SGX boss needs new tricks to boost prospects, Q4 profit seen down

SINGAPORE - Singapore Exchange Ltd Chief Executive Magnus Bocker is facing a conundrum - how to boost trading volume when global markets are battling a slump.

Bocker, whose contract was renewed for three years in June, has launched initiatives such as installing the world's fastest trading engine and signing agreements with foreign bourses to enhance liquidity in Asia's second-largest listed bourse by value.

Few of these measures are close to paying dividends yet and analysts expect SGX to report a nearly 16 per cent fall in April-June profit on Friday, partly hit by a drop in securities-related revenue.

"We need to see securities volume come back. As long as it doesn't, the stock will hover around current levels," said Neo Chiu Yen, an equity analyst at ABN AMRO Private Banking. "The exchange has put all operational levers in place to capture a recovery in security volume." SGX is expected to report net profit of S$67 million ($53 million) for its fourth quarter, according to the average forecast from five analysts polled by Reuters.

A key tenet of Mr Bocker's plan to lift trading activity - which aside from boosting revenue would encourage more big-ticket initial public offerings - is to get more retail investors onto the city-state's stock market.

"We have a huge opportunity for us as a company to engage retail investors, to make them more active. It's good for the markets, it's good for their long-term savings and it's good for Singapore, for us, to become a much more attractive place to raise money," Mr Bocker told an investment conference this year.

"So, that is something that you'll see us doing a lot more in the years to come," said the Swede, who joined SGX from Nasdaq OMX in December 2009.

Despite Singapore having a large proportion of wealthy citizens - around 15 per cent of households are millionaires - less than 10 per cent of retail investors are active on the stock market, compared with 17 per cent in Australia and 25 per cent in Hong Kong.

SGX is trying to change that by giving retail investors a larger share of IPOs and running investor education courses. But it could struggle to make any major headway in the near term.

BULLET TRAIN VS LOCOMOTIVE

"Magnus is on a bullet train and the investors are on a locomotive," said David Gerald, chief executive of the Securities Investors Association of Singapore. "It will take time, another 10 years of investor education, and maybe we'll get there." This year, Bocker took direct responsibility for the listings business as part of overhauling SGX's structure.

SGX has been hit by weak global markets, which forced companies to pull listing plans. Last week, India's Reliance Communications shelved a planned Singapore IPO by its undersea cable unit to raise up to $1 billion.

SGX has denied it is in merger talks with London Stock Exchange, while last month Hong Kong stock exchange agreed to pay $2.2 billion to buy the London Metal Exchange.

SGX shares have risen 8 per cent this year, underperforming a 13 per cent increase in Singapore's benchmark index.

"Efforts to drive up trading liquidity, diversify revenue sources and attract quality listings will only bear fruit in the longer term," CIMB, which has a 'neutral' rating on SGX, said in a report on Thursday. "The near-term outlook remains gloomy." -- REUTERS

http://in.reuters.com/article/2012/07/26/singaporeexchange-earnings-forecast-idINL4E8IQ0Z120120726

Bank loans growth hits the skids

[SINGAPORE] Bank loans growth is gradually weakening, as persistent economic uncertainty curbs business activity and banks themselves lend carefully.

Analysts expect loans growth for the year to slow to the low teens, significantly below last year's 30 per cent growth, but add that such a pace remains healthy.

Singapore-dollar loans to businesses and consumers grew 7.6 per cent over the first six months of this year, down from 16 per cent over the same period last year.

Preliminary data for June from the Monetary Authority of Singapore, shows that loans and advances from domestic banking units grew a slower 1.7 per cent over the month, after a 2.2 per cent spike in May thanks to a sharp rise in business lending.

But lending growth in year-on-year terms has been on a downward trend since December last year, one which extended into June.

Consumer and business loans from the banks stood at $452.57 billion as at June 30, growing 20.9 per cent from a year ago - the slowest pace in more than a year.

Economists see the loans growth slowdown so far as cyclical. DBS economist Irvin Seah, for instance, sees no sharp dislocation in bank lending unless a blow-up in the eurozone results in global recession.

Mizuho Corporate Bank economist Vishnu Varathan says: "The moderation till mid-year has been pretty light, though it is likely that a combination of supply and demand factors will bring down loans growth further in H2."

