Thursday, July 24, 2014

OCBC builds Wing Hang Bank stake as takeover gains traction: Update

OCBC, based in Singapore, raised its stake in its target by almost 11 percentage points to 67.8% in the five days to July 22, filings with Hong Kong’s Securities and Futures Commission showed. OCBC had 56.9% on July 17, up just 6.5 percentage points since July 4, filings showed.

Acceptances for the US$5 billion ($6.2 billion) bid dragged earlier this month as Elliott Capital Advisors LP boosted its stake in Wing Hang, which Mizuho Securities Asia said at the time could put pressure on OCBC to raise its HK$125 per ($20) share bid price. The offer, made in April, has been accepted by shareholders including the family of Wing Hang’s Chairman Patrick Fung.

“It’s nice to see this moving in the right direction,” Jim Antos, a Mizuho analyst based in Hong Kong, said by phone. For minority shareholders, “HK$125 is a more than fair price for Wing Hang Bank. Looking at the history of bank mergers in Hong Kong, it’s a fair deal.”

Hong Kong regulations allow OCBC to delist Wing Hang once it owns 90% of the shares. Should it fall short, OCBC must ensure that at least 25% of Wing Hang stock remains in public hands, meaning it may have to sell stock to cut its stake. The offer closes July 29.

Koh Ching Ching, a Singapore-based spokeswoman for OCBC, declined to comment on the bank’s increased stake. OCBC bought 346,870 Wing Hang shares at HK$124.7659 each on July 22, taking its holding to 67.8%, a filing with Hong Kong’s SFC showed yesterday.

NO DISTRACTION

OCBC shares gained 0.3% to $9.68 at 10:37 a.m. in Singapore today, the highest intraday level in a month. Wing Hang was unchanged at HK$124.60 in Hong Kong.

Shares of the Hong Kong bank traded as high as HK$127 on July 7 after Elliott Capital said in a July 3 filing it had increased its stake to 7.8%. The stock was bought at HK$125, the same as OCBC’s offer.

“We know that they’re there, but in terms of would it distract us or change us from what we’re currently doing, it will not,” Chief Executive Officer Samuel Tsien said in a July 10 interview. ‘We’ll just proceed according to the general offer document and if we cannot get 90%, we’ll keep the company listed.’’

The acquisition will give OCBC more access in the Greater China region and enable both banks to offer services to Chinese companies expanding in Southeast Asia, where it has a larger presence, Tsien said. Wing Hang gives OCBC a network of about 70 branches spanning Hong Kong, Macau and mainland China.

The bid is the largest takeover of a Hong Kong bank since DBS Group Holdings, OCBC’s biggest competitor in Singapore, offered US$5.4 billion for Dao Heng Bank Group in April 2001.

Singapore home prices set to extend drop, Keppel Land says: Update

Home prices in Singapore will probably extend declines as the government sticks with curbs, according to Keppel Land, signaling further losses for Asia’s second-most expensive housing market.

“Home prices are expected to continue to moderate,” Chief Executive Officer Ang Wee Gee said at a results briefing yesterday. “Singapore is unlikely to relax property-cooling measures in the short term.”

Residential values in the city-state slid for a third quarter in the three months to June to post the longest losing streak in five years after the government introduced loan measures last June, widening a campaign that began in 2009 to curb speculation. Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said on July 4 that a further correction in the Singapore property market would not be unexpected. Keppel Land stock closed yesterday at the highest in almost two months.

“I don’t see the government relaxing the curbs for a year,” said Nicholas Mak, an executive director at SLP International Property Consultants in Singapore. “Developers that have deep pockets may not be under tremendous pressure to cut prices.”

The index tracking 49 property companies in the island- state decline 0.3% in Singapore trading as of 11:38 a.m. local time, the first drop in eight days. Keppel Land stock rose 0.6% to $3.53, heading for the highest close since April 21.

CHALLENGING PERIOD

Singapore’s home sales by volume fell 68% in June from May as developers marketed fewer projects. The government began introducing the housing-market curbs in 2009, with some of the strictest measures implemented in 2013, including a cap on debt at 60% of a borrower’s income, higher stamp duties on home purchases and an increase in real-estate taxes.

“We don’t see a major correction in the residential property market in Singapore,” said Ang after the company reported second-quarter profit rose 12% to $107.2 million. The first six months have been challenging as the enforcement of cooling measures in Singapore and in China continued to damp the market, said Ang.

