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Malaysia Daily Bulletin – 22/04/13

PETRONAS Fails Takeover Bid For MISC
The RM9.16 billion cash buyout of MISC fell through last week when Petroliam Nasional (PETRONAS) failed to get at least 90 percent acceptance level. Its minority shareholders, who account for nearly 14 percent of MISC voting shares, rejected the offer leaving PETRONAS with only 86.07 percent voting shares, at the close of the acceptance at 5pm last Friday. It is not confirmed whether PETRONAS plans to make a new revised offer. MISC said PETRONAS will return all the shares to shareholders who have accepted the offer, within 14 days. On 5 April, PETRONAS revised its offer price for MISC shares to RM5.50 each after the shipping group’s second largest shareholder, the Employees Provident Fund (EPF), said the original offer of RM5.30 per share was low. Last Thursday, the EPF agreed to sell its 9.5 percent stake at the revised RM5.50 per share. The stock fell 14 sen to RM5.30 last Friday, making it the fourth biggest loser on Bursa Malaysia. It was also among the most active stocks with a total of 79.23 million shares traded.

Significance: The move by PETRONAS to acquire the rest of MISC shares was generally considered by some analysts as “not fair but reasonable” deal. Upon sensing that the takeover was not going to happen, investors sent MISC’s shares down.

I-Bhd Forecast Surge In Earnings
I-Berhad’s transition from an electrical products manufacturer to a property developer has shown encouraging returns on investments (ROI) as the property industry is booming today. On this note, executive chairman Tan Sri Lim Kim Hong says the company is on a growth trajectory and earnings will experience a “quantum leap” for the financial year ending 31 December 2013. “From RM25 million in 2012, we expect to see an exponential growth in revenue to RM410 million from our property development division come 2014,” he adds. He remains optimistic that these earnings will also be sustainable after 2014 due to good returns from its flagship i-City property development. Based on a SJ Securities research report issued in March, the developer’s earnings have reached an “inflection point” where it expects an upward shift in the company’s earnings moving forward. I-Bhd sees its property development to become its leading segment and account for up to 85 percent of revenue in 2014 from 37 percent in 2012.

Significance: Despite the lucrative returns from its leisure division, the company sees property development as a more sustainable path to growth in the longer term due to the industry being a strong proxy to the economy growing healthily in Malaysia.

FGVH Refinery Move Receives ‘Neutral’ Response
Analysts are neutral on Felda Global Ventures Holdings’ (FGVH) RM35 million acquisition of a biodiesel refinery and other assets at Kuantan Port. In a filing to Bursa Malaysia, FGVH announced that its subsidiary, Felda Global Ventures Downstream, had signed an asset purchase agreement with Mission Biotechnologies to acquire a 100,000-tonne-per-annum biodiesel refinery at Kuantan Port. According to CIMB Research, the investment is in line with FGVH’s strategy to venture into further downstream operations. It also noted that the investment cost of RM35 million is insignificant against FGVH’s RM5 billion cash reserves. The research house believes the deal would allow the group to better integrate the acquired plant into its existing operations and save on transport costs, as the plant is located close to FGVH’s estates in Pahang as well as its refinery and oleochemical plant. In view of the small capacity of the biodiesel refinery relative to the group’s existing upstream and downstream businesses, the research house expects the impact on FGVH’s earnings to be minimal. FGVH expects the acquisition to be completed in June, while the plant is expected to be fully operational by July 2013.

Significance: CIMB Research believes the acquisition would allow FGVH to channel its lower quality crude palm oil (CPO) for biodiesel production and achieve better pricing for its palm products. It also expects FGVH to turn around the business through improved utilisation rates and better procurement of raw materials.

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