On the demand side, CIMB research head Kenneth Ng thinks companies are probably delaying expansion plans as economic uncertainty mounts.

Business loans growth slowed to 2 per cent over June, from 3.1 per cent in May. Compared to a year ago, business lending grew a smaller 25.4 per cent too.

Over the first six months of this year, loans to businesses rose 8.9 per cent, less than the 22.3 per cent rise over the same period last year.

This is in line with the slowdown in global trade, and is also partly due to last year's high-base, as China's strong demand for credit spilled over to Singapore, says Bank of America Merrill Lynch economist Chua Hak Bin.

Demand for trade finance loans from China has since faded, says Mr Ng. "This arbitrage trade played on the strengthening renminbi and weakening US dollar, a trend that stalled this year as risk aversion and flight to safety contributes to the US dollar's strength, making such trade finance loans less attractive," he says.

More corporate bond issuances also point to the fact that larger companies have alternative sources of funds. "Singapore corporates are taking advantage of the very accommodative funding conditions to tap the bond market, especially given the increasing investor appetite for yield enhancement," says OCBC economist Selena Ling.

Consumer loans have held up better. Growth picked up to 1.4 per cent over the month of June, from 1.1 per cent in May. Over the first half of this year, consumer loans grew 6.5 per cent, slightly slower than the 8 per cent growth over the same period in 2011.

Property sales continue to fuel the growth of housing loans, a major component of consumer lending which picked up to 1.4 per cent over June, and sped up to 15.2 per cent in year-on-year terms too.

"Labour markets and wage growth are still healthy, so people are still using their credit cards to spend," said Barclays economist Leong Wai Ho.

On the supply-side, banks' hesitation to lend could also be behind slowing loans growth. Mr Ng thinks it is the key factor.

With the uncertain economic climate, banks are likely to be more watchful of clients or sectors which could run into financial difficulties and tweak their exposure accordingly, he said.

Mr Leong too, says banks may have turned slightly more cautious and selective, compounding the impact of cautious businesses. "Banks could be tightening collateral standards and getting more prudent with loan-to-value ratios," adds Mr Varathan.

Loan growth may also be restrained by slowing deposit growth, says Dr Chua. In year-on-year terms, deposits growth has weakened all this year till June, when it rose slightly to 8.2 per cent.

Singapore's three local banks, due to report earnings in coming weeks, warned earlier this year that loan growth will slow to the low teens in 2012.

Phillips Securities Research banking analyst Ken Ang says that the three have remained careful, avoiding increased lending to troubled industries or borrowers. He expects overall loans to register low double-digit growth for the year, similar to Mr Ng's 12-15 per cent forecast.

Less optimistic is DMG & Partners analyst Leng Seng Choon, who expects loan growth to drop to 10 per cent. But in a spread reflective of macro uncertainty, other forecasters such as Mr Varathan and Mr Leong expect loan growth of about 20 per cent this year.

http://www.businesstimes.com.sg/premium/top-stories/bank-loans-growth-hits-skids

Spanish borrowing costs hit new historic high

MADRID - Spanish borrowing prices hit a new historic high on Tuesday after a second region said it too may seek rescue aid, roiling world markets already hit by a surprise ratings warning to Germany.

The Spanish stock market plunged for a third day, falling by 3.58 per cent to its lowest close since April 2003. Other markets limited their losses, but fears that Madrid will soon need a full-blown bailout loomed large.

Spanish and German finance ministers sought to contain such fears, saying that Spain's soaring borrowing costs do not correspond to its economic strength or the "sustainability of its public debt." The joint statement by Wolfgang Schaeuble and Luis de Guindos after talks in Berlin followed another statement from Madrid reportedly on behalf of Spain, France and Italy expressing impatience at a delay to major financial reforms.

"Speed is an essential condition for the success of any European action," the statement quoted Spain's junior minister for European Affairs, Inigo Mendez de Vigo, as saying.

But Italy expressed "stupor" at the "supposed" statement and France also categorically denied it was behind a call that, if confirmed, would have likely been interpreted as a thinly disguised challenge to Germany.

"There has been no common approach with Italy and Spain," French European Affairs Minister Bernard Cazeneuve said. "I have not asked for the immediate application of the accords. It makes no sense to say that." Following the angry comments by Rome and Paris, Mendez de Vigo backtracked, saying he didn't intend to say that the three countries had issued a joint statement.

