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

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

Malaysian O&G poises for multi-year growth story

KUALA LUMPUR: JP Morgan Securities Research says the Malaysian oil & gas sector is poised for a multi-year growth story, as Petroliam Nasional Bhd refocuses its efforts on domestic oil and gas exploration and production. Its top sector pick is DIALOG GROUP BHD [].

Read it in The Edge

OSK Research maintains Buy on Dialog, target price RM1.47

Written by OSK Research Friday, 08 October 2010 08:46

KUALA LUMPUR: OSK Research is maintaining its Buy call on DIALOG GROUP BHD [] and its target price is RM1.47 based on sum-of-parts valuation.

On Thursday, Oct 7, Dialog announced the Johor approved to award Dialog the exclusivity to develop an independent deepwater petroleum terminal at Pengerang, Johor for a period of 60 years.

However, this approval is subject to the outcome of a detailed feasibility and environmental impact assessment.

“We understand that the technical part of the feasibility study has been completed and this concluded that the site is suitable for land reclamation of about 500 acres and the phased CONSTRUCTION [] of approximately 5 million cubic metres of storage capacity for the proposed terminal. Nevertheless, the environmental impact assessment is still in progress,” the research house said on Friday, Oct 8.

OSK Research said it is good that Dialog had received the “go ahead” from the Johor Government to build the independent deepwater storage terminal for oil products in Pengerang.

“This is because it will be difficult to move to the next stage of development otherwise. Hence, since the Government has given its green light, we believe it would be a matter of time for the environmental impact assessment to be completed and once done, we believe Dialog will start with the Phase 1 construction,” it added.

RHB ups Dailog target price to RM1.80

Dialog Group Bhd, an oil and gas services provider, rose 1.4 per cent to RM1.47, heading for the highest close since June 2, 2008.

The share price forecast for the stock was raised to RM1.80 from RM1.58 at RHB Research Institute Sdn Bhd on the prospects of “stronger” earnings growth. - Bloomberg

Oil & Gas

Oil & Gas
New oil sands investments suggest renewed confidence by oil majors Overweight- Platts and The Canadian Press reported that ConocoPhillips will start work on phase 2 of Surmont oilsands project in Alberta lifting bitumen production from 27,000 to 110,000 barrels/day by 2015. Surmont isa 50:50 joint venture between ConocoPhillips and France’s Total SA. There were no financial details in thenews report.- Suncor Energy Inc. (TSX:SU), another big oil sands player, is starting up Phase 3 of its Firebag oil sandsproject, which had been put into "safe mode" during the recession.

The revival of these oil sands investments suggest that oil majors have renewed confidence in the long term trend for crude oil prices, and thus in non-conventional E&P projects where the investment hurdle rates are higher.
- We highlight that we are looking at US$80-100/barrel crude oil prices in 2010.
- The beneficiaries of increased E&P activity in non-conventional projects include the process equipment andcompression equipment players (KNM, Wah Seong) and technical services providers (Dialog).

Corporate Highlights
Dialog : Potential upside to TLP’s earnings contribution in FY11 Outperform Visit Note
- According to management, the company is in advanced stages of discussion with customers for additionalstorage capacity, which would either be an expansion of T1 (from the current 400k m3 strorage capacity) or development of T2. We view this positively as this would further enhance its recurrent earnings base (i.e.around 70% of its FY09 revenue). We highlight that our back-of-envelope calculations based on the additional 200k m3 storage capacity, suggest our FY11-12 EPS forecasts could be enhanced by 11.3%and 11.1% respectively.

- We understand from management that current E&C orderbook now stands at around RM500m (vs.RM400m previously). These include 56% of the RM600m construction value of Tanjung Langsat Port (TLP)project and Vopak’s terminal in Singapore as well as other smaller EPCC jobs. Management expects 50%of its current orderbook to be recognised in FY10 and the balance in FY11.

- We have raised our FY10-12 EPS forecasts by 2.8%, 1.4% and 0.5% respectively after factoring in: 1)earnings contribution from JSB; and 2) higher revenue contribution from E&C division.- Accordingly, we have raised our SOP fair value to RM1.80 (vs. RM1.58 previously) based on 16x FY06/11PER (vs. 16x CY10 previously). Nevertheless, we highlight potential stronger earnings growth in FY11-12arising from expansion of TLP and EPCC jobs as well as sizeable catalyst handling projects.