YTL Power expects to realise RM210.1m gain from YTL Jawa BV share sale

KUALA LUMPUR: YTL POWER INTERNATIONAL BHD [] expects to realise a gain on disposal of RM210.10 million from the sale of a 42.86% equity interest in YTL Jawa BV to Marubeni Corporation for US$224 million (RM680.96 million).

The company said on Thursday, July 7 that its wholly owned unit YTL Jawa Power Holdings Ltd had entered into the share purchase agreement with Maubeni and its subsidiary Aster Power for the sale of 7,715 ordinary shares of '1 each and certain company interests.

YTL Jawa BV is the holding company of YTL Jawa Power BV, which in turn holds a 35% stake in P.T. Jawa Power (Jawa Power).

Jawa Power is the owner of a coal-fired power generation plant with an installed capacity of 1,220 megawatts ('MW') located at the Paiton Power Generation Complex in the district of Probolinggo, in East Java, Indonesia.

YTL Power said it intends to utilise the proceeds from the disposal for future investments in utility assets, working capital requirements and/or for the paring down of existing borrowings.

'There is no intended timeframe at this juncture for full utilisation of the proceeds from the disposal.

'Until such time as the proceeds are fully utilised, they will be placed in interest-bearing deposits with licensed financial institutions,' it said.

On the rationale for the share sale, YTL Power said it would enable Aster Power and Marubeni to co-invest in YTL Jawa BV and form a strategic partnership with the group, which was in line with YTL Power's growth strategy of investing in long-term geographically diverse infrastructure assets, whilst concurrently achieving synergies across its portfolio of utility businesses.

It said the strategic partnership would facilitate collaborations between YTL Power and Marubeni on potential investments and the development of future opportunities in the global utilities industry.

'The YTL Power group is continuously seeking to develop and expand its presence in utility businesses both in Malaysia and offshore,' it said.

Currently, YTL Power owns 100% stakes in Wessex Water Limited, a water and sewerage operator in the United Kingdom, PowerSeraya Limited, which has a total licensed capacity of 3,100 MW representing approximately 25% of Singapore's licensed generation capacity and operates multi-utility businesses, and YTL Power Generation Sdn Bhd, an independent power producer which owns power stations with a combined generation capacity of 1,212 MW in Malaysia.

In addition to its 35% stake in Jawa Power, the group also has an indirect 33.5% investment in ElectraNet Pty Ltd, the company which owns and operates the power transmission grid for the state of South Australia under a 200-year concession.

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I-Bhd gets 21-year concession from Selangor state

KUALA LUMPUR: I-BHD [] has inked a 21-year concession agreement with the Selangor state government to develop the i-City Area as a Technopreneur Campus.

In a filing Thursday, July 7, the company said its wholly owned unit I-City (Selangor) Sdn Bhd had entered into a management and development agreement with the Selangor state and Shah Alam city council to develop the area.

It said the concession was subject to revision of every five years for I-City Selangor to operate the project.

I-City Selangor is principally involved in the development and management of i-City, Shah Alam as a MSC Malaysia Cybercentre.

I-Bhd said the objective of the agreement was to define the parameters for the development and management of i-City as a knowledge hub, tourism destination and as an international park.

It said I-City Selangor would be authorised to manage, operate and maintain the i-City Area throughout the concession period for which it would be reimbursed by MBSA up to 70% of the assessment charges paid by the owners of the PROPERTIES [] in the i-City Area.

Other terms include the state government granting I-City Selangor a temporary occupation licence for 30 acres of neighbouring land for 21 years; the plot ratio of the i-City development area could be increased from the current overall of 1:3 to 1:5; the Bumiputera sales quota for all the plots in the i-City development would be 30%; and I-City Selangor would be allowed to establish and carry out the approved outlets and activities anywhere within the i-City Area on a twenty four (24) hours per day basis.

Genting, MMHE weigh on FBM KLCI

KUALA LUMPUR: The FBM KLCI slipped into negative territory on Thursday, July 7 in line with the cautious sentiment at key regional markets ahead of employment data to be released in the US later in the day.

The FBM KLCI shed 0.07% or 1.10 points to 1,590.24, as profit taking at blue chips including at Genting, MMHE and MISC kept the index struggling to stay above the 1,590-level.

Gainers edged losers by 368 to 355, while 355 counters traded unchanged. Volume was 1.27 billion shares valued at RM2.07 billion.

At the regional markets, the Shanghai Composite Index and Taiwan's Taiex fell 0.58% each to 2,794.27 and 8,773.42, Japan's Nikkei 225 shed 0.11% to 10,071.14 while South Korea's Kospi added 0.43% to 2,180.59, Singapore's Straits Times Index rose 0.36% to 3,125.87 and Hong Kong's Hang Seng Index edged up 0.06% to 22,530.18.

Among the decliners on Bursa Malaysia, Genting fell 16 sen to RM11.10, MMHE 13 sen to RM8.54, MISC eight sen to RM7.50, RHB Capital and PPB six sen each to RM9.05 and RM17.74, while Hong Leong Bank, IOI Corp, Petronas Dagangan and YTL fell four sen each to RM13.72, RM5.31, RM17.12 and RM1.53 respectively.

