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Archive for the ‘Property’ Category

FCOT: Great insight!

In Property, Reits on 29/06/2012 at 6:31 am

“FCOT sold a S$10 mil yielding KeyPoint for S$360 mil and bought a S$10 mil yielding Caroline for S$113 mil!”

http://www.investmentmoats.com/money-management/reit/frasers-commercial-trusta-reit-worth-looking-out-for/

Effectively it’s get the same yield but reducing the capital used by 31%, releasing the balance of 69% for hopefully more proftable use. Great financial engineering. F&N’s chairman should tell his sis-in-law at Temasek to pay F&N and FCOT to teach Temasek financial engineering.

And great insight by Investment Moats: worthy of a Buffett.

Bad PR by FCOT. It should enhance shareholder value be publicising its financial egineering skills.

Though must point out that the returns in Caroline’s case are in A$. Nevertheless …

But given that FCOT was gifted the Alexandra Technopark by F&N when F&N was trying to salvage its investment in FCOT during the financial crisis, there’s a danger that FCOT may have to return the favour. I was surprised that F&N shareholders did not kick up a fuss as the valuation then looked rather low, even taking into account the crisis. But then the property is “peanuts’ in relation to F&N’s assets. So there’s a gd chance that F&N would not ask FCOT for a favour.

As to the best use of the Keypoint money, redeem the convertibles in full: increasing leverage. Rely on F&N’s balance sheet: maybe pay it a fee for “renting”. Worst case: rights issue again. But then I’m a bit of a gambler (like the cowboys and cowgals at Temasek), even if I invest in Reits for the yield. Some habits die hard.

Katong property more valuable than Hawaiian island

In Property, Uncategorized on 21/06/2012 at 7:17 pm

So the the Katong home of the late Liem Sioe Liong, one of Indonesia’s richest men, is valued at approximately S$100 million, according to a report in Indonesia’s TEMPO Interactive. The property is 86,000 sq ft.

It was reported yesterday that the billionaire boss of technology giant Oracle is to buy 98% of the Hawaiian island of Lanai. Larry Ellison’s successful bid is unknown, but the asking price for the 141 sq mile (365 sq km) was said to be between US$500m and $600m http://www.bbc.co.uk/news/world-us-canada-18529739.

Reminded me that in the late 1980s, the grounds of the Imperial Palace in downtown Tokyo was said to be worth all the land in California. Australia sold part of the land its embassy was on and paid off half of its foreign debt.

Cambridge Reit

In Property, Reits on 06/06/2012 at 1:59 pm

Almost no coverage from analysts, so this might interest http://sreit.reitdata.com/2012/05/25/cambridge-dmg-4/

The yield is great, the gearing levels are ok but the lack of a big, conservative brother scares me. In times like this, need a big, stodgy brother like F&N, Keppel, or AMP; or effectively zero gearing (Lippo trusts). I consider CapitaLand too racy for me despite it’s a TLC.

Saizen Reit

In Japan, Property, Reits on 06/06/2012 at 1:28 pm

 This article (“Residential properties have been the most popular among investors based on its stable return,” said Ishinabe. “Since last year, investors have expanded their interest into other types of properties such as office buildings and commercial facilities.”) on two bulls in Jap commercial property despite supply a’coming reminded me of u’m post on Saizen Reit that tot me the basics of this residental property Jap Reit. 

http://singaporeanstocksinvestor.blogspot.com/2012/05/saizen-reit-to-buy-or-not-to-buy.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+ASingaporeanStockmarketInvestorassi+%28A+Singaporean+Stockmarket+Investor+%28ASSI%29%29

 

Test needed to ask questions at co. meetings

In China, Corporate governance, Financial competency, Humour, Property on 04/06/2012 at 5:01 am

(Or “Shume really stupid shareholders” or “Why SGX shld pay Mano Sabnani to conduct courses on asking sensible qns at AGMs and EGMs”)  

Sometime back, the media reported that some daft shareholders (same people as those who complained at DBS AGM that DBS paid 50% premium over Bank Danamon’s share price to get controlling stake? I mean these people never ever heard of a premium needed to secure a controlling block?) abt CapitaLand’s China exposure and share price since 2008 or 2007 at its AGM.

Don’t they read the int’l media?

Example from BBC Online:”China has, thus far, avoided the much-feared hard landing,” said IHS Global’s Ren Xianfeng.

“Expect no major property meltdown or construction bust. Expect no deflationary spiral or banking crunch.”

Analysts said that given the steadiness of the property market, policymakers were likely to continue to ease their policies to boost growth.

Ting Liu of Bank of America-Merrill Lynch forecast that China’s economy was likely to grow at an annual rate on 8.5% in the second quarter, up from 8.1% in the first three months of the year.

And on the share price: don’t they realise that equity markets have had a choppy ride since 2008. And that China-related stocks have been the target of bear raids and that CapitaLand is an obvious target to short given that the stock is liquid and shares can be easily borrowed

In case anyone doesn’t understand the reference to Mano, he asks vv intelligent questions at AGMs and EGMs. Only one I can bitch abt is at K-Reit EGM when he queried the price paid for Ocean Towers from its parent. Shumething like Ocean Towers seldom gets sold at mkt price, except perhaps in distressed sale. Kanna pay premium.

How times have changed since the late 70s (Moral suasion)

In Corporate governance, Political governance, Property on 01/06/2012 at 6:39 am
Someone wrote in to Voices as follows
 
Property developers countering govt policy
 
The extra stamp duty of 10 per cent was introduced in December to curb excessive foreign investment in private residential property. This cooling measure has failed. New private home sales last month were the strongest in nearly three years.One possible reason is the increasingly common practice by property developers to absorb the extra stamp duty as part of their marketing strategy, visibly offered as a carrot to potential buyers in their advertisements of property launches.If a government policy could be circumvented this easily, then it has lost its effectiveness. The Government should make it illegal for property developers to absorb any stamp duty.
 
In the late 1970s, never mind making it illegal for property developers to absorb any stamp duty: someone would call up the developers offering this deal and tell them that what they were doing was “not in the national interest”, and please scrap the offers. Developers would listen to the polite request to behave responsibly in obeying the spirit of the law rather than the letter of the law because no developer wanted the tax authorities going thru their books if they decided to follow the letter of the law.
 
How times have changed since when I started work. For the better or the worse in this instance, I am uncertain.
 
 

Reits R financial engineering

In Financial competency, Property, Reits on 17/05/2012 at 10:52 am

Reits have a new tool to juice up returns: perpetual securitiesor perps. Could “leverage up” without “debt”. Shld not technically use the word “bonds” even though they are effectively bonds.

http://www.todayonline.com/Business/Property/EDC120504-0000036/Perpetual-bonds–A-boon-to-Singapore-REITs

Could be burps if shumething goes wrong.

The central bank is worried that retail investors may not understand perps*. I’m worried reit managers may be seduced by investment bankers to use perps indiscrimately. Us investors get shafted. So invest in reits where the sponsor is big, stodgy and conservative (like F&N, or AMP), and has a big stake in reit.  If sponsor doesn’t meet the first criteria, think long and hard. I did in case of LMRT, and bot in.

Update: Comments on ST article abt central babk’s stance.

———————————–

*Bankers said MAS officials had voiced their concerns over retail holdings of perpetual bonds during at least two informal meetings in recent weeks.

The central bank’s scrutiny is preliminary and there is no suggestion of any wrongdoing on the part of the banks or companies involved in the recent flurry of perpetual bond issues. But the discussions show that the regulator is worried individual investors may be taking on too much risk without a full understanding of the product.

http://www.todayonline.com/Business/EDC120515-0000049/Perpetual-bond-rush-causes-alarm-in-Spore

MIIF & FCT: Useful updates

In China, Property, Reits on 17/05/2012 at 6:51 am

Never summed up the courage to buy MIIF because although it is a China infrastructure play, yirld is super, and MIIF is net cash, its underlying investments are up to their eyebrows in debt: could affect MIIF’s payouts, NAV and price. But chk out for yrself  http://www.investmentmoats.com/money-management/dividend-investing/amfraser-have-some-seriously-optimistic-cash-flow-projections-for-miif/

For the working stiffs who got cashflow from day jobs. Not for retiree who gambled his cashflow.

 CIMB likes Frasers Commercial Trust I own shume.

Update: DBSV likes FCT too http://sreit.reitdata.com/2012/05/18/fcot-dbsv-3/

Ascendas India: DBS is bullish

In India, Property, Reits on 08/05/2012 at 6:06 pm

http://sreit.reitdata.com/2012/05/02/a-itrust-dbsv/ (Ya I know technically it’s not a Reit, but it looks like one.)

So am I. )))). BTW, the Indian rupee has strengthened after the government said on Monday that it would delay proposed laws targeting tax avoidance by one year.

But five things wrong with the Indian economy.

Gd Reit table

In Property, Reits on 07/05/2012 at 7:06 pm

http://mystocksinvesting.com/wp-content/uploads/2012/05/Singapore-undervalued-REIT-stock-comparison-5-May-2012.png

Thanks to complier.

