COSCO - SELL: DMG

SELL: DMG & Partners Securities

Nov 01, 2008 The Business Times

ON a year-on-year comparison, Cosco Corporation's revenue surged 80.7 per cent to $987.7 million in Q3 2008 as order backlog for shipbuilding and marine engineering was recognised.
Revenue from this segment contributed 92.1 per cent (an increase of 87 per cent) or $909.9 million. Dry bulk shipping turnover grew 36 per cent to $72.5 million, lifted by more favourable charter rates renewed in the earlier part of the year. Though gross margin was lower at 23.4 per cent (compared to 37.9 per cent in Q3 2007) as a result of higher material costs and a shift in revenue contribution mix towards lower margin shipbuilding business, Cosco still managed to improve its bottom line by 16.5 per cent to $113.9 million.

But as compared to Q2 2008, Cosco's revenue declined 5.7 per cent. Turnover from ship building fell 10.7 per cent while marine engineering dropped 24.4 per cent, bringing the overall top-line contribution from ship repair, shipbuilding and marine engineering down by 6 per cent. Coupled with a lower gross profit margin of 23.4 per cent (a decline of 260 basis points), Cosco's profit after tax and minority interests fell by 11.5 per cent.

Only one of the first 10 dry bulk carriers would be delivered this year. The remaining nine carriers, which are currently being built in Zhoushan shipyard, would be delivered progressively in 2009. The management attributed the delay to several reasons:

1. Zhoushan shipyard was not operating at optimal capacity as the yard was undergoing expansion works concurrently.

2. Over-ambitious vessel delivery schedule, overlooking the fact that Cosco only ventured into the newbuilding business segment in 2007. Going forward, we remain concerned on the tight schedule and further possible delay in vessel deliveries as the management hinted that not all 40 vessels scheduled for delivery in FY 2009 have commenced construction work. A typical bulk carrier newbuild takes 12-15 months to build.

The Baltic Dry Index (BDI) plunged below 1,000 recently (This is a fraction of the 10,000 a year ago). While Cosco would not expect any material negative impact from this falling BDI in the short term as the current charter contracts had been locked in based on higher freight rates previously, we believe the protracted low BDI rates would impact Cosco's shipping contribution in FY 2009 significantly.

The management guided that Cosco's shipping business division would be loss making should its bulk carriers be chartered at the current spot rate.

Cosco has always been a relatively high-beta stock, and this is especially evident in today's volatile market environment. As we continue to take a cautious stance on our sector outlook pertaining to the shipping industry, we are lowering our price-to-book valuation parameter to 1.0 times (from 1.2 times previously), deriving a target price of $0.680 (from $0.860 previously). Maintain SELL.

Cosco Corporation
Sell
DMG & Partners Securities
Oct 31 close: $0.775

SGX Q2-0809 Results - OCBC

Singapore Exchange Ltd

Cutting fair value to S$4.50

SINGAPORE Company Update

Carmen Lee
(65) 6531 9802
e-mail: carmen@ocbc-research.com

16 January 2009

Maintain
HOLD

Previous Rating: HOLD
S$4.99

Fair Value: S$4.50

General Data
Issued Capital (m) 1,069
Mkt Cap (S$m/US$m) 5,334/3,569
Major Shareholder SEL Hldgs (24%)
Free Float (%) 51
NAV per share (S$) 0.62
Daily Vol 3-mth (‘000) 8,383
52Wk High (S$) 10.960
52Wk Low (S$) 4.150

Year to Turnover EBIT PAT EPS PER Net DPS Net Div Yield
30 Jun (S$m) (S$m) (S$m) (cents) (x) (cents) (%)
FY 07* 576.2 365.2 421.8 40.8 12.2 36.0 7.2
FY 08* 768.6 529.0 478.3 44.7 11.2 38.0 7.6
FY 09F 556.0 341.7 280.4 26.2 19.0 22.0 4.4
FY 10F 600.1 384.3 315.5 29.5 16.9 25.0 5.0

* Note: Included one-off from SGX Centre in FY07 and distribution from SGX-DT Compensation Fund in FY08

