1. 大盘
“大盘如果跌破3300，下看3000点，如果没有跌破，则保持3470的目标“ - GOOLA WARDEN

手顺的时候有点大意，没料到会跌得这么猛。下周应该有反弹，趁反弹减仓，下个月大部分时间不能操作，下周减到半仓（大部分是长线股和食品股例如THAIBEV， F&N）

话说大盘不好并不代表空仓，这几天DUKANG， XMH 表现都很好，逆市上升，关键是选股。

2. REITS
REITS 大部分已跌破50、100、甚至200天线。趁反弹一定要割。绝对不能向下摊平。同样的，Yield Play 像Starhub，MGCCT， CRT，APTT 都在跌，原因是美国国债债息上升。这些股尽量避免持有。

听说过一位家庭主妇股神，买且只买Starhub，每月固定买入，三年来无往不利，赚了不少，逢人便推荐这个方法。只可惜天下无不散之宴席，市场趋势改变了，就要改变自己。祝她好运。

3. THAIBEV
前景看好，目标价0.73-0.80. 既是防御股，又是增长股，兼缅甸概念。而且有可能把它手中的 F&N股票分派。长线持有。

4. CORDLIFE
前景长期看好。

本人意见：不过股价已经升的太多。如果能跌到1元一下可以考虑。

5. Courts
Courts 上季业绩不太好，发债US$125M,有可能进行收购。PHILIPS 目标价 1.14.

本人意见：一元以下可以考虑

少侠很是用功
The Edge Singapore

May 27, 2013

The Week: Should DBS press on with bid for Bank Danamon?

BYLINE: Goola Warden

LENGTH: 579 words

It was not what officials at DBS Group Holdings wanted to hear. Yet, news reports quoting Darmin Nasution, the outgoing governor of Bank Indonesia (BI), that DBS would be allowed to acquire a 40% stake in PT Bank Danamon were taken to be a victory of sorts. In reality, an outright rejection from Indonesia's authorities might have been a better outcome for investors in DBS.
In April last year, DBS announced plans to acquire a 67% stake in Bank Danamon from Temasek Holdings for IDR7,000 per share, or a total of IDR45.2 trillion ($6.2 billion). DBS said it would pay for this by issuing 439 million new shares at an issue price of $14.07. That would have increased Temasek's stake in the enlarged DBS to 40% from 29% currently. DBS also planned to make a cash offer for all the remaining shares in Bank Danamon at IDR7,000 each. That would have cost it a further IDR21.2 trillion.
While the deal would have given DBS a significant footprint in one of the region's most under-banked markets, the transaction was criticised by some observers for benefiting Temasek at the expense of minority investors in DBS. Indeed, shares in DBS have risen 31% since April 2 last year to $17.39 currently. On the other hand, shares in Bank Danamon have slid 0.9% to IDR5,850 during that time.
Pressing ahead with the acquisition of just 40% of Bank Danamon is likely to draw more criticism. For one thing, not having outright control of the Indonesian bank might limit the ability of DBS to extract maximum synergies from the unit. A mere 40% stake in Danamon would also be a drag on DBS's capital ratios under the new Basel III standards, according to a report by UBS dated May 21.
According to news reports, BI might eventually allow DBS to acquire more than 40% of Bank Danamon in the event the Monetary Authority of Singapore (MAS) allows Indonesian banks easier access to the Singapore market. For its part, DBS reacted coolly to the news reports of BI's decision. "DBS hopes the application will be approved as originally submitted and will continue to be closely guided by Bank Indonesia," says a spokeswoman for DBS.
According to officials at DBS, as at May 21, the bank had not received written notification of BI's approval for it to acquire a 40% stake in Bank Danamon. Some analysts doubt that written notification will be issued immediately if BI and MAS now enter discussions about reciprocal market access. "Without a clear, indisputable path to control within a sensible timeframe, we think DBS may need to reconsider its options," says UBS in its report.
Indeed, there is a possibility that Temasek will also baulk if it is not allowed to unload its entire 67% stake in the transaction. "If DBS were to get just 40% and Temasek can only sell 40%, both are likely to walk away as the deal would not make any sense," says Kenneth Ng, an analyst at CIMB Research, in a report.
So, what happens next? "We think the episode is not over yet," Ng says in his report. "BI seems to be finessing to get concessions from MAS, so that Indonesian banks can gain access to Singapore before BI eventually allows a full transfer of the 67% stake. We think MAS could ultimately approve of such a plan." Even then, however, DBS might not be allowed to acquire all of Bank Danamon, Ng adds.
Gaining a significant footprint in Indonesia could boost DBS's long-term prospects. Yet, the uncertainties it faces in its bid for Bank Danamon raises serious questions about whether it ought to press ahead.

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The Edge Singapore

May 27, 2013

Week in Review

BYLINE: Compiled by Jo-Ann Huang

LENGTH: 558 words

F&B group Japan Foods Holding is opening the Menya Musashi brand of restaurants in China, marking its expansion in the country. Japan Foods will do this via Highly Yield, a joint venture with Ajisen Investments, an indirect wholly-owned subsidiary of Ajisen China, in which Japan Foods holds a 20% stake and Ajisen Investments hold the remaining 80%. Menya Musashi is a popular brand of restaurants in Japan serving ramen. Japan Foods holds the license rights to operate restaurants of the Menya Musashi brand in Singapore. The group has opened five restaurants in Singapore and through joint ventures, has five restaurants in Hong Kong.
Religare Health Trust, the business trust with a portfolio of healthcare assets in India, announced that its executive director and chief operating officer Gurpeet Dhillon will become the company's CEO with immediate effect. Dhillon succeeds Ravi Meh-
rotra, who will continue to serve as chairman and director of Religare Health Trust. The trust reported a 3.55-cent distribution per unit for its FY2012 ended-March, representing a yield of 8.75%, on the back of $49.6 million in revenue. It added that Gurgaon Clinical Establishment, the largest asset within the trust's portfolio, is fully operational and a key growth driver.
Trading company Intraco says the acquisition of Dynamic Colours Ltd (DCL) will bring about synergistic benefits to both companies. Foo Der Rong, CEO of Intraco, says DCL could market the plastic resins distributed by Intraco's plastics division to customers in Vietnam and Malaysia, while Intraco could market the compounded resins DCL produces to its own customers. Intraco announced a conditional cash offer for DCL on May 3, following the acquisition of 20.1 million DCL shares at 18.5 cents, raising its shareholding in DCL from 29.9% to 39.5%. It is now offering to acquire all the issued shares of DCL at the same price, conditional upon receiving more than 50% of the voting rights of the issued shares.
Cedar Strategic, a Catalist-listed company in the real estate industry engaged in asset management, is acquiring Hua Cheng Group, a leading property player in Guizhou province in China for $936.2 million. The move is part of Cedar Strategic's positioning as a regional real estate group. Hua Cheng has assets worth RMB6.7 billion ($1.36 billion) in Guizhou, and has completed more than 12 property developments to date. Dr Charlie In, chairman of Cedar Strategic, says the acquisition will complement its property portfolio in Singapore, and is expected to generate stable income revenue streams. Cedar Strategic will acquire Trechance, the owners of Hua Cheng, for $936.2 million, satisfied by the issuance of 46.8 million new shares at two cents each. It will also convene an EGM among shareholders to seek approval for the acquisition.
Sembcorp Industries, the biggest utility company in Southeast Asia, has officially opened its US$1 billion ($1.26 billion) Salalah water and power plant in Oman. The facility consists of a gas-fired power plant and a seawater desalination plant, the largest of its kind in Dhofar, Sembcorp said in a statement. The company's first facility in Oman, it will provide water and power under a 15-year purchase agreement with the state. Commercial operations at the facility began earlier this year, the company said in the May 19 statement.

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The Edge Singapore

May 27, 2013

EdgeWise: A Myanmar gem tycoon dazzles local investors

BYLINE: ---

LENGTH: 654 words

Nay Win Tun wears a ring set with diamonds and a ruby the size of a quail's egg on each of his hands. A gem-encrusted writhing dragon pin adorns the lapel of his jacket. And, he could be struggling Catalist-listed WE Holdings' ticket to salvation.
Nay Win Tun is chairman of the Ruby Dragon group of companies, based in Myanmar's southern Shan state. According to reports, the business empire was founded in 1992, after Shan rebel leader and Nay Win Tun's mentor Aung Kham Hti cut a peace deal with the country's military regime. Over the last two decades, the group's interests have expanded from gold and gem mining to vineyards, resorts and construction materials.
On May 18, WE Holdings said it would invest US$20 million ($25.24 million) in a 20% stake in Dragon Cement, which owns a cement factory in Shan state. WE Holdings also has an option to acquire a further 20% of Dragon Cement for US$20 million.
Dragon Cement was started two years ago, reportedly with about US$21 million in initial investment. The Ruby Dragon group also provided it with funds for working capital. Dragon Cement now produces 400 tonnes of wet process cement daily. WE Holdings' investment will go towards doubling its output to 800 tonnes daily. Under the deal, the limestone, gypsum and coal mines that supply raw materials to the cement factory will be held under Dragon Cement.
Shares in WE Holdings are up nearly 200% this year, as the company has begun looking for investment opportunities in Myanmar. In early March, WE Holdings said it would expand into the oil and gas business in Myanmar, through a joint venture with Nay Win Tun. As part of the agreement, both parties would invest $100,000 each in a joint-venture company. WE Holdings intends to spend some
$1.17 million on expansion into this sector.
Kenny Sim, CEO of WE Holdings, says the company has not abandoned its plans to enter the oil and gas sector following its decision to invest in Dragon Cement. In fact, the joint venture it formed with Nay Win Tun is still actively looking for oil exploration opportunities in Myanmar, he adds.
In the meantime, however, the cement deal was too good to pass up. "We identified Myanmar as one of the locations where there will be growth," Sim says. "We realised that the property market and infrastructure sector is booming, and the best way to be part of it would be through the cement business."
According to Nay Win Tun, the cement business enjoys gross margins of 40%. And, with strong demand from road builders and housing developers in the Shan state, he does not have plans to expand beyond this market for now.
Through WE Holdings, however, Nay Win Tun has access to cash from the public market for any investment opportunities that do come along. With the steep run-up in its shares, WE Holdings has raised cash more than once this year
In February, it took in some $6 million from the placement of new shares. Its controlling shareholders, including CEO Sim, also sold some of their shares. That exercise brought in Terence Tea, now WE Holdings' chairman. Tea currently holds about 10.3% of WE Holdings through his metal trading company SingYaSin SMC.
On April 2, WE Holdings announced a rights-cum-warrants issue that could raise as much as $10.1 million. The company says it plans to use about half the proceeds to repay debt, and another $3.45 million to fund new businesses.
Meanwhile, WE Holdings has signed a deal with Serial System to dispose of its electronics business for US$2.06 million. That is just 3.3% of its FY2013 revenues, and close to its FY2007 earnings before business deteriorated. (The company has a March year-end). Serial System also has an option to buy WE Holdings' inventory, which is carried in its books at US$4.8 million.
Will WE Holdings fare any better in Myanmar with Nay Win Tun than it has with its legacy electronics business? For now at least, it's a risk that investors seem happy for it to take.

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The Edge Singapore

May 27, 2013

Economy Watch: US growth likely to gain momentum, says Société Générale's Aneta Markowska

BYLINE: Assif Shameen

LENGTH: 1648 words

As benchmark US equity indices slipped from their recent record highs, markets are now scouring for clues on when the world's largest economy will taper off its aggressive monetary stimulus programme. As part of its quantitative easing efforts, the US Federal Reserve has been buying US$85 billion ($107 billion) worth of Treasury and mortgage bonds every month in an attempt to keep long-term borrowing rates down. The move has pushed the prices of bonds up, while sending their yields lower and encouraging more American consumers to spend and invest.
One person who believes that the Fed may soon begin to reduce its asset purchase programme is Aneta Markowska, chief US economist for French banking giant Société Générale in New York. She argues that the current consensus view of the Fed rolling back at year-end may be off the mark. She believes the asset purchases will start tapering off in the third quarter, though like others, she does not believe the US central bank will move on interest rates until 2015 when unemployment dips below the 6.5% target. Markowska spoke to The Edge Singapore over the phone from the US recently. Here are excerpts from the interview.
What is your take on the US economy right now? Until a few weeks ago, the consensus was that the US economy was in a recovery mode with a rebound in housing, improving consumer sentiment and falling unemployment. Some of the more recent data suggests the recovery may be more fragile.
That's not really been a huge surprise. Maybe the softness came in a little bit earlier than expected but we always knew that there were fiscal restraints that were going to affect the economy, particularly the sequester which kicked in around March. Everybody thought the effects were likely to be felt with a little bit of a delay. There is also this typical seasonal slowdown in hiring in the US and that seasonal distortion has emerged since the crisis. So, there was an expectation that we would see some deceleration in the pace of hiring. If anything, I will argue that the deceleration is not as severe as expected. The consensus GDP forecast for 2Q is around 1.5%.
Would you say that the US is on track to get unemployment down to the magical 6.5% number by next year-end?
The 6.5% unemployment target might only [be] hit at some point in 2015. I would also say that the private sector is now looking much healthier. There has been a lot of repair in household balance sheets. I also think housing is now a tailwind to growth, not just through residential investments but also through secondary knock-on effects from rising home prices. So, a lot of the structural headwinds to growth that we were facing in recent years have dissipated and have actually become tailwinds. If it hadn't been for fiscal restraints, we would be seeing growth in excess of 3% on a more consistent basis. So, we really just have to get through that fiscal restraint and I believe that it will begin to diminish in the second half of the year at the margins and some of the positive private sector fundamentals will start to come through on the GDP numbers. I expect much stronger growth in the second half of the year or around 3% for the third and fourth quarters.
It seems US consumers are getting a bit of a bonus as well, with lower commodity prices, particularly low gasoline prices at the pump, which work like a nice tax cut?
The gasoline prices are an added benefit, which are helping to offset the fiscal drag in the near term. We had a slight tax increase earlier in the year and there wasn't much of an impact on consumer demand in the first quarter and while there is some concern that we might get a delayed hit in the second quarter, there have been other factors offsetting, including the decline in gasoline prices, which is quite helpful. As at April, consumption growth had already hit 1.7%, so there is actually upside risk to GDP numbers in the second quarter.
Have US household balance sheets been repaired to the extent where consumers are more confident about spending?
Absolutely. I think it has to do with the type of repair that is going on because up until recently, the Fed struggled with reflating home prices, in particular. So to the extent the households who wanted to rebuild their balance sheets had to do it through the liability side, that is by reducing their mortgage and obviously that [had] weighed on consumer demand. Now that home prices are rising decidedly above or ahead of expectations, the rebuilding of balance sheets has shifted to the asset side. This is a more growth-friendly balance sheet repair. That is why I believe we are now at the end of the deleveraging process or the pressure to reduce debt by cutting demand.
Isn't there also that wealth effect from the soaring stock market with US indices hitting new highs every other day?
To be honest, empirical evidence suggests that wealth effect with respect to financial markets is not that strong. Actually, wealth effect due to higher residential real estate prices is much stronger. So, that is why I think we are at an inflection point because even though the Fed was very successful in reflating financial assets, it struggled to reflate housing. It has only started to succeed on that front quite recently.
Talk about that fiscal drag. The US went to the edge of a fiscal cliff at the end of last year, but just avoided it; there was the withdrawal of the payroll tax and, more recently, the sequester. At end-May 2013, have Americans taken all the hits from the fiscal drag or are there more to come?
We are still in the process of taking the hits. I think by the end of the year or by the third quarter, we will be past the worst of it. I will argue that we have already passed all the hits on the tax increases and to the extent we were going see an impact, we would have seen it by now. There is only so much delay that one would anticipate on that. The impact of the sequester is still, however, a question mark. We really haven't seen much in the data yet. We are still in the beginning of it, so there is a risk that it might still come through in the next few months. But I believe in the second half of this year we will have been through the inflection point of fiscal restraint. Government spending will still continue to contract but as long as the pace of contraction starts to diminish, we will have acceleration of the GDP.
Let's move beyond the next two quarters and look out to a few years from here. What will drive the US economy forward over the next three years? Is it going to be shale, the oil boom that makes it Saudimerica or manufacturing coming back to the US as "insourcing" becomes the next big trend?
We are at the start of a multi-year secular trend or cycle where we are seeing a lot of new structural drivers. As far as the shale story [is concerned], that's already showing up in the data. The "insourcing" or manufacturing renaissance is not showing in the data yet, but we are certainly seeing a compelling case when you look at unit labour costs in the US now compared with some [of] our Asian trading partners. When we add on top of that all the non-labour costs such as logistics and shipping, it makes the case even more compelling. We are now seeing more anecdotal evidence that [it] is actually happening and that companies are bringing some production back at the margins. But really, they are just testing the waters and seeing if the numbers that look good on paper actually work in real life. So far, we hear that some of the experiences have been very positive, so I expect to see more of it over the next few years. But it will happen gradually over time and we will start to see the impact of this manufacturing renaissance and insourcing over the next few quarters.
What could go wrong for the US economy at the moment? What might derail US economic recovery? Are the big risks mainly external - such as a sudden turn for the worst in the European debt crisis or a sharp slowdown in China - or something internal that the Fed might do or Congress might force the Administration to do on fiscal policy?
Certainly the external risks are always there although I will say that the US is primarily a domestic demand-driven economy. The only way Europe or China could impact the US economy in a negative way is through a financial event or a financial shock and while that continues to be a risk, I don't think that is a huge risk right now. The real risk is that once the US economy starts to normalise, meaning we start to erode the excess slack and the Fed starts to normalise its policy, whether that process will be smooth or disruptive. While I don't expect the Fed's move to be outright disruptive, I do believe it is unlikely to be as smooth as the Fed would like it to be. We are looking at bond yields to move up quite sharply. Our own year-end target for 10-year treasuries is 2.75% (from 1.97% currently). While we don't think that will necessarily derail the economy, we think the whole process could be challenging for investors and probably bring volatility back into financial markets.
But you don't see the Fed moving anytime soon - not this year and probably not for much of next year.
No, not on interest rates but I think the Fed will start tapering [off] asset purchases sooner rather than later. Our own call is that it will start tapering in the third quarter and that it will actually be done with asset purchases by the end of the year, so we do see risks on the consensus view, which is that [the] Fed will continue to buy at [the] current pace at least until the end of the year. If the tapering does begin in the third quarter, we believe the bond markets could sell off pretty sharply. I believe the risks to growth are shifting to the upside and the Fed tapering will come sooner than everyone expects and that the next big challenge is the normalisation of interest rates.

