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2 of Temasek’s Fab 5 looking sickly?/ Meng Seng’s financial counterpart

In Energy, Financial competency, Temasek on 13/01/2016 at 5:14 am

In 2013, I recommended investing in Temasek’s Fab 5 for KS types. Last June I pointed out problems at two of them Keppel  and SembCorp Marine because of lower oil prices.

The rot continues as Bloomberg reports

The last time Singapore’s marine services industry was staring at what would eventually turn out to be an 18-year drought in demand for oil rigs, Mr Ronald Reagan was starting his second term as US President.

Jack-up rigs, used to drill for oil in shallow waters, saw orders evaporate between 1985 and 2003. As Macquarie notes, rampant overcapacity means such a prolonged slump could well occur again. That definitely would not be good news for the rig-building industry’s two Singaporean leaders – Keppel Corp and Sembcorp Marine.

After a decade-long boom, there were zero new orders globally for jack-up rigs last year. With oil prices swooning, and rigs’ daily rental rates having crashed to US$92,000 (S$132,000) from US$130,000 in 2014, there’s a risk that 70 per cent of Keppel and SembMarine’s order book might get cancelled, especially if the Petrobras bribery scandal in Brazil deepens, Macquarie analysts Somesh Kumar Agarwal and Justin Chiam wrote this week.

… rig-builders’ shares may have to give back much of the China-induced exuberance of the past decade. That could be quite painful for investors, including Temasek.
… owns a little less than half of SembMarine’s parent, Sembcorp Industries, and 21 per cent of Keppel, Bloomberg data shows. It can’t be feeling very chuffed about the 47 per cent slump in SembMarine over the past year, or Keppel’s 26 per cent slide.  

And there might be more trouble ahead. Since early 2004, the two stocks have returned about 300 per cent, thanks primarily to hefty dividends. Those might now start thinning out. According to analyst estimates compiled by Bloomberg, Keppel’s dividends will shrink by as much as 11 per cent over the next three years, compared with annualised growth of 3 per cent over the past three.

No orders coming in doesn’t augur well for shareholders, who will be far behind debtholders in getting paid, and the latter will have substantial claims. Oil- and gas- linked companies with outstanding Singdollar-denominated bonds have to refinance or repay some $625 million of notes this year, a further $390 million in 2017 and $700 million in 2018, Bloomberg-compiled data shows.

The other big risk comes from the duo’s Brazilian yards. Japanese shipbuilders like Mitsubishi Heavy are cutting their losses and exiting as the Petrobras saga drags on. 

Stock in Ensco, the London-based owner of shallow and deepwater rigs, has been hit after Petrobras said it was scrapping a contract in the US Gulf of Mexico because, it claims, Ensco knew about improper payments between a shipbuilder and a consultant when the drillship was constructed, a charge Ensco denies.

Analysts are being predictably slow in sounding the alert. Their median price estimate predicts a 25 per cent jump over the next year in Keppel shares, and a 15 per cent climb in SembMarine.

So far factual or fair comment. But I think the Indian FT* writing for Bloomberg is talking rubbish when he talks of Temasek selling out. Our rig-builders are market leaders, not has-beens like NOL And the oil sector is a cyclical sector, not a declining sector.

Were that triumph of hope over experience to prove elusive, what might Temasek do? It recently decided to sell shipping company Neptune Orient Lines to CMA CGM at $1.30 a share, after having paid as much as $2.80 in 2004 to acquire a part of its 67 per cent stake.

If the Macquarie analysts are right about Keppel and SembMarine eventually trading below book value, like South Korean yards do, then there may not be much point in Temasek’s hanging on to the rig-builders either.

http://www.bloomberg.com/gadfly/articles/2016-01-07/keppel-and-sembcorp-marine-may-bear-the-brunt-of-vanishing-demand

What strholders of SembCorp Marine should be concerned is that SembCorp privates Marine. About 15 yrs ago Keppel did that to FELS.

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*He’s the analyst equivalent of Goh Meng Seng (three GEs, three different parties, and a declining share of the vote). This FT has in the same period worked for Bloomberg, MediaCorp, Reuters and now Bloomberg again. Oh and the last time this FT was working for Bloomberg, he and Bloomberg had to pay damages to one of the Lees, can’t remember which.

As Goh Meng Seng is an exemplar of the traditional oppo politican, this FT shows that T can stand for “Trash”.

 

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Relooking at 2 of Temasek’s Fab 5/ Whither oil prices

In Energy, Temasek, Uncategorized on 05/06/2015 at 6:51 am

I’ve advised since 2013 that investing in Temasek’s Fab 5 is a no-brainer for conservative, KS types. https://atans1.wordpress.com/2013/10/03/temaseks-fab-5-spore-blue-chips/

Here’s looking  at major problems at two of them.

Problems in the Brazilian and Mexican oil industries caused by the fall in oil prices are not good for Keppel and SembCorp Marine. They have received massive orders for rigs from Latin America in recent years.

But new orders will be weak and existing contracts will renegotiated.

Both have also been forced to deny allegations of corruption in winning Brazilian biz. There is a big  political and financial corruption scandal in Brazil, centred around Petrobas, its national oil champion. Petrobas has been a big player in the rig market.

