Singapore Companies
Published February 12, 2007

Chip Eng Seng eyes more deals

SINGAPORE construction and property firm Chip Eng Seng, which has teamed up with Lehman Brothers to develop property, said it plans to tie up with the investment bank on more projects amid a booming market.

Tall order: The builder of the Housing and Development Board's 50-storey-high Pinnacle @ Duxton, expects its order book to grow to S$800m in the next 3-4 years

Chip Eng Seng's executive director Raymond Chia said in a recent interview that the partnership would give them more resources to undertake larger projects.

'We like to have joint ventures to spread out risks,' said Mr Chia, the son-in-law of company founder and executive chairman Lim Tiam Seng. 'We want to move forward but at the same time, we have to be prudent.'

Last July, the firm formed a joint venture with US investment bank Lehman Brothers' private equity real estate fund - Lehman Brothers Real Estate Partners II - to develop properties in Singapore including two high-rise apartment blocks in Singapore's prime and suburban districts.

Singapore's smaller real estate firms are scouting for bigger partners in order to improve their chances against property giants such as CapitaLand and City Developments in the city-state's land auctions.

Besides Lehman Brothers, Chip Eng Seng has also joined up with Chicago-based hedge fund Citadel Investment Group to develop properties in Singapore. Sing Holdings tied up with United States-based fund Forum Partners.

Chip Eng Seng, which means 'united and eternally successful' in Mandarin, has developed five high-rise residential apartments since it ventured into property development in 2001.

With a market value of US$162 million, Chip Eng Seng ranks sixth out of 23 companies in the Singapore Construction Index . Its stock has nearly doubled over the past six months.

Although two-thirds of the firm's profits come from property development, Mr Chia said he remains focused on construction amid a recovery in the city-state's building market.

Chip Eng Seng is building Pinnacle@Duxton, Singapore's tallest public housing apartment block with 50-storeys and a sky bridge.

Peter Khoo, the firm's chief financial officer, said the builder's current order book stands at S$560 million, adding that it might grow to S$800 million in the next three to four years.

Mr Chia declined to give a profit forecast. However, he said that UOB Kay Hian's forecast of a S$36 million net profit for 2007, is 'close enough'. UOB Kay Hian forecast a net profit of S$12.3 million for 2006. Chip Eng Seng is due to report its full-year earnings on Feb 13.

Singapore's two planned casinos, which are due to open in 2009-2010 and cost a total of US$6.6 billion, will generate more business for local construction firms, and Mr Chia said that he hopes to make an acquisition in the sector to benefit from that demand. 'Foreign companies that come in would likely need a local firm to help them execute the project. They would need specialist sub-contractors as it'll be extremely expensive to bring theirs in,' he said.

'To me, the best way for an expansion plan is not through organic growth, I would have to go into acquisitions.'

Mr Chia said that the company plans to issue a two-year bond of up to S$150 million in tranches to finance its current projects, acquisitions and for working capital. - Reuters