PM: Civil servants to get half-month bonus

KUALA LUMPUR: The government has agreed to pay bonus of half-month salary with minimum payment of RM500 for civil servants.

Prime Minister Datuk Seri Najib Tun Razak said the goverment had also agreed to give special payment of RM500 to government pensioners.

"The bonus and special payment will be made in the middle of this month," Najib, who is also Finance Minister, said in a statement Monday.

Najib said the bonus was to appreciate the dedication and contributions of civil servants in successfully implementing the nation's development programmes.

"The government hopes the provision of this bonus and special payment can lighten the burden of civil servants and government pensioners and help them make preparations for the upcoming Aidilfitri celebration.

"This shows that the government is always concerned about the welfare of civil servants and government pensiors. The awarding of the bonus is a mark of appreciation to all civil servants," said Najib.

Najib said the two payments involved 1.27 million civil servants and 590,000 government pensioners and entailed an estimated expenditure of RM2bil.

2011 Merger of Sapuracrest Petroleum Bhd and Kencana Petroleum Bhd

Kuala Lumpur: The RM11.85 billion merger of Sapuracrest Petroleum Bhd and Kencana Petroleum Bhd is literally "one big approval" away before officially creating the country's largest oil and gas service provider by asset size.

The board of directors of SapuraCrest and Kencana yesterday approved the merger exercise, deciding to take up the offers made by special purpose vehicle (SPV) Integral Key Sdn Bhd (IKSB).

This leaves the need for both companies to secure at least 75 per cent shareholders nod as the next big hurdle before the deal goes through.

SapuraCrest and Kencana are expected to call for special shareholders' meetings to vote on the deal soon.

Overall, the companies are expecting the whole merger exercise that will create a new entity with some RM6 billion of assets to be completed by the first quarter of next year.
SapuraCrest and Kencana yesterday issued a statement each to say that their board of directors had decided to accept IKSB's offers.

"The board ... has resolved to accept the offer by IKSB to acquire the SapuraCrest business for a total consideration of RM5.87 billion," SapuraCrest said in its announcement to Bursa Malaysia yesterday.

"The board is not seeking other alternative bids to make an offer to acquire the SapuraCrest business," it added.

IKSB has offered to buy all the assets and liabilities of SapuraCrest and Kencana under a cash and share swap deal.

The SPV will pay almost RM5.98 billion or RM3 per Kencana share satisfied by the issuance of 2.5 billion new IKSB shares at RM2 apiece and a cash payment of RM968 million.

For SapuraCrest, IKSB will pay RM5.87 billion or RM4.60 per SapuraCrest share. This will be satisfied by the issuance of 2.5 billion new IKSB shares, also at RM2 apiece and a cash payment of RM875 million.

Kencana, in its announcement to Bursa Malaysia yesterday said that moving forward, there will be no assurance that the merged entity will be able to attain a higher or equivalent combined earnings.

This is after taking into consideration the cultural and management differences, possible customer overlap, and the additional borrowings amounting to about RM1.8 billion repre-senting the total cash payments, which will be incurred by IKSB pursuant to the merger offer.

"Notwithstanding the above, the management of Kencana Petroleum will work together with the management of SapuraCrest to realise potential synergies from the proposed merger, towards the continued growth and success of the merged entity," Kencana said.

Kencana and SapuraCrest posted a net profit of RM136.2 million and RM231.4 million respectively in their last financial year.

Once the deal is completed, IKSB will be listed on Bursa Malaysia's Main Market, in place of Sapura-Crest and Kencana.

Analysts estimate that the Sapura group founder Tan Sri Shamsuddin Abdul Kadir and his family will own slightly over a fifth of IKSB, and Kencana's Datuk Mokhzani Mahathir about 16 per cent.

Norwegian rig contractor Seadrill will also be a substantial shareholder given its current 23.6 per cent stake in SapuraCrest.

MAS-AIRASIA MERGER ??? AirAsia's Fernandes to gain 20% stake in MAS

KUALA LUMPUR: Malaysia Airlines (MAS) and AirAsia will swap shares in a surprise deal which will see Tan Sri Tony Fernandes becoming the single biggest shareholder.

Khazanah Nasional Bhd, which owns over 69% of MAS, is said to have concluded negotiations with Fernandes to come up with a deal to save the national carrier.

Sources said the deal, which was struck last week after negotiations over the past year, became urgent after MAS' poor showing in the last two quarters.

Fernandes is set to get 20% of MAS equity under the deal that is to be signed next week, with some sources saying it has already received the Government's approval and could be inked by tomorrow.

Industry players expressed surprise at the deal because of past animosity between the management of the two airlines.

Those who were aware of the negotiations were also surprised at the speed at which it was concluded.

At present, Khazanah, a strategic investment company, holds about 69% stake in MAS, and under the deal with Tune Air Sdn Bhd, it will get a similar stake in AirAsia. Fernandes and his co-founder partner Datuk Kamarudin Meranun hold 26.28% in the world's biggest budget airline.

Fernandes declined to comment when asked about the deal.

Insiders in both airlines confirmed that the negotiations concentrated on the synergy such a share swap would bring.

