Author: tfwee
SingTel – BT
SingTel may keep 25% stake in Bharti-MTN
SINGAPORE Telecommunications (SingTel) could maintain a 25 per cent stake in the combined entity created as a result of a potential merger between India’s Bharti Airtel and South Africa’s MTN, Morgan Stanley said in a report yesterday.
‘We do not expect the Bharti-MTN transaction to have material dilutive impact to SingTel’s EPS (earnings per share),’ analysts at the US investment bank said.
‘Indeed, if the Bharti-MTN transaction goes through and SingTel increases its stake in the new entity using debt (which is very likely), we see room for slight EPS enhancement.’
SingTel, South-east Asia’s biggest phone firm, owns about 30.4 per cent stake in Bharti Airtel, India’s leading mobile operator.
SingTel has said in the past it will remain a significant shareholder after any deal, though some analysts have expressed concerns that its stake in the combined entity could fall below 20 per cent.
Bharti Airtel’s planned tie-up with MTN faces scrutiny from regulators and politicians. It said on Tuesday that the deal would comply with the laws in both countries and any required waivers would be sought when appropriate.
Bharti Airtel’s statement came shortly after the Indian market regulator amended takeover regulations by bringing depositary receipt holders with voting rights on par with shareholders.
Morgan Stanley said the latest change in takeover regulations in India creates uncertainties about the deal, but if the transaction goes through, it expects SingTel could borrow to increase its stake in the combined entity.
SingTel could enhance its earnings-per-share compound annual growth rate by 200-300 basis points assuming a 25 per cent stake in the new entity, the research report said. — Reuters
STEng – BT
ST Engg’s US unit gets repeat order for articulated tug barge
SINGAPORE Technologies (ST) Engineering’s US shipyard unit VT Halter Marine has clinched a repeat order to outfit and commission a second 350,000-barrel-capacity articulated tug barge (ATB) unit for OSG Ship Management.
Work will commence in November and is expected to be completed by mid-2010. VT Halter Marine was contracted in April by OSG to undertake similar work on another 350,000-barrel ATB, expected to be delivered by the end of this year. The two units were reportedly uncompleted jobs removed from Mobile-based Bender Shipbuilding by OSG in March due to delays in the delivery schedule.
ST Engineering declined to reveal contract values but they are not expected to have any material impact on its consolidated net tangible assets per share and earnings per share for the current financial year.
However as an indication, VT Halter received a contract to build four smaller units of a similar type of vessel for US$240 million in September 2006. This was a full construction job and included the cost of owner-furnished equipment. The 199.65m by 32m ATBs will be the largest ever built by VT Halter Marine. These state-of-the-art ATBs will be used to perform lightering services and equipped with specialised equipment to meet stringent vapour balancing regulations in the Delaware Bay, where the vessels will trade.
‘Delivering these vessels to an important customer is a top priority for OSG. We selected VT Halter Marine due to their experience in constructing similar types of ships and the company’s high quality of operations, which extends to the quality of vessels they have built, the skills and experience of the shipyard workers and management’s commitment to working with us on this high-profile project,’ said Robert Johnston senior vice-president, OSG Ship Management.
M1 – CIMB
Best exposure to broadband segment
• Maintaining earnings forecasts, target price and NEUTRAL. M1 remains our top pick in the telco sector where we are maintaining our NEUTRAL position. Our DCFbased target price of S$1.71 (WACC: 10.5%, LT growth: 1%) is unchanged. While there is a lack of re-rating catalysts, we like M1 for its attractive yields of 8%, the best exposure to wireless broadband and the biggest upside from the upcoming NGNBN.
• M1 offers the best exposure to the wireless broadband growth, in our opinion, given its more concentrated cellular exposure. Its mobile data revenue had grown to 10.9% of service revenue in 2Q09 from 9.1% in 1Q08 on the back of a rapid increase in subscriber usage. About 15% of M1’s postpaid subscribers used its wireless broadband services in 2Q09, up from 9% in 1Q08. The growth should continue and the industry could see 1m wireless broadband subscribers in three years’ time, up from the current estimate of 400K-500K.
• NGNBN another avenue of growth. We reiterate that M1 offers the greatest upside for NGNBN as it has no legacy business to cannibalise and NGNBN would give M1 a chance to address its single-product disadvantage. OpenNet’s rollout is progressing according to schedule with a target of 5% coverage by end-Sep 09, 15% by Dec 09 and 60% by end-2010.
• No capital management initiatives this year. Beyond the usual payout, M1 will not be returning excess cash to shareholders this year due to still-fragile economies and tight credit markets. However, it is not opposed to capital-management initiatives in FY10.
SMRT – BT
SMRT Capital’s debut $150m note issue well received
Orderbook closed within half hour of launch with 2 times oversubscription
The debut $150 million note issue of SMRT Corp’s wholly owned subsidiary, SMRT Capital, has attracted strong demand.
‘Strong interest from bond investors resulted in the orderbook being more than two times oversubscribed and closed within half an hour of the launch of the notes,’ SMRT said yesterday.
