F&N is losing rights to distribute Coca-Cola and Sprite soft drinks

By The star

Shares in Fraser & Neave Holdings Bhd (F&N) plunged yesterday after the company lost the rights to sell Coca-Cola and Sprite soft drinks, tumbling RM1.15 or 12.78% to RM7.85.
About 4.2 million shares changed hands.

The selldown was sparked on concerns about the beverage maker’s prospects after The Coca-Cola Co decided not to extend its bottling and distribution agreements with F&N.
Although F&N said the non-renewal agreement was not expected to have any material effect on the operating performance for this financial year ending Sept 30 (FY09) as the agreements only expired in 2010.

In a filing with Bursa Malaysia on Wednesday, F&N said Coca-Cola Co was not extending the bottling and distribution agreements with F&N when they expired on Jan 26, 2010.
Sales revenue of Coca-Cola Co products, mainly Coca-Cola and Sprite, amounted to RM421mil, or 35% of F&N’s soft drinks division’s revenue in FY08.

Sales revenue from this division stood at RM1.2bil in FY08, or 48% of the entire group’s revenue.

Group chief executive officer Tan Ang Meng said in a statement yesterday the non-renewal of the Coca-Cola franchise agreements would give the group the opportunity to further build on the F&N brand equity, and realise a potential which was unavailable in the past.
“As a result of our new status, we are now able to launch new products and venture into new territories and export markets from which we were restricted in the past by the agreements,” he said.

Tan said the relationship between Coca-Cola Co and F&N was a dynamic one and, in the course of the collaboration, there had been differing perspectives, viewpoints and expectations.
“The group’s financial position is sound, our business sustainable and diversified and coupled with our resolve and determination, we will overcome and withstand any eventualities. While challenging, our future is indeed bright and we are confident,” he said.
Analysts were surprised when the agreements were terminated after decades-long partnership between the two companies.

Maybank Investment Bank Bhd head of research Vincent Khoo said the expiration of F&N’s 73-year union with Coca-Cola Co was unexpected.

“This is likely to de-rate F&N in terms of sentiment, as well as operationally,” he said, adding that the loss of Coca-Cola and Sprite revenues were estimated to be RM229mil in FY10 and RM475mil in FY11.

This would translate into an estimated 8.1% and 18.1% reduction in the beverage maker’s FY10 and FY11 net profit forecasts.

AmResearch said it viewed the development as negative for F&N, as its soft drinks division was the most lucrative compared with its three other divisions - dairy products, glass containers and properties.

“Assuming F&N is unsuccessful in obtaining new contracts with Coca-Cola Co, this will have a negative impact on our forecast earnings for FY10 and FY11.
“Based on our assumptions, the calculations show a potential earnings revision by as much as 14% for FY10 and a greater 22% for FY11,” it said.

Brand new Jaya Jusco in Bandar Sri Permaisuri by Aeon Co (M) Bhd?

By the Star

Aeon Co (M) Bhd has entered into a sale and purchase agreement to acquire 2.5ha of land and property for RM107.2mil from Kuala Lumpur City Hall.

The purchase comprised RM27.2mil in land cost and RM80mil in building cost to be built in the future. The land forms part of a township called Bandar Sri Permaisuri.

In a statement to Bursa Malaysia yesterday, Aeon said the acquisition would be fully satisfied by cash and financed through the company’s internal funds.

“The acquisition is in line with Aeon’s corporate strategy of accelerating the expansion of its retail business through opening of new shopping centres and outlets,” it said.

This acquisition is not expected to have any impact on the earnings per share, net assets per share and gearing of the company.

There will be no change in the share capital and major shareholders’ shareholding of the company.

*Does it mean that there will be a brand new Jaya Jusco in Bandar Sri Permaisuri? Good chance to snap new property launching in Bandar Sri Permaisuri? Your choice...

