Singapore Corporate News - 14 Feb 2008

Rotary Engg JV bags US$62m Saudi contract

ROTARY Engineering is starting to penetrate the highly competitive Middle East market. Through its Saudi joint venture Petrol Steel, Rotary has just secured a US$62 million deal with Saudi Kayan Petrochemical Company to build 24 storage tanks for its Al-Jubail complex in Saudi Arabia.

At the same time, mainboard-listed Rotary said that it is increasing its stake in the Petrol Steel JV to 51 per cent, following a move to boost the capitalisation of the JV company from five million Saudi riyals to 20 million riyals (S$7.5 million).

The contract involves the engineering, supply, fabrication, construction, testing and pre-commissioning of the storage tanks. Work is scheduled to start soon with the project expected to be completed by the year-end.

The US$2 billion-plus Saudi Kayan petrochemical complex comprises a two million tonnes per year ethane/butane cracker. This is the Rotary JV's first significant contract.

Last year, it clinched a S$11 million engineering, procurement and construction (RPC) support deal from SHARQ Eastern Petrochemical Company for its plant expansion at Jubail Industrial City.

Rotary chairman and managing director Chia Kim Piow said: 'Our venture into the Middle East has been a gradual but heartening process. We are constantly scaling the learning curve and there is indeed much to learn as we enter into a relatively new market.

'It is indeed gratifying that our joint venture partner recognises our lead role in the execution of projects and is thus prepared for us to take a majority stake in this venture,' he said, adding that this reflects its confidence in Rotary's expertise and experience.

'We are confident that this will turn out to be a winning move as it strengthens our toehold in this market. There are many opportunities in the Middle East and we see tremendous potential there. The environment is competitive, but it spurs us to work even harder to secure more deals,' Mr Chia said.

Rotary's foray into the Gulf began in 2006. Last year it invested S$22 million to set up a fabrication and maintenance facility - currently under construction - in Jubail Industrial City. This is expected to be ready by the second quarter of this year.

Courage Marine expects freight rates to climb

SHIPPING company Courage Marine Group expects rising demand for coal, iron ore and other commodities and possible delays in vessel deliveries by new Chinese shipyards will drive up freight rates.

'I'm generally quite optimistic about the dry bulk shipping market very simply because I look at all the commodity prices,' Hsu Chih-Chien, Courage Marine chairman, said yesterday from Taipei in an interview with Bloomberg Television.

'If commodity prices are high, that means demand is high, and you have to move all these commodities on dry-bulk carriers.'

Courage Marine has benefited from the coal shortage in China, where the worst snowstorms in 50 years disrupted transport and caused a shortage of the fuel. The owner and operator of eight dry-bulk carriers on Feb 11 said it has been awarded an emergency contract to transport coal from Indonesia to China.

Bottlenecks, especially at coal- loading terminals, will persist as China's demand for the fuel rises, driving up rates, Mr Hsu said. North Asian countries like Japan and South Korea, which have relied on coal from China, have had to source the fuel elsewhere, he said.

'Most of the coal is produced from northern China, and a lot of the demand is in southern China,' Mr Hsu said. 'Southern China is importing a lot of coal from Vietnam, Indonesia and Australia. A by-product of this demand, especially in the past couple of weeks, is that Korea and Japan have had to go farther away to source from Indonesia and Australia.'

Contract iron ore prices may rise by between 25 per cent and 50 per cent this year, Mr Hsu said. Iron ore is the biggest seaborne commodity.

Cia Vale do Rio Doce, Rio Tinto Group and BHP Billiton, which account for three quarters of the global iron-ore trade, in November began talks to set benchmark contract prices for 2008 with Chinese steelmakers. Contract prices, which are valid for 12 months, have tripled to a record in five years because of rising Chinese demand. China is the world's biggest buyer of the material, which is used in steelmaking.

