Singapore Corporate News - 8 Apr 2008

United Fiber surges as stalled mill gets going

SHARES in United Fiber System surged as much as 15 per cent in trading yesterday as a long held-up billion-dollar pulp-mill project looks set to start taking shape with the expected signing this week of a turnkey contract with a new Chinese partner.

The stock of the forestry, pulp and construction company closed trading at 29.5 cents, up 13.5 per cent or 3.5 cents, after hitting an intra-day high of 30 cents. Some 153.7 million shares changed hands for the day.

Since end-February, the counter has been on an upward trajectory on the back of record order books for its wholly owned subsidiary Poh Lian Construction. The unit saw a 58 per cent surge in its order books to $550 million after winning a $202 million building contract from UOL, which was expected to contribute positively to group revenue this year.

United Fiber has also seen a substantial shareholder gradually raising its stake in the company. On Thursday last week, Lee Pineapple Co - through wholly owned subsidiary Paramount Assets Investments Pte Ltd - raised its holding to 7.14 per cent.

'I believe the Lee family will continue to buy after becoming a substantial shareholder (in March). They are not the only ones who look like they'll be increasing their stake. I suspect there will be more,' a local house trader was quoted as saying by Dow Jones Newswire yesterday.

This stake increase also came ahead of the finalisation this week of the turnkey contract to build a US$863 million (S$1.19 billion) greenfield pulp mill in South Kalimantan in Indonesia - a tie-up between United Fiber's unit PT Marga Buana Bumi Mulia and China MCC20 Construction Co Ltd.

China MCC20 will be responsible for the design, procurement and supply of all machinery and equipment, civil work, and the installation work as well as providing supplier's credit for the project.

The contract with the new Chinese partner, which was announced on Feb 24, helped allay investor concerns about the project which was long held-up over regulatory clearance by both the Indonesian and the Chinese governments.

The delay led to the earlier contract with China National Machinery & Equipment Import & Export Corp being aborted and the new contract with China MCC20.

United Fiber and China MCC20 have targeted to execute the engineering, procurement and construction contract and the supplier's credit agreement before Friday this week.

Federal clinches waste-water treatment contract in China

FEDERAL International (2000), through a consortium, has won a contract to provide centralised waste-water treatment services to factories in China's Sichuan PanZhiHua Vanadium-Titanium Industrial Park.

The consortium comprises Federal's 65 per cent-owned subsidiary Federal Environmental & Energy and IESE Water (Asia). Federal Environmental & Energy will be involved in project management and equipment procurement for the new waste-water treatment plant.

The build, operate and own project will be undertaken by Federal Environmental (China-PZH), in which Federal will have an effective 61.75 per cent stake. Federal Environmental (China-PZH) will be incorporated in China with its paid-up capital to be increased progressively to US$4.5 million, said Federal.

The 27-year, three-phase project is said to be China's largest acidity waste-water treatment project. On completion of all the phases, the plant will be able to process 100,000 tonnes of waste-water daily. The investment cost of this plant is 280 million yuan (S$55.2 million).

Construction starts this month and the first phase of the project is expected to be completed by year-end. Federal expects the first phase to generate annual revenue of 100 million yuan and to be able to process 25,000 tonnes of waste-water per day. The investment is worth about 106 million yuan. Federal Environmental & Energy will be involved in project management and equipment procurement for the new waste-water treatment plant.

'We are excited to have made this breakthrough in China's environmental management industry,' said Federal's executive chairman and chief executive KK Koh. 'We are delighted to provide environmental management solutions and contribute towards environmentally friendly activities in China. Given the booming environmental management industry in China, going forward, we intend to build up our portfolio of environmental projects.'

Federal, a provider of engineering and procurement services to the oil, gas, energy and infrastructure industries, said its investment in the project will be funded internally and through bank borrowings. It believes the investment will not have a material impact on its earnings per share or net tangible assets for the year ending Dec 31, 2008.

Sino-Environment clinches rights for deNOx catalysts

SINO-ENVIRONMENT Technology Group - which was queried by the Singapore Exchange over the 12 per cent surge in share price to $1.40 last Friday - yesterday announced that it has secured rights from a Japanese company to manufacture de-nitrogenation (deNOx) catalysts for coal-fired power plants. The rights are worth an expected initial revenue contribution of 300 million yuan (S$59.2 million) for next year.

The environmental protection and waste recovery solution provider in China said that the rights came from Catalysts and Chemicals Industries (CCIC). CCIC is a wholly owned subsidiary of Tokyo-listed JGC Corporation, a global environmental and chemical engineering contractor.

For the project, Sino-Environment expects to invest 265 million yuan in capital expenditure (including royalty fees) in 2009. The expected revenue contribution of about 300 million yuan for 2009 is based on an initial capacity of 6,000 cubic metres.

