Category: SG Stocks And Shares

Property Counters today!

For all my clients

– The market could chalk up further upside gains on growing confidence after IMF chief Christine Lagarde said that the long-awaited global economic recovery is taking hold and urged policymakers to seize the opportunity to create a more inclusive economy and broader, lasting prosperity.

– NFP data tonight, expecting Fed to increase interest rates
– Technically, the STI is likely to break out of its tight 3,230-3,265 range bounded by the 20 and 50-day moving averages.

– MKE estimates flash 3Q GDP to be near 4%, with strong manufacturing (+20%) leading a broadening recovery in the services sector.
– Full-year GDP growth could well exceed the government’s 2-3% and MKE’s 3% forecasts, with 8M17 core inflation creeping higher to 1.5%.
– This could prompt the MAS to normalize and tighten its neutral stance at its upcoming semi-annual policy meeting this month.

– Normanton Park has been sold en bloc to Chinese firm Kingsford Huray Development for $830.1m or 4% above its reserve price.
– Inclusive of development charges, this works out to a land price of $969 psf ppr for the 667,368 sf site, which can yield a total gfa of 1.4m sf accommodating 1,200 new homes.
– This is the 12th residential collective sale sealed this year, reflecting the mad scramble among land-hungry developers.
– Top picks are UOL (TP: $9.43), GuocoLand (TP: $2.75) and City Dev (TP: $12.05).

*Soilbuild Construction
– Awarded a contract from Soilbuild Group to erect a 7-storey single-user general industrial factory development for $50.4m.
– Works expected to be completed by 3Q19 and will lift order book to $574.2m.

*Croesus Retail Trust
– Scheme of arrangement to take the Japanese mall landlord private at $1.17/unit has been sanctioned by the Court.
– Last day of trading will be on 10 Oct, with expected payment to unitholders will be no later than 26 Oct. Counter will be delisted on 27 Oct.

– Enlists CIMB Securities to place out 47.5m new shares representing 10% of its existing share capital at $0.255 apiece or 5.6% discount to the last close,
– Net proceeds of $11.9m will be used to for general working capital purposes.
– The steel engineering group is loss-making and trades at 0.44x P/B.

*ABR Holdings
– Acquiring a second land plot, adjacent to its previous purchase, in Kuala Lumpur, Malaysia, for RM4.95m.
– The 99 year-leasehold site has an area of 1,533.5 sqm.
– Last traded at 35.81x trailing P/E.

*United Food
– Proposed acquisition of 80% stake in each of Hebei Xingrun Shengwu Keji Gufen, Chengde Purun Shengwu Zhiyao and Benchmark Trade, for Rmb120m ($24.5m) or 25% below independent valuation.
– The three firms are involved in the development, manufacture and sale of animal feed and related products in China.
– The move will help the group expand and strengthen its foothold in the agribusiness and food industry in China.
– The pig farmer and pork processor has been loss-making for the past two years.

– Signs MOU with Temasek Polytechnic to collaborate on training and R&D, relating to aquaculture and biomedical sciences.

News for today 6/10/2017:
– Five Things You Need to Know to Start Your Day
– Oil rises 2%, boosted by potential Opec deal
– US stocks end at fresh record peaks; Nasdaq up 0.8 per cent
– US trade deficit narrows as exports hit 2.5 year high
– Trump jolts markets with remarks about erasing Puerto Rico’s massive debt
– Fitch joins S&P in issuing Catalonia debt downgrade warning
– Australian retailers suffer worst sales in 4½ years as hefty mortgages push up household debt
– Singapore, Thailand discuss e-payment alliance for digital push
– Model Factory to help SMEs test production line solutions
– ‘Gig economy’ cushioning impact of weak job market: Maybank Kim Eng report
– Harnessing new blockchain tech for inter-bank payments
– Normanton Park sold en bloc for $830.1 million
– Selling en bloc: Cairnhill Mansions jumps on bandwagon for the fifth time, with $362 million guide price
– S’pore’s hotel market draws investors
– Second-liner property stocks now in play
– 10 largest Catalist stocks beat blue chips: Report; Some Catalist stocks shine, but traps lurk

Stocks to watch today 6/10/2017:
Far East Group last close $0.081, 52wk high/low $0.11/$0.018- Company inks deal to buy S$22.5m property at Ubi Avenue 3
OCBC last close $11.25, 52wk high/low $11.49/$8.33 – Bank joins fixed-rate home loan battle
SIA Engg last close $3.22, 52wk high/low $4.15/$3.15 – SIAEC struggles to recover from 6-year low despite buyback
United Food Holdings last close $0.37, 52wk high/low $0.41/$0.025 – Company to buy 80% stakes in 3 animal feed-related companies for 120m yuan
Yongnam last close $0.27, 52wk high/low $0.31/$0.193 – Company to place S$12.1 million of shares at S$0.255 apiece for working capital


Companies & Markets 
United Food to buy 80% stakes in 3 animal feed-related companies for 120m yuan
Yongnam to place S$12.1 million of shares at S$0.255 apiece for working capital

Real Estate 
Kingsford awarded Normanton Park for S$830.1m or S$969 psf ppr
Cairnhill Mansions to be launched for en bloc sale for S$362m

Banking & Finance 
StanChart is said to be probed on US$1.4b client transfers
Wells Fargo board can’t duck investor claims over fake accounts

Energy & Commodities 
Gold dips after strong US data lifts dollar
Oil rises 2%, boosted by potential Opec deal

Mattel scraps plan for digital assistant for kids
ST Telemedia data centre unit acquires stake in UK’s Virtus

Mattel scraps plan for digital assistant for kids
Kobe Bryant’s sports drink enters octagon in UFC deal

Ryanair promises pilots significant improvements in pay, conditions
Boeing-backed startup eyes hybrid electric plane in 2022

Government & Economy 
Two die as Saudi police crack down on IS-linked group
KPMG South Africa finds no evidence that errors are ‘systemic’

Life & Culture 
Hollywood mogul Weinstein apologises after sex harassment claims
World Cup 2018: Video-assisted referee could be delayed

Europe: Stocks edge higher as Spain’s IBEX pulls out of nosedive
US: Stocks end at fresh record peaks; Nasdaq +0.8%

Oversea-Chinese Banking Corporation (OCBC SP/BUY/S$11.25/Target: S$13.38)

3Q17 results preview: Steady and steadfast.

