Singapore Corporate News - 21 Feb 2008

UOL profit doubles on valuation gains

UOL Group, which yesterday posted a 124 per cent jump in group net profit to $758.9 million on the back of $590.5 million in fair value gain on investment properties, is planning to launch three freehold condos this year.

They are the 100-unit Nassim Park Residences, an 88-unit boutique development named Breeze by the East, and a 401-unit condo on the former Green Meadows site along Upper Thomson Road. opposite Peirce Reservoir.

In its outlook for the current year, UOL said: 'Following the strong price appreciation in 2007 and with the removal of deferred payment scheme and the turmoil in the global financial markets, the residential property market has turned cautious and any price appreciation is expected to be modest.'

However, the group's hotels should benefit from high occupancy and improved average room rates, it added.

The group also has exposure to the office market through Novena Square, United Square, Odeon Towers and Faber House, which analysts say should provide UOL with upside from positive rental reversions.

UOL also owns Velocity and United Square retail malls.

The group did not list its Q4 performance, but comparing the full-year results with that for the first nine months, net profit for the quarter ended Dec 31, 2007 came to $332.1 million, up 43.3 per cent from the same year-ago period.

On its latest full-year performance, UOL said that even excluding fair value gains and exceptional items, profit surged 72 per cent to $273.2 million. The increase came from higher income from property development, quoted investments, property investments and hotel operations.

'Operating profit from property development grew by 117 per cent compared to 2006, while operating profit from hotel operations and property investments increased by 45 per cent and 10 per cent respectively,' UOL said.

Full-year group revenue rose 18 per cent to $709.1 million. UOL said that it benefited from the progressive recognition of revenues from the sale of residential projects like Duchess Residences, Pavilion 11, Southbank, and The Regency at Tiong Bahru.

And despite the exclusion of revenue from Parkroyal on Coleman Street which was sold in December 2006, revenue from hotel operations was higher, due to improved performance of the group's hotels in Australia, Singapore and Vietnam and the inclusion of revenues from Pan Pacific Orchard (formerly Negara on Claymore) and Pan Pacific Hotels & Resorts Pte Ltd, which were acquired in June 2006 and July 2007 respectively.

UOL's net asset value per share rose to $4.96 as at Dec 31, 2007 from $3.97 as at end-2006 on the back of capital appreciation of office and retail properties and quoted investments.

UOL's listed hotel arm Hotel Plaza reported a 26 per cent drop in net earnings for the year ended Dec 31, 2007 to nearly $85 million - due to the absence of exceptional gains from the sale of Parkroyal on Coleman Street, although this was partly offset by better operating performance from the group's hotels, as well as lower interest expense and the recognition of $49.3 million in fair value gain on investment properties.

Hotel Plaza's group revenue increased a mere one per cent to $290.2 million, again due to the absence of contribution from Parkroyal on Coleman Street which was divested in late 2006. Hotel Plaza's Q4 net earnings - based on comparing the full-year and nine-month results - fell 52.1 per cent to $44.8 million.

Hotel Plaza is proposing a five-cent per share (one-tier) first & final dividend. UOL shareholders will receive a 10-cent per share first & final dividend and a five-cent per share special dividend. Both payouts are one tier.

ARA aims to double asset portfolio in three years

SEEMINGLY undaunted by the global credit crunch, real estate fund and Reit manager ARA Asset Management is aiming to double its assets under management to more than $20 billion by 2011.

'We have positioned ourselves to double what we have today in three years' time,' chief executive John Lim told BT in an interview.

ARA's total assets under management stood at $10.4 billion at the end of last year - a jump from the $6.7 billion in assets the company was managing at the end of 2006.

ARA, which derives its income mainly from managing real estate investment trusts (Reits) and private real estate funds, is seeking to expand geographically and into new asset sectors to hit its target portfolio size.

Right now, the company is focused on office and retail properties in Singapore and Hong Kong.

But it plans to look at India, Japan, Australia and the Middle East for growth, Mr Lim said. He is also keen to branch out into the fast-growing hospitality and industrial sectors.