Amid the turmoil, the euro fell 0.4 per cent against the dollar in New York trade on Tuesday, touching fresh two-year lows as Spain appeared to inch closer to a bailout.

The European currency fell as low as US$1.2059, its lowest level since June 2010, before recovering slightly.

More bad news was delivered by Moody's ratings agency, which lowered the outlook on the EU's bailout fund from stable to negative Tuesday, a day after threatening the triple-A credit ratings of three of the eurozone's major guarantors.

Moody's said its decision to lower the outlook on the European Financial Stability Facility (EFSF) reflected the changes in outlooks on Germany, the Netherlands and Luxembourg. But it maintained the EFSF's triple-A rating.

The EFSF, which was established with a total lending capacity of 440 billion euros, is to be replaced eventually by a permanent rescue fund called the European Stability Mechanism, with 500 billion euros of firepower.

In Berlin, Schaeuble and de Guindos only stressed "the importance to work - together with European Partners - on the quick implementation of the European Council decisions of June 29." Those words were echoed by French Finance Minister Pierre Moscovici, who called for the "rapid" and "effective" execution of decisions made at the June summit to assure the sustainability of the eurozone. He meets de Guindos Wednesday.

Earlier Tuesday, the finance minister of Catalonia, Spain's second biggest region, raised the prospect of a regional bailout in a morning interview with BBC radio.

Another big region, Valencia, last week became the first to apply for help from an 18-billion-euro (US$22 billion) fund set up by the central government to rescue struggling regions.

Economists increasingly agree that a eurozone bailout of up to 100 billion euros agreed for Spain's banks will be insufficient to get the country through the crisis brought on by a collapse of its real estate boom in 2008.

The yield or rate of return on the benchmark 10-year Spanish government bond crept ever higher Tuesday, at 7.621 per cent, hovering at the levels that forced Greece, Ireland and Portugal to seek EU-IMF bailouts.

It marked the highest level that Spain's yield has reached since Madrid adopted the euro.

At such high rates, it is impossible to raise funds on the market, said Daniel Pingarron at IG Markets, forecasting that Spain could only hold out for two months.

Analysts said Spain needs either a bailout or market intervention by the European Central Bank to force its borrowing costs down by buying bonds.

The ECB has done this before but it is not clear if it is ready to step in again now without clear backing from the major eurozone states, especially Germany.

The shock decision by ratings agency Moody's to slash the outlook of Germany, Europe's top economy and paymaster, from "stable" to "negative" came as auditors arrived in debt-wracked Greece.

Moody's said its decision was based on "rising uncertainty regarding the outcome of the euro area debt crisis (and the) ... increased likelihood of Greece's exit from the euro area." In Athens, auditors from the International Monetary Fund, ECB and European Union arrived to review Greek progress towards securing a further slice of bailout cash before the country goes bankrupt.

Officials in Germany have insisted they will wait for this report, due in early September, before casting judgement on Greece's ability to stay in the eurozone.

European Commission President Jose Manuel Barroso visits Athens for talks with Prime Minister Antonis Samaras on Thursday, his first since June 2009. - AFP

http://www.businesstimes.com.sg/breaking-news/world/spanish-borrowing-costs-hit-new-historic-high

Kirin, F&N line up advisers as Singapore brewery battle heats up

(Reuters) - Japan's Kirin Holdings (2503.T) and Singapore's Fraser and Neave (FRNM.SI) have hired investment banks to advise them through the takeover battle for a prized Asian beer maker, adding to signs that a bidding war will intensify in the coming days.

Kirin has tapped Deutsche Bank (DBKGn.DE) to help defend its turf in a two-way fight for Asia Pacific Breweries (APB) (APBB.SI), sources familiar with the matter said on Tuesday, showing for the first time that the Japanese company will not sit quietly while its rivals move in to wrest control of the maker of Tiger beer.

Last week, companies linked to a Thai billionaire agreed to pay S$3.8 billion ($3.02 billion) to acquire stakes in F&N and its affiliate APB from Singapore bank OCBC. That forced APB shareholder Heineken NV (HEIN.AS) to launch a $6 billion counter-bid for the beermaker.

