Monday, May 29, 2017

Oil trades below US$50 as market pessimism over OPEC deal lingers

Oil traded below US$50 a barrel after OPEC underwhelmed investors with its production-cut extension deal.
Futures fell 0.3 percent in New York. Prices closed 1.1 percent lower last week after OPEC agreed to extend limits on crude output through the first quarter of 2018. Saudi Arabia’s Energy Minister Khalid Al-Falih said the oil-cuts strategy is working and that global stockpiles will drop faster in the third quarter. US explorers added two rigs last week to 722, the highest level since April 2015, Baker Hughes Inc said Friday.

“It’s huge inventories around the globe that are really keeping a lid on prices, combined with the ability of those agile US producers who scramble back into action should the oil price rise,” Michael McCarthy, chief market strategist at CMC Markets in Sydney, said by phone. Trading volumes were comparatively low due to public holidays in the US and the UK.
Oil in New York clawed back from its tumble toward US$45 in the run-up to the meeting in Vienna as Saudi Arabia and Russia rallied support for the deal. Meanwhile, US inventories dropped seven weeks in a row, though they still remain above the five-year average and production rose to the highest since August 2015. Trading volumes were comparatively low due to public holidays in the US and the UK.

West Texas Intermediate for July delivery traded at US$49.67 a barrel on the New York Mercantile Exchange, down 13 cents, at 3.45pm in Dubai. Total volume traded was about 50 percent below the 100-day average. Prices rose 90 cents to close at US$49.80 on Friday.

US rigs
Brent for July settlement was 11 cents lower at US$52.04 a barrel on the London-based ICE Futures Europe exchange. The contract gained 69 cents, or 1.3 percent, to settle at US$52.15 on Friday. The global benchmark crude traded at a premium of US$2.36 to WTI.
“We believe the next big move for prices is up as oil inventories fall at an even faster pace in the coming weeks,” Giovanni Staunovo, a Zurich-based commodity analyst at UBS Group AG, said by email. While U.S. shale output is set for “robust growth” in the second half of the year, “we see the oil market tightening further in the coming quarters,” he said.

Rigs targeting crude in the US increased for a 19th straight week in the longest streak of gains since August 2011, according to Baker Hughes data. While the number of working rigs has more than doubled from last year’s low of 316, it was the smallest increase this year. Drillers in the D-J/Niobrara Basin in Colorado led the growth last week, adding four for a total of 27 oil rigs in the region.

Harn Len buys private company to get hands on Johor land

Loss-making oil palm planter and property developer Harn Len Corp Bhd announced today that it has bought a private company for RM24 million to gain access to a plot of land the latter owns in Johor Bahru. 
The target company is Midwest Equity Sdn Bhd and jointly owned by Datuk Azizi Yom Ahmad (35%), Datuk Abdul Gani Yusof (35%), and Piagam Wira Sdn Bhd (30%). However, Harn Len did not detail how big the land is.

“The basis of the Purchase Consideration was that the Land is located at a strategic and prime location and thus, there is expected capital appreciation and gain from future development,” Harn Len said in a filing with Bursa Malaysia today.

“The land is located in the heart of Johor Bahru City Centre and approximately opposite the state's most strategic development, comprising of six towers — a hotel, a hotel with residences, an office, high rise medical suites, two serviced apartment towers and a mall,” Harn Len added.
According to Harn Len, its purchase of Midwest Equity — done on the basis of willing-buyer, willing-seller — was funded via a combination of cash and borrowings. As at end-2016, Harn Len has cash and bank balances of RM3.12 million.

Harn Lern owns 16,901ha of oil palm plantations, mainly in Pahang and East Malaysia. It also operates a three-star hotel, Tropical Inn, which is part of the 25-storey office tower known as Johor Tower.

Listed on the main market since 2003, Harn Lern shares slid 1 sen or 1.22% to 81 sen today, for a market capitalisation of RM150.24 million.

Genting 1Q net profit surges 361% on disposal gain

Genting Bhd saw its net profit surge 361% to RM603.06 million or 16.2 sen per share for the first quarter ended March 31, 2017 (1QFY17), from RM130.83 million or 3.52 sen per share in 1QFY16, helped by a gain on disposal.
Revenue for the quarter, however, grew a marginal 1% year-on-year to RM4.77 billion from RM4.71 billion.
In a statement, Genting said its performance for the quarter was boosted by a gain of RM302.2 million recognised from the completion of the sale of Genting Singapore Plc’s 50% interest in associate Landing Jeju Development Co Ltd.
The group said Resorts World Sentosa (RWS) benefited from the stronger Singapore dollar exchange rate to the ringgit during 1QFY17, translating to higher revenue for the quarter.

As for Resorts World Genting (RWG), it reported stronger revenue contribution due to better hold percentage from the mid to premium segment of the business, even though business volumes were lower. However, RWG pre-tax profit slid on higher costs related to the premium players business, and costs incurred for the new facilities under Genting Integrated Tourism Plan (GITP).

The group’s operations in UK also saw lower revenue and pre-tax profit, due to the weaker British pound against the ringgit.
As for its Resorts World Casino New York City (RWNYC), it saw better performance following an improved commission structure with the New York state authority, which, coupled with the stronger US dollar versus the ringgit, drove revenue and pre-tax profit higher for its US and Bahamas business.

"There was also a lower adjusted loss before interest, tax, depreciation and amortisation (LBITDA) from the Resorts World Bimini operations in Bahamas following the cessation of Bimini Superfast cruise ferry operations in 1QFY16," it said.
Meanwhile, its plantation business in Indonesia recorded higher revenue and profit amid higher palm product selling prices and higher fresh fruit bunch (FFB) production. But its plantation business in Malaysia, despite higher prices, posted lower performance amid lower sales.

The power division was impacted by lower construction revenue, due to lower percentage of completion for the 660MW coal-fired Banten plant in Indonesia, while the oil and gas division benefited from higher average oil prices.
Going forward, the group said it continues to focus on the development of GITP, which is expected to elevate RWG’s position as the destination of choice in the region, while RWS remains focused on growing the premium mass market.
For the plantation business, Genting said the movements in palm product prices and crop production trends will continue to have significant influence. It expects FFB production growth to be driven by the addition of newly-mature areas and the progression of existing mature areas into higher-yielding brackets at its Indonesian estates.

Genting closed down 21 sen or 2.11% at RM9.73, giving it a market capitalisation of RM37.03 billion.