SFI – BT

Singapore Food Industries shutting down Swissco

Analysts see move to wind up loss-making business as a boost for SFI

SINGAPORE Food Industries (SFI) is shutting down its Ireland-based loss-making business which had raised concerns amongst minority shareholders of its predator, Singapore Airport Terminal Services (SATS).

SFI said that it had asked the High Court of Dublin to wind up operations of its loss-making convenience food business, Swissco. Swissco is 100 per cent owned by SFI’s Cresset Ltd.

The business has been bleeding to the tune of almost $8 million, raising concerns amongst shareholders of SATS.

The Changi Airport ground operator and Singapore Airline subsidiary recently announced a $335 million takeover of Temasek Holdings’ 69 per cent stake in Singapore’s largest integrated food specialist. The value of the deal is likely to balloon to $509 million following an expected general offer.

But some minority shareholders of SATS had expressed reservations about some of SFI’s businesses which the former would be ingesting. And Swissco was a key concern.

SFI had hoped to sell the business, thus avoiding the costs of closing it down, but found little interest in the market.

Analysts reckon that the removal of Swissco will boost SFI’s balance sheet and profitability significantly.

‘While valuations of 15x earnings and 3x book are not cheap, SFI’s core earnings are depressed by one-time charges and overseas subsidiary losses,’ Kim Eng noted in a report.

‘After adjusting for losses at subsidiaries to be sold, we estimate SFI’s FY2007 profits at 34 per cent higher than reported, which would reduce SATS’ buyout valuation to 11x earnings, below SATS’ current 12.5x P/E.’

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