Possible delays in the delivery of new bulk ships by start-up shipyards, mostly located in China, and potential difficulties in raising funds for new vessels in the wake of the US sub-prime mortgage crisis, may reverse a freight rate decline, Mr Hsu said.

'A lot of the orders are placed in brand new shipyards that have not delivered a single ship, and many of these are in mainland China,' Mr Hsu said. 'With these new shipyards, it's natural to expect the first few deliveries to experience serious delays as the yards slowly get production in order.' Most of the new bulk carriers will start joining the fleet in 2010 and 2011, Mr Hsu said.

The Baltic Dry Index, a measure of shipping costs for commodities, climbed 2.9 per cent on Tuesday, or 192 points, to 6,712 points, a fourth day of gains, according to the London-based Baltic Exchange. It rose to a record 11,039 on Nov 13.

Courage Marine shares rose a second day yesterday, gaining as much as 16 per cent before closing at 35 Singapore cents. The stock has fallen 13 per cent from the start of the year, compared with the 14 per cent decline in the benchmark Straits Times Index.

StarHub Q4 net profit down 31% at $98m

STARHUB yesterday posted net profit of $98 million for the fourth quarter ended Dec 31, down 31 per cent due to tax credit adjustments.

For the full year 2007, net profit was $330 million, down 8 per cent, on a 12 per cent rise in revenue to $2 billion. StarHub tax credits were $20 million and $77 million for 2007 and 2006 respectively.

Despite pressure on margins and falling market share in the all-important mobile phone segment, the second-largest telco in Singapore managed a credible 14 per cent rise in Q4 total revenue to $539 million and saw free cash flow jump 23.4 per cent to $67.2 million. Free cash flow for the full year grew 45 per cent to $483 million.

StarHub decided to reward shareholders with a higher fourth-quarter dividend of 4.5 cents, up from 3.5 cents, bringing the total for the year to 16 cents.

It further delighted shareholders by promising to raise dividend payout for 2008 to a minimum 18 cents.

The confident telco also said it expects full-year operating revenue to grow 10 per cent and capital expenditure to not exceed 12 per cent of operating revenue.

But for the first time, StarHub said it expects Ebitda - earnings before interest, tax, depreciation and amortisation - to decline to 33 per cent for 2008. It was 33.7 per cent in 2007.

Chief executive Terry Clontz said while he expects continued growth, pressures on margin will increase given the fierce competition.

Without naming its bigger rival Singapore Telecommunications, which has increased share of the lucrative mobile phone segment by aggressive marketing, Mr Clontz said 'it only takes one to disturb the balance', though he believes that in the long run, rational behaviour should prevail in a mature market such as Singapore.

During the quarter under review, StarHub's mobile unit was as usual the top performer, with sales up 14 per cent to $275.6 million and 13 per cent to $1 billion for the full year.

Customer base grew 14 per cent to 1.76 million at end-2007 but StarHub's market share eased to 31.3 per cent from 33.1 per cent a year ago.

Singapore's mobile penetration has risen to 122.5 per cent fuelled by the rising number of foreign workers and SingTel has the lion's market share in excess of 41 per cent.

The fight for market share has been intensifying since late last year when Singapore announced that mobile number portability (MNP) will be introduced in June.

StarHub, SingTel and third-place MobileOne have been spending more to retain customers ahead of June and the telcos' marketing efforts will get more bitter in order to defend their customer bases ahead of the start of MNP.

Mr Clontz said while market share is important, his focus is on increasing shareholder value and cash flow.

He also noted that StarHub still has the highest average revenue per user per month at $26 for pre-paid and $79 for post-paid.

StarHub's cable TV revenues grew 20 per cent for the quarter to $95 million as it managed to increase subscription prices to customers and sign on more viewers. Despite SingTel's entrance into the pay-TV space, StarHub has managed to defend its position as the premier provider by cornering the exclusive broadcast rights to all the must-watch sports events, such as bagging this year's UEFA European Championship football matches.

