Wall Street, finishing flat, posts 4 weeks of gains

NEW YORK: Stocks closed out a fourth week of gains in quiet fashion on Friday, Oct 28 edging higher as the market took a breather after rallying 3 percent on Europe's deal to stem its debt crisis.

Though investors still have questions about implementing the deal, they appeared satisfied by Europe's progress as stocks ended their longest weekly winning streak of the year.

The S&P 500 rose 3.7 percent for the week. The benchmark index had a seven-week rally that ended in January, but only two of the weeks were in 2011.

October also was on track to be the best month for stocks since 1974, supported by strong earnings. Merck & Co Inc (MRK.N) and Chevron Corp (CVX.N) both topped expectations with financial results on Friday.

"For it to not sell off is as much a positive sign as anything," said Andrew Slimmon, managing director at Global Investment Solutions of Morgan Stanley Smith Barney in Chicago.

"We have had a very good earnings season and the benefit of what happened in Europe is that it allows investors to focus on the good earnings season and move the European problem from the primary worry to off the headlines."

The Dow Jones industrial average .DJI gained 22.56 points, or 0.18 percent, to 12,231.11. The Standard & Poor's 500 Index .SPX.INX added 0.49 point, or 0.04 percent, to 1,285.08. The Nasdaq Composite Index .IXIC shed 1.48 points, or 0.05 percent, to 2,737.15.

Concerns that the euro zone debt crisis would spread and stifle domestic bank profits had been a huge overhang for equities, with the S&P down almost 20 percent -- defined as a bear market -- early this month.

As optimism grew about Europe's debt plan, bulls began to gain momentum and the S&P 500 is now up more than 13 percent this month, on pace for its biggest monthly gain since October 1974.

According to Thomson Reuters data, of the 315 companies in the S&P 500 that have reported quarterly results, 71 percent have posted earnings above analyst expectations.

The head of Europe's bailout fund played down hopes of a quick deal with China for that country to throw its support behind efforts to resolve the crisis but said he expects Beijing to continue to buy bonds issued by the rescue fund.

Hewlett-Packard Co (HPQ.N) gained 3.5 percent to $27.94 a day after it said it was ditching a plan to spin off its personal computers unit, a plan that was expected to have cost billions of dollars in expenses and lost business.

A pair of Dow components posted stronger-than-expected earnings. Merck rose 2.3 percent to $35.11 after its profit and sales beat analyst estimates, and Chevron's profit more than doubled. The stock advanced 0.6 percent to $109.64.

MF Global Holdings Ltd (MF.N) slumped 16.1 percent to $1.20. Some customers are moving money away from the futures brokerage, rivals, hedge fund officials and analysts said, though the extent of the outflows is unclear.

Economic data on Friday showed U.S. consumer sentiment improved in October for the second month in a row as consumers felt more upbeat about the economy's prospects.

Volume was about 7.71 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, below the daily average of 8.03 billion.

Declining stocks outnumbered advancing ones on the NYSE by 1,505 to 1,475, while on the Nasdaq, decliners beat advancers 1,406 to 1,114. - Reuters

Stocks, euro pause as Europe doubts linger

NEW YORK: U.S. and European shares took a breather on Friday, Oct 28 after a strong rally on a long-awaited euro zone rescue deal, but a weak sale of Italian bonds showed investor confidence in the agreement was shaky.

The euro eased from a seven-week high against the dollar, while oil and gold prices declined on skepticism over whether the debt deal is enough to staunch the crisis.

Italy's 10-year borrowing costs topped 6 percent for the first time since the launch of the euro after a debt auction, underscoring the country's vulnerability at the center of the crisis.

It was the first euro zone bond auction after policymakers struck an agreement on Thursday to slash Greece's debt burden and strengthen the European Financial Stability Facility, the region's rescue fund.

Adding to concerns, the head of the EFSF played down hopes of a quick deal with China to throw its support behind efforts to resolve the crisis. But he said he expected Beijing to continue to buy bonds issued by the fund.

"I think we have a long way to go with this (European debt) mess. I still see huge risks," said Stanley J.G. Crouch, who oversees $2 billion as the chief investment officer of Aegis Capital in New York.

U.S. stocks ended mixed in quiet trading after rallying 3 percent the previous day, closing out a fourth week of gains.

The Dow Jones industrial average .DJI ended up 22.56 points, or 0.18 percent, at 12,231.11. The Standard & Poor's 500 Index .SPX added 0.49 point, or 0.04 percent, at 1,285.08. The Nasdaq Composite Index .IXIC slipped 1.48 points, or 0.05 percent, at 2,737.15.

