Singapore Corporate News - 28 Feb 2008

Impairment charges drive UOB Q4 profit down 5.7%

DRAGGED down by a $128 million impairment charge on loans and higher provisions for its investments in collateralised debt obligations (CDOs), United Overseas Bank, Singapore's second largest banking group, reported lower-than-expected fourth-quarter earnings.

Net profit for the three months ended Dec 31, 2007, dropped 5.7 per cent to $506 million from Q4 2006's $537 million as impairment charges doubled for the period. Its profits were less than market forecasts of $549 million, based on projections from analysts polled by Reuters Estimates.

Q4 operating profit was marginally lower year-on-year at $719 million.

Some $67 million of impairment charges on loans for the quarter came largely from higher provisions in countries such as Malaysia, Thailand and the Philippines.

'We took advantage of the favourable equity and property market to expedite the restructuring of non-performing loans (NPL) portfolio,' explained Lee Wai Fai, chief financial officer. An additional $61 million in impairment charges was taken for securities and other assets like CDOs.
Trevor Kalcic, an analyst at ABN Amro, noted that this was not unusual, and that it was a 'normalisation', from very low provisions in the past.

The bank's full-year net profit also fell, by 18 per cent to $2.11 billion from $2.57 billion previously. The analysts polled by Reuters Estimates had expected $2.152 billion. Impairment charges for the year rose 66 per cent to $300 million. The year's operating profit rose 14.7 per cent to $2.85 billion.

FY2006 had included a gain of $689 million relating to the special dividend received from Overseas Union Enterprise (OUE) and the gain from the divestment of OUE and Hotel Negara. Without the 2006 one-off gain, 2007's net profit would have increased 12 per cent from $1.88 billion.

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 5.9 per cent from a year ago to $743 million. On a full-year basis, it increased 10 per cent to $2.98 billion. Customer loans hit $92.7 billion for 2007, up 20.5 per cent, led by broad-based growth across products and industries.

'Given that it's a challenging year ahead, growth in loans will be moderate,' said Wee Ee Cheong, UOB group deputy chairman and chief executive officer.

He also said that the bank was monitoring the home-loan mortgage situation, since Maybank last week slashed its home loan rates.

Interest margins for the year increased from 1.99 per cent to 2.04 per cent as a result of improved asset mix.

For the quarter, non-interest income expanded 3 per cent to $532 million. Higher fees and commission income and gain on sale of foreclosed securities added a boost while higher mark-to-market losses on investments pulled trading and investment income down. Other operating income from trading activities for the quarter declined 47 per cent to $25 million. For the year, non-interest income rose 25 per cent to $1.89 billion.

Expenses increased 12 per cent for the quarter to $556 million, and 16 per cent for the year to $2.02 billion, due largely to the bank's business expansion and higher staff cost.

Mr Wee said at yesterday's briefing that this year was likely to be 'challenging'. 'The excesses and mispricing of risk have caught up with the system. Unless US slides into severe recession, Asian economies should be able to weather it. We should see stronger checks and balances.'

A final tax-exempt dividend of 45 cents per share has been proposed, taking the full-year dividend to 73.7 cents per share.

Shares of UOB yesterday ended 42 cents or 2.2 per cent lower at $18.42.

SGX buys rubber exchange Sicom for $7.5m

THE Singapore Exchange (SGX) is acquiring the Singapore Commodity Exchange (Sicom), a move that will integrate the highly sophisticated securities and derivatives market with a rubber exchange still trying to drag itself into the modern world.

In a joint announcement yesterday, the two exchanges said that they have agreed, in principle, for SGX to acquire at least 95 per cent of Sicom through the subscription of shares for a total investment of $7.5 million.

Sicom's net asset value as at Dec 31, 2006, came to $2.8 million. The proposed acquisition by SGX is subject to mutually agreeable terms and regulatory approvals as well as the consent of Sicom's shareholders. The acquisition is expected to be completed by end-June 2008.