Mr Lim is undaunted by the global credit crunch. While he admits that fund-raising is getting more competitive, he said that there is still plenty of capital out there.

'Banks might be more reluctant to lend, yes,' Mr Lim said. 'But when it comes to US pension funds or money from the Middle East, there is still plenty of money waiting to be invested.'

ARA divested a Syariah- compliant private real estate fund last October, recording an internal rate of return of 23.7 per cent. The fund was set up in August 2004 with $100 million in committed capital.

ARA now intends to establish a second Syariah- compliant fund this year, Mr Lim said.

ARA's performance is also not likely to take a hit this year even in the face of the global market downturn, he said. The company has a good locked-in income stream in the form of base fees and performance fees for the Reits it manages, as well as portfolio management fees from its US$1.5 billion ARA Asia Dragon Fund, which closed last September.

ARA's 2008 financial performance should outstrip last year's, Mr Lim said. In particular, full-year contribution from ARA Asia Dragon fund is expected to provide a 'significant boost' to revenue this year, he said.

ARA yesterday reported that its 2007 net profit rose 153 per cent to $34 million, up from 2006's $13.5 million.

Revenue for the year ended Dec 31, 2007, rose 98 per cent to $62.1 million - from $31.3 million in 2006 - as the company brought in higher management, acquisition and performance fees.

Net margin rose from 43 per cent to 55 per cent. Earnings per share rose from 2.64 cents to 6.53 cents.

The company will pay out a final dividend of 3.8 cents a share, it said.

ARA, which is 16 per cent owned by Hong Kong's Cheung Kong Holdings, was listed on the Singapore Exchange last November, with an initial offer price of $1.15 a share. The stock closed 0.5 cent down at 71.5 cents yesterday.

Epure Int'l posts 81% jump in Q4 profit

CHINESE water-treatment specialist Epure International reported steady growth in top and bottom lines yesterday, with net profit soaring 81 per cent year on year to 46.98 million yuan (S$9.3 million) for the fourth quarter ended December 2007.

For the full year, net profit rose 49 per cent to 164.4 million yuan.

The surge in earnings attributable to equity-holders came as revenues for the group, which mainly does turnkey projects in both the industrial and municipal space, rose 45 per cent to 181.2 million yuan for the fourth quarter and 38 per cent to 697.3 million yuan for the full year. The group, which counts the World Bank's private sector arm International Finance Corp as a major shareholder, enjoyed a strong fourth quarter thanks to project sales recognition. Gross profit margins for the three months also rose 2.4 percentage points to 35.8 per cent.

The group aims to diversify into more build-operate-transfer (BOT) projects, and took a one-fifth stake in Shanghai Chenghuan Water Operation Co, an operations management firm, to help it do so.

'We are optimistic that this joint venture will continue to secure more management projects this year,' said Wang Zhili, Epure's chief executive.

Epure has also invested in BOT projects via stakes of under 20 per cent each in three Chinese companies in Anyang and Xian, as it recognises that the engineering, procurement and construction segment of the water-treatment industry will become increasingly competitive over time, it said.

It also signed a non-binding memorandum of understanding to acquire Aqua-Tech Engineering & Supplies Pte, a Singapore-based fabricator of membranes with 30 years of water-treatment experience in a wide range of industries worldwide.

Aqua-Tech's equipment is installed in places like hotels, oil drilling platforms, shipyards and ships.

Mr Wang said the group is seeking to drive medium to long-term growth by providing customers with an integrated range of services.

The firm also spent 4.7 million yuan on research and development (R&D) last year - less than one per cent of its sales. It has set aside 20 million yuan of its initial public offering proceeds for R&D.

The company announced a first and final tax-exempt dividend of two cents per share. Its shares closed down five cents at $1.67 yesterday.

Ex-CREIM CEO sells 28% stake to Oxley

FORMER CEO of Cambridge Real Estate Investment Management (CREIM) Chan Wang Kin has sold his 28 per cent stake in the company to Singapore-based Oxley Capital Group. Oxley is headed by Michael Dwyer, ex-CEO of Allco (Singapore), which manages Allco Commercial Reit.