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The Edge Singapore

May 27, 2013

Corporate: US economy, stocks to upstage Asia in two years, says Standard & Poor's

BYLINE: Frankie Ho

LENGTH: 1420 words

Asia may be the world's centre of attention at the moment, with stocks in Japan all the rage among investors and most economies in the region still bustling with activity, but it is the US that will capture the global spotlight in the next couple of years as the world's biggest economy springs back to life.
That, in a nutshell, is one of the key messages delivered at a recent investment conference in Singapore organised by S&P Capital IQ, a sister company of Standard & Poor's Ratings Services and subsidiary of New York-listed McGraw Hill Financial.
According to Paul Gruenwald, Asia-Pacific chief economist at S&P Ratings Services, the "real surprise" in the next two years will come from the US. "It looks like all the pieces are coming together. We have households starting to spend again. Banks are starting to lend again. The housing market has turned around. The fiscal situation is looking better. Shale gas is coming online. So, we can actually tell a pretty good story about the US," he says.
While some investors are concerned that the US Federal Reserve may soon decide to wind down its quantitative easing (QE) programme and even raise interest rates - measures that helped lift the world's largest economy out of recession - Gruenwald figures that any such moves should be regarded positively. "If the Fed is thinking about going off zero per cent rates and ending QE, that means the economy and the labour market are strong enough for them to be confident enough to start moving."
As the US economy gathers strength, American corporate spending will rise and interest in US stocks will increase, says Lorraine Tan, another speaker at the conference. She is vice-president of Asia equity research at S&P Capital IQ. "North American expansion is there. Part of that is fuelled by deferred spending over the past few years because of the recession."
Companies in the US are also benefiting from cheaper fuel costs as the country exploits vast reserves of shale gas. "Cost pressures in the US are not really there. The [environment] is therefore more conducive for organic expansion. It's definitely more competitive [than Asia] as well," Tan adds.
Already, the Dow Jones Industrial Average has risen above the 15,000-point mark for the first time, buoyed by recent signs of strength in the economy, including a drop in the US jobless rate in April to 7.5%, the lowest since December 2008. "I think the expectation is that the US is going to garner the lion's share of the interest in equities in the next couple of years," says Tan.
Stocks in the US are still "relatively cheap" in terms of valuations, with price-to-earnings ratios of companies tracked by the S&P 500 index holding below their long-term average, she points out. "Going by the long-term average, you'll see the S&P 500 at 1,700. There is still room to go up." The S&P 500 is up about 17% so far this year, and is holding above 1,600.
Kinks in Asia
As for Asia, economies in the region should continue to hum along, but challenges abound, according to S&P. For one, a mismatch in supply and demand has emerged, following substantial investments in Asia over the past few years.
"This region, in our view, is becoming a victim of its own success, in the sense that a lot of companies are no longer investing in Europe or the US, but in Asia because that's where the growth is," says Xavier Jean, director of corporate ratings at S&P Ratings Services. "When everybody starts investing in the same place, it creates more and more supply and structural over-capacity.
"When China's GDP was growing at 9%, people were building capacity for 9% growth. But when China's growth slows to 8% or 7.5%, you start having a bit of dissociation between the supply and underlying demand, which, although still very robust, is going down to some extent."
Sectors most exposed to this "dichotomy" include chemicals, mining and base metals, Jean says. Even certain consumer segments in countries such as Indonesia and Vietnam are starting to face excess supply, although some companies are reluctant to scale down expansion as "they don't want to be left by the side of the road if [economic] growth picks up".
Complacency has also set in in some industries in Asia, Jean adds. "Because demand was growing, the only thing they [felt they] had to do was to add capacity. That led to management thinking they could not fail, that they didn't need to innovate. But we've started seeing margin pressure across a number of sectors. This complacency and cannot-fail attitude is potentially a risk for the next two years or so for the corporate sector."
Consolidation within industries is essential in order for companies to achieve some stability in the prices of their goods and services, according to Tan. Already, fixed asset investments in China are tapering off, she notes. "That is probably prudent." China may even let some of its state-owned enterprises go under, "something they are not necessarily used to doing". Higher labour costs in Asia will also continue to be a key risk for companies, she adds. As such, profit margins for companies in Asia excluding Japan are likely to be "stable at best".
Cheap debt
Low borrowing costs may also work against some companies in Asia, Jean notes. "Some companies see that they can borrow money cheaply and just borrow it. They then think about what they are going to use it for. That is something that doesn't bode well from a value creation point of view. They start diversifying. Companies that historically are very strong in one sector, because money is so cheap, start expanding into a completely unrelated sector. For sure, you create value when things go well. But when you don't have any track record or experience, things can turn sour," he says. "When value creation is dictated by increased risk-taking rather than by looking at your markets, trying to innovate and maintaining and developing your competitive advantage, that is a bit worrying."
Without naming the companies involved, he alludes to "some very high-profile Thai takeovers of companies" in Singapore as an example. "[The Thai parties] spotted a very large opportunity outside their market - in this case, Singapore - and started using debt because debt is cheap. There are some sectors that are notoriously difficult to create synergy; consumer products just take forever."
Through his firms Thai Beverage and TCC Assets, Thai tycoon Charoen Sirivadhanabhakdi took control of Singapore F&B group Fraser and Neave in February in a $13.8 billion acquisition, the largest takeover deal in the city-state's corporate history.
'Consumption must increase'
In order for economic growth in Asia to be more sustainable, consumption - rather than investment - needs to increase, according to Gruenwald. While investment is necessary for building and maintaining infrastructure, a consumption-based approach to growth is more important as an economy will come out of the infrastructure build-out stage of its development and move towards maturity, he says. "Boosting investment alone may work for a while to stimulate growth, but it will eventually hit the wall of diminishing returns."
Within Asia, China and Singapore rank the lowest in terms of private consumption as a percentage of GDP, says Gruenwald. The former has a consumption-to-GDP ratio of 36%, while Singapore's is 39%, well below the range of 50% to 65% for the rest of Asia. "This tells me that these economies are not getting enough resources to households. That's allowing countries to run big current account surpluses and pile up on reserves. This is not good news."
To boost consumer spending, Gruenwald suggests that countries in Asia strengthen their social safety nets so that households spend less on insurance and more on consumption. Banks should also be encouraged to lend more to households and small and medium-sized enterprises, while countries should allow their currencies to appreciate so that imports are cheaper. State-owned enterprises should ideally also distribute part of their profits to households.
In general, while Asia should continue to outpace global economic growth in the near term, "most of the upside" will come from the US in the next couple of years, he figures. "We don't expect too many fireworks out of Asia. China is going to be a 7.5%-to-8% growth story. Asean, led by Indonesia, is going to be pretty stable. Meanwhile, we have these small tiger economies - Hong Kong, Singapore, Taiwan and South Korea - that kind of go up and down more than the global economy."

LOAD-DATE: May 28, 2013

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The Edge Singapore

May 27, 2013

Opinion: Time for companies to think of better ways to reach customers

BYLINE: Joan Ng

LENGTH: 756 words

On holiday in Italy two years ago, I was buzzed out of bed by my ringing smartphone. I groggily swiped the screen to turn off what I thought was my alarm - wondering why I felt so unrested - only to be greeted by an all-too-familiar voice: "Good morning, ma'am, I'm calling from..."
No doubt, there are readers who have felt the same annoyance before at being rudely awakened, and who are, like me, looking forward to the implementation of the Do Not Call (DNC) Registry next year. New rules will require companies to cross-check phone numbers against a national database before calling those numbers or sending text messages.
The new rule will add, however, a layer of cost and complexity that businesses appear concerned about. Recent news reports have quoted representatives from industry bodies such as the Contact Centre Association of Singapore and the Singapore Business Federation, which say small and medium-sized companies in particular will face challenges with compliance. Besides the additional work involved in looking up numbers every 30 days, businesses also have to pay for each number checked.
But companies concerned about such details are missing the forest for the trees. There is strong consumer support for a DNC Registry. The Infocomm Development Authority (IDA)'s public poll of 724 respondents found that 97% supported such a list and 96% wanted a Data Protection Commission to investigate and serve enforcement notices on organisations that have breached data protection laws. The real message that telemarketers, contact centres and businesses in general should take home is this: Customers do not like being bothered on their mobile phones.
There will always be exceptions, of course, just as there will always be people who click on spam email and keep the business model of spammers alive. According to a study by computer scientists from the University of California in Berkeley and San Diego, one response in 12.5 million emails sent is enough for spam operations to turn a profit because the business cost is so low. And indeed, when the IDA conducted its public consultation on the proposed DNC registry, some organisations responded that the new rules would disadvantage customers who want to receive marketing messages.
Yet, building a customer communication and marketing campaign on the same principles as email spam - low costs and working on the law of averages rather than actual understanding of the target customer - was a poor model to begin with. Companies should not think about how much more it will now cost them to hit on that one customer who will say "yes" on the phone, or respond positively to an SMS ad campaign. Rather, they should think about how they can make their interactions with customers more meaningful.
American entrepreneur and author Seth Godin writes that "the best definition of permission marketing used to be messages that were anticipated, personal and relevant". The real question marketers should ask, Godin says, is would people miss it if it did not arrive? That is because spam is not defined by a set of regulations or a marketer's objective, but by whether the recipient wants it.
Today, the sending of bulk unsolicited commercial electronic messages such as text messages and emails is governed by a Spam Control Act that requires senders to include an "<ADV>" prefix in the subject header and a valid means to unsubscribe. In other words, it is not technically spam unless there is no way to get out of it. Yet, a text message that complies with those rules is no less annoying.
Companies need to think of better ways to reach their consumers. And technological advancements have made it possible for even small businesses to accomplish this. Consider LINS Smoodees, a small veggie smoothie shop in the CBD that earlier this year tried to build a marketing database on Facebook. Anyone who "liked" its Facebook page would be able to redeem a one-for-one offer. The company has built a database of 1,000 customers and can send them messages about what is on offer daily.
Customers indicate their preferences in all sorts of ways, and social media is just one of them. Other new media marketing tactics emerging include online coupons and smartphone apps. The great thing about such targeted technologies is that most recipients are interested in whatever is on offer. And once companies have people looking forward to what they have to say, they will not be in the awkward position of having to explain why they had to wake someone up in the wee hours of the morning.

LOAD-DATE: May 28, 2013

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7 of 42 DOCUMENTS


The Edge Singapore

May 27, 2013

Corporate: Singapore's REIT sector is maturing

BYLINE: Goola Warden

LENGTH: 2248 words

Eng Seat Moey, managing director and head of asset-backed structured products at DBS Group Holdings, has seen Singapore's real estate investment trusts (REITs) come a long way over the past decade. In 2002, Eng helped facilitate the listing of CapitaMall Trust, Singapore's first REIT, which hit the market with about $600 million in assets. Today, CMT has assets of $9.6 billion, and a market value topping $8 billion. It is the biggest and, arguably, the most successful of more than two dozen REITs and property-related business trusts in the local market.
Over the past year, the FTSE REIT Index is up 39% against the Straits Times Index's pedestrian 23% gain excluding dividends. That could fuel further growth in the sector, as individual property trusts raise funds for acquisitions, and new trusts are created. Notably, Singapore saw the biggest REIT ever to come to market this year with the listing of Mapletree Greater China Commercial Trust (MGCCT), which had an asset size of $2.1 billion, Eng notes.
Now, a handful of long-term winners with the heft and expertise to continue delivering steady returns look set to forge ahead. "It's no longer a situation where a REIT manager just sits back, acquires, acquires and acquires to look for yield accretion," Eng tells The Edge Singapore during a recent interview. "REIT managers have to up the ante and actively manage the portfolio and capital structure."
Singapore's leading REITs have been doing just that. Last year, CMT divested itself of Hougang Plaza for $24.1 million. The REIT is also redeveloping assets such as Jurong Entertainment Centre into JCube, and transforming acquisitions such as -Iluma into Bugis+ under asset enhancement initiatives (AEIs). Meanwhile, CMT's first development property, a 30% stake in Westgate in Jurong, will open this year-end. Most recently, CMT announced it is spending $35 million on an AEI for Bugis Junction, recovering 70,000 sq ft from department store BHG and reconfiguring the space. The REIT is expected to deliver a return on investment (ROI) of 9% from the AEI.
Another REIT that is demonstrating an ability to deliver returns in a multiple of ways is CapitaCommercial Trust, which focuses on office properties. In 2011, CCT sold Robinson Point and Starhub Centre. CCT is also redeveloping its Market Street Car Park site into CapitaGreen in partnership with sponsor and major shareholder CapitaLand.
CMT and CCT are part of the CapitaLand corporate stable, which other REIT managers seek to emulate. Eng says REITs backed by big local property groups such as CapitaLand, Ascendas, Mapletree Investments, Keppel Land and Frasers Centrepoint have an advantage because of their deep talent pool and strong financial standing. These REITs also enjoy a lower cost of debt and a ready pipeline of assets that they can acquire to grow.
The way Eng sees it, these qualities are just what investors are looking for in a REIT. "As investors become more selective, they want to look at the capability and expertise of the REIT manager. The REIT manager is very important," she says. "It's a lot more of fund management, property management and capital management."
This focus on quality is partly the result of the problems encountered by the sector during the recent global financial crisis, when credit became scarce and asset values collapsed. Even the best-managed REITs were caught in a bind, and it was ultimately the ones backed by strong parents prepared to lend support that came through. Among the
REITs that raised fresh equity during the crunch with the backing of their parent groups were CMT, CCT, Keppel REIT and Mapletree Logistics Trust.
A number of REITs that did not have strong parents ended up being acquired by other groups. Notably, Allco Commercial REIT's manager was bought by Frasers Centrepoint. MacarthurCook Industrial REIT and its manager were acquired by George Wang, an Australian businessman. Cambridge Industrial Trust's manager changed hands. Meanwhile, Macquarie Prime REIT is now known as Starhill Global REIT, after its manager was acquired by Malaysia's YTL Corp.
Since then, these once-troubled REITs have begun to draw an investor following. Starhill Global REIT, for instance, is viewed as a play on iconic shopping destinations in Singapore, Malaysia and Australia. "YTL Corp is fully committed, and Starhill Global REIT grew by venturing into Australia and Malaysia," Eng says.
More to come
REITs have seen their market valuations rise significantly since the global financial crisis. At current levels, they are trading at an average 5.2% yield based on forecast distributions per unit (DPU) for 2013, and an average 1.24 times their book value. A year ago, they were trading at an average yield of 6.5%, and close to their book values.
That is making it worthwhile to package property assets into trusts. Among the property groups that have indicated an intention to launch new REITs are Overseas Union Enterprise and Singapore Press Holdings. Dynasty REIT with mainland Chinese malls and offices could also revive plans to list after being shelved last year, some market watchers say. M&L, a hotel group that attempted an IPO last year, could try again. A couple of industrial REITs could also be in the pipeline, including one linked to the former managers of Cambridge Industrial Trust.
"We see a lot more new sectors coming up. Last year, we had two hotel IPOs. This year, we are bringing new geographies," Eng says. "There is a likelihood we could expand to Europe because property prices are much cheaper there, and Asians are going to Europe to buy so, we may bring European assets here. It's not unthinkable to bring European and US assets into Singapore."
Meanwhile, the established REITs in the market could expand their portfolios. CMT is now in a position to acquire its parent's 50% stake in ION Orchard, according to Eng. Units in CMT are now yielding about 4%, lower than the property yield on ION Orchard, which means the property can be acquired on terms that would be immediately yield accretive, even if the deal was funded entirely through the issue of new units. CapitaLand's 50% stake in ION Orchard was last valued at $1.4 billion in its books.
"People expect them to put it in. I'm sure ION is yield accretive," Eng says. Indeed, that could well be the deal that renews investor interest in CMT. "It has come to a stage where CMT is so big that to acquire, and for the acquisition to make sense and be yield accretive, it would have to buy a huge property," she adds. Analysts have estimated that ION Orchard could contribute 13% to CMT's earnings before interest and tax in the event CapitaLand's stake in it is acquired.
Fee structure in focus
The ability to grow is not the only quality investors look at these days, though. A decade after REITs first came to Singapore, investors have also become more discerning when it comes to their fee structures and how that influences the behaviour of their managers. Notably, fees linked to the size or growth of the assets in REIT portfolios have been criticised for incentivising managers to acquire assets rather than deliver value for unitholders. Now, there are calls for REITs to introduce more performance-oriented fee structures, and adopt an internal management structure.
Eng says Singapore's REITs were initially based on the Australian model. "We looked at Australia and we adopted their kind of fee structure. As we grew, investors have become more savvy, and REIT managers have to progress," she says. "The REIT manager's fee, from feedback from investors, has to be more performance based." MGCCT, the latest major REIT to hit the market, has a base fee that is tied to DPU and a performance fee driven by DPU growth. That is a standard that other
REITs might follow in the future, according to Eng. "Mapletree is giving you the benchmark."
REITs have to be of a certain size before they can adopt such fee structures, though. "If you come out with a small REIT, you won't even get to pay your employees' salary and rental," Eng remarks.
REITs versus business trusts
Investors have also become more careful in assessing the risks of REITs and business trusts. REITs have definite debt ceilings. Those with a credit rating are allowed debt-to-asset ratios of up to 60%. In practical terms, however, REITs rarely allow their debt-to-asset ratios to stray beyond 50%. Unrated
REITs, on the other hand, need to keep gearing ratios at or below 35%. All REITs are required to pay out at least 90% of their distributable income in order to get the full benefit of their tax incentives.
Some REIT managers say this hampers their ability to grow their portfolios because every major acquisition requires the issue of new units. Eng figures there probably should be some flexibility for REITs to hold back more of their distributable income if it is to improve their assets. "Investors would understand," she reckons. "Managers are trying to lobby [for] that. If they have a good reason for keeping cash, they should not be taxed, especially if it's for capital expenditure. There should be flexibility."
In fact, business trusts are being used for property assets because of the flexibility they offer. Besides not having to pay out all their distributable income, business trusts can also hold substantial development projects. REITs are only allowed to have 10% of their assets exposed to development projects.
Yet, business trusts have not performed as well as REITs. In fact, Singapore investors have endured spectacularly poor results with some business trusts. For instance, the troubled Forterra Trust said in February that it would not be paying dividends for the next three years. Meanwhile, Pacific Shipping Trust and Hyflux Water Trust were both privatised within five years of their listing.
What can business trusts do to improve their marketability? Eng says the sponsors of these trusts ought to adopt a visible cash distribution policy and stick to it. After all, the purpose of a trust is to deliver steady and stable returns through cash payouts to investors. "I want to know if you are going to distribute 50% or 80% [of your distributable income]. Otherwise, why don't you go and adopt a company structure?" says Eng.
Eng adds that business trusts ought to keep their investments focused in a specific field so that investors can understand them more easily. She also points out that managers of business trusts, which do not have a cap on their debt-to-asset ratios, are often tempted to push up their gearing in order to deliver higher returns to investors and earn more fees for themselves. But that can make the market nervous. "If you carve out more than your accounting profit, and you want the investors to pay for it in higher valuation, you must give them clarity in terms of gearing," Eng advises. "If not, they will penalise you."
Sponsors of business trusts might also look into improving their corporate governance safeguards. "For REITs, at least you have an independent trustee," Eng says. Business trusts do not have this particular safeguard, but some of them have begun to look for ways to assure investors that their interests are not being overlooked.
Notably, some business trusts are internalising their management company. Units in Hong Kong-listed HKT Trust, for instance, are "stapled" to shares in its management company. Hence, unitholders also own the management company. HKT Trust also has a distribution and gearing policy, and any change requires the approval of its unitholders. Similarly, Bursa-listed KLCC Stapled Group has shareholders owning both the REIT and manager.
"You can always inject the internal trustee manager [into the trust]. There is nothing to stop you from doing that. You can also get the unitholders to approve the independent board like a listed company. These are things you can do to improve corporate governance," Eng says. Corporate governance standards could also be enhanced by creating an independent trustee as with the REITs, she adds.
Investors more discerning
Whatever the case, investors have become discerning enough to recognise the risks and growth potential of different REITs and trusts. While large REITs backed by major property groups tend to have relatively high valuations, some are higher than others.
For instance, retail property REITs such as CMT and Frasers Centrepoint Trust are trading at yields of 4% to 5%. Eng says that reflects the stability of their cash flows and the long-term growth potential they offer. On the other hand, industrial property REITs such as Cambridge Industrial Trust and Sabana Shariah Compliant Industrial REIT are trading at higher yields of 6% to 7%. That is partly because of the relatively short land tenure, and relatively long leases taken by their tenants. "It's a sector where there is very little you can do to enhance the asset, not like retail [property] and hotels," Eng says.
This does not mean that there is no room for these assets in the market. In fact, diverging valuations for different REITs and trusts are a clear sign of the market's growing maturity. As Eng puts it, CMT came to market a decade ago with a portfolio of local shopping malls that investors were familiar with. "You can touch and feel it. And, in Singapore, it's easy to value." Now, there are 32 REITs and trusts in the market with all manner of assets, located all over the globe. "We've come a long way," Eng says. "Investors have become selective. They know one REIT from the other."