The FTSEurofirst 300 .FTEU3 index of leading European shares ended 0.2 percent lower at 1,018.14.

MSCI's all-country world stock index .MIWD00000PUS was last up 0.5 percent at 319.22, after hitting its highest level in nearly three months and posting its best week since July, 2009.

Emerging market shares .MSCIEF rallied 1.9 percent.

While there are still questions over implementing the European deal, some analysts said investors investors appeared satisfied by Europe's progress.

"For (markets) to not sell off is as much a positive sign as anything," said Andrew Slimmon, managing director at Global Investment Solutions of Morgan Stanley Smith Barney in Chicago.

Investors' focus was shifting to a meeting of the Group of 20 nations next week in Cannes, France. They will watch for any coordinated efforts or pledges to help stabilize world financial markets, which have been battered this year by Europe's debt crisis and a slowing world economy.

EURO OFF HIGHS

The euro slipped 0.2 percent to $1.4161, retreating from a seven-week high of $1.4247 set on Thursday. The dollar steadied after falling 1.8 percent against a basket of currencies the previous day in its biggest daily drop in more than two years.

"We're seeing the market reposition itself," said Michael Woolfolk, managing director at BNY Mellon Global Markets in New York. "Going into the two (European) summits, speculators were long dollars. They have now exited those positions and players are fine tuning."

Analysts said much of this month's 5.8 percent rally in the euro against the dollar was driven by a squeeze of short positions, with speculators reluctant to build bets against the euro ahead of the G20 and a U.S. Federal Reserve meeting next week.

Any hints the Fed is considering another round of monetary easing to boost the U.S. economy or of a commitment from G20 players to support the euro zone bailout fund would likely push the euro higher.

The U.S. dollar index last traded up 0.2 percent at 75.053 .DXY. Against the yen, the dollar slipped 0.2 percent to 75.79, keeping alive the risk of intervention by Japanese authorities to curb the yen's rally.

Brent crude settled down $2.17 at $109.91. U.S. crude dropped 64 cents to settle at $93.32.

Spot gold retreated to around $1,741 an ounce from a one-month high of $1,751.99.

U.S. Treasuries prices rose as the highest yields in more than 2-1/2 months drew buyers. The benchmark 10-year U.S. Treasury note was up 18/32, its yield at 2.32 percent. - Reuters

Groupon mulls raising IPO price

NEW YORK/ SAN FRANCISCO: Groupon Inc is considering raising its IPO price range, as underwriters grow more confident about demand after completing the East Coast leg of a two-week roadshow to woo investors, Reuters reported on Friday, Oct 28.

One of the most closely watched initial public offerings of the year, Groupon had previously filed with regulators to sell 30 million shares at $16 to $18 apiece, scaling back its aspirations amid weak market conditions and uncertainties over its long-term business outlook.

The company is now considering raising the price range and could file an amended IPO prospectus early next week, said a source familiar with the situation. Groupon declined to comment and no other details were immediately available.

Chief Executive Andrew Mason hosted a luncheon on Friday at the St. Regis hotel in Manhattan -- the biggest event on the roadshow, seen as crucial in helping Groupon's bankers decide how to price the shares.

Fund managers who attended the meeting told Reuters they were pleasantly surprised by how charming and composed Mason was, since he has a reputation of being volatile after he blasted Groupon's critics in a leaked staff memo this summer.

Nonetheless, quite a few investors said they were still undecided about buying into the IPO, noting that Groupon faces huge competition in the daily deals business. The company has also had to change its accounting twice under regulatory pressure and has lost two chief operating officers in the past year.

Mason "was a lot more likable, less arrogant in person than I expected," said a money manager at a firm with more than $15 billion under management, who attended the Friday meeting.

"It's intriguing. It's such a massive opportunity if they're the winner, so the question is, 'Do they become the winner?'" he said, speaking on condition of anonymity.

Despite lingering concerns, investors expect the IPO to be over-subscribed, partly because bankers have limited the float to just 4.7 percent of shares.

One investor who attended the event said the investor's hedge fund firm planned to ask for shares in the offer, but added that it was very unlikely to get an allocation.

The risk is that Groupon may be flipped by some investors on the first day. Later on, early-stage investors might want to cash out through secondary issues, putting downward pressure on the stock.

"It will probably be like LinkedIn, a huge moonshot," said a hedge fund manager with $500 million under management, who attended Friday's presentation.

"There hasn't been an IPO in a long time and everyone will clamor for it," he said, but added that he does not view Groupon as a long-term investment.

