Berjaya Food: Testing Investors' Appetite?

Listing tomorrow (March 8), Berjaya Food (BFood), through its subsidiary Berjaya Roasters, is principally involved in the development and operation of the Kenny Rogers Roasters (KRR) chain of restaurants in Malaysia. All started when Berjaya Group acquired KRR in 1993, and being the exclusive franchisee in Malaysia, operating 52 outlets nationwide.

Kenny Rogers Roasters

What's in BFood mind?

• Open 8-10 outlets per annum
• Emphasizes healthy food targeting increasingly heath conscious consumers

What Analysts say?

The IPO price was set at RM0.51, and Berjaya Group will still be the largest shareholders after IPO with 70.91% shareholdings. OSK Research value BFood with a RM0.57 target price, based on 7.5x PE, which represents a 30% discount to its closest peer in Malaysia, QSR Brands due to its smaller revenue and earnings base. BFood intends to distribute up to 50% dividend payout.

Past and projected revenue. Source: OSK, Prospectus

More "food" for BFood? 

Berjaya Group does not discount the possibility of injecting its other food businesses into BFood once they turn more profitable. I believe this is just the beginning for Berjaya Group to unlock its value in food and beverages businesses. Potential businesses that may injected includes:

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Goodbye to BJCorp Investors

Hans in Hungary

Since a couple of days I am in Budapest. I am visiting Corvinus University until mid-March.

If I am able to I will come back with some comments on the economical situation here in Hungary, i.e. some observation related to the investment climate.

New Fund: OSK-UOB Capital Protected Sector Strategy Fund

Yet, another capital protected fund for investors by OSK-UOB unit trust management. Following the pump priming efforts by governments around the world during the financial crisis, the global economies have begun to stabilize and signs of recovery are growing strong. The stimulus packages introduced have benefited broad market sectors to a different extent in each sector at each stage of recovery.

"At each stage of the economic recovery, different market sectors will benefit to a different extent. These 4 sectors which are well diversified are expected to capitalize on the different sectors' play", said Ho Seng Yee, CEO of OSK-UOB.

According to Ho, the fund shares a similar strategy with the OSK-UOB Capital Protected Gold Guru Fund that was launched in 2009 and has registered returns of 29%.

Funds' Allocation & Strategy

This is a 4-year close-ended capital protected fund which aims to provide capital appreciation over the medium term whilst protecting investors' capital on the maturity date. To accord for the capital protection feature, the fund will invest primarily in 4-year ZNIDs with the remainder of the capital raised invested in 4-year over-the-counter (OTC) option whose underlying asset is the Multi Sector Strategy ("Sector Option") to generate the returns for the fund.

The Multi Sector Strategy Option

It provides investors an exposure to 4 distinct market sectors represented by exchange traded funds in the Energy, Material, Financial and Consumer Discretionary sectors.

While the Sector Option is denominated in Ringgit Malaysia, the underlying Multi Sector Strategy is based in Singapore Dollars, thus, the Fund's return is subject to exchange rate risk.

Source: OSK-UOB unit trust management bhd

To read the fund's prospectus, please click here .


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How far could Oil price RISES?

As usual, another episodes of tension in the Middle East pushes global oil prices higher, and surpassing $100 per barrel this time. We did seen this kind of scenario before in the Middle East during 1973-74, 1979, and the Iraq war in 1990. Are there any different this time?

Libyan leader Muammar Qaddafi

By Credit Suisse, 

We believe the rise in oil prices is manageable. Each 10% rise in oil prices only takes about 0.1% off global GDP and 0.2% off US growth. With Western wage growth muted, central banks are unlikely to raise rates on account of oil alone.

Our analysts see oil prices below $100 pb this year, supported by the following reason which differs from previous oil crisis:-

1. There is enough spare capacity in the global oil market to deal with supply-side disruptions as long as they are not too extreme
2. The energy intensity of global GDP has fallen by around 40% over the past 40 years
3. There is unlikely to be the same inflationary follow-through as in the 1970s
4. Oil producers are spending their windfall gains

Yahoo Finance: Oil prices since 28th Feb 2011

Potential Losers

Among the countries that are both significant energy importers and where energy accounts for a large part of the CPI basket, we would highlight India, Czech Republic and Poland. We note that China has the fiscal strength to subsidize higher energy prices, while other countries (namely India and Thailand) may not.

Potential Winners

In our view, the potential winners are countries that are net energy exporters and that have a positive output gap. This highlights Russia, Columbia, Australia, Canada, Malaysia and Norway.

The outlook for oil prices...

We believe that the oil price should fall from here. Saudi Arabia is likely to release some of its oil reserves into the market as it perceives a high oil price to be supportive for the Iranian government. Our house view is that oil price could falls below $100. We would only be concerned if the political unrest in the Middle East were to spread to Saudi Arabia.

* This is just an excerpt from Credit Suisse Research report dated 1 March 2011. This may not informative enough for readers to come to a conclusion.