Severe market decline dragged down 2Q performance.
Singapore Exchange Ltd (SGX) posted a 52% YoY or 12% QoQ decline in 2QFY09 earnings to S$74.7m, dragged down by adverse market conditions, but in line with market expectation of S$73m. For 1H, earnings fell 44% to S$159.2m, or down 37% if S$34m distribution in previous period was excluded. All segments posted QoQ decline, resulting in a 7% QoQ or 28% YoY decline in operating revenue to S$146.7m in 2QFY09. It came as no surprise that Securities Market revenue fell 7% QoQ or 43% YoY to S$69.6m, while Derivatives was down 7% QoQ but up 11% YoY to S$42.8m. Even Stable Revenue fell 9% QoQ and 20% YoY to S$34.3m. Refer to
Exhibit 1 for more details. SGX has declared a 2Q dividend of 3.5 S cents, payable on 18 Feb 2009.

Uncertainty remains.
Volatility in the market is likely to stay for a while, and this cautious environment could curtail trading activities, affecting Securities Market revenue. Management emphasized that it will look at cost containment. The decline in the global equity market has also taken a toll on capital raising exercises, IPOs and derivatives trading activity, which were clearly seen in SGX's 2Q results. The launch of the Extended Settlement contacts (single stock contracts) has been pushed back to 3Q FY09.

Retain HOLD,
cutting fair value to S$4.50. With cautious market sentiment, corporates are finding it hard to raise funds. This has led to the sharp decline in capital raising activities, which now look likely to persist into 4QFY09, and could impact SGX's corporate and listing fees. Management has indicated that it will continue to develop its Derivatives business, but we expect the slump in the equity market to be the present over-riding concern for the stock. Internally, we expect management to keep a close watch on costs in line with other corporates dealing with the present market uncertainty. In view of the unresolved turmoil in the market, we are cutting our 2HFY09 earnings, resulting in a decline in FY09 earnings from S$327.9m to S$280.4m. We have also cut our FY10 earnings from S$362.3m to S$315.5m. As a result of this, but still maintaining our valuation parameter of 16x, our fair value estimate is now S$4.50 (previous: S$5.80).

We retain our HOLD rating.

Keppel Corp FY08 Results - Cautiously forward :OCBC

Keppel Corporation

Cautiously forward

SINGAPORE Company Update
23 January 2009

Maintain
HOLD

Previous Rating: HOLD
S$4.04

Fair Value: S$4.40

General Data
Issued Capital (m) 1,593
Mkt Cap (S$m/US$m) 6,436 / 4,296
Major Shareholder Temasek Holdings (21.2%)
Free Float (%) 78
NAV per share (S$) 2.81
Daily Vol 3-mth (‘000) 9,680
52Wk High (S$) 12.500
52Wk Low (S$) 3.350

Kelly Chia
(65) 6531 9817
e-mail: kelly@ocbc-research.com

Offshore surprises.
Keppel Corporation (KepCorp) reported topline growth of 13.2% YoY to S$11.8b for FY08 while net profits inched ahead 6.9% YoY to S$1.09b. The results exceeded our expectations in view of a S$3b revenue spurt from the Offshore and Marine business in the final quarter. KepCorp's order book of S$10.8b consists of deliveries stretching till 2012.

Upwards, but cautiously.
We have revised our previously bearish FY09F estimates to cater for better guidance from management that KepCorp's "yards will be busier in 2009 than 2008" and its plan to deliver up to 14 rigs will load its coffers with delivery payments. KepCorp's Infrastructure division will become a major revenue contributor (~30%) in FY09F and this has also aided in bumping up our forecasts. However, our enthusiasm is tempered by the possibility of delays in payments and rig deliveries. Overall, our FY09F revenue and bottomline estimates are revised 18% and 21%
higher.

Property drags.
Keppel Land's (KepLand) revenue for 4Q08 plunged 46.8% YoY to S$197.4m due to completion of projects in previous quarters and a slowdown in property sales. No provisions were made but we reckon that there is still looming risk over write-downs of its investment properties. KepLand's high earnings concentration towards the residential and office sectors puts it at high earnings risks. As such, we have incorporated lower forecasts and decided to peg a higher effective group discount rate of 50% to our valuation.

Possible positive surprises.
KepCorp also announced that its Sino-Tianjin venture has entered into an MOU with Sembawang Engineers and Constructors for feasibility study for the development of a US$1b solar polysilicon production plant. While details are not available yet, we are hopeful that this could translate to an EPC contract. On the M&A front, management updated that it is on the prowl for good companies that are currently heavily geared and have become cash strapped due to an aggressive expansion drive in the last 2 bull years.

