Friday, May 25, 2012

RAM Ratings reaffirms Adventa’s AAA(bg)/P1 sukuk ratings

Published on 25 May 2012

RAM Ratings has reaffirmed the respective long- and short-term ratings of Adventa Berhad’s (“Adventa” or “the Group”) RM150 million Islamic Commercial Papers/Islamic Medium-Term Notes Programme (2011/2018) (“ICP/IMTN” or “the sukuk”) at AAA(bg) and P1, with a stable outlook. Adventa is involved in the manufacture and distribution of surgical, dental and examination gloves as well as the distribution of medical products and devices for the healthcare industry.

The AAA(bg) rating of the ICP/IMTN reflects the unconditional and irrevocable guarantee extended by Maybank Islamic Berhad, which enhances the credit profile of the sukuk beyond Adventa’s inherent or stand-alone credit position. Meanwhile, the Group’s stand-alone credit profile and P1 rating are predominantly based on its strong position within the surgical-glove market. Relative to commodity-like examination gloves, the specialised application of surgical gloves heightens entry barriers as more stringent regulations apply. The Group’s adequate financial profile also continues to support its credit standing.

Nevertheless, Adventa’s credit profile remains moderated by its vulnerability to fluctuating input prices and susceptibility to foreign-exchange volatility. Following the aggressive expansion of production capacity for rubber gloves in recent years, the Group is operating in an increasingly competitive landscape – particularly in relation to dental and examination gloves, the users of which are more price-sensitive given these products’ generic applications.

In fiscal 2011, Adventa’s top line was lifted 25.84% by higher selling prices, stronger sales of surgical and examination gloves and its improved operations in Uruguay. This was in spite of a 63.9% slump in dental-glove sales; hefty latex costs and keen competition within the dental-glove market had prompted users to switch to the cheaper nitrile variant. Similar to its industry peers, however, Adventa’s profitability had been largely crimped by costly latex and a generally stronger ringgit during the year. The Group’s operating profit before depreciation, interest and tax fell about 6 percentage points to 7.94% in FY Oct 2011, exacerbated by a larger proportion of lower-margin examination gloves in its sales mix. Along with a heavier debt load to fund its larger capital expenditure and working capital, Adventa’s funds from operations debt coverage ratio (“FFODC”) was halved to 0.19 times at the end of the period (end-FY Oct 2010: 0.37 times). Its gearing ratio deteriorated from 0.59 to 0.88 times over the same span.

Looking ahead, the Group’s gearing ratio is expected to stay manageable at 0.91 times in the short term, before easing to less than 0.8 times in the medium term as plans for a more modest expansion are expected to reduce its capital expenditure and debt level. “Adventa’s financial performance will be largely supported by demand for the Group’s surgical gloves and full-year contributions from its new production lines. In the near term, the Group’s profitability is envisaged to benefit from easing latex prices, albeit moderated by the competitive dental- and examination-glove markets,” observes Kevin Lim, Head of Consumer and Industrials Ratings. With this, the Group’s FFODC is expected to hover around 0.25 times in the near term, before rebounding to more than 0.30 times.

Media contact
Low Pui San
(603) 7628 1051

Fixed income markets unfazed by Eurozone jitters (By IFN)

GLOBAL: The wider market may be feeling jittery due to the ongoing Greece crisis, but the fixed income space remains unfazed; with Sukuk sales set to continue at a rapid pace.

Yields have also maintained stability and are expected to stay steady going forward. Although the euro declined to a near two-year low on the 24th May, as Greece moved closer towards an exit from the Eurozone, the currency has not been massively devalued; with liquidity still abound in the market, commented the Malaysian head of debt capital markets at a European bank.

Speaking to Islamic Finance news, the banker noted that while the debt market may see some “blips”, these are not due to the Greek crisis; and more as a result of locally-centric factors.

Yields on Malaysian corporate ‘AAA’-rated Sukuk have risen marginally from the beginning of the year, to 3.89% as at the 23rd May; while falling from 3.91% a month earlier, according to data from Bond Pricing Agency Malaysia.

Meanwhile in Dubai, despite a small increase in yields to 4.32% as at the 23rd May from 4.29% a month earlier, yields in the emirate have fallen from 5.28% at the start of the year, data from the HSBC/Nasdaq Dubai Corporate US Dollar Sukuk Index shows.

Continued investor confidence and demand for Sukuk have also helped a slew of issuances this year; with issuers such as Banque Saudi Fransi, The National Industrialization Company (TASNEE) and Dubai Islamic Bank (DIB) successfully tapping the Islamic debt market in the last two weeks.

Banque Saudi Fransi’s US$750 million offering saw orders worth US$4 billion; TASNEE’s SAR2 billion (US$533.31 million) attracted an orderbook of SAR5.2 billion (US$1.39 billion); and DIB’s US$500 million program was oversubscribed four times.

With some banks cutting back on financing, the Sukuk market is clearly providing a booming avenue for corporate fundraising.


News Alert - May 25, 2012

1. Blue chips lift KLCI to higher close
2. Maybank 1Q net profit up 17.87pct to RM1.35b
3. Moody's Analytics: M'sian economy to expand 4pct in 2012
4. 50pct of PPAs to be extended, says Che Khalib
5. JT International 1Q net profit rises 9.35pct to RM37.75m
6. Government to get tough with IPPs
7. Non-interest income boosts CIMB 1Q profit
8. AEON looks East, doesn't plan to enter Asean markets yet
9. Young trees age profile underpins TSH's future growth

Thursday, May 24, 2012

Embattled MAS announces US$800.19 million Sukuk plan (By IFN)

MALAYSIA: National carrier Malaysian Airline System (MAS) has unveiled a RM2.5 billion (US$800.19 million) Sukuk program in an effort to boost capital after reporting record losses in 2011.

