THE EDGE summaries 4 Feb - 10 Feb

UBG's major transformation

• UBG Bhd is a cash-rich shell after selling Rashid Hussain Bhd in mid-2007
• It has started to roll out a plan that will transform it into a major construction group - it will see the entry of Abu Dhabi Kuwait Malaysia Investment Group (ADKM) as a major shareholder
• In return ADKM will sell its interest in Loh&Loh and Putrajaya Perdana (PPB) to UBG
• UBG is the investment vehicle belonging to the family of Sarawak Chief Minister
• UBG will acquire 49.21% in PPB and 37.56% in Loh&Loh for RM4.85 per share (offer price the same for both companies)
• ADKM will not cash out, from the cash it receives from UBG, it will subscribe 182.62mil shares in UBG for RM2.50 each
• This new shares subscription will result in ADKM triggering a mandatory general offer for the remaining shares in UBG, however if the level of acceptance raises it stakes above 35%, it will need to pare it down to 35% by selling to institutional investors
• First phase of UBG transformation will be completed between April-July
• The second phase willl see UBG acquire strategic stakes in other medium to large sized companies in construction, water projects and infrastructure concessions
• The second phase will also see UBG undertake more projects in Middle East and Malaysia
• SP Setia is said to gain from UBG transformation as it has significant stakes in Loh&Loh and PPB
• The question is will SP Setia accept UBG's MGO offer for RM4.85 per share for Loh&Loh (SP Setia has 25% stake) and PPB; or will it enter the second phase with UBG and help UBG secure more projects?

TMI board woos Infosys' Murthy

• According to sources, Telekom Malaysia International is trying to woo Infosys' Narayana Murthy to take a board seat
• TMI is also considering a representative from Spain's Telefonica as TMI board member
• TMI is set to be listed by April 2008
• If TMI is successful in getting Murthy on TMI's board, it would be a huge boost in its attempt to strengthen its presence in India (TMI's Spice is still seeking a pan-India operating license)
• Murthy is highly regarded in the IT community, he is known as the Software Icon and has been attributed with many success stories in IT consultancy
• Meanwhile, TMI's partner in Bangladesh is looking to sell 30% stakes in AKTEL
• The AK Khan Group who own AKTEL's 30% interest sale is likely to fetch a premium since the incoming partner will become part of the larger TMI group
• Among those interested are said to be Vodafone, UAE's Etisalat, DoCoMo, MTN and Zain.

Quek trims exposure in O&G

• Tan Sri Quek Leng Chan is trimming down his interest in Kencana (from 14% to 6.8%) and Petra Perdana (12.1% to 9.1%)
• It is not clear as to why he is doing so
• It is a surprising move as the O&G counters are said to continue benefit from the rise on oil exploration activities worldwide
• Quek's selling may also have adversely affected the performance of both companies on the stock market
• Could it be that he is just locking in profits (Kencana has appreciated 420% since listing)?
• But with the future prospects looking bright for Kencana and PPerdana, Quek's intriguing move has indeed attracted a lot of attention

Satang moves too quickly for its own good!

• Satang Holdings Bhd took a swift action to reduce the amount revenue that will be recognised in FY ended 30 Sept 2007
• The EDGE broke the news a week ago that Satang may have inflated its FY2007 revenue
• Upon receiving the news, Satang management quickly revised its revenue
• But this has only raised more suspicion and questions as it usually take more than just a few days to resolve such accounting matters
• It took an external auditor several months to resolve Transmile accounting scandal, but somehow Satang's management manage to resolve this in a few days? How?
• Usually the board would require all the facts before making announcement and adjustment to accounting figures
• The EDGE highlighted that Satang's executive directors are also involved in management
• Such swift action from Satang has surely raised more questions than answers (SC is still investigating)

Looking for the next plantation gem

• Investors are taking a second look into the plantation sector in the hope of discovering the next plantation gem
• KLK and IOICorp saw their share prices increase by 75% in just 5 months
• Aseambankers highlighted that the PE multiple gap between the big boys and smaller players is as large as 20 times
• One the approaches used by investors to seek out plantation gems is to look for those with aggressive expansion plans and whose shares are still trading at a decent valuation
• One fund managers pointed out that Kwantas (PE 10 times) and TSH Resources (PE 10.7 times) have such criteria
• But Kenanga Research said that they prefer dividend paying plantation companies during this turbulent global market
• They pointed out that Hap Seng Plantation and KLK pay attractive dividends
• EDGE also highlighted that Riverview Rubber is another example of a high dividend but minimal growth plantation company
• Regardless of what approach investors take, as long as CPO remains high, interest in plantation stocks will stay high

Primus Pacific entering EONCap, but how much will it pay for the stake?

• Last week, DRB-Hicom announced that it has obtained an approval of Ministry of Finance to dispose its 20.2% interest in EONCap to Primus, but no price was disclosed
• HK's Primus Pacific Partners' purchase of a 20.2% stake in EON Capital Bhd comes with management control; it is said that Primus is not interested in increasing its stake beyond that
• EONCap share price moved up to RM6.05 from RM5.60 prior to the purchase annoucement
• EONCap is the 3rd smallest banking group by assets. and it is known for its sound retail franchise
• It is understood that Primus wasn't DRB-Hicom first choice (they wanted to sell the stake to Newbridge Capital), but sources said that EONCap other major shareholder, Rin Kei Mei preferred the HK-private equity group over Newbridge
• But how much will Primus pay for the 20.2% stake? EDGE said it will have to pay a hefty premium for the 20.2% interest, and it had been reported that DRB-Hicom was looking at RM9 per share for its stake

Scomi sets sights on Mumbai Monorail

• Scomi Group Bhd is among the seven companies that have pre-qualified for the Mumbai Monorail project
• Its strongest competitor is said to be Hitachi Japan
• Scomi has partnered with India's Larsen and Toubro Ltd, and its recent successful procurement of the Penang Monorail job wil give it added credibility
• The Mumbai job will be its big test because so far Scomi work has been confined to local projects
• The project is expected to be operated on a build, operate and own basis
• According to reports, the contract is due to be awarded in May 2008