Singapore Corporate News - 29 Feb 2008

CDL able to weather uncertainty for next 3 yrs

THE top brass at City Developments Ltd (CDL) yesterday said the property group has 'the financial muscle to weather the current period of uncertainty even for the next three years', after announcing a record full-year net profit of $725 million.

The group sold about $6.2 billion of residential projects in 2006 and 2007, which means it has locked in, to a very large extent, handsome profits which have yet to be booked.

These substantial and better-than-expected profits will continue to be recognised progressively based on construction progress. 'Some will come in 2008, 2009, perhaps also into 2010,' CDL managing director Kwek Leng Joo said at the group's results briefing yesterday.

'Even if the market recovery should take place a little bit later than expected, I think we'll be OK,' he added.

In short, the group can afford to delay launches of new residential projects if necessary to ride out the current weak sentiment.

As a major office landlord, CDL will also benefit from the office crunch as many of its key tenant leases are up for renewal between now and 2011 - a period when office supply is expected to be limited.

In the hospitality sector, CDL's hotel arm Millennium & Copthorne Hotels has a string of hotels with a wide geographical spread - which should act as 'an insurance against a downturn in any particular geographical area', CDL executive chairman Kwek Leng Beng said.

The group also has many other attractive assets such as City Square Mall and St Regis Hotel in Singapore which it could potentially sell, boosting its bottom line.

As well, CDL has a healthy balance sheet, with relatively low net gearing of 48 per cent.

CDL posted a 106 per cent jump in group net profit for the year ended Dec 31, to a record $725 million. However, had it adopted the revaluation policy of its peers, its bottom line would have surged to $2.84 billion after factoring in about $2.1 billion of fair value gains on investment properties.

The $2.84 billion net earnings for the year ended Dec 31 would pip the $2.76 billion net profit posted by fellow property giant CapitaLand for the same period.

CDL's fourth-quarter net profit rose about 71 per cent year-on-year to $235 million, with revenue inching up 3.7 per cent to $765.7 million.

The group has also yet to recognise any profits for One Shenton, The Solitaire, Cliveden at Grange and Wilkie Studio, as these residential projects are still in the initial stage of construction. These projects alone account for $1.7 billion in sales value.

Even if the group defers or paces its launches, it will proceed with the construction of its projects where construction cost had been favourably secured earlier, CDL said.

It may also consider building selected projects when the construction cost stabilises at a reasonable level. It expects that when sentiment improves and the market begins to recover, there will be pent-up demand which the group will be in a position to meet.

The group is planning to launch in the first half of this year some 427 private homes in four Singapore projects - Shelford Suites, a condo on the former Lock Cho Apartments site at Thomson Road, The Quayside Isle @ Sentosa Cove and a condo at Pasir Ris.

In its results statement, CDL also said that it has an investment commitment in the private fund Real Estate Capital Asia Partners, which acquired Jungceylon complex at Phuket's Patong Beach. This is a 1.5 million sq ft mall which opened for business recently and is next to the Millennium Resort Patong Phuket.

CDL also reckons it has 'ample time' to review its strategy for its office portfolio, given improving office rental yields.

Its options include retaining its office properties at a low cost base, monetising the portfolio and/or extracting maximum value by selling its assets wholesale or individually. Another option would be to spin off an office real estate investment trust.

The group has all along been following its conservative policy of stating investment properties at cost less accumulated depreciation and impairment losses. On adoption of Financial Reporting Standard FRS 40, the group continues to state these assets at cost less accumulated depreciation and impairment losses.

Most other Singapore- listed property groups state investment properties at fair value, as permitted by FRS 40.

CDL's full-year revenue for the year ended Dec 31, 2007, rose 22 per cent to $3.1 billion, also a record for the group.

The group also gave a segmental breakdown of profit before tax, including share of after-tax profit of associates and jointly controlled entities, which showed that pre-tax from property development more than doubled from $225.8 million in 2006 to $506.3 million in 2007.

Pre-tax profit from hotel operations fell from $396.6 million in 2006 to $285.4 million in 2007, mainly because the 2006 figure had included a $150.9 million one-off gain from the sale of long leasehold interests in four Singapore hotels to CDL Hospitality Trusts.

Profit before tax from rental properties more than quadrupled from $30 million in 2006 to $133.6 million in 2007.

