Singapore Corporate News - 20 Mar 2008

1st Software plans $175m acquisition of property firm

IN a bid to retain its listing status, 1st Software is acquiring a construction and property development firm for $175 million in a reverse takeover deal.

1st Software entered into an agreement with Teambuild Corporation yesterday to acquire it through the issue of about 10.94 billion new 1st Software shares at 1.6 cents each, which will give the vendors of Teambuild an approximately 85 per cent stake in 1st Software's enlarged capital.

Teambuild, which has offices in Singapore and Malaysia, is a privately-held company specialising in property development and building construction.

The firm's current business is made up of a mix of public and private residential developments, as well as institutional and upgrading projects.

Another reason for the proposed acquisition is that it will allow the company to participate in the business of property development and building construction based primarily in Singapore with a strong growth potential, said 1st Software.

Under the deal, Teambuild provided a post-tax profit guarantee of at least $8 million for FY2007 and $20 million for FY2008.

For its 2007 financial year, Teambuild may declare dividends out of its reserves of not more than $10 million. If Teambuild fails to meet its profit targets, the vendors will have to pay 1st Software for the shortfall.

The acquisition is subject to regulatory and shareholder approval. It is also contingent on other prevailing conditions including the ability to secure a $2 million loan to finance the buyout. An application has also been made for waiver from a general offer. Shares of 1st Software have been suspended since Dec 26, 2006, following the sale of its core digital publishing business earlier in the year.

In a bid to find a new venture to maintain its listing, the company had tried to acquire Hong Kong commodities trading firm Psons Ltd through a $67.95 million reverse takeover deal in November 2007 but the transaction eventually fell through.

Freight Links to buy 60% stake in Citic Logistics

FREIGHT Links Express Holdings, a logistics solution provider in Singapore, has agreed to pay 86.4 million yuan (S$16.9 million) for a 60 per cent stake in Citic Logistics, one of the top three chemical logistics players in China.

The acquisition is in line with the group's strategy to strengthen and expand its overseas capabilities and to make headway into the growing China market, Freight Links said in a statement yesterday.

Said Eric Khua, Freight Links' chief executive officer: 'It is a landmark step for Freight Links to gain direct access to MNC clients like Shell, BASF, Atofina and Mitsubishi Chemical. With the robust growth of the chemical industry in China, Citic Logistics is well positioned to meet the increase in demand for these logistics services.'

Freight Links said Citic Logistics has the competitive advantage of being the only exclusive dangerous goods warehouse chemical service provider within the Shanghai Chemical Industry Park, operating a fleet of more than 250 chemical trucks and running its key operations in Shanghai, Huizhou and Ningbo.

Citic Logistics is also a major player in moving oversized cargo transportation tasks for state and local key projects in the fields of petroleum, chemical, metallurgy, highway, railway, water conservation, electricity and municipal works.

'This acquisition will greatly enhance Freight Links' capabilities in the project cargo business,' added Mr Khua.

Rickmers inks US$1.35b deal

RICKMERS Maritime has moved a step closer to acquiring 13 new vessels that are expected to treble its contracted fleet capacity when fully delivered.

The company, which owns and operates container ships, has inked a memorandum of agreement (MOA) to buy the 13 new container ships from Polaris Ship Management Company for US$1.35 billion.

This follows the preliminary agreements that were signed between the two companies last year. The ships, slated for delivery between 2008 and 2010, will take the firm's fleet size to 23 and increase its contracted fleet capacity by over 220 per cent.

Five 4,250 TEU (twenty-foot equivalent unit) vessels from this acquisition will be chartered to Mitsui OSK Lines, while four others of similar capacity will be contracted to South Korea's Hanjin Shipping. Four 13,100 TEU vessels, among the largest in the world, will be chartered to AP Moller-Maersk. The tenure of these fixed-rate charters range from seven to 10 years.

'I am confident that our investors will share our excitement with this 222 per cent growth pipeline, which includes four of the largest container ships ever built,' said Thomas Hansen, CEO of Rickers Trust Management (RTM), which manages Rickmers Maritime. 'The MOA signifies our commitment in growing the trust and we will continue to keep a lookout for other viable acquisitions that fit our investment mandate and allow us to deliver positive returns to our unit holders.'

The ships are set to boost Rickmers' distributable cash flow once they are delivered and in operation. 'They are expected to increase Rickmers Maritime's aggregate contracted revenue in excess of US$2.1 billion for the years up to 2010,' said Quah Ban Huat, Rickmers Maritime chief financial officer.

The purchase of the vessels is still subject to the approval of unit-holders.

MacarthurCook Reit to fight any hostile bid

THE manager of Singapore-listed MacarthurCook Industrial Reit, a subject of takeover speculation, said yesterday that it will fight any hostile bid to acquire the trust.

'I can guarantee you that it will be contested. We certainly won't let somebody just walk in the door and take over management,' Craig Dunstan, managing director of Australia's MacarthurCook Ltd, told Reuters in an interview.

