Published November 3, 2009

Courts Mammoth's price tag: US$300m

Baring hires UBS to advise sale of consumer electronics retailer

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(HONG KONG) Baring Private Equity Asia has hired Swiss bank UBS to advise on the sale of its Malaysian portfolio company Courts Mammoth, in a deal that may fetch US$300 million, sources said yesterday. Courts, Malaysia's largest consumer electronics and furniture retailer and once listed in both Kuala Lumpur and Singapore, was taken private in 2007 by a private equity consortium including Baring and Topaz Investment Worldwide for about US$84 million.

UBS had been looking for bidders for Courts, which also operates businesses in Singapore, Indonesia and Thailand, for some months but initial market response had been tough, mainly on price concerns, said the sources. 'It's a good company, so Baring doesn't want to sell cheaply in a hurry, while potential buyers feel they should probably wait and see for a bit more time,' said one of the sources. The sources have direct knowledge of the plan, but declined to be identified as the sale process is private. UBS declined to comment. Courts and Baring could not be immediately reached for comment.

UBS is mainly helping Baring seek private equity buyers to take over Courts as Baring aims to cash out from its investment and focus more on the Greater China market, including mainland China, Hong Kong and Taiwan, said the sources.

Courts, seen as a combination of Swedish furniture chain Ikea and China's top home appliance retailer Gome, started with one store in Johor Baru over 20 years ago and is now the top Malaysian appliances and furniture retailer.

Some US and Asia funds have been invited to look at Courts' books in the past few months, but none have made formal bids, the sources added. Topaz Investment Worldwide also agreed to Baring's plan to sell Courts if an attractive deal can be reached, one of the sources said.

Private equity funds, betting on strong economic recovery in Asia, especially China, have been chasing investments in consumer driven sectors. In June, US buyout fund Bain Capital agreed to invest up to US$418 million in Beijing-based Gome, dubbed 'China's Best Buy'. -- Reuters

Published November 3, 2009

Kuok group to sell sugar units for RM1.25b

It also intends to sell 5,797 hectares of land in Perlis for RM45m to Felda

By PAULINE NG
IN KUALA LUMPUR

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GIVEN that Robert Kuok is synonymous with the sugar trade, few would have envisaged the tycoon leaving the business that earned him the moniker Sugar King.

His PPB group announced late Friday that it planned to sell its entire stake in two local refining businesses to Felda Global Ventures Holdings for a total of RM1.25 billion (S$510.5 million) cash.

Felda Global is a wholly owned subsidiary of federal government agency Felda which is in charge of the country's agriculture agenda. It would buy PPB's 100 per cent interest in Malayan Sugar Manufacturing Company for RM1.22 billion and its 50 per cent of Kilang Gula Felda Perlis for RM26 million.

The Kuok-controlled PPB also intends to sell to Felda 5,797 hectares of land in Perlis for RM45 million cash - a sale in which the Perlis chief minister also wants to be given an option to acquire, according to a report in the New Straits Times.

Overall, PPB would net RM758 million from the three disposals, realising its investments with 'a substantial gain,' the company stated to the exchange.

The net proceeds would be used for 'other strategic investment options and opportunities that may be available to the group both domestically and overseas,' it said, although senior executives have assured PPB is looking to buy local assets.

Even so, analysts who conceded to be taken aback by PPB's sugar exit in Malaysia, do not see what better domestic assets could be bought with RM1.3 billion. 'Moreover, Kuok has been taking money out so why would he buy local assets?' asked an analyst, pointing to PPB's 2006 sale of its plantation assets to Singapore-listed Wilmar International under a share swap exercise involving its subsidiary PPB Oil Palms which was then de-listed.

Indeed, there are those who think PPB could use the RM1.3 billion to increase its stake in Wilmar beyond the 18 per cent it currently holds, and reap the benefit when it lists its China unit in the future.

