Proton to announce Volkswagen tie-up talks results in 1 to 2 weeks, posts profit for FY2009/10

When Proton first announced that it was not proceeding with a supposedly finalized tie-up with Volkswagen quite some time ago, to be honest I had abandoned hope in such a tie-up happening.

But that feeling stayed only for a moment as over the past few Proton events between then and now, the responses from Proton management especially Datuk Syed Zainal when answering questions from the media regarding the revival of such a tie-up seemed to say no comment officially but somehow you just had the feeling that Proton was up to something exciting when you looked at the good Datuk’s facial expression.

And then last night at its AGM where it announced its latest financial numbers, the chairman confirmed it – Proton and Volkswagen is indeed in talks and an outcome of what is being discussed would be announced in two weeks time. He declined to mention any specifics for now, saying he prefers not to jump the gun, so we don’t know if its something like a contract assembly agreement or perhaps something larger involving an equity tie-up or a technical collaboration.

We suspected that something was going on – while going in and out of the Proton COE HQ in Shah Alam to pick up cars for our Driven shoot in the past few months, we’ve seen visiting Touaregs parked near the higher management parking a few times and had a feeling it was perhaps Volkswagen officials over for a visit.

Proton CEO Datuk Syed Zainal Abidin also revealed that Proton is expected to launch a new model around October or November 2010. This is quite interesting actually as Datuk Syed Zainal said the new model will contribute significantly to Proton’s ability to further increase market share both at home and in export markets. If it is in fact a rebadged Mitsubishi, this means we also have export rights for the car.

At its AGM earlier this week, Proton posted a consolidated profit before tax of RM285 million for the financial year ending 31st March 2010, an improvement of over 150% compared to the last financial year’s RM319 million loss. It reported an increase in domestic sales volume of 8%, despite a 2% vehicle sales volume (TIV) contraction. Cumulative revenue was RM8.23 million – a 27% increase over the RM6.49 billion posted in the previous financial year. Proton attributes this improvement to encouraging sales of the Saga, Persona and the Exora, which are Proton’s three core models

Mah Sing wins award for its Southbay project

PENANG: MAH SING GROUP BHD [] bagged an award as best developer in the future waterfront development for its Southbay project in Penang Island at the 2010 Cityscape Asia Real Estate Awards Ceremony in Singapore on Tuesday, May 18.

The first phase of the billion-ringgit township development has been opened for registration with more than 1,500 registrants thus far, said the company in a statement on Thursday.

Southbay is located at Batu Maung, Penang Island. The development comprises residential, commercial and tourist attractions, with shopping and dining districts.

Group managing director Tan Sri Leong Hoy Kum said Mah Sing was pleased with the award, which was its seventh for the year.

Cityscape is the world's largest business-to-business real estate event brand. Mah Sing has 16 years of experience in property development, with 26 residential, commercial and industrial projects under its belt.

Action-packed week expected in the market

Overseas market turbulence, vital economic data to influence trading patterns

KUALA LUMPUR: Turbulence in the markets overseas, ignited by the growing debt concerns in Europe, are expected to influence trading patterns on Bursa Malaysia in a week filled with vital economic data and the release of quarterly financial results of the country’s largest banks.

Gross Domestic Product (GDP) growth data for the first quarter and a decision on whether interest rates would be raised are scheduled to be announced on May 13 while the results of Malayan Banking Bhd and CIMB Group Holdings Bhd are expected to be announced towards the end of the week.

OSK Investment Bank research head Chris Eng said that because of the bad news in European markets, the local bourse is expected to see shaky trading but he sees some calm returning to markets after Wall Street stabilises.

“There should be a rebound in global markets towards the end of the week,’’ he said.

Global markets were roiled on Thursday and Friday as concerns over the Greek debt crisis and its possible contagion to the rest of Europe and the major global banks boiled over, culminating in a huge drop on Wall Street that saw all the gains of the year wiped off.

After falling 347.8 points on Thursday, the Dow Jones Industrial Average slipped a further 139.89 points on Friday as worries gathered momentum that the current turmoil in Greece and Europe had the makings of a fresh credit crisis.

German Chancellor Angela Merkel on Saturday said Greece was not the only country in Europe that was facing financial market pressures, and described the situation as serious.

“Amid prevailing nervousness, news and developments will be interpreted in an amplified way. Hence, I expect a high level of liquidity ahead as investors watch ramifications of the euro debt crisis, including the impact on the euro, British politics, recent US trading glitches and locally, the upcoming Bank Negara monetary policy meeting,’’ said Kumpulan Sentiasa Cemerlang Sdn Bhd research director Tan Beng Ling.

