Singapore Corporate News - 18 Feb 2008

Straits Trading Q4 profit up 87%

THE Straits Trading Company - the subject of a take-over tussle - has reported an 87 per cent jump in net profit to $184.4 million on a 21 per cent rise in sales for the fourth quarter ended Dec 31, 2007.

Turnover for the period came to $382.2 million, while earnings per share hit 56.6 cents - up from 30.3 cents previously.

On a full-year basis, the firm's net profit more than doubled to $485 million, even though sales rose just 20 per cent to over $1.1 billion.

This resulted from an exceptional gain of $420 million, which Straits Trading attributed to revaluation gains from its investment properties, the disposal of Sime Darby Bhd and Golden Hope, among other things. Excluding the exceptional item, its profit before tax rose 37.8 per cent to $116.8 million.

The company, which now faces takeover bids from both the Lee and Tan families, has interests in metals and mineral resources, hotels, property and financial investments.

Last year, its subsidiary Malaysia Smelting Corporation reported net earnings of RM67.4 million ($29.59 million) - from RM41.5 million previously - while hotel revenue rose nearly 45 per cent to $156.5 million, from $108.1 million a year ago.

The addition of new hotels to the group, and higher average room rates in Perth and Singapore, boosted hotel revenue. Turnover from the property arm rose 25 per cent to $69.6 million.

Profit from the sale of trading securities last year was minimal, but the firm gained from the buoyant equity markets and posted a rise in fair value on its trading portfolio to $17.5 million, from $10.9 million a year ago.

Looking ahead, Straits Trading expects positive contribution from its metals and mineral resources segment, and believes that the positive outlook for the hotel industry augurs well for its business.

The firm declared a first interim dividend of 2.5 cents per share (less tax of 27 per cent), plus another interim dividend of 5 cents, tax exempt one-tier.

On Friday, its shares gained 12 cents to close at $6.67.

Macquarie may sell Reit stake after review

MACQUARIE MEAG Prime Reit is expected to undergo a strategic review soon that may result in the Macquarie group selling its 26 per cent stake in the Singapore-listed Reit, industry sources said.

The move is believed to be prompted by the trust trading at a steep discount to its net asset value (NAV). MMP last traded at $1.06, compared with its NAV of $1.61 as at Dec 31, 2007. Among MMP's current assets are Wisma Atria and Ngee Ann City.

Macquarie, it seems, has floated the 'strategic review' proposal to the other two shareholders of the Reit's manager Macquarie Pacific Star Prime Reit Management - MEAG Munich ERGO Asset Management GmbH and Investmore Enterprises Ltd - both of which are likely to have reservations about the move.

MEAG is part of the Munich Re group, one of the largest reinsurance groups in Germany, while Investmore belongs to the fast-growing Pacific Star group founded by Singaporean entrepreneur Jeff Tay.

Industry observers said that since Macquarie bought into the Reit during the IPO, it has been calling the shots at the Reit and its strategy for growing the Reit's footprint in Asia does not always agree with those of the other two shareholders.

In the event of a sale, unitholders may raise the question of a potential conflict of interest as Macquarie is the single largest unit holder of the Reit, as well as manager of the Reit and its properties.

Also, some feel that if Macquarie wishes to divest, it should get its own investment bank to carry out a private tender rather than have the Reit manager do so in a public manner that may create uncertainty for tenants, employees and business associates during the review period, expected to take a few months.

Sales activity surges to 42 disposals, buying falls to 79 purchases

THE buying was low while the sales activity by directors and substantial shareholders was high last week, based on filings on the Singapore Exchange from Feb 11 to 15. A total of 26 companies recorded 79 purchases versus 16 firms with 42 disposals. The buy figures were down from the previous week's two-and-a-half-day totals of 33 companies and 83 purchases, while the sales were up from seven companies and 21 disposals.

The fund manager sentiment was negative last week with 10 asset managers that posted 33 disposals against nine institutions with 18 acquisitions. The figures are a sharp turnaround from the 12 institutions that recorded 41 acquisitions and seven asset managers that posted 18 sales in the previous week.

The buyback activity was also low last week with only three firms that recorded 13 repurchases worth $18.9 million. That was the third straight week of low buyback activity by listed firms. An average of only 1.4 companies and 2.5 trades were recorded per day since Jan 28, versus the daily average of 7.1 firms and 11 buybacks from Jan 7 to 25. Overall, a total of 33 repurchases worth $55.9 million were recorded in the past three weeks versus 165 trades worth $74.5 million in the previous three-week period.