Fidelity Investments, Capital Group and T Rowe Price already own Groupon stock from private investment rounds and are planning on buying more shares in the IPO, according to two underwriting sources.

The three asset managers all declined to comment so it was not certain if they would follow through. Institutional investors typically do not show their hand until a day or two before the final pricing and stock market debut.

AHEAD OF AMAZON

Groupon scaled back its IPO to raise up to $540 million, from a previous target of up to $750 million, amid Wall Street concerns that the Chicago-based company faced well-funded rivals such as Google Inc and Amazon.com Inc. They have billions of dollars to put in play, while Groupon expects to have about $723 million in cash and equivalents after the IPO.

A private equity investor who attended the presentation on Friday said he thinks Groupon is big enough that it is here to stay, but he was still not sure how much the company is worth.

"People are questioning Groupon's business model but I think that's misplaced," said the investor, whose firm has more than $10 billion under management. "I don't know if it's worth $11 billion or $5 billion or $20 billion -- that's where the debate comes in -- but it's a real business."

Groupon, which is approaching three years old, stressed to potential investors on Friday that its financials compared favorably to those of Amazon in its early days.

Mason said Groupon is currently generating about $190 in gross billings per customer per year on average, compared with Amazon's $130 when it was at a comparable stage of development, according to a person who attended the presentation. Amazon now generates about $290 in gross billings per customer per year, Mason was quoted as saying.

"Given the past mistakes management has made, they sounded credible," Scott Sweet of research firm IPO Boutique said.

The one-hour presentation took place at a room atop the St. Regis, a luxury hotel off Fifth Avenue that sports red carpet stairways leading up from the sidewalk and staff in fancy overcoats and top hats.

Security was tight and investors who were not pre-registered and who tried to walk in were turned away. Those investors who made it inside were offered chicken salad, bread, chocolate chip cookies, and tea or coffee.

There were half a dozen questions after the presentation, of which two focused on one slide that showed Groupon spending roughly $14 to acquire each customer and generating a return on that investment, according to one investor.

Another question focused on Groupon's efforts to reduce marketing spending and how that will effect subscriber growth.

Executives and bankers are scheduled to meet with investors in San Francisco, Denver and Chicago next week.

Underwriters on the Groupon IPO are being lead by Morgan Stanley, Goldman Sachs & Co and Credit Suisse. The shares are expected to begin trading on the Nasdaq on November 4 under the ticker symbol "GRPN." - Reuters

London investment bank keen on 30% stake in Envair

SHAH ALAM: Envair Holdings Bhd has received a letter of intent from Zai Corporate Finance Ltd (ZAICF), an investment banking firm based in London, to subscribe for up to 30% of its new ordinary shares of 10 sen each at the market issue price.

The ACE Market listed company said on Friday, Oct 28 the board would deliberate on this matter and announce its decision on the private placement.

Envair executive director Mohd Anuar Mohd Hanadzlah, the pricing would be based on the average market price of the group's shares traded on Bursa Malaysia over a certain period.

'They have indicated in the letter of intent that the valuation will be based on the current market price. Probably what we'll do is that we'll take the average market price over one or two weeks.

'However, the share price has rallied in recent weeks and reached 44 sen, so maybe there are not many who would be keen to buy the shares at 44 sen,' he said, indicating there would be certain amount of discount to be given for the private placement.

The water treatment system equipment manufacturer and distributor group's share price has risen after it announced that it has entered into a joint marketing agreement with Resscom Petroleum Sdn Bhd to undertake the business of distribution and trading of crude oil and liquefied natural gas.

Since Oct 6, share price had surged 232% from 11 sen per share to Friday's closing price of 37.5 sen.'' Year-to-date, its share price has risen by'' 461.5%, from 6.5 sen on Jan 3 and reached its closing high of 40 sen on Oct 20. It hit an intraday high of 43.5 sen on Oct 20.

Interest in the stock was also spurred on by its statement on Oct 13,announced it was venturing into the oil and gas sector.

In the second quarter ended June 30, 2011 the group recorded RM170,000 in revenue and losses of RM290,000.

Sudden interest in the stock has been buoyed by market talk that Envair had received letter of intent from potential buyer based in China to buy between 1.5 million and 2.0 million barrels of oil per month from the group.

In fact, the share rally was due to the entry of some individual investors based in China.

Envair's major shareholders include Teh Chee Teong (15.83%) and Kao Hsuan-Ying (12.16%) while the others are Ng King Kau (9.11%), Zhang Li (4.97%), Lim Ah Seng (4.59%) and Wong Peng Yew (4.45%).

