Published August 25, 2009
KL delays plans to impose GST
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(KUALA LUMPUR) Malaysia may not impose a goods and service tax (GST) in its 2010 budget, further delaying plans for its implementation, The Edge Financial Daily said yesterday, citing unidentified sources.
Buying time: Malaysia shelved plans to implement GST in 2007 but has recently mulled plans to bring it back due to declining oil revenues
One source said that new Prime Minister Najib Razak, who is also the finance minister, could announce a timeframe for the introduction of GST when he tables the budget in October.
The news comes after the International Monetary Fund (IMF) cautioned Kuala Lumpur earlier this month not to delay plans to introduce GST to boost revenues in an economy where the deficit could hit 7.7 per cent of gross domestic product (GDP) this year.
Malaysia shelved plans to implement GST in 2007 but has recently mulled plans to bring it back due to declining oil revenues. The IMF said that Malaysia's budget deficit in 2008, excluding oil revenues will be 11 per cent of GDP.
Analysts said that imposing a GST may not be politically helpful for the government, which faces its first major recession since the 1998 financial crisis and is struggling to build up support after unprecedented losses in last year's general elections.
Another source cited by The Edge said that the government would instead expand a 5 per cent service tax to cover certain personal and business banking services provided by financial institutions.
'Banking is somewhat a daily affair to most people. If they start to pay 5 per cent tax from next year onwards for certain financial services, they would slowly gain insights into the need for a value-added tax regime,' said the second source. -- Reuters
Tuesday, 25 August 2009
Published August 25, 2009
M'sian minister files RM500m defamation suit
Ong Tee Keat sues businessman over claim of giving him RM10m for his party
By S JAYASANKARAN
IN KUALA LUMPUR
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MALAYSIA'S Minister of Transport Ong Tee Keat yesterday filed a staggering RM500 million (S$205 million) lawsuit against businessman-politician Tiong King Sing over the latter's claim that he had given Mr Ong RM10 million for his political party.
Mr Tiong: His firm, the developer of Port Klang Free Zone, is under probe by Mr Ong's ministry
Mr Ong is the president of the Malaysian Chinese Association (MCA), the second largest component party in the ruling Barisan Nasional coalition.
Mr Tiong has other troubles. His company Kuala Dimensi was the main developer of the scandal- wracked Port Klang Free Zone (PKFZ) development and is the subject of probes by various agencies including Mr Ong's ministry and the police.
The PKFZ was originally slated to have cost the Port Klang Authority, its owner and operator, RM2.5 billion but the final cost could be closer to RM10 billion. Mr Ong, who took over the transport portfolio last March, pushed for investigations but the backlash has seen all sorts of allegations flying from both parties.
Mr Tiong not only alleged the RM10 million payout but said that Mr Ong was not averse to accepting free rides on his private jets. That's hurt the transport minister who's tried hard to portray himself as a clean and transparent leader who, more than any other Barisan leader, pushed for a full accounting of the PKFZ fiasco.
The lawsuit is the latest incident in the ongoing fallout from the investigations into the PKFZ matter and could backlash against the administration of Prime Minister Najib Razak as almost all the protagonists are from the ruling coalition. Mr Tiong is a Barisan lawmaker from Sarawak and his deputy at Kuala Dimensi Faizal Abdullah is a youth chief from Mr Najib's dominant United Malays National Organisation.
Indeed, there is some speculation that Umno leaders would be happy to see the back of Mr Ong. On Sunday, former MCA leader- turned-oppositionist Chua Jiu Meng alleged at a gathering that there was an ongoing effort by Umno to oust Mr Ong as transport minister.
Mr Ong seems to think so. Under increasing pressure, he was reported to have said that he was in danger of losing his transport minister job ever since he pushed for the PKFZ investigation.
Mr Tiong's RM10 million allegation came after a special transport ministry-appointed task force probing PKFZ said that Kuala Dimensi could have made at least RM500 million in questionable claims. Since then, Port Klang Authority chairman Lee Hwa Beng has lodged a police report.
Mr Ong maintains that Mr Tiong is trying to divert attention from the special task force's findings. The opposition agrees. The Democratic Action Party's Lim Kit Siang said that he would support Mr Ong in resisting any attempt by Kuala Dimensi to 'block' the investigation. For his part, Mr Tiong has generally been unmoved by any of Mr Ong's statements.
M'sian minister files RM500m defamation suit
Ong Tee Keat sues businessman over claim of giving him RM10m for his party
By S JAYASANKARAN
IN KUALA LUMPUR
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MALAYSIA'S Minister of Transport Ong Tee Keat yesterday filed a staggering RM500 million (S$205 million) lawsuit against businessman-politician Tiong King Sing over the latter's claim that he had given Mr Ong RM10 million for his political party.
Mr Tiong: His firm, the developer of Port Klang Free Zone, is under probe by Mr Ong's ministry
Mr Ong is the president of the Malaysian Chinese Association (MCA), the second largest component party in the ruling Barisan Nasional coalition.
Mr Tiong has other troubles. His company Kuala Dimensi was the main developer of the scandal- wracked Port Klang Free Zone (PKFZ) development and is the subject of probes by various agencies including Mr Ong's ministry and the police.
The PKFZ was originally slated to have cost the Port Klang Authority, its owner and operator, RM2.5 billion but the final cost could be closer to RM10 billion. Mr Ong, who took over the transport portfolio last March, pushed for investigations but the backlash has seen all sorts of allegations flying from both parties.
Mr Tiong not only alleged the RM10 million payout but said that Mr Ong was not averse to accepting free rides on his private jets. That's hurt the transport minister who's tried hard to portray himself as a clean and transparent leader who, more than any other Barisan leader, pushed for a full accounting of the PKFZ fiasco.
The lawsuit is the latest incident in the ongoing fallout from the investigations into the PKFZ matter and could backlash against the administration of Prime Minister Najib Razak as almost all the protagonists are from the ruling coalition. Mr Tiong is a Barisan lawmaker from Sarawak and his deputy at Kuala Dimensi Faizal Abdullah is a youth chief from Mr Najib's dominant United Malays National Organisation.
Indeed, there is some speculation that Umno leaders would be happy to see the back of Mr Ong. On Sunday, former MCA leader- turned-oppositionist Chua Jiu Meng alleged at a gathering that there was an ongoing effort by Umno to oust Mr Ong as transport minister.
Mr Ong seems to think so. Under increasing pressure, he was reported to have said that he was in danger of losing his transport minister job ever since he pushed for the PKFZ investigation.
Mr Tiong's RM10 million allegation came after a special transport ministry-appointed task force probing PKFZ said that Kuala Dimensi could have made at least RM500 million in questionable claims. Since then, Port Klang Authority chairman Lee Hwa Beng has lodged a police report.
Mr Ong maintains that Mr Tiong is trying to divert attention from the special task force's findings. The opposition agrees. The Democratic Action Party's Lim Kit Siang said that he would support Mr Ong in resisting any attempt by Kuala Dimensi to 'block' the investigation. For his part, Mr Tiong has generally been unmoved by any of Mr Ong's statements.
Published August 25, 2009
Is Ban Joo capable of doing an L&M?
By VEN SREENIVASAN
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IS TROUBLED textile player Ban Joo & Co being lifted to new recent heights by a growing reverse takeover (RTO) fever gripping the market? Some market watchers seem to think so. And they may be right.
With the China stock fever largely in deep freeze, and most blue chips and bellwethers almost fully valued following a four-month rally, market players seem to be gravitating towards second-liners and penny stocks with corporate development stories, or at least the potential for it.
At its closing price of 10 cents yesterday, Ban Joo was at its highest levels since November 2007. The stock, which has risen 43 per cent in a week, was the third most actively traded counter on the bourse yesterday, with some 108 million units changing hands.
What makes this all the more remarkable is that this company has been under the Watch-List of the Singapore Exchange (SGX) since December 2008.
The SGX places mainboard-listed companies on its watch-list if they record pre-tax losses for the latest three consecutive fiscal years and an average daily market capitalisation of less than $40 million over the last 120 trading days. Companies face the risk of being delisted if they are unable to return to the black or do not have enough market capitalisation within two years of being on the watch-list.
For the financial year ended Sept 30, 2008, Ban Joo's net loss widened to $17.4 million from $15.05 million due to impairment on trade and other receivables, fair-value losses, forex losses and interest expenses. But for the nine months ended June 30, 2009, it recorded an unaudited net profit of $1 million, a reversal from a net loss of $6.6 million during the nine months of the previous year. This was due to proceeds from the disposal of its four shoplots on Circular Road.
Despite being just a shell company, Ban Joo has cash of some $26 million as at end-June 2009, thanks to the sale of assets and the funds raised in a share placement.
The inspiration for the punt on Ban Joo could be recently relisted Seroja Investments, the new 'avatar' of previously debt-laden L&M Investments.
The civil engineering company went under judicial management in January 2006, and has since been resurrected as an offshore and energy play controlled by Indonesian interests. But since re-listing on Aug 17, Seroja has been one of the hottest stocks, closing at 45 cents on its debut, climbing steadily through last week, then jumping to 71.5 cents yesterday. And on high volumes.
There are parallels between the two companies: A virtually busted business being taken over by well-connected Indonesian parties who are injecting new assets and businesses which have no resemblance to the previous ones.
Indeed, Ban Joo recently made a barely noticed announcement that it was exiting the difficult textile industry to 'invest in profitable businesses'. It added that it was in the 'final stage of an acquisition' which will facilitate its return to profitability within two years from Dec 31, 2008.
The acquisition target is Telemedia Pacific Inc, a company which has started building an Asian undersea fibre-optic cable network. Ban Joo revealed it was in the process of conducting the due diligence with SMA Investment Holding Ltd and PT Setya Mukti Abadi Indonesia, in line with a previously announced memorandum of understanding in April this year.
Following the 'acquisition' of the new business and restructuring, Ban Joo will re-emerge as Telemedia Pacific Corp Ltd.
The market seems to be betting Ban Joo could 'do an L&M'.
It remains to be seen if this can happen.
For one thing, Ban Joo's restructuring is still a work-in-progress, though the company appears confident it will be a done deal. Also, Ban Joo is not as well known a brand name as L&M, though much of the latter's publicity in 2006 was not particularly flattering.
Meanwhile, there is vague market speculation that the restructured and renamed company's first major undersea cable customer could be a well-known Hong Kong-based telecoms player.
This heady combination of impending Indonesian control, potential Hong Kong clientele and a current Singapore listing has made Ban Joo one of the hottest plays on the local market.
Let's hope no one gets burnt.
Is Ban Joo capable of doing an L&M?
By VEN SREENIVASAN
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IS TROUBLED textile player Ban Joo & Co being lifted to new recent heights by a growing reverse takeover (RTO) fever gripping the market? Some market watchers seem to think so. And they may be right.
With the China stock fever largely in deep freeze, and most blue chips and bellwethers almost fully valued following a four-month rally, market players seem to be gravitating towards second-liners and penny stocks with corporate development stories, or at least the potential for it.
At its closing price of 10 cents yesterday, Ban Joo was at its highest levels since November 2007. The stock, which has risen 43 per cent in a week, was the third most actively traded counter on the bourse yesterday, with some 108 million units changing hands.
What makes this all the more remarkable is that this company has been under the Watch-List of the Singapore Exchange (SGX) since December 2008.
The SGX places mainboard-listed companies on its watch-list if they record pre-tax losses for the latest three consecutive fiscal years and an average daily market capitalisation of less than $40 million over the last 120 trading days. Companies face the risk of being delisted if they are unable to return to the black or do not have enough market capitalisation within two years of being on the watch-list.
For the financial year ended Sept 30, 2008, Ban Joo's net loss widened to $17.4 million from $15.05 million due to impairment on trade and other receivables, fair-value losses, forex losses and interest expenses. But for the nine months ended June 30, 2009, it recorded an unaudited net profit of $1 million, a reversal from a net loss of $6.6 million during the nine months of the previous year. This was due to proceeds from the disposal of its four shoplots on Circular Road.
Despite being just a shell company, Ban Joo has cash of some $26 million as at end-June 2009, thanks to the sale of assets and the funds raised in a share placement.
The inspiration for the punt on Ban Joo could be recently relisted Seroja Investments, the new 'avatar' of previously debt-laden L&M Investments.
The civil engineering company went under judicial management in January 2006, and has since been resurrected as an offshore and energy play controlled by Indonesian interests. But since re-listing on Aug 17, Seroja has been one of the hottest stocks, closing at 45 cents on its debut, climbing steadily through last week, then jumping to 71.5 cents yesterday. And on high volumes.
There are parallels between the two companies: A virtually busted business being taken over by well-connected Indonesian parties who are injecting new assets and businesses which have no resemblance to the previous ones.
Indeed, Ban Joo recently made a barely noticed announcement that it was exiting the difficult textile industry to 'invest in profitable businesses'. It added that it was in the 'final stage of an acquisition' which will facilitate its return to profitability within two years from Dec 31, 2008.
The acquisition target is Telemedia Pacific Inc, a company which has started building an Asian undersea fibre-optic cable network. Ban Joo revealed it was in the process of conducting the due diligence with SMA Investment Holding Ltd and PT Setya Mukti Abadi Indonesia, in line with a previously announced memorandum of understanding in April this year.
Following the 'acquisition' of the new business and restructuring, Ban Joo will re-emerge as Telemedia Pacific Corp Ltd.
The market seems to be betting Ban Joo could 'do an L&M'.
It remains to be seen if this can happen.
For one thing, Ban Joo's restructuring is still a work-in-progress, though the company appears confident it will be a done deal. Also, Ban Joo is not as well known a brand name as L&M, though much of the latter's publicity in 2006 was not particularly flattering.
Meanwhile, there is vague market speculation that the restructured and renamed company's first major undersea cable customer could be a well-known Hong Kong-based telecoms player.
This heady combination of impending Indonesian control, potential Hong Kong clientele and a current Singapore listing has made Ban Joo one of the hottest plays on the local market.
Let's hope no one gets burnt.
Published August 24, 2009
Nine bodies found after tanker fire
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(KUALA LUMPUR) Malaysian rescuers recovered the charred remains of nine Chinese sailors who went missing after an oil tanker caught fire after colliding with another vessel, a marine official said yesterday.
The bodies of two crew members trapped in the Liberian-registered Formasaproduct Brick were found on Friday and another seven on Saturday, First Adm Tan Kok Kwee of the Malaysian Maritime Enforcement Agency said.
The tanker was carrying more than 50,000 tonnes of naphtha from the United Arab Emirates to South Korea when a Britain-registered bulk carrier rammed into its rear late on Tuesday in the Malacca Strait, one of the world's busiest shipping lanes.
Firefighters took more than 30 hours to put out the blaze. Rescue efforts were hindered by rough sea conditions and salvage work to stabilise the ship, officials said.
Mr Tan said there was no spillage and marine authorities would assess the damage before releasing the vessel.
Accidents in the Malacca Strait, which separates peninsula Malaysia from Indonesia's Sumatra island, are rare even though some 70,000 vessels use the waterway annually. Traffic was not affected by the collision and fire. -- AP
Nine bodies found after tanker fire
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(KUALA LUMPUR) Malaysian rescuers recovered the charred remains of nine Chinese sailors who went missing after an oil tanker caught fire after colliding with another vessel, a marine official said yesterday.
The bodies of two crew members trapped in the Liberian-registered Formasaproduct Brick were found on Friday and another seven on Saturday, First Adm Tan Kok Kwee of the Malaysian Maritime Enforcement Agency said.
The tanker was carrying more than 50,000 tonnes of naphtha from the United Arab Emirates to South Korea when a Britain-registered bulk carrier rammed into its rear late on Tuesday in the Malacca Strait, one of the world's busiest shipping lanes.
Firefighters took more than 30 hours to put out the blaze. Rescue efforts were hindered by rough sea conditions and salvage work to stabilise the ship, officials said.
Mr Tan said there was no spillage and marine authorities would assess the damage before releasing the vessel.
Accidents in the Malacca Strait, which separates peninsula Malaysia from Indonesia's Sumatra island, are rare even though some 70,000 vessels use the waterway annually. Traffic was not affected by the collision and fire. -- AP
Published August 24, 2009
Telekom Q2 profit slips 2.6% in absence of mobile income
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(KUALA LUMPUR) Telekom Malaysia Bhd, the nation's biggest fixed-line telephone operator, said that profit fell in the second quarter from a year earlier without the income from its mobile phone operation that was spun off in 2008.
Dropped calls: Profit would have more than doubled from RM114.7 million last year if mobile phone earnings were excluded from the 2008 figures
Net income slid 2.6 per cent to RM266 million (S$109 million) in the three months ended June 30 compared with RM273.2 million a year earlier, the company said in a statement to the stock exchange in Kuala Lumpur last Friday. Revenue rose 0.9 per cent to RM2.13 billion.
Profit would have more than doubled from RM114.7 million last year if mobile phone earnings were excluded from the 2008 figures, helped by foreign exchange gains after the ringgit strengthened against the US dollar, Telekom said. It also announced an interim dividend of RM358 million, or 10 sen a share.
Kuala Lumpur-based Telekom separated the mobile business in April last year, cutting off earnings from units across Asia. The company said last Friday that it is on schedule to meet a target to pay RM700 million in total dividends for the full year.
'Higher revenue from Internet and multimedia, other telecommunication-related services and non-telecommunication related services' mitigated the decline in voice revenue, the company said.
Telekom had foreign exchange gains of RM123.2 million in the quarter, compared with a loss of RM74.9 million a year earlier, it said. The ringgit rose 3.8 per cent against the US dollar in the second quarter, according to Bloomberg data.
Telekom plans to spend RM350 million over the next three to four years for the content of an Internet- television service that it plans to start next year, chief executive officer Zamzamzairani Isa told a press conference in here last Friday.
'These are challenging times,' he said, referring to the economic situation. The company is committed to meeting its revenue and earnings targets this year, he said.
The earnings announcement came after the market closed. Telekom shares were unchanged at RM3.05 last Friday. The stock has fallen one per cent this year, compared with a 33 per cent gain in the benchmark stock index. -- Bloomberg
Telekom Q2 profit slips 2.6% in absence of mobile income
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(KUALA LUMPUR) Telekom Malaysia Bhd, the nation's biggest fixed-line telephone operator, said that profit fell in the second quarter from a year earlier without the income from its mobile phone operation that was spun off in 2008.
Dropped calls: Profit would have more than doubled from RM114.7 million last year if mobile phone earnings were excluded from the 2008 figures
Net income slid 2.6 per cent to RM266 million (S$109 million) in the three months ended June 30 compared with RM273.2 million a year earlier, the company said in a statement to the stock exchange in Kuala Lumpur last Friday. Revenue rose 0.9 per cent to RM2.13 billion.
Profit would have more than doubled from RM114.7 million last year if mobile phone earnings were excluded from the 2008 figures, helped by foreign exchange gains after the ringgit strengthened against the US dollar, Telekom said. It also announced an interim dividend of RM358 million, or 10 sen a share.
Kuala Lumpur-based Telekom separated the mobile business in April last year, cutting off earnings from units across Asia. The company said last Friday that it is on schedule to meet a target to pay RM700 million in total dividends for the full year.
'Higher revenue from Internet and multimedia, other telecommunication-related services and non-telecommunication related services' mitigated the decline in voice revenue, the company said.