Its Sukuk program forms the tip of the iceberg of a RM9 billion (US$2.88 billion) funding plan that includes a RM1 billion (US$320.08 million) bridging loan from a consortium of banks and a proposal for the government to set up a special purpose vehicle to raise RM5.3 billion (US$1.69 billion) to pay for aircraft purchases.

“The proposed Sukuk would have an effective tenor of 10 years, as MAS would have a call option to redeem the Sukuk in full from year 10 onwards. For the first 10 years, the profit rate payable on the Sukuk is based on the prevailing market rate at the time of issuance; and after the tenth year, the profit rate payable on the Sukuk would rise by a pre-determined rate.

“We anticipate to drawdown the first tranche of RM1 billion of the proposed Sukuk, sometime in June 2012 once all regulatory approvals are cleared; and for the remaining amount of the program later,” said MAS.

MAS also received a RM1 billion bridging loan from CIMB Bank on the 30th March 2012 to ensure its working capital cash balances remain adequate until the expected drawdown of the first tranche of its planned Sukuk.

Having been distressed for several years, the airline recently announced its widest ever loss of RM2.5 billion for 2011, followed by a loss of RM171.8 million (US$54.99 million) in the first quarter of this year. It reported cash and cash equivalents of just RM1.35 billion (US$432.1 million) during the quarter.


News Alert - May 24, 2012

1. KLCI falls to below 1,540 as global stocks retreat
2. MPHB proposes demerger of gaming, non-gaming units
3. HSL 1Q net profit up 10.86pct to RM19.69m
4. Regulators, investors turn up heat over Facebook IPO
5. MPHB plans for 80% dividend payout policy
6. RHB, OSK wrap up merger deal
7. Malaysia's GDP expanded 4.7% in 1Q12
8. Axiata to narrow gap in cost of debt

Wednesday, May 23, 2012

Why a Greek Exit Could Be Much Worse than Expected...

Musing of an Expressive, Ordered and Restless Mind: Why a Greek Exit Could Be Much Worse than Expected...: Below is a very interesting article from Time about the possible crisis that could happen if the Greece exits the Euro. Have a read. Click on the link just before this paragraph.

News Alert - May 23, 2012

1. KLCI extends gains as global markets rise
2. MAS narrows 1Q net loss to RM171.79m
3. Axiata 1Q net profit up 3.15% to RM565.63m
4. Petrofac gets RM220m Carigali refurbishment job
5. GMG re-submits Port Klang plans
6. MPHB to spin off non-core assets
7. Growth prospects for SOP still good

Encorp Systembilt fully redeems ABBA Notes

Published on 22 May 2012

RAM Ratings has received confirmation that Encorp Systembilt Sdn Bhd has fully redeemed its RM1,321.60 million Al-Bai Bithaman Ajil Notes Issuance Facility (“ABBA Notes”) (2000/2018) (or Tranche 1), RM510 million ABBA Notes (2000/2018) (“Tranche 2”), RM250 million ABBA Notes (2002/2028) (“Tranche 3”) and RM667 million ABBA Notes (2004/2026) (“Tranche 4”). As such, RAM Ratings has withdrawn the AA2(s) ratings and no longer has any rating obligation on the ABBA Notes.

Meanwhile, the outstanding ABBA Notes were refinanced through the issuance of up to RM1.575 billion (2012/2028) of Sukuk Murabahah on 18 May 2012. RAM Ratings had earlier assigned an AA2 rating to the Sukuk Murabahah; the long-term rating has a stable outlook.

Media contact
Karin Koh
(603) 7628 1174

RAM Ratings reaffirms Tan Chong Motor’s AA2/P1 ratings

Published on 22 May 2012

RAM Ratings has reaffirmed the respective long- and short-term corporate credit ratings of Tan Chong Motor Holdings Berhad (“TCMH” or “the Group”) at AA2 and P1; the long-term rating has a stable outlook. TCMH is primarily an investment-holding company, with subsidiaries principally involved in the assembly, sale and distribution of passenger and commercial vehicles under its franchise distributorships for Nissan, Renault and Ultimate Dependability vehicles.

The ratings are supported by the Group’s conservative financial profile, its position as a notable player within the domestic automotive industry and entrenched relationships with its principals. The Nissan marque is well known as a fuel-efficient, value-for-money brand in Malaysia. These strengths are, nonetheless, moderated by the cyclicality of the automotive industry and changes in regulatory policies. Moreover, TCMH’s performance is exposed to fluctuations in foreign-exchange rates, particularly the US dollar and Japanese yen.

In 2011, the domestic automotive industry was severely tested by the devastating earthquake in Japan and the massive floods in Thailand. These unfortunate events had led to supply constraints for many automotive players; Japanese car makers had been the hardest hit. Consequently, the top 3 Japanese marques in Malaysia ceded their market shares last year; Honda had borne the brunt, with its market share declining to 5.41% (2010: 7.35%) while Nissan and Toyota had suffered slight dilutions in their respective market shares to 5.38% (2010: 5.73%) and 14.49% (2010: 15.13%). This had enabled globally prominent marques such as Volkswagen, Hyundai, Ford, Peugeot, Kia and Chevrolet, which had been unaffected by the supply constraints following the floods in Thailand, to almost double their aggregate market share to 4.5% of total industry volume (“TIV”) in 2011 (2010: 2.4%).