CDL is proposing a final dividend of 7.5 cents per share as well as a special final dividend of 12.5 cents per share. Both payouts are tax exempt.

Chemoil charts expansion plans

MARINE fuel supplier Chemoil Energy plans to expand its Arabian Gulf and Singapore terminals and wants to build a terminal in Panama, chairman and chief executive Michael Bandy said yesterday.

The projects - to better position Chemoil in major bunker ports - 'continue the growth momentum started by Bob Chandran', he said of Chemoil's founder, who died in a helicopter accident in Indonesia last month.

Mr Bandy, speaking after the inauguration of Chemoil's US$122 million, 448,000 cu m Helios Terminal on Jurong Island, said that after Helios, the next project is a US$60 million-plus expansion at Fujairah in the United Arab Emirates.

Chemoil, which now operates 100,000 cu m of tankage there, including a joint venture GPS-Chemoil terminal, will add a further 250,000-500,000 cu m in two phases over the next two years, Mr Bandy said.

In Singapore, it expects to invest a further US$15-20 million in additional tankage and modifications to its dock and jetty. But reflecting the shortage of land for oil storage on Jurong Island, 'at most we can expand Helios to 600,000 cu m', he said.

Helios is running at full capacity, with a third of its tankage used by Brazilian oil company Petrobas and 30-50 per cent by Chemoil itself. 'About half a dozen individuals have approached Chemoil to take a stake in Helios,' Mr Bandy said. The cost of building terminals here has risen 25-40 per cent since Helios was built, which crimps opportunities for new terminal operators.

Chemoil's plan for a terminal in Panama is still at exploratory stage and 'several years down the road', he said.

Finance Minister Tharman Shanmugaratnam, who officiated at yesterday's Helios opening, cited the company's founder Mr Chandran in last year's Budget speech as an example of a global player who had put down roots here.

The Helios terminal signals Chemoil's long-term commitment to Singapore's oil and chemical hub, which is poised to grow with new crackers from Shell and ExxonMobil, Mr Tharman said. 'The industry is doing exceptionally well.'

Speaking to reporters later, he said tax incentives for the industry is 'something we keep looking at' because of its importance to Singapore.

The maritime, petrochemical and refining sectors are key growth drivers that generate substantial economic spin-offs.

Fair-value gains help double OUE profit

DESPITE a decline in revenue, revaluation gains helped Overseas Union Enterprise (OUE) lift full-year 2007 net profit to $645.9 million, almost double 2006's $330.8 million.

The surge in profit attributable to equity-holders was largely due to fair-value gains of $328.9 million on investment properties as a result of the property boom in the past year.

Two properties - Overseas Union House and OUB Centre - were the major contributors.

A higher share of profits totalling $273.5 million from associated companies also helped boost last year's bottom line, OUE said.

But revenue fell 2.3 per cent to $169.8 million, mainly due to lower dividend income, the company added.

Basic earnings per share for the year came in at $3.29, up from $1.87 a year earlier.

Revenue from the hospitality division, which covers the hotels OUE owns and manages, climbed to $155.2 million, from $138.2 million in 2006. This was attributed to higher room and occupancy rates amid buoyant demand.

For example, Meritus Mandarin Singapore's revenue per available room rose 29.6 per cent to $204 in 2007, and hotels in China, such as Meritus Shantou and Meritus Mandarin Haikou, enjoyed similar gains.

Looking forward, OUE said it remains 'cautiously optimistic' about the outlook for Singapore's real estate market despite the government's recent decision to cut the country's 2008 gross domestic product forecast to between 4 and 6 per cent.

'The current macro-economic factors, such as US sub-prime mortgage issues, financial market volatility and rise in global inflation, will cast a cloud over general economic and business conditions for at least the first half of 2008,' OUE said. 'Therefore, there is no assurance that the group will continue to achieve similar profitability as experienced in 2007.'

Wilmar seeks to raise its products' prices in China

PALM oil giant Wilmar will apply to the Chinese government 'soon' for permission to increase prices for its cooking oil products in that country, chairman and chief executive officer Kuok Khoon Hong said yesterday.

'We're still profitable now, we're still covering raw material (cost),' he said at a results briefing. But the company is 'almost' at the tipping point. 'China's economy is growing at 10 per cent, but higher prices mean consumption is not going that high,' Mr Kuok said.

