kim heng eyes m&as for expansion
TRANSCRIPT
COMPANY MEETINGS
COMPANY MEETING PLACE DATE TIME
E2-Captial Hldgs E 120 Robinson Rd
#08-01 02-Jun 2.00pm
Global Yellow Pages E 450 Lorong 6
Toa Payoh Hersing Centre
Level 3 02-Jun 10.00am
Sunvic Chemical E EDB Room
Lower Lobby
The Fullerton Hotel S'pore
1 Fullerton Square 03-Jun 10.00am
SuperBowl Hldg A Ramada Singapore
Level 2
Zhongshan Meeting Room
16 Ah Hood Road
Zhongshan Park 03-Jun 11.00am
Noble Group S Ballrooms 1 & 2
Amara Singapore Hotel
165 Tanjong Pagar Road 05-Jun 10.00am
Xinren Aluminum E Millenia 2
Level 2
The Ritz Carlton Millenia S’pore
7 Raffles Avenue 06-Jun 10.00am
Tritech Group E 31 Changi South
Avenue 2 11-Jun 10.00am
ISR Capital A 20 Martin Road #10-01 12-Jun 11.30am
E Seng Kee Building 12-Jun 12.30am
Cedar Strategic A 20 Havelock Road
Central Square
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Conference Room 1 14-Jun 10.30am
Chemical Industries A 3 Jalan Samulun 18-Jun 10.30am
Etika Intl E Crystal Suite
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Holiday Inn Singapore
Orchard City Centre
11 Cavenagh Road 20-Jun 10.00am
A: Annual , E: Extraordinary , G: General, S: Special, W: Warrantholders
BANKS %
Agricultural Bank Of China .......... 5.50
ANZ Singapore ........................... 5.50
Bangkok Bank Public Co. Ltd ....... 6.00
Bank of China Limited ................ 5.50
Bank of Communications ........... 5.50
Bank of East Asia ......................... 5.75
Bank of Singapore ........................ 5.50
Bank of Taiwan ........................... 6.00
Bank of Tokyo-Mitsubishi
UFJ, Ltd .................................. 6.00
Banque Internationale a
Luxembourg ........................... 6.00
Barclays Bank PLC ........................ 5.50
BNP Paribas ................................. 6.00
Chang Hwa Commercial Bank ..... 5.50
China Construction Bank Corp ..... 5.25
CIMB Bank Berhad .................... 5.50
Citibank NA ................................. 5.50
Credit Agricole Corporate and
Investment Bank ..................... 5.75
Credit Industriel ET
Commercial ............................ 6.00
Deutsche Bank AG ...................... 5.50
DBS Bank .................................... 4.25
DNB Bank ASA ........................... 6.00
Far Eastern Bank ......................... 5.00
First Commercial Bank ................ 5.75
Habib Bank ................................. 6.00
HL Bank ..................................... 5.75
HSBC ........................................... 5.50
HSBC Private Bank
(Suisse) SA ............................... 5.50
Hua Nan Comm Bank ................. 5.50
Indian Bank ................................ 5.50
Indian Overseas Bank ................. 5.50
Industrial & Commercial
Bank of China ......................... 5.00
Intesa SanPaolo SPA .................... 4.00
Korea Exchange Bank ................. 5.75
KBC Bank N.V. ........................... 5.50
Land Bank of Taiwan .................. 6.00
Landesbank Baden-Wuerttemberg
.................................................... 6.00
Lloyds TSB Bank Plc ................... 6.25
Maybank .................................... 5.25
Mega Inter'l Commercial Bank
Co Ltd .................................... 5.25
Mitsubishi UFJ Trust & Banking
Corp, ...................................... 6.00
Mizuho Bank Ltd ....................... 6.00
Natixis ......................................... 6.00
Norinchukin Bank, The ............... 6.00
Nordea Bank Finland PLC ........... 6.00
OCBC Bank ................................ 5.00
Philippine Nat Bank ................... 6.75
PT Bank Negara Indonesia
(Persero) TBK .......................... 6.00
PT Bank Mandiri
(Persero) Tbk .......................... 6.00
Rabobank International ............... 5.25
Raiffeisen Bank International
AG ........................................... 6.00
RHB Bank Berhad ....................... 5.70
Royal Bank of Canada ............... 4.75
Royal Bank of Scotland plc .......... 5.50
Skandinaviska Enskilda Banken ... 5.75
State Bank of India .................... 6.00
Standard Chartered Bank ............. 5.75
Sumitomo Mitsui Bk Corp ............ 6.00
Sumitomo Mitsui Trust Bank Limited
Singapore Branch ........................ 6.00
Svenska Handelsbanken ............ 6.00
The Siam Comm Bank
P Co Ltd .................................. 6.00
UCO Bank .................................. 6.00
United Overseas Bank Ltd ......... 5.00
Woori Bank ................................. 8.25
Source: The Association of Banks
in Singapore
FINANCE COMPANIES
Hong Leong Fin (PLR) ................ 6.88
Hong Leong Fin (EBR) ................. 4.75
S'pura Fin (BLR) .......................... 6.63
Sing Inv & Fin (PLR) .................... 5.35
EBR: Enterprise Base Rate
BLR: Base Lending Rate
IN the corporate world, it has long beenthe norm to have procedures for regu-lar appraisal or evaluation of both staffand departments at various levelsthroughout the organisation.
