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CC8 • THEEDGE SINGAPORE
| MARCH 3, 2008
CITY&COUNTRY
HOME LOAN RATES responsible for any loss or damage arising directly or indirectly from the use of, or reliance on, the information provided herein.
Disclaimer: The rates shown here are only indicative and are subject to changes by the respective banks without prior notice. They are not to be taken as an offer of contract. The Edge Publishing Pte Ltd shall not be
SOURCES: VARIOUS BANKS, EXPRESS HOME LOAN CONSULTANCY, THE EDGE SINGAPORE
HDB housing loan rates BOARD RATE (%)
FIRST YEAR (%)
80% FINANCING SECOND YEAR (%)
THIRD YEAR (%)
THEREAFTER (%)
BOARD RATE (%)
FIRST YEAR (%)
90% FINANCING SECOND YEAR (%)
THIRD YEAR (%)
THEREAFTER (%)
Fixed Rate Package (min $300k) Flexible Rate Package
5.50 5.50
4.25 (fixed) 4.25 (HBR-1.25)
4.50 (fixed) 4.50 (HBR-1.00)
4.50 (fixed) 4.50 (HBR-1.00)
5.50 (HBR) 5.50 (HBR)
5.50 5.50
4.25 (fixed) 4.25 (HBR-1.25)
4.50 (fixed) 4.50 (HBR-1.00)
4.50 (fixed) 4.50 (HBR-1.00)
5.50 (HBR) 5.50 (HBR)
Hong Leong Finance
2-Year Fixed Rate Package Variable Rate Package
4.25 4.25
3.48 (fixed) 3.18 (HBR-1.07)
3.48 (fixed) 3.38 (HBR-0.87)
3.98 (HBR-0.27) 3.88 (HBR-0.37)
3.98 (HBR-0.27) 3.98 (HBR-0.27)
4.25 4.25
4.48 (fixed) 3.98 (HBR-0.27)
4.70 (fixed) 4.20 (HBR-0.05)
4.75 (HBR+0.50) 4.75 (HBR+0.50)
4.75 (HBR+0.50) 4.75 (HBR+0.50)
HSBC
2-Year Fixed Rate Package (min $500k) 50% of Loan on Fixed rate (2-yr lock-in)*** Variable Rate Home Loan (min $100k, no lock-in) Variable Rate Home Loan (min $100k, 1-year lock-in) 50% of Loan on Sibor Pegged Package (no lock-in) ***
NA NA NA
4.00 (fixed) 2.8% (fixed) 3.50
4.00 (fixed) 2.8% (fixed) 3.50
4.00 3.40% (fixed) 3.70
4.00 3.80% (fixed) 3.80
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA
3.30 3mth Sibor +0.7%
3.50 3mth Sibor +0.7%
3.70 3mth Sibor +0.7%
3.80 3mth Sibor +0.7%
NA NA
NA NA
NA NA
NA NA
NA NA
1-Year Fixed Rate Package
3.75
2.68 (fixed)
3.08 (BR-0.67)
3.38 (BR-0.37)
3.75 (HBR)
NA
NA
NA
NA
NA
2-Year Fixed Rate Package
3.75
2.28 (fixed)
2.68(fixed)
2.98 (BR-0.77)
3.75 (HBR)
NA
NA
NA
NA
NA
3-Year Fixed Rate Package**
3.75
1.68 (fixed)
2.68 (fixed)
3.38 (fixed)
3.75 (HBR)
NA
NA
NA
NA
NA
3-Year Fixed 2.80% Cashback
3.75
2.48 (fixed)
3.68 (fixed)
4.38 (fixed)
3.75 (HBR)
NA
NA
NA
NA
NA
Variable Rate Package (1-yr lock-in)
3.75
2.78 (BR-0.97)
3.08 (BR-0.67)
3.38 (BR-0.37)
3.75 (HBR)
NA
NA
NA
NA
NA
Variable Rate Package (2-yr lock-in)
3.75
2.48 (BR-1.27)
2.88 (BR-0.87)
3.38 (BR-0.37)
3.75 (HBR)
NA
NA
NA
NA
NA
Variable Rate Package (3-yr lock-in) Variable Rate Package (no lock-in)
3.75 3.75
2.28 (BR-1.47) 2.98 (BR-0.77)
2.88 (BR-0.87) 3.28 (BR-0.47)
3.38 (BR-0.37) 3.38 (BR-0.37)
3.75 (HBR) 3.75 (HBR)
NA NA
NA NA
NA NA
NA NA
NA NA
BANK
NAME OF LOAN SCHEME
ABN Amro
Maybank
Variable 2.80% Cashback
3.75
3.08 (BR-0.67)
3.88 (BR+0.13)
4.38 (BR+0.63)
3.75 (HBR)
NA
NA
NA
NA
NA
OCBC
1-Year Fixed Rate Package 2-Year Fixed Rate Package Variable Rate Package
3.75 3.75 3.75
3.75 (fixed) 3.75 (fixed) 3.25 (HBR-0.50)
3.50 (HBR-0.25) 4.00 (fixed) 3.50 (HBR-0.25)
3.75 (HBR) 3.75 (HBR) 3.75 (HBR)
3.75 (HBR) 3.75 (HBR) 3.75 (HBR)
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA NA
POSB
Home Ideal package (pegged to CPF rate)** 3-Year Fixed Rate Package
NA NA
CPF Rate + 1.00 3.88 (fixed)
CPF Rate + 1.25 3.88 (fixed)
CPF Rate + 1.58 3.88 (fixed)
CPF Rate + 1.58 CPF Rate + 1.58
NA NA
NA NA
NA NA
NA NA
NA NA
4.25
4.00 (HBR-0.25)
4.25 (HBR)
4.75 (HBR+0.50)
4.75 (HBR+0.50)
NA
NA
NA
NA
NA
NA
3.25
3.50
3.75
3.75
NA
NA
NA
NA
NA
Sing Investments Variable Rate Package & Finance Standard Chartered
Floating Rate Package (min $100k)
UOB
1-Year Fixed Rate Package 2-Year Fixed Rate Package 3-Year Fixed Rate Package Floating Rate Package
4.50 4.50 4.50 4.50
4.25 (fixed) 4.10 (fixed) 3.98 (fixed) 3.25 (HBR-1.25)
4.25 (HBR-0.25) 4.10 (fixed) 3.98 (fixed) 3.50 (HBR-1.00)
4.25 (HBR-0.25) 4.10 (HBR-0.40) 3.98 (fixed) 3.75 (HBR-0.75)
4.25 (HBR-0.25) 4.10 (HBR-0.40) 3.98 (HBR-0.52) 3.75 (HBR-0.75)
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
RHB
2-Year Fixed Rate Package Variable Rate Package
4.25 4.25
3.50 (fixed) 3.25 (HBR-1.00)
3.75 (fixed) 3.50 (HBR-0.75)
3.88 (HBR-0.37) 3.75 (HBR-0.50)
4.00 (HBR-0.25) 4.25 (HBR)
NA NA
NA NA
NA NA
NA NA
NA NA
HBR = HDB Housing Board Rate
NA = Not available
**CPF rate has remained at 2.5% per annum since July 1999
Private housing loan rates BOARD RATE (%)
FIRST YEAR (%)
80% FINANCING SECOND YEAR (%)
THIRD YEAR (%)
THEREAFTER (%)
BOARD RATE (%)
FIRST YEAR (%)
90% FINANCING SECOND YEAR (%)
THIRD YEAR (%)
THEREAFTER (%)
Fixed Rate Package (min $300k) Flexible Rate Package
5.50 5.50
4.25 (fixed) 4.25 (BR-1.25)
4.50 (fixed) 4.50 (BR-1.00)
4.50 (fixed) 4.50 (BR-1.00)
5.50 (BR) 5.50 (BR)
5.50 5.50
4.25 (fixed) 4.25 (BR-1.25)
4.50 (fixed) 4.50 (BR-1.00)
4.50 (fixed) 4.50 (BR-1.00)
5.50 (BR) 5.50 (BR)
Interbank Market Rate Package* Nil Loyalty Period 1-Year Loyalty Period 2-Year Loyalty Period 3-Year Loyalty Period
NA NA NA NA
Sibor + 1.25 Sibor + 1.10 Sibor + 0.95 Sibor + 0.80
Sibor + 1.25 Sibor + 1.25 Sibor + 0.95 Sibor + 0.80
Sibor + 1.25 Sibor + 1.25 Sibor + 1.25 Sibor + 0.80
Sibor + 1.25 Sibor + 1.25 Sibor + 1.25 Sibor + 1.25
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
7.25 7.25
3.88 (fixed) 3.38 (BR-3.87)
4.18 (fixed) 3.88 (BR-3.37)
4.00 (BR-3.25) 4.00 (BR-3.25)
4.00 (BR-3.25) 4.00 (BR-3.25)
7.25 7.25
4.58 (fixed) 4.18 (BR-3.07)
4.78 (fixed) 4.38 (BR-2.87)
4.75 (BR-2.50) 4.75 (BR-2.50)
4.75 (BR-2.50) 4.75 (BR-2.50)
NA NA NA
4.00 (fixed) 2.8% (fixed) 3.50
4.00 (fixed) 2.8% (fixed) 3.50
4.00 3.40% (fixed) 3.70
4.00 3.80% (fixed) 3.80
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA 3.30 NA 3mth Sibor +0.7%
3.50 3mth Sibor +0.7%
3.70 3mth Sibor +0.7%
3.80 3mth Sibor +0.7%
NA NA
NA NA
NA NA
NA NA
NA NA
BANK
NAME OF LOAN SCHEME
ABN Amro DBS
Hong Leong Finance
2-Year Fixed Rate Package Variable Rate Package
HSBC
2-Year Fixed Rate Package (min $500k) 50% of Loan on Fixed rate (2-yr lock-in)*** Variable Rate Home Loan (min $200k, no lock-in) Variable Rate Home Loan (min $200k, 1-year lock-in) 50% of Loan on Sibor Pegged Package (no lock-in)***
Maybank
1-Year Fixed Rate Package
3.75
2.68 (fixed)
3.08 (BR-0.67)
3.38 (BR-0.37)
3.75 (BR)
3.75
3.18 (fixed)
3.58 (BR-0.17)
3.88 (BR+0.13)
4.25 (BR+0.50)
2-Year Fixed Rate Package
3.75
2.28 (fixed)
2.68(fixed)
2.98 (BR-0.77)
3.75 (BR)
3.75
2.78 (fixed)
3.18 (fixed)
3.48 (BR-0.27)
4.25 (BR+0.50)
3-Year Fixed Rate Package**
3.75
1.68 (fixed)
2.68 (fixed)
3.38 (fixed)
3.75 (BR)
3.75
2.18 (fixed)
3.18 (fixed)
3.88 (fixed)
4.25 (BR+0.50)
3-Year Fixed 2.80% Cashback
3.75
2.48 (fixed)
3.68 (fixed)
4.38 (fixed)
3.75 (BR)
3.75
2.98 (fixed)
4.18 (fixed)
4.88 (fixed)
4.25 (BR+0.50)
Variable Rate Package (1-yr lock-in)
3.75
2.78 (BR-0.97)
3.08 (BR-0.67)
3.38 (BR-0.37)
3.75 (BR)
3.75
3.28 (BR-0.47)
3.58 (BR-0.17)
3.88 (BR+0.13)
4.25 (BR+0.50)
Variable Rate Package (2-yr lock-in)
3.75
2.48 (BR-1.27)
2.88 (BR-0.87)
3.38 (BR-0.37)
3.75 (BR)
3.75
2.98 (BR-0.77)
3.38 (BR-0.37)
3.88 (BR+0.13)
4.25 (BR+0.50)
Variable Rate Package (3-yr lock-in) Variable Rate Package (no lock-in) Variable 2.80% Cashback
3.75 3.75 3.75
2.28 (BR-1.47) 2.98 (BR-0.77) 3.08 (BR-0.67)
2.88 (BR-0.87) 3.28 (BR-0.47) 3.88 (BR+0.13)
3.38 (BR-0.37) 3.38 (BR-0.37) 4.38 (BR+0.63)
3.75 (BR) 3.75 (BR) 3.75 (BR)
3.75 3.75 3.75
2.78 (BR-0.97) 3.48 (BR-0.27) 3.58 (BR-0.17)
3.38 (BR-0.37) 3.78 (BR+0.03) 4.38 (BR+0.63)
3.88 (BR+0.13) 3.88 (BR+0.13) 4.88 (BR+1.13)
4.25 (BR+0.50) 4.25 (BR+0.50) 4.25 (BR+0.50)
OCBC
Fixed Rate Package Variable Rate Package
4.50 4.50
3.75 (fixed) 3.25 (BR-1.25)
4.00 (fixed) 3.50 (BR-1.00)
3.75 (BR-0.75) 3.75 (BR-0.75)
3.75 (BR-0.75) 3.75 (BR-0.75)
NA NA
NA NA
NA NA
NA NA
NA NA
Standard Chartered
Floating Rate Package (min $200k) MortgageOne Package (min $500k)
5.00 5.00
3.25 (BR-1.75) 3.50 (BR-1.50)
3.50 (BR-1.50) 3.75 (BR-1.25)
3.75 (BR-1.25) 4.00 (BR-1.00)
4.00 (BR-1.00) 4.25 (BR-0.75)
3.85 4.10
4.10 (BR+0.25) 4.35 (BR+0.25)
4.35 (BR+0.50) 4.60 (BR+0.50)
4.60 (BR+0.75) 4.85 (BR+0.75)
4.60 (BR+0.75) 4.85 (BR+0.75)
UOB
1-Year Fixed Rate Package 2-Year Fixed Rate Package 3-Year Fixed Rate Package Floating Rate Package (UOB Home Plus)
4.50 4.50 4.50 4.50
4.25 (fixed) 4.10 (fixed) 3.98 (fixed) 3.50 (BR-1.00)
4.25 (BR-0.25) 4.10 (fixed) 3.98 (fixed) 3.75 (BR-0.75)
4.25 (BR-0.25) 4.10 (BR-0.40) 3.98 (fixed) 4.00 (BR-0.50)
4.25 (BR-0.25) 4.10 (BR-0.40) 3.98 (BR-0.52) 4.00 (BR-0.50)
NA 4.50 NA 4.50
NA 4.50 (fixed) NA 4.25 (BR-0.25)
NA 4.50 (fixed) NA 4.50 (BR)
NA 4.50 (BR+0.25) NA 5.00 (BR+0.50)
NA 4.50 (BR+0.25) NA 5.00 (BR+0.50)
Sing Investments Variable Rate Package & Finance
5.00
4.00 (BR-1.00)
4.25 (BR-0.75)
4.75 (BR-0.25)
4.75 (BR-0.25)
5.00
4.00 (BR-1.00)
4.25 (BR-0.75)
4.75 (BR-0.25)
4.75 (BR-0.25)
RHB
5.75 5.75
3.50 (fixed) 3.25 (BR-2.50)
3.75 (fixed) 3.50 (BR-2.25)
3.90 (BR-1.85) 3.75 (BR-2.00)
3.90 (BR-1.85) 3.75 (BR-2.00)
5.75 5.75
4.25 (fixed) 4.00 (BR-1.75)
4.25 (fixed) 4.25 (BR-1.50)
4.50 (BR-1.25) 4.50 (BR-1.25)
4.50 (BR-1.25) 4.50 (BR-1.25)
2-Year Fixed Rate Package Variable Rate Package
*The Interbank Market Rate refers to the 12-month Sibor. Sibor rate is $1.66250 as at Feb 28, 2008. **3-Year Fixed Rate valid until March 10, 2008 *** Package valid until March 22, 2008. For fixed rate loans go to www.hsbc.com.sg
BR = Board rate NA = Not available
90% financing available on a case-by-case basis based on bank’s discretion All board rates are variable
Tables updated as at Feb 28, 2008
CC2 • THEEDGE SINGAPORE
| MARCH 3, 2008
CITY&COUNTRY
PROPERTY BRIEFS
Home CDL’s record year
EDITOR/REGIONAL MANAGING DIRECTOR Tan Boon Kean ([email protected]) SECTION EDITOR Cecilia Chow ([email protected]) COPY-EDITING DESK Elaine Lim, Evelyn Tung, Ng Bee Cheng, James Chong PHOTO EDITOR Samuel Isaac Chua ([email protected]) PHOTOJOURNALIST Gwyneth Yeo ([email protected]) EDITORIAL COORDINATOR Rahayu Mohamad (rahayu.mohamad @bizedge.com) DESIGN DESK Tan Siew Ching, Christine Ong, Chan Yoke Lin, Jamy Gan ADVERTISING + MARKETING REGIONAL GENERAL MANAGER | Edward Stanislaus ([email protected]) SENIOR MANAGER | Colin Tan ([email protected]) MANAGERS | Simon Wong ([email protected]) Cecilia Kay ([email protected]) Jeffrey Wong ([email protected]) Windy Tan ([email protected]) Faith Teo ([email protected]) Julia Tan ([email protected]) COORDINATOR | Nor Aisah Bte Asmain ([email protected]) MALAYSIA REPRESENTATIVE | Helen John Corry ([email protected]) CIRCULATIONSUBSCRIPTIONS REGIONAL SENIOR MANAGER | Suresh Kumar ([email protected]) ASSISTANT MANAGER | Naziela Nasir ([email protected]) ASSISTANTS | Juliana Ibrahim ([email protected]) Iryanti Zainol ([email protected]) PUBLISHER The Edge Publishing Pte Ltd 150, Cecil Street #13-00 Singapore 069543 Tel: (65) 6232 8622 Fax: (65) 6232 8620 PRINTER KHL Printing Co Pte Ltd 57 Loyang Drive Singapore 508968 Tel: (65) 6543 2222 Fax: (65) 6545 3333 We welcome your comments and criticism. Send your letters to The Edge, Raffles City Post Office PO Box 218 Singapore 911708 Tel: (65) 6232 8622 Fax: (65) 6232 8620 e-mail: feedbackspore @bizedge.com Pseudonyms are allowed but please state your full name, address and contact number for us to verify.
Singapore’s leading property developer, City Developments Ltd (CDL), posted stellar 4Q2007 and full-year results. Net profit in 4Q2007 amounted to $235 million, up 71% y-o-y, while full-year profit rang in at $725 million compared with $200.7 million in FY2006 (if the $150 million profit from the sale of hotel assets to CDL Hospitality Trusts is excluded). Total revenue for the year was $3.1 billion. In the local residential market, CDL sold 1,655 units worth $3.38 billion compared with last year’s 1,337 units totalling $2.77 billion. Slated for launch in 1H of the year are: the 77-unit Shelford Suites; 100 of the 336-unit new condo at the former Lok Cho Apartments site; 100 of the 228-unit The Quayside Isle at Sentosa Cove; and the first phase of 150 units of the 724-unit Pasir Ris condominium development.
Ho Bee has record $272mil net profit Property development group Ho Bee Investment has announced record results for FY2007. The group had a net profit after tax and minority interest of $272 million for the full year ended Dec 31 — up 176% from the previous year. This was achieved on the back of record revenue of $596 million — up 52% from its previous peak of $393 million. Earnings per share stand at 36.9 cents compared with 14 cents previously, an increase of 163%. The company has proposed a one-tier final dividend of two cents per share. Y-o-y sales of properties were steeply higher, rising 51% to $576.7 million, compared with $382.2 million in 2006. Income came from residential projects including Coral Island, The Coasts and Paradise Island at Sentosa Cove; Orange Grove Residences at Orange Grove Road; Montview at Mount Sinai; and Quinterra at Holland Road.
Cityscape Asia returns to Singapore The world’s largest business-to-business real estate event brand, Cityscape, will hold Cityscape Asia at Suntec on April 15 to 17. The inaugural event last year featured more than 100 exhibitors from 35 countries, selling out more than 86,000 sq ft of space. This year’s Cityscape Asia will highlight opportunities to an audience of regional and international investors, real estate developers, architects and designers, government and senior professionals. Major sponsors include Limitless — a Dubai World company — and UK-listed company Aseana Properties, which is focused on developments in Malaysia and Vietnam.
OKP rides high on vibrant construction sector A strong economy and vibrant construction sector has seen infrastructure and civil engineering firm OKP Holdings announce a record full-year net profit after tax and minority interest of $11 million — up 171% on 2006. The group has declared a one-tier tax-exempt first and final dividend of two cents per share. Turnover for the year ended Dec 31 hit a high of $124.7 million, up 70% from the $73.3 million achieved in the previous financial year. OKP specialises in the construction of airport runways and taxiways, expressways, flyovers, vehicular bridges, and urban and arterial roads. The bulk of group revenue was generated from its construction segment, which saw a y-o-y surge of 95.9% from $53.4 million to contribute $104.7 million — 84% — to total revenue.
CapitaLand partners with leading Australia developer CapitaLand has entered into a joint venture with Australand Industrial and Lo-
gistics International, one of Australia’s major diversified property groups. The agreement, through CapitaLand subsidiary CapitaLand Industrial & Logistics Holdings (CIL), aims to establish a Pan-Asian development platform in the industrial and logistics sectors in Asia. CIL will own a 51% stake in projects and Australand the remaining 49%. Australand is a leading industrial and logistics property developer and manager in Australia.
leases of 15 years. The office buildings on these sites — which could be amalgamated — are expected to be low-rise developments of four storeys. Knight Frank says the expected price for Parcel A is $14 million to $18.2 million ($100 to $130 per sq ft per plot ratio) and $14.6 million to $19 million ($100 to $130 psf ppr) for Parcel B. Tenders for Parcel A close at noon on April 24 and at noon on April 30 for Parcel B.
Koh Brothers reports huge profit jump Koh Brothers Group has reported fullyear net profit of $39.7 million — 877% more than the 2006 result. Sales in 2007 were $285.5 million compared with $259.6 million the previous year — a 10% increase. The real estate division contributed $26.9 million, or 9% of the group’s turnover. New sales contribution came from Bungalow @ Caldecott and rental income from the Alocassia Apartments. Turnover from the construction and building materials division increased from $227.8 million in 2006 to $251.2 million in 2007. The group’s net profit attributable to shareholders has increased 877% from $4.1 million in 2006 to $39.7 million last year, which includes the net revaluation surplus of $32.2 million.
URA launches two transitional office sites at Scotts Road URA has launched the sale of two transitional office sites at Scotts Road-Anthony Road. Located next to the Newton MRT station, Land Parcel A has a site area of 93,455 sq ft and can yield a maximum gross floor (GFA) area of 140,193 sq ft. The adjacent land parcel B has a site area of around 97,287 sq ft and a maximum GFA of 145,920 sq ft. Both parcels are being sold on short-term
$18 million revamp of Tiong Bahru Plaza Shopping mall management group, AsiaMalls Management, the joint venture between ARMF and SGX-listed Guthrie Group, announced last week that it will be repositioning Tiong Bahru Plaza (above), one of the suburban malls in its portfolio which includes six other malls — Hougang Mall, White Sands, Century Square, Liang Court, Central Plaza and the upcoming Tampines 1. Two floors of the Central Plaza office tower (acquired early last year) located next door to Tiong Bahru Plaza will be converted to civic use. This allows the latter to provide additional gross floor area for retail use. Targeted for completion by 3Q2008, the estimated cost of the revamp is $18 million, and will add another 19,000 sq ft for retail and F&B outlets, while the existing areas will be reconfigured. — Compiled by E Mark Henderson
(
Offshore CapitaLand to create $426mil fund for Vietnam expansion CapitaLand has strengthened its presence in Vietnam with several new business initiatives which include a strategic partnership and a multi-million dollar development fund. A statement of strategic intent has been signed with CapitaLand’s local Vietnamese partner Nam Thang Long Investment Joint-Stock Company to form a strategic alliance to seek further real estate business opportunities. The partners will also develop residential properties and commercial-residential mixed developments. CapitaLand will also leverage on its real estate and fund management expertise to set up its first property fund to invest in Vietnam. It intends to take a 30% sponsor stake in the targeted $426 million fund. CapitaLand has signed a memorandum of understanding with Citi Private Bank, one of the world’s largest wealth managers, to explore real estate investment opportunities in Vietnam. CapitaLand believes the fund will follow the success of its CapitaLand China Development Fund, which is also co-marketed with Citi Private Bank in China. The group is confident of doubling its residential pipeline in Vietnam from the present 2,800 homes to around 6,000 homes over the next three years. CapitaLand is also looking for opportunities in the office, retail, and integrated leisure, entertainment and conventions sectors. CapitaLand is in a strong financial position to tap opportunities in Vietnam despite the tough global financial landscape. In February, the group raised
$1.3 billion through a 10-year convertible bond issue — the largest 10-year convertible bond transaction ever done in Singapore. It also recently closed two new funds — the CapitaRetail India Development Fund has raised US$600 million to invest in retail development projects in India, and the CapitaRetail China Development Fund II which has US$600 million ($837.84 million).
Keppel Land unveils Saigon Centre concept plans Keppel Land, one of the largest property developers in Vietnam, has unveiled concept plans for its Saigon Centre. The 2ha mixed-use development fronts Le Loi Boulevard, the main thoroughfare in Ho Chi Minh City. Phase One, completed in 1996, is a 25storey building comprising a three-storey retail podium, 11 levels of prime office space, 89 serviced apartments and three levels of basement carpark. Saigon Centre is the preferred address of the diplomatic corps, multinational companies, bank and financial institutions. Keppel Land and local partners, Sowatco and Resco, will embark on plans to develop an iconic landmark development integrating subsequent phases of Saigon Centre. Skidmore, Owings and Merrill, one of the world’s largest architectural firms, will design the new concept plans.
More demand for Bangkok luxury apartments CB Richard Ellis (CBRE) predicts Bangkok’s luxury condominium market will become more active this year and new supply will continue to
be limited. Freehold plots in prime central locations are very limited and the increase in land prices has resulted in a drop in the new supply of luxury units in these areas, while demand for downtown city living is growing. Prices for new downtown condominiums have risen by an average of 10% to 12% a year since 2003. CBRE says investment in new luxury apartments in prime locations has generated an average of 4% to 5% yield per annum over the past four years along with price appreciation. The average percentage of foreigner buyers has increased to 32% over the past three years from less than 20% a decade ago. Tight supply and relative affordability is boosting prices in downtown Bangkok. A luxury two-bedroom unit with 970 to 1,300 sq ft sells for around US$500,000 ($698,200).
Ascott to manage new Jakarta serviced residence The Ascott Group will manage Somerset Kuningan, a new serviced residence in Jakarta’s CBD. The contract was signed with PT Ciputra Adigraha, a subsidiary of PT Ciputra Property Tbk, one of Indonesia’s most established commercial property developers. Somerset Kuningan will be part of a large integrated development called Ciputra World Jakarta. The 10ha project comprises a high-end retail mall, office towers, condominiums and a fivestar hotel-luxury residence. The 153-unit serviced residence is expected to open in 2H2012. — ComE piled by Mark Henderson
THEEDGE SINGAPORE | MARCH 3, 2008 • CC3
Phillip Investor Hub also houses all of its 310 financial advisers, some of its backroom staff, and act as a satellite office for its 150 remisiers
PICTURES: GWYNETH YEO/THE EDGE SINGAPORE
CITY&COUNTRY
quarters occupies six floors in Raffles City Tower, totalling 60,000 to 70,000 sq ft. “We are actually expanding in Raffles City, not shrinking,” emphasises Lim. “We still need more space. [The new investor hub] indirectly helps relieve some of the space pressure that we have in Raffles City.”
Rental costs
More than just a hub | BY NOVA THERESIANTO |
H
omegrown financial services firm, PhillipCapital, has been most aggressive at bringing its financial services nearer to its investors — to the heartland districts. Over the last eight years, it has planted investor centres in major residential neighbourhoods from Ang Mo Kio, Marine Parade and Toa Payoh, to as far as Bukit Batok, Yishun and Woodlands. It also has two investor centres in the CBD, namely Robinson Road and Raffles City Tower. In fact, its first investor centre was at Straits Trading Building along Battery Road. Set up in 2000, it
has since been relocated to the current Robinson Towers premise. To date, it has nine investor centres. Two weeks ago, PhillipCapital opened its first investor hub at the former Moulmein Community Centre at Shan Road, off Balestier Road. Unlike the typical investor centres in the heartlands, which tend to be housed in shophouses of around 2,000 sq ft, the flagship Phillip Investor Hub is 10 times larger with a gross floor area of 22,593 sq ft. PhillipCapital spent about $1.8 million refurbishing the former community centre, which had been vacant for more than two years. Unlike the other investor centres, the Phillip
Investor Hub is designed like a clubhouse with a cafeteria and a rooftop garden for client functions.
‘Comprehensive range of services’ “We thought it was a good idea to do something more significant, like a hub, which we can plant in different major parts of Singapore,” says Lim Hua Min, executive chairman of PhillipCapital. “And so hopefully, this first hub will not be the last one, so that we will be in a position to provide a more comprehensive range of services.” Including the new investor hub at the former Moulmein Community Centre, PhillipCapital now has 10
Lim: We are actually expanding in Raffles City, not shrinking. We still need more space.
such investor centres. “Our aim is to have 20 [investor hubs and centres] in time to come, [and] we are looking at three this year,” says Lisa Lee, director of business development and consumer services at PhillipCapital. The rate of expansion will depend on the availability of sizeable properties in strategic locations, for instance, in the regional centres of Jurong East in the west and Tampines in the east. The investor hub also helps centralise several functions. It houses all the 310 financial advisers who were previously located in various investor centres. It also acts as a satellite office for its 150 remisiers or so-called “home sales force”. It will also house some of PhillipCapital’s backroom functions. Currently, PhillipCapital’s head-
On top of that, it also helps reduce overall rental costs. As of February, asking rents at Raffles City Tower is in the range of $16.20-$17.50 psf per month, according to office leasing specialists, Corporate Locations’ latest rental guide. Meanwhile, PhillipCapital had successfully bid to lease the former Moulmein Community Centre site for its investor hub from the Singapore Land Authority for $35,000 per month in June last year. This works out to a rental rate of a mere $1.55 psf per month. The lease period is for three years, with an option to renew for threeplus three years. Unlike the other investor centres which follow regular office hours (in the heartlands they are opened from 9am to 1pm on Saturdays), the new investor hub will be opened seven days a week from 11am to 5pm. “The CBD gets really sleepy during the weekend, therefore we are actually going into areas where these investors live,” says Lee. The company has also set up investor centres in Thailand, Indonesia E and Hong Kong.
CC4 • THEEDGE SINGAPORE
| MARCH 3, 2008
CITY&COUNTRY
COVERSTORY
The pric
1 1 1 1 1
MILLIONAIRES’
The brand new super-luxury good class bungalow at 39 Leedon Road and the neighbouring 37 Leedon Road are on the market with price tags of $35 million each
row in Singapore
While GCB transactions are expected to moderate this year after a record 2007, sellers are still bullish with their asking prices | BY CECILIA CHOW |
T
he US subprime woes may have dampened sentiment and slowed the rate of sales, but it has yet to put a dent on owners’ asking prices, especially at the top-tier of the luxury home market, the good class bungalows (GCBs). Last year was a record year for the GCB market, with 117 transactions worth $1.54 billion taking place, according to Jones Lang LaSalle Research. However, the bulk of the sales of $1.4 billion (90%) were done in the first nine months of the year. In 4Q when the US subprime crisis started to have a knockon effect on global stock markets, market sentiment in Singapore dipped, and only nine GCBs changed hands over the last three months of 2007. “2008 is generally expected to see a slower start to the year as fears of a US recession continue to affect market sentiment,” says David Batchelor, associate director of investments at Jones Lang LaSalle, and a specialist in the GCB market. While demand for GCBs remains strong, actual transactions for 2008 is expected to moderate. This is already evident in terms of sales for the first
two months of the year: only a handful of GCBs changed hands compared with the same period last year, which saw around 20 transactions. The most recent deal according to URA Realis database of caveats lodged, was on Feb 4 when 32 White House Park with a land area of 15,081 sq ft, changed hands for $18 million or $1,194 psf. However, unlike the luxury condo market that has gone very quiet since the last quarter of 2007, with developers holding back their launches until sentiment improves, there is still activity in the landed homes segment, observes Shaun Poh, senior director of investment advisory services and auction at DTZ Debenham Tie Leung.
More GCBs priced above $1,000 psf Most recently, DTZ put up for sale by private treaty a GCB at 5A Bishopsgate (located off Grange Road and Nathan Road) with an indicative price of $24 million. This translates to $1,423 psf based on a land area of 16,861 sq ft. The double-storey bungalow with a total built-up area of 9,800 sq ft has seven bedrooms and a swimming pool. Built 11 years ago, the house is still in mint condition and was recently given a fresh coat of paint. Hence, the new
owner would not need to do any extensive renovation works. The property is currently tenanted at a monthly rental rate of $40,000 a month, with the lease expiring end-October 2009. Just next door, 7A Bishopsgate changed hands for $21 million or $1,202 psf in December last year. “These days, the asking price for GCBs is above $1,000 psf,” says Poh. There are also several properties that were put on the market last year at prices above $1,000 psf, and which are still available for sale. One of them is 35 Leedon Road, which sits on a 43,927 sq ft freehold. The owners are not budging from their asking price of $44 million or $1,001 psf. Another is 3 Wollerton Park which has a land area of 26,326 sq ft site and an indicative sale price of $32 million to $33 million or $1,215 to 1,254 psf. The existing mansion has a built-up area of 15,000 sq ft with six bedrooms and a basement. There’s also a separate wing for entertaining guests. In the exclusive Chatsworth Park enclave, the conservation bungalow at No 5 Chatsworth Park was put up for sale by private treaty in November. The conservation house and an outhouse sit on a sprawling 43,496 sq ft site and the price tag is $45 million or close to
$1, the er G inc
in 2 psf cen wit to $ aG bou Na for sim $19
Sep we ma me ow and Roa his
ter Lan mo and
Su bu
As ma the the 37 ope at t lau gal tran Lim: As you move up to the tip of the pyramid, there are fewer and fewer people who can afford a home at this level
bui
THEEDGE SINGAPORE | MARCH 3, 2008 • CC5
COVERSTORY COVER STORY
Top 10 GCB transactions in 2007 NO
DATE
ADDRESS
31 75 94 96 98 104 106 108 112 117
March 30 June 8 July 25 Aug 2 Aug 7 Sept 11 Sept 18 Sept 26 Nov 9 Dec 21
63 Dalvey Road 20B Nassim Road 10 Peirce Hill 15 White House Park 5A Bishopsgate 32G Nassim Road 32H Nassim Road 30 White House Park 7 Gallop Walk 7A Bishopsgate
LAND AREA (SQ FT)
SALE PRICE ($)
PSF ($)
15,080 24,186 16,926 22,011 16,867 13,292 13,422 14,811 15,202 17,472
16,450,000 24,183,480 17,200,000 28,800,000 18,800,000 19,998,000 25,500,000 15,500,000 15,350,000 21,000,000
1,091 1,000 1,016 1,308 1,115 1,505 1,900 1,047 1,010 1,202
Good class bungalows transactions in 2008 (to date)
1,600 1,400
Total transacted value ($mil) Total transacted value Total No sold
120 100
1,200 1,000
80
800
60
600
40
400 20
200 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
luxlow and g 37 the s of ach
140
0
$1,035 psf. Given the size of the land, it has the potential to be sub-divided into two smaller GCB sites of over 21,000 sq ft each, which includes the conservation bungalow. According to Jones Lang LaSalle Research, in 2007, 10 GCBs were sold at prices of $1,000 psf and above. Three of the deals were concentrated in the exclusive Nassim Road area, with the highest price achieved there at close to $1,900 psf, which is also a record price for a GCB property. This was for one of two neighbouring plots at Nassim Road, namely 32H Nassim Road (a 13,422 sq ft site that was sold for $25.5 million or $1,899 psf); and 32G Nassim Road (a 13,292 sq ft site that was sold for $19.998 million or $1,505 psf). Both these properties were transacted in September, and according to market sources, were bought by Chew Hua Seng, the chairman and CEO of Raffles Education Corp (formerly Raffles LaSalle Ltd). Chew currently owns 32K Nassim Road, just two doors away, and sources say the two neighbouring Nassim Road homes were likely to be purchased for his family’s use. “The rich are getting richer and have better holding power than before,” observes Jones Lang LaSalle’s Batchelor. “The GCB market is more resilient than the luxury condo market, and is a better hedge against inflation.”
Super-luxury, high-specification bungalows at $35 million
r
As more GCBs start to cross the $1,000 psf mark, more GCB owners will be willing to put their homes on the market. The latest launch is the brand new pair of “super-luxury” GCBs at 37 and 39 Leedon Road by niche luxury developer, George Lim of GLim Pte Ltd. Completed at the end of December, the two homes were launched in a glitzy event on Feb 21. Each bungalow carries a price tag of $35 million, which translates to over $1,500 psf. No 37 has a land area of 22,000 sq ft and built-up area of 10,000 sq ft. Meanwhile, No
2,750 2,500 2,250 2,000 1,750 1,500
($) High end condo avg cap value GCB avg $ per sq ft
JONES LANG LASALLE RESEARCH
1,800
High-end condos vs GCBs
DATE
ADDRESS
1 2 3 4 5
Feb 4 Feb 4 Feb 4 Jan 16 Jan 22
32 White House Park 14 Mount Echo Park 20 Caldecott Close 5 Swettenham Green 85 Chestnut Drive Total land area Total transaction Average psf
1,250 1,000 750 500 250 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
GCB transactions
JONES LANG LASALLE RESEARCH
The good class bungalow at 5A Bishopsgate (located off Grange Road and Nathan Road) has an indicative price of $24 million or $1,423 psf
NO
39 has a land area of 21,000 sq ft and builtup area of 11,000 sq ft. Both homes have fivebedrooms, an aquarium with exotic fish, a koi pond, swimming pool, a roof deck for outdoor entertaining, a separate guest house, a wine cellar to house 2,000 bottles of wine, a shoe cupboard for up to 500 pairs of shoes, a gourmet kitchen with imported Viking professional kitchen appliances, an internal lift, and a basement car park for seven cars. The two homes will appeal to the tech-savvy. There is a home automation system that can be programmed to turn on lights and airconditioning anywhere around the house either with the wall panels or remotely from your mobile phone or PC; an entertainment system with AMX movie on demand (up to 250 movies) and piped in music for every room and outdoor areas. There are also six plasma televisions installed in the house — a ceilingmounted 50” TV in the master bedroom and five others in the living and family rooms. The kitchen also has a 28” high-definition TV. All the TVs are linked to surveillance cameras in various parts of the house for security. Lim has also installed a dehumidifier for all the walk-in wardrobes as well as the shoe cupboard. “Whenever I build a house, I always ask myself, ‘What can I do to make the home more comfortable and convenient through home automation without making it too complicated for the owner?’”. Offers in the “$30-million range” have trickled in, but Lim is not biting. Will he consider lowering his price tag if he doesn’t get his asking price of $35 million? “There’s no reason why a property like this can’t be sold,” he comments. “As you move up to the tip of the pyramid, there are fewer and fewer people who can afford a home at this level.” A newly completed home like Lim’s will likely appeal to homebuyers in the face of skyrocketing construction costs over the past year due to competition for scarce resources and manpower amidst a construction boom.
Batchelor: The rich are getting richer and have better holding power than before. The GCB market is more resilient than the luxury condo market, and is a better hedge against inflation.
Hence, most GCB buyers have shifted their focus from building their own dream GCBs to looking for completed GCBs where little or no improvements are required, observes Batchelor. “Thus it is expected that [demand for] completed GCBs will be stronger in 2008 as construction costs continue to remain high.”
More owner occupiers and long-term investors as prices trend up Over at 11 Ford Avenue, the tender for the sale closed on Feb 21. This is one of the few large GCB sites left. With a sprawling 45,894 sq ft site, the property has the potential to be subdivided into three smaller GCBs. The owner of 11 Ford Avenue is believed to be the Eu family of Singapore Exchange-listed Eu Yan Sang. The traditional Chinese medicine empire founded back in 1879 is already in the fourth generation of the family, and is headed by Richard Eu, the great-great-grandson of the founder, Eu Kong.
LAND AREA (SQ FT)
SALE PRICE
PSF ($)
15,081 18,568 17,400 15,817 15,999
18,000,000 13,250,000 10,080,000 12,682,760 8,580,000
1,194 714 579 802 536
82,865 sq ft $62,592,760 $755 psf
The property was put up for sale on Jan 15 with an indicative price tag of $41 million or $893 psf. Colliers International, the marketing agent for the property is said to be “in negotiations with interested parties”. According to Ho Eng Joo, executive director of investment sales at Colliers International, who’s handling the sale, interest has come mainly from buyers who’re looking at buying the super-sized GCB site for their own occupation. As GCB prices continue to head north, buyers have started to widen their search beyond the traditional prime residential districts in the city centre. They are looking further out to locations like Chestnut Drive and Windsor Park where prices are still below the $1,000 psf mark. This can be seen in the transactions this year. While 32 White House Park was sold for $1,192 psf, the GCB at 83 Chestnut Drive with a 15,999 sq ft site went for $8.58 million or $536 psf. At 20 Caldecott Close, the GCB on a 17,400 sq ft site changed hands for $10.08 million or $579 psf. While the total value of sales in 2007 at $1.54 billion exceeded 2006’s $1.3 billion, in terms of the number of transactions, 2007’s 117 were fewer than 2006’s 128. This reflects the sharp run-up in property prices last year. The average price per square foot for GCBs was $692 psf in 2007, compared with $503 psf in 2006, which showed average capital values appreciating 37.6%. The average price for the five transactions in 2008 to date was $755 psf, which is 9% higher than the average prices recorded last year. Hence, while Batchelor expects sales volume to moderate this year, he is confident that in terms of value, it could potentially remain on par with last year. What’s worth noting is that while GCBs remain sought-after investments and are still coveted assets for newly minted millionaires, it is now seeing stiff competition from Sentosa Cove, with 99-year leasehold waterfront bungalows. While land values of GCBs averaged at $692 psf for the whole of last year, sea-fronting bungalow parcels at Sentosa Cove were close to double that at $1,283 psf. Even luxury-end condos are seeing transaction prices that are much higher than GCBs, averaging $2,730 psf in 2007. “The GCB market is unique and caters to the ultra-rich home buyers and sellers and will generally continue to remain resilient against any recession in the US,” he adds. Transactions of GCBs will remain active and record prices are expected for the various GCB enE claves in 2008.”
JONES LANG LASALLE RESEARCH, URA REALIS
PICTURES: SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
CITY&COUNTRY
| MARCH 3, 2008 GWYNETH YEO/THE EDGE SINGAPORE
CC6 • THEEDGE SINGAPORE
CITY&COUNTRY
The row of five terraced houses at Essex Road has a price tag of $30 million or $1,500 psf ppr
COLLIERS INTERNATIONAL
Train of collective sale hopefuls continues unabated | BY CECILIA CHOW |
T
he collective sale market may have cooled considerably since 4Q2007, but the ardour of collective sale hopefuls apparently hasn’t. And it’s no longer confined to the owners of condominium and apartment blocks either. Jumping on the bandwagon are owners of landed homes. Last November, the owners of 15 terraced houses along Jalan Bunga Raya in Balestier banded together and sold their homes collectively for $61 million to a Chinese developer and a Singaporean partner. Each of the owners walked away with $4 million. More recently, the owners of a row of five terraced houses along Essex Road, just off Thomson Road, are hoping to reap an equally profitable windfall. Unlike a collective sale of a condominium project where only 80% of the owners need to give their consent for a sale to go through (for projects that are at least 10 years old), in the case of landed homes, all the owners have to agree. However, as landed homes, the collective sale does not need Strata Title Board approval, which will make the sale less cumbersome once all the owners have agreed to the sale. In the case of the Essex Road houses, Knight Frank, the appointed marketing agent, received approval from all the owners to proceed with the collective sale. This was made easier because the owner of three of the five houses is the person who also initiated the sale process. He is Dr Lim, CEO of ASIAINSTITUT OF MANAGEMENT (AM School of Business Studies), who had purchased the houses three years ago. What’s also interesting is that the owners have decided to opt for an auction sale in the hope of achieving a speedier sale process. Knight Frank will be putting up the properties for auction sale on March 20. Lim believes the potential of the row of Essex Road terraced houses hinges on the possibility of it being amalgamated with the neighbouring strip of state land, the service road behind the houses for the owners to park their cars, and more importantly, with the apartment block Lion Towers behind it, which is also pursuing a collective sale. He argues that such an amalgamation will enhance the footprint of the existing Lion Towers site by another 80%, making it more attractive to a developer looking for a freehold
The row of 16 terraced houses at Fort Terrace has an indicative price of $95 million or $1,238 psf ppr
development site in the prime residential enclave of Newton/Novena. The en bloc sales committee of Lion Towers at 2 Essex Road has recently appointed CB Richard Ellis (CBRE) as their marketing agent to handle their collective sale. According to market sources, it’s still in the process of drafting the collective sale agreement.
Lion Towers Built close to 30 years ago, Lion Towers has 52 apartments and sits on a 40,409 sq ft freehold site. With a plot ratio of 2.8 and a maximum height of 36-storeys under the 2003 Master Plan, a developer will be able to build a brand new 75-unit luxury condominium with units averaging 1,500 sq ft each. According to market sources, the indicative price of Lion Towers is estimated to be close to $200 million, which works out to around $1,742.46 psf ppr. At that price, each owner will pocket $3.8 million each. The owners are said to have already applied to the Singapore Land Authority (SLA) regarding the possible annexation of the neighbouring state land to be amalgamated with the Lion Towers site. Meanwhile, the five houses at Essex Road are sitting on a freehold site of 7,163 sq ft. The land is zoned for residential development
with a plot ratio of 2.8 according to URA’s 2003 Master Plan, and has a maximum height of 36-storeys as well. The owners’ asking price is $1,500 psf ppr or around $30 million. If that price is achieved, each owner will walk away with a cool $6 million. This asking price is comparable to the sale price of last year’s collective sale deals in its immediate neighbourhood. Last November, contractor-cum-developer, Bravo Building Construction Group, bought Makeway View for $162.8 million through a collective sale, which is equivalent to $1,583 psf ppr. In June last year, a consortium led by Koh Brothers bought Lincoln Lodge in a collective sale worth $243 million or $1,449 psf ppr. If the site of the Essex Road houses is combined with the neighbouring state land and service road, the total area would be over 30,000 sq ft, estimates Lim. If amalgamated with the Lion Towers site, he reckons that the enlarged footprint would be over 70,000 sq ft and a developer could potentially build a 100-unit luxury project with unit sizes averaging 1,800 sq ft. Another attraction of the site is the fact that at the end of Essex Road is SJI Junior (the former St Michael’s School). It is also in the neighbourhood of other good schools
in Bukit Timah such as Nanyang Girls’ High School, Hwa Chong High and National Junior College. What’s more the Novena enclave is also turning into a booming medical hub. Linked to the Novena MRT station and located behind Novena Square is Tan Tock Seng Hospital and Far East Organization’s brand new Novena Medical Centre. The area recently received an added boost when Parkway Holdings bid a record $1.25 billion ($1,600 psf ppr) for a 1.7ha, 99-year leasehold government site to build a private hospital at Novena Terrace/Irrawady Road. It’s also a sought-after residential neighbourhood given its proximity to the CBD and Orchard Road. In the immediate neighbourhood of Parkway’s site is Frasers Centrepoint’s new condominium development, the 417-unit twin-tower Soleil@Sinaran that was launched last year and is currently under construction. The most recent transaction, according to the caveats lodged on URA Realis, was for a 958 sq ft unit on the third floor which was sold for $1.23 million ($1,285 psf). A 1,453 sq ft apartment on the 16th floor changed hands on the sub-sale market for over $2.32 million ($1,600 psf) at the end of last year. Meanwhile, at 1 Essex Road is Far East Organization’s Strata, a 32-storey, 100-unit loftstyle apartment tower completed in 2006. According to the URA Realis database of caveats lodged, three 506 sq ft apartments changed hands on the resale market at prices ranging from $650,000 ($1,285 psf) for the most recent transaction on Sept 21 last year to $820,000 ($1,621 psf) for a similar-sized unit also on the second floor, which was sold in early August last year. Across the road and next to United Square shopping mall is Allgreen Properties’ Viva, a brand new condominium that’s yet to be launched. Behind Viva is Keppel Land’s 486unit Park Infinia at Wee Nam, targeted for completion next year. A handful of units in the development changed hands in January at prices ranging from $1,410 to $1,600 psf. The selling prices of new launches in the area are even higher. Just down the street from the row of Essex Road houses is the showflat of Lucida, a 62-unit high-end condominium project by boutique developer, Novelty Group. Private previews at Lucida have yet to begin, but marketing agents are citing an indicative selling price of $1,700 to $2,000 psf.
Fort Terrace, another collective sale hopeful Meanwhile, over at the east coast, the owners of a row of 16 terraced houses called Fort Terrace at 29-59 Fort Road have also put their properties up for collective sale. The freehold residential site was put up for tender on Feb 27, and will close on March 26. The rectangular freehold development site has a total area of 47,886 sq ft and under the 2003 Master Plan, it is zoned for residential use with a gross plot ratio of 2.1. Colliers International, the marketing agent, has already obtained 100% agreement from the owners to proceed with the collective sale. According to Ho Eng Joo, executive director of investment sales at Colliers International, the indicative price is $95 million. There’s a development charge of $23 million, as well as the cost of annexing a piece of 10,964 sq ft state land, which is estimated at $6.4 million. This will work out to $1,238 psf ppr. The site has the potential to be redeveloped into a high-rise condominium with 67 units averagE ing 1,500 sq ft each.
CITY&COUNTRY
Unlike many other Western economies swamped by the subprime backwash, the Australian property scene still looks bright
| BY MARK HENDERSON |
T
he fallout from the US subprime crisis is hammering housing markets across the US and Europe. Mortgage foreclosures in the US are escalating as inflated home values sink. And the news is also grim in the UK where homeowners are watching their valuations slide. But it’s not all doom and gloom on the Western property front, claims Australian property expert Ben Boyle. There are, he says, reliable returns in strong growth areas Down Under, such as Queensland. Boyle is a director of Your Property Solutions (YPS), a property consultancy service based in Brisbane. He was recently in Singapore and Hong Kong to market the company to expatriates and locals while catching up with clients. The difference between YPS and most other agencies, says Boyle, is that the company works exclusively for the buyer. “We use our extensive knowledge and experience in the Queensland market to source property to the buyer’s requirements.” YPS not only finds the property, it negotiates price (which Boyle claims is typically 10% less than the “fair market value”), arranges building and pest inspections, insurance and finance services. The agency also operates a property management service, which has more than 500 investment homes on its books. Around 70% of YPS’ clients are investors. Boyle, a former captain in the Australian Army, who served in East Timor and Iraq, says his confidence in the Sunshine State’s residential market is backed by solid data. Unlike many other Western economies swamped by the subprime backwash, the Australian property scene still looks bright. While falling house prices elsewhere are undermining consumer wealth and confidence, Australia is tracking a different pattern. A report by Macquarie Research Economics in December 2007 points out that the Aussies
Buying property in Australia’s Sunshine State year led the way with 20%-plus capital gain. “Key drivers are strong economic growth from the mining-dominated economy — many of the country’s mining giants operate in Queensland — and strong population and wages growth, particularly in Queensland. Around 50,000 people a year are moving to the state. Many corporates are relocating to Brisbane from Sydney. Brisbane has a broad-based economy, including agriculture and information technology. The city is no longer a big country town.” Boyle believes median-priced properties in median-priced suburbs are a solid bet for long-term growth. Around A$450,000 will buy a three-bedroom, two-bathroom house on 6,400 sq ft of
land within 10km of central Brisbane. This property will earn A$400 a week in rent for a net 4% to 5% return, plus capital growth, which was running at 20% last year. Capital gain has averaged 10% annually over the past 10 years in southeast Queensland. Apartments close to the city, says Boyle
Apartments close to the city, says Boyle are ‘renting machines’. A new A$400,000 unit with two bedrooms and two bathrooms rents for A$380 to A$460 per week. A three-bedroom townhouse costs A$500,000 and can fetch A$450-plus a week in rents.
are “renting machines”. A new A$400,000 unit with two bedrooms and two bathrooms rents for A$380 to A$460 per week. A threebedroom townhouse costs A$500,000 and can fetch A$450-plus a week in rents. Foreigners can only buy brand new houses and apartments, but there is plenty of new apartment stock in Brisbane, says Boyle. Investors are liable for capital gains tax at around 25% when they sell the property. YPS charges a flat A$10,000 fee for sourcing and negotiating the purchase of a property on behalf of a client. Andrew Powell, who works in an airlinerelated industry, and has been living in Singapore for the last five years, recently bought two houses near Brisbane using Boyle and YPS. “I wanted someone with knowledge on the ground,” says Powell. He paid A$420,000 for the first property, a three-bedroom house 5km from the city, in 2006. The house is now valued at A$550,000. Last year, he shelled out A$1.15 million for a sprawling five-bedroom, fully renovated traditional “Queenslander” colonial verandah house “in a great suburb” 4km from Brisbane. That property, he says, could now be confidently listed at A$1.4 million.
Queensland’s appeal have already had their pain. The slowdown in most of the Australian housing market took place in 2004-05. House prices in Adelaide and Brisbane have bounced back over the past couple of years. In Brisbane, the average cost of a three-bedroom house has climbed from A$350,000 ($488,940) to around A$450,000. Adelaide homes have risen from A$300,000 to more than A$360,000.
Heavy demand Demand for homes is outstripping supply. The Reserve Bank of Australia currently estimates 180,000 homes a year are wanted, but only 150,000 are being built. Residential building activity has been flat for five years, despite increasing migration into Australia. That’s putting pressure on the rental market. Rents are rising fast in most capital cities. In Brisbane, rents for a family home have increased by around A$50 per week (15%) over the past 12 months. Boyle says the residential good times will continue. Housing in Brisbane and Perth last
House prices in Adelaide and Brisbane have bounced back over the past couple of years
“I used Ben because I didn’t have the time to look myself,” says Powell. “The fee is a small price to pay for local knowledge. It took me four months to find an investment property in Sydney a few years ago. Ben found my first Brisbane buy on the same day it went to market.” Powell reckons that Queensland should appeal to many investors from Asia. “The Australian property market doesn’t have massive swings; it is more predictable with less risk over the long term.” Further north, booming Townsville offers investors some good opportunities, says Boyle. Townsville has a large transient population — mine workers on fly-in-fly-out contracts, for example — so rents are relatively high. Houses start from around A$300,000, up from A$150,000 five years ago. Apartments along the waterfront sell for A$400,000-plus. Boyle says Perth, popular with Singaporeans, has peaked. “Perth has come off the boil. After enjoying 20% capital growth over the past two years, the residential market there E has slowed to around 4%.”
PICTURES: YPS
THEEDGE SINGAPORE | MARCH 3, 2008 • CC7
GF2 (273mm) GF3 (276mm)
pg 41 (279mm) THEEDGE SINGAPORE | MARCH 3, 2008 • 41
HIGHLIGHT
Natural Cool a late-cycle play on construction boom
Strategist....................... 27 Brokers’ Digest ............. 28 Bloomberg .................... 31
INVESTING IDEAS PG26
Insider Moves ............... 32 FactSet Estimates .......... 35 Warrants ....................... 38
THEEDGE SINGAPORE | THE WEEK OF MARCH 3, 2008
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COMPILED BY AUDRINA GAN
Chasen Holdings (one cent), a logistics and engineering services company, topped the list of actives. The penny stock was heavily traded despite the absence of positive news. In January, the company acquired a 63.7% stake in GKH Group, a scaffolding equipment and services provider for the local marine and construction industries. The acquisition will allow Chasen to diversify its revenue base from its current niche.
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Synear Food Holdings (68.5 cents) was heavily sold last week, following its FY2007 results announcement. Gross margin for the Chinese dumplings and snacks manufacturer dipped 1.4 percentage points to 32.2%, owing to a 13% y-o-y increase in the prices of key raw ingredients such as pork, flour and packaging materials. With no let-up in China’s inflation, the share prices of Chinese food companies have taken a beating in recent weeks. Deutsche Bank has downgraded the stock to “hold”, citing higher labour and pork prices, with a 12-month target price of 83 cents.
Yangzijiang Shipbuilding ($1.08) fell 1.6% last Friday, its lowest since Jan 22, despite reporting a 90% increase in net profit to 453 million renminbi ($89 million) on the back of 2.3 billion renminbi in revenues. The bearish sentiment stems from worries that rising steel costs will put a dent in the profits of Chinese shipyards. With that, DBS Vickers has downgraded the stock to “hold”, with a 12-month target price of $1.45. With more shipbuilding projects, the cost of sales for mainly steel purchases at Yangzijiang have increased 62% to 2.9 billion renminbi, according to filings with the Singapore Exchange. Yangzijiang had an order book of US$7 billion ($9.7 billion) as at Jan 31. Golden Agri-Resources ($1.13) surged to a year-high of $1.23 last Tuesday. A unit of Indonesia’s largest oil palm grower, Sinar Mas Group, Golden Agri-Resources is riding on strong demand for palm oil, which is used as cooking oil and fuel. The share price of Golden Agri-Resources has more than doubled over the past year. OCBC Investment Research’s analyst Selena Leong has upgraded FY2008 earnings to US$694.9 million ($968.4 million), up 50.3% on the back of higher prices and increased demand for crude palm oil.
Results damper Drop in property stocks spooks market Analysts revise forecasts downwards
| BY GOOLA WARDEN |
P
roperty stocks fell across the board, although almost all showed strong, if not record, profits last year as results came in last week. But fears of an economic slowdown and expected drop in property sales for the year caused more profit-taking, especially after the Straits Times Index had also gained for several consecutive days early in the week. The reaction to other results announcements was little different. Crude palm oil producer Wilmar International, a market darling, fell almost Straits 300 5% the day after it released results, despite announcing a fivefold rise in net profits for the three months to Dec 31, 2007 to US$234 million ($326 million). Its CEO Kuok Khoon Hong sounded downbeat in his assessment 0 of prospects in spite of sharply rising crude palm oil prices. “One has to be a bit cautious,” he was quoted as saying. No wonder dealers struck a cautious note as well on the market. Asked what his outlook was for the week, a dealer said he had no idea. At one point, it looked like the STI would be able to break out of 3,100, he said, but then it failed again. With billionaires moderating expectations, most punters say they would prefer to remain largely on the sidelines. Thus traders are likely to be out within the day, says a dealer, because few want to hold positions overnight, much less over the weekend. volume (million)
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Crane operator Tat Hong Holdings may be doing a roaring trade and still elicits a “buy” recommendation from Citigroup Research. Still, its target price was revised downwards from $4.15 to $3.15. No matter that it is higher than Tat Hong’s price last week. The market sold it off to $2.15 from $2.30 on the downgrade. Another significant downgrade occurred with Advance SCT, a company that was transformed into a copper smelter, when it issued a profit warning ahead of a set of nasty results. Net profits fell 36% to $4.9 million. Although net debt-to-equity is less than 50%, interest expense of $7.7 million rose 66% y-oTimes y. This, coupled with a large negative operating cash flow of $41 million, triggered a sharp sell off. At its closing price of 30.5 cents, Advance SCT is a quarter of its value just four months ago. Dealers say there are plenty of margin calls on the counter. Elsewhere, Synear Food Holdings was downgraded by Merrill Lynch. Earlier in the year, brokers had “buy” recommendations on the stock, and margin calls were aplenty as well, say dealers.
What to look out for Roxy-Pacific Holdings starts trading on March 2. Although its IPO price of 30 cents is a 50% discount to net asset value, dealers are reporting no grey-market price. On the other hand, Li Heng Chemical Fibre Technologies, a nylon yarn manufacturer, has a grey-market price of 84 cents, slightly above its offer price of 80 cents.
26 • THEEDGE SINGAPORE
| MARCH 3, 2008
CAPITAL
INVESTING IDEAS
Cashline For whatever, whenever
DBS Cashline. For whatever, whenever.
Natural Cool Holdings
Air-con and switchgear supplier is a late-cycle play on local construction boom | BY ELLEN LOKAJAYA |
T
hese are heady times for Natural Cool Holdings, a company that supplies and installs air-conditioners and switchgears. The construction boom has fuelled demand for the services it provides, enabling it to become picky about projects it takes on. “Last time, the main contractors choose their contractors — now it’s the contractors who choose the main contractors,” says Steven Chen, CEO of the company. “And, now, even the main contractors are choosy also. They will choose the good developers.” The company began in 1989 as a sub-contractor supplying and installing air-conditioners, and gradually built up its business. It later added the switchgear division, and more recently branched into the furniture and fitment business. And, as property developers and construction companies rush to complete apartment blocks and office complexes in one of the country’s biggest building booms in decades, Natural Cool is seeing a strong pick-up in business that could last for the next couple of years. Last year, the company saw its revenue jump 56% to $114.2 million, boosted by strong growth in its three main businesses. Natural Cool’s aircon business contributed 59% or $67 million to the revenue in 2007, while switchgears contributed 32%. Its fledgling building materials business saw an eight-fold jump in revenue to $10 million. However, the company’s margins were squeezed by higher transport costs and expansion initiatives, resulting in earnings ris-
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ing by only 14% to $3.8 million. Even so, things seem to be only just picking up for late-cycle construction plays like Natural Cool, and its stock doesn’t appear expensive. Shares in the company are up 10% over the past year to 34.5 cents last week. That’s about nine times historical earnings. The company doesn’t currently have any analyst coverage. Natural Cool’s air-con business involves installation, replacement and maintenance services for the residential and commercial sectors. The company also recycles air-conditioners, says Chen. In addition, the company makes its own house-brand copper pipes and air-con brackets. Among the air-con projects the company has completed are condominiums like Scott sHigh Park and Monterey Park, and institutions like Anglo-Chinese School and Nanyang Girls School. According to Chen, the company’s biggest contract so far comes from Hilltops con-
dominium, worth over $5 million. Natural Cool’s switchgear division, called S Team, started operations in 2003 and became part of the group in 2005. S Team manufactures, assembles and installs switchgears in commercial and residential buildings. Switchgears are used to manage the distribution of electricity to different points in a building. Among the notable deals S Team secured is a $1 million contract for the Icon. “Switchgears and air-cons actually complement each other because in any HDB block or condominiums or factories or offices, you need switchgears and you need air-cons,” says Joseph Ang, executive director and founder of S Team. But Natural Cool isn’t just dependent on private developers, says Ang. The company also gets significant recurring income from the Housing Development Board’s upgrading projects. According to Ang, the company has an 80% share of the switchgear market for HDB’s upgrading projects in which electrical wiring and switchgears are installed or replaced. Natural Cool’s building materials segment was added in 2007. In July, the company acquired J2 Pte Ltd, a systems furniture and fitment company that sells office partitions, office chairs and tables and wardrobes, for $900,000. That is proving to be a timely move. According to Chen, the business has huge potential with new office buildings in the Marina Bay Financial Centre nearing completion. The company is currently participating in several tenders for systems furniture and fitment contracts, Chen adds. The company added another element to its
building material division last year. Last April, it formed a joint venture called NC Steel Pte Ltd with stainless steel supplier Jiang Yin Cheng Iron Co Ltd. Natural Cool invested US$255,000 ($355,937) and holds a 51% stake. The jointventure company will be the sole distributor of Jiang Yin Cheng’s products in Singapore. It will also distribute its products, such as steel sheet piles and cold rolled steel, around Southeast Asia. Chen expects the JV to be a money spinner now that steel prices have gone up to $800 per tonne from $490 per tonne last year. At the moment, Natural Cool has a small presence outside of Singapore — specifically in China, India, Cambodia and Vietnam. Last year, the company generated revenue of $4 million in China and $1.4 million in Cambodia. Chen is laying the groundwork for an expansion push in China in the years ahead. Last August, Natural Cool signed a memorandum of understanding to acquire a stake in Hart Technologies Pte Ltd, which owns Beijing Henji Construction Engineering Co Ltd, for no more than $560,000. Chen says that holding a stake in Beijing Henji will be strategic for the company because it has the necessary licences to tender for projects worth up to 50 million renminbi ($10 million), and its location will allow it to serve northern China. For the next two years, however, Natural Cool will have its hands full with the building boom on its home-turf in Singapore, says Chen, who owns 14.2% of the company. And, as it cherry picks the best projects on offer, investors might E begin to take more notice of its shares.
Swissco International
Offshore vessel charterer is a value play after steep slide, analysts say | BY KANG WAN CHERN |
T
he offshore energy exploration and production cycle isn’t showing any signs of slowing down, yet shares in support vessel charterer Swissco International are trading at what some analysts are calling “distressed levels”. Shares in the company have tumbled 33% since the beginning of the year, weighed down by the broad market sell-off and overlooked by large investors because of its relatively small market capitalisation of $151 million. But at the current levels of 84 cents each, shares in Swissco trade for less than they would be worth if the company were to sell its vessels and other assets and wind itself up. “Stripping out Swissco’s value add as an established offshore vessel charterer, we estimate that the current assets breakup value for Swissco to be worth between $1.02 and $1.18 per share,” says a report by DBS Vickers Securities. There is, of course, no reason for Swissco to consider selling all its assets. Business is booming at the moment and the company is actually busy expanding its fleet. It currently
has a fleet of 26 vessels, all of which are less than 2½ years old. And, it is scheduled to take delivery of a further 11 vessels this year and another nine next year. Besides chartering its vessels to companies in the oil and gas, and shipping and marine infrastructure industries, Swissco is also a pioneer in the Out-Port-Limit (OPL) business in Singapore, which involves servicing ships passing Singapore on their way to other ports. The company is also a specialist in the provision of repairs and maintenance services to a niche market of small tankers and vessels. The company owns two slipways and a 3,000 dead weight tonne drydock. In addition, the company holds a 9% stake in listed integrated offshore service contractor Swiber Holdings. Much like Swissco, shares in Swiber have tumbled significantly since the beginning of the year — by some 33%. It now has a market capitalisation of just over $1 billion. But analysts expect the company to continue securing contracts and its stock to recover over time. Last Friday, Swiber reported a 126.4% rise in revenue to $151.2 million
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for 2007, and a 309.4% jump in net earnings to $49.7 million. As an operating entity, DBS Vickers figures that Swissco could be worth as much as $1.41 per share. The brokerage house obtains that target price by valuing Swissco’s core chartering business at 10 times forecast earnings for 2008, and its stake in Swiber at an estimated “fair value” of $3.49 per share. DBS Vickers has a “buy” recommendation on Swissco.
Even on a straight price-to-earnings basis, shares in Swissco look reasonably priced. For 2007, Swissco reported a 23% rise in revenue to $31.2 million, a 53.2% rise in gross profits to $15.8 million. Net earnings surged 216% to $40.2 million, boosted by gains on the divestment of a 5.9% stake in Swiber last June, which Swissco intends to use to expand its fleet. The company is proposing a special interim dividend of three cents per share, and has declared final ordinary and special dividends totalling one cent per share. It is also proposing a bonus issue of up to 18 million new ordinary shares on the basis of one bonus share credited as fully paid for every 10 existing ordinary shares. DBS Vickers is forecasting 52% growth in revenue this year to $47 million and a further 4% rise next year to $49 million. Net earnings are forecast to come in at $12 million, or 6.8 cents per share in 2008, and $13 million, or 7.1 cents per share in 2009. On those forecasts, shares in Swissco are trading at 12 times and 11.4 times 2008 and 2009 earnings respectively. If there is such a thing as a value play in a E hot sector, this might be it.
THEEDGE SINGAPORE | MARCH 3, 2008 • 27
CAPITAL
Cheap palm oil may overtake soy on rising Asia demand Feb 25: Palm oil, the world’s most-used cooking oil, is also the cheapest, a discrepancy that won’t last long as demand rises across Asia’s biggest countries. An ingredient in curries, stir-fries and Skittles candy, Malaysian palm oil costs 15% less than soybean oil on the Chicago Board of Trade (CBOT). Tobin Gorey, a commodity strategist at Commonwealth Bank of Australia Ltd in Sydney, said the two may soon be even money, raising the prospect of at least a US$1.5 million ($2.1 million) profit from a US$10 million investment. Rising incomes mean billions of people in Asia’s developing economies seek palm oil for fried and processed foods, according to the US Department of Agriculture (USDA). Crude oil at US$100 a barrel is boosting demand for alternative fuels such as diesel from vegetable oil. “We may have a case of mass shortage of vegetable oil in China,” said Rudolphe Roche, a manager at Schroders plc’s US$6 billion agricultural commodities fund in London on Feb 25. “This means they will continue to import from the rest of the world.” Palm oil, produced in Malaysia and Indonesia, will benefit the most because its proximity to China lowers shipping costs, he said. Rising prices will increase expenses at Nissin Food Products Co, Japan’s biggest instant-noodle maker, and increase profits at Malaysia’s Sime Darby Bhd, the world’s largest publicly traded owner of palm plantations. About 36% of the world’s cooking oil comes from oil palm, more than any other plant, USDA data shows. The last time palm oil was this cheap, last April, prices rallied for two months because of increasing demand, gaining 38% to RM2,855 ($1,246) a tonne on the Malaysia Derivatives Exchange to reach parity with Chicago prices. Contracts for May delivery ended at RM3,698 a tonne (52 US cents a pound) on Feb 22 in Malaysia. May soybean oil finished at 63.02 US cents a pound on the CBOT. Palm oil and soybean oil reached records today. Palm oil rose as much as 5.8% to RM3,914 a tonne and closed 4.5% higher at RM3,866, the biggest gain since Dec 26, 2006. Soybeans advanced as much as 2.4% to 64.52 US cents a pound and last traded at 64.29 US cents. That narrowed palm oil’s discount to 16% from 17%.
Australian, NZ dollars advance on demand for yield Feb 25: The Australian dollar traded near a three-month high and the New Zealand dollar rose close to the strongest level in 23 years on speculation investors will be drawn to the nations’ higher-yielding assets. The Australian and New Zealand dollars, also known as the Aussie and kiwi respectively, are the second- and third-best performers of the 16 most-active currencies this month as traders bet the US Federal Reserve will cut interest rates by half a percentage point to 2.5% in March. Australia’s currency also traded near the highest this year against the yen as rising stocks gave investors confidence to buy Australian assets funded with loans in Japan. The Aussie bought 92.43 US cents as at 4:45pm in Sydney today compared with 92.38 US cents late in New York on Feb 22, when it reached 92.51 US cents, the most since Nov 9. It will match a 23-year high of 94 US cents in the next month, Morriss said. The currency traded at ¥99.27 ($1.29) from ¥99 Feb 22. The kiwi rose to as high as 80.96 US cents before buying 80.83 US cents, from 80.87 US cents in late New York trading on
Feb 22. It advanced to ¥86.81 from ¥86.67. The kiwi rose 1.7% versus the yen last week and the Australian dollar climbed 1% as US and European stocks gained, encouraging investors to seek higher returns. New Zealand’s record 8.25% benchmark rate is the highest after Iceland’s among Aaa-rated economies. “Equity markets have been more stable and we’ve seen an improvement in risk appetite,” said Michael Gordon, a currency strategist at Westpac Banking Corp in Wellington. “We’ve seen a general move back toward high-yielders like the kiwi.” The New Zealand dollar may rise above 81.10 US cents, the highest since the currency was al-
lowed to trade freely in 1985, Gordon said. Australia’s benchmark interest rate of 7% compares with 3% in the US and 0.5% in Japan. In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the borrowing and lending rate. The risk is that currency moves erase those profits. Traders are assigning 89% odds the Reserve
STRATEGIST
Bank of Australia will raise its target rate a quarter percentage point to 7.25% at its March 4 meeting, a Credit Suisse Group index based on interest-rate swaps shows. The odds were 6% that the Reserve Bank of New Zealand will increase its benchmark rate a quarter point to 8.5% at its March 6 meeting, a similar index showed. — Compiled E from Bloomberg LP
The stories on this page are compiled from various news sources and directly from the firms. Disclaimer: Readers should consult their adviser on the strategies and read the full reports. The Edge Singapore does not accept any liability whatsoever for any direct, indirect or consequential losses (including loss of profit) or damages that may arise from the use of information or opinions published. Opinions expressed are subject to change without notice. The strategists may from time to time have positions in the products mentioned.
28 • THEEDGE SINGAPORE
| MARCH 3, 2008
CAPITAL
BROKERS’ DIGEST | COMPILED BY RAHAYU MOHAMAD |
Every week, The Edge Singapore brings you digested excerpts of research reports of Singapore Exchange-listed companies available in the public domain or received from brokers. Investors interested in research on companies are also encouraged to register for free access to reports from stockbrokers that participate in the SGX-Monetary Authority of Singapore Research Incentive Scheme (www.research.sgx.com). Disclaimer: The Edge Publishing Pte Ltd does not accept any liability whatsoever
AEM Holdings (Feb 28: 9.5 cents)
for any direct, indirect or consequential losses (including loss of profit) or damages that may arise from the use of information or opinions in this publication. The information and opinions in this publication are not to be considered as an offer to sell or buy any of the securities discussed. Opinions expressed are subject to change without notice. The brokers may, from time to time, have interests or positions in the securities mentioned. The Edge Singapore welcomes brokers submitting their reports for investor information to [email protected].
C&O Pharmaceutical Technology (Feb 28: 39.5 cents)
Q-o-q y-o-y DCF Ebitda EPS FY NAV NTA P/BV PEG PER ROE
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Quarter-on-quarter Year-on-year Discounted cash flow Earnings before interest, tax, depreciation and amortisation Earnings per share Financial year Net asset value Net tangible assets Price-to-book value Price earnings to growth Price-to-earnings ratio Return on equity
CitySpring Infrastructure Trust (Feb 28: 76.5 cents)
MAINTAIN HOLD. AEM turned in a disappointing set of FY2007 results with a net loss of $3 million. This is due to significantly higher assets write-off and impairment provisions made to its precision and system integration (PSI) division and materials and services (MNS) division. Revenue slid 18.7% y-o-y to $192.8 million, due to a 49.1% dive in contribution from its PSI division, coupled with an 8.7% decrease from its MNS division. AEM’s focus on its less cyclical Substrates & System Packaging (SSP) division looks to be a beneficial move. AEM posted a net loss of $4 million, compared to a net profit of $5.9 million and $0.9 million in 2H2006 and 1H2007, respectively. We pare our FY2008 estimates by 7% to 22% and ease our valuation from eight times FY2008F PER to seven times, thus lowering our fair value from 15 cents to 10 cents. — OCBC Investment Research (Feb 25)
MAINTAIN BUY. C&O recently issued its 2Q2008 result. Its top line growth is in line with our expectation. However due to higher sales and administration expenses, C&O’s net profit is lower than our expectation. As the sales budget for calendar year 2008 is expected to be higher than 2007, we adjusted down the net profit for FY2008 and FY2009 to HK$109 million and HK$131 million from HK$128 million and HK$158 million respectively. However, compared to other manufacturing companies in China, we still find drug companies more attractive as they generally enjoy a much higher gross margin and are less affected by escalating costs. We retain our buy call on C&O, but cut our target value to 53 cents from 64.5 cents, based on 15 times forward twelve month PER. — Phillip Securities Research (Feb 25)
OVERWEIGHT-V. We are changing our rating to OverweightV and our price target to $1.00. We believe downside risk from here is limited in the near term. A F2008E dividend yield of 7.9% (tax free), Temasek support, and the yield-accretive acquisition of Basslink should all be reasons for the stock to outperform in the medium term. Near term, the stock might remain range-bound owing to a potential equity fund raising for the Basslink acquisition. We have removed the allocation of a 30% premium for the Temasek association. Post-Basslink, we expect CitySpring to increase its annual distribution to seven cents from the current DPU of $0.064. The stock is currently trading at 13 times EV/Ebitda F2009e (adjusted for lease receivable payment). — Morgan Stanley Research (Feb 25)
Aqua-Terra Supply Co (Feb 28: 37 cents)
Cacola Furniture Int’l Ltd (Feb 28: 34.5 cents)
Genting Int’l (Feb 28: 62 cents)
MAINTAIN BUY. The strong growth in revenue from $155 million to $231 million was mainly supported by the newly acquired subsidiaries and new income stream from procurement and supply (P&S). Both new subsidiaries and the P&S contracts together contributed about $61.3 million. The net margin improved by 0.1 percentage point to 5.1%. Nonetheless, if share of profit of associate and joint venture is excluded, net margin would drop from 4% in FY2006 to 3.4% in FY2007. ATS posted $11.8 million PATMI (profit after tax and minority interest) for FY2007, below the consensus estimates of $13 million (according to Bloomberg). Pegging its valuation at an undemanding 12 times FY2008 EPS, we derive a target price of 59 cents, at an upside potential of 49%. — Westcomb Research (Feb 28)
MAINTAIN BUY. Cacola reported a 23.83% growth in revenue from 455.62 million renminbi ($89.39 million) in FY2006 to 564.18 million renminbi in FY2007. The group’s net profit grew by 63.96% from 75.21 million renminbi in FY2006 to 123.31 million renminbi in FY2007. The group’s overall gross profit margins increased by 1.80 percentage points (y-o-y) from 32% to 33.8% in FY2007, whereas their net profit margins increased by 5.35 percentage points (y-o-y) from 16.51% to 21.86% in FY2007. For FY2007, the group has proposed a first and final dividend of 0.0713 renminbi per ordinary share, which translates to approximately 19.95% of their net profit. We revised our estimates and revalued our fair value estimate to 61 cents per share, derived from a PER of 5.8 times pegged to FY2008 earnings. This implies a 76.81% upside. — Phillip Securities Research (Feb 27)
MAINTAIN HOLD. GIL’s recurring earnings were below our expectations due to the weaker-than-expected performance of the UK casinos, following the gaming duty hike in April 2007 and the smoking ban in July 2007. The main interest in GIL is not on the existing operations, but rather the Singapore integrated resort (Resorts World at Sentosa). GIL reported a net loss of $381.5 million due to a $472.7 million impairment charge for its UK operations. Our target price continues to be based on RNAV. We have valued the Sentosa project based on a combination of DCF with implied IRR of 15% and EV/EBITDA (target 14times 2010 discounted at 15%). Lower 12-month target price of 69 cents (previously 81 cents). — Standard & Poor’s (Feb 26)
Armstrong Industrial (Feb 28: 30 cents)
China Energy (Feb 28: 89.5 cents)
Ho Bee Investments (Feb 28: $1.23)
MAINTAIN OUTPERFORM. 4Q2007 net profit of $6.2 million (+90% y-o-y) was 26% ahead of consensus and our estimates due to better-than-expected revenue growth and margins. Full-year net profit was 9% ahead of consensus and our forecasts. Sales jumped 36% y-o-y in 4Q2007. EBITDA margins improved 3.8% pts y-o-y to 19.3% in 4Q2007, on the back of gross margin expansion. Net cash widened from $14.5 million as at end-September 2007 to $21.1 million on the back of higher profitability and proceeds from the disposal of its stake in Soon Lee. The company declared a first and final dividend of 1.6 cents, up from 1.05 cents a year ago, translating into a 5.3% yield. We have rolled forward our 12 times target PER to CY2009, lifting our target price from 55 cents to 61.5 cents and providing 106% upside. — CIMB-GK (Feb 28)
MAINTAIN BUY. China Energy reported FY2007 earnings up 38% y-o-y and 110% q-o-q, earnings rebound in 4Q2007 was mainly driven by strong DME (dimethyl ether) sales volume ramp up on favourable product price spreads. Leveraging on the strong YTD Methanol-LPG spreads in China, we expect strong 1Q2008 earnings up 213% y-o-y to 158 million renminbi ($31.01 million) or 31% of our full year estimate. While China Energy plans to increase its methanol capacity from 250k to 750k by end 2008, we expect self sufficiency will not exceed 40% by FY2009 as additional DME capacities ramp up. We revise our target price to $1.5 per share based on 19 times FY2008E earnings, at a 20% discount to the Bloomberg Alternative Energy Index which reflects China Energy’s volatile earnings.— Citigroup Research (Feb 26)
MAINTAIN OUTPERFORM. FY2007 core net profit (excluding revaluation gains) of $190 million came in below expectations, at 88% of our estimate. We believe the results were below consensus as well. 4Q2007 core EPS of 3.8 cents made up 13% of our full year. Ho Bee declared a final dividend of two cents per share, representing a payout of 6.2% and a yield of 1.3%. FY2008-2009 EPS estimates have been raised by 3% to 4%. Our CY2008 RNAV estimate has also been increased from $2.22 to $2.59, on higher ASP forecasts. We now peg our target price at a 25% discount to RNAV (vs 10% discount previously), which is in line with Ho Bee’s 10-year average to reflect a maturing cycle. Our target price thus declines from $2.22 to $1.94. — CIMB-GK (Feb 28)
Bright World Precision Mach (Feb 28: 42 cents)
China Haida (Feb 28: 17 cents)
Hongguo Int’l (Feb 28: 62.5 cents)
REDUCED TO FULLY VALUED. Stripping out 12 million renminbi ($2.35 million) technical grant, Bright World’s (BWPM) FY2007 net profit would have been in line with our expectation, growing 15% y-o-y on 26% y-o-y higher sales. BWPM did not declare dividends for FY2007, as opposed to our expectation of a 30% dividend payout like the past two years because it opted to retain earnings for future development. The impact of rising material cost was evident in 4Q2007, as gross margin shrank 10 percentage points y-o-y to 30.3%, worse than our expectation of a 4.5 percentage points margin contraction. We trimmed FY2008F and FY2009F earnings by 28% and 23%, respectively, after imputing 5.5 percentage points and five percentage points lower gross margins. Reduced target price of 40 cents, based on lower seven times PER vs 11 times previously. — DBS Vickers Securities (Feb 28)
DOWNGRADE TO HOLD. Revenue increased by 14.7% to 444.6 million renminbi ($87.22) while cost of sales increased at a higher rate of 19.9% to 365.9 million renminbi. Gross profit fell 4.5% to 78.7 million renminbi with gross margin dropping 3.6 percentage points from 21.3% in FY2006 to 17.7% FY2007. Profit after tatimes fell 25.2% to 36.1 million renminbi. With uncertain outlook, we have trimmed our FY2008 revenue growth to 5.8%. Gross profit margin is likely to decrease further due to expected higher aluminium prices in FY2008. Gross profit are expected to fell 7.2% to 73.1 million renminbi while net profit are expected to fall another 22.7% to 27.9 million renminbi. Given the pessimistic outlook, we peg our target price at its 10% discount to its current NTA per shares, works out to be 17.5 cents, translating to eight times FY2008 PER. — Westcomb Research (Feb 27)
MAINTAIN BUY. Revenue increased 24% to 739 million renminbi ($144.936) and net earnings were up 22% yo-y to 110 million renminbi. While gross profit was up 29% to 300 million renminbi, EBIT margin decreased one percentage point y-o-y. Selling expense to sales ratio increased to 16.4% in 2007 from 13.6% in 2006. Management attributed the increase to rising staff and AMP expenses. Hongguo declared a final dividend per share of 97 US cents ($1.35), representing a payout of 27%. We increase our FY2008-2009 earnings by 5% to 9% after Hongguo reported a set of solid results. We raise our target price to 82 HK cents (14.68 cents) to reflect our earnings increase. We introduce our 2010 earnings and forecast Hongguo will deliver an earnings CAGR of 23% over 2008-2010E. — Citigroup Research (Feb 26)
M t m d G f o e W e m M C o —
M m r b G U t U N p W v i d R
O
M t u t i S e f 3 c b a p d i f
THEEDGE SINGAPORE | MARCH 3, 2008 • 29
CAPITAL
BROKERS’ DIGEST
AD |
e E d l m d k
, n e e y
r e n n t d n K n n d
t n e e o ,
o d w
s t K
n p d s
d r f o e t s f
Midas Holdings (Feb 28: $1.22)
PSL Holdings (Feb 28: 22 cents)
ST Engineering (Feb 28: $3.47)
MAINTAIN BUY. FY2007 earnings grew by 25% y-o-y to $32 million on top line growth of 34% y-o-y to $140 million. This was 10% below our estimate of $35.8m due to (a) poorer than expected contribution from the Group’s polyethylene pipe business, which suffered from increasing competition; and (b) slower delivery of aluminium extrusion products in 4Q2007 than we expected. A final dividend of 0.5 cents was declared. Whilst we have cut our FY2008 and FY2009 earnings estimates by 34% and 18% respectively to factor in a more conservative delivery schedule for Nanjing Puzhen, Midas’ earnings are still projected to grow at a robust CAGR of 48% over the next two years. Target price of $1.60, based on 24 times FY2008/FY2009 earnings. — DBS Vickers Securities (Feb 28)
MAINTAIN BUY. Revenue surged 113.3% in FY2007 to $53 million, exceeding our forecast of $50.6 million, contributed by the group’s core business segments, piling and engineering services as well as trading and equipment rental. Gross profit increased 113.5% to $12.9 million, in line with the top line growth, maintaining gross profit margin at 24.4%. Profit before tax (PBT) grew 157.4% in FY2007 to $8.9 million, faster than top line growth, mainly due to the group’s effective cost control. PSL is currently trading at an attractive 3.4 times and 1.5 times FY2008’s price-to-earnings ratio and FY2007’s price-to-book ratio respectively. We have projected sales growth of 19.7% in FY2008. Price target of 29 cents based on at five times FY2008 PER, accounting for its small capitalisation and low trading depth, providing an upside of 49%. — Westcomb Research (Feb 26)
MAINTAIN BUY. STE posted a 13% rise in net profit to $503.5 million, in line with our expectation of $504.1 million. Turnover grew 13% to $5,051 million. As expected, aerospace remains the largest contributor to turnover, accounting for 36% of sales. STE also declared a final dividend of 14.88 cents, and total dividend for the year was 16.88 cents, in line with its payout policy of 100% of earnings. STE’s overall current order book stands at some $9.49 billion. FY2008 and FY2009 forecast unchanged, at $555.4 million and $605.2 million respectively. We are also introducing our FY2010 net profit forecast of $654.5 million. Three-year earnings compound annual growth rate (CAGR) stands at 9.1%. STE’s consistent dividend policy generates an outstanding yield of 5.1% for FY2008. Our DCF-derived fair price target of $4.50 is maintained. — Kim Eng Research (Feb 27)
Noble Group (Feb 28: $2.26)
SC Global Developments (Feb 28: $1.76)
Techcomp Holdings (Feb 27: 44 cents)
MAINTAIN BUY. Net profit surged 91.9% to US$258.1 million ($359.52) on the back of a 70.7% growth in revenue to US$23.5 billion. Revenue grew across all its business segments, led by higher commodity prices. Gross profit per metric ton of its commodities rose from US$5.2 per metric ton in 2006 to US$6.4 per metric ton in 2007. Fully diluted EPS climbed 83% to 9.96 US cents from 5.43 US cents in FY2006. To top it off, Noble has proposed a cash dividend of 2.48 US cents per ordinary share, as well as a one-for-five bonus issue. We roll forward our valuation to FY2008, but trim our valuation parameter to 15 times (from 17 times) to align it with the general de-rating of the market, leading us to derive a fair value estimate of $2.64. — OCBC Investment Research (Feb 27)
DOWNGRADE TO HOLD. SC Global reported FY2007 results that were below our expectations, due to lower than expected revenue. Revenue declined 32% y-o-y to $129.2 million while net profit increased 68% y-o-y to $28.3 million. A final dividend of two cents per share was declared. With the special interim dividend of 3.5 cents declared earlier, this works out to a yield of 2.7% for FY2007. We expect SC Global to commence revenue recognition for The Marq and Hilltops in FY2008. Given the expected challenges in the high-end residential market this year, we have lowered estimates for ASP, raised construction costs and stretched sale periods for the two projects. We ascribe a 30% discount to RNAV, lowering our target price to $2.04. — DBS Vickers Securities (Feb 28)
MAINTAIN BUY. Net profit increased 38.2% y-o-y to US$6 million in FY12/2007 on the back of 20% revenue growth to US$65.8 million, in line with consensus and our estimates. Excluding one-time gain of US$700,000 from disposal of properties, core earnings still rose by a respectable 22.1% y-o-y. On a segmental basis, the distribution and manufacturing business recorded sales growth of 19.5% and 22.6%, respectively, driven by robust demand in China (+21.7% y-o-y) and Indonesia (+101.7% y-o-y). The Group has declared a final dividend of $0.012 per share, implying a decent yield of about 3.1%. The counter is currently trading at a compelling valuation of 6.3 times FY12/2008 PER and 4.8 times FY12/2009 PER. Price target of 69 cents, pegged at 10 times FY12/08 PER. — SBI E2-Capital (Feb 27)
OKP Holdings (Feb 28: 60 cents)
Sing Holdings (Feb 28: 53 cents)
Tsit Wing Int’l Holdings (Feb 26: 29.5 cents)
MAINTAIN BUY. OKP’s FY2007 net profit surged 171% to $11 million (well above our forecast of $8.8 million) underpinned by better margins and 70% uptick in revenue to $124.7 million. Gross margin widened to 18% from 14% in FY2006 as the group commenced work on ExxonMobil’s Singapore Parallel Train project in conjunction with its existing Universal Terminal project as well as benefited from good cost management. Return on equity jumped to 35% while net cash position improved to $21.1 million (14 cents per share). We have raised our FY2008 bottomline by 35% to $15.7 million based on potential contract awards. We have lowered our target price to 95 cents premised on nine times FY2008 PER, placing a 20% discount to peer valuation to factor in tight liquidity issue. Management is also declaring two cents dividend for FY2007. — Kim Eng Research (Feb 28)
MAINTAIN BUY. Sing Holdings reported FY2007 revenue of $95.7 million (+469.2% y-o-y) and net profit of $24.1 million (-24.1% y-o-y). The higher revenue was due to the sale of 15 units at 38 Draycott Drive, recognition of revenue from the sale of Meyer Residence based on the progress of construction as well as the sale of units in Eastgate that resulted in a net gain of $15.9 million. However, FY2007 net profit was lower due to the absence of gains from the divestment of Ocean Towers in Shanghai in FY2006. We have reduced our fair value to 92 cents by pegging our fair value to parity with RNAV. This is because the construction costs of the residential projects have increased and the expecting sales prices have been reduced in our estimates to reflect the current cautious property market sentiment. — Phillip Securities Research (Feb 25)
MAINTAIN HOLD. Revenue grew 12.8% in FY2007 to HK$362.8 million, in line with our forecast of $361 million, mainly contributed by 83% growth in China market, of which a significant portion of the growth came from sale of blended tea and grocery products. Gross Profit Margin (GPM) shrunk 4.3% in FY2007 to 38.5%, in line with our expected GPM of 38.7%, as a result of the continuous rise in the cost of raw coffee beans and tea leaves. Tsit Wing declared a final dividend of HK$0.075 per share, bringing total dividend to HK$0.11 for a yield of 6.7%. Taking into account the surge in raw material prices in early 2008, we are lowering our GPM to 35.5%, leading to a 3.6% revision to our earnings forecast for FY2008 to HK$36.7 million. We introduced our FY2009 forecast and roll forward our valuations to FY2009E earnings, pegged at seven times FY2009E earnings to arrive at a price target E of 25.5 cents. — Westcomb Research (Feb 28)
30 • THEEDGE SINGAPORE
| MARCH 3, 2008
Reuters Support: (1 800) 776 7188 Dealing Code HELP | Customer zone: www.reuters.com/customers | Product info: www.reuters.com/productinfo
COMMODITIES Gold powers to new heights, crude oil goes all-time high
Precious metals prices (Feb 29)
Feb 29: Gold powered to a new high near $980 an ounce today after crude oil set an all-time high of above US$103 ($143.55) a barrel, igniting inflation worries and another round of buying from investors and speculators. Palladium jumped to its highest level in more than six years and silver hit a 27-year peak. Platinum rebounded from its lows but given the absence of new developments in South Africa’s supply problems, gains are likely to be capped. Gold jumped as high as US$975.90 an ounce, up from US$968.90/US$969.70 late in New York on Thursday. Gold has gained more than 16% this year, and the next upside target pegged by dealers is US$1,000. Record high oil and expectations of more interest rate cuts in the US add to inflation pressures, elevating gold’s appeal as a hedge against rising prices, while volatile stock markets have encouraged investors to shift some of their money into gold and other precious metals. “The target is US$1,000. I personally hope it will be US$1,000 within a month,” said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo, adding that gold was likely be driven by movements in oil in coming weeks. Crude oil rallied to another record above US$103 a barrel as Ecuador shut a key export pipeline and a fire hit a major European natural gas plant. While oil is at a record price in inflation-adjusted as well as nominal terms, gold has lagged. According to analysts at GFMS gold’s inflation-
METAL
Sp Spot Gold Spot Silver Spot Platinum Spot Palladium TOCOM Gold TOCOM Platinum TOCOM Silver TOCOM Palladium Euro/Dollar Dollar/Yen
LAST
CHANGE
PCT CHG
YTD PCT CHG
TURNOVER
972.75 19.82 2161.00 582.00 3291.00 7051.00 673.50 2011.00 1.5210 104.29
3.85 0.08 26.00 22.00 -6.00 34.00 12.00 80.00
+0.40 +0.41 +1.22 +3.93 -0.18 +0.48 +1.81 +4.14
16.82 34.19 42.17 58.15 7.55 32.07 24.49 48.85
91070 40945 2257 24559
TOCOM prices in yen per gram, except TOCOM silver which is priced in yen per 10 grams. Spot prices in $ per ounce.
adjusted record is US$2,079 an ounce. “Most of the funds are buying inflation hedges such as gold, silver and oil. It’s still a bull market, where hedge funds and banks buy precious metals,” said William Kwan, a dealer at Phillip Futures in Singapore. “I think inflation is really getting out of hand. I am looking at US$955 for support and resistance at US$985,” said Kwan, who pegged upside target for silver at US$20. Silver rose as high as US$19.92 an ounce, its highest in 27 years, up from US$19.74/US$19.79 an ounce in New York. The dollar tumbled to a three-year low versus the yen and held near record troughs against other currencies after Federal Reserve chief Ben
CDS
Bernanke warned some small US banks could fail, suggesting that interest rates may fall more. Spot platinum rose to US$2,161/US$2,168 an ounce from US$2,135/US$2,140 an ounce late in New York to track a rebound in Tokyo futures. Platinum has dropped more than 1% since last week’s record high of US$2,192 an ounce. Automakers, who had bought the metal on fears of further price hikes and mining disruptions in South Africa, were on the sidelines waiting for a correction, said Sonoda of Daiichi Commodities. “Car makers are waiting for the price to decrease to US$2,000,” he said. Platinum, used in jewellery and auto catalysts, has jumped more than 40% this year after
mines in South Africa, accounting for 80% of world output, were shut for five days at the height of last month’s power crisis. The most active February 2009 contract on the Tokyo Commodity Exchange hit a low of ¥6,839 ($91.66) per gram before funds bought on dips and pushed up the contract to a high of ¥7,069. It ended at ¥7,051, up ¥34 from Thursday’s close. “This is driven by funds, and there’s no buying from the general public. What we’ve seen is purely a technical rebound,” said a dealer in Tokyo. Palladium hit a high of US$582 an ounce, its strongest in more than six years, up from US$560/US$564 late in New York. — By Lewa Pardomuan
GLOBAL MARKETS
Credit spreads widen as US economy fears mount
Stocks slip, dollar tumbles on economy concerns
The most active traded CDS (credit default swap) in basis points (Feb 29) NAME
LAST
CCY
WELLS FARGO MEXICO HSBC FINCE CORP THOMSON CAPITAL ONE FNCL TURKEY MERRILL LYNCH CO RUSSIA WACHOVIA CORP UBS AMERICAN EXPRESS BRAZIL RUSSIA ELECTROLUX AB GAZPROM JPMORGAN CHASE
91 115 242 430 405 240 200 125 160 140 0 142 125 130 252 89
USD USD USD EUR USD USD USD USD USD EUR USD USD USD EUR USD USD
GV1 TEXT
GV2 TEXT CLOSE
5Y 5Y 5Y 5Y 5Y 5Y 5Y 5Y 5Y 5Y
SENIOR SENIOR SENIOR SENIOR SENIOR SENIOR SENIOR SENIOR SENIOR SENIOR
5Y 5Y 5Y 5Y 5Y
SENIOR SENIOR SENIOR SENIOR SENIOR
91 113 242 420 405 240 200 125 160 123 0 130 125 130 252 89
GFI, CREDIT DERIVATIVES BROKER. EXCLUSIVELY FROM REUTERS
Feb 29: European credit spreads widened on Friday, with indexes creeping towards record highs touched last week, after comments from US Federal Reserve chairman Ben Bernanke spooked markets about the state of the economy. Bernanke, in a second day of testimony before Congress on Thursday, said small banks that invested heavily in real estate could collapse as the housing downturn drains their capital. By 0857 GMT, the investment-grade Markit iTraxx Europe index was at 122 basis points (bps), according to data from Markit, 8.5 bps wider than late Thursday. The Markit iTraxx Crossover index, made up of 50 mostly “junk”rated credits, was at 594 bps, 16 bps wider. It had touched 600 bps in early trade. Weak data has also stoked fears the fragile US economy will tip into recession. Both of the major credit indexes have widened steadily since Wednesday, bringing a halt to a tentative rally earlier in the week. They are close to record highs of 137 bps for the Europe index and levels above 600 bps on the Crossover. In the cash bond market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 122.1 bps more than similarly dated government bonds, 0.5 bps higher on the day. In underlying government bond markets, the yield on the interest rate sensitive two-year Schatz was 3.219%, 4.8 bps lower on the day. The 10-year Bund yielded 3.972%, 1.7 bps lower. The 10-year euro swap rate was 4.376%. — By Natalie Harrison
Rates as at Feb 29 (%)
Feb 29: Stocks slipped and the dollar tumbled to historic lows on Friday as the US Federal Reserve’s warning on the health of domestic banks raised concerns over a US recession, driving oil and safe-haven gold to record peaks. Fed chairman Ben Bernanke said on Thursday some small US banks could fail during the current market turmoil stemming from the fallout in US subprime mortgages, in remarks which fanned expectations for an aggressive interest rate cut in March. However, Bernanke also acknowledged inflation could complicate the central bank’s effort to spur the economy, which weighed on risky assets. The FTSEurofirst 300 index was down 0.1% on the day, having hit a one-week low earlier in the day. The MSCI main world equity index fell a quarter percent. The dollar fell to a three-year low of ¥104.23 while it hit record lows of US$1.5238 per euro and tumbled to historic troughs against a basket of major currencies. Interest rate futures markets are pricing in an almost 40% chance of the Fed lowering the cost of borrowing by three-quarters of a percentage point in March. Gold, a safe-haven asset, which offers an inflation hedge, rose as high as US$975 an ounce, bringing gains this year to more than 16% this year. US light crude had risen to US$103.05 a barrel, before eroding gains, after Ecuador shut a key export pipeline and a fire hit a major European natural gas plant. Surging energy, commodity and food prices are fanning inflation concerns which could tie the hands of central banks SGDAUD
DEPOSIT RATE
AUD CNY HKD IDR INR JPY MYR NZD PHP THB TWD USD
GOV BOND
1M
3M
6M
1Y
10Y
7.3700
7.7900 3.3300 2.3200 4.8700 2.6920 0.8500 1.4780 8.9400 3.6730 5.6550 1.7400 3.0000
8.1300 3.7800 2.2200 4.9660 3.0350 0.8900 1.7460 8.8000 4.0430 4.8320 1.6110 2.8100
8.4100 4.1400 2.1200 5.8510 3.2700 1.1100 2.0930 9.0000 2.1490 3.6220 1.6760 2.8200
6.2150 4.1298 2.9040 10.2180 7.5420 1.3600 3.6780 6.4000 7.0690 4.4700 2.4550 3.6431
2.6800 4.3340 1.1730 0.7700 1.6140 8.5000 3.3340 6.1790 1.7090 3.0400
keen to cut interest rates to bolster the economy. This is in turn prompting investors to buy safe-haven gold and other basic resources, creating a self-fulfilling cycle. Emerging sovereign spreads widened 2 basis points while emerging stocks were down 0.8%. The cost of corporate bond insurance rose after Bernanke’s warning, with the iTraxx Crossover index, most-widely watched indicator for European credit market sentiment, widening to 594 basis points. The March Bund future rose 0.3%, capitalising on woes E in stock markets. — By Natsuko Waki
-8.87%
SGDCNY
0.68% 9.18%
SGDHKD SGDIDR
8.54%
SGDINR
-0.68% -2.69%
SGDJPY
-0.17%
SGDMYR SGDNZD SGDPHP
-6.56% -8.75% 2.76%
SGDTHB
3.02%
SGDTWD
9.61%
SGDUSD -10.00%
-5.00%
0.00% Sing vs Asia currencies (y-o-y, Feb 29)
5.00%
10.00%
THEEDGE SINGAPORE | MARCH 3, 2008 • 31
SEE BLOOMBERG TELEVISION ON STARHUB CABLE TV, CHANNEL 25.
CAPITAL
Bloomberg Financial Markets Commodities News Tel: (65) 6212 1000 | Fax: (65) 6212 1111
SINGAPORE FSSTI Straits Times Index ranked returns (per cent change)
FEB 22–29, 2008
FSSTI Straits Times Index equity index movers
FEB 29, 2008
SINGAPORE equity movers Property companies are worst-performing stocks Feb 29 — The Straits Times Index fell 47.70, or 1.6%, to 3,026.45 at the close of trading. The index fell for a fourth straight month, declining 0.8% this month, it longest losing streak since the four months to Feb 28, 2003. City Developments Ltd, Singapore’s second-largest developer, lost 52 cents, or 4.2%,
to $11.96, the third-worst performing stock on the index. CapitaLand Ltd, the city-state’s largest developer, fell 33 cents to $6.30, the second-worst performing stock on the index. Keppel Land Ltd, the third largest, declined 20 cents to $5.90. ABN Amro Holding NV expects the prices of luxury property to decline 10% to 20% by year-end. The prices for mass-market property
will climb 10%, analyst Fera Wirawan said. Advance SCT Ltd, provider of printed-circuitboard testing services, tumbled 6.5 cents, or 16%, to 34.5 cents, the second worst-performing stock on the broader FTSE Straits Times All Share Index. The company reported 2007 net income dropped 47% to $4.2 million as administrative expenses surged 85%. UOB KayHian Holdings Ltd, Singapore’s big-
gest brokerage by market value, rose three cents to $2.04. The company reported 4Q profit surged 81% to $62 million and commission income rose 56% to $159 million, it said. Suntec Real Estate Investment Trust fell nine cents, or 5.6%, to $1.51, its biggest drop since Jan 22. Wilmar International Ltd, fell 12 cents, or 2.7%, to $4.39, its fourth day of declines. E
WORLD Equity indices: Ranked returns
Currencies: Per cent change
BEST & WORST PERFORMING MEMBERS FOR THE WEEK OF FEB 22–29, 2008
BEST & WORST PERFORMING MEMBERS FOR THE WEEK OF FEB 22–29, 2008
MALAYSIAN equity movers AirAsia, IGB fall Feb 29 — Malaysia’s Kuala Lumpur Composite Index fell 10.87, or 0.8%, to close at 1,357.40, the lowest since Jan. 22. The measure fell 2.6% this month, taking a two-month decline to 6.1%. AirAsia Bhd dropped three sen (1.3 cents) to RM1.56. IGB Corp fell nine sen to RM1.92, its biggest decline since Jan 22, after the developer said profit in 4Q fell 35% to RM19.2 million. OSK Holdings Bhd rose six sen to RM1.95 after the brokerage said fourthquarter profit climbed 14% to RM40.7 million from a year earlier. Malaysian Resources Corp added 11 sen to RM2.01, snapping a seven-day losing streak. Malaysian Airline System Bhd, the national carrier, fell 16 sen to RM4.12 on speculation that record crude oil prices E would erode earnings.
Oil may fall as US supplies grow and demand drops, survey shows C rude oil may fall this week because of rising US inventories and weakening fuel demand as the nation’s economy slows and refineries perform maintenance. Twenty-one of 34 analysts surveyed by Bloomberg News, or 62%, said prices will drop through March 7. Six of the respondents, or 18%, said futures will rise and seven forecast that prices will be little changed. Two weeks
ago, 69% said oil would drop. Crude-oil supplies have jumped 25.7 million barrels, or 9.1%, in the past seven weeks, according to an Energy Department report last Wednesday. Total implied fuel demand averaged 20.6 million barrels a day in the past four weeks, down 2.4% from a year earlier, the report showed. Oil surged to a record the past two days af-
ter the US dollar dropped to an all-time low against the euro, prompting investors to buy commodities as an inflation hedge. “If the US dollar ever manages an upward correction to its downtrend, we think crudeoil traders will be surprised to discover that there is little in the way of physical tightness to help cushion the downside,” says Tim Evans, an energy analyst at Citigroup
Global Markets Inc in New York. Crude oil for April delivery rose US$3.78 ($5.27), or 3.8%, to US$102.59 a barrel last week on the New York Mercantile Exchange. Futures reached US$102.97 a barrel last Thursday, the highest price since trading began in 1983. The oil survey has correctly predicted the direction of prices 52% of the time since its E introduction. — Bloomberg LP
32 • THEEDGE SINGAPORE
| MARCH 3, 2008
CAPITAL
INSIDER MOVES
Tat Hong increases stake in associate Yongmao
SHARES ACQUIRED (DISPOSED)
Venture Partners. Salim now has a 50.8% stake in Gallant. Gallant runs industrial parks on the Indonesian islands of Batam and Bintan and it owns 18,200ha — roughly one-third the size of Singapore — of resort and industrial land on Bintan that it plans to sell. Buoyed by excitement on the company’s prospects in Indonesia, the stock had soared from its 2006 IPO price of 50 cents a share to a high of $1.50 in February last year. However, in March last year, it emerged that an Indonesian company PT Raflesia Matrawisata was claiming ownership of some portions of Gallant’s land in Bintan. The idea of a potential legal squabble sent investors running for cover and shares of Gallant took a plunge. Gallant has since provided reassurance that the land ownership claims by PT Raflesia have been rejected by both the district court and, on appeal, the high court. However, the stock has showed no sign of recovering, falling to a 52-week intraday low of 66 cents last Tuesday. The weakness could have something to do with Gal-
70000
Volume (’000)
Price ($) 1.5
1.1
30000
1.0
Feb 3, 2007 Net profit
$14.7 mil
FY Dec 2006
$29.0 mil
Share price
Feb 28, 2008
52-week high 52-week low PER (times)
ADAMPAK LTD
—
12,874,000
AEI CORP LTD
100,000
ONG CHIN YEW
16,920,000
—
FEB 22
APEX-PAL INT’L LTD
100,000
DOUGLAS FOO PEOW YONG
FEB 22
APEX-PAL INT’L LTD
82,000
FEB 27
APOLLO ENTERPRISES LTD
FEB 21
ARA ASSET MANAGEMENT LTD
FEB 20 FEB 21
59.2 mil
67.5 cents
Share price
Feb 28, 2008
44.5 cents
Jul 5, 2007
$1.45
52-week high
Feb 27, 2008
49.5 cents
Feb 26, 2008
66 cents
52-week low
Feb 20, 2008
35 cents
FY2007
110.7
PER (times)
FY2007
0.1
FY2008 (est)
14.1
Gross dividend yield
SALES IN OPEN MARKET AT OWN DISCRETION (20/2)
—
OPEN MARKET PURCHASE (22/2)
—
OPEN MARKET PURCHASE (22/2)
65,000
NG WEI YEOW
5,532,322
85,350,128
OPEN MARKET PURCHASE (25/2)
10,000
LIM HOW TECK
300,000
10,000
OPEN MARKET PURCHASE (21/2)
ASA GROUP HLDGS LTD
71,000
POH CHOO BIN
14,516,000
—
OPEN MARKET PURCHASE (20/2)
ASA GROUP HLDGS LTD
100,000
NG SHEK YAM
200,000
10,700,000
OPEN MARKET PURCHASE (21/2)
FEB 26
ASA GROUP HLDGS LTD
50,000
POH CHOO BIN
14,566,000
—
OPEN MARKET PURCHASE (26/2)
FEB 21
ASCENDAS INDIA TRUST
7,009,900
THE CAPITAL GROUP OF COMPANIES
—
67,939,900
OPEN MARKET PURCHASE (21/2)
FEB 21
ASIA DEKOR HLDGS LTD
10,018,000
VALUE PARTNERS LTD
—
58,150,000
FEB 20
ASIA POWER CORP LTD
78,000
HE JUN
—
78,000
FEB 27
ASIA POWER CORP LTD
40,000,000
ADDYSON XUE
1,500,000
—
FEB 25
ASPIAL CORP LTD
105,000
KOH WEE SENG
14,190,800
69,958,500
FEB 27
ASPIAL CORP LTD
26,000
4,030,300
71,403,200
OPEN MARKET PURCHASE (25/2)
FEB 26
ASPIAL CORP LTD
100,000
14,290,800
69,958,500
OPEN MARKET PURCHASE (26/2)
FEB 22
AUSTON INT’L GROUP LTD
FEB 21
AVI-TECH ELECTRONICS LTD
200,000
FEB 21
AVI-TECH ELECTRONICS LTD
100,000
FEB 22
AZTECH SYSTEMS LTD
53,000
NG TECK SIM, COLIN
FEB 22
AZTECH SYSTEMS LTD
47,000
NG TECK SIM, COLIN
FEB 22
BABCOCK & BROWN STRUCTURED FINANCE FUND LTD
FEB 25
BH GLOBAL MARINE LTD
FEB 21
C & O PHARM TECH (HLDGS) LTD
661,000
FEB 22
C & O PHARM TECH (HLDGS) LTD
1,000,000
FEB 22
CHARTERED SEMICONDUCTOR MFG LTD
FEB 26
CHASEN HLDGS LTD
FEB 25
CHINA PRECISION TECHNOLOGY LTD
10,000,000
DYNAMIC GOAL FINANCE LTD
FEB 25
CHINA PRECISION TECHNOLOGY LTD
-30,000,000
JHT INVESTMENTS PTE LTD
FEB 19
CHINA SUNSINE CHEM HLDGS LTD
FEB 27
CITYNEON HLDGS LTD
FEB 22
COSCO CORP (S) LTD
FEB 20
CYBER VILLAGE HLDGS LTD
-997,000
FEB 20
CYBER VILLAGE HLDGS LTD
-1,000,000
FEB 20
CYBER VILLAGE HLDGS LTD
FEB 20 FEB 25 FEB 21
DBS GROUP HLDGS LTD
FEB 25
DELONG HLDGS LTD
FEB 19
DEVOTION ENERGY GROUP LTD
210,000
FEB 20
EXCELPOINT TECHNOLOGY LTD
25,000
FEB 21
FORTUNE REAL ESTATE INV TRUST
FEB 20
FRAGRANCE GROUP LTD
FEB 26
FRAGRANCE GROUP LTD
FEB 21
GALLANT VENTURE LTD
FEB 21
GALLANT VENTURE LTD
1,000,000
DORNIER PROFITS LTD
FEB 21
GALLANT VENTURE LTD
1,000,000
ANTHONI SALIM
FEB 26
GALLANT VENTURE LTD
1,000,000
DORNIER PROFITS LTD
160,963 95,051,200
40,000 -500,000,000
-612,000 1,442,000
to lower land sale revenue and lower rental revenue, adding that the subprime crisis and potential recession in the US have affected investment sentiment in Bintan, which may reE sult in lower land sales.
OPEN MARKET PURCHASE (19/2)
1,108,400
PURCHASE OF SHARES (20/2) OPEN MARKET PURCHASE (12/2/07) PLACEMENT OF SHARES (5/2) OPEN MARKET PURCHASE (25/2)
HONG BO EDUCATION DEVT HLDGS LTD
34,000,000
—
LIM ENG HONG
79,638,350
26,390,000
OPEN MARKET PURCHASE (21/2)
5,780,000
—
OPEN MARKET PURCHASE (21/2)
563,000
—
OPEN MARKET PURCHASE (21/2)
610,000
—
OPEN MARKET PURCHASE (22/2)
—
27,134,310
282,828,600
—
GAO BIN
449,000
363,162,000
OPEN MARKET PURCHASE (20/2)
GAO BIN
449,000
364,162,000
OPEN MARKET PURCHASE (21/2)
76,060
—
EXERCISE OF SHARE OPTIONS/CONVERTIBLES (12/2)
2,996,316,920
—
SALES IN OPEN MARKET AT OWN DISCRETION (25/2)
224,192,592
—
MARRIED DEAL (25/2)
50,000,000
—
SALES IN OPEN MARKET AT OWN DISCRETION (25/2)
—
25,208,097
SALES IN OPEN MARKET AT OWN DISCRETION (19/2)
WONG WEE LIM, WILLIAM
EVEREST BABCOCK & BROWN LTD BENG HUI HLDGS (S) PTE LTD
ANDRE BORREL YAP KOON BEE @ LOUIS YAP
TOE TEOW HENG
SALE OF SHARES AND ALLOTMENT OF NEW CAPITAL (20/2) OTHERS (21/2)
—
OPEN MARKET PURCHASE (25/2)
177,000
35,000
OPEN MARKET PURCHASE (22/2)
JUSTIN LEONG MING LOONG
—
15,090,000
JUSTIN LEONG MING LOONG
—
14,090,000
SALES IN OPEN MARKET AT OWN DISCRETION (18/2)
-500,000
JUSTIN LEONG MING LOONG
—
13,590,000
SALES IN OPEN MARKET AT OWN DISCRETION (19/2)
DAYEN ENVIRONMENTAL LTD
-500,000
JOHN LEE THIAN GUAN
39,904,750
—
MARRIED DEAL (20/2)
DAYEN ENVIRONMENTAL LTD
-925,000
KOR HOCK LAI
22,038,000
—
SALES IN OPEN MARKET AT OWN DISCRETION (22/2)
7,782,000 -53,557,498
STANLEY TAN POH LENG
SALES IN OPEN MARKET AT OWN DISCRETION (22/2)
10,424,000
50,000
POH HEE BOON
SALES IN OPEN MARKET AT OWN DISCRETION (15/2)
THE BANK OF NEW YORK MELLON CORP
—
76,895,315
OTHERS (24/1)
ZHAO JING
—
358,817,502
OTHERS (25/2)
—
210,000
237,779,520
12,990,840
—
12,696,899
OTHERS (21/2)
KOH WEE MENG
610,665,000
91,825,000
OPEN MARKET PURCHASE (20/2)
150,000
KOH WEE MENG
610,815,000
91,825,000
1,000,000
ANTHONI SALIM
—
1,222,411,776
-1,199,000 10,000
HE JUN JOSEPH ALBERT PHUAY YONG HEN LIM HWEE CHIANG
85,000,000
628,293,350
—
1,223,411,776
86,000,000
628,293,350
—
REASON
91,584,640
-6,000,000
renminbi
—
ANDY ONG SIEW KWEE
KOH WEE SENG
Feb 28, 2008
FY March 2007
lant’s less than stellar earnings. For FY2007, the company reported a 9.5% drop in revenue to $234.3 million while net profit was down 30.4% to $14.7 million. Management attributed the decline
FEB 20
0.44
Feb 21, 2008 Net profit
Gross dividend yield
SHARES HELD AFTER CHANGE DIRECT DEEMED
0.445
0
Feb 28, 2008 FY Dec 2007
0.45
10000
0.675 0.6
0
0.455
20000
0.8
10000
0.46
30000
0.9
20000
Price ($) 0.465
40000
1.2
40000
Volume (’000)
50000
1.3
50000
FEB 22
TAN SU LAN @ TAN SOO LUNG
60000
1.4
COMPANY
PRUDENTIAL ASSET MANAGEMENT (S) LTD
Yongmao Holdings
60000
FILING DATE
-2,126,000
DIRECTOR/SUBSTANTIAL SHAREHOLDER
Gallant Venture
OPEN MARKET PURCHASE (28/12/07) OPEN MARKET PURCHASE (19/2)
OPEN MARKET PURCHASE (26/2) PURCHASE OF SHARES (20/2) OPEN MARKET PURCHASE (21/2) PURCHASE OF SHARES (21/2) OPEN MARKET PURCHASE (26/2)
The information in Insider Moves is provided as a service to readers. The explanations filed are at times abridged, indirect interest declarations summarised together with direct interests and figures totalled for space. While every effort is made to ensure accuracy, the information presented is not the official record of shareholder filings. Readers who are interested should check the original filings filed with the SGX.
BLOOMBERG
T
at Hong Holdings, the largest crane rental company in Singapore, last week bought nine million shares in its newly-listed associate Yongmao Holdings. The move, which follows a similar open market purchase of 9.8 million shares on Feb 22, takes Tat Hong’s stake in the China-based tower crane manufacturer to 20% from 18% previously. Prior to the IPO, Tat Hong had a 21.1% stake in Yongmao, which was reduced to 15% post-IPO. Yongmao was listed on the main board of the Singapore Exchange earlier this month. The company offered 111.6 million shares at 35 cents each. The stock surged 11 cents or 31% to 46 cents on its first day of trading and was the most actively-traded by volume. Since then, however, interest in the stock has died down and Yongmao closed last Thursday at 44.5 cents. For FY2007 ended March, Yongmao recorded a net profit of 59.2 million renminbi ($11.6 million) on
the back of revenue of 278.3 million renminbi. And for 1Q2008, net profit was 38.6 million renminbi while revenue rose to 158.3 million renminbi. Business is brisk and Yongmao’s facilities in China are already being worked at full capacity. The company hopes to raise its manufacturing capacity to 600 cranes a year from the present 200. Construction on a new facility in the province of Liaoning has already begun and is expected to be completed by year end. Yongmao plans to use about 60% of the IPO proceeds to help in the construction of this facility and another 30% to buy new machinery. Meanwhile, Anthoni Salim of Indonesian conglomerate the Salim Group — the world’s largest instant noodles maker — has been increasing his stake in Gallant Venture. Last week, Salim purchased one million shares in Gallant on the open market through Dornier Profits, a company in which he holds a more than 50% stake. Earlier this month, Salim also increased his stake in Gallant by buying two million shares through Dornier Profits as well as Parallax
BLOOMBERG
| BY JOAN NG |
THEEDGE SINGAPORE | MARCH 3, 2008 • 33
INSIDER MOVES
CAPITAL
FILING DATE
COMPANY
FEB 26
GALLANT VENTURE LTD
1,000,000
ANTHONI SALIM
—
1,224,411,776
FEB 20
GEMS TV HLDGS LTD
-4,264,000
EAGLE EYE ASSOCIATES LTD
—
104,957,250
FEB 21
GEMS TV HLDGS LTD
-30,198,000
EAGLE EYE ASSOCIATES LTD
—
74,759,250
SALE OF SHARES (19/2)
FEB 22
GEMS TV HLDGS LTD
-4,783,000
EAGLE EYE ASSOCIATES LTD
—
69,976,250
SALE OF SHARES (20/2)
FEB 22
GEMS TV HLDGS LTD
-2,657,000
EAGLE EYE ASSOCIATES LTD
—
67,319,250
SALE OF SHARES (21/2)
FEB 25
GEMS TV HLDGS LTD
-3,317,000
EAGLE EYE ASSOCIATES LTD
—
64,002,250
FEB 21
GREAT EASTERN HLDGS LTD
2,000
—
OPEN MARKET PURCHASE (21/2)
FEB 27
GREAT EASTERN HLDGS LTD
OPEN MARKET PURCHASE (26/2)
FEB 22
GUL TECHNOLOGIES SINGAPORE LTD
FEB 25
HIAP SENG ENGINEERING LTD
300,000
M RAJARAM
FEB 21
HONGGUO INT’L HLDGS LTD
-600,000
SCHRODER INVESTMENT MANAGEMENT GROUP
FEB 21
IDT HLDGS (S) LTD
390,000
YEO SENG CHONG
FEB 26
ISDN HLDGS LTD
500,000
FEB 27
ISDN HLDGS LTD
850,000
FEB 20
KIAN ANN ENGINEERING LTD
FEB 22
KING’S SAFETWEAR LTD
FEB 25 FEB 26
ts
FEB 22
LMA INT’L N V
PORTER ORLIN LLC
—
88,012,000
OPEN MARKET PURCHASE (20/2)
ts
FEB 25
MAP TECHNOLOGY HLDGS LTD
197,000
DAVID LEE KUO CHUEN
—
28,600,115
OPEN MARKET PURCHASE (21/2)
FEB 26
MAP TECHNOLOGY HLDGS LTD
141,000
DAVID LEE KUO CHUEN
—
28,741,115
OPEN MARKET PURCHASE (22/2)
FEB 27
MAP TECHNOLOGY HLDGS LTD
124,000
DAVID LEE KUO CHUEN
—
28,865,115
OPEN MARKET PURCHASE (26/2)
FEB 26
MERMAID MARITIME PUBLIC CO LTD
140,000
—
OPEN MARKET PURCHASE (26/2)
FEB 26
MIDSOUTH HLDGS LTD
—
59,091,000
OPEN MARKET PURCHASE (22/2)
FEB 27
OLAM INT’L LTD
500,000
SUNNY GEORGE VERGHESE
FEB 20
PACIFIC SHIPPING TRUST
100,000
PACIFIC INT’L LINES (PTE) LTD
FEB 15
PT BERLIAN LAJU TANKER TBK
2,926,000
FEB 18
PT BERLIAN LAJU TANKER TBK
FEB 19
0.465
0.46
0.455
0.45
0.445
BLOOMBERG
0.44
wer ubion ent reE
SHARES ACQUIRED (DISPOSED)
DIRECTOR/SUBSTANTIAL SHAREHOLDER
SHARES HELD AFTER CHANGE DIRECT DEEMED
2,000
MICHAEL WONG PAKSHONG
3,000
MICHAEL WONG PAKSHONG
50,000
TAN KIM LEONG
REASON
PURCHASE OF SHARES (26/2) SALE OF SHARES (18/2)
SALE OF SHARES (22/2)
5,000
—
50,000
—
OPEN MARKET PURCHASE (23/2)
300,000
—
OPEN MARKET PURCHASE (25/2)
—
19,632,000
802,000
8,150,000
OPEN MARKET PURCHASE (21/2)
KARL-WALTER BRAUN
18,500,000
—
OPEN MARKET PURCHASE (22/2)
KARL-WALTER BRAUN
19,350,000
—
OPEN MARKET PURCHASE (26/2)
100,000
LAU HWEE BENG
51,824,770
10,236,500
OPEN MARKET PURCHASE (18/2)
90,000
YEO LOY KIANG
1,797,000
—
OPEN MARKET PURCHASE (21/2)
LIANG HUAT ALUMINIUM LTD
45,267
BENJAMIN TAN HAI SENG
—
1,800,045,267
LEEDEN LTD
35,000
ONG NAI PEW
—
9,733,000
4,914,000
30,000
M L CHANDCHUTHA CHANDRATAT
3,544,000
LEE CHONG MIN
OTHERS (19/2)
OTHERS (17/9/07) OPEN MARKET PURCHASE (25/2)
80,022,630
15,000,000
OPEN MARKET PURCHASE (27/2)
116,643,000
220,000
OPEN MARKET PURCHASE (19/2)
PT TUNGGALADHI BASKARA
2,232,807,764
138,000,000
OPEN MARKET PURCHASE (14/2)
2,982,000
PT TUNGGALADHI BASKARA
2,235,789,764
138,000,000
OPEN MARKET PURCHASE (15/2)
PT BERLIAN LAJU TANKER TBK
3,831,000
PT TUNGGALADHI BASKARA
2,239,620,764
138,000,000
OPEN MARKET PURCHASE (18/2)
FEB 20
PT BERLIAN LAJU TANKER TBK
3,515,000
PT TUNGGALADHI BASKARA
2,243,135,764
138,000,000
OPEN MARKET PURCHASE (19/2)
FEB 21
PT BERLIAN LAJU TANKER TBK
2,500,000
PT TUNGGALADHI BASKARA
2,245,635,764
138,000,000
OPEN MARKET PURCHASE (20/2)
FEB 21
RICKMERS MARITIME
50,000
LIM HOW TECK
350,000
—
OPEN MARKET PURCHASE (20/2)
FEB 21
RICKMERS MARITIME
10,000
LIM HOW TECK
350,000
10,000
OPEN MARKET PURCHASE (21/2)
FEB 26
RICKMERS MARITIME
33,000
LEE SUET FERN
333,000
—
OPEN MARKET PURCHASE (25/2)
FEB 25
SAIZEN REAL ESTATE INV TRUST
—
1,273,094
FEB 20
SCORPIO EAST HLDGS LTD
15,000
ANG SIN LIU
8,330,738
—
OPEN MARKET PURCHASE (18/2)
FEB 20
SCORPIO EAST HLDGS LTD
316,000
ANG SIN LIU
8,646,738
—
OPEN MARKET PURCHASE (19/2)
FEB 22
SCORPIO EAST HLDGS LTD
180,000
ANG SIN LIU
8,826,738
—
OPEN MARKET PURCHASE (21/2)
FEB 22
SCORPIO EAST HLDGS LTD
134,000
ANG SIN LIU
8,960,738
—
OPEN MARKET PURCHASE (22/2)
FEB 20
SIM LIAN GROUP LTD
404,000
KUIK AH HAN
5,305,480
347,455,480
OPEN MARKET PURCHASE (20/2)
FEB 21
SIM LIAN GROUP LTD
360,000
KUIK AH HAN
5,305,480
347,816,480
OPEN MARKET PURCHASE (21/2)
FEB 20
SING INVESTMENTS & FINANCE LTD
20,000
AW KIM CHEN
—
12,065,780
OPEN MARKET PURCHASE (19/2)
FEB 21
SING INVESTMENTS & FINANCE LTD
40,000
AW KIM CHEN
—
12,105,780
FEB 26
SNF CORP LTD
9,942,670
—
FEB 21
STAMFORD TYRES CORP LTD
40,000
WEE KOK WAH
26,065,554
53,768,319
OPEN MARKET PURCHASE (20/2)
FEB 22
STAMFORD TYRES CORP LTD
40,000
WEE KOK WAH
26,065,554
53,808,319
OPEN MARKET PURCHASE (21/2)
FEB 22
STRAITS TRADING CO LTD
3,427,493
THE CAIRNS PTE LTD
78,530,446
—
OPEN MARKET PURCHASE (21/2)
FEB 22
STX PAN OCEAN CO LTD
3,180,000
MORGAN STANLEY
4,819,000
101,288,032
OPEN MARKET PURCHASE (20/2)
FEB 27
SYNEAR FOOD HLDGS LTD
7,360,000
LI WEI
—
457,460,000
PURCHASE AND SALE OF SHARES (26/2)
FEB 20
THE ASCOTT GROUP LTD
19,016,523
SOMERSET CAPITAL PTE LTD
1,021,040,470
—
OTHERS (20/2)
FEB 21
THE ASCOTT GROUP LTD
34,603,549
SOMERSET CAPITAL PTE LTD
1,055,644,019
—
OTHERS (21/2)
FEB 22
THE ASCOTT GROUP LTD
63,005,884
SOMERSET CAPITAL PTE LTD
1,118,649,903
—
OTHERS (22/2)
FEB 25
THE ASCOTT GROUP LTD
18,047,075
SOMERSET CAPITAL PTE LTD
1,136,696,978
—
OTHERS (25/2)
FEB 26
THE ASCOTT GROUP LTD
20,161,781
SOMERSET CAPITAL PTE LTD
1,156,858,759
—
OTHERS (26/2)
FEB 26
TTL HLDGS LTD
2,142,000
TAN KEE LIANG
31,562,000
—
OPEN MARKET PURCHASE (26/2)
FEB 25
UMS HLDGS LTD
-1,446,000
ARISAIG ASEAN FUND LTD
43,725,000
43,725,000
SALES IN OPEN MARKET AT OWN DISCRETION (21/2)
FEB 21
UNISTEEL TECHNOLOGY LTD
-452,000
FEB 25
WILLAS-ARRAY ELEC (HLDGS) LTD
581,000
YEO SENG CHONG
FEB 20
YANGZIJIANG SHIPBUILDING HLDGS LTD
-731,000
FMR LLC ON BEHALF OF THE MANAGED ACCOUNTS OF ITS
FEB 22
YONGMAO HLDGS LTD
9,770,000
TAT HONG HLDGS LTD
FEB 27
YONGMAO HLDGS LTD
9,006,000
TAT HONG HLDGS LTD
88,755,369
944,094
ARNOLD IP TIN CHEE
-1,461,000
NG HOCK CHING
OTHERS (21/2)
OPEN MARKET PURCHASE (20/2) SALES IN OPEN MARKET AT OWN DISCRETION (22/2)
FMR LLC ON BEHALF OF THE MANAGED ACCOUNTS OF ITS DIRECT AND INDIRECT SUBSIDIARIES & FIDELITY INT’L LTD
DIRECT AND INDIRECT SUBSIDIARIES & FIDELITY INT’L LTD
—
27,779,500
MARKET TRANSACTION (20/2)
1,050,000
17,985,000
OPEN MARKET PURCHASE (25/2)
—
164,393,000
79,749,369
—
OPEN MARKET PURCHASE (22/2)
—
OPEN MARKET PURCHASE (27/2)
SALES IN OPEN MARKET AT OWN DISCRETION (18/2)
Share buybacks DATE
nted
COMPANY
SHARES ACQUIRED HIGH
SHARE PRICE LOW
CUMULATIVE NET OUTSTANDING TREASURY SHARES
DATE
COMPANY
SHARES ACQUIRED
SHARE PRICE HIGH
LOW
CUMULATIVE NET OUTSTANDING TREASURY SHARES
FEB 12
AZTECH SYSTEMS LTD
305,000
0.260
0.260
10,098,000
FEB 27
SINO-ENVIRONMENT TECH GRP LTD
1,000,000
1.313
1.313
3,550,000
FEB 15
AZTECH SYSTEMS LTD
120,000
0.265
0.265
10,218,000
FEB 11
UNITED OVERSEAS BANK LTD
210,000
17.400
17.000
15,937,000
FEB 19
AZTECH SYSTEMS LTD
100,000
0.255
0.255
10,318,000
FEB 12
UNITED OVERSEAS BANK LTD
200,000
17.200
17.040
16,137,000
FEB 20
AZTECH SYSTEMS LTD
110,000
0.250
0.250
10,428,000
FEB 13
UNITED OVERSEAS BANK LTD
200,000
17.640
17.260
16,337,000
FEB 22
AZTECH SYSTEMS LTD
50,000
0.245
0.245
10,578,000
FEB 14
UNITED OVERSEAS BANK LTD
200,000
17.960
17.700
16,537,000
FEB 26
AZTECH SYSTEMS LTD
290,000
0.250
0.235
10,868,000
FEB 15
UNITED OVERSEAS BANK LTD
200,000
18.220
17.660
16,737,000
FEB 27
AZTECH SYSTEMS LTD
150,000
0.245
0.240
11,018,000
FEB 18
UNITED OVERSEAS BANK LTD
200,000
18.360
17.800
16,937,000
FEB 25
CHINA PRECISION TECHNOLOGY LTD
19,900,000
0.270
0.270
21,291,000
FEB 19
UNITED OVERSEAS BANK LTD
150,000
18.440
18.200
17,087,000
FEB 26
CHUAN HUP HLDGS LTD
201,000
0.360
0.350
43,213,000
FEB 20
UNITED OVERSEAS BANK LTD
200,000
18.120
17.860
17,287,000
FEB 27
CHUAN HUP HLDGS LTD
258,000
0.360
0.350
43,471,000
FEB 22
UNITED OVERSEAS BANK LTD
150,000
18.680
18.080
17,587,000
FEB 22
DBS GROUP HLDGS LTD
50,000
17.900
17.780
1,505,000
FEB 25
UNITED OVERSEAS BANK LTD
150,000
18.860
18.720
17,737,000
FEB 26
INNOTEK LTD
359,000
0.790
0.750
10,435,000
FEB 26
UNITED OVERSEAS BANK LTD
150,000
18.900
18.480
17,887,000
FEB 27
INNOTEK LTD
149,000
0.795
0.785
10,584,000
FEB 27
UNITED OVERSEAS BANK LTD
150,000
18.900
18.420
18,037,000
FEB 25
SEMBCORP MARINE LTD
2,400,000
3.650
3.600
2,400,000
FEB 11
WING TAI HLDGS LTD
500,000
2.040
2.040
1,867,000
FEB 27
SEMBCORP MARINE LTD
1,358,000
3.760
3.700
3,758,000
34 • THEEDGE SINGAPORE
| MARCH 3, 2008
CAPITAL
THOMSON FIRST CALL EARNINGS ESTIMATES REGIONAL
\ About Thomson First Call Thomson First Call (www1.firstcall.com) is the source for real-time broker research and quantitative data serving the global financial community. Internet-based applications pioneered by Thomson First Call deliver integrated content from over 850 brokerage firms to 52,000 institutional desktops worldwide. Thomson First Call provides accurate, comprehensive coverage of more than 18,000 companies in 60 countries, and offers realtime, commingled full-text equity and fixed income research, analyst morning meeting notes, analyst earning estimates, corporate news, shareholdings data, sell-side workflow tools, internal research distribution and outstanding technology-based custom solutions. In the fall of 2000, The Thomson CORP acquired Primark and its stable of brands, among them I/B/E/S and Datastream. Since then, Thomson Financial has integrated I/B/E/S, Thomson First Call and Datastream into an organization focused on research and analytics. Also, I/B/E/S has been fully integrated onto the Thomson First Call website. Collectively, the totally revamped site represents 50 years of experience between I/B/E/S and Thomson First Call, providing best-of-breed financial content and pioneering technology product lines to the global buy-side and sell-side communities. COMPANY LONG NAME
BASIC INDUSTRIES RIO TINTO LTD POSCO BAOSHAN IRON & STEEL CO LTD ALUMINUM CORP OF CHINA (CHALCO) WUHAN IRON & STEEL CO LTD FORMOSA PETROCHEMICAL CORP STEEL AUTHORITY OF INDIA (SAIL) SIME DARBY BHD FORTESCUE METALS GROUP LTD ANGANG STEEL CO LTD WESFARMERS LTD NAN YA PLASTICS CORP CHINA STEEL CORP NEWCREST MINING LTD IOI CORP BHD FORMOSA PLASTICS CORP TATA STEEL LTD STERLITE INDUSTRIES INDIA LTD LG CORP HINDUSTAN UNILEVER LTD CAPITAL GOODS SAMSUNG ELECTRONICS HON HAI PRECISION INDUSTRY CHINA UNITED TELECOMMUNICATIONS HYUNDAI HEAVY INDUSTRIES LARSEN & TOUBRO CHINA YANGTZE POWER CO LTD CHINA RAILWAY GROUP LTD CHINA STATE SHIPBUILDING CO LTD LG ELECTRONICS INC DOOSAN HEAVY INDUSTRIES KEPPEL CORP LTD LEIGHTON HLDGS LTD CITIC PACIFIC LTD CHINA COMMUNICATIONS CONSTRUCTION FOXCONN INTERNATIONAL HLDGS ANHUI CONCH CEMENT CO LTD HYUNDAI ENGINEERING & CONSTRUCTION CHEUNG KONG INFRASTRUCTURE GMR INFRASTRUCTURE LTD GS ENGINEERING CONSUMER DURABLES SAIC MOTOR CORP LTD HYUNDAI MOTOR CO LTD PT ASTRA INTERNATIONAL INC GUANGDONG MIDEA ELECTRIC APPLIANCE MARUTI SUZUKI INDIA LTD BAJAJ AUTO LTD JARDINE CYCLE & CARRIAGE LTD FAW CAR CO LTD MAHINDRA & MAHINDRA DENWAY MOTORS LTD QINGDAO HAIER COMPANY LTD KIA MOTORS CORP HERO HONDA BOSCH LTD LEE & MAN PAPER MANUFACTURING LTD TIANJIN FAW XIALI AUTOMOBILE CO SINOTRUK (HONG KONG) LTD DONGFENG AUTOMOBILE CO LTD XINJIANG GUANGHUI INDUSTRY CO LTD YULON MOTOR COMPANY CONSUMER NON-DURABLES RELIANCE INDUSTRIES LTD KWEICHOW MOUTAI DISTILLERY GROUP YIBIN WULIANGYE CO LTD ITC LTD FORMOSA CHEMICAL & FIBRE KT&G CORP FOSTER’S GROUP LTD LUZHOU LAOJIAO CO LTD GOLDEN AGRI-RESOURCES LTD FAR EASTERN TEXTILE CO TINGYI (CAYMAN ISLN) HLDG CO COCA-COLA AMATIL LTD COSCO CORP LTD YOUNGOR GROUP CO LTD DAIRY FARM INTERNATIONAL GREE ELECTRICAL APPLIANCES INC UNILEVER INDONESIA TBK PT NORTHEAST SECURITIES CO LTD PT ASTRA AGRO LESTARI TBK UNI-PRESIDENT ENTERPRISES CO CONSUMER SERVICES HUTCHISON WHAMPOA LTD WOOLWORTHS LTD HAITONG SECURITIES CO LTD JARDINE STRATEGIC HLDGS LTD WIPRO LTD ESPRIT HLDGS LTD BRAMBLES LTD LI & FUNG LTD SUNING APPLIANCE CO LTD SHINSEGAE CO LTD(P) TENCENT HLDGS LTD SWIRE PACIFIC LTD LOTTE SHOPPING CO SAMSUNG CORP SHANGRI-LA ASIA LTD GENTING BERHAD CROWN LTD TABCORP HLDGS LTD GOME ELECTRICAL APPLIANCES HLDG SHENZHEN OVERSEAS CHINESE TOWN H ENERGY PETROCHINA CO LTD CHINA PETROLEUM & CHEMICAL ‘H’ BHP BILLITON LTD CNOOC LTD OIL & NATURAL GAS CORP NTPC LTD WOODSIDE PETROLEUM LTD PTT PUBLIC COMPANY LTD RELIANCE PETROLEUM LTD
Thomson First Call Real Time Earnings Estimates database features more than 200 data items, including current and previous individual earnings estimates, recommendations, growth rates and Thomson First Call consensus estimates. The database covers over 17,000 companies in 60 countries and is updated by analysts from more than 770 leading brokerage firms worldwide as they make revisions. Thomson First Call Research Direct provides institutional-quality research and quantitative forecast measures for more than 34,000 companies in over 130 countries. The global information originates from 800 contributing firms, corporate documents and public filings. The breadth and depth of Thomson First Calls content offerings are unparalleled in the industry as we now offer integrated access to combined First Call and I/B/E/S research and data. The Edge/Thomson First Call Earnings Table provides only a brief summary of the detailed Thomson First Call data available in real-time on Singapore equities. For more information readers are invited to contact Thomson First Call at the numbers below or visit the company website. Thomson First Call has offices throughout five continents, covering major markets around the globe, including New York, Boston, Toronto, Sao Paulo, London, Paris, Frankfurt, Tokyo, Hong Kong, Singapore, Sydney, Seoul and Mumbai. Thomson First Call is part of Thomson Financial, a US$2 billion provider of information and technology solutions to the worldwide financial community.