Wilmar is a major supplier of China's retail cooking oil. Earlier this year, it was named as a company that had to seek permission before raising the price of basic foods.

Wilmar said net profit for its fourth quarter to Dec 31, 2007, surged more than five-fold year-on-year to US$234 million from US$43.9 million on contributions from its June merger with Kuok Group's palm plantation and edible oils business. Revenue almost trebled to US$6.5 billion from US$2.2 billion. Included in the results was a one-off charge of US$61.5 million from a share grant given to staff of the group.

Wilmar also booked an US$88.5 million gain from changes in the fair value of its biological assets, plus a US$16 million charge arising from merger expenses and the issue of convertible bond issue. Earnings per share (EPS) were 5.16 US cents, up from 1.89 US cents. For the full year, net profit was up 169 per cent to US$580.4 million on revenue of US$16.5 billion, up 135 per cent. EPS for the full year was 12.8 US cents, up from 9.31 US cents in 2006. The company declared a final dividend of 2.6 Singapore cents per share.

All of Wilmar's key business segments recorded strong performances as prices of crude palm oil and other oils soared on strong demand. Synergies following the merger helped reduce costs, the company said.

Mr Kuok said the company's biodiesel operations will be badly affected by the rising cost of crude palm oil.

'Biodiesel did so well last year, first quarter of 2008 is still okay, but going forward it's not okay,' he said. 'It's lousy business now, but luckily last year we recovered our costs, so we're waiting for the timing to come back.' The company's biodiesel plants are currently running at about 20 per cent capacity.

Crude palm oil prices may rise even further, Mr Kuok said. 'One has to be a bit cautious. It's not a price level where you want to keep huge long positions.'

Wilmar shares closed at S$4.51 yesterday, down 35 cents or 7.2 per cent.

Banyan Tree fund gets first US$100m

BANYAN Tree Holdings, which is seeking a commitment of US$300-400 million for an Indochina real estate development fund, unveiled yesterday the first closing with three parties committing a total of US$100 million. The announcement accompanied Banyan Tree's release of fourth-quarter results, which rose 26 per cent year-on-year to S$18.4 million.

Banyan Tree Indochina Hospitality Fund, established on Jan 29, is the first real estate development fund established by Banyan Tree. It will invest primarily in the Laguna Vietnam project located in Vietnam's Chan May-Lang Co Economic Zone. It will also invest in other yet-to-be-identified projects.

The three parties, which include a Banyan Tree wholly owned subsidiary, are prepared to commit a further US$50 million, which will bring their total commitment to US$150 million, or a cap of US$50 million each.

The other two parties are HSIL Investments (a member of the HSBC Group) and a feeder fund of Nan Fang Group, a privately held real estate group in Hong Kong. The final closing date of the fund is expected to be in the third quarter of this year. Banyan said it has given HSBC Investment Banking a mandate to place partnership interests in the fund to institutional and other investors.

Banyan Tree Indochina (GP) Company Limited, a wholly owned subsidiary of Banyan Tree Holdings, is the general partner of the fund.

Banyan Tree's fourth-quarter net profit attributable to shareholders of S$18.4 million came on the back of a 33 per cent jump in revenue to S$151.4 million for the three months ended Dec 31, 2007.

Driven by its hotel operations and property sales segments, coupled with a one-off exceptional gain - in the form of a negative goodwill of S$44.5 million relating to its increased stake in a subsidiary following a rights issue - the group posted a trebling in profit after tax and minority interests to S$81.9 million from S$27 million the previous year.

The 2007 one-off gain compares with a one-off charges of S$7.7 million for Q4 2006.

Full-year earnings per share rose to 10.76 cents from 3.92 cents. The company is recommending a final dividend of 2 cents per share. Full-year revenue reached S$421.9 million, an increase of 26 per cent. Ho KwonPing, executive chairman of Banyan Tree, said: 'We are hopeful that the positive trend will continue into 2008.'

Banyan Tree shares closed trading yesterday at $1.32, up 2 cents.

SCS books $18m profit in 2007

YESTERDAY was a specially memorable day for local information and communications service provider Singapore Computer Systems Limited (SCS).

