Singapore Corporate News - 22 Feb 2008

OCBC's profit slips 16% in Q4 to $428m

OCBC Bank's fourth-quarter net profit dropped 16 per cent year-on-year to $428 million in the absence of divestment gains which it saw in the previous corresponding quarter.

In Q4 2006, divestment gains came to $77 million.

Its profits, though, beat analysts' forecasts as they expected the bank to post full-year net profit of $2.04 billion, implying a fourth-quarter net profit expectation of $397 million, according to average forecasts from 15 analysts in Reuters Estimates.

The group made a further $10 million allowance in the fourth quarter, bringing the total allowances to $231 million for its investments in collateralised debt obligations (CDOs) in FY07. The allowances reduce the carrying value of the portfolio by 85 per cent to $41 million as at end-2007.

Subsidiary Great Eastern Holdings provided an allowance of $5 million in the fourth quarter of 2007 for the CDOs invested under its shareholders' funds, reducing their carrying value to $13 million as at end-2007.

'We believe the CDO issue is behind us given that we've provided for 85 per cent of the portfolio,' said Soon Tit Koon, OCBC's chief financial officer.

The bank's full-year net profit remained flat at $2.07 billion from $2 billion a year ago. Q4 2007 included a $104 million tax refund and divestment gains of $90 million, against divestment gains of $559 million in Q4 2006.

But operationally, the bank saw growth in its core businesses of net interest income and fee income. Net interest income - or profit from loans - for the fourth quarter grew 25 per cent from a year ago to $613 million. On a yearly basis, it increased 25 per cent to $2.24 billion. Customer loans hit $72.8 billion, up 19 per cent, led by corporate and SME lending in Singapore, Malaysia and overseas markets. The loan pipeline remains healthy, said CEO David Conner.

Interest margins for the year increased from 2 per cent to 2.1 per cent as the bank benefited because cost of funds fell faster than its asset yields.

For the quarter, non-interest income expanded 12 per cent to $464 million. Higher profit from life assurance and stockbroking, wealth management fees added a boost. However, a $47 million net loss in the quarter from securities and derivatives trading took some shine off. For the year, non-interest income rose 34 per cent to $1.94 billion.

Expenses increased 26 per cent to $1.68 billion, due largely to the bank's overseas business expansion and higher staff cost.

Mr Conner said: 'Given the ongoing concerns over the effects of the US sub-prime crisis and a possible US recession, the economic outlook for 2008 is uncertain.'

A final tax-exempt dividend of 14 cents per share has been proposed, bringing the full-year dividend to 28 cents per share. Shareholders can choose to receive the final dividend in convertible Tier 2 subordinated notes, which will pay an interest coupon and are convertible to OCBC Bank ordinary shares. Through this preferential offer to shareholders, the bank intends to issue up to $500 million of Tier 2 subordinated notes. The bank said this will help to replace part of the group's surplus Tier 1 capital with Tier 2 capital. If all shareholders subscribe to the note, up to $432 million in face value of the notes will be issued.

Shares of OCBC yesterday ended 15 cents or 2 per cent higher at $7.60.

Auric Pac sells office building for $99m

LIPPO unit Auric Pacific has sold One Phillip Street in the Raffles Place area to UK-based New Star International Property Fund for $99.02 million or $2,736 per square foot of the 999-year leasehold building's net lettable area (NLA).

Auric's selling price is about 2.6 times the $37.6 million it paid for the 16-storey building about two years ago when it bought the property from Kewalram Group. Interestingly, Kewalram had bought One Phillip Street from Lippo in early 1996 for $76.8 million.

The latest sale earlier this week is believed to have been brokered by Jones Lang LaSalle.

The property, with 36,194 sq ft net lettable area, is fully leased. Tenants include Auric Pacific, First Reit and Miller Insurance Services. Completed in 1993, the building does not have immediate redevelopment potential based on current planning parameters.

