Olam Invests US$240m In Sugar Milling Asset
Olam International announced plans to invest in its first sugar milling asset in Brazil, amounting to US$240 million as part of its aggressive acquisition strategy in a bid to raise net profit after tax to US$1 billion by 2016. It entered an agreement to acquire Brazilian sugarcane miller and processor Usina Acucareira Passos (UAP) for US$128.8 million and will invest another US$111.5 million over the next five years in capital expenditure to improve the cane growing and milling capacity of the mill. UAP’s crushing capacity is expected to reach three million tonnes per annum from the current 1.75 million tonnes and it also offers a number of structural advantages which can give Olam an attractive cost competitive position. With this investment, Olam has strengthened its commitment to the agricultural sector in Brazil where it has already built strong leadership positions in coffee and cotton.
Significance: While the mill is currently loss-making and will be slightly earnings dilutive in the first year, it is expected that the mill can eventually deliver earnings before interest, tax, depreciation and amortisation margins of more than 30 percent. This could allow Olam to gain a potentially high-yielding asset.
Metro Holdings’ FY12 Earnings Jumps 12.2%
Property development and investment group, Metro Holdings posted a 6.7 percent jump in revenue to $187 million while earnings increased 12.2 percent to $91.9 million for its full year ended 31 March 2012. Metro noted that the revenue was driven by higher turnover from its core businesses in property and retail divisions, where the higher rental income achieved more than compensated the marginal 1 percent decline in turnover from the fall in value of the Chinese Yuan against the Sing dollar. Earnings were boosted from the gain in the disposal of Metro City Beijing, which more than offsets the lower fair value gains on its investment properties and an impairment charge. Metro’s balance sheet remains strong with a cash position of $579.6 million in FY12, rising 42.1 percent from $407.8 million in FY11. It declared a final dividend of 2 cents and special dividend of 4 cents, translating to a total payout ratio of 54.1 percent.
Significance: With the disposal of Metro City Beijing, rental income is likely to decline. However, as the joint venture had incurred a marginal operating loss previously, the impact to its bottom line is likely to be minimal. Furthermore, Metro aims to leverage on its track record in retail and strategic partnerships to boost its revenue stream to facilitate sustained profitability and improved yield.
SingXpress Land Reports Lacklustre FY12 Results
SingXpress Land’s FY12 earnings sank into the red on the back of a 70 percent fall in revenue to $8.9 million. Revenue was mainly derived from rental income instead of sales of properties recorded in FY11. Notably, no revenue from the Charlton Residences was recognised this year although the company completed the pre-sales of all 21 units in view of the preliminary stage of construction progresses. However, it expects to recognise approximately $30 million of the revenue from Charlton Residences in FY13, while the balance will be over FY14 and FY15. Nevertheless, with the unveiling of the company’s strategy of adopting an investment banking approach for its development and re-development of properties in Singapore, it has since stepped up efforts in the local market. It announced two public housing developments at Pasir Ris (under the Design, Build and Sell Scheme) and an executive condominium project in Tampines.
Significance: The company is positive that the revenue from the Charlton Residences will contribute to its financial performance as well as its first full year roll out of it new strategy would enhance return on equity from the better managed risks.