But recorded order books are huge (billions of USD) and both have weathered storms. Both have experienced, internally promoted CEOs

Time to cut and run is when scholar, ex-SAF general is parachuted in as  CEO (like in SMRT, NOL).

On oil prices: views are very mixed

Big Oil is too confident about crude prices. After a 40 percent rally from January’s six-year low, the momentum has been on the upside. But the current prices – $65 a barrel for Brent and $60 for WTI – look more like a ceiling than a floor.

That is not what many insiders seem to think. Some oil service companies expect mid-$70s Brent by the end of this year. Anglo-Dutch Shell assumed oil will rebound to $90 by 2018 in its $70 billion takeover of the UK’s BG Group. Some believe that the steep cut in capex costs will affect supply, including shale, and boost prices again.

http://blogs.reuters.com/breakingviews/2015/06/01/why-the-oil-price-will-fall-again/

Just this week, the head of BP said he doesn’t expect the glut to clear until at least 2016. The Shell view would be a good excuse to hold onto these two Fab5 shares.

Temasek’s Fab 5 S’pore blue chips

In Financial competency, Temasek on 03/10/2013 at 5:11 am

Regolar readers will know this blog’s hostile to ST esp in its personal investment coverage.And usually is critical of Temasek.

Here’s an exception: If you owned one or more of these blue chips, you would be really ungrateful not to vote for PM

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid=435478142-19236-1456515192

Data from SGX My Gateway and Bloomberg showed aircraft engineering firm SIA Engineering Company topping the list, with a total return of 164 per cent over the five years to Sept 13, the cut-off date for this exercise. This includes price increases and cash dividends paid out, and works out to a compounded 21 per cent a year.

Telecommunications firm StarHub, engineering firm Singapore Technologies Engineering and rig builders Keppel Corporation and Sembcorp Marine round up the rest of the top five.

One key thread of these firms is that they are all part-owned by Temasek, which probably adds to the confidence of investors.

They are all also known for being solid with their dividend payments … Of course the share prices reflect that fact i.e. that there are better yields in the market albeit with greater risk.

Disclosure: got Keppel for yonks, and odd lot of SIAEC.

HoHoHo: Will Temasek slip on oil patch?

In Energy, Temasek on 13/02/2016 at 5:31 am

investors and lenders have laid the groundwork for the rebound – buying assets in fire sales and making new loans. But even opportunists are still uneasy. Many investors fear they could be too early if they jump in now – they had already been burned by forecasts that predicted oil would recover last year.

Remember tthis investment?

NYT Dealbook reports

LOW OIL PRICES AND A RECKONING ON DEBT Energy executives and their bankers are preparing for a prolonged downturn that could change the energy industry in a way not seen since the turmoil of the late 1990s gave rise to mega-mergers like Exxon Mobil, Clifford Krauss and Michael Corkery report in DealBook.

Crude prices have plunged more than 70 percent over the last 20 months, but until recently, companies were able to ride out the slump using hedges to sell their oil for more than the market price.

These hedges have expired in recent months, leaving oil companies low on cash and unable to pay their debts. They are also realizing that a recovery in oil prices is at least a year away – too long for many companies to hold out.

If prices hold at such low levels – oil traded near $28 a barrel on Tuesday –as many as 150 oil and gas companies could file for bankruptcy, according to IHS, an energy research firm.

That is a relatively small slice of the industry, but hundreds of other companies that piled on debt to grow into significant players in the shale oil boom are now likely to be acquired or sell their assets. As much as a third of the oil industry could be consolidated as a result of the downturn.

As losses have mounted, investors and lenders have laid the groundwork for the rebound – buying assets in fire sales and making new loans. But even opportunists are still uneasy. Many investors fear they could be too early if they jump in now – they had already been burned by forecasts that predicted oil would recover last year.

Temase should remember that it already has exposures to the oil patch via Heppel and SembCorp Marine: the bad and ugly, the good 

And think about buying SembCorp. If oil prices recover, it’ll bewnefit from its stake in Marine. If it doesn’t, there’s the other biz.

Where Reits can go wrong

In Property, Reits on 14/11/2013 at 5:20 am

Reits are back in fashion after the Fed delayed tapering. QE is still coming.

So bear in mind the following comments by Fitching Ratings (ST 10 October 2013):

Yet key risks remain, including high-leveraged Reits that borrowed more to take advantage of low interest rates.

Reits could also face refinancing issues if loans are not renewed or when asset values fall below what had been anticipated.

Rising supply could also hit industrial Reits, with more multi-user factory space coming onstream over the next two years.

This could depress rents and lower asset valuations, which would worsen the sector’s financial metrics, warned Fitch Ratings.

“This is particularly salient for the hospitality industry which is the most cyclical and leveraged of the Reits under Fitch’s coverage,” the agency stated.

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid=412728214-19457-4491932987

I’m still long Reits, have no intention of selling yet, but am not a buyer. https://atans1.wordpress.com/2013/07/08/why-im-not-selling-my-reits-yet/. Look at dividend stocks. KS people shld look at Temasek Fab 5  and compare their dividends with waz available from CPF or govt bonds or S$ fixed deposits.