At A Glance

Addvalue Technologies: Partners to trial app for fishing vessels, eye market size of 500.
Micro-Mechanics: CEO gives S$435,000 of own shares to family charity.
SIA Engineering Company: Conducts largest one-day share buyback in a year as stock slumps.
United Food Holdings: To buy 80% stakes in 3 animal feed-related companies for Rmb120m.
Yongnam Holdings: To place S$12.1m worth of shares at S$0.255 apiece for working capital.

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Bitcoin, Cryptocurrency Mining, and You

There is a cryptocurrency craze going on. Everyone is excited, fund houses are setting up new departments, countries setting up think tanks to consider all the possibilities.And with all the hype around, the uninitiated will ask the eventual question: …


Additional points to note:per trade will be S$10 min or 0.12%, which ever is higherContra trading is ALLOWED on UOBKHNo min trades required.Cash upfront before tradingOnly for SG stocksInterested parties please drop me a message. My…


·        Maintain OVERWEIGHT, interest rate hike priced in. Fed fund futures imply a 96% likelihood of a hike next week. The impact of an interest rate hike on S-REIT distributions is minimal in the near term (0.4-4.6% drop in DPU for a 100bp rise) due to long debt maturity periods and high proportion of fixed rate debts. We prefer deep value and diversified REITs with exposure to the industrial business park and hospitality spaces. Our top picks are AREIT, FLT, FHT and CCT.

· First of the three planned rate hikes likely next week, although jury is still out on the rest. All signs point to a rate hike next week, with both futures traders and the equity market in broad agreement. This view is also bolstered by a strong US labour market that is at or close to full employment, with the US unemployment rate at 4.8% and weekly jobless claims near a 44-year low.  However, reasons that would have the Fed pausing on accelerating rate hikes in 2017 include: 

a) continued volatility in Europe with rising anti-globalization sentiment post Brexit, 

b) depressed growth prospects in mature Asian markets like Japan, where interest rates are only marginally positive, and 

c) slowing growth in China, with its 2017 GDP growth target lowered to 6.5%, from 6.5-7% in 2016. These could create a feedback loop in the US economy, especially as foreign contributions make up about 44% of S&P 500 companies’ sales figures in 2015, according to S&P Dow Jones.

·        Muted response seen in the past two rate hikes, third unlikely to deviate much. The REITs share price performance was in line with the market in the weeks of the past two rate hikes. REITs outperformed the market by 5-7% post the 3- to 6-month period after the first rate hike on 16 Dec 15, and underperformed by 0.5-3% in the 1- to 3-month period post the second rate hike in 14 Dec 16. The muted response reflects the pricing in of the rate hike ahead of the actual move.


·        Best of both worlds – Yield play on downturn and growth play on upturn. In light of a potentially depressed global growth outlook hampering further interest rate acceleration, we opine that REITs could continue to be an attractive asset class. However, if the recent share price rally turns out to be a precursor to the cyclical recovery going forward, REITs will transition from being viewed as yield vehicles to growth vehicles and continue to deliver strong performances unlike traditional yield plays. Yield compression to upcycle spread implies. We prefer deep value and diversified REITs with exposure to the industrial business park and hospitality spaces. Our top picks are AREIT, FLT, FHT and CCT. 


·        Financing impact also minimised due to diversified sources of funding. The average debt maturities across REITs within our coverage have doubled to about 3.4 years, from around 1.7 years during the global financial crisis in 2008, implying the lower likelihood of near-term debt refinancing. The lengthening debt maturities have been bolstered by tapping debt markets, as REIT managers issue bonds ie medium-term notes. Examples include AREIT and CMT, with MTN loans maturing as far as 2029 and 2031 respectively.


· Positive US REIT and S-REIT returns during rate hike cycles, with the US REITs (FTSE NAREIT All Equity Total Return Index) doubling from mid-04 to end-06 when US Fed Funds Target Rate (FFTR) rose 425bp from 1% to 5.25%. US REITs also gained 3% during the previous rate hike cycle in mid-99 to mid-2000 when FFTR rates were hiked 175bp to 6.5% from 4.75%. Similarly, S-REITs rallied in the last rate-hike cycle, with the FTSE ST REIT Index surging 83% from 500 in mid-04 to 914 by end-06, despite the 3M SIBOR more than tripling, rising from 0.75% to 3.44% over the same period. As REITs rallied, yields were compressed by 230bp, falling from 7% in mid-04 to 4.66% by end-06. The present cycle differs with regard to the outlook of growth being relatively better for the US economy. However, the interdependencies as highlighted earlier would limit the number of rate hikes planned by the Fed, keeping REITs attractive as yield instruments. When the rates eventually rise on back of global growth, REITs will come into focus as equity instruments. 


