Bnp

THEMATIC RESEARCH

July 2009

Eyes down for a full house

„ Both integrated resorts will be a success, in our view, creating a positive spin-off for the Singapore economy. Singapore’s advantages are its excellent connectivity, close proximity to a growing regional gaming market and a low gaming tax regime. „ Using history as a guide, the property market could see some sparks. However, the excitement could be tempered by hawkish measures aimed at the mass-market segment. We expect high-end property developers like SC Global to benefit as expensive homes are not on the government’s radar.

Ng Wee Siang, CFA BNP Paribas Securities (Singapore) Pte Ltd Co. Reg. No. 199801966C (65) 6210 1945 [email protected] And the

Singapore Research Team

„ With tourists expected to come in droves, filling up hotel rooms, hoteliers like CDL Hospitality Trusts and Fragrance stand to gain. „ Integrated interior designer Kingsmen Creatives could see brisk business. „ Retailers are marginal gainers as higher tourist revenue combines with downward pressure on retail rental (from new retail supply).

BNP Paribas research is available on Thomson Reuters, Bloomberg, and on http://equities.bnpparibas.com. Please contact your salesperson for authorisation. Please see the important notice on the inside back cover.

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Contents Two integrated resorts, one country .............................................................................. 2 Factors that work in favour of Singapore

2

Who stands to gain? ...................................................................................................... 5 Beneficiary #1: The property market

5

Beneficiary #2: Hotel operators

8

Beneficiary #3: Interior design contractor

11

Beneficiary #4: Consumer and aviation names

12

Borderline beneficiary: Retailers

12

Fragrance Group ......................................................................................................... 13 Kingsmen Creatives..................................................................................................... 15 Appendices .................................................................................................................. 17 1. Marina Bay Sands

17

2. Resorts World

19

3. Known New Hotel Supply From 2Q09–2014

20

4. Known Future Retail Supply (2Q09-2013)

21

5. Private Residential Projects That Are Expected To Be Completed From 2Q09-2011

22

Singapore Research Team Ng Wee Siang, CFA

Michael Greenall, CFP

Pang Chin Hong, PhD

BNP Paribas Securities (Singapore) Pte Ltd Co. Reg. No. 199801966C (65) 6210 1945 [email protected]

BNP Paribas Capital (Malaysia) Sdn. Bhd. (60 3) 2050 9908 [email protected]

BNP Paribas Securities (Singapore) Pte Ltd Co. Reg. No. 199801966C (65) 6210 1956 [email protected]

Glenford Tan

Foong Choong Chen

Rocky Indrawan

BNP Paribas Securities (Singapore) Pte Ltd Co. Reg. No. 199801966C (65) 6210 1953 [email protected]

BNP Paribas Capital (Malaysia) Sdn. Bhd. (60 3) 2050 9938 [email protected]

BNP Paribas Securities (Singapore) Pte Ltd Co. Reg. No. 199801966C (65) 6210 1955 [email protected]

1

BNP

PARIBAS

Singapore Strategy Ng Wee Siang (65) 6210 1945 B N P

P A R I B A S

July 2009 –

M A R K E T

O U T L O O K

Eyes down for a full house x

Both integrated resorts will be a success, in our view, creating a positive spin-off for the Singapore economy.

x

The excitement lies in the property and hotel sectors; property boosted by new money, while hoteliers benefit from a tourist influx.

x

Retailers are marginal gainers as higher tourist revenue combines with downward pressure on retail rental (from new retail supply).

Ng Wee Siang, CFA BNP Paribas Securities (Singapore) Pte Ltd Co. Reg. No. 199801966C (65) 6210 1945 [email protected]

Singapore Sector Ratings Sector

Rating

Banks

Neutral

Two integrated resorts, one country

Land transport

Positive

A buzz is being generated by the opening of Marina Bay Sands (MBS) and Resorts World at Sentosa (RWS). In this report, we explore the potential economic implications and, in the process, identify the gainers and losers. We expect this theme to play out in 2H09.

Offshore & Marine

Positive

Don’t underestimate the Singapore government Our recent meetings with the management of Genting and Las Vegas Sands have reinforced our optimism on the potential spin-offs from the two integrated resorts. We believe these two behemoth developments will bring good fortune to Singapore. To start with, the resorts complement one another: MBS targets business travelers while RWS targets families. Second, Singapore’s excellent connectivity and close proximity to a growing regional gaming market is one big plus. Third, China’s travel restrictions to Macau and Singapore’s much lower gaming tax regime could make Singapore the ‘destination’.

Property sector one key beneficiary Property markets in Macau, Sydney and Melbourne enjoyed a multiyear boom following the liberalization of gaming. History could repeat itself in Singapore, albeit in a moderate manner. We think the benefits will be contained at the high-end segment, with inflows of high-net-worth money. Hawkish measures will limit any price run-up in mass-market homes. The government needs to ensure mass-market homes remain affordable. As such, high-end property developers like SC Global and Wheelock stand to gain more than mass-market property developers.

Other gainers – hoteliers and interior designer Tourists are expected to come in droves, filling up hotel rooms as more attractions are added to the skyline. Hoteliers – CDL Hospitality Trusts, Hotel Properties, Pan Pacific and Fragrance – and SIA stand to gain. Budget hotel operator Fragrance could see more bookings from costconscious travelers. Interior designer Kingsmen, which specializes in the design and production of exhibits for conventions, could participate in some of the international conventions that could come to Singapore. Consumer names like Breadtalk and FJ Benjamin could see brisk sales.

A borderline case: retailers The remaking of Singapore is set to attract more tourism revenues, auguring well for the retailers. However, this will be offset by an influx of retail space (+20% by end-2010) that could exert downward pressure on retail rental.

BNP Paribas research is available on Thomson Reuters, Bloomberg, and on http://equities.bnpparibas.com. Please contact your salesperson for authorisation. Please see the important notice on the inside back cover. 1

Plantations

Neutral

Property developers

Neutral

Property REITs

Neutral

Telecommunications

Neutral

Source: BNP Paribas

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Two integrated resorts, one country The buzz: The official opening of Resorts World at Sentosa (RWS) and Marina Bay Sands (MBS) is expected to be in the first quarter of 2010. In this report, we explore the potential economic implications on Singapore, and in the process identify sectors and stocks that stand to gain or lose. We expect the casino theme to play out over the course of 2H09.

Heralding in a new chapter for Singapore

Factors that work in favour of Singapore Reasonably established local betting market: Contrary to general belief, Singapore has a reasonably established betting market, as evidenced by:

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The hard data tells us so

Estimated gross betting in Singapore grew 8.5% to USD7.6b for the fiscal year ended March 2008. As shown in Exhibit 1, slightly less than half of the gross betting came from lotteries (4 Digit Numbers, Toto or Singapore Sweep).

Exhibit 1: Estimated Gross Betting Amounts In Singapore 2007*

2008*

2007*

2008*

(SGD b)

(SGD b)

(USD b)

(USD b)

Amount Lottery^

4.7

5.1

3.2

3.4

Slot machines

2.6

3.0

1.7

2.0

Horse racing

2.1

2.3

1.4

1.5

Football (soccer)

1.1

1.0

0.7

0.7

10.5

11.4

7.0

7.6

Total Mix

(%)

(%)

Lottery^

45.0

44.8

Slot machines

24.5

26.2

Horse racing

19.8

20.2

Football (soccer) Total

10.6

8.7

100.0

100.0

^ Includes 4 Digit Numbers, Toto, and Singapore Sweep * Represents fiscal year ending 31 March Sources: Inland Revenue Authority of Singapore; Las Vegas Sands; BNP Paribas

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Based on a survey conducted by the Ministry of Community Development, Youth and Sports, more than half of the Singaporean adults said they had gambled in 2008. For details on Singapore’s gambling trends by income bracket, please refer to Exhibit 2.

Exhibit 2: Singapore’s Gambling Trends By Income Bracket Monthly income

—— Those who gambled ——

(SGD)

2005

2008

(%)

(%)

1-999

50

60

1,000-1,999

63

66

2,000-2,999

72

62

3,000-3,999

70

56

4,000 and above

74

56

* Note: There were 2,300 survey respondents for 2008 and 2,004 respondents for 2005 Sources: Ministry of Community Development, Youth and Sports; BNP Paribas

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More than 7,000 VIP betters have registered at the Singapore Turf Club. They have the propensity to bet more than USD65,000 per race day.