First, there will be rationalising of routes. Between them, the two airlines cover most of the lucrative routes from Asia to Europe.

Second, when they are seen as a single unit, their bargaining power with airports and aircraft manufacturers will double, said a source close to the deal.

He pointed to the recent move to merge SapuraCrest Petroleum andKencana Petro-leum via a share swap as an example for the AirAsia-MAS deal.

Insiders said it was unlikely the two airlines would merge into a single unit, but would operate though separate managements at operational level, while sharing common directors and policies.

Malaysia will get the best of both worlds a premier full-service carrier in MAS and the best budget carrier in AirAsia.

“They have been competing with each other for too long, and it's time to work together because there is more than enough to go around,” said a senior government official.

The official added that the “feud” between the two had been going on for 10 years since Fernandes and others took over the ailing AirAsia fromDRB Hicom.

AirAsia is twice as big as MAS in terms of market capitalisation. MAS is worth about RM5.3bil, while Fernandes' outfit is worth slightly more than RM11bil.

AirAsia stocks closed at RM3.95 per share yesterday while MAS' was at RM1.60.

A news portal, The Malaysian Insider, which broke the story of the deal yesterday, reported that Fernandes would likely appoint Khazanah's executive director of investments Mohd Rashdan Mohd Yusof as chief operating officer after the share swap. Rashdan already sits on the MAS board.

Sources said no decision was made about the position of MAS CEO Tengku Datuk Azmil Zahruddin.

MAS recorded a first quarter net loss of RM242.3mil against a profit of RM310.6mil in the same period last year. Analysts expect the national carrier to make full-year operating losses due to high fuel costs and falling yields.

In contrast, AirAsia recorded a first quarter profit of RM171.9mil for this year and a record RM1.5bil in profits for 2010.

Sources said the merger would also force the two airlines to take stock of their future aircraft purchases if they are to enjoy any synergy.

AirAsia purchased 200 Airbus A320 aircraft earlier this year with an option to buy another 100, while MAS was set to make a decision on the replacement aircraft for its Boeing 747 and 777 fleet, which is more than 20 years old.

FBMKLCI likely to continue slide

The downtrend on Bursa Malaysia is likely to continue next week with the recent massive sell-off in regional markets on increasing concerns over a global economic slowdown, dealers said.

This is in also in view of recent poor economic data from the United States (US) and expectations of a prevailing weak US jobs market which points to the prospect of a double-dip recession.

Affin Investment Bank, head of retail research Dr Nazri Khan said going forward, the FBM KLCI will continue its slide and test the crucial psychological 1,500 support level, on the back of negative economic signals and expectations of a double dip recession in Western markets.

He said this week's dismal performance is the fourth consecutive weekly loss for the FBM KLCI with the index falling 76 points or 4.7 per cent since the mid-July peak after crossing down the psychological 1550 support level last Monday.
"We believe investors are fearful that the global economy may be heading for a recession with strong selling seen worldwide," he added.

Nazri said investors are becoming increasingly concerned that the attempt by governments to tackle the debt crisis will not resolve problems but only exacerbate the economic slowdown.

"As for strategy next week, we are recommending that our aggressive investors hold the short position in index futures. Conservative investors should stick with defensive asset class (such as high yield utilities and bonds) and increase their cash positions," he added.

US stocks on Thursday suffered their worst sell-off in two years and analysts are expecting further correction in the coming week, according to foreign news reports.

The ongoing European debt crisis also continued to plague global markets.

During the week, the local bourse was choppy, with the market recovering from three trading days of losses on Monday in tandem with firmer regional bourses.

This followed news that US congressional leaders have agreed to raise the debt limit and cut government spending to avoid a potentially disastrous default.

However, the local bourse lost its momentum on Tuesday, on continued weaknesses in regional markets, spooked by concerns of a slowdown in global manufacturing activities amid weak US economic reports.

On Friday, Bursa Malaysia ended sharply lower,in line with massive losses in regional markets with the benchmark FBM KLCI plunging 22.46 points to 1,524.43, the lowest since May 10 this year.

On a Friday-to-Friday basis, the FBM KLCI declined 24.38 points to 1,524.43 from 1,548.81 previously.

The Finance Index lost 138.46 points to 14,489.15 from 14,627.61 on last Friday.

The Industrial Index declined 69.50 points to 2,758.24 on Friday from 2,827.74 previously while the Plantation Index lost 143.26 points to 7,592.94 from 7,736.2.

The FBM Emas Index decreased 204.49 points to 10,478.30 from 10,682.79 last Friday.

Total weekly volume increased to 6.020 billion shares worth RM9.858 billion from 5.13 billion shares worth RM8.07 billion last week.

The main market turnover increased to 4.089 billion shares worth RM9.53 billion from 3.6 billion shares worth RM7.84 billion last week.

Volume on the ACE market increased to 1.38 billion shares valued at RM236.207 million from 999.5 million valued at RM277.46 million last week.

Warrants decreased to 481.029 million shares valued at RM71.227 million from 494.04 million shares valued at RM96.7 million last week. -- Bernama

OSK Malaysia Top Pick for Defensive Stock 2011

KUALA LUMPUR: The local stock market will keep climbing for the remainder of 2011, amid the current weak global economic sentiment, OSK Research Sdn Bhd said.