NetLink NBN Trust (NetLink SP)

SP : NetLink NBN Trust (NetLink SP) : Unassailable Foundation Of Next Gen NBN



NetLink NBN Trust (NetLink SP)

Buy | Price/Tgt: S$0.805/S$0.93 | Mkt Cap: S$3,137.1m

Unassailable Foundation Of Next Gen NBN

NetLink NBN Trust operates the only passive fibre infrastructure to provide wholesale dark fibre services for ultra-high-speed fibre connections in SIngapore. It has a dominant market share of 81.7% for residential and 30.8% for non-residential connections, where growth is projected at 5-year CAGR of 7.2% and 10.1% respectively for 2016-21. The Smart Nation initiative also provides numerous opportunities for growth. Initiate coverage with BUY. Target price: S$0.93.

·        Futile to replicate NetLink’s extensive passive infrastructure. NetLink NBN Trust (NetLink) is the sole network company for Next Gen NBN. Its extensive nationwide coverage acts as a barrier to entry. To date, NetLink has received aggregate grants of S$732m for the construction of passive fibre infrastructure. Without similar support from the government, it would be almost impossible for any potential competitor to provide a viable alternative or meet current regulated wholesale pricing.

·        Defensive and regulated cash flows. NetLink possesses resilient, predicatable, transparent and regulated revenue streams. Competition or churn among retail service providers does not affect the number of fibre connections provided by NetLink. NetLink’s customers are established players in the telecommunications industry in Singapore.
·        Growth from Smart Nation initiative. The Smart Nation platform is a government initiative to build a pervasive network of sensors and probes deployed to collect real-time environmental information, process it and share it among government agencies and private sector participants. Smart Nation would have a positive impact on demand for NetLink’s NBAP connections.

·        Growth propelled by migration from ADSL and HFC to fibre connections. Independent industry consultant Media Partners Asia (MPA) estimated the penetration for legacy ADSL and HFC-based connections at 17.9% as of Mar 17. MPA expects all ADSL subscribers to migrate to fibre connections by Dec 19, and HFC-based services to cease by Dec 21. As such, residential fibre broadband subscribers are projected to increase at a 5-year CAGR of 7.2% in 2016-21.

·        SMEs drive demand for non-residential connections. Growth drivers for the non-residential segment include SMEs and cloud-based applications. To encourage the adoption of fibre broadband among SMEs, the government has provided a 50% subsidy capped at S$120/month for up to 24 months for SMEs subscribing to fibre broadband plans with speeds of at least 100Mbps. MPA projects non-residential fibre broadband subscribers to grow at a 5-year CAGR of 10.1% in 2016-21.

·        Initiate coverage with BUY. Our target price of S$0.93 is based on DCF methodology (cost of equity: 6.5%, terminal growth: 2.0%). The stock provides attractive distribution yield of 5.2% (annualised) and 6.0% for FY18 and FY19 respectively.


For my clients, more details in my email.

– Investors will have plenty of US and China economic data to chew this week but the biggest risk issues would be Trump’s renewed threat to scrap Nafta and his long-awaited tax reform agenda.
– Yellen and Draghi Both Defend Post-Crisis Financial Regulation delivered back-to-back warnings against dismantling tough post-crisis financial rules that the Trump administration blames for stifling U.S. growth.
– Technically, the STI remains in oversold territory with immediate resistance at 3,275 and underlying support at 3,220.

– Maybank KE believes that a resurgentenbloc market offers alternative land banking opportunities for developers and could ease upwards pressure on land prices.
– Over $3b worth of deals have been concluded so far and another 30 properties are in various stages of the collective sale process.
– Together with six confirmed sites in 2H17 GLS, we see potential 12,400 units added to Singapore’s residential pipeline.
Enbloc sales also front-load demand with displaced households looking out for new properties and could potentially reduce the 16,900 unsold inventory.
– MKE is positive on property developers. UOL (Buy, TP: $9.43) and City Dev (Buy, TP: $12.05) are its top large-cap picks, while GuocoLand (Buy, TP: $2.75) offers compelling relative value.

– 4QFY17 net profit surged to $244.8m (4QFY16: $39.8m) and brought FY17 earnings to $357.2m (-41%), meeting expectations. The slide was due toabsence of one-off gain arising from disposal of Dongzhimen project last year.
– For the quarter, revenue soared 90% to $407.4m on faster-than-expected sale recognition from Singapore residential projects.
– Gross margin widened 4.6ppt to 24.4%.
– Bottom line was boosted by $254.5m (4QFY16: $14.6m) fair value gain from revaluation of Guoco Tower at Tanjong Pagar Centre.
– Net gearing eased to 0.84x from 1x in Mar ’17.
– Proposed final DPS of 7¢ (FY16: final 5¢, special 4¢).
– Last traded at 0.72 P/B. Maybank KE has a Buy with TP of $2.75

*Silverlake Axis
– 4QFY17 net profit tumbled 58% to RM32.7m as it incurred wider losses from associates/JVs of RM5.3m (4QFY16: -RM0.08m). This brought FY17 core earnings to RM160.7m (-41.3%), which missed estimates.
– For the quarter, revenue fell 25% to RM124.9m, hurt by lower contributions from software licensing (-88%), maintenance and enhancement services (-11%),sale of software and hardware products (-49%).
– Gross margin contracted 20ppt to 46% amid weaker software licensing business.
– Drop in
bottom line was pared by a positive RM10.7m FX swing.
– Proposed final DPS of 0.3¢ (4QFY16: 1¢) and special DPS of 1¢ (4QFY16: nil), bringing full-year payout to 4.5¢ (FY16: 3¢).
– Trades at 20.1x forward P/E

– FY17 net profit fell 28% to US$49m on revenue of US$350.2m (-11%).
Revenue decline was mainly due to lower contributions from its hotel (-10%), gaming (-53%) and property development (-67%) segments.
– RevPAR declined 10% due to the weaker GBP.
– Bottom line was further hit by a legal settlement in the UK, US$3.7m write-off on property and equipment as well as a 38% jump in net financing cost.
– Maintained first and final DPS of 2.2¢.
– NAV/share at US$0.808

