Unionmet to diversify into property development and oil blending

For "diversified returns and long term growth".

The Board of Directors of Unionmet (Singapore) Limited announced that the company is proposing to diversify into the business of property development and the blending and distribution of diesel and engine oil.

The property development business will include the business of propertyholding, development, management and other related property activities with a focus on the residential and commercial sectors in Singapore and the People’s Republic of China (PRC).

The proposed diversification requires the approval of shareholders.

The company said the proposed diversification is part of its continuing corporate strategy to provide shareholders with diversified returns and long term growth. The Directors note that though there may be some uncertainty over the direction of the Singapore property market in the short term, over the mid to long term, the growth and continued prospects of the Singapore residential property market should remain upbeat.

"This is due to the continued demand for housing from residents as well as Singapore’s position as an attractive real estate market for investment in Asia for both for local and international investors."

The Directors also note that the PRC has enjoyed rapid economic development in the past decade. This has led to an increase in its GDP per capita, and per capita disposable income. There is also increasing urbanization in the PRC, and rapid growth of its cities and metropolises. Accordingly, the Directors are of the view that all this will lead to increased demand for housing by urban residents, and encourage individual and corporate investment in property.

Diesel and engine oil is one of the most efficient fuels available today and is used in a variety of industries including shipping, railroad, motor vehicles and aviation. The Company is currently in the final stages of negotiations with a manufacturer of oil blending equipment with the technology to refine and blend diesel and engine oil that will produce potential cost savings when compared to regular diesel and engine oil.

By harnessing the technology to produce diesel and engine oil that burns in a more efficient manner, the Board is of the view that the Oil Blending Business represents an attractive opportunity for the Group as customers seek out more energy-efficient fuel in light of high oil prices.

The Board believes that this new business has the potential to become a new driver of earnings growth that will bring economic benefits to the Group in addition to the Group’s core business and enhance long term shareholder value. The Board believes that the Oil Blending Business is likely to generate steady cash flows for the Group.

During the initial phases, the Group intends to focus on construction companies as the initial target customers of its Oil Blending Business in view of the fact that there will be oil consumption from machinery at construction sites and transportation of building materials. Accordingly, the Oil Blending Business is likely to be complementary to the Property Development Business and potentially enable the Group to achieve synergy in these two businesses.

In view of the foregoing considerations, the Board is of the view that the Proposed Diversification is in the best interests of the Group to broaden its sources of revenue and to increase its competitiveness.