Mah Sing new project in setapak

By the Star

Mah Sing Properties Sdn Bhd is set to launch its latest commercial project, StarParc Point, in three months following good response from a project preview last week, said deputy chief operating officer Andy Chua.

“Whatever factors a good commercial development should have, we have it here at StarParc Point. What’s more, most of the land around that area is leasehold except for our land.

“We expect to sell off the project this year,” he told StarBiz in an interview yesterday.

The RM118mil StarParc Point is an integrated business hub in Setapak consisting of three-storey shop offices and six-storey retail-cum-office suites on five acres of freehold land. Besides fronting Jalan Genting Klang where there is heavy foot traffic, the project offers over 8% rental yield potential, interesting architectural design and a weather-controlled outdoor yard.

The office suites are priced from RM295,000 or about RM200 per sq ft, while the three-storey shop offices are selling for about RM2.3mil or RM400 per sq ft. The retail unit costs about RM1.3mil each.

Chua said the pricing for the development was “reasonable” in view of the similar prices fetched by surrounding leasehold properties.

He added that the group was working with banks to provide buyers up to 85% financing.

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Satyam saga’s impact on outsourcing industry

By the star

SATYAM’S fall from grace has been much discussed.

Besides tarnishing the accounting image of all Indian companies, this saga has newfound consequence to the outsourcing industry as a whole. With one of its stars being jolted into the spotlight for the wrong reasons, the entire industry is left to lick its wounds and consider the profound impact to the perception of the industry in the midst of challenging times.

Though unfair, the saga has affected confidence in India as a preferred choice of outsourcing destination. Recently, India’s IT industry suffered a major blow with the barring of Wipro Technologies and Megasoft Consultants from doing any work with World Bank.

These and other similar outcomes have alienated a number of clients from outsourcing companies in India. With the belief that the Satyam scandal may not be an isolated case, people are now starting to question the viability of other Indian companies as well.

Collectively, these events have a disastrous impact on the outsourcing industry for India and the IT industry as a whole. The question now is to what degree will this saga continue to beset Satyam and India, and more importantly how does the world perceive this?
A question of bad timing?

Indeed, the news could not have come at a worse time. Already struggling amidst the backdrop of a weak global economy, the global outsourcing industry now faces a new obstacle – an erosion of confidence.

Consider this. Even before the Satyam scandal broke out, companies were already trying to undercut one another with ridiculously low rates with some companies in India believed to be willing to offer up to a fifth off its competitors’ price.

Following the scandal, outsourcing companies will now have to confront another real obstacle on top of a slowing global economy.

Many questions are now posed after Satyam’s demise. How would customers now guarantee that the outsourcing company that they invest millions of dollars in, would not suffer the same fate as Satyam? What about shareholders and more importantly, financial institutions?
All these factors combined place huge strains upon even the largest outsourcing companies in the world when one can no longer count on a solid reputation to close deals or obtain financing backing.

Satyam’s collapse was so sudden and so badly affected the company that it reportedly didn’t have the money even to pay salaries in January (although subsequently they managed to secure some funding for this). Imagine, if this could happen to the first ever Indian Internet firm to be listed on the Nasdaq, the fear factor is exponentially increased for other smaller outsourcing or IT companies.

The prospects are becoming more daunting when anti-outsourcing voices are growing louder by the day, emanating from the US. Coupled with a weakened US economy, outsourcing companies that used clinch large contracts from American companies may need to brace themselves for a hard landing, especially those based in India.

Closer to home

Whilst the Satyam incident is mostly detrimental to outsourcing companies in India, there might be a reprieve for other countries that are building on their outsourcing competencies and trying to benefit from a slice of the Indian monopoly on major outsourcing deals.

Albeit the slice is thinning, I believe we will see more companies considering options aside from India.

Countries with burgeoning outsourcing companies like Philippines and Malaysia are likely to benefit from this.

Malaysia’s appeal lies not only with its reputation as one of the top ranked outsourcing countries in A.T. Kearney’s yearly rankings, but with external factors as well.

With the strengthening of the US dollar against the ringgit, there is now greater impetus for US firms to invest in Malaysia. There is also the huge untapped Middle East market that has yet to jump on the outsourcing bandwagon and Malaysia could be well poised to benefit from its close ties with countries in that region.

Nonetheless, Malaysia faces challenges from countries like China. Upon hearing about Satyam’s fall, a China IT outsourcer introduced a “zero cost transitioning” carrot to lure customers to switch alliance.

With the market thinning, competition is fierce and Malaysian outsourcing companies need to be more aggressive to capture every available potential.

* Opportunity for Malaysia's outsourcing company to get a slice of india's strong IT market? Much effort, R&D and motivation needed to get hold a slice of this IT fat cake.

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.