– Turned around to 4QFY17 net profit of A$2.4m (4QFY16: A$165.1m loss) in absence of A$130.9m impairment on fixed assets and intangibles.
– This swung FY17 results to a net profit of A$4.7m (FY16: A$258.9m loss).
– Quarterly revenue rose 18% to A$121.2m on increased work on core projects in the energy and process sector.
– Gross margin slipped to -0.9ppt to 7.8%.
– Bottom line was also buttressed bya A$5.5m net gain from partial debt restructuring, and A$4.3m drop in tax to A$2.9m.
– NAV/share at A$0.017

*ST Engineering
– Acquired rig repair assets adjacent to its existing yard, VT Halter Marine in Pascagoula, Mississippi, US from World Marine of Mississippi for US$25m.
– These assets comprise a purpose-built facility of 94 acres for heavy marine fabrication, and offshore oil and gas rig upgrades, repairs and conversions.

– SG Bike, a 51:27:22 JV with Sean Tay and Andy Tay, has launched a bike sharing scheme at Bukit Panjang, which is expected to broaden group revenue base.
– The JV aims to addressissue of indiscriminate parking by working out a solution with local authorities.

*Ley Choon
– Secured a PUB contract worth $1.4m relating to trial trenching works for water projects.

– Proposing to divest 19.3m shares (~40% stake) in Mediacorp Press and 18m shares (20% stake) in Mediacorp TV to Mediacorp for $9.4m and $8.6m respectively.
– The group expects to record a write-down of $31m due to the transaction.

*UOL/Haw Par
– UOL exercisedcall option to acquire 60m shares of UIC from Haw Par via issue of 27.3m new shares.
– This will increase UOL’s stake in UIC to about 48.94%
from 44.71%.
– The transaction is expected to be completed by early Sep ’17

*Tiong Seng/Ocean Sky
– 60:40 JV to acquire Sloane Court Hotel and adjacent plot of land at Balmoral Road for $80.5m or $1,292psf ppr.

Singapore Stocks to Watch

* First Resources (FR SP): New outperform at Daiwa, PT S$2.11
Golden Agri (GGR SP): New underperform at Daiwa, PT S$0.32
GuocoLand (GUOL SP): 4Q net income S$244.8m vs S$39.8m year ago
Indofood Agri Resources (IFAR SP): New
underperform at Daiwa, PT S$0.40
Marco Polo Marine (MPM SP): Co., unit filed 2 further applications to Singapore high court for leave to convene a meeting to consider 2 schemes of arrangement
Singapore Press Holdings (SPH SP): Mediacorp buys SPH stakes in two units for S$18m
Singapore Technologies Engineering (STE SP): Co. buys rig repair assets in U.S. for $25 million
Wilmar (WIL SP): New buy at Daiwa, PT S$3.82

News for today 28/8/2017:
– It pays to not profit from someone else’s misery

– Traders watching US and China this week

– US stocks end higher; oil shares boosted by hurricane

– Financial rules have made economy stronger, changes should be modest: Yellen;

Post-recession financial rules have made economy stronger, not slower: Yellen

– Multi-decade triple top points to decline in US equities

– Amazon to slash prices on upscale US grocer’s products

– Toronto property market in chaos as prices slide

– Euro hits 2-1/2-year high after Draghi refrains from talking down currency

– China industrial profits keep pace as factory inflation holds up

– Japan’s core consumer prices up for 7th month
– Electronics powers 21 per cent jump in factory output;

Singapore factory output outperforms with 21% surge in July as electronics manufacturing soars;

Singapore factory output for July sizzles with 21% growth

– STI ends lower with profit-taking by investors

– Short-sellers caught short in S’pore

– Govt studying plan to sell large land plots in Jurong Lake District

– Call to pace development of Jurong Lake District

– HSBC ‘back in growth mode’ in Singapore

– Sun Rosier condo off Bartley Road up for en bloc sale

Stocks to watch today 28/8/2017:
– Tiong Seng, Ocean Sky unit to buy Sloane Court Hotel

* Ocean Sky last close $0.076, 52wk high/low $0.149/$0.06

* Tiong Seng last close $$0.295, 52wk high/low $0.38/$0.21

Comfortdelgro last close $2.28, 52wk high/low $2.98/$2.13 – Analysts upbeat on possible tie-up between Comfort and Uber

Guocoland last close $2.29, 52wk high/low $2.31/$1.78 – Q4 profit soars to $245m for GuocoLand

GL Ltd last close $0.75, 52wk high/low $0.83/$0.69 – Company’s profit hit by declines in hotel, property development

ICP last close $0.008, 52wk high/low $0.011/$0.006 – Company’s FY earnings still mired in red ink with S$2.7m loss; revenue expands 6.8% to S$2.1m

Imperium Crown last close $0.109, 52wk high/low $0.128/$0.057 – Company’s FY results still bogged in red ink with S$6.7m loss

Mary Chia last close $0.11, 52wk high/low $0.121/$0.044 – Company set for makeover after buyout; Mary Chia shares shoot up 70% on mandatory general offer

Metech International last close $0.003, 52wk high/low $0.004/$0.001 – Company’s Q4 profit rockets to S$391,000 from loss in previous year

POSH last close $0.275, 52wk high/low $0.405/$0.265 – PACC Offshore plots steady course in rough seas

Silverlake Axis last close $0.605, 52wk high/low $0.71/$0.50 – Company’s Q4 profit down 58%

ST Engineering last close $3.55, 52wk high/low $3.86/$3.03 – Company picks up rig repair assets in the US for US$25 million;