Despite its diminished market share arising from lower sales volumes, TCMH still managed to achieve a record revenue of RM3.86 billion in FYE 31 December 2011 (“FY Dec 2011”), on the back of higher average selling prices due to full-year contributions from sales of the more expensive Teana. However, the supply-chain disruptions had resulted in production inefficiencies that crimped TCMH’s profitability; its operating margin lost more than 1 percentage point to 8.81%. Still, TCMH’s balance sheet stayed healthy as at end-December 2011, with a relatively unchanged gearing ratio of 0.43 times; the Group’s net gearing ratio (including highly liquid money-market funds) came up to 0.15 times while its funds from operations (“FFO”) debt cover stood at 0.36 times due to its strong cash-generating ability.

“Looking ahead, TCMH’s performance this year is expected to improve with the introduction of the Almera (a B-segment model), the recently launched NV200 Vanette and the support from its existing fleet of established models such as the Grand Livina, the Teana and the Sylphy,” notes Kevin Lim, RAM Ratings’ Head of Consumer and Industrial Ratings. The launch of the Almera in 2H 2012 is in line with the Group’s plans to significantly augment its market share by penetrating the A and B segments, which account for more than 60% of TIV.

We note that TCMH has set aside about RM300 million for its medium-term capital expenditure (“capex”). The Group is expected to invest up to RM91 million (USD30 million) for the completion of its assembly plant in Danang as well as to set up sales and distribution centres in Vietnam, Cambodia and Laos, in a bid to strengthen its Indochina operations that are currently loss-making. The remainder will be utilised for the upgrading of the Serendah plant and invested in new models. Even after accounting for TCMH’s planned capex, which is expected to be largely supported by its internal funds, the Group’s gearing ratio is envisaged to remain strong at less than 0.4 times over the next 2 years while its FFO debt cover ratio is expected to increase to above 0.4 times in FY Dec 2012, before rising above 0.5 times from FY Dec 2013 onwards on the back of its improving operating performance. As such, we reiterate the stable outlook on TCMH’s long-term rating.

Media contact
Woon Tien Ern
(603) 7628 1040

KFH Malaysia announces first quarter profit after continued losses in 2011 (By IFN)

MALAYSIA: Kuwait Finance House (Malaysia) has announced a loss after tax of RM596 million (US$190.04 million) for 2011, as it continued its provisioning exercise on legacy accounts, but limited media fallout by simultaneously reporting a return to profit for the first quarter of this year.

It reported a net loss of RM75.64 million (US$24.12 million) in 2010.

“This was a necessary approach for the bank to adopt in order to remain on track to write-off the last traces of legacy matters while maintaining prudent quality management,” said Dr Nabeel Al-Mannae, its chairman, of the bank’s provisions.

The bulk of KFH Malaysia’s loss for the year is a result of RM796 million (US$253.81 million) in impairment allowances on financing, advances and other receivables.

For the quarter ended the 31st March 2012, it reported a net profit of RM16.54 million (US$5.27 million) against a net loss of RM30.48 million (US$9.72 million) a year earlier.

Commenting on the results, local rating agency MARC said that its ‘AA+/MARC-1’ ratings on KFH Malaysia are not affected following the bank’s first quarter earnings announcement, further noting that while the bank’s balance strength has been impacted by the huge losses, its capitalization remains strong, with a risk-weighted capital ratio of 18.4%.

“KFH Malaysia’s long-standing non-performing financing facilities have been a drag on the bank’s performance in recent years. MARC believes that the bank’s improved operating performance in the first quarter of 2012 and the reduced potential for unexpected material impairments that could weaken profitability or capitalization levels, suggest reduced downside risks to the bank’s creditworthiness,” it said.

The rating agency also expects further recovery in the bank’s profitability in the subsequent quarters, factoring in the potential for additional impairment to decline from its peak in 2011.


Tuesday, May 22, 2012

News Alert - May 22, 2012

1. Blue chips lift KLCI, but stays below 1,540-level
2. Mah Sing unit buys land for RM330.77m
3. Bina Darulaman 1Q net profit up two-fold to RM6.88m
4. F1 to pre-market USD3b Singapore IPO May 22, says source
5. Boon Siew sells land to Mah Sing
6. Boustead offers RM3.30 for UAC
7. Lufthansa divests interest in catering service to Brahim's
8. Mega First has approval for Laos dam

Monday, May 21, 2012

Gulf Finance House announces restructuring of Sukuk (By IFN)

BAHRAIN: Gulf Finance House (GFH) has announced the restructuring of US$110 million-worth of Sukuk outstanding; extending its repayment of the debt.

The bank received approval from its Sukukholders for the restructuring, which will see the bank extending its repayment over the next six years. The Sukuk will now mature in June 2018, with GFH receiving a two-year grace period for the principal repayment amount in 2012 and 2013.

“With the approval to restructure GFH’s Sukuk, we are now in a better position to accelerate growth initiatives for the future. We are targeting to extend the maturities of our debt over a longer-term to retain our key assets. The restructuring of the GFH Sukuk is an extremely positive development for the bank and will enhance the bank’s balance sheet significantly,” said Hisham Alrayes, its acting CEO.

More than 92% of the bank’s Sukukholders voted on the restructuring during an extraordinary general meeting on the 15th May, with 100% of the voters agreeing to the new terms.
Liquidity Management Center and KPMG advised on the transaction.

GFH sold the US$200 million Sukuk in July 2007. The bank, which has been struggling since the 2008/2009 financial crisis, reported a 92% year-on-year plunge to US$1 million in its net profit in the first quarter of this year. It has embarked on a recovery plan which, apart from debt restructurings, also includes stringent cost cutting measures.

As at the 31st March this year, the bank’s cash and cash equivalents amounted to US$6.42 million against US$40.92 million a year earlier.


