Singapore Corporate News - 29 Mar 2008

Olam raising up to $307m through new share offer

OLAM International is raising up to about $307 million through a preferential offer of new shares. The supply chain manager of agricultural products and food ingredients announced this last evening after calling a share trading halt in the afternoon.

The equity fund-raising involves the offer of 155.6 million new shares at an issue price of $1.97 each on the basis of one new share for 10 existing shares held. Olam shares were traded at $2.07 yesterday before the trading halt.

In a conference call yesterday, Olam said investors may see this 'as a great opportunity to buy'.

The books closure date for the non-renounceable and non-transferable preferential offering is April 8.

Olam said in its announcement yesterday that net proceeds from the preferential offering will be used for purposes such as financing investments, joint ventures and mergers and acquisitions. Other uses included reducing or retiring certain bank borrowings and loans and for general working capital.

Kewalram Singapore Limited and Sunny Verghese, Olam's managing director and CEO, have made irrevocable undertaking to subscribe for all of their entitlements. Together with excess applications that they have also undertaken to make, the offering will have a take-up rate of about 70.7 per cent at least.

Olam chairman R Jayachandran also said: 'We expect that members of our management team who have a combined shareholding of approximately 10 per cent would also support the capital raising.'

Olam shares dived 14 per cent to $1.95 on Wednesday following a 'sell' call by Merrill Lynch. Merrill believed that Olam's dependence on leverage for growth is not sustainable, although a successful equity placement would 'alleviate the financial stress'.

Olam's shares rebounded to $2.04 on Thursday after the company responded to Merrill's research report.

'As we have previously indicated to the market, we have been planning this capital-raising exercise to raise funds for the next phase of our growth,' said Mr Verghese. The Singapore Exchange granted in-principle approval for the equity fund-raising exercise yesterday.

OSIM plans to issue warrants

OSIM International is proposing a renounceable non-underwritten rights issue of warrants to raise net proceeds of about $12 million.

The healthy-lifestyle products group said yesterday it plans to issue up to 136.6 million warrants priced at 9 cents each. Each warrant carries the right to subscribe for one new OSIM share at an exercise price of 35 cents.

The warrants will be offered to shareholders on the basis of one warrant for every four shares held. The company intends to use the net proceeds of about $12 million from the warrant issue for general working capital and other purposes.

Said OSIM founder and CEO Ron Sim: 'The outlook of the healthy-lifestyle industry is positive and I believe that we are in a great position to build and transform OSIM into a global brand over the next few years. This fund-raising gives us the capital to accelerate the growth of our core business.'

Mr Sim, who owns about 53.32 per cent of OSIM, has given the company an irrevocable undertaking to subscribe for all the warrants representing his allotment under the issue, as well as all the remaining warrants not taken up by other shareholders.

Noting the current market weakness, Mr Sim said: 'I feel very strongly that our share price is undervalued. With the warrants exercise price fixed at the current share price level, the warrants offer all our shareholders the opportunity to enjoy potential equity upside in the medium term as OSIM continues to grow.'

OSIM shares, down 41 per cent so far this year, closed unchanged yesterday at 35 cents.

The company has appointed DBS Bank as the manager for the warrants issue. In view of Mr Sim's irrevocable undertaking and the savings in respect of underwriting fees, OSIM said it has decided not to have the issue underwritten.

OSIM saw its net profit fall 91 per cent from $33.8 million in 2006 to $3.1 million in 2007 as it grappled with raising the profitability of its US unit Brookstone.

'I believe the fundamentals of the business are strong as we expand the OSIM brand to more major cities globally. China will continue to grow and our US business will get better,' Mr Sim said.

ComfortDelGro sets new goal of 70% overseas revenue

TO mark its fifth anniversary, ComfortDelGro Corp has set a target of achieving 70 per cent of annual turnover from overseas operations within five to seven years.