Lippo Reit: OCBC is bullish, but Indon economy is slowing

In Indonesia, Property, Reits on 07/05/2012 at 6:25 pm

http://sreit.reitdata.com/2012/05/02/lmir-ocbc-14/

So am I. But Indonesia’s economy grew at its slowest pace in 18 months amid a slowdown in exports as demand from key markets such as the US, Europe, China and India weakened.

Worse, the Indonesian rupiah has fallen 8% against the US dollar in the last twelve months: a weak currency may hurt the purchasing power of domestic consumers and dent demand. Remember domestic consumption accounts for nearly 60% of its economy. http://www.bbc.co.uk/news/business-17980123

Other analysis, info on LMIRT:

http://s-reitinvestmentblog.blogspot.com/2012/05/analysis-of-lmir.html

http://diyvalueinvesting.blogspot.com/2012/04/lmir-q1fy2012.html

Why the rich live in exclusive areas like Sentosa Cove or Districts 9, 10

In Humour, Property on 01/05/2012 at 5:27 am

They want to make sure that they do not break God’s order Love Thy Neighbour http://front.moveon.org/three-words-in-the-bible-that-some-people-totally-ignore/?rc=daily.share&id=40399-20042274-0D2I6Wx

After all, being wealth shows that God favours them.

 

Property: Rich Indons buying in London

In Indonesia, Property on 30/04/2012 at 7:17 pm

More wealthy Indonesians are looking to buy a second home in London, while interest in Singapore has waned, according to Property Report, a real estate magazine, citing a study by global property consultancy Knight Frank, earlier this month.

“Interest from Indonesian-based purchasers in London property increased by over 100 per cent last year … Indonesia moved up two places last year in Knight Frank’s rankings of Asian buyers in London, from 11th in 2010 to ninth position… weakening of the British pound against the rupiah has made the idea of buying property in London more attractive to wealthy Indonesians”.

Even though Singapore remains the No 1 destination for Indonesian property investors, the Republic’s recently-introduced additional buyer’s stamp duty was having a “cooling effect”, the report said.

BTW, lots more Muslims and rich people there. The Arabs love London, so do the Russian rich.

Knight Frank also said Singapore remains the favourite for the Indonesians, “Indonesians are among the top-three property buyers in Singapore after China and Malaysia. Last year, Indonesians bought 1,714 properties in Singapore. In the first quarter of this year, the number was 137″.

“We estimate that Indonesians spent 1.5 trillion rupiah (S$204.5 million) on property in Singapore (last year)”.

Not another excuse to promote S-Reits?

In Financial competency, Property, Reits on 25/04/2012 at 6:37 pm

(Or “S-Reits: Is an amber light flashing?”)

Regular readers will know that I’m up to my eyeballs in Reits (AMP, Fraser, Lippo and Ascendas India, ya I know AI is a biz trust, but it’s a Reit except in form). Greedy for the yield, what with inflation at above 5%. And no high salary to fall back on. In fact no salary at all. (((

Generally Reits are up 10% in 1Q, and taz without taking into account the payouts! So I’m not complaining.

But I’m getting concerned abt future total returns (price + payouts) when the expected appreciation of the S$* is given as a reason to buy Reits. “If they [investors] expect the dollar to appreciate … there will be more interest in Singapore-dollar-denominated assets … Reits that are listed in Singapore and traded in Singapore dollars will benefit as well,”  someone senior from SIAS Research was quoted by MediaCorp as saying recently. And remember that SIAS is the self-proclaimed watch dog for retail investors!

WTF, ever heard that quite a number of Reits are diversified geographically, or are exposed to a specific country like India, China or Indonesia? If a Reit has oversea income, that income would be “reduced” when translated into an appreciating Singapore dollar.

Anyway, as of last week, DBS Vickers liked Mapletree Logistics Trust, Ascendas India Trust and Frasers Commercial Trust. These were Reits to accumulate ahead of payout declarations because it expected the payouts to exceed mkt expectations.

CIMB favoured CapitaMall Trust and Frasers Centrepoint Trust for their retail exposure and strong growth potential. And OCBC prefered industrial REITS, which offer yields in excess of 8% to outperform.

But do remember that unlike companies, Reits have by law to payout out 90% of their income. There is no such thing as keeping something for “a rainy day”. Something that “dividend stocks” like Haw Par, SPH or F&N do. With a Reit, if income drops, the payout drops and the share price will drop to reflect the reduced payout.

As a Reit investor, you got to sell when the going gets good, or be prepared to hold it through down-cycles and be prepared to cough up monies then for rights issues to shore up the financials.  Net-net, could use up the payouts you got in gd times.  

————–

*Following the recent announcement by the central bank to allow the Singapore dollar to appreciate at a faster pace.

F&N: Trading at deep discount to RNAV says DBS

In Property on 13/04/2012 at 6:07 pm

As the shares closed at  6.74 today, I tot readers might be interested in DBS’s continued call to buy F&N.

My problem with this stock is that there doesn’t seem to be any plans to reshuffle the portfolio of assets (Asia Pacific Breweries, F&N Berhad, Times Publishing, properties and a few other things) to extract more shareholder value. It’s more of the same. But dividend is sustainable, yielding abt 2.7% (trailing). Better than leaving money in the bank.

DBS Group Research | Mar 30

Close: $6.70

 … announced that its wholly owned subsidiary, FCL (China) Pte Ltd, is proposing to privatise its 56.17 per cent-owned, Hong Kong-listed entity, Frasers Property (China) Ltd (FPC). The proposed privatisation will be undertaken jointly with Riverbook Group Ltd, a wholly owned subsidiary of Ascendas Land International Pte Ltd. Riverbook is also the second largest shareholder of FPC with a 17.16 per cent stake. The main assets of FPC include the 157,610 sq m Vision Shenzhen Business Park and Shanshui Four Seasons in Shanghai with 737,000 sqm earmarked for residential/commercial uses.

We believe that the rationale for this exercise is that the current traded price does not reflect its value as FPC is trading at a 43 per cent discount to its NAV.

Furthermore, FPC’s trading value is relatively low at less than HK$1 million a day. The privatisation is likely to provide more flexibility for the major shareholders to extract value, in our view.

We continue to see value in F&N, as it is trading at a 24 per cent discount to our RNAV ($9.02), with the potential to progressively unlock value over the longer term – Asia Pacific Breweries, F&N Berhad, Times Publishing, properties, etc. In the meantime, the group’s earnings will benefit from the strong performance of its brewery unit, stable investment property earnings, coupled with about S$1.7 billion in unrecognised property development sales in Singapore. We believe its low landbank and partnership strategy for land tenders will better insulate it from policy risks in this uncertain market.

Link between changes in PR rules & ministerial salaries?

In Financial competency, Property, Wit on 06/04/2012 at 6:39 am

The move to scrap one avenue for rich foreigners to fast-track their permanent residency applications by parking large sums of money here will have little impact on the Republic’s economy, analysts noted.

In fact, an analyst went as far as to describe the Financial Investor Scheme (FIS) – started in 2004 – as having “outlived its usefulness. http://www.todayonline.com/Singapore/EDC120405-0000087/Scheme-for-rich-foreigners-outlived-usefulness

The devil whispered in my ear, “What this means is that there will be less people applying for leave to buy houses in District 10, and less demand for places in Sentosa Cove, and super high end luxury apartments. Remember there is a group of S’poreans who have had their salaries cut by about half. Less competition for them now when it comes to buying luxury-end properties?”

“Perish the tot,” the angel of the Lord said. “These are the people who introduced GRCs.”

“My point exactly,” said the MU supporter.

Angel of the Lord, “Since 2010, these businessmen, have not been allowed to include the cost of buying a private home as part of their required investment.”

MU supporter, “The pigs knew they were going to have to cut their salaries. Pre-emptive move to ensure they are not affected by the cut in salaries.”

Angel, “OMG! What can I say? You may have a point!”

Tesco Thai Property Fund Debuts Strongly as Yield Play

In Property, Reits on 24/03/2012 at 6:05 am

Even Bangkok punters play the yield game.

http://www.nytimes.com/reuters/2012/03/19/business/19reuters-tesco-thailand.html?_r=2&src=busln&nl=business&emc=edit_dlbkam_20120319China%20IPOs:

“Younger S’poreans should not be burdened with taxes” and “only about 50% of S’poreans pay taxes”

In Financial competency, Political governance, Property on 14/03/2012 at 9:13 am

Minister K Shanmugam has said that the Government does not want younger Singaporeans to be saddled with tax burdens, even as it ensures that the elderly are taken care of and no one is left behind.

When I read the above, I could only chuckle and then sigh. I had juz posted my very mixed tots about Mohammad Charlie Jasni who is earning $850 a month, buying a $99,200 HDB 2-room flat, noting that after the $40,000 grant the HDB loan is $59,220. On a 30-year mortgage at the HDB Concessionary Loan rate of 2.6%, the monthly repayment is $237. Mohammad is only able to pay $83 a month because the mortgage was reduced to slightly more than $20,000 because he and his wife have used up their CPF monies of $40,000. If they default, they have lost serious money.

About 15 years ago, in 1997 or 1998, I had an interesting conversation with some expat couples in their early 30s at my club . What surprised them most about S’pore was the financial commitements that their S’porean contemporaries had: 20 to 25 year loans to buy public housing apartments, and 10–year car loans. They said that back home (Canada, OZ or the UK), they would never have dared to make such long-term financial commitements. But it was par for the course here. And they would have not needed to, I added. They agreed. Well, now HDB mortgages are an “affordble” 30 years.