Buy Keppel, SembCorp Marine & Sapura?

In Energy, Financial competency, Malaysia, Temasek on 15/01/2016 at 11:48 am

Continuing the theme of buying dogs, commodities and energy …

Forget what the financial equivalent of Goh Meng Seng says (reported here), and buy the two fallen Fab 5 stocks? And M’sian Sapurakencana Petroleum? One of Asia’s leading oilfield services groups, if you don’t know. 

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He’s the journalist equivalent of Goh Meng Seng (three GEs, three different parties, and a declining share of the vote). This FT has in the about same period worked for Bloomberg, MediaCorp, Reuters and now Bloomberg again. Oh and the last time this FT was working for Bloomberg, he and Bloomberg had to pay damages to one of the Lees, can’t remember which.

As Goh Meng Seng is an exemplar of the traditional oppo politican, this FT shows that T can stand for “Trash”.

====================================

There’s deep despair about the oil price as this report from NYT’s Dealbook recounts. But there’s two swallows in the sky:

–Premier Oil has finally agreed to buy all of German utility E.On’s UK North Sea assets in a deal worth $120m (£83m) despite oil trading below US$30,

— Statoil ASA, Norway’s biggest energy company, snapped up a 12% stake in Lundin Petroleum AB to increase its access to the giant Johan Sverdrup field.

The acquisition corresponds to a price per share of about 124 kronor, in line with Lundin’s average price over the past 30 days, according to data compiled by Bloomberg. Lundin shares have dropped about 20 percent since crude started to tumble in mid-2014. Brent oil, the global benchmark, is now trading near $30 a barrel.

“The market situation made it possible for us to secure this position at an attractive price,” Baard Glad Pedersen, a spokesman at Statoil, said by phone. The Stavanger-based company won’t seek representation on Lundin’s board, he said. Bloomberg

At current prices, extracting oil from the North Sea is theoratically the equivalent of burning dollar notes.. Its oil is expensive to extract.

Back to the gloom and doom painted by Dealbook bearing in mind that Monkey is a trickster

NO BOTTOM IN SIGHT FOR OIL PRICES The collapse in commodity prices pushed oil futures even lower on Monday and analysts predicted that the slide was far from over, Jad Mouawad reports in The New York Times.

Oil prices were at a 12-year low on Tuesday, with West Texas Intermediate near $30 a barrel after a decline of more than 5 percent overnight. Brent crude was just under $31 a barrel by the Asian afternoon, as The Wall Street Journal reports.

The drop in commodities prices is being felt throughout the energy sector and beyond. Saudi Arabia said it was considering selling shares in its state-run oil company. Arch Coal, one of the biggest oil producers in the United States, filed for bankruptcy protection to cut its debt. Russia’s main stock indexes plummeted on Monday as oil prices cast a pall over its energy-dependent economy, Andrew E. Kramer reports in The New York Times.

Oil’s decline in the last year was caused in part by Saudi Arabia’s decision not to reduce production. The change, intended to force out high-cost energy producers, backfired on the kingdom and other producers, which now have to consider how to finance their oil-dependent economies.

The slump in oil prices had gained momentum last week on renewed concerns about China’s economy.

Jason Bordoff, director of the Center on Global Energy Policy at Columbia University, said that everything indicated a continued oil glut. “Iran is about to re-enter the market, demand numbers and economic indicators look relatively weak, U.S. supply is holding up in a low-price environment much better than people though and global inventories are growing.”

Many analysts expect more declines. Goldman Sachs and Morgan Stanley have both said that oil could drop to $20 a barrel.

Double confirm: PM’s really from Bizzaro S’pore

In Political governance, Public Administration on 23/07/2015 at 4:51 am

Yesterday, I speculated that our PM’s from Bizzaro S’pore*. Well u/m double confirms this suspicion:

Speaking at a FutureChina Global Forum, Prime Minister Lee Hsien Loong said the Government had “Singaporeans’ interests at heart” when it came to immigration and population policies.

He said “it makes sense to take in foreign labour and immigrants” purely from the perspective of numbers.

“We have explained the reasons many times. I think people may not necessarily want more explanations.”

“But from an emotional standpoint, it is not easy for people to accept, to agree and support.”

Now isn’t the above in line with the Bizarro Code?

In the Bizarro world … society is ruled by the Bizarro Code which states “Us do opposite of all Earthly things! Us hate beauty! Us love ugliness! Is big crime to make anything perfect on Bizarro World!” In one episode, for example, a salesman is doing a brisk trade selling Bizarro bonds: “Guaranteed to lose money for you”**. Later, the mayor appoints Bizarro No. 1 to investigate a crime, “Because you are stupider than the entire Bizarro police force put together”***. This is intended and taken as a great compliment.

I belong to a Facebook group that is pretty conservative and members cut the PAP administration a lot of slack particularly on healthcare, law and order, and welfare (well-off leh and mean) issues. But members don’t cut the PAP administration any slack when it comes to immigration and population policies. While they believe talents are needed and there is a need for immigration, they feel that too much trash is coming in. The belief is that the primary reason for immigration is to keep costs down.

