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Singapore Daily Bulletin – 04/02/13

OEL’s IPO Drives Interest In Raffles Education’s Stock
A four month high was seen for Raffles Education (RE) last week as interest in an impending listee, Overseas Education (OEL), which is scheduled to trade this coming Thursday, 7 February 2013, also lifted the interest of education player, RE. Come Thursday, OEL will be one of the latest contenders among the education providing players. Over 125 million shares will be offered at $0.48 apiece, which translates into a Price Earnings multiple of 6.6 times. OEL also stated in its prospectus that it intends to pay out at least 50 percent of its net profit after tax for each financial year. On the other hand, RE has moved on from a rough patch over the past couple of years. It posted a loss of some $85 million for FY12, largely due to write offs in Vietnam and China. Despite that, RE seems to be on a turnaround path. Its 1Q13 profit showed a profit of $5.4 million and a revenue figure of $32.8 million. RE’s trajectory also seems positive, evidently seen in its expansion moves over the past two years such as expanding its ex-China footprint, the new campus in merchant square to growing its Oriental University City in Beijing.

Significance: Whether or not the interest in OEL will continue to boost RE’s stock interest remains largely speculative as of current. However, as the largest private education group in the Asia-Pacific with 22,000 students in 33 colleges in 30 cities across 13 countries, RE is likely to remain on radar screens of investors.

Rowsley Seals Two Deals It Needed To Transform Into Property Player
Two deals which will transform Rowsley into a property player has been sealed. This comes after it announced its plans in December 2012 to acquire RSP Architects Planners & Engineers (RSP) and a 9.23 hectare plot of land in Iskandar in Johor. Sale and purchase agreements have been signed yesterday on 3 February 2013 by Rowsley to acquire RSP in an all-share deal for $187 million. The Iskandar-located plot of land will also be acquired from Malaysia’s Vantage Bay in an all-share deal for $358 million. Once all the necessary shareholder and regulatory approvals for the deals are received, Rowsley will reward existing shareholders with a free bonus of two warrants for every existing share held. Each warrant will have an exercise price of $0.18 per share. Rowsley will be issuing 1.25 billion shares at $0.15 a share to RSP and 2.4 billion shares for the freehold land located within the Iskandar Development Region from Vantage Bay.

Significance: The land is set to be used for developing it into an integrated mixed-use township with a major shopping, entertainment, and residential complex. It will also house hotel, commercial and office developments. This therefore underscores the potential for superior revenue inflow expected of this project after it has been set up.

Double Digit Earnings Growth Expected For Three Local Banks
Underscoring the resilient environment in which the three local banks operate in, 2012 core earnings is likely to see double digit growth. This is even after taking into consideration of the exclusion of one-off gains of $1.58 billion. The $1.58 billion largely reflects the one off sales of assets by OCBC Bank (OCBC) and DBS Group Holdings (DBS). A $1.13 billion divestment gain from the sale of its stakes in Fraser & Neave and Asia Pacific Breweries in 3Q12 was made by OCBC, while DBS’ sale of the 10.4 percent stake in the Bank of the Philippine Islands to Ayala Corporation will net DBS with a gain of about $450 million against the carrying value of the investment. Daniel Lau, lead analyst at CIMB bank said that there could be some surprises on the upside as loans growth in December was strong, and banks should continue to enjoy strong fee income from the sale of wealth management products. Data from the Monetary Authority of Singapore also showed that bank loans in December 2012 rose a faster 17 percent as compared to that of December 2011. The three banks are expected to report their results this month, with DBS on 6 February 2013, OCBC on 15 February and United Overseas Bank on 27 February.

Significance: DBS Vickers said asset quality is expected to remain robust in the Banks’ sheets. Coupling this with the driving forces of non-interest income and low provisions as a result of the banks’ stable credit quality, full year 2012 earnings are estimated to grow at a strong 18 percent.