Customer base rose 4 per cent to 504,000 at end-2007, giving StarHub a household penetration of 45 per cent.

SSH expects more deals from new plants

OILFIELD equipment supplier SSH Corp expects to clinch more contracts this year from new petrochemical and bio-diesel plants being built here, says chairman and CEO Kris Wiluan.

'We are talking to people like Shell and ExxonMobil, as well as other investors coming to set up plants in the growing oil and gas hub in Singapore,' he said after SSH released strong interim results yesterday.

For the half year ended Dec 31, 2007, SSH reported a 51 per cent rise in net profit to $12.5 million on a 48 per cent increase in revenue to $114.7 million. It is paying an interim dividend of 0.7 cent per share, up from 0.55 cent previously.

This follows strong demand for its products, and contributions from an $80 million deal bagged by SSH and joint venture French partner Phoceenne to supply pipes, fittings and flanges to Shell's new US$3 billion petrochemical complex currently under construction.

But increased activity has resulted in higher expenses, including a bigger headcount and wages bill. Higher inventory, trade debtors and other working capital needs, meanwhile, resulted in an increase in bank borrowings to $57.5 million.

Apart from SSH, Indonesian tycoon Mr Wiluan's stable includes rig builder and refurbisher KS Energy and oil services provider Aqua Terra Supply, which have recently ventured into rig building in the United Arab Emirates and oilfield equipment supplies and drilling operations in Bohai, China.

The three companies are working in tandem, Mr Wiluan said. 'Each by itself will otherwise not have that (geographical) reach,' he said. But synergies among the trio are starting to show, and SSH's latest results reflect this.

Asked about challenges, Mr Wiluan said one has been getting a good team together and in this respect a 'merger' of people from the three Singapore companies is now complete.

'The actual merger of physical assets and regulations has still to be completed, but that's secondary, although we are moving to one integrated site at Jurong this year,' he said.

The prospects for the KS Energy-led trio are good, he reckons. 'The oil and gas industry is still very strong. Oil prices are still high and demand remains strong.'

Yellow Pages posts 69.9% plunge in Q3 earnings

YELLOW Pages (Singapore) Limited posted a 69.9 per cent year-on-year fall in net profit to $1.5 million for its third quarter ended Dec 31, 2007, as revenue tumbled 30.2 per cent to $11.8 million. This revenue came mainly from FY2008 Singapore Phone Directories (SPD) and Internet Yellow Pages (IYP).

Yellow Pages - Singapore's largest publisher of telephone directories and provider of classified directory advertising - said that the revenue fall was 'primarily attributable to the difference in distribution rates of SPD'. But IYP continued its growth momentum, registering a 68.8 per cent rise in revenue to $1.2 million. Q3 earnings per share were 0.95 cents, down from 3.14 cents.

The quarter also saw a 91.2 per cent fall in 'other gains' to $56,278, taking into account a balance of $0.8 million in realised exchange loss. Share of results of associated companies also showed a loss of $253,152, up 83.1 per cent.

For the first nine months, net profit dropped 23.8 per cent to $13 million, with revenue dipping 1.9 per cent to $54.7 million. Net 'other losses' for the nine months came to $1.57 million, against a gain of $1.76 million in the year-ago period. The 'other losses' included a total realised exchange loss of $3.4 million arising from the closing out of all forward foreign exchange contracts, partly offset by rental income and interest income from fixed deposits.

Share of results of associated companies for the nine months showed a profit of $244,272, down 37.7 per cent.

Yellow Pages chief executive Danny Chow said: 'Our IYP business has deepened its market penetration as it gains wider popularity and acceptance as a dynamic digital platform of choice. However, print directories will continue to be our core revenue generator while we continue fast-tracking our digital business.'

Yellow Pages kicked off its sales canvass for the FY2009 SPD in September 2007. As at Feb 1 this year, sales contract value increased 2.5 per cent to $22 million, compared with $21.4 million for the same period last year.

