KPJ Healthcare not keen on buying Fomema

KPJ Healthcare Bhd, the largest operator of private hospitals in Malaysia, will remain focused on its healthcare business and not look to pick up Government concession businesses. Its managing director Datin Paduka Siti Sa'diah Sheikh Bakir said the company has no plans to buy foreign worker health check company Fomema Sdn Bhd from its rival Pantai Holdings Bhd. "We have been a very focused healthcare company and this focus has been our critical success factor that has allowed us to grow," she told Business Times. Last Friday, Business Times had quoted sources as saying that healthcare group Pantai Holdings was looking to sell its Malaysian Government concession businesses, Pantai Medivest Sdn Bhd and Fomema, to focus on growing its hospital business. (BT)

US rate hike roils Asian markets

Stock markets across Asia slumped today, following an unexpected move by the US Federal Reserve to raise the discount rate yesterday night, after Wall Street had closed. This raised fears that the inevitable US monetary tightening could come sooner than expected.

The Federal Reserve raised the overnight rate, the rate it charges banks for emergency loans by 25 basis points to 0.75%. This was to withdraw some of the emergency measures put in place to counter the economic crisis, towards a more normalised structure with the economy on a recovery path.

Investors should note the distinction between the discount rate and the federal funds interbank lending rate. The key federal funds rate, the main monetary policy tool, remains unchanged near zero, and within the target of 0% to 0.25% established since late 2008 during the crisis.

The key federal funds rate is likely to remain low for some time to sustain the still fragile US economic recovery, especially with high unemployment. Thus, the raising of the overnight rate itself does not necessarily mark the start of tightening monetary policy in the US yet, which many expect to happen in the second half of 2010 or early next year.

Nonetheless, the sudden move, especially in between Federal Open Market Committe meetings, roiled global financial markets today, sending stock markets and commodities lower and the US dollar higher. Most affected were cyclical and export-oriented stocks, as well as the Hong Kong bourse, whose currency and monetary policies are closely tied to the US.

The local stock market was comparatively more resilient. The FBM KLCI traded within a narrow four-point range for much of today, and ended down just 1.3 points to 1,257.7.

Market breadth was negative with declining stocks beating advancing ones by a three-to-one margin. Trading remained thin with 623 million shares changing hands.

Actively traded stocks include newly-listed Homeritz, Genting, KNM, Maybank, CIMB and Axiata. Major gainers include DiGi and Dutch Lady. Losers include Tanjong plc, BAT and Genting.

Global equity investors have been hit by several rough patches lately, with problems ranging from mixed economic data, fears of monetary tightening, China’s credit tightening measures and sovereign debt problems in Europe, among others.

This ongoing tug of war between investor optimism and pessimism will likely continue for some time as long as economic data remains mixed and external problems linger.

Pantai plans concession sale

Pantai Holdings Bhd, a healthcare group, plans to sell its Malaysian government concession businesses as it seeks to focus on growing its hospital business, sources say.

The group, owned by Khazanah Nasional Bhd and Singapore's Parkway Group, holds a long-term contract to provide services like laundry to public hospitals in three states and another for foreign worker health checks.

It is believed that Pantai has already approached potential suitors like government-linked companies or government-linked investment funds for the sale. When contacted by Business Times, an official from Pantai declined to comment.

"It's hospitals that they can add value to, there's not much value to add for concessions," said one source.

Both Pantai Medivest Sdn Bhd, the support services firm, and Fomema Sdn Bhd, the foreign worker health check company, are profitable oligopoly and monopoly businesses respectively.
Pantai Medivest provides services to hospitals in the southern peninsula. Faber Group Bhd does the same work in northern peninsula and Sabah and Sarawak, while Radicare operates in central and eastern peninsula areas.

Pantai holds Fomema through wholly-owned Pantai Fomema & Systems Sdn Bhd.

