AmBank issues 7 put & call warrants

AmBank (M) Berhad (“AmBank”) is issuing seven new European style cash-settled structured warrants to meet investors’ demand for trading opportunities and alternative investments for the current market.

Under AmBank’s Put-Call Pair Programme, there will be three pairs of put and call warrants (the “PW” and “CW”
respectively) over the ordinary shares of Dialog Group Berhad (“DIALOG”), DRB-HICOM Berhad (“DRBHCOM”) and Malaysia Marine and Heavy Engineering Holdings Berhad (“MHB”).

There will also be a CW issued over the ordinary shares of TanChong Motor Holdings Berhad (“TCHONG”). The structured warrants on DIALOG, DRBHCOM and MHB will have tenures of approximately eight months while the call warrant on TCHONG will have a tenure of approximately twelve months. The structured warrants will be listed on 1 July 2011 with issue size of up to 100 million each.

“For AmBank’s upcoming tranche of structured warrants, we are issuing three put and call warrant pairs on DIALOG, DRBHCOM and MHB under our Put-Call PairProgramme, all of which have seen significant trading interest recently on the back of the Malaysian government’s ETP initiatives and M&A activities.

However, as market sentiment remains uncertain and conditions volatile over fears of a slowdown in global growth and Eurozone debt issues, AmBank’s put-call pair programme enables investors to profit on both the ups and downs of share price movements.

AmBank’s put warrants can also be used by investors to hedge their exposure to the underlying share. Each put and call warrant pair is issued with the same strike price over the underlying share,” said Ms Ng Ee Fang,Director/Head, Equity Derivatives, AmInvestment Bank Berhad.

Oil and gas services company DIALOG recently signed a RM1.9 billion agreement to provide engineering, procurement, construction and commissioning (EPCC) works for the first phase of a deepwater petroleum terminal at Pengerang, Johor. The
construction cost of RM1.9 billion is higher than management’s earlier guidance of RM1.7 billion with the schedule of completion extended from end-2013 to 2014.

The first phase of the terminal will have a capacity of 1.3 million cubic metres and will comprise a harbour port, jetty and other marine facilities with waterdepth up to 26 metres. Besides the Pengerang tank terminal project, DIALOG couldalso be potentially involved in the Bentara/Balai marginal field development.

AmBank’s CW and PW on DIALOG are both priced at 15 sen each with gearing of 6.09 times.

Major oil & gas fabricator MHB’s acquisition of Sime Darby’s 130-acre Pasir Gudang yard for RM399 million cash is expected to transform Malaysia’s fabrication landscape. Along with Petronas’ Teluk Ramunia yard, MHB will have access to Malaysia’s largest domestic fabrication yard of 672 acres. Petronas’ capex programme of RM250 billion for the next five years points to an abundance of new projects for fabrication yards. Therefore, MHB’s capacity expansion from the Pasir Gudang yard acquisition is expected to accelerate order book recognition, enhance deepwater capabilities and drive margin efficiencies.

AmBank’s CW and PW on MHB are both priced at 15 sen each with gearing of 5.69 times.

Conglomerate DRBHCOM had recently won the bid for Khazanah Nasional’s 32.2% stake in POS Malaysia. With its stake in POS Malaysia, DRBHCOM subsidiary Bank Muamalat can leverage on POS Malaysia’s extensive network of branches to reach a wider consumer base. POS Malaysia also has an attractive land bank with
potential for commercial development. DRBHCOM’s automotive joint-venture with Volkswagen AG to assemble Volkswagen vehicles is slated to start production towards the end of 2011. AmBank’s CW and PW on DRBHCOM are both priced at 15 sen each with gearing of 5.02 times.

