TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issue manager
Comments
Lynn Kan
27 June 2012
Woes in Greece and the dry bulk shipping sector have simultaneously, and finally, washed up on the shores of Singapore-listed shipbuilder Yangzijiang.
Last week, the Chinese yard acknowledged that two bulk carriers were cancelled by its buyer. Nasdaq- listed Greek shipping company Freeseas defaulted on US$7.4 million in payments for two bulk carriers slated for delivery in Q2 and Q3 2012.
While it was on Yangzijiang’s doorstep that bad news showed up, it bears pointing out that it is Yangzijiang’s peer on the Singapore Exchange (SGX) - Cosco Corporation - which is displaying more worrying symptoms of default contagion on its order book although it has remained hitherto unmarred.
Lest Yangzijiang investors worry themselves into a tizzy, Yangzijiang’s order book is unlikely to be littered with the carcasses of defaulted and cancelled ships - for a number of reasons.
Almost immediately after the news broke, chairman Ren Yuanlin told the media that Yangzijiang had impounded Freeseas’ 20 per cent downpayment on the ships whose total contract value is about US$49 million.
While Yangzijiang has not released more details to SGX about the contract cancellation, there is already a veneer of a calm back-up plan. Either Freeseas looks for alternative financing to pay for the ships; or, worse comes to worst, Yangzijiang will have to find new takers for the newbuilds.
With ship financing tight and earnings for shipowners poor, it seems improbable that Freeseas will be the ultimate owner of the vessels.
What is more likely to happen is that Yangzijiang will look elsewhere for buyers. Cannier owners (those flush with cash) who avoided buying at the peak are out there. Even if Yangzijiang accepts a 10 per cent discount from a new buyer and the vessels are sold at about US$22 million, it will safely be able to cover its costs.
Most importantly, this contract makes up a puny one per cent of Yangzijiang’s outstanding order book.
Moreover, the chances of a recurrence are slim: a majority of Yangzijiang’s clients are actually non-European shipowners. When they are European, the ships are financed by Chinese banks that do not face the same liquidity crunch as European banks. So, vital signs point to this case of eurozone default being an exception rather than a rule.
Turning our attention to Cosco Corp, however, more alarm bells should be set off.
First of all, most of its order book is exposed to European interest. A recent DBS Vickers report in the wake of the Freeseas default noted that 60 per cent of Cosco Corp’s orders are from European or Greek shipowners.
Moreover, the Freeseas default is on bulk carriers - one of the most oversupplied and depressed shipping sectors, that is far from a quick recovery. An OCBC report pointed out that Cosco Corp has 47 bulk carriers on order, “which may be susceptible to cancellations should the operating conditions for bulk shippers worsen”. Given the poor performance of the Baltic Dry Index this year and for the foreseeable few years, Cosco Corp’s order book faces an immediate quality downturn.
Presumably, Cosco Corp has the buffer that Yangzijiang does not - it can build offshore vessels like drillships and rigs, following in the footsteps of many of the Korean yards.
But Cosco Corp’s offshore foray has been a rough ride so far. Cosco has made repeated, heavy loss provisions on its financial statements to take into account higher than projected steel prices in its offshore vessel construction projects.
Then there is the problem that lurks beneath the surface: Sevan Drilling, which is one of Cosco Corp’s customers for two drilling rigs.
In an interim Q1 update, Sevan announced a revised payment schedule on the two units to a more “backloaded” term.
It is a slippery slope. OCBC rightly noted that this may prompt Cosco’s other customers to renegotiate easier terms of payment and also increase its credit risk.
Yangzijiang expectedly took a direct hit from the Freeseas cancellation. Its stock price lost about 3.4 per cent the day after the news broke on June 20. The stock has yet to recover to pre-Freeseas levels, closing unchanged yesterday at $1.01.
Cosco Corp shares did not suffer as dramatic a dive, falling about 2 per cent to 98.5 cents the same day. That was to be expected - the threat of default is not the same as a cancellation coming to pass. The stock closed yesterday at 97.5 cents.
The difference in price reaction suggests that the market has yet to realise that a repeat Freeseas freak-out is a clearer and more present danger for one than the other.