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Stocks In Focus SG (COSCO, Rotary, SPH) – 10/07/13
COSCO Secures Contracts Worth US$216m
COSCO Corporation (Singapore) announced a series of contracts won through its subsidiaries, COSCO (Zhoushan) Shipyard and COSCO (Dalian) Shipyard, with an aggregated value of US$216 million. These contracts consist of an oil tanker of 22,000 deadweight tonnage (dwt) and a stinger barge, to be delivered by fourth quarter and first quarter of 2014 respectively. In addition, four contracts on the construction of four 111,000 dwt tankers with delivery expected to commence from first half of 2015. The latter contracts provide the ship owner the option to declare up to another two contracts for the construction of the same tankers.
Significance: Coming off a disappointing 1Q13 financial result, COSCO continues to win high value contracts reiterating its competitiveness in the market since the beginning of the year. However, the falling net profit margin mainly due to an increase in interest expenditure for the higher bank borrowing deployed brings uncertainty to the profitability of the company in the near term.
Rotary’s $60m 2Q13 Contract Wins Show Signs Of Gradual Recovery
The leading engineering, procurement, construction (EPC) and maintenance services specialist contractor, Rotary Engineering, has won approximately $60 million worth of contracts in Singapore for 2Q13. The largest contract worth nearly $30 million was from an international specialty chemicals company to provide electrical and instrumentation works for an entire plant in Jurong Island. The other larger contract worth $17 million is awarded by a repeat oil major customer thought to be Shell and involves the provision of piping and structural works in a new processing unit in Jurong Island producing high purity chemicals. Rotary’s chairman and managing director, Chia Kim Piow said: “We are glad to win a steady stream of contracts in Singapore as the demand for EPC of storage and distribution infrastructure remain robust.” He added “Rotary is on track for steady growth and will bid more contracts in the markets it operates to build up their orderbook.”
Significance: This brings Rotary’s total contracts won this year well exceeding $400 million. Rotary is currently working on two major projects, namely the US$250 million EPC deal for the Fujairah Oil Terminal in the United Arab Emirates and the $300 million Pulau Busing oil terminal expansion in Singapore. Both projects are scheduled to be completed within the next two years.
SPH REIT IPO Plans To Raise Over $500m
SPH REIT, Singapore Press Holding Real Estate Investment Trust, has lodged its preliminary prospectus, indicating that approximately 308.9 million units will be made available under the offering tranche at $0.85 cents to $0.90 cents each, subjected to an over-allotment option of 56 million shares. The expenditure of the listing will be financed with its credit line facilitates with the estimated gearing ratio of SPH Reit to be between 27.3 percent and 31.3 percent. The net cash proceeds, estimated to be around $1 billion, will mainly be used to pay SPH for the acquisition of two properties in SPH REIT’s portfolio, value at around $3.1 billion. Commenting on this, SPH revealed its plan to use the amount for its working capital to grow its business and a one-time distribution of special dividend of 18 cents per share to its shareholders. The estimated yield of the REIT is between 5.4 percent to 5.5 percent, without any income support from the vendor of Clementi Mall in considerations.
Significance: The public subscription is expected to be about 84 million units while for the international placement tranche is expected to be about 224.9 million units. At a reasonable price of $0.85 to $0.90 each, the IPO is in line with SPH’s earlier expectation of raising $540 million.
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