United Overseas Bank Sees Loans To Chinese Firms Surge
United Overseas Bank (UOB) saw a six-fold increase in loans in the last six months to Chinese companies venturing beyond the mainland. According to UOB’s commercial banking executive director Sam Cheong, these hundreds of Chinese firms were investing in South-East Asia, leading to the loans to them surging to billions in Singapore dollars from a few hundred millions. Many successful Chinese companies are looking for new markets to sustain their growth especially since China’s economy show signs of slowing with the World Bank expecting a weaker GDP showing of 8.2 percent this year from last year’s 9.2 percent. Furthermore, China has accumulated a lot of foreign reserves and will actually find outlets to invest their excess foreign reserves. The trend of Chinese companies expanding into South-east Asia has not escaped OCBC Bank, which also saw a more than two-fold increase in our loans to these Chinese companies over the last two years.
Significance: Notably, in 1Q12, China’s outbound direct investment (ODI) jumped 94.5 percent year-on-year to US$16.55 billion and it is expected to continue rising as China’s 12th Five Year Plan for 2011 to 2015 sees ODI growing at 17 percent annually to a total of US$560 billion. UOB is hoping to ride on this wave of ODI from China.
Global Premium Hotels To Buy Fragrance Heritage For $25.1m
Global Premium Hotels (GPH) is planning to spend $25.1 million from its initial public offering (IPO) proceeds and working capital to acquire Fragrance Heritage (FH) from its parent, Fragrance Group. The purchase consideration is equivalent to FH’s net asset value of $992,382 as at 31 March, and a sum of $24.1 million as the valuation surplus. The property comprises of a freehold development site on Tyrwhitt Road, which GPH intends to develop a hotel. Notably, two independent valuers appointed by FH, as at 24 May, highlighted that the estimated open market value of the Tyrwhitt Road property is $78 million. Upon the completion of the proposed hotel development, the gross development value is estimated at $150 million. The acquisition is subject to the approval of GPH shareholders at an extraordinary general meeting. Earlier, GPH had reported its 1Q12 with net profit rising 46.9 percent to $6.36 million on the back of a 28.8 percent increase in revenue to $14.87 million.
Significance: While the acquisition is not expected to have any material impact for FY12, the completion of the proposed hotel – which could take up to 2.5 years – will contribute positively to the consolidated net tangible assets or earnings per share of GPH.
Japan Foods Holding Posts 49.7% Jump In FY12 Net Earnings
Leading Japanese restaurant chain in Singapore, Japan Foods Holding (JPH), reported a 49.7 percent jump in net profit to $3.7 million for the financial year ended 31 March, against $2.5 million in the previous year. Its strong performance was achieved on the back of an 11.2 percent growth in revenue from $50.4 million in the fiscal year of 2011 to $56.1 million. In line with the increase in revenue, JPH’s gross profit also rose by 12.3 percent, with gross profit margin increasing from 77.5 percent to 78.3 percent arising from better control of raw material costs, elimination of non-performing brands, as well as the appreciation of the Singapore dollar against the Japanese yen and the Hong Kong dollar. In April 2012, JPH also established a $450,000 noodle production facility in its existing central kitchen facility to enable the company to gradually reduce its reliance on noodle suppliers, manage costs more effectively and enhance its competitive strengths.
Significance: Going forward, JPH’s measures to control raw material costs and strengthen its restaurant portfolio by eliminating non-performing brands, and expanding and diversifying more popular ones through brand extensions would likely enable it to sustain its financial performance.