Singapore Corporate News - 17 Jan 2008

SGX plummets after analysts' downgrade

THE stock of Singapore Exchange (SGX) suffered a twin blow yesterday as the local market came under heavy selling pressure and after several analysts downgraded the counter.

Shares in SGX sank as much as 72 cents or 7.2 per cent to $9.28 before closing the day at $9.32 - down 68 cents or 6.8 per cent from Tuesday's $10 close, with 17.3 million shares changing hands for the day.

Both UOB-Kay Hian and Citigroup called a 'sell' on the stock, while OCBC Investment Research recommended a 'hold'. UOB-Kay Hian and Citi set price targets of $9.70 and $11.22, while OCBC Investment Research has a fair value of $11.20.

Morgan Stanley cut the target price for SGX to $10.50 from $15, keeping its 'equal weight', while Goldman Sachs revalued the stock at $15.30 - down from its previous target of $18.40.

Similarly, Credit Suisse cut its target price to $10.90, from $14.50 previously.

Taking a contrarian view is DBS Vickers, which upgraded SGX from a 'hold' to a 'buy'. It said: 'Compared with HKSE and Bursa Malaysia, SGX's valuations look attractive at this juncture.' Its target price is $13.20.

For the second quarter ended Dec 31, 2007, SGX reported a 43.9 per cent surge in net profit to $156.4 million, underpinned by strong revenue and receipt of a one-time distribution.

Q2 operating revenue jumped 63 per cent to $203.54 million.

In its report, UOB-Kay Hian said it has lowered assumed stockmarket turnover in FY09 and FY10 by 20 per cent and 13 per cent to $505 billion and $555 billion respectively due to weak conditions. Its analyst Leng Seng Choon also cut his earnings forecasts for SGX.

OCBC analyst Carmen Lee sees signs of weakness in the current quarter, saying: 'We have seen eight days of selling on the local bourse out of only 10 trading days, with the STI down 9 per cent so far this year. At this rate, this is likely to point to some slowdown ahead and may even spill over to SGX's Q4.'

Morgan Stanley said in a client note that slowing transaction volume and unlikely merger prospects mean more downside risk for SGX. 'The stock is still not cheap in the current market context. Downside risk remains should volume/ value (of trade) continue to decline,' said Morgan Stanley analyst Matthew Wilson.

Citi's Robert Kong kept his FY08 profit estimate of $486 million for SGX but said 'market turnover and sentiment will be key'.

Meanwhile, Bloomberg news agency reported that SGX expects Indian companies to account for some of its biggest share sales this year following a tie-up with the Bombay Stock Exchange (BSE).

SGX chief financial officer Seck Wai Kwong was quoted as saying the exchange expects to draw Indian companies with more than $1 billion in market capitalisation.

'Our strategy is to aim for the larger companies. India will be a significant source of listings,' he said.

The report said SGX needs to attract larger foreign companies to sustain its standing as South-east Asia's biggest bourse.

The exchange expects more than half of its publicly traded companies to come from overseas in 2012, from 36 per cent now, Mr Seck said.

SGX is collaborating with foreign bourses to increase revenue from overseas. For example, it bought 5 per cent of India's BSE last year and sold 4.99 per cent of itself to Tokyo Stock Exchange.

CapitaRetail China equity exercise completing soon

CAPITARETAIL China Trust (CRCT) is proceeding to complete a $280 million equity-raising exercise to fund the acquisition of Xizhimen Mall in Beijing by the end of this month.

CapitaRetail China Trust Management Ltd's (CRCTML) CEO Lim Beng Chee, who said this at the trust's fourth-quarter results briefing yesterday, also expressed confidence of getting legal title to Wangjing Mall - currently the trust's main income generator - by May. CRCT currently does not have legal title to this property, also in Beijing. Instead, it has only contractual rights to the asset.

The trust posted distributable income of $8.6 million for the fourth quarter ended Dec 31, 2007, 9.1 per cent higher than the CRCTML's forecast, despite net property income and gross revenue falling below forecast. CRCT's Q4 distribution per unit of 1.80 cents reflects an annualised payout of 7.15 cents, translating to 3.78 per cent distribution yield based on CRCT's closing price of $1.89 yesterday. The counter ended two cents lower yesterday. It reached an intra-day high of $3.34 in October last year.

Yields on real estate investment trusts like CRCT go up as their unit prices on the stock market fall, all other factors being equal.

Based on the trust's current price, the upcoming $336 million acquisition of Xizhimen Mall will still provide yield accretion, going by the asset's initial property yield of 5.7 per cent for the first year, Mr Lim added.

CRCTML obtained unitholders' approval for the equity-raising exercise on Dec 4 but has yet to launch it because of weak equity market conditions. Assuming CapitaLand and CapitaMall Trust each subscribe for the new units to maintain their current 20 per cent stake each in CRCT, the amount to be raised from external parties would be $168 million, which Mr Lim described as a 'very small equity raising' for which he expects good response based on the keen interest among investors on the China growth story during CRCTML's roadshow in November.

For Q4 ended Dec 31, CRCT posted net property income of $11.6 million, 13.6 per cent below the trust manager's forecast in the trust's listing prospectus dated Nov 29, 2006, on the back of gross revenue of $17.9 million, 11.2 per cent below forecast. This was due mainly to three of the trust's seven established malls - Qibao Mall, Xinwu Mall and Jinyu Mall.