It is only logical that the board of direc-tors – being the highest governing body ofa company which controls major resourc-es, both financial and human – should alsobe subjected to a regular evaluation pro-cess.
The Singapore Code of Corporate Gov-ernance states that: “There should be a for-mal annual assessment of the effectivenessof the board as a whole and its board com-mittees and the contribution by each direc-tor to the effectiveness of the board.”
It is also recommended that a write-upof the board evaluation process be includ-ed in the company’s annual report.
The processBoard evaluations are typically basedaround directors rating themselves, theother directors and the collective board, aswell as the three principal committees (Au-dit, Nomination and Remuneration). Thisrating is done on a series of questions relat-ed to their responsibilities and functions asa board.
The results of this rating are then com-piled and analysed and a report deliveredto the Nominating Committee or the board.
There are two basic areas to look at inboard evaluation: people factors and pro-cess factors. People factors tend to be byfar the more important of the two in achiev-ing an effective board.
On the people front, questions thatshould be asked include: How do the direc-tors work as a team; what are their inter-personal skills; and is there a dominantchairman or CEO.
Process factors deal with things such aswhether appropriate, timely and unbiasedinformation, of the right length and quali-ty, is provided to the board; whether thereare sufficient board and committee meet-ings; and if they are conducted in a man-ner that ensures open communication,meaningful participation and timely resolu-tion of issues.
Over-arching the people and processquestions are those which are broader andmore strategic. Questions such as:
◆ Has the board set itself clear perform-ance objectives and how well has it per-formed against them?
◆ What has been the whole board’s contri-bution to the testing and development ofstrategy?
◆ What has been the board’s contributionto ensuring robust and effective risk man-agement?
◆ Is the composition of the board and itscommittees appropriate with the right mixof knowledge and skills sufficient to maxim-ise performance in the light of future strate-gy?
Ensuring effectivenessFor the exercise to be of value, thereshould be a firm commitment and beliefthat formal annual evaluations and followthrough of findings would go a long way tohelping the board improve its own per-formance.
Therefore, serious thought and ade-quate time should be put into answeringthe questionnaires. Honesty is also impor-tant. To that end, directors are encouragedto articulate their views to support or justi-fy the ratings they provide.
Well conducted evaluations have the po-tential to achieve various benefits, amongother things, helping the board to:
◆ Confirm that it has a suitable balance ofskills and other attributes and focusing at-tention on the attributes required in anynew director;
◆ Focus on any inadequacies;
◆ Identify strategic priorities;
◆ Develop skills, knowledge and under-standing in the individual directors;
◆ Review its practices and procedures tobecome more efficient and effective.
Based on the results of the evaluation, awork programme incorporating recom-mendations that are to be undertaken,specifying who are responsible for whichrecommendations and the deadline for therecommendations to be implementedshould be developed.
This provides a formal accountabilityand project plan for the board, which ismore likely to result in the recommenda-tions being put into action.
In practiceIn Singapore, board evaluation is typicallydone on the board as a whole. Self andpeer evaluations are avoided, probably be-cause of our Asian culture which treasurespoliteness, humility and avoidance of con-flict.
What is also not usually done is an eval-
uation of each director by the board chair-man and of the board chairman by the di-rectors. This, in my view, should be under-taken as boards mature.
The engagement of external facilitatorsand professional consultants to gather andanalyse the findings can help to instillgreater discipline and improve objectivityin the process. However, this is not normal-ly done due primarily to cost considera-tions.
The most recent SID-SGX Board of Di-rectors Survey 2013, which polled listedcompanies in Singapore, showed thatthere has been a shift from results-orient-
ed emphasis of performance criteria to-wards more process-oriented factorswhen appraising boards.
The main challenge faced by boards inexecuting board assessment is the per-ceived challenge of having a rigorous pro-cess to pursue substance over form.
To further raise the level of corporategovernance, transparency and accountabil-ity in Singapore, it is time to enhance therigours of board evaluation by introducingsome of these steps.
