Listed Companies' Announcement
FEDERAL INTERNATIONAL (2000) LTD
Increase in interests in PT Gunanusa Utama Fabricators
The Directors of Federal International (2000) Ltd (the "Company" or Federal) are pleased to announce that Federal Hardware Engineering Co Pte Ltd ("Federal Hardware"), a wholly owned subsidiary of the Company intends to increase by 10% of its interests in PT Gunanusa Utama Fabricators ("PTG"), a company incorporated in the Republic of Indonesia.
Details of Transaction
The Company through its subsidiary Federal Hardware currently has interests in 200 shares in PTG, representing 10% of the paid-up capital of PTG. It has been agreed that the Company would increase its interests in PTG via an injection of funds of US$1.5 million (or approximately S$2.7 million) in cash (the "Proposed Transaction").
The purchase consideration of US$1.5 million was negotiated based on a willing buyer and willing seller basis, valuing PTG at US$15 million (or Rp 144 billion, based on the then prevailing exchange rate of US$1 to Rp9,600 at the time of negotiation). Factors taken into consideration on the valuation of PTG included the following:
1) Based on the adjusted Net Asset Value ("NAV") of PTG as at 31 December 2000, and taking into consideration the appraisal value on land and building, the NAV of PTG would be between Rp163.0 billion to Rp172.3 billion. The revaluation was computed as follows:-
|NAV as at 31 December 2000|
Based on the audited accounts of PTG, the NAV as at 31 December 2001 is Rp90.9 billion without taking into account adjustments to inventory, investments and revaluation surplus.
2) Based on the adjusted earnings* of PTG for the year ended 31 December 2000 of approximately Rp19.4 billion and assuming a PE ratio of between 5 to 8 times, the valuation of PTG would be between Rp97.0 billion to Rp155.2 billion. For the year ended 31 December 2001, the earnings of PTG based on the audited accounts of PTG is Rp17.9 billion.
* The audited earnings of PTG for the year ended 31 December 2000 of Rp22.1 billion was adjusted for revaluation losses and depreciation resulting in adjusted earnings of Rp19.4 billion.
3) Based on PTG's stated turnover capacity of US$40-50 million and assuming normal earnings after tax of 6% and capacity utilization of 80%, the valuation of PTG (based on the PE ratio of between 5 to 8 times) would be between US$9.6-15.4 million to US$12.0-19.2 million.
The Proposed Transaction will be funded through Federal's internal resources. The injection of funds will be by way of Federal Hardware granting a loan of US$1.5 million to PT Federal International, a company being incorporated in Indonesia. PT Federal International will utilize the loan proceeds to acquire the new shares to be issued by PTG. PT Federal International will grant a call option to Federal Hardware to acquire its shareholdings in PTG at an exercise price of US$1.5 million. The call option will commence on the date the option is granted and end on the date when the option is exercised.
Completion of the proposed transaction is subject to the execution and completion of the necessary legal documentation to effect to the above.
Information about PTG
PTG is a leading Indonesian fabrication yard involved in large turnkey projects for offshore platforms, container cranes, boilers and pressure vessels. PTG started its operation in 1983 as a private company, specializing in turnkey execution of energy related and industrial plan project. PTG's facility consists of 190,000 sqm of land with 800 metres of waterfront, complete with two 2,600 tons and 5000 tons loading and unloading jetties, and 10,000 sqm covered workshop. PTG provides engineering, procurement, construction/fabrication and installation services to the following industries:
- Oil & gas
- Petrochemical & chemical based industry
- General heavy industries
- Agro based industries
- Infrastructure and material handling equipment
- Site construction
Waiver from SGX
The net profit attributable to the interest acquired in PTG will exceed the threshold requirements of Clause 1007 of the Listing Manual. The Company has applied for and has been granted a waiver by the Singapore Exchange Limited from the requirement to seek shareholders' approval under Clause 1007 of the Listing Manual for the Proposed Transaction.
Rationale for Transaction
The increase in investment in PTG will foster closer ties between the two companies, and allow for more opportunities for cooperation. The Directors of the Company believe that the core activities of Federal and PTG are complementary; PTG undertakes industrial engineering projects while Federal is principally a manufacturer and dealer in flowline control products and its related equipment.
The Company is actively expanding its business activities in Indonesia and the Company foresees an active market springing from the exploration and development of new sources of energy. The injection of funds is to assist PTG in expanding its fabrication plant and to set up a logistic and backup service depot in Indonesia. The Company has an existing EPC contract with PTG to jointly undertake large projects in the region. The Directors believe that increasing its shareholding in PTG represents a greater commitment to PTG.
Financial Effects of Transaction
Purely for illustration purposes only, based on the Company's consolidated results for FY2001 and assuming the Proposed Transaction had been completed on 1 January 2001, the financial effects of the Proposed Transaction are presented below:-
|As at |
31 December 2001
|Pro forma after the proposed acquisition|
|Earnings per Share|
|Profit after Tax and MI||$917,701||$1,901,080|
|No. of Shares||175,243,875||175,243,875|
|Earnings per Share||0.52 cents||1.08 cents|
|Net Tangible Assets|
|No. of Shares||175,243,875||175,243,875|
|NTA per Share||23.71 cents||24.53 cents|
|Total Liabilities ||$33,165,549||$33,599,552|
|Gearing ratio||0.76 times||0.75 times|
Interest of Directors and Substantial Shareholders
Mr. Iman Taufik, a director and shareholder of the Company (holding 70% equity interest) of PTG is also a Director and shareholder (by virtue of his deemed interest in approximately 2% shareholding in the Company held by his wife) in the Company.
Save as disclosed above, none of the Directors or substantial shareholders of the Company has any interest, direct or indirect, in the transaction. There is no director to be appointed to the Board of the Company in connection with the Proposed Transaction.
The Proposed Transaction is exempted from the requirements of Chapter 9A of the Listing Manual as Clause 9A07 exempts from the requirements of Chapter 9A transactions between the Company and another person, where there are no other interested relationships except for common directorships and the directors who have common directorships have in aggregate less than 5% of the shareholdings in either the Company or that other company.
As stated above, Mr Taufik's deemed interest in the Company is less than the 5% threshold.
Information about the Company
Federal International (2000) Ltd. (the "Company") is listed on the Singapore Exchange Ltd ("SGX") in year 2000. The Group was initially a value added distributor and provider of turnkey EPC (engineering, procurement and construction) solutions for oil and gas, petrochemical and refinery industries. Through recent investments and acquisitions, the Company now engages in the following core businesses through its subsidiaries:
- Design, manufacture, assembly, distribution and provision of flow-line control products and services;
- Research and development, design, manufacture and distribution of high pressure and temperature valves and related oilfield products;
- Distribution of fire protection and detection systems; and
- Provision of IT services and distribution of electrical products.
By Order of the Board
Submitted by Chng Geok, Company Secretary on 28/06/2002 to the SGX