Said Sicom chairman Lim How Teck: 'SGX sees great value in the rubber community and its continued role in the trading of rubber in Singapore.'

SGX CEO Hsieh Fu Hua noted that Sicom is well-known in the international rubber business with an established base of market participants.

'SGX has the systems and clearing capabilities, international membership and resources to enhance economies of scale and facilitate growth. We welcome this opportunity to work with the Sicom community to leverage on mutually beneficial synergies to build an international commodity futures market.'

The development comes shortly after Sicom took initial steps - with a long hiatus in between - to modernise itself. BT reported late last year that it had embarked on setting up a new electronic trading platform and was also looking beyond rubber to list more contracts, including cocoa.

Parkway sees new hospital making profit by 2nd year

HEALTHCARE provider Parkway Holdings expects a new hospital it will put up on a $1.25 billion site at Novena Terrace by 2011 to contribute to group earnings by its second year of operation, the company said yesterday.

For FY 2007 ended Dec 31, Parkway made a net profit of $298 million including exceptional items - a 439 per cent leap from $55.3 million the year before. Excluding exceptional items, net profit was $90.3 million, up 35 per cent from the $66.7 million in FY 2006.

Revenue for FY 2007 was $869.7 million, matching the previous year's $868 million. But this was largely attributable to the restructuring of its interest in Pantai Holdings Bhd - its healthcare unit in Malaysia - from a subsidiary to a joint-venture company in Q4 2006, which reduced Parkway's revenue and expenses in FY 2007 as a result of accounting changes.

Q4 2007 net profit grew 80 per cent year on year to $26.7 million, from $14.8 million previously. Q4 revenue was $232.6 million, up 30 per cent from $179.5 million previously.

Directors have declared a final tax-exempt dividend of 4.51 cents a share for 2007, bringing the payout for the year to 24.45 cents a share less tax. Earnings per share rose 31 per cent to 11.74 cents for the year.

Revenue from Singapore hospitals accounted for more than half of FY 2007 group revenue, while international hospitals and healthcare services contributed $402 million.

Parkway Holdings group president and CEO Lim Cheok Peng said: 'Foreign arrivals continue to grow. And there's an increased population base in Singapore with 1.2 million expatriates.'

Malaysia and Indonesia account for majority of foreign patients, but Parkway is looking to non-traditional markets such as the Middle East and Russia.

Parkway's winning bid for the 1.7 ha site at Novena - which works out to $1,600 per square foot per plot ratio - made the site the most expensive commercial land sale since 2006. Development cost is expected to be up to $500 million over three years. Medical equipment could cost a further $200 million, but the company may look at leasing this.

Ho Bee Q4 net falls 24%

HO Bee Investment, the biggest developer on Sentosa Cove, has posted a 24.2 per cent year-on-year drop in net earnings.

For the fourth quarter ended Dec 31 it made $38.8 million, a reduction attributed to lower property development revenue and profit.

The comparable period Q4 2006 saw the group's top and bottom lines helped by the physical completion of The Berth condo.

Ho Bee did manage to achieve a record full-year net profit of $272.2 million, up 176.1 per cent from 2006, due to a sharp rise in revenue from property development, mostly from progressive recognition of revenue from the group's projects on Sentosa Cove.

Also boosting the full-year bottom line was an $83.3 million gain in fair value of investment properties, mainly from office space that Ho Bee owns at Samsung Hub and Suntec City, and the group's industrial properties.

Ho Bee acknowledged that demand for high-end residential property has dropped as foreign and local investors have become more cautious.

However, for Ho Bee, the substantial progressive recognition of income from the sale of residential projects and the expected launch of new residential projects will be a significant contributor to the group's revenue and earnings for the current year ending December 2008 as well as the next two years.

Ho Bee is likely to launch this year the 150-unit Trilights on the Elmira Heights site at Newton Road, the 348-unit Dakota Residence (a joint development with ChoiceHomes Investments) and the 151-unit Seascape on the Seaview Collection plot at Sentosa Cove.