COUNTRY NAME
MARKET CAP (US$ MIL)
CURRENCY
PRICE (LATEST)
EPS FY1 MEAN
EPS FY1 P/E
Australia Korea China China China Taiwan India Malaysia Australia China Australia Taiwan Taiwan Australia Malaysia Taiwan India India Korea India
57,828.83 49,978.83 42,299.87 39,690.93 27,361.28 26,008.27 25,188.15 22,443.35 21,488.65 20,994.94 20,517.83 18,358.61 17,324.06 16,016.34 15,783.64 15,775.05 14,848.78 14,582.02 12,460.18 11,999.10
AUD KRW CNY CNY CNY TWD INR MYR AUD CNY AUD TWD TWD AUD MYR TWD INR INR KRW INR
136.20 543,000.00 17.29 31.77 19.99 87.70 243.35 12.00 8.25 24.44 40.50 75.10 47.00 38.00 8.30 86.00 811.05 821.40 68,400.00 219.90
8.05 46,850.96 0.82 0.89 0.83 7.42 18.65 0.57 -0.04 1.27 1.85 7.79 4.52 1.14 0.33 8.26 100.87 58.08 4,308.05 9.52
16.91 11.59 21.01 35.72 23.96 11.82 13.05 20.95 — 19.20 21.87 9.64 10.40 33.37 25.03 10.42 8.04 14.14 15.88 23.11
Korea Taiwan China Korea India China China China Korea Korea Singapore Australia Hong Kong Hong Kong Hong Kong China Korea Hong Kong India Korea
89,880.20 38,729.79 31,655.72 30,809.18 26,568.19 23,142.32 23,066.97 16,835.12 15,804.75 14,815.41 12,537.38 12,458.20 11,936.91 11,815.38 11,744.67 10,100.63 10,066.90 9,081.33 8,137.19 8,049.09
KRW TWD CNY KRW INR CNY CNY CNY KRW KRW SGD AUD HKD CNY HKD CNY KRW HKD INR KRW
578,000.00 192.00 10.69 384,000.00 3,630.95 17.60 9.66 181.88 103,500.00 134,000.00 11.10 48.20 42.35 19.10 12.98 63.80 86,000.00 31.40 178.35 149,500.00
46,350.15 11.74 0.23 24,173.58 87.39 0.57 0.16 4.59 7,704.36 2,584.67 0.79 2.18 2.95 0.39 0.89 1.57 2,925.59 2.22 1.08 7,847.27
12.47 16.35 47.24 15.89 41.55 31.01 60.75 39.60 13.43 51.84 14.11 22.10 14.36 48.90 14.59 40.55 29.40 14.17 165.63 19.05
China Korea Indonesia China India India Singapore China India Hong Kong China Korea India India Hong Kong China Hong Kong China China Taiwan
17,251.59 15,691.18 12,452.02 8,207.49 6,024.36 5,518.50 5,154.39 4,831.57 4,056.12 4,003.28 3,872.69 3,614.35 3,604.93 3,277.02 3,195.77 2,850.28 2,644.68 2,165.41 2,156.08 2,041.62
CNY KRW IDR CNY INR INR SGD CNY INR HKD CNY KRW INR INR HKD CNY HKD CNY CNY TWD
18.85 67,600.00 27,950.00 46.60 832.10 2,176.40 20.96 21.25 658.65 4.15 20.71 9,860.00 720.40 4,080.05 21.90 12.79 9.06 7.75 17.82 43.10
0.76 7,696.75 1,483.23 1.33 65.74 128.43 1.36 0.38 66.53 0.30 0.52 236.41 44.05 170.40 1.33 0.20 0.55 0.28 0.45 —
24.72 8.78 18.84 35.09 12.66 16.95 15.40 56.07 9.90 13.61 40.06 41.71 16.36 23.94 16.47 64.60 16.59 27.90 39.22 —
India China China India Taiwan Korea Australia China Singapore Taiwan Hong Kong Australia Singapore China Hong Kong China Indonesia China Indonesia Taiwan
94,258.58 25,339.41 19,329.84 19,046.44 13,800.31 11,990.41 9,608.24 8,521.65 8,303.49 7,427.50 7,342.38 6,734.47 6,687.66 6,566.61 6,519.43 6,102.76 5,751.68 5,638.50 5,606.14 5,221.45
INR CNY CNY INR TWD KRW AUD CNY USD TWD USD AUD SGD CNY USD CNY IDR CNY IDR TWD
2,587.55 192.18 36.45 201.75 77.90 80,700.00 5.38 70.00 0.83 51.70 1.31 9.88 4.20 21.11 4.84 52.32 6,850.00 38.58 32,350.00 45.80
101.28 2.35 0.44 8.40 8.40 4,832.78 0.37 0.80 0.03 2.34 0.03 0.55 0.23 0.90 0.19 1.33 272.09 2.22 1,158.71 —
25.55 81.72 82.93 24.03 9.27 16.70 14.37 87.83 24.06 22.06 37.58 17.91 18.18 23.57 26.16 39.33 25.18 17.37 27.92 —
Hong Kong Australia China Hong Kong India Hong Kong Australia Hong Kong China Korea Hong Kong Hong Kong Korea Korea Hong Kong Malaysia Australia Australia Hong Kong China
41,078.89 33,877.95 24,644.38 17,122.68 16,103.78 16,086.98 13,806.05 13,060.38 12,989.24 11,627.90 11,439.26 10,895.03 10,056.72 9,730.11 8,576.90 8,184.13 7,625.61 7,415.98 7,254.28 6,951.33
HKD AUD CNY USD INR HKD AUD HKD CNY KRW HKD HKD KRW KRW USD MYR AUD AUD HKD CNY
75.10 30.01 42.88 15.82 439.90 100.90 10.50 29.50 64.50 584,000.00 49.85 92.75 328,000.00 59,000.00 2.98 7.10 12.06 15.20 17.24 42.85
7.82 1.32 1.32 1.04 22.34 5.25 0.50 0.95 0.90 29,343.52 0.86 6.59 25,624.48 2,935.59 0.09 0.42 0.58 0.97 0.45 0.64
9.60 22.78 32.59 15.14 19.69 19.20 20.92 31.14 71.84 19.90 58.00 14.08 12.80 20.10 34.68 16.81 20.82 15.65 38.12 66.51
China China Australia Hong Kong India India Australia Thailand India
510,785.21 167,722.81 124,304.51 76,774.14 55,651.96 41,811.04 36,639.56 29,164.97 18,657.44
CNY CNY AUD CNY INR INR AUD THB INR
22.58 17.17 39.85 12.40 1,038.30 202.35 57.27 334.00 165.45
0.79 0.72 2.91 0.71 100.92 9.18 2.79 34.91 -0.03
28.45 23.94 13.71 17.50 10.29 22.05 20.53 9.57 —
Through the widest range of products and services in the industry, Thomson Financial helps clients in more than 70 countries make better decisions, be more productive and achieve superior results. Thomson Financial is part of The Thomson CORP (www. thomson. com/financial/), a leading global provider of integrated information solutions for business and professional customers. The CORP reported 2000 revenues of approximately US$6 billion and its common shares are listed on the Toronto and London stock exchanges (TSE: TOC). For more information on Thomson Financial, visit www.thomsonfinancial.com. Glossary to First Call • Net Profit Estimates Up Last 1 Month: The number of brokers who have revised upward their net profit estimates in the last one month • Net Profit Estimates Down Last 1 Month: The number of brokers who have revised downward their net profit estimates in the last one month • Last Price: The last quoted price corresponding to the last update of the service • 52 Week High: Highest share price during the 52 weeks leading up to the last update adjusted for capital changes • EPS FY1: The reported earnings per share (EPS) or the arithmetic average of all the estimates • EPS FY2: The reported EPS or the arithmetic average of all the estimates • PE FY1: Price-Earnings Ratio (price divided by EPS) COMPANY LONG NAME
COUNTRY NAME
CHINA SHENHUA ENERGY CO LTD PT BUMI RESOURCES TBK INDIAN OIL CORP LTD PTT EXPLORATION & PRODUCTION PCL HUANENG POWER INTERNATIONAL INC CHINA OILFIELD SERVICES LTD SK ENERGY CO LTD SUZLON ENERGY LTD CAIRN INDIA OIL & GAS DEVELOPMENT CO LTD WORLEYPARSONS LTD FINANCE INDUSTRIAL & COMMERCIAL BANK OF CHINA LIFE INSURANCE CO LTD COMMONWEALTH BANK OF AUSTRALIA CHINA MERCHANTS BANK CO LTD PING AN INSURANCE COMPANY NATIONAL AUSTRALIA BANK LTD SUN HUNG KAI PROPERTIES LTD WESTPAC BANKING CORP AUSTRALIA & NEW ZEALAND BANKING CHINA PACIFIC INSURANCE GROUP CO HANG SENG BANK LTD DLF LTD CHEUNG KONG HLDGS LTD BANK OF CHINA LTD CHINA CITIC BANK WESTFIELD GROUP ICICI BANK LTD INDUSTRIAL BANK CO LTD CITIC SECURITIES CO LTD STATE BANK OF INDIA HEALTHCARE WILMAR INTERNATIONAL LTD CSL LTD SUN PHARMACEUTICALS INDS LTD SONIC HEALTHCARE LTD HENGAN INTL GROUP CO LTD RANBAXY LABORATORIES LTD CIPLA LTD GLENMARK PHARMACEUTICALS LTD JIANGSU HENRUI MEDICINE CO LTD COCHLEAR LTD HARBIN PHARMACEUTICAL GROUP SHANGHAI FOSUN INDUSTRIAL CO LTD YUNNAN BAIYAO GROUP CO LTD SYMBION HEALTH LTD SHANDONG DONG-E-EJIAO COMPANY LTD DR REDDY’S LABORATORIES LTD DIVI’S LABORATORIES LTD GLAXOSMITHKLINE PHARMACEUTICALS DABUR INDIA LTD BEIJING DOUBLE CRANE PHARMACEUTI PUBLIC UTILITIES CHINA MOBILE LTD TELSTRA CORP LTD SINGAPORE TELECOMMUNICATIONS BHARTI AIRTEL LTD CHINA UNICOM RELIANCE COMMUNICATION LTD BHARAT HEAVY ELECTRICALS CHUNGHWA TELECOM CO LTD KOREA ELECTRIC POWER (KEPCO) TELEKOMUNIKASI INDONESIA TBK PT CHINA NETCOM GROUP CORP HK LTD CLP HLDGS LTD DATANG INTERNATIONAL POWER GENER HONG KONG & CHINA GAS CO SK TELECOM CO LTD PHILIPPINE LONG DISTANCE TEL KT CORP HONGKONG ELECTRIC HLDGS TELEKOM MALAYSIA TENAGA NASIONAL TECHNOLOGY TAIWAN SEMICONDUCTOR MANUFACTURING INFOSYS TECHNOLOGIES LTD TATA CONSULTANCY SERVICES LTD LG PHILIPS LCD AU OPTRONICS CORP HIGH TECH COMPUTER CORP HYNIX SEMICONDUCTOR MEDIATEK INCORPORATED ASUSTEK COMPUTER INC XINJIANG GOLDWIND SCI & TECH CO CHI MEI OPTOELECTRONICS CORP INNOLUX DISPLAY CORP UNITED MICROELECTRONICS CORP SATYAM COMPUTER SERVICES LTD LENOVO GROUP LTD SILICONWARE PRECISION INDS ADVANCED SEMICONDUCTOR ENGINEERING FOXCONN TECHNOLOGY CO LTD HCL TECHNOLOGIES LTD COMPUTERSHARE LTD TRANSPORTATION CHINA COSCO HLDGS CO LTD DAQIN RAILWAY COMPANY LTD SHANGHAI INTL PORT GROUP CO LTD MTR CORP AIR CHINA LTD SINGAPORE AIRLINES LTD CHINA MERCHANTS HLDGS INTERNATIONAL CHINA SHIPPING DEVELOPMENT CO LTD MISC BERHAD CHINA SHIPPING CONTAINER LINES CHINA SOUTHERN AIRLINES CO LTD CATHAY PACIFIC AIRWAYS SHANGHAI INTERNATIONAL AIRPORT QANTAS AIRWAYS LTD MUNDRA PORT SPECIAL ECONOMIC ZON CHINA EASTERN AIRLINES ‘H’ TATA MOTORS LTD GUANGSHEN RAILWAY ‘H’ NWS HLDGS LTD MACQUARIE AIRPORTS
• PE FY2: Price-Earnings Ratio (price divided by EPS) • No of Brokers’ Estimates: The number of brokers’ estimates used to calculate the consensus estimates Disclaimer In no event will Thomson First Call or The Edge be responsible for special, indirect, incidental or consequential damages that may be incurred or experienced on account of entering into or relying on the data. Thomson First Call acts solely as a transmitter of information provided by certain brokers, certain CORPs and certain other sources. Neither Thomson First Call, any source, nor any third party that Thomson First Call contracts to effect transmission, makes any warranty of merchantability or fitness for a particular purpose with respect to the Thomson First Call financial information. Nor shall any of them be liable for any error or omission in the information supplied to The Edge or its subscribers or the accuracy, completeness or timeliness of the data.
For enquiries, call: Hong Kong (852) 2524 0077
Seoul
(822) 711 5527
Singapore
(65) 6879 4122
Mumbai
(91) 22 204 6905
Sydney
(612) 9233 4855
Tokyo
(813) 5218 6648
MARKET CAP (US$ MIL)
CURRENCY
PRICE (LATEST)
EPS FY1 MEAN
EPS FY1 P/E
Hong Kong Indonesia India Thailand China China Korea India India Pakistan Australia
17,833.92 16,869.33 16,298.22 15,844.94 15,238.89 13,499.52 12,787.53 11,392.53 10,040.68 8,886.73 8,761.96
HKD IDR INR THB CNY CNY KRW INR INR PKR AUD
40.90 7,900.00 545.45 155.00 12.12 32.64 131,000.00 303.70 225.30 129.15 40.94
1.26 314.21 85.93 10.96 0.51 0.48 13,467.88 8.08 1.52 12.88 1.48
32.48 25.14 6.35 14.15 23.82 67.61 9.73 37.59 148.27 10.02 27.73
China China Australia China China Australia Hong Kong Australia Australia China Hong Kong India Hong Kong Hong Kong China Australia India China China India
229,295.02 112,466.84 56,765.60 53,569.60 48,024.58 47,411.03 45,665.65 42,858.18 42,045.93 38,209.56 35,689.53 35,241.61 35,184.12 33,161.48 33,001.06 32,583.39 30,561.50 30,357.64 29,377.66 29,110.47
CNY HKD AUD CNY CNY AUD HKD AUD AUD CNY HKD INR HKD CNY CNY AUD INR CNY CNY INR
6.54 42.10 46.41 31.84 71.82 31.33 138.80 24.55 23.55 35.52 145.50 824.90 118.40 3.12 8.87 18.05 1,113.75 43.46 63.43 2,082.55
0.25 1.43 3.73 1.00 2.24 3.01 5.58 2.05 2.18 0.85 8.31 40.04 11.21 0.21 0.20 1.06 38.40 1.69 3.56 117.16
26.62 29.42 12.44 31.95 32.06 10.40 24.87 11.96 10.81 41.69 17.50 20.60 10.56 14.84 43.84 17.01 29.01 25.75 17.84 17.78
Singapore Australia India Australia Hong Kong India India India China Australia China China China Australia China India India India India China
22,078.33 19,887.16 5,987.53 4,574.87 4,379.76 4,080.33 3,925.90 3,199.29 3,112.89 2,889.96 2,888.99 2,841.11 2,587.96 2,465.82 2,334.18 2,280.62 2,244.74 2,208.16 2,173.86 1,987.86
SGD AUD INR AUD HKD INR INR INR CNY AUD CNY CNY CNY AUD CNY INR INR INR INR CNY
4.86 38.88 1,192.65 14.76 29.90 436.35 201.55 513.60 51.69 55.90 16.65 16.43 38.27 4.10 31.90 541.55 1,387.55 1,040.30 100.40 32.26
0.13 1.27 51.00 0.75 0.84 19.54 8.79 23.14 0.88 2.15 0.40 0.35 0.65 0.18 0.40 28.85 52.42 47.41 3.97 0.64
37.35 30.52 23.39 19.58 35.45 22.33 22.94 22.19 58.89 25.95 41.21 47.01 58.56 23.40 79.68 18.77 26.47 21.94 25.31 50.41
Hong Kong Australia Singapore India Hong Kong India India Taiwan Korea Indonesia China Hong Kong China Hong Kong Korea Philippines Korea Hong Kong Malaysia Malaysia
308,180.78 57,016.52 44,397.09 40,029.15 31,941.77 30,281.53 27,759.30 23,591.45 23,434.41 22,407.39 21,579.12 19,264.73 19,097.43 17,959.08 16,757.32 13,501.17 13,465.96 12,459.04 12,311.80 12,272.27
CNY AUD SGD INR CNY INR INR TWD KRW IDR HKD HKD CNY HKD KRW PHP KRW HKD MYR MYR
110.11 4.93 3.92 841.65 16.77 585.45 2,262.90 76.10 34,600.00 10,100.00 25.20 62.35 16.15 23.10 195,500.00 2,895.00 46,350.00 45.50 11.50 9.10
4.14 0.30 0.23 34.78 0.56 24.31 66.33 5.08 3,103.89 674.70 1.66 4.53 0.31 1.21 20,782.73 187.84 4,214.09 3.31 0.71 0.82
26.59 16.35 16.83 24.20 29.83 24.08 34.11 14.98 11.15 14.97 15.16 13.77 51.73 19.16 9.41 15.41 11.00 13.76 16.24 11.08
Taiwan India India Korea Taiwan Taiwan Korea Taiwan Taiwan China Taiwan Taiwan Taiwan India Hong Kong Taiwan Taiwan Taiwan India Australia
53,892.98 23,164.33 21,524.28 16,639.52 15,366.68 12,239.69 12,097.00 11,881.74 10,520.60 10,363.23 9,260.47 8,239.14 7,923.78 7,338.75 6,192.77 5,320.43 5,144.32 4,952.46 4,799.20 4,720.38
TWD INR INR KRW TWD TWD KRW TWD TWD CNY TWD TWD TWD INR HKD TWD TWD TWD INR AUD
63.60 1,617.40 877.70 44,050.00 61.30 666.00 24,950.00 356.00 88.00 74.18 42.55 93.40 18.70 437.10 5.39 54.00 29.45 203.50 288.30 9.14
4.05 81.00 52.15 3,651.71 6.81 47.36 738.64 22.83 7.07 0.85 5.00 5.74 0.87 25.37 0.34 5.71 2.89 12.14 19.18 0.57
15.72 19.97 16.83 12.06 9.00 14.06 33.78 15.59 12.45 87.79 8.51 16.27 21.38 17.23 15.75 9.45 10.19 16.77 15.03 16.00
China China China Hong Kong China Singapore Hong Kong China Malaysia China China Hong Kong China Australia India China India China Hong Kong Australia
40,215.83 36,221.79 23,401.19 21,417.45 20,715.75 13,332.06 13,119.89 10,286.13 10,246.02 10,084.15 8,829.28 8,421.70 8,224.17 8,178.41 7,483.92 6,864.63 6,834.12 6,269.73 6,094.57 5,990.25
CNY CNY CNY HKD CNY SGD HKD CNY MYR CNY CNY HKD CNY AUD INR CNY INR CNY HKD AUD
37.70 19.98 7.98 29.75 18.90 15.80 42.50 36.27 8.85 9.10 19.75 16.66 30.55 4.63 745.35 14.89 707.45 7.94 23.40 3.75
1.97 0.46 0.17 1.13 0.32 1.62 1.36 1.37 0.66 0.29 0.48 1.49 0.91 0.56 8.47 -0.05 50.11 0.23 2.11 0.19
19.15 43.37 46.71 26.41 58.33 9.77 31.26 26.44 13.44 31.93 41.55 11.20 33.47 8.23 88.03 — 14.12 34.22 11.11 19.36
THEEDGE SINGAPORE | MARCH 3, 2008 • 35
CAPITAL COMPANY
PRICE
MARKET CAPITALISATION ($ MIL)
RECOMMENDATION RECOMMENDATION CONSENSUS 75 DAYS CONSENSUS 75 DAYS AS OF 26/02/08 AS OF 04/12/07
ADVANCE SCT LTD 0.64 ALLCO COMMERCIAL REAL ESTATE INVESTMENT TRUST 0.86 ALLGREEN PROPERTIES 1.23 AMARA HLDGS LTD 0.57 AQUA-TERRA SUPPLY CO LTD 0.40 ARMSTRONG INDUSTRIAL CORP 0.31 ASCENDAS INDIA TRUST 1.08 ASCENDAS REAL ESTATE 2.29 ASCOTT RESIDENCE TRUST 1.41 ASIA ENTERPRISES HLDGS LTD 0.43 ASIA ENVIRONMENT HLDGS LTD 0.60 ASIA PACIFIC BREWERIES 13.40 ASIAPHARM 0.70 ASL MARINE HLDGS LTD 1.28 AUSGROUP LTD 1.10 AZTECH SYSTEMS LTD 0.25 BANYAN TREE HLDGS LTD 1.31 BEAUTY CHINA HLDGS LTD 1.10 BENG KUANG MARINE LTD 0.25 BIOSENSORS INTERNATIONAL GROUP LTD 0.89 BIO-TREAT TECHNOLOGY 0.63 BOUSTEAD SPORE LTD 2.30 BROADWAY INDUSTRIAL GROUP 0.85 BUKIT SEMBAWANG ESTATES 9.30 C&G INDUSTRIAL HLDGS LTD 0.37 CAMBRIDGE INDUSTRIAL TRUST 0.69 CAPITACOMMERCIAL TRUST 2.18 CAPITALAND LTD 6.30 CAPITAMALL TRUST 3.30 CAPITARETAIL CHINA TRUST 1.62 CDL HOSPITALITY TRUSTS 2.20 CH OFFSHORE LTD 0.63 CHARTERED SEMICONDUCTOR 0.76 CHINA AUTO ELECTRONICS GROUP LTD 0.28 CHINA DAIRY GROUP LTD 0.27 CHINA ENERGY LTD 0.94 CHINA FISHERY GROUP LTD 1.72 CHINA MILK PRODUCTS GROUP LTD 0.88 CHINA SKY CHEMICAL FIBRE CO LTD 1.53 CHINA SPORTS INTERNATIONAL LTD 1.23 CHINA SUNSINE CHEMICAL HLDGS LTD 0.27 CHINA XLX FERTILISER LTD 0.83 CITY DEVELOPMENTS LTD 11.66 CITY SPRING INFRASTRUCTURE TRUST 0.78 COMFORTDELGRO CORP LTD 1.63 COSCO CORP SINGAPORE LTD 4.28 CREATIVE TECHNOLOGY LTD 7.00 CSE GLOBAL LTD 0.97 DATACRAFT ASIA LTD 1.12 DBS GROUP HLDG LTD 17.94 DELONG HLDGS LTD 3.13 EOC LTD 19.90 EPURE INTERNATIONAL LTD 1.98 EU YAN SANG INTL LTD 0.55 EZRA HLDGS LTD 2.31 FEDERAL INTL 2000 LTD 0.54 FERROCHINA LTD 1.57 FIBRECHEM TECHNOLOGIES LTD 0.83 FIRST REAL ESTATE INVESTMENT TRUST (INDONESIA) 0.74 FIRST SHIP LEASE TRUST 1.12 FJ BENJAMIN HLDGS LTD 0.54 FORTUNE REAL ESTATE INV TRUST 5.60 FRASER & NEAVE LTD 4.95 FRASERS CENTREPOINT TRUST 1.30 GALLANT VENTURE LTD 0.70 GEMS TV HLDGS LTD 0.25 GOLDEN AGRI RESSOURCES 1.17 GOODPACK 1.65 GP BATTERIES INTL LTD 0.95 GREAT EASTERN HLDGS LTD 16.20 GUOCOLAND LTD 4.07 HG METAL MANUFACTURING LTD 0.35 HIAP SENG ENGINEERING LTD 0.40 HI-P INTERNATIONAL LTD 0.50 HO BEE INVESTMENT LTD 1.29 HONG LEONG ASIA LTD 2.99 HONG LEONG FINANCE LTD 3.80 HONGKONG LAND HLDGS LTD 4.20 HOTEL PROPERTIES LTD 3.19 HOUR GLASS LTD 0.91 HUAN HSIN HLDGS LTD 0.58 HUPSTEEL LTD 0.32 HYFLUX 3.33 INDOFOOD AGRI RESOURCES LTD 2.77 INTER ROLLER ENGINEERING 0.58 JARDINE CYCLE & CARRIAGE LTD 21.60 JARDINE MATHESON HLDGS LTD 27.86 JARDINE STRATEGIC HLDGS LTD 15.04 JAYA HLDG LTD 1.38 JIUTIAN CHEMICAL GROUP LTD 0.23 JURONG TECHNOLOGIES IND 0.40 K REAL ESTATE INVESTMENT TRUST ASIA 1.63 KEPPEL CORP LTD 10.60 KEPPEL LAND LTD 5.96 LIAN BENG GROUP 0.56 LIZHONG WHEEL GROUP LTD 0.63 LMA INTERNATIONAL 0.25 LONGCHEER HLDGS LTD 0.46 LUZHOU BIO-CHEM TECHNOLOGY LTD 0.24 MACARTHURCOOK INDUSTRIAL REAL ESTATE INVESTMENT TR 1.00 MACQUARIE MEAG PRIME REAL ESTATE INVESTMENT TRUST 1.26 MAN WAH HLDGS LTD 0.26 MANDARIN ORIENTAL INTL 1.90 MAPLETREE LOGISTICS TRUST 0.94 MEIBAN GROUP LTD 0.41 MICRO-MECHANICS (HLDGS) LTD 0.68 MIDAS HLDGS LTD 1.38 MOBILEONE LTD 2.01 NEPTUNE ORIENT LINES LTD 3.45 NERA TELECOM 0.41 NOBLE GROUP LTD 1.95 OLAM INTERNATIONAL LTD 2.56 OSIM INTL 0.38 OVERSEAS-CHINESE BANKING CORP 7.57 PACIFIC ANDES HLDG 0.52 PAN UNITED CORP 0.69 PARKWAY HLDGS LTD 2.84 PARKWAY LIFE REAL ESTATE INVESTMENT TRUST 1.18 PEOPLE’S FOOD HLDGS 0.98 PETRA FOODS LTD 1.28 RAFFLES EDUCATION 2.70 RAFFLES MEDICAL GROUP 1.32 RICKMERS MARITIME TRUST 1.09 ROBINSON & CO LTD 6.40 ROTARY ENGRG LTD 1.00 SAMUDERA SHIPPING LINE 0.34 SC GLOBAL DEVT LTD 1.79 SEMBCORP INDUSTRIES LTD 5.00 SEMBCORP MARINE LTD 3.65 SIA ENGINEERING CIE 3.92 SILVERLAKE AXIS LTD 0.55 SINCERE WATCH LTD 2.38 SING HLDGS LTD 0.53 SINGAPORE AIRLINES LTD 15.74 SINGAPORE AIRPORT TERMINAL 2.40 SINGAPORE EXCHANGE LTD 8.76 SINGAPORE FOOD INDUSTRIES 0.79 SINGAPORE LAND 6.95 SINGAPORE PETROLEUM CO LTD 7.15 SINGAPORE POST LTD 1.12 SINGAPORE PRESS HLDG LTD 4.40 SINGAPORE SHIPPING CORP 0.40 SINGAPORE TECH ENGINEERING 3.62 SINGAPORE TELECOM 3.89 SINO ENVIRONMENT TECHNOLOGY GROUP LTD 1.41 SINOMEM TECHNOLOGY LTD 0.81 SMRT 1.74 SNP CORP LTD 1.16 SP CHEMICALS LTD 0.71 SSH CORP LTD 0.31 STARHUB LTD 2.96 STATS CHIPPAC LTD 1.24 STRAITS ASIA RESOURCES LTD 3.89 SUNNINGDALE TECH LTD 0.20 SUNTEC REAL ESTATE INVESTMENT TRUST 1.60 SWIBER HLDGS LTD 2.53 SWISSCO INTERNATIONAL LTD 0.86 TAT HONG HLDGS 2.31 THE ASCOTT LTD 1.84 THOMSON MEDICAL CENTRE LTD 0.61 TIONG WOON CORP HLDG 0.75 TOTAL ACCESS COMMUNICATION PCL 1.36 UNISTEEL TECHNOLOGY 1.50 UNITED ENGINEERS 3.68 UNITED OVERSEAS BANK LTD 18.74 UOL GROUP LTD 4.02 VENTURE CORP LTD 10.78 VERIGY LTD 19.99 WHEELOCK PROPERTIES (SINGAPORE) LTD 2.01 WILMAR INTERNATIONAL LTD 5.00 WING TAI HLDGS LTD 2.20 YANLORD LAND GROUP LTD 2.60 YANTAI RAFFLES SHIPYARD PTE LTD 16.00 YELLOW PAGES (SINGAPORE) LTD 0.87 YONGNAM HLDGS 0.25
201.10
1.00
604.65 1,956.16 331.74 140.40 152.69 812.22 3,035.52 855.57 119.63 212.70 3,459.24 344.93 380.37 433.35 102.86 997.43 376.60 94.25 938.95 565.99 588.74 175.23 1,003.46 170.82 551.83 3,020.19 17,681.96 5,501.18 999.66 1,812.90 444.21 1,942.86 162.00 118.70 1,146.70 1,345.18 649.97 1,213.89 414.33 132.76 835.00 10,602.36 382.17 3,398.15 9,579.54 598.18 491.64 498.83 27,235.61 1,674.22 2,207.97 851.40 198.24 1,353.28 170.10 1,254.70 754.21
FACTSET ESTIMATES CONSENSUS SINGAPORE
NO OF ESTIMATES
P/E 2008 (X) (75 DAYS)
2008 EPS (75 DAYS)
2008 EPS (45 DAYS)
2008 EPS GROWTH (%)
6-MONTH PERFORMANCE (%)
6-MONTH PERFORMANCE RELATIVE TO STI (%)
1.00
2
5.66
0.11
0.11
77.36
-22.42
-14.26
1.25 1.93 1.50 1.00 1.00 1.33 1.50 1.21 1.25 1.50 3.00 1.83 1.00 1.00 2.50 1.50 1.25 1.25 1.13 1.75 1.00 1.25 1.25 1.25 1.13 1.46 1.71 1.20 2.50 1.31 2.00 2.00 1.00 1.50 1.00 1.50 1.00 1.30 1.07 1.25 1.25 1.50 1.50 1.45 1.25 1.90 1.33 1.30 1.47 1.80 1.50 1.00 2.00 1.08 1.00 1.13 1.10
1.25 1.83 1.17 1.50 1.13 1.17 1.68 1.08 1.50 1.25 3.00 1.50 1.00 1.00 1.33 1.00 1.13 1.00 1.25 1.83 1.25 1.25 1.17 1.25 1.25 1.44 1.69 1.44 1.50 1.25 1.50 2.18 1.00 1.50 1.30 1.50 1.25 1.25 1.00 1.50 1.25 1.50 1.83 1.45 1.10 2.50 1.17 1.17 1.30 1.50 1.00 1.13 2.00 1.07 1.00 1.33 1.13
5 6 1 1 1 3 6 6 2 1 1 3 2 2 2 1 2 2 3 2 1 2 2 2 3 11 16 12 2 8 1 18 1 1 1 3 1 5 7 2 2 11 2 12 11 4 3 4 19 5 1 3 1 6 1 4 5
12.29 10.65 20.54 7.02 8.24 15.43 15.90 21.12 5.40 8.45 22.71 12.24 5.45 8.96 7.42 19.28 10.11 11.31 NA 8.26 12.11 4.43 6.84 4.23 12.55 21.80 19.46 23.23 22.93 22.00 18.20 46.69 3.80 11.74 9.88 8.25 5.50 8.39 10.25 1.40 11.03 14.95 NA 13.58 17.61 35.60 8.90 14.65 10.94 8.91 11.17 16.45 11.96 13.75 7.94 5.25 7.69
0.07 0.12 0.03 0.06 0.04 0.07 0.14 0.07 0.08 0.07 0.59 0.06 0.24 0.12 0.03 0.07 0.11 0.02 -0.01 0.08 0.19 0.19 1.36 0.09 0.06 0.10 0.32 0.14 0.07 0.10 0.03 0.02 0.08 0.02 0.10 0.21 0.16 0.18 0.12 0.19 0.08 0.78 0.00 0.12 0.24 0.20 0.11 0.08 1.64 0.35 1.78 0.12 0.05 0.17 0.07 0.30 0.11
0.07 0.15 0.03 0.06 0.04 0.07 0.14 0.07 0.08 0.07 0.59 0.05 0.24 0.12 0.03 0.07 0.11 0.02 -0.01 0.08 0.19 0.19 0.75 0.09 0.06 0.10 0.33 0.14 0.07 0.10 0.03 0.02 0.08 0.02 0.10 0.21 0.16 0.18 0.12 0.19 0.08 0.84 0.00 0.12 0.24 0.29 0.11 0.08 1.64 0.30 1.78 0.12 0.05 0.16 0.07 0.28 0.11
16.67 18.89 64.71 46.91 85.00 40.00 8.91 11.54 12.78 42.84 11.32 24.43 20.66 48.55 -21.38 -28.45 20.13 46.92 R+ 16.88 5.56 36.48 79.20 26.70 0.00 17.35 -50.82 9.54 6.24 25.00 -60.80 R+ 120.59 -14.81 116.12 24.76 60.00 19.29 36.71 148.87 14.55 20.00 R8.03 64.29 -17.40 37.51 14.45 7.96 41.85 220.60 65.79 6.98 109.69 -32.00 67.50 3.13
-14.85 -26.35 -6.50 -9.09 -24.69 -21.17 -4.18 -14.55 0.00 -1.65 0.00 26.13 -14.67 -36.05 -55.45 -35.78 -7.56 -0.68 31.85 -15.33 -4.56 18.88 -7.00 -37.07 -13.66 -16.15 -14.29 -1.79 -38.87 -1.35 -19.23 -29.82 -38.04 -34.94 -35.17 -14.00 -18.52 -20.73 11.82 -14.29 -14.36 -22.27 -22.00 -16.41 -14.40 16.67 -16.38 -5.08 -11.63 3.64 -17.08 16.47 -3.51 -12.00 -22.30 -16.49 -33.73
-5.89 -18.60 3.33 0.48 -16.77 -12.87 5.90 -5.55 10.52 8.70 10.52 39.40 -5.69 -29.32 -50.77 -29.03 2.16 9.78 45.73 -6.42 5.48 31.39 2.79 -30.45 -4.58 -7.33 -5.27 8.55 -32.43 9.04 -10.73 -22.43 -31.52 -28.09 -28.35 -4.95 -9.94 -12.38 23.58 -5.27 -5.35 -14.09 -13.79 -7.61 -5.39 28.94 -7.58 4.90 -2.33 14.55 -8.36 28.73 6.65 -2.74 -14.13 -7.70 -26.76
216.31 560.00 307.11 4,548.68 6,870.29 804.05 1,688.73 262.87 11,671.70 763.81 104.20 7,667.77 3,612.25 153.78 121.50 443.58 951.16 1,140.24 1,669.36 9,639.90 1,608.43 210.85 232.00 203.91 1,743.54 4,010.34 194.69 7,595.88 17,295.77 16,278.28 1,061.99 317.30 243.03 404.36 16,828.14 4,293.27 296.67 148.07 149.88 182.47 95.04
1.00 1.00 1.67 1.00 2.00 1.75 1.25 2.50 1.00 1.33 2.00 2.00 1.75 1.00 2.00 1.90 1.75 1.25 1.25 1.50 1.50 1.00 2.00 1.25 1.25 1.25 2.00 1.00 1.00 1.00 1.25 1.50 2.10 2.33 1.32 1.67 1.00 1.00 2.00 2.00 2.50
1.00 1.00 1.17 1.00 2.00 1.25 1.50 1.50 1.10 2.00 2.50 2.00 1.40 1.50 1.67 1.92 1.63 1.36 1.33 1.80 1.17 1.00 1.67 1.00 1.70 1.25 2.20 1.25 1.25 1.00 1.50 1.50 2.05 1.14 1.33 1.66 1.25 1.33 1.70 1.50 2.00
1 2 3 2 3 2 2 1 2 3 1 3 2 1 1 5 2 2 6 1 2 2 2 2 2 4 1 1 1 1 2 2 6 4 18 14 1 3 3 1 1
10.58 56.21 10.80 15.34 15.85 21.82 0.12 8.96 13.56 12.96 31.67 15.73 10.00 5.08 5.63 6.76 3.44 10.03 12.75 21.99 12.39 8.23 7.41 5.54 17.08 18.68 9.23 16.36 12.72 10.37 7.05 7.64 3.33 32.96 13.17 10.93 5.33 6.12 4.40 5.62 6.79
0.07 0.02 0.05 0.37 0.31 0.06 5.78 0.03 0.09 0.13 0.03 1.03 0.41 0.07 0.07 0.07 0.38 0.30 0.30 0.19 0.26 0.11 0.08 0.06 0.20 0.15 0.06 1.32 2.19 1.45 0.20 0.03 0.12 0.05 0.81 0.55 0.11 0.10 0.06 0.08 0.04
0.07 0.02 0.05 0.37 0.31 0.06 5.78 0.03 0.09 0.13 0.03 1.03 0.41 0.07 0.07 0.07 0.42 0.30 0.30 0.19 0.26 0.13 0.06 0.06 0.20 0.16 0.06 1.32 2.19 1.45 0.22 0.03 0.13 0.05 0.80 0.55 0.11 0.10 0.06 0.08 0.04
8.20 -20.22 31.58 -14.37 14.29 4.71 5,566.67 R+ 58.62 22.98 R+ -6.90 88.81 37.80 54.28 48.00 -2.61 20.35 10.43 26.49 81.66 11.42 -0.17 -0.38 391.67 50.54 -7.46 24.53 12.31 15.08 11.94 85.98 14.92 -41.87 23.39 -8.02 144.19 32.11 48.15 12.25 41.55
0.00 30.23 -3.05 5.66 -1.00 -10.35 -30.69 -56.03 123.92 -22.54 -29.10 -10.50 -9.56 9.80 -48.05 -30.56 -31.75 -3.55 4.40 7.69 -27.17 30.94 5.45 -12.89 31.10 190.05 -24.52 45.95 13.71 9.78 -22.03 -42.50 -36.92 -32.92 -15.87 -25.50 43.59 -34.03 -56.03 -22.69 -38.46
10.52 43.94 7.15 16.78 9.42 -0.91 -23.40 -51.41 147.49 -14.38 -21.64 -1.08 -0.04 21.36 -42.59 -23.25 -24.56 6.60 15.38 19.02 -19.50 44.71 16.55 -3.73 44.90 220.57 -16.57 61.30 25.68 21.33 -13.83 -36.45 -30.28 -25.86 -7.02 -17.66 58.70 -27.09 -51.41 -14.55 -31.99
260.75
1.00
1.25
1
12.50
0.08
0.08
-68.87
-13.04
-3.89
1,200.32 176.54 1,882.47 1,047.23 137.80 94.17 1,166.32 1,797.29 5,076.81 146.57 5,068.85 3,983.75 208.35 23,920.90 708.81 379.74 2,188.76 709.99 1,107.71 681.31 3,077.81 680.47 425.36 550.00 567.84 183.30 707.86 8,922.05 7,559.37 4,209.77 617.05 491.90 142.21 18,668.62 2,577.14 9,337.90 405.07 2,866.71 3,691.67 2,155.14 7,000.62 172.23 10,811.32 61,928.80 488.18 374.04 2,636.33 136.59 259.64 170.22 5,050.56 2,548.14 4,237.65 147.13 2,383.54 1,073.60 153.33 1,147.19 2,961.44 176.65 253.18 3,220.25 603.95 812.24 28,555.48 3,200.13 2,956.42 1,198.53 2,405.07 31,928.40 1,745.28 4,747.09 4,376.00 137.52 304.44
1.33 1.00 1.50 1.69 1.00 1.00 1.00 1.56 1.94 1.50 1.25 1.36 2.38 1.56 1.25 1.00 1.83 1.00 2.00 2.17 1.50 1.50 1.00 2.00 1.25 1.00 1.00 1.50 1.21 1.40 1.00 2.00 1.00 1.36 1.50 1.92 1.33 1.50 1.00 1.50 1.50 3.00 1.38 1.41 1.67 2.00 1.71 1.00 1.50 1.00 1.63 1.79 1.80 1.00 1.36 1.50 1.50 1.30 1.67 1.00 1.13 1.30 1.22 1.50 1.79 1.20 1.20 1.25 1.67 1.36 1.75 1.63 2.00 1.50 2.00
1.13 1.40 1.25 1.44 1.50 1.00 1.40 1.81 2.17 1.25 1.08 1.50 1.50 1.47 1.33 1.50 1.92 1.17 1.67 2.00 1.38 1.38 1.17 1.50 1.17 2.00 1.20 1.38 1.62 1.33 1.17 1.67 1.00 1.39 1.50 2.21 1.00 1.13 1.67 1.67 1.60 3.00 1.40 1.42 2.17 2.13 1.85 1.00 2.00 1.00 1.61 1.86 1.80 1.00 1.35 1.50 1.50 1.38 1.33 1.17 1.25 1.31 1.30 1.50 1.47 1.20 1.36 1.00 2.00 1.50 1.80 1.17 2.00 2.00 1.50
5 2 2 9 1 1 2 15 8 1 2 7 4 18 2 2 6 2 3 3 4 5 2 1 3 1 2 3 13 5 4 1 2 14 2 12 2 1 3 6 12 1 4 17 3 3 12 1 2 3 15 9 6 1 9 1 1 5 3 1 4 24 9 1 13 5 15 9 3 7 4 5 1 3 1
18.36 4.27 16.99 14.03 6.01 7.53 25.09 11.01 7.22 11.25 15.53 21.69 10.13 11.96 5.44 10.55 20.93 18.53 8.00 13.17 25.15 22.00 12.51 11.17 8.93 6.42 4.54 15.77 15.87 13.52 9.29 19.08 4.51 10.56 12.69 18.06 10.50 16.46 7.45 14.00 12.98 26.79 18.30 14.96 9.02 13.50 17.19 8.20 3.51 8.08 14.24 14.11 20.17 5.88 17.78 5.93 12.61 10.74 41.82 15.13 7.73 12.93 9.54 5.47 12.70 11.82 9.19 15.50 9.57 28.78 5.73 13.68 6.71 10.88 12.50
0.07 0.06 0.11 0.07 0.07 0.09 0.06 0.18 0.48 0.04 0.13 0.12 0.04 0.63 0.10 0.07 0.14 0.06 0.12 0.10 0.11 0.06 0.09 0.57 0.11 0.05 0.39 0.32 0.23 0.29 0.06 0.12 0.12 1.49 0.19 0.49 0.07 0.42 0.96 0.08 0.34 0.01 0.20 0.26 0.16 0.06 0.10 0.14 0.20 0.04 0.21 0.09 0.19 0.03 0.09 0.43 0.07 0.22 0.04 0.04 0.10 0.11 0.16 0.67 1.48 0.34 1.17 1.29 0.21 0.17 0.38 0.19 2.38 0.08 0.02
0.07 0.06 0.11 0.07 0.07 0.09 0.05 0.18 0.48 0.04 0.13 0.12 0.03 0.64 0.10 0.07 0.15 0.06 0.12 0.10 0.11 0.06 0.08 0.57 0.12 0.05 0.39 0.32 0.23 0.29 0.06 0.12 0.12 1.49 0.20 0.49 0.06 0.42 0.96 0.08 0.34 0.01 0.20 0.26 0.16 0.07 0.10 0.14 0.20 0.04 0.21 0.09 0.20 0.03 0.09 0.43 0.07 0.22 0.05 0.04 0.10 0.10 0.16 0.67 1.49 0.35 1.17 1.25 0.34 0.17 0.38 0.21 2.38 0.08 0.02
14.23 30.79 11.18 0.00 4.55 19.20 38.41 0.00 -1.90 20.00 22.35 38.82 135.19 -1.55 37.38 22.56 10.12 103.67 37.62 18.72 35.82 -11.83 56.81 10.40 13.89 1.92 236.82 10.43 38.46 11.54 21.92 6.08 29.12 -6.54 -1.01 7.27 7.34 29.90 -2.04 0.00 6.25 0.28 11.08 10.06 61.44 33.33 8.23 -8.72 42.23 18.18 10.53 38.75 246.92 10.59 18.25 62.89 -68.01 29.47 -39.04 33.33 34.35 38.65 29.06 140.69 7.07 60.69 9.62 -27.93 85.27 36.36 58.64 50.79 88.81 6.34 100.00
8.62 34.18 -9.95 -18.53 -25.23 0.00 4.54 -5.19 -27.52 15.71 19.63 -12.03 -35.83 -12.49 -27.08 -14.81 -29.00 0.00 -24.03 -11.72 45.16 -9.59 -31.01 40.97 -13.79 -11.69 -33.08 -6.54 -6.24 -12.89 -29.03 60.81 -37.65 -19.28 -10.45 -7.30 -3.68 -26.84 18.18 -8.20 1.38 27.16 -2.16 6.87 -46.99 -33.06 -0.57 12.62 -20.22 -14.87 0.34 -16.22 206.30 -41.18 -11.60 -5.60 -25.65 13.79 24.32 -9.02 -23.08 13.33 -27.54 12.20 -9.03 -17.62 -30.45 -20.01 -20.24 66.67 -26.43 -13.33 -40.19 -26.89 -35.06
20.05 48.30 -0.48 -9.96 -17.36 10.52 15.55 4.79 -19.89 27.89 32.22 -2.77 -29.08 -3.28 -19.41 -5.85 -21.53 10.52 -16.04 -2.44 60.44 -0.08 -23.75 55.80 -4.72 -2.39 -26.04 3.29 3.63 -3.72 -21.56 77.73 -31.09 -10.79 -1.02 2.45 6.45 -19.14 30.62 1.46 12.05 40.54 8.13 18.11 -41.41 -26.01 9.89 24.47 -11.83 -5.91 10.90 -7.40 238.53 -34.99 -2.30 4.34 -17.83 25.77 37.41 0.55 -14.98 25.26 -19.91 24.00 0.54 -8.95 -23.13 -11.59 -11.84 84.21 -18.68 -4.21 -33.89 -19.20 -28.23
/ The Edge/FactSet Estimates Consensus Table presents the earnings forecast of Singaporean equities using the latest and more robust FactSet methodology that provides more timely and useful information. FactSet utilises only the latest estimates in calculating the consensus. Any estimates that are more than 75 days old are discarded to avoid the possibility of old forecasts polluting the consensus. The latest 45-day forecast EPS not only gives you the more robust consensus but also a glimpse of the earnings trend, while the Recommendation Consensus Rating is the scale that measures how the analysts feel about a stock. FactSet offers instant access to accurate financial data and analytics to thousands of investment professionals around the world. Our company combines more than 200 databases from industry-leading suppliers and clients’ own proprietary data into a single powerful information system, making FactSet a one-stop source for financial information. Glossary to FactSet Estimates Consensus Table •
Price: Closing price as of stated date
•
Market Capitalisation ($): Market capitalisation ($) in millions
•
Recommendation Consensus Rating: The following rating is assigned to each type of recommendation provided by participating brokers: 1 = positive (strong buy) 1.5 = overweight 2 = neutral 2.5 = underweight 3 = negative (strong sell) – = no recommendation from brokers at that point of time The average of all recommendations is then calculated to give the consensus rating •
No of Estimates (75 days): Number of estimates that are less than 75 days old and are included in the consensus calculation
•
PE 2008: The forecast PE ratio for year 2008 (NA — unable to calculate, for example negative earnings per share figures)
•
EPS 2008 (75 days): The forecast earnings per share for year 2008 using estimates from the latest 75 days
•
EPS 2008 (45 days): The forecast earnings per share for year 2008 using estimates from the latest 45 days
•
EPS Growth: Earnings per share growth compared to last year (R = Recovery)
•
6-month performance: Six-month price performance for that equity
•
6-month performance relative to STI: Sixmonth price performance relative to the Straits Times Index.
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36 • THEEDGE SINGAPORE
| MARCH 3, 2008
CAPITAL
RIGHT TIMING
Chart A
Chart B
Chart C
STI tests support Outlook
Punters are heaving a huge sigh of relief as corporates rushed to release results last week. That’s because the market kept reacting negatively to results announcements. Analysts were busy revising targets and profits downwards while maintaining “buy” or “hold” recommendations. No wonder traders were confused. Many simply chose to stay on the sidelines and that’s the reason the market eased. Perhaps with all the good news out of the way, prices can rise?
Short-term stochastics is actually falling, and may start to bottom later this week. The uncertain direction of the market is being reflected in the ADX indicator, which is falling and is below 20. Its creator J Welles Wilder said a reading below 20 indicates a market with no trend and advised traders to stay clear. ADX was originally created to take a trader into the market when it started trending and out of the | BY GOOLA WARDEN | market when it stopped trending. The direction wasn’t the main criteria as traders can sell short. STI (3,022) For the STI now, its DIs are negatively placed, but with a low ADX, the index is unlikely to move Long-term: down; medium term: rebound; much in either direction. True to form, the index eased 22 points during the week to close at short term: downturn 3,026, down from 3,048 a week earlier. Quarterly momentum is rising, as is 21-day RSI. While RSI Short term RSI (Chart B) is still in a rising mode after may ease later this week as it hits its equilibriturning up from an oversold low but should um line and turns down, quarterly momentum may continue to move up because the market meet with resistance this week. ADX (Chart B) is falling and the DIs remain was falling sharply three months ago. The STI’s chart pattern looks like an ascendnegative. ing triangle. Last week, the index approached the Stochastics (Chart B) is turning down. top of the triangle when it tested 3,100 — as opposed to 3,150 on the triangle — and eased. Medium term Quarterly momentum (Chart A) may have bottomed and could be building a base. No change in downtrend for long-term Annual momentum is falling after breaking in the indicators wake of a negative divergence with the index. Long-term indicators continue to fall. While 24-month ROC is falling. medium-term indicators have lightened up,
the decline in long-term indicators haven’t quite run their course. Quarterly momentum may be trying to bottom, but other long-term indicators are falling. Annual momentum broke below its equilibrium line last month in a negative move. 24month ROC turned down last December and is now clearly tracing out a declining trend. These underminings will probably prevent the STI from a definitive break above the ascending triangle. Near-term moves may remain within the 3,000 to 3,100 range. The earlier breakdown level at 3,300 indicated a target of 2,100 but there’s an outside chance that this may not be met. The 3,000 psychological level has turned out to be a benchmark of sorts. It was retested again last Friday when the STI touched a low of 3,002 before rebounding to close higher. For now, that looks like support. Note though, that it has been breached previously. Since stochastics may not turn up this week, the likelihood of a rally from current levels may not materialise. Part of the reason is the falling ADX. It means that the market lacks a trend (and this also implies an uptrend as well as a downtrend). If the STI is unable to fall much further it implies that the ascending triangle is part of a base formation. The breakout from the triangle occurs if the index betters 3,150. A successful breakout indicates an upside of 450 points or 3,600. That possibility looks remote, because ascending triangles are usually continuation patterns and the market’s trend is still down.
The rest of the market Overall, selling appears to have dried up, in particular for the blue chips. This is despite some property stocks falling last week in reaction to a results briefing by City Developments.
Its executive chairman was quoted as saying that he would defer residential launches this year. The counter fell 52 cents last Friday and closed at $11.96. China food stocks suffered a sell down. On the whole though, declines are getting shallower, volume lighter, and interest in stocks lower. Almost always, at bottoms, interest in the market tends to be low. And that can only be good for the market.
Commodity uptrend continues Commodity prices have been on a tear. Crude palm oil (CPO) for instance is up 87% over the last 12 months, and that is not counting the gains it made in 2006. Indeed, since 3Q2006, prices have doubled to RM3,827 ($1,669.51) per tonne. Which is why we’re paying more for cooking oil in the supermarket — and going by the charts, a major correction isn’t quite on the cards just yet. While annual momentum may be peaking, it hasn’t turned down, nor is it displaying any negative divergence with price. In addition, the CPO chart pattern is still very much an uptrend with no visible top formation. Support is at RM3,300 per tonne in the event of a correction.
China blues The Shanghai Composite (4,348) is hanging on to support at 4,300 by a thread. A break below this would trigger a decline to 3,600 based on a measured move. Annual momentum is falling, but quarterly momentum is trying to bottom, and that has halted the downtrend temporarily. Last year, the Shanghai Composite broke below a double top at 5,500, and in January this year, the index fell through the thrice-tested 4,800 level. Any rebound is likeE ly to find resistance at 4,800.
GETTING TECHNICAL
| BY MICHAEL KAHN |
T
he US stock market finally made a move higher this week as it latched on to good news and shrugged off bad. Many view the action as a breakout from the market’s recent range, but there are still a few obstacles looming overhead. For now, the evidence points to continued strength in the short term. Some sectors of the market have legitimate technical breakouts in place but the broader market indexes still have some work to do. They are close, but with so many crosscurrents in the market this month, long-term investors need more proof that the danger in the market is truly past. Conflicting evidence pits fundamentals. On the charts, this week’s strength is impressive in light of soaring commodities prices, a dollar plumbing new depths versus the euro and rather mediocre trad-
ing volume. Many pundits have been looking for a retest of the January lows, citing among other reasons the need for a final washout of bullish sentiment. Those low levels would most likely scare the collective pants off investors to clear the decks for a new rally. Unfortunately, when such views are widespread the market tends to not accommodate them. A selling panic back down to 11,700 on the Dow Jones Industrial Average would have given off too obvious of a signal: the proverbial bell ringing at the bottom. We all know that there is no bell. Then as the market moved mostly sideways for several weeks, a very obvious coiling, or triangle pattern emerged on all the major indexes including the Standard & Poor’s 500 (see chart). What is obvious is known by everyone, and what everyone knows is just not worth knowing when it comes to the markets.
ESIGNAL
Despite gains in the US market, caution is still the watchword is important because it did not give both bulls and bears suf($SPX,D) Dynamic, 0:00-24:00 ficient time to think 1550.00 things through, lose 1550.00 the emotions and place 1450.00 1405 their bets.Because the 1400.00 1375.26 borders of the triangle 1350.00 were so steep, they 1300.00 squeezed price action um NYSE vo volume -1,794,967,296294 so tightly that there 1,616,137,086.4 946,410,930 was no place left for 0 the market to go but July 2, 2007 Feb 25, 2008 outside the pattern. The passage of time So this week, all of these trian- and not a sea of change in the supgle patterns were broken to the up- ply and demand balance is partially side. Voila! A breakout! Time to buy, to blame for the breakout. That is not the spirit of a techniright? Well, not exactly. From a purely technical point of view, the trian- cal breakout. Chart watchers now gle on the S&P 500 was not as good can assume that the original pattern as it first appeared to be. The reason was too small and is morphing into is that it was out of proportion with something a bit bigger. In this case, very large price swings within a rel- the S&P is still in a triangle formaatively compact period of time. This tion although with a different upper
Dow Jones Industrial Average
border. The healing process is still in progress. Another reason to remain a little cautious is that volume remains on the decline. Consolidation patterns such as triangles are usually accompanied by falling volume as both bulls and bears become unsure of their convictions. Since volume is still in a declining trend from last month’s high levels, we have to again think that the consolidation is still going on. The market is in a better place than it was last week. Should prices continue to edge higher and volume starts to pick up, we’ll know that demand is back to bolster the bullish case. The best we can say about the market is so far, so good. Technically, there are too many problems on the charts to believe that it is safe. So enjoy the possibility of a few strong weeks coming up. Just stay alert. — © 2008 Dow Jones & Co, Inc E
THEEDGE SINGAPORE | MARCH 3, 2008 • 37
CAPITAL
HOT STOCKS
Chinese takeaways for thought Who pays for rising food prices? We thought we, the consumer had to. But, companies which manufacture food are in the same frying pan. With rising costs of raw materials, margins are being squeezed. Margin calls are also causing the China food stocks listed on the Singapore
Exchange to fall. Selected counters, though, are showing signs of strength. The strongest is People’s Food, long maligned because their pigs regularly fall sick. Now though, with rising meat prices, pigs are ready to fly. The counter too, has just broken out of a base.
SYNEAR FOOD — Accelerated fall
PEOPLE’S FOOD — Pigs try to fly
Synear Food’s (68 cents) freefall has been halted — albeit temporarily — by a bounce last Friday. A sign that selling is drying up is of course falling volume but this hasn’t quite happened yet. Unfortunately, the break below $1 was accompanied by a gap — possibly a breakaway gap — and a surge in volume. This is probably because the stock was on the buy lists of several brokers at the start of the year, on the back of the Beijing Olympics frenzy. However, the breakdown actually indicates a target of 50 cents, and this may well be met before the stock builds a base and recovers in 2H2008. The rebound that started last Friday may not last, and the breakdown level of $1 will likely provide formidable resistance.
People’s Food ($1.08) has not quite broken out of a downtrend. Interestingly though, quarterly momentum, which is meant to identify latent strength (and weakness), is suggesting that prices could strengthen. Momentum has turned up and broken above both its own moving average and a failure swing. This is a bullish signal. The break above $1 seems to confirm the probability of a further rally. The move indicates an initial target of $1.26 and a subsequent upside of $1.36. Support has been established at 84 cents.
CHINA MILK — No bull in a china shop
CHINA DAIRY — Early stage base formation
China Milk (85.5 cents) is drifting lower, on the back of falling short-term indicators. The good thing about this drift downwards is the dwindling volume, which suggests a lack of sellers — technically then, prices are oversold. Last week, the counter made a new oneyear low of 84 cents, just pipping the January low of 85 cents. If these levels aren’t broken in the next two days, prices could be in a base formation. By then, stochastics may have turned up with a rebound in the offing. The move would also cause a positive divergence between momentum and price. Any rebound finds resistance at 96 cents.
China Dairy (26 cents), a milk processing company actually looks like it could strengthen despite an uninspiring set of 2H2007 results. This came in about 20% below analyst expectations because of spiralling costs. Quarterly momentum is attempting to turn up. Note though, that no positive divergence exists between quarterly momentum and price. In addition, five-day stochastics is falling and that could lead to short-term weakness. In addition, moving averages are still declining. However, with volume dwindling, current moves are probably the initial part of a base formation. Support has been established at 25 cents and the breakout level is at 28 cents.
CELESTIAL NUTRIFOODS — Nothing celestial in the short term
CHINA ESSENCE — Likely to ease short term
Celestial NutriFoods (63.5 cents) is in a base formation. In the short term, however, falling stochastics may dampen sentiment and this will likely cause prices to ease. Support is at the twice-tested 56-cent level. A breakdown below $1 in last December indicated a target of 50 cents. This has yet to be met, but prices may touch this level on an intra-day basis as quarterly momentum attempts to create positive divergence. Food stocks have been savaged over the past week. For Celestial, the moves could be part of a bottoming process. Unfortunately, the soya bean producer may be hit by rising costs and this is affecting investor perception, despite the company reporting a 27% growth in net profits to 131 million renmimbi ($25.67 million).
China Essence (68 cents), a mainland Chinese potato starch producer, hit resistance at its 50-day moving average at 75 cents last week, causing it to retreat. Five-day stochastics is falling, and quarterly momentum has turned down after a temporary rebound. So far, the stock is bearing up well, but weak sentiment on China plays coupled with a downturn by the counter’s medium- and short-term indicators could exaggerate a decline. Support is at 55 cents for the time being. Since volume is dwindling on the down days, current moves could be part of a broader base formation.
38 • THEEDGE SINGAPORE
| MARCH 3, 2008
CAPITAL
WARRANTS UPDATE SINGAPORE
Warrants update (as at Feb 28, 2008)
About Société Générale Société Générale is one of the largest financial services groups in the eurozone. The group employs 151,000 people worldwide in three key businesses: • Retail Banking & Financial Services: Société Générale serves 27 million individual customers worldwide; • Global Investment Management & Services: Société Générale is one of the largest banks in the eurozone in terms of assets under custody (€2,583 billion, December 2007) and under management (€434.6 billion, December 2007); and • Corporate & Investment Banking: Société Générale ranks among the leading banks worldwide in euro capital markets, derivatives and structured finance. Société Générale is included in the five major sociallyresponsible investment indexes. (www.socgen.com)
Data provided by
TOP VOLUME WARRANT NAME
WARRANT PRICE
AVERAGE 5-DAY VOLUME
EXERCISE PRICE
MOTHER SHARE PRICE
EXPIRY DATE
CONVERSION RATIO
MACQ BK-CW08 HANG SENG INDE
0.7
MACQ BK-CW08 SINGAPORE TELE
0.19
42475800
24000
24591.69
3/28/2008
13521600
4.2000
3.86
6/3/2008
MACQ BK-CW08 CAPITALAND LTD
0.18
12954400
6.8000
6.63
MACQ BK-PW08 HANG SENG INDE
0.425
12597600
23400
DEUTSCHE-CW08 DBS GROUP HOLD
0.125
11738200
18.9000
MACQ BK-CW08 DBS GROUP HOLD
0.17
9360200
SOC GEN-CW08 HANG SENG INDE
0.77
DEUTSCHE-CW08 COSCO CORP SIN MACQ BK-CW08 COSCO CORP SIN SOC GEN-CW08 STRAITS TIMES
PREMIUM
GEARING
500
5.53
12.60
1
13.73
20.32
6/2/2008
3
10.71
12.28
24591.69
3/28/2008
500
9.66
20.76
17.52
7/21/2008
10
15.01
14.02
18.5000
17.52
6/6/2008
6
11.42
17.18
9001200
24000
24591.69
4/29/2008
500
6.32
11.46
0.075
8272800
5.5000
4.14
7/7/2008
5
41.91
11.04
0.12
8163400
5.0000
4.14
6/6/2008
3
29.47
11.50
0.225
6763200
3100
3074.15
3/28/2008
600
5.23
22.77
DEUTSCHE-CW08 CAPITALAND LTD
0.265
6544000
6.6000
6.63
6/23/2008
3
11.54
8.34
BNP PAR-PW08 STRAITS TIMES
0.085
6517600
2900
3074.15
3/28/2008
800
7.88
45.21
MACQ BK-CW08 HANG SENG INDE
0.055
5674200
24800
24591.69
2/28/2008
500
1.47
160.40
MACQ BK-CW08 SINGAPORE EXCH
0.135
5161400
10.0000
8.62
6/6/2008
6
25.41
10.64
SOC GEN-CW08 HANG SENG INDE
0.09
5122000
26600
24591.69
3/28/2008
1000
10.21
49.01
MACQ BK-CW08 UNITED OVERSEA
0.2
5047000
19.0000
18.34
6/3/2008
6
10.14
15.28
BNP PAR-PW08 STRAITS TIMES
0.18
4962200
3100
3074.15
3/28/2008
800
3.84
21.35
BNP PAR-PW08 HANG SENG INDE
0.23
4403600
24000
24591.69
4/29/2008
1500
10.23
12.79
RABOBANK-CW08 DBS GROUP HOLD
0.15
4228800
17.8000
17.52
6/30/2008
10
10.16
11.68
MACQ BK-CW08 CAPITALAND LTD
0.36
4048200
5.8000
6.63
6/6/2008
3
3.77
6.14
WARRANT PRICE
% GAIN (1 WEEK)
EXERCISE PRICE
MOTHER SHARE PRICE
EXPIRY DATE
CONVERSION RATIO
PREMIUM
GEARING
MACQ BK-CW08 NOBLE GROUP LT
0.04
300.0
2.5000
2.26
3/7/2008
1
12.39
56.50
RABOBANK-CW08 KEPPEL CORP LT
0.03
100.0
13.8800
10.98
7/7/2008
10
29.14
36.60
DEUTSCHE-CW08 NOBLE GROUP LT
0.14
86.7
2.6800
2.26
6/30/2008
2
30.97
8.07
SOC GEN-CW08 NOBLE GROUP LT
0.19
81.0
2.1000
2.26
4/28/2008
2
9.73
5.95
DEUTSCHE-CW08 CAPITALAND LTD
0.045
80.0
6.8000
6.63
3/17/2008
5
5.96
29.47
SOC GEN-CW08 CITY DEVELOPME
0.08
77.8
14.7000
12.48
5/20/2008
8
22.92
19.50
Disclaimer The prices of warrants may rise or fall and the warrants may expire worthless, resulting in a total loss of investment. The investor should make an independent appraisal of the risks and consult to the extent necessary his own legal, financial, tax, accounting and other professional advisors prior to any subscription or acquisition. Société Générale and its associated and connected persons, their directors, officers and/or employees, including persons involved in the preparation or issuance of this material, may have positions or other interests in, and may, as principal or agent, effect transactions in securities mentioned herein, and may also perform or seek to perform broking, investment banking and other banking or financial services for the issuer of any securities referred to herein. The information is provided on a without liability basis. While Société Générale reasonably believes that the information is accurate, Société Générale does not warrant the accuracy thereof and shall not be liable for any loss or damage howsoever suffered in reliance on the said information.
TOP GAINERS WARRANT NAME
SOC GEN-CW08 NOBLE GROUP LT
0.21
75.0
2.5000
2.26
6/30/2008
2
29.20
5.38
DEUTSCHE-CW08 SINGAPORE PETR
0.19
72.7
8.0000
6.99
6/30/2008
3
22.60
12.26
MACQ BK-CW08 NOBLE GROUP LT
0.18
71.4
2.2000
2.26
5/5/2008
2
13.27
6.28
BNP PAR-PW08 DBS GROUP HOLD
0.11
69.2
18.6200
17.52
3/10/2008
10
0.00
15.93
SOC GEN-CW08 SINGAPORE PETR
0.165
57.1
7.8800
6.99
7/7/2008
5
24.54
8.47
RABOBANK-CW08 SEMBCORP MARIN
0.185
54.2
3.7710
3.72
6/23/2008
2.857
15.58
7.04
SOC GEN-CW08 NOBLE GROUP LT
0.115
53.3
2.3200
2.26
4/7/2008
2
12.83
9.83
MACQ BK-CW08 CAPITALAND LTD
0.475
53.2
6.4000
6.63
4/1/2008
1
3.70
13.96
SOC GEN-CW08 SEMBCORP MARIN
0.09
50.0
3.5715
3.72
3/10/2008
2.857
2.92
14.47
DEUTSCHE-CW08 SINGAPORE EXCH
0.015
50.0
16.7000
8.62
5/26/2008
10
95.48
57.47
RABOBANK-CW08 CAPITALAND LTD
0.105
50.0
6.8000
6.63
6/2/2008
5
10.48
12.63
SOC GEN-CW08 SINGAPORE TECH
0.065
44.4
3.9400
3.47
4/14/2008
2
17.29
26.69
BNP PAR-CW08 SEMBCORP MARIN
0.065
44.4
4.4300
3.72
6/6/2008
4
26.08
14.31
SOC GEN-CW08 SEMBCORP MARIN
0.05
42.9
3.9644
3.72
3/24/2008
2.857
10.41
26.04
The week’s top volume: MACQ BK-CW08 Hang Seng Inde 0.7
Price ($) 0.7
0.65 0.6 0.55 0.5 0.45
Feb 21, 2008
Feb 28, 2008
The week’s top gainer: MACQ BK-CW08 Noble Group LT 0.04
Price ($) 0.04
0.035 0.03 0.025
TOP LOSERS WARRANT NAME
0.02 WARRANT PRICE
% LOSS (1 WEEK)
EXERCISE PRICE
MOTHER SHARE PRICE
EXPIRY DATE
CONVERSION RATIO
PREMIUM
GEARING
0.015
SOC GEN-CW08 COSCO CORP SIN
0.01
-86.7
5.1000
4.14
3/17/2008
5
24.40
82.80
0.01
MACQ BK-CW08 HANG SENG INDE
0.005
-85.7
28600
24591.69
2/28/2008
500
16.36
1,764.44
0.005 0
RABOBANK-CW08 YANGZIJIANG SH
0.005
-83.3
2.5500
1.16
4/22/2008
2
120.69
116.00
BNP PAR-CW08 DBS GROUP HOLD
0.005
-75.0
18.0800
17.52
2/29/2008
15
3.62
233.60
MACQ BK-CW08 ALIBABA.COM LT
0.005
-75.0
40.0000
19.08
4/3/2008
2
109.94
342.25
SOC GEN-CW08 COSCO CORP SIN
0.03
-70.0
4.1000
4.14
3/3/2008
5
2.66
27.60
SOC GEN-CW08 PUBLIC BANK BH
0.065
-68.3
10.9274
10.40
4/11/2008
1.987
7.92
35.10
BNP PAR-CW08 DBS GROUP HOLD
0.005
-66.7
19.3800
17.52
3/10/2008
10
10.90
350.40
Feb 21, 2008
The week’s top loser: SOC GEN-CW08 Cosco Corp Sin
BNP PAR-CW08 YANGZIJIANG SH
0.04
-66.7
1.2800
1.16
3/28/2008
2
17.24
14.50
DEUTSCHE-CW08 SINGAPORE EXCH
0.01
-60.0
10.1000
8.62
3/10/2008
8
18.10
107.75
0.08
DEUTSCHE-CW08 CITY DEVELOPME
0.05
-56.5
14.5000
12.48
6/2/2008
10
20.19
24.96
0.07
SOC GEN-CW08 HANG SENG INDE
0.035
-56.3
28600
24591.69
3/28/2008
800
16.93
157.54
0.06
0.07
-54.8
2700
3074.15
3/28/2008
500
13.31
87.83
0.05
SOC GEN-PW08 HANG SENG INDE
0.125
-51.9
22400
24591.69
3/28/2008
800
11.18
44.11
0.04
RABOBANK-CW08 YANGZIJIANG SH
0.055
-50.0
1.8800
1.16
6/6/2008
1
66.81
21.09
0.03
BNP PAR-CW08 STRAITS TIMES
0.005
-50.0
3800
3074.15
3/28/2008
800
23.74
768.54
0.02
BNP PAR-CW08 OVERSEA-CHINES
0.005
-50.0
8.9800
7.69
3/18/2008
6
17.17
256.33
DEUTSCHE-CW08 COSCO CORP SIN
0.005
-50.0
7.2000
4.14
4/7/2008
5
74.52
165.60
BNP PAR-CW08 HANG SENG INDE
0.005
-50.0
33000
24591.69
2/28/2008
2000
34.42
441.11
MACQ BK-CW08 COSCO CORP SIN
0.05
-50.0
6.5000
4.14
6/5/2008
3
60.63
27.60
SOC GEN-PW08 STRAITS TIMES
HIGHEST PREMIUM WARRANT NAME
Feb 27, 2008
Price ($)
0.01
0.01
0
Feb 15, 2008
Feb 27, 2008
HIGHEST DISCOUNT WARRANT PRICE
EXERCISE PRICE
MOTHER SHARE PRICE
EXPIRY DATE
CONVERSION RATIO
PREMIUM
GEARING
WARRANT NAME
WARRANT PRICE
EXERCISE PRICE
MOTHER SHARE PRICE
MACQ BK-CW08 SYNEAR FOOD HO
0.005
2.5000
0.645
3/3/2008
2
289.15
64.50
DEUTSCHE-PW08 SINGAPORE EXCH
0.685
16.4000
8.62
MACQ BK-CW08 SYNEAR FOOD HO
0.06
2.0000
0.645
6/5/2008
2
228.68
5.38
MACQ BK-PW08 SINGAPORE EXCH
0.94
15.0000
8.62
EXPIRY DATE
CONVERSION RATIO
PREMIUM/ (DISCOUNT)
GEARING
6/23/2008
10
-10.79
1.26
6/18/2008
6.000
-8.58
1.53
MACQ BK-CW08 CELESTIAL NUTR
0.035
1.8000
0.615
3/3/2008
2
204.07
8.79
MACQ BK-CW08 CHINA RAILWAY
1.2
6.5000
9.40
3/4/2008
0.33
-7.37
4.26
DEUTSCHE-CW08 YANGZIJIANG SH
0.02
3.1800
1.16
6/30/2008
2
177.59
29.00
BNP PAR-PW08 DBS GROUP HOLD
0.1
19.8000
17.52
2/29/2008
15
-4.45
11.68
BNP PAR-CW08 YANGZIJIANG SH
0.005
3.2000
1.16
3/28/2008
3.000
177.16
77.33
SOC GEN-PW08 DBS GROUP HOLD
0.405
22.3000
17.52
3/10/2008
10
-4.17
4.33
MACQ BK-CW08 YANGZIJIANG SH
0.015
3.0000
1.16
4/3/2008
3.000
162.50
25.78
SOC GEN-CW08 TELEKOM MALAYS
0.095
10.3831
11.40
3/3/2008
2.884
-3.41
18.14
DEUTSCHE-CW08 YANGZIJIANG SH
0.01
2.8800
1.16
6/2/2008
2
150.00
58.00
BNP PAR-PW08 COSCO CORP SIN
0.505
6.8000
4.14
2/28/2008
5
-3.26
1.64
MERRILL-CW08 YANGZIJIANG SH
0.01
2.7000
1.16
3/28/2008
2
134.48
58.00
SOC GEN-PW08 SINGAPORE EXCH
0.7
15.9000
8.62
4/7/2008
10
-3.25
1.23
MERRILL-CW08 CHINA OILFIELD
0.02
1.1000
0.48
4/28/2008
1
133.33
24.00
BNP PAR-CW08 CAPITALAND LTD
0.685
4.3800
6.63
6/26/2008
3
-2.94
3.23
MACQ BK-CW08 FERROCHINA LIM
0.04
3.0000
1.34
4/3/2008
2
129.85
16.75
DEUTSCHE-PW08 DBS GROUP HOLD
0.16
19.6000
17.52
3/3/2008
10
-2.74
10.95
THEEDGE SINGAPORE | MARCH 3, 2008 • 39
WeekinPictures PICTURES: BLOOMBERG
CORPORATEMOVES Companies are invited to submit notices of senior corporate appointments and changes. Photographs (in jpeg format) are welcomed. Announcements will be edited for brevity. Please e-mail [email protected]; attention: editorial coordinator, Rahayu Mohamad.
ArianeCorp Ltd
Hongwei Technologies Ltd
Yeo Kan Yen has been appointed COO wef Feb 25 Work experience: MD, CarrierNet Corp (S) Pte Ltd; regional sales manager, Nagamei Marine Pte Ltd
Lam Tin Faat, Tony has been appointed CFO wef Feb 23 Work experience: Has worked with local Hong Kong audit firm and consulting firms in managerial positions Tsai Hungching resigned as ED wef Feb 23
Barclays Global Investors
Ma Ying-jeou, presidential candidate of the opposition Kuomintang, delivers a speech during the “228” memorial concert, in Taipei, Taiwan, last Thursday.
Drew Corbett has been appointed head of distribution, iShares Asia ex-Japan wef February 2008 Work experience: Head of ETF trading for Citigroup and for Merrill Lynch Jane Leung has been appointed head of product, iShares Asia ex-Japan wef February 2008 Work experience: Oversaw the management of US and non-US equity iShares with BGI in San Francisco Paul So has been appointed head of portfolio management, iShares Asia ex-Japan wef February 2008 Work experience: Led transition management and equity index portfolio management for BGI in Canada.
China Energy Ltd Li Qiang has been appointed deputy CEO wef Feb 22 Work experience: GM, Jiutai Energy (Guangzhou) Co Ltd
Courts Singapore Ltd Puma AG CEO Jochen Zeitz (left) shakes hands with British-based Cypriot fashion designer Hussein Chalayan during a news conference in Paris last Thursday. Puma AG, the German sporting-goods maker controlled by PPR SA, hired Chalayan to be the company’s creative director and acquired a majority stake in the British designer’s fashion brand.
Howard Lester Bryant has been appointed non-executive director wef Feb 26 Work experience: Director, Tesco Stores Thailand; commercial director, Tesco Lotus
Gavin Anderson James Weeks (top right) has been promoted to executive chairman, Asia Pacific wef February 2008 Work experience: President/ CEO, Gavin Anderson Deborah Hayden has been appointed CEO, Japan wef February 2008 Work experience: Deputy CEO, Gavin Anderson
A model poses with a RAZR 2 mobile phone launched by Motorola Korea Inc in Seoul last Thursday
GUL Technologies Singapore Ltd Kik Teng Guan has been appointed ED wef Feb 22 Work experience: CEO, Gul Technologies Singapore Ltd; senior VP — business development and customer relationships (Asia), Sanmina-Sci Systems Singapore Pte Ltd William Liem has resigned as ED wef Feb 22
Hi-P Int’l Ltd Zhou Wei Dong has been appointed MD, wireless strategic business unit wef Feb 26 Work experience: GM, wireless business unit, Hi-P Int’l Ltd; operations manager, Hi-P Int’l Ltd; engineering manager, Uniplas (Shanghai) Co Ltd Alan Ong will resign as MD, computing & automotive strategic business unit wef March 31
Jets Technics Int’l Holdings Ltd Au Chun Kwok, Augustus has resigned as independent non-executive director wef Feb 18
Rotol Singapore Ltd Phua Tian How @ Phua Tin Wei has been appointed non-executive independent director wef Feb 26 Work experience: President/CEO, TranSil Corp Pte Ltd; group president, Straco Corp Ltd; ED, SBS Transit Ltd
Sapphire Corp Ltd Toh Ewe Kok has been appointed COO wef March 1 Work experience: Director, Sapphire Mineral Resources Pte Ltd; GM, Sapphire Offshore Engineering Pte Ltd
Seksun Corp Ltd Mak Bang Mui has been appointed non-executive director wef Feb 15 Work experience: Director, Centurion Investment Management Pte Ltd; associate director, UOB Kay Hian Pte Ltd Yeo Boon Hing has been appointed non-executive director wef Feb 15 Work experience: CEO, Summit CD Manufacture Pte Ltd; regional sales manager — sales and marketing, Honeywell Information Systems Choo Soo Kwang has been appointed CFO wef Feb 21 Work experience: Founder, SLM Consulting Pte Ltd; partner, Chia Wong & Partners Victor Loh Kwok Hoong has resigned as non-executive director wef Feb 15 Leong Horn Kee has resigned as non-executive director wef Feb 15
Springboard Research Michael Barnes (bottom left) has been appointed VP of software research wef February 2008 Work experience: Over 13 years of research experience in information and communications technology software and services markets, worked with META Group, Hurwitz Group and Prudential Insurance
Synear Food Holdings Ltd Li Wenjun has been appointed ED wef Feb 25 Work experience: Director, Henan Synear; purchasing manager, Synear Frozen
Transpac Industrial Holdings Ltd Vince Feng has been appointed non-executive independent director wef Mar 1 Work experience: MD, General Atlantic LLC
Yong Xin Int’l Holdings Ltd Hongguo Int’l Holdings Ltd
Thaksin Shinawatra, former Prime Minister of Thailand and owner of the Manchester City football club, greets a crowd as he arrives at the airport in Bangkok last Thursday. Shinawatra, deposed in a coup 18 months ago, returned home from exile saying he will never return to public life.
Xu Tingyu has been appointed ED wef March 1 Work experience: CFO, Hongguo Int’l Holdings Ltd; senior supervisor, China Orient Asset Mgmt Company, Nanjing Gui Zuhua has resigned as non-executive director wef March 1
Yuan Xuanli has been appointed ED/COO wef Feb 28 Work experience: Assistant to general coordinator/head of cold rolling workship, Yongxin Precision Material (Wuxi) Co Ltd; GM, ChangShu ChangJiang Stainless Steel Material Co Ltd Wu Jie has resigned as ED/COO wef Feb 28 — Compiled by Rahayu Mohamad
40 • THEEDGE SINGAPORE
| MARCH 3, 2008
MARKETDIARY
LISTINGS
Monday, March 3
CORPORATE/CAPITAL MARKETS
Singapore CH Offshore Ltd
March 3 to 5 Topic: 7th Annual Investor Conference 2008 – India Unlimited Highlights: Incisive, insightful analysis from more than 70 leading corporates, including Bharti Airtel, Educomp, ICICI Bank, etc Venue: The Ritz-Carlton, Millenia Singapore Organiser: ICICI Securities Tel: 91 22 6637 7249 Email: [email protected]
Tai Sin Electric Ltd
Dividend: $0.005 interim tax exempt; record date: March 5; payable date: March 18 Dividend: $0.01 interim one-tier tax; record date: March 5; payable date: March 18
Tuesday, March 4 Singapore Purchasing Managers Index (Feb) Electronic Sector Index (Feb) Epure Int’l Ltd Stock split offer of 3 for 1 Pertama Holdings Ltd Dividend: $0.008 interim tax exempt; record date: March 6; payable date: March 20 US Total Vehicle Sales
March 7 Topic: Changes in Vietnam – Challenges and Opportunities Speaker: Ayumi Konishi, country director,
Asian Development Bank, Vietnam Resident Mission Hanoi Time: 10am to 11.30am Venue: Seminar Room II, ISEAS Organiser: Institute of Southeast Asian Studies Tel: 6870 2413 Email: [email protected]
INDUSTRY/TECHNOLOGY March 5 and 6 Topic: Delay & Disruption in Construction Contracts Highlights: Reduce cost, improve efficiency, manage risks, analyse delay, disruption and cost, obtain the latest knowledge
Venue: The Raffles Hotel, Singapore Organisers: Hill Int’l, CIOB Tel: 6338 2455/6429 0304 Email: [email protected] March 8 Topic: Technology Commercialisation in the Bio-Tech Industry: What (Really) Works! Time: 11am to 1pm Venue: SIM University, 461 Clementi Road, Level 4 Organisers: SIM University, The Institute of Engineers, Singapore Tel: 6248 9211 Email: [email protected] Website: www.unisim.edu.sg
German tax probe yields confessions as search widens
Wednesday, March 5 Singapore Automobile COE Open Bid Cat, A, B, E Raffles Education Corp Ltd EGM Sunway Int’l Holdings Ltd AGM US ABC Consumer Confidence US MBA Mortgage Applications
Thursday, March 6 Singapore F J Benjamin Holdings Ltd
Transview Holdings Ltd
Dividend: (First interim) $0.009 interim one-tier tax; record date: March 10; payable date: March 27 Dividend: $0.006 first and final tax exempt; record date: March 10; payable date: March 28
Friday, March 7 Singapore Foreign Reserves (Feb) US Unemployment rate — Compiled by Rahayu Mohamad
IPOWATCH
G
erman authorities said 195 people confessed to tax evasion since their probe of Liechtenstein bank accounts began two weeks ago, as the investigation widened to at least 13 countries including the US. German investigators have already searched the homes and offices of 150 people, with 91 of them confessing and agreeing to pay €27.8 million ($58.84 million) in taxes, prosecutor Hans-Ulrich Krueck said. Another 104 have voluntarily gone to tax authorities, four German states said. The US Internal Revenue Service said last Tuesday it would pursue more than 100 Americans who may be avoiding paying taxes by hiding money in Liechtenstein accounts. The UK, France, Ireland, Netherlands, Norway and Sweden announced their own crackdowns, and Swedish authorities said another five countries have information on tax avoiders with Liechtenstein accounts. “The pressure is building on all sides,” Sylvia Schenk, the chairwoman of Transparency International in Germany, said in a phone interview from Frankfurt. “Public expectations are huge now that these cases will be investigated and be punished.” The German probe, focused on €200 million deposited in Liechtenstein, has already led to the resignation of Deutsche Post AG CEO Klaus Zumwinkel. The investigation has centred on information from LGT Group, the Liechtenstein bank owned by the principality’s ruling family, which said yesterday stolen records passed to Germany contain data from 1,400 clients. Bochum prosecutors now have data
from a second Liechtenstein bank and are reviewing whether they need to investigate additional banks in the principality, Eduard Gueroff, a spokesman for the Bochum prosecutor’s office, said. The amount of money that people are paying back in taxes is “increasing daily,” Krueck said during a press conference in the German city of Bochum, which is heading the investigation. “We’ve been informed already of additional voluntary payments” in a similar magnitude received so far. The US federal tax collection agency said it would work together with the governments of Australia, Canada, France, Italy, New Zealand, Sweden and the United Kingdom to obtain the records and prosecute tax fraud. “Combating off-shore tax avoidance and evasion are high priorities,” IRS Acting Commissioner Linda Stiff said in a statement. “We will use all our authority to fairly and effectively enforce our tax laws.” German prosecutors have also searched banks in the country where either suspects in the probe had accounts or employees assisted customers to set up Liechtenstein trusts to avoid taxes. Bankhaus Metzler, Dresdner Bank AG, the banking unit of Allianz SE, private bank Hauck & Aufhaeuser, UBS AG and Hamburg-based Berenberg Bank have confirmed searches at their offices. Bayerische Landesbank, German’s second-biggest state bank, said last Tuesday it may retreat from Liechtenstein by selling its stake in a unit located in the principality. The Munich-based bank bought a major-
ity stake in Austria’s Hypo Alpe Adria Bank International AG last year and through it an indirect holding in Hypo Alpe Adria Liechtenstein AG. The German government paid as much as €5 million for information on German account holders in Liechtenstein on a disk provided by an informant to the Federal Intelligence Service. It’s open to sharing this information with other countries, the Finance Ministry said last Monday. Germany has threatened to “tighten the thumb screws” on Liechtenstein if an agreement to stem illegal cash flows can’t be reached, and Chancellor Angela Merkel warned the previous week that “the clock is ticking.” Merkel discussed her concerns that Germans are evading taxes by hiding money in safe havens with Monaco’s Prince Albert during his visit to Berlin last Wednesday. Monaco, Liechtenstein and Andorra are on a list of “uncooperative tax havens” published by the Paris-based Organization for Economic Cooperation and Development. Sweden is investigating about 100 Swedes with questionable accounts, Mats Sjoestrand, the Swedish Tax Agency’s director general, said in an opinion article published last Tuesday in the Swedish newspaper Dagens Nyheter that the tax agency later confirmed. Ireland plans to ask Germany for details on any Irish citizens uncovered in its probe, while France has already received information on its citizens that may have evaded taxes in Liechtenstein, the tax collection offices in the two countries said last Tuesday. E —Bloomberg LP
Friday, Feb 22 Grand Pacific Properties Ltd Status: Lodged (preliminary prospectus) Lodged date: Feb 22 Core business: The group is an Indonesianbased real estate group principally focused on developing and investing in commercial and residential properties in strategically selected key cities in Indonesia. Its aim is to develop premium quality residential and commercial properties. Apart from developing its own property projects, the group has also invested in Grade A commercial buildings. Underwriter: HL Bank Issue manager: HL Bank, Hong Leong Finance Ltd Issue size: NA Public offer: NA Issue price: NA
Stanchart moves Asia CEO to Hong Kong from Singapore | BY CHIA-PECK WONG |
S
tandard Chartered Plc, the UK bank that makes most of its profit in Asia, relocated its CEO for the region to Hong Kong from Singapore. The move will bring Asia CEO Jaspal Bindra closer to the Greater China region that was the biggest contributor to Standard Char-
tered’s pretax profit last year. “It makes a huge amount of business sense for the Asian CEO to be headquartered in Hong Kong,” Bindra told reporters in the city last Thursday. “Greater China is the bank’s biggest focus for our group.” With pretax profit of US$1.19 billion ($1.66 billion) last year, Hong Kong accounted for more
than a third of the bank’s total of US$4.04 billion. Profit from China jumped 73% to US$498 million, helping drive a 25% increase in Standard Chartered’s net income. Other executives based in Singapore, including the Asian heads of wholesale banking and human resources, will also move to Hong Kong, Bindra said. The
London-based bank received bids for its Indian mutual fund unit higher than the US$120 million indicated late last year, and expects to complete the sale this year, Bindra said. He didn’t identify any bidders. “All the bids we are getting are quite generous; we think it will happen in 2008,” he said. E —Bloomberg LP
CC2 • THEEDGE SINGAPORE
| MARCH 3, 2008
CITY&COUNTRY
PROPERTY BRIEFS
Home CDL’s record year
EDITOR/REGIONAL MANAGING DIRECTOR Tan Boon Kean ([email protected]) SECTION EDITOR Cecilia Chow ([email protected]) COPY-EDITING DESK Elaine Lim, Evelyn Tung, Ng Bee Cheng, James Chong PHOTO EDITOR Samuel Isaac Chua ([email protected]) PHOTOJOURNALIST Gwyneth Yeo ([email protected]) EDITORIAL COORDINATOR Rahayu Mohamad (rahayu.mohamad @bizedge.com) DESIGN DESK Tan Siew Ching, Christine Ong, Chan Yoke Lin, Jamy Gan ADVERTISING + MARKETING REGIONAL GENERAL MANAGER | Edward Stanislaus ([email protected]) SENIOR MANAGER | Colin Tan ([email protected]) MANAGERS | Simon Wong ([email protected]) Cecilia Kay ([email protected]) Jeffrey Wong ([email protected]) Windy Tan ([email protected]) Faith Teo ([email protected]) Julia Tan ([email protected]) COORDINATOR | Nor Aisah Bte Asmain ([email protected]) MALAYSIA REPRESENTATIVE | Helen John Corry ([email protected]) CIRCULATIONSUBSCRIPTIONS REGIONAL SENIOR MANAGER | Suresh Kumar ([email protected]) ASSISTANT MANAGER | Naziela Nasir ([email protected]) ASSISTANTS | Juliana Ibrahim ([email protected]) Iryanti Zainol ([email protected]) PUBLISHER The Edge Publishing Pte Ltd 150, Cecil Street #13-00 Singapore 069543 Tel: (65) 6232 8622 Fax: (65) 6232 8620 PRINTER KHL Printing Co Pte Ltd 57 Loyang Drive Singapore 508968 Tel: (65) 6543 2222 Fax: (65) 6545 3333 We welcome your comments and criticism. Send your letters to The Edge, Raffles City Post Office PO Box 218 Singapore 911708 Tel: (65) 6232 8622 Fax: (65) 6232 8620 e-mail: feedbackspore @bizedge.com Pseudonyms are allowed but please state your full name, address and contact number for us to verify.
Singapore’s leading property developer, City Developments Ltd (CDL), posted stellar 4Q2007 and full-year results. Net profit in 4Q2007 amounted to $235 million, up 71% y-o-y, while full-year profit rang in at $725 million compared with $200.7 million in FY2006 (if the $150 million profit from the sale of hotel assets to CDL Hospitality Trusts is excluded). Total revenue for the year was $3.1 billion. In the local residential market, CDL sold 1,655 units worth $3.38 billion compared with last year’s 1,337 units totalling $2.77 billion. Slated for launch in 1H of the year are: the 77-unit Shelford Suites; 100 of the 336-unit new condo at the former Lok Cho Apartments site; 100 of the 228-unit The Quayside Isle at Sentosa Cove; and the first phase of 150 units of the 724-unit Pasir Ris condominium development.
Ho Bee has record $272mil net profit Property development group Ho Bee Investment has announced record results for FY2007. The group had a net profit after tax and minority interest of $272 million for the full year ended Dec 31 — up 176% from the previous year. This was achieved on the back of record revenue of $596 million — up 52% from its previous peak of $393 million. Earnings per share stand at 36.9 cents compared with 14 cents previously, an increase of 163%. The company has proposed a one-tier final dividend of two cents per share. Y-o-y sales of properties were steeply higher, rising 51% to $576.7 million, compared with $382.2 million in 2006. Income came from residential projects including Coral Island, The Coasts and Paradise Island at Sentosa Cove; Orange Grove Residences at Orange Grove Road; Montview at Mount Sinai; and Quinterra at Holland Road.
Cityscape Asia returns to Singapore The world’s largest business-to-business real estate event brand, Cityscape, will hold Cityscape Asia at Suntec on April 15 to 17. The inaugural event last year featured more than 100 exhibitors from 35 countries, selling out more than 86,000 sq ft of space. This year’s Cityscape Asia will highlight opportunities to an audience of regional and international investors, real estate developers, architects and designers, government and senior professionals. Major sponsors include Limitless — a Dubai World company — and UK-listed company Aseana Properties, which is focused on developments in Malaysia and Vietnam.
OKP rides high on vibrant construction sector A strong economy and vibrant construction sector has seen infrastructure and civil engineering firm OKP Holdings announce a record full-year net profit after tax and minority interest of $11 million — up 171% on 2006. The group has declared a one-tier tax-exempt first and final dividend of two cents per share. Turnover for the year ended Dec 31 hit a high of $124.7 million, up 70% from the $73.3 million achieved in the previous financial year. OKP specialises in the construction of airport runways and taxiways, expressways, flyovers, vehicular bridges, and urban and arterial roads. The bulk of group revenue was generated from its construction segment, which saw a y-o-y surge of 95.9% from $53.4 million to contribute $104.7 million — 84% — to total revenue.
CapitaLand partners with leading Australia developer CapitaLand has entered into a joint venture with Australand Industrial and Lo-
gistics International, one of Australia’s major diversified property groups. The agreement, through CapitaLand subsidiary CapitaLand Industrial & Logistics Holdings (CIL), aims to establish a Pan-Asian development platform in the industrial and logistics sectors in Asia. CIL will own a 51% stake in projects and Australand the remaining 49%. Australand is a leading industrial and logistics property developer and manager in Australia.
leases of 15 years. The office buildings on these sites — which could be amalgamated — are expected to be low-rise developments of four storeys. Knight Frank says the expected price for Parcel A is $14 million to $18.2 million ($100 to $130 per sq ft per plot ratio) and $14.6 million to $19 million ($100 to $130 psf ppr) for Parcel B. Tenders for Parcel A close at noon on April 24 and at noon on April 30 for Parcel B.
Koh Brothers reports huge profit jump Koh Brothers Group has reported fullyear net profit of $39.7 million — 877% more than the 2006 result. Sales in 2007 were $285.5 million compared with $259.6 million the previous year — a 10% increase. The real estate division contributed $26.9 million, or 9% of the group’s turnover. New sales contribution came from Bungalow @ Caldecott and rental income from the Alocassia Apartments. Turnover from the construction and building materials division increased from $227.8 million in 2006 to $251.2 million in 2007. The group’s net profit attributable to shareholders has increased 877% from $4.1 million in 2006 to $39.7 million last year, which includes the net revaluation surplus of $32.2 million.
URA launches two transitional office sites at Scotts Road URA has launched the sale of two transitional office sites at Scotts Road-Anthony Road. Located next to the Newton MRT station, Land Parcel A has a site area of 93,455 sq ft and can yield a maximum gross floor (GFA) area of 140,193 sq ft. The adjacent land parcel B has a site area of around 97,287 sq ft and a maximum GFA of 145,920 sq ft. Both parcels are being sold on short-term
$18 million revamp of Tiong Bahru Plaza Shopping mall management group, AsiaMalls Management, the joint venture between ARMF and SGX-listed Guthrie Group, announced last week that it will be repositioning Tiong Bahru Plaza (above), one of the suburban malls in its portfolio which includes six other malls — Hougang Mall, White Sands, Century Square, Liang Court, Central Plaza and the upcoming Tampines 1. Two floors of the Central Plaza office tower (acquired early last year) located next door to Tiong Bahru Plaza will be converted to civic use. This allows the latter to provide additional gross floor area for retail use. Targeted for completion by 3Q2008, the estimated cost of the revamp is $18 million, and will add another 19,000 sq ft for retail and F&B outlets, while the existing areas will be reconfigured. — Compiled by E Mark Henderson
(
Offshore CapitaLand to create $426mil fund for Vietnam expansion CapitaLand has strengthened its presence in Vietnam with several new business initiatives which include a strategic partnership and a multi-million dollar development fund. A statement of strategic intent has been signed with CapitaLand’s local Vietnamese partner Nam Thang Long Investment Joint-Stock Company to form a strategic alliance to seek further real estate business opportunities. The partners will also develop residential properties and commercial-residential mixed developments. CapitaLand will also leverage on its real estate and fund management expertise to set up its first property fund to invest in Vietnam. It intends to take a 30% sponsor stake in the targeted $426 million fund. CapitaLand has signed a memorandum of understanding with Citi Private Bank, one of the world’s largest wealth managers, to explore real estate investment opportunities in Vietnam. CapitaLand believes the fund will follow the success of its CapitaLand China Development Fund, which is also co-marketed with Citi Private Bank in China. The group is confident of doubling its residential pipeline in Vietnam from the present 2,800 homes to around 6,000 homes over the next three years. CapitaLand is also looking for opportunities in the office, retail, and integrated leisure, entertainment and conventions sectors. CapitaLand is in a strong financial position to tap opportunities in Vietnam despite the tough global financial landscape. In February, the group raised
$1.3 billion through a 10-year convertible bond issue — the largest 10-year convertible bond transaction ever done in Singapore. It also recently closed two new funds — the CapitaRetail India Development Fund has raised US$600 million to invest in retail development projects in India, and the CapitaRetail China Development Fund II which has US$600 million ($837.84 million).
Keppel Land unveils Saigon Centre concept plans Keppel Land, one of the largest property developers in Vietnam, has unveiled concept plans for its Saigon Centre. The 2ha mixed-use development fronts Le Loi Boulevard, the main thoroughfare in Ho Chi Minh City. Phase One, completed in 1996, is a 25storey building comprising a three-storey retail podium, 11 levels of prime office space, 89 serviced apartments and three levels of basement carpark. Saigon Centre is the preferred address of the diplomatic corps, multinational companies, bank and financial institutions. Keppel Land and local partners, Sowatco and Resco, will embark on plans to develop an iconic landmark development integrating subsequent phases of Saigon Centre. Skidmore, Owings and Merrill, one of the world’s largest architectural firms, will design the new concept plans.
More demand for Bangkok luxury apartments CB Richard Ellis (CBRE) predicts Bangkok’s luxury condominium market will become more active this year and new supply will continue to
be limited. Freehold plots in prime central locations are very limited and the increase in land prices has resulted in a drop in the new supply of luxury units in these areas, while demand for downtown city living is growing. Prices for new downtown condominiums have risen by an average of 10% to 12% a year since 2003. CBRE says investment in new luxury apartments in prime locations has generated an average of 4% to 5% yield per annum over the past four years along with price appreciation. The average percentage of foreigner buyers has increased to 32% over the past three years from less than 20% a decade ago. Tight supply and relative affordability is boosting prices in downtown Bangkok. A luxury two-bedroom unit with 970 to 1,300 sq ft sells for around US$500,000 ($698,200).
Ascott to manage new Jakarta serviced residence The Ascott Group will manage Somerset Kuningan, a new serviced residence in Jakarta’s CBD. The contract was signed with PT Ciputra Adigraha, a subsidiary of PT Ciputra Property Tbk, one of Indonesia’s most established commercial property developers. Somerset Kuningan will be part of a large integrated development called Ciputra World Jakarta. The 10ha project comprises a high-end retail mall, office towers, condominiums and a fivestar hotel-luxury residence. The 153-unit serviced residence is expected to open in 2H2012. — ComE piled by Mark Henderson
THEEDGE SINGAPORE | MARCH 3, 2008 • CC3
Phillip Investor Hub also houses all of its 310 financial advisers, some of its backroom staff, and act as a satellite office for its 150 remisiers
PICTURES: GWYNETH YEO/THE EDGE SINGAPORE
CITY&COUNTRY
quarters occupies six floors in Raffles City Tower, totalling 60,000 to 70,000 sq ft. “We are actually expanding in Raffles City, not shrinking,” emphasises Lim. “We still need more space. [The new investor hub] indirectly helps relieve some of the space pressure that we have in Raffles City.”
Rental costs
More than just a hub | BY NOVA THERESIANTO |
H
omegrown financial services firm, PhillipCapital, has been most aggressive at bringing its financial services nearer to its investors — to the heartland districts. Over the last eight years, it has planted investor centres in major residential neighbourhoods from Ang Mo Kio, Marine Parade and Toa Payoh, to as far as Bukit Batok, Yishun and Woodlands. It also has two investor centres in the CBD, namely Robinson Road and Raffles City Tower. In fact, its first investor centre was at Straits Trading Building along Battery Road. Set up in 2000, it
has since been relocated to the current Robinson Towers premise. To date, it has nine investor centres. Two weeks ago, PhillipCapital opened its first investor hub at the former Moulmein Community Centre at Shan Road, off Balestier Road. Unlike the typical investor centres in the heartlands, which tend to be housed in shophouses of around 2,000 sq ft, the flagship Phillip Investor Hub is 10 times larger with a gross floor area of 22,593 sq ft. PhillipCapital spent about $1.8 million refurbishing the former community centre, which had been vacant for more than two years. Unlike the other investor centres, the Phillip
Investor Hub is designed like a clubhouse with a cafeteria and a rooftop garden for client functions.
‘Comprehensive range of services’ “We thought it was a good idea to do something more significant, like a hub, which we can plant in different major parts of Singapore,” says Lim Hua Min, executive chairman of PhillipCapital. “And so hopefully, this first hub will not be the last one, so that we will be in a position to provide a more comprehensive range of services.” Including the new investor hub at the former Moulmein Community Centre, PhillipCapital now has 10
Lim: We are actually expanding in Raffles City, not shrinking. We still need more space.
such investor centres. “Our aim is to have 20 [investor hubs and centres] in time to come, [and] we are looking at three this year,” says Lisa Lee, director of business development and consumer services at PhillipCapital. The rate of expansion will depend on the availability of sizeable properties in strategic locations, for instance, in the regional centres of Jurong East in the west and Tampines in the east. The investor hub also helps centralise several functions. It houses all the 310 financial advisers who were previously located in various investor centres. It also acts as a satellite office for its 150 remisiers or so-called “home sales force”. It will also house some of PhillipCapital’s backroom functions. Currently, PhillipCapital’s head-
On top of that, it also helps reduce overall rental costs. As of February, asking rents at Raffles City Tower is in the range of $16.20-$17.50 psf per month, according to office leasing specialists, Corporate Locations’ latest rental guide. Meanwhile, PhillipCapital had successfully bid to lease the former Moulmein Community Centre site for its investor hub from the Singapore Land Authority for $35,000 per month in June last year. This works out to a rental rate of a mere $1.55 psf per month. The lease period is for three years, with an option to renew for threeplus three years. Unlike the other investor centres which follow regular office hours (in the heartlands they are opened from 9am to 1pm on Saturdays), the new investor hub will be opened seven days a week from 11am to 5pm. “The CBD gets really sleepy during the weekend, therefore we are actually going into areas where these investors live,” says Lee. The company has also set up investor centres in Thailand, Indonesia E and Hong Kong.
CC4 • THEEDGE SINGAPORE
| MARCH 3, 2008
CITY&COUNTRY
COVERSTORY
The pric
1 1 1 1 1
MILLIONAIRES’
The brand new super-luxury good class bungalow at 39 Leedon Road and the neighbouring 37 Leedon Road are on the market with price tags of $35 million each
row in Singapore
While GCB transactions are expected to moderate this year after a record 2007, sellers are still bullish with their asking prices | BY CECILIA CHOW |
T
he US subprime woes may have dampened sentiment and slowed the rate of sales, but it has yet to put a dent on owners’ asking prices, especially at the top-tier of the luxury home market, the good class bungalows (GCBs). Last year was a record year for the GCB market, with 117 transactions worth $1.54 billion taking place, according to Jones Lang LaSalle Research. However, the bulk of the sales of $1.4 billion (90%) were done in the first nine months of the year. In 4Q when the US subprime crisis started to have a knockon effect on global stock markets, market sentiment in Singapore dipped, and only nine GCBs changed hands over the last three months of 2007. “2008 is generally expected to see a slower start to the year as fears of a US recession continue to affect market sentiment,” says David Batchelor, associate director of investments at Jones Lang LaSalle, and a specialist in the GCB market. While demand for GCBs remains strong, actual transactions for 2008 is expected to moderate. This is already evident in terms of sales for the first
two months of the year: only a handful of GCBs changed hands compared with the same period last year, which saw around 20 transactions. The most recent deal according to URA Realis database of caveats lodged, was on Feb 4 when 32 White House Park with a land area of 15,081 sq ft, changed hands for $18 million or $1,194 psf. However, unlike the luxury condo market that has gone very quiet since the last quarter of 2007, with developers holding back their launches until sentiment improves, there is still activity in the landed homes segment, observes Shaun Poh, senior director of investment advisory services and auction at DTZ Debenham Tie Leung.
More GCBs priced above $1,000 psf Most recently, DTZ put up for sale by private treaty a GCB at 5A Bishopsgate (located off Grange Road and Nathan Road) with an indicative price of $24 million. This translates to $1,423 psf based on a land area of 16,861 sq ft. The double-storey bungalow with a total built-up area of 9,800 sq ft has seven bedrooms and a swimming pool. Built 11 years ago, the house is still in mint condition and was recently given a fresh coat of paint. Hence, the new
owner would not need to do any extensive renovation works. The property is currently tenanted at a monthly rental rate of $40,000 a month, with the lease expiring end-October 2009. Just next door, 7A Bishopsgate changed hands for $21 million or $1,202 psf in December last year. “These days, the asking price for GCBs is above $1,000 psf,” says Poh. There are also several properties that were put on the market last year at prices above $1,000 psf, and which are still available for sale. One of them is 35 Leedon Road, which sits on a 43,927 sq ft freehold. The owners are not budging from their asking price of $44 million or $1,001 psf. Another is 3 Wollerton Park which has a land area of 26,326 sq ft site and an indicative sale price of $32 million to $33 million or $1,215 to 1,254 psf. The existing mansion has a built-up area of 15,000 sq ft with six bedrooms and a basement. There’s also a separate wing for entertaining guests. In the exclusive Chatsworth Park enclave, the conservation bungalow at No 5 Chatsworth Park was put up for sale by private treaty in November. The conservation house and an outhouse sit on a sprawling 43,496 sq ft site and the price tag is $45 million or close to
$1, the er G inc
in 2 psf cen wit to $ aG bou Na for sim $19
Sep we ma me ow and Roa his
ter Lan mo and
Su bu
As ma the the 37 ope at t lau gal tran Lim: As you move up to the tip of the pyramid, there are fewer and fewer people who can afford a home at this level
bui
THEEDGE SINGAPORE | MARCH 3, 2008 • CC5
COVERSTORY COVER STORY
Top 10 GCB transactions in 2007 NO
DATE
ADDRESS
31 75 94 96 98 104 106 108 112 117
March 30 June 8 July 25 Aug 2 Aug 7 Sept 11 Sept 18 Sept 26 Nov 9 Dec 21
63 Dalvey Road 20B Nassim Road 10 Peirce Hill 15 White House Park 5A Bishopsgate 32G Nassim Road 32H Nassim Road 30 White House Park 7 Gallop Walk 7A Bishopsgate
LAND AREA (SQ FT)
SALE PRICE ($)
PSF ($)
15,080 24,186 16,926 22,011 16,867 13,292 13,422 14,811 15,202 17,472
16,450,000 24,183,480 17,200,000 28,800,000 18,800,000 19,998,000 25,500,000 15,500,000 15,350,000 21,000,000
1,091 1,000 1,016 1,308 1,115 1,505 1,900 1,047 1,010 1,202
Good class bungalows transactions in 2008 (to date)
1,600 1,400
Total transacted value ($mil) Total transacted value Total No sold
120 100
1,200 1,000
80
800
60
600
40
400 20
200 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
luxlow and g 37 the s of ach
140
0
$1,035 psf. Given the size of the land, it has the potential to be sub-divided into two smaller GCB sites of over 21,000 sq ft each, which includes the conservation bungalow. According to Jones Lang LaSalle Research, in 2007, 10 GCBs were sold at prices of $1,000 psf and above. Three of the deals were concentrated in the exclusive Nassim Road area, with the highest price achieved there at close to $1,900 psf, which is also a record price for a GCB property. This was for one of two neighbouring plots at Nassim Road, namely 32H Nassim Road (a 13,422 sq ft site that was sold for $25.5 million or $1,899 psf); and 32G Nassim Road (a 13,292 sq ft site that was sold for $19.998 million or $1,505 psf). Both these properties were transacted in September, and according to market sources, were bought by Chew Hua Seng, the chairman and CEO of Raffles Education Corp (formerly Raffles LaSalle Ltd). Chew currently owns 32K Nassim Road, just two doors away, and sources say the two neighbouring Nassim Road homes were likely to be purchased for his family’s use. “The rich are getting richer and have better holding power than before,” observes Jones Lang LaSalle’s Batchelor. “The GCB market is more resilient than the luxury condo market, and is a better hedge against inflation.”
Super-luxury, high-specification bungalows at $35 million
r
As more GCBs start to cross the $1,000 psf mark, more GCB owners will be willing to put their homes on the market. The latest launch is the brand new pair of “super-luxury” GCBs at 37 and 39 Leedon Road by niche luxury developer, George Lim of GLim Pte Ltd. Completed at the end of December, the two homes were launched in a glitzy event on Feb 21. Each bungalow carries a price tag of $35 million, which translates to over $1,500 psf. No 37 has a land area of 22,000 sq ft and built-up area of 10,000 sq ft. Meanwhile, No
2,750 2,500 2,250 2,000 1,750 1,500
($) High end condo avg cap value GCB avg $ per sq ft
JONES LANG LASALLE RESEARCH
1,800
High-end condos vs GCBs
DATE
ADDRESS
1 2 3 4 5
Feb 4 Feb 4 Feb 4 Jan 16 Jan 22
32 White House Park 14 Mount Echo Park 20 Caldecott Close 5 Swettenham Green 85 Chestnut Drive Total land area Total transaction Average psf
1,250 1,000 750 500 250 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
GCB transactions
JONES LANG LASALLE RESEARCH
The good class bungalow at 5A Bishopsgate (located off Grange Road and Nathan Road) has an indicative price of $24 million or $1,423 psf
NO
39 has a land area of 21,000 sq ft and builtup area of 11,000 sq ft. Both homes have fivebedrooms, an aquarium with exotic fish, a koi pond, swimming pool, a roof deck for outdoor entertaining, a separate guest house, a wine cellar to house 2,000 bottles of wine, a shoe cupboard for up to 500 pairs of shoes, a gourmet kitchen with imported Viking professional kitchen appliances, an internal lift, and a basement car park for seven cars. The two homes will appeal to the tech-savvy. There is a home automation system that can be programmed to turn on lights and airconditioning anywhere around the house either with the wall panels or remotely from your mobile phone or PC; an entertainment system with AMX movie on demand (up to 250 movies) and piped in music for every room and outdoor areas. There are also six plasma televisions installed in the house — a ceilingmounted 50” TV in the master bedroom and five others in the living and family rooms. The kitchen also has a 28” high-definition TV. All the TVs are linked to surveillance cameras in various parts of the house for security. Lim has also installed a dehumidifier for all the walk-in wardrobes as well as the shoe cupboard. “Whenever I build a house, I always ask myself, ‘What can I do to make the home more comfortable and convenient through home automation without making it too complicated for the owner?’”. Offers in the “$30-million range” have trickled in, but Lim is not biting. Will he consider lowering his price tag if he doesn’t get his asking price of $35 million? “There’s no reason why a property like this can’t be sold,” he comments. “As you move up to the tip of the pyramid, there are fewer and fewer people who can afford a home at this level.” A newly completed home like Lim’s will likely appeal to homebuyers in the face of skyrocketing construction costs over the past year due to competition for scarce resources and manpower amidst a construction boom.
Batchelor: The rich are getting richer and have better holding power than before. The GCB market is more resilient than the luxury condo market, and is a better hedge against inflation.
Hence, most GCB buyers have shifted their focus from building their own dream GCBs to looking for completed GCBs where little or no improvements are required, observes Batchelor. “Thus it is expected that [demand for] completed GCBs will be stronger in 2008 as construction costs continue to remain high.”
More owner occupiers and long-term investors as prices trend up Over at 11 Ford Avenue, the tender for the sale closed on Feb 21. This is one of the few large GCB sites left. With a sprawling 45,894 sq ft site, the property has the potential to be subdivided into three smaller GCBs. The owner of 11 Ford Avenue is believed to be the Eu family of Singapore Exchange-listed Eu Yan Sang. The traditional Chinese medicine empire founded back in 1879 is already in the fourth generation of the family, and is headed by Richard Eu, the great-great-grandson of the founder, Eu Kong.
LAND AREA (SQ FT)
SALE PRICE
PSF ($)
15,081 18,568 17,400 15,817 15,999
18,000,000 13,250,000 10,080,000 12,682,760 8,580,000
1,194 714 579 802 536
82,865 sq ft $62,592,760 $755 psf
The property was put up for sale on Jan 15 with an indicative price tag of $41 million or $893 psf. Colliers International, the marketing agent for the property is said to be “in negotiations with interested parties”. According to Ho Eng Joo, executive director of investment sales at Colliers International, who’s handling the sale, interest has come mainly from buyers who’re looking at buying the super-sized GCB site for their own occupation. As GCB prices continue to head north, buyers have started to widen their search beyond the traditional prime residential districts in the city centre. They are looking further out to locations like Chestnut Drive and Windsor Park where prices are still below the $1,000 psf mark. This can be seen in the transactions this year. While 32 White House Park was sold for $1,192 psf, the GCB at 83 Chestnut Drive with a 15,999 sq ft site went for $8.58 million or $536 psf. At 20 Caldecott Close, the GCB on a 17,400 sq ft site changed hands for $10.08 million or $579 psf. While the total value of sales in 2007 at $1.54 billion exceeded 2006’s $1.3 billion, in terms of the number of transactions, 2007’s 117 were fewer than 2006’s 128. This reflects the sharp run-up in property prices last year. The average price per square foot for GCBs was $692 psf in 2007, compared with $503 psf in 2006, which showed average capital values appreciating 37.6%. The average price for the five transactions in 2008 to date was $755 psf, which is 9% higher than the average prices recorded last year. Hence, while Batchelor expects sales volume to moderate this year, he is confident that in terms of value, it could potentially remain on par with last year. What’s worth noting is that while GCBs remain sought-after investments and are still coveted assets for newly minted millionaires, it is now seeing stiff competition from Sentosa Cove, with 99-year leasehold waterfront bungalows. While land values of GCBs averaged at $692 psf for the whole of last year, sea-fronting bungalow parcels at Sentosa Cove were close to double that at $1,283 psf. Even luxury-end condos are seeing transaction prices that are much higher than GCBs, averaging $2,730 psf in 2007. “The GCB market is unique and caters to the ultra-rich home buyers and sellers and will generally continue to remain resilient against any recession in the US,” he adds. Transactions of GCBs will remain active and record prices are expected for the various GCB enE claves in 2008.”
JONES LANG LASALLE RESEARCH, URA REALIS
PICTURES: SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
CITY&COUNTRY
| MARCH 3, 2008 GWYNETH YEO/THE EDGE SINGAPORE
CC6 • THEEDGE SINGAPORE
CITY&COUNTRY
The row of five terraced houses at Essex Road has a price tag of $30 million or $1,500 psf ppr
COLLIERS INTERNATIONAL
Train of collective sale hopefuls continues unabated | BY CECILIA CHOW |
T
he collective sale market may have cooled considerably since 4Q2007, but the ardour of collective sale hopefuls apparently hasn’t. And it’s no longer confined to the owners of condominium and apartment blocks either. Jumping on the bandwagon are owners of landed homes. Last November, the owners of 15 terraced houses along Jalan Bunga Raya in Balestier banded together and sold their homes collectively for $61 million to a Chinese developer and a Singaporean partner. Each of the owners walked away with $4 million. More recently, the owners of a row of five terraced houses along Essex Road, just off Thomson Road, are hoping to reap an equally profitable windfall. Unlike a collective sale of a condominium project where only 80% of the owners need to give their consent for a sale to go through (for projects that are at least 10 years old), in the case of landed homes, all the owners have to agree. However, as landed homes, the collective sale does not need Strata Title Board approval, which will make the sale less cumbersome once all the owners have agreed to the sale. In the case of the Essex Road houses, Knight Frank, the appointed marketing agent, received approval from all the owners to proceed with the collective sale. This was made easier because the owner of three of the five houses is the person who also initiated the sale process. He is Dr Lim, CEO of ASIAINSTITUT OF MANAGEMENT (AM School of Business Studies), who had purchased the houses three years ago. What’s also interesting is that the owners have decided to opt for an auction sale in the hope of achieving a speedier sale process. Knight Frank will be putting up the properties for auction sale on March 20. Lim believes the potential of the row of Essex Road terraced houses hinges on the possibility of it being amalgamated with the neighbouring strip of state land, the service road behind the houses for the owners to park their cars, and more importantly, with the apartment block Lion Towers behind it, which is also pursuing a collective sale. He argues that such an amalgamation will enhance the footprint of the existing Lion Towers site by another 80%, making it more attractive to a developer looking for a freehold
The row of 16 terraced houses at Fort Terrace has an indicative price of $95 million or $1,238 psf ppr
development site in the prime residential enclave of Newton/Novena. The en bloc sales committee of Lion Towers at 2 Essex Road has recently appointed CB Richard Ellis (CBRE) as their marketing agent to handle their collective sale. According to market sources, it’s still in the process of drafting the collective sale agreement.
Lion Towers Built close to 30 years ago, Lion Towers has 52 apartments and sits on a 40,409 sq ft freehold site. With a plot ratio of 2.8 and a maximum height of 36-storeys under the 2003 Master Plan, a developer will be able to build a brand new 75-unit luxury condominium with units averaging 1,500 sq ft each. According to market sources, the indicative price of Lion Towers is estimated to be close to $200 million, which works out to around $1,742.46 psf ppr. At that price, each owner will pocket $3.8 million each. The owners are said to have already applied to the Singapore Land Authority (SLA) regarding the possible annexation of the neighbouring state land to be amalgamated with the Lion Towers site. Meanwhile, the five houses at Essex Road are sitting on a freehold site of 7,163 sq ft. The land is zoned for residential development
with a plot ratio of 2.8 according to URA’s 2003 Master Plan, and has a maximum height of 36-storeys as well. The owners’ asking price is $1,500 psf ppr or around $30 million. If that price is achieved, each owner will walk away with a cool $6 million. This asking price is comparable to the sale price of last year’s collective sale deals in its immediate neighbourhood. Last November, contractor-cum-developer, Bravo Building Construction Group, bought Makeway View for $162.8 million through a collective sale, which is equivalent to $1,583 psf ppr. In June last year, a consortium led by Koh Brothers bought Lincoln Lodge in a collective sale worth $243 million or $1,449 psf ppr. If the site of the Essex Road houses is combined with the neighbouring state land and service road, the total area would be over 30,000 sq ft, estimates Lim. If amalgamated with the Lion Towers site, he reckons that the enlarged footprint would be over 70,000 sq ft and a developer could potentially build a 100-unit luxury project with unit sizes averaging 1,800 sq ft. Another attraction of the site is the fact that at the end of Essex Road is SJI Junior (the former St Michael’s School). It is also in the neighbourhood of other good schools
in Bukit Timah such as Nanyang Girls’ High School, Hwa Chong High and National Junior College. What’s more the Novena enclave is also turning into a booming medical hub. Linked to the Novena MRT station and located behind Novena Square is Tan Tock Seng Hospital and Far East Organization’s brand new Novena Medical Centre. The area recently received an added boost when Parkway Holdings bid a record $1.25 billion ($1,600 psf ppr) for a 1.7ha, 99-year leasehold government site to build a private hospital at Novena Terrace/Irrawady Road. It’s also a sought-after residential neighbourhood given its proximity to the CBD and Orchard Road. In the immediate neighbourhood of Parkway’s site is Frasers Centrepoint’s new condominium development, the 417-unit twin-tower Soleil@Sinaran that was launched last year and is currently under construction. The most recent transaction, according to the caveats lodged on URA Realis, was for a 958 sq ft unit on the third floor which was sold for $1.23 million ($1,285 psf). A 1,453 sq ft apartment on the 16th floor changed hands on the sub-sale market for over $2.32 million ($1,600 psf) at the end of last year. Meanwhile, at 1 Essex Road is Far East Organization’s Strata, a 32-storey, 100-unit loftstyle apartment tower completed in 2006. According to the URA Realis database of caveats lodged, three 506 sq ft apartments changed hands on the resale market at prices ranging from $650,000 ($1,285 psf) for the most recent transaction on Sept 21 last year to $820,000 ($1,621 psf) for a similar-sized unit also on the second floor, which was sold in early August last year. Across the road and next to United Square shopping mall is Allgreen Properties’ Viva, a brand new condominium that’s yet to be launched. Behind Viva is Keppel Land’s 486unit Park Infinia at Wee Nam, targeted for completion next year. A handful of units in the development changed hands in January at prices ranging from $1,410 to $1,600 psf. The selling prices of new launches in the area are even higher. Just down the street from the row of Essex Road houses is the showflat of Lucida, a 62-unit high-end condominium project by boutique developer, Novelty Group. Private previews at Lucida have yet to begin, but marketing agents are citing an indicative selling price of $1,700 to $2,000 psf.
Fort Terrace, another collective sale hopeful Meanwhile, over at the east coast, the owners of a row of 16 terraced houses called Fort Terrace at 29-59 Fort Road have also put their properties up for collective sale. The freehold residential site was put up for tender on Feb 27, and will close on March 26. The rectangular freehold development site has a total area of 47,886 sq ft and under the 2003 Master Plan, it is zoned for residential use with a gross plot ratio of 2.1. Colliers International, the marketing agent, has already obtained 100% agreement from the owners to proceed with the collective sale. According to Ho Eng Joo, executive director of investment sales at Colliers International, the indicative price is $95 million. There’s a development charge of $23 million, as well as the cost of annexing a piece of 10,964 sq ft state land, which is estimated at $6.4 million. This will work out to $1,238 psf ppr. The site has the potential to be redeveloped into a high-rise condominium with 67 units averagE ing 1,500 sq ft each.
CITY&COUNTRY
Unlike many other Western economies swamped by the subprime backwash, the Australian property scene still looks bright
| BY MARK HENDERSON |
T
he fallout from the US subprime crisis is hammering housing markets across the US and Europe. Mortgage foreclosures in the US are escalating as inflated home values sink. And the news is also grim in the UK where homeowners are watching their valuations slide. But it’s not all doom and gloom on the Western property front, claims Australian property expert Ben Boyle. There are, he says, reliable returns in strong growth areas Down Under, such as Queensland. Boyle is a director of Your Property Solutions (YPS), a property consultancy service based in Brisbane. He was recently in Singapore and Hong Kong to market the company to expatriates and locals while catching up with clients. The difference between YPS and most other agencies, says Boyle, is that the company works exclusively for the buyer. “We use our extensive knowledge and experience in the Queensland market to source property to the buyer’s requirements.” YPS not only finds the property, it negotiates price (which Boyle claims is typically 10% less than the “fair market value”), arranges building and pest inspections, insurance and finance services. The agency also operates a property management service, which has more than 500 investment homes on its books. Around 70% of YPS’ clients are investors. Boyle, a former captain in the Australian Army, who served in East Timor and Iraq, says his confidence in the Sunshine State’s residential market is backed by solid data. Unlike many other Western economies swamped by the subprime backwash, the Australian property scene still looks bright. While falling house prices elsewhere are undermining consumer wealth and confidence, Australia is tracking a different pattern. A report by Macquarie Research Economics in December 2007 points out that the Aussies
Buying property in Australia’s Sunshine State year led the way with 20%-plus capital gain. “Key drivers are strong economic growth from the mining-dominated economy — many of the country’s mining giants operate in Queensland — and strong population and wages growth, particularly in Queensland. Around 50,000 people a year are moving to the state. Many corporates are relocating to Brisbane from Sydney. Brisbane has a broad-based economy, including agriculture and information technology. The city is no longer a big country town.” Boyle believes median-priced properties in median-priced suburbs are a solid bet for long-term growth. Around A$450,000 will buy a three-bedroom, two-bathroom house on 6,400 sq ft of
land within 10km of central Brisbane. This property will earn A$400 a week in rent for a net 4% to 5% return, plus capital growth, which was running at 20% last year. Capital gain has averaged 10% annually over the past 10 years in southeast Queensland. Apartments close to the city, says Boyle
Apartments close to the city, says Boyle are ‘renting machines’. A new A$400,000 unit with two bedrooms and two bathrooms rents for A$380 to A$460 per week. A three-bedroom townhouse costs A$500,000 and can fetch A$450-plus a week in rents.
are “renting machines”. A new A$400,000 unit with two bedrooms and two bathrooms rents for A$380 to A$460 per week. A threebedroom townhouse costs A$500,000 and can fetch A$450-plus a week in rents. Foreigners can only buy brand new houses and apartments, but there is plenty of new apartment stock in Brisbane, says Boyle. Investors are liable for capital gains tax at around 25% when they sell the property. YPS charges a flat A$10,000 fee for sourcing and negotiating the purchase of a property on behalf of a client. Andrew Powell, who works in an airlinerelated industry, and has been living in Singapore for the last five years, recently bought two houses near Brisbane using Boyle and YPS. “I wanted someone with knowledge on the ground,” says Powell. He paid A$420,000 for the first property, a three-bedroom house 5km from the city, in 2006. The house is now valued at A$550,000. Last year, he shelled out A$1.15 million for a sprawling five-bedroom, fully renovated traditional “Queenslander” colonial verandah house “in a great suburb” 4km from Brisbane. That property, he says, could now be confidently listed at A$1.4 million.
Queensland’s appeal have already had their pain. The slowdown in most of the Australian housing market took place in 2004-05. House prices in Adelaide and Brisbane have bounced back over the past couple of years. In Brisbane, the average cost of a three-bedroom house has climbed from A$350,000 ($488,940) to around A$450,000. Adelaide homes have risen from A$300,000 to more than A$360,000.
Heavy demand Demand for homes is outstripping supply. The Reserve Bank of Australia currently estimates 180,000 homes a year are wanted, but only 150,000 are being built. Residential building activity has been flat for five years, despite increasing migration into Australia. That’s putting pressure on the rental market. Rents are rising fast in most capital cities. In Brisbane, rents for a family home have increased by around A$50 per week (15%) over the past 12 months. Boyle says the residential good times will continue. Housing in Brisbane and Perth last
House prices in Adelaide and Brisbane have bounced back over the past couple of years
“I used Ben because I didn’t have the time to look myself,” says Powell. “The fee is a small price to pay for local knowledge. It took me four months to find an investment property in Sydney a few years ago. Ben found my first Brisbane buy on the same day it went to market.” Powell reckons that Queensland should appeal to many investors from Asia. “The Australian property market doesn’t have massive swings; it is more predictable with less risk over the long term.” Further north, booming Townsville offers investors some good opportunities, says Boyle. Townsville has a large transient population — mine workers on fly-in-fly-out contracts, for example — so rents are relatively high. Houses start from around A$300,000, up from A$150,000 five years ago. Apartments along the waterfront sell for A$400,000-plus. Boyle says Perth, popular with Singaporeans, has peaked. “Perth has come off the boil. After enjoying 20% capital growth over the past two years, the residential market there E has slowed to around 4%.”
PICTURES: YPS
THEEDGE SINGAPORE | MARCH 3, 2008 • CC7
CC8 • THEEDGE SINGAPORE
| MARCH 3, 2008
CITY&COUNTRY
HOME LOAN RATES responsible for any loss or damage arising directly or indirectly from the use of, or reliance on, the information provided herein.