Maintain HOLD.
Since our last report that iterated our cautious stance, KepCorp fell ~11%. However, our SOTP fair value has been bumped up to S$4.40 (prev. S$4.00) as we work in less bearish estimates. We are maintaining our HOLD rating as we take a wait-and-watch stance for the time being to let any residual delays and cancellations be flushed out of the system. We will become buyers at its recent lows of ~S$3.95.

Keppel Corp Full Year 08 Results

Keppel Corp

Jan 28 close: $4.18

DMG & Partners Securities, Jan 23

FY08 earnings in line with market expectation:
Keppel Corporation reported record FY08 revenue of $11.8 billion (+13.2 per cent year-on-year) aided by higher contributions from O&M and Infrastructure divisions. Core recurring FY08 profit after tax and minority interest (Patmi) of $1.1 billion (+6.9 per cent y-o-y) was in line with the market consensus' estimates of $1.07 billion. While Keppel's FY08 results were credible, total distribution of 35 cents/share declared was slightly disappointing. This implied a gross dividend payout of 51 per cent - the lowest in five years - and at the lower end of management's guidance of 50-60 per cent.

O&M to face headwinds:
O&M's FY08 revenue of $8.6 billion (+18 per cent y-o-y) accounted for 73 per cent of Keppel's revenue, while O&M's FY08 Patmi of $705 million (+35 per cent y-o-y) contributed to 64 per cent of Keppel's Patmi as the division saw the successful completion of 13 jack-ups and three semis. Having current backlog orders of $10.8 billion, the management maintained that the yards would still be busy, with 10 jack-ups and six semis stipulated for delivery in FY09. However, we reiterate our cautious stance on the O&M sector, and opine any significant newbuild contract to occur only in H209 soonest. Our FY09 and FY10 new order estimates stay at $2.2 billion and $2.6 billion respectively.

Not time for a 'buy' yet, downside risks persist:
We advocate that it is still too early to turn buyers on this counter. Downside risks persist, including potential orderbook cancellations and sustained period of depressed oil price. However, we are comforted that Keppel's improved ROE of 22.4 per cent, strong free cash flow of $1.9 billion and net cash position of 0.04x will strengthen Keppel's ability to weather through this crisis.

Our recommendation stays at 'neutral', with a revised TP of $4.48 (from $4.53 previously) due to DMG's revised TP of $1.80 (from $2 previously) for Keppel Land and updated market values for the listed entities. NEUTRAL

MONEY MATTERS 2009: A year of two halves

Business Times - 14 Jan 2009

MONEY MATTERS 2009: A year of two halves

Market volatility likely to persist, yet opportunities may surface in second half

By NORMAN VILLAMIN

AS unprecedented stress struck the core of the global financial system last year, it was clear to many observers that a worldwide recession was on the way. Citi analysts expect major industrial economies to contract well into 2009 as adjustments occur to raise the level of savings in these economies. And while the pace of contraction in global growth is expected to ease moving into the second half of the year, next year's expected economic recovery is forecast to be modest, with growth likely to remain below trends seen before the current crisis.

From a market perspective, this backdrop suggests investors should continue to expect 2008-style volatility in the early part of this year. Looking further ahead, though, downside risks to economic growth are expected to dissipate as global fiscal stimulus efforts gather speed and de-leveraging pressures ease. When this happens, the extreme valuations in equity and credit markets seen today should provide attractive opportunities for investors. For more tactically oriented investors, as we observed in our December column, a global recession does not preclude bear market rallies, even as markets continue on an underlying trend of decline. Such rallies, as seen in previous downturns, may be big, providing opportunities for more trading-oriented investors.

The Japanese experience of the 1990s has served us well so far in navigating the current crisis, and our experience with the latest global equity rally has been no different. During the 1990s when the Japanese market declined to below 1.5x book value, sizeable fiscal stimulus proposals tended to coincide with bear market rallies. On three occasions, prices rose as much as 45 per cent.

Likewise, after global equities fell to 1.2x book value in mid-November last year, and sizeable fiscal stimulus plans were announced around the same time, global markets rallied 25 per cent at their peaks last week. Fiscal stimulus proposals to date have come up relatively short of the stimulus delivered by Japan in the 1990s, which came up to 4-10 per cent of GDP. As a result, it is no surprise then that the recent rally was less robust.