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That said, the local market is not expected to be the money-spinner for MBS and RWS. This is because the majority of the Singaporeans will probably end up in the mass-market gambling halls rather than VIP rooms. Our recent meeting with management of Las Vegas Sands suggests that the high rollers in Southeast Asia are largely the Indonesians and the Thais, while the Malaysians and the Singaporeans make up the mass-market segment.

Singaporean gamblers are largely the grinders

Close proximity to a growing regional gaming market is a plus: Singapore is located within a five-hour flight radius by more than 2b people. While Macau casinos cater to Northeast Asia, Singapore will primarily target casino patrons from the Southeast Asia region (Thailand, Malaysia and Indonesia), and India. Based on estimates gathered from various sources, the size of the regional gaming market is estimated to be in excess of USD27b. MBS and RWS stand to steal market share from Australia – dominated by the Star City in Sydney, Burswood Casino in Perth and the Crown Casino in Melbourne – Genting in Malaysia, and regional cruise ships. While the VIP market accounted for 28% of total gaming revenue (amounting to USD1.5b) for Australia in 2008, we postulate a smaller 20% high-roller revenue collections for Malaysia.

To steal market share from Australia and Malaysia

Exhibit 3: Australian Gaming Market Profile As Of 2008

Australia’s VIP content of 28% beats Malaysia’s 20% VIP USD414.7m (28%)

Mass market USD1,071.2m (72%)

Sources: Crown Limited; Tabcorp; BNP Paribas

Singapore to benefit from China’s travel restrictions to Macau: As long as the travel restrictions imposed on mainland Chinese visiting Macau are in place, Singapore stands to benefit as mainland Chinese casino patrons that face travelling restrictions will soon be presented with a new destination when the doors of the two Singapore’s integrated resorts are flung open in early 2010. The spillover effect can be significant, considering the size of Macau’s gaming market, which chalked up USD13.5b gaming revenue in 2008 (2007: USD10.3b). Since Macau’s gaming industry was liberalized in 2001, total gaming collections have grown by an impressive 30.3% CAGR over 200208 as shown in Exhibit 4. Interestingly, Macau’s gaming market is dominated by high rollers, which contributed 67.8% of 2008’s total gaming collections (2007: 67.2%; see Exhibit 5). Judging from Macau’s visitor arrival profile, we believe mainland Chinese make up the majority of the VIP market. In 2008, Macau welcomed as many as 22.9m visitors, of which 11.6m (or 50.6% of total visitors) was from mainland China, followed by 7.0m (or 30.6%) from Hong Kong.

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The big money lies in attracting high rollers frequenting Macau

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Exhibit 4: Macau Gaming Market Saw Impressive Growth

JULY

2009

Exhibit 5: Macau Gaming Market Profile

(USD m) 16,000

(%)

VIP

Mass

Slot

100

14,000

13,525

30% CAGR

90 80

12,000

10,324

70

10,000

60 7,041

8,000 5,145

6,000 4,000

STRATEGY

2,758

50

5,726

40 30

3,565

20

2,000

10 0

0 2002

2003

2004

2005

2006

2007

2008

2002 2003 2004 2005 2006 2007 2008 1Q09

Sources: Macau Gaming Inspection and Coordination Bureau; BNP Paribas

Sources: Macau Gaming Inspection and Coordination Bureau; BNP Paribas

A low tax regime: The projected blended effective goods and services tax (GST) and gaming tax for Singapore is 17.3% (derived by Las Vegas Sands), which compares favourably with that of Macau (39%). Given MBS’s favorable tax regime, it is in Las Vegas Sands’ interest to lure some of the high rollers currently visiting its Macau casinos to Singapore. See Exhibit 6 for a breakdown.

Las Vegas Sands could lure its Macau high rollers to Singapore

Exhibit 6: Singapore Has Significantly Lower Gaming Taxes Than Macau Macau Grind Gaming tax GST

Singapore

(%)

(%)

39.0

14.0

—

6.5

39.0

20.5

39.0

4.7

VIP Gaming tax GST

—

6.5

39.0

11.2

Sources: Las Vegas Sands; BNP Paribas

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THEME?

Who stands to gain? Beneficiary #1: The property market Additional layer of demand to support the rental market: At face value, the Singapore property market stands to benefit as demand for rental homes starts to strengthen. As the rental market recovers, it should bring about capital appreciation. We would attribute current excitement surrounding the Singapore private property market in part to the imminent opening of the two integrated resorts.

More foreign workers mean higher rental demand

What does Macau’s experience tell us? Drawing lessons from Macau’s property price trend from 1Q99-1Q09 (Exhibit 7), our observations are as follows:

Macau’s property market appears to be punter’s haven

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Slow and cautious: 2002-03. At the initial stages of the gaming industry liberalization, Macau’s property price traded within a tight range with downward bias over the course of 2002-03. We believe the SARS-induced economic weakness could play a part in dampening investor sentiment.

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In euphoric mood: 2004-07. The upturn started in 2004 sparked by the grand opening of Sands Macao in May 2004 and improving global economic outlook. The euphoria was carried through over the next four years as more casinos came into operations, before peaking in end-2007. As shown in Exhibit 8, the number of casinos in Macau jumped from a mere 11 in 2003 to 28 in 2007, during which the number of gaming tables soared to its record high of 4,375 by end-2007 from 424 in end-2003 (Exhibit 9).

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A volatile price uptrend. From 2004-07, the rising trend was punctuated by two severe price dips: 2Q05 (-10.2%) and 1Q06 (-29.9%). Interestingly, there were six sharp price increases: 1Q04 (+9.7%); 4Q04 (+15.0%); 4Q05 (+54.4%); 2Q06 (+19.4%); 4Q06 (+44.9%) and 4Q07 (+23.4%).

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Caution reigned: 2008 onwards. The downturn that started in 1Q08 also followed a volatile trend, with the price plunging 25.1% q-q in 2Q08 and 16.8% q-q in 4Q08, but partially offset by two sharp price up-ticks in 3Q08 (+8.3% q-q) and 1Q09 (+7.0% q-q).

Exhibit 7: Macau’s Property Price Index (Using 2004 As The Base Year)

(index)

Visa restrictions

Grand opening of Venetian Macao

400

Spiked before the grand opening of Sands Macao; collapsed following travelling restrictions and global financial crisis

350 China's austerity measure for property market

300 250

Grand opening of Sands Macao

200

Stabilisation of price in 1Q09

150 100 50 1Q99

1Q00

1Q01

1Q02

1Q03

1Q04

1Q05

1Q06

1Q07

1Q08

1Q09

Sources: Statistics and Census Service Macao SAR Government; BNP Paribas

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(no of casinos) 35

31

(no) 14,000

31

28

20

11,971

10,000 8,000

17 11

2009

11,856

Slot machines

6,546

15 15

13,267

Gaming tables

12,000

24

25

JULY

Exhibit 9: Number Of Gaming Tables And Slot Machines In Macau

Exhibit 8: Number Of Casinos In Macau

30

STRATEGY

6,000

11

10

4,000

5

2,000

3,421 2,762

4,375 4,017 3,998

2,254 808 8141,092 1,388 339 424

0

0 2002

2003

2004

2005

2006

2007

2002 2003 2004 2005 2006 2007 2008 1Q09

2008 1Q09

Sources: Macau Gaming Inspection and Coordination Bureau; BNP Paribas

Sources: Macau Gaming Inspection and Coordination Bureau; BNP Paribas

What does Sydney and Melbourne’s experience tell us? Exhibit 10 tells us a similar story: property markets in Sydney and Melbourne benefited from the 1997 opening of the Star City and the Crown Casino. From end-1996 to end-2003, property prices in Sydney and Melbourne soared 124.9% and 143.3%, respectively. The price-increase momentum gathered pace from 2001-03, a contrast to the Asian property markets that suffered price weakness on account of a weak economic backdrop.

