Market Thoughts

US stocks reversed their early losses to end near session highs in thin trading Monday, but investors hesitated to jump in ahead of what is expected to be a lackluster first-quarter earnings season. Meanwhile, European shares closed off their highs but remained in positive territory, shrugging off poor investor sentiment data for the euro zone.

On the local exchange, the FBM KLCI closed flat after shedding 0.66 points to 1687.99 points. We expect the index to remain range bound below the resistance of 1700 points as investors await the general election. Stocks in focus are: WCT and MMC after their respective project in Middle East has been terminated; Alam Maritim, has secured a RM61m service contract from Petronas Carigali; DRB Hicom, sold two plots of land in Johor and a plot of land in Klang Valley for RM605m.

Malaysia News & Highlights

EPF set to accept Petronas' enhanced offer?

SIGNALS from the Employees Provident Fund (EPF) indicate that it will not reject Petroliam Nasional Bhd (Petronas)'s enhanced offer to privatise shipping arm MISC Bhd. A banker close to the pension fund said EPF will accept the new offer because there is no point in keeping the MISC shares any longer as "they may collapse in the future". "It's better to accept rather than see the money stuck there, earning no dividends. EPF will accept the offer and invest the money elsewhere. "And maybe the pension fund can come in again in the future after MISC has been restructured and able to earn dividends again," the banker told Business Times yesterday. EPF's newly-appointed chief executive officer Datuk Shahril Ridza Ridzuan declined to comment when contacted yesterday. (Source: Business Times)

KLCC stapled REIT to be among Asia's largest

KLCC REIT, which will be called KLCCP Stapled Group after a corporate restructuring, is expected to be listed in early May. KLCC Property Holdings Bhd's new stapled real estate investment trust (KLCC REIT) is set to become one of Asia's largest listed groups with RM15.4 billion in assets and nearly RM13 billion market capitalisation upon listing.KLCC REIT, which will be called KLCCP Stapled Group after a corporate restructuring, is the first syariah-compliant stapled REIT in the country. KLCC Property group chief executive officer Hashim Wahir said the REIT is expected to be listed in early May. To achieve a stapled REIT structure, KLCC Property will have to undertake three key restructuring steps. (Source: Business Times)

Alam Maritim wins Petronas Carigali deal

Alam Maritim Resources Bhd has received a letter of award from Petronas Carigali Sdn Bhd for the provision of one accommodation vessel for RM61.32 million. In a filing to Bursa Malaysia yesterday, the company said the five-year contract, which commenced on March 11 can be extended for another year. (Source: Business Times)

MMC: Saudi project rights dropped

MMC Corp Bhd's rights to develop a multi-billion-dollar economic city in Saudi Arabia has been terminated, together with the rights given to its Saudi partner Saudi Binladin Group (SBG).The Saudi Arabian General Investment Authority's termination via a letter date April 3 2013 took effect immediately, MMC told Bursa Malaysia in a filing yesterday."The termination was a result of circumstances which gave rise to several difficulties that interrupted the progress of the project," MMC said. MMC and SBG were awarded the rights to develop and manage the Jizan Economic City (JEC) in 2006.The plan was to build it over 30 years and to cost some US$30 billion (RM240 billion). MMC said it could not immediately ascertain what the financial impact will be for the group, following the termination of the billion-dollar job.(Source: Business Times)

Bernas, Tradewinds offer extended to Apr 25

The deadline for the acceptance of an unconditional take-over offer for all the remaining shares in Padiberas Nasional Bhd (Bernas) and Tradewinds Plantation Bhd (TWP), for a cash price of RM3.70 and RM5.00 each respectively, has been extended to 5pm on April 25. The initial deadline for the offer made by joint-offerors Perspective Lane (M) Sdn Bhd, Kelana Ventures Sdn Bhd, Seaport Terminal (Johore) Sdn Bhd and Acara Kreatif Sdn Bhd, as well as Tradewinds (M) Bhd, being the party acting in concert with the joint-offerors, for the remaining shares not already owned by them was 5pm on April 11. As at April 8, the level of acceptance for the Bernas offer stood at 80.23%, and for TWP 96.1%. (Source: The Star)

Salcon unit wins RM13.4mil contracts

A subsidiary of Salcon Bhd’s unit has secured two projects with a combined value of RM13.4mil in Shah Alam.In an announcement to Bursa Malaysia, the water and wastewater engineering company said Envitech Sdn Bhd, a 60%-owned subsidiary of its wholly owned subsidiary Salcon Engineering Bhd, had received the letters of award for the projects from Lebar Daun Development Sdn Bhd and Temasya Development Co Sdn Bhd last week. (Source: The Star)

