Published October 18, 2008
Ascendas-Reit Q2 net rises 14.8% to $53.3m on additional rental income
By EMILYN YAP
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ASCENDAS Real Estate Investment Trust (A-Reit) yesterday reported net distributable income of $53.3 million for its second quarter ended Sept 30, 2008. This is 14.8 per cent higher than a year ago.
Fuelled mainly by additional rental income from completed acquisitions and development projects, gross revenue rose 21.3 per cent year-on-year to $97.3 million.
Distributable income per unit (DPU) was 4.01 cents, up 14.2 per cent from the same period last year. Based on the six months to Sept 30, annualised DPU stands at 15.8 cents. This translates to an annualised yield of 8.4 per cent based on the $1.87 closing price of units on Sept 30.
The 'sustainable financial results' were achieved amid a 'turbulent global financial market and a slowing economy,' said A-Reit manager Ascendas Funds Management (S) chief executive Tan Ser Ping.
First-half gross revenue, net distributable income and DPU all increased from a year earlier.
With credit concerns growing in the market, A-Reit said that it remains committed to prudent capital management.
For instance, it has entered into fixed-rate hedging for 76.7 per cent of its debt for the next 3.93 years at a weighted average cost of 3.25 per cent. It is also getting a $1 billion medium term note programme ready in November to diversify funding sources.
For A-Reit's portfolio of 88 properties with a total book value of around $4.5 billion, the overall occupancy rate was 98 per cent at Sept 30.
As current average passing rents within the the portfolio remain lower than market spot rents, A-Reit expects to see positive rental reversion for most leases due for renewal in the rest of the financial year.
Barring any further deterioration in the external economic environment, the manager believes A-Reit is well-placed to deliver a DPU for the current financial year 'in line with its recent performance'.
A-Reit's unit price ended 16 cents lower at $1.51 yesterday.
Saturday, 18 October 2008
Published October 18, 2008
GuocoLand in the red over forex paper losses
By ARTHUR SIM
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GUOCOLAND Ltd has reported a net loss of $2.8 million for the first quarter ended Sept 30, compared with a net profit of $27.7 million a year ago.
It attributed this mainly to unrealised mark-to-market foreign exchange loss of $19.2 million arising from the revaluation of US$300 million in bank loans as the US dollar appreciated against the Singapore dollar.
Group revenue fell 20 per cent to $153.1 million from a year ago due mainly to lower revenue recognised for property development projects in China. But it said that this was partially offset by higher revenue and cost of sales recognised for property development projects in Singapore. Cash and cash equivalents for the quarter came to $620.66 million, down from $1.53 billion a year ago.
The aggregate amount of the group's borrowings and debt securities repayable in one year or less (or on demand) at end-September was $163.75 million (secured) and $705.66 million (unsecured).
The amount repayable after one year as at end-September was $1.29 billion (secured) and $871.66 million (unsecured).
GuocoLand launched three developments in Singapore - Le Crescendo, The Quartz and The View @ Meyer. As at Oct 16, it said that it had achieved sales of 93 per cent for Le Crescendo, 91 per cent for The View @ Meyer and 68 per cent for The Quartz. In addition, Goodwood Residence is 17 per cent sold.
In China, its residential development at West End Point, in Feng Sheng, Xicheng District of Beijing, is 97 per cent sold and the retail units are currently being launched for sale.
In August, it launched 354 units in its Changfeng project called Guoson Centre Changfeng in Putuo District of Shanghai. To-date, 11 per cent has been sold.
It said that construction is in progress for the three developments located in Dong Cheng District of Beijing, Qixia District of Nanjing and Putuo District of Shanghai.
The group's 64.98 per cent subsidiary, GuocoLand (Malaysia) Berhad, currently has eight mixed residential development projects located in Rawang, Sungai Buloh, Cheras, Kajang, Sepang, Damansara Heights and Jalan Klang Lama.
GuocoLand also reported that Phase 1 in The Canary, a development located next to Vietnam Singapore Industrial Park in Binh Duong Province, is 96 per cent sold to date.
Loss per ordinary share for the period came to 0.34 of a cent. At the close of trading yesterday, Guocoland shares ended one cent down at $1.40.
GuocoLand in the red over forex paper losses
By ARTHUR SIM
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GUOCOLAND Ltd has reported a net loss of $2.8 million for the first quarter ended Sept 30, compared with a net profit of $27.7 million a year ago.
It attributed this mainly to unrealised mark-to-market foreign exchange loss of $19.2 million arising from the revaluation of US$300 million in bank loans as the US dollar appreciated against the Singapore dollar.
Group revenue fell 20 per cent to $153.1 million from a year ago due mainly to lower revenue recognised for property development projects in China. But it said that this was partially offset by higher revenue and cost of sales recognised for property development projects in Singapore. Cash and cash equivalents for the quarter came to $620.66 million, down from $1.53 billion a year ago.
The aggregate amount of the group's borrowings and debt securities repayable in one year or less (or on demand) at end-September was $163.75 million (secured) and $705.66 million (unsecured).
The amount repayable after one year as at end-September was $1.29 billion (secured) and $871.66 million (unsecured).
GuocoLand launched three developments in Singapore - Le Crescendo, The Quartz and The View @ Meyer. As at Oct 16, it said that it had achieved sales of 93 per cent for Le Crescendo, 91 per cent for The View @ Meyer and 68 per cent for The Quartz. In addition, Goodwood Residence is 17 per cent sold.
In China, its residential development at West End Point, in Feng Sheng, Xicheng District of Beijing, is 97 per cent sold and the retail units are currently being launched for sale.
In August, it launched 354 units in its Changfeng project called Guoson Centre Changfeng in Putuo District of Shanghai. To-date, 11 per cent has been sold.
It said that construction is in progress for the three developments located in Dong Cheng District of Beijing, Qixia District of Nanjing and Putuo District of Shanghai.
The group's 64.98 per cent subsidiary, GuocoLand (Malaysia) Berhad, currently has eight mixed residential development projects located in Rawang, Sungai Buloh, Cheras, Kajang, Sepang, Damansara Heights and Jalan Klang Lama.
GuocoLand also reported that Phase 1 in The Canary, a development located next to Vietnam Singapore Industrial Park in Binh Duong Province, is 96 per cent sold to date.
Loss per ordinary share for the period came to 0.34 of a cent. At the close of trading yesterday, Guocoland shares ended one cent down at $1.40.
Published October 18, 2008
Corporate Earnings
M1's Q3 net dives 21% to $34m
Higher customer acquisition and retention costs dent profitability
By WINSTON CHAI
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The curtain raiser for the quarterly results of local telcos got off to a gloomy start yesterday, with MobileOne reporting a 21.1 per cent drop in third-quarter net profit and warning of a drop in full-year earnings.
DOWN BUT NOT BEATENWith the worsening economic climate, the company is predicting a 'single-digit' decline in full-year earnings. However, it still expects its total cash distribution for 2008 to be at least 80per cent of net profit
Net income for the three months ended Sept 30 slid to $34.4 million from $43.6 million last year, as higher customer acquisition and retention costs dented profitability, M1 said.
Earnings per share dropped 22.4 per cent to 3.8 cents, while revenue eased 1.7 per cent to $196.7 million. M1's gearing - debt-to-equity - ratio for the quarter was 128.2 per cent, down from 132.8 per cent last year.
'Increased competitive activity prior to the launch of full mobile number portability on June 13, 2008 continued into Q3,' said chief executive Neil Montefiore. 'The combination of an increased take-up of new competitive tariff plans and continuing high acquisition and retention costs caused a decline in profitability in the quarter.'
Local telcos have seen profits suffer as a result of a full-blown marketing war to attract new customers and lock in existing subscribers in the wake of number portability.
M1's customer retention cost soared 30.3 per cent in the third quarter to $155, while acquisition cost declined 6.9 per cent to $164, with the advertising and promotional blitz starting to show signs of cooling down.
Singapore's smallest telco added 10,000 customers in Q3 to lift its total customer base to 1.621 million. Despite the increase, its overall market share had slipped to 26.1 per cent at end-July from 28.3 per cent a year earlier, as competitors chalked up bigger customer gains.
During Q3, M1 finally branched into the market for fixed-line broadband services by launching four new high-speed Internet access packages, thanks to an infrastructure leasing deal with rival StarHub.
The two companies also joined hands to bid for a government tender to build Singapore's upcoming ultra-fast fibre-optic broadband highway, but the authorities awarded the contract last month to a rival consortium involving Singapore Telecom.
For the first nine months of this year, M1's net profit dropped 15.2 per cent to $113.5 million, though sales edged up 1.6 per cent to $605.9 million.
With the worsening economic climate, the company is predicting a 'single-digit' decline in full-year earnings. However, it still expects its total cash distribution for 2008 to be at least 80 per cent of net profit. M1 shares closed six cents lower yesterday at $1.70.
Rivals StarHub and SingTel are expected to report their quarterly results in the coming weeks.
However, SingTel has already hinted of a possible slowdown for some parts of its Singapore business and has responded with cost-cutting measures such as a hiring freeze and advertising cutbacks.
Corporate Earnings
M1's Q3 net dives 21% to $34m
Higher customer acquisition and retention costs dent profitability
By WINSTON CHAI
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The curtain raiser for the quarterly results of local telcos got off to a gloomy start yesterday, with MobileOne reporting a 21.1 per cent drop in third-quarter net profit and warning of a drop in full-year earnings.
