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Stocks In Focus (AusGroup, UE, Yangzijiang) – 05/07/13
AusGroup Bags Contract Worth A$36m
AusGroup’s subsidiary, AGC Industries (AGC) announced that they have been awarded a three-year plus three-month extension contract with Alcoa of Australia (Alcoa) worth approximately A$36 million. The initial scope of work covers calciner overhaul maintenance services which include refractory, access, and mechanical trade work as well as general calciner repair work. These services will be done in refineries located at Kwinana, Pinjarra and Wagerup. Commenting on being awarded the extension contract since its service to Alcoa in 2007, AGC gives credit to its systems and advanced methodologies that has provided their clients with safe and efficient delivery of refractory maintenance, updates and expansions services.
Significance: Despite the ongoing legal proceedings with Karara Mining, AusGroup has constantly been awarded new contracts showing strong indication of AusGroup’s consistency and competence in meeting customer requirement. With this contract award, AusGroup’s order book now stands at A$252 million.
UE Plans To Divest Its Investment In UE BizHub EAST
United Engineers (UE) announced the proposed $518 million divestment of the group’s build-to-suit (“BTS”) mixed-use development at Changi Business Park, known as UE BizHub EAST. United Engineers Developments (UED), a wholly owned subsidiary of UE, has entered into a conditional put and call option agreement with Viva Industrial Trust Management in its capacity as the manager of the proposed Viva Industrial Real Estate Investment Trust, concerning the divestment transaction. The divestment of UE BizHub EAST aims to free up resources within the company for new investment opportunities, allowing UE to streamline and consolidate its property portfolio, thereby maximising its overall returns. Net proceeds from the divestment will be utilised to repay bank borrowings, pay for the shortfall in the net rental income commitment, provide working capital for the group and/or fund other investment opportunities.
Significance: Upon completion of the divestment, UED will realise an estimated net divestment gain after tax of approximately $86.7 million after taking into account shortfall in the net rental income commitment for the property and transaction costs.
YZJ Secures US$414m Worth Of New Contracts
Yangzijiang Shipbuilding (Holdings) (YZJ), a Chinese shipbuilder, announced on 4 July 2013 to have secured new shipbuilding contracts for 15 vessels with an aggregate contract value of US$414 million. The new contracts secured comprise of six units of 82,000 deadweight tonnage (DWT) bulk carriers, eight units of 64,000 DWT bulk carriers and one unit of 94,000 DWT transload vessel. Vessels in the contracts are scheduled for deliveries in the period from 2015 to 2016, and therefore will not have any significant impact on the earnings of the group for the financial year ending 31 December 2013. In 1H13, YZJ had secured a total of 27 effective shipbuilding contracts with an aggregate value of US$1.01 billion, bringing the year-to-date contract win to 42.
Significance: YZJ currently has a total of 51 options entered with its respective buyers and it is confident that more options will be exercised in 2H13. However, investors should remain cautious considering the slowdown in demand for global shipping.
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