LOAD-DATE: May 28, 2013

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PUBLICATION-TYPE: Newspaper


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8 of 42 DOCUMENTS


The Edge Singapore

May 27, 2013

Corporate: New Listing: TEE International spins off property subsidiary in IPO of TEE Land

BYLINE: Chan Chao Peh

LENGTH: 1098 words

Engineering company TEE International is spinning off its property development subsidiary TEE Land in a Mainboard listing to unlock the value of its property business and raise capital for future growth.
TEE International will issue 115 million new TEE Land shares at a minimum indicative price of 50 cents to raise gross proceeds of at least $57.5 million. Based on that price and a total share base of 446.9 million shares, TEE Land will have a market value of at least $223.4 million. Post-IPO, TEE International will hold at least 70% of TEE Land.
Since TEE International announced plans to spin off its subsidiary last November, its stock has surged about 20 cents to close at 47.5 cents on May 22, giving the company a market value of $221.1 million. On May 15, TEE International shareholders voted in an EGM to approve the listing. Lee Bee Wah, a Member of Parliament and previously a director of TEE International, has also been appointed TEE Land's chairman.
TEE International, listed in 2001, was founded in the 1980s as a general electrical contractor. In 2006, the company ventured into property development. Since then, TEE International has completed six developments, launched 10 others and obtained stakes in eight other
projects that have yet to be launched. The capital value of TEE Land's portfolio stands at $394.6 million.
Jonathan Phua, CEO of TEE Land, explains during a press conference that the listing will help unlock the value of its property portfolio. "For our engineering business, you don't need much leverage from the banks, but property is really capital-intensive. By taking [the property business out], you will see TEE International in a different light. This is something most shareholders want to see," says Phua, who is the nephew of Phua Chian Kin, group CEO and managing director of TEE International.
TEE Land plans to use 42% of the gross proceeds from the listing for future business growth. Twenty-four per cent will be used to repay a loan from parent TEE International, another 18% has been set aside for working capital and a further 10% will be used for the repayment of bank loans. "When the government releases good plots of land, we should have the 'bullets' to bid," says Phua.
For 1HFY2013 ended Nov 30, 2012, TEE Land earned $666,000 on revenue of $6.79 million. In 1HFY2012, the corresponding figures were $2.69 million on revenue of $2.87 million. For FY2012, the company earned $1.52 million on revenue of $7.91 million.
Like TEE International, TEE Land has not set a formal dividend policy. According to the preliminary prospectus, however, the company intends to pay at least half of its net earnings for FY2013 as dividends.
TEE Land's management believes that demand in Singapore's property market will remain healthy, despite the availability of 36,352 unsold new units at the end of last year. "People are upgrading from HDB flats to condominiums. Those already staying in condos are looking for their second or third units for investment," says Phua, who attributes the unsold units to potential buyers' holding out for possible discounts as well as the slew of launches in the market.
The most recent tender for a 10,990.6 sq m 99-year leasehold plot at Kim Tian Road, which closed on April 18, drew 11 bids. The top bid of $550 million was just a shade higher than the second-highest bid of $513.3 million. "I believe they have done their sums. All of us have done our sums. Bidding for land [involves] certain risks that we have to take," says Phua.
On May 15, the government announced plans to put up five more sites for sale, which could add 2,725 residential units to the market. Phua is not worried. "Most of our developments are more than 75% sold. It is not necessary for us to cut prices. We have good margins on these projects," he explains.
Phua believes that, unlike many of the mass-market projects with hundreds of units in each development, TEE Land's chosen niche differentiates it from the competitors. "Most of our developments are freehold and have fewer than 200 units each, allowing us to remain nimble," he says.
Currently, TEE Land has eight unlaunched projects. Locally, they include a wholly owned development at 64-98 Hillside Drive, as well as joint ventures of various stakes in Cactus Road, Geylang, Sam Leong Road and West Coast Highway. It also has one development each in Thailand, Malaysia and Vietnam.
TEE Land's IPO has drawn a couple of big names. Pre-IPO investors include Koh Wee Meng, billionaire executive chairman of hotel operator and developer Fragrance Group, in his own capacity. Together with Tommie Goh and Jeremy Lee Sheng Poh, both of investment firm 2G Capital, Koh has put in a total $4 million for a post-IPO stake of 3.55%.
TEE Land's management declines to say whether there are already plans to go into property joint ventures with Fragrance. "They have shown that they have confidence in us. We hope to have good news soon," says Boon Choon Kiat, TEE Land's finance director-cum-executive director. TEE International's other regular partners in the property business include KSH Holdings, Heeton Holdings, Oxley
Holdings and Zap Piling.
Boon, who joined TEE International in 2000, has been fronting its Thailand and, more recently, other Indochina businesses. Outside Singapore, Thailand is the second-largest market for TEE Land, with its string of joint ventures with the Panichewa family, which besides property, also has interests in non-life insurance, industrial estates, toll ways and car rental. "They are very well connected, very wealthy, and we are very happy and have more plans to work together," says Boon.
He adds that demand for residential projects in Thailand is mainly from local professionals and executives who plan to occupy the property, given the low interest-rate environment. These projects also see investment demand from wealthier buyers - both local and foreign, including Singaporeans. "Thailand is the unpolished gem. We are likely to see more projects and opportunities there, so we need to quicken the pace," says Phua.
TEE Land is also actively seeking distressed assets in Vietnam. Farther afield, the company is looking at countries such as Sri Lanka, New Zealand and Myanmar, where TEE International is exploring a cement-plant joint venture.
"You are looking at a company that is really diversified. We do have exposure in the region. If anything happens to one country, we will not suffer the full impact, unless it is a global situation. We are looking at a very diversified portfolio - and we are continuing to diversify our portfolio," says Boon.

LOAD-DATE: May 28, 2013

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9 of 42 DOCUMENTS


The Edge Singapore

May 27, 2013

Corporate: New Listing: Soilbuild Construction taps Mainboard to fund working capital and expansion

BYLINE: BY GOOLA WARDEN

LENGTH: 1072 words

Soilbuild Construction Group has raised $42 million through an IPO with an eye towards expanding its construction business to Myanmar. In March, the group announced that it had signed an agreement with a Myanmar company to provide consulting and project management services. A month later, the group secured a second contract to provide similar services to a second Myanmar company.
"Myanmar is at a very infant stage and their rules are not clear. We can sit back and wait for the rules to morph and lose first-mover advantage or get in on advisory work, where we can interact with the contractors and see how they operate and understand that market better," says Ho Toon Bah, executive director of Soilbuild Construction, on the sidelines of the media and analysts' briefing. "In a consultancy role, we don't bring our [cash] capital, only intellectual capital. And yes, we are looking for more jobs."
Soilbuild Construction is the seventh IPO this year and the fourth to be listed on the Mainboard of the SGX. Of the IPO proceeds of $42 million, 58.3% will be used for working capital, 23.8% for expansion to regional countries, 11.9% for productivity improvements and 6% for IPO expenses. "We have been largely Singapore-centric, but over the last 12 months we started building our external wing," Ho says.
In the public tranche of the IPO, two million shares priced at 25 cents apiece were available for application. The placement tranche of 166 million shares was placed out by United Overseas Bank and Oversea-Chinese Banking Corp. Post-listing, parent Soilbuild Group Holdings will hold 73.8% of the company, while the free float will be 25%. At the IPO price of 25 cents, Soilbuild Construction's market cap on listing will be $166 million. Trading of the stock will begin on May 27.
Based on the earnings per share of 3.3 cents for FY2012 ended Dec 31, Soilbuild Construction's historic price-to-earnings ratio is just 7.5 times. Post-listing, its net asset value will be 8.3 cents. Soilbuild Construction will also have a dividend policy. "We believe dividends should form a part of any investment, and we've committed to paying out 25% of our net profit," says Ho. The company said it would pay at least 25% of net profit after tax from the date of its listing until Dec 31, and a further 25% for FY2014.
Meanwhile, Soilbuild Construction will continue to source for jobs locally. "Construction demand of between $26 billion and $32 billion is projected for 2013, anchored by public-sector projects," the Building & Construction Authority (BCA) announced earlier this year. Of this, 53% is likely to come from public housing demand and rail construction.
"We started to move into public housing in 2011 and we are quite pleased that we managed to get $250 million of public housing projects," Ho says. Currently, the company has construction projects in Ang Mo Kio, Bukit Batok and Tampines HDB estates.
As at April 30, Soilbuild Construction's order book stood at $511 million. "Over half is internal [from Soilbuild Group] and the other half is external," says Ho, referring to the contracts to build developments for Soilbuild Group. "The split between residential and industrial property is 40:60."
Parent Soilbuild Group Holdings was founded by Lim Chap Huat with a capital of just $25,000 in 1977. In 2005, Soilbuild Group listed on the Mainboard at 31 cents, but was privatised in 2010 at 80 cents.
"When we listed the company in 2005, it was listed as a development company, and construction formed part of its business. Over the years, that company grew with construction, property development and a portfolio of investment properties," Ho recounts. "We believed the complex structure of its business was not understood by investors. Because trading value was low and the stock illiquid, Mr Lim decided that he would buy out the minority shareholders," he explains.
"But since our delisting, we have been working very hard," Ho says, pointing to the various HDB projects the company has clinched. It has also structured some deals with third parties by taking equity stakes in developments such as Angullia Park with Sonangol Land. The company is also developing Lavender BizHub with an equity stake. "These are efforts we've put in, and you see the results in profits and turnover," Ho notes.
Soilbuild Group has also built up a portfolio of industrial properties valued at between $800 million and $850 million. In 2011, the company submitted the winning tender (in a two-stage tender process) of $288.3 million to build a portfolio of properties for JTC (Jurong Town Corp). The properties comprise 10 blocks of flatted factories and amenity centres situated at Kolam Ayer, Kallang Basin and Tai Seng. That could form the pipeline should Soilbuild Group decide to sell its industrial properties into a REIT. Analysts expect Soilbuild Group to list its REIT this year, and as early as end-June.
Ho is confident that Soilbuild Construction can continue to expand its order book. "Since we have an A1 grading, we can tender for public-sector projects of unlimited value," he points out. Indeed, out of the some 1,100 construction companies in Singapore, only 64 have A1 grading. "It gives us a lot of advantages," Ho notes.
"HDB has made an announcement to step up its BTO [build-to-order] programme and we will continue to receive orders," he says. "With the HDB, we have no counterparty risk." The government's white paper on population may have been met with apprehension by Singaporeans, but Soilbuild Construction should benefit. "The population white paper projecting 6.9 million is good news. There are going to be more houses and more buildings to be built and more jobs for us," Ho figures.
As for the government's call to improve productivity in the construction sector, Ho says high labour costs can be absorbed by mechanising some processes such as replacing labour with machines and using precast concrete. "However, what is more worrying is attracting talent such as site engineers. Nowadays, many graduates would rather become hedge fund managers than civil engineers, so you have a brain drain from construction to the banks," Ho gripes.
Nevertheless, Soilbuild Construction is certain future growth would have to come from overseas expansion. "We will continue to look at our external wing to expand to other Southeast Asian countries, in particular Myanmar, which is at a very early stage of growth," says Ho.

LOAD-DATE: May 28, 2013

LANGUAGE: ENGLISH

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10 of 42 DOCUMENTS


The Edge Singapore

May 27, 2013

Corporate: Macquarie International Infrastructure Fund shareholders get chance to invest in Asia's first pay-TV business trust

BYLINE: Goola Warden

LENGTH: 972 words

The $1.4 billion IPO of Asian Pay Television Trust (APTT) is an opportunity for public investors to buy into the first pay-TV trust to list in Asia, and a chance for shareholders of Macquarie International Infrastructure Fund (MIIF) to realise part of the value of their investment. For the public wishing to subscribe, the offer price for APTT units is 97 cents. The offer closes on May 27 at noon, and APTT units start trading on May 29.
APTT will hold Taiwan Broadband Communications (TBC) Group, which is Taiwan's third-largest cable-TV operator. The trust is being formed with the backing of a slate of cornerstone investors that includes Eastspring Investments (Singapore) Ltd, Asian Century Quest Capital LLC, Capital World Investors, Indus Capital Investors LLC, Lion Global Investors, Neuberger Berman LLC, George Soros' Quantum Partners and Oz Management. All in, these cornerstone investors will hold as much as 32% of APTT. The sponsor Macquarie Capital will hold a further 3% of APTT. The remaining 65% of the trust will be held by public and institutional investors.
TBC Group is being sold to APTT by MIIF and Macquarie Korea Opportunities Fund (MKOF), which are both part of Australia's Macquarie Group. The move is part of the process by MIIF to wind itself up, following a strategic review commissioned by its board. Shareholders of MIIF had been pressuring its board to address the persistent discount at which shares in MIIF traded to its net asset value (NAV). The review recommended that MIIF start a joint process with MKOF to realise maximum value for their investment in TBC. It also recommended that MIIF divest its interests in Hua Nan Expressway, Changshu Xinghua Port and Miaoli Wind.
Based on the offer price and estimated transaction costs, the consideration payable to MIIF for its stake in TBC is $510.1 million, which will be returned to its shareholders in the form of a capital reduction. Existing MIIF shareholders have the option of being paid in cash or in the form of APTT units. MIIF shareholders who have elected to get cash will receive $443.29 for every 1,000 MIIF shares. MIIF shareholders who opt for APTT units will be entitled to 457 APTT units for every 1,000 MIIF shares held.
Should MIIF's shareholders take the cash or units in APTT? Why would TBC be any more interesting under APTT than MIIF?
Unlike the fund, the business trust will be able to pay out more than its accounting profit to investors, according to bankers. Also, a business trust structure makes it more difficult for disgruntled minority shareholders to call for an EGM to disband the trust. Sponsor Macquarie Capital will control quite a bit of the trust through the trustee-manager and a small stake in the trust, as well as through the appointment of the trust's directors. That could give APTT a better chance of taking the time it needs to grow its portfolio and develop its assets.
TBC Group is effectively APTT's "seed" asset. Owned and managed by Macquarie Capital since 2006, TBC Group owns more than 751,000 basic cable-TV revenue-generating units as at Dec 31. The company operates exclusively in Taiwan, where it offers basic cable-TV, premium digital cable-TV and broadband services to households and businesses in northern and central Taiwan, including South Taoyuan, Hsinchu county, North Miaoli, South Miaoli and Taichung city.
APTT has a two-pronged growth plan. It aims to raise distribution per unit (DPU) via acquisitions by investing in cash-generative pay-TV businesses and broadband businesses in Taiwan, Hong Kong, Japan and Singapore. Organically, APTT plans to increase TBC Group's revenue by increasing the take-up of premium digital cable-TV services, promoting the bundling of cable-TV and broadband services, driving retention and building loyalty, and upgrading the HFC network to 870MHz to offer better service to subscribers.
APTT's DPU is projected at 7.29 cents for this year and 8.25 cents for next year. The yield, based on the forecast DPUs, is 7.51% for FY2013 and 8.51% for FY2014. The trust intends to distribute 100% of its distributable free cash flows. Distributions will be made on a semi-annual basis, with the amount calculated as at June 30 and Dec 31 each year. Post-IPO, the NAV is projected at 93 cents.
There are risks, though. Taiwan's pay-TV and broadband market is highly competitive, says UOB Kay Hian in a report to clients. In addition, there has been a reduction in basic cable-TV rate caps. The ability to provide attractive content also depends on supply agreement relationships and cooperation with content providers, which could prove ephemeral.
In FY2012, TBC Group's operating profit decreased 10% to $132.8 million from a year earlier, owing to some accounting issues, including currency exchange loss on USD-denominated shareholder loans and tax penalties, according to the IPO prospectus. Because of the exchange loss and tax penalties, TBC Group's profit before tax decreased $60.2 million to $10.6 million in FY2012, from $70.8 million in FY2011. As a result, its loss for the year increased $21.7 million to $26.3 million in FY2012, from $4.5 million in FY2011. After adjusting for non-recurring items, TBC Group's net income for FY2012 was $74.2 million.
According to the trust deed, the trustee-manager is entitled to a base fee of $7 million, which, if pro-rated, amounts to $4.1 million for this year. The base fee will be adjusted annually based on Singapore's Consumer Price Index, and is assumed to be $7.2 million for FY2014, according to the prospectus. Directors' fees, including independent directors' fees and salaries of the key executives of the trustee-manager, will be paid out of the base fee. The trustee-manager has elected to receive 100% of the base fee in cash for FY2013 and FY2014. There will be no performance fee for these two years.