There’s no place like #PIKOMCapsquare for the coolest gadgets in town. Come for the grand launch, 25-27 May!

There’s no place like #PIKOMCapsquare for the coolest gadgets in town. Come for the grand launch, 25-27 May!



It was a dismal week for equity investors with all regions affected by the ongoing Greek drama and Spain sub-plot as even the Facebook IPO received only a muted response. Regional markets were not spared either, with Tadawul closing near a 3-month low on Saturday. While the euro continued to be battered, the Indian rupee continues to slide to record lows given its burgeoning current account and fiscal deficits alongside withdrawals by foreign funds. Among commodities, gold was one of the gainers, posting its biggest weekly gain in a month, while crude oil prices slipped.
Global Developments

Industrial production in Apr recorded an uptick of 1.1% mom (Mar: -0.6%), above market consensus, with manufacturing rising by 0.6%. Motor vehicle production, at 3.9% (Mar: 1.2%), accounted for much of the rise; factory output excluding this segment recorded only 0.3% hike. Capacity utilisation increased to 79.2% (78.4%) - the highest since Apr ‘08.
Retail sales grew at the slowest pace this year by 0.1% mom in Apr (Mar: 0.7%), weighed down by building materials (-1.8%) and clothing (-0.7%).
Housing starts increased 2.6% mom to 717k (sa) in Apr, though building permits fell to 715k (sa) from a 3.5 year high largely owing to a 23% drop in the volatile apartments segment.
CPI for Apr was 2.3% yoy and remained unchanged mom (Mar: 0.3%) while core CPI, which excludes food and energy costs, picked up 0.2% mom.
Initial jobless claims remained flat at 370k in the week ended May 12, taking the four-week average to 375k from 379,750 previously.
US tax rules that require reporting of Americans' overseas bank accounts has resulted in some Asian banks turning away US customers while an official from BlackRock stated that “foreign investors may choose not to invest in funds that include US securities because they could be penalised if they work with a foreign broker who isn't compliant”.


With no coalition government in Greece, the country goes into another election, scheduled for June as the speculation that Greece could leave the euro continues to spook markets. It was also reported that about USD 894mn was withdrawn from Greek banks on Monday alone, leading to a potential bank run.
The Bank of Spain disclosed that bad bank loans had risen to EUR 148bn at end-Mar, the highest since Aug ‘94, accounting for about 8.4% of the sector’s entire loan portfolio. Moody’s, meanwhile, downgraded 16 Spanish banks, citing “recession, reduced funding access for lenders and deterioration in loan quality.
Q1 GDP data was released for the Euro area along with a clear divergence pattern emerging in growth numbers of Germany, France, Italy and Spain. Euro area growth was unchanged from the previous quarter (Q4: -0.3%), avoiding a recession headline helped by Germany, which reported a strong 0.5% qoq pick-up helped by exports (Q4: -0.2%). France’s growth dissipated in Q1 (Q4: +0.1%) while growth in Italy was down by 0.8% (Q4: -0.7%).
EU industrial production fell 0.3% mom and 2.2% yoy in Mar (Feb: +0.8%), as energy production declined by a whopping 8.5% (+8.7%). Production increased in Germany by 1.3% while most other nations reported declines: Netherlands (9%), Spain (1.8%), Greece (1%).
German ZEW registered a decline by 12.6 points to 10.8 in May: as per the report, "the outcome of the elections in Greece and France has made it more doubtful that European governments will resolutely fight the sovereign debt crisis", resulting in lower investor confidence.
26 Italian banks, including UniCredit SpA and Intesa Sanpaolo SpA, were downgraded by Moody’s last week citing “the banks' vulnerability to mounting loan defaults and potential funding problems”.

Asia and Pacific:

Japan’s machinery orders declined by 2.8% mom in Mar (Feb: +2.8%), largely from the volatile chemical sector which dipped followed a rise the month before. However, inspite of the decrease, orders for Q1 remained positive at 0.9% qoq.
Domestic demand and exports rebounded in Q1, enabling Japan’s GDP to expand by 1.0% qoq, from Q4’s unchanged reading. In yoy terms, growth was up 2.7%, the first yoy rise in 5 quarters.
Singapore’s non-oil domestic exports (NODX) rose by 8.3% yoy in Apr (Mar: -4.3%) with strong performance from both electronic (+1.0%, Mar: +2.8%) and non-electronic (12%, -7.8%) segments. While NODX to US and Europe declined, the top three countries expanding were Japan, Hong Kong and South Korea.
Singapore GDP grew 10% qoq and 1.6% yoy in Q1, a tad higher than initial projections, compared to 2.5% qoq contraction and 3.6% yoy growth recorded in Q4 2011. Growth forecast for this year has been maintained in the range of 1-3%, amidst uncertain global outlook.
Unemployment rate in Korea held steady at 3.4% in April, while total employment was up 1.9% yoy to 24.76mn. Meanwhile, the UN’s Social and Economic Survey of Asia and the Pacific forecast youth unemployment in the region to remain unchanged at 10.2% this year.

Bottom line: Even as Greece dominates headlines and heads to another round of elections in June, the G8 leaders have sent out a statement that “we reaffirm our interest in Greece remaining in the euro zone while respecting its commitments”. The balance of power between Germany and France is likely to come into the forefront again, if the G8 meeting (where France’s growth-oriented strategy found some acceptance) is anything to go by. Till the question of Greece’s “will it or won’t it” leave the Eurozone is answered, market volatility can be expected, irrespective of data releases.


Friday, May 18, 2012


KUALA LUMPUR, May 17, 2012 – Bond Pricing Agency Malaysia has introduced its latest product; the Market Implied Rating (MIR). MIR is a market-perceived credit signal, implied via market statistics and enhanced with financial mathematics. MIR is distinct from ratings issued by credit rating agencies, as the ultimate determinant of MIR is based on observable market data.