Ho Bee is also expected to launch a 72-unit condo, The Orange Grove, this year.

The group may also release a 184-unit condo on the Holland Hill Mansions site in the second half of this year in a joint venture with MCL Land.

The group's joint-venture condo on the Pinnacle Collection parcel at Sentosa Cove could be launched in the first six months of next year.

Ho Bee shareholders will receive a two-cent per share (one-tier) final dividend.

Revenue for Q4 eased 63 per cent to $60.7 million while full-year revenue rose 51.7 per cent to $596.1 million. Most of the increase came from a 51 per cent jump in revenue from property development.

The improved showing was chiefly due to the progressive recognition of revenue from Ho Bee's three Sentosa Cove projects, the Coral Island development, The Coast and Paradise Island, as well as Orange Grove Residences, Montview at Mount Sinai Road and Quinterra at Holland Road.

Ho Bee has yet to book revenue for Turquoise condo at Sentosa Cove as construction has yet to begin.

SC Global posts 67% rise in FY07 profit to $28.3m

SC GLOBAL has reported a profit after tax and minority interests of $28.3 million for FY2007 - an increase of 67 per cent from 2006.

In a statement yesterday, it attributed its performance to sales of residential units at The Ladyhill, The Lincoln Modern, The Boulevard Residences and The Tomlinson.

Higher contribution from its Australian associate AV Jennings and a write-back of provision for diminution in value of development property also contributed.

SC Global has proposed a final dividend of two cents a share, after a special interim dividend of 3.5 cents a share paid during the year.

FY2007 turnover fell 32 per cent to $129.2 million, from $190.8 million in FY2006.

In particular, sales in the second half of 2007 fell 61 per cent to $41.2 million.

SC Global said this was mainly due to the timing of revenue recognition. It added that it also had a low number of completed units for sale.

It said its first development project in China made its maiden contribution to the group's revenue.

While gross profit fell 16 per cent to $45.2 million for the year, gross margin was higher at 35 per cent compared to 28 per cent the previous year, as higher prices were achieved.

SC Global said the launch of its new residential project at Martin Road can be expected in Q2/Q3 this year.

In China it is also expected to launch the next phase of units at Kairong International Gardens in Q2/Q3 this year.

It added that it has secured a land bank of more than 1.1 million sq ft in Orchard Road and on Sentosa.

Chemoil profit hit by volatile oil prices, derivative losses

VOLATILE oil prices and continued losses from derivative contracts in the fourth quarter caused marine fuel supplier Chemoil Energy to incur a 47.6 per cent fall in 2007 net profit to US$30.3 million.

This was despite a 23.4 per cent increase in sales revenue last year - attributed to higher sales in Europe and the Americas - to US$5.36 billion.

The group reported net losses from its derivative financial instruments of US$84.9 million for FY2007 - of which US$36 million was incurred in the fourth quarter. This was against physical gains of US$132.9 million for the whole year.

Earlier, it had also booked in Q3 a derivatives-related loss of US$48.5 million.

This marked a reversal of derivative gains it made in 2006 - US$58.1 million for the full year, of which US$17 million was in the fourth quarter - with Chemoil explaining that 'oil price movements were much steeper in 2007 compared to 2006'.

Chemoil warned that for the coming 12 months 'the volatility in both energy pricing and price relationships between physical and hedge instruments may contribute to increase in earnings variability'.

Earnings per share for FY2007 fell 55 per cent to 2.346 US cents, and no dividend was declared.

For the fourth quarter itself, Chemoil managed to eke out a 5 per cent increase in net profit to US$14.4 million, on the back of a one-third rise in revenue to US$1.45 billion.

It said that Q4 sales volumes dropped 18 per cent to 3.1 million tonnes mainly due to lower sales volumes in Singapore, as operations here were scaled back to prepare for its move to its new Helios Terminal.

