Singapore Corporate News - 10 Jan 2008

Analysts still upbeat on SIA shares

ANALYSTS are bullish on Singapore Airlines (SIA) despite the carrier's failure to buy into China Eastern Airlines (CEA).

Yesterday, CIMB-GK issued an 'outperform' call on SIA shares with a price target of $28.40, while UOB-Kay Hian carried a 'buy' call with a target of $21.

Likewise, Morgan Stanley and Nomura Securities made 'overweight' and 'buy' recommendations on Tuesday.

CEA's minority shareholders on Tuesday shot down SIA's bid to buy into CEA at HK$3.80 (70 Singapore cents) a share.

SIA's failure followed a campaign by rival Air China's parent, China National Aviation Corp (CNAC), against the bid. CNAC, which had been building up its minority stake in CEA, claimed that the offer by SIA and Singapore investment company Temasek was too low and had, with partner Cathay Pacific, indicated their intention to make a higher offer of HK$5 a share.

Yesterday, SIA's share price fell to a day low of $16.40, before recovering to close at $16.86 - up 16 cents or one per cent. About 4.84 million shares changed hands.

In a report, CIMB emphasised that 'the failure has no impact on SIA's near-term fundamentals', even though the carrier may not be able to fully tap on China's aviation boom in the longer term.

However, 'we laud SIA for exercising discipline and refusing to be drawn into a price war', analyst Raymond Yap wrote in a report. 'It would be far worse for SIA to overpay, than not to buy at all,' he added.

He believed that CEA's board of directors will reject cooperation with Air China and will not replace SIA with Air China in the proposed share subscription deal.

However, Mr Yap did not rule out a hostile bid by CNAC at its indicative offer price of HK$5 per share.

He added: 'Should Air China buy over a large stake in CEA successfully, the combined Air China-Cathay Pacific-China Eastern group will be a force to be reckoned with in the Chinese aviation industry.'

CIMB thought that SIA may consider other investments in China, like a tie-up with Shanghai Airlines or China Southern as tapping into the country's aviation growth is still important.

'Furthermore, a combined mega-carrier under the leadership of Air China could create incentives for smaller airlines to team up with foreign shareholders,' it said in its report.

In the midst of a bustling Singapore aviation hub, CIMB believed that SIA is reaping the rewards of a global travel boom.

Therefore, 'we believe that growth for both long-haul and intra-Asia premium traffic will hold up on the back of strength in Asian economic growth, and SIA is well positioned to benefit from this'.

For the half-year ended Sept 30, 2007, SIA reported a 7.3 per cent year-on-year rise in net profit to $931.9 million, while revenue was about $7.59 billion.

Ho Bee-IOI tie-up wins Sentosa's Pinnacle site

IT was the last chance for a bite of the sweet Sentosa Cove pie, but only three developers tendered for The Pinnacle Collection site with Ho Bee Investment and Malaysia's IOI Properties partnering to put in the winning bid of $1.1 billion.

In a joint statement released yesterday, the joint venture partners said its bid for the largest and last condominium development site works out to $1,822 per sq ft (psf) per plot ratio (ppr).

In July 2007, SC Global won the tender for The Beachfront Collection condominium site with a bid that works out to $1,800 psf ppr. Not only were five bids received, but SC Global's winning bid also set a new benchmark price for Sentosa Cove, topping the highest bid of $1,361 psf ppr for The Seaview Collection tender held in March 2007 - also won by Ho Bee/IOI - by over 30 per cent.

The Pinnacle Collection was, however, awarded based on price and design concept.

Ho Bee has a 35 per cent stake in the project and news of the win, with what appears to be a relatively low bid, was greeted by investors positively yesterday. Its share price rose 3 per cent to end the trading day four cents higher at $1.39.

Ho Bee Investment executive director Ong Chong Hua said: 'The US sub-prime crisis has in our view helped us to secure what we believe to be the best site, not only in Sentosa but also in Singapore, at a price level which would otherwise be much higher for such an iconic site under normal circumstances'.

Factoring in higher construction cost for a luxury development, Ho Bee expects the breakeven cost to be about $2,600 psf.

The 231,676 sq ft site has a 2.6 plot ratio and a total permissible gross floor area of about 602,360 sq ft. Mr Ong said it will build 280 units comprising a mix of three- and four-bedroom units as well as penthouses.