40 LubeXperts in the pipeline

Petronas Dagangan Bhd (PDB) is setting aside RM3 million to set up 40 automobile workshops nationwide called the Petronas LubeXperts this year. PDB managing director and chief executive officer Aminul Rashid Mohd Zamzam said this is part of the company's key strategic initiatives to spur the growth of its lubricant business. Aminul Rashid said the lubricant segment contributes about 24 per cent of the company's earnings and that PDB aims to raise it to 26 per cent by year-end. Aminul Rashid said PDB will make an entry into Thailand's lubricant business this year as the company aims to expand its presence regionally. (Source: Business Times)

WCT to build Paradigm-like malls in KL, JB

WCT Land Sdn Bhd plans to replicate the success of its iconic Paradigm Mall development at two sites in Kuala Lumpur and Johor Baru. Its general manager, Ben Chong, who oversees the development of shopping malls under the group, said the company planned to put in place a similar concept at the Overseas Union Garden site in Kuala Lumpur and at an abandoned shopping mall which was acquired last year in Jalan Skudai, Johor Baru. It was part of the firm's strategy to grow further the contribution from shopping malls which were currently under the group's property investment and management, he added. Chong said the Paradigm Mall had, so far, contributed a pre-tax profit of between RM10 million and RM15 million to WCT Bhd. (Source: Business Times)

Ireka: Viet projects starting to bear fruit

IREKA Corp Bhd is poised to gain from its investments in Vietnam as most of the projects will start to bear fruits between now and 2018, boosting the group's earnings, said a top official. Its infrastructure arm Ireka Engineering and Construction Vietnam Co Ltd (IECVCL) has completed a RM112 million job to build the City International Hospital in Ho Chi Minh City. The hospital is part of the RM670 million International Hi-Tech Healthcare Park (IHHP), which consists of private hospitals, mixed commercial, hospitality and houses. (Source: Business Times)

DRB-HICOM sells land for RM604.65m

DRB-HICOM Bhd has sold two plots of land in Johor and another plot here for a combined RM604.65 million. The group sold a 145.74ha and 102.85ha plots in Tebrau for RM313.50 million and RM221.23 million respectively, both to Promosi Etika Sdn Bhd. It has also sold 3.89ha plot in Mukim Batu here to Summer Nights Sdn Bhd for RM69.92 million. The latter disposal was completed on March 18, the group said in a statement yesterday. Assuming the proposed Johor land disposals will be completed on March 31 2014, DRB-HICOM stands to net RM89.12 million gain. The consolidated net gain from the Mukim Batu land disposal in the financial year ended March 31 is RM54.60 million, it added."The staggered deferred sale consideration will allow the group to receive cash that will be utilised to fund the development of the remaining land bank of 365.64ha in Tebrau and/or working capital for the group," DRB-HICOM added. (Source: Business Times)

Deadline extended for BIMB to buy DFG stake

Bank Negara Malaysia (BNM) has given BIMB Holdings Bhd until June 30 2013 to complete its negotiations to buy Dubai Financial Group LLC's (DFG) 30 per cent stake in Bank Islam Malaysia Bhd. BIMB, in a filing to Bursa Malaysia yesterday, said the central bank did not object to the extension, after which a formal approval for the proposed acquisition must be sought. "The parties must ensure that the negotiations are completed within the extended deadline of June 30 2013," it said.BIMB has announced late last month that DFG and Lembaga Tabung Haji are seeking an extension from Bank Negara over their corporate exercise involving Bank Islam.The extension will allow the group to conclude negotiations which involved DFG's 30.5 per cent stake in Bank Islam.(Source: Business Times)

Oldtown buys 70pc of HK’s Advanced City

Oldtown Bhd, via its unit Old Town (M) Sdn Bhd, has acquired a 70 per cent stake in Hong Kong’s Advanced City Ltd for HK$67 million (RM26.41 million). In a statement to Bursa Malaysia yesterday, the company said the acquisition would be funded by the proceeds raised from its private placement which was completed on December 21 last year. “The acquisition enables the company to take control of the current distribution operation with the objective of maximising the sales potential for greater financial return,” Oldtown said. The company added that the acquisition is expected to improve its revenue stream and profitability prospects. (Source: Business Times)

