Daily news - 12 Dec

Olam buys back US$118m convertible bonds
Olam International is buying back US$117.6 million of convertible bonds at a discount, booking gains and shaving its gearing in the process. For US$0.65 on the dollar, Olam is paying US$76.44 million in cash for the convertible bonds. It will take up a new three-year term loan to fund the deal. 'Current market conditions afforded us an opportunity to reduce outstanding debt, reduce refinancing risk, strengthen our balance sheet and deliver value to our shareholders,' said group managing director and CEO Sunny Verghese yesterday. Olam's repurchase offer attracted over 60 bids from global investors. Prices of the convertible bonds have fallen since US$300 million of them were issued in July. They last closed at US$0.6275 on the dollar on Dec 10, according to Bloomberg data. The convertible bond buyback and new loan leaves Olam with a net decrease in debt of US$41.16 million. The company will also book a non-taxable gain of about the same amount when the repurchase is completed. Assuming that Olam had repurchased the convertible bonds on Sept 30, the net debt to equity ratio for its first quarter would be a lower 2.46 instead of 2.71.

Hyflux confident of two years of record profits
Hyflux Ltd, building the world's largest membrane- based desalination plant, may post record profits this year and next as governments step up infrastructure spending to bolster economic growth, an executive said. 'With the order book that we have of more than $1 billion, we have the confidence to say that 2008 will be a record year, and 2009 can be better,' deputy chief executive officer Sam Ong said yesterday. The water-treatment company, which gets half of its sales from China, is counting on increased state spending in the world's fourth-largest economy to sustain profit growth amid the global recession. It is now in talks with two Chinese municipal governments for new orders, Mr Ong said. 'There's a long-term, bullish story' on China projects, said DBS Vickers Securities analyst Suvro Sarkar, who has a 'buy' rating on Hyflux. Profit will 'be better next year because they're pretty much covered by existing orders.' The stock, which has slumped 48 per cent this year, declined 1.8 per cent to close at $1.65 yesterday, paring an earlier loss of as much as 4.2 per cent. That valued the company at $867 million. 'We don't like to announce agreements until everything has been finalised and funding has been secured,' Mr Ong said, referring to potential orders. About 90 per cent of Hyflux's revenue is generated from government contracts, he added. Hyflux's profit more than tripled to $45.6 million in the nine months to Sept 30 compared with $13.3 million in the same period a year earlier. Mr Ong forecast on Oct 9 that orders in 2009 may expand as much as 30 per cent as governments boost spending to alleviate the impact of the credit crunch. The Chinese government said last month it plans to spend 4 trillion yuan (S$869 billion) through 2010 to protect the economy and create jobs. The stimulus package could contribute 1 to 2 per centage points to China's growth, Fan Jianping, chief economist at China's State Information Centre, said on Nov 30.

Source: Kim Eng