When PM says “I think people may not necessarily want more explanations”, he isn’t talking about this Facebook group. He is talking about Jason Chua and his Fabrications aboyt the PAP? Btw, Jason Chua was kicked out from this group for posting runbbish from FATPAP. He then complained that the group considered supporting the PAP as a crime. My avatar posted to loud acclaim that his stupidity was criminal.

My serious point is that PM is deluded if he thinks the PAP administration has explained away why we need FTs by the container load: even a Facebook group that cuts the PAP a lot of slack doesn’t accept the “right” explanations.

He thinks we S’poreans too from Bizarro S’pore, like him?

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*The Bizarro World (also known as htraE, which is “Earth” spelled backwards) is a fictional planet appearing in American comic books published by DC comics. Introduced in the early 1960s, htraE is a cube-shaped planet, home to Bizarro and companions, all of whom were initially Bizarro versions of Superman, Lois Lane and their children and, later, other Bizarros including Batzarro, the World’s Worst Detective.

In popular culture “Bizarro World” has come to mean a situation or setting which is weirdly inverted or opposite to expectations.

**Think the scholar, general, Temasek MD running NOL. I wrote this in 2013 https://atans1.wordpress.com/2013/11/19/scholar-cant-repair-nol-maersk-steams-ahead/ and this in 2015 https://atans1.wordpress.com/2015/05/15/nol-versus-maersk-what-can-i-say/

***Think the scholar, general running SMRT who can’t make the trains run on time https://atans1.wordpress.com/2015/03/20/aqua-lions-no-worries-about-coup-smrt-no-got-this/.

PAP’s idea of being a “badass”?/ S’pore’s Big Boss

In Uncategorized on 09/06/2015 at 4:47 am

Couldn’t stop laughing when I read the following

George Yeo turned down an offer he couldn’t refuse from Lee Kuan Yew

6 quotes that reveal that George Yeo is a badass at heart.

http://mothership.sg/2015/06/george-yeo-turned-down-an-offer-he-couldnt-refuse-from-lee-kuan-yew/

Double confirms my perception that the well-funded mothership.sg is really nothing more than pary of the PAP’s spin machine juz like ST, MediaCorp or Fabrications about the PAP*.

I mean only a PAP dog, (sorry,  my dogs growled) hackette would say turning down an offer made by Harry shows that BG Yeo’s a “badass”.

Seriously if you go thru the list, it shows more how straight laced is this lady writer. Or how hard she is straining to make BG Yeo look like a “badass” i.e. look normal.

On BG Yeo’s spurning LKY’s offer, two tots:

— How come he can offer BG Yeo a job in Temasek when he has no formal authority in or over Temasek? Double confirms my view that he was the Big Boss, bigger than PM or the cabinet.

— Actually if he is as dedicated to serving S’pore as he claims he is, he’d have taken up LKY’s offer of a job at GIC or Temasek. A former Foreign Affairs minister is really useful in a SWF. Can open doors, smooth ruffle feathers etc.

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*There is a story making the rounds that BG Yeo pitched the idea of mothership to one Philip Yeo (the now retired civil servant with whom Harry daughter had a bone to pick). Philip Yeo wrote a cheque for $1m. Other people’s money, despite both of them being wealthy. Most probably taxpayers’ money.

Reits: Keep on holding

In Economy, Financial competency, Property, Reits, Temasek on 19/03/2015 at 7:24 am

Likewise stocks with sustainable, decent dividend yields like Temasek’s Fab 5

“The Fed rate projections have been significantly lowered over a three-year horizon. This points to a later lift-off,” FT quotes a BNP Paribas economist.

In simpler English:

“The Fed is in no rush,” said Ward McCarthy, chief US economist at Jefferies.

“At the current juncture, the timing of the liftoff is still indeterminate and will depend upon the inflation data. The policy statement eliminated the use of ‘patient’ in forward guidance, but the FOMC also described the new forward guidance as being “consistent” with the prior forward guidance.”

He added: “The word ‘patient’ was removed, but the meaning of patient remained.” (BBC)

Or as Reuters puts it:  The Federal Reserve on Wednesday moved a step closer to hiking rates for the first time since 2006, but downgraded its economic growth and inflation projections, signaling it is in no rush to push borrowing costs to more normal levels.

http://www.reuters.com/article/2015/03/18/us-usa-fed-idUSKBN0ME0D520150318

Offshore & Marine: Calls, dogs and TLCs/ Whither oil?

In Energy on 03/12/2014 at 2:52 pm

Below is a piece from a broker on smaller cap O&M plays.. My view is don’t play, play. Buy two of Temasek’s Fab 5 and ride the upswing and sleep peacefully if oil prices remain low for a long time.

according to data compiled by Bloomberg. Sembcorp Marine Ltd. (SMM), the world’s second-biggest oil-rig maker, is down 29 percent this year, the index’s worst-performing stock.

Keppel Corp. Ltd. (KEP), which earned 69 percent of its revenues from the offshore and marine sectors in the quarter through September, is down 20 percent, the third-worst performer.

Many of the stocks in report posted by a friend on Facebook cannot survive prolonged period of oil at present levels.

OFFSHORE & MARINE (OVERWEIGHT)

OSK Report

Could Yesterday Be Capitulation?

