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Stocks In Focus (DBS, Keppel Corp, Keppel REIT, Cosco Corp) – 22/05/13
DBS Wins Approval For Smaller Stake Than It Had Sought For Danamon
Singapore’s largest bank, DBS Group (DBS), has met with a mixed bag of success pertaining the year long effort in view of its takeover bid of Indonesia’s PT Bank Danamon (Danamon). Instead of a full takeover, Indonesia’s central bank, Bank Indonesia, will allow DBS to acquire up to 40 percent of Danamon. Governor Darmin Nasution of Bank Indonesia, who is stipulated to step down from his post on 23 May, expressed that approval for any larger stake in Danamon is dependent on whether the Monetary Authority of Singapore (MAS) grants Indonesian bank easier access to the Singapore market. In April 2012, DBS had proposed a full takeover of Danamon, where it offered a deal worth some US$6.77 billion to buy Singapore investment company Temasek’s 67 percent stake and the rest from the open market for 7,000 rupiah each.
Significance: Darmin Nasution’s comments threaten to be a potential rough patch for DBS’s plans to move into one of the most under banked and most profitable markets in the region. Also significantly influential on this would be what MAS would do to open some parts of the financial sector in Singapore to Indonesian lenders.
Keppel Corp To Divest 6.7% Stake In Keppel REIT
Keppel Corporation (Keppel Corp) entered into an agreement with Goldman Sachs, to sell off a 6.7 percent stake in Keppel Real Estate Investment Trust (Keppel-REIT). Keppel Corp will be receiving $279.9 million for the sale of 180 million units at $1.555 apiece which will account for 6.7 percent stake in Keppel-REIT to Goldman Sachs. The sale of Keppel-REIT at $1.555 was a 3.1 percent discount to the market price of $1.605 which will further decrease Keppel Corp’s holding in Keppel-REIT to 51.5 percent following the sale of 75 million units of Keppel-REIT in March. Keppel-REIT currently owns the highest-quality office portfolio among office Singapore Office REITs including prime office buildings such as Ocean Financial Centre, One Raffles Quay and Marina Bay Financial Centre Towers 1 and 2 which makes up 80 percent of its portfolio by net leasable area. With its prime portfolio, Keppel-REIT attracted major investors such as Temasek Holdings and Capital Group which owns a 2.8 and 1.33 percent stake in Keppel-REIT respectively.
Significance: Attracting major investors such as Goldman Sachs can be viewed as a value affirmation ofKeppel-REIT and a positive outlook to its industry despite divestment by Keppel Corp. However, a lower than market price purchase could mean that investors driven by yield might have overvalued the REIT.
Contract Worth More Than Rmb500m Secured; Cosco Corp
COSCO (Dalian) Shipyard Co (Cosco Dalian), subsidary of Cosco Corp’s 51 percent owned subsidiary of Cosco Shipyard Group (Cosco Shipyard), has bagged a contract valued some Rmb500 million from a Chinese ship owner to build one 28,000 CBM LNG Vessel. Scheduled for delivery in 1Q15, this successful contract comes on the back of a separate contract awarded to COSCO (Zhoushan) Shipyard Company, a subsidiary of Cosco Shipyard, two weeks ago with a Malaysian ship owner to build a floatover launch barge valued over US$23 million with an expected delivery scheduled in 4Q13. In a press release where Cosco Corp announced its 1Q13 financial results, it noted that new orders received in its first quarter already amounts to US$254 million.
Significance: The contracts shed a positive light on the firm after its recent financial announcement for 1Q13 where net profit decreased by 65 percent. The award further strengthens Cosco Corp’s presence in China which accounts for 98.1 percent of its sales generated.
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