Sunseap, ST Kinetics ink solar energy agreement

SPH last close $2.76, 52wk high/low $3.84/$2.75 – Company to divest stakes in Mediacorp TV and Press while Today newspaper will cease print edition and go fully digital;

SPH divesting stakes in Mediacorp entities

Tan Chong last close HK$2.37, 52wk high/low HK$2.50/HK$2.25

– Company’s half-year net profit up 177%

Thakral last close $0.58, 52wk high/low $0.67/$0.155 – Company accepts bid of $74m for Hong Kong warehouse properties

Trendlines last close $0.141, 52wk high/low $0.205/$0.136 – Company builds war chest; eyes combined markets of Israel, Singapore, China

Options and Considerations For Privatisations in Singapore

Options and Considerations For Privatisations in Singapore

LUCIEN WONG – Allen & Gledhill LLP

LEE KEE YENG – Allen & Gledhill LLP

Lucien Wong and Lee Kee Yeng at Allen & Gledhill LLP offer their highly sought after expertise on privatisations in Singapore.
Lucien Wong and Lee Kee Yeng

Lucien Wong and Lee Kee Yeng
Amid the lingering uncertainties over the economy and the easing valuations in the market in 2009 and 2010, 33 companies, with an aggregate market capitalisation of approximately S$15.4 billion, were privatised and delisted from the Singapore Exchange. While the list of privatisations included strategic acquisitions led by sovereign wealth funds such as ATIC’s acquisition of Chartered Semiconductor Manufacturing Ltd (which was delisted from the Singapore Exchange in December 2009) and Khazanah’s offer for Parkway Holdings Limited (which was delisted from the Singapore Exchange in November 2010), a significant number of privatisations were initiated by major shareholders seeking to capitalise on lower valuations, as listed companies continued to trade below their 2007 peaks. Market observers anticipate that more such privatisations and delistings may be in the pipeline for 2011 as acquirers continue to take advantage of current valuations and the recovery in the credit markets.
Why Privatise?
Companies go public in order to raise funds from the market but a listing also requires a company to continually meet its regulatory obligations. Companies seeking to delist often cite illiquidity, costs of compliance and lack of operational flexibility as the key motivations for privatisation. In addition, many Chinese companies who had previously sought an overseas listing are now tempted by the prospect of re-listing closer to home at higher valuations. Such companies hope to benefit from greater investor interest in exchanges in China or Hong Kong, where shares may trade at higher multiples and investors may be more familiar with their brand names. Oft-cited examples of such “success stories” include Want Want Holdings Ltd (a Singapore company with its principal operations in Taiwan and China), which delisted from the Singapore Exchange in 2007 and was subsequently listed in Hong Kong at three times the value of its privatisation offer, and Man Wah Holdings Limited (a Bermuda company with its principal operations in China), which delisted from the Singapore Exchange in 2009 with a market capitalisation of S$200 million and was subsequently listed in Hong Kong with a market capitalisation of S$1.2 billion.
A Singapore-listed company (both foreign as well as Singapore incorporated) can be taken private in several ways: (i) a voluntary delisting; (ii) a scheme of arrangement (for a Singapore incorporated company); (iii) a general offer; and (iv) an amalgamation (for a Singapore incorporated company). Each of these is briefly considered below.
Voluntary Delistings
Under its listing rules, the Singapore Exchange will permit a Singapore-listed company to be voluntarily delisted if: (i) the delisting is approved by more than 75 per cent of shareholders present and voting with not more than 10 per cent of such shareholders objecting; and (ii) (following the approval of the delisting) an exit offer is made to the shareholders, which must normally be in cash or include a cash alternative. If the delisting is approved, the company will be delisted whether or not shareholders choose to accept the exit offer. Acquirers who are already major shareholders of the company can vote their shares to approve the delisting together with the minority shareholders. As this can significantly reduce the execution risk for the transaction, a voluntary delisting is generally the route taken by existing major shareholders seeking to privatise a company.
In order to protect minority shareholders, the Singapore Exchange requires a “reasonable” exit offer to be made to the remaining shareholders of the company. The board of directors of a delisting company is required to take into account the interests of all shareholders as a whole and must ensure that the exit alternative is a reasonable proposal when making its recommendation for a delisting. The company must appoint an independent financial adviser to opine on whether the exit offer is reasonable and such opinion must be clear and unequivocal without reference to diverse investment horizons.
Whether an exit offer is reasonable continues to be a sticky issue in the market, especially in relation to shares that trade below their net asset value. Acquirers should therefore remain sensitive to shareholder reaction as to the consideration offered. While the delisting transactions for 2009 and 2010 have generally offered a premium above the closing share price prior to the transaction announcement date, some of the delisting transactions were made at a price lower than the net asset value of the company. This has been a hotly debated issue in a number of voluntary delistings, where minority shareholders objected voraciously. Whether rightly or wrongly, the net asset value of the company will remain a benchmark for some shareholders as reflecting the “true” value of the shares and major shareholders looking to privatise must be prepared to defend their valuations.
Although the use of a voluntary delisting does not guarantee the buy-out of the minorities, once the delisting is approved, there is the disadvantage of remaining as a shareholder of illiquid shares in an unlisted company, and this often provides the motivation for minority shareholders to accept the exit offer. If minority shareholders do not accept the exit offer, the company will still be delisted, with minority shareholders remaining in the company. Acquirers using the voluntary delisting route must therefore assess whether their post-delisting objectives can be achieved with minority shareholders in place, and the potential exit strategies for these minority shareholders thereafter.
Schemes Of Arrangement
Where obtaining 100 per cent of the shares is key to the acquirer’s plans for the company post delisting, a scheme of arrangement may be preferred as it provides the comfort of a binary outcome – either compulsory buyout of all shareholders if the scheme is successful or the acquirer does not have to acquire any shares. A Singapore-listed and Singapore incorporated company may enter into an implementation agreement pursuant to which it agrees to undertake a scheme of arrangement for the acquisition by the acquirer of all its issued shares in accordance with section 210 of the Companies Act (chapter 50 of Singapore, the Companies Act). The scheme requires the approval of the majority in number of shareholders present and voting, representing 75 per cent or more in value of the shares voted. The scheme is also subject to approval by the High Court of Singapore.
Major shareholders looking to privatise may be disadvantaged in a scheme of arrangement as, unlike a voluntary delisting, they would not be permitted to vote on the scheme and the decision would be entirely in the hands of minority shareholders. In addition, as a scheme must be approved by a majority in number present and voting on the scheme, the transaction could be defeated by a large number of shareholders holding a very small number of shares.
General Offers
Voluntary delistings, schemes of arrangement and amalgamations (discussed below) require the co-operation of the target company. If this is not expected to be forthcoming, an acquirer would need to consider implementing the privatisation by way of a general offer for the company. In addition, where there is substantial interloper risk, a general offer structure allows an acquirer to retain greater flexibility in its ability to respond to a competing bid. Where the intention is to privatise, the offer should be conditional upon the acquirer receiving acceptances for more than 90 per cent of the outstanding shares of the company. If the acquirer holds more than 90 per cent of the company, the listed company would no longer meet its free float requirement and the Singapore Exchange would direct that the company be delisted if the acquirer does not restore the free float after the close of the offer. In addition, if the acquirer receives sufficient acceptances to exercise its rights of compulsory acquisition under the Companies Act, it can squeeze out the minority shareholders who have not accepted the general offer.
Where the Singapore-listed company is also a Singapore incorporated company, the privatisation could take place by way of an amalgamation under section 215A of the Companies Act. Amalgamations are akin to US-style mergers in which a merging entity is absorbed into an acquiring entity. The acquirer and the listed company would enter into an agreement to implement an amalgamation of the two companies with the acquirer as the surviving company or with both companies merging into a new company. The amalgamation must be approved by not less than 75 per cent of the shareholders of each amalgamating company, and the board of directors of each amalgamating company must give a solvency statement, stating its belief that the amalgamated company will remain solvent for the next 12 months. On completion of the amalgamation, the Singapore-listed company will be delisted and cease to exist as a separate legal entity and all its property, rights, privileges, obligations and liabilities will be transferred to and vest in the amalgamated entity.
The provisions for amalgamations under the Companies Act were introduced in Singapore in 2005. While amalgamations have been used to effect internal restructurings, we have yet to see a privatisation in Singapore being implemented by way of an amalgamation. There are several possible reasons for this. First, acquirers remain understandably reluctant to be the test case for a new acquisition structure. In addition, directors on the board of a public company are likely to be wary of providing a forward looking solvency statement for the amalgamated company on a consolidated basis, as they are personally liable for such statements. Lastly, as with a scheme, major shareholders looking to privatise would not be permitted to vote on the amalgamation and this invariably increases the execution risk of the transaction.
*   *   *