Of course, the PAP doesn’t want to burden the young with more taxes. The young can’t afford to pay higher taxes: they are juz managing a decent, comfortable life after meeting the interest and principal payments on their 25 to 30-year HDB mortgages. More will vote Opposition if taxes are increased. And I don’t mean the bluish near-clones of the men in white. They will vote for the people in red. Or they will riot.

The minister also said, “[W]e also have to send another message, which is that, only about 50 per cent of Singaporeans pay taxes”. This surely is wrong? If only 50% of S’poreans pay taxes, then why is the government giving a permanent rebate for the poor so that GST becomes a lot less regressive*?

We all (rich, poor and so-so) pay GST. That is why economists consider this tax to be the most efficient and effective way of taxing people. Tax is paid when one consumes. We all consume. 

(It also has the added advantage of taxing consumption, not savings or investments. In traditional economics savings and investments are good, consumption is bad. Bit like how the PAP thinks? Investing in a 30-year mortgage is good, but spending more on consumables is bad.)

What he means by “taxes” is “income tax”. The minister when he was in legal practice was one of the top litigation lawyers around. He was very, very good. Err I hope that now he is a minister he doesn’t join the likes of PritamS, Vikram Nair and Hri Kumar Nair. Their use of words reminds me of::

    “I don’t know what you mean by ‘glory,’ ” Alice said.
    Humpty Dumpty smiled contemptuously. “Of course you don’t—till I tell you. I meant ‘there’s a nice knock-down argument for you!’ ”
    “But ‘glory’ doesn’t mean ‘a nice knock-down argument’,” Alice objected.
    “When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”
    “The question is,” said Alice, “whether you can make words mean so many different things.”
    “The question is,” said Humpty Dumpty, “which is to be master      that’s all.”
    Alice was too much puzzled to say anything, so after a minute Humpty Dumpty began again. “They’ve a temper, some of them—particularly verbs, they’re the proudest—adjectives you can do anything with, but not verbs—however, I can manage the whole lot! Impenetrability! That’s what I say!”

(Lewis Carroll’s Through the Looking-Glass, and What Alice Found There )

———-

*But TOC’s Uncle Leong has described the problem with the government’s “solution”, “A new GST voucher will be given to help particularly lower-income and elderly Singaporeans, comprising three components – cash, Medisave top-up and U-Save.

‘So, you pay for your GST increase in cash, but you get the bulk of it back not in cash, but as Medisave top-ups which you can only use for medical purposes, and U-Save which helps you to pay for what has historically been generally increasing utility bills.”

A wicked, mean tot. Could one of the reasons for putting the money into CPF accounts rather than pay cash be to lessen the cost to the government? The real value of the cash in the CPF accounts are steadily and steathily eroded by inflation. With the Medisave account paying 4%, and the ordinary account 2.5%, and inflation at juz below 5%, could the government be hoping that inflation reduces its headline cost by the time the money is withdrawn? Even if inflation returns to the 2% range, the real cost to the government is reduced. As I said, a wicked, mean tot that would never occur to a PAP supporter or a journalist in our constructive, nation-building local media.

http://atans1.wordpress.com/2012/02/27/budget-a-plague-on-both-your-houses/

Behind the $83 a month HDB flat

In Financial competency, Political economy, Political governance, Property on 12/03/2012 at 4:37 am

(Or “Mixed thoughts about the poor having to take out a HDB mortgage” or “What the HELL? PAP misses the plot!”)

In, I suppose, an attempt to show that ministers were not talking rubbish about someone earning less than a $1000 being able to afford a HDB flat (thanks be to a government subsidy, and forced savings via the CPF system), the constructive, nation-building ST had an article on how Mohammad Charlie Jasni who is earning $850 a month is able to afford a two-room HDB flat.

The analytical, compassionate, risk-adverse part of me agreed

– With the view articulated by TOC’s Uncle Leong that it would be better if Mohammad was allowed to lease, and not have pay a mortgage ($44 versus $83 a month)

  — It’s cheaper.

  — There is a possibility of him defaulting and losing all that he and his his wife have put in ($40,000 in CPF savings), “the probability of job loss, pay cut, sickness or accident, may be relatively higher than others … the likelihood of him defaulting on his mortgage over the next 30 years may be high”.

  — He and his wife would have some savings for the couple’s old age. He is only able to pay only $83 a month because his and his wif’e’s CPF savings of $40,000 have been used up, reducing the amount owed to slightly more than $20,000.

– And with this comment on this TOC article thread, “I find it very CHILDISH for the government to glamorise a policy that enables a low income earner to own a HDB flat, and yet ignoring the fact that the same low income earner will face the bigger problems of making ends meet on the daily basic necessities like food and transport.

‘These low income earns may own a HDB flat but cannot survive paying the basic expenses in our daily life, and then end up dying of hunger… good policy meh? …”

On the other hand, the analytical, risk-taking side of me thinks that here is a couple who because of the CPF grant and forced savings have been given the chance to better themselves.

The couple can sell off the property after five years and make a good profit (at least $100,000) on the flat, even assuming a slightly weaker market. They can move to Johor, rent a place there, and he can commute. Alternatively in five years time, assuming he is allowed to rent the place out, he can use the rent money to rent a place in Johor, and commute. He could even go into business, while living in Johor.

The couple has options that leasing does not give them, albeit at greater risk. Many of the comments I read on this issue on the internet portray people like Mr Mohammad Charlie Jasni as passive and helpless. The one good thing the ST article shows is that this is not true. They are just as keen to better themselves as better-off, more fortunate S’poreans. In its Alice-in-wonderland way, the government is trying to help them out of a surreal place that is largely the creation of the government.

The issue is why is public housing so expensive: a two-room flat costs $99,200?, Note after $40,000 grant, the HDB loan is $59,220. On a 30-year mortgage at the HDB Concessionary Loan rate of 2.6%, the monthly repayment is $237. Mohammad is only able to pay $83 a month because the mortgage was reduced to slightly more than $20,000 because he and his wife have used up their CPF monies of $40,000. If they default …

But let’s celebrate Mr and Mrs Mohammad Charlie Jasni. They give the lie to the Hard Truth that only immigrants work harder and aspire to have a better life. They also give the lie to the casual assumption of many do-gooders that the poor are passive and helpless.

Roxy-Pacific: Insiders buying

In Property on 07/03/2012 at 5:38 am

I’ve kept an eye on Roxy-Pacific since at least last March. It trades at a huge discount to RNAV, presumably because of its massive debts. I’ve concerns that it may not be able to refinance its debts if we have a repeat of the 2008 crisis.

Well, the executive chairman and an executive director were buying recently according to this BT report on Monday: Executive chairman of the board and CEO Teo Hong Lim and executive director Koh Seng Geok acquired shares of residential property developer Roxy-Pacific Holdings in the second half of February with a combined 1.849 million shares purchased from Feb 20 to 29 at an average of 45.5 cents each. The acquisitions, which accounted for 21 per cent of the stock’s trading volume, were made after the stock rose by 17 per cent from 39 cents on Jan 20.

The purchases were also made after Roxy-Pacific Holdings announced on Feb 16 a 5 per cent drop in Q4 profit after tax to $11.40 million for the three months to Dec 31, 2011. Earnings for the full year, however, rose by 16 per cent to $49.65 million. Chairman Teo Hong Lim picked up 1.399 million shares from Feb 20 to 22 and a further 380,000 shares on Feb 29 at an average of 45.5 cents each, which increased his holdings (direct and deemed) to 366.512 million shares or 57.57 per cent. He previously acquired 2.5 million shares on Jan 12 via a married deal at 40 cents each and 1.528 million shares from May 9 to Aug 22, 2011, at an average of 46 cents each.

Executive director Koh Seng Geok, on the other hand, bought 70,000 shares on Feb 21 at 45 cents each, which boosted his direct holdings to 4.398 million shares or 0.69 per cent. He previously acquired 40,000 shares from September to October 2011 at an average of 39.3 cents each and 100,000 shares in February 2011 at an average of 44.5 cents each. The counter closed at 47.5 cents on Friday

Do Reits have unintended commercial consequences for SMEs?

In Political economy, Property, Reits on 16/02/2012 at 6:45 am

I invest in Reits for the yields and the brokers and local media have discovered Reits as a great defensive play. But SMEs claim that Reits have caused their rentals to escalate unreasonably.  JTC has been asked to review its current policy of divesting industrial space to private entities (like its Ascendas).

Business Times – 02 Feb 2012

SMEs blame Reits for growing rental pains

JTC asked to review its current policy of divesting industrial space to private entities

By MINDY TAN

(SINGAPORE) Rising rentals for commercial and industrial space have emerged as a pressing issue for small and medium enterprises (SMEs), and the fingers are pointed squarely at the dominance of real estate investment trusts or Reits as landlords.

The Reits’ drive to enhance yields and returns for unit holders – which usually translates into rental hikes – have left many SME owners, who feel they have limited alternatives here, fuming.