LOAD-DATE: May 28, 2013

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The Edge Singapore

May 27, 2013

Corporate: UE and STC chart new courses post-WBL

BYLINE: Assif Shameen

LENGTH: 1717 words

And then, there were two. The battle for control of WBL Corp, one of Singapore's most venerable firms, ended abruptly on May 13 when The Straits Trading Co (STC), one of the two contenders - themselves old storied firms in their own right - threw in the towel in the long-drawn-out tug of war, paving the way for rival bidder United Engineers (UE) to walk away as the victor.
"We are delighted that we won," exclaims Jackson Yap, UE's CEO, who had personally shepherded the deal to its culmination. STC and its concert parties accepted UE's revised offer to acquire their entire 44.58% stake in WBL for $4.50 a share, valuing the firm at over $1.25 billion.
The battle almost went to the wire, but in the end, STC, WBL's single-largest shareholder, chose to take the cash rather than duel it out with UE. WBL was coveted by the two companies because it controls two listed flexible printed circuit makers, distributes a range of luxury cars in Southeast Asia, including Bentley and Bugatti, and has a high-end property portfolio in five cities in China that is valued at around $1.1 billion.
For the second time in five years, a corporate battle had pitted two of Singapore's most prominent business families against each other. UE's controlling shareholder is the Lee family, which co-founded the Oversea-Chinese Banking Corp (OCBC), while STC is controlled by the heirs of the late Tan Chin Tuan, the man who once ran the bank and its expansive and loosely connected stable of companies for the Lees. In early 2008, Tan's family firm, Tecity, led by his granddaughter Chew Gek Khim, grabbed control of STC in a protracted battle with the Lees. In many ways, the tussle for WBL had mirrored the earlier battle between the two families for STC itself. While the Tans handily won the first battle, the Lees came up tops in the second.
Revised offer
Until the very end, it looked as if UE's bid might not have enough momentum to cross the line. Over the past decade or so, several well-publicised takeover battles as well as privatisation exercises have failed by the smallest of margins, and many analysts had predicted WBL's fate might not be too different. Indeed, STC had allowed its earlier bid for WBL to lapse because it was confident that its near-45% stake would keep it at the helm.
In the end, it came down to sheer numbers. UE needed just over 9% to take it over the line. Its initial offer of $4.15 a share got little traction, as WBL's stock remained above the offer price for most of the offer period. Two weeks ago, UE came back with a revised offer of $4.50 a share. Even at that point, the betting was that the race was too close to call, but on the evening of May 13, STC decided to accept UE's offer, which put an additional $500 million in its kitty and added over $80 million to its bottom line. For Chew, the decision was whether to take UE's money or let the battle drag on. She decided to accept the offer and take the cash.
For UE, the merger is "clearly a major transformational acquisition", beams Yap. "It will dramatically change UE itself," the CEO tells The Edge Singapore. Yap has long articulated a strategy to grow the construction, engineering and property firm inorganically, but by his own admission, has been hampered by a lack of attractive targets. Yet, when STC first announced its bid for WBL last November, Yap knew it was time for him to move. It was a once-in-a-lifetime opportunity to grab something in which he could see clear synergies.
WBL and UE are small property players in their own right, but the merger creates a formidable mid-sized real-estate unit with a regional footprint. "UE has properties, but with WBL, we also get exposure to five cities in China - Chengdu, Chongqing, Suzhou, Shanghai and Shenyang - which is quite exciting for us," says Yap, a lifetime construction industry insider whose family hails from South Africa. Moreover, the acquisition also brought in a new business in the form of the distribution of luxury cars to UE's broad portfolio.
Yet, there are some parts of the merged entity's portfolio that need a careful look. One big issue WBL's new owner must now grapple with is the two electronics companies that it owns: Nasdaq-listed Multi-Fineline Electronix Inc (M-Flex) and SGX Mainboard-listed MFS Technology Ltd. Both companies make fairly similar components used in mobile electronic devices, such as smartphones, tablets and portable barcode scanners, and combining them makes sense. Indeed, M-Flex first announced a $791 million bid to take over MFS in March 2006, but the takeover dragged on for more than a year despite M-Flex's attempts to withdraw the bid, which were rebuffed by the Securities Industry Council. Eventually, M-Flex's offer lapsed.
For two years now, there has been talk that WBL was keen to see better synergies between its two separately listed subsidiaries. According to Yap, it is too early for him to say what UE might do as the new owner of M-Flex and MFS. The board of WBL had already started a new initiative even before UE launched a bid for the company, he notes. Last December, M-Flex filed a shelf registration with Nasdaq over WBL's 62% beneficial ownership. While Yap refuses to be drawn on M-Flex-MFS moves, he promises that he and his board will look at all avenues open to chart a new course for its flexible printed circuit business. "Once the deal is completed, we will engage with the management on what we need to do to move forward with those two companies."
UE will delist WBL if its stake crosses the 90% threshold, says Yap. But post-merger operations are unlikely to be a walk in the park even for a company like UE, which is financing the deal with a combination of internal funds and debt. For now, Yap refuses to say whether there will be an asset sale, listing of investment properties as a real estate investment trust (REIT) or perhaps even a cash call to keep debt levels low so that UE is ready to pounce on another investment if the opportunity emerges. "It's far too early for us to say what we will do because the deal hasn't really closed, but we will look at all the options and weigh one against the others."
Finding synergies
Once the WBL deal goes through over the next few weeks and UE takes charge, the next step for Yap would be to oversee the integration of the two companies and "see where the synergies are and look at how we can restructure and build from there". In the months following the merger, the management of the enlarged entity will have its hands full, says the UE head honcho.
For her part, with STC's WBL stake sold and the firm's hotels put in a joint venture with Far East Group, Chew now has a drastically shrunk business and lots of cash. Post-WBL-sale, does it makes sense for STC to remain listed, with a Malaysian tin firm - Malaysia Smelting Corp - that is already dual-listed in Singapore, an office block and a minority stake in a hotel group? After her Tecity group took over STC in 2008, the firm's shares were very thinly traded, so Chew went about remaking the company into one that institutional and retail shareholders would want to own. "With the bulk of the restructuring completed, we are well placed to increase our shareholder base as and when conditions are right," she says. The share swap with Third Avenue and Aberdeen Asset Management - buying their WBL stakes and giving them a stake in STC - was the first step. "The next phase is to work towards finalising the structure of Straits Trading as a holding company of businesses in which it has strategic stakes and is an active investor," Chew points out.
Moreover, she adds, STC hasn't really exited the hotel business. "We used to have 100% of a hospitality business with around 2,000 rooms. Now, initially we will have a 30% interest in a venture with about 6,000 rooms, with the potential to gain scale rapidly with an excellent partner" in one of Singapore's largest property groups. "And we plan to grow this platform to around 12,000 rooms in the not-too-distant future," Chew notes. According to her, STC still has a large property portfolio worth about $600 million, comprising mainly residential properties, including nine Good Class Bungalows and some residential apartments, as well as land holdings in Malaysia besides its flagship office building on Battery Road.
STC's plans
What will STC do with the $500 million cash hoard that it will receive from WBL? "We will return any cash in excess of our operational needs to shareholders" in the form of dividends, Chew tells The Edge Singapore after the firm had tendered its shares to UE, following the revised offer. "We anticipate using some of the funds to invest in businesses that are good generators of cash." Will it buy small stakes in companies or go for majority control? "It can be 100% of a business or stakes of less than 100% in a business in which we can add value and have a say," Chew says.
For now, STC is likely to keep searching for acquisition targets. "We will continue to execute our strategy of building STC into a holding company with stakes in businesses that are good generators of cash," Chew says. STC's business model as an investment holding company "is not dissimilar to that of Berkshire Hathaway", she points out, referring to billionaire investor Warren Buffett's conglomerate. Trying to imitate Berkshire is a long-term aspirational target rather than part of a short-term strategy, but Chew says STC is committed to offering its shareholders "a stake in a holding company with exposure to different businesses in which we are active investors and in which we can continue to add and create value".
STC doesn't intend to be a passive investor for the long haul. Instead, Chew says her firm wants to be an active participant in the businesses that it invests in, adding value to them by contributing its skills and sharing with them its knowledge of finance, capital markets and even corporate action. She knows finding the right companies and executing strategies isn't going to be easy. "We hope there will be businesses that will welcome us as investors and that can work closely with us," she says. Losing WBL to UE wasn't an opportunity passed up, but a chance for STC, which now has a strong balance sheet and $500 million more in cash, to take a different course to growth.

LOAD-DATE: May 28, 2013

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12 of 42 DOCUMENTS


The Edge Singapore

May 27, 2013

Cover Story: Pacific Basin's winning formula

BYLINE: Kang Wan Chern

LENGTH: 2817 words

When shipping veteran Mats Berglund joined Pacific Basin Shipping as its new CEO in June last year, the dry bulk shipping business was in a moribund state. The Baltic Dry Index, a benchmark for global dry bulk rates, had fallen by more than 90% from its high in 2008 to 830, its weakest levels since 1986, battered by rising fuel prices and an over-abundance of capacity.
Yet, Berglund had little doubt that Pacific Basin would be one of the eventual survivors in the bulk carrier business. "[It's] an excellent company with a strong business model and correct focus in the Handysize and Handy-max vessel segments, which is exactly where we need to be to continue outperforming the market," he tells The Edge Singapore during an interview in Hong Kong last month. Now, he is carefully expanding Pacific Basin's capacity to position it for an eventual upturn in demand.
Headquartered and listed in Hong Kong, Pacific Basin is the world's largest owner and operator of Handysize and Handymax vessels, the two smallest categories of dry bulk ships, ranging from 20,000 to 60,000 deadweight tonnes (DWT). By comparison, the mammoth Capesize vessels are as big as 200,000 DWT. Dry bulk ships transport all manner of commodities, from iron ore to grain. Since the global financial crisis, demand for commodities weakened just as vessels ordered during the boom flooded the market, leaving the industry awash in red ink.
Pacific Basin's large fleet of relatively small vessels helped it stay afloat. Its fleet currently consists of 143 Handysize and 50 Handymax ships. The company also runs 14 dry bulk offices around the globe, which gives it greater ability to negotiate a good mix of spot and long-term cargo contracts. In FY2012, Pacific Basin moved 41 million tonnes of dry cargo, about two thirds of which consisted of agricultural produce such as grains, fertiliser and sugar as well as construction material such as logs, steel and cement. It also shipped coal, metals and minerals such as sand and gypsum in smaller proportions.
"You can't win a cargo contract with a small fleet because chances are, you won't have the right ship in the right place at the right time," says Berglund. "We have the world's largest fleet of Handysize and Handymax ships with dry bulk offices across six continents, so our customers can rest assured that if one ship is late, we can always pull in another one to move the cargo they need."
In fact, there has been a lack of reliable Handysize and Handymax vessel operators to meet the needs of smaller-scale customers, according to Berglund, which has enabled Pacific Basin to command relatively high freight rates. In 1Q2013, Pacific Basin's Handysize vessels were moving cargo at US$8,820 a day, a 35% premium to the US$6,530 earned by the rest of the Handysize market. In the Handymax market, Pacific Basin managed to secure rates averaging US$9,930 a day, which was 29% more than the US$7,680 a day earned by other similar vessels in the market. In FY2012, Pacific Basin outperformed the market by 44% and 31% in terms of Handysize and Handymax rates respectively.
Besides helping Pacific Basin win the best cargo contracts across the market, the large fleet of small vessels also positions the company to win "backhauls". Backhaul cargoes represent the load a ship hauls on its return voyage. The nature of the commodities trade is that vessels are usually fully laden when sailing from a resource-rich country but empty when sailing back from a resource-hungry country. "Our rates are higher than average because of our cargo contracts, which enable us to ship cargo in both directions. Most ship owners are laden one way and empty going back, which is just 50% laden. But our cargo contracts ensure that we have a 70% to 80% laden percentage, or utilisation rate, on our fleet," Berglund explains.
Yet, Berglund was still forced to make some tough decisions within months of joining the company, though. For one thing, Pacific Basin's fleet of roll on/roll off (RoRo) vessels, which are used to transport wheeled cargoes such as cars, trucks and trailers, had become unprofitable. "At the time of my arrival, it became apparent that prospects for our large RoRo vessels had turned negative and would not improve. Thus, we made the decision to cut the loss-making RoRo business to focus on our core dry bulk segment," Berglund says.
In September 2012, Pacific Basin made a deal to sell six RoRo ships to Italy's Grimaldi Group. Under the agreement, the Italians will buy at least one of the vessels by the end of June, followed by at least one vessel purchase in each six-month period until 2015. That move resulted in Pacific Basin's first annual loss since its listing in 2004. For 2012, the company reported a loss of US$158.5 million ($200.1 million) versus earnings of US$32 million in 2011, mostly as a result of losses incurred from the discontinuation of the RoRo business. However, Pacific Basin's revenue in 2012 climbed 10% to US$1.44 billion, driven by higher revenue days achieved by its fleet during the year.
Fleet expansion strategy
Berglund plans to take advantage of the weakness in the dry bulk market to expand Pacific Basin's fleet of bulk carriers. Currently, the majority of the company's ships are chartered in as a result of high vessel values between 2007 and 2008, which made ships very expensive to own. With the slump in prices over the last couple of years, however, Berglund figures it is an opportune moment to gradually increase the number of owned-vessels in the company's fleet. Since joining Pacific Basin, Berglund has already bought eight vessels averaging 6.5 years in age in the second-hand market at an average price of US$15.4 million each.
"We are still outperforming the market and breaking even in this market. And, we have a strong balance sheet with 14% gearing and positive cash flows of US$149 million. So, we can afford to be counter cyclical and buy more vessels now," says Berglund. "So far, we have focused on Japanese-built, second-hand ships because we prefer not to add to the oversupply in the market."
But Pacific Basin's strategy does not represent the prevailing mind set in the industry. In the past year, many shipping companies have been ordering new and larger vessels, which are supposed to be eco-friendly and more cost-efficient to operate. The way Berglund sees it, however, the smaller, second-hand vessels he is buying have operating efficiencies that are superior to the big, new vessels. "The fuel savings from a new ship are not enough to make up for the extra capital invested compared to buying a second-hand ship," he says. "At current slow-steaming speeds of 10 to 11 knots, the difference in fuel consumption between a new and second-hand ship is also much smaller. So, it does not always make sense to buy these eco-ships marketed by the yards."
In addition, second-hand vessel values have fallen by a larger proportion than for newbuild vessels over the past year. "When buying new vessels, you should always buy the one which has come down the most in terms of value for better upside," says Berglund. "We need to expand our fleet when prices are low because this is a very capital-intensive industry and what you pay for your ship is more important than anything else. You have to enter and exit the market at the right time and so far, the returns have been higher for second-hand vessels."
Berglund is not ruling out the idea of buying newly built vessels, though. He is already planning to include more newbuilds in Pacific Basin's fleet with the delivery of 10 Japanese-built Handysize and Handymax vessels and six newbuild chartered in vessels over the next two years. Berglund is also keen to add several newly designed 37,000 to 38,000 DWT Handysize vessels to the Pacific Basin fleet. "We are looking to add these larger Handysizes to our fleet and deploy them in some of the routes where they will be optimally used. Because these are new designs, there are no second-hand ships available, so we may go to the yards. We may also consider chartering in some new eco-ships to see how they perform at different speeds."
Much ultimately depends on prices of second-hand vessels, which tend to rise and fall more sharply than newbuilds in the face of the shifting outlook for the industry. This is because second-hand vessels are available immediately while newbuilds can take years to be delivered. Yet, the two segments of the market are tightly intertwined and constantly influence each other. In March, Norwegian ship tycoon John Fredriksen created a stir when he put in a mega-order for as many as 32 Capesize ships at various yards in South Korea and China, reports note. The move led to speculation that the dry bulk market could soon turn the corner, which in turn gave prices of second-hand vessels a boost.
Currently, a five-year-old second-hand Handysize vessel costs an average of US$12 million each, up from US$11.7 million in 4Q2012, according to data from Drewry. By comparison, new Handysize vessel values were down to US$18.3 million in 1Q2013 compared with US$18.7 million in 4Q2012. If the difference between second-hand vessels and newbuilds continues to narrow, Pacific Basin might begin buying more new vessels, Berglund says.
Improving prospects
Whatever the outlook for the prices of second-hand vessels versus newbuilds, Berglund is certain that demand for Handysize bulk carriers will rise in the years ahead. For one thing, capacity growth in the segment has trailed the rest of the dry bulk market with fewer deliveries and a higher level of scrapping. In 1Q2013, the global Handysize fleet registered no growth compared to y-o-y growth of 1.6% in the other segments of the dry bulk market, according to shipping research firm Clarksons.
Industry data suggests that growth in the number of Handysize vessels in the market will likely remain muted for the next few quarters. Notably, the Handysize order book is currently the smallest in the dry bulk market. In 1Q2013, there were just 389 vessels with a combined 12.5 million DWT of capacity on order, according to data from Drewry. That represents 14.6% of the existing Handysize capacity in the market. Moreover, in 1Q2013, just 2.2 million DWT of new capacity were delivered, while 1.3 million tonnes of new orders were cancelled. "Handysize is the only dry bulk sector that is not crippled by oversupply," Drewry says in a 1Q2013 sector report.
Not surprisingly perhaps, spot rates for Handysize vessels are now inching upwards, ahead of the harvest season in the US and South America in 2Q2013. Indeed, the Baltic Handysize Index - which compiles spot rates for Handysize vessels - stood at 554 as at May 22 compared with 464 on March 31. "The second quarter is the harvest season in most parts of the world, bringing opportunities for smaller vessels. Handysizes, which are primarily used on shorter hauls and coastal trade, will find demand less disturbed by, if not completely cushioned from, the doubtful global growth outlook," Drewry says.
Berglund figures that Pacific Basin is set to do well in this environment. "Demand is looking pretty good, particularly with Chinese imports of minor bulks growing 14% y-o-y in 1Q2013 and dry bulk imports into China growing 7% y-o-y in 2012," he says. Minor bulk refers to cargo usually carried on Handysize vessels such as soybean and sugar as well as steel and minerals. On the other hand, major bulk refers to commodities such as coal, iron ore and grains that are usually shipped on the larger Panamax and Capesize carriers. "Our segment should see higher returns than [with] the larger ships and things will gradually get better, but we have to be patient as this will not happen overnight," Berglund says.
Meanwhile, Pacific Basin also operates a small but profitable towage business, which could help support its growth. In FY2012, PB Towage contributed up to 15% of Pacific Basin's total revenues. With a fleet of 44 tugs and barges, it provides towage support to offshore energy operators in Australia. In FY2012, PB Towage increased its involvement in the Gorgon offshore gas fields in Western Australia with the purchase of Singapore-listed Ezion's one third stake in Offshore Marine Services Alliances (OMSA). OMSA is an offshore marine logistics joint venture now owned by Pacific Basin and Australian offshore staffing company Skilled Group.
This year, PB Towage sealed an agreement with Europe's Boluda Towage and Salvage to tap opportunities in providing towage support to liquefied natural gas (LNG) terminals in the region. It also plans to open a harbour towage in the Port of Newcastle by June. "PB Towage has been growing and helping to boost our revenues since we diversified into the towage business in 2007," says Berglund. "We expect this division to contribute strongly to our FY2013 earnings."
Best bulk carrier?
Sweden-born Berglund, 50, has spent most of his career in the shipping industry. He started out at the Swedish family-owned conglomerate Stena in 1986. During his time there, he was group controller of Stena Line, the group's ferry operating business; and later chief financial officer for Stena's tanker shipping arm, Concordia Maritime. He was also CFO of StenTex, a joint venture in which Stena was invested, which managed the tanker and marine-related offshore support activities for US oil company Texaco.
Berglund eventually rose to the post of president of Stena Rederi, the parent company of Stena's shipping businesses. In 2005, Berglund left Stena to head the tanker division of New York-listed Overseas Shipholding Group. In 2011, he was appointed COO of Singapore-listed Chemoil Energy. He left the following year to head Pacific Basin.
The company traces its roots to 1987 when Chris Buttery and Paul Over, who worked at companies linked to the Jardine Matheson group, formed Pacific Basin Shipping and Trading as a specialist Handysize bulk carrier operator. The company listed on the Nasdaq in 1994, but was subsequently acquired and taken private in 1996 by Malaysian shipping conglomerate MISC. Over and Buttery were kept on as employees for two years with Over even moving to Kuala Lumpur to oversee the business. The two founders eventually walked away with some cash and the rights to use the Pacific Basin name. In 1998, after their non-compete deal with MISC expired, the pair
relaunched Pacific Basin Shipping, once more to focus on the Handysize bulk carrier sector.
The founders have since severed ties with and sold off their shares in Pacific Basin. The largest shareholders of the company these days are a group of institutional investors, which include Aberdeen with an 18% stake, Canadian Forest Navigation with 7.7%, Mondrian Investment Partners with 6% and JP Morgan with 5.8%.
Shares of Pacific Basin are down by about 4% this year. The company has a market capitalisation of HK$8.8 billion, or 26.5 times forward earnings. Its shares offer a dividend of 1.1%. Of the 21 analysts who cover Pacific Basin, nine have "buy" calls on its stock with an average 12-month target valuation of HK$4.71. Eight recommend a "hold" or are "neutral" on the stock, while four are calling for a "sell".
Berglund does not envision an easy time in his new job. Freight rates are expected to remain generally weak for the rest of the year, owing to a persistent oversupply of tonnage in the dry bulk market. In 1Q2013, the dry bulk industry took delivery of 18 million DWT of new capacity, according to Clarksons. Factoring in the seven million DWT of capacity taken out of the industry as a result of vessel scrapping, this translates to a net growth of 8.4% y-o-y globally. That has made it tough for most bulk carrier operators to make any money in the business.
"There are still too many ships around, primarily in the larger-size segments and this is influencing rates in our Handysize and Handymax segments," Berglund says. When new vessel deliveries peaked in FY2012 for instance, spot rates for Handysize carriers were down 28% y-o-y, while spot rates for Handymax carriers were down 34% y-o-y, according to data provided by Clarksons and Bloomberg.
Yet, Pacific Basin is in better shape than most of its peers. Notably, it has already covered 50% of its contracted Handysize revenue days for the remaining three quarters of 2013 at US$9,500 a day. Pacific Basin has also covered 68% of its contracted Handymax revenue days at US$11,020 a day for the rest of the year.
"Dry bulk markets will continue to stay weak this year but we will continue to outperform the market and do better than our peers in the larger-ship segments," Berglund says. "We have a strong balance sheet which enables us to execute our strategy of growing our fleet at attractive valuations and position ourselves for a cyclical upturn. We are already the world's largest Handysize operator and we will work hard to make our position even stronger."