YTL Francis Yeoh is one of Asia's best executives 2008

By YTL Community News

Tan Sri (Dr.) Francis Yeoh, Managing Director of YTL Group won the accolade of being one of Asias best executive 2008 under the Asias best companies & executives category awards. ASIAMONEY talks to fund managers andanalysts to determine the best managed small, medium and large cap corporations and best executives across the region. Some attribute this patience to his Christianity. An investment banker close to Yeoh says heoften invites staff and advisers to pray before and after deal completion meetings. Whether or not Yeoh's success is the result of divine intervention, he has a knack of timing deals well.

Amongst Asias best executives 2008 were Grant King, Managing Director of Origin Energy in Australia, Zhu Min, Executive Vice-President of Bank of China, Vincent Cheng, Chairman of HSBC in Hong Kong, Liew Mun Leong, CEO of CapitaLand in Singapore, Tadashi Yanai, Chairman & CEO of Fast Retailingin Japan, Om Prakash Bhatt, Chairman of State Bank of India, Nam Yong, CEO of LG Electronics in Korea, Morris Chang, Chairman of TSMC in Taiwan, Manuel Pangilinan, Chairman of PLDT in The Philippines, Khalid Hashim, Managing Director of Precious Shipping in Thailand and Graeme Pitkethly, CFO of Unilever Indonesia.

Asiamoney, December 2008/January 2009 issue:

BEST EXECUTIVEFrancis Yeoh, managing director, YTL Group
Francis Yeoh, managing director of sprawling hotels-to-water empire YTL Group, was born into a wealthy business. He inherited his wealthy father's construction company in 1986.
But the canny business leader has proven his mettle in the years since. Under Yeoh's prudent stewardship, YTL entered both the 1997-8 Asian crisis and the current credit crisis in financial health.

Yeoh sits patiently on the sidelines during bull markets, waiting until businesses run into trouble and need to sell up cheaply. Some attribute this patience to his Christianity. An investment banker close to Yeoh says he often invites staff and advisers to pray before and after deal completion meetings. Whether or not Yeoh's success is the result of divine intervention, he has a knack of timing deals well.

In 2002, after Enron collapsed, YTL bought Britain's Wessex Water for a very cheap 1.2 billion (US$1.8 billion). And as times get tough across Asia, YTL has RM12 billion in net cash and Yeoh is on the look-out for bargains.

In October, YTL bought controlling stakes in two property funds from Australian bank Macquarie for US$189 million. The price valued the real estate investment trusts, which own a stretch of shops along Singapore's Orchard Road, at a bargain 49% of net asset value. A month later, Yeoh announced he was combing through other prospective acquisitions.
His corporate governance record is impressive, too. Unlike many Asian tycoons, Yeoh has avoided the myriad of cross-ownerships and related party transactions that so frustrate investors.

Amongst Asias best executives 2008 were Grant King, Managing Director of Origin Energy in Australia, Zhu Min, Executive Vice-President of Bank of China, Vincent Cheng, Chairman of HSBC in Hong Kong, Liew Mun Leong, CEO of CapitaLand in Singapore, Tadashi Yanai, Chairman & CEO of Fast Retailingin Japan, Om Prakash Bhatt, Chairman of State Bank of India, Nam Yong, CEO of LG Electronics in Korea, Morris Chang, Chairman of TSMC in Taiwan, Manuel Pangilinan, Chairman of PLDT in The Philippines, Khalid Hashim, Managing Director of Precious Shipping in Thailand and Graeme Pitkethly, CFO of Unilever Indonesia.

Higher Unemployment for 2009

By JobsDB

Economists are projecting Malaysia’s jobless/unemployment rate to rise to between 4 and 4.5 per cent this year following a third-quarter 2008 spike when lay-offs were four times those in Q2, says the online news portal, The Malaysian Insider.

It noted that some 11,560 workers were retrenched in Q3.

And the rate of job losses is expected to accelerate this year, with estimates that between 200,000 and 400,000 people could be laid off should the global slowdown bite deeper into consumer demand.

The news portal said tor export-reliant Malaysia - the country’s external trade to GDP is 172 per cent - manufacturing would be hit hardest. And the electrical and electronic (E&E) and automotive-related sectors would likely be bruised most.