It has also led to calls – including a recommendation by the newly formed SME Committee – for JTC Corp to review its current policy of divesting industrial space to private entities like Reits and return to its previous role of an industrial landlord, so that it can provide ready and affordable industrial space to SMEs.

‘Rentals and capital values of properties are going up, impacting business costs for SME owners and eating into their bottomline,’ said Lawrence Leow, chairman of the SME Committee.

Read the rest of this entry »

PM’s salary in 1970 and in 2012

In Financial competency, Political governance, Property on 01/02/2012 at 7:07 am

(Or “PM’s salary in 1970 and today using a terrace hse’s price as a reference point” or “Fooling around with numbers: Can prove anything with numbers”)

According to this, LKY’s annual salary in 1970 was $42,000 a year. The value of my parents’ home was then $35,000  based on a neighbour’s transaction if I recollect correctly). So LKY could have bot the house and have $7,000 spare cash left over (17% of his annual salary).

His son now gets under the revised salary scheme a yearly salarly of $2.2m (assuming he gets his bonuses). My parents’ house now is valued at $1.5m (based on a neighbour’s 2010 transaction). The PM can buy the house and still have $700,000 in his pocket (32% of his salary). And this after a 36% pay cut. At his 2010 salary, he could have bot the house and have $1.5m (50% of salary) spare change.

Bottom line: LKY had a bad deal relative to that his son gave himself, and the one he has now accepted.  Even taking into account inflation, our PM is earning much more than his dad. In fact, the PM’s pay rose a lot more than the sum of the inflation rate, and rate of the appreciation of the terrace house’s value.

And unlike dad, who allowed ministers to earn more than he did, our PM is the top earner in the cabinet.

On how much David Marshall was earning (see this), I’ve been told that he could be wrong to claim he was getting $8,000 a month when he was Chief Minister in the late 1950s. When he gave the interview that mentioned that figure, he made several mistakes that were corrected before publication. This could have been one mistake that went uncorrected.

Will keep readers informed as this $8,000 figure had been widely (and unthinkingly) used to beat up the PAP: bunch of greedy pigs. As I’ve tried to show, it “proves”, if anything, PAP ministers are grossly underpaid using Marshall’s numbers. Juz as today’s example ‘proves” that our PM is overpaid.

My wider point is that numbers can be manipulated to support any view. There is no “truth” in numbers per se.

Finally, maybe Marshall was not mistaken over his $8,000 monthly salary because LKY was earning $3,500 in 1970. When he came into power in 1959, he slashed civil servants’ and ministers’ salaries by about half. And given the economic and political problems of the 1960s, he might not have dared to give himself a raise.

For that thank the Communists and their fellow leftists. They kept LKY on the straight and narrow,’cause he knew their power to cause trouble. If they were unhappy, they got protestors onto the streets, not mobilise anonymous grumblers on the Internet.

Finally on the performance bonuses.  The way the bonus scheme  is drawn up, esp how easy it is to achieve the targets (see here somewhere),  reminds me of the Caucus-race in Alice in Wonderland (a favourite book). This was a race where the runners all started in different positions, ran for as long as they liked and stopped in different places. Then everyone got a prize.

Metro: Share price of 0.695 includes 0.36 of net cash

In China, Property on 30/01/2012 at 5:40 am

DMG & Partners Securities on 27 December 2011, issued a “Buy” call on Metro Holdings. As the price remains unchanged at 0.695 (despite a strong market); and given that less the net cash, the stock is only trading at 0.335;  and a yield of almost 3% (historical), it’s something worth exploring despite it being a China play, and a property one at that.

(Background: Metro was founded in 1957 as a department store operator and became a household name. It diversified into property development in the 1990s and was one of the early investors in China’s real estate market, thereby missing the bullet of being a retailer here.)

It has since built up a portfolio of prime commercial properties in Tier-1 cities in Shanghai, Beijing and Guangzhou, as well as several property projects and joint ventures in Tier-2 and Tier-3 cities. Key properties that the group owns include Metro City and EC Mall in Beijing, Metro City and Metro Tower in Shanghai and GIE Tower in Guangzhou.

Leveraging on the group’s retail experience, Metro has chalked up an impressive track record as a mall operator and investor in China. To date, all its property ventures have been profitable, with past divestments making gains of 5-25 per cent premium over book value.

Over the past five years, shareholders’ equity compounded at a CAGR of 9 per cent. This was achieved without the use of excessive leverage given management’s conservative style. Its strong balance sheet (net cash of 36 cents) allows it to deploy capital opportunistically. The ability to recycle capital and profits into new projects has been a hallmark of Metro’s management.

The company is in the midst of selling its 50 per cent stake in Metro City Beijing for 1.25 billion yuan (S$247.5 million), a 50 per cent premium over its latest valuation. Should the deal go through, Metro will be able to book a pretax profit of $87.4 million. We estimate this will lift book NAV by nine cents/share.

On our estimates, the stock has an RNAV of $1.02 billion, or $1.23/share, after netting out liabilities. At current price, the stock is trading at a steep discount of 45 per cent to RNAV. Our target price for the stock is $0.86, based on a 30 per cent discount to RNAV.

S’pore Property: But would banks be allowed to?

In Banks, Economy, Political economy, Political governance, Property on 27/01/2012 at 11:42 am

Mortgage rates make the difference

So what contributed to the recent decoupling of Singapore and Hong Kong home prices?

The simple answer is mortgage rates.

Driven by strong loan growth and rising loan-to-deposit ratios, Hong Kong banks have raised their mortgage rate spreads since early this year [2011]. This has resulted in higher mortgage rates and reduced demand for residential properties, which in turn led to the slide in private home prices since September.

On the other hand, the Government’s property cooling efforts have so far been thwarted by very low mortgage rates. With base interest rates remaining near record lows and Singapore banks charging very low mortgage spreads, affordability remains high.

However, there is a risk that Singapore mortgage rates would rise next year from their current low levels. Like their Hong Kong peers, Singapore banks have also experienced strong loan growth over the past year, which in turn has pushed up their loan-to-deposit ratios – although it must be said that ratios in Singapore dollars are generally still low.

Moreover, with the debt crisis that is plaguing the European Union, there has been anecdotal evidence that some European banks are pulling back their credit lines in Singapore to help boost capital ratios as required by the EU debt plan. If these banks continue to deleverage, it could result in less competition in the lending market for Singapore banks, which may then feel comfortable enough to raise their lending spreads, including mortgage spreads.

In fact, during the 2008/2009 global financial crisis, local banks such as UOB and OCBC were able to increase their net interest margins as foreign banks reduced their lending activities in Singapore.

Thus, while the recent decoupling in Singapore and Hong Kong residential property prices may make for an interesting read, we do not expect it to last for long, especially with the latest round of cooling measures introduced in Singapore.

http://www.todayonline.com/Commentary/EDC111223-0000039/A-tale-of-two-cities

Should happen as this UBS analyst postulated in late Dec 2011. But if the government thinks property prices will tank, not juz fall a little, the local banks will “do the right thing” by home owners, but not investors. It has happened before. In the crisis in the mid 80s, when many home owners had negative equity, the banks “did the right thing” and did not ask for more equity. Home owners had gd reason to vote PAP.  

 

 

Liberal immigration policies leads to higher property prices

In Economy, Property on 13/01/2012 at 5:39 am

No not PAP propoganda but a sober analysis by Deutsche Bank that looked at the relationship between demographics and house prices in Western economies.

An analysis by Ajay Kapur of Deutsche Bank shows this relationship is pretty robust. He finds a positive relationship between changes in the working age population ratio (15-64 year olds relative to the rest of the population) and residential property prices, real prices almost always rise when the working age ratio is improving. In contrast, real property prices fell in one in three years when the working age proportion was falling. This ratio is declining in many countries; indeed in some the absolute number of workers is set to fall.

http://www.economist.com/blogs/buttonwood/2012/01/housing-markets

What Grace Fu can’t afford

In Political governance, Property on 08/01/2012 at 5:19 am

(or “Why PAP Ministers feel underpaid”) 

So Grace Fu for one is unhappy about her salary cut. At least , for only a few hours sadly, she had the courage to voice her unhappiness. Then she repented her outburst or rather blamed us for “misunderstanding” her? Like we “misunderstood” Han or Han “misunderstood” SMRT’s SVP? At least Han had the excuse of his use of Singlish (his spoken English, let’s face it, is rubbish) for the former.

Well she should be very upset when she compares herself to S’pore’s last Chief Minister. Last March I wrote, Someone in TR wrote that David Marshall in an interview said he was paid $8000 a month in the 1950s as Chief Minister and went on like Marshall to rant against the PAP.

Based on $8000 a month, Marshall was paid $96,000 a year. From what I understand that could buy 3 bungalow properties in a then non-fashionable area in the East, say Frankel or Opera estate. He could have some change leftover. Today, a minister earning $3m a yr, may juz be able to buy a bungalow in these areas with his annual salary.

Well, assuming Grace Fu is earning say $935,000 (her new pay grade according to Gerald Ee and his maths-challenged committee), a 25% drop, she can’t buy nothing in the area on her salary. She can’t even buy a terrace house in a nearby estate.  They are going for around $1.5m.

