Economist and Hedge Fund Manager Shayne Heffernan of www.livetradingnews.com takes a look at ASEAN Equities, DBS, CIMB, PLDT, Siam Cement, Bumi
Borneo Lumbung Energi & Metal (BORN) expects a return on its investments worth US$1 billion following a purchase of a 23.8 percent stake in Bumi Plc. Alexander Ramlie, BORN director, said that was the reason the company did not follow the lead of the Bakrie Group who proposed disposing its shares. “These are two different deals,” said Alexander on Oct. 25.
However, if Bakrie Group’s proposal is approved at the shareholders’ meeting, then the two special purpose vehicles (SPVs), comprising Borneo Bumi and Bumi Borneo investing in Bumi Plc, must be dissolved. According to Alexander, BORN is waiting for the recommendation of independent directors at Bumi Plc , who are currently evaluating Bakrie Group’s proposal.
Late last year, Samin Tan—BORN owner—agreed to buy the 23.8 percent, or half of the Bakrie Group’s stake in Bumi Plc for US$1 billion. The funds was a loan from Standard Chartered Bank, as the sole lender with a time period of five years and at commercial interest rates.
BORN and Bakrie then founded Borneo Bumi Energi & Metal (Borneo Bumi) and Bumi Borneo Resources (Earth Borneo) in Singapore as the vehicles each holding a share of 23.8 percent in Bumi Plc. The Bakrie Group owns 51 percent shares in Bumi Borneo and 49 percent in Borneo Bumi.
Recently, relations between the Bakrie Group and Nathaniel Rothschild, a British baron, the original owner of Vallar Plc, which became the forerunner of Bumi Plc came to a head, impacting on the shares of Bumi Plc. Earlier this month, the Bakrie Group proposed to swap their entire stake in Bumi Plc with Bumi Resources (BUMI) shares controlled by the London-based mining company.
Siam Cement, Thailand’s biggest cement producer, plans to invest more than $350 million for the construction of a cement plant in West Java as part of its efforts to expand in the region.
The 11 billion baht ($358 million) Indonesian cement plant is one of its three projects across Southeast Asia, the Bangkok-based company said in a statement sent to the Stock Exchange of Thailand on Wednesday. The other projects include a cement packaging plant in Thailand and expansion of a cement plant in Cambodia.
“The board of directors has approved several new investment projects, totaling 23,200 million baht in the cement and paper businesses. These investments are in accordance with Siam Cement’s strategy to become an Asean sustainable business leader,” it said.
The Indonesian cement plant is expected to have total estimated annual production at 1.8 million metric tons.
“This green-field investment is expected to start up in mid-2015 and will include the latest waste-heat power generator system for reduced electrical consumption,” the company said. Siam Cement says that demand in Indonesia’s cement market is estimated at 54 million tons in 2012, with expected annual growth at 5 percent to 10 percent in the next 10 years.
Infrastructure projects such as roads, airports and seaports should boost demand for building materials including cement.
Siam Cement’s local competitors are Semen Gresik, Holcim Indonesia and Indocement Tunggal Prakarsa.
The Thai company’s expansion in Indonesia is part of its $754 million investment project in cement and paper.
Around $179 million will be used to build a second cement line with a capacity of 900,000 tons in Cambodia.
“This second line will be located in the existing cement facility in Kampot, which is Cambodia’s first cement plant and has been in operation since mid-2007,” the company, adding that the remainder would go to expand its packaging operations in Thailand.
DBS Bank Ltd. of Singapore is divesting around 50 percent of its shareholdings in Bank of the Philippine Islands (BPI).
“This partial divestment is in line with DBS’s disciplined capital management and strengthens its capital position ahead of the introduction in Singapore of Basel III in 2013, BPI parent Ayala Corp. said in statement released Friday by Philippine Stock Exchange.
Ayala said it entered into an agreement with DBS to buy part of the common shares held by the Singapore-based financial services group for P25.6 billion. The transaction would boost Ayala’s ownership stake in BPI by 10.4 percent to 44 percent from 33.6 percent.