KNM, Zecon, GAP yet to finalise terms for RM15b project

KUALA LUMPUR: KNM GROUP BHD [] and ZECON BHD [] have yet to finalise the agreement and financing for the RM15 billion petroleum refinery and polypropylene unit projects in Teluk Ramunia, Johor, with Gulf Asian Petroleum Sdn Bhd.

The two companies said on Friday, Oct 28 said the heads of agreements were signed on July 26, 2011 but they had 'yet to achieve financial close for the refinery/polypropylene project and the storage project'.

To recap, the first agreement was to undertake the engineering, procurement, CONSTRUCTION [] and commissioning (EPCC) contract of the 150,000/200,000 barrels per day (bpd) petroleum refinery and 400,000/525,000 million tonnes per annum (mtpa) polypropylene unit for Gulf Asian Petroleum.

The second was to undertake the EPCC contract for the petroleum product storage terminal'' comprising four terminals with a total storage capacity of 2.328 million cubic meters, complete with supporting infrastructure and auxiliaries including the jetty.

Gulf Asian Petroleum is owned 50% by Mubadala Capital Sdn Bhd and 50% by Abdul Aziz Hamad Al-Delaimi. It was established to build and operate an integrated petroleum complex comprising of the refinery and storage projects at Teluk Ramunia.

However, on Friday, KNM and Zecon said they would continue to pursue to finalise the EPCC contract, consortium agreement, shareholders agreement and financing for the projects.

Cycle & Carriage 3Q earnings down 38% on lower margins

KUALA LUMPUR: Cycle & Carriage Bhd's earnings for third quarter ended Sept 30, 2011 fell 38.37% to RM5.93 million from RM9.62 million a year ago, due to lower margins and reduced non-recurring income.

It said on Friday, Oct 28 that revenue rose 20.6% to RM188.21 million from RM156.03 million. Earnings per share were 5.89 sen compared to 9.55 sen the previous year.

Cycle & Carriage said the persistent intense competition in the premium vehicle segment in Malaysia put pressure on margins resulting in the lower margins.

However, the group said it managed to increase sales of Mercedes-Benz cars by 16%, assisted by the inclusion of sales by Lowe Motors Sdn Bhd. Lowe Motors was acquired in May 2011.

The group's head office costs were lower than the year before and earnings from the group's after-sales activities have also improved.

For the nine months ended Sept 30, 2011, profit fell 8.93% to RM20.29 million from RM22.28 million a year ago. Revenue increased 11.92% to RM519.00 million from RM463.70 million.

Cycle & Carriage chairman Brian Keswick said: "While the impact of the deteriorating global economy on Malaysia is still unclear, the intense competition in the local automotive market is expected to continue putting pressure on sales and margins."

#Update* Tenaga 4Q operating loss at RM248.80m, sees challenging FY12

KUALA LUMPUR: TENAGA NASIONAL BHD [] posted operating losses of RM248.80 million in the fourth quarter ended Aug 31, 2011 due to higher fuel costs of coal and utilisation of oil and distillates and expects the current financial year to be 'very challenging'.

The power giant said on Friday, Oct 28, the severe gas curtailment in 4QFY11 led to higher usage of the alternative fuels while coal price rose to US$117.30 per tonne from US$97.20 a year ago.

Tenaga said the decision to use alternative fuel was crucial to meet the demand during the gas curtailment period as it was severely impacted by the high costs. This saw Tenaga posting net loss of RM453.90 million, which was also impacted by foreign exchange translation loss of RM344.60 million in the quarter.

The dismal results were in contrast from a year ago when it posted operating profit of RM917.20 million in the fourth quarter ended Aug 31, 2010.

Its net loss in 4QFY11 was also in contrast with 4QFY10's net profit of RM555.20 million through there was forex translation loss of RM35.50 million.

However, revenue was 13% higher at RM9.12 billion compared with RM8.07 billion a year ago. Loss per share was 8.33 sen compared with earnings per share of 10.22 sen.

Tenaga said for the 4QFY11, it recorded electricity sales of RM8.41 billion compared with RM7.68 billion a year ago.

It had borrowings totaling RM19.054 billion at as Aug 31, 2011, of which RM5.457 billion was in yen, RM2.909 billion in US dollar and RM25.80 million in other currency while RM10.66 billion was in ringgit.

Its cash and cash equivalents shrank to RM3.258 billion as at Aug 31, 2011 from RM8.015 billion a year ago.

For the financial year ended Aug 31, 2011, its net profit plunged 84.3% to RM499.50 million from RM3.20 billion in FY10. Revenue was 6.2% higher at RM32.20 billion compared with RM30.32 billion.

