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Friday, August 15, 2008

WCT’s margins feeling the pressure

PETALING JAYA: Construction and property company WCT Bhd’s margins are under pressure due to escalating building material prices with a quarter-on-quarter contraction in construction earnings before interests and tax margins to 6.2% from 8.3%.

OSK Research analyst Jeremy Goh said in a research note that year-on-year cumulative margins had contracted at all levels with the exception of net margins, which came in at 5.4% compared to 4.6% last year due to earnings from foreign subsidiaries not subjected to taxation.

“Management indicates that the pinch was felt the most for local construction jobs. However, due to the stronger recognition of property sales, overall margins were still up on a quarter-on-quarter basis,” he said, adding that results for the first half of 2008 (1H08) were also 15.7% below house and 14.5% below consensus estimates.

The company also face currency translation issues for the US$1.3bil (RM4.6bil) Meydan Racecource project in Dubai, a 50:50 joint venture with Arabtec Construction LLC. Goh said WCT’s share of the project, which came in at RM2.3bil, was now revised down to RM2.1bil due to the currency translation.

“As of 1H08, billings for the newly revised Meydan Racecourse value sums to 12%. In terms of actual physical works, the job is currently 34% complete. We reckon that revenue recognition will pick up further next quarter,” he said.

Goh, which maintained a “buy” on the stock, said the target price (TP) of RM3.90 has been trimmed to RM3.83 due to the changing value of the Meydan Racecourse project. He said there was a risk that the TP might be reduced pending further developments at an analysts’ briefing called by the company Friday.

By The Star (by Fintan Ng)

Menara Citibank up for sale?

INVERFIN Sdn Bhd, the owner of Menara Citibank in Jalan Ampang, Kuala Lumpur, has put its asset up for sale and shortlisted three bidders, sources say.

The bidders are a local listed entity, a private equity fund and a Korean fund. A decision may be made next week.

Inverfin may fetch between RM760 million and RM910 million for the 758,608 sq ft building, based on a bid price of between RM1,000 and RM1,200 per sq ft.

Inverfin is 50 per cent owned by Menara Citi Holding Co Sdn Bhd, a unit of US bank Citigroup. Singapore's CapitaLand Ltd holds another 30 per cent, while Amsteel Corp Bhd has the rest.

"The building could fetch between RM1,000 and RM1,200 per sq ft. The parties are looking at the terms and conditions of the deal now," the source said.

Citibank Bhd declined to comment, while the Lion group did not respond to Business Times' query at press time.

The 50-storey building, built in 1994 by the Lion group, was previously called Menara Lion. It is located at the heart of the city centre, close to the Petronas Twin Towers.

In 2000, the Lion group sold half of the building to Citigroup for RM75.25 million, or RM543 per sq ft, to pare debt.

The building, which is fully occupied, houses Citibank's local branch, Lion group offices, oil and gas company Talisman, Japan Airlines and the Tourism Board of Thailand, among others.

Citigroup has been selling assets worldwide to raise funds since taking a huge hit from the US subprime mortgage meltdown. Earlier this year, it sold its Japan headquarters to Morgan Stanley in a deal said to be worth US$445 million (RM1.5 billion).

It was also reported that Citigroup is selling two Manhattan office buildings to SL Green Realty Corp for about US$1.58 billion (RM5.3 billion).

In India, Citibank was reported to have sold more than half a dozen flats in Mumbai.

By New Straits Times (by Vasantha Ganesan)

Builders: Scrap import tariffs on steel bars, billets

The government has been urged to consider abolishing tariffs on all steel bars and billets to ease the current shortage which has resulted in a critical increase in prices.

The Master Builders Association Malaysia (MBAM) said the steel bars and billets are now tiered at five per cent Common Effective Preferential Tariff from Asean members and 15 per cent Most Favoured Nation from other countries.

“The proposal will make it easier for the construction industry to obtain cheaper steel bars and feed its current growth and to ensure projects can be completed according to deadline,” MBAM said at the Ministry of International Trade and Industry Dialogue 2008 today.

It said both China and India had started to impose a 15 per cent tax on export of steel bars to ensure that their demand was met.

Taiwan had suspended exports of rebars and steel billets for three months to increase local supplies and curb price escalations since March this year, it said.

MBAM said the suggestion would help contribute towards disciplining the local steel industry and help solve the perennial steel shortage that has affected the construction industry.

Meanwhile, the Real Estate and Housing Developers Association Malaysia (REHDA) said the authorities should rectify the situation by fully liberalising the import of steel bars, rods and wires immediately to ensure supply at competitive prices for the domestic housing and construction industry.

REHDA and related industry players welcomed the governments decision to liberalise the cement market but did not agree with the imposition of 10 per cent import duty.

“The cement importers still have to consider other expenses such as handling and especially transportation charges, which can be a very hefty expense now with increase in fuel price,” it said.

By Bernama