The results came just a day ahead of the official inauguration today of the US$122 million, 448,000 cubic metres oil terminal on Jurong Island.

Originally scheduled for Jan 10, the event was postponed after the tragic loss of its founder Robert Chandran who died in a helicopter accident in Indonesia.

Michael Bandy, who has succeeded Mr Chandran as Chemoil's chairman and CEO, said: 'We are fully committed to our growth strategy of converting expenses to assets and extracting margins at every stage.'

Del Monte reports 155% Q4 profit rise

MAINBOARD-LISTED Del Monte Pacific posted a 155 per cent year-on-year rise in net profit to US$23.3 million for its fourth quarter ended Dec 31 as revenue rose 27 per cent to US$105.9 million.

The Philippine market was the major driver of the company's growth for the fourth quarter and full year.

The Q4 results were also helped by a one-time positive tax adjustment of US$9.8 million resulting from the grant of special economic zone status for the company's Philippine facility. Fourth quarter earnings per share jumped to 2.16 US cents, 155 per cent higher than the year-ago period.

By end-2007, the company had increased store coverage to 64,000 stores in the Philippines, from just 28,000 in May. It also enjoyed cost savings of US$4.7 million for the year as a result of an early retirement programme, purchasing savings and cannery and logistics improvements.

Del Monte made two major acquisitions in 2007, buying a 40 per cent stake in the Indian produce company FieldFresh, and investing US$10 million in the American S&W brand for the brand rights to Asia, Africa and Europe. Del Monte had net debt of US$19.2 million as at end-2007, versus US$7.8 million net cash surplus at end-2006.

Net profit for the year before non-recurring item surged 37 per cent to US$28.8 million from US$21 million in 2006. With the one-time tax adjustment, net profit leapt 83.5 per cent to US$38.6 million, and earnings per share to 3.57 US cents.

Directors have announced a final dividend of US$0.0195 per share.

Hyflux earnings double to $33m

MEMBRANE specialist Hyflux made a net profit of $32.95 million for the year ended December 2007, more than double its 2006's $15.47 million restated earnings. This was helped by gains from the divestment of assets to its recently launched Hyflux Water Trust.

Revenue climbed 35 per cent to $192.79 million, thanks to higher municipal sales in China, the Middle East and North Africa, and higher industrial sales.

Speaking of the group's achievements in 2007, chief executive Olivia Lum first mentioned neither the launch of its business trust nor its breakthrough into the Algerian market - but its staff.

'One of the most important things is that we have built up human capital, a lot of new blood in finance and investment, technology and research, operations and business development for the oil and materials side,' she said.

Staff costs rose 53 per cent in 2007 to almost $31 million. The new managers are 'all from very senior positions from MNCs and TLCs with experience in running big corporations,' Ms Lum said.

It is expected that the increase in staff cost will moderate to between 15-20 per cent a year going forward, in line with revenue growth, said chief financial officer Sam Ong.

Hyflux also has a lot of interesting technology coming on stream, said Ms Lum. For example, it completed a pilot plant using its membranes to refine palm oil, which uses much less steam and achieves better resource efficiency, she said. If commercialised, this could help the group break into the South-east Asia palm oil market, Mr Ong added.

In its core water treatment business, Hyflux saw municipal sales almost double to $89 million, while industrial sales rose 14 per cent to $102.3 million.

China, where Hyflux now has 31 municipal projects in operation or under construction, contributed over four-fifths of total revenue for the year, while the Middle East and North Africa contributed 12 per cent, helped a desalination contract won in Algeria in March 2007, worth US$214 million.

The group has US dollar exposure in Algeria but this is already hedged with corresponding material, interest and manpower costs. Its balance sheet is net long on the Singapore dollar and net short on US dollar, said Mr Ong.

Hyflux earns revenue in yuan from its projects in China, though it borrows in US dollars for many of the projects, said Ms Lum.

