Archive for June, 2011|Monthly archive page

OCBC: look after yr shareholders, not yr creditors or regulators

In Banks on 30/06/2011 at 10:57 am

First, Banking 101. The more capital a bank is required to hold, the less it can lend. It will make smaller profits, compared to a bank that needs to hold less capital.

Next some definitions. DBS Group, United Overseas Bank (UOB), OCBC Bank are required to hold a minimum Tier 1 capital adequacy ratio (CAR) of 6% and a total CAR of 10%.

International rules will require banks to hold a minimum common equity Tier 1 (CET1) CAR of 4.5%. MAS has decided that locally incorporated banks meet this rule from Jan 1, 2013 – two years ahead of the international 2015 timeline.

MAS will raise the minimum CET1 CAR to 6.5% from Jan 1, 2015. It will also bring the minimum Tier 1 CAR to 8%. The total CAR will remain at 10%.

MAS will also introduce a capital conservation buffer of 2.5% above the CET1 CAR. This will be phased in from 2016 to 2019.

So by 2019  locally incorporated banks will have to maintain a CET1 CAR of at least 9%, Tier 1 CAR of 8%. and CAR at 10%.

But one OCBC estimates that  its CET1 CAR would be around 10.8% cent based on the bank’s financial position as at March 31, 2o11. Its Tier 1 and total CAR are estimated at 14.1% and 16.9% respectively.

It’s only 2011 but OCBC’s CET1CAR is 20% above 2019’s required  levels, while  Tier 1 and total CAR are 76% and 69% more than required.

This is a lot higher than needed for a bank whose main markets (S’pore, Malaysia and Hong Kong) are safe, mature and well regulated markets. True OCBC is also into “cowboy” countries like China and Indonesia but these countries contribute little to revenue.

Too much capital relative to assets and liabilities is unfair to shareholders, while not benefiiting depositors and other creditors. It only makes life easy for regulators.

So OCBC should return excess capital in the form of dividends (I’m not in favour of buy-backs, something I’ll explain one of these days). Of course OCBC could decide to increase its balance sheet, but that usually leads to tears for shareholders.

Related post


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.

China play: when due diligence is not enough

In China, Corporate governance on 27/06/2011 at 9:54 am

The hedgie who made a fortune shorting subprime mortgages, and who made money buying BoA when one Temasek was selling, recently lost US$100m over a China play despite doing serious due diligence.

If such an investor with all his resources and acumen, can still get snookered, what makes the ordinary retail investor here think he can do better?

Ignore S-Chips? They can ruin yr finances.

Some nasty but funny comments on Tony Tan’s independence

In Political governance, Uncategorized, Wit on 27/06/2011 at 9:51 am
Who would you believe? A mama-san at Kabuki KTV claiming to be a virgin or Tony Tan claiming to be independent? — karmabear
What’s the use of another PAP man as president?  It is like putting Dr Mahathir as referee for a match between Singapore and Malaysia. —  ?

Dr. Tony Tan’s election as President sounded like a CFO / CEO of a company is seeking re-appointment as its External Auditor after having resigned from the company. — MayRulersBeRighteous

PRATA going — Chou Doufu coming — xCode

If Tony Tan s independent, then pigs would fly and the sun would set in the east!! — Chanel

chouDoufu tcock liao — Transformers

For the record, I’m on the lookout for nasty and funny comments on the other two Tans. Very little luck.

Keppel Telecommunications & Transportation

In Infrastructure, Telecoms on 27/06/2011 at 7:41 am

DBS issued a “Buy” on KT&T last week when it traded at S$1.32. The interesting fact is that  the stock is trading at a 35% discount to DBS’ sum-of-the-parts-based target price of S$1.65. Too bad yield is only 2.65%.

The Next Generation National Broadband Network and growth in cloud computing are fuelling demand for data-centre space in Singapore. Keppel Telecommunications & Transportation (Keppel T&T) is the only listed player in Singapore with significant exposure to data-centre business and is among the top five players in Singapore.

Besides, Keppel T&T is positioned to benefit from the increasing trend of logistics outsourcing to third-party players in China and South-east Asia. The recently acquired Keppel DigiHub data centre in Singapore and the newly built Nanhai Distribution Centre in China are the key growth drivers for 2011.

Keppel T&T has set up a dedicated fund (initial closing of US$100 million) to invest in Syariah-compliant data centres globally in an alliance with Saudi Arabia-based Al Rajhi Holding Group. Ever since the appointment of new management in January 2010, Keppel T&T is focusing on growing its data centre and logistics business with less emphasis on the legacy business of network engineering.

Core business is deeply undervalued. Excluding M1, Keppel T&T’s core business is trading at only 6x estimated 2011 full-year earnings, based on our conservative estimates. Global data centre players such as Equinix and Digital Realty Trust trade at 40-50x earnings, reflecting higher growth in the sector. Initiate with ‘buy’ for 35 per cent upside potential to our sum-of-the-parts-based TP of S$1.65.