Kirin, which indirectly owns part of APB through its stake in F&N, could try to block an attempt for control of the Singapore conglomerate, sources said.

"All options are on the table," said one of the sources with direct knowledge of the deal. "As a major shareholder of F&N they have a lot more say."

It was unclear whether Kirin wants to launch a counter-bid for F&N, which analysts have mentioned as a possible break-up candidate. The Singapore conglomerate earned 59 percent of its revenue last year from its food and beverage business and 34 percent from property.

But Kirin, with its near 15 percent stake in F&N, would want to have a say if the battle for F&N leads to a break-up, said the sources, who declined to be identified because they were not authorized to speak to the media.

Kirin and Deutsche Bank declined to comment.

"I'm not convinced that Kirin will go ahead and take such a large amount of debt to get into something that is fairly complicated, given the property assets involved at F&N," said Nigel Muston, an analyst at CLSA Asia-Pacific Markets in Tokyo.

"And that their own Japanese brand beer and soft drinks may not get the sort of exposure they want in Southeast Asia if they can get it," he said.

GOLDMAN SACHS

F&N has hired Goldman Sachs to weigh Heineken's bid for APB, sources said on Monday. The Dutch brewer's bid for APB will expire on Friday.

The tussle for Southeast Asia's biggest beer maker comes amid a wave of industry consolidation and expanding beer sales in emerging markets, although APB's ownership structure makes this among the most complicated assets to buy.

Heineken's proposal last Friday completed a frenetic week for F&N, whose joint venture with the Dutch brewer has a 65 percent controlling stake in APB.

Heineken offered to buy out F&N's interest in APB after OCBC and an affiliated group received a $3 billion bid for their stakes in F&N and APB from companies linked to Thai billionaire and founder of Thai Beverage PCL (TBEV.SI), Charoen Sirivadhanabhakdi.

APB, whose shares surged as much as 18 percent to a record on Monday, were up 0.3 percent on Tuesday. They were still trading below Heineken's offer of S$50.00 a share.

F&N rose 1 percent on Tuesday.

F&N was not immediately available to comment on Goldman's (GS.N) role as its financial adviser, while a spokeswoman for the bank declined to comment.

"There's still some uncertainty as it is not clear how F&N will react to the offer," said Goh Han Peng, an analyst at DMG & Partners Securities.

"If the F&N shareholders do not accept the offer from Heineken, they may come up with a hostile offer for APB, meaning they will go to the minority shareholders. The second way is to go directly to F&N and mount a takeover because shares in APB are very illiquid."

Nomura said if F&N accepts Heineken's offer, it will reap cash proceeds of about S$5.2 billion but lose an important contributor to its earnings.

Without APB, F&N will have a smaller food and beverage business comprising its ASEAN soft drinks and dairies businesses, Nomura said.

But the Singapore conglomerate will have additional cash of S$5.2 billion, or S$3.66 per share, part of which could be paid as a special dividend, according to Nomura. ($1 = 1.2569 Singapore dollars)

Kirin hires Deutsche Bank to consider options for F&N: sources

(Reuters) - Japan's Kirin Holdings Ltd has hired Deutsche Bank to examine all options as it prepares to defend its interest in Singapore conglomerate Fraser and Neave Ltd, sources with knowledge of the matter told Reuters.

Kirin owns a near 15 percent stake in F&N, the second-biggest holder behind Oversea-Chinese Banking Corp Ltd.

Last week, companies linked to a Thai billionaire agreed to pay S$3.8 billion ($3.02 billion) to buy stakes in F&N and its affiliate Asia Pacific Breweries (APB)  from OCBC. That forced Dutch brewer and APB shareholder Heineken to launch a counter-bid for APB.

"All options are on the table," said one of the sources with direct knowledge of the deal. "As a major shareholder of F&N they have a lot more say," the source added.

The sources were not authorized to speak to the media. Kirin declined to comment, while Deutsche Bank was not available for an immediate comment.

London and Singapore Bourses in Merger Talks: Report

The London Stock Exchange Group is in talks with the Singapore Exchange <SGXL.SI> about a potential 7.2 billion-pound ($11.3 billion) merger, the Daily Telegraph reported, in a deal likely to face tough regulatory scrutiny.