When the land transport giant was formed five years ago after the merger of Comfort Group and DelGro Corp, its mid-term target was to derive 50 per cent of total revenue from abroad. It is almost there. For the year ended Dec 31, 2007, overseas operations accounted for 47 per cent of group turnover and 46 per cent of group operating profit.

Its record overseas turnover of $1.4 billion was thanks to strong performances by bus operations in the UK, Sydney and Shenyang, and taxi operations in the UK and Beijing.

'As we celebrate our fifth anniversary, we have to ask ourselves how we are going to sustain and further grow our business in today's highly competitive and fast-changing landscape,' ComfortDelGro chairman Lim Jit Poh said at a gala dinner yesterday.

'My board is not just satisfied with our present achievement. We are hungry and want to do more. We are now setting ourselves a new target, increasing our overseas turnover to the next hurdle of 70 per cent of our total turnover within the next five to seven years.'

He said that although this will not be easy to achieve because the group is now starting from a much larger base, it is a target that must be set.

Since its formation, ComfortDelGro has adopted an aggressive overseas expansion strategy to become the world's second-largest land transport company today. It has a global fleet of more than 41,000 vehicles and 22,000 staff. It operates in 23 cities across seven countries - Singapore, China, the UK, Ireland, Australia, Vietnam and Malaysia. In terms of the number of countries, the group has added only one - Australia - compared with five years ago. But the difference is that its presence in each country today is huge.

ComfortDelGro has so far invested $791.9 million overseas. The bulk, $309 million, is in China, followed closely behind by the UK and Ireland with $294 million. Australia is a fast-growing market and third at $176.5 million, while Vietnam and Malaysia account for $8.5 million and $4 million respectively.

'From humble beginnings, ComfortDelGro Corporation has grown into a multi-modal, multinational land transport operator,' said Minister in the Prime Minister's Office Lim Boon Heng, who was guest-of-honour at yesterday's dinner. 'It is not just number one in Singapore. It is number two in the world.'

He called ComfortDelGro a 'Singapore success story' and said it has the best global footprint: 'It has grown its businesses and positioned itself well in different markets. It has stayed focused on its core business and built upon its strengths to the benefit of the communities in which it serves.'

SembCorp in JV to build China water recycling facility

SEMBCORP Industries yesterday signed an 80:20 joint-venture agreement with Zhangbao Industries Co to build, own and operate an industrial wastewater recycling facility in the Zhangjiagang Free Trade Zone in Jiangsu, China.

The joint-venture company, Zhangjiagang Free Trade Zone SembCorp Water Recycling Co, will build a 40,000 cubic metres per day industrial water recycling facility in the free trade zone. Investment cost is about 112.2 million yuan (S$22.1 million) and completion is expected in the first half of 2009.

The company has a 50-year concession for exclusive rights to supply recycled water including demineralised water to industries in the zone. Further expansion of the facility is expected as the zone develops.

This will be SembCorp's third water management project in Zhangjiagang. Its first project is a 20,000 cu m per day wastewater treatment facility. Its second, a 15,000 cu m per day high- concentration industrial wastewater facility, is currently being built.

Both the second and third projects will be part of a demonstration project under a memorandum of understanding between China's Ministry of Construction and Singapore's Ministry of Environment and Water Resources to showcase Singapore's expertise in water management.

This latest project brings SembCorp's investments in Zhangjiagang to almost 300 million yuan - more than three times the initial investment of 88 million yuan in 2005, said SembCorp president and CEO Tang Kin Fei.

'Together with SembCorp's other beachheads in Shanghai, Nanjing, Tianjin and Shenyang, the expansion of our presence in Zhangjiagang will also provide further growth for our water business in China. We hope to build on the success of this third water project to broaden our offer of integrated water solutions to other customers and chemical parks in China,' he added.

SembCorp's joint-venture investment is expected to be funded through a mixture of equity and a commercial loan. The contract is not expected to have a material impact on the earnings and net tangible assets per share of the group for the current financial year.

Swiber raises $100m in S$ bonds

TO better cater to its growing oil and gas deals, niche offshore services provider Swiber Holdings has raised another $100 million in the Singapore bond market to fund its continued fleet expansion.

