Singapore Corporate News - 22 Jan 2008

Bright Orient to buy bulk carrier, port business

BRIGHT Orient Holdings is to give up its clothing manufacturing operation after buying a bulk carrier and port operation business in a reverse takeover deal worth some $160.5 million.

Yesterday, Bright Orient said that it entered into a conditional agreement to acquire the entire issued and paid-up capital of Golden Oriental Pte Ltd.

It will pay the vendors by issuing some two billion new Bright Orient shares.

Bright Orient said that the purchase consideration was determined at arm's length and on a willing-buyer-willing-seller basis.

Eighty per cent of the escrowed shareholders' stake will be issued to vendors Guo Ze Ming, Chang Poh Nee, Sarah Sim Kim Lian and Wan Teck Guan when the acquisition is completed.

The remaining 20 per cent will be released if the enlarged group achieves a net profit of at least $18 million for the year ending March 2009.

Upon the completion of the deal, Bright Orient will issue 60.7 million facilitator shares to Pacific Ten Holdings and 39.7 million facilitator shares to Joy Wing Enterprises for helping in the acquisition, it said.

An adjustment will be made to the number of shares issued if Golden Oriental reports a net profit of less than $12 million for the year ending March 2008.

As part of the deal, Bright Orient will also dispose of its existing business.

In the statement, the firm said that it has been facing difficulties since 2006, mainly due to the increase in the prices of raw materials and energy, labour shortage, shortages in electric power, the increase in the value of yuan, the reduction in the export refund rate and the increase in corporate tax rate.

Therefore, Bright Orient believes that the proposed disposal and acquisition will offer an opportunity to exit from the existing business at a reasonable price.

It also provides an opportunity for the firm to acquire an expanding feeder port business in the rapidly growing domestic container port industry in the Pearl River Delta, China and a chance to buy a profitable bulk carrier vessel owning and leasing business with a credible operating track record.

For the half-year ended June 30, 2007, Bright Orient reported a 46.5 per cent plunge in net profit attributable to shareholders to 1.25 million yuan (S$247,75), even though sales rose 14.4 per cent to 222.4 million yuan.

Investors shrug off Jade-E3 China deal

TWO relatively small listed companies have announced joint big-money projects in China.

The news could have brought relief to some investors as both firms have suffered losses in recent years and are trading far below historical highs.

The market yesterday reacted instead by sending the share price of one of the two, Jade Technologies Holdings, down 25.6 per cent, or 5.5 cents, to close at 16 cents.

The other, E3 Holdings (formerly ei-Nets), traded flat at about six cents through most of the day before closing at 5.5 cents, down 8.3 per cent. Both counters, listed on Catalist, were in the top 20 by trading volume yesterday.

Investors apparently had doubts about the venture. Not helping was that the news came amid a broad stock market retreat.

The deal came in two parts: A 49 per cent stake in a small oil refinery - 34 per cent for Jade and 15 per cent for E3 - with payment of 95.2 million yuan (S$19 million) in cash and assumption of about 145.8 million yuan of debt; and the purchase of a nearby 3 sq km plot of land, on part of which Jade will build a new, much larger refinery. E3 will develop the rest for downstream petrochemical industries.

The deals are subject, among other things, to due diligence and the availability of finance.

The initial cost of the land was just 60 million yuan, but according to the companies' calculations, total development costs could hit 20 billion yuan.

The combined market cap of both Jade and E3 is roughly S$275 million, and both registered net losses after tax in their last financial year.

The companies said that they are searching for partners and investors to undertake the development of the new oil refinery and the rest of the plot of land.

As well, BT understands that representatives of banks in China came to Singapore to iron out financing details.

Major oil refineries in China are deep in the red as record crude prices hurt refining margins, even while the government controls fuel prices to rein in soaring inflation.

Sinopec, the country's largest refiner, posted a 2006 refining loss of 23.9 billion yuan, three times its 7.84 billion yuan loss from refining for 2005. It is likely to have made refining losses last year as well, according to reports.

The company received more than 14 billion yuan in state subsidies in 2005 and 2006, and Beijing is expected to give it US$2.75 to US$4.12 billion in subsidies for 2007, according to reports.

The vendor of the refinery is to receive by Jan 28 a loan of 30 million yuan from both companies, which BT understands will be offset against the purchase price once the deal is closed.

The refinery is running below capacity as curbs are placed on feedstock, possibly to preserve output from the dwindling Daqing oilfield located about 100km away.

