| GLOBAL ARIEL: A play on China's property boom |
|
| GLOBAL ARIEL: A play on China's property boom |
|
 Jason Li, Deputy President (Finance), Global Ariel, at one of the group's ready-mixed concrete plants. Picture by Dave Tan/Financial PR. A US hedge fund, however, is betting on the company, which currently has a market capitalization of nearly $300 million and supplies ready-mixed concrete to the building industry. On Oct 16, Global Ariel entered into an agreement to offer up to 29.4 million shares in a private placement to D.B. Zwirn Mauritius Trading and D.B. Zwirn Special Opportunities Fund. D.B. Zwirn Mauritius Trading is wholly-owned by D.B. Zwirn Special Opportunities Fund, L.P., a limited partnership managed by D.B. Zwirn & Co., L.P., a global alternative investments manager and merchant capital provider with over US$5 billion worth of assets under management. They are the same sources of a $100-million financing facility for Oculus in August this year to fund its expansion into renewable energy businesses. The funds will acquire Global Ariel’s shares - representing 1.77% of the enlarged share capital of Global Ariel - at 17.01 cents a share. The net proceeds from the placement are estimated to be S$4.8 million, which will be used for the construction of a multi-purpose development of mixed residential and commercial use in Suzhou.  Operations at a ready-mixed concrete plant. Picture by Dave Tan “Being the market leader of ready-mixed concrete in Suzhou gives us a strong competitive advantage over the cost of building materials, which forms a significant proportion of the costs for property development. "We will expect the synergies generated from the progression to property development and the additional revenue streams to have a positive impact on our earnings in the coming years,” said Executive Chairman of Global Ariel, Mr Sun Jianming. $115-million reverse takeoverIn its previous incarnation, Global Ariel was Ho Wah Genting International, a company incorporated in Singapore 34 years ago as Horiguchi Engineering. A series of events, including a business downturn, caused the company to become insolvent. It sought a suspension of the trading of its shares and that took effect in July 2001. Ariel Singapore, a private investment company, undertook a white knight rescue of Ho Wah Genting International in March 2004 through an injection of funds. The company changed its name to Global Ariel in March 2005. The move towards a reverse takeover of the China ready-mixed concrete business started in Feb 2006, when Global Ariel entered into an agreement to acquire Assetgold Finance, the investment holding company of 8 PRC subsidiaries in Jiangsu province. They are in the business of producing ready-mixed concrete. The group is said to be the second largest supplier in Jiangsu. Global Ariel completed the acquisition in June this year by issuing 1.15 billion new shares at 10 cents a share to Ever Universe Investments, which became the largest shareholder of Global Ariel with a 69% stake. The vendors have given a dividend guarantee of 50 per cent of the net profit of the group this year, or $5 million, whichever is greater. The executive chairman of Global Ariel is Sun Jianming, 38, while his father, Sun Jinnan, 60, is the managing director. They have a combined 34.2 % stake in Ever Universe.
 Barges transport raw materials for making cement to Global Ariel's plants, lowering costs. Picture by Dave Tan Highlights of its 1H 2007 (period ended June 30) results: * Revenue increased 13.53% (or RMB 37.3 m) as a result of a 5.6% increase in output and 10.2% rise in average selling price. * Gross profit margin was 16% versus 14.3% previously. * Profit attributable to shareholders crept up 1.8% to RMB 16.3 million. * Net asset value as at June 30 this year was 24 RMB cents. The group’s sales are primarily of ready-mixed concrete, which has a shelf-life of about four hours after it is mixed and poured into the mixer truck for delivery.  Canals are commonplace in Suzhou, threading even between homes. As a result, the group’s customers are located within 50 km of its concrete-mixing plants. The business is largely dependent on the building and construction industry in Jiangsu, a province whose better-known destinations include Suzhou city. The city has a network of rivers, which serve Global Ariel well. All of the Group’s concrete-mixing plants are located near rivers, and raw materials such as coarse aggregate, sand and cement are transported to the plants on barges. Growth drivers from Suzhou development Global Ariel’s management is of the view that Suzhou’s growing economy and increase in capital investment will lead to an increase in infrastructure and construction projects that will result in increased demand for ready-mixed concrete. Suzhou’s GDP is currently ranked fifth among PRC cities. In February 2007, the PRC government approved the construction of an underground light railway system - the Suzhou Metro - through the city of Suzhou. It is the first prefecture level city in China to gain approval for such a major project. Light railway systems have already been completed in provincial-level cities such as Shanghai, Beijing and Guangzhou. Construction of the first railway line is expected to start by the end of 2007 and be completed by 2011. This first line, starting from Suzhou National New & Hi-Tech Industrial Development Zone and ending at Suzhou Industrial Estate, stretches over 26.1km with 23 stations. The total investment involved for the first line is estimated to be around RMB9.7 billion. Based on the construction of Guangzhou Metro Line 2 (23.3 km with 20 stations) which requires a total of 1.14 million cubic metres of concrete, the amount of concrete needed for the entire Suzhou Metro Project is estimated to be around 6.8 million cubic metres.
|
