Reproduced by permission of The Edge Publishing Pte Ltd., Copyright © 2012 The Edge Publishing Pte Ltd.. All Rights Reserved Worldwide.

8 • THEEDGE SINGAPORE | AUGUST 6, 2012

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New investor causes a stir at Grand Banks with move to remove and replace board| BY JO-ANN HUANG |

Just when US-based yacht maker Grand Banks Yachts thought it was sailing into calmer wa-ters, the company faces yet another wave of challenges

— one big enough to throw its cur-rent directors overboard.

Peter Cheng Lim Kong, former CEO of renewable energy firm Van Der Horst, now renamed GKE Corp Ltd, is proposing to remove all of Grand Banks’ directors and replace them with four new ones, including himself. In a letter dated July 27, he asked the board of Grand Banks to hold an EGM for this very purpose. This comes more than a week after Cheng amassed 9.7 million shares in Grand Banks, which is just over 10% of the company. The shares were ac-quired at 10 cents apiece from Wass-bourne Finance, a shareholder that of-ficials at Grand Banks say they know

little about. At 10 cents apiece, the shares are a bargain, as the closing price on July 18 was 18 cents.

Cheng, together with another shareholder, Kwah Yeow Khong, is proposing that directors Peter Poli, who is also the chief financial of-ficer of Grand Banks; Basil Chan, treasurer at the Singapore Institute of Directors, Jeffrey Stewart Bland, CEO of medical research firm Kin-Dex Therapeutics; and Heine Askaer-Jensen, group director of manufac-turing, distribution and engineering firm Jebsen & Jessen Southeast Asia, be removed from the board.

He has proposed as directors Mahtani Bhagwandas, an independ-ent director at GKE Corp; former Maybank Kim Eng analyst Rohan Suppiah; and Seah Cheng San, a board member of property devel-oper Soilbuild Group Holdings. The crew will be led by Cheng himself as executive director. In the letter,

Cheng wrote that the proposed new directors, with their exten-sive management and profession-al expertise, will be able to boost the company’s operations and act in the interest of the company and its shareholders.

The news came as a rude shock to Grand Banks’ CEO Rob Living-ston II, who tells The Edge Singa-pore that Cheng and Kwah did not communicate with him or any of Grand Banks’ directors and employ-ees. Moreover, Grand Banks had an-nounced barely three weeks before that its outlook was finally turning positive after four years of dismal yacht sales brought on by the glo-bal financial crisis.

On July 18, Grand Banks said its strategy of cutting costs and pushing out new yacht models to turn the company around was finally paying off. It expected to turn in a profit in the next one or two financial years. The fact that its new boat models

were sold in boat shows in the US, its largest market, even before they were launched was testament to im-proving sentiment among yacht en-thusiasts, the firm said.

Since 2008, Grand Banks has been working to reduce costs in a number of ways. It has moved its manufacturing plant from Singa-pore to Pasir Gudang in Johor and reduced its headcount from 1,250 to fewer than 350. For FY2012 end-ed June, it wrote off deferred tax assets and recognised impairment losses in an effort to lighten its bal-ance sheet.

Yet, it is evident that there is sim-mering dissatisfaction among Grand Banks’ shareholders. Last December, after three years of losses and being placed on the SGX Watch List, its shareholders voted off most of the company’s board, including Living-ston and his father Rob Livingston I, who founded the company in Octo-ber last year. The revolt wasn’t or-ganised, though, and the board was subsequently reconstituted with some old and new faces.

Now, Livingston and the compa-ny’s directors are urging sharehold-ers of Grand Banks to allow them to stay in order to see the company through its recovery. “As CEO, I am firmly against this proposed remov-al,” says Livingston in an email. “We have a clear road map, our new de-signs are selling well and we are on the road to recovery.”

When contacted by The Edge Singapore, Cheng declined to com-ment on the matter. However, he says he is “worried” about Grand Banks’ grand plan to return to prof-it, citing uncertainty in the firm’s order book. He points out that the company’s $13 million order book for FY2013 is already half fulfilled (the company’s fiscal year begins in July.) He adds that sales from its current order book alone may not be sufficient to cover its overheads, even if they have been greatly re-duced over the last four years. This is despite Grand Banks stating that

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Livingston says Cheng and Kwah did not communicate with him or any of Grand Banks’ directors and employees

CONTINUES ON PAGE 11

it expects to close more orders by September. According to the com-pany, its FY2012 expenses, includ-ing salaries, sales, marketing and administration, amount to $19.5 million.

Cheng was CEO of GKE from 2008 to January 2012. For FY2012 ended May, GKE reported losses of $1.04 million, from a $3.61 mil-lion profit a year ago. The company chalked up a revenue of $35.6 mil-lion, compared with $28.5 million a year earlier.

Who is Wassbourne Finance?At the heart of the unfolding drama lies Wassbourne Finance, which of-ficials at Grand Banks say is regis-tered in the tax haven of the British Virgin Islands. Poli says efforts to contact the owners of Wassbourne have been in vain. Wassbourne be-gan buying into Grand Banks in 2004 and currently owns a 12% stake in the company.