The rights, which Sino-Environment won through wholly owned subsidiary Fujian Thumb Environmental Facilities, involve the transfer of technology for the production of catalysts used in the de-nitrogenation of flue gas for coal-fired power plants.

Sino-Environment will roll out initial production facilities for the deNOx catalysts in Fuzhou. The catalysts will be used in the group's deNOx projects, and will also be sold to third-party environmental solution providers in China.

The group expects production capacity to expand, in line with future growth in the industry for deNOx environmental solutions.

Sino-Environment said that the deal 'provides for close technical exchange and cooperation' with CICC, and 'marks an important milestone' in its strategy to position itself as the environmental solution for power plants in China.

The deal is not expected to have a material financial impact on the group's net tangible asset and earnings per share for the current financial year.

Shares of Sino-Environment, in which trading was halted at 4.30pm last Friday pending the announcement, resumed trading yesterday at 2.30pm. It hit an an intra-day high of $1.41 before closing at $1.34, down six cents from Friday.

Pacific Healthcare bags first Thailand deal

PACIFIC Healthcare Holdings has clinched its third consultancy and management contract - and its maiden deal in Thailand.

Under the deal with Bangkok Mediplex Co, Pacific will reap more than $500,000 over three years by helping duplicate its design and set-up model at Singapore's Paragon Medical Centre at a new facility in Bangkok's downtown Sukhumvit area.

'It's quite lucrative in the sense that we don't have to put in any equity contribution,' Pacific CEO William Chong told BT. 'And whichever country or company we share our design with gives us a value straight into the bottom line. Also, by helping them manage, we establish contacts in the country, so the cross-referral value will also be there.'

Under the agreement, Pacific will help conceptualise and manage a one billion baht (S$44 million) medical facility at a 33-storey condominium development called Nusasiri Grand Condo Sukhumvit-Ekamai. Bangkok Mediplex is building a multi-disciplinary specialist centre with a gross floor area of 70,000 sq ft spread across four floors.

'We chose Pacific Healthcare because its pioneering concept of providing top-notch specialist healthcare with the ambience of a spa is in line with our philosophy of providing sound anti-ageing medicine,' said Bangkok Mediplex managing director Niwat Kittichaiwong.

Mainboard-listed Pacific will also help Bangkok Mediplex set up a pharmacy at its anti-ageing medicine unit and provide advanced training in implant and cosmetic dentistry. The new facility is slated to open in June, according to Thai news reports.

'I'm very excited about this because none of the (Singapore) healthcare players are in Bangkok at the moment,' Dr Chong said.

Yesterday's announcement follows two other management deals signed recently by Pacific. In January 2007, it won a contract to design and project-manage a healthcare facility by Vietnam's Khanh Hoa Trading and Investment Company. Subsequently, it signed a management contract with the Advanced Medicare & Research Institute group in India to help train and develop specialists and administrative staff.

The company's shares closed 2.5 cents higher at 31.5 cents yesterday.

SGX to launch clearing of OTC benzene swaps

THE Singapore Exchange (SGX) is introducing the world's first clearing of benzene swaps in response to the petrochemical market's need for a credit risk mitigation facility.

The exchange announced yesterday that SGX AsiaClear will launch the clearing of over-the-counter (OTC) benzene swap contracts on May 5.

The size of each benzene free-on-board (FOB) Korea swaps contract is 500 tonnes. It will be cash settled based on the monthly average of Platts' daily spot marker physical cargo assessments in the contract month.

Benjamin Foo, SGX's head of clearing, commodities and AsiaClear, said that it has been working closely with OTC and petrochemical market participants to introduce benzene swaps to meet their trading and risk management needs. 'This product complements SGX's suite of OTC oil contracts,' he added.

Said Simon Chua, vice-president of Summit Petrochemical Trading Inc: 'This service will help to create a more active benzene paper market for traders and producers to manage their price and counter-party risks.'

SGX experienced a big boost for its OTC clearing service for oil swaps and forward freight agreements last year. SGX AsiaClear saw an average monthly value of trades cleared in 2007 exceeding US$390 million, compared with US$31.5 million in 2006.

SGX shares closed up 10 cents at $9 yesterday.

SPH, Star Publications in JV

SINGAPORE Press Holdings (SPH), through SPH Interactive International Pte Ltd (SPH II), has forged a joint venture (JV) with Star Publications (Malaysia) to provide digital media services in Malaysia.

The JV is called 701Panduan Sdn Bhd. In Malay, panduan means to provide direction or guidance, which is what 701Panduan aims to do by helping consumers find what they need on new media platforms.

The authorised and paid-up capital of 701Panduan is RM60 million (S$26 million), with SPH II and Star Publications each holding 50 per cent.

The deal was signed yesterday at the headquarters of Star Publications in Kuala Lumpur, Malaysia. Star Publications publishes The Star, Malaysia's most widely read English daily.

