Published January 15, 2009

Jurong Tech shares dive on news of OCBC demand

Stock price falls 56% to close at record low of four cents

By CHEW XIANG

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SHARES of Jurong Technologies Industrial Corp fell 56 per cent or five cents yesterday to close at four cents, a record low, after OCBC Bank demanded that it repay $56.6 million of outstanding debt within three weeks or face winding up.

Other banks are likely to follow suit, said analysts. Jurong Tech, a contract manufacturer, had unsecured borrowings of $282.3 million due in one year or less as at Sept 30. It is said to have at least five other creditor banks, including at least one other local bank.

'It's anybody's guess (whether Jurong Tech will be wound up),' said DMG & Partners analyst James Lim, adding that Jurong Tech is likely to try to find buyers for its $18 million stake in MAP Technology Holdings. 'If they can sell it, that may satisfy OCBC for now,' Mr Lim said.

'Worse come to worst, OCBC could convert its loan to equity,' he said, but admitted that that was not likely.

Other banks are likely to be pressing for repayment too, Mr Lim said, but the company may not disclose this until negotiations hit the wall. 'They may have gone through several options before (disclosing OCBC's demands),' he said.

In its 2007 annual report, the company disclosed that it held $298 million in unsecured bank loans denominated in various currencies, almost all of which was due in 2008.

Jurong Tech said it will continue to negotiate with its creditor banks to achieve a favourable resolution. Last night, the company issued an announcement stating that 'the trading activities of the business of the company and its subsidiaries are on-going and are carried on in the ordinary course'.

'There has been no break or cessation of business activities of the company and its subsidiaries. The company wishes to re-emphasise that it seeks to achieve a favourable resolution of this matter,' Jurong Tech said.

Jurong Tech has been hurt in the last two years by lower orders from Motorola, the troubled handset manufacturer which is a major customer, but has made efforts to diversify into other businesses, including ultra low-cost handsets.

Analysts have generally been bearish on the stock, with the most recent note, by OCBC Research, a downgrade. OCBC analyst Kevin Tan cited the company's credit difficulties and falling sales as causes for concern and no house tracked by Bloomberg has issued a 'buy' call.