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Investment Talk We're now living in a world of challenging global economy where changes take place at a rapid pace. Investment Talk offers concerned Malaysians the opportunity to express their opinion on the performance of our country's economy in various sectors -- market watch, property talk, money market and others like unit trusts, bonds, bonus, dividends etc.

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Old 08-05-2006, 10:34 PM
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Default Market News 8/5/06

1. PROTON HOLDINGS BHD (RM6.00; BUY)
PSA Peugeot or Volkswagen a potential partner?

According to The Edge, it was reported that Proton’s management has been in negotiation with PSA Peugeot Citroen Group and Volkswagen AG for potential tie-up. Ethos Consulting has been appointed by Proton to evaluate the potential foreign collaboration, which will be beneficial to it.

Potential tie-up with PSA
PSA is currently the world’s 7th largest carmaker. Also the 2nd largest in Europe, its sale of car is not only restricted to the European region. In 2004, it had sold 950,000 units, which had accounted for 28% of its total production to non-European countries like China and South America. The Edge had reported that the potential tie up with PSA would probably involve the development of an Asean car that can be marketed either as a Proton or a Peugeot/Citroen. This new car will likely be a compact car like the Peugeot 107 or Citroen C1. Having this sort of tie-up arrangement is not new to PSA as in the past, PSA had tie-up with Toyota to develop Toyota Agyo for the European market. Hence, in the case of Proton, in return for the compact car, Proton may divest a minority equity stake to PSA like what it did with Mitsubishi Motors Corp in the past.

Potential tie-up with VW
VW is the largest carmaker in Europe and it is ranked forth in the world. It also has the reputation of transforming Skoda from a struggling player in the automotive industry to one of the top automotive manufacturers in the world. According to the Edge, VW is still in negotiation with Proton for a potential tie-up. If the negotiation is successful, it is likely that a new company will be set up to jointly develop models under the Proton marque. These models will be sold in the Malaysian and Asean markets. Proton is likely to inject its manufacturing, engineering and sales division into this new company while VW is to concentrate on designing a new
platform for the development of new Proton cars. Hence, in terms of equity stakes, VW is likely to hold a higher stake in the new company since it will be transferring extensive valuable technology into Proton.

Our views
* Recall, in our last month’s update on Proton, we hypothesis the possibility of a collaboration between Naza and Proton.
* Having a foreign tie-up is not impossible for Proton. However, such tie-ups would usually lead to Proton having to divest its equity stake to the foreign partner. A good example is VW, which most industry observers would expect Proton to give a substantial equity stake in return for the new platform developed by VW for the production of new Proton cars. It is unlikely that VW will be willing to transfer its valuable technology into Proton without it having some control over Proton.
* Hence, this made us to conclude that Naza will be a better choice for Proton as it would ensure that Proton remains under national ownership. Furthermore, Naza comes with the backing of Kia, one of the best selling carmakers in the highly competitive American market.





SP Setia officially launched Setia 18+18 Home Warranty during the Setia Alam Family Fun Carnival yesterday in Shah Alam. This extends the group’s warranty period from the current standard defect liability period of 18 months to 36 months. The Local Government and Housing Minister, Datuk Seri Ong Ka Ting said that the ministry would look into the basis for the present 18-month warranty period for the industry.
* Setting the cutting edge for the industry. SP Setia remains one of the leading property developers in the country by daring to set such a high benchmark. This implies that the company is confident of the quality of its workmanship and quality control system.
* Another strong marketing strategy by the company. Given the slow pace of home buying interest in the sector in view of rising inflation and interest rates, competition amongst developers has intensified. As such, we view this as another marketing strategy by the company to continue drawing in potential home buyers.
* Not likely to raise costs given the group’s existing good quality control systems with its contractors.

NEWS
DiGi Telecommunications Sdn Bhd (DiGi) aims to capture 30% of the Muslim market in Malaysia with its WAP Taqwa service launched Saturday. The Head of the Marketing Segment in DiGi, Yohani Yusof, said the WAP Taqwa service -- the first of its kind in Malaysia, offered Islamic services for DIGI customers especially Muslims who subscribe to GPRS or EDGE. The WAP Taqwa offered mobile content on the Haj pilgrimage, Umrah, the Haji Ifrad, Haji Qiran and Haji Tamattuk procedures of performing the Haj, as well as prohibitions and penalties. The Taqwa WAP portal and would be charged RM4 for each application downloaded. It is available for both pre and post-paid users.TH Technologies Sdn Bhd, a subsidiary of Lembaga Tabung Haji, is providing the mobile content for WAP Taqwa based on the book on Haj and Umrah guidelines issued by Tabung Haji's Guidance Division.
Tenaga Nasional Bhd (TNB) employees should brace themselves for changes to the country's power industry where the transmission and distribution of electricity may be offered to other companies in the future. In other countries, there is competition in transmission and distribution with several firms offering such services. In 5-10 years, perhaps such trends would be widely practised in Malaysia.

Ranhill Bhd. is expected to get a RM1.5b (US$416m) construction contract from the Malaysian government in the next month, the Business Times reported, citing a company official it didn't name. The contract is among privatized projects picked under the government's 9MP where companies will finance these jobs, the report said. The project, which will take 2 years to complete, will boost Ranhill's local order book to RM3.5b, the newspaper reported.

MISC Bhd’s wholly owned subsidiary MISC Integrated Logistics Sdn Bhd (MILS) and its joint venture partners are investing up to RM60m to develop the biggest halal cold storage facility in Asia at MILS Logistics Hub in Westport, Port Klang. MILS entered into an agreement with French ETB Seafrigo and Maritime Logistics Network Sdn Bhd to form a joint venture company under the name of MILS-Seafrigo Sdn Bhd to operate the cold chain facility at the logistic hub. MILS owns 60% stake in the joint venture while Seafrigo and Maritime Logistics 30% and 10% respectively. MILS also entered into another agreement with SterilGamma
(M) Sdn Bhd to form a 70:30 joint venture company called MILS-SterilGamma Sdn Bhd, which would operate the sterilisation and fumigation facility at the hub.
Malaysian Airline System Bhd (MAS) is offering return travel "International Supersaver fares" on 24 routes from Kuala Lumpur to selected destinations in Asean, China and the Indian subcontinent from now to May 10 for online bookings.

Last edited by Uncle-Cle : 24-07-2006 at 03:41 PM.
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