Singapore Corporate News - 9 Jan 2008

Woh Hup wins $1b Keppel Land contract

WOH Hup has been awarded the $1 billion main contract for Keppel Land's Reflections at Keppel Bay. The 1,129-unit development will take about five years to build and is expected to be completed by 2013.

On the challenges facing the construction industry in the next few years, Woh Hup vice-chairman Yong Tiam Yoon said: 'We are lucky because we lined up our sub-contractors at the tender stage. We have been around a long time and have the support of sub-contractors and suppliers.'

The $1 billion main contract covers all major construction works including, piling, structural, mechanical and electrical, and architectural. It is Woh Hup's biggest-ever contract - but Mr Yong said the company, which is also working on the MRT Circle Line, has no problem with projects of this size.

Estimating that Reflections will require about 10,000 cubic metres of structural concrete per month, he said Woh Hup is already handling projects of close to this magnitude.

The first phase of Reflections, comprising 620 waterfront homes, has been sold out and the second phase is expected to be launched this year.

On the expected date of completion, a Keppel Land spokesman said that while the target is 2013 he expects the development will be completed sooner. The time-frame of construction is not long considering the size of the development, which has a gross floor area of 2.1 million sq ft and a site area of 8.4 hectares, he said.

Advance SCT in $11m buyout of M'sian unit

COPPER recycling group Advance SCT is proposing to pay $11 million to acquire the remaining 20 per cent stake it does not own in Malaysian copper smelter TTM Industries from Tembusu Growth Fund.

TTM Industries owns a 60,000-tonne copper smelter in Port Klang. The first of the smelter's two furnaces began operating in the second quarter of last year while the second one started up in the fourth quarter.

Advance said that the $11.05 million price for the 20 per cent stake represents a price earnings ratio of about 4.6 times TTM Industries' FY2007 unaudited net profit.

'With the commencement of production from the second furnace in the fourth quarter, the higher output of copper coils in the second half of 2007 has resulted in a corresponding increase in profit contribution,' said Advance chief executive Terence Tea. 'The total capacity of 60,000 tonnes will be available in 2008, at a time when we will have full ownership of the copper smelter.'

This would contribute positively to the earnings growth of the group, he added. The acquisition will be funded by issuing 11.9 million new shares in Advance at 93 cents each. The company said that it would hold a shareholders meeting at a later date to seek approval for the deal.

Its share price ended half a cent higher at 93.5 cents yesterday.

Separately, Advance also announced yesterday that it is buying Singapore-based freight and logistics management company Ever Glory Logistics (EGL) for $1.5 million. Of this, $600,000 will be in cash, while the rest will be paid through the issue of some 928,000 new shares in Advance at 97 cents each.

As a condition of the agreement, EGL's current owners have given an undertaking that net tangible assets as at end-2007 are worth at least $1 million and its full-year profit for 2007 would be at least $200,000.

Advance said that it was expanding its copper supply chain management business in the region and it believes that the acquisition of EGL would improve its logistics infrastructure, shortening the turnaround time for importing raw materials and exporting refined copper products.

SNF moving into the healthcare business

SNF Corporation - the subject of a recent boardroom tussle - is now looking to re-invent itself as a healthcare business in a deal worth $525 million.

The electronics distributor has proposed a reverse takeover deal which will see the business of Healthway Medical Services Pte Ltd (HMS) being injected into the listed entity.

It intends to buy the entire issued and paid-up capital of HMS from Universal Healthway Pte Ltd for $525 million - and pay for it by issuing 2.6 billion shares - after a two-into-one share consolidation - at $0.20 each.

SNF Corp shares last traded at $0.155.

The company said the purchase price for HMS was determined based on a valuation of 25 times the estimated proforma net profit before tax of $21 million for HMS and its subsidiaries, for the financial year ended Dec 31, 2007.

It said the price was arrived at after arm's length negotiations between itself and Universal Healthway, agreed upon on a willing buyer-willing seller basis.

The price is subject to subsequent adjustments, depending on the results of the financial due diligence to be carried out by SNF Corp.

The deal is conditional upon, among other things, the approval of directors, shareholders and regulatory authorities being obtained.

Universal Healthway will have the option and the sole discretion to consider allowing SNF Corp to keep its existing business - following a report by public accounting firm Baker Tilly on the viability of SNF Corp's business and undertakings.

SNF Corp explained yesterday that it is venturing into a new business because it recognises that the business environment in the electronics and plastics industries remains challenging and that any growth may be limited.