Singapore oil and gas (O&G) stocks dropped 5-16% yesterday when Brent crude
fell 2% intra-day to USD67.50/bbl. A capitulation? We see at worst a 10-15%
short-term oil price downside from here before bumping up against marginal
deepwater costs, which form the oil price floor from a fundamental
perspective. The market’s fear is palpable, creating a positive environment
for mid-term returns for investors who can ride out the volatility.

What’s the downside? Today, global oil production stands at c.92m
barrels/day, c.70% onshore, c.20% shallow water and c.10% deepwater. Oil
demand is still growing 1.5% annually, while US shale supply has exceeded
forecasts. To maintain this production level to meet demand, deepwater
sources with marginal costs at USD40-80/barrel (bbl) must remain
profitable. Using the range’s mid-point, prices could go 10-15% lower in
the short term before a physical supply crunch. Oil traders know this and
will likely not extend shorts beyond USD60/bbl.

The oil market is heavily-speculated, too. Investors tend to forget that
the oil market is a human one too, prone to overreaction to peaks and lows.
Oil-related stocks now appear to be swinging in response to oil traders’
moves, which completely ignore company fundamentals.

What is made can be unmade. Cheerful media articles are now talking about
oil going to the USD36/bbl range (financial crisis low) or the USD12/bbl
range (in the 1980s when Saudi Arabia last defended market share). They
ignore the fact that the financial crisis low was caused by a global credit
crunch, forcing traders to take liquidity out from any source. The 1980s
environment was that of a global recession when oil demand fell 10%
cumulatively and when 90% of the oil was produced onshore. Such conditions
do not exist today. The recent price fall was more or less engineered by
the Organisation of the Petroleum Exporting Countries’ (OPEC) decision to
maintain production, which takes a simple production cut to undo.

Our Top Picks at USD70/bbl oil. Oil prices at this level will hit
ultra-deepwater hard, but shallow-water fields (at USD25-50/bbl) remain
strongly profitable and production-related work are unlikely to be
significantly affected. We continue to like selected Singapore O&G stocks
that entered this correction with starting valuations already low, which
have since become 35% lower. Our Top Picks are Giken Sakata (GSS SP, BUY,
TP: SGD0.65), Ezion (EZI SP, BUY, TP: SGD2.65), Nam Cheong (NCL SP, BUY,
TP: SGD0.61), Pacific Radiance (PACRA SP, BUY, TP: SGD1.55) and Marco Polo
Marine (MPM SP, BUY, TP: SGD0.60). They have strong 12-month earnings
growth and low valuations, unique industry positions and a focus on
shallow-water operations that can lead to a strong re-rating when the
market stabilises. We are negative on Vard (VARD SP, SELL, TP: SGD0.57) and
PACC Offshore Services (POSH SP, NR) for their deepwater exposure.

And watch out.

Swiber and Ezra Holdings Ltd. are scheduled to repay S$720 million ($552 million) of notes within the next two years, or three-quarters of the borrowers’ market value, after funding expansion.

http://www.bloomberg.com/news/2014-11-27/singapore-wealthy-stung-as-crude-rout-sinks-bonds-asean-credit.html

Swiber, with a market value of about $150 million, has raised the equivalent of $289 million in four bond sales this year, three in Singapore dollars and one in offshore yuan. The October 2016 notes issued at par in April traded at 92.99 cents Nov. 27, while the June 2016 bonds sold in May were at 94.65.

Swiber had negative operating cash flow of $5.3 million in the quarter through September, according to its latest results, and total bonds and loans climbed to $1.23 billion at Sept. 30 from $837.7 million at the end of 2013.

“The company is aware of current market concerns surrounding the oilfield services sector as a result of the recent weakness in oil prices,” a Swiber spokesman said in an e-mailed statement. “Swiber has developed good longstanding and supportive relationships with its banks, and is confident of its ability to meet existing debt obligations when these come due.”

Ezra Holdings’ total liabilities were $2.2 billion at the end of August, a 22 percent leap from a year earlier. Its 2016 bonds issued in March dropped more than two cents in as many months, Bloomberg compiled prices show.

Oil’s correction should be temporary as a lack of substitutes will ensure strong demand, said Eugene Cheng Chee Mun, chief financial officer of Ezra Holdings.

“We are proactively looking at refinancing options,” said Cheng Chee Mun. The company is at the peak of the capital expenditure cycle and should start increasing free cash flow next year and hence start to deleverage, he said.

Backgrounder from NYT’s DealBook dated Monday

Oil prices have come under pressure as global output of crude oil exceeded demand this year. In particular, domestic oil production has soared more 70 percent over the last six years, to roughly nine million barrels a day. The country is still a net importer, but with production growing by more than a million barrels a day every year, it is importing less and less almost every month. Imports from OPEC producers have been cut by more than a half in recent years, forcing increasing competition among Saudi Arabia and other exporting countries seeking to replace the American market with Chinese and other Asian markets. The tumbling price in oil has produced economic hardship and potential political problems for OPEC producers like Venezuela and Iran.

