since Vietnamese will buy just 3 million or so computers this year, while the Intel plant will be able to turn out hundreds of millions of chips annually. And Canon's US$100 million laser printer facility outside Hanoi, its largest anywhere, ships its products overseas.
An Asean agreement that allows free trade in autos around the region may help reduce the importance of China and the West. Ford Motor, for example, ships sport-utility vehicles from Thailand to Vietnam, Indonesia, and the Philippines. The free trade "gives us enough volume," says David N. Alden, president of Ford's operations in Southeast Asia, where auto sales are about the same as in India. "Thailand's market alone could not have made this a business base."
AirAsia, a scrappy budget airline based in Malaysia, shows the potential of the regional market. In 2001, entrepreneur Datuk Tony Fernandes took a bankrupt carrier and relaunched it with just two planes flying out of Kuala Lumpur. Thanks to liberalisation of air travel in much of the region, Fernandes has ramped up to 81 aircraft and 122 destinations in 16 countries — often smaller cities others had ignored. He expects to carry 24 million passengers in 2009, up 30 per cent from last year. "We focused on building an Asean brand," says Fernandes. "We saw a huge opportunity no one was exploiting." — Forbes

Privatising Litrak most logical solution to cap toll

Friday June 5, 2009
Privatising Litrak most logical solution to cap toll

PETALING JAYA: The privatisation of concession holder Lingkaran Trans Kota Holdings Bhd (Litrak) by the Government is the most logical solution to cap toll rates, a local research house said. In a report yesterday, HwangDBS Vickers Research assumed an offer would be made for Litrak at its (HwangDBS) target price of RM2.70 per share, implying a market capitalisation of RM1.3bil.

The research house said funding would not be an issue given that the Government was able to issue long-term bonds of 20 to 25 years (the concession runs for another 21 years) at the current prevailing Malaysian Government Securities’ (MGS) annual yield of 4.4%. Litrak is the concessionaire for the 40 km Damansara-Puchong Highway (LDP), which links the various urban areas within the Klang Valley. It also holds a 50% stake in Lebuhraya Sistem Penyuraian Trafik Kuala Lumpur Barat Sdn Bhd (Sprint), which is currently loss-making.

Assuming the current toll rates of RM1.60 are maintained through the 30-year concession period, the LDP could still generate enough income to pay for the new bond issued by the Government, HwangDBS said. “But this may not be adequate to service interest and principal on the existing bond,” it added.

While government bonds generally enjoy a sovereign rating, Litrak’s current facility of RM1.5bil has a AA2 rating which implies a higher cost of funding. Based on the privatisation price of RM2.70 and a projected dividend per share of 20 sen, the Government stood to yield some 7.4%, a spread of 300 basis points at the current prevailing MGS yield of 4.4%, HwangDBS said.
Litrak closed up 2 sen to RM2.30 yesterday.

The LDP concession has been viewed as a pure cash cow by the opposition political party.
Tony Pua, Petaling Jaya Utara MP, has been quoted as saying that “the LDP cost RM1.33bil to build, but over the 30-year concession period, they stand to make RM18.87bil. Whatever Litrak will collect for the next 20 years is definitely excessive profit,” he said. He added that the 30-year concession agreement could be expropriated or bought over by the Government, if that was in the national interest.

Meanwhile, another analyst said: “I don’t buy this privatisation story. I think if the Government is serious about pump priming the economy, it would spend money to create new infrastructure rather than buy existing infrastructure.” A study by the Economic Planning Unit to address issues faced by those who are financially burdened by toll fees is expected to be ready by end-July.

Based on Litrak’s existing concession agreement, toll rates will increase by 50 sen in 2011 to RM2.10 and a further RM1 in 2016 to RM3.10. The rates will then remain status quo at RM3.10 from 2016 to 2030, which is the end of the concession period.

Tuesday, June 2, 2009

Naim plans eyeing major infrastructure and property projects in Sarawak

Tuesday June 2, 2009

KUCHING: Construction company Naim Holdings Bhd is eyeing major infrastructure and property development projects in Sarawak Corridor of Renewable Energy (SCORE). Senior vice-president/director Ahmad Abu Bakar said Naim was in talks with state agencies and other interested parties on several development proposals within SCORE. “However, discussions are still at the preliminary stage,” he told StarBiz.

SCORE will be driven by the development of Sarawak’s abundant hydro and coal resources to generate electricity to power energy-intensive industries, like alunimium smelters, to be set up with the regional economic development belt.

Sarawak is now building the proposed Murum dam – which could generate about 900MW - in the upper Rejang Basin in central Sarawak. Murum is located upstream of the on-going Bakun hydroelectric dam project capable of generating up to 2,400MW.
Several other hydro dam projects have also been planned in the upper reaches of the Rejang River.

To provide accessibility to these proposed dam sites, Sarawak Second Finance Minister Datuk Wong Soon Koh said recently that six major road projects, with a combined length of 403km, within SCORE would be built. The design for the access road from Jalan Bakun extended to Murum has been completed while other proposed access roads are still being designed.

Meanwhile, Naim was close to securing two road projects worth RM250mil in Sarawak, said Ahmad. The projects are funded by the federal government under the stimulus package. e said Naim had an outstanding net order book of RM2.5bil that could keep the group busy in the next five years.

Its ongoing projects include a RM630mil contract from Syarikat Perumahan Negara Sdn Bhd to build some 5,000 residential homes in Kuching (average RM126,000 per house - blogger) , Samarahan and Miri divisions, the RM310mil Bengoh dam near here, RM150mil phase one, Kuching flood mitigation project in Matang (the entire project is estimated to cost RM1.6bil), a RM188mil road project in Sibu and the proposed RM90mil Sarawak Islamic Centre project here.

Ahmad said Naim sold 633 houses and shophouses worth RM165mil last year. For the 2009 first quarter, it raked in some RM26mil from the sales of 103 such properties. Our target this year is to sell 800 units, 80% of them residential homes. Unsold houses (mostly high end), commerical units and detached lots are worth about RM20mil,’’ he said, adding that the company was carrying out various promotion activities to attract buyers.

Ahmad said Naim would save at least RM5mil this year through a series of cost-cutting measures introduced last year. Naim posted a group net profit of RM83mil on a turnover of RM524mil for the financial year ended Dec 31, 2008 compared with RM80mil and RM646mil respectively in 2007. For the first quarter ended March 31, Naim chalked up a group net profit of RM17mil on revenue of RM95mil. Naim’s 36%-owned Dayang Enterprise Holdings Bhd contributed RM22mil in net profit to the group last year.

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.