DOWN BUT NOT BEATENWith the worsening economic climate, the company is predicting a 'single-digit' decline in full-year earnings. However, it still expects its total cash distribution for 2008 to be at least 80per cent of net profit
Net income for the three months ended Sept 30 slid to $34.4 million from $43.6 million last year, as higher customer acquisition and retention costs dented profitability, M1 said.
Earnings per share dropped 22.4 per cent to 3.8 cents, while revenue eased 1.7 per cent to $196.7 million. M1's gearing - debt-to-equity - ratio for the quarter was 128.2 per cent, down from 132.8 per cent last year.
'Increased competitive activity prior to the launch of full mobile number portability on June 13, 2008 continued into Q3,' said chief executive Neil Montefiore. 'The combination of an increased take-up of new competitive tariff plans and continuing high acquisition and retention costs caused a decline in profitability in the quarter.'
Local telcos have seen profits suffer as a result of a full-blown marketing war to attract new customers and lock in existing subscribers in the wake of number portability.
M1's customer retention cost soared 30.3 per cent in the third quarter to $155, while acquisition cost declined 6.9 per cent to $164, with the advertising and promotional blitz starting to show signs of cooling down.
Singapore's smallest telco added 10,000 customers in Q3 to lift its total customer base to 1.621 million. Despite the increase, its overall market share had slipped to 26.1 per cent at end-July from 28.3 per cent a year earlier, as competitors chalked up bigger customer gains.
During Q3, M1 finally branched into the market for fixed-line broadband services by launching four new high-speed Internet access packages, thanks to an infrastructure leasing deal with rival StarHub.
The two companies also joined hands to bid for a government tender to build Singapore's upcoming ultra-fast fibre-optic broadband highway, but the authorities awarded the contract last month to a rival consortium involving Singapore Telecom.
For the first nine months of this year, M1's net profit dropped 15.2 per cent to $113.5 million, though sales edged up 1.6 per cent to $605.9 million.
With the worsening economic climate, the company is predicting a 'single-digit' decline in full-year earnings. However, it still expects its total cash distribution for 2008 to be at least 80 per cent of net profit. M1 shares closed six cents lower yesterday at $1.70.
Rivals StarHub and SingTel are expected to report their quarterly results in the coming weeks.
However, SingTel has already hinted of a possible slowdown for some parts of its Singapore business and has responded with cost-cutting measures such as a hiring freeze and advertising cutbacks.
Published October 18, 2008
Sales of premium cars and sports models hit the brakes
By SAMUEL EE
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WHEN you are wealthy and worried about the current economic mess, you're more than likely to immediately stop buying more jewellery, wine futures and yes, that new car too.
Sales of high-end cars have plunged since the start of this month, with the lowest point being last weekend when some distributors of upmarket Continental cars reported zero bookings over the normally busy Saturday and Sunday period.
'After a week of non-stop news about bank bailouts and hundred-billion-dollar rescue plans, last weekend's order book was zero,' said an executive with a premium dealership. He explained that prospective buyers usually shop around for a car during the week, before coming in over the weekend to put down a deposit.
He said the last time he encountered zero weekend sales was during the Sars epidemic.
The executive was not alone. At least two other European franchises also did not manage to record any sales over last weekend. All those interviewed spoke on condition that both they and the brands they represent are not named.
At one high-end sports car dealership, this month's orders have so far plunged by 50 per cent, according to a source.
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'Generally, it's the cars which are in the $250,000 to $300,000 range that get hit first because they are mainly bought by people who got a big bonus or a promotion, what some would call the marginal owners,' he said.
The sports models in his showroom cost between a quarter and three-quarters of a million dollars.
He said sales of the more expensive models have also slowed down but not by as much.
'Those who buy $300,000 to $500,000 cars can lose 50 per cent of their stock portfolio but generally, they are still cash-rich,' said the source. 'So thank God there haven't been any cancellations.'
But he added that most well-heeled customers such as these may not want to buy anything for now.
'Maybe they are preoccupied with waiting for an opportunity to make more money with whatever assets they have left,' he speculated.
A manager of a premium marque agrees.
'We had a lot of showroom traffic last week but no one was signing on the dotted line. That means the product is still attractive, our advertising and marketing are still effective, but people are not willing to commit to a purchase yet. It's like the property market - they still have cash but are waiting to pick up a good bargain,' he said.
Another factor is tightening credit, added the manager.
'In a very weak market, most finance companies become more cautious with loans. They may not reject an application outright, but they will reduce the loan quantum from 80 or 90 per cent to 50 to 60 per cent if there is the slightest question about your credit standing,' he said.
Before the current credit crunch, local sports car sales had been on an uptrend. Last year, luxury sports cars - defined as those costing $200,000 or more - jumped 97 per cent from the previous year. In 2007, 659 units were sold by authorised distributors, that is, non-parallel importers - up 97 per cent from 334 units in 2006.
Driving sales in this luxury band were mainly models in the $250,000 to $350,000 price bracket, such as the Porsche Cayman, BMW 6 Series and M3, and Mercedes-Benz CLK-Class.
Together, the 659 units made up less than one per cent of the 81,493 passenger cars sold by authorised distributors in 2007 but they were more profitable than other volume models.
Still, the jury is out on how badly the high-end car market will be hit this year. One observer said expensive models such as Bentley, Lamborghini, Ferrari and some Porsche models - all of which start from above $700,000 each - are pre-ordered three to four months ahead of time.
He said: 'You won't see demand tapering off yet because there will still be deliveries. So up to December, it won't be an issue. But going forward, there is bound to be some reduction. If we're lucky, it will be 20 per cent down. If we're not, it could be 60 to 70 per cent. It's anybody's guess.'
Sales of premium cars and sports models hit the brakes
By SAMUEL EE
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WHEN you are wealthy and worried about the current economic mess, you're more than likely to immediately stop buying more jewellery, wine futures and yes, that new car too.
Sales of high-end cars have plunged since the start of this month, with the lowest point being last weekend when some distributors of upmarket Continental cars reported zero bookings over the normally busy Saturday and Sunday period.
'After a week of non-stop news about bank bailouts and hundred-billion-dollar rescue plans, last weekend's order book was zero,' said an executive with a premium dealership. He explained that prospective buyers usually shop around for a car during the week, before coming in over the weekend to put down a deposit.
He said the last time he encountered zero weekend sales was during the Sars epidemic.
The executive was not alone. At least two other European franchises also did not manage to record any sales over last weekend. All those interviewed spoke on condition that both they and the brands they represent are not named.
At one high-end sports car dealership, this month's orders have so far plunged by 50 per cent, according to a source.
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'Generally, it's the cars which are in the $250,000 to $300,000 range that get hit first because they are mainly bought by people who got a big bonus or a promotion, what some would call the marginal owners,' he said.
The sports models in his showroom cost between a quarter and three-quarters of a million dollars.
He said sales of the more expensive models have also slowed down but not by as much.
'Those who buy $300,000 to $500,000 cars can lose 50 per cent of their stock portfolio but generally, they are still cash-rich,' said the source. 'So thank God there haven't been any cancellations.'
But he added that most well-heeled customers such as these may not want to buy anything for now.
'Maybe they are preoccupied with waiting for an opportunity to make more money with whatever assets they have left,' he speculated.
A manager of a premium marque agrees.
'We had a lot of showroom traffic last week but no one was signing on the dotted line. That means the product is still attractive, our advertising and marketing are still effective, but people are not willing to commit to a purchase yet. It's like the property market - they still have cash but are waiting to pick up a good bargain,' he said.
Another factor is tightening credit, added the manager.
'In a very weak market, most finance companies become more cautious with loans. They may not reject an application outright, but they will reduce the loan quantum from 80 or 90 per cent to 50 to 60 per cent if there is the slightest question about your credit standing,' he said.
Before the current credit crunch, local sports car sales had been on an uptrend. Last year, luxury sports cars - defined as those costing $200,000 or more - jumped 97 per cent from the previous year. In 2007, 659 units were sold by authorised distributors, that is, non-parallel importers - up 97 per cent from 334 units in 2006.
Driving sales in this luxury band were mainly models in the $250,000 to $350,000 price bracket, such as the Porsche Cayman, BMW 6 Series and M3, and Mercedes-Benz CLK-Class.
Together, the 659 units made up less than one per cent of the 81,493 passenger cars sold by authorised distributors in 2007 but they were more profitable than other volume models.
Still, the jury is out on how badly the high-end car market will be hit this year. One observer said expensive models such as Bentley, Lamborghini, Ferrari and some Porsche models - all of which start from above $700,000 each - are pre-ordered three to four months ahead of time.
He said: 'You won't see demand tapering off yet because there will still be deliveries. So up to December, it won't be an issue. But going forward, there is bound to be some reduction. If we're lucky, it will be 20 per cent down. If we're not, it could be 60 to 70 per cent. It's anybody's guess.'
Published October 18, 2008
HK refers 2 banks for possible sanctions
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(Hong Kong)
TWO banks were yesterday referred for possible sanctions in Hong Kong as part of an investigation into misleading sales tactics in connection with Lehman Brothers investments whose values are in doubt, authorities said. The Hong Kong Monetary Authority sent securities regulators 24 cases involving allegations of misconduct and 'mis-selling' against the lenders, the agency said.