How low can oil prices go? Tony Roth, chief investment officer at Wilmington Trust, told Reuters, “Crude seems to have no floor right now, and we could easily see the price drop into the low $60s.” Ed Morse, global head of commodities research at Citigroup, told The Wall Street Journal, “There’s lower prices ahead.” On Monday morning, benchmark futures in New York and London slumped as much as 3.7 percent, before making up some of those losses. “It’s clear that a production war is on and it will be survival of the fittest,” Phil Flynn, a senior market analyst at the Price Futures Group in Chicago, said in an email to Bloomberg News.

PAP voter refusing to pay S&C cont’d

In Political governance on 21/11/2014 at 4:55 am
TRE republished this and below are three great responses to the PAppy’s reasoning on why he refuses to pay S&C charges: he didn’t vote for the WP and he and other PA PAP supporters want to use non-payment to force the WP out of Aljunied GRC.
Wolaiye:

WP should send people to scout the homes that don’t pay their S&CC. If homes are well furnished and no sign of poverty, must be PAP supporters who deliberately refuse to pay. After a month or two, cut of their power and water supply and charge them extra admin and penalty cost. No need for lawyer letter and waste money paying the lawyer fee like what pap town councils do.

RedHot:

This Idiot words:
” I am an Aljunied resident living with my parents. Lately, due to some disagreements I had with the TC, I have been asking my parents not to pay the S&C fees. My reasoning is simple. Why should we pay to an administration body that we did NOT vote for??? Let those people who voted for them pay for them.

I can only imagine the sheer number of people who feels the same way. I hope these people continue to withhold payment and hopefully we can shame the Workers Party out of parliament.

Why can’t Aljunied have a “normal” and competent town council like other constituencies??”

I can say that he should eat the rubbish in his mouth. National Processed Bills are to be observed whether in opposition or ruling party ward. It must be some uneducated bums who made this statement and a shame to the country.

It has been suggested that the writer is a member of the anti-PAP cyber warriors brigade, pretending to be a PAPpy. He could be but I think not because, Why can’t Aljunied have a “normal” and competent town council like other constituencies??, seems to have a ring of authenticity about it. Normality and competency is equated with PAP rule by die-die PAPpiess.. Anything else is abnormal and incompetent. It could be the PM speaking at a PAP election rally, or Temasek’s chairman at a PAP PA organised function in Aljunied.

Finally, while the WP’s cont’d silence on explaining the arrears is worrying (PritamS deleted the files? An “honest mistake”?*) so is Khaw’s and other ministers’ silence on the PAPpy’s rationale for not paying:

Samuel S:

Can PAP ministers, especially KBW, please comment if it is right for those pro-PAP not paying S&C. This is important and must quickly communicate to all citizens in this Singapore.

—-

*Seriously as the Honorary Secretary of a club, that only had one full time accounts clerk and a part-time accountant, I could easily access financial data such as arrears collection. The delay in explaining what happened could be because the records are in a mess, or that mgt wasn’t reading the reports produced.

As to the deficit, I await the WP’s comments. TOC’s piece on the deficit sounds like Roy’s research on CPF, full of para-facts. Standards have dropped at TOC, I’ve informed TOC. Since the return of a co-founder, TOC has become to the WP what Patir and Fabs about the PAP are to the PAP administration.

 

Desperately seeking “core plus” or “value add” Reits

In Financial competency, Property, Reits on 29/07/2014 at 5:37 am

When it comes to Reits, I’m almost like Pussy Lim saying the PAP is doomed (since 1990s), though she recently nuanced her remarks and Roy on the govt “stealing” (my take on what he is claiming, not his word) CPF. Same old messages.

Here’s a variation on my Reits tale. I’m looking at a Reits’ strategy to guard against the effects of likely interest rate rises*. I’m looking at a“core plus” or “value add” strategy: Reits that buy underperforming assets, for example a building with empty space, and focuses on improving returns, for instance by increasing occupancy.

Or Reits outside traditional core commercial real estate include student housing, medical offices, storage and even social housing. I’ll be looking at the Jap Golf Reit.

If I find Reits that are executing this “core plus” or “value add” strategy competently, I’ll switch to them even if their yields are lower. Let you know my conclusions after I do the switches.

BTW, Bank of S’pore, OCBC’s private bank, is recommending Reits and other income plays.

Sounds like what I’ve been doing, suggesting the last few yrs. Maybe I can be Bank of Singapore’s strategist?

Singapore equities will remain range-bound for the short term, but dividend plays will continue to attract interest, said BoS’s CIO on July 3.

“… certain interesting themes in the Singapore market, and one of which … there are many opportunities in the dividend yielding sector, ‘REITs’, some of those Temasek-linked companies** do give you a very nice yield in the context of a very low yielding environment in the world,” said Chief Investment Officer Hou Wey Fook.

BOS says the impact of a slowing Chinese economy on Singapore’s growth will likely be offset by the pick-up in the developed economies. This combined with the steady performance of emerging economies will deliver the best global economic outlook in 2014, since three years ago. (BT report)

BoS, like me, says it prefers equities to fixed income due to falling bond yields and soaring stock market indices. It also expects the improving growth momentum to spur companies into increasing their capital expenditure and M&A activities.

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*Keep an eie on the junk bond market. It’s going through a serious correction that could turn into a collapse given that many say the junk bond is a bubble.