Industrial sales remain robust and provide a steady contribution, while oil-recycling projects in Saudi Arabia and Vietnam are progressing steadily, Hyflux said.

It has declared a first and final dividend of 1.89 cents per share, out of earnings per share of 6.32 cents. Hyflux's share price closed six cents up at $3.44 yesterday.

Thai Beverage full-year profit rises 3% to 10.38b baht

THAI Beverage, Thailand's largest liquor producer and one of its biggest companies, reported a 3 per cent rise in net earnings to 10.38 billion baht (S$484 million) for the year ended Dec 31, 2007, from 10.05 billion baht the year before, thanks mainly to its spirits business, which includes the country's best selling Mekong whisky.

In fact, the spirits business accounted for 85 per cent of its net profits while the beer sector, which includes its famous Chang and Archa beers, brought in the rest. The industrial alcohol division suffered a small loss.

Total revenue also increased 3 per cent to 100.54 billion baht from 97.8 billion baht due mainly to a 2.6 per cent increase in the spirits business and a 3.2 per cent rise in beer/water business. Revenue-wise, spirits accounted for 53 per cent of the total while beer comprised 47 per cent, indicating that margins from spirits are five times those of beers'.

During the year just ended the company completed the purchase of a distillery (United Products Co Ltd) and a non-alcohol beverage maker (SPM Foods and Beverages Co Ltd) and their financials have been included since November.

The company continues to be fairly optimistic on the growth of its business despite the country's economic difficulties. It sees growing demand for low alcohol beers and brown spirits but white spirits (whisky) remains the main underpinning of its profitability for the present.

On its domestic strategy it said: 'ThaiBev's strategy for the domestic market focuses on the protection of the core businesses of beer and spirits. We intend to continue growing the portfolio and become a leader in all alcoholic segments.

'We strongly believe that the Thai market has room to grow further as there is still a lack of choice regarding the number of brands available and the narrow segmentation of brands. Thai people aspire to move to higher-end drinks, whether alcoholic or non-alcoholic and as the economy improves, as it must do over time, ThaiBev will have products ready to meet consumer demand.'

It added that in future it will introduce standard and premium products that will extend its portfolio. It will also increase its portfolio of non-alcoholic drinks, noting that the energy drinks market is growing 3 per cent per annum and offers an attractive net profit margin of 10 per cent.

The company also plans to take better advantage of its extensive distribution network and even offers it to outside organisations. One of its objectives is to set up five huge distribution centres around Thailand that would be able to store more products and distribute them to surrounding regions more efficiently.

Separately, the company announced that it had two judgements in its favour regarding 128 million baht in over-assessments by the Household and Land Tax authorities.

ThaiBev shares ended half a cent off at 24.5 cents apiece on the Singapore bourse where it has been listed since May of 2006.

Midas posts 24.8% jump in 2007 profit

MIDAS Holdings, manufacturer of aluminium alloy extrusion products and polyethylene pipes, has posted a net profit of $31.9 million for the year ended Dec 31, 2007, a 24.8 per cent increase from the previous year.

Revenue also rose by 34 per cent to $140.4 million.

The aluminium alloy division, Jilin Midas Aluminium Industries, continued to be the key contributor to Midas' growth last year, accounting for 76.9 per cent of total revenue and 92.5 per cent of profits before interest and tax. Midas associate company, Nanjing SR Puzhen Rail Transport (NPRT), made its first contribution to the group, a profit of $1.26 million.

Midas CEO Patrick Chew attributed the growth to increased entrenchment in the rail transportation sector. 'Our aluminium alloy division registered significant growth with the securing of various new contracts. Nanjing SR Puzhen Rail Transport also put on a strong showing since its inception in January 2007.'

NPRT, with its consortium partners, secured three high-profile metro train projects in China.

A final dividend of half a cent per share was declared.