But based on current prices, PPB would only raise its stake by a mere 1.3 per cent, according to OSK Research. That would lift its pre-tax profit by RM60 million versus RM165 million foregone from sugar refining and trading. As such, it is doubtful the proceeds would be used to buy more shares in its associate company which contributed RM519 million or nearly 72 per cent of PPB's pre-tax profit of RM714 million for the fiscal six months to end June.

What Mr Kuok, now a Hong Kong resident, has in mind for PPB is difficult to fathom. Johor-born Mr Kuok is one of five advisers to Iskandar Malaysia but has not made any significant investments in the state or country in recent years. About five years ago, the billionaire had also sold off his listed Johor-based property unit, Pelangi, to Permodalan Nasional.

A PPB executive indicated the sugar business had become increasingly tedious for the group. Because sugar price is controlled by the federal government which subsidies the costs, margin pressures were inevitable whenever raw material costs rose.

Besides the three disposals, PPB's 49 per cent associate, Grenfell Holdings, also plans to sell to Felda its 59.2 million shares representing a fifth of Tradewinds Malaysia for RM207.5 million, or RM3.50 per share.

In view of the future cash horde, investors are not discounting the possibility of a special dividend. PPB closed 20 sen higher to RM15.34 yesterday.

Published November 3, 2009

US$300m sub-sea cable by SingTel and partners lands in Japan

By ONG BOON KIAT

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SINGAPORE Telecom, Google and other partners are on track for a substantial sub-sea bandwidth boost from the first quarter of next year.

A US$300 million, 9,620km sub-sea cable system funded by a consortium of six companies - Bharti Airtel, Global Transit, Google, KDDI Corp, Pacnet and SingTel - has landed in the Japanese coastal town of Chikura. Construction of the system was announced in February last year.

Linking Japan to the US via the Pacific Ocean, this undersea digital superhighway is expected to be a major boost for its owners, as well as businesses and consumers in bandwidth-hungry Asia.

The cable system will add up to 4.8 terabits per second (Tbps) of bandwidth between the US and Asia and help its owners meet growing demand for data, e-commerce and Internet traffic between Asia and the US.

It will also serve as an important alternate route to ferry digital traffic in the event of disruptions to other cable systems.

The timing of the Chikura landing shows the consortium - called Unity - is on schedule with construction.

'The new Unity cable system will enable members of the consortium to deliver increased capacity and more reliable connectivity to support the growth of bandwidth-hungry applications such as video, the growing popularity of cloud computing and to address the rise of digital content travelling between Asia and the United States,' said Chris Wilson, chairman of the Unity executive committee.

This is the first time since 2004 that SingTel is financing a sub-sea cable-laying project.

In 2004, it joined 15 other companies to build a 20,000km system known as the South East Asia-Middle-East - West Europe 4, or SEA-ME - WE 4.

This venture is also notable for the participation of Internet search giant Google.

Unity's largest investor Pacnet, which owns the region's largest private sub- sea cable system EAC-C2C, will link its portion of the new cable system - dubbed EAC Pacific - with the EAC-C2C.

Published November 3, 2009

Noble seen redeeming 2013 bonds early

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(SINGAPORE) China Investment Corp's (CIC) purchase of a stake in Noble Group Ltd may allow the Hong Kong-based commodity supplier to redeem as much as 35 per cent of its 2013 bonds early, according to Nomura Holdings Inc.

'Noble is quite cash rich and funding costs right now would probably be lower than what they are currently paying,' Annisa Lee, an analyst at the Japanese bank, said in a phone interview from Hong Kong yesterday.

'There is an incentive for them to redeem the bonds and reduce their interest expense.'

A clause in the terms of Noble's 2013 bonds means it may use money raised from equity to redeem as much as 35 per cent of the notes at 108.5 cents on the dollar by May 30, 2011.

Any such redemption must be completed within 90 days of the closing date of the equity offering, and the CIC sale may enable Noble to exercise this clause, according to Ms Lee.