Mergers between exchange firms around the world have been happening thick and fast in recent years as traditional operators try to cut costs and boost their offerings to fend off growing competition from alternative trading platforms and so-called "dark pool" operators that link anonymous buyers and sellers.

The chief executive of LSE Group, Xavier Rolet, has held a series of
informal talks with SGX Chief Executive Magnus Bocker about a potential merger, the Telegraph said in an article published on its website on Thursday, without specifying where it got the information.

"There will be synergies if there is any acquisition or merger as both of the exchanges work in different time zones," said Leng Seng Choon, an analyst at broker DMG & Partners Securities Pte Ltd. "They recently had this cross-border trading agreement which suggests they are on friendly terms."

A deal combining the two bourses would behind NYSE Euronext <NYX.N> and Nasdaq OMX <NDAQ.O> in terms of number of trades, but a takeover of Europe's oldest independent bourse could run into stiff regulatory and political opposition.

While the structure of any potential merger is unclear, the newspaper speculated that SGX would take over its British rival because of its larger market capitalisation.

"The two boards will be super-cautious is considering any proposal given the history of failures," said a source familiar with SGX's thinking who was not authorised to speak to the media. "It is not impossible, but the regulatory challenges will stand in the way of any deal."

A SGX spokeswoman said the company would not comment on the report or a potential merger with LSE, while the British firm did not immediately respond to request for comment.


PRELIMINARY TALKS

The talks, still in their preliminary stages, are focused on the benefits of merging the two exchanges amid continued consolidation attempts in the sector, the Telegraph said.

"The only strategic rationale I can see is the global derivatives offering through an around-the-clock futures trading platform. There are some other potential benefits, such as IT synergies, but see it as reasonably tenuous," Credit Suisse analyst Arjan van Veen said. "The regulators would likely want clearing to be done in their own countries."

Banking sources quoted by the Telegraph said any form of formal offer was still some time away. The paper cited market rumours that suggest a takeover would be in the region of 13.50 pounds per LSE Group share -- a 32 percent premium to LSE's Thursday close.

Based on Thursday's closing prices, SGX is worth $5.7 billion, while LSE is worth $4.2 billion, making a combined market capitalisation of $10.1 billion.

The sector has been one of the most active for M&As in the past decade, but some centres have balked at handing over control of their stock exchanges to foreign companies. The European Commission this year blocked the $7.4 billion merger of NYSE Euronext and Deutsche Boerse <DB1Gn.DE>, and the LSE itself, under previous CEO Clara Furse, fought off a host of unwanted takeover attempts in the 2000s.

SGX's largest shareholder with a 23 percent stake is a state-backed fund, a factor in the failing of SGX's last takeover attempt.

SGX and its acquisitive CEO Bocker made an $8 billion bid for Australian stock exchange operator ASX Ltd <ASX.AX>, but the attempt was dropped in 2011 after opposition from the Australian government.

A combination of the SGX and the LSE was touted as a potential alternative at that time and the two have since been building closer ties.

This month, SGX and LSE signed an agreement to allow the pair's largest stocks to be traded on both bourses, increasing access for investors and boosting liquidity.

A consortium including LSE and SGX bid for the London Metals Exchange earlier this year but failed to get past the first round. The LME was eventually bought by Hong Kong Exchanges and Clearing Ltd (HKEx) <0388.HK>, the operator of Asia's bourse, for what analysts said was a rich $2.2 billion.

SGX's Bocker made his name stitching together seven Nordic bourses to create OMX, later sold to NASDAQ, before moving to Asia.

Earlier this month, the C$3.8 billion ($3.72 billion) acquisition of Canada's TMX Group <X.TO> cleared its final regulatory hurdles.

http://www.cnbc.com/id/48251903

DMG downgrades SGX to sell, maintains TP of S$5.00

DMG & Partners Research (DMG) has downgraded Singapore Exchange's (SGX) rating to sell on Friday, maintaining its target price of S$5.00 due to the uncertainty of merger talks between London Stock Exchange (LSE) and SGX.

Stocks for SGX were at S$6.78 at 1.17pm, gaining 1.50 per cent from the start of the day's trading.

The Daily Telegraph had reported on the possible merger between LSE and SGX worth a potential 7.2 billion pounds (US$11.31 billion) today, however SGX had since refuted that claim, according to Reuters.