The firm would attribute this to the strong news flow with regard to the general election and the Economic Transformation Programme (ETP) initiatives.

"We also felt that domestic factors in the form of the ETP and the impending general election meant that the global market could outperform as long as there was no global meltdown," it said in its latest note.

However, OSK Research said if there is a global recession, the Malaysian market cannot expect to continue climbing this year.

It has recommended six alternative defensive stocks for the longer run that would benefit in the event a recession does set in early.
The alternative stocks recommendation varies from airline, healthcare, media group, food, education and rubber glove stock. They are AirAsia Bhd, KPJ Healthcare Bhd, QL Resources Bhd, Media Chinese International Ltd, SEG International Bhd and Supermax Corp Bhd.

"These stocks will benefit from a drop in incomes and commodity prices and are generally more inward looking as we believe domestic incomes should be more resilient," it said.

OSK Research has given a "buy" call on the six stocks based on a 12-month outlook.

Tanjong said to sell gaming unit for RM2B

Tanjong Plc agreed to sell its gaming unit to a group of Malaysian businessmen including Genting Bhd chairman Lim Kok Thay for RM2.1 billion (US$710 million), according to two people with knowledge of the matter.

Hong Leong Financial Group Bhd chairman Quek Leng Chan, Lion Corp chairman William Cheng and businessman Chua Ma Yu are also part of the group, said the people, who declined to be identified because they aren’t authorized to discuss the deal. A preliminary agreement was signed yesterday to sell the unit, Pan Malaysian Pools Sdn Bhd, they said.

The acquisition would give the buyers control over a numbers-forecasting business and a monopoly over horse race betting in the Southeast Asian nation. The deal comes a year after a group led by billionaire T. Ananda Krishnan offered RM4.7 billion for full control of Tanjong.

Lion’s Cheng is away overseas and couldn’t immediately comment, according to his secretary. The other buyers either declined to comment on the purchase or didn’t immediately respond to requests for comment. Tanjong chief financial officer Gerard Nathan declined to comment.
Pan Malaysian Pools was Tanjong’s second-biggest revenue source, contributing RM721.4 million last year, according to data compiled by Bloomberg. Tanjong’s biggest business is power generation, with investments in markets including the Middle East, South and Southeast Asia and North Africa, according to its website.

The sale of Pan Malaysian Pools was earlier reported by the Edge Financial Daily today. Pan Malaysian Pools may be listed later and the group has pledged to set aside some of the profits from Pan Malaysian Pools for charitable causes, the Edge reported.

Ananda Krishnan, who holds a majority stake in mobile-phone operator Maxis Bhd, delisted Measat Global Bhd along with Tanjong and pay-TV broadcaster Astro All Asia Networks Plc last year. Last month, he raised $888 million from the initial public offering of Bumi Armada Bhd, the country’s biggest supplier of support vessels for the oil and gas industry. -- Bloomberg

Always look at fundamentals: Research head

Investors should not read too much into the oversubscription rate of fresh initial public offerings

KUALA LUMPUR: Investors should not read too much into the oversubscription rate of fresh initial public offerings (IPOs) as an indication that when the shares are traded in the public domain they will receive a strong response.

"The oversubscription rate is only for the public portion of the IPOs, and for most of the second tier IPOs, the public offer is very small," said Mercury Securities head of research Edmund Tham.

"The public portion for second tier IPOs normally comes up to about RM10 million, unlike in the heydays when companies used to raise in excess of RM100 million, just from the public portion," Tham told Business Times.

In recent weeks the market has been hit by a row of fresh IPOs trading below their IPO price, soon after being listed on the exchange.
Among the IPOs that have faltered in recent weeks are PeterLabs Holdings Bhd, XOX Bhd, MCLean Technologies Bhd and Ideal Jacobs (Malaysia) Corp Bhd.

These companies are attempting to tap the retail investor market more than institutional investors, perhaps, because they are smaller in size, and are not within the market capitalisation size that falls under the radar of institutional investors.

Based on the data made available on Bursa Malaysia's website, smaller companies seemed to be more than willing to raise cash via the IPO route this year.

However, it should be noted that companies with a market capitalisation of less than RM500 million, normally, are unable to entice foreign portfolio funds to take up a stake in their company.

Although there would still be demand for such IPO-companies on the ACE Market, it will not be so much from institutional investors.

"Each IPO case is different. Investors should always look at the fundamentals and the pricing of the IPO," Tham said.

He said this is due to the various issues affecting the global financial markets presently, such as the US debt ceiling issue, and the sovereign debt issue in Europe (such as Greece).

Meanwhile, OSK Research head analyst and associate director Christopher Eng Poh Yoon said fund managers generally cannot invest in the ACE Market which limits its attractiveness given that retail participation in the Malaysian market continues to be somewhat lackluster.

"My view is that the listing of MSM Bhd and Bumi Armada Bhd means that a lot of institutional investors held back their funds to subscribe to these larger IPOs leaving less money for the smaller, less recognised IPOs," he said.