(Now if this piece cannot find its way into “Petir” or “Fabrications about the PAP”, then Zaqy and friends on PAP’s new media team are sleeping.  As the efforts of Zaqy and gang based on the support the PAP is getting on the Internet, is so bad I’ll end as follows)

Ah well, she can still buy one 5-room and one 4-room HDB flat or a nice private condo apartment. But taz beneath her, I’m sure she thinks.

——

(Note Tan Jee say has a house in Frankel)

Related Posts

http://atans1.wordpress.com/2011/03/18/how-many-houses-david-marshall-could-buy-on-his-salary/

http://atans1.wordpress.com/2010/12/29/property-what-a-ministers-salary-can-buy-in-1957-and-2010/

What the news of the numbers of PRs owning HDB flats (and how it was reported) tells us

In Political economy, Political governance, Property on 29/11/2011 at 6:31 pm

(I waited eight days after the data on PRs owning HDB flats came out because I wanted to see if the local MSM would give a favourable-  to the government- spin on the data, which the MSM could reasonably do. The MSM was silent.)

Last Tueday, BT reported that  S’pore permanent residents (PRs) owned some 48,700 HDB flats as at September 2011 , according to the Ministry of National Development. It was answering a PAP MP’s question. According to this, there were approximately 1,038,473 flats as of May 201o.

This means that 4.7% of HDB flats are owned by PRs. So those lurid figures (over 20%, if I remember correctly) claimed by TR are not true.

It was also reported that 39,100 units in the 3rd Quarter 2011, are rented out. Assuming that the rentees are all FTs (PRs and other foreigners), a not unfair assumption, this means only 8.5% of the flats are occupied by FTs. Again, nothing near what TR claimed (over 30% from memory). 

Now as PRs are 13.9% of the resident population or 10.2% of the total population*, and PRs and other FTs 37.1% of the total population, these HDB numbers indicate that PRs and other FTs cannot be a major cause of HDB price rises. If  the 8.5% of the flats are occupied by FTs were 30- 40% (in line with their share of the population), then they would be a major cause of price rises. So Mah was right to he said that PRs and other FTs had no or little effect on public housing prices?

The way to look at this piece of data in relation to all the data made available is that FTs  have an effect (disproportionate perhaps?) because the supply was not keeping pace with demand given the influx of FTs. Khaw’s programme of building a surplus buffer is an admission that there was insufficient supply when the FTs were flooding in, courtesy of the government that we voted in in 2006.

No surprise then that the government and PAP spin doctors, and ST and MediaCorp staff missed telling us shumething important. This piece of info shows that Minister Mah did not know the numbers, or was fibbing when he said that PRs and FTs had no or little effect on public housing prices. They had an effect because he goofed, and then was in denial.  Hence the silence when the local MSM or spin doctors could have rubbished TR’s assertions, and the belief that FTs are the the major cause for HDB price rises?

This piece of information helps give some perspective to the ongoing (often heated and irrational on both sides) debate on public housing and immigration. Yet it only appeared in BT, which is behind a pay wall most of the day. Later Yahoo! reported it. This reminds me of what David Boey in a letter to Voices wrote, ” [R]elevant information is sometimes unavailable to the public or is not presented in a consistent format to facilitate analysis.”

How true and sad. Can fix this lack of info or not, PM? Will be a test of your promise of more openness, and change.

————-

*”Singapore’s total population stood at 5.18 million as at end-June 2011. There were 3.79 million Singapore residents, comprising 3.26 million Singapore citizens and 0.53 million permanent residents, and 1.39 million non-resident foreigners, ” Department of Statistics report released on September 28th 2011.

“Singapore’s total population stood at 5.18 million as at end-June 2011. There were 3.79 million Singapore residents, comprising 3.26 million Singapore citizens and 0.53 million permanent residents, and 1.39 million non-resident foreigners.”

Reits: A blast from the past

In Property, Reits on 21/11/2011 at 7:11 am

Our constructive, nation- building media are promoting Reits as “safe” investments, so maybe it’s time to read or reread “Initially, I wanted to title this post “The Disastrous Singapore REITs Model” but decided otherwise”, written late last year?

It analyses what went wrong in the S-Reit sector in the period up to massive rights issues in 2009.

In a report issued last Thurday, CIMB identified K-Reit Asia, Frasers Commercial Trust (FCOT), Ascott Residence Trust (ART) and Suntec Reit as those likely to engage in equity fundraising in the near future. “The first signs of more cash calls to come have surface.”

The Reit industry is stronger than it was three years ago, CIMB said. Across the sector, the proportion of short-term debt to total debt stood at 8%  in September, much lower than the 38% in June 2008. With reduced pressure from short term liabilities, Reits are less likely to make cash calls, even if the industry’s average gearing did climb to 36%  (from 34% in 2008). But some Reits -(especially those in the office sector) could be vulnerable to asset devaluation as a downturn looms. Lower property values push up gearing ratios.

According to CIMB K-Reit, ART and Suntec Reit had gearings of 42%, 41% and% respectively at end-Sept, higher than the average of 36%.

The risk of a cash call is greatest for K-Reit. Its aggregate leverage remains high despite a massive rights issue (17 for 20) now underway to fund the purchase of Ocean Financial Centre from parent Keppel Land, and 20% of its debt is due for refinancing next year.

 ART not only has high leverage but its European assets could see a devaluation, raising its leverage- a vicious cycle. But if it divests Somerset Grand Cairnhill, which has provisional approval for redevelopment into a residential and hotel project, a near-term cash call could be avoided.

Suntec Reit  may not need a cash call until it is ready to acquire Phase 2 of Marina Bay Financial Centre and its capital expenditure needs could be partly met by proceeds from selling Chijmes.

FCOT is  a potential candidate for a rights issue because of  its relatively high leverage of 37%  and low interest coverage ratio. Also, all of its debt is maturing next year. But it could divest KeyPoint. Given F&N as its “big brother”, it could refinance its debt at lower interest rates.

But CIMB believes that Reits are still safe, maintaining its ‘overweight’ call on the sector.

HDB: Oversupply again by next GE?

In Property on 19/11/2011 at 6:40 am

The housing market in Singapore is heading for a prolonged downturn and overall private home prices are forecast to fall between 22 and 26%  in the next three years, Daiwa Research said. “We believe the residential property market could remain depressed for several years, triggered initially by a likely forthcoming gross domestic product slowdown (in 2012) and lingering global economic uncertainty.” (If you think this is bad, Barclays predicts a 45% decline in HK.)

Daiwa downgraded its view of Singapore’s property sector to “Negative” from “Neutral”, adding that “it is hard for us to see the developer shares outperforming the Straits Times Index over the next six months” despite their underperformance in the year to date.

From late next year, Daiwa said, structural issues such as the rapid build-up in unsold inventory in the primary market and vacant rental units will take centre stage and keep home prices and rents in check for several years. The mass-market segment will hold up slightly better than high-end properties, supported by better affordability and the resilience in the resale prices of HDB flats.

Err what happens if because of

– less FTS,

– slower economic growth or even a recession, and

– Khaw’s promise to build, build,

kiasu young S’poreans decide not to take up the HDB flats that are being built because they think prices will tank?

Remember that Mah overbuilt by more than 150,000 units in 2003, and was beaten up by the Opposition and netizens. For housing, the simple answer was the electorate demanded it, if you could recall the daily outcry in 2001 – 2003 by the opposition as well as members of publc on wastage of public funds on the more than 150,000 units left empty:  ajohor, a poster, on my blog pointed out recently.

(BTW can you blame him for then being super cautious and getting a reputation as the man who made public housing prices go up in a recession? No can win. But he got millions in the bank to console him, so no need to cry for him.)

Final tots. If there is an overhang of HDB flats, what will the Opposition and netizens then say? And how will the voters vote? For or against PAP? Hmm maybe PM deserves his global benchmark breaking salary? Salary review committee pls note.

HDB: “affordability” and “market-based land costs” redefined”?

In Political governance, Property on 27/10/2011 at 5:51 pm

“Mr Khaw said that a typical two-room Build-To-Order flat, which has an income ceiling of S$2,000, would cost less than three years of income, factoring in the grants available. Meanwhile, larger four or five-room flats – with an income ceiling of S$10,000 – cost less than five years of income,” it was reported last Friday. (Translated into $. 2-room flats: $72,000, 5-room flats up to $600,000.  All before subsidies.)

Err who can devote 100% of monthly salary for 3- 5 years to pay for flats? More likely kanna strech payments for 30 years (Comrade Mah’s assumption). So talking of the cost of flats in terms of salaries for 3- 5 years sounds like another variation of Minister Mah’s, “No cash outlay” where he forgot to mention the more and for a longer duration money is deducted from CPF accounts, the less home owners have to retire on.

Remember Minister’s Mah rants about “reserves being raided” if the land on which HDB flats were built were not valued at “market-based land costs”? Well Minister Khaw may have redefined “market-based land costs”, without the “reserves being raided”.

The possibility that there is a new definition of “market-based land costs” was spotted and commented on by a ST journalist, Li Xueying (Good for her).In a piece on 20 October 2011, “Chance lost on clearing hows and whys of flat pricing”, she wrote, Mr Khaw spoke of how, since May, the Government had stabilised the prices of 13,000 flats in three [Build-to-Order] launches. This, even as prices in the private and resale market rose, albeit at a slowing pace … ‘We have moderated price changes such that after adjusting for differences in location, amenities and other physical attributes, the May, July and September BTO prices were roughly comparable to the prices of similar units in the April BTO launch.’