CREIM holds a 60 per cent stake in Cambridge Industrial Trust Management (CITM), manager of Singapore's first independent industrial real estate investment trust, Cambridge Industrial Trust (CIT), which has assets currently valued at about $949.8 million.

A statement released by CREIM yesterday also said that Mr Chan will cease to be a director of the company as well as CITM, and will relinquish his executive position in the Reit manager. No reason was given by CREIM for Mr Chan's departure. When contacted yesterday, Mr Chan said he could not comment.

Oxley Capital executive chairman Michael Dwyer, who left Allco (Singapore) last July, said: 'We are really excited about this transaction and look forward to working with the management of CITM going forward.'

Oxley Capital is a private investment house with a focus on real estate and private equity investment.

Welcoming Oxley Capital, CITM CEO Wilson Ang said: 'We are excited with the new development, particularly in light of the regional networking and value-add that Oxley will bring to this partnership.'

It was also announced that Mr Ang had also sold a 5 per cent stake in CREIM to Oxley Capital.

Last year, CIT's portfolio grew by $340 million and Mr Ang said it expects this figure to increase in 2008. 'Our yearly target is $500 million,' he said.

Some of these acquisitions could be in Singapore. Mr Ang said that it believes there could still be about 96 million sq ft of investment-grade properties here. On possible regional expansion, Mr Ang said that countries it is currently looking at include Malaysia, China and Japan.

CITM counts Japan's Mitsui & Co as one of its shareholders with its 20 per cent stake. Logistics company CWT holds the remaining 20 per cent.

For the year ended Dec 31, 2007, Cambridge posted distributable income of $35.7 million, which was 31.7 per cent higher than forecast by CITM.

Net property income of $45.8 million was 28.3 per cent above forecast, while gross revenue of $53 million surpassed the forecast by 22.7 per cent.

At the close of trading yesterday, CIT units ended half a cent down at 68.5 cents per unit.

Asia Env full-year profit rises 27%

CONTINUED growth in China's water-treatment sector helped Asia Environment record 70 per cent year-on-year growth in revenue to 463.5 million yuan (S$91.6 million) for the full year ended December 2007, with net profit rising 27 per cent to 81.8 million yuan.

Margins were pulled down due to the completion of a major project the previous year, from 43.8 per cent in FY2006 based on restated figures, compared with 33.4 per cent for FY2007.

An increase in raw material prices also contributed slightly to the decline in margins.

The group's revenue rose largely thanks to revenue recognised from turnkey services rendered to various build-operate-transfer projects. These projects accounted for nearly 88 per cent of the 191 million yuan increase in profits in FY2007.

Asia Env also saw increases in sales of manufactured equipment and in operating and maintenance revenues.

The group had earnings per share of 0.2536 yuan for FY2007. It is proposing a total cash dividend of $0.02, made up of ordinary and special dividends of $0.01 each.

'In China, the growth of the water and waste-water treatment sector has been dynamic, given the government's aggressive environmental targets to arrest a mounting water crisis,' the group said.

'Underpinned by the huge demand for a cleaner environment and cleaner water, there is no shortage of projects in China.'

Asia Env has a total of 10 projects under way, with total investment value of 1.22 billion yuan and capacity of 685,000 cubic metres per day, according to a company presentation.

Most are due for completion between the second and fourth quarters this year. Seven of the projects were secured in FY2007, with one secured in January 2008.

Asia Env shares closed three cents up at 54.5 cents yesterday.

OSIM in the black in Q4 but full-year earnings fall 90.7%

AFTER three consecutive quarters of net losses, healthy lifestyle products group OSIM International yesterday reported a net profit of $30.17 million for the fourth quarter ended Dec 31, 2007, up slightly from the previous corresponding quarter's $29.9 million.

But for the full year, net profit attributable to shareholders came to just $3.13 million, down 90.7 per cent from 2006's $33.8 million. This is because net losses for the first nine months of 2007 totalled about $27 million.