Noble, which supplies commodities from aluminium to zinc, said on Sept 22 that it agreed to sell a 15 per cent stake to CIC, China's sovereign wealth fund.

The company will use proceeds from the sale to expand investment in agricultural commodities including soybeans and sugar, it said at the time.

The 8.5 per cent coupon on Noble's 2013 bonds compares with an average of 2.5 percentage points over the London interbank offered rate (Libor) the company agreed to pay last month when it borrowed over three years from banks including Agricultural Bank of China Ltd and ING Groep NV. - Bloomberg

Published November 3, 2009

SIA Engineering Q2 earnings slide 16.8%

Revenue falls 11.2% amid slump in airframe, component overhaul work

By VEN SREENIVASAN

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SIA Engineering Co's (SIAEC) net profit for the second quarter ended September 2009 fell 16.8 per cent to $61.1 million, from $73.4 million a year earlier, amid a slump in airframe and component overhaul work.

Related links: Click here for SIAEC's earnings release Unaudited financial statements

Revenue for the quarter fell 11.2 per cent to $248.1 million, from $279.3 million for the corresponding July-September quarter in 2008.

The results translated into first-half earnings of $106.2 million, a 19.6 per cent slump from the previous year's $132.1 million. Revenue for the April-September 2009 period fell 7 per cent to $492.3 million, from $529.5 million.

The Singapore Airlines engineering subsidiary blamed the slide in topline and bottomline numbers on lower airframe and component overhaul work, material usage and less revenue from the B747-400 turnkey project.

But it added that this was partially mitigated by higher line maintenance revenue, with more flights handled and an increase in aircraft support work, and fleet management revenue.

Expenditure dropped $26.2 million or 11 per cent to $213 million for fiscal Q2, reflecting lower staff, subcontract and material costs.

Operating profit for the quarter was $35.1 million, a decrease of $5 million or 12.5 per cent over the same quarter last year.

Profits from associated and joint venture companies declined $7.7 million or 19.4 per cent to $32 million. This represented a contribution of 44.9 per cent to the group's pre-tax profits.

The basic earnings per share was 5.66 cents.

Still, the group had cash and deposits of some $302.2 million at the end of September, compared to $280.5 million a year earlier.

The company declared an interim dividend of 5 cents per share, unchanged from last year.

Despite lower overall numbers against a year ago, the higher second-quarter numbers compared to the first quarter reflected an improvement in the operating environment.

SIAEC has been enjoying a sequential increase in flights handled and aircraft support work, and fleet management revenue.

However, the company said the prospects for a sustained recovery remained uncertain.

'Ongoing efforts to extend market reach and increase product mix will continue with the aim of broadening the revenue base,' it said in a statement.

'The group will press on with its efforts to manage costs, optimise manpower deployment and improve productivity. With these measures in place, the group is well positioned to capitalise on opportunities.'

SIAEC shares closed trading yesterday at $2.75, down 5 cents.

Published November 3, 2009

Allgreen more than doubles Q3 net to $74m

Higher contribution from property development led to strong showing

By KALPANA RASHIWALA

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MALAYSIAN tycoon Robert Kuok's Singapore-listed property and hotel group Allgreen Properties has posted a surge in third-quarter earnings on the back of contributions from its One Devonshire and Viva condominium projects in Singapore.

Selling well: Sales at One Devonshire helped in Allgreen's profit surge

Allgreen reported net earnings of $74 million for the third quarter ended Sept 30, 2009, more than double the $31.2 million net profit in Q3 last year. Revenue jumped from about $113.4 million to $293.1 million.

Allgreen credited its strong Q3 earnings chiefly to higher contribution from its property development business.

For the first nine months of this year, Allgreen achieved a 92.4 per cent year-on-year increase in net profit to about $126.7 million on the back of a 66.5 per cent increase in revenue to $458.5 million.

The revenue improvement was again due largely to increases in revenue from development properties.

The period saw a weaker performance of the hotel and serviced apartments businesses as a result of drops in both occupancy and room rates amid a sluggish economy.