The BTO launch next month will repeat this pattern, he promised … ‘As long as construction costs do not rise dramatically, the BTO prices will stabilise.’

As long as construction costs do not rise dramatically. This raises a question.

What about the second component that the Housing Board factors in in pricing its new flats, that is, land costs?

More specifically, market-based land costs – a formula that has drawn so much angst in the past, given that it is pegged to the gyrations of the private market.

(Market-based pricing of land is done based on prices of state land located within HDB estates sold to the private sector.) …

But it is telling that Mr Khaw also spoke of how his ministry had moderated the prices of the BTO projects such that the prices of those launched last month were comparable with the prices of those launched in April, even though prices in the private market rose over the same period.

Has the market-based pricing formula been quietly tweaked behind closed doors? Or did the Government just decide to deploy an interim measure of pegging new prices to April’s levels, given the unhappiness over spiralling flat prices? …

But the speed with which the minister has done so – never mind the market – does raise questions on how exactly the Government prices its flats.

… MP Zainudin Nordin also queried this, calling for the pricing formula to be as transparent as possible.

Doing so will assure Singaporeans that ‘the Government is not out to make a profit through the sale of public housing’, he said.

Unfortunately, Mr Zainudin and his colleagues did not manage to seize the opportunity to seek this clarification from Mr Khaw yesterday.

She ends with remarks that the prime minister especially should take heed of, Going ahead, the need to be more open and transparent with information will continue to be an imperative that the Government has to struggle with, given a more questioning electorate.

Voters no longer want to be told just the answer – the what. They also want to understand the hows and the whys.

 

CapitaLand: Reason for CEO interview in ST

In Corporate governance, Property on 25/10/2011 at 6:51 am

Two fridays ago, ST has a whole page devoted to an interview with CapitaLand’s CEO. He was trying to explain to CapitaLand was not a China play, and that it was not a financial engineer pretending to be a property developer. It had been until recently playing up that it was a China play, and that it was asset light, using financial egineering, rather than owning assets.

I tot, “Wow, co must be worried abt share price.” Still I was that surprised when late last week, it announced a year-on-yearn 83% drop in its third quarter net profit to S$80.2 million.

Moral of story: Whenever a usually publicity-shy CEO “opens up”,  be wary, very wary.

What if there is stagnation?

In Commodities, Economy, Investments, Property on 21/10/2011 at 6:49 am

A few days ago, I blogged that were three scenarios for the developed world. Growth — buy equities; inflation — buy property and commodities; and recession — buy government bonds.

Thinking about it again, there is a  fourth scenario: stagnation. There will be shallow recoveries and recessions in quick succession.

In that scenario, one should be looking at buying equities for their dividend yields, and the corporate bonds of super blue chips.

Industrial Reits: not that defensive says Credit Suisse

In Logistics, Property, Reits on 18/10/2011 at 7:30 am

Last week, Credit Suisse issued a report on industrial Reits. Excerpts from report’s Executive Summary.

Not as defensive as perceived: We assume coverage of the Singapore industrial Reits sector with a slightly negative stance as we believe that the perception of its defensiveness (due to longer lease tenures) is misplaced.

… we have done thorough analyses on the factory, business parks and warehouses sub-segments, and conclude that we are most positive on the warehouse sector fundamentals.

… flat to low single-digit growth for factory rents driven by high occupancy, and business park rents to moderate due to the oncoming supply pressure (including new supply of decentralised office space).

Potential weak demand may slow rental growth: Singapore industrial rents have surpassed pre-sub-prime crisis peaks and are at 10-year highs.

… upside is limited from here on, given the moderating economic growth outlook, Singapore’s high exposure to the US and European economies and the appreciating currency which will reduce Singapore’s competitiveness as an industrial location of choice.

However … the few less labour-intensive, higher value-add fields, and sectors/ players with better pricing power, like biotechnology, water technology, environmental/energy sciences will likely be less impacted by cost inflation.

This should underpin rental growth for the class of industrial assets exposed to these sectors.

… expect rents in (logistics) warehouse – our preferred industrial sub-segment – to continue to remain strong on the back of fairly strong 90-91 per cent occupancies based on limited supply completion over the next three years. While supply for all factories over the next five years looks manageable, at 9-10 per cent of existing supply of 332 million sq ft NLA for factories and business parks … rents for older-specs factories could come under pressure especially given current economic uncertainties, which will likely impact SMEs and less cost-efficient companies (those at the lower end of the value chain).

… hi-tech and business park rents to moderate, due to the oncoming supply of business parks over the next four years amounting to 29 per cent of existing supply, coupled with existing high vacancies.

M&A increasingly challenging: Despite the supportive capital-raising environment, in our view, with cap rates continuing to compress on the back of rising competition for land (as industrial assets have the highest yields), … becoming increasingly challenging for a Reit to make an accretive acquisition, particularly in Singapore, where capital values today are at 10-year highs.

Based on our analyses of Ascendas Reit (A-Reit), Mapletree Logistics Trust (MLT) and Mapletree Industrial Trust (MINT), we conclude that (1) A-Reit has the most debt headroom with $1 billion available for future acquisitions; (2) A-Reit and MLT both have the strongest acquisition pipeline, with $1 billion each of injection pipeline from their sponsors; and (3) MINT and MLT have the highest risk of placement, depending on the size of transaction given their gearing levels of 39.3 per cent and 40.6 per cent, respectively.

Three investable names, at this stage: After screening for market cap of over $1 billion and liquidity of US$1.5 million/day, only three of the seven industrial S-Reits are deemed investable: A-Reit, MLT, MINT.

Where be the next winner?

In Commodities, Economy, Investments, Property on 17/10/2011 at 7:00 am

Depending on where the developed world heads, equities, commodities and property, or government bonds could be the investment.

There are three scenarios for the developed world (remember the BRIC and Indonesia etc still are dependent on the developed world to drive their economies). It can

– grow out of its debt burden,

–  inflate the debt away, or

–  fall back into recession, marked by the occasional default.

Each of those outcomes leads to a different portfolio.

Renewed growth would favour equities, but at the moment, this looks too hard to achieve. An attempt to inflate would be good for commodities and property but would be disastrous for government bonds. Selected equities might do well: those that can pass on the cost rises to customers. Those bonds would do best if the developed world goes into a  recession.

Hope this explains the extreme volatility of markets.

Mortgagors may get double whammy?

In Economy, Property on 29/09/2011 at 2:00 pm

Looks like MAS is right to focus on weakening S$ Double dip here we come.

So morgagors may face rising interest rates (interbank rates rise to attract S$ deposits) and a recession (no jobs). True rate rises may be moderate but it all depends on how prudent “homeowners” have been in their budgeting.

I hear that advertising and marketing people are being axed as of this morning.

Mortgagors: No gd scenarios

In Economy, Property on 29/09/2011 at 6:44 am

Commentators like Tan Kin Lian have been saying for ages that interest rates cannot remain at so low levels here and that they must rise one day. Then those homeowners who overleveraged by not anticipating having more in interest would face problems servicing their loans.

Well it seems that higher interest rates are occurring finally because the central bank no longer wants an appreciating S$. It now seems to want the S$ to weaken.

The central bank is forcing the value of the S$ down, making it unattractive to hold S$ deposits. It has reversed its policy of allowing the S$ to strengthen against the US$ because it is afraid that a stronger S$ will lead to weaker exports, slower growth and a recession. It allowed the S$ to strengthen because it wanted to fight inflation, a fight that has yet to be won.

If the central bank continues to allow the S$ to depreciate, then S$ interbank rates will have to rise to attract S$ funds. However analysts are divided on how much further the central bank will force down the S$. Those with property mortgages may hope that MAS reverts to a stronger S$ policy. But then the problem is whether they then still have the jobs to service the loans. A stronger S$ could hasten the recession.

Snigger, snigger.

Update on 29 September 2011 at 2.05am

Mortgagors: Double whammy?

Buying property stocks: What can go wrong?

In Economy, Property on 15/09/2011 at 8:00 am

Maybe as part of a campaign to make us “feel good”, the constructive, nation-building local media are highlighting that stockbrokers are telling their clients that property stocks are trading at a discount to their net asset valuation (where once they traded at premiums)  or way below  their usual discount net asset valuation.

Hence there are gd buys around.

But there is the fine print that the MSM don’t report or don’t highlight. The brokers point out that they are assuming a slowdown in the economy, not a global recession. Neither they nor MSM highlight that investors are assuming the worst, a global recession, and hence are pricing the stocks at recession values i.e. investors do not believe the values brokers are pricing the assets at because they think the brokers are optimistic.

So if you believe that the world economy is only experiencing a slow-down, go ahead and buy the recommended property stocks. But if you are afraid of a recession, sit tight. The discounts will bet bigger

DBS bullish on KepLand and UOL

In Economy, Property, Reits on 07/09/2011 at 7:22 am

We believe stocks are currently priced for a slowdown but not a recession. Our strategy would be to adopt a stock picking strategy in the property sector. Within the office segment, office landlords are trading in excess of -1 standard deviation to historical RNAV discount while S-Reits are trading at less than 1 SD to the long-term yield.