Sydney and Melbourne benefited too

Exhibit 10: Sydney And Melbourne’s Property Price Index

(index) 150

Sydney

Reasonably impressive price run-up from 1997-03

Melbourne

130 110 90 70

Liberalisation of Australia's gaming industry

50 30 Mar-95

Mar-97

Mar-99

Mar-01

Mar-03

Mar-05

Mar-07

Mar-09

* Using the average index straddling 1Q03-4Q04 as the base period. Sources: Australian Bureau of Statistics; BNP Paribas

Is history a good gauge? The price gyrations give us the impression that Macau’s property market has over the years lured in many property punters. The million dollar question now is whether Singapore’s private residential property price will witness a similar major upswing from the current levels. One word of caution about reading too much into Macau’s property price trend and trying to draw parallel is the fact that Macau’s price uptrend coincided with a very strong global economic backdrop that saw property prices across many Asian cities surging during the same period. Also, the gaming industry liberalization attracted an influx of foreign workers to Macau, raising demand for rental homes and in the process pushing up capital value. The same can also be said about the property markets in Sydney and Melbourne that enjoyed a decent run-up following casino openings plus a multiyear commodity boom. Sydney property market also received another boost in the form of the Sydney 2000 Olympics.

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Macau and Australian property markets in large part benefited from a strong global economy

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Large new home supply and few high-paying jobs reduce likelihood of sharp price increase: It is hard to envisage a sharp increase in private residential home price from current levels, after having risen by some 15% from its recent March’s troughs. Our view is predicated on the following reasons:

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Government intervention. Akin to the recent episode straddling 2006-08, we expect the hawkish Singapore government to closely monitor private residential home price trend particularly the public housing and mass-market segments. We believe the Singapore government will use all measures at its disposal to reduce the likelihood of a runaway property price and/or price gyrations that could lead to various social and financial stresses on both individuals and banks. Sharp increase in property price could make Singapore an expensive city to live in and visit, eroding its competitive edge – certainly not a preferred outcome. Antispeculation measures could be imposed to ensure a more manageable price movement. The proposed amendment to the Income Tax Act (to be effected in January 2010) – imposing capital gains tax on second property sale within four years – should be seen as part of broader property price stabilization efforts by the Singapore government.

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Additional rental demand is smaller than new home supply. With some of the casino jobs going to foreigners, this will translate into stronger demand for rental homes. However, this additional rental demand can easily be met by new supply of private homes and rental homes that could be given up by an expected outflow of workers currently involved in the development and construction phase of the two integrated resorts. We gather that as many as 20,000 new jobs will be created. Assuming 20% of the jobs are taken up by new foreign workers (note that some of the jobs will be filled up by existing unemployed foreigners currently residing in Singapore) and a household size of three persons, we estimate an additional rental home demand of 1,333. This is far smaller than additional 8,872 new private homes (3.6% of existing supply) that are set to be completed from April to December 2009 and 5,952 in 2010 (2.4%). See Exhibit 11 and 12.

Exhibit 11: Estimated New Supply Of Private Homes

(units)

Under construction

(units)

Planned

14,000

12,000

12,000

2010

2011

2012

2013

6,000

No. of completed units (LHS) Vacancy rate (RHS) 9.0 8.8 9.0 8.5 8.0 8.2 7.7 8.4 7.0 6.9 5.7 6.1 6.1 6.2 5.6 Estimated demand: 5,000-10,000 units/year

(%) 10 9 8 7 6 5 4 3 2 1 0

4,000 2,000 0

>2013

* 2009 refers to period from April to December 2009. Note that 2,230 homes were completed in 1Q09. Sources: URA; BNP Paribas estimates

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Don’t forget about the Singapore government that will be watching history unfolds like a hawk

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E

2009

10,379

8,213

0

8,000

571

9,221

6,489

2,000

5,285 667

4,000

8,872

6,000

10,000

3,849

7,528

14,000 3,420

16,000

8,000

2009

Exhibit 12: Private Home Supply And Occupancy Rate

16,000

10,000

JULY

Sources: URA; BNP Paribas estimates

Mostly low to medium-paying jobs. Our channel checks suggest that only a very small proportion (less than 5%) of these new jobs command high pay (in excess of SGD10,000 per month). We tabulate job postings related to MBS and RWS in Exhibit 13 which clearly shows that there are few job openings offering associate director and above categories. This means the bulk of these new foreign workers could well end up putting up in public housing units or dormitory. In the event that housing cost becomes too expensive, our sources tell us that some of the casino workers (eg the croupiers) could even be housed in Johor, Malaysia.

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Exhibit 13: Job Openings For MBS And RWS As Of June 2009 Marina Bay Sands

Resorts World

Director

2

4

Associate director

2

5

VP Manager

1

42

17

11

Assistant manager

4

7

Executive

5

2

Supervisor

7

8

Assistant chief

3

58

Senior

10

na

Officer

4

na

6

na

Coordinator Others

29

na

Total

90

137

Sources: Marina Bay Sands; Resorts World At Sentosa; BNP Paribas

The above three factors lead us to believe that the two integrated resorts are only likely to provide price support rather than serve as a strong catalyst for the mass to mid-high private home prices to rise significantly from current levels. Singapore luxury homes could be an exception: These two integrated resorts could get the high rollers thinking about buying high-end or luxury homes in Singapore. Singapore should appeal to these high rollers whose emphasis is on security and convenience. On this count, we expect luxury home developers like SC Global and Wheelock Properties to benefit. We believe SC Global is a larger beneficiary given its large portfolio of undeveloped land parcels (eg The Ardmore and the Beachfront Collection) coupled with unsold inventory (eg Martin No. 38, The Marq and HillTops). We have a BUY call on SC Global with a SGD1.27 target price, based on a 40% discount to our RNAV estimate of SGD2.12. History tells us that the Singapore government is less concerned about the luxury residential home segment and hence, less likely to take action to cool this segment down.

SC Global could benefit the most

Beneficiary #2: Hotel operators A tourist haven: As shown in Exhibit 14, Las Vegas saw spikes in visitor arrivals following casino openings. Exhibit 15 depicts a similar story with visitor arrivals at Macau jumping in 2004 onwards as the number of casinos increased sharply. As such, it is only logical to expect more tourists coming to Singapore. This is especially in view of the fact that both integrated resorts present different appeals: MBS targets the business travelers whereas RWS appeals to family travelers. Along with the creation of more new attractions such as the likes of Gardens by the Bay, Sports Hub and more shopping centres in Orchard, visitors will have reasons to extend their stay. Transit travelers may in the future make it a point to stopover for a night or two in order to have a feel of a new Singapore.

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More visitors set to swing by Singapore

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Exhibit 14: Las Vegas – Spikes In Visitors With New Casinos

JULY

2009

Exhibit 15: Macau Enjoys Strong Visitor Arrivals Since 2001

(y-y %)

(m visitors) Luxor, MGM Grand, Treasure Island open

25

35

19.9

Mirage opens

20

STRATEGY

15.6

30

Venetian, Bellagio, Mandalay Bay open

25

15 10.5 10

15

5.2 3.2

5

Liberalisation of gaming industry in 2001

20

Wynn opens

6.0

CAGR: 16.6%

10

0

5

(5)

0 1980

1984

1988

1992

1996

2000

2004

2008

1998

Sources: Las Vegas Convention and Visitors Authority; BNP Paribas

2000

2002

2004

2006

2008

Sources: CEIC; BNP Paribas

Addressing an influx of tourists with more new hotel rooms: An expected influx of tourists will not have problem finding a place to stay considering the number of hotel rooms that will be added over the next three years: 2009: 4,059; 2010: 4,705 in 2010 and 2011: 3,662 (Exhibit 16). The Singapore Tourism Board (STB) expects 2009’s visitor arrivals of up to 9.5m, representing a 6.1% decline from the 10.1m visitors recorded in 2008. Assuming visitor arrivals grow 10% to 10.45m visitors in 2010, the incremental visitors can absorb up to 5.2% of total hotel supply in 2010, or 23.8% of the collective new hotel supply that is coming onstream over the course of 2009-10, based on our conservative assumptions. This calculation is premised on the following assumptions:

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60% of the incremental visitors stay in hotel, consistent with STB’s survey in 2007;

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An average length of stay of four days, which reflects the trend recorded over the past 12 months; and

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Three persons share one room, reflecting the average party size for 2007, according to survey conducted by STB.