The move came as the territory's banking association announced it agreed to a government proposal under which banks and other sellers of one type of Lehman-backed investments, known as Minibonds, would buy them back from investors.
The banks under investigation, which weren't identified, are the first to be referred for sanctions in the investigation. The cases involve products worth about HK$10 million (S$1.9 million) sold to retail investors. Regulators could impose fines and revoke the banks' licence, among other penalties. The Securities and Futures Commission, which decides what sanctions, if any, would be imposed, said that it was initiating an investigation into cases referred by the HKMA but wouldn't comment on them until after examining the evidence. -- AP
HK refers 2 banks for possible sanctions
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(Hong Kong)
TWO banks were yesterday referred for possible sanctions in Hong Kong as part of an investigation into misleading sales tactics in connection with Lehman Brothers investments whose values are in doubt, authorities said. The Hong Kong Monetary Authority sent securities regulators 24 cases involving allegations of misconduct and 'mis-selling' against the lenders, the agency said.
The move came as the territory's banking association announced it agreed to a government proposal under which banks and other sellers of one type of Lehman-backed investments, known as Minibonds, would buy them back from investors.
The banks under investigation, which weren't identified, are the first to be referred for sanctions in the investigation. The cases involve products worth about HK$10 million (S$1.9 million) sold to retail investors. Regulators could impose fines and revoke the banks' licence, among other penalties. The Securities and Futures Commission, which decides what sanctions, if any, would be imposed, said that it was initiating an investigation into cases referred by the HKMA but wouldn't comment on them until after examining the evidence. -- AP
Published October 18, 2008
Banks may compensate victims of 'mis-selling'
Focus on 'vulnerable' customers who bought Lehman-linked products
By GENEVIEVE CUA
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'VULNERABLE' customers, who were mis-sold structured products linked to Lehman Brothers, may find their cases being heard more sympathetically.
MR HENG'Several FIs have assured MAS that they will take full responsibility... They must do the right thing and ensure a quick and fair resolution.'
The Monetary Authority of Singapore is focusing on helping the elderly, the unemployed, retirees and those with little English proficiency who invested a significant portion of their savings in such products. It will also focus on cases where the products were 'clearly inappropriate for them given their circumstances'.
In a briefing yesterday, MAS managing director Heng Swee Keat said that financial institutions which distributed the products have been told to give priority to these cases. 'They should not take an overly legalistic approach to mis-selling in dealing with these cases.'
'For cases where there are sufficient indications that the product was mis-sold or that it was clearly inappropriate given the investor's profile and circumstances, the FI should take responsibility. Several FIs have assured MAS that they will take full responsibility . . . They must do the right thing and ensure a quick and fair resolution for these customers.'
News wires reported, meanwhile, that Hong Kong banks will buy back Lehman's Minibonds from investors at market value. In Singapore, HSBC Institutional Trust Services is exploring the option of a new swap counterparty for Minibond, which is understood to be a preferred option among investors.
Yesterday, SCMP also reported that DBS Bank in Hong Kong has agreed to a partial refund for an 84 year old woman and her mentally ill son. DBS has declined to comment on individual cases. Mr Heng said the elderly may not necessarily be vulnerable. 'You may have certain individuals who are elderly but have been investing in markets for some time.'
Mr Heng said MAS will take action against institutions or individuals who breach regulations. 'MAS has required the independent parties to highlight these breaches and potential cases of mis-selling to MAS. They have already brought a number of possible cases to our attention and we are following up on them.'
The banks responded positively to such measures. In a statement, DBS said that MAS' measures are consistent with its own actions to address investors' concerns. 'We are now reviewing all concerns raised on High Notes 5 in a prompt and comprehensive manner, and will not hesitate to take responsibility in instances where evidence of mis-selling is established,' it said. Hong Leong Finance also said that the company was prepared to compensate customers in cases where there had been mis-selling. Maybank added that it was prepared to deploy all necessary resources to assist affected Minibond investors.
Meanwhile, three independent persons have been appointed by the financial institutions involved to oversee the complaints handling process related to the sale of Minibond, DBS High Notes and Merrill Lynch's Jubilee Series 3 Notes. These persons are Gerard Ee, Hwang Soo Jin and Law Song Keng.
Mr Heng said that MAS normally does not comment on dealings with individual institutions. 'However, given public interest in this matter, MAS confirms that we have been conducting formal inquiries into allegations of breaches of the law, inadequate internal controls by the FIs or poor sales practices by their representatives. We will make an announcement on any actions we are taking when our inquiries are completed.'
MAS urged individuals who have a genuine claim of mis-selling to lodge their complaint with their FI. Those who are not satisfied with the FIs' decision can turn to the Financial Industry Disputes Resolution Centre (FIDReC) which has a fast-track process in place.
Banks may compensate victims of 'mis-selling'
Focus on 'vulnerable' customers who bought Lehman-linked products
By GENEVIEVE CUA
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'VULNERABLE' customers, who were mis-sold structured products linked to Lehman Brothers, may find their cases being heard more sympathetically.
MR HENG'Several FIs have assured MAS that they will take full responsibility... They must do the right thing and ensure a quick and fair resolution.'
The Monetary Authority of Singapore is focusing on helping the elderly, the unemployed, retirees and those with little English proficiency who invested a significant portion of their savings in such products. It will also focus on cases where the products were 'clearly inappropriate for them given their circumstances'.
In a briefing yesterday, MAS managing director Heng Swee Keat said that financial institutions which distributed the products have been told to give priority to these cases. 'They should not take an overly legalistic approach to mis-selling in dealing with these cases.'
'For cases where there are sufficient indications that the product was mis-sold or that it was clearly inappropriate given the investor's profile and circumstances, the FI should take responsibility. Several FIs have assured MAS that they will take full responsibility . . . They must do the right thing and ensure a quick and fair resolution for these customers.'
News wires reported, meanwhile, that Hong Kong banks will buy back Lehman's Minibonds from investors at market value. In Singapore, HSBC Institutional Trust Services is exploring the option of a new swap counterparty for Minibond, which is understood to be a preferred option among investors.
Yesterday, SCMP also reported that DBS Bank in Hong Kong has agreed to a partial refund for an 84 year old woman and her mentally ill son. DBS has declined to comment on individual cases. Mr Heng said the elderly may not necessarily be vulnerable. 'You may have certain individuals who are elderly but have been investing in markets for some time.'
Mr Heng said MAS will take action against institutions or individuals who breach regulations. 'MAS has required the independent parties to highlight these breaches and potential cases of mis-selling to MAS. They have already brought a number of possible cases to our attention and we are following up on them.'
The banks responded positively to such measures. In a statement, DBS said that MAS' measures are consistent with its own actions to address investors' concerns. 'We are now reviewing all concerns raised on High Notes 5 in a prompt and comprehensive manner, and will not hesitate to take responsibility in instances where evidence of mis-selling is established,' it said. Hong Leong Finance also said that the company was prepared to compensate customers in cases where there had been mis-selling. Maybank added that it was prepared to deploy all necessary resources to assist affected Minibond investors.
Meanwhile, three independent persons have been appointed by the financial institutions involved to oversee the complaints handling process related to the sale of Minibond, DBS High Notes and Merrill Lynch's Jubilee Series 3 Notes. These persons are Gerard Ee, Hwang Soo Jin and Law Song Keng.
Mr Heng said that MAS normally does not comment on dealings with individual institutions. 'However, given public interest in this matter, MAS confirms that we have been conducting formal inquiries into allegations of breaches of the law, inadequate internal controls by the FIs or poor sales practices by their representatives. We will make an announcement on any actions we are taking when our inquiries are completed.'
MAS urged individuals who have a genuine claim of mis-selling to lodge their complaint with their FI. Those who are not satisfied with the FIs' decision can turn to the Financial Industry Disputes Resolution Centre (FIDReC) which has a fast-track process in place.
Published October 18, 2008
Slippery side-bets that hurt casinos
By LEE U-WEN
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IT is not just the shadow of a downturn that the casinos have to ward off. It is also the spectre of side-betting. This practice is rampant in Macau, often carried out right under the nose of the casinos, and yet they are helpless to staunch the massive revenue haemorrhage.
Industry estimates have suggested that side-betting - more commonly known as under-the-table betting or parallel betting - has cost Macau casinos over HK$100 billion (S$19.1 billion) in winnings and HK$40 billion in tax revenue over the past five years.
How it works is simple, yet devious. The most common forms of side-betting are when junket operators - middle-men who bring high-rollers to casino VIP rooms and give them credit to play with - quietly bet with these gamblers on the side, based on what happens on the actual casino tables.
So a gambler may bet, say, HK$10,000 in chips with the casino. But he might have a 'side-bet' with the junket operator for US$10,000. This means that while the casino sees just HK$10,000 change hands, the gambler is, in fact, betting to the tune of HK$88,000 - the bulk of it with the junket operator - while using the facilities of the casino.
In some cases, the junket operator is even sitting at the same table as the gambler, and taking note of each game played and the bet in each round. The two parties will then settle the outstanding amounts owed to each other when they get back to the mainland.
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The benefits to the gambler are two-fold. He typically gets better odds for his side-bet with the operator - who has no overhead expenses, unlike the casino - giving him higher returns than if he were to bet the entire sum with the casino. Also, the gambler gets to enjoy the perks of being a high-roller, such as free food and alcohol, expensive cigars, transport to the casino, free stays at the hotel's suites, and so on.
