Singapore Corporate News - 25 Apr 2008

Venture Corp profit slumps 20.3% in Q1

MAJOR losses from collateralised debt obligation (CDO) investments continue to dent Venture Corporation's profits, pulling its net income down by 20.3 per cent in the first quarter of this year.

Net profit attributable to equity-holders for the three months ended March 31 fell to $56.3 million from $70.7 million a year earlier. The plunge was attributed largely to a mark-to-market charge of $20.7 million from Venture's CDO investments that were hit by the US credit crunch.

'This (fair-value) adjustment is quite significant. Without this, the results would have been quite favourable,' Venture chairman and chief executive Wong Ngit Liong said at its results briefing yesterday.

'It's unfortunate that many years ago our previous CFO went into this (CDO investment). It's something we shouldn't have gone into but we will deal with it and manage it,' he said.

Venture's first-quarter revenue dipped 3.1 per cent to $939.1 million compared with the previous corresponding period, while Q1 earnings per share dropped to 20.5 cents from 25.9 cents a year earlier.

Although the company's revenue is fully pegged to the declining greenback, Mr Wong said Venture has not suffered major losses because it has been 'managing its foreign exchange well'. For Q1 2008, it had a foreign currency exchange adjustment gain of $4.1 million, lower than the previous Q1's $6 million.

'We are quite prepared for any further decline in the US dollar of up to 5 per cent. We have all the mechanisms to ensure that we can come out favourably,' Mr Wong said.

And while the US is on the fringe of a bear market, Mr Wong maintains that there has been no 'adverse impact' on Venture's business so far. 'Most of the impact has been felt in the consumer area. We do very little business in the consumer space,' he explained.

Venture makes printers for Hewlett-Packard, as well as testing equipment for Agilent Technologies and point-of-sale solutions for companies like NCR Corp.

In Q1, sales from the company's printing and imaging business suffered a 19.7 per cent drop due to product delays. However, this segment continues to be the main income driver, accounting for 25.6 per cent of the quarter's turnover.

Computer peripherals and data storage products contributed 20.2 per cent, while retail solutions and industrial offerings took up 19.5 per cent. Networking and communications accounted for 18.3 per cent of sales and the remainder was made up of products like test and measurement tools, as well as medical devices.

Venture said it is 'cautiously optimistic' about its prospects, adding that signs from customers point to a favourable outlook for the rest of 2008.

'There are signs that volume is coming. We have seen signs that things are recovering towards the end of the first quarter,' Mr Wong said.

Venture shares closed 1.8 per cent down at $11.72 yesterday.

Keppel Land Q1 net profit down 3.5%

KEPPEL Land yesterday posted net earnings of about $60.3 million for the first quarter ended March 31, 2008, down 3.5 per cent from the corresponding period last year.

Earnings per share for the quarter fell to 8.4 cents from 8.7 cents.

The results were helped by a $23.1 million writeback of provisions made earlier for properties held for sale, mostly on Park Infinia at Wee Nam condo which received Temporary Occupation Permit at the end of Q1 2008. For Q1 2007, the writeback of provisions for properties held for sale was $13.34 million lower at $9.76 million.

Profit after tax and minority interest (Patmi) from property trading fell 13.1 per cent to $49.1 million due to the completion of several projects in Singapore and overseas, and reduced profit contribution from Marina Bay Residences (which was being developed by an associated company). In Q1 2007, an initial 20 per cent profit for this project was recognised upon signing of the sales and purchase agreements. Keppel Land also said that property trading posted a lower contribution in Q1 2008 as launches were held back due to market conditions brought on by US sub-prime problems.

Patmi from property investment fell by 33.9 per cent to $7.6 million in Q1 2008.

However, fund management activities achieved a higher Patmi of $4.2 million in Q1 2008 compared with $0.7 million in Q1 2007, on the back of higher management fee income from a larger portfolio of assets under management by K-Reit Asia (arising from the acquisition of a one-third stake in One Raffles Quay) and Alpha Investment Partners.

Keppel Land's Q1 sales slipped 7.6 per cent year-on-year to $273.1 million. The lower turnover was due largely to the completion of Urbana and The Belvedere in Singapore, as well as The Waterfront in China during the last financial year, and hence no sales were recognised in Q1 2008, Keppel Land said.