More new hotel rooms to meet an up-tick in demand

Exhibit 16: Supply Of Hotel Rooms In Singapore

('000)

Total hotel rooms (LHS)

(y-y %)

Growth (RHS)

45

16

41

12

37

8

33

4

29

0

25

An average 4,142 new rooms will be added per annum over 2009-11

(4) 1996

1998

2000

2002

2004

2006

2008

2010

2012

Sources: CBRE; BNP Paribas

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Which hotel operator stands to benefit? There are only nine listed hotel names that have presence in Singapore (Exhibit 17), of which only CDL Hospitality Trusts (CDREIT), Hotel Properties Ltd (HPL), Pan Pacific Hotels Group (formerly known as Hotel Plaza) and Fragrance Group have a meaningful presence in Singapore. This narrower list of hotel names can be split into three categories:

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Upscale hotel operator – HPL and Pan Pacific Hotels (Exhibit 18).

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Economy hotel operator – Fragrance Group.

2009

Mid-tier and economy hotel operators set to benefit more

Mid-tier hotel operator – CDREIT. Note that CDREIT targets primarily the more cost-conscious business and individuals travelers.

With Genting projecting to attract 5m visitors to RWS in 2010 and 15m in 2012 (its first full-year of operations), it is logical to expect significant spillover to other hotels. This is especially in view of the lack of hotel rooms in RWS (1,800 hotel rooms). We gather that RWS may tie up with some hotels for block bookings. This should benefit hotel owners such as the likes of CDREIT, HPL and Pan Pacific for their strategicallylocated hotels (Exhibits 18 and 19). Exhibit 17: Listed Hotel Names In Singapore Group

Rooms

Market cap

3-mth avg daily turnover

(USD m)

(USD m)

CDL Hospitality Trusts

2,351

502.6

2.39

Fragrance Group

1,341

248.9

0.04

Hotel Properties

1,083

563.1

0.43

877

496.1

0.12

Pan Pacific Orchard Parade

597

203.0

0.10

Hotel Royal

554

100.9

0.10

Amara Holdings

501

119.3

0.09

Grand Central

400

189.3

0.03

Ascott Residences

341

298.1

0.68

Total

8,045

Sources: Companies; BNP Paribas

Exhibit 18: Singapore Hotel Portfolio Of HPL And Pan Pacific Hotel Properties Hotels

Rooms

Address

Hilton Hotel

422

581 Orchard Road

Four Seasons Hotel

254

190 Orchard Boulevard

Concorde Hotel

407

100 Orchard Road

1,083 Pan Pacific (formerly known as Hotel Plaza) Hotels

Rooms

Address

Parkroyal on Kitchener Road

534

181 Kitchener Road

Parkroyal on Beach Road

343

7500C Beach Road

877 Sources: Hotel Properties; Pan Pacific; BNP Paribas

1 100

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STRATEGY

JULY

2009

Exhibit 19: Singapore Hotel Portfolio Of CDREIT And Fragrance CDL Hospitality Trusts Hotels

Rooms

Address

No. of stars

Status

653

442 Orchard Rd S238879

4+ stars

Upscale

Grand Copthorne Waterfront Hotel

574

392 Havelock Rd S169663

4+ stars

Upscale

M Hotel

413

81 Anson Rd S079908

4+ stars

Upscale

Orchard Hotel

Copthorne King's Hotel

310

403 Havelock Rd S169632

3+ stars

Mid-Tier

Novotel Clarke Quay

401

177A River Valley Rd S179031

4+ stars

Upscale

2,351 Fragrance Group Rooms

Address

No. of stars

Status

Imperial

Hotels

74

Penhas Road

3 stars

Mid-Tier

Selegie

120

183 Selegie Road

3 stars

Mid-Tier

Oasis

36

435 Balestier Road

2 stars

Economy

Classic

48

418 Balestier Road

2 stars

Economy

Rose

68

263 Balestier Road

2 stars

Economy

Balestier

48

255 Balestier Road

2 stars

Economy

Crystal

125

50 Lor 18 Geylang

2 stars

Economy

Emerald

126

20 Lor 6 Geylang

2 stars

Economy

Ruby

168

10 Lor 20 Geylang

2 stars

Economy

Pearl

129

21 Lor 14 Geylang

2 stars

Economy

Sapphire

50

3 Lor 10 Geylang

2 stars

Economy

Sunflower

27

10 Lor 10 Geylang

2 stars

Economy

Waterfront

57

418 Pasir Panjang Road

2 stars

Economy

Ocean View

47

432 Pasir Panjang Road

2 stars

Economy

The Fragrance

90

219 Joo Chiat

2 stars

Economy

Lavender

35

51 Lavender Street

2 stars

Economy

Viva

33

75 Wishart Road

2 stars

Economy

Kovan

43

760 Upper Serangoon Road

2 stars

Economy

Royal

32

400 Teluk Belangah Road

2 stars

Economy

Fragrance Hostel

17

63 Dunlop Street

Hostel

1,373 Sources: CDL Hospitality Trusts; Fragrance; BNP Paribas estimates

Fragrance stands to be the larger beneficiary: Comparing Fragrance to CDREIT, we believe the former stands to benefit more from the opening of the two integrated resorts. This is because CDREIT’s mid to upscale hotel franchises will be in more direct competition with hotels at MBS and RWS. On the other hand, Fragrance will continue to cater to the needs of the budget travelers and/or travelers that are more cost conscious. For more info on Fragrance, please refer to our write-up on page 13.

Budget hotel business could see brisk business

Beneficiary #3: Interior design contractor Greater demand for interior designs: The opening of the integrated resorts should boost demand for interior design works and services. In the case of MBS, demand will emanate from design and production of exhibits for exhibitions and conventions. On the other hand, Universal Studios at RWS will demand: 1) the construction of show sets and props; and 2) design, fabrication and maintenance of interior fit-out works for food and beverage, and retail/merchandise outlets within the theme park.

Don’t overlook this area

Who stands to gain? One key player that stands to benefit is Kingsmen Creatives. Listed on the Main Board of the Singapore Exchange, Kingsmen is a leading communications design and production group in Asia Pacific and the Middle East. Established in 1976, Kingsmen offers a “one-stop-shop” solution through a vertical and horizontal integration of services, giving clients the benefits of convenience and cost savings. The group has a long-standing base of clients from diverse industries

Main board-listed Kingsmen Creatives stands to benefit

1 111

BNP

PARIBAS

NG WEE

SIANG

SINGAPORE

STRATEGY

JULY

2009

including well-known names such as BMW, Burberry, DBS Bank, Dickson Group, Esprit, FJ Benjamin, Gucci, Nokia, Robinsons Group (including John Little and Marks and Spencer), Tiffany and Wing Tai. For details, please refer to page 15.

Beneficiary #4: Consumer and aviation names Few that could benefit directly: In our view, there are only a handful of consumer names in Singapore that stand to benefit from larger tourist receipts. We believe Breadtalk Group, FJ Benjamin and Singapore Airlines (SIA) are the likely winners. However, the earnings impact is hard to quantify.

Breadtalk, FJ Benjamin and SIA could enjoy the spillover

Borderline beneficiary: Retailers Huge amount of additional retail space coming onstream: Total private retail space is projected to increase by close to 20% by 2010 from 2008, its sharpest twoyear increase on record. In 2008, Singapore collected SGD7,115 tourism receipts per every sqm of net private floor space, representing a 3.8% increase compared to the SGD6,852 in 2007. Assuming the 2008’s levels are maintained in 2010, our analysis suggests that tourism revenue needs to increase to SGD17.7b by 2010. This works out to SGD1,698 spend per visitor by 2010, representing a 7.7% CAGR. In our view, this is not a hard to achieve level given the fact that tourism revenue collections per visitor stood at SGD1,895 in 1998 and SGD1,639 in 1999, in the aftermath of the 1997-98 Asian Financial Crisis. Exhibit 20: Private Retail Space Set To Jump In 2009-10E

('000 sm net) Total private retail sector stock (LHS) 2,700

Exhibit 21: Tourism Receipts

(SGD b)

SG tourism receipts (LHS)

10

16

% of GDP (RHS)

8

14

(y-y %)

Growth (RHS)

Higher tourist revenue offset by lower rental

2,500

4

2,100

2

12

10

6 2,300

(%)

12 8

10 8

0

6

1,900 1,700

(2)

6

(4)

4

Sources: CBRE Research; BNP Paribas estimates

4 1992 1994 1996 1998 2000 2002 2004 2006 2008

1996 1998 2000 2002 2004 2006 2008 2010 2012

Sources: CEIC; BNP Paribas

Retailers could benefit marginally: With more tourists coming to Singapore, retail sales are set to rise, which could benefit suburban retailers like CapitaMall Trust and Frasers Centerpoint Trusts. However, the benefits could be marginal as the unprecendented amount of floor space coming onstream could exert downward pressure on retail rental.