WCT: Oman project will not proceed

WCT Bhd yesterday said the RM1 billion Batinah Expressway-Package 2 project in Oman it secured last August, will not proceed. The Ministry of Transport and Communications of Oman had informed it and its JV partner, Oman Roads Engineering Co LLC, that it had decided not to proceed with the project pursuant to the tender, WCT said. “The company respects and will adhere to the employer’s decision,” it said in a filing to Bursa Malaysia. The scope of works was originally to build a 44.75km dual four-lanes expressway and the works were expected to be completed in 36 months. (Source: Business Times)

Foreign News

U.S. Stocks Advance on Investor Optimism Over Earnings

U.S. stocks rose as investors speculated first-quarter earnings would help equities rebound from their biggest weekly decline of the year. The S&P 500 rose 0.6 percent to 1,563.07 at 4 p.m. in New York, after falling as much as 0.3 percent earlier. The index erased its April 5 loss sparked by the government’s monthly jobs report. The Dow Jones Industrial Average added 48.23 points, or 0.3 percent, to 14,613.48. About 5.1 billion shares changed hands on U.S. exchanges, 19 percent below the three-month average.

Obama Drops Stimulus for Benefit Cut to Woo Republicans

Less than a week after job-creation figures fell short of expectations and underscored the U.S. economy’s fragility, President Barack Obama will send Congress a budget that doesn’t include the stimulus his allies say is needed and instead embraces cuts in an appeal to Republicans. “This is not our ideal budget,” Gene Sperling, director of the White House’s National Economic Council, told Bloomberg Television. “This does reflect a compromise offer. There’s measures in here we would prefer not to take.”

Hedge Funds Cut Bets Most Since ’08 as Prices Slump: Commodities

Hedge funds reduced bets on a commodity rally by the most since 2008 as rising supplies of everything from copper to sugar and slowing U.S. growth drove prices to the biggest slump in six months. Speculators cut netlong positions across 18 U.S. futures and options by 31 percent to 468,780 contracts in the week ended April 2, the most since October 2008, U.S. Commodity Futures Trading Commission data show. Investors are betting on a decline in silver for the first time and have record bearish positions in copper and sugar. Corn wagers dropped the most since June 2010, leading the biggest ever decline in agricultural holdings.

German Industrial Production Increased in February

German industrial output rebounded in February, adding to signs that Europe’s largest economy is stabilizing after a contraction in the fourth quarter. Production rose 0.5 percent from January, when it contracted 0.6 percent, the Economy Ministry in Berlin said today. Economists forecast a 0.3 percent gain, according to the median of 41 estimates in a Bloomberg News survey. From a year earlier, production dropped 1.8 percent when adjusted for working days.

Portugal Plans Spending Cuts After Ruling on Salaries

Portugal will carry out more spending cuts this year and ruled out further tax increases after the Constitutional Court blocked a plan to suspend a monthly salary payment to state workers and pensioners. “I will give instructions to the ministries to proceed with the necessary reductions in operating expenses to compensate for what was blocked by the Constitutional Court’s ruling,” Prime Minister Pedro Passos Coelho said in Lisbon. “The government does not accept more tax increases, which seems to be the solution that the Constitutional Court favors in its interpretation.”

Slovenia Bailout Signaled by Worsening Debt Swaps: Euro Credit

Slovenia’s creditworthiness is deteriorating at the fastest pace in the world after Cyprus as investors speculate a banking crisis will force it to follow the island nation and become the sixth euro country to need aid. Creditdefault swaps insuring Slovenian debt for five years soared as much as 66 percent to a six-month high of 414 basis points on March 28 from 250 on March 15, the last trading day before Cyprus announced plans for its rescue. It’s now up 34 percent at 336 basis points, compared with a 45 percent increase for Cyprus and 18 percent for Portugal in the period.

N. Korea May Conduct Joint Missile-Nuclear Tests, South Says

North Korea may detonate a nuclear device and carry out a missile test together as early as this week, South Korea’s government said, as the totalitarian regime defies international concern including from ally China. Kim Jong Un’s regime is ready to conduct a fourth underground atomic weapon test at its Punggye-ri site, after carrying out its third Feb. 12, South Korean Defense Ministry spokesman Kim Min Seok said today. National security chief Kim Jang Soo said yesterday the North may stage a provocation including a ballistic missile test on or around April 10.

(Source: Bloomberg)