The group will monitor the market closely and launch Marina Bay Suites and the second phase of Reflections at Keppel Bay 'when market conditions are more favourable', the company said in its results statement.

In late January, it had indicated that Marina Bay Suites would be launched after Chinese New Year, within the first quarter. That itself was a delay from the earlier launch target of before Chinese New Year.

Keppel Land said that Jakarta Garden City, a gated residential township in eastern Jakarta was soft launched early last month and 76 per cent of the initial 191 landed homes released have been sold. In India, marketing is slated to begin in the second half of this year for Elita Horizon, a 1,142-unit condo in Bangalore.

As reported earlier, over 50 per cent of the 2.9 million square feet of total net lettable area at Marina Bay Financial Centre (MBFC) have been pre-committed. Over the last few months, about 150,000 sq ft were taken up, mainly by Barclays and Amex.

Keppel Land said that its other upcoming Ocean Financial Centre has secured financing at an attractive rate and appointed the main contractor.

OSIM narrows Q1 loss to $13.2m

OSIM International posted a net loss of S$13.2 million, or 2.44 cents a share, for the first quarter ended March 31 this year.

The first-quarter deficit was about 24 per cent lower than in the previous corresponding period, when the net loss was S$17.3 million or 3.19 cents a share.

But the loss for the healthy-lifestyle products group was a turnaround from the S$30.17 million net profit it saw for Q4 ended Dec 31 last year.

Q1 revenue slipped to S$115.6 million from S$121.3 million a year earlier.

OSIM's Q1 share of losses from associated and joint-venture firms fell to S$12.7 million from the previous corresponding period's S$14.4 million.

The group, which equity accounts the results of OSIM Brookstone, said the US unit's Q1 revenue rose 8 per cent to US$89.8 million. The unit reported a loss of US$13 million from continuing operations, up from the previous corresponding period's US$11.7 million loss.

Brookstone achieved its eighth consecutive quarter of same-store growth.

OSIM is upbeat about Brookstone's future, as its closest competitor in the US market, Sharper Image, recently declared bankruptcy.

'Now there is a clear path and opportunity to build our business in the US for the mid to long term,' said OSIM's chief financial officer Peter Lee.

To achieve better profitability, OSIM has begun a programme to rationalise smaller, unproductive outlets and down-size bigger stores.

It hopes to open more stores in China - its number one market, which now accounts for 20 per cent of overall turnover.

'We are optimistic about the group's performance in 2008 despite challenging global conditions,' said OSIM chief executive Ron Sim. 'We will continue to develop our long-term plan to establish a global healthy lifestyle retailing business.'

'As with any longer-term endeavour, some short-term volatility in performance from quarter to quarter is inevitable. Barring unforeseen circumstances, the group expects profit after tax in FY 2008 to be higher than FY 2007,' he added.

OSIM shares closed half a cent up at S$0.315 yesterday.

CAO (S) gets 309m yuan asset injection

CHINA Aviation Oil (Singapore) has finally received its first asset injection - under an earlier rehabilitation deal - from its Chinese parent. This is a 49 per cent stake, worth 309.4 million yuan (S$59.9 million), in China's longest multi-oil pipeline, supplying Tianjin and Beijing airports, the latter being China's biggest jet fuel consumer.

And there could be more assets coming. CAO chairman Lim Jit Poh told BT 'there is nothing on the table yet' as far as asset injections from its other shareholder British Petroleum (BP) is concerned, but 'this doesn't mean we are not looking at some'.

CAO said it signed the agreement for the injection of 49 per cent of China Aviation Oil Tianjin Pipeline Transportation Centre (TSN-PEK) with parent China National Aviation Fuel (CNAF) yesterday.

The acquisition price is based on the valuation of 100 per cent of TSN-PEK at 631 million yuan. Based on its forecast FY2008 net profit of 47.3 million yuan, this represents a PE ratio of about 13 times.

TSN-PEK, headquartered at Tianjin Airport, currently transports about 88 per cent and 41 per cent of Beijing and Tianjin airports' respective jet fuel requirements.

The asset injection comes under an earlier, non-binding memorandum of understanding signed by parent CNAF and oil giant BP in December 2005 as part of CAO's rehabilitation effort. CAO ran into trouble in 2004 when it racked up US$550 million of losses from speculative trading of oil options.

