Thursday, July 25, 2013

CMS to build new plant and further increase market dominance

New plant, increasing cement production to spur growth for CMS

Borneo Post July 24, 2013, Wednesday
 Photo shows an aerial view of CMS Clinker’s facilities. RHB Research notes that the plant has been operating without any problems since March, projecting annual cost savings of RM15 million each from efficiency improvement, and switching to a local low calorific value coal source.
KUCHING: With a string of major development projects either underway or in the pipeline, busy years ahead is anticipated for construction players in Sarawak, in particular for Cahya Mata Sarawak Bhd (CMS).
According to RHB Research Institute Sdn Bhd (RHB Research) in a report on the group yesterday, growth in demand for cement will continue to push CMS forward.
To note, cement demand in 2012 was reported to be at 1.64 million tonnes compared to the grinding capacity of 1.6 million tonnes.
In fact, CMS had to import some 95,000 tonnes of cement last year to cope with demand.
“Based on conservative growth estimates of five per cent for 2013 to 2014, and a constant growth of 2.5 per cent from 2015 onwards, the group will be importing some half a million tonnes of cement to meet the shortfall in the state by 2020, although the actual deficit may be greater than estimated,” it highlighted in the report.
“This led to the board approving proposals for a new cement grinding line with a one million tonne per day (tpy) capacity, which will require a capital expenditure (capex) of RM150 million to cater to demand,” it stated.
To note, the plant’s management confirmed the construction of this new plant, which will take 18 to 24 months and is slated to begin early next year.
This was on the back of a RM78 million investment in plant upgrade works for wholly owned subsidiary CMS Clinker Sdn Bhd (CMS Clinker), which will increase the group’s production to 2,800 tonnes per day (tpd), or 896,000 tpy.
RHB Research noted that this particular upgrade had been delayed owing to technical hiccups relating to equipment supply.
“We are relieved to learn that these issues have been resolved and that the plant has been operating without any problems since March,” it stated.
“Meanwhile, we are projecting annual cost savings of RM15 million each from efficiency improvement, and switching to a local low calorific value coal source.
“The additional internally-produced clinker will also boost CMS’ bottomline from 2014 onwards. All in all, we are confident that this division – which recorded a loss of RM29 million as a result of the prolonged shutdown in financial year 2012 (FY12) – is indeed well on track to return to the black in FY13.”
To note, the group supplies about half of Sarawak’s high quality asphaltic concrete (premix) and bitumen emulsion.
It is also a substantial player in stone aggregates and a trader of various types of construction materials within Sarawak.
With the government setting its sights on the state’s infrastructure development, the research house expect the demand for construction-related materials to be well supported.
Separately, the group maintains approximately 4,800km of state roads and 680km of federal roads via two separate concession agreements expiring in December 2017 and August 2018 respectively.
RHB Research further explained that CMS’ share price has surged 75.4 per cent since its March 2013 initiation report entitled ‘Set To SCORE’.
“We believe the group’s cement division remains its c’rown jewel’ given its stranglehold on Sarawak’s cement market.
“Nonetheless, its market cap only represents an approximate estimate of the full value of its cement division, if we apply a multiple similar to its regional peers based on FY14 earnings.”

IHH milik Khazanah Nasional menjual Gleneagles CRC

Tuesday, July 23, 2013

Maybank grossly overpaid for BII acquisition?

Amirsham Maybnak CEO in 2008

Maybank lost billions in BII acquisition’

Lisa J. Ariffin | July 23, 2013

DAP's Tony Pua urges Prime Minister Najib Tun Razak to look into Maybank's acquisition of Bank International Indonesia to determine possible reckless abuse of power. UPDATED KUALA LUMPUR: Maybank Berhad has incurred losses amounting to billions of ringgit since its record acquisition of Bank International Indonesia (BII) in 2008, a DAP MP claimed today. Petaling Jaya Utara MP Tony Pua today disclosed that Maybank had “quietly” disposed of 5,065,380,000 ordinary shares to a third party investor on June 20 at Rp355 per share – a significant 21.9% lower than the cost of acquisition. “This 9% (of the issued and paid-up share capital) stake sale will immediately translate to an estimated realised loss of RM157 million. And if these loss is extrapolated, Maybank could be looking at a potential loss of RM1.74 billion,” Pua told a press conference today. He also said that Maybank was “staring at a staggering paper losses of RM2.5 billion” as a result of the acquisition, namely when BII shares closed at Rp315 or 30.7% drop from the acquisition price as of last week. In 2008, Maybank acquired BII at the cost of RM8.25 billion at approximately Rp455 per share and was flayed by critics for paying more than four times the asset value of BII. “In reality, as at Dec 31, 2012, Maybank has already made impairments of RM1.62 billion for the acquisition. This is from Maybank records itself,” he said. He noted that since the acquisition, the return on Maybank’s investment has been abysmal at -0.17%, 1.86%, 2.31% and 6.27% in 2009, 2013, 2011 and 2012 respectively. “Despite the above, in the announcement to Bursa Malaysia, Maybank has claimed that ‘the disposal will not result in any material financial impact to the group’,” Pua said. “However, evidence points to the contrary and in the light of billions of ringgit of losses incurred by Maybank… it is crucial now for Maybank to come clean,” he added, referring particularly to the disposal of 9% of shares. He then explained that Maybank was under pressure to sell its stake in BII due to the Indonesian stock market regulation which requires that at least 20% of BII’s shares to be “free float”. “This condition was imposed by the Indonesian authorities and accepted by Maybank when BII was acquired in 2008,” he said. “More losses will likely be realised when Maybank is forced to sell another 8.3% of BII shares to third parties by Dec 31, 2013, the new extended deadline granted,” he added. ‘Good for the country’ Pua then urged Prime Minister Najib Tun Razak, who is also Finance Minister, to “personally look into this matter”. “We call upon (Najib) to personally look into the matter, whether the cause of losses was ‘a bad business decision’ or possibly a reckless abuse of power,” he said. “Whichever the cause, action must be taken against those found at fault so that the rakyat’s interest in Maybank Bhd will continue to be protected.” In 2008, then prime minister Abdullah Ahmad Badawi defended the acquisition claiming that “the government is confident that the management of Maybank and its board of directors have made the purchase not only in the best interest of Maybank but also for the country”. Najib had insisted then that the “move was still a good one for the country”. In 2012, Maybank chairman Megat Zaharuddin Megat Mohd Nor told Reuters that Maybank is “not going to sell down if we’re going to make a loss compared to what we thought it should be”. Zaharuddin, who is also BII’s president commissioner, said the bank will not sell BII’s stake below Rp510 per share, the price it paid to buy the bank in 2008 before discount.