Telekom had foreign exchange gains of RM123.2 million in the quarter, compared with a loss of RM74.9 million a year earlier, it said. The ringgit rose 3.8 per cent against the US dollar in the second quarter, according to Bloomberg data.
Telekom plans to spend RM350 million over the next three to four years for the content of an Internet- television service that it plans to start next year, chief executive officer Zamzamzairani Isa told a press conference in here last Friday.
'These are challenging times,' he said, referring to the economic situation. The company is committed to meeting its revenue and earnings targets this year, he said.
The earnings announcement came after the market closed. Telekom shares were unchanged at RM3.05 last Friday. The stock has fallen one per cent this year, compared with a 33 per cent gain in the benchmark stock index. -- Bloomberg
Published August 24, 2009
Naza brothers stepping out of dad's shadow
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(KUALA LUMPUR) It was a deal that everyone thought was pretty straightforward.
Without the Naza group's involvement, Kumpulan Jetson's fortune will pretty much depend on what the brothers and their partners want to do.
Two brothers, sons of the late Nasimuddin Amin, and their partners had bought a third of Kumpulan Jetson Bhd, a small construction and manufacturing outfit, for RM12.3 million (S$5.03 million), the Malaysian Business Times reported.
The Naza Group will probably inject some of its assets into Kumpulan Jetson. The group is large and it had gone after listed companies before, most notably DRB-Hicom Bhd and Proton Holdings Bhd. But suddenly, the brothers said this was personal.
Personal means not part of the family business. Now this is different. Without the Naza group's involvement, Kumpulan Jetson's fortune will pretty much depend on what the brothers and their partners want to do. There are not much clues to go by.
For one, they want to keep Kumpulan Jetson listed. That should be fairly easy since the stock has shot up above its offer price of 70 sen. This means that despite a mandatory general offer on the table from the new investors, minorities won't rush to accept the general offer.
Secondly, the brothers picked a company that makes car parts as well as builds and develops properties. This is familiar territory as they grew up with a man who built Malaysia's biggest private motor vehicle group and amassed a fair bit of properties locally and abroad.
The big question is why are they doing this if the Naza group is not involved? Won't it distract them from running the group? Mr Nasaruddin is head of the group and Mr Faliq runs the property business.
Although there are signs of recovery, the economy is still going though a rough patch. We have probably passed through the worst of the storm, but the storm hasn't subsided.
A closer look also shows that Kumpulan Jetson is not in good shape financially. Its turnover has fallen every year since 2004 and it has made money in only two of the last five years.
Although it has more in current assets or money that will come in within a year, than current liabilities, almost three-fourths of the assets are receivables, which may take longer to collect in the current climate.
Jetson doesn't have much cash, about RM5 million as at June 30 this year, versus debt of more than RM40 million.
The bulk or almost 90 per cent of Jetson's total assets are tied up in the receivables and its plant and a concession asset. It has a 25-year contract to operate a hostel for Universiti Putra Malaysia.
So we're back to the first question of why. Why take over this company if Naza Group does not figure in the whole scheme of things.
One possible explanation is that the brothers are out to prove that they can make it on their own without the might of Naza Group behind them. The sons want to step out of their late father's long shadow.
Naza brothers stepping out of dad's shadow
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(KUALA LUMPUR) It was a deal that everyone thought was pretty straightforward.
Without the Naza group's involvement, Kumpulan Jetson's fortune will pretty much depend on what the brothers and their partners want to do.
Two brothers, sons of the late Nasimuddin Amin, and their partners had bought a third of Kumpulan Jetson Bhd, a small construction and manufacturing outfit, for RM12.3 million (S$5.03 million), the Malaysian Business Times reported.
The Naza Group will probably inject some of its assets into Kumpulan Jetson. The group is large and it had gone after listed companies before, most notably DRB-Hicom Bhd and Proton Holdings Bhd. But suddenly, the brothers said this was personal.
Personal means not part of the family business. Now this is different. Without the Naza group's involvement, Kumpulan Jetson's fortune will pretty much depend on what the brothers and their partners want to do. There are not much clues to go by.
For one, they want to keep Kumpulan Jetson listed. That should be fairly easy since the stock has shot up above its offer price of 70 sen. This means that despite a mandatory general offer on the table from the new investors, minorities won't rush to accept the general offer.
Secondly, the brothers picked a company that makes car parts as well as builds and develops properties. This is familiar territory as they grew up with a man who built Malaysia's biggest private motor vehicle group and amassed a fair bit of properties locally and abroad.
The big question is why are they doing this if the Naza group is not involved? Won't it distract them from running the group? Mr Nasaruddin is head of the group and Mr Faliq runs the property business.
Although there are signs of recovery, the economy is still going though a rough patch. We have probably passed through the worst of the storm, but the storm hasn't subsided.
A closer look also shows that Kumpulan Jetson is not in good shape financially. Its turnover has fallen every year since 2004 and it has made money in only two of the last five years.
Although it has more in current assets or money that will come in within a year, than current liabilities, almost three-fourths of the assets are receivables, which may take longer to collect in the current climate.
Jetson doesn't have much cash, about RM5 million as at June 30 this year, versus debt of more than RM40 million.
The bulk or almost 90 per cent of Jetson's total assets are tied up in the receivables and its plant and a concession asset. It has a 25-year contract to operate a hostel for Universiti Putra Malaysia.
So we're back to the first question of why. Why take over this company if Naza Group does not figure in the whole scheme of things.
One possible explanation is that the brothers are out to prove that they can make it on their own without the might of Naza Group behind them. The sons want to step out of their late father's long shadow.
Published August 24, 2009
MALAYSIA INSIGHT
Is Asas Serba's plan brilliant or absurd?
Its proposal to take over all the toll concessionaire firms doesn't make sense
By S JAYASANKARAN
KL CORRESPONDENT
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IN May or thereabouts, Asas Serba Sdn Bhd - a private company little known to anyone in Malaysia - submitted a proposal to the Works Ministry to buy all the toll concessionaire companies in the country for RM50 billion (S$20.7 billion), according to businessmen familiar with the proposal. There are 22 such companies in the country.
It doesn't quite make sense. Most of the 22 companies are privately held, so the notion of going through the government seems unreasonable to begin with.
The biggest concessionaire, however, is state-owned Plus Expressways, which owns and manages a highway traversing the length of Peninsular Malaysia. So the application to buy that is at least grounded in some reason.
According to various reports, the promoters of the scheme argue that they would cut toll rates by 20 per cent and keep it that way in perpetuity. In return, they want the concession periods extended.
High toll fares are admittedly a pain for the people who have to use them regularly. In fact, that is why Nor Mohamad Yakcop, Minister in charge of the Economic Planning Unit, said recently that the government itself was planning to take Plus private - presumably as a prelude towards lowering toll rates.
Asas Serba probably thinks Mr Nor Mohamad is planning to extend the government's purchase to all the toll companies in the country. It would argue that it would be better for the private sector to take over the concessions rather than the government, which is already running a sizeable budget deficit; this year, it is expected to come close to 8 per cent of gross domestic product.
One can think of a few reasons why the government should not do what Asas Serba is proposing. Forking out RM50 billion for a mature business that does not create any new jobs or have any multiplier effects on the economy does not make any sense.
Indeed, putting that kind of money into new projects that would help kick-start the economy would be a far better proposition. In addition, one cannot forget the foreign shareholders of the concession companies who would simply repatriate the money out.
Should that be taken to mean that Asas Serba's proposition has merit and should be considered seriously?
Not at all. Who is Asas Serba anyway? The market speculation is that Halim Saad, the former controlling shareholder of the now-defunct Renong conglomerate, is behind the deal. But Mr Halim has publicly denied it and no one is any wiser.
According to news reports, the company comprises four people, two of whom are former senior executives of Renong. But the point here is that none can be said to be any kind of corporate heavyweight, which begs the question: why would any bank want to get involved in the scheme in the first place?
RM50 billion is a colossal sum by any standards, and the only way to get this kind of deal going would be through government support; few banks would dare to participate without government aid. The Employees Provident Fund, which is the one institution with that kind of money, would not get involved without tacit government support.
In sum, for Asas Serba to succeed, the government must back its proposition - in word and in deed. That implies that Kuala Lumpur - which had to step in to save Renong after it crashed under the burden of its own debt - will have to intervene if anything goes wrong.
This scenario rings of an absurd play. If that is the case, then Mr Nor Mohamad should just proceed with his own plan and forget about the critics.
MALAYSIA INSIGHT
Is Asas Serba's plan brilliant or absurd?
Its proposal to take over all the toll concessionaire firms doesn't make sense
By S JAYASANKARAN
KL CORRESPONDENT
Email this article
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IN May or thereabouts, Asas Serba Sdn Bhd - a private company little known to anyone in Malaysia - submitted a proposal to the Works Ministry to buy all the toll concessionaire companies in the country for RM50 billion (S$20.7 billion), according to businessmen familiar with the proposal. There are 22 such companies in the country.
It doesn't quite make sense. Most of the 22 companies are privately held, so the notion of going through the government seems unreasonable to begin with.
The biggest concessionaire, however, is state-owned Plus Expressways, which owns and manages a highway traversing the length of Peninsular Malaysia. So the application to buy that is at least grounded in some reason.
According to various reports, the promoters of the scheme argue that they would cut toll rates by 20 per cent and keep it that way in perpetuity. In return, they want the concession periods extended.
High toll fares are admittedly a pain for the people who have to use them regularly. In fact, that is why Nor Mohamad Yakcop, Minister in charge of the Economic Planning Unit, said recently that the government itself was planning to take Plus private - presumably as a prelude towards lowering toll rates.
Asas Serba probably thinks Mr Nor Mohamad is planning to extend the government's purchase to all the toll companies in the country. It would argue that it would be better for the private sector to take over the concessions rather than the government, which is already running a sizeable budget deficit; this year, it is expected to come close to 8 per cent of gross domestic product.
One can think of a few reasons why the government should not do what Asas Serba is proposing. Forking out RM50 billion for a mature business that does not create any new jobs or have any multiplier effects on the economy does not make any sense.
Indeed, putting that kind of money into new projects that would help kick-start the economy would be a far better proposition. In addition, one cannot forget the foreign shareholders of the concession companies who would simply repatriate the money out.
Should that be taken to mean that Asas Serba's proposition has merit and should be considered seriously?
Not at all. Who is Asas Serba anyway? The market speculation is that Halim Saad, the former controlling shareholder of the now-defunct Renong conglomerate, is behind the deal. But Mr Halim has publicly denied it and no one is any wiser.
According to news reports, the company comprises four people, two of whom are former senior executives of Renong. But the point here is that none can be said to be any kind of corporate heavyweight, which begs the question: why would any bank want to get involved in the scheme in the first place?
RM50 billion is a colossal sum by any standards, and the only way to get this kind of deal going would be through government support; few banks would dare to participate without government aid. The Employees Provident Fund, which is the one institution with that kind of money, would not get involved without tacit government support.
In sum, for Asas Serba to succeed, the government must back its proposition - in word and in deed. That implies that Kuala Lumpur - which had to step in to save Renong after it crashed under the burden of its own debt - will have to intervene if anything goes wrong.
This scenario rings of an absurd play. If that is the case, then Mr Nor Mohamad should just proceed with his own plan and forget about the critics.
Published August 24, 2009
Is the market always right?
By R SIVANITHY
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IT'S always an interesting and useful exercise to question conventional wisdom in the stock market, either when the mood is overtly bullish or bearish. Of course, many observers would point to a time-honoured maxim that 'the market is always right' which if true, suggests that it is an exercise in futility to try and probe for hidden truths beyond what the markets are saying at any one time - just accept the message being conveyed and react accordingly.
Stimulus packages may cause more damage as they delay the downturn and prevent economies from healing themselves.
As a general rule, this approach would be correct; you'd have to assume that the market is usually right and certainly, if you had stood still over the past five months and done nothing, you'd have missed out on a rebound that has, on average, added 40 per cent to equities round the world.
However, all rules have exceptions and this could well be one such instance when markets are, shall we say, less than correct. We say this because current wisdom, going by the large upward thrust in equities since March, says that because the US economy has turned a corner and is supposedly improving, then the outlook has to be rosy and thus stocks are cheap. This much most investors would be familiar with, the mantra from the broking community and investment banks that markets have more upside, that there are more earnings upgrades to bank on and that economic growth has only one direction - up.
But you'd have to ask, why is there still such widespread scepticism among an appreciable number of learned observers? In BT's Aug 20 Roundtable for example, the recovery was described as 'phony' by financial consultant Ernest Kepper. He said that 'a turn-up in the economy is not the same as the economy recovering lost ground'. Japanese professor and former finance vice-minister for international affairs Eisuke Sakakibara said that he was mystified because there is no good reason why stock prices are so high, either in Japan, the US or even in China, where he believes a major bubble is inflating.
Plenty to ponder
All of these concerns might be dismissed as simple, misplaced over-conservatism if stock prices are really cheap relative to future prospects, but here we find plenty to ponder.
In US financial weekly Barron's Aug 3 issue for example, former Merrill Lynch strategist David Rosenberg is quoted as being still doubtful that Wall Street's March low was a real market bottom. This is because, according to his reckoning, on March 6 US stocks were trading at two times book value, 13 times forward earnings and 18 times trailing earnings which were supported by a paltry 3 per cent dividend yield - all numbers which don't qualify as a true market low.
Worse, the dividend yield today has dropped to 2 per cent while the trailing price/earnings has climbed to 24, leading to the suggestion that 'the marginal buyer of equities today may well be the same person who was loading up on real estate during the summer of 2006'.
And what of US growth? Even here, questions can be asked. Thus far, the latest figures - which incidentally brought cheer to Wall Street when they were released - showed that the slide in US consumption is levelling off, but this was most likely due to tax cuts and the stimulus taking effect, both of which can only provide temporary relief. With no real improvement in employment and only 0.2 per cent private sector wage growth, it's not likely that US consumers can do their part to spend the economy out of trouble in the months ahead.
As some critics have correctly pointed out, stimulus packages may ultimately cause more damage than good because they delay the inevitable downturn and prevent economies from healing themselves. One editorial described stimulus packages as akin to juggling flaming torches - impressive while it lasts, but doomed to succumb eventually to the law of gravity. If and when the US's 'bailout bubble' bursts - or when the stimulus is withdrawn - Wall Street could be in serious trouble.
Liquidity driven momentum
So where does this leave the investor who is wondering where equities might head in the months ahead? First, it's best to acknowledge that a large part of Wall Street's rally since March was liquidity driven, possibly even fuelled by money from US bailout packages that was quietly channelled to investment banks. If the liquidity dries up, so will the momentum.
Second, government spending and stimulus can help ease some of the pain some of the time, but not all of the pain all of the time - especially when both are funded by government borrowing. This is because artificial growth of the sort being engineered in the US comes at a price, and this could take the form of higher inflation and higher taxes as many have forecast.
Third and perhaps most important though, is not to get too carried away by the pronouncements from the broking community that the worst is over and that it's all happy days ahead because there is plenty of room for scepticism.
Put differently, it's best not to place too much faith in the dictum that the market is always right because sometimes, it isn't.
Is the market always right?
By R SIVANITHY
Email this article
Print article
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IT'S always an interesting and useful exercise to question conventional wisdom in the stock market, either when the mood is overtly bullish or bearish. Of course, many observers would point to a time-honoured maxim that 'the market is always right' which if true, suggests that it is an exercise in futility to try and probe for hidden truths beyond what the markets are saying at any one time - just accept the message being conveyed and react accordingly.
Stimulus packages may cause more damage as they delay the downturn and prevent economies from healing themselves.
As a general rule, this approach would be correct; you'd have to assume that the market is usually right and certainly, if you had stood still over the past five months and done nothing, you'd have missed out on a rebound that has, on average, added 40 per cent to equities round the world.
However, all rules have exceptions and this could well be one such instance when markets are, shall we say, less than correct. We say this because current wisdom, going by the large upward thrust in equities since March, says that because the US economy has turned a corner and is supposedly improving, then the outlook has to be rosy and thus stocks are cheap. This much most investors would be familiar with, the mantra from the broking community and investment banks that markets have more upside, that there are more earnings upgrades to bank on and that economic growth has only one direction - up.
But you'd have to ask, why is there still such widespread scepticism among an appreciable number of learned observers? In BT's Aug 20 Roundtable for example, the recovery was described as 'phony' by financial consultant Ernest Kepper. He said that 'a turn-up in the economy is not the same as the economy recovering lost ground'. Japanese professor and former finance vice-minister for international affairs Eisuke Sakakibara said that he was mystified because there is no good reason why stock prices are so high, either in Japan, the US or even in China, where he believes a major bubble is inflating.
Plenty to ponder
All of these concerns might be dismissed as simple, misplaced over-conservatism if stock prices are really cheap relative to future prospects, but here we find plenty to ponder.
In US financial weekly Barron's Aug 3 issue for example, former Merrill Lynch strategist David Rosenberg is quoted as being still doubtful that Wall Street's March low was a real market bottom. This is because, according to his reckoning, on March 6 US stocks were trading at two times book value, 13 times forward earnings and 18 times trailing earnings which were supported by a paltry 3 per cent dividend yield - all numbers which don't qualify as a true market low.
Worse, the dividend yield today has dropped to 2 per cent while the trailing price/earnings has climbed to 24, leading to the suggestion that 'the marginal buyer of equities today may well be the same person who was loading up on real estate during the summer of 2006'.
And what of US growth? Even here, questions can be asked. Thus far, the latest figures - which incidentally brought cheer to Wall Street when they were released - showed that the slide in US consumption is levelling off, but this was most likely due to tax cuts and the stimulus taking effect, both of which can only provide temporary relief. With no real improvement in employment and only 0.2 per cent private sector wage growth, it's not likely that US consumers can do their part to spend the economy out of trouble in the months ahead.
As some critics have correctly pointed out, stimulus packages may ultimately cause more damage than good because they delay the inevitable downturn and prevent economies from healing themselves. One editorial described stimulus packages as akin to juggling flaming torches - impressive while it lasts, but doomed to succumb eventually to the law of gravity. If and when the US's 'bailout bubble' bursts - or when the stimulus is withdrawn - Wall Street could be in serious trouble.
Liquidity driven momentum
So where does this leave the investor who is wondering where equities might head in the months ahead? First, it's best to acknowledge that a large part of Wall Street's rally since March was liquidity driven, possibly even fuelled by money from US bailout packages that was quietly channelled to investment banks. If the liquidity dries up, so will the momentum.
Second, government spending and stimulus can help ease some of the pain some of the time, but not all of the pain all of the time - especially when both are funded by government borrowing. This is because artificial growth of the sort being engineered in the US comes at a price, and this could take the form of higher inflation and higher taxes as many have forecast.
Third and perhaps most important though, is not to get too carried away by the pronouncements from the broking community that the worst is over and that it's all happy days ahead because there is plenty of room for scepticism.
Put differently, it's best not to place too much faith in the dictum that the market is always right because sometimes, it isn't.
Published August 24, 2009
F1 organisers, hotels hit the home stretch
There's catching up to do as race weekend nears
By NISHA RAMCHANDANI
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(SINGAPORE) Michael Schumacher may not be returning to Formula One racing, but the buzz is slowly stealing back to the Singapore Grand Prix as the September event approaches.