Jade's group president Anthony Soh said that with the firm's contacts with Russian oil suppliers, the refinery would be able to run profitably and at full capacity.

According to analysts, returns from refining in China will likely improve as the Beijing government is expected to raise domestic fuel prices further, after a 10 per cent nationwide hike last November.

Marco Polo in transshipment services JV with Glencore unit

INTEGRATED shipping group Marco Polo Marine yesterday signed a binding letter of intent to enter into a strategic partnership with Glencore International's Singapore-incorporated unit ST Shipping and Transport to jointly own and operate a fleet of transshipment tugboats and barges.

The soon-to-be-incorporated 50:50 joint venture will provide transshipment services primarily for cargo managed and carried by Glencore International and its related corporations and affiliates. Glencore is one of the world's largest suppliers of a wide range of commodities and raw materials to industrial consumers.

Under the terms of the agreement, Marco Polo will procure the building and supply of an initial fleet of 16 vessels - eight tugboats and eight barges - for the joint venture at an intended aggregate contract value of about $34 million.

'Marco Polo is indeed honoured to partner ST Shipping for this strategic alliance,' said Marco Polo chief executive Sean Lee. 'The collaboration will bring together the experience of Marco Polo in the field of transshipment services with ST Shipping's expertise in the commercial management of the commodity to be transported.'

Marco Polo's participation in the joint venture is expected to have a positive financial impact on the net tangible assets and earnings per share of the group for the financial year ending Sept 30, 2008.

'Glencore has had a successful commercial relationship with Marco Polo as a result of the company's highly efficient services,' said ST Shipping director Angus Paul. 'We are pleased to formalise relations with Marco Polo, given the prevailing conditions in the transshipment and commodity markets.'

Marco Polo is mainly involved in providing chartering, rechartering and transshipment services of tugboats and barges to its customers and end-users from the mining, commodity, trading, shipping, construction, infrastructure, property development and land reclamation industries as well as in the shipyard business.

Glencore has purchase contracts with the major coal and coke producers in Australia, South America, Indonesia, South Africa and Russia, and supplies the world's power utilities, steel mills, cement producers and chemical plants.

Rates for the transport of commodities have risen sharply in recent months with the Baltic Dry Index off a record high set last November but still at its highest levels in several years.

Chip Eng Seng wins $188m HDB contract

CHIP Eng Seng Corporation has been awarded a contract worth $188 million by the Housing & Development Board for the construction of 1,394 dwelling units in Queenstown.

The contract, won through wholly-owned subsidiary Chip Eng Seng Contractors (1988) Pte Ltd, also includes the construction of a multi-storey carpark, link bridges, a roof garden, an education centre and other facilities.

Building works are expected to begin next month and to be completed by 2011. This is Chip Eng Seng's first construction contract won this year.

With construction demand on the rise, Chip Eng Seng said it expects its construction division to be busy with tenders and construction work this year.

'After many lacklustre years, an upturn in the construction industry is in view. We are very positive about our prospects for 2008,' said Lim Tiam Seng, executive chairman of the group.

As at June 2007, Chip Eng Seng had a construction order book of about $590 million that will take the group through to 2011. The company is undertaking two other HDB housing projects. One is in Sembawang and the other is the Pinnacle @ Duxton, which features seven 50-storey residential blocks with skybridges, and communal and commercial facilities.

When completed, Pinnacle @ Duxton will be the tallest public housing in Singapore.

Chip Eng Seng, which is into property as well as construction, has undertaken a broad spectrum of construction projects in both the private and public sectors. It has also been actively acquiring and developing properties in Singapore, spanning residential, commercial and industrial properties.

Raffles Education to list part of China ops

RAFFLES Education Corporation intends to seek a Hong Kong mainboard listing for part of the group's China operations.

It did not indicate the amount it plans to raise but Reuters, quoting sources, said it could be up to US$700 million, and that the listing may take place in the middle of the year.

The education provider said in its announcement yesterday that a listing would allow its China operations to focus on growth there. It also believes that such a move would unlock the value of its investments in the China operations.

Raffles Education, which has engaged UBS AG for the planned flotation, said the proposed listing is still at a preliminary stage and is subject to approval by shareholders and regulators.

Analysts told BT that the move makes sense and would be beneficial for the group, but added that it is still too early to tell what assets will be listed.

'It's a good move for the company,' said an analyst. 'China accounts for a large part of the group's revenue, about 60 per cent as of June last year, so it would make sense.'

'Hong Kong commands a higher valuation, and this would help unlock growth drivers,' the analyst added.

