Singapore Corporate News - 15 Apr 2008

SGX's Q3 earnings up 13.9% on derivatives boost

THE Singapore Exchange emerged from a challenging third quarter to register a 13.9 per cent year-on-year rise in net profit to $101.5 million, thanks to a surge in derivatives market revenue.

Earnings for the three months ended March 31 came in between CIMB-GK's net profit projection of $97 million and Citi's expectations of $112.5 million.

Because of lower trading activity in the securities market as a result of the sharp global market downturn, SGX's Q3 net profit was 17.1 per cent lower than the second quarter's $122.4 million.

While revenue from securities market trading - typically accounting for about 60 per cent of SGX's operating revenue - fell a slight 0.4 per cent year-on-year to $96.3 million, its derivatives market revenue jumped 36.4 per cent to $39 million as futures clearing revenue grew.

This offset from the derivatives market helped lift operating revenue for the third quarter by 10.2 per cent year-on-year to $173.3 million.

'The strong performance of the derivatives business reflected the market participants' appetite for equity derivatives products and services in the Asian equity markets during the Asian time zone,' SGX said in a release.

Its stable revenue rose 18.7 per cent to $38 million due to higher corporate action, price information, listing and membership fees.

The volatile market conditions hit SGX's securities daily average trading value, which dropped to $1.9 billion in the third quarter from $2.37 billion in the preceding second quarter and $1.97 billion a year ago.

In contrast, the trading value of the exchange-traded funds (ETFs) more than trebled to a record value of $727.4 million from the previous Q3's $211.2 million. Including the first India ETF based on the Nifty index launched last month, SGX now offers a total suite of 18 ETFs with exposure to commodities such as gold, and major Asian markets including Singapore, India, Greater China, South Korea and Japan.

Picking up the slack from the securities market, SGX's futures trading volume jumped 51 per cent year-on-year to 14.8 million contracts on the back of strong growth across its main Asian equity futures products.

Looking ahead, SGX plans to expand its equity derivatives suite by launching a futures contract based on the MSCI Asia Apex 50 Index, which will allow market participants to conveniently manage their exposure to Asian equity markets during the Asian time zone, SGX CEO Hsieh Fu Hua said. 'We are also working on the roll-out of Single Stock Derivatives targeted for H1 FY2009.'

For the first nine months ended March 31, SGX posted a 76.5 per cent jump in net profit to $353.9 million before a net amount of $34.1 million stemming from distribution from its SGX-DT Compensation Fund and write-back of allowance for impairment. This came on the back of a 54.5 per cent increase in operating revenue to $596.5 million.

SGX proposed an interim dividend of three cents per share, up from two cents for the same period last year.

Yesterday, shares of SGX slipped 35 cents or 4.2 per cent to $7.93 after 12.56 million shares changed hands ahead of the earnings release.

Analysts are divided over the stock, with Citi keeping a 'sell' call with a $6.45 target last Friday on the prospect of future earnings disappointment and CIMB-GK upgrading the stock to 'outperform' from 'underperform' last Friday.

CIMB-GK analyst Kenneth Ng said that he views current yields as attractive for entry into the stock but cut his target price to $10.58 from $14.20 after lowering its FY08-09 earnings estimate by 19-20 per cent on reduced market turnover assumptions.

Tuan Sing set to gain from sale of 2 Aussie hotels

MAINBOARD-LISTED property group Tuan Sing Holdings is expected to make a handsome gain from the sale of two of its Australian hotel properties in Adelaide and Canberra.

The company yesterday announced that it had appointed an international property agent to seek buyers for two of its four Grand Hotel Group (GHG) hotels: Hyatt Regency Adelaide and Hyatt Hotel Canberra.

Tuan Sing controls 50 per cent of GHG. Its partner, Morgan Stanley, holds the remaining 50 per cent.

The two hotels on sale are the smaller of the four GHG hotels in Australia.

The 249-room Canberra hotel, which sits on leasehold title till 2082, is the only 5-star hotel in the heart of Australia's diplomatic enclave. The 367-room Hyatt Regency Adelaide, which has leasehold title till 2083 (renewable for 20 years), sits in the CBD next to the Adelaide Convention Centre and Casino.

The other two bigger properties are Hyatt Regency Perth and Grand Hyatt Melbourne, both of which occupy freehold land.

