Singapore Corporate News - 5 Feb 2008

SIA investors in for generous H2 dividend?

CASH-RICH Singapore Airlines, which has just reported strong third-quarter earnings, could pay a generous second-half dividend despite headwinds in the coming year, analysts say.

Merrill Lynch, UBS Investment Research, Citigroup Global Markets Equity Research and Goldman Sachs reckon investors can look forward to a good full- year payout on account of the company's strong cash balance.

This comes after SIA posted net earnings of $590 million for the October-December 2007 quarter. This compared with $589 million a year earlier - but that result included a $198 million exceptional gain from the disposing of its stake in Singapore Aircraft Leasing Enterprise.

Earnings before interest and tax grew 51 per cent year-on-year to $675 million in the latest Q3, as top-line revenue grew 13 per cent to $4.3 billion. For the first nine months, net earnings came in at $1.52 billion, versus $1.46 billion a year earlier.

But Merrill Lynch drew attention to the airline group's strong balance sheet.

'The airline remains on track to reach our March 2008 net cash target of $3.4 billion,' say Merrill Lynch analysts Paul Drewberry and Ying Ying Hou. 'We think a second effort at securing a $1 billion stake in China Eastern is likely soon. However, should it fail, then we expect a special distribution in May of at least $1 billion ($0.85 per share). It is conceivable that SIA could do both.'

UBS's Damien Horth agrees. 'Year to date, SIA has seen operating cash flow increase 72 per cent to $3.3 billion, exceeding our full-year forecast,' he says. 'While capital expenditure is likely to increase in the final quarter, free cash flow YTD amounts to $1.9 billion. Our full-year 2008 forecasts call for just $1 billion of free cash flow. Despite the payment of $2.9 billion to shareholders this year, SIA is still holding cash of $4 billion (even with a global slowdown looming, we consider this a lazy balance sheet).'

Corrine Png of Citigroup notes that SIA's cash flow should also be boosted by rising dividends from subsidiaries Singapore Airport Terminal Services (SATS) and SIA Engineering Co (SIAEC).

'Post capital reduction, net cash was $2.5 billion (or $2.10 per share) as at December 2007,' she says. 'We expect SIA to be free cash flow positive for the next three years notwithstanding its capex programme. Cash flow should also be boosted by rising dividends from SATS and SIAEC. As such, there could be further capital management in the longer term, particularly if there are no/few acquisition targets.'

Analysts also point out that the operating environment for SIA and other airlines is getting tougher.

But Goldman Sachs says the latest results are a validation of SIA's strong franchise.

'While SIA is obviously not immune to pressure on passenger and cargo yields in 2008, we believe it remains the most defensive among regional peers,' analysts Mathew Chan and Tom Kim note.

The four houses have price targets ranging from $18 to $23.50 for the stock. Separately, local house DBS Vickers has a 12-month target price of $24, adjusted from $25 on account of lower target price for SIAEC and lower market value for SATS.

SIA stock closed at $16.26 yesterday.

SingTel gets record 197,000 new mobile subscribers in Q3

GIANT telco Singapore Telecommunications (SingTel) continues to hoover up mobile phone subscriptions as consumers indulge in their love affair with the handset.

For the quarter ended Dec 31, 2007, SingTel has scooped a record 197,000 new subscribers to bring its total to 2.33 million, meaning one in two people in Singapore is its customer.

The record quarterly increase of 197,000 prepaid and postpaid mobile subscribers beat the preceding quarter's high of 185,000 net additions, said SingTel in a statement yesterday.

Singapore's population stands at 4.68 million, comprising one million foreign workers and their families and 3.68 million Singaporeans and permanent residents. But the popularity of the mobile phone here has led to more handsets than people. According to the latest data from the Infocomm Development Authority of Singapore, total mobile subscriptions as at end-November 2007 stood at 5.432 million or a penetration rate of 116.1 per cent.

SingTel's market share as at end-November was 41.2 per cent, up from 40.3 per cent as at end-September, said a company spokeswoman. The company reports third-quarter and nine-month results ended Dec 31, 2007 today.

Smaller rivals StarHub and MobileOne (M1) have been struggling to keep their market share amid tough competition.

M1, which posted full-year 2007 results last month, said its customer base rose 14.8 per cent to 1.54 million but market share fell to 27.4 per cent at the end of November from 28.5 per cent a year ago.

StarHub will post fourth-quarter 2007 results on Feb 13, 2007. Elsewhere in the region, SingTel's associates too have been hitting records in garnering more mobile phone subscribers. Group combined mobile subscriber base in the region has reached 171.54 million as at Dec 31, 2007, up 53 per cent from Dec 31, 2006's 112.28 million.

The latest figure was boosted by the addition of Warid Telecom's 13.21 million subscribers in Pakistan in the quarter. SingTel bought 30 per cent of Warid in September 2007. SingTel has associates in Australia, Bangladesh, India, Indonesia, Pakistan, the Philippines and Thailand.