After a more subdued start this year against the backdrop of an unprecedented economic recession and the recent U-turn by Schumi, ticket sales and hotel bookings have just a little over a month to play catch-up for the Sept 25-27 event.
At present, close to 70 per cent of grandstand and walkabout tickets have been sold, while over 82 per cent of corporate hospitality suites and the Paddock Club have been taken up, said race promoter Singapore GP (SGP). The numbers have been climbing although at this point last year, over 95 per cent of tickets had been sold.
SGP also scaled back the number of its built-to-order hospitality suites at the circuit to 160 this year from 180 previously, given the poorer economy.
Meanwhile, hotel bookings for race weekend are also lagging behind last year's despite the steeper discounts offered by hoteliers. The trackside Grand Park City Hall (GPCH) has yet to see bookings hit the halfway mark for the F1 weekend.
'Currently, we are not seeing very strong demand,' Park Hotel Group director Allen Law said.
And this is despite the fact that room rates at GPCH have been kept largely the same, although the 30 per cent F1 tax for trackside hotels which is being levied by the government will be passed on to patrons. Room rates start at $480.
'We want to maintain our normal traffic, so we are only asking our normal rate plus the surcharge,' explained Mr Law. Stipulations such as a minimum number of nights have also been done away with, as this tends to deter travellers who are not attending the race.
The Ritz-Carlton, which is near the pit building, is not running a full house yet but remains upbeat.
'Based on last year's occupancy over the race weekend and given that hotel reservations since late last year have been made on a shorter-term basis, we're anticipating to once again fill up this coming year,' said Michelle Wan, director of public relations. The Ritz-Carlton was fully booked over the 2008 race weekend.
Still, the one thing the industry does seem to agree on is that bookings will - and have started to - move faster as the race weekend approaches.
'Bookings at The St Regis Singapore for the Singapore Grand Prix have started to pick up speed as race week draws closer,' said Cheryl Ong, director of marketing communications.
'Given the positive shift of business sentiment lately, it is expected that the optimism will encourage increased corporate bookings as well,' Pan Pacific Singapore general manager Ivan Lee added.
Hotels are also working with other parties to help drum up additional business. The Ritz-Carlton, together with GH Mumm, event organiser B-Yond and other partners such as Audi and Citibank, are joining hands for the Podium Lounge party, a ticketed event at the Ritz-Carlton poolside over race weekend.
And in a tie-up with the Singapore Flyer, the Pan Pacific is offering a $1,900 package which includes three nights' accommodation, a three-day pass to watch the race as well as tickets for the Singapore Flyer.
Meanwhile, the spate of announcements in recent weeks have also started to herald the arrival of Grand Prix season.
The three-day multi-artist concert F1 Rocks, which makes its worldwide debut right here in Singapore, just added Taiwanese pop singer A-Mei to a star-studded line-up which includes Beyonce, the Black Eyed Peas, ZZ Top and Jacky Cheung.
GH Mumm, the official champagne of F1, will be hosting an F1 vintage party at Velvet Underground on Sept 25. And Johnnie Walker, which is flying in some 150 corporate partners and VIPs for the race this year, will host a 500-strong private party at One on the Bund as well as set up a makeshift venue at Clarke Quay - Black Lounge Experience - which will be open to the public.
F1 organisers, hotels hit the home stretch
There's catching up to do as race weekend nears
By NISHA RAMCHANDANI
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(SINGAPORE) Michael Schumacher may not be returning to Formula One racing, but the buzz is slowly stealing back to the Singapore Grand Prix as the September event approaches.
After a more subdued start this year against the backdrop of an unprecedented economic recession and the recent U-turn by Schumi, ticket sales and hotel bookings have just a little over a month to play catch-up for the Sept 25-27 event.
At present, close to 70 per cent of grandstand and walkabout tickets have been sold, while over 82 per cent of corporate hospitality suites and the Paddock Club have been taken up, said race promoter Singapore GP (SGP). The numbers have been climbing although at this point last year, over 95 per cent of tickets had been sold.
SGP also scaled back the number of its built-to-order hospitality suites at the circuit to 160 this year from 180 previously, given the poorer economy.
Meanwhile, hotel bookings for race weekend are also lagging behind last year's despite the steeper discounts offered by hoteliers. The trackside Grand Park City Hall (GPCH) has yet to see bookings hit the halfway mark for the F1 weekend.
'Currently, we are not seeing very strong demand,' Park Hotel Group director Allen Law said.
And this is despite the fact that room rates at GPCH have been kept largely the same, although the 30 per cent F1 tax for trackside hotels which is being levied by the government will be passed on to patrons. Room rates start at $480.
'We want to maintain our normal traffic, so we are only asking our normal rate plus the surcharge,' explained Mr Law. Stipulations such as a minimum number of nights have also been done away with, as this tends to deter travellers who are not attending the race.
The Ritz-Carlton, which is near the pit building, is not running a full house yet but remains upbeat.
'Based on last year's occupancy over the race weekend and given that hotel reservations since late last year have been made on a shorter-term basis, we're anticipating to once again fill up this coming year,' said Michelle Wan, director of public relations. The Ritz-Carlton was fully booked over the 2008 race weekend.
Still, the one thing the industry does seem to agree on is that bookings will - and have started to - move faster as the race weekend approaches.
'Bookings at The St Regis Singapore for the Singapore Grand Prix have started to pick up speed as race week draws closer,' said Cheryl Ong, director of marketing communications.
'Given the positive shift of business sentiment lately, it is expected that the optimism will encourage increased corporate bookings as well,' Pan Pacific Singapore general manager Ivan Lee added.
Hotels are also working with other parties to help drum up additional business. The Ritz-Carlton, together with GH Mumm, event organiser B-Yond and other partners such as Audi and Citibank, are joining hands for the Podium Lounge party, a ticketed event at the Ritz-Carlton poolside over race weekend.
And in a tie-up with the Singapore Flyer, the Pan Pacific is offering a $1,900 package which includes three nights' accommodation, a three-day pass to watch the race as well as tickets for the Singapore Flyer.
Meanwhile, the spate of announcements in recent weeks have also started to herald the arrival of Grand Prix season.
The three-day multi-artist concert F1 Rocks, which makes its worldwide debut right here in Singapore, just added Taiwanese pop singer A-Mei to a star-studded line-up which includes Beyonce, the Black Eyed Peas, ZZ Top and Jacky Cheung.
GH Mumm, the official champagne of F1, will be hosting an F1 vintage party at Velvet Underground on Sept 25. And Johnnie Walker, which is flying in some 150 corporate partners and VIPs for the race this year, will host a 500-strong private party at One on the Bund as well as set up a makeshift venue at Clarke Quay - Black Lounge Experience - which will be open to the public.
Published August 24, 2009
SGX may force lifting of veil on pledged shares
Requirement is among several new rules under consideration in light of recent experience
By JAMIE LEE
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(SINGAPORE) Controlling shareholders may in future be forced to disclose any significant share pledges they have made, based on new regulations now being studied by the Singapore Exchange (SGX).
Such shareholders may also have to custodise their shares in Singapore, said SGX chief executive Hsieh Fu Hua, who was speaking at Invest Fair 2009 on Saturday.
A controlling shareholder - defined as someone who owns at least 15 per cent of the total number of issued shares - must inform investors of the pledged shares if the amount is large enough to prompt a change in control.
This can mean that if a controlling shareholder has pledged shares translating to at least 30 per cent of the firm, he may have to make an announcement. Under current rules, a mandatory takeover offer is triggered when an investor's stake in a listed company hits 30 per cent.
These controlling shareholders must also disclose their share pledges if the seizure of such shares may cause a breach of loan covenants by the company.
This would apply regardless of the size of the loan covenants, SGX's head of issuer regulation Richard Teng told BT.
The company can emphasise that it is not a material event if the share pledge is related to a small loan, Mr Teng added.
In comparison, in the UK, Financial Services Authority rules state that company directors must not deal in any of their company's shares - including shares as collateral against loans - without the approval of the chairman. Directors must also notify the company of share transactions that mainly benefited them and that had a material impact on their interests in the company.
SGX's proposed move follows a recent slew of cases involving S-chips in which controlling shareholders had pledged their entire stake in the company for personal loans and then risked losing control of the company when they failed to pay up.
At Sino-Environment Technology, chairman and chief executive Sun Jiangrong lost the 56 per cent control that he held in the company after he used his shares as collateral for a loan but could not repay in full. His shares were then sold.
Mr Sun's loss of control triggered an early redemption of $149 million in convertible bonds, which the company has defaulted on.
China Sky Chemical Fibre CEO Huang Zhong Xuan also pledged half of his 38 per cent stake in the company to secure personal loans from two lenders. One of the lenders has demanded payment, threatening to sell the pledged shares if the loan is not repaid.
At Beauty China Holdings, founder and chairman Wong Hon Wai pledged his 39 per cent stake to secure credit facilities and later saw his stake cut to about 30 per cent in a series of forced sales. He also tried, but failed, to sell the remaining shares.
Issues over pledged shares are not limited to S-chips. Former group president of Jade Technologies, Anthony Soh, tried to buy up the company but pulled out suddenly after a large chunk of his Jade shares - which were used as collateral for a loan - were force sold by Merrill Lynch. Mr Soh has been censured by the Securities Industry Council for being 'far too casual' in approaching his obligations as an offeror.
Mak Yuen Teen, co-director at the National University of Singapore's Corporate Governance and Financial Reporting Centre, fully agreed that pledged shares should be disclosed.
'The reality is that when it comes to controlling shareholders, it is difficult to separate their personal dealings from the firm's fortunes,' Prof Mak told BT.
Lee Suet Fern, managing partner of Stamford Law Corporation, said that investors have a right to know of these share pledges since they could cause 'a sudden unplanned change in control of the company'.
'This must be a risk that the public would want to factor in before investing in any particular company.'
Co-head of Kim Eng Capital's corporate finance Ding Hock Chai said that such disclosure must not be 'overly burdensome' such that major shareholders lose the motivation to list here.
'You don't want shareholders making announcements every day when there are small margin calls,' he added.
SGX has also proposed that controlling shareholders have their shares custodised in Singapore. This indicates that shareholders would have to hold their shares under the Central Depository here and means that the legal responsibility for the securities is held locally.
'During an investigation of irregularities involving the controlling shareholder, there would be greater regulatory purchase over them,' said Mr Hsieh at Invest Fair, which is co-organised by online trading platform ShareInvestor and The Business Times.
But while the idea of having shares kept in Singapore is appealing, an effective implementation is less straightforward, said Prof Mak, noting that a more detailed study is necessary.
As these proposed changes extend to the Companies Act, they would need to be approved by other authorities such as the Monetary Authority of Singapore.
SGX may force lifting of veil on pledged shares
Requirement is among several new rules under consideration in light of recent experience
By JAMIE LEE
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(SINGAPORE) Controlling shareholders may in future be forced to disclose any significant share pledges they have made, based on new regulations now being studied by the Singapore Exchange (SGX).
Such shareholders may also have to custodise their shares in Singapore, said SGX chief executive Hsieh Fu Hua, who was speaking at Invest Fair 2009 on Saturday.
A controlling shareholder - defined as someone who owns at least 15 per cent of the total number of issued shares - must inform investors of the pledged shares if the amount is large enough to prompt a change in control.
This can mean that if a controlling shareholder has pledged shares translating to at least 30 per cent of the firm, he may have to make an announcement. Under current rules, a mandatory takeover offer is triggered when an investor's stake in a listed company hits 30 per cent.
These controlling shareholders must also disclose their share pledges if the seizure of such shares may cause a breach of loan covenants by the company.
This would apply regardless of the size of the loan covenants, SGX's head of issuer regulation Richard Teng told BT.
The company can emphasise that it is not a material event if the share pledge is related to a small loan, Mr Teng added.
In comparison, in the UK, Financial Services Authority rules state that company directors must not deal in any of their company's shares - including shares as collateral against loans - without the approval of the chairman. Directors must also notify the company of share transactions that mainly benefited them and that had a material impact on their interests in the company.
SGX's proposed move follows a recent slew of cases involving S-chips in which controlling shareholders had pledged their entire stake in the company for personal loans and then risked losing control of the company when they failed to pay up.
At Sino-Environment Technology, chairman and chief executive Sun Jiangrong lost the 56 per cent control that he held in the company after he used his shares as collateral for a loan but could not repay in full. His shares were then sold.
Mr Sun's loss of control triggered an early redemption of $149 million in convertible bonds, which the company has defaulted on.
China Sky Chemical Fibre CEO Huang Zhong Xuan also pledged half of his 38 per cent stake in the company to secure personal loans from two lenders. One of the lenders has demanded payment, threatening to sell the pledged shares if the loan is not repaid.
At Beauty China Holdings, founder and chairman Wong Hon Wai pledged his 39 per cent stake to secure credit facilities and later saw his stake cut to about 30 per cent in a series of forced sales. He also tried, but failed, to sell the remaining shares.
Issues over pledged shares are not limited to S-chips. Former group president of Jade Technologies, Anthony Soh, tried to buy up the company but pulled out suddenly after a large chunk of his Jade shares - which were used as collateral for a loan - were force sold by Merrill Lynch. Mr Soh has been censured by the Securities Industry Council for being 'far too casual' in approaching his obligations as an offeror.
Mak Yuen Teen, co-director at the National University of Singapore's Corporate Governance and Financial Reporting Centre, fully agreed that pledged shares should be disclosed.
'The reality is that when it comes to controlling shareholders, it is difficult to separate their personal dealings from the firm's fortunes,' Prof Mak told BT.
Lee Suet Fern, managing partner of Stamford Law Corporation, said that investors have a right to know of these share pledges since they could cause 'a sudden unplanned change in control of the company'.
'This must be a risk that the public would want to factor in before investing in any particular company.'
Co-head of Kim Eng Capital's corporate finance Ding Hock Chai said that such disclosure must not be 'overly burdensome' such that major shareholders lose the motivation to list here.
'You don't want shareholders making announcements every day when there are small margin calls,' he added.
SGX has also proposed that controlling shareholders have their shares custodised in Singapore. This indicates that shareholders would have to hold their shares under the Central Depository here and means that the legal responsibility for the securities is held locally.
'During an investigation of irregularities involving the controlling shareholder, there would be greater regulatory purchase over them,' said Mr Hsieh at Invest Fair, which is co-organised by online trading platform ShareInvestor and The Business Times.
But while the idea of having shares kept in Singapore is appealing, an effective implementation is less straightforward, said Prof Mak, noting that a more detailed study is necessary.
As these proposed changes extend to the Companies Act, they would need to be approved by other authorities such as the Monetary Authority of Singapore.
Published August 22, 2009
PCCW denies reports of inability to pay dividends
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(Hong Kong)
PCCW Ltd, Hong Kong's biggest phone carrier, said that it may resume paying dividends, denying reports that the company may be forced to withhold payouts to shareholders because of its indebtedness.
Singapore-listed Pacific Century Regional Developments holds a 22.9 per cent stake in PCCW.
'These press reports are inaccurate,' PCCW said in a statement to the Hong Kong stock exchange yesterday. 'The company is able to pay dividends in the future if directors of the company consider it appropriate to declare or recommend dividends.'
PCCW's liabilities exceeded assets by HK$3.06 billion (S$571 million) at the end of June, rendering the company unable to pay dividends to its investors, Ming Pao Daily News reported yesterday. The carrier's debt climbed after it paid a HK$8.8 billion special dividend in the first half, according to the Hong Kong-based newspaper.
The company has 'positive distributable reserves', giving it the ability to pay dividends, the statement said.
PCCW shares fell 3.8 per cent to HK$2.05 in Hong Kong trading yesterday, the biggest decline since May 7. The city's benchmark Hang Seng Index slid 0.6 per cent.
PCCW on Thursday reported first-half profit fell to HK$654 million from HK$656 million as telecommunications sales declined.
The company said that it won't pay an interim dividend, after net debt rose to HK$30.6 billion at the end of June from HK$22.8 billion six months earlier. -- Bloomberg
PCCW denies reports of inability to pay dividends
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(Hong Kong)
PCCW Ltd, Hong Kong's biggest phone carrier, said that it may resume paying dividends, denying reports that the company may be forced to withhold payouts to shareholders because of its indebtedness.
Singapore-listed Pacific Century Regional Developments holds a 22.9 per cent stake in PCCW.
'These press reports are inaccurate,' PCCW said in a statement to the Hong Kong stock exchange yesterday. 'The company is able to pay dividends in the future if directors of the company consider it appropriate to declare or recommend dividends.'
PCCW's liabilities exceeded assets by HK$3.06 billion (S$571 million) at the end of June, rendering the company unable to pay dividends to its investors, Ming Pao Daily News reported yesterday. The carrier's debt climbed after it paid a HK$8.8 billion special dividend in the first half, according to the Hong Kong-based newspaper.
The company has 'positive distributable reserves', giving it the ability to pay dividends, the statement said.
PCCW shares fell 3.8 per cent to HK$2.05 in Hong Kong trading yesterday, the biggest decline since May 7. The city's benchmark Hang Seng Index slid 0.6 per cent.
PCCW on Thursday reported first-half profit fell to HK$654 million from HK$656 million as telecommunications sales declined.
The company said that it won't pay an interim dividend, after net debt rose to HK$30.6 billion at the end of June from HK$22.8 billion six months earlier. -- Bloomberg
Published August 21, 2009
Buy Public Bank, Carlsberg in dividend play: RHB
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(KUALA LUMPUR) Investors should buy Public Bank Bhd, Carlsberg Brewery Malaysia Bhd and other Malaysian companies with 'attractive' dividend yields to ride out the stock market's volatility, RHB Research Institute said.
'We recognise the market's volatility as a sign that valuations on current earnings estimates have become stretched and a market correction would be an opportunity to buy the fundamentally more robust stocks.'
- RHB Research Institute
'Dividend yield plays are once again attractive,' RHB Research said in a report yesterday.
'We recognise the market's volatility as a sign that valuations on current earnings estimates have become stretched and a market correction would be an opportunity to buy the fundamentally more robust stocks.'
Investors should also add shares of Hai-O Enterprise Bhd, a seller of Chinese wines, herbs and medicines; power and gaming group Tanjong plc and chipmaker Malaysian Pacific Industries Bhd as an economic recovery in 2010 will make the companies' earnings prospects 'assured', the report said.
The benchmark FTSE Bursa Malaysia KLCI Index, which has gained 32 per cent this year, has risen less than 0.1 per cent this month.
A gauge of the index's 30-day historical volatility advanced to 13.05 yesterday, the highest level since July 28.
The KLCI closed 0.68 per cent higher yesterday at 1,163.43.
Hai-O has a dividend yield of 7.8 per cent, the highest among RHB Research's dividend stock picks, while Public Bank offers a 6.5 per cent return, and Carlsberg has a 5.7 per cent yield, according to the report.
That's higher than the 10-year Malaysian government securities' 4.17 per cent yield, it said.
The benchmark index offers a 3.7 per cent dividend return, according to data compiled by Bloomberg.
The Malaysian government, which has forecast an economic contraction of as much as 5 per cent in 2009, expects the economy to return to growth in the fourth quarter. -- Bloomberg
Buy Public Bank, Carlsberg in dividend play: RHB
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(KUALA LUMPUR) Investors should buy Public Bank Bhd, Carlsberg Brewery Malaysia Bhd and other Malaysian companies with 'attractive' dividend yields to ride out the stock market's volatility, RHB Research Institute said.