Tuan Sing and its partner Morgan Stanley say they plan to 'be involved in the selection of suitable buyers and negotiations on the terms of sale' of the two hotels.

'The directors believe that it is in the interests of the company to consider the proposed disposal with a view to unlocking shareholder value and to accordingly seek expressions of interests which may lead to the sale of one or both of the properties.'

Indeed, given the potential selling price of these properties, shareholder value could be given a huge boost.

The two properties on sale are believed to be worth well over A$200 million (S$251 million) - which puts the value of Tuan Sing's 50 per cent share at about A$100 million. But Tuan Sing's share of the original purchase price of these two hotels is estimated at about A$70 million.

This means the company stands to make a net gain of over A$30 million, which works out to a gain of over 3.3 cents per Tuan Sing share.

Meanwhile, Tuan Sing - which is controlled by the Nursalim family - is also believed to be in negotiations to redevelop its three adjoining prime commercial properties in the Market Street/Robinson Road area, centred on its Robinson Towers.

Tuan Sing's stock closed half a cent lower at 26 cents yesterday.

SPH Q2 profit dips 6.3% to $99.6m

SINGAPORE Press Holdings (SPH) turned in strong second-quarter recurring earnings for its media and property businesses. But a fall in investment income resulted in a 6.3 per cent dip in net profit to $99.6 million, from $106.3 million a year earlier.

The decline in net profit for the three months ended Feb 29 was due to an 83.7 per cent fall in investment income to $5.1 million from $31.6 million a year ago.

Stripping out investment income, profit jumped 36 per cent to $111.8 million from $82.2 million a year ago. This was backed by the strong performance of its newspaper and magazine operations and contribution from its Sky@eleven property development.

The drop in investment income was due mainly to higher profit on sale of investments last year. Also, this year's fair valuation of investments was hit by the continued volatility in global financial markets. SPH restated its Q2 2007 results to take into account the retrospective adjustments relating to investment property under FRS (Financial Reporting Standard) 40.

Q2 earnings per share dropped to six cents from seven cents.

Operating revenue for the quarter grew 18.9 per cent to $298.1 million. Revenue from core newspaper and magazine operations rose 8.4 per cent to $236.4 million, with print advertisement revenue jumping 11.3 per cent to $179.8 million.

The property segment's revenue almost doubled to $54.3 million from $27.3 million, with a $24.2 million contribution from Sky@eleven and a 10.6 per cent or $2.9 million increase in income from rental and related services from Paragon.

Total operating expenses went up by 10.8 per cent to $190 million. Property development costs for Sky@eleven amounted to $6.9 million while staff costs were up 9.7 per cent or $7.1 million, mainly due to increased headcount and annual salary increments. Headcount at end-February reached 3,814, up from 3,628 a year ago, mainly because of staffing for its new media businesses and increased operational needs for the magazine business.

Other operating expenses increased by 11.1 per cent or $4.2 million in tandem with the increase in business activity.

For the half-year ended Feb 29, 2008, net profit, including investment income, dropped 2.4 per cent from a year ago to $211.5 million. Excluding investment income, profit was up 26.9 per cent at $238.3 million.

First-half investment income was lower by 75.5 per cent or $46.3 million due largely to higher profit on sale of investments last year and this year's lower fair valuation. H1 earnings per share fell to 13 cents from 14 cents last year.

SPH declared an interim dividend of eight cents a share, up from seven cents a year ago.

Chief executive Alan Chan said that recurring earnings for the current financial year are expected to be satisfactory. 'Advertisement revenue will continue to be driven by the Singapore economy which is expected to grow at a more moderate pace in 2008. Profits from Sky@eleven will continue to provide an added boost to the group's performance.'

He said that, in view of rising business costs amid the current inflationary climate, efforts will be focused on sustaining operating profit margins.

SPH shares fell eight cents to close at $4.43 yesterday, on volume of 3.9 million shares.

Dayen to sell Indonesian coal concession

LOSS-MAKING China- based waste and water treatment specialist Dayen Environmental hopes to turn its fortunes around by flipping its Indonesian coal mining concession to a China state-controlled firm for US$25 million.

It said yesterday it has entered into an agreement with China (Fujian) Foreign Trade Centre Holdings (FTC) for the latter to take over its mining rights agreement with PT Modal Investasi Mineral. Dayen obtained the concession last December.

