Published December 19, 2006 | |||
| Strong market sentiment seen continuing into 2007 OCBC report also forecasts more M&A deals
By OH BOON PING THIS year's strong market momentum should continue into the new year, says OCBC Investment Research, which has also identified such trends as an increase in merger & acquisition (M&A) activities here in 2007.
The research house's stock picks for the new year include KS Energy Services, SembCorp Marine, Genting International, Tat Hong and STATS ChipPAC. In a report, OCBC said the Straits Times Index (STI) has seen new highs in 2006, while the local market benefited from the optimism arising from improved macroeconomic factors. Likewise, tenders for the integrated resorts also buoyed interest in property, hotel and construction stocks. The research house expects this optimism to continue into 2007, particularly for oil and resources linked companies, citing factors such as strong orders throughout this year and the sector's strong earnings visibility. 'This will differentiate this sector from the rest of the pack if market situation does take a turn for the worst. Strong share price performances are well backed by strong corporate earnings stream, and we continue to have an overweight on this sector.' Despite the lack of earnings visibility, OCBC is also upbeat on the other sectors thanks to improved macro-economic factors which it says 'should help to ensure continuous profitability, although share price appreciation momentum is likely to taper off after coming from the strong base in 2006'. Some of the investment trends it sees next year include a more active M&A scene and interest in China consumer-linked stocks. Due to strong earnings visibility, a sustained interest in oil-linked companies is also likely, the report adds. On the M&A front, OCBC noted that corporations here have been fairly quiet on the acquisitions scene this year, as most were focused on organic growth. However, this may change next year when these firms merge to fence off competition and retain market share, especially in the face of mega M&A deals overseas. 'If this materialises, it could bring another 'hot' factor into the market.' Already, the brokerage sees several potential areas for M&A activities. These include smaller construction firms coming together to work on projects related to the integrated resorts, as well as smaller pharmaceutical firms forging strategic alliances to ensure growth. 'In the highly fragmented consumer and electronic sectors, mergers are also likely in order to gain more market share. In the Reit market, the lack of acquirable assets will also see some of the bigger Reits taking a serious look at some of the smaller Reits.' OCBC also sees growing interest in laggard stocks, even as buying interest moves from the current big-to-mid cap stocks to mid-to small cap stocks. The report said: 'While the STI appreciated 21 per cent as at end-November 2006, only 42 per cent of the listed stocks have matched the STI's gain of at least 21 per cent. This means that about 58 per cent of listed companies have underperformed the STI.' Similarly, OCBC believes that the next big growth could come from China consumer-linked stocks in areas like food, retail, entertainment and health, and it also sees potential in non-China stocks with China exposure. The report said such non-China stocks are run by management with valued expertise garnered from operations in other established markets in the region, while tapping on the huge growth potential in China. Based on those trends, the brokerage selected a list of stocks that 'offer the right exposure to various aspects of these investment themes'. These include AsiaPharm Group, Biosensors International, Bright World, China Essence, Ezra Holdings and Frasers Centrepoint. The other preferred plays are HTL International, Jurong Technologies, Koda, Pacific Andes Holdings, Pine Agritech. | |||
Tuesday, December 19, 2006
Strong Market to 2007
Monday, December 18, 2006
BnB IPO
Babcock & Brown IPO: not quite a no-brainer
By OH BOON PING
SOON-to-be-listed Babcock & Brown Structured Finance Fund is projecting a 9 per cent yield next year based on its offer price - surely one of the most attractive initial public offers this year. But is this a no-brainer investment that investors should rush into?
A look at the asset classes that the fund invests in quickly reveals that it warrants a serious look. However, attention should be paid not just to its promising prospects but also the associated risks. Babcock & Brown said that its initial portfolio, acquired for $397.7 million, consists of near-equal allocation across assets like biofuels financing, loan portfolio and securitisation such as collateralised debt obligations (CDOs), and operating leases in aircraft and rail. The IPO consists of 6.47 million public offer shares and 316.99 million placement shares at $1.06 each, and Babcock & Brown said that investors can expect to receive total payout of 10.06 cents per share by the end of next year. This comprises a dividend of 9.54 cents for 2007 and 0.52 of a cent for the period from the listing date to Dec 31 this year.
To be fair, the segment which includes renewable energy financing is a potential money spinner, given the boom in the energy sector. And Babcock & Brown's projected payout also serves as an assurance somewhat. But it is also clear that the fund has no comparable on the local bourse that can be used as a performance benchmark, and complex products like CDOs are very new to most retail investors here. This means that these investors may not fully understand the risks of buying into the fund.
Take the example of CDO - a pool of underlying debt obligations, which has its risk redistributed across investors via tranches. Yes, most of us know that there is default risk that comes from the underlying pool. But what complicates the picture in a CDO is that the default of one party may result, to different degrees, in the default of other parties in the portfolio. As such, the performance of the individual tranches depends largely on the degree of correlation of the defaults that may occur in the underlying portfolio.
The instrument also faces legal risk as legal and documentary issues are factors in ensuring the efficiency of risk transfer and of clearly defining the role of the different parties involved in a CDO structure. Third party risk is also present in a CDO, as the inability of a third party to meet its obligations could jeopardise the viability of a transaction. In the case of cash-flow CDOs, this takes the form of counterparty risk vis-a-vis the counterparties of interest rate or foreign exchange swaps, or providers of external credit enhancers.