Mapletree Logistics is interesting

In Logistics, Property, Reits, Temasek on 26/06/2011 at 6:45 am

This Temasek-related Reit invests in logistics facilities in the region. Its latest investment is in S Korea.

Its yield is 6.8%. While its last traded price is $0.92 and its last reported NAV is $0.85, OCBC recently came out to say that OCBC calculated that its revised NAV is $1.01 (also OCBC’s target price for the stock). Not a rich discount to the share price but pretty decent, given its Temasek credentials.

I might add it to my portfolio.

More than words,TKL supporters

In Political governance on 26/06/2011 at 6:44 am
Dr Tan Cheng Bock has said that he is relying on his own resources and that of backers to fund his presidential campaign. He has yet to decide on asking for donations. Dr Tony Tan has not said anything yet, but money should not be an issue for him.
TKL is funding his campaign from his own pocket and has asked for contributions from supporters. But on 22 June 2011, he wrote on his blog, “The contribution to the election campaign has been slow. I hope that more people will come forward and give their financial support.”
As regular readers of this blog will know, I’d rather not have TKL for president. I’ll blog on my reasons sume other time. 
I want to make the point here that his supporters should do the right thing. Don’t just send anonymous emails saying they support him. Talk, like bullshit, is cheap. Send in contributions to help him fund his bid. He has estimated that campaigning will cost him $100,000–200,000. Dr Tan Cheng Bock estimates that he will need $500,000.
TKL kanna played out once before by his fickle fans. In 2008, because he was helping the minibonders etc, he got lots of emails asking him to stand for president. He said he would stand if he got 100,000 signatures asking him to stand. He got only 1,200 signatures, I think.
Despite this experience of being “p;ayed out”, when recently people asked him to stand, he said he will stand. He is not shy of being bitten again. He has courage.
Don’t play him out again, fans of TKL.
People who ask TKL to be president, Walk the Walk, don’t juz Talk the Talk. Contribute to his campaign.

Asians love social media networks

In Uncategorized on 25/06/2011 at 9:50 am

In the US only 55% of internet users use social media networks like FB or Twitter.

In Asia, Indonesia, the Philippines, Malaysia, India, China, S’pore and HK exceed the 55% mark. Well-wired Korea and Japan are behind the US.

Trivia Pursuit: the presidential elections

In Political governance, Wit on 24/06/2011 at 8:57 am

All three leading candidates are Tans.

They all have gd paper qualifications. Dr Tan Cheng Bock is a medical doctor. Dr Tony Tan has a PhD in Applied Mathematics (he also has a masters from MIT). When Tan Kin Lian qualified as an actuary, I’ve been told, there was only one other actuary here.

All three have dedicated their lives to public service. What the two doctors have done is a matter of public record. As one of the few actuaries in S’pore,  TKL could have made a fortune in the private sector. He chose to be the CEO of NTUC Income. Those were the days when there were huge discrepancies in pay vis-a-vis the private sector and government and trade union sectors.

Of the three, only Tony Tan came from an upper middle class family. The other two had much humbler backgrounds.

Tony Tan was the only one who studied at SJI. The other two were RI boys.

Only Tony Tan has the dubious distinction of coming from St Pats.

But Tony Tan was the only scholar among the three.

Only Tan Cheng Bock worked among the poor peasants in the countryside. He would be someone Mao would have been proud of.

The other two would have been in Mao’s words,”Running dogs of the capitalists”. One was a banker, following in his uncle’s footsteps. The other was an insurance man.

TKL was the only one of the three not to pick up the COE form himself. He was “not free” and sent his friend to pick up the forms.

TKL is the only one of the three who says (on his presidential campaign website), “If and when it [COE] is approved, I will decide if I wish to take part in the contest.” The other two have not given themselves such an “escape clause”.

Two seem to have well oiled teams in place. Only one is a one-man band.

Moody’s on S-Reits

In Property, Reits on 23/06/2011 at 7:16 am

Ratings agency Moody’s Investors Service reiterated its ‘stable’ outlook on Singapore-listed Reits (S-Reits) for the next 12-18 months.

“We expect S-Reits to use their well-capitalised balance sheets to continue acquisitive strategies and assume they will fund potential acquisitions with a mix of debt and equity while maintaining leverage within targeted limits of 40-45 per cent”.

Tan Cheng Bock & the ISA

In Uncategorized on 23/06/2011 at 7:13 am

Dr Tan Cheng Bock has been getting a lot of criticism from netizens on his support of the government’s use of the Internal Security Act in 1987 against the so-called “Marxist conspirators”. Example

Let’s remember that Dr Tan grew up in the 1950s and 1960s. Many people then agreed (and they still do) with the colonial, and then the PAP government view that detention without trial under the ISA was necessary to fight the communists and other enemies of the state. And let’s member that the 50s and 60s were turbulent times.