Delistings are part and parcel of a functioning capital market. As companies continue to review their valuations in the aftermath of the financial crisis, and look to strategically reposition themselves for better market conditions, privatisation will remain a key option for consideration. In determining the most appropriate transaction structure, acquirers must assess which structure allows them to adequately manage their execution risks while achieving their objectives for delisting.
Taken from

Retail Market Monitor: Wednesday, August 16, 2017

For my clients

– The market may succumb to profit-taking as 2Q results season winds to an end and investors await FOMC minutes for clues on the Fed’s interest rate path.
– With the current US and NK disputes, USD continue to remain flat.
– Of the >100 companies tracked, 22% surpassed 2Q earnings estimates, while 32% missed, down from 28% and 36% respectively in 1Q17.
– Technically, STI exhibited a bearish engulfing candlestick yesterday, which points to near term weakness. Support for the index is at 3,275, with topside resistance is at 3,360.
– If possible please avoid Wilmar.

*Healthway Medical
– Dipped into 1QFY18 net loss of $0.5m (1QFY17: $0.5m profit), weighed by a surge in finance costs (+163.1%) and income tax (+134.5%).
– Revenue slid 6.2% to $23.2m on declines across primary healthcare (-$1.1m) and specialist & wellness healthcare (-$0.4m) segments.
– Gross margin held steady at 81% (1QFY17: 79.6%) but operating cash flow deteriorated to negative $4.2m.
– While the operating environment continues to be challenging, the group is well-capitalised following the $60m issuance of convertible notes in Apr.
– SGX has requested it to appoint an independent reviewer to look into loan extensions to related parties.
– Trades at 0.7x P/B.

– Jul operating statistics showed higher group passenger load factor of 83.6% (+1.5ppt) as traffic (+4.1%) outpaced capacity growth (+2.2%).
– Cargo load factor rose 2.5ppt to 63.2%.
– Parent load factor improved for routes to Americas (+3ppt), Europe (+4.5ppt), West Asia and Africa (+2.4ppt), although South West Pacific (-2ppt) deteriorated, while East Asia was muted (+0.5ppt).
– Load factor for SilkAir (+4.5ppt to 76.6%) was also better but that budget carrier (-0.2ppt to 84.7%) weakened slightly.
– Trades at 0.94x P/B.

– Maiden hotel development at Stevens Road has received TOP on 3 Aug and will likely open end 2017.
– The $900m project will have two hotels – 254-room Novotel and 518-room Mercure and includes some commercial space.
– Trades at 1.73x P/B.

*Libra Group
– Secured three projects worth $42m.
– Works include the erection of a 5-storey residential building with scheduled completion in 2018, a sub-contract for architectural works at Lentor Station (completion: 2020) and a sub-contract for architectural works at Stevens Station (completion: 2020).
– Trades at 21.8x trailing P/E.