The group is bullish for this year, in view of last December's framework agreement which was established with the Aluminium Corporation of China (Chinalco), which guarantees active collaboration in the business development of aluminium alloy plates, sheets and profiles.

Mr Chew said: 'This tie-up with Chinalco will enable us to tap on the vast opportunities in the PRC as well as international markets for the long term.'

Hi-P Q4 profit more than doubles to $31m

CONTRACT manufacturer Hi-P International has forecast higher net profit for the current quarter, along with a stronger FY08 performance.

CEO Robert Mahoney told analysts yesterday that the firm will continue to diversify and improve its cost structure, which will translate into stronger performance.

For the three months ended Dec 31, 2007, the firm more than doubled its net income to $30.99 million from $13.44 million, while sales went up 21.8 per cent to $313.3 million. Earnings per share were 3.49 cents - up from 1.52 cents.

On a full-year basis, its net income inched up 4.4 per cent to nearly $60 million, while sales grew 16.4 per cent to $976.6 million.

Hi-P had earlier forecast lower net profit but higher sales for FY07. However, the firm achieved better-than-expected margins due to the better sales in Q4, better cost controls, better capacity utilisation and lower than expected operating losses at its plant in Poland.

For Q4, there was a net tax credit of $2.9 million from the recognition of substantial deferred tax assets and tax holidays from some of its profitable China operations. Also, an inventory writeback of $4.9 million was recorded.

However, the firm incurred a forex loss of $5 million due to the weakening of the US dollar.

During the year, revenue from wireless telecommunications edged up 3.8 per cent to $529.3 million, accounting for 54.2 per cent of group revenue.

Hi-P said this resulted from new projects from a customer which offset lower sales to existing customers. The firm's revenue was earlier hit by lower orders from a key customer, widely believed to be Motorola.

However, Hi-P has since diversified its customer base to include Blackberry maker Research In Motion and other mobile phone brands.

Sales from the consumer electronics and electrical (CE) was up 44 per cent to $374 million, due mainly to contributions from the plant in Poland as well as from a new customer. But Mr Mahoney does not expect the CE sales to grow at a similar rate this year. In Q4, the firm also cut its operating losses in Poland.

Turnover from the computing, automotive, medical and others (CA) business rose a modest 5.3 per cent to $73.2 million due mainly to subdued sales to hard disk drives customers.

The CA business accounted for 7.5 per cent of group revenue last year.

Hi-P declared a first and final gross dividend of 1.5 cents per share with a tax rate of 18 per cent.
Separately, Hi-P also announced the appointment of Zhou Wei Dong as the managing director of the wireless strategic business unit with immediate effect. He replaces Ang Lien Peng who resigned in December.

Mr Zhou was most recently the general manager of Hi-P's wireless business unit and had joined the firm as an operations manager in the unit in 2005.

Prior to that, Mr Zhou had been an engineering manager with Uniplas (Shanghai) for nine years and has substantial manufacturing experience in innovative decorative processes for the handset market and has also dealt extensively with major players in the industry.

And by March 1, Hi-P will merge the CE and CA business units under the leadership of Lim Kay Leong, currently the MD of CE unit. Alan Ong, MD of CA segment, will then step down by end-March to pursue other career opportunities.

Food Empire proposes bonus issue of shares

FOOD Empire Holdings is proposing a bonus issue of 88.961 million new shares on the basis of one bonus share for every five existing shares held in the capital of the company.

Armstrong Ind full-year profit rises 71.5%

ARMSTRONG Industrial Corp reported a 71.5 per cent rise in 2007 net profit to $17.6 million. Revenue increased 29 per cent to $183.0 million.

Over four-fold rise in Yongnam 2007 profit

YONGNAM Holdings Limited registered a more than four-fold surge in net profit to $24.8 million for FY2007 from $5.3 million. Revenue for the period grew 16.1 per cent to $174.6 million. Excluding the gain of $12.8 million arising from the writeback of impairment provision on an investment property, net profit increased 125.5 per cent to $12 million.