One should bear that in mind when judging Dr Tan’s actions in 1987.

And anyway, When asked whether he still feels the ‘Marxist conspirators’ are guilty, Dr Tan says with a tone of sincerity, “I really feel they are innocent. They are all social workers and they meant well but unfortunately…(trails off)”

He adds, “I saw the ex-detainees and I really do feel for them. But at that time I believed the information that was given to me.”

Can’t ask for more, methinks.

Update on 25 June 2011 — corrected misspelling of Dr Tan’s name. Careless of me.

Weak property mkt?

In Political governance on 22/06/2011 at 9:56 am

Wow prices are off 12% in less than a week. Sim Lian less than a week ago priced its 5-room HDB flats at $880,000. Now they are going for $778,000, a 12% discount.

Thanks Super Khaw! When he became minister of MND, I tot he would offshore HDB flats to Batam, Bintang and Johor. S’poreans would commute in. I was planning to buy Penguin (ferries to Indon islands, and SMRT and DelGro). Glad I didn’t 

BTW, trumpets pls. I predicted Sim Lian would be forced to cut its prices.

Susan Lim’s BT Interview or The Importance of Numbers

In Corporate governance on 21/06/2011 at 7:32 am

Susan Lim gave her side of the story to BT last week. I assume she wanted BT readers to understand her case and sympathise with her.

But the numbers she quoted (see below) made no sense, and annoyed this reader. They in no way supported her point that, This was a huge loss-making assignment. (Yahoo carried this report. My quotes are from the original BT report.)

She points to a detailed report produced by KordaMentheNeo’s Owain Stone, an expert in forensic accounting, which concludes – among other things – that the daily breakeven cost for Dr Lim’s practice, over a six-month period in 2007 during which she worked intensely on the patient, amounts to $46,000.

This compares to the $58,000 a day she billed the patient for, which included overtime pay and work done outside Singapore not factored into the calculation of the $46,000.

Her comments had this number cruncher wanting to know more because these numbers do not support her point that, This was a huge loss-making assignment.

Juz using her numbers, she made a net profit of $2.18m for these six months or 182 days: (58- 46) x 182 x 1000. Extrapolate these numbers and one gets a yearly income of $4.38m. Now $4.38m is close to the figure another surgeon (Ng Eng Hen) is alleged to have earned in the year before he entered politics. $4m is serious money for us lesser mortals.

Granted I “cheated” as, the $58,000 a day she billed the patient for, which included overtime pay and work done outside Singapore not factored into the calculation of the $46,000. True, but shouldn’t the accountants have added these overtime and overseas work into the breakeven cost so that the breakeven cost increases?*

And if they didn’t, why not? Proper accounting for costs is not rocket science, but sumething first- year students are taught in management accounting courses.

And if they did account for these, why didn’t she quote these numbers? They could have shown that her practice did lose money on the assignment.

Another question that is begging for an answer is, “Do the breakeven cost of $46,000 include any payments to you in the form of salary, director’s fees or advance payments?”. If they do, these numbers should have been disclosed by her when she bandied these numbers. These would have given an analyst a better understanding of what went into calculating the breakeven.

I’m not accusing Susan Lim or her accountants of anything shady or stupid. I’m juz trying to understand how the numbers she quoted prove that, This was a huge loss-making assignment.

And I am expected to believe her when she says her practice is technically bankrupt? Certainly not on the numbers she quoted.

Maybe the numbers are all there, but Susan Lim had airheads as her media handlers and advisers. From my experience, this is a not uncommon occurrence. They goofed, she suffered.

Whatever the case may be, the moral of the story is, “Don’t play play with numbers”. And don’t employ PR people who are uncomfortable with number. BTW I was a PR person for a short spell. And I am comfortable with numbers. And I was a lawyer.

*This was corrected at 7.40pm on 21 June 2011. “True, but shouldn’t the accountants have added these overtime and overseas work into the breakeven cost while deducting them from the billings, so that the breakeven cost increases and the billings decrease?”


Security Guard: A waste of Tony Tan’s talents

In Political governance on 21/06/2011 at 6:57 am

Don’t know abt you, but I think that having Tony Tan as president is a waste of his talents and bad for the mgt of our reserves.

The minister of law, Shanmugam, has explained what the president is elected and empowered to do under the constitution. A statement by Shanmugam said that under the constitution, the president has custodial powers, not executive powers. “He can veto or block government actions in specified areas, but he has no role to advance his own policy agenda”.

Singapore has a parliamentary system of government, with the PM being the head of government and has the authority and responsibility to govern Singapore. National policies and running the government are the responsibility of the PM and cabinet.

The statement also explained that the president’s veto powers over the government are limited to specific areas.

Later, he added that the duties of president were important but again stressed they were not executive.

Tony Tan was CEO of OCBC and DPM. He is now the executive director of GIC which, it seems, has done pretty well in the crisis, unlike Temasek.

