Singapore Corporate News - 2 Apr 2008

Hyflux bids for world's largest desalination plant

Hyflux said yesterday it is bidding for a US$500 million contract to build a seawater desalination plant in Algeria, in an announcement made in response to news reports.

But it may not yet have secured the contract for sure, as the reports imply.

'Singaporean company Hyflux Ltd will build a water desalination plant for an investment of US$468 million in the Oran region, western Algeria, within the next 36 months with a capacity of 500,000 cubic metres per day,' said a Thompson Financial report, quoting the APS press agency.

Hyflux confirmed details on the plant's size and location.

But while 'it has been advised that it is the most competitive bidder', out of the five international bidders, 'the official result of the successful bidding has not yet been released by the relevant Algerian authority', it said.

Asked when the official result would be released, Hyflux said it was unable to comment at this stage.

The plant will be the world's largest seawater desalination plant using membrane technology, as well as in terms of volume production, with a designed capacity of half a billion tonnes a day, the group also said.

It will make further announcements when it receives definite information on the plant contract, said Hyflux, which is already in a joint venture to build and operate a US$238 million desalination plant in Tlemcen, Algeria.

Construction of the Oran plant would take three years, starting from the date of the project achieving financial close.

According to Thompson Financial, Hyflux will execute the project via a joint venture, MTM Spa, which will be 51 per cent owned by Hyflux and 49 per cent owned by the Algerian Energy Company, which was created in 2001 by Algeria's state oil company Sonatrach and state electricity and gas company Sonelgaz.

Algeria aims to build 13 desalination plants by 2010, with total capacity of some 2.3 million cubic metres per day, to provide drinking water for urban centres.

Hyflux shares closed eight cents up yesterday at $3.11.

Design Studio, Depa form JV for regional mega jobs

SINGAPORE-listed furnishing and fit-out specialist Design Studio Furniture Manufacturer has joined hands with Dubai's Depa United Group, one of the world's largest interior fit-out contractors, to form a joint-venture company for mega jobs in Singapore and the region.

DDS Asia Holdings, with a paid-up capital of some $10 million, will be 45 per cent-owned by Design Studio and 55 per cent by Depa.

It will bid for comprehensive fit-out projects of more than $50 million in size - mainly in the hotel and hospitality sectors - in Singapore, Malaysia, Vietnam, Indonesia and Thailand.

Depa, which has a 16 per cent stake in Design Studio, is the world's fifth largest end-to-end interior contractor, and the largest in Asia.

It is a leader in the Middle East and North Africa, where its key projects have included Burj Dubai, Emirates Palace Hotel in Abu Dhabi, and the Four Season's group hotels in Doha, Cairo, Sharm El Sheikh, San Stefano and Mumbai.

Depa's chief executive officer Mohannad Sweid said Depa delivers one completed hotel project every three weeks, one store every four days, and one yatch and 100 apartments every month.

He added that the new joint-venture company would have the financial firepower to bid for mega projects around the region which many existing fit-out specialists would not be able to match due to financial constraints.

'When you bid for mega projects, you need the financial resources and bank facilities which not only cover the performance bond required of contractors, but also the funds to tide you over during the initial start-up phase when you have to pay upfront to suppliers. This can prove to be very onerous on many companies,' he said.

He added that Depa not only had deep pockets, but also access to banking facilities which would back DDS Holdings in its bid for such huge projects.

Design Studio, on its part, will provide local and regional market knowledge and make available its production facilities for wood furniture and fittings.

DDS Holdings will kick off by bidding for large projects in Singapore. Two projects which it has its eyes on are the Integrated Resort developments here.

Design Studio has already bid for the room fit-outs for two of the three hotels at the Marina Sands site. The results will be announced soon.

Design Studio's executive chairman and CEO Bernard Lim said that his company would be a key supplier of furniture and fittings to the joint-venture company.

'We have facilities in Singapore and Malaysia which are currently running at some 50 to 60 per cent capacity,' he said.

