Dec 24, 2012

ASEAN - ASEAN Market Preview, Jaya Ancol, Scientex, Olam, Thai Union Frozen

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Mitsui & Co are setting up a partnership with Thai Union Frozen (TUF) Group by buying existing facilities and then building new ones on the coast of Thailand. They will own 49% of the venture that will cost them three billion yen (US$36 million). “This strategy will help Mitsubishi respond to increasing global demand for food products and to fulfill the role of providing a stable supply of resources,” the company said. Chief Executive Officer Ken Kobayashi said that food will be one of their key areas in the next few years.

Japan’s trading companies have, for the past decade or so, earned their profit by investing in coking coal and iron ore, which had a big demand in China. But now, they are shifting their investments to food, utility and transport businesses due to the waning demand for bulk commodity prices. Food in particular, has been a source of growth for these trading companies.

Mitsubishi, Japan’s biggest trader by market value, invested in meat and livestock in China through Cofco Corp and went into the salmon fish-farming business in Chile last year. This 2012, they also added to their investment portfolio grain collection and coffee plantation projects in Brazil and phosphate mines in Peru.


Olam has swamped Muddy Waters with huge volume and a strong rally, this is playing out exactly as we suggested, I will cover Olam and Muddy Waters tomorrow.

In Olam’s favor also is an improved outlook for the sector in 2013, food prices are expected to rise and regionally ASEAN +6 will speed up local GDP.

Of Muddy Waters seven attacks on companies in China, they all have a common theme, fraud and “accounting anomalies”, as I have said before they tend to feed off the Western view that those of us in Asia are somewhat less sophisticated, or more sinister than our counterparts in the West. Muddy Waters attacks work best when the shareholders are foreign entities, and Muddy Waters gets to cash in on their existing mistrust of China/Asia. Of course this is completely untrue, America most definitely has proven to be the country that produces corporate fraud at a level so vast it has more than once impacted the global economy.

It is important to remember when reading all the Muddy Waters press that not all of his targets have collapsed, and fraud has not always been proven, the Muddy Waters strike rate in relation to sinking companies or proving criminality is pretty low. What the Muddy Waters press machine does is create doubts on a company, without proof or accountability for a quick buck, while there is nothing wrong with making a quick buck, the Muddy Waters approach is beginning to wear thin, there are now a trail of innocent investors and managers whose businesses suffer lingering suspicion but with no proof of having committed any accounting breach.

But I do think it is harder to scare Singapore investors, wherever they are from. Singapore has a stellar reputation and rightfully so, that is why I predict that the Muddy Waters attack on Olam is a strategic error, Muddy Waters will lose this battle.


Scientex Bhd’s earnings rose 20.6% to RM24.87mil in the first quarter ended Oct 31, 2012 from RM20.63mil a year ago, due to strong growth in its manufacturing and property divisions.

It said on Wednesday its revenue increased by 13% to RM241.61mil from RM213.76mil. Operating profit was 18.6% higher at RM31.48mil from RM26.54mil. Earnings per share were 11.57 sen compared with 9.59 sen.

Scientex said the industrial packaging manufacturing division’s revenue rose 12.0% to RM172.6mil from RM154.1mil a year ago, boosted by higher regional exports.

Its property division reported a 15.6% increase in revenue at RM69.0mil due to increased revenue recognition from ongoing projects.

Earlier at its AGM, shareholders approved the company’s acquisition of GW Plastics Holdings Bhd’s core assets — industrial plastic packaging, blown film, and downstream printing and laminating capabilities — for RM283.2mil.

This acquisition would allow the group to fast-track its manufacturing division expansion plans.

Scientex said the deal would expand its capacity to produce 154,000 tonnes of industrial stretch film and 28,000 tonnes of blown film.

“Given plans already put in motion, the total annual stretch film capacity is expected to hit the 194,000 tonne mark by 2014,” it said, adding the acquisition was expected to be completed by end-January 2013.


Pembangunan Jaya Ancol, a recreational park operator in North Jakarta, set the coupon rate on its Rp 300 billion ($31 million) bond sale plan.

The Jakarta-based company will offer Rp 100 billion worth of three-year bonds at a coupon of 8.1 percent, the company said in a brief prospectus published by Investor Daily on Tuesday. The company is also offering Rp 200 billion worth of five-year bonds at 8.4 percent.

Pembangunan Jaya plans to list the bond on the Indonesia Stock Exchange on Dec. 28.

The company’s bonds coupons are lower than that offered by its rival Modernland Realty.

Modernland Realty, an Indonesian property company, is offering Rp 250 billion worth of three year bonds at 10.75 percent, according to a brief prospectus published also published in Investor Daily on Tuesday. It also offering Rp 250 biliion in seven-year bonds at 11 percent, the prospectus showed.

Typically the coupon of the notes sold by private companies such as Modernland and Ancol are higher than those sold by the government. The yield on the government five-year bonds was 4.7581 percent on Tuesday from 4.7594 percent the previous day while the yield on the three-year bonds was at 4.6656 percent, according to data from Indonesia Bond Pricing Agency.

Indonesian companies and commercial banks are selling bonds to capitalize on low borrowing costs in Southeast Asia’s largest economy.

Pembangunan Jaya said that it will use the proceeds from the bond sale to finance its expansion plans. It plans to build residential houses and coastal villas inside the Ancol park complex in North Jakarta.

Pembangunan Jaya named Indo Premier Securities and Mandiri Securities as financial adviser for the debt sale.

The Jakarta government owns 72 percent of Jaya Ancol, with 18 percent owned by Pembangunan Jaya and 10 percent by other investors.

Company shares rose 1.2 percent to Rp 850 on Tuesday.

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