GIC made money on its Citibank stake and while it has a book loss on its UBS investment it was an investment that at the time had UBS shareholders upset. They had wanted UBS to call a rights issue, rather than give GIC what they saw as a steal. Contrast this with Temasek. It lost billions on its Merrill Lynch deal, cutting its losses when hedgies were buying BoA (the acquirer of ML).

Does Singapore have so much talent in investing our reserves that it can afford for someone of his stature to be a security guard for S’pore? I mean George Yeo, Mah Bow Tan, Raymond Lim, Cry Baby Lim,  Wong Kan Seng and Goh Chok Tong, we can certainly do without with in executive roles. But Tony Tan?

I think, he is still needed in an executive role to grow our reseves.

Maybe in 2017, he should be president. But certainly not now.

I’m sure, in the meantime, we can find someone else who wants be a $4-million a year jaga with a bed in the Istana, rather than a chapoy on the pavement. If you are too young to know what a jaga and chapoy are, ask yr parents or grandparents.

Experts differ on prospects for China; but we got big bets on China

In China, Temasek on 20/06/2011 at 9:36 am

Some see serious trouble ahead, some see the troubles as to be expected in a rapidly expanding economy, and are notb that serious.

And do remember Temasek has big bets on China.

So does GIC.

What DPM Teo is trying to tell us

In Political governance on 20/06/2011 at 7:53 am

DPM Teo (one of the few ministers I don’t begrudge getting millions in salary) says that electing a president is different from electing a MP, and Singaporeans should understand this before making their choice.

“When you’re electing an MP, you want somebody who’s active on the ground, working with residents and so on …The President, I think, has a different role to play. He needs to be measured, considered and, at the same time, also be a unifying factor on a higher level for all Singaporeans.” Article

Why doesn’t he come out and simply tell us that we shouldn’t treat the presidential election as another chance to show our dis-satisfaction with the ruling PAP? Sumething that we did in 1993, when Mr Chua Kim Yeow (a retired accountant-general) stood against Ong Teng Cheong. Despite being an unknown who didn’t campaign (he said he couldn’t afford it), he got 41% of the votes.

This was widely seen by S’poreans as a protest vote against the PAP who in GE1991 got 61% of the popular vote.

Since then the presidential elections have been walkovers, with only one eligible candidate standing.

This year may be different. One person who seems eligible is prepared to stand: Dr Tan Chin Bok. Another person who looks eligible, Tan Kin Lian has said, ,”If and when it [COE] is approved, I will decide if I wish to take part in the contest”.

Hence the coded message that DPM Teo is sending us: Don’t use the presidential election to show unhappiness with the PAP. And the attempts of Jayakumar and Shanmugam to put the role of the president in a cage.

But if there is an election, we, the voters, can vote to send a message to the PAP that we are still unhappy.

Thank you Mr “Hard Truths” for coming up with the role elected presidency. Although you didn’t intend it, the post has become a symbol that S’poreans can use to show that they are not happy with yr version of Utopia.

TKL changes mind yet again?

In Political governance on 19/06/2011 at 9:37 am

This is a newly set-up site

In the second paragraph, Tan Kin Lian writes,”If and when it [COE] is approved, I will decide if I wish to take part in the contest”.

Contrast this with sumething he issued on 8 June,  “I have decided to contest the Presidential Election”. This was issued a few days after he had said he was thinking of stand. A friend had collected the COE forms because Mr Tan was “not free” and TKL was responding to media queries.

(And reminder: In 2008, he had expressed interest in running for the election if 100,000 Singaporeans signed an online petition of support. He got sumething like 1,200 signers. In 2009, he said he was not planning a contest any longer. He said (rightly) that he did not have the support of S’poreans. He blamed the fearfulness of S’poreans.)

How about treating yr fellow S’poreans and the office of president with some respect, TKL? Want to stand, stand. Like what Dr Tan Chin Bock is doing.

Don’t one day say, ” Think of standing”, then few days later say, “Will stand”, and then 10 days say, “Thinking abt standing”. Reminds me of you calling out supporters to attend Income AGM in 2008 and 2009, You wanted to oppose or propose certain things. Supporters turned out, but you did no opposing or proposing.

Related post


FTR, I helped out on minibonds etc.

Aftertot 21 June 2011

TKL might get himself into a deep hole by playing coy on whether he wanrs to stand. If he refuses to declare that he is a candidate if he is given a COE, the three wise men vetting his eligibility should be within their rights to refuse to consider his eligibilty. They could reasonably point out that they should not be wasting their time on vetting the candidacy of someone who hasn’t made up his mind. They, like TKL, are “not free”.

Property: Greedy developer?

In Property on 17/06/2011 at 3:32 pm

Given all the recent bad news about property (e.g. this, and this), I was surprised to read that a developer (listco Sim Lian) had priced some HDB flats in Tampines at S$750 per sq foot (5-room flats at S$880,000 and more (4 and 3-room flats).