Looking forward and with this sizeable rally behind us, investment returns are expected to shift from a focus on valuation and fiscal stimulus back towards the trends of economic contraction and earnings risk, as seen last September to October. Once again, drawing on Japan's experience in the 1990s, investors should find that, just as signs signalling the start of bear market rallies existed, a similar set of signs signalling their end existed. In particular, the Japanese bear market rallies of the 1990s tended to end near valuation peaks before the start of the valuation bubble years, or near 2.3x book value. Going back to the 1970s, Japanese equities tended to trade in a relatively stable range between 1.5x and 2.3x book value before they were dramatically re-rated during the Japanese asset bubble in the late-1980s. So, coincidentally or not, as the Japanese asset bubble burst, valuations proceeded to return to their pre-bubble valuation ranges of 1.5x to 2.3x book value. Putting the Japanese framework into the context of global equities, the equivalent pre-bubble range was about 1.0x to 1.6x book value. At last week's highs, global valuations, as measured through the MSCI World index, stood at near 1.5x to 1.6x book value, close to the high end of their pre-bubble range. This suggests that the supportive backdrop for a bear market rally, prospective fiscal stimulus notwithstanding, has eroded with the market rally.

For longer-term investors, Citi analysts believe further progress in the current downcycle is needed to create attractive opportunities to enter the accumulation phase for long-term equity exposure. In particular, moderation in expectations for global equity markets, such as 14 per cent year-on-year consensus earnings growth for global equities in 2010, is likely necessary before markets begin to bottom out in coming quarters.

Driving this troughing process, we anticipate, should be an easing of de-leveraging pressures in the global financial system. While large-scale capital raisings took place among global financials in the fourth quarter of 2008, to a large extent these fund-raisings have served only to stabilise balance sheets following losses earlier in the year. In 2009, we anticipate further capital-raisings and asset sales to drive the needed de-leveraging. Only as these catalysts emerge do we expect to see an increase in the historically extreme valuations and a sustained rally in equity and credit markets.

Norman Villamin is head of investment analysis & advice, global wealth management & global consumer group, Citi, Asia Pacific.

BT: Network Man, Ricky Wong

Very inspiring article about how a man can grow from small to big in his career.

Business Times - 26 Jul 2008

Network man

Ricky Wong, chairman of Hong Kong-based City Telecom, tells AMIT ROY CHOUDHURY that Singapore's planned broadband network is all about attracting talent RICKY Wong's idea of future-proof technology is simple. It should be something his grandchildren will be able to use when they grow up.

As 46-year-old Mr Wong, co-founder and chairman of Hong Kong-based City Telecom (HK) Ltd (CTI), has two young children, it's obvious he is talking in terms of a couple of decades at least.
And he thinks the super-fast broadband network he has put up in Hong Kong, which connects 1.5 million homes in that city, is future-proof infrastructure his grandchildren will enjoy and find useful.

You need to remember how fast things move nowadays to understand the significance of Mr Wong's belief. Yesterday's cutting edge is today's obsolete technology.

Sub-megabit per second (mbps) connection speeds provided by dial up modems were state-of-the-art only a few years ago. Now a 100 mbps broadband connection, the highest Singapore has today, is already considered previous generation.

Cisco has called the Hong Kong cyber highway the world's biggest Metro Ethernet network. It can provide connection speeds of one gigabyte per second (gbps) and beyond.

The Hong Kong cyber highway was set up by Hong Kong Broadband Network, (HKBN), a wholly-owned subsidiary of CTI.

Mr Wong has now teamed up with local telcos StarHub and MobileOne in the Infinity Consortium to build Singapore's very own cyber highway - the Next Generation Broadband network, called Next Gen NBN or NBN for short.

Infinity is one of two bidders for the network. The other is the OpenNet consortium, led by Canada's Axia NetMedia and comprising Singapore Telecom, Singapore Press Holdings and SP Telecommunications.

One of these two consortiums will build the network and run it as the Network Operator - or NetCo.

Mr Wong comes across as a sincere man with a clear vision of what he wants to achieve and what the hurdles are.

He candidly admits that in this project there are plenty of wild cards. 'The oil price, interest rates, material costs, the regulatory environment and whether the current telecom incumbents will use our network - there are many unknowns,' he says.

