Singapore Corporate News - 12 Jan 2008

STATS ChipPAC to distribute US$813m by capital reduction

STATS ChipPAC, South-east Asia's largest provider of chip testing and packaging services, plans to return up to US$813 million to shareholders through a proposed capital reduction.

The amount works out to 39 US cents a share based on present share capital. It will be 37 US cents a share on a diluted basis - taking into consideration potential new shares to be issued under such schemes as share options and the possible conversion of convertible subordinated notes held by majority shareholder Temasek Holdings.

Based on 37 US cents a share, Temasek stands to receive US$684 million. The Singapore investment company, which owns a stake of 83.05 per cent in STATS ChipPAC through wholly owned subsidiary Singapore Technologies Semiconductors Pte Ltd (STSPL), also holds, again through STSPL, US$134.5 million of 2.5 per cent convertible subordinated notes, which may be converted to about 145.14 million STATS ChipPAC shares based on the current conversion price.

'The capital reduction, if effected, would allow the company to return surplus capital to the shareholders,' STATS ChipPAC said.

STATS ChipPAC expects Temasek, through STSPL, to vote in favour of the capital reduction. Temasek and STSPL have been in discussions with it on the proposed exercise.

The capital reduction will reduce the share capital of the company from about US$1.89 billion to about US$1.21 billion, assuming full note conversion by Temasek.

The proposed capital reduction will not result in a cancellation of shares.

The cash distribution will be funded by issuing additional debt securities, and borrowings under credit facilities. The capital reduction is subject to STATS ChipPAC being able to obtain debt financing to fund the exercise, as well as approval of shareholders at an extraordinary general meeting and regulatory approval from the High Court and from the Singapore Exchange (SGX).

Before the cash distribution, STATS ChipPAC directors will also take into consideration the prevailing market or economic conditions.

Should the capital reduction be successful, net tangible assets, on a pro forma basis, is expected to decrease to US$135 million from US$846 million, short-term and long-term debt will be increased to US$1.41 billion from US$683 million and gross gearing is expected to increase to 2.2 times from 0.5 times.

STATS ChipPAC said that after the capital reduction, its financial position is expected to remain healthy.

Temasek had said in December last year that it was 'still considering' delisting the firm from the SGX.

STATS ChipPAC has already announced its intention to voluntarily delist from Nasdaq in the US as its trading volume there has declined significantly since Temasek gained control of its shares in May after a takeover bid.

The company also announced yesterday that in light of the capital reduction exercise, it has decided to continue to maintain its American Depositary Receipts (ADR) programme with the depositary until after the exercise is completed or abandoned. It will decide whether to terminate the programme after this.

STATS ChipPAC shares closed 2 cents up at S$1.52 yesterday.

Old Chang Kee's success: it's no puff

UNDAUNTED by failed attempts to enter Japan, Myanmar, China, New Zealand and South Africa in the early 1990s, F&B group Old Chang Kee is now launching a second wave of overseas expansion - this time with a firmer hand.

'Those outlets didn't do well because the concept of franchising wasn't that well understood then,' Old Chang Kee chairman Han Keen Juan told BT in Mandarin. 'They weren't making money, and there were problems with the quality as well. So we had to close them.'

But that doesn't mean you can't climb up again after a fall, added Mr Han. This time, however, the group is making direct investments in its target markets, rather than licensing the franchise to overseas partners.

'The first shop is very critical because we'll have to face culture shocks,' said Mr Han. 'The people are different (from Singaporeans). Chinese people, for example, are quite different from us. So a lot of time and effort will be spent on understanding the market.'

Which explains why the company has opted to start its first China outlet in Chengdu this time. 'If we go to Shanghai or Beijing, the cost of learning will be very high,' he said. He estimates that rental cost in Chengdu is about 30-40 per cent lower than the Chinese coastal cities, and Old Chang Kee will probably take about two years to get to grips with understanding the Chinese consumer.

Having started three outlets in Chengdu, Old Chang Kee is planning to open a shop, where customers can sit down and have a quick bite. For a sneak peak, Mr Han said the food may be presented in cups rather than on skewers, to differentiate it from the cheap, barbecued meat on skewers that is commonly sold in China. Also, curry meals may be introduced, 'because Chengdu people perceive curries as good, expensive food', added CEO William Lim.

When that model proves successful, it will be exported to Chongqing, which the company is eyeing next. 'The most important thing is to do it well, in all aspects,' said Mr Han. 'After that, it will be easy for us to replicate (the model) in other parts of China.'

Apart from China, Old Chang Kee is planning to open at least two retail outlets in Australia over the next two years. It will start in Perth, where it is scouting for a small factory.

In Singapore, where it already has 54 retail outlets, the group still sees opportunities to expand. It is eyeing at least five more outlets within two years.

Mr Han added that the group may also look into alliances, acquisitions and joint ventures with other food-related businesses. He noted that a number of SMEs are at a crossroads now as the next generation is unwilling to take over the family business, while corporatisation is not a viable option.