Disclaimer: The rates shown here are only indicative and are subject to changes by the respective banks without prior notice. They are not to be taken as an offer of contract. The Edge Publishing Pte Ltd shall not be
SOURCES: VARIOUS BANKS, EXPRESS HOME LOAN CONSULTANCY, THE EDGE SINGAPORE
HDB housing loan rates BOARD RATE (%)
FIRST YEAR (%)
80% FINANCING SECOND YEAR (%)
THIRD YEAR (%)
THEREAFTER (%)
BOARD RATE (%)
FIRST YEAR (%)
90% FINANCING SECOND YEAR (%)
THIRD YEAR (%)
THEREAFTER (%)
Fixed Rate Package (min $300k) Flexible Rate Package
5.50 5.50
4.25 (fixed) 4.25 (HBR-1.25)
4.50 (fixed) 4.50 (HBR-1.00)
4.50 (fixed) 4.50 (HBR-1.00)
5.50 (HBR) 5.50 (HBR)
5.50 5.50
4.25 (fixed) 4.25 (HBR-1.25)
4.50 (fixed) 4.50 (HBR-1.00)
4.50 (fixed) 4.50 (HBR-1.00)
5.50 (HBR) 5.50 (HBR)
Hong Leong Finance
2-Year Fixed Rate Package Variable Rate Package
4.25 4.25
3.48 (fixed) 3.18 (HBR-1.07)
3.48 (fixed) 3.38 (HBR-0.87)
3.98 (HBR-0.27) 3.88 (HBR-0.37)
3.98 (HBR-0.27) 3.98 (HBR-0.27)
4.25 4.25
4.48 (fixed) 3.98 (HBR-0.27)
4.70 (fixed) 4.20 (HBR-0.05)
4.75 (HBR+0.50) 4.75 (HBR+0.50)
4.75 (HBR+0.50) 4.75 (HBR+0.50)
HSBC
2-Year Fixed Rate Package (min $500k) 50% of Loan on Fixed rate (2-yr lock-in)*** Variable Rate Home Loan (min $100k, no lock-in) Variable Rate Home Loan (min $100k, 1-year lock-in) 50% of Loan on Sibor Pegged Package (no lock-in) ***
NA NA NA
4.00 (fixed) 2.8% (fixed) 3.50
4.00 (fixed) 2.8% (fixed) 3.50
4.00 3.40% (fixed) 3.70
4.00 3.80% (fixed) 3.80
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA
3.30 3mth Sibor +0.7%
3.50 3mth Sibor +0.7%
3.70 3mth Sibor +0.7%
3.80 3mth Sibor +0.7%
NA NA
NA NA
NA NA
NA NA
NA NA
1-Year Fixed Rate Package
3.75
2.68 (fixed)
3.08 (BR-0.67)
3.38 (BR-0.37)
3.75 (HBR)
NA
NA
NA
NA
NA
2-Year Fixed Rate Package
3.75
2.28 (fixed)
2.68(fixed)
2.98 (BR-0.77)
3.75 (HBR)
NA
NA
NA
NA
NA
3-Year Fixed Rate Package**
3.75
1.68 (fixed)
2.68 (fixed)
3.38 (fixed)
3.75 (HBR)
NA
NA
NA
NA
NA
3-Year Fixed 2.80% Cashback
3.75
2.48 (fixed)
3.68 (fixed)
4.38 (fixed)
3.75 (HBR)
NA
NA
NA
NA
NA
Variable Rate Package (1-yr lock-in)
3.75
2.78 (BR-0.97)
3.08 (BR-0.67)
3.38 (BR-0.37)
3.75 (HBR)
NA
NA
NA
NA
NA
Variable Rate Package (2-yr lock-in)
3.75
2.48 (BR-1.27)
2.88 (BR-0.87)
3.38 (BR-0.37)
3.75 (HBR)
NA
NA
NA
NA
NA
Variable Rate Package (3-yr lock-in) Variable Rate Package (no lock-in)
3.75 3.75
2.28 (BR-1.47) 2.98 (BR-0.77)
2.88 (BR-0.87) 3.28 (BR-0.47)
3.38 (BR-0.37) 3.38 (BR-0.37)
3.75 (HBR) 3.75 (HBR)
NA NA
NA NA
NA NA
NA NA
NA NA
BANK
NAME OF LOAN SCHEME
ABN Amro
Maybank
Variable 2.80% Cashback
3.75
3.08 (BR-0.67)
3.88 (BR+0.13)
4.38 (BR+0.63)
3.75 (HBR)
NA
NA
NA
NA
NA
OCBC
1-Year Fixed Rate Package 2-Year Fixed Rate Package Variable Rate Package
3.75 3.75 3.75
3.75 (fixed) 3.75 (fixed) 3.25 (HBR-0.50)
3.50 (HBR-0.25) 4.00 (fixed) 3.50 (HBR-0.25)
3.75 (HBR) 3.75 (HBR) 3.75 (HBR)
3.75 (HBR) 3.75 (HBR) 3.75 (HBR)
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA NA
POSB
Home Ideal package (pegged to CPF rate)** 3-Year Fixed Rate Package
NA NA
CPF Rate + 1.00 3.88 (fixed)
CPF Rate + 1.25 3.88 (fixed)
CPF Rate + 1.58 3.88 (fixed)
CPF Rate + 1.58 CPF Rate + 1.58
NA NA
NA NA
NA NA
NA NA
NA NA
4.25
4.00 (HBR-0.25)
4.25 (HBR)
4.75 (HBR+0.50)
4.75 (HBR+0.50)
NA
NA
NA
NA
NA
NA
3.25
3.50
3.75
3.75
NA
NA
NA
NA
NA
Sing Investments Variable Rate Package & Finance Standard Chartered
Floating Rate Package (min $100k)
UOB
1-Year Fixed Rate Package 2-Year Fixed Rate Package 3-Year Fixed Rate Package Floating Rate Package
4.50 4.50 4.50 4.50
4.25 (fixed) 4.10 (fixed) 3.98 (fixed) 3.25 (HBR-1.25)
4.25 (HBR-0.25) 4.10 (fixed) 3.98 (fixed) 3.50 (HBR-1.00)
4.25 (HBR-0.25) 4.10 (HBR-0.40) 3.98 (fixed) 3.75 (HBR-0.75)
4.25 (HBR-0.25) 4.10 (HBR-0.40) 3.98 (HBR-0.52) 3.75 (HBR-0.75)
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
RHB
2-Year Fixed Rate Package Variable Rate Package
4.25 4.25
3.50 (fixed) 3.25 (HBR-1.00)
3.75 (fixed) 3.50 (HBR-0.75)
3.88 (HBR-0.37) 3.75 (HBR-0.50)
4.00 (HBR-0.25) 4.25 (HBR)
NA NA
NA NA
NA NA
NA NA
NA NA
HBR = HDB Housing Board Rate
NA = Not available
**CPF rate has remained at 2.5% per annum since July 1999
Private housing loan rates BOARD RATE (%)
FIRST YEAR (%)
80% FINANCING SECOND YEAR (%)
THIRD YEAR (%)
THEREAFTER (%)
BOARD RATE (%)
FIRST YEAR (%)
90% FINANCING SECOND YEAR (%)
THIRD YEAR (%)
THEREAFTER (%)
Fixed Rate Package (min $300k) Flexible Rate Package
5.50 5.50
4.25 (fixed) 4.25 (BR-1.25)
4.50 (fixed) 4.50 (BR-1.00)
4.50 (fixed) 4.50 (BR-1.00)
5.50 (BR) 5.50 (BR)
5.50 5.50
4.25 (fixed) 4.25 (BR-1.25)
4.50 (fixed) 4.50 (BR-1.00)
4.50 (fixed) 4.50 (BR-1.00)
5.50 (BR) 5.50 (BR)
Interbank Market Rate Package* Nil Loyalty Period 1-Year Loyalty Period 2-Year Loyalty Period 3-Year Loyalty Period
NA NA NA NA
Sibor + 1.25 Sibor + 1.10 Sibor + 0.95 Sibor + 0.80
Sibor + 1.25 Sibor + 1.25 Sibor + 0.95 Sibor + 0.80
Sibor + 1.25 Sibor + 1.25 Sibor + 1.25 Sibor + 0.80
Sibor + 1.25 Sibor + 1.25 Sibor + 1.25 Sibor + 1.25
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
7.25 7.25
3.88 (fixed) 3.38 (BR-3.87)
4.18 (fixed) 3.88 (BR-3.37)
4.00 (BR-3.25) 4.00 (BR-3.25)
4.00 (BR-3.25) 4.00 (BR-3.25)
7.25 7.25
4.58 (fixed) 4.18 (BR-3.07)
4.78 (fixed) 4.38 (BR-2.87)
4.75 (BR-2.50) 4.75 (BR-2.50)
4.75 (BR-2.50) 4.75 (BR-2.50)
NA NA NA
4.00 (fixed) 2.8% (fixed) 3.50
4.00 (fixed) 2.8% (fixed) 3.50
4.00 3.40% (fixed) 3.70
4.00 3.80% (fixed) 3.80
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA 3.30 NA 3mth Sibor +0.7%
3.50 3mth Sibor +0.7%
3.70 3mth Sibor +0.7%
3.80 3mth Sibor +0.7%
NA NA
NA NA
NA NA
NA NA
NA NA
BANK
NAME OF LOAN SCHEME
ABN Amro DBS
Hong Leong Finance
2-Year Fixed Rate Package Variable Rate Package
HSBC
2-Year Fixed Rate Package (min $500k) 50% of Loan on Fixed rate (2-yr lock-in)*** Variable Rate Home Loan (min $200k, no lock-in) Variable Rate Home Loan (min $200k, 1-year lock-in) 50% of Loan on Sibor Pegged Package (no lock-in)***
Maybank
1-Year Fixed Rate Package
3.75
2.68 (fixed)
3.08 (BR-0.67)
3.38 (BR-0.37)
3.75 (BR)
3.75
3.18 (fixed)
3.58 (BR-0.17)
3.88 (BR+0.13)
4.25 (BR+0.50)
2-Year Fixed Rate Package
3.75
2.28 (fixed)
2.68(fixed)
2.98 (BR-0.77)
3.75 (BR)
3.75
2.78 (fixed)
3.18 (fixed)
3.48 (BR-0.27)
4.25 (BR+0.50)
3-Year Fixed Rate Package**
3.75
1.68 (fixed)
2.68 (fixed)
3.38 (fixed)
3.75 (BR)
3.75
2.18 (fixed)
3.18 (fixed)
3.88 (fixed)
4.25 (BR+0.50)
3-Year Fixed 2.80% Cashback
3.75
2.48 (fixed)
3.68 (fixed)
4.38 (fixed)
3.75 (BR)
3.75
2.98 (fixed)
4.18 (fixed)
4.88 (fixed)
4.25 (BR+0.50)
Variable Rate Package (1-yr lock-in)
3.75
2.78 (BR-0.97)
3.08 (BR-0.67)
3.38 (BR-0.37)
3.75 (BR)
3.75
3.28 (BR-0.47)
3.58 (BR-0.17)
3.88 (BR+0.13)
4.25 (BR+0.50)
Variable Rate Package (2-yr lock-in)
3.75
2.48 (BR-1.27)
2.88 (BR-0.87)
3.38 (BR-0.37)
3.75 (BR)
3.75
2.98 (BR-0.77)
3.38 (BR-0.37)
3.88 (BR+0.13)
4.25 (BR+0.50)
Variable Rate Package (3-yr lock-in) Variable Rate Package (no lock-in) Variable 2.80% Cashback
3.75 3.75 3.75
2.28 (BR-1.47) 2.98 (BR-0.77) 3.08 (BR-0.67)
2.88 (BR-0.87) 3.28 (BR-0.47) 3.88 (BR+0.13)
3.38 (BR-0.37) 3.38 (BR-0.37) 4.38 (BR+0.63)
3.75 (BR) 3.75 (BR) 3.75 (BR)
3.75 3.75 3.75
2.78 (BR-0.97) 3.48 (BR-0.27) 3.58 (BR-0.17)
3.38 (BR-0.37) 3.78 (BR+0.03) 4.38 (BR+0.63)
3.88 (BR+0.13) 3.88 (BR+0.13) 4.88 (BR+1.13)
4.25 (BR+0.50) 4.25 (BR+0.50) 4.25 (BR+0.50)
OCBC
Fixed Rate Package Variable Rate Package
4.50 4.50
3.75 (fixed) 3.25 (BR-1.25)
4.00 (fixed) 3.50 (BR-1.00)
3.75 (BR-0.75) 3.75 (BR-0.75)
3.75 (BR-0.75) 3.75 (BR-0.75)
NA NA
NA NA
NA NA
NA NA
NA NA
Standard Chartered
Floating Rate Package (min $200k) MortgageOne Package (min $500k)
5.00 5.00
3.25 (BR-1.75) 3.50 (BR-1.50)
3.50 (BR-1.50) 3.75 (BR-1.25)
3.75 (BR-1.25) 4.00 (BR-1.00)
4.00 (BR-1.00) 4.25 (BR-0.75)
3.85 4.10
4.10 (BR+0.25) 4.35 (BR+0.25)
4.35 (BR+0.50) 4.60 (BR+0.50)
4.60 (BR+0.75) 4.85 (BR+0.75)
4.60 (BR+0.75) 4.85 (BR+0.75)
UOB
1-Year Fixed Rate Package 2-Year Fixed Rate Package 3-Year Fixed Rate Package Floating Rate Package (UOB Home Plus)
4.50 4.50 4.50 4.50
4.25 (fixed) 4.10 (fixed) 3.98 (fixed) 3.50 (BR-1.00)
4.25 (BR-0.25) 4.10 (fixed) 3.98 (fixed) 3.75 (BR-0.75)
4.25 (BR-0.25) 4.10 (BR-0.40) 3.98 (fixed) 4.00 (BR-0.50)
4.25 (BR-0.25) 4.10 (BR-0.40) 3.98 (BR-0.52) 4.00 (BR-0.50)
NA 4.50 NA 4.50
NA 4.50 (fixed) NA 4.25 (BR-0.25)
NA 4.50 (fixed) NA 4.50 (BR)
NA 4.50 (BR+0.25) NA 5.00 (BR+0.50)
NA 4.50 (BR+0.25) NA 5.00 (BR+0.50)
Sing Investments Variable Rate Package & Finance
5.00
4.00 (BR-1.00)
4.25 (BR-0.75)
4.75 (BR-0.25)
4.75 (BR-0.25)
5.00
4.00 (BR-1.00)
4.25 (BR-0.75)
4.75 (BR-0.25)
4.75 (BR-0.25)
RHB
5.75 5.75
3.50 (fixed) 3.25 (BR-2.50)
3.75 (fixed) 3.50 (BR-2.25)
3.90 (BR-1.85) 3.75 (BR-2.00)
3.90 (BR-1.85) 3.75 (BR-2.00)
5.75 5.75
4.25 (fixed) 4.00 (BR-1.75)
4.25 (fixed) 4.25 (BR-1.50)
4.50 (BR-1.25) 4.50 (BR-1.25)
4.50 (BR-1.25) 4.50 (BR-1.25)
2-Year Fixed Rate Package Variable Rate Package
*The Interbank Market Rate refers to the 12-month Sibor. Sibor rate is $1.66250 as at Feb 28, 2008. **3-Year Fixed Rate valid until March 10, 2008 *** Package valid until March 22, 2008. For fixed rate loans go to www.hsbc.com.sg
BR = Board rate NA = Not available
90% financing available on a case-by-case basis based on bank’s discretion All board rates are variable
Tables updated as at Feb 28, 2008
WEEK OF MARCH 3, 2008
Jumping on the wagon Collective sale hopefuls in landed homes
Queensland’s allure The Sunshine State’s housing market is still bright
The $35 million newly completed Good Class Bungalow at 37 Leedon Road
MILLIONAIRES’ row in Singapore
While GCB transactions are expected to moderate this year after a record 2007, sellers are still bullish with their asking prices
BUSINESS & INVESTMENT • EVERY WEEK
T H E W E E K O F MARCH 3, 2008
308
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| MARCH 3, 2008
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2 • THEEDGE SINGAPORE
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Kwek, one of Singapore’s leading property developers, addressing analysts and journalists at CDL’s FY2007 results briefing at M Hotel last Thursday
High-end property at a crossroads Last week’s earnings results showed Singapore property developers reporting strong and, for some, record profits for FY2007 on the back of the biggest property boom in years. But the continuing US subprime crisis has dampened market sentiment, and developers are now bracing themselves for a difficult year ahead. Kwek Leng Beng, executive chairman of one of Singapore’s largest property developers, City Developments Ltd (CDL), voiced the feelings of many, saying at a results briefing last Thursday: “Sentiment is the most important element in buying and selling. When you don’t have a good feeling about the market, you don’t buy. You want to sell, but you can’t sell because you want to sell at a higher price.
“So, sentiment is more important than supply and demand. The higher prices go, the more people want to buy. The lower they go — [as they say] in Chinese — in crisis, there’s opportunity.” Kwek said the property market is unlikely to collapse; instead, homebuyers and investors are adopting a “wait-and-see attitude” in view of the current uncertainty. Others say that prices, especially at the luxury end, will soften this year as they saw the steepest increase last year, compared with the mid-end and mass market. Luxury condo prices leapt more than 57% last year versus the residential property price index, which saw a 31.2% increase. “If the US subprime crisis worsens, then
United Engineers Ltd said full-year profit rose 406%, owing to a gain in fair value of $186 million for UE Square, gains from partial divestment of the group’s short-term investments in Yongnam and other investment properties. Net profit surged to $172.9 million for the year ended Dec 31, 2007, from $59 million a year earlier, the company said in a statement last Friday. Sales dipped 12% to $539.8 million. Wilmar International Ltd fell for a fourth day as analysts downgraded the stock amid concern that the biggest palm oil trader may lose money on its retail business in China unless authorities approve price hikes. Wilmar was the seventh-worst performer on the Straits Times Index, which fell 1.6% last Friday. In January, China named Wilmar among companies that must seek permission from the National Development and Reform Commission before raising prices to help combat inflation. The curbs were “understandable”, Wilmar said last Thursday in a presentation that accompanied 4Q profit data. Banyan Tree Holdings Ltd, an operator of luxury resorts and hotels, said it plans to raise as much as US$400 million ($557 million) for a fund that will invest in properties in Vietnam, Cambodia and Laos. The Banyan Tree Hospitality Fund LP will have assets of about $300 million to $400 million when it closes this year, the company said in a statement to the Singapore Exchange. Banyan Tree, HSIL Investments Ltd and Hong Kong-based Nan Fung Group have each agreed to invest $33.33 million in the fund and may increase the sum
the entire property market will be affected,” says a property consultant who declined to be named. “Then prices starting from the top end will start to drop.” But Kwek believes otherwise. “Many of you are frightened that the high end has collapsed,” he said at the results briefing. “The high-end [buyers] are usually rich people [and] they have better holding power.” Instead of launching new developments, CDL will now proceed with the construction of some of their projects where it has struck “a good bargain with the construction company”. As piling and foundation works for condo projects typically take a year to complete, Kwek says if he were to launch a year from
to $50 million, the statement said. HSIL is a unit of HSBC Holdings plc. Hyflux Ltd, Singapore’s biggest publicly traded water-treatment company, said its order book may increase 20% to 30% this year as it wins more wastewater treatment and water recycling projects. Hyflux’s order book almost doubled to $863 million as at December, and the company will bid for more contracts in China and the Middle East, said Sam Ong, Hyflux’s deputy chief executive and chief financial officer. Mapletree Treasury Services Ltd, a unit of Mapletree Logistics Trust, will sell $75 million worth of two-year bonds with a coupon rate of 2.6%, a source familiar with the deal said. The coupon for the fixed-rate bond will be paid on March 3, the source said, adding the deal size was increased by $45 million after demand was strong. The swap offered rate for the two-year bond was last quoted at 1.67% on Friday, according to Reuters data. Suntec Real Estate Investment Trust, controlled by Hong Kong tycoon Li Ka-shing’s Cheung Kong (Holdings), launched a convertible bond issue on Thursday worth up to $300 million, a source familiar with the deal said. The property trust was selling five-year convertible bonds worth $250 million, with an over-allotment option for a further $50 million, in a deal handled by Citigroup and Deutsche Bank. The bonds have a coupon rate of 3.25%, a conversion premium of 23% to 28% and a reference price of $1.60, which was where the REIT’s unit closed on Thursday.
now a project that’s currently under construction, he would be able to collect a 30% deposit from buyers instead of the 20% down payment he would get from launching the same project today. “So, why do I need to be in a hurry to launch?” he says. He believes that the “next big wave” in the property market will come in 2010, when the integrated resorts at Marina Bay and on Sentosa Island are completed and operating. With a record-year in 2007 and given that CDL chalked up $7.6 billion in residential property sales in the market upturn of 2005 to 2007, it is likely to have a strong cash flow in the year ahead. “Don’t worry if we don’t launch anything [this year]”, says Kwek. — By Cecilia Chow
The Thai baht weakened in offshore trading, moving closer to onshore levels for the currency, after the central bank announced capital controls would be lifted from Monday. In offshore deals, the baht moved to 30.90 per US dollar from levels near 30.05 traded before the announcement. In onshore trading, the baht moved up to 31.35 from levels of 31.90 prior to the Bank of Thailand press conference. In December 2006, the central bank imposed controls to check speculation on a rising baht, with heavy restrictions on how much money foreigners could bring into the country and specifying a minimum period for most investments. Bank of Thailand Governor Tarisa Watanagase said on Friday the country would allow Thai companies to invest more offshore, and that the ceiling on bank borrowings from non-residents would be lifted. While announcing the removal of capital controls, she also said the authorities had alternative measures to stabilise the baht, Asia’s top performer in 2006 against the US dollar. The onshore baht gained 7% against the dollar last E year. — Compiled by Nova Theresianto
Quoteworthy This is the Bernanke shock, causing much faster dollar depreciation than expected — Michiyoshi Kato, senior vice-president of currency sales in Tokyo at Mizuho Corporate Bank. The US dollar fell to the lowest in almost three years versus the yen and a record against the euro since the currency’s inception in 1999 last Friday, on growing signs that the US economy is slipping into a recession.
THEEDGE SINGAPORE | MARCH 3, 2008 • 3
EDGEWISE
Auric primes balance sheet Is the battle for the control of retailer Robinson & Co nearing an end? On Feb 20, Mainboardlisted conglomerate Auric Pacific Group sold One Phillip Street, an office building, for $99 million to a fund managed by New Star Asset Management. A deal like that would normally attract little attention. But Auric Pacific is no ordinary company. It’s the local flagship of the Indonesian Riady family, which has a 49% stake. Through Auric, the Riadys assert control over listed local retail group Robinson & Co through a 29.9% stake held by their vehicle Red Oasis. Is Auric’s latest sale part of a larger exercise to build a war chest? Last year, it sold a fivestorey shopping centre in Malaysia. Now the office block sale has gotten tongues wagging that the cornered Lippo Group is serious about doing what it takes to keep control of Robinson. According to an announcement released by the company, $25 million of the proceeds from the sale of Philip Street block will be used to pay off the mortgage on the building, leaving Auric with $74 million, which could be used to settle some of its $125 million debt. The money, could also be used “to fund any future investments or acquisitions that the company may undertake” notes Auric in a release to the Singapore Exchange. Aside from the 29.99% stake in Robinson (held through the 60-40 Red Oasis joint venture with Sulaiman Holdings), the latest sale leaves Auric with just a 29.9% stake in listed Food Junction and assets related to manufacturing and distributing Sunshine Bread and bakery products as well as SCS Butter. Auric’s net profit last year was $51.5 million, which included a revaluation gain of $44.8 million from One Phillip Street and a $2.5 million revaluation gain from its penthouse at Pebble Bay. In general, the company’s largest profit contribution (61%) is from rental income and without its main property, the company would lose its main source of earnings. The sale of the two buildings in the past year, say analysts, puts pressure on Auric to seriously hunt for new income streams. It’s almost sitting on one. Robinson made a net profit of $15.8 million for the three months to Dec 31, 2007, its second quarter. Could Auric possibly be interested in raising its stake in Robinson’s to over 50% so that its own bottom line gets a shot in the arm? Perhaps. But Robinson might already be spoken for. On Jan 20, Al Futaim Global offered $6.25 per Robinson share after receiving irrevocable undertakings from Silchester International Investors (11.3%), Aberdeen Asset Management Asia (8.78%) and Tecity (3.13%) for their stakes. The No 3 banking group, OCBC, owns 6.05%. David Conner, CEO of OCBC told an analyst briefing two weeks ago that he hasn’t decided what to do with the bank’s stake even though it is a non-core holding. OCBC had earlier sold 29% of Robinson to Auric in compliance with MAS rules. The $6.25 per share offer that Al Futaim made might just be its opening shot. Indeed, it may be readying its next move. If Auric wants to counter bid for Robinson, how would the deal be done? At its close last Friday of $6.70, Robinson’s market capitalisation was $575.8 million. Red Oasis would need to find funding for at least $403 million to take Robinson private. If the acquisition uses equity and debt in a ratio of 30:70, then Red Oasis would need to cough up $121 million with Auric’s share
at $72 million. That is affordable. But Al-Futaim might have other ideas. Building a war chest by selling assets is easy but winning a battle of nerves with deep-pocketed predators like Al Futaim can E be a hard slog.
Is Auric Pacific Group building a hefty war chest to acquire Robinson & Co?
4 • THEEDGE SINGAPORE
| MARCH 3, 2008
ECONOMY WATCH
| BY STEPHEN JEN AND CHARLES ST-ARNAUD |
O
il prices just breached the psychological US$100 ($140) a barrel threshold. High oil prices will clearly boost the global capital flows into petrodollars: After all, high energy prices lead to transfers from oil importers to oil exporters. Investment decisions — both physical and financial — made by the owners of petrodollars will obviously be more important the higher oil prices are. In this note, we remind ourselves of the broad magnitudes of the key factors we need to consider in this discussion. At US$100 a barrel, the value of the total proven oil reserves in the world is US$121 trillion, US$48 trillion of which belongs to the GCC (Gulf Cooperation Council) countries. On a flow basis, annual oil export receipts of Opec (Organization of Petroleum Exporting Countries) members total some US$1.3 trillion, at US$100 a barrel. High oil prices, in short, will lead to a significant transfer of financial power to the petrodollar holders.
The meaning of ‘one trillion dollars’ Before we get started, we should familiarise ourselves with the concept of “a trillion dollars”: What may have been vaguely referred to as “gazillion” not too long ago is now a unit investors need to fully comprehend, just as we had to be indoctrinated with the concept of “a billion dollars” when we were in school. The total GDP of Africa is US$1.3 trillion. The size of South Korea and Russia’s GDP are about US$1 trillion and US$1.2 trillion, respectively; that of the UK is about US$2.7 trillion; and that of the US is about US$14 trillion. The total market capitalisation of publicly traded equities is about US$50 trillion, and that of the bond markets is about the same size. The total world’s official foreign reserves are around US$6.4 trillion. Understanding the true meaning of “one trillion dollars” is essential in this discussion, as it will be the primary unit of account when it comes to petrodollars.
The basic numbers How big are petrodollars? They are big, and getting bigger with the rise of oil prices. We can look at this issue in terms of the monetary worth of the stocks of proven oil reserves underground, or in terms of flows, that is, the
value of the annual oil exports. At US$100 a barrel, the total value of the world’s proven oil reserves underground is around US$121 trillion: US$48 trillion of this belongs to the GCC member countries, the rest of the Opec owns another US$44 trillion, while the non-Opec countries (Canada, Norway, Mexico and Russia) own another US$12 trillion worth of oil reserves. At the current pace of production and exports, and at US$100 a barrel, the GCC, non-GCC Opec and “other” oil-exporting countries are projected to earn a total of US$2.1 trillion annually, with the shares of these receipts roughly evenly split between the three categories of countries. Since “other” oil exporters are producing at a more rapid pace relative to their proven stocks of oil reserves, they are, collectively, expected to run out of oil in about 15 years’ time, while the GCC and the non-GCC Opec countries could continue to export oil for another 65 to 70 years, at the current pace of extraction, assuming no new discoveries.
BLOOMBERG
Petrodollar tsunami warning Likely impact on finnancial markets
Using our calculations, for the GCC countries, cumulative oil export receipts could reach US$5 trillion by 2013 (at US$100 a barrel) and US$10 trillion by 2020. The global total petrodollar flows should be roughly three times this size (US$15 trillion) for the next five years or so, before some of the nonOpec countries start to experience output declines. First, the financial arguments for transforming underground oil wealth into above-ground financial (equities) wealth are quite compelling. These oil-exporting countries, with the exception of Russia, cannot fully spend the oil receipts, and therefore much of these trade surpluses will be channelled into the global financial markets. Second, a good part — we guesstimate half or so — of these cumulative receipts will be recycled through sovereign wealth funds. Thus, while there might be a lot of focus on foreign sovereign entities acquiring strategic assets, the root cause of this Scope for domestic trend is high oil prices. investment in infrastructure Third, bulging petrodollars Such large windfall receipts/profwill keep global long-term interits could be invested in domestic physical infrastructure, as has been The Abu Dhabi Investment Authority building in the United Arab Emirates. Petro- est rates artificially low, in our view. As the US savings-investthe case in Qatar and Iran. But, dollars are building up SWFs into a force to be reckoned with. ment deficit shrinks, excess glocompared with most of the Asian economies, the investment-to-GDP ratios of ample, will run out of oil and gas in bal savings are likely to intensify, forcing the most of the oil exporters look low. While five years’ time. Oman’s oil reserves could world’s cost of capital lower. Norway may not have much need for large last “only” until 2027, at the current level infrastructure spending, the same cannot be of production. Bottom line said about Russia or Saudi Arabia. For counA boost of 5% to 10% of GDP’s worth of High oil prices will obviously increase the tries like the United Arab Emirates, Qatar, investment in the coming years would not flow of petrodollars. The stock of the world’s Oman and Bahrain that have been trying to be unreasonable, provided that these coun- proven oil reserves is now worth some US$121 become regional financial and tourism cen- tries can control the inflation consequenc- trillion — close to the combined market captres, considerable further investment spend- es. Five to 10% of GDP is only US$35 billion italisation of global equities and bonds, with ing is needed in the coming years. to US$70 billion — equivalent to about 10% annual flows (oil export receipts) of US$2 trilPhysical investment is a necessary, though of the annual oil revenues of the GCC coun- lion. While up to 10% of these receipts may insufficient, way to help these economies de- tries. In short, part of the oil receipts will be be spent on infrastructure and other investvelop a more diversified structure away from diverted to domestic investments in many of ments, the rest will be invested in the global the energy sector. On this issue, it should be these oil-exporting countries. However, the financial markets. A tsunami is coming. E stressed that there is considerable dispari- bulk of the petrodollar windfalls will still not ty among the GCC members regarding the be spent, and will wait to be invested in the This article is taken from a Morgan Stanley resize of the energy reserves. Bahrain, for ex- global financial markets. port dated Feb 22
6 • THEEDGE SINGAPORE
| MARCH 3 , 2008
CORPORATE
| BY ELLEN LOKAJAYA |
F
ederal International (2000) Ltd has long derived the bulk of its earnings from selling oil and gas equipment such as valves. Business continues to be brisk, with oil prices finding new legs and leaping to a new high of US$101 ($140) per barrel last week. However, it isn’t the trading business that is occupying much of chief operating officer Sanjeev Gupta’s time and energy at the moment. Gupta, who joined the company last April, has his hands full steering the company into several new areas in the energy sector. Since the second half of last year, Federal has added a slew of new businesses to its portfolio. These are marine logistics, where the company charters out floating, storage and offloading (FSO) vessels; power plants, where the company has so far inked deals to build and operate three; water treatment; and coal mining. “The [energy] market is very hot. We have to strike at the right time,” Gupta says in a recent interview with The Edge Singapore. However, as most of these new businesses are at an early stage of development, equipment trading looks set to stay as Federal’s primary business until earnings from power generation and coal mining kick in. Marine logistics has started contributing, accounting for 8.1% of revenue for the year to Dec 31, 2007, but the trading business remains dominant and made up 83.2% of revenue last year. Its venture into marine logistics began in 2006 when an FSO vessel became available on the market. Management decided to move into the business, emboldened by the sector’s good charter rates. It secured a 10-year charter worth US$91 million with PetroChina for that FSO, named Federal I. The company recently announced that it had purchased a second FSO vessel, Federal II, for US$31.5 million, with the expectation that it would also be chartered in a long-term contract. Gupta is confident of leasing out the vessel, given still-buoyant conditions in the market. And although management’s plan is to build up a fleet of such vessels, tight demand and supply conditions have kept vessels in short supply and prices lofty. “It is difficult to get vessels at this time,” he says.
Recurrent earnings Vessel chartering introduces an element of long-term, recurrent earnings to a company that is better acquainted with the vagaries and slim margins of the trading business. This shift towards long-term earnings sources should pick up pace as the company’s utilities-related projects take off. The company has clinched four deals to build, operate and transfer (BOT) or build, operate and own
(BOO) power plants — three in Indonesia and one in Singapore. Last June, Federal said it would build a 5MW cogeneration plant on Jurong Island for $21 million. It also signed a contract to provide electricity and steam to a biodiesel plant being built on Jurong Island by Australian-listed Natural Fuel Ltd. The deal is for 12 years and will see Federal getting at least $54 million, which works out to $4.5 million a year. Gupta explains that this is the fixedcost component and that, even if no steam or power is delivered, Federal will receive the money. On top of that, the company stands to earn revenues of $300 million from the supply of steam and electricity over the 12 years. The plant has started producing steam and is due to start producing electricity by end-April. Those numbers were struck in the middle of last year, however, when biodiesel seemed like a much healthier business. This year, palm oil prices have soared to new heights, making it very difficult to turn a profit in the business. That’s something its customer Natural Fuel is quickly finding out. On Feb 20, its CEO was quoted as saying it would indefinitely delay the start-up of the newly completed Phase One of the plant in Jurong Island. It is also understood to be holding back plans for Phases Two and Three. When asked about Natural Fuel’s biodiesel dilemma, Gupta acknowledges that it makes no sense to produce bio— Gupta diesel at these palm oil prices but points out that the Natural Fuel plant is producing glycerine, a byproduct of the feedstock. He also un- The plant will cost US$4.4 million and the JV derstands that the biodiesel plant is able to company has an agreement to supply electricirun not just on palm oil but canola oil and ja- ty over 25 years to PT PLN (Persero) Distribusi tropha as well. for US$56 million. Federal expects the project to be completed by June 2009. Prior to that, in December, Federal said it Power, coal and water Meanwhile, Federal continues with its power would build a 12MW integrated gas processing projects in Indonesia, all of which are being and power plant in Tuban, East Java. It will cost undertaken on a joint-venture basis, in which US$25.9 million and is expected to generate anits stake will be 60%. Two weeks ago, the com- nual revenue of US$20 million to US$30 million pany announced its third project in Indonesia, over the next six years. Last August, the comwhere it will build a 4MW mini-hydro plant in pany said it would build a 6MW power plant in Bengkulu, in the southwest coast of Sumatra. Jambi, Sumatra. To cost US$18.8 million, it will supply electricity to PT Lontar Papyrus Pulp and Paper Industry in a 10-year deal that will net the JV US$178 million in total. The plant is expected to be completed in August. Aside from this, Federal is stepping into the coal business. This is being done through a 51% subsidiary and in partnership with two Singaporeans — Lim Lee Leng and Gary Ng — who have been working in the Indonesian coal industry. The company is now in negotiations with mine concession owners in Kalimantan to operate three mines and sell coal. Gupta says the company expects revenue from the mines to reach more than $15 million annually, which he considers a conservative figure. The mines are expected to produce about
GWYNETH YEO/THE EDGE SINGAPORE
Equipment supplier Federal International expands energy interests 100,000 tonnes a month. Federal is also tapping the Chinese water treatment industry. The company partnered IESE Water (Asia) Pte Ltd to form a JV company, FederalIESE Environment Technology (Shanghai) Co Ltd. The JV company, in which Federal has a 90% stake, will take on BOO or BOT water and waste treatment and management projects and also supply specialty chemicals used in the treatment plants. Federal-IESE will focus on cities such as Shanghai, Jiangsu and Guangdong. Besides diversifying its business, Federal is broadening its geographical footprint and heading towards the Middle Eastern market by establishing a trading post in the United Arab Emirates. “The Middle East is where we have to go. And we have not taken that market very seriously in the past,” says Gupta. The company has in the past hauled in sales of oil and gas-related equipment there but Gupta sees the potential for much more, noting that the Middle East market for oil and gas equipment is in the billions. Gupta says the ultimate goal for Federal is to get 3% to 4% of that market but, for this year, his goal is to start with sales of US$10 million.
Risks from fast expansion If Gupta and his team deliver on these targets and numbers, Federal could be a very different animal in the next two years. However, its rapid expansion is leaving some in the investment community a little cautious. In a Jan 24 report, analyst Serene Lim from OCBC Investment Research, says Federal’s expansion into different businesses at such a short time “raises the issue of execution risks as most of these ventures are new or at the infancy stage”. She also expects that “the gestation periods for these projects may stretch longer due to the initial learning curve”. Still, Lim continues to rate the shares a “buy” and has a target price of 81 cents. Federal closed at 49 cents last Thursday, down 23% since the start of the year. For his part, Gupta doesn’t feel the company is stretching itself too thin as it moves into these new areas. “We are pretty strong financially. We have built up our balance sheet. We have all the requisite resources,” he says. For the year to Dec 31, 2007, the company reported a 2.7% rise in revenue to $154.5 million, while earnings jumped 165.6% to $27.2 million, boosted by the $16.6 million gain from the divestment of a subsidiary. As at end-December, it had a gearing ratio of 13%. Gupta and his team spent the better part of last year laying the groundwork for new businesses that could transform Federal into a diversified player in energy and resources. The challenge now is to take these projects to the next stage of their development and demonstrate to investors that Federal is no longer just E a seller of oil and gas equipment.
The [energy] market is very hot. We have to strike at the right time.
8 • THEEDGE SINGAPORE
| MARCH 3 , 2008
CORPORATE
SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
ST Engineering plans diversification moves to sidestep possible US slowdown | BY JOAN NG |
A
mong the exhibits at the Singapore Airshow 2008 earlier this month was a truck with an enlarged body that could fit several tables, half a dozen computers, a server and four flatpanel television screens — and still have room for 20 personnel. Dubbed the Mobile Command Hub (MCH), the vehicle was outfitted by ST Electronics, a unit of the locally listed Singapore Technologies Engineering. While the MCH had very little to do with the aerospace industry or the airshow, it has everything to do with ST Engineering’s positioning strategy: having a wide range of products that work with each other to form part of an integrated solution. At this year’s airshow, ST Engineering’s display aimed to demonstrate how the four major units of the company — ST Aerospace, ST Electronics, ST Kinetics and ST Marine — have products that work together as part of a total solution, for instance, for disaster relief. Alongside the MCH, which can receive live data feeds of the overall operations situation from the FanTail 5000 — an aerial sensor built by ST Aerospace — ST Kinetics displayed its Commercial Articulated Vehicle (CAV), a lighter version of its popular all-terrain vehicle called the Bronco. Ideal for rescue missions, the amphibious CAV can be transported to the disaster site on board the 141m Landing Ship Tank, a miniature of which was on display at ST Marine’s corner of the exhibition. The integrated presentation of its products may have helped to boost ST Engineering’s success in winning contracts at the airshow this year. It announced close to US$500 million ($700 million) worth of deals during the show, held from Feb 19 to 24, which CEO Tan Pheng Hock says is much more than last year. But the underlying principle of diversification and integration has had far-reaching effects on the company’s growth and bottom line. Last week, announcing its results for FY2007, ST Engineering reported double-digit growth for the third consecutive year. Both turnover and net profit rose 13% to $5.1 billion and $503.5 million respectively.
Aerospace unit performing well The group’s aerospace unit, which makes up 53% of group profit before tax (PBT), showed a 10% rise in turnover and a 12% increase in PBT. ST Aerospace is the world’s largest independent third-party provider of maintenance, repair and overhaul (MRO) services for the aviation sector. PBT margins for the aerospace division rose one percentage point to 19%, while margins for all other sectors held stable. The results are noteworthy in view of the disappointing results of SIA Engineering Co, which competes with ST Aerospace in the MRO sector. In January, SIA Engineering reported a
to the analysts. Of the nine that issued updates following the results, five have downgraded their target prices for the stock. One of the analysts to do so was CIMB-GK’s Lim Siew Khee, who cut her price target from $4.36 to $4.01. “While we are comforted by its strong order book of $9.49 billion, we remain cautious, given the weakening US dollar and softening US market, which could hurt its US operations,” Lim wrote in a note to clients on Feb 27. On the other hand, Citigroup analyst Lim Jit Soon was very positive about ST Engineering’s strong fundamentals and good earnings visibility, saying in a report: “We believe order momentum can be sustained, given ST Engineering’s established track record and reputation, noting a series of recent contract wins from existing and new customers.”
Preparing for a slowdown
With a greater variety of products that showcase the group’s total engineering capabilities, Tan hopes the company will be in a better position to bid on tenders
3.1% decline in net profit for its 3Q2008 ended Dec 31, 2007 and a 1.1% increase in revenue for the period, while its PBT margin fell close to two percentage points. DBS Vickers analyst Janice Chua cut her price target for SIA Engineering by 23.5% to $3.77 from $4.93 previously, citing pressure on operating margins. Chua also cut forward earnings by 8% to 10%. CEO Tan believes that the secret to ST Aerospace’s improving margins is a wide mix of products that it markets along with MRO services as part of an integrated package. “Today, we do what we call total aviation support, [which includes] components and engines. I like to call it a choice of an à la carte menu or a buffet menu, where we can package more services together,” Tan says. “This means we can move into highervalue-added services.” ST Aerospace’s capabilities extend beyond MRO into the development of avionics hardware, flight software solutions and various other complex solutions. Looking ahead to FY2008, Tan says the MRO business is looking healthy. As the number of ageing aircraft crossing the skies increases, carriers are increasingly turning to the MRO industry. Hiccups at Airbus and The Boeing Co in the manufacture of their aircraft have de-
layed delivery of new planes, and a slowing US economy may lead some carriers to put existing orders on hold. Meanwhile, a growing number of aircraft owners is seeking to add value to or improve the performance of their aircraft through overhaul works. And as higher oil prices drive commercial players to cut costs, outsourcing MRO work will become all the more attractive.
High US earnings a vulnerability In preparation for this anticipated rise in demand, ST Engineering is rapidly increasing its MRO capacity. A fortnight ago, the company announced a new hangar at the Seletar Aerospace Park that can accommodate up to two narrow-body aircraft. It also opened a new engine test facility in Paya Lebar. And in December, it announced a joint venture with a Chinese firm to set up an engine MRO facility in Xiamen, China. But even as this expansion takes place, the company will have to deal with the prospect of a falling US dollar and the impact of a slower US economy on its businesses in that part of the world. Turnover from its US business crossed US$1 billion for the first time in FY2007, making up 28.1% of total group turnover. And PBT would have been $15 million higher if not for the weaker US dollar. In the light of economic uncertainty, ST Engineering is guiding for a softer year with turnover growth in the mid-single digits. But Tan says the guidance is not so much a reflection of a perceived slowdown in orders as a preference to err on the side of caution. “I like to be proven wrong when it comes to this. But in today’s uncertain environment, it’s a bit dicey to say I’m going to [achieve double-digit growth again]. You really can’t see too far. There’s always a possibility that owners negotiate and then decide to postpone the deal,” he says. Tan’s cautious leanings have filtered down
Tan is preparing to prove that track record with a four-pronged game plan to insulate ST Engineering: cutting costs, finding new customers in new markets, diversifying its product base and improving its material sourcing process. He says the company has already begun streamlining its business operations to cut overhead costs. “For example, we have shifted a product made in two localities to one, for efficient production, and we closed down an outfit that was marginal,” explains Tan. For plant materials, it has begun using global procurement to help lower costs, sourcing beyond North America, in China and other parts of Asia, for instance, for cheaper materials. It’s not just parts that will have to come from outside the US. ST Engineering is even now pursuing contracts in emerging markets such as Africa, Central Asia, Latin America and the Middle East. At the airshow, the company managed to secure a US$60 million contract to provide aircraft engine maintenance to South African airline Comair and a US$31.6 million defence export contract from a Middle Eastern customer. The deal from the Middle East proves that ST Engineering has what it takes to do business with other governments despite the sensitive nature of the defence business, says Tan. And being able to tap into this revenue stream should provide some stability because, while the appetite for commercial deals may decline somewhat, government defence budgets, some of which have better margins, will continue to rise. The defence business contributed 33% of the group’s revenue last year. Meanwhile, Tan says, the company will continue to develop new products and redesign old ones to provide total solutions like the one displayed at the airshow. With a greater variety of products that showcase the group’s total engineering capabilities, Tan hopes the company will be in a better position to bid on tenders. “If there’s a tender where they may not want to buy a standard product but would rather use your base unit to design some changes, this is where we come in and add value,” he says, adding that being able to spread an order out over a wider base would improve economies of scale. If Tan’s game plan works, ST Engineering’s shareholders will have a great deal to cheer about. The company has distributed all its net earnings as dividends for five straight years, with the total dividend for FY2007 coming to 16.9 cents, a yield of close to 5%. For a stock with a market capitalisation of $10.8 billion, that figure is impressive, and all the more so as the company has continued to show double-digit growth. Amid the present market turE bulence, that’s quite a comfort.
THEEDGE SINGAPORE | MARCH 3, 2008 • 9
CORPORATE
Small-company financier DB Zwirn winds down funds | BY DESMOND WONG |
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GWYNETH YEO/THE EDGE SINGAPORE
ew York-based DB Zwirn & Co (DBZ) is a relatively obscure name in the world of private equity funds, but it was an active financier of small-cap companies in Singapore last year. And, news over the last fortnight that it is winding down its principal funds after its investors — spooked by alleged accounting irregularities — pulled out some US$2 billion ($2.79 billion) could have an impact on the local market. According to media reports, DBZ is likely to see its funds under management shrink from US$5 billion to just US$1 billion after it completes the closure of several funds. It is currently under investigation by the US Securities and Exchanges Commission.
We are not worried at all, as they said they would honour the agreements and convert [the bonds] — Low Going by filings with the Singapore Exchange, DBZ provided financing to at least six small-cap companies between last March and August, extending $30 million to $100 million to each through convertible bond arrangements. Among the recipients of the cash were former eye-care company Oculus Ltd, fire-extinguisher company Asiatic Group (Holdings) and shipbuilder cum ferry operator Penguin Boat International. CONTINUES NEXT PAGE
Oculus 350000
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10 • THEEDGE SINGAPORE
| MARCH 3, 2008
CORPORATE
DBZ reassures small-cap customers FROM PREVIOUS PAGE
DBZ officials in Singapore and New York declined to speak to The Edge Singapore. But executives at companies that DBZ has funded say representatives from the private equity firm had been sent to Singapore to assure them it wasn’t going to pull out of its deals. “We are not worried at all, as they said they would honour the agreements and convert [the bonds],” says Low Shiong Jin, executive director of Oculus Ltd. Oculus had raised $100 million from DBZ to help fund the $600 million purchase of carbon credit developer and trader Aretae in a reverse takeover deal that it proposed last year. That deal has since stalled, and Oculus is now proposing to buy patents and licensing contracts from an ophthalmic drugs and devices company in Australia to remain listed while
it scouts around for other RTO opportunities. “Given that the redemption [of investor funds from DBZ] will take three years or so, we are not too concerned,” Low adds. Even if DBZ does change its mind, some of the companies it had financing arrangements with aren’t worried. “The convertible bond issues were just another funding facility,” says George Tan, CEO of Asiatic Group. “You have banks, and everything else. There are all sorts of ways to raise funds.” Last July, Asiatic Group agreed to issue $30 million worth of convertible bonds to DBZ. It planned to use the funds for building its power generation business, beginning with power plants in Cambodia. Meanwhile, Penguin Boat says it has completed its dealings with DBZ. The company issued $30 million worth of convertible bonds to
DBZ in January last year, which DBZ converted into shares in June and July. “Going forward, they are not our only source [of funding],” a spokesman for Penguin Boat says.
Funding high-risk growth Nevertheless, DBZ’s troubles could mean it won’t be as active a financier of small local companies in the future. While small companies do have access to a variety of sources of funds, DBZ was providing them with money for ventures that probably couldn’t have been funded any other way. “If they could get money from the banks, they would have done so,” says a consultant at boutique corporate finance firm Prime Partners. To be sure, the risks were high. But DBZ’s money produced some spectacular results. Asiatic posted a 120% jump in revenue to
$22 million for the six months to September (it has a March year-end), and a 95% increase in earnings to $923,000. This was achieved on the back of revenue gained as the power plant projects in Cambodia came onstream. Penguin Boat was another success. The company reported a 46% jump in turnover to $81.3 million last year, and a 563% leap in earnings to $7.8 million, driven primarily by new shipbuilding contracts. Last year, the company scored US$69 million worth of shipbuilding deals, including US$23 million from the Abu Dhabi National Oil Co for the construction of three ships. Meanwhile, electrical generator company VibroPower Corp, which obtained $30 million in convertible loans from DBZ last year, expanded to take on larger generator supply contracts in Russia and India. For 2007, the company reported a 29.9% increase in revenue to $67.3 million, and a 302.6% jump in earnings to $3.5 million. At end-September, the company’s order book stood at $78.6 million.
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More limited upside now Will other hedge fund players move in to take DBZ’s place? Perhaps. “The local funds, the boutique ones, might be interested,” says the consultant at Prime Partners. “They might not be as affected by global trends as the bigger players, who might also have a shorter investment horizon.” But any hedge fund that steps into the market is likely to be a lot more selective now amid the nervousness in the stock market, because the potential returns might not be worth the high risk. Last year, even the mere hint of a corporate deal or acquisition often sent share prices of small companies through the roof, making it easy for a convertible bond financier to quickly cash out. In the case of Penguin Boat, for example, DBZ’s loan was convertible into new shares priced at 16 cents each. But when it cashed out in the middle of last year, shares in Penguin Boat were trading at more than twice that, at 37 cents. “It would be much harder for [small companies] to attract that kind of attention from the hedge fund guys,” says the consultant from Prime Partners. “Because the markets are much weaker, private equity will see very little upE side in terms of share price.”
THEEDGE SINGAPORE | MARCH 3, 2008 • 11
This is the third of a five-part series on the Singapore furniture industry
Success, made-to-measure
A
sian property markets are booming, and Singapore’s furniture industry is riding along, and is set to do so. But the success of this industry did not occur by chance. Singapore’s furniture companies have worked hard at being the best, and have developed the knack for anticipating new trends and understand-
ing what appeals to the overseas markets. To help Singapore’s furniture companies catch a bigger share of this growing pie, the Singapore Furniture Industries Council (SFIC) — together with the lead agency for the furniture industry, SPRING Singapore and International Enterprise Singapore — is jointly launching a local furniture
Kingsmen Creative
Nobel Design
ounded in 1976, Kingsmen Creatives is an established Singaporelisted communications design and production group. The company specialises in the design and production of temporary installations for exhibits and event displays. It also provides interior design and fit-out services for mid to high-end retail outlets and commercial showrooms. As at Dec 31, 2006, Kingsmen had a turnover of around $109 million. The company has a regional network of 16 offices in the Asia-Pacific and Middle East regions, as well as markets in the US and Europe, making it a solid, credible regional player in this space. Kingsmen’s four main business areas are: research and design; exhibitions and museums; retail and commercial interiors; and integrated marketing communications. Through years of experience in the business, the company has gained a thorough understanding of its custom- Ong: Our long-term goal is to be the leader in Asia-Pacific ers’ business and culture. This has en- and an elite global player in whatever we do abled the company to come up with With a dedicated workforce of more than styles and designs that best fit their customers’ requirements. This in turn translates into 1,000 including a team of 150 well-trained deproducts that are able to illustrate the busi- signers, Kingsmen differentiates itself from its ness concept and brand image that custom- peers by providing customers with seamless “one-stop” design and production services. ers want to portray. Over the years, Kingsmen has chalked up These range from research and design, project a sterling roster of customers. They include management, specialised production and lolocal brands like Robinsons and Raoul, as gistics management to after sales services. Managing director Simon Ong says Kingswell as international retailers such as Guess?, Banana Republic, Esprit, GAP and Tag Heu- men lives by the “never say die” approach er. Other high-end brands such as Burberry, and a shared vision of being a design-led, and Gucci, Polo Ralph Lauren and Chanel have quality- and service-driven company. “Our long-term goal is to be the leader in Asia-Paalso engaged the company’s services. In addition, Kingsmen has designed na- cific and an elite global player in whatever tional pavilions for international trade shows we do,” he says. Ong also believes that the combined efand exhibits for museums and visitor centres, such as the Singapore Science Centre forts of SPRING, SFIC and IE Singapore in launching the local furniture industry brandand Maritime Experience in Sentosa. The company has also picked up a string ing programme is timely. “Singapore’s furniof accolades including the Singapore Prom- ture industry is still small,” he says. “Howising Brand Award (Most Distinctive Brand), ever, the country’s infrastructure and reliable the President Design Award and the Interior reputation are positive factors that compaBuilders Award. Recently, it also won first nies can leverage on, thus the branding explace in the ISP/VM+SD design award in ercise will certainly help push the promising New York for its work on Robinsons’ flag- furniture companies in Singapore to greater heights.” ship store in Malaysia.
Sunrise, not sunset PICTURES: GWYNETH YEO/THE EDGE SINGAPORE
‘To be an elite global player’
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industry branding programme on March 9, in conjunction with the International Furniture Fair Singapore/Asean Furniture Show 2008. This week, we zoom in on two furniture companies that have helped their customers to stay ahead of the competition through their keen eye for design and customisation.
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obel Design, another Singapore-listed company, is a diversified interior design and furnishing company with the capabilities to meet the customer demands across a broad market spectrum. Be it a massmarket retailer, or a high-end brand, Nobel is equipped to serve their needs. Currently, its business focus includes retail, export, special project services for designers and customised interior design.
gauge its customers’ needs, Nobel’s designers can then work to develop the most suitable products. The company’s special project services involve servicing high-end designers and architects that are involved in projects such as Changi Airport’s Terminal Three, and the show flat for Reflection, a Keppel Land condominium project. In addition, Nobel is in the business of providing customised interior design services, where the company’s designers work with mid-end home upgraders to help them turn their dream homes into reality. Through comprehensive feedback, market analysis, good customer relationship management, and close monitoring of design trends in the market, Nobel Design is able to identify the types of designs that will work well with its range of customers, says managing director Bert Choong. “We also have 25 years of experience and ample knowledge of the market as well as good contacts with top-end designers who are the trendsetters in the industry,” he says. “We are a team of designers, manufacturers, retailers and exporters. We know our stuff.” Choong, who is also an executive committee member of the SFIC, says business is great and will continue to do better because of the property boom. “In 2007, Singapore’s total trade was around 1% of the world’s total trade. Choong: We are a team of designers, manufacturers, There is a big opportunity for us to inretailers and exporters. We know our stuff. crease our market share to perhaps 2%,” Nobel’s retail business involves the sourc- he says. “Many years ago, the local furniture ing of appropriate furniture of suitable qual- industry was perceived as a sunset industry, ity and price from international markets. Its but owing to the entrepreneurship of our deretail products include home2be, a selection signers, we have proved everyone wrong. We of trendy, Italian-inspired designs at budget are a sunrise, not sunset industry. “With the support of SPRING Singapore prices for first-time home owners, and Minotti by Marquis Interiors, a luxury brand on our Furniture Industry Branding Project, carrying high-end Italian designer furniture, we are confident that furniture exporters which the company currently displays at its like us will enjoy better business results at international exhibitions and in our business Minotti showroom on Hill Street. Nobel has also collaborated with buyers dealings worldwide. Our industry is very such as JC Penny in the US to form buylat- resilient. Even if it may take us some time, eral.com, an online catalogue business car- I believe that if we walk the talk, we can go rying the company’s products. By working a long way in making Singapore’s furniture closely with the designers from JC Penny to known on a global front.”
Catch the launch of a New Identity for our Singapore Furniture Industry! Find out more at the International Furniture Fair Singapore/ ASEAN Furniture Show 2008 9-12 March 2008 Singapore Expo, 1 Expo Drive
12 • THEEDGE SINGAPORE
| MARCH 3, 2008
CORPORATE
I
ness, which was first mooted in September 2006. Last Friday, Celestial has completed a biodiesel plant in Heilongjiang and installed all the necessary machinery. The plant is a joint venture with Daiki-Axis Co Ltd and Shanghai Nikki Environment System Inc, in which Celestial has an 80% stake. Costing 430 million renminbi, it will churn out 100,000 tonnes of biodiesel a year. But unlike most biodiesel plants, Zhao says this plant is flexible and will be able to use not just soybean oil but other vegetable oils and waste oil. Zhao, who has a degree in commercial accounting and masters in business administration, is confident it will be able to turn a profit, despite high raw material prices.
Forecasts cut Analysts covering Celestial are still calling its shares a “buy” despite the continuing climate of agri-inflation. They have, however, lowered their target prices. “As the prices are likely to stay high, we have raised our assumed soybean costs by 35% to 4,500 renminbi per tonne, which represents a 60% increase from 2007 average costs,” says Merrill Lynch analyst Eddy Loh in a Feb 25 report. “We believe the group could pass on only part of the higher costs.” With this, Loh forecasts an eight percentage point drop for this year’s gross profit margins to 31% and has cut his earnings forecast for this year by 14%. DBS Vickers’ Andy Sim has lowered his FY2008 earnings numbers by 4% to factor in lower gross margins. However, he is maintaining his “buy” call as he is optimistic of the company’s long-term prospects and management’s ability to deliver. He has a target of $1.59 for the shares, currently the highest price target for Celestial. The shares closed at 63.5 cents last Wednesday. However, he cautions that the share price in the short term would likely move sideways, given the market’s concerns on the unprecedented rise in soybean prices. Shareholders must certainly be hoping that Zhao’s conviction that soybean prices will moderate from their peaks will come E through this year.
AAAA
f Zhao Xianghua is sweating about the sky-high price of soybeans, he certainly isn’t displaying it. The executive director of Celestial NutriFoods Ltd, which makes soybean-based food products, is a picture of calm in the face of the highest soybean prices he has ever seen. Already up some 90% last year, soybean prices on the global market have continued to climb this year, rising by just over a fifth. Those record-smashing prices are causing investors in the China-based company, whose biggest product is a soy-based protein powder, to swoon. Fearful of further margin compression, they have deserted the shares, which have tumbled 38.3% since the start of the year. From last July, when soybean prices began to rally, the shares have fallen nearly two-thirds as at last Wednesday. Rising global demand for soybean has shrunk soybean stockpiles and pushed its price to a record. However, from Zhao’s perspective, soybean prices have run up too much and he believes that the Chinese government will tap into its inventory of the commodity to alleviate the current tightness in the market. By the end of the year, he sees soybean prices coming down by as much as 20% to 30%. Chinese food companies like Ce-
lestial are partly shielded from the global inflation in agricultural commodities as a result of the country’s price controls on such items. In Celestial’s case, the average cost of its soybean purchases rose 24.6% last year from 2,241 renminbi ($439.97) per tonne in 2006 to 2,792 renminbi per tonne in 2007, far more moderate than the price escalations on the global market. Based in China’s most northern province, Heilongjiang, Celestial sources soybeans from local farmers, processes them to make protein powders, highprotein biscuits and canned protein beverages and sells them under its house brand “Sun Moon Star” to the domestic market. It also processes soy protein isolate, soy functional protein and biochemical feedstuff for other food manufac- Zhao sees soybean prices coming down by as much as 20% to 30% by year-end turing companies. However, high soybean prices still sively expanded its industrial prod- margins shrank to 39% from 44.3% dented its margins as it wasn’t able to ucts output — products which have the previous year. pass on the higher costs to custom- lower gross profit margins of about ers. In November, it raised its average 30% compared to retail products such Soy noodles and pastries selling price for its retail products by as its protein F&B products, which The company’s strategy, amid high15% to 20%. For its industrial prod- have much fatter gross margins of er soybean costs, is to forge ahead ucts, such as soy protein isolate, av- about 50%. So, although Celestial with its expansion plans. It plans erage selling prices were gradually was able to grow its sales by 55.4% to increase the utilisation rate at its raised by about 10% over the course last year to 1.8 billion renminbi, its “Soybean Zone” plant, currently runbottom line was up a slimmer 13.3% ning at about 75%. Celestial is also of last year. On top of that, Celestial aggres- to 419 million renminbi. Gross profit launching four new high-protein nutrient products. This will be broken down into two phases and will cost 405 million renminbi. The first phase, which will be completed in 2Q2008 (Celestial has a December year-end), is expected to produce 15,000 tonnes of fruit-flavoured protein beverages and 5,000 tonnes of high-protein nutrient powders a year. The second phase, which will be completed in 4Q2008, is expected to produce 10,000 tonnes of high-protein nutrient noodles and 5,000 tonnes of high-protein nutrient pastries a year. Soy-based pastries and noodles will be a first for Celestial, which dominates the market for soy-based protein powders. Mixed with water, the powder becomes a health beverage and is popular among the Chinese. Upon completion of both phases, the plant’s utilisation rate will increase to 95%. Aside from this, Celestial is going ahead with its biodiesel busi-
CELESTIAL NUTRIFOODS
| BY NOVA THERESIANTO |
SAMUEL ISAAC CHUA/THE EDGE SINGAPROE
Celestial NutriFoods continues expansion despite escalating soybean prices
High-protein biscuits produced at Celestial’s factory in Heilongjiang province
CORPORATE
Singapore dollar advances to highest in 12 years on inflation
T
he Singapore dollar rose to the highest in 12 years on speculation the central bank will seek faster currency gains to quell accelerating inflation. The US dollar’s drop against all 15 most-active currencies the past five days also boosted the Singapore dollar. Trade Minister Lim Hng Kiang said on Feb 27 there is a limit on how far the currency can gain without hurting growth. A stronger exchange rate may help slow price increases, at the fastest pace since 1982 last month, by reducing imports costs. “There is more room for the Singapore dollar to appreciate amid accelerating inflation,” said Osamu Takashima, chief analyst for global market sales and trading at Bank of Tokyo-Mitsubishi UFJ Ltd in Tokyo. “Singapore accepts the trend of global US dollar weakness, because that helps Singapore to fight price increases.”
Strongest gain since 1996 The Singapore dollar gained 0.1% to $1.395 as of last Friday, the strongest since February 1996, according to data compiled by Bloomberg. The currency may climb to as high as $1.35 by the end of March, Takashima said. The island’s currency strengthened 9.4% in the past six months, making it the thirdbest performer among the 10-most actively traded currencies in Asia outside Japan. The Monetary Authority of Singapore (MAS), which allows its dollar to rise and fall within an undisclosed band based on a trade-weighted index of currencies of its biggest trading partners, said in October it would “increase slightly the slope of the policy band”. “While the MAS exchange-rate policy stance has helped to keep inflation down by dampening some of the higher import costs, we cannot insulate ourselves completely from the effects of higher global prices,” Lim said in parliament on Feb 27. He is also deputy chairman of the MAS. A government report this week showed consumer prices rose 6.6% in January from a year earlier, increasing pressure on the central bank to let its currency strengthen further to curb rising import prices.
SGD could appreciate further “It is important to recognise there is a limit to how fast the Singapore dollar can appreciate without hurting our growth, and eventually causing employment and wages to fall,” said Lim. Singapore’s dollar may extend this month’s 1.6% gain versus the US dollar as the central bank may let the currency rise at a quicker pace to contain inflation, according to United Overseas Bank Ltd. “The MAS could actually allow the Singapore dollar to appreciate faster on a trade-weighted basis,” said Ho Woei Chin, an economist at United Overseas Bank. The Singapore dollar “could continue to strengthen.” United Overseas Bank forecasts the Singapore dollar at $1.380 at the end of September and the end of December, Ho said. E — Bloomberg LP
The island state’s currency strengthened 9.4% in the past six months, making it the third-best performer among the 10-most actively traded currencies in Asia outside Japan
BLOOMBERG
THEEDGE SINGAPORE | MARCH 3, 2008 • 13
14 • THEEDGE SINGAPORE
| MARCH 3, 2008
CORPORATE
GWYNETH YEO/THE EDGE SINGAPORE
Roxy-Pacific launches IPO, sees steady income from hotel | BY AUDRINA GAN |
R
oxy-Pacific Holdings will be the second property company to list on the Singapore Exchange this year, amid widespread concerns about flagging property prices and stock-market weakness. The first to list was China-based CentraLand, which actually did reasonably well with its stock now trading 8% above its IPO price. Roxy-Pacific — which has a market cap of $190 million at its IPO price of 30 cents a share — hopes to pull off a similar start with the help of eight new local residential projects aimed at the current sweet spot of middle-income families, and the 4½-star Grand Mercure Roxy on East Coast Road. The homegrown property development and investment company reported net profit of $1.5 million, $2.2 million, $5.2 million and $7.7 million in FY2004, FY2005, FY2006 and 1H2007 respectively. Over the same periods, it generated revenues of $38 million, $30.9 million, $48.8 million and $42.4 million. As at 1H2007 ended June 30, its book value stood at 8.67 cents a share. With such consistent growth, Teo Hong Lim, executive chairman of Roxy-Pacific Holdings, is not worried about listing the company founded by his father 40 years ago despite the uncertainty in the property sector and stock market. “Everyone’s sitting on the fence now,” says Teo. But he is sanguine about the ebb and flow of the stock and property markets. “People will flock back into the market once they see stability. There are a lot of such spurts in Singapore,” he says calmly.
People will flock back into the market once they see stability. There are a lot of such spurts in Singapore. — Teo
With a focus on developing smallto medium-sized developments that target middle-income families, RoxyPacific has, over the past few years, developed nine freehold projects and sold 279 units, mainly in the east of Singapore, including three in Telok Kurau, The TreeLine, The Montage and The Medley; St Patrick’s Loft on St Patrick’s Road; Axis@Siglap at East Coast Terrace; and Marque@ Irrawaddy on Shan Road. All the units in the nine projects have been sold, except for three units at The
Veranda in Telok Kurau. Over the next six to eight months, Roxy-Pacific will progressively launch eight new development projects including The Ambrosia, The Adara and The Florentine, which are located in the East Coast, Thomson and Novena areas, with average selling prices ranging from $850 to $1,100 psf. Targeted at the mid-tier and mass markets, the projects should benefit from the pent-up demand, which property indicators are already pointing to.
Teo’s optimism also stems from the group’s ownership of the 558room Grand Mercure Roxy Hotel, a 4½-star hotel currently managed by French hospitality group Accor Hotels & Resorts. Last May, the Grand Mercure was valued at $270 million, and Teo expects its value to gradually rise, given the buoyant demand for hotel sites. “We’ve received enquiries from prospective buyers but the interest level [for our hotel] is not high,” he says. “The hotel is a key asset we acquired at an attractive price back in the 1970s.” Revenue for Roxy-Pacific’s hotel ownership and investment business — via the 31% ownership of the strata-titled The Roxy Square Shopping Centre — came to $22.5 million, $25.5 million, $30.8 million and $18.2 million in FY2004, FY2005, FY2006 and 1H2007 respectively, according to the prospectus. Located close to Parkway Parade, the seven-year-old hotel has been a source of constant income as well as capital appreciation for the group, even as it rides the tourism boom in Singapore. And there will be more good years to come for the industry. According to the Singapore Tourism Board, thanks to the upcoming Formula 1 night races, mega resorts in Sentosa and Marina Bay, and Youth Olympics in 2010, the citystate should see tourism receipts of $30 billion and 17 million visitors by 2015. With more tourists dropping into town and a dearth of hotel rooms, the occupancy rate at Grand Mercure Roxy exceeded 92% for the 10
months to Oct 31, 2007. The hotel’s location near Changi has also helped, as a significant portion of its guests comes from the nearby aviation and logistics-related businesses like FedEx as well as factories of companies like IBM Corp and Matsushita. Between 2004 and 2006, the hotel hit high average occupancy rates of 85.5%. To enhance its yield, the Grand Mercure Roxy has also undergone a $5 million makeover over the past three years to add more guestrooms and expand its facilities for holding big functions like weddings and corporate events. The renovations have paid off handsomely. Despite the current squeeze on hotel rooms, the enhancements have brought about a 31.5% y-o-y increase in revenue per available room to $135.20 a night in 1H2007. Looking ahead, Teo expects Singapore’s low interest rates, strong economy and long-term population target of 6.5 million to help drive growth in the property market despite “near-term uncertainties”. He believes, however, that local residential property prices spiked up “too fast” last year, otherwise “the momentum would have been sustainable”. But “everything should be all right over the next one to two years”, he adds. Furthermore, Roxy-Pacific’s early entry into the property industry before the current boom has allowed it to acquire land at attractive prices when others have had to pay much more. Land costs are the largest direct-cost component for property developers and account for 40% to 60% of Roxy-Pacific’s total development cost. That has enabled the group to generate bigger profits and maintain a profit margin of 20% as it sold its properties at an average price of $1,000 psf. As a rule of thumb, developers with comparable projects break even selling their properties at $700 psf, says Teo. To maximise yield, RoxyPacific prefers to build bigger apartments with three to four bedrooms in prime areas. Last year, the group sold 138 apartments from Jan 1 to June 30, for a total of $125.8 million, which will be progressively recognised up to FY2010, says the IPO prospectus. Along with revenue generated from its existing and upcoming projects, Roxy-Pacific expects to derive more than half of its earnings from the property development business over the next two years. Property development accounted for 68.5%, 38.3%, 64.8% and 80.3% of total revenue in FY2004, FY2005, FY2006 and 1H2007 respectively. So, are investors covinced RoxyPacific can sustain its growth momentum? Their response when the stock starts trading on March 12 E should give some indication.
THEEDGE SINGAPORE | MARCH 3 , 2008 • 15
CORPORATE
Dumpling maker Synear slumps, highlights risks for China stocks | BY KANG WAN CHERN |
T
he spectacular crash of shares in China-based frozen dumpling maker Synear Food Holdings following an expectedly dismal earnings report last week could be a wake-up call for analysts and investors on the earnings risks that many companies face in 2008. Synear isn’t a small, obscure company. It is one of China’s top-three frozen food companies and, before the slump a week ago, it had a market value of $1.4 billion. It had snared the rights to be the exclusive supplier of frozen foods to the 2008 Beijing Olympics, and it had Hong Kong action-superstar Jackie Chan endorsing its products. While everyone knew that raw food prices were spiraling higher, analysts figured that China’s one billion-plus population of increasingly affluent consumers made this company a slamdunk growth play. Then, last week, Synear announced that its revenue for 4Q to December had only inched up 1.3% to 596.6 million renminbi ($117.2 million), while its earnings had slumped 50.3% to 63.8 million renminbi, well below expectations. For the full year, Synear’s revenue was up 18.9% to 2.2 billion renminbi, while earnings increased 17.2% to 475.8 million renminbi. In 2006, the company’s revenue and earnings had increased by a more robust 25.4% and 67.1% respectively. Synear’s officials are blaming its disappointing results on skyrocketing pork prices,
Synear 300000
Volume (‘000)
Price ($)
2.5 2.3
250000
2.1 1.9
200000
1.7 150000
1.5 1.3
100000
1.1 0.9
50000
0.68 0.5
0
Feb 23, 2007
Feb 29, 2008
China Hongxing 350000
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1.4 1.3
300000
1.2
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200000
1 0.9
150000
0.8
100000
0.7 0.66
50000
0.5
0
0.4
Feb 23, 2007
Feb 29, 2008
Yangzijiang 700000
Volume (‘000)
Price ($)
2.8 2.6
600000
2.4 500000
2.2
400000
2
300000
1.8 1.6
200000
1.4 100000
1.2 1.08
0
April 20, 2007
Feb 29, 2008
which have increased more than 70% y-o-y following the “blue-ear” pig virus outbreak on the Mainland last August, leaving pig breeders reeling. On top of that, higher selling and distribution costs as well as an unexpected tax squeezed its earnings. The reaction from investors was swift and severe. Shares in Synear dropped 26% on massive trading volume the day after its results were reported. And, they kept sliding after that, closing last Friday at 68 cents, down 34% for the week and 72% below the high of $2.44 set in October.
Tighter margins, lower valuations It is unlikely that Synear is the only company affected by rising costs in China, and an-
alysts are already bracing themselves for bad news from other hot China stocks. While “agflation” puts Synear and other food-related companies like Celestial Nutrifoods, Pine Agritech and Youcan Foods in an especially dangerous position, analysts are also going cold on a variety of other China-based companies because of rising inflation. And, even companies that don’t disappoint on the earnings front might suffer lower and lower market valuations. Case in point: sportswear maker China Hongxing Sports. Last Monday, the company reported a robust set of results for 2007, which were above analysts’ expectations. Revenue for the year was up 45% to 2 billion
renmimbi, while earnings soared 94% to 416 million renmimbi. Analysts are forecasting earnings growth of 30% per annum for the next two years, slower than past years but strong nevertheless. Local brokerage house DBS Vickers Securities has a “buy” recommendation on the stock and a price target of $1, which reflects a valuation of 20 times 2009 earnings. Amid the uncertainty about growth and inflation, however, investors might wait for those forward earnings to be delivered before bidding higher for shares in China Hongxing Sports. Shares in the company edged up 1.5% last week following its robust results, closing CONTINUES NEXT PAGE
16 • THEEDGE SINGAPORE
| MARCH 3 , 2008
CORPORATE
‘The worst could be over’ FROM PREVIOUS PAGE
last Friday at 66 cents, which is about 12.5 times 2009 earnings. Elsewhere in the market, China-based shipbuilder Yangzijiang is another hot China play that could be hit by lower profitability this year. “Going forward, we believe margins have peaked and forward margins will be impacted by rising steel and labour costs and the strengthening of the yuan against the US dollar given that the bulk of
its contracts are in the US dollar,” says a report by DBS Vickers dated Feb 26. “These unfavourable conditions put Yangzijiang at greater risk as vessel prices are contracted now but deliveries are scheduled up to five years from now.” For the financial year ended Dec 31, 2007, Yangzijiang’s revenue was up 66% and earnings were up 91%. Instead of seeing a boost in its share price, however, the shipbuilder’s shares fell by two cents to $1.21 immediate-
ly after its results were out. DBS Vickers has cut its recommendation on the company to “hold” from “buy”, and reduced its price target to $1.45 from $3.04. Is there anywhere to hide from the rising cost of food and other commodities? Some market watchers suggest that companies producing alternative foods could be interesting. One such company is China Kangda, which produces rabbit and chicken meat, potential alternatives to the pork that is in short supply. The compa-
ny is also the largest Chinese exporter of rabbit meat to Europe, Russia and Japan. Last Tuesday, the company announced that earnings for 2007, were up 26.6% to 109 million renmimbi, on a 43.7% increase in sales to 728 million renmimbi. Shares in the company have climbed 25% since the beginning of the month to 34.5 cents last week. At current levels, the stock is being valued at less than six times forward earnings. However, even if the company sees stronger growth at the expense of pork producers in China, it is likely to be hampered by rising labour and transport costs that are pressuring other companies. And, shares in China Kangda don’t look much cheaper than most other food-related companies in China. Synear is now trading at a forward price-toearnings ratio (PER) of eight times. Celestial Nutrifoods and Youcan Foods, are trading at forward PER of 4.6 times and 10 times respectively.
Will Synear bounce back? In fact, some analysts see shares in Synear recovering from the lows they hit last week. “With pork costs likely to peak in 1Q2008F, we believe the worst could be over for Synear,” says a report by Nomura dated Feb 25. Other brokerage houses like UOBKayHian have “buy” calls on the stock too. CIMB called the stock a “trading sell” last week, but its lowered price target of $1.14 is still 43% more than Synear’s current market price. Terence Wong, head of research at DMG & Partners, reckons that the plunge in Chi-
While ‘agflation’ puts Synear and other foodrelated companies in an especially dangerous position, analysts are also going cold on a variety of other Chinabased companies because of rising inflation na-based stocks over the past fortnight is temporary. “The market has been punishing S-chips since their peak in Oct 2007, and Synear’s crash has been a strong catalyst leading to the heavy sell out this week,” he tells The Edge Singapore. “Investors shouldn’t be perturbed by languishing S-chips, rather, they should delve into the fundamentals of each company and use this time as a buying opportunity.” Perhaps indicating that the market has overreacted to its poor 4Q results, Synear’s CEO Li Wei picked up 7.3 million shares in his company on Feb 26, according to shareholder filings with Singapore Exchange. Li now owns 33.27% of the company after the purchase. “Growing urbanisation and changing consumer lifestyles in China, are expected to drive popularity and demand for convenience-food products,” Synear’s officials say, responding to questions from The Edge Singapore by e-mail. “We are therefore increasing utilisation of our Chengdu plant in Sichuan Province, while our Huzhou and Guangdong plants are also expected to commence operations in 2008.” But nervous investors might just prefer to wait until the impact of this growing demand on Synear’s bottom line becomes clearer. E
PICTURES: SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
18 • THEEDGE SINGAPORE
| MARCH 3, 2008
COVERSTORY
por ly uni ty a at p cos ITs
SURVIVING the crunch | STORIES BY GOOLA WARDEN |
J
ohn Lim isn’t losing any sleep over the convulsions that real estate investment trusts (REITs) have gone through recently. Instead, the CEO of ARA Asset Management — the only manager of REITs and property funds listed in Singapore — has been on the prowl for opportunities to double his company’s $10 billion worth of assets under management (AUM) within three years. He has also been on road shows to promote shares in the company. ARA Asset Management manages five privately held property funds as well as four public-listed REITs: Suntec REIT and Fortune REIT, which are listed on the Singapore Exchange; Prosperity REIT, on the Hong Kong Stock Exchange; and AmFIRST REIT on Bursa Malaysia. “As long as you have quality assets and quality lenders, I don’t see a problem,” Lim says, in a recent interview with The Edge Singapore. Tell that to investors in the many REITs that have been bashed down over the last eight months after being forced to shelve equity-capital-raising exercises amid the turmoil in financial markets. While they are off their lows set six weeks ago, at least 12 of 20 REITs (and one trust) listed in Singapore are trading at discounts to their net asset values (NAVs) — with three at discounts of at least 50%. Five of them offer forward yields of more than 8%. That slump in valuations of REITs already appears to be having
ARA Asset Management has emerged unscathed from the funding crunch in the REIT market. Now, CEO John Lim wants to double its assets under management within three years to $20 billion, a level that would rival CapitaLand’s real estate asset management business. No wonder institutional investors are excited about the stock. an impact on their managers and shareholders. On Feb 19, the CEO of MacarthurCook Industrial Trust, Chris Calvert, resigned just eight weeks after the REIT dropped plans to raise fresh equity capital. Earlier that month, Macquarie Bank in Australia was reported to be contemplating selling its 26% stake in Macquarie MEAG Prime REIT (MMP REIT). The manager of MMP REIT, Macquarie Pacific Star Prime REIT Management, which is 50%-owned by Macquarie Bank, has since said it is planning a strategic review of the REIT. Meanwhile, Chan Wang Kin, a major shareholder of Cambridge Industrial Trust Management, has sold his stake in the REIT management company to Oxley Capital. However, Lim isn’t worried about ARA succumbing to the crunch. He says the recent developments in the sector are just a passing squall, the result of excessive optimism built up over the last few years, when the real estate market was on a tear and REITs came to be viewed as investment instruments offering growth instead of just high yields. Once everyone adjusts their expectations, REITs will prove to be viable securitisation vehicles again, and ARA will face little
ARA REIT
Suntec REIT 120000
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0
1.4
0
March 2, 2007
Feb 28, 2008
difficulty in expanding its AUM. “The REIT model is definitely still viable,” Lim says. “It’s a product that has a part to play in the property market here. In most REITs, the assets are performing, but there’s a perceived weakness in the structure.” Indeed, this could well be a good time for investors with the stomach for risk to wade into REITs, say several industry watchers. “The irrationality of the market has dragged down REITs even though they are a proxy for direct real estate,” says Peter Mitchell, CEO of the Asian Public Real Estate Association (Aprea). “This is creating excellent buying opportunities for highly capitalised, lowly geared players.” REITs have
0.65 0.55 0.45
Jan 11, 2007
Feb 28, 2008
staged a strong recovery over the last fortnight, with some of the hardest hit bouncing the most. Lim says ARA received a warm reception from institutional investors during a road show over the last couple of weeks. Shares in ARA have risen strongly from their recent lows of 56 cents four weeks ago, partly because of the investor road show, Lim adds. “We were received very well and our share price rose 20%,” he says. Analysts think the stock could go higher. Brokerage houses such as Credit Suisse and DBS Group Research have “buy” recommendations on the stock, with price targets of $1.15 and $1.14 respectively. About 60% of the company’s rev-
Lim: The REIT model is definitely still viable. It’s a product that has a part to play in the property market here.
enue comes from base management, performance, acquisition and divestment fees from its four REITs. The rest comes from fees from managing private real estate funds. These include portfolio management fees, performance fees and return on seed capital. “It’s a very low-capital, knowledgeintensive, high-ROE business,” says Lim. “A lot of people tried to duplicate it — but can’t.” For the 12 months to Dec 31, 2007, ARA made a net profit of $34 million on revenues of $62.1 million. Analysts forecast a 9% rise in earnings this year to $37 million, and a further 27% next year to $47 million. They expect the company to declare dividends of 4.5 cents and 5.7 cents a share for 2008 and 2009 respectively. At current levels, shares in ARA are trading at 11 times and 8.8 times forecast earnings for 2008 and 2009 respectively, and at a forward dividend yield of 5%.
Coping with tough markets A former Prudential Real Estate executive director and DBS Land employee, Lim formed ARA in partnership with Hong Kong’s Cheung Kong Holdings in 2002. Justin Chiu, Cheung Kong executive director and chairman of ARA, regularly attends ARA events. Lim listed the company on the SGX last December, following an IPO at $1.15 cents a share that raised $236 million, hitting the market just as the sentiment on REITs was turning sour. Until last year, REITs were easily raising cash from investors and lenders, and facing little difficulty expanding their investment
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THEEDGE SINGAPORE | MARCH 3, 2008 • 19
COVERSTORY
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“Now we talk about 100-basis-point spreads or maybe higher.”
One Raffles Quay (ORQ), a top-end commercial building in the CBD. Comprising 1.3 million sq ft of lettable space, ORQ was completed in 2005, just as it was becoming clear that Singapore faced an acute shortage of prime office space. However, many of ORQ’s early tenants had locked in rentals of as low as $5.50 psf versus $12 psf for similar properties in the area last year. That meant ORQ, which was equally owned by Keppel Land, Cheung Kong Holdings and Hongkong Land, wouldn’t generate much income compared with its market value for some years. However, that didn’t deter two of ORQ’s three owners from pushing ahead with plans to securitise their stakes. In simultaneous deals last year, Keppel Land agreed to sell its one-third stake in ORQ to KREIT Asia for $941.5 million in late July, while Cheung Kong Holdings offloaded its one-third stake in the building at the same price to Suntec REIT — one of four managed by ARA. In addition, both Keppel Land and Cheung Kong agreed to provide the two REITs with “rental support” payments of $103.4 million each over a period of 54 months to compensate for the initial few years of low rental income. While analysts called the 54-month stretch of rental support to make the deal work “aggressive”, some still thought Keppel Land and Cheung Kong weren’t getting maximum value for ORQ. Within months, it became clear that K-REIT Asia had bitten off more than it could chew. The purchase of a one-third stake in ORQ was its first acquisition since listing in April 2006. Almost equivalent to the size of its existing portfolio, the deal was especially ambitious. Amid the doubts about whether the acquisition would be immediately yield-accretive because of the turmoil in financial markets, units in K-REIT were savaged and it was unable to raise the funds it needed from the market. It eventually fell back on a $942 million bridging loan from Keppel Corp. Suntec REIT fared much better. With an asset size of $3.9 billion
Unwinding the excesses
The securitisation of stakes in One Raffles Quay triggered a re-assessment of risk in the REIT sector
before the purchase and a balance sheet that had a low gearing of 23%, it easily digested its one-third stake in ORQ. “We didn’t have an issue,” Lim says. “For Suntec REIT, ORQ was only 20% of our asset size. It was very easy to finance. We just used debt.” Following the acquisition, Suntec REIT’s gearing is still a manageable 35%. Even so, units in Suntec REIT were also battered by nervous investors in 2H2007. Early last month, Moody’s downgraded its outlook on the REIT’s “Baa1” credit rating to negative, citing near-term refinancing risks, given the tough conditions in the credit markets. About 40% of its total debt is related to a bridging facility for the purchase of its one-third stake in ORQ, which falls due in eight months, according to Moody’s. A fur-
ther one-third of its debt matures at end-March. Lim doubts that Suntec REIT will face difficulty refinancing its debts. “We have already lined up all the financing for the $178 million that comes due in April,” he says. Last Thursday, the manager of Suntec REIT, announced it will issue $250 million worth of bonds of five-year maturity, convertible into cash and new ordinary units. But Lim concedes that funding it is becoming more expensive. With units in Suntec REIT trading at forward yields of 6% to 7% now versus property yields of 4.5% to 5%, it doesn’t make sense to raise equity, he says. In addition, lenders are more selective now, and borrowing costs have gone up. “We use to borrow at 40 to 50 basis points [above Sibor],” he says.
Why didn’t Cheung Kong and Keppel Land simply hold on to the property until all its tenant leases had been renewed at higher rents? Because the advent of property securitisation vehicles like REITs had got them used to being able to quickly monetise their developments and use the funds for other projects. “Cheung Kong is not in the business to invest — they build and sell,” Lim says, when asked about it. Moreover, the managers of REITs and property funds were hungry for assets to bulk up and grow. “It’s a great asset and we’re very proud to own it,” Lim adds. Nevertheless, the result of the borrowing and growth binge in which some REITs indulged could mean significantly slower asset growth for the sector in the immediate future, some market watchers say. With gearing levels nudging the 60% regulatory ceiling, and their units trading at a fraction of their NAVs, some REITs actually have no room to raise money for more acquisitions in the short term. Among the REITs in this predicament are K-REIT Asia, Mapletree Logistics Trust and Allco Commercial REIT. One way out is to persuade their shareholders to pump in fresh equity capital to reduce their gearing. However, with many REITs trading at yields that are higher than the yields on the property assets they own, it will be tough trying to convince investors to come up with the money. Still, with determinedenough backers, some of them might succeed. For instance, K-REIT is attempting to raise some $700 million through a rights issue now to repay the bridging loan from Keppel Corp. The rights issue is effectively being underwritten by Keppel Corp and Keppel Land, which together own more than 70% of K-REIT. If other shareholders of K-REIT don’t pony up for their portion of their rights, the CONTINUES NEXT PAGE
REIT valuations (as at Feb 26) NAME
DPU ($)
YIELD (%)
PRICE ($)
MARKET CAP ($ MIL)
NAV ($)
GEARING (%)
FY2007
FY2008E
FY2007
FY2008
MANAGER
MAJOR SHAREHOLDERS
CapitaMall Trust CapitaCommercial Trust Ascendas REIT Suntec REIT CDL Hospitality Trust Ascendas India Trust
3.300 2.150 2.270 1.580 2.210 1.080
5,389.0 2,978.0 2,916.0 2,353.0 1,821.0 812.0
2.240 2.840 1.490 2.530 1.610 1.850
34.7 23.9 28.9 35.6 18.7 4.0
0.13 0.09 0.13 0.08 0.09 NA
0.14 0.10 0.14 0.11 0.11 0.06
4.03 4.05 5.59 5.19 4.07 NA
4.24 4.79 6.08 7.15 5.02 5.19
CapitalMall Trust Mgmt CapitaCommercial Trust Mgmt Ascendas MGM Funds Mgmt ARA Trust Mgmt M&C REIT Mgmt Ascendas Property Fund Trustees
5.66 4.81 1.95 5.47 6.98 4.24 4.96 6.38 3.91
6.99 4.89 5.68 5.34 7.41 5.00 5.60 6.53 8.41
7.79 9.00 7.15 7.33 9.73
9.19 9.29 6.91 8.81 9.86
Ascott Residence Trust Mgmt Frasers Centrepoint Asset Mgmt Parkway Trust Mgmt K-REIT Asia Mgmt Mapletree Logistics Trust Mgmt CapitaRetail China Trust Mgmt Macquarie Pacific Star Prime Mgmt ARA Asset Mgmt Lippo-Mapletree Indonesia Retail Trust Management Allco (Singapore) Cambridge Industrial Trust Mgmt Japan Residential Assets Manager MacathurCook Investment Managers Bowsprit Capital Corp
CapitaLand (29.3%) CapitaLand (29.8%), PGGM (10.6%) Ascendas Land (17%), MGM Singapore (6.3%), Macquarie Bank (4.9%) Asean Investment (5%) M&C (38%), Istithmar Hotels (8%), Siong Lim (8%) Ascendas Land (17%), General Electric (11.9%), JPMorgan (8.3%), Capital Group (8.2%), Great Eastern Life (6.2%) CapitaLand (27%), The Ascott Group (18%) FCL (51.2%), PGGM (6%), Standard Life (6%), AIG (5%) Parkway Group (35%), Symphony International (6%), Matthews Intl (5%) Keppel Land (42%), Keppel Real Estate Investment (30.6%), JPMorgan (5%) Temasek Holdings (30%), UBS (6.9%) CapitaLand (20%), CapitaMall Trust (20%) Macquarie Bank (26%), AIG (11%), Morgan Stanley (10%) Cheung Kong (32.4%), PGGM (14.8%), DBS (6.5%) Lanius (27.1%), Mapletree Investments (12%), CPI Capital (8.6%)
Ascott Residence Trust Frasers Centrepoint Trust Parkway Life REIT K-REIT Asia Mapletree Logistics Trust CapitaRetail China Trust Macquarie MEAG Prime REIT Fortune REIT (HK$) Lippo Mapletree Retail Trust
1.360 1.350 1.180 1.610 0.945 1.580 1.250 5.500 0.690
606.8 822.0 710.0 399.0 1,047.0 974.9 1,190.0 4,467.0 731.7
1.600 1.160 1.360 3.780 0.940 1.010 1.610 9.010 0.910
33.1 29.2 4.0 53.9 54.6 29.7 29.0 23.5 0
0.08 0.07 0.02 0.09 0.07 0.07 0.06 0.35 0.03
0.10 0.07 0.07 0.09 0.07 0.08 0.07 0.36 0.06
Allco Commercial REIT Cambridge Industrial Trust Saizen REIT MacarthurCook Industrial REIT First REIT
0.860 0.700 0.825 1.010 0.740
607.1 355.8 372.0 263.0 201.5
1.500 0.760 0.728 1.300 0.960
43.6 35.1 30.0 7.8 15.5
0.07 0.06 0.06 0.07 0.07
0.08 0.07 0.06 0.09 0.07
Allco Finance Group (17.3%), Capital Research (6.5%) Capital Research (6.6%), Schroders (6%) JHYP (35.4%), Argyle Street (12%), Japan Opportunities (11.7%) UBS (19.6%), Lion Capital (9.1%), USS (8.4%), Indus Capital (5.8%) PT Lippo Karawaci (20.2%)
CITIGROUP RESEARCH, BLOOMBERG
T
portfolios on terms that immediately enhanced their distribution per unit (DPU). That’s because property assets were being offered for sale at prices that yielded more than the cost of the debt and equity the REITs needed to raise. In that heady environment, REITs expanded their portfolios aggressively, and their fast-growing DPUs attracted investors interested in their growth potential rather than just their yields. REITs seen to offer strong growth potential traded at lower yields than others, driving many of them to adopt aggressive expansion strategies. Besides targeting to double or even triple the size of their portfolios, the rush for DPU growth also prompted some REITs to bet on future rental potential of the assets they were buying rather than their existing cash-generation potential. For instance, when Allco Commercial Trust acquired 55 Market Street in 2006 for $72.5 million, or $981 psf, it was with vacant possession. The trust upgraded the property and then leased it to tenants. As chronicled in our Cover Story two months ago (“Funding crunch overshadows REITs”, Issue 299, Dec 24 to 30), the situation changed late last year. Property prices had soared dramatically and interest rates were firming, making it more difficult for REITs to acquire properties on yieldaccretive terms and deliver the lofty growth in DPUs that investors had come to expect. Then, the US subprime mortgage bust struck, rattling financial markets around the world and scuppering plans by several REITs to prime their balance sheets with equity-raising exercises for ongoing acquisitions. That left some of them with higher gearing levels than they would have liked. Among the REITs that dropped plans to raise equity late last year were Allco Commercial, KREIT Asia, Mapletree Logistics Trust and MacarthurCook Industrial REIT. ARA was relatively unscathed in the slump. But it was involved in a deal that helped trigger a broad reassessment of risk in the REIT sector — the securitisation of stakes in
20 • THEEDGE SINGAPORE
| MARCH 3, 2008
COVERSTORY isma Atria and Ngee Ann City on Orchard Road are among the best known and most visited shopping malls in Singapore. But the real estate investment trust (REIT) that owns them, as well as the management company that runs it, might soon become distant memories. Amid the funding crunch that has sparked a reassessment of risk and return across the REIT sector, units in Macquarie MEAG Prime REIT (MMP REIT) had been knocked down by some 16% from their highs of $1.26 set last April to $1.06 last month. Unhappy with this low valuation, Australia’s Macquarie Bank began pushing the manager of the property trust, Macquarie Pacific Star Prime REIT Management, to do something to realise the value of its underlying assets. Macquarie Bank owns 26% of MMP REIT and 50% of the management company, and it is reportedly prepared to sell its stake in the REIT. Last week, MMP REIT’s manager announced it would conduct a “strategic review” and come up with a solution. “This exercise could see the possibility of an asset sale, or a merger with another REIT or company,” says Franklin Heng, CEO of Macquarie Pacific Star Prime REIT Management. Or, it could simply involve the entire REIT being sold to another party, he adds. “It is Macquarie’s belief that everyone together could get a higher price,” says Heng. “The benefit of this exercise is such that it would close the value gap between the market price of MMP REIT’s units and its NAV.” In fact, units of MMP REIT have recovered to the highs they set in April on news of a possible sale. At current levels, units in MMP REIT are trading at a 23% discount to its NAV (net asset value) per share of $1.61, and offer forward yields of 5.6%. MMP REIT owns 27% of Ngee Ann City, a
THE EDGE SINGAPORE
Managers of MMP REIT contemplate M&A deal W MMP REIT
60000
Volume (‘000)
Price ($)
50000
1.3
1.24 1.2
40000
1.15 30000 1.1 20000
1.05
10000
1 0.95
0
March 2, 2007
Heng: This exercise could see the possibility of an asset sale, or a merger with another REIT or company
leasehold property expiring in 2072; and 74.2% of Wisma Atria, also a leasehold property that expires in 2061. Last year, MMP REIT acquired seven properties in Tokyo and a retail mall in Chengdu. As at Dec 31, 2007, the REIT had an asset size of $2.2 billion. That’s well above its market capitalisation of $1.18 billion. While the sale of MMP REIT to another party is potentially bad news for its manager, Heng says he is fully behind efforts to realise the value of the REIT because he has a large investment in it. “The public market has not accorded us the right valuation and there is a disconnect,” he says. “This gives us an opportunity to seek a transaction that can close the gap.”
Feb 27, 2008
In the past, Heng and his team had attempted to improve MMP REIT’s value by expanding its portfolio and distribution per unit (DPU). However, soaring property values and higher funding costs have made it tough to find yield-accretive acquisitions now. In fact, with MMP REIT’s units yielding more than 5% on the properties it owns, it would be better off divesting its assets and returning money to its investors. The REIT initiated a share buyback programme last December, but it is now on hold because of the strategic review it is undertaking. Heng says he had been approached with offers for large stakes in MMP REIT in the past. But these offers were contingent on the acquirer’s gaining management rights over the REIT. “When it came to a management rights discussion, I could never deliver because it was related to our shareholders,” he says. With Macqurie Bank now willing to cede control, Heng has more flexibility to cut a deal. “In this exercise, I can now freely discuss management control with any strategic partner. If they can take 100% of the company, we can unlock further value.” A spokeswoman for Macquarie Bank con-
firms that it has received offers for its stake in MMP REIT, but that it will make no decisions until the REIT completes a review of its options. “Also, in respect of confidentiality, we are unable to disclose whom we have received offers from,” she says. A sale won’t be easy to pull off, though. If the REIT is sold to a company or a property fund, there would be corporate tax and stamp duty to consider. “If there are any leakages in the sale, it would reduce the value to MMP REIT’s unitholders,” says Heng. Selling MMP REIT to another REIT would be more tax-efficient, but many REITs are now facing difficulty raising money for acquisitions. “You’ve seen the deferral of equity raisings by some REITs. They have demonstrated it is not easy to raise money. It’s tax-efficient, but it is unclear whether REITs have the capital in place.” One property group with the financial muscle and motive to buy MMP REIT is CapitaLand, some market watchers say. The real estate giant is jointly developing ION Orchard with Sun Hung Kai Properties, which is adjacent to Wisma Atria. Meanwhile, John Lim, CEO of ARA Asset Management, says he would be interested in any opportunity at the right price. “As a fund manager, we would take a look at MMP’s assets,” he says. “Most Singapore REITs have good assets.” Despite the strong likelihood that MMP REIT will soon be bought out, Heng still believes that REITs are viable securitisation instruments. “REITs are about making quality investible properties available to retail investors,” he says. The problem is that investors have pursued REITs that offered growth potential instead of judging them on the tax-free, stable yield they offer, he adds. “Now, with [the] subprime [criE sis], we’ve come back to reality.”
ARA’s Lim unfazed by competition FROM PREVIOUS PAGE
REIT might end up being more than 90%-owned by the Keppel group. That could result in its being taken private by its parent companies on the cheap. K-REIT is currently trading at a hefty 57% discount to its NAV and a forecast yield of 5.3%. Its property yields based on information in its latest financial statement are 4% to 4.5%. Alternatively, debt-laden REITs could just sell some of their properties to raise cash or agree to a takeover by another better-capitalised REIT or property fund. Analysts reckon that this year could be consolidation time for REITs. “With no clear growth strategy and the rising cost of capital, some REITs are trading at hefty discounts to their NAVs as well as offering high single- and doubledigit yields,” says Wendy Koh, an analyst at Citigroup, in a recent report. “This makes them potential takeover targets, especially if they have loose shareholding structures.” Among the REITs that might be sold or dismantled are MMP REIT, Allco Commercial and MacarthurCook Industrial, say analysts. ARA’s Suntec REIT was once considered a possible takeover target because of its loose shareholding. (Temasek Holdings owns 5.98%, UBS
5.2%, Asean Investment Corp 5%, Macquarie 3.4% and Perennial Investment Partners [Australia] 6.2%.) Today, however, its size — it is the second-largest REIT listed on the SGX, behind CapitaMall Trust — and relatively low gearing make it a potential acquirer rather than a takeover target. “I can’t see any constraint to our growth if there’s an opportunity to buy,” Lim says. Are Suntec and ARA eyeing the assets of any particular REIT? “We will leave that to the market to decide,” says Lim, with a nervous laugh. “We have our view but it’s not convenient to share.”
ARA hunts for assets Whatever it is that Lim is considering buying, he might find it more convenient to use a property fund backed by private-equity money rather than a public-listed REIT. With the higher cost of debt and equity and the stock market likely to remain volatile, it could be tough to organise an acquisition that is immediately yield-accretive to a REIT. That is especially so with the intense competition for property assets in Asia, says some industry players. “There are very few quality assets we can acquire, especially when we have a lot of funds coming to Asia, paying top dollar for assets,” says Franklin
Heng, CEO of Macquarie Pacific Star Prime REIT Management. As it happens, ARA has been raising money for new property funds recently. In December, the company closed its Asia Dragon Fund with US$1.2 billion ($1.7 billion). The largest investor in the fund is US-based pension fund CalPERS, which put in some US$500 million. Eight other US pension funds invested a total of US$296 million. Lim is coy at first about exactly what it will do, only letting on that distressed assets are his first love and he has been looking for opportunities in China, Vietnam and Thailand. When pressed, however, he says the fund has committed to the acquisition of a prime residential property in Singapore but has yet to complete the transaction. “It was a sizeable acquisition,” he says. “It is under construction. We believe the government will be successful in transforming the economy and I cannot see why the residential market cannot continue to grow. I’m one who doesn’t believe that the residential market will come down.” He is less optimistic about commercial property, though, especially after the steep run in rentals and capital values over the last couple of years. “I wouldn’t buy a building now
because of the limited upside of 5% to 10%,” he says. “We won’t see the type of gain we saw in the last three years.” But he adds that he doesn’t think the market for office properties will weaken much either. However, Lim is careful to explain that these private pools of capital that ARA manages are targeting assets that its REITs couldn’t purchase because they wouldn’t be immediately yield-accretive. “Yields are not the driving factor for funds,” Lim notes. “Our strategy [for the funds] is development, repositioning assets or factors that don’t compete with REITs, such as assets without yields which have to be worked on.” Once the assets mature and begin producing income, they could be sold to a REIT managed by ARA. “But at the outset, our funds are not competing with our REITs,” Lim stresses. Besides property funds, ARA is working on bringing two more REITs to market soon. Lim hopes to list them when stock-market conditions improve. “We don’t have a hospitality trust and an industrial REIT,” he hints, when asked about the kind of assets they will own. ARA is by no means the only player in this field. The 900-pound gorilla in the sector is none other than CapitaLand. The property behemoth has
five listed REITs, four trading on the SGX and one on Bursa Malaysia. It also manages and co-owns at least 15 property funds. Its total AUM stood at $17.7 billion at end-2007. According to CapitaLand’s CEO Liew Mun Leong, the group wants to grow its AUM to $25 billion within the next three to five years. It is looking at launching five new REITs, including a warehouse and logistics trust, and has just launched a US$300 million Vietnam fund. Lim is unfazed by the competition. In fact, he has larger ambitions than just matching his competitors in Asia. “If Blackstone can go to US$100 billion, why can’t we?” he says, referring to the asset size of the US-based private-equity-fund group. Could the turbulence in financial markets and a possible economic recession cloud ARA’s outlook? Lim thinks not. The reason is that the company operates a fee-based business. While its fee income could contract if its AUM shrinks, Lim says the assets held by most REITs and property funds are conservatively valued. “No REIT [asset] has a valuation that is going to collapse tomorrow, especially in Singapore and Hong Kong,” he says. After the tailspin the sector has been through, that’s E good to know.
With a massive land bank of 1.3 million ha — roughly 18.5 times the size of Singapore — Golden Agri effectively has the world’s largest amount of land for new plantations
GOLDEN AGRI-RESOURCES
THEEDGE SINGAPORE | MARCH 3 , 2008 • 21
CORPORATE
Golden Agri-Resources plants up, seeks to close valuation gap
F
ranky Oesman Widjaja, chairman and CEO of Golden Agri-Resources Ltd, and scion of one of Indonesia’s richest families, made a rare appearance before the media at the Fullerton Hotel last Monday. Widjaja heads Indonesia’s largest oil palm plantation company and unveiled what had been a record year for the company. Those numbers, which put its net profit in the billion-dollar league for the first time, come as the company is rapidly scaling up and attempting to reassert its dominance of the palm oil industry. Growers and producers of palm oil like Golden Agri have not had it so good in years. The crop, used largely to make cooking oil, is now the most consumed edible oil in the world. Swelling demand from fast-growing countries like China and India as well as new demand in recent times from producers of biodiesel is warring with tight supply. This has kept palm oil prices at levels that have astonished even the most seasoned industry players. “Every day is a new record,” says Widjaja, 50, who has a degree in commerce from Japan’s Aoyama Gakuin University. Despite racing up some 55% last year, palm oil prices have run up a further 23% this year, hitting a new high of RM3,827 ($1,646) a tonne last Wednesday. For the year to Dec 31, 2007, Golden Agri saw its revenue rise two thirds to US$1.87 billion ($2.62 billion) and its net profit rocket 2.5 times to US$1.17 billion. Gross profit margins swelled from 24% to 35%. Shareholders would not have been disappointed: The company doubled its dividends for a payout ratio of 21% and committed, for the first time, to pay up to 30% of underlying profit each year. These bumper times are bolstering the cash coffers of plantation companies in Malaysia and Indonesia, which together account for some 86% of all palm oil produced globally. Because this is a business that thrives on economies of scale, they are wasting no time planting new trees and expanding their land bank. Widjaja has grand plans for Golden Agri, which is 48%-owned by the Sinar Mas group, whose 84-year-old founder Eka Tjipta Widjaja is listed by Forbes as Indonesia’s fifthrichest man.
Oil palm plantation companies are reaping bumper profits and Golden Agri, the world’s second-largest, is on a planting spree in a concerted move to become No 1 again. Yet, its shares still trade at a discount to its smaller peers. SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
| BY SUNITA SUE LENG |
Widjaja: We hope to catch up [with Sime Darby]. We are determined to do it.
its goal is to plant another 60,000ha. “We hope to catch up [with Sime Darby]. We are determined to do it,” Widjaja says, referring to the company’s aim to regain its size leadership in the industry. Golden Agri’s plantation land is located mostly in Sumatra and Kalimantan. “With its aggressive planting programme of 60,000ha a year, Golden Agri will become the world’s largest plantation company in planted hectarage in two to three years’ time,” says Alvin Tai of Malaysia’s OSK Research in a Feb 26 report.
Largest plantation land bank globally
Are record palm oil prices sustainable?
The younger Widjaja, one of Eka’s many children, wants to make Golden Agri the world’s biggest oil palm plantation again. It held this title until Malaysian conglomerate Sime Darby merged its plantation business with Golden Hope and Kumpulan Guthrie last year, swiftly catapulting Sime Darby to top spot, with its planted areas covering some 540,000ha. In comparison, Golden Agri has 360,000ha of land planted. That makes it not only Indonesia’s largest plantation firm but also 1.5 times larger than its closest competitor, Astra Agro Lestari. Golden Agri’s trump card, however, is its massive land bank. Spanning 1.3 million ha — roughly 18.5 times the size of Singapore — Golden Agri effectively has the world’s largest amount of land for new plantations. And that, it reckons, will allow it to regain its leadership position in the world. Last year, it planted up 53,000ha, increasing its hectarage by about a fifth. This year,
In the meantime, as Golden Agri and its peers rush to grow trees, the current tight demandsupply equation may slacken, especially if the global economy starts to lose some steam. At a well-attended industry conference in Kuala Lumpur last week, James Fry, managing director at research outfit LMC International Ltd, predicted that palm oil futures in Malaysia may fall below RM2,900 this year. “In one to three months’ time, I think this party will be over,’’ he said, noting that high prices were affecting demand for food and fuel. In a Feb 13 report, ABN Amro analyst Nirgunan Tiruchelvam says a “sharp correction is in the offing” for palm oil. He expects prices to fall to US$900 on average between 2008 and 2010 and cites factors like diminishing biodiesel demand (as palm-based biodiesel becomes economically unviable) and rising supply. According to Oil World, an independent research house for the oilseeds industry, crude
palm oil production stands to increase 7% this year in Malaysia. In Indonesia, production is due to rise a sharp 19% this year — the largest annual rise in absolute terms based on available records. However, even if prices moderate from their current lofty levels, plantation CEOs like Widjaja aren’t ruffled. That’s because with costs in Indonesia running at US$200 to US$300 a tonne, margins from the plantations business are at levels not seen in years. Golden Agri produced two million tonnes of palm products last year and crude palm oil accounted for 43% of its revenue. It operates 31 mills that can process eight million tonnes of crude palm oil. It also processes and sells palm kernel produces, refined palm products such as cooking oil and margarine and soybean products such as soybean meal for animal feed and soybean oil. This year, it has earmarked between US$350 million and US$500 million to expand its oil palm plantations and add two new refineries in Kalimantan. Aside from its sheer heft in Indonesia, the company lays claim to having yields up to 30% higher than the industry average and higher than those chalked up by companies like Sime Darby or Wilmar International, among the top five plantation companies in Indonesia and currently the world’s largest refiner of palm oil. Golden Agri also has a robust balance sheet, with a net debt-to-equity ratio of just 0.1 time as at end-2007.
Valuation gap Despite this, Golden Agri doesn’t command the sort of valuations that smaller plantation stocks do. In fact, it has long traded well below the sector’s multiples. On consensus forecasts for 2008, Golden Agri is on a price-toearnings ratio of 12.6 times. Much smaller Indofood Agri is at 15.5 times and Astra Agro is at a high 19.4 times. Wilmar, which draws the highest ratings in the sector, boasts a PER of 23.1 times for this year. All are listed on the Singapore Exchange except for Astra Agro, which trades in Indonesia. In Malaysia, IOI Corp, another investor favourite, trades at 24.5 times for its fiscal year to June 30, 2008 while peer KL Kepong CONTINUES NEXT PAGE
22 • THEEDGE SINGAPORE
| MARCH 3 , 2008
CORPORATE
| BY JOAN NG |
P
eter Lau, the Hong Kongborn founder and managing director of Joyas International Holdings, grew up surrounded by things that glittered. His father was a goldsmith who made jewellery and all his brothers learned the trade as well. So, when Lau graduated from university, it was only natural that he too should join the family business. Lau never learnt to make the jewellery, spending his days working the shop front instead. But his immediate surroundings, he believes, helped groom his taste for what he does now: making metal gift products such as business card cases, photo frames and cufflinks for premium customers like Lamborghini, Folli Follie and Marks & Spencer. Today, he says, his taste has helped place Joyas among the leading manufacturers of premium metal gift products in Asia. Now, Lau wants to expand his business in a big way and is looking to raise $6.6 million in an IPO on the Singapore Exchange. That’s not a lot of money but Lau says the listing is more for a public profile than anything else. “I want to build up a platform so that we can have joint ventures or mergers with European manufacturers, doing work for high-end brands and metal accessories,” he says. At the moment, most of Joyas’ revenue (about 40%) comes from customers in the US, with only about 25% coming from Europe. But as manufacturing in Europe becomes
GWYNETH YEO/THE EDGE SINGAPORE
Metal goods maker Joyas hopes to tap growth in Europe and China more expensive, companies are looking to outsource their work to China, where Joyas has a 3,291 sq m production facility in Shenzhen that is capable of making about eight million pieces of gift items a year. “The European manufacturers are moving their production to China now, but they are not able to find any manufacturers in China that are good enough. In order to secure their business, I would like to be able to have joint ventures with them.” Being a listed company, he says, should make this easier.
European roots Lau’s first customer was a prominent US retail chain where one of his friends worked. In casual conversation one day, the friend happened to mention that his company needed a manufacturer to make some metal gift items. And despite having no experience or expertise, Lau decided to take the plunge and told his friend he would like to attempt it. His offer was accepted and Lau found to his horror that he had just 2½ months to make over 100,000 pieces of a gold-plated metal razors. “I was one of the first to hire Vietnamese refugees,” he says. Working 24 hours a day, Lau successfully delivered his shipment, which led him to think of bigger things. He packed his bags and went to Europe to survey the gift business there and on coming home, he hired some designers to make a few crude samples for him to market. That was the start to what Lau believes was the first metal gift manufacturing business in Asia. To his
I want to build up a platform so that we can have joint ventures or mergers with European manufacturers, doing work for high-end brands and metal accessories — Lau surprise, orders began coming in so strongly he was soon forced to begin turning people away. “At my first exhibition in Frankfurt, I had to go without lunch and toilet breaks for four days,” he says.
Expansion plans Those European roots played a prominent role in determining Lau’s design tastes, which he describes as distinctly continental. To this day, he still personally approves each
design the company manufactures. Lau believes the company should have little problem penetrating the Europe market. He adds that there has been growing demand among luxury European brands for metal accessories such as handbag clasps and cosmetic casings. To capitalise on this trend, Joyas is expanding its product range into the metal accessories segment. To keep up with growing demand, the company is also expanding its production facilities. Joyas has a 112,559 sq m plot in Guangdong, China, and is currently constructing the first phase of a new production facility there, which will start operations at the end of March and will increase annual production capacity to 12 million pieces. Funding for the plant’s machinery will come from the IPO. Joyas is offering 28.8 million shares at 29 cents a piece. Lau is also expanding in anticipation of rising demand from within China. With rising affluence, sectors such as private banking or retail will grow and many of Joyas’ products go to these industries — as promotional gifts for high-networth clients or packaged with luxury goods for the well-heeled. All this should help boost Joyas’ gross profit, which has been rising at a respectable compound annual growth rate of 35.6% from 2004 to 2006. And hopefully, the scale will allow the company to improve gross profit margins that, despite having risen steadily for the last three years, dipped slightly for 1H2007 to E 36.5% from 39% in FY2006.
‘Golden Agri too significant to ignore’ is at 18.9 times for the year to Sept 30, 2008. Sime Darby is not a strict comparable as the conglomerate also derives earnings from property, motor and utilities.
Legacy hangover The reason Golden Agri trades at a discount to its peers is that “the controlling family has some association with very poor corporate govern-
ance”, says ABN Amro’s Tiruchelvam, pointing to the storied bankruptcy of Asia Pulp & Paper. “That has been a weight on the shares.” The Sinar Mas group built one of the largest pulp and paper businesses in the region on a mountain of debt, which eventually led to the collapse of New York-listed Asia Pulp & Paper in 2001. The group’s Bank Internasional Indonesia, which had loaned large sums to related companies such as Asia Pulp & Paper, was hobbled during the Asian
financial crisis and had to be recapitalised. Amid all that, the group took its plantation arm, Golden Agri, public in Singapore in 1999. Almost a decade on, investors haven’t altogether dismissed the past corporate failures of the Widjaja family, whose net worth today is estimated at US$2.8 billion. However, the sector’s golden age, coupled with the company’s move to introduce more transparency through analyst and media briefings, appears GOLDEN AGRI-RESOURCES
FROM PREVIOUS PAGE
How the plantation companies stack up ‘000 ha
Malaysia
Indonesia
375 Immature Mature
Sime Darby
59 300
21 225
150
43
64
33
13 9
293 249 185
75
160
15 85
172
7 68
22 15
157
8 140
101
IOI
KLK
72
84
0
Golden AgriResources
Astra Agro
Wilmar
Lonsum
Indo Agri (incl Lonsum) Sampoerna
Kumpulan Guthrie Golden Hope Sime Darby
Tradewinds
to be starting to draw some interest back to the stock. On Feb 20, the company also carried out a one-for-two stock split to improve liquidity for retail investors. Tiruchelvam does not cover Golden Agri but says the plantation company is a “wellmanaged enterprise and has a huge land bank”. OSK’s Tai, in his report on the company, reckons that “the company is too big and too significant a plantation player for investors to ignore”. In recent months, Golden Agri has sent its management to meet with investors in the capital markets of Europe, North America and East Asia. Richard Fung, its director of investor relations, says reception has been positive and that the valuation gap between Golden Agri and its peers “is not as big as it used to be”. At end2006, Golden Agri traded at a 62% discount to its peers. The figure is currently about 41%. However, with its ratings still trailing the sector and analyst coverage a fraction of that for Wilmar, CEO Widjaja and his team may have to persevere with the investor road shows — and roll out industry-beating numbers each quarter if Golden Agri hopes to cease being the cheapest large-cap plantation play E in the region.
THEEDGE SINGAPORE | MARCH 3, 2008 • 23
CORPORATE
PICTURES: GWYNETH YEO/THE EDGE SINGAPORE
Del Monte Pacific emphasises brand strength, moves up value chain | BY GOOLA WARDEN |
C
omparing fruits to electronics may seem like comparing the proverbial “apples to oranges”, but that’s not how plantation company Del Monte Pacific sees it. Like an original equipment manufacturer (OEM) in the electronics industry seeking to move up the value chain by selling products under its own brand name, Singapore Exchangelisted Del Monte Pacific wants to put pineapples grown at its plantation in the Philippines into cans labelled with its own S&W brand to reach consumers all over the world. And, like companies in high-tech industries, Del Monte Pacific is innovating and creating better products. Among its recent successes is an ultrasweet strain of pineapple called MD2. Last November, Del Monte Pacific bought the S&W brand from its US affiliate Del Monte Foods Inc for US$10 million ($13.9million), which it plans to use as a vehicle to expand its market around the world. Despite its name, Del Monte Pacific can only sell its canned fruits, juices and condiments under the Del Monte brand in the Philippines and India. Under a deal struck decades ago, Del Monte-brand foods elsewhere in the world are sold by its US and European affiliates. Del Monte Pacific supplies these affiliates with pineapples and other produce. “We have this portfolio of products under the Del Monte brand, which we can only distribute in limited markets,” explains Joselito Campos, CEO of Del Monte Pacific. But with the 112-yearold S&W brand under its belt now, the company will be able to re-brand its products under the S&W label for sale in all markets around the world except North and South America, Australia and New Zealand. (In Europe, its US affiliate Del Monte Foods will continue to sell Del Monte brand canned food products under a perpetual royalty-free licence from Del Monte Pacific.) “We would duplicate our product portfolio and gain access into more markets,” Campos says. It may even allow Del Monte Pacific to catch up with its closest competitor, Dole Food Co of the US, according to company officials. Although both rivals own fruit plantations of about the same size, Del Monte Pacific lags behind Dole because it lacked a global brand. Another corporate investment that’s bearing fruit for Del Monte Pacific is its purchase of a 40.1% stake in India’s FieldFresh Foods for US$22.5 million last September. The other major shareholder of FieldFresh is Bharti Enterprises, a unit of India’s Bharti Group, one of the country’s leading business groups with interests in telecommunications, agri business, insurance and retailing. FieldFresh has around 300ha of land in northern India, where it grows fresh fruits and vegetables for export to Europe as well as for sale in the Indian market. FieldFresh grows mainly mangoes, grapes and pomegranates. India is already a fast growing market for Del Monte Pacific’s products. With the investment in FieldFresh, officials at Del Monte Pacific say its operations in the country could become a business pillar for the company that’s as significant as its home market of the Philippines and the S&W brand. “India is a big opportunity for us while S&W gives us the global reach,” says Luis Alejandro, chief operating officer at Del Monte. “If you look at [our] business today, it is predominantly the Philippines and the exports, but we are going through a transformation right now.” In that transformation, Del Monte Pacific will turn itself into a global consumer brand by using the S&W label
Alejandro: We’re looking at increasing our hectarage by 30% over the next three years and fresh pineapple contributions to 20% of revenue
Campos: We would duplicate our product portfolio and gain access into more markets with S&W
Gapud: Del Monte is no longer just a plantation company. We’re going to consumer branded products and we’re almost completely global. As the market digests this change, our share price could appreciate more
and expand in India using the Bharti-Del Monte Pacific joint venture, says Alejandro. How much will FieldFresh and S&W contribute? “If we have the Philippines as one of our strongest legs today, we want to have BhartiDel Monte and S&W as the other two legs to the same degree in the future, because of the vastness of the India market and the global reach of S&W,” says Alejandro.
that will come from contract growers,” he adds. To quickly process the harvested fruits, the company’s cannery is just a half-hour’s drive from the plantation and is situated adjacent to its own port, which has docking facilities for transport. Del Monte Pacific’s plantations are a legacy from the US occupation of the Philippines. “Even Filipinos cannot own more than 1,024ha of farming land,” says Rolando Gapud, chairman of Del Monte Pacific, referring to the Philippines’ Land Reform Act instituted in the 1960s. “But this plantation was started by the Americans 80 years ago when the Philippines was still a commonwealth of the US. That’s really the reason we were able to get the lease over such a large area.” In future, Del Monte Pacific wants 20% of its revenues to come from fresh produce like pineapples, which at the moment, makes up a negligible part of the business. The company plans to market this fresh produce globally under the S&W brand as margins are usually higher for fresh fruits than for processed fruit. So, Del Monte Pacific’s R&D department has come up with a new pineapple strain called MD2. “It is 30 times sweeter than the ordinary fruit,” says Campos, “and the flesh is very yellow.” On the brix scale of sweetness in a fruit, explains Campos, MD2 is 15 brix compared to the 12 brix in the chempaka variety that is the most common variety of pineapple at Del Monte’s plantations.
Among them is “Fit n Right”, a pineapple drink that contains L-Carnitine, an FDA-approved protein that helps to reduce body fat. Introduced in 4Q2007, the drink retails for the equivalent of 60 cents per pack and has been a runaway hit. “Forty per cent of college students in the Philippines switched from taking soft drinks to Fit n Right,” says Campos. Indeed, the doubling of the company’s beverage sales in the Philippines in 4Q is due, in no small part, to the launch of Fit n Right, adds Alejandro. For 2007, Del Monte Pacific reported a 19% rise in revenue to US$289 million and a 37% increase in net earnings to US$29 million. Most of the improved earnings came from cost cutting, tax savings and an expanded range of products, says Gapud. “For the three years since Campos has taken over, the income of the company has grown by double-digits. The Philippines market was the major driver of the company’s growth in 4Q and the full year. Additionally, in November 2007, the company secured a special-economic-zone tax incentive and started enjoying reduced tax rates of 5% of gross profit instead of 35% of profit before tax. Gapud says it has no plans to raise equity with its current negligible gearing ratio. “We want to keep our shareholders happy and we’re paying out 75% of profits in dividends,” he adds. Not everything is hunky dory though. For one thing, the strengthening Philippine peso is eating into the company’s profits. According to Del Monte Pacific’s officials, a 12% appreciation in the peso decreases profits by US$1 million each quarter. The other challenge is the lack of investor interest in the company. Del Monte Pacific’s share price hasn’t fallen this year largely because it is seen as a dull, defensive stock and isn’t widely owned. But if Campos and his team follow through with their plans for India and the S&W brand, that might soon change. While acknowledging that Del Monte Pacific is a “grower” and benefits from rising food prices, chairman Gapud brings up the analogy of the electronics industry to emphasise that it is now more than just a plantation company. “We’re no longer an OEM supplier,” he says. “We now have a brand. We’re going into consumer-branded products and we’re almost completely global. As the market digests this change, our share price could E appreciate more.”
Expanding plantations To match its global ambitions, Del Monte Pacific is planning to increase the size of its plantation in the Philippines, currently measuring 19,000ha in size. While Del Monte Pacific sources raw materials from all over the world to cut the cost of investing in plantations, it is still the largest producer of pineapples in the world with about a 20% market share. “The area we cover is 40km by 80km,” says Campos, referring to its pineapple plantation in Mindanao. That’s more than the land area of Singapore. As a non-Philippines registered company, Del Monte Pacific cannot own more than 3ha of land. To get around this, most of the land is leased from a cooperative that is made up of employees of the company. “The remaining part is managed through different farmers from whom we lease the land and we give them a different fee,” says Alejandro. He maintains there is no danger of these contract growers being offered a better rate by other companies because Del Monte Pacific provides additional sweeteners for the farmers, such as providing them new technology and helping them with the harvest. “This is exclusively contracted to us,” Alejandro insists. “We’re looking at increasing our hectarage by 30% over the next three years and
Del Monte Pacific 80
Volume (‘000)
Price ($)
0.80
70
0.75
60
0.70 0.65
50
0.60 0.585
40 30
0.50
20
0.45
10
0.40
0
0.35
Feb 13, 2007
Feb 29, 2008
More than just a ‘grower’ Understated and eloquent, the Cornell-educated Campos is the head of the NutriAsia group, a maker of sauces and condiments that churns out 90% of the banana ketchup consumed in the Philippines. In January 2006, a unit of Campos’ corporate group bought a controlling stake in Del Monte Pacific, marking the first time in almost two decades that the company had the backing of a single controlling shareholder. Campos currently controls a 79% stake in Del Monte Pacific. The company has a market cap of $633 million. Since taking over, Campos has trimmed the workforce, raised the number of distribution centres from two to 18 in the Philippines, and increased the company’s outlets from 28,000 stores in May last year to 64,000 by December. He has also introduced a slew of new products to help drive the company’s revenue and earnings.
24 • THEEDGE SINGAPORE
| MARCH 3, 2008
CORPORATE
BIG MONEY
Money in looming global water crisis
A
dventure capitalist, investment biker, and self-confessed China and commodities bull Jim Rogers has a new investment theme. The former hedge fund guru co-founded and successfully built the Quantum Fund with George Soros, only to quit Wall Street in the prime of his life to travel around the world. Outspoken Rogers, who sold his US$15 million ($21 million) New York town house last year and now calls Singapore home, isn’t talking of new frontiers like Africa or exotic asset classes like private equity and derivatives. He is talking of something more common and oft underestimated: water. Indeed, Rogers actually believes if there is one thing that can derail China and India’s dream run over the next few years, it won’t be their burgeoning property or stock market bubbles or overvaluation of other assets, but water. “Think about it: What is the scarcest resource in the world today?” Rogers asked his audience at a seminar recently. “It is not oil, it’s not coal or sugar or wheat that dramatically alters their growth momentum but something even more fundamental to human survival: water.” Nations have gone to war, people have fought for hundreds of years over access to water. More recently, actor George Clooney has articulated the plight of Darfur in Sudan, where tribal fight-
ing has raged over water and cropland in the country’s arid west region, leaving hundreds of thousands of people dead. For his part, Rogers brings his own unique perspective as a globetrotter with two record-breaking aroundthe-world tours across Asia, Africa and Latin America. “I have seen first hand what water does to land and people. It can cause destruction of unimaginable scale and render huge swathes of land unliveable,” he said. That’s a good enough reason for him to bet on water. Water covers more than 70% of the Earth’s surface. However, most of it is saltwater and unfit for people to drink. A mere 2.6% of all the water on Earth is actually potable freshwater. But here’s the real rub: A large share of that small percentage is frozen in the polar icecaps, while part of the freshwater supply is buried so deep in the earth’s crust that it cannot be extracted. Little wonder, then, that, water ranks as one of the world’s scarcest natural resources. Only 0.26% of the total amount of fresh water is potentially available above ground in lakes and river systems. A recent Credit Suisse report noted that roughly 80 countries were unable to provide their populations with a sufficient supply of water without great difficulty. What’s causing this water crisis? First, there is the boom in China, India
| BY ASSIF SHAMEEN |
and other emerging markets, which means the world is using far more water than it did five years ago. Add in climate change, environmental degradation, low water tables in Northern China, the US and India, and the picture becomes grimmer. Owing to the rapid spread of urbanisation and the use of water-intensive agricultural products, the current rate of increase in water usage is double that of the world’s population growth, according to the UN’s Food and Agriculture Organization (FAO). However, this strong surge in water usage has not been met by a corresponding growth in water supply. Global warming, or climate change, is another reason water is becoming scarcer on earth. Scientists say the water-holding capacity of the atmosphere increases as Earth’s temperature rise. Moreover, this is happening just as the duration and frequency
Appetite for food stocks shrinks I
n the north of China, dumplings filled with pork and cabbage are a staple at meal times. Synear Food Holdings has grown fat on this, churning out frozen versions of these dumplings as well as other popular offerings such as glutinous rice dumplings. The company is no small fry: revenue hit 2.2 billion renminbi ($429 million) last year and the company has an estimated 15% to 20% of the quick freeze food products market. And when the Beijing Olympics kicks off in August, the Chinese company will be the exclusive supplier of such frozen dumplings and snacks at the sports fest. But like most converters of food along the food chain, Synear has been buffeted by “agflation” or agricultural price inflation. Never mind the subprime bust or a US recession. Commodity prices continue to shoot through the roof, taking food prices along with them. Wheat is at a new record as stockpiles have sunk to a 60year low (brace yourselves for higher bread prices). Soybean is also at a new peak while corn is at levels not seen in over a decade. Farmers have been channelling the yellow crop towards biodiesel refineries, leaving less for livestock. Pork prices have soared. For Synear, that combination of higher meat and flour prices has been compounded by a rise in packaging costs. And, that has pushed up its
| BY SUNITA SUE LENG |
as i call it raw material prices by about 13% in 2007. But when it came to passing on this inflation, it was only able to hike its average selling prices by approximately 8% last year following a price adjustment in April 2007. As a result, its overall gross profit margin dipped to 32.2% last year versus 33.6% the year before. On its own, this wasn’t too shabby a performance. However, and more tellingly, Synear’s FY2007 numbers, released last Monday, showed that growth was braking in 4Q. As brokerage CIMB-GK points out in a Feb 26 note, its sales volume actually fell 6.7% in 4Q2007, despite that quarter
being a strong one seasonally. On top of that, analysts were caught off guard by a spike in selling and distributing costs and a surprise tax charge. Synear’s FY2007 profit came in some 14% below consensus forecasts. Investors promptly sold down the shares the next day, taking it down by 26.2%. Put another way, a whopping $371.3 million was wiped off its market capitalisation. The shares closed at a new low of 64.5 last Thursday and since the start of the year are down just over 60%. Higher soybean prices also hurt Pine Agritech, which makes soybean health products and food ingredients. The company said last Thursday its gross profit for 2007 fell 6.6% due primarily to higher soybean costs, which rose by over a third last year. The shares are down some 37% year-to-date. Shares of Celestial NutriFoods, which makes soybean-based health beverages and
of rains are falling, which means it now takes longer in warmer climate to recharge the atmosphere with rainforming vapours. Whether you are a Clooney fan or pretend to understand the intricacies of the Darfur crisis, all you need to know is that water is likely to be key to more of the world’s conflicts. Forget Iraq or the Middle East, the water crisis could be the biggest security threat since Al-Qaeda. Reams of paper have been wasted in recent months on editorials about agri or food inflation. But consider this: If the current global water crunch deepens, water will soon become an even more expensive commodity and, because everything we eat or drink or grow uses water in some form, inflation pushed by scarcer water could wreak real havoc. We don’t need a Nobel Prize and Academy Award-winning former VicePresident of the US to warn us of an impending global economic calamity. Even if the water crisis doesn’t lead to food costs spiralling, there are likely to be ripple effects aplenty on the global economy. Rogers believes that “without water, there is no China growth story, there is no India growth story”. Without the boom in China, India and emerging markets, the global growth train is likely to be derailed. India and China have been the engines of global growth in recent years. To ensure China’s growth
story stays on track, the world needs to ensure there is plenty of water to fuel the growth and lubricate those tracks. “By the way, India has more severe water problems in most areas than China,” says Rogers. For investors, there is money to be made from water. GHD, a global environmental consultancy, estimates that revenue generated by the global water sector is expected to grow from to US$342 billion by 2010 to more than double what it generated in 2004. It says the key drivers of that growth will be China, India and other emerging markets. Two listed Singapore water firms Hyflux and Epure figure in lists of global water stocks. Even legendary billionaire investor T Boone Pickens, who made his money from oil, is hopping on the water bandwagon. Pickens’ firm, Mesa Water, recently acquired water rights for 200,000 acres in Texas and is busy buying water rights across the US the way oil companies were buying drilling rights decades ago. Pickens has said oil and water are the two big commodities he is bullish about for the long term. General Electric’s CEO Jeff Immelt recently mentioned water as the one sector that the world’s biggest conglomerate was looking to increase its exposure in. Rogers, Pickens, Immelt and others can’t be wrong. Water’s E time has come.
food, also retreated last week after the company reported a drop in gross profit margins for 2007. In a slowing world, the Chinese consumer was thought to be one pocket of resilience. After all, sales of consumer goods rose 16.8% last year even as inflation swelled by 4.8% in China. However, 4Q numbers from companies indicate that consumption demand may indeed be taking a dent, a casualty of the increase most people have seen in food prices from the wet markets to the hypermarkets to eating places. This makes it all the more difficult to pass on agflation to end-consumers — especially when the government has adopted a hawkish stance in relation to consumer prices. In mid-January, the Chinese authorities introduced temporary price control measures on daily necessities such as processed grains, edible oil, meat,
dairy products and eggs. According to the new rules, big producers have to obtain governmental approval before raising their prices. Wilmar International, which is the leading player in China’s edible oil market, has held off asking for a price hike as it has covered its raw material prices very well, the company said at its results briefing last Thursday. However, it expects to do so “soon”. The question is: Will the government allow it to raise prices? In its results statement, Wilmar cautioned that consumption of edible oils in China might be affected by high prices. The company, however, isn’t altogether wringing its hands at recordbreaking soybean and palm oil prices. That’s because it is reaping bumper gains from growing oil palm. And, for the most part, sells its processed oil to industrial users, who absorb high raw material prices more readily than consumers. Agflation hurts when you’re not vertically integrated. This latest bout of commodity price increases — which stretches from the humble soybean to fuel such as coal and crude oil — is stoking already high inflation. Today, the rise in the cost of everyday life has become the No 1 issue on almost everyone’s plate. That’s starting to crimp appetites, both for the shares of food producers and even for staple items E like savoury dumplings.
Commodity prices continue to shoot through the roof, taking food prices along with them. Wheat is at a new record as stockpiles have sunk to a 60-year low (brace yourselves for higher bread prices).
SINGAPORE (INCLUSIVE OF GST) S$3.00
OTHER HIGHLIGHTS THE ASCOTT INTERVIEW
Millionaires’ row in Singapore
Petrodollar tsunami warning
Concord CEO sparks revolution
CITY&COUNTRY
ECONOMY WATCH
OPTIONS
MICA (P) No. 075/08/2007 PPS 1519/09/2008 (000599)
3
BUSINESS
&
INVESTMENT
WEEKLY
THE WEEK OF MARCH 3 — MARCH 9, 2008
308
SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
NOTEWORTHY
The best of the best:
THE EDGE-LIPPER SINGAPORE FUND AWARD WINNERS
2008
ASSIF SHAMEEN:
Money in looming global water crisis SUNITA SUE LENG:
Appetite for food stocks shrinks ST Engineering plans diversification to sidestep possible US slowdown Golden Agri plants up, seeks to close valuation gap Del Monte emphasises brand strength, moves up value chain Celestial NutriFoods continues expanding, squeezed by high soybean prices
SURVIVING the crunch ARA Asset Management has emerged unscathed from the funding squeeze in the REIT market. Now, CEO John Lim wants to double its assets under management within three years to $20 billion, a level that would rival CapitaLand’s real estate asset management business. Turn to our Cover Story for why institutional investors are excited about the stock.
Federal International makes rash of energy investments Small-cap financier DB Zwirn winds down funds Synear Food, China Milk, Celestial NutriFoods, People’s Food, China Dairy, China Essence Hot stocks
8 885002 090004
PLUS: Managers of MMP REIT contemplate M&A deal
563/%"3, 4,*&450 #-6&
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SINGAPORE (INCLUSIVE OF GST) S$3.00
OTHER HIGHLIGHTS THE ASCOTT INTERVIEW
Millionaires’ row in Singapore
Petrodollar tsunami warning
Concord CEO sparks revolution
CITY&COUNTRY
ECONOMY WATCH
OPTIONS
MICA (P) No. 075/08/2007 PPS 1519/09/2008 (000599)
3
BUSINESS
&
INVESTMENT
WEEKLY
THE WEEK OF MARCH 3 — MARCH 9, 2008
308
SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
NOTEWORTHY
The best of the best:
THE EDGE-LIPPER SINGAPORE FUND AWARD WINNERS
2008
ASSIF SHAMEEN:
Money in looming global water crisis SUNITA SUE LENG:
Appetite for food stocks shrinks ST Engineering plans diversification to sidestep possible US slowdown Golden Agri plants up, seeks to close valuation gap Del Monte emphasises brand strength, moves up value chain Celestial NutriFoods continues expanding, squeezed by high soybean prices
SURVIVING the crunch ARA Asset Management has emerged unscathed from the funding squeeze in the REIT market. Now, CEO John Lim wants to double its assets under management within three years to $20 billion, a level that would rival CapitaLand’s real estate asset management business. Turn to our Cover Story for why institutional investors are excited about the stock.