On the group's outlook, the company said that fourth-quarter revenue will come mainly from the distribution of other niche directories and its IYP. The group has already fully realised its FY2008 SPD sales contract value of $49.2 million. 'With the bulk of the group's revenue already accounted for, the fourth quarter will typically result in a loss,' it said.

The group expects its full-year result ending March 31, 2008, to be lower than that of FY2007, primarily due to the one-off realised exchange loss of $3.4 million. As part of a new growth plan for this new year, Yellow Pages will be looking to grow existing print revenue while introducing new print products. It hopes to accelerate digital platform growth through a multi-pronged strategy, while seeking M&A prospects and synergistic opportunities with strategic partners. It will also increase investments in print and digital platforms.

Plans are in the pipeline to introduce a new Hotel Edition Yellow Pages to tap the vibrant tourism sector in view of upcoming developments such as the Integrated Resorts. The company has also identified motorists, heavily populated heartland areas, newly arrived long-term residents as well as the active ageing population as targets for the development of print directories customised to meet their needs.

Yellow Pages also announced yesterday the promotion of David Cheah to chief financial officer.

Tat Hong Q3 earnings up 20% to $21.2m

TAT Hong, the world's largest crane company, hoisted its third-quarter earnings by 20 per cent to $21.2 million, thanks to strong demand and better margins in all its key markets.

The earnings boost for the October-December 2007 quarter was achieved on the back of a 17 per cent increase in revenue to $157.9 million, from $135.3 million a year earlier.

On a year-to-date basis, the company lifted its earnings for its first nine months of FY08 by 65 per cent to $61.4 million, on the back of a 31 per cent rise in revenue to $456.2 million.

During the quarter, crane rental revenue contribution almost doubled due to higher rental rates, strong demand from Australia's resources sector, and higher contribution and rising utilisation rates from projects in Singapore, Malaysia and the Middle East.

As a result, gross profit margin increased from 30.5 per cent a year ago, to 39.6 per cent during the 3Q/FY08 period.

Gross profit was up 52 per cent to $62.6 million.

The only segment which saw a decline was equipment sales, which decreased 8 per cent from $78.9 million, to $72.7 million. The company attributed this to a delay in shipment of cranes.

On a segmental basis, gross profit from the flagship crane rental business more than doubled to $32.6 million during the quarter, from $16.2 million in 2006.

Roland Ng, Tat Hong's president and chief executive officer, sounded bullish on prospects for the company, going forward.

'The outlook for our industry is very positive,' he said. 'And this is particularly so for Asia in general, and Singapore in particular, which sits at the epicentre of this growth. We are in the right industry, in the right place, at the right time.'

He said construction demand in Singapore this year would surpass the previous high of $24.4 billion in 1997.

'And the strong growth we are seeing now will continue for the next three years.'

Meanwhile, the company is listing its 21 per cent held China subsidiary, Yongmao Holdings Ltd, here next week.

Mr Ng said investor reception to the IPO had been very good, given the strong prospects for the China- based company.

'Demand for tower cranes in China is outstripping supply,' Mr Ng said. 'And this demand will grow even more as that country's infrastructure needs, especially in the energy sector, intensifies.'

Yongmao launched its IPO offering of 115 million shares at 35 cents a piece on Jan 31. It will start trading on the Singapore Exchange on Feb 21.

BT understands that all placements shares have been fully subscribed.

Tat Hong's stake will be diluted to 15.7 per cent after the listing.

This is the second listing of a subsidiary by the Singapore-listed crane giant. In end-2005, it listed its Australian subsidiary Tutt Bryant, which has since grown to become one of the country's biggest and most successful crane companies through both organic growth and acquisitions.

Tat Hong's latest results boosted the company's earnings per share for the nine months to end December by 51 per cent to 12.13 cents.

$46.5m capital gain boost for Bt Sembawang


THANKS to a one-time capital gain, Bukit Sembawang Estates has reported third-quarter net earnings of $52.4 million, more than eight times the net profit of $6.25 million it generated for the corresponding quarter last year.