He said the Australian property manager now controls 13.2 per cent of MacarthurCook Industrial, raising its stake from an initial 2.3 per cent when the trust was listed last April.

Singapore's real estate investment trust (Reit) sector is expected to consolidate in the short term, and brokerages such as Goldman Sachs have cited MacarthurCook Industrial as a potential takeover target due to its diffuse shareholding structure.

The absence of a large controlling shareholder makes it easier for predators to buy a majority stake.

MacarthurCook Industrial's share price fell 2.9 per cent yesterday, while the broader Singapore market was flat.

MacarthurCook Industrial and other Singapore Reits controlled by Australian firms have suffered the most in the current weak market due to concerns over their ability to raise debt or equity.

Allco Commercial Reit, which is planning to sell its Australia properties as embattled manager Allco Finance Group struggles to repay its debts, fell 8.1 per cent after Moody's downgraded its credit rating further on Tuesday.

Mr Dunstan said MacarthurCook Industrial, which owns about $620 million worth of factories and warehouses, mainly in Singapore, will not meet its annual asset growth target of $500 million for the fiscal year to end-March 2009.

'We're not going to raise equity in today's market at today's prices, because that's not the right thing to do for our current investors,' he said.

MacarthurCook Industrial currently trades at around a 24 per cent discount to its net asset value of $1.30 a share.

The property trust dropped a $200 million equity fundraising exercise in January citing poor market conditions, and is now looking to buy two properties in Asia instead of the 10 it was considering initially, Mr Dunstan said.

'Our responsibility is to generate good risk-adjusted returns for our current investors. They will continue to get a good return whether we buy another asset in the next 12 months or not,' said Mr Dunstan, a former lawyer who founded MacarthurCook in 2002.

Olam quashes rumours of heavy losses

OLAM International, a global integrated supply chain manager of agricultural products and food ingredients, has dismissed rumours that it would suffer heavy losses because of its link to commodities broker MF Global, whose shares have plummeted over liquidity problems.

In a statement to the Singapore Exchange yesterday, Olam said: 'Contrary to rumours being circulated, the company has no meaningful exposure to MF Global.' Olam's shares dived as much as 14.6 per cent to $1.76 yesterday before closing at $1.80, still 12.6 per cent down.

'MF Global accounts for less than 3 per cent of all Olam's hedging activities,' said Olam, which uses futures and options traded on various commodity futures exchanges to hedge its market exposure to its underlying physical business.

'Olam uses a number of futures brokers to carry out its hedging activities on these exchanges,' said Olam. 'Our current account balance with MF Global as on March 19, 2008, amounts to less than US$750,000. MF Global continues to honour all its obligations to Olam including call back of any margin surpluses made by Olam prior to and on March 18, 2008.'

Shares of MF Global, the world's largest broker of exchange-listed futures and options, dived as much as 78 per cent in value on Monday. The plunge was sparked by speculation that the brokerage will follow in the footsteps of investment bank Bear Stearns, which experienced liquidity problems that led to its collapse and highly discounted sale to JPMorgan Chase, backed by Federal Reserve loans.

This is the second big blow to MF Global this year. The fall in its stocks follows an announcement in late February that it would have to set aside US$141.5 million to cover losses incurred when one of its brokers substantially exceeded his authorised trading limit.

MF Global has reassured clients that it has sufficient funding to conduct normal business and US$1.4 billion in undrawn credit facilities. It has also confirmed that it has no exposure to sub-prime mortgage-backed securities.

Despite the drastic drop in stock price, MF Global has continued to remain in compliance with Commodity Futures Trading Commission's financial requirements, the top US futures market regulator said in a statement.

China Auto Electronics allays fears as share price plunges

CHINA Auto Electronics Group has assured its shareholders and investors that the fundamentals of its business and business model remain sound.

The Bermuda-registered Chinese company - previously named China Transcom when it was a maker of fixed and cordless phones - has seen its share price plunge to near its all-time low of 14.5 cents in recent weeks, in line with the rest of the market. Yesterday, the stock closed at 15.5 cents, down 6.1 per cent.

In a filing with the Singapore Exchange, it said: 'The board of directors of China Auto Electronics Group would like to assure all our shareholders and investors that nothing has changed in the fundamentals of our company's business and business model.'

When China Auto announced a plan for a reverse takeover of Henan-based car parts company Tianhai Electric (Group) Corporation in a $39.7 million deal, the company's shares traded to a high of 79 cents.

China Auto said then that it would have a 10 per cent share of China's car wiring harness and connector markets. But since the end of last year, its shares have plunged in line with the global meltdown.

In an apparent effort to assuage shareholders and investors, it pointed out: 'We have recently added businesses through acquisition which we believe will strengthen our company and build an even stronger platform to take the company to the next level. And we will continually look for business and acquisition opportunities that will further strengthen our company.'

It is not known whether China Auto was responding to a query from the Singapore Exchange (SGX), but it said: 'We can only attribute the recent fall in the share price of our company to the general weak market sentiment which similarly affected the share prices of other listed companies.'

