United Fiber surges as stalled mill gets going

New Chinese partner set to sign turnkey contract for pulp mill

SHARES in United Fiber System surged as much as 15 per cent in trading yesterday as a long held-up billion-dollar pulp-mill project looks set to start taking shape with the expected signing this week of a turnkey contract with a new Chinese partner.

The stock of the forestry, pulp and construction company closed trading at 29.5 cents, up 13.5 per cent or 3.5 cents, after hitting an intra-day high of 30 cents. Some 153.7 million shares changed hands for the day.

Since end-February, the counter has been on an upward trajectory on the back of record order books for its wholly owned subsidiary Poh Lian Construction. The unit saw a 58 per cent surge in its order books to $550 million after winning a $202 million building contract from UOL, which was expected to contribute positively to group revenue this year.

United Fiber has also seen a substantial shareholder gradually raising its stake in the company. On Thursday last week, Lee Pineapple Co - through wholly owned subsidiary Paramount Assets Investments Pte Ltd - raised its holding to 7.14 per cent.

'I believe the Lee family will continue to buy after becoming a substantial shareholder (in March). They are not the only ones who look like they'll be increasing their stake. I suspect there will be more,' a local house trader was quoted as saying by Dow Jones Newswire yesterday.

This stake increase also came ahead of the finalisation this week of the turnkey contract to build a US$863 million (S$1.19 billion) greenfield pulp mill in South Kalimantan in Indonesia - a tie-up between United Fiber's unit PT Marga Buana Bumi Mulia and China MCC20 Construction Co Ltd.

China MCC20 will be responsible for the design, procurement and supply of all machinery and equipment, civil work, and the installation work as well as providing supplier's credit for the project.

The contract with the new Chinese partner, which was announced on Feb 24, helped allay investor concerns about the project which was long held-up over regulatory clearance by both the Indonesian and the Chinese governments.

The delay led to the earlier contract with China National Machinery & Equipment Import & Export Corp being aborted and the new contract with China MCC20.

United Fiber and China MCC20 have targeted to execute the engineering, procurement and construction contract and the supplier's credit agreement before Friday this week.