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Stocks In Focus MY (Malaysia GDP, Iris Corp, Astro Malaysia Hldgs) – 13/02/14

Malaysia’s Economy Grew 5.1% In 4Q13
• In the fourth quarter of 2013, broad-based growth in manufacturing and services sectors lifted Malaysia’s gross domestic product (GDP) by a faster-than-expected 5.1 percent from a year earlier.
• This is the fastest pace at which the economy grew since 4Q12. For the whole year of 2013, the economy grew by 4.7 percent compared with 5.6 percent in 2012.
• Underpinning the growth was the services sector that accounts for more than half of the GDP, which grew by 6.4 percent, in line with the improvement in trade and manufacturing activities. Rebounding exports also helped as it rose 2.9 percent year-on-year in 4Q13, compared to 1.7 percent the preceding quarter.

Significance : While GDP growth slowed from last year, growth momentum is expected to remain resilient going forward as advanced economies continue to strengthen. According to Bank Negara, this will help to offset softening domestic demand as the government cuts back on fiscal largesse.

Iris’ Shares Surges On Buyout Possbility
• Shares of Iris Corporation jumped to their highest close in nearly nine years despite the company’s managing director Datuk Tan Say Jim reportedly downplayed the possibility of a takeover by Federal Land Development Authority (Felda).
• The stock settled RM0.05 higher at RM0.50 on Wednesday. At this price, Iris’ market capitalisation is about RM985 million, just a tad short of joining the RM1 billion market capitalisation club.
• For more than a decade, Tan has been the public face and major shareholder in Iris, before Felda appeared in the picture last year. In a surprise move, Felda bought 394.1 million new Iris shares at RM0.28 apiece, which was a 40 per cent premium over the stock’s trading price of RM0.215 a share then.

Significance : According to Tan, Felda was willing to pay a premium because it wanted to use Iris’ network to expand its own plantation-based business in Africa. Felda now owns 26.7 percent of Iris, while Tan’s stake is believed to be under 11 percent.

Alliance Research Positive On Astro’s Home TV Shopping Venture
• Following news that Astro Retail Ventures, a subsidiary of Astro Malaysia Holdings, had teamed up with South Korea’s GS Home Shopping Inc to establish a home-shopping business in Malaysia for RM70 million, Alliance Research expressed confidence in the foray. GS Home Shopping is one of the largest home shopping companies in Korea with market capitalisation of about US$1.64 billion.
• Based on a note issued by Alliance Research, the partnership poses minimal overall risks and the new business could generate a new revenue stream to the pay-TV company.
• The risks for sourcing merchandise is also low given GS Home Shopping’s existing strong network of merchandisers and vendors, which includes exclusive distributorship for several key vendors such as LG Household & Healthcare.

Significance : Despite the overall positive view by analysts, there was a concern as highlighted by Affin Investment Bank that Astro’s home shopping business venture as the retailing business extends beyond Astro’s core competency. Additionally, most Malaysian customers still preferred to see the products before making a purchase, and Astro could be up against price competition from online shopping services or big retailers like Aeon or Tesco.

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