Design Studio, whose current projects include the Capella Sentosa, Ritz-Carlton Dubai and the Crown Plaza at Changi's Terminal 3, has an orderbook of $152 million and cash in excess of $22 million. It will fund the joint-venture investment with its own cash.

Meanwhile, Depa - whose net profit last year was some AED160.5 million (S$60.2 million) on contract income of AED1.4 billion - is headed for a listing in London and Dubai next month.

Wilmar gets nod to raise its products' prices in China

THE Chinese authorities have given Wilmar International the go-ahead to raise the price of its consumer pack cooking oil products but the recent sharp drop in the region's edible oil prices appears to have prevented the palm oil giant from imposing an immediate price hike.

In a statement yesterday, the group said that the National Development and Reform Commission, an economic planning body in China, has approved its application for a 10 per cent price increase. BT understands that the approval came with no conditions or time limits attached.

But Wilmar, citing the recent sharp drop in edible oil prices, said that it 'will monitor prices closely before determining any price revision'.

Palm oil prices in Malaysia fell sharply yesterday after news of increased soybean planting in the United States this year. This dragged down shares of palm oil companies in the region.

Wilmar announced the application early last month, citing the then sharp increase in vegetable oil prices. The announcement was made in response to a BT article the previous day on an imminent application.

China's temporary price intervention measures on basic food items were imposed in January. Under the measures, 12 companies, including Wilmar, have to seek approval before raising prices of such items, including cooking oil, instant noodles and milk.

Wilmar owns some of the top edible oil brands in China. According to analysts, the branded cooking oil business makes up between 15 and 20 per cent of Wilmar's earnings.

Palm oil shares across South-east Asia fell yesterday on the news of falling palm oil prices. Wilmar's share price reached an intra-day low of $3.98 before ending the day at $4.08, 10 cents or 2.4 per cent down. Two other Singapore-listed plantation stocks, Golden Agri-Resources and Indofood Agri, lost 9 per cent while First Resources fell 6 per cent.

Mercator buys bulk carrier for US$65.5m

MOVING into a more aggressive phase, India-focused dry bulk carrier Mercator Lines (Singapore) has made its first vessel acquisition since listing in December last year.

Mercator yesterday announced it is buying the 1997-built, 69,221 dwt geared Panamax size dry bulk carrier YK Titan from Panama's Tanagra Shipping for US$65.5 million. The vessel is currently hired on a time charter-in basis by Mercator. The tentative proposal is to finance the acquisition from Mercator's initial public offering proceeds.

'This acquisition is our first since listing and is in line with our strategy of capitalising on the vast opportunities in both India and other high growth markets. We see great growth opportunities in the Indian markets, particularly in the area of coal imports into India,' said Mercator managing director and CEO Shalabh Mittal.

The vessel's geared feature, which enables it to load and unload cargo independently of shore equipment, gives it an advantage over gearless vessels through the ability to operate in ports with underdeveloped infrastructure, such as the Indian and Indonesian ports in which Mercator regularly operates.

'Our selection of geared vessels provides us with a distinct versatility that enhances trading flexibility at the ports of the Indian sub-continent where port facilities remain underdeveloped. Mercator has the largest fleet of geared Panamaxes amongst the Indian-owned shipping companies, hence providing us with a strong competitive edge in the Indian markets,' said Mr Mittal.

'Additionally, the inclusion of YK Titan is also in line with our strategy to establish a stronger presence in the global dry bulk shipping segment, which is experiencing strong demand. With increased availability of iron ore supply, particularly from Australia and Brazil, and a strong iron ore demand from China, the global seaborne trade in iron ore looks set to expand, thereby providing us with ample growth opportunities.'

The acquisition of YK Titan will expand Mercator's owned fleet to eight ships comprising four gearless Panamax and Kamsarmax ships and four geared Panamaxes. The acquisition is expected to have a positive impact on Mercator's net tangible assets per share, earnings per share and operating results for the current financial year ending March 31, 2009.

Star Cruises to halt quarterly reporting

STAR Cruises, which is quoted on Singapore's Clob International, will stop its voluntary quarterly reporting of financial results from the current financial year.

