Singapore Corporate News - 28 Aug 2007

Centillion to buy US waste recycler for US$22m

CENTILLION Environment & Recycling has signed a memorandum of understanding to take over US-based electronic waste recycler Metech International Inc. The move will 'close the loop' for the once-beleaguered e-waste recycler, Centillion chairman Eddie Chng told BT yesterday.

He said the US$22 million acquisition will give Centillion a foothold in the US - the only major e-waste recycling market it does not already have a business presence - and enable the Singapore company to post its first set of 'meaningful numbers' since it was rescued by Mr Chng and tycoon Oei Hong Leong late last year.

Centillion shares - and those of its parent, Equation Corp - were halted yesterday morning for the announcement. Centillion shares closed half a cent higher at 11.5 cents, while Equation shares were unchanged at 17.5 cents.

Centillion had announced that, under the MOU, it will buy the privately-held Metech from its shareholders - New Heritage Finance Ltd, the Advani Family Trust and LAD Logistics LLC - for US$22 million.

Of the amount, US$12 million will be funded by cash, and the remaining US$10 million through the issue of new Centillion shares at S$0.108 each.

Metech's shareholders have provided a special warranty to Centillion that Metech's earnings before interest, taxation, depreciation and amortisation (Ebitda) for the financial year ending Dec 31, 2008, shall not be less than US$4 million and that its Ebitda for FY2009 shall not be less than US$5.5 million.

The US company's principal business is the recycling of electronic waste and it counts more than 30 multinational corporations (MNCs) as its clients. It recorded revenues of US$44 million for the financial year just ended, handling more than 13 million pounds of materials in FY2006 and 19 million pounds of materials in FY2007.

MI-Reit to expand into offices and technology parks

THE fourth listed industrial real estate investment trust (Reit) - MacarthurCook Industrial Reit - is extending its investments into offices and technology parks.

MI-Reit yesterday announced that it has agreed to buy Plot 4A, International Business Park from Eurochem Corporation (a member of Tolaram Group), for $91 million.

This is a 13-storey office park building with a basement car park located in Jurong East's International Business Park.

MI-Reit's first investment in offices or technology parks brings it a 20 per cent exposure to the sector.

According to Jones Lang LaSalle Research's Asia-Pacific Property Digest for Q2 2007, business park rents grew 30 per cent in the quarter while capital values grew 8 per cent.

Under this sale and leaseback arrangement, Eurochem - a Singapore- based company in the petrochemical sector - will sign a head lease over the entire facility for 10 years, with an option to extend for another five years.

This will start from the date of completion, scheduled for December 2009.

Mr Calvert added that the acquisition will increase the size of the portfolio from the initial value of $316.2 million at the time of listing in April, to $407.2 million upon completion of the acquisition.

MI-Reit said the purchase will extend its average weighted lease expiry duration from 6.3 years to seven.

To be funded wholly by debt, other alternative funding sources will also be considered, said the manager.

MI-Reit's gearing level will increase from its current 8.6 per cent to 29.1 per cent, assuming 100 per cent debt financing and that there are no other acquisitions between now and settlement of the property.

MI-Reit's initial portfolio comprised 12 industrial assets across Singapore, the largest of which is UE Technology Park, which was acquired for $115 million.

At the date of listing, the initial properties in MI-Reit had a combined value of $316.2 million.
The Reit invests primarily in industrial real estate assets in Singapore, Japan, Hong Kong, Malaysia and China.

Last month, the Reit reported a distributable income of $3.9 million for its first quarter ended June 30 - 2.9 per cent higher than the forecast $3.8 million.

Distribution per unit (DPU) also beat expectations, coming to 1.52 cents, which was 3 per cent higher than the forecast DPU of 1.47 cents.

Tie-up pares Longcheer's stake in associate firm

MOBILE handset designer Longcheer Holdings said yesterday it will dilute its stake in an associate firm following a 28.5 million yuan (S$5.7 million) capital injection by China Seven Star Shopping.

China Seven Star, a company that sells consumer products through TV shopping, is investing in Shanghai QL Telecommunications Co, which is 57 per cent owned by Longcheer's wholly-owned subsidiary Sinolong Technology (Shanghai) Co.

'We are proud to partner China Seven Star in the marketing and distribution of mobile handsets in China,' said Longcheer CEO Du Junhong. 'We believe the participation of China Seven Star will enhance Shanghai QL's mobile handset marketing capability and diversify its distribution channel in China.'

Following the capital injection by Hong Kong-listed China Seven Star, Shanghai QL's registered capital will be increased from 50 million yuan to 78.5 million yuan.
Sinolong's stake in Shanghai QL will be pared to 36.3 per cent, while China Seven Star will own 36.3 per cent. The remaining 27.4 per cent will be held by Shanghai LS Investment Co, which now has a 43 per cent interest.