Other losers included Nestle that fell 52 sen to RM46.98, Unite PLANTATION []s and GAB that lost 16 sen each to RM21 and RM10.40, Glenealy and Far East 15 sen each to RM5.70 and RM7.25, while Hap Seng and BIMB shed 14 sen each to RM5.29 and RM2.23.

Dutch Lady topped the gainers and rose 74 sen to RM19.54, DiGi 20 sen to RM29.96, AFG 19 sen to RM3.62, APM Automotive 16 sen to RM5.03, Malayan Flour Mills 15 sen to RM8.41, while Ibraco and UOA Development gained 12 sen each to RM1.12 and RM2.21.

The actives included Timecom, Flonic, AFG, KBB and Genting Malaysia.

Bank Negara maintains OPR at 3%

KUALA LUMPUR: Bank Negara Malaysia has maintained the overnight policy rate (OPR) at 3% at its Monetary Policy Committee (MPC) on Thursday, July 7.

In a statement today, Bank Negara said the global economic recovery in the second quarter of the year was affected by supply disruptions arising from natural disasters and geopolitical developments, the impact of fiscal consolidation measures, the more uncertain conditions in the global financial markets and the higher commodity prices.

Going forward, global growth will remain highly uneven across regions, with increased downside risks, it said.

For the region, growth is expected to be sustained by robust domestic demand, increased investment activity and intra-regional trade, said the central bank.

Bank Negara said that in the domestic economy, the latest indicators pointed to a moderation in growth in the second quarter, due primarily to slower external demand, greater than expected disruptions in the global manufacturing supply chain and lower than projected public sector investment.

Private consumption and investment have, however, continued to be important drivers of growth, it said.

'Going forward, growth is expected to improve, underpinned by continued strength in private consumption and private investment.

'This growth prospect however, could be affected by the heightened external risks,' it said.

Bank Negara said domestic headline inflation increased to 3.3% in May on account of higher food and fuel prices.

Supply factors continue to be the key determinant affecting consumer prices with global commodity and energy prices projected to remain elevated, it said.

There are also some signs that domestic demand factors could exert upward pressure on prices in the second half of the year, it said.

'The MPC's assessment is that the risks to inflation are on the upside. While the outlook for growth remains positive, there are heightened uncertainties arising from global developments that have created higher downside risks to growth.

'The MPC will assess carefully the evolving economic conditions and to the extent that the growth momentum is sustained, further normalisation of monetary conditions will be considered to safeguard price stability,' it said.

Bank Negara raises Statutory Reserve Requirement to 4%

KUALA LUMPUR: Bank Negara Malaysia has raised the Statutory Reserve Requirement (SRR) Ratio from 3% to 4%, effective from July 16, 2011.

In a statement Thursday, July 7, the central bank said the decision to raise the SRR was undertaken as a measure to manage the significant build-up of liquidity, which may result in financial imbalances and create risks to financial stability.

'The SRR is an instrument to manage liquidity and is not a signal on the stance of monetary policy.

'The Overnight Policy Rate (OPR) is the sole indicator used to signal the stance of monetary policy that is announced through the Monetary Policy Statement released after each Monetary Policy Committee meeting,' it said.

Bank Negara foreign reserves up US$1.1b

KUALA LUMPUR: Bank Negara Malaysia's international reserves rose US$1.1 billion to US$134.3 billion (RM406.3 million) as at June 30, 2011 from US$133.2 billion (RM402.6 billion) as at June 15 this year.

In a statement Thursday, July 7, the central bank said the increase was after taking into account the quarterly foreign exchange revaluation gain, following the strengthening of some major currencies against the ringgit during the quarter.

The reserves position is sufficient to finance 9.6 months of retained imports and is 4.5 times the short-term external debt, it said.

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RAM reaffirms ratings of CCM RM500m debt notes

KUALA LUMPUR: RAM Rating Services Bhd reaffirmed the respective long- and short-term ratings of CHEMICAL COMPANY OF MALAYSIA [] Bhd's RM500 million Islamic debt notes at AA3 and P1.

The rating agency said on Thursday, July 7 the debt notes were the Musharakah commercial papers/medium-term notes programme (2008/2023).

'Concurrently, the negative outlook on the long-term rating has been maintained,' it said, adding that CCM's patchy recovery since the 2008/2009 global financial crisis.

CCM's subsidiaries are involved in the manufacture and distribution of pharmaceutical products, fertilisers, industrial chemicals and polymer-coating solutions as well as designing, installing and providing maintenance services for water and wastewater-treatment systems.

RAM Ratings said the reaffirmation of the ratings was due to CCM's strong market position in its core businesses and its well-diversified business profile.

To recap, CCM is one of Malaysia's largest manufacturers of pharmaceuticals and compound fertilisers; it is one of only two companies in the country that supplies liquefied chlorine to water-treatment plants.

