Thursday 29 May 2014

Puncak Niaga not allowed to abstract raw water for treatment, so how?

10 March 2014
Puncak Niaga (M) Sdn Bhd had on 10 March 2014 received a faxed letter from Lembaga Urus Air Selangor (“LUAS”) that in line with the decision of the Selangor State Government on 12 February 2014, the water treatment concession companies in Selangor will be allowed to conduct raw water abstraction activities until the expiry of the existing raw water abstraction license on 31 May 2014, following which there will be no renewal of license thereof unless further directive is issued by the Selangor State Government.
20 March 2014
Puncak Niaga (M) Sdn Bhd (“PNSB”) had on 20 March 2014 filed an application in the Kuala Lumpur High Court for leave to issue Judicial Review proceedings against the decision of Lembaga Urus Air Selangor ("LUAS") and Selangor State Government as notified by LUAS to PNSB via a letter dated 7 March 2014 to not renew PNSB’s raw water abstraction licenses beyond 31 May 2014.
29 May 2014
The Kuala Lumpur High Court had at the hearing today, dismissed the substantive application for Judicial Review Proceedings filed by its wholly-owned subsidiary, Puncak Niaga (M) Sdn Bhd (“PNSB”) against Lembaga Urus Air Selangor and the Selangor State Government with costs of RM15,000.00 to each Respondent.
The Kuala Lumpur High Court had also dismissed PNSB’s oral application thereafter for a stay pending an appeal to the Court of Appeal.
Upon PNSB's instruction, PNSB's solicitors had filed a Notice of Appeal against the decision of the Kuala Lumpur High Court at the Registry of the High Court on even date.
1. On what grounds the water abstraction licenses were not renewed?

2. Will Puncak Niaga continue to operate its water treatment plants without raw water abstraction licenses?

3. Puncak Niaga has 42% of total water treatment capacity in Selangor. What will happen to the supply of treated water in Selangor?

4. Puncak Niaga has to choose whether to continue with the water treatment operation illegally without the licenses, or to default on the supply of stipulated amount of treated water as stated in the concession agreement. Isn't it a choice between bad and worse?

5. Was the non-renewal of the licenses done in bad faith to give grounds to the state government to takeover the operation of water treatment from Puncak Niaga? Isn't such a move an ultra vires government action?

Wednesday 28 May 2014

Rights issue fund just before disposal of major asset?

Silk Holdings Berhad (SILK) announced the proposed disposal of SILK Highway on 27 May 2014 for cash consideration of RM398m.

In less than 3 week before this, on 9 May 2014 to be specific, SILK had proposed a private placement of about 6.2% of the issued and paid up capital of Silk Holdings Berhad to finance investment opportunities, so to speak. Subsequent, the group announced the issue price of the new shares was 72.5sen/share.

For the proposed disposal of Kajang-SILK Highway, SILK is expected to get RM39.8m or equivalent to 10% of the total cash consideration upon execution of the SPA, expected within 14 days from 27 May 2014 or such other extended period as may be agreed between SILK and IJM.

Is SILK really in such a dire need to raise RM21.75m, which is not too significant to the scale of its operations, and just before the proposed disposal of highway? More so when the management of SILK is still exploring investment opportunities and has not entered into any arrangement with any parties, according to the company announcement dated 9 May 2014.

Why raise fund when the group is expecting huge sales proceeds from the disposal of highway? Wasn't the management aware of the proposed disposal of Kajang-Silk Highway earlier?

To whom the shares placed out?

Monday 26 May 2014

Is disposal of SB Mall by The Store a non-related party transaction?

Source: Company announcement dated 27 Dec 2013

Is the disposal of SB Mall Sdn Bhd by the Store a non-related party transaction? Let do some mapping here.

Mall of Malaysia
Mall of Malaysia currently has 6 (7?) malls of which 3 are in operation. They are the KB Mall, Alor Star Mall and Batu Pahat Mall. 4 more malls are in the pipelines - SB Mall, Taiping Mall, BM City Mall and KTCC Mall. (Source: MRCA Newsletter Vol 2 No 1, page 34)


Is Managing Director of The Store Corporation Berhad, Tan Sri Dato' Sri Tang Yeam Soon related to Mall of Malaysia?

