SINGAPORE
LISTED CHINA AUTO CORP(CAC) subsidiary company
NEFTECH- POSSIBLE TURNAROUND IN THE MAKING IN 2013
SINGAPORE
LISTED China stocks or s-chips as they are popularity known have been battered
over the past couple of years and now suffer from poor liquidity and virtually
no interest. This is arguably understandable given the various governance
scandals associated with this segment.
There
is however, one China stock that is strictly speaking not an S-chip. While it
has manufacturing facilities in China, its roots are wholly Singaporean. Its
headquarters are not in Bermuda, the British Virgin Islands or some obscure
Chinese province but instead Jurong and its main shareholders, chairman, chief executive
and most senior management are all Singaporean.
The
company is China Auto Corp (CAC) which investors with memories stretch back 20
years might recall was Acma Ltd whose shares at one time in the mid-1990s
traded as high as $14. Now China Auto Corp (CAC) with its subsidiary Neftech is
researching with Russian scientists on how it can help shipping company save at
least 10% of fuel cost with the aim of reducing emissions in the midst of
global warming.
Since
January 2012, Neftech
has begun installing cavitation technology equipment on 20 ships owned and
operated by APL, a wholly-owned subsidiary of global container shipping,
terminals and logistics group Neptune Orient Lines Limited (NOL).
At a joint
briefing last week, the companies said the technology, developed by Russian
scientists, uses a fuel emulsification process that adds water to heavy fuel
oil to produce a superior emulsified fuel for ships. HFO is the low-grade fuel
used for powering the engines of ocean-going vessels. Cheng Wai Keung, NOL
chairman, said: “In today’s highly challenging business landscape, reducing
costs, increasing efficiency and lessening the environmental impact of our
operations are among the biggest challenges we face. Neftech offers a strong
value proposition.” Under the terms of the agreement, Neftech will bear the
cost of installating its fuel-saving equipment on-board the 20 ships, with
payment terms to be in the form of fuel savings and carbon credits to be shared
with APL in an agreed ratio based on proven and documented cost savings. The
installation programme is expected to be completed over the next 12 months.
In February
2012, China Auto Corp announced its intention to increase its stake in Neftech
to 48.9% by acquiring another 25% of Neftech. The Company views this latest announcement
by Neftech as another positive development in the expansion of its business
potential. This acquisition is subject to various shareholder approvals to be
obtained at an extraordinary general meeting to be convened.
This
agreement marks the first step for Neftech in moving into the land based power
plant industry. There are several thousand of these independent power producers
world wide, with many of them using heavy fuel oil to generate electricity.
Neftech has successfully installed its fuel saving equipment on several ships.
Mr
Levin said he expects Neftech, which has started marketing the technology to
other shipping companies and the power industry, to make annual revenue of
around US$1 billion. Justifying this ambitious target, Lim
How Teck, a Neftech shareholder and former NOL deputy CEO, said the company
will make a strong case for fuel savings with the shipping industry which
spends more than US$160 billion a year on fuel. This is based on their use of
nearly 370 million tons of fuel a year at an average cost of US$450 per tonne.