See Hup Seng to build $27m chemical hub
Construction work will begin towards year-end, and the hub is expected to be completed and operational in 2015
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Construction work will begin towards year-end, and the hub is expected to be completed and operational in 2015
By KELLY TAY
10 March 2012
Mainboard-listed See Hup Seng Ltd is planning to build a $27 million integrated chemical hub here through a joint venture with GEP Asia Holdings Pte Ltd.
The provider of corrosion-prevention services yesterday revealed that it had entered into a conditional sale-and-purchase agreement with GEP to acquire a 51 per cent stake in Eastern Tankstore (S) Pte Ltd (ETS) for $4.08 million.
ETS owns a 13,500 square metre leasehold property at Penjuru Lane, on which See Hup Seng intends to build its integrated chemical hub.
Given its existing balance lease of six years, the property’s open market value is $4.5 million. Assuming an extended lease of 30 years, this figure climbs to $11 million.
Under the present blueprint, the facility will take the shape of a four-storey hub with a gross floor area of around 25,450 sqm.
The integrated chemical hub will offer two main services: Toll blending, which includes chemical blending and filling into drums; and chemical warehousing and logistics.
Toll blending is a specialised service provided to customers who require raw materials to be processed into a final product, based on a specified chemical formulation.
Such services are rapidly gaining traction in the Asia-Pacific, driven by the region’s ever-increasing demand for chemical products.
Said See Hup Seng executive chairman Thomas Lim: ‘The integrated chemical hub will extend our business from distribution of refined petroleum products to providing value-added services of blending and logistics, which will widen our earnings base.’
‘As more refining and chemical manufacturing operations concentrate in Singapore, the growth in chemical manufacturing output is expected to drive demand for petroleum-related supporting services. We believe the integrated chemical hub will enable the group to capitalise on the business opportunities in the region, and strengthen our position in the refined petroleum industry.’
When the acquisition is completed, the purchase consideration of $4.08 million will be fully satisfied in cash, and will be funded from See Hup Seng’s internal resources.
ETS, which was incorporated here 35 years ago will then become a subsidiary of See Hup Seng.
The acquisition is not expected to have a material impact on See Hup Seng’s earnings per share or net asset value per share for the financial year ending Dec 31, 2012.
Construction work at Penjuru Lane will begin towards year-end, and the hub is expected to be completed and operational in 2015.
With estimated construction costs totalling $27 million, See Hup Seng and GEP have agreed that ‘a substantial portion of the development cost’ shall be funded through bank financing to be obtained by ETS.
Any shortfall in the required funding will be provided jointly by See Hup Seng and GEP in proportion to their shareholdings.
The counter last traded at 21.5 cents on Thursday. The group requested for a trading halt before the market opening yesterday.