'We recognise the market's volatility as a sign that valuations on current earnings estimates have become stretched and a market correction would be an opportunity to buy the fundamentally more robust stocks.'
- RHB Research Institute
'Dividend yield plays are once again attractive,' RHB Research said in a report yesterday.
'We recognise the market's volatility as a sign that valuations on current earnings estimates have become stretched and a market correction would be an opportunity to buy the fundamentally more robust stocks.'
Investors should also add shares of Hai-O Enterprise Bhd, a seller of Chinese wines, herbs and medicines; power and gaming group Tanjong plc and chipmaker Malaysian Pacific Industries Bhd as an economic recovery in 2010 will make the companies' earnings prospects 'assured', the report said.
The benchmark FTSE Bursa Malaysia KLCI Index, which has gained 32 per cent this year, has risen less than 0.1 per cent this month.
A gauge of the index's 30-day historical volatility advanced to 13.05 yesterday, the highest level since July 28.
The KLCI closed 0.68 per cent higher yesterday at 1,163.43.
Hai-O has a dividend yield of 7.8 per cent, the highest among RHB Research's dividend stock picks, while Public Bank offers a 6.5 per cent return, and Carlsberg has a 5.7 per cent yield, according to the report.
That's higher than the 10-year Malaysian government securities' 4.17 per cent yield, it said.
The benchmark index offers a 3.7 per cent dividend return, according to data compiled by Bloomberg.
The Malaysian government, which has forecast an economic contraction of as much as 5 per cent in 2009, expects the economy to return to growth in the fourth quarter. -- Bloomberg
Published August 21, 2009
KL may ease curbs on public gatherings
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(KUALA LUMPUR) Malaysia's government plans to ease a decades-old law requiring police permits for public protests, but only for gatherings held in stadiums and other designated places, reports and an official said yesterday.
Mr Hishammuddin: 'The whole idea is to make these Acts more relevant... and ensure transparency so that there is no room for accusations of its abuse'
Home Minister Hishammuddin Hussein said on Wednesday that the government is reviewing a law that forbids gatherings of three people or more without special police permission. A ministry official, who declined to be named citing protocol, confirmed Mr Hishammuddin's announcement.
Authorities have rarely allowed protests organised by opposition politicians and activists, who complain permits are denied on the pretext of security. Their protests are deemed illegal, and organisers are usually charged in court.
Earlier this month police used tear gas and water cannons and arrested hundreds to stop an opposition-led mass rally against the Internal Security Act, which allows for indefinite detention without trial.
'At the end of the day, it is all about national security and stability,' the New Straits Times quoted Mr Hishammuddin as saying. 'Thus far, the police had allowed gatherings that do not pose threats.'
He said places, such as stadiums and 'certain corners of the town,' may be allocated for protests but declined to give details pending further studies.
The Star daily quoted him as saying that amendments to the law are expected to be debated by lawmakers in Parliament in December.
He also said the government is considering amending the Internal Security Act.
'The whole idea is to make these Acts more relevant to the present time and ensure transparency so that there is no room for accusations of its abuse,' the Times quoted Mr Hishammuddin.
Mr Hishammuddin said the government may shorten an initial detention period for investigations and change other provisions, but critics say the act must be abolished. They claim it is prone to abuse as government critics can be labelled a threat to national security and locked up indefinitely.
Prime Minister Najib Razak, who took office in April, is struggling to address voters' calls for more openness. His coalition's popularity reached an all-time low last year amid complaints of economic mismanagement, corruption and racial discrimination. -- AP
KL may ease curbs on public gatherings
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(KUALA LUMPUR) Malaysia's government plans to ease a decades-old law requiring police permits for public protests, but only for gatherings held in stadiums and other designated places, reports and an official said yesterday.
Mr Hishammuddin: 'The whole idea is to make these Acts more relevant... and ensure transparency so that there is no room for accusations of its abuse'
Home Minister Hishammuddin Hussein said on Wednesday that the government is reviewing a law that forbids gatherings of three people or more without special police permission. A ministry official, who declined to be named citing protocol, confirmed Mr Hishammuddin's announcement.
Authorities have rarely allowed protests organised by opposition politicians and activists, who complain permits are denied on the pretext of security. Their protests are deemed illegal, and organisers are usually charged in court.
Earlier this month police used tear gas and water cannons and arrested hundreds to stop an opposition-led mass rally against the Internal Security Act, which allows for indefinite detention without trial.
'At the end of the day, it is all about national security and stability,' the New Straits Times quoted Mr Hishammuddin as saying. 'Thus far, the police had allowed gatherings that do not pose threats.'
He said places, such as stadiums and 'certain corners of the town,' may be allocated for protests but declined to give details pending further studies.
The Star daily quoted him as saying that amendments to the law are expected to be debated by lawmakers in Parliament in December.
He also said the government is considering amending the Internal Security Act.
'The whole idea is to make these Acts more relevant to the present time and ensure transparency so that there is no room for accusations of its abuse,' the Times quoted Mr Hishammuddin.
Mr Hishammuddin said the government may shorten an initial detention period for investigations and change other provisions, but critics say the act must be abolished. They claim it is prone to abuse as government critics can be labelled a threat to national security and locked up indefinitely.
Prime Minister Najib Razak, who took office in April, is struggling to address voters' calls for more openness. His coalition's popularity reached an all-time low last year amid complaints of economic mismanagement, corruption and racial discrimination. -- AP
Published August 21, 2009
M'sian Islamic banks launch standard commo contract
Uniform agreement aimed at removing key barrier to sector's growth
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(KUALA LUMPUR) Malaysian Islamic banks yesterday launched a standard agreement for commodity murabaha deposit accounts between banks and corporates, aiming to remove a key barrier to the sector's growth.
The Association of Islamic Banking Institutions Malaysia - which groups banks such as Bank Islam, CIMB Islamic and the Malaysian units of Kuwait Finance House and Al Rajhi - said the master contract would be similar to an interbank murabaha agreement launched earlier.
'Such a standard agreement will certainly promote and uphold the tenets of transparency and consistency in Islamic financial transactions, which eventually will result in product effectiveness and operational efficiencies of Islamic banks,' the association's president Zukri Samat said.
Under a commodity murabaha deposit account, a company that wants to place surplus funds with an Islamic bank will appoint the bank as its buying agent. The bank then buys commodities such as metal or palm oil on behalf of the company.
The bank then offers to buy the commodities from the company on a deferred cash payment basis, with the sale price including a profit to the company from the sale. Murabaha is widely used as an Islamic financing tool.
The International Islamic Financial Market, an industry body backed by the central banks of several Muslim countries, has estimated that the global commodity murabaha market is valued at more than US$100 billion.
But the structure has been criticised as a sham, with some bankers saying deals can be done with no true sale taking place and no real transfer of risk to the buyer of the goods.
'Some jurisdictions actually do not recognise commodity murabaha,' Mr Zukri said. 'This is the responsibility of the various people, the sharia scholars, to try to bring down the gap. Of course we cannot agree on everything.
'Islam allows for different views and different opinions so long as you don't deviate from the main principle of Islam.'
Islamic law is interpreted differently by different religious scholars, resulting in some sharia banking practices being accepted in certain jurisdictions but rejected in some others.
Some regulators and bankers say this lack of uniformity makes it hard to sell products across borders and can raise the cost of transactions. But some practitioners argue that the absence of standardisation helps the industry to innovate.
The murabaha master agreement comes after Bahrain-based industry body Accounting and Auditing Organization for Islamic Financial Institutions said this month it would screen Islamic banking products for sharia compliance to promote uniformity.
Mr Zukri said the murabaha agreement would unlock the potential of the Malaysian Islamic money market which has more than RM6 billion (S$2.5 billion) of average daily transactions. - Reuters
M'sian Islamic banks launch standard commo contract
Uniform agreement aimed at removing key barrier to sector's growth
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(KUALA LUMPUR) Malaysian Islamic banks yesterday launched a standard agreement for commodity murabaha deposit accounts between banks and corporates, aiming to remove a key barrier to the sector's growth.
The Association of Islamic Banking Institutions Malaysia - which groups banks such as Bank Islam, CIMB Islamic and the Malaysian units of Kuwait Finance House and Al Rajhi - said the master contract would be similar to an interbank murabaha agreement launched earlier.
'Such a standard agreement will certainly promote and uphold the tenets of transparency and consistency in Islamic financial transactions, which eventually will result in product effectiveness and operational efficiencies of Islamic banks,' the association's president Zukri Samat said.
Under a commodity murabaha deposit account, a company that wants to place surplus funds with an Islamic bank will appoint the bank as its buying agent. The bank then buys commodities such as metal or palm oil on behalf of the company.
The bank then offers to buy the commodities from the company on a deferred cash payment basis, with the sale price including a profit to the company from the sale. Murabaha is widely used as an Islamic financing tool.
The International Islamic Financial Market, an industry body backed by the central banks of several Muslim countries, has estimated that the global commodity murabaha market is valued at more than US$100 billion.
But the structure has been criticised as a sham, with some bankers saying deals can be done with no true sale taking place and no real transfer of risk to the buyer of the goods.
'Some jurisdictions actually do not recognise commodity murabaha,' Mr Zukri said. 'This is the responsibility of the various people, the sharia scholars, to try to bring down the gap. Of course we cannot agree on everything.
'Islam allows for different views and different opinions so long as you don't deviate from the main principle of Islam.'
Islamic law is interpreted differently by different religious scholars, resulting in some sharia banking practices being accepted in certain jurisdictions but rejected in some others.
Some regulators and bankers say this lack of uniformity makes it hard to sell products across borders and can raise the cost of transactions. But some practitioners argue that the absence of standardisation helps the industry to innovate.
The murabaha master agreement comes after Bahrain-based industry body Accounting and Auditing Organization for Islamic Financial Institutions said this month it would screen Islamic banking products for sharia compliance to promote uniformity.
Mr Zukri said the murabaha agreement would unlock the potential of the Malaysian Islamic money market which has more than RM6 billion (S$2.5 billion) of average daily transactions. - Reuters
Published August 21, 2009
Is the bellwether stock obsolete?
By WONG WEI KONG
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FOLLOW the Leader is a game children sometimes play. First a leader is chosen, then the other children all line up behind. The leader then moves around and all the children have to mimic the leader's actions. Any player who messes up or doesn't do what the leader does has to leave the game.
Moving on: Diversified groups have restructured to focus on core or new businesses over the years
But in the local stock market it seems, it's the leader who's out of the game.
Consider this. Not too long ago, traders, analysts and journalists often talked or wrote in terms of bellwether stocks. But in more recent years, this hasn't been the case. The concept of the bellwether stock, in the local context at least, appears to have faded into obscurity.
The term bellwether comes from 'bellewether', which refers to a sheep which leads the rest of the flock, using a bell to attract the attention of the other sheep. Traditionally, the leader sheep was a wether, or castrated ram. Over time, people began to use the term more generally to refer to any sort of leader or indicator.
So a bellwether stock is one that is seen to be an indicator of the trend in the stock market or a sector. If the bellwether stock is moving up or down, the whole sector or even market is expected to follow suit. It is the leader stock, leading the rest higher or lower.
A classic example of a bellwether stock is General Motors or GM in the US. The stock acts as a reference point for the automobile industry, but also influences other sectors too. GM buys from a wide number of suppliers, so its performance has a ripple effect. It sells to consumers, so its sales figures are an indicator of consumer confidence.
Conversely, it employs thousands of people, so whether it's hiring or firing also determines consumer sentiment. And because it makes things that run on gasoline, its performance reflects the impact of oil price movements. Hence the popular saying: 'What's good for GM is good for America', which, looking at the current circumstances facing GM, spells a period of painful restructuring for the US economy.
The Singapore market had its own bellwether stocks. The classic example was Keppel Corp. In the 1990s, the group had major interests in ship and rig building, property, banking, energy, telecommunications and engineering. With such a diversified portfolio, it was considered a proxy to the Singapore economy and the most important bellwether stock. Keppel's performance was closely tracked, and the group's earnings were often the key opening event of the reporting season.
Indeed, when Keppel's shares fell to record lows during the Asian financial crisis, it reflected accurately what was happening to the Singapore economy and corporate earnings then.
But today, there is no bellwether stock of this stature in the Singapore market. It's down to two broad reasons: the shifts within the economy and corporate action. While banking and property remain key sectors in the economy, newer industries, such as pharmaceuticals and knowledge-driven sectors, have become more important. But the representation of these newer sectors in the stock market remains low, with most of the major players being foreign companies. That rules for the listing of bio-tech firms have just been recently unveiled highlights the yawing gap.
And over the last decade, corporate groups have restructured to focus on core or new businesses, prompted by internal strategy changes or by regulatory requirements. Keppel, for one, shed its banking exposure (Keppel Bank), and pared its interests in other non-core areas to focus on marine, property and engineering activities. The banks cut their exposure to property, while other corporates also restructured to refocus on selected operations.
While manufacturing is still an important economic sector, the consolidation among major listed manufacturing groups also means that the key electronics manufacturing segment, for instance, is represented by just two major stocks, Venture Manufacturing and Creative Tech.
So the wide-ranging conglomerates of the 1990s gave way to more focused groups, and the idea of the bellwether stock became increasingly diluted.
Keppel may still lead sentiment within the marine sector, but it's no longer the bellwether stock for the broader market or economy. The closest investors have to a bellwether stock these days are probably the three listed banks, with their lending exposure to consumers and different sectors of the economy - but this isn't pure, direct exposure.
But then, perhaps the idea of a bellwether stock is obsolete anyway. The concept of bellwether stocks affecting other stocks because investors read bullish or bearish signals from their performance is premised on the fact that the market trades on fundamental factors. This is often (maybe mostly) not the case these days.
The growth of proprietary trading here, in which house traders move huge amounts of stocks for no reason other than to earn a margin, has more or less thrown the idea of fundamentals leading the market out of the window. The banks or big stocks like Keppel may rise or fall, but the market can be going the other way. Even if there's a leader, there may not be followers.
It's as if all the sheep are now wearing bells, and it just means that reading the market has become that much more difficult for the average investor.
Is the bellwether stock obsolete?
By WONG WEI KONG
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FOLLOW the Leader is a game children sometimes play. First a leader is chosen, then the other children all line up behind. The leader then moves around and all the children have to mimic the leader's actions. Any player who messes up or doesn't do what the leader does has to leave the game.
Moving on: Diversified groups have restructured to focus on core or new businesses over the years
But in the local stock market it seems, it's the leader who's out of the game.
Consider this. Not too long ago, traders, analysts and journalists often talked or wrote in terms of bellwether stocks. But in more recent years, this hasn't been the case. The concept of the bellwether stock, in the local context at least, appears to have faded into obscurity.
The term bellwether comes from 'bellewether', which refers to a sheep which leads the rest of the flock, using a bell to attract the attention of the other sheep. Traditionally, the leader sheep was a wether, or castrated ram. Over time, people began to use the term more generally to refer to any sort of leader or indicator.
So a bellwether stock is one that is seen to be an indicator of the trend in the stock market or a sector. If the bellwether stock is moving up or down, the whole sector or even market is expected to follow suit. It is the leader stock, leading the rest higher or lower.
A classic example of a bellwether stock is General Motors or GM in the US. The stock acts as a reference point for the automobile industry, but also influences other sectors too. GM buys from a wide number of suppliers, so its performance has a ripple effect. It sells to consumers, so its sales figures are an indicator of consumer confidence.
Conversely, it employs thousands of people, so whether it's hiring or firing also determines consumer sentiment. And because it makes things that run on gasoline, its performance reflects the impact of oil price movements. Hence the popular saying: 'What's good for GM is good for America', which, looking at the current circumstances facing GM, spells a period of painful restructuring for the US economy.
The Singapore market had its own bellwether stocks. The classic example was Keppel Corp. In the 1990s, the group had major interests in ship and rig building, property, banking, energy, telecommunications and engineering. With such a diversified portfolio, it was considered a proxy to the Singapore economy and the most important bellwether stock. Keppel's performance was closely tracked, and the group's earnings were often the key opening event of the reporting season.
Indeed, when Keppel's shares fell to record lows during the Asian financial crisis, it reflected accurately what was happening to the Singapore economy and corporate earnings then.
But today, there is no bellwether stock of this stature in the Singapore market. It's down to two broad reasons: the shifts within the economy and corporate action. While banking and property remain key sectors in the economy, newer industries, such as pharmaceuticals and knowledge-driven sectors, have become more important. But the representation of these newer sectors in the stock market remains low, with most of the major players being foreign companies. That rules for the listing of bio-tech firms have just been recently unveiled highlights the yawing gap.
And over the last decade, corporate groups have restructured to focus on core or new businesses, prompted by internal strategy changes or by regulatory requirements. Keppel, for one, shed its banking exposure (Keppel Bank), and pared its interests in other non-core areas to focus on marine, property and engineering activities. The banks cut their exposure to property, while other corporates also restructured to refocus on selected operations.
While manufacturing is still an important economic sector, the consolidation among major listed manufacturing groups also means that the key electronics manufacturing segment, for instance, is represented by just two major stocks, Venture Manufacturing and Creative Tech.
So the wide-ranging conglomerates of the 1990s gave way to more focused groups, and the idea of the bellwether stock became increasingly diluted.
Keppel may still lead sentiment within the marine sector, but it's no longer the bellwether stock for the broader market or economy. The closest investors have to a bellwether stock these days are probably the three listed banks, with their lending exposure to consumers and different sectors of the economy - but this isn't pure, direct exposure.
But then, perhaps the idea of a bellwether stock is obsolete anyway. The concept of bellwether stocks affecting other stocks because investors read bullish or bearish signals from their performance is premised on the fact that the market trades on fundamental factors. This is often (maybe mostly) not the case these days.
The growth of proprietary trading here, in which house traders move huge amounts of stocks for no reason other than to earn a margin, has more or less thrown the idea of fundamentals leading the market out of the window. The banks or big stocks like Keppel may rise or fall, but the market can be going the other way. Even if there's a leader, there may not be followers.
It's as if all the sheep are now wearing bells, and it just means that reading the market has become that much more difficult for the average investor.
Published August 21, 2009
Worst seems to be over for S-chips, analysts say
Biggest concern now is when Beijing will tighten its monetary policy
By LYNETTE KHOO
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IT WAS an uphill battle against declining demand for many Singapore Exchange-listed Chinese companies, or S-chips, in the second quarter, but the good news is that the only way to go from the valley now is up.
'The bright spot is that we have probably hit the bottom,' said Kim Eng analyst James Koh, citing lower inventory build-up and fewer problems on receivables cropping up.
Roger Tan, vice-president of SIAS Research, noted that the earnings performance of S-chips in the last quarter was mixed. While the reporting season saw positive surprises from property groups Yanlord and CentraLand, it also presented poor report cards on shipbuilders Cosco Corp and JES International.
Yangzijiang posted the highest profits of $128.76 million, a 79.6 per cent surge from a year ago, thanks to stronger revenue from building larger vessels in the second quarter.
Higher selling prices for Yanlord Land Group's residential projects enabled the group to post a 36.2 per cent year-on-year rise in net profit to $91.6 million for the three months ended June 30. CentraLand posted an 18-fold jump in net profit to $417,000 on the back of a 178 per cent surge in revenue to $4.35 million from a year ago when it did not register any property sales.