Automotive assembler and distributor TCHONG posted strong quarter-on-quarter earnings growth of 53% for Q1 2011 (ended 31 Mar 2011) on the back of a 36% increase in sales revenue. Strong demand for its high-end CKD Teana model also helped boost average selling prices for its vehicles by 19%. For Q1 2011, 1,790 units of Teana were sold compared with only 476 units in Q4 2010. Although parts supply was disrupted by the major Japan earthquake and tsunami in March, parts supply from Nissan to TCHONG is expected to return to normal by July. As for TCHONG’s operations overseas, subsidiary Nissan Vietnam Ltd. is breaking even at EBITDA level. AmBank’s CW on TCHONG is priced at 15 sen each with gearing of 3.77 times.

This offer is aimed at sophisticated traders who want to trade on the direction and volatility of DIALOG, DRBHCOM, MHB and TCHONG. The new CWs and PWs have gearings ranging between 3.77 and 6.09 and are targeted at investors who want leveraged exposure to the underlying on both the upside and downside. - Bloomberg

Read more: AmBank issues 7 put & call warrants

Euro debt news lifts stocks after last week's loss

Signs that a widespread European debt crisis could be averted helped send stocks up sharply Monday.

French banks agreed to accept slower repayment of Greece's debt. That would give Greece more time to meet its other immediate financial obligations. French bondholders hold about $21.3 billion in Greek government debt. Greek lawmakers are also debating austerity measures that must pass before the country can receive another financial rescue package to help avoid default.

The U.S. government, meanwhile, said that spending by consumers decreased in May, after adjusting for inflation. April's figures were also revised downward, revealing the first decline since January 2010. Consumer spending accounts for 70 percent of economic activity.

Gas prices nearing $4 per gallon in late April and early May curtailed spending on retail goods such as televisions and clothes. Since then, gas prices have fallen to a national average of $3.57 per gallon. Oil prices have declined steeply over the last few weeks, which should eventually translate into even lower pump prices. Lower gas prices could help boost consumer spending in other areas in the coming months.

In late afternoon trading, the Dow Jones industrial average rose 157 points, or 1.3 percent, to 12,093. The Standard & Poor's 500 index rose 15, or 1.2 percent, to 1,283. The Nasdaq composite index rose 40, or 1.5 percent, to 2,692.

Analysts said the rally was stronger than the economic news would suggest in part because many traders invest when indices hit certain pre-determined price levels.

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Kencana 3Q net profit jumps 81% to RM56.42m

KUALA LUMPUR: KENCANA PETROLEUM BHD []’s earnings rose 81% to RM56.42 million in the third quarter ended April 30, 2011 from RM31.17 million a year ago underpinned by the progress achieved for the oil and gas contracts.

It said on Friday, June 24 that revenue rose 34.7% to RM377.83 million from RM280.37 million. Earnings per share were 3.08 sen versus 1.92 sen a year ago.

“Compared to the corresponding quarter ended April 30, 2010 of RM280.37 million and RM36.5 million, revenue and profit before tax had increased by approximately 35% and 91% respectively in the current quarter.

“This is mainly due to higher progress achieved for contracts in hand on the back of bigger order book and better management of relevant costs as well as contribution from drilling services,” it said.

For the nine-months, earnings increased by 69% to RM159.38 million from RM94.3 million while revenue increased by 31.5% to RM 1.06 billion from RM811.51 million.

Its cash and cash equivalents increased to RM809.50 million as at April 30 from RM222.39 million on July 31, 2010.

Kencana was upbeat about its prospects following the Malaysian government’s strategy to intensify exploration activities in Malaysia to increase the oil and gas production as set out in the Economic Transformation Programme.

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Gamuda 3Q net profit up 39.6% to RM116.63m

KUALA LUMPUR: GAMUDA BHD []'s net profit for the third quarter ended April 30, 2011 rose 39.6% to RM116.63 million from RM83.53 million a year earlier due to higher contributions from all its divisions.

Revenue for the quarter rose to RM621.20 million from RM511.20 million in 2010. Earnings per share was 5.67 sen while net assets per share was RM1.77.