Federal International makes rash of energy investments Small-cap financier DB Zwirn winds down funds Synear Food, China Milk, Celestial NutriFoods, People’s Food, China Dairy, China Essence Hot stocks
8 885002 090004
PLUS: Managers of MMP REIT contemplate M&A deal
563/%"3, 4,*&450 #-6&
Turmoil in financial markets doesn’t necessarily have to spell trouble for your investments. Hedge with stock and index-tracking CFDs on SaxoTrader to preserve the value of your portfolio.
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More efficient intra-day stock trading with live prices Leverage investments up to 10 times Diversify with CFDs from 23 major exchanges globally Low entry cost of CFDs on 15 major stock indices
Get your free demo account; visit www.saxomarkets.com.sg, email [email protected] or call +65 6303 7788. 3JTLXBSOJOH-FWFSBHFEJOWFTUNFOUTJOGPSFJHOFYDIBOHFPSEFSJWBUJWFTDBSSZBIJHIEFHSFFPGSJTLBOENBZSFTVMUJOTJHOJ¾DBOUHBJOTPSMPTTFT:PVTIPVMEDBSFGVMMZDPOTJEFSZPVS¾OBODJBMTJUVBUJPOBOEDPOTVMUZPVSJOEFQFOEBOU¾OBODJBMBEWJTPSTBTUP UIFTVJUBCJMJUZPGZPVSTJUVBUJPOQSJPSUPNBLJOHBOZJOWFTUNFOUT $PNQBOZ/P.
OP2 • THEEDGE SINGAPORE
| MARCH 3, 2008
BUY RIGHT
SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
| BY AUDREY SIMON |
EDITOR/REGIONAL MANAGING DIRECTOR Tan Boon Kean ([email protected])
Charmed life The YSL charm bracelet is adorned with YSL’s iconic items such as the Downtown bag, the Uptown bag and the Tribute heels. Available at YSL boutiques.
SECTION EDITOR Audrey Simon ([email protected]) CONTRIBUTORS Grace Chin, Jamie Nonis, Leela Barrock, Felix Cheong, Tony Watts COPY-EDITING DESK Elaine Lim, Evelyn Tung, Ng Bee Cheng, James Chong PHOTO EDITOR Samuel Isaac Chua ([email protected]) PHOTOJOURNALIST Gwyneth Yeo ([email protected]) EDITORIAL COORDINATOR Rahayu Mohamad ([email protected])
Like a ballerina Flat shoes are hot this season. Lanvin has just released its collection of Ballerina flats that are so comfortable, you won’t want to take them off. They cost between $729 and $899 and are available at 0247 Wisma Atria.
Scent for life Diesel’s Fuel for Life fragrance for men has been touted as a body balm: The ingredients that go into it are star anise, heliotrope, raspberry, tangerine and pink grapefruit. This deliciously energetic fragrance has a female version as well so you and your partner can complement your scents. Available at leading department stores.
DESIGN DESK Tan Siew Ching, Christine Ong, Chan Yoke Lin, Jamy Gan ADVERTISING + MARKETING REGIONAL GENERAL MANAGER | Edward Stanislaus ([email protected]) SENIOR MANAGER | Colin Tan ([email protected]) MANAGERS | Simon Wong ([email protected]) Cecilia Kay ([email protected]) Jeffrey Wong ([email protected]) Windy Tan ([email protected]) Faith Teo ([email protected]) Julia Tan ([email protected]) COORDINATOR | Nor Aisah Bte Asmain ([email protected]) MALAYSIA REPRESENTATIVE | Helen John Corry ([email protected]) CIRCULATION-SUBSCRIPTIONS REGIONAL SENIOR MANAGER | Suresh Kumar ([email protected]) ASSISTANT MANAGER | Naziela Nasir ([email protected]) ASSISTANTS | Juliana Ibrahim ([email protected]) Iryanti Zainol ([email protected]) PUBLISHER THE EDGE PUBLISHING PTE LTD 150, CECIL STREET #13-00 SINGAPORE 069543 TEL: (65) 6232 8622 FAX: (65) 6232 8620 PRINTER KHL Printing Co Pte Ltd 57 Loyang Drive Singapore 508968 Tel: (65) 6543 2222 Fax: (65) 6545 3333 We welcome your comments and criticism. Send your letters to The Edge, Raffles City Post Office PO Box 218 Singapore 911708 Tel: (65) 6232 8622 Fax: (65) 6232 8620 e-mail: [email protected] Pseudonyms are allowed but please state your full name, address and contact number for us to verify.
Nature lovers Franck Muller draws inspiration from the humble pebble for its latest collection of timepieces. Called the Galet, French for pebble, the watch shows off its purity and smooth lines, just like the pebble that has been polished and shaped through years of erosion by water. It is minimalist, elegant and will remain a classic. Available at authorised retailers. Get organised Savvy travellers will love the new Solana collection by luggage specialist Samsonite. It is ergonomically designed and comes with extras such as a toiletry kit, a removable suit compartment and more space so you need not worry about wrinkling your clothes. The luggage can be expanded by 5cm, a plus for those who love to shop while overseas. Available at Samsonite boutiques and leading department stores.
HOME, SWEET HOME Imagine your love nest filled with limited items from designer Giorgio Armani
This month, Armani/Casa is filled with some of the finest furniture you will ever set your eyes on. They are available in limited quantities, so you can be sure of exclusivity and guests to your home will be impressed. Here are highlights: Antoinette (left and centre) is a dream dressing table for the woman who takes time and effort to look her best. At a glance, the dressing table set looks like a round table but take it apart and you will see the table with the mirror and a comfortable seat. Aida is a desk covered in gilded lizard print. Adelchi (right), also a desk, has a satin finish with glossy metal tiles. All items area available at Armani/Casa at the Raffles Arcade.
THEEDGE SINGAPORE | MARCH 3, 2008 • OP3
YourWeekOut
WATCH 10,000 BC (opens March 6), an epic action adventure from Independence Day director Roland Emmerich and set in prehistoric times. D’Leh (Steven Strait) is a warrior who mellows after falling in love with Evolet (Camilla Belle). But when she is kidnapped, his fighting instincts return. SEE Harry Connick Jr in action when he brings his My New Orleans Tour to town and opens the Mosaic Music Festival. The multiple Grammy awardwinner takes his band on the road to promote his new album, Oh, My NOLA, which is filled with big-band sounds and piano workouts. March 7, 8pm, Esplanade Theatre. Tickets at $88 to $248 from Sistic*.
CHECK out The Stage Club’s staging of three classic works in Black Comedy and Light Tragedies. They are Peter Shaffer’s Black Comedy about a poor sculptor and his fiancée’s unexpected confrontation when a bulb blows; Alan Ayckbourn’s Countdown, a snapshot of a marriage; and Michael Green’s Present Slaughter, where a Noel Coward play descends into a bloodbath after its leading man meets with an accident. Directed by Nick Perry. March 5 to 8, 8pm, DBS Arts Centre, Home of SRT. Tickets at $30 and $35 from Sistic*. TAKE the kids to Paper Shaper, a physical theatre piece that promises to be funny, quirky and colourful. Capital E National Theatre for Children from New Zealand puts on this performance about a mysterious garbage man living underground and a determined passer-by trying to throw his lunch away. Part of ACT 3 International’s Prudential Children First! Singapore International Festival for Children 2008. March 5 to 9, 10am and 2pm (Wednesday to Friday), 11am and 5pm (Saturday and Sunday), Drama Centre Black Box. Tickets at $20 from Sistic*. CATCH Incubus in concert as the alternative metal band, made up of vocalist Brandon Boyd, guitarist Mike Einziger, bassist Ben Kenney, drummer Jose Pasillas and turntablist Chris Kilmore, play their past hits and songs from its latest album, Light Grenades. March 7, 8pm, Fort Canning Park. Tickets at $125 and $400 (with access to VIP hospitality suite) from Sistic*.
ENJOY a casual afternoon of classical music with the Singapore Symphony Orchestra in its concert Fantasy and Romance. The orchestra plays Saint-Saens’ Fantaisie for Violin and Harp, Glinka’s Romance and Debussy’s Les Chansons de Bilitis, among others. March 9, 5pm, Victoria Concert Hall. Tickets at $10 (show your ticket at Victoria Café from 4pm to 5pm to enjoy a free cup of coffee or tea and a slice of cake).
endary jazz musician comes to town for the Mosaic Music Festival. Known as Captain Fingers, Ritenour has established himself as one of the world’s leading jazz guitarists, playing with The Mamas and the Papas, Tony Bennett, Lena Horne, Sergio Mendes, Herbie Hancock, Dizzy Gillespie and a host of other luminaries. March 8, 7.30pm, Esplanade Concert Hall. Tickets at $58 to $118 from Sistic*.
DON’T miss Lee Ritenour in concert when the leg-
*Sistic hotline: 6348 5555
OP4 • THEEDGE SINGAPORE
| MARCH 3, 2008
SPECIAL EVENT
Annalyn Celebrating her 9th Birthday by Hartmut Schwarzbach. Nine-year old Annalyn, who wants to be a neighbourhood teacher, lives in a charcoal camp located in a trash dump in Manila. Schwarzbach’s shot won him third prize at Unicef’s Photo of the Year contest last year.
Captivating compelling
P
hotography as a communicative art has become accessible to the masses with the affordability of technology and proliferation of digital cameras. Ruth Eichorn, director of photography for GEO magazine, says: “Photography is the international language of the future. The more people are getting educated about good photography, the better.” The ubiquitous photo-sharing experience online has exposed and heightened the public’s awareness of what a “good” picture looks like. “But what makes a photograph, or a series of photographs, stand out from the familiar and generic?” asks Simon Bainbridge, editor of the British Journal of Photography. Bainbridge says it takes more than good technique, or being in the right place at the right time, to capture something compelling. “You need commitment, engagement, investigation and, above all, a unique way of seeing and interpreting what is in front of you. Otherwise, it is just visual karaoke,” he says. “The paradox is that a ‘just good enough’ attitude pervades in this age of cheap and instant image downloads, which devalues the status of professional photography, and
yet the medium’s standing as an art form has never been higher. The World Photography Awards provide an excellent opportunity to celebrate excellence, and to show the world that great photographs can’t be bought for a dollar,” Bainbridge adds. Eichhorn and Bainbridge are among two of the World Photographic Academy (WPA) members who are judges for the inaugural Sony World Photography Awards, an international showcase of the best images taken from both renowned and undiscovered photographers alike. The awards are supported by hundreds of the industry’s top photographers, critics, gallery owners and directors, among others. Of the 25,9354 amateur and 44,641 professional photograph entries, 17 short-listed candidates for both professional and amateur participants were announced recently for the 11 categories: abstract, advertising, architecture, fashion, music, nature, nude, portraiture, photojournalism, science, and sport. The winners will be announced at a black-tie award ceremony at the Palais des Festivals in Cannes on April 24. The annual awards and the follow-up exhibition aim to become to photography art
&
The World Photography Awards celebrate excellence in the field. Grace Chin reports.
America’s Cup by Miguel Riopa Alende
what the Oscars are to the film industry. Its judges are drawn from from the WPA, set up to promote excellence in the field and to provide inspiration for the new generation of photographers. Members include 100 of the world's most respected photographers, critics, picture editors, gallerists and other industry leaders, including Phil Stern (US), Terry O’ Neil (UK), Chien-Chi (China), Sylvia Plachy (Hungary), Carl de Keyzer (Belgium) and Esko Mannikko (Finland). Members form the judging panel for the awards, and winners will automatically gain membership to the academy. The academy is governed
by the Honorary Board, which comprises 11 members, including Tom Stoddart, Mary Ellen Mark, Bruce Davidson, Martin Parr, Elliott Erwitt, Susan Meiselas and Stephen Cohen. Exceptional photographs will be selected — ranging from artistic expressions to personal documentation and interpretations of subjects — that represent the diverse and colourful psyche of humanity and our environment. Says UK-based artist and academy member Idris Khan, “Photography is a medium in which we celebrate the vision of an artist who most of the time quite literally points his camera to the world and says,
‘Look at this’, and then we read it as ‘Look at what was there’ and even more now ‘Was that really there?’ Its development is fast and challenging; it has no boundaries [and it] should live longer than you or me.” The overall winner of the title Sony World Photography Awards Photographer of the Year will receive US$25,000 ($35,162). The winner of the amateur category gets US$5,000, donated by Sony, and will be named Sony World Photography Awards Amateur Photographer of the Year. The individual will also be flown to attend the awards ceremony in Cannes. In addition to that, Saatchi Online, one of the biggest names in the arts and photography world, has signed up to partner the awards and support the amateur entries. A selection of 100 images from highly commended amateur entries will be displayed on the Saatchhi Online Gallery wall in Cannes during the awards, followed by the launch of the WPA Image Bank on Saatchi Online that will feature up to 1,000 top commended amateur images for commercial sale. Grace Chin is a writer with the Options desk at The Edge Malaysia. Browse the short-listed entries at worldphotographyawards.org.
| MARCH 3, 2008
THE ASCOTT INTERVIEW
SPARKING a REVOLUTION Concord has gone from classic to edgy in a flash. Its president Vincent Perriard speaks to Jamie Nonis about being given carte blanche in reinventing the brand.
SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
OP6 • THEEDGE SINGAPORE
W
hen Vincent Perriard was invited to Movado Group International (MGI)’s headquarters in New York to meet MGI boss Greg Grinberg, he was visibly disappointed after being told that, of all the brands under its stable, Perriard was to be entrusted with Concord. Recalling the exchange, Perriard says, “He asked, ‘Why do you react that way? It’s a cool brand.’ And I said, ‘No, it’s not a cool brand at all!’ “I think I did that on purpose. I wanted to test him and see whether we were on the same page because, for me to take on the challenge of Concord, it could only be a great success if we could completely rethink the brand from inside out.” His second mandate was that the brand shift its headquarters back to Switzerland after being in New York for 35 years. “In the US, they don’t really know how to speak luxury. Concord became almost like an American brand and that was one of the biggest issues,” he says. Perriard was promptly granted both wishes and given free rein to mould Concord. In addition, a brand-new team was put together to create a revolutionary milestone for the brand. The only directive from Grinberg was that he wanted “to be proud of Concord again”, shares Perriard. This goal was achieved in a single day at the annual Basel watch fair in Switzerland last year, when Concord sold all 1,100 pieces of its new C1 chronograph. Any detractors who had laughed at the brand’s bold declaration of reinventing itself as “modern and edgy” had to swallow their words as the industry enthusiastically lapped up the C1. Indeed, the watch makes a strong statement, with its striking and highly recognisable design. It is a monster on the wrist at 44mm, distinguishable by three unique features. First, the case alone comprises 53 components, versus the usual maximum of seven. Second is the absence of lugs that usually affix the strap to the case, making the watch adaptable to even those with smaller wrists. Finally, the deal-sealer is the three-layer dial that creates an extraordinary 3D effect. Never in your wildest imaginations would you have envisaged that a watch stamped with the Concord brand could look this cool. Indeed, Grinberg’s words have come to pass under Perriard’s deft hands and inspired vision. All the brand’s previous collections, such as the Delirium and Saratoga, have been done away with, as has the old logo. So, really, it is a brand-new Concord in every sense of the word. This year, Concord will rock aficionados’ worlds further with the first-ever tourbillon located outside the watch and positioned vertically instead of the usual horizontal mode. The watch will be called the Tourbillon Gravity. Perriard says, when the tourbillon was invented by Abraham-Louis Breguet in the 1700s, it was intended for pocket watches. When kept in the pocket, the tourbillon was maintained in a vertical position and this was “the best way for quality and accuracy”. Thus, he says the Tourbillon Gravity will boast a heightened accuracy compared with traditional tourbillons. Perriard, who has worked at Audemars Piguet and Hamilton, was the perfect candidate to spearhead this “risky and daring” project of refashioning a classical brand. First, the 38-year-old looks nothing like the stereotypical, sometimes stuffy, image of a CEO of a luxury watch brand. Dressed in an impeccably cut suit and designer prescription glasses stylishly stealing some attention from his bald pate, Perriard looks like he heads a fashion house instead. He gamely models, not just poses, for our series of photographs; his towering physique seamlessly contouring into position. He speaks with Options about being given carte blanche to completely reinvent a long-time classic, taking Concord from mass to niche and a 200% jump in its price point. In terms of brand DNA, how would you describe the transformation Concord has undergone? It’s completely radical. That was one of the biggest challenges because, when the team started in June 2006, we asked people in many countries like Singapore, Hong Kong, Japan and the US to describe the DNA of Concord and it was always a different answer. The reason is that, in the past, Concord was doing different advertising campaigns, and [had] almost different logos and different collections [to appeal to different mar-
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THEEDGE SINGAPORE | MARCH 3, 2008 • OP7
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kets]. So, you end up with a situation in which the image is not very clear. So we said, ‘Let’s go back to when Concord was a strong brand.’ In the late 1970s, Concord was hot in the industry because in 1979, we launched the thinnest watch in the industry, which was the Delirium. At that time, the brand had a very strong reputation. So we said, ‘Let’s imagine that we are in 1979 and try to describe Concord at that time’. Then, the brand was daring, modern, and it was using a tremendous amount of technological know-how and engineering. The brand was edgy as it was really unexpected to create such a thin watch [at the time]. Those elements were the DNA of Concord, so we decided to keep that DNA — daring, modern, [technological] know-how, unexpected — and use those values to redesign the new Concord. We gave these values to the designers and they came up with this design. So, you’ve gone from having the thinnest watch to the thickest. Is it really the thickest in the industry right now? We believe so. We might find a special grand complication that’s a bit thicker but, for chronographs, I think we have the thickest in the industry. We said, ‘Let’s imagine the ultimate in construction’ and we came up with this idea of having a very complex watch in terms of construction. What has the consumer and industry feedback been like since you relaunched? We presented [the C1] to the industry at Basel 2007 and we sold the whole quantity in a day. So, we knew at that moment [that] we had something hot on our hands. The other thing is the number of press interviews at Basel. [At] Basel 2006, I was not there, we had three or four interviews. [In] Basel 2007, we had 137 press interviews in a day. It was crazy, so the attention from the press was big. We knew we were definitely going in the right direction with this product. And then the second step of reaction was the trade and the public in the forums. If you go to Google and type Concord C1, you’ll see the number of hits is crazy. Has Concord’s price point increased? A lot. It was not driven by marketing. We wanted to create something special, something ultimate with the construction [and] we wanted something very edgy. So, we worked with the best suppliers in the industry and, at the end of the process of building the watch, you end up with the price. It’s about [a] 200% [increase]. That’s why we were quite nervous about the whole idea. But the design, product and the story seemed to work so well in Basel. So, this is proof that if you have the right product, great design, some innovation in the product and you are very niche — we had only 1,100 units last year — it works. We changed the logo, the colours, we removed the old stock, [so] it’s a new display, new merchandising, everything is new, even the people are new. When you bring so much freshness and new ideas, we have a new clientele. The person who buys the C1 is an extrovert [with an] open personality and a very strong character. He loves big, statement watches. He’s not shy. The clientele we had before was much more conservative, classical and understated.
So, you’re not planning to retain the old clientele? No. But if people love what we have done with the C1, then great. We’re doing the concept that we think is [best] for Concord but we never try to appeal to the old clientele of Concord. We know that we are losing some [of the old clientele] but the new clientele is much more energetic and we’ve already seen some great discussions in the [Internet] forums. So, it’s not a problem at all. Who are your competitors in the market now? I can honestly say we have no competitors. [The C1 is] going to be purchased by a consumer who has [an Audemars Piguet] Royal Oak Offshore. He might have a Hublot Big Bang, a Panerai and, tomorrow, he will have a C1. We believe the C1 will not be for someone’s first purchase. You need to be ‘educated’, understand and be in love with the industry. Maybe you will start with an Omega, then you will go to a Panerai, then maybe Corum, then suddenly you see the C1 — it’s bigger, there are no lugs, it’s different and you love the story of the dial. We are in this universe of big, visible, constructed watches and so those names I mentioned are the brands in this game. Can you share revenue figures? It’s a listed company so the numbers are open but we don’t break down the numbers for the specific brand. We are moving from a brand that used to produce 40,000 pieces a year to being a brand that produces 3,000 pieces a year — that’s going to be our target. In other words,
we have no pressure from the group to deliver numbers. We have pressure to do the best qualitative job ever because the revenues are really coming from the other brands like Ebel, Movado and the fashion brands as we own [watch] licences for brands like Hugo Boss, Tommy Hilfiger, Lacoste, Coach and so on. Concord has a mission now to be really small and beautiful, so it’s all about limited quantities. What kind of impact on revenue are you expecting with this new strategy? What I can tell you is 2007 [was about] stabilising the numbers because we shut down the old Concord and we launched the new C1. The balance makes a flat number and, as of next year, we are going to start to grow [but] a very limited growth of around 5%. We feel we could have a huge boom with the C1 but we’re going to keep it very limited; we want to keep the numbers down. We don’t want to burn [out]. Do you plan to keep production figures at 3,000 or will you increase this in the years to come? It’s a very difficult question because we also have to adapt, depending on the speed of success. If I had to give you a number, I would say that five to 10 years from now, the vision will be to achieve a maximum of 10,000 units. But it’s only when the brand has proven that it’s working well and we are everywhere. Compared with others, 10,000 units [is still] really small, which is fine because we want to be niche. Have you kept the same market strategy? No, there is a big shift. We used to be very strong in the US [50%], then the Middle East, then Southeast Asia. The new Concord, and the way we have sold the pieces in Basel so far, I would say 25% each in North America, Europe/Russia, Asia and the Middle East. It’s a very good balanced business so far but, obviously, it may evolve along the way.
The C1 is a monster on the wrist at 44mm, distinguishable by three unique features: a case that comprises 53 components (the norm is only up to seven); the absence of lugs that usually affix the strap to the case; and a three-layer dial that creates a 3D effect
What are your plans for China, India and the Middle East? The Middle East is still a very strong market [and], with the C1, it’s even stronger. We see huge potential. We launched in Dubai in January with the most powerful group in the region. There is no special plan as Concord is a very famous brand in the Middle East because of the past, so we have a very good future there. In India, we don’t have any plans today because we have so many things to do first in Europe. We started in January but only with three points of sale, which are really at the top [of the luxury market]. We have a subsidiary in Hong Kong. We reorganised the subsidiary and decided that this year, we will give full attention to Hong Kong and Macau and that’s it for the beginning. The objective is to grow to only 10 points of sale and maintain that number by year-end. Next year, we will enter the Chinese market with a subsidiary in E Shanghai and partnerships in China. Jamie Nonis is a freelance writer with a passion for quality timepieces
OP8 • THEEDGE SINGAPORE
| MARCH 3, 2008
FEATURE
Juli her
Rolex’s
GIFT TO THE ARTS Continuing a tradition almost as old as time, the Rolex Mentor and Protégé Arts Initiative is an international philanthropic programme created to assist extraordinary, rising artists to achieve their full potential. It seeks out these artists from around the world and brings them together with great masters for a year of creative collaboration in a one-to-one mentoring relationship. Leela Barrock was in New York for the initiative’s gala night.
I
t was a blustery November night at the Lincoln Centre in New York. A tad too early for Christmas but a little detail like that would not put a damper on the festivities that evening. There was a real-life red carpet (like on E! Channel) and press photographers at the ready to capture the rich and famous all dressed to the nines (yes, exactly like on E!) — gliding, posing, gliding, looking oh-soglamorous, mingling, trilling and sipping champagne. Martin Scorsese was there in a tux, smiling, nodding, managing to look every inch the legend he is even with this awestruck reporter enthusiastically pumping his hand, transfixed into silence by his lack of height (he looks taller on TV, I swear) and those eyebrows. Mira Nair was resplendent in a startling red Punjabi suit. She called Scorcese a guru and later smiled indulgently as Julie Taymor (Lion King, remember?) waited for the same reporter to finish pumping her hand. Owen Wilson was a guest, standing out with his blonde bangs, tan
corduroy and canvas shoes in the sea of formal evening wear. And Stephen Frears, the man possessed of a soul sensitive enough to have captured The Queen, cut a dashing figure in formal attire, in stark contrast to the somewhat rumpled man some 15 journalists had interviewed just a few hours earlier. There were other luminaries as well, from the worlds of literature, dance, music and the visual arts, from all over the world. “Only in New York could you put together such a gathering,” one of the guests at the gala event remarked as yet another familiar face squeezed past a nearby table. Indeed, not only did it seem that every nation on earth was represented there, the place was overflowing with the famous and glamorous. There were numerous don’t-I-knowher/him-from-somewhere moments, as a dozen different languages and countless accents ebbed and swelled among the crowd, which gave up all claim to personal space. But it was not New York that drew the Frears and Scorceses of the
world to the Lincoln Centre that night. It was Rolex. Rolex is better known for its precision Swiss (what else) watches but it does have a long history of association with the arts. But nothing quite like this, though. It was in 2002 that Rolex launched its Mentor and Protégé Arts Initiative, giving a twist to the Medici-style patron of the great Florentine tradition, but without any fanfare. For that first cycle, Rolex brought together mentors like William Forsythe (dance), Toni Morrison (literature), Sir Collin Davis (music), Robert Wilson (theatre) and Alvaro Siza (visual arts) with carefully selected protégés — all, without exception, nominated for their talent, potential, need, motivation and suitability. “Just as it takes a year to construct a Rolex timepiece to our exacting standards, it takes a year to set up a relationship between a mentor and a protégé, who then spend another year developing a fruitful collaboration,” Rolex CEO Patrick Heiniger said.
Thus, for two years, the protégé gets paid to spend time with his/her mentor. The protégé gets a stipend of US$25,000 ($35,162) plus expenses and gets to spend time with an idol he or she may have only dreamed of ever meeting. Too good to be true? It gets better. Rolex will offer an additional US$25,000 to produce an event. And they do not wash their hands of past protégés but keep track of their progress and even boast about them like any proud benefactor would. To prevent the unsavoury aspects of patronage from tainting the process, the protégés are selected in secret. There is no application process and no lobbying. Instead, six nominating panels consider 30 to 40 young candidates from around the world and narrow their numbers down to three or four. The mentors, selected by a Rolex advisory panel, will then pick the protégé they want to work with. No wonder the protégés’ descriptions of that first phone call from Rolex sounded like a Cinderella moment. “I cannot describe what an opportuni-
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THEEDGE SINGAPORE | MARCH 3, 2008 • OP9
(From left) Germaine Acogny, dance adviser for the Rolex Arts Initiative; Pinchas Zukerman, 2006/07 mentor in music; and Anani Dodji Sanouvi, 2006/07 protégé in dance
Stephen Frears (left), 2006/07 mentor in film; Mira Nair, 2004/05 mentor in film; and Josué Méndez, 2006/07 protégé in film
Julie Taymor (left), 2006/07 mentor in theatre, and her protégée Selina Cartmell
Edem Awumey (left), 2006/07 protégé in literature, and Wole Soyinka, 2008/09 mentor in literature Renee Flemming Martin Scorsese, 2008/09 mentor in film
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ty this was for me,” Antonio Garcia Angel, protégé for literature in the second cycle, said when I shared a bus ride with him one evening. There he was, a struggling writer in Columbia and — voilà! — the offer comes to spend a year under Peruvian author Mario Vargas Llosa. “It was incredible... I thought it was a joke at first,” Angel said. This was the thread that ran through all the protégés — Rolex had given them a-once-in-a-lifetime opportunity. In the second cycle, theatre was added to the list of disciplines, with Mira Nair as the first mentor. There was Saburo Teshigawara in dance, Mario Vargas Llosa in literature, Jessey Norman in music, Sir Peter Hall in theatre and David Hockney for the visual arts. That night in New York, Rolex was celebrating the culmination of the third season of the mentor protégé programme with some 650 guests crammed into the 400seater ballroom to fete the mentors and protégés of the third season and announce the mentors of the fourth season. Scorsese, the reigning Oscar winner for best director is the mentor for film in the fourth cycle, taking over from Frears, who played the role in the third cycle. Joining him will be Rebecca Horn as mentor for the visual arts, Jiri Kylian for dance, Youssou N’Dour for music, Wole Soyinka for literature and Kate Valk for theatre. Apart from Frears, the other mentors for the third season were Taymor (thea-
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Patrick Heiniger (left), CEO of Rolex SA, and William Forsythe, 2002/03 mentor in dance
tre), Tahar Ben Jelloun (literature), Anne Teresa De Keersmacker (dance), Pinchas Zukerman (music) and John Baldessari (visual arts). Most of the mentors spoke with enthusiasm of the initiative of living up to Rolex’ claim that they had been selected not just because they are great artists but also because they are generous, according to Rebecca Irvine, Rolex’s programme director. At least two of the three mentor-and-protégé pairs I spoke with appeared to have formed lasting bonds with each other. Director Julie Taymor and protégé Selina Cartmell said they had become friends and they looked like friends, talking as much to each other as of each other during the interview. Author Tahar Ben Jelloum and Edem Awumey showed a respect for each other that was heart-warming to see and spoke of the continuing relationship the two enjoy. It was Frears, the Englishman who is renowned for such film hits as The Queen, Dangerous Liaisons and My Beautiful Launderette, who stood out as the only mentor
who said he did not see a reason to continue his professional relationship with his protégé. No, really. Was that Frears playing to the gallery? Perhaps he was, because Frears and protégé Josué Méndez appeared to share a certain camaraderie and dry, self-deprecating wit. One got the feeling that it would just go against Frear’s grain to admit that he had a grand time of things in the two years and may actually have enjoyed mentoring Méndez. Known for being a taciturn interviewee, Frears has cultivated a reputation for his acerbic wit and caustic temperament. Would it not do to appear like he actually enjoyed mentoring a young, budding Peruvian? Or at least that was the glossymagazine-quality psychoanalysis a couple of us journalists came up with between glasses of wine. The night ended relatively, early considering that the following day was a Tuesday and thus a working day. On the bus back to the hotel, a tiny Indian lady in a sari smiled uncertainly at me. “Are you
Indian?” she asked. “No,” I replied. “I’m Malaysian.” The irony of the moment was lost to all but me because nobody else would understand that nowhere else in the world am I classified as an Indian except in my own country. The lady, it turned out, was one of the panel of judges who select potential protégés. Her category was dance. I looked at her with interest. The Rolex process had found her to become one of six panellists to scour the world looking for suitable candidates to become a protégé in dance. She was evidence of the process Rolex is proud of — a transparent, free and fair process that offers a chance for a student to learn at the knees of a master, keeping the age-old tradition of apprenticeship alive and within reach. She was evidence that the Rolex initiative was not just a sterling effort — it is a commitment E worthy of the brand. Leela Barrock is an associate editor at The Edge Malaysia
OP10 • THEEDGE SINGAPORE
| MARCH 3, 2008
BEHIND THE BOTTLE
SUFFERING for SAKE BLOOMBERG
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he first steaming rice batch of the year is prayed over in a Shinto rite and travels along a conveyor belt in the frosty morning air at Kinoshita-Shuzou’s brewery, to begin a centuries-old transformation into sake. At hundreds of similar facilities around Japan, the same process is taking place, with one key difference: At 160-year-old Kinoshita-Shuzou near Kyoto, the man in charge of brewing the beverage isn’t Japanese. Philip Harper, raised in Cornwall, England and educated at Oxford, is Japan’s only foreign-born master sake brewer. “I’m obviously a bit of a weird presence,” Harper, 41, says during an afternoon break as a kerosene heater blasted from the corner of the tatami room. “It’s not particularly well-remunerated work.” After years of declining domestic sales and shuttered breweries, Harper has become a link in the industry’s effort to boost the export market. In Japan, chairmen break open sake casks to commemorate corporate anniversaries and sumo champions guzzle it from trophy cups. Younger drinkers, however, are switching to wine, beer and other drinks. Sake shipments in Japan plummeted 27% in the five years to 2005, according to the Japan Sake Brewers Association. Harper, a soft-spoken man, began his sake career 17 years ago in the western city of Nara after arriving in Japan as an English teacher in the late 1980s. A passion for tasting turned into a full-time job and eventually led to Harper attaining the rank of toji, or master brewer, three years ago. Dying tojis He took the helm of Kinoshita-Shuzo in October following the death of the previous toji, who had held the position for 47 years. The sixth-generation owner of the brewery considered closing the plant until an acquaintance put him in touch with Harper. Only about a third of the nation’s 2,000 traditional breweries, or kura, are active because of the retirement or death of master brewers who left behind no apprentice. “There’s a real crisis of manpower in the traditional guilds,” says Harper. “You’ve got a huge changing of the guard. You probably will see some breweries for whom
Rocky Swift watches as Japan’s British master brewer gets to work
Harper has a passion for sake and has written two books on the brew in an effort to promote the drink globally
this is the final straw.” Winter is the busiest season for sake brewers, a remnant of a system developed centuries ago to give farmers something to do when fields were fallow. The labour is long and physical, and at times requires night-time vigils as the bacteria and yeast work on the brew. On this January morning, Harper cycles wordlessly through activities from cooking rice, mixing in purified water from the local mountain spring, then transporting huge tubs of it over space heaters using a forklift. Long nights A four-year correspondence course gave him the technical know-how for the work, with long nights fretting over hissing, frothy vats of fermenting rice. “You don’t get much in the way of a social life if you’re doing traditional brewing,” he says. “My first
five years brewing, the only day I had off was the day I got married.” Harper toiled in relative obscurity until he wrote The Insider’s Guide to Sake, a pocket-sized explanation of the art that has sold about 20,000 copies. It describes nigori, a sweet brew with a cloudy texture caused by leaving the rice sediment unfiltered. There are the dai-ginjo, ginjo and hon-jouzu — gradations of brew determined by the type of rice and how far each grain is milled down to its starchy core. His follow-up, The Book of Sake, is a trim, picture-laden volume aimed at enthusiastic overseas novices. Overseas growth “The brightest point at the moment is that overseas sake sales are coming along so well,” Harper says. “Only about 1% of sake that’s made is going overseas, so obviously that market needs to continue growing very strongly for it to make up for the drop in domestic demand.” Sake exports rose 46% over the five years to 2006, with more than a third of those sales in North America. Japan’s surviving breweries are focusing more on highgrade sakes popular with overseas enthusiasts. Quantity will decline as kura go out of business, while overall quality will improve, says Yasutaka Daimon, a sixth-generation sake brewer from Osaka. Daimon cofounded eSake.com in 1998 to promote the product over the Internet and through North American distributors. The site’s top 720ml bottle, Sato no Homare, from Japan’s oldest brewery, costs US$200 ($281). He said the industry needs to win back younger Japanese drinkers and capture a domestic market that has been almost ignored: women. “It was common sense that women do not like sake,” Daimon says. “But it was not right; they just didn’t have the chance.” At the Kinoshita-Shuzou brewery, Harper is nervous about how his first batches of sake will turn out, working with a new crew and with different machinery and ingredients. He named his debut brand Fukubukuro, after the “lucky bags”, loaded with surprises, that retailers sell at New Year. “At the end of the day,” Harper says, “the whole thing only works if the stuff is actually being drunk.” E — Bloomberg LP
BITE
The Terrace
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o celebrate Easter, be sure to make your way to The Terrace at the Sentosa Resort & Spa, where a champagne brunch awaits, with rock lobsters, shucked oysters and crabs to complement the more terrestrial offerings. These include whole Beef Ribs on the Bone, Pan-Fried Foie Gras, a barbecue selection and steamed shrimp. It wouldn’t be a champagne brunch without a little bubble, and there will be a free-flow of Duval Leroy. The day will be a family affair, with a do-it-yourself pizza section for children, an Easter Egg hunt, bouncy castles and a va-
riety of other activities to keep the munchkins entertained while you enjoy the afternoon. Where: The Terrace, Sentosa Resort and Spa Prices: $158++ for adults; $79++ for children (four to 12 years old) Reservations: Call 6371 1414, full payment is required. Email [email protected] for additional information, or log on to www.thesentosa.com.
BreadTalk
breads. The new selection took a year to research and test, and was developed in consultation with chefs from France, Japan, Spain and Taiwan, to give this new range a truly international flavour. Highlights include the Canto Gusto, the equivalent of dim sum in a bun, Apple King (a bun stuffed with a light apple cream), and Curry Dozo (Japanese curry with egg wrapped in bread). Check out these delectable new flavours at the refurbished CityLink Mall outlet and other branches across the island. Where: CityLink Mall, B1-42 or any BreadTalk bakery
Carl’s Jr
In conjunction with its eight anniversary celebrations, BreadTalk has released 12 new signature
A good burger on the go is a rare find in this part of the world, but that won’t be a problem for too long. Carl’s Jr is opening a 24-hour drive-through outlet at the Playground @ Big Splash in East Coast Park. American-style grilled burgers are now available
anytime of the day. Where: Playground @ Big Splash, East Coast Park
Prego, The Fairmont Singapore Easter Sunday brunch at an Italian restaurant seems as good an
idea as any. Highlights of the spread by chef Salvatore are Salmon and Ricotta Filled Shell Pasta in Cream of Tomato, or Oven-Roasted Lamb with Peas and Carrots, and Squid Ink Lasagna with Seafood Ragout, Ricotta Fresca and Italian Herb Tomato Salsa. There will be a free-flow of champagne and feel free to bring the kids as there will be an Easter Egg hunt to keep them out of your hair. Where: 80 Bras Basah Road, Fairmont Singapore Prices: $88++ per person, with free-flow of Soave Brut, soft drinks, coffee and tea; $68++ per person, with freeflow of soft drinks, smoothies, coffee and tea; $35++ per person, with free-flow of soft drink and smoothies (for children aged six to 12) Reservations: Call 6431 6156 or email [email protected] — Compiled by DesE mond Wong
THEEDGE SINGAPORE | MARCH 3, 2008 • OP11
FOOD
J.Co Donuts recently opened at the basement of Raffles City
J.Co’s doughnuts have catchy names such as Al Capone
S
ingaporeans just can’t seem to get enough of biting into doughnuts. Check out the long queue snaking its way around popular outlets like Donut Factory at Raffles City — even before they open their doors. Which is why Singapore Exchange-listed Breadtalk Group recently brought in J.Co Donuts & Coffee café. Located at the newly renovated basement one of Raffles City, it’s touted as the first lifestyle donut café in town, boasting 25 yummy varieties of doughnuts as well as a selection of top-of-the-line coffee and iceblended drinks like the signature Almonetto Freeze. Founded by Indonesian entrepreneur Johnny Andrean in 2005, the chain has expanded aggressively in Asean over the past couple of years, counting 32 outlets in Indonesia and two in Malaysia. In Singapore, the Breadtalk Group holds the master franchise to run J.Co for 10 years. “J.Co is Asia’s fastest-growing lifestyle concept,” enthuses William Tan, CEO of J.Co Donuts & Coffee, adding that both Andrean and Breadtalk founder George
Quek have been business partners and friends for many years. “Rather than compete with him and create our own [brand], we opted to work with him to bring J.Co to the next level.” Although he declines to tell Options how much the master franchise is worth or the company’s projected monthly turnover, he does let on that the Singapore outlet is a joint venture, with Breadtalk holding 70% and Andrean, 30%. The synergy seems intuitive, almost inevitable. For, just like Breadtalk’s range of buns and breads, J.Co’s donuts also come with snazzy and offbeat names, such as Al Capone, Heaven Berry and JCrown Donatella. The donuts are light, easy on the tongue and not cloyingly sweet. They’re handmade and freshly baked, using natural ingredients. Little wonder, then, that since the café opened on Feb 9, the
BRINGING in the dough
Fad or not, the doughnut craze has hit Singapore and joining in the fray is J.Co Donuts. Felix Cheong is smitten by the little pastry with a hole in the middle. doughnuts have been flying off the counters. But given Singaporeans’ taste buds for food fads, is it a sustainable business? Remember the coffee-scented bun, Rotiboy, which inspired a spate of copycats? Or how about Portuguese egg tarts, Taiwanese bubble tea and melt-in-your-mouth
apple crumble? The craze fizzled out soon enough. “J.Co is not just about doughnuts,” asserts Tan, who also wears another hat as president of the Breadtalk Group. “It’s a lifestyle café concept that also offers great music, ambience and even reading material. It’s a great place to
meet and chill out.” Which is why you can look forward to another J.Co Donuts & Coffee at Bugis Junction in the middle of the year and possibly more over the next few years. E Felix Cheong is a published poet and author
THE EDGE SINGAPORE & enjoy a 50% DISCOUNT Subscribe to
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HONJIN KUSHIYAKI RESTAURANT
OP12 • THEEDGE SINGAPORE
| MARCH 3, 2008
DRIVE
Expect to hear the Cooper name even more often with the local launch of John Cooper Works Tuning. On offer are body kits, double-spoke 18-inch wheels, 16-inch brake kits, branded Recaro sports seats and a tuning kit.
Maximising the Mini The Mini Cooper S gets a lift with the addition of the John Cooper Works tuning kit. Tony Watts hangs on for the ride.
W
hat’s in a name? If you harbour fantasies of having your name live forever, there are a few routes to sure success. The easy route is the one taken by Idi Amin, Pol Pot and their ilk, though chances are you’d prefer to be fondly remembered. A better path is to succeed in motorsport, though gone are the days when you could enter a Formula 1 race in a car bearing your own name — there is just too much money in the sport these days. Names such as Brabham, Jordan and Surtees are fading memories, though it has to be said that McLaren, Williams and Ferrari still fire the collective imagination. When those names appear on road-going cars, they do have cachet — Ferrari is an obvious one, and McLaren is responsible for one of the fastest roadgoing cars ever (top speed was around 390kph), though only a small number of buyers managed to come up with the million-dollar-plus asking price. When you look at the Mini — particularly the humble original, with it’s small wheels and tiny engine — Formula 1 is not the first thing that comes to mind, though the most coveted Minis, wearing the Cooper badge, should. John Cooper and his father started the Cooper Car Co after the war, building single-seat racing cars, which were mostly sold to private individuals. The cars had the engine placed behind the driver — apparently Cooper said this was for practical reasons, as they were powered by motorcycle engines using the chain final drive — but the handling ba-
There is more legroom in the front, and there’s a lot of kit as standard, such as auto climate control, a proximity key, leather and more airbags than you could possibly know what to do with
lance of these mid-engined cars showed the way forward. I should say at this point that the British racing fraternity was possibly a little myopic: There had been examples of successful mid-engined race cars that predated the Coopers’. Still, the design was a success and the company won back-to-back Formula 1 World Championships in 1959 and 1960, and is often credited as a pioneer of the mid-engine concept. Cooper fame But the Cooper name will be best remembered for its association with Mini. It helps that the Mini Cooper S won the gruelling Monte Carlo Rally several times, too. Little surprise, then, that when BMW resurrected the Mini, it would resurrect the Cooper name with it — the basic line-up here includes the Mini One, Mini Cooper and Mini Cooper S. Expect to hear the Cooper
name even more often with the local launch of John Cooper Works Tuning. On offer are body kits, double-spoke 18-inch wheels, 16inch brake kits, branded Recaro sports seats and a tuning kit. It was the latter fitted to the car on test. Altered engine management, a different air filter and twin exhaust boost the performance of the Cooper S. Horsepower is up 17hp to 192hp, top speed is 232kph (up from 225kph) and the zero-to-100kph dash is dispatched in 6.8 seconds (down from 7.1, though you can probably add around 0.2 second for this automatic variant). The kit does all this without too much fanfare — there are no silly wings or bulges added, just a few discrete badges and different exhaust tips. It’s an approach I wholeheartedly approve of — I’d rather have a car that goes quick, than one that simply looks quick. As the base car is a Cooper S,
there are no real changes to basic functionality. The bootspace, for instance, is pretty small, and the rear seats have decent headroom, but a fairly — uh — mini amount of legroom. Things are better in the front seats, and there’s a lot of kit as standard, such as auto climate control, a proximity key, leather, and more airbags than you could possibly know what to do with. There are even audio controls on the steering wheel, which is difficult to fathom as the audio system is a very short reach away. The details are pure Mini — the “floating” roof (which is achieved largely by blacking-out the pillars), chrome filler cap and door handles give it that retro touch, without appearing naff. Retro The interior also gets the retro treatment and, after several years between drives, I have to admit to being less enamoured of the details. The central rocker switches for the electric windows, for instance, look great, but aren’t ideal from an operation perspective; likewise the massive speedometer in the centre of the dash. I know it harks back to the ori-
MINI COOPER S WITH JOHN COOPER WORKS TUNING KIT $6,248 (kit only) $134,048 including COE Engine: 1,598cc, 16-valve, turbocharged in-line four Power/torque: 192hp/270Nm (overboost) 0-100kph: 6.8 seconds* Top speed: 232kph* *Figures for manual transmission
ginal cars, but it does mean taking your eyes off the road to see what speed you’re doing. Worse, if your passengers like to nag, the speedometer is on display to everybody in the car. This is a real shame, because the Cooper S with the John Cooper Works tuning kit does like to go, so they will probably have plenty to nag about. The test car was fitted with the six-speed automatic transmission (one retro item I’d really have liked to see here is the manual gearbox), which offers steering wheel-mounted paddles for gearshifting. The power does make itself known through the steering with a little tug at the wheel when you floor it — torque-steer in motoring parlance. Otherwise, the Mini is a joy to pilot. The power is strong, the handling is sharp and the braking performance up to scratch. It is a surprise just how rapidly this thing gets along. One price you pay for all this is a firm ride, but if you want a limousine, maybe you should be looking elsewhere. Oh, and the manual gearbox would give it slightly more speed, and a more “in control” feel. Still, the original Mini had an anti-establishment rebelliousness about it, and if equipped with the John Cooper Works tuning kit, so does this one. It doesn’t matter if you find some of the retro details contrived; the Cooper S essentially follows the spirit of the original car, and that’s nothing but a E good thing. Tony Watts is a freelance writer with a passion for fast cars and bikes
THE WEEK OF MARCH 3, 2008
Rolex’s gift to the arts
Help for rising artists to reach full potential
Suffering for sake Keeping a dying art alive
Maximising the Mini
Mini Cooper S gets a lift
Sparking a
REVOLUTION Concord’s president Vincent Perriard on being given carte blanche in reinventing the brand
PW2 • THEEDGE SINGAPORE
| MARCH 3, 2008
PERSONAL WEALTH
SECTION EDITOR Kelvin Tan ([email protected]) COPY-EDITING DESK Elaine Lim, Evelyn Tung, Ng Bee Cheng, James Chong PHOTO EDITOR Samuel Isaac Chua ([email protected]) PHOTOJOURNALIST Gwyneth Yeo ([email protected]) EDITORIAL COORDINATOR Rahayu Mohamad ([email protected]) DESIGN DESK Tan Siew Ching, Christine Ong, Chan Yoke Lin, Jamy Gan ADVERTISING + MARKETING REGIONAL GENERAL MANAGER | Edward Stanislaus ([email protected]) SENIOR MANAGER | Colin Tan ([email protected]) MANAGERS | Simon Wong ([email protected]) Cecilia Kay ([email protected]) Jeffrey Wong ([email protected]) Windy Tan ([email protected]) Faith Teo ([email protected]) Julia Tan ([email protected]) COORDINATOR | Nor Aisah Bte Asmain ([email protected]) MALAYSIA REPRESENTATIVE | Helen John Corry ([email protected]) CIRCULATION-SUBSCRIPTIONS REGIONAL SENIOR MANAGER | Suresh Kumar ([email protected]) ASSISTANT MANAGER | Naziela Nasir ([email protected]) ASSISTANTS | Juliana Ibrahim ([email protected]) Iryanti Zainol ([email protected]) PUBLISHER The Edge Publishing Pte Ltd 150, Cecil Street #13-00 SINGAPORE 069543 TEL: (65) 6232 8622 FAX: (65) 6232 8620 PRINTER KHL Printing Co Pte Ltd 57 Loyang Drive Singapore 508968 Tel: (65) 6543 2222 Fax: (65) 6545 3333 We welcome your comments and criticism. Send your letters to The Edge, Raffles City Post Office PO Box 218 Singapore 911708 Tel: (65) 6232 8622 Fax: (65) 6232 8620 e-mail: [email protected] Pseudonyms are allowed but please state your full name, address and contact number for us to verify.
What makes Fidelity tick? GWYNETH YEO/THE EDGE SINGAPORE
EDITOR/REGIONAL MANAGING DIRECTOR Tan Boon Kean ([email protected])
| BY JOAN NG |
F
or the second year running, Fidelity Investments emerged tops at last week’s The EdgeLipper Singapore Fund Awards. The global fund management giant swept a total 10 awards, sharing the honours with Lion Capital Management, which also bagged the same number of awards. As one of the powerhouses of the global fund-management industry, with US$1.6 trillion ($2.25 trillion) in assets under management, Fidelity has attained a reputation of grooming and retaining top talent, embodied by legendary fund managers like Gerald Tsai and Peter Lynch. Part of that has come from allowing its fund managers relatively free rein and more flexibility than is found at other fund houses. “We give them the freedom to be themselves,” says global head of institutional investment Michael Gordon. “To express themselves as an individual within their funds.” Gordon, who joined Fidelity in Australia in 2000 and until recently held the position of chief investment officer, admits that there isn’t total freedom in certain aspects — such as the number of stocks a fund holds or the types of stocks that make up a portfolio, which are elements subject to a fund’s type or mandate. Since the 1990s, Fidelity has had to reduce some of the leeway it gives its managers to make big bets as those that backfired had hurt fund returns. “But they’re free to build the fund as they see fit,” he says. Most other fund houses would perhaps classify a growth manager or a value manager and buy or reject a stock on the basis of which profile it fits, but Fidelity doesn’t do that, Gordon explains. “The fund manager is free to formulate their own investment view, their own thoughts, their own thesis. So a lot of entrepreneurialism exists with the individual. Which I think is one of the reasons people stay with the firm, one of the reasons people like the firm.”
and you want to make sure you put them in the right position. If they’re good at attacking, you put them in an attacking position and then you make sure they’re behaving in accordance with their strengths.” This year will be a year in which those skills become all the more important. Global equity markets are sliding and the benchmark MSCI World Index is down 9.5% since the start of this year (as at Feb 20). A majority of experts are predicting a US recession that would spin off into a global bear market.
‘A long while to get through’
Gordon: There’s much more demand within Asia. We have supply shortages.
Right position Such flexibility does, however, create issues as to the point at which a manager needs to be reined in. For Gordon, there is no hard and fast rule. “It’s not like two years you’re on warning and three years you’re out,” he says. “I have taken action when a fund manager hasn’t underperformed… Yet there are times when we’ve got good fund managers who’ve underperformed for three years and we’ve done nothing.” Instead of taking just fund performance as a measure of a manager’s progress, Gordon says it’s important to look at specific behaviours that could affect the team, or are counter to an individual’s strengths. He recalls an incident where one fund manager began underperforming around the time he stopped sending out his thoughts to his team over email. “We told him, how about you get back and start writing again, and it worked. So it’s things like that. You look for patterns of behaviour that correlate with strong performance,” he says. “It’s a bit like coaching a sporting team. A good CIO knows his players’ strengths and weaknesses
“This is not a market correction [where you can say that] once the S&P gets to a particular level we’ll be fine. This is going to take a long while to get through,” says Gordon of the banking and housing crisis that has hit the US. “But the big difference between Asia and the US is debt. The US is saddled with it and Asia has none of it. And Asia knows what it’s like to go through a debt crisis. They went through one 10 years ago and that’s how painful it’s going to be for the US.” Gordon does believe that the Asian markets are in a much better position to ride out the difficult times. “When you look at it fundamentally, you think actually [the idea that Asian markets cannot decouple] is not right… There’s much more demand within Asia. We have supply shortages,” he says. With the exception of a few sectors that are exceptionally dependent on the US, Gordon doubts there will be a significant slowdown in Asia. “If the US is in trouble, Asian economies are in better condition than they’ve ever been. Since [the Asian financial] crisis, Asia now gets all the ticks: self-funded, huge saving ratios, massive foreign reserves. It’s in great shape,” he adds. Gordon believes that, globally, the investment community will eventually begin looking less towards the US for leadership and more towards Asia. “We’ve all spent most of our working lives thinking that [what’s in] the US is best practice and I think these are times E for questioning that. Particularly here in Asia.”
Driving returns with an aggressive and concentrated approach | BY KELVIN TAN |
One of the first things Mario Frontini did when he took over as portfolio manager of the Fidelity European Aggressive Fund last June was to cut the fund’s stock holdings by a third to approximately 60 names by selling the potential underperformers while increasing exposure to stocks that he has high convictions on. At end-2007, Frontini’s concentrated strategy seemed to have paid off after this fund turned in stellar returns of 13% (in euro terms), outpacing his fund sector average of 6.55%. Generating above-average gains, however, isn’t new to the 39-year-old Italian fund manager, who used to beat his benchmark every year when he ran the Fidelity’s Italian Fund from 2004 to mid-2007. The following are excerpts from an interview with Personal Wealth last week, in which Frontini talks about his investment style, strategies and stocks that he likes. His Fidelity European Aggressive Fund won two awards at last week’s The EdgeLipper Singapore Fund Awards 2008 for best fund in the European equity category over three- and five-years.
Personal Wealth: You seem to have adopted a more focused and concentrated approach to the running of the European Aggressive Fund. Tell us your rationale of doing that. And is that move primarily to boost performance? Mario Frontini: I have always run more concentrated portfolios in all previous mandates and I still do so. I tend to invest quite a lot of time with company management and analyse the industry dynamics and whenever I find a good investment idea, I would try to make the most of the benefits for the fund. That said, I am very focused on controlling risk and limiting the downside, should my investment case prove to be incorrect. In what other ways is your management style different from that of your predecessor? As with my predecessor, I am a bottom-up stock picker and I
look for opportunities. I believe it is essential to be constantly ahead of the market and be willing to take, at times, a contrarian view. I do not have a specific investment style as such, though I prefer companies that are trading below intrinsic asset value, where there is a valuation anomaly or market inefficiency, or they are undergoing change.
movements of macroeconomic indicators. During this recent period of volatility I have uncovered several interesting new ideas and purchased some stocks that have suffered as a result of the indiscriminate market sell-off rather than from any deterioration in their fundamentals.
Name us some stock names which you are bullish on and have the highest conviction over a 12-month period. I have conviction in [German steel producer] Thyssen Krupp, as I believe Frontini: I remain cautious that the fundamentals for the European on financials, given the steel sector are very good. The low uncertainty surrounding the current inventories and re-stocking should sector, and I do not currently translate into higher prices. The company find valuations compelling is also benefiting from a large investment plan in the US and Brazil and investors are not recognising Let’s talk about the European stock markets, which the strong growth in its technology and elevator divisions. I also think that the recent correction in luxury goods like most other markets, have been affected of companies, like Richemont, is unjustified and I have been late. What is your current strategy in this difficult buying this stock recently. I also like the deepwater drilling condition? sector and I would recommend Seadrill, a Norwegian Over recent months, volatility has remained very high, and this has created substantial uncertainty among professional company, which has a very modern fleet. investors and the general public. I see the current market Are you staying away from European banks and environment as offering interesting opportunities, and I financials at the moment? remain convinced that adherence to a clear and consistent I remain cautious on financials, given the uncertainty investment process should benefit the fund’s performance surrounding the sector, and I do not currently find in the medium term. valuations compelling, due to the heightened level of The overall outlook for the European economy is rather risk. I believe that the issues currently affecting the complex and difficult to assess. Therefore, it is not easy credit markets and beyond are having a significant to forecast how things will balance out over the coming impact on the financial sector. Of course, the health of months. As a result, I believe that I can add more value the financial sector has an impact on the rest of the by focusing on company fundamentals and spotting economy and I am wary of this. undervalued stocks, instead of slavishly following the Have you added more exposure to small or mid caps since taking charge or are most of your holdings still in the big-cap arena? The weighting in stocks with a market cap of under €5 billion [$10.56 billion] has risen over the past six months, while the weighting in stocks above a €20 billion market cap has been reduced somewhat, but this is primarily due to stock picking rather than an overt bias towards small caps.
PW4 • THEEDGE SINGAPORE
| MARCH 3, 2008
PERSONAL WEALTH
PICTURES: GWYNETH YEO/THE EDGE SINGAPORE
Lion Capital builds a reputation by sticking to processes | STORIES BY JOAN NG |
I
t is among the newest players in the fund management game. Yet Lion Capital Management has succeeded, for the third year running, at coming out among the front runners in this year’s The Edge-Lipper Singapore Fund Awards 2008. Formed in 2005 from a merger of OCBC Asset Management, the fund management arm of OCBC Bank, and Straits Lion Asset Management, the investment subsidiary of local insurer Great Eastern Life, the fund house won 10 awards, including a group award in the mixed asset category. Daniel Chan, the CEO and chief investment officer of Lion Capital, says he is “delighted” and “maybe a little surprised” with the results. After all, the firm has not been around for a long time. “And to be winning the same number of awards as Fidelity, which has many funds in Singapore, is a rare honour,” he adds. Fidelity also bagged 10 awards last week.
Putting faith in processes Chan believes that the wins are a testimonial of sorts to the stock-picking processes he has put in place at the firm. “I think this time we can say that we’re a little bit more confident that the wins reflect more of the Lion Capital resource, process and structure than the previous year,” he says. “We have always said that we try to institutionalise the process so that it’s not so people-dependent. [It’s about] having the right structure, the right process and the right approach to make it work.” Last year, Lion Capital lost two key fund managers: Hou Wey Fook, head of global equities, left the firm in May to take up the role of chief investment officer at ING Asia Pacific Bank; and in December, senior fund manager Kam Yoke Meng, who had been managing the award-winning Lion Capital Singapore/Malaysia Fund, departed for DBS Asset Management.
Chan: We have always said that we try to institutionalise the process so that it’s not so people-dependent
But Janet Liem, head of Asian equities at Lion Capital, says the departures had very little impact on the performance of the funds they were managing. “There is no star manager in Lion Capital. So when a fund does well or does badly, it is joint ownership for the entire team. The portfolio manager basically is the face for the fund, but the credit doesn’t go entirely to the portfolio manager,” Liem says. “With the departure of any one of us in the team, there should not be any change if our process is adhered to.” However, that’s not to say that the firm disregards the importance of retaining talent. “Our compensation policy factors are geared
towards retention of talent: paying a competitive salary and rewarding good performance. We have also introduced battle chest schemes to give them an incentive; sort of a stake in the firm,” Chan says.
Cloudy outlook but stick with Asia The trade secrets put in place at Lion Capital will be tested a fair bit this year. Since 2005, when Lion Capital was formed, global equity markets have been fairly strong. The MSCI World Index rose by about 40% between the start of 2005 and end-2007, and most equity funds have been performing well in general. But with the global freefall in markets of late, it will require
more from the company’s investment professionals to maintain its track record. Chan is well aware of this, but believes that some opportunities can be found if you look hard enough. “I think the outlook is still a little bit cloudy simply because of the scale of the credit problems that we are seeing; not just subprime but various other commercial mortgages, credit cards, auto loan receivables and so on. Mainly problems originating out of the US,” says Chan. “So, it looks like it’s still too early to say that we have seen everything and I think we haven’t really seen the full damage on the [US] economy.” Nevertheless, Chan also adds that fundamentals in Asia still look very strong. Corporate balance sheets, for instance, are still healthy. “The Asian markets have also had quite a correction, even in China and India. We are starting to see a lot of value emerging here and there,” he says. “So, although I think it’s hard to say where the bottom [of this banking and housing crisis is], if you invest on a bottom-up basis, and taking a long-term view, I would say this represents a buying opportunity.” In terms of specific geographical markets, Chan is most positive on China H-shares, which he says are looking particularly attractive at the moment, especially with the recent sell-down. Year-to-date, the Hang Seng Index is down 16.3%. Markets that Chan isn’t too keen on are South Korea and India. Although the South Korean market has a price-to-earnings multiple of about 12 times, making it appear cheap, he believes that its dependence on the rather cyclical heavy sectors is a weakness. Meanwhile in India, earnings expectations are a little too high for his liking. Chan assures investors that even with the market turmoil Lion Capital will keep hunting for investment opportunities. “With all this selldown, it can only represent fair value E opportunities for us.”
New manager rebalances Singapore/ Malaysia fund
Wong: Sectors that we prefer right now are telcos and transport for their defensive nature
With the departure of its portfolio manager Kam Yoke Meng, the Lion Capital Singapore/Malaysia Fund now has a new fund manager. But Kelvin Wong, who joined Lion Capital in January, has a tough act to follow. After all, the fund, which is among the oldest of Singapore’s unit trusts, has been consistently winning awards year after year. This year, it secured an award in each of the individual fund categories for best performance: over three, five and 10 years. Wong, who has seven years of experience in equities and two years in corporate banking, says that there has not been any basic change in his approach to the fund. “I’ve looked at the portfolio and it’s a well run fund,” he says. “In terms of the number of stocks, right now we have slightly under 40, so it’s a relatively well diversified but also in a way concentrated portfolio.” According to Wong, the only tweak he has made in the short time since he joined was to increase the country weightage of Malaysia in the portfolio. Previously, Malaysia made up less than 40% of the total fund portfolio. “I think
the short-term catalysts in Malaysia are there, what with the election year and the government pumping in money,” he says. Wong increased the weightage so that both Malaysia and Singapore weighed about evenly. “We’re also taking a look at our smallcap exposure. What with the uncertainty in the US, and being unsure of how long this is actually going to last, I’ve been looking at our small-cap exposure and just trimming it, especially those stocks that we’re a bit less comfortable with,” Wong adds. Brigette Goh, a portfolio manager at Lion Capital who specialises in Malaysian equities and has worked with the Singapore/Malaysia fund team for the last two years, says last year’s performance was helped significantly by the strong performance of the property and construction sector in Malaysia, which saw a lot of good news flow in 1H2007. “Another theme that was also structurally steady and took off very strongly last year was plantation and soft commodities,” she adds. Looking forward though, both Goh and
Wong believe that the Singapore market should outperform the Malaysian one. “Singapore is clearly showing a lot more value and it also offers a lot more choices,” Goh says. Wong also adds that the fund will have a slight tilt towards the defensive this year because of market uncertainties. “Sectors that we prefer right now are telcos and transport for their defensive nature.” Wong’s top picks are SMRT Corp and StarHub, which he says are rising- population plays. “StarHub should get the benefit in terms of a bigger addressable market, as well as a number portability issue in the second half, which may allow it to steal some market share from SingTel,” he says. And for SMRT, the growing population as well as the recently-announced government initiatives should lead to more people taking public transportation. Apart from these two stocks, Wong also likes DBS Group Holdings, which he says is currently undervalued in relation to its peers United Overseas Bank and Oversea-Chinese Banking Corp.
| MARCH 3, 2008 SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
PW6 • THEEDGE SINGAPORE
PERSONAL WEALTH
Shift to mixed assets
Tan Boon Kean (back row, second from left), editor and regional managing director of The Edge Singapore, with the winners of The Edge-Lipper Singapore Fund Awards 2008
As equities drop, investors search for safety | BY JOAN NG |
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lobal fund giant Fidelity and local asset management powerhouse Lion Capital Management emerged tops at last week’s annual The Edge-Lipper Singapore Fund Awards 2008, scooping up 10 awards each. Runners-up AllianceBernstein and UOB Asset Management picked up seven awards and six awards respectively. Lion Capital, AllianceBernstein and UOB also bagged a group award each: Lion Capital for best performance in the mixed assets category, AllianceBernstein for the bond asset class and UOB for overall best performance among the locally registered fund houses. Deutsche Asset Management won the fourth group award for best performance in the equities asset class category, while also picking up two individual fund awards. The winners were presented their plaques at Reuters’ spanking-new office at One Raffle Quay last Thursday. The awards are jointly organised by The Edge Singapore and Lipper, a company wholly owned by Reuters. A total of 67 awards was given out to individual funds for performance across three broad categories: bonds, equities and mixed assets. One group award was also
presented for each category, and one award for overall performance across categories. Winning funds are selected based on the Lipper Leader format, which uses four major categories: consistent returns, total return, preservation and expenses. Kenneth Koh, head of research for Lipper’s Asia ex-Japan team, spoke briefly on the importance of using different categories to judge the performance of funds. “Not everyone would have the same requirements from a fund,” Koh explains, and the categories allow buyers to make choices based on their individual investment goals. While the individual fund awards help investors select particular funds, the group awards system is also helpful in boosting the position of a fund house. To qualify for the group awards, fund houses must have three distinct portfolios in each of the three asset classes. The winner is calculated based on the best average consistent returns over the last three years, which means that while a fund house may not win as many individual awards, a fairly consistent performance across portfolios and asset classes would allow it to stand out. “A fund house represents itself to investors not through just one fund, or one asset class, but across all its products,” Koh says. “What is important is for all the funds to be able to demonstrate con-
Top and bottom 10 Lipper global classifications for FY2007 by net fund flows ($ mil) INFLOWS
OUTFLOWS NET FLOW
Mixed asset SGD balanced Equity Asia Pacific ex Japan Money market SGD Bond SGD Equity China Equity Singapore Equity Greater China Equity sector natural resource Equity Malaysia/Singapore Equity global
1,432.37 1,270.57 638.22 591.00 520.58 469.12 439.07 364.10 318.13 317.42
LIPPER GLOBAL CLASSIFICATION
NET FLOW
Protected Equity Japan Equity emerging markets Europe Equity sector information technology Equity sector pharmaceuticals & health Guaranteed Equity sector real estate global Equity Europe small & mid cap Mixed asset SGD aggressive Equity sector real estate Europe
-1,121.75 -278.14 -212.70 -172.85 -116.79 -90.35 -82.21 -60.36 -55.86 -53.07
LIPPER/IMAS FUND FLOW REPORTS
LIPPER GLOBAL CLASSIFICATION
Singapore fund flows (1Q to 4Q2007) 2000
$ mil
1500
1Q2007 2Q2007 3Q2007 4Q2007
1000
sistent above-average performance in relation to their peer groups.”
a driver and I’m still trying to find out whether this trend is sustainable,” says Koh.
Healthy fund inflows
2008 to be challenging
Koh, who also spoke briefly about the trends in the fund management industry last year and the outlook for 2008, said 2007 saw a healthy amount of fund flows. In fact, fund flows rose to $5.6 billion last year, more than double the $2.1 billion in fund flows for 2006. Inflows were larger than outflows, amounting to $31.9 billion, versus $26.3 billion for outflows. The bulk of the money flowed through equity funds, which accounted for $3.8 billion, or about two-thirds of total fund flows. However, Koh also noted that while aggregate fund flows into equity funds were high, a lot of it also consisted of fund outflows. Total fund subscriptions amounted to $20.6 billion while redemptions stood at $16.7 billion. “It means a lot of people are actually using the market to trade and taking a more short-term view,” Koh says. “Of course, some of the fund houses may not be too happy, because they want long-term money; but there could be some investors, in fact there are investors, who take a short-term view and use equity funds for that purpose.” Another trend that Koh also pointed out was the continued weak fund flows coming in under the CPF Investment Scheme (CPFIS), which allows Singaporeans to invest portions of their CPF savings in approved unit trusts. CPFIS-approved funds recorded an aggregate outflow of $34.8 billion in 2007. However, this outflow is still less than the recorded outflow of $52.9 billion in 2006. The improvement was due to a sharp spike in inflows in 2H2007, which Koh says could be due to government policies introduced last year, such as investment restrictions on the CPF Ordinary Account (OA) monies. Indeed, come April, CPF members would no longer be able to invest the first $20,000 of their OA balances under the CPFIS. To beat the April deadline, when the restriction comes into effect, some members have already started scrambling to invest their OA monies in CPFIS products. “I’m not saying it’s
Koh sees the emerging markets in Asia as somewhat of a safe haven against market volatilities this year. Last year’s fund flows increasingly reflected that, with Equity Asia Pacific ex-Japan offerings recording an overall increase of $1.3 billion, ranked second among the fund classifications. With the volatility in the equities market likely to continue, however, there is no doubt that 2008 will be a tough year. Because of that, he believes, investor appetite for riskier investments is also shrinking. In 4Q2007, net flows into equity unit trusts slowed to $720 million from $1.7 billion in 3Q. Meanwhile, net flows in the mixed-asset class grew in 4Q2007 to $543.6 million, closing the gap with equities. In the short term, Koh believes it is unlikely that mixed asset funds will overtake equity funds in popularity. “Most Asians tend to be still, fundamentally, equity investors,” he says. However, he believes that this year will be a challenging one for most fund managers and fund houses, owing to market volatility. There will certainly be a great deal of cautiousness among investors. “That is why we will need to stay vigilant to maintain viability in the marketplace,” Koh says. “When markets are bad, there are always products that you can buy — a more conservative product, for instance. So, in that perspective, the industry still has room to move. What is important, then, is for the fund promoters to come up with innovative products to deliver returns and yet not compromise on risk. That’s where product innovation comes in.” Koh believes that since the local fund management industry experienced its boom at least a decade ago, there has been some stagnation in the market in terms of innovation and better products. He says this will have to change. “Obviously, it’s not always easy. Product development and innovation will take time,” he says. But when well executed, such innovaE tion is almost always rewarded.
CPF versus non-CPF net flows (1Q to 4Q2007) 1800
$ mil
1600 1400 CPF net flows Non-CPF net flows Total net flows
1200 1000 800
500
600 0
400 200
-500
0 -200
-1000
Bond
Equity
Mixed assets
Money market
Others
1Q2007
2Q2007
3Q2007
4Q2007
PW8 • THEEDGE SINGAPORE
| MARCH 3, 2008
PERSONAL WEALTH
FRANKLIN TEMPLETON
Templeton bond fund outperforms by betting against the greenback | BY KELVIN TAN |
G
iven the extensive travelling time Franklin Templeton’s Michael Hasenstab spends visiting countries, especially those in the developing world, you would have thought that he was part of the fund house’s globetrotting emerging markets equity team rather than fixedincome bond chief. Hasenstab, who co-directs all investment strategies within the International Fixed Income Group at Franklin Templeton, spends one third of his time on the road. Indeed, he is unlike many of the archetypal bond fund managers who prefer to do their fixed-income investing behind the desk, with the aid of complex quantitative models to evaluate the yield curves, direction of interest rates and currencies. Managing the Templeton Global Bond (A [Mdis] USD) Fund, which invests heavily in the government bonds of Asia, Latin America and Eastern Europe, Hasenstab believes that it is imperative to be on the ground when evaluating the economic, political and social aspects of these everchanging emerging countries. “Country visits are as important for us as company visits are for equity fund managers,” he points out. In recent years, Hasenstab’s investment approach seems to have paid off. Over the past five years, his fund — a winner of two awards at last week’s The Edge-Lipper Singapore Fund Awards 2008 for best fund in the global bonds category over a five- and 10-year period — has significantly outperformed all other global bond funds available for sale in Singapore after turning redhot returns of 32.28% versus average group gains of 11.6%. To know more about his winning ways and the outlook for global bonds, Personal Wealth recently spoke to Hasenstab, who holds a PhD in economics from the Australian National University and currently oversees bond assets in excess of US$22 billion ($30.83 billion). Here are excerpts from the interview. Personal Wealth: How do you manage to outpace most of your rivals and turn in such high double-digit returns for your bond fund in recent years? Michael Hasenstab: Our approach is to combine qualitative analysis of macroeconomic factors with sophisticated quantitative tools. We begin with an in-depth analysis of a country in order to understand its fundamentals and then complement a bottom-up analysis, with a top-down global perspective, that helps reveal potential catalysts that may drive a revaluation. We seek to identify opportunities within those countries, ultimately searching for value. Our unconstrained [non-benchmark] approach provides the flexibility to hold only the most attractive
Our approach is to combine qualitative analysis of macroeconomic factors with sophisticated quantitative tools — Hasenstab sources of alpha. Currency, interest rate, and credit exposure are evaluated and exploited independently in order to maximise risk-adjusted returns. The past two years have presented the fund with the opportunity to capitalise on several very important secular trends in the context of a largely benign global environment. The fund has taken advantage of the rebalancing of global growth towards developing economies by adding currency exposure to those rapidly growing economies. Asian currencies have largely benefited the fund performance over this period as have peripheral European currencies, which have benefited from euro-area convergence. To add to that, the fund benefited from having almost no exposure to the US dollar over the period. Further, the fund has only recently started adding duration exposure after only holding interest rate exposure in select economies during the period of strong growth and rising interest rates. As returns and risks go hand in hand, does it mean that your fund is riskier compared with other global bond funds? The fund’s high returns are much more a product of its fundamentals driven research and selective portfolio construction than they are due to holding risky assets. Our returns typically come from currency and interest rate changes
as well as security selection. Currency and interest rate returns are generally larger than the returns from credit exposure, and this has been true recently with currency exposure having been particularly beneficial. While it is true that individual assets generally compensate for higher risk with higher returns, the broad opportunity set available to the fund allows it to achieve high returns while maintaining broad diversification and high credit quality. In fact, the fund’s average credit rating has remained quite high, historically ranging from A to AA. What was your best strategy? How much return was gained by your fund with that single strategy and how long was your holding period? For the past several years, the fund has held almost no exposure to the US dollar. This allocation has been a central part of the fund’s strong performance as the US dollar has been weak, and it has allowed the fund to maintain exposure to a variety of appreciating currencies, particularly in Asia. Our view on the dollar has been based on the historically large and unsustainable, current account deficit of the US. We anticipated a shift in global growth and consumption away from the US and towards these developing economies, which have become the world’s producers. Declining interest rates in the US recently have benefited this
positioning even further. For example, the Malaysian ringgit appreciated 12.5% in 2006 and 2007 against the US dollar, the South Korean won rose 22% from the beginning of 2004 through 2006, and the Indian rupee appreciated 12.3% against the dollar in 2007 alone. Most strategists are still calling for an underweight position in the fixed-income asset class this year, saying that bonds in general will produce very low real returns in 2008. Do you agree that the current environment is difficult for global bonds to generate respectable returns? Overall, we remain positive on the global fixed-income asset class given attractive valuations in various segments of our investment opportunity set. Often, increased market volatility leads to the mispricing of assets, and creates opportunities for the fund. Our flexible strategy allows us to take advantage of changing macro themes, and allows the fund to provide alpha and diversification in any stage of the business cycle. The fund is currently positioned for a likely US-led global slowdown. In addition to extending duration to benefit from changes in growth and inflation in countries that are likely to be strongly impacted by the US downturn such as South Korea and Mexico, we can also position the fund in defensive currency positions and where fund restrictions permit, through instruments such as credit default swaps, which provide credit protection. One example of our defensive currency positioning is increasing exposure to currencies that were used to fund carry trades, such as the Japanese yen or Swiss franc, which benefit from rising volatility in global markets. The yen and franc offer strong fundamental value as both countries run large current account surpluses and interest rate differentials with other countries that are likely to decline as concerns over growth persist into 2008. Additionally, we can take relative currency positions to benefit from currency exposure even in an environment of a strong base currency. Going long on one currency against another is a way to benefit from deteriorating fundamentals in one country against strong fundamentals in another that is relatively insulated from external influences. What other strategies are you adopting and what type of bonds are you betting on at the moment? While US Treasuries performed well over the past few months, we remain attentive to valuations. We see value outside of the US and in markets where yields have lagged the rally in the US. We also see value in peripheral bond markets, particularly those that backed up from risk aversion in 2H2007 and where the macroeco-
nomic backdrop favours lower yields through potential interest rate easing. Additionally, we are interested in European markets, where recoupling could have a larger impact on aggregate growth, given the limited room for a quick fiscal policy response and limited capacity for households to pick up the slack. We aim to take advantage of market weakness to add to existing positions and will continue to look for attractive valuations as opportunities arise amid shifts in the global economy. We continue to be negative on the US dollar due to the large balance-of-payment imbalances. Historical examples suggest this requires a multiyear weak dollar cycle to correct. This dollar-weakening cycle began in 2002 and by end-2007, saw only marginal improvement in the US current account deficit. As the growth momentum in the US slows, we would expect some cyclical improvement in the current account via low import growth. However, the larger issue in our view is the magnitude of the current account deficit, which must still be financed to prevent dollar weakness by foreign capital at a time when corporate profits are under pressure and the US Federal Reserve is easing interest rates. Additionally, the interest rate advantage over other developed economies is narrowing and will likely turn negative this year. As a result, the US dollar is still vulnerable, and its ability to attract capital flows to match the size of the current account is deteriorating. Longer-term trends also work against the US dollar, including foreign exchange reserve diversification. While we are now bearish on the US dollar, the cycle will eventually turn. The Templeton Global Bond Fund has the ability to hedge fully back into the US dollar and we anticipate a time in the short to medium term when US dollar exposure will be increased. Among non-dollar currencies, the rebalancing of the global economy favours Asia. While low import growth in the US and double-digit export growth has marginally improved the US current account deficit over the last several quarters, bilateral balances show that underlying imbalances persist. This likely reflects the strong competitive positioning of Asian economies along with the managed-currency approach of many Asian countries. We also view peripheral European currencies as having more attractive valuations than the euro as many of those economies are experiencing higher growth and are more competitive. Finally, we paired the yen and Swiss franc against higher-yielding currencies that are likely to suffer in periods of volatility. These exposures have helped minimise risk and have benefited performance through the difficult period of the last sevE eral months.
PERSONAL WEALTH
Betting on a turnaround in Chinese equities | BY KELVIN TAN |
A
fter delivering impressive annual gains of 73.74% and 64.88% in 2006 and 2007, respectively, Jiang Yiqian and Craig Chen — co-portfolio managers of the DWS China Equity Fund — now face the challenge of steering their fund into positive territory in 2008, after being hit by the severe global stock market rout in January. Although their fund is currently 18.8% in the red for the year as at Feb 26, the managers from DWS, which is the retail fund management arm of Deutsche Asset Management, remain confident of turning their performance around over the next 10 months. “We expect positive gains in 2008, for Chinese equities,” asserts Jiang. She points out that earnings growth for Chinese stocks is expected to exceed 20% this year. And with ongoing mergers and acquisitions/restructuring activities, the strengthening of the remimbi coupled with strong economic growth in China, there is no reason why Chinese stocks would continue to stay in negative territory, says Jiang, who has 11 years of investment experience. Sharing that optimism, Chen points out that valuations of China-related stocks — especially Hong Kong-listed H-shares and red chips, which were “oversold” recently — have now come down to reasonable levels and are looking to be good value. “Valuations of China stocks have become very attractive after the recent correction, trading at around 14 times 2008 price-toearnings ratio with expected earnings growth of over 20% this year,” beams the fund manager, who has 12 years of investment experience. “We expect Chinese companies to deliver strong earnings growth during the annual results season, which should help ease some of the current market concerns,” he adds. The DWS China Equity Fund, which won an award for the best fund in the China equity fund category at last week’s The Edge-Lipper Singapore Fund Awards 2008, currently has assets of 86.8% invested in H-shares and red chips, 3.5% in mainland China B shares, 4.8% in Singapore-listed Chinese companies and 2.5% in Hong Kong-listed firms. In recent weeks, the DWS fund managers reveal that they have been taking advantage of the market correction to buy into Chinese companies in the railway construction, agriculture, and alternative energy sectors. “These sectors are less affected by the government’s austerity measures or global economic slowdown,” says Jiang. In addition, she points out that her team has revised the weightings in banks from “underweight” to “neutral”, adding that the sector was oversold on concerns over credit tightening. At the moment, the DWS fund managers like China stocks such as the attractively valued banking counter ICBC, telecom firm China Telecom (a key beneficiary of telecom industry restructuring and 3G licensing), and fertiliser distributor Sinofert (an agriculture play that is benefiting from increasing demand for fertilizer in China). Looking ahead, Chen says a prolonged recession in the US, and high inflation in China, currently pose the biggest risks for Chinese equities. “On the domestic front, persistent inflationary pressure would be a negative factor. The government may impose more price controls or tightening measures if the CPI [consumer price index] continues to rise.” Nevertheless, he believes that China’s CPI would start to drop in 2Q due to the easing of supE ply shortages.
Investors monitor stock quotes at a securities trading firm in Shanghai, China, on Jan 22, when stocks tumbled, with the benchmark index posting its biggest two-day decline on record
BLOOMBERG
THEEDGE SINGAPORE | MARCH 3, 2008 • PW9
PW10 • THEEDGE SINGAPORE
| MARCH 3, 2008
PERSONAL WEALTH
BLOOMBERG
Fears of US recession could spur interest in defensive healthcare stocks | BY KELVIN TAN |
T
he global healthcare equity sector hasn’t had the best of times over the past two years. Dragged down by patent expirations of blockbuster drugs, a more stringent US Food and Drug Administration (FDA), which has scaled back and delayed approvals of new drugs, as well as high-profile billion dollar lawsuits against big pharmaceutical companies, the MSCI World Healthcare Index — a barometer of healthcare stocks around the world — has been on a downtrend since early last year. Despite the cloudy outlook in the US-centric global healthcare sector, which could get darker if the drug safety focused Democratic Party wins the coming US presidential election, Mae Leong — fund manager of United Global Healthcare Fund — is seeing a silver lining emerging from the anaemic sector. (Globally, the US is the largest consumer of healthcare goods and services.) Like most investment specialists in the healthcare sector, Leong reckons that drug companies could do well relative to other stocks in 2008 if the US economy goes into recession. Indeed, people would still require medicines and healthcare in good or bad times in the economic cycle. “The healthcare sector, which is often perceived as defensive, [could outperform] as investors become more concerned about the possibilities of a global recession,” says the fund manager from UOB Asset Management (UOBAM). The United Global Healthcare Fund won two awards at last week’s The Edge-Lipper Singapore Fund Awards 2008 for the best fund in the equity sector pharmaceuticals and health care category over a three- and five-year period.
Near-term opportunities At the end of last year, Leong’s fund — relative to the MSCI Healthcare Index — had taken an underweight position in pharmaceutical companies while overweighting biotechnology companies and those in medical products and healthcare services. With the broad sell-off in drug companies last year, Leong is beginning to see “nearterm opportunities” in well-diversified pharmaceutical companies with strong drug pipelines, as well as companies “with favourable earnings trend driven by significant cost restructuring, patent victories and emerging pipelines”. “Selected US, European and Japanese pharmaceuticals with strong pipelines and good costs controls would continue to see strong sales growth and improving operating margins,” she adds. The rise of mergers and acquisitions (M&A) in the pharmaceutical industry is also seen as beneficiary for the stock prices of drug companies. “Pharmaceutical companies are continuing to merge to create cost synergies, diversify and enhance their drug pipeline, form alliances to enhance their research and development capabilities and acquire biotech companies to improve their drug pipeline,” Leong observes. One of Leong’s best performing stocks of last year that benefited from M&A was US drug company Medimmune, which was delisted after it was acquired by UK pharmaceutical giant AstraZeneca. The share price of Medimmune almost doubled from early 2007 to June last year, after it was bought over by AstraZeneca at a significant premium. Leong, whose fund had small holdings in Singapore- listed healthcare stocks such as Eu Yan Sang International, LMA International and Parkway Holdings last year, declined to talk about stock names. Besides pharmaceuticals, she also sees opportunities in the medical technology sector. She points out that companies in the sector tend to hold up well in economic downturns as they are less exposed to consumer discretionary spending. At the same time, these companies — unlike pharmaceuticals — are not subjected to the threats of generic companies taking market share over their products and pipeline problems, she adds.
Two main trends supporting the long-term investment case for healthcare are demographics and technological innovation
trounced its rivals by a wide margin in terms of performance. For instance, over the past five years (ended Feb 15), the fund delivered gains of 78.4%, which are more than twice of that of the average gains of 36.24% in the healthcare fund sector. Lion Capital Global Healthcare Investment A Fund was a distant second, achieving a return of 39.67% over the same period. (See Table 1 for more information on the performance of retail healthcare-focused unit trusts sold to investors in Singapore.) Leong attributes the strong performance of her bottom-up stock-focused fund to a “value style” investment approach within the growth sector of healthcare, which rides on SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
A consistent performer Over the past three and five years, the United Global Healthcare Fund, leveraging on the expertise of Boston-based institutional fund management firm Wellington Management, the sub-adviser to the fund, has consistently
Top 10 Holdings (As at Dec 31, 2007) Forest Laboratories Schering Plough Corp Eli Lilly UnitedHealth Group Mckesson Corp Shionogi Eisai Co Sanofi Aventis Medtronic ST Jude Medical
agnostics, medical devices, surgical practices and in the study of the human genome and its applications.”
Leong: The long-term case for global healthcare investing is strong
powerful secular growth trends such as ageing populations in developed countries and technological innovation. “The fund focuses on value investing in a growth industry, given its focus on fundamentals and valuation. Some may consider this to be a contrarian approach,” Leong quips. “As an example, for the pharmaceutical stocks, the biggest overhang has been ongoing patent lawsuits. We view this as merely a timing issue. As cases are ultimately decided, the market will remove the heavy discount being placed on the long-term earnings outlook,” explains the fund manager, who isn’t afraid to pick up fundamentally solid companies whose share prices have suffered unduly over the short-term.
Betting on a recovery Although the United Global Healthcare Fund, like many other healthcare-focused unit trusts, suffered negative performance last year, Leong, who is sanguine on the long-term prospects of the global healthcare sector, isn’t worried. “The long-term case for global healthcare investing is strong,” she says, adding that her fund generally “focuses on longer-term trends and drivers”. “Currently, there are two main trends supporting the long-term case for healthcare — demographics and technological innovation.” Leong says the positive trend in demographics is largely driven by the growing gray population around the world, longer life expectancy, a rise in chronic diseases and an increase in demand from non-US markets. “Technological innovation is also critical to the growth of the sector. It is at work in areas such as di-
Diversifying from the US
LIPPER
Table 1
Performance of Singapore-registered healthcare unit trusts RETURN % YTD
RETURN % 1 YEAR
RETURN % 3 YEARS
RETURN % 5 YEARS
12/31/2007 - 02/15/2008
02/ 15/2007 - 02/15/2008
02/15/2005 - 02/15/2008
02/14/2003 - 02/15/2008
NAME
VALUE
RANK
VALUE
RANK
VALUE
RANK
VALUE
RANK
Lion Capital Global Healthcare Investment A Fidelity Funds – Global Health Care A United Global Healthcare Fund AllianceBernstein — International Health Care A USD ABN AMRO Health Care A EUR DWS Invest Life Science LC Equity Sector Pharma & Health Average (6)
-7.80 -8.27 -5.31 -7.71 -7.84 -9.51 -7.74
3 5 1 2 4 6 6
-1.25 -10.45 -10.56 -11.87 -15.60 -15.78 -10.92
1 2 3 4 5 6 6
4.15 6.50 15.54 2.92 -4.39 -4.80 3.32
3 2 1 4 5 6 6
39.67 34.49 78.40 28.26 11.60 25.01 36.24
2 3 1 4 6 5 6
To reduce the risk of her fund to “US politics” on healthcare, the UOBAM fund manager has also recently started diversifying away from US holdings to those in Europe and Japan. “European and Japanese companies that have relatively low valuations and much lesser exposure to US political risks also look increasingly attractive on valuation grounds in 2008.” At the end of last year, the United Global Healthcare Fund had assets of 66.52% invested in the US, 11.59% in Japan, and 12.93% in Europe and the rest of the world. Looking ahead, the global pharmaceutical market, which reached US$603 billion in 2006, will continue to grow with emerging markets showing the highest average annual growth rate of 10% per annum, says Leong. She is expecting a turnaround in performance for the healthcare sector this year. According to the recent Russell Investment Group’s Investment Manager Outlook report released at the end of last year, the healthcare industry remains the second-most favoured sector behind technology with some 73% of fund E managers saying they are bullish on it.
PERSONAL WEALTH
Betting on a turnaround in Chinese equities | BY KELVIN TAN |
A
fter delivering impressive annual gains of 73.74% and 64.88% in 2006 and 2007, respectively, Jiang Yiqian and Craig Chen — co-portfolio managers of the DWS China Equity Fund — now face the challenge of steering their fund into positive territory in 2008, after being hit by the severe global stock market rout in January. Although their fund is currently 18.8% in the red for the year as at Feb 26, the managers from DWS, which is the retail fund management arm of Deutsche Asset Management, remain confident of turning their performance around over the next 10 months. “We expect positive gains in 2008, for Chinese equities,” asserts Jiang. She points out that earnings growth for Chinese stocks is expected to exceed 20% this year. And with ongoing mergers and acquisitions/restructuring activities, the strengthening of the remimbi coupled with strong economic growth in China, there is no reason why Chinese stocks would continue to stay in negative territory, says Jiang, who has 11 years of investment experience. Sharing that optimism, Chen points out that valuations of China-related stocks — especially Hong Kong-listed H-shares and red chips, which were “oversold” recently — have now come down to reasonable levels and are looking to be good value. “Valuations of China stocks have become very attractive after the recent correction, trading at around 14 times 2008 price-toearnings ratio with expected earnings growth of over 20% this year,” beams the fund manager, who has 12 years of investment experience. “We expect Chinese companies to deliver strong earnings growth during the annual results season, which should help ease some of the current market concerns,” he adds. The DWS China Equity Fund, which won an award for the best fund in the China equity fund category at last week’s The Edge-Lipper Singapore Fund Awards 2008, currently has assets of 86.8% invested in H-shares and red chips, 3.5% in mainland China B shares, 4.8% in Singapore-listed Chinese companies and 2.5% in Hong Kong-listed firms. In recent weeks, the DWS fund managers reveal that they have been taking advantage of the market correction to buy into Chinese companies in the railway construction, agriculture, and alternative energy sectors. “These sectors are less affected by the government’s austerity measures or global economic slowdown,” says Jiang. In addition, she points out that her team has revised the weightings in banks from “underweight” to “neutral”, adding that the sector was oversold on concerns over credit tightening. At the moment, the DWS fund managers like China stocks such as the attractively valued banking counter ICBC, telecom firm China Telecom (a key beneficiary of telecom industry restructuring and 3G licensing), and fertiliser distributor Sinofert (an agriculture play that is benefiting from increasing demand for fertilizer in China). Looking ahead, Chen says a prolonged recession in the US, and high inflation in China, currently pose the biggest risks for Chinese equities. “On the domestic front, persistent inflationary pressure would be a negative factor. The government may impose more price controls or tightening measures if the CPI [consumer price index] continues to rise.” Nevertheless, he believes that China’s CPI would start to drop in 2Q due to the easing of supE ply shortages.
Investors monitor stock quotes at a securities trading firm in Shanghai, China, on Jan 22, when stocks tumbled, with the benchmark index posting its biggest two-day decline on record
BLOOMBERG
THEEDGE SINGAPORE | MARCH 3, 2008 • PW11
PW12 • THEEDGE SINGAPORE
| MARCH 3, 2008
PERSONAL WEALTH
Reuters Support: (1 800) 776 7188 Dealing Code HELP | Customer zone: www.reuters.com/customers | Product info: www.reuters.com/productinfo
Avenue Capital takes hits, but sees opportunities in distressed debts
HEDGE FUND WATCH
REUTERS
Singapore-registered funds
fload assets to raise money to meet investor redemptions. “If we can buy what we think ew York-based Aveare world-class companies at cheap nue Capital Group, the valuations, we will do that,” LasUS$20 billion ($28.13 ry points out. “But we will have billion) hedge fund some mark-to-market hits,” meangroup led by investor ing portfolio markdowns as asMarc Lasry, took some hits in sets sink lower. “Over the next January amid the market turmoil, month or two, we’ll probably be but Lasry says he sees “phenomflat to up a little.” enal opportunities” this year for Indeed, January was not kind Avenue’s distressed-debt investto Avenue, although it performed ment strategy. better than comparable indices In a recent interview, Lasry also for its strategies. The US$500 says he’s not changing the firm’s million Avenue Investments LP health-care plan in response to critiand US$1.2 billion Avenue Intercism by his highest profile employ- Chelsea with her mother, Hillary, on the US presidential campaign national Ltd funds, for instance, ee, former first daughter Chelsea trail. Chelsea, who works at Avenue, had criticised the firm’s fell 2% and 2.46% respectively, Clinton. “I think we have a great health-care plan. the worst monthly performance health-care plan,” he adds. The hedge fund group was down 1% as in January, but we will end up doing for both since July 2002, according to the investor letter. That compares favourably to 2.5% in its major strategies in Europe extremely well.” Lasry isn’t alone in his optimism for with the Altman Combined Index, which and the US, according to a letter Avenue sent to investors last week that was ob- distressed debt investing. Bruce Richards, values bank debt, which fell 2.9% in Janhead of the US$11 billion hedge fund group uary and the Credit Suisse Distressed Intained by Reuters. Lasry declined to confirm performance Marathon Asset Management, told an in- dex, which fell 12.23%. Outside the office, Lasry is a big Demonumbers, citing regulatory restrictions. But vestor conference last month that dishe acknowledged that the firm suffered tressed investing has become “a trillion cratic Party supporter and is backing Hila rare down month in January as global dollar-plus opportunity”, driven by the lary Clinton, whom he predicts will win the Democratic nomination. debt and equity markets swooned in re- meltdown in global credit markets. And the amount of money raised for In 2006, the firm hired Chelsea Clinton sponse to a broad credit pullback. For Lasry, who started his firm in 1995, distressed-investing hedge funds ballooned as an associate, although the move recentthe prospect of a recession is good news from an estimated US$70 billion in 2006 to ly drew some unwanted attention to the for Avenue and a growing group of oth- US$105 billion in 2007, according to indus- firm. The younger Clinton, on leave camer hedge funds that buy corporate bank try tracker Hedge Fund Research, a trend paigning for her mother, suggested that she is “not happy” with her employerand bond debt that has fallen well below that experts say is likely to continue. But Lasry said it won’t always be smooth provided health care at Avenue, accord“par”, or its issue price. “When the markets are in disloca- sailing generating returns in choppy mar- ing to media reports. Lasry appeared to take Chelsea’s words tion and things go bad, that ends up be- kets, even when the firm sees major buying good for us,” says Lasry, who said he ing opportunities in debt that is trading with humour and says he has no plans to change the firm’s medical plan. He adds continues to raise money from investors at 50% or 60% of its par value. Sometimes, he says, the marks push he wholeheartedly supported Chelsea, looking to jack up their allocations to the strategy. “As the economy goes into re- such securities even lower as faltering, calling her “exceptionally talented and E cession, we’ll take some short-term hits, leveraged hedge funds scramble to of- incredibly smart”.
| STORIES BY DANE HAMILTON | 10 best performers over the past three months NAME
% VALUE
Optimal Global Trading (Ireland) A USD
67.02
Halbis India Alpha USD
13.13
Permal US Capital Growth Opportunities A
10.08
Vega Select Opportunities Investor USD
9.28
Man AHL Currency
7.21
HSBC Japan AdvantEdge JPY
6.51
Aliquot Gold Bullion A USD
6.29
UEB Diversity Portfolio (CHF Reference)
5.78
Man AHL Diversified Futures Ltd
5.66
Man RMF Four Seasons Strategies 2XL CHF
4.74
10 worst performers over the past three months Platinum Dynasty USD
-31.93
Platinum Turnberry USD
-24.16
GAM Asia Equity Hedge USD Open
-20.92
Permal Media & Technology A
-19.78
La Fayette Leveraged USD
-16.52
Platinum Global Dividend USD
-15.74
CAAM Invest VaR 20 C (EUR)
-13.78
GAM Japan Equity Hedge USD Open
-13.47
Permal Global Multi-Long Holdings A USD
-13.14
Vega Relative Value Fund Ltd Investor Class USD
-12.92
International funds 10 best performers over the past three months NAME
% VALUE
RAM Fund LLC
62.45
RAM Agressive
62.11
Clarke Global Basic Program
51.79
Legacy Futures LP
34.71
Hawksbill Global Diversified Program A1 (Inc Not)
34.69
Atyant Capital India Fund-I (Offshore)
32.71
Cazenove Eu Alpha Eq Absolute Return A EUR
31.66
Aurarian Offshore Ltd
31.48
TOMAC 2
30.65
Scully Mistral Program
29.53
10 worst performers over the past three months The High Risk Fund Ltd
-58.72
Absolute Precious Metals
-56.83
AAM China Fund
-35.71
Pukula YES Bond Yield Enhancement Program
-34.98
Platinum Dynasty USD
-31.93
Endeavor LLC
-29.63
CITIC Capital China Plus Ltd
-28.56
Lucerne Mid-Cap Offshore Ltd
-27.97
Wellchamp Ltd
-27.91
Pictet Targeted Fund 2-Global Value-P
-27.62
Source: Reuters/Lipper Fund performance as at Jan 31, 2008
Note: The hedge funds registered in Singapore are sold generally to accredited investors who are required to have a net worth of at least $2 million or an annual net income of $300,000. Investors should consult their financial advisers before investing in these alternative investment funds.
N
Another hedge fund blows up
Funds sue Yahoo over Microsoft rebuff | BY GINA KEATING |
D
B Zwirn & Co, a US$5 billion ($7 billion) hedge fund group managed by investor Daniel Zwirn, will liquidate its two largest hedge funds after investors demanded some US$2 billion in withdrawals, a person familiar with the situation said last week. The New York-based firm told investors in a letter on Feb 21 that it would sell assets in two funds, its Special Opportunities Fund and a sister offshore fund, which hold about US$4 billion combined, according to the source. The investors’ redemptions come after the firm disclosed that it faced questions from its auditors about its accounting for operational expenses, the source adds. The firm said it may take years to liquidate the funds, because much of the holdings are illiquid assets, such as private loans, derivatives and other thinly traded assets, the source says. The liquidation is a blow to Zwirn, who was previously a senior portfolio manager of the Special Opportunities Group of Highbridge Capital Management, which is majority owned by JPMorgan Chase & Co. Zwirn was also previously a portfolio manager with MSD Capital LP, the private investment firm of Dell Inc founder Michael Dell. “Anytime a fund reportedly is losing 80% of its assets, it calls into question how sustainable the firm is on a continuing basis,” said Daniel Farkas, a hedge fund analyst at Morningstar Inc. “But things are still playing out so it’s E too early to say.”
T
wo Detroit pension funds sued Yahoo Inc and its board over a week ago for rejecting Microsoft Corp’s unsolicited US$41.2 billion ($57.73 billion) offer in a sign of growing shareholder frustration with the online search and media company. The proposed class action, filed by veteran shareholder litigation firm Bernstein Litowitz Berger & Grossman, takes Yahoo directors to task for spurning the Feb 1 offer and “pursuing all manner of value-destructive third-party deals”. The two plaintiffs, Detroit’s Police and Fire Retirement System and General Retirement System, are concerned about news reports of a “potential imminent deal” sought by the Yahoo board with media conglomerate News Corp or Time Warner Inc’s AOL that would not require a shareholder vote. The plaintiffs asked a Delaware Chancery Court to block the Yahoo board from completing any such transaction with those companies, to force it to reconsider Microsoft’s offer, and to block it from implementing defensive measures that would render the company unattractive to potential buyers. Lawsuits by Yahoo shareholders have multiplied in the wake of Yahoo’s Feb 11 refusal to entertain the offer, which represented a 62% premium over Yahoo’s share price. Yahoo said at the time the bid substantially undervalues the company, failing to take into account its 500 million users worldwide, investments in its advertising platform and lucrative overseas holdings. Microsoft has yet to show signs it would raise its offer. Before the offer, Yahoo’s share price had dropped 46% since October as it struggled to compete with Internet search leader E Google Inc. — Compiled from Reuters
THEEDGE SINGAPORE | MARCH 3, 2008 • PW13
PERSONAL WEALTH
PICTURES: BLOOMBERG
‘Low-teen gains’ expected from BRIC markets | BY KELVIN TAN |
D
espite recent years’ strong run-up in the stock markets of Brazil, Russia, India and China (BRIC), which are the biggest and fastest-growing economies of the developing world, the market upswing for these four red-hot nations is still at an early stage, says Nick Timberlake, fund manager of the world’s first BRIC mutual fund, the HSBC GIF BRIC Freestyle, which made its debut in late 2004. “In the long run, the drivers for growth in the BRIC economies remain as they were before, with strong and sustainable GDP growth, political and fiscal reform and with more and more companies listing on their stock exchanges,” says Timberlake, who is also HSBC Investments’ head of global emerging markets (GEM), in a recent interview with Personal Wealth. “It is true to say that each BRIC country has its own cycle of development and is at different points on it but the fact is that all four are at the earlier points in their ‘emerging growth’ cycles.” The BRIC fund generated high-octane returns of 40%, 44.5% and 47.6% in 2005, 2006 and 2007 respectively. Last week, the HSBC GIF BRIC Freestyle (M1C USD) Fund, which has almost a third of its assets invested in Russia stocks in oil-andgas names Gazprom and Lukoil Oil as well as banks such as Sberbank, won an award for the best fund in the global emerging markets equity category over a three-year period at The Edge-Lipper Singapore Fund Awards 2008.
Russia — in the eyes of the HSBC head of global emerging markets — looks to be most attractive after the recent downturn in global equities
‘In buying territory’
COUNTRY
Russia Brazil China India
% OF FUND’S ASSETS*
29.4 25.7 22.7 20.4
*As at Jan 31, 2008
Top 10 holdings (as at Dec 31, SECURITIES
Petroleo Brasileiro ADR Gazprom ELN China Mobile Lukoil ADR Sherbank of Russia Jindal Steel & Power Novatek GDR Yanzhou Coal Mining Vimpelcom ADR Gazprom ADR
HOLDING (%)
8.08 6.11 4.20 3.16 2.83 2.72 2.62 2.47 2.28 2.25
Tapping expertise of specialist fund managers
As lead manager for the HSBC BRIC fund, Timberlake’s main job is to decide how much to allocate to each of the BRIC markets. The stockpicking process, on the other hand, is taken care of by four specialist fund managers: Luiz Ribeiro, a Brazilian equity expert based in São Paulo; Douglas Helfer, who runs the Russian portfolio from London; Sanjiv Duggal, a Singapore-based manager specialising in Indian equities; and Richard Wong, 2007) who manages Chinese INDUSTRY equities in Hong Kong. Oil & gas producers All four managers have Oil & gas producers more than 10 years’ inMobile telecom vestment experience in Oil & gas producers their respective markets. Bank “In addition, each fund Industrial metals manager has considerOil & gas producers able support from the Mining Halbis network of anaMobile telecom lysts and from the widOil & gas producers er HSBC network as a whole,” Timberlake says. HSBC INVESTMENTS
Country allocation for HSBC GIF BRIC Freestyle Fund
HSBC INVESTMENTS
Although equity prices of all BRIC markets, with the exception of Brazil, are currently in the red for the year after January’s market rout, the HSBC emerging market fund manager is still confident that equities in the BRIC markets “should make upward progress again” this year, unless there is a sharp US recession. “However, the markets are volatile at present and sensitive to news. Although we expect GEM equities to have a positive year and to beat developed markets, it is not possible to say to what extent,” says Timberlake, who oversees US$5.3 billion ($7.4 billion) worth of emerging-market assets.
Although a US recession would affect the BRIC economies, he believes the negative impact would be limited because of the robust GDP growth exhibited by the BRIC nations. Companies there such as those in the domestic consumer-related sectors, which are less dependent on global growth, would still be able to grow their earnings, even if the US goes into a recession, he argues. “The recent volatility has thrown up some interesting opportunities. Markets have started to price in a mild recession in US and investor surveys are unanimously bearish. History shows that when everyone agrees on the outlook, it usually pays to take the opposite view. That’s why we are now in buying territory again,” Timberlake says. Doubtless, gains in 2008 for the BRIC markets will moderate compared with previous years. But with earnings per share (EPS) growth in double-digit territory, low double-digit returns for this year should still be a possibility, he points out. “Given that EPS growth [in BRIC markets] is currently in the low teens of 12% to 13%, similar returns would normally be expected from equities,” he adds.
Timberlake: History shows that when everyone agrees on the outlook, it usually pays to take the opposite view. That’s why we are now in buying territory again.
Halbis is the active management specialist arm of the HSBC Group. To run a successful BRIC fund of such an approach, “communication is key”, says Timberlake, who gets together once a month with the four fund managers and one of the HSBC economists to discuss the risks and opportunities in the investment landscape of the BRIC markets. After the discussion, a target asset allocation would be derived from “an appraisal of the relative merits of the markets to each other”, he explains. “This is the clear differentiator of our fund from the rest of its competitors. The process is a marriage of top-down and bottom-up stock selection, which has proved itself since the fund was launched.”
Most bullish on Russia At the moment, among the four BRIC markets, Russia — in the eyes of the HSBC head of global emerging markets — looks to be most attractive after the recent downturn in global equities. Last month, the Russian equity market fell by more than 16%, underperforming the broader emerging markets universe. “Russian equities, following the January sell-off, are again some of the cheapest and fastest-growing in the emerging world and present an outstanding long-term investment opportunity,” Timberlake says. He believes that Russia’s economic growth
is accelerating, driven by high levels of public and private investment, liberalisation and consumption. Last year, GDP numbers for Russia exceeded US$1 trillion after growing a healthy 8.1% from the previous year. “We continue to believe the dramatic slowdown in the US economy will have little direct effect on Russian economic and corporate profits growth,” he adds. Timberlake is also sanguine on the prospects of Indian equities, which he is “selectively buying on weakness”. “The sharp market correction of late has brought the Indian market to more reasonable valuation levels and our outlook for the market is positive,” he says, adding that the key issues to monitor in the Indian market are fiscal and monetary policy initiatives of the government to keep inflation under control and the “large new corporate capital-raising pipeline”, which still remains a concern. On the other hand, Timberlake is staying cautious on Brazil because of high inflation, which could lead to possible interest-rate hikes by its central bank. “The extent of the impact of the US slowdown on Brazil is still unclear and we believe that volatility will persist in the coming weeks. However, inflation will be a major focus in the coming months and the market will be carefully watching the central bank and the risk of interest-rate increases,” he says. For China, inflation and monetary tightening are also the main concerns of Timberlake. “We believe sentiment [for Chinese equities] will remain cautious over the coming month on concern of further government tightening to curb inflation and the increased likelihood of lower global economic growth in 2008,” he explains. He expects inflation in China to remain high in 1Q but it should ease by 2H as food prices soften. “The Chinese government will likely maintain an overall tight credit policy over the coming months to bring inflation down ahead of the important National Peoples Congress meeting in March,” he says. At the moment, Timberlake says the Hong Kong H-shares, which his team “has been buying on weakness”, look to be of better value than mainland A-shares. “The H-share discount to A-shares has widened in January to 56%, owing to market actions, which leaves the Hong Kong-traded China shares even more attracE tive,” he adds.
PW14 • THEEDGE SINGAPORE
| MARCH 3, 2008
PERSONAL WEALTH
Tan (left) presenting Rajeev Demello, head of Singapore operations at Western Asset Management, with the award for Best Fund Over Three Years — Bond Asia-Pacific
Kenneth Koh (left), head of research for Asia ex-Japan at Lipper, presenting Ernesto Bettoni, global product specialist at ABN AMRO Asset Management, with the award for Best Fund Over Three Years — Bond Emerging Markets Global
Darren Duffy (left), vice-president and global head of production at Lipper, presenting Teo Chon Kiat, vice-president at DBS Asset Management, with the award for Best Fund Over Three Years — Equity Global Small and Mid Caps
Tan Boon Kean (left), editor and regional managing director of The Edge Singapore, presenting William Tan, head of sales at Templeton Asset Management, with the award for Best Fund Over Five Years — Bond Global
Tan (left) presenting Daniel Chan, CEO and chief investment officer (CIO) at Lion Capital Management, with the award for Best Fund Over Three Years — Equity Malaysia and Singapore
Koh (left) presenting Tan Kheng Lai, managing director of AIG Global Investment (Singapore), with the award for Best Fund Over Three Years — Bond Singapore Dollar
Duffy (left) presenting Andrew Kwek, CEO Singapore of Deutsche Asset Management (Asia), with the award for Best Fund Over Three Years — Bond Global
Tan (left) presenting Tan Su Yin, director for marketing & sales distribution at Henderson Global Investors Singapore, with the award for Best Fund Over Five Years — Equity Sector Information Technology
Edward Haddad (left), senior company officer, ASEAN at Reuters Singapore, presenting Suraj Mishra, CEO of Prudential Asset Management Singapore, with the award for Best Fund Over Three Years — Equity Europe Small and Mid Caps
Koh (left) presenting Dokyoung Lee, senior portfolio manager at AllianceBernstein, with the award for Best Fund Over Three Years — Bond US Dollar
Duffy (left) presenting Madeline Ho, managing director at Fidelity Investments (Singapore), with the award for Best Fund Over Three Years — Equity Asia-Pacific
Duffy (left) presenting Neo Shiang Yi, marketing & communications manager at First State Investments Singapore, with the award for Best Fund Over Three Years — Equity Sector Information Technology
And for B
Tan (left) presenting Serene Quek, head of retail business development at HSBS Investment Singapore, with the award for Best Fund Over Three Years — Equity Emerging Markets Global
Haddad (left) presenting Jeffrey Lee, managing director and CIO at Phillip Capital Management, with the award for Best Fund Over Five Years — Mixed Asset SGD Aggressive
Koh (left) presenting Yunis Lee, head of corporate communications at BNP Paribas (Singapore), with the award for Best Fund Over Five Years — Equity Sector Banks and Other Financials
Dok Best Man
Tan presenting Bas van Buuren, CEO of ING Investment Management Asia-Pacific, with the award for Best Fund Over Three Years — Bond Europe
Haddad presenting Albert Tse, head of retail sales at Schroder Investment Management Singapore, with the award for Best Fund Over Three Years — Equity Emerging Markets Latin America
Dan —M
Thio awa
THEEDGE SINGAPORE | MARCH 3, 2008 • PW15
PERSONAL WEALTH
Winners of The Edge-Lipper Singapore Fund Awards 2008 FUND AWARD SECTOR
FUND NAME
FUND COMPANY
Bond Asia Pacific
Legg Mason Asian Bond Trust
Legg Mason
Bond Emerging Markets Global
ABN AMRO Global Emerging Markets Bond (EUR) A
ABN AMRO Asset Management
Bond Europe
ING (L) Renta Fund Euromix Bond P Cap
ING Investment Management
Bond Global
DWS Lion Bond SGD
Deutsche Asset Management
Bond Singapore Dollar
AIG International Funds — Singapore Bond
AIG Global Investment Corp
Bond US Dollar
AllianceBernstein-American Income A USD
AllianceBernstein LP
Equity Asia Pacific
Fidelity Funds — Pacific A
Fidelity International
Equity Asia Pacific Ex Japan
Fidelity Funds — South East Asia A
Fidelity International
Equity China
DWS China Equity A SGD
Deutsche Asset Management
Equity Emerging Markets Global
HSBC GIF BRIC Freestyle M1C USD
HSBC Investments
Equity Emerging Markets Latin America
Schroder ISF Latin American A Acc
Schroder Asset Management
Equity Europe
Fidelity Funds — European Aggressive A
Fidelity International
Equity Europe Small and Mid Caps
M&G European Smaller Companies A Euro Acc
M&G Investment Management
Equity Eurozone
Fidelity Funds — Euro Blue Chip A
Fidelity International
Equity Global
UOB Optimix Contrarian Fund
UOB Asset Management
Equity Global Small and Mid Caps
Shenton Global Advantage
DBS Asset Management
Equity Greater China
ABN AMRO China Equity A USD
ABN AMRO Asset Management
Equity Japan
Lion Capital Japan Growth SGD
Lion Capital Management
Equity Korea
Lion Capital Korea SGD
Lion Capital Management
Best Fund Over Three Years
erast
nt for pore
enest aps
Haddad (left) presenting Thio Boon Kiat, CIO and managing director of UOB Asset Management, with the award for Best Fund Over Three Years — Mixed Asset SGD Aggressive.
Dokyoung Lee (centre), senior portfolio manager at AllianceBernstein, poses with the award for Best Group — Bond, with (from left) Tan, Haddad, Giri Muudeliar, executive director of Investment Management Association of Singapore, and Duffy
Lion Capital Singapore/Malaysia SGD
Lion Capital Management
Equity North America
M&G American A Euro Acc
M&G Investment Management
Equity Sector Banks and Other Financials
Fidelity Funds — Global Financial Services A
Fidelity International
Equity Sector Information Technology
First State Asia Innovation and Technology SGD
First State Investments
Equity Sector Pharmaceuticals and Health Care
United Global Healthcare Fund
UOB Asset Management
Equity Singapore
DWS Singapore Equity
Deutsche Asset Management
Equity Thailand
Lion Capital Thailand SGD
Lion Capital Management
Mixed Asset SGD Aggressive
United Millennium Trusts III
UOB Asset Management
Mixed Asset SGD Balanced
Schroder Asian Balanced A
Schroder Asset Management
Mixed Asset USD Balanced — Global
AllianceBernstein-Global Balanced A USD
AllianceBernstein LP
Bond Asia Pacific
Legg Mason Asian Bond Trust
Legg Mason
Bond Emerging Markets Global
ING (L) Renta Fund Emerging Mkts Debt (HC) P Cap
ING Investment Management
Bond Europe
AllianceBernstein-European Income A EUR
AllianceBernstein LP
Bond Global
Templeton Global Bond A MDis USD
Franklin Templeton Investments
Bond Singapore Dollar
AIG International Funds — Singapore Bond
AIG Global Investment Corp
Bond US Dollar
AllianceBernstein-American Income A USD
AllianceBernstein LP
Equity Asia Pacific
Fidelity Funds — Pacific A
Fidelity International
Equity Asia Pacific Ex Japan
Templeton Asian Growth A YDis USD
Franklin Templeton Investments
Equity Emerging Markets Global
Fidelity Funds — Emerging Markets A
Fidelity International
Best Fund Over Five Years
Andrew Kwek (centre), CEO Singapore of Deutsche Asset Management Asia, poses with the award for Best Group — Equity, with (from left) Tan, Haddad, Muudeliar and Duffy
Equity Emerging Markets Latin America
Schroder ISF Latin American A Acc
Schroder Asset Management
Equity Europe
Fidelity Funds — European Aggressive A
Fidelity International
Equity Europe Small and Mid Caps
M&G European Smaller Companies A Euro Acc
M&G Investment Management
Equity Eurozone
Schroder ISF EURO Active Value A Acc
Schroder Asset Management
Equity Global
M&G Global Basics A Euro Acc
M&G Investment Management
Equity Global Small and Mid Caps
Shenton Global Advantage
DBS Asset Management
Equity Greater China
Lion Capital China Growth SGD
Lion Capital Management
Equity Japan
Lion Capital Japan Growth SGD
Lion Capital Management
Equity Malaysia and Singapore
Lion Capital Singapore/Malaysia SGD
Lion Capital Management
Equity North America
Franklin US Opportunities A Acc USD
Franklin Templeton Investments
Equity Sector Banks and Other Financials
Parvest Europe Financials C
BNP Paribas Investment Partners
Equity Sector Information Technology
Henderson HF Global Technology A2 USD
Henderson Global Investors
Equity Sector Pharmaceuticals and Health Care
United Global Healthcare Fund
UOB Asset Management
Equity Singapore
Shenton Thrift
DBS Asset Management
Equity Thailand
Lion Capital Thailand SGD
Lion Capital Management
Mixed Asset SGD Aggressive
Phillip Growth
Phillip Capital Management
Mixed Asset SGD Balanced
AIG International Funds — Acorns of Asia Balanced
AIG Global Investment Corp
Bond Global
Templeton Global Bond A MDis USD
Franklin Templeton Investments
Bond US Dollar
AllianceBernstein-American Income A USD
AllianceBernstein LP
Equity Asia Pacific Ex Japan
United Asia Fund
UOB Asset Management
Equity Emerging Markets Global
ABN AMRO Global Emerging Markets Equity A USD
ABN AMRO Asset Management
Equity Europe
HSBC GIF European Equity PD EUR
HSBC Investments
Equity Global
AllianceBernstein-Global Growth Trends A USD
AllianceBernstein LP
Equity Greater China
AllianceBernstein-Greater China Portfolio A USD
AllianceBernstein LP
Equity Japan
Fidelity Funds — Japan Fund A
Fidelity International
Best Fund Over Ten Years
nd st
oor atin
Equity Malaysia and Singapore
Daniel Chan (centre), CEO and CIO at Lion Capital Management, poses with the award for Best Group — Mixed Asset, with (from left) Tan, Haddad, Muudeliar and Duffy
Equity Malaysia and Singapore
Lion Capital Singapore/Malaysia SGD
Lion Capital Management
Equity North America
Fidelity Funds — America A
Fidelity International
Equity Sector Information Technology
Henderson HF Global Technology A2 USD
Henderson Global Investors
Equity Singapore
Schroder Singapore Trust Class A
Schroder Asset Management
Best Fund Group
Thio Boon Kiat (centre), CIO and managing director of UOB Asset Management, poses with the award for Best Group — Overall, with (from left) Tan, Haddad, Muudeliar and Duffy
ASSET CLASS
FUND COMPANY
Bond
AllianceBernstein LP
Equity
Deutsche Asset Management
Mixed Assets
Lion Capital Management
Overall
UOB Asset Management
PW16 • THEEDGE SINGAPORE
| MARCH 3, 2008
PERSONAL WEALTH
S
urging more than six folds over the past five years, Latin American equities — measured by the MSCI Latin America index, which is heavily weighted in resource and commodities stocks — have turned in some spectacular returns in recent times, boosted by high commodity prices and an overall improvement in the region’s economic fundamentals. Although the recent global stock market downturn, triggered by fears of a looming US recession and turbulence in the global credit markets, have halted the uptrend of many Latin American markets this year, investors Table 1
YTD returns of Latin American bourses Mexico Bolsa Index Argentina Merval Index Brazil Bovespa Index Chile Stock Market Select Venezuela Stock Market Index Peru Lima General Index Columbia IGBC General Index Costa Rica BCT Index Jamaica JSE Market Index
+1.44% -1.74% +1.75% -3.75% -7.95% -2.83% -2.83% +3.45% +4.43%
with equity exposure to this region shouldn’t be too concerned over the short-term market rout, says Nicholas Morse, head of Latin American equities at global fund house Schroders. He points out that the outlook for Latin American stocks remains bright over the next 24 months. (See table 1 for how Latin American stock markets have performed this year.) “Compared with the past, Latin American and indeed all emerging markets are extremely well placed to weather a downturn in the US,” asserts Morse, whose Schroder ISF Latin American Fund won two awards at last week’s The Edge-Lipper Singapore Fund Awards 2008 for the best fund in the Equity Emerging Markets Latin America category over a three- and five-year period. “Not only have the economic fundamentals improved significantly, but growth [of Latin American economies] is increasingly being driven by domestic demand and the share of exports going to the US is declining,” adds the portfolio manager, who oversees equity assets of US$6.5 billion ($9.13 billion) in dedicated Latin American portfolios. BLOOMBERG
| BY KELVIN TAN |
Limited impact Morse, whose fund is currentSCHRODERS
Table 2
Top 10 holdings in % HOLDING
SECTOR
Petrobras America Movil Cia Vale do Rio Dooe Bradespar Uniao de Barcos Brasileiros Banco Bradesoo Investimentosltau Eletropaulo Metropol Empresabras De Aeronautica All America Latina Logistica Total number of holdings = 67
Energy Telecommunication servies Materials Financials Financials Financials Financials Ultilies Industrials Industrialas
% NAV
14.0 10.0 7.9 6.4 4.8 4.7 2.8 2.0 1.7 1.6
ly heavily weighted in stocks such as Brazilian petroleum powerhouse Petrobas, Mexican telecommunications company America Movil and Brazilian commodities firm Cia Vale do Rio Doce (CVRD), is confident that the emerging economies will “decouple” from the developed region. Indeed, the impact of a US recession will vary from country to country in Latin America. For instance, Mexico, whose economy is heavily tied to the US, is likely to be more vulnerable than other Latin American economies but the potential negative impact has already been factored into share prices, insists the bullish Morse. The Schroders fund manager tells Personal Wealth that Latin America has massive reserves of natural hard commodities such as oil, copper, iron ore and gold as well as soft resources in coffee, wheat and soya beans. “This puts Latin American economies in a strong position to supply the developed world, where many of these resources are becoming increasingly scarce, as well as supplying strongly growing emerging economies such as China.” Adding to his optimism, Morse says most Latin American governments “are in a strong financial position” with high levels foreign currency reserves compared with the past when there was a global economic slowdown. Indeed, Brazil, which was the emerging markets’ biggest debtor over the past decade, is now a net foreign creditor after its international reserves, boosted by investment inflows and record-high export income from agricultural commodities and oil, surpassed gross foreign liabilities by US$4 billion last month.
Top-down, bottom-up process Over the past three and five years, the Schroder ISF Latin American Fund has generated red-hot returns of 144.56% and 512.91% respectively (as at Feb 15), according to fund
DBSAM to double assets in five years | BY KEVIN LIM |
D
BS Asset Management (DBSAM), the funds arm of Southeast Asia’s largest lender DBS Group, has plans to double assets under management by attracting investors from outside Singapore. DBSAM currently manages $27.6 billion and hopes to raise the amount to around $50 billion in five years, says CEO Deborah Ho. This would be done by tapping the parent’s overseas branch network as well as the asset manager’s joint ventures in Malaysia and China for new customers, she adds. “In the past 25 years, we’ve been very domestic in nature. Our business was very Singapore-centric. Post Asian crisis, the Asian story has become a lot more compelling.” Ho, who previously worked at Citigroup, Credit Suisse, JPMorgan and UBS in fixed-income sales, joined DBS Asset Management in
September after a stint as a consultant and lecturer at Temasek Holdings’ Wealth Management Institute. She says foreign institutional investors have become more interested in Asia as the region developed, helping Asia-focused asset managers like DBSAM. “Asian currency markets and bond markets have opened up and there are more avenues for investments.” DBSAM has operations in Singapore and Hong Kong as well as joint ventures in China and Malaysia. Its China venture, Changsheng Fund Management, obtained in October the country’s qualified domestic institutional investor (QDII) licence. DBSAM is considering setting up a research unit in Vietnam to cater to growing investor interest in that country, says Ho adding that DBSAM would prefer working with local partners to distribute its funds rather than setting up E its own sales outlets overseas. — Reuters
BLOOMBERG
Latin America will continue to shine
Morse: Emerging markets are extremely well placed to weather a downturn in the US
this year. Boosted by interest rate cuts in recent years, Brazilian stocks have been one of the best- performing groups of stocks in Latin America over the past three years, surging some 240%. Morse, however, cautions that the interest rate easing cycle in Brazil has probably come to an end in the short term. Morse is less sanguine on the prospects of the Chilean stock market. Over the short term, he sees headwinds such as GDP downgrades and interest rate hikes in Chile, where inflation is currently “well ahead of expectations”.
Main risk for Latin America data provided by Lipper. Morse attributes the good performance of his fund to an investment process that involves a mix of top-down analysis and bottom-up stock selection. “We aim to derive 20% of our value added from country allocation and 80% from our choice of stocks.” Using a quantitative country allocation model, Morse and his team start the investment process by selecting the right countries to invest in within the Latin American region. After the country selection process is done, “we then invest in the most attractive stocks in those countries, ranked by our team of analysts, who conduct fundamental research on the ground”, he explains. (See table 2 for the top 10 holdings of the Schroder ISF Latin American Fund.) Among the Latin American markets, Morse says he is most bullish on the prospects of Brazil going forward. “There have been some GDP upgrades recently while fiscal accounts remain strong. Earnings growth is also robust and valuations remain attractive,” says Morse. The Brazilian Bovespa stock index currently trades at a forward-looking price-to-earnings ratio of 12.52 while earnings per share growth is expected to surge an average of 22%
Going forward, Morse says the primary long-term risk for Latin American stock markets is a drastic deceleration in global economic growth, which could cause commodity prices to weaken significantly. That would negatively impact the region’s fiscal and trade accounts. The fund manager, however, points out that such a risk is fairly remote at this point in time, adding that the current growth engines of the world such as China and India as well as many other economies in the developed world are still enjoying robust GDP growth. Over the short term, he is more concerned about the further deterioration in investors’ appetite for risk assets should the upheavals in the global credit markets persist. Indeed, a surge in risk aversion among global investors could lead to more fund flows out of emerging markets including Latin America, despite the region’s positive valuations and earnings growth outlook, he adds. “In the near term, [Latin American] stock markets are likely to remain volatile, but as the year progresses, the weaker global outlook should be discounted and investors will begin to look forward to 2009. Emerging markets will then look increasingly E attractive,” he argues.
UOBAM plans overseas growth | BY SAEED AZHAR AND KEVIN LIM |
S
ingapore fund manager UOB Asset Management (UOBAM) believes its assets under management and profitability are poised for double-digit growth over the next five years as it targets expansion in North Asia. Thio Boon Kiat, managing director of the fund management arm of Singapore’s secondbiggest bank United Overseas Bank, says his firm would try to grow in new markets such as China, Japan and South Korea. The firm, which manages $24.3 billion in assets, saw single-digit growth in total assets in each of the last two years, but contributions from overseas markets doubled during the same period. “On asset growth, over the next five years, we hope to achieve double-digit growth and one thing that we want to stress is profitability,” says Thio. “Last year we opened an office in Brunei, we want to make inroads into North Asia, we already have a presence in Taiwan — so we would like to be in Japan,
South Korea and China.” Thio says his firm may also take advantage of opportunities that have sprung up in the wake of the credit crisis. “We think there is an opportunity there and we believe we have sufficient capability to look into that area. Most of the distressed assets we are seeing are in the developed world.” Thio adds that the firm is looking for jointventure opportunities in China as well as exploring how it could tap Chinese investors through the Qualified Domestic Institutional Investor (QDII) scheme, which lets Chinese investors put money to work in foreign markets. Currently UOB Asset Management’s assets from clients outside Singapore, in markets such as Malaysia, Thailand and Indonesia, account for a quarter of total assets. UOB Asset Management clinched the “Best Overall Fund Group” in The Edge-Lipper Singapore Fund Awards 2008 last Thursday, for delivering consistently strong performance in bond assets, equity assets and mixed asE sets. — Reuters
THE WEEK OF MARCH 3, 2008
PersonalWealth M A N AG I N G
YO U R
M O N E Y
BRIC outlook Russia looks to be the most attractive, says HSBC
Bond fund with equitytype returns Templeton fund manager bets against greenback
TOUGH going Fidelity, Lion Capital, AllianceBerstein, UOB Asset Management and Deutsche Asset Management were the biggest winners at last week’s The Edge-Lipper Singapore Fund Awards 2008. Seen here are Madeline Ho (front left), managing director of Fidelity Investments Singapore; next to Ho is Daniel Chan, CEO and CIO of Lion Capital Management; (back row from left) Dokyoung Lee, senior portfolio manager of AllianceBernstein; Andrew Kwek, CEO Singapore of Deutsche Asset Management (Asia); and Thio Boon Kiat, managing director and CIO of UOB Asset Management.
The best fund managers last year are finding this year the most challenging. Read about what’s in store for the fund industry, markets and trends.
GF1 (273mm)
pg 42 (279mm) Cover (276mm) 42 • THEEDGE SINGAPORE
| MARCH 3, 2008
SINGAPORE (INCLUSIVE OF GST) S$3.00
OTHER HIGHLIGHTS
THE ASCOTT INTERVIEW
Millionaires’ row in Singapore
Petrodollar tsunami warning
Concord CEO sparks revolution
CITY&COUNTRY
ECONOMY WATCH
OPTIONS
MICA (P) No. 075/08/2007 PPS 1519/09/2008 (000599)
3
BUSINESS
&
INVESTMENT
WEEKLY
THE WEEK OF MARCH 3 — MARCH 9, 2008
308
SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
NOTEWORTHY
The best of the best:
THE EDGE-LIPPER SINGAPORE FUND AWARD WINNERS
2008
ASSIF SHAMEEN:
Money in looming global water crisis
SUNITA SUE LENG:
Appetite for food stocks shrinks
ST Engineering plans diversification to sidestep possible US slowdown Golden Agri plants up, seeks to close valuation gap Del Monte emphasises brand strength, moves up value chain Celestial NutriFoods continues expanding, squeezed by high soybean prices
SURVIVING the crunch
ARA Asset Management has emerged unscathed from the funding squeeze in the REIT market. Now, CEO John Lim wants to double its assets under management within three years to $20 billion, a level that would rival CapitaLand’s real estate asset management business. Turn to our Cover Story for why institutional investors are excited about the stock.
Federal International makes rash of energy investments Small-cap financier DB Zwirn winds down funds Synear Food, China Milk, Celestial NutriFoods, People’s Food, China Dairy, China Essence Hot stocks
8 885002 090004
PLUS: Managers of MMP REIT contemplate M&A deal
563/%"3, 4,*&450 #-6&
Turmoil in financial markets doesn’t necessarily have to spell trouble for your investments. Hedge with stock and index-tracking CFDs on SaxoTrader to preserve the value of your portfolio.
C A P I T A L M A R K E T S
So trade up to SaxoTrader and enjoy access to over 5,000 CFDs – many of which allow you to short-sell. Some other benefits include: • • • •
More efficient intra-day stock trading with live prices Leverage investments up to 10 times Diversify with CFDs from 23 major exchanges globally Low entry cost of CFDs on 15 major stock indices
Get your free demo account; visit www.saxomarkets.com.sg, email [email protected] or call +65 6303 7788. 3JTLXBSOJOH-FWFSBHFEJOWFTUNFOUTJOGPSFJHOFYDIBOHFPSEFSJWBUJWFTDBSSZBIJHIEFHSFFPGSJTLBOENBZSFTVMUJOTJHOJ¾DBOUHBJOTPSMPTTFT:PVTIPVMEDBSFGVMMZDPOTJEFSZPVS¾OBODJBMTJUVBUJPOBOEDPOTVMUZPVSJOEFQFOEBOU¾OBODJBMBEWJTPSTBTUP UIFTVJUBCJMJUZPGZPVSTJUVBUJPOQSJPSUPNBLJOHBOZJOWFTUNFOUT $PNQBOZ/P. Published by The Edge Publishing Pte Ltd 150 Cecil Street #13-00 Singapore 069543
• Printed by KHL Printing Co Pte Ltd 57 Loyang Drive Singapore 508968
GF1 (273mm)
pg 42 (279mm) Cover (276mm) 42 • THEEDGE SINGAPORE
| MARCH 3, 2008
SINGAPORE (INCLUSIVE OF GST) S$3.00
OTHER HIGHLIGHTS
THE ASCOTT INTERVIEW
Millionaires’ row in Singapore
Petrodollar tsunami warning
Concord CEO sparks revolution
CITY&COUNTRY
ECONOMY WATCH
OPTIONS
MICA (P) No. 075/08/2007 PPS 1519/09/2008 (000599)
3
BUSINESS
&
INVESTMENT
WEEKLY
THE WEEK OF MARCH 3 — MARCH 9, 2008
308
SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
NOTEWORTHY
The best of the best:
THE EDGE-LIPPER SINGAPORE FUND AWARD WINNERS
2008
ASSIF SHAMEEN:
Money in looming global water crisis
SUNITA SUE LENG:
Appetite for food stocks shrinks
ST Engineering plans diversification to sidestep possible US slowdown Golden Agri plants up, seeks to close valuation gap Del Monte emphasises brand strength, moves up value chain Celestial NutriFoods continues expanding, squeezed by high soybean prices
SURVIVING the crunch
ARA Asset Management has emerged unscathed from the funding squeeze in the REIT market. Now, CEO John Lim wants to double its assets under management within three years to $20 billion, a level that would rival CapitaLand’s real estate asset management business. Turn to our Cover Story for why institutional investors are excited about the stock.
Federal International makes rash of energy investments Small-cap financier DB Zwirn winds down funds Synear Food, China Milk, Celestial NutriFoods, People’s Food, China Dairy, China Essence Hot stocks
8 885002 090004
PLUS: Managers of MMP REIT contemplate M&A deal
563/%"3, 4,*&450 #-6&
Turmoil in financial markets doesn’t necessarily have to spell trouble for your investments. Hedge with stock and index-tracking CFDs on SaxoTrader to preserve the value of your portfolio.
C A P I T A L M A R K E T S
So trade up to SaxoTrader and enjoy access to over 5,000 CFDs – many of which allow you to short-sell. Some other benefits include: • • • •
More efficient intra-day stock trading with live prices Leverage investments up to 10 times Diversify with CFDs from 23 major exchanges globally Low entry cost of CFDs on 15 major stock indices
Get your free demo account; visit www.saxomarkets.com.sg, email [email protected] or call +65 6303 7788. 3JTLXBSOJOH-FWFSBHFEJOWFTUNFOUTJOGPSFJHOFYDIBOHFPSEFSJWBUJWFTDBSSZBIJHIEFHSFFPGSJTLBOENBZSFTVMUJOTJHOJ¾DBOUHBJOTPSMPTTFT:PVTIPVMEDBSFGVMMZDPOTJEFSZPVS¾OBODJBMTJUVBUJPOBOEDPOTVMUZPVSJOEFQFOEBOU¾OBODJBMBEWJTPSTBTUP UIFTVJUBCJMJUZPGZPVSTJUVBUJPOQSJPSUPNBLJOHBOZJOWFTUNFOUT $PNQBOZ/P. Published by The Edge Publishing Pte Ltd 150 Cecil Street #13-00 Singapore 069543
• Printed by KHL Printing Co Pte Ltd 57 Loyang Drive Singapore 508968
| MARCH 3, 2008
CITY&COUNTRY
HOME LOAN RATES responsible for any loss or damage arising directly or indirectly from the use of, or reliance on, the information provided herein.