In the morning, it announced a 140 per cent jump in 2007 full-year net profit to $17.6 million, from 2006's $7.3 million. The $17.6 million includes a $3 million tax credit which the company utilised.

Later in the evening, SCS, as part of the One Meridian consortium, won the $1.3 billion contract to outsource the front-end computer network of the public sector in Singapore.

The group's net profit came on a turnover of $453.4 million for 2007, which was 21 per cent up from 2006's $375.3 million.

Tan Tong Hai, SCS' president and CEO, noted that this is the second consecutive year of profitability for the company and it has more than doubled its profit.

'We have also established better resilience in our business with more robust project health tracking and risk assessment processes. This resulted in increased profitability in our business solutions segment,' Mr Tan noted.

He added that the company has increased the service component in its infrastructure business resulting in better margins.

'We will continue to execute on the strategies that have served us well to grow shareholder value.'

On One Meridian winning the government outsourcing contract, called the Standard Operating Environment (SOE), Mr Tan added: 'Being a key local partner for One Meridian, SCS is most delighted with this win. We will do our utmost to support our consortium to deliver the project.'

Mr Tan said the experience from the SOE project will give SCS the expertise to help private companies and will also create a backlog of projects which will stand it in good stead.

The company's increase in revenue for 2007 was due to improved revenue contributions from both infrastructure and business solutions segments.

Profit before tax was $15.6 million, an increase of 38 per cent.

Commenting on the results, Mr Tan said: 'The improvement in profit was due to increased margins from Singapore operations and better management of operating costs.'

Revenue from Singapore increased by 23 per cent from $300.3 million in fiscal 2006 to $368.3 million in fiscal 2007, with growth in revenues for both Singapore's business solutions and infrastructure segments.

As at Dec 31, 2007, the group had cash and cash equivalents amounting to $38.5 million and a year- end closing order book of $267.6 million.

SCS shares ended trading yesterday at 98.5 cents, up 14 cents.

Sixfold surge in Allgreen 2007 profit

ALLGREEN Properties' 2007 net profit surged more than sixfold to $493.5 million on the back of a fair value gain of $348.5 million on its investment properties. In contrast, the developer recorded net profit of $75.9 million for 2006.

Excluding revaluation gains, Allgreen's 2007 net profit came to a more modest $145.0 million but was still 91 per cent higher compared to the previous year. Revenue for the year ended Dec 31, 2007, rose 19.4 per cent to $568.8 million - from $476.5 million a year ago - as the developer sold more homes amidst new launches and saw increased revenue from its investment properties and hotel.

Last year, Allgreen officially launched Cairnhill Residences at Cairnhill Circle, Blossoms@Woodleigh and phase 1c of Pavilion Park at Bukit Batok. Cairnhill Residences is fully sold while Blossoms and Pavilion Park phase 1c are almost fully sold. The company also sold 186 units of its 536-unit Cascadia at Bukit Timah Road.

For investment properties, Allgreen's Great World City office, retail and service apartment complex and Tanglin Place enjoyed higher occupancies and rents. At Tanglin Mall, however, renovations to increase lettable area meant that the occupancy was lower although rental rates were slightly higher.

At Traders Hotel, room rates and occupancy were higher in 2007 than the previous year, the company said. Allgreen's earnings per share rose to 31.4 cents in 2007, up from 7.2 cents in 2006. The company declared a dividend of five cents a share.

Going forward, Allgreen said that it expects a property market slowdown in the early part of 2008 but is hopeful that the second half of the year will bring a recovery - in line with what other developers in Singapore have said.

'The market in the early months of 2008 is expected to be fairly quiet, given the financial and economic uncertainties in the United States,' the company said. 'We are optimistic of a pick-up in activities in the second half of 2008.'

Allgreen shares closed two cents up at $1.28 yesterday.

Swissco net triples; Sinwa's rises 4.5%

SWISSCO International's 2007 net profit more than tripled to $40.2 million from $12.7 million on the back of the booming shipping and offshore oil and gas industries. But marine supply and logistics company Sinwa posted just a 4.6 per cent rise in net earnings to $7.9 million from $7.6 million.

Swissco kept up the strong momentum in its core business of chartering ships to oil, marine construction and mining companies to post record turnover of $31.2 million in 2007, up from $25.3 million previously. Increased offshore vessel chartering services contributed especially.