"Pending more details from either SGX or LSE, it would be difficult to assess the impact of any potential M&A on SGX's share price performance," said DMG's report.

http://www.businesstimes.com.sg/breaking-news/singapore/dmg-downgrades-sgx-sell-maintains-tp-s500

Far East Reit marketing $560m S'pore IPO

HONG KONG - Far East Reit, which owns hotels and serviced residences in Singapore, started pre-marketing on Friday of an initial public offering of up to S$700 million (US$558 million), the biggest in the Southeast Asian country so far this year, a source said.

The real estate investment trust, sponsored by Far East Organization, comprises seven hotels and four serviced residences in Singapore with about 2,500 rooms, said the source, who was not authorized to speak publicly on the matter.

The deal will come on the heels of Ascendas Hospitality Trust's US$304 million offering, which had to be relaunched this week after the company was forced to remove one of the hotels from its portfolio.

It will be a welcome development for equity capital markets in Singapore, where issuance plunged 74 per cent to US$4.7 billion in the first half of the year from the same period of 2011. The slump was much steeper than the 30 per cent decline in stock sales in Asia ex-Japan, according to Thomson Reuters data.

Far East Reit and its bankers will start taking orders for the IPO on Aug. 6, with pricing slated for Aug. 15. The Reit is set to debut on the Singapore stock exchange on Aug. 27.

The Reit is being marketed at a yield of 6 per cent to 6.5 per cent, the source said. About half of the orders for the offering are expected to be covered by cornerstone investors, the source added.

DBS Group, Goldman Sachs and HSBC were hired as joint global coordinators and joint bookrunners on the deal. -- REUTERS

http://www.businesstimes.com.sg/breaking-news/singapore/far-east-reit-marketing-560m-spore-ipo-source

Heineken Plans S$7.7 Billion APB Bid In Asian Beer Push

Heineken NV (HEIA), the world’s third- biggest brewer, offered S$5.1 billion ($4.1 billion) to buy the rest of Asia Pacific Breweries it doesn’t own from Fraser & Neave Ltd. to extend control of the Tiger beer brand amid a push into emerging markets.

Heineken will pay S$50 per share for Fraser & Neave’s interests in Asia Pacific Breweries Ltd. (APB), or APB, and S$163 million for its share in Asia Pacific Investment Pte, the Amsterdam-based company said in a regulatory statement. Heineken owns a 42 percent stake in Asia Pacific Breweries. Fraser & Neave owns 40 percent.

“The primary motivation is to secure some control of the company,” said Goh Han Peng, an analyst at DMG & Partners Securities. “The offer is quite compelling and for any other player to come in and make counter offer, they first have to contend with the fact that Heineken won’t be a seller of the stake they own.”

The purchase comes after Thai Beverage Pcl (THBEV) and a family member of the company’s founder offered to buy shares of Fraser & Neave and Asia Pacific Breweries this week from a group of investors. Goh yesterday said Fraser & Neave’s stake in Asia Pacific Breweries is its “crown jewel” because of its presence in more than a dozen regional markets.
Brewing Assets

Brewing assets in attractive markets are in short supply globally as beer makers buy each other to boost sales. Anheuser- Busch InBev NV, the world’s biggest brewer, in June agreed to buy the remainder of Mexico’s Grupo Modelo SAB for $20.1 billion in cash, gaining full control of the Corona maker to increase its presence in emerging markets.

Heineken is trying to extend its reach in emerging markets, with acquisitions of investments in Mexico, India, Brazil, and Africa in recent years, the company said in a statement. The price offered is a 19 percent premium to Asia Pacific Breweries’ closing price of S$42 yesterday.

Thai Beverage, Thailand’s biggest beer maker, this week agreed to pay S$2.78 billion ($2.2 billion) for Fraser & Neave’s shares held by Oversea-Chinese Banking Corp. and its partners.

Thai Beverage is controlled by Thai billionaire Charoen Sirivadhanabhakdi’s TCC Group. Charoen also owns companies in industries ranging from insurance to property development. His son-in-law, Chotiphat Bijananda, will buy stakes in Asia Pacific Breweries, Thai Beverage said.

