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Stocks In Focus SG (China Minzhong, Cordlife, KS Energy) – 27/08/13

China Minzhong Falls 47.8% In A Repeat Of Olam Saga
Shortseller Glaucus Research Group sent shares of China Minzhong plunging by more than half after publishing a 49-page report accusing the company of fraud and financial irregularities. China Minzhong shares fell from $1.015 to its lowest at $0.50 before trading was halted at 11.15am yesterday. Its last traded price at $0.53 was down 47.8 percent, and wiped out more than $300 million from the company’s market capitalisation. Glaucus had cast doubts on the company’s balance sheet and alleged that sales were boosted artificially through suspicious capital expenditures and increasing receivables, amid abnormal profit margins and negative free cash flow. It also alleged that China Minzhong had already faked sales to its top two customers as well as payments to its top supplier at the time of its listing in 2010.

Significance: China Minzhong is in the process of reviewing the report by Glaucus and announced that it will take all necessary steps to defend its reputation. While Glaucus’s attacks on firms have been hit and miss, more clarification by China Minzhong on the questions raised will be needed.

Cordlife’s FY13 Records 94.7% Jump In Net Profit to $13.5m
Cordlife Group announced that the group recorded a 94.7 percent year-on-year (y-o-y) surge in its net profit of $13.5 million in FY13 from $6.9 million in FY12. The surge is mainly due to an increase in revenue of 14.6 percent to $34.7 million and an improvement of net profit margin excluding one-off items to 34 percent. The group maintains a healthy balance sheet with a strong cash position of $23.3 million and a low gearing ratio of 0.08. The group realised a compound annual growth rate (CAGR) of 15.7 percent and 12.7 percent for its increased profitability including and excluding one-off items respectively, and a 43.9 percent y-o-y growth in earnings per share to $0.058.

Significance: Cordlife has announced a $0.01 final dividend to be payable on 15 November 2013. The group shows strong confidence in the growth of its industry with projections made in a report by Deloitte & Touche Financial Advisory Services which expects the private cord blood banking segment’s incremental cord blood storage growth is projected at a CAGR of 9 percent from 2011 to 2015.

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KS Energy To Set Up Joint Venture With PDSI Worth Around US$130m
KS Energy announced a joint venture with PT Pertamina Drilling Services Indonesia (PDSI) to own and operate drilling rigs in Indonesia. The new joint venture company intends to take over the contracts held by the existing joint operations and tender for new contracts in Indonesia, thereby further reinforce the group’s position in the Indonesian oil and gas market. The jointly operated drilling rigs are valued at around US$130 million. KS Energy and PDSI currently jointly operate two high specification land rigs for a major oil company under a contract worth approximately US$98 million and an offshore jack-up rig in the West Madura oilfield under a contract worth US$87.6 million.

Significance: Indonesia is stepping up its efforts to increase its oil and gas production in the country. The partnership between PDSI and KS Energy will release many opportunities for the company to participate in the drilling activities in the country.



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