The development is targeted for launch in the first quarter of 2009.

Upbeat about the high-end market, Mr Ong said that while the sub-prime crisis has created some market uncertainty, the Singapore real estate market is fundamentally 'very healthy', backed by solid demand and robust economic growth.

'We think the sub-prime crisis provided a very healthy consolidation to the market. It is a good reality check on the 'irrational exuberance' which we had experienced especially in mid-2007,' he added.

He also believes the high-end market will consolidate in the next three to six months after which he expects a steady growth of 5-10 per cent.

This will be Ho Bee's eighth project at Sentosa Cove and IOI Properties' third foray into the Singapore property market.

On the tender price, CB Richard Ellis (Research) executive director Li Hiaw Ho noted that the winning bid was only 14 per cent above the reserve price of $1,600 psf ppr. 'When the site was opened for tender in September 2007, market sentiment was more upbeat and it was widely expected that the winning bid would be in the region of $2,000 psf ppr,' he added.

He noted that the latest launches in Sentosa Cove, the Turquoise and Marina Collections, were priced at an average of $2,600 psf and $2,700-$3,000 psf, respectively. He also expects The Pinnacle Collection to sell at around $3,000 psf.

Biosensors seeks full control of JW Medical

MONTHS after buying a 50 per cent stake in Chinese stent maker JW Medical Systems, Biosensors International said yesterday it intends to acquire the rest of the company for $173 million.

Biosensors will meet the price by issuing new stock to JW Medical's other shareholder, Shandong Weigao Group Medical Polymer Co (Weigao). Listed on Hong Kong's Growth Enterprise Market (GEM), Weigao owns 50 per cent of JW.

'Through this acquisition, Biosensors will have immediate access to the large China market that will give us a strong platform to introduce future products, including BioMatrix,' said Biosensors chairman and CEO Lu Yoh Chie.

JW will come in useful as Biosensors prepares to commercialise BioMatrix, a proprietary drug eluting stent (DES) expected to gain regulatory approval in Europe this month.

The group plans to seek approval for its products in China after that.

Biosensors said JW is estimated to hold 30-35 per cent of China's DES market. It has achieved this in just two years, following the launch of its Excel DES in early 2006.

For the nine months ended Sept 30, JW's net profit jumped almost three times to US$11.1 million, from US$3.8 million previously.

'We expect JW Medical not only to add sales to our top line but also to contribute positively to our profit line when its financial results are consolidated with ours,' said Mr Lu.

The acquisition will be carried out in two steps. Biosensors will first issue 120 million new shares to Weigao at $1.08 each in exchange for 30 per cent of JW.

Weigao then has a put option, exercisable by July 2009, to sell the remaining 20 per cent of JW for a further 40 million Biosensors shares. When the buyout is completed, Weigao will end up with a 13.2 per cent stake in Biosensors.

The Shandong-based medical devices group also has the right to buy up to 20 million new Biosensors shares in cash.

If it takes up the offer, it could eventually own 14.6 per cent of Biosensors.

Weigao chairman Chen Xue Li said the agreement with Biosensors will provide a launchpad for JW's entry into the rest of Asia, where Biosensors has an extensive distribution network.

In particular, it is eyeing Indonesia, India, Japan and South Korea.

'As shareholders of Biosensors we can leverage on Biosensors' leadership in interventional cardiology and enable Weigao to become a leader in the medical device industry in Asia,' Mr Chen said.

Weigao reported a 75.6 per cent surge in nine- month profit to 198.6 million yuan (S$38.7 million).

For the year to September period, turnover went up 36.8 per cent to 777.4 million yuan.

Biosensors, on the other hand, narrowed its six- month losses to US$3.04 million, from US$15.9 million earlier.

For the six months ended September, revenue went up 45 per cent to US$23.6 million.

Following yesterday's announcement, Biosensors shares rose 5.5 cents to close at 96 cents.

Weigao last traded on Tuesday, when it closed at HK$16.80.

Chemoil's Helios Terminal opens for business

TODAY'S official opening ceremony at Jurong Island planned earlier by Chemoil is not taking place due to the tragic loss of its founder and CEO. But Robert Chandran's Helios Terminal is now open for business.

That's the latest message sent out yesterday by Chemoil directors who stressed that operations continue as normal, even as board members fly in to choose a successor to Mr Chandran, who died in a helicopter accident in Indonesia earlier this week.