1 122

CMT and FCT could benefit

BNP

PARIBAS

Fragrance Group Ng Wee Siang (65) 6210 1945 T H E M A T I C

FRAG SP

Singapore Consumer Discretionary/Consumer Services

Share Price: SGD0.43 July 2009

R E P O R T

Nimble management Ng Wee Siang, CFA

Fragrance specializes in boutique residential property developments and management of budget hotels. Management rode the 2007 property boom with several well-timed property launches and at the same time scaled back on land bank. Given its 20 strategically-located budget hotels, Fragrance is well poised to gain from an expected pick-up in tourism following the opening of both the integrated resorts in 1Q10.

Making the right moves in hotel business After expanding its hotel network over the years, Fragrance now has a total capacity of 1,373 hotel rooms, catering to the more cost-conscious travelers. Given the strategically-located hotels – Balestier and Geylang – Fragrance stands to gain from an expected increase in tourist arrivals. Fragrance’s unique business model of catering to a minimum of twohourly accommodation puts it in an enviable position to better compete with large hotels that do not have such flexibility. As tourist arrivals increase, occupancy and room rates are set to rise, boosting the Group’s profitability. For 2008, hotel operations made up of 28.8% of the Group’s pre-tax profit.

A nimble boutique property developer Management was quick to capitalize on the 2007 property boom and managed to sell the majority of its property development projects. Four of the larger property launches in 2007-08 were: 1) Pristine Heights; 2) Imperial Heights; 3) The Merlot; and 4) City Regency. Unlike other boutique property players, Fragrance exercised great discipline by not participating in the land-banking frenzy seen at the peak of the property cycle. This helped generate an operating cash flow of SGD40.4m, taking the Group’s net gearing down to 1.5x (2007: 2.6x). The property division contributed 71.2% of the Group’s 2008 pre-tax profit (2007: 74.1%).

BNP Paribas Securities (Singapore) Pte Ltd Co. Reg. No. 199801966C (65) 6210 1945 [email protected]

Earnings Estimates And Valuation Ratios YE Dec (SGD m)

2005

2006

2007

2008

Revenue

86.7

97.7

136.1

215.3

Reported net profit

13.8

14.8

30.4

55.6

Reported EPS (SGD)

1.64

1.77

3.62

6.61

Net profit margin (%)

15.9

15.2

22.3

25.8

na

7.9

104.8

82.8

P/E (x)

26.3

24.3

11.9

6.5

Dividend yield (%)

13.5

7.0

3.5

2.3

EPS growth (%)

Price/book (x)

7.5

6.5

4.5

2.8

ROE (%)

0.0

28.7

44.8

53.3

Interest cover (x) Net debt/equity (%)

9.0

6.2

10.8

20.6

324.9

291.3

255.7

154.5

Sources: Fragrance Group; BNP Paribas

Share Price Daily vs MSCI Fragrance Group Rel to MSCI Singapore

(SGD) 0.50 0.40

40

0.30

20

0.20

0

0.10 Jul-08

Oct-08

Jan-09

Next results/event Market cap (USD m) 12m avg daily turnover (USD ‘000) Free float (%) Major shareholder 12m high/low (SGD)

Property development the mainstay We gather that Fragrance will continue to focus on its niche mid-end property developments that are meant for upgraders and end purchasers. The two residential projects that are to be launched in 2H09 are: 1) Parc Imperial at Pasir Panjang Road (preview underway); and 2) a yet-to-be-named project at Teluk Kurau Road. Given its depleting land bank, Fragrance may need to start replenishing its land bank again in the near future. The Group added one more hotel, called Fragrance Hotel – Royal, to its existing hotel chain in 2009 (2008: two new hotels; 2007: four new hotels).

Trading at 6.5x 2008 EPS and 2.8x BV At 6.5x historical P/E, valuation does not look expensive compared to the historical P/E mean of 8.6x. In P/BV terms, the stock is priced close to the historical mean. P/E multiple could rise once profit contribution from the property division starts to taper off.

13

(%) 60

ADR (USD)

Apr-09

(20) Jul-09 August 2009 248.2 37.8 16

Koh Wee Meng (73%) 0.485/0.190 Nil

Avg daily turnover (USD m)

Nil

Discount/premium (%)

Nil

Disc/premium vs 52-wk avg (%)

Nil

Sources: Bloomberg, BNP Paribas

NG WEE

SIANG

FRAGRANCE

GROUP

FRAG

SP

JULY

2009

Key company information Exhibit 1: Company Background

Exhibit 2: Pre-Tax Profit Contribution By Division

Fragrance – listed in March 2005 – specializes in boutique

(%) 100

residential property developments and management of budget hotels.

80

Property

Hotel

SGD4.9m (26.5%)

SGD9.6m (25.9%)

SGD19.4m (28.8%)

SGD13.7m (73.5%)

SGD27.5m (74.1%)

SGD48.2m (71.2%)

2006

2007

2008

Fragrance runs a hotel chain that carries the “Fragrance” name. Fragrance now has a total capacity of 1,373 hotel rooms catering to

60

the more cost-conscious travelers. The property division accounted for slightly more than 70% of the

40

Group’s pre-tax profit since listing days. Profit contributions from the growing hotel operations continued to hold up in the region of 25-

20

28% over 2006-08.

0

Sources: Fragrance Group; BNP Paribas

Sources: Fragrance Group; BNP Paribas

Exhibit 3: Net Profit And ROE Trend

Exhibit 4: Net Debt And Net Gearing Trend

(SGD m)

Net profit (LHS)

60

ROE (RHS)

(SGD m)

(%) 55.6

220

55

30.4

198.3

200

45

40

3.5

205.4

50

50

(x)

Net debt (LHS) Net gearing (RHS)

2.5

40 180

30 35 20

14.8

2.0 161.3

30

10

160

156.6 1.5

25

2006

2007

1.0

140

20

0

2005

2008

2006

2007

2008

Sources: Fragrance Group; BNP Paribas

Sources: Fragrance Group; BNP Paribas

Exhibit 5: Fragrance Trailing P/E Band Chart

Exhibit 6: Fragrance Trailing P/BV Band Chart

(x)

(x)

16

7

14

6

12

3.0

+1 SD = 11.3x

5 +1 SD = 4.1x

10

4

8

Mean = 3.0x

3

Mean = 8.6x

-1 SD = 1.9x 6

2

-1 SD = 5.9x

4 2 May-05

1

Mar-06

Jan-07

Sources: Fragrance Group; BNP Paribas

Oct-07

Aug-08

0 May-05

Jun-09

Mar-06

Jan-07

Oct-07

Aug-08

Jun-09

Sources: Fragrance Group; BNP Paribas

2 14

BNP

PARIBAS

Kingsmen Creatives Ng Wee Siang (65) 6210 1945 T H E M A T I C

Singapore Consumer Discretionary/Consumer Services

KMEN SP Share Price: SGD0.50 July 2009

R E P O R T

A little-known acorn Ng Wee Siang, CFA

There are many positives for Kingsmen Creatives (Kingsmen) as Singapore rejuvenates itself. Being one of a handful of specialists in the design and production of exhibits for conventions and trade shows, Kingsmen stands to gain with the opening of the two integrated resorts.

BNP Paribas Securities (Singapore) Pte Ltd Co. Reg. No. 199801966C (65) 6210 1945 [email protected]

Earnings Estimates And Valuation Ratios YE Dec (SGD m)

2005

2006

2007

2008

To benefit from the remaking of Singapore

Revenue

76.7

108.9

145.9

190.6

Being a one-stop provider of high quality design and production services to the exhibition, retail and office interior sectors, Kingsmen stands to benefit from the opening of the two integrated resorts, rejuvenation of the Orchard road, and various events/activities in the pipeline. Given its established brand name and specialization in the design and production of exhibits, coupled with its impressive track record, more contracts could be on the way.

