Hiap Teck ... Apr10

About 55 million shares representing close to 17% of steelmaker Hiap Teck Venture Bhd were crossed in off-market trades in April 2010 The transactions in two blocks comprising 29.6 million shares and 25.4 million shares were valued at a total of RM88 mllion or RM1.60 per share.

The 29.6 million shares or 9.05% stake block is an exact match to major shareholder United Coconut Fibre Products Sdn Bhd’s interest in Hiap Teck. Hiap Teck’s largest shareholder is KHL Sdn Bhd with a 25.8% stake while Lembaga Tabung Haji holds 6.98%.

United Coconut had disposed of 5.5 million shares or a 1.7% stake in Hiap Teck in February 2010. Hiap Teck’s managing director Kua Hock Lai is deemed interested in both United Coconut Fibre and KHL.

Hiap Teck posted a net profit of RM3.9 million for its second quarter ended Jan 31, 2010 against a net loss of RM7.2 million a year earlier as market conditions improved. However, revenue dropped 6% to RM251.4 million from RM267.3 million previously.
Hiap Teck had in March 2010 made the first tranche payment for its 55% acquisition of Eastern Steel Sdn Bhd. The first payment of RM33 million was 30% of the purchase price of RM110 million. The second tranche would be paid later April 2010.

There were concerns over its gearing which it estimated to be at 32.7% for FY10. However, the downside would be limited if the proposed venture secured an off-take agreement with Ji Kang Dimensi and technology from Jinan Iron & Steel Group for the setting up of its blast furnace plant.

Eastern Steel owns two parcels of industrial land with a total combined area of 600 acres in Kemaman, Terengganu on which a blast furnace plant would be built on. It is awaiting approval from the Department of Environment to proceed. The State Economic Planning Unit of Terengganu has also approved the alienation of 1,200 acres of land at Kemaman to Eastern Steel in two phases.

Hiap Teck has said the purchase of Eastern Steel will enable it to become an integrated player with both upstream and downstream operations, thus strengthening its position within the local steel industry and also allowed it to better manage its profit margins.