In a statement yesterday, Chemoil's chief financial officer Jerry Lorenzo said: 'The board will meet in person in Singapore . . . before this week ends in order to arrive at a decision on succession, and the company expects to make further announcements soon thereafter.'

But his are big shoes to fill, as Mr Chandran is known in the market to be 'a hands-on manager who controls everything'.

Key to the decision on a successor will be his controlling 50.46 per cent stake in Chemoil, which some have suggested that his family may choose to sell. Japan's Itochu Corporation, with 37.5 per cent, will also be a leading player in any restructuring.

Meanwhile, Chemoil emphasised in its statement yesterday that 'its directors, in conjunction with the management team, are in constant communication with each other regarding the company's business continuity measures'.

As such, operations of its US$122 million, 448,000 cubic metres Singapore terminal will start as planned this month, it said.

Sanjay Anand, managing director of Helios, said: 'The terminal is ready for operation and will usher in a new age for independent marine fuel suppliers in Singapore.'

Chemoil said that it 'will also proceed with plans to start delivering fuel from the GPS-Chemoil terminal in the UAE port of Fujairah shortly afterwards'.

This will provide Chemoil with a physical presence in the world's four key oil product markets, namely, Singapore, Fujairah, Rotterdam and the US Gulf. Mr Anand said that the US$60 million expansion of the Fujairah terminal will also proceed as planned.

After a knee-jerk sell-off on Tuesday, Chemoil shares yesterday settled at 48.5 US cents, or up one per cent.

STX to buy 11 bulk carriers

STX Pan Ocean is gearing up for the dry bulk boom with a US$810 million budget for buying ships this year. The company's board approved the budget for acquiring 11 bulk carriers and two container vessels, the company said in an SGX announcement yesterday.

STX said the investment amount and types of vessels to be acquired during the year may vary according to market conditions. However with the continuing boom in the commodities market, it seems unlikely the number of bulk carriers ordered will be reduced.

A newbuild contract for four supramax-size bulk carriers for 2010 delivery costing about US$40 million each with China's Cosco (Zhoushan) Shipyard has been approved.

STX Pan Ocean has a stated objective of becoming one of the world's top five shipping companies. It plans to enter the LPG carrier market as well as strengthen the existing core bulker sector and expand the tankers, PCTCs, container and car carrier segments.

Separately, Samudera Shipping Line yesterday announced that it is planning to buy a container ship for US$28.9 million from Pacific Faith Shipping Company. The China-built 1,100 TEU vessel is due for delivery in the first quarter.

This will be the third container vessel Samudera is buying and will be deployed on its Chittagong service, which is currently one of the company's major trades. Owning the vessels gives it better control over operating costs and capacity, Samudera said.

Datacraft to buy NZ firm for US$3.86m

DATACRAFT, an independent IT solutions and services company, has reached final agreement to acquire the business of Security-Assessment.com, a high-end IT security consulting firm based in New Zealand, for US$3.86 million. Datacraft said it sees the acquisition as pivotal in its drive to provide best-in-class protection to its clients' networks and IT environments across the Asia-Pacific region.

Hyflux names group deputy CEO

WATER treatment firm Hyflux Ltd has announced the appointment of Sam Ong as its group deputy chief executive officer. Mr Ong will continue to hold his position as group chief financial officer. Prior to joining Hyflux, he had held leadership positions in the US and in Singapore in treasury, pension fund investment, strategic planning, project financing and business development. Hyflux also appointed Fong Chun Hoe as group executive vice-president and chief technology officer. He will be responsible for the research, development, exploration of new membrane applications, product development and commercialisation of technology. He will also oversee corporate supply chain, environmental health and safety, human resource and quality functions.

Europtronic buys into China biotech firm

EUROPTRONIC Group has entered into an investment agreement with Dinghan Biotechnology Co Ltd, which is incorporated in China and principally engaged in professional breeding, propagating and planting of phalaenopsis, developing DNA and cloning technology, and the sale of orchid seeding plants with optimised DNA. The current registered capital of Dinghan is US$1 million of which US$750,000 has been fully paid-up. Europtronic will subscribe for the balance unpaid capital of Dinghan for US$250,000, representing 25 per cent of the enlarged paid-up capital of the company. The investment will be funded by internal resources.