We believe office stocks have more than priced in the muted outlook and valuations appear attractive currently. While we have widened target price (TP) discounts and lowered TP for landlords given the higher risks going forward, upside to our TP remains significant.

Our top picks remains Keppel Land and UOL. Keppel Land is currently trading at 46 per cent discount to RNAV of $5.57 and offers 40 per cent upside to our lowered TP of $4.18.

We remain positive on UOL, thanks to its multiple growth engines that spans commercial, residential as well as hospitality. Our TP of $4.96, based on a wider 20 per cent discount, offers 9 per cent upside. We have lowered our call on Singland to Hold due to its large 75 to 80 per cent exposure to the office sector.

DBS loves Reits too

In Property, Reits on 03/09/2011 at 6:22 pm

In the recent equity market sell off, the FSTREI (S-Reit index) while corrected by some 5 per cent versus the 12 per cent and 25 per cent fall in the STI and FSTREH (property developers index) respectively. S-Reits now offer a prospective FY11-12F distribution yield of 6.5-6.7 per cent, which represent a 500 basis points spread above the long-term government bond. It is now closer to -1 standard deviation of the sector historical yield trading range. We believe that S-Reits continue to offer a compelling investment proposition.

We reiterate our preference for retail Reits. Even in the event of an economic downturn, retail Reits’ exposure in necessity shopping (eg supermarkets, F&B outlets) have kept earnings fairly stable. Industrial S-Reits also offer strong stability and visibility given a larger proportion of their income deriving from master-lease structures. While we continue to see hospitality Reits delivering good numbers going into a seasonally busier 2H11, we believe that growth momentum should be slowing down.

We see value emerging in CapitaMall Trust (Buy, TP $2.05) which is our big cap pick with attractive FY11-12F yields of about 5.3-5.9 per cent. Mapletree Commercial Trust (Buy, TP $1.09) is attractive for its strong organic growth coming off from a first renewal cycle at its VivoCity retail mall. Among the industrial Reits, Mapletree Logistics Trust MLT (Buy, TP $1.07) stands out post an active H1 FY11 and is poised to deliver strong earnings growth into H2 FY11. We continue to see relative value amongst the smaller cap S-Reits – Cache (Buy, TP S$1.07) and Frasers Commercial Trust (Buy, TP $1.05), which offer higher than average yields with limited earnings downside.

S-Reits: What can go wrong?

In Property, Reits on 31/08/2011 at 8:38 am

S-Reits are the flavour of the moment. Witness this gushing report.

“The current yield gap between S-Reits and the 10-year government bond is attractive to us at 5.1 percentage points versus 0.8 percentage point during the 2007 boom, and an average of 3.4 percentage points over the past seven years,” said Royal Bank of Scotland analysts in a report last week.

The report put S-Reits yields for 2011 and 2012 at 6.7 per cent and 7.1 per cent respectively. The high yields now being provided by S-Reits are well supported by a stable rental outlook, low interest costs and acquisitive growth potential, the RBS analysts said.

RBS has an ‘overweight’ call on the S-Reit sector.

As reported earlier http://atans1.wordpress.com/2011/08/21/cimb-on-reits/, CIMB is “neutral” on developers as a whole but “overweight” on S-Reits.

So what can go wrong? Nomura Singapore said that one of the current concerns of investors in the Reits space is the potential risk of recapitalisation if asset values were to fall significantly. In simple English, investors are afraid of rights issues if the gearing of Reits goes sky high if property values supporting the loans collapse. This happened in late 2008.

Even if property values don’t collapse, Reits could face banks refusing to renew their credit facilities, and asking for their money back if the banks face a liquidity crunch. This too happened in late 2008.

Property: What weed are these people smoking?

In Property on 22/08/2011 at 2:05 pm

I am amazed that any broker can call the Singapore real estate sector “Overweight”. But RBS did it on 16 August 2011

The valuation gap between developer stocks and physical properties widened over the past eight months. We expect it to narrow as home sales remain robust. Strong household and developer balance sheets should support prices and cooling measures may prove ineffective in quelling real demand. We upgrade our view on the sector to ‘overweight’ from ‘neutral’.

Developer stocks’ premium to NAV narrowed to just 4 per cent from 33 per cent in January, despite robust primary home sales of 11,197 units (up 13 per cent year on year) in the first seven months of 2011 and a 4.3 per cent half-on-half increase in home prices in H1 2011. The sector also underperformed the STI by 11 percentage points in the last eight months. Policy risks seem as low now in view of heightened global uncertainty. We think any policies to cool the market would prove ineffective as we believe there is virtually no speculation now. We expect mass-market homes to continue to be undersupplied in 2012 to 2013.

Growth in total stock averages 2.3 per cent a year from 2011-12, below the long-term average of 3 per cent, while occupancy rate is at 98 per cent. Hence, we expect the healthy churn of mass properties to persist. We stress-tested the household balance sheet and found that a 30 per cent drop in home prices would bring the debt-to-asset ratio to 18.6 per cent, slightly higher than the long-term average of 18 per cent but below the high of 21 per cent in the 1997 and 2001 booms.

Gearing of larger developers is low at 34 per cent vs 41 per cent during the pre-crisis level of 2008 while that of smaller players halved to 103 per cent. Given their low land bank, developers will not cut prices even if there is a recession, in our view.

RBS expects the economy to grow 6 per cent in 2010 and 5 per cent in 2012. We expect an equilibrium in the office sector, in the light of higher visibility of supply and likely slower demand. Hence, we moderate our office rental growth assumptions to 5 per cent in both 2011 and 2012.

Overall, retail rents may soften in view of an oversupply but quality malls owned by seasoned operators should continue to do well. We like hotels on a structural growth story in Singapore tourism. Capital values of commercial assets should also hold up in view of persistently low rates.

We are most positive on City Developments, which we believe could benefit from a lifting of policy risks and continued strength in the residential market. Hence, we upgrade the stock from a ‘hold’ to ‘buy’, for its large exposure to the residential sector which accounts for 39 per cent of its RNAV.

We maintain our ‘buy’ ratings on Keppel Land, OUE and UOL as these commercial stocks look undervalued, trading at 30 to 50 per cent discount to RNAV. We maintain our ‘hold’ rating on CapitaLand as we believe that the stock may lag in stock price performance in view of its complex shareholding structure.

CIMB on Reits

In Property, Reits on 21/08/2011 at 7:54 am

CIMB loves them based on a research note dated Aug 18 2011 where it called for an “Overweight” on the Reit sector.

CIMB recently hosted nine Singapore and Malaysia real estate investment trusts (Reits) at our inaugural Asean Reit conference. While investors were generally not pricing in a double dip, most appeared increasingly cautious.

Coupled with value emerging from the recent selldown, we sensed increased interest in Reits, with a particular preference for those in more resilient segments like industrial, retail and healthcare.

Our top picks are Ascendas Reit, Frasers Commercial Trust, Starhill Global Reit and Cache Logistics Trust. We also like CapitaMall Trust and CDL Hospitality Trust at current valuations.

During the conference, we sensed increased caution among investors after the recent market selldown, with more turning to S-Reits given increased risk aversion. Most Reits also gave the feedback that they had been receiving more investor interest and enquiries. While turning cautious, investors were not yet pricing in a double dip.

Questions centred on rental growth and expansion via acquisitions or development. Most agreed with us that S-Reits have emerged with stronger balance sheets and portfolios from the last crisis.

Recent market volatilities and developments in advanced economies have not affected Reits yet.

Notwithstanding slowing growth in advanced economies, industry participants remained positive on growth in the region. However, most would be monitoring developments closely.

Industrial Reits continued to expect positive rental reversions on the back of rising spot rentals and rental step-ups. Investors liked the stability from industrial leases but were slightly wary of a seeming slowdown in manufacturing in Singapore.

Industrial S-Reits, however, noted that manufacturing remains a core component of Singapore’s economy and continued to see bright spots as local manufacturing transitions to higher-value-added products and services.

While spot rents for most office S-Reits remained healthy, more investors were starting to question rental growth next year. We noted a moderation in tone among the office S-Reits, on the back of a slowing leasing momentum, significant physical completions in 2012 and potential growth concerns. Most expected rental growth to be more moderate in 1H12, before picking up again in 2H12 as supply tightens in 2013.

Most Reits are still keen to grow through acquisitions. Opportunities are, however, limited with the system still flush with liquidity.

Industrial Reits noted a difficult acquisition environment, given increased competition from new entrants such as private funds, smaller players and other industrial Reits. Most were thus gravitating towards development (mainly build-to-suit) and redevelopment, given their enhanced yields, the small capital outlays, short gestation periods and Reits’ ability to mitigate leasing risks by building to suit.

Similar concerns on compressed yields and a lack of quality assets for acquisition were expressed by the office S-Reits.

Citi continues to prefer Reits

In Property, Reits on 18/08/2011 at 9:30 am

Citi continues to prefer Singapore Reits over developers, because of the current uncertain economic environment. “Despite attractive valuations, continued policy risk implies that it remains difficult to suggest picks within the real estate developer space”.

