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Stocks In Focus (AusGroup, Enviro-Hub, Yongnam) – 26/06/13
AusGroup’s Subsidiary Commences Legal Proceedings Against Karara Mining
AusGroup’s subsidiary, AGC Industries, has issued a Writ of Summons against Western Australia-incorporated Karara Mining (KML) in the Supreme Court of Western Australia. AGC is claiming against KML’s failure to make progress payments amounting to approximately A$43.5 million and for a failure by KML to recognise additional corporate overhead and profit of A$11.2 million in performance incentive for achieving certain milestone dates (COP) for structural, mechanical and piping installation works carried out by AGC on KML’s Karara Iron Ore Project in Western Australia. Despite previous claim requests by AGC, KML has been withholding payment since March 2013, leaving AGC no option but to commence legal proceedings. In addition to the Writ, AGC has been granted an interim injunction to prevent KML from converting to cash an A$8.8 millioin performance security bank guarantee until further order from the court.
Significance: Managing director and chief executive officer of AusGroup, Laurie Barlow, said: “AGC is confident that it has fulfilled its obligations under the contract and firmly believes it is fully entitled to the progress payments and COP payment from KML for the services provided and which can be supported when the matter proceeds to a hearing and formal decision.”
Enviro-Hub Acquires F2S1 For $164.5m
Enviro-Hub Holdings, through a recently formed joint venture, EH Property & Investments, has moved to purchase F2S1 Investment (F2S1). F2S1 is engaged in the business of investment holding of real estate and real estate-related investments and currently holds the property, PoMo, located along Selegie Road. PoMo, with approximately 177,381 sqaure feet of net lettable area, is a nine-storey commercial building with a basement level comprising of four and six floors of retail and office space respectively. Based on the FY12 financial statements of F2S1, the net profit after tax is approximately $7.4 million. For illustrative purposes, the final consideration would be $164.5 million from an initial consideration of $336 million, after deducting the bank liabilities ($165.8 million) and the net other asset value ($5.7 million) of F2S1. Based on the latest available valuation dated 11 January 2013, the market value of the unexpired leasehold interest in PoMo is $273 million. The acquisition is expected to be completed on 18 October 2013.
Significance: Enviro-Hub’s existing core business include recycling, recovery and refining of precious metals as well as plastic to fuel refining. The acquisition will place the firm in a better position to achieve long-term sustainable growth across diverse economic conditions.
Yongnam Secures $27m Subcontracts In Hong Kong
Yongnam Holdings’ subsidiary, Yongnam Engineering, has won two new specialist civil engineering subcontracts worth HK$166 million ($27 million) for works in Hong Kong. In the first subcontract, Yongnam will support the main contractor, Chun Wo-CRGL-MBEC Joint Venture, on the Hong Kong Express Link Central-Wan Chai Bypass Tunnel project. The scope of works, expected to be completed in April 2014, includes approximately 2,000 tons of steel for the construction of temporary steel bridges between the Tunnel’s North Point Section and Island Eastern Corridor Link. This is Yongnam’s second contract win, having previously secured a subcontract for earthwork lateral support works from the main contractor. In the second subcontract, which is expected to completed by 2016, Yongnam is tasked to design, supply, install and dismantle approximately 10,000 tons of struts at two Hong Kong Mass Transit Railway stations for the Shatin to Central Link for the main contractor, Samsung-Hsin Chong Joint Venture. Both projects are expected to contribute positively to Yongnam’s financial performance for FY13.
Significance: Chief executive officer of Yongnam, Seow Soon Yong, said: “We are pleased to have awarded these two subcontracts, demonstrating our continued competitiveness in the Hong Kong market, and underpinning the group’s solid track record in specialist civil engineering projects.”
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