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Malaysia Daily Bulletin – 09/11/12

Sime Darby To Develop Education Hub
Sime Darby’s indirect wholly owned unit Sime Darby Johor Development (SJD) has formed a 60:40 joint venture (JV) with Tunas Selatan Pagoh to undertake the Pagoh Education Hub project worth RM992.6 million. The project which is under the Private Finance Initiative will be based on the “build-lease-maintain-transfer” concept. Upon completion, the campus will be leased out to the Ministry of Higher Education, Universiti Teknologi Malaysia, International Islamic University Malaysia and Universiti Tun Hussein Onn Malaysia for 20 years. Under the agreement for developing and maintaining the facilities on the proposed campus, the JV will receive availability charges of RM2.6 billion over 20 years as well as asset management service charges of RM764.5 million over a similar time frame. For the first five years, the JV would also receive RM156.9 million for the agreed teaching equipment.

Significance: The education hub project is in line with its existing core business segments. According to the company’s announcement, the concession agreements are expected to contribute positively to the company’s earnings in the future financial years.

MSC To Cease PT Koba Tin Operations
Malaysia Smelting Corporation (MSC) will suspend mining and smelting operations at PT Koba Tin, Indonesian ahead of the expiry next 31 March of its mining contract. MSC has 75 percent stake in PT Koba with the remaining held by Indonesia’s largest tin miner, PT Timah. The tin unit to be ceased was the 11th largest producer of refined tin in the year 2010. The government has asked PT Timah to take over PT Koba when its contract expires in the next year. MSC has sunk into red compare to a profit of RM106,389 for the preceding year corresponding period. “The operating environment continues to be difficult and challenging due to weaker demand and low prices for commodities arising from the prevailing global economic uncertainties including sovereign debt concerns, economic recession in Europe and slower growth in China,” it said.

Significance: MSC has decided to suspend PT Koba operations pending the renewal of contract of work to stanch losses after evaluating the available options as a result of very low production, high mine maintenance and rehabilitation cost as well as lower tin prices.

FGV, CPO Prices Set To Recover Early Next Year
Crude palm oil (CPO) prices are expected to recover early next year from the current level of RM2,300 per tonne, according to Felda Global Ventures Holdings (FGV) Group President, Datuk Sabri Ahmad. However, he had stated that the sudden spike in CPO prices would be disadvantageous for market sentiment. “The prices should not be too high or too low as this is not good for the plantation players,” the group president told reporters yesterday at a press conference. Earlier, Sabri oversaw the signing of Spare Part Logistics Solutions agreement between Felda Transport Services and Felda Palm Industries. In addition, Felda Transport Services inked a separate Spare Part Logistics Solutions Service agreement with DHL Supply Chain. The group CEO said the three-plus-two year agreements were in line with FGV’s strategy to adopt the best practices in all areas especially in management and corporate governance and to exercise greater transparency in its business.

Significance: Meanwhile, FGV’s weaker stock price has reflected on the movement of CPO prices. As at noon break on Thursday, 8 November, FGV’s share price was down four sen to RM4.59 with a total of 856,700 shares done. The stock however managed to regain 4 sen to close unchanged.