Disclaimer: The rates shown here are only indicative and are subject to changes by the respective banks without prior notice. They are not to be taken as an offer of contract. The Edge Publishing Pte Ltd shall not be
SOURCES: VARIOUS BANKS, EXPRESS HOME LOAN CONSULTANCY, THE EDGE SINGAPORE
HDB housing loan rates BOARD RATE (%)
FIRST YEAR (%)
80% FINANCING SECOND YEAR (%)
THIRD YEAR (%)
THEREAFTER (%)
BOARD RATE (%)
FIRST YEAR (%)
90% FINANCING SECOND YEAR (%)
THIRD YEAR (%)
THEREAFTER (%)
Fixed Rate Package (min $300k) Flexible Rate Package
5.50 5.50
4.25 (fixed) 4.25 (HBR-1.25)
4.50 (fixed) 4.50 (HBR-1.00)
4.50 (fixed) 4.50 (HBR-1.00)
5.50 (HBR) 5.50 (HBR)
5.50 5.50
4.25 (fixed) 4.25 (HBR-1.25)
4.50 (fixed) 4.50 (HBR-1.00)
4.50 (fixed) 4.50 (HBR-1.00)
5.50 (HBR) 5.50 (HBR)
Hong Leong Finance
2-Year Fixed Rate Package Variable Rate Package
4.25 4.25
3.48 (fixed) 3.18 (HBR-1.07)
3.48 (fixed) 3.38 (HBR-0.87)
3.98 (HBR-0.27) 3.88 (HBR-0.37)
3.98 (HBR-0.27) 3.98 (HBR-0.27)
4.25 4.25
4.48 (fixed) 3.98 (HBR-0.27)
4.70 (fixed) 4.20 (HBR-0.05)
4.75 (HBR+0.50) 4.75 (HBR+0.50)
4.75 (HBR+0.50) 4.75 (HBR+0.50)
HSBC
2-Year Fixed Rate Package (min $500k) 50% of Loan on Fixed rate (2-yr lock-in)*** Variable Rate Home Loan (min $100k, no lock-in) Variable Rate Home Loan (min $100k, 1-year lock-in) 50% of Loan on Sibor Pegged Package (no lock-in) ***
NA NA NA
4.00 (fixed) 2.8% (fixed) 3.50
4.00 (fixed) 2.8% (fixed) 3.50
4.00 3.40% (fixed) 3.70
4.00 3.80% (fixed) 3.80
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA
3.30 3mth Sibor +0.7%
3.50 3mth Sibor +0.7%
3.70 3mth Sibor +0.7%
3.80 3mth Sibor +0.7%
NA NA
NA NA
NA NA
NA NA
NA NA
1-Year Fixed Rate Package
3.75
2.68 (fixed)
3.08 (BR-0.67)
3.38 (BR-0.37)
3.75 (HBR)
NA
NA
NA
NA
NA
2-Year Fixed Rate Package
3.75
2.28 (fixed)
2.68(fixed)
2.98 (BR-0.77)
3.75 (HBR)
NA
NA
NA
NA
NA
3-Year Fixed Rate Package**
3.75
1.68 (fixed)
2.68 (fixed)
3.38 (fixed)
3.75 (HBR)
NA
NA
NA
NA
NA
3-Year Fixed 2.80% Cashback
3.75
2.48 (fixed)
3.68 (fixed)
4.38 (fixed)
3.75 (HBR)
NA
NA
NA
NA
NA
Variable Rate Package (1-yr lock-in)
3.75
2.78 (BR-0.97)
3.08 (BR-0.67)
3.38 (BR-0.37)
3.75 (HBR)
NA
NA
NA
NA
NA
Variable Rate Package (2-yr lock-in)
3.75
2.48 (BR-1.27)
2.88 (BR-0.87)
3.38 (BR-0.37)
3.75 (HBR)
NA
NA
NA
NA
NA
Variable Rate Package (3-yr lock-in) Variable Rate Package (no lock-in)
3.75 3.75
2.28 (BR-1.47) 2.98 (BR-0.77)
2.88 (BR-0.87) 3.28 (BR-0.47)
3.38 (BR-0.37) 3.38 (BR-0.37)
3.75 (HBR) 3.75 (HBR)
NA NA
NA NA
NA NA
NA NA
NA NA
BANK
NAME OF LOAN SCHEME
ABN Amro
Maybank
Variable 2.80% Cashback
3.75
3.08 (BR-0.67)
3.88 (BR+0.13)
4.38 (BR+0.63)
3.75 (HBR)
NA
NA
NA
NA
NA
OCBC
1-Year Fixed Rate Package 2-Year Fixed Rate Package Variable Rate Package
3.75 3.75 3.75
3.75 (fixed) 3.75 (fixed) 3.25 (HBR-0.50)
3.50 (HBR-0.25) 4.00 (fixed) 3.50 (HBR-0.25)
3.75 (HBR) 3.75 (HBR) 3.75 (HBR)
3.75 (HBR) 3.75 (HBR) 3.75 (HBR)
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA NA
POSB
Home Ideal package (pegged to CPF rate)** 3-Year Fixed Rate Package
NA NA
CPF Rate + 1.00 3.88 (fixed)
CPF Rate + 1.25 3.88 (fixed)
CPF Rate + 1.58 3.88 (fixed)
CPF Rate + 1.58 CPF Rate + 1.58
NA NA
NA NA
NA NA
NA NA
NA NA
4.25
4.00 (HBR-0.25)
4.25 (HBR)
4.75 (HBR+0.50)
4.75 (HBR+0.50)
NA
NA
NA
NA
NA
NA
3.25
3.50
3.75
3.75
NA
NA
NA
NA
NA
Sing Investments Variable Rate Package & Finance Standard Chartered
Floating Rate Package (min $100k)
UOB
1-Year Fixed Rate Package 2-Year Fixed Rate Package 3-Year Fixed Rate Package Floating Rate Package
4.50 4.50 4.50 4.50
4.25 (fixed) 4.10 (fixed) 3.98 (fixed) 3.25 (HBR-1.25)
4.25 (HBR-0.25) 4.10 (fixed) 3.98 (fixed) 3.50 (HBR-1.00)
4.25 (HBR-0.25) 4.10 (HBR-0.40) 3.98 (fixed) 3.75 (HBR-0.75)
4.25 (HBR-0.25) 4.10 (HBR-0.40) 3.98 (HBR-0.52) 3.75 (HBR-0.75)
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
RHB
2-Year Fixed Rate Package Variable Rate Package
4.25 4.25
3.50 (fixed) 3.25 (HBR-1.00)
3.75 (fixed) 3.50 (HBR-0.75)
3.88 (HBR-0.37) 3.75 (HBR-0.50)
4.00 (HBR-0.25) 4.25 (HBR)
NA NA
NA NA
NA NA
NA NA
NA NA
HBR = HDB Housing Board Rate
NA = Not available
**CPF rate has remained at 2.5% per annum since July 1999
Private housing loan rates BOARD RATE (%)
FIRST YEAR (%)
80% FINANCING SECOND YEAR (%)
THIRD YEAR (%)
THEREAFTER (%)
BOARD RATE (%)
FIRST YEAR (%)
90% FINANCING SECOND YEAR (%)
THIRD YEAR (%)
THEREAFTER (%)
Fixed Rate Package (min $300k) Flexible Rate Package
5.50 5.50
4.25 (fixed) 4.25 (BR-1.25)
4.50 (fixed) 4.50 (BR-1.00)
4.50 (fixed) 4.50 (BR-1.00)
5.50 (BR) 5.50 (BR)
5.50 5.50
4.25 (fixed) 4.25 (BR-1.25)
4.50 (fixed) 4.50 (BR-1.00)
4.50 (fixed) 4.50 (BR-1.00)
5.50 (BR) 5.50 (BR)
Interbank Market Rate Package* Nil Loyalty Period 1-Year Loyalty Period 2-Year Loyalty Period 3-Year Loyalty Period
NA NA NA NA
Sibor + 1.25 Sibor + 1.10 Sibor + 0.95 Sibor + 0.80
Sibor + 1.25 Sibor + 1.25 Sibor + 0.95 Sibor + 0.80
Sibor + 1.25 Sibor + 1.25 Sibor + 1.25 Sibor + 0.80
Sibor + 1.25 Sibor + 1.25 Sibor + 1.25 Sibor + 1.25
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
7.25 7.25
3.88 (fixed) 3.38 (BR-3.87)
4.18 (fixed) 3.88 (BR-3.37)
4.00 (BR-3.25) 4.00 (BR-3.25)
4.00 (BR-3.25) 4.00 (BR-3.25)
7.25 7.25
4.58 (fixed) 4.18 (BR-3.07)
4.78 (fixed) 4.38 (BR-2.87)
4.75 (BR-2.50) 4.75 (BR-2.50)
4.75 (BR-2.50) 4.75 (BR-2.50)
NA NA NA
4.00 (fixed) 2.8% (fixed) 3.50
4.00 (fixed) 2.8% (fixed) 3.50
4.00 3.40% (fixed) 3.70
4.00 3.80% (fixed) 3.80
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA 3.30 NA 3mth Sibor +0.7%
3.50 3mth Sibor +0.7%
3.70 3mth Sibor +0.7%
3.80 3mth Sibor +0.7%
NA NA
NA NA
NA NA
NA NA
NA NA
BANK
NAME OF LOAN SCHEME
ABN Amro DBS
Hong Leong Finance
2-Year Fixed Rate Package Variable Rate Package
HSBC
2-Year Fixed Rate Package (min $500k) 50% of Loan on Fixed rate (2-yr lock-in)*** Variable Rate Home Loan (min $200k, no lock-in) Variable Rate Home Loan (min $200k, 1-year lock-in) 50% of Loan on Sibor Pegged Package (no lock-in)***
Maybank
1-Year Fixed Rate Package
3.75
2.68 (fixed)
3.08 (BR-0.67)
3.38 (BR-0.37)
3.75 (BR)
3.75
3.18 (fixed)
3.58 (BR-0.17)
3.88 (BR+0.13)
4.25 (BR+0.50)
2-Year Fixed Rate Package
3.75
2.28 (fixed)
2.68(fixed)
2.98 (BR-0.77)
3.75 (BR)
3.75
2.78 (fixed)
3.18 (fixed)
3.48 (BR-0.27)
4.25 (BR+0.50)
3-Year Fixed Rate Package**
3.75
1.68 (fixed)
2.68 (fixed)
3.38 (fixed)
3.75 (BR)
3.75
2.18 (fixed)
3.18 (fixed)
3.88 (fixed)
4.25 (BR+0.50)
3-Year Fixed 2.80% Cashback
3.75
2.48 (fixed)
3.68 (fixed)
4.38 (fixed)
3.75 (BR)
3.75
2.98 (fixed)
4.18 (fixed)
4.88 (fixed)
4.25 (BR+0.50)
Variable Rate Package (1-yr lock-in)
3.75
2.78 (BR-0.97)
3.08 (BR-0.67)
3.38 (BR-0.37)
3.75 (BR)
3.75
3.28 (BR-0.47)
3.58 (BR-0.17)
3.88 (BR+0.13)
4.25 (BR+0.50)
Variable Rate Package (2-yr lock-in)
3.75
2.48 (BR-1.27)
2.88 (BR-0.87)
3.38 (BR-0.37)
3.75 (BR)
3.75
2.98 (BR-0.77)
3.38 (BR-0.37)
3.88 (BR+0.13)
4.25 (BR+0.50)
Variable Rate Package (3-yr lock-in) Variable Rate Package (no lock-in) Variable 2.80% Cashback
3.75 3.75 3.75
2.28 (BR-1.47) 2.98 (BR-0.77) 3.08 (BR-0.67)
2.88 (BR-0.87) 3.28 (BR-0.47) 3.88 (BR+0.13)
3.38 (BR-0.37) 3.38 (BR-0.37) 4.38 (BR+0.63)
3.75 (BR) 3.75 (BR) 3.75 (BR)
3.75 3.75 3.75
2.78 (BR-0.97) 3.48 (BR-0.27) 3.58 (BR-0.17)
3.38 (BR-0.37) 3.78 (BR+0.03) 4.38 (BR+0.63)
3.88 (BR+0.13) 3.88 (BR+0.13) 4.88 (BR+1.13)
4.25 (BR+0.50) 4.25 (BR+0.50) 4.25 (BR+0.50)
OCBC
Fixed Rate Package Variable Rate Package
4.50 4.50
3.75 (fixed) 3.25 (BR-1.25)
4.00 (fixed) 3.50 (BR-1.00)
3.75 (BR-0.75) 3.75 (BR-0.75)
3.75 (BR-0.75) 3.75 (BR-0.75)
NA NA
NA NA
NA NA
NA NA
NA NA
Standard Chartered
Floating Rate Package (min $200k) MortgageOne Package (min $500k)
5.00 5.00
3.25 (BR-1.75) 3.50 (BR-1.50)
3.50 (BR-1.50) 3.75 (BR-1.25)
3.75 (BR-1.25) 4.00 (BR-1.00)
4.00 (BR-1.00) 4.25 (BR-0.75)
3.85 4.10
4.10 (BR+0.25) 4.35 (BR+0.25)
4.35 (BR+0.50) 4.60 (BR+0.50)
4.60 (BR+0.75) 4.85 (BR+0.75)
4.60 (BR+0.75) 4.85 (BR+0.75)
UOB
1-Year Fixed Rate Package 2-Year Fixed Rate Package 3-Year Fixed Rate Package Floating Rate Package (UOB Home Plus)
4.50 4.50 4.50 4.50
4.25 (fixed) 4.10 (fixed) 3.98 (fixed) 3.50 (BR-1.00)
4.25 (BR-0.25) 4.10 (fixed) 3.98 (fixed) 3.75 (BR-0.75)
4.25 (BR-0.25) 4.10 (BR-0.40) 3.98 (fixed) 4.00 (BR-0.50)
4.25 (BR-0.25) 4.10 (BR-0.40) 3.98 (BR-0.52) 4.00 (BR-0.50)
NA 4.50 NA 4.50
NA 4.50 (fixed) NA 4.25 (BR-0.25)
NA 4.50 (fixed) NA 4.50 (BR)
NA 4.50 (BR+0.25) NA 5.00 (BR+0.50)
NA 4.50 (BR+0.25) NA 5.00 (BR+0.50)
Sing Investments Variable Rate Package & Finance
5.00
4.00 (BR-1.00)
4.25 (BR-0.75)
4.75 (BR-0.25)
4.75 (BR-0.25)
5.00
4.00 (BR-1.00)
4.25 (BR-0.75)
4.75 (BR-0.25)
4.75 (BR-0.25)
RHB
5.75 5.75
3.50 (fixed) 3.25 (BR-2.50)
3.75 (fixed) 3.50 (BR-2.25)
3.90 (BR-1.85) 3.75 (BR-2.00)
3.90 (BR-1.85) 3.75 (BR-2.00)
5.75 5.75
4.25 (fixed) 4.00 (BR-1.75)
4.25 (fixed) 4.25 (BR-1.50)
4.50 (BR-1.25) 4.50 (BR-1.25)
4.50 (BR-1.25) 4.50 (BR-1.25)
2-Year Fixed Rate Package Variable Rate Package
*The Interbank Market Rate refers to the 12-month Sibor. Sibor rate is $1.66250 as at Feb 28, 2008. **3-Year Fixed Rate valid until March 10, 2008 *** Package valid until March 22, 2008. For fixed rate loans go to www.hsbc.com.sg
BR = Board rate NA = Not available
90% financing available on a case-by-case basis based on bank’s discretion All board rates are variable
Tables updated as at Feb 28, 2008
CC2 • THEEDGE SINGAPORE
| MARCH 3, 2008
CITY&COUNTRY
PROPERTY BRIEFS
Home CDL’s record year
EDITOR/REGIONAL MANAGING DIRECTOR Tan Boon Kean ([email protected]) SECTION EDITOR Cecilia Chow ([email protected]) COPY-EDITING DESK Elaine Lim, Evelyn Tung, Ng Bee Cheng, James Chong PHOTO EDITOR Samuel Isaac Chua ([email protected]) PHOTOJOURNALIST Gwyneth Yeo ([email protected]) EDITORIAL COORDINATOR Rahayu Mohamad (rahayu.mohamad @bizedge.com) DESIGN DESK Tan Siew Ching, Christine Ong, Chan Yoke Lin, Jamy Gan ADVERTISING + MARKETING REGIONAL GENERAL MANAGER | Edward Stanislaus ([email protected]) SENIOR MANAGER | Colin Tan ([email protected]) MANAGERS | Simon Wong ([email protected]) Cecilia Kay ([email protected]) Jeffrey Wong ([email protected]) Windy Tan ([email protected]) Faith Teo ([email protected]) Julia Tan ([email protected]) COORDINATOR | Nor Aisah Bte Asmain ([email protected]) MALAYSIA REPRESENTATIVE | Helen John Corry ([email protected]) CIRCULATIONSUBSCRIPTIONS REGIONAL SENIOR MANAGER | Suresh Kumar ([email protected]) ASSISTANT MANAGER | Naziela Nasir ([email protected]) ASSISTANTS | Juliana Ibrahim ([email protected]) Iryanti Zainol ([email protected]) PUBLISHER The Edge Publishing Pte Ltd 150, Cecil Street #13-00 Singapore 069543 Tel: (65) 6232 8622 Fax: (65) 6232 8620 PRINTER KHL Printing Co Pte Ltd 57 Loyang Drive Singapore 508968 Tel: (65) 6543 2222 Fax: (65) 6545 3333 We welcome your comments and criticism. Send your letters to The Edge, Raffles City Post Office PO Box 218 Singapore 911708 Tel: (65) 6232 8622 Fax: (65) 6232 8620 e-mail: feedbackspore @bizedge.com Pseudonyms are allowed but please state your full name, address and contact number for us to verify.
Singapore’s leading property developer, City Developments Ltd (CDL), posted stellar 4Q2007 and full-year results. Net profit in 4Q2007 amounted to $235 million, up 71% y-o-y, while full-year profit rang in at $725 million compared with $200.7 million in FY2006 (if the $150 million profit from the sale of hotel assets to CDL Hospitality Trusts is excluded). Total revenue for the year was $3.1 billion. In the local residential market, CDL sold 1,655 units worth $3.38 billion compared with last year’s 1,337 units totalling $2.77 billion. Slated for launch in 1H of the year are: the 77-unit Shelford Suites; 100 of the 336-unit new condo at the former Lok Cho Apartments site; 100 of the 228-unit The Quayside Isle at Sentosa Cove; and the first phase of 150 units of the 724-unit Pasir Ris condominium development.
Ho Bee has record $272mil net profit Property development group Ho Bee Investment has announced record results for FY2007. The group had a net profit after tax and minority interest of $272 million for the full year ended Dec 31 — up 176% from the previous year. This was achieved on the back of record revenue of $596 million — up 52% from its previous peak of $393 million. Earnings per share stand at 36.9 cents compared with 14 cents previously, an increase of 163%. The company has proposed a one-tier final dividend of two cents per share. Y-o-y sales of properties were steeply higher, rising 51% to $576.7 million, compared with $382.2 million in 2006. Income came from residential projects including Coral Island, The Coasts and Paradise Island at Sentosa Cove; Orange Grove Residences at Orange Grove Road; Montview at Mount Sinai; and Quinterra at Holland Road.
Cityscape Asia returns to Singapore The world’s largest business-to-business real estate event brand, Cityscape, will hold Cityscape Asia at Suntec on April 15 to 17. The inaugural event last year featured more than 100 exhibitors from 35 countries, selling out more than 86,000 sq ft of space. This year’s Cityscape Asia will highlight opportunities to an audience of regional and international investors, real estate developers, architects and designers, government and senior professionals. Major sponsors include Limitless — a Dubai World company — and UK-listed company Aseana Properties, which is focused on developments in Malaysia and Vietnam.
OKP rides high on vibrant construction sector A strong economy and vibrant construction sector has seen infrastructure and civil engineering firm OKP Holdings announce a record full-year net profit after tax and minority interest of $11 million — up 171% on 2006. The group has declared a one-tier tax-exempt first and final dividend of two cents per share. Turnover for the year ended Dec 31 hit a high of $124.7 million, up 70% from the $73.3 million achieved in the previous financial year. OKP specialises in the construction of airport runways and taxiways, expressways, flyovers, vehicular bridges, and urban and arterial roads. The bulk of group revenue was generated from its construction segment, which saw a y-o-y surge of 95.9% from $53.4 million to contribute $104.7 million — 84% — to total revenue.
CapitaLand partners with leading Australia developer CapitaLand has entered into a joint venture with Australand Industrial and Lo-
gistics International, one of Australia’s major diversified property groups. The agreement, through CapitaLand subsidiary CapitaLand Industrial & Logistics Holdings (CIL), aims to establish a Pan-Asian development platform in the industrial and logistics sectors in Asia. CIL will own a 51% stake in projects and Australand the remaining 49%. Australand is a leading industrial and logistics property developer and manager in Australia.
leases of 15 years. The office buildings on these sites — which could be amalgamated — are expected to be low-rise developments of four storeys. Knight Frank says the expected price for Parcel A is $14 million to $18.2 million ($100 to $130 per sq ft per plot ratio) and $14.6 million to $19 million ($100 to $130 psf ppr) for Parcel B. Tenders for Parcel A close at noon on April 24 and at noon on April 30 for Parcel B.
Koh Brothers reports huge profit jump Koh Brothers Group has reported fullyear net profit of $39.7 million — 877% more than the 2006 result. Sales in 2007 were $285.5 million compared with $259.6 million the previous year — a 10% increase. The real estate division contributed $26.9 million, or 9% of the group’s turnover. New sales contribution came from Bungalow @ Caldecott and rental income from the Alocassia Apartments. Turnover from the construction and building materials division increased from $227.8 million in 2006 to $251.2 million in 2007. The group’s net profit attributable to shareholders has increased 877% from $4.1 million in 2006 to $39.7 million last year, which includes the net revaluation surplus of $32.2 million.
URA launches two transitional office sites at Scotts Road URA has launched the sale of two transitional office sites at Scotts Road-Anthony Road. Located next to the Newton MRT station, Land Parcel A has a site area of 93,455 sq ft and can yield a maximum gross floor (GFA) area of 140,193 sq ft. The adjacent land parcel B has a site area of around 97,287 sq ft and a maximum GFA of 145,920 sq ft. Both parcels are being sold on short-term
$18 million revamp of Tiong Bahru Plaza Shopping mall management group, AsiaMalls Management, the joint venture between ARMF and SGX-listed Guthrie Group, announced last week that it will be repositioning Tiong Bahru Plaza (above), one of the suburban malls in its portfolio which includes six other malls — Hougang Mall, White Sands, Century Square, Liang Court, Central Plaza and the upcoming Tampines 1. Two floors of the Central Plaza office tower (acquired early last year) located next door to Tiong Bahru Plaza will be converted to civic use. This allows the latter to provide additional gross floor area for retail use. Targeted for completion by 3Q2008, the estimated cost of the revamp is $18 million, and will add another 19,000 sq ft for retail and F&B outlets, while the existing areas will be reconfigured. — Compiled by E Mark Henderson
(
Offshore CapitaLand to create $426mil fund for Vietnam expansion CapitaLand has strengthened its presence in Vietnam with several new business initiatives which include a strategic partnership and a multi-million dollar development fund. A statement of strategic intent has been signed with CapitaLand’s local Vietnamese partner Nam Thang Long Investment Joint-Stock Company to form a strategic alliance to seek further real estate business opportunities. The partners will also develop residential properties and commercial-residential mixed developments. CapitaLand will also leverage on its real estate and fund management expertise to set up its first property fund to invest in Vietnam. It intends to take a 30% sponsor stake in the targeted $426 million fund. CapitaLand has signed a memorandum of understanding with Citi Private Bank, one of the world’s largest wealth managers, to explore real estate investment opportunities in Vietnam. CapitaLand believes the fund will follow the success of its CapitaLand China Development Fund, which is also co-marketed with Citi Private Bank in China. The group is confident of doubling its residential pipeline in Vietnam from the present 2,800 homes to around 6,000 homes over the next three years. CapitaLand is also looking for opportunities in the office, retail, and integrated leisure, entertainment and conventions sectors. CapitaLand is in a strong financial position to tap opportunities in Vietnam despite the tough global financial landscape. In February, the group raised
$1.3 billion through a 10-year convertible bond issue — the largest 10-year convertible bond transaction ever done in Singapore. It also recently closed two new funds — the CapitaRetail India Development Fund has raised US$600 million to invest in retail development projects in India, and the CapitaRetail China Development Fund II which has US$600 million ($837.84 million).
Keppel Land unveils Saigon Centre concept plans Keppel Land, one of the largest property developers in Vietnam, has unveiled concept plans for its Saigon Centre. The 2ha mixed-use development fronts Le Loi Boulevard, the main thoroughfare in Ho Chi Minh City. Phase One, completed in 1996, is a 25storey building comprising a three-storey retail podium, 11 levels of prime office space, 89 serviced apartments and three levels of basement carpark. Saigon Centre is the preferred address of the diplomatic corps, multinational companies, bank and financial institutions. Keppel Land and local partners, Sowatco and Resco, will embark on plans to develop an iconic landmark development integrating subsequent phases of Saigon Centre. Skidmore, Owings and Merrill, one of the world’s largest architectural firms, will design the new concept plans.
More demand for Bangkok luxury apartments CB Richard Ellis (CBRE) predicts Bangkok’s luxury condominium market will become more active this year and new supply will continue to
be limited. Freehold plots in prime central locations are very limited and the increase in land prices has resulted in a drop in the new supply of luxury units in these areas, while demand for downtown city living is growing. Prices for new downtown condominiums have risen by an average of 10% to 12% a year since 2003. CBRE says investment in new luxury apartments in prime locations has generated an average of 4% to 5% yield per annum over the past four years along with price appreciation. The average percentage of foreigner buyers has increased to 32% over the past three years from less than 20% a decade ago. Tight supply and relative affordability is boosting prices in downtown Bangkok. A luxury two-bedroom unit with 970 to 1,300 sq ft sells for around US$500,000 ($698,200).
Ascott to manage new Jakarta serviced residence The Ascott Group will manage Somerset Kuningan, a new serviced residence in Jakarta’s CBD. The contract was signed with PT Ciputra Adigraha, a subsidiary of PT Ciputra Property Tbk, one of Indonesia’s most established commercial property developers. Somerset Kuningan will be part of a large integrated development called Ciputra World Jakarta. The 10ha project comprises a high-end retail mall, office towers, condominiums and a fivestar hotel-luxury residence. The 153-unit serviced residence is expected to open in 2H2012. — ComE piled by Mark Henderson
THEEDGE SINGAPORE | MARCH 3, 2008 • CC3
Phillip Investor Hub also houses all of its 310 financial advisers, some of its backroom staff, and act as a satellite office for its 150 remisiers
PICTURES: GWYNETH YEO/THE EDGE SINGAPORE
CITY&COUNTRY
quarters occupies six floors in Raffles City Tower, totalling 60,000 to 70,000 sq ft. “We are actually expanding in Raffles City, not shrinking,” emphasises Lim. “We still need more space. [The new investor hub] indirectly helps relieve some of the space pressure that we have in Raffles City.”
Rental costs
More than just a hub | BY NOVA THERESIANTO |
H
omegrown financial services firm, PhillipCapital, has been most aggressive at bringing its financial services nearer to its investors — to the heartland districts. Over the last eight years, it has planted investor centres in major residential neighbourhoods from Ang Mo Kio, Marine Parade and Toa Payoh, to as far as Bukit Batok, Yishun and Woodlands. It also has two investor centres in the CBD, namely Robinson Road and Raffles City Tower. In fact, its first investor centre was at Straits Trading Building along Battery Road. Set up in 2000, it
has since been relocated to the current Robinson Towers premise. To date, it has nine investor centres. Two weeks ago, PhillipCapital opened its first investor hub at the former Moulmein Community Centre at Shan Road, off Balestier Road. Unlike the typical investor centres in the heartlands, which tend to be housed in shophouses of around 2,000 sq ft, the flagship Phillip Investor Hub is 10 times larger with a gross floor area of 22,593 sq ft. PhillipCapital spent about $1.8 million refurbishing the former community centre, which had been vacant for more than two years. Unlike the other investor centres, the Phillip
Investor Hub is designed like a clubhouse with a cafeteria and a rooftop garden for client functions.
‘Comprehensive range of services’ “We thought it was a good idea to do something more significant, like a hub, which we can plant in different major parts of Singapore,” says Lim Hua Min, executive chairman of PhillipCapital. “And so hopefully, this first hub will not be the last one, so that we will be in a position to provide a more comprehensive range of services.” Including the new investor hub at the former Moulmein Community Centre, PhillipCapital now has 10
Lim: We are actually expanding in Raffles City, not shrinking. We still need more space.
such investor centres. “Our aim is to have 20 [investor hubs and centres] in time to come, [and] we are looking at three this year,” says Lisa Lee, director of business development and consumer services at PhillipCapital. The rate of expansion will depend on the availability of sizeable properties in strategic locations, for instance, in the regional centres of Jurong East in the west and Tampines in the east. The investor hub also helps centralise several functions. It houses all the 310 financial advisers who were previously located in various investor centres. It also acts as a satellite office for its 150 remisiers or so-called “home sales force”. It will also house some of PhillipCapital’s backroom functions. Currently, PhillipCapital’s head-
On top of that, it also helps reduce overall rental costs. As of February, asking rents at Raffles City Tower is in the range of $16.20-$17.50 psf per month, according to office leasing specialists, Corporate Locations’ latest rental guide. Meanwhile, PhillipCapital had successfully bid to lease the former Moulmein Community Centre site for its investor hub from the Singapore Land Authority for $35,000 per month in June last year. This works out to a rental rate of a mere $1.55 psf per month. The lease period is for three years, with an option to renew for threeplus three years. Unlike the other investor centres which follow regular office hours (in the heartlands they are opened from 9am to 1pm on Saturdays), the new investor hub will be opened seven days a week from 11am to 5pm. “The CBD gets really sleepy during the weekend, therefore we are actually going into areas where these investors live,” says Lee. The company has also set up investor centres in Thailand, Indonesia E and Hong Kong.
CC4 • THEEDGE SINGAPORE
| MARCH 3, 2008
CITY&COUNTRY
COVERSTORY
The pric
1 1 1 1 1
MILLIONAIRES’
The brand new super-luxury good class bungalow at 39 Leedon Road and the neighbouring 37 Leedon Road are on the market with price tags of $35 million each
row in Singapore
While GCB transactions are expected to moderate this year after a record 2007, sellers are still bullish with their asking prices | BY CECILIA CHOW |
T
he US subprime woes may have dampened sentiment and slowed the rate of sales, but it has yet to put a dent on owners’ asking prices, especially at the top-tier of the luxury home market, the good class bungalows (GCBs). Last year was a record year for the GCB market, with 117 transactions worth $1.54 billion taking place, according to Jones Lang LaSalle Research. However, the bulk of the sales of $1.4 billion (90%) were done in the first nine months of the year. In 4Q when the US subprime crisis started to have a knockon effect on global stock markets, market sentiment in Singapore dipped, and only nine GCBs changed hands over the last three months of 2007. “2008 is generally expected to see a slower start to the year as fears of a US recession continue to affect market sentiment,” says David Batchelor, associate director of investments at Jones Lang LaSalle, and a specialist in the GCB market. While demand for GCBs remains strong, actual transactions for 2008 is expected to moderate. This is already evident in terms of sales for the first
two months of the year: only a handful of GCBs changed hands compared with the same period last year, which saw around 20 transactions. The most recent deal according to URA Realis database of caveats lodged, was on Feb 4 when 32 White House Park with a land area of 15,081 sq ft, changed hands for $18 million or $1,194 psf. However, unlike the luxury condo market that has gone very quiet since the last quarter of 2007, with developers holding back their launches until sentiment improves, there is still activity in the landed homes segment, observes Shaun Poh, senior director of investment advisory services and auction at DTZ Debenham Tie Leung.
More GCBs priced above $1,000 psf Most recently, DTZ put up for sale by private treaty a GCB at 5A Bishopsgate (located off Grange Road and Nathan Road) with an indicative price of $24 million. This translates to $1,423 psf based on a land area of 16,861 sq ft. The double-storey bungalow with a total built-up area of 9,800 sq ft has seven bedrooms and a swimming pool. Built 11 years ago, the house is still in mint condition and was recently given a fresh coat of paint. Hence, the new
owner would not need to do any extensive renovation works. The property is currently tenanted at a monthly rental rate of $40,000 a month, with the lease expiring end-October 2009. Just next door, 7A Bishopsgate changed hands for $21 million or $1,202 psf in December last year. “These days, the asking price for GCBs is above $1,000 psf,” says Poh. There are also several properties that were put on the market last year at prices above $1,000 psf, and which are still available for sale. One of them is 35 Leedon Road, which sits on a 43,927 sq ft freehold. The owners are not budging from their asking price of $44 million or $1,001 psf. Another is 3 Wollerton Park which has a land area of 26,326 sq ft site and an indicative sale price of $32 million to $33 million or $1,215 to 1,254 psf. The existing mansion has a built-up area of 15,000 sq ft with six bedrooms and a basement. There’s also a separate wing for entertaining guests. In the exclusive Chatsworth Park enclave, the conservation bungalow at No 5 Chatsworth Park was put up for sale by private treaty in November. The conservation house and an outhouse sit on a sprawling 43,496 sq ft site and the price tag is $45 million or close to
$1, the er G inc
in 2 psf cen wit to $ aG bou Na for sim $19
Sep we ma me ow and Roa his
ter Lan mo and
Su bu
As ma the the 37 ope at t lau gal tran Lim: As you move up to the tip of the pyramid, there are fewer and fewer people who can afford a home at this level
bui
THEEDGE SINGAPORE | MARCH 3, 2008 • CC5
COVERSTORY COVER STORY
Top 10 GCB transactions in 2007 NO
DATE
ADDRESS
31 75 94 96 98 104 106 108 112 117
March 30 June 8 July 25 Aug 2 Aug 7 Sept 11 Sept 18 Sept 26 Nov 9 Dec 21
63 Dalvey Road 20B Nassim Road 10 Peirce Hill 15 White House Park 5A Bishopsgate 32G Nassim Road 32H Nassim Road 30 White House Park 7 Gallop Walk 7A Bishopsgate
LAND AREA (SQ FT)
SALE PRICE ($)
PSF ($)
15,080 24,186 16,926 22,011 16,867 13,292 13,422 14,811 15,202 17,472
16,450,000 24,183,480 17,200,000 28,800,000 18,800,000 19,998,000 25,500,000 15,500,000 15,350,000 21,000,000
1,091 1,000 1,016 1,308 1,115 1,505 1,900 1,047 1,010 1,202
Good class bungalows transactions in 2008 (to date)
1,600 1,400
Total transacted value ($mil) Total transacted value Total No sold
120 100
1,200 1,000
80
800
60
600
40
400 20
200 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
luxlow and g 37 the s of ach
140
0
$1,035 psf. Given the size of the land, it has the potential to be sub-divided into two smaller GCB sites of over 21,000 sq ft each, which includes the conservation bungalow. According to Jones Lang LaSalle Research, in 2007, 10 GCBs were sold at prices of $1,000 psf and above. Three of the deals were concentrated in the exclusive Nassim Road area, with the highest price achieved there at close to $1,900 psf, which is also a record price for a GCB property. This was for one of two neighbouring plots at Nassim Road, namely 32H Nassim Road (a 13,422 sq ft site that was sold for $25.5 million or $1,899 psf); and 32G Nassim Road (a 13,292 sq ft site that was sold for $19.998 million or $1,505 psf). Both these properties were transacted in September, and according to market sources, were bought by Chew Hua Seng, the chairman and CEO of Raffles Education Corp (formerly Raffles LaSalle Ltd). Chew currently owns 32K Nassim Road, just two doors away, and sources say the two neighbouring Nassim Road homes were likely to be purchased for his family’s use. “The rich are getting richer and have better holding power than before,” observes Jones Lang LaSalle’s Batchelor. “The GCB market is more resilient than the luxury condo market, and is a better hedge against inflation.”
Super-luxury, high-specification bungalows at $35 million
r
As more GCBs start to cross the $1,000 psf mark, more GCB owners will be willing to put their homes on the market. The latest launch is the brand new pair of “super-luxury” GCBs at 37 and 39 Leedon Road by niche luxury developer, George Lim of GLim Pte Ltd. Completed at the end of December, the two homes were launched in a glitzy event on Feb 21. Each bungalow carries a price tag of $35 million, which translates to over $1,500 psf. No 37 has a land area of 22,000 sq ft and built-up area of 10,000 sq ft. Meanwhile, No
2,750 2,500 2,250 2,000 1,750 1,500
($) High end condo avg cap value GCB avg $ per sq ft
JONES LANG LASALLE RESEARCH
1,800
High-end condos vs GCBs
DATE
ADDRESS
1 2 3 4 5
Feb 4 Feb 4 Feb 4 Jan 16 Jan 22
32 White House Park 14 Mount Echo Park 20 Caldecott Close 5 Swettenham Green 85 Chestnut Drive Total land area Total transaction Average psf
1,250 1,000 750 500 250 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
GCB transactions
JONES LANG LASALLE RESEARCH
The good class bungalow at 5A Bishopsgate (located off Grange Road and Nathan Road) has an indicative price of $24 million or $1,423 psf
NO
39 has a land area of 21,000 sq ft and builtup area of 11,000 sq ft. Both homes have fivebedrooms, an aquarium with exotic fish, a koi pond, swimming pool, a roof deck for outdoor entertaining, a separate guest house, a wine cellar to house 2,000 bottles of wine, a shoe cupboard for up to 500 pairs of shoes, a gourmet kitchen with imported Viking professional kitchen appliances, an internal lift, and a basement car park for seven cars. The two homes will appeal to the tech-savvy. There is a home automation system that can be programmed to turn on lights and airconditioning anywhere around the house either with the wall panels or remotely from your mobile phone or PC; an entertainment system with AMX movie on demand (up to 250 movies) and piped in music for every room and outdoor areas. There are also six plasma televisions installed in the house — a ceilingmounted 50” TV in the master bedroom and five others in the living and family rooms. The kitchen also has a 28” high-definition TV. All the TVs are linked to surveillance cameras in various parts of the house for security. Lim has also installed a dehumidifier for all the walk-in wardrobes as well as the shoe cupboard. “Whenever I build a house, I always ask myself, ‘What can I do to make the home more comfortable and convenient through home automation without making it too complicated for the owner?’”. Offers in the “$30-million range” have trickled in, but Lim is not biting. Will he consider lowering his price tag if he doesn’t get his asking price of $35 million? “There’s no reason why a property like this can’t be sold,” he comments. “As you move up to the tip of the pyramid, there are fewer and fewer people who can afford a home at this level.” A newly completed home like Lim’s will likely appeal to homebuyers in the face of skyrocketing construction costs over the past year due to competition for scarce resources and manpower amidst a construction boom.
Batchelor: The rich are getting richer and have better holding power than before. The GCB market is more resilient than the luxury condo market, and is a better hedge against inflation.
Hence, most GCB buyers have shifted their focus from building their own dream GCBs to looking for completed GCBs where little or no improvements are required, observes Batchelor. “Thus it is expected that [demand for] completed GCBs will be stronger in 2008 as construction costs continue to remain high.”
More owner occupiers and long-term investors as prices trend up Over at 11 Ford Avenue, the tender for the sale closed on Feb 21. This is one of the few large GCB sites left. With a sprawling 45,894 sq ft site, the property has the potential to be subdivided into three smaller GCBs. The owner of 11 Ford Avenue is believed to be the Eu family of Singapore Exchange-listed Eu Yan Sang. The traditional Chinese medicine empire founded back in 1879 is already in the fourth generation of the family, and is headed by Richard Eu, the great-great-grandson of the founder, Eu Kong.
LAND AREA (SQ FT)
SALE PRICE
PSF ($)
15,081 18,568 17,400 15,817 15,999
18,000,000 13,250,000 10,080,000 12,682,760 8,580,000
1,194 714 579 802 536
82,865 sq ft $62,592,760 $755 psf
The property was put up for sale on Jan 15 with an indicative price tag of $41 million or $893 psf. Colliers International, the marketing agent for the property is said to be “in negotiations with interested parties”. According to Ho Eng Joo, executive director of investment sales at Colliers International, who’s handling the sale, interest has come mainly from buyers who’re looking at buying the super-sized GCB site for their own occupation. As GCB prices continue to head north, buyers have started to widen their search beyond the traditional prime residential districts in the city centre. They are looking further out to locations like Chestnut Drive and Windsor Park where prices are still below the $1,000 psf mark. This can be seen in the transactions this year. While 32 White House Park was sold for $1,192 psf, the GCB at 83 Chestnut Drive with a 15,999 sq ft site went for $8.58 million or $536 psf. At 20 Caldecott Close, the GCB on a 17,400 sq ft site changed hands for $10.08 million or $579 psf. While the total value of sales in 2007 at $1.54 billion exceeded 2006’s $1.3 billion, in terms of the number of transactions, 2007’s 117 were fewer than 2006’s 128. This reflects the sharp run-up in property prices last year. The average price per square foot for GCBs was $692 psf in 2007, compared with $503 psf in 2006, which showed average capital values appreciating 37.6%. The average price for the five transactions in 2008 to date was $755 psf, which is 9% higher than the average prices recorded last year. Hence, while Batchelor expects sales volume to moderate this year, he is confident that in terms of value, it could potentially remain on par with last year. What’s worth noting is that while GCBs remain sought-after investments and are still coveted assets for newly minted millionaires, it is now seeing stiff competition from Sentosa Cove, with 99-year leasehold waterfront bungalows. While land values of GCBs averaged at $692 psf for the whole of last year, sea-fronting bungalow parcels at Sentosa Cove were close to double that at $1,283 psf. Even luxury-end condos are seeing transaction prices that are much higher than GCBs, averaging $2,730 psf in 2007. “The GCB market is unique and caters to the ultra-rich home buyers and sellers and will generally continue to remain resilient against any recession in the US,” he adds. Transactions of GCBs will remain active and record prices are expected for the various GCB enE claves in 2008.”
JONES LANG LASALLE RESEARCH, URA REALIS
PICTURES: SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
CITY&COUNTRY
| MARCH 3, 2008 GWYNETH YEO/THE EDGE SINGAPORE
CC6 • THEEDGE SINGAPORE
CITY&COUNTRY
The row of five terraced houses at Essex Road has a price tag of $30 million or $1,500 psf ppr
COLLIERS INTERNATIONAL
Train of collective sale hopefuls continues unabated | BY CECILIA CHOW |
T
he collective sale market may have cooled considerably since 4Q2007, but the ardour of collective sale hopefuls apparently hasn’t. And it’s no longer confined to the owners of condominium and apartment blocks either. Jumping on the bandwagon are owners of landed homes. Last November, the owners of 15 terraced houses along Jalan Bunga Raya in Balestier banded together and sold their homes collectively for $61 million to a Chinese developer and a Singaporean partner. Each of the owners walked away with $4 million. More recently, the owners of a row of five terraced houses along Essex Road, just off Thomson Road, are hoping to reap an equally profitable windfall. Unlike a collective sale of a condominium project where only 80% of the owners need to give their consent for a sale to go through (for projects that are at least 10 years old), in the case of landed homes, all the owners have to agree. However, as landed homes, the collective sale does not need Strata Title Board approval, which will make the sale less cumbersome once all the owners have agreed to the sale. In the case of the Essex Road houses, Knight Frank, the appointed marketing agent, received approval from all the owners to proceed with the collective sale. This was made easier because the owner of three of the five houses is the person who also initiated the sale process. He is Dr Lim, CEO of ASIAINSTITUT OF MANAGEMENT (AM School of Business Studies), who had purchased the houses three years ago. What’s also interesting is that the owners have decided to opt for an auction sale in the hope of achieving a speedier sale process. Knight Frank will be putting up the properties for auction sale on March 20. Lim believes the potential of the row of Essex Road terraced houses hinges on the possibility of it being amalgamated with the neighbouring strip of state land, the service road behind the houses for the owners to park their cars, and more importantly, with the apartment block Lion Towers behind it, which is also pursuing a collective sale. He argues that such an amalgamation will enhance the footprint of the existing Lion Towers site by another 80%, making it more attractive to a developer looking for a freehold
The row of 16 terraced houses at Fort Terrace has an indicative price of $95 million or $1,238 psf ppr
development site in the prime residential enclave of Newton/Novena. The en bloc sales committee of Lion Towers at 2 Essex Road has recently appointed CB Richard Ellis (CBRE) as their marketing agent to handle their collective sale. According to market sources, it’s still in the process of drafting the collective sale agreement.
Lion Towers Built close to 30 years ago, Lion Towers has 52 apartments and sits on a 40,409 sq ft freehold site. With a plot ratio of 2.8 and a maximum height of 36-storeys under the 2003 Master Plan, a developer will be able to build a brand new 75-unit luxury condominium with units averaging 1,500 sq ft each. According to market sources, the indicative price of Lion Towers is estimated to be close to $200 million, which works out to around $1,742.46 psf ppr. At that price, each owner will pocket $3.8 million each. The owners are said to have already applied to the Singapore Land Authority (SLA) regarding the possible annexation of the neighbouring state land to be amalgamated with the Lion Towers site. Meanwhile, the five houses at Essex Road are sitting on a freehold site of 7,163 sq ft. The land is zoned for residential development
with a plot ratio of 2.8 according to URA’s 2003 Master Plan, and has a maximum height of 36-storeys as well. The owners’ asking price is $1,500 psf ppr or around $30 million. If that price is achieved, each owner will walk away with a cool $6 million. This asking price is comparable to the sale price of last year’s collective sale deals in its immediate neighbourhood. Last November, contractor-cum-developer, Bravo Building Construction Group, bought Makeway View for $162.8 million through a collective sale, which is equivalent to $1,583 psf ppr. In June last year, a consortium led by Koh Brothers bought Lincoln Lodge in a collective sale worth $243 million or $1,449 psf ppr. If the site of the Essex Road houses is combined with the neighbouring state land and service road, the total area would be over 30,000 sq ft, estimates Lim. If amalgamated with the Lion Towers site, he reckons that the enlarged footprint would be over 70,000 sq ft and a developer could potentially build a 100-unit luxury project with unit sizes averaging 1,800 sq ft. Another attraction of the site is the fact that at the end of Essex Road is SJI Junior (the former St Michael’s School). It is also in the neighbourhood of other good schools
in Bukit Timah such as Nanyang Girls’ High School, Hwa Chong High and National Junior College. What’s more the Novena enclave is also turning into a booming medical hub. Linked to the Novena MRT station and located behind Novena Square is Tan Tock Seng Hospital and Far East Organization’s brand new Novena Medical Centre. The area recently received an added boost when Parkway Holdings bid a record $1.25 billion ($1,600 psf ppr) for a 1.7ha, 99-year leasehold government site to build a private hospital at Novena Terrace/Irrawady Road. It’s also a sought-after residential neighbourhood given its proximity to the CBD and Orchard Road. In the immediate neighbourhood of Parkway’s site is Frasers Centrepoint’s new condominium development, the 417-unit twin-tower Soleil@Sinaran that was launched last year and is currently under construction. The most recent transaction, according to the caveats lodged on URA Realis, was for a 958 sq ft unit on the third floor which was sold for $1.23 million ($1,285 psf). A 1,453 sq ft apartment on the 16th floor changed hands on the sub-sale market for over $2.32 million ($1,600 psf) at the end of last year. Meanwhile, at 1 Essex Road is Far East Organization’s Strata, a 32-storey, 100-unit loftstyle apartment tower completed in 2006. According to the URA Realis database of caveats lodged, three 506 sq ft apartments changed hands on the resale market at prices ranging from $650,000 ($1,285 psf) for the most recent transaction on Sept 21 last year to $820,000 ($1,621 psf) for a similar-sized unit also on the second floor, which was sold in early August last year. Across the road and next to United Square shopping mall is Allgreen Properties’ Viva, a brand new condominium that’s yet to be launched. Behind Viva is Keppel Land’s 486unit Park Infinia at Wee Nam, targeted for completion next year. A handful of units in the development changed hands in January at prices ranging from $1,410 to $1,600 psf. The selling prices of new launches in the area are even higher. Just down the street from the row of Essex Road houses is the showflat of Lucida, a 62-unit high-end condominium project by boutique developer, Novelty Group. Private previews at Lucida have yet to begin, but marketing agents are citing an indicative selling price of $1,700 to $2,000 psf.
Fort Terrace, another collective sale hopeful Meanwhile, over at the east coast, the owners of a row of 16 terraced houses called Fort Terrace at 29-59 Fort Road have also put their properties up for collective sale. The freehold residential site was put up for tender on Feb 27, and will close on March 26. The rectangular freehold development site has a total area of 47,886 sq ft and under the 2003 Master Plan, it is zoned for residential use with a gross plot ratio of 2.1. Colliers International, the marketing agent, has already obtained 100% agreement from the owners to proceed with the collective sale. According to Ho Eng Joo, executive director of investment sales at Colliers International, the indicative price is $95 million. There’s a development charge of $23 million, as well as the cost of annexing a piece of 10,964 sq ft state land, which is estimated at $6.4 million. This will work out to $1,238 psf ppr. The site has the potential to be redeveloped into a high-rise condominium with 67 units averagE ing 1,500 sq ft each.
CITY&COUNTRY
Unlike many other Western economies swamped by the subprime backwash, the Australian property scene still looks bright
| BY MARK HENDERSON |
T
he fallout from the US subprime crisis is hammering housing markets across the US and Europe. Mortgage foreclosures in the US are escalating as inflated home values sink. And the news is also grim in the UK where homeowners are watching their valuations slide. But it’s not all doom and gloom on the Western property front, claims Australian property expert Ben Boyle. There are, he says, reliable returns in strong growth areas Down Under, such as Queensland. Boyle is a director of Your Property Solutions (YPS), a property consultancy service based in Brisbane. He was recently in Singapore and Hong Kong to market the company to expatriates and locals while catching up with clients. The difference between YPS and most other agencies, says Boyle, is that the company works exclusively for the buyer. “We use our extensive knowledge and experience in the Queensland market to source property to the buyer’s requirements.” YPS not only finds the property, it negotiates price (which Boyle claims is typically 10% less than the “fair market value”), arranges building and pest inspections, insurance and finance services. The agency also operates a property management service, which has more than 500 investment homes on its books. Around 70% of YPS’ clients are investors. Boyle, a former captain in the Australian Army, who served in East Timor and Iraq, says his confidence in the Sunshine State’s residential market is backed by solid data. Unlike many other Western economies swamped by the subprime backwash, the Australian property scene still looks bright. While falling house prices elsewhere are undermining consumer wealth and confidence, Australia is tracking a different pattern. A report by Macquarie Research Economics in December 2007 points out that the Aussies
Buying property in Australia’s Sunshine State year led the way with 20%-plus capital gain. “Key drivers are strong economic growth from the mining-dominated economy — many of the country’s mining giants operate in Queensland — and strong population and wages growth, particularly in Queensland. Around 50,000 people a year are moving to the state. Many corporates are relocating to Brisbane from Sydney. Brisbane has a broad-based economy, including agriculture and information technology. The city is no longer a big country town.” Boyle believes median-priced properties in median-priced suburbs are a solid bet for long-term growth. Around A$450,000 will buy a three-bedroom, two-bathroom house on 6,400 sq ft of
land within 10km of central Brisbane. This property will earn A$400 a week in rent for a net 4% to 5% return, plus capital growth, which was running at 20% last year. Capital gain has averaged 10% annually over the past 10 years in southeast Queensland. Apartments close to the city, says Boyle
Apartments close to the city, says Boyle are ‘renting machines’. A new A$400,000 unit with two bedrooms and two bathrooms rents for A$380 to A$460 per week. A three-bedroom townhouse costs A$500,000 and can fetch A$450-plus a week in rents.
are “renting machines”. A new A$400,000 unit with two bedrooms and two bathrooms rents for A$380 to A$460 per week. A threebedroom townhouse costs A$500,000 and can fetch A$450-plus a week in rents. Foreigners can only buy brand new houses and apartments, but there is plenty of new apartment stock in Brisbane, says Boyle. Investors are liable for capital gains tax at around 25% when they sell the property. YPS charges a flat A$10,000 fee for sourcing and negotiating the purchase of a property on behalf of a client. Andrew Powell, who works in an airlinerelated industry, and has been living in Singapore for the last five years, recently bought two houses near Brisbane using Boyle and YPS. “I wanted someone with knowledge on the ground,” says Powell. He paid A$420,000 for the first property, a three-bedroom house 5km from the city, in 2006. The house is now valued at A$550,000. Last year, he shelled out A$1.15 million for a sprawling five-bedroom, fully renovated traditional “Queenslander” colonial verandah house “in a great suburb” 4km from Brisbane. That property, he says, could now be confidently listed at A$1.4 million.
Queensland’s appeal have already had their pain. The slowdown in most of the Australian housing market took place in 2004-05. House prices in Adelaide and Brisbane have bounced back over the past couple of years. In Brisbane, the average cost of a three-bedroom house has climbed from A$350,000 ($488,940) to around A$450,000. Adelaide homes have risen from A$300,000 to more than A$360,000.
Heavy demand Demand for homes is outstripping supply. The Reserve Bank of Australia currently estimates 180,000 homes a year are wanted, but only 150,000 are being built. Residential building activity has been flat for five years, despite increasing migration into Australia. That’s putting pressure on the rental market. Rents are rising fast in most capital cities. In Brisbane, rents for a family home have increased by around A$50 per week (15%) over the past 12 months. Boyle says the residential good times will continue. Housing in Brisbane and Perth last
House prices in Adelaide and Brisbane have bounced back over the past couple of years
“I used Ben because I didn’t have the time to look myself,” says Powell. “The fee is a small price to pay for local knowledge. It took me four months to find an investment property in Sydney a few years ago. Ben found my first Brisbane buy on the same day it went to market.” Powell reckons that Queensland should appeal to many investors from Asia. “The Australian property market doesn’t have massive swings; it is more predictable with less risk over the long term.” Further north, booming Townsville offers investors some good opportunities, says Boyle. Townsville has a large transient population — mine workers on fly-in-fly-out contracts, for example — so rents are relatively high. Houses start from around A$300,000, up from A$150,000 five years ago. Apartments along the waterfront sell for A$400,000-plus. Boyle says Perth, popular with Singaporeans, has peaked. “Perth has come off the boil. After enjoying 20% capital growth over the past two years, the residential market there E has slowed to around 4%.”
PICTURES: YPS
THEEDGE SINGAPORE | MARCH 3, 2008 • CC7
GF2 (273mm) GF3 (276mm)
pg 41 (279mm) THEEDGE SINGAPORE | MARCH 3, 2008 • 41
HIGHLIGHT
Natural Cool a late-cycle play on construction boom
Strategist....................... 27 Brokers’ Digest ............. 28 Bloomberg .................... 31
INVESTING IDEAS PG26
Insider Moves ............... 32 FactSet Estimates .......... 35 Warrants ....................... 38
THEEDGE SINGAPORE | THE WEEK OF MARCH 3, 2008
HIGHS & LOWS
VOLUMEMOVERS 1400000
Volume (‘000)
Price (S$)
0.025
1200000 0.02 1000000 0.015
800000 600000
0.01
400000 0.005
COMPILED BY AUDRINA GAN
Chasen Holdings (one cent), a logistics and engineering services company, topped the list of actives. The penny stock was heavily traded despite the absence of positive news. In January, the company acquired a 63.7% stake in GKH Group, a scaffolding equipment and services provider for the local marine and construction industries. The acquisition will allow Chasen to diversify its revenue base from its current niche.
350
350
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0
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300000
Feb 23, 2007
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2.5 2.3
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2.1 1.9
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150000
1.3 100000
1.1 0.9
50000
0.685 0.5
0 Feb 23, 2007
700000
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2.8 2.6
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1.2 1.08
0 April 20, 2007
700000
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0 Feb 23, 2007
Feb 29, 2008
Synear Food Holdings (68.5 cents) was heavily sold last week, following its FY2007 results announcement. Gross margin for the Chinese dumplings and snacks manufacturer dipped 1.4 percentage points to 32.2%, owing to a 13% y-o-y increase in the prices of key raw ingredients such as pork, flour and packaging materials. With no let-up in China’s inflation, the share prices of Chinese food companies have taken a beating in recent weeks. Deutsche Bank has downgraded the stock to “hold”, citing higher labour and pork prices, with a 12-month target price of 83 cents.
Yangzijiang Shipbuilding ($1.08) fell 1.6% last Friday, its lowest since Jan 22, despite reporting a 90% increase in net profit to 453 million renminbi ($89 million) on the back of 2.3 billion renminbi in revenues. The bearish sentiment stems from worries that rising steel costs will put a dent in the profits of Chinese shipyards. With that, DBS Vickers has downgraded the stock to “hold”, with a 12-month target price of $1.45. With more shipbuilding projects, the cost of sales for mainly steel purchases at Yangzijiang have increased 62% to 2.9 billion renminbi, according to filings with the Singapore Exchange. Yangzijiang had an order book of US$7 billion ($9.7 billion) as at Jan 31. Golden Agri-Resources ($1.13) surged to a year-high of $1.23 last Tuesday. A unit of Indonesia’s largest oil palm grower, Sinar Mas Group, Golden Agri-Resources is riding on strong demand for palm oil, which is used as cooking oil and fuel. The share price of Golden Agri-Resources has more than doubled over the past year. OCBC Investment Research’s analyst Selena Leong has upgraded FY2008 earnings to US$694.9 million ($968.4 million), up 50.3% on the back of higher prices and increased demand for crude palm oil.
Results damper Drop in property stocks spooks market Analysts revise forecasts downwards
| BY GOOLA WARDEN |
P
roperty stocks fell across the board, although almost all showed strong, if not record, profits last year as results came in last week. But fears of an economic slowdown and expected drop in property sales for the year caused more profit-taking, especially after the Straits Times Index had also gained for several consecutive days early in the week. The reaction to other results announcements was little different. Crude palm oil producer Wilmar International, a market darling, fell almost Straits 300 5% the day after it released results, despite announcing a fivefold rise in net profits for the three months to Dec 31, 2007 to US$234 million ($326 million). Its CEO Kuok Khoon Hong sounded downbeat in his assessment 0 of prospects in spite of sharply rising crude palm oil prices. “One has to be a bit cautious,” he was quoted as saying. No wonder dealers struck a cautious note as well on the market. Asked what his outlook was for the week, a dealer said he had no idea. At one point, it looked like the STI would be able to break out of 3,100, he said, but then it failed again. With billionaires moderating expectations, most punters say they would prefer to remain largely on the sidelines. Thus traders are likely to be out within the day, says a dealer, because few want to hold positions overnight, much less over the weekend. volume (million)
0
Crane operator Tat Hong Holdings may be doing a roaring trade and still elicits a “buy” recommendation from Citigroup Research. Still, its target price was revised downwards from $4.15 to $3.15. No matter that it is higher than Tat Hong’s price last week. The market sold it off to $2.15 from $2.30 on the downgrade. Another significant downgrade occurred with Advance SCT, a company that was transformed into a copper smelter, when it issued a profit warning ahead of a set of nasty results. Net profits fell 36% to $4.9 million. Although net debt-to-equity is less than 50%, interest expense of $7.7 million rose 66% y-oTimes y. This, coupled with a large negative operating cash flow of $41 million, triggered a sharp sell off. At its closing price of 30.5 cents, Advance SCT is a quarter of its value just four months ago. Dealers say there are plenty of margin calls on the counter. Elsewhere, Synear Food Holdings was downgraded by Merrill Lynch. Earlier in the year, brokers had “buy” recommendations on the stock, and margin calls were aplenty as well, say dealers.
What to look out for Roxy-Pacific Holdings starts trading on March 2. Although its IPO price of 30 cents is a 50% discount to net asset value, dealers are reporting no grey-market price. On the other hand, Li Heng Chemical Fibre Technologies, a nylon yarn manufacturer, has a grey-market price of 84 cents, slightly above its offer price of 80 cents.
26 • THEEDGE SINGAPORE
| MARCH 3, 2008
CAPITAL
INVESTING IDEAS
Cashline For whatever, whenever
DBS Cashline. For whatever, whenever.
Natural Cool Holdings
Air-con and switchgear supplier is a late-cycle play on local construction boom | BY ELLEN LOKAJAYA |
T
hese are heady times for Natural Cool Holdings, a company that supplies and installs air-conditioners and switchgears. The construction boom has fuelled demand for the services it provides, enabling it to become picky about projects it takes on. “Last time, the main contractors choose their contractors — now it’s the contractors who choose the main contractors,” says Steven Chen, CEO of the company. “And, now, even the main contractors are choosy also. They will choose the good developers.” The company began in 1989 as a sub-contractor supplying and installing air-conditioners, and gradually built up its business. It later added the switchgear division, and more recently branched into the furniture and fitment business. And, as property developers and construction companies rush to complete apartment blocks and office complexes in one of the country’s biggest building booms in decades, Natural Cool is seeing a strong pick-up in business that could last for the next couple of years. Last year, the company saw its revenue jump 56% to $114.2 million, boosted by strong growth in its three main businesses. Natural Cool’s aircon business contributed 59% or $67 million to the revenue in 2007, while switchgears contributed 32%. Its fledgling building materials business saw an eight-fold jump in revenue to $10 million. However, the company’s margins were squeezed by higher transport costs and expansion initiatives, resulting in earnings ris-
Natural Cool Holdings 7000
Volume (‘000)
Price ($)
0.44
6000
0.42
5000
0.4
4000
0.38
3000
0.36
2000
0.345
1000
0.32 0.3
0
Feb 23, 2007
Feb 29, 2008
ing by only 14% to $3.8 million. Even so, things seem to be only just picking up for late-cycle construction plays like Natural Cool, and its stock doesn’t appear expensive. Shares in the company are up 10% over the past year to 34.5 cents last week. That’s about nine times historical earnings. The company doesn’t currently have any analyst coverage. Natural Cool’s air-con business involves installation, replacement and maintenance services for the residential and commercial sectors. The company also recycles air-conditioners, says Chen. In addition, the company makes its own house-brand copper pipes and air-con brackets. Among the air-con projects the company has completed are condominiums like Scott sHigh Park and Monterey Park, and institutions like Anglo-Chinese School and Nanyang Girls School. According to Chen, the company’s biggest contract so far comes from Hilltops con-
dominium, worth over $5 million. Natural Cool’s switchgear division, called S Team, started operations in 2003 and became part of the group in 2005. S Team manufactures, assembles and installs switchgears in commercial and residential buildings. Switchgears are used to manage the distribution of electricity to different points in a building. Among the notable deals S Team secured is a $1 million contract for the Icon. “Switchgears and air-cons actually complement each other because in any HDB block or condominiums or factories or offices, you need switchgears and you need air-cons,” says Joseph Ang, executive director and founder of S Team. But Natural Cool isn’t just dependent on private developers, says Ang. The company also gets significant recurring income from the Housing Development Board’s upgrading projects. According to Ang, the company has an 80% share of the switchgear market for HDB’s upgrading projects in which electrical wiring and switchgears are installed or replaced. Natural Cool’s building materials segment was added in 2007. In July, the company acquired J2 Pte Ltd, a systems furniture and fitment company that sells office partitions, office chairs and tables and wardrobes, for $900,000. That is proving to be a timely move. According to Chen, the business has huge potential with new office buildings in the Marina Bay Financial Centre nearing completion. The company is currently participating in several tenders for systems furniture and fitment contracts, Chen adds. The company added another element to its
building material division last year. Last April, it formed a joint venture called NC Steel Pte Ltd with stainless steel supplier Jiang Yin Cheng Iron Co Ltd. Natural Cool invested US$255,000 ($355,937) and holds a 51% stake. The jointventure company will be the sole distributor of Jiang Yin Cheng’s products in Singapore. It will also distribute its products, such as steel sheet piles and cold rolled steel, around Southeast Asia. Chen expects the JV to be a money spinner now that steel prices have gone up to $800 per tonne from $490 per tonne last year. At the moment, Natural Cool has a small presence outside of Singapore — specifically in China, India, Cambodia and Vietnam. Last year, the company generated revenue of $4 million in China and $1.4 million in Cambodia. Chen is laying the groundwork for an expansion push in China in the years ahead. Last August, Natural Cool signed a memorandum of understanding to acquire a stake in Hart Technologies Pte Ltd, which owns Beijing Henji Construction Engineering Co Ltd, for no more than $560,000. Chen says that holding a stake in Beijing Henji will be strategic for the company because it has the necessary licences to tender for projects worth up to 50 million renminbi ($10 million), and its location will allow it to serve northern China. For the next two years, however, Natural Cool will have its hands full with the building boom on its home-turf in Singapore, says Chen, who owns 14.2% of the company. And, as it cherry picks the best projects on offer, investors might E begin to take more notice of its shares.
Swissco International
Offshore vessel charterer is a value play after steep slide, analysts say | BY KANG WAN CHERN |
T
he offshore energy exploration and production cycle isn’t showing any signs of slowing down, yet shares in support vessel charterer Swissco International are trading at what some analysts are calling “distressed levels”. Shares in the company have tumbled 33% since the beginning of the year, weighed down by the broad market sell-off and overlooked by large investors because of its relatively small market capitalisation of $151 million. But at the current levels of 84 cents each, shares in Swissco trade for less than they would be worth if the company were to sell its vessels and other assets and wind itself up. “Stripping out Swissco’s value add as an established offshore vessel charterer, we estimate that the current assets breakup value for Swissco to be worth between $1.02 and $1.18 per share,” says a report by DBS Vickers Securities. There is, of course, no reason for Swissco to consider selling all its assets. Business is booming at the moment and the company is actually busy expanding its fleet. It currently
has a fleet of 26 vessels, all of which are less than 2½ years old. And, it is scheduled to take delivery of a further 11 vessels this year and another nine next year. Besides chartering its vessels to companies in the oil and gas, and shipping and marine infrastructure industries, Swissco is also a pioneer in the Out-Port-Limit (OPL) business in Singapore, which involves servicing ships passing Singapore on their way to other ports. The company is also a specialist in the provision of repairs and maintenance services to a niche market of small tankers and vessels. The company owns two slipways and a 3,000 dead weight tonne drydock. In addition, the company holds a 9% stake in listed integrated offshore service contractor Swiber Holdings. Much like Swissco, shares in Swiber have tumbled significantly since the beginning of the year — by some 33%. It now has a market capitalisation of just over $1 billion. But analysts expect the company to continue securing contracts and its stock to recover over time. Last Friday, Swiber reported a 126.4% rise in revenue to $151.2 million
Swissco International 50000
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Feb 23, 2007
Feb 29, 2008
for 2007, and a 309.4% jump in net earnings to $49.7 million. As an operating entity, DBS Vickers figures that Swissco could be worth as much as $1.41 per share. The brokerage house obtains that target price by valuing Swissco’s core chartering business at 10 times forecast earnings for 2008, and its stake in Swiber at an estimated “fair value” of $3.49 per share. DBS Vickers has a “buy” recommendation on Swissco.
Even on a straight price-to-earnings basis, shares in Swissco look reasonably priced. For 2007, Swissco reported a 23% rise in revenue to $31.2 million, a 53.2% rise in gross profits to $15.8 million. Net earnings surged 216% to $40.2 million, boosted by gains on the divestment of a 5.9% stake in Swiber last June, which Swissco intends to use to expand its fleet. The company is proposing a special interim dividend of three cents per share, and has declared final ordinary and special dividends totalling one cent per share. It is also proposing a bonus issue of up to 18 million new ordinary shares on the basis of one bonus share credited as fully paid for every 10 existing ordinary shares. DBS Vickers is forecasting 52% growth in revenue this year to $47 million and a further 4% rise next year to $49 million. Net earnings are forecast to come in at $12 million, or 6.8 cents per share in 2008, and $13 million, or 7.1 cents per share in 2009. On those forecasts, shares in Swissco are trading at 12 times and 11.4 times 2008 and 2009 earnings respectively. If there is such a thing as a value play in a E hot sector, this might be it.
THEEDGE SINGAPORE | MARCH 3, 2008 • 27
CAPITAL
Cheap palm oil may overtake soy on rising Asia demand Feb 25: Palm oil, the world’s most-used cooking oil, is also the cheapest, a discrepancy that won’t last long as demand rises across Asia’s biggest countries. An ingredient in curries, stir-fries and Skittles candy, Malaysian palm oil costs 15% less than soybean oil on the Chicago Board of Trade (CBOT). Tobin Gorey, a commodity strategist at Commonwealth Bank of Australia Ltd in Sydney, said the two may soon be even money, raising the prospect of at least a US$1.5 million ($2.1 million) profit from a US$10 million investment. Rising incomes mean billions of people in Asia’s developing economies seek palm oil for fried and processed foods, according to the US Department of Agriculture (USDA). Crude oil at US$100 a barrel is boosting demand for alternative fuels such as diesel from vegetable oil. “We may have a case of mass shortage of vegetable oil in China,” said Rudolphe Roche, a manager at Schroders plc’s US$6 billion agricultural commodities fund in London on Feb 25. “This means they will continue to import from the rest of the world.” Palm oil, produced in Malaysia and Indonesia, will benefit the most because its proximity to China lowers shipping costs, he said. Rising prices will increase expenses at Nissin Food Products Co, Japan’s biggest instant-noodle maker, and increase profits at Malaysia’s Sime Darby Bhd, the world’s largest publicly traded owner of palm plantations. About 36% of the world’s cooking oil comes from oil palm, more than any other plant, USDA data shows. The last time palm oil was this cheap, last April, prices rallied for two months because of increasing demand, gaining 38% to RM2,855 ($1,246) a tonne on the Malaysia Derivatives Exchange to reach parity with Chicago prices. Contracts for May delivery ended at RM3,698 a tonne (52 US cents a pound) on Feb 22 in Malaysia. May soybean oil finished at 63.02 US cents a pound on the CBOT. Palm oil and soybean oil reached records today. Palm oil rose as much as 5.8% to RM3,914 a tonne and closed 4.5% higher at RM3,866, the biggest gain since Dec 26, 2006. Soybeans advanced as much as 2.4% to 64.52 US cents a pound and last traded at 64.29 US cents. That narrowed palm oil’s discount to 16% from 17%.
Australian, NZ dollars advance on demand for yield Feb 25: The Australian dollar traded near a three-month high and the New Zealand dollar rose close to the strongest level in 23 years on speculation investors will be drawn to the nations’ higher-yielding assets. The Australian and New Zealand dollars, also known as the Aussie and kiwi respectively, are the second- and third-best performers of the 16 most-active currencies this month as traders bet the US Federal Reserve will cut interest rates by half a percentage point to 2.5% in March. Australia’s currency also traded near the highest this year against the yen as rising stocks gave investors confidence to buy Australian assets funded with loans in Japan. The Aussie bought 92.43 US cents as at 4:45pm in Sydney today compared with 92.38 US cents late in New York on Feb 22, when it reached 92.51 US cents, the most since Nov 9. It will match a 23-year high of 94 US cents in the next month, Morriss said. The currency traded at ¥99.27 ($1.29) from ¥99 Feb 22. The kiwi rose to as high as 80.96 US cents before buying 80.83 US cents, from 80.87 US cents in late New York trading on
Feb 22. It advanced to ¥86.81 from ¥86.67. The kiwi rose 1.7% versus the yen last week and the Australian dollar climbed 1% as US and European stocks gained, encouraging investors to seek higher returns. New Zealand’s record 8.25% benchmark rate is the highest after Iceland’s among Aaa-rated economies. “Equity markets have been more stable and we’ve seen an improvement in risk appetite,” said Michael Gordon, a currency strategist at Westpac Banking Corp in Wellington. “We’ve seen a general move back toward high-yielders like the kiwi.” The New Zealand dollar may rise above 81.10 US cents, the highest since the currency was al-
lowed to trade freely in 1985, Gordon said. Australia’s benchmark interest rate of 7% compares with 3% in the US and 0.5% in Japan. In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the borrowing and lending rate. The risk is that currency moves erase those profits. Traders are assigning 89% odds the Reserve
STRATEGIST
Bank of Australia will raise its target rate a quarter percentage point to 7.25% at its March 4 meeting, a Credit Suisse Group index based on interest-rate swaps shows. The odds were 6% that the Reserve Bank of New Zealand will increase its benchmark rate a quarter point to 8.5% at its March 6 meeting, a similar index showed. — Compiled E from Bloomberg LP
The stories on this page are compiled from various news sources and directly from the firms. Disclaimer: Readers should consult their adviser on the strategies and read the full reports. The Edge Singapore does not accept any liability whatsoever for any direct, indirect or consequential losses (including loss of profit) or damages that may arise from the use of information or opinions published. Opinions expressed are subject to change without notice. The strategists may from time to time have positions in the products mentioned.
28 • THEEDGE SINGAPORE
| MARCH 3, 2008
CAPITAL
BROKERS’ DIGEST | COMPILED BY RAHAYU MOHAMAD |
Every week, The Edge Singapore brings you digested excerpts of research reports of Singapore Exchange-listed companies available in the public domain or received from brokers. Investors interested in research on companies are also encouraged to register for free access to reports from stockbrokers that participate in the SGX-Monetary Authority of Singapore Research Incentive Scheme (www.research.sgx.com). Disclaimer: The Edge Publishing Pte Ltd does not accept any liability whatsoever
AEM Holdings (Feb 28: 9.5 cents)
for any direct, indirect or consequential losses (including loss of profit) or damages that may arise from the use of information or opinions in this publication. The information and opinions in this publication are not to be considered as an offer to sell or buy any of the securities discussed. Opinions expressed are subject to change without notice. The brokers may, from time to time, have interests or positions in the securities mentioned. The Edge Singapore welcomes brokers submitting their reports for investor information to [email protected].
C&O Pharmaceutical Technology (Feb 28: 39.5 cents)
Q-o-q y-o-y DCF Ebitda EPS FY NAV NTA P/BV PEG PER ROE
— — — — — — — — — — — —
Quarter-on-quarter Year-on-year Discounted cash flow Earnings before interest, tax, depreciation and amortisation Earnings per share Financial year Net asset value Net tangible assets Price-to-book value Price earnings to growth Price-to-earnings ratio Return on equity
CitySpring Infrastructure Trust (Feb 28: 76.5 cents)
MAINTAIN HOLD. AEM turned in a disappointing set of FY2007 results with a net loss of $3 million. This is due to significantly higher assets write-off and impairment provisions made to its precision and system integration (PSI) division and materials and services (MNS) division. Revenue slid 18.7% y-o-y to $192.8 million, due to a 49.1% dive in contribution from its PSI division, coupled with an 8.7% decrease from its MNS division. AEM’s focus on its less cyclical Substrates & System Packaging (SSP) division looks to be a beneficial move. AEM posted a net loss of $4 million, compared to a net profit of $5.9 million and $0.9 million in 2H2006 and 1H2007, respectively. We pare our FY2008 estimates by 7% to 22% and ease our valuation from eight times FY2008F PER to seven times, thus lowering our fair value from 15 cents to 10 cents. — OCBC Investment Research (Feb 25)
MAINTAIN BUY. C&O recently issued its 2Q2008 result. Its top line growth is in line with our expectation. However due to higher sales and administration expenses, C&O’s net profit is lower than our expectation. As the sales budget for calendar year 2008 is expected to be higher than 2007, we adjusted down the net profit for FY2008 and FY2009 to HK$109 million and HK$131 million from HK$128 million and HK$158 million respectively. However, compared to other manufacturing companies in China, we still find drug companies more attractive as they generally enjoy a much higher gross margin and are less affected by escalating costs. We retain our buy call on C&O, but cut our target value to 53 cents from 64.5 cents, based on 15 times forward twelve month PER. — Phillip Securities Research (Feb 25)
OVERWEIGHT-V. We are changing our rating to OverweightV and our price target to $1.00. We believe downside risk from here is limited in the near term. A F2008E dividend yield of 7.9% (tax free), Temasek support, and the yield-accretive acquisition of Basslink should all be reasons for the stock to outperform in the medium term. Near term, the stock might remain range-bound owing to a potential equity fund raising for the Basslink acquisition. We have removed the allocation of a 30% premium for the Temasek association. Post-Basslink, we expect CitySpring to increase its annual distribution to seven cents from the current DPU of $0.064. The stock is currently trading at 13 times EV/Ebitda F2009e (adjusted for lease receivable payment). — Morgan Stanley Research (Feb 25)
Aqua-Terra Supply Co (Feb 28: 37 cents)
Cacola Furniture Int’l Ltd (Feb 28: 34.5 cents)
Genting Int’l (Feb 28: 62 cents)
MAINTAIN BUY. The strong growth in revenue from $155 million to $231 million was mainly supported by the newly acquired subsidiaries and new income stream from procurement and supply (P&S). Both new subsidiaries and the P&S contracts together contributed about $61.3 million. The net margin improved by 0.1 percentage point to 5.1%. Nonetheless, if share of profit of associate and joint venture is excluded, net margin would drop from 4% in FY2006 to 3.4% in FY2007. ATS posted $11.8 million PATMI (profit after tax and minority interest) for FY2007, below the consensus estimates of $13 million (according to Bloomberg). Pegging its valuation at an undemanding 12 times FY2008 EPS, we derive a target price of 59 cents, at an upside potential of 49%. — Westcomb Research (Feb 28)
MAINTAIN BUY. Cacola reported a 23.83% growth in revenue from 455.62 million renminbi ($89.39 million) in FY2006 to 564.18 million renminbi in FY2007. The group’s net profit grew by 63.96% from 75.21 million renminbi in FY2006 to 123.31 million renminbi in FY2007. The group’s overall gross profit margins increased by 1.80 percentage points (y-o-y) from 32% to 33.8% in FY2007, whereas their net profit margins increased by 5.35 percentage points (y-o-y) from 16.51% to 21.86% in FY2007. For FY2007, the group has proposed a first and final dividend of 0.0713 renminbi per ordinary share, which translates to approximately 19.95% of their net profit. We revised our estimates and revalued our fair value estimate to 61 cents per share, derived from a PER of 5.8 times pegged to FY2008 earnings. This implies a 76.81% upside. — Phillip Securities Research (Feb 27)
MAINTAIN HOLD. GIL’s recurring earnings were below our expectations due to the weaker-than-expected performance of the UK casinos, following the gaming duty hike in April 2007 and the smoking ban in July 2007. The main interest in GIL is not on the existing operations, but rather the Singapore integrated resort (Resorts World at Sentosa). GIL reported a net loss of $381.5 million due to a $472.7 million impairment charge for its UK operations. Our target price continues to be based on RNAV. We have valued the Sentosa project based on a combination of DCF with implied IRR of 15% and EV/EBITDA (target 14times 2010 discounted at 15%). Lower 12-month target price of 69 cents (previously 81 cents). — Standard & Poor’s (Feb 26)
Armstrong Industrial (Feb 28: 30 cents)
China Energy (Feb 28: 89.5 cents)
Ho Bee Investments (Feb 28: $1.23)
MAINTAIN OUTPERFORM. 4Q2007 net profit of $6.2 million (+90% y-o-y) was 26% ahead of consensus and our estimates due to better-than-expected revenue growth and margins. Full-year net profit was 9% ahead of consensus and our forecasts. Sales jumped 36% y-o-y in 4Q2007. EBITDA margins improved 3.8% pts y-o-y to 19.3% in 4Q2007, on the back of gross margin expansion. Net cash widened from $14.5 million as at end-September 2007 to $21.1 million on the back of higher profitability and proceeds from the disposal of its stake in Soon Lee. The company declared a first and final dividend of 1.6 cents, up from 1.05 cents a year ago, translating into a 5.3% yield. We have rolled forward our 12 times target PER to CY2009, lifting our target price from 55 cents to 61.5 cents and providing 106% upside. — CIMB-GK (Feb 28)
MAINTAIN BUY. China Energy reported FY2007 earnings up 38% y-o-y and 110% q-o-q, earnings rebound in 4Q2007 was mainly driven by strong DME (dimethyl ether) sales volume ramp up on favourable product price spreads. Leveraging on the strong YTD Methanol-LPG spreads in China, we expect strong 1Q2008 earnings up 213% y-o-y to 158 million renminbi ($31.01 million) or 31% of our full year estimate. While China Energy plans to increase its methanol capacity from 250k to 750k by end 2008, we expect self sufficiency will not exceed 40% by FY2009 as additional DME capacities ramp up. We revise our target price to $1.5 per share based on 19 times FY2008E earnings, at a 20% discount to the Bloomberg Alternative Energy Index which reflects China Energy’s volatile earnings.— Citigroup Research (Feb 26)
MAINTAIN OUTPERFORM. FY2007 core net profit (excluding revaluation gains) of $190 million came in below expectations, at 88% of our estimate. We believe the results were below consensus as well. 4Q2007 core EPS of 3.8 cents made up 13% of our full year. Ho Bee declared a final dividend of two cents per share, representing a payout of 6.2% and a yield of 1.3%. FY2008-2009 EPS estimates have been raised by 3% to 4%. Our CY2008 RNAV estimate has also been increased from $2.22 to $2.59, on higher ASP forecasts. We now peg our target price at a 25% discount to RNAV (vs 10% discount previously), which is in line with Ho Bee’s 10-year average to reflect a maturing cycle. Our target price thus declines from $2.22 to $1.94. — CIMB-GK (Feb 28)
Bright World Precision Mach (Feb 28: 42 cents)
China Haida (Feb 28: 17 cents)
Hongguo Int’l (Feb 28: 62.5 cents)
REDUCED TO FULLY VALUED. Stripping out 12 million renminbi ($2.35 million) technical grant, Bright World’s (BWPM) FY2007 net profit would have been in line with our expectation, growing 15% y-o-y on 26% y-o-y higher sales. BWPM did not declare dividends for FY2007, as opposed to our expectation of a 30% dividend payout like the past two years because it opted to retain earnings for future development. The impact of rising material cost was evident in 4Q2007, as gross margin shrank 10 percentage points y-o-y to 30.3%, worse than our expectation of a 4.5 percentage points margin contraction. We trimmed FY2008F and FY2009F earnings by 28% and 23%, respectively, after imputing 5.5 percentage points and five percentage points lower gross margins. Reduced target price of 40 cents, based on lower seven times PER vs 11 times previously. — DBS Vickers Securities (Feb 28)
DOWNGRADE TO HOLD. Revenue increased by 14.7% to 444.6 million renminbi ($87.22) while cost of sales increased at a higher rate of 19.9% to 365.9 million renminbi. Gross profit fell 4.5% to 78.7 million renminbi with gross margin dropping 3.6 percentage points from 21.3% in FY2006 to 17.7% FY2007. Profit after tatimes fell 25.2% to 36.1 million renminbi. With uncertain outlook, we have trimmed our FY2008 revenue growth to 5.8%. Gross profit margin is likely to decrease further due to expected higher aluminium prices in FY2008. Gross profit are expected to fell 7.2% to 73.1 million renminbi while net profit are expected to fall another 22.7% to 27.9 million renminbi. Given the pessimistic outlook, we peg our target price at its 10% discount to its current NTA per shares, works out to be 17.5 cents, translating to eight times FY2008 PER. — Westcomb Research (Feb 27)
MAINTAIN BUY. Revenue increased 24% to 739 million renminbi ($144.936) and net earnings were up 22% yo-y to 110 million renminbi. While gross profit was up 29% to 300 million renminbi, EBIT margin decreased one percentage point y-o-y. Selling expense to sales ratio increased to 16.4% in 2007 from 13.6% in 2006. Management attributed the increase to rising staff and AMP expenses. Hongguo declared a final dividend per share of 97 US cents ($1.35), representing a payout of 27%. We increase our FY2008-2009 earnings by 5% to 9% after Hongguo reported a set of solid results. We raise our target price to 82 HK cents (14.68 cents) to reflect our earnings increase. We introduce our 2010 earnings and forecast Hongguo will deliver an earnings CAGR of 23% over 2008-2010E. — Citigroup Research (Feb 26)
M t m d G f o e W e m M C o —
M m r b G U t U N p W v i d R
O
M t u t i S e f 3 c b a p d i f
THEEDGE SINGAPORE | MARCH 3, 2008 • 29
CAPITAL
BROKERS’ DIGEST
AD |
e E d l m d k
, n e e y
r e n n t d n K n n d
t n e e o ,
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Midas Holdings (Feb 28: $1.22)
PSL Holdings (Feb 28: 22 cents)
ST Engineering (Feb 28: $3.47)
MAINTAIN BUY. FY2007 earnings grew by 25% y-o-y to $32 million on top line growth of 34% y-o-y to $140 million. This was 10% below our estimate of $35.8m due to (a) poorer than expected contribution from the Group’s polyethylene pipe business, which suffered from increasing competition; and (b) slower delivery of aluminium extrusion products in 4Q2007 than we expected. A final dividend of 0.5 cents was declared. Whilst we have cut our FY2008 and FY2009 earnings estimates by 34% and 18% respectively to factor in a more conservative delivery schedule for Nanjing Puzhen, Midas’ earnings are still projected to grow at a robust CAGR of 48% over the next two years. Target price of $1.60, based on 24 times FY2008/FY2009 earnings. — DBS Vickers Securities (Feb 28)
MAINTAIN BUY. Revenue surged 113.3% in FY2007 to $53 million, exceeding our forecast of $50.6 million, contributed by the group’s core business segments, piling and engineering services as well as trading and equipment rental. Gross profit increased 113.5% to $12.9 million, in line with the top line growth, maintaining gross profit margin at 24.4%. Profit before tax (PBT) grew 157.4% in FY2007 to $8.9 million, faster than top line growth, mainly due to the group’s effective cost control. PSL is currently trading at an attractive 3.4 times and 1.5 times FY2008’s price-to-earnings ratio and FY2007’s price-to-book ratio respectively. We have projected sales growth of 19.7% in FY2008. Price target of 29 cents based on at five times FY2008 PER, accounting for its small capitalisation and low trading depth, providing an upside of 49%. — Westcomb Research (Feb 26)
MAINTAIN BUY. STE posted a 13% rise in net profit to $503.5 million, in line with our expectation of $504.1 million. Turnover grew 13% to $5,051 million. As expected, aerospace remains the largest contributor to turnover, accounting for 36% of sales. STE also declared a final dividend of 14.88 cents, and total dividend for the year was 16.88 cents, in line with its payout policy of 100% of earnings. STE’s overall current order book stands at some $9.49 billion. FY2008 and FY2009 forecast unchanged, at $555.4 million and $605.2 million respectively. We are also introducing our FY2010 net profit forecast of $654.5 million. Three-year earnings compound annual growth rate (CAGR) stands at 9.1%. STE’s consistent dividend policy generates an outstanding yield of 5.1% for FY2008. Our DCF-derived fair price target of $4.50 is maintained. — Kim Eng Research (Feb 27)
Noble Group (Feb 28: $2.26)
SC Global Developments (Feb 28: $1.76)
Techcomp Holdings (Feb 27: 44 cents)
MAINTAIN BUY. Net profit surged 91.9% to US$258.1 million ($359.52) on the back of a 70.7% growth in revenue to US$23.5 billion. Revenue grew across all its business segments, led by higher commodity prices. Gross profit per metric ton of its commodities rose from US$5.2 per metric ton in 2006 to US$6.4 per metric ton in 2007. Fully diluted EPS climbed 83% to 9.96 US cents from 5.43 US cents in FY2006. To top it off, Noble has proposed a cash dividend of 2.48 US cents per ordinary share, as well as a one-for-five bonus issue. We roll forward our valuation to FY2008, but trim our valuation parameter to 15 times (from 17 times) to align it with the general de-rating of the market, leading us to derive a fair value estimate of $2.64. — OCBC Investment Research (Feb 27)
DOWNGRADE TO HOLD. SC Global reported FY2007 results that were below our expectations, due to lower than expected revenue. Revenue declined 32% y-o-y to $129.2 million while net profit increased 68% y-o-y to $28.3 million. A final dividend of two cents per share was declared. With the special interim dividend of 3.5 cents declared earlier, this works out to a yield of 2.7% for FY2007. We expect SC Global to commence revenue recognition for The Marq and Hilltops in FY2008. Given the expected challenges in the high-end residential market this year, we have lowered estimates for ASP, raised construction costs and stretched sale periods for the two projects. We ascribe a 30% discount to RNAV, lowering our target price to $2.04. — DBS Vickers Securities (Feb 28)
MAINTAIN BUY. Net profit increased 38.2% y-o-y to US$6 million in FY12/2007 on the back of 20% revenue growth to US$65.8 million, in line with consensus and our estimates. Excluding one-time gain of US$700,000 from disposal of properties, core earnings still rose by a respectable 22.1% y-o-y. On a segmental basis, the distribution and manufacturing business recorded sales growth of 19.5% and 22.6%, respectively, driven by robust demand in China (+21.7% y-o-y) and Indonesia (+101.7% y-o-y). The Group has declared a final dividend of $0.012 per share, implying a decent yield of about 3.1%. The counter is currently trading at a compelling valuation of 6.3 times FY12/2008 PER and 4.8 times FY12/2009 PER. Price target of 69 cents, pegged at 10 times FY12/08 PER. — SBI E2-Capital (Feb 27)
OKP Holdings (Feb 28: 60 cents)
Sing Holdings (Feb 28: 53 cents)
Tsit Wing Int’l Holdings (Feb 26: 29.5 cents)
MAINTAIN BUY. OKP’s FY2007 net profit surged 171% to $11 million (well above our forecast of $8.8 million) underpinned by better margins and 70% uptick in revenue to $124.7 million. Gross margin widened to 18% from 14% in FY2006 as the group commenced work on ExxonMobil’s Singapore Parallel Train project in conjunction with its existing Universal Terminal project as well as benefited from good cost management. Return on equity jumped to 35% while net cash position improved to $21.1 million (14 cents per share). We have raised our FY2008 bottomline by 35% to $15.7 million based on potential contract awards. We have lowered our target price to 95 cents premised on nine times FY2008 PER, placing a 20% discount to peer valuation to factor in tight liquidity issue. Management is also declaring two cents dividend for FY2007. — Kim Eng Research (Feb 28)
MAINTAIN BUY. Sing Holdings reported FY2007 revenue of $95.7 million (+469.2% y-o-y) and net profit of $24.1 million (-24.1% y-o-y). The higher revenue was due to the sale of 15 units at 38 Draycott Drive, recognition of revenue from the sale of Meyer Residence based on the progress of construction as well as the sale of units in Eastgate that resulted in a net gain of $15.9 million. However, FY2007 net profit was lower due to the absence of gains from the divestment of Ocean Towers in Shanghai in FY2006. We have reduced our fair value to 92 cents by pegging our fair value to parity with RNAV. This is because the construction costs of the residential projects have increased and the expecting sales prices have been reduced in our estimates to reflect the current cautious property market sentiment. — Phillip Securities Research (Feb 25)
MAINTAIN HOLD. Revenue grew 12.8% in FY2007 to HK$362.8 million, in line with our forecast of $361 million, mainly contributed by 83% growth in China market, of which a significant portion of the growth came from sale of blended tea and grocery products. Gross Profit Margin (GPM) shrunk 4.3% in FY2007 to 38.5%, in line with our expected GPM of 38.7%, as a result of the continuous rise in the cost of raw coffee beans and tea leaves. Tsit Wing declared a final dividend of HK$0.075 per share, bringing total dividend to HK$0.11 for a yield of 6.7%. Taking into account the surge in raw material prices in early 2008, we are lowering our GPM to 35.5%, leading to a 3.6% revision to our earnings forecast for FY2008 to HK$36.7 million. We introduced our FY2009 forecast and roll forward our valuations to FY2009E earnings, pegged at seven times FY2009E earnings to arrive at a price target E of 25.5 cents. — Westcomb Research (Feb 28)
30 • THEEDGE SINGAPORE
| MARCH 3, 2008
Reuters Support: (1 800) 776 7188 Dealing Code HELP | Customer zone: www.reuters.com/customers | Product info: www.reuters.com/productinfo
COMMODITIES Gold powers to new heights, crude oil goes all-time high
Precious metals prices (Feb 29)
Feb 29: Gold powered to a new high near $980 an ounce today after crude oil set an all-time high of above US$103 ($143.55) a barrel, igniting inflation worries and another round of buying from investors and speculators. Palladium jumped to its highest level in more than six years and silver hit a 27-year peak. Platinum rebounded from its lows but given the absence of new developments in South Africa’s supply problems, gains are likely to be capped. Gold jumped as high as US$975.90 an ounce, up from US$968.90/US$969.70 late in New York on Thursday. Gold has gained more than 16% this year, and the next upside target pegged by dealers is US$1,000. Record high oil and expectations of more interest rate cuts in the US add to inflation pressures, elevating gold’s appeal as a hedge against rising prices, while volatile stock markets have encouraged investors to shift some of their money into gold and other precious metals. “The target is US$1,000. I personally hope it will be US$1,000 within a month,” said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo, adding that gold was likely be driven by movements in oil in coming weeks. Crude oil rallied to another record above US$103 a barrel as Ecuador shut a key export pipeline and a fire hit a major European natural gas plant. While oil is at a record price in inflation-adjusted as well as nominal terms, gold has lagged. According to analysts at GFMS gold’s inflation-
METAL
Sp Spot Gold Spot Silver Spot Platinum Spot Palladium TOCOM Gold TOCOM Platinum TOCOM Silver TOCOM Palladium Euro/Dollar Dollar/Yen
LAST
CHANGE
PCT CHG
YTD PCT CHG
TURNOVER
972.75 19.82 2161.00 582.00 3291.00 7051.00 673.50 2011.00 1.5210 104.29
3.85 0.08 26.00 22.00 -6.00 34.00 12.00 80.00
+0.40 +0.41 +1.22 +3.93 -0.18 +0.48 +1.81 +4.14
16.82 34.19 42.17 58.15 7.55 32.07 24.49 48.85
91070 40945 2257 24559
TOCOM prices in yen per gram, except TOCOM silver which is priced in yen per 10 grams. Spot prices in $ per ounce.
adjusted record is US$2,079 an ounce. “Most of the funds are buying inflation hedges such as gold, silver and oil. It’s still a bull market, where hedge funds and banks buy precious metals,” said William Kwan, a dealer at Phillip Futures in Singapore. “I think inflation is really getting out of hand. I am looking at US$955 for support and resistance at US$985,” said Kwan, who pegged upside target for silver at US$20. Silver rose as high as US$19.92 an ounce, its highest in 27 years, up from US$19.74/US$19.79 an ounce in New York. The dollar tumbled to a three-year low versus the yen and held near record troughs against other currencies after Federal Reserve chief Ben
CDS
Bernanke warned some small US banks could fail, suggesting that interest rates may fall more. Spot platinum rose to US$2,161/US$2,168 an ounce from US$2,135/US$2,140 an ounce late in New York to track a rebound in Tokyo futures. Platinum has dropped more than 1% since last week’s record high of US$2,192 an ounce. Automakers, who had bought the metal on fears of further price hikes and mining disruptions in South Africa, were on the sidelines waiting for a correction, said Sonoda of Daiichi Commodities. “Car makers are waiting for the price to decrease to US$2,000,” he said. Platinum, used in jewellery and auto catalysts, has jumped more than 40% this year after
mines in South Africa, accounting for 80% of world output, were shut for five days at the height of last month’s power crisis. The most active February 2009 contract on the Tokyo Commodity Exchange hit a low of ¥6,839 ($91.66) per gram before funds bought on dips and pushed up the contract to a high of ¥7,069. It ended at ¥7,051, up ¥34 from Thursday’s close. “This is driven by funds, and there’s no buying from the general public. What we’ve seen is purely a technical rebound,” said a dealer in Tokyo. Palladium hit a high of US$582 an ounce, its strongest in more than six years, up from US$560/US$564 late in New York. — By Lewa Pardomuan
GLOBAL MARKETS
Credit spreads widen as US economy fears mount
Stocks slip, dollar tumbles on economy concerns
The most active traded CDS (credit default swap) in basis points (Feb 29) NAME
LAST
CCY
WELLS FARGO MEXICO HSBC FINCE CORP THOMSON CAPITAL ONE FNCL TURKEY MERRILL LYNCH CO RUSSIA WACHOVIA CORP UBS AMERICAN EXPRESS BRAZIL RUSSIA ELECTROLUX AB GAZPROM JPMORGAN CHASE
91 115 242 430 405 240 200 125 160 140 0 142 125 130 252 89
USD USD USD EUR USD USD USD USD USD EUR USD USD USD EUR USD USD
GV1 TEXT
GV2 TEXT CLOSE
5Y 5Y 5Y 5Y 5Y 5Y 5Y 5Y 5Y 5Y
SENIOR SENIOR SENIOR SENIOR SENIOR SENIOR SENIOR SENIOR SENIOR SENIOR
5Y 5Y 5Y 5Y 5Y
SENIOR SENIOR SENIOR SENIOR SENIOR
91 113 242 420 405 240 200 125 160 123 0 130 125 130 252 89
GFI, CREDIT DERIVATIVES BROKER. EXCLUSIVELY FROM REUTERS
Feb 29: European credit spreads widened on Friday, with indexes creeping towards record highs touched last week, after comments from US Federal Reserve chairman Ben Bernanke spooked markets about the state of the economy. Bernanke, in a second day of testimony before Congress on Thursday, said small banks that invested heavily in real estate could collapse as the housing downturn drains their capital. By 0857 GMT, the investment-grade Markit iTraxx Europe index was at 122 basis points (bps), according to data from Markit, 8.5 bps wider than late Thursday. The Markit iTraxx Crossover index, made up of 50 mostly “junk”rated credits, was at 594 bps, 16 bps wider. It had touched 600 bps in early trade. Weak data has also stoked fears the fragile US economy will tip into recession. Both of the major credit indexes have widened steadily since Wednesday, bringing a halt to a tentative rally earlier in the week. They are close to record highs of 137 bps for the Europe index and levels above 600 bps on the Crossover. In the cash bond market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 122.1 bps more than similarly dated government bonds, 0.5 bps higher on the day. In underlying government bond markets, the yield on the interest rate sensitive two-year Schatz was 3.219%, 4.8 bps lower on the day. The 10-year Bund yielded 3.972%, 1.7 bps lower. The 10-year euro swap rate was 4.376%. — By Natalie Harrison
Rates as at Feb 29 (%)
Feb 29: Stocks slipped and the dollar tumbled to historic lows on Friday as the US Federal Reserve’s warning on the health of domestic banks raised concerns over a US recession, driving oil and safe-haven gold to record peaks. Fed chairman Ben Bernanke said on Thursday some small US banks could fail during the current market turmoil stemming from the fallout in US subprime mortgages, in remarks which fanned expectations for an aggressive interest rate cut in March. However, Bernanke also acknowledged inflation could complicate the central bank’s effort to spur the economy, which weighed on risky assets. The FTSEurofirst 300 index was down 0.1% on the day, having hit a one-week low earlier in the day. The MSCI main world equity index fell a quarter percent. The dollar fell to a three-year low of ¥104.23 while it hit record lows of US$1.5238 per euro and tumbled to historic troughs against a basket of major currencies. Interest rate futures markets are pricing in an almost 40% chance of the Fed lowering the cost of borrowing by three-quarters of a percentage point in March. Gold, a safe-haven asset, which offers an inflation hedge, rose as high as US$975 an ounce, bringing gains this year to more than 16% this year. US light crude had risen to US$103.05 a barrel, before eroding gains, after Ecuador shut a key export pipeline and a fire hit a major European natural gas plant. Surging energy, commodity and food prices are fanning inflation concerns which could tie the hands of central banks SGDAUD
DEPOSIT RATE
AUD CNY HKD IDR INR JPY MYR NZD PHP THB TWD USD
GOV BOND
1M
3M
6M
1Y
10Y
7.3700
7.7900 3.3300 2.3200 4.8700 2.6920 0.8500 1.4780 8.9400 3.6730 5.6550 1.7400 3.0000
8.1300 3.7800 2.2200 4.9660 3.0350 0.8900 1.7460 8.8000 4.0430 4.8320 1.6110 2.8100
8.4100 4.1400 2.1200 5.8510 3.2700 1.1100 2.0930 9.0000 2.1490 3.6220 1.6760 2.8200
6.2150 4.1298 2.9040 10.2180 7.5420 1.3600 3.6780 6.4000 7.0690 4.4700 2.4550 3.6431
2.6800 4.3340 1.1730 0.7700 1.6140 8.5000 3.3340 6.1790 1.7090 3.0400
keen to cut interest rates to bolster the economy. This is in turn prompting investors to buy safe-haven gold and other basic resources, creating a self-fulfilling cycle. Emerging sovereign spreads widened 2 basis points while emerging stocks were down 0.8%. The cost of corporate bond insurance rose after Bernanke’s warning, with the iTraxx Crossover index, most-widely watched indicator for European credit market sentiment, widening to 594 basis points. The March Bund future rose 0.3%, capitalising on woes E in stock markets. — By Natsuko Waki
-8.87%
SGDCNY
0.68% 9.18%
SGDHKD SGDIDR
8.54%
SGDINR
-0.68% -2.69%
SGDJPY
-0.17%
SGDMYR SGDNZD SGDPHP
-6.56% -8.75% 2.76%
SGDTHB
3.02%
SGDTWD
9.61%
SGDUSD -10.00%
-5.00%
0.00% Sing vs Asia currencies (y-o-y, Feb 29)
5.00%
10.00%
THEEDGE SINGAPORE | MARCH 3, 2008 • 31
SEE BLOOMBERG TELEVISION ON STARHUB CABLE TV, CHANNEL 25.
CAPITAL
Bloomberg Financial Markets Commodities News Tel: (65) 6212 1000 | Fax: (65) 6212 1111
SINGAPORE FSSTI Straits Times Index ranked returns (per cent change)
FEB 22–29, 2008
FSSTI Straits Times Index equity index movers
FEB 29, 2008
SINGAPORE equity movers Property companies are worst-performing stocks Feb 29 — The Straits Times Index fell 47.70, or 1.6%, to 3,026.45 at the close of trading. The index fell for a fourth straight month, declining 0.8% this month, it longest losing streak since the four months to Feb 28, 2003. City Developments Ltd, Singapore’s second-largest developer, lost 52 cents, or 4.2%,
to $11.96, the third-worst performing stock on the index. CapitaLand Ltd, the city-state’s largest developer, fell 33 cents to $6.30, the second-worst performing stock on the index. Keppel Land Ltd, the third largest, declined 20 cents to $5.90. ABN Amro Holding NV expects the prices of luxury property to decline 10% to 20% by year-end. The prices for mass-market property
will climb 10%, analyst Fera Wirawan said. Advance SCT Ltd, provider of printed-circuitboard testing services, tumbled 6.5 cents, or 16%, to 34.5 cents, the second worst-performing stock on the broader FTSE Straits Times All Share Index. The company reported 2007 net income dropped 47% to $4.2 million as administrative expenses surged 85%. UOB KayHian Holdings Ltd, Singapore’s big-
gest brokerage by market value, rose three cents to $2.04. The company reported 4Q profit surged 81% to $62 million and commission income rose 56% to $159 million, it said. Suntec Real Estate Investment Trust fell nine cents, or 5.6%, to $1.51, its biggest drop since Jan 22. Wilmar International Ltd, fell 12 cents, or 2.7%, to $4.39, its fourth day of declines. E
WORLD Equity indices: Ranked returns
Currencies: Per cent change
BEST & WORST PERFORMING MEMBERS FOR THE WEEK OF FEB 22–29, 2008
BEST & WORST PERFORMING MEMBERS FOR THE WEEK OF FEB 22–29, 2008
MALAYSIAN equity movers AirAsia, IGB fall Feb 29 — Malaysia’s Kuala Lumpur Composite Index fell 10.87, or 0.8%, to close at 1,357.40, the lowest since Jan. 22. The measure fell 2.6% this month, taking a two-month decline to 6.1%. AirAsia Bhd dropped three sen (1.3 cents) to RM1.56. IGB Corp fell nine sen to RM1.92, its biggest decline since Jan 22, after the developer said profit in 4Q fell 35% to RM19.2 million. OSK Holdings Bhd rose six sen to RM1.95 after the brokerage said fourthquarter profit climbed 14% to RM40.7 million from a year earlier. Malaysian Resources Corp added 11 sen to RM2.01, snapping a seven-day losing streak. Malaysian Airline System Bhd, the national carrier, fell 16 sen to RM4.12 on speculation that record crude oil prices E would erode earnings.
Oil may fall as US supplies grow and demand drops, survey shows C rude oil may fall this week because of rising US inventories and weakening fuel demand as the nation’s economy slows and refineries perform maintenance. Twenty-one of 34 analysts surveyed by Bloomberg News, or 62%, said prices will drop through March 7. Six of the respondents, or 18%, said futures will rise and seven forecast that prices will be little changed. Two weeks
ago, 69% said oil would drop. Crude-oil supplies have jumped 25.7 million barrels, or 9.1%, in the past seven weeks, according to an Energy Department report last Wednesday. Total implied fuel demand averaged 20.6 million barrels a day in the past four weeks, down 2.4% from a year earlier, the report showed. Oil surged to a record the past two days af-
ter the US dollar dropped to an all-time low against the euro, prompting investors to buy commodities as an inflation hedge. “If the US dollar ever manages an upward correction to its downtrend, we think crudeoil traders will be surprised to discover that there is little in the way of physical tightness to help cushion the downside,” says Tim Evans, an energy analyst at Citigroup
Global Markets Inc in New York. Crude oil for April delivery rose US$3.78 ($5.27), or 3.8%, to US$102.59 a barrel last week on the New York Mercantile Exchange. Futures reached US$102.97 a barrel last Thursday, the highest price since trading began in 1983. The oil survey has correctly predicted the direction of prices 52% of the time since its E introduction. — Bloomberg LP
32 • THEEDGE SINGAPORE
| MARCH 3, 2008
CAPITAL
INSIDER MOVES
Tat Hong increases stake in associate Yongmao
SHARES ACQUIRED (DISPOSED)
Venture Partners. Salim now has a 50.8% stake in Gallant. Gallant runs industrial parks on the Indonesian islands of Batam and Bintan and it owns 18,200ha — roughly one-third the size of Singapore — of resort and industrial land on Bintan that it plans to sell. Buoyed by excitement on the company’s prospects in Indonesia, the stock had soared from its 2006 IPO price of 50 cents a share to a high of $1.50 in February last year. However, in March last year, it emerged that an Indonesian company PT Raflesia Matrawisata was claiming ownership of some portions of Gallant’s land in Bintan. The idea of a potential legal squabble sent investors running for cover and shares of Gallant took a plunge. Gallant has since provided reassurance that the land ownership claims by PT Raflesia have been rejected by both the district court and, on appeal, the high court. However, the stock has showed no sign of recovering, falling to a 52-week intraday low of 66 cents last Tuesday. The weakness could have something to do with Gal-
70000
Volume (’000)
Price ($) 1.5
1.1
30000
1.0
Feb 3, 2007 Net profit
$14.7 mil
FY Dec 2006
$29.0 mil
Share price
Feb 28, 2008
52-week high 52-week low PER (times)
ADAMPAK LTD
—
12,874,000
AEI CORP LTD
100,000
ONG CHIN YEW
16,920,000
—
FEB 22
APEX-PAL INT’L LTD
100,000
DOUGLAS FOO PEOW YONG
FEB 22
APEX-PAL INT’L LTD
82,000
FEB 27
APOLLO ENTERPRISES LTD
FEB 21
ARA ASSET MANAGEMENT LTD
FEB 20 FEB 21
59.2 mil
67.5 cents
Share price
Feb 28, 2008
44.5 cents
Jul 5, 2007
$1.45
52-week high
Feb 27, 2008
49.5 cents
Feb 26, 2008
66 cents
52-week low
Feb 20, 2008
35 cents
FY2007
110.7
PER (times)
FY2007
0.1
FY2008 (est)
14.1
Gross dividend yield
SALES IN OPEN MARKET AT OWN DISCRETION (20/2)
—
OPEN MARKET PURCHASE (22/2)
—
OPEN MARKET PURCHASE (22/2)
65,000
NG WEI YEOW
5,532,322
85,350,128
OPEN MARKET PURCHASE (25/2)
10,000
LIM HOW TECK
300,000
10,000
OPEN MARKET PURCHASE (21/2)
ASA GROUP HLDGS LTD
71,000
POH CHOO BIN
14,516,000
—
OPEN MARKET PURCHASE (20/2)
ASA GROUP HLDGS LTD
100,000
NG SHEK YAM
200,000
10,700,000
OPEN MARKET PURCHASE (21/2)
FEB 26
ASA GROUP HLDGS LTD
50,000
POH CHOO BIN
14,566,000
—
OPEN MARKET PURCHASE (26/2)
FEB 21
ASCENDAS INDIA TRUST
7,009,900
THE CAPITAL GROUP OF COMPANIES
—
67,939,900
OPEN MARKET PURCHASE (21/2)
FEB 21
ASIA DEKOR HLDGS LTD
10,018,000
VALUE PARTNERS LTD
—
58,150,000
FEB 20
ASIA POWER CORP LTD
78,000
HE JUN
—
78,000
FEB 27
ASIA POWER CORP LTD
40,000,000
ADDYSON XUE
1,500,000
—
FEB 25
ASPIAL CORP LTD
105,000
KOH WEE SENG
14,190,800
69,958,500
FEB 27
ASPIAL CORP LTD
26,000
4,030,300
71,403,200
OPEN MARKET PURCHASE (25/2)
FEB 26
ASPIAL CORP LTD
100,000
14,290,800
69,958,500
OPEN MARKET PURCHASE (26/2)
FEB 22
AUSTON INT’L GROUP LTD
FEB 21
AVI-TECH ELECTRONICS LTD
200,000
FEB 21
AVI-TECH ELECTRONICS LTD
100,000
FEB 22
AZTECH SYSTEMS LTD
53,000
NG TECK SIM, COLIN
FEB 22
AZTECH SYSTEMS LTD
47,000
NG TECK SIM, COLIN
FEB 22
BABCOCK & BROWN STRUCTURED FINANCE FUND LTD
FEB 25
BH GLOBAL MARINE LTD
FEB 21
C & O PHARM TECH (HLDGS) LTD
661,000
FEB 22
C & O PHARM TECH (HLDGS) LTD
1,000,000
FEB 22
CHARTERED SEMICONDUCTOR MFG LTD
FEB 26
CHASEN HLDGS LTD
FEB 25
CHINA PRECISION TECHNOLOGY LTD
10,000,000
DYNAMIC GOAL FINANCE LTD
FEB 25
CHINA PRECISION TECHNOLOGY LTD
-30,000,000
JHT INVESTMENTS PTE LTD
FEB 19
CHINA SUNSINE CHEM HLDGS LTD
FEB 27
CITYNEON HLDGS LTD
FEB 22
COSCO CORP (S) LTD
FEB 20
CYBER VILLAGE HLDGS LTD
-997,000
FEB 20
CYBER VILLAGE HLDGS LTD
-1,000,000
FEB 20
CYBER VILLAGE HLDGS LTD
FEB 20 FEB 25 FEB 21
DBS GROUP HLDGS LTD
FEB 25
DELONG HLDGS LTD
FEB 19
DEVOTION ENERGY GROUP LTD
210,000
FEB 20
EXCELPOINT TECHNOLOGY LTD
25,000
FEB 21
FORTUNE REAL ESTATE INV TRUST
FEB 20
FRAGRANCE GROUP LTD
FEB 26
FRAGRANCE GROUP LTD
FEB 21
GALLANT VENTURE LTD
FEB 21
GALLANT VENTURE LTD
1,000,000
DORNIER PROFITS LTD
FEB 21
GALLANT VENTURE LTD
1,000,000
ANTHONI SALIM
FEB 26
GALLANT VENTURE LTD
1,000,000
DORNIER PROFITS LTD
160,963 95,051,200
40,000 -500,000,000
-612,000 1,442,000
to lower land sale revenue and lower rental revenue, adding that the subprime crisis and potential recession in the US have affected investment sentiment in Bintan, which may reE sult in lower land sales.
OPEN MARKET PURCHASE (19/2)
1,108,400
PURCHASE OF SHARES (20/2) OPEN MARKET PURCHASE (12/2/07) PLACEMENT OF SHARES (5/2) OPEN MARKET PURCHASE (25/2)
HONG BO EDUCATION DEVT HLDGS LTD
34,000,000
—
LIM ENG HONG
79,638,350
26,390,000
OPEN MARKET PURCHASE (21/2)
5,780,000
—
OPEN MARKET PURCHASE (21/2)
563,000
—
OPEN MARKET PURCHASE (21/2)
610,000
—
OPEN MARKET PURCHASE (22/2)
—
27,134,310
282,828,600
—
GAO BIN
449,000
363,162,000
OPEN MARKET PURCHASE (20/2)
GAO BIN
449,000
364,162,000
OPEN MARKET PURCHASE (21/2)
76,060
—
EXERCISE OF SHARE OPTIONS/CONVERTIBLES (12/2)
2,996,316,920
—
SALES IN OPEN MARKET AT OWN DISCRETION (25/2)
224,192,592
—
MARRIED DEAL (25/2)
50,000,000
—
SALES IN OPEN MARKET AT OWN DISCRETION (25/2)
—
25,208,097
SALES IN OPEN MARKET AT OWN DISCRETION (19/2)
WONG WEE LIM, WILLIAM
EVEREST BABCOCK & BROWN LTD BENG HUI HLDGS (S) PTE LTD
ANDRE BORREL YAP KOON BEE @ LOUIS YAP
TOE TEOW HENG
SALE OF SHARES AND ALLOTMENT OF NEW CAPITAL (20/2) OTHERS (21/2)
—
OPEN MARKET PURCHASE (25/2)
177,000
35,000
OPEN MARKET PURCHASE (22/2)
JUSTIN LEONG MING LOONG
—
15,090,000
JUSTIN LEONG MING LOONG
—
14,090,000
SALES IN OPEN MARKET AT OWN DISCRETION (18/2)
-500,000
JUSTIN LEONG MING LOONG
—
13,590,000
SALES IN OPEN MARKET AT OWN DISCRETION (19/2)
DAYEN ENVIRONMENTAL LTD
-500,000
JOHN LEE THIAN GUAN
39,904,750
—
MARRIED DEAL (20/2)
DAYEN ENVIRONMENTAL LTD
-925,000
KOR HOCK LAI
22,038,000
—
SALES IN OPEN MARKET AT OWN DISCRETION (22/2)
7,782,000 -53,557,498
STANLEY TAN POH LENG
SALES IN OPEN MARKET AT OWN DISCRETION (22/2)
10,424,000
50,000
POH HEE BOON
SALES IN OPEN MARKET AT OWN DISCRETION (15/2)
THE BANK OF NEW YORK MELLON CORP
—
76,895,315
OTHERS (24/1)
ZHAO JING
—
358,817,502
OTHERS (25/2)
—
210,000
237,779,520
12,990,840
—
12,696,899
OTHERS (21/2)
KOH WEE MENG
610,665,000
91,825,000
OPEN MARKET PURCHASE (20/2)
150,000
KOH WEE MENG
610,815,000
91,825,000
1,000,000
ANTHONI SALIM
—
1,222,411,776
-1,199,000 10,000
HE JUN JOSEPH ALBERT PHUAY YONG HEN LIM HWEE CHIANG
85,000,000
628,293,350
—
1,223,411,776
86,000,000
628,293,350
—
REASON
91,584,640
-6,000,000
renminbi
—
ANDY ONG SIEW KWEE
KOH WEE SENG
Feb 28, 2008
FY March 2007
lant’s less than stellar earnings. For FY2007, the company reported a 9.5% drop in revenue to $234.3 million while net profit was down 30.4% to $14.7 million. Management attributed the decline
FEB 20
0.44
Feb 21, 2008 Net profit
Gross dividend yield
SHARES HELD AFTER CHANGE DIRECT DEEMED
0.445
0
Feb 28, 2008 FY Dec 2007
0.45
10000
0.675 0.6
0
0.455
20000
0.8
10000
0.46
30000
0.9
20000
Price ($) 0.465
40000
1.2
40000
Volume (’000)
50000
1.3
50000
FEB 22
TAN SU LAN @ TAN SOO LUNG
60000
1.4
COMPANY
PRUDENTIAL ASSET MANAGEMENT (S) LTD
Yongmao Holdings
60000
FILING DATE
-2,126,000
DIRECTOR/SUBSTANTIAL SHAREHOLDER
Gallant Venture
OPEN MARKET PURCHASE (28/12/07) OPEN MARKET PURCHASE (19/2)
OPEN MARKET PURCHASE (26/2) PURCHASE OF SHARES (20/2) OPEN MARKET PURCHASE (21/2) PURCHASE OF SHARES (21/2) OPEN MARKET PURCHASE (26/2)
The information in Insider Moves is provided as a service to readers. The explanations filed are at times abridged, indirect interest declarations summarised together with direct interests and figures totalled for space. While every effort is made to ensure accuracy, the information presented is not the official record of shareholder filings. Readers who are interested should check the original filings filed with the SGX.
BLOOMBERG
T
at Hong Holdings, the largest crane rental company in Singapore, last week bought nine million shares in its newly-listed associate Yongmao Holdings. The move, which follows a similar open market purchase of 9.8 million shares on Feb 22, takes Tat Hong’s stake in the China-based tower crane manufacturer to 20% from 18% previously. Prior to the IPO, Tat Hong had a 21.1% stake in Yongmao, which was reduced to 15% post-IPO. Yongmao was listed on the main board of the Singapore Exchange earlier this month. The company offered 111.6 million shares at 35 cents each. The stock surged 11 cents or 31% to 46 cents on its first day of trading and was the most actively-traded by volume. Since then, however, interest in the stock has died down and Yongmao closed last Thursday at 44.5 cents. For FY2007 ended March, Yongmao recorded a net profit of 59.2 million renminbi ($11.6 million) on
the back of revenue of 278.3 million renminbi. And for 1Q2008, net profit was 38.6 million renminbi while revenue rose to 158.3 million renminbi. Business is brisk and Yongmao’s facilities in China are already being worked at full capacity. The company hopes to raise its manufacturing capacity to 600 cranes a year from the present 200. Construction on a new facility in the province of Liaoning has already begun and is expected to be completed by year end. Yongmao plans to use about 60% of the IPO proceeds to help in the construction of this facility and another 30% to buy new machinery. Meanwhile, Anthoni Salim of Indonesian conglomerate the Salim Group — the world’s largest instant noodles maker — has been increasing his stake in Gallant Venture. Last week, Salim purchased one million shares in Gallant on the open market through Dornier Profits, a company in which he holds a more than 50% stake. Earlier this month, Salim also increased his stake in Gallant by buying two million shares through Dornier Profits as well as Parallax
BLOOMBERG
| BY JOAN NG |
THEEDGE SINGAPORE | MARCH 3, 2008 • 33
INSIDER MOVES
CAPITAL
FILING DATE
COMPANY
FEB 26
GALLANT VENTURE LTD
1,000,000
ANTHONI SALIM
—
1,224,411,776
FEB 20
GEMS TV HLDGS LTD
-4,264,000
EAGLE EYE ASSOCIATES LTD
—
104,957,250
FEB 21
GEMS TV HLDGS LTD
-30,198,000
EAGLE EYE ASSOCIATES LTD
—
74,759,250
SALE OF SHARES (19/2)
FEB 22
GEMS TV HLDGS LTD
-4,783,000
EAGLE EYE ASSOCIATES LTD
—
69,976,250
SALE OF SHARES (20/2)
FEB 22
GEMS TV HLDGS LTD
-2,657,000
EAGLE EYE ASSOCIATES LTD
—
67,319,250
SALE OF SHARES (21/2)
FEB 25
GEMS TV HLDGS LTD
-3,317,000
EAGLE EYE ASSOCIATES LTD
—
64,002,250
FEB 21
GREAT EASTERN HLDGS LTD
2,000
—
OPEN MARKET PURCHASE (21/2)
FEB 27
GREAT EASTERN HLDGS LTD
OPEN MARKET PURCHASE (26/2)
FEB 22
GUL TECHNOLOGIES SINGAPORE LTD
FEB 25
HIAP SENG ENGINEERING LTD
300,000
M RAJARAM
FEB 21
HONGGUO INT’L HLDGS LTD
-600,000
SCHRODER INVESTMENT MANAGEMENT GROUP
FEB 21
IDT HLDGS (S) LTD
390,000
YEO SENG CHONG
FEB 26
ISDN HLDGS LTD
500,000
FEB 27
ISDN HLDGS LTD
850,000
FEB 20
KIAN ANN ENGINEERING LTD
FEB 22
KING’S SAFETWEAR LTD
FEB 25 FEB 26
ts
FEB 22
LMA INT’L N V
PORTER ORLIN LLC
—
88,012,000
OPEN MARKET PURCHASE (20/2)
ts
FEB 25
MAP TECHNOLOGY HLDGS LTD
197,000
DAVID LEE KUO CHUEN
—
28,600,115
OPEN MARKET PURCHASE (21/2)
FEB 26
MAP TECHNOLOGY HLDGS LTD
141,000
DAVID LEE KUO CHUEN
—
28,741,115
OPEN MARKET PURCHASE (22/2)
FEB 27
MAP TECHNOLOGY HLDGS LTD
124,000
DAVID LEE KUO CHUEN
—
28,865,115
OPEN MARKET PURCHASE (26/2)
FEB 26
MERMAID MARITIME PUBLIC CO LTD
140,000
—
OPEN MARKET PURCHASE (26/2)
FEB 26
MIDSOUTH HLDGS LTD
—
59,091,000
OPEN MARKET PURCHASE (22/2)
FEB 27
OLAM INT’L LTD
500,000
SUNNY GEORGE VERGHESE
FEB 20
PACIFIC SHIPPING TRUST
100,000
PACIFIC INT’L LINES (PTE) LTD
FEB 15
PT BERLIAN LAJU TANKER TBK
2,926,000
FEB 18
PT BERLIAN LAJU TANKER TBK
FEB 19
0.465
0.46
0.455
0.45
0.445
BLOOMBERG
0.44
wer ubion ent reE
SHARES ACQUIRED (DISPOSED)
DIRECTOR/SUBSTANTIAL SHAREHOLDER
SHARES HELD AFTER CHANGE DIRECT DEEMED
2,000
MICHAEL WONG PAKSHONG
3,000
MICHAEL WONG PAKSHONG
50,000
TAN KIM LEONG
REASON
PURCHASE OF SHARES (26/2) SALE OF SHARES (18/2)
SALE OF SHARES (22/2)
5,000
—
50,000
—
OPEN MARKET PURCHASE (23/2)
300,000
—
OPEN MARKET PURCHASE (25/2)
—
19,632,000
802,000
8,150,000
OPEN MARKET PURCHASE (21/2)
KARL-WALTER BRAUN
18,500,000
—
OPEN MARKET PURCHASE (22/2)
KARL-WALTER BRAUN
19,350,000
—
OPEN MARKET PURCHASE (26/2)
100,000
LAU HWEE BENG
51,824,770
10,236,500
OPEN MARKET PURCHASE (18/2)
90,000
YEO LOY KIANG
1,797,000
—
OPEN MARKET PURCHASE (21/2)
LIANG HUAT ALUMINIUM LTD
45,267
BENJAMIN TAN HAI SENG
—
1,800,045,267
LEEDEN LTD
35,000
ONG NAI PEW
—
9,733,000
4,914,000
30,000
M L CHANDCHUTHA CHANDRATAT
3,544,000
LEE CHONG MIN
OTHERS (19/2)
OTHERS (17/9/07) OPEN MARKET PURCHASE (25/2)
80,022,630
15,000,000
OPEN MARKET PURCHASE (27/2)
116,643,000
220,000
OPEN MARKET PURCHASE (19/2)
PT TUNGGALADHI BASKARA
2,232,807,764
138,000,000
OPEN MARKET PURCHASE (14/2)
2,982,000
PT TUNGGALADHI BASKARA
2,235,789,764
138,000,000
OPEN MARKET PURCHASE (15/2)
PT BERLIAN LAJU TANKER TBK
3,831,000
PT TUNGGALADHI BASKARA
2,239,620,764
138,000,000
OPEN MARKET PURCHASE (18/2)
FEB 20
PT BERLIAN LAJU TANKER TBK
3,515,000
PT TUNGGALADHI BASKARA
2,243,135,764
138,000,000
OPEN MARKET PURCHASE (19/2)
FEB 21
PT BERLIAN LAJU TANKER TBK
2,500,000
PT TUNGGALADHI BASKARA
2,245,635,764
138,000,000
OPEN MARKET PURCHASE (20/2)
FEB 21
RICKMERS MARITIME
50,000
LIM HOW TECK
350,000
—
OPEN MARKET PURCHASE (20/2)
FEB 21
RICKMERS MARITIME
10,000
LIM HOW TECK
350,000
10,000
OPEN MARKET PURCHASE (21/2)
FEB 26
RICKMERS MARITIME
33,000
LEE SUET FERN
333,000
—
OPEN MARKET PURCHASE (25/2)
FEB 25
SAIZEN REAL ESTATE INV TRUST
—
1,273,094
FEB 20
SCORPIO EAST HLDGS LTD
15,000
ANG SIN LIU
8,330,738
—
OPEN MARKET PURCHASE (18/2)
FEB 20
SCORPIO EAST HLDGS LTD
316,000
ANG SIN LIU
8,646,738
—
OPEN MARKET PURCHASE (19/2)
FEB 22
SCORPIO EAST HLDGS LTD
180,000
ANG SIN LIU
8,826,738
—
OPEN MARKET PURCHASE (21/2)
FEB 22
SCORPIO EAST HLDGS LTD
134,000
ANG SIN LIU
8,960,738
—
OPEN MARKET PURCHASE (22/2)
FEB 20
SIM LIAN GROUP LTD
404,000
KUIK AH HAN
5,305,480
347,455,480
OPEN MARKET PURCHASE (20/2)
FEB 21
SIM LIAN GROUP LTD
360,000
KUIK AH HAN
5,305,480
347,816,480
OPEN MARKET PURCHASE (21/2)
FEB 20
SING INVESTMENTS & FINANCE LTD
20,000
AW KIM CHEN
—
12,065,780
OPEN MARKET PURCHASE (19/2)
FEB 21
SING INVESTMENTS & FINANCE LTD
40,000
AW KIM CHEN
—
12,105,780
FEB 26
SNF CORP LTD
9,942,670
—
FEB 21
STAMFORD TYRES CORP LTD
40,000
WEE KOK WAH
26,065,554
53,768,319
OPEN MARKET PURCHASE (20/2)
FEB 22
STAMFORD TYRES CORP LTD
40,000
WEE KOK WAH
26,065,554
53,808,319
OPEN MARKET PURCHASE (21/2)
FEB 22
STRAITS TRADING CO LTD
3,427,493
THE CAIRNS PTE LTD
78,530,446
—
OPEN MARKET PURCHASE (21/2)
FEB 22
STX PAN OCEAN CO LTD
3,180,000
MORGAN STANLEY
4,819,000
101,288,032
OPEN MARKET PURCHASE (20/2)
FEB 27
SYNEAR FOOD HLDGS LTD
7,360,000
LI WEI
—
457,460,000
PURCHASE AND SALE OF SHARES (26/2)
FEB 20
THE ASCOTT GROUP LTD
19,016,523
SOMERSET CAPITAL PTE LTD
1,021,040,470
—
OTHERS (20/2)
FEB 21
THE ASCOTT GROUP LTD
34,603,549
SOMERSET CAPITAL PTE LTD
1,055,644,019
—
OTHERS (21/2)
FEB 22
THE ASCOTT GROUP LTD
63,005,884
SOMERSET CAPITAL PTE LTD
1,118,649,903
—
OTHERS (22/2)
FEB 25
THE ASCOTT GROUP LTD
18,047,075
SOMERSET CAPITAL PTE LTD
1,136,696,978
—
OTHERS (25/2)
FEB 26
THE ASCOTT GROUP LTD
20,161,781
SOMERSET CAPITAL PTE LTD
1,156,858,759
—
OTHERS (26/2)
FEB 26
TTL HLDGS LTD
2,142,000
TAN KEE LIANG
31,562,000
—
OPEN MARKET PURCHASE (26/2)
FEB 25
UMS HLDGS LTD
-1,446,000
ARISAIG ASEAN FUND LTD
43,725,000
43,725,000
SALES IN OPEN MARKET AT OWN DISCRETION (21/2)
FEB 21
UNISTEEL TECHNOLOGY LTD
-452,000
FEB 25
WILLAS-ARRAY ELEC (HLDGS) LTD
581,000
YEO SENG CHONG
FEB 20
YANGZIJIANG SHIPBUILDING HLDGS LTD
-731,000
FMR LLC ON BEHALF OF THE MANAGED ACCOUNTS OF ITS
FEB 22
YONGMAO HLDGS LTD
9,770,000
TAT HONG HLDGS LTD
FEB 27
YONGMAO HLDGS LTD
9,006,000
TAT HONG HLDGS LTD
88,755,369
944,094
ARNOLD IP TIN CHEE
-1,461,000
NG HOCK CHING
OTHERS (21/2)
OPEN MARKET PURCHASE (20/2) SALES IN OPEN MARKET AT OWN DISCRETION (22/2)
FMR LLC ON BEHALF OF THE MANAGED ACCOUNTS OF ITS DIRECT AND INDIRECT SUBSIDIARIES & FIDELITY INT’L LTD
DIRECT AND INDIRECT SUBSIDIARIES & FIDELITY INT’L LTD
—
27,779,500
MARKET TRANSACTION (20/2)
1,050,000
17,985,000
OPEN MARKET PURCHASE (25/2)
—
164,393,000
79,749,369
—
OPEN MARKET PURCHASE (22/2)
—
OPEN MARKET PURCHASE (27/2)
SALES IN OPEN MARKET AT OWN DISCRETION (18/2)
Share buybacks DATE
nted
COMPANY
SHARES ACQUIRED HIGH
SHARE PRICE LOW
CUMULATIVE NET OUTSTANDING TREASURY SHARES
DATE
COMPANY
SHARES ACQUIRED
SHARE PRICE HIGH
LOW
CUMULATIVE NET OUTSTANDING TREASURY SHARES
FEB 12
AZTECH SYSTEMS LTD
305,000
0.260
0.260
10,098,000
FEB 27
SINO-ENVIRONMENT TECH GRP LTD
1,000,000
1.313
1.313
3,550,000
FEB 15
AZTECH SYSTEMS LTD
120,000
0.265
0.265
10,218,000
FEB 11
UNITED OVERSEAS BANK LTD
210,000
17.400
17.000
15,937,000
FEB 19
AZTECH SYSTEMS LTD
100,000
0.255
0.255
10,318,000
FEB 12
UNITED OVERSEAS BANK LTD
200,000
17.200
17.040
16,137,000
FEB 20
AZTECH SYSTEMS LTD
110,000
0.250
0.250
10,428,000
FEB 13
UNITED OVERSEAS BANK LTD
200,000
17.640
17.260
16,337,000
FEB 22
AZTECH SYSTEMS LTD
50,000
0.245
0.245
10,578,000
FEB 14
UNITED OVERSEAS BANK LTD
200,000
17.960
17.700
16,537,000
FEB 26
AZTECH SYSTEMS LTD
290,000
0.250
0.235
10,868,000
FEB 15
UNITED OVERSEAS BANK LTD
200,000
18.220
17.660
16,737,000
FEB 27
AZTECH SYSTEMS LTD
150,000
0.245
0.240
11,018,000
FEB 18
UNITED OVERSEAS BANK LTD
200,000
18.360
17.800
16,937,000
FEB 25
CHINA PRECISION TECHNOLOGY LTD
19,900,000
0.270
0.270
21,291,000
FEB 19
UNITED OVERSEAS BANK LTD
150,000
18.440
18.200
17,087,000
FEB 26
CHUAN HUP HLDGS LTD
201,000
0.360
0.350
43,213,000
FEB 20
UNITED OVERSEAS BANK LTD
200,000
18.120
17.860
17,287,000
FEB 27
CHUAN HUP HLDGS LTD
258,000
0.360
0.350
43,471,000
FEB 22
UNITED OVERSEAS BANK LTD
150,000
18.680
18.080
17,587,000
FEB 22
DBS GROUP HLDGS LTD
50,000
17.900
17.780
1,505,000
FEB 25
UNITED OVERSEAS BANK LTD
150,000
18.860
18.720
17,737,000
FEB 26
INNOTEK LTD
359,000
0.790
0.750
10,435,000
FEB 26
UNITED OVERSEAS BANK LTD
150,000
18.900
18.480
17,887,000
FEB 27
INNOTEK LTD
149,000
0.795
0.785
10,584,000
FEB 27
UNITED OVERSEAS BANK LTD
150,000
18.900
18.420
18,037,000
FEB 25
SEMBCORP MARINE LTD
2,400,000
3.650
3.600
2,400,000
FEB 11
WING TAI HLDGS LTD
500,000
2.040
2.040
1,867,000
FEB 27
SEMBCORP MARINE LTD
1,358,000
3.760
3.700
3,758,000
34 • THEEDGE SINGAPORE
| MARCH 3, 2008
CAPITAL
THOMSON FIRST CALL EARNINGS ESTIMATES REGIONAL
\ About Thomson First Call Thomson First Call (www1.firstcall.com) is the source for real-time broker research and quantitative data serving the global financial community. Internet-based applications pioneered by Thomson First Call deliver integrated content from over 850 brokerage firms to 52,000 institutional desktops worldwide. Thomson First Call provides accurate, comprehensive coverage of more than 18,000 companies in 60 countries, and offers realtime, commingled full-text equity and fixed income research, analyst morning meeting notes, analyst earning estimates, corporate news, shareholdings data, sell-side workflow tools, internal research distribution and outstanding technology-based custom solutions. In the fall of 2000, The Thomson CORP acquired Primark and its stable of brands, among them I/B/E/S and Datastream. Since then, Thomson Financial has integrated I/B/E/S, Thomson First Call and Datastream into an organization focused on research and analytics. Also, I/B/E/S has been fully integrated onto the Thomson First Call website. Collectively, the totally revamped site represents 50 years of experience between I/B/E/S and Thomson First Call, providing best-of-breed financial content and pioneering technology product lines to the global buy-side and sell-side communities. COMPANY LONG NAME
BASIC INDUSTRIES RIO TINTO LTD POSCO BAOSHAN IRON & STEEL CO LTD ALUMINUM CORP OF CHINA (CHALCO) WUHAN IRON & STEEL CO LTD FORMOSA PETROCHEMICAL CORP STEEL AUTHORITY OF INDIA (SAIL) SIME DARBY BHD FORTESCUE METALS GROUP LTD ANGANG STEEL CO LTD WESFARMERS LTD NAN YA PLASTICS CORP CHINA STEEL CORP NEWCREST MINING LTD IOI CORP BHD FORMOSA PLASTICS CORP TATA STEEL LTD STERLITE INDUSTRIES INDIA LTD LG CORP HINDUSTAN UNILEVER LTD CAPITAL GOODS SAMSUNG ELECTRONICS HON HAI PRECISION INDUSTRY CHINA UNITED TELECOMMUNICATIONS HYUNDAI HEAVY INDUSTRIES LARSEN & TOUBRO CHINA YANGTZE POWER CO LTD CHINA RAILWAY GROUP LTD CHINA STATE SHIPBUILDING CO LTD LG ELECTRONICS INC DOOSAN HEAVY INDUSTRIES KEPPEL CORP LTD LEIGHTON HLDGS LTD CITIC PACIFIC LTD CHINA COMMUNICATIONS CONSTRUCTION FOXCONN INTERNATIONAL HLDGS ANHUI CONCH CEMENT CO LTD HYUNDAI ENGINEERING & CONSTRUCTION CHEUNG KONG INFRASTRUCTURE GMR INFRASTRUCTURE LTD GS ENGINEERING CONSUMER DURABLES SAIC MOTOR CORP LTD HYUNDAI MOTOR CO LTD PT ASTRA INTERNATIONAL INC GUANGDONG MIDEA ELECTRIC APPLIANCE MARUTI SUZUKI INDIA LTD BAJAJ AUTO LTD JARDINE CYCLE & CARRIAGE LTD FAW CAR CO LTD MAHINDRA & MAHINDRA DENWAY MOTORS LTD QINGDAO HAIER COMPANY LTD KIA MOTORS CORP HERO HONDA BOSCH LTD LEE & MAN PAPER MANUFACTURING LTD TIANJIN FAW XIALI AUTOMOBILE CO SINOTRUK (HONG KONG) LTD DONGFENG AUTOMOBILE CO LTD XINJIANG GUANGHUI INDUSTRY CO LTD YULON MOTOR COMPANY CONSUMER NON-DURABLES RELIANCE INDUSTRIES LTD KWEICHOW MOUTAI DISTILLERY GROUP YIBIN WULIANGYE CO LTD ITC LTD FORMOSA CHEMICAL & FIBRE KT&G CORP FOSTER’S GROUP LTD LUZHOU LAOJIAO CO LTD GOLDEN AGRI-RESOURCES LTD FAR EASTERN TEXTILE CO TINGYI (CAYMAN ISLN) HLDG CO COCA-COLA AMATIL LTD COSCO CORP LTD YOUNGOR GROUP CO LTD DAIRY FARM INTERNATIONAL GREE ELECTRICAL APPLIANCES INC UNILEVER INDONESIA TBK PT NORTHEAST SECURITIES CO LTD PT ASTRA AGRO LESTARI TBK UNI-PRESIDENT ENTERPRISES CO CONSUMER SERVICES HUTCHISON WHAMPOA LTD WOOLWORTHS LTD HAITONG SECURITIES CO LTD JARDINE STRATEGIC HLDGS LTD WIPRO LTD ESPRIT HLDGS LTD BRAMBLES LTD LI & FUNG LTD SUNING APPLIANCE CO LTD SHINSEGAE CO LTD(P) TENCENT HLDGS LTD SWIRE PACIFIC LTD LOTTE SHOPPING CO SAMSUNG CORP SHANGRI-LA ASIA LTD GENTING BERHAD CROWN LTD TABCORP HLDGS LTD GOME ELECTRICAL APPLIANCES HLDG SHENZHEN OVERSEAS CHINESE TOWN H ENERGY PETROCHINA CO LTD CHINA PETROLEUM & CHEMICAL ‘H’ BHP BILLITON LTD CNOOC LTD OIL & NATURAL GAS CORP NTPC LTD WOODSIDE PETROLEUM LTD PTT PUBLIC COMPANY LTD RELIANCE PETROLEUM LTD
Thomson First Call Real Time Earnings Estimates database features more than 200 data items, including current and previous individual earnings estimates, recommendations, growth rates and Thomson First Call consensus estimates. The database covers over 17,000 companies in 60 countries and is updated by analysts from more than 770 leading brokerage firms worldwide as they make revisions. Thomson First Call Research Direct provides institutional-quality research and quantitative forecast measures for more than 34,000 companies in over 130 countries. The global information originates from 800 contributing firms, corporate documents and public filings. The breadth and depth of Thomson First Calls content offerings are unparalleled in the industry as we now offer integrated access to combined First Call and I/B/E/S research and data. The Edge/Thomson First Call Earnings Table provides only a brief summary of the detailed Thomson First Call data available in real-time on Singapore equities. For more information readers are invited to contact Thomson First Call at the numbers below or visit the company website. Thomson First Call has offices throughout five continents, covering major markets around the globe, including New York, Boston, Toronto, Sao Paulo, London, Paris, Frankfurt, Tokyo, Hong Kong, Singapore, Sydney, Seoul and Mumbai. Thomson First Call is part of Thomson Financial, a US$2 billion provider of information and technology solutions to the worldwide financial community.