LOAD-DATE: May 28, 2013

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13 of 42 DOCUMENTS


The Edge Singapore

May 27, 2013

Cover Story: Courage Marine, Mercator cut capacity to limit losses

BYLINE: ----

LENGTH: 1514 words

Hsu Chih-Chien, chairman of Singapore-listed dry bulk ship operator Courage Marine, has been reducing the size of the company's fleet over the past three years, and is not planning to make new investments anytime soon. "We feel that the market is going to be poor over the long haul and the bigger the fleet, the more dire the strain on the owner," Hsu tells The Edge Singapore.
Courage Marine is one of a number of Singapore-listed bulk carrier operators struggling to keep their heads above water as freight rates plumb to their lowest levels since 1986. With a market value of just $72 million, the company operates a fleet of four Capesize carriers and one Supermax vessel. Mercator Lines, another locally-listed bulk carrier operator, is not a big player either with a market capitalisation of $151 million and a fleet of 13 Panamax carriers. Meanwhile, STX Pan Ocean, which has a market value of $720 million, is being put up for sale as its parent desperately tries to fend off bankruptcy.
With such small fleets, neither Courage Marine nor Mercator are able to emulate the strategy of Hong Kong-listed Pacific Basin Shipping and form large trade networks to serve a broad range of customers. Instead, they both rely on contracts with specific customers. That leaves them especially vulnerable to low freight rates, and puts them at risk of having to sell their vessels at bargain basement prices, even as the big players expand.
Dry bulk carriers are used to ship raw materials such as coal, iron ore and grain. Since 2010, the Baltic Dry Index (BDI), which tracks the rates carriers charge to ship these commodities, has fallen by about 80% to 830 currently, weighed down by an oversupply of capacity and the continued delivery of new ships. Last year, new deliveries peaked at 98.6 million deadweight tonnes (DWT), which expanded industry capacity by more than 12% y-o-y, according to industry data.
With sinking BDI and rising supply of vessels, the prices of ships have declined sharply. According to data provided by Drewry, the price of a new 170,000 DWT Capesize bulk carrier is now about US$44.3 million ($55.77 million), or 23.5% less than three years ago. On the other hand, a second-hand, five-year-old Capesize vessel would cost about US$28.2 million, or 48% less than three years ago. Capesize vessels are at least 100,000 DWT in size. Rates in this segment of the dry bulk sector have suffered the most.
Prices are falling even as the pace at which new vessels are being delivered across the industry is slowing. This year, global dry bulk capacity is expected to rise by as little as 4.2% compared with 12.3% in 2012. It is expected to grow at an even slower rate of 2.6% next year. However, the indications are that vessel supply growth could begin accelerating from 2015. Indeed, a total of 7.5 million DWT of new capacity was ordered in 1Q2013, about three times the orders received in 4Q2012, according to Drewry. About 67%, or five million DWT, of the new orders received were for Capesize vessels, more than what was ordered during the whole of last year.
Where are these orders coming from? Some of the largest and most deep-pocketed bulk carrier players in the world are choosing to expand, betting that the BDI and vessel prices are not likely to slide much lower. Among them are companies linked to billionaire John Fredriksen including Frontline 2012 - which is listed in the US and Norway - and Golden Ocean Group, which is listed in Norway. Frontline recently placed orders for as many as 32 Capesize vessels from yards in South Korea and China, while Golden Ocean Group is also on the prowl for more Capesize vessels to add to its current fleet of 13 Capesizes. Meanwhile, Pacific Basin is waiting to take delivery of at least 18 new and second-hand vessels. "The new lows in newbuilding prices lured cash-rich owners to order more ships in large numbers blighting the recovery prospects for this sector," says Drewry in its 1Q2013 dry bulk sector report.
That is bad news for Hsu. "It is almost farcical that owners are buying more vessels in the past quarter when freight rates have been [at] rock bottom levels and have shown absolutely no hint of improving. And the largest orders are for Capesizes, where freight rates are the worst in the dry bulk market," he grumbles.
Staying slim
While the heavyweight players expand their fleets, Courage Marine has been slimming down to keep its costs low. Last year, the company sold five older Capesize and Supermax dry bulk carriers, cutting its fleet capacity by more than 50% to 265,688 DWT. It subsequently replaced the five vessels with two second-hand Capesize vessels and one Supermax vessel, taking the company's fleet size to the current four vessels with a combined capacity of 417,376 DWT.
"Many of our ships are mainly on contracts to move mainly coal and ore, and occasionally woodchips and bauxite as well as grain and soybean for specific companies in China and Taiwan," Hsu says. "We are keeping our fleet occupied by deploying them on specific trades in our network across Asia, but we are not going for any massive expansion in the foreseeable future."
For 1Q2013, Courage Marine reported a 12% decline in revenue to US$5 million and a loss of US$622,000, compared with a loss of US$1.2 million in 1Q2012. The company is 1.4 times geared, according to Bloomberg data. Hsu is hoping to nudge the company's bottom line into the black and ride out the slump. "We have the advantage of being able to keep our operating costs and debt levels low, which will help us survive in this market," he says. "We keep a very experienced senior management team for one, and we also save a lot by sourcing for second-hand parts from demolition yards in China when replacing parts for our ships."
Cutting losses
Its Singapore-listed peer Mercator is also trying to lower its running costs in order to survive. In 1Q2013, Mercator returned three Panamax vessels on long-term charter ahead of schedule. The ships were secured at the peak of the dry bulk cycle in 2007-08 at an average charter rate of US$25,000 a day. Spot Panamax rates are now hovering at US$10,000 a day, making the charters unprofitable for Mercator. As compensation for the early terminations, Mercator is paying its charterers US$29.4 million in cash and new Mercator shares.
During the quarter, Mercator also sold its 280,000 DWT Very Large Ore Carrier (VLOC) Sri Prem Putli to South Korean shipping company Polaris Shipping. At US$44.4 million, the sale price for the VLOC included an attached 14-year charter contract with Brazilian miner Vale to ship iron ore from Brazil to China, which was in its fifth year. Mercator had taken delivery of the vessel for US$85 million in 2009. Mercator now operates a fleet of 13 vessels of between 70,000 and 90,000 DWT.
Mercator is a subsidiary of Indian coal mining and logistics company Mercator Ltd, and specialises in the transport of coal to India from Australia and Indonesia. It also ships iron ore from India to countries such as China. In general, the company aims to have at least 60% of its fleet running on time charters ranging from 11 months to 12 years.
For 1Q2013, Mercator reported a 26% decline in revenue to US$108.7 million and a loss of US$78.4 million, versus earnings of US$7.1 million in 1Q2012. The losses included a non-recurring charge of US$23 million from the sale of Sri Prem Putli. "The Panamax segment suffered a striking decline in returns in 2012 as supply increased while demand failed to show much vigour, failing to absorb the influx of vessels into the already massive fleet," Drewry noted in its report. In 2013, the global Panamax fleet is expected to swell by 9%.
On the positive side, reducing its fleet enabled Mercator to strengthen its balance sheet. As at March 31, its gearing was 0.6 times, down from 0.74 times at end-2012. In the months ahead, the company aims to continue paying down its debt and improve its cash flow.
Some analysts see some reprieve around the corner for operators of Panamax vessels such as Mercator. In 1Q2013, demand for the vessels climbed 5% versus the previous quarter on higher grain cargoes. "With 2Q being the harvest season in many places, Panamax vessels will prosper from this trade in the coming quarter," notes Drewry. "[Meanwhile], coal is gradually becoming the most traded commodity in the dry bulk sector, and is taking the sector out of its current slump. Spare coal in the US for exports will continue to generate employment for coal-carrying bulkers, particularly Panamaxes."
Raymond Yap, an analyst at CIMB Research, also notes that Capesize spot rates have picked up in recent weeks. However, they are still below the estimated breakeven operational costs of around US$7,500 a day for such vessels. "Even by 2015, Capesize rates may not experience a full recovery due to the glut of ships," he says in a recent report.
Against this backdrop, small players in the bulk carrier sector such as Courage Marine and Mercator are likely to continue finding themselves at a significant disadvantage versus the heavyweights.

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The Edge Singapore

May 27, 2013

Corporate: Coca-Cola regroups in Malaysia, Singapore

BYLINE: Leu Siew Ying

LENGTH: 1591 words

The Coca-Cola Co's state-of-the-art bottling plant in Malaysia, built on a greenfield site amid rolling hills near the Kuala Lumpur International Airport, is so remote that visitors approaching it on the access road from the highway might think they are lost were it not for trucks emblazoned with its familiar red logo rumbling past.
Opened in 2011, within a year of the ground-breaking ceremony, graced by no less than Malaysia's Prime Minister Najib Razak, the facility has several green features, including a mechanism that harvests roof water and double-glazed walls and skylights that keep the factory floor cool and bright. The Malaysian facility now has four bottling lines in operation. It also has equipment to produce PET bottles and clean glass bottles returned by consumers. The 31-acre site that the plant occupies is large enough for two more bottling lines, and Coca-Cola has an option to purchase an adjacent 10-acre site for expansion in the future.
The bottling facility is part of a RM1 billion ($415 million) investment programme in Malaysia that Coca-Cola launched after it decided in 2009 to terminate a 75-year-old bottling arrangement with Fraser and Neave (F&N) and take charge of its own destiny in the region. "They have their brands and we have our brands. We wanted to bring our portfolio to life as we have done in other markets and we felt constrained [in] doing what we want to do," says Gill McLaren, Coca-Cola's general manager for Malaysia, Singapore and Brunei. "We feel we have relaunched Coke since we took it back."
Industry watchers say Coca-Cola's sales in Malaysia had been flat for some years, while sales at F&N had been growing steadily. One reason for this was, under its agreement with F&N, Coca-Cola could not introduce isotonic drinks and juices, which have been some of the fastest-growing segments of the beverage sector. On the other hand, F&N was not allowed to introduce colas or lime-based drinks. F&N was also prohibited from expanding into geo-graphical markets beyond its bottling agreement with Coca-Cola.
Coca-Cola maintains that the parting of ways with F&N was "very amicable". Industry watchers, however, say Coca-Cola's move did not go down well with F&N at first. "Initially, it was hostile," says an analyst, who declines to be named. F&N subsequently came to realise that breaking with Coca-Cola was inevitable, and the move could potentially open a whole range of opportunities for growth, he adds. "They worked out an agreement for each of them to introduce new products and grow new brands and get some market impact during a transition period while Coke built its plant and developed its own distribution channels."
After the 20-month transition period ended in September 2011, however, competition quickly heated up as the two parties tried to expand their market share with new products and aggressive price discounting. Coca-Cola pushed the sales of Fanta, a line of fruit-flavoured soft drinks; and brought its Aquarius isotonic drink to the market. On the other hand, F&N introduced Citrus, its answer to Coca-Cola's Sprite. F&N has also significantly expanded its range of Seasons drinks.
On the face of it, Coca-Cola does appear to have the upper hand in markets where it now competes with F&N. A multinational corporation with a market value of US$191.1 billion ($240 billion), Coca-Cola already has a formidable line-up of products, a powerful brand and buckets of cash to fund its bid for market share. Besides its RM1 billion investment programme in Malaysia, Coca-Cola also opened a $72 million concentrate plant in Singapore in 2011. "Our company saw amazing opportunities in Malaysia. We want to invest heavily. We want to move fast," says McLaren.
On the other hand, most of F&N's beverage businesses are housed under its Kuala Lumpur-listed unit, which has a market value of just RM6.5 billion. After the break-up with Coca-Cola, its earnings before interest and taxes margins fell to 8% from 15% the year before as a result of the loss of economies of scale and soaring marketing expenses, according to one analyst. Singapore-listed F&N, which includes a large property development business, has a market value of $13.2 billion.
Industry shake-up
F&N is a company in transition though. Last year, corporate entities linked to the family of the late rubber and banking baron Lee Kong Chian sold their controlling stake in F&N to Thai Beverage, the Singapore-listed unit of Thai billionaire Charoen Sirivadhanabhakdi's business empire. Charoen's companies have since raised their collective stake in F&N to 90.3%. In the process, F&N has sold its interest in Asia Pacific Breweries, which produces Tiger and Heineken beers, to its long-time partner Heineken International NV.
Even as Charoen was pursuing F&N Singapore, however, he was also dealing a blow to Coca-Cola's arch-rival PepsiCo in Thailand. Last year, Bangkok-listed Serm Suk ended a longstanding bottling deal with PepsiCo, which freed both parties from a non-compete agreement. Serm Suk, which is controlled by Charoen, immediately cut PepsiCo out of its distribution channels and began selling its brand of cola called "est" in the same bottles bearing a red, white and blue logo. Analysts say Charoen is now looking to consolidate his beverage businesses in order to extract efficiencies and synergies.
For its part, PepsiCo has opened a US$170 million bottling plant in Thailand, and has partnered with DHL to distribute its drinks in the country. However, PepsiCo as well as Coca-Cola are likely to eventually spin off the bottling operations they have just started and refocus on their brand development and marketing. Coca-Cola's interest in its new Malaysian bottling operation is currently held under its Bottling Investments Group, a division that nurses ailing bottlers and restores them before they are put out on the market again. AAD Equity, a private-equity fund linked to Malaysia's controversial former finance minister Daim Zainuddin, owns 5% of the Malaysian bottling unit, while Malaysia's armed forces fund Lembaga Tabung Angkatan Tentera holds a further 10%.
The expansion of these bottling businesses and their eventual divestment could significantly reshape the beverage sector in the region. "Everyone is trying to benefit from the improvement in consumer spending here. Last week, F&N said that Malaysia's per capita consumption of non-alcoholic ready-to-drink beverages is the lowest in the region. The market is growing all over the region because as income increases it is one of the first beneficiaries because [beverages] are small ticket items," says the analyst.
Coca-Cola's secret formula
Famous for jealously guarding the recipe of its eponymous fizzy drink that sells in just about every country in the world, Coca-Cola actually now sells some 3,500 beverage products under more than 500 brand names. Indeed, the secret formula that has really made Coca-Cola great is its ability to make global brands relevant to local markets. "We make sure the marketing is local. We are in 206 countries in the world. That's our success - to have a truly amazing brand that looks the same the world over but we have a local image by the way we invest and link with the local community. Our secret formula is getting that balance right," McLaren says.
One of its newest brands is Gold Peak, a line of iced teas. Since its launch in 2006, sales of the brand have grown by double-digits for 24 consecutive quarters and is rapidly on its way to becoming a billion-dollar brand, according to Coca-Cola. Its other billion-dollar brands include its Aquarius isotonic drinks, its Georgia coffee brand in Japan and its Minute Maid Pulpy juices. Then, there are Coca-Cola, Sprite and Fanta.
Unlike its rival PepsiCo, which has diversified into food, Coca Cola is set on remaining a beverage company. "What we have learnt from our experience is that we are a great beverage company and there are plenty of opportunities in beverages. We know what we are about. We want to focus on what we do best," says McLaren. Among the biggest growth opportunities for Coca-Cola now is in Asia, especially in frontier markets such as Myanmar and Laos. "People perceive us as a US company but the majority of growth is coming from outside the US. We are a truly international business," says McLaren. For 1Q2013, Coca-Cola reported volume growth of 3% in North America, and 5% growth in its international division.
With the growing importance of the Asian market to Coca-Cola, increasingly more of its products are being developed in the region. Case in point - the Heaven and Earth tea brand was created in Singapore for local consumers, but became so popular that it has also been launched in Malaysia. Minute Maid Pulpy was originally made for China, but is now sold in Singapore, Malaysia and other markets in the region. "We have innovation hubs all over the world, which create innovation in terms of new products that are locally relevant. It's not a top-down mandate to launch something but a blend of centrally created innovation that is part of our success," says McLaren.
Coca-Cola's US-listed shares are up 16.9% this year. They are currently trading at 19.7 times forward earnings, and offer a dividend yield of 2.6%. The company has raised its dividend for 51 consecutive years. Shares in PepsiCo are up 20.7% and are trading at 18.8 times earnings. Shares in Singapore-listed F&N, which has proposed a capital reduction that will distribute $3.28 per share to investors, are trading at 21.6 times earnings.