Keppel Land’s revenue declined 7.8% to $304.6 million in the three months to June, according to a statement. The developer sold 98 homes in Singapore in the first six months of the year.

An index tracking private-residential prices retreated 1.1% to 209.3 points in the three months to June, following a 1.3% decline in the previous three months, according to preliminary data released by the Urban Redevelopment Authority on July 1.

Keppel Land shares gained 5.1% this year compared with the 8% advance in the Straits Times Real Estate Index. The stock ended at $3.51 yesterday, the highest close since May 26.

Singapore's central bank says too early to ease property curbs

Monetary Authority of Singapore said it’s too early for the city-state to ease property measures that is helping curb surging residential prices.

“Property prices, they remain at elevated levels, although they’ve just started to soften,” Ravi Menon, managing director of the MAS, as the central bank is known, at the release of its 2013/14 annual report today. “It’s very important that we secure the gains that we’ve made in stabilizing the market and restoring financial prudence.”

Debt levels among highly-leveraged households remain high, Menon said. The MAS has narrowed its 2014 inflation forecast to between 1.5% and 2% from 1.5% to 2.5% as the property curbs helped stabilize prices and rents, Menon said.

Residential values in the city-state slid for a third quarter in the three months to June to post the longest losing streak in five years after the government introduced loan measures last June, widening a campaign that began in 2009 to curb speculation.

Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam, who’s also chairman of the central bank, said on July 4 that a further correction in the Singapore property market would not be unexpected.

CNA Group signs MoU to deliver fuel management system in Laos

CNA Group, the master system integrator, has signed a Memorandum of Agreement with Buathip Lao Co. to jointly deliver a national Integrated Fuel Management System (IFMS) in Laos.

The IFMS will measure and manage fuel imports into the country. This IFMS allows a central control centre to collect and collate fuel data through a networked infrastructure of data gathering points, enabling better management, cost analysis and accounting for fuel inventory movement.

Buathip has received a 10+10 year contract from the Government of Laos to deliver an IFMS whereby the Laos Government will pay a service charge on a per litre basis to Buathip. Under the MOA, Buathip will give CNA a minimum guarantee of 1 billion litres per year, which will translate into US$2.73 million ($3.4 billion) per year. Currently Laos has an annual import fuel volume of approximately 1.2 to 1.5 billion litres.

CNA will be the technology partner, and with Buathip’s assistance, CNA will conduct the site survey, perform the design, installation of equipment, conduct the testing & commissioning, conduct training, and perform operations & maintenance.

This project with Buathip will be the third project for CNA in Laos. The Group was previously awarded projects in Laos to implement Common Use Terminal Equipment (CUTE) solutions in Wattay International Airport and Luang Prabang International Airport.

Tiger Airways to look for growth overseas after loss widens

Tiger Airways Holdings, a low- cost carrier partly owned by Singapore Airlines, said it’s seeking to forge alliances with other airlines to boost overseas revenue after losses widened.

The carrier plans to focus initially on filling its planes with passengers, and then on improving yields through partnerships to raise earnings, Chief Executive Officer Lee Lik Hsin told reporters in a conference call in Singapore yesterday.

“We want to try to increase the overseas revenue contribution to our revenue base,” said Lee, who became CEO in May. “We need to market ourselves more like a network carrier rather than a point-to-point carrier. In order to grow and grow profitably, we need to expand beyond that.”

Tiger Air has grounded planes, canceled aircraft orders and exited overseas joint ventures as part of a restructuring after posting three straight annual losses. The efforts are symptomatic of the challenges budget airlines face in Southeast Asia, where competition among half a dozen carriers has pushed fares down.

Tiger Air’s loss widened to $65.2 million in the quarter ended June from $32.8 million a year earlier because of costs incurred from closing its Indonesia venture and Australia operations.

Shares of Tiger Air fell as much as 5.6%, the biggest intraday decline since June 23, to 42 cents and traded at 43 cents as of 9:34 a.m. in the city. The stock has fallen 16% this year, compared with a 5.7% climb in Singapore’s benchmark Straits Times Index.

REDUCE FLIGHTS

The airline is also looking at reducing flights to destinations where demand has weakened, Lee said. It’s waiting for approval from authorities to strengthen the company’s partnership with Scoot, the long-haul budget carrier of Singapore Air, he said.