COUNTRY NAME
MARKET CAP (US$ MIL)
CURRENCY
PRICE (LATEST)
EPS FY1 MEAN
EPS FY1 P/E
Australia Korea China China China Taiwan India Malaysia Australia China Australia Taiwan Taiwan Australia Malaysia Taiwan India India Korea India
57,828.83 49,978.83 42,299.87 39,690.93 27,361.28 26,008.27 25,188.15 22,443.35 21,488.65 20,994.94 20,517.83 18,358.61 17,324.06 16,016.34 15,783.64 15,775.05 14,848.78 14,582.02 12,460.18 11,999.10
AUD KRW CNY CNY CNY TWD INR MYR AUD CNY AUD TWD TWD AUD MYR TWD INR INR KRW INR
136.20 543,000.00 17.29 31.77 19.99 87.70 243.35 12.00 8.25 24.44 40.50 75.10 47.00 38.00 8.30 86.00 811.05 821.40 68,400.00 219.90
8.05 46,850.96 0.82 0.89 0.83 7.42 18.65 0.57 -0.04 1.27 1.85 7.79 4.52 1.14 0.33 8.26 100.87 58.08 4,308.05 9.52
16.91 11.59 21.01 35.72 23.96 11.82 13.05 20.95 — 19.20 21.87 9.64 10.40 33.37 25.03 10.42 8.04 14.14 15.88 23.11
Korea Taiwan China Korea India China China China Korea Korea Singapore Australia Hong Kong Hong Kong Hong Kong China Korea Hong Kong India Korea
89,880.20 38,729.79 31,655.72 30,809.18 26,568.19 23,142.32 23,066.97 16,835.12 15,804.75 14,815.41 12,537.38 12,458.20 11,936.91 11,815.38 11,744.67 10,100.63 10,066.90 9,081.33 8,137.19 8,049.09
KRW TWD CNY KRW INR CNY CNY CNY KRW KRW SGD AUD HKD CNY HKD CNY KRW HKD INR KRW
578,000.00 192.00 10.69 384,000.00 3,630.95 17.60 9.66 181.88 103,500.00 134,000.00 11.10 48.20 42.35 19.10 12.98 63.80 86,000.00 31.40 178.35 149,500.00
46,350.15 11.74 0.23 24,173.58 87.39 0.57 0.16 4.59 7,704.36 2,584.67 0.79 2.18 2.95 0.39 0.89 1.57 2,925.59 2.22 1.08 7,847.27
12.47 16.35 47.24 15.89 41.55 31.01 60.75 39.60 13.43 51.84 14.11 22.10 14.36 48.90 14.59 40.55 29.40 14.17 165.63 19.05
China Korea Indonesia China India India Singapore China India Hong Kong China Korea India India Hong Kong China Hong Kong China China Taiwan
17,251.59 15,691.18 12,452.02 8,207.49 6,024.36 5,518.50 5,154.39 4,831.57 4,056.12 4,003.28 3,872.69 3,614.35 3,604.93 3,277.02 3,195.77 2,850.28 2,644.68 2,165.41 2,156.08 2,041.62
CNY KRW IDR CNY INR INR SGD CNY INR HKD CNY KRW INR INR HKD CNY HKD CNY CNY TWD
18.85 67,600.00 27,950.00 46.60 832.10 2,176.40 20.96 21.25 658.65 4.15 20.71 9,860.00 720.40 4,080.05 21.90 12.79 9.06 7.75 17.82 43.10
0.76 7,696.75 1,483.23 1.33 65.74 128.43 1.36 0.38 66.53 0.30 0.52 236.41 44.05 170.40 1.33 0.20 0.55 0.28 0.45 —
24.72 8.78 18.84 35.09 12.66 16.95 15.40 56.07 9.90 13.61 40.06 41.71 16.36 23.94 16.47 64.60 16.59 27.90 39.22 —
India China China India Taiwan Korea Australia China Singapore Taiwan Hong Kong Australia Singapore China Hong Kong China Indonesia China Indonesia Taiwan
94,258.58 25,339.41 19,329.84 19,046.44 13,800.31 11,990.41 9,608.24 8,521.65 8,303.49 7,427.50 7,342.38 6,734.47 6,687.66 6,566.61 6,519.43 6,102.76 5,751.68 5,638.50 5,606.14 5,221.45
INR CNY CNY INR TWD KRW AUD CNY USD TWD USD AUD SGD CNY USD CNY IDR CNY IDR TWD
2,587.55 192.18 36.45 201.75 77.90 80,700.00 5.38 70.00 0.83 51.70 1.31 9.88 4.20 21.11 4.84 52.32 6,850.00 38.58 32,350.00 45.80
101.28 2.35 0.44 8.40 8.40 4,832.78 0.37 0.80 0.03 2.34 0.03 0.55 0.23 0.90 0.19 1.33 272.09 2.22 1,158.71 —
25.55 81.72 82.93 24.03 9.27 16.70 14.37 87.83 24.06 22.06 37.58 17.91 18.18 23.57 26.16 39.33 25.18 17.37 27.92 —
Hong Kong Australia China Hong Kong India Hong Kong Australia Hong Kong China Korea Hong Kong Hong Kong Korea Korea Hong Kong Malaysia Australia Australia Hong Kong China
41,078.89 33,877.95 24,644.38 17,122.68 16,103.78 16,086.98 13,806.05 13,060.38 12,989.24 11,627.90 11,439.26 10,895.03 10,056.72 9,730.11 8,576.90 8,184.13 7,625.61 7,415.98 7,254.28 6,951.33
HKD AUD CNY USD INR HKD AUD HKD CNY KRW HKD HKD KRW KRW USD MYR AUD AUD HKD CNY
75.10 30.01 42.88 15.82 439.90 100.90 10.50 29.50 64.50 584,000.00 49.85 92.75 328,000.00 59,000.00 2.98 7.10 12.06 15.20 17.24 42.85
7.82 1.32 1.32 1.04 22.34 5.25 0.50 0.95 0.90 29,343.52 0.86 6.59 25,624.48 2,935.59 0.09 0.42 0.58 0.97 0.45 0.64
9.60 22.78 32.59 15.14 19.69 19.20 20.92 31.14 71.84 19.90 58.00 14.08 12.80 20.10 34.68 16.81 20.82 15.65 38.12 66.51
China China Australia Hong Kong India India Australia Thailand India
510,785.21 167,722.81 124,304.51 76,774.14 55,651.96 41,811.04 36,639.56 29,164.97 18,657.44
CNY CNY AUD CNY INR INR AUD THB INR
22.58 17.17 39.85 12.40 1,038.30 202.35 57.27 334.00 165.45
0.79 0.72 2.91 0.71 100.92 9.18 2.79 34.91 -0.03
28.45 23.94 13.71 17.50 10.29 22.05 20.53 9.57 —
Through the widest range of products and services in the industry, Thomson Financial helps clients in more than 70 countries make better decisions, be more productive and achieve superior results. Thomson Financial is part of The Thomson CORP (www. thomson. com/financial/), a leading global provider of integrated information solutions for business and professional customers. The CORP reported 2000 revenues of approximately US$6 billion and its common shares are listed on the Toronto and London stock exchanges (TSE: TOC). For more information on Thomson Financial, visit www.thomsonfinancial.com. Glossary to First Call • Net Profit Estimates Up Last 1 Month: The number of brokers who have revised upward their net profit estimates in the last one month • Net Profit Estimates Down Last 1 Month: The number of brokers who have revised downward their net profit estimates in the last one month • Last Price: The last quoted price corresponding to the last update of the service • 52 Week High: Highest share price during the 52 weeks leading up to the last update adjusted for capital changes • EPS FY1: The reported earnings per share (EPS) or the arithmetic average of all the estimates • EPS FY2: The reported EPS or the arithmetic average of all the estimates • PE FY1: Price-Earnings Ratio (price divided by EPS) COMPANY LONG NAME
COUNTRY NAME
CHINA SHENHUA ENERGY CO LTD PT BUMI RESOURCES TBK INDIAN OIL CORP LTD PTT EXPLORATION & PRODUCTION PCL HUANENG POWER INTERNATIONAL INC CHINA OILFIELD SERVICES LTD SK ENERGY CO LTD SUZLON ENERGY LTD CAIRN INDIA OIL & GAS DEVELOPMENT CO LTD WORLEYPARSONS LTD FINANCE INDUSTRIAL & COMMERCIAL BANK OF CHINA LIFE INSURANCE CO LTD COMMONWEALTH BANK OF AUSTRALIA CHINA MERCHANTS BANK CO LTD PING AN INSURANCE COMPANY NATIONAL AUSTRALIA BANK LTD SUN HUNG KAI PROPERTIES LTD WESTPAC BANKING CORP AUSTRALIA & NEW ZEALAND BANKING CHINA PACIFIC INSURANCE GROUP CO HANG SENG BANK LTD DLF LTD CHEUNG KONG HLDGS LTD BANK OF CHINA LTD CHINA CITIC BANK WESTFIELD GROUP ICICI BANK LTD INDUSTRIAL BANK CO LTD CITIC SECURITIES CO LTD STATE BANK OF INDIA HEALTHCARE WILMAR INTERNATIONAL LTD CSL LTD SUN PHARMACEUTICALS INDS LTD SONIC HEALTHCARE LTD HENGAN INTL GROUP CO LTD RANBAXY LABORATORIES LTD CIPLA LTD GLENMARK PHARMACEUTICALS LTD JIANGSU HENRUI MEDICINE CO LTD COCHLEAR LTD HARBIN PHARMACEUTICAL GROUP SHANGHAI FOSUN INDUSTRIAL CO LTD YUNNAN BAIYAO GROUP CO LTD SYMBION HEALTH LTD SHANDONG DONG-E-EJIAO COMPANY LTD DR REDDY’S LABORATORIES LTD DIVI’S LABORATORIES LTD GLAXOSMITHKLINE PHARMACEUTICALS DABUR INDIA LTD BEIJING DOUBLE CRANE PHARMACEUTI PUBLIC UTILITIES CHINA MOBILE LTD TELSTRA CORP LTD SINGAPORE TELECOMMUNICATIONS BHARTI AIRTEL LTD CHINA UNICOM RELIANCE COMMUNICATION LTD BHARAT HEAVY ELECTRICALS CHUNGHWA TELECOM CO LTD KOREA ELECTRIC POWER (KEPCO) TELEKOMUNIKASI INDONESIA TBK PT CHINA NETCOM GROUP CORP HK LTD CLP HLDGS LTD DATANG INTERNATIONAL POWER GENER HONG KONG & CHINA GAS CO SK TELECOM CO LTD PHILIPPINE LONG DISTANCE TEL KT CORP HONGKONG ELECTRIC HLDGS TELEKOM MALAYSIA TENAGA NASIONAL TECHNOLOGY TAIWAN SEMICONDUCTOR MANUFACTURING INFOSYS TECHNOLOGIES LTD TATA CONSULTANCY SERVICES LTD LG PHILIPS LCD AU OPTRONICS CORP HIGH TECH COMPUTER CORP HYNIX SEMICONDUCTOR MEDIATEK INCORPORATED ASUSTEK COMPUTER INC XINJIANG GOLDWIND SCI & TECH CO CHI MEI OPTOELECTRONICS CORP INNOLUX DISPLAY CORP UNITED MICROELECTRONICS CORP SATYAM COMPUTER SERVICES LTD LENOVO GROUP LTD SILICONWARE PRECISION INDS ADVANCED SEMICONDUCTOR ENGINEERING FOXCONN TECHNOLOGY CO LTD HCL TECHNOLOGIES LTD COMPUTERSHARE LTD TRANSPORTATION CHINA COSCO HLDGS CO LTD DAQIN RAILWAY COMPANY LTD SHANGHAI INTL PORT GROUP CO LTD MTR CORP AIR CHINA LTD SINGAPORE AIRLINES LTD CHINA MERCHANTS HLDGS INTERNATIONAL CHINA SHIPPING DEVELOPMENT CO LTD MISC BERHAD CHINA SHIPPING CONTAINER LINES CHINA SOUTHERN AIRLINES CO LTD CATHAY PACIFIC AIRWAYS SHANGHAI INTERNATIONAL AIRPORT QANTAS AIRWAYS LTD MUNDRA PORT SPECIAL ECONOMIC ZON CHINA EASTERN AIRLINES ‘H’ TATA MOTORS LTD GUANGSHEN RAILWAY ‘H’ NWS HLDGS LTD MACQUARIE AIRPORTS
• PE FY2: Price-Earnings Ratio (price divided by EPS) • No of Brokers’ Estimates: The number of brokers’ estimates used to calculate the consensus estimates Disclaimer In no event will Thomson First Call or The Edge be responsible for special, indirect, incidental or consequential damages that may be incurred or experienced on account of entering into or relying on the data. Thomson First Call acts solely as a transmitter of information provided by certain brokers, certain CORPs and certain other sources. Neither Thomson First Call, any source, nor any third party that Thomson First Call contracts to effect transmission, makes any warranty of merchantability or fitness for a particular purpose with respect to the Thomson First Call financial information. Nor shall any of them be liable for any error or omission in the information supplied to The Edge or its subscribers or the accuracy, completeness or timeliness of the data.
For enquiries, call: Hong Kong (852) 2524 0077
Seoul
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Singapore
(65) 6879 4122
Mumbai
(91) 22 204 6905
Sydney
(612) 9233 4855
Tokyo
(813) 5218 6648
MARKET CAP (US$ MIL)
CURRENCY
PRICE (LATEST)
EPS FY1 MEAN
EPS FY1 P/E
Hong Kong Indonesia India Thailand China China Korea India India Pakistan Australia
17,833.92 16,869.33 16,298.22 15,844.94 15,238.89 13,499.52 12,787.53 11,392.53 10,040.68 8,886.73 8,761.96
HKD IDR INR THB CNY CNY KRW INR INR PKR AUD
40.90 7,900.00 545.45 155.00 12.12 32.64 131,000.00 303.70 225.30 129.15 40.94
1.26 314.21 85.93 10.96 0.51 0.48 13,467.88 8.08 1.52 12.88 1.48
32.48 25.14 6.35 14.15 23.82 67.61 9.73 37.59 148.27 10.02 27.73
China China Australia China China Australia Hong Kong Australia Australia China Hong Kong India Hong Kong Hong Kong China Australia India China China India
229,295.02 112,466.84 56,765.60 53,569.60 48,024.58 47,411.03 45,665.65 42,858.18 42,045.93 38,209.56 35,689.53 35,241.61 35,184.12 33,161.48 33,001.06 32,583.39 30,561.50 30,357.64 29,377.66 29,110.47
CNY HKD AUD CNY CNY AUD HKD AUD AUD CNY HKD INR HKD CNY CNY AUD INR CNY CNY INR
6.54 42.10 46.41 31.84 71.82 31.33 138.80 24.55 23.55 35.52 145.50 824.90 118.40 3.12 8.87 18.05 1,113.75 43.46 63.43 2,082.55
0.25 1.43 3.73 1.00 2.24 3.01 5.58 2.05 2.18 0.85 8.31 40.04 11.21 0.21 0.20 1.06 38.40 1.69 3.56 117.16
26.62 29.42 12.44 31.95 32.06 10.40 24.87 11.96 10.81 41.69 17.50 20.60 10.56 14.84 43.84 17.01 29.01 25.75 17.84 17.78
Singapore Australia India Australia Hong Kong India India India China Australia China China China Australia China India India India India China
22,078.33 19,887.16 5,987.53 4,574.87 4,379.76 4,080.33 3,925.90 3,199.29 3,112.89 2,889.96 2,888.99 2,841.11 2,587.96 2,465.82 2,334.18 2,280.62 2,244.74 2,208.16 2,173.86 1,987.86
SGD AUD INR AUD HKD INR INR INR CNY AUD CNY CNY CNY AUD CNY INR INR INR INR CNY
4.86 38.88 1,192.65 14.76 29.90 436.35 201.55 513.60 51.69 55.90 16.65 16.43 38.27 4.10 31.90 541.55 1,387.55 1,040.30 100.40 32.26
0.13 1.27 51.00 0.75 0.84 19.54 8.79 23.14 0.88 2.15 0.40 0.35 0.65 0.18 0.40 28.85 52.42 47.41 3.97 0.64
37.35 30.52 23.39 19.58 35.45 22.33 22.94 22.19 58.89 25.95 41.21 47.01 58.56 23.40 79.68 18.77 26.47 21.94 25.31 50.41
Hong Kong Australia Singapore India Hong Kong India India Taiwan Korea Indonesia China Hong Kong China Hong Kong Korea Philippines Korea Hong Kong Malaysia Malaysia
308,180.78 57,016.52 44,397.09 40,029.15 31,941.77 30,281.53 27,759.30 23,591.45 23,434.41 22,407.39 21,579.12 19,264.73 19,097.43 17,959.08 16,757.32 13,501.17 13,465.96 12,459.04 12,311.80 12,272.27
CNY AUD SGD INR CNY INR INR TWD KRW IDR HKD HKD CNY HKD KRW PHP KRW HKD MYR MYR
110.11 4.93 3.92 841.65 16.77 585.45 2,262.90 76.10 34,600.00 10,100.00 25.20 62.35 16.15 23.10 195,500.00 2,895.00 46,350.00 45.50 11.50 9.10
4.14 0.30 0.23 34.78 0.56 24.31 66.33 5.08 3,103.89 674.70 1.66 4.53 0.31 1.21 20,782.73 187.84 4,214.09 3.31 0.71 0.82
26.59 16.35 16.83 24.20 29.83 24.08 34.11 14.98 11.15 14.97 15.16 13.77 51.73 19.16 9.41 15.41 11.00 13.76 16.24 11.08
Taiwan India India Korea Taiwan Taiwan Korea Taiwan Taiwan China Taiwan Taiwan Taiwan India Hong Kong Taiwan Taiwan Taiwan India Australia
53,892.98 23,164.33 21,524.28 16,639.52 15,366.68 12,239.69 12,097.00 11,881.74 10,520.60 10,363.23 9,260.47 8,239.14 7,923.78 7,338.75 6,192.77 5,320.43 5,144.32 4,952.46 4,799.20 4,720.38
TWD INR INR KRW TWD TWD KRW TWD TWD CNY TWD TWD TWD INR HKD TWD TWD TWD INR AUD
63.60 1,617.40 877.70 44,050.00 61.30 666.00 24,950.00 356.00 88.00 74.18 42.55 93.40 18.70 437.10 5.39 54.00 29.45 203.50 288.30 9.14
4.05 81.00 52.15 3,651.71 6.81 47.36 738.64 22.83 7.07 0.85 5.00 5.74 0.87 25.37 0.34 5.71 2.89 12.14 19.18 0.57
15.72 19.97 16.83 12.06 9.00 14.06 33.78 15.59 12.45 87.79 8.51 16.27 21.38 17.23 15.75 9.45 10.19 16.77 15.03 16.00
China China China Hong Kong China Singapore Hong Kong China Malaysia China China Hong Kong China Australia India China India China Hong Kong Australia
40,215.83 36,221.79 23,401.19 21,417.45 20,715.75 13,332.06 13,119.89 10,286.13 10,246.02 10,084.15 8,829.28 8,421.70 8,224.17 8,178.41 7,483.92 6,864.63 6,834.12 6,269.73 6,094.57 5,990.25
CNY CNY CNY HKD CNY SGD HKD CNY MYR CNY CNY HKD CNY AUD INR CNY INR CNY HKD AUD
37.70 19.98 7.98 29.75 18.90 15.80 42.50 36.27 8.85 9.10 19.75 16.66 30.55 4.63 745.35 14.89 707.45 7.94 23.40 3.75
1.97 0.46 0.17 1.13 0.32 1.62 1.36 1.37 0.66 0.29 0.48 1.49 0.91 0.56 8.47 -0.05 50.11 0.23 2.11 0.19
19.15 43.37 46.71 26.41 58.33 9.77 31.26 26.44 13.44 31.93 41.55 11.20 33.47 8.23 88.03 — 14.12 34.22 11.11 19.36
THEEDGE SINGAPORE | MARCH 3, 2008 • 35
CAPITAL COMPANY
PRICE
MARKET CAPITALISATION ($ MIL)
RECOMMENDATION RECOMMENDATION CONSENSUS 75 DAYS CONSENSUS 75 DAYS AS OF 26/02/08 AS OF 04/12/07
ADVANCE SCT LTD 0.64 ALLCO COMMERCIAL REAL ESTATE INVESTMENT TRUST 0.86 ALLGREEN PROPERTIES 1.23 AMARA HLDGS LTD 0.57 AQUA-TERRA SUPPLY CO LTD 0.40 ARMSTRONG INDUSTRIAL CORP 0.31 ASCENDAS INDIA TRUST 1.08 ASCENDAS REAL ESTATE 2.29 ASCOTT RESIDENCE TRUST 1.41 ASIA ENTERPRISES HLDGS LTD 0.43 ASIA ENVIRONMENT HLDGS LTD 0.60 ASIA PACIFIC BREWERIES 13.40 ASIAPHARM 0.70 ASL MARINE HLDGS LTD 1.28 AUSGROUP LTD 1.10 AZTECH SYSTEMS LTD 0.25 BANYAN TREE HLDGS LTD 1.31 BEAUTY CHINA HLDGS LTD 1.10 BENG KUANG MARINE LTD 0.25 BIOSENSORS INTERNATIONAL GROUP LTD 0.89 BIO-TREAT TECHNOLOGY 0.63 BOUSTEAD SPORE LTD 2.30 BROADWAY INDUSTRIAL GROUP 0.85 BUKIT SEMBAWANG ESTATES 9.30 C&G INDUSTRIAL HLDGS LTD 0.37 CAMBRIDGE INDUSTRIAL TRUST 0.69 CAPITACOMMERCIAL TRUST 2.18 CAPITALAND LTD 6.30 CAPITAMALL TRUST 3.30 CAPITARETAIL CHINA TRUST 1.62 CDL HOSPITALITY TRUSTS 2.20 CH OFFSHORE LTD 0.63 CHARTERED SEMICONDUCTOR 0.76 CHINA AUTO ELECTRONICS GROUP LTD 0.28 CHINA DAIRY GROUP LTD 0.27 CHINA ENERGY LTD 0.94 CHINA FISHERY GROUP LTD 1.72 CHINA MILK PRODUCTS GROUP LTD 0.88 CHINA SKY CHEMICAL FIBRE CO LTD 1.53 CHINA SPORTS INTERNATIONAL LTD 1.23 CHINA SUNSINE CHEMICAL HLDGS LTD 0.27 CHINA XLX FERTILISER LTD 0.83 CITY DEVELOPMENTS LTD 11.66 CITY SPRING INFRASTRUCTURE TRUST 0.78 COMFORTDELGRO CORP LTD 1.63 COSCO CORP SINGAPORE LTD 4.28 CREATIVE TECHNOLOGY LTD 7.00 CSE GLOBAL LTD 0.97 DATACRAFT ASIA LTD 1.12 DBS GROUP HLDG LTD 17.94 DELONG HLDGS LTD 3.13 EOC LTD 19.90 EPURE INTERNATIONAL LTD 1.98 EU YAN SANG INTL LTD 0.55 EZRA HLDGS LTD 2.31 FEDERAL INTL 2000 LTD 0.54 FERROCHINA LTD 1.57 FIBRECHEM TECHNOLOGIES LTD 0.83 FIRST REAL ESTATE INVESTMENT TRUST (INDONESIA) 0.74 FIRST SHIP LEASE TRUST 1.12 FJ BENJAMIN HLDGS LTD 0.54 FORTUNE REAL ESTATE INV TRUST 5.60 FRASER & NEAVE LTD 4.95 FRASERS CENTREPOINT TRUST 1.30 GALLANT VENTURE LTD 0.70 GEMS TV HLDGS LTD 0.25 GOLDEN AGRI RESSOURCES 1.17 GOODPACK 1.65 GP BATTERIES INTL LTD 0.95 GREAT EASTERN HLDGS LTD 16.20 GUOCOLAND LTD 4.07 HG METAL MANUFACTURING LTD 0.35 HIAP SENG ENGINEERING LTD 0.40 HI-P INTERNATIONAL LTD 0.50 HO BEE INVESTMENT LTD 1.29 HONG LEONG ASIA LTD 2.99 HONG LEONG FINANCE LTD 3.80 HONGKONG LAND HLDGS LTD 4.20 HOTEL PROPERTIES LTD 3.19 HOUR GLASS LTD 0.91 HUAN HSIN HLDGS LTD 0.58 HUPSTEEL LTD 0.32 HYFLUX 3.33 INDOFOOD AGRI RESOURCES LTD 2.77 INTER ROLLER ENGINEERING 0.58 JARDINE CYCLE & CARRIAGE LTD 21.60 JARDINE MATHESON HLDGS LTD 27.86 JARDINE STRATEGIC HLDGS LTD 15.04 JAYA HLDG LTD 1.38 JIUTIAN CHEMICAL GROUP LTD 0.23 JURONG TECHNOLOGIES IND 0.40 K REAL ESTATE INVESTMENT TRUST ASIA 1.63 KEPPEL CORP LTD 10.60 KEPPEL LAND LTD 5.96 LIAN BENG GROUP 0.56 LIZHONG WHEEL GROUP LTD 0.63 LMA INTERNATIONAL 0.25 LONGCHEER HLDGS LTD 0.46 LUZHOU BIO-CHEM TECHNOLOGY LTD 0.24 MACARTHURCOOK INDUSTRIAL REAL ESTATE INVESTMENT TR 1.00 MACQUARIE MEAG PRIME REAL ESTATE INVESTMENT TRUST 1.26 MAN WAH HLDGS LTD 0.26 MANDARIN ORIENTAL INTL 1.90 MAPLETREE LOGISTICS TRUST 0.94 MEIBAN GROUP LTD 0.41 MICRO-MECHANICS (HLDGS) LTD 0.68 MIDAS HLDGS LTD 1.38 MOBILEONE LTD 2.01 NEPTUNE ORIENT LINES LTD 3.45 NERA TELECOM 0.41 NOBLE GROUP LTD 1.95 OLAM INTERNATIONAL LTD 2.56 OSIM INTL 0.38 OVERSEAS-CHINESE BANKING CORP 7.57 PACIFIC ANDES HLDG 0.52 PAN UNITED CORP 0.69 PARKWAY HLDGS LTD 2.84 PARKWAY LIFE REAL ESTATE INVESTMENT TRUST 1.18 PEOPLE’S FOOD HLDGS 0.98 PETRA FOODS LTD 1.28 RAFFLES EDUCATION 2.70 RAFFLES MEDICAL GROUP 1.32 RICKMERS MARITIME TRUST 1.09 ROBINSON & CO LTD 6.40 ROTARY ENGRG LTD 1.00 SAMUDERA SHIPPING LINE 0.34 SC GLOBAL DEVT LTD 1.79 SEMBCORP INDUSTRIES LTD 5.00 SEMBCORP MARINE LTD 3.65 SIA ENGINEERING CIE 3.92 SILVERLAKE AXIS LTD 0.55 SINCERE WATCH LTD 2.38 SING HLDGS LTD 0.53 SINGAPORE AIRLINES LTD 15.74 SINGAPORE AIRPORT TERMINAL 2.40 SINGAPORE EXCHANGE LTD 8.76 SINGAPORE FOOD INDUSTRIES 0.79 SINGAPORE LAND 6.95 SINGAPORE PETROLEUM CO LTD 7.15 SINGAPORE POST LTD 1.12 SINGAPORE PRESS HLDG LTD 4.40 SINGAPORE SHIPPING CORP 0.40 SINGAPORE TECH ENGINEERING 3.62 SINGAPORE TELECOM 3.89 SINO ENVIRONMENT TECHNOLOGY GROUP LTD 1.41 SINOMEM TECHNOLOGY LTD 0.81 SMRT 1.74 SNP CORP LTD 1.16 SP CHEMICALS LTD 0.71 SSH CORP LTD 0.31 STARHUB LTD 2.96 STATS CHIPPAC LTD 1.24 STRAITS ASIA RESOURCES LTD 3.89 SUNNINGDALE TECH LTD 0.20 SUNTEC REAL ESTATE INVESTMENT TRUST 1.60 SWIBER HLDGS LTD 2.53 SWISSCO INTERNATIONAL LTD 0.86 TAT HONG HLDGS 2.31 THE ASCOTT LTD 1.84 THOMSON MEDICAL CENTRE LTD 0.61 TIONG WOON CORP HLDG 0.75 TOTAL ACCESS COMMUNICATION PCL 1.36 UNISTEEL TECHNOLOGY 1.50 UNITED ENGINEERS 3.68 UNITED OVERSEAS BANK LTD 18.74 UOL GROUP LTD 4.02 VENTURE CORP LTD 10.78 VERIGY LTD 19.99 WHEELOCK PROPERTIES (SINGAPORE) LTD 2.01 WILMAR INTERNATIONAL LTD 5.00 WING TAI HLDGS LTD 2.20 YANLORD LAND GROUP LTD 2.60 YANTAI RAFFLES SHIPYARD PTE LTD 16.00 YELLOW PAGES (SINGAPORE) LTD 0.87 YONGNAM HLDGS 0.25
201.10
1.00
604.65 1,956.16 331.74 140.40 152.69 812.22 3,035.52 855.57 119.63 212.70 3,459.24 344.93 380.37 433.35 102.86 997.43 376.60 94.25 938.95 565.99 588.74 175.23 1,003.46 170.82 551.83 3,020.19 17,681.96 5,501.18 999.66 1,812.90 444.21 1,942.86 162.00 118.70 1,146.70 1,345.18 649.97 1,213.89 414.33 132.76 835.00 10,602.36 382.17 3,398.15 9,579.54 598.18 491.64 498.83 27,235.61 1,674.22 2,207.97 851.40 198.24 1,353.28 170.10 1,254.70 754.21
FACTSET ESTIMATES CONSENSUS SINGAPORE
NO OF ESTIMATES
P/E 2008 (X) (75 DAYS)
2008 EPS (75 DAYS)
2008 EPS (45 DAYS)
2008 EPS GROWTH (%)
6-MONTH PERFORMANCE (%)
6-MONTH PERFORMANCE RELATIVE TO STI (%)
1.00
2
5.66
0.11
0.11
77.36
-22.42
-14.26
1.25 1.93 1.50 1.00 1.00 1.33 1.50 1.21 1.25 1.50 3.00 1.83 1.00 1.00 2.50 1.50 1.25 1.25 1.13 1.75 1.00 1.25 1.25 1.25 1.13 1.46 1.71 1.20 2.50 1.31 2.00 2.00 1.00 1.50 1.00 1.50 1.00 1.30 1.07 1.25 1.25 1.50 1.50 1.45 1.25 1.90 1.33 1.30 1.47 1.80 1.50 1.00 2.00 1.08 1.00 1.13 1.10
1.25 1.83 1.17 1.50 1.13 1.17 1.68 1.08 1.50 1.25 3.00 1.50 1.00 1.00 1.33 1.00 1.13 1.00 1.25 1.83 1.25 1.25 1.17 1.25 1.25 1.44 1.69 1.44 1.50 1.25 1.50 2.18 1.00 1.50 1.30 1.50 1.25 1.25 1.00 1.50 1.25 1.50 1.83 1.45 1.10 2.50 1.17 1.17 1.30 1.50 1.00 1.13 2.00 1.07 1.00 1.33 1.13
5 6 1 1 1 3 6 6 2 1 1 3 2 2 2 1 2 2 3 2 1 2 2 2 3 11 16 12 2 8 1 18 1 1 1 3 1 5 7 2 2 11 2 12 11 4 3 4 19 5 1 3 1 6 1 4 5
12.29 10.65 20.54 7.02 8.24 15.43 15.90 21.12 5.40 8.45 22.71 12.24 5.45 8.96 7.42 19.28 10.11 11.31 NA 8.26 12.11 4.43 6.84 4.23 12.55 21.80 19.46 23.23 22.93 22.00 18.20 46.69 3.80 11.74 9.88 8.25 5.50 8.39 10.25 1.40 11.03 14.95 NA 13.58 17.61 35.60 8.90 14.65 10.94 8.91 11.17 16.45 11.96 13.75 7.94 5.25 7.69
0.07 0.12 0.03 0.06 0.04 0.07 0.14 0.07 0.08 0.07 0.59 0.06 0.24 0.12 0.03 0.07 0.11 0.02 -0.01 0.08 0.19 0.19 1.36 0.09 0.06 0.10 0.32 0.14 0.07 0.10 0.03 0.02 0.08 0.02 0.10 0.21 0.16 0.18 0.12 0.19 0.08 0.78 0.00 0.12 0.24 0.20 0.11 0.08 1.64 0.35 1.78 0.12 0.05 0.17 0.07 0.30 0.11
0.07 0.15 0.03 0.06 0.04 0.07 0.14 0.07 0.08 0.07 0.59 0.05 0.24 0.12 0.03 0.07 0.11 0.02 -0.01 0.08 0.19 0.19 0.75 0.09 0.06 0.10 0.33 0.14 0.07 0.10 0.03 0.02 0.08 0.02 0.10 0.21 0.16 0.18 0.12 0.19 0.08 0.84 0.00 0.12 0.24 0.29 0.11 0.08 1.64 0.30 1.78 0.12 0.05 0.16 0.07 0.28 0.11
16.67 18.89 64.71 46.91 85.00 40.00 8.91 11.54 12.78 42.84 11.32 24.43 20.66 48.55 -21.38 -28.45 20.13 46.92 R+ 16.88 5.56 36.48 79.20 26.70 0.00 17.35 -50.82 9.54 6.24 25.00 -60.80 R+ 120.59 -14.81 116.12 24.76 60.00 19.29 36.71 148.87 14.55 20.00 R8.03 64.29 -17.40 37.51 14.45 7.96 41.85 220.60 65.79 6.98 109.69 -32.00 67.50 3.13
-14.85 -26.35 -6.50 -9.09 -24.69 -21.17 -4.18 -14.55 0.00 -1.65 0.00 26.13 -14.67 -36.05 -55.45 -35.78 -7.56 -0.68 31.85 -15.33 -4.56 18.88 -7.00 -37.07 -13.66 -16.15 -14.29 -1.79 -38.87 -1.35 -19.23 -29.82 -38.04 -34.94 -35.17 -14.00 -18.52 -20.73 11.82 -14.29 -14.36 -22.27 -22.00 -16.41 -14.40 16.67 -16.38 -5.08 -11.63 3.64 -17.08 16.47 -3.51 -12.00 -22.30 -16.49 -33.73
-5.89 -18.60 3.33 0.48 -16.77 -12.87 5.90 -5.55 10.52 8.70 10.52 39.40 -5.69 -29.32 -50.77 -29.03 2.16 9.78 45.73 -6.42 5.48 31.39 2.79 -30.45 -4.58 -7.33 -5.27 8.55 -32.43 9.04 -10.73 -22.43 -31.52 -28.09 -28.35 -4.95 -9.94 -12.38 23.58 -5.27 -5.35 -14.09 -13.79 -7.61 -5.39 28.94 -7.58 4.90 -2.33 14.55 -8.36 28.73 6.65 -2.74 -14.13 -7.70 -26.76
216.31 560.00 307.11 4,548.68 6,870.29 804.05 1,688.73 262.87 11,671.70 763.81 104.20 7,667.77 3,612.25 153.78 121.50 443.58 951.16 1,140.24 1,669.36 9,639.90 1,608.43 210.85 232.00 203.91 1,743.54 4,010.34 194.69 7,595.88 17,295.77 16,278.28 1,061.99 317.30 243.03 404.36 16,828.14 4,293.27 296.67 148.07 149.88 182.47 95.04
1.00 1.00 1.67 1.00 2.00 1.75 1.25 2.50 1.00 1.33 2.00 2.00 1.75 1.00 2.00 1.90 1.75 1.25 1.25 1.50 1.50 1.00 2.00 1.25 1.25 1.25 2.00 1.00 1.00 1.00 1.25 1.50 2.10 2.33 1.32 1.67 1.00 1.00 2.00 2.00 2.50
1.00 1.00 1.17 1.00 2.00 1.25 1.50 1.50 1.10 2.00 2.50 2.00 1.40 1.50 1.67 1.92 1.63 1.36 1.33 1.80 1.17 1.00 1.67 1.00 1.70 1.25 2.20 1.25 1.25 1.00 1.50 1.50 2.05 1.14 1.33 1.66 1.25 1.33 1.70 1.50 2.00
1 2 3 2 3 2 2 1 2 3 1 3 2 1 1 5 2 2 6 1 2 2 2 2 2 4 1 1 1 1 2 2 6 4 18 14 1 3 3 1 1
10.58 56.21 10.80 15.34 15.85 21.82 0.12 8.96 13.56 12.96 31.67 15.73 10.00 5.08 5.63 6.76 3.44 10.03 12.75 21.99 12.39 8.23 7.41 5.54 17.08 18.68 9.23 16.36 12.72 10.37 7.05 7.64 3.33 32.96 13.17 10.93 5.33 6.12 4.40 5.62 6.79
0.07 0.02 0.05 0.37 0.31 0.06 5.78 0.03 0.09 0.13 0.03 1.03 0.41 0.07 0.07 0.07 0.38 0.30 0.30 0.19 0.26 0.11 0.08 0.06 0.20 0.15 0.06 1.32 2.19 1.45 0.20 0.03 0.12 0.05 0.81 0.55 0.11 0.10 0.06 0.08 0.04
0.07 0.02 0.05 0.37 0.31 0.06 5.78 0.03 0.09 0.13 0.03 1.03 0.41 0.07 0.07 0.07 0.42 0.30 0.30 0.19 0.26 0.13 0.06 0.06 0.20 0.16 0.06 1.32 2.19 1.45 0.22 0.03 0.13 0.05 0.80 0.55 0.11 0.10 0.06 0.08 0.04
8.20 -20.22 31.58 -14.37 14.29 4.71 5,566.67 R+ 58.62 22.98 R+ -6.90 88.81 37.80 54.28 48.00 -2.61 20.35 10.43 26.49 81.66 11.42 -0.17 -0.38 391.67 50.54 -7.46 24.53 12.31 15.08 11.94 85.98 14.92 -41.87 23.39 -8.02 144.19 32.11 48.15 12.25 41.55
0.00 30.23 -3.05 5.66 -1.00 -10.35 -30.69 -56.03 123.92 -22.54 -29.10 -10.50 -9.56 9.80 -48.05 -30.56 -31.75 -3.55 4.40 7.69 -27.17 30.94 5.45 -12.89 31.10 190.05 -24.52 45.95 13.71 9.78 -22.03 -42.50 -36.92 -32.92 -15.87 -25.50 43.59 -34.03 -56.03 -22.69 -38.46
10.52 43.94 7.15 16.78 9.42 -0.91 -23.40 -51.41 147.49 -14.38 -21.64 -1.08 -0.04 21.36 -42.59 -23.25 -24.56 6.60 15.38 19.02 -19.50 44.71 16.55 -3.73 44.90 220.57 -16.57 61.30 25.68 21.33 -13.83 -36.45 -30.28 -25.86 -7.02 -17.66 58.70 -27.09 -51.41 -14.55 -31.99
260.75
1.00
1.25
1
12.50
0.08
0.08
-68.87
-13.04
-3.89
1,200.32 176.54 1,882.47 1,047.23 137.80 94.17 1,166.32 1,797.29 5,076.81 146.57 5,068.85 3,983.75 208.35 23,920.90 708.81 379.74 2,188.76 709.99 1,107.71 681.31 3,077.81 680.47 425.36 550.00 567.84 183.30 707.86 8,922.05 7,559.37 4,209.77 617.05 491.90 142.21 18,668.62 2,577.14 9,337.90 405.07 2,866.71 3,691.67 2,155.14 7,000.62 172.23 10,811.32 61,928.80 488.18 374.04 2,636.33 136.59 259.64 170.22 5,050.56 2,548.14 4,237.65 147.13 2,383.54 1,073.60 153.33 1,147.19 2,961.44 176.65 253.18 3,220.25 603.95 812.24 28,555.48 3,200.13 2,956.42 1,198.53 2,405.07 31,928.40 1,745.28 4,747.09 4,376.00 137.52 304.44
1.33 1.00 1.50 1.69 1.00 1.00 1.00 1.56 1.94 1.50 1.25 1.36 2.38 1.56 1.25 1.00 1.83 1.00 2.00 2.17 1.50 1.50 1.00 2.00 1.25 1.00 1.00 1.50 1.21 1.40 1.00 2.00 1.00 1.36 1.50 1.92 1.33 1.50 1.00 1.50 1.50 3.00 1.38 1.41 1.67 2.00 1.71 1.00 1.50 1.00 1.63 1.79 1.80 1.00 1.36 1.50 1.50 1.30 1.67 1.00 1.13 1.30 1.22 1.50 1.79 1.20 1.20 1.25 1.67 1.36 1.75 1.63 2.00 1.50 2.00
1.13 1.40 1.25 1.44 1.50 1.00 1.40 1.81 2.17 1.25 1.08 1.50 1.50 1.47 1.33 1.50 1.92 1.17 1.67 2.00 1.38 1.38 1.17 1.50 1.17 2.00 1.20 1.38 1.62 1.33 1.17 1.67 1.00 1.39 1.50 2.21 1.00 1.13 1.67 1.67 1.60 3.00 1.40 1.42 2.17 2.13 1.85 1.00 2.00 1.00 1.61 1.86 1.80 1.00 1.35 1.50 1.50 1.38 1.33 1.17 1.25 1.31 1.30 1.50 1.47 1.20 1.36 1.00 2.00 1.50 1.80 1.17 2.00 2.00 1.50
5 2 2 9 1 1 2 15 8 1 2 7 4 18 2 2 6 2 3 3 4 5 2 1 3 1 2 3 13 5 4 1 2 14 2 12 2 1 3 6 12 1 4 17 3 3 12 1 2 3 15 9 6 1 9 1 1 5 3 1 4 24 9 1 13 5 15 9 3 7 4 5 1 3 1
18.36 4.27 16.99 14.03 6.01 7.53 25.09 11.01 7.22 11.25 15.53 21.69 10.13 11.96 5.44 10.55 20.93 18.53 8.00 13.17 25.15 22.00 12.51 11.17 8.93 6.42 4.54 15.77 15.87 13.52 9.29 19.08 4.51 10.56 12.69 18.06 10.50 16.46 7.45 14.00 12.98 26.79 18.30 14.96 9.02 13.50 17.19 8.20 3.51 8.08 14.24 14.11 20.17 5.88 17.78 5.93 12.61 10.74 41.82 15.13 7.73 12.93 9.54 5.47 12.70 11.82 9.19 15.50 9.57 28.78 5.73 13.68 6.71 10.88 12.50
0.07 0.06 0.11 0.07 0.07 0.09 0.06 0.18 0.48 0.04 0.13 0.12 0.04 0.63 0.10 0.07 0.14 0.06 0.12 0.10 0.11 0.06 0.09 0.57 0.11 0.05 0.39 0.32 0.23 0.29 0.06 0.12 0.12 1.49 0.19 0.49 0.07 0.42 0.96 0.08 0.34 0.01 0.20 0.26 0.16 0.06 0.10 0.14 0.20 0.04 0.21 0.09 0.19 0.03 0.09 0.43 0.07 0.22 0.04 0.04 0.10 0.11 0.16 0.67 1.48 0.34 1.17 1.29 0.21 0.17 0.38 0.19 2.38 0.08 0.02
0.07 0.06 0.11 0.07 0.07 0.09 0.05 0.18 0.48 0.04 0.13 0.12 0.03 0.64 0.10 0.07 0.15 0.06 0.12 0.10 0.11 0.06 0.08 0.57 0.12 0.05 0.39 0.32 0.23 0.29 0.06 0.12 0.12 1.49 0.20 0.49 0.06 0.42 0.96 0.08 0.34 0.01 0.20 0.26 0.16 0.07 0.10 0.14 0.20 0.04 0.21 0.09 0.20 0.03 0.09 0.43 0.07 0.22 0.05 0.04 0.10 0.10 0.16 0.67 1.49 0.35 1.17 1.25 0.34 0.17 0.38 0.21 2.38 0.08 0.02
14.23 30.79 11.18 0.00 4.55 19.20 38.41 0.00 -1.90 20.00 22.35 38.82 135.19 -1.55 37.38 22.56 10.12 103.67 37.62 18.72 35.82 -11.83 56.81 10.40 13.89 1.92 236.82 10.43 38.46 11.54 21.92 6.08 29.12 -6.54 -1.01 7.27 7.34 29.90 -2.04 0.00 6.25 0.28 11.08 10.06 61.44 33.33 8.23 -8.72 42.23 18.18 10.53 38.75 246.92 10.59 18.25 62.89 -68.01 29.47 -39.04 33.33 34.35 38.65 29.06 140.69 7.07 60.69 9.62 -27.93 85.27 36.36 58.64 50.79 88.81 6.34 100.00
8.62 34.18 -9.95 -18.53 -25.23 0.00 4.54 -5.19 -27.52 15.71 19.63 -12.03 -35.83 -12.49 -27.08 -14.81 -29.00 0.00 -24.03 -11.72 45.16 -9.59 -31.01 40.97 -13.79 -11.69 -33.08 -6.54 -6.24 -12.89 -29.03 60.81 -37.65 -19.28 -10.45 -7.30 -3.68 -26.84 18.18 -8.20 1.38 27.16 -2.16 6.87 -46.99 -33.06 -0.57 12.62 -20.22 -14.87 0.34 -16.22 206.30 -41.18 -11.60 -5.60 -25.65 13.79 24.32 -9.02 -23.08 13.33 -27.54 12.20 -9.03 -17.62 -30.45 -20.01 -20.24 66.67 -26.43 -13.33 -40.19 -26.89 -35.06
20.05 48.30 -0.48 -9.96 -17.36 10.52 15.55 4.79 -19.89 27.89 32.22 -2.77 -29.08 -3.28 -19.41 -5.85 -21.53 10.52 -16.04 -2.44 60.44 -0.08 -23.75 55.80 -4.72 -2.39 -26.04 3.29 3.63 -3.72 -21.56 77.73 -31.09 -10.79 -1.02 2.45 6.45 -19.14 30.62 1.46 12.05 40.54 8.13 18.11 -41.41 -26.01 9.89 24.47 -11.83 -5.91 10.90 -7.40 238.53 -34.99 -2.30 4.34 -17.83 25.77 37.41 0.55 -14.98 25.26 -19.91 24.00 0.54 -8.95 -23.13 -11.59 -11.84 84.21 -18.68 -4.21 -33.89 -19.20 -28.23
/ The Edge/FactSet Estimates Consensus Table presents the earnings forecast of Singaporean equities using the latest and more robust FactSet methodology that provides more timely and useful information. FactSet utilises only the latest estimates in calculating the consensus. Any estimates that are more than 75 days old are discarded to avoid the possibility of old forecasts polluting the consensus. The latest 45-day forecast EPS not only gives you the more robust consensus but also a glimpse of the earnings trend, while the Recommendation Consensus Rating is the scale that measures how the analysts feel about a stock. FactSet offers instant access to accurate financial data and analytics to thousands of investment professionals around the world. Our company combines more than 200 databases from industry-leading suppliers and clients’ own proprietary data into a single powerful information system, making FactSet a one-stop source for financial information. Glossary to FactSet Estimates Consensus Table •
Price: Closing price as of stated date
•
Market Capitalisation ($): Market capitalisation ($) in millions
•
Recommendation Consensus Rating: The following rating is assigned to each type of recommendation provided by participating brokers: 1 = positive (strong buy) 1.5 = overweight 2 = neutral 2.5 = underweight 3 = negative (strong sell) – = no recommendation from brokers at that point of time The average of all recommendations is then calculated to give the consensus rating •
No of Estimates (75 days): Number of estimates that are less than 75 days old and are included in the consensus calculation
•
PE 2008: The forecast PE ratio for year 2008 (NA — unable to calculate, for example negative earnings per share figures)
•
EPS 2008 (75 days): The forecast earnings per share for year 2008 using estimates from the latest 75 days
•
EPS 2008 (45 days): The forecast earnings per share for year 2008 using estimates from the latest 45 days
•
EPS Growth: Earnings per share growth compared to last year (R = Recovery)
•
6-month performance: Six-month price performance for that equity
•
6-month performance relative to STI: Sixmonth price performance relative to the Straits Times Index.
Disclaimer In no event will FactSet or The Edge be responsible for special, indirect, incidental or consequential damages that may be incurred or experienced on account of entering into or relying on the data. FactSet acts solely as a transmitter of information provided by certain brokers, certain corporations and certain other sources. Neither FactSet, any source or any third party which FactSet contracts to effect transmission makes any warranty of merchantability or fitness for a particular purpose with respect to the FactSet financial information, nor shall any of them be liable for any error or omission in the information supplied to The Edge or its subscribers or the accuE racy, completeness or timeliness of the data.
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36 • THEEDGE SINGAPORE
| MARCH 3, 2008
CAPITAL
RIGHT TIMING
Chart A
Chart B
Chart C
STI tests support Outlook
Punters are heaving a huge sigh of relief as corporates rushed to release results last week. That’s because the market kept reacting negatively to results announcements. Analysts were busy revising targets and profits downwards while maintaining “buy” or “hold” recommendations. No wonder traders were confused. Many simply chose to stay on the sidelines and that’s the reason the market eased. Perhaps with all the good news out of the way, prices can rise?
Short-term stochastics is actually falling, and may start to bottom later this week. The uncertain direction of the market is being reflected in the ADX indicator, which is falling and is below 20. Its creator J Welles Wilder said a reading below 20 indicates a market with no trend and advised traders to stay clear. ADX was originally created to take a trader into the market when it started trending and out of the | BY GOOLA WARDEN | market when it stopped trending. The direction wasn’t the main criteria as traders can sell short. STI (3,022) For the STI now, its DIs are negatively placed, but with a low ADX, the index is unlikely to move Long-term: down; medium term: rebound; much in either direction. True to form, the index eased 22 points during the week to close at short term: downturn 3,026, down from 3,048 a week earlier. Quarterly momentum is rising, as is 21-day RSI. While RSI Short term RSI (Chart B) is still in a rising mode after may ease later this week as it hits its equilibriturning up from an oversold low but should um line and turns down, quarterly momentum may continue to move up because the market meet with resistance this week. ADX (Chart B) is falling and the DIs remain was falling sharply three months ago. The STI’s chart pattern looks like an ascendnegative. ing triangle. Last week, the index approached the Stochastics (Chart B) is turning down. top of the triangle when it tested 3,100 — as opposed to 3,150 on the triangle — and eased. Medium term Quarterly momentum (Chart A) may have bottomed and could be building a base. No change in downtrend for long-term Annual momentum is falling after breaking in the indicators wake of a negative divergence with the index. Long-term indicators continue to fall. While 24-month ROC is falling. medium-term indicators have lightened up,
the decline in long-term indicators haven’t quite run their course. Quarterly momentum may be trying to bottom, but other long-term indicators are falling. Annual momentum broke below its equilibrium line last month in a negative move. 24month ROC turned down last December and is now clearly tracing out a declining trend. These underminings will probably prevent the STI from a definitive break above the ascending triangle. Near-term moves may remain within the 3,000 to 3,100 range. The earlier breakdown level at 3,300 indicated a target of 2,100 but there’s an outside chance that this may not be met. The 3,000 psychological level has turned out to be a benchmark of sorts. It was retested again last Friday when the STI touched a low of 3,002 before rebounding to close higher. For now, that looks like support. Note though, that it has been breached previously. Since stochastics may not turn up this week, the likelihood of a rally from current levels may not materialise. Part of the reason is the falling ADX. It means that the market lacks a trend (and this also implies an uptrend as well as a downtrend). If the STI is unable to fall much further it implies that the ascending triangle is part of a base formation. The breakout from the triangle occurs if the index betters 3,150. A successful breakout indicates an upside of 450 points or 3,600. That possibility looks remote, because ascending triangles are usually continuation patterns and the market’s trend is still down.
The rest of the market Overall, selling appears to have dried up, in particular for the blue chips. This is despite some property stocks falling last week in reaction to a results briefing by City Developments.
Its executive chairman was quoted as saying that he would defer residential launches this year. The counter fell 52 cents last Friday and closed at $11.96. China food stocks suffered a sell down. On the whole though, declines are getting shallower, volume lighter, and interest in stocks lower. Almost always, at bottoms, interest in the market tends to be low. And that can only be good for the market.
Commodity uptrend continues Commodity prices have been on a tear. Crude palm oil (CPO) for instance is up 87% over the last 12 months, and that is not counting the gains it made in 2006. Indeed, since 3Q2006, prices have doubled to RM3,827 ($1,669.51) per tonne. Which is why we’re paying more for cooking oil in the supermarket — and going by the charts, a major correction isn’t quite on the cards just yet. While annual momentum may be peaking, it hasn’t turned down, nor is it displaying any negative divergence with price. In addition, the CPO chart pattern is still very much an uptrend with no visible top formation. Support is at RM3,300 per tonne in the event of a correction.
China blues The Shanghai Composite (4,348) is hanging on to support at 4,300 by a thread. A break below this would trigger a decline to 3,600 based on a measured move. Annual momentum is falling, but quarterly momentum is trying to bottom, and that has halted the downtrend temporarily. Last year, the Shanghai Composite broke below a double top at 5,500, and in January this year, the index fell through the thrice-tested 4,800 level. Any rebound is likeE ly to find resistance at 4,800.
GETTING TECHNICAL
| BY MICHAEL KAHN |
T
he US stock market finally made a move higher this week as it latched on to good news and shrugged off bad. Many view the action as a breakout from the market’s recent range, but there are still a few obstacles looming overhead. For now, the evidence points to continued strength in the short term. Some sectors of the market have legitimate technical breakouts in place but the broader market indexes still have some work to do. They are close, but with so many crosscurrents in the market this month, long-term investors need more proof that the danger in the market is truly past. Conflicting evidence pits fundamentals. On the charts, this week’s strength is impressive in light of soaring commodities prices, a dollar plumbing new depths versus the euro and rather mediocre trad-
ing volume. Many pundits have been looking for a retest of the January lows, citing among other reasons the need for a final washout of bullish sentiment. Those low levels would most likely scare the collective pants off investors to clear the decks for a new rally. Unfortunately, when such views are widespread the market tends to not accommodate them. A selling panic back down to 11,700 on the Dow Jones Industrial Average would have given off too obvious of a signal: the proverbial bell ringing at the bottom. We all know that there is no bell. Then as the market moved mostly sideways for several weeks, a very obvious coiling, or triangle pattern emerged on all the major indexes including the Standard & Poor’s 500 (see chart). What is obvious is known by everyone, and what everyone knows is just not worth knowing when it comes to the markets.
ESIGNAL
Despite gains in the US market, caution is still the watchword is important because it did not give both bulls and bears suf($SPX,D) Dynamic, 0:00-24:00 ficient time to think 1550.00 things through, lose 1550.00 the emotions and place 1450.00 1405 their bets.Because the 1400.00 1375.26 borders of the triangle 1350.00 were so steep, they 1300.00 squeezed price action um NYSE vo volume -1,794,967,296294 so tightly that there 1,616,137,086.4 946,410,930 was no place left for 0 the market to go but July 2, 2007 Feb 25, 2008 outside the pattern. The passage of time So this week, all of these trian- and not a sea of change in the supgle patterns were broken to the up- ply and demand balance is partially side. Voila! A breakout! Time to buy, to blame for the breakout. That is not the spirit of a techniright? Well, not exactly. From a purely technical point of view, the trian- cal breakout. Chart watchers now gle on the S&P 500 was not as good can assume that the original pattern as it first appeared to be. The reason was too small and is morphing into is that it was out of proportion with something a bit bigger. In this case, very large price swings within a rel- the S&P is still in a triangle formaatively compact period of time. This tion although with a different upper
Dow Jones Industrial Average
border. The healing process is still in progress. Another reason to remain a little cautious is that volume remains on the decline. Consolidation patterns such as triangles are usually accompanied by falling volume as both bulls and bears become unsure of their convictions. Since volume is still in a declining trend from last month’s high levels, we have to again think that the consolidation is still going on. The market is in a better place than it was last week. Should prices continue to edge higher and volume starts to pick up, we’ll know that demand is back to bolster the bullish case. The best we can say about the market is so far, so good. Technically, there are too many problems on the charts to believe that it is safe. So enjoy the possibility of a few strong weeks coming up. Just stay alert. — © 2008 Dow Jones & Co, Inc E
THEEDGE SINGAPORE | MARCH 3, 2008 • 37
CAPITAL
HOT STOCKS
Chinese takeaways for thought Who pays for rising food prices? We thought we, the consumer had to. But, companies which manufacture food are in the same frying pan. With rising costs of raw materials, margins are being squeezed. Margin calls are also causing the China food stocks listed on the Singapore
Exchange to fall. Selected counters, though, are showing signs of strength. The strongest is People’s Food, long maligned because their pigs regularly fall sick. Now though, with rising meat prices, pigs are ready to fly. The counter too, has just broken out of a base.
SYNEAR FOOD — Accelerated fall
PEOPLE’S FOOD — Pigs try to fly
Synear Food’s (68 cents) freefall has been halted — albeit temporarily — by a bounce last Friday. A sign that selling is drying up is of course falling volume but this hasn’t quite happened yet. Unfortunately, the break below $1 was accompanied by a gap — possibly a breakaway gap — and a surge in volume. This is probably because the stock was on the buy lists of several brokers at the start of the year, on the back of the Beijing Olympics frenzy. However, the breakdown actually indicates a target of 50 cents, and this may well be met before the stock builds a base and recovers in 2H2008. The rebound that started last Friday may not last, and the breakdown level of $1 will likely provide formidable resistance.
People’s Food ($1.08) has not quite broken out of a downtrend. Interestingly though, quarterly momentum, which is meant to identify latent strength (and weakness), is suggesting that prices could strengthen. Momentum has turned up and broken above both its own moving average and a failure swing. This is a bullish signal. The break above $1 seems to confirm the probability of a further rally. The move indicates an initial target of $1.26 and a subsequent upside of $1.36. Support has been established at 84 cents.
CHINA MILK — No bull in a china shop
CHINA DAIRY — Early stage base formation
China Milk (85.5 cents) is drifting lower, on the back of falling short-term indicators. The good thing about this drift downwards is the dwindling volume, which suggests a lack of sellers — technically then, prices are oversold. Last week, the counter made a new oneyear low of 84 cents, just pipping the January low of 85 cents. If these levels aren’t broken in the next two days, prices could be in a base formation. By then, stochastics may have turned up with a rebound in the offing. The move would also cause a positive divergence between momentum and price. Any rebound finds resistance at 96 cents.
China Dairy (26 cents), a milk processing company actually looks like it could strengthen despite an uninspiring set of 2H2007 results. This came in about 20% below analyst expectations because of spiralling costs. Quarterly momentum is attempting to turn up. Note though, that no positive divergence exists between quarterly momentum and price. In addition, five-day stochastics is falling and that could lead to short-term weakness. In addition, moving averages are still declining. However, with volume dwindling, current moves are probably the initial part of a base formation. Support has been established at 25 cents and the breakout level is at 28 cents.
CELESTIAL NUTRIFOODS — Nothing celestial in the short term
CHINA ESSENCE — Likely to ease short term
Celestial NutriFoods (63.5 cents) is in a base formation. In the short term, however, falling stochastics may dampen sentiment and this will likely cause prices to ease. Support is at the twice-tested 56-cent level. A breakdown below $1 in last December indicated a target of 50 cents. This has yet to be met, but prices may touch this level on an intra-day basis as quarterly momentum attempts to create positive divergence. Food stocks have been savaged over the past week. For Celestial, the moves could be part of a bottoming process. Unfortunately, the soya bean producer may be hit by rising costs and this is affecting investor perception, despite the company reporting a 27% growth in net profits to 131 million renmimbi ($25.67 million).
China Essence (68 cents), a mainland Chinese potato starch producer, hit resistance at its 50-day moving average at 75 cents last week, causing it to retreat. Five-day stochastics is falling, and quarterly momentum has turned down after a temporary rebound. So far, the stock is bearing up well, but weak sentiment on China plays coupled with a downturn by the counter’s medium- and short-term indicators could exaggerate a decline. Support is at 55 cents for the time being. Since volume is dwindling on the down days, current moves could be part of a broader base formation.
38 • THEEDGE SINGAPORE
| MARCH 3, 2008
CAPITAL
WARRANTS UPDATE SINGAPORE
Warrants update (as at Feb 28, 2008)
About Société Générale Société Générale is one of the largest financial services groups in the eurozone. The group employs 151,000 people worldwide in three key businesses: • Retail Banking & Financial Services: Société Générale serves 27 million individual customers worldwide; • Global Investment Management & Services: Société Générale is one of the largest banks in the eurozone in terms of assets under custody (€2,583 billion, December 2007) and under management (€434.6 billion, December 2007); and • Corporate & Investment Banking: Société Générale ranks among the leading banks worldwide in euro capital markets, derivatives and structured finance. Société Générale is included in the five major sociallyresponsible investment indexes. (www.socgen.com)
Data provided by
TOP VOLUME WARRANT NAME
WARRANT PRICE
AVERAGE 5-DAY VOLUME
EXERCISE PRICE
MOTHER SHARE PRICE
EXPIRY DATE
CONVERSION RATIO
MACQ BK-CW08 HANG SENG INDE
0.7
MACQ BK-CW08 SINGAPORE TELE
0.19
42475800
24000
24591.69
3/28/2008
13521600
4.2000
3.86
6/3/2008
MACQ BK-CW08 CAPITALAND LTD
0.18
12954400
6.8000
6.63
MACQ BK-PW08 HANG SENG INDE
0.425
12597600
23400
DEUTSCHE-CW08 DBS GROUP HOLD
0.125
11738200
18.9000
MACQ BK-CW08 DBS GROUP HOLD
0.17
9360200
SOC GEN-CW08 HANG SENG INDE
0.77
DEUTSCHE-CW08 COSCO CORP SIN MACQ BK-CW08 COSCO CORP SIN SOC GEN-CW08 STRAITS TIMES
PREMIUM
GEARING
500
5.53
12.60
1
13.73
20.32
6/2/2008
3
10.71
12.28
24591.69
3/28/2008
500
9.66
20.76
17.52
7/21/2008
10
15.01
14.02
18.5000
17.52
6/6/2008
6
11.42
17.18
9001200
24000
24591.69
4/29/2008
500
6.32
11.46
0.075
8272800
5.5000
4.14
7/7/2008
5
41.91
11.04
0.12
8163400
5.0000
4.14
6/6/2008
3
29.47
11.50
0.225
6763200
3100
3074.15
3/28/2008
600
5.23
22.77
DEUTSCHE-CW08 CAPITALAND LTD
0.265
6544000
6.6000
6.63
6/23/2008
3
11.54
8.34
BNP PAR-PW08 STRAITS TIMES
0.085
6517600
2900
3074.15
3/28/2008
800
7.88
45.21
MACQ BK-CW08 HANG SENG INDE
0.055
5674200
24800
24591.69
2/28/2008
500
1.47
160.40
MACQ BK-CW08 SINGAPORE EXCH
0.135
5161400
10.0000
8.62
6/6/2008
6
25.41
10.64
SOC GEN-CW08 HANG SENG INDE
0.09
5122000
26600
24591.69
3/28/2008
1000
10.21
49.01
MACQ BK-CW08 UNITED OVERSEA
0.2
5047000
19.0000
18.34
6/3/2008
6
10.14
15.28
BNP PAR-PW08 STRAITS TIMES
0.18
4962200
3100
3074.15
3/28/2008
800
3.84
21.35
BNP PAR-PW08 HANG SENG INDE
0.23
4403600
24000
24591.69
4/29/2008
1500
10.23
12.79
RABOBANK-CW08 DBS GROUP HOLD
0.15
4228800
17.8000
17.52
6/30/2008
10
10.16
11.68
MACQ BK-CW08 CAPITALAND LTD
0.36
4048200
5.8000
6.63
6/6/2008
3
3.77
6.14
WARRANT PRICE
% GAIN (1 WEEK)
EXERCISE PRICE
MOTHER SHARE PRICE
EXPIRY DATE
CONVERSION RATIO
PREMIUM
GEARING
MACQ BK-CW08 NOBLE GROUP LT
0.04
300.0
2.5000
2.26
3/7/2008
1
12.39
56.50
RABOBANK-CW08 KEPPEL CORP LT
0.03
100.0
13.8800
10.98
7/7/2008
10
29.14
36.60
DEUTSCHE-CW08 NOBLE GROUP LT
0.14
86.7
2.6800
2.26
6/30/2008
2
30.97
8.07
SOC GEN-CW08 NOBLE GROUP LT
0.19
81.0
2.1000
2.26
4/28/2008
2
9.73
5.95
DEUTSCHE-CW08 CAPITALAND LTD
0.045
80.0
6.8000
6.63
3/17/2008
5
5.96
29.47
SOC GEN-CW08 CITY DEVELOPME
0.08
77.8
14.7000
12.48
5/20/2008
8
22.92
19.50
Disclaimer The prices of warrants may rise or fall and the warrants may expire worthless, resulting in a total loss of investment. The investor should make an independent appraisal of the risks and consult to the extent necessary his own legal, financial, tax, accounting and other professional advisors prior to any subscription or acquisition. Société Générale and its associated and connected persons, their directors, officers and/or employees, including persons involved in the preparation or issuance of this material, may have positions or other interests in, and may, as principal or agent, effect transactions in securities mentioned herein, and may also perform or seek to perform broking, investment banking and other banking or financial services for the issuer of any securities referred to herein. The information is provided on a without liability basis. While Société Générale reasonably believes that the information is accurate, Société Générale does not warrant the accuracy thereof and shall not be liable for any loss or damage howsoever suffered in reliance on the said information.
TOP GAINERS WARRANT NAME
SOC GEN-CW08 NOBLE GROUP LT
0.21
75.0
2.5000
2.26
6/30/2008
2
29.20
5.38
DEUTSCHE-CW08 SINGAPORE PETR
0.19
72.7
8.0000
6.99
6/30/2008
3
22.60
12.26
MACQ BK-CW08 NOBLE GROUP LT
0.18
71.4
2.2000
2.26
5/5/2008
2
13.27
6.28
BNP PAR-PW08 DBS GROUP HOLD
0.11
69.2
18.6200
17.52
3/10/2008
10
0.00
15.93
SOC GEN-CW08 SINGAPORE PETR
0.165
57.1
7.8800
6.99
7/7/2008
5
24.54
8.47
RABOBANK-CW08 SEMBCORP MARIN
0.185
54.2
3.7710
3.72
6/23/2008
2.857
15.58
7.04
SOC GEN-CW08 NOBLE GROUP LT
0.115
53.3
2.3200
2.26
4/7/2008
2
12.83
9.83
MACQ BK-CW08 CAPITALAND LTD
0.475
53.2
6.4000
6.63
4/1/2008
1
3.70
13.96
SOC GEN-CW08 SEMBCORP MARIN
0.09
50.0
3.5715
3.72
3/10/2008
2.857
2.92
14.47
DEUTSCHE-CW08 SINGAPORE EXCH
0.015
50.0
16.7000
8.62
5/26/2008
10
95.48
57.47
RABOBANK-CW08 CAPITALAND LTD
0.105
50.0
6.8000
6.63
6/2/2008
5
10.48
12.63
SOC GEN-CW08 SINGAPORE TECH
0.065
44.4
3.9400
3.47
4/14/2008
2
17.29
26.69
BNP PAR-CW08 SEMBCORP MARIN
0.065
44.4
4.4300
3.72
6/6/2008
4
26.08
14.31
SOC GEN-CW08 SEMBCORP MARIN
0.05
42.9
3.9644
3.72
3/24/2008
2.857
10.41
26.04
The week’s top volume: MACQ BK-CW08 Hang Seng Inde 0.7
Price ($) 0.7
0.65 0.6 0.55 0.5 0.45
Feb 21, 2008
Feb 28, 2008
The week’s top gainer: MACQ BK-CW08 Noble Group LT 0.04
Price ($) 0.04
0.035 0.03 0.025
TOP LOSERS WARRANT NAME
0.02 WARRANT PRICE
% LOSS (1 WEEK)
EXERCISE PRICE
MOTHER SHARE PRICE
EXPIRY DATE
CONVERSION RATIO
PREMIUM
GEARING
0.015
SOC GEN-CW08 COSCO CORP SIN
0.01
-86.7
5.1000
4.14
3/17/2008
5
24.40
82.80
0.01
MACQ BK-CW08 HANG SENG INDE
0.005
-85.7
28600
24591.69
2/28/2008
500
16.36
1,764.44
0.005 0
RABOBANK-CW08 YANGZIJIANG SH
0.005
-83.3
2.5500
1.16
4/22/2008
2
120.69
116.00
BNP PAR-CW08 DBS GROUP HOLD
0.005
-75.0
18.0800
17.52
2/29/2008
15
3.62
233.60
MACQ BK-CW08 ALIBABA.COM LT
0.005
-75.0
40.0000
19.08
4/3/2008
2
109.94
342.25
SOC GEN-CW08 COSCO CORP SIN
0.03
-70.0
4.1000
4.14
3/3/2008
5
2.66
27.60
SOC GEN-CW08 PUBLIC BANK BH
0.065
-68.3
10.9274
10.40
4/11/2008
1.987
7.92
35.10
BNP PAR-CW08 DBS GROUP HOLD
0.005
-66.7
19.3800
17.52
3/10/2008
10
10.90
350.40
Feb 21, 2008
The week’s top loser: SOC GEN-CW08 Cosco Corp Sin
BNP PAR-CW08 YANGZIJIANG SH
0.04
-66.7
1.2800
1.16
3/28/2008
2
17.24
14.50
DEUTSCHE-CW08 SINGAPORE EXCH
0.01
-60.0
10.1000
8.62
3/10/2008
8
18.10
107.75
0.08
DEUTSCHE-CW08 CITY DEVELOPME
0.05
-56.5
14.5000
12.48
6/2/2008
10
20.19
24.96
0.07
SOC GEN-CW08 HANG SENG INDE
0.035
-56.3
28600
24591.69
3/28/2008
800
16.93
157.54
0.06
0.07
-54.8
2700
3074.15
3/28/2008
500
13.31
87.83
0.05
SOC GEN-PW08 HANG SENG INDE
0.125
-51.9
22400
24591.69
3/28/2008
800
11.18
44.11
0.04
RABOBANK-CW08 YANGZIJIANG SH
0.055
-50.0
1.8800
1.16
6/6/2008
1
66.81
21.09
0.03
BNP PAR-CW08 STRAITS TIMES
0.005
-50.0
3800
3074.15
3/28/2008
800
23.74
768.54
0.02
BNP PAR-CW08 OVERSEA-CHINES
0.005
-50.0
8.9800
7.69
3/18/2008
6
17.17
256.33
DEUTSCHE-CW08 COSCO CORP SIN
0.005
-50.0
7.2000
4.14
4/7/2008
5
74.52
165.60
BNP PAR-CW08 HANG SENG INDE
0.005
-50.0
33000
24591.69
2/28/2008
2000
34.42
441.11
MACQ BK-CW08 COSCO CORP SIN
0.05
-50.0
6.5000
4.14
6/5/2008
3
60.63
27.60
SOC GEN-PW08 STRAITS TIMES
HIGHEST PREMIUM WARRANT NAME
Feb 27, 2008
Price ($)
0.01
0.01
0
Feb 15, 2008
Feb 27, 2008
HIGHEST DISCOUNT WARRANT PRICE
EXERCISE PRICE
MOTHER SHARE PRICE
EXPIRY DATE
CONVERSION RATIO
PREMIUM
GEARING
WARRANT NAME
WARRANT PRICE
EXERCISE PRICE
MOTHER SHARE PRICE
MACQ BK-CW08 SYNEAR FOOD HO
0.005
2.5000
0.645
3/3/2008
2
289.15
64.50
DEUTSCHE-PW08 SINGAPORE EXCH
0.685
16.4000
8.62
MACQ BK-CW08 SYNEAR FOOD HO
0.06
2.0000
0.645
6/5/2008
2
228.68
5.38
MACQ BK-PW08 SINGAPORE EXCH
0.94
15.0000
8.62
EXPIRY DATE
CONVERSION RATIO
PREMIUM/ (DISCOUNT)
GEARING
6/23/2008
10
-10.79
1.26
6/18/2008
6.000
-8.58
1.53
MACQ BK-CW08 CELESTIAL NUTR
0.035
1.8000
0.615
3/3/2008
2
204.07
8.79
MACQ BK-CW08 CHINA RAILWAY
1.2
6.5000
9.40
3/4/2008
0.33
-7.37
4.26
DEUTSCHE-CW08 YANGZIJIANG SH
0.02
3.1800
1.16
6/30/2008
2
177.59
29.00
BNP PAR-PW08 DBS GROUP HOLD
0.1
19.8000
17.52
2/29/2008
15
-4.45
11.68
BNP PAR-CW08 YANGZIJIANG SH
0.005
3.2000
1.16
3/28/2008
3.000
177.16
77.33
SOC GEN-PW08 DBS GROUP HOLD
0.405
22.3000
17.52
3/10/2008
10
-4.17
4.33
MACQ BK-CW08 YANGZIJIANG SH
0.015
3.0000
1.16
4/3/2008
3.000
162.50
25.78
SOC GEN-CW08 TELEKOM MALAYS
0.095
10.3831
11.40
3/3/2008
2.884
-3.41
18.14
DEUTSCHE-CW08 YANGZIJIANG SH
0.01
2.8800
1.16
6/2/2008
2
150.00
58.00
BNP PAR-PW08 COSCO CORP SIN
0.505
6.8000
4.14
2/28/2008
5
-3.26
1.64
MERRILL-CW08 YANGZIJIANG SH
0.01
2.7000
1.16
3/28/2008
2
134.48
58.00
SOC GEN-PW08 SINGAPORE EXCH
0.7
15.9000
8.62
4/7/2008
10
-3.25
1.23
MERRILL-CW08 CHINA OILFIELD
0.02
1.1000
0.48
4/28/2008
1
133.33
24.00
BNP PAR-CW08 CAPITALAND LTD
0.685
4.3800
6.63
6/26/2008
3
-2.94
3.23
MACQ BK-CW08 FERROCHINA LIM
0.04
3.0000
1.34
4/3/2008
2
129.85
16.75
DEUTSCHE-PW08 DBS GROUP HOLD
0.16
19.6000
17.52
3/3/2008
10
-2.74
10.95
THEEDGE SINGAPORE | MARCH 3, 2008 • 39
WeekinPictures PICTURES: BLOOMBERG
CORPORATEMOVES Companies are invited to submit notices of senior corporate appointments and changes. Photographs (in jpeg format) are welcomed. Announcements will be edited for brevity. Please e-mail [email protected]; attention: editorial coordinator, Rahayu Mohamad.
ArianeCorp Ltd
Hongwei Technologies Ltd
Yeo Kan Yen has been appointed COO wef Feb 25 Work experience: MD, CarrierNet Corp (S) Pte Ltd; regional sales manager, Nagamei Marine Pte Ltd
Lam Tin Faat, Tony has been appointed CFO wef Feb 23 Work experience: Has worked with local Hong Kong audit firm and consulting firms in managerial positions Tsai Hungching resigned as ED wef Feb 23
Barclays Global Investors
Ma Ying-jeou, presidential candidate of the opposition Kuomintang, delivers a speech during the “228” memorial concert, in Taipei, Taiwan, last Thursday.
Drew Corbett has been appointed head of distribution, iShares Asia ex-Japan wef February 2008 Work experience: Head of ETF trading for Citigroup and for Merrill Lynch Jane Leung has been appointed head of product, iShares Asia ex-Japan wef February 2008 Work experience: Oversaw the management of US and non-US equity iShares with BGI in San Francisco Paul So has been appointed head of portfolio management, iShares Asia ex-Japan wef February 2008 Work experience: Led transition management and equity index portfolio management for BGI in Canada.
China Energy Ltd Li Qiang has been appointed deputy CEO wef Feb 22 Work experience: GM, Jiutai Energy (Guangzhou) Co Ltd
Courts Singapore Ltd Puma AG CEO Jochen Zeitz (left) shakes hands with British-based Cypriot fashion designer Hussein Chalayan during a news conference in Paris last Thursday. Puma AG, the German sporting-goods maker controlled by PPR SA, hired Chalayan to be the company’s creative director and acquired a majority stake in the British designer’s fashion brand.
Howard Lester Bryant has been appointed non-executive director wef Feb 26 Work experience: Director, Tesco Stores Thailand; commercial director, Tesco Lotus
Gavin Anderson James Weeks (top right) has been promoted to executive chairman, Asia Pacific wef February 2008 Work experience: President/ CEO, Gavin Anderson Deborah Hayden has been appointed CEO, Japan wef February 2008 Work experience: Deputy CEO, Gavin Anderson
A model poses with a RAZR 2 mobile phone launched by Motorola Korea Inc in Seoul last Thursday
GUL Technologies Singapore Ltd Kik Teng Guan has been appointed ED wef Feb 22 Work experience: CEO, Gul Technologies Singapore Ltd; senior VP — business development and customer relationships (Asia), Sanmina-Sci Systems Singapore Pte Ltd William Liem has resigned as ED wef Feb 22
Hi-P Int’l Ltd Zhou Wei Dong has been appointed MD, wireless strategic business unit wef Feb 26 Work experience: GM, wireless business unit, Hi-P Int’l Ltd; operations manager, Hi-P Int’l Ltd; engineering manager, Uniplas (Shanghai) Co Ltd Alan Ong will resign as MD, computing & automotive strategic business unit wef March 31
Jets Technics Int’l Holdings Ltd Au Chun Kwok, Augustus has resigned as independent non-executive director wef Feb 18
Rotol Singapore Ltd Phua Tian How @ Phua Tin Wei has been appointed non-executive independent director wef Feb 26 Work experience: President/CEO, TranSil Corp Pte Ltd; group president, Straco Corp Ltd; ED, SBS Transit Ltd
Sapphire Corp Ltd Toh Ewe Kok has been appointed COO wef March 1 Work experience: Director, Sapphire Mineral Resources Pte Ltd; GM, Sapphire Offshore Engineering Pte Ltd
Seksun Corp Ltd Mak Bang Mui has been appointed non-executive director wef Feb 15 Work experience: Director, Centurion Investment Management Pte Ltd; associate director, UOB Kay Hian Pte Ltd Yeo Boon Hing has been appointed non-executive director wef Feb 15 Work experience: CEO, Summit CD Manufacture Pte Ltd; regional sales manager — sales and marketing, Honeywell Information Systems Choo Soo Kwang has been appointed CFO wef Feb 21 Work experience: Founder, SLM Consulting Pte Ltd; partner, Chia Wong & Partners Victor Loh Kwok Hoong has resigned as non-executive director wef Feb 15 Leong Horn Kee has resigned as non-executive director wef Feb 15
Springboard Research Michael Barnes (bottom left) has been appointed VP of software research wef February 2008 Work experience: Over 13 years of research experience in information and communications technology software and services markets, worked with META Group, Hurwitz Group and Prudential Insurance
Synear Food Holdings Ltd Li Wenjun has been appointed ED wef Feb 25 Work experience: Director, Henan Synear; purchasing manager, Synear Frozen
Transpac Industrial Holdings Ltd Vince Feng has been appointed non-executive independent director wef Mar 1 Work experience: MD, General Atlantic LLC
Yong Xin Int’l Holdings Ltd Hongguo Int’l Holdings Ltd
Thaksin Shinawatra, former Prime Minister of Thailand and owner of the Manchester City football club, greets a crowd as he arrives at the airport in Bangkok last Thursday. Shinawatra, deposed in a coup 18 months ago, returned home from exile saying he will never return to public life.
Xu Tingyu has been appointed ED wef March 1 Work experience: CFO, Hongguo Int’l Holdings Ltd; senior supervisor, China Orient Asset Mgmt Company, Nanjing Gui Zuhua has resigned as non-executive director wef March 1
Yuan Xuanli has been appointed ED/COO wef Feb 28 Work experience: Assistant to general coordinator/head of cold rolling workship, Yongxin Precision Material (Wuxi) Co Ltd; GM, ChangShu ChangJiang Stainless Steel Material Co Ltd Wu Jie has resigned as ED/COO wef Feb 28 — Compiled by Rahayu Mohamad
40 • THEEDGE SINGAPORE
| MARCH 3, 2008
MARKETDIARY
LISTINGS
Monday, March 3
CORPORATE/CAPITAL MARKETS
Singapore CH Offshore Ltd
March 3 to 5 Topic: 7th Annual Investor Conference 2008 – India Unlimited Highlights: Incisive, insightful analysis from more than 70 leading corporates, including Bharti Airtel, Educomp, ICICI Bank, etc Venue: The Ritz-Carlton, Millenia Singapore Organiser: ICICI Securities Tel: 91 22 6637 7249 Email: [email protected]
Tai Sin Electric Ltd
Dividend: $0.005 interim tax exempt; record date: March 5; payable date: March 18 Dividend: $0.01 interim one-tier tax; record date: March 5; payable date: March 18
Tuesday, March 4 Singapore Purchasing Managers Index (Feb) Electronic Sector Index (Feb) Epure Int’l Ltd Stock split offer of 3 for 1 Pertama Holdings Ltd Dividend: $0.008 interim tax exempt; record date: March 6; payable date: March 20 US Total Vehicle Sales
March 7 Topic: Changes in Vietnam – Challenges and Opportunities Speaker: Ayumi Konishi, country director,
Asian Development Bank, Vietnam Resident Mission Hanoi Time: 10am to 11.30am Venue: Seminar Room II, ISEAS Organiser: Institute of Southeast Asian Studies Tel: 6870 2413 Email: [email protected]
INDUSTRY/TECHNOLOGY March 5 and 6 Topic: Delay & Disruption in Construction Contracts Highlights: Reduce cost, improve efficiency, manage risks, analyse delay, disruption and cost, obtain the latest knowledge
Venue: The Raffles Hotel, Singapore Organisers: Hill Int’l, CIOB Tel: 6338 2455/6429 0304 Email: [email protected] March 8 Topic: Technology Commercialisation in the Bio-Tech Industry: What (Really) Works! Time: 11am to 1pm Venue: SIM University, 461 Clementi Road, Level 4 Organisers: SIM University, The Institute of Engineers, Singapore Tel: 6248 9211 Email: [email protected] Website: www.unisim.edu.sg
German tax probe yields confessions as search widens
Wednesday, March 5 Singapore Automobile COE Open Bid Cat, A, B, E Raffles Education Corp Ltd EGM Sunway Int’l Holdings Ltd AGM US ABC Consumer Confidence US MBA Mortgage Applications
Thursday, March 6 Singapore F J Benjamin Holdings Ltd
Transview Holdings Ltd
Dividend: (First interim) $0.009 interim one-tier tax; record date: March 10; payable date: March 27 Dividend: $0.006 first and final tax exempt; record date: March 10; payable date: March 28
Friday, March 7 Singapore Foreign Reserves (Feb) US Unemployment rate — Compiled by Rahayu Mohamad
IPOWATCH
G
erman authorities said 195 people confessed to tax evasion since their probe of Liechtenstein bank accounts began two weeks ago, as the investigation widened to at least 13 countries including the US. German investigators have already searched the homes and offices of 150 people, with 91 of them confessing and agreeing to pay €27.8 million ($58.84 million) in taxes, prosecutor Hans-Ulrich Krueck said. Another 104 have voluntarily gone to tax authorities, four German states said. The US Internal Revenue Service said last Tuesday it would pursue more than 100 Americans who may be avoiding paying taxes by hiding money in Liechtenstein accounts. The UK, France, Ireland, Netherlands, Norway and Sweden announced their own crackdowns, and Swedish authorities said another five countries have information on tax avoiders with Liechtenstein accounts. “The pressure is building on all sides,” Sylvia Schenk, the chairwoman of Transparency International in Germany, said in a phone interview from Frankfurt. “Public expectations are huge now that these cases will be investigated and be punished.” The German probe, focused on €200 million deposited in Liechtenstein, has already led to the resignation of Deutsche Post AG CEO Klaus Zumwinkel. The investigation has centred on information from LGT Group, the Liechtenstein bank owned by the principality’s ruling family, which said yesterday stolen records passed to Germany contain data from 1,400 clients. Bochum prosecutors now have data
from a second Liechtenstein bank and are reviewing whether they need to investigate additional banks in the principality, Eduard Gueroff, a spokesman for the Bochum prosecutor’s office, said. The amount of money that people are paying back in taxes is “increasing daily,” Krueck said during a press conference in the German city of Bochum, which is heading the investigation. “We’ve been informed already of additional voluntary payments” in a similar magnitude received so far. The US federal tax collection agency said it would work together with the governments of Australia, Canada, France, Italy, New Zealand, Sweden and the United Kingdom to obtain the records and prosecute tax fraud. “Combating off-shore tax avoidance and evasion are high priorities,” IRS Acting Commissioner Linda Stiff said in a statement. “We will use all our authority to fairly and effectively enforce our tax laws.” German prosecutors have also searched banks in the country where either suspects in the probe had accounts or employees assisted customers to set up Liechtenstein trusts to avoid taxes. Bankhaus Metzler, Dresdner Bank AG, the banking unit of Allianz SE, private bank Hauck & Aufhaeuser, UBS AG and Hamburg-based Berenberg Bank have confirmed searches at their offices. Bayerische Landesbank, German’s second-biggest state bank, said last Tuesday it may retreat from Liechtenstein by selling its stake in a unit located in the principality. The Munich-based bank bought a major-
ity stake in Austria’s Hypo Alpe Adria Bank International AG last year and through it an indirect holding in Hypo Alpe Adria Liechtenstein AG. The German government paid as much as €5 million for information on German account holders in Liechtenstein on a disk provided by an informant to the Federal Intelligence Service. It’s open to sharing this information with other countries, the Finance Ministry said last Monday. Germany has threatened to “tighten the thumb screws” on Liechtenstein if an agreement to stem illegal cash flows can’t be reached, and Chancellor Angela Merkel warned the previous week that “the clock is ticking.” Merkel discussed her concerns that Germans are evading taxes by hiding money in safe havens with Monaco’s Prince Albert during his visit to Berlin last Wednesday. Monaco, Liechtenstein and Andorra are on a list of “uncooperative tax havens” published by the Paris-based Organization for Economic Cooperation and Development. Sweden is investigating about 100 Swedes with questionable accounts, Mats Sjoestrand, the Swedish Tax Agency’s director general, said in an opinion article published last Tuesday in the Swedish newspaper Dagens Nyheter that the tax agency later confirmed. Ireland plans to ask Germany for details on any Irish citizens uncovered in its probe, while France has already received information on its citizens that may have evaded taxes in Liechtenstein, the tax collection offices in the two countries said last Tuesday. E —Bloomberg LP
Friday, Feb 22 Grand Pacific Properties Ltd Status: Lodged (preliminary prospectus) Lodged date: Feb 22 Core business: The group is an Indonesianbased real estate group principally focused on developing and investing in commercial and residential properties in strategically selected key cities in Indonesia. Its aim is to develop premium quality residential and commercial properties. Apart from developing its own property projects, the group has also invested in Grade A commercial buildings. Underwriter: HL Bank Issue manager: HL Bank, Hong Leong Finance Ltd Issue size: NA Public offer: NA Issue price: NA
Stanchart moves Asia CEO to Hong Kong from Singapore | BY CHIA-PECK WONG |
S
tandard Chartered Plc, the UK bank that makes most of its profit in Asia, relocated its CEO for the region to Hong Kong from Singapore. The move will bring Asia CEO Jaspal Bindra closer to the Greater China region that was the biggest contributor to Standard Char-
tered’s pretax profit last year. “It makes a huge amount of business sense for the Asian CEO to be headquartered in Hong Kong,” Bindra told reporters in the city last Thursday. “Greater China is the bank’s biggest focus for our group.” With pretax profit of US$1.19 billion ($1.66 billion) last year, Hong Kong accounted for more
than a third of the bank’s total of US$4.04 billion. Profit from China jumped 73% to US$498 million, helping drive a 25% increase in Standard Chartered’s net income. Other executives based in Singapore, including the Asian heads of wholesale banking and human resources, will also move to Hong Kong, Bindra said. The
London-based bank received bids for its Indian mutual fund unit higher than the US$120 million indicated late last year, and expects to complete the sale this year, Bindra said. He didn’t identify any bidders. “All the bids we are getting are quite generous; we think it will happen in 2008,” he said. E —Bloomberg LP
CC2 • THEEDGE SINGAPORE
| MARCH 3, 2008
CITY&COUNTRY
PROPERTY BRIEFS
Home CDL’s record year
EDITOR/REGIONAL MANAGING DIRECTOR Tan Boon Kean ([email protected]) SECTION EDITOR Cecilia Chow ([email protected]) COPY-EDITING DESK Elaine Lim, Evelyn Tung, Ng Bee Cheng, James Chong PHOTO EDITOR Samuel Isaac Chua ([email protected]) PHOTOJOURNALIST Gwyneth Yeo ([email protected]) EDITORIAL COORDINATOR Rahayu Mohamad (rahayu.mohamad @bizedge.com) DESIGN DESK Tan Siew Ching, Christine Ong, Chan Yoke Lin, Jamy Gan ADVERTISING + MARKETING REGIONAL GENERAL MANAGER | Edward Stanislaus ([email protected]) SENIOR MANAGER | Colin Tan ([email protected]) MANAGERS | Simon Wong ([email protected]) Cecilia Kay ([email protected]) Jeffrey Wong ([email protected]) Windy Tan ([email protected]) Faith Teo ([email protected]) Julia Tan ([email protected]) COORDINATOR | Nor Aisah Bte Asmain ([email protected]) MALAYSIA REPRESENTATIVE | Helen John Corry ([email protected]) CIRCULATIONSUBSCRIPTIONS REGIONAL SENIOR MANAGER | Suresh Kumar ([email protected]) ASSISTANT MANAGER | Naziela Nasir ([email protected]) ASSISTANTS | Juliana Ibrahim ([email protected]) Iryanti Zainol ([email protected]) PUBLISHER The Edge Publishing Pte Ltd 150, Cecil Street #13-00 Singapore 069543 Tel: (65) 6232 8622 Fax: (65) 6232 8620 PRINTER KHL Printing Co Pte Ltd 57 Loyang Drive Singapore 508968 Tel: (65) 6543 2222 Fax: (65) 6545 3333 We welcome your comments and criticism. Send your letters to The Edge, Raffles City Post Office PO Box 218 Singapore 911708 Tel: (65) 6232 8622 Fax: (65) 6232 8620 e-mail: feedbackspore @bizedge.com Pseudonyms are allowed but please state your full name, address and contact number for us to verify.
Singapore’s leading property developer, City Developments Ltd (CDL), posted stellar 4Q2007 and full-year results. Net profit in 4Q2007 amounted to $235 million, up 71% y-o-y, while full-year profit rang in at $725 million compared with $200.7 million in FY2006 (if the $150 million profit from the sale of hotel assets to CDL Hospitality Trusts is excluded). Total revenue for the year was $3.1 billion. In the local residential market, CDL sold 1,655 units worth $3.38 billion compared with last year’s 1,337 units totalling $2.77 billion. Slated for launch in 1H of the year are: the 77-unit Shelford Suites; 100 of the 336-unit new condo at the former Lok Cho Apartments site; 100 of the 228-unit The Quayside Isle at Sentosa Cove; and the first phase of 150 units of the 724-unit Pasir Ris condominium development.
Ho Bee has record $272mil net profit Property development group Ho Bee Investment has announced record results for FY2007. The group had a net profit after tax and minority interest of $272 million for the full year ended Dec 31 — up 176% from the previous year. This was achieved on the back of record revenue of $596 million — up 52% from its previous peak of $393 million. Earnings per share stand at 36.9 cents compared with 14 cents previously, an increase of 163%. The company has proposed a one-tier final dividend of two cents per share. Y-o-y sales of properties were steeply higher, rising 51% to $576.7 million, compared with $382.2 million in 2006. Income came from residential projects including Coral Island, The Coasts and Paradise Island at Sentosa Cove; Orange Grove Residences at Orange Grove Road; Montview at Mount Sinai; and Quinterra at Holland Road.
Cityscape Asia returns to Singapore The world’s largest business-to-business real estate event brand, Cityscape, will hold Cityscape Asia at Suntec on April 15 to 17. The inaugural event last year featured more than 100 exhibitors from 35 countries, selling out more than 86,000 sq ft of space. This year’s Cityscape Asia will highlight opportunities to an audience of regional and international investors, real estate developers, architects and designers, government and senior professionals. Major sponsors include Limitless — a Dubai World company — and UK-listed company Aseana Properties, which is focused on developments in Malaysia and Vietnam.
OKP rides high on vibrant construction sector A strong economy and vibrant construction sector has seen infrastructure and civil engineering firm OKP Holdings announce a record full-year net profit after tax and minority interest of $11 million — up 171% on 2006. The group has declared a one-tier tax-exempt first and final dividend of two cents per share. Turnover for the year ended Dec 31 hit a high of $124.7 million, up 70% from the $73.3 million achieved in the previous financial year. OKP specialises in the construction of airport runways and taxiways, expressways, flyovers, vehicular bridges, and urban and arterial roads. The bulk of group revenue was generated from its construction segment, which saw a y-o-y surge of 95.9% from $53.4 million to contribute $104.7 million — 84% — to total revenue.
CapitaLand partners with leading Australia developer CapitaLand has entered into a joint venture with Australand Industrial and Lo-
gistics International, one of Australia’s major diversified property groups. The agreement, through CapitaLand subsidiary CapitaLand Industrial & Logistics Holdings (CIL), aims to establish a Pan-Asian development platform in the industrial and logistics sectors in Asia. CIL will own a 51% stake in projects and Australand the remaining 49%. Australand is a leading industrial and logistics property developer and manager in Australia.
leases of 15 years. The office buildings on these sites — which could be amalgamated — are expected to be low-rise developments of four storeys. Knight Frank says the expected price for Parcel A is $14 million to $18.2 million ($100 to $130 per sq ft per plot ratio) and $14.6 million to $19 million ($100 to $130 psf ppr) for Parcel B. Tenders for Parcel A close at noon on April 24 and at noon on April 30 for Parcel B.
Koh Brothers reports huge profit jump Koh Brothers Group has reported fullyear net profit of $39.7 million — 877% more than the 2006 result. Sales in 2007 were $285.5 million compared with $259.6 million the previous year — a 10% increase. The real estate division contributed $26.9 million, or 9% of the group’s turnover. New sales contribution came from Bungalow @ Caldecott and rental income from the Alocassia Apartments. Turnover from the construction and building materials division increased from $227.8 million in 2006 to $251.2 million in 2007. The group’s net profit attributable to shareholders has increased 877% from $4.1 million in 2006 to $39.7 million last year, which includes the net revaluation surplus of $32.2 million.
URA launches two transitional office sites at Scotts Road URA has launched the sale of two transitional office sites at Scotts Road-Anthony Road. Located next to the Newton MRT station, Land Parcel A has a site area of 93,455 sq ft and can yield a maximum gross floor (GFA) area of 140,193 sq ft. The adjacent land parcel B has a site area of around 97,287 sq ft and a maximum GFA of 145,920 sq ft. Both parcels are being sold on short-term
$18 million revamp of Tiong Bahru Plaza Shopping mall management group, AsiaMalls Management, the joint venture between ARMF and SGX-listed Guthrie Group, announced last week that it will be repositioning Tiong Bahru Plaza (above), one of the suburban malls in its portfolio which includes six other malls — Hougang Mall, White Sands, Century Square, Liang Court, Central Plaza and the upcoming Tampines 1. Two floors of the Central Plaza office tower (acquired early last year) located next door to Tiong Bahru Plaza will be converted to civic use. This allows the latter to provide additional gross floor area for retail use. Targeted for completion by 3Q2008, the estimated cost of the revamp is $18 million, and will add another 19,000 sq ft for retail and F&B outlets, while the existing areas will be reconfigured. — Compiled by E Mark Henderson
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Offshore CapitaLand to create $426mil fund for Vietnam expansion CapitaLand has strengthened its presence in Vietnam with several new business initiatives which include a strategic partnership and a multi-million dollar development fund. A statement of strategic intent has been signed with CapitaLand’s local Vietnamese partner Nam Thang Long Investment Joint-Stock Company to form a strategic alliance to seek further real estate business opportunities. The partners will also develop residential properties and commercial-residential mixed developments. CapitaLand will also leverage on its real estate and fund management expertise to set up its first property fund to invest in Vietnam. It intends to take a 30% sponsor stake in the targeted $426 million fund. CapitaLand has signed a memorandum of understanding with Citi Private Bank, one of the world’s largest wealth managers, to explore real estate investment opportunities in Vietnam. CapitaLand believes the fund will follow the success of its CapitaLand China Development Fund, which is also co-marketed with Citi Private Bank in China. The group is confident of doubling its residential pipeline in Vietnam from the present 2,800 homes to around 6,000 homes over the next three years. CapitaLand is also looking for opportunities in the office, retail, and integrated leisure, entertainment and conventions sectors. CapitaLand is in a strong financial position to tap opportunities in Vietnam despite the tough global financial landscape. In February, the group raised
$1.3 billion through a 10-year convertible bond issue — the largest 10-year convertible bond transaction ever done in Singapore. It also recently closed two new funds — the CapitaRetail India Development Fund has raised US$600 million to invest in retail development projects in India, and the CapitaRetail China Development Fund II which has US$600 million ($837.84 million).
Keppel Land unveils Saigon Centre concept plans Keppel Land, one of the largest property developers in Vietnam, has unveiled concept plans for its Saigon Centre. The 2ha mixed-use development fronts Le Loi Boulevard, the main thoroughfare in Ho Chi Minh City. Phase One, completed in 1996, is a 25storey building comprising a three-storey retail podium, 11 levels of prime office space, 89 serviced apartments and three levels of basement carpark. Saigon Centre is the preferred address of the diplomatic corps, multinational companies, bank and financial institutions. Keppel Land and local partners, Sowatco and Resco, will embark on plans to develop an iconic landmark development integrating subsequent phases of Saigon Centre. Skidmore, Owings and Merrill, one of the world’s largest architectural firms, will design the new concept plans.
More demand for Bangkok luxury apartments CB Richard Ellis (CBRE) predicts Bangkok’s luxury condominium market will become more active this year and new supply will continue to
be limited. Freehold plots in prime central locations are very limited and the increase in land prices has resulted in a drop in the new supply of luxury units in these areas, while demand for downtown city living is growing. Prices for new downtown condominiums have risen by an average of 10% to 12% a year since 2003. CBRE says investment in new luxury apartments in prime locations has generated an average of 4% to 5% yield per annum over the past four years along with price appreciation. The average percentage of foreigner buyers has increased to 32% over the past three years from less than 20% a decade ago. Tight supply and relative affordability is boosting prices in downtown Bangkok. A luxury two-bedroom unit with 970 to 1,300 sq ft sells for around US$500,000 ($698,200).
Ascott to manage new Jakarta serviced residence The Ascott Group will manage Somerset Kuningan, a new serviced residence in Jakarta’s CBD. The contract was signed with PT Ciputra Adigraha, a subsidiary of PT Ciputra Property Tbk, one of Indonesia’s most established commercial property developers. Somerset Kuningan will be part of a large integrated development called Ciputra World Jakarta. The 10ha project comprises a high-end retail mall, office towers, condominiums and a fivestar hotel-luxury residence. The 153-unit serviced residence is expected to open in 2H2012. — ComE piled by Mark Henderson
THEEDGE SINGAPORE | MARCH 3, 2008 • CC3
Phillip Investor Hub also houses all of its 310 financial advisers, some of its backroom staff, and act as a satellite office for its 150 remisiers
PICTURES: GWYNETH YEO/THE EDGE SINGAPORE
CITY&COUNTRY
quarters occupies six floors in Raffles City Tower, totalling 60,000 to 70,000 sq ft. “We are actually expanding in Raffles City, not shrinking,” emphasises Lim. “We still need more space. [The new investor hub] indirectly helps relieve some of the space pressure that we have in Raffles City.”
Rental costs
More than just a hub | BY NOVA THERESIANTO |
H
omegrown financial services firm, PhillipCapital, has been most aggressive at bringing its financial services nearer to its investors — to the heartland districts. Over the last eight years, it has planted investor centres in major residential neighbourhoods from Ang Mo Kio, Marine Parade and Toa Payoh, to as far as Bukit Batok, Yishun and Woodlands. It also has two investor centres in the CBD, namely Robinson Road and Raffles City Tower. In fact, its first investor centre was at Straits Trading Building along Battery Road. Set up in 2000, it
has since been relocated to the current Robinson Towers premise. To date, it has nine investor centres. Two weeks ago, PhillipCapital opened its first investor hub at the former Moulmein Community Centre at Shan Road, off Balestier Road. Unlike the typical investor centres in the heartlands, which tend to be housed in shophouses of around 2,000 sq ft, the flagship Phillip Investor Hub is 10 times larger with a gross floor area of 22,593 sq ft. PhillipCapital spent about $1.8 million refurbishing the former community centre, which had been vacant for more than two years. Unlike the other investor centres, the Phillip
Investor Hub is designed like a clubhouse with a cafeteria and a rooftop garden for client functions.
‘Comprehensive range of services’ “We thought it was a good idea to do something more significant, like a hub, which we can plant in different major parts of Singapore,” says Lim Hua Min, executive chairman of PhillipCapital. “And so hopefully, this first hub will not be the last one, so that we will be in a position to provide a more comprehensive range of services.” Including the new investor hub at the former Moulmein Community Centre, PhillipCapital now has 10
Lim: We are actually expanding in Raffles City, not shrinking. We still need more space.
such investor centres. “Our aim is to have 20 [investor hubs and centres] in time to come, [and] we are looking at three this year,” says Lisa Lee, director of business development and consumer services at PhillipCapital. The rate of expansion will depend on the availability of sizeable properties in strategic locations, for instance, in the regional centres of Jurong East in the west and Tampines in the east. The investor hub also helps centralise several functions. It houses all the 310 financial advisers who were previously located in various investor centres. It also acts as a satellite office for its 150 remisiers or so-called “home sales force”. It will also house some of PhillipCapital’s backroom functions. Currently, PhillipCapital’s head-
On top of that, it also helps reduce overall rental costs. As of February, asking rents at Raffles City Tower is in the range of $16.20-$17.50 psf per month, according to office leasing specialists, Corporate Locations’ latest rental guide. Meanwhile, PhillipCapital had successfully bid to lease the former Moulmein Community Centre site for its investor hub from the Singapore Land Authority for $35,000 per month in June last year. This works out to a rental rate of a mere $1.55 psf per month. The lease period is for three years, with an option to renew for threeplus three years. Unlike the other investor centres which follow regular office hours (in the heartlands they are opened from 9am to 1pm on Saturdays), the new investor hub will be opened seven days a week from 11am to 5pm. “The CBD gets really sleepy during the weekend, therefore we are actually going into areas where these investors live,” says Lee. The company has also set up investor centres in Thailand, Indonesia E and Hong Kong.
CC4 • THEEDGE SINGAPORE
| MARCH 3, 2008
CITY&COUNTRY
COVERSTORY
The pric
1 1 1 1 1
MILLIONAIRES’
The brand new super-luxury good class bungalow at 39 Leedon Road and the neighbouring 37 Leedon Road are on the market with price tags of $35 million each
row in Singapore
While GCB transactions are expected to moderate this year after a record 2007, sellers are still bullish with their asking prices | BY CECILIA CHOW |
T
he US subprime woes may have dampened sentiment and slowed the rate of sales, but it has yet to put a dent on owners’ asking prices, especially at the top-tier of the luxury home market, the good class bungalows (GCBs). Last year was a record year for the GCB market, with 117 transactions worth $1.54 billion taking place, according to Jones Lang LaSalle Research. However, the bulk of the sales of $1.4 billion (90%) were done in the first nine months of the year. In 4Q when the US subprime crisis started to have a knockon effect on global stock markets, market sentiment in Singapore dipped, and only nine GCBs changed hands over the last three months of 2007. “2008 is generally expected to see a slower start to the year as fears of a US recession continue to affect market sentiment,” says David Batchelor, associate director of investments at Jones Lang LaSalle, and a specialist in the GCB market. While demand for GCBs remains strong, actual transactions for 2008 is expected to moderate. This is already evident in terms of sales for the first
two months of the year: only a handful of GCBs changed hands compared with the same period last year, which saw around 20 transactions. The most recent deal according to URA Realis database of caveats lodged, was on Feb 4 when 32 White House Park with a land area of 15,081 sq ft, changed hands for $18 million or $1,194 psf. However, unlike the luxury condo market that has gone very quiet since the last quarter of 2007, with developers holding back their launches until sentiment improves, there is still activity in the landed homes segment, observes Shaun Poh, senior director of investment advisory services and auction at DTZ Debenham Tie Leung.
More GCBs priced above $1,000 psf Most recently, DTZ put up for sale by private treaty a GCB at 5A Bishopsgate (located off Grange Road and Nathan Road) with an indicative price of $24 million. This translates to $1,423 psf based on a land area of 16,861 sq ft. The double-storey bungalow with a total built-up area of 9,800 sq ft has seven bedrooms and a swimming pool. Built 11 years ago, the house is still in mint condition and was recently given a fresh coat of paint. Hence, the new
owner would not need to do any extensive renovation works. The property is currently tenanted at a monthly rental rate of $40,000 a month, with the lease expiring end-October 2009. Just next door, 7A Bishopsgate changed hands for $21 million or $1,202 psf in December last year. “These days, the asking price for GCBs is above $1,000 psf,” says Poh. There are also several properties that were put on the market last year at prices above $1,000 psf, and which are still available for sale. One of them is 35 Leedon Road, which sits on a 43,927 sq ft freehold. The owners are not budging from their asking price of $44 million or $1,001 psf. Another is 3 Wollerton Park which has a land area of 26,326 sq ft site and an indicative sale price of $32 million to $33 million or $1,215 to 1,254 psf. The existing mansion has a built-up area of 15,000 sq ft with six bedrooms and a basement. There’s also a separate wing for entertaining guests. In the exclusive Chatsworth Park enclave, the conservation bungalow at No 5 Chatsworth Park was put up for sale by private treaty in November. The conservation house and an outhouse sit on a sprawling 43,496 sq ft site and the price tag is $45 million or close to
$1, the er G inc
in 2 psf cen wit to $ aG bou Na for sim $19
Sep we ma me ow and Roa his
ter Lan mo and
Su bu
As ma the the 37 ope at t lau gal tran Lim: As you move up to the tip of the pyramid, there are fewer and fewer people who can afford a home at this level
bui
THEEDGE SINGAPORE | MARCH 3, 2008 • CC5
COVERSTORY COVER STORY
Top 10 GCB transactions in 2007 NO
DATE
ADDRESS
31 75 94 96 98 104 106 108 112 117
March 30 June 8 July 25 Aug 2 Aug 7 Sept 11 Sept 18 Sept 26 Nov 9 Dec 21
63 Dalvey Road 20B Nassim Road 10 Peirce Hill 15 White House Park 5A Bishopsgate 32G Nassim Road 32H Nassim Road 30 White House Park 7 Gallop Walk 7A Bishopsgate
LAND AREA (SQ FT)
SALE PRICE ($)
PSF ($)
15,080 24,186 16,926 22,011 16,867 13,292 13,422 14,811 15,202 17,472
16,450,000 24,183,480 17,200,000 28,800,000 18,800,000 19,998,000 25,500,000 15,500,000 15,350,000 21,000,000
1,091 1,000 1,016 1,308 1,115 1,505 1,900 1,047 1,010 1,202
Good class bungalows transactions in 2008 (to date)
1,600 1,400
Total transacted value ($mil) Total transacted value Total No sold
120 100
1,200 1,000
80
800
60
600
40
400 20
200 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
luxlow and g 37 the s of ach
140
0
$1,035 psf. Given the size of the land, it has the potential to be sub-divided into two smaller GCB sites of over 21,000 sq ft each, which includes the conservation bungalow. According to Jones Lang LaSalle Research, in 2007, 10 GCBs were sold at prices of $1,000 psf and above. Three of the deals were concentrated in the exclusive Nassim Road area, with the highest price achieved there at close to $1,900 psf, which is also a record price for a GCB property. This was for one of two neighbouring plots at Nassim Road, namely 32H Nassim Road (a 13,422 sq ft site that was sold for $25.5 million or $1,899 psf); and 32G Nassim Road (a 13,292 sq ft site that was sold for $19.998 million or $1,505 psf). Both these properties were transacted in September, and according to market sources, were bought by Chew Hua Seng, the chairman and CEO of Raffles Education Corp (formerly Raffles LaSalle Ltd). Chew currently owns 32K Nassim Road, just two doors away, and sources say the two neighbouring Nassim Road homes were likely to be purchased for his family’s use. “The rich are getting richer and have better holding power than before,” observes Jones Lang LaSalle’s Batchelor. “The GCB market is more resilient than the luxury condo market, and is a better hedge against inflation.”
Super-luxury, high-specification bungalows at $35 million
r
As more GCBs start to cross the $1,000 psf mark, more GCB owners will be willing to put their homes on the market. The latest launch is the brand new pair of “super-luxury” GCBs at 37 and 39 Leedon Road by niche luxury developer, George Lim of GLim Pte Ltd. Completed at the end of December, the two homes were launched in a glitzy event on Feb 21. Each bungalow carries a price tag of $35 million, which translates to over $1,500 psf. No 37 has a land area of 22,000 sq ft and built-up area of 10,000 sq ft. Meanwhile, No
2,750 2,500 2,250 2,000 1,750 1,500
($) High end condo avg cap value GCB avg $ per sq ft
JONES LANG LASALLE RESEARCH
1,800
High-end condos vs GCBs
DATE
ADDRESS
1 2 3 4 5
Feb 4 Feb 4 Feb 4 Jan 16 Jan 22
32 White House Park 14 Mount Echo Park 20 Caldecott Close 5 Swettenham Green 85 Chestnut Drive Total land area Total transaction Average psf
1,250 1,000 750 500 250 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
GCB transactions
JONES LANG LASALLE RESEARCH
The good class bungalow at 5A Bishopsgate (located off Grange Road and Nathan Road) has an indicative price of $24 million or $1,423 psf
NO
39 has a land area of 21,000 sq ft and builtup area of 11,000 sq ft. Both homes have fivebedrooms, an aquarium with exotic fish, a koi pond, swimming pool, a roof deck for outdoor entertaining, a separate guest house, a wine cellar to house 2,000 bottles of wine, a shoe cupboard for up to 500 pairs of shoes, a gourmet kitchen with imported Viking professional kitchen appliances, an internal lift, and a basement car park for seven cars. The two homes will appeal to the tech-savvy. There is a home automation system that can be programmed to turn on lights and airconditioning anywhere around the house either with the wall panels or remotely from your mobile phone or PC; an entertainment system with AMX movie on demand (up to 250 movies) and piped in music for every room and outdoor areas. There are also six plasma televisions installed in the house — a ceilingmounted 50” TV in the master bedroom and five others in the living and family rooms. The kitchen also has a 28” high-definition TV. All the TVs are linked to surveillance cameras in various parts of the house for security. Lim has also installed a dehumidifier for all the walk-in wardrobes as well as the shoe cupboard. “Whenever I build a house, I always ask myself, ‘What can I do to make the home more comfortable and convenient through home automation without making it too complicated for the owner?’”. Offers in the “$30-million range” have trickled in, but Lim is not biting. Will he consider lowering his price tag if he doesn’t get his asking price of $35 million? “There’s no reason why a property like this can’t be sold,” he comments. “As you move up to the tip of the pyramid, there are fewer and fewer people who can afford a home at this level.” A newly completed home like Lim’s will likely appeal to homebuyers in the face of skyrocketing construction costs over the past year due to competition for scarce resources and manpower amidst a construction boom.
Batchelor: The rich are getting richer and have better holding power than before. The GCB market is more resilient than the luxury condo market, and is a better hedge against inflation.
Hence, most GCB buyers have shifted their focus from building their own dream GCBs to looking for completed GCBs where little or no improvements are required, observes Batchelor. “Thus it is expected that [demand for] completed GCBs will be stronger in 2008 as construction costs continue to remain high.”
More owner occupiers and long-term investors as prices trend up Over at 11 Ford Avenue, the tender for the sale closed on Feb 21. This is one of the few large GCB sites left. With a sprawling 45,894 sq ft site, the property has the potential to be subdivided into three smaller GCBs. The owner of 11 Ford Avenue is believed to be the Eu family of Singapore Exchange-listed Eu Yan Sang. The traditional Chinese medicine empire founded back in 1879 is already in the fourth generation of the family, and is headed by Richard Eu, the great-great-grandson of the founder, Eu Kong.
LAND AREA (SQ FT)
SALE PRICE
PSF ($)
15,081 18,568 17,400 15,817 15,999
18,000,000 13,250,000 10,080,000 12,682,760 8,580,000
1,194 714 579 802 536
82,865 sq ft $62,592,760 $755 psf
The property was put up for sale on Jan 15 with an indicative price tag of $41 million or $893 psf. Colliers International, the marketing agent for the property is said to be “in negotiations with interested parties”. According to Ho Eng Joo, executive director of investment sales at Colliers International, who’s handling the sale, interest has come mainly from buyers who’re looking at buying the super-sized GCB site for their own occupation. As GCB prices continue to head north, buyers have started to widen their search beyond the traditional prime residential districts in the city centre. They are looking further out to locations like Chestnut Drive and Windsor Park where prices are still below the $1,000 psf mark. This can be seen in the transactions this year. While 32 White House Park was sold for $1,192 psf, the GCB at 83 Chestnut Drive with a 15,999 sq ft site went for $8.58 million or $536 psf. At 20 Caldecott Close, the GCB on a 17,400 sq ft site changed hands for $10.08 million or $579 psf. While the total value of sales in 2007 at $1.54 billion exceeded 2006’s $1.3 billion, in terms of the number of transactions, 2007’s 117 were fewer than 2006’s 128. This reflects the sharp run-up in property prices last year. The average price per square foot for GCBs was $692 psf in 2007, compared with $503 psf in 2006, which showed average capital values appreciating 37.6%. The average price for the five transactions in 2008 to date was $755 psf, which is 9% higher than the average prices recorded last year. Hence, while Batchelor expects sales volume to moderate this year, he is confident that in terms of value, it could potentially remain on par with last year. What’s worth noting is that while GCBs remain sought-after investments and are still coveted assets for newly minted millionaires, it is now seeing stiff competition from Sentosa Cove, with 99-year leasehold waterfront bungalows. While land values of GCBs averaged at $692 psf for the whole of last year, sea-fronting bungalow parcels at Sentosa Cove were close to double that at $1,283 psf. Even luxury-end condos are seeing transaction prices that are much higher than GCBs, averaging $2,730 psf in 2007. “The GCB market is unique and caters to the ultra-rich home buyers and sellers and will generally continue to remain resilient against any recession in the US,” he adds. Transactions of GCBs will remain active and record prices are expected for the various GCB enE claves in 2008.”
JONES LANG LASALLE RESEARCH, URA REALIS
PICTURES: SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
CITY&COUNTRY
| MARCH 3, 2008 GWYNETH YEO/THE EDGE SINGAPORE
CC6 • THEEDGE SINGAPORE
CITY&COUNTRY
The row of five terraced houses at Essex Road has a price tag of $30 million or $1,500 psf ppr
COLLIERS INTERNATIONAL
Train of collective sale hopefuls continues unabated | BY CECILIA CHOW |
T
he collective sale market may have cooled considerably since 4Q2007, but the ardour of collective sale hopefuls apparently hasn’t. And it’s no longer confined to the owners of condominium and apartment blocks either. Jumping on the bandwagon are owners of landed homes. Last November, the owners of 15 terraced houses along Jalan Bunga Raya in Balestier banded together and sold their homes collectively for $61 million to a Chinese developer and a Singaporean partner. Each of the owners walked away with $4 million. More recently, the owners of a row of five terraced houses along Essex Road, just off Thomson Road, are hoping to reap an equally profitable windfall. Unlike a collective sale of a condominium project where only 80% of the owners need to give their consent for a sale to go through (for projects that are at least 10 years old), in the case of landed homes, all the owners have to agree. However, as landed homes, the collective sale does not need Strata Title Board approval, which will make the sale less cumbersome once all the owners have agreed to the sale. In the case of the Essex Road houses, Knight Frank, the appointed marketing agent, received approval from all the owners to proceed with the collective sale. This was made easier because the owner of three of the five houses is the person who also initiated the sale process. He is Dr Lim, CEO of ASIAINSTITUT OF MANAGEMENT (AM School of Business Studies), who had purchased the houses three years ago. What’s also interesting is that the owners have decided to opt for an auction sale in the hope of achieving a speedier sale process. Knight Frank will be putting up the properties for auction sale on March 20. Lim believes the potential of the row of Essex Road terraced houses hinges on the possibility of it being amalgamated with the neighbouring strip of state land, the service road behind the houses for the owners to park their cars, and more importantly, with the apartment block Lion Towers behind it, which is also pursuing a collective sale. He argues that such an amalgamation will enhance the footprint of the existing Lion Towers site by another 80%, making it more attractive to a developer looking for a freehold
The row of 16 terraced houses at Fort Terrace has an indicative price of $95 million or $1,238 psf ppr
development site in the prime residential enclave of Newton/Novena. The en bloc sales committee of Lion Towers at 2 Essex Road has recently appointed CB Richard Ellis (CBRE) as their marketing agent to handle their collective sale. According to market sources, it’s still in the process of drafting the collective sale agreement.
Lion Towers Built close to 30 years ago, Lion Towers has 52 apartments and sits on a 40,409 sq ft freehold site. With a plot ratio of 2.8 and a maximum height of 36-storeys under the 2003 Master Plan, a developer will be able to build a brand new 75-unit luxury condominium with units averaging 1,500 sq ft each. According to market sources, the indicative price of Lion Towers is estimated to be close to $200 million, which works out to around $1,742.46 psf ppr. At that price, each owner will pocket $3.8 million each. The owners are said to have already applied to the Singapore Land Authority (SLA) regarding the possible annexation of the neighbouring state land to be amalgamated with the Lion Towers site. Meanwhile, the five houses at Essex Road are sitting on a freehold site of 7,163 sq ft. The land is zoned for residential development
with a plot ratio of 2.8 according to URA’s 2003 Master Plan, and has a maximum height of 36-storeys as well. The owners’ asking price is $1,500 psf ppr or around $30 million. If that price is achieved, each owner will walk away with a cool $6 million. This asking price is comparable to the sale price of last year’s collective sale deals in its immediate neighbourhood. Last November, contractor-cum-developer, Bravo Building Construction Group, bought Makeway View for $162.8 million through a collective sale, which is equivalent to $1,583 psf ppr. In June last year, a consortium led by Koh Brothers bought Lincoln Lodge in a collective sale worth $243 million or $1,449 psf ppr. If the site of the Essex Road houses is combined with the neighbouring state land and service road, the total area would be over 30,000 sq ft, estimates Lim. If amalgamated with the Lion Towers site, he reckons that the enlarged footprint would be over 70,000 sq ft and a developer could potentially build a 100-unit luxury project with unit sizes averaging 1,800 sq ft. Another attraction of the site is the fact that at the end of Essex Road is SJI Junior (the former St Michael’s School). It is also in the neighbourhood of other good schools
in Bukit Timah such as Nanyang Girls’ High School, Hwa Chong High and National Junior College. What’s more the Novena enclave is also turning into a booming medical hub. Linked to the Novena MRT station and located behind Novena Square is Tan Tock Seng Hospital and Far East Organization’s brand new Novena Medical Centre. The area recently received an added boost when Parkway Holdings bid a record $1.25 billion ($1,600 psf ppr) for a 1.7ha, 99-year leasehold government site to build a private hospital at Novena Terrace/Irrawady Road. It’s also a sought-after residential neighbourhood given its proximity to the CBD and Orchard Road. In the immediate neighbourhood of Parkway’s site is Frasers Centrepoint’s new condominium development, the 417-unit twin-tower Soleil@Sinaran that was launched last year and is currently under construction. The most recent transaction, according to the caveats lodged on URA Realis, was for a 958 sq ft unit on the third floor which was sold for $1.23 million ($1,285 psf). A 1,453 sq ft apartment on the 16th floor changed hands on the sub-sale market for over $2.32 million ($1,600 psf) at the end of last year. Meanwhile, at 1 Essex Road is Far East Organization’s Strata, a 32-storey, 100-unit loftstyle apartment tower completed in 2006. According to the URA Realis database of caveats lodged, three 506 sq ft apartments changed hands on the resale market at prices ranging from $650,000 ($1,285 psf) for the most recent transaction on Sept 21 last year to $820,000 ($1,621 psf) for a similar-sized unit also on the second floor, which was sold in early August last year. Across the road and next to United Square shopping mall is Allgreen Properties’ Viva, a brand new condominium that’s yet to be launched. Behind Viva is Keppel Land’s 486unit Park Infinia at Wee Nam, targeted for completion next year. A handful of units in the development changed hands in January at prices ranging from $1,410 to $1,600 psf. The selling prices of new launches in the area are even higher. Just down the street from the row of Essex Road houses is the showflat of Lucida, a 62-unit high-end condominium project by boutique developer, Novelty Group. Private previews at Lucida have yet to begin, but marketing agents are citing an indicative selling price of $1,700 to $2,000 psf.
Fort Terrace, another collective sale hopeful Meanwhile, over at the east coast, the owners of a row of 16 terraced houses called Fort Terrace at 29-59 Fort Road have also put their properties up for collective sale. The freehold residential site was put up for tender on Feb 27, and will close on March 26. The rectangular freehold development site has a total area of 47,886 sq ft and under the 2003 Master Plan, it is zoned for residential use with a gross plot ratio of 2.1. Colliers International, the marketing agent, has already obtained 100% agreement from the owners to proceed with the collective sale. According to Ho Eng Joo, executive director of investment sales at Colliers International, the indicative price is $95 million. There’s a development charge of $23 million, as well as the cost of annexing a piece of 10,964 sq ft state land, which is estimated at $6.4 million. This will work out to $1,238 psf ppr. The site has the potential to be redeveloped into a high-rise condominium with 67 units averagE ing 1,500 sq ft each.
CITY&COUNTRY
Unlike many other Western economies swamped by the subprime backwash, the Australian property scene still looks bright
| BY MARK HENDERSON |
T
he fallout from the US subprime crisis is hammering housing markets across the US and Europe. Mortgage foreclosures in the US are escalating as inflated home values sink. And the news is also grim in the UK where homeowners are watching their valuations slide. But it’s not all doom and gloom on the Western property front, claims Australian property expert Ben Boyle. There are, he says, reliable returns in strong growth areas Down Under, such as Queensland. Boyle is a director of Your Property Solutions (YPS), a property consultancy service based in Brisbane. He was recently in Singapore and Hong Kong to market the company to expatriates and locals while catching up with clients. The difference between YPS and most other agencies, says Boyle, is that the company works exclusively for the buyer. “We use our extensive knowledge and experience in the Queensland market to source property to the buyer’s requirements.” YPS not only finds the property, it negotiates price (which Boyle claims is typically 10% less than the “fair market value”), arranges building and pest inspections, insurance and finance services. The agency also operates a property management service, which has more than 500 investment homes on its books. Around 70% of YPS’ clients are investors. Boyle, a former captain in the Australian Army, who served in East Timor and Iraq, says his confidence in the Sunshine State’s residential market is backed by solid data. Unlike many other Western economies swamped by the subprime backwash, the Australian property scene still looks bright. While falling house prices elsewhere are undermining consumer wealth and confidence, Australia is tracking a different pattern. A report by Macquarie Research Economics in December 2007 points out that the Aussies
Buying property in Australia’s Sunshine State year led the way with 20%-plus capital gain. “Key drivers are strong economic growth from the mining-dominated economy — many of the country’s mining giants operate in Queensland — and strong population and wages growth, particularly in Queensland. Around 50,000 people a year are moving to the state. Many corporates are relocating to Brisbane from Sydney. Brisbane has a broad-based economy, including agriculture and information technology. The city is no longer a big country town.” Boyle believes median-priced properties in median-priced suburbs are a solid bet for long-term growth. Around A$450,000 will buy a three-bedroom, two-bathroom house on 6,400 sq ft of
land within 10km of central Brisbane. This property will earn A$400 a week in rent for a net 4% to 5% return, plus capital growth, which was running at 20% last year. Capital gain has averaged 10% annually over the past 10 years in southeast Queensland. Apartments close to the city, says Boyle
Apartments close to the city, says Boyle are ‘renting machines’. A new A$400,000 unit with two bedrooms and two bathrooms rents for A$380 to A$460 per week. A three-bedroom townhouse costs A$500,000 and can fetch A$450-plus a week in rents.
are “renting machines”. A new A$400,000 unit with two bedrooms and two bathrooms rents for A$380 to A$460 per week. A threebedroom townhouse costs A$500,000 and can fetch A$450-plus a week in rents. Foreigners can only buy brand new houses and apartments, but there is plenty of new apartment stock in Brisbane, says Boyle. Investors are liable for capital gains tax at around 25% when they sell the property. YPS charges a flat A$10,000 fee for sourcing and negotiating the purchase of a property on behalf of a client. Andrew Powell, who works in an airlinerelated industry, and has been living in Singapore for the last five years, recently bought two houses near Brisbane using Boyle and YPS. “I wanted someone with knowledge on the ground,” says Powell. He paid A$420,000 for the first property, a three-bedroom house 5km from the city, in 2006. The house is now valued at A$550,000. Last year, he shelled out A$1.15 million for a sprawling five-bedroom, fully renovated traditional “Queenslander” colonial verandah house “in a great suburb” 4km from Brisbane. That property, he says, could now be confidently listed at A$1.4 million.
Queensland’s appeal have already had their pain. The slowdown in most of the Australian housing market took place in 2004-05. House prices in Adelaide and Brisbane have bounced back over the past couple of years. In Brisbane, the average cost of a three-bedroom house has climbed from A$350,000 ($488,940) to around A$450,000. Adelaide homes have risen from A$300,000 to more than A$360,000.
Heavy demand Demand for homes is outstripping supply. The Reserve Bank of Australia currently estimates 180,000 homes a year are wanted, but only 150,000 are being built. Residential building activity has been flat for five years, despite increasing migration into Australia. That’s putting pressure on the rental market. Rents are rising fast in most capital cities. In Brisbane, rents for a family home have increased by around A$50 per week (15%) over the past 12 months. Boyle says the residential good times will continue. Housing in Brisbane and Perth last
House prices in Adelaide and Brisbane have bounced back over the past couple of years
“I used Ben because I didn’t have the time to look myself,” says Powell. “The fee is a small price to pay for local knowledge. It took me four months to find an investment property in Sydney a few years ago. Ben found my first Brisbane buy on the same day it went to market.” Powell reckons that Queensland should appeal to many investors from Asia. “The Australian property market doesn’t have massive swings; it is more predictable with less risk over the long term.” Further north, booming Townsville offers investors some good opportunities, says Boyle. Townsville has a large transient population — mine workers on fly-in-fly-out contracts, for example — so rents are relatively high. Houses start from around A$300,000, up from A$150,000 five years ago. Apartments along the waterfront sell for A$400,000-plus. Boyle says Perth, popular with Singaporeans, has peaked. “Perth has come off the boil. After enjoying 20% capital growth over the past two years, the residential market there E has slowed to around 4%.”
PICTURES: YPS
THEEDGE SINGAPORE | MARCH 3, 2008 • CC7
CC8 • THEEDGE SINGAPORE
| MARCH 3, 2008
CITY&COUNTRY
HOME LOAN RATES responsible for any loss or damage arising directly or indirectly from the use of, or reliance on, the information provided herein.