The shortfalls were temporary in nature - for instance, delays in the start of certain leases on the upper floors in the case of Qibao Mall. Management has taken a longer-than-expected time to sign new leases to achieve a more optimal tenancy mix and rental rate. Revenue is expected to improve within three to six months, CRCT said in its results statement.

Despite lower-than-expected revenue and net property income, CRCT's Q4 distributable income still came in above forecast because of net interest saving, and over-provision of taxation in previous quarters.

For the year ended December 2007, CRCT posted distributable income of nearly $32 million, 9.5 per cent above forecast.

The trust's asset size will increase to $1.2 billion after the Xizhimen acquisition and the trust manager is confident of achieving the $3 billion target size by end-2009, thanks to the strong acquisition pipeline put in place sponsor CapitaLand.

First Ship Lease Trust's US$12.1m Q4 distribution beats IPO forecast

FIRST Ship Lease Trust (FSLT) is to distribute US$12.1 million to unit-holders for the fourth quarter ended Dec 31, 2007, 13.6 per cent better than the projection made during its initial public offering (IPO) in March last year.

The Q4 distribution represents 100 per cent of the amount available for distribution. Distribution per unit (DPU) is 2.42 US cents compared with a forecast 2.13, and works out to 9.68 cents on an annualised basis. The Q4 DPU is also 8.5 per cent higher than that for the preceding quarter.

Based on Jan 15's closing unit price of $1.20 and assuming a Singapore dollar/US dollar exchange rate of $1.431, this translates into a distribution yield of 11.5 per cent.

Revenue for the quarter came up to US$15.2 million, 31.4 per cent higher than the initial projection. The increase in DPU of 0.19 US cent over the preceding Q3 was made possible mainly by incremental cash flow resulting from the purchase and leaseback of two product tankers from Groda Shipping and Transportation in November.

'We are very pleased with our achievements for the fourth quarter where revenue continued to grow compared to the preceding quarter and was significantly higher than what we projected at IPO,' said Philip Clausius, chief executive of FSLT's trust-manager FSL Trust Management.

FSLT had an initial portfolio of 13 vessels at listing. This has expanded to 18 vessels as at Dec 31, 2007, comprising four containerships, nine product tankers, three chemical tankers and two dry bulk carriers.

The trust aims to continue pursuing acquisition opportunities as part of its growth strategy but FSLT's revenue base is still quite dependent on container ships and product tankers. It is, however, working to better diversify its portfolio, said chief financial officer Cheong Chee Tham.

It is on track to accomplish its IPO target of US$200 million asset acquisitions within 12 months of its listing date and has raised the target to US$300 million for financial year 2008. So far, US$158 million worth of vessels which are subject to long-term leases have been acquired.

FSLT's books closure date is Jan 24 and payout will be made on Feb 22. The trust closed two cents lower at $1.18 yesterday.

KepLand in tie-up with marina builder

KEPPEL Land International and high-end marina builder Bellingham Marine Industries yesterday signed a memorandum of understanding for Bellingham to design and construct premier marinas in Keppel Land's waterfront properties in the region.

Bellingham will provide KepLand with design, project management and construction expertise for marinas, when there is a potential for one to be included in one of its masterplan projects. KepLand chief executive Kevin Wong said: 'We are confident that Bellingham, with its proven track record in the design and construction of marinas, will enhance our overall masterplan for our developments at Keppel Bay as well as our other waterfront developments in Asia.'

The US-headquartered company with an annual turnover of over US$100 million has carried out several marina projects in countries around the world. Apart from the recently completed Marina at Keppel Bay, others include the 180-berth Portofino Yacht Club in Redondo Beach, California, and the 250-berth Marina CostaBaja in Mexico.

Bellingham president Everett Babbitt said: 'Keppel is a very honourable and outstanding company and our talents mesh very well because we bring a high degree of technical skills while they have all the contacts and infrastructure base throughout Asia.'

KepLand's marina project is Bellingham's biggest foray into the region, where it has been active for only the past three years.

Mr Babbitt said Bellingham enjoys a good reputation among the yachting and marina circles. The company organises forums for megayacht skippers and crews and is well known in the community. Mr Babbitt said these crews, who make many decisions on behalf of the owners about where to dock these expensive boats, tend to look out for Bellingham-designed marinas because they know they can expect a high standard.

Mr Babbitt said he hopes the partnership will lead to more success in the region and perhaps raise revenue share from Asia from about one per cent to 10 to 15 per cent in future.

BH Global wins sole distributorship

BH Global Marine has been appointed by global cables company Prysmian Group as its sole distributor in the Asia-Pacific region for its Prysmian range of marine cables products. BH Global Marine is also looking to expand its warehousing facilities to enhance its supply chain management capabilities and is exploring M&A opportunities to expand its regional presence across strategic markets in Asia, it said.

Asia Env inks China plant BTO pact

ASIA Environment Holdings has entered into a build-operate-transfer (BTO) concession agreement with Lishui County Government to build and operate a waste-water treatment plant in the Anqing Economic Development Zone, Anhui Province. The project involves the construction of a waste-water treatment plant with a capacity of 10,000 cubic metres a day. The plant is expected to be completed by end-2008.

Asia Power in share subscription deal

ASIA Power Corporation has entered into an agreement for a subsidiary of China EnerSave to subscribe for 40 million Asia Power shares at 33 cents each.