So in assessing the risk-return trade-offs for this one asset class alone, investors already need to carry out a substantial amount of research, which may not be easily available. As such, a 9 per cent yield may come with risks that retail investors are not able to measure easily.
Business outlook-wise, Babcock & Brown is optimistic about prospects in aircraft operating leasing, citing factors such as the growing proportion of global commercial fleet subject to leases, from 26.3 per cent in 1986 to 50.7 per cent in June this year. To be sure, aircraft values and lease rates have shown continued improvement since the trough of 2002-2003, and lease rates on in-production long-range wide bodies and certain narrow-body aircraft, posted double-digit growth over the past year.
However, one should also note that high fuel-related costs, geopolitical risks and health-related threats such as Sars or avian flu will continue to affect the outlook for the sector. Plus, most of its assets are parked in North America, Europe and Australia, and local investors may not be able to make informed judgments about the market conditions in those countries. This is especially critical as any downturn in the US will directly affect the returns and default risks of the portfolio. A look at its portfolio also reveals that its assets are often inaccessible to most retail investors, which may not be a bad thing since investors now have more investment options. But as these investments are relatively illiquid, this also heightens the liquidity risk when it comes to disposal of assets. Investors would do well to look further into these issues before calling their brokers.
TYJ, Super Coffeemix
By WEE LI-EN
SINGAPORE-BASED Tee Yih Jia Food (TYJ) Manufacturing and Super Coffeemix have joined China's biggest vinegar producer, Jiangsu Hengshun Vinegar Industry, to build a 500 million yuan (S$98.5 million) vinegar plant in Zhenjiang City.
The joint venture company, Jiangsu Hengshun Seasoning & Food Development, is 49 per cent owned by TYJ and Super Coffeemix while Shanghai-listed Jiangsu Hengshun owns the remaining 51 per cent.
Deputy Prime Minister Wong Kan Seng, together with officials from Jiangsu province, Zhenjiang City and International Enterprise Singapore, attended the ground-breaking ceremony for Hengshun Seasoning's 250,000-square-metre new facility on Saturday.
The plant is expected to produce 200,000 tonnes of vinegar by early 2008 when the first phase of the project is completed. The second phase is expected to add another 300,000 tonnes in capacity by 2012, costing an additional 800 million yuan.
Jiangsu Hengshun chairman Ye Youwei said he hoped to list Hengshun Seasoning in Singapore in the next three to five years. He said his company had decided to work with TYJ and Super Coffeemix because 'Singapore companies are well regarded internationally, especially in the global food and beverage industry'.
'The construction of this state-of-the-art plant marks the launch of our next phase of growth as we expand our capacity and capabilities to extend our reach into both our domestic and international markets,' Mr Ye said.
Jiangsu Hengshun has an annual production capacity of about 100,000 tonnes, about 4 per cent of China's total vinegar market.
Hengshun Seasoning's new plant, to be helmed by a Singaporean general manager, will have state-of-the-art equipment and material-handling machinery incorporating one of the most advanced environmental protection and recycling systems in the country.
TYJ's chairman Sam Goi said that the Hengshun brand is a household name in China and has the potential to grow internationally and 'become a global brand such as Heinz'.
'Against the backdrop of strong growth prospects for the vinegar business in China and beyond, Hengshun Seasoning is expected to benefit from TYJ and Super Coffeemix's extensive global distribution networks.'
Aspial, Want Want, Electrotech, Star Pharm, Federal, Sunningdale
By ROBERT HALILI
THERE was a sharp rebound in the buying and a slowdown in the selling last week, based on filings from Dec 11 to 15 on the Singapore Exchange. A total of 21 firms recorded 48 director and substantial shareholder acquisitions worth $14.3 million, versus 12 companies with 19 disposals worth $5.2 million.
The numbers of firms and trades on the buying side were sharply up from the previous week's 15 companies and 22 acquisitions. Although the number of purchases was more than double the previous week's trades, the buy value of $14.3 million was sharply lower than the previous week's $31.8 million. The sales figures, on the other hand, were down from the previous week's 16 firms, 22 disposals and $128 million. There were several market-breaking trades on the local market. Acquisitions by Affinity Precision in First Engineering triggered a mandatory cash offer for all the issued and paid-up ordinary shares of the company. It will be interesting to see how the buy-out offer plays out as several fund managers who own substantial stakes will look to exit at a good price. There was also an initial filing by Moon Capital Master Fund Ltd in Roly International Holdings, a day after the company announced voluntary delisting of its shares last week. Raffles Education Corporation also hit the headlines this month, as the group made an aggressive move into the potentially lucrative mainland market with the acquisition of a 20.16 per cent stake in education management services provider Oriental Century. Aside from those three major events, there were several stocks that investors should watch out for in the near term. On the buying side, there were first-time buybacks and purchases by a director of Aspial Corporation. Another stock on our 'buy' alert is Want Want Holdings as the group resumed its buyback programme at higher than its purchase prices from 2000 to 2004.
On the fund managers' front, CIM Dividend Fund boosted its stake in Electrotech Investments by 6 per cent to 5.3 per cent last week. On the selling side, investors should trade with caution on Star Pharmaceutical, Federal International, and Sunningdale Tech, due to huge substantial shareholder sales.
The disposals in Star Pharmaceutical and Sunningdale Tech were triggered by sharp falls in their share prices, while the sale in Federal International was made on the back of a 41 per cent gain in the stock's price.