Recording the fastest growth pace was Indonesian associate Telkomsel. Its 3.43 million net addition was more than double the previous quarter's 1.65 million, bringing the total customer base to 47.89 million as at end-2007. SingTel has a 35 per cent stake in Telkomsel which is currently facing charges of price fixing and may be forced to reduce its tariffs. SingTel and parent Temasek Holdings are also fighting anti-competitive charges in the Indonesian courts.

Doing well too was Bharti which propelled past the 50 million mark. Bharti, India's largest regional mobile, broke its previous net addition records by attracting 6.29 million mobile subscribers in the quarter. As at Dec 31, 2007, Bharti - in which SingTel owns 30.45 per cent - has enlarged its subscriber base to 55.16 million mobile subscribers.

AIS, Globe Telecom, PBTL and Warid Telecom also posted healthy subscriber growth of between 4.4 per cent and 11.3 per cent during the quarter.

Optus, SingTel's Australian unit, saw its subscriber base pass the seven million mark at end-2007, up from 6.68 million a year ago.

Globe Telecom earnings surge 27%

GLOBE Telecom, SingTel's listed Philippine unit, sustained its robust earnings stream last year, posting another record profit despite stiff competition in the telecoms market.

Excluding non-recurring costs such as foreign exchange losses and the early payment of US$300 million debt notes, Globe's after-tax profit surged 27 per cent to 13.7 billion pesos (S$478.2 million) on the back of an 11 per cent rise in turnover to 63.2 billion pesos.

Analysts described the company's results as 'slightly well above expectations,' noting its aggressive marketing campaigns that yielded a new wave of high-paying subscribers.

'Innovations and creativity had paid off for Globe Telecom as it continues to build up its market base in all segments and gain a major foothold in the telecoms market,' an analyst said.

Globe Telecom officials said the year-end results reflected the company's 'strong and healthy' financial position amid what they called a 'consistently challenging and competitive market.'

Regular and special cash dividends paid out in 2007 amounted to 15.3 billion pesos, up 132 per cent from the 6.6 billion pesos in 2006. The dividends translated to 116 pesos per share, one of the highest among industries in the Philippines.

'We hope to sustain this growth into 2008 through continued focus on the needs of our subscribers and disciplined execution of our strategy blueprint,' Globe president and chief executive officer Gerardo Ablaza Jr said yesterday.

Globe, SingTel's tie-up with listed Philippine conglomerate Ayala Corp, is the country's second largest telco, next to dominant player Philippines Long Distance Telephone.

Mr Ablaza said that like in the previous years, 2007 was another milestone as the number of mobile phone subscribers jumped 30 per cent to 20.3 million, the first time it breached the 20 million mark. 'All of the company's brands performed strongly,' he said.

Globe has launched new products and services, including those that cater to millions of foreign exchange-earning Filipinos working in the Middle East, North America and Asia.

'These targeted offers, coupled with the strong growth in the Philippine economy, have enabled Globe's wireless business to post double-digit growth,' Mr Ablaza said.

Broadband business also did well for Globe last year with customer base rising by 133 per cent to 120,000 subscribers as a result of the company's capacity expansion.

Globe's capital expenditures last year amounted to 13.9 billion pesos, which is 22 per cent of its service revenues, to enhance mobile network quality and coverage.

This year, the company is allotting up to US$450 million for wired and wireless broadband technologies.

The amount includes investment in the TGN-Intra Asia Cable System, an international submarine cable project led by VSNL International of India, which will link the Philippines to Japan, Hong Kong, and Singapore with onward connectivity to the United States. Globe will be the exclusive landing party in the Philippines.

Globe was one of the most active stocks, closing 2.5 per cent up to 1,640 pesos on the Philippines Stock Exchange yesterday.

ASL Marine rides oil industry boom to post record figures

MARINE group ASL Marine has achieved record revenue and earnings at mid-stream.

For its first six months ended Dec 31, 2007, the group posted a 66.9 per cent year-on-year jump in net profit to $27.98 million as revenue rose 23.7 per cent to $193.4 million on the back of a buoyant oil and gas industry boom.

ASL saw strong growth in all its three business segments.

The shipbuilding segment continued to lead revenues in absolute terms at $117.3 million, with chartering coming in a distant second at $43.5 million, followed by ship repair at $32.6 million. In terms of percentage growth, shiprepair led with 52.9 per cent, followed by chartering (26 per cent) and shipbuilding (16.7 per cent).

The repair segment also shows its potential with the highest gross profit margin of 31.4 per cent. The increase in ship repair revenue was due to ASL being able to take on more repair and conversion jobs at its 150,000 deadweight tonne (dwt) graving dock and 20,000 dwt floating dock in Batam.

In the shipbuilding segment, ASL had an outstanding order book of $609 million, about a quarter of which will be recognised in the second half ending June 30. The group also has contracts for four vessels worth $51 million which is expected to be recognised after FY2008.

Managing director Ang Kok Tian was upbeat on the group's prospects in the year ahead. He cited the booming oil and gas market, rapid infrastructure development in the Middle East, increased domestic infrastructure construction and the International Maritime Organisation's 2010 single hull tanker phaseout as factors that will drive the industry. 'With these we can assume margins will remain stable going forward,' he said.