**https://atans1.wordpress.com/2013/10/03/temaseks-fab-5-spore-blue-chips/

Keppel still looks gd BUT

In Energy on 07/01/2014 at 4:58 am

Last December, there were three pieces of gd news

— KFELS delivered its 21st new build offshore rig for 2013, setting a world record for the most number of rigs delivered in a year.KFELS held the previous record of delivering 13 rigs in a year back in 2009.

Keppel O&M (KPELS parent)won $150m in contracts (five of them). This year there is expected to be strong growth in capital investments in global exploration and production (E&P) projects which should should keep new orders coming in for Singapore’s offshore and marine sector this year, although rising costs and competition could put pressure margins.

  It will build its first drillship. But it doesn’t have a buyer lined up. Keppel is usually very KS, so this is something to watch. Still going into drillship is a major step showing it has confidence in its technical ability to built such ships. Most likely Keppel couldn’t get a decent price from operators who would want big discounts for being the first customer.

But it has a new CEO, a numbers man, not an engineer.

Keppel Corporation has appointed its CEO-Designate Loh Chin Hua as an executive director to its board with effect from January 1, 2014.

Its CEO Choo Chiau Beng will retire on the same day.

With effect from the same date, Mr Loh will also succeed Mr Choo as chairman on the boards of the group’s key subsidiaries, including Keppel Land, Keppel Offshore & Marine and Keppel Infrastructure.

Mr Loh was appointed as group chief financial officer in January 2012 and then CEO-Designate in July 2013.

He has been with the Keppel group for 11 years and has over 25 years of experience in real estate investing and fund management. (CNA in early December)

Those who know their history of US car maker, GM, will know that GM’s decline began when the top job went to a finance guy, not an engineer. Keppel’s core competency is riig-building, not property or finance, the new CEO’s core skills. And frankly KepLand sucks by comparison with CapitaLand or Keppel’s offshore engineering biz. If it was an ang moh co, investors would have demanded that Keppel divest its property biz And Kep T&T. But to give the new CEO some credit, Kep T&T is finally going ahead with a reits of its data centre assets.

And here’s an interesting article I came across: http://www.fool.sg/2013/12/12/is-keppel-corp-really-cheap/

Finally, the other Temasek’s Fab 5 stocks still look gd for those who want equity exposure, decent income and relative safety. Doubtless there will be those TRe readers who will post I’m a PAP mole if TRE republishes this article. They should remember, Deng’s,”It doesn’t matter whether a cat is white or black, as long as it catches mice.”: likewise let’s be objective when trying to make money. They should also remember Mao’s “Seek Truth from facts.”, if they hate Deng for being complimentary about S’pore.

Declaration of interest: got Keppel shares. in super long term section of portfolio, alongside HSBC, Haw Par and Hwa Hong.

Related post: https://atans1.wordpress.com/2013/11/28/where-sporean-traits-produce-world-class-tlcs/

Central bank cautions on Reits

In Property, Reits on 12/12/2013 at 6:02 am

[A] Monetary Authority of Singapore (MAS) report … warned that a rise in rates will hit Reits – and lower their dividends.

Reits own a portfolio of property and pay investors regular dividends out of their income – the property rentals received.

The central bank’s financial stability review noted that Reits need to distribute 90 per cent of any taxable income to unitholders.

So these vehicles have limited retained earnings and are dependent on capital markets and banks to meet their financing needs.

The MAS estimated that the ease with which Singapore-listed Reits would be able to pay their interest bills would fall markedly once interest rates headed north.

The median “interest cover” for Singapore-listed Reits would fall from 6.8 to 3.5 times if interest rates were to rise by 3 percentage points, the MAS estimated.

The interest cover is a ratio used to determine how easily a company can pay interest on its debt – the higher the ratio, the easier the interest can be paid.

The MAS also warned that higher interest rates would likely increase interest expenses and lead to lower dividend payouts. Reits might then appeal less to investors, capping their ability to raise more cash from capital markets.

On the bright side, the debt maturity profile of Reits is better now than before the global financial crisis in 2008 and 2009.

A smaller proportion of borrowings by Reits are due for refinancing in the next two years.

The MAS also issued a warning over the larger corporate sector.

“If interest rates were to rise from their currently low levels, firms’ debt-servicing burdens could increase significantly.”

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid=1011063489-19666-9955500363

Don’t blame govt if Reits tank after you buy buy.

Possible gd alt to Reits for the KS: https://atans1.wordpress.com/2013/10/03/temaseks-fab-5-spore-blue-chips/. While the yields are not as high, some pretty lowish in fact, they are not highly leveraged and have maintained steady pay-outs.  And think ComfortDelgro and even SMRT (fare rises leh)

Related post: https://atans1.wordpress.com/2013/11/14/where-reits-can-go-wrong/

Where S’porean traits produce world-class TLCs

In Energy, Indonesia, Temasek, Vietnam on 28/11/2013 at 6:25 am

More to irritate Temaeek and S’pore (self) haters, especially TRE readers*. There are advantages to S’poreans’ reputation as the Prussians of the East: hardworking, careful, conscientious and mindlessly efficient. These are very qualities that make Keppel and SembCorp world beaters in rig-building.