Pantai Fomema holds 75 per cent of Fomema that has a 15-year concession ending in 2012. Fomema's role is to implement, manage and supervise nationwide mandatory health screening programme for all legal foreign workers in Malaysia.

There are some 1.2 million legal foreign workers in Malaysia.

Sources said the concession is not something that Pantai can grow although it provides a steady stream of income.

Furthermore, a sale would help it deal with an issue that is a political hot potato.

In late 2005, politicians and lawmakers were up in arms questioning why Parkway, a foreign firm, could end up holding major stakes in two government concessions.

This led to Khazanah taking control of Pantai in 2006, and it has been running the group in partnership with Parkway since.

A search with Companies Commission of Malaysia reveals that in the financial year ended December 31 2008, Pantai Fomema made a profit after tax of RM41.58 million on the back of RM235.87 million revenue.

The company also has current fair and equitable separation assets of RM71.7 million and is free of debt, with reserves of RM58.87 million.

Pantai Medivest made RM207.8 million revenue for 2008 and a profit after tax of RM14.8 million, documents from the commission showed.

Pantai Medivest's 15-year concession ends in 2011.

However, the sale of these concessions, which would need government approval, might be tricky as there is probably a limited number of buyers.

The fact that the contract ends in less than three years also complicates matters because a buyer might not want to pay too much due to uncertainty over the concession's renewal.

However, Pantai would probably want a price that reflects the concession being renewed.

Pantai is now wholly-owned by Pantai Irama Ventures Sdn Bhd, which in turn is 60 per cent held by Khazanah Nasional Bhd and 40 per cent by Singapore's Parkway Holdings Ltd. Khazanah also has a 24 per cent stake in Parkway.

'Good time to invest in energy, metal sectors'

Right now, commodities are cheap and there's constraint on supply, says Rupert Rucker of Schroders Plc's head of product for Asia

It is a good time to invest in energy and metal sectors now, said Rupert Rucker of Schroders Plc's head of product for Asia.

"Right now, commodities are cheap and there's constraint on supply. By putting money in commodities, you'll hedge against inflation," he told Business Times in an interview in Kuala Lumpur.

"We're still in a commodities' supercycle. Global demand for oil, coal, gas and copper is on the rise as we see signs of recovery in the global economy," said the fund manager.

Rucker, who is based in Tokyo, recently flew in to Kuala Lumpur to give a briefing on the 2010 outlook on global markets and commodities.
"We take a bottom up view when sizing up the potentials of commodity-based companies. Those that offer bigger investment opportunities tend to be in Brazil, Russia, India and China," Rucker said.

As early as five years ago, Rucker had already likened the BRIC phenomenon to the emergence of the US as an economic power in the 19th century and Japan's explosive growth in the 1960s. He still thinks so today.

These four countries have huge populations - India and China number close to 2.5 billion people between them - and, as more of them get a share in the growing wealth of their countries, their spending will fuel further economic growth.

Rucker explained that while their performance will obviously be affected by commodity price fluctuations or global economic circumstances, these emerging economic grouping are not wholly-dependent on traditional economic cycles.

Rucker presented three scenarios that influences his crude oil forecast.

"Should the global economy experience a 'V-shaped' recovery, we can expect oil price to surpass US$100 (RM342) per barrel. If it is going to be a double-dip or a 'W-shaped' recovery, then oil price could well trade in the region of US$80 (RM273) per barrel," he said.

"There's also another situation where the global economy could go into a stagflation where we see oil trade at a higher bandwidth of US$90 (RM307) per barrel while world growth stumbles along at 1 per cent," he added.

Rucker was representing Schroders, which is helping to manage some RM550 million for the CIMB Group. Also present at the session were CIMB-Principal Asset Management Bhd chief executive officer Campbell Tupling and CIMB Wealth Advisors Bhd chief executive officer Tan Beng Wah.

At the end of 2009, CIMB-Principal managed a total of RM23.4 billion of investors' money, of which almost half are unit trusts.