Why Macau's casinos are so keen to clamp down on side-betting is that it removes their take from the total bet amount, as well as the 40 per cent government tax, leaving all the revenue in the hands of the players and operators.
The director of the Macau Gaming Inspection and Co-ordination Bureau, Manuel Joaquim das Neves, told the Macau Daily Times earlier this year that it is impossible to prove when side-betting is going on. 'We take some measures with the Judiciary Police, but nobody tells if they are taking side-betting, so it's impossible to prove it. If I go with you to a casino and bet with you according to the result of the table, nobody knows if you don't tell,' he pointed out.
Could side-betting find its way into Singapore's IRs when they eventually open? It may be too early to tell, but it's perhaps a given that the managements of both resorts will be keeping a close watch on junket operators and doing all they can to minimise this revenue leakage.
Slippery side-bets that hurt casinos
By LEE U-WEN
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IT is not just the shadow of a downturn that the casinos have to ward off. It is also the spectre of side-betting. This practice is rampant in Macau, often carried out right under the nose of the casinos, and yet they are helpless to staunch the massive revenue haemorrhage.
Industry estimates have suggested that side-betting - more commonly known as under-the-table betting or parallel betting - has cost Macau casinos over HK$100 billion (S$19.1 billion) in winnings and HK$40 billion in tax revenue over the past five years.
How it works is simple, yet devious. The most common forms of side-betting are when junket operators - middle-men who bring high-rollers to casino VIP rooms and give them credit to play with - quietly bet with these gamblers on the side, based on what happens on the actual casino tables.
So a gambler may bet, say, HK$10,000 in chips with the casino. But he might have a 'side-bet' with the junket operator for US$10,000. This means that while the casino sees just HK$10,000 change hands, the gambler is, in fact, betting to the tune of HK$88,000 - the bulk of it with the junket operator - while using the facilities of the casino.
In some cases, the junket operator is even sitting at the same table as the gambler, and taking note of each game played and the bet in each round. The two parties will then settle the outstanding amounts owed to each other when they get back to the mainland.
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The benefits to the gambler are two-fold. He typically gets better odds for his side-bet with the operator - who has no overhead expenses, unlike the casino - giving him higher returns than if he were to bet the entire sum with the casino. Also, the gambler gets to enjoy the perks of being a high-roller, such as free food and alcohol, expensive cigars, transport to the casino, free stays at the hotel's suites, and so on.
Why Macau's casinos are so keen to clamp down on side-betting is that it removes their take from the total bet amount, as well as the 40 per cent government tax, leaving all the revenue in the hands of the players and operators.
The director of the Macau Gaming Inspection and Co-ordination Bureau, Manuel Joaquim das Neves, told the Macau Daily Times earlier this year that it is impossible to prove when side-betting is going on. 'We take some measures with the Judiciary Police, but nobody tells if they are taking side-betting, so it's impossible to prove it. If I go with you to a casino and bet with you according to the result of the table, nobody knows if you don't tell,' he pointed out.
Could side-betting find its way into Singapore's IRs when they eventually open? It may be too early to tell, but it's perhaps a given that the managements of both resorts will be keeping a close watch on junket operators and doing all they can to minimise this revenue leakage.
Published October 18, 2008
Dicing with a downturn
With so much riding on Singapore's IRs, can they beat a global slowdown?
By LEE U-WEN
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REACHING deep into the earth and also soaring above it, Singapore's two integrated resorts (IRs) approach their moment of truth. Just over a year back, when the skies above them were clear, they were set ambitious targets.
Each was primed to bring in $2.7 billion - 0.8 per cent in all - as value-add contribution to Singapore's gross domestic product. Between them, they were expected to add 50,000 jobs to the economy by 2015.
What could go wrong? This was 13 months ago and Macau had just made headlines for achieving US$10 billion in gaming revenue, propelling it ahead of glitzy Las Vegas.
Then came the surge in construction costs that raised the amount being pumped into the Marina Bay and Sentosa IRs to US$10.5 billion - a 20 per cent hike above initial plans. For the IRs to reach their financial targets, they would have to recoup these extra billions through higher revenues. But 15 months before casino doors are thrown open, it looks as if even meeting revenue targets would be an achievement.
Already, Singapore's in a technical recession and it is likely to stay with us for several quarters. The US and Europe are staring at their bleakest outlook in decades. Even China, previously thought to be immune to the meltdown, has seen its tycoons get trimmed. The average billionaire on Hurun's 2008 China Rich List now has US$2.4 billion of personal wealth, down from US$3.6 billion the year before.
Macau, meanwhile, is bleeding. So what does the future hold for Singapore's IRs?
Macau's loss, ironically, could be Singapore's gain. For the first time in three years, Macau's casino revenue fell last month from the 52.5 per cent average growth achieved in the first eight months of 2008.
This has everything to do with the curbs imposed on mainlanders visiting Macau. From once a fortnight, the frequency of these visits was cut to once a month from June 1, then once every two months from July 1 - and now once every three months from Oct 1. Macau tourism operators reckon the curbs could slash the number of mainlanders joining package tours to Hong Kong and Macau by 10 per cent.
So where will Chinese gamblers - especially the high-rollers - go for their kicks? Las Vegas is very far away. But Singapore - just three hours from Hong Kong - is not. And it could emerge as their destination of choice when the IRs at Marina Bay and Sentosa open by 2010.
The IRs are going all out to lure big spenders from China and elsewhere, says Andy Nazarechuk, a gaming industry expert and dean of the University of Nevada Las Vegas campus in Singapore. 'High-rollers in Las Vegas spend anywhere between US$50,000 and US$150,000 for their vacation at such resorts,' he says. 'The revenue generated from this group here will be high, which is why the investors are building these IRs.'
But can the China tide alone lift the worry clouds around Singapore's IRs?
Resorts World (RW) spokesperson Krist Boo does not want to single out China as Sentosa's big bet. 'We have an unparalleled sales and distribution network in Asia and are confident of delivering the numbers. We are in 18 cities - Jakarta, Kuala Lumpur, Bangkok, Shanghai, Mumbai and Tokyo, just to name a few.'
Resorts World is sticking to its forecast of 15 million visits in the first year. According to Ms Boo, Asians still take holidays when times are not so good but favour nearby destinations to save on airfare. This could swing the pendulum in RW's favour, she says. 'We are confident the visitors will come. We are building a destination that Asia has never had - six hotels, Universal Studios Singapore, the world's largest oceanarium, a water park, maritime museum and spa.'
Tourists are expected to account for about 60 per cent of visits and locals the rest.
Marina Bay Sands, too, is sticking to its forecast that it will turn a profit the minute it opens. 'We expect to be profitable from day one,' says George Tanasijevich, its general manager and vice-president of Singapore development. 'Our expected payback time-frame remains at five to eight years.'
That, however, may be easier said than done. The Singapore Tourism Board itself is not confident of achieving this year's target of 10.8 million visitors. And even if visitor numbers do pick up, it remains to be seen whether they will spend as freely as initially expected. For while the IRs have spread their bets to markets all over the world, their problem is that almost each of these markets has sunk in unison. The Shanghai index has fallen 69 per cent from its peak in October 2007 and hit a 22-month closing low in September this year. Mumbai has not fared much better.
'While locals will be excited about the IRs initially, over time, the tourists will be the main market,' says Dr Nazarechuk. And that is where the problem lies.
The immediate outlook for the IRs also hinges on how well airlines perform, according to Jonathan Galaviz of Globalysis, a Las Vegas-based boutique travel and leisure consultancy. 'A significant risk when the IRs open will be the health of the airline industry. If capacity to Singapore is reduced substantially, it will jeopardise the performance of the resorts.'
On their part, the IRs are betting on Singapore's resilience. 'Our MICE-driven business model serves to mitigate the effects of a challenging economy,' says Mr Tanasijevich.
Nevertheless, confidence is hard to pin down in uncertain times - as the principal players behind the two projects know. Las Vegas Sands has seen its share price slump from a peak of US$144.15 last year to just US$11.83 now. Genting International has weathered the storm better, falling from S$0.72 last year to S$0.39 now.
Analysts, meanwhile, have cut back their projections on how much the IRs here will contribute to GDP, and expect the number to remain between 0.3 per cent and 0.5 per cent between 2010 and 2015.
The IRs would give a lot for a glimpse of blue skies now.
Dicing with a downturn
With so much riding on Singapore's IRs, can they beat a global slowdown?
By LEE U-WEN
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REACHING deep into the earth and also soaring above it, Singapore's two integrated resorts (IRs) approach their moment of truth. Just over a year back, when the skies above them were clear, they were set ambitious targets.
Each was primed to bring in $2.7 billion - 0.8 per cent in all - as value-add contribution to Singapore's gross domestic product. Between them, they were expected to add 50,000 jobs to the economy by 2015.
What could go wrong? This was 13 months ago and Macau had just made headlines for achieving US$10 billion in gaming revenue, propelling it ahead of glitzy Las Vegas.
Then came the surge in construction costs that raised the amount being pumped into the Marina Bay and Sentosa IRs to US$10.5 billion - a 20 per cent hike above initial plans. For the IRs to reach their financial targets, they would have to recoup these extra billions through higher revenues. But 15 months before casino doors are thrown open, it looks as if even meeting revenue targets would be an achievement.