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OSK Stock Picks for March 2011

By OSK Research,

Despite relatively strong results from a number of Blue Chips in February, the market still retreated and ended up in the red so far in 2011. Selling was largely attributed to concerns arising from political unrest in the Middle East although we continue to see limited risk if this does not spread to Saudi Arabia.

Go out and BUY?

Trading Strategy - Buy on Weakness

OSK continue to advise investors to Buy on Weakness in the current volatile market with focus on Banks, especially those that have been sold down recently as we still see robust loans growth of 8.5%. OSK also advise trading in Oil & Gas, Construction and Property counters as the news flow should remain good although they caution that profits will likely to kick in only in 2H of 2011.

March 2011 Top Buys

OSK's top buys did poorly for February, with only 2 stocks matching or exceeding the KLCI namely KPJ and Kencana. For March, as we remain hopeful of a market rebound, we are keeping CIMB, Kencana and SP Setia as our top buys. At the same time, we have added in defensive plays such as Petronas Gas and also retain KPJ.

Source: OSK Research

By Finance Malaysia,

While we are hopeful that the unrest in Middle East will eased soon, without spreading to Saudi Arabia, I think investor should trades cautiously as long as KLCI did not break free from the 1,500 psychological level. In terms of sector, I prefer Oil & Gas and Construction sector mainly because of Malaysia government's "preferred play". I view these sector as more defensive to global uncertainties, as Petronas and government is the main projects sources for O&G and construction sector respectively.

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FIMM is a Self-Regulating Organization now. What does it mean?

During a speech at The Edge-Lipper Awards 2011 yesterday, Chairman of Securities Commission (SC) Malaysia highlighted that Federation of Investment Managers Malaysia (FIMM) as a Self-Regulatory Organization (SRO).

"I am pleased to note that the Minister of Finance approved the SC's recommendation to recognize FIMM as an SRO, through a notice that was gazetted on 20 January 2011. I have full confidence that FIMM will be able to discharge its role as an SRO effectively in self-regulating its members for the benefit of the industry as well as investors" said SC's chairman.

Tan Sri Zarinah Anwar, Chairman of Securities Commission Malaysia

What is the role of SRO?

Through SROs, industry players can expand beyond the confines of their own interests and align their interests with that of the public. This will result in the values of ethical behavior and integrity being ingrained into corporate and market cultures.

According to Investopedia, SRO meaning that a non-governmental organization that has the power to create enforce industry regulations and standards. The priority is to protect investors through the establishment of rules that promote ethics and equality.

What does it meant for FIMM?

As an SRO, FIMM is expected to regulate its members, including through self enforcement, and also develop rules that are designed to set standards of behavior for its members while promoting investor protection.

FIMM's immediate tasks is to enhance professionalism of sales agents and distributors and to formulate a robust sales practices regime with adequate supervision and monitoring by FIMM in order to:

• Enhance investor confidence
• Enhance investor protection
• Ensure that investors are not misled into investing in products that are not suitable to them

Some of the possible changes in Unit Trust industry soon...

1. More innovative products, such as zero-upfront funds
2. More stringent rules to eliminate unprofessional unit trust consultants (UTC)
3. UTC must fulfill the minimum Continuing Professional Education (CPE) training hours set
4. More stringent licensing issues to deter unqualified UTCs
5. Easier and faster way of sales and redemption processing, etc online transactions

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Game-Over for Construction Sector? (28 Feb 2011)

All are going very well for Malaysia construction sector last year in line with the recovery of economy until it hit the first "hard bump" last week. We all know that construction sector is very volatile, influenced by the health of global economy, government's pump-priming projects, and of course the huge overhead costs such as labor and building materials costs.

Somehow, unrest at Middle East are hogging the bright future of Malaysia's construction counters. First, surging oil prices put pressure on the bottom-line of the companies. Second, projects from that oil-rich nations will dampened the outlook with a slew of Malaysian companies venturing successfully into that region.

The Game still going on?

According to CIMB Research, the selling pressure on construction stocks is overdone as jobs in the Middle East account for 3 - 41% of the order books of WCT, IJM Corp, Gamuda and Muhibbah Engineering and the projects are mostly at the tail end with no payment issues so far. 

For instance, IJM only has 3% order book exposure while Muhibbah's balance of works at NDIA 

is backed by the Qatar government's push to complete the job by end-2011. WCT has a geographical advantage in Qatar which appears to be at the lowest risk of a political unrest. As for Gamuda, its Middle East exposure is minimal.

However, Finance Malaysia opine that the panic selling is understandable given the past experience of LCL Corp. Before the 2008 financial crisis, and also with high oil prices (just like right now), LCL has a bunch of projects in Middle East especially Dubai. All seems pretty well, until a sudden sharp drops in oil prices landed the oil-rich nation into huge budget deficit. Subsequently, LCL is facing cash flow problems which forced the company being delisted. A company with great potential go burst in few months. Of course, traders do take precautions now to avoid that same fate.

But, given the continuous ETP projects being rolled out by government this year, and also the "election factor", I think construction sector is very happening at least for another few months. Government: "The game must go on?"

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