The group also made a significant gain of $29 million from partly disposing of a long-held investment in financial assets. Finance cost, however, rose to $699,000 from $411,000, due to increased borrowings to fund the delivery of new vessels and progress payments for vessels under construction. The group expects to take delivery of 13 new vessels in the rest of the year and these are expected to contribute progressively to its performance as they join the fleet.

Marine logistics services to the oil and gas maritime industries continued to grow, with profit from the sector almost doubling to $13.2 million from $7.7 million the year before. Earnings per share tripled from 7.58 cents per share to 22.47 cents.

Despite the recent uncertainties in the financial markets, the oil and gas industry continues to remain buoyant, Swissco said. With high energy prices and strong demand for offshore support vessels, coupled with slow delivery of new tonnage, the group expects the demand for its offshore support vessels and marine related services to continue this year.

Sinwa, meanwhile, being a little further upstream from the action, saw a slower pace of growth. Revenue rose 10.2 per cent to $122.5 million from $111.2 million. Earnings per share dipped from 3.99 cents to 3.63 cents.

The group expects the general shipping market to continue to be buoyant this year. The positive outlook is boosted by growth in the shipping trade in East Asia and an increase in offshore activities in Western Australia, where it has focused its investments and is seeking to increase its market share.

'The 2007 full-year results have been satisfactory,' said chief executive Mike Sim. 'The group has concentrated its investments in Western Australia by acquiring substantial land in Karratha and Perth/Fremantle to expand our operations. With these investments, our Australian operations will contribute more to our performance in future.'

'We are confident that we will continue to be profitable in 2008,' he added.

Swissco shares closed two cents lower at 82.5 cents, while Sinwa shares closed a cent down at 35 cents.

Kingsmen FY07 net profit jumps 90% to $9.4m

COMMUNICATIONS design specialist Kingsmen Creatives Ltd has almost doubled its full-year earnings and built up a record order book, thanks to buoyant conventions, exhibition, events and retail business.

The company reported a 90 per cent jump in net earnings to $9.4 million for the year ended Dec 31, 2007, on the back of a 34 per cent rise in revenue to $146.1 million, from $108.9 million in FY2006.

Earnings per share was 7.87 cents, versus 4.88 cents last year. At yesterday's closing price of 65 cents, its price-earnings multiple was 8.2 times.

Group executive chairman Benedict Soh pointed out that, as with the previous year, all the company's divisions registered growth.

'Our overseas operations in Hong Kong, China and Taiwan have started to contribute significantly, and we see tremendous potential for us to develop and grow further in these markets,' Mr Soh said. 'On the other side of the globe, our exports of retail fixtures to Europe and North America are also showing promising results.'

Closer to home, the company expects to land significant new projects in the integrated resorts (IRs) and the rejuvenation of Orchard Road.

Its order book currently stands at $66 million.

The key contributor to group revenue, the Interiors division, saw its revenue grow 57 per cent $87.9 million in FY2007, led by growth in the retail sector in Singapore and Malaysia.

Some 80 per cent of the business came from key accounts such as Apple, Burberry, Chanel, DBS, Esprit, FJ Benjamin, Gap, Gucci, John Little, Marks & Spencer, Nokia, Nuance Watsons, Omega, Polo Ralph Lauren, Robinsons, Standard Chartered Bank, Tag Heuer, Tiffany, Tommy Hilfiger and Wing Tai.

Kingsmen is also benefiting from the regional rollout programmes by customers such as Aldo, Apple Ipod, and Marks & Spencer, and continued orders from Nokia.

Meanwhile, top-line revenue for the group's Exhibitions and Museums division grew 8 per cent to $50.4 million, as it handled major exhibition events such as Cityscape Dubai, Dubai Airshow, Guangzhou Motorshow, Korea Airshow, Label Expo, SIBOS, TFAP and Tempus, the Venetian opening event in Macao, and various event launches in Singapore, Vietnam and Malaysia.

Kingsmen plans to use its subsidiaries in Northeast Asia to capitalise on the retail boom and a rapidly growing exhibition industry in China. It also plans to expand its presence in the fast-growing sports marketing, consultancy and event management service area through its associate company, Enterprise Sports Group Pte Ltd, which it acquired last year for $585 million. In the Middle East, it expects to ride on massive construction projects, an expanding manufacturing base and a thriving services sector.