The five-year 2.42 per cent fixed rate notes are issued under SMRT Cap’s $1 billion multi-currency guaranteed medium term note programme and are expected to be issued on Oct 7 and mature in 2014. SMRT guarantees the servicing of the notes. Hongkong and Shanghai Banking Corporation acted as sole lead manager and bookrunner of the notes and sole arranger of the programme.
The programme has been rated AAA by Standard & Poor’s.
The net proceeds arising from the issue of the notes will be used to finance the general corporate funding requirements of SMRT and its subsidiaries.
The issue of the notes represents SMRT Cap’s debut visit to the bond markets and is the first bond issue from the SMRT group since December 2006.
The deal was priced on Wednesday at about 10 basis points above the five-year Singapore-dollar Swap Offer Rate, the tightest five-year pricing for a Singapore domiciled corporate since January 2007.
Executive vice-president and chief financial officer for SMRT Corp Lim Cheng Cheng said: ‘We are very pleased with the keen investor response to our issue. This issue helps us re-establish SMRT’s presence in the Singapore-dollar bond markets in a very positive manner.’
Amit Gupta, managing director and head of global markets for HSBC in Singapore, said: ‘We are privileged and honoured to have brought a premium institution like SMRT to the Singapore-dollar bond market. By leveraging on HSBC’s strong capital markets platform and local knowledge, we were able to execute a broadly distributed transaction for SMRT Capital at the tightest five-year pricing level achieved in the Singapore-dollar bond market since January 2007.’
Temasek-linked companies (TLCs) have been on a fund-raising spree over the past few months as they take advantage of a recovering economic outlook to tap the financial markets to build up war chests ahead of potential future deals. For some, such a move will also improve their debt positions.
Six TLCs have raised a massive $10.5 billion from rights issues since December.
In July, SMRT said it is acquiring a 49 per cent stake in Shenzhen transport company Shenzhen Zona Transportation Group for 320 million yuan (S$68 million). SMRT said its first investment in a Chinese company is a beachhead for its expansion into China. SMRT said at its Q1FY10 results briefing that it sees a tough year ahead with continued volatility in diesel prices, the effects of the fare reduction package and the ramp-up costs for the opening of the remaining Circle Line stations.
SingTel – BT
Telstra break-up long overdue, says Optus
Telstra has been accused of charging unfair fees
In a bid to curb Telstra Corp’s long-standing dominance, the Australian government plans to force the once state-owned monopoly to split up its retail and wholesale businesses, a move which rival Optus describes as being ‘long overdue’.
Under the draft legislation unveiled yesterday, Telstra will be barred from buying new licences for wireless broadband services if it does not fall in line, according to Australia’s Communications Minister Stephen Conroy.
If enforced, the curb would cut Telstra out of a fast-growing market segment that could eclipse the size of Australia’s fixed-line Internet segment.
With high-speed broadband connectivity being confined mainly to the cities, wireless Internet technology is widely seen as the key to linking up the rest of the country.
‘The government’s strategy on separation is to make Telstra an offer it cannot refuse. Separate yourself, or have separation done for you,’ according to technology research firm Ovum.
Telstra, which has long opposed a break-up, deemed the government proposal as ‘unnecessary’ and said it was disappointed with the result, a view not shared by Singapore Telecommunications’ Australian unit Optus.
‘The Federal Government today made an important step in reforming the telecommunications sector. It is now up to the parliament, Telstra and the rest of the industry to ensure this long overdue reform becomes a reality,’ Optus CEO Paul O’Sullivan said in a statement.
The new government legislation comes amid growing calls for a Telstra split in some government quarters, as well as among the country’s competition regulator and other local telecommunications players.
With its ownership of extensive telecommunications infrastructure, Telstra has constantly been accused of charging unfair fees and delaying access to its network nodes.
Mr Conroy was previously quoted as saying that Telstra’s current structure is a ‘complete joke’ that is stalling the country’s plans to build a pervasive, high- speed broadband network.
Telstra was barred from taking part in the tender for this project last year. However, other bidders also returned empty handed as authorities eventually decided to take on the task themselves.
To comply with the proposed government mandate, Telstra may have to divest its fixed-line business or move some services to the new government network. The key is to make Telstra ‘structurally separate’, Mr Conroy said.
‘The measures in this legislation will finally correct the mistakes of the past. The government will require the functional separation of Telstra unless it decides to voluntarily structurally separate,’ he said in a Reuters report
‘However, separation takes time to accomplish, because separation requires IT systems to be redesigned or even duplicated. While the government will seek agreement by year’s end, a separation process might take two years to fully execute,’ Ovum cautioned.
In Singapore, a similar requirement has been applied to the ongoing Next- Gen NBN (National Broadband Network) project.
Under the Singapore model, the company in charge of building the new network will need to be ‘structurally separate’ from the firm that is managing the fibre-optic broadband highway.
The Singapore authorities believe the separation clause will curb unfair practices and spark competition in the market for providing high-speed Internet services.