EDBI replacing Temasek? Is CWT a gd bet?

In EDB, Logistics, Temasek on 05/02/2010 at 5:16 am

(Update on 1 December: See link to November 2010 post at end of article)

Remember last yr when Temasek revised its charter and took out something about “growing our own companies” (my words, not theirs)?

The local MSM, bloggers and various chatter-boxes moaned and wondered who would replace Temasek in its nurturing role?

Well last week, we may have gotten an answer: though based on the silence of the  chatterliterati, they did not know, or care, that their question might have been answered.

EDB Investments (EDBI) took around 2.7% of CWT’s enlarged capital, paying S$12.6 million.

According to a CWT statement, the investment arm of the  Economic Development Board subscribed to 16 million new shares in the company at $0.788 per share. The issue price represented a discount of nearly 10%  to the counter’s weight-average price of $0.875 the previous  Friday.

Net proceeds from the sale would be used to finance CWT’s long-term expansion.

For those not familiar, CWT offers integrated logistics services to commodities and chemical companies, in addition to providing international freight forwarding. It claims to have the largest container yard capacity in Singapore with four container depots.

Now all these activities are activities that the EDB wants to promote here. So you can the fit.

The transport and storage industries account for 9% of Singapore’s GDP (gross domestic product) and employed about 182,000 people in 2008: quite a contribution neh?

And, as BT said “the competitiveness of Singapore’s trading and export-orientated manufacturing industries depends on a strong logistics industry that can offer high value, integrated supply chain services to connect Singapore with the global markets.”

Other good reasons to invest in CWT

So the EDBI could be the new patron, investing in strategic local companies. I cannot recall any other non-high tech or biotech listco or private company that has in the last 20 yrs attracted EDBI investment.

As to whether CWT is a gd investment, well I’ve not seen a negative broker’s report. For those that cover it, the following from Kim Eng is typical

‘Cache is king: The proposed Reit, which will be named Cache Logistics Trust (CLT) will mainly invest in logistics-related real estate in Asia-Pacific. CWT will have a joint-stake with ARA Asset Management in the Reit manager and property manager. The initial portfolio of six properties will also include four properties owned by C&P, the majority shareholders of CWT.

‘One-off gain of $157.7 million: Of the $443 million purchase consideration, an estimated $65 million will be satisfied in the form of CLT units, with CWT holding about 12.2 per cent of CLT upon listing. Upon using $154.3 million to partially repay debt, the Group will receive a net $224 million and we believe shareholders could receive a bumper payout of $0.15/ share ($88.5 million) in special dividends.

‘Sweet deal for CWT shareholders: We like the structure of this deal, as CWT gets to unlock value of the two properties, while still retaining the rental revenue as well as significant control through the managers. There is no significant impact on accounting profit as we understand the effects of rental payment will likely balance out with lower net depreciation/ amortization.

‘Not time for you to cash in yet: We have upgraded our target price to $1.23 (previous $1.08), taking into account our estimated special dividend of $0.15/ share. With FY2009 results due to be published this month, we have kept our forecasts for now. Upon receiving the proceeds (we estimate three months from now), we expect management to utilise them towards more earnings accretive projects/expansion which could provide earnings upside.


CWT is on my to watch list.

Related post (Results not as gd as expected but brokers’ still bullish)

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