Challenging year ahead seen for secondary residential properties (2009)

By Star Biz

It will continue to be challenging in 2009 for the secondary residential property market as buyers continue to adopt a wait-and-see stance on property purchases due to the global economic slowdown, property experts said.

The degree of softening in property sales would depend on the severity of the economic downturn next year, they said.

Regroup Associates Sdn Bhd executive director Paul Khong acknowledged that the secondary residential property market has been quite slow as potential buyers have been holding off decisions on house purchases. “This has significantly impacted the property market especially in the current quarter,” he told StarBiz.

“The quiet period is expected to continue through to the first quarter of 2009 after all the holidays are over.” S.K. Brothers Realty (M) Sdn Bhd general manager Chan Ai Cheng said buyer sentiment had taken a beating due to the current economic uncertainties.

“It’s a waiting game for buyers. There are even ‘aborted’ cases where buyers have placed an earnest deposit to purchase a property and subsequently pulled out from the transaction, in the hope that prices will come down further or in search of fire-sales while others are uncertain of their job stability and postponing the purchase commitment,” she said.

Nevertheless, Hartamas Real Estate Sdn Bhd managing director Eric Lim is anticipating stable to moderate growth due to bargain hunting in certain segments of the secondary property market, especially landed residential property. “(However) the market for properties that are purchased for investment and speculation will be slower,” he acknowledged.
The agency experienced a 20% to 30% drop in sales in the second half of the year versus the corresponding period of 2007. “This is quite substantial for us. Sentiment is still not good,” Lim noted.

CH Williams Talhar & Wong Sdn Bhd managing director Goh Tian Sui concurred. “The last two to three months have been quite bad – enquiries and sales activities have dropped. Owners are more open to negotiations in pricing,” he said. The prices of certain secondary residential properties could also face more pressure next year due to a lack of demand and an increase in supply of completed projects.

Citing an example, Regroup’s Khong said the situation for high-end condominiums in the KLCC and Mont Kiara areas were getting critical and there would be more pressure on rental and capital values as many of the projects in the vicinity would be completed within the next one or two years.

“Supply will be mounting on a monthly basis as demand continues to be low and this will eventually translate into lower capital values and rental.

“An easy 15% to 20% shed in values are envisaged for this sector generally,” Khong said.
The asking prices for middle-class residential properties in general, for example, terrace houses in good locations such as Sri Hartamas, Bandar Utama and even Taman Tun Dr Ismail, had already been adjusted 5% to 10% lower to reflect current market conditions, Khong said.
Khong & Jaafar Sdn Bhd managing director Elvin Fernandez noted that prices of high density condominiums with a low occupancy rate in not-so-choice locations were about 10% lower now compared with a year ago.

“Although prices have softened, it is still difficult to sell such properties,” he said.

YTL Power a BUY?

By Star Biz

YTL Power International Bhd’s proposed purchase of Singapore’s PowerSeraya Ltd looks unattractive from the earnings record of the latter. It was announced on Tuesday the YTL Power group will purchase the entire equity of PowerSeraya, owner of two power stations that has 25% of Singapore’s electricity generation capacity.

The price for PowerSeraya is S$3.4bil (RM8.09bil) and the assumption of a S$200mil debt that owner Temasek Holdings Ltd owes the former. As the debt is owed to a company that will become YTL Power’s wholly-owned subsidiary, it is believed the debt can be cancelled.
The acquisition is expected to be completed in the first half next year and in its first full year of contribution in 2010, PowerSeraya is projected to produce a net profit of RM76mil, YTL Power said. That translates into an earnings per share contribution of 1 sen for YTL Power, the company added.

That sounds miniscule for an investment outlay of S$3.4bil. It should be noted, however, that PowerSeraya’s net profit was much higher at S$218.3mil for its year ended March 31 (FY08). The reason for the wide fluctuation in its profitability is not known.

It could be due to factors such as scheduled maintenance shutdown at a certain period. PowerSeraya’s earnings in FY08 would be a return of 6.4% on YTL Power’s purchase price. The free cashflow from PowerSeraya should exceed that because depreciation, a large non-cash item, would have been deducted to arrive at the profit figure.