The cruise ship operator, which is listed in Hong Kong but quoted on the Singapore over-the-counter market, will instead stick to mandatory half-yearly and annual financial reporting under Hong Kong listing rules.

Singapore Exchange-listed companies with a market capitalisation exceeding $75 million are required to perform quarterly reporting.

But Star Cruises, which is exempted because it is only quoted on the over-the- counter market, has been complying with this rule on a voluntary basis.

In its announcement yesterday, it said the preparation and release of quarterly reports is unduly costly and burdensome for the company.

Star Cruises also said information provided under half-yearly and annual reporting and disclosure requirements are sufficient and timely and that quarterly reporting may not provide additional meaningful information.

It is also concerned that fluctuations in quarterly results may lead to unnecessary share price volatility. This happens when investors focus on short-term performance.

Star Cruises believes that its move will help in 'reserving more management time and the company's resources for operational matters and business development, which will be in the interests of the company and its shareholders as a whole'.

There has been much debate on the quarterly reporting requirement since it was introduced in Singapore in 2003.

Opponents of the rule say that it adds to companies' compliance costs and encourages short-termism, reasons that Star Cruises also cited.

Supporters, however, argue that quarterly reporting improves transparency and helps investors make better decisions.

The dissemination of quarterly results should not be seen as an increased burden because management and majority shareholders already possess the information.

Star Cruises' shares closed at 19.5 US cents yesterday, with 1.69 million shares traded for the day.

Peace Mark to seek delisting of Sincere Watch

IN AN about-turn, Peace Mark Holdings - which is taking over Singapore's home-grown Sincere Watch - said yesterday that it is looking to delist the luxury watch retailer from the Singapore Exchange. This was despite Peace Mark saying all along that it intended to maintain its listing.

Hong Kong-listed Peace Mark said yesterday in a statement: 'Having evaluated the options available to restore the minimum public float and taken into account the current market conditions, the directors of the offeror (A-A United) and the directors of Peace Mark intend to make an application to the SIC (Securities Industry Council) to seek its consent to exercise their powers of compulsory acquisition. . . and delist Sincere Watch from the main board of the SGX-ST.'

Peace Mark, which made the offer for Sincere Watch through its indirect wholly owned subsidiary A-A United, had last month said at the close of the offer that it intended to maintain its listing status, and that it did not intend to exercise its powers of compulsory acquisition for the remaining shares.

Peace Mark had added that it intended to work with Sincere Watch to restore the minimum public float to enable it to meet the shareholding requirement and maintain its listing status.

Yesterday's announcement thus signalled Peace Mark's change of intentions on Sincere Watch's listing. The Hong Kong-listed group added that further announcements will be made after it and A-A United have consulted the SIC.

Peace Mark, which operates mostly in China, had said that the acquisition of Sincere Watch will allow it to expand in the luxury segment, to expand geographically and to increase its retail network.

UE wins $85m job at Marina Bay Sands IR

UNITED Engineers Ltd (UE) said yesterday that its wholly owned unit United Engineers (Singapore) (UES) won a contract worth $85 million to provide electrical services for the hotel development at the Marina Bay Sands Integrated Resort (IR).

The contract was awarded by Ssangyong Engineering & Construction Co Ltd to engage UES as a nominated sub-contractor and came amid a slew of contracts generated by the construction of the two integrated resorts here.

Under the terms of the agreement, UES will supply, deliver, install, test and commission all electrical installation for the hotel. The work is expected to start in the second quarter this year and be completed by the fourth quarter of 2009.

The contract is expected to have a positive impact on the earnings of the group in future, UE said in a statement.

UES is an engineering company with competencies in the procurement and instrumentation of mechanical and electrical works. It has been involved in other major projects such as ION Orchard and Singapore's wastewater projects - the Changi Water Reclamation Plant and Choa Chu Kang Waterworks.

The development of the two integrated resorts here have proven to be a boon for some Singapore firms so far. Last month, another electrical engineering firm, TEE International, was awarded the contracts for North and South Podium electrical installation for the Marina Bay Sands IR for a total sum of $109.01 million.