Gamuda declared a second interim tax-exempt dividend of 6 sen per share single-tier.

For the nine months ended April 30, Gamuda’s net profit rose 26.7% to RM299.19 million from RM236.19 million on the back of revenue RM1.86 billion.

Commenting on its prospects, Gamuda said on Thursday, June 23 that with the existing CONSTRUCTION [] projects progressing on schedule and the strong performance of the property division, the group’s results were expected to further improve in the remaining quarter of the current financial year.

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Stocks End Sharply Lower; Dow Skids 1.5%

Stocks closed broadly lower Wednesday as the dollar jumped following worries over the exacerbating Greek debt situation and after a handful of dismal economic news.

The Dow Jones Industrial Average plunged 178.84 points, or 1.48 percent, to close at 11,897.27.

The blue-chip index has declined almost 5.5 percent since the beginning of the month. Since 1950, the Dow has been down more than 5 percent halfway into a month 30 times. When that happened, the index almost always finished in the red for the month.

And if the Dow does finish down this month, it will be its first back-to-back monthly declines since May/June 2010.

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Petronas Chem on acquisition trail

Kertih: Petronas Chemicals Group Bhd, which has a war chest of RM8 billion, is eyeing strategic acquisitions in the country and the region to consolidate its position as one of Southeast Asia's largest integrated petrochemical producers.

Petronas Chemicals president and chief executive officer Dr Abd Hapiz Abdullah said the expansion plan will be selective and synergistic as well as add growth, value and competitiveness to the group.

"The selective acquisition could be in the setting up of a new plant, joint ventures or buying stakes in other firms.

"We are talking with several parties right now but they are at a very preliminary stage.

"Rest assured, this is part of our reinforced commitment and strategy to grow our business," Abd Hapiz told some ten visiting jounalists here at its sprawling 5,000ha complex on Thursday.

Abd Hapiz said Petronas Chemicals is flexible when it comes to holding discussions but it will all depend on how to set objectives on growing its business.

"Sitting on a big cash pile helps a little bit on how you look at growing the business. We are going to have selective opportunity acquisitions in the future," he said.

Petronas Chemicals is the chemical arm of national oil and gas corporation Petroliam Nasional Bhd (Petronas).

The group floated its shares on Bursa Malaysia last November, raising RM12.8 billion which is Southeast Asia's largest initital public offering to date.

Established in 1985, Petronas Chemicals has 22 subsidiaries. They comprise wholly-owned and partly-owned subsidiaries, joint ventures and associate companies which it has been forging in the past 26 years.

These include its US$660 million (RM1.99 billion) purchase of Optimal group of companies in 2009 from US-based Dow Chemical Co, the world's oldest chemical company.

Last year, Petronas Chemicals bought UK-based BP plc's 15 per cent stake and 60 per cent interest in Ethylene Malaysia Sdn Bhd and Polyethylene Malaysia Sdn Bhd, respectively, for a combined US$363 million (RM101 billion) cash.

Petronas Chemicals chief financial officer Wan Shamilah Saidi said the group was able to make both purchases in a timely and quick manner without going to the market to raise funds.

The group has no firm plans and a timeframe on its selective opportunistic acquisitions.

After the listing, Petronas Chemicals is a 64.4 per cent subsidiary of Petronas with a market capitalisation of over RM47 billion.

It is one of Bursa Malaysia's top 15 companies and a component of the FTSE Bursa Malaysia Kuala Lumpur Composite Index.

Read more: Petronas Chem on acquisition trail

Dow falls below 12K; stocks drop 6 weeks straight

Fears that the global economic recovery has stalled pushed the Dow Jones industrial average below 12,000 for the first time since March and drove the stock market lower for the sixth straight week.

Friday's drop extended the longest weekly losing streak for stocks since the fall of 2002.