For its investment properties, Allgreen said that Great World City mall and Tanglin Mall enjoyed higher occupancy and rental rates.

Related link: Click here for Allgreen Properties' financial results

The occupancy rate for offices at Great World City was slightly lower but higher rental rates were achieved.

Allgreen's Great World City complex at Kim Seng Road comprises offices, shop space and serviced residences; the group also has stakes in Tanglin Mall, Tanglin Place and the Traders Hotel near Orchard Road.

Cash and cash equivalents rose from $125.2 million as at end-September 2008 to $170.1 million as at end-September 2009, due largely to proceeds received from sales of units at One Devonshire and Viva, which is located at Suffolk Walk near Novena MRT Station.

According to official data, 227 of Viva's total 235 units were sold as at the end of last month. As for One Devonshire, 150 of the total 152 units were sold as of the same date.

Allgreen has three launch-ready projects in Singapore - RV Residences in the River Valley area, Holland Residences near Holland Village and Suites at Orchard at Handy Road.

As at end-September 2009, the group had net borrowings of about $1.06 billion and gearing of 0.4 time, a reduction from 0.45 time and $1.14 billion as at end-December 2008.

Allgreen's earnings per share rose from 1.96 cents in Q3 2008 to 4.65 cents in Q3 2009.

Net asset value per share stood at $1.47, up six cents from end-December 2008.

On the stock market yesterday, Allgreen closed two cents lower at $1.13.

Published November 3, 2009

Just move on, StarHub

By WINSTON CHAI

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DESPERATE times call for desperate measures, so the saying goes. And when one has to turn to one's rival for balm, that must surely signal that the situation is as dire as it gets.

Up against a wall: Rather than moping over the BPL loss, StarHub should concede that the sports battle is lost and move on quickly to reposition itself with its other exclusive pay-TV content

StarHub may have done just that when it extended an olive branch to Singapore Telecommunications to carry the latter's pay-television content on its cable platform for free.

On the surface, the suggestion - unheard of in the pay TV industry - appears to be a rare case of business altruism. StarHub's 500,000 cable television customers can be spared the hassle of having two set top boxes when the new BPL (Barclays Premier League) kicks off next August.

Rival SingTel also stands to gain as it could save millions by tapping StarHub's infrastructure to reach consumers and businesses instead of investing in its own wiring.

To make the deal even sweeter, customers will pay SingTel for their BPL subscriptions, even though the channel is delivered via StarHub's cable television set-up. After all, the argument is that StarHub has already been doing the same for free-to-air channels such as MediaCorp 5 and 8.

It would seem that the complaints of long-suffering football fans have finally been heard and, short of any government intervention, an interim win-win work-around has now been found. However, if you peel the bark off the StarHub olive branch, it is quite clear that damage-control is the true self-serving intent.

The BPL has always been the crown jewel of StarHub's sports line-up and its latest offer to SingTel seems like a veiled attempt to cling on to this prized trophy.

StarHub's mooted approach will indeed save consumers the inconvenience of owning two pay TV boxes.

What is left unsaid is that it will also help stem the exodus among its current cable television base. This is because StarHub customers who want to watch the BPL will be more inclined to hang on to their pay-TV subscriptions.

Another fact is that StarHub is mandated to carry terrestrial channels such as MediaCorp 5 and 8 by the Media Development Authority of Singapore (MDA). In the latest plot twist, StarHub extended the offer to carry SingTel's content out of its own free will.

The MDA has already said that it would not interfere in the commercial arrangements of pay-TV operators despite some recent customer rumblings. This is consistent with its decision in 2006 when SingTel appealed successfully to the MDA to ban exclusive content such as the BPL on the grounds that it discourages competition.

This means that any tweaks to the regulator's policy should only be made in the next round of bidding three years later when the scores between the two quibbling foes are even.

While StarHub could be using the media to influence public opinion to get SingTel to concede the middle ground, it may have done the exact opposite of stirring the hornet's nest.