Reported net profit

2.2

4.9

9.4

14.2

Reported EPS (SGD)

1.45

3.26

4.94

7.30

Net profit margin (%)

2.9

4.5

6.4

7.4

EPS growth (%)

73.8

125.2

51.6

47.9

P/E (x)

35.3

15.7

10.3

7.0

2.0

3.9

5.9

5.9

Dividend yield (%) Price/book (x) ROE (%) Interest cover (x) Net debt/equity (%)

5.3

4.2

2.7

2.3

14.9

26.7

26.2

33.2

42.3

72.1

127.9

111.5

(40.5)

(61.8)

(55.4)

(62.6)

Sources: Kingsmen Creatives; BNP Paribas

Milestones and accolades In 2008, Kingsmen achieved two commendable milestones: 1) A fiveyear contact to fabricate seating and Corporate Suites for Singapore 2008 F1 Grand Prix; and 2) Universal Studios Singapore contracts worth SGD59.5m. Some of the more prestigious awards received in 2008 were: 1) “Service Partner Excellence Award” – Singapore Business Events Awards 2008; and 2) “Gold Award (Retail/Showroom Category)” for Robinsons Department Store at The Gardens, Mid Valley City, Malaysia – 8th Design Excellence Awards 2008, Singapore.

Strong balance sheet and strong clientele base As of March, the Group had a net cash hoard of SGD26.1m or SGD0.13 per share. In the absence of sizeable capex in the foreseeable future, dividend payout of 40-50% appears achievable. We gather that 70% of its revenue comes from repeat customers. Some of Kingsmen’s longstanding clients are Robinson & Co, DFS Venture, the Dickson Group, FJ Benjamin, Burberry Asia, Asian Aerospace, and Reed Exhibitions.

More local fun fares We expect Las Vegas Sands (LVS) to work closely with the Singapore Tourism Board (STB) to attract more international exhibitions and/or conventions to be hosted by Marina Bay Sands (MBS). It is in the interest of LVS to do so to recoup its bloated USD5b investments in MBS. Various large events planned for 2010 such as the first Youth Olympics Games in Singapore and Singapore Grand Prix 2010 also augur well for Kingsmen.

Extending its wings beyond Singapore Over the years, Kingsmen has enjoyed rising overseas contributions. Singapore contributed as much as 72% to the Group’s revenue in 2003, but that has since then declined to 40%, as contribution from Greater China has increased substantially following the acquisition of Kingsmen (North Asia). We believe that contributions from Greater China will remain robust in 2010, especially in view of the 2010 World Expo in Shanghai.

15

Share Price Daily vs MSCI Kingsmen Creatives Rel to MSCI Singapore

(SGD) 0.60

60

0.50

40

0.40

20

0.30 0.20 Jul-08

(%) 80

0 Oct-08

Jan-09

Next results/event

Apr-09

(20) Jul-09 August 2009

Market cap (USD m)

66.9

12m avg daily turnover (USD ‘000)

74.1

Free float (%) Major shareholders

49 Islanda Pte Ltd (20%) & O-Vest Pte Ltd (20%)

12m high/low (SGD) ADR (USD)

0.515/0.290 Nil

Avg daily turnover (USD m)

Nil

Discount/premium (%)

Nil

Disc/premium vs 52-wk avg (%)

Nil

Sources: Bloomberg, BNP Paribas

NG WEE

SIANG

KINGSMEN

CREATIVES

KMEN

SP

JULY

2009

Key company information Exhibit 1: Company Background

Exhibit 2: Revenue Trend

Kingsmen, established in 1976, specializes in the design and

(SGD m)

Revenue (LHS)

production

250

Net profit margin (RHS)

of

exhibits

for

exhibitions,

museums,

events,

(%) 8

environmental graphics and tradeshows, as well as the design and production of interiors for retail stores, eateries, and corporate

7

190.6

200

offices.

6

145.9

150

With 16 offices in the Asia Pacific and the Middle East and more

108.9

than 1,000 employees, Kingsmen has built its name as a provider of

100

quality interior design works and carved a niche in the mid- to- up-

5

76.7

4

market retail sector. It is a one-stop-shop solutions provider, from

50

design to production and marketing promotions. Some of its long-

3

standing clients are Robinson & Co, DFS Venture, the Dickson

0

Group, FJ Benjamin, Burberry Asia, Asian Aerospace, and Reed

2 2005

Exhibitions.

2006

Sources: Kingsmen Creatives; BNP Paribas

Sources: Kingsmen Creatives; BNP Paribas

Exhibit 3: Net Profit And ROE Trend

Exhibit 4: Net Cash Per Share

(SGD m)

Net profit (LHS)

16

ROE (RHS)

(%) 14.2

(cents) 17

35

14 9.4

15.7 13.8

13

10

11.3

25 11

8 20

4.9

6 4

2008

15

30

12

2007

9

2.2

15

7

10

5

2 0 2005

2006

2007

2008

5.9

2005

2006

2007

Sources: Kingsmen Creatives; BNP Paribas

Sources: Kingsmen Creatives; BNP Paribas

Exhibit 5: Kingsmen Rolling P/E Band Chart

Exhibit 6: Kingsmen Trailing P/BV Band Chart

(x) 25

(x)

20

2.5

2008

3.0

+1SD = 1.8 2.0 15 +1SD = 10.0

1.5

Mean = 1.3

10 Mean = 6.0 5

0.5

-1SD = 2.1 0 Jan-04

May-05

Sep-06

Sources: Kingsmen Creatives; BNP Paribas

-1SD = 0.8

1.0

Feb-08

0.0 Jan-04

Jun-09

May-05

Sep-06

Feb-08

Jun-09

Sources: Kingsmen Creatives; BNP Paribas

2 16

BNP

PARIBAS

NG WEE

SIANG

APPENDIX

SINGAPORE

STRATEGY

JULY

2009

1

Marina Bay Sands Exhibit 1.1: Marina Bay Sands Features

Hotel Convention

Details

Capacity

Three 55-storeys hotel towers

2,600 rooms and suites

An exhibition hall

2,000 exhibition booths

A flexible convention centre

250 meeting rooms

A grand ballroom

8,000 sqm

Total area: 120,000 sqm Shops

Total retail GLA: 74,322 sqm

Entertainment

Two theatres

Total of 4,000 seats

Warterfront Promenade

10,000 people

Casino and Paiza Club for premium players Artscience Museum

Iconic lotus-inspired museum

Sources: Marina Bay Sands; BNP Paribas

Exhibit 1.2: Marina Bay Sands In Pictures Overview of Marina Bay Sands

Layout of Waterfront Promenade

Layout of Artscience Museum

Sources: Marina Bay Sands; BNP Paribas

1 17

BNP

PARIBAS

NG WEE

SIANG

SINGAPORE

STRATEGY

JULY

2009

Exhibit 1.3: Financing Details Of Marina Bay Sands Details Financing details

ƒ

In December 2007, MBS secured a facility agreement providing for: 1) 2)

an SGD2.0b term loan (called Permanent Facility A) that was funded in January 2008, an SGD2.75b term loan (Permanent Facility B) that is available on a delayed draw basis until 31 December 2010,

3)

a SGD192.6m banker’s guarantee facility (Permanent Facility C) to provide the bankers’ guarantees in favour of the Singapore Tourism Board (STB) required under the development agreement that was fully drawn in January 2008, and

4)

a SGD500.0m revolving credit facility (Permanent Facility D) that is available until 28 February 2015.

Interest

ƒ ƒ

Singapore swap offer rate plus a spread of 2.25% pa (3.9% as of 30 June 2008). MBS is required to pay standby interest fees of 1.125% pa and 0.90% pa on the undrawn amounts under Permanent Facility B and Facility D, respectively.

ƒ

MBS is required to pay a commission of 2.25% pa on the bankers’ guarantees outstanding under the permanent facilities for the period during which any banker’s guarantees are outstanding.

Security

ƒ

Collateralised by a first-priority security interest in substantially all of MBS’s assets.

Repayment

ƒ

The permanent facilities mature on 31 March 2015, with MBS required to repay or pre-pay the permanent facilities under certain circumstances.

ƒ

With effect from 31 March 2011, and at the end of each quarter thereafter, MBS is required to repay the outstanding Permanent Facility A and Facility B loans on a pro rata basis in an aggregate amount equal to SGD125.0m per quarter.

ƒ

In addition, commencing at the end of the third full quarter of operations of the MBS, MBS is required to further prepay the outstanding Permanent Facility A and Facility B loans on a pro rata basis with a percentage of excess free cash flow (as defined by the Permanent Facility Agreement).