Weak economic news has dampened hopes for a steady recovery, sending stocks down. Traders worry that weaker hiring, sluggish industrial output, and a moribund housing market are reversing a bull market that has lifted the Dow 20 percent over the past year.

If the indexes continue their slide for another week, it would be the first time in 10 years that the market suffered a seven-week stretch of losses. The last such stretch began in May 2001 as the dot-com bubble deflated.

The Dow fell 172.45 points, or 1.4 percent, to close Friday at 11,951.91. The S&P 500 index fell 18.02, or 1.4 percent, to 1,270.98. The Nasdaq dropped 41, or 1.5 percent, to 2,643.733.

The Nasdaq is now down slightly for the year, as is the Russell 2000 index of small company stocks. The Dow is still up 3.2 percent for 2011 and the S&P 1.1 percent.

Some investors said the recent pullback may not last.

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About a year ago.... Wall St tumbles on global economic worries

Bernanke's Talk Kills Stock Rally

NEW YORK—A gloomy economic assessment from Federal Reserve Chairman Ben Bernanke erased an earlier stock rally, sending major indexes in the final minutes of Tuesday's session to their fifth consecutive drop.

The Dow Jones Industrial Average closed down 19.15 points, or 0.2%, to 12070.81. The blue-chip index has dropped 4% during its five-day skid, its longest losing streak since August. The Dow rose as much as 89 points Tuesday afternoon prior to Mr. Bernanke's comments, but turned negative during the remarks and finished at its lowest closing level since March 22.

The Standard & Poor's 500-stock index dropped 1.23 points, or 0.1%, to 1284.94, led lower by the technology and telecom sectors. The index, which has dropped 4.5% during its five-day losing streak, hit its lowest closing level since March 18.

The sharp reversal came after Bernanke offered downbeat comments on the U.S. economy. He said economic growth has been "somewhat slower" than expected, although he added that the recovery should pick back up in the second half of 2011 despite recent signs of weakness.

Mr. Bernanke also said the recovery two years after the end of the recession remains "uneven" and that conditions—particularly in the labor market—remain troubled.

"The market is not buying what Bernanke is selling," said Keith Bliss, senior vice president at Cuttone & Co., a brokerage on the New York Stock Exchange floor. "He's not wowing the crowd."

Mr. Bernanke's comments follow a drumbeat of weak economic data and worries that the recovery is running out of steam. The government's disappointing jobs report last week came on the heels of several weak regional manufacturing reports and consumer-confidence data that have fueled anxiety on Wall Street.

"[Bernanke] certainly seemed to be a little more dour on the economy," said Jay Suskind, senior vice president at Duncan-Williams. "If you had to classify it, it's more glass half empty than glass half full."

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Next stop: Dow 20,000

NEW YORK (MarketWatch) — The market fell like a brick on Wednesday. People can’t handle any piece of bad news without saying “this is the big one.” We have visceral memories of May through July 2010, just a year ago. We have visceral memories of 2008, when it seemed like no end was in sight. Nobody wants to be caught trying to catch that knife with their mouths like in a circus act. You get cut up that way, and the blood isn’t pretty.

But it’s not going to happen. Even God took one day to rest. The market every now and then needs a day or two to rest. Maybe even more than a day or two. But over the next 12 to 18 months I expect to see Dow 20,000!

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Stocks Start June With a Plunge

NEW YORK—Stocks plunged Wednesday, suffering their biggest drop in almost a year, as a slew of downbeat reports prompted fears the economic recovery was running out of steam.

The Dow Jones Industrial Average closed down 279.65 points, or 2.2%, to 12290.14, the biggest point drop since June 4, 2010. All 30 of the blue-chip components finished in negative territory.

The Standard & Poor's 500-stock index fell 30.65 points, or 2.3%, to 1314.55, dragged down by the financial, industrial and material sectors, which each fell more than 3%. Only 10 stocks in the S&P 500 finished in positive territory. The technology-oriented Nasdaq Composite fell 66.11 points, or 2.3%, to 2769.19.

