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HG Metal another Gem

knightrider
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09-Aug-2007 17:02

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Remember someone post, have confident in this counter !!!

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Financial Highlights

HG Metal may start factory in Johor to produce steel products

By Nande Khin
May 14, 2007
The Business Times

STEEL stockist HG Metal may undertake a 'mega project' on its newly acquired land in Johor that would see the company producing steel products which it is now only trading in, said CEO Wee Piew.

This would allow the group to scale down on its inventory in Singapore as it would be able to get the steel products directly from its Johor factory - a mere drive from Singapore, he said in an interview with BT.

Alternatively, it could supply these products for use in the construction of Johor's Iskandar Development Region in which its newly acquired land is located.

This piece of land, bought by HG Metal earlier this year for RM24 million (S$10.7 million), comprises five lots of land with a total land area of 26.18 acres in the Nusajaya Industrial Park in the Iskandar Development Region. The Region itself has been estimated to require an investment of US$105 billion over 20 years.

The scale of such an investment, noted Mr Wee, is much bigger than those of Singapore's integrated resorts combined, and hence the construction activities - and the demand for steel products - would also be much more.

Mr Wee would not name the type of steel products which HG Metal is considering producing. Looking at the products the group has been trading, one likely possibility is steel plates since the sale of this product contributes to about 50 per cent of HG Metal's total sales.

'But the only thing is that such a project would be very big and we would have to think about how to finance it,' said Mr Wee, stressing that this mega project is only one of a few possibilities HG Metal is mulling over with regard to the use of its Johor land.

Another option HG Metal is looking at is to 'go small' and carry out different activities on each of the lots. For example, the group can make steel pipes, which does not require much land, and have warehouses on the other plots of land for its stockist business. 'So it would be like a replication of our Singapore operations,' said Mr Wee.

Steel pipes are, along with steel lip channels, the only products that HG Metal currently manufactures. Its manufacturing operations only contributes to about 6 per cent of its turnover. Its trading (stockist) activities contribute to about 93 per cent of turnover.

The group is carrying out feasibility studies on its Johor land to decide on which plan would be best. 'First, it depends on financial resources and how much we can commit. And second, it depends on what it makes sense for us to do,' said Mr Wee. All this is part of HG Metal's strategy to grow bigger in size. 'We feel that the steel industry itself is changing, it's become that size does matter as can be seen from the the global trend of consolidation in the industry,' Mr Wee said.

'Also, the steel industry is becoming more transparent and competitive, and it's moving towards a more efficient way of selling. We want to move towards a certain size, so that we can attain economies of scale. If you are a bigger player, you can get bigger quantities and more discounts, as well as better rates for transportation - which is an important consideration in this industry because steel is bulky and transportation is an issue.'

However, he could not say what is an ideal size for HG Metal, although he reiterated the group's target is to hit at least $500 million in annual sales by 2009.

The group is already 'moving towards that direction' as can be seen from its recent results, he said.

HG Metal last Friday reported a near 70 per cent increase in first-half earnings to $7.6 million, boosted by higher steel prices and a strong demand for steel products from the shipbuilding and ship repair sector as well as the construction industry.

The group's turnover was up 23.55 per cent to $214 million, fuelled by strong sales from its steel trading segment which accounted for about 93 per cent of revenue. The rest was contributed by HG Metal's manufacturing segment which makes steel pipes and mild steel lip channels. Gross margin improved significantly from 4.2 per cent to 9.4 per cent.

Shareholder funds as at March 31 stood at $77.3 million, compared to $59.4 million as at Sept 30, 2006. This beefing up of its funds is in tandem with the group's expansion plans, said Mr Wee.

The increase in funds was due to the retention of profits, the completion of a rights issue as well as the partial conversion of a convertible loan from OCBC Bank.

To date, OCBC has fully converted the loan of $10 million to 31.17 million new ordinary shares.

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limhpp
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08-Aug-2007 08:29

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The placement share of $0.52 is done before market correction. This shows that people are confident in this counter; all 37 million shares are fully placed.

Smiley

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totoro
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08-Aug-2007 08:28

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Bigman..

Take note that 6/8/07 announcement is just the completion of the share placement which HG announced in 23/7/07. Not a new placement. In july the price was around 51-54 cents. That's why placement was at 52.

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idesa168
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07-Aug-2007 23:58

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Value of a stock is what the mkt perceive its worth. There is under value of a stock in the stock mkt, all driven by greed and fear.

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Bigman
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07-Aug-2007 23:40

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If placement share is $0.52, then why not buy from market share???

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iTrader
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07-Aug-2007 20:23

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knightrider, best of luck!!