Swiber's latest bond issue was a success despite the 'difficult market conditions', Raymond Goh, its chairman and chief executive said.

It follows the firm's inaugural Singapore-dollar bond issue last August, which raised $108.5 million under a $300 million multi-currency medium term note programme which Swiber set up last July. Swiber had earlier raised $120.4 million in a private placement of new shares in June last year.

It has so far deployed the monies raised into buying vessels like sub-sea support craft and deep-water anchor handling tugs as well as offshore derrick cranes.

The latest bond issue - for which OCBC Bank was the sole lead manager - has a maturity of three years and is split equally between a floating rate tranche and a fixed rate one, together bearing an interest rate of about 4 per cent per annum.

The successful issue underlines Swiber's credit strength as well as investors' warm reception to Singapore dollar bonds in the oil and gas sector which are in scarce supply.

OCBC's head of capital markets at the group's investment banking division, Tan Lay Hoon, said: 'Swiber's financing strategy of issuing in both floating and fixed rate tranches was critical in the success of the bond issue.

'By penetrating both the fixed and floating rate asset classes of investors, Swiber was able to broaden its investor reach, and strengthen its relations with both bank lenders and traditional fixed income investors.'

Swiber's Mr Goh said: 'With this bond issue, Swiber continues to broaden our investor base in the bond market. This helps to strengthen Swiber's financial flexibility and funding access in support of our growth strategy.'

He added: 'Not only did we meet our size target, we have also managed to capitalise on the declining interest rate environment to raise very cost-effective funding.'

The latest projects which Swiber looks set to secure include a US$127 million project to build various offshore structures for the oil and gas industry in the Arabian Sea, off India, and another US$50 million deal to install platforms and pipelines in the Gulf of Thailand. Swiber earlier this month signed letters of intent for these deals.

Yangzijiang to buy rest of shipyard for $517m

YANGZIJIANG Shipbuilding, which owns 75.19 per cent of Jiangsu New Yangzi Shipbuilding (JNYS), is buying the remaining 24.81 per cent for about 2.63 billion yuan (S$517.67 million).

Yangzijiang said yesterday the acquisition plays a critical part in its plan to build larger vessels, offshore vessels and oil tankers, which can generate better margins.

JNYS is involved in shipbuilding and maintenance, and processing and manufacturing of structural steel products.

Yangzijiang will pay for the acquisition by issuing 352.6 million new shares at about 85.4 cents each, amounting to about 301.27 million yuan. A further 216.4 million yuan will be paid in cash. This will be funded from proceeds of initial public offer in April last year.

Illustrating the financial effects, Yangzijiang said its net tangible assets post-acquisition will increase from 3.79 billion yuan to 5.32 billion yuan. Net profit will remain the same, while earnings per share will fall from 15.94 cents to 14.31 cents.

JNYS was valued at 16 billion yuan by an independent valuer, Yangzijiang said. The stake is therefore valued at 3.97 billion yuan, and Yangzijiang's purchase price is a 33.8 per cent discount to the value. JNYS reported a loss of 41.94 million yuan for the financial year ended Dec 31, 2007.

Raffles Edu buys China college

RAFFLES Education Corp is buying a full-time privately run college in China's Anhui province.

Under an agreement signed yesterday for the proposed purchase, Raffles Education, through three subsidiaries, and Shanghai Shengxin Commercial Consulting Co Ltd will take over Wanbo Technology Vocation College through the full acquisition of Hefei Wanbo Education Management Co Ltd for 208.5 million yuan (S$41.1 million). The three Raffles Education units will own 99 per cent of Hefei Wanbo, with the remaining one per cent going to Shanghai Shengxin.

Payment for the acquisition will be made in five instalments based on agreed milestones, with the last instalment not later than March 31 next year.

Raffles said that its investment will be funded either through external financing, internal resources or a combination of both.