The asset is New Star's second major acquisition in Singapore. In May last year, it bought Parakou Building, at the time a newly completed freehold office block, at the corner of Robinson Road and McCallum Street for $128 million or $2,013 psf of NLA.

Since its acquisition of Parakou Building, New Star has enjoyed a 20 per cent capital appreciation of the property. The building's occupancy has also increased from 85 per cent to 100 per cent, and its rental income risen by 31 per cent since acquisition, according to New Star Asset Management's head of acquisitions (Asia-Pacific) Simon Tyrrell.

As for the One Phillip Street purchase, Mr Tyrrell acknowledged that the passing yield (based on current leases) is 'quite low' but added that New Star plans to boost returns from the building through its professional management, which includes achieving more efficient power usage, improving the leasing structure and embarking on refurbishment and upgrading works that could potentially boost the property's NLA and income.

This is the 17th asset the fund has bought since its launch in June last year. Its properties are located in Japan, Australia, Germany and the Netherlands, in addition to Singapore. The open-ended fund has raised £pounds;650 million (S$1.8 billion) so far, of which about £pounds;270 million have been invested so far.

'We're an unleveraged fund, and make pure-cash acquisitions. So we're not susceptible to sub-prime issues. We're also a long- term investor,' he added.

Mr Tyrrell revealed that the fund is eyeing another acquisition in Singapore to the tune of $50-100 million. 'We're looking across all asset classes, including office, industrial, retail and industrial/office,' he added.

The fund is also looking at properties in Taiwan and Korea.

Auric said the net book value of One Phillip Street as at Sept 30, 2007, was $79.25 million and the sale was part of its strategy of divesting non-core investments.

Auric owns stakes in Robinson and Co (currently the subject of a takeover offer by Dubai's Al-Futtaim Group), Food Junction Holdings and the Delifrance chain.

The sale will result in a net gain of about $13.52 million which will be recognised in Auric's group profit and loss accounts for the current year ending Dec 2008.

Assuming that the sale had been effected at the end of the company's financial year ended Dec 31, 2006, the net tangible assets per share would have increased by 46 cents from $1.79 to $2.25.

Assuming that the sale had been effected at the beginning of the company's financial year ended Dec 31, 2006, the earnings per share would have decreased by 0.29 cent from 15.71 cents to 15.42 cents.

Cosco full-year earnings jump 64% to $336.6m

MAJOR ship-repair, shipbuilding and marine engineering group Cosco Corp (Singapore) saw its strategy of moving into higher value conversion and offshore projects pay off with a 64 per cent jump in full-year 2007 net profit to $336.6 million or 15.09 cents per share from $205.4 million or 9.3 cents per share the year before.

FY2006 included an exceptional gain of $24.1 million from the disposal of four old bulk carriers. Had this non-recurring item been excluded, 2007 net profit attributable to shareholders would have risen 86 per cent from 2006's adjusted $181.2 million.

'Our group is well positioned to be a key player in the ship-repair, shipbuilding and marine engineering arena in China,' said Cosco Corp vice-chairman and president Ji Hai Sheng.

Turnover rose 86 per to $2.26 billion from $1.22 billion. Revenue from ship-repair and shipbuilding almost doubled to $2.03 billion from $1.03 billion the year before. This segment now accounts for about 90 per cent of turnover with the other major component of the business, dry bulk shipping making up 9 per cent, down from 12 per cent previously.

Despite a reduction in the overall contribution to revenue, the dry bulk shipping business saw an impressive 40 per cent rise in turnover from $148 million to about $208 million on firmer charter rates due to the very high demand being enjoyed currently.

Nothing is finalised yet, Mr Ji said in response to queries on the long speculated disposal of the dry bulk fleet. He added that it made sense to capitalise on the good revenues available due to the present boom in the sector.

Mr Ji also disclosed that the expansion of the Nantong yard to focus on the offshore marine sector is progressing well. Work on phase one of four has begun with around $100 million of investment and will be completed in about a year and all four phases should be developed by 2011.

The group has a healthy order book of US$6.5 billion as at Dec 31, 2007.