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The Edge Singapore

May 27, 2013

Opinion: Divided Europe in recession cuts back on glam and glitter of Eurovision pop fest

BYLINE: Compiled by Lim Yin Foong

LENGTH: 856 words

And so the glitzy and over-the-top spectacle that is the Eurovision Song Contest has come and gone for yet another year.
Held in Sweden on May 17, this year's Eurovision finals featured the usual mix of upbeat Europop songs, quirky folk tunes and power ballads, with the coveted prize going to Denmark's pop/folk singer-songwriter Emmelie de Forest.
By winning the 2013 Eurovision, Denmark also gains the honour of hosting next year's event. In today's cash-strapped Europe, however, this has become a dubious privilege, particularly given the notoriously expensive bill of putting up a good show for one of the world's most popular television broadcasts.
Oil-rich Azerbaijan was believed to have spent a whopping ￡60 million ($97 million) to host the 2012 Eurovision, while 2011's event in Dusseldorf, Germany, cost 46 million. The average spend of previous contests was about 25 million. Considering the hefty bill, one could almost believe the rumours of countries sending mediocre acts to avoid winning a competition that they could barely afford to host.
Thankfully for Denmark, however, its Scandinavian neighbour has decided to turn the tide by scaling back this year. Sweden has been lauded for hosting the "Austerity Eurovision" on a relatively modest budget of 15 million. The smaller scale of this year's contest was evident in the choice of venue; the Southern Swedish city of Malmo rather than the larger metropolis of Stockholm or Gothenburg.
This year's live audience in Malmo Arena numbered a more intimate 10,500 compared with the 38,000 who filled Copenhagen's Parken Stadium in 2001, reportedly the largest audience ever hosted by the Eurovision. And while there was no escaping the glitz and glamour, there was a distinct dearth of show-stopping special effects in this year's stripped-back stage productions.
Another obvious sign of the times - several countries, including Portugal, Bosnia-Herzegovina and Slovakia, opted not to participate in this year's Eurovision due to financial reasons. There were early concerns that crisis-stricken Greece, a regular Eurovision Top 10 contestant, would not be participating this year. Thankfully, a private music channel came to the rescue, enabling the troubled nation to be represented by an exuberant performance of the memorably titled song Alcohol is Free.
The Eurovision Song Contest was first mooted in 1956 to bring a sense of unity to post-war Europe. Yet, the 2013 Eurovision tagline "We are One" seems ironic, given the results of a recent YouGov EuroTrack survey. More than 50% of respondents - from France, Germany, Denmark, Norway, Sweden, Finland and the UK - do not believe that the music competition brings Europe closer together.
If anything, many of them, including 75% of British respondents, feel that some countries suffer unfairly from political voting and don't have a real chance of winning the contest, the survey found. The UK has performed dismally in the song competition over the past 14 years, with this year's contestant, 1980s songstress Bonnie Tyler, placing 19th out of 26 acts.
The winning Eurovision act is determined by the most votes from the professional juries as well as public viewers from participating countries. There is, however, one caveat - you cannot vote for your own country's act. As a result, culturally or politically sympathetic neighbouring countries have a tendency to vote for each other, leading to contentions of unfair political or bloc voting, as some countries are left out in the cold.
In the aftermath of this year's Eurovision, the Germans have blamed their poor performance - 21st place as it failed to receive any points from 34 of the 39 countries voting - on Chancellor Angela Merkel's strong stance on crisis-hit eurozone nations. Similarly, there were those who felt that the British act received no points at all in the 2003 Eurovision because of the UK's role in the Iraqi war, which began that year.
Indeed, the Eurovision controversies could be seen as a reflection of an increasingly fragmented Europe, where eurosceptism is growing not just in the UK but also on the continent. A recent study by the Pew Research Centre found greater cynicism with the "European project" among the French, with only 22% believing in the benefits of European economic integration compared with 26% of British respondents and 54% of Germans.
According to the European Union polling organisation Eurobarometer, public trust in the EU has fallen to historically low levels in the six biggest member countries of France, Germany, Italy, Spain, Poland and the UK. And confidence is unlikely to be restored by recent news that the eurozone has recorded its sixth consecutive quarter of economic contraction, marking its longest recession since the euro's launch in 1999.
As it now prepares to host next year's show, Denmark will no doubt note how different Europe - and the world - is today from when it last hosted the Eurovision Song Contest back in May 2001.
Lim Yin Foong was editor of Personal Money, a Malaysian personal finance magazine published by The Edge Communications, from 2001 to 2006. She is currently based in the UK.

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The Edge Singapore

May 27, 2013

Corporate:Kori Holdings eyes more rail work, mulls diversification

BYLINE: Jo-Ann Huang

LENGTH: 834 words

Hooi Yu Koh, the CEO of construction subcontractor Kori Holdings, is excited about his company's growth. After all, the Catalist company has eight ongoing projects on the Downtown Line Stages 2 and 3. The projects have boosted Kori's order book as at January to $72.6 million, which will translate into revenue for the company over the next one to two years. "We even had to expand our office to accommodate the higher headcount," Hooi tells The Edge Singapore.
Kori supplies and installs steel struts and steel decking, which are steel beams and structures built within tunnels for support. This allows activities above ground, such as traffic, to proceed without disruption. The company also supplies skilled engineers for main contractors who want to bore tunnels for roads, sewerage systems or underground railways. "This is a niche market and the players are few. In order to carry out these types of works, we need licensing and we need some skills which are very limited in the construction industry," says Hooi.
Kori has been involved in underground construction works since the 1980s. Along with competitors such as Yongnam Holdings, it hopes to ride on projects from the construction of the Downtown Line, expected to open in three phases starting from this year, and the upcoming Thomson Line, where its first phase is expected to open in 2019.
"For every line that has been announced by the LTA [Land Transport Authority], we have been able to secure about four out of the 12 to 15 contracts, so that will translate into about 25% in terms of total contracts available," Hooi explains. "We work closely with our clients and we build a good rapport with them. We have confidence that they will engage us if they were to secure contracts," he says. Its clients include Lum Chang Holdings, Shanghai Tunnel Engineering and Hock Lian Seng Infrastructure.
Besides projects in Singapore, which form the bulk of its business, Kori actively seeks out contracts in markets where it has completed key projects. For example, in 2009, it provided tunnelling works for the Pahang-Selangor Raw Water Transfer project in Malaysia, in a contract worth $1.1 million. From 2007 to 2009, it took on tunnelling works for the Dubai Metro Red Line in a contract worth $4 million.
Hooi points out that the Malaysian government is spending more than RM230 billion ($95.4 billion) for infrastructure works, with 60% of the funds being allocated for projects from 2011 to 2015. Kori says it is already negotiating for contracts for the Klang Valley MRT Project, a train network that serves the metropolitan Kuala Lumpur areas and the city's outskirts. The first line to be approved for implementation is the 51km MRT Sungai Buloh-Kajang Line, which has 31 stations and is expected to serve a population of 1.2 million in the rail corridor. Kori also intends to bid for projects for the Japanese-funded MRT Jakarta, a planned train network with lines stretching more than 110km.
Kori went public last December, raising $4.4 million in net proceeds for its expansion at a listing price of 25 cents a share. The company, founded by its Japanese chairman Nobuaki Kori, used $3 million of the net proceeds to buy more steel structures and tunnelling equipment. Kori intends to provide the tunnelling equipment to contractors, in addition to supplying skilled tunnelling personnel, according to its latest annual report. Another $1 million will be used to purchase a new storage yard in Iskandar Malaysia, replacing its storage yard in Marina Grove, whose lease expires in 2013. The new yard will also act as a fabrication facility for its large steel structures.
Hooi says moving the yard to Iskandar will help Kori mitigate the rise in costs stemming from the tight Singapore labour market. Higher levies and a smaller quota of foreign workers are already weighing on its labour-intensive business, he adds.
Another way to boost efficiency is to cross-train Kori's employees over both disciplines of tunnelling works and strutting. "We can fine-tune our operations by cross-training our workers so [that] there will be a reduction in downtime. If there is less strutting work for a period of time, we will transfer them to tunnelling operations," Hooi says.
Like many of its construction peers, Kori is considering a diversification into property development. "Property is in a way, tied to construction. And all construction firms dream of doing property development in the future," says Hooi. "That is part of our dream too, but it's a little too early to say. We need a lot of cash for property development and it's not for everyone, especially smaller players like us. So, it will take some time."
For its FY2012 ended December, Kori posted $52.9 million in revenue, up 53% from a year ago. Earnings posted were 31% higher at $7.87 million. Kori has a market capitalisation of $37.7 million. The stock closed at 38 cents as at May 22, or about 3.8 times FY2012 earnings. In comparison, Yongnam is trading at 6.9 times FY2012 earnings.

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The Edge Singapore

May 27, 2013

Property Briefs: home

BYLINE: Compiled by Amy Tan

LENGTH: 704 words

Freehold bungalow land at
Tudor Close going for $38 mil
A piece of prime D11 bungalow land at 16 Tudor Close (below) has been launched for sale by tender by Savills Singapore. The 22,534 sq ft freehold land is located near the Camden Park and Cheen Hoon Avenue Good Class Bungalow areas. The site is zoned for double-storey bungalow development under the Master Plan 2008, and has received approval for subdivision into four bungalow plots.
Savills expects the property to fetch more than $38 million. "Such prime sites are rare and would appeal to boutique developers and extended families who wish to stay near each other while enjoying their privacy," says Steven Ming, deputy managing director of Savills Singapore. The plot is located close to Orchard Road, Dempsey Hill and Holland Village, and surrounded by renowned schools such as Anglo-Chinese School (Primary) and Nanyang Primary School. The tender for
16 Tudor Close will close at 3pm on June 28.
DTZ sees sharp fall in resale volume
Resale transaction volume fell sharply, following the imposition of the cooling measures in January, according to DTZ Research in its 1Q2013 report on residential demand on May 22. Resale of private homes fell by 43.3% q-o-q across all sub-markets. On a y-o-y basis, resale transactions fell 11.2% y-o-y.
Notably, resale volume remained weak on a monthly basis until April.
According to DTZ, the recovery in resale volume last year was due to buyers' finding better value in the resale market after some projects in the primary market set benchmark prices. In comparison, developers were more competitive in their pricing strategies this year and the latest round of cooling measures in January were more comprehensive than those in December 2011. The mismatch in expectations between buyers and sellers could also have contributed to the weak resale volume.
Meanwhile, the proportion of purchases by foreigners rose moderately from 6.9% in 4Q2012 to 9.9% in 1Q2013, higher than the quarterly average of 6.4% in 2012. This could be due to foreigners' getting accustomed to the additional buyer's stamp duty (ABSD), which first came into effect in December 2011. Purchases by Americans remained resilient, especially in the high-end segment, as they are not subject to the 15% ABSD for foreigners. Transactions by Indonesian buyers in the high-end segment fell. Elsewhere, demand from mainland Chinese buyers held up well across most price segments, except for those that cost less than $1 million.
Demand from Singaporeans dropped most significantly, as local buyers are now subject to an ABSD of 7% and 10% when buying their second and subsequent properties, respectively, with effect from Jan 12 this year. Previously, Singaporeans were subject to an ABSD of 3% on their third and subsequent purchase of a residential property.
DTZ expects secondary sales to continue to underperform relative to primary sales, owing to the absence of discounts and incentives in the secondary market. Investment demand from individuals may fall this year because of the higher stamp duties, stricter financing restrictions and slower rental growth.
Pool villas at The Stairs Villa Hotel,
Bali for sale
The Stairs Villa Hotel (above) is a luxury lifestyle property designed by Philippe Starck and is located on the southern coast of Bali. This is Starck's first fully envisioned hotel villa concept in Asia-Pacific. The development has 12 exclusive pool villas, each with its own 11m x 4m pool, multiple living and dining spaces, two bathrooms and a master bedroom lofted suite. Amenities include personal concierge per villa,
private hosted dinners, personal effects storage, workout trainers and VIP access to events.
Facilities include a café, restaurant, bar lounge, boutiques, mezzanine bibliothèque and spa. The project is scheduled for completion next year. "Since there are only 12 properties available, we anticipate the villas to be purchased quickly by clients who seek an investment with solid growth as well as a place to jet to on the weekends," says Julian Sedgwick, director and head of business development for Savills International Residential Sales - Asia-Pacific. Savills is the appointed sales partner in Singa-pore. - Compiled by Amy Tan

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The Edge Singapore

May 27, 2013

City & Country: Jurong's first 'lifestyle hub' opens

BYLINE: stories By Amy Tan

LENGTH: 387 words

Australian property giant Lend Lease will be opening Jurong East's first "lifestyle hub", Jem, on May 29. At more than 818,000 sq ft, the 17-storey mixed-development is the third-largest shopping mall in Singapore. Early last month, the developer announced that the mall was already 100% leased ahead of its opening.
"We're the first lifestyle hub in the west," says Chris Brown, development director of Jem. "So, we will bring mid- to mid-plus fashion, food and entertainment to Jurong that didn't exist in the area until now. That, coupled with our community spaces and Jem Park [on Levels Five to Seven], will differentiate us."
Directly connected to the Jurong East MRT station and located at the junction of Jurong Gateway Road and Boon Lay Way, Jem will be part of the Jurong Gateway regional centre, which will be 2.5 times bigger than the Tampines regional centre. Jem's retail and F&B area spans six trading levels and houses 280 tenants.
There will be 241 shops in Jem, inclu-ding a good mix of local and inter-national brands such as H&M, Victoria's Secret and Books Kinokuniya. Anchor tenants include Cathay, which will open the largest cinema multiplex in the west; Robinsons, which will have its first flagship department store in the suburbs; and a 70,000 sq ft FairPrice Xtra. "We are elated to achieve 100% tenancy well ahead of the mall's opening.
"With Jem's vibrant retail mix, we are poised to offer shoppers a unique experience comparable to shopping in the city, right at their doorstep," adds Brown, who expects 50,000 visitors daily.
It is not only the mall that is fully leased. Two years ago, the Ministry of National Development (MND) announced that it had signed a 30-year lease and will be taking up the entire 315,385 sq ft office space at Lend Lease's development in Jurong Gateway. The office block is scheduled to be completed next year. The other statutory boards that will be relocating to Jurong East with MND are the Agri-Food & Veterinary Authority and the Building and Construction Authority (BCA).
The mixed-use development is designed by SAA Architects and was awarded the highest accolade in green design: the BCA Green Mark Platinum Award. The project has also replaced more than 122% of the greenery lost to its building footprint through the provision of sky terraces and landscaping.

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The Edge Singapore

May 27, 2013

City & Country: Yishan Capital scours SEA for real estate

BYLINE: ---

LENGTH: 854 words

John Van Oost arrived in Singapore four years ago and set up a real estate investment and asset management firm, Yishan Capital Partners. The name of the company is derived from the ancient Chinese fable, Yugong Yishan, about an old man called Yu Gong who decided to remove two mountains blocking the path to his house. He started by digging every day, year after year, and persisted despite being labelled a fool. Eventually, the mountains were removed. The moral of the story is that perseverance pays. "Yi Shan" literally means "to move mountains".
"I really like the concept of moving mountains," says Van Oost. "When you start something new, it's always complicated and difficult, and you have to be tenacious." Yishan is the Asian affiliate of Captiva Capital Partners, a European real estate investment firm managing 1,500 properties worth more than 8 billion ($31 billion).
Like Yu Gong, Yishan Capital does not mind starting with small investments in Southeast Asia, which it is focusing solely on and in which it is building up a portfolio and track record. In Singapore, for instance, the company acquired five shop units in the CBD last year at $6,500 psf. "We like the location, the fact that we could add value to the property and increase the rent on an incremental basis," he says. "We doubled the rent over the past year."
Van Oost sees value in neighbourhood shopping centres measuring 5,000 to 10,000 sq m (53,820 to 107,640 sq ft) in Singapore. His focus is on such shopping centres where he can add value by improving the tenant mix and running the shopping centre more effectively.
"We have been looking at some of the collective sales," he says. "I'm a big fan of Bukit Timah, Ang Mo Kio and Geylang. These areas may be expensive, but you can still create value and improve things. That's what we're looking at. We're not just buying to keep. We want to add value."
He sees the proliferation of strata-titled commercial or mixed-use projects presenting challenges. "The difficulty will be valuing such units over the long term," he explains. "That's why it's a bubble, because the prices are not backed by fundamentals but by money flows, fairly cheap financing and low interest rates. As a private investor, I would be very cautious."
Still, Van Oost is aggressively looking for more retail units and boutique shopping centres in Singapore.
Yishan Capital is also raising US$250 million ($754.6 million) for a closed-end fund to invest exclusively in Indonesian property. Last October, the company and its partner, Baruna Realty, an Indonesia-based property developer, launched a 41,721 sq ft office development in central Jakarta aimed at mid-sized businesses in the services and medical industry. The development is scheduled for completion by year-end.
Yishan Capital is also interested in developing housing, shopping centres, as well as industrial and logistics properties in Indonesia. It has already invested about US$50 million worth of equity capital in Indonesia and its first hospitality project in Cambodia.
For Yishan Capital, the appeal of Indonesia is the emergence of the middle class. As incomes rise among its population of 242 million, the republic is one of the fastest-growing economies globally. With a diversified economy, underpinned by strong fundamentals such as an expanding working-age consumer class and thriving urban centres, "this increased consumption will have a direct impact on real estate - an increase in demand for housing, retail space and warehouses", adds Van Oost.
Nicholas Holt, Knight Frank's head of research for Asia-Pacific, says Indonesia was one of the markets that saw the most foreign interest last year. "Large amounts of [foreign direct investment] were coming into the country," he said. "Jakarta saw rising GDP, rising urbanisation and growth in population, led by rising aspirations of the middle class, and was at the top of our index in 2012, with luxury property prices seeing an increase of 38%."
Thus, Yishan Capital's Van Oost continues to be interested in developing residential projects, especially landed housing in the suburbs of Jakarta. "Land prices have been rising very rapidly," he says. The firm is actively looking at acquiring more development land in Jakarta and Surabaya.
Another market that the real estate investment firm is looking at is the Philippines. As in Indonesia, Van Oost is interested in almost all sectors of the real estate market: shopping malls, industrial and warehouses. The company is opening an office there in July and is in active discussion on several deals, he adds.
"Our approach to real estate investment is very much like a private equity business, we look at creating teams first, then we form joint ventures, have people in place, and then start investing in very specific asset classes," he says.
Van Oost would like to do more deals in Singapore. "We have been approached by a number of investors asking us to manage their portfolio for them. We have not done that before, and I think we will stay open to it. That skill set is something that's emerging here. What we bring to this market is the know-how."

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The Edge Singapore

May 27, 2013

City & Country: Jones Lang LaSalle swoops in on Halcyon

BYLINE: Cecilia Chow

LENGTH: 614 words

The seventh round of government mea-sures may have cast a pall over the top end of Singapore's residential market as sales have dropped. Yet, Chris Fossick, Jones Lang LaSalle's managing director for Singapore and Southeast Asia, sees rays of light breaking through.
"Many of the local developers, especially in Sentosa Cove - where they are not subject to the conditions of the Qualifying Certificate (QC) - have therefore decided to hold on to their units and lease them out for long-term gains," says Fossick.
One of the conditions of the QC is that a developer has to sell all the units in a development within two years of obtaining its Temporary Occupation Permit (TOP). Another condition under the QC is that the developer is not allowed to lease out unsold units in the development. Developers in Sentosa Cove are exempted from the QC.
In the prime districts, some property funds and private individuals are also sitting on entire blocks or multi-ple units in newly completed condos. They are also looking to lease out their units.
"We believe we can do project leasing for these owners because of our corporate contacts all over the world," explains Fossick. "The same thing applies when we do project leasing for office or retail developments. We are able to reach out to our corporate network and help secure occupiers for their buildings. Likewise, we can help tenants find suitable offices or accommodation."
As such, Fossick sees an increase in demand for residential project leasing services. Likewise, there will be a rise in tenant representation business as more foreigners and permanent residents choose to rent rather than buy their own homes because of the higher additional buyer's stamp duty (ABSD) introduced in January.
To ramp up JLL's service offering in residential leasing, the firm announced on May 20 that it had acquired boutique realty firm Halcyon Real Estate, headed by principal founder Juliann
Teo and co-founder Raymond Ler.
Halcyon Real Estate was formed in 2009 and has built a track record in Sentosa Cove, having leased a substantial number of units in luxury condominium projects such as Ho Bee Group's 91-unit Turquoise and 151-unit Seascape.
Following the acquisition of Halcyon, its entire team of 18 will be moving to JLL next month, where Teo will assume her new role as head of residential leasing.
Since Fossick became managing director of JLL seven years ago, he has been determined to re-establish the firm's presence in the Singa-pore residential sector, especially residential project marketing, a business the firm exited more than a decade ago.
JLL has made a string of acquisitions in Singapore over the last two years. In January 2011, the firm acquired Property Edge International, headed by Nancy Hawkes, who had left Knight Frank to start her own firm. In October that year, JLL acquired DST International, headed by property veteran Doris Tan, a leader in international project marketing, parti-cularly in UK projects. Last year, JLL created waves when it acquired Credo Real Estate, which had made a name for itself in the collective sales market.
"Over the years, we have been investing in residential services," acknowledges Fossick. "Our strategy has always been to build our presence in Singapore and establish a strong business to service our local and global clients."
As Singapore is a hub, like Hong Kong and London, JLL would also be extending the residential leasing business to the rest of Southeast Asia. "This is also part of our strategy of broadening our services to clients," adds Fossick.
One thing is for sure, if M&L gets listed, Kum will no longer be able to visit his neighbourhood Dimbulah Coffee outlet incognito.