As well as this: there is a fundamental difference between the Hong Kong example and what Singapore is embarking on. And that is the basic model being adopted.

In Hong Kong, HKBN is a vertically integrated service provider, meaning it owns the dark fibre and uses the bandwidth it provides to offer all manner of services.

Singapore has adopted a radically different model - an open access, no conflict model with the infrastructure owner not playing in the retail space, to ensure that it does not enjoy the competitive advantage by owning the network.

On top of the NetCo layer - for which the Infinity Consortium is bidding - there will be an Operating Company or OpCo, for which a separate bidding process will be held.

CTI is a pre-qualified bidder for this process, if it chooses to bid, when the bidding process is started by the government.

The OpCo will lease the bandwidth from the NetCo, then sell it to various companies which will use that bandwidth to offer all manner of retail services, from plain vanilla Internet connections all the way up to IPTV (Internet Protocol TV) and VoIP (Voice over Internet Protocol).

So, considering all the uncertainty, why is Mr Wong here? As he says himself, this job is not going to make him a billionaire. And anyway, he already has tonnes of money.

'I'm financially secure and I can retire because I'm the majority shareholder of CTI. But I still work hard because I enjoy what I do,' he says. Mr Wong has a dream - and that's what drives him. He wants to ensure that in five years there is fibre to most homes in Singapore and Hong Kong.

'Then these two cities will become a model for the rest of the world. The Americans and Europeans will come here to learn and follow us. We will become the technology leaders.'

And he adds an important point - maybe the big idea behind the building of the NBN. 'What is important is not how much bandwidth is used after the fibre is laid. Rather, what's important is that the bandwidth acts as a magnet to attract more talent. Attracting tech-savvy talent to Singapore is the real purpose of the NBN. If that is achieved, the NBN can be considered a success.'

Mr Wong reckons tech-savvy people worldwide will then see that Singapore is the best place to live, work and play - better than Silicon Valley, because it will have the best infrastructure.

Apart from this vision, Mr Wong loves a challenge, which is another factor behind his commitment to spend - as he says - half of the rest of his working life in Singapore if his consortium wins the contract.

To understand this urge to take risks and do something different, it's useful to know how Mr Wong's past experiences have made him a streetsmart - and contrarian - businessman.
'My first business was back in 1979 when I was 17 and had just finished my public examination at secondary school,' he says. 'I organised a summer school, got 400 students and made around HK$40,000,' he adds with a wry smile.

A few years later, when he entered Chinese University of Hong Kong to study electronics, he traded in textbooks. 'I used to bring in textbooks from Taiwan, where they were about 70-80 per cent cheaper than in Hong Kong, and sell them to fellow students. 'That helped make me self-sufficient while at university.'

After obtaining a Bachelor of Science degree in electronics in 1985, Mr Wong joined IBM in Hong Kong and worked for four years. After that, he migrated to Canada where he set up CTI in 1991. A year later he returned to Hong Kong to set up CTI there to provide competitively-priced IDD (international direct dial) services.

'In 1992 we did what was known as a call-back service - an alternative IDD service,' he said 'We did that until 1999 when we started to do simple re-selling of IDD.'

In 2000, CTI got a fixed-network licence in Hong Kong. 'We could do both international calls and infrastructure within the city of Hong Kong,' he says.

In the same year, CTI started a broadband venture. At the time, the idea that broadband could be a viable business was yet to sink in. But he went ahead. 'I wanted to take risks,' he recalls. 'I liked the challenge. I wanted to change the world. Everyone, including my parents, poured cold water on my plans, saying, 'Ricky, you know what you are doing? You are fighting with Hong Kong Telecom. They are huge, so what makes you so confident? Why are you wasting your time'?'

But Mr Wong politely told his parents: 'I know I can do it.'

His confidence came from the fact that CTI did it in IDD, so much so that at the peak, its market share was only 2 per cent lower than that of Hong Kong Telecom, now owned by PCCW.

Mr Wong recalls that in 2000 CTI was the last player to enter the local fixed-line market, unlike with IDD, in which it was the first to enter the re-selling market.

'The local fixed market deregulation started in 1995-96.' he says. 'And before we entered the market in 2000, three additional licences were issued - to Hutchison, Wharf and New World.'
As a result, CTI found itself up against a formidable foursome of blue chip companies - PCCW, Hutchison Telecom, New World Telecom and Wharf T&T.