The one-time capital gain of $46.5 million for the three months ended Dec 31, 2007, came from the sale of more than two million shares in HSBC Holdings plc. Bukit Sembawang had earlier said that the share sale was to reduce the group's bank borrowings.

The exceptional gain was reflected in the group's 'other operating income' which went up to $47 million, from $961,000 in the year-ago period. Revenue jumped 30.9 per cent to $17.7 million.

The performance brings the property group's nine-month revenue to $63.7 million, 51.3 per cent higher than the $42.1 million in Q3 last year. During the period, revenues for housing units sold at Parc Mondrian, Paterson Suites and phases 4 and 6 of Mimosa Terrace were recognised.

The boost in Q3 bumped up its nine-month net profit to $71.3 million, from $17.7 million. This brings basic earnings per share to 78.11 cents, from 24.47 cents previously. As at Dec 31, 2007, net asset value per share came to $4.53, from $4.64 as at March 31, 2007.

In view of the uncertain climate in the property market, Bukit Sembawang said it is reviewing the launch of the two projects - the 102-unit freehold development Paterson Suites and the 123-unit The Vermont on Cairnhill. It is also waiting for the hearing of the appeal against the Strata Title Board's rejection on the collective sale of Airview Towers.

Bukit Sembawang had planned to build a 36-storey condominium on the site currently occupied by Airview Towers and an adjacent property. But the Strata Titles Board had dismissed a collective sale application by the majority owners of Airview Towers on grounds of technicality. The hearing of the appeal is set to take place on Feb 19.

Shares of Bukit Sembawang slipped 2 cents yesterday to close at $8.96.

Sincere Q3 profit more than doubles

CITING robust economic conditions and positive consumer sentiment, Sincere Watch yesterday reported a more than doubling in net profit to $12.65 million for the third quarter ended Dec 31, 2007, as sales hit a record $141.38 million.

For the 2006 corresponding period, net profit and revenue were $5.54 million and $105.73 million respectively.

The 33.7 per cent jump in Q3 revenue brought nine-month revenue to $337.16 million, up 27.8 per cent. Net profit for the nine months doubled from $10.76 million to $21.97 million, translating to earnings per share of 10.67 cents, up from 5.23 cents.

Sincere attributed its strong performance to improved local demand and increased tourist traffic in its key markets. Also helping were the opening of more boutiques, refurbishment of key outlets and innovative marketing programmes. Sincere said it also benefited from its expanded distributorship network with its retail partners in North Asia.

The group noted that despite an increase in staff costs, rental and depreciation expenses, which was in line with the increased level of business, it enjoyed improved average gross margins.

Sincere's sales and net profit for the nine months represent some 94 per cent and 97 per cent of the total sales and net profit achieved for the whole of financial year 2007.

An estimated professional fee of $5.3 million to be incurred on the basis that the voluntary offer by Hong Kong watch retailer Peace Mark is fully accepted by all shareholders has not been provided for in the accounts made up to Dec 31. The takeover bid at about $2.564 per share values Sincere Watch at $530 million.

For the past nine months, the group implemented an aggressive expansion strategy, with the opening of new Sincere Fine Watches (SFW) boutiques and launching mono brand shops like the new concept Franck Muller (FM) boutique at Delfi Orchard and the Omega boutique at Raffles City.

In North Asia, it opened new FM boutiques at Ocean Terminal in Kowloon, at Shin Kong Place in Beijing, at Plaza 66 in Shanghai and at the Venetian Casino and Resort in Macau. The existing flagship FM boutique in Central Hong Kong was considerably refurbished and enlarged. The group also opened its largest SFW boutique in Kuala Lumpur in October 2007.

