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Stockwatch- Rotary Engineering (S'pore) on 7 Nov 2006 proposes bonus dividend of $0.10 per share and 2-for-5 rights issue

Rotary Engineering proposes bonus dividend of S$0.10 per ordinary share and two-for-five rights issue at S$0.20 per Rights Share

Shareholders can choose to use the Bonus Dividend to subscribe for Rights Issue

Initiatives are intended to reward shareholders and to strengthen capital base

SINGAPORE, 7 November 2006 – Mainboard-listed Rotary Engineering Limited ("Rotary") today declared a bonus dividend of S$0.10 less tax of 20% per ordinary share, and proposed a renounceable, non-underwritten rights issue on the basis of two Rights Shares for every five shares held. Rotary is a leading provider of engineering, procurement, construction and maintenance services supporting the oil-and-gas and petrochemical industry.

Shareholders may elect to use all or part of their Bonus Dividend to pay for the Rights Shares, and if they use their entire Bonus Dividend for this purpose, no further cash outlay is required for the rights subscription.

Based on Rotary’s current issued ordinary share capital, the aggregate amount of the Bonus Dividend is approximately S$32.4m. Rotary expects the Rights Issue to be well subscribed, such that shareholders’ equity will remain largely unaffected by these initiatives.

The Company’s issued share capital is 405,585,000 shares as at 7 Nov 2006. Assuming all vested employees’ share options of 35,000 share options are exercised at Book Closure date, the issued share capital of the company would comprise 405,620,000 shares and up to 162,248,000 Rights Shares would be issued. With the additional shares issued, the company hopes to further increase the liquidity of its shares traded.

Each of the five substantial shareholders -- REL Investments Pte Ltd, Chia Kim Piow, Wong Oi Moi, Wong Liang Feng and Chaung Swee Khim – who hold direct interests representing a total of 55.78% of the company, has irrevocably undertaken to subscribe for the whole of its direct entitlement of Rights Shares under the Rights Issue.

Rationale for the two exercises
The Bonus Dividend is intended to reward shareholders with a cash dividend and allow the company to pass on its Section 44 tax credits to shareholders. At the same time, the Bonus Dividend will provide shareholders with an option to re-invest their Bonus Dividend by subscribing for Rights Shares.

The Rights Issue seeks to strengthen the capital base of the company following the payment of the Net Bonus Dividend. Together with the Bonus Dividend, the Rights Issue will in effect transform a portion of the Company’s retained earnings into permanent share capital.
Commenting on the exercise, Mr Chia Kim Piow, Rotary’s Chairman and Managing Director, said: "As a listed company, we are mindful of our obligation to our shareholders and we continually look for ways to create shareholder value. By paying a bonus dividend, we are able to pass on Section 44 tax credits to our shareholders."

Mr Chia is optimistic about market outlook, and is excited about the opportunities that Rotary can enjoy. He added: "Indeed, our enhanced capital position will hold us in good stead as we continue to grow our business in Singapore, the region and as we move into new markets such as the Middle East."

Rotary’s recent corporate developments
Just two weeks ago (25 October), Rotary announced S$ 15.5m worth of contracts that its wholly-owned subsidiary, Rotary IMC Pte. Ltd, had secured from Shell Eastern Petroleum (Pte) Ltd for part of the early works at its Bukom Shell Houdini Project.

In August 2006, Rotary won a S$24m contract to undertake the Engineering, Procurement and Construction (EPC) of a biodiesel process plant and its related facilities on Jurong Island to produce biofuel and other downstream derivatives for Nexsol (Singapore) Pte. Ltd., a subsidiary company of Peter Cremer (Singapore) GmBH.

Its biggest contract to date is the S$ 535million EPC contract to build an oil terminal in Jurong Island for Universal Terminal (S) Pte Ltd. Upon its completion by end 2007, Universal Terminal will be one of the world’s largest independent oil terminals, with 2.3 million cubic metres of storage capacity in 73 custom-built tanks. The Universal Terminal will be the first oil terminal in this region to have its own 12 berths, including two VLCC berths. The terminal will have dedicated inner basin with six berths for coastal and bunker vessels of up to 15,000 DWT, while the outer berths are designed with the flexibility to handle vessels up to 320,000 DWT.

The company turned in a net profit after tax and minority interest of S$16.0m for its first half ended 30 June 2006, an increase of 395% over the S$ 3.2m it made in the same period the previous year. Group turnover for the first six months of 2006 stands at S$202m, an increase of 150% over the S$80.7m it achieved in the previous corresponding period.

posted by gsg @ 1:09 PM