Aspial Corporation
There were first-time buybacks and a purchase by a director of jewellery manufacturer and residential property developer, Aspial Corporation, this month. The group repurchased 81,000 shares on Dec 7 and 8 at an average of 50.7 cents each. Those were the first purchases by the company since buybacks were introduced by SGX in 1999.
On the directors' side, non-executive director Tan Soo Lung acquired 30,000 shares on Dec 8 at 50.5 cents each, which increased his direct holdings to 3.1 million shares. Mr Tan had previously acquired 393,000 shares from Aug 31 to Nov 16 at 40 cents to 50.5 cents each, or an average of 42.2 cents each. He also bought 104,000 shares from 2003 to 2005 at an average of 31.5 cents each.
The fact that Mr Tan acquired more shares this quarter at higher than his previous acquisitions indicates that the stock is still undervalued at 51 cents each. Aside from the company and Mr Tan, CEO Koh Wee Seng bought 1.5 million shares from Jan 12 to Nov 24 at an average of 45 cents each, which boosted his direct holdings by 18 per cent - to 10.6 million shares or 9.1 per cent. Mr Koh also acquired 2.2 million shares from May to December 2005 at an average of 41.7 cents each. The counter closed at 51 cents on Friday.
Want Want Holdings
Snack food and beverage manufacturer and trader Want Want Holdings resumed its buyback programme at higher than its purchase prices from 2000 to 2004. The group repurchased 20,000 shares on Dec 15 at US$1.59 each. It previously acquired 2.3 million shares in April 2004 at US$1.08 each, and 1.6 million shares from 2000 to 2001 at around US$1.16 each.
The recent buyback was made a month after the company announced its 3Q results on Nov 14. Want Want Holdings posted a 35.2 per cent drop in net profit to US$17.40 million for the three months to Sept 30, 2006. Net profit for the first nine months, however, rose by 8.1 per cent to US$79.81 million. The counter closed slightly higher from the group's last buyback price at US$1.62 on Friday.
Electrotech Investments
CIM Dividend Income Fund became a substantial shareholder of outsourcing services & electronics manufacturing services provider Electrotech Investments on Dec 1, after the purchase of 900,000 shares at 48.8 cents each. The trade boosted its direct holdings by 6 per cent - to 16 million shares or 5.3 per cent.
The initial filing was significant as two top board members have also bought shares this year. The company's president Gooi Soon Hock acquired 500,000 shares from April 18 to Sept 11 at 59.5 cents to 45 cents each, which increased his deemed holdings to 100.5 million shares or 33 per cent. Non-executive chairman Larry Low Hock Peng, on the other hand, purchased 230,000 shares (direct and deemed interests) from Feb 24 to June 20 at 55 cents to 45 cents each. The trades increased his direct stake to 143,000 shares, and deemed holdings to 41 million shares or 13.5 per cent. The stock closed at 47 cents on Friday.
Star Pharmaceutical
Prudential Asset Management has lowered its stake in prescription drugs manufacturer and seller Star Pharmaceutical to below 5 per cent this month at sharply below its initial filing price in June. The group reported a disposal-related filing last Tuesday of 183,000 shares at an estimated price of 37 cents each, which reduced its direct holdings to 11.5 million shares or 4.9 per cent. The group previously reported an initial filing on June 22 of 228,000 shares at 48 cents each, which raised its interest to 5.01 per cent.
The purchase and sale by Prudential were the first trades by a director or substantial shareholder of Star Pharmaceutical since the stock was listed on Feb 15. The counter has been on the decline since August, falling from 49 cents to 36 cents on Friday.
Federal International
Fabulous Commercial Inc recorded its first sale in flowline control products and services firm Federal International since it became a substantial shareholder in July. The group sold 7.5 million shares last Tuesday at an estimated price of 70.5 cents each, which reduced its deemed holdings by 39 per cent - to 11.6 million shares or 5.1 per cent.
The disposal was made at a huge profit based on the initial 19.1 million shares or 8.6 per cent that the group acquired in July at 50 cents each. The stock has rebounded sharply since November, from 47 cents to 70 cents on Friday.
Sunningdale Tech
New Smith Opportunities Hedge Fund LP unloaded 38.2 million shares of precision plastic component supplier Sunningdale Tech last Friday at an estimated price of 28.5 cents each. The trade reduced its direct holdings by 70 per cent - to 16.7 million shares or 2.2 per cent. The disposal was made on the back of the 61 per cent drop in the share price since the hedge fund became a substantial shareholder in July last year, from 72.5 cents. The sale was also made near the stock's record low of 24 cents since its listing in October 2003.
The hedge fund acquired an initial 52.8 million shares or 7.2 per cent on July 15, 2005, via share conversion at an undisclosed price. Investors should note that director Ng Boon Hoo sold 3.7 million shares on Nov 27 at an estimated price of 30 cents each, which reduced his direct holdings by 51 per cent - to 3.6 million shares or 0.5 per cent. Mr Ng also has deemed interest of 131.6 million shares or 17.9 per cent.
Sunningdale Tech announced its 3Q results in November with net profit down by 29.3 per cent to $5.46 million for the three months to Sept 30, 2006. Earnings for the first nine months fell by 65.7 per cent to $7.63 million. The counter closed at 28.5 cents on Friday.
The writer is managing director, Asia Insider Ltd
Thursday, December 14, 2006
Wilmar
Thu Dec 14, 2006 7:04am ET
NEW YORK, Dec 14 (Reuters) - Archer Daniels Midland Co. (ADM.N: Quote, Profile , Research) said on Thursday it would trade China-based agriculture processing joint venture assets to Wilmar International Ltd. (WLIL.SI: Quote, Profile , Research) in exchange for Wilmar shares.
