offered a more conciliatory stance towards
restarting ECRL. For those who have missed the
large re-rating upwards of oil & gas plays, these
stocks under ECRL theme may be worth doing
more research into.
The mini bull run seems to have gotten some
legs, thanks to the upcoming Samurai bond and
PM's visit to China in April.
The last two by-elections, which the rakyat handed
a sound thumping to the ruling government, was
actually a good thing. To me, they are not really
racially based swings but more dissatisfaction
from the general populace over the "excessive
handbraking in the real economy" by the ruling
government.
While we want to eradicate corruption, primarily by
cronies of the previous government, the collateral
damage has been excessive to bystanders.
Coming at a time which coincided with the US-
China trade war spat just made things worse over
the last 12 months.
Just imagine the number of subcontractors and
workers linked to the HSR and ECRL, what were
they doing for the last 12 months. The stock
market mostly edged lower for most of the last
12 months. The velocity of money almost ground
to a halt. Coupled by a weakish palm oil price
regime and gross overbuilding of properties - we
have a recipe for a sluggish economic period to
put it kindly.
The ECRL has merits. Not just in
revitalizing domestic economic activity to Eastern
block of the peninsula, but for paving access and
logistics for goods and services which have a
higher multiplier effect.
Why Restarting ECRL Is Probable: Our side has
apparently paid 39% of the supposed total cost
already for just 13% work done. Whether some of
the sums were "diverted" or "misused" is up for
conjecture for now.
Now let's use RM55bn as the benchmark, 39% =
RM21.45bn. That figure is probably not
retrievable. It is likely that the Chinese side has
agreed to finish the project for something a lot
less than RM55bn. Judging from the statements
issued thus far, a figure of RM33bn-36bn seems
plausible. The pragmatic thing to do, since we
have paid RM21.45bn is to get the project
finished. Plus it is not wise to further irk China as
a major trading partner.
ECRL - If restarted, will be at a much much lower
price. Thus the main con and even sub cons
should only be eyeing much tighter margins.
Beneficiaries based on networking: Those
companies who were in the front running for the
ECRL scraps before, may no longer be in vogue IF
they relied upon or seemed to rely extensively on
their connections to the past government. I
shouldn't name names but you should know.
Beneficiaries based on need supplies: Steel - you
can't get away from that. You can't be silly enough
to import. Most steel players had a rough past 6
months thanks to the US-China trade war spat.
I am benchmarking their stock price to their April/
May 2018 prices. We may expect a reversal back
close to those April/May 2018 prices should the
ECRL be restarted. Using 75% of the April/May
2018 prices may be a sensible trading target.
Current Price Apr/May
2018 price
LION INDUSTRIES 0.58 1.05
MASTEEL 0.48
0.80
ANNJOO 1.60
2.90
Lafarge Malaysia has showed buying interest of
late, possibly on the back of ECRL theme as well.
Trading around RM2.30, its April/May 2018 price
was around RM4.20.
Possible the biggest beneficiary, not that they
asked or lobbied for it I think, should be AZRB. It
may not be the best-run company or most
aggressive company out there, but the stars are
aligning just for them. The other big landowners in
that area will be Pasdec but owing to nature of its
shareholders, its prospects will not be as clear as
AZRB.
AZRB Strong Points:
- has a RM1.55bn contract to build an
expressway from Gombak to Kajang tagged with a
concession for the tollway for 50 years
- jointly awarded the RM1.7bn MRT line from Sg
Buloh to Kajang with IJM
- Class 1 Bumi contractor
- 50 acres quarry land in Terengganu
- 67 acres of development land in Marang,
Terengganu
- 11 acres in Bentong
- 30 acres of commercial land in Kuantan
The two oil & gas marine supply bases of AZRB
at Tok Bali and Kemasik are gems.
Kemasik - RAPID refinery is there and needs more
than 50m barrels of crude yearly for its refinery.
AZRB has been extended another 5 years for sale
of marine diesel oil. AZRB also has around 4
acres of land in Kemasik.
Tok Bali - It is the intention for Petronas to
develop this into a petrochemical hub. AZRB is
already in a joint venture with Petronas for marine
oil supply and other supporting industries.
http://malaysiafinance.blogspot.com/2019/02/
whats-up-with-azrb.html
Not a recommendation to buy or sell but
information for discussion and further research if
you believe there is a good likelihood of ECRL
being restarted.
Posted 4 days ago by Salvador Dali
7
MAR
ECRL Theme To The Fore
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