DBS has been an investor in BPI since 1999 and is one of the Philippine-based bank’s major shareholders with a 20.3 percent effective interest. It will retain a 9.9 percent ownership and a board seat in BPI.
“DBS has been and will continue to be a valuable strategic partner in the governance and management of BPI,” said Ayala chairman and CEO Jaime Augusto Zobel de Ayala.
Basel III is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector, according to the Bank of International Settlements.
These measures aim to improve the banking sector’s ability to absorb shocks arising from financial and economic stress, whatever the source improve risk management and governance, and strengthen banks’ transparency and disclosures, BIS added.
CIMB Group Holdings Bhd is expected to report lower net interest margins (NIM) in the second half of this year compared with the first half, analysts said.
In a report, Alliance Research analyst Cheah King Yoong said this was potentially due to the ongoing loan replacement cycle and competitive rates given to a significant portion of Economic Transformation Programme-related business loans.
CIMB Niaga, the bank’s Indonesian unit which contributes about 30% to group net profit, has seen loan growth slows down, dragged by the cut in loan-to-value ratio for housing loans from 80% to 70% by Bank of Indonesia.
“Although the group’s NIM inched up by 7 basis points quarter-on-quarter to 3.13% in the second quarter of financial year 2012 (FY12), we understand that NIM may contract by five to 10 basis points in the second half,” said Cheah.
Hong Leong Investment Bank’s research head Low Yee Huap said in a report that NIM – a measure of the difference between the interest income generated by banks and the amount of interest paid out to depositors – was expected to be under continued pressure.
“FY12 NIM would be higher (year-on-year) but second half will be lower than the first half,” he said.
Both research outfits came out with their reports after an analyst briefing last week.
At the briefing, Cheah said CIMB’s management reaffirmed that the 8% core equity tier-1 (CET1) ratio was reflective of recent acquisitions and the latest concept paper on capital requirement issued by Bank Negara.
As such, they do see a significant downward revision to their guided CET1 of 8%.
Although management cautioned that the final capital requirement by Bank Negara could be more stringent than its concept paper, they maintained that the group was not looking to raise additional equity capital but prefer to take alternative actions such as selling its non-core assets to meet the potential capital shortfall, if any, Cheah noted.
He added that CIMB management did not foresee the group to undertake any merger and acquisition activities in the near term.
The acquisitions of a 60% stake in Bank of Commerce in the Philippines, and Royal Bank of Scotland’s selective cash equities and associated investment banking businesses in the Asia-Pacific, would have completed its regional platform for now, Cheah said.
Therefore, the group would focus on integrating its recent acquisitions, going forward, he said.
Low said in terms of deal pipeline, bond deals would continue to be robust in view of the need to replenish maturing issues and financing requirements.
However, equity pipeline was uncertain after mega issues earlier this year, he said.
Given the rapid increase in telecommunications traffic, the Philippine Long Distance Telephone Co. (PLDT) will continue to spend about 20 to 25 percent of its capital expenditures on its fiber optic technologies.
Rolando Peña, PLDT’s and Smart Communications Inc.’s technology group head said Tuesday that the telco would use the monies for the laying down of more fiber optic cables.
It has already spent, to date, about P40 billion in this effort. This comes to about 54,000 kilometers of fiber optic cables, the backbone of its high-speed data transmission, laid for its network all over the Philippines.
Peña also touted that PLDT’s Domestic Fiber Optic Network (DFON) has the largest long-haul capacity in the country at 4.6 terabytes per second.
He explained that fiber optic technology enables the fixed line network to transmit voice, data, and video over the internet at much higher bandwidths, faster speeds, and with better quality.
“This enables us to offer advanced multi-media communications services not only through our fixed line network through fiber-to-the-home services but also through our mobile network using services like Long Term Evolution or LTE,” he added.
Peña said PLDT is “fibering” its network from end-to-end.
“We are bringing fiber up to the home and enterprises as well as to the cell sites for a richer broadband experience of our customers across all business segments. The closer the fiber, the bigger the available bandwidth,” he said.
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