In addition, PowerSeraya is constructing two 379MW cogeneration units that will be operational in 2010, which will expand its revenue-generating capacity. Power project investments are premised on free cashflow of the acquired assets being used to repay loans taken to finance the acquisition.

YTL Power said the PowerSeraya purchase will be funded by S$1.15bil from the former’s cash reserves and S$2.25bil from a loan.

Outlining a scenario, an investment banker told StarBiz yesterday that if YTL Power took a 10-year loan for S$2.25bil, half of that would be repaid in five years from PowerSeraya’s own cashflow. At that time, S$1.125bil of debt would have been repaid and become equity for the YTL Power group.

In 10 years, the entire loan would have been repaid and YTL Power would then own PowerSeraya with the entire debt repaid. Effectively, YTL Power would have gained an equity value of S$2.25bil by then.

That’s a huge sum in equity value, although it’s not an acquisition primed for high growth. The objective is steady, assured wealth creation. Furthermore, YTL Power is not getting PowerSeraya at a distressed sale price because Temasek is not in any form of distress. The word on the street is the internal rate of return (IRR) - the return to be earned on invested capital - for PowerSeraya is about 10% or in the low teens.

For a richer IRR in the mid-teens, YTL Power will have to trawl further afield for distressed asset sales which, no doubt, it is working on.

Petronas revenue still up!

By the edge

Despite falling oil prices, national oPeil company Petroliam Nasional Bhd (Petronas) continued to chalk up an impressive growth in net profit on the back of higher average prices of the commodity.

Petronas posted a 46% year-on-year growth in net profit to RM42.68 billion for the first half (1H) of its financial year ending March 31, 2009 from RM29.27 billion, after paying tax expense of RM20.5 billion.

Revenue was sharply higher at RM157.2 billion versus RM102.8 billion a year ago. Pre-tax profit soared nearly 49% to RM63.26 billion from RM42.57 billion previously. Higher earnings boosted Petronas’ cash pile to RM124.6 billion from RM113 billion as at March 31. The group’s other liabilities, however, shot up 47% to RM112.8 billion from RM76.9 billion in the previous corresponding period.

The surge in Petronas’ profit did not come as a surprise given the 64%, or US$49.50 (RM179.68), jump in the average price of Tapis crude to US$126.48 per barrel during the six months under review. The average price of the commodity was US$76.64 in the corresponding period last year.

Tapis crude is the benchmark for Petronas’ production.

However, the national oil company which contributes over 40% of the government’s coffers in the form of petroleum taxes and dividend, is likely to see lower profits in the second half of its financial year in tandem with the drastic drop in crude oil prices since July when the worldwide commodity boom collapsed.

The average price of Tapis fell to US$74.77 in October, down 30% from US$106.92 in September. Yesterday, Bloomberg Asia-Pacific Tapis crude oil spot price was US$50.03 per barrel. The current level is the lowest since January 2005. The price has plunged 67% from the peak of US$153 in mid-July.

The last financial year, ended March 31, 2008, was a record year of profit for Petronas. The operating environment has since turned harsh, for on top of the meltdown in crude prices, the weakening ringgit and increase in production costs will further erode the group’s profitability.
According to Petronas president Tan Sri Mohd Hassan Marican, every 10-sen fall in the ringgit against the US dollar will take away about RM2.5 billion from the group’s profit.
The US dollar has strengthened substantially in recent months due to its standard currency status. The greenback has appreciated to RM3.628 against the ringgit, up almost 13% from the US$3.21 level in July.

International operation is Petronas’ biggest revenue contributor, generating RM68.9 billion or 44% of total revenue, followed by exports with RM56.7 billion or 36%, and domestic opertation, RM31.5 billion or 20%. But domestic operation, including exports, is still the most profitable due mainly to the lucrative production-sharing contracts it has with international oil majors for exploration and production (E&P) activities.

Giving a breakdown, the oil business, including refined petroleum products and crude oil trading, is the most profitable division, accounting for 40% or RM25.7 billion of the company’s operating profit. Gas is the second biggest profit-earner, contributing RM20.8 billion or 32.5% to group operating profit. Next comes E&P with 19% or RM11.9 billion.