The arrangement has been set down in a non-binding memorandum of understanding. If it goes through, Shanghai QL will cease as a subsidiary and will instead become an associate company of Longcheer.

The deal is subject to Shanghai QL's net asset value being at least 50 million yuan.
Longcheer reported a 16 per cent fall in full-year net profit to 187.8 million yuan. For the 12 months ended June, revenue rose 23 per cent to 2.4 billion yuan. The counter closed 1.5 cents lower at 58 cents yesterday.

Pan Hong acquires 75% stake in Guangdong plot

PAN Hong Property Group has acquired a 75 per cent interest in a plot of land in China's Guangdong province, which it plans to develop into a high-end residential and commercial project.

Pan Hong paid 38.1 million yuan (S$7.6 million) for its stake in the land, which is in Jiangnan Road, in the urban part of Jiangmen city.

The site is 28,130 sq m and the planned gross floor area is about 49,000 sq m.

The acquisition of the land parcel and subsequent development cost will be financed from Pan Hong's internal resources and bank borrowings.

Olam buys US food processor for US$16m

COMMODITIES group Olam International is acquiring a processor and supplier of dehydrates to the food processing industry, to penetrate the US$1.2 billion dehydrated ingredients market.

Olam will pay US$16 million in cash for full ownership of Key Foods Ingredients (KFI), which primarily converts raw garlic and garlic flakes into dried, cleaned and milled garlic ingredients, before selling them to food service firms.

Headquartered in US, KFI owns a production facility in Qingdao, China, that is approved for food safety and hygiene by major US customers.

The US market currently accounts for some 85 per cent of its total sales, while Europe and Australia contributed the rest.

Last year, KFI posted a revenue of US$20.2 million - up from US$7.5 million three years earlier.

However, its earnings before interest, tax, depreciation and amortisation (Ebitda) was slightly more volatile, dipping to US$1 million in FY05 - from US$3 million previously, before recovering to US$1.3 million last year.

KFI said its Ebitda was hit by a significant run-up in raw material costs in FY05, but Olam says it has a wide procurement reach in China to manage any supply disruptions in future.

The deal is transacted at a price-earnings multiple of 5.5 times and is expected to be completed by Sept 30, 2007.

In the first half of FY07, KFI's Ebitda has recovered to reach US$2.7 million. The company currently has a 10 per cent share of the US dehydrated garlic market which is equivalent to 20 per cent of the total dehydrated garlic exported from China to the United States.

In all, China's dehydrated garlic exports now account for some 45 per cent of the US market, and Olam believes that the percentage will rise further in future.

Therefore, the investment is expected to significantly enhance Olam's presence in the US, 'which remains the largest and most important spices market in the world', it said.

Olam said the investment will be earnings accretive in the first year, and forecast an Ebitda of US$3.4 million from the dehydrated garlic business in China this year.

The expected Ebitda from this business next year is US$4.6 million.

Kian Ann net rises 30% on sales growth

KIAN Ann Engineering achieved a 30.18 per cent rise in net profit to a record $9.7 million for the year ended June 30.

The distributor of heavy machinery parts and diesel engine components reported sales growth for its markets in more than 50 countries. Group revenue rose 14.72 per cent to $129.53 million, with the Malaysian market reporting the highest sales growth of 28.4 per cent to $38.7 million.

Its sales in Singapore grew 8.6 per cent to $26 million buoyed by the robust construction industry.

Kian Ann said its earnings also received a boost from its newly incorporated subsidiary, Kian Chue Hwa (Industries) Pte Ltd (KCHI), which took over the business of Kian Chue Hwa Auto Pte Ltd, and is a parts stockist for commercial and industrial vehicles as well as an authorised parts stockist for Mercedes Benz in Singapore.

To pass on Section 44A tax credits to its shareholders, Kian Ann had in June announced an interim bonus dividend of 8.54 cents per share less tax 18 per cent (net 7 cents), in addition to the 0.60 cent per share less tax of 18 per cent it had paid on March 28. It had also proposed a one-for-two rights issue at 14 cents for each rights share, which is expected to strengthen its capital base from 292.07 million shares up to 438.1 million shares if fully subscribed.

It is now proposing a final dividend of 0.40 cent per share less tax of 18 per cent for all shares issued after the rights issue exercise, subject to shareholders' approval in the upcoming annual general meeting.

Kian Ann said it will continue to focus on leveraging its sourcing abilities, expanding its product offerings and global market share, and raising internal efficiencies.

'The group expects the demand for its parts to be sustainable (and) will continue its efforts to increase sales volume in Asia as well as other markets,' it added.

Earnings per share was 3.32 cents, up from 2.55.