1. Tan Sri Dato’ Sri Tang Yeam Soon, Managing Director of The Store Corporation Berhad, has interest in YST Holdings and Dream Property. The Store Group pays rental to YST Holdings and Dream Property for renting of retail space at KB Mall and Batu Pahat Mall.

2. William Tang is the Special Assistant to Group Managing Director of Mall of Malaysia. Sharing the same surname, not sure if William Tang is related to Tan Sri Dato' Sri Tang Yeam Soon, the Managing Director of The Store Corporation Berhad.

3. The Store Group operates hypermarket/supermarket & departmental stores at Alor Star Mall, Batu Pahat Mall and KB Mall, which are in portfolio of Mall of Malaysia.

Disposal of SB Mall Sdn Bhd to non-related party
Based on announcement dated 27 Dec 2013, The Store Corporation Berhad is disposing 100% stake in SB Mall Sdn Bhd (owner of the shopping complex) to non-related party Goldleaf Synergy Sdn Bhd.

1. Is the SB Mall under Mall of Malaysia the same as the one to be disposed by The Store Group?
2. The Store Group and Mall of Malaysia share the same address?

Source: The Store 2013 annual report, page 15

Source: Google Map

3. Does Tan Sri Dato' Sri Tang Yeam Soon have any interest in Mall of Malaysia?
4. If it is a "yes" to Q1, is the proposed disposal deemed a non-related party transaction because Mall of Malaysia will just be the mall operator while the property will be owned by non-related party Goldleaf Synergy Sdn Bhd?
5. Which company manages SB Mall? Which company will take over as the operator of the mall? If the Store group is the mall operator before the proposed disposal, why not keep its role as the mall operator post disposal if the intention of the disposal is just to be raise cash for working capital?

Other related article:
The Store to pay MD’s firm RM130mil for shopping mall

Sunday 25 May 2014

KK Group of Companies

Executive Chairman of KK Group of Companies, Dato' Dr KK Chai, Sarawakian

Opened first KK Super Mart in Kuchai Lama in 2001

Catering for the masses and is considered a supermarket rather than a convenience store

Selling point: open 24 hours, 365 days a year.

165 outlets by end of 1Q14

Strong presence in KL, Seremban, Melaka and Kuching

A total of 1238 employees with each outlet having 6 to 8 employees.

Have 5 outlets in Kathmandu, Nepal

Has a wide range of businesses under his directorship. These include 24-hour Super Mart, F&B, Beauty & Hair, Surveillance Systems, Development & Construction, Fresh Mart, Home Deco, Manufacturing, Automobile Upgrade of Services, Property & Investment, Fashion, Hotel, and Sport Complex.

More info about the group:

Saturday 17 May 2014

Samalaju gaining momentum

Limited coverage by media in Peninsular but Borneo Post provided some updates on SCORE.
“Besides the three companies that are in operation in Samalaju Industrial Park now, two other companies namely Pertama Ferroalloys Sdn Bhd and OM Materials (Sarawak) Sdn Bhd are currently constructing their manufacturing plants and facilities.
“Asia Advanced Materials Sdn Bhd has completed the site preparatory works and two other companies namely Elkem Carbon Malaysia Sdn Bhd and Cosmos Chemical Bhd are doing their site preparations.”
He added six companies that had been approved and issued with manufacturing licences would begin their land preparation works once their power purchase agreements had been finalised.
The economic corridor is gaining momentum. CMSB, being one of the largest Sarawak-based company listed in Bursa is a good proxy to the booming industrial development in Sarawak, SCORE in particular.

Besides being a state with rich natural resources, it is also the largest state in Malaysia. Her land area of 124,450km2 is just slightly smaller than the land area of 131,598km2 in Peninsular Malaysia.

Mystery in highway toll-rates

I felt puzzled after reading news articles related to tolled-expressway in Malaysia.