MIR benefits users from both credit and market sectors; they include dealers, brokers, regulators, rating agencies, risk and fund managers, analysts, researchers as well as corporations participating in Malaysian debt capital market. Among the benefits of MIR to users are MIR provides timely and up-to-date credit indicator by offering a short-term, snapshot view. This is based on dynamic, objective and unbiased perspective and the degrees of credit migrations as determined by market trades and perception.

“For the first time ever, the availability of MIR for the Malaysian bond and sukuk market will enable investors to have near real-time credit signals, which is directly derived from market trading activities. MIR is a globally recognized indicator and brings the level of information in the local market closer to international standards. This latest product from BPAM demonstrates our continued commitment to providing leading edge solutions for the Ringgit fixed income market”, said Meor Amri Meor Ayob, BPAM’s Chief Executive Officer.

For more information, please refer to -> Commentary & Research ->BPAM Pricing Research for Market Implied Rating (MIR)FAQ

New products from Bait Al Bursa (from IFN)

BAHRAIN: Bait Al Bursa, the Shariah compliant arm of the Bahrain Financial Exchange (BFX), plans to expand its business by launching a number of Islamic products in the coming months, which will include Islamic equities, Sukuk and exchange traded funds.

In a response to Islamic Finance news, the bourse also said that it will be introducing other Shariah compliant assets onto its fully automated platform, e-Tayseer, such as industrial equipment, metals and soft commodities.

The current underlying assets for e-Tayseer are cars and car parts.

In addition, the Islamic bourse, which has 20 members including Al Baraka Islamic Bank, ABC Bank, Elaf Bank, Khaleeji Commercial Bank, TAIB Bank and Tadhamon Capital, aims to double that number by the end of this year.

However, BFX, which recently announced a total turnover of US$1 billion as at the 24th April, with its total trading volume increasing to 24,046 contracts, has yet to release trading figures for its Islamic platform. “We have not yet started making the figures about volumes on our Murabahah platform public,” it said.

The Bait Al Bursa was launched in February last year.

Meanwhile, BFX recorded trading turnover of US$523.44 million for the period between the 1st-24th April, 11 times more than in December 2011. “During the same period, the trading volume has increased around 10 times, from 1,170 contracts to 11,150 contracts. The total trading turnover in April 2012 (up to the 24th April), was more than the total trading turnover from the launch date of the 23rd November 2011 to the 31st March 2012,” it said.


The #tacticalpen is definitely mightier than the sword, as it doubles as a firestarter too. Get it for RM 96 at @milkadeal!

The #tacticalpen is definitely mightier than the sword, as it doubles as a firestarter too. Get it for RM 96 at @milkadeal!

News Alert - May 18, 2012

1. KLCI pares down gains as Europe shares retreat
2. AMMB 4Q net profit up 8.3pct to RM342.63m
3. EPF Joins JCorp in KFC and QSR acquisition
4. Scomi to exit machine shop business with disposal of Nigerian unit and Oiltools Africa for USD39.77m
5. Kuwait Finance House Malaysia continues losing streak
6. JCY stages a big turnaround
7. JobStreet added Vietnam to its portfolio
8. Smaller REITs offer more attractive yields

Thursday, May 17, 2012

Banque Saudi Fransi prices US$750 million, five-year Sukuk (See IFN)

SAUDI ARABIA: Banque Saudi Fransi (BSF) has priced a US$750 million, five-year Sukuk at par with a spread of 185 basis points (bps) over midswaps, or 2.95%, following an initial price guidance of a 200 bps spread.

The offering attracted orders worth US$4 billion.

Citi, Credit Agricole and Deutsche Bank were the lead arrangers of the transaction; yet another to come out of Saudi’s burgeoning Islamic bond market.

The Sukuk marks BSF’s first Shariah compliant offering. The bank is part-owned by Credit Agricole, which earlier in the year said that it was also looking at issuing a Sukuk for its Islamic business, of which a large part has moved to Dubai from Bahrain.

The issuance is also seen to have received strong regional support, despite prevailing uncertainty in the Eurozone. “We have seen regional buyers support deal momentum and pricing increasingly over the last six months. Despite the troubles in the rest of the world, the [Gulf] region has its own microclimate,” a Gulf-based debt capital market official is quoted as saying.

BSF’s Sukuk also brings optimism on the growing participation of western, conventional banks in Islamic finance. Much like the effect Goldman Sachs’ planned US$2 billion Sukuk was to have on the market, BSF’s Sukuk is also seen as an affirmation of the increasing importance of Shariah compliant finance in the conventional markets; cementing Islamic finance’s role as an alternative source of funding.

As a result, BSF’s successful sale could further help shine the spotlight on Islamic finance and lead the way for further Shariah compliant offerings from conventional institutions.


RAM Ratings withdraws Kencana’s ratings, assigns AA3 rating to SapuraKencana

Published on 17 May 2012

Following the finalisation of the merger between Kencana Petroleum Berhad (“Kencana”) and SapuraCrest Petroleum Berhad (“SapuraCrest”) on 15 May 2012, RAM Ratings has withdrawn the AA3 ratings of Kencana’s RM700 million Sukuk Mudharabah Programme (2011/2026) (“Sukuk Mudharabah”) and proposed RM350 million Sukuk Mudharabah (with detachable warrants) (“Sukuk Mudharabah-W”). Concurrently, we have assigned the AA3 rating of the Sukuk Mudharabah to SapuraKencana Petroleum Berhad (“SapuraKencana” or “the Group”); the long-term rating has a stable outlook.

