Indian Communication Giant To List Business Trust On SGX
India’s Number 2 mobile operator, Reliance Communications, has received “in-principle” approval from the Singapore stock exchange (SGX) for a potential US$1.4 billion share sale of its undersea cable unit. The unit is expected to be listed as a business trust and proceeds from the sale will most probably be diverted to lowering the debt load of its parent company. Beleaguered Reliance Communications is currently struggling under debts of around US$6.9 billion. To add to its sticky situation, it has posted declining earnings in the past 10 quarters as it grapples with fierce competition domestically. The IPO, the biggest in Asia this year, could be launched within the current quarter. However, successful deals have not graced Reliance Communications often. A separately planned IPO for its telecoms tower unit had failed to take off and a planned sale of the business has been encumbered for close to two years.
Significance: The planned IPO by Reliance Communication’s undersea cable unit comes at a time when SGX’s IPO pipeline is seen to be growing under the direct stewardship of chief executive Magnus Bocker.
Genting’s Perpetual Securities To See Hot Demand From Investors
Genting Singapore is expecting to receive robust demand for its retail perpetual securities as it seeks to raise around $500 million. The public offer for Genting’s $500 million perpetuals comes with an interest of 5.125 percent as well as an option to upsize the total offer to $700 million if oversubscribed. However, some analysts feel that this issuance of perpetuals could erode earnings per share for existing shareholders. Analysts seem question the timing of this recent fund raising by Genting as it had only just reaped around $1.8 billion from its first perpetual issuance in March-2012. Duetsche Bank notes that Genting had already ended FY11 with a net cash position while operations at its local casino are expected to reap in cash of around $0.9 billion in FY12. Genting had suggested that the proceeds from the current fund raising exercise will be channeled to possible acquisitions as well as investments in new projects to grow its gambling and hospitality business in Asia.
Significance: The general public could view this latest perpetual issue as an alternative to bank deposits. However, at the other end of the spectrum, existing shareholders might begin to feel the pinch as interest payments erode into future possible dividends.
CSC Bags MRT Foundation Contract
CSC Holdings announced on 10 April 2012 that it had clinched a new foundation contract for a Mass Rapid Transit (MRT) station under the Tuas West Extension project. The contract entails the construction of barrette piles for a MRT station. The new station will be one of four other stations that will help to improve MRT connectivity in the Tuas area once it is completed. According to the LTA, the Tuas West extension is expected to serve 100,000 commuters daily when completed. Construction work is expected to commence in April-2012 and is projected to complete by 1H13. This will be the fifth contract that has been secured by CSC in six months for the construction of foundation piles for MRT stations. The other four contracts were for four MRT stations under the Downtown Line 3 MRT project. As at 9 April 2012, CSC’s order book stands at around $270 million with the bulk of revenue recognition to be expected in the next few quarters.
Significance: Along with this latest MRT contract win, CSC has secured several other foundation contracts from the residential and industrial sector. These new contracts are worth in excess of $100 million and could help boost the firm’s performance in FY12 and beyond.