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knightrider
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07-Aug-2007 16:05

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I still trust this is a good counter to hold, I am holding it tight and when rebound or come to Sep is their annual financial yearly result. It should be positive thus they are building the warehouse plus the placement share of S$0.52. I think it is now a good chance to hold and accumulate it, correct me if I am wrong. Good Luck.

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BlackStallion
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07-Aug-2007 15:59

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Looks oversold and undervalued.

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iTrader
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06-Aug-2007 20:43

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knightrider, market still dropping. Is it not too risky to buy 50lots at 0.43?. Do you see an upside soon ?.

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novicetrader
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06-Aug-2007 13:16

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Look at it this way, which stock does not drop. Thay all drop in tandem. The million dollar question is why should the asian markets be affected by the DJI when the asian economy is doing so well. In the past the saying was that when the US sneezes the whole world catches a cold. BUT look at the China market.

It could be panic selling.

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knightrider
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06-Aug-2007 12:05

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This real too much, ilogical, placement share all snap up by others at S$0.52 and share drops so crazy. I just bought another 50 lots at S$0.43 this morning !!! Good Luck.

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BlackStallion
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06-Aug-2007 00:27

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http://www.listedcompany.com/ir/hgmetal/newsroom/PressRelease_03.08.2007.pdf

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BlackStallion
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24-Jul-2007 11:05

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Accumulating at 0.53

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novicetrader
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24-Jul-2007 09:23

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Sound decision. Right move.

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knightrider
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24-Jul-2007 09:03

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The right issues $$ is fully used, thus not much $$$ left , thus need to placement to get $$$ again !!!

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mpeg444
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24-Jul-2007 01:24

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better run if 2moro it go up abit, or got to hold long term liao......might go down to 48 or lower, not all placement will be gd to the counter, sometime was a plot btw the company director + the banker...and we the retail investers got to hold at high price....so all bru pls act smarter....

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BlackStallion
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24-Jul-2007 00:03

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LeeMetal after placement at 0.21, went up to 0.27 and this week 0.335.

HG placememt at 0.52, with the strong fundamental and gd mgmt, I only see more upside potential than downside risk.

Good luck for those who vested! Hold on for the rocket ride!

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ryantka
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23-Jul-2007 23:27

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Its not exactly good news, nor bad news either, they need fresh funds for the construction of new warehouses. Given the high gearing ratio of the company, funding by equity is a better choice than funding by debt. In my humble opinion, its a right decision by the company.

The Company intends to use the Net Proceeds in the following manner: (i) approximately S$12.0 million to finance construction of new warehouses, acquisition of machineries and related expenses; and (ii) the balance for general working capital purposes. Pending the deployment of the Net Proceeds, such proceeds may be placed as deposits with banks and financial institutions or invested in short term money market or debt instruments or for any other purpose on a short-term basis as the Directors of the Company may in their absolute discretion deem fit from time to time.

Based on the unaudited consolidated financial statements of the Group for the six months ended
31 March 2007 (as announced by the Company on 11 May 2007), the Group?s net asset value
per Share was approximately 29.47 cents as at 31 March 2007. Assuming that the Placement
had been effected on 31 March 2007 and that all the 37,000,000 Placement Shares are issued on
the same date, the Group's net asset value per Share, after adjusting for the issue of the
Placement Shares, would be approximately 31.99 cents.

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alexmay
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23-Jul-2007 20:47

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The Board of Directors of HG Metal Manufacturing Limited (the ?

that the Company has today entered into a placement agreement (the ?

with CIMB-GK Securities Pte. Ltd. (?

Company has agreed to issue up to 37,000,000 new ordinary shares (?

the Company (the ?

to subscribe and pay and/or procure the subscription and payment for the Placement Shares, at

an issue price of S$0.52 per Placement Share (the ?

aggregate consideration of up to S$19.2 million, and on the terms and conditions of the

Placement Agreement.

The Placement Price represents a discount of approximately 3.47% to the volume-weighted

average market price of S$0.5387 for each Share, based on trades done on the Main Board of

the Singapore Exchange Securities Trading Limited (the ?

on 23 July 2007

prior to the signing of the Placement Agreement).

The Company will pay to the Placement Agent a placement commission of 3.75% of the

Placement Price (and any applicable goods and services tax thereon) for each Placement Share

for which the Placement Agent procures subscription and payment.

Hope this helps

Company?) wishes to announcePlacement Agreement?)CIMB-GK? or the ?Placement Agent?) pursuant to which theShares?) in the capital ofPlacement Shares?) and CIMB-GK has agreed to use their best endeavoursPlacement Price?), amounting to anSGX-ST?) from 9.00 a.m. to 4.00 p.m.1 and for the full market day on 20 July 2007 (being the preceding market day

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fruitty
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23-Jul-2007 20:30

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Is HG placing out 37,000,000 shares at $0.52 to institutions?

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