It added that CCM is also the largest local producer of polymer-coating solutions for rubber gloves. Its diversified business profile enables it to better withstand a downturn in any particular sector.

'CCM derives financial flexibility from its major shareholder, Permodalan Nasional Bhd (PNB); PNB's active participation in the strategic direction of the Group underlines CCM's importance to its parent,' it said.

However, it said CCM's chemicals division remains exposed to the cyclical nature of manufacturing demand while the performance of its fertilisers division largely depends on the fortunes of the oil palml industry, which is also highly cyclical.

RAM Ratings said cautioned that due to the competitive landscape of its core businesses and the relatively generic nature of its products (pharmaceuticals, fertilisers and chemicals), CCM is exposed to pricing risk. CCM is vulnerable to the price volatility of raw materials, which constitute a large proportion of the various divisions' costs.

'Meanwhile, our reiteration of the negative rating outlook is premised on CCM's patchy recovery since the 2008/2009 global financial crisis. Although the Group's overall performance improved in fiscal 2010, its recovery remained slow, largely due to the more intense competition faced by its fertilisers and pharmaceuticals divisions.

'As such, its funds from operations debt cover (FFODC) of 0.14 times as at end-December 2010 remained below our initial projection of 0.2 times (end-December 2009: 0.08 times). As at end-March 2011, CCM's annualised FFODC stayed unchanged at 0.14 times,' it said.

RAM Ratings' Head of Consumer & Industrial Ratings Kevin Lim said looking ahead, the fertilisers division may keep being plagued by price competition amid an oversupply of local fertilisers.

'This, coupled with the anticipated commencement of commercial production for its new fertiliser plant in Lahad Datu, Sabah (in July 2011), heightens the group's exposure to demand risk.

'In addition, the division may still have to contend with escalating raw-material costs. Meanwhile, the pharmaceuticals division's profit margins, which have been thinning over the years, remain vulnerable to competitive pressures. The Group's water-system business is still mired in losses due to insufficient contracts amid lacklustre investment growth for the industrial sector,' he added.

Lim said should CCM's financial profile deteriorate, there may be downward pressure on its ratings. On the other hand, the rating outlook may be revised to stable if the group is able to show sustainable improvement in its debt-coverage ratios and capital structure.

KKB Engineering gets RM70m Samalaju job

KUALA LUMPUR: KKB ENGINEERING BHD [] has secured a RM70 million contract from OM Materials (Sarawak) Sdn Bhd for the proposed earthworks package for OM Sarawak Plant at Samalaju Industrial Park.

In a filing Thursday, July 7, KKB Engineering said that its wholly owned unit KKB Builders Sdn Bhd signed the form of agreement with OM Sarawak for the project.

It said the contract was for a period of 12 months.

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RHB Cap says still in market for merger partner

KUALA LUMPUR: RHB Capital, Malaysia's fifth largest lender, remains open to merger opportunities if the price is right, its chief said after two larger rivals scrapped plans to acquire it in a bid to create Southeast Asia's biggest bank.

RHB was earlier pursued by Maybank'' and, Malaysia's top two lenders, and is expected to remain in the spotlight despite the failed bids as the authorities encourage consolidation to create bigger banks with the muscle to grab regional market share.

A potential merger with Maybank, CIMB or other lenders could be considered if valuations are right, RHB's group managing director Kellee Kam told Reuters in an interview on Thursday, July 7

"We are happy with RHB's standalone strategy, but if opportunities for M&A exists that outweigh a standalone strategy, then it's something that can be evaluated," Kam said.

"As we understand it, they (CIMB and Maybank) believed they couldn't put together a compelling enough proposition for us to be able to continue our discussions."

CIMB and Maybank called off separate merger plans with RHB last month after Abu Dhabi Commercial Bank'' sold its 25 percent stake in RHB to its sister company Aabar at RM10.80 per share.

The RM10.80 price tag effectively prices RHB at RM23.7 billion or 2.25 times book value. Analysts said that Aabar's transacted price had set a benchmark for any potential merger deal, which could have deterred Maybank and CIMB.

But a banker involved in the earlier merger discussions told Reuters the share sale to Aabar had not been completed with the Abu Dhabi investment fund yet to be registered as an RHB shareholder.

All conditions of the sale agreement have been met but as the shares have not been transferred from Abu Dhabi Commercial Bank meant that the final sale price could still change, the banker, who was not authorised to speak to the media, said.

"If the deal happens at a lower price, the banks can probably look at it again," the banker said. "It can be resurrected. It's all about the valuation."

Kam said a change in the price was a possibility although RHB was not presently not in discussions with anyone. - Reuters

LFE Corp external auditors quit

KUALA LUMPUR: LFE CORPORATION BHD []'s external auditors, Messrs Russell Bedford LC & Company'' tendered its resignation on Thursday, July 7.

The company said an EGM would be arranged for the proposed appointment of new external auditors and to authorise the directors to fix their remuneration.

LFE said the resignation of the existing external auditors shall take effect on the date of approval by the shareholders on the proposed appointment at''the EGM.