Disclaimer: The rates shown here are only indicative and are subject to changes by the respective banks without prior notice. They are not to be taken as an offer of contract. The Edge Publishing Pte Ltd shall not be
SOURCES: VARIOUS BANKS, EXPRESS HOME LOAN CONSULTANCY, THE EDGE SINGAPORE
HDB housing loan rates BOARD RATE (%)
FIRST YEAR (%)
80% FINANCING SECOND YEAR (%)
THIRD YEAR (%)
THEREAFTER (%)
BOARD RATE (%)
FIRST YEAR (%)
90% FINANCING SECOND YEAR (%)
THIRD YEAR (%)
THEREAFTER (%)
Fixed Rate Package (min $300k) Flexible Rate Package
5.50 5.50
4.25 (fixed) 4.25 (HBR-1.25)
4.50 (fixed) 4.50 (HBR-1.00)
4.50 (fixed) 4.50 (HBR-1.00)
5.50 (HBR) 5.50 (HBR)
5.50 5.50
4.25 (fixed) 4.25 (HBR-1.25)
4.50 (fixed) 4.50 (HBR-1.00)
4.50 (fixed) 4.50 (HBR-1.00)
5.50 (HBR) 5.50 (HBR)
Hong Leong Finance
2-Year Fixed Rate Package Variable Rate Package
4.25 4.25
3.48 (fixed) 3.18 (HBR-1.07)
3.48 (fixed) 3.38 (HBR-0.87)
3.98 (HBR-0.27) 3.88 (HBR-0.37)
3.98 (HBR-0.27) 3.98 (HBR-0.27)
4.25 4.25
4.48 (fixed) 3.98 (HBR-0.27)
4.70 (fixed) 4.20 (HBR-0.05)
4.75 (HBR+0.50) 4.75 (HBR+0.50)
4.75 (HBR+0.50) 4.75 (HBR+0.50)
HSBC
2-Year Fixed Rate Package (min $500k) 50% of Loan on Fixed rate (2-yr lock-in)*** Variable Rate Home Loan (min $100k, no lock-in) Variable Rate Home Loan (min $100k, 1-year lock-in) 50% of Loan on Sibor Pegged Package (no lock-in) ***
NA NA NA
4.00 (fixed) 2.8% (fixed) 3.50
4.00 (fixed) 2.8% (fixed) 3.50
4.00 3.40% (fixed) 3.70
4.00 3.80% (fixed) 3.80
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA
3.30 3mth Sibor +0.7%
3.50 3mth Sibor +0.7%
3.70 3mth Sibor +0.7%
3.80 3mth Sibor +0.7%
NA NA
NA NA
NA NA
NA NA
NA NA
1-Year Fixed Rate Package
3.75
2.68 (fixed)
3.08 (BR-0.67)
3.38 (BR-0.37)
3.75 (HBR)
NA
NA
NA
NA
NA
2-Year Fixed Rate Package
3.75
2.28 (fixed)
2.68(fixed)
2.98 (BR-0.77)
3.75 (HBR)
NA
NA
NA
NA
NA
3-Year Fixed Rate Package**
3.75
1.68 (fixed)
2.68 (fixed)
3.38 (fixed)
3.75 (HBR)
NA
NA
NA
NA
NA
3-Year Fixed 2.80% Cashback
3.75
2.48 (fixed)
3.68 (fixed)
4.38 (fixed)
3.75 (HBR)
NA
NA
NA
NA
NA
Variable Rate Package (1-yr lock-in)
3.75
2.78 (BR-0.97)
3.08 (BR-0.67)
3.38 (BR-0.37)
3.75 (HBR)
NA
NA
NA
NA
NA
Variable Rate Package (2-yr lock-in)
3.75
2.48 (BR-1.27)
2.88 (BR-0.87)
3.38 (BR-0.37)
3.75 (HBR)
NA
NA
NA
NA
NA
Variable Rate Package (3-yr lock-in) Variable Rate Package (no lock-in)
3.75 3.75
2.28 (BR-1.47) 2.98 (BR-0.77)
2.88 (BR-0.87) 3.28 (BR-0.47)
3.38 (BR-0.37) 3.38 (BR-0.37)
3.75 (HBR) 3.75 (HBR)
NA NA
NA NA
NA NA
NA NA
NA NA
BANK
NAME OF LOAN SCHEME
ABN Amro
Maybank
Variable 2.80% Cashback
3.75
3.08 (BR-0.67)
3.88 (BR+0.13)
4.38 (BR+0.63)
3.75 (HBR)
NA
NA
NA
NA
NA
OCBC
1-Year Fixed Rate Package 2-Year Fixed Rate Package Variable Rate Package
3.75 3.75 3.75
3.75 (fixed) 3.75 (fixed) 3.25 (HBR-0.50)
3.50 (HBR-0.25) 4.00 (fixed) 3.50 (HBR-0.25)
3.75 (HBR) 3.75 (HBR) 3.75 (HBR)
3.75 (HBR) 3.75 (HBR) 3.75 (HBR)
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA NA
POSB
Home Ideal package (pegged to CPF rate)** 3-Year Fixed Rate Package
NA NA
CPF Rate + 1.00 3.88 (fixed)
CPF Rate + 1.25 3.88 (fixed)
CPF Rate + 1.58 3.88 (fixed)
CPF Rate + 1.58 CPF Rate + 1.58
NA NA
NA NA
NA NA
NA NA
NA NA
4.25
4.00 (HBR-0.25)
4.25 (HBR)
4.75 (HBR+0.50)
4.75 (HBR+0.50)
NA
NA
NA
NA
NA
NA
3.25
3.50
3.75
3.75
NA
NA
NA
NA
NA
Sing Investments Variable Rate Package & Finance Standard Chartered
Floating Rate Package (min $100k)
UOB
1-Year Fixed Rate Package 2-Year Fixed Rate Package 3-Year Fixed Rate Package Floating Rate Package
4.50 4.50 4.50 4.50
4.25 (fixed) 4.10 (fixed) 3.98 (fixed) 3.25 (HBR-1.25)
4.25 (HBR-0.25) 4.10 (fixed) 3.98 (fixed) 3.50 (HBR-1.00)
4.25 (HBR-0.25) 4.10 (HBR-0.40) 3.98 (fixed) 3.75 (HBR-0.75)
4.25 (HBR-0.25) 4.10 (HBR-0.40) 3.98 (HBR-0.52) 3.75 (HBR-0.75)
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
RHB
2-Year Fixed Rate Package Variable Rate Package
4.25 4.25
3.50 (fixed) 3.25 (HBR-1.00)
3.75 (fixed) 3.50 (HBR-0.75)
3.88 (HBR-0.37) 3.75 (HBR-0.50)
4.00 (HBR-0.25) 4.25 (HBR)
NA NA
NA NA
NA NA
NA NA
NA NA
HBR = HDB Housing Board Rate
NA = Not available
**CPF rate has remained at 2.5% per annum since July 1999
Private housing loan rates BOARD RATE (%)
FIRST YEAR (%)
80% FINANCING SECOND YEAR (%)
THIRD YEAR (%)
THEREAFTER (%)
BOARD RATE (%)
FIRST YEAR (%)
90% FINANCING SECOND YEAR (%)
THIRD YEAR (%)
THEREAFTER (%)
Fixed Rate Package (min $300k) Flexible Rate Package
5.50 5.50
4.25 (fixed) 4.25 (BR-1.25)
4.50 (fixed) 4.50 (BR-1.00)
4.50 (fixed) 4.50 (BR-1.00)
5.50 (BR) 5.50 (BR)
5.50 5.50
4.25 (fixed) 4.25 (BR-1.25)
4.50 (fixed) 4.50 (BR-1.00)
4.50 (fixed) 4.50 (BR-1.00)
5.50 (BR) 5.50 (BR)
Interbank Market Rate Package* Nil Loyalty Period 1-Year Loyalty Period 2-Year Loyalty Period 3-Year Loyalty Period
NA NA NA NA
Sibor + 1.25 Sibor + 1.10 Sibor + 0.95 Sibor + 0.80
Sibor + 1.25 Sibor + 1.25 Sibor + 0.95 Sibor + 0.80
Sibor + 1.25 Sibor + 1.25 Sibor + 1.25 Sibor + 0.80
Sibor + 1.25 Sibor + 1.25 Sibor + 1.25 Sibor + 1.25
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
7.25 7.25
3.88 (fixed) 3.38 (BR-3.87)
4.18 (fixed) 3.88 (BR-3.37)
4.00 (BR-3.25) 4.00 (BR-3.25)
4.00 (BR-3.25) 4.00 (BR-3.25)
7.25 7.25
4.58 (fixed) 4.18 (BR-3.07)
4.78 (fixed) 4.38 (BR-2.87)
4.75 (BR-2.50) 4.75 (BR-2.50)
4.75 (BR-2.50) 4.75 (BR-2.50)
NA NA NA
4.00 (fixed) 2.8% (fixed) 3.50
4.00 (fixed) 2.8% (fixed) 3.50
4.00 3.40% (fixed) 3.70
4.00 3.80% (fixed) 3.80
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA 3.30 NA 3mth Sibor +0.7%
3.50 3mth Sibor +0.7%
3.70 3mth Sibor +0.7%
3.80 3mth Sibor +0.7%
NA NA
NA NA
NA NA
NA NA
NA NA
BANK
NAME OF LOAN SCHEME
ABN Amro DBS
Hong Leong Finance
2-Year Fixed Rate Package Variable Rate Package
HSBC
2-Year Fixed Rate Package (min $500k) 50% of Loan on Fixed rate (2-yr lock-in)*** Variable Rate Home Loan (min $200k, no lock-in) Variable Rate Home Loan (min $200k, 1-year lock-in) 50% of Loan on Sibor Pegged Package (no lock-in)***
Maybank
1-Year Fixed Rate Package
3.75
2.68 (fixed)
3.08 (BR-0.67)
3.38 (BR-0.37)
3.75 (BR)
3.75
3.18 (fixed)
3.58 (BR-0.17)
3.88 (BR+0.13)
4.25 (BR+0.50)
2-Year Fixed Rate Package
3.75
2.28 (fixed)
2.68(fixed)
2.98 (BR-0.77)
3.75 (BR)
3.75
2.78 (fixed)
3.18 (fixed)
3.48 (BR-0.27)
4.25 (BR+0.50)
3-Year Fixed Rate Package**
3.75
1.68 (fixed)
2.68 (fixed)
3.38 (fixed)
3.75 (BR)
3.75
2.18 (fixed)
3.18 (fixed)
3.88 (fixed)
4.25 (BR+0.50)
3-Year Fixed 2.80% Cashback
3.75
2.48 (fixed)
3.68 (fixed)
4.38 (fixed)
3.75 (BR)
3.75
2.98 (fixed)
4.18 (fixed)
4.88 (fixed)
4.25 (BR+0.50)
Variable Rate Package (1-yr lock-in)
3.75
2.78 (BR-0.97)
3.08 (BR-0.67)
3.38 (BR-0.37)
3.75 (BR)
3.75
3.28 (BR-0.47)
3.58 (BR-0.17)
3.88 (BR+0.13)
4.25 (BR+0.50)
Variable Rate Package (2-yr lock-in)
3.75
2.48 (BR-1.27)
2.88 (BR-0.87)
3.38 (BR-0.37)
3.75 (BR)
3.75
2.98 (BR-0.77)
3.38 (BR-0.37)
3.88 (BR+0.13)
4.25 (BR+0.50)
Variable Rate Package (3-yr lock-in) Variable Rate Package (no lock-in) Variable 2.80% Cashback
3.75 3.75 3.75
2.28 (BR-1.47) 2.98 (BR-0.77) 3.08 (BR-0.67)
2.88 (BR-0.87) 3.28 (BR-0.47) 3.88 (BR+0.13)
3.38 (BR-0.37) 3.38 (BR-0.37) 4.38 (BR+0.63)
3.75 (BR) 3.75 (BR) 3.75 (BR)
3.75 3.75 3.75
2.78 (BR-0.97) 3.48 (BR-0.27) 3.58 (BR-0.17)
3.38 (BR-0.37) 3.78 (BR+0.03) 4.38 (BR+0.63)
3.88 (BR+0.13) 3.88 (BR+0.13) 4.88 (BR+1.13)
4.25 (BR+0.50) 4.25 (BR+0.50) 4.25 (BR+0.50)
OCBC
Fixed Rate Package Variable Rate Package
4.50 4.50
3.75 (fixed) 3.25 (BR-1.25)
4.00 (fixed) 3.50 (BR-1.00)
3.75 (BR-0.75) 3.75 (BR-0.75)
3.75 (BR-0.75) 3.75 (BR-0.75)
NA NA
NA NA
NA NA
NA NA
NA NA
Standard Chartered
Floating Rate Package (min $200k) MortgageOne Package (min $500k)
5.00 5.00
3.25 (BR-1.75) 3.50 (BR-1.50)
3.50 (BR-1.50) 3.75 (BR-1.25)
3.75 (BR-1.25) 4.00 (BR-1.00)
4.00 (BR-1.00) 4.25 (BR-0.75)
3.85 4.10
4.10 (BR+0.25) 4.35 (BR+0.25)
4.35 (BR+0.50) 4.60 (BR+0.50)
4.60 (BR+0.75) 4.85 (BR+0.75)
4.60 (BR+0.75) 4.85 (BR+0.75)
UOB
1-Year Fixed Rate Package 2-Year Fixed Rate Package 3-Year Fixed Rate Package Floating Rate Package (UOB Home Plus)
4.50 4.50 4.50 4.50
4.25 (fixed) 4.10 (fixed) 3.98 (fixed) 3.50 (BR-1.00)
4.25 (BR-0.25) 4.10 (fixed) 3.98 (fixed) 3.75 (BR-0.75)
4.25 (BR-0.25) 4.10 (BR-0.40) 3.98 (fixed) 4.00 (BR-0.50)
4.25 (BR-0.25) 4.10 (BR-0.40) 3.98 (BR-0.52) 4.00 (BR-0.50)
NA 4.50 NA 4.50
NA 4.50 (fixed) NA 4.25 (BR-0.25)
NA 4.50 (fixed) NA 4.50 (BR)
NA 4.50 (BR+0.25) NA 5.00 (BR+0.50)
NA 4.50 (BR+0.25) NA 5.00 (BR+0.50)
Sing Investments Variable Rate Package & Finance
5.00
4.00 (BR-1.00)
4.25 (BR-0.75)
4.75 (BR-0.25)
4.75 (BR-0.25)
5.00
4.00 (BR-1.00)
4.25 (BR-0.75)
4.75 (BR-0.25)
4.75 (BR-0.25)
RHB
5.75 5.75
3.50 (fixed) 3.25 (BR-2.50)
3.75 (fixed) 3.50 (BR-2.25)
3.90 (BR-1.85) 3.75 (BR-2.00)
3.90 (BR-1.85) 3.75 (BR-2.00)
5.75 5.75
4.25 (fixed) 4.00 (BR-1.75)
4.25 (fixed) 4.25 (BR-1.50)
4.50 (BR-1.25) 4.50 (BR-1.25)
4.50 (BR-1.25) 4.50 (BR-1.25)
2-Year Fixed Rate Package Variable Rate Package
*The Interbank Market Rate refers to the 12-month Sibor. Sibor rate is $1.66250 as at Feb 28, 2008. **3-Year Fixed Rate valid until March 10, 2008 *** Package valid until March 22, 2008. For fixed rate loans go to www.hsbc.com.sg
BR = Board rate NA = Not available
90% financing available on a case-by-case basis based on bank’s discretion All board rates are variable
Tables updated as at Feb 28, 2008
WEEK OF MARCH 3, 2008
Jumping on the wagon Collective sale hopefuls in landed homes
Queensland’s allure The Sunshine State’s housing market is still bright
The $35 million newly completed Good Class Bungalow at 37 Leedon Road
MILLIONAIRES’ row in Singapore
While GCB transactions are expected to moderate this year after a record 2007, sellers are still bullish with their asking prices
BUSINESS & INVESTMENT • EVERY WEEK
T H E W E E K O F MARCH 3, 2008
308
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2 • THEEDGE SINGAPORE
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Kwek, one of Singapore’s leading property developers, addressing analysts and journalists at CDL’s FY2007 results briefing at M Hotel last Thursday
High-end property at a crossroads Last week’s earnings results showed Singapore property developers reporting strong and, for some, record profits for FY2007 on the back of the biggest property boom in years. But the continuing US subprime crisis has dampened market sentiment, and developers are now bracing themselves for a difficult year ahead. Kwek Leng Beng, executive chairman of one of Singapore’s largest property developers, City Developments Ltd (CDL), voiced the feelings of many, saying at a results briefing last Thursday: “Sentiment is the most important element in buying and selling. When you don’t have a good feeling about the market, you don’t buy. You want to sell, but you can’t sell because you want to sell at a higher price.
“So, sentiment is more important than supply and demand. The higher prices go, the more people want to buy. The lower they go — [as they say] in Chinese — in crisis, there’s opportunity.” Kwek said the property market is unlikely to collapse; instead, homebuyers and investors are adopting a “wait-and-see attitude” in view of the current uncertainty. Others say that prices, especially at the luxury end, will soften this year as they saw the steepest increase last year, compared with the mid-end and mass market. Luxury condo prices leapt more than 57% last year versus the residential property price index, which saw a 31.2% increase. “If the US subprime crisis worsens, then
United Engineers Ltd said full-year profit rose 406%, owing to a gain in fair value of $186 million for UE Square, gains from partial divestment of the group’s short-term investments in Yongnam and other investment properties. Net profit surged to $172.9 million for the year ended Dec 31, 2007, from $59 million a year earlier, the company said in a statement last Friday. Sales dipped 12% to $539.8 million. Wilmar International Ltd fell for a fourth day as analysts downgraded the stock amid concern that the biggest palm oil trader may lose money on its retail business in China unless authorities approve price hikes. Wilmar was the seventh-worst performer on the Straits Times Index, which fell 1.6% last Friday. In January, China named Wilmar among companies that must seek permission from the National Development and Reform Commission before raising prices to help combat inflation. The curbs were “understandable”, Wilmar said last Thursday in a presentation that accompanied 4Q profit data. Banyan Tree Holdings Ltd, an operator of luxury resorts and hotels, said it plans to raise as much as US$400 million ($557 million) for a fund that will invest in properties in Vietnam, Cambodia and Laos. The Banyan Tree Hospitality Fund LP will have assets of about $300 million to $400 million when it closes this year, the company said in a statement to the Singapore Exchange. Banyan Tree, HSIL Investments Ltd and Hong Kong-based Nan Fung Group have each agreed to invest $33.33 million in the fund and may increase the sum
the entire property market will be affected,” says a property consultant who declined to be named. “Then prices starting from the top end will start to drop.” But Kwek believes otherwise. “Many of you are frightened that the high end has collapsed,” he said at the results briefing. “The high-end [buyers] are usually rich people [and] they have better holding power.” Instead of launching new developments, CDL will now proceed with the construction of some of their projects where it has struck “a good bargain with the construction company”. As piling and foundation works for condo projects typically take a year to complete, Kwek says if he were to launch a year from
to $50 million, the statement said. HSIL is a unit of HSBC Holdings plc. Hyflux Ltd, Singapore’s biggest publicly traded water-treatment company, said its order book may increase 20% to 30% this year as it wins more wastewater treatment and water recycling projects. Hyflux’s order book almost doubled to $863 million as at December, and the company will bid for more contracts in China and the Middle East, said Sam Ong, Hyflux’s deputy chief executive and chief financial officer. Mapletree Treasury Services Ltd, a unit of Mapletree Logistics Trust, will sell $75 million worth of two-year bonds with a coupon rate of 2.6%, a source familiar with the deal said. The coupon for the fixed-rate bond will be paid on March 3, the source said, adding the deal size was increased by $45 million after demand was strong. The swap offered rate for the two-year bond was last quoted at 1.67% on Friday, according to Reuters data. Suntec Real Estate Investment Trust, controlled by Hong Kong tycoon Li Ka-shing’s Cheung Kong (Holdings), launched a convertible bond issue on Thursday worth up to $300 million, a source familiar with the deal said. The property trust was selling five-year convertible bonds worth $250 million, with an over-allotment option for a further $50 million, in a deal handled by Citigroup and Deutsche Bank. The bonds have a coupon rate of 3.25%, a conversion premium of 23% to 28% and a reference price of $1.60, which was where the REIT’s unit closed on Thursday.
now a project that’s currently under construction, he would be able to collect a 30% deposit from buyers instead of the 20% down payment he would get from launching the same project today. “So, why do I need to be in a hurry to launch?” he says. He believes that the “next big wave” in the property market will come in 2010, when the integrated resorts at Marina Bay and on Sentosa Island are completed and operating. With a record-year in 2007 and given that CDL chalked up $7.6 billion in residential property sales in the market upturn of 2005 to 2007, it is likely to have a strong cash flow in the year ahead. “Don’t worry if we don’t launch anything [this year]”, says Kwek. — By Cecilia Chow
The Thai baht weakened in offshore trading, moving closer to onshore levels for the currency, after the central bank announced capital controls would be lifted from Monday. In offshore deals, the baht moved to 30.90 per US dollar from levels near 30.05 traded before the announcement. In onshore trading, the baht moved up to 31.35 from levels of 31.90 prior to the Bank of Thailand press conference. In December 2006, the central bank imposed controls to check speculation on a rising baht, with heavy restrictions on how much money foreigners could bring into the country and specifying a minimum period for most investments. Bank of Thailand Governor Tarisa Watanagase said on Friday the country would allow Thai companies to invest more offshore, and that the ceiling on bank borrowings from non-residents would be lifted. While announcing the removal of capital controls, she also said the authorities had alternative measures to stabilise the baht, Asia’s top performer in 2006 against the US dollar. The onshore baht gained 7% against the dollar last E year. — Compiled by Nova Theresianto
Quoteworthy This is the Bernanke shock, causing much faster dollar depreciation than expected — Michiyoshi Kato, senior vice-president of currency sales in Tokyo at Mizuho Corporate Bank. The US dollar fell to the lowest in almost three years versus the yen and a record against the euro since the currency’s inception in 1999 last Friday, on growing signs that the US economy is slipping into a recession.
THEEDGE SINGAPORE | MARCH 3, 2008 • 3
EDGEWISE
Auric primes balance sheet Is the battle for the control of retailer Robinson & Co nearing an end? On Feb 20, Mainboardlisted conglomerate Auric Pacific Group sold One Phillip Street, an office building, for $99 million to a fund managed by New Star Asset Management. A deal like that would normally attract little attention. But Auric Pacific is no ordinary company. It’s the local flagship of the Indonesian Riady family, which has a 49% stake. Through Auric, the Riadys assert control over listed local retail group Robinson & Co through a 29.9% stake held by their vehicle Red Oasis. Is Auric’s latest sale part of a larger exercise to build a war chest? Last year, it sold a fivestorey shopping centre in Malaysia. Now the office block sale has gotten tongues wagging that the cornered Lippo Group is serious about doing what it takes to keep control of Robinson. According to an announcement released by the company, $25 million of the proceeds from the sale of Philip Street block will be used to pay off the mortgage on the building, leaving Auric with $74 million, which could be used to settle some of its $125 million debt. The money, could also be used “to fund any future investments or acquisitions that the company may undertake” notes Auric in a release to the Singapore Exchange. Aside from the 29.99% stake in Robinson (held through the 60-40 Red Oasis joint venture with Sulaiman Holdings), the latest sale leaves Auric with just a 29.9% stake in listed Food Junction and assets related to manufacturing and distributing Sunshine Bread and bakery products as well as SCS Butter. Auric’s net profit last year was $51.5 million, which included a revaluation gain of $44.8 million from One Phillip Street and a $2.5 million revaluation gain from its penthouse at Pebble Bay. In general, the company’s largest profit contribution (61%) is from rental income and without its main property, the company would lose its main source of earnings. The sale of the two buildings in the past year, say analysts, puts pressure on Auric to seriously hunt for new income streams. It’s almost sitting on one. Robinson made a net profit of $15.8 million for the three months to Dec 31, 2007, its second quarter. Could Auric possibly be interested in raising its stake in Robinson’s to over 50% so that its own bottom line gets a shot in the arm? Perhaps. But Robinson might already be spoken for. On Jan 20, Al Futaim Global offered $6.25 per Robinson share after receiving irrevocable undertakings from Silchester International Investors (11.3%), Aberdeen Asset Management Asia (8.78%) and Tecity (3.13%) for their stakes. The No 3 banking group, OCBC, owns 6.05%. David Conner, CEO of OCBC told an analyst briefing two weeks ago that he hasn’t decided what to do with the bank’s stake even though it is a non-core holding. OCBC had earlier sold 29% of Robinson to Auric in compliance with MAS rules. The $6.25 per share offer that Al Futaim made might just be its opening shot. Indeed, it may be readying its next move. If Auric wants to counter bid for Robinson, how would the deal be done? At its close last Friday of $6.70, Robinson’s market capitalisation was $575.8 million. Red Oasis would need to find funding for at least $403 million to take Robinson private. If the acquisition uses equity and debt in a ratio of 30:70, then Red Oasis would need to cough up $121 million with Auric’s share
at $72 million. That is affordable. But Al-Futaim might have other ideas. Building a war chest by selling assets is easy but winning a battle of nerves with deep-pocketed predators like Al Futaim can E be a hard slog.
Is Auric Pacific Group building a hefty war chest to acquire Robinson & Co?
4 • THEEDGE SINGAPORE
| MARCH 3, 2008
ECONOMY WATCH
| BY STEPHEN JEN AND CHARLES ST-ARNAUD |
O
il prices just breached the psychological US$100 ($140) a barrel threshold. High oil prices will clearly boost the global capital flows into petrodollars: After all, high energy prices lead to transfers from oil importers to oil exporters. Investment decisions — both physical and financial — made by the owners of petrodollars will obviously be more important the higher oil prices are. In this note, we remind ourselves of the broad magnitudes of the key factors we need to consider in this discussion. At US$100 a barrel, the value of the total proven oil reserves in the world is US$121 trillion, US$48 trillion of which belongs to the GCC (Gulf Cooperation Council) countries. On a flow basis, annual oil export receipts of Opec (Organization of Petroleum Exporting Countries) members total some US$1.3 trillion, at US$100 a barrel. High oil prices, in short, will lead to a significant transfer of financial power to the petrodollar holders.
The meaning of ‘one trillion dollars’ Before we get started, we should familiarise ourselves with the concept of “a trillion dollars”: What may have been vaguely referred to as “gazillion” not too long ago is now a unit investors need to fully comprehend, just as we had to be indoctrinated with the concept of “a billion dollars” when we were in school. The total GDP of Africa is US$1.3 trillion. The size of South Korea and Russia’s GDP are about US$1 trillion and US$1.2 trillion, respectively; that of the UK is about US$2.7 trillion; and that of the US is about US$14 trillion. The total market capitalisation of publicly traded equities is about US$50 trillion, and that of the bond markets is about the same size. The total world’s official foreign reserves are around US$6.4 trillion. Understanding the true meaning of “one trillion dollars” is essential in this discussion, as it will be the primary unit of account when it comes to petrodollars.
The basic numbers How big are petrodollars? They are big, and getting bigger with the rise of oil prices. We can look at this issue in terms of the monetary worth of the stocks of proven oil reserves underground, or in terms of flows, that is, the
value of the annual oil exports. At US$100 a barrel, the total value of the world’s proven oil reserves underground is around US$121 trillion: US$48 trillion of this belongs to the GCC member countries, the rest of the Opec owns another US$44 trillion, while the non-Opec countries (Canada, Norway, Mexico and Russia) own another US$12 trillion worth of oil reserves. At the current pace of production and exports, and at US$100 a barrel, the GCC, non-GCC Opec and “other” oil-exporting countries are projected to earn a total of US$2.1 trillion annually, with the shares of these receipts roughly evenly split between the three categories of countries. Since “other” oil exporters are producing at a more rapid pace relative to their proven stocks of oil reserves, they are, collectively, expected to run out of oil in about 15 years’ time, while the GCC and the non-GCC Opec countries could continue to export oil for another 65 to 70 years, at the current pace of extraction, assuming no new discoveries.
BLOOMBERG
Petrodollar tsunami warning Likely impact on finnancial markets
Using our calculations, for the GCC countries, cumulative oil export receipts could reach US$5 trillion by 2013 (at US$100 a barrel) and US$10 trillion by 2020. The global total petrodollar flows should be roughly three times this size (US$15 trillion) for the next five years or so, before some of the nonOpec countries start to experience output declines. First, the financial arguments for transforming underground oil wealth into above-ground financial (equities) wealth are quite compelling. These oil-exporting countries, with the exception of Russia, cannot fully spend the oil receipts, and therefore much of these trade surpluses will be channelled into the global financial markets. Second, a good part — we guesstimate half or so — of these cumulative receipts will be recycled through sovereign wealth funds. Thus, while there might be a lot of focus on foreign sovereign entities acquiring strategic assets, the root cause of this Scope for domestic trend is high oil prices. investment in infrastructure Third, bulging petrodollars Such large windfall receipts/profwill keep global long-term interits could be invested in domestic physical infrastructure, as has been The Abu Dhabi Investment Authority building in the United Arab Emirates. Petro- est rates artificially low, in our view. As the US savings-investthe case in Qatar and Iran. But, dollars are building up SWFs into a force to be reckoned with. ment deficit shrinks, excess glocompared with most of the Asian economies, the investment-to-GDP ratios of ample, will run out of oil and gas in bal savings are likely to intensify, forcing the most of the oil exporters look low. While five years’ time. Oman’s oil reserves could world’s cost of capital lower. Norway may not have much need for large last “only” until 2027, at the current level infrastructure spending, the same cannot be of production. Bottom line said about Russia or Saudi Arabia. For counA boost of 5% to 10% of GDP’s worth of High oil prices will obviously increase the tries like the United Arab Emirates, Qatar, investment in the coming years would not flow of petrodollars. The stock of the world’s Oman and Bahrain that have been trying to be unreasonable, provided that these coun- proven oil reserves is now worth some US$121 become regional financial and tourism cen- tries can control the inflation consequenc- trillion — close to the combined market captres, considerable further investment spend- es. Five to 10% of GDP is only US$35 billion italisation of global equities and bonds, with ing is needed in the coming years. to US$70 billion — equivalent to about 10% annual flows (oil export receipts) of US$2 trilPhysical investment is a necessary, though of the annual oil revenues of the GCC coun- lion. While up to 10% of these receipts may insufficient, way to help these economies de- tries. In short, part of the oil receipts will be be spent on infrastructure and other investvelop a more diversified structure away from diverted to domestic investments in many of ments, the rest will be invested in the global the energy sector. On this issue, it should be these oil-exporting countries. However, the financial markets. A tsunami is coming. E stressed that there is considerable dispari- bulk of the petrodollar windfalls will still not ty among the GCC members regarding the be spent, and will wait to be invested in the This article is taken from a Morgan Stanley resize of the energy reserves. Bahrain, for ex- global financial markets. port dated Feb 22
6 • THEEDGE SINGAPORE
| MARCH 3 , 2008
CORPORATE
| BY ELLEN LOKAJAYA |
F
ederal International (2000) Ltd has long derived the bulk of its earnings from selling oil and gas equipment such as valves. Business continues to be brisk, with oil prices finding new legs and leaping to a new high of US$101 ($140) per barrel last week. However, it isn’t the trading business that is occupying much of chief operating officer Sanjeev Gupta’s time and energy at the moment. Gupta, who joined the company last April, has his hands full steering the company into several new areas in the energy sector. Since the second half of last year, Federal has added a slew of new businesses to its portfolio. These are marine logistics, where the company charters out floating, storage and offloading (FSO) vessels; power plants, where the company has so far inked deals to build and operate three; water treatment; and coal mining. “The [energy] market is very hot. We have to strike at the right time,” Gupta says in a recent interview with The Edge Singapore. However, as most of these new businesses are at an early stage of development, equipment trading looks set to stay as Federal’s primary business until earnings from power generation and coal mining kick in. Marine logistics has started contributing, accounting for 8.1% of revenue for the year to Dec 31, 2007, but the trading business remains dominant and made up 83.2% of revenue last year. Its venture into marine logistics began in 2006 when an FSO vessel became available on the market. Management decided to move into the business, emboldened by the sector’s good charter rates. It secured a 10-year charter worth US$91 million with PetroChina for that FSO, named Federal I. The company recently announced that it had purchased a second FSO vessel, Federal II, for US$31.5 million, with the expectation that it would also be chartered in a long-term contract. Gupta is confident of leasing out the vessel, given still-buoyant conditions in the market. And although management’s plan is to build up a fleet of such vessels, tight demand and supply conditions have kept vessels in short supply and prices lofty. “It is difficult to get vessels at this time,” he says.
Recurrent earnings Vessel chartering introduces an element of long-term, recurrent earnings to a company that is better acquainted with the vagaries and slim margins of the trading business. This shift towards long-term earnings sources should pick up pace as the company’s utilities-related projects take off. The company has clinched four deals to build, operate and transfer (BOT) or build, operate and own
(BOO) power plants — three in Indonesia and one in Singapore. Last June, Federal said it would build a 5MW cogeneration plant on Jurong Island for $21 million. It also signed a contract to provide electricity and steam to a biodiesel plant being built on Jurong Island by Australian-listed Natural Fuel Ltd. The deal is for 12 years and will see Federal getting at least $54 million, which works out to $4.5 million a year. Gupta explains that this is the fixedcost component and that, even if no steam or power is delivered, Federal will receive the money. On top of that, the company stands to earn revenues of $300 million from the supply of steam and electricity over the 12 years. The plant has started producing steam and is due to start producing electricity by end-April. Those numbers were struck in the middle of last year, however, when biodiesel seemed like a much healthier business. This year, palm oil prices have soared to new heights, making it very difficult to turn a profit in the business. That’s something its customer Natural Fuel is quickly finding out. On Feb 20, its CEO was quoted as saying it would indefinitely delay the start-up of the newly completed Phase One of the plant in Jurong Island. It is also understood to be holding back plans for Phases Two and Three. When asked about Natural Fuel’s biodiesel dilemma, Gupta acknowledges that it makes no sense to produce bio— Gupta diesel at these palm oil prices but points out that the Natural Fuel plant is producing glycerine, a byproduct of the feedstock. He also un- The plant will cost US$4.4 million and the JV derstands that the biodiesel plant is able to company has an agreement to supply electricirun not just on palm oil but canola oil and ja- ty over 25 years to PT PLN (Persero) Distribusi tropha as well. for US$56 million. Federal expects the project to be completed by June 2009. Prior to that, in December, Federal said it Power, coal and water Meanwhile, Federal continues with its power would build a 12MW integrated gas processing projects in Indonesia, all of which are being and power plant in Tuban, East Java. It will cost undertaken on a joint-venture basis, in which US$25.9 million and is expected to generate anits stake will be 60%. Two weeks ago, the com- nual revenue of US$20 million to US$30 million pany announced its third project in Indonesia, over the next six years. Last August, the comwhere it will build a 4MW mini-hydro plant in pany said it would build a 6MW power plant in Bengkulu, in the southwest coast of Sumatra. Jambi, Sumatra. To cost US$18.8 million, it will supply electricity to PT Lontar Papyrus Pulp and Paper Industry in a 10-year deal that will net the JV US$178 million in total. The plant is expected to be completed in August. Aside from this, Federal is stepping into the coal business. This is being done through a 51% subsidiary and in partnership with two Singaporeans — Lim Lee Leng and Gary Ng — who have been working in the Indonesian coal industry. The company is now in negotiations with mine concession owners in Kalimantan to operate three mines and sell coal. Gupta says the company expects revenue from the mines to reach more than $15 million annually, which he considers a conservative figure. The mines are expected to produce about
GWYNETH YEO/THE EDGE SINGAPORE
Equipment supplier Federal International expands energy interests 100,000 tonnes a month. Federal is also tapping the Chinese water treatment industry. The company partnered IESE Water (Asia) Pte Ltd to form a JV company, FederalIESE Environment Technology (Shanghai) Co Ltd. The JV company, in which Federal has a 90% stake, will take on BOO or BOT water and waste treatment and management projects and also supply specialty chemicals used in the treatment plants. Federal-IESE will focus on cities such as Shanghai, Jiangsu and Guangdong. Besides diversifying its business, Federal is broadening its geographical footprint and heading towards the Middle Eastern market by establishing a trading post in the United Arab Emirates. “The Middle East is where we have to go. And we have not taken that market very seriously in the past,” says Gupta. The company has in the past hauled in sales of oil and gas-related equipment there but Gupta sees the potential for much more, noting that the Middle East market for oil and gas equipment is in the billions. Gupta says the ultimate goal for Federal is to get 3% to 4% of that market but, for this year, his goal is to start with sales of US$10 million.
Risks from fast expansion If Gupta and his team deliver on these targets and numbers, Federal could be a very different animal in the next two years. However, its rapid expansion is leaving some in the investment community a little cautious. In a Jan 24 report, analyst Serene Lim from OCBC Investment Research, says Federal’s expansion into different businesses at such a short time “raises the issue of execution risks as most of these ventures are new or at the infancy stage”. She also expects that “the gestation periods for these projects may stretch longer due to the initial learning curve”. Still, Lim continues to rate the shares a “buy” and has a target price of 81 cents. Federal closed at 49 cents last Thursday, down 23% since the start of the year. For his part, Gupta doesn’t feel the company is stretching itself too thin as it moves into these new areas. “We are pretty strong financially. We have built up our balance sheet. We have all the requisite resources,” he says. For the year to Dec 31, 2007, the company reported a 2.7% rise in revenue to $154.5 million, while earnings jumped 165.6% to $27.2 million, boosted by the $16.6 million gain from the divestment of a subsidiary. As at end-December, it had a gearing ratio of 13%. Gupta and his team spent the better part of last year laying the groundwork for new businesses that could transform Federal into a diversified player in energy and resources. The challenge now is to take these projects to the next stage of their development and demonstrate to investors that Federal is no longer just E a seller of oil and gas equipment.
The [energy] market is very hot. We have to strike at the right time.
8 • THEEDGE SINGAPORE
| MARCH 3 , 2008
CORPORATE
SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
ST Engineering plans diversification moves to sidestep possible US slowdown | BY JOAN NG |
A
mong the exhibits at the Singapore Airshow 2008 earlier this month was a truck with an enlarged body that could fit several tables, half a dozen computers, a server and four flatpanel television screens — and still have room for 20 personnel. Dubbed the Mobile Command Hub (MCH), the vehicle was outfitted by ST Electronics, a unit of the locally listed Singapore Technologies Engineering. While the MCH had very little to do with the aerospace industry or the airshow, it has everything to do with ST Engineering’s positioning strategy: having a wide range of products that work with each other to form part of an integrated solution. At this year’s airshow, ST Engineering’s display aimed to demonstrate how the four major units of the company — ST Aerospace, ST Electronics, ST Kinetics and ST Marine — have products that work together as part of a total solution, for instance, for disaster relief. Alongside the MCH, which can receive live data feeds of the overall operations situation from the FanTail 5000 — an aerial sensor built by ST Aerospace — ST Kinetics displayed its Commercial Articulated Vehicle (CAV), a lighter version of its popular all-terrain vehicle called the Bronco. Ideal for rescue missions, the amphibious CAV can be transported to the disaster site on board the 141m Landing Ship Tank, a miniature of which was on display at ST Marine’s corner of the exhibition. The integrated presentation of its products may have helped to boost ST Engineering’s success in winning contracts at the airshow this year. It announced close to US$500 million ($700 million) worth of deals during the show, held from Feb 19 to 24, which CEO Tan Pheng Hock says is much more than last year. But the underlying principle of diversification and integration has had far-reaching effects on the company’s growth and bottom line. Last week, announcing its results for FY2007, ST Engineering reported double-digit growth for the third consecutive year. Both turnover and net profit rose 13% to $5.1 billion and $503.5 million respectively.
Aerospace unit performing well The group’s aerospace unit, which makes up 53% of group profit before tax (PBT), showed a 10% rise in turnover and a 12% increase in PBT. ST Aerospace is the world’s largest independent third-party provider of maintenance, repair and overhaul (MRO) services for the aviation sector. PBT margins for the aerospace division rose one percentage point to 19%, while margins for all other sectors held stable. The results are noteworthy in view of the disappointing results of SIA Engineering Co, which competes with ST Aerospace in the MRO sector. In January, SIA Engineering reported a
to the analysts. Of the nine that issued updates following the results, five have downgraded their target prices for the stock. One of the analysts to do so was CIMB-GK’s Lim Siew Khee, who cut her price target from $4.36 to $4.01. “While we are comforted by its strong order book of $9.49 billion, we remain cautious, given the weakening US dollar and softening US market, which could hurt its US operations,” Lim wrote in a note to clients on Feb 27. On the other hand, Citigroup analyst Lim Jit Soon was very positive about ST Engineering’s strong fundamentals and good earnings visibility, saying in a report: “We believe order momentum can be sustained, given ST Engineering’s established track record and reputation, noting a series of recent contract wins from existing and new customers.”
Preparing for a slowdown
With a greater variety of products that showcase the group’s total engineering capabilities, Tan hopes the company will be in a better position to bid on tenders
3.1% decline in net profit for its 3Q2008 ended Dec 31, 2007 and a 1.1% increase in revenue for the period, while its PBT margin fell close to two percentage points. DBS Vickers analyst Janice Chua cut her price target for SIA Engineering by 23.5% to $3.77 from $4.93 previously, citing pressure on operating margins. Chua also cut forward earnings by 8% to 10%. CEO Tan believes that the secret to ST Aerospace’s improving margins is a wide mix of products that it markets along with MRO services as part of an integrated package. “Today, we do what we call total aviation support, [which includes] components and engines. I like to call it a choice of an à la carte menu or a buffet menu, where we can package more services together,” Tan says. “This means we can move into highervalue-added services.” ST Aerospace’s capabilities extend beyond MRO into the development of avionics hardware, flight software solutions and various other complex solutions. Looking ahead to FY2008, Tan says the MRO business is looking healthy. As the number of ageing aircraft crossing the skies increases, carriers are increasingly turning to the MRO industry. Hiccups at Airbus and The Boeing Co in the manufacture of their aircraft have de-
layed delivery of new planes, and a slowing US economy may lead some carriers to put existing orders on hold. Meanwhile, a growing number of aircraft owners is seeking to add value to or improve the performance of their aircraft through overhaul works. And as higher oil prices drive commercial players to cut costs, outsourcing MRO work will become all the more attractive.
High US earnings a vulnerability In preparation for this anticipated rise in demand, ST Engineering is rapidly increasing its MRO capacity. A fortnight ago, the company announced a new hangar at the Seletar Aerospace Park that can accommodate up to two narrow-body aircraft. It also opened a new engine test facility in Paya Lebar. And in December, it announced a joint venture with a Chinese firm to set up an engine MRO facility in Xiamen, China. But even as this expansion takes place, the company will have to deal with the prospect of a falling US dollar and the impact of a slower US economy on its businesses in that part of the world. Turnover from its US business crossed US$1 billion for the first time in FY2007, making up 28.1% of total group turnover. And PBT would have been $15 million higher if not for the weaker US dollar. In the light of economic uncertainty, ST Engineering is guiding for a softer year with turnover growth in the mid-single digits. But Tan says the guidance is not so much a reflection of a perceived slowdown in orders as a preference to err on the side of caution. “I like to be proven wrong when it comes to this. But in today’s uncertain environment, it’s a bit dicey to say I’m going to [achieve double-digit growth again]. You really can’t see too far. There’s always a possibility that owners negotiate and then decide to postpone the deal,” he says. Tan’s cautious leanings have filtered down
Tan is preparing to prove that track record with a four-pronged game plan to insulate ST Engineering: cutting costs, finding new customers in new markets, diversifying its product base and improving its material sourcing process. He says the company has already begun streamlining its business operations to cut overhead costs. “For example, we have shifted a product made in two localities to one, for efficient production, and we closed down an outfit that was marginal,” explains Tan. For plant materials, it has begun using global procurement to help lower costs, sourcing beyond North America, in China and other parts of Asia, for instance, for cheaper materials. It’s not just parts that will have to come from outside the US. ST Engineering is even now pursuing contracts in emerging markets such as Africa, Central Asia, Latin America and the Middle East. At the airshow, the company managed to secure a US$60 million contract to provide aircraft engine maintenance to South African airline Comair and a US$31.6 million defence export contract from a Middle Eastern customer. The deal from the Middle East proves that ST Engineering has what it takes to do business with other governments despite the sensitive nature of the defence business, says Tan. And being able to tap into this revenue stream should provide some stability because, while the appetite for commercial deals may decline somewhat, government defence budgets, some of which have better margins, will continue to rise. The defence business contributed 33% of the group’s revenue last year. Meanwhile, Tan says, the company will continue to develop new products and redesign old ones to provide total solutions like the one displayed at the airshow. With a greater variety of products that showcase the group’s total engineering capabilities, Tan hopes the company will be in a better position to bid on tenders. “If there’s a tender where they may not want to buy a standard product but would rather use your base unit to design some changes, this is where we come in and add value,” he says, adding that being able to spread an order out over a wider base would improve economies of scale. If Tan’s game plan works, ST Engineering’s shareholders will have a great deal to cheer about. The company has distributed all its net earnings as dividends for five straight years, with the total dividend for FY2007 coming to 16.9 cents, a yield of close to 5%. For a stock with a market capitalisation of $10.8 billion, that figure is impressive, and all the more so as the company has continued to show double-digit growth. Amid the present market turE bulence, that’s quite a comfort.
THEEDGE SINGAPORE | MARCH 3, 2008 • 9
CORPORATE
Small-company financier DB Zwirn winds down funds | BY DESMOND WONG |
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GWYNETH YEO/THE EDGE SINGAPORE
ew York-based DB Zwirn & Co (DBZ) is a relatively obscure name in the world of private equity funds, but it was an active financier of small-cap companies in Singapore last year. And, news over the last fortnight that it is winding down its principal funds after its investors — spooked by alleged accounting irregularities — pulled out some US$2 billion ($2.79 billion) could have an impact on the local market. According to media reports, DBZ is likely to see its funds under management shrink from US$5 billion to just US$1 billion after it completes the closure of several funds. It is currently under investigation by the US Securities and Exchanges Commission.
We are not worried at all, as they said they would honour the agreements and convert [the bonds] — Low Going by filings with the Singapore Exchange, DBZ provided financing to at least six small-cap companies between last March and August, extending $30 million to $100 million to each through convertible bond arrangements. Among the recipients of the cash were former eye-care company Oculus Ltd, fire-extinguisher company Asiatic Group (Holdings) and shipbuilder cum ferry operator Penguin Boat International. CONTINUES NEXT PAGE
Oculus 350000
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50000
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0
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10 • THEEDGE SINGAPORE
| MARCH 3, 2008
CORPORATE
DBZ reassures small-cap customers FROM PREVIOUS PAGE
DBZ officials in Singapore and New York declined to speak to The Edge Singapore. But executives at companies that DBZ has funded say representatives from the private equity firm had been sent to Singapore to assure them it wasn’t going to pull out of its deals. “We are not worried at all, as they said they would honour the agreements and convert [the bonds],” says Low Shiong Jin, executive director of Oculus Ltd. Oculus had raised $100 million from DBZ to help fund the $600 million purchase of carbon credit developer and trader Aretae in a reverse takeover deal that it proposed last year. That deal has since stalled, and Oculus is now proposing to buy patents and licensing contracts from an ophthalmic drugs and devices company in Australia to remain listed while
it scouts around for other RTO opportunities. “Given that the redemption [of investor funds from DBZ] will take three years or so, we are not too concerned,” Low adds. Even if DBZ does change its mind, some of the companies it had financing arrangements with aren’t worried. “The convertible bond issues were just another funding facility,” says George Tan, CEO of Asiatic Group. “You have banks, and everything else. There are all sorts of ways to raise funds.” Last July, Asiatic Group agreed to issue $30 million worth of convertible bonds to DBZ. It planned to use the funds for building its power generation business, beginning with power plants in Cambodia. Meanwhile, Penguin Boat says it has completed its dealings with DBZ. The company issued $30 million worth of convertible bonds to
DBZ in January last year, which DBZ converted into shares in June and July. “Going forward, they are not our only source [of funding],” a spokesman for Penguin Boat says.
Funding high-risk growth Nevertheless, DBZ’s troubles could mean it won’t be as active a financier of small local companies in the future. While small companies do have access to a variety of sources of funds, DBZ was providing them with money for ventures that probably couldn’t have been funded any other way. “If they could get money from the banks, they would have done so,” says a consultant at boutique corporate finance firm Prime Partners. To be sure, the risks were high. But DBZ’s money produced some spectacular results. Asiatic posted a 120% jump in revenue to
$22 million for the six months to September (it has a March year-end), and a 95% increase in earnings to $923,000. This was achieved on the back of revenue gained as the power plant projects in Cambodia came onstream. Penguin Boat was another success. The company reported a 46% jump in turnover to $81.3 million last year, and a 563% leap in earnings to $7.8 million, driven primarily by new shipbuilding contracts. Last year, the company scored US$69 million worth of shipbuilding deals, including US$23 million from the Abu Dhabi National Oil Co for the construction of three ships. Meanwhile, electrical generator company VibroPower Corp, which obtained $30 million in convertible loans from DBZ last year, expanded to take on larger generator supply contracts in Russia and India. For 2007, the company reported a 29.9% increase in revenue to $67.3 million, and a 302.6% jump in earnings to $3.5 million. At end-September, the company’s order book stood at $78.6 million.
Vibropower Corp 20000
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More limited upside now Will other hedge fund players move in to take DBZ’s place? Perhaps. “The local funds, the boutique ones, might be interested,” says the consultant at Prime Partners. “They might not be as affected by global trends as the bigger players, who might also have a shorter investment horizon.” But any hedge fund that steps into the market is likely to be a lot more selective now amid the nervousness in the stock market, because the potential returns might not be worth the high risk. Last year, even the mere hint of a corporate deal or acquisition often sent share prices of small companies through the roof, making it easy for a convertible bond financier to quickly cash out. In the case of Penguin Boat, for example, DBZ’s loan was convertible into new shares priced at 16 cents each. But when it cashed out in the middle of last year, shares in Penguin Boat were trading at more than twice that, at 37 cents. “It would be much harder for [small companies] to attract that kind of attention from the hedge fund guys,” says the consultant from Prime Partners. “Because the markets are much weaker, private equity will see very little upE side in terms of share price.”
THEEDGE SINGAPORE | MARCH 3, 2008 • 11
This is the third of a five-part series on the Singapore furniture industry
Success, made-to-measure
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sian property markets are booming, and Singapore’s furniture industry is riding along, and is set to do so. But the success of this industry did not occur by chance. Singapore’s furniture companies have worked hard at being the best, and have developed the knack for anticipating new trends and understand-
ing what appeals to the overseas markets. To help Singapore’s furniture companies catch a bigger share of this growing pie, the Singapore Furniture Industries Council (SFIC) — together with the lead agency for the furniture industry, SPRING Singapore and International Enterprise Singapore — is jointly launching a local furniture
Kingsmen Creative
Nobel Design
ounded in 1976, Kingsmen Creatives is an established Singaporelisted communications design and production group. The company specialises in the design and production of temporary installations for exhibits and event displays. It also provides interior design and fit-out services for mid to high-end retail outlets and commercial showrooms. As at Dec 31, 2006, Kingsmen had a turnover of around $109 million. The company has a regional network of 16 offices in the Asia-Pacific and Middle East regions, as well as markets in the US and Europe, making it a solid, credible regional player in this space. Kingsmen’s four main business areas are: research and design; exhibitions and museums; retail and commercial interiors; and integrated marketing communications. Through years of experience in the business, the company has gained a thorough understanding of its custom- Ong: Our long-term goal is to be the leader in Asia-Pacific ers’ business and culture. This has en- and an elite global player in whatever we do abled the company to come up with With a dedicated workforce of more than styles and designs that best fit their customers’ requirements. This in turn translates into 1,000 including a team of 150 well-trained deproducts that are able to illustrate the busi- signers, Kingsmen differentiates itself from its ness concept and brand image that custom- peers by providing customers with seamless “one-stop” design and production services. ers want to portray. Over the years, Kingsmen has chalked up These range from research and design, project a sterling roster of customers. They include management, specialised production and lolocal brands like Robinsons and Raoul, as gistics management to after sales services. Managing director Simon Ong says Kingswell as international retailers such as Guess?, Banana Republic, Esprit, GAP and Tag Heu- men lives by the “never say die” approach er. Other high-end brands such as Burberry, and a shared vision of being a design-led, and Gucci, Polo Ralph Lauren and Chanel have quality- and service-driven company. “Our long-term goal is to be the leader in Asia-Paalso engaged the company’s services. In addition, Kingsmen has designed na- cific and an elite global player in whatever tional pavilions for international trade shows we do,” he says. Ong also believes that the combined efand exhibits for museums and visitor centres, such as the Singapore Science Centre forts of SPRING, SFIC and IE Singapore in launching the local furniture industry brandand Maritime Experience in Sentosa. The company has also picked up a string ing programme is timely. “Singapore’s furniof accolades including the Singapore Prom- ture industry is still small,” he says. “Howising Brand Award (Most Distinctive Brand), ever, the country’s infrastructure and reliable the President Design Award and the Interior reputation are positive factors that compaBuilders Award. Recently, it also won first nies can leverage on, thus the branding explace in the ISP/VM+SD design award in ercise will certainly help push the promising New York for its work on Robinsons’ flag- furniture companies in Singapore to greater heights.” ship store in Malaysia.
Sunrise, not sunset PICTURES: GWYNETH YEO/THE EDGE SINGAPORE
‘To be an elite global player’
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industry branding programme on March 9, in conjunction with the International Furniture Fair Singapore/Asean Furniture Show 2008. This week, we zoom in on two furniture companies that have helped their customers to stay ahead of the competition through their keen eye for design and customisation.
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obel Design, another Singapore-listed company, is a diversified interior design and furnishing company with the capabilities to meet the customer demands across a broad market spectrum. Be it a massmarket retailer, or a high-end brand, Nobel is equipped to serve their needs. Currently, its business focus includes retail, export, special project services for designers and customised interior design.
gauge its customers’ needs, Nobel’s designers can then work to develop the most suitable products. The company’s special project services involve servicing high-end designers and architects that are involved in projects such as Changi Airport’s Terminal Three, and the show flat for Reflection, a Keppel Land condominium project. In addition, Nobel is in the business of providing customised interior design services, where the company’s designers work with mid-end home upgraders to help them turn their dream homes into reality. Through comprehensive feedback, market analysis, good customer relationship management, and close monitoring of design trends in the market, Nobel Design is able to identify the types of designs that will work well with its range of customers, says managing director Bert Choong. “We also have 25 years of experience and ample knowledge of the market as well as good contacts with top-end designers who are the trendsetters in the industry,” he says. “We are a team of designers, manufacturers, retailers and exporters. We know our stuff.” Choong, who is also an executive committee member of the SFIC, says business is great and will continue to do better because of the property boom. “In 2007, Singapore’s total trade was around 1% of the world’s total trade. Choong: We are a team of designers, manufacturers, There is a big opportunity for us to inretailers and exporters. We know our stuff. crease our market share to perhaps 2%,” Nobel’s retail business involves the sourc- he says. “Many years ago, the local furniture ing of appropriate furniture of suitable qual- industry was perceived as a sunset industry, ity and price from international markets. Its but owing to the entrepreneurship of our deretail products include home2be, a selection signers, we have proved everyone wrong. We of trendy, Italian-inspired designs at budget are a sunrise, not sunset industry. “With the support of SPRING Singapore prices for first-time home owners, and Minotti by Marquis Interiors, a luxury brand on our Furniture Industry Branding Project, carrying high-end Italian designer furniture, we are confident that furniture exporters which the company currently displays at its like us will enjoy better business results at international exhibitions and in our business Minotti showroom on Hill Street. Nobel has also collaborated with buyers dealings worldwide. Our industry is very such as JC Penny in the US to form buylat- resilient. Even if it may take us some time, eral.com, an online catalogue business car- I believe that if we walk the talk, we can go rying the company’s products. By working a long way in making Singapore’s furniture closely with the designers from JC Penny to known on a global front.”
Catch the launch of a New Identity for our Singapore Furniture Industry! Find out more at the International Furniture Fair Singapore/ ASEAN Furniture Show 2008 9-12 March 2008 Singapore Expo, 1 Expo Drive
12 • THEEDGE SINGAPORE
| MARCH 3, 2008
CORPORATE
I
ness, which was first mooted in September 2006. Last Friday, Celestial has completed a biodiesel plant in Heilongjiang and installed all the necessary machinery. The plant is a joint venture with Daiki-Axis Co Ltd and Shanghai Nikki Environment System Inc, in which Celestial has an 80% stake. Costing 430 million renminbi, it will churn out 100,000 tonnes of biodiesel a year. But unlike most biodiesel plants, Zhao says this plant is flexible and will be able to use not just soybean oil but other vegetable oils and waste oil. Zhao, who has a degree in commercial accounting and masters in business administration, is confident it will be able to turn a profit, despite high raw material prices.
Forecasts cut Analysts covering Celestial are still calling its shares a “buy” despite the continuing climate of agri-inflation. They have, however, lowered their target prices. “As the prices are likely to stay high, we have raised our assumed soybean costs by 35% to 4,500 renminbi per tonne, which represents a 60% increase from 2007 average costs,” says Merrill Lynch analyst Eddy Loh in a Feb 25 report. “We believe the group could pass on only part of the higher costs.” With this, Loh forecasts an eight percentage point drop for this year’s gross profit margins to 31% and has cut his earnings forecast for this year by 14%. DBS Vickers’ Andy Sim has lowered his FY2008 earnings numbers by 4% to factor in lower gross margins. However, he is maintaining his “buy” call as he is optimistic of the company’s long-term prospects and management’s ability to deliver. He has a target of $1.59 for the shares, currently the highest price target for Celestial. The shares closed at 63.5 cents last Wednesday. However, he cautions that the share price in the short term would likely move sideways, given the market’s concerns on the unprecedented rise in soybean prices. Shareholders must certainly be hoping that Zhao’s conviction that soybean prices will moderate from their peaks will come E through this year.
AAAA
f Zhao Xianghua is sweating about the sky-high price of soybeans, he certainly isn’t displaying it. The executive director of Celestial NutriFoods Ltd, which makes soybean-based food products, is a picture of calm in the face of the highest soybean prices he has ever seen. Already up some 90% last year, soybean prices on the global market have continued to climb this year, rising by just over a fifth. Those record-smashing prices are causing investors in the China-based company, whose biggest product is a soy-based protein powder, to swoon. Fearful of further margin compression, they have deserted the shares, which have tumbled 38.3% since the start of the year. From last July, when soybean prices began to rally, the shares have fallen nearly two-thirds as at last Wednesday. Rising global demand for soybean has shrunk soybean stockpiles and pushed its price to a record. However, from Zhao’s perspective, soybean prices have run up too much and he believes that the Chinese government will tap into its inventory of the commodity to alleviate the current tightness in the market. By the end of the year, he sees soybean prices coming down by as much as 20% to 30%. Chinese food companies like Ce-
lestial are partly shielded from the global inflation in agricultural commodities as a result of the country’s price controls on such items. In Celestial’s case, the average cost of its soybean purchases rose 24.6% last year from 2,241 renminbi ($439.97) per tonne in 2006 to 2,792 renminbi per tonne in 2007, far more moderate than the price escalations on the global market. Based in China’s most northern province, Heilongjiang, Celestial sources soybeans from local farmers, processes them to make protein powders, highprotein biscuits and canned protein beverages and sells them under its house brand “Sun Moon Star” to the domestic market. It also processes soy protein isolate, soy functional protein and biochemical feedstuff for other food manufac- Zhao sees soybean prices coming down by as much as 20% to 30% by year-end turing companies. However, high soybean prices still sively expanded its industrial prod- margins shrank to 39% from 44.3% dented its margins as it wasn’t able to ucts output — products which have the previous year. pass on the higher costs to custom- lower gross profit margins of about ers. In November, it raised its average 30% compared to retail products such Soy noodles and pastries selling price for its retail products by as its protein F&B products, which The company’s strategy, amid high15% to 20%. For its industrial prod- have much fatter gross margins of er soybean costs, is to forge ahead ucts, such as soy protein isolate, av- about 50%. So, although Celestial with its expansion plans. It plans erage selling prices were gradually was able to grow its sales by 55.4% to increase the utilisation rate at its raised by about 10% over the course last year to 1.8 billion renminbi, its “Soybean Zone” plant, currently runbottom line was up a slimmer 13.3% ning at about 75%. Celestial is also of last year. On top of that, Celestial aggres- to 419 million renminbi. Gross profit launching four new high-protein nutrient products. This will be broken down into two phases and will cost 405 million renminbi. The first phase, which will be completed in 2Q2008 (Celestial has a December year-end), is expected to produce 15,000 tonnes of fruit-flavoured protein beverages and 5,000 tonnes of high-protein nutrient powders a year. The second phase, which will be completed in 4Q2008, is expected to produce 10,000 tonnes of high-protein nutrient noodles and 5,000 tonnes of high-protein nutrient pastries a year. Soy-based pastries and noodles will be a first for Celestial, which dominates the market for soy-based protein powders. Mixed with water, the powder becomes a health beverage and is popular among the Chinese. Upon completion of both phases, the plant’s utilisation rate will increase to 95%. Aside from this, Celestial is going ahead with its biodiesel busi-
CELESTIAL NUTRIFOODS
| BY NOVA THERESIANTO |
SAMUEL ISAAC CHUA/THE EDGE SINGAPROE
Celestial NutriFoods continues expansion despite escalating soybean prices
High-protein biscuits produced at Celestial’s factory in Heilongjiang province
CORPORATE
Singapore dollar advances to highest in 12 years on inflation
T
he Singapore dollar rose to the highest in 12 years on speculation the central bank will seek faster currency gains to quell accelerating inflation. The US dollar’s drop against all 15 most-active currencies the past five days also boosted the Singapore dollar. Trade Minister Lim Hng Kiang said on Feb 27 there is a limit on how far the currency can gain without hurting growth. A stronger exchange rate may help slow price increases, at the fastest pace since 1982 last month, by reducing imports costs. “There is more room for the Singapore dollar to appreciate amid accelerating inflation,” said Osamu Takashima, chief analyst for global market sales and trading at Bank of Tokyo-Mitsubishi UFJ Ltd in Tokyo. “Singapore accepts the trend of global US dollar weakness, because that helps Singapore to fight price increases.”
Strongest gain since 1996 The Singapore dollar gained 0.1% to $1.395 as of last Friday, the strongest since February 1996, according to data compiled by Bloomberg. The currency may climb to as high as $1.35 by the end of March, Takashima said. The island’s currency strengthened 9.4% in the past six months, making it the thirdbest performer among the 10-most actively traded currencies in Asia outside Japan. The Monetary Authority of Singapore (MAS), which allows its dollar to rise and fall within an undisclosed band based on a trade-weighted index of currencies of its biggest trading partners, said in October it would “increase slightly the slope of the policy band”. “While the MAS exchange-rate policy stance has helped to keep inflation down by dampening some of the higher import costs, we cannot insulate ourselves completely from the effects of higher global prices,” Lim said in parliament on Feb 27. He is also deputy chairman of the MAS. A government report this week showed consumer prices rose 6.6% in January from a year earlier, increasing pressure on the central bank to let its currency strengthen further to curb rising import prices.
SGD could appreciate further “It is important to recognise there is a limit to how fast the Singapore dollar can appreciate without hurting our growth, and eventually causing employment and wages to fall,” said Lim. Singapore’s dollar may extend this month’s 1.6% gain versus the US dollar as the central bank may let the currency rise at a quicker pace to contain inflation, according to United Overseas Bank Ltd. “The MAS could actually allow the Singapore dollar to appreciate faster on a trade-weighted basis,” said Ho Woei Chin, an economist at United Overseas Bank. The Singapore dollar “could continue to strengthen.” United Overseas Bank forecasts the Singapore dollar at $1.380 at the end of September and the end of December, Ho said. E — Bloomberg LP
The island state’s currency strengthened 9.4% in the past six months, making it the third-best performer among the 10-most actively traded currencies in Asia outside Japan
BLOOMBERG
THEEDGE SINGAPORE | MARCH 3, 2008 • 13
14 • THEEDGE SINGAPORE
| MARCH 3, 2008
CORPORATE
GWYNETH YEO/THE EDGE SINGAPORE
Roxy-Pacific launches IPO, sees steady income from hotel | BY AUDRINA GAN |
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oxy-Pacific Holdings will be the second property company to list on the Singapore Exchange this year, amid widespread concerns about flagging property prices and stock-market weakness. The first to list was China-based CentraLand, which actually did reasonably well with its stock now trading 8% above its IPO price. Roxy-Pacific — which has a market cap of $190 million at its IPO price of 30 cents a share — hopes to pull off a similar start with the help of eight new local residential projects aimed at the current sweet spot of middle-income families, and the 4½-star Grand Mercure Roxy on East Coast Road. The homegrown property development and investment company reported net profit of $1.5 million, $2.2 million, $5.2 million and $7.7 million in FY2004, FY2005, FY2006 and 1H2007 respectively. Over the same periods, it generated revenues of $38 million, $30.9 million, $48.8 million and $42.4 million. As at 1H2007 ended June 30, its book value stood at 8.67 cents a share. With such consistent growth, Teo Hong Lim, executive chairman of Roxy-Pacific Holdings, is not worried about listing the company founded by his father 40 years ago despite the uncertainty in the property sector and stock market. “Everyone’s sitting on the fence now,” says Teo. But he is sanguine about the ebb and flow of the stock and property markets. “People will flock back into the market once they see stability. There are a lot of such spurts in Singapore,” he says calmly.
People will flock back into the market once they see stability. There are a lot of such spurts in Singapore. — Teo
With a focus on developing smallto medium-sized developments that target middle-income families, RoxyPacific has, over the past few years, developed nine freehold projects and sold 279 units, mainly in the east of Singapore, including three in Telok Kurau, The TreeLine, The Montage and The Medley; St Patrick’s Loft on St Patrick’s Road; Axis@Siglap at East Coast Terrace; and Marque@ Irrawaddy on Shan Road. All the units in the nine projects have been sold, except for three units at The
Veranda in Telok Kurau. Over the next six to eight months, Roxy-Pacific will progressively launch eight new development projects including The Ambrosia, The Adara and The Florentine, which are located in the East Coast, Thomson and Novena areas, with average selling prices ranging from $850 to $1,100 psf. Targeted at the mid-tier and mass markets, the projects should benefit from the pent-up demand, which property indicators are already pointing to.
Teo’s optimism also stems from the group’s ownership of the 558room Grand Mercure Roxy Hotel, a 4½-star hotel currently managed by French hospitality group Accor Hotels & Resorts. Last May, the Grand Mercure was valued at $270 million, and Teo expects its value to gradually rise, given the buoyant demand for hotel sites. “We’ve received enquiries from prospective buyers but the interest level [for our hotel] is not high,” he says. “The hotel is a key asset we acquired at an attractive price back in the 1970s.” Revenue for Roxy-Pacific’s hotel ownership and investment business — via the 31% ownership of the strata-titled The Roxy Square Shopping Centre — came to $22.5 million, $25.5 million, $30.8 million and $18.2 million in FY2004, FY2005, FY2006 and 1H2007 respectively, according to the prospectus. Located close to Parkway Parade, the seven-year-old hotel has been a source of constant income as well as capital appreciation for the group, even as it rides the tourism boom in Singapore. And there will be more good years to come for the industry. According to the Singapore Tourism Board, thanks to the upcoming Formula 1 night races, mega resorts in Sentosa and Marina Bay, and Youth Olympics in 2010, the citystate should see tourism receipts of $30 billion and 17 million visitors by 2015. With more tourists dropping into town and a dearth of hotel rooms, the occupancy rate at Grand Mercure Roxy exceeded 92% for the 10
months to Oct 31, 2007. The hotel’s location near Changi has also helped, as a significant portion of its guests comes from the nearby aviation and logistics-related businesses like FedEx as well as factories of companies like IBM Corp and Matsushita. Between 2004 and 2006, the hotel hit high average occupancy rates of 85.5%. To enhance its yield, the Grand Mercure Roxy has also undergone a $5 million makeover over the past three years to add more guestrooms and expand its facilities for holding big functions like weddings and corporate events. The renovations have paid off handsomely. Despite the current squeeze on hotel rooms, the enhancements have brought about a 31.5% y-o-y increase in revenue per available room to $135.20 a night in 1H2007. Looking ahead, Teo expects Singapore’s low interest rates, strong economy and long-term population target of 6.5 million to help drive growth in the property market despite “near-term uncertainties”. He believes, however, that local residential property prices spiked up “too fast” last year, otherwise “the momentum would have been sustainable”. But “everything should be all right over the next one to two years”, he adds. Furthermore, Roxy-Pacific’s early entry into the property industry before the current boom has allowed it to acquire land at attractive prices when others have had to pay much more. Land costs are the largest direct-cost component for property developers and account for 40% to 60% of Roxy-Pacific’s total development cost. That has enabled the group to generate bigger profits and maintain a profit margin of 20% as it sold its properties at an average price of $1,000 psf. As a rule of thumb, developers with comparable projects break even selling their properties at $700 psf, says Teo. To maximise yield, RoxyPacific prefers to build bigger apartments with three to four bedrooms in prime areas. Last year, the group sold 138 apartments from Jan 1 to June 30, for a total of $125.8 million, which will be progressively recognised up to FY2010, says the IPO prospectus. Along with revenue generated from its existing and upcoming projects, Roxy-Pacific expects to derive more than half of its earnings from the property development business over the next two years. Property development accounted for 68.5%, 38.3%, 64.8% and 80.3% of total revenue in FY2004, FY2005, FY2006 and 1H2007 respectively. So, are investors covinced RoxyPacific can sustain its growth momentum? Their response when the stock starts trading on March 12 E should give some indication.
THEEDGE SINGAPORE | MARCH 3 , 2008 • 15
CORPORATE
Dumpling maker Synear slumps, highlights risks for China stocks | BY KANG WAN CHERN |
T
he spectacular crash of shares in China-based frozen dumpling maker Synear Food Holdings following an expectedly dismal earnings report last week could be a wake-up call for analysts and investors on the earnings risks that many companies face in 2008. Synear isn’t a small, obscure company. It is one of China’s top-three frozen food companies and, before the slump a week ago, it had a market value of $1.4 billion. It had snared the rights to be the exclusive supplier of frozen foods to the 2008 Beijing Olympics, and it had Hong Kong action-superstar Jackie Chan endorsing its products. While everyone knew that raw food prices were spiraling higher, analysts figured that China’s one billion-plus population of increasingly affluent consumers made this company a slamdunk growth play. Then, last week, Synear announced that its revenue for 4Q to December had only inched up 1.3% to 596.6 million renminbi ($117.2 million), while its earnings had slumped 50.3% to 63.8 million renminbi, well below expectations. For the full year, Synear’s revenue was up 18.9% to 2.2 billion renminbi, while earnings increased 17.2% to 475.8 million renminbi. In 2006, the company’s revenue and earnings had increased by a more robust 25.4% and 67.1% respectively. Synear’s officials are blaming its disappointing results on skyrocketing pork prices,
Synear 300000
Volume (‘000)
Price ($)
2.5 2.3
250000
2.1 1.9
200000
1.7 150000
1.5 1.3
100000
1.1 0.9
50000
0.68 0.5
0
Feb 23, 2007
Feb 29, 2008
China Hongxing 350000
Volume (‘000)
Price ($)
1.4 1.3
300000
1.2
250000
1.1
200000
1 0.9
150000
0.8
100000
0.7 0.66
50000
0.5
0
0.4
Feb 23, 2007
Feb 29, 2008
Yangzijiang 700000
Volume (‘000)
Price ($)
2.8 2.6
600000
2.4 500000
2.2
400000
2
300000
1.8 1.6
200000
1.4 100000
1.2 1.08
0
April 20, 2007
Feb 29, 2008
which have increased more than 70% y-o-y following the “blue-ear” pig virus outbreak on the Mainland last August, leaving pig breeders reeling. On top of that, higher selling and distribution costs as well as an unexpected tax squeezed its earnings. The reaction from investors was swift and severe. Shares in Synear dropped 26% on massive trading volume the day after its results were reported. And, they kept sliding after that, closing last Friday at 68 cents, down 34% for the week and 72% below the high of $2.44 set in October.
Tighter margins, lower valuations It is unlikely that Synear is the only company affected by rising costs in China, and an-
alysts are already bracing themselves for bad news from other hot China stocks. While “agflation” puts Synear and other food-related companies like Celestial Nutrifoods, Pine Agritech and Youcan Foods in an especially dangerous position, analysts are also going cold on a variety of other China-based companies because of rising inflation. And, even companies that don’t disappoint on the earnings front might suffer lower and lower market valuations. Case in point: sportswear maker China Hongxing Sports. Last Monday, the company reported a robust set of results for 2007, which were above analysts’ expectations. Revenue for the year was up 45% to 2 billion
renmimbi, while earnings soared 94% to 416 million renmimbi. Analysts are forecasting earnings growth of 30% per annum for the next two years, slower than past years but strong nevertheless. Local brokerage house DBS Vickers Securities has a “buy” recommendation on the stock and a price target of $1, which reflects a valuation of 20 times 2009 earnings. Amid the uncertainty about growth and inflation, however, investors might wait for those forward earnings to be delivered before bidding higher for shares in China Hongxing Sports. Shares in the company edged up 1.5% last week following its robust results, closing CONTINUES NEXT PAGE
16 • THEEDGE SINGAPORE
| MARCH 3 , 2008
CORPORATE
‘The worst could be over’ FROM PREVIOUS PAGE
last Friday at 66 cents, which is about 12.5 times 2009 earnings. Elsewhere in the market, China-based shipbuilder Yangzijiang is another hot China play that could be hit by lower profitability this year. “Going forward, we believe margins have peaked and forward margins will be impacted by rising steel and labour costs and the strengthening of the yuan against the US dollar given that the bulk of
its contracts are in the US dollar,” says a report by DBS Vickers dated Feb 26. “These unfavourable conditions put Yangzijiang at greater risk as vessel prices are contracted now but deliveries are scheduled up to five years from now.” For the financial year ended Dec 31, 2007, Yangzijiang’s revenue was up 66% and earnings were up 91%. Instead of seeing a boost in its share price, however, the shipbuilder’s shares fell by two cents to $1.21 immediate-
ly after its results were out. DBS Vickers has cut its recommendation on the company to “hold” from “buy”, and reduced its price target to $1.45 from $3.04. Is there anywhere to hide from the rising cost of food and other commodities? Some market watchers suggest that companies producing alternative foods could be interesting. One such company is China Kangda, which produces rabbit and chicken meat, potential alternatives to the pork that is in short supply. The compa-
ny is also the largest Chinese exporter of rabbit meat to Europe, Russia and Japan. Last Tuesday, the company announced that earnings for 2007, were up 26.6% to 109 million renmimbi, on a 43.7% increase in sales to 728 million renmimbi. Shares in the company have climbed 25% since the beginning of the month to 34.5 cents last week. At current levels, the stock is being valued at less than six times forward earnings. However, even if the company sees stronger growth at the expense of pork producers in China, it is likely to be hampered by rising labour and transport costs that are pressuring other companies. And, shares in China Kangda don’t look much cheaper than most other food-related companies in China. Synear is now trading at a forward price-toearnings ratio (PER) of eight times. Celestial Nutrifoods and Youcan Foods, are trading at forward PER of 4.6 times and 10 times respectively.
Will Synear bounce back? In fact, some analysts see shares in Synear recovering from the lows they hit last week. “With pork costs likely to peak in 1Q2008F, we believe the worst could be over for Synear,” says a report by Nomura dated Feb 25. Other brokerage houses like UOBKayHian have “buy” calls on the stock too. CIMB called the stock a “trading sell” last week, but its lowered price target of $1.14 is still 43% more than Synear’s current market price. Terence Wong, head of research at DMG & Partners, reckons that the plunge in Chi-
While ‘agflation’ puts Synear and other foodrelated companies in an especially dangerous position, analysts are also going cold on a variety of other Chinabased companies because of rising inflation na-based stocks over the past fortnight is temporary. “The market has been punishing S-chips since their peak in Oct 2007, and Synear’s crash has been a strong catalyst leading to the heavy sell out this week,” he tells The Edge Singapore. “Investors shouldn’t be perturbed by languishing S-chips, rather, they should delve into the fundamentals of each company and use this time as a buying opportunity.” Perhaps indicating that the market has overreacted to its poor 4Q results, Synear’s CEO Li Wei picked up 7.3 million shares in his company on Feb 26, according to shareholder filings with Singapore Exchange. Li now owns 33.27% of the company after the purchase. “Growing urbanisation and changing consumer lifestyles in China, are expected to drive popularity and demand for convenience-food products,” Synear’s officials say, responding to questions from The Edge Singapore by e-mail. “We are therefore increasing utilisation of our Chengdu plant in Sichuan Province, while our Huzhou and Guangdong plants are also expected to commence operations in 2008.” But nervous investors might just prefer to wait until the impact of this growing demand on Synear’s bottom line becomes clearer. E
PICTURES: SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
18 • THEEDGE SINGAPORE
| MARCH 3, 2008
COVERSTORY
por ly uni ty a at p cos ITs
SURVIVING the crunch | STORIES BY GOOLA WARDEN |
J
ohn Lim isn’t losing any sleep over the convulsions that real estate investment trusts (REITs) have gone through recently. Instead, the CEO of ARA Asset Management — the only manager of REITs and property funds listed in Singapore — has been on the prowl for opportunities to double his company’s $10 billion worth of assets under management (AUM) within three years. He has also been on road shows to promote shares in the company. ARA Asset Management manages five privately held property funds as well as four public-listed REITs: Suntec REIT and Fortune REIT, which are listed on the Singapore Exchange; Prosperity REIT, on the Hong Kong Stock Exchange; and AmFIRST REIT on Bursa Malaysia. “As long as you have quality assets and quality lenders, I don’t see a problem,” Lim says, in a recent interview with The Edge Singapore. Tell that to investors in the many REITs that have been bashed down over the last eight months after being forced to shelve equity-capital-raising exercises amid the turmoil in financial markets. While they are off their lows set six weeks ago, at least 12 of 20 REITs (and one trust) listed in Singapore are trading at discounts to their net asset values (NAVs) — with three at discounts of at least 50%. Five of them offer forward yields of more than 8%. That slump in valuations of REITs already appears to be having
ARA Asset Management has emerged unscathed from the funding crunch in the REIT market. Now, CEO John Lim wants to double its assets under management within three years to $20 billion, a level that would rival CapitaLand’s real estate asset management business. No wonder institutional investors are excited about the stock. an impact on their managers and shareholders. On Feb 19, the CEO of MacarthurCook Industrial Trust, Chris Calvert, resigned just eight weeks after the REIT dropped plans to raise fresh equity capital. Earlier that month, Macquarie Bank in Australia was reported to be contemplating selling its 26% stake in Macquarie MEAG Prime REIT (MMP REIT). The manager of MMP REIT, Macquarie Pacific Star Prime REIT Management, which is 50%-owned by Macquarie Bank, has since said it is planning a strategic review of the REIT. Meanwhile, Chan Wang Kin, a major shareholder of Cambridge Industrial Trust Management, has sold his stake in the REIT management company to Oxley Capital. However, Lim isn’t worried about ARA succumbing to the crunch. He says the recent developments in the sector are just a passing squall, the result of excessive optimism built up over the last few years, when the real estate market was on a tear and REITs came to be viewed as investment instruments offering growth instead of just high yields. Once everyone adjusts their expectations, REITs will prove to be viable securitisation vehicles again, and ARA will face little
ARA REIT
Suntec REIT 120000
Volume (‘000)
Price ($) 2.1 2
100000
1.9
80000
1.8 60000
120000
Volume (‘000)
Price ($) 1.45 1.35 1.25 1.15 1.05 0.95 0.85 0.795
100000 80000 60000
1.7 40000
1.6
40000
20000
1.5
20000
0
1.4
0
March 2, 2007
Feb 28, 2008
difficulty in expanding its AUM. “The REIT model is definitely still viable,” Lim says. “It’s a product that has a part to play in the property market here. In most REITs, the assets are performing, but there’s a perceived weakness in the structure.” Indeed, this could well be a good time for investors with the stomach for risk to wade into REITs, say several industry watchers. “The irrationality of the market has dragged down REITs even though they are a proxy for direct real estate,” says Peter Mitchell, CEO of the Asian Public Real Estate Association (Aprea). “This is creating excellent buying opportunities for highly capitalised, lowly geared players.” REITs have
0.65 0.55 0.45
Jan 11, 2007
Feb 28, 2008
staged a strong recovery over the last fortnight, with some of the hardest hit bouncing the most. Lim says ARA received a warm reception from institutional investors during a road show over the last couple of weeks. Shares in ARA have risen strongly from their recent lows of 56 cents four weeks ago, partly because of the investor road show, Lim adds. “We were received very well and our share price rose 20%,” he says. Analysts think the stock could go higher. Brokerage houses such as Credit Suisse and DBS Group Research have “buy” recommendations on the stock, with price targets of $1.15 and $1.14 respectively. About 60% of the company’s rev-
Lim: The REIT model is definitely still viable. It’s a product that has a part to play in the property market here.
enue comes from base management, performance, acquisition and divestment fees from its four REITs. The rest comes from fees from managing private real estate funds. These include portfolio management fees, performance fees and return on seed capital. “It’s a very low-capital, knowledgeintensive, high-ROE business,” says Lim. “A lot of people tried to duplicate it — but can’t.” For the 12 months to Dec 31, 2007, ARA made a net profit of $34 million on revenues of $62.1 million. Analysts forecast a 9% rise in earnings this year to $37 million, and a further 27% next year to $47 million. They expect the company to declare dividends of 4.5 cents and 5.7 cents a share for 2008 and 2009 respectively. At current levels, shares in ARA are trading at 11 times and 8.8 times forecast earnings for 2008 and 2009 respectively, and at a forward dividend yield of 5%.
Coping with tough markets A former Prudential Real Estate executive director and DBS Land employee, Lim formed ARA in partnership with Hong Kong’s Cheung Kong Holdings in 2002. Justin Chiu, Cheung Kong executive director and chairman of ARA, regularly attends ARA events. Lim listed the company on the SGX last December, following an IPO at $1.15 cents a share that raised $236 million, hitting the market just as the sentiment on REITs was turning sour. Until last year, REITs were easily raising cash from investors and lenders, and facing little difficulty expanding their investment
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THEEDGE SINGAPORE | MARCH 3, 2008 • 19
COVERSTORY
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One Raffles Quay (ORQ), a top-end commercial building in the CBD. Comprising 1.3 million sq ft of lettable space, ORQ was completed in 2005, just as it was becoming clear that Singapore faced an acute shortage of prime office space. However, many of ORQ’s early tenants had locked in rentals of as low as $5.50 psf versus $12 psf for similar properties in the area last year. That meant ORQ, which was equally owned by Keppel Land, Cheung Kong Holdings and Hongkong Land, wouldn’t generate much income compared with its market value for some years. However, that didn’t deter two of ORQ’s three owners from pushing ahead with plans to securitise their stakes. In simultaneous deals last year, Keppel Land agreed to sell its one-third stake in ORQ to KREIT Asia for $941.5 million in late July, while Cheung Kong Holdings offloaded its one-third stake in the building at the same price to Suntec REIT — one of four managed by ARA. In addition, both Keppel Land and Cheung Kong agreed to provide the two REITs with “rental support” payments of $103.4 million each over a period of 54 months to compensate for the initial few years of low rental income. While analysts called the 54-month stretch of rental support to make the deal work “aggressive”, some still thought Keppel Land and Cheung Kong weren’t getting maximum value for ORQ. Within months, it became clear that K-REIT Asia had bitten off more than it could chew. The purchase of a one-third stake in ORQ was its first acquisition since listing in April 2006. Almost equivalent to the size of its existing portfolio, the deal was especially ambitious. Amid the doubts about whether the acquisition would be immediately yield-accretive because of the turmoil in financial markets, units in K-REIT were savaged and it was unable to raise the funds it needed from the market. It eventually fell back on a $942 million bridging loan from Keppel Corp. Suntec REIT fared much better. With an asset size of $3.9 billion
Unwinding the excesses
The securitisation of stakes in One Raffles Quay triggered a re-assessment of risk in the REIT sector
before the purchase and a balance sheet that had a low gearing of 23%, it easily digested its one-third stake in ORQ. “We didn’t have an issue,” Lim says. “For Suntec REIT, ORQ was only 20% of our asset size. It was very easy to finance. We just used debt.” Following the acquisition, Suntec REIT’s gearing is still a manageable 35%. Even so, units in Suntec REIT were also battered by nervous investors in 2H2007. Early last month, Moody’s downgraded its outlook on the REIT’s “Baa1” credit rating to negative, citing near-term refinancing risks, given the tough conditions in the credit markets. About 40% of its total debt is related to a bridging facility for the purchase of its one-third stake in ORQ, which falls due in eight months, according to Moody’s. A fur-
ther one-third of its debt matures at end-March. Lim doubts that Suntec REIT will face difficulty refinancing its debts. “We have already lined up all the financing for the $178 million that comes due in April,” he says. Last Thursday, the manager of Suntec REIT, announced it will issue $250 million worth of bonds of five-year maturity, convertible into cash and new ordinary units. But Lim concedes that funding it is becoming more expensive. With units in Suntec REIT trading at forward yields of 6% to 7% now versus property yields of 4.5% to 5%, it doesn’t make sense to raise equity, he says. In addition, lenders are more selective now, and borrowing costs have gone up. “We use to borrow at 40 to 50 basis points [above Sibor],” he says.
Why didn’t Cheung Kong and Keppel Land simply hold on to the property until all its tenant leases had been renewed at higher rents? Because the advent of property securitisation vehicles like REITs had got them used to being able to quickly monetise their developments and use the funds for other projects. “Cheung Kong is not in the business to invest — they build and sell,” Lim says, when asked about it. Moreover, the managers of REITs and property funds were hungry for assets to bulk up and grow. “It’s a great asset and we’re very proud to own it,” Lim adds. Nevertheless, the result of the borrowing and growth binge in which some REITs indulged could mean significantly slower asset growth for the sector in the immediate future, some market watchers say. With gearing levels nudging the 60% regulatory ceiling, and their units trading at a fraction of their NAVs, some REITs actually have no room to raise money for more acquisitions in the short term. Among the REITs in this predicament are K-REIT Asia, Mapletree Logistics Trust and Allco Commercial REIT. One way out is to persuade their shareholders to pump in fresh equity capital to reduce their gearing. However, with many REITs trading at yields that are higher than the yields on the property assets they own, it will be tough trying to convince investors to come up with the money. Still, with determinedenough backers, some of them might succeed. For instance, K-REIT is attempting to raise some $700 million through a rights issue now to repay the bridging loan from Keppel Corp. The rights issue is effectively being underwritten by Keppel Corp and Keppel Land, which together own more than 70% of K-REIT. If other shareholders of K-REIT don’t pony up for their portion of their rights, the CONTINUES NEXT PAGE
REIT valuations (as at Feb 26) NAME
DPU ($)
YIELD (%)
PRICE ($)
MARKET CAP ($ MIL)
NAV ($)
GEARING (%)
FY2007
FY2008E
FY2007
FY2008
MANAGER
MAJOR SHAREHOLDERS
CapitaMall Trust CapitaCommercial Trust Ascendas REIT Suntec REIT CDL Hospitality Trust Ascendas India Trust
3.300 2.150 2.270 1.580 2.210 1.080
5,389.0 2,978.0 2,916.0 2,353.0 1,821.0 812.0
2.240 2.840 1.490 2.530 1.610 1.850
34.7 23.9 28.9 35.6 18.7 4.0
0.13 0.09 0.13 0.08 0.09 NA
0.14 0.10 0.14 0.11 0.11 0.06
4.03 4.05 5.59 5.19 4.07 NA
4.24 4.79 6.08 7.15 5.02 5.19
CapitalMall Trust Mgmt CapitaCommercial Trust Mgmt Ascendas MGM Funds Mgmt ARA Trust Mgmt M&C REIT Mgmt Ascendas Property Fund Trustees
5.66 4.81 1.95 5.47 6.98 4.24 4.96 6.38 3.91
6.99 4.89 5.68 5.34 7.41 5.00 5.60 6.53 8.41
7.79 9.00 7.15 7.33 9.73
9.19 9.29 6.91 8.81 9.86
Ascott Residence Trust Mgmt Frasers Centrepoint Asset Mgmt Parkway Trust Mgmt K-REIT Asia Mgmt Mapletree Logistics Trust Mgmt CapitaRetail China Trust Mgmt Macquarie Pacific Star Prime Mgmt ARA Asset Mgmt Lippo-Mapletree Indonesia Retail Trust Management Allco (Singapore) Cambridge Industrial Trust Mgmt Japan Residential Assets Manager MacathurCook Investment Managers Bowsprit Capital Corp
CapitaLand (29.3%) CapitaLand (29.8%), PGGM (10.6%) Ascendas Land (17%), MGM Singapore (6.3%), Macquarie Bank (4.9%) Asean Investment (5%) M&C (38%), Istithmar Hotels (8%), Siong Lim (8%) Ascendas Land (17%), General Electric (11.9%), JPMorgan (8.3%), Capital Group (8.2%), Great Eastern Life (6.2%) CapitaLand (27%), The Ascott Group (18%) FCL (51.2%), PGGM (6%), Standard Life (6%), AIG (5%) Parkway Group (35%), Symphony International (6%), Matthews Intl (5%) Keppel Land (42%), Keppel Real Estate Investment (30.6%), JPMorgan (5%) Temasek Holdings (30%), UBS (6.9%) CapitaLand (20%), CapitaMall Trust (20%) Macquarie Bank (26%), AIG (11%), Morgan Stanley (10%) Cheung Kong (32.4%), PGGM (14.8%), DBS (6.5%) Lanius (27.1%), Mapletree Investments (12%), CPI Capital (8.6%)
Ascott Residence Trust Frasers Centrepoint Trust Parkway Life REIT K-REIT Asia Mapletree Logistics Trust CapitaRetail China Trust Macquarie MEAG Prime REIT Fortune REIT (HK$) Lippo Mapletree Retail Trust
1.360 1.350 1.180 1.610 0.945 1.580 1.250 5.500 0.690
606.8 822.0 710.0 399.0 1,047.0 974.9 1,190.0 4,467.0 731.7
1.600 1.160 1.360 3.780 0.940 1.010 1.610 9.010 0.910
33.1 29.2 4.0 53.9 54.6 29.7 29.0 23.5 0
0.08 0.07 0.02 0.09 0.07 0.07 0.06 0.35 0.03
0.10 0.07 0.07 0.09 0.07 0.08 0.07 0.36 0.06
Allco Commercial REIT Cambridge Industrial Trust Saizen REIT MacarthurCook Industrial REIT First REIT
0.860 0.700 0.825 1.010 0.740
607.1 355.8 372.0 263.0 201.5
1.500 0.760 0.728 1.300 0.960
43.6 35.1 30.0 7.8 15.5
0.07 0.06 0.06 0.07 0.07
0.08 0.07 0.06 0.09 0.07
Allco Finance Group (17.3%), Capital Research (6.5%) Capital Research (6.6%), Schroders (6%) JHYP (35.4%), Argyle Street (12%), Japan Opportunities (11.7%) UBS (19.6%), Lion Capital (9.1%), USS (8.4%), Indus Capital (5.8%) PT Lippo Karawaci (20.2%)
CITIGROUP RESEARCH, BLOOMBERG
T
portfolios on terms that immediately enhanced their distribution per unit (DPU). That’s because property assets were being offered for sale at prices that yielded more than the cost of the debt and equity the REITs needed to raise. In that heady environment, REITs expanded their portfolios aggressively, and their fast-growing DPUs attracted investors interested in their growth potential rather than just their yields. REITs seen to offer strong growth potential traded at lower yields than others, driving many of them to adopt aggressive expansion strategies. Besides targeting to double or even triple the size of their portfolios, the rush for DPU growth also prompted some REITs to bet on future rental potential of the assets they were buying rather than their existing cash-generation potential. For instance, when Allco Commercial Trust acquired 55 Market Street in 2006 for $72.5 million, or $981 psf, it was with vacant possession. The trust upgraded the property and then leased it to tenants. As chronicled in our Cover Story two months ago (“Funding crunch overshadows REITs”, Issue 299, Dec 24 to 30), the situation changed late last year. Property prices had soared dramatically and interest rates were firming, making it more difficult for REITs to acquire properties on yieldaccretive terms and deliver the lofty growth in DPUs that investors had come to expect. Then, the US subprime mortgage bust struck, rattling financial markets around the world and scuppering plans by several REITs to prime their balance sheets with equity-raising exercises for ongoing acquisitions. That left some of them with higher gearing levels than they would have liked. Among the REITs that dropped plans to raise equity late last year were Allco Commercial, KREIT Asia, Mapletree Logistics Trust and MacarthurCook Industrial REIT. ARA was relatively unscathed in the slump. But it was involved in a deal that helped trigger a broad reassessment of risk in the REIT sector — the securitisation of stakes in
20 • THEEDGE SINGAPORE
| MARCH 3, 2008
COVERSTORY isma Atria and Ngee Ann City on Orchard Road are among the best known and most visited shopping malls in Singapore. But the real estate investment trust (REIT) that owns them, as well as the management company that runs it, might soon become distant memories. Amid the funding crunch that has sparked a reassessment of risk and return across the REIT sector, units in Macquarie MEAG Prime REIT (MMP REIT) had been knocked down by some 16% from their highs of $1.26 set last April to $1.06 last month. Unhappy with this low valuation, Australia’s Macquarie Bank began pushing the manager of the property trust, Macquarie Pacific Star Prime REIT Management, to do something to realise the value of its underlying assets. Macquarie Bank owns 26% of MMP REIT and 50% of the management company, and it is reportedly prepared to sell its stake in the REIT. Last week, MMP REIT’s manager announced it would conduct a “strategic review” and come up with a solution. “This exercise could see the possibility of an asset sale, or a merger with another REIT or company,” says Franklin Heng, CEO of Macquarie Pacific Star Prime REIT Management. Or, it could simply involve the entire REIT being sold to another party, he adds. “It is Macquarie’s belief that everyone together could get a higher price,” says Heng. “The benefit of this exercise is such that it would close the value gap between the market price of MMP REIT’s units and its NAV.” In fact, units of MMP REIT have recovered to the highs they set in April on news of a possible sale. At current levels, units in MMP REIT are trading at a 23% discount to its NAV (net asset value) per share of $1.61, and offer forward yields of 5.6%. MMP REIT owns 27% of Ngee Ann City, a
THE EDGE SINGAPORE
Managers of MMP REIT contemplate M&A deal W MMP REIT
60000
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Price ($)
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1.3
1.24 1.2
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1.15 30000 1.1 20000
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Heng: This exercise could see the possibility of an asset sale, or a merger with another REIT or company
leasehold property expiring in 2072; and 74.2% of Wisma Atria, also a leasehold property that expires in 2061. Last year, MMP REIT acquired seven properties in Tokyo and a retail mall in Chengdu. As at Dec 31, 2007, the REIT had an asset size of $2.2 billion. That’s well above its market capitalisation of $1.18 billion. While the sale of MMP REIT to another party is potentially bad news for its manager, Heng says he is fully behind efforts to realise the value of the REIT because he has a large investment in it. “The public market has not accorded us the right valuation and there is a disconnect,” he says. “This gives us an opportunity to seek a transaction that can close the gap.”
Feb 27, 2008
In the past, Heng and his team had attempted to improve MMP REIT’s value by expanding its portfolio and distribution per unit (DPU). However, soaring property values and higher funding costs have made it tough to find yield-accretive acquisitions now. In fact, with MMP REIT’s units yielding more than 5% on the properties it owns, it would be better off divesting its assets and returning money to its investors. The REIT initiated a share buyback programme last December, but it is now on hold because of the strategic review it is undertaking. Heng says he had been approached with offers for large stakes in MMP REIT in the past. But these offers were contingent on the acquirer’s gaining management rights over the REIT. “When it came to a management rights discussion, I could never deliver because it was related to our shareholders,” he says. With Macqurie Bank now willing to cede control, Heng has more flexibility to cut a deal. “In this exercise, I can now freely discuss management control with any strategic partner. If they can take 100% of the company, we can unlock further value.” A spokeswoman for Macquarie Bank con-
firms that it has received offers for its stake in MMP REIT, but that it will make no decisions until the REIT completes a review of its options. “Also, in respect of confidentiality, we are unable to disclose whom we have received offers from,” she says. A sale won’t be easy to pull off, though. If the REIT is sold to a company or a property fund, there would be corporate tax and stamp duty to consider. “If there are any leakages in the sale, it would reduce the value to MMP REIT’s unitholders,” says Heng. Selling MMP REIT to another REIT would be more tax-efficient, but many REITs are now facing difficulty raising money for acquisitions. “You’ve seen the deferral of equity raisings by some REITs. They have demonstrated it is not easy to raise money. It’s tax-efficient, but it is unclear whether REITs have the capital in place.” One property group with the financial muscle and motive to buy MMP REIT is CapitaLand, some market watchers say. The real estate giant is jointly developing ION Orchard with Sun Hung Kai Properties, which is adjacent to Wisma Atria. Meanwhile, John Lim, CEO of ARA Asset Management, says he would be interested in any opportunity at the right price. “As a fund manager, we would take a look at MMP’s assets,” he says. “Most Singapore REITs have good assets.” Despite the strong likelihood that MMP REIT will soon be bought out, Heng still believes that REITs are viable securitisation instruments. “REITs are about making quality investible properties available to retail investors,” he says. The problem is that investors have pursued REITs that offered growth potential instead of judging them on the tax-free, stable yield they offer, he adds. “Now, with [the] subprime [criE sis], we’ve come back to reality.”
ARA’s Lim unfazed by competition FROM PREVIOUS PAGE
REIT might end up being more than 90%-owned by the Keppel group. That could result in its being taken private by its parent companies on the cheap. K-REIT is currently trading at a hefty 57% discount to its NAV and a forecast yield of 5.3%. Its property yields based on information in its latest financial statement are 4% to 4.5%. Alternatively, debt-laden REITs could just sell some of their properties to raise cash or agree to a takeover by another better-capitalised REIT or property fund. Analysts reckon that this year could be consolidation time for REITs. “With no clear growth strategy and the rising cost of capital, some REITs are trading at hefty discounts to their NAVs as well as offering high single- and doubledigit yields,” says Wendy Koh, an analyst at Citigroup, in a recent report. “This makes them potential takeover targets, especially if they have loose shareholding structures.” Among the REITs that might be sold or dismantled are MMP REIT, Allco Commercial and MacarthurCook Industrial, say analysts. ARA’s Suntec REIT was once considered a possible takeover target because of its loose shareholding. (Temasek Holdings owns 5.98%, UBS
5.2%, Asean Investment Corp 5%, Macquarie 3.4% and Perennial Investment Partners [Australia] 6.2%.) Today, however, its size — it is the second-largest REIT listed on the SGX, behind CapitaMall Trust — and relatively low gearing make it a potential acquirer rather than a takeover target. “I can’t see any constraint to our growth if there’s an opportunity to buy,” Lim says. Are Suntec and ARA eyeing the assets of any particular REIT? “We will leave that to the market to decide,” says Lim, with a nervous laugh. “We have our view but it’s not convenient to share.”
ARA hunts for assets Whatever it is that Lim is considering buying, he might find it more convenient to use a property fund backed by private-equity money rather than a public-listed REIT. With the higher cost of debt and equity and the stock market likely to remain volatile, it could be tough to organise an acquisition that is immediately yield-accretive to a REIT. That is especially so with the intense competition for property assets in Asia, says some industry players. “There are very few quality assets we can acquire, especially when we have a lot of funds coming to Asia, paying top dollar for assets,” says Franklin
Heng, CEO of Macquarie Pacific Star Prime REIT Management. As it happens, ARA has been raising money for new property funds recently. In December, the company closed its Asia Dragon Fund with US$1.2 billion ($1.7 billion). The largest investor in the fund is US-based pension fund CalPERS, which put in some US$500 million. Eight other US pension funds invested a total of US$296 million. Lim is coy at first about exactly what it will do, only letting on that distressed assets are his first love and he has been looking for opportunities in China, Vietnam and Thailand. When pressed, however, he says the fund has committed to the acquisition of a prime residential property in Singapore but has yet to complete the transaction. “It was a sizeable acquisition,” he says. “It is under construction. We believe the government will be successful in transforming the economy and I cannot see why the residential market cannot continue to grow. I’m one who doesn’t believe that the residential market will come down.” He is less optimistic about commercial property, though, especially after the steep run in rentals and capital values over the last couple of years. “I wouldn’t buy a building now
because of the limited upside of 5% to 10%,” he says. “We won’t see the type of gain we saw in the last three years.” But he adds that he doesn’t think the market for office properties will weaken much either. However, Lim is careful to explain that these private pools of capital that ARA manages are targeting assets that its REITs couldn’t purchase because they wouldn’t be immediately yield-accretive. “Yields are not the driving factor for funds,” Lim notes. “Our strategy [for the funds] is development, repositioning assets or factors that don’t compete with REITs, such as assets without yields which have to be worked on.” Once the assets mature and begin producing income, they could be sold to a REIT managed by ARA. “But at the outset, our funds are not competing with our REITs,” Lim stresses. Besides property funds, ARA is working on bringing two more REITs to market soon. Lim hopes to list them when stock-market conditions improve. “We don’t have a hospitality trust and an industrial REIT,” he hints, when asked about the kind of assets they will own. ARA is by no means the only player in this field. The 900-pound gorilla in the sector is none other than CapitaLand. The property behemoth has
five listed REITs, four trading on the SGX and one on Bursa Malaysia. It also manages and co-owns at least 15 property funds. Its total AUM stood at $17.7 billion at end-2007. According to CapitaLand’s CEO Liew Mun Leong, the group wants to grow its AUM to $25 billion within the next three to five years. It is looking at launching five new REITs, including a warehouse and logistics trust, and has just launched a US$300 million Vietnam fund. Lim is unfazed by the competition. In fact, he has larger ambitions than just matching his competitors in Asia. “If Blackstone can go to US$100 billion, why can’t we?” he says, referring to the asset size of the US-based private-equity-fund group. Could the turbulence in financial markets and a possible economic recession cloud ARA’s outlook? Lim thinks not. The reason is that the company operates a fee-based business. While its fee income could contract if its AUM shrinks, Lim says the assets held by most REITs and property funds are conservatively valued. “No REIT [asset] has a valuation that is going to collapse tomorrow, especially in Singapore and Hong Kong,” he says. After the tailspin the sector has been through, that’s E good to know.
With a massive land bank of 1.3 million ha — roughly 18.5 times the size of Singapore — Golden Agri effectively has the world’s largest amount of land for new plantations
GOLDEN AGRI-RESOURCES
THEEDGE SINGAPORE | MARCH 3 , 2008 • 21
CORPORATE
Golden Agri-Resources plants up, seeks to close valuation gap
F
ranky Oesman Widjaja, chairman and CEO of Golden Agri-Resources Ltd, and scion of one of Indonesia’s richest families, made a rare appearance before the media at the Fullerton Hotel last Monday. Widjaja heads Indonesia’s largest oil palm plantation company and unveiled what had been a record year for the company. Those numbers, which put its net profit in the billion-dollar league for the first time, come as the company is rapidly scaling up and attempting to reassert its dominance of the palm oil industry. Growers and producers of palm oil like Golden Agri have not had it so good in years. The crop, used largely to make cooking oil, is now the most consumed edible oil in the world. Swelling demand from fast-growing countries like China and India as well as new demand in recent times from producers of biodiesel is warring with tight supply. This has kept palm oil prices at levels that have astonished even the most seasoned industry players. “Every day is a new record,” says Widjaja, 50, who has a degree in commerce from Japan’s Aoyama Gakuin University. Despite racing up some 55% last year, palm oil prices have run up a further 23% this year, hitting a new high of RM3,827 ($1,646) a tonne last Wednesday. For the year to Dec 31, 2007, Golden Agri saw its revenue rise two thirds to US$1.87 billion ($2.62 billion) and its net profit rocket 2.5 times to US$1.17 billion. Gross profit margins swelled from 24% to 35%. Shareholders would not have been disappointed: The company doubled its dividends for a payout ratio of 21% and committed, for the first time, to pay up to 30% of underlying profit each year. These bumper times are bolstering the cash coffers of plantation companies in Malaysia and Indonesia, which together account for some 86% of all palm oil produced globally. Because this is a business that thrives on economies of scale, they are wasting no time planting new trees and expanding their land bank. Widjaja has grand plans for Golden Agri, which is 48%-owned by the Sinar Mas group, whose 84-year-old founder Eka Tjipta Widjaja is listed by Forbes as Indonesia’s fifthrichest man.
Oil palm plantation companies are reaping bumper profits and Golden Agri, the world’s second-largest, is on a planting spree in a concerted move to become No 1 again. Yet, its shares still trade at a discount to its smaller peers. SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
| BY SUNITA SUE LENG |
Widjaja: We hope to catch up [with Sime Darby]. We are determined to do it.
its goal is to plant another 60,000ha. “We hope to catch up [with Sime Darby]. We are determined to do it,” Widjaja says, referring to the company’s aim to regain its size leadership in the industry. Golden Agri’s plantation land is located mostly in Sumatra and Kalimantan. “With its aggressive planting programme of 60,000ha a year, Golden Agri will become the world’s largest plantation company in planted hectarage in two to three years’ time,” says Alvin Tai of Malaysia’s OSK Research in a Feb 26 report.
Largest plantation land bank globally
Are record palm oil prices sustainable?
The younger Widjaja, one of Eka’s many children, wants to make Golden Agri the world’s biggest oil palm plantation again. It held this title until Malaysian conglomerate Sime Darby merged its plantation business with Golden Hope and Kumpulan Guthrie last year, swiftly catapulting Sime Darby to top spot, with its planted areas covering some 540,000ha. In comparison, Golden Agri has 360,000ha of land planted. That makes it not only Indonesia’s largest plantation firm but also 1.5 times larger than its closest competitor, Astra Agro Lestari. Golden Agri’s trump card, however, is its massive land bank. Spanning 1.3 million ha — roughly 18.5 times the size of Singapore — Golden Agri effectively has the world’s largest amount of land for new plantations. And that, it reckons, will allow it to regain its leadership position in the world. Last year, it planted up 53,000ha, increasing its hectarage by about a fifth. This year,
In the meantime, as Golden Agri and its peers rush to grow trees, the current tight demandsupply equation may slacken, especially if the global economy starts to lose some steam. At a well-attended industry conference in Kuala Lumpur last week, James Fry, managing director at research outfit LMC International Ltd, predicted that palm oil futures in Malaysia may fall below RM2,900 this year. “In one to three months’ time, I think this party will be over,’’ he said, noting that high prices were affecting demand for food and fuel. In a Feb 13 report, ABN Amro analyst Nirgunan Tiruchelvam says a “sharp correction is in the offing” for palm oil. He expects prices to fall to US$900 on average between 2008 and 2010 and cites factors like diminishing biodiesel demand (as palm-based biodiesel becomes economically unviable) and rising supply. According to Oil World, an independent research house for the oilseeds industry, crude
palm oil production stands to increase 7% this year in Malaysia. In Indonesia, production is due to rise a sharp 19% this year — the largest annual rise in absolute terms based on available records. However, even if prices moderate from their current lofty levels, plantation CEOs like Widjaja aren’t ruffled. That’s because with costs in Indonesia running at US$200 to US$300 a tonne, margins from the plantations business are at levels not seen in years. Golden Agri produced two million tonnes of palm products last year and crude palm oil accounted for 43% of its revenue. It operates 31 mills that can process eight million tonnes of crude palm oil. It also processes and sells palm kernel produces, refined palm products such as cooking oil and margarine and soybean products such as soybean meal for animal feed and soybean oil. This year, it has earmarked between US$350 million and US$500 million to expand its oil palm plantations and add two new refineries in Kalimantan. Aside from its sheer heft in Indonesia, the company lays claim to having yields up to 30% higher than the industry average and higher than those chalked up by companies like Sime Darby or Wilmar International, among the top five plantation companies in Indonesia and currently the world’s largest refiner of palm oil. Golden Agri also has a robust balance sheet, with a net debt-to-equity ratio of just 0.1 time as at end-2007.
Valuation gap Despite this, Golden Agri doesn’t command the sort of valuations that smaller plantation stocks do. In fact, it has long traded well below the sector’s multiples. On consensus forecasts for 2008, Golden Agri is on a price-toearnings ratio of 12.6 times. Much smaller Indofood Agri is at 15.5 times and Astra Agro is at a high 19.4 times. Wilmar, which draws the highest ratings in the sector, boasts a PER of 23.1 times for this year. All are listed on the Singapore Exchange except for Astra Agro, which trades in Indonesia. In Malaysia, IOI Corp, another investor favourite, trades at 24.5 times for its fiscal year to June 30, 2008 while peer KL Kepong CONTINUES NEXT PAGE
22 • THEEDGE SINGAPORE
| MARCH 3 , 2008
CORPORATE
| BY JOAN NG |
P
eter Lau, the Hong Kongborn founder and managing director of Joyas International Holdings, grew up surrounded by things that glittered. His father was a goldsmith who made jewellery and all his brothers learned the trade as well. So, when Lau graduated from university, it was only natural that he too should join the family business. Lau never learnt to make the jewellery, spending his days working the shop front instead. But his immediate surroundings, he believes, helped groom his taste for what he does now: making metal gift products such as business card cases, photo frames and cufflinks for premium customers like Lamborghini, Folli Follie and Marks & Spencer. Today, he says, his taste has helped place Joyas among the leading manufacturers of premium metal gift products in Asia. Now, Lau wants to expand his business in a big way and is looking to raise $6.6 million in an IPO on the Singapore Exchange. That’s not a lot of money but Lau says the listing is more for a public profile than anything else. “I want to build up a platform so that we can have joint ventures or mergers with European manufacturers, doing work for high-end brands and metal accessories,” he says. At the moment, most of Joyas’ revenue (about 40%) comes from customers in the US, with only about 25% coming from Europe. But as manufacturing in Europe becomes
GWYNETH YEO/THE EDGE SINGAPORE
Metal goods maker Joyas hopes to tap growth in Europe and China more expensive, companies are looking to outsource their work to China, where Joyas has a 3,291 sq m production facility in Shenzhen that is capable of making about eight million pieces of gift items a year. “The European manufacturers are moving their production to China now, but they are not able to find any manufacturers in China that are good enough. In order to secure their business, I would like to be able to have joint ventures with them.” Being a listed company, he says, should make this easier.
European roots Lau’s first customer was a prominent US retail chain where one of his friends worked. In casual conversation one day, the friend happened to mention that his company needed a manufacturer to make some metal gift items. And despite having no experience or expertise, Lau decided to take the plunge and told his friend he would like to attempt it. His offer was accepted and Lau found to his horror that he had just 2½ months to make over 100,000 pieces of a gold-plated metal razors. “I was one of the first to hire Vietnamese refugees,” he says. Working 24 hours a day, Lau successfully delivered his shipment, which led him to think of bigger things. He packed his bags and went to Europe to survey the gift business there and on coming home, he hired some designers to make a few crude samples for him to market. That was the start to what Lau believes was the first metal gift manufacturing business in Asia. To his
I want to build up a platform so that we can have joint ventures or mergers with European manufacturers, doing work for high-end brands and metal accessories — Lau surprise, orders began coming in so strongly he was soon forced to begin turning people away. “At my first exhibition in Frankfurt, I had to go without lunch and toilet breaks for four days,” he says.
Expansion plans Those European roots played a prominent role in determining Lau’s design tastes, which he describes as distinctly continental. To this day, he still personally approves each
design the company manufactures. Lau believes the company should have little problem penetrating the Europe market. He adds that there has been growing demand among luxury European brands for metal accessories such as handbag clasps and cosmetic casings. To capitalise on this trend, Joyas is expanding its product range into the metal accessories segment. To keep up with growing demand, the company is also expanding its production facilities. Joyas has a 112,559 sq m plot in Guangdong, China, and is currently constructing the first phase of a new production facility there, which will start operations at the end of March and will increase annual production capacity to 12 million pieces. Funding for the plant’s machinery will come from the IPO. Joyas is offering 28.8 million shares at 29 cents a piece. Lau is also expanding in anticipation of rising demand from within China. With rising affluence, sectors such as private banking or retail will grow and many of Joyas’ products go to these industries — as promotional gifts for high-networth clients or packaged with luxury goods for the well-heeled. All this should help boost Joyas’ gross profit, which has been rising at a respectable compound annual growth rate of 35.6% from 2004 to 2006. And hopefully, the scale will allow the company to improve gross profit margins that, despite having risen steadily for the last three years, dipped slightly for 1H2007 to E 36.5% from 39% in FY2006.
‘Golden Agri too significant to ignore’ is at 18.9 times for the year to Sept 30, 2008. Sime Darby is not a strict comparable as the conglomerate also derives earnings from property, motor and utilities.
Legacy hangover The reason Golden Agri trades at a discount to its peers is that “the controlling family has some association with very poor corporate govern-
ance”, says ABN Amro’s Tiruchelvam, pointing to the storied bankruptcy of Asia Pulp & Paper. “That has been a weight on the shares.” The Sinar Mas group built one of the largest pulp and paper businesses in the region on a mountain of debt, which eventually led to the collapse of New York-listed Asia Pulp & Paper in 2001. The group’s Bank Internasional Indonesia, which had loaned large sums to related companies such as Asia Pulp & Paper, was hobbled during the Asian
financial crisis and had to be recapitalised. Amid all that, the group took its plantation arm, Golden Agri, public in Singapore in 1999. Almost a decade on, investors haven’t altogether dismissed the past corporate failures of the Widjaja family, whose net worth today is estimated at US$2.8 billion. However, the sector’s golden age, coupled with the company’s move to introduce more transparency through analyst and media briefings, appears GOLDEN AGRI-RESOURCES
FROM PREVIOUS PAGE
How the plantation companies stack up ‘000 ha
Malaysia
Indonesia
375 Immature Mature
Sime Darby
59 300
21 225
150
43
64
33
13 9
293 249 185
75
160
15 85
172
7 68
22 15
157
8 140
101
IOI
KLK
72
84
0
Golden AgriResources
Astra Agro
Wilmar
Lonsum
Indo Agri (incl Lonsum) Sampoerna
Kumpulan Guthrie Golden Hope Sime Darby
Tradewinds
to be starting to draw some interest back to the stock. On Feb 20, the company also carried out a one-for-two stock split to improve liquidity for retail investors. Tiruchelvam does not cover Golden Agri but says the plantation company is a “wellmanaged enterprise and has a huge land bank”. OSK’s Tai, in his report on the company, reckons that “the company is too big and too significant a plantation player for investors to ignore”. In recent months, Golden Agri has sent its management to meet with investors in the capital markets of Europe, North America and East Asia. Richard Fung, its director of investor relations, says reception has been positive and that the valuation gap between Golden Agri and its peers “is not as big as it used to be”. At end2006, Golden Agri traded at a 62% discount to its peers. The figure is currently about 41%. However, with its ratings still trailing the sector and analyst coverage a fraction of that for Wilmar, CEO Widjaja and his team may have to persevere with the investor road shows — and roll out industry-beating numbers each quarter if Golden Agri hopes to cease being the cheapest large-cap plantation play E in the region.
THEEDGE SINGAPORE | MARCH 3, 2008 • 23
CORPORATE
PICTURES: GWYNETH YEO/THE EDGE SINGAPORE
Del Monte Pacific emphasises brand strength, moves up value chain | BY GOOLA WARDEN |
C
omparing fruits to electronics may seem like comparing the proverbial “apples to oranges”, but that’s not how plantation company Del Monte Pacific sees it. Like an original equipment manufacturer (OEM) in the electronics industry seeking to move up the value chain by selling products under its own brand name, Singapore Exchangelisted Del Monte Pacific wants to put pineapples grown at its plantation in the Philippines into cans labelled with its own S&W brand to reach consumers all over the world. And, like companies in high-tech industries, Del Monte Pacific is innovating and creating better products. Among its recent successes is an ultrasweet strain of pineapple called MD2. Last November, Del Monte Pacific bought the S&W brand from its US affiliate Del Monte Foods Inc for US$10 million ($13.9million), which it plans to use as a vehicle to expand its market around the world. Despite its name, Del Monte Pacific can only sell its canned fruits, juices and condiments under the Del Monte brand in the Philippines and India. Under a deal struck decades ago, Del Monte-brand foods elsewhere in the world are sold by its US and European affiliates. Del Monte Pacific supplies these affiliates with pineapples and other produce. “We have this portfolio of products under the Del Monte brand, which we can only distribute in limited markets,” explains Joselito Campos, CEO of Del Monte Pacific. But with the 112-yearold S&W brand under its belt now, the company will be able to re-brand its products under the S&W label for sale in all markets around the world except North and South America, Australia and New Zealand. (In Europe, its US affiliate Del Monte Foods will continue to sell Del Monte brand canned food products under a perpetual royalty-free licence from Del Monte Pacific.) “We would duplicate our product portfolio and gain access into more markets,” Campos says. It may even allow Del Monte Pacific to catch up with its closest competitor, Dole Food Co of the US, according to company officials. Although both rivals own fruit plantations of about the same size, Del Monte Pacific lags behind Dole because it lacked a global brand. Another corporate investment that’s bearing fruit for Del Monte Pacific is its purchase of a 40.1% stake in India’s FieldFresh Foods for US$22.5 million last September. The other major shareholder of FieldFresh is Bharti Enterprises, a unit of India’s Bharti Group, one of the country’s leading business groups with interests in telecommunications, agri business, insurance and retailing. FieldFresh has around 300ha of land in northern India, where it grows fresh fruits and vegetables for export to Europe as well as for sale in the Indian market. FieldFresh grows mainly mangoes, grapes and pomegranates. India is already a fast growing market for Del Monte Pacific’s products. With the investment in FieldFresh, officials at Del Monte Pacific say its operations in the country could become a business pillar for the company that’s as significant as its home market of the Philippines and the S&W brand. “India is a big opportunity for us while S&W gives us the global reach,” says Luis Alejandro, chief operating officer at Del Monte. “If you look at [our] business today, it is predominantly the Philippines and the exports, but we are going through a transformation right now.” In that transformation, Del Monte Pacific will turn itself into a global consumer brand by using the S&W label
Alejandro: We’re looking at increasing our hectarage by 30% over the next three years and fresh pineapple contributions to 20% of revenue
Campos: We would duplicate our product portfolio and gain access into more markets with S&W
Gapud: Del Monte is no longer just a plantation company. We’re going to consumer branded products and we’re almost completely global. As the market digests this change, our share price could appreciate more
and expand in India using the Bharti-Del Monte Pacific joint venture, says Alejandro. How much will FieldFresh and S&W contribute? “If we have the Philippines as one of our strongest legs today, we want to have BhartiDel Monte and S&W as the other two legs to the same degree in the future, because of the vastness of the India market and the global reach of S&W,” says Alejandro.
that will come from contract growers,” he adds. To quickly process the harvested fruits, the company’s cannery is just a half-hour’s drive from the plantation and is situated adjacent to its own port, which has docking facilities for transport. Del Monte Pacific’s plantations are a legacy from the US occupation of the Philippines. “Even Filipinos cannot own more than 1,024ha of farming land,” says Rolando Gapud, chairman of Del Monte Pacific, referring to the Philippines’ Land Reform Act instituted in the 1960s. “But this plantation was started by the Americans 80 years ago when the Philippines was still a commonwealth of the US. That’s really the reason we were able to get the lease over such a large area.” In future, Del Monte Pacific wants 20% of its revenues to come from fresh produce like pineapples, which at the moment, makes up a negligible part of the business. The company plans to market this fresh produce globally under the S&W brand as margins are usually higher for fresh fruits than for processed fruit. So, Del Monte Pacific’s R&D department has come up with a new pineapple strain called MD2. “It is 30 times sweeter than the ordinary fruit,” says Campos, “and the flesh is very yellow.” On the brix scale of sweetness in a fruit, explains Campos, MD2 is 15 brix compared to the 12 brix in the chempaka variety that is the most common variety of pineapple at Del Monte’s plantations.
Among them is “Fit n Right”, a pineapple drink that contains L-Carnitine, an FDA-approved protein that helps to reduce body fat. Introduced in 4Q2007, the drink retails for the equivalent of 60 cents per pack and has been a runaway hit. “Forty per cent of college students in the Philippines switched from taking soft drinks to Fit n Right,” says Campos. Indeed, the doubling of the company’s beverage sales in the Philippines in 4Q is due, in no small part, to the launch of Fit n Right, adds Alejandro. For 2007, Del Monte Pacific reported a 19% rise in revenue to US$289 million and a 37% increase in net earnings to US$29 million. Most of the improved earnings came from cost cutting, tax savings and an expanded range of products, says Gapud. “For the three years since Campos has taken over, the income of the company has grown by double-digits. The Philippines market was the major driver of the company’s growth in 4Q and the full year. Additionally, in November 2007, the company secured a special-economic-zone tax incentive and started enjoying reduced tax rates of 5% of gross profit instead of 35% of profit before tax. Gapud says it has no plans to raise equity with its current negligible gearing ratio. “We want to keep our shareholders happy and we’re paying out 75% of profits in dividends,” he adds. Not everything is hunky dory though. For one thing, the strengthening Philippine peso is eating into the company’s profits. According to Del Monte Pacific’s officials, a 12% appreciation in the peso decreases profits by US$1 million each quarter. The other challenge is the lack of investor interest in the company. Del Monte Pacific’s share price hasn’t fallen this year largely because it is seen as a dull, defensive stock and isn’t widely owned. But if Campos and his team follow through with their plans for India and the S&W brand, that might soon change. While acknowledging that Del Monte Pacific is a “grower” and benefits from rising food prices, chairman Gapud brings up the analogy of the electronics industry to emphasise that it is now more than just a plantation company. “We’re no longer an OEM supplier,” he says. “We now have a brand. We’re going into consumer-branded products and we’re almost completely global. As the market digests this change, our share price could E appreciate more.”
Expanding plantations To match its global ambitions, Del Monte Pacific is planning to increase the size of its plantation in the Philippines, currently measuring 19,000ha in size. While Del Monte Pacific sources raw materials from all over the world to cut the cost of investing in plantations, it is still the largest producer of pineapples in the world with about a 20% market share. “The area we cover is 40km by 80km,” says Campos, referring to its pineapple plantation in Mindanao. That’s more than the land area of Singapore. As a non-Philippines registered company, Del Monte Pacific cannot own more than 3ha of land. To get around this, most of the land is leased from a cooperative that is made up of employees of the company. “The remaining part is managed through different farmers from whom we lease the land and we give them a different fee,” says Alejandro. He maintains there is no danger of these contract growers being offered a better rate by other companies because Del Monte Pacific provides additional sweeteners for the farmers, such as providing them new technology and helping them with the harvest. “This is exclusively contracted to us,” Alejandro insists. “We’re looking at increasing our hectarage by 30% over the next three years and
Del Monte Pacific 80
Volume (‘000)
Price ($)
0.80
70
0.75
60
0.70 0.65
50
0.60 0.585
40 30
0.50
20
0.45
10
0.40
0
0.35
Feb 13, 2007
Feb 29, 2008
More than just a ‘grower’ Understated and eloquent, the Cornell-educated Campos is the head of the NutriAsia group, a maker of sauces and condiments that churns out 90% of the banana ketchup consumed in the Philippines. In January 2006, a unit of Campos’ corporate group bought a controlling stake in Del Monte Pacific, marking the first time in almost two decades that the company had the backing of a single controlling shareholder. Campos currently controls a 79% stake in Del Monte Pacific. The company has a market cap of $633 million. Since taking over, Campos has trimmed the workforce, raised the number of distribution centres from two to 18 in the Philippines, and increased the company’s outlets from 28,000 stores in May last year to 64,000 by December. He has also introduced a slew of new products to help drive the company’s revenue and earnings.
24 • THEEDGE SINGAPORE
| MARCH 3, 2008
CORPORATE
BIG MONEY
Money in looming global water crisis
A
dventure capitalist, investment biker, and self-confessed China and commodities bull Jim Rogers has a new investment theme. The former hedge fund guru co-founded and successfully built the Quantum Fund with George Soros, only to quit Wall Street in the prime of his life to travel around the world. Outspoken Rogers, who sold his US$15 million ($21 million) New York town house last year and now calls Singapore home, isn’t talking of new frontiers like Africa or exotic asset classes like private equity and derivatives. He is talking of something more common and oft underestimated: water. Indeed, Rogers actually believes if there is one thing that can derail China and India’s dream run over the next few years, it won’t be their burgeoning property or stock market bubbles or overvaluation of other assets, but water. “Think about it: What is the scarcest resource in the world today?” Rogers asked his audience at a seminar recently. “It is not oil, it’s not coal or sugar or wheat that dramatically alters their growth momentum but something even more fundamental to human survival: water.” Nations have gone to war, people have fought for hundreds of years over access to water. More recently, actor George Clooney has articulated the plight of Darfur in Sudan, where tribal fight-
ing has raged over water and cropland in the country’s arid west region, leaving hundreds of thousands of people dead. For his part, Rogers brings his own unique perspective as a globetrotter with two record-breaking aroundthe-world tours across Asia, Africa and Latin America. “I have seen first hand what water does to land and people. It can cause destruction of unimaginable scale and render huge swathes of land unliveable,” he said. That’s a good enough reason for him to bet on water. Water covers more than 70% of the Earth’s surface. However, most of it is saltwater and unfit for people to drink. A mere 2.6% of all the water on Earth is actually potable freshwater. But here’s the real rub: A large share of that small percentage is frozen in the polar icecaps, while part of the freshwater supply is buried so deep in the earth’s crust that it cannot be extracted. Little wonder, then, that, water ranks as one of the world’s scarcest natural resources. Only 0.26% of the total amount of fresh water is potentially available above ground in lakes and river systems. A recent Credit Suisse report noted that roughly 80 countries were unable to provide their populations with a sufficient supply of water without great difficulty. What’s causing this water crisis? First, there is the boom in China, India
| BY ASSIF SHAMEEN |
and other emerging markets, which means the world is using far more water than it did five years ago. Add in climate change, environmental degradation, low water tables in Northern China, the US and India, and the picture becomes grimmer. Owing to the rapid spread of urbanisation and the use of water-intensive agricultural products, the current rate of increase in water usage is double that of the world’s population growth, according to the UN’s Food and Agriculture Organization (FAO). However, this strong surge in water usage has not been met by a corresponding growth in water supply. Global warming, or climate change, is another reason water is becoming scarcer on earth. Scientists say the water-holding capacity of the atmosphere increases as Earth’s temperature rise. Moreover, this is happening just as the duration and frequency
Appetite for food stocks shrinks I
n the north of China, dumplings filled with pork and cabbage are a staple at meal times. Synear Food Holdings has grown fat on this, churning out frozen versions of these dumplings as well as other popular offerings such as glutinous rice dumplings. The company is no small fry: revenue hit 2.2 billion renminbi ($429 million) last year and the company has an estimated 15% to 20% of the quick freeze food products market. And when the Beijing Olympics kicks off in August, the Chinese company will be the exclusive supplier of such frozen dumplings and snacks at the sports fest. But like most converters of food along the food chain, Synear has been buffeted by “agflation” or agricultural price inflation. Never mind the subprime bust or a US recession. Commodity prices continue to shoot through the roof, taking food prices along with them. Wheat is at a new record as stockpiles have sunk to a 60year low (brace yourselves for higher bread prices). Soybean is also at a new peak while corn is at levels not seen in over a decade. Farmers have been channelling the yellow crop towards biodiesel refineries, leaving less for livestock. Pork prices have soared. For Synear, that combination of higher meat and flour prices has been compounded by a rise in packaging costs. And, that has pushed up its
| BY SUNITA SUE LENG |
as i call it raw material prices by about 13% in 2007. But when it came to passing on this inflation, it was only able to hike its average selling prices by approximately 8% last year following a price adjustment in April 2007. As a result, its overall gross profit margin dipped to 32.2% last year versus 33.6% the year before. On its own, this wasn’t too shabby a performance. However, and more tellingly, Synear’s FY2007 numbers, released last Monday, showed that growth was braking in 4Q. As brokerage CIMB-GK points out in a Feb 26 note, its sales volume actually fell 6.7% in 4Q2007, despite that quarter
being a strong one seasonally. On top of that, analysts were caught off guard by a spike in selling and distributing costs and a surprise tax charge. Synear’s FY2007 profit came in some 14% below consensus forecasts. Investors promptly sold down the shares the next day, taking it down by 26.2%. Put another way, a whopping $371.3 million was wiped off its market capitalisation. The shares closed at a new low of 64.5 last Thursday and since the start of the year are down just over 60%. Higher soybean prices also hurt Pine Agritech, which makes soybean health products and food ingredients. The company said last Thursday its gross profit for 2007 fell 6.6% due primarily to higher soybean costs, which rose by over a third last year. The shares are down some 37% year-to-date. Shares of Celestial NutriFoods, which makes soybean-based health beverages and
of rains are falling, which means it now takes longer in warmer climate to recharge the atmosphere with rainforming vapours. Whether you are a Clooney fan or pretend to understand the intricacies of the Darfur crisis, all you need to know is that water is likely to be key to more of the world’s conflicts. Forget Iraq or the Middle East, the water crisis could be the biggest security threat since Al-Qaeda. Reams of paper have been wasted in recent months on editorials about agri or food inflation. But consider this: If the current global water crunch deepens, water will soon become an even more expensive commodity and, because everything we eat or drink or grow uses water in some form, inflation pushed by scarcer water could wreak real havoc. We don’t need a Nobel Prize and Academy Award-winning former VicePresident of the US to warn us of an impending global economic calamity. Even if the water crisis doesn’t lead to food costs spiralling, there are likely to be ripple effects aplenty on the global economy. Rogers believes that “without water, there is no China growth story, there is no India growth story”. Without the boom in China, India and emerging markets, the global growth train is likely to be derailed. India and China have been the engines of global growth in recent years. To ensure China’s growth
story stays on track, the world needs to ensure there is plenty of water to fuel the growth and lubricate those tracks. “By the way, India has more severe water problems in most areas than China,” says Rogers. For investors, there is money to be made from water. GHD, a global environmental consultancy, estimates that revenue generated by the global water sector is expected to grow from to US$342 billion by 2010 to more than double what it generated in 2004. It says the key drivers of that growth will be China, India and other emerging markets. Two listed Singapore water firms Hyflux and Epure figure in lists of global water stocks. Even legendary billionaire investor T Boone Pickens, who made his money from oil, is hopping on the water bandwagon. Pickens’ firm, Mesa Water, recently acquired water rights for 200,000 acres in Texas and is busy buying water rights across the US the way oil companies were buying drilling rights decades ago. Pickens has said oil and water are the two big commodities he is bullish about for the long term. General Electric’s CEO Jeff Immelt recently mentioned water as the one sector that the world’s biggest conglomerate was looking to increase its exposure in. Rogers, Pickens, Immelt and others can’t be wrong. Water’s E time has come.
food, also retreated last week after the company reported a drop in gross profit margins for 2007. In a slowing world, the Chinese consumer was thought to be one pocket of resilience. After all, sales of consumer goods rose 16.8% last year even as inflation swelled by 4.8% in China. However, 4Q numbers from companies indicate that consumption demand may indeed be taking a dent, a casualty of the increase most people have seen in food prices from the wet markets to the hypermarkets to eating places. This makes it all the more difficult to pass on agflation to end-consumers — especially when the government has adopted a hawkish stance in relation to consumer prices. In mid-January, the Chinese authorities introduced temporary price control measures on daily necessities such as processed grains, edible oil, meat,
dairy products and eggs. According to the new rules, big producers have to obtain governmental approval before raising their prices. Wilmar International, which is the leading player in China’s edible oil market, has held off asking for a price hike as it has covered its raw material prices very well, the company said at its results briefing last Thursday. However, it expects to do so “soon”. The question is: Will the government allow it to raise prices? In its results statement, Wilmar cautioned that consumption of edible oils in China might be affected by high prices. The company, however, isn’t altogether wringing its hands at recordbreaking soybean and palm oil prices. That’s because it is reaping bumper gains from growing oil palm. And, for the most part, sells its processed oil to industrial users, who absorb high raw material prices more readily than consumers. Agflation hurts when you’re not vertically integrated. This latest bout of commodity price increases — which stretches from the humble soybean to fuel such as coal and crude oil — is stoking already high inflation. Today, the rise in the cost of everyday life has become the No 1 issue on almost everyone’s plate. That’s starting to crimp appetites, both for the shares of food producers and even for staple items E like savoury dumplings.
Commodity prices continue to shoot through the roof, taking food prices along with them. Wheat is at a new record as stockpiles have sunk to a 60-year low (brace yourselves for higher bread prices).
SINGAPORE (INCLUSIVE OF GST) S$3.00
OTHER HIGHLIGHTS THE ASCOTT INTERVIEW
Millionaires’ row in Singapore
Petrodollar tsunami warning
Concord CEO sparks revolution
CITY&COUNTRY
ECONOMY WATCH
OPTIONS
MICA (P) No. 075/08/2007 PPS 1519/09/2008 (000599)
3
BUSINESS
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INVESTMENT
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THE WEEK OF MARCH 3 — MARCH 9, 2008
308
SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
NOTEWORTHY
The best of the best:
THE EDGE-LIPPER SINGAPORE FUND AWARD WINNERS
2008
ASSIF SHAMEEN:
Money in looming global water crisis SUNITA SUE LENG:
Appetite for food stocks shrinks ST Engineering plans diversification to sidestep possible US slowdown Golden Agri plants up, seeks to close valuation gap Del Monte emphasises brand strength, moves up value chain Celestial NutriFoods continues expanding, squeezed by high soybean prices
SURVIVING the crunch ARA Asset Management has emerged unscathed from the funding squeeze in the REIT market. Now, CEO John Lim wants to double its assets under management within three years to $20 billion, a level that would rival CapitaLand’s real estate asset management business. Turn to our Cover Story for why institutional investors are excited about the stock.