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The Dow looks like going on a new upswing!

Petronas Chemicals 4Q net profit up 5.7% to RM932m, proposes RM1.52b dividends

KUALA LUMPUR: Petronas Chemicals Group Bhd reported net profit of RM932 million in the fourth quarter ended March 31, 2011, an increase of 5.7% from the RM881 million a year ago.

It said on Thursday, May 26 that revenue rose 8.9% to RM4.353 billion from RM3.996 billion while earnings per share were 12 sen. It proposed dividend of 19 sen per share totaling RM1.52 billion.

“The increase was achieved on the back of higher realised prices across most petrochemical products. Overall, the group’s production volume was lower due to maintenance activities during the current quarter,” it said.

Petronas Chemicals said the group’s operating profit declined slightly by RM96 million due principally to costs incurred for maintenance activities in the current quarter. The impact of higher cost was however offset by lower tax expense and higher share of profits from associates and jointly controlled entities.

For the financial year ended March 31, its net profit increased by 36.1% to RM2.994 billion from RM2.199 billion. Revenue rose 19.5% to RM14.586 billion from RM12.203 billion supported by higher prices and volume addition contributed by its acquisitions, Optimal Chemicals (Malaysia) Sdn Bhd and Optimal Glycols (Malaysia) Sdn. Bhd.

“The group achieved operating profit of RM3.7 billion, an increase of RM405 million (12%) from previous year.

“The group's results were further supported by the strong performance of BASF Petronas Chemicals Sdn. Bhd., which primarily contributed towards higher share of profits from associate and jointly controlled entities by RM533 million,” it said.

The group's EBITDA was at RM4.677 billion, up 23% or RM875 million from a year ago.

Read it in The Edge

Pengerang oil and gas complex to benefit Petronas Chemicals

PETALING JAYA: Petronas Chemicals Group Bhd will undoubtedly benefit from parent company Petroliam Nasional Bhd's (Petronas) plan to build a US$20bil integrated downstream oil and gas complex in Pengerang, Johor.

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The research house said Petronas Chemicals would report strong fourth-quarter earnings for the financial year ended March 31 (due to be out tomorrow), with a growth of 36% quarter-on-quarter and 34% year-on-year.

The better earnings will be driven by higher margins on all of its products, improved petrochemical product prices (owing to higher oil prices) and a smaller increase in costs, especially ethane cost which is relatively fixed due to contracts.

It maintains an “outperform” call on the stock and said the share price was likely to be re-rated for its strong earnings in the fourth quarter and improved fundamentals, both short term (due to higher oil price and rising volume) and long term (its expansion plans and industry margin improvement post-2011 due to the industry upcycle).

“The stock remains attractive, given its superior growth profile and profitability. We continue to apply a calendar year 2012 EV/EBITDA (enterprise value/earnings before interest, taxes, depreciation and amortisation) of 10 times to the stock, leading to an unchanged target price of RM10,” it said.

Read it in The Star

Has it paid to panic over the EU crisis headlines?

It’s a very ugly open this morning…because of new concerns that Spain and Italy are to join Ireland and Greece as problem children of the EU…again. Each and every time we’ve seen the markets get hit badly here in the US over some concerns about some smaller countries in Europe who are going to bail out their bankers and cut social services to kick the can further down the road, I’ve reminded you guys that we should use such catalysts as buying opportunities. And that has indeed been the right approach. Look at the recent trends of concerns about the EU and their budget over the last twelve months:

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Smartag Solutions, Customs to start trial run of RFID system June 1

KUALA LUMPUR: Smartag Solutions Bhd and the Customs Department will start the trial run of the radio frequency identification (RFID) based security and trade facilitation system on June 1.

The company said on Monday, May 23 the trail run would be held at all the Customs checkpoints nationwide with participants from the logistics and manufacturing sector including Western Digital, TNT, Federal Express Brokerage (Fedex) and Priority Cargo.