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The Edge Singapore

May 27, 2013

Capital: Small caps in play

BYLINE: Frankie Ho

LENGTH: 892 words

The shortened trading week of May 20 kicked off with a fair amount of action by some small-cap stocks. Blue chips, on the other hand, were mostly subdued all through the week after a recent run-up that lifted the Straits Times Index above the 3,400-point mark for the first time since December 2007. Investors of these large caps, according to dealers, were mostly awaiting US Federal Reserve chairman Ben Bernanke's congressional testimony on May 22 for any indication of when he would start winding down the central bank's quantitative easing programme.
Shares of WE Holdings jumped on heavy volume on May 20 after the loss-making company, previously known as Westech Electronics, said it would invest US$20 million ($25.2 million) in a cement-manufacturing business in Myanmar. The firm will acquire a 20% stake in Dragon Cement, which is owned by businessman Nay Win Tun, who heads a diversified business group in Myanmar that has operations in mining, manufacturing, agriculture, F&B, trading and hospitality.
WE Holdings has an option to double its stake in Dragon Cement to 40%. The proposed investment is subject to both parties executing a definitive legal agreement by Aug 16. Separately, the company is considering selling its electronics distribution business to Mainboard-listed Serial System in order to focus on exploring new business opportunities. WE Holdings incurred a net loss of US$3.7 million for the 12 months ended March 2013 as a result of reduced demand and stiffer price competition. Its share price closed on May 22 at 11.2 cents, up from 11.1 cents on May 20.
Meanwhile, XMH Holdings' share price soared after the diesel-engine maker said it would rope in prominent businessman Koh Boon Hwee and his private-equity fund as substantial investors. Credence Partners, founded by Koh and two other individuals, will inject $10 million into XMH by subscribing for some 36 million new shares at 27.74 cents each. It also has an option to subscribe for about 47.6 million vendor shares at 31.5 cents apiece. The new shares and vendor shares represent about 19.9% of the enlarged share base of XMH, which plans to use the proceeds to expand its assembly and production lines.
"We believe XMH has no need for extra cash today. Our model indicates that its new facilities can be funded by cash on hand and operating cash flows without bank debt," says OSK-DMG, which has a "buy" call and a price target of 40 cents on XMH. "The [new] cash inflow means that any potential acquisition can be made with a higher proportion of cash versus shares, leading to stronger EPS [earnings per share] accretion." Shares of XMH closed on May 22 at 38.5 cents, just below its record high of 39 cents set the previous day.
Interest in ISDN Holdings was just as strong. Shares of the mechatronics engineering group jumped 10.1% to 92.5 cents on May 22, the day they resumed trading after the company announced it had formed a joint venture with a Myanmar firm to develop a coal mine in the country for production.
Shares of Cordlife Group continued to advance, rising above $1 for the first time ever, after the company said it would expand to India, the Philippines and Indonesia by acquiring the cord-blood and core-tissue banking businesses of Australia-listed Cordlife, previously known as Cygenics. The three countries are considered high-growth markets, where demand for cord-blood banking services is driven by rising affluence and a burgeoning middle class. Cordlife currently operates in Singapore and Hong Kong.
Cordlife's share price has largely been on an uptrend ever since it hit a low of 43 cents last June. The stock, which made its trading debut last March, closed on May 22 at $1.055, more than double its IPO price of 49.5 cents.
Among mid-cap stocks, Boustead Singapore fell 5.3% to $1.44 on May 22 as investors took profit after chasing the counter to an all-time high of $1.52 the previous day, when the engineering firm reported record full-year earnings of $81.4 million, up 46%, for the 12 months ended March. Revenue rose 26% to $513.2 million.
The STI closed at 3,454.37 points on May 22. CIMB expects limited upside for the index for the rest of the year. It has a target of 3,460 for the STI by end-2013. "With no earnings growth and ROEs [returns on equity] stuck at lower ends of historical bands, we are not convinced that valuations for the Singapore market will go beyond cur rent mean levels," it says in a report.
DBS Vickers is more upbeat, though. "With [global economic] growth slow enough for central banks to continue their current accommodative stance, but yet not so slow as to trigger recession fears, we see the trend for liquidity inflows to seek out yield, value and defensive stocks continuing. This should provide support to the Singapore market," it says in a report. The broking house has a year-end target of 3,650 for the STI.
What to look out for
The current earnings season wraps up at the end of the month. Among the companies that are scheduled to report results in the days ahead are Yoma Strategic Holdings (May 27), Tat Hong Holdings (May 28) and Biosensors International Group (May 29).
Units of Asian Pay Television Trust will start trading in Singapore on May 29. The business trust, which owns the third-largest cable TV operator in Taiwan, sold up to 936.2 million units at 97 cents each in its IPO.

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The Edge Singapore

May 27, 2013

Investing Ideas: Office property REITs offer best upside amid rush for yield, says UOB Kay Hian's Khi

BYLINE: Goola Warden

LENGTH: 1242 words

Real estate investment trusts (REITs) have performed strongly in the past couple of years, lifted by an insatiable demand for yield in the market. In fact, forward yields for Singapore-listed REITs have compressed to 5.2% to 5.4%, down from 5.8% to 6% just two months ago. They now trade at 1.24 times book value. At the last peak, in mid-2007, the yields of leading Singapore-listed REITs fell to as low as 3.8%, and they were valued at as much as 1.64 times book value.
The strong investor interest in REITs looks set to spur a rash of new listings. In March, Mapletree Greater China Commercial Trust hit the market. Its $1.6 billion IPO was the largest ever for a Singapore-listed REIT and it was 29.5 times subscribed. On May 13, Overseas Union Enterprise said it planned to package Mandarin Orchard and Mandarin Gallery in a REIT. On March 10, Singapore Press Holdings stated that it was exploring listing a REIT, which analysts say is likely to hold The Paragon and Clementi Mall.
Terence Khi, an analyst at UOB Kay Hian, believes things will only get hotter in the REIT sector in the months ahead. "There is a lot of liquidity in the sector," he says. While yields offered by REITs have compressed, they are still attractive compared with Singapore government securities. The current yield spread between the REITs and 10-year Singapore government bonds is around 4.1%. "The long-term average is 3.8% to 3.9%," Khi says. "At any rate, when REIT yields compress, they usually overshoot. There could be more room for REIT yields to compress further."
The way Khi sees it, investors should now focus on REITs with the potential to rise the most as the market continues to climb higher. "We prefer the high-beta office REITs," he says. The four largest office REITs - CapitaCommercial Trust, Frasers Centrepoint Trust, Keppel REIT and Suntec REIT - are trading at an average price-to-book ratio of 1.02 times compared with the sector average of 1.24 times. And, their distributions per unit (DPUs) are expected to grow by an average of 7.4%, leading to yield growth of more than 6%. This compares favourably with the average yield growth for industrial property REITs and retail property REITs of just 3.3%.
A lot of this growth is coming from rising office rents. "We expect Grade-A office rents to rise 8% in 2014 after bottoming out this year, and for office demand to rebound. The rate of fall in 1Q2013, at -0.3% q-o-q to $9.55 psf per month, has slowed dramatically from the average -3.4% q-o-q fall reported in 2012," Khi notes. "We anticipate office demand to rebound to 2.1 million sq ft per annum in 2013-17, while demolitions could remove up to 50% of upcoming supply."
In his view, Keppel REIT holds the best Grade-A office portfolio in Singapore. Despite Keppel REIT's contentious acquisition of Ocean Financial Centre (OFC) in 2011, the property has performed well. In fact, OFC helped to boost its net property income (NPI) in 1Q2013, following loss of rental support at One Raffles Quay (ORQ). For the quarter, Keppel REIT's DPU rose 3.7% y-o-y to 1.97 cents per unit. This was despite a placement of 40 million units to raise $52.3 million during the quarter.
Keppel REIT might also deliver growth through an acquisition or two in the months ahead. Notably, MBFC Tower 3, in which Keppel Land has a one-third stake, is already 80% occupied and likely to be fully leased by end-2013. "The next acquisition could be MBFC [Marina Bay Financial Centre] Tower 3," Khi says. In fact, with the market for REITs so strong now, he thinks there is a chance that Keppel REIT might manage to make that acquisition without any "income support" from Keppel Land.
All of Keppel REIT's recent acquisitions, including its one-third stake in ORQ, OFC and its one-third stake in MBFC Towers 1 and 2, were done with some form of income support. Essentially, Keppel Land promised that the properties would deliver a certain return over a defined period and that it would stump up for any shortfall. Other office REITs have also needed income support from vendors of properties they have purchased. Suntec REIT, for instance, acquired a one-third stake in ORQ and MBFC Towers 1 and 2 with income support. CapitaCommercial Trust also bought One George Street with "yield support", which is due to expire this year.
More recently, however, office REITs are beginning to appear capable of making acquisitions that are immediately yield-accretive without this support from the vendors of the assets. "Mapletree Commercial Trust acquired Mapletree Anson without income support," Khi points out.
Whatever the case, Khi has a "buy" call on Suntec REIT. In 1Q2013, the REIT's distributable income fell 8.4%, while its DPU sank 9.2%. That's because it was in the midst of an extensive asset enhancement initiative (AEI) at its flagship property, which reduced its 1Q2013 NPI by more than 30%. However, pre-commitments for Phase 1 of the AEI are at 96.7% and pre-commitments for Phase 2 are at 53%. Meanwhile, Suntec REIT managed to lower the cost of its debt by 4bps q-o-q to 2.79% in 1Q2013, on the back of a new issue of convertible bonds. Khi is forecasting DPU of nine cents for this year and 9.5 cents for next year, giving forward yields of 4.76% and 5% respectively.
Elsewhere, he is sticking to his "buy" rating for CapitaCommercial Trust despite some headwinds facing the trust. Yield support from CapitaLand for One George Street falls off in July, and that could lower rental income from One George Street by as much as 20%, Khi estimates. This should be mitigated by positive leasing momentum from Six Battery Road following an AEI, and also from the positive rental reversions across its portfolio.
Meanwhile, Khi has downgraded Parkway Life REIT and he is cautious on Sabana Shariah Compliant Industrial REIT. "Parkway Life is very well run, but yields have compressed to less than 4%," he points out. "We've downgraded it to a 'hold'." Parkway Life owns a portfolio of nursing homes in Japan, as well as the Mount Elizabeth and Gleneagles Hospitals in Singapore. The REIT reported a 2.9% rise in 1Q2013 distributable income to $16.0 million and a 2.9% y-o-y rise in DPU to 2.64 cents, which was within consensus expectations.
Parkway Life has the financial capacity to make $200 million worth of acquisitions, given its debt-to-asset ratio of 31.6%. The REIT's pipeline from its sponsor, IHH Healthcare, includes nine Pantai Hospitals and two Gleneagles Hospitals in Malaysia, and possibly Mount Elizabeth Novena.
On the other hand, Sabana Shariah Compliant Industrial REIT will face the expiry of 45% of its leases by gross revenue this year, Khi cautions. This is largely due to the fall-off of their master leases. Sabana's WALE (weighted average lease to expiry) is just 1.9 years, shorter than the industrial REIT average. Still, rents for high-tech industrial space, warehouse space and factory space have been up 15%, 25% and 27% respectively since Sabana's IPO in 2010. Looking ahead, there is a chance the REIT could benefit from positive rental reversions if it manages to lease out the space.
At any rate, Khi reckons REIT fever isn't over. He estimates there could be a 10% upside from current levels for the REIT sector, based on the yield gap versus 10-year government bonds. Positive rental reversions, accretive acquisitions and AEIs could continue to raise DPUs, he says. "Lots of REITs and business trusts want to come here for listing," he notes.

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The Edge Singapore

May 27, 2013

Investing Ideas: Seek out mispriced or niche companies, says Templeton analyst Tan Siang Khee

BYLINE: BY JOAN NG

LENGTH: 1568 words

Years ago, when Tan Siang Khee was an IT specialist at IBM, he found that the company was being undercut on contracts by China- and India-based firms that could do the work for a fraction of its price. "I saw headwinds for the industry... and that prompted me to move away from IT," he says. Tan moved into the financial sector, putting his expertise in the IT world to use by analysing tech companies and the industry.
Today, Tan is a research analyst at Templeton Asset Management who focuses on the technology space. It is an exciting area, he says, with plenty of price competition as well as innovation still going on. One of the biggest trends he is tracking today is the rise of the smartphone and decline of the PC. The PC market posted its steepest decline ever in 1Q2013, according to numbers from research firm IDC. In the quarter, 76.3 million units were shipped - down 13.9% y-o-y. Meanwhile, vendors shipped 216.2 million smartphones in the same period - up 41.6% y-o-y.
Worst hit are the big PC makers such as Lenovo Group, Dell and Acer. Tan explains that besides having to contend with falling demand for their core products, they also face challenges as they try to make up for weaker PC demand with smartphone products. All three companies have tried to launch portable devices running on the Google-supported open source Android operating system, but have had limited success. Dell announced last year that it would quit the smartphone business.
A key challenge is price points, Tan says. "First, you have that shift from notebooks to mobile devices, so companies that are unable to come up with tablets or smartphones take a hit because of market share declines. At the same time, if you compare, the cost of a tablet is less than the cost of a PC. Not only are companies suffering in terms of volume, they are suffering in terms of pricing as well," he explains. "To companies like Acer, it's revenue that matters. That top line has significant repercussions on profits because, with a lower revenue base, the amount of money they can spend on marketing may decline and they need to drive growth in other areas to maintain their operating expenditure."
For investors, however, there might be a way to make some money from this shift in consumer tastes. Tan notes that the smartphone revolution has also led to some mispricing of companies that are not well understood. One example is Microsoft. "It actually makes 40% of its profits from enterprise software like database software and email. It's not entirely exposed to consumer PCs. [And enterprise software] is an area that is currently exposed to cyclical pressures rather than structural pressures," Tan says. When economic activity picks up, Microsoft's business in the enterprise space should pick up too. "Companies like these are now trading at rather cheap prices and within the Templeton Global Equity Group, this is one stock that we think is misunderstood by the market."
In the last month, shares of Microsoft have soared - partly on the back of a US market rally. But the stock still trades at a reasonable 12.7 times its estimated earnings for FY2013 ending June, which is less than the Standard & Poor's 500 Index.
Building on smartphones
The other side of the story is the boom in smartphones. Samsung Electronics Co, currently the world leader in this area, has seen its stock rise 23.4% over the last year against a 10.1% increase in the benchmark Korea Stock Exchange KOSPI Index. Samsung continues to trade at an attractive seven times estimated earnings for FY2013.
Tan says, however, that there are a few other ways investors can play the smartphone story. One of the stocks in Templeton's portfolios is AAC Technologies Holdings, a Hong Kong-listed company that makes miniature acoustic components for smartphones and other electronic products. Shares of AAC are not particularly cheap, at 17.6 times earnings, but that multiple reflects the company's success in a segment with high barriers to entry.
"One thing I often look out for is the level of fragmentation in an industry. If there is very high fragmentation, it probably [does not have] as high a barrier to entry," says Tan. "When the barrier to entry is too low, that weakens your competitive advantage and you will start to see margins come down rather quickly." Often, in industries with less fragmentation, companies are also able to supply to more than one smartphone maker.
Another company that checks the right boxes is Largan Precision Co. Listed in Taiwan, it makes optical lens modules and optoelectronic components for projectors, scanners, optical mice, DVDs, LEDs and cameras. Its components are used in the powerful but small cameras that go into smartphones today. "Optical lenses and acoustics are two areas where we have seen a more consolidated industry," says Tan.
Changing tastes
The smartphone versus PC story is oft-repeated in the tech sector, and is one that poses the biggest challenge for investors: rapid change driven by new technology usurping the old. The decline of companies such as BlackBerry and Hewlett-Packard illustrates this well. BlackBerry's market capitalisation is currently about a tenth of what it was at its height in 2008.
Tan says investors should not let this deter them from buying tech companies. "You don't only make money from companies that are about to launch the next big thing." -Rather, he suggests investors look out for companies with proven track records or strong management that is able to innovate or change as the industry requires. "There are companies that have been able to execute well historically - companies whose management has the track record of navigating in a difficult industry." One such example is Taiwan-listed -Delta Electronics, which makes power supplies for notebook computers.
Founder Bruce Cheng named his company after the mathematical variable denoting change, and indeed the company has lived up to that name. It started in 1971 making TV components, but an oil crisis caused demand for TVs to dry up. So Delta started making power switching supplies that would help reduce energy consumption in computers and TVs. Today, it is among the world's largest companies in its space, but it is already beginning to build new solutions in electric vehicle charging and wind energy.
Sometimes, disruptions also give investors the chance to pick up stocks at bargain -prices. Tan points to the 19% single-day plunge that shares of Japanese camera maker Nikon took in February after it announced that earnings for the quarter ended December fell to just ￥300 million ($3.7 million) from ￥16.3 billion in the preceding quarter. A glut of interchangeable lens cameras (ILCs), and slowing demand for cameras as consumers opt to take photos with their Internet-linked smartphones instead, have cramped profitability.
But Tan points out that Nikon and its competitor Canon are market leaders in the ILC space. "Today, the ILC segment is dominated by Canon and Nikon. That's an example of a company and industry that is perceived as high risk. But as consumers become more affluent and disposable income rises, it's a segment that will continue to grow," he says. Indeed, Nikon's shares rebounded earlier this month and are now trading at new 52-week highs as the Japanese stock market is buoyed by a new central bank-led easing programme. "There are opportunities like that, which come once in a while."
A new world order
As Tan looks back on his days as an IBM executive, he sees a few other companies that are benefiting from the same trend that induced him to leave the industry. Companies such as Tata Consultancy Services and Infosys continue to enjoy success because of outsourcing trends that are moving some functions to lower-cost countries. "Given that revenues may be hard to come by, companies now want to control costs. Controlling costs becomes a priority. And that could be interesting for some of the IT companies in Asia," he says. Both Tata and Infosys have good track records and have been able to gain reasonable market share within the IT outsourcing space, Tan adds.
He warns, however that companies need more than just a low-cost base to survive. "One should also recognise that competitor companies will also try to build capabilities [in low-cost bases]," he says. "As it stands, Accenture and Cap Gemini have a sizeable labour pool in India. Should they succeed in building up a quality labour base, then one could question the sustainability of the operating margins [at companies like Tata]." Indeed, he notes that even his former employer has begun to train and employ more people in India.
The same principles should apply for investors: Seek out companies that operate in industries with high barriers to entry or have managed to build those barriers themselves, make sure management is strong and has the ability to adapt, and look out for bargains when the market misprices certain risks. The final point is particularly important in the tech sector, which historically has seen outsized valuations and where it can be near impossible to accurately predict which companies will stick around. "Yes, it's a matter of investment views. But it's also about risk and reward. You wouldn't want to buy Apple if it was trading at 100 times earnings," he adds. That's the philosophy that Franklin Templeton Investments was built on and investors would do well to abide by it.