At the time, broadband was very expensive in Hong Kong. It was a luxury product that cost from HK$300 to HK$400, Mr Wong recalls.

He, however, noted something that seemed significant, Although all of his major competitors were blue chip companies rolling in money, only one of them, PCCW, had its own network. The others leased network space from PCCW and other parties.

'So I said to myself, what's the difference in terms of service? Same chef, different waiter. Where is the choice (for consumers)?' says Mr Wong.

CTI decided to build a new network so it did not have to depend on the old networks to provide services.

But it was tough going. 'We didn't want to take the easy way out, so we built everything from scratch, because even if there is one inch of old cable in a network, that will become a traffic bottleneck,' says Mr Wong.

CTI faced many difficulties, as building owners were reluctant to let company engineers in to do construction work.

'I personally went to hold meetings with house owners,' Mr Wong says. 'They were mostly housewives and professionals who were not experts in telecommunications.'

He recalls talking until midnight, explaining to them the benefits of having high-speed connections to their homes. 'I used simple language to explain,' he says

Mr Wong feels that apart from being able to convince home owners, he was able to demonstrate to his staff that they had to be patient.

He notes that today, the incumbent player in Hong Kong provides around 8 mbps downlink and about one mbps uplink, while CTI's standard product is 100 mbps uplink and downlink. 'It's totally two generations up front and is not comparable.'

The CTI network is what is called a Category 5 network - the best there is on the market. Telephone lines are uncategorised or Category 0. Category 5, or Cat 5, as it is known, is the highest quality - the same as computer cabling.

'The difference between Cat 5 and a telephone line is the capacity we can put on,' says Mr Wong. 'With Cat 5 we can do 10, 100 and even 1,000 mbps (1 gbps).'

In Hong Kong, CTI offers two customer solutions. They can either use Cat 5, that is a high quality copper wire, or opt for an optical fibre line. The capacity limit of a Cat 5 copper wire is 1 gbps. With optical fibre, capacity is theoretically infinite.

'It's a future-proof technology,' says Mr Wong. 'We haven't come up with any alternative that is faster than fibre. It will be relevant for the next 20 years.'

And so what about the Singapore project?

Mr Wong feels very confident because there are, according to him, a lot of similarities between Hong Kong and Singapore. 'I think most of the households in the two cities already have a telephone line and a coaxial line for cable TV. The optical fibre will be an additional piece of infrastructure,' he says.

He, however, agrees that Singapore's open access model is radically different from his vertically integrated model in Hong Kong, but feels it's the only model that can succeed in Singapore.
'In Hong Kong we are all self-funded. We have no government support,' he says. 'But in Singapore, whoever builds the network will need government funding.'

While there are many similarities between the two cities, there is also a key difference, he says. And that is household density. In Hong Kong there are, on average, about 300 households per residential building, whereas in Singapore the number is about 80. 'So the construction cost is very different and that makes the whole business mode different.'

Mr Wong says he spent about HK$2.8 billion to connect 1.5 million homes. 'In Singapore it will definitely cost multiples of that amount to build a same-size network.'

As result, he adds, the Singapore NBN cannot be set up purely on a commercial basis, because the risk and return will not satisfy prudent investment criteria.

Singapore is not alone. Around the world, especially in European countries, the situation is the same, as it is in many other Asian countries, Mr Wong adds.

So if there has to be government support, it is only fair that the model should be open access with no conflict. 'It should be very low-risk, low-return kind of model, like say a water supply company.'

He reckons that for the system to work satisfactorily, the NetCo and OpCo should just provide the infrastructure. 'The competition should be at the retail level - the supply of different quality and type of services, like VoIP, karaoke, monitoring of the elderly etc. This is the right model to usher in a new network in Singapore.'

Mr Wong believes his company has one great advantage in the race to build the NBN - its experience in building in dense areas, using existing infrastructure and causing minimum disruption.

'While forming the (Infinity) consortium, I got a very good understanding of what is happening in Singapore,' he says. 'I even went down into one of the drains one rainy day to see how we can use them to build out the network. I saw we can utilise a lot of existing non-telecom infrastructure, like drains and bridges, to roll out the network, just as we did in Hong Kong. Our experience will come in handy.'

