Stocks In Focus MY (Palm Oil Futures, Brahim’s Hldgs, Lafarge M’sia) – 26/12/14
Palm Oil Futures, BRAHIMS (9474), LAFMSIA (3794)
Malaysian Palm Oil Price Hits Near 1-Month High On Monsoon Disruption
Malaysian palm oil futures rose to their highest in nearly a month on Wednesday, 24 December, as severe flooding in parts of the country due to the monsoon rains affected harvesting and crushing of palm fruit.
The benchmark March contract on the Bursa Malaysia Derivatives Exchange had edged up 0.5 percent to RM2,219 ($635) per tonne by Wednesday’s close in its sixth straight day of gains, with prices trading at their highest since 26 November. Total traded volume stood at 51,113 lots of 25 tonnes, much higher than the usual 35,000 lots.
Lingam Supramaniam, director of Malaysia-based commodities firm Pelindung Bestari said that the market is also seeing short covering after the recent output data and flood vagaries because it feels that the harvest will be delayed as a result of the rainfall and the flooding of certain mills in the east coast.
Significance: According to Reuters, technicals showed the price of palm oil futures may encounter key resistance when it reaches RM2,338 per tonne in the next 3 months. A break above will lead to a further increase to RM2,649.
Brahim’s Revising Deal With Khazanah
Brahim’s Holdings is renegotiating its RM6.3 billion in-flight catering contract with Khazanah Nasional and hopes to agree on certain conditions soon, that will not put a dent on its earnings. The company has a 25-year contract till 2028 to provide catering and related services at the Kuala Lumpur International Airport (KLIA) and Penang International Airport.
The two parties are discussing on new conditions for the existing catering contract, which will be carried over to the new Malaysia Airlines (MAS NewCo). Khazanah’s plan to migrate Malaysian Airlines’ (MAS) operations to MAS NewCo but leave the existing contract obligations with the current entity, will give MAS stronger bargaining power to renegotiate its supply contracts.
Sources said that discussions are currently centred on prices and industry benchmarking. Khazanah is also said to be very reasonable in its negotiations on account of the huge amount Brahim had invested in the catering contract.
Significance: While the current catering contract will not be reduced or axed, the group expects to generate RM350 million in revenue a year from the catering contract after negotiations, as opposed to the current RM380 million.
Lafarge Contract Win, Mill Buy Positive For Firm
Hong Leong Investment Bank (HLIB) Research sees the RM254 million concrete supply contract awarded to Lafarge Malaysia and its purchase of cement mill from Lafarge Ciment (Romania) SA for RM46 million as positive for the group.
The research house said the five-year contract to supply concrete for the Refinery and Petrochemicals Integrated Development project and other Petronas-related projects in Pengerang, Johor, is in line with its positive outlook on the company.
The purchase of the cement mill and ancillaries, which are in an unused state, is deem to be beneficial to the firm, as acquiring a cement mill from a related party would generate cost savings compared to buying a new mill from a different party.
Significance: HLIB has reiterated its ‘Buy’ call on the company with a target price of RM10.72. It added that catalysts to the acquisition include timely implementation of Economic Transformation Programme projects and sustainable demand from property development projects.
http://www.sharesinv.com
Palm Oil Futures, BRAHIMS (9474), LAFMSIA (3794)
Malaysian Palm Oil Price Hits Near 1-Month High On Monsoon Disruption
Malaysian palm oil futures rose to their highest in nearly a month on Wednesday, 24 December, as severe flooding in parts of the country due to the monsoon rains affected harvesting and crushing of palm fruit.
The benchmark March contract on the Bursa Malaysia Derivatives Exchange had edged up 0.5 percent to RM2,219 ($635) per tonne by Wednesday’s close in its sixth straight day of gains, with prices trading at their highest since 26 November. Total traded volume stood at 51,113 lots of 25 tonnes, much higher than the usual 35,000 lots.
Lingam Supramaniam, director of Malaysia-based commodities firm Pelindung Bestari said that the market is also seeing short covering after the recent output data and flood vagaries because it feels that the harvest will be delayed as a result of the rainfall and the flooding of certain mills in the east coast.
Significance: According to Reuters, technicals showed the price of palm oil futures may encounter key resistance when it reaches RM2,338 per tonne in the next 3 months. A break above will lead to a further increase to RM2,649.
Brahim’s Revising Deal With Khazanah
Brahim’s Holdings is renegotiating its RM6.3 billion in-flight catering contract with Khazanah Nasional and hopes to agree on certain conditions soon, that will not put a dent on its earnings. The company has a 25-year contract till 2028 to provide catering and related services at the Kuala Lumpur International Airport (KLIA) and Penang International Airport.
The two parties are discussing on new conditions for the existing catering contract, which will be carried over to the new Malaysia Airlines (MAS NewCo). Khazanah’s plan to migrate Malaysian Airlines’ (MAS) operations to MAS NewCo but leave the existing contract obligations with the current entity, will give MAS stronger bargaining power to renegotiate its supply contracts.
Sources said that discussions are currently centred on prices and industry benchmarking. Khazanah is also said to be very reasonable in its negotiations on account of the huge amount Brahim had invested in the catering contract.
Significance: While the current catering contract will not be reduced or axed, the group expects to generate RM350 million in revenue a year from the catering contract after negotiations, as opposed to the current RM380 million.
Lafarge Contract Win, Mill Buy Positive For Firm
Hong Leong Investment Bank (HLIB) Research sees the RM254 million concrete supply contract awarded to Lafarge Malaysia and its purchase of cement mill from Lafarge Ciment (Romania) SA for RM46 million as positive for the group.
The research house said the five-year contract to supply concrete for the Refinery and Petrochemicals Integrated Development project and other Petronas-related projects in Pengerang, Johor, is in line with its positive outlook on the company.
The purchase of the cement mill and ancillaries, which are in an unused state, is deem to be beneficial to the firm, as acquiring a cement mill from a related party would generate cost savings compared to buying a new mill from a different party.
Significance: HLIB has reiterated its ‘Buy’ call on the company with a target price of RM10.72. It added that catalysts to the acquisition include timely implementation of Economic Transformation Programme projects and sustainable demand from property development projects.
http://www.sharesinv.com