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The Edge Singapore

May 27, 2013

Dividend watch: Shangri-La Asia and Sakae Holdings to trade ex-dividend on June 4 and 6 respectively

BYLINE: Adele Teo

LENGTH: 506 words

Shangri-La Asia will trade ex-dividend on June 4 for the final dividend of 10 Hong Kong cents per share for the full year ended Dec 31, 2012 (FY2012). Including the interim dividend of 10 HK cents per share, the total full-year dividend of 20 HK cents translates into a dividend yield of 1.4% based on its May 20 closing price of HK$14.50. In FY2011, the company also gave a dividend of 20 HK cents per share.
Shangri-La Asia, through its subsidiaries, owns and operates hotels, as well as provides management and related services. The company also leases offices, commercial, residential and exhibition hall space.
As at Dec 31, 2012, Shangri-La Asia had cash and cash balances of $839 million. About $80.6 million will be paid out as dividends. In FY2012, earnings increased by 41.8% to US$358.9 million ($450.5 million) on the back of a 7.6% rise in revenue to US$2.06 billion. Hotels in Hong Kong, mainland China and Singapore continued to be the key profit contributors. Yields of the group's investment properties generally improved over 2011, with the exception of Beijing Kerry Centre, Shanghai Kerry Centre and Shangri-La Residences, Dalian which were adversely affected by renovation programmes.
In 2012, Shangri-La completed the acquisition of the entire interest in an operating hotel in Brisbane, Australia and rebranded it as Traders Hotel, Brisbane. Following that, the group completed the acquisition of the entire equity interest in the investment holding companies that own the existing Shangri-La Hotel, Sydney. The group also opened its wholly owned Shangri-La Hotel, Yangzhou in mainland China.
Elsewhere, Sakae Holdings will trade ex-dividend on June 6 for the final dividend of one cent per share for the fiscal year ended Dec 31, 2012 (FY2012). Including the interim dividend of 0.5 cents per share, the full-year dividend is 1.5 cents per share. Based on the stock's closing price of 35 cents on May 20, the dividend yield is 4.3%. In FY2011, the company declared a total dividend of one cent per share.
Sakae Holdings owns and operates restaurants, cafes and kiosks. The company also offers catering services and franchises its F&B brands.
As at Dec 31, 2012, total cash and cash equivalents amounted to $8.8 million, an increase of $2.7 million from the previous year. Net cash from operating activities was $11.9 million, up from $4.6 million in 2011. About $2.1 million will be paid out as dividends.
In FY2012, revenue totalled $95.9 million, a 7.5% increase from 2011. Revenue performance in 1H2011 was affected by the tsunami in Japan. However, the decline in demand for Japanese food recovered in 2H2011. As a result, Sakae achieved a 5% increase in same-store sales in 2012, from 2011.
In addition, its continuous efforts in offering new types of quality dining and products, through the periodic introduction of products and menu launches, also contributed to its sales growth in 2012. Earnings improved by 70% to $12.6 million on lower operating expenses as a result of more stringent and -effective controls.

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The Edge Singapore

May 27, 2013

Brokers Digest:

BYLINE: compiled by Rahayu Mohamad

LENGTH: 1709 words

Advanced Holdings (May 21: 28 cents)
MAINTAIN INVEST. Advanced Holdings Ltd (Advanced) reported Patmi of $500,000 on revenue of $18.5 million for 1QFY2013. The results were lower than expected. However, the company has an order book in excess of $90 million as at May 15, 2013. This is an impressive order book, as 1Q revenue coupled with orders on hand will provide at least $108.5 million of revenue in FY2013 and 1HFY2014, suggesting room to meet our forecasts as the company continues to take on new orders over the next three quarters. The company's use of bank facilities to finance the new building reduces its weighted average cost of capital, which in turn raises our valuation of the company to 31.5 cents per share (versus 28.5 cents previously). - SIAS Research (May 20)
Banyan Tree Holdings (May 21: 67 cents)
MAINTAIN BUY. Banyan Tree Holdings (BTH) has started the year well, reporting earnings of $14.2 million (+19% y-o-y) on the back of a 17% increase in topline to $96.9 million. The improved performance was portfolio-wide with its owned and managed resorts seeing strong revenue per available room growth of 8% y-o-y to $255, driven by higher average daily rates, especially its resorts in Thailand, while occupancy levels remained stable at 57%. Given its asset heavy balance sheet, we believe that setting up a real estate investment trust can result in the group crystallising significant value in its balance sheet. Improving indicators provide us with increasing confidence in BTH's ability to deliver stronger profits in FY2013F. Our price target of 83 cents is based on 14 times EV/Ebidta. - DBS Vickers Securities (May 16)
CSE Global (May 21: 83.5 cents)
MAINTAIN BUY. 1Q revenue fell 10.9% y-o-y to $120 million on lower contribution from the Americas and EMEA (Europe, Middle East and Africa), while Patmi was flat at $12.7 million. The improvement in net margin (1Q2013: 10.5%; 1Q2012: 9.4%) was due to (i) lower amount of zero-margin revenue in the Middle East (as the loss-making projects were nearing completion), and (ii) a larger amount of high-margin offshore work in the Americas. We expect a slight contraction in the top-line for FY2013F, followed by a modest 13% organic growth for FY2014F. In terms of profitability, we think that gross margin should stabilise around 30%. We have tweaked our model slightly and our fair value declines to 96 cents (previously 99 cents) on 10 times FY2013F PER. - OCBC Investment Research (May 16)
CWT (May 21: $1.805)
MAINTAIN BUY. CWT's 1Q2013 revenue jumped 39% y-o-y to $1.5 billion, while net profit was flat at $27 million. 1Q results were in-line with ours and the street's expectations. The surge in 1Q revenue was mainly driven by its newly established trading business (Commodity SCM), which resulted in higher volume, and the inception of a new product line. At the same time, the group incurred higher administrative expenses relating to the costs of establishing new operations. The group's logistics operations were largely business as usual. Excluding the self-liquidating, short-term trade financing (non-recourse to CWT), the group has net cash reserve of $35.9 million as at end-1Q2013. Overall balance sheet looks sound and is supportive of long-term growth. Unchanged fair value of $2.08. - OCBC Investment Research (May 20)
Dairy Farm International (May 21: US$12.75)
MAINTAIN OUTPERFORM. Dairy Farm released its interim management statement covering the period from Jan 1 to May 14. Earnings were marginally lower y-o-y owing to weaker margins in Malaysia in the face of more promotions, lower supplier income and cost pressures. Operations in Singapore were sluggish, affected by higher operational expenditure. We were not entirely surprised by the stiffening competition in Malaysia, especially as new entrant Aeon seeks to consolidate its position. We are not overly concerned, though, owing to strong developments in Indonesia and Hong Kong. We lower our FY2013-15 EPS by 1% to 4% as we factor in the weaker earnings guidance. We see three-year earnings compound annual growth rate of 17%. Our residual-income-based price target of US$13.55 dips accordingly. - CIMB Research (May 17)
Global Logistic Properties (May 21: $2.95)
MAINTAIN OUTPERFORM. The yen continues to weaken but lower yields implied by the market should neutralise the impact on Global Logistic Properties' (GLP) asset valuations. We believe that the market is now ideal for GLP to recycle more assets in Japan to facilitate future growth or possibly a higher dividend payout. We make a few adjustments to our model (i) lower FY2013-15 core EPS estimates by 17% to 23% for a weaker yen versus the greenback and earnings lost from assets injected into GLP J-REIT, (ii) a 50bp decline in Japanese cap rates and (iii) higher assets under management fee assumptions as we expect more asset recycling over the next 12 months. Our price target of $3.32, which is based on sum of parts, is raised by 8%. - CIMB Research (May 20)
Global Palm Resources (May 21: 18 cents)
MAINTAIN HOLD. Global Palm Resources (GPR) posted 1Q2013 revenue of IDR66.8 billion ($8.63 million), down 33% y-o-y and 4% q-o-q, hit by softer crude palm oil (CPO) prices as well as lower volume sold. Reported net profit tumbled 36% y-o-y to IDR8.3 billion; GPR posted a net loss of IDR85.7 billion in 4Q2012 owing to a large bio-asset revaluation loss of IDR116.9 billion. That said, results were in line with our expectations, as revenue met 29% of our full-year forecast while earnings met 25%. The outlook remains muted, given the still-sluggish CPO prices and an impending increase in labour cost. Until we see fresh progress in its land negotiation and/or acquisition of either new or existing plantations, we opt to keep our hold rating and 17 cents fair value (based on 10 times FY2013F EPS). - OCBC Investment Research (May 21)
KS Energy (May 21: 43.5 cents)
MAINTAIN HOLD. KS Energy (KSE) reported a 27.6% y-o-y rise in revenue to $153.4 million and a net profit of $1.1 million in 1Q2013, versus a net loss of $315,000 in 1Q2012. About $6.5 million of the group's share of results of jointly controlled entities relates to the disposal gain. Hence the net impact from the disposal is $700,000. We hence estimate core net profit of about $400,000 in 1Q2013. The group expects business and operating conditions this year to "remain similar" to 2012. We review the valuations of KSE's closest comparables on the Singapore Exchange, and note that the average P/BV is about 0.7 times. We ascribe a 20% premium to arrive at a 0.85 times P/BV for KSE owing to its integrated operations, which are larger in scale in comparison with some of its peers. Our fair value estimate falls to 50 cents, based on 0.85 times FY2013/14F net tangible asset.- OCBC Investment Research (May 17)
Oxley Holdings (May 21: 38 cents)
MAINTAIN INCREASE EXPOSURE. Oxley recorded $70.6 million revenue and $13.2 million Patmi for 3QFY2013. 9M performance formed 83.9% and 72.5% of our previous forecast respectively. We continue to be sanguine about Oxley's outlook and are impressed by their continuous innovation, especially the recent four bedroom Triplex design at NEWest. We are upping our FY2014 revenue and Patmi in view of the pending completion of Bizhub, Bizhub 2, ArcSphere and Commerze@Irving. As the completion of some of the industrial developments will take place earlier than estimated, we are adjusting our FY2014 revenue and Patmi to $1.24 billion and $309 million respectively. As some of the bigger projects are closer to completion, we are adjusting our RNAV discount to 30% to better reflect the lower risk. Intrinsic value of 44.5 cents. - SIAS Research (May 17)
Petra Foods (May 21: $4.21)
MAINTAIN INVEST. Petra Foods reported 1QFY2013 net profit from continuing operations of US$14.1 million ($17.79 million), up 20.2% from a year ago. Our forecasts imply revenue growth of 22% and growth of 32% for net profit from continuing operations for FY2013. We hold the view that such growth rates are reasonable, given the strength of Petra's business in key markets and its plans to enter into new product categories. Had the disposal of the Cocoa Ingredients business been completed at March 31, 2013, estimated net proceeds would have been US$248 million, yielding estimated net gain of US$76 million. The utilisation of this US$248 million of proceeds, plus its available credit facilities, places the company in good position to drive growth or reward shareholders. Intrinsic value of $4.46. - SIAS Research (May 17)
Singapore Airlines (May 21: $10.87)
UPGRADE TO HOLD. Singapore Airlines reported a fairly weak set of results with net income of $68.3 million (4QFY2012: -$38.2 million) for the quarter. Operating losses of $44.2 million was largely due to losses of $69 million and $39 million at the parent airline and its cargo unit respectively. On closer inspection, the group's bottom line was flattered by the $54.7 million gain on disposal of ppe in the quarter. SIA announced slightly higher final dividend per share of 17cents, taking its full year payout to 23 cents (FY2012: 20 cents). SIA's stock rallied significantly off its low of $10.06 on expectations of recovery in the global economy. However, the latest set of results highlighted continued challenges for the airline industry and we see little scope for further re-rating at the current price. Price target of $11.70. - Maybank Kim Eng Research (May 17)
Ying Li Int'l Real Estate (May 21: 49.5 cents)
MAINTAIN INCREASE EXPOSURE. Ying Li Int'l Real Estate Ltd (Ying Li) reported net profit of RMB7.6 million ($1.56 million) for 1QFY2013, up 109.3% from a year ago. Growth was largely driven by higher rental income, which doubled from RMB13.6 million a year ago to RMB26.8 million in 1QFY2013. The overall structure of the Ying Li International Plaza (YLIP) has been substantially completed as at May 2013. As such, we can look forward to the handover of Blocks 4 and 5 in 2013, consistent with our bullish view. On the whole, we leave our forecasts and valuation unchanged in this update, as the bulk of property development profits will only come in at the handover of a portion of YLIP units later this year. Intrinsic value of 86.5 cents. - SIAS Research (May 17)

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The Edge Singapore

May 27, 2013

Insider Moves: Saizen REIT and Second Chance Properties see insiders increase their stakeholdings

BYLINE: BY JO-ANN HUANG

LENGTH: 522 words

Yeh V-Nee, a prominent businessman from Hong Kong, snapped up 2.5 millio`n units in Saizen Real Estate Investment Trust (REIT) on May 17 at 19 cents each. This brings his direct stake in Saizen REIT to 12%. Yeh's other reported holdings include a 17% stake in Value Partners Group, a fund management firm listed on the Hong Kong Stock Exchange.
Saizen REIT's portfolio includes 138 properties in 14 cities in Japan. Most of its properties are located in Sapporo, Hiroshima and Sendai. It holds a mix of residential, commercial, retail and carpark properties. The entire net lettable area of Saizen's portfolio stands at nearly 206,000 sq m. The properties are valued at ￥39.7 billion ($486 million) in total. They also have an average occupancy rate of 92% and are 18 years old on average.
For the three months ended March (3QFY2013), Saizen REIT's revenue increased by 9.2% y-o-y to reach ￥959 million. Net property income rose by 12.5% to reach ￥144 million. As a result, losses attributable to unitholders were 56.2% lower at ￥46.2 million compared to a year ago.
The 3Q also saw Saizen REIT divest Mansion Lilac in March for ￥53.5 million. It also acquired two more properties for ￥1.5 billion. Saizen REIT units closed at 19.1 cents apiece on May 21.
Meanwhile, Mohamed Hasan Marican, deputy CEO at Second Chance Properties, snapped up 300,000 shares on May 8 at 42 cents each. This brings his direct stake to 0.96%.
Second Chance's businesses comprise gold retailing, apparel retailing and property investment. Its commercial portfolio includes investments in Sim Lim Square, Peninsula Plaza, City Plaza and Far East Plaza, while its women's apparel store First Lady has branches in Malaysia and Singapore.
Second Chance Properties is known for paying high dividends regularly. In a recent announcement filed on the SGX, the company's board of directors intends to distribute a tax-exempt dividend of 3.4 cents per ordinary share for FY2013 ended June, translating to a yield of 7.6%.
For the three months ended February (2QFY2013), Second Chance achieved revenue of $10.1 million, an increase of 9.6% y-o-y. Its earnings reached $3 million for the quarter, falling by 42.4% y-o-y. Second Chance shares closed at 44.5 cents apiece on May 21.
In other trades, Chan Wai Kheong, a significant shareholder of Cambridge Industrial Trust, purchased 1.6 million units on May 2 at 85 cents each. This brings his direct stake in the trust to 9%.
Cambridge Industrial's portfolio comprises industrial properties, most of which are for light and general industrial properties, as well as for warehousing purposes. It has 51 properties in its portfolio with a total gross floor area of about 8 million sq ft and a total property value of $1.2 billion.
For the quarter ended March (1QFY2013), Cambridge Industrial posted revenue of $24.8 million, an increase of 18.6% y-o-y. Net property income grew 18.8% y-o-y to reach $21.3 million, while its earnings distributable to unitholders reached $15.1 million, growing by 5.4%
y-o-y. Cambridge Industrial's distribution per unit climbed 6% to 5 cents. The trust closed at 84.5 cents per unit as at May 21.

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The Edge Singapore

May 27, 2013

Trading Ideas: Shanghai Index's breakout momentum

BYLINE: by Daryl Guppy

LENGTH: 897 words

The China "Go Global" policy has been modified. It is now "Go Global, but with Caution". I recently spoke at a conference designed to attract Chinese investment. My particular presentation was to an audience of companies looking for Chinese investors. My focus was on giving them the basics of working with Chinese companies in a way that avoided confusion and enhanced the chances of success both in the short term and the long term. These are essential in any investment environment, but the messages delivered by senior Chinese officials the following day, and backed up by more informal conversations with Chinese bankers and project managers, painted a more severe message. It also highlighted the need for enhanced skills in understanding and working with Chinese investors.
Put simply, it means that, despite an increase in money available for global investing, it is becoming more difficult to secure that investment. It may seem contradictory, but in China that is often the normal situation. The Chinese government, via the banking system and regulatory system, has in some ways made it easier for companies to move the capital required for investment.
But at the same time they have lifted the bar when it comes to the conditions necessary for the approval of investment projects. Some changes look as if they should make going global easier, but the devolution of some approval processes to the provincial level actually makes the approval process more difficult. This may be due to the recruitment of new staff to these bureaus, or giving existing staff greater responsibility. In China, greater responsibility often translates into greater culpability and this leads to a much higher level of caution when it comes to making decisions.
The result: Getting approval for global investment has become more difficult, but once approval is granted, it is easier to allocate larger sums of capital to the investment. The quality of the process has improved, and it is hoped that the quality of the investment projects that have been approved will also improve. This is an increasing level of sophistication, driven where necessary by changes in state regulations and procedures.
Chinese investors continue to come and be interested, but they are forced to be more cautious. Higher levels of target company due diligence are required and this takes time. Companies desperate for investment capital put themselves at a disadvantage because approvals for global investment are taking longer.
The Shanghai Index developed a rapid breakout above the minor resistance level that has developed near 2,245. This is very bullish, but it also comes with caution. The break-out is moving too fast and too quickly. This type of momentum is unsustainable, so there will be a retracement development. There are two potential ways the retracement can develop.
The first type of retracement is similar to the retracement that developed between Dec 17 and 25, 2012. This retracement behaviour was a small sideways consolidation. The consolidation did not slope downwards, so it was not classed as a flag pattern. The breakout from the upper edge of this sideways retracement was also very rapid. This was the beginning of a fast and sustained upmove that continued on a steep uptrend until February 2013. This type of upmove delivers good profits, but it can also include very large trend reversals.
The second type of retracement behaviour is more severe but better for the establishment of a longer-term sustainable uptrend. The type of retracement is shown by the thick black lines on the chart. The key feature of this type of retracement is the potential uptrend line A. This line uses the low of May 2 and then the low of May 16 as the first two anchor points. This helps define a potential future long-term sustainable uptrend.
In this environment, the Shanghai Index would develop a retracement that tested the strength of the new uptrend line. This is shown by the thick black lines. The market would pull back perhaps to near 2,250, and then rebound from the trend line to develop a new rally. The rally-and-retreat behaviour in this trend environment is more volatile, but the underlying uptrend is more reliable and more sustainable over the long term.
The breakout is part of the of the three test trend breakouts related to the Guppy Multiple Moving Average indicator. The first test of the long-term GMMA group of averages is a weak test followed by a retreat. The second test of the long-term GMMA often has an index move above the upper edge of the long-term GMMA. This is also followed by a retreat-and-rebound rally.
The third test is when the short-term GMMA moves above the upper edge of the long-term GMMA. This is also followed by a retreat but the retreat uses the long-term GMMA as a support level for the next rally rebound. This is the key future development investors are watching. The retreat would use the trend line A as the support level and this may also be similar to the value of the long-term GMMA group of averages.
Daryl Guppy is a well-known international financial technical analysis expert. For more than four years, he has provided weekly Shanghai Index analyses for Shanghai Security News and other mainland Chinese media. Guppy appears regularly on CNBC Asia and is known as 'The Chart Man'. He is a national board member of the Australia China Business Council.

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我看大盘若跌破3300点，最多下看3200点。。。
若真的跌到30000点，那牛市也就结束了。

今天REITS回光返照...
RT