“There were a few years when they didn’t go to shareholder meet-ings. They lay dormant and then they became more active by submitting a proxy to represent them at meet-ings,” says Poli. He notes that Wass-bourne voted against a proposed in-vestment by Italian private-equity firm Investindustrial Asian Development Holdings in an EGM last year. The proposal, which involved issuing 136 million shares to Investindustrial at 33 cents a share to give it a 58.7% stake in Grand Banks, was rejected by shareholders, who deemed the price too low.

Mano Sabnani, a long-time share-holder of Grand Banks, is puzzled by Wassbourne’s move to sell its shares at 10 cents apiece to Cheng. “It could be that Wassbourne is a tired shareholder, and they have a big block of shares which is not easy to sell, given that the shares are illiquid,” he says.

Whatever the case, Sabnani be-lieves that the board of Grand Banks is in danger of being thrown out again. With the Livingston family owning just 28.7% of the firm, they could be easily outvoted by disgrun-tled shareholders. “There are many shareholders who are not happy with Grand Banks. It’s a good company that has gone down so much that shareholders want swift action by management,” he points out.

However, Sabnani thinks that shares in Grand Banks are actual-ly cheap, and he has been buying them up despite the problems faced by the company. The way he sees it, Grand Banks has a good brand and plenty of cash. As at end-FY2012, it had a cash balance of $22 million, according to its officials. The com-pany currently has a market value of just $23.5 million.

What’s next?Shareholders are waiting for Cheng to unveil his plans for Grand Banks, which will likely be outlined in a

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THEEDGE SINGAPORE | AUGUST 6, 2012 • 11

s Grand Banks’ shareholders waiting for unveiling of plansFROM PAGE 8

circular shortly. Some say he might want to steer the company into China, a huge untapped market that Grand Banks claims is “not ready” for its style of boats.

He wouldn’t be the only one trying to tap the China market, though. In January, Shandong Heavy Industry Group-Weichai Group, a Chinese state-owned bulldozer maker, invested €178 million ($270 mil-lion) for a 75% stake in Ferretti Group, a near-bankrupt Italian yacht maker. The Chinese now own a 75% stake in the firm. Ferretti is one of the largest luxury yacht makers in the world, having made boats for movie stars such as Brigitte Bardot and Sean Connery. Sleek, fast and flashy, Fer-retti’s yachts are a stark contrast to Grand Banks’ sturdy and all-American style ves-sels that have been its trademark for the last 56 years.

China’s yacht market is still in its infan-cy, with only 100 yachts longer than 60ft in the country as at May last year. In 2006, there were at least 7,000 of such boats in the US alone. But with at least 400 US dol-

lar billionaires in China, the potential in that market cannot be ignored.

Do Cheng and his slate of proposed direc-tors have what it takes to set Grand Banks on a faster recovery track? “None of the individ-uals proposed as directors appear to have any background in the recreational yacht indus-try, but that doesn’t mean they are not quali-fied,” says Poli.

Grand Banks’ shares closed at 24.5 cents on Aug 2.

11

Aug 14, 2009 Aug 2, 2012

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| BY AGUS SUHANA & YOGA RUSMANA |

Indonesia may invest IDR26.2 trillion ($3.5 billion) to triple the capacity at its main airport near capital Jakarta to meet ris-

ing travel demand in Southeast Asia’s big-gest economy.

The Soekarno-Hatta International Airport’s capacity will be expanded to handle 62 mil-lion passengers by end-2014, compared with 22 million currently, Tri S Sunoko, president director of PT Angkasa Pura II, the facility’s operator, said on Aug 2 at an event to mark the project’s groundbreaking.

The development plan also includes add-ing more runways and expanding cargo ter-minals at the facility, which was Southeast Asia’s busiest in 2010, surpassing Bangkok’s Suvarnabhumi and Singapore’s Changi. Sin-gapore and Thailand are also working on ex-panding their airports as the region’s eco-nomic growth boosts air travel and carriers add more planes.

Airport expansion is a key part of Presi-dent Susilo Bambang Yudhoyono’s plans to

increase infrastructure spending as he seeks to boost investor confidence and deliver an average growth of 6.6% by end-2014.

“The middle-class people in Indonesia are the largest in Southeast Asia and they need air transport services,” Yudhoyono said, after an-nouncing the planned investment in the project. “The airport expansion will also support in-vestment opportunity in Indonesia.”

The Soekarno-Hatta airport, named after the nation’s first president and vice-president, handled 51.5 million passengers last year, more than double its capacity, Sunoko said.

The annual capacity at Terminal 3 will be increased to 25 million from four million, he added. Terminal 1 and 2 will be expanded to handle 18 million and 19 million passen-gers respectively.

Indonesian airlines are also expanding. PT Lion Mentari Airlines, the nation’s big-gest low-cost carrier, in February ordered 230 Boeing planes worth about US$22 bil-lion at list prices. PT Garuda Indonesia in April signed a firm order for 11 Airbus SAS A330-300 planes. — Bloomberg LP

Indonesia to spend US$2.8b to expand Jakarta airport

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Reproduced by permission of The Edge Publishing Pte Ltd., Copyright © 2012 The Edge Publishing Pte Ltd.. All Rights Reserved Worldwide.