“Much of the issues and much of drain came from some of these joint ventures which we were not able to make work,” Lee said. “With the exit from these joint ventures, everyone in the company is feeling confident that we are in a good position.”

The airline filled 84.7% of its seats in the quarter, compared with 83.9% a year earlier. Capacity is expected to remain little changed this year, the company said without elaborating.

Tiger Air is considering options for four aircraft that were returned after its Indonesia venture closed earlier this month, including selling them, Lee said. The company said earlier this year it plans to ground eight aircraft in the 12 months ending March.

Singapore home prices set to extend declines, Keppel Land says

Home prices in Singapore will probably extend declines as the government sticks with curbs, according to Keppel Land, signaling further losses for Asia’s second-most expensive housing market.

“Home prices are expected to continue to moderate,” Chief Executive Officer Ang Wee Gee said at a results briefing yesterday. “Singapore is unlikely to relax property-cooling measures in the short term.”

Residential values in the city-state slid for a third quarter in the three months to June to post the longest losing streak in five years after the government introduced loan measures last June, widening a campaign that began in 2009 to curb speculation. Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said on July 4 that a further correction in the Singapore property market would not be unexpected. Keppel Land stock closed yesterday at the highest in almost two months.

“I don’t see the government relaxing the curbs for a year,” said Nicholas Mak, an executive director at SLP International Property Consultants in Singapore. “Developers that have deep pockets may not be under tremendous pressure to cut prices.”

Singapore’s home sales by volume fell 68% in June from May as developers marketed fewer projects. The government began introducing the housing-market curbs in 2009, with some of the strictest measures implemented in 2013, including a cap on debt at 60% of a borrower’s income, higher stamp duties on home purchases and an increase in real-estate taxes.

CHALLENGING PERIOD

“We don’t see a major correction in the residential property market in Singapore,” said Ang after the company reported second-quarter profit rose 12% to $107.2 million. The first six months have been challenging as the enforcement of cooling measures in Singapore and in China continued to damp the market, said Ang.

Keppel Land’s revenue declined 7.8% to $304.6 million in the three months to June, according to a statement. The developer sold 98 homes in Singapore in the first six months of the year.

An index tracking private-residential prices retreated 1.1% to 209.3 points in the three months to June, following a 1.3% decline in the previous three months, according to preliminary data released by the Urban Redevelopment Authority on July 1.

Keppel Land shares gained 5.1% this year compared with the 8% advance in the Straits Times Real Estate Index. The stock ended at $3.51 yesterday, the highest close since May 26.

July 24: Cambridge REIT, CRCT, Pteris Global, Tiger Air

The Straits Times Index (STI) on Wednesday ended 23.79 points higher or +0.72% to 3340.70, taking the year-to-date performance to +5.55%. The top active stocks were DBS (+1.70%), Global Logistic (+2.21%), UOB (+1.31%), Wilmar Intl (+0.62%), Spackman (+2.15%). Here are some stocks and factors to watch this Thursday morning:

Cambridge Industrial Trust has announced a distribution per unit (DPU) of 1.251 cents for its second quarter ended 30 June 2014 (2Q2014). This is higher than the DPU of 1.240 cents paid out a year ago.

CapitaRetail China Trust (CRCT), announced a distribution per unit (DPU) for 2Q 2014 was 2.59 cents, an increase of 8.8% from the 2.38 cents for the corresponding period a year ago.

Lian Beng Group, the construction company cum developer, said it achieved record revenue and net profit of $753.9 million and $127 million respectively for its financial year ended 31 May 2014 (FY2014).

Ascendas REIT has announced a distribution per unit of 3.64 cents for the first quarter of this year. This is 2.5% higher than a year back.

Tiger Airways Holdings said on Thursday its first-quarter net loss reached $65.2 million from $32.8 million a year earlier, hurt by one-time costs related to the shutting down of its Indonesian venture.

Keppel Land said it posted a 12.3% rise in earnings for the 2Q ended June compared to a year ago. Net profit for 2Q came in at $107 million led by steady overseas sales offsetting a weaker Singapore residential market.

Shareholders of loss-making Pteris Global has voted in favour of a reverse takeover (RTO) deal that will see China International Marine Containers (CIMC) gain a controlling interest in Pteris.