Sincere said it has continued to develop new markets for expansion. In India, its duty-free travel retail outlet at the Indira Gandhi International Airport in New Delhi commenced operations in the fiscal first quarter and its first office in Melbourne commenced distribution of Franck Muller timepieces in October last year.

Going forward, the group said it believes the developments in Singapore, China and Hong Kong to boost their respective economies augur well for the group.

'Although the industry will remain competitive and despite the reported early signs of a recession in the USA, the group is optimistic that it will maintain its leading position in the region,' it added.

CitySpring's Q3 DPU of 1.6cents beats projections

CITYSPRING Infrastructure Trust has beaten projections with its performance in its third financial quarter ended Dec 31, 2007.

It has declared a distribution per unit (DPU) of 1.6 cents for Q3 FY2008, 6.7 per cent or 0.1 cent above the projected DPU provided at the time of its IPO in February 2007.

Cash earnings of $20.5 million were also 92 per cent higher than projection, CitySpring said. It defined cash earnings as the aggregate of profit before income tax adjusted for non-cash income and expenses and lease receivable repayment, after deduction of capital expenditure and before principal repayment of debt.

'The creditable financial performance came on the back of $97.0 million in revenue for the quarter, underpinned by robust contribution from City Gas Trust, SingSpring Trust (the initial assets) and Basslink,' CitySpring Infrastructure Management Pte Ltd, the manager of the trust, said in a statement.

All three assets in the CitySpring portfolio turned in healthy performances during the quarter. City Gas Trust registered better than projected results, benefiting from an increase in gas tariffs which took effect on Nov 1, 2007. City Gas Trust has further raised its gas tariffs by 7.6 per cent from Feb 1, 2008, against the backdrop of higher fuel costs.

SingSpring Trust maintained its average dispatch volume of desalinated water to the Public Utilities Board during the period. It expects to remain a leading supplier of desalinated water in Singapore.

Basslink achieved total cumulative availability of 98.8 per cent for the full calendar year in 2007. It expects to achieve at least 97 per cent in availability for 2008. Basslink is the electricity interconnector linking Tasmania to mainland Australia.

Said CEO of CitySpring Infrastructure Management Fai Au Yeung: 'We are continuing to actively identify initiatives that will enhance the value of our portfolio assets and improve cash earnings as well as returns.'

'At the same time, we remain focused on seeking quality projects, across the region, which generate long-term, regular and predictable cashflows to further enhance our asset portfolio. There is a healthy flow of potential acquisition opportunities which is keeping the trustee manager busy. We are not facing any issues with regard to raising debt to fund these opportunities.'

Gallant Venture Q4 earnings fall 58.1%

GALLANT Venture has reported a 58.1 per cent drop in Q4 net earnings to $6.37 million, bringing its full-year net profit to $14.7 million, a year-on-year drop of 30.4 per cent. Revenue for the three months ended December 2007 fell 29.3 per cent to $55 million. The group's FY2007 revenue slipped 9.5 per cent to $234.3 million.

Equation turns around with $5.5m H1 profit

EQUATION Corp yesterday reported half-year earnings of $5.5 million, from a loss of $2.5 million in the year-ago period. For the six months ended December 2007, sales went up to $24.8 million, from $7.8 million.

Metro Q3 profit drops 33.69%

METRO Holdings has posted a 33.69 per cent drop in third-quarter net profit attributable to shareholders to $21.8 million, as the closure of Metro Tampines shaved off sales at its retail division. For the three months ended December 2007, revenue slipped 6.77 per cent to $57.8 million. On a nine-month basis, net profit fell 18.69 per cent to $40.34 million while revenue rose 7.34 per cent to $171.17 million.

Courts S'pore posts Q3 loss of $2.35m

COURTS Singapore yesterday reported a Q3 net loss of $2.35 million, from a loss of $2.42 million in the same quarter last year. This was despite sales edging up 3.3 per cent to $87.2 million for the three months ended December 2007. This was largely attributed to losses at its subsidiary in Thailand, where it had closed four branches in the north-east.