Prices are higher than the resale HDB flats in the Tampines private housing in surrounding areas. Article

The developer paid only S$261 per sq ft, so it can’t claim that its cost of land was high.

But it will, in my view, end up like greedy en-blocers, cutting prices to get sales.

My sources tell me that million-dollar units in a development in a gd district that is within walking distance of an MRT station are going a-begging. It seems only about half the units on offer have been bought.

Market has moved from “Buy before prices go higher” to “Wait and see”. But Sim Lian seems to think that there are daft buyers out there.

Be stressed, be happy?

In Uncategorized on 17/06/2011 at 8:13 am

Rush: Why you need and love the rat race argues we need stress to feel alive. It keeps our minds agile, makes us feel good about ourselves and helps us live longer. It argues that “stress” is not a dirty word, and is not to be avoided.


How to unsilence the president: the people’s way

In Political governance on 16/06/2011 at 8:10 am

Late last week, one day after former senior and law minister S Jayakumar said that the President was not “a centre of power unto himself”, law minister K Shanmugam released a three-page statement explaining the role of the president. It said the President “has no role to advance his own policy agenda”. Well that’s the law as the government sees it.

Yesterday, ST carried an article by Tommy Koh (yet another lawyer) that said, among many other things, that the president should not be “politicised”.

On the other hand there are those like Aurvandil and other bloggers who hold that the very act of having an elected president changes the role of the president, making him “political”. “If you are going to be an Elected President, you have to actively engage in politics in order to win the elections. You have to tell voters what you are going to do once you are elected.”

From this, it flows that the president can speak out. From the perspective of a layperson, this logic may be impeccable.

But I have yet to hear any legally trained person publicly argue along these lines, even though I know lawyers who think S’poreans shouldn’t have to buy into the PAP’s paradigm of what the elected presidency should look like, since “that paradigm is clearly a self-serving one, given their clash with Ong Teng Cheong’s own slightly-differing view”.

(Aside, if any lawyer wants to argue anonymously that the the very act of having an elected president changes the role of president, this blog is available. My only condition is that I must be in a position to verify that the wannabe poster is a lawyer.)

Even though, those who argue that the president has the freedom to voice his opinions do not have the law (OK the lawyers) on their side, their views could still prevail. In a democracy (assuming S’pore is one), the will of the people matters.

In 1975, Australia had a constitutional crisis which started when the opposition-controlled senate refused to pass legislation allowing the unpopular Labor government to spend money (block supply). It ended when the Labor appointed governor- general sacked the Labor prime minister who still commanded a majority in the house of representatives. An election of both houses of parliament followed, and Labor lost.

Even though the senate retains its power to block supply, and the governor-general the power to dismiss the government, these powers have not been used since 1975.

The reason is that these actions are considered too controversial to try again. Effectively, the Australian public has decided that whatever the constitution allows, the senate should not block supply, nor should the government be sacked by the governor-general. The government can only lose power in a general election or if loses the support of the majority in the house of representatives.

Putting this into the S’pore context, the role of the elected president can be changed (without changing the constitution) if

— an eligible candidate articulates before the election that he will be guided by the views of the people and will speak out publicly on their behalf;

— he gets elected;

— he walks the walk, not juz talk the talk; and

— the government, instead of removing him or ignoring him or telling him to shut up, listens to him.

Then the role of the president will change by convention (customary practice).

Is this easier than winning two-thirds of the parliamentary seats and amending the constitution? At least this process doesn’t depend on the People in Blue, the near clones of the MIW.

Bullish on Orchard Rd rentals?

In Property, Reits on 15/06/2011 at 7:12 am

Starhill Global Reit should interest you.

DBS is retaining our ‘buy’ call for Starhill Global Reit following updates from management and the Hong Kong non-deal roadshow.

Starhill Global Reit’s unique value proposition lies in its prime retail offering and niche office exposure along the Orchard Road belt. FY11-12 yields of 6.9-7.3 per cent imply attractive 280 basis points spread over the risk-free rate, backed by the top class commercial assets in town and a reputable sponsor.

There is good earnings visibility going forward, led by organic growth potential and proactive asset enhancements. At current valuations of 0.7 times P/B NAV versus its commercial peers’ 0.8-1.3 times, valuations are attractive. At $0.73 target price, the stock offers 23 per cent total return.


Note I don’t own shares in this Reit yet. Nothing wrong with the numbers (the 6.9% is attractive and sustainable) but in times like this I would prefer its “big brother” to be an international name, not a M’sian cotporate, albeit a respectable name.

Got refund or not?

In Political governance on 14/06/2011 at 9:50 am

Amidst all the comments on the Internet and local MSM on the review of ministerial salaries, I realise that there is sumethng missing.

If as expected the committee recommends major cuts to the salaries, another question arises.