Already, Singapore's in a technical recession and it is likely to stay with us for several quarters. The US and Europe are staring at their bleakest outlook in decades. Even China, previously thought to be immune to the meltdown, has seen its tycoons get trimmed. The average billionaire on Hurun's 2008 China Rich List now has US$2.4 billion of personal wealth, down from US$3.6 billion the year before.
Macau, meanwhile, is bleeding. So what does the future hold for Singapore's IRs?
Macau's loss, ironically, could be Singapore's gain. For the first time in three years, Macau's casino revenue fell last month from the 52.5 per cent average growth achieved in the first eight months of 2008.
This has everything to do with the curbs imposed on mainlanders visiting Macau. From once a fortnight, the frequency of these visits was cut to once a month from June 1, then once every two months from July 1 - and now once every three months from Oct 1. Macau tourism operators reckon the curbs could slash the number of mainlanders joining package tours to Hong Kong and Macau by 10 per cent.
So where will Chinese gamblers - especially the high-rollers - go for their kicks? Las Vegas is very far away. But Singapore - just three hours from Hong Kong - is not. And it could emerge as their destination of choice when the IRs at Marina Bay and Sentosa open by 2010.
The IRs are going all out to lure big spenders from China and elsewhere, says Andy Nazarechuk, a gaming industry expert and dean of the University of Nevada Las Vegas campus in Singapore. 'High-rollers in Las Vegas spend anywhere between US$50,000 and US$150,000 for their vacation at such resorts,' he says. 'The revenue generated from this group here will be high, which is why the investors are building these IRs.'
But can the China tide alone lift the worry clouds around Singapore's IRs?
Resorts World (RW) spokesperson Krist Boo does not want to single out China as Sentosa's big bet. 'We have an unparalleled sales and distribution network in Asia and are confident of delivering the numbers. We are in 18 cities - Jakarta, Kuala Lumpur, Bangkok, Shanghai, Mumbai and Tokyo, just to name a few.'
Resorts World is sticking to its forecast of 15 million visits in the first year. According to Ms Boo, Asians still take holidays when times are not so good but favour nearby destinations to save on airfare. This could swing the pendulum in RW's favour, she says. 'We are confident the visitors will come. We are building a destination that Asia has never had - six hotels, Universal Studios Singapore, the world's largest oceanarium, a water park, maritime museum and spa.'
Tourists are expected to account for about 60 per cent of visits and locals the rest.
Marina Bay Sands, too, is sticking to its forecast that it will turn a profit the minute it opens. 'We expect to be profitable from day one,' says George Tanasijevich, its general manager and vice-president of Singapore development. 'Our expected payback time-frame remains at five to eight years.'
That, however, may be easier said than done. The Singapore Tourism Board itself is not confident of achieving this year's target of 10.8 million visitors. And even if visitor numbers do pick up, it remains to be seen whether they will spend as freely as initially expected. For while the IRs have spread their bets to markets all over the world, their problem is that almost each of these markets has sunk in unison. The Shanghai index has fallen 69 per cent from its peak in October 2007 and hit a 22-month closing low in September this year. Mumbai has not fared much better.
'While locals will be excited about the IRs initially, over time, the tourists will be the main market,' says Dr Nazarechuk. And that is where the problem lies.
The immediate outlook for the IRs also hinges on how well airlines perform, according to Jonathan Galaviz of Globalysis, a Las Vegas-based boutique travel and leisure consultancy. 'A significant risk when the IRs open will be the health of the airline industry. If capacity to Singapore is reduced substantially, it will jeopardise the performance of the resorts.'
On their part, the IRs are betting on Singapore's resilience. 'Our MICE-driven business model serves to mitigate the effects of a challenging economy,' says Mr Tanasijevich.
Nevertheless, confidence is hard to pin down in uncertain times - as the principal players behind the two projects know. Las Vegas Sands has seen its share price slump from a peak of US$144.15 last year to just US$11.83 now. Genting International has weathered the storm better, falling from S$0.72 last year to S$0.39 now.
Analysts, meanwhile, have cut back their projections on how much the IRs here will contribute to GDP, and expect the number to remain between 0.3 per cent and 0.5 per cent between 2010 and 2015.
The IRs would give a lot for a glimpse of blue skies now.
Prosecutors subpoena ex-Lehman CEO Richard
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NEW YORK - Federal prosecutors investigating the collapse of Lehman Brothers have subpoenaed several executives associated with the company, including former CEO Richard Fuld, according to a person briefed on the inquiry.
At least 12 people, including Fuld (above) and former Lehman chief financial officer Erin Callan, have received grand jury subpoenas in connection with several ongoing probes of the bank's demise
An attorney for Lehman Brothers Holdings, Harvey Miller, told a bankruptcy court judge on Thursday that at least 12 people have received grand jury subpoenas in connection with several ongoing probes of the bank's demise.
He didn't identify which executives had been asked for information, but said the company is dealing with separate investigations by federal prosecutors in New Jersey, Brooklyn and Manhattan. New Jersey's attorney general has said state securities regulators there are also investigating.
Spokespeople for the US attorneys in those three jurisdictions declined to comment on Friday, but a person with knowledge of the subpoenas said that the subpoena recipients included Fuld and former Lehman chief financial officer Erin Callan.
The person spoke to The Associated Press on the condition of anonymity because of the secrecy of grand jury investigations.
An attorney for Fuld did not immediately return a phone message on Friday. Callan, who now works for Credit Suisse Group, did not return a phone message.
The existence of the Fuld subpoena was first reported by the New York Post.
Lehman Brothers filed for bankruptcy on Sept 15, following a swift and stunning fall linked to bad investments and turmoil in the credit markets.
Barclays, the British bank, subsequently absorbed the company's key US units.
The speed at which Lehman failed prompted complaints by some that the company wasn't honest about its financial condition in the months leading up to its collapse.
Federal prosecutors are reportedly looking into whether anyone at Lehman may have misled investors about its health or the value of its assets. -- AP
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NEW YORK - Federal prosecutors investigating the collapse of Lehman Brothers have subpoenaed several executives associated with the company, including former CEO Richard Fuld, according to a person briefed on the inquiry.
At least 12 people, including Fuld (above) and former Lehman chief financial officer Erin Callan, have received grand jury subpoenas in connection with several ongoing probes of the bank's demise
An attorney for Lehman Brothers Holdings, Harvey Miller, told a bankruptcy court judge on Thursday that at least 12 people have received grand jury subpoenas in connection with several ongoing probes of the bank's demise.
He didn't identify which executives had been asked for information, but said the company is dealing with separate investigations by federal prosecutors in New Jersey, Brooklyn and Manhattan. New Jersey's attorney general has said state securities regulators there are also investigating.
Spokespeople for the US attorneys in those three jurisdictions declined to comment on Friday, but a person with knowledge of the subpoenas said that the subpoena recipients included Fuld and former Lehman chief financial officer Erin Callan.
The person spoke to The Associated Press on the condition of anonymity because of the secrecy of grand jury investigations.
An attorney for Fuld did not immediately return a phone message on Friday. Callan, who now works for Credit Suisse Group, did not return a phone message.
The existence of the Fuld subpoena was first reported by the New York Post.
Lehman Brothers filed for bankruptcy on Sept 15, following a swift and stunning fall linked to bad investments and turmoil in the credit markets.
Barclays, the British bank, subsequently absorbed the company's key US units.
The speed at which Lehman failed prompted complaints by some that the company wasn't honest about its financial condition in the months leading up to its collapse.
Federal prosecutors are reportedly looking into whether anyone at Lehman may have misled investors about its health or the value of its assets. -- AP
Friday, 17 October 2008
Published October 17, 2008
MMC may win US$5b Saudi water, power deal
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(KUALA LUMPUR) Infrastructure group MMC Corp Bhd is in the running to win a US$5 billion independent water and power project (IWPP) in Saudi Arabia, says a report in Malaysia's Business Times yesterday.
'We are quite confident that there are funds available in Saudi Arabia to make it bankable.'
- Hasni Harun,
CEO
Director and CEO Hasni Harun said MMC is part of a consortium with a Saudi Arabian and an international firm that has been named preferred bidder for the project, which will have capacity to produce one million cubic metres (m3/day) of water per day and 1,100 megawatts (MW) of electricity .
'We are close to completion (of the bid) and will know the result by December. We are now waiting for the financial close,' Mr Hasni told reporters after its shareholders meeting here on Wednesday. 'Looking at the liquidity in the Middle East, we are quite confident that there are funds available in Saudi Arabia to make the project bankable,' he added.
MMC and its two partners have an equal shareholding in the consortium that will hold a 25- to 30- year concession for the plant, which will take four years to build.
MMC, via 51 per cent- owned unit Malakoff Bhd, has a concession in the 900MW and 1,030,000 m3/day Shuaibah IWPP in Saudi Arabia and a 200,000 m3/day seawater desalination plant in Algeria.
It also has interests in Central Electricity Generation Co in Jordan and Dhofar Power Co in Oman.
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In July, it won exclusive rights to undertake a study to build a US$2 billion coal-fired power plant of up to 1,000MW in Ajman in the United Arab Emirates. MMC is tipped to win the Ajman job, subject to a technical and economic feasibility study it is undertaking.
It is learnt that MMC will form a consortium to operate and maintain the plant for 20 years, which will contribute positively to its financial figures.