In this article which was published a day before the opening of Besraya Expressway Extension,
“Besraya’s concession has been extended for eight more years to end on May 14, 2040 due to the new 12.34km route,” he said, adding that the toll rate would be decided by the Government.
In another article which was published just few days before the opening of second Penang Bridge.
Jambatan Kedua Sdn Bhd managing director Datuk Dr Ismail Mohamed Taib said the firm had initially asked to match the rate with that of the first bridge link at RM7 but the Malaysian Highway Authority proposed a higher amount.

“The rate will still be below RM10 but it will be able above RM7. For example, it could be RM8.50,” he told the press at a media briefing session today at the Batu Kawan toll booth leading to the newly completed bridge.

He added that the final decision on the toll rate will be announced by the Prime Minister Datuk Seri Najib Razak when he officiates the bridge’s opening this Saturday.
1) Why were toll rates fixed last minutes, and not during the signing of concession agreements?

It would be interesting to find out how the toll rates were decided by the government, and at the very last moment just before the toll collection started.

In these cases, how the concessionaires obtain financing if there was uncertainty in the toll rates and cash flow? The difference in proposed toll rates of RM8.50 and RM7.00 is considerably significant (17.6%). Also, without the toll-rates known to a concessionaire, how the concessionaire proceeds with its capital budgeting before committing to a highway project? And we are talking about highway projects that cost a few hundred millions each if not in billions.

2) Why Malaysian Highway Authority proposed a higher amount?

Malaysian Highway Authority is a statutory body/regulator. Why it proposed higher toll rates for second Penang Bridge? Was it for the best interest of the public? It is easier to comprehend if it came from the concessionaire.


Friday 16 May 2014

8-letter stock name?

If I remember correctly, stock names of bursa listed companies are limited to 7 letters. As such, adjustments were made by some companies to accommodate the limit.



Maica was renamed to Sunsuria. However, the stock name remains 8 letters. Is it an exceptional case?

Thursday 15 May 2014

Update on OM Sarawak

Update on OM Sarawak, in which CMSB has 20% stake.

Source: OM Holdings Ltd 2013 Annual Report

During the year we have made very significant progress with the OM Sarawak project. The project continues to represent an outstanding investment opportunity based on strong demand fundamentals, increasing industry-wide energy costs and the unique cost competitiveness of Sarawak. The project continues to benefit from its competitive advantages of competitively priced and reliable power, proximity to raw materials and customers, tax incentives, lack of import and export duties and existing infrastructure.

OM Sarawak has concluded its project financing with a syndicate of leading international and regional lenders for USD215 million and MYR310 million of project debt and a further MYR126 million credit line. It has successfully executed the EPC contract with Sinohydro Corporation Limited and Sinohydro Corporation (M) Sdn Bhd (“Sinohydro”) as the Project’s lump-sum turn-key EPC contractor and Sinosteel Jilin Electro-Mechanical Equipment Co Ltd (“Sinosteel“) as a nominated sub-contractor responsible for all engineering, manufacture, and installation and commissioning. The EPC contract will allow us to leverage Sinohydro’s project management experience and Sinosteel Jilin’s specialist equipment and control system expertise.

A game-changing 2014 ahead
The #1 deliverable of the Group remains the commissioning of the first furnaces at OM Sarawak during the second half year of 2014, while continuing with the commissioning of subsequent furnaces during the year and achieving the full commissioning of the smelting plant by the middle of 2015. We will progress the development of our recently announced quartzite mining joint venture in Perak, Malaysia, with a view of strengthening OM Sarawak’s key raw material security of supply position while further strengthening its cost competitiveness. We remain very clear in our view that successful execution of OM Sarawak will be a game-changer for the Group and this view is now fully shared not only by our Board and management team but also by our key investors, financiers and other stakeholders.

OM Sarawak will not only transform the Group’s production and financial profile but will also become a platform for significant future strategic growth and value creation opportunities in an industry which is ripe for consolidation.

OM Materials (Sarawak) Sdn Bhd (“OM Sarawak”), an 80:20 joint venture between OMH and Cahya Mata Sarawak Berhad (“CMSB”), a listed industrial conglomerate on the Main Market of the Malaysian Stock Exchange, Bursa Malaysia, is the owner of the Ferro Alloy Smelting Project in Sarawak, Malaysia (the “Project”). OM Sarawak aims to be a low cost ferrosilicon producer, with a cost of production placing it at the lower end of the global industry cost curve of ferrosilicon producers. The Project, which represents a major step in OMH’s development as a potentially world class lowest-quartile cost producer of ferroalloys, notably ferrosilicon and manganese silicon, entails the continued development of a manganese and ferrosilicon alloy smelter with an expected annual production capacity of approximately 600,000 tonnes in the Samalaju Industrial Park, Sarawak, Malaysia.