– Entered a joint marketing agreement with NEC Asia Pacific for sale of a high-performance face-recognition surveillance related product in Singapore, Malaysia and other Asia Pacific region.
– NEC’s NeoFace® Watch with real-time facial recognition will be integrated with Miyoshi’s wireless audio/video wearable solution.
– The upcoming product will offer on-ground security officers with instant analysis of what they see and enable them to provide actionable intelligence to commanders.
– Trades at 18.1x trailing P/E.

*Best World
– Explained that it has yet to convert its business to direct selling in China after its shares and other similar MLM firms slumped amid a government crackdown on pyramid schemes.
– All its products are currently sold at outlets and workshops under the export model and the clampdown will have little impact on its China business.
– For now, MKE is keeping its Buy rating and TP of $1.88.

*Parkson Retail Asia
– Expected to reportFY17 net loss of $62m (FY16: $30m profit) due to retail headwinds and asset write-downs following a comprehensive review.

*United Engineers
– Independent financial adviser SAC Capital views a takeover bid led by Perennial Real Estate and Yanlord Land as fair and reasonable.
– The consortium triggered the mandatory takeover offer at $2.60/share after buyingover the 33.5% stake from OCBC, Great Eastern and other vendors for $729.7m.
– Trades at 1.03x offer price and 0.89x P/B.

– Entered into a 50:25:25 JV with Myanmar MarcoPolo and Bulox Power to manufacture and/or assemble transformers, generator sets and power solution products in Myanmar.
– It will invest an initial US$0.5m in the JVCo.

– Disclosed that discussions with a potential investor are still ongoing.

– Collaborating with US-based Chemia Corp to develop specialised fragrances to counter mosquito-borne diseases and stress and anxiety, as well as anti-viral medical applications.

News for today 16/8/2017:
– Oil prices little changed as dollar gains, China demand weak

– US retail sales post biggest gain in seven months

– UK inflation holds steady in July as price pressures ease

– IMF forecasts faster Chinese growth as rising debt adds to risks

– Singapore bank stocks battered by more O&M bad news

– Buying momentum buoys July sales of private and EC homes; Executive condos chalk up bumper sales

– Indonesia’s oil and gas sector slumps, falling to 3% of nation’s GDP

– We are not done building Singapore yet: Lawrence Wong; Major infrastructure projects over next decade will put Singapore economy on stronger footing: Lawrence Wong

– Property agents may get tech boost

– Tampines Court gets $970m collective sale offer; Sim Lian tipped to have bid S$970m for Tampines Court

– Sales of new private homes and ECs almost double in July from June

Stocks to watch today 16/8/2017:
Best World last close $1.355, 52wk high/low $1.62/$0.59 – Share price slumps on China crackdown news

China Jinjiang last close $0.79, 52wk high/low $0.99/$0.765 – Company posts higher earnings for Q2

Healthway Medical last close $0.044, 52wk high/low $0.059/$0.026 – Company in the red for Q1

Noble Group last close $0.435, 52wk high/low $2.80/$0.285 – Company hit by ‘loss of confidence’ as ratings cut again; Noble hit by ‘loss of confidence’ as ratings cut again

Oxley last close $0.55, 52wk high/low $0.615/$0.38 – Company’s Stevens Rd hotels likely to open by end-2017

XMH Holdings last close $0.35, 52wk high/low $0.42/$0.25 – Company enters into Myanmar joint venture

YuuZoo Corp last close $0.055, 52wk high/low $0.187/$0.05 – Company back in the black; posts Q2 net profit of S$8.4 million

Gearing fell marginally to 0.87x (2Q17) from 0.88x (2Q17). This was primarily due to net debt repayment of c.SGD19.2m (repayment of the SGD50m BTHSP 6.25% 05/2017 bond on maturity) while equity declined due to

6M17 revenues -3%yoy to c.SGD160.3m, while EBIT climbed to c.SGD5.2m (vs 6M16 of SGD217K). On a standalone 2Q17 basis, total revenues expanded +6%yoy to c.SGD69.8m while EBIT loss narrowed to c.-SGD6.6m.
What's New:

Overall, credit metrics remained stable in 2Q17 considering that 2Q and 3Q performance tend to be seasonally weaker for the group. The agreements pertaining to the Vanke partnership and alliance with Accor have completed post-2Q17 close. We are now focused on how these strategic partnerships will pan out for BTH, through potential new revenue streams and cost efficiencies. Additional liquidity from the Accor's CD issuance/Share Placement could also aid BTH in its deleveraging intent and strengthen its balance sheet position. Given that the hospitality business is susceptible to factors such as the macro environment and geopolitical/ terrorism risks, we remain watchful of the operating performance of the group. Moreover, as the group pursues an asset light approach, we would be watchful of its contingent liabilities. BTHSP bonds have performed very well YTD rallying by c.7-18%. Barring a macro shock event and despite the strong rally, we continue to like BTHSP bonds for carry and believe the recent developments will continue to strengthen the business profile over the long term.
Bondholder Perspectives:

Green shoots of growth

Please see attached our update on Banyan Tree's 2Q17 financial results. This report is suitable for distribution to end clients. This report is not for distribution into Hong loss in 2Q17.

Agreement with China Vanke Co Ltd ("Vanke") in relation to the strategic partnership completed. BTH's NTA is expected to increase to SGD546.8m and pro-forma 2Q17 gearing is estimated to reduce to c.0.83x given the equity base expansion.

Completion of an irredeemable convertible debenture issuance of SGD24m ("CD") and grant option by Accor to acquire up to 10% of the share capital ofBTH.