CNAF president Sun Li told a news conference here: 'CNAF decided to divest 49 per cent of its interest in TSN-PEK to CAO to honour its commitment to inject suitable synergetic assets into CAO. CNAF's willingness to accept new CAO shares as full or part of the consideration also signifies our continued support for CAO and is testament to our confidence in CAO's business and growth prospects.'

The consideration for the deal will be either cash or the issuance of 37.07 million new CAO shares representing 4.88 per cent of CAO's enlarged issued and paid-up capital - or a combination of both.

The issue price of $1.6128 per share was derived from the average traded price of CAO shares in the 20 market days preceding the agreement.

CAO chairman Mr Lim said: 'We consider TSN-PEK to be a good-quality asset, given it currently has the exclusive rights to transport jet fuel from Tianjin Nanjiang Harbour to Beijing Airport via its pipeline, which is currently the most cost-effective means of transporting jet fuel to Beijing Airport.

'TSN-PEK will have steady income streams from its pipeline business, as Beijing Airport at present has the highest jet fuel consumption volume in China. There is also high potential of maximising the capacity of the 185km pipeline.'

Last year, the pipeline transported 2.3 million tonnes of oil, and is operating at 71 per cent capacity. This means it can handle even more jet fuel as demand grows at the two airports it serves, and TSN-PEK is expected to have enough capacity until 2010.

Mr Lim said the deal took 6-9 months to conclude. 'BP and independent directors including myself had a look first at the asset, which we felt was viable. We followed this up by doing our due diligence, appointing KPMG as our financial adviser and Stamford Law as our legal adviser in the process.'

CAO's 49 per cent stake in TSN-PEK is its second in a jet fuel pipeline in China, where it also has a 33 per cent stake in Shanghai-Pudong International Airport Aviation Fuel Supply Company.

In a separate announcement last night, CAO said independent director Lee Suet Fern has resigned from its board. Mrs Lee said in a letter that she enjoyed the cordiality of board directors but added: 'However, it has become, as a result of the company's approach to information flow and the management of decision making, review and oversight, increasingly difficult for me to properly discharge my duties as an independent director of the company.'

SingTel to open 5th data centre at Kim Chuan

A NEW SingTel data centre as big as 125 five-room HDB flats will open at Kim Chuan in 2010. And it promises to be one of the world's most advanced, as well as environmentally friendly.

SingTel says the 150,000 sq ft facility - its fifth in Singapore - will go up next to its existing data centre at Kim Chuan.

The Kim Chuan Telecommunications Centre 2 (KCTC-2) will offer managed hosting services to corporate customers when it opens in early 2010. Through managed hosting, a facility or computing equipment is leased by businesses to run their IT operations. The provider also supports clients in running their IT operations.

KCTC-2 will swell SingTel's data centre capacity in Singapore to more than 500,000 sq feet.

A notable feature of the centre is that it will comply with the Building and Construction Authority's Green Mark scheme, which evaluates buildings based on environmental friendliness and energy efficiency. KCTC-2 will be the first SingTel data centre to comply with these criteria.

It will also adhere to data centre consultant Uptime Institute's Tier-4 standard, which is widely recognised as the industry's most stringent data centre standard.

According to SingTel corporate communications manager Dylan Tan, KCTC-2 will be the first SingTel data centre to achieve such a rating.

Data centres that are rated Tier-4 - Uptime's highest rating on its scale of four - must have fail-safe measures such as multiple power and cooling equipment systems, advanced fire suppression systems and other protection. These provisions ensure a centre remains operational under almost all conditions.

Bill Chang, SingTel's executive vice-president for business, said SingTel expects strong demand for KCTC-2's facilities. He said its strategic location, state-of-the-art infrastructure and well-rounded offerings will be key selling points.

The local market for managed hosting services is expected to be bullish, according to SingTel. It says the growth of high-performance computing and Singapore's Intelligent Nation 2015 (iN2015) government initiative will drive demand for new data centre facilities.

First Ship Lease Trust to pay out US$12.95m in Q1

DIVERSIFIED shipping trust First Ship Lease (FSL) Trust has announced a distribution of US$12.95 million for the first quarter ended March 31, 2008 - working out to 2.59 US cents per unit.