The Project will be developed in two phases at an approximate total project cost of USD 592 million. This phased execution of the Project is designed to expedite cash flow and allow additional construction and ramp-up flexibility. Phase 1 is expected to fast-track the higher margin ferrosilicon production, while providing additional time for further technical and commercial optimisation of Phase 2.

The Project is located on approximately 500 acres of land with a 60-year lease in the Samalaju Industrial Park, part of the Sarawak Corridor of Renewable Energy initiative of Sarawak, Malaysia.

The Project’s unique competitive advantages include, but are not limited to, access to competitively priced long-term hydroelectric power supply (from the Bakun Hydroelectric Dam), coastal industrial land with direct access to a dedicated future port facility, geographical proximity to both raw materials and Asian steel mills, tax incentives, no import and/or export duties as well as comprehensive purpose built industrial infrastructure.

To-date, OM Sarawak has signed off-take agreements with JFE Shoji Trade Corporation, Hanwa Co., Ltd and Fesil Sales AG, collectively exceeding 60% of the Project's expected Phase 1 production capacity. Notwithstanding this, the Project continues to receive strong interest in its product, which the company is evaluating and actively managing with a view to positioning itself to secure optimal arrangements at the opportune time. The strategic intent is to maintain a mix of long and short term off-take arrangements to optimise returns and flexibility, and it is envisaged that further contracts will be entered into as the Project nears commercial operation.

The market demand for both ferrosilicon and manganese alloys from this smelter is expected to be strong. This will be driven by the long-term growth prospects for steel production in the East Asian region and the smelter's competitive first quartile position on the operating and delivery cost curve thanks to its comparatively cheaper energy costs and its strategic proximity to growing East Asian markets. All this, coupled with the change in industry dynamics, which is largely being driven by rising power prices and labour costs, growing demand from China for ferrosilicon alloys, higher environmental standards affecting older plants, and the Chinese Government's disincentives to export energy intensive products, augurs well for the smelter's future operations.

Plant Construction and Development
Overall schedule performance achieved as of February 2014 was reported as 57%, with the civil and structural work behind schedule by approximately 14%. Despite the delay, the Interim Commercial Operation Date is still expected to be on schedule.

The last mile connection from Samalaju substation to the smelting plant has been completed. To-date, the progress for substation is approximately 92% and installation of communication and metering panels were in progress in the substation. The substation is expected to be ready to draw power from the Sarawak power grid well before the start of commercial operation date.

Sinosteel's fabrication work is progressing well; procurement and fabrication for most of Plant A equipment has been completed and the majority of the critical equipment delivered to site.

At the end of February 2014, the overall Project cumulative earned value progress achieved is 57%. Commercial production at the Sarawak Project will commence on a phased ramp-up basis and the company is preparing for operational readiness. To date, 65% of workers required for Plant A has been recruited and are undergoing a comprehensive training regime in China. Raw materials and certain auxiliary materials are expected are expected to arrive on site in Q2 2014.

The Facilities Agreement in respect of the project finance facility was successfully executed in March 2013, and together with the committed equity from OM Sarawak's shareholders, Phase 1 of the Project has been fully funded.

The funding commitment were received from a syndicate of leading local and international lenders, namely the Export-Import Bank of Malaysia Berhad, Maybank Investment Bank Berhad, RHB Bank Berhad and Standard Chartered Bank Malaysia Berhad. The project financing comprised limited recourse senior project finance debt facilities totalling USD215 million and MYR310 million for the total capital cost of the Project's Phase 1 ferrosilicon production facility, and another MYR126 million credit line for the purpose of the issuance of performance and payment guarantees to the power provider, Syarikat Sesco Berhad, as part of OM Sarawak's obligations under the Power Purchase Agreement.