Singapore Daily Bulletin – 16/11/12

Battle For F&N Continues; OUE Bids $9.08/Share
The battle for Fraser and Neave (F&N) continues as a consortium led by Overseas Union Enterprise (OUE) bid $9.08 per share for the conglomerate. This offer, which trumps the $8.88 offer by Thai billionaire Chareon Saravadhanabhakdi, is worth $13.1 billion and has received the irrevocably undertaking of Kirin Holdings that owns around 14.8 percent of F&N. Given the going through of the deal, Kirin has agreed to make a $2.7 billion offer for F&N’s food and beverage business which will leave OUE with F&N’s property and publishing business. To recap, OUE had previously made a $1.4 billion offer for F&N’s serviced apartment arm Frasers Hospitality that was rejected by F&B board.

Significance: Chareon, who already owns approximately a third of F&N, has on last week extended his offer for a second time to 22 November. Considering that F&N’s financial advisor noted his bid to be near the low end of estimated valuation of $8.30 to $11.20 per share and a rival bid, Chareon may possibly tender a higher bid in the coming days.

China Paper 3Q12 Profit Falls 37% On Slowing Chinese Economy
China Paper Holdings, a vertically-integrated paper and paper chemical products manufacturer in China, saw its profit fell 37 percent to Rmb14.1 million in 3Q12 ended 30 September. The fall came in face of lower revenue and gross profit, which declined 7.2 percent to Rmb238.8 million and 28.7 percent to Rmb36.9 million respectively. Specifically, it registered lower average selling prices of its products in light of the slowing China economy despite an increase in its average cost of sales. Also, it experienced lower production volume due to intermittent suspension of production at one of its facilities following implementation of power rationing by the government. To achieve a stable production process, it raised $32.3 million via a 1-for-1 rights issue to finance the construction and operation of its own power generation facility.

Significance: New 50,000 tonnes per annum of uncoated paper and new 10,000 tonnes per annum of paper stationary have commenced trial production in the quarter. Given a stable power supply source from its own power generation facility, it will enhance its competitiveness with greater economies of scale.

Ocean Sky Reaps Fruit From Cost Management Initiative, Profit Up 14% In 3Q12
Ocean Sky International reported a 14 percent rise in profit to US$5.1 million for 3Q12 ended 30 September. The improved performance came despite an 11.9 percent fall in revenue to US$94.1 million in light of reduced freight on board unit prices. Commendably, gross profit registered 17.2 percent increase to US$16.3 million due to continued effort in managing raw materials, reduce wastage for improved production efficiency, increased sales of higher margin items and goods sold on delivered duty paid terms. For the nine-month period, revenue declined 9.5 percent to US$199.3 million while profit rose 15 percent to US$9.2 million.

Significance: Amidst a macro environment that is expected to be weak and challenging, Ocean Sky will continue to focus on managing and optimising resources effectively to improve its overall production and operational efficiencies.