The most active firm in the past three weeks has been United Overseas Bank (UOB) with 2.5 million shares purchased worth $44.3 million at an average of $17.65 each. That brought its buybacks since January to 5.14 million shares worth $91.2 million. Investors should note that UOB has cancelled more than 1.1 per cent of its issued capital since it started its second buyback programme in June last year.

There were several significant trades in the market last week. On the buying side, the chief executive officer (CEO) of Hiap Seng Engineering recorded his first buys since 2002 following the 61 per cent fall in the share price. Meanwhile, Tembusu Growth Fund acquired more shares of Hongwei Technologies at below its subscription price. Lastly, there was a rare buy by substantial shareholder Lim Eng Hock in FJ Benjamin Holdings which boosted his stake by 17 per cent. On the negative side, Cohen & Steers recorded its first sale in Fortune Real Estate Investment Trust at below its purchase price.

Hiap Seng Engineering

Purchases by chairman and CEO Tan Ah Lam in mechanical engineering firm Hiap Seng Engineering from Jan 21 to Feb 11 totalling 1.8 million shares accounted for nearly 7 per cent of the stock's trading volume. The acquisitions, which were made at 39 cents to 34 cents each, boosted his direct holdings by 153 per cent - to 2.98 million shares or 0.98 per cent of the issued capital. Mr Tan also has deemed interest of 70.1 million shares or 23.1 per cent.

The purchases in the past month were made on the back of the 61 per cent drop in the share price since the last week of September 2007, from 94.5 cents. The counter is also sharply down since mid-July 2007, from $1.22. Despite the fall in the share price, the CEO resumed buying at sharply higher than his previous purchase price based on the 150,000 shares that he acquired in February 2002 at 17 cents each. Hiap Seng announced its H1 results in November 2007 with net profit after tax down by 47.9 per cent to $3.90 million for the six months to Sept 30, 2007. The stock closed at 38.5 cents on Friday.

Hongwei Technologies

Tembusu Growth Fund Ltd has acquired more shares of polyester differential fibres manufacturer, Hongwei Technologies, at below its subscription price in May last year. The group picked up 800,000 shares on Feb 6 at an estimated price of 25 cents each. The fund manager previously acquired 794,000 shares on Jan 23 at an estimated price of 21.5 cents each.

The trades in the past month totalling 1.6 million shares have increased its direct holdings by 14 per cent - to 12.8 million shares or 5.7 per cent. Prior to those acquisitions, Tembusu Growth Fund subscribed for an initial 11.3 million shares or 5 per cent in May 2007 at 33 cents each. The stock has fallen sharply since October 2007, from 38 cents to 26 cents on Friday.

FJ Benjamin Holdings

Substantial shareholder Lim Eng Hock recorded a rare buy in fashion retailer and timepiece distributor, FJ Benjamin Holdings, with 10.9 million shares purchased last Monday at an estimated price of 59.5 cents each, which increased its holdings by 17 per cent to 75.9 million shares or 13.4 per cent. That was his first acquisition since September 2006. He previously sold 4.5 million shares in March 2007 at an estimated price of 70 cents each. Prior to that sale, Mr Lim bought nearly three million shares in September 2006 at an estimated price of 49 cents each and 1.5 million shares in January 2006 at an estimated price of 37 cents each.

Investors should note that Lloyd George Investment Management (Bermuda) Ltd ceased to be a substantial shareholder on Jan 24 following the sale of 1.7 million shares at an estimated price of 61 cents each, which reduced its deemed holdings to 27.9 million shares or 4.9 per cent. The fund manager previously reported an initial filing on Aug 1, 2007, of 2.4 million shares at 84 cents each, which raised its interest to 5.4 per cent. The stock closed at 60 cents on Friday.

Fortune Real Estate Investment Trust

Cohen & Steers Inc recorded its first sale in Fortune Real Estate Investment Trust since it became a substantial shareholder in February last year, with 4.1 million units sold last Monday at an estimated price of $5.20 each. The trade reduced its deemed holdings by 7 per cent - to 52.9 million units or 6.5 per cent.

The group previously acquired 16.7 million units from February to July 2007 at $5.73 to $6.30 each. Cohen & Steers reported an initial filing on Feb 8, 2007, of 641,000 units at HK$5.90 each, which raised its interest to 5 per cent. The stock closed at $5.28 on Friday.