Among the recent contracts given out, Sembawang Engineers and Constructors was also awarded a $400 million contract by Marina Bay Sands Pte Ltd to build the North Podium comprising the casino, theatres and retail arcade.

As for the other IR, Resorts World at Sentosa (RWS), communications design and production firm Kingsmen Creatives secured a $14.5 million deal last month to build props and show sets for the Universal Studios there, which is a major feature of the resort being built by RWS, a subsidiary of Genting International.

CMT issues 2-year notes

CAPITAMALL Trust, Singapore's largest property trust, said yesterday it had issued $155 million worth of two- year fixed-rate notes bearing an annual interest rate of 3.25 per cent. The notes, issued under its $1 billion multicurrency medium-term note programme, will mature on April 1, 2010. The proceeds will be used mostly for general working capital, CapitaMall said in a statement.

CapitaMall competes with other Singapore-listed real estate investment trusts (Reits) which own offices and retail malls, including Suntec Reit, Macquarie MEAG Prime and Frasers Centrepoint.

Globe Telecom sees slower revenue as inflation bites

Globe Telecom, the Philippines' second-lar-gest phone company, said yesterday that it expects slower revenue growth this year as rising oil and food prices soak up income used for texting and calling.

Globe president Gerardo Ablaza told reporters after the company's annual stockholders meeting that sales were weakening. 'It's going to be difficult to achieve the double-digit growth rate we saw last year,' he said.

Philippine economic growth is expected to ease from last year's 31-year high of 7.3 per cent as a possible recession in the US, its main trading partner, hits exports and as rising inflation crimps consumer spending.

The World Bank said yesterday that it expected growth in the Philippines to ease to 5.9 per cent this year.

Mr Ablaza said the rising price of rice, the main food staple for most Filipinos, was particularly worrisome. 'Any changes in the price of rice affects a large number of our people,' he said.

Globe's service revenues rose 11 per cent last year, helping to boost net profit 13 per cent to 13.28 billion pesos (S$440 million).

According to Reuters Estimates, Globe, owned by Singapore Telecommunications and Philippine conglomerate Ayala Corp, is expected to post a 19 per cent rise in net profit this year. Larger rival PLDT is forecast to post net income growth of 8 per cent in 2008.

Globe finished 0.3 per cent lower at 1,500 pesos compared to a 0.5 per cent drop on the general index. Globe's shares have lost over 4 per cent since the start of the year, outperforming the index, which has lost around 18 per cent in the same period.

So far, a possible economic slowdown has not dampened new mobile phone subscribers, which have grown in the first quarter at the same annual pace of 6 per cent as the fourth quarter, Mr Ablaza said.

Globe, which has 38 per cent of the mobile industry against PLDT's 55 per cent, also said that it was looking to raise 7.5 billion pesos in debt this year to partly finance capital expenditure of US$400-450 million.

Part of the financing will come from a 3-5 year loan of at least 2.5 billion pesos which Globe is currently negotiating with Standard Chartered Bank, company chief finance officer Delfin Gonzalez said. Globe has also secured a 2.5 billion peso five-year loan facility with the country's largest lender Metropolitan Bank & Trust Co earlier last month, he added.

China Printing issues Q1 profit warning

CHINA Printing & Dyeing has warned that net profit for the quarter ended March 31 could be significantly lower, with losses in a worst-case scenario. Among the reasons it cited were lower profit margins due to the weakening dollar against the yuan, rising raw material and energy-related costs, and the effect of recent snow storms on China sales.

SC Global seeks share buy-back mandate

SC Global Developments is proposing to seek shareholders' approval to make purchases of its own shares from time to time of up to a maximum of 10 per cent of its issued capital. It said that the proposed share buy-back mandate will give the company and its directors the flexibility to better manage its capital structure and cash reserves.

Furama in MOU to buy Bangkok properties

FURAMA Ltd has entered into a memorandum of understanding in Thailand to acquire Bangkok properties for hotel operations. The MOU is with Prasert Chansrichawla and his nominees. Under the agreement, both parties will hold 49 per cent share equity, with the balance 2 per cent to be held by a third party.