Singapore-based Wilmar plans to acquire the worldwide oilseed-related assets of Wilmar Holdings Pte. Ltd. and merge with the Kuok Group, making it the largest agribusiness group in Asia.
Wilmar says bids $4.3 bln for Malaysian agri assets
Thu Dec 14, 2006 7:55am ET
By Saeed Azhar
SINGAPORE, Dec 14 (Reuters) - Palm oil refiner Wilmar (WLIL.SI: Quote, Profile , Research) said it would buy Malaysian plantation and agri-business assets from The Kuok Group and others in a $4.3 billion deal, continuing Malaysia's palm oil industry shake-up.
The new merged group would have a stock market value of about $7 billion and estimated revenues of $12 billion, Singapore-listed Wilmar International said, making it Asia's leading agribusiness group with a strong presence in Southeast Asia and China.
Just last month, three Malaysian state-controlled plantation firms -- Sime Darby Bhd (SIME.KL: Quote, Profile , Research), Kumpulan Guthrie Bhd (KGBK.KL: Quote, Profile , Research), and Golden Hope Bhd (GHOP.KL: Quote, Profile , Research) -- announced an $8.6 billion merger to create the world's biggest palm oil group.
The trend towards consolidation reflects increasing interest in alternative energy sources, or biofuels, as crude oil prices remain high.
"The objective is to become a leading merchandiser and processor of palm oil. We see palm oil as becoming a major commodity," Kuok Khoon Hong, chairman and chief executive of Wilmar told a media and analysts briefing.
"Wilmar will be the undisputed leader of merchandising of palm oil in Malaysia and Indonesia," he said, and would expand to China and India.
Wilmar said it would buy Malaysia's PPB Oil Palms Bhd (PPBO.KL: Quote, Profile , Research), a listed unit of PPB Group (PEPT.KL: Quote, Profile , Research), in an all-share buyout worth $1.1 billion, and acquire other PPB Group assets bringing the total value of that part of the deal to $2.7 billion.
For the listed unit, Wilmar is offering 2.3 new shares at S$1.71 a share for every PPB Oil Palms share held.
The palm oil producer is 55.6 percent-owned by PPB Group, while the remaining shares are listed.
In addition, Wilmar will acquire the edible oils, grains and related businesses of its parent, Wilmar Holdings, including interests held by Archer Daniels Midland (ADM.N: Quote, Profile , Research), in a deal valued at $1.6 billion.
Kuok, who co-founded Wilmar, is the nephew of Robert Kuok, whose family controls PPB Group and the Kuok Group.
He said the deal would be completed by the second quarter of 2007 and would more than double Wilmar's landbank to 573,405 hectares (5,734 square kilometres, or nine times the size of Singapore).
"This company with its scale and size would certainly attract investors and funds," said a fund manager who was present at the briefing but who declined to be named.
KEY SHAREHOLDERS
The deal would still leave Wilmar Holdings with a 48.5 percent stake in Singapore-listed Wilmar International, while Malaysia's Kuok Group would have 31 percent.
Wilmar has major refining facilities in Indonesia and has been increasing its land bank to reduce its reliance on other palm oil producers.
Wilmar also plans to quadruple its biodiesel capacity from 250,000 metric tonnes a year to 1.05 million metric tonnes a year in 2007.
Palm oil firms are merging, exploiting surging crude palm oil prices and high stock valuations to buy rivals with their own shares and meet growing global demand.
Shares in Wilmar, PPB Group and PPB Oil Palms were all suspended from trading on Wednesday, pending the announcement.
Wilmar shares, which have risen 128 percent this year, fell 5.5 percent before trading was halted on Wednesday. PPB Group shares have gained 18 percent in 2006. (additional reporting by Mark Bendeich in Kuala Lumpur)
China Energy IPO
China Energy to raise S$207 mln in Singapore IPO
Wed Dec 13, 2006 3:33am ETSINGAPORE, Dec 13 (Reuters) - China-based chemicals producer China Energy Ltd. has priced its planned Singapore initial public offering at S$0.83 a share, at the top of the indicative range, the company said in its prospectus on Wednesday.
This means the firm would raise about S$207 million ($134.5 million) in the IPO.
China Energy has also increased its total offering size to 220 million new shares and 29 million vendor shares because of strong demand for the IPO, a banker involved in the deal said.
The revised total offering would be equal to 20 percent of the firm's enlarged share capital and would value the company at more than S$1 billion.
Initially, the company had offered to sell 16 percent of its enlarged share capital, and had set an indicative range of S$0.54 to S$0.83 a share for the IPO, sources said.
ABN AMRO Rothschild (AAH.AS: Quote, Profile , Research) is the lead manager for the IPO.
China Energy Ltd. said that it is the country's largest producer of Di-Methyl-Ether (DME), an alternative fuel to liquefied petroleum gas. It produces DME and methanol in Linyi, in China's Shandong province.
The shares will start trading on Dec. 21.
The company plans to use the IPO proceeds to acquire an additional production facility, to boost existing capacity and for working capital needs.
It plans to increase its DME production capacity to 600,000 tonnes per year by the first half of 2007, from 150,000 tonnes per year currently following an acquisition.