There were no comparative figures for the previous corresponding period as FSL was constituted and listed in March last year. Compared with the preceding fourth quarter's 2.42 US cents, the Q1 DPU of 2.59 US cents was 7 per cent higher. This came as FSL added ships to its portfolio.

Q1 revenue rose 10.1 per cent from Q4 to US$16.6 million as the impact of the purchase and concurrent leaseback of two product tankers from Groda Shipping and Transportation in November was fully realised during the quarter.

The distribution translates into an annualised DPU of 10.36 US cents, 7 per cent higher than the annualised DPU of 9.68 US cents in the preceding quarter. Based on FSL Trust's closing unit price of S$1.10 on April 22, this translates into a distribution yield of 12.7 per cent per annum.

Trustee manager FSL Trust Management (FSLTM) said it will continue to pursue acquisition opportunities as part of its strategy to grow the trust. To support this effort, it has broadened the transaction origination platform by hiring a head of sales (East of Suez), who is joining the management team next month.

FSLTM is confident of achieving the previously announced acquisition target of US$300 million for financial year 2008. In fact, with the recent US$140 million Geden Lines transaction involving two Aframax class crude oil tankers announced earlier this week, about 50 per cent of the acquisition target has already been achieved.

'In view of the greater difficulty in raising conventional bank financing in the current tight credit environment, ship operators are turning increasingly to alternative financing solutions such as leasing. We are bullish in meeting the balance of the acquisition target of US$160 million over the next eight months of this year,' said FSLTM chief executive officer Philip Clausius.

Funding for these future acquisitions will be from the newly secured US$200 million credit facility, of which about US$150 million remains undrawn.

Ascott Trust Q1 payout per unit up 47%

ASCOTT Residence Trust (ART) achieved a unitholders' distribution of $14.17 million for the first quarter ended March 31 - a 76 per cent rise from a year earlier. And distribution per unit (DPU) rose 47 per cent to 2.33 cents.

The trust said its serviced residences continued to benefit from strong demand for accommodation from business travellers in Asia. The improved operating performance of its properties and contributions from new acquisitions also boosted its performance.

Serviced residences posted 15 per cent growth in revenue per available unit (RevPAU) overall, led by a strong RevPAU increase of 29 per cent in Singapore and higher RevPAU in China, Indonesia, the Philippines and Vietnam.

In addition, rental housing properties in Tokyo have performed well since they were acquired in December last year, achieving average occupancy of about 90 per cent, according to ART.

'We will continue to focus on maximising asset yields to drive organic growth and making yield-accretive acquisitions to deliver stable and growing returns to unitholders,' said Lim Jit Poh, chairman of Ascott Residence Trust Management Ltd.

Added Chong Kee Hiong, ARTML's chief executive officer: 'Our strategy of maintaining a balance of properties in stable as well as emerging markets in the Pan-Asian region will continue to provide a high degree of income stability for the portfolio.'

Upon completion of its latest acquisition in Perth, expected in the current Q2, the trust's portfolio will expand to $1.52 billion, comprising 37 properties with 3,550 units in 11 cities across seven countries.

SP Chemicals profit slides 14% in Q1

SP CHEMICALS has reported a 14 per cent decline in first-quarter net profit to 68 million yuan (S$13.2 million). This was despite revenue rising 61 per cent to 686 million yuan for the three months ended March 31.

Dayen in 1.1b yuan Inner Mongolia deal

DAYEN Environmental yesterday said it has signed a memorandum of understanding to invest in a 50 per cent stake in five sewage treatment plants and water supply infrastructure with Hohhot Chunhua Water. The deal, estimated to be worth 1.1 billion yuan (S$213 million), is facilitated by The Great Town Group. The investment in Inner Mongolia includes five sewage treatment plants scheduled for completion by the year's end, and a water treatment and delivery infrastructure. Dayen also said that The Great Town Group executive director Kam Yu has subscribed for a placement of 12 million Dayen shares.

Frasers Centrepoint Trust distribution up

FRASERS Centrepoint Trust has posted a 17 per cent rise in Q2 distributable income to $12 million. For the three months ended March 31, distribution per unit is 1.75 cents, up from 1.67 cents a year ago.