'We have a lot of opportunities like that, but we need to figure out how to work together,' he said. 'I have to be very careful because it's a sensitive thing.'

Some of its expansion plans will be funded by the $5 million in gross proceeds that will be raised from its IPO this month. Old Chang Kee is placing out 25 million new shares at 20 cents each. About 10.3 million placement shares have already been taken up by Novena Holdings. One million shares will be available for public offer, which closes next Monday.

The listing move is aimed more at raising profile than money, said Mr Lim, pointing out that the company has cash and short-term deposits of more than $4 million, a fully paid-up factory and no debt.

'We are here because we want a different profile for Old Chang Kee,' he said. 'When dealing with PRC (China) people, if you tell them you are a listed company, your status would be elevated. It's easier for us to do business.'

The company expects to see a dip in its net profit for FY2007, due to rising raw material costs. But it is likely to pay dividends, as it has done in previous years, said Mr Han.

Trading of its shares is scheduled to start on Catalist next Wednesday. The group hopes to upgrade itself to the mainboard within two years.

Second A380 jet joins SIA fleet

SINGAPORE Airlines' second Airbus A380, which was handed over to the company in Toulouse, France, yesterday, will join the first one on the Singapore-Sydney route.

This will allow some rotation of aircraft on the Sydney route, SIA said.

The second aircraft is expected to arrive in Singapore around 9 am today. It seats 471 passengers in three different classes like the first A380, which took to the skies in October last year.

In a release, SIA also said that the addition of the second double-decker jet would create opportunities for crew training.

The airline's third A380, which will join the stable late next month, is to be used for a daily service between Singapore and London Heathrow.

SIA said it has firm orders for another 17 A380s, for a total of 19 aircraft.

On Thursday evening, the first A380 slipped off the tarmac onto a grass verge at Changi Airport, Terminal 3. No one was injured. The incident happened after a tow truck pulling the plane forward to a take-off position disconnected from it because of a fault with the truck's hydraulics. The plane has since been lifted out of the grass verge and given the green light to resume its flight yesterday.

One-time gain lifts Ezra Q1 net profit to $188.4m

A HUGE one-time gain lifted offshore support and marine services company Ezra Holdings to a net profit of $188.4 million for its first quarter ended Nov 30, 2007.

The Q1 earnings, which compare with just $4.6 million for the previous corresponding quarter, were due to an exceptional gain of $197.9 million from the partial divestment of a stake in Oslo-listed subsidiary EOC, which reduced its stake from 88 per cent to 48.9 per cent.

Ezra said excluding one-time items, recurrent income was 270 per cent higher at $16.6 million as revenue more than doubled from $32 million to $67.2 million.

The good performance was attributed to contributions from new vessels coming onstream - seven anchor handling, towing and supply (AHTS) vessels, a crew boat and a launch barge.

Ezra also benefited from higher charter rates as the red-hot oil and gas industry continues to expand.

Profit margin rose 9.8 percentage points to 41.9 per cent. Earnings per share leapt from 0.82 of a cent to 32.78 cents, while net asset value rose from 69.85 cents to 95.15 cents.

The company expects oil and gas activities to continue with the current trend in the next 12 months and believes the outlook for the offshore support market is encouraging.

'We are optimistic about opportunities in the offshore oil and gas industries as world demand for energy will remain strong in the year ahead and there is a global shortage of the younger, medium and large-sized offshore support vessels that we offer,' said Ezra managing director Lionel Lee.

'As a global player catering to the entire life cycle of an offshore oilfield, we are committed to and place great importance on growing a young, technologically advanced, deepwater-capable fleet,' he added. 'We are expanding coverage beyond markets in South-east Asia to include Africa, Brazil and Europe's North Sea.'

Ezra recently set up a marketing office in Aberdeen, Scotland to tap the flourishing oil and gas construction and production phases in the North Sea fields.

Ezra shares closed nine cents lower at $3.12 yesterday.

Derivatives expected to bolster SGX Q2 profit

SINGAPORE Exchange (SGX), South-east Asia's top bourse operator, should have pushed up its October-December profit by more than two-thirds on the back of strong volumes in derivatives trading as edgy investors rushed to hedge positions in fickle stock markets.

Analysts said that a firm derivatives business should outweigh a seasonal slowdown in securities trading, further exacerbated by global market turbulence, but stock market skittishness may erode SGX's earnings in coming quarters.

'The derivatives side looks quite impressive. There'll be a slowdown in securities trading, but SGX will not be held ransom by that,' said CLSA analyst Thilan Wickramasinghe.

SGX is expected to post net profit of $107 million for its October-December fiscal second quarter, a poll of three analysts shows, up 68 per cent from $63.7 million profit a year ago.

The exchange said this week that its derivatives trading volume rose 21 per cent last year to a record 44 million contracts.