Shouldn’t all those who served from the time the salaries were increased till the date the review changes took effect have a moral obligation to refund the amount deemed excessive? True, legally there is no need to make a refund. But if the ministers are servants of the people, then there is a valid moral argument that they repay the excess amounts?

There may be practical difficulties (ministers may have made bad investments and so may not have money to refund) but the issue is not a practical matter, it is a moral one.

So please take out yr chequebooks, ministers past and present who benefitted from the mega-salaries of the past.

Have a tough decision to make?

In Uncategorized on 13/06/2011 at 10:58 am

Go drink five glasses of water. A full bladder, apparently, helps us take more rational, long-term decisions.



So free leh?

In Political governance, Wit on 13/06/2011 at 6:45 am

Within a few weeks after retiring from the cabinet, Jayakumar was seen hawking his book, “Diplomacy”. Presumably he wrote it during his time in office.

The president has written one book while in office (proceeds to charity) and has publicised that another will be out in September (he leaves office on 31 August, unless he stands again).

One wonders if their official duties leave them so much free time that they can write books while in office? I tot, based on the experiences of a friend, mega-salaries come with little personal free time time. Or maybe $2-4m a yr is “peanuts”, so very little to do on the job?

S-Chips: Sumething SIAS could do

In China, Corporate governance on 11/06/2011 at 4:45 pm

SIAS is, as usual, calling for more measures to safeguard investors’ interesting following yet another S-Chip fiasco.

SIAS has a research department. Why can’t it do what Muddy Waters Research is doing? This US firm has issued damning reports on five Chinese cos listed in the US. He approaches each case like an investigation, sifting through corporate registration documents and even hiring private investigators to pose as potential business partners.

Only one way for property stocks to go

In Property on 10/06/2011 at 9:46 am

Well the analysts got it right at the beginning of the yr telling us to sell or avoid property stocks because of possible govmin actions.

But I bet no-one tot a minister would use a blog posting as part of his plan.

Interesting read–Market-crash-or-ghost-towns

The Silence of the President

In Political governance on 09/06/2011 at 8:22 pm

(Responding to this. The author feels that the president should be free to speak out on things that the president thinks the government is doing wrong. I had said the president has to remain silent on many things.)

Singapore had a constitutional presidency. The president was S’pore’s equivalent to the monarch in the UK. The monarch has no discretion and must act in accordance with the advice of the cabinet. There would be a constitutional crisis if the monarch fails or declines to act on the advice of the cabinet.

Executive power lies with the elected government of the day. The monarch is above politics. The monarch is a figurehead performing ceremonial functions, but does not exercise political power. This power ultimately resides in the parliament, because the elected government rules only if it is able to command the support of the majority in the parliament.

Substitute the word “monarch” with the word “president” in the preceding two paragraphs and you had, in a nutshell, the legal position of the president.

But this changed with the Elected Presidency amendments in 1991. They introduced a rojak approach. The president was to be elected, with some veto powers over executive decisions. These veto powers may be exercised by the president in his sole discretion, i.e. he does not need to follow the advice of the cabinet on such matters.

But on all other matters, the president continues to be bound by the advice of the cabinet. In this ceremonial or figurehead role, the president, like the monarch, has no discretion. Because they have no discretion, they are above politics. Whatever they do on advice, they cannot be criticised because they are only doing their duty.

By extension, because the monarch is above criticism, the monarch does not give her views on government policies actions, or decisions; or anything faintly political. Have you heard the monarch give her views on anything that could be controversial?

One way of looking at it is as follows: Since she cannot be criticised, the monarch should not put herself in a position where she can be criticised. Another way of looking at it: The monarch cannot have any independent view when she is carrying out a ceremonial function.

Read the rest of this entry »

French discount, Japanese premium

In Japan on 09/06/2011 at 6:24 am

Renault’s market capitalisation is currently around €11.7 billion (US$16.8 billion). Nissan’s is ¥3.7 trillion (US$45.3 billion). Renault’s 43% stake in Nissan, at US$19 billion, is worth more on paper than Renault itself.

Many things president cannot do

In Political governance on 08/06/2011 at 7:23 am

I am getting very concerned that those who call on George Yeo to stand for election to the post of president, and most of those who support Dr Tan Chin Bok’s and Tan Kin Lian’s plans to stand at the presidential election, do not know the role of the president.

Based on their media and online comments, I get the impression that they think that the president has the power to act as a check on the government of the day.

As Siew Kum Hong blogged many moons ago, the role of the president is very circumscribed. The president has some veto powers over executive decisions. But on all other matters, the president is bound by the advice of the Cabinet.

This means he is not a check on the government of the day on matters where he is bound by the decisions of the ruling party.

If he goes against the government of the day (or even speaks out against it) on matters where he must listen to the government’s advice, there will be a constitutional crisis.