The only caveat now is how the market will move, he noted. 'The timing is not really appropriate,' he said, referring to the sharp declines in regional bourses in the past weeks.

Amid a broad-market retreat yesterday, Raffles Education's share price closed five cents, or 1.8 per cent, down at $2.69.

Raffles Education, which runs 29 colleges in the Asia-Pacific region with total enrolment of some 44,000 students, is one of the largest publicly listed education companies in Asia. Earlier this month, it proposed a one-to-two stock split.

In an earlier statement, Raffles Education said: 'The sub-division will increase the affordability, accessibility and liquidity of the shares of the company available for trading on the main board of the Singapore Exchange.' The company has almost 1.14 billion shares in issue. The split, which will double the number to 2.28 billion, is subject to the approval of the shareholders and the Singapore Exchange.

In November last year, Raffles Education posted a 57 per cent rise in first-quarter net profit to $14.7 million for the period ended Sept 30. The result was on a 45 per cent rise in revenue to $39.1 million. The company also said it would carry out $200 million a year of acquisition deals in China, India and Vietnam for the next three years.

Wee Hur offers 83.65m IPO shares at 25 cents each

FOCUS, focus, focus. That's the mantra of Wee Hur Holdings, which managed to ride out the downturn in the construction industry a few years ago without having to resort to lay-offs.

Riding on the current construction boom, the building contractor is now seeking a mainboard listing, launching yesterday an initial public offering (IPO) of about 83.65 million shares at 25 cents each. The shares comprise about 78.91 million new shares and 4.74 vendor shares.

Speaking to BT before the IPO launch, Wee Hur's executive chairman and managing director Goh Yeow Lian said: 'Our philosophy worked well during the good and bad times.'

Explaining his company's motto, 'Prudence in our ways, Excellence is our aim', Mr Goh said the company is prudent in selecting its clients and takes on a wide spectrum of projects to avoid being dependent on any sector for its revenue.

'We work on a few projects at a time. We don't want to put all the eggs in one basket,' he said.

The company also views continual improvement as the key to achieving excellence.

Wee Hur said it has earned its reputation as a reliable contractor offering quality work by holding firm to its beliefs.

Even during the slump in the construction industry, Wee Hur was always in the list of preferred contractors and remained profitable, Mr Goh said.

'Last year, we secured all our jobs through invited tenders where the pool of contenders is relatively small.'

'In view of the current construction boom, and with our proven track record, our strengths and our committed management team, I believe the (IPO) take-up will be good,' said Mr Goh.

Wee Hur's main growth strategies are to undertake larger-scale and fast-track projects and to enhance its business profile.

The estimated $17.8 million net proceeds of the mainboard issue will be used to fund projects.

Wee Hur, which means 'noble cooperation' in Chinese, is managed by four brothers, including Mr Goh, and two brothers-in-law.

As testimony to its good track record and efficiency, Wee Hur said it was appointed by the health ministry for two fast-track projects during the Sars crisis.

Mr Goh sees construction as the main growth area for the company, and has no immediate plans for expansion.

'In the next few years, we will still concentrate on construction,' he said. 'We will leverage on our competency in this area and focus our resources on construction.'

For the last three financial years, Wee Hur's revenue grew from $48.1 million in FY2004 to $80.6 million in FY2006, with net profit rising from $1.7 million to $2.8 million.

The IPO, which is jointly lead-managed by SBI E2-Capital Asia Securities and Philip Securities, closes on Jan 28. The shares are expected to begin trading on Jan 30.

Man Wah MD raises stake in company

MAN Wah Holdings' managing director Wong Man Li has bought 921,000 shares in the company, raising his direct and deemed stake in Man Wah from 62.07 per cent to 62.34 per cent.

Sky China mulls rights to Songliao oilfield

SKY China Petroleum Services said that it is considering a proposal to take up exclusive development and operating rights to an oilfield located in the petroleum-rich Songliao Basin, China. The oilfield is expected to be developed in three phases, and Sky China estimates that the initial investment in Phase 1 will cost about US$30 million.

Sinobest issues loss warning

SINOBEST Technology Holdings has warned of an unaudited consolidated loss for the year ended Dec 31, 2007, due mainly to a fall in sales and gross profit amid continuing fierce competition.

Mapletree signs option for warehouse

MAPLETREE Logistics Trust has signed a put and call option agreement to acquire a warehouse in Singapore for $40 million. The firm also terminated the purchase of a property at 21 Tai Seng Drive.