Sunday, December 10, 2006
Tat Hong
Published December 9, 2006 | |
| Tat Hong's Aussie unit buying North Sheridan
By VEN SREENIVASAN TAT Hong Holding's Sydney-listed unit Tutt Bryant Group (TBG) is buying Queensland-based equipment hire specialist, North Sheridan Pty Ltd, for about A$51 million (S$62 million). TBG, which is 70 per cent owned by mainboard-listed Tat Hong, will pay A$31.7 million in cash and assume about A$19 million in finance liabilities on North Sheridan's books. TBG is already the operator of one of the largest crawler crane hire fleets in Australia and is also a leading multi-franchised distributor of construction equipment and cranes. And Tat Hong is the world's largest crane company by number of crawler cranes with a combined rental and sales fleet of over 500 mobile and crawler cranes throughout the region. According to Tat Hong president and chief executive Roland Ng, the deal will significantly increase TBG's footprint in the robust and fast-growing general equipment hire business in Australia. 'Australia is enjoying a huge infrastructure, mining and energy boom at the moment,' he said. 'Besides cranes and other heavy equipment, these activities are also driving a huge demand for general equipment.' TBG accounts for about 60 per cent of Tat Hong's revenue of some S$400 million. The company already has a small but lucrative general equipment rental business which generates about A$90 million revenue annually. And this business is expected to take off in a big way with the North Sheridan takeover. The transaction will initially be funded by bank debt. TBG intends to raise A$40-50 million by way of a renounceable rights issue in the first quarter of 2007 in order to refinance the acquisition, reduce its gearing levels and provide working capital for further growth. The takeover is expected to be completed by Dec 12. According to Mr Ng, it will immediately contribute to TBG and Tat Hong's bottom line as the companies head into their final January-March 2007 quarter for the current fiscal year. |
FnN + Temasek
It is now F&N's second-largest shareholder with 205.5m shares
By SIOW LI SEN
TEMASEK Holdings yesterday took a 14.9 per cent stake in Fraser & Neave, paying $900 million cash in an unusual departure for the investment company which in recent times has been investing outside Singapore as part of its portfolio rebalancing.
Temasek - through Seletar Investments - bought the 205.5 million new F&N shares, paying $4.38 a piece to become the drinks company's second-largest shareholder, after the OCBC/Lee family group whose stake falls to just under 19 per cent from 22.06 per cent.
F&N shares, in which trading was halted pending the announcement, last closed at $4.48. At a press conference yesterday, Nicky Tan of nTan Corporate Advisory, the F&N director who brokered the deal with Temasek, said the sale price was based on the past 10 days' weighted average price.
Temasek will nominate two directors to the F&N board, said F&N chief executive Han Cheng Fong at the press conference.
'We intend to use the proceeds to expand the business, grow the business and make acquisitions in F&B (food and beverage),' Dr Han said.
He said much of the group's earnings come from property and Temasek's participation will help strengthen the group's food and beverage business as it extends its reach further into the region, and the longer term goal of making Tiger beer a global brand.
Food and beverage contributed 26 per cent to group profit of $320 million, second to property's 66 per cent. The remaining 8 per cent came from printing and publishing.
Beer profit was about 20 per cent of the group's attributable profit before exceptionals of $295 million.
'I think you can say that Temasek has an objective, medium term to be invested one-third in Singapore, one-third in emerging markets, one-third in the OECD (developed markets) . . . this is not cast in stone,' said Temasek executive director Simon Israel to a question on whether the latest investment represented a change in strategy.
'At the end of the day, we will move the weighting in between those as we see appropriate, as we see opportunities. We are quite open to investments in Singapore where we see opportunity and value,' he said. A significant portion of F&N's business is regional, he pointed out.
One of Temasek's investment themes is to serve the emerging growing middle class in Asia, said Mr Israel.
'In the context of that theme, F&N fits very nicely in terms of serving the emerging middle class, and as a company, is very well positioned to do so because if you look at its geographic presence, it spans from China to South-east Asia, all the way to India,' he said.
At the end of March, Temasek's investments were valued at $129 billion. Its exposure to Singapore was 44 per cent, down from 49 per cent in the year before.
The last significant investment into a local company was in September 2004 when Temasek increased its stake in Neptune Orient Lines to over 67 per cent from 29 per cent.
First Enggr
AFFINITY Precision (S), which already owns 28.1 per cent of First Engineering, is making a voluntary conditional cash offer of $1 a share for the rest of the plastic components maker. The offer, which values the company at about $203 million, is conditional on Affinity Precision ending up with more than 50 per cent of First Engineering.
Affinity said it is making the offer in order to acquire statutory control of First Engineering and provide shareholders of First Engineering with an opportunity to realise their investment in the shares for cash, at a premium over the recent market price. Shares of First Engineering last traded at 83 cents.
Citibank + SMRT
Next stop: Citibank ATMs at all 51 SMRT stations
Exclusive tie-up with ez-link will also break local banks' last stranglehold on ERP payments
By SIOW LI SEN
(SINGAPORE) Citibank is sweeping into Singapore's heartland through an exclusive tie-up with SMRT Corp that will see a dramatic increase in Citi branches and ATMs and the issue of ez-link cards.
Under the partnership, Citi will open 10 new branches at MRT stations - giving it the widest bank branch network at stations. It will also install 51 ATMs plus 51 Citibank-AXS bill payment terminals - covering all 51 SMRT stations.
Significantly, Citibank-SMRT ez-link co-brand credit and debit cards will position Citi to smash the final bastion of the local banks, which now have a stranglehold on electronic road pricing (ERP) payments. New generation in-vehicle units will accept ez-link cards.
