Business

Monday February 27, 2012

Investors eagerly awaiting big dividends

By CHOONG EN HAN
han@thestar.com.my


PETALING JAYA: With the barrage of results coming in, investors chasing for more returns and yields are still on the lookout for that big one, as hints of more bumper dividends allure in the face of a volatile market rocked by external headwinds.

The latest will be the move by Maxis Bhd, which had recently secured approval from the authorities for the proposed 10-year sukuk issuance amounting to RM2.45bil.

Sources contacted by StarBiz recently confirmed that Maxis' board of directors would discuss the possibility of declaring a special dividend payout at its routine directors meeting soon.

The telecommunications sector as a whole is also seeing some activity with Telekom Malaysia Bhd announcing a total cash distribution of RM1.42bil or 39.8 sen per share, while Axiata Group Bhd also raised its payout ratio from 30% to 60%, having proposed a bumper dividend of 19 sen per share.

OSK Research in a report said the bumper payout indicated Axiata's willingness to meet investors' expectations of rising dividends as it was rapidly building up cash, thanks to the strong operational momentum across few operating companies.

Analysts believe that there is some level of interest and speculation that other high cash-flow counters dealing in the buoyant consumer market may also have plans to reward their shareholders.

With a strong and stable free cashflow, along with minimal gearing, these financially-sound companies could declare a special dividend.

Last Friday, Dutch Lady Milk Industries Bhd announced a dividend of 50 sen in addition of a special dividend of 80 sen for its financial year ending March 31, 2012.

UOB Kay Hian's head of research Vincent Khoo said the key point about these companies was that they generated a very steady income, while the amount of capital expenditure to expand their businesses was quite modest, leaving a substantial cash pile for utilisation.

“While in the thriving brewery sector, given that Guinness Anchor Bhd (GAB) announced a surprise dividend last year, we reckon Carlsberg (Brewery Malaysia Bhd) may also follow suit by declaring a special dividend,” Khoo said on Friday before the results were released.

Subsequently, after announcing its results, Carlsberg declared a total special dividend payout of 67.5 sen, representing a 7.1% return over its last closing price.

A local bank-backed analyst also reckoned that GAB might declare another special dividend as it had only drawn down RM150mil from its RM500mil medium-term notes.

Khoo is also quite positive on Berjaya Sports Toto Bhd (BToto) as the company has just reached a debt neutral level, with the company still committed to its minimum 75% net payout dividend policy.

The numbers forecast operator is expected to release its financial numbers on March 15.

OSK Research said BToto's relatively stable and defensive earnings, as well as strong likelihood for dividends to surprise on the upside, made the stock an ideal investment under the current volatile environment, in which the broader market's earnings pace might disappoint on the downside.

Meanwhile, OSK head of research Chris Eng advised investors not to jump into a company because of its dividends, and instead should focus on the growth potential of the company.

“Dividends are just an added benefit, we are neutral on stocks like Maxis and DiGi, as these companies have limited upside, with no strong growth story,” he said, adding that with the run-up in prices of some selected large capitalised counters, many other smaller counters were still attractive with a good return for dividends.

Meanwhile, another analyst noted that investors could expect a substantial bumper dividend if Panasonic Manufacturing Malaysia Bhd decided to undergo some capital management exercise.

“Panasonic is standing at a very strong cash position as well, representing about 40% of its market capitalisation,” he said.

As at Dec 31, 2011, Panasonic had cash and cash equivalents of RM449.19mil, which works out to RM7.49 per share with no current borrowings.

For 2011, Panasonic paid net dividends of RM66.06mil, or RM1.09 per share, equivalent to 80% of its net profit in that year.

Similarly as at end-September 2011, JT International Bhd (JTI) had RM189.94mil in cash translating to 72 sen per share with no borrowings.

For 2010, JTI paid net dividends amounting to 22.5 sen per share.

Another analyst also noted that with the stronger earnings seen in the financial sector, banks like Alliance Financial Group Bhd and CIMB Bank Bhd might see a dividend upside as well.

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