He also cannot use the office of president as a bully pulpit to advocate policies that he would like the government to adopt. He also has to avoid talking on “controversial” matters.

So, if for example Tan Kin Lian becomes president, he cannot speak out on of the need for a minimum wage, on the honesty and integrity of financial advisers, or whether lawyers, doctors and architects overcharge for certain services. He definitely cannot publicly ask the AG to look into prosecuting financial institutions or land bank businesses for “cheating” the public.

These things are not done, and if done will cause constitutional problems, if not crises.


For the record, I helped out when TKL was fighting for the rights of minibonders etc. I never bot these instruments but if my mum had banked with any one of those financial institutions selling these products, there was a gd chance that she would have been persuaded to try these products. Fortunately, she banked with OCBC and POSB.  The main reason why I helped out was because it could have happened to my mum.

Losing serious money is easy

In Financial competency, Investments on 07/06/2011 at 8:12 am

In Minding the Markets, the author argues that contemporary economics, with its neat mathematical models and fully rational robot-like decision-makers, fatally under-estimates the importance of emotions.

Tuckett’s insight, based on in-depth interviews with more than 50 investors, each managing more than $1bn, is that stocks, shares and derivatives are a special kind of asset, and decisions about whether to buy and sell them are particularly subject to stories and emotions.

— the value of financial assets is prone to extreme uncertainty: thousands of unpredictable events can affect the profitability of a company, for example, from the collapse of a key supplier to a sudden change in the cost of commodities to a natural disaster many thousands of miles away.

— the owner has nothing they can eat, drink, live in, or even hold in their hands: they have to weave a story, a narrative, even to understand why it’s worth buying the asset in the first place, let alone hanging onto it when its value has soared to once-unthinkable heights.

Given these special characteristics, Tuckett argues, financial assets tend to become what he calls “phantastic objects”, which their owners invest with extraordinary powers and think about in ways that are unavoidably emotional.

Guardian article

Even greedier en-blockers

In Property on 06/06/2011 at 9:34 am

Pine Grove, I’ve been reminded by irate Laguna Park residents is the most expensive en bloc propery up for sale, costing about S$1.7 bn. They were upset by my comments that they were greedy.

Despite the absence of a sea view, and its odd shape, Pine Grove will cost developers S$2.17bn or S$1,152 per sq ft per plot ratio in total, inclusive of the S$460mn development charge.

Funnily, Laguna Park’s larger plot ratio allows the winning developer to build up to 36 storeys. Although it is a smaller plot compared to Pine Grove, the intensity to build is there. The buildable areas for both sites are about the same.

For instance, with a land area of 677,493 sq ft and plot ratio of 2.8, the redeveloped Laguna Park is able to yield about 1,600 units at 1,200 sq ft each.

With a plot ratio of 2.8 Pine Grove is able to yield about 1,500 units at the same size per unit.

Analysts have said  that a reserve price with a discount of 20 to 25% is more “realistic” for Pine Grove.

This translates to about S$1.3 bn to S$1.4 billion, or about S$924 to S$970 per sq ft per plot ratio.

Laguna Park residents say their reserve price of S$1.33bn is reasonable.

I say that the residents of both estates are greedy, Pine Grove being worse. Pine Grove should be worth about S$1bn.

MacPherson is a must

In Political governance, Wit on 05/06/2011 at 5:40 pm

A truck hawking designer gds from such designers like Louis Vuitton, Fendi and Kate Spade will make stops in the Central Business District and HarbourFront, among other locations.

While MacPherson isn’t exactly a place associated with those who buy luxury gds, its MP is one Tin Pei Ling otherwise known as Kate Spade Tin. As she is no longer working in the CBD, methinks she will appreciate the truck making regular stops at MacPherson so that her constituents can see her in another light: little Ms Tai-Tai.

There is an educational aspect too. In a video, she implied that the poor need to be motivated to work harder. What better way to motivate the poor in MacPherson than seeing their MP buying a S$1000 bag while they are waiting for their hawker or restaurant food from VB’s successor?

Why all the wayang again Tan Kin Lian?

In Political governance on 04/06/2011 at 6:58 am

So TKL is thinking (again) of standing for president. Not the first time.

In 2008, he had expressed interest in running for the election if 100,000 Singaporeans signed an online petition of support. He got sumething like 1,200 signers. In 2009, he said he was not planning a contest any longer. He said (rightly) that he did not have the support of S’poreans. He blamed the fearfulness of S’poreans.

Now he thinking abt it again. Please leh: Want to stand, stand, like Tan Cheng Bok.

Why all this thinking of standing, not once but twice? Want the publicity? I note that yr friend who picked up yr forms was quoted as saying he was doing so because you were “not free”. This “can’t be bothered attitude” got this blogger very upset. Doesn’t yr attitude show that all this is Wayang?


For the record, I helped out when TKL was helping the minibonders etc. I think what he did took serious courage.