Under the terms of the deal, FTC will pay Dayen US$25 million in six annual payments, from September 2008 to December 2013.

Dayen will book the first payment of US$5 million in its current FY08 financial year. FTC will also pay Dayen an additional US$1 million that the Sesdaq company incurred to acquire the concession from the Indonesians.

Dayen said that when the full US$25 million is recognised, its net asset value per share will be boosted by 17.7 Singapore cents.

It said it will remain a part of the coal mining 'value chain' as FTC has undertaken to engage it to help with the operation of the mines. It added that besides being earnings-accretive, the deal will create 'direct potential in downstream mining business and unlock future opportunities to secure further coal concessions for Dayen'.

'This is a landmark achievement for the group,' Dayen chairman John Lee said in a statement. 'We have secured an immediate gain from our expansion into the coal mining business which will improve our cash flow.

'This deal is expected to contribute significantly to the bottom line for this financial year that will, for the first time in two years, pull the business back into a profit-making one.'

Mr Lee said Dayen is transforming itself to focus on yield-accretive and low-risk investments, and is on the lookout to acquire businesses and projects that can strengthen and broaden its revenue base.

Listed on the Singapore Exchange in April 2002, Dayen has been swimming in red ink for the past two financial years. It posted a S$6.1 million loss at end-September 2007 and an $800,000 loss a year before. Revenue last year was $31.4 million, less than half of the $75.3 million in FY2005.

The stock was suspended at 61 cents yesterday.

C&O Pharma in venture with US outfit

MAINBOARD-LISTED C&O Pharmaceutical Technology Holdings aims to ride the global trend to outsource research to Asia by setting up a joint venture with US contract research organisation (CRO) XenoBiotic Labs.

As part of its share in the JV, in which it will have a 37.5 per cent stake, C&O Pharma will invest US$4.8 million cash by next year.

The move is part of the company's diversification strategy, as demand for contract research services booms in Asia. According to executive chairman Gao Bin, the world's top pharmaceutical companies have already set up laboratories in China. He expects these firms to outsource some of their work to CROs as volume grows. 'China remains as an attractive location for foreign pharmaceutical companies to outsource to, considering its lower costs and quality of work provided,' Mr Gao told BT.

C&O Pharma derives most of its revenue from the exclusive sale of imported products, C&O-branded drugs and amoxycillin. It has always been interested in venturing into contract research services in a bigger way but was limited by lack of space. Currently, contract research services account for less than one per cent of the group's revenue.

Through the JV, the group intends to set up a 45,000 sq ft lab compliant with US Good Laboratory Practice standards. The facility will be able to house up to 240 researchers and technicians in five years. The lab will be up and running by the end of this year and will start commercial services next year.

'We expect the JV to generate gross profit margins of over 50 per cent,' said Mr Gao. The lab will focus on drug metabolism, pharmaco-kinetic and toxico-kinetic, bio-analytical, clinical metabolism and product analytical studies. It marks the first venture outside the US by New Jersey-based XenoBiotic.

Quoting data from medical market research publisher Kalorama Information, Mr Gao said the worldwide market for outsourced drug discovery is expected to grow 15 per cent a year from US$4.1 billion in 2005 to US$7.2 billion in 2009.

Investment in the JV will be financed from internal resources. C&O Pharma reported a half-year net profit of HK$43.1 million (S$7.5 million), from HK$5.4 million in the year-ago period.

Yongnam forms JV for Marina Bay sky park

CONSTRUCTION-related Yongnam Holdings is forming a joint venture with Japanese engineering firm JFE Engineering Corporation to undertake a $50.3 million contract for the construction of the sky park - a one-hectare park set atop the three hotel towers at the Marina Bay Sands Integrated Resort. The contract was awarded to the joint venture by Marina Bay Sands Pte Ltd, a subsidiary of Las Vegas Sands Corp. This is Yongnam's second contract for the Marina Bay Sands Integrated Resort.

Sino Construction to list on main board

SINO Construction has lodged its preliminary prospectus with the Monetary Authority of Singapore (MAS) to list its shares on the main board of the Singapore Exchange (SGX). Sino Construction was established in 1998 and is mainly engaged in building construction and civil engineering activities in Daqing City, located in the western part of Heilongjiang Province, China. HL Bank is the manager, underwriter, placement agent and receiving bank for the group's proposed listing on the SGX.