Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on changes — just in case they’re material to our investing thesis. The Straits Times Index (SGX: ^STI) started the week on a bright note with a slight 0.2% climb to 3,305 points. Within its 30 constituents, 17 shares had ended the day in the green while 10 others had lost some ground. Let’s take a look at a few market beaters outside the index. The aptly-named China-based construction outfit Sino Construction (SGX: F3V) is up 2.4% to S$0.215…
The Straits Times Index (SGX: ^STI) started the week on a bright note with a slight 0.2% climb to 3,305 points. Within its 30 constituents, 17 shares had ended the day in the green while 10 others had lost some ground.
Let’s take a look at a few market beaters outside the index.
The aptly-named China-based construction outfit Sino Construction (SGX: F3V) is up 2.4% to S$0.215 following an acquisition announcement made last Friday. Sino Construction intends to purchase a 51% stake in Signet Coking Coal International, a company that’s involved with coal mining, for a total sum of US$21 million.
Depending on the seller’s preference, the acquisition could be paid by Sino Construction with cash or its own shares. If the entire transaction were paid with shares, 136.5 million new shares of Sino Construction would have to be issued. By way of comparison, the company had 1.317 billion shares at last count.
According to Sino Construction, the acquisition will help diversify its business as well as enabling it “to gain a strong foothold to participate in the coking and thermal coal resources industry.”
Interestingly, the operational businesses that are owned by Signet have no profit and have more liabilities than assets. At last count, Sino Construction’s share of Signet’s losses and net liabilities (total liabilities minus total asset) came up to around S$134,601 and S$134,597 respectively. Despite Signet being a loss-making operation with no asset value to speak of, Sino Construction “has not commissioned any valuation” for the acquisition target. There’s also no need for Sino Construction to obtain shareholder’s approval for this transaction.
Banyan Tree Holdings (SGX: B58) gained 2.3% to S$0.67. The luxury resort, hotel and spa operator had just issued S$125 million worth of notes (i.e. debt) last Tuesday.
The new notes, which carry an annual interest expense of 4.875%, are part of the company’s S$400 million Multicurrency Medium Term Note Programme that was last revised in October 2011. Banyan Tree has the intention to use these new borrowings to finance its day-to-day business operations and to invest into either new opportunities or its existing businesses.
At last count prior to the new debt offering, Banyan Tree had S$113 million in cash and equivalents while carrying S$388.5 million in total debt. Based on this figures, the new notes would likely not overstretch the company’s finances.
That said, investors might still want to keep an eye on the company’s interest expenses. In 2013, Banyan Tree’s interest expense had already come up to S$23.3 million while its earnings before interest & taxes (EBIT) stood at only S$32.3 million. The new notes would add another S$6.1 million to the company’s annual interest expense (assuming the company’s total debt of S$388.5 million prior to the new offering does not get retired) and squeeze its profit further if its EBIT doesn’t grow.
Real estate developer Frasers Centrepoint (SGX: TQ5) rounds up the trio with its shares climbing by 1.9% to S$1.845. Last week, the company announced a A$2.6 billion bid for the Australia-based Australand Property Group, one of the largest property outfits in the country.
The move is a push by Frasers Centrepoint to expand its Australian business interests. As it stands, Australia is Frasers Centrepoint’s second largest market after Singapore and there are possible synergies that the company can have with Australand’s real estate operations in the country.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn’t own shares in any companies mentioned.