Perennial Retail Trust: the case against

In China, Property, Reits on 03/06/2011 at 10:36 am

In today’s ST, Perennial China Retail Trust took out a full-page ad in colour in ST to extol the IPO’s merits.

Two pages away, ST carried a story headlined ” CapitaLand’s share dip linked to China”. In juz slightly smaller type face, the headline went on, “Poor showing due to concerns over firm’s greater exposure, vulnerability to policy changes”.

If I were Perennial, I’d ask ST for a refund. This headline sums up the thesis why this is an IPO to avoid.

Sitoh: Not a question of “Can’t”

In Political governance on 03/06/2011 at 10:09 am

After it seems promising to keep all the Potong Pasir town council staff, Sitoh is saying he can’t keep his word. “Mr Sitoh reiterated that he could not keep all 16 employees as he had to abide by EM Services’ regulations, after bringing it in as the managing agent for the town council.”

What a dumb reason. He need not have brought in EM Services. By all accounts, the staff at PP town council were doing a gd job. So why change? EM Services, is I understand, is a joint venture between HDB and Keppel Land, whose CEO is former Hong Kah GRC MP Ang Mong Seng.

Here is the PM trying hard to convince S’poreans that the PAP understands the message it got at the May GE, while here is another MP who is behaving as though nothing has changed, despite being told by PM that this is new era. He is using the old PAP methods of bull-dozing, and spinning the truth by being legalistic and pedantic. It won’t wotk Sitoh. Ask Lim Wee Kiak.

Last week it was Lim Wee Kiak who was saboing PM. This week it is Sitoh. Whether their saboing is intentional or accidental is irrelevant. They are damaging the message that the PM is putting across: that the PAP is listening to our concerns and will do something.

With MPs like them, the PM doesn’t need enemies.

DBS bullish on Hutch Port at US$0.95

In China, Infrastructure on 02/06/2011 at 6:29 am

Find it difficult to poke holes in DBS’ analysis. But note DBS was one of the IPO mgr and that HPH is trading below its IPO price of US$1.01. DBS says:

Firm prospects over the short and medium term. We like HPH Trust for its stable and growing earnings profile, which we believe will be driven by continued rising trade volumes into and out of the Pearl River Delta region, translating into an annual growth of 10 per cent in distributions to unit-holders for the next few years.

HPH Trust is due to report its interim results by mid-August, and we are expecting a distribution per unit (DPU) of about 1.8 US cents to be declared.

Maintain ‘buy’ and US$1.15 TP. Given that HPH Trust seems to be well on its way to meeting our projections in FY2011 and FY2012, current FY2011 and FY2012 yields look very attractive at 6.6 per cent and 7.2 per cent, respectively; expect DPU compound annual growth rate of 10 per cent up to 2013.

Our target price implies a total return potential in excess of 30 per cent at current prices. Among Singapore-listed Reits, business trusts and high yield plays, HPH Trust offers one of the highest combinations of yield and DPU growth.

Dealing with an Angry Public

In Political governance on 02/06/2011 at 6:15 am

As a S’porean who (to his great surprise and against his better judgement) believes that the PM is sincere abt addressing the concerns of S’poreans, I hope the PM will read “Dealing with an Angry Public: The Mutual Gains Approach to Resolving Disputes”; and make it compulsory reading for ministers, PAP MPs and senior civil servants.

The book is about the “mutual gains approach” in dealing with the public:

  • Acknowledge the concerns of the other side.
  • Encourage joint fact-finding.
  • Offer contingent commitments to minimize impacts if they do occur, and promise to compensate unintended (but knowable) effects.
  • Accept responsibility, admit mistakes, and share power.
  • Act in a trustworthy fashion at all times.
  • Focus on building long-term relationships.

Two useful links for anyone interested in the book

And WP, SDP and SPP leaders and public communications teams should buy the book to improve their communication skills.

Yes, I left out RP, NSP and SDA: for a very gd reason. The 2011 GE shows that these parties have been rejected by S’poreans. I hope they will heed the message and close shop.

Why IPOs get underpriced

In Uncategorized on 01/06/2011 at 11:27 am

The theories by corporate finance academics:

Consequences of Khaw’s HDB policies

In Property on 01/06/2011 at 7:08 am

I hope S’poreans realise that the HDB building spree means that in all probability their properties will lose value in the coming few yrs as HDB flats are available for occupancy. Remember also that there is a lot of private housing coming on-stream.  How much values fall depends on the complex interplay of housing demand and supply and the growth of the economy. Immigration policies play a part in this interplay.

Those who will be worst affected by a fall in values will be those who bot HDB flats, and lower end private condos in the last few yrs (say from 2006).

These property owners should demand that more FTs be let in to keep property prices buoyant. They should also demand that the PAP focus on GDP growth.

They will also be fans of Mah Bow Tan who even in a recession kept property prices going up. Every dog has its day and Mah will be popular soon. Khaw will be reviled.