Cosco has proposed a total dividend payout of seven cents per share for the year. The group's shares closed 11 cents higher at $4.38 yesterday.

Ascott Group, Vantage Corp poised to be delisted

ASCOTT Group and Vantage Corp are on track to be delisted from the Singapore Exchange.

Property giant CapitaLand yesterday said that it had amassed 91.7 per cent of Ascott shares in issue. It made a general offer in January.

As Ascott's free float will be less than 10 per cent upon the offer's close on Feb 26, the Singapore Exchange is expected to suspend the stock. As it is not the offeror's intention to preserve the listing status, CapitaLand will not act for lifting of any trading suspension.

However, CapitaLand does not have the right yet to compulsorily acquire all remaining Ascott shares - because it has yet to amass 90 per cent of Ascott shares that it or its concert parties did not own before the general offer.

As at 5pm yesterday, it had received valid acceptances which, together with market purchases, amount to 75.17 per cent of shares not owned. It still needs 4.99 per cent of Ascott shares in issue before compulsory acquisition is triggered.

Separately, Galleria Resources, the investment vehicle of Rafat Rizvi, a British citizen of Pakistani descent, has also amassed more than 90 per cent of Vantage Corp.

Mr Rizvi has said that he intends to delist the company. In January, he bought 77.5 per cent of Vantage from its then controlling shareholder Kea Kah Kim at 24 cents a share, triggering a general offer for all outstanding shares at the same price.

At the close of the offer on Tuesday, Galleria received valid acceptances for a further 12.5 per cent of Vantage's issued share capital, bringing its total holdings to 90.05 per cent.

Shares of Vantage - formerly known as Blu Inc Group and Jack Chia-MPH - have been suspended from trading since September 2004, after the company sold its core publishing arm. Based on its latest financial results ended Sept 30 last year, Vantage has a net asset value per share of 27.5 cents. One of its assets is 75 per cent owned subsidiary Tembusu Investments, which is listed on the London AIM.

In December last year, SGX decided to delist Vantage by March 31 after rejecting its proposed acquisition of Healthway Medical Services (HMS) when the deal failed to satisfy certain listing requirements. In January, SNF Corp signed a deal to buy HMS for $525 million in a reverse takeover.

In late 2005, Vantage also bought a 28.6 per cent stake in Internet service provider Pacific Internet, as it sought new businesses to stay listed. But in the ensuing tussle with rival company MediaRing for control of PacNet, it sold its stake early last year to US-based fund Connect Holdings, which eventually won the takeover battle.

Hiap Hoe full-year net profit up 54.1%

HIAP Hoe, a niche property developer, saw net profit rise 54.1 per cent to $19.4 million for the financial year ended Dec 31, 2007 while group revenue jumped 82.4 per cent to $92.2 million. It attributed the performance to the good response to its private residential developments amid the upturn in the property market.

Jurong Cement exec director and CEO quits

JURONG Cement executive director and CEO Joe Khor has resigned with effect from April 1, 2008 to spend more time with his family in Australia. Roland Mathys, from BASF, has been appointed as the company's new executive director and CEO.

Jurong Technologies Industrial Corp said Lee Lok Fui, the executive chairman of the group, has retired from office with effect from Feb 20, 2008.

Kim Eng unit to divest associate for US$46.8m

KIM Eng Holdings said its unit KE Strategic will dispose of 476,060 shares in Vision Investment Management for US$46.8 million in pursuant of an agreement under which Vision has agreed to repurchase 915,600 shares or some 40 per cent of its outstanding shares from its existing shareholders.

Fujian Zhenyun net profit rises 21%

FUJIAN Zhenyun Plastics Industry Co posted a 21 per cent year-on-year jump in its net profit to 68.34 million yuan in its maiden set of results for the year ended Dec 31, 2007, thanks to a 22.4 per cent increase in revenue to 481 million yuan as the sales of its polyvinyl chloride (PVC) pipe products grew.

It also recommended a first and final dividend of RMB9.96 cents per share.