Some domestic players put up a mixed showing. China Dairy's Q2 net profit jumped ninefold from a year ago to $2.27 million but China Farm's net profit fell 60.3 per cent to $3.12 million on waning sales.
The 14 S-chips that swung from profits a year ago into losses last quarter included food manufacturers Celestial Nutrifoods, United Food and Pine Agritech, as well as chemical fibre firms Sino Techfibre and China Sky Chemical Fibre.
Sports apparel players were dealt a blow from the post-Olympic slump. China Hongxing's Q2 net profit slipped 60 per cent to $10 million on weaker sales while China Sport's 38 per cent fall in Q2 net profit to $7.68 million was dragged by higher marketing expenses.
Fibrechem and Sino-Environment have yet to announce their first and second-quarter results as their auditors could not finalise the review of their cash.
For the third quarter, Mr Tan of SIAS expects the Chinese property firms to fare well and enjoy a 5-10 per cent earnings growth. Local consumer plays could also see another 5 per cent gain in earnings while export-driven firms may see flat growth, he said.
'The worst is over, but the biggest concern now is when the Chinese government is going to tighten its monetary policy,' he added. A bursting of the asset bubble may put the brakes on growth in the property sector but analysts noted that Beijing would be careful not to do so.
Mr Koh of Kim Eng said that any tightening would likely be selectively applied to areas of undue speculation such as the stock market or property market.
'China is still very much committed to its GDP (gross domestic product) growth target and tightening credit in productive areas would be a counter-intuitive measure,' he said. 'From what we understand, banks there are still very happy to lend to industries or companies engaged in areas such as infrastructure and water.'
Since this year, the combined market cap of S-chips has risen by over 40 per cent to $34.5 billion as at Aug 18. There is room for more upside, analysts said.
'For the next six to 12 months, we are seeing a potential for 15-20 per cent upside in S-chips,' Mr Tan said. But he noted that corporate governance concerns among S-chips have not fully blown over yet.
This is 'a shake-up period where the good S-chips are differentiated from the rest', he said. 'But we need to give good Chinese companies a fair valuation to keep them in Singapore.'
Worst seems to be over for S-chips, analysts say
Biggest concern now is when Beijing will tighten its monetary policy
By LYNETTE KHOO
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IT WAS an uphill battle against declining demand for many Singapore Exchange-listed Chinese companies, or S-chips, in the second quarter, but the good news is that the only way to go from the valley now is up.
'The bright spot is that we have probably hit the bottom,' said Kim Eng analyst James Koh, citing lower inventory build-up and fewer problems on receivables cropping up.
Roger Tan, vice-president of SIAS Research, noted that the earnings performance of S-chips in the last quarter was mixed. While the reporting season saw positive surprises from property groups Yanlord and CentraLand, it also presented poor report cards on shipbuilders Cosco Corp and JES International.
Yangzijiang posted the highest profits of $128.76 million, a 79.6 per cent surge from a year ago, thanks to stronger revenue from building larger vessels in the second quarter.
Higher selling prices for Yanlord Land Group's residential projects enabled the group to post a 36.2 per cent year-on-year rise in net profit to $91.6 million for the three months ended June 30. CentraLand posted an 18-fold jump in net profit to $417,000 on the back of a 178 per cent surge in revenue to $4.35 million from a year ago when it did not register any property sales.
Some domestic players put up a mixed showing. China Dairy's Q2 net profit jumped ninefold from a year ago to $2.27 million but China Farm's net profit fell 60.3 per cent to $3.12 million on waning sales.
The 14 S-chips that swung from profits a year ago into losses last quarter included food manufacturers Celestial Nutrifoods, United Food and Pine Agritech, as well as chemical fibre firms Sino Techfibre and China Sky Chemical Fibre.
Sports apparel players were dealt a blow from the post-Olympic slump. China Hongxing's Q2 net profit slipped 60 per cent to $10 million on weaker sales while China Sport's 38 per cent fall in Q2 net profit to $7.68 million was dragged by higher marketing expenses.
Fibrechem and Sino-Environment have yet to announce their first and second-quarter results as their auditors could not finalise the review of their cash.
For the third quarter, Mr Tan of SIAS expects the Chinese property firms to fare well and enjoy a 5-10 per cent earnings growth. Local consumer plays could also see another 5 per cent gain in earnings while export-driven firms may see flat growth, he said.
'The worst is over, but the biggest concern now is when the Chinese government is going to tighten its monetary policy,' he added. A bursting of the asset bubble may put the brakes on growth in the property sector but analysts noted that Beijing would be careful not to do so.
Mr Koh of Kim Eng said that any tightening would likely be selectively applied to areas of undue speculation such as the stock market or property market.
'China is still very much committed to its GDP (gross domestic product) growth target and tightening credit in productive areas would be a counter-intuitive measure,' he said. 'From what we understand, banks there are still very happy to lend to industries or companies engaged in areas such as infrastructure and water.'
Since this year, the combined market cap of S-chips has risen by over 40 per cent to $34.5 billion as at Aug 18. There is room for more upside, analysts said.
'For the next six to 12 months, we are seeing a potential for 15-20 per cent upside in S-chips,' Mr Tan said. But he noted that corporate governance concerns among S-chips have not fully blown over yet.
This is 'a shake-up period where the good S-chips are differentiated from the rest', he said. 'But we need to give good Chinese companies a fair valuation to keep them in Singapore.'
Published August 21, 2009
St James Hldgs posts $16.3m full-year loss
Non-recurring items account for the bulk of loss, says group
By TEH SHI NING
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(SINGAPORE) Night entertainment group St James Holdings, hit by party-goers' recession-dampened spirits and non-recurring costs, yesterday posted a full-year net loss of $16.3 million.
Tough times: Poor economic sentiment and roadworks near St James Power Station at Sentosa Gateway took their toll on sales, says the group
The non-recurring items - which account for the bulk of the loss - comprise $14.25 million for costs of reverse acquisition written off, $0.5 million for write-off of goodwill from acquiring Bar None (now known as Firefly Entertainment) and $0.58 million in impairment loss on plant and equipment.
But even excluding the one-time costs, the group still posted a loss of $0.72 million at the operating level for the year ended June 30, falling from its full-year operating profits of $5.34 million and full-year net profit of $4.3 million the preceding financial year.
Poor economic sentiment, coupled with roadworks near St James Power Station at Sentosa Gateway, took its toll on sales, especially in the second half of the financial year, the group said.
For the full year, total revenue had in fact risen 7 per cent to $41.4 million, from $38.7 million the preceding year, with added contributions from Bar None and The Living Room, acquired last April, and Bellini Grande at Clarke Quay, which opened on the former premises of the Crazy Horse last October.
These new outlets, which the group added to its existing stable of nine entertainment outlets in St James Power Station, also led to a 26 per cent increase in costs to $42.1 million from $33.4 million a year ago, hence the overall operating loss.
The group's loss per share of 5.36 cents as at June 30, compares with earnings per share of 1.79 cents the year before. Net asset value per share also fell to 4.25 cents as at June 30 this year, from 15.85 cents a year ago. Its cash and cash equivalents as at June 30 totalled $3.8 million, compared with $3.7 million a year back.
St James was listed on Catalist last August via a $108 million reverse takeover of the former JK Technology. To avoid doubt, the group said, yesterday's results announcement did not include the discontinued operations of the IT business of JK Tech, wholly divested last August.
The group said that it expects the opening of Resorts World at Sentosa next year to boost traffic to its Sentosa-Harbourfront outlets, and hopes that when roadworks at Sentosa Gateway and the travellator connecting VivoCity and Resorts World are complete, St James Power Station will benefit from added buzz in the area.
It is planning for the opening of a new venue within Resorts World next year, and expects positive contributions from these developments by the second half of FY 2010.
St James' shares fell 3.5 cents or 18 per cent yesterday to 16 cents, making it one of the top 20 losers on the exchange.
St James Hldgs posts $16.3m full-year loss
Non-recurring items account for the bulk of loss, says group
By TEH SHI NING
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(SINGAPORE) Night entertainment group St James Holdings, hit by party-goers' recession-dampened spirits and non-recurring costs, yesterday posted a full-year net loss of $16.3 million.
Tough times: Poor economic sentiment and roadworks near St James Power Station at Sentosa Gateway took their toll on sales, says the group
The non-recurring items - which account for the bulk of the loss - comprise $14.25 million for costs of reverse acquisition written off, $0.5 million for write-off of goodwill from acquiring Bar None (now known as Firefly Entertainment) and $0.58 million in impairment loss on plant and equipment.
But even excluding the one-time costs, the group still posted a loss of $0.72 million at the operating level for the year ended June 30, falling from its full-year operating profits of $5.34 million and full-year net profit of $4.3 million the preceding financial year.
Poor economic sentiment, coupled with roadworks near St James Power Station at Sentosa Gateway, took its toll on sales, especially in the second half of the financial year, the group said.
For the full year, total revenue had in fact risen 7 per cent to $41.4 million, from $38.7 million the preceding year, with added contributions from Bar None and The Living Room, acquired last April, and Bellini Grande at Clarke Quay, which opened on the former premises of the Crazy Horse last October.
These new outlets, which the group added to its existing stable of nine entertainment outlets in St James Power Station, also led to a 26 per cent increase in costs to $42.1 million from $33.4 million a year ago, hence the overall operating loss.
The group's loss per share of 5.36 cents as at June 30, compares with earnings per share of 1.79 cents the year before. Net asset value per share also fell to 4.25 cents as at June 30 this year, from 15.85 cents a year ago. Its cash and cash equivalents as at June 30 totalled $3.8 million, compared with $3.7 million a year back.
St James was listed on Catalist last August via a $108 million reverse takeover of the former JK Technology. To avoid doubt, the group said, yesterday's results announcement did not include the discontinued operations of the IT business of JK Tech, wholly divested last August.
The group said that it expects the opening of Resorts World at Sentosa next year to boost traffic to its Sentosa-Harbourfront outlets, and hopes that when roadworks at Sentosa Gateway and the travellator connecting VivoCity and Resorts World are complete, St James Power Station will benefit from added buzz in the area.
It is planning for the opening of a new venue within Resorts World next year, and expects positive contributions from these developments by the second half of FY 2010.
St James' shares fell 3.5 cents or 18 per cent yesterday to 16 cents, making it one of the top 20 losers on the exchange.
Published August 21, 2009
Want that iPod faster? Work in Tokyo then
UBS survey reveals Singaporeans are just the 5th highest earners in the region
By CHEN HUIFEN
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(SINGAPORE) Singapore may be the second most expensive city in Asia after Tokyo, but employees here are only the fifth highest wage earners in the region, a study has found.
To indicate wage levels, the UBS survey looked at how long a person has to work to buy an 8GB iPod nano player,
In Singapore, it takes 27.5 hours - but in Tokyo it takes 12 hours, and in Hong Kong it takes 19 hours.
On a global scale, Singapore ranked 40th in terms of gross wages, down two notches from 38th in 2006, the last time the study was conducted.
In 18th place worldwide, Tokyo workers are Asia's highest earners, followed by Hong Kong (37th, up from 40th in 2006), Seoul (38th, down from 32nd), Taipei (39th, from 36th), Singapore, Shanghai (59th, same as in 2006), Beijing (64th, from 65th) and Mumbai (73rd, from 67th).
Compiled in a report titled Prices and Earnings, the findings emerged from surveys conducted in March and April by local UBS employees, members of student organisation AIESEC, chambers of commerce, consumer organisations and selected individuals.
The wage and salary data covers 14 different occupations including building labourer, engineer, cook, bank credit officer and primary school teacher. They represent a cross-section of the workforce in the industrial and services sectors.
Employees in Copenhagen, Zurich, Geneva and New York have the highest gross wages, in that order. In contrast, the average employee in Delhi, Manila, Jakarta and Mumbai earns less than one-fifteenth of Swiss hourly wages after tax.
In terms of cost of living, excluding rent, Oslo remains the most expensive city in the world, followed by Zurich and Copenhagen. The prices were calculated based on a reference basket of 122 different products and services. London dropped dramatically to 21st position, from the second most expensive city in 2006. Singapore was ranked the 24th most expensive globally, up from 32nd position in 2006.
People in Asia and the Middle East generally spend more hours at work than those in Europe. On average, Singapore employees work 2,088 hours a year - higher than the global average of 1,902.
'Overall, the most hours are worked in Cairo (2,373 per year), followed by Seoul (2,312),' the UBS report said. 'Workers in Doha, Dubai and Manama also rack up long hours, averaging 2,210 per year - 308 more than the international average.
'There are significant differences within regions, too. Employees work considerably more in Hong Kong (2,295 hours) and Seoul (2,312 hours) than in Tokyo (1,997 hours) and Shanghai (1,946 hours).'
The survey was conducted in 73 cities.
Want that iPod faster? Work in Tokyo then
UBS survey reveals Singaporeans are just the 5th highest earners in the region
By CHEN HUIFEN
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(SINGAPORE) Singapore may be the second most expensive city in Asia after Tokyo, but employees here are only the fifth highest wage earners in the region, a study has found.
To indicate wage levels, the UBS survey looked at how long a person has to work to buy an 8GB iPod nano player,
In Singapore, it takes 27.5 hours - but in Tokyo it takes 12 hours, and in Hong Kong it takes 19 hours.
On a global scale, Singapore ranked 40th in terms of gross wages, down two notches from 38th in 2006, the last time the study was conducted.
In 18th place worldwide, Tokyo workers are Asia's highest earners, followed by Hong Kong (37th, up from 40th in 2006), Seoul (38th, down from 32nd), Taipei (39th, from 36th), Singapore, Shanghai (59th, same as in 2006), Beijing (64th, from 65th) and Mumbai (73rd, from 67th).
Compiled in a report titled Prices and Earnings, the findings emerged from surveys conducted in March and April by local UBS employees, members of student organisation AIESEC, chambers of commerce, consumer organisations and selected individuals.
The wage and salary data covers 14 different occupations including building labourer, engineer, cook, bank credit officer and primary school teacher. They represent a cross-section of the workforce in the industrial and services sectors.
Employees in Copenhagen, Zurich, Geneva and New York have the highest gross wages, in that order. In contrast, the average employee in Delhi, Manila, Jakarta and Mumbai earns less than one-fifteenth of Swiss hourly wages after tax.
In terms of cost of living, excluding rent, Oslo remains the most expensive city in the world, followed by Zurich and Copenhagen. The prices were calculated based on a reference basket of 122 different products and services. London dropped dramatically to 21st position, from the second most expensive city in 2006. Singapore was ranked the 24th most expensive globally, up from 32nd position in 2006.
People in Asia and the Middle East generally spend more hours at work than those in Europe. On average, Singapore employees work 2,088 hours a year - higher than the global average of 1,902.
'Overall, the most hours are worked in Cairo (2,373 per year), followed by Seoul (2,312),' the UBS report said. 'Workers in Doha, Dubai and Manama also rack up long hours, averaging 2,210 per year - 308 more than the international average.
'There are significant differences within regions, too. Employees work considerably more in Hong Kong (2,295 hours) and Seoul (2,312 hours) than in Tokyo (1,997 hours) and Shanghai (1,946 hours).'
The survey was conducted in 73 cities.
Published August 21, 2009
GIC gives UBS share sale a miss
Swiss government divests entire stake to institutional investors, raking in 1.2b franc profit
By CONRAD TAN
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(SINGAPORE) The Swiss government has sold its entire 9.3 per cent stake in UBS for a tidy profit, less than a year after it poured six billion Swiss francs (S$8.15 billion) into the country's biggest bank.
The Government of Singapore Investment Corporation (GIC) said it did not buy any of the UBS shares sold by the Swiss government, but added that it remains confident of the long-term prospects of its earlier investment.
The Swiss government sold all 332.2 million UBS shares it controls to institutional investors for 16.50 francs each, or a total of some 5.48 billion francs, yesterday, the Swiss Federal Department of Finance said in a statement in German on its website.
The government will receive another 1.8 billion francs in cash from UBS as payment for waiving its right to future coupon payments on the mandatory convertible notes through which it held its investment in the bank.
Such notes earn interest like debt, but must be exchanged for ordinary shares by a fixed maturity date. The notes held by the Swiss government paid interest of 12.5 per cent a year, and were due to mature in June 2011.
In total, the government will receive 7.2 billion francs, or a profit of 1.2 billion francs on the sale of its six billion franc investment in UBS, it said.
To complete the sale, the notes will be converted into 332.2 million new UBS shares on Aug 25, which will then be transferred to the buyers.
The Swiss government disposed of its UBS investment just a day after signing an agreement with the US government to release data on some 4,450 American clients of UBS suspected of evading taxes.
'GIC did not participate in the placement of UBS shares. As a large investor in UBS, we maintain our confidence in the long-term prospects,' a GIC spokeswoman said yesterday when contacted by BT.
'We do not comment on the specifics of our investments,' she added.
BT's calculations show that GIC's own investment of 11 billion francs in UBS mandatory convertible notes is worth just four billion francs at the bank's current share price, despite clauses designed to safeguard the investment that were included in the original investment agreement in December 2007.
That excludes the two yearly coupons of 9 per cent, or 990 million francs each, that GIC is entitled to over the two-year term of the UBS notes it holds. Based on the original agreement, GIC would have received the first coupon payment in March this year.
The Swiss government's exit leaves GIC as the largest shareholder of UBS, Reuters reported, citing people familiar with the bank.
The Swiss government invested six billion francs in mandatory convertible notes issued by UBS last year, as part of a US$60 billion support package that also included US$54 billion in state backing for the bank's soured debt securities.
The capital injection by the government effectively diluted the stakes of earlier investors in UBS, including GIC.
In December 2007, GIC agreed to invest 11 billion francs in mandatory convertible notes issued by UBS, alongside an unnamed Middle East investor who bought another two billion francs worth of the notes.
The mandatory conversion feature of the notes held by GIC and the Middle East investor means that they must be exchanged for UBS shares by the time they mature on March 5, 2010 - two years after the notes were first issued.
Various safeguards were built into the investment agreement, including provisions to protect the investors' stakes from being diluted, which kicked in when UBS issued some 16 billion francs worth of new shares in a rights offer in June 2008.
According to UBS's 2008 annual report published in March this year, the 13 billion francs worth of notes held by GIC and the Middle East investor are convertible into 270.4 million UBS shares.
'As a result of anti-dilution adjustments triggered by the June 2008 capital increase, the initial conversion prices were adjusted and the (notes) will be converted into a fixed number of 270,438,942 shares,' the report says.
GIC's portion of the 13 billion franc investment means that it would receive some 228.83 million UBS shares when the notes are converted.
At yesterday's closing price of 17.50 francs for UBS shares, those shares would be worth just four billion francs.
GIC gives UBS share sale a miss
Swiss government divests entire stake to institutional investors, raking in 1.2b franc profit
By CONRAD TAN
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(SINGAPORE) The Swiss government has sold its entire 9.3 per cent stake in UBS for a tidy profit, less than a year after it poured six billion Swiss francs (S$8.15 billion) into the country's biggest bank.
The Government of Singapore Investment Corporation (GIC) said it did not buy any of the UBS shares sold by the Swiss government, but added that it remains confident of the long-term prospects of its earlier investment.
The Swiss government sold all 332.2 million UBS shares it controls to institutional investors for 16.50 francs each, or a total of some 5.48 billion francs, yesterday, the Swiss Federal Department of Finance said in a statement in German on its website.