Equity contribution requirement

ƒ

Under the terms of the SGD credit facility, LVS is obligated to fund at least 20% of the project costs with equity contributions or subordinated intercompany loans, with the remaining 80% funded with debt.

ƒ

Through 30 June, LVS has funded its equity contribution requirement via US senior secured credit facility and operating cash flows generated from its Las Vegas operations.

Source: Las Vegas Sands

Exhibit 1.4: Financial Institutions That Participated In Marina Bay Sands’ Syndicated Loans Role

Financial institutions involved

Original mandated lead arrangers

DBS, Goldman Sachs, OCBC and UOB.

Mandated lead arrangers

Bank of Nova Scotia, Calyon, Citi, DBS, Goldman Sachs, Lehman Brothers, Merrill Lynch, RBS, Standard Chartered Bank, Sumitomo-Mitsui, OCBC and UOB.

Bookrunners Senior lead arrangers

DBS, Goldman Sachs, OCBC, UOB, Citi, Lehman Brothers and Merrill Lynch. Aareal Bank, Bangkok Bank, Bank of China, BNP Paribas, Commerzbank, CIMB, Hypo Real Estate, RHB Bank and Mizuho Corporate Bank.

Senior managers

Bank of East Asia, Bank of India, Bank of Taiwan, Chang Hwa Commercial Bank, China Construction Bank, Credit Industrial et Commercial, First Commercial Bank, Hua Nan Commercial Bank, Land Bank of Taiwan and Mega International Bank.

Sources: Finance Asia; BNP Paribas

Exhibit 1.5: Respective Singapore Banks’ Original Exposure To Marina Bay Sands (SGD m)

Permanent facility A

Permanent facility B

Permanent facility D

Total

UOB

323.5

444.8

122.0

890.3

DBS

269.8

371.0

101.7

742.5

OCBC

208.6

286.9

76.3

571.8

Total

801.9

1,102.7

300.0

2,204.6

Note that respective banks’ exposure is different as banks may have cut their levels of exposure by “offloading” the loans to a third party. Sources: Dealogic; BNP Paribas

2 18

BNP

PARIBAS

NG WEE

SIANG

APPENDIX

SINGAPORE

STRATEGY

JULY

2009

2

Resorts World Exhibit 2.1: Features Of Resorts World At Sentosa Attractions

Features

Universal Studios Singapore

Movie-theme park

Marine Life Park

World's largest oceanarium

Maritime Xperiential Museum Equarius Water Park

Water theme park

FestiveWalk

Dining, shopping, clubbing

Le Vie

Theatrical production

Hotels

Themes

Proximity

Maxims Tower

Ultra-deluxe, lavish, all-suite hotel

Casino Casino

Hotel Michael

Elegant, boutique hotel

Hard Rock

Energetic, fun and glamorous

Universal Studio, oceanarium

Festive Hotel

Contemporary with hip and chic image

Le Vie Theatre

Equarius Hotel

Nature-themed hotel at the fringe of rain forest

Equarius Water Park

Spa Villas

Luxurious, private and tranquil

Wellness centre by ESPA

Sources: Resorts World; BNP Paribas

Exhibit 2.2: Resorts World At Sentosa In Pictures Overview of Resorts World At Sentosa

Layout of Maxims Tower

Layout of Hotel Michael

Layout of Hard Rock Hotel

Sources: Resorts World; BNP Paribas

3 19

BNP

PARIBAS

NG WEE

SIANG

APPENDIX

SINGAPORE

STRATEGY

JULY

2009

3

Known New Hotel Supply From 2Q09–2014 Exhibit 3.1: Known New Hotel Supply From 2Q09–2014* Expected

Area Location

classification

No. of

Total no. of rooms

No.

2Q09-4Q09

1

Park Hotel Clarke Quay

Clemenceau Ave/Unity St

Rest of Central Area

340

2

The Fullerton Bay Hotel

Collyer Quay

Downtown Core

104

3

Hotel (to be named)

Dickson Rd (ex Hong Wen School)

Rest of Central Area

29

4

Capella Singapore

The Knolls

Sentosa Island

32

5

Park Regis Hotel

New Market Rd/Merchant Rd

Downtown Core

203

6

Hotel (to be named)

Canning Walk

Rest of Central Area

7

Hotel (to be named)

400/404 East Coast Rd

Outside Central Region

8

The Marina Bay Sands

Marina Bay IR

Downtown Core

2,626

9

Hotel (to be named)

Tanjong Pagar Rd/Gopeng St

Downtown Core

388

10

Hotel (to be named)

Jurong Country Club

Outside Central Region

300

11

Hotel (to be named)

Sinaran Drive

Fringe Area

432

12

Hotel (to be named)

Fairy Hill Point

Outside Central Region

180

13

Hotel (to be named)

Belilios Rd/Klang Lane

Rest of Central Area

328

14

Holiday Chalet Resort (ex

Halton Rd/Hendon Rd

Outside Central Region

72

Santa Grand East Coast

East Coast Rd

Outside Central Region

67

Extension to Treasure Resort

Beach View

Sentosa Island

2010

Proposed hotel projects

rooms **

completion

82 65 3,481

Changi Hospital) 15 16

129

Hotel 17

Extension to Carlton Hotel

Bras Basah Rd

Downtown Core

287

18

Republic Iconic Hotel

Mohamed Sultan/Nanson Rd

Rest of Central Area

383

19

Renovation to Grand Park

Orchard Rd

Orchard

309

Orchard 2011

20

Resorts World at Sentosa

Sentosa IR (Central Zone)

Sentosa Island

21

Park Avenue Suites @ The

One-north (Buona Vista)

Fringe Area

1,830 370

4,705

Rochester 22

UE BizHub

Changi Business Park

Outside Central Region

301

23

Redevelopment of Hotel

Orchard Rd

Orchard

535

Phoenix 24

Hotel (to be named)

Race Course Rd/Rangoon Rd

Rest of Central Area

255

25

Hotel (to be named)

Upper Pickering St

Downtown Core

345

26

Orchid Hotel

Tanjong Pagar Rd/Tras St

Downtown Core

272

27

The W Hotel

The Quayside Isle (Sentosa Cove)

Sentosa Island

250

28

Laguna Hotel

Laguna Golf Green

Outside Central Region

191

29

Ibis Novena

Balestier Rd

Rest of Central Area

241

30

Hotel (to be named)

Kallang Rd/Jellicoe Rd

Rest of Central Area

902

2012

31

The Biltmore

Cuscaden Rd/Orchard Boulevard

Orchard

165

32

Hotel (to be named)

Marina View (Parcel B)

Downtown Core

272

437

2014

33

South Beach

Beach Road

Downtown Core

560

560

na

34

Hotel (to be named)

Telok Blangah Rd (former Citiport

Fringe Area

266 437

3,662

Ctr) na

35

Hotel (to be named)

Thomson Lane

Outside Central Region

na

36

Extension To Raffles Hotel

North Bridge/Bras Basah/Beach Rd

Downtown Core

78

na

37

Hotel (to be named)

Beach Rd

Downtown Core

273

na

38

Hotel (to be named)

Cross St

Downtown Core

384 304

na

39

Hotel (to be named)

Changi Business Park (Plot 61)

Outside Central Region

na

40

Hotel (to be named)

Orchard Boulevard

Orchard

39

Total

1,781 14,626

* As of March 2009, list includes projects which are under construction or have obtained provisional or written permission. It excludes projects for which approvals have lapsed or those which have to be submitted for approval. ** Estimates only. Sources: CBRE Research; BNP Paribas

4 20

BNP

PARIBAS

NG WEE

SIANG

APPENDIX

SINGAPORE

STRATEGY

JULY

2009

4

Known Future Retail Supply (2Q09-2013) Exhibit 4.1: Known Future Retail Supply (2Q09-2013)* Expected completion

No.