Pursuant to the merger, the Sukuk Mudharabah has been novated to SapuraKencana; the latter has assumed the repayment responsibility on the Sukuk Mudharabah. Meanwhile, the proposed Sukuk Mudharabah-W has been aborted.

To recap, RAM Ratings reaffirmed the AA3 rating of the Sukuk Mudharabah on 23 March 2012, on the premise that the then-proposed merger would be successfully completed. Moving forward, the Group is expected to clinch more turnkey engineering, procurement, construction, installation, and commissioning projects on the international scene. SapuraKencana, along with other local providers of oil and gas support services, also benefits from the favourable policies implemented by the Government and Petroliam Nasional Berhad. On the flipside, we note that the Group shoulders a hefty debt burden, with considerable complexity when attempting to integrate the businesses of the 2 sizeable entities. For more details, please refer to RAM Ratings’ rationale on Kencana, published on 30 March 2012.

Media contact
Low Li May
(603) 7628 1175

Bank governor warns of eurozone crisis 'storm' (By BBC)


The Bank of England has cut its growth forecast for this year to 0.8% from 1.2%, saying the eurozone "storm" is still the main threat to UK recovery.

The eurozone was "tearing itself apart" and the UK would not be "unscathed", said its governor Sir Mervyn King.

He also confirmed that the Bank has been making contingency plans for the break-up of the euro.

The rate of inflation will remain above the government's 2% target "for the next year or so", the Bank said.

News Alert - May 17, 2012

1. Regional markets slump, KLCI falls more than 25 points
2. MISC 1Q net loss widens to RM465.08 million
3. Hock Seng Lee lands RM45.72m Sibu flood mitigation project subcontract
4. Hong Leong Bank 3Q net profit surges 60.54pct to RM465.1 million
5. SapuraKencana to spend USD1.5b in capex over next 3 years
6. Facebook boosts IPO size by 25pct, aims for USD15b
7. Market roiled by Greece euro exit fears
8. HSBC: Risk of Greece's euro exit rises significantly
9. Lower TV ads hurt Media Prima’s bottom line
10. EON acquisition continues to drive Hong Leong's earnings

Wednesday, May 16, 2012

RAM Ratings reaffirms ratings of Menara ABS’s RM1 billion sukuk; outlook on Tranche A revised to negative

Published on 16 May 2012

RAM Ratings has reaffirmed the respective AAA, AA2, A1, A2 and AAA ratings of Menara ABS Berhad’s Tranche A1, Tranche A2, Tranche A3, Tranche A4 (collectively, “the Tranche A Sukuk”) and Tranche B Sukuk Ijarah. The rating of Tranche B Sukuk carries a stable outlook whilst the outlook on ratings of Tranche A Sukuk has been revised to negative from stable.

Menara ABS is a trust-owned, special-purpose vehicle incorporated solely for this sale-and-leaseback transaction involving 4 properties - Menara TM, Menara Celcom, TM Taman Desa and TM Cyberjaya (collectively, “the Properties”) - previously owned by Telekom Malaysia Berhad (“TM” or “TM Group”). Profit payments on the Tranche A Sukuk are covered by lease payments from TM while the principal redemption will be met via proceeds from either refinancing, repurchase by TM or disposal of the Properties in the open market. Meanwhile, the principal redemption and profit payments on the Tranche B Sukuk are met by the lease payments from TM, whose credit profile therefore underpins this tranche’s rating and outlook.

The reaffirmation of the Tranche A Sukuk’s ratings is premised on the Properties’ adjusted valuation of RM657 million, the resultant cumulative loan-to-value ratios and stressed debt service coverage levels that remain in line with their respective ratings. The ratings also take into account the minimal counterparty risk given TM’s role as the Master Lessee in the 15-year Master Ijarah Agreement with Menara ABS. We note that TM promptly settled its RM65.39 million of lease payment obligations in December 2011.

The revision in outlook on the Tranche A Sukuk to negative reflects our concern over the potential weakening of the Properties’ cashflow-generating ability, due to the longer-than-expected time taken to fill up vacant space at Menara TM and the significant lease-renewal risk for Menara Celcom. In 2011, the Properties’ net income of RM46 million stayed below our sustainable-cashflow assumption of RM58 million as Menara TM had taken longer than expected to regain full occupancy following its space-optimisation exercise (completed in late 2010). Constrained by the weak market conditions for office buildings, it is likely that TM’s net income will take longer than initially assumed to meet our sustainable-cashflow assumption. The transaction also faces material renewal risk posed by Menara Celcom as the tenancy of its primary tenant is expiring by end-2012. We therefore highlight that a reassessment of the Properties’ sustainable value may be necessary if the Properties continues to underperform.

On a related note, the Properties are expected to be revaluated in 1H 2012. RAM Ratings highlights that there could be a material change in the market value of Menara TM’s refurbished auditorium due to its modified layout and features, which may in turn cause us to revise our valuation approach in arriving at its sustainable value. On this score, we will maintain close monitoring over the progress of the revaluation exercise.

Media contact
Tan Han Nee
03-7628 1023

News Alert - May 16, 2012

1. KLCI pares down losses at close in line with regional markets
2. UBS Research lowers FBM KLCI target to 1,650 for end-2012 from 1,700
3. Mitrajaya unit gets contract worth RM111.84m from Putrajaya Holdings
4. Tian Chua pleads not guilty to disobeying police orders
5. Najib: People's choice is what matters
6. Score woos 17 projects worth RM24.63b
7. Felda locks in stakeholders for IPO
8. MRT bidders get more time
9. CPO price on watch after dip to 7-month low
10. Risk aversion favours REITs

Tuesday, May 15, 2012

KLK fully redeems RM500 million Sukuk Ijarah Programme

Published on 14 May 2012

Kuala Lumpur Kepong Berhad (“KLK”) fully redeemed its RM500 million Sukuk Ijarah Islamic Commercial Papers/Medium-Term Notes Programme (2007/2012) on the scheduled maturity date of 10 May 2012. As a result, we no longer have any rating obligations on the said facility, which had previously carried AA1/Stable/P1 ratings.

