Singapore Digest: SMJ expands into property; ST Kinetics divests China unit; Wave Link increases stake in Loyz Energy

Skyline of Singapore financial centre. Credit:Flickr/Paul Chaloner

The latest in the deal landscape in Singapore has seen SMJ International expanding into property, ST Kinetics is divesting it stake in a Chinese associated company and investment firm Wave Link increasing its stake in Loyz Energy.

SMJ International exploring expansion into property line

Carpet specialist firm SMJ International is diversifying into property investment and management, as a complementary arm of its business in a bid to diversity and broaden its income stream and revenue.

According to the company, it is exploring and evaluating opportunities in the property and hospitality industry with the potential to be complementary to its carpet making and installation business. The company will have to seek shareholders’ approval to initiate the diversification.

It is hoped that this business diversification will boost its prospects and provide an opportunity to leverage its current network in the carpet furnishing business. It believes that its networks in the property business will enable it to identify business opportunities in the property market, as well as leverage the property business to sell its floor furnishing products to properties managed by the group.

With no plans to restrict itself to specific geographical markets, SMJ intends to develop the property arm into a core business division and is also open to exploring explore joint ventures (JVs) or strategic alliances with relevant third parties possessing the necessary expertise.

The diversification plans come as SMJ reported 46 per cent decline in total attributable comprehensive income for FY15 to S$865,000.

With export distribution sales growth yielding lower margins than local distribution sales, as well as competitive prices resulting from contract sales projects from the Singapore government results in reduced market lucrativeness, the firm is exploring other avenues for growing and sustaining revenue.

ST Kinetics divests stake in associated firm

ST Kinetics’ wholly-own subsidiary Autonomous Technology will divest its 60 per cent equity stake in Guizhou Jonyang Kinetics. The cash consideration for the sale of the stake amounts to 200 million yuan (S$43 million). ST Kinetics is the land systems arm of the ST Engineering conglomerate.

The sale and purchase agreement is between Autonomous Technology and its joint venture (JV)  partner, Guiyang Industrial and Commercial Assets Management. This divestment awaits regulatory and other appropriate approvals and will not impact ST Engineerings’ results for this financial year.

The consideration for the sale to Guiyang Industrial accounts for the general condition of the Chinese construction equipment market as well as Guizhou Jonyang Kinetics’ net assets value and its expected financial performance.

The divestment comes amidst continued review by ST Kinetics of its specialty vehicle business in China. In a media release, the firm stated:”The management (of ST Kinetics) has decided to exit the Guizhou Jonyang Kinetics business, which builds excavators and is in a segment that increasingly requires scale to gain competitive advantage.”

Wave Link increase stake in Loyz Energy

Singapore-based upstream energy group Loyz Energy Limited is seeing new controlling shareholder, Wave Link, and is implementing strategic changes to its board of directors and management team, in order to survive the current difficulties in the upstream oil and gas sector. Wave Link is an investment fund focusing on investments in certain core sectors, including the oil and gas industry.

Speaking on the investment, Wave Link stated: “The fundamentals of Loyz Energy’s upstream oil and gas business are very sound, taking into account their proven oil reserves, low cost of production and potential to scale-up quickly. All they need is strong support to enable them to ride through this temporary storm in the oil and gas sector.”

Wave Link L.P, an existing shareholder of Loyz, is purchasing an additional 9.85 per cent interest in the company from Jit Sun Investments Pte Ltd, the largest shareholder of Loyz Energy. The acquired shares will be transferred in two tranches, with the first tranche in May 2016 and the second tranche before August 2016.

Post-acquisition, Wave Link will become Loyz’s second largest shareholder, with an aggregate 16.70 per cent shareholding interest, with Jit Sun remaining the largest controlling shareholder of the Company, with a 17.18 per cent stake. According to Jit Sun, it will continue to provide financial support to Loyz where necessary.

CEO Jeffrey Pang, recently appointed to the role, said, “Our immediate focus is to improve our cash flows and ensure we can operate smoothly even when oil prices are at the current low levels. With our substantially reduced operating costs, we are in a good position to benefit when oil prices rise.There is significant untapped potential in our Thailand fields.

Pang continued,”Low drilling and operating costs imply significant potential to increase production and potentially reserves, thereby boosting the value of our fields and Company for the benefit of shareholders.”

“Our non-core assets will be divested as we continue to look for strategic options to create more value for our shareholders. Taking a conservative view, we have also fully impaired the value of the investments made on non-core assets, even though we believe there will be some value generated when the assets are divested,” he added.

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