So the savvy Hong Kong businessman waits for the government to announce the winner of the bid to build Singapore's own cyber highway. And if the Infinity Consortium wins, Mr Wong is confident he will help build something his grandchildren's generation in Singapore will thank him for.

BT: Mass market stays buoyant as buyers find price is right

Business Times - 02 Jul 2008


Mass market stays buoyant as buyers find price is right

Flash estimates for Q2 show overall private home prices flattening; steady HDB resales keep mass market more active

By ARTHUR SIM

(SINGAPORE) Flash estimates for property price indices are in with numbers suggesting that price-sensitive buyers are bargain hunting or scaling down their expectations altogether.

The Urban Redevelopment Authority (URA) released estimates for the Q2 2008 price index for private residential property yesterday with prices rising just 0.4 per cent - a mere crawl compared to the 3.7 per cent increase in the previous quarter.

While this represents the slowest growth in four years, Jones Lang LaSalle's local director and head of research (South East Asia) Chua Yang Liang also notes that it is the, 'steepest' quarterly rate of change since Q3 2000.

Much of the activity was in the mid and mass-market as reflected by URA's index for three geographical regions. Prices of non-landed private residential properties increased by just 0.2 per cent in Core Central Region (CCR) and 0.7 per cent in Rest of Central Region (RCR), but climbed a more robust 1.3 per cent in Outside Central Region (OCR).

Dr Chua added that demand remained favourable in the OCR supported by average nominal wage increases in the Q1 2008 and 'dislodged residents of collective sale sites'.

Also robust was the Housing and Development Board's (HDB) resale market with estimates for the quarter revealing that the HDB Resale Price Index increased by 4.4 per cent over the previous quarter, and higher than the 3.7 per cent increase in Q1 2008.

Knight Frank director (research and consultancy) Nicholas Mak said that the mass market is 'influenced' by HDB's resale market and added that, 'the resale market has been steady'.

Indeed, while HDB resale volume did fall to 6,360 units in Q1 2008, a 6 per cent drop compared to Q4 2007, it actually increased by one per cent on a year-on-year (y-o-y) basis.

By comparison, secondary market private property transactions of 2,304 units in Q1 2008 was a fall of about 40 per cent, quarter-on-quarter (q-o-q) and a fall of 57 per cent, y-o-y, while primary market transactions of about 762 units was a fall of about 48 per cent in Q1 2008 q-o-q, and a fall of 84 per cent y-o-y.

Related article:

Click here for the URA news release


ERA Realty Network assistant vice-president Eugene Lim also believes that a buoyant HDB resale market could boost HDB upgrader sentiment, but he pointed out that the strength of the HDB resale market can be attributed to 'upgraders, downgraders and permanent residents'. On the last group, Mr Lim estimates that based on in-house data, permanent residents account for about 20 per cent of the buyers in the HDB resale market.

And attention is likely to continue to be diverted away from high-end products.

'The market is not short of buyers and many astute investors have been shopping around, looking to scoop up value buys,' added Mr Lim.

CBRE Research executive director Li Hiaw Ho noted that in the private property market, most of the transactions were mid and mass-market projects with the majority of transactions in the $750-$1,000 psf price bracket.

As such, Mr Li expects sales volume of new launches to rise to between 1,200-1,400 units in Q2 2008, compared to just 762 units in Q1 2008.

Property consultants have so far been careful to not use the 'F' word to describe home prices. Most believe prices have 'plateaued' or 'softened', but not 'fallen'.

Colliers International director (research and advisory) Tay Huey Ying even believes that home prices have, 'remained stubbornly resilient to the extent that they continue to post a y-o-y increase of 20.4 per cent'.

Ms Tay also added that for the first six months of the year, home prices rose by 4.2 per cent. '(Developer's) current pricing strategy can be described as competitive, that is either similar to current market prices or marginally lower than competitors,' she added.

Ms Tay believes that home prices will continue to resist 'downward pressure' and expects prices to hold steady or decline marginally by not more than 3 per cent in Q3 2008.

Saying that mass-market prices have generally not been 'chased up' or preyed upon by the 'speculative element', Ms Tay believes this sector could be the best performing for the rest of the year.

This however needs to be put in context.

Knight Frank's Mr Mak does point out that prime property prices have increased by 52.4 per cent over the last two years. 'On this basis, it is not surprising that this market segment will lead the slowdown in price growth,' he added.