Singapore’s two main yards, Keppel and SembCorp Marine, have also invested heavily in quality and efficiency. They specialise more in deep-sea rigs than in drill-ships and carriers. Keppel, the bigger of the two, is building a record 20 such monsters this year; next year it will deliver the first of three giant, $600m “jack-up” rigs (ones that are floated into place then jacked up on their legs).

Time is money

The Singaporeans are also good at building things on time, which is vital in an industry where late delivery can cost the operators of rigs and drill-ships over $500,000 a day. Over the past five years, rigs ordered from Keppel and SembCorp were, on average, delivered ahead of schedule, whereas Chinese yards delivered 50-250 days late, says IHS Petrodata, a research firm.

http://www.economist.com/news/business/21590496-korean-and-singaporean-yards-have-adapted-well-chinas-challenge-deeper-better

As to China’s cost advantage, having facilities in Indonesia helps provide cheap labour for SembCorp’s rig building biz. Keppel too has an Indonesian operation, though its tiny compared to SembCorp’s.

And with Vietnam having problems with China over maritime boundaries, one wonders if Chinese built-rigs are allowed in its waters. Remember, energy cos are exploring for oil off Vietnam. Still, the waters do not require the sophisticated rigs built by these TLCs.

Related post: https://atans1.wordpress.com/?s=Temasek+Fab+5

*Though TRE readers will be pleased that these TLCs are not led by ex-generals or ex-Temasek MDs. The CEO of Keppel is a scholar, but I’m not sure of the background of CEO’s SembCorp. But both have worked that these TLs for many yrs. They were not parachuted in like in NOL to teach executives to suck eggs.

Why economic forecasters underperform fortune tellers

In Economy, Financial competency on 20/10/2013 at 5:23 am

(Taz all the more reason to stick to stocks that make can make sustainable (we hope) good payouts. Check Temasek’s Fab 5 out: they have consistently made gd payments but the prices reflects this i.e. better yields available elsewhere but at greater risk.)

[A]n advance estimate showing the city-state’s economy shrank 1.0 percent on quarter in the July-September period, better than expectations for a 3.6 percent contraction, but a significant deceleration from 16.9 percent growth in the previous three months.http://www.cnbc.com/id/101109030

Opps wrong again. And govt isn’t that gd either at forecasting. A few months ago: The Republic’s economy is expected to do better this year than previously expected, with the growth forecast raised to between 2.5 and 3.5 per cent, Prime Minister Lee Hsien Loong said yesterday.

The previous official forecast was between 1 and 3 per cent. [Today]

In both cases, in percentage terms, the changes are significant: a fortune teller would lose his credibility with such forecasts. All finance ministers, their advisers, economists, central bankers and analysts always get their forecasts wrong: nothing uniquely S’porean.

In addition to the general reasons I gave here, here are two more reasons for them being sotong in the post 2008 environment.:-

— The experts are lost because the conventional model of how the financial system interacts with the real economy has evolved too little since the huge and largely unexpected financial crisis. Now as then, there is too much debt in the world for either monetary or fiscal policy to have the effect that the textbooks say.

The stimulative efforts of governments and central banks help the highly leveraged financial system stay afloat, but only a small portion of the funds actually reach the real economy. In such an unconventional financial world, the conventional wisdom is likely to stay wrong. Expect more of the unexpected.

http://blogs.reuters.com/breakingviews/2013/08/05/markets-central-bankers-face-strange-new-world/

— Economics is an inexact science, with exceptions to almost every pattern of behaviour that economists take for granted. For example, economists predict that higher prices for a good will reduce demand for it. But students of economics will no doubt remember an early encounter with “Giffen goods”, which violate the usual pattern. When tortillas become more expensive, a poor Mexican worker may eat more of them, because she now has to cut back on more expensive food like meat.

Such “violations” occur elsewhere as well. Customers often value a good more when its price goes up. One reason may be its signalling value. An expensive handcrafted mechanical watch may tell time no more accurately than a cheap quartz model; but, because few people can afford one, buying it signals that the owner is rich. Similarly, investors flock to stocks that have appreciated, because they have “momentum”.

The point is that economic behavior is complex and can vary among individuals, over time, between goods, and across cultures. Physicists do not need to know the behavior of every molecule to predict how a gas will behave under pressure. Economists cannot be so sanguine. Under some conditions, individual behavioral aberrations cancel one another out, making crowds more predictable than individuals. But, under other conditions, individuals influence one another in such a way that the crowd becomes a herd, led by a few.

Unfortunately, many of these methods [to get clear-cut evidence of causality. If high national debt is associated with slow economic growth, is it because excessive debt impedes growth, or because slow growth causes countries to accumulate more debt? cannot be applied to the most important questions facing economic policymakers.] So the evidence does not really tell us whether a heavily indebted country should pay down its debt or borrow and invest more.Moreover, what seem like obvious, commonsense policy solutions all too often have unintended consequences, because a policy’s targets are not passive objects, as in physics, but active agents who react in unpredictable ways. For example, price controls, rather than lowering prices, often cause scarcity and the emergence of a black market in which controlled commodities cost significantly more.

http://www.theguardian.com/business/2013/aug/08/raghuram-rajan-economic-paranoia-uncertainty