Unrecognized property sales backlog of SGD154m, which represents c.3 years of property sales revenue.

Areas to Watch:

(i) Share Placement with Vanke/ conversion of Accor's CD, (ii) overall demand for tourism (growth vs geopolitical risks), (iii) buyer defaults on property sales and (iv) contingent liabilities.

EBITDA positive but OCF remains in the red. 2Q17 revenue was +c.25%qoq to c.
What's New:

Credit metrics deteriorated for PACRA as EBIT continued into its eighth quarter of losses while gearing spiked further. We noted marginal improvement in utilisation across the OSV and Subsea, coupled with new contracts secured, however day rates continue to remain weak. Fundamentally, a significant turnaround of industry parameters has yet to be seen whilst PACRA continues to rationalize costs to manage cash burn. Given the impending restructuring news and uncertainty around the terms to be proposed, we have downgraded the bond to FV. Based on current bond price, our assessment suggests that the current implied discount on the fleet stands at c.20-31%.
Bondholder Perspectives:

Restructuring plan in the works

Please see attached the update on Pacific Radiance's 2Q17 financial results. This report is suitable for distribution to end clients. This report is not for distribution into Hong Kong.USD17.5m, boosted mainly by higher utilisation rates of OSV vessels (56% this quarter vs. 30+% in 1Q17). EBITDA was positive for the first time in over a year, though negative OCF - for the seventh consecutive quarter - of c.USD10.4m continued to be a strain on cash flows.

Restructuring plan on the horizon. PACRA announcedin its 2Q17 results that it has appointed advisors to assist in "reviewing the overall capital structure and developing a feasible restructuring plan...". This appears to be a precursor to an all-encompassing financial restructuring, which we think would likely include bondholders should it occur.

Gearing (D/E) continued to rise from c.1.83x (1Q17) to c.1.97x (2Q17), and could rise further due to slower debt amortisation, additional debt drawdown and potential asset impairments.

Higher 2Q17 unrestricted cash balance of c.USD27.8m. PACRA reported higher 2Q17 unrestricted cash balance primarily due to the partial drawdown of the IFS loan.

Asset divestments continue; c.USD2.2m raised in 2Q17. Although the cash quantum raised from the divestments are arguably small, we view this as credit-positive given the divestments are made on non-core, idle vessels

c.USD35.8m of firm charters secured for 10 vessels, which is positive from a utilization perspective. Day rates or length of contract were not disclosed though at this point rates are likely to still be depressed.

Areas to Watch: (i) OSV utilisation and day rate trends, (ii) asset sales and (iii) details on potential restructuring

Bumitama Agri (BAL SP/BUY/S$0.70/Target: S$1.03)
Anticipate Stronger 2H17
We expect 2H17 results to be better than 1H17. This will be mainly driven by higher FFB production and resumption of biodiesel delivery. Management has revised up FFB production growth guidance to +25% yoy from +15% yoy for 2017 as anticipation stronger yield recovery. However, we maintain our FFB production growth forecast of +18.3% yoy for now. We project 2H17 core net profit of Rp892b vs 1H17’s of Rp551b. Maintain BUY. Target price: S$1.03.
What’s new
The key takeaways from 2Q17 results briefing are: a) expect production continued to be strong in 2H17 and a peak in 4Q17, b) management is revising FFB production guidance upwards to +25% Key takeaways from 2Q17 results briefing. ·        yoy from +15% yoy for 2017, c) about 73% of the fertiliser costs were booked in 1H17, the remaining fertiliser application is likely to complete in 3Q17 and, d) biodiesel take-up rate has returned to normal since end-Jun 17.
·        1H17 FFB nucleus production registered a record high and surpassed 1H15’s level. For 1H17, FFB nucleus production was 891,693 tonnes, higher than 1H15’s FFB production of 696,155 tonnes, which also represents a record high production for BAL. This is mainly supported by increase in mature areas and yield recovery. However, we noticed that FFB yield in 1H17 has yet to recover to 1H15’s level as still affected by lagged impact from severe drought. We understand that the lagged impact from severe drought is waning and anticipate FFB production continued to be strong in 2H17 and to register a peak in 4Q17.
·        Upwards revision of FFB production growth guidance. Management is now more positive and revised FFB production growth guidance upwards to +25% yoy from +15% yoy for 2017. The production ratio is expected to be 48%:52% for 1H17:2H17. Nevertheless, we are maintaining our FFB production growth forecast of +18.3% yoy for now. Should we adjusted our FFB production growth to +25% yoy, it will increase our 2017 earnings forecast by 2.8%.
·        Most of the fertiliser costs were booked in 1H17, suggesting a record earnings in 4Q17. We gather that about 73% of fertiliser costs were booked in 1H17, while the remaining fertiliser application is likely to complete in 3Q17. Coupled with the expectation of strong production and low operating costs, we are anticipating another record quarter in 4Q17.
·        Biodiesel delivery has retuned to normal. We understand that the biodiesel delivery has been delayed in May-Jun 17 due to some logistics issues in Pertamina. Nevertheless, biodiesel delivery volume has returned to normal levels since end-Jun 17. The volume that did not delivered in May-Jun 17 is not recoverable. Meanwhile, the biodiesel subsidy has been reduced to a pricing formula of CPO base price + US$100/tonne from CPO base price + US$125/tonne. This will affect the operating margin, but it is still profitable for BAL which is about 2% net margin.  
·        We are maintaining our net profits forecasts of Rp1,443b, Rp1,337b and Rp1,504b for 2017-19 respectively for now.
·        Maintain BUY and target price of S$1.03, based on 13x 2018F PE. We like BAL for its young tree age profile, which spells strong production, as well as its hands-on estate management which has allowed BAL to consistently deliver a high oil extraction rate (OER).