Proposed retail projects

Location

2Q09

1

Orchard Central

Orchard Rd

Net Floor Area** Total NFA (sqft)

(sqft)

250,000

1H09

2

Tanglin Village Expansion

Dempsey Rd

3Q09

3

ION Orchard

Orchard Rd/Orchard Turn

660,000

64,600

3Q09

4

Mandarin Gallery (Meritus Mandarin)

Orchard Rd

130,000

4Q09

5

City Square Mall

Jln Besar/Serangoon/Kitchener Rd

450,000

4Q09

6

Plaza 8@CBP

Changi Business Park

65,000

4Q09

7

TripleOne Somerset

Somerset Rd

50,000

4Q09

8

313@Somerset

Orchard Rd/Somerset Rd

2H09

9

Fusionopolis Phase 2B

one-north

294,000

2009

10

2 Havelock Rd

Havelock Rd

29,300

2009

11

CityVibes

Clementi

19,000

2009

12

The Fullerton Heritage

Fullerton Rd/Collyer Quay

18,000

2009

13

Quayside Isle at Sentosa Cove

Sentosa

1Q10

14

Marina Bay Shoppes@The Marina Bay Sands

Marina Bay

800,000

1Q10

15

*scape

Orchard Rd

34,000 83,000

3,200

29,000

2Q10

16

Park Hotel Orchard (former Crown Hotel)

Orchard Rd

2Q10

17

50 Collyer Quay

Collyer Quay

11,000

2Q10

18

36 Armenian St

Armenian St

14,900

3Q10

19

Serangoon Gardens Village redevt

Serangoon Gardens

38,000

4Q10

20

nex

Serangoon Central

2010

21

Proposed Supermarket/Eating establishment

Hougang Ave 10

2010

22

Resorts World at Sentosa (IR)

Sentosa

330,000

2010

23

Proposed 3-storey retail block in front of PSA

Alexandra Road

110,000

2010

24

Bedok Mall

Bedok

2010

25

MBFC (Phase 1)

Marina Bay

64,000

2011

26

1 Raffles Place

Raffles Place

22,700

2,062,100

618,000 22,600

Building 80,000

2011

27

268 Orchard Road

Orchard Road

86,000

2011

28

Gardens by the Bay

Marina South

100,000

2011

29

HDB retail mall at Clementi Town Centre

Clementi Ave 3

116,400

2011

30

Orchid Hotel

Tanjong Pagar Rd/Tras St

2011

31

UE BizHub

Changi Business Park

2011

32

Redevelopment of Hotel Phoenix and Specialists’ Orchard Road/Somerset Road

2011

33

2,205,500

21,700 50,600 150,000

Centre The Rochester Mall

one-north (Vista Exchange)

60,300

2011

34

Plot 61 Changi Business Park

Changi Business Park

2011

35

Scotts Square

Scotts Road

80,000

2012

36

MBFC site (Phase 2)

Marina Bay

41,700

2012

37

Sports Hub

Kallang

2012

38

The Biltmore

Cuscaden Rd/Orchard Rd

2012

39

Retail & Entertainment Zone of the Integrated

one-north

303,600 991,300

441,300 7,100 258,300

748,400

10,764

10,764

Total

6,018,064

BNP

PARIBAS

Hub@one-north 2013

40

Office/Shops development at Jln Besar/Lavender Jalan Besar/Lavender St St

* As of March 2009, new space is considered to be space under construction, additions/extensions and total refurbishment of existing space. ** Estimates only. Sources: CBRE Research; BNP Paribas

5 21

NG WEE

SIANG

APPENDIX

SINGAPORE

STRATEGY

JULY

2009

5

Private Residential Projects That Are Expected To Be Completed From 2Q09-2011 Exhibit 5.1: Private Residential Projects That Are Expected To Be Completed From 2Q09-2011 Project Name

Postal

Developer

Total units

Launch

district

Avg launch price

TOP

(SGD/sqft)

City Square Residences

8

CDL

910

Apr-05

600

2009

The Quartz

19

Guocoland

625

Jun-06

490

2009

The Centris

22

Prime Point Realty Development

610

Sep-06

500

2009

Casa Merah

16

Choice Homes / Wing Tai

556

Apr-07

600

2009

Botannia

5

CDL/ Capitaland

493

Apr-07

720

2009

One-North Residences

5

UOL / Kheng Leong

405

Mar-07

900

2009

The Metropolitan Condominium

3

Capitaland/ Lippo

382

Nov-06

800

2009

Carabelle

5

Sim Lian

338

Mar-07

600

2009

The Infiniti

5

FNN

315

Feb-06

550

2009

One Jervois

10

FNN

275

May-06

950

2009

The Coast at Sentosa Cove

4

Ho Bee

249

Oct-06

1,550

2009

ClementiWoods Condominium

5

FNN

240

Jan-07

550

2009

Pavilion 11

11

UOL

180

Mar-07

850

2009

Hillcrest Villa

11

MCL Land

163

Sep-07

867

2009

The Regency at Tiong Bahru

3

UIC / UOL

158

Oct-06

850

2009

The Suites at Central

9

KepLand

157

May-06

1,350

2009

The Parc Condominium

5

Lehman Bros/ Chip Eng Seng

659

Aug-07

900

2010

One Amber

15

Sing Land/UIC/UOL

562

Apr-05

750

2010

The Cascadia

21

Allgreen

536

Sep-07

1,650

2010

Ferraria Park Condominium

17

Hong Leong

472

Oct-06

600

2010

Marina Bay Residences

1

Keppel Land/ HKL/Cheung Kong

428

Dec-06

1,600-1,800

2010

Sky@eleven

11

SPH

273

Jan-07

1,000

2010

The Oceanfront @ Sentosa Cove

4

CDL/TID

264

Jul-06

1,400

2010

Hilltops

9

S C Global

241

Oct-07

4,000-4,800

2010

The Trillium

9

Lippo Land

231

Apr-07

1,600

2010

Southbank

7

Low Kheng Huat

197

Jun-06

626

2010

Southbank

7

UOL

197

Jun-06

626

2010

Park Natura

23

UIC

192

Nov-07

1,000

2010

Belle Vue Residences

9

WingTai

176

May-09

2,000

2010

St Thomas suites

9

FNN

176

Jan-07

1,850

2010

The Sixth Avenue Residences

10

Keppel land / Sing Land

175

Dec-06

1,000

2010

Tribeca

9

CDL

175

Nov-06

1,450

2010

Lumiere

2

BS Shenton Pte Ltd

168

Dec-06

1,550

2010

Montebleu

11

Soilbuild

151

Mar-07

900

2010 2011

LIVIA

18

City Dev.

1,822

Jul-08

666

Waterfront Waves

16

F&N

827

Jan-08

815

2011

Clover By The Park

20

Sim Lian

616

Jun-08

800

2011

The Rochester

5

United Engineers

366

Jul-07

1,250

2011

Dakota Residences

14

Ho Bee/ NTUC Choice Homes

348

Jun-08

1,000

2011

One Shenton

1

CDL

341

Jan-07

1,700-2,000

2011

Scotts Square

9

Wheelock Properties

338

Jul-07

3,900

2011

Floridian

21

FEO / Wing Tai

336

Dec-07

1,700

2011

The Arte

12

CDL

336

Mar-09

850

2011

The Seafront On Meyer

15

Capitaland

327

Mar-07

1,400-2,200

2011

Martin Place Residences

9

FNN

302

Feb-08

1,800

2011

Pavilion Park (Phase 2)

23

Allgreen

298

na

na

2011

Sophia Residence

9

Guocoland

272

na

na

2011

Goodwood Residence

10

GuocoLand

210

na

2,800

2011

The Peak @ Balmeg

5

MCL Land

180

Sep-08

1,011

2011

The Orchard Residences

9

Capitaland/SHK

175

Mar-07

3,200

2011

Sources: Urban Redevelopment Authority; BNP Paribas

6 22

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SINGAPORE

STRATEGY

JULY

2009

NOTES

1 233

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NG WEE

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SINGAPORE

STRATEGY

JULY

2009

NOTES

1 244

BNP

PARIBAS

NG WEE

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DISCLAIMERS

SINGAPORE

&

STRATEGY

JULY

2009

DISCLOSURES

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All share prices are as at market close on 9 July 2009 unless otherwise stated. Stock recommendations are based on absolute upside (downside), which we define as (target price* - current price) / current price. If the upside is 10% or more, the recommendation is BUY. If the downside is 10% or more, the recommendation is REDUCE. For stocks where the upside or downside is less than 10%, the recommendation is HOLD. In addition, we have key buy and key sell lists in each market, which are our most commercial and/or actionable BUY and REDUCE calls and are limited to at most five key buys and five key sells in each market at any point in time. Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on market price and the formal recommendation. *In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst doesn't think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts, then the target price may differ from fair value. In most cases, therefore, our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value. © 2009 BNP Paribas Group

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