Leslie Fong, a director of SPH II and SPH's senior executive vice-president of marketing, said: 'Malaysia has one of the highest Internet penetration rates in South-east Asia. More than half of its 28 million people enjoy ready access to the Internet. In absolute numbers, this is more than Singapore's entire population. Together with the country's growing economy, this makes investing in the online business an attractive proposition.'

Mr Fong said that The Star is a top partner with a strong brand name and an established network of readers and advertisers.

Star chief operating officer Linda Ngiam said: 'The Star has spent more than 12 years establishing a leadership position on the Malaysian Internet scene. We are happy to enter into this partnership with SPH, which will take our online and new media properties to the next level.'

SPH said that the transaction will have no material impact on its earnings and net assets per share for the financial year ending Aug 31, 2008.

SPH shares closed unchanged at $4.62 yesterday.

SGX to delist Carats

CARATS Ltd will be delisted from the Singapore Exchange, after it failed to meet the exchange's requirements for the shell company to acquire a new business by April 5. The firm will be wound down and its cash returned to shareholders.

Al-Futtaim's Robinson stake rises

AL-FUTTAIM Group's stake in Robinson & Co is inching towards the 90 per cent level, with the offeror saying that, as at 5.30 pm yesterday, it and parties acting in concert control 88.36 per cent of the retailer group.

Sihuan buys stake in drug R&D firm

SIHUAN Pharmaceutical Hldgs, a manufacturer of cardiocerebral vascular drugs in China, has bought a 60 per cent stake in drug research firm Shandong R&D Co for 62.5 million yuan (S$12.3 million). Sihuan said that the purchase would pave its way to advance into the international healthcare market.

SIAEC making waves overseas

WHEN the going gets tough, the tough go global. SIA Engineering Company (SIAEC) seems to be doing just that.

Last Friday, the Singapore Airlines subsidiary signed a joint venture agreement with the Philippines' Cebu Pacific Air (Cebu) to set up an aircraft heavy maintenance facility at Clark International Airport in the Philippines.

Under the terms of the deal, SIAEC will take a 65 per cent stake in the joint venture, with Cebu holding the remaining 35 per cent. The joint venture, SIAEC's 21st, plans to construct three hangars in succession over the next 3 years at an estimated cost of $81 million.

In 2000, when SIAEC was listed here, almost all of its revenue came from parent SIA. Today, 60 per cent of the combined revenue of SIAEC and its 20 joint ventures in seven countries - Singapore, Australia, Ireland, Hong Kong, Taiwan, Indonesia and the Philippines - comes from 85 international airlines and aerospace equipment manufacturers outside the SIA Group. Located at more than 40 airports around the Asia-Pacific, these joint ventures brought in combined revenue of $2.4 billion last year.

In Singapore, SIAEC has invested more than $500 million in 13 joint ventures including critical partnerships with 'big boys' like Rolls-Royce, Pratt & Whitney and Hamilton Sundstrand. But it is overseas where the company will see its strongest growth, going forward.

Asia-Pacific airlines will take delivery of one new aircraft every day over the next five years. According to industry estimates, Asian widebody fleet will grow by 35 per cent by 2013, narrow-bodies by 51 per cent and regional jets will more than double. A further 1,759 aircraft are scheduled for delivery between 2013 and 2018, according to the Centre for Asia Pacific Aviation.

This is why ventures like the one in the Philippines are critical. They extend SIAEC's capabilities and presence beyond its six hangars in Singapore. The three hangars at Clark are designed to provide heavy and light maintenance services to narrow and wide-body aircraft belonging to Cebu Pacific and other carriers.

The geographic expansion beyond Singapore will give SIAEC more capacity at lower costs to capture a larger slice of the global MRO outsourcing market in Asia.

Recently, the company unveiled a third-quarter net profit of $53.6 million for the period ended Dec 31, 2007, down 3.1 per cent from a year earlier. Group revenue rose 1.1 per cent to $248.6 million.

While line maintenance revenue increased by 12 per cent, revenue from airframe maintenance and component overhaul declined 2 per cent due to a lower volume of component work in the quarter and a weaker US dollar. An increase in business volume in fleet management led to 11 per cent growth in revenue for the segment.

For the nine months ended December 2007, revenue improved by 6.2 per cent to $784.5 million, while net profit rose 2.5 per cent to $198.6 million. Its full-year profit is expected to be almost 10 per cent better than FY07's $242 million.

Being debt-free and sitting on a cash pile of $366 million, SIAEC has enough financial firepower to expand its pan-Asian and global footprint well into the next decade.

SIAEC's ability to successfully execute its expansion strategy seems to have also halted - for now, at least - talk of parent SIA divesting its 84 per cent stake in the company. The new thinking within SIA seems to be that not only is SIAEC 'mission critical' for the parent, it has also become a star performer, chalking up better ROE and ROA than SIA itself.