Analysts said that SGX may not yet have seen the bottom of the outward rippling from the US sub-prime crisis, with investors still jittery about the health of the world's largest economy.

'Market conditions only started to deteriorate at the end of the quarter. What we're seeing now may not be fully reflected in the results,' said Morgan Stanley analyst Matthew Wilson.

SGX, which ranks behind Hong Kong Exchanges and Clearing (HKEx) among Asia's listed bourses, enjoyed record quarterly profit last year as optimism in domestic growth drove a surge in trading appetite for property and banking counters.

In the first 10 months of 2007, SGX shares more than tripled to a record $17.20, helped by speculation that SGX may be a takeover target amid mergers and acquisitions in the industry.

The benchmark Straits Times Index gained 31 per cent during the same period.

Trading at nearly 25 times forecast earnings, SGX is cheaper than HKEx at 37.6 times. Australian Stock Exchange, Asia's No 3 listed bourse, trades at 24.4 times.

Harry's plans to raise $3-5m from listing on SGX's Catalist

HARRY'S International, which operates the largest chain of pubs in Singapore, plans to list its shares on the Singapore Exchange's junior board by June, chief executive Mohan Mulani said yesterday.

The planned listing will involve the transfer of Harry's shares from Phillip Capital's OTC market to the SGX's Catalist bourse. Harry's hopes to raise $3 million to $5 million, Mr Mulani said in an interview.

Harry's operates over 30 outlets in Singapore, most of them watering holes bearing the Harry's brandname and catering to mainly expatriates and tourists.

The company is best known for its original outlet at Boat Quay along the Singapore River, which was the favourite hangout of Nick Leeson, the former rogue trader who brought down Britain's Barings Bank in 1995 after incurring over US$1 billion in losses.

Mr Mulani said the planned move to Catalist was aimed at increasing trading in Harry's shares as well as to help finance the company's planned expansion into India and the Middle East.

'We are pretty much done in Singapore. We can't expand anymore, except for the upcoming casinos,' he said, referring to the two large integrated resorts that are being built in the city-state.

'A lot of our shareholders have complained the OTC (over-the- counter) market is a bit illiquid,' he added.

Harry's achieved profit after tax of $1.46 million in the half year to June 2007 on sales of $12.36 million.

SGX launched Catalist, which is modelled after the London Stock Exchange's Alternative Investment Market (AIM) for smaller companies, in December.

Phillip's OTC board, which started at the end of 2006 as a low-cost platform for firms seeking to raise small amounts of money, currently has five companies.

Yanlord launches more flats in Shanghai project

YANLORD Land Group, a real estate developer, has launched another batch of apartments at its Shanghai Yanlord Riverside City Phase Two project.

Driven by the continued demand for high-end residential properties in the PRC, the latest batch of the pre-sold apartments commanded an average selling price (ASP) of about 34,500 yuan per square metre (S$6,805), up from about 24,300 yuan for a similar type of apartments sold in July 2007.

This represents an increase of roughly 42 per cent in terms of ASP, the company said.

'This increase in ASP outstrips the national average housing price increase of 10.2 per cent for November 2007 . . . and demonstrates the continued ability of Yanlord's developments to command price premiums mainly due to the high quality of its fully fitted developments.'

Yanlord chairman and chief executive officer Zhong Sheng Jian said the significant increase in average selling price also reflects the sustained demand growth for high-end residential properties in China.

With almost 100 units sold on the first two days of launch at an ASP of about 34,500 yuan, Yanlord said it expects sales of the project to contribute strongly to the group's future performance.

Yanlord was recently added to the revamped Straits Times Index, which started trading this week.

Lianhe Publishing sells CittaBella stake

MEDIA group Singapore Press Holdings (SPH) announced yesterday that Lianhe Publishing, a wholly owned subsidiary of SPH Magazines, has sold its entire 49 per cent stake in CittaBella Malaysia Sdn Bhd to Nanyang Press Sdn Bhd for RM650,000 (S$278,000). The consideration was arrived at on a willing buyer, willing seller basis.

The magazine Citta Bella Malaysia will continue to be published by CittaBella Malaysia under a licence agreement with SPH Magazines. The transaction, which was completed yesterday, has no material impact on the earnings and the net tangible assets per share of SPH for the financial year ending Aug 31, 2008.

Equation appoints new chairman, director

EQUATION Corp has appointed former ambassador Toh Hock Ghim as chairman and an independent non-executive director with effect from yesterday. Eddie Chng Weng Wah stepped down as chairman yesterday but remains as executive director and chief executive officer. The company said that it adopted the recommendation of the Code of Corporate Governance to separate the roles of chairman and CEO. Mr Toh was ambassador to Vietnam from January 1994 to January 2002 and consul-general to the Hong Kong & Macau SARs from February 2002 to December 2007. He was appointed as the senior adviser to the Ministry of Foreign Affairs upon his retirement from the foreign service at the end of 2007.