Meanwhile, Mr Hasni said MMC's offer to acquire more than 50 per cent equity in Aliran Ihsan Resources Bhd (AIRB) for up to RM238.6 million (S$100 million) will spearhead plans to bid for more lucrative utilities and infrastructure projects overseas, especially in the Middle East.
AIRB is a Johor-based water treatment plant operator with 16 plants under its belt, supplying about 70 per cent of the state's water needs.
'The acquisition will be our springboard to hold more water assets. We may take some equity stakes, get involved in water treatment plants and form joint ventures,' Mr Hasni said.
He said the acquisition is the first move by MMC to be involved in the water business domestically and will be a strategic fit.
It will complement MMC's global power generation business, particularly in the Middle East and North African regions, where power project bidders are invariably required to provide water solution proposals in their bids.
'We intend to keep AIRB's listing status and grow the business in terms of size, people and market capitalisation,' Mr Hasni said.
MMC's debt stands at RM20 billion, of which RM1.3 billion comes from the holding company and another RM16 billion from subsidiary Malakoff Bhd.
MMC may win US$5b Saudi water, power deal
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(KUALA LUMPUR) Infrastructure group MMC Corp Bhd is in the running to win a US$5 billion independent water and power project (IWPP) in Saudi Arabia, says a report in Malaysia's Business Times yesterday.
'We are quite confident that there are funds available in Saudi Arabia to make it bankable.'
- Hasni Harun,
CEO
Director and CEO Hasni Harun said MMC is part of a consortium with a Saudi Arabian and an international firm that has been named preferred bidder for the project, which will have capacity to produce one million cubic metres (m3/day) of water per day and 1,100 megawatts (MW) of electricity .
'We are close to completion (of the bid) and will know the result by December. We are now waiting for the financial close,' Mr Hasni told reporters after its shareholders meeting here on Wednesday. 'Looking at the liquidity in the Middle East, we are quite confident that there are funds available in Saudi Arabia to make the project bankable,' he added.
MMC and its two partners have an equal shareholding in the consortium that will hold a 25- to 30- year concession for the plant, which will take four years to build.
MMC, via 51 per cent- owned unit Malakoff Bhd, has a concession in the 900MW and 1,030,000 m3/day Shuaibah IWPP in Saudi Arabia and a 200,000 m3/day seawater desalination plant in Algeria.
It also has interests in Central Electricity Generation Co in Jordan and Dhofar Power Co in Oman.
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In July, it won exclusive rights to undertake a study to build a US$2 billion coal-fired power plant of up to 1,000MW in Ajman in the United Arab Emirates. MMC is tipped to win the Ajman job, subject to a technical and economic feasibility study it is undertaking.
It is learnt that MMC will form a consortium to operate and maintain the plant for 20 years, which will contribute positively to its financial figures.
Meanwhile, Mr Hasni said MMC's offer to acquire more than 50 per cent equity in Aliran Ihsan Resources Bhd (AIRB) for up to RM238.6 million (S$100 million) will spearhead plans to bid for more lucrative utilities and infrastructure projects overseas, especially in the Middle East.
AIRB is a Johor-based water treatment plant operator with 16 plants under its belt, supplying about 70 per cent of the state's water needs.
'The acquisition will be our springboard to hold more water assets. We may take some equity stakes, get involved in water treatment plants and form joint ventures,' Mr Hasni said.
He said the acquisition is the first move by MMC to be involved in the water business domestically and will be a strategic fit.
It will complement MMC's global power generation business, particularly in the Middle East and North African regions, where power project bidders are invariably required to provide water solution proposals in their bids.
'We intend to keep AIRB's listing status and grow the business in terms of size, people and market capitalisation,' Mr Hasni said.
MMC's debt stands at RM20 billion, of which RM1.3 billion comes from the holding company and another RM16 billion from subsidiary Malakoff Bhd.
Published October 17, 2008
M'sian growth seen falling to 3.4% in 2009
Impact of global financial turmoil will be more severe than '98 crisis: think tank
By PAULINE NG IN KUALA LUMPUR
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MALAYSIA'S economic growth is expected to slip to 3.4 per cent next year, possibly slipping into a technical recession in the second or third quarter, according to an independent economic think tank.
Hopeful sign: This year ought to be relatively positive for Malaysia given that the economy ran at a strong pace in the first two quarters, says think tank Mier
In an outlook report yesterday, the Malaysian Institute of Economic Research (Mier) warned that unlike the sharp V-shaped recession of the 1998 Asian financial crisis, the effects of the current global financial turmoil would be U-shaped and more severe, with 'strong headwinds' lasting for about two years.
Because much of the global problem is still uncertain, Mier's growth forecast does not take into account a recession, executive director Mohamed Ariff said, but neither should one be ruled out. 'There is a 40 per cent chance of a technical recession,' he observed, the declines in the various consumer and business confidence indices plus export weakness in August supporting such concerns.
Earlier this week, Malaysian leaders assured that the nation's strong fundamentals - high liquidity, robust current account surplus and reserves and healthy savings - would help it ride out the global turmoil and stave off recession this year.
The last recession to hit home was during the currency crisis of 1998 when the economy contracted 7.4 per cent, although a technical recession also occurred in 2001 during the dot-com bust. Growth, then, was a nominal 0.5 per cent.
Mier agreed this year ought to be relatively positive given that the local economy ran at a strong pace in the first and second quarter of 7.1 and 6.3 per cent respectively. Its gross domestic product (GDP) estimates for the year have been revised upwards to 5.3 per cent from 4.6 per cent previously. After all, the knock-on effects of a flagging global economy are only expected to hit towards the end of the year.
In its 2008-2009 economic report launched in August, the government had projected a GDP of 5.7 per cent this year, falling to 5.3 per cent next year.
Lower income earners can be expected to bear the brunt of the pain. The rural sector is not spared in this round owing to the drastic decline in commodity prices. Bullish crude oil and crude palm oil prices over the past three to four years had helped cushion the effects of higher prices, but have plunged by more than half since hitting their peaks in the first quarter.
A major worry is Malaysia's heavy reliance on oil revenue to finance its fiscal spending as more than 40 per cent of its revenue is derived from petroleum dollars.
Although the government had expected to slash the budget deficit of some 4.8 per cent of GDP this year to less than 4 per cent next year, Mier doubted it would be achieved.
Because Malaysia continues to run a budget deficit and its interest rates are already low - the overnight policy rate at 3.5 per cent is one of the lowest in the region - its use of fiscal and monetary instruments is limited.
Nonetheless, the social safety net needs to be strengthened, Mr Ariff said, with more assistance to be channelled to the urban and rural poor.
Petrol prices have been reduced thrice since a shocking 42 per cent increase in June, but food and transport costs remain stubbornly high.
Mr Ariff expects more relief measures to be unveiled next week when the government is scheduled to announce additional steps to counter the spiralling global crisis.
M'sian growth seen falling to 3.4% in 2009
Impact of global financial turmoil will be more severe than '98 crisis: think tank
By PAULINE NG IN KUALA LUMPUR
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MALAYSIA'S economic growth is expected to slip to 3.4 per cent next year, possibly slipping into a technical recession in the second or third quarter, according to an independent economic think tank.
Hopeful sign: This year ought to be relatively positive for Malaysia given that the economy ran at a strong pace in the first two quarters, says think tank Mier
In an outlook report yesterday, the Malaysian Institute of Economic Research (Mier) warned that unlike the sharp V-shaped recession of the 1998 Asian financial crisis, the effects of the current global financial turmoil would be U-shaped and more severe, with 'strong headwinds' lasting for about two years.
Because much of the global problem is still uncertain, Mier's growth forecast does not take into account a recession, executive director Mohamed Ariff said, but neither should one be ruled out. 'There is a 40 per cent chance of a technical recession,' he observed, the declines in the various consumer and business confidence indices plus export weakness in August supporting such concerns.
Earlier this week, Malaysian leaders assured that the nation's strong fundamentals - high liquidity, robust current account surplus and reserves and healthy savings - would help it ride out the global turmoil and stave off recession this year.
The last recession to hit home was during the currency crisis of 1998 when the economy contracted 7.4 per cent, although a technical recession also occurred in 2001 during the dot-com bust. Growth, then, was a nominal 0.5 per cent.
Mier agreed this year ought to be relatively positive given that the local economy ran at a strong pace in the first and second quarter of 7.1 and 6.3 per cent respectively. Its gross domestic product (GDP) estimates for the year have been revised upwards to 5.3 per cent from 4.6 per cent previously. After all, the knock-on effects of a flagging global economy are only expected to hit towards the end of the year.
In its 2008-2009 economic report launched in August, the government had projected a GDP of 5.7 per cent this year, falling to 5.3 per cent next year.
Lower income earners can be expected to bear the brunt of the pain. The rural sector is not spared in this round owing to the drastic decline in commodity prices. Bullish crude oil and crude palm oil prices over the past three to four years had helped cushion the effects of higher prices, but have plunged by more than half since hitting their peaks in the first quarter.
A major worry is Malaysia's heavy reliance on oil revenue to finance its fiscal spending as more than 40 per cent of its revenue is derived from petroleum dollars.
Although the government had expected to slash the budget deficit of some 4.8 per cent of GDP this year to less than 4 per cent next year, Mier doubted it would be achieved.
Because Malaysia continues to run a budget deficit and its interest rates are already low - the overnight policy rate at 3.5 per cent is one of the lowest in the region - its use of fiscal and monetary instruments is limited.
