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Singapore stock market and companies daily report (King Wan Corporation, Berlian Laju) (October 04, 2012)

Contributed by Shares Investment

Palm Oil Prices Drags Down Palm Plays
Palm oil prices has dropped to their lowest level since October 2008 on 2 October 2012 underpinned by weaker Malaysian palm export data for September and concerns over strong supply in the short term. The Business Times quoted CIMB analyst Ivy Ng said that weak demand and a supply glut is expected to lead to a record high in Malaysian palm oil stocks. While food demand for palm oil remains consistent, demand for industrial use is currently being dragged by weak economic prospects of China, India and Europe. Palm oil stocks plunged yesterday as the stock market reacted to the fall in prices. However, there are expectations that palm oil prices to bottom out soon. Crude palm oil prices lag behind soybean prices, which is a close substitute. The supply and demand situation for soybean remains tight and the resulting strong soybean oil prices will eventually pull up crude oil prices.
Significance: Other commodity stocks did not perform well yesterday as well. Growing doubts over the effectiveness of QE3 and other stimulus measures burdened by other fundamental problems have led to downward pressure on commodity prices.

King Wan Secures $30.8m Worth Of Contracts
King Wan Corporation announced that its subsidiary, King Wan Construction has clinched five mechanical and electrical (M&E) contracts in Singapore since August 2012. The aggregate amount of all contracts total approximately $30.77 million. The contracts consist of three HDB projects located at Bukit Panjang, Bukit Batok and Sembawang as well as two condominium projects. Chua Eng Eng, managing director of King Wan said that the group is very pleased to have won the five contracts. Chua said that King Wan’s “track record and emphasis on quality and reliability, we (King Wan) remain committed to providing excellent services to our clients and executing our projects efficiently”. Separately, King Wan’s associate, Meadows Bright Development, together with its partners was awarded a residential site at a tender of $244.3 million. The joint venture partners are now looking into developing the site into a 400-unit mid-range condominium.
Significance: To date, including the five contracts won, King Wan has secured an order book of approximately $187.3 million worth of M&E engineering contracts with completion dates ranging from 2013 to 2016. This will help provide visibility to King Wan’s future performance.

Berlian Laju Aims To Restructure Debt By 2012
World’s third-largest chemical shipper, PT Berlian Laju has hopes to restructure its US$1.9 billion debt by the end of 2012. Berlian also hopes to switch its focus to niche liquid chemical and gas transport. Berlian had previously defaulted on several debt instruments and has been talking to creditors about restructuring its operations and finances. Hadi Surya, Berlian’s founder and chairman was quoted by The Business Times as saying that the group hopes to push the process faster. Surya said Berlian will strengthen its business in liquid chemical and gas shipping and trim its oil shipping activities once the debt restructuring is complete. However, lenders are increasingly wary of shipping finance as credit tightens globally and ratings agencies have cut Berlian credit ratings to default. Berlian has until 13 November 2012 to agree to a restructuring plan with its creditors after it won a 90-day extension in August. While Surya declined to discuss details of its restructuring plan with The Business Times, he mentioned the plan may include the sale of vessels.
Significance: To compound its restructuring problems, Berlian has been squeezed between weak freight rates and higher shipping fuel costs in an oil tanker market struggling through the global downturn. This ultimately could force Berlian to go into liquidation to settle its debts.