The government will receive another 1.8 billion francs in cash from UBS as payment for waiving its right to future coupon payments on the mandatory convertible notes through which it held its investment in the bank.
Such notes earn interest like debt, but must be exchanged for ordinary shares by a fixed maturity date. The notes held by the Swiss government paid interest of 12.5 per cent a year, and were due to mature in June 2011.
In total, the government will receive 7.2 billion francs, or a profit of 1.2 billion francs on the sale of its six billion franc investment in UBS, it said.
To complete the sale, the notes will be converted into 332.2 million new UBS shares on Aug 25, which will then be transferred to the buyers.
The Swiss government disposed of its UBS investment just a day after signing an agreement with the US government to release data on some 4,450 American clients of UBS suspected of evading taxes.
'GIC did not participate in the placement of UBS shares. As a large investor in UBS, we maintain our confidence in the long-term prospects,' a GIC spokeswoman said yesterday when contacted by BT.
'We do not comment on the specifics of our investments,' she added.
BT's calculations show that GIC's own investment of 11 billion francs in UBS mandatory convertible notes is worth just four billion francs at the bank's current share price, despite clauses designed to safeguard the investment that were included in the original investment agreement in December 2007.
That excludes the two yearly coupons of 9 per cent, or 990 million francs each, that GIC is entitled to over the two-year term of the UBS notes it holds. Based on the original agreement, GIC would have received the first coupon payment in March this year.
The Swiss government's exit leaves GIC as the largest shareholder of UBS, Reuters reported, citing people familiar with the bank.
The Swiss government invested six billion francs in mandatory convertible notes issued by UBS last year, as part of a US$60 billion support package that also included US$54 billion in state backing for the bank's soured debt securities.
The capital injection by the government effectively diluted the stakes of earlier investors in UBS, including GIC.
In December 2007, GIC agreed to invest 11 billion francs in mandatory convertible notes issued by UBS, alongside an unnamed Middle East investor who bought another two billion francs worth of the notes.
The mandatory conversion feature of the notes held by GIC and the Middle East investor means that they must be exchanged for UBS shares by the time they mature on March 5, 2010 - two years after the notes were first issued.
Various safeguards were built into the investment agreement, including provisions to protect the investors' stakes from being diluted, which kicked in when UBS issued some 16 billion francs worth of new shares in a rights offer in June 2008.
According to UBS's 2008 annual report published in March this year, the 13 billion francs worth of notes held by GIC and the Middle East investor are convertible into 270.4 million UBS shares.
'As a result of anti-dilution adjustments triggered by the June 2008 capital increase, the initial conversion prices were adjusted and the (notes) will be converted into a fixed number of 270,438,942 shares,' the report says.
GIC's portion of the 13 billion franc investment means that it would receive some 228.83 million UBS shares when the notes are converted.
At yesterday's closing price of 17.50 francs for UBS shares, those shares would be worth just four billion francs.
Published August 21, 2009
S'pore blue chips show their true colour
Sequential earnings reveal robustness in tough times
By JOYCE HOOI
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(SINGAPORE) For the heavyweights of the Straits Times Index (STI), it may finally be safe to emerge from the bunker, now that the dust from the downturn seems to have settled.
A quarter-on-quarter (q-o-q) earnings comparison of 19 blue-chip companies by BT found these heavyweights have been posting decidedly sturdy earnings in this era of unprecedented panic and losses.
BT also tracked earnings q-o-q to determine whether firms' positions had improved following the recession that started last September.
The q-o-q comparison of the 19 STI companies' results shows the worst may be over - for now at least.
In Q1, their combined net earnings increased 11 per cent q-o-q to $2.8 billion, with 10 posting higher profits than they did in the quarter before.
Despite the pessimism that pervaded the business environment well past March, Q2 brought even better tidings, with a robust 33.3 per cent increase in the combined earnings of the 19 companies to $3.8 billion. In that quarter, 13 reported higher earnings q-o-q, swelling the hoard from Q1.
Making the distinction between blue-chip companies and other companies starker, on a year-on-year basis, the 19 STI companies recorded a 16.8 per cent decline in net profit for Q2, compared with the 34.8 per cent fall recorded by almost 300 companies as at last Friday.
Only two companies - Genting SP and Neptune Orient Lines (NOL) - showed losses for both quarters. While NOL managed to narrow its loss in Q2, Genting SP saw its loss balloon to $50.7 million, from $31.9 million in Q1.
'The worst is most likely over,' said Goh Mou Lih, head of research at Westcomb Securities. 'The issue is whether we will have a strong recovery or face problems in the future.'
While most analysts were loathe to be prematurely upbeat about the prospect of a strong recovery, the variety of analyst responses to the q-o-q rebound reflected the wide-ranging spectrum of crystal balls that industry insiders possess.
Golden Agri-Resources, which topped the q-o-q list of Q2 gains, saw a 511.7 per cent increase in net profit to $79.7 million.
Analyst Carey Wong from OCBC Investment Research framed Golden Agri-Resources' performance against a cheery economic outlook in his report on the company.
'The recovery in the global economies has come slightly faster than expected and this has lent some support to crude oil prices and crude palm oil prices,' he said.
Noble Group was not given such ebullient treatment where its outlook is concerned. It scored a record gain in Q2 - a 162.5 per cent increase q-o-q - and romped towards its highest-ever tonnage in H1.
Despite that, a Lim & Tan Securities report downgraded Noble to a 'sell into strength' rating, saying its earnings outlook would only improve significantly next year.
In contrast, City Developments, which saw a 68.3 per cent increase in q-o-q earnings to $140 million in Q2, was unanimously the darling of analysts on the property circuit for its low gearing and strong cash flow.
In comparison, CapitaMall Trust saw Q2 earnings contract 2.1 per cent q-o-q and CapitaLand slipped into the red, from a $42.9 million net profit in Q1 to a $156.9 million net loss in Q2 - the only company among the 19 to do so.
Despite the varied fortunes of property companies, analysts are convinced that the only way left to go is up. 'With prices here remaining 20 per cent off their Q4 2007 peaks, we expect interest to pick up strongly upon opening of integrated resorts and more improved macro-economic data,' said DMG & Partners Securities' Brandon Lee, who is overweight on the sector.
The trend of optimism continues for stocks that bucked the industry trend, such as ST Engineering. The group's net profit rose 27.5 per cent in Q2 from Q1, prompting UOB-KayHian's K Ajith to upgrade its rating from 'sell' to 'hold' on expectations of a better second half.
While the q-o-q recovery of the banking sector was acknowledged all around, normalisation of earnings is only expected to happen in 2011. 'We expect 2009 earnings to remain sluggish with provisions front-loaded in Q1 2009,' a DBS Group Research report stated.
While the various sectors' outlooks are governed by their individual peculiarities, the sustainability of overall recovery will depend very much on the actions of central banks, according to Westcomb's Mr Goh.
'If central banks do not mind the risk of inflation or a bubble, they will keep up the stimulus effort and we could see some recovery,' he warned. 'If the stimulus is stopped too soon, things may get worse again.'
S'pore blue chips show their true colour
Sequential earnings reveal robustness in tough times
By JOYCE HOOI
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(SINGAPORE) For the heavyweights of the Straits Times Index (STI), it may finally be safe to emerge from the bunker, now that the dust from the downturn seems to have settled.
A quarter-on-quarter (q-o-q) earnings comparison of 19 blue-chip companies by BT found these heavyweights have been posting decidedly sturdy earnings in this era of unprecedented panic and losses.
BT also tracked earnings q-o-q to determine whether firms' positions had improved following the recession that started last September.
The q-o-q comparison of the 19 STI companies' results shows the worst may be over - for now at least.
In Q1, their combined net earnings increased 11 per cent q-o-q to $2.8 billion, with 10 posting higher profits than they did in the quarter before.
Despite the pessimism that pervaded the business environment well past March, Q2 brought even better tidings, with a robust 33.3 per cent increase in the combined earnings of the 19 companies to $3.8 billion. In that quarter, 13 reported higher earnings q-o-q, swelling the hoard from Q1.
Making the distinction between blue-chip companies and other companies starker, on a year-on-year basis, the 19 STI companies recorded a 16.8 per cent decline in net profit for Q2, compared with the 34.8 per cent fall recorded by almost 300 companies as at last Friday.
Only two companies - Genting SP and Neptune Orient Lines (NOL) - showed losses for both quarters. While NOL managed to narrow its loss in Q2, Genting SP saw its loss balloon to $50.7 million, from $31.9 million in Q1.
'The worst is most likely over,' said Goh Mou Lih, head of research at Westcomb Securities. 'The issue is whether we will have a strong recovery or face problems in the future.'
While most analysts were loathe to be prematurely upbeat about the prospect of a strong recovery, the variety of analyst responses to the q-o-q rebound reflected the wide-ranging spectrum of crystal balls that industry insiders possess.
Golden Agri-Resources, which topped the q-o-q list of Q2 gains, saw a 511.7 per cent increase in net profit to $79.7 million.
Analyst Carey Wong from OCBC Investment Research framed Golden Agri-Resources' performance against a cheery economic outlook in his report on the company.
'The recovery in the global economies has come slightly faster than expected and this has lent some support to crude oil prices and crude palm oil prices,' he said.
Noble Group was not given such ebullient treatment where its outlook is concerned. It scored a record gain in Q2 - a 162.5 per cent increase q-o-q - and romped towards its highest-ever tonnage in H1.
Despite that, a Lim & Tan Securities report downgraded Noble to a 'sell into strength' rating, saying its earnings outlook would only improve significantly next year.
In contrast, City Developments, which saw a 68.3 per cent increase in q-o-q earnings to $140 million in Q2, was unanimously the darling of analysts on the property circuit for its low gearing and strong cash flow.
In comparison, CapitaMall Trust saw Q2 earnings contract 2.1 per cent q-o-q and CapitaLand slipped into the red, from a $42.9 million net profit in Q1 to a $156.9 million net loss in Q2 - the only company among the 19 to do so.
Despite the varied fortunes of property companies, analysts are convinced that the only way left to go is up. 'With prices here remaining 20 per cent off their Q4 2007 peaks, we expect interest to pick up strongly upon opening of integrated resorts and more improved macro-economic data,' said DMG & Partners Securities' Brandon Lee, who is overweight on the sector.
The trend of optimism continues for stocks that bucked the industry trend, such as ST Engineering. The group's net profit rose 27.5 per cent in Q2 from Q1, prompting UOB-KayHian's K Ajith to upgrade its rating from 'sell' to 'hold' on expectations of a better second half.
While the q-o-q recovery of the banking sector was acknowledged all around, normalisation of earnings is only expected to happen in 2011. 'We expect 2009 earnings to remain sluggish with provisions front-loaded in Q1 2009,' a DBS Group Research report stated.
While the various sectors' outlooks are governed by their individual peculiarities, the sustainability of overall recovery will depend very much on the actions of central banks, according to Westcomb's Mr Goh.
'If central banks do not mind the risk of inflation or a bubble, they will keep up the stimulus effort and we could see some recovery,' he warned. 'If the stimulus is stopped too soon, things may get worse again.'
Published August 20, 2009
M'sia consumer prices fall again in July
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(SINGAPORE) Malaysia's consumer prices fell for a second straight month in July as commodity costs eased from last year's records, giving the central bank room to keep interest rates low to spur an economic recovery.
Consumer prices slid 2.4 per cent from a year earlier, after a 1.4 per cent decline in June, the Putrajaya-based statistics department said in a statement yesterday. That matches the median forecast in a Bloomberg News survey of 15 economists.
Consumer prices are falling in Asian economies including China, Singapore and Hong Kong, as the global recession reduces demand, causing oil and other raw material costs to ease from unprecedented highs in 2008. Easing inflation allowed policymakers worldwide to cut interest rates and increase public spending to stimulate their economies.
'Inflation should remain sufficiently subdued to allow Malaysia's central bank to hold interest rates steady through year-end,' said David Cohen, an economist with Action Economics in Singapore.
Bank Negara Malaysia has cut its benchmark interest rate by 1.5 percentage points since late November to 2 per cent to revive an economy that shrank 6.2 per cent in the first quarter. Policymakers will meet next Tuesday and release their rate decision the same day.
Consumer price gains may average between 1.5 per cent and 2 percent this year, central bank governor Zeti Akhtar Aziz said in May. -- Bloomberg
M'sia consumer prices fall again in July
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(SINGAPORE) Malaysia's consumer prices fell for a second straight month in July as commodity costs eased from last year's records, giving the central bank room to keep interest rates low to spur an economic recovery.
Consumer prices slid 2.4 per cent from a year earlier, after a 1.4 per cent decline in June, the Putrajaya-based statistics department said in a statement yesterday. That matches the median forecast in a Bloomberg News survey of 15 economists.
Consumer prices are falling in Asian economies including China, Singapore and Hong Kong, as the global recession reduces demand, causing oil and other raw material costs to ease from unprecedented highs in 2008. Easing inflation allowed policymakers worldwide to cut interest rates and increase public spending to stimulate their economies.
'Inflation should remain sufficiently subdued to allow Malaysia's central bank to hold interest rates steady through year-end,' said David Cohen, an economist with Action Economics in Singapore.
Bank Negara Malaysia has cut its benchmark interest rate by 1.5 percentage points since late November to 2 per cent to revive an economy that shrank 6.2 per cent in the first quarter. Policymakers will meet next Tuesday and release their rate decision the same day.
Consumer price gains may average between 1.5 per cent and 2 percent this year, central bank governor Zeti Akhtar Aziz said in May. -- Bloomberg
Published August 20, 2009
No need for third KL stimulus package: minister
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(KUALA LUMPUR) Malaysia will not need a third stimulus package to boost its economy, a Malaysian official said on Tuesday.
Getting better: With the world economy recovering, KL is maintaining its economic forecast made earlier
The government believes economic growth will contract 4-5 per cent in 2009, as forecast earlier this year, said Malaysian Second Finance Minister Ahmad Husni Hanadzlah.
The world economy is recovering, making a third package for the country unnecessary, Mr Husni told reporters after chairing a meeting at Putrajaya, the administrative centre of the federal government.
The International Monetary Fund (IMF) has said there is room for the Malaysian government to further pump-prime the economy for stimulating purposes.
Mr Husni said the Project Management Unit would closely monitor the progress of the previous two stimulus packages announced earlier this year with reports submitted on a weekly basis. The implementation of the packages is based on the government's cash flow and so far it is on track, he added.
The government announced two stimulus packages worth a total of RM67 billion (S$27.5 billion) to curb the negative impact of the sluggish external business environment.
Touching on tax revenue, Mr Husni said he expected a drop of RM18 billion to RM160 billion and a further decrease in 2010.
This was due to the current economic situation, drop of fuel tax revenue, decrease in exports as well as lower corporate profits, explained Mr Husni. He hoped the government- linked companies doing well could contribute to the government in some form.
He also said that when the country becomes a high-income nation, the number of taxpayers would definitely be more than the current one million, expanding Malaysia's tax base. -- Xinhua
No need for third KL stimulus package: minister
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(KUALA LUMPUR) Malaysia will not need a third stimulus package to boost its economy, a Malaysian official said on Tuesday.
Getting better: With the world economy recovering, KL is maintaining its economic forecast made earlier
The government believes economic growth will contract 4-5 per cent in 2009, as forecast earlier this year, said Malaysian Second Finance Minister Ahmad Husni Hanadzlah.
The world economy is recovering, making a third package for the country unnecessary, Mr Husni told reporters after chairing a meeting at Putrajaya, the administrative centre of the federal government.
The International Monetary Fund (IMF) has said there is room for the Malaysian government to further pump-prime the economy for stimulating purposes.
Mr Husni said the Project Management Unit would closely monitor the progress of the previous two stimulus packages announced earlier this year with reports submitted on a weekly basis. The implementation of the packages is based on the government's cash flow and so far it is on track, he added.
The government announced two stimulus packages worth a total of RM67 billion (S$27.5 billion) to curb the negative impact of the sluggish external business environment.
Touching on tax revenue, Mr Husni said he expected a drop of RM18 billion to RM160 billion and a further decrease in 2010.
This was due to the current economic situation, drop of fuel tax revenue, decrease in exports as well as lower corporate profits, explained Mr Husni. He hoped the government- linked companies doing well could contribute to the government in some form.
He also said that when the country becomes a high-income nation, the number of taxpayers would definitely be more than the current one million, expanding Malaysia's tax base. -- Xinhua
Published August 20, 2009
Second China firm debuts on KL bourse
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(KUALA LUMPUR) China-based shoe sole maker Multi Sports Holdings Ltd began trading yesterday on Malaysia's stock exchange, becoming the second foreign company to list here.
It was a shot in the arm for the Malaysian bourse, which recently simplified and sped up procedures to attract more foreign listings and give its market more depth amid the global credit crunch.
Multi Sports hit a high of RM0.89 shortly after debuting on the main board of Bursa Malaysia, up from its initial public offering price of RM0.85. However, it slid to RM0.815 at noon in an overall sluggish market.
Chris Eng, analyst with OSK Securities, said that investors are expected to be cautious with the two foreign stocks as the companies are fairly small and in the competitive area of shoe manufacturing.
Stock of China's sportswear company Xingquan International Sports Holdings Ltd, which began trading on July 10, was at RM1.43 at noon yesterday, down 16 per cent from its IPO price of RM1.71.
'The appetite for good quality foreign IPO is huge, but people tend to be cautious of generally small foreign companies,' Mr Eng said.
Malaysia's stock market has been eclipsed by neighbouring Singapore, which has more than 100 foreign listings, partly due to affirmative action policies under which listed businesses had to allot 30 per cent of their shares to ethnic Malay Muslims.
The government scrapped the equity requirement recently as part of a liberalisation of financial services to woo foreign investors.
Authorities also waived listing fees and gave fast-tracked approvals to Xingquan and Multi Sports.
Multi Sports chief executive Lin Hou Zhi said that the company chose to be listed in Malaysia because it was less affected by the global financial crisis compared to other nations.
The company has said that it expected to raise RM58 million (S$23.7 million) from its share sale and would use part of the proceeds to build a second factory in China to triple its production capacity to 74.6 million pairs of soles a year.
Based in the south-eastern city of Jinjiang in the Fujian province, Multi Sports posted a net profit of RM46.8 million last year. -- AP
Second China firm debuts on KL bourse
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(KUALA LUMPUR) China-based shoe sole maker Multi Sports Holdings Ltd began trading yesterday on Malaysia's stock exchange, becoming the second foreign company to list here.
It was a shot in the arm for the Malaysian bourse, which recently simplified and sped up procedures to attract more foreign listings and give its market more depth amid the global credit crunch.
Multi Sports hit a high of RM0.89 shortly after debuting on the main board of Bursa Malaysia, up from its initial public offering price of RM0.85. However, it slid to RM0.815 at noon in an overall sluggish market.
Chris Eng, analyst with OSK Securities, said that investors are expected to be cautious with the two foreign stocks as the companies are fairly small and in the competitive area of shoe manufacturing.
Stock of China's sportswear company Xingquan International Sports Holdings Ltd, which began trading on July 10, was at RM1.43 at noon yesterday, down 16 per cent from its IPO price of RM1.71.
'The appetite for good quality foreign IPO is huge, but people tend to be cautious of generally small foreign companies,' Mr Eng said.