Nonetheless, the social safety net needs to be strengthened, Mr Ariff said, with more assistance to be channelled to the urban and rural poor.
Petrol prices have been reduced thrice since a shocking 42 per cent increase in June, but food and transport costs remain stubbornly high.
Mr Ariff expects more relief measures to be unveiled next week when the government is scheduled to announce additional steps to counter the spiralling global crisis.
Published October 17, 2008
Four S-share firms clarify net cash positions
JES International, Sino Techfibre, China Hongxing, Synear give updates
By LYNETTE KHOO
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RECENT market woes triggered by the insolvency of FerroChina and a full-year net loss at Bio-Treat for fiscal 2008 have pushed other Singapore Exchange (SGX) listed Chinese firms or S-shares into shedding some light on their financial conditions so as to assuage investors' fears.
Cash in hand: Recent market woes have pushed S-share companies to assuage investors' fears
These fears apparently heightened after a media report this week cited some S-share companies with negative cash flow, possibly pointing to a risk of their running into financial difficulties.
Over the past two days, four Chinese firms - JES International, Sino Techfibre, China Hongxing and Synear - issued updates or clarifications on SGX to clarify their net cash positions. Sino Techfibre, China Hongxing and Synear were among the S-shares cited in a media report to have negative cashflow.
Sino Techfibre said in an SGX filing that contrary to what was reported, it is financially strong with a net cash inflow from operating activities of 144.3 million yuan (S$31 million) in the second quarter. As at June 30, the group has cash and cash equivalents of 171.6 million yuan. It has also maintained a low gearing of 1.4 per cent.
'Going forward, the company does not foresee any liquidity problems arising from paying off the short-term obligations from current assets excluding inventories, given a healthy quick ratio of 3.49,' Sino Techfibre said.
It added that the budget of 600 million yuan that it set aside for expansion plans is sufficient to secure its growth for the next few years, and that there will not be any major capital expenditure in the foreseeable future.
It also expects to be profitable for the third quarter ended Sept 30.
In the same vein, sports apparel firm China Hongxing clarified yesterday that it is in a net cash position, with cash balances of 2.2 billion yuan and net current asset base of 3.34 billion yuan as at June 30.
On Wednesday, frozen food producer Synear clarified that it is in a net cash position of 1.34 billion yuan as at June 30.
In response to various queries received recently, JES said yesterday that its financial position remains healthy. It had net current assets of about 1.7 billion yuan as at June 30, which included some 1.1 billion yuan in cash and cash equivalents.
Its total short-term unsecured loans stood at five million yuan and it had no long-term loans as at end-June.
The Chinese shipbuilder also reiterated that it has not received any cancellations of shipbuilding orders and its order book as at end-June stood at US$1.49 billion.
Chinese stock analysts felt that fears of cashflow problems among S-shares have been exaggerated.
Prime Partners research manager Lim Keng Soon said that the financial woes reportedly faced by some Chinese firms should not be used to judge the financial health of all S-shares companies.
'It's wise to go into the details and study their financial health before we generalise them,' he said.
But those that are highly geared and have expanded massively over the past two years may run into working capital problems if they do not see sufficient demand when the new plants become operational, he noted.
In a note issued yesterday, CIMB-GK analyst Ho Choon Seng said that the concerns over Synear's cash flow and possible default risks are overplayed.
'With a significant net cash position of 1.3 billion yuan as at end-Q2, Synear is not at risk of default from any working capital strains,' he said.
'While we forecast FY08 free cash flow of 280 million yuan due to high expansion capex (capital expenditure), we still expect the company to end FY08 with a significant net cash position of 1.6 billion yuan.'
He upgraded the stock to 'outpeform' from 'underperform' given the low valuation, and kept the target price unchanged at 35 cents.
Four S-share firms clarify net cash positions
JES International, Sino Techfibre, China Hongxing, Synear give updates
By LYNETTE KHOO
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RECENT market woes triggered by the insolvency of FerroChina and a full-year net loss at Bio-Treat for fiscal 2008 have pushed other Singapore Exchange (SGX) listed Chinese firms or S-shares into shedding some light on their financial conditions so as to assuage investors' fears.
Cash in hand: Recent market woes have pushed S-share companies to assuage investors' fears
These fears apparently heightened after a media report this week cited some S-share companies with negative cash flow, possibly pointing to a risk of their running into financial difficulties.
Over the past two days, four Chinese firms - JES International, Sino Techfibre, China Hongxing and Synear - issued updates or clarifications on SGX to clarify their net cash positions. Sino Techfibre, China Hongxing and Synear were among the S-shares cited in a media report to have negative cashflow.
Sino Techfibre said in an SGX filing that contrary to what was reported, it is financially strong with a net cash inflow from operating activities of 144.3 million yuan (S$31 million) in the second quarter. As at June 30, the group has cash and cash equivalents of 171.6 million yuan. It has also maintained a low gearing of 1.4 per cent.
'Going forward, the company does not foresee any liquidity problems arising from paying off the short-term obligations from current assets excluding inventories, given a healthy quick ratio of 3.49,' Sino Techfibre said.
It added that the budget of 600 million yuan that it set aside for expansion plans is sufficient to secure its growth for the next few years, and that there will not be any major capital expenditure in the foreseeable future.
It also expects to be profitable for the third quarter ended Sept 30.
In the same vein, sports apparel firm China Hongxing clarified yesterday that it is in a net cash position, with cash balances of 2.2 billion yuan and net current asset base of 3.34 billion yuan as at June 30.
On Wednesday, frozen food producer Synear clarified that it is in a net cash position of 1.34 billion yuan as at June 30.
In response to various queries received recently, JES said yesterday that its financial position remains healthy. It had net current assets of about 1.7 billion yuan as at June 30, which included some 1.1 billion yuan in cash and cash equivalents.
Its total short-term unsecured loans stood at five million yuan and it had no long-term loans as at end-June.
The Chinese shipbuilder also reiterated that it has not received any cancellations of shipbuilding orders and its order book as at end-June stood at US$1.49 billion.
Chinese stock analysts felt that fears of cashflow problems among S-shares have been exaggerated.
Prime Partners research manager Lim Keng Soon said that the financial woes reportedly faced by some Chinese firms should not be used to judge the financial health of all S-shares companies.
'It's wise to go into the details and study their financial health before we generalise them,' he said.
But those that are highly geared and have expanded massively over the past two years may run into working capital problems if they do not see sufficient demand when the new plants become operational, he noted.
In a note issued yesterday, CIMB-GK analyst Ho Choon Seng said that the concerns over Synear's cash flow and possible default risks are overplayed.
'With a significant net cash position of 1.3 billion yuan as at end-Q2, Synear is not at risk of default from any working capital strains,' he said.
'While we forecast FY08 free cash flow of 280 million yuan due to high expansion capex (capital expenditure), we still expect the company to end FY08 with a significant net cash position of 1.6 billion yuan.'
He upgraded the stock to 'outpeform' from 'underperform' given the low valuation, and kept the target price unchanged at 35 cents.
Published October 17, 2008
Falling rents may take shine off S-Reits
By UMA SHANKARI
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SINGAPORE-LISTED real estate investment trusts, or S-Reits, are now finding favour with analysts.
UOB Kay Hian, for example, upgraded the S-Reit sector from market weight to overweight earlier this month due to the 'overwhelmingly attractive' yield spread. JPMorgan similarly said in a recent report that the Reit model is not broken. The research firm has 'buy' calls on seven S-Reits. Analysts from other research firms have also been recently issuing 'buy' calls on several Reits here.
This is quite a reversal from a year ago, when the S-Reit sector was considered unattractive. Many Reits were facing concerns about their ability to refinance debt amid the credit crunch. Acquisitions, which had been fuelling growth, were also becoming harder to come by.
But now, some of these Reits are seen to be sources of stable, visible and recurrent income in uncertain times. Yields are also at historic highs as stock prices continue their downtrend.
Analysts are now saying that debt refinancing will not be an issue for all Reits. For one, strong sponsors could act as lenders of last resort for Reits and prevent any fire sale of assets. Retail and industrial Reits are the most exposed to refinancing risk. So investors are encouraged to buy those Reits with strong sponsors and avoid certain sectors.
But the one thing that has been largely overlooked in most analyses is the impact of falling rents.
Rents will fall across most sectors - that much is certain. Office trusts, such as K-Reit Asia and CapitaCommercial Trust, will be among the first to be hit.
The massive upheaval in the banking system means that financial institutions are unlikely to continue with any expansion plans yet to be executed. Other businesses will have reduced access to bank credit and scale back expansion plans. With a reduced appetite for space and looming new office supply coming onstream in 2010, landlords are losing their bargaining power and rents will inevitably fall.
Kim Eng Research, for one, expects prime Grade A office rents to fall by up to 15 per cent by the end of 2009.
Rentals for retail Reits will also fall. Already, there are signs from retailers in Reit properties that they cannot afford the high rents being charged at the moment. Retail spot rents are being hit by slowing economic growth and falling visitor arrivals amid increasing supply. Goldman Sachs yesterday said that it expects retail rental rates to fall 15 per cent between now and 2010.
Reits here typically renew their leases on a revolving basis, with a certain fraction of tenants re-signing every year. So those tenants who signed three-year leases last year could be stuck forking out high rentals for another year or two. But tenants renewing their leases soon will ask for lower rents. In a couple of years - say, by 2010 - the bulk of a Reit's tenants could be paying lower rents, leading to lower rental incomes for S-Reits. Their yields are not likely to look so attractive then.