No dividend has been recommended for FY2007 compared with a $15 million payout for 2006.

Year-on-year, fourth quarter revenue in 2007 fell 12 per cent from $146 million to $128 million, while full-year turnover fell 16 per cent from $623 million to $524 million. OSIM attributed the fall in 2007 revenue to lower sales in South and North Asia, which resulted in lower operating margins.

Net asset value per share fell from 31 cents to 29 cents.

The group said its Brookstone unit achieved a record year and completed seven successive quarters of same-store growth.

OSIM founder and chief executive Ron Sim said: '2007 was a transitional year for OSIM in which we revamped the structure & systems and sharpened the strategy of the group.'

'Restructuring in 2007 is substantially completed and is expected to deliver improvements in the business this year,' he added.

Creative: a crucial six months ahead

NO 27-year-old company is likely to have its future shaped in six months. But for Creative Technology, its coming two fiscal quarters could hold telling answers to its next steps.

Under investor scrutiny will be the financial results of its current fiscal year, which ends in September. Two more profitable quarters will cement a turnaround from nearly three years in the doldrums. The next six months will also be seen as an early barometer for Creative's new business-to-business product foray - one which could prove strategic for its future.

Market watchers will also be eager to see how well Creative can respond to the rapidly emerging new wave of music player vendors which have bootstrapped ambitious online music stores to their wares, and will bring them to Asia by year's end.

How will Creative fare on these three fronts? Recent signs have pointed to a likely fiscal turnaround in 2008. The company recently posted its second successive profitable quarter - something it has not done since Q3 of its fiscal 2005. In 2008's first two quarters, it improved operating results, although not revenue, from the previous two quarters. The company had posted operating losses since 2005; indeed, its last bullish year was in 2004, when it made US$134.2 million in profit. Its sustained difficulties saw its share price fall to a historical low of $4.82 last month.

The long wait will no doubt make the turnaround sweeter. Besides injecting a huge dose of market confidence into the company, a profitable 2008 would also vindicate recent cost-cutting and inventory control measures loudly trumpeted by Creative this year.

The next six months will also be an early indicator of the viability of Creative's new business line, which might be the company's most strategic product since its first MP3 player eight years ago. Last month, Creative announced a wireless video-phone service called inPerson Conferencing, which lets businesses set up multi-party, high-quality video conferencing sessions over the Web, from anywhere. No doubt Creative hopes to grab a slice of the unified communications (UC) market, and reap the windfall of being a first mover.

The business video-phone market (a part of the UC umbrella) is not new, but low-cost options are rare today. Hence, the Singapore-designed inPerson wants to be a low-cost alternative to expensive systems made by Cisco, Polycom and others, which can cost thousands of dollars and require expensive dedicated data networks. Creative's fliptop DVD-player lookalike system will set users back by $1,200 for the hardware, and $21 per month for connection.

The UC market is an incredibly bullish one today, with one market research firm - US-based In-Stat and Wainhouse Research - pegging it at an astounding US$48.7 billion by 2012. If Creative can drum up good demand for inPerson, it could develop into a healthy revenue stream and channel pressure off its MP3 player segment, which currently contributes to more than half of its revenue.

And just as well, as the competition in the MP3 player market this year looks set to be ratcheted up several notches, and not just because of Apple. While the juggernaut continues to streak ahead in the MP3 market - selling a staggering 22 million iPods over the Christmas quarter - a new wave of competitors now l`ooms.

In the past year, mobile phone bigwigs Sony Ericsson, Nokia, Motorola and others have announced new or expanded online music stores where songs can be downloaded straight into users' mobile phones and PCs. This will surely start a shift in listening habits of music lovers, from dedicated MP3 players to music store-connected mobile phones. At least two major mobile music downloading services are coming to Asia by December: Nokia's store of 2 million songs will be in Singapore and Australia, while Sony Ericsson's 5 million track-strong online store is expected to be in many parts of Asia.

It will be interesting to see how Creative retools - or not - its MP3 business in the face of change. The answers may not come in the next six months, but with other vendors moving so fast, the window for change is a shrinking one.