Citi's 10 new branches - expected to open within 12 months - will more than double the bank's branch network to 19 and more than triple its proprietary ATM locations to 75. The first two new branches will open within three months - at Tiong Bahru and Bugis MRT stations.
Citi now has nine branches, 24 ATMs, over 370 Citibank-AXS terminals and more than 140 ATMs under the shared ATM5 network with the other four foreign banks.
'This partnership with SMRT represents a major step for Citibank as we reach deeper into the heartlands of Singapore to serve all segments of customers,' Citibank Singapore chief executive Jonathan Larsen said yesterday at the launch of the partnership with SMRT.
'It will also enable us to provide unparalleled convenience and value to everyone in Singapore every day.'
Mr Larsen said that in the past 18 months Citi has expanded its physical touch points from just five to more than 500, including branches, ATMs and the partnership with AXS. 'The added accessibility has been particularly well-received by our heartland customers, who make up 64 per cent of our total customer base,' he said.
SMRT president Saw Phaik Hwa said: 'This collaboration with Citibank, a global banking giant, is a milestone for SMRT.
'Citibank's presence in our 51 MRT stations is in line with our drive to transform our MRT stations into lifestyle destinations of choice.' Citi's strategy of giving people more banking choice poses a formidable challenge to the other banks operating here - in particular the local banks, which have seen their costs rise in recent years and have tried to prune their branch networks.
Now, Citi's aggressive penetration of the heartland along MRT lines and through ez-link will make things even harder and more expensive for the competition.
SMRT passengers make two million trips daily. And through its exclusive tie-up with ez-link, Citibank is poised to break into the ERP system.
ez-link's senior vice-president of business and technology Nicholas Lee said: 'We, Citi and SMRT are quite excited at exploring this new market.' Mr Lee noted that the new market is not just for ERP but also for carparks all over Singapore which accept in-vehicle cashcards for payment.
The in-vehicle cashcard now issued by Nets, which is owned by the three local banks, is incompatible with the ez-link card, which has lead to many complaints from Singaporeans.
Mr Lee said ez-link is working closely with the Land Transport Authority on new generation in-vehicle units that will accept ez-link cards. Citi's rivals yesterday shrugged off its latest challenge.
'Competition is not new to us,' said a United Overseas Bank spokesman. 'The Singapore banking industry has been liberalised for some time and there is little the foreign banks cannot do.'
And a DBS spokeswoman said: 'As it stands, DBS has the largest ATM network in MRT stations.'
Indicating that DBS may fight Citi for some MRT locations allocated to the highest bidder in a tender, she said: 'The bank is always on the look out for suitable locations to situate our branches, and some of these locations may include MRT stations.
'The crux of the matter is the reach and accessibility of our ATMs. Where we are not in the stations, our ATMs are situated within easy access of our customers - we are in the nearby HDB estates, shopping malls and/or petrol kiosks.'
DBS has 81 branches and more than 800 ATMs in Singapore.
OCBC Bank's head of delivery, group consumer financial services Patrick Chew said that while MRT stations are an integral part of the Singaporean lifestyle, the bank's market studies show that crowds at stations tend to be fluid and transitory.
'As such, customers' banking transactions tend to be simple and quick in execution,' Mr Chew said.
'We find that these can be served by well-placed self-service ATMs in and about MRT stations. We also find that it is more appropriate for our branches to be situated close to transportation hubs.
'Places where we are able to serve a wider crowd and where customers have more time on their hands to conduct their financial matters.'
Foreign bank Maybank noted that all foreign banks will be able to leverage on Citi's expansion through the ATM5 network.
'The additional Citibank ATMs will expand the ATM5 network and it will benefit customers of the five qualifying full banks (QFBs),' said a Maybank spokeswoman.
The QFBs are ABN Amro Bank, Citibank, HSBC, Maybank and Standard Chartered Bank.
Genting
By S JAYASANKARAN
IN KUALA LUMPUR
BY WINNING the right to develop the Sentosa integrated resort project, Malaysia's Genting Bhd group is poised to be re-rated as a global gaming company with operations in Malaysia, London and Singapore.
More immediately, however, its triumph is expected to add considerable fizz to its share price.
'Although this (Genting's victory) was widely expected, it's still fantastic from a market perspective,' said Jason Chong, a fund manager with UOB-OSK Asset Management in Kuala Lumpur.
'I've seen brokers' reports which, including Sentosa, value Genting at between RM33-36 a share.' Genting closed at RM29.25 in Kuala Lumpur yesterday.
Genting's victory signals a new and brasher direction under its chairman Lim Kok Thay. Mr Lim, the son of Genting's patriarch and founder Lim Goh Tong, has eschewed the conservative, risk-averse ways of his father and stamped his mark on the group since taking over the reins in 2002.
The company has diversified into oil and gas, power and packaging, besides aggressively extending its gaming reach by investing in London - and now Singapore.
Investors like it. Genting's share price hit a historic high of RM30 recently, a fact company officials downplay by pointing out that the previous high was achieved during the mid-1990s - at a time when profits were half of those being achieved now.
Its 2005 net profit was RM1.25 billion (S$545 million).
Indeed, company officials reckon investors don't give Genting the valuations it deserves. Global gaming companies routinely trade at 33-35 times earnings, while Genting is trading at 14 times 2007 earnings.
But the Sentosa project will transform Genting into the world's third-largest gaming company, which could make it a must-have stock for fund managers in future.