It said under the trial, users would use the RFID seal to secure their containers when entering, leaving, and moving within the country.

With the usage of the system, the users will be able to automatically identify the container’s movement electronically via the RFID seal to the RFID readers that are set up by Smartag in the various Customs checkpoints across the country.

Smartag said the system would reduce the congestions at various checkpoints while increasing the department’s efficiency in tracking and clearing the containers.

Its chief executive officer PK Lim said the project reflected the abilities of the Malaysian public and private sector to work together to provide Malaysia the competitive edge as the country moves up the value chain.”

“With this system in place, Smartag is hopeful that the project will be a major contributor to the group revenues starting from next year,” Lim said.

Read it in The Edge

Markets Preview

Asia Media raising profit margins by 50pc

Kuala Lumpur: Asia Media Group Bhd, the country's largest transit-TV network operator, is increasing gross profit margins in the current year by 50 per cent, its controlling shareholder Datuk Ricky Wong Shee Kai said.

Thirty-year-old Wong, who has a first class honours in finance from Lancaster University in UK, owns slightly more than 45 per cent of the company.

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Asia Media is expected to announce its results in a day or two.

Market expectation is nothing less than a 100 per cent growth in net profit for the first quarter ended March 31 2011, from its group level net profit of RM2.17 million posted in the final quarter of 2010, if the company is to match analysts' expectations.

TA Securities, in a report, said Asia Media is forecast to post re-venue of RM31.6 million, alongside a gross profit of RM16.5 million, while net profit is expected to be in the range of RM11.9 million.

Read more: Asia Media raising profit margins by 50pc

Comparing the Dow, Hang Seng and KLCI charts

Week in Review: China, Big Tech and a Sideways Market

O&G counters advance ahead of Friday announcement of downstream project

PETALING JAYA: Oil and gas (O&G) stocks rose yesterday on the local bourse as several O&G service providers are expected to benefit from a multi-billion ringgit downstream project to be announced on Friday by the Government, and the gains in these stocks were also in line with the rise seen on the broader market.
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Dialog Group Bhd, which was up 14 sen to RM2.70 with a turnover of 13.4 million shares yesterday, stands to gain from the RAPID project as it gives better visibility to its proposed RM5bil independent deepwater petroleum terminal in Pengerang.

“Besides the tank terminal project, Dialog has the edge in providing engineering, procurement and construction (EPC) operations as well as specialist services and plant maintenance activities for this new complex given the proximity of its existing tank terminal project.

Read it in The Star

Dialog climbs to fresh highs, investors upbeat on prospects

KUALA LUMPUR: Shares of DIALOG GROUP BHD [] climbed to fresh highs of RM2.73 in late afternoon trade on Thursday, May 12 as investors were upbeat about its prospects.

At 4pm, Dialog was up three sen to Rm2.73 with 12.71 million shares done.

The FBM KLCI fell 1.88 points to 1,534.15. Turnover was 696.86 million shares valued at RM956.51 million. There were 250 gainers versus 447 losers and 279 stocks unchanged.

Petroliam Nasional Bhd is reported to be investing up to RM50 billion in new integrated downstream project to expand its business and further spur the growth of Malaysia’s oil and gas downstream sector.

The signing ceremony is expected to be done on Friday.

Then project would likely be the independent deepwater petroleum terminal project at Pengerang, Johor which is jointly undertaken by Dialog and Vopak.

Dialog and Vopak’s combined investment in the terminal would be RM5 billion and over a seven year period. Dialog’s investment would be RM2.5b of which 30% would be from equity and 70% from project financing.

Dialog and Vopak are the core facilitators for the project, which is viewed as an entry point project (EPP) under the government’s Economic Transformation Policy (ETP).

There are tremendous spinoffs opportunities from the Pengarang project and attract combined investments of another RM95 billion.

Read it in The Edge