Ex-Transmile independent directors fined, jailed

KUALA LUMPUR: Two former independent directors of TRANSMILE GROUP BHD [], Jimmy Chin Kim Feung and Shukri Sheikh Abdul Tawab were jailed one year and fined RM300,000 in default six months imprisonment for authorising a misleading statement to Bursa Malaysia.

The Securities Commission said on Friday, Oct 28 the Kuala Lumpur Sessions Court found them guilty under section 122B(b)(bb) of the Securities Industry Act 1983.

Their offence was authorising the furnishing of a misleading statement to the stock exchange in Transmile's quarterly report on unaudited consolidated results for the financial year ended Dec 31, 2006.

'The misleading statement was with respect to the unaudited revenue figures which were reported to the stock exchange for both the fourth quarter of 2006 as well as the cumulative period for 2006,' said the SC.

According to the SC, Chin and Shukri, were at the material time, in February 2007, members of Transmile's audit committee and board of directors.

They were charged in 2007 and claimed trial. The trial started in 2010 and the prosecution called 11 witnesses to prove the charge against both accused. Both accused gave sworn evidence in their defence.

Sessions Court Judge, Justice Datuk Jagjit Singh Bant Singh, in passing the sentence of one year imprisonment and a fine of RM300,000, had said the public interest factor must be given paramount consideration.

He said the audit committee is a vital organ of the company and particularly important in the corporate governance.

Jagjit Singh said the audit committee had specific duties, functions and responsibilities and that the investing public relied on them very much.

However, evidence showed a blatant disregard of the seriousness of the concerns on the contra transactions when the audit committee was told by Deloitte that the contra transactions were very unusual and lacked commercial justification.

Jagjit Singh said these were sufficient warning bells and as audit committee members they should have raised these issues to the board but instead failed to do so.

The trial of two other former directors of Transmile -- Gan Boon Aun and Khiudin Mohammed -- who were executive directors at that time, are pending in the Kuala Lumpur Sessions Court.

The SC said the charges against Gan and Khiudin were also because of the misleading statements made in the same quarterly statement which was submitted by Transmile to Bursa Malaysia in February 2007.

Both accused had, on March 22, 2011, been called to enter their defence after the close of the prosecution case.

KLCI closes at more than 2-months high

KUALA LUMPUR: The FBM KLCI closed at a more than two-months high on Friday, Oct 28, led by fund buying of index-linked stocks, as investors were upbeat on the euro zone leaders deal on Greece's debt issue

The KLCI closed up 10.89 points or 0.74% to 1,481.82, the highest since Aug 23, though it was off its day's best. Volume traded was at 1.88 billion shares valued at RM2.295 billion. Gainers led losers 470 to 338 while 319 counters traded unchanged.

The upbeat mood was evident in key regional markets. Hong Kong's Hang Seng was up 1.68% to 20,019.24, Shanghai's Composite Index 1.55% to 2,473.41, Japan's Nikkei 225 1.39% to 9,050.47, Singapore's Straits Index 2.04% to 2,905.72 and South Korea's Kospi 0.39% to 1,929.48.

At Bursa Malaysia, key stocks which pushed the KLCI were Nestle, British American Tabacco, MALAYSIA AIRPORT HOLDINGS BHD [], KLK and F&N.

Nestle rose 94 sen to RM50.40, BAT 92 sen to RM46.22, MAHB 44 sen to RM21.00 and F&N 38 sen to RM16.78.

CIMB gained 18 sen to RM7.46, pushing the index up 3.10 points, Genting gained 30 sen to RM10.60 adding 2.67 points to the index, while Maybank gained six sen to RM8.35 and PetChem 10 sen to RM6.41 to add 2.03 points to the index.

Zelan gets letter of intent from Mudaya for RM300m civil works

KUALA LUMPUR: ZELAN BHD [] has received a letter of intent from Mudajaya Corporation Bhd to undertake civil works valued at RM300 million for a power plant expansion in Johor..

It said on Friday, Oct 28 Mudajaya confirmed its intention to subcontract part of the civil works for the CONSTRUCTION [] of the 1,000 MW Tanjung Bin coal fired power plant in Johor.

However, this was subject to the consortium, comprising of Alstom, Mudajaya and Eversendai Corp Bhd, being appointed the main engineering, procurement and construction contractor (EPCC) by Malakoff Corporation Bhd for the power plant expansion.

Zelan also said the letter of intent was also subject to the subcontract price being competitive and acceptable to Mudajaya, it added. The letter of intent will be valid for nine months or until the consortium receives the letter of award and notice to proceed, whichever is earlier.