Mr Ang added that the group is being cautious about future newbuild contracts as the effects of the sub-prime woes hit some ship owners. Other concerns include the rising price of building materials like steel and shortage of supplies of critical components like engines.

The only drag was in the chartering market. Although revenue rose 26 per cent to $43.5 million, this was attributed mainly to a bigger fleet. Margins fell from 35.9 per cent to 30.9 per cent due to lower vessel utilisation as more vessels came under mandatory maintenance in the period.

ASL's earnings per share rose to 10.26 cents from 6.7 while net asset value was 67.05 at end-2007, up from 59.68 at mid-2007. No interim dividend was declared. ASL shares closed eight cents up at $1.25.

China Milk's Q3 profit rises 13.5%

CHINA Milk Products Group achieved a 13.5 per cent rise in net profit to 116.9 million yuan (S$23 million) for its third quarter ended Dec 31, 2007 - boosted by a shortage of raw milk in China.

Revenue rose 23.6 per cent to 140.7 million yuan from a year earlier as the group lifted production of bull semen, cow embryos and raw milk to meet rising demand. Earnings per share improved 14.3 per cent to 16 fen.

The sale of pedigree bull semen remained China Milk's biggest business, representing 68.4 per cent of total revenue. Sales of bull semen grew 7.8 per cent to 96.3 million yuan.

Sales of cow embryos and raw milk also grew. Sales of pedigree dairy cow embryos rose 88.6 per cent to 16.5 million yuan, accounting for 11.7 per cent of total revenue, while sales of raw milk rose 76.2 per cent to 28 million yuan, accounting for 19.9 per cent of total revenue.

China Milk produced 1.36 million straws of pedigree bull semen, 8,667 pedigree dairy cow embryos and 10,487 tonnes of raw milk in Q3.

'The overall improvement across all three product segments can be attributed to the group's expanded herd size and improved productivity,' it said. At Dec 31, 2007, China Milk's herd size was 17,237, comprising pedigree bull sires, young sires and dairy cows. In January 2008 it took delivery of 2,000 Australian Holsteins, raising its year-to-date herd size to more than 19,000.

The dairy industry in China is growing vigorously, particularly the raw milk market where prices have been on the uptrend as consumers demand healthier, more nutritious food and drinks. China Milk says it expects continued strong demand, especially bull semen and cow embryos, as farmers focus on cattle genetics improvement to raise milk yield.

The group aims to grow by boosting its herd size and productivity. Besides internal breeding, it plans to import a further 3,000 Australian Holsteins around June this year. It also aims to commercialise its gender-controlled bull semen and cow embryos.

Besides organic growth, China Milk has identified several Chinese husbandry players as acquisition targets. It is currently in talks to buy a government-owned bull semen producer in Heilongjiang Province.

Goodpack in deals with China firms

(SHANGHAI) Singapore's Goodpack Ltd will provide packaging to Sinopec and Sinochem for their imports of synthetic rubber and natural rubber, Goodpack said.

By teaming up with Sinopec, China's largest refiner, and Sinochem, a major state-owned trader and producer of oil and petroleum products, Goodpack hopes to tap into China's booming demand for rubber.

China, which buys more than 70 per cent of its rubber from overseas, has seen imports nearly double since 2000. In 2007, China imported 1.6 million tonnes of natural rubber, up 2.2 per cent from 2006. Its imports of synthetic rubber in 2007 jumped almost 9 per cent to 1.4 million tonnes.

Biosensors cuts Q3 net loss to US$7.8m

BIOSENSORS International has narrowed its net loss for the third quarter ended Dec 31, 2007, by 25 per cent to US$7.8 million, from the previous corresponding quarter's US$10.4 million. Revenue rose 5 per cent to US$8.75 million.

Radiance Electronics posts $13.7m half-year loss

RADIANCE Electronics went into the red with a net loss of $13.7 million for the half-year ended Dec 31, 2007, from a net profit of $2.2 million for the previous corresponding period. Revenue dropped 22.1 per cent to $59.4 million from $76.3 million. Other operating expenses ballooned to $10.8 million in the half-year, from just $657,000 one year ago. This was attributed to the impairment of plant and equipment, allowance for trade receivables and the write-off of goodwill on consolidation in the wholly-owned subsidiary Xiptech Holdings, which amounted to $9.2 million.

Longcheer half-year net up 1% to 114.4m yuan

CHINA-BASED mobile handset designer Longcheer Holdings yesterday announced a one per cent rise in net profit to 114.4 million yuan (S$22.6 million) for the half-year ended Dec 31, 2007, from 113.5 million yuan for the previous corresponding period. This came on the back of a 50 per cent rise in revenue to 1.74 billion yuan. The small rise in net profit was attributed to higher operating expenses, brought about by the increase in sales and higher research and development investment.

K1 posts $25.9m Q2 earnings

K1 Ventures has announced a net profit attributable to shareholders of $25.9 million for the second quarter ended Dec 31, 2007. This compares with a net loss of $2.2 million for the previous corresponding three months.Q2 revenue was $131 million.