The SNF Group incurred losses in FY2006 and for the quarter ended Sept 30, 2007.

It believes the Singapore healthcare industry will see impressive growth.

'The medical industry in Singapore and the region is growing,' said SNF Corp's chief executive, Low Shiong Jin.

'The proposed agreement, if completed, represents a good opportunity for the shareholders of SNF to tap into this regional growth industry. Healthway has over 15 years of experience in the business and is an established brand name. We are also looking to bring the Healthway name beyond Singapore shores to create even greater returns for our shareholders.'

The HMS Group is one of the largest private outpatient medical service providers in Singapore. It has over 80 fully owned medical clinics offering primary healthcare, dental services, and specialist medical services.

In November, SNF Corp's entire board, led by chairman John Chen, was ousted by shareholders at an extraordinary general meeting.

Shareholders voted in a new board, led by Mr Low - who is also the executive director of Ariel Singapore.

Pacific Internet, Asia Netcom merge; joint entity Pacnet eyes US listing

PACIFIC Internet and Hong Kong-based Asia Netcom yesterday announced their operational merger in Hong Kong.

A strategic plan, which includes a possible listing, was also unveiled for the joint entity, which will be called Pacnet.

The integration of the two companies into Pacnet creates Asia's leading independent telecommunications service provider with the largest regional footprint and the region's most extensive sub-sea cable infrastructure.

Pacnet's CEO Bill Barney said the new company will go to market with a new brand.

'The next decade is all about Asia, and Pacnet is poised to be a unique 'pure play' provider focused on delivering solid communication solutions within Asia and into the region from anywhere in the world.'

A Bloomberg report quoted Mr Barney as saying that Pacnet has plans to raise between US$500 million and US$800 million from an initial share sale.

Pacnet is seeking a listing in the United States in the fourth quarter, Mr Barney said in Hong Kong yesterday.

The Bloomberg report also quoted Mr Barney as saying that Pacnet may boost the combined revenue of Asia Netcom and Pacific Internet by about 20 per cent to US$500 million this year, on rising demand from carriers and corporate customers.

The key asset behind Pacnet's growth is its EAC-C2C cable infrastructure, a 36,800km submarine cable network that can carry up to 10.24 Tbps (terabits per second) of capacity, of which only 240 Gbps (gigabits per second) is currently used.

According to analysts, the EAC-C2C network has an estimated replacement value of US$4 billion - based on the cost of building a similar infrastructure. However, at current market rates, the analysts have assessed the true value of the EAC-C2C network at close to US$10.3 billion.

As part of the company's strategic plans to meet the recent surge of bandwidth demand in Asia, Pacnet has already embarked on its Next Generation Network (NGN) upgrades which will increase network efficiency and reliability and put the EAC-C2C cable network one step ahead of other cable systems available today, the Pacnet CEO added.

'We've never been in a better position in the market and 2008 will be an extremely exciting year for Pacnet,' said Mr Barney.

Jiutian shares dive on fear of weak Q4 earnings

SHARES of Jiutian Chemical came under selling pressure yesterday amid market talk of weak fourth- quarter earnings. But analysts stay upbeat on the stock.

The China-based manufacturer of fine chemicals saw its stock slip below 40 cents for the first time since August.

The stock dived six cents or 14.3 per cent to 36 cents at one point before closing trading at 37 cents, a drop of five cents or 11.9 per cent.

Trading was heavy, with 52.16 million shares changing hands.

Its substantial shareholder Legg Mason Inc, which at end-October raised its deemed stake to 8.09 per cent from 7.83 per cent, pared its holding last Friday to 7.23 per cent.

The management declined to comment on the earnings speculation when contacted by BT, but analysts said rumours making the rounds included a weak fourth quarter ended Dec 31, 2007, due to continued pricing pressures on one of its key products - dimethylformamide (DMF).

A Dow Jones MarketTalk report yesterday had it that there were concerns on whether there will be continued strong demand for DMF because of a weaker export market in China that might affect its competitors, leading to an oversupply in China.

Jiutian's margins were squeezed by pricing weakness in its DMF products in 2007's third quarter, with average selling price down 10 per cent from a year ago and 5 per cent from a quarter before to 5,880 yuan (S$1,158).

Its Q3 2007 revenue shed 11.6 per cent from a year ago to 55.97 million yuan and net profit slid 25.7 per cent to 14.33 million yuan.

The company's new 120,000-tonne facility at Anyang City in China that produces DMF and methylamine came on stream in the third quarter last year.