On the other hand, the win on Sentosa could have negative consequences for Genting's flagship resort-casino atop the Genting Highlands east of Kuala Lumpur, although these would only kick in after 2009 when the Sentosa project is completed.
'It could affect visitor arrivals to the highlands by as much as 20 per cent because of curiosity about the new kid on the block,' said James Lau, chief executive officer of Southern Bank Securities.
'But it will be a temporary thing because, don't forget that the great pull about the highlands is its (low) temperature.'
The Singapore project is expected to cost $5.2 billion, but Genting, with its healthy balance sheet and net gearing of only 10 per cent, isn't likely to find funding a problem.
Indeed, analysts think that the project is a money spinner with an internal rate of return of 15-20 per cent, which indicates a payback period of five to seven years.
Moody's Investors Service yesterday affirmed the ratings of Genting and its associate Star Cruises, which will have a 25 per cent stake in the Sentosa IR project. The other 75 per cent is held by Singapore-listed Genting International, a subsidiary of Genting Bhd.
Moody's affirmed the A3 issuer and debt ratings of Genting Bhd with a stable outlook.
And it maintained Star Cruises' B1 corporate family rating with a negative outlook due to its high borrowings.
'While this large-scale greenfield project, with an estimated cost of over $5 billion, will increase Genting's exposure to development and execution risks, as well as capital needs in the medium term, it will also strategically strengthen the company's regional coverage and competitive position over the long term,' said Moody's lead analyst Kaven Tsang.
Thursday, December 07, 2006
Jaya
New bid values firm at $1.1b; block trade raises stake to above 50%
By WEE LI-EN
NAUTICAL Offshore Services (NOS), which is owned by buyout fund adviser Affinity Group, has bought more shares in shipping company Jaya Holdings to acquire control, and has raised its offer price on an ex-dividend basis by 12 per cent to $1.45, valuing the company at $1.1 billion.
Affinity announced yesterday that NOS had acquired 49.92 million shares in Jaya at $1.45 each, representing a 6.5 per cent stake, via a block trade executed through the Singapore Exchange. Affinity said: 'The revised offer price will not be further revised or increased.'
Jaya shares rose two cents to close at $1.46 yesterday with 52.6 million shares traded. The stock has risen 19 per cent this year, while the benchmark Straits Times Index rose 23 per cent.
The purchase brings NOS' overall shareholding in Jaya to some 51.5 per cent. On Oct 20, Affinity acquired a 44.3 per cent stake from a subsidiary of Sime Darby, Malaysia's second-biggest publicly traded company by sales, and five individual shareholders, some of whom are also directors of Jaya.
With the acquisition of more than half of Jaya, NOS increased its offer to $1.45 from the original cum-dividend offer price of $1.35 a share.
Merrill Lynch, the investment bank advising NOS on the purchase, said yesterday that the initial offer price of $1.35 per share was on a cum-dividend basis while the revised offer price of $1.45 is on an ex-dividend basis and should be compared with the initial ex-dividend offer price of $1.295. The revised offer of $1.45 therefore represents an increase of about 12 per cent.
Jaya's core businesses are offshore ship chartering and shipbuilding, with two shipyards in Singapore and Batam. The Singapore company's main ship chartering customers are engaged in offshore oil and gas exploration and production, marine construction, mining and general marine-related industries.
Jaya reported a 25 per cent jump in net profit to $107.3 million for the year ended June 30, on the back of an 81 per cent surge in revenue to $306.2 million.
Affinity advises and manages more than US$1 billion of funds and assets, making it one of the largest independent financial sponsors in the Asia-Pacific region for control-oriented investments. It has completed 13 transactions valued at more than US$2.5 billion since 1999 in five countries.
Datacraft
SINGAPORE - Datacraft Asia, South-east Asia's largest computer data network builder, expects technology spending by its customers in fiscal year 2007 to hold at the same level as the previous year, it said on Thursday.
'It seems we have a similar level of budgets this (fiscal) year, as in FY2006. But some of our banking clients are saying that projects may be prioritised differently, or may slow a little bit,' Chief Executive Bill Padfield told Reuters at a luncheon.
Last month, Datacraft said its fiscal fourth-quarter net profit more than doubled to US$6.45 million on aggressive technology spending by businesses, cost cuts and a lower tax rate.
The company, a unit of South African information technology group Dimension Data, builds and maintains computer networks for banks, telecoms providers and tech firms.
The Singapore networking specialist said it expected growth momentum in the new fiscal year to remain strong, underpinned by an order backlog of about US$143 million. -- REUTERS
Tuesday, December 05, 2006
SEMBAWANG Engineers & Constructors
By CONRAD RAJ
SEMBAWANG Engineers & Constructors (SBW), formerly a subsidiary of SembCorp Industries and now a member of India's Punj Lloyd Group, yesterday announced its involvement in a US$200 million polyethylene plant in Thailand.
The company said its UK subsidiary, Simon Carves Ltd, had signed a letter of intent (LOI) on Nov 30 to start work immediately on an EPC (engineering, procurement, construction) contract with Thailand's PTT Polyethylene Company (PTT PE) for a new 300,000 tonne low density polyethylene plant.
The plant, co-owned by Toyo Thai Corporation, is to be built at PTT PE's site at Map-Ta-Phut as part of its cracker complex. Construction work on the facility is expected to commence in the fourth quarter of next year and is expected to be completed by the first quarter of 2010. PTT PE is a wholly owned subsidiary of PTT Chemical Company.
