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Stocks In Focus SG (DBS, Japan Foods, Universal Res) – 12/11/13
DBS Exiting The Philippines
DBS Bank, a subsidiary of DBS Group Holdings (DBS), will divest its 9.9 percent stake in The Bank of the Philippine Islands (BPI) to GIC and Ayala Corporation (AC) for $850 million in cash. DBS holds its interest in a joint venture (JV) company with AC and will dispose its stake in the JV company, as opposed to a sale of BPI shares. The sale price represents a 10.5 percent discount to the closing share price of BPI on 8 November 2013, the last trading day prior to this announcement. The divestment will be transacted in two equal tranches in 4Q13 and 1Q14. DBS stands to realise a net gain of $447 million over the carrying value of the investment.
Significance: The proposed sale follows a partial divestment in BPI carried out by DBS in October 2012 and is in line with the firm’s focus on its core markets of Singapore, Hong Kong, China, Taiwan, India and Indonesia.
Japan Foods 1H14 Earnings Jump 27.6%
In spite of a marginal increase in revenue for the six months ended 30 September 2013, Japan Foods Holding posted a 4 percent increase in gross profit to $25 million, as compared to $24 million for the corresponding period last year. This was as a result of the group’s 1H14 gross profit margins inching up by 1.7 percentage points to 80.8 percent, arising from cost savings generated from better efficiency on the use of raw materials as well as the appreciation of the Singapore dollar. The group managed to reduce its other operating expenses by 18.7 percent to $0.7 million which was mainly attributed to the decreased amount of the write off of plant and equipment of $0.4 million compared to last year. However, this was entirely offset by a $0.3 million increase in administrative expenses due to additional staff costs imposed from the group’s expansion and costs associated with the issuance of performance share scheme shares. Consequently, the group saw a 27.6 percent jump in 1H14 earnings to $3.8 million.
Significance: Owing to its stellar performance in 1H14, Japan Foods has proposed up to a 57.8 million bonus shares issue on the basis of granting one bonus share for every two existing ordinary shares in the capital of the company. The bonus issue will encourage trading liquidity of the shares, greater participation by investors and broaden the shareholder base of the company.
Universal To Enter Indonesian Petroleum Sector
Universal Resources And Services (Universal), previously known as Sky China Petroleum Services, has entered into a memorandum of understanding with Calgary Petroleum to procure a 57.6 percent stake in the latter’s subsidiary, Hongkong New Wing Energy Development Company (HEDC). The proposed purchase will lead to a 49 percent equity interest in Challedon Service, a unit of HEDC. Challedon possesses a contract to carry out petroleum operations in certain oil blocks in Menduwai, Indonesia. The contract area is located in one of the world’s most prolific oil fields with substantial potential exploration prospects. Following the proposed acquisition, Universal would have the option, within the next three years, to increase its stake in HEDC up to 85 percent.
Significance: Since the disposal of Universal’s oil transportation business, the firm has been on the lookout for new profit avenues in line with its long term growth strategy. The proposed purchase will position Universal in a strategic spot to diversify its operations geographically beyond the People’s Republic of China.
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