At the red camp, this suggestion will undoubtedly be seen as yet another gibe at its ability to wire-up the nation over the next 10 months for BPL broadcast.

StarHub's outgoing helmsman, Terry Clontz, had already questioned this once and the comment was met with a stern rebuttal from SingTel Singapore CEO Allen Lew.

'We have never said something and not delivered,' Mr Lew told BT then.

If SingTel takes up the StarHub offer now, it will be seen as backtracking on a public commitment. Pride aside, a compromise also cast doubts over the viability of its own mio TV platform.

If SingTel can resort to door-to-door selling in housing estates to push its mio TV service two years ago, you can be sure it will spare no expense to drive the take-up for its new sports portfolio.

Furthermore, the marketing machinery at SingTel has already been fired up. Its telemarketers have already started calling customers to up-sell its new sports line-up. Such a content-sharing arrangement would only complicate the sign-up process.

Rather than moping over the BPL loss, StarHub should move quickly to resolve lingering consumer doubts. Concede that the sports battle is lost and move on quickly to reposition itself with its other exclusive pay-TV content. Make the necessary price adjustments and offer perks to lock in consumers with shorter-term one-year contracts to stem immediate customer outflow.

StarHub has said that it would bounce back after being one goal down. Now it's time to put the money where its mouth is. Offering to take in your rival's star striker can hardly be considered a viable solution.

Published November 3, 2009

Mahathir dashes hopes of groups eyeing Proton sale

He's working on plan to revive firm, says it's not for sale

By S JAYASANKARAN
IN KUALA LUMPUR

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MALAYSIA'S former prime minister Mahathir Mohamad has dismissed news reports that national car maker Proton Holdings is for sale, writing in his blog that he has told the company's chairman and chief executive that it 'is not for sale'.

Dr Mahathir's influence has soared in the new administration of Prime Minister Najib Razak, and the former PM indicated that he is back as Proton's adviser and 'busy on a plan to resuscitate the company'.

Under the previous administration of Abdullah Badawi, Dr Mahathir hinted that he had no role in Proton as 'no one asks me for advice'.

His unequivocal statement that Proton is not for sale will dash the hopes of at least three parties said to be interested in the company. They are the DRB- Hicom conglomerate, the Naza auto group and the management of Proton itself, whose chairman suggested it two weeks ago.

Dr Mahathir began by saying that Proton is returning to profitability given the number of new cars he keeps seeing on the roads. 'I know that a new car is not noticed on the roads until a certain volume of sales is achieved,' he said in his blog.

'Since Proton acquired a new chairman in the person of Nadzmi Salleh, I find it easier to perform the work of Proton adviser,' he continued. 'The Prime Minister has also indicated that Proton's affairs should be referred to me. Accordingly, I have been busy on a plan to resuscitate the company and have been talking to potential technology partners for Proton.'

Then he got to the point. 'Lately I have been disturbed by media reports that Proton is to be sold to certain parties. This talk has agitated the staff of Proton. Their worry affects their performance. I have told the chairman and the chief executive that Proton is not for sale - and there is no plan to sell Proton in the foreseeable future.

'The need is to restructure the company and reach agreement with the potential partner,' said the former premier. 'After that, work has to be done to ensure Proton fully recovers.'

Dr Mahathir's comments are likely to have been noted seriously by the government, as Proton was his brainchild back in 1984. They would also have been noted with regret by Syed Mokhtar Al-Bukhary, the controlling shareholder of DRB-Hicom, which news reports indicated was front runner for the car firm.

The tycoon bid for Proton six years ago but his bid was rejected by the-then premier Mr Abdullah. DRB-Hicom was thought to be looking at buying 32 per cent of Proton.

The car firm posted a net loss of RM320 million (S$130.6 million) for the year to March 31, 2009 but is expected to be back in the black in the current financial year. Its sales have climbed steeply and it expects to sell 155,000 units by the time its financial year closes in March 2010.