The writer is the second vice-chairman ofthe Singapore Institute of Directors
For more articles, go to btd.sg/BMatters
KIM Heng Offshore & Marine(Kim Heng) is exploring somemerger and acquisition (M&A)deals to expand its business,particularly to grow its sup-ply-chain services to the off-shore sector.
Thomas Tan, the compa-ny’s executive chairman and CEO, tells TheBusiness Times that the company has a “cou-ple of M&A (deals) in the pipeline”, whichwould “strengthen and also increase (our)market share in the supply-chain (segment),both locally and overseas”.
Kim Heng’s core business lies in the off-shore rig services, but according to Mr Tan itis also looking to grow its profitable sup-ply-chain management segment to ride onthe growth of offshore services.
“It is all related to rig support and we arelooking to provide more (supply-chain man-agement) services in-house. Some of these ser-vices we do not have, and (there are) areaswhere we could expand our resources andstrength. So by doing the M&As it will help usto do more,” Mr Tan explains, in an inter-view.
The group listed on the SGX in Januarythis year at 25 cents per share for 174 millionshares, to give it a market capitalisation of$177.5 million. It was a popular IPO with in-vestors, as its share offering, which was 5.8times subscribed, jumped as much as 28 percent in price on its debut.
Yard extension
This backing by investors and cash proceedsfrom the listing has encouraged the companyto expand. Mr Tan discloses that part of thecash proceeds would be used to finance M&Aactivity.
It would also go towards the proposed ex-tension and enhancement of the company’syard, for which it is currently awaiting JTC ap-proval, Mr Tan confirms.
Kim Heng’s continued growth and strongfinancial performance would continue to un-derpin investor confidence, Mr Tan believes.
For its first quarter ended March 31, KimHeng’s net profit grew 16 per centyear-on-year to $3.9 million as revenue alsoincreased 10 per cent to $23.6 million. Thiswas on the back of higher revenue from itschartering and towage services, as well as itsmarine offshore support services.
Kim Heng’s strong financial results couldspill over into subsequent quarters, as MrTan suggests that yards in Korea and Chinacontinue to build rigs to be deployed.
“We see continued delivery of rigs fromthese yards and also from Brazil and Africa tothis part of the world. Everybody is looking to
the region because Asia is a energy-hungry re-gion where everyone is trying to maximise do-mestic production. So we expected that activi-ty will increase in the next six months to ayear.”
Mr Tan is optimistic that charter rateswould also continue to rise as offshore sup-
port activities increase in tandem with the in-crease in rigs being deployed, giving KimHeng’s revenue prospects a boost.
He admits, however, that there is a chanceof a base-case scenario as there is risk ofsome over-capacity developing in the rig mar-ket, particularly in the jack-up and drill shipfloater market.
Even so, Mr Tan points out that such a sce-nario is unlikely to affect Kim Heng’s pros-pects. “For us, we are providing rig services,so whether the rig is stagnant and looking forwork or doing work, they still need servicesfrom us to support the rig. In that sense, weare indispensable to the drilling contractorsas they need people to run the rigs – suppli-ers, welders, cleaners or to send a piece ofequipment to the rig.”
Robust outlookOverall, Mr Tan has targeted a 20-30 per centgrowth for Kim Heng in the next one year ashe highlights that the global drilling outlookremains very robust.
The group has secured forward commit-ments of over $40 million with Mr Tan reveal-ing that these comprise projects for rig servic-ing and maintenance and supply contracts,with most of them to be recognised in thenext “two or three months”.
Mr Tan adds that these projects are fornew rigs that are currently being built as wellas for existing ones in operation. He expectsthese forward commitments to grow as thereare rigs coming in from Europe towards theend of the year.
With offshore services and rig demand con-tinuing to grow in the region, Kim Heng’splanned expansion could lead it to be at theright place at the right time. And its IPO hasgiven it the financial muscle that it needs toachieve its goals.
[email protected]@MalminderjitBT
PRIME LENDING RATES May 30
Board evaluation –more can be doneThe main challenge is the perceived difficulty ofhaving a rigorous process. By YVONNE GOH
Substance over form: The engagement of external facilitators and consultants togather and analyse the findings can help to instill greater discipline. PHOTO: FREEIMAGES
Firm wants to use such deals to strengthen and increase its market share in supply-chain segment, reports MALMINDERJIT SINGH
Mr Tan: Kim Heng is looking to growits profitable supply-chain managementsegment to ride on the growth ofoffshore services. FILE PHOTO
TOPLINE
Kim Heng eyes M&As for expansion
4 COMPANY NEWS The Business Times, Monday, June 2, 2014