Analysts are now beginning to factor falling rents into their calculations. Goldman Sachs yesterday downgraded K-Reit from 'buy' to 'neutral'. 'We have been positive on K-Reit, given its attractive pricing relative to book value and our expectation that organic growth for the next two years at least will still find good support from positive rental reversions,' said the firm in a report. 'However, we underestimated the focus by investors on the direction of spot rents and were not sufficiently conservative in terms of how far Singapore office rents could decline from their peak.'
However, even with falling rents factored in, S-Reits can be attractive, some maintain. After imposing worst-case operating assumptions for each property sub-segment, including a blowout of financing costs and accelerating the rental reversions to the entire portfolio, Daiwa Institute of Research's David Lum still estimates that all S-Reits could deliver recurrent worst-case yields of at least 6 per cent per year.
But whether making 'buy' or 'sell' calls for S-Reits, it's important to factor in the impact that falling rents will have on S-Reit rental incomes over the next 2-3 years. Refinancing is not the only concern.
Falling rents may take shine off S-Reits
By UMA SHANKARI
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SINGAPORE-LISTED real estate investment trusts, or S-Reits, are now finding favour with analysts.
UOB Kay Hian, for example, upgraded the S-Reit sector from market weight to overweight earlier this month due to the 'overwhelmingly attractive' yield spread. JPMorgan similarly said in a recent report that the Reit model is not broken. The research firm has 'buy' calls on seven S-Reits. Analysts from other research firms have also been recently issuing 'buy' calls on several Reits here.
This is quite a reversal from a year ago, when the S-Reit sector was considered unattractive. Many Reits were facing concerns about their ability to refinance debt amid the credit crunch. Acquisitions, which had been fuelling growth, were also becoming harder to come by.
But now, some of these Reits are seen to be sources of stable, visible and recurrent income in uncertain times. Yields are also at historic highs as stock prices continue their downtrend.
Analysts are now saying that debt refinancing will not be an issue for all Reits. For one, strong sponsors could act as lenders of last resort for Reits and prevent any fire sale of assets. Retail and industrial Reits are the most exposed to refinancing risk. So investors are encouraged to buy those Reits with strong sponsors and avoid certain sectors.
But the one thing that has been largely overlooked in most analyses is the impact of falling rents.
Rents will fall across most sectors - that much is certain. Office trusts, such as K-Reit Asia and CapitaCommercial Trust, will be among the first to be hit.
The massive upheaval in the banking system means that financial institutions are unlikely to continue with any expansion plans yet to be executed. Other businesses will have reduced access to bank credit and scale back expansion plans. With a reduced appetite for space and looming new office supply coming onstream in 2010, landlords are losing their bargaining power and rents will inevitably fall.
Kim Eng Research, for one, expects prime Grade A office rents to fall by up to 15 per cent by the end of 2009.
Rentals for retail Reits will also fall. Already, there are signs from retailers in Reit properties that they cannot afford the high rents being charged at the moment. Retail spot rents are being hit by slowing economic growth and falling visitor arrivals amid increasing supply. Goldman Sachs yesterday said that it expects retail rental rates to fall 15 per cent between now and 2010.
Reits here typically renew their leases on a revolving basis, with a certain fraction of tenants re-signing every year. So those tenants who signed three-year leases last year could be stuck forking out high rentals for another year or two. But tenants renewing their leases soon will ask for lower rents. In a couple of years - say, by 2010 - the bulk of a Reit's tenants could be paying lower rents, leading to lower rental incomes for S-Reits. Their yields are not likely to look so attractive then.
Analysts are now beginning to factor falling rents into their calculations. Goldman Sachs yesterday downgraded K-Reit from 'buy' to 'neutral'. 'We have been positive on K-Reit, given its attractive pricing relative to book value and our expectation that organic growth for the next two years at least will still find good support from positive rental reversions,' said the firm in a report. 'However, we underestimated the focus by investors on the direction of spot rents and were not sufficiently conservative in terms of how far Singapore office rents could decline from their peak.'
However, even with falling rents factored in, S-Reits can be attractive, some maintain. After imposing worst-case operating assumptions for each property sub-segment, including a blowout of financing costs and accelerating the rental reversions to the entire portfolio, Daiwa Institute of Research's David Lum still estimates that all S-Reits could deliver recurrent worst-case yields of at least 6 per cent per year.
But whether making 'buy' or 'sell' calls for S-Reits, it's important to factor in the impact that falling rents will have on S-Reit rental incomes over the next 2-3 years. Refinancing is not the only concern.
Published October 17, 2008
$1b sales from Mid-East projects: CapitaLand
By ARTHUR SIM
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CAPITALAND has made about $1 billion worth of sales in two projects in the Middle East.
In a statement yesterday, the company said that it had sold 849 units out of a total of 1,559 units in the two developments since June.
The developments are the 691-unit Raffles City Bahrain and the 868-unit Rihan Heights in Abu Dhabi.
Raffles City Bahrain is owned and developed by the Syariah-compliant Raffles City Bahrain Fund, which is managed by CapitaLand, while Rihan Heights is the first phase of CapitaLand's 49 per cent-owned associate company Capitala's US$5-6 billion flagship integrated development Arzanah.
Liew Mun Leong, president and CEO of CapitaLand Group, said: 'Besides our core markets of Singapore, China and Australia, CapitaLand is now seeing contributions from its fourth engine of growth, namely the new markets of the Gulf Cooperation Council (GCC) countries, as well as Asian countries like Vietnam, Thailand and India.'
CapitaLand said that it had launched 750 residential units of its 80 per cent-owned The Vista, Vietnam and 590 residential units of its 49 per cent-owned The Orchard Residency, India.
While The Vista units have been fully booked, 309 units at The Orchard Residency have been sold. In Thailand, TCC Capital Land, CapitaLand's 40 per cent-owned joint venture with TCC Land, has sold or booked over 2,400 residential units to date.
Raffles City Bahrain, in the country's capital city of Manama, will be an integrated project comprising residential, retail and serviced residence components.
The average sale price of the residential units achieved was about $615.67 psf. CapitaLand said that this was higher than the average price of $474.92 psf for similar residential apartments in Bahrain.
Rihan Heights is part of the Arzanah integrated development which is located on a prime 1.4 million square metre waterfront site surrounding Zayed Stadium on Abu Dhabi main island.
The average sale price achieved ranged from about $902.74 psf to $976.78 psf, depending on the size, level and orientation of the unit.
$1b sales from Mid-East projects: CapitaLand
By ARTHUR SIM
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CAPITALAND has made about $1 billion worth of sales in two projects in the Middle East.
In a statement yesterday, the company said that it had sold 849 units out of a total of 1,559 units in the two developments since June.
The developments are the 691-unit Raffles City Bahrain and the 868-unit Rihan Heights in Abu Dhabi.
Raffles City Bahrain is owned and developed by the Syariah-compliant Raffles City Bahrain Fund, which is managed by CapitaLand, while Rihan Heights is the first phase of CapitaLand's 49 per cent-owned associate company Capitala's US$5-6 billion flagship integrated development Arzanah.
Liew Mun Leong, president and CEO of CapitaLand Group, said: 'Besides our core markets of Singapore, China and Australia, CapitaLand is now seeing contributions from its fourth engine of growth, namely the new markets of the Gulf Cooperation Council (GCC) countries, as well as Asian countries like Vietnam, Thailand and India.'
CapitaLand said that it had launched 750 residential units of its 80 per cent-owned The Vista, Vietnam and 590 residential units of its 49 per cent-owned The Orchard Residency, India.
While The Vista units have been fully booked, 309 units at The Orchard Residency have been sold. In Thailand, TCC Capital Land, CapitaLand's 40 per cent-owned joint venture with TCC Land, has sold or booked over 2,400 residential units to date.
Raffles City Bahrain, in the country's capital city of Manama, will be an integrated project comprising residential, retail and serviced residence components.
The average sale price of the residential units achieved was about $615.67 psf. CapitaLand said that this was higher than the average price of $474.92 psf for similar residential apartments in Bahrain.
Rihan Heights is part of the Arzanah integrated development which is located on a prime 1.4 million square metre waterfront site surrounding Zayed Stadium on Abu Dhabi main island.
The average sale price achieved ranged from about $902.74 psf to $976.78 psf, depending on the size, level and orientation of the unit.
Published October 17, 2008
Analysts maintain 'sell' call on SGX
They cite bearish market, the global crisis; set average target price at $5.56
By CHEW XIANG
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ANALYSTS largely maintained their 'sell' calls on the Singapore Exchange after it reported a 35 per cent plunge in its first-quarter earnings on Wednesday.
And OCBC Investment Research, which had a 'buy' call, yesterday downgraded the stock to 'hold'.
According to Bloomberg data, 10 houses that had issued reports following the latest results reported an average target price of $5.56. SGX closed yesterday 35 cents down at $5.54.
OCBC's Carmen Lee explained that the house was cutting its valuation parameter in line with the sharp drop in market valuations, and also lowered its fair value estimate from $8.50 to $5.80.
Kim Eng analyst Pauline Lee maintained a 'sell' call, saying that 'SGX's stable dividend payout and its monopolistic status will be overshadowed by the global financial crisis'.
'Furthermore