On the local front, besides projects from the remaking of Orchard Road and IRs, it expects to be involved in the upgrading of Changi's Terminal 1.

It has already clinched a five-year $25 million contract to construct grandstands and corporate suites for the Singapore F1 Grand Prix, and looks well placed to land more contracts for the 2010 Youth Olympics.

Kingsmen is paying a first and final dividend of 2 cents per share and an additional special dividend of one cent per share.

Sihuan holding talks for potential acquisitions

SIHUAN Pharmaceutical Holdings is shopping for a number of acquisitions and is in talks with a few potential partners for possible deals.

The company is eyeing drugs marketing firms and research and development (R&D) companies focusing on cardiocerebral vascular (CV) drugs.

Also of interest to the company is the development of what is known as 'me-too drugs' and 'me-better drugs', which involves extracting existing chemical entities and rejigging them. 'Me-too drugs' are usually branded under a different name. If they can be improved to bring therapeutic benefits, then they are known as 'me-better drugs'.

Added Sihuan chief financial officer Choi Yiau Chong: 'We'll target those new drugs overseas, those in final stages of clinical trials.'

Sihuan currently distributes more than 60 drugs in China, of which it manufactures 20. It has one proprietary drug in Kelinao, a treatment for CV conditions, and another 70 over in its R&D pipeline.

During its initial public offering last year, the company said that it will introduce at least five new drugs a year. But that plan has been hampered by the overhaul of China's drug registration framework. Last year, Sihuan managed to introduce only one new product, anti-blood clotting drug sodium ozagrel.

However, the group intends to make up for the shortfall this year, said CEO Che Fengsheng.

'Within this year, I believe we will have more than 10 (new products),' Dr Che told BT. The bulk is likely to be CV drugs.

Although primarily centred on the Chinese market now, Sihuan does not rule out acquisition targets outside the mainland. It also expects this year's results to be better than last year, as regulatory changes in China's health care market stabilises.

'The push by the PRC government to consolidate the pharmaceutical industry will create a conducive growth environment,' said Dr Che. 'Moreover, the approval process for pharmaceutical drugs, which resumed last October, will facilitate our efforts to bring more drugs to the market and contribute to growth. Therefore, we are confident of doing better this year.'

Sihuan posted a 98.2 per cent surge in full-year net profit to 179.3 million yuan (S$35 million) last year. Earnings per share rose to 39.93 fen from 24.12 fen. Sales went up 77 per cent to 286.3 million yuan.

Pan Hong 2007 profit nearly quadruples to 185m yuan

PROPERTY developer Pan Hong nearly quadrupled its net profit to 184.9 million yuan (S$36.3 million) for the year ended Dec 31, thanks to strong sales from a project in China.

Likewise, full-year sales nearly quadrupled to 564.9 million yuan, while earnings per share were 38.37 fen - up from 12.55 fen previously.

The firm attributed the strong performance to buoyant sales from the first phase of its current residential and commercial property development in Nanchang city, Jiangxi province.

Launched last year, Nanchang Honggu Kaixuan fetched sales of about 548.3 million yuan in FY2007 as the group completed the handover of 989 residential units with a combined gross floor area of about 117,846 sq m.

The remaining sales of 16.6 million yuan came from sales of the remaining units at its other completed developments.

The gross profit margin expanded to 40.8 per cent - up from 37.9 per cent previously, thanks to the higher overall average selling prices of properties sold during FY2007.

Other income and gains more than trebled to 77.4 million yuan in FY2007, due mainly to higher agency commission and consultancy fee income.

Looking ahead, the firm said the construction of the Nanchang Honggu Kaixuan (Phase 2) is already in progress, with pre-sales expected to take place in batches by the middle of 2008.

The group is also targeting to unveil two other projects in FY2008 - Hua Cui Ting Yuan in Huzhou city, Zhejiang province, as well as Hangzhou Liyang Yuan (Phase 2) in Hangzhou.

'Based on the encouraging response the group has received for its recent property development and current market climate, the group expects revenue and earnings for the current financial year to remain robust.'

Its directors proposed to pay a first and final dividend of two HK cents per share, exempted from taxes.