'I think it is a matter of the market taking time to digest the onslaught of capacity and only after this will we see firmer selling prices for Jiutian products,' said a local analyst with a brokerage headquartered in Hong Kong.

'But we believe demand still outstrips supply in China,' he added. 'I would believe by the first quarter or into the second quarter, this new capacity would have been absorbed by the market.'

UOB-Kay Hian analyst Allen Jiao told BT that there was also market talk on a new and larger Chinese DMF manufacturer to be listed in Singapore.

'The management has already denied the credibility of these rumours,' Mr Jiao said. But the company did not provide further details on its financial results for the full year ended Dec 31, as it is scheduled to be announced next month.

Mr Jiao said he expects the fourth quarter to be firmer than the third quarter, led by a likely recovery in selling prices in the fourth quarter.

He noted that third- quarter weakness was caused by a cutback in production by China's sole producer of methylene diphenyl diisocyanate (MDI), Yantai Wanhua. MDI is used together with DMF to produce polyurethane (PU).

As a result, the supply of MDI fell short of that for DMF, which caused an oversupply of DMF. But the production of MDI had since recovered in the fourth quarter.

'We don't see sharp changes in the company's fundamentals and its plans for capacity expansion are (on track),' Mr Jiao said. 'With the commencement of its new DMF projects in Q407 and additional methanol production in Q308, I think the company will grow steadily. But we will keep an eye on its fourth- quarter results.'

UOB-Kay Hian is maintaining its 'buy' call on Jiutian with a target price of 60.6 cents. DBS Vickers also has a 'buy' call with 76 cents target while CIMB-GK has an 'outperform' rating on the stock with 77 cents target.

Ascott shares surge on news of offer

NEWS of CapitaLand's offer to buy out minority owners of its subsidiary Ascott Group sent Ascott's shares surging yesterday, as CapitaLand's stock price dropped.

CapitaLand shares shed 33 cents or 5.3 per cent to close at $5.92 on news that the property giant could pay up to $989.5 million to acquire all remaining shares in Ascott. CapitaLand now owns 66.5 per cent of the company.

By contrast, Ascott's shares gained 50 cents or 41.3 per cent to close at $1.71 yesterday. CapitaLand is offering $1.73 for each Ascott share.

Ascott's shares rose because the offer is attractive to the company's minority shareholders, analysts said. But CapitaLand's shares took a beating because there is uncertainty over whether the deal is equally positive for CapitaLand.

'We believe the deal looks very positive for Ascott shareholders,' said Credit Suisse analysts Tricia Song and Teo Leng Chye. 'For CapitaLand, it is slightly dilutive for pro forma earnings.'

Analysts were also split on whether the CapitaLand's offer is on the pricey side. At least some think that the offer does not look cheap.

CapitaLand's offer of $1.73 per share is 43 per cent higher than the last-traded price of Ascott's stock before the offer was made and represents a premium of about 145 per cent to Ascott's unaudited net asset value per share at Sept 30, 2007.

Other analysts, however, reckoned that CapitaLand's offer is 'fair'.

'We believe the offer price of $1.73 share is reasonable and falls within the lower band of the fair value range for Ascott Group of $1.72-$2.29 a share,' UBS Investment Research said in a note.

The deal is likely to be positive for CapitaLand in the longer term, some analysts said.

'We view the move positively from a strategic standpoint,' said Deutsche Bank analysts Gregory Lui and Elaine Khoo.

The privatisation of Ascott will allow CapitaLand to expand its service residence business more aggressively and is in line with its long-term plan to grow its fund management business in the long run, some analysts said.


Enhancements to streetTRACKS fund

STATE Street Global Advisors Singapore has announced enhancements to its streetTRACKS Straits Times Index Fund, including a 10-for-1 stock split from Jan 10. The split will increase the board lot size from 100 to 1,000 units. Also, the creation and redemption unit size will be reduced by half to 500,000 units. Total assets of the fund, which seeks to track the performance of the Straits Times Index, were $793 million at Dec 31, 2007.

Macquarie Pacific Star buyback plan okayed

UNITHOLDERS of Macquarie Pacific Star, the manager of MMP Reit, approved a buyback scheme at an extraordinary general meeting yesterday. The scheme allows Macquarie Pacific Star to buy back up to 10 per cent of units in issue at any time within the mandate period. Separately, a $2 billion multi-currency Medium Term Note programme has been established for MMP Reit to tap wider sources of debt funding.