OCBC, Singapore’s second-biggest bank, said it will sell S$389.3 million of Asia Pacific Breweries shares Bijananda’s company, while Great Eastern will divest its stake in the Singapore beermaker for S$530.9 million. The price for both stakes was S$45 a share.

http://www.bloomberg.com/news/2012-07-20/heineken-offers-s-5-1-billion-to-fraser-neave-for-apb-assets.html

Special dividend hopes drive OCBC share price

[SINGAPORE] OCBC's share price yesterday surged to its highest in almost a year, on the prospect of a possible special dividend for shareholders.

But analysts say the bulk of the proceeds from the sale of OCBC Bank and its listed subsidiary Great Eastern Holdings' (GEH) stakes in Fraser & Neave (F&N) and Asia Pacific Breweries (APB) are likely to be used to grow OCBC's main financial businesses.

News of the $3.2 billion sale of OCBC and GEH's combined F&N stake of 18.1 per cent and APB stake of 8 per cent to Thai Beverage and another company drove OCBC's share price to a peak of $9.52 around noon yesterday.

The counter closed at $9.49, up 19 cents or 2.04 per cent, after almost 12 million shares changed hands.

GEH's shares gained 18 cents, or 1.31 per cent, to close at $13.86, after hitting $14 during the day.

OCBC's estimate of a total post-tax gain of $1.15 billion for the group, including gains from GEH's disposal, works out to 34 cents per OCBC share.

A portion of this may be paid out as a special dividend, but analysts say shareholders probably will not get the lion's share of proceeds. Said DBS Vickers analyst Lim Sue Lin: "Assuming banks remain on capital conservation mode, OCBC may well use these one-off gains to boost their capital ratios."

Gains from such investments are recognised as Tier 1 capital, and Ms Lim estimates that sales proceeds will add 50 basis points to OCBC's Tier 1 capital adequacy ratio (CAR), which was 11.8 per cent in March.

OSK DMG analyst Leng Seng Choon estimates, based on the assumption of a FY2012 Tier 1 CAR of 15.1 per cent, that OCBC can pay out $0.9 billion in special dividends or 26 cents per share. This, he expects, would be the upper limit and any special dividend dished out would be smaller.

Most of the proceeds are expected to be re-invested to grow the bank's core financial businesses.

CIMB research head Kenneth Ng noted that in the past, OCBC's divestments were eventually matched with investments in its core business, such as a larger stake in GEH, Bank NISP, Bank of Ningbo, and what is now its private bank, Bank of Singapore.

He reckons that OCBC may use sale proceeds to launch a third privatisation offer for GEH, after failing twice in 2004 and 2006.

Other possibilities include expansion in China through GEH, Bank of Ningbo or new concessionaires, as the China-Singapore free trade agreement has smoothened Singapore banks' China expansion plans.

While this is the first major corporate deal since Samuel Tsien took over as OCBC's chief executive in April, a deal likely initiated by the buyer does not shed clear light on the new management.

"What is clear is that OCBC is now more institutionalised and not sentimental about holding on to old legacy assets," Mr Ng said.

Looking beyond the "knee-jerk" positive share price reaction yesterday and what will likely be stunning Q3 results if the deal closes within the quarter, Mr Ng said this one-off hike in book value does not change concerns over OCBC's earnings volatility.

http://www.businesstimes.com.sg/premium/top-stories/special-dividend-hopes-drive-ocbc-share-price

Heineken NV has bid for APB

SINGAPORE - Heineken NV has bid S$5.1 billion (US$4.1 billion) for Asia Pacific Breweries, offering to buy Fraser and Neave's stake and other ordinary shares it does not already own as a Thai billionaire competes for control.

The Dutch brewer will make a mandatory general offer for all shares of Singapore-based APB in does not own at a price of S$50 a share, the brewer said in a statement in Amsterdam.

Heineken has also offered S$163 million for F&N's interest in the non-APB assets held by Asia Pacific Investment Private Ltd, a 50/50 joint venture between Heineken and F&N.

The offer comes two days after companies linked to Thai drinks and property tycoon Charoen Sirivadhanabhakdi bought F&N and APB shares from Singapore's No 2 bank OCBC for US$3 billion.

That put pressure on Heineken to protect its investment in APB, with which it makes the popular Tiger beer.

Credit Suisse and Citigroup are advising Heineken. - REUTERS