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Singapore Daily Bulletin – 03/01/13

CapitaLand Restructures Business Units
CapitaLand said that it will simplify its corporate structure into four main business units by consolidating most of its Singapore and China operations into two entities. After its organisational change, the Singapore-based company will comprise CapitaLand Singapore, CapitaLand China, shopping-mall developer CapitaMalls Asia and serviced-apartments arm The Ascott Ltd. In the statement, CapitaLand said it will place most of its domestic operations, including residential, commercial, and fund management businesses, into CapitaLand Singapore, which will be headed by Wen Khai Meng, currently chief executive of CapitaLand Financial.

Significance: The change in CapitaLand’s corporate structure will help to enhance its competitiveness as the simplified structure will allow the company to leverage and optimise its resources to improve efficiency, economies of scale and shareholder returns.

DBS Remains Hopeful On Danamon Deal
More than eight months after it first announced the deal to acquire Temasek Holdings’ 67 percent stake in Danamon for $6.2 billion and a cash offer of $2.9 billion or 7,000 rupiah per share for the rest of the bank, DBS Group Holdings is hopeful that its bid is still on track after its plan was attacked by Indonesian politicians and other local interests. Bank Indonesia (BI) had said that it would not approve DBS’ bid until after new ownership bank rules and other regulations came into effect. New rules and regulations were announced in July and November, none of which on paper at least would have blocked DBS’ ambitions. DBS spokeswoman Karen Ngui said yesterday that “we’re guided by BI”, repeating the bank’s official view when asked for an update on the acquisition.

Significance: While the outcome of the deal remains hanging, DBS’ investors, however, seemed to have shrugged off developments and are mainly neutral on the deal although some raised concerns about overpaying and dilution. Nonetheless, DBS remains attractive amongst brokerage houses like Nomura for its international play and its exposure to North Asia.

Olam Clears Doubt Following The Muddy Waters Saga
Olam International broke its month-long silence as it sought to clear the fog of doubt. It noted that its balance sheet is the strongest since its listing in 2005, and again reiterated that the issues raised about the company had no merits. In a 274-page “offer information statement” relating to its rights issue – which includes a letter to shareholders to update them on recent developments – the firm said it had formed a sub-committee to do an internal review after its first comments had been published and had “wanted to take the requisite time” to conduct a review before responding to Muddy Waters’ claims in public. Olam said its investments would take time and ongoing expenses before generating positive cashflows. “A negative cash flow is acceptable as long as value is being built and there is a clear pathway to the point where the business will start to generate positive free cash flows.” The firm further emphasised that its rights issue had been done so as to shore up confidence among its stakeholders, and not for liquidity reasons.

Significance: Olam’s shares opened at $1.665 and soared above the $1.70 mark today after it addressed the questions about its gearing level and rights issue, its business model, the alleged accounting discrepancies and the specific acquisitions raised by Muddy Waters.