The Thai plant will be the 36th high pressure polyethylene plant of this type executed by Simon Carves, which has more than 100 year's experience in the field which it leads.
The LOI was announced at the launch of a new corporate identity by 24-year-old SBW. Punj Lloyd chairman Atul Punj explained the change: 'Sembawang E&C is a design-and-build engineering and construction service provider with core capabilities in engineering, procurement and construction management, while Punj Lloyd is essentially an engineering construction company.
'This new identity will help to create a strong, unified branding platform for the group. With the inclusion of Sembawang under the brand name of Punj Lloyd, the company would come to be recognised as a part of a group that is a global provider of integrated EPC services.'
SBW, which was recently sold to Punj Lloyd for around $40 million by SembCorp, has, with its subsidiaries, over $1.3 billion worth of work in hand, to keep its 1,200 employees busy till 2010. SembCorp suffered an exceptional loss of $22 million from the sale.
It is the largest engineering and construction group in South-east Asia, with core capabilities in process engineering and design, civil engineering and building construction, and has experience in 35 countries, including China, India, Mexico, Middle East, South-east Asia, and the UK.
Punj Lloyd, listed on the stock exchanges of Mumbai and New Delhi, is among the largest engineering and construction companies in India providing integrated design, engineering, procurement, construction and project management services for energy and infrastructure sector projects.
Its operations are spread across the Middle East, Caspian, Asia-Pacific, Africa and South Asia.
Norelco
Aerospace parts factory expected to generate US$100m revenue in 5 years
By CONRAD TAN
NORELCO UMS Holdings, an equipment manufacturer for the disk-drive and electronics industries, is to invest US$20 million in a new plant at Changi to make parts for the aerospace industry.
The 80,000 sq ft factory is expected to generate US$100 million in annual revenue in five years. Construction of the new facility is scheduled to be completed in the second half of next year, with operations expected to start in January 2008.
It will initially employ 30 people, and eventually expand to 180 by 2012, comprising mainly technical staff. Norelco will lease the factory for an initial period of eight years from Boustead Projects Pte Ltd, a unit of engineering group Boustead Singapore, which is building the facility.
'This investment is part of our concerted effort to extend our core competencies in precision machining into the aerospace industry, which has robust growth potential,' said Norelco UMS chairman and chief executive Andy Luong at the groundbreaking for the plant yesterday.
'It is also part of our group's strategy to expand into higher margin, value-added businesses. We are not new to the aerospace industry as we are already working with first-tier aerospace suppliers such as Hamilton Sundstrand and Honeywell Aerospace.
'We expect the new plant to contribute to our bottomline in 2008. Together with the semiconductor industry, the aerospace business will be a key growth driver going forward. The current worldwide supply shortage of aerospace parts and components coupled with Asia expecting to double its fleet of aircraft by 2015, means the aerospace industry is set to fly even higher,' he said.
The expansion into aerospace manufacturing is also expected to make the company less vulnerable to downturns in any one industry, he added. 'Aerospace contracts last from one to five years and earnings from the aerospace business are more predictable. Our company will enjoy a more stable income stream.'
Last month, the company reported a 15 per cent increase in revenue for the third quarter, to $43.9 million. Excluding a $7.9 million gain from disposal of its recycling business, its core earnings grew 70 per cent to $5.2 million. The company was formed in 2004 through a merger of listed Norelco Centreline and privately-owned UMS Semiconductor.
Its share price closed unchanged at 45 cents yesterday.
Monday, December 04, 2006
Swiber Holdings
secured a charter contract in India worth about US$14 million. The contract from BG
Exploration and Production India Ltd is for the provision of an anchor handling tug and
supply (AHTS) vessel to be used in Indian waters for marine oil and gas works. The threeyear
contract starts in April next year (2007) and includes options for two six-month
extensions. The deal is expected to have a positive impact on the company's net tangible
assets and earnings per share for the financial year ending Dec 30, 2007, said Swiber. BG
Exploration is a subsidiary of BG India, which holds a 30 per cent interest in the Tapti gas
field together with the Panna/Mukta oil and gas fields off the shore of Mumbai. The latest
contract comes on the heels of an earlier letter of intent Swiber signed with BG Exploration
for the provision of transport vessels, a deal which is expected to contribute about US$5.75
million to Swiber's turnover in FY2007.
UTAC
investing US$100 million over the next three years in Thailand, where it will consolidate its
leadframe-based packaging business. The investment will include a 29,100-square-metre
factory - its third in the country - will have testing operations and a distribution centre. The
new investment follows the company's acquisition of NS Electronics Bangkok (1993) in
June for US$175 million. It has been renamed Utac Thai. 'Our Thailand operations are
growing very strongly and have become a significant contributor to the group's growth over
the past two quarters,' said group president and chief executive officer Lee Joon Chung in a
news release yesterday. 'Moving forward, the group's strategy will be to consolidate
leadframe-based assembly in Thailand, with Singapore concentrating on substrate-based
packaging activities. 'The strategy to focus on the respective strengths and capabilities of
our Singapore and Thailand operations reinforces the synergies between both sites.' Utac
Thai will lease the new building, which is near the existing plant in the Wellgrow industrial
park of Chachoengsao province. The plant, expected to begin production in the second half
of next year, will employ more than 1,000 people. Utac Thai has two other factories in the
districts of Bangna and Wellgrow, just outside Bangkok city, with a total of 640,000 square
feet of production space hosting 598 wirebonders and 340 testers, the company said.