Malaysia's stock market has been eclipsed by neighbouring Singapore, which has more than 100 foreign listings, partly due to affirmative action policies under which listed businesses had to allot 30 per cent of their shares to ethnic Malay Muslims.
The government scrapped the equity requirement recently as part of a liberalisation of financial services to woo foreign investors.
Authorities also waived listing fees and gave fast-tracked approvals to Xingquan and Multi Sports.
Multi Sports chief executive Lin Hou Zhi said that the company chose to be listed in Malaysia because it was less affected by the global financial crisis compared to other nations.
The company has said that it expected to raise RM58 million (S$23.7 million) from its share sale and would use part of the proceeds to build a second factory in China to triple its production capacity to 74.6 million pairs of soles a year.
Based in the south-eastern city of Jinjiang in the Fujian province, Multi Sports posted a net profit of RM46.8 million last year. -- AP
Published August 20, 2009
Rehashing plan for 49 km bridge
But prospect of bridge linking Malacca, Sumatra still doubtful
By S JAYASANKARAN
IN KUALA LUMPUR
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A 14-year old plan to build a US$12.5 billion, 49 kilometre bridge between Malacca and Sumatra has been dusted off and resubmitted to both governments by a private Malaysian firm for approval. But now, as it was then, its feasibility remains in doubt.
Yesterday, businessman Ibrahim Zain was quoted by the New Straits Times as saying that his private Straits of Malacca Partners had submitted its proposals to both capitals and hoped to start work 'by the end of the year or early 2010'.
He said that the project would cost US$12.5 billion and was based on traffic projections of at least 15,000 vehicles a day. He also said that toll charges would be around US$75-US$85 per vehicle based on current ferry charges of RM100 (S$40) per person one way.
According to Mr Ibrahim, funding was also no problem with his firm generating 15 per cent (RM6.64 billion) and an official from China's Exim Bank being quoted as saying that his bank could provide 'up to 85 per cent funding for such infrastructure projects'.
The plan seems to suggest a return to the Think Big credo that former prime minister Mahathir Mohamad suggested should be the operational philosophy of Malaysia's business community. During the go-go 1990s, all sorts of grandiose projects - including, memorably, a planned city-on-a-river - suggested by the private sector were endorsed by him.
In any case, the plan does reinforce a suggestion in 1995 by Dr Mahathir to build a similar bridge to enhance greater connectivity between Malaysia and the region's largest economy.
At the time, the plan was embraced with enthusiasm by the Renong conglomerate, then no stranger to grandiose projects, which came up with a feasibility study. But the project ran up against the Asian financial crisis and nothing was heard about it again.
The project presupposes that Malaysian businessmen would use the facility and invest in Sumatra in a big way, thus creating enough jobs there to stem the influx of Indonesian immigrants to Malaysia looking for work. It also is based on a belief that trade and tourism between Malacca and Sumatra would boom - at least 7 per cent of Sumatra's 70 million people are middle class.
But some maritime analysts argue that the Straits of Malacca is one of the world's busiest waterways and building a bridge across it could be a hazard looking ahead. Last year, shipping volume grew at 7 per cent and that's been a continuous process.
Indeed, a recent study by the Maritime Institute of Malaysia estimated that the waterway would be at near-peak capacity by 2024. 'Given that the bridge would be spanning 48 kilometres, its pylons could pose a danger to ships especially in stormy weather,' one analyst told BT.
It also isn't clear if permission for such a bridge would be needed from the waterway's users epitomised by the International Maritime Organisation. It also isn't clear if Singapore's wishes must be heeded. Maritime law stipulates that the permission from littoral states must be obtained, but some maritime analysts argue that Singapore's littoral status is confined to the Singapore straits and not the Malacca straits.
Rehashing plan for 49 km bridge
But prospect of bridge linking Malacca, Sumatra still doubtful
By S JAYASANKARAN
IN KUALA LUMPUR
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A 14-year old plan to build a US$12.5 billion, 49 kilometre bridge between Malacca and Sumatra has been dusted off and resubmitted to both governments by a private Malaysian firm for approval. But now, as it was then, its feasibility remains in doubt.
Yesterday, businessman Ibrahim Zain was quoted by the New Straits Times as saying that his private Straits of Malacca Partners had submitted its proposals to both capitals and hoped to start work 'by the end of the year or early 2010'.
He said that the project would cost US$12.5 billion and was based on traffic projections of at least 15,000 vehicles a day. He also said that toll charges would be around US$75-US$85 per vehicle based on current ferry charges of RM100 (S$40) per person one way.
According to Mr Ibrahim, funding was also no problem with his firm generating 15 per cent (RM6.64 billion) and an official from China's Exim Bank being quoted as saying that his bank could provide 'up to 85 per cent funding for such infrastructure projects'.
The plan seems to suggest a return to the Think Big credo that former prime minister Mahathir Mohamad suggested should be the operational philosophy of Malaysia's business community. During the go-go 1990s, all sorts of grandiose projects - including, memorably, a planned city-on-a-river - suggested by the private sector were endorsed by him.
In any case, the plan does reinforce a suggestion in 1995 by Dr Mahathir to build a similar bridge to enhance greater connectivity between Malaysia and the region's largest economy.
At the time, the plan was embraced with enthusiasm by the Renong conglomerate, then no stranger to grandiose projects, which came up with a feasibility study. But the project ran up against the Asian financial crisis and nothing was heard about it again.
The project presupposes that Malaysian businessmen would use the facility and invest in Sumatra in a big way, thus creating enough jobs there to stem the influx of Indonesian immigrants to Malaysia looking for work. It also is based on a belief that trade and tourism between Malacca and Sumatra would boom - at least 7 per cent of Sumatra's 70 million people are middle class.
But some maritime analysts argue that the Straits of Malacca is one of the world's busiest waterways and building a bridge across it could be a hazard looking ahead. Last year, shipping volume grew at 7 per cent and that's been a continuous process.
Indeed, a recent study by the Maritime Institute of Malaysia estimated that the waterway would be at near-peak capacity by 2024. 'Given that the bridge would be spanning 48 kilometres, its pylons could pose a danger to ships especially in stormy weather,' one analyst told BT.
It also isn't clear if permission for such a bridge would be needed from the waterway's users epitomised by the International Maritime Organisation. It also isn't clear if Singapore's wishes must be heeded. Maritime law stipulates that the permission from littoral states must be obtained, but some maritime analysts argue that Singapore's littoral status is confined to the Singapore straits and not the Malacca straits.
Published August 20, 2009
Rickmers confounds investors on DPU
By VINCENT WEE
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THE difference between distributable income and distribution per unit (DPU) became sharply obvious to investors when Rickmers Maritime Trust (RMT) became the last of the three SGX-listed shipping trusts to release second-quarter results at the end of last week.
RMT said back in May that it expected to see an increase in distributable income in Q2 due to the delivery of new vessels. It delivered on that, posting a 42 per cent rise in distributable income to US$19.6 million. Charter revenue and cash flow from operating activities both rose 59 per cent and 56 per cent respectively to US$37.6 million and US$28.7 million from the second quarter the year before.
However, the rub lies in the actual returns to unitholders in the form of distribution per unit - DPU plunged 73 per cent to just 0.6 of a US cent. Like the other two trusts reporting before it, RMT cited conserving cash as a reason for the cut. It also chose to use the results briefing to highlight some major challenges facing the trust's management, while declining to give a DPU forecast for the coming quarters. In the process, RMT has positioned itself as the shipping trust with the most negative outlook.
Investors naturally reacted negatively on Monday, selling down the trust, which lost over 20 per cent to close at 46.5 cents from 58.5 cents on Friday.
To be fair, the issues that management flagged are not new. The refinancing of RMT's US$130 million top-up loan facility maturing in April 2010 and unsecured funding for its four 13,100 TEU ships, due for delivery in the latter part of 2010 have been hanging over it for most of the year, as has the question of value-to-loan (VTL) covenants and the need to negotiate a waiver on them.
Analysts have also turned bearish on RMT. Maintaining its 'sell' call on RMT, Citigroup's Rigan Wong said DPU was lower than consensus expectations of 1.5 US cents and went on to add that: 'We believe RMT's share price may de-rate, given the low Q209 DPU payout and lack of dividend guidance.'
The question that needs to be asked is why did they choose to reiterate them at this particular juncture. One answer might be that the prognosis has gotten worse and management feels investors should be further warned of the risks. 'PwC highlighted the 'existence of a material uncertainty that may cast significant doubt on the group's ability to continue as a going concern', noting that RMT's US$130 million loan maturing in April 2010 has yet to be refinanced and that it is also in talks with banks on its VTL covenants,' said Mr Wong.
The other possibility is that in depressing the unit price, it helps make the yield look a little better. The 5.9 per cent annualised yield at last Friday's closing is far below the average 15 per cent yields the other two are producing, but with yesterday's closing price of 45 cents, it goes up to 7.7 per cent. As the unit price drops, the yield picture might start to look better going forward because, barring some pretty drastic restructuring moves, the future looks very grim indeed for RMT. Barring questions of whether one buys business trusts for capital gains or dividend yields, this may well be the only bright spot ahead.
Rickmers confounds investors on DPU
By VINCENT WEE
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THE difference between distributable income and distribution per unit (DPU) became sharply obvious to investors when Rickmers Maritime Trust (RMT) became the last of the three SGX-listed shipping trusts to release second-quarter results at the end of last week.
RMT said back in May that it expected to see an increase in distributable income in Q2 due to the delivery of new vessels. It delivered on that, posting a 42 per cent rise in distributable income to US$19.6 million. Charter revenue and cash flow from operating activities both rose 59 per cent and 56 per cent respectively to US$37.6 million and US$28.7 million from the second quarter the year before.
However, the rub lies in the actual returns to unitholders in the form of distribution per unit - DPU plunged 73 per cent to just 0.6 of a US cent. Like the other two trusts reporting before it, RMT cited conserving cash as a reason for the cut. It also chose to use the results briefing to highlight some major challenges facing the trust's management, while declining to give a DPU forecast for the coming quarters. In the process, RMT has positioned itself as the shipping trust with the most negative outlook.
Investors naturally reacted negatively on Monday, selling down the trust, which lost over 20 per cent to close at 46.5 cents from 58.5 cents on Friday.
To be fair, the issues that management flagged are not new. The refinancing of RMT's US$130 million top-up loan facility maturing in April 2010 and unsecured funding for its four 13,100 TEU ships, due for delivery in the latter part of 2010 have been hanging over it for most of the year, as has the question of value-to-loan (VTL) covenants and the need to negotiate a waiver on them.
Analysts have also turned bearish on RMT. Maintaining its 'sell' call on RMT, Citigroup's Rigan Wong said DPU was lower than consensus expectations of 1.5 US cents and went on to add that: 'We believe RMT's share price may de-rate, given the low Q209 DPU payout and lack of dividend guidance.'
The question that needs to be asked is why did they choose to reiterate them at this particular juncture. One answer might be that the prognosis has gotten worse and management feels investors should be further warned of the risks. 'PwC highlighted the 'existence of a material uncertainty that may cast significant doubt on the group's ability to continue as a going concern', noting that RMT's US$130 million loan maturing in April 2010 has yet to be refinanced and that it is also in talks with banks on its VTL covenants,' said Mr Wong.
The other possibility is that in depressing the unit price, it helps make the yield look a little better. The 5.9 per cent annualised yield at last Friday's closing is far below the average 15 per cent yields the other two are producing, but with yesterday's closing price of 45 cents, it goes up to 7.7 per cent. As the unit price drops, the yield picture might start to look better going forward because, barring some pretty drastic restructuring moves, the future looks very grim indeed for RMT. Barring questions of whether one buys business trusts for capital gains or dividend yields, this may well be the only bright spot ahead.
Published August 20, 2009
Mass-market site draws strong developer interest
Hong Leong puts in top bid of $280 psf ppr for the plot in Pasir Panjang
By UMA SHANKARI
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(SINGAPORE) An impressive 13 bids were received for a residential site at Chestnut Avenue in Bukit Panjang at the close of the tender yesterday, reflecting the renewed interest and the growing positive outlook among developers for mass market residential projects.
And the top bid of $143.7 million - or $280 per square foot per plot ratio (psf ppr) - put in by two companies in the Hong Leong Group stable was also much higher than expected by analysts, who had predicted a top bid of $200 psf ppr just a month ago.
Analysts said that developers are looking to restock their landbanks after selling a large number of homes - mostly in the mass market - over the past few months.
'The level of interest shown by the bidders of this site at Chestnut Avenue indicate a growing appetite for mass market projects, especially so with suburban condominiums selling well in the present market,' said Leonard Tay, director of CBRE Research.
'With developers' landbank of suburban sites running low, more of the suburban land parcels on the government land sales reserve list are likely to be triggered in the remainder of the year.'
Colliers International's director for research and consultancy Tay Huey Ying agreed. While most developers still have fairly large high-end and luxury landbanks (as sales in these segments have been slow), their mass market landbanks have diminished greatly since the start of the year, Ms Tay said. And since mass market sites are hard to come by in the private sector, the government's land sales programme is expected to be popular.
Among the bidders were large property groups such as Far East Organization, Sim Lian Land, Ho Bee Investments, Allgreen Properties and Frasers Centrepoint. Far East Organization made the second highest bid of $129.1 million, or $252 psf ppr.
The 99-year leasehold site in the state's reserve list was triggered for launch last month, marking the first time in a year that the government has offered a residential site for tender. Then, the applicant who triggered the tender agreed to bid at least $62 million for the site, which works out to $121 psf ppr.
Under the reserve list system, the state offers a site for sale only if there is an application by a developer undertaking to bid at a minimum price acceptable to the government.
Property consultants said then that the successful bid for the site could come in anywhere between $136 and $200 psf ppr.
The top bid by Hong Leong Group is some 132 per cent above the minimum bid price.
The estimated breakeven price for a residential project based on a land price of $280 psf ppr should be around $550-580 psf, said CBRE's Mr Tay. So the eventual selling price might be around $650 psf to $700 psf when the project is ready to launch, he added.
Mass-market site draws strong developer interest
Hong Leong puts in top bid of $280 psf ppr for the plot in Pasir Panjang
By UMA SHANKARI
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(SINGAPORE) An impressive 13 bids were received for a residential site at Chestnut Avenue in Bukit Panjang at the close of the tender yesterday, reflecting the renewed interest and the growing positive outlook among developers for mass market residential projects.
And the top bid of $143.7 million - or $280 per square foot per plot ratio (psf ppr) - put in by two companies in the Hong Leong Group stable was also much higher than expected by analysts, who had predicted a top bid of $200 psf ppr just a month ago.
Analysts said that developers are looking to restock their landbanks after selling a large number of homes - mostly in the mass market - over the past few months.
'The level of interest shown by the bidders of this site at Chestnut Avenue indicate a growing appetite for mass market projects, especially so with suburban condominiums selling well in the present market,' said Leonard Tay, director of CBRE Research.
'With developers' landbank of suburban sites running low, more of the suburban land parcels on the government land sales reserve list are likely to be triggered in the remainder of the year.'
Colliers International's director for research and consultancy Tay Huey Ying agreed. While most developers still have fairly large high-end and luxury landbanks (as sales in these segments have been slow), their mass market landbanks have diminished greatly since the start of the year, Ms Tay said. And since mass market sites are hard to come by in the private sector, the government's land sales programme is expected to be popular.
Among the bidders were large property groups such as Far East Organization, Sim Lian Land, Ho Bee Investments, Allgreen Properties and Frasers Centrepoint. Far East Organization made the second highest bid of $129.1 million, or $252 psf ppr.
The 99-year leasehold site in the state's reserve list was triggered for launch last month, marking the first time in a year that the government has offered a residential site for tender. Then, the applicant who triggered the tender agreed to bid at least $62 million for the site, which works out to $121 psf ppr.
Under the reserve list system, the state offers a site for sale only if there is an application by a developer undertaking to bid at a minimum price acceptable to the government.
Property consultants said then that the successful bid for the site could come in anywhere between $136 and $200 psf ppr.
The top bid by Hong Leong Group is some 132 per cent above the minimum bid price.
The estimated breakeven price for a residential project based on a land price of $280 psf ppr should be around $550-580 psf, said CBRE's Mr Tay. So the eventual selling price might be around $650 psf to $700 psf when the project is ready to launch, he added.
Published August 19, 2009
M'sia vows to cut its budget deficit in 2010
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(PUTRAJAYA, Malaysia) Malaysia pledged on Tuesday to cut its budget deficit next year after years of poor fiscal control and a surge in spending in 2009 pushed it to its highest level in 22 years.
However, Second Finance Minister Ahmad Husni Hanadzlah, the top official in charge of the day-to-day running of the ministry, gave few clues as to how the deficit would be cut in a year when oil revenues would be weak.
Mr Husni told reporters that operating expenses would be cut by 15 per cent next year after the government projected the budget deficit would hit 7.6 per cent of gross domestic product (GDP) in 2009, its highest level since 1987.
He also said the government was looking at means testing for fuel subsidies, which together with food subsidies cost the government RM30 billion (S$12.3 billion) annually, according to Mr Husni. Last year, subsidies accounted for over a fifth of total budget spending.
'At this stage, (the deficit) next year will be lower than this year's deficit,' Mr Husni told a news conference, adding that operational spending would be cut by 15 per cent in 2010.
Malaysia is drafting its 2010 budget after a year in which the government says the economy will shrink by 5 per cent, its first major recession since the 1998 Asian financial crisis, while the government tries to rally support after record losses in state and national elections in 2008.
Mr Husni said planned savings included selling or leasing government assets such as land and buildings, cutting down on overseas trips and scrapping direct tenders for government procurement for non-sensitive industries where open and selective tenders would result in greater efficiency.
However, wages for the more than 1.1 million civil servants, at 26.7 per cent the largest component of operating expenditure in 2008, would not be included in the cost-cutting drive.
'Since it would obviously be politically difficult, if not impossible, to cut wages or reduce civil service headcount, the most obvious candidates would be cutting subsidies - especially fuel,' said Citibank economist, Kit Wei Zheng.
The International Monetary Fund last week urged the government to introduce a goods-and-services tax to boost revenues and the IMF forecast the deficit would hit 7.7 per cent of GDP this year and only ease to 7.1 per cent of GDP in 2010.
'We are looking at it (GST) seriously but the government does not want to cause any pain to the people,' Mr Husni explained.
Mr Kit said raising corporate and personal income taxes would erode Malaysia's competitiveness, but that it was not politically expedient to implement GST now. 'Given that it was politically difficult to implement GST even during the good years, it remains to be seen if GST implementation will be feasible in a post-crisis world of arguably slower growth,' he noted.
Malaysia shelved plans to implement GST in 2007 but has recently put it back on the drawing board due to declining oil revenues.
Malaysia's budget deficit excluding oil revenues will be 11 per cent of GDP in 2008, according to the IMF, and with lower oil prices in 2009 than in 2008, the income from oil will shrink in 2010 as it is based on 2009 prices. -- Reuters
M'sia vows to cut its budget deficit in 2010
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(PUTRAJAYA, Malaysia) Malaysia pledged on Tuesday to cut its budget deficit next year after years of poor fiscal control and a surge in spending in 2009 pushed it to its highest level in 22 years.
However, Second Finance Minister Ahmad Husni Hanadzlah, the top official in charge of the day-to-day running of the ministry, gave few clues as to how the deficit would be cut in a year when oil revenues would be weak.