Despite the gravity-defying performance by the FTSE Bursa Malaysia KLCI on Friday – it was the only major stock market that closed up – analysts do not think investors would be able to repeat that performance, should conditions sour when trading kicks off in Asia today.

The FBM KLCI closed up 1.02 points on Friday to 1,332.89.

But the one silver lining many are waiting for would be economic and earnings data.

The release of the first quarter GDP data and the potential increase in interest rates on Thursday would be welcomed by investors.

Expectations are rife that the first quarter GDP number would beat consensus expectations although many brokers of late have tweaked their first quarter numbers upwards in the past week or so after export data came in much stronger than what the market was looking for.

There is a sense of belief that the first quarter GDP would hit double digit for the first time in a decade. Even if it does not, the GDP number should come in at the high single-digit range.

Confirmation of a strong first quarter would come after industrial production data is released tomorrow. Helping sentiment locally would also be the widely expected decision by the Monetary Policy Comittee on Thursday to lift the overnight policy rate (OPR) by another 25 basis points.

Eng said the market had built in a rise of 25 basis points in the OPR when the policy statement was released and that would help the ringgit and possibly sentiment in Malaysia.

Investors would also be keeping a keen eye out for numbers from the country’s two largest banks. Helping their numbers would not only be a growing domestic franchise but contributions from their overseas subsidiaries, particularly from Indonesia.

“When the dust settles, I believe the relative strength of Asia ex-Japan will be appreciated even better,’’ said Tan.

KNM Group expects to perform better this year Read more: KNM Group expects to perform better this year

PROCESS equipment manufacturer KNM Group Bhd (7164)expects to perform better this year on lower tax rates and higher exploration and production activities.

"We recently spoke to the management of KNM following the breakdown of its proposed takeover offer. We believe that investors have overlooked the business aspect in the last few months after the takeover news first broke off back in February 2010," wrote HWANGDBS Vickers Research Sdn Bhd (HDBSVR) analyst Lee Wee Keat in a note to clients yesterday.

KNM's substantial shareholder and group managing director Lee Swee Eng had recently aborted his proposed offer via Bluefire Capital Group to buy KNM's entire business at RM0.90 per share.

Last year was a bad year for KNM as oil majors held back spending in view of low and volatile oil prices.
"We understand that KNM managed to secure only RM1.5 billion worth of jobs last year, and capacity utilisation was only 65 per cent compared with 80 per cent in 2008.

"(Profit) margins for the jobs secured were also slimmer as intense competition over the modest number of jobs available led competitors to cut prices," he said.

Lee expects margins for the next few quarters to remain sluggish as the company completes jobs secured last year. He estimated that the average completion ranges from 15 to 18 months per project.

"We gather that margins have improved since, but have yet to recover to previous levels."

Lee also said concerns over KNM's orderbook replenishment persists.

"KNM has a RM2.4 billion orderbook, with RM400 million of new contracts secured thus far. This is slow, but we foresee a rise in exploration and production activities in the second half of this year to trigger contract flows."

The group currently has a RM11 billion tender book comprising jobs mostly in the Middle East and Europe.

However, Lee has cut his new wins assumption for KNM to RM1.7 billion from RM1.8 billion previously for the financial year ended December 31 2010 (FY10), based on current tender book and historical hit rate of 15 per cent.

KNM's FY09 audited net profit stood at RM260.6 million after adjusting for the tax incentive, which was granted by the Finance Ministry on April 7 2010 to its subsidiary KNM Process Systems Sdn Bhd for the acquisition of Borsig.

Totalling RM1.4 billion, the tax incentive will apply for a period of four years from 2009.

"We expect a lower tax rate going forward as local operations will be spared from paying taxes. Also, there was no impairment charge for Borsig. Borsig contributed about 45 per cent of total FY09 earnings," said Lee.

The research firms has upgraded KNM to "hold" from "fully valued", but lowered its target price to RM0.60 from RM0.65.

"We expect some overhang in the share price given the EPF's recent heavy selling, but at the current price level, we believe that most of the negatives have been priced in. KNM has also started to buy back its shares.

"We believe KNM's strong RM571.7 million cash balance should support more buyback on share price weakness," said Lee.

Read more: KNM Group expects to perform better this year http://www.btimes.com.my/Current_News/BTIMES/articles/03knm/Article/index_html#ixzz0mvq0ZOgg