Malaysia's most valuable brands 2008

By the edge

For the second year running, Maybank has been ranked as Malaysia’s most valuable brand with a brand value of RM9.3 billion in a valuation study commissioned by 4As (the Association of Accredited Advertising Agents Malaysia) and The Edge.

The Malaysia’s Most Valuable Brands (MMVB) 2008 study, conducted by leading brand consultancy Interbrand, also ranked Public Bank, with a brand value of RM6.8 billion, as Malaysia’s second most valuable brand, followed by CIMB, with a brand value of RM6.3 billion.
The three banks, together with Genting (RM4.5 billion), Parkson (RM4.2 billion), and Celcom (RM3.9 billion), make up the six most valuable brands. All six had a brand value that exceeded US$1 billion (RM3.6 billion) each.

The total brand value of Malaysia’s 30 Most Valuable Brands was RM61.8 billion, up from RM56.6 billion last year. The top 30 brands were honoured at a gala event here last night. The guest of honour, Tan Sri Amirsham Abdul Aziz, Minister in the Prime Minister’s Department, handed out the awards.

“Brand valuation is a step in the right direction. Brands build trust. With the economic situation, branding has become even more important,” said Amirsham.
According to the study, despite a small drop of 3% in value, Maybank still tops the league table. Its acquisition in Indonesia has not affected the results as the study was based on year-end 2007 financials.

Datuk Seri Abdul Wahid Omar, president and CEO of Maybank who received the award last night, said he was happy with the ranking even though the brand value had decreased slightly. “So as we move forward locally, we will aim for the Maybank brand to be recognised, not only in Malaysia, but also in the Southeast Asian region.”

On the other hand, CIMB’s mergers and acquisitions in 2006 and its unifying brand strategy saw its brand value jump 83% to RM6.3 billion from RM3.4 billion last year, the highest increase among the top 30.

“This is a testament to our investment over the last year, We will continue with our long-term strategy as it has proven effective,” said Effendy Shahul Hamid, head of group corporate communications, CIMB Group.

The brand value of DiGi, which moved up one notch from No 10 last year, grew 35% despite a highly competitive and licence-restricted marketplace, said Interbrand in a press release issued yesterday.

Maxis is not in the rankings this year as it has been delisted from Bursa Malaysia. One of the criteria for MMVB is that the brands must be owned by listed companies as the study is based on publicly available information. Brands must also be consumer-facing and Malaysian-owned or originated.

National icon Proton saw the biggest fall in brand value of 37%, causing it to drop from No 23 last year to No 28 this year. The study noted that Perodua’s brand value now stands at more than 15 times that of Proton.

Interbrand’s methodology values brands in the same way that other corporate assets are valued, on the basis of how much the brands are likely to earn for their owners in the future. “Interbrand uses a combination of analysts’ projections, financial reports, and its own analysis to arrive at a net present value of those earnings,” said Interbrand group CEO Jez Frampton.
Interbrand noted that global turbulence roiling the markets had not fully impacted, except for falling margins and the increase in provisioning in general. The brand risk factor has also increased, it added.

4As president Datuk Vincent Lee said the study put Malaysia among the few Asian countries that currently recognised the value of brands as business and economic assets. “It helps the growth of business and celebrates the true heroes of economic value generation, the brand builders of a nation,” he added. Ho Kay Tat, managing director and editor-in-chief of The Edge, said the study “creates a platform for discussing the role of brand-building, ensuring business health and earnings continuity”.

“Through all this (economic turmoil) it has been very clear that brands are a powerful driver of recovery. Fundamentally, brands are there to enable consumers to choose. They mark out one offer from a company from somebody else’s. They are the reason why people will buy, and the reason why people will repurchase. They are a driver of demand,” said Frampton at a press conference earlier.

This year, three new brands made it to the top 30 — Sin Chew (No 27), Jobstreet.com (No 19) and Ogawa (No 29). Jobstreet.com is the first online brand to make it into the list.