Citi prefers Reits that are operationally more defensive, including retail Reits such as Mapletree Commercial Trust and Fraser Centrepoint Trust, where passing rental rates are below market ones.

Property developers should petition PM

In Economy, Property on 08/08/2011 at 6:46 am

Given the downgrade of US debt with the fear of higher global interest rates and weaker equity markets, property developers must be more worried today than they were this time last week. Maybe they should petition the PM to bring back Mah Bow Tan as housing minister? It is a well known fact that he can e3nsure that residential property prices rise in a recession.

That they were already very worried last Monday is evidenced by the meeting that day that Redas (the property developers trade union) held for 17 analysts from 14 stockbrokers and five consultants. Developers don’t call for such meetings when they are bullish. They are then too busy counting their potential profits.

They discussed issues such as “possible ways to facilitate sharing of information among industry stakeholders, the need to better understand and analyse new market dynamics and the changing nature of the demand for Singapore residential properties”, Redas said in response to queries from BT.

According to BT, Redas had suggested sharing in-house data to help analysts better study the property market. The supply of private homes in the pipeline was also discussed. The meeting took place days after Redas shared results from the latest Redas-NUS Real Estate Sentiment Index survey, which polled developers, consultants and other Redas members.

The findings reflected a softening in sentiments about the property market in the second quarter.

In recent months, several equity research houses also released reports about a potential glut in private homes. One of the most recent is a July 28 report from Bank of America Merrill Lynch, predicting ‘an inflection point in 2012, driven by excess supply, demand moderation and slowing economic growth’.

Its analysts expect around 12,500 new units to enter the market every year between 2011 and 2015 – 60 per cent higher than the 15-year historic average annual supply delivered to the market. At the same time, they expect demand for private homes to weaken due to factors such as tighter immigration policies and an influx of HDB flats.

Citi’s property analysts are among some who do not see an over-supply of private homes coming, as their June report shows.

Adding to reports from property analysts are views from National Development Minister Khaw Boon Wan, who blogs often. In a June entry, he had advised investors and upgraders to consider various factors, such as volatile global conditions, before buying a property.

According to Redas, its president Wong Heang Fine said that he would like to have such sessions on a regular basis, say, every six months.

CIMB still likes FCOT

In Property, Reits on 07/08/2011 at 1:14 pm

On I August 2011 when FCOT was at $0.88 (note I own some shares), CIMB came out with report where it maintains ‘outperform’. Q3 2011 distribution per unit (DPU) of 1.38 cents meets our forecast and Street expectation at 24 per cent of our FY2011 figure. 9M 2011 DPU forms 74 per cent of our estimate. DPU was up 10 per cent y-o-y on stronger net property income (NPI) contributions from almost all its self-managed assets mainly on better occupancy. Occupancy at KeyPoint had improved for the ninth consecutive quarter.

An improving underlying portfolio at China Square Central meanwhile should position Frasers Commercial Trust (FCOT) for upside when it takes over direct management in March 2012. No change to our DPU estimates or dividend discount model-based target price of $0.99 (discount rate: 9.4 per cent).

With an improving portfolio, stable capital structure and a strong sponsor in F&N, we see no reason for its 35 per cent discount to book amid forward yields of 7 per cent. We see catalysts from early refinancing, the unlocking of value from AEI at China Square Central and improvements in occupancy and rentals.

NPI was up 10 per cent y-o-y on stronger contributions from Central Park, Caroline Chisholm Centre and Keypoint. Q-o-q, NPI was up 4 per cent as there were improvements at its Australian assets. Occupancy at KeyPoint also continued to improve for the ninth consecutive quarter to 86 per cent since the in-house team took over property leasing in Q2 2009.

Passing rents were stable at about $5 per square foot with limited exposure to higher rollover rents locked in at the 2008 peak.

China Square Central’s underlying occupancy improved 20 basis points, with recent leases renewed at $6.30-8.00 psf versus expiring rents of $6.30 psf and passing rents of below $6 psf. Continued improvements in occupancy and rentals on the back of more proactive management by FCOT and an upcoming Telok Ayer MRT station could position FCOT for upside when it takes over direct management following the expiry of the master lease in March 2012.

Asset leverage had been pared down to about 37 per cent after the divestments of AWPF and Cosmo Plaza. This entire amount ($745 million) will mature in 2012. With a high cost of debt of 4.3 per cent and prolonged low interest rates, FCOT could save in terms of interest following the refinancing of this debt. We estimate that a 50-basis point interest rate reduction could lift its DPU by 11 per cent.

OUTPERFORM

CIMB on property sector

In Property on 20/07/2011 at 9:59 am

We remain ‘neutral’ on the sector, remaining negative on residential and positive on the commercial/hospitality segments.

Our top picks are Keppel Land (‘overweight’, TP: $4.73); Fraser and Neave (‘overweight’, TP: $7.34); and CapitaLand (‘overweight’, TP: $3.62).

Hard to argue with the bearish stance on residential and bullish on retail and commercial.

More from DBS on S-Reits

In Property, Reits on 17/07/2011 at 9:18 am

Retail Reits are expected to see positive rental reversions going forward, supported by the current positive consumer sentiment.

Frasers Centrepoint Trust (‘buy’, TP: $1.73) is expected to deliver a good set of numbers in the coming quarters, as reconstruction works at Causeway Point have passed the most crucial stage, with committed occupancy at over 99 per cent. In addition, the impending purchase of Bedok mall will act as a re-rating catalyst for the stock.

Mapletree Commercial Trust (‘buy’, TP: $1.05) should also see strong reversions in rental growth of about 10 per cent in the coming quarters, coming off from a first renewal cycle at its VivoCity retail mall.

S-Reits have collectively acquired about $1.9 billion of assets year-to-date, which should start contributing to earnings in the coming quarters.

After two months of relatively flattish distribution per unit, we believe Mapletree Logistics Trust (‘buy’, TP: $1.07) is poised to deliver a strong uptick in earnings momentum, boosted by recently completed acquisitions

FYI, yields for the above trusts are very decent and all three trusts have strong Tai Kors. F&N for Frasers and Temasek for the other two.

Frasers Centrepoint — 6.8%

Mapletree Commercial — 5.7%

Mapletree Log — 6.7%

 

DBS on smaller cap S-Reits

In Logistics, Property, Reits on 15/07/2011 at 7:04 am

We see relative value among certain smaller-cap S-Reits. Cache Logistics Trust (‘buy’, TP: $1.11), which currently offers a yield of over 8.0 per cent, is attractive, backed by transparent earnings structure and armed with a low leverage of 26 per cent, having the headroom to acquire further.

Frasers Commercial Trust (‘buy’, TP: $1.05), at a P/B of 0.6 times, is unjustified in our view, given that the yield-enhancing steps taken by management and plans to re-finance its expiring loans should result in future interest savings.

I’m glad someone sess value in FCT where I have a holding. Yields 6.77%.

Citi: No property glut

In Property on 29/06/2011 at 6:45 am

Citigroup thinks that the increase in the supply of new HDB flats and private apartments over the next few years will not lead to a housing glut in 2013 and 2014. A stand contrary to that held by most other brokers e.g. Morgan Stanley and CIMB.

The current “severe shortage”‘ of HDB flats is also likely to provide support for mass-market prices and demand. Most other brokers argue that a step-up in HDB supply will dampen demand for mass-market private homes and hit prices

“We estimate that the deficit in housing units is in excess of 50,000 currently and this undersupply situation will likely take several years to clear, just like the oversupply situation in the early 2000s. With a severe shortage, we are not overly concerned about the rise in supply in both HDB and private residential units.”

The coming HDB supply and the potential increase in the income ceiling for new HDB flats will reduce HDB resale transactions by 7-15% at most. The impact on the private property market would be even smaller. The shortfall in the HDB market will support demand for and prices of mass-market homes.

“rate for mass-market properties are at an all-time high of 97.5 per cent. With yields averaging at around 4.2 per cent versus mortgage rates of just between 1.2-1.6 per cent, investment demand for small units and mass-market units could remain strong.”

However any further price increase or spike in volume in the mass-market segment risks more property measures as the government is monitoring the market closely.

Property: 9 July 2011 is a day to watch

In Malaysia, Property, Uncategorized on 28/06/2011 at 6:21 am

In 2009, S’poreans expected property prices to weaken. There was a recession. They were wrong, prices went up. Lots of reasons were given in hindsight for example  low interest rates, high liquidity, enblocers needed homes. All true but another factor was the flood of FTs coming in from M’sia. Why did they come? In 2008 GE, the ruling BN lost its two-thirds majority in the federal parliament and lost control of five states.

Many Chinese and Indian professionals were fearful of racial riots breaking out. They came here.

On July 9 2011, Perkasa (a Malay supremacist organisation) is threatening to counter demonstrate if Bersih 2.o goes ahead a with demonstration.

The July 9 “Walk for Democracy” Kuala Lumpur protest will be attended by several civil societies, including a few opposition parties. Bersih and its coalition partners have six demands in mind, including an end to the misuse of government machinery and funds during elections. With an expected attendance of more than 100,000, the march is expected to the biggest of its kind since the group’s 2007 demonstrations.

If blood flows on KL streets, Malsysians will be rushing here.  And they need places to live in.

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