Yesterday, its share price rose to an intraday high of $1.03 before finishing at $1, up 4 cents from the previous closing price. Some 8.2 million shares changed hands.

The Wanbo college runs diploma courses for science majors, literature and art. As at Aug 31 last year, it had 5,930 students on its enrolment, all of whom are also boarding on the campus.

Raffles said that the proposed deal is part of its strategy to expand its footprint in key strategic cities in China, and is complementary to the firm's business there.

'As the Wanbo college provides a three-year diploma programme, the proposed acquisition will enable the company and its subsidiaries to develop the vocational and technical education areas and enhance the group's range of educational offerings in the PRC,' Raffles said.

Conditions for the takeover include the completion of the financial and legal due diligence exercise to Raffles' satisfaction, the release of all encumbrances over the equity and no changes to the current laws, regulations or policies in China that could prohibit the transactions under the sale and purchase agreement.

For the second quarter ended Dec 31, 2007, Raffles reported a net profit of $16.3 million, up 55.1 per cent year-on-year. Revenue for the quarter rose 43.5 per cent to $39.3 million.

STX Pan Ocean to set up S'pore unit for LNG operations

KOREAN bulk shipper STX Pan Ocean is getting more involved in the liquefied natural gas (LNG) business with the setting up of a new Singapore unit, STX Pan Ocean LNG, to deal in LNG operations and ship financing for the introduction of LNG carriers. STX Pan Ocean intends to invest US$60 million in the subsidiary, with funding from internal resources.

The purchase of the LNG carriers will be financed through bank borrowings from BNP Paribas. The loan will be secured by a guarantee from STX Pan Ocean for US$167 million for a period of 12 years from the date of delivery of the first LNG carrier, which is targeted to be in May.

The company will also enter into a novation agreement with STX Pan Ocean LNG for the novation of the existing shipbuilding contract for the construction of a 153,000 CBM LNG carrier with Hanjin Heavy Industries & Construction for a contract price of US$37.25 million from STX Pan Ocean to STX Pan Ocean LNG. This is equivalent to 17 per cent of the shipbuilding contract.
A novation is typically the process by which a newly formed corporation assumes the pre-incorporation liabilities incurred by its founders and must be agreed upon by all parties of the original agreement.

The establishment of the subsidiary is not expected to have any material effect on the net tangible assets per share or earnings per share of the company for the current financial year ending Dec 31, 2008.

STX Pan Ocean shares closed four cents higher at $2.90 yesterday.

AnnAik drops 1-for-4 bonus issue plan

STAINLESS steel products maker AnnAik Ltd announced yesterday that it will not go ahead with a proposed 1-for-4 bonus issue because of regulatory compliance. It said that it cannot comply with Rule 838 of the SGX listing manual which states that a company must satisfy the exchange that its daily weighted average price, adjusted for the capitalisation issue or subdivision of shares, will not be less than 20 cents. The firm said its share price during the past month has been adversely affected by the weak market sentiment.

StarHub launches Int'l Ethernet service

STARHUB, Singapore's second largest info-communications provider, has announced the launch of its International Ethernet (IE) service that enables businesses in Singapore to deploy high-quality data, IP and voice/VoIP solutions in Asia and the US using StarHub's high-bandwidth, scaleable and secured IE connection. The telco said the launch of this service follows its success in connecting Singapore businesses via its domestic Ethernet Leased Line services since 2003.

M1 offers discounts of up to 35%

MOBILEONE (M1) Ltd, Singapore's smallest wireless operator, will cut prices by as much as 35 per cent for users with multiple connections to retain customers before a rule change lets people keep their number while switching carriers. Users with at least three mobile-phone or high-speed Internet subscriptions will get discounts of 25 per cent to 35 per cent from today, M1 said in a statement to the Singapore Exchange yesterday.

SingTel charity drive exceeds target

SINGTEL said the SingTel Touching Lives Fund, its philanthropy programme, raised a total of $2.4 million in 2007, exceeding its target commitment of $2.3 million.