Mr Husni told reporters that operating expenses would be cut by 15 per cent next year after the government projected the budget deficit would hit 7.6 per cent of gross domestic product (GDP) in 2009, its highest level since 1987.
He also said the government was looking at means testing for fuel subsidies, which together with food subsidies cost the government RM30 billion (S$12.3 billion) annually, according to Mr Husni. Last year, subsidies accounted for over a fifth of total budget spending.
'At this stage, (the deficit) next year will be lower than this year's deficit,' Mr Husni told a news conference, adding that operational spending would be cut by 15 per cent in 2010.
Malaysia is drafting its 2010 budget after a year in which the government says the economy will shrink by 5 per cent, its first major recession since the 1998 Asian financial crisis, while the government tries to rally support after record losses in state and national elections in 2008.
Mr Husni said planned savings included selling or leasing government assets such as land and buildings, cutting down on overseas trips and scrapping direct tenders for government procurement for non-sensitive industries where open and selective tenders would result in greater efficiency.
However, wages for the more than 1.1 million civil servants, at 26.7 per cent the largest component of operating expenditure in 2008, would not be included in the cost-cutting drive.
'Since it would obviously be politically difficult, if not impossible, to cut wages or reduce civil service headcount, the most obvious candidates would be cutting subsidies - especially fuel,' said Citibank economist, Kit Wei Zheng.
The International Monetary Fund last week urged the government to introduce a goods-and-services tax to boost revenues and the IMF forecast the deficit would hit 7.7 per cent of GDP this year and only ease to 7.1 per cent of GDP in 2010.
'We are looking at it (GST) seriously but the government does not want to cause any pain to the people,' Mr Husni explained.
Mr Kit said raising corporate and personal income taxes would erode Malaysia's competitiveness, but that it was not politically expedient to implement GST now. 'Given that it was politically difficult to implement GST even during the good years, it remains to be seen if GST implementation will be feasible in a post-crisis world of arguably slower growth,' he noted.
Malaysia shelved plans to implement GST in 2007 but has recently put it back on the drawing board due to declining oil revenues.
Malaysia's budget deficit excluding oil revenues will be 11 per cent of GDP in 2008, according to the IMF, and with lower oil prices in 2009 than in 2008, the income from oil will shrink in 2010 as it is based on 2009 prices. -- Reuters
Published August 19, 2009
Proposal submitted to take over Plus Expressways
Privatisation plan by state-owned firm's former execs said to include toll-rate cut
By S JAYASANKARAN
IN KUALA LUMPUR
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A PROPOSAL to take over Plus Expressways from the state by former executives of the listed highway concessionaire has been submitted for consideration to the country's powerful Economic Planning Unit which oversees privatisations.
According to executives familiar with the matter, the senior executives include Ibrahim Bidin who used to be chief executive of Plus over five years ago.
Mr Ibrahim was also a key lieutenant of Halim Saad, the former owner of the Renong conglomerate, the previous owner of Plus until the government took over all the assets in late 2001.
Mr Halim's name, however, does not surface in the proposal although the market speculation is that he could be linked to the offer. But the tycoon has told some analysts that he isn't involved.
No details of the offer were immediately available but the executives said that if the proposal was accepted, the new owners of Plus were prepared to cut toll rates by at least 20 per cent. It seems likely, however, that they would also ask for an extension of the concession period.
It isn't clear if the government would agree to Plus's privatisation: it is the crown jewel in the United Engineers conglomerate - the former Renong group - with the strongest cash flows.
According to the executives, however, it could form part of a new plan where the government would divest some of the assets of government linked companies like United Engineers and Sime Darby to private hands.
It also isn't clear how the deal's promoters plan to fund it. The firm, which principally operates a highway traversing the length of Peninsular Malaysia, made a net profit of RM1.1 billion (S$451 million) on revenues of almost RM3 billion.
It is 64 per cent owned by United Engineers which is itself wholly owned by Khazanah Nasional, the investment agency of the federal government. At present market values, that 64 per cent is worth RM10.5 billion.
The North-South Highway was completed in the 1990s by Mr Halim's Renong group. The tycoon leveraged the tolled road into a bewildering slew of businesses from telecommunications and banking to construction and infrastructure.
Indeed, Mr Halim, now 55, helped create modern Malaysia. Renong, which at its peak had assets of over RM40 billion, built highways, sport stadiums, bridges and mass rapid transit systems. But the group also racked up debt of over RM20 billion which left it vulnerable to the Asian financial crisis.
In late 2001, after Mr Halim had unsuccessfully tried out various restructuring schemes, Kuala Lumpur lost patience and effectively nationalised Renong by taking over an affiliate company United Engineers.
Mr Halim stepped down from the board and has since adopted a low profile although he continues to run businesses in Malaysia and abroad.
Proposal submitted to take over Plus Expressways
Privatisation plan by state-owned firm's former execs said to include toll-rate cut
By S JAYASANKARAN
IN KUALA LUMPUR
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A PROPOSAL to take over Plus Expressways from the state by former executives of the listed highway concessionaire has been submitted for consideration to the country's powerful Economic Planning Unit which oversees privatisations.
According to executives familiar with the matter, the senior executives include Ibrahim Bidin who used to be chief executive of Plus over five years ago.
Mr Ibrahim was also a key lieutenant of Halim Saad, the former owner of the Renong conglomerate, the previous owner of Plus until the government took over all the assets in late 2001.
Mr Halim's name, however, does not surface in the proposal although the market speculation is that he could be linked to the offer. But the tycoon has told some analysts that he isn't involved.
No details of the offer were immediately available but the executives said that if the proposal was accepted, the new owners of Plus were prepared to cut toll rates by at least 20 per cent. It seems likely, however, that they would also ask for an extension of the concession period.
It isn't clear if the government would agree to Plus's privatisation: it is the crown jewel in the United Engineers conglomerate - the former Renong group - with the strongest cash flows.
According to the executives, however, it could form part of a new plan where the government would divest some of the assets of government linked companies like United Engineers and Sime Darby to private hands.
It also isn't clear how the deal's promoters plan to fund it. The firm, which principally operates a highway traversing the length of Peninsular Malaysia, made a net profit of RM1.1 billion (S$451 million) on revenues of almost RM3 billion.
It is 64 per cent owned by United Engineers which is itself wholly owned by Khazanah Nasional, the investment agency of the federal government. At present market values, that 64 per cent is worth RM10.5 billion.
The North-South Highway was completed in the 1990s by Mr Halim's Renong group. The tycoon leveraged the tolled road into a bewildering slew of businesses from telecommunications and banking to construction and infrastructure.
Indeed, Mr Halim, now 55, helped create modern Malaysia. Renong, which at its peak had assets of over RM40 billion, built highways, sport stadiums, bridges and mass rapid transit systems. But the group also racked up debt of over RM20 billion which left it vulnerable to the Asian financial crisis.
In late 2001, after Mr Halim had unsuccessfully tried out various restructuring schemes, Kuala Lumpur lost patience and effectively nationalised Renong by taking over an affiliate company United Engineers.
Mr Halim stepped down from the board and has since adopted a low profile although he continues to run businesses in Malaysia and abroad.
Published August 19, 2009
Don't shortchange minority shareholders
By JAMIE LEE
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IN ONE of the most heart-wrenching passages in English literature, young Oliver Twist - who was 'desperate with hunger, and reckless with misery' - finished his serving of gruel and made the famous request: 'Please sir, may I have some more?'
That, as the narration continued, invited a blow on his head with a ladle and a great deal of yelling from the masters of the workhouse, as though starving Oliver's plea for more food was a heinous crime.
Like Oliver Twist, minority investors have been left hungry by recent privatisation offers and are asking for more.
From Man Wah Holdings and Kingboard Copper Foil to Elec & Eltek International Company to CK Tang, shareholders of these companies that made privatisation plans have been bitterly upset at the exit offers.
Kingboard Copper Foil - which failed in its de-listing attempt - offered 21 cents a share or 0.374 shares of its own Hong Kong-listed shares, or a combination of the two, to take the company private. Small-time investors were disgruntled, arguing that the low valuation was unfair.
The successful attempt by the Tang brothers to take CK Tang private was also tainted with fierce and hostile opposition from minority investors.
These small-time investors - many of whom have held the shares for more than 10 years - argued that the price was just too low and did not price in the value of its flagship store along Orchard Road that could be unlocked with redevelopment.
Should minority investors be given a bigger serving of gruel?
Majority investors have used the recession as a reason - and a convenient one at that - to argue otherwise. Some of these offers were priced at discounts to net asset values, which these companies say are likely to suffer given the limbo in economic recovery. In other words, it's not our fault, blame the economy.
It is difficult to tsk-tsk these companies for taking advantage of this opportunity. Like it or not, it's a shrewd move to derive more bang for their buck. And minorities are, as the label tellingly indicates, last in the pecking order. Majority investors - who put in more resources than the minority investors - are the top chickens, minorities cluck at the bottom.
However, it's one thing to grab an opportunity, it's another to be opportunistic. The majority shareholders are in a powerful position to impose their will on these investors, who have parted with their money in implicit expectation of a fair return in the end. Protection of minority investors is also thin at this point. Perhaps the proposed minority buy-out rights regime - under which companies here may be required to buy out minority investors who disagree with a fundamental change to the business - will address this.
There is no doubt that there will be numerous debates over what is the fair value at which investors should be bought out, but that is the crux of the issue.
Avoiding these long-drawn arguments with investors may prompt some companies to offer a more attractive exit price in the first place, rather than risk having investors come after them with alternative valuations, since the process will certainly be lengthy and tense.
But before that fear even comes into play, companies mulling privatisation should on their own consider the legacy they leave behind. If companies factor 'goodwill' into their offers - not in the accounting sense but in the general sense of showing appreciation for the loyalty and support of minority shareholders - more investors will go away pleased.
This isn't as critical for companies that haven't been on the market for years, but for retailer CK Tang, for example, its shine as a listed retailer for 34 years has been taken off by the bitter fight over privatisation. One angry shareholder, for example, has threatened to boycott the store (and there is little doubt that she will) to protest the exit offer.
Gaining such 'goodwill' beats any glossed-up marketing ploy and helps to preserve the heritage of a company that was once shared by the public.
No doubt, it'll cost the offerers more money. But it certainly beats being remembered as the sour man who hit a skinny orphan boy over a portion of gruel.
Don't shortchange minority shareholders
By JAMIE LEE
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IN ONE of the most heart-wrenching passages in English literature, young Oliver Twist - who was 'desperate with hunger, and reckless with misery' - finished his serving of gruel and made the famous request: 'Please sir, may I have some more?'
That, as the narration continued, invited a blow on his head with a ladle and a great deal of yelling from the masters of the workhouse, as though starving Oliver's plea for more food was a heinous crime.
Like Oliver Twist, minority investors have been left hungry by recent privatisation offers and are asking for more.
From Man Wah Holdings and Kingboard Copper Foil to Elec & Eltek International Company to CK Tang, shareholders of these companies that made privatisation plans have been bitterly upset at the exit offers.
Kingboard Copper Foil - which failed in its de-listing attempt - offered 21 cents a share or 0.374 shares of its own Hong Kong-listed shares, or a combination of the two, to take the company private. Small-time investors were disgruntled, arguing that the low valuation was unfair.
The successful attempt by the Tang brothers to take CK Tang private was also tainted with fierce and hostile opposition from minority investors.
These small-time investors - many of whom have held the shares for more than 10 years - argued that the price was just too low and did not price in the value of its flagship store along Orchard Road that could be unlocked with redevelopment.
Should minority investors be given a bigger serving of gruel?
Majority investors have used the recession as a reason - and a convenient one at that - to argue otherwise. Some of these offers were priced at discounts to net asset values, which these companies say are likely to suffer given the limbo in economic recovery. In other words, it's not our fault, blame the economy.
It is difficult to tsk-tsk these companies for taking advantage of this opportunity. Like it or not, it's a shrewd move to derive more bang for their buck. And minorities are, as the label tellingly indicates, last in the pecking order. Majority investors - who put in more resources than the minority investors - are the top chickens, minorities cluck at the bottom.
However, it's one thing to grab an opportunity, it's another to be opportunistic. The majority shareholders are in a powerful position to impose their will on these investors, who have parted with their money in implicit expectation of a fair return in the end. Protection of minority investors is also thin at this point. Perhaps the proposed minority buy-out rights regime - under which companies here may be required to buy out minority investors who disagree with a fundamental change to the business - will address this.
There is no doubt that there will be numerous debates over what is the fair value at which investors should be bought out, but that is the crux of the issue.
Avoiding these long-drawn arguments with investors may prompt some companies to offer a more attractive exit price in the first place, rather than risk having investors come after them with alternative valuations, since the process will certainly be lengthy and tense.
But before that fear even comes into play, companies mulling privatisation should on their own consider the legacy they leave behind. If companies factor 'goodwill' into their offers - not in the accounting sense but in the general sense of showing appreciation for the loyalty and support of minority shareholders - more investors will go away pleased.
This isn't as critical for companies that haven't been on the market for years, but for retailer CK Tang, for example, its shine as a listed retailer for 34 years has been taken off by the bitter fight over privatisation. One angry shareholder, for example, has threatened to boycott the store (and there is little doubt that she will) to protest the exit offer.
Gaining such 'goodwill' beats any glossed-up marketing ploy and helps to preserve the heritage of a company that was once shared by the public.
No doubt, it'll cost the offerers more money. But it certainly beats being remembered as the sour man who hit a skinny orphan boy over a portion of gruel.
Published August 19, 2009
CapitaLand allots $1b to Ascott, China, Viet arms
Group expects to reduce cash levels from $2.8b to $1-2b over 6-12 months
By KALPANA RASHIWALA
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PROPERTY giant CapitaLand has deployed about $1 billion from its $1.8 billion rights issue earlier this year to grow its China, Vietnam and Ascott businesses. The money will be used to increase the respective capital base of these three wholly owned businesses of the group.
Thinking long-term: Mr Lim (left) and Mr Liew. Vietnam offers potential to be the group's fourth growth pillar - after Singapore, China and Australia, says Mr Liew
CapitaLand group CFO Olivier Lim said that, over the next 6-12 months, the group expects its corporate treasury cash levels to be reduced from the existing $2.8 billion to $1-2 billion, partly by pre-paying debt that matures in the next two to three years, and partly by deploying capital to investment opportunities that may arise.
The $2.8 billion corporate treasury cash is part of the $4.2 billion cash and cash equivalents as at June 30, 2009, as reported with CapitaLand's first-half results last month.
Half or $500 million of the additional capital deployment will go to CapitaLand China Holdings, $299 million to CapitaLand (Vietnam) Holdings and $200 million to serviced apartment chain The Ascott Group.
The balance of about $800 million will be set aside for further investment opportunities that the group's business units may identify, CapitaLand added.
The group's $1.1 billion convertible bond (CB) issue, which was announced late last month, was upsized this week to $1.2 billion. Upon settlement of that CB issue, CapitaLand will have more than $4 billion of long-term core debt comprising CBs and medium-term notes with an average maturity exceeding six years, the group said.
'This core debt position provides the group with a safe capital structure that can withstand market stresses that might arise through a business cycle.'
Following the additional capital deployment, the paid-up capital of CapitaLand China has increased to $1.45 billion; CapitaLand (Vietnam), to $300 million; and Ascott, to $472.3 million.
CapitaLand group president and CEO Liew Mun Leong said that Vietnam offers potential to be the fourth growth pillar for the group - after Singapore, China and Australia. 'We are thus increasing our capital and human resources in the country.
'We continue to remain committed to our existing projects in the Gulf Cooperation Council region, Thailand, Malaysia, Japan and India. Our focus will continue to be in Asia, which has strong fundamentals, greatest opportunities, and where we can leverage on our established operations on the ground.'
CFO Mr Lim, declaring that the group had met its capital management objectives for extending debt maturities, reducing leverage, and increasing cash liquidity, said: 'Looking back, the point of maximum stress in the markets was between September last year and March this year.
'Since then, there has been broad recovery in almost all risk classes, the most notable of late being the credit markets globally which saw significant improvement in the last two months.
'There are still remaining risks, in particular, whether economies and financial markets might experience a double dip. Looking forward, while the group remains vigilant and sensitive to these risks in the short term, it is firmly focused on the long-term opportunities for growth.'
In the stock market yesterday, CapitaLand ended seven cents higher at $3.63.
CapitaLand allots $1b to Ascott, China, Viet arms
Group expects to reduce cash levels from $2.8b to $1-2b over 6-12 months
By KALPANA RASHIWALA
Email this article
Print article
Feedback
PROPERTY giant CapitaLand has deployed about $1 billion from its $1.8 billion rights issue earlier this year to grow its China, Vietnam and Ascott businesses. The money will be used to increase the respective capital base of these three wholly owned businesses of the group.
Thinking long-term: Mr Lim (left) and Mr Liew. Vietnam offers potential to be the group's fourth growth pillar - after Singapore, China and Australia, says Mr Liew
CapitaLand group CFO Olivier Lim said that, over the next 6-12 months, the group expects its corporate treasury cash levels to be reduced from the existing $2.8 billion to $1-2 billion, partly by pre-paying debt that matures in the next two to three years, and partly by deploying capital to investment opportunities that may arise.
The $2.8 billion corporate treasury cash is part of the $4.2 billion cash and cash equivalents as at June 30, 2009, as reported with CapitaLand's first-half results last month.
Half or $500 million of the additional capital deployment will go to CapitaLand China Holdings, $299 million to CapitaLand (Vietnam) Holdings and $200 million to serviced apartment chain The Ascott Group.
The balance of about $800 million will be set aside for further investment opportunities that the group's business units may identify, CapitaLand added.
The group's $1.1 billion convertible bond (CB) issue, which was announced late last month, was upsized this week to $1.2 billion. Upon settlement of that CB issue, CapitaLand will have more than $4 billion of long-term core debt comprising CBs and medium-term notes with an average maturity exceeding six years, the group said.
'This core debt position provides the group with a safe capital structure that can withstand market stresses that might arise through a business cycle.'
Following the additional capital deployment, the paid-up capital of CapitaLand China has increased to $1.45 billion; CapitaLand (Vietnam), to $300 million; and Ascott, to $472.3 million.
CapitaLand group president and CEO Liew Mun Leong said that Vietnam offers potential to be the fourth growth pillar for the group - after Singapore, China and Australia. 'We are thus increasing our capital and human resources in the country.
'We continue to remain committed to our existing projects in the Gulf Cooperation Council region, Thailand, Malaysia, Japan and India. Our focus will continue to be in Asia, which has strong fundamentals, greatest opportunities, and where we can leverage on our established operations on the ground.'
CFO Mr Lim, declaring that the group had met its capital management objectives for extending debt maturities, reducing leverage, and increasing cash liquidity, said: 'Looking back, the point of maximum stress in the markets was between September last year and March this year.
'Since then, there has been broad recovery in almost all risk classes, the most notable of late being the credit markets globally which saw significant improvement in the last two months.
'There are still remaining risks, in particular, whether economies and financial markets might experience a double dip. Looking forward, while the group remains vigilant and sensitive to these risks in the short term, it is firmly focused on the long-term opportunities for growth.'
In the stock market yesterday, CapitaLand ended seven cents higher at $3.63.
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