M1, Olam seize the moment

If what’s being said about there being boundless opportunities in this recession is true, then MobileOne’s (M1) Chief Executive Officer Karen Kooi must be relishing the challenge to make the Telco one of the region’s largest. And she is not waiting any longer to let the rest of the players in the know that she means business. First off, in a three-part initiative that shows signs of better execution, M1 has renegotiated lower network maintenance fee for the 2009 financial year, which is expected to save the company a whopping S$10m. Also even though the M1’s market share of 25.4% may have hit its bottom in the first quarter of this year, Kooi and her team have started to focus on high-end post paid plans such as M1’s Take 3 plan, which provides customers with an attractive handset subsidy to high-end users as it would be able to amortize the handset subsidy over 21 months instead of having to expense off immediately. And finally M1 has also launched very competitive data plans in June ‘09, as its own backhaul capacity starts to kick in, implying stable leasing costs despite traffic increase. Now thanks to these three initiatives, analysts from DBS Group Research, Singapore research team are buzzing at the potential cost savings that M1 can achieve. “In the fourth quarter of 2008 and the first quarter of 2009, M1 saved S$5m in each quarter in staff costs through headcount freeze, job credit scheme and lower bonuses, which may possibly continue till top line growth enters into the positive territory. In addition, M1 saved about S$3m in facilities expenses in the first quarter of this year, mainly due to lower network maintenance fee for FY09F. Overall, annual cost savings of S$25-30m in the 2009 financial year should compensate for revenue decline of S$20-25m, leading to stable financial year 2009 earnings, in our view,” said the DBS Group Research Team in a note. on Olam International.

Continuing on the theme of opportunities in a recession is Olam International’s CEO Sunny Verghese, whose firm has won the bid to purchase selected assets of major U.S. tomato processor SK Foods and its wholly owned subsidiary RHM.

Industrial/Specialty Foods, in California after a Chapter 11 auction which has been approved by the United States Bankruptcy Court in Sacramento for a cool US$39m.
On June 24, 2009, Olam had signed a “stalking horse” asset purchase agreement for the acquisition. The next day the Trustee declared Olam the successful bidder and its agreement was approved by the Court on June 26, 2009.

The court has stipulated a closing period of 11 days from the date of its approval, and hence the acquisition is expected to close by July 10, 2009. Now the reasoning behind the acquisition according to CIMB-GK’s Ho Choon Seng is that the acquisition will expand its product range. “Olam says the acquisition will expand its product range with cross-selling opportunities.

It will also offer cost savings from the consolidation of logistics and general functions, and an immediate entry into a large and profitable market. The acquisition price of US$39m is, moreover, significantly lower than the replacement cost of US$130m,” said Ho. And it is because of this that cash from its recent fundraising has put the company in a strong position to snap up further attractive assets at distress prices to gain market share and break into new markets.

Metro’s founder passes away
In much sadder news we mourn the passing of Ong Tjoe Kim, founder of Singapore’s landmark Metro Department store and Metro Holdings Limited, who passed on August 11th at the grand old age of 98.

Born in Fujian Province, China, Mr. Ong TK left China at the age of 16 and came to Singapore via Surabaya, Indonesia.

In 1953, Mr. Ong opened the first Metro Department Store in Surabaya. In 1957, Metro opened its first Singapore-based outlet, specialising in textiles, at 72 High Street, which was at that time the heart of Singapore’s shopping district. Singapore’s Treasury Building now occupies that site.

A Singapore business pioneer, Mr. Ong TK expanded operations quickly and opened the first Metro branch (Metrotext) in Liat Tower on Orchard Road in 1965. He then began building a chain of Metro Stores in Singapore, Indonesia and Malaysia.
The company has been publicly listed on the Singapore stock exchange since 1973 and is a household name across the region. Metro has become an active retail and property investment company with nearly S$1 billion in net assets and dealings in China, Indonesia, Malaysia and Singapore.