In mid-January, SGX asked the company to explain a 'substantial decrease in the price of your shares'.

Saying that it was not aware of any unannounced material information that might explain the fall, China Auto said that it had been told that a DBS research report had cut the estimates of the company's earnings for FY2007 and FY2008.

'The company wishes to inform that we expect the earnings after tax for FY2007 to be significantly better than FY2006, and barring unforeseen circumstances, we are optimistic of the prospects of the company for 2008,' China Auto said then.

Last month, the company said that it ended fiscal year 2007 with revenue up 57 per cent at 830.4 million yuan (S$162 million) from 529.1 million yuan, and net profit more than trebling to 117.3 million yuan from 33.2 million yuan.

Cash and bank balances increased about 390.1 million yuan due mainly to net proceeds of 325.3 million yuan from a share placement.

AusGroup wins contract worth A$26m

ENERGY and resources specialist AusGroup has secured a new contract worth about A$26 million (S$33.4 million). The contract from a global mining resources firm is for the fabrication, supply and installation of structural and mechanical piping and electrical systems for a new iron ore facility in Western Australia.

Work is scheduled for commencement in May and completion by November.

'The contract takes our group order book to A$180 million and what is pleasing is that it is from a new 'blue chip' client in the booming Western Australian iron ore industry,' said AusGroup managing director John Sheridan. 'The group is well-positioned to continue to secure opportunities in both the oil and gas and minerals sectors and build on our order book.'

AusGroup is primarily based in Australia where it is a supplier of total engineering solutions in the oil, gas and resource-mining sectors.

The group believes it is well-positioned to benefit from the increasing capital investments in the sectors it is in. It pointed to the latest Australian Bureau of Statistics survey data, which indicate continued strong capital expenditure growth for Australia's mining and resources sector - the first estimate for FY08 has been released and is recorded at A$30 billion, 12.6 per cent higher than the corresponding estimate for FY07.

'On the back of this strong outlook, we are experiencing record levels of enquiries from current and new clients across the group,' said Mr Sheridan. 'We are implementing a more focused tender selection process to ensure we target and secure projects that will deliver strong returns to our shareholders.'

AusGroup is also on course to increase the output of its subsidiary Cactus Engineering, a manufacturer of subsea equipment, with the recent purchase of a new facility in Singapore's Tuas area.

For the half year ended Dec 31, AusGroup's net profit rose 47 per cent to A$12.1 million while revenue hit A$202.2 million, an increase of 60.4 per cent.

Roxy-Pacific profit soars on good show by property, hotels

NEWLY listed Roxy-Pacific Holdings, a Singapore specialty property and hospitality group, has posted a strong set of maiden results.

Group net profit surged to $19.3 million for the full year ended Dec 31, 2007, from $4.84 million the previous year as revenue more than doubled to $102.7 million from $48.8 million.

Earnings per share increased to 3.79 cents from 1.02 cents. The increase in revenue was driven by strong performances by both the key segments of property development and hotel ownership and property investment.

Revenue from property development rose to $64.2 million from $18.0 million as a result of the progressive recognition of revenue from the sales of seven development projects: The Nclave, The Treeline, The Montage, St Patrick's Loft, Axis@Siglap, The Marque@Irrawaddy and The Medley.

Higher selling prices of the group's property units resulted in improved gross profit margin of 21 per cent, up from 10 per cent.

The group's gross profit margin for its hotel ownership and property investment segment also increased.

Said Teo Hong Lim, executive chairman and CEO of Roxy-Pacific: 'In 2007, the strong property market and robust tourism industry augured well for us and we remain optimistic about the Singapore property market in 2008, in particular, prospects for the mid-tier and mass market segments which is the focus of all our existing projects.'

'We intend to launch eight residential projects comprising about 290 units for FY2008 and expect these together with current ongoing projects to contribute positively to our performance for FY2008.'

The group announced a final cash dividend of one cent per share, which translates to a dividend yield of about 4 per cent.

Changes to Allco (Singapore)'s board

ALLCO (Singapore) Limited, the manager of Allco Reit, has appointed William Graham as executive director. It also announced the resignation of three non-executive directors: Timothy Rich, Frank Tearle and Christopher West. Besides giving up his non-executive director post, Mr Rich has also resigned as a member of the audit committee.

Natural Cool subsidiary sells HQ

NATURAL Cool Holdings yesterday announced that its subsidiary Natural Cool Investments (NCI) has signed a memorandum of understanding to sell its headquarters at Tai Seng Street/Tai Seng Avenue to Cambridge Industrial Trust Management Limited (CIT) for $55.2 million. Upon completion of the sale, NCI will lease the property back from CIT for seven years at an annual average rent of $3.93 million, with an option to renew for a further three years.

SGX seeks views on new futures contract

THE Singapore Exchange (SGX) is seeking public comments on the proposed specifications of the SGX MSCI Asia Apex 50 Index futures. The futures contract is targeted to be launched by end-June.