Tuesday, March 03, 2009

Kumpulan Sentiasa Cemerlang (KSC) says it..

By Biz Times

MALAYSIAN fund manager KSC is bullish on consumer stocks such as tobacco company BAT Malaysia and utilities such as YTL Power
due to the dividends they pay, but is steering clear of state-controlled power firm Tenaga Nasional.

Choong Khuat Hock, director of research at Kumpulan Sentiasa Cemerlang (KSC), which manages about US$150 million, told Reuters in an interview the deepening economic crisis boosted the allure of dividend-paying stocks as safe-haven plays.

Food maker Nestle Malaysia, mobile phone company DiGi.com and independent power producer (IPP) Tanjong were also expected to be resilient in a worsening economy, said Choong. But it was a different story with Tenaga, he said.

“The problem for Tenaga is that industrial production and electricity demand have dropped quite a bit. The company is suffering from a fall in electricity demand,” said Choong.

Tenaga, which supplies two-thirds of the country’s electricity needs, must purchase all capacity produced by IPPs regardless of its requirement.

The company swung to a net loss in the first quarter and warned that its financial performance would worsen due to ballooning capacity payments to IPPs.


KSC currently owns 106,000 shares of Tanjong and 217,000 shares of YTL Corp, according to Thomson One Analytics.

YTL Corp is the parent of YTL Power. Choong declined to comment on what stocks the company is buying or selling.

Malaysian companies finished their reporting season for the October-December quarter last week, where many companies such as No. 2 palm oil producer IOI and builder WCT reported a big drop in net profits due to a surge in customer defaults, provisions and investment writedowns.

JPMorgan said in a report on the quarterly results from 44 Malaysian companies that 39 per cent had reported earnings below expectations.

“The world economy is getting worse, Malaysia is not immune. Going forward, there will be worries about further earnings downgrades,” said Choong.

The fund manager said he does not expect any major surprises from the second stimulus package to be unveiled by Malaysia’s government on March 10.

The second stimulus package is widely expected to be larger than the first one which was put in place last November and worth about US$2 billion.

“I guess they will pump prime, spend more money on infrastructure and they will presumably relax or open up the services sector as well.

But then there is only so much they can do given that our budget deficit is already quite high,” said Choong. - Reuters