Federal International makes rash of energy investments Small-cap financier DB Zwirn winds down funds Synear Food, China Milk, Celestial NutriFoods, People’s Food, China Dairy, China Essence Hot stocks
8 885002 090004
PLUS: Managers of MMP REIT contemplate M&A deal
563/%"3, 4,*&450 #-6&
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More efficient intra-day stock trading with live prices Leverage investments up to 10 times Diversify with CFDs from 23 major exchanges globally Low entry cost of CFDs on 15 major stock indices
Get your free demo account; visit www.saxomarkets.com.sg, email [email protected] or call +65 6303 7788. 3JTLXBSOJOH-FWFSBHFEJOWFTUNFOUTJOGPSFJHOFYDIBOHFPSEFSJWBUJWFTDBSSZBIJHIEFHSFFPGSJTLBOENBZSFTVMUJOTJHOJ¾DBOUHBJOTPSMPTTFT:PVTIPVMEDBSFGVMMZDPOTJEFSZPVS¾OBODJBMTJUVBUJPOBOEDPOTVMUZPVSJOEFQFOEBOU¾OBODJBMBEWJTPSTBTUP UIFTVJUBCJMJUZPGZPVSTJUVBUJPOQSJPSUPNBLJOHBOZJOWFTUNFOUT $PNQBOZ/P.
SINGAPORE (INCLUSIVE OF GST) S$3.00
OTHER HIGHLIGHTS THE ASCOTT INTERVIEW
Millionaires’ row in Singapore
Petrodollar tsunami warning
Concord CEO sparks revolution
CITY&COUNTRY
ECONOMY WATCH
OPTIONS
MICA (P) No. 075/08/2007 PPS 1519/09/2008 (000599)
3
BUSINESS
&
INVESTMENT
WEEKLY
THE WEEK OF MARCH 3 — MARCH 9, 2008
308
SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
NOTEWORTHY
The best of the best:
THE EDGE-LIPPER SINGAPORE FUND AWARD WINNERS
2008
ASSIF SHAMEEN:
Money in looming global water crisis SUNITA SUE LENG:
Appetite for food stocks shrinks ST Engineering plans diversification to sidestep possible US slowdown Golden Agri plants up, seeks to close valuation gap Del Monte emphasises brand strength, moves up value chain Celestial NutriFoods continues expanding, squeezed by high soybean prices
SURVIVING the crunch ARA Asset Management has emerged unscathed from the funding squeeze in the REIT market. Now, CEO John Lim wants to double its assets under management within three years to $20 billion, a level that would rival CapitaLand’s real estate asset management business. Turn to our Cover Story for why institutional investors are excited about the stock.
Federal International makes rash of energy investments Small-cap financier DB Zwirn winds down funds Synear Food, China Milk, Celestial NutriFoods, People’s Food, China Dairy, China Essence Hot stocks
8 885002 090004
PLUS: Managers of MMP REIT contemplate M&A deal
563/%"3, 4,*&450 #-6&
Turmoil in financial markets doesn’t necessarily have to spell trouble for your investments. Hedge with stock and index-tracking CFDs on SaxoTrader to preserve the value of your portfolio.
C A P I T A L M A R K E T S
So trade up to SaxoTrader and enjoy access to over 5,000 CFDs – many of which allow you to short-sell. Some other benefits include: • • • •
More efficient intra-day stock trading with live prices Leverage investments up to 10 times Diversify with CFDs from 23 major exchanges globally Low entry cost of CFDs on 15 major stock indices
Get your free demo account; visit www.saxomarkets.com.sg, email [email protected] or call +65 6303 7788. 3JTLXBSOJOH-FWFSBHFEJOWFTUNFOUTJOGPSFJHOFYDIBOHFPSEFSJWBUJWFTDBSSZBIJHIEFHSFFPGSJTLBOENBZSFTVMUJOTJHOJ¾DBOUHBJOTPSMPTTFT:PVTIPVMEDBSFGVMMZDPOTJEFSZPVS¾OBODJBMTJUVBUJPOBOEDPOTVMUZPVSJOEFQFOEBOU¾OBODJBMBEWJTPSTBTUP UIFTVJUBCJMJUZPGZPVSTJUVBUJPOQSJPSUPNBLJOHBOZJOWFTUNFOUT $PNQBOZ/P.
OP2 • THEEDGE SINGAPORE
| MARCH 3, 2008
BUY RIGHT
SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
| BY AUDREY SIMON |
EDITOR/REGIONAL MANAGING DIRECTOR Tan Boon Kean ([email protected])
Charmed life The YSL charm bracelet is adorned with YSL’s iconic items such as the Downtown bag, the Uptown bag and the Tribute heels. Available at YSL boutiques.
SECTION EDITOR Audrey Simon ([email protected]) CONTRIBUTORS Grace Chin, Jamie Nonis, Leela Barrock, Felix Cheong, Tony Watts COPY-EDITING DESK Elaine Lim, Evelyn Tung, Ng Bee Cheng, James Chong PHOTO EDITOR Samuel Isaac Chua ([email protected]) PHOTOJOURNALIST Gwyneth Yeo ([email protected]) EDITORIAL COORDINATOR Rahayu Mohamad ([email protected])
Like a ballerina Flat shoes are hot this season. Lanvin has just released its collection of Ballerina flats that are so comfortable, you won’t want to take them off. They cost between $729 and $899 and are available at 0247 Wisma Atria.
Scent for life Diesel’s Fuel for Life fragrance for men has been touted as a body balm: The ingredients that go into it are star anise, heliotrope, raspberry, tangerine and pink grapefruit. This deliciously energetic fragrance has a female version as well so you and your partner can complement your scents. Available at leading department stores.
DESIGN DESK Tan Siew Ching, Christine Ong, Chan Yoke Lin, Jamy Gan ADVERTISING + MARKETING REGIONAL GENERAL MANAGER | Edward Stanislaus ([email protected]) SENIOR MANAGER | Colin Tan ([email protected]) MANAGERS | Simon Wong ([email protected]) Cecilia Kay ([email protected]) Jeffrey Wong ([email protected]) Windy Tan ([email protected]) Faith Teo ([email protected]) Julia Tan ([email protected]) COORDINATOR | Nor Aisah Bte Asmain ([email protected]) MALAYSIA REPRESENTATIVE | Helen John Corry ([email protected]) CIRCULATION-SUBSCRIPTIONS REGIONAL SENIOR MANAGER | Suresh Kumar ([email protected]) ASSISTANT MANAGER | Naziela Nasir ([email protected]) ASSISTANTS | Juliana Ibrahim ([email protected]) Iryanti Zainol ([email protected]) PUBLISHER THE EDGE PUBLISHING PTE LTD 150, CECIL STREET #13-00 SINGAPORE 069543 TEL: (65) 6232 8622 FAX: (65) 6232 8620 PRINTER KHL Printing Co Pte Ltd 57 Loyang Drive Singapore 508968 Tel: (65) 6543 2222 Fax: (65) 6545 3333 We welcome your comments and criticism. Send your letters to The Edge, Raffles City Post Office PO Box 218 Singapore 911708 Tel: (65) 6232 8622 Fax: (65) 6232 8620 e-mail: [email protected] Pseudonyms are allowed but please state your full name, address and contact number for us to verify.
Nature lovers Franck Muller draws inspiration from the humble pebble for its latest collection of timepieces. Called the Galet, French for pebble, the watch shows off its purity and smooth lines, just like the pebble that has been polished and shaped through years of erosion by water. It is minimalist, elegant and will remain a classic. Available at authorised retailers. Get organised Savvy travellers will love the new Solana collection by luggage specialist Samsonite. It is ergonomically designed and comes with extras such as a toiletry kit, a removable suit compartment and more space so you need not worry about wrinkling your clothes. The luggage can be expanded by 5cm, a plus for those who love to shop while overseas. Available at Samsonite boutiques and leading department stores.
HOME, SWEET HOME Imagine your love nest filled with limited items from designer Giorgio Armani
This month, Armani/Casa is filled with some of the finest furniture you will ever set your eyes on. They are available in limited quantities, so you can be sure of exclusivity and guests to your home will be impressed. Here are highlights: Antoinette (left and centre) is a dream dressing table for the woman who takes time and effort to look her best. At a glance, the dressing table set looks like a round table but take it apart and you will see the table with the mirror and a comfortable seat. Aida is a desk covered in gilded lizard print. Adelchi (right), also a desk, has a satin finish with glossy metal tiles. All items area available at Armani/Casa at the Raffles Arcade.
THEEDGE SINGAPORE | MARCH 3, 2008 • OP3
YourWeekOut
WATCH 10,000 BC (opens March 6), an epic action adventure from Independence Day director Roland Emmerich and set in prehistoric times. D’Leh (Steven Strait) is a warrior who mellows after falling in love with Evolet (Camilla Belle). But when she is kidnapped, his fighting instincts return. SEE Harry Connick Jr in action when he brings his My New Orleans Tour to town and opens the Mosaic Music Festival. The multiple Grammy awardwinner takes his band on the road to promote his new album, Oh, My NOLA, which is filled with big-band sounds and piano workouts. March 7, 8pm, Esplanade Theatre. Tickets at $88 to $248 from Sistic*.
CHECK out The Stage Club’s staging of three classic works in Black Comedy and Light Tragedies. They are Peter Shaffer’s Black Comedy about a poor sculptor and his fiancée’s unexpected confrontation when a bulb blows; Alan Ayckbourn’s Countdown, a snapshot of a marriage; and Michael Green’s Present Slaughter, where a Noel Coward play descends into a bloodbath after its leading man meets with an accident. Directed by Nick Perry. March 5 to 8, 8pm, DBS Arts Centre, Home of SRT. Tickets at $30 and $35 from Sistic*. TAKE the kids to Paper Shaper, a physical theatre piece that promises to be funny, quirky and colourful. Capital E National Theatre for Children from New Zealand puts on this performance about a mysterious garbage man living underground and a determined passer-by trying to throw his lunch away. Part of ACT 3 International’s Prudential Children First! Singapore International Festival for Children 2008. March 5 to 9, 10am and 2pm (Wednesday to Friday), 11am and 5pm (Saturday and Sunday), Drama Centre Black Box. Tickets at $20 from Sistic*. CATCH Incubus in concert as the alternative metal band, made up of vocalist Brandon Boyd, guitarist Mike Einziger, bassist Ben Kenney, drummer Jose Pasillas and turntablist Chris Kilmore, play their past hits and songs from its latest album, Light Grenades. March 7, 8pm, Fort Canning Park. Tickets at $125 and $400 (with access to VIP hospitality suite) from Sistic*.
ENJOY a casual afternoon of classical music with the Singapore Symphony Orchestra in its concert Fantasy and Romance. The orchestra plays Saint-Saens’ Fantaisie for Violin and Harp, Glinka’s Romance and Debussy’s Les Chansons de Bilitis, among others. March 9, 5pm, Victoria Concert Hall. Tickets at $10 (show your ticket at Victoria Café from 4pm to 5pm to enjoy a free cup of coffee or tea and a slice of cake).
endary jazz musician comes to town for the Mosaic Music Festival. Known as Captain Fingers, Ritenour has established himself as one of the world’s leading jazz guitarists, playing with The Mamas and the Papas, Tony Bennett, Lena Horne, Sergio Mendes, Herbie Hancock, Dizzy Gillespie and a host of other luminaries. March 8, 7.30pm, Esplanade Concert Hall. Tickets at $58 to $118 from Sistic*.
DON’T miss Lee Ritenour in concert when the leg-
*Sistic hotline: 6348 5555
OP4 • THEEDGE SINGAPORE
| MARCH 3, 2008
SPECIAL EVENT
Annalyn Celebrating her 9th Birthday by Hartmut Schwarzbach. Nine-year old Annalyn, who wants to be a neighbourhood teacher, lives in a charcoal camp located in a trash dump in Manila. Schwarzbach’s shot won him third prize at Unicef’s Photo of the Year contest last year.
Captivating compelling
P
hotography as a communicative art has become accessible to the masses with the affordability of technology and proliferation of digital cameras. Ruth Eichorn, director of photography for GEO magazine, says: “Photography is the international language of the future. The more people are getting educated about good photography, the better.” The ubiquitous photo-sharing experience online has exposed and heightened the public’s awareness of what a “good” picture looks like. “But what makes a photograph, or a series of photographs, stand out from the familiar and generic?” asks Simon Bainbridge, editor of the British Journal of Photography. Bainbridge says it takes more than good technique, or being in the right place at the right time, to capture something compelling. “You need commitment, engagement, investigation and, above all, a unique way of seeing and interpreting what is in front of you. Otherwise, it is just visual karaoke,” he says. “The paradox is that a ‘just good enough’ attitude pervades in this age of cheap and instant image downloads, which devalues the status of professional photography, and
yet the medium’s standing as an art form has never been higher. The World Photography Awards provide an excellent opportunity to celebrate excellence, and to show the world that great photographs can’t be bought for a dollar,” Bainbridge adds. Eichhorn and Bainbridge are among two of the World Photographic Academy (WPA) members who are judges for the inaugural Sony World Photography Awards, an international showcase of the best images taken from both renowned and undiscovered photographers alike. The awards are supported by hundreds of the industry’s top photographers, critics, gallery owners and directors, among others. Of the 25,9354 amateur and 44,641 professional photograph entries, 17 short-listed candidates for both professional and amateur participants were announced recently for the 11 categories: abstract, advertising, architecture, fashion, music, nature, nude, portraiture, photojournalism, science, and sport. The winners will be announced at a black-tie award ceremony at the Palais des Festivals in Cannes on April 24. The annual awards and the follow-up exhibition aim to become to photography art
&
The World Photography Awards celebrate excellence in the field. Grace Chin reports.
America’s Cup by Miguel Riopa Alende
what the Oscars are to the film industry. Its judges are drawn from from the WPA, set up to promote excellence in the field and to provide inspiration for the new generation of photographers. Members include 100 of the world's most respected photographers, critics, picture editors, gallerists and other industry leaders, including Phil Stern (US), Terry O’ Neil (UK), Chien-Chi (China), Sylvia Plachy (Hungary), Carl de Keyzer (Belgium) and Esko Mannikko (Finland). Members form the judging panel for the awards, and winners will automatically gain membership to the academy. The academy is governed
by the Honorary Board, which comprises 11 members, including Tom Stoddart, Mary Ellen Mark, Bruce Davidson, Martin Parr, Elliott Erwitt, Susan Meiselas and Stephen Cohen. Exceptional photographs will be selected — ranging from artistic expressions to personal documentation and interpretations of subjects — that represent the diverse and colourful psyche of humanity and our environment. Says UK-based artist and academy member Idris Khan, “Photography is a medium in which we celebrate the vision of an artist who most of the time quite literally points his camera to the world and says,
‘Look at this’, and then we read it as ‘Look at what was there’ and even more now ‘Was that really there?’ Its development is fast and challenging; it has no boundaries [and it] should live longer than you or me.” The overall winner of the title Sony World Photography Awards Photographer of the Year will receive US$25,000 ($35,162). The winner of the amateur category gets US$5,000, donated by Sony, and will be named Sony World Photography Awards Amateur Photographer of the Year. The individual will also be flown to attend the awards ceremony in Cannes. In addition to that, Saatchi Online, one of the biggest names in the arts and photography world, has signed up to partner the awards and support the amateur entries. A selection of 100 images from highly commended amateur entries will be displayed on the Saatchhi Online Gallery wall in Cannes during the awards, followed by the launch of the WPA Image Bank on Saatchi Online that will feature up to 1,000 top commended amateur images for commercial sale. Grace Chin is a writer with the Options desk at The Edge Malaysia. Browse the short-listed entries at worldphotographyawards.org.
| MARCH 3, 2008
THE ASCOTT INTERVIEW
SPARKING a REVOLUTION Concord has gone from classic to edgy in a flash. Its president Vincent Perriard speaks to Jamie Nonis about being given carte blanche in reinventing the brand.
SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
OP6 • THEEDGE SINGAPORE
W
hen Vincent Perriard was invited to Movado Group International (MGI)’s headquarters in New York to meet MGI boss Greg Grinberg, he was visibly disappointed after being told that, of all the brands under its stable, Perriard was to be entrusted with Concord. Recalling the exchange, Perriard says, “He asked, ‘Why do you react that way? It’s a cool brand.’ And I said, ‘No, it’s not a cool brand at all!’ “I think I did that on purpose. I wanted to test him and see whether we were on the same page because, for me to take on the challenge of Concord, it could only be a great success if we could completely rethink the brand from inside out.” His second mandate was that the brand shift its headquarters back to Switzerland after being in New York for 35 years. “In the US, they don’t really know how to speak luxury. Concord became almost like an American brand and that was one of the biggest issues,” he says. Perriard was promptly granted both wishes and given free rein to mould Concord. In addition, a brand-new team was put together to create a revolutionary milestone for the brand. The only directive from Grinberg was that he wanted “to be proud of Concord again”, shares Perriard. This goal was achieved in a single day at the annual Basel watch fair in Switzerland last year, when Concord sold all 1,100 pieces of its new C1 chronograph. Any detractors who had laughed at the brand’s bold declaration of reinventing itself as “modern and edgy” had to swallow their words as the industry enthusiastically lapped up the C1. Indeed, the watch makes a strong statement, with its striking and highly recognisable design. It is a monster on the wrist at 44mm, distinguishable by three unique features. First, the case alone comprises 53 components, versus the usual maximum of seven. Second is the absence of lugs that usually affix the strap to the case, making the watch adaptable to even those with smaller wrists. Finally, the deal-sealer is the three-layer dial that creates an extraordinary 3D effect. Never in your wildest imaginations would you have envisaged that a watch stamped with the Concord brand could look this cool. Indeed, Grinberg’s words have come to pass under Perriard’s deft hands and inspired vision. All the brand’s previous collections, such as the Delirium and Saratoga, have been done away with, as has the old logo. So, really, it is a brand-new Concord in every sense of the word. This year, Concord will rock aficionados’ worlds further with the first-ever tourbillon located outside the watch and positioned vertically instead of the usual horizontal mode. The watch will be called the Tourbillon Gravity. Perriard says, when the tourbillon was invented by Abraham-Louis Breguet in the 1700s, it was intended for pocket watches. When kept in the pocket, the tourbillon was maintained in a vertical position and this was “the best way for quality and accuracy”. Thus, he says the Tourbillon Gravity will boast a heightened accuracy compared with traditional tourbillons. Perriard, who has worked at Audemars Piguet and Hamilton, was the perfect candidate to spearhead this “risky and daring” project of refashioning a classical brand. First, the 38-year-old looks nothing like the stereotypical, sometimes stuffy, image of a CEO of a luxury watch brand. Dressed in an impeccably cut suit and designer prescription glasses stylishly stealing some attention from his bald pate, Perriard looks like he heads a fashion house instead. He gamely models, not just poses, for our series of photographs; his towering physique seamlessly contouring into position. He speaks with Options about being given carte blanche to completely reinvent a long-time classic, taking Concord from mass to niche and a 200% jump in its price point. In terms of brand DNA, how would you describe the transformation Concord has undergone? It’s completely radical. That was one of the biggest challenges because, when the team started in June 2006, we asked people in many countries like Singapore, Hong Kong, Japan and the US to describe the DNA of Concord and it was always a different answer. The reason is that, in the past, Concord was doing different advertising campaigns, and [had] almost different logos and different collections [to appeal to different mar-
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THEEDGE SINGAPORE | MARCH 3, 2008 • OP7
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kets]. So, you end up with a situation in which the image is not very clear. So we said, ‘Let’s go back to when Concord was a strong brand.’ In the late 1970s, Concord was hot in the industry because in 1979, we launched the thinnest watch in the industry, which was the Delirium. At that time, the brand had a very strong reputation. So we said, ‘Let’s imagine that we are in 1979 and try to describe Concord at that time’. Then, the brand was daring, modern, and it was using a tremendous amount of technological know-how and engineering. The brand was edgy as it was really unexpected to create such a thin watch [at the time]. Those elements were the DNA of Concord, so we decided to keep that DNA — daring, modern, [technological] know-how, unexpected — and use those values to redesign the new Concord. We gave these values to the designers and they came up with this design. So, you’ve gone from having the thinnest watch to the thickest. Is it really the thickest in the industry right now? We believe so. We might find a special grand complication that’s a bit thicker but, for chronographs, I think we have the thickest in the industry. We said, ‘Let’s imagine the ultimate in construction’ and we came up with this idea of having a very complex watch in terms of construction. What has the consumer and industry feedback been like since you relaunched? We presented [the C1] to the industry at Basel 2007 and we sold the whole quantity in a day. So, we knew at that moment [that] we had something hot on our hands. The other thing is the number of press interviews at Basel. [At] Basel 2006, I was not there, we had three or four interviews. [In] Basel 2007, we had 137 press interviews in a day. It was crazy, so the attention from the press was big. We knew we were definitely going in the right direction with this product. And then the second step of reaction was the trade and the public in the forums. If you go to Google and type Concord C1, you’ll see the number of hits is crazy. Has Concord’s price point increased? A lot. It was not driven by marketing. We wanted to create something special, something ultimate with the construction [and] we wanted something very edgy. So, we worked with the best suppliers in the industry and, at the end of the process of building the watch, you end up with the price. It’s about [a] 200% [increase]. That’s why we were quite nervous about the whole idea. But the design, product and the story seemed to work so well in Basel. So, this is proof that if you have the right product, great design, some innovation in the product and you are very niche — we had only 1,100 units last year — it works. We changed the logo, the colours, we removed the old stock, [so] it’s a new display, new merchandising, everything is new, even the people are new. When you bring so much freshness and new ideas, we have a new clientele. The person who buys the C1 is an extrovert [with an] open personality and a very strong character. He loves big, statement watches. He’s not shy. The clientele we had before was much more conservative, classical and understated.
So, you’re not planning to retain the old clientele? No. But if people love what we have done with the C1, then great. We’re doing the concept that we think is [best] for Concord but we never try to appeal to the old clientele of Concord. We know that we are losing some [of the old clientele] but the new clientele is much more energetic and we’ve already seen some great discussions in the [Internet] forums. So, it’s not a problem at all. Who are your competitors in the market now? I can honestly say we have no competitors. [The C1 is] going to be purchased by a consumer who has [an Audemars Piguet] Royal Oak Offshore. He might have a Hublot Big Bang, a Panerai and, tomorrow, he will have a C1. We believe the C1 will not be for someone’s first purchase. You need to be ‘educated’, understand and be in love with the industry. Maybe you will start with an Omega, then you will go to a Panerai, then maybe Corum, then suddenly you see the C1 — it’s bigger, there are no lugs, it’s different and you love the story of the dial. We are in this universe of big, visible, constructed watches and so those names I mentioned are the brands in this game. Can you share revenue figures? It’s a listed company so the numbers are open but we don’t break down the numbers for the specific brand. We are moving from a brand that used to produce 40,000 pieces a year to being a brand that produces 3,000 pieces a year — that’s going to be our target. In other words,
we have no pressure from the group to deliver numbers. We have pressure to do the best qualitative job ever because the revenues are really coming from the other brands like Ebel, Movado and the fashion brands as we own [watch] licences for brands like Hugo Boss, Tommy Hilfiger, Lacoste, Coach and so on. Concord has a mission now to be really small and beautiful, so it’s all about limited quantities. What kind of impact on revenue are you expecting with this new strategy? What I can tell you is 2007 [was about] stabilising the numbers because we shut down the old Concord and we launched the new C1. The balance makes a flat number and, as of next year, we are going to start to grow [but] a very limited growth of around 5%. We feel we could have a huge boom with the C1 but we’re going to keep it very limited; we want to keep the numbers down. We don’t want to burn [out]. Do you plan to keep production figures at 3,000 or will you increase this in the years to come? It’s a very difficult question because we also have to adapt, depending on the speed of success. If I had to give you a number, I would say that five to 10 years from now, the vision will be to achieve a maximum of 10,000 units. But it’s only when the brand has proven that it’s working well and we are everywhere. Compared with others, 10,000 units [is still] really small, which is fine because we want to be niche. Have you kept the same market strategy? No, there is a big shift. We used to be very strong in the US [50%], then the Middle East, then Southeast Asia. The new Concord, and the way we have sold the pieces in Basel so far, I would say 25% each in North America, Europe/Russia, Asia and the Middle East. It’s a very good balanced business so far but, obviously, it may evolve along the way.
The C1 is a monster on the wrist at 44mm, distinguishable by three unique features: a case that comprises 53 components (the norm is only up to seven); the absence of lugs that usually affix the strap to the case; and a three-layer dial that creates a 3D effect
What are your plans for China, India and the Middle East? The Middle East is still a very strong market [and], with the C1, it’s even stronger. We see huge potential. We launched in Dubai in January with the most powerful group in the region. There is no special plan as Concord is a very famous brand in the Middle East because of the past, so we have a very good future there. In India, we don’t have any plans today because we have so many things to do first in Europe. We started in January but only with three points of sale, which are really at the top [of the luxury market]. We have a subsidiary in Hong Kong. We reorganised the subsidiary and decided that this year, we will give full attention to Hong Kong and Macau and that’s it for the beginning. The objective is to grow to only 10 points of sale and maintain that number by year-end. Next year, we will enter the Chinese market with a subsidiary in E Shanghai and partnerships in China. Jamie Nonis is a freelance writer with a passion for quality timepieces
OP8 • THEEDGE SINGAPORE
| MARCH 3, 2008
FEATURE
Juli her
Rolex’s
GIFT TO THE ARTS Continuing a tradition almost as old as time, the Rolex Mentor and Protégé Arts Initiative is an international philanthropic programme created to assist extraordinary, rising artists to achieve their full potential. It seeks out these artists from around the world and brings them together with great masters for a year of creative collaboration in a one-to-one mentoring relationship. Leela Barrock was in New York for the initiative’s gala night.
I
t was a blustery November night at the Lincoln Centre in New York. A tad too early for Christmas but a little detail like that would not put a damper on the festivities that evening. There was a real-life red carpet (like on E! Channel) and press photographers at the ready to capture the rich and famous all dressed to the nines (yes, exactly like on E!) — gliding, posing, gliding, looking oh-soglamorous, mingling, trilling and sipping champagne. Martin Scorsese was there in a tux, smiling, nodding, managing to look every inch the legend he is even with this awestruck reporter enthusiastically pumping his hand, transfixed into silence by his lack of height (he looks taller on TV, I swear) and those eyebrows. Mira Nair was resplendent in a startling red Punjabi suit. She called Scorcese a guru and later smiled indulgently as Julie Taymor (Lion King, remember?) waited for the same reporter to finish pumping her hand. Owen Wilson was a guest, standing out with his blonde bangs, tan
corduroy and canvas shoes in the sea of formal evening wear. And Stephen Frears, the man possessed of a soul sensitive enough to have captured The Queen, cut a dashing figure in formal attire, in stark contrast to the somewhat rumpled man some 15 journalists had interviewed just a few hours earlier. There were other luminaries as well, from the worlds of literature, dance, music and the visual arts, from all over the world. “Only in New York could you put together such a gathering,” one of the guests at the gala event remarked as yet another familiar face squeezed past a nearby table. Indeed, not only did it seem that every nation on earth was represented there, the place was overflowing with the famous and glamorous. There were numerous don’t-I-knowher/him-from-somewhere moments, as a dozen different languages and countless accents ebbed and swelled among the crowd, which gave up all claim to personal space. But it was not New York that drew the Frears and Scorceses of the
world to the Lincoln Centre that night. It was Rolex. Rolex is better known for its precision Swiss (what else) watches but it does have a long history of association with the arts. But nothing quite like this, though. It was in 2002 that Rolex launched its Mentor and Protégé Arts Initiative, giving a twist to the Medici-style patron of the great Florentine tradition, but without any fanfare. For that first cycle, Rolex brought together mentors like William Forsythe (dance), Toni Morrison (literature), Sir Collin Davis (music), Robert Wilson (theatre) and Alvaro Siza (visual arts) with carefully selected protégés — all, without exception, nominated for their talent, potential, need, motivation and suitability. “Just as it takes a year to construct a Rolex timepiece to our exacting standards, it takes a year to set up a relationship between a mentor and a protégé, who then spend another year developing a fruitful collaboration,” Rolex CEO Patrick Heiniger said.
Thus, for two years, the protégé gets paid to spend time with his/her mentor. The protégé gets a stipend of US$25,000 ($35,162) plus expenses and gets to spend time with an idol he or she may have only dreamed of ever meeting. Too good to be true? It gets better. Rolex will offer an additional US$25,000 to produce an event. And they do not wash their hands of past protégés but keep track of their progress and even boast about them like any proud benefactor would. To prevent the unsavoury aspects of patronage from tainting the process, the protégés are selected in secret. There is no application process and no lobbying. Instead, six nominating panels consider 30 to 40 young candidates from around the world and narrow their numbers down to three or four. The mentors, selected by a Rolex advisory panel, will then pick the protégé they want to work with. No wonder the protégés’ descriptions of that first phone call from Rolex sounded like a Cinderella moment. “I cannot describe what an opportuni-
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THEEDGE SINGAPORE | MARCH 3, 2008 • OP9
(From left) Germaine Acogny, dance adviser for the Rolex Arts Initiative; Pinchas Zukerman, 2006/07 mentor in music; and Anani Dodji Sanouvi, 2006/07 protégé in dance
Stephen Frears (left), 2006/07 mentor in film; Mira Nair, 2004/05 mentor in film; and Josué Méndez, 2006/07 protégé in film
Julie Taymor (left), 2006/07 mentor in theatre, and her protégée Selina Cartmell
Edem Awumey (left), 2006/07 protégé in literature, and Wole Soyinka, 2008/09 mentor in literature Renee Flemming Martin Scorsese, 2008/09 mentor in film
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ty this was for me,” Antonio Garcia Angel, protégé for literature in the second cycle, said when I shared a bus ride with him one evening. There he was, a struggling writer in Columbia and — voilà! — the offer comes to spend a year under Peruvian author Mario Vargas Llosa. “It was incredible... I thought it was a joke at first,” Angel said. This was the thread that ran through all the protégés — Rolex had given them a-once-in-a-lifetime opportunity. In the second cycle, theatre was added to the list of disciplines, with Mira Nair as the first mentor. There was Saburo Teshigawara in dance, Mario Vargas Llosa in literature, Jessey Norman in music, Sir Peter Hall in theatre and David Hockney for the visual arts. That night in New York, Rolex was celebrating the culmination of the third season of the mentor protégé programme with some 650 guests crammed into the 400seater ballroom to fete the mentors and protégés of the third season and announce the mentors of the fourth season. Scorsese, the reigning Oscar winner for best director is the mentor for film in the fourth cycle, taking over from Frears, who played the role in the third cycle. Joining him will be Rebecca Horn as mentor for the visual arts, Jiri Kylian for dance, Youssou N’Dour for music, Wole Soyinka for literature and Kate Valk for theatre. Apart from Frears, the other mentors for the third season were Taymor (thea-
Diane Von Furstenberg
Patrick Heiniger (left), CEO of Rolex SA, and William Forsythe, 2002/03 mentor in dance
tre), Tahar Ben Jelloun (literature), Anne Teresa De Keersmacker (dance), Pinchas Zukerman (music) and John Baldessari (visual arts). Most of the mentors spoke with enthusiasm of the initiative of living up to Rolex’ claim that they had been selected not just because they are great artists but also because they are generous, according to Rebecca Irvine, Rolex’s programme director. At least two of the three mentor-and-protégé pairs I spoke with appeared to have formed lasting bonds with each other. Director Julie Taymor and protégé Selina Cartmell said they had become friends and they looked like friends, talking as much to each other as of each other during the interview. Author Tahar Ben Jelloum and Edem Awumey showed a respect for each other that was heart-warming to see and spoke of the continuing relationship the two enjoy. It was Frears, the Englishman who is renowned for such film hits as The Queen, Dangerous Liaisons and My Beautiful Launderette, who stood out as the only mentor
who said he did not see a reason to continue his professional relationship with his protégé. No, really. Was that Frears playing to the gallery? Perhaps he was, because Frears and protégé Josué Méndez appeared to share a certain camaraderie and dry, self-deprecating wit. One got the feeling that it would just go against Frear’s grain to admit that he had a grand time of things in the two years and may actually have enjoyed mentoring Méndez. Known for being a taciturn interviewee, Frears has cultivated a reputation for his acerbic wit and caustic temperament. Would it not do to appear like he actually enjoyed mentoring a young, budding Peruvian? Or at least that was the glossymagazine-quality psychoanalysis a couple of us journalists came up with between glasses of wine. The night ended relatively, early considering that the following day was a Tuesday and thus a working day. On the bus back to the hotel, a tiny Indian lady in a sari smiled uncertainly at me. “Are you
Indian?” she asked. “No,” I replied. “I’m Malaysian.” The irony of the moment was lost to all but me because nobody else would understand that nowhere else in the world am I classified as an Indian except in my own country. The lady, it turned out, was one of the panel of judges who select potential protégés. Her category was dance. I looked at her with interest. The Rolex process had found her to become one of six panellists to scour the world looking for suitable candidates to become a protégé in dance. She was evidence of the process Rolex is proud of — a transparent, free and fair process that offers a chance for a student to learn at the knees of a master, keeping the age-old tradition of apprenticeship alive and within reach. She was evidence that the Rolex initiative was not just a sterling effort — it is a commitment E worthy of the brand. Leela Barrock is an associate editor at The Edge Malaysia
OP10 • THEEDGE SINGAPORE
| MARCH 3, 2008
BEHIND THE BOTTLE
SUFFERING for SAKE BLOOMBERG
T
he first steaming rice batch of the year is prayed over in a Shinto rite and travels along a conveyor belt in the frosty morning air at Kinoshita-Shuzou’s brewery, to begin a centuries-old transformation into sake. At hundreds of similar facilities around Japan, the same process is taking place, with one key difference: At 160-year-old Kinoshita-Shuzou near Kyoto, the man in charge of brewing the beverage isn’t Japanese. Philip Harper, raised in Cornwall, England and educated at Oxford, is Japan’s only foreign-born master sake brewer. “I’m obviously a bit of a weird presence,” Harper, 41, says during an afternoon break as a kerosene heater blasted from the corner of the tatami room. “It’s not particularly well-remunerated work.” After years of declining domestic sales and shuttered breweries, Harper has become a link in the industry’s effort to boost the export market. In Japan, chairmen break open sake casks to commemorate corporate anniversaries and sumo champions guzzle it from trophy cups. Younger drinkers, however, are switching to wine, beer and other drinks. Sake shipments in Japan plummeted 27% in the five years to 2005, according to the Japan Sake Brewers Association. Harper, a soft-spoken man, began his sake career 17 years ago in the western city of Nara after arriving in Japan as an English teacher in the late 1980s. A passion for tasting turned into a full-time job and eventually led to Harper attaining the rank of toji, or master brewer, three years ago. Dying tojis He took the helm of Kinoshita-Shuzo in October following the death of the previous toji, who had held the position for 47 years. The sixth-generation owner of the brewery considered closing the plant until an acquaintance put him in touch with Harper. Only about a third of the nation’s 2,000 traditional breweries, or kura, are active because of the retirement or death of master brewers who left behind no apprentice. “There’s a real crisis of manpower in the traditional guilds,” says Harper. “You’ve got a huge changing of the guard. You probably will see some breweries for whom
Rocky Swift watches as Japan’s British master brewer gets to work
Harper has a passion for sake and has written two books on the brew in an effort to promote the drink globally
this is the final straw.” Winter is the busiest season for sake brewers, a remnant of a system developed centuries ago to give farmers something to do when fields were fallow. The labour is long and physical, and at times requires night-time vigils as the bacteria and yeast work on the brew. On this January morning, Harper cycles wordlessly through activities from cooking rice, mixing in purified water from the local mountain spring, then transporting huge tubs of it over space heaters using a forklift. Long nights A four-year correspondence course gave him the technical know-how for the work, with long nights fretting over hissing, frothy vats of fermenting rice. “You don’t get much in the way of a social life if you’re doing traditional brewing,” he says. “My first
five years brewing, the only day I had off was the day I got married.” Harper toiled in relative obscurity until he wrote The Insider’s Guide to Sake, a pocket-sized explanation of the art that has sold about 20,000 copies. It describes nigori, a sweet brew with a cloudy texture caused by leaving the rice sediment unfiltered. There are the dai-ginjo, ginjo and hon-jouzu — gradations of brew determined by the type of rice and how far each grain is milled down to its starchy core. His follow-up, The Book of Sake, is a trim, picture-laden volume aimed at enthusiastic overseas novices. Overseas growth “The brightest point at the moment is that overseas sake sales are coming along so well,” Harper says. “Only about 1% of sake that’s made is going overseas, so obviously that market needs to continue growing very strongly for it to make up for the drop in domestic demand.” Sake exports rose 46% over the five years to 2006, with more than a third of those sales in North America. Japan’s surviving breweries are focusing more on highgrade sakes popular with overseas enthusiasts. Quantity will decline as kura go out of business, while overall quality will improve, says Yasutaka Daimon, a sixth-generation sake brewer from Osaka. Daimon cofounded eSake.com in 1998 to promote the product over the Internet and through North American distributors. The site’s top 720ml bottle, Sato no Homare, from Japan’s oldest brewery, costs US$200 ($281). He said the industry needs to win back younger Japanese drinkers and capture a domestic market that has been almost ignored: women. “It was common sense that women do not like sake,” Daimon says. “But it was not right; they just didn’t have the chance.” At the Kinoshita-Shuzou brewery, Harper is nervous about how his first batches of sake will turn out, working with a new crew and with different machinery and ingredients. He named his debut brand Fukubukuro, after the “lucky bags”, loaded with surprises, that retailers sell at New Year. “At the end of the day,” Harper says, “the whole thing only works if the stuff is actually being drunk.” E — Bloomberg LP
BITE
The Terrace
T
o celebrate Easter, be sure to make your way to The Terrace at the Sentosa Resort & Spa, where a champagne brunch awaits, with rock lobsters, shucked oysters and crabs to complement the more terrestrial offerings. These include whole Beef Ribs on the Bone, Pan-Fried Foie Gras, a barbecue selection and steamed shrimp. It wouldn’t be a champagne brunch without a little bubble, and there will be a free-flow of Duval Leroy. The day will be a family affair, with a do-it-yourself pizza section for children, an Easter Egg hunt, bouncy castles and a va-
riety of other activities to keep the munchkins entertained while you enjoy the afternoon. Where: The Terrace, Sentosa Resort and Spa Prices: $158++ for adults; $79++ for children (four to 12 years old) Reservations: Call 6371 1414, full payment is required. Email [email protected] for additional information, or log on to www.thesentosa.com.
BreadTalk
breads. The new selection took a year to research and test, and was developed in consultation with chefs from France, Japan, Spain and Taiwan, to give this new range a truly international flavour. Highlights include the Canto Gusto, the equivalent of dim sum in a bun, Apple King (a bun stuffed with a light apple cream), and Curry Dozo (Japanese curry with egg wrapped in bread). Check out these delectable new flavours at the refurbished CityLink Mall outlet and other branches across the island. Where: CityLink Mall, B1-42 or any BreadTalk bakery
Carl’s Jr
In conjunction with its eight anniversary celebrations, BreadTalk has released 12 new signature
A good burger on the go is a rare find in this part of the world, but that won’t be a problem for too long. Carl’s Jr is opening a 24-hour drive-through outlet at the Playground @ Big Splash in East Coast Park. American-style grilled burgers are now available
anytime of the day. Where: Playground @ Big Splash, East Coast Park
Prego, The Fairmont Singapore Easter Sunday brunch at an Italian restaurant seems as good an
idea as any. Highlights of the spread by chef Salvatore are Salmon and Ricotta Filled Shell Pasta in Cream of Tomato, or Oven-Roasted Lamb with Peas and Carrots, and Squid Ink Lasagna with Seafood Ragout, Ricotta Fresca and Italian Herb Tomato Salsa. There will be a free-flow of champagne and feel free to bring the kids as there will be an Easter Egg hunt to keep them out of your hair. Where: 80 Bras Basah Road, Fairmont Singapore Prices: $88++ per person, with free-flow of Soave Brut, soft drinks, coffee and tea; $68++ per person, with freeflow of soft drinks, smoothies, coffee and tea; $35++ per person, with free-flow of soft drink and smoothies (for children aged six to 12) Reservations: Call 6431 6156 or email [email protected] — Compiled by DesE mond Wong
THEEDGE SINGAPORE | MARCH 3, 2008 • OP11
FOOD
J.Co Donuts recently opened at the basement of Raffles City
J.Co’s doughnuts have catchy names such as Al Capone
S
ingaporeans just can’t seem to get enough of biting into doughnuts. Check out the long queue snaking its way around popular outlets like Donut Factory at Raffles City — even before they open their doors. Which is why Singapore Exchange-listed Breadtalk Group recently brought in J.Co Donuts & Coffee café. Located at the newly renovated basement one of Raffles City, it’s touted as the first lifestyle donut café in town, boasting 25 yummy varieties of doughnuts as well as a selection of top-of-the-line coffee and iceblended drinks like the signature Almonetto Freeze. Founded by Indonesian entrepreneur Johnny Andrean in 2005, the chain has expanded aggressively in Asean over the past couple of years, counting 32 outlets in Indonesia and two in Malaysia. In Singapore, the Breadtalk Group holds the master franchise to run J.Co for 10 years. “J.Co is Asia’s fastest-growing lifestyle concept,” enthuses William Tan, CEO of J.Co Donuts & Coffee, adding that both Andrean and Breadtalk founder George
Quek have been business partners and friends for many years. “Rather than compete with him and create our own [brand], we opted to work with him to bring J.Co to the next level.” Although he declines to tell Options how much the master franchise is worth or the company’s projected monthly turnover, he does let on that the Singapore outlet is a joint venture, with Breadtalk holding 70% and Andrean, 30%. The synergy seems intuitive, almost inevitable. For, just like Breadtalk’s range of buns and breads, J.Co’s donuts also come with snazzy and offbeat names, such as Al Capone, Heaven Berry and JCrown Donatella. The donuts are light, easy on the tongue and not cloyingly sweet. They’re handmade and freshly baked, using natural ingredients. Little wonder, then, that since the café opened on Feb 9, the
BRINGING in the dough
Fad or not, the doughnut craze has hit Singapore and joining in the fray is J.Co Donuts. Felix Cheong is smitten by the little pastry with a hole in the middle. doughnuts have been flying off the counters. But given Singaporeans’ taste buds for food fads, is it a sustainable business? Remember the coffee-scented bun, Rotiboy, which inspired a spate of copycats? Or how about Portuguese egg tarts, Taiwanese bubble tea and melt-in-your-mouth
apple crumble? The craze fizzled out soon enough. “J.Co is not just about doughnuts,” asserts Tan, who also wears another hat as president of the Breadtalk Group. “It’s a lifestyle café concept that also offers great music, ambience and even reading material. It’s a great place to
meet and chill out.” Which is why you can look forward to another J.Co Donuts & Coffee at Bugis Junction in the middle of the year and possibly more over the next few years. E Felix Cheong is a published poet and author
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OP12 • THEEDGE SINGAPORE
| MARCH 3, 2008
DRIVE
Expect to hear the Cooper name even more often with the local launch of John Cooper Works Tuning. On offer are body kits, double-spoke 18-inch wheels, 16-inch brake kits, branded Recaro sports seats and a tuning kit.
Maximising the Mini The Mini Cooper S gets a lift with the addition of the John Cooper Works tuning kit. Tony Watts hangs on for the ride.
W
hat’s in a name? If you harbour fantasies of having your name live forever, there are a few routes to sure success. The easy route is the one taken by Idi Amin, Pol Pot and their ilk, though chances are you’d prefer to be fondly remembered. A better path is to succeed in motorsport, though gone are the days when you could enter a Formula 1 race in a car bearing your own name — there is just too much money in the sport these days. Names such as Brabham, Jordan and Surtees are fading memories, though it has to be said that McLaren, Williams and Ferrari still fire the collective imagination. When those names appear on road-going cars, they do have cachet — Ferrari is an obvious one, and McLaren is responsible for one of the fastest roadgoing cars ever (top speed was around 390kph), though only a small number of buyers managed to come up with the million-dollar-plus asking price. When you look at the Mini — particularly the humble original, with it’s small wheels and tiny engine — Formula 1 is not the first thing that comes to mind, though the most coveted Minis, wearing the Cooper badge, should. John Cooper and his father started the Cooper Car Co after the war, building single-seat racing cars, which were mostly sold to private individuals. The cars had the engine placed behind the driver — apparently Cooper said this was for practical reasons, as they were powered by motorcycle engines using the chain final drive — but the handling ba-
There is more legroom in the front, and there’s a lot of kit as standard, such as auto climate control, a proximity key, leather and more airbags than you could possibly know what to do with
lance of these mid-engined cars showed the way forward. I should say at this point that the British racing fraternity was possibly a little myopic: There had been examples of successful mid-engined race cars that predated the Coopers’. Still, the design was a success and the company won back-to-back Formula 1 World Championships in 1959 and 1960, and is often credited as a pioneer of the mid-engine concept. Cooper fame But the Cooper name will be best remembered for its association with Mini. It helps that the Mini Cooper S won the gruelling Monte Carlo Rally several times, too. Little surprise, then, that when BMW resurrected the Mini, it would resurrect the Cooper name with it — the basic line-up here includes the Mini One, Mini Cooper and Mini Cooper S. Expect to hear the Cooper
name even more often with the local launch of John Cooper Works Tuning. On offer are body kits, double-spoke 18-inch wheels, 16inch brake kits, branded Recaro sports seats and a tuning kit. It was the latter fitted to the car on test. Altered engine management, a different air filter and twin exhaust boost the performance of the Cooper S. Horsepower is up 17hp to 192hp, top speed is 232kph (up from 225kph) and the zero-to-100kph dash is dispatched in 6.8 seconds (down from 7.1, though you can probably add around 0.2 second for this automatic variant). The kit does all this without too much fanfare — there are no silly wings or bulges added, just a few discrete badges and different exhaust tips. It’s an approach I wholeheartedly approve of — I’d rather have a car that goes quick, than one that simply looks quick. As the base car is a Cooper S,
there are no real changes to basic functionality. The bootspace, for instance, is pretty small, and the rear seats have decent headroom, but a fairly — uh — mini amount of legroom. Things are better in the front seats, and there’s a lot of kit as standard, such as auto climate control, a proximity key, leather, and more airbags than you could possibly know what to do with. There are even audio controls on the steering wheel, which is difficult to fathom as the audio system is a very short reach away. The details are pure Mini — the “floating” roof (which is achieved largely by blacking-out the pillars), chrome filler cap and door handles give it that retro touch, without appearing naff. Retro The interior also gets the retro treatment and, after several years between drives, I have to admit to being less enamoured of the details. The central rocker switches for the electric windows, for instance, look great, but aren’t ideal from an operation perspective; likewise the massive speedometer in the centre of the dash. I know it harks back to the ori-
MINI COOPER S WITH JOHN COOPER WORKS TUNING KIT $6,248 (kit only) $134,048 including COE Engine: 1,598cc, 16-valve, turbocharged in-line four Power/torque: 192hp/270Nm (overboost) 0-100kph: 6.8 seconds* Top speed: 232kph* *Figures for manual transmission
ginal cars, but it does mean taking your eyes off the road to see what speed you’re doing. Worse, if your passengers like to nag, the speedometer is on display to everybody in the car. This is a real shame, because the Cooper S with the John Cooper Works tuning kit does like to go, so they will probably have plenty to nag about. The test car was fitted with the six-speed automatic transmission (one retro item I’d really have liked to see here is the manual gearbox), which offers steering wheel-mounted paddles for gearshifting. The power does make itself known through the steering with a little tug at the wheel when you floor it — torque-steer in motoring parlance. Otherwise, the Mini is a joy to pilot. The power is strong, the handling is sharp and the braking performance up to scratch. It is a surprise just how rapidly this thing gets along. One price you pay for all this is a firm ride, but if you want a limousine, maybe you should be looking elsewhere. Oh, and the manual gearbox would give it slightly more speed, and a more “in control” feel. Still, the original Mini had an anti-establishment rebelliousness about it, and if equipped with the John Cooper Works tuning kit, so does this one. It doesn’t matter if you find some of the retro details contrived; the Cooper S essentially follows the spirit of the original car, and that’s nothing but a E good thing. Tony Watts is a freelance writer with a passion for fast cars and bikes
THE WEEK OF MARCH 3, 2008
Rolex’s gift to the arts
Help for rising artists to reach full potential
Suffering for sake Keeping a dying art alive
Maximising the Mini
Mini Cooper S gets a lift
Sparking a
REVOLUTION Concord’s president Vincent Perriard on being given carte blanche in reinventing the brand
PW2 • THEEDGE SINGAPORE
| MARCH 3, 2008
PERSONAL WEALTH
SECTION EDITOR Kelvin Tan ([email protected]) COPY-EDITING DESK Elaine Lim, Evelyn Tung, Ng Bee Cheng, James Chong PHOTO EDITOR Samuel Isaac Chua ([email protected]) PHOTOJOURNALIST Gwyneth Yeo ([email protected]) EDITORIAL COORDINATOR Rahayu Mohamad ([email protected]) DESIGN DESK Tan Siew Ching, Christine Ong, Chan Yoke Lin, Jamy Gan ADVERTISING + MARKETING REGIONAL GENERAL MANAGER | Edward Stanislaus ([email protected]) SENIOR MANAGER | Colin Tan ([email protected]) MANAGERS | Simon Wong ([email protected]) Cecilia Kay ([email protected]) Jeffrey Wong ([email protected]) Windy Tan ([email protected]) Faith Teo ([email protected]) Julia Tan ([email protected]) COORDINATOR | Nor Aisah Bte Asmain ([email protected]) MALAYSIA REPRESENTATIVE | Helen John Corry ([email protected]) CIRCULATION-SUBSCRIPTIONS REGIONAL SENIOR MANAGER | Suresh Kumar ([email protected]) ASSISTANT MANAGER | Naziela Nasir ([email protected]) ASSISTANTS | Juliana Ibrahim ([email protected]) Iryanti Zainol ([email protected]) PUBLISHER The Edge Publishing Pte Ltd 150, Cecil Street #13-00 SINGAPORE 069543 TEL: (65) 6232 8622 FAX: (65) 6232 8620 PRINTER KHL Printing Co Pte Ltd 57 Loyang Drive Singapore 508968 Tel: (65) 6543 2222 Fax: (65) 6545 3333 We welcome your comments and criticism. Send your letters to The Edge, Raffles City Post Office PO Box 218 Singapore 911708 Tel: (65) 6232 8622 Fax: (65) 6232 8620 e-mail: [email protected] Pseudonyms are allowed but please state your full name, address and contact number for us to verify.
What makes Fidelity tick? GWYNETH YEO/THE EDGE SINGAPORE
EDITOR/REGIONAL MANAGING DIRECTOR Tan Boon Kean ([email protected])
| BY JOAN NG |
F
or the second year running, Fidelity Investments emerged tops at last week’s The EdgeLipper Singapore Fund Awards. The global fund management giant swept a total 10 awards, sharing the honours with Lion Capital Management, which also bagged the same number of awards. As one of the powerhouses of the global fund-management industry, with US$1.6 trillion ($2.25 trillion) in assets under management, Fidelity has attained a reputation of grooming and retaining top talent, embodied by legendary fund managers like Gerald Tsai and Peter Lynch. Part of that has come from allowing its fund managers relatively free rein and more flexibility than is found at other fund houses. “We give them the freedom to be themselves,” says global head of institutional investment Michael Gordon. “To express themselves as an individual within their funds.” Gordon, who joined Fidelity in Australia in 2000 and until recently held the position of chief investment officer, admits that there isn’t total freedom in certain aspects — such as the number of stocks a fund holds or the types of stocks that make up a portfolio, which are elements subject to a fund’s type or mandate. Since the 1990s, Fidelity has had to reduce some of the leeway it gives its managers to make big bets as those that backfired had hurt fund returns. “But they’re free to build the fund as they see fit,” he says. Most other fund houses would perhaps classify a growth manager or a value manager and buy or reject a stock on the basis of which profile it fits, but Fidelity doesn’t do that, Gordon explains. “The fund manager is free to formulate their own investment view, their own thoughts, their own thesis. So a lot of entrepreneurialism exists with the individual. Which I think is one of the reasons people stay with the firm, one of the reasons people like the firm.”
and you want to make sure you put them in the right position. If they’re good at attacking, you put them in an attacking position and then you make sure they’re behaving in accordance with their strengths.” This year will be a year in which those skills become all the more important. Global equity markets are sliding and the benchmark MSCI World Index is down 9.5% since the start of this year (as at Feb 20). A majority of experts are predicting a US recession that would spin off into a global bear market.
‘A long while to get through’
Gordon: There’s much more demand within Asia. We have supply shortages.
Right position Such flexibility does, however, create issues as to the point at which a manager needs to be reined in. For Gordon, there is no hard and fast rule. “It’s not like two years you’re on warning and three years you’re out,” he says. “I have taken action when a fund manager hasn’t underperformed… Yet there are times when we’ve got good fund managers who’ve underperformed for three years and we’ve done nothing.” Instead of taking just fund performance as a measure of a manager’s progress, Gordon says it’s important to look at specific behaviours that could affect the team, or are counter to an individual’s strengths. He recalls an incident where one fund manager began underperforming around the time he stopped sending out his thoughts to his team over email. “We told him, how about you get back and start writing again, and it worked. So it’s things like that. You look for patterns of behaviour that correlate with strong performance,” he says. “It’s a bit like coaching a sporting team. A good CIO knows his players’ strengths and weaknesses
“This is not a market correction [where you can say that] once the S&P gets to a particular level we’ll be fine. This is going to take a long while to get through,” says Gordon of the banking and housing crisis that has hit the US. “But the big difference between Asia and the US is debt. The US is saddled with it and Asia has none of it. And Asia knows what it’s like to go through a debt crisis. They went through one 10 years ago and that’s how painful it’s going to be for the US.” Gordon does believe that the Asian markets are in a much better position to ride out the difficult times. “When you look at it fundamentally, you think actually [the idea that Asian markets cannot decouple] is not right… There’s much more demand within Asia. We have supply shortages,” he says. With the exception of a few sectors that are exceptionally dependent on the US, Gordon doubts there will be a significant slowdown in Asia. “If the US is in trouble, Asian economies are in better condition than they’ve ever been. Since [the Asian financial] crisis, Asia now gets all the ticks: self-funded, huge saving ratios, massive foreign reserves. It’s in great shape,” he adds. Gordon believes that, globally, the investment community will eventually begin looking less towards the US for leadership and more towards Asia. “We’ve all spent most of our working lives thinking that [what’s in] the US is best practice and I think these are times E for questioning that. Particularly here in Asia.”
Driving returns with an aggressive and concentrated approach | BY KELVIN TAN |
One of the first things Mario Frontini did when he took over as portfolio manager of the Fidelity European Aggressive Fund last June was to cut the fund’s stock holdings by a third to approximately 60 names by selling the potential underperformers while increasing exposure to stocks that he has high convictions on. At end-2007, Frontini’s concentrated strategy seemed to have paid off after this fund turned in stellar returns of 13% (in euro terms), outpacing his fund sector average of 6.55%. Generating above-average gains, however, isn’t new to the 39-year-old Italian fund manager, who used to beat his benchmark every year when he ran the Fidelity’s Italian Fund from 2004 to mid-2007. The following are excerpts from an interview with Personal Wealth last week, in which Frontini talks about his investment style, strategies and stocks that he likes. His Fidelity European Aggressive Fund won two awards at last week’s The EdgeLipper Singapore Fund Awards 2008 for best fund in the European equity category over three- and five-years.
Personal Wealth: You seem to have adopted a more focused and concentrated approach to the running of the European Aggressive Fund. Tell us your rationale of doing that. And is that move primarily to boost performance? Mario Frontini: I have always run more concentrated portfolios in all previous mandates and I still do so. I tend to invest quite a lot of time with company management and analyse the industry dynamics and whenever I find a good investment idea, I would try to make the most of the benefits for the fund. That said, I am very focused on controlling risk and limiting the downside, should my investment case prove to be incorrect. In what other ways is your management style different from that of your predecessor? As with my predecessor, I am a bottom-up stock picker and I
look for opportunities. I believe it is essential to be constantly ahead of the market and be willing to take, at times, a contrarian view. I do not have a specific investment style as such, though I prefer companies that are trading below intrinsic asset value, where there is a valuation anomaly or market inefficiency, or they are undergoing change.
movements of macroeconomic indicators. During this recent period of volatility I have uncovered several interesting new ideas and purchased some stocks that have suffered as a result of the indiscriminate market sell-off rather than from any deterioration in their fundamentals.
Name us some stock names which you are bullish on and have the highest conviction over a 12-month period. I have conviction in [German steel producer] Thyssen Krupp, as I believe Frontini: I remain cautious that the fundamentals for the European on financials, given the steel sector are very good. The low uncertainty surrounding the current inventories and re-stocking should sector, and I do not currently translate into higher prices. The company find valuations compelling is also benefiting from a large investment plan in the US and Brazil and investors are not recognising Let’s talk about the European stock markets, which the strong growth in its technology and elevator divisions. I also think that the recent correction in luxury goods like most other markets, have been affected of companies, like Richemont, is unjustified and I have been late. What is your current strategy in this difficult buying this stock recently. I also like the deepwater drilling condition? sector and I would recommend Seadrill, a Norwegian Over recent months, volatility has remained very high, and this has created substantial uncertainty among professional company, which has a very modern fleet. investors and the general public. I see the current market Are you staying away from European banks and environment as offering interesting opportunities, and I financials at the moment? remain convinced that adherence to a clear and consistent I remain cautious on financials, given the uncertainty investment process should benefit the fund’s performance surrounding the sector, and I do not currently find in the medium term. valuations compelling, due to the heightened level of The overall outlook for the European economy is rather risk. I believe that the issues currently affecting the complex and difficult to assess. Therefore, it is not easy credit markets and beyond are having a significant to forecast how things will balance out over the coming impact on the financial sector. Of course, the health of months. As a result, I believe that I can add more value the financial sector has an impact on the rest of the by focusing on company fundamentals and spotting economy and I am wary of this. undervalued stocks, instead of slavishly following the Have you added more exposure to small or mid caps since taking charge or are most of your holdings still in the big-cap arena? The weighting in stocks with a market cap of under €5 billion [$10.56 billion] has risen over the past six months, while the weighting in stocks above a €20 billion market cap has been reduced somewhat, but this is primarily due to stock picking rather than an overt bias towards small caps.
PW4 • THEEDGE SINGAPORE
| MARCH 3, 2008
PERSONAL WEALTH
PICTURES: GWYNETH YEO/THE EDGE SINGAPORE
Lion Capital builds a reputation by sticking to processes | STORIES BY JOAN NG |
I
t is among the newest players in the fund management game. Yet Lion Capital Management has succeeded, for the third year running, at coming out among the front runners in this year’s The Edge-Lipper Singapore Fund Awards 2008. Formed in 2005 from a merger of OCBC Asset Management, the fund management arm of OCBC Bank, and Straits Lion Asset Management, the investment subsidiary of local insurer Great Eastern Life, the fund house won 10 awards, including a group award in the mixed asset category. Daniel Chan, the CEO and chief investment officer of Lion Capital, says he is “delighted” and “maybe a little surprised” with the results. After all, the firm has not been around for a long time. “And to be winning the same number of awards as Fidelity, which has many funds in Singapore, is a rare honour,” he adds. Fidelity also bagged 10 awards last week.
Putting faith in processes Chan believes that the wins are a testimonial of sorts to the stock-picking processes he has put in place at the firm. “I think this time we can say that we’re a little bit more confident that the wins reflect more of the Lion Capital resource, process and structure than the previous year,” he says. “We have always said that we try to institutionalise the process so that it’s not so people-dependent. [It’s about] having the right structure, the right process and the right approach to make it work.” Last year, Lion Capital lost two key fund managers: Hou Wey Fook, head of global equities, left the firm in May to take up the role of chief investment officer at ING Asia Pacific Bank; and in December, senior fund manager Kam Yoke Meng, who had been managing the award-winning Lion Capital Singapore/Malaysia Fund, departed for DBS Asset Management.
Chan: We have always said that we try to institutionalise the process so that it’s not so people-dependent
But Janet Liem, head of Asian equities at Lion Capital, says the departures had very little impact on the performance of the funds they were managing. “There is no star manager in Lion Capital. So when a fund does well or does badly, it is joint ownership for the entire team. The portfolio manager basically is the face for the fund, but the credit doesn’t go entirely to the portfolio manager,” Liem says. “With the departure of any one of us in the team, there should not be any change if our process is adhered to.” However, that’s not to say that the firm disregards the importance of retaining talent. “Our compensation policy factors are geared
towards retention of talent: paying a competitive salary and rewarding good performance. We have also introduced battle chest schemes to give them an incentive; sort of a stake in the firm,” Chan says.
Cloudy outlook but stick with Asia The trade secrets put in place at Lion Capital will be tested a fair bit this year. Since 2005, when Lion Capital was formed, global equity markets have been fairly strong. The MSCI World Index rose by about 40% between the start of 2005 and end-2007, and most equity funds have been performing well in general. But with the global freefall in markets of late, it will require
more from the company’s investment professionals to maintain its track record. Chan is well aware of this, but believes that some opportunities can be found if you look hard enough. “I think the outlook is still a little bit cloudy simply because of the scale of the credit problems that we are seeing; not just subprime but various other commercial mortgages, credit cards, auto loan receivables and so on. Mainly problems originating out of the US,” says Chan. “So, it looks like it’s still too early to say that we have seen everything and I think we haven’t really seen the full damage on the [US] economy.” Nevertheless, Chan also adds that fundamentals in Asia still look very strong. Corporate balance sheets, for instance, are still healthy. “The Asian markets have also had quite a correction, even in China and India. We are starting to see a lot of value emerging here and there,” he says. “So, although I think it’s hard to say where the bottom [of this banking and housing crisis is], if you invest on a bottom-up basis, and taking a long-term view, I would say this represents a buying opportunity.” In terms of specific geographical markets, Chan is most positive on China H-shares, which he says are looking particularly attractive at the moment, especially with the recent sell-down. Year-to-date, the Hang Seng Index is down 16.3%. Markets that Chan isn’t too keen on are South Korea and India. Although the South Korean market has a price-to-earnings multiple of about 12 times, making it appear cheap, he believes that its dependence on the rather cyclical heavy sectors is a weakness. Meanwhile in India, earnings expectations are a little too high for his liking. Chan assures investors that even with the market turmoil Lion Capital will keep hunting for investment opportunities. “With all this selldown, it can only represent fair value E opportunities for us.”
New manager rebalances Singapore/ Malaysia fund
Wong: Sectors that we prefer right now are telcos and transport for their defensive nature
With the departure of its portfolio manager Kam Yoke Meng, the Lion Capital Singapore/Malaysia Fund now has a new fund manager. But Kelvin Wong, who joined Lion Capital in January, has a tough act to follow. After all, the fund, which is among the oldest of Singapore’s unit trusts, has been consistently winning awards year after year. This year, it secured an award in each of the individual fund categories for best performance: over three, five and 10 years. Wong, who has seven years of experience in equities and two years in corporate banking, says that there has not been any basic change in his approach to the fund. “I’ve looked at the portfolio and it’s a well run fund,” he says. “In terms of the number of stocks, right now we have slightly under 40, so it’s a relatively well diversified but also in a way concentrated portfolio.” According to Wong, the only tweak he has made in the short time since he joined was to increase the country weightage of Malaysia in the portfolio. Previously, Malaysia made up less than 40% of the total fund portfolio. “I think
the short-term catalysts in Malaysia are there, what with the election year and the government pumping in money,” he says. Wong increased the weightage so that both Malaysia and Singapore weighed about evenly. “We’re also taking a look at our smallcap exposure. What with the uncertainty in the US, and being unsure of how long this is actually going to last, I’ve been looking at our small-cap exposure and just trimming it, especially those stocks that we’re a bit less comfortable with,” Wong adds. Brigette Goh, a portfolio manager at Lion Capital who specialises in Malaysian equities and has worked with the Singapore/Malaysia fund team for the last two years, says last year’s performance was helped significantly by the strong performance of the property and construction sector in Malaysia, which saw a lot of good news flow in 1H2007. “Another theme that was also structurally steady and took off very strongly last year was plantation and soft commodities,” she adds. Looking forward though, both Goh and
Wong believe that the Singapore market should outperform the Malaysian one. “Singapore is clearly showing a lot more value and it also offers a lot more choices,” Goh says. Wong also adds that the fund will have a slight tilt towards the defensive this year because of market uncertainties. “Sectors that we prefer right now are telcos and transport for their defensive nature.” Wong’s top picks are SMRT Corp and StarHub, which he says are rising- population plays. “StarHub should get the benefit in terms of a bigger addressable market, as well as a number portability issue in the second half, which may allow it to steal some market share from SingTel,” he says. And for SMRT, the growing population as well as the recently-announced government initiatives should lead to more people taking public transportation. Apart from these two stocks, Wong also likes DBS Group Holdings, which he says is currently undervalued in relation to its peers United Overseas Bank and Oversea-Chinese Banking Corp.
| MARCH 3, 2008 SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
PW6 • THEEDGE SINGAPORE
PERSONAL WEALTH
Shift to mixed assets
Tan Boon Kean (back row, second from left), editor and regional managing director of The Edge Singapore, with the winners of The Edge-Lipper Singapore Fund Awards 2008
As equities drop, investors search for safety | BY JOAN NG |
G
lobal fund giant Fidelity and local asset management powerhouse Lion Capital Management emerged tops at last week’s annual The Edge-Lipper Singapore Fund Awards 2008, scooping up 10 awards each. Runners-up AllianceBernstein and UOB Asset Management picked up seven awards and six awards respectively. Lion Capital, AllianceBernstein and UOB also bagged a group award each: Lion Capital for best performance in the mixed assets category, AllianceBernstein for the bond asset class and UOB for overall best performance among the locally registered fund houses. Deutsche Asset Management won the fourth group award for best performance in the equities asset class category, while also picking up two individual fund awards. The winners were presented their plaques at Reuters’ spanking-new office at One Raffle Quay last Thursday. The awards are jointly organised by The Edge Singapore and Lipper, a company wholly owned by Reuters. A total of 67 awards was given out to individual funds for performance across three broad categories: bonds, equities and mixed assets. One group award was also
presented for each category, and one award for overall performance across categories. Winning funds are selected based on the Lipper Leader format, which uses four major categories: consistent returns, total return, preservation and expenses. Kenneth Koh, head of research for Lipper’s Asia ex-Japan team, spoke briefly on the importance of using different categories to judge the performance of funds. “Not everyone would have the same requirements from a fund,” Koh explains, and the categories allow buyers to make choices based on their individual investment goals. While the individual fund awards help investors select particular funds, the group awards system is also helpful in boosting the position of a fund house. To qualify for the group awards, fund houses must have three distinct portfolios in each of the three asset classes. The winner is calculated based on the best average consistent returns over the last three years, which means that while a fund house may not win as many individual awards, a fairly consistent performance across portfolios and asset classes would allow it to stand out. “A fund house represents itself to investors not through just one fund, or one asset class, but across all its products,” Koh says. “What is important is for all the funds to be able to demonstrate con-
Top and bottom 10 Lipper global classifications for FY2007 by net fund flows ($ mil) INFLOWS
OUTFLOWS NET FLOW
Mixed asset SGD balanced Equity Asia Pacific ex Japan Money market SGD Bond SGD Equity China Equity Singapore Equity Greater China Equity sector natural resource Equity Malaysia/Singapore Equity global
1,432.37 1,270.57 638.22 591.00 520.58 469.12 439.07 364.10 318.13 317.42
LIPPER GLOBAL CLASSIFICATION
NET FLOW
Protected Equity Japan Equity emerging markets Europe Equity sector information technology Equity sector pharmaceuticals & health Guaranteed Equity sector real estate global Equity Europe small & mid cap Mixed asset SGD aggressive Equity sector real estate Europe
-1,121.75 -278.14 -212.70 -172.85 -116.79 -90.35 -82.21 -60.36 -55.86 -53.07
LIPPER/IMAS FUND FLOW REPORTS
LIPPER GLOBAL CLASSIFICATION
Singapore fund flows (1Q to 4Q2007) 2000
$ mil
1500
1Q2007 2Q2007 3Q2007 4Q2007
1000
sistent above-average performance in relation to their peer groups.”
a driver and I’m still trying to find out whether this trend is sustainable,” says Koh.
Healthy fund inflows
2008 to be challenging
Koh, who also spoke briefly about the trends in the fund management industry last year and the outlook for 2008, said 2007 saw a healthy amount of fund flows. In fact, fund flows rose to $5.6 billion last year, more than double the $2.1 billion in fund flows for 2006. Inflows were larger than outflows, amounting to $31.9 billion, versus $26.3 billion for outflows. The bulk of the money flowed through equity funds, which accounted for $3.8 billion, or about two-thirds of total fund flows. However, Koh also noted that while aggregate fund flows into equity funds were high, a lot of it also consisted of fund outflows. Total fund subscriptions amounted to $20.6 billion while redemptions stood at $16.7 billion. “It means a lot of people are actually using the market to trade and taking a more short-term view,” Koh says. “Of course, some of the fund houses may not be too happy, because they want long-term money; but there could be some investors, in fact there are investors, who take a short-term view and use equity funds for that purpose.” Another trend that Koh also pointed out was the continued weak fund flows coming in under the CPF Investment Scheme (CPFIS), which allows Singaporeans to invest portions of their CPF savings in approved unit trusts. CPFIS-approved funds recorded an aggregate outflow of $34.8 billion in 2007. However, this outflow is still less than the recorded outflow of $52.9 billion in 2006. The improvement was due to a sharp spike in inflows in 2H2007, which Koh says could be due to government policies introduced last year, such as investment restrictions on the CPF Ordinary Account (OA) monies. Indeed, come April, CPF members would no longer be able to invest the first $20,000 of their OA balances under the CPFIS. To beat the April deadline, when the restriction comes into effect, some members have already started scrambling to invest their OA monies in CPFIS products. “I’m not saying it’s
Koh sees the emerging markets in Asia as somewhat of a safe haven against market volatilities this year. Last year’s fund flows increasingly reflected that, with Equity Asia Pacific ex-Japan offerings recording an overall increase of $1.3 billion, ranked second among the fund classifications. With the volatility in the equities market likely to continue, however, there is no doubt that 2008 will be a tough year. Because of that, he believes, investor appetite for riskier investments is also shrinking. In 4Q2007, net flows into equity unit trusts slowed to $720 million from $1.7 billion in 3Q. Meanwhile, net flows in the mixed-asset class grew in 4Q2007 to $543.6 million, closing the gap with equities. In the short term, Koh believes it is unlikely that mixed asset funds will overtake equity funds in popularity. “Most Asians tend to be still, fundamentally, equity investors,” he says. However, he believes that this year will be a challenging one for most fund managers and fund houses, owing to market volatility. There will certainly be a great deal of cautiousness among investors. “That is why we will need to stay vigilant to maintain viability in the marketplace,” Koh says. “When markets are bad, there are always products that you can buy — a more conservative product, for instance. So, in that perspective, the industry still has room to move. What is important, then, is for the fund promoters to come up with innovative products to deliver returns and yet not compromise on risk. That’s where product innovation comes in.” Koh believes that since the local fund management industry experienced its boom at least a decade ago, there has been some stagnation in the market in terms of innovation and better products. He says this will have to change. “Obviously, it’s not always easy. Product development and innovation will take time,” he says. But when well executed, such innovaE tion is almost always rewarded.
CPF versus non-CPF net flows (1Q to 4Q2007) 1800
$ mil
1600 1400 CPF net flows Non-CPF net flows Total net flows
1200 1000 800
500
600 0
400 200
-500
0 -200
-1000
Bond
Equity
Mixed assets
Money market
Others
1Q2007
2Q2007
3Q2007
4Q2007
PW8 • THEEDGE SINGAPORE
| MARCH 3, 2008
PERSONAL WEALTH
FRANKLIN TEMPLETON
Templeton bond fund outperforms by betting against the greenback | BY KELVIN TAN |
G
iven the extensive travelling time Franklin Templeton’s Michael Hasenstab spends visiting countries, especially those in the developing world, you would have thought that he was part of the fund house’s globetrotting emerging markets equity team rather than fixedincome bond chief. Hasenstab, who co-directs all investment strategies within the International Fixed Income Group at Franklin Templeton, spends one third of his time on the road. Indeed, he is unlike many of the archetypal bond fund managers who prefer to do their fixed-income investing behind the desk, with the aid of complex quantitative models to evaluate the yield curves, direction of interest rates and currencies. Managing the Templeton Global Bond (A [Mdis] USD) Fund, which invests heavily in the government bonds of Asia, Latin America and Eastern Europe, Hasenstab believes that it is imperative to be on the ground when evaluating the economic, political and social aspects of these everchanging emerging countries. “Country visits are as important for us as company visits are for equity fund managers,” he points out. In recent years, Hasenstab’s investment approach seems to have paid off. Over the past five years, his fund — a winner of two awards at last week’s The Edge-Lipper Singapore Fund Awards 2008 for best fund in the global bonds category over a five- and 10-year period — has significantly outperformed all other global bond funds available for sale in Singapore after turning redhot returns of 32.28% versus average group gains of 11.6%. To know more about his winning ways and the outlook for global bonds, Personal Wealth recently spoke to Hasenstab, who holds a PhD in economics from the Australian National University and currently oversees bond assets in excess of US$22 billion ($30.83 billion). Here are excerpts from the interview. Personal Wealth: How do you manage to outpace most of your rivals and turn in such high double-digit returns for your bond fund in recent years? Michael Hasenstab: Our approach is to combine qualitative analysis of macroeconomic factors with sophisticated quantitative tools. We begin with an in-depth analysis of a country in order to understand its fundamentals and then complement a bottom-up analysis, with a top-down global perspective, that helps reveal potential catalysts that may drive a revaluation. We seek to identify opportunities within those countries, ultimately searching for value. Our unconstrained [non-benchmark] approach provides the flexibility to hold only the most attractive
Our approach is to combine qualitative analysis of macroeconomic factors with sophisticated quantitative tools — Hasenstab sources of alpha. Currency, interest rate, and credit exposure are evaluated and exploited independently in order to maximise risk-adjusted returns. The past two years have presented the fund with the opportunity to capitalise on several very important secular trends in the context of a largely benign global environment. The fund has taken advantage of the rebalancing of global growth towards developing economies by adding currency exposure to those rapidly growing economies. Asian currencies have largely benefited the fund performance over this period as have peripheral European currencies, which have benefited from euro-area convergence. To add to that, the fund benefited from having almost no exposure to the US dollar over the period. Further, the fund has only recently started adding duration exposure after only holding interest rate exposure in select economies during the period of strong growth and rising interest rates. As returns and risks go hand in hand, does it mean that your fund is riskier compared with other global bond funds? The fund’s high returns are much more a product of its fundamentals driven research and selective portfolio construction than they are due to holding risky assets. Our returns typically come from currency and interest rate changes
as well as security selection. Currency and interest rate returns are generally larger than the returns from credit exposure, and this has been true recently with currency exposure having been particularly beneficial. While it is true that individual assets generally compensate for higher risk with higher returns, the broad opportunity set available to the fund allows it to achieve high returns while maintaining broad diversification and high credit quality. In fact, the fund’s average credit rating has remained quite high, historically ranging from A to AA. What was your best strategy? How much return was gained by your fund with that single strategy and how long was your holding period? For the past several years, the fund has held almost no exposure to the US dollar. This allocation has been a central part of the fund’s strong performance as the US dollar has been weak, and it has allowed the fund to maintain exposure to a variety of appreciating currencies, particularly in Asia. Our view on the dollar has been based on the historically large and unsustainable, current account deficit of the US. We anticipated a shift in global growth and consumption away from the US and towards these developing economies, which have become the world’s producers. Declining interest rates in the US recently have benefited this
positioning even further. For example, the Malaysian ringgit appreciated 12.5% in 2006 and 2007 against the US dollar, the South Korean won rose 22% from the beginning of 2004 through 2006, and the Indian rupee appreciated 12.3% against the dollar in 2007 alone. Most strategists are still calling for an underweight position in the fixed-income asset class this year, saying that bonds in general will produce very low real returns in 2008. Do you agree that the current environment is difficult for global bonds to generate respectable returns? Overall, we remain positive on the global fixed-income asset class given attractive valuations in various segments of our investment opportunity set. Often, increased market volatility leads to the mispricing of assets, and creates opportunities for the fund. Our flexible strategy allows us to take advantage of changing macro themes, and allows the fund to provide alpha and diversification in any stage of the business cycle. The fund is currently positioned for a likely US-led global slowdown. In addition to extending duration to benefit from changes in growth and inflation in countries that are likely to be strongly impacted by the US downturn such as South Korea and Mexico, we can also position the fund in defensive currency positions and where fund restrictions permit, through instruments such as credit default swaps, which provide credit protection. One example of our defensive currency positioning is increasing exposure to currencies that were used to fund carry trades, such as the Japanese yen or Swiss franc, which benefit from rising volatility in global markets. The yen and franc offer strong fundamental value as both countries run large current account surpluses and interest rate differentials with other countries that are likely to decline as concerns over growth persist into 2008. Additionally, we can take relative currency positions to benefit from currency exposure even in an environment of a strong base currency. Going long on one currency against another is a way to benefit from deteriorating fundamentals in one country against strong fundamentals in another that is relatively insulated from external influences. What other strategies are you adopting and what type of bonds are you betting on at the moment? While US Treasuries performed well over the past few months, we remain attentive to valuations. We see value outside of the US and in markets where yields have lagged the rally in the US. We also see value in peripheral bond markets, particularly those that backed up from risk aversion in 2H2007 and where the macroeco-
nomic backdrop favours lower yields through potential interest rate easing. Additionally, we are interested in European markets, where recoupling could have a larger impact on aggregate growth, given the limited room for a quick fiscal policy response and limited capacity for households to pick up the slack. We aim to take advantage of market weakness to add to existing positions and will continue to look for attractive valuations as opportunities arise amid shifts in the global economy. We continue to be negative on the US dollar due to the large balance-of-payment imbalances. Historical examples suggest this requires a multiyear weak dollar cycle to correct. This dollar-weakening cycle began in 2002 and by end-2007, saw only marginal improvement in the US current account deficit. As the growth momentum in the US slows, we would expect some cyclical improvement in the current account via low import growth. However, the larger issue in our view is the magnitude of the current account deficit, which must still be financed to prevent dollar weakness by foreign capital at a time when corporate profits are under pressure and the US Federal Reserve is easing interest rates. Additionally, the interest rate advantage over other developed economies is narrowing and will likely turn negative this year. As a result, the US dollar is still vulnerable, and its ability to attract capital flows to match the size of the current account is deteriorating. Longer-term trends also work against the US dollar, including foreign exchange reserve diversification. While we are now bearish on the US dollar, the cycle will eventually turn. The Templeton Global Bond Fund has the ability to hedge fully back into the US dollar and we anticipate a time in the short to medium term when US dollar exposure will be increased. Among non-dollar currencies, the rebalancing of the global economy favours Asia. While low import growth in the US and double-digit export growth has marginally improved the US current account deficit over the last several quarters, bilateral balances show that underlying imbalances persist. This likely reflects the strong competitive positioning of Asian economies along with the managed-currency approach of many Asian countries. We also view peripheral European currencies as having more attractive valuations than the euro as many of those economies are experiencing higher growth and are more competitive. Finally, we paired the yen and Swiss franc against higher-yielding currencies that are likely to suffer in periods of volatility. These exposures have helped minimise risk and have benefited performance through the difficult period of the last sevE eral months.
PERSONAL WEALTH
Betting on a turnaround in Chinese equities | BY KELVIN TAN |
A
fter delivering impressive annual gains of 73.74% and 64.88% in 2006 and 2007, respectively, Jiang Yiqian and Craig Chen — co-portfolio managers of the DWS China Equity Fund — now face the challenge of steering their fund into positive territory in 2008, after being hit by the severe global stock market rout in January. Although their fund is currently 18.8% in the red for the year as at Feb 26, the managers from DWS, which is the retail fund management arm of Deutsche Asset Management, remain confident of turning their performance around over the next 10 months. “We expect positive gains in 2008, for Chinese equities,” asserts Jiang. She points out that earnings growth for Chinese stocks is expected to exceed 20% this year. And with ongoing mergers and acquisitions/restructuring activities, the strengthening of the remimbi coupled with strong economic growth in China, there is no reason why Chinese stocks would continue to stay in negative territory, says Jiang, who has 11 years of investment experience. Sharing that optimism, Chen points out that valuations of China-related stocks — especially Hong Kong-listed H-shares and red chips, which were “oversold” recently — have now come down to reasonable levels and are looking to be good value. “Valuations of China stocks have become very attractive after the recent correction, trading at around 14 times 2008 price-toearnings ratio with expected earnings growth of over 20% this year,” beams the fund manager, who has 12 years of investment experience. “We expect Chinese companies to deliver strong earnings growth during the annual results season, which should help ease some of the current market concerns,” he adds. The DWS China Equity Fund, which won an award for the best fund in the China equity fund category at last week’s The Edge-Lipper Singapore Fund Awards 2008, currently has assets of 86.8% invested in H-shares and red chips, 3.5% in mainland China B shares, 4.8% in Singapore-listed Chinese companies and 2.5% in Hong Kong-listed firms. In recent weeks, the DWS fund managers reveal that they have been taking advantage of the market correction to buy into Chinese companies in the railway construction, agriculture, and alternative energy sectors. “These sectors are less affected by the government’s austerity measures or global economic slowdown,” says Jiang. In addition, she points out that her team has revised the weightings in banks from “underweight” to “neutral”, adding that the sector was oversold on concerns over credit tightening. At the moment, the DWS fund managers like China stocks such as the attractively valued banking counter ICBC, telecom firm China Telecom (a key beneficiary of telecom industry restructuring and 3G licensing), and fertiliser distributor Sinofert (an agriculture play that is benefiting from increasing demand for fertilizer in China). Looking ahead, Chen says a prolonged recession in the US, and high inflation in China, currently pose the biggest risks for Chinese equities. “On the domestic front, persistent inflationary pressure would be a negative factor. The government may impose more price controls or tightening measures if the CPI [consumer price index] continues to rise.” Nevertheless, he believes that China’s CPI would start to drop in 2Q due to the easing of supE ply shortages.
Investors monitor stock quotes at a securities trading firm in Shanghai, China, on Jan 22, when stocks tumbled, with the benchmark index posting its biggest two-day decline on record
BLOOMBERG
THEEDGE SINGAPORE | MARCH 3, 2008 • PW9
PW10 • THEEDGE SINGAPORE
| MARCH 3, 2008
PERSONAL WEALTH
BLOOMBERG
Fears of US recession could spur interest in defensive healthcare stocks | BY KELVIN TAN |
T
he global healthcare equity sector hasn’t had the best of times over the past two years. Dragged down by patent expirations of blockbuster drugs, a more stringent US Food and Drug Administration (FDA), which has scaled back and delayed approvals of new drugs, as well as high-profile billion dollar lawsuits against big pharmaceutical companies, the MSCI World Healthcare Index — a barometer of healthcare stocks around the world — has been on a downtrend since early last year. Despite the cloudy outlook in the US-centric global healthcare sector, which could get darker if the drug safety focused Democratic Party wins the coming US presidential election, Mae Leong — fund manager of United Global Healthcare Fund — is seeing a silver lining emerging from the anaemic sector. (Globally, the US is the largest consumer of healthcare goods and services.) Like most investment specialists in the healthcare sector, Leong reckons that drug companies could do well relative to other stocks in 2008 if the US economy goes into recession. Indeed, people would still require medicines and healthcare in good or bad times in the economic cycle. “The healthcare sector, which is often perceived as defensive, [could outperform] as investors become more concerned about the possibilities of a global recession,” says the fund manager from UOB Asset Management (UOBAM). The United Global Healthcare Fund won two awards at last week’s The Edge-Lipper Singapore Fund Awards 2008 for the best fund in the equity sector pharmaceuticals and health care category over a three- and five-year period.
Near-term opportunities At the end of last year, Leong’s fund — relative to the MSCI Healthcare Index — had taken an underweight position in pharmaceutical companies while overweighting biotechnology companies and those in medical products and healthcare services. With the broad sell-off in drug companies last year, Leong is beginning to see “nearterm opportunities” in well-diversified pharmaceutical companies with strong drug pipelines, as well as companies “with favourable earnings trend driven by significant cost restructuring, patent victories and emerging pipelines”. “Selected US, European and Japanese pharmaceuticals with strong pipelines and good costs controls would continue to see strong sales growth and improving operating margins,” she adds. The rise of mergers and acquisitions (M&A) in the pharmaceutical industry is also seen as beneficiary for the stock prices of drug companies. “Pharmaceutical companies are continuing to merge to create cost synergies, diversify and enhance their drug pipeline, form alliances to enhance their research and development capabilities and acquire biotech companies to improve their drug pipeline,” Leong observes. One of Leong’s best performing stocks of last year that benefited from M&A was US drug company Medimmune, which was delisted after it was acquired by UK pharmaceutical giant AstraZeneca. The share price of Medimmune almost doubled from early 2007 to June last year, after it was bought over by AstraZeneca at a significant premium. Leong, whose fund had small holdings in Singapore- listed healthcare stocks such as Eu Yan Sang International, LMA International and Parkway Holdings last year, declined to talk about stock names. Besides pharmaceuticals, she also sees opportunities in the medical technology sector. She points out that companies in the sector tend to hold up well in economic downturns as they are less exposed to consumer discretionary spending. At the same time, these companies — unlike pharmaceuticals — are not subjected to the threats of generic companies taking market share over their products and pipeline problems, she adds.
Two main trends supporting the long-term investment case for healthcare are demographics and technological innovation
trounced its rivals by a wide margin in terms of performance. For instance, over the past five years (ended Feb 15), the fund delivered gains of 78.4%, which are more than twice of that of the average gains of 36.24% in the healthcare fund sector. Lion Capital Global Healthcare Investment A Fund was a distant second, achieving a return of 39.67% over the same period. (See Table 1 for more information on the performance of retail healthcare-focused unit trusts sold to investors in Singapore.) Leong attributes the strong performance of her bottom-up stock-focused fund to a “value style” investment approach within the growth sector of healthcare, which rides on SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
A consistent performer Over the past three and five years, the United Global Healthcare Fund, leveraging on the expertise of Boston-based institutional fund management firm Wellington Management, the sub-adviser to the fund, has consistently
Top 10 Holdings (As at Dec 31, 2007) Forest Laboratories Schering Plough Corp Eli Lilly UnitedHealth Group Mckesson Corp Shionogi Eisai Co Sanofi Aventis Medtronic ST Jude Medical
agnostics, medical devices, surgical practices and in the study of the human genome and its applications.”
Leong: The long-term case for global healthcare investing is strong
powerful secular growth trends such as ageing populations in developed countries and technological innovation. “The fund focuses on value investing in a growth industry, given its focus on fundamentals and valuation. Some may consider this to be a contrarian approach,” Leong quips. “As an example, for the pharmaceutical stocks, the biggest overhang has been ongoing patent lawsuits. We view this as merely a timing issue. As cases are ultimately decided, the market will remove the heavy discount being placed on the long-term earnings outlook,” explains the fund manager, who isn’t afraid to pick up fundamentally solid companies whose share prices have suffered unduly over the short-term.
Betting on a recovery Although the United Global Healthcare Fund, like many other healthcare-focused unit trusts, suffered negative performance last year, Leong, who is sanguine on the long-term prospects of the global healthcare sector, isn’t worried. “The long-term case for global healthcare investing is strong,” she says, adding that her fund generally “focuses on longer-term trends and drivers”. “Currently, there are two main trends supporting the long-term case for healthcare — demographics and technological innovation.” Leong says the positive trend in demographics is largely driven by the growing gray population around the world, longer life expectancy, a rise in chronic diseases and an increase in demand from non-US markets. “Technological innovation is also critical to the growth of the sector. It is at work in areas such as di-
Diversifying from the US
LIPPER
Table 1
Performance of Singapore-registered healthcare unit trusts RETURN % YTD
RETURN % 1 YEAR
RETURN % 3 YEARS
RETURN % 5 YEARS
12/31/2007 - 02/15/2008
02/ 15/2007 - 02/15/2008
02/15/2005 - 02/15/2008
02/14/2003 - 02/15/2008
NAME
VALUE
RANK
VALUE
RANK
VALUE
RANK
VALUE
RANK
Lion Capital Global Healthcare Investment A Fidelity Funds – Global Health Care A United Global Healthcare Fund AllianceBernstein — International Health Care A USD ABN AMRO Health Care A EUR DWS Invest Life Science LC Equity Sector Pharma & Health Average (6)
-7.80 -8.27 -5.31 -7.71 -7.84 -9.51 -7.74
3 5 1 2 4 6 6
-1.25 -10.45 -10.56 -11.87 -15.60 -15.78 -10.92
1 2 3 4 5 6 6
4.15 6.50 15.54 2.92 -4.39 -4.80 3.32
3 2 1 4 5 6 6
39.67 34.49 78.40 28.26 11.60 25.01 36.24
2 3 1 4 6 5 6
To reduce the risk of her fund to “US politics” on healthcare, the UOBAM fund manager has also recently started diversifying away from US holdings to those in Europe and Japan. “European and Japanese companies that have relatively low valuations and much lesser exposure to US political risks also look increasingly attractive on valuation grounds in 2008.” At the end of last year, the United Global Healthcare Fund had assets of 66.52% invested in the US, 11.59% in Japan, and 12.93% in Europe and the rest of the world. Looking ahead, the global pharmaceutical market, which reached US$603 billion in 2006, will continue to grow with emerging markets showing the highest average annual growth rate of 10% per annum, says Leong. She is expecting a turnaround in performance for the healthcare sector this year. According to the recent Russell Investment Group’s Investment Manager Outlook report released at the end of last year, the healthcare industry remains the second-most favoured sector behind technology with some 73% of fund E managers saying they are bullish on it.
PERSONAL WEALTH
Betting on a turnaround in Chinese equities | BY KELVIN TAN |
A
fter delivering impressive annual gains of 73.74% and 64.88% in 2006 and 2007, respectively, Jiang Yiqian and Craig Chen — co-portfolio managers of the DWS China Equity Fund — now face the challenge of steering their fund into positive territory in 2008, after being hit by the severe global stock market rout in January. Although their fund is currently 18.8% in the red for the year as at Feb 26, the managers from DWS, which is the retail fund management arm of Deutsche Asset Management, remain confident of turning their performance around over the next 10 months. “We expect positive gains in 2008, for Chinese equities,” asserts Jiang. She points out that earnings growth for Chinese stocks is expected to exceed 20% this year. And with ongoing mergers and acquisitions/restructuring activities, the strengthening of the remimbi coupled with strong economic growth in China, there is no reason why Chinese stocks would continue to stay in negative territory, says Jiang, who has 11 years of investment experience. Sharing that optimism, Chen points out that valuations of China-related stocks — especially Hong Kong-listed H-shares and red chips, which were “oversold” recently — have now come down to reasonable levels and are looking to be good value. “Valuations of China stocks have become very attractive after the recent correction, trading at around 14 times 2008 price-toearnings ratio with expected earnings growth of over 20% this year,” beams the fund manager, who has 12 years of investment experience. “We expect Chinese companies to deliver strong earnings growth during the annual results season, which should help ease some of the current market concerns,” he adds. The DWS China Equity Fund, which won an award for the best fund in the China equity fund category at last week’s The Edge-Lipper Singapore Fund Awards 2008, currently has assets of 86.8% invested in H-shares and red chips, 3.5% in mainland China B shares, 4.8% in Singapore-listed Chinese companies and 2.5% in Hong Kong-listed firms. In recent weeks, the DWS fund managers reveal that they have been taking advantage of the market correction to buy into Chinese companies in the railway construction, agriculture, and alternative energy sectors. “These sectors are less affected by the government’s austerity measures or global economic slowdown,” says Jiang. In addition, she points out that her team has revised the weightings in banks from “underweight” to “neutral”, adding that the sector was oversold on concerns over credit tightening. At the moment, the DWS fund managers like China stocks such as the attractively valued banking counter ICBC, telecom firm China Telecom (a key beneficiary of telecom industry restructuring and 3G licensing), and fertiliser distributor Sinofert (an agriculture play that is benefiting from increasing demand for fertilizer in China). Looking ahead, Chen says a prolonged recession in the US, and high inflation in China, currently pose the biggest risks for Chinese equities. “On the domestic front, persistent inflationary pressure would be a negative factor. The government may impose more price controls or tightening measures if the CPI [consumer price index] continues to rise.” Nevertheless, he believes that China’s CPI would start to drop in 2Q due to the easing of supE ply shortages.
Investors monitor stock quotes at a securities trading firm in Shanghai, China, on Jan 22, when stocks tumbled, with the benchmark index posting its biggest two-day decline on record
BLOOMBERG
THEEDGE SINGAPORE | MARCH 3, 2008 • PW11
PW12 • THEEDGE SINGAPORE
| MARCH 3, 2008
PERSONAL WEALTH
Reuters Support: (1 800) 776 7188 Dealing Code HELP | Customer zone: www.reuters.com/customers | Product info: www.reuters.com/productinfo
Avenue Capital takes hits, but sees opportunities in distressed debts
HEDGE FUND WATCH
REUTERS
Singapore-registered funds
fload assets to raise money to meet investor redemptions. “If we can buy what we think ew York-based Aveare world-class companies at cheap nue Capital Group, the valuations, we will do that,” LasUS$20 billion ($28.13 ry points out. “But we will have billion) hedge fund some mark-to-market hits,” meangroup led by investor ing portfolio markdowns as asMarc Lasry, took some hits in sets sink lower. “Over the next January amid the market turmoil, month or two, we’ll probably be but Lasry says he sees “phenomflat to up a little.” enal opportunities” this year for Indeed, January was not kind Avenue’s distressed-debt investto Avenue, although it performed ment strategy. better than comparable indices In a recent interview, Lasry also for its strategies. The US$500 says he’s not changing the firm’s million Avenue Investments LP health-care plan in response to critiand US$1.2 billion Avenue Intercism by his highest profile employ- Chelsea with her mother, Hillary, on the US presidential campaign national Ltd funds, for instance, ee, former first daughter Chelsea trail. Chelsea, who works at Avenue, had criticised the firm’s fell 2% and 2.46% respectively, Clinton. “I think we have a great health-care plan. the worst monthly performance health-care plan,” he adds. The hedge fund group was down 1% as in January, but we will end up doing for both since July 2002, according to the investor letter. That compares favourably to 2.5% in its major strategies in Europe extremely well.” Lasry isn’t alone in his optimism for with the Altman Combined Index, which and the US, according to a letter Avenue sent to investors last week that was ob- distressed debt investing. Bruce Richards, values bank debt, which fell 2.9% in Janhead of the US$11 billion hedge fund group uary and the Credit Suisse Distressed Intained by Reuters. Lasry declined to confirm performance Marathon Asset Management, told an in- dex, which fell 12.23%. Outside the office, Lasry is a big Demonumbers, citing regulatory restrictions. But vestor conference last month that dishe acknowledged that the firm suffered tressed investing has become “a trillion cratic Party supporter and is backing Hila rare down month in January as global dollar-plus opportunity”, driven by the lary Clinton, whom he predicts will win the Democratic nomination. debt and equity markets swooned in re- meltdown in global credit markets. And the amount of money raised for In 2006, the firm hired Chelsea Clinton sponse to a broad credit pullback. For Lasry, who started his firm in 1995, distressed-investing hedge funds ballooned as an associate, although the move recentthe prospect of a recession is good news from an estimated US$70 billion in 2006 to ly drew some unwanted attention to the for Avenue and a growing group of oth- US$105 billion in 2007, according to indus- firm. The younger Clinton, on leave camer hedge funds that buy corporate bank try tracker Hedge Fund Research, a trend paigning for her mother, suggested that she is “not happy” with her employerand bond debt that has fallen well below that experts say is likely to continue. But Lasry said it won’t always be smooth provided health care at Avenue, accord“par”, or its issue price. “When the markets are in disloca- sailing generating returns in choppy mar- ing to media reports. Lasry appeared to take Chelsea’s words tion and things go bad, that ends up be- kets, even when the firm sees major buying good for us,” says Lasry, who said he ing opportunities in debt that is trading with humour and says he has no plans to change the firm’s medical plan. He adds continues to raise money from investors at 50% or 60% of its par value. Sometimes, he says, the marks push he wholeheartedly supported Chelsea, looking to jack up their allocations to the strategy. “As the economy goes into re- such securities even lower as faltering, calling her “exceptionally talented and E cession, we’ll take some short-term hits, leveraged hedge funds scramble to of- incredibly smart”.
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-31.93
Endeavor LLC
-29.63
CITIC Capital China Plus Ltd
-28.56
Lucerne Mid-Cap Offshore Ltd
-27.97
Wellchamp Ltd
-27.91
Pictet Targeted Fund 2-Global Value-P
-27.62
Source: Reuters/Lipper Fund performance as at Jan 31, 2008
Note: The hedge funds registered in Singapore are sold generally to accredited investors who are required to have a net worth of at least $2 million or an annual net income of $300,000. Investors should consult their financial advisers before investing in these alternative investment funds.
N
Another hedge fund blows up
Funds sue Yahoo over Microsoft rebuff | BY GINA KEATING |
D
B Zwirn & Co, a US$5 billion ($7 billion) hedge fund group managed by investor Daniel Zwirn, will liquidate its two largest hedge funds after investors demanded some US$2 billion in withdrawals, a person familiar with the situation said last week. The New York-based firm told investors in a letter on Feb 21 that it would sell assets in two funds, its Special Opportunities Fund and a sister offshore fund, which hold about US$4 billion combined, according to the source. The investors’ redemptions come after the firm disclosed that it faced questions from its auditors about its accounting for operational expenses, the source adds. The firm said it may take years to liquidate the funds, because much of the holdings are illiquid assets, such as private loans, derivatives and other thinly traded assets, the source says. The liquidation is a blow to Zwirn, who was previously a senior portfolio manager of the Special Opportunities Group of Highbridge Capital Management, which is majority owned by JPMorgan Chase & Co. Zwirn was also previously a portfolio manager with MSD Capital LP, the private investment firm of Dell Inc founder Michael Dell. “Anytime a fund reportedly is losing 80% of its assets, it calls into question how sustainable the firm is on a continuing basis,” said Daniel Farkas, a hedge fund analyst at Morningstar Inc. “But things are still playing out so it’s E too early to say.”
T
wo Detroit pension funds sued Yahoo Inc and its board over a week ago for rejecting Microsoft Corp’s unsolicited US$41.2 billion ($57.73 billion) offer in a sign of growing shareholder frustration with the online search and media company. The proposed class action, filed by veteran shareholder litigation firm Bernstein Litowitz Berger & Grossman, takes Yahoo directors to task for spurning the Feb 1 offer and “pursuing all manner of value-destructive third-party deals”. The two plaintiffs, Detroit’s Police and Fire Retirement System and General Retirement System, are concerned about news reports of a “potential imminent deal” sought by the Yahoo board with media conglomerate News Corp or Time Warner Inc’s AOL that would not require a shareholder vote. The plaintiffs asked a Delaware Chancery Court to block the Yahoo board from completing any such transaction with those companies, to force it to reconsider Microsoft’s offer, and to block it from implementing defensive measures that would render the company unattractive to potential buyers. Lawsuits by Yahoo shareholders have multiplied in the wake of Yahoo’s Feb 11 refusal to entertain the offer, which represented a 62% premium over Yahoo’s share price. Yahoo said at the time the bid substantially undervalues the company, failing to take into account its 500 million users worldwide, investments in its advertising platform and lucrative overseas holdings. Microsoft has yet to show signs it would raise its offer. Before the offer, Yahoo’s share price had dropped 46% since October as it struggled to compete with Internet search leader E Google Inc. — Compiled from Reuters
THEEDGE SINGAPORE | MARCH 3, 2008 • PW13
PERSONAL WEALTH
PICTURES: BLOOMBERG
‘Low-teen gains’ expected from BRIC markets | BY KELVIN TAN |
D
espite recent years’ strong run-up in the stock markets of Brazil, Russia, India and China (BRIC), which are the biggest and fastest-growing economies of the developing world, the market upswing for these four red-hot nations is still at an early stage, says Nick Timberlake, fund manager of the world’s first BRIC mutual fund, the HSBC GIF BRIC Freestyle, which made its debut in late 2004. “In the long run, the drivers for growth in the BRIC economies remain as they were before, with strong and sustainable GDP growth, political and fiscal reform and with more and more companies listing on their stock exchanges,” says Timberlake, who is also HSBC Investments’ head of global emerging markets (GEM), in a recent interview with Personal Wealth. “It is true to say that each BRIC country has its own cycle of development and is at different points on it but the fact is that all four are at the earlier points in their ‘emerging growth’ cycles.” The BRIC fund generated high-octane returns of 40%, 44.5% and 47.6% in 2005, 2006 and 2007 respectively. Last week, the HSBC GIF BRIC Freestyle (M1C USD) Fund, which has almost a third of its assets invested in Russia stocks in oil-andgas names Gazprom and Lukoil Oil as well as banks such as Sberbank, won an award for the best fund in the global emerging markets equity category over a three-year period at The Edge-Lipper Singapore Fund Awards 2008.
Russia — in the eyes of the HSBC head of global emerging markets — looks to be most attractive after the recent downturn in global equities
‘In buying territory’
COUNTRY
Russia Brazil China India
% OF FUND’S ASSETS*
29.4 25.7 22.7 20.4
*As at Jan 31, 2008
Top 10 holdings (as at Dec 31, SECURITIES
Petroleo Brasileiro ADR Gazprom ELN China Mobile Lukoil ADR Sherbank of Russia Jindal Steel & Power Novatek GDR Yanzhou Coal Mining Vimpelcom ADR Gazprom ADR
HOLDING (%)
8.08 6.11 4.20 3.16 2.83 2.72 2.62 2.47 2.28 2.25
Tapping expertise of specialist fund managers
As lead manager for the HSBC BRIC fund, Timberlake’s main job is to decide how much to allocate to each of the BRIC markets. The stockpicking process, on the other hand, is taken care of by four specialist fund managers: Luiz Ribeiro, a Brazilian equity expert based in São Paulo; Douglas Helfer, who runs the Russian portfolio from London; Sanjiv Duggal, a Singapore-based manager specialising in Indian equities; and Richard Wong, 2007) who manages Chinese INDUSTRY equities in Hong Kong. Oil & gas producers All four managers have Oil & gas producers more than 10 years’ inMobile telecom vestment experience in Oil & gas producers their respective markets. Bank “In addition, each fund Industrial metals manager has considerOil & gas producers able support from the Mining Halbis network of anaMobile telecom lysts and from the widOil & gas producers er HSBC network as a whole,” Timberlake says. HSBC INVESTMENTS
Country allocation for HSBC GIF BRIC Freestyle Fund
HSBC INVESTMENTS
Although equity prices of all BRIC markets, with the exception of Brazil, are currently in the red for the year after January’s market rout, the HSBC emerging market fund manager is still confident that equities in the BRIC markets “should make upward progress again” this year, unless there is a sharp US recession. “However, the markets are volatile at present and sensitive to news. Although we expect GEM equities to have a positive year and to beat developed markets, it is not possible to say to what extent,” says Timberlake, who oversees US$5.3 billion ($7.4 billion) worth of emerging-market assets.
Although a US recession would affect the BRIC economies, he believes the negative impact would be limited because of the robust GDP growth exhibited by the BRIC nations. Companies there such as those in the domestic consumer-related sectors, which are less dependent on global growth, would still be able to grow their earnings, even if the US goes into a recession, he argues. “The recent volatility has thrown up some interesting opportunities. Markets have started to price in a mild recession in US and investor surveys are unanimously bearish. History shows that when everyone agrees on the outlook, it usually pays to take the opposite view. That’s why we are now in buying territory again,” Timberlake says. Doubtless, gains in 2008 for the BRIC markets will moderate compared with previous years. But with earnings per share (EPS) growth in double-digit territory, low double-digit returns for this year should still be a possibility, he points out. “Given that EPS growth [in BRIC markets] is currently in the low teens of 12% to 13%, similar returns would normally be expected from equities,” he adds.
Timberlake: History shows that when everyone agrees on the outlook, it usually pays to take the opposite view. That’s why we are now in buying territory again.
Halbis is the active management specialist arm of the HSBC Group. To run a successful BRIC fund of such an approach, “communication is key”, says Timberlake, who gets together once a month with the four fund managers and one of the HSBC economists to discuss the risks and opportunities in the investment landscape of the BRIC markets. After the discussion, a target asset allocation would be derived from “an appraisal of the relative merits of the markets to each other”, he explains. “This is the clear differentiator of our fund from the rest of its competitors. The process is a marriage of top-down and bottom-up stock selection, which has proved itself since the fund was launched.”
Most bullish on Russia At the moment, among the four BRIC markets, Russia — in the eyes of the HSBC head of global emerging markets — looks to be most attractive after the recent downturn in global equities. Last month, the Russian equity market fell by more than 16%, underperforming the broader emerging markets universe. “Russian equities, following the January sell-off, are again some of the cheapest and fastest-growing in the emerging world and present an outstanding long-term investment opportunity,” Timberlake says. He believes that Russia’s economic growth
is accelerating, driven by high levels of public and private investment, liberalisation and consumption. Last year, GDP numbers for Russia exceeded US$1 trillion after growing a healthy 8.1% from the previous year. “We continue to believe the dramatic slowdown in the US economy will have little direct effect on Russian economic and corporate profits growth,” he adds. Timberlake is also sanguine on the prospects of Indian equities, which he is “selectively buying on weakness”. “The sharp market correction of late has brought the Indian market to more reasonable valuation levels and our outlook for the market is positive,” he says, adding that the key issues to monitor in the Indian market are fiscal and monetary policy initiatives of the government to keep inflation under control and the “large new corporate capital-raising pipeline”, which still remains a concern. On the other hand, Timberlake is staying cautious on Brazil because of high inflation, which could lead to possible interest-rate hikes by its central bank. “The extent of the impact of the US slowdown on Brazil is still unclear and we believe that volatility will persist in the coming weeks. However, inflation will be a major focus in the coming months and the market will be carefully watching the central bank and the risk of interest-rate increases,” he says. For China, inflation and monetary tightening are also the main concerns of Timberlake. “We believe sentiment [for Chinese equities] will remain cautious over the coming month on concern of further government tightening to curb inflation and the increased likelihood of lower global economic growth in 2008,” he explains. He expects inflation in China to remain high in 1Q but it should ease by 2H as food prices soften. “The Chinese government will likely maintain an overall tight credit policy over the coming months to bring inflation down ahead of the important National Peoples Congress meeting in March,” he says. At the moment, Timberlake says the Hong Kong H-shares, which his team “has been buying on weakness”, look to be of better value than mainland A-shares. “The H-share discount to A-shares has widened in January to 56%, owing to market actions, which leaves the Hong Kong-traded China shares even more attracE tive,” he adds.
PW14 • THEEDGE SINGAPORE
| MARCH 3, 2008
PERSONAL WEALTH
Tan (left) presenting Rajeev Demello, head of Singapore operations at Western Asset Management, with the award for Best Fund Over Three Years — Bond Asia-Pacific
Kenneth Koh (left), head of research for Asia ex-Japan at Lipper, presenting Ernesto Bettoni, global product specialist at ABN AMRO Asset Management, with the award for Best Fund Over Three Years — Bond Emerging Markets Global
Darren Duffy (left), vice-president and global head of production at Lipper, presenting Teo Chon Kiat, vice-president at DBS Asset Management, with the award for Best Fund Over Three Years — Equity Global Small and Mid Caps
Tan Boon Kean (left), editor and regional managing director of The Edge Singapore, presenting William Tan, head of sales at Templeton Asset Management, with the award for Best Fund Over Five Years — Bond Global
Tan (left) presenting Daniel Chan, CEO and chief investment officer (CIO) at Lion Capital Management, with the award for Best Fund Over Three Years — Equity Malaysia and Singapore
Koh (left) presenting Tan Kheng Lai, managing director of AIG Global Investment (Singapore), with the award for Best Fund Over Three Years — Bond Singapore Dollar
Duffy (left) presenting Andrew Kwek, CEO Singapore of Deutsche Asset Management (Asia), with the award for Best Fund Over Three Years — Bond Global
Tan (left) presenting Tan Su Yin, director for marketing & sales distribution at Henderson Global Investors Singapore, with the award for Best Fund Over Five Years — Equity Sector Information Technology
Edward Haddad (left), senior company officer, ASEAN at Reuters Singapore, presenting Suraj Mishra, CEO of Prudential Asset Management Singapore, with the award for Best Fund Over Three Years — Equity Europe Small and Mid Caps
Koh (left) presenting Dokyoung Lee, senior portfolio manager at AllianceBernstein, with the award for Best Fund Over Three Years — Bond US Dollar
Duffy (left) presenting Madeline Ho, managing director at Fidelity Investments (Singapore), with the award for Best Fund Over Three Years — Equity Asia-Pacific
Duffy (left) presenting Neo Shiang Yi, marketing & communications manager at First State Investments Singapore, with the award for Best Fund Over Three Years — Equity Sector Information Technology
And for B
Tan (left) presenting Serene Quek, head of retail business development at HSBS Investment Singapore, with the award for Best Fund Over Three Years — Equity Emerging Markets Global
Haddad (left) presenting Jeffrey Lee, managing director and CIO at Phillip Capital Management, with the award for Best Fund Over Five Years — Mixed Asset SGD Aggressive
Koh (left) presenting Yunis Lee, head of corporate communications at BNP Paribas (Singapore), with the award for Best Fund Over Five Years — Equity Sector Banks and Other Financials
Dok Best Man
Tan presenting Bas van Buuren, CEO of ING Investment Management Asia-Pacific, with the award for Best Fund Over Three Years — Bond Europe
Haddad presenting Albert Tse, head of retail sales at Schroder Investment Management Singapore, with the award for Best Fund Over Three Years — Equity Emerging Markets Latin America
Dan —M
Thio awa
THEEDGE SINGAPORE | MARCH 3, 2008 • PW15
PERSONAL WEALTH
Winners of The Edge-Lipper Singapore Fund Awards 2008 FUND AWARD SECTOR
FUND NAME
FUND COMPANY
Bond Asia Pacific
Legg Mason Asian Bond Trust
Legg Mason
Bond Emerging Markets Global
ABN AMRO Global Emerging Markets Bond (EUR) A
ABN AMRO Asset Management
Bond Europe
ING (L) Renta Fund Euromix Bond P Cap
ING Investment Management
Bond Global
DWS Lion Bond SGD
Deutsche Asset Management
Bond Singapore Dollar
AIG International Funds — Singapore Bond
AIG Global Investment Corp
Bond US Dollar
AllianceBernstein-American Income A USD
AllianceBernstein LP
Equity Asia Pacific
Fidelity Funds — Pacific A
Fidelity International
Equity Asia Pacific Ex Japan
Fidelity Funds — South East Asia A
Fidelity International
Equity China
DWS China Equity A SGD
Deutsche Asset Management
Equity Emerging Markets Global
HSBC GIF BRIC Freestyle M1C USD
HSBC Investments
Equity Emerging Markets Latin America
Schroder ISF Latin American A Acc
Schroder Asset Management
Equity Europe
Fidelity Funds — European Aggressive A
Fidelity International
Equity Europe Small and Mid Caps
M&G European Smaller Companies A Euro Acc
M&G Investment Management
Equity Eurozone
Fidelity Funds — Euro Blue Chip A
Fidelity International
Equity Global
UOB Optimix Contrarian Fund
UOB Asset Management
Equity Global Small and Mid Caps
Shenton Global Advantage
DBS Asset Management
Equity Greater China
ABN AMRO China Equity A USD
ABN AMRO Asset Management
Equity Japan
Lion Capital Japan Growth SGD
Lion Capital Management
Equity Korea
Lion Capital Korea SGD
Lion Capital Management
Best Fund Over Three Years
erast
nt for pore
enest aps
Haddad (left) presenting Thio Boon Kiat, CIO and managing director of UOB Asset Management, with the award for Best Fund Over Three Years — Mixed Asset SGD Aggressive.
Dokyoung Lee (centre), senior portfolio manager at AllianceBernstein, poses with the award for Best Group — Bond, with (from left) Tan, Haddad, Giri Muudeliar, executive director of Investment Management Association of Singapore, and Duffy
Lion Capital Singapore/Malaysia SGD
Lion Capital Management
Equity North America
M&G American A Euro Acc
M&G Investment Management
Equity Sector Banks and Other Financials
Fidelity Funds — Global Financial Services A
Fidelity International
Equity Sector Information Technology
First State Asia Innovation and Technology SGD
First State Investments
Equity Sector Pharmaceuticals and Health Care
United Global Healthcare Fund
UOB Asset Management
Equity Singapore
DWS Singapore Equity
Deutsche Asset Management
Equity Thailand
Lion Capital Thailand SGD
Lion Capital Management
Mixed Asset SGD Aggressive
United Millennium Trusts III
UOB Asset Management
Mixed Asset SGD Balanced
Schroder Asian Balanced A
Schroder Asset Management
Mixed Asset USD Balanced — Global
AllianceBernstein-Global Balanced A USD
AllianceBernstein LP
Bond Asia Pacific
Legg Mason Asian Bond Trust
Legg Mason
Bond Emerging Markets Global
ING (L) Renta Fund Emerging Mkts Debt (HC) P Cap
ING Investment Management
Bond Europe
AllianceBernstein-European Income A EUR
AllianceBernstein LP
Bond Global
Templeton Global Bond A MDis USD
Franklin Templeton Investments
Bond Singapore Dollar
AIG International Funds — Singapore Bond
AIG Global Investment Corp
Bond US Dollar
AllianceBernstein-American Income A USD
AllianceBernstein LP
Equity Asia Pacific
Fidelity Funds — Pacific A
Fidelity International
Equity Asia Pacific Ex Japan
Templeton Asian Growth A YDis USD
Franklin Templeton Investments
Equity Emerging Markets Global
Fidelity Funds — Emerging Markets A
Fidelity International
Best Fund Over Five Years
Andrew Kwek (centre), CEO Singapore of Deutsche Asset Management Asia, poses with the award for Best Group — Equity, with (from left) Tan, Haddad, Muudeliar and Duffy
Equity Emerging Markets Latin America
Schroder ISF Latin American A Acc
Schroder Asset Management
Equity Europe
Fidelity Funds — European Aggressive A
Fidelity International
Equity Europe Small and Mid Caps
M&G European Smaller Companies A Euro Acc
M&G Investment Management
Equity Eurozone
Schroder ISF EURO Active Value A Acc
Schroder Asset Management
Equity Global
M&G Global Basics A Euro Acc
M&G Investment Management
Equity Global Small and Mid Caps
Shenton Global Advantage
DBS Asset Management
Equity Greater China
Lion Capital China Growth SGD
Lion Capital Management
Equity Japan
Lion Capital Japan Growth SGD
Lion Capital Management
Equity Malaysia and Singapore
Lion Capital Singapore/Malaysia SGD
Lion Capital Management
Equity North America
Franklin US Opportunities A Acc USD
Franklin Templeton Investments
Equity Sector Banks and Other Financials
Parvest Europe Financials C
BNP Paribas Investment Partners
Equity Sector Information Technology
Henderson HF Global Technology A2 USD
Henderson Global Investors
Equity Sector Pharmaceuticals and Health Care
United Global Healthcare Fund
UOB Asset Management
Equity Singapore
Shenton Thrift
DBS Asset Management
Equity Thailand
Lion Capital Thailand SGD
Lion Capital Management
Mixed Asset SGD Aggressive
Phillip Growth
Phillip Capital Management
Mixed Asset SGD Balanced
AIG International Funds — Acorns of Asia Balanced
AIG Global Investment Corp
Bond Global
Templeton Global Bond A MDis USD
Franklin Templeton Investments
Bond US Dollar
AllianceBernstein-American Income A USD
AllianceBernstein LP
Equity Asia Pacific Ex Japan
United Asia Fund
UOB Asset Management
Equity Emerging Markets Global
ABN AMRO Global Emerging Markets Equity A USD
ABN AMRO Asset Management
Equity Europe
HSBC GIF European Equity PD EUR
HSBC Investments
Equity Global
AllianceBernstein-Global Growth Trends A USD
AllianceBernstein LP
Equity Greater China
AllianceBernstein-Greater China Portfolio A USD
AllianceBernstein LP
Equity Japan
Fidelity Funds — Japan Fund A
Fidelity International
Best Fund Over Ten Years
nd st
oor atin
Equity Malaysia and Singapore
Daniel Chan (centre), CEO and CIO at Lion Capital Management, poses with the award for Best Group — Mixed Asset, with (from left) Tan, Haddad, Muudeliar and Duffy
Equity Malaysia and Singapore
Lion Capital Singapore/Malaysia SGD
Lion Capital Management
Equity North America
Fidelity Funds — America A
Fidelity International
Equity Sector Information Technology
Henderson HF Global Technology A2 USD
Henderson Global Investors
Equity Singapore
Schroder Singapore Trust Class A
Schroder Asset Management
Best Fund Group
Thio Boon Kiat (centre), CIO and managing director of UOB Asset Management, poses with the award for Best Group — Overall, with (from left) Tan, Haddad, Muudeliar and Duffy
ASSET CLASS
FUND COMPANY
Bond
AllianceBernstein LP
Equity
Deutsche Asset Management
Mixed Assets
Lion Capital Management
Overall
UOB Asset Management
PW16 • THEEDGE SINGAPORE
| MARCH 3, 2008
PERSONAL WEALTH
S
urging more than six folds over the past five years, Latin American equities — measured by the MSCI Latin America index, which is heavily weighted in resource and commodities stocks — have turned in some spectacular returns in recent times, boosted by high commodity prices and an overall improvement in the region’s economic fundamentals. Although the recent global stock market downturn, triggered by fears of a looming US recession and turbulence in the global credit markets, have halted the uptrend of many Latin American markets this year, investors Table 1
YTD returns of Latin American bourses Mexico Bolsa Index Argentina Merval Index Brazil Bovespa Index Chile Stock Market Select Venezuela Stock Market Index Peru Lima General Index Columbia IGBC General Index Costa Rica BCT Index Jamaica JSE Market Index
+1.44% -1.74% +1.75% -3.75% -7.95% -2.83% -2.83% +3.45% +4.43%
with equity exposure to this region shouldn’t be too concerned over the short-term market rout, says Nicholas Morse, head of Latin American equities at global fund house Schroders. He points out that the outlook for Latin American stocks remains bright over the next 24 months. (See table 1 for how Latin American stock markets have performed this year.) “Compared with the past, Latin American and indeed all emerging markets are extremely well placed to weather a downturn in the US,” asserts Morse, whose Schroder ISF Latin American Fund won two awards at last week’s The Edge-Lipper Singapore Fund Awards 2008 for the best fund in the Equity Emerging Markets Latin America category over a three- and five-year period. “Not only have the economic fundamentals improved significantly, but growth [of Latin American economies] is increasingly being driven by domestic demand and the share of exports going to the US is declining,” adds the portfolio manager, who oversees equity assets of US$6.5 billion ($9.13 billion) in dedicated Latin American portfolios. BLOOMBERG
| BY KELVIN TAN |
Limited impact Morse, whose fund is currentSCHRODERS
Table 2
Top 10 holdings in % HOLDING
SECTOR
Petrobras America Movil Cia Vale do Rio Dooe Bradespar Uniao de Barcos Brasileiros Banco Bradesoo Investimentosltau Eletropaulo Metropol Empresabras De Aeronautica All America Latina Logistica Total number of holdings = 67
Energy Telecommunication servies Materials Financials Financials Financials Financials Ultilies Industrials Industrialas
% NAV
14.0 10.0 7.9 6.4 4.8 4.7 2.8 2.0 1.7 1.6
ly heavily weighted in stocks such as Brazilian petroleum powerhouse Petrobas, Mexican telecommunications company America Movil and Brazilian commodities firm Cia Vale do Rio Doce (CVRD), is confident that the emerging economies will “decouple” from the developed region. Indeed, the impact of a US recession will vary from country to country in Latin America. For instance, Mexico, whose economy is heavily tied to the US, is likely to be more vulnerable than other Latin American economies but the potential negative impact has already been factored into share prices, insists the bullish Morse. The Schroders fund manager tells Personal Wealth that Latin America has massive reserves of natural hard commodities such as oil, copper, iron ore and gold as well as soft resources in coffee, wheat and soya beans. “This puts Latin American economies in a strong position to supply the developed world, where many of these resources are becoming increasingly scarce, as well as supplying strongly growing emerging economies such as China.” Adding to his optimism, Morse says most Latin American governments “are in a strong financial position” with high levels foreign currency reserves compared with the past when there was a global economic slowdown. Indeed, Brazil, which was the emerging markets’ biggest debtor over the past decade, is now a net foreign creditor after its international reserves, boosted by investment inflows and record-high export income from agricultural commodities and oil, surpassed gross foreign liabilities by US$4 billion last month.
Top-down, bottom-up process Over the past three and five years, the Schroder ISF Latin American Fund has generated red-hot returns of 144.56% and 512.91% respectively (as at Feb 15), according to fund
DBSAM to double assets in five years | BY KEVIN LIM |
D
BS Asset Management (DBSAM), the funds arm of Southeast Asia’s largest lender DBS Group, has plans to double assets under management by attracting investors from outside Singapore. DBSAM currently manages $27.6 billion and hopes to raise the amount to around $50 billion in five years, says CEO Deborah Ho. This would be done by tapping the parent’s overseas branch network as well as the asset manager’s joint ventures in Malaysia and China for new customers, she adds. “In the past 25 years, we’ve been very domestic in nature. Our business was very Singapore-centric. Post Asian crisis, the Asian story has become a lot more compelling.” Ho, who previously worked at Citigroup, Credit Suisse, JPMorgan and UBS in fixed-income sales, joined DBS Asset Management in
September after a stint as a consultant and lecturer at Temasek Holdings’ Wealth Management Institute. She says foreign institutional investors have become more interested in Asia as the region developed, helping Asia-focused asset managers like DBSAM. “Asian currency markets and bond markets have opened up and there are more avenues for investments.” DBSAM has operations in Singapore and Hong Kong as well as joint ventures in China and Malaysia. Its China venture, Changsheng Fund Management, obtained in October the country’s qualified domestic institutional investor (QDII) licence. DBSAM is considering setting up a research unit in Vietnam to cater to growing investor interest in that country, says Ho adding that DBSAM would prefer working with local partners to distribute its funds rather than setting up E its own sales outlets overseas. — Reuters
BLOOMBERG
Latin America will continue to shine
Morse: Emerging markets are extremely well placed to weather a downturn in the US
this year. Boosted by interest rate cuts in recent years, Brazilian stocks have been one of the best- performing groups of stocks in Latin America over the past three years, surging some 240%. Morse, however, cautions that the interest rate easing cycle in Brazil has probably come to an end in the short term. Morse is less sanguine on the prospects of the Chilean stock market. Over the short term, he sees headwinds such as GDP downgrades and interest rate hikes in Chile, where inflation is currently “well ahead of expectations”.
Main risk for Latin America data provided by Lipper. Morse attributes the good performance of his fund to an investment process that involves a mix of top-down analysis and bottom-up stock selection. “We aim to derive 20% of our value added from country allocation and 80% from our choice of stocks.” Using a quantitative country allocation model, Morse and his team start the investment process by selecting the right countries to invest in within the Latin American region. After the country selection process is done, “we then invest in the most attractive stocks in those countries, ranked by our team of analysts, who conduct fundamental research on the ground”, he explains. (See table 2 for the top 10 holdings of the Schroder ISF Latin American Fund.) Among the Latin American markets, Morse says he is most bullish on the prospects of Brazil going forward. “There have been some GDP upgrades recently while fiscal accounts remain strong. Earnings growth is also robust and valuations remain attractive,” says Morse. The Brazilian Bovespa stock index currently trades at a forward-looking price-to-earnings ratio of 12.52 while earnings per share growth is expected to surge an average of 22%
Going forward, Morse says the primary long-term risk for Latin American stock markets is a drastic deceleration in global economic growth, which could cause commodity prices to weaken significantly. That would negatively impact the region’s fiscal and trade accounts. The fund manager, however, points out that such a risk is fairly remote at this point in time, adding that the current growth engines of the world such as China and India as well as many other economies in the developed world are still enjoying robust GDP growth. Over the short term, he is more concerned about the further deterioration in investors’ appetite for risk assets should the upheavals in the global credit markets persist. Indeed, a surge in risk aversion among global investors could lead to more fund flows out of emerging markets including Latin America, despite the region’s positive valuations and earnings growth outlook, he adds. “In the near term, [Latin American] stock markets are likely to remain volatile, but as the year progresses, the weaker global outlook should be discounted and investors will begin to look forward to 2009. Emerging markets will then look increasingly E attractive,” he argues.
UOBAM plans overseas growth | BY SAEED AZHAR AND KEVIN LIM |
S
ingapore fund manager UOB Asset Management (UOBAM) believes its assets under management and profitability are poised for double-digit growth over the next five years as it targets expansion in North Asia. Thio Boon Kiat, managing director of the fund management arm of Singapore’s secondbiggest bank United Overseas Bank, says his firm would try to grow in new markets such as China, Japan and South Korea. The firm, which manages $24.3 billion in assets, saw single-digit growth in total assets in each of the last two years, but contributions from overseas markets doubled during the same period. “On asset growth, over the next five years, we hope to achieve double-digit growth and one thing that we want to stress is profitability,” says Thio. “Last year we opened an office in Brunei, we want to make inroads into North Asia, we already have a presence in Taiwan — so we would like to be in Japan,
South Korea and China.” Thio says his firm may also take advantage of opportunities that have sprung up in the wake of the credit crisis. “We think there is an opportunity there and we believe we have sufficient capability to look into that area. Most of the distressed assets we are seeing are in the developed world.” Thio adds that the firm is looking for jointventure opportunities in China as well as exploring how it could tap Chinese investors through the Qualified Domestic Institutional Investor (QDII) scheme, which lets Chinese investors put money to work in foreign markets. Currently UOB Asset Management’s assets from clients outside Singapore, in markets such as Malaysia, Thailand and Indonesia, account for a quarter of total assets. UOB Asset Management clinched the “Best Overall Fund Group” in The Edge-Lipper Singapore Fund Awards 2008 last Thursday, for delivering consistently strong performance in bond assets, equity assets and mixed asE sets. — Reuters
THE WEEK OF MARCH 3, 2008
PersonalWealth M A N AG I N G
YO U R
M O N E Y
BRIC outlook Russia looks to be the most attractive, says HSBC
Bond fund with equitytype returns Templeton fund manager bets against greenback
TOUGH going Fidelity, Lion Capital, AllianceBerstein, UOB Asset Management and Deutsche Asset Management were the biggest winners at last week’s The Edge-Lipper Singapore Fund Awards 2008. Seen here are Madeline Ho (front left), managing director of Fidelity Investments Singapore; next to Ho is Daniel Chan, CEO and CIO of Lion Capital Management; (back row from left) Dokyoung Lee, senior portfolio manager of AllianceBernstein; Andrew Kwek, CEO Singapore of Deutsche Asset Management (Asia); and Thio Boon Kiat, managing director and CIO of UOB Asset Management.
The best fund managers last year are finding this year the most challenging. Read about what’s in store for the fund industry, markets and trends.
GF1 (273mm)
pg 42 (279mm) Cover (276mm) 42 • THEEDGE SINGAPORE
| MARCH 3, 2008
SINGAPORE (INCLUSIVE OF GST) S$3.00
OTHER HIGHLIGHTS
THE ASCOTT INTERVIEW
Millionaires’ row in Singapore
Petrodollar tsunami warning
Concord CEO sparks revolution
CITY&COUNTRY
ECONOMY WATCH
OPTIONS
MICA (P) No. 075/08/2007 PPS 1519/09/2008 (000599)
3
BUSINESS
&
INVESTMENT
WEEKLY
THE WEEK OF MARCH 3 — MARCH 9, 2008
308
SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
NOTEWORTHY
The best of the best:
THE EDGE-LIPPER SINGAPORE FUND AWARD WINNERS
2008
ASSIF SHAMEEN:
Money in looming global water crisis
SUNITA SUE LENG:
Appetite for food stocks shrinks
ST Engineering plans diversification to sidestep possible US slowdown Golden Agri plants up, seeks to close valuation gap Del Monte emphasises brand strength, moves up value chain Celestial NutriFoods continues expanding, squeezed by high soybean prices
SURVIVING the crunch
ARA Asset Management has emerged unscathed from the funding squeeze in the REIT market. Now, CEO John Lim wants to double its assets under management within three years to $20 billion, a level that would rival CapitaLand’s real estate asset management business. Turn to our Cover Story for why institutional investors are excited about the stock.
Federal International makes rash of energy investments Small-cap financier DB Zwirn winds down funds Synear Food, China Milk, Celestial NutriFoods, People’s Food, China Dairy, China Essence Hot stocks
8 885002 090004
PLUS: Managers of MMP REIT contemplate M&A deal
563/%"3, 4,*&450 #-6&
Turmoil in financial markets doesn’t necessarily have to spell trouble for your investments. Hedge with stock and index-tracking CFDs on SaxoTrader to preserve the value of your portfolio.
C A P I T A L M A R K E T S
So trade up to SaxoTrader and enjoy access to over 5,000 CFDs – many of which allow you to short-sell. Some other benefits include: • • • •
More efficient intra-day stock trading with live prices Leverage investments up to 10 times Diversify with CFDs from 23 major exchanges globally Low entry cost of CFDs on 15 major stock indices
Get your free demo account; visit www.saxomarkets.com.sg, email [email protected] or call +65 6303 7788. 3JTLXBSOJOH-FWFSBHFEJOWFTUNFOUTJOGPSFJHOFYDIBOHFPSEFSJWBUJWFTDBSSZBIJHIEFHSFFPGSJTLBOENBZSFTVMUJOTJHOJ¾DBOUHBJOTPSMPTTFT:PVTIPVMEDBSFGVMMZDPOTJEFSZPVS¾OBODJBMTJUVBUJPOBOEDPOTVMUZPVSJOEFQFOEBOU¾OBODJBMBEWJTPSTBTUP UIFTVJUBCJMJUZPGZPVSTJUVBUJPOQSJPSUPNBLJOHBOZJOWFTUNFOUT $PNQBOZ/P. Published by The Edge Publishing Pte Ltd 150 Cecil Street #13-00 Singapore 069543
• Printed by KHL Printing Co Pte Ltd 57 Loyang Drive Singapore 508968
GF1 (273mm)
pg 42 (279mm) Cover (276mm) 42 • THEEDGE SINGAPORE
| MARCH 3, 2008
SINGAPORE (INCLUSIVE OF GST) S$3.00
OTHER HIGHLIGHTS
THE ASCOTT INTERVIEW
Millionaires’ row in Singapore
Petrodollar tsunami warning
Concord CEO sparks revolution
CITY&COUNTRY
ECONOMY WATCH
OPTIONS
MICA (P) No. 075/08/2007 PPS 1519/09/2008 (000599)
3
BUSINESS
&
INVESTMENT
WEEKLY
THE WEEK OF MARCH 3 — MARCH 9, 2008
308
SAMUEL ISAAC CHUA/THE EDGE SINGAPORE
NOTEWORTHY
The best of the best:
THE EDGE-LIPPER SINGAPORE FUND AWARD WINNERS
2008
ASSIF SHAMEEN:
Money in looming global water crisis
SUNITA SUE LENG:
Appetite for food stocks shrinks
ST Engineering plans diversification to sidestep possible US slowdown Golden Agri plants up, seeks to close valuation gap Del Monte emphasises brand strength, moves up value chain Celestial NutriFoods continues expanding, squeezed by high soybean prices
SURVIVING the crunch
ARA Asset Management has emerged unscathed from the funding squeeze in the REIT market. Now, CEO John Lim wants to double its assets under management within three years to $20 billion, a level that would rival CapitaLand’s real estate asset management business. Turn to our Cover Story for why institutional investors are excited about the stock.
Federal International makes rash of energy investments Small-cap financier DB Zwirn winds down funds Synear Food, China Milk, Celestial NutriFoods, People’s Food, China Dairy, China Essence Hot stocks
8 885002 090004
PLUS: Managers of MMP REIT contemplate M&A deal
563/%"3, 4,*&450 #-6&
Turmoil in financial markets doesn’t necessarily have to spell trouble for your investments. Hedge with stock and index-tracking CFDs on SaxoTrader to preserve the value of your portfolio.
C A P I T A L M A R K E T S
So trade up to SaxoTrader and enjoy access to over 5,000 CFDs – many of which allow you to short-sell. Some other benefits include: • • • •
More efficient intra-day stock trading with live prices Leverage investments up to 10 times Diversify with CFDs from 23 major exchanges globally Low entry cost of CFDs on 15 major stock indices
Get your free demo account; visit www.saxomarkets.com.sg, email [email protected] or call +65 6303 7788. 3JTLXBSOJOH-FWFSBHFEJOWFTUNFOUTJOGPSFJHOFYDIBOHFPSEFSJWBUJWFTDBSSZBIJHIEFHSFFPGSJTLBOENBZSFTVMUJOTJHOJ¾DBOUHBJOTPSMPTTFT:PVTIPVMEDBSFGVMMZDPOTJEFSZPVS¾OBODJBMTJUVBUJPOBOEDPOTVMUZPVSJOEFQFOEBOU¾OBODJBMBEWJTPSTBTUP UIFTVJUBCJMJUZPGZPVSTJUVBUJPOQSJPSUPNBLJOHBOZJOWFTUNFOUT $PNQBOZ/P. Published by The Edge Publishing Pte Ltd 150 Cecil Street #13-00 Singapore 069543
• Printed by KHL Printing Co Pte Ltd 57 Loyang Drive Singapore 508968
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