Nonetheless, RAM Ratings will maintain surveillance on the AA1/Stable/P1 ratings of KLK’s RM300 million Sukuk Ijarah Commercial Papers/Medium-Term Notes Programme (2011/2016).

Media contact
Chan Yin Huei
(603) 7628 1180

News Alert - May 15, 2012

1. KLCI slips below 1,580-level on banks, plantations
2. CIMB's acquisition of Bank of Commerce credit positive, says Moody's Investors Service
3. Standard and Poor's affirms 'BBB+' credit rating on IOI Corp with stable outlook
4. Permaju denies disposing land in Sabah for RM100m
5. Quek's Rank edges Genting in UK
6. Windfall for IGB from KrisAssets' cash payout
7. EPF raises stake in Oriental Holdings
8. Incentives to draw energy-efficient vehicle investments

Monday, May 14, 2012


Check out:

Election week created generalised turbulence in equity markets, with news on JP Morgan’s loss adding fuel to fire. Asian markets had their worst ever week since Nov last year. Regional markets mirrored activity in world markets, with all markets closing lower compared to the previous week, except for Egypt where Presidential elections are ongoing. The Greek uncertainty led to a three and a half month low in the euro alongside a rise in the pound as BoE decided to put QE on hold. Gold prices recorded the biggest weekly drop this year, losing its safe haven status while oil prices were down on slowing Chinese demand concerns.

Global Developments

A rise in imports by 5.2% led to widening of the US trade deficit to USD 51.8bn in Mar (Feb: USD 45.42). The pickup in imports, the largest in almost a year, overshadowed the 2.9% gain in exports. Imports from China rose by 12%, widening the US-China trade gap to USD 31.5bn (USD 28.1bn).
US posted a budget surplus of USD 59.1bn in Apr, the first since Sep 2008, as tax revenues increased alongside a drop in expenditure. Compared to a year ago, receipts rose 10% to USD 318.8bn and spending was lower by 21%.
Initial jobless claims dropped by 1k to 367k in the week ended May 5, recording the lowest since end-March and the 4-week average touched 384k. Continuing claims, meanwhile, fell 61k to 3.2mn.
The Producers Price Index fell slightly by 0.2% mom in Apr (Mar: unchg) as energy prices dropped by 1.4% while the core PPI was up 0.2%.
U. of Michigan consumer sentiment picked up for the ninth straight month, rising to 77.8 in May (Apr: 76.4) - also the highest level since Jan 08.


German factory orders grew by 2.2% mom in Mar (Feb: 0.6%), driven by overseas demand - domestic factory orders increased 1.3% while export orders climbed 3%, the latter driven by a 4.8% increase in sales outside the Eurozone.
Trade balance in Germany recorded a surplus of EUR 13.7bn (sa) in Mar, unchanged from Feb, after exports grew 0.9% mom (sa) alongside a 1.2% rise in imports.
Industrial production data for March was released in Germany, Italy, France and UK - with the first two recording unexpected rebounds of 2.8% mom (Feb: -0.3%) and 0.5% (-0.7%) respectively. In France, output slid by 0.9% mom (+0.3%) though manufacturing production climbed for the first time this year by 1.4%. In the UK, IP fell 0.3% largely due to a decline in oil and gas production while manufacturing output grew a higher-than-expected 0.9% (-1.1%).
April harmonised CPI was released in both Germany and Spain - at 2.1% and 2% respectively, both were higher than the ECB’s comfort zone of "close to but below two percent" level.

Asia and Pacific:

The PBoC on Saturday announced a cut in the reserve requirement for commercial lenders again by 50bps, effective May 18. This follows Apr data on new Yuan loans, which dipped to CNY 681.8bn - a drop of CNY 61.2bn and CNY 328.2bn compared to a year ago and a month ago respectively.
A host of Apr data was released in China last week: trade surplus widened to USD 18.4bn in Apr as exports increased by 4.9% to USD 163.3bn and imports rose 0.3% to USD 144.8bn; retail sales increased at a slower pace of 14.1% yoy (Mar: 15.2%), the lowest in almost 14 months, to CNY 1.56trillion; fixed asset investment grew 20.2% in Jan-Apr - this was the slowest since Dec 02; inflation moderated to 3.4% (Mar: 3.6%) as food prices rose by 7% compared to 7.5% in Mar.
Latest industrial production data released in both China and India recorded a decline. Chinese IP, at 9.3% yoy in Apr (Mar: 11.9%), was the lowest in three years while India’s IP fell by 3.5% in Mar (Feb: +4.1%), contracting for the first time since Oct last year.
Sluggish export growth dragged down Hong Kong’s Q1 GDP, which eased to 0.4% yoy compared to 3% in Q4. Indonesia, which also released Q1 GDP data, recorded a growth of 1.4% qoq and 6.3% yoy (Q4: -1.3% qoq, 6.5% yoy) on resilient private consumption as exports and total investments declined yoy.
Japan’s coincident index, an indicator of current economic activity, rose for the third consecutive month to 96.5 in Mar (Feb: 95.2). Mar current account surplus, at JPY 1.589 trillion, fell 8.6% yoy though exports gained by 7.3% - the first rise in six months.
Central banks of Malaysia, Indonesia and South Korea met last week and as expected, kept policy rates unchanged.
China, Japan and Korea have agreed to hold talks to create a Free Trade Area. They account for about 20% of global GDP and 19% of exports.

Bottom line: Sentiment has been largely overshadowed by elections and their outcomes: Sarkozy losing to Hollande in France and Greece failing to form a coalition government put a big question mark as to the fate of the Eurozone and the euro. China’s latest data has only added to the worries about a global slowdown.

Malaysian Sheet Glass fully redeems bank-guaranteed debt facility

Published on 11 May 2012

Malaysian Sheet Glass Sdn Bhd (“Malaysian Sheet Glass”) fully redeemed its RM200 million Bank-Guaranteed Commercial Papers/Medium Term Notes Programme (2007/2012) on the scheduled maturity date of 9 May 2012. As such, RAM Ratings no longer has any rating obligation on the debt facility, which had previously been rated AA1(bg)/P1(bg), with a stable outlook.

Media contact
Ben Inn
(603) 7628 1024

News Alert - May 14, 2012

1. MRT contract gets tepid response
2. Proton goes private
3. Ho Hup's case goes to Federal Court this week
4. Sentiment expected to stay cautious amid hazy outlook

Press release by BPA Malaysia


Available for download May 14, 2012 (Monday) at 8:30 AM Kuala Lumpur Time (KLT).

As part of our ongoing product and service enhancement program, BPA Malaysia will be launching the latest version of our BondStream platform.

Version 3.0 adds many more features to enhance user friendliness and functionality, includin

Screen Number            New Function

1000                             Bond Advanced Search
Enhanced search conditions and data display
i)  New search selection by ISIN Code, Islamic Concept and Market Implied Rating
                                        ii) Result display has been increased from 21 to 300 records.
1010                             Favourite Bond
                                    Portfolio Management Tools
     i)   Users are able to add/insert a maximum of 5 Customised Columns into each portfolio, enabling free text entry to record external data.
ii)  Users are able to track rating changes at stock level on daily basis.
iii)  New search selection by ISIN Code, Islamic Concept and Market Implied Rating
1030                             Bond Stock
Enhanced search conditions and data display
i)  New search selection and data display for ISIN Code and Market Implied Rating
1031                             Stock Info
                                    Enhanced data display
-       Remaining Tenure Bucket
-       Actual Remaining Tenure     
-       Market Implied Rating
-       Bid-Ask Data (Date, Price and Yield)
1040                             Credit Rating
Rating Announcement articles are available for view at issuer level.  New column added "Rating Announcements Date".

1080                             Issuer Information
                                    Enhanced data display for "Latest Financial Summary".
1110                             Tender List
                                    New button "Issuer Trade Tracking" showing trading activity post issuance
1300                             Trade Advanced Search
Enhanced search conditions and data display
i) New search selection by ISIN Code, Islamic Concept and Market Implied Rating
                                        ii) Result display has been increased from 21 to 300 records.                          

1500                             Bond Calculator
                                    Algorithm updated.
1510                             Daily MTM Prices (LT)
Enhanced search conditions and data display
                                        i)  New search selection by ISIN Code
    ii) New Column added : ISIN Code, Market Implied Rating and Name change for ‘Remaining Tenure’ to ‘Remaining Tenure Bucket’.

1515                             Daily MTM Prices (ST)
Enhanced search conditions and data display
i)  New search selection by ISIN Code
ii) New Column added : ISIN Code, Market Implied Rating and Name change for ‘Remaining Tenure’ to ‘Remaining Tenure Bucket’.

1530                             Daily Bid - Ask Prices
Enhanced search conditions and data display
i.)  New search selection by ISIN Code
ii.) New Column added : ISIN Code, Market Implied Rating and Name change for ‘Remaining Tenure’ to ‘Remaining Tenure Bucket’.
1620                             Bond Index Performance
                                    Enhanced data display
                                        i) TR BPAM Bond Index headline numbers are available for all users
    ii) New Column added : "No. of Bonds" and "Market Value (MYR mil)"
1650                             Bond Index Chart
Enhanced data display
                                    TR BPAM Bond Index headline data are available for all users

Market Implied Rating:

Available FREE with Bondstream 3.0.
MIR provides a market driven perspective over a company’s credit quality and acts as a complement to fundamental credit rating analysis.  For more information, please refer to Commentary & Research ->BPAM Pricing Research for Market Implied Rating (MIR) FAQ. Our MIR data starts from 11 May 2012.

IMPORTANT: Before you login to the BondStream, please check your BondStream server address and Online Update URL by following the steps below:

1. Click to launch BondStream application
2. Click on "Properties"
3. BondStream server address tab:
4. Online Update URL tab:
5. Once step 3 and 4 is completed, you may login in to BondStream.

Once you are logged in to BondStream, you will be prompted to install the new version and follow the on-screen instructions. Alternatively, go to "On-line Update" in the main menu. If you are unable to perform On-line Update, please contact us for an installation CD. 

From 31st August 2012, BPAM will no longer support BondStream Versions 2.5 and below as they fall outside the 3 year support threshold as set out in the IT Undertakings Section of the Service Contract.
Users of Version 2.5 will no longer be able to login and therefore mandatory update to latest BondStream version i.e. Version 3.0 is recommended.

If you have any queries and installation problems, do not hesitate to contact our Help Desk at +603 2772 0888 or email

Thank you.

Best Regards
Market Development Team

No. 17-8 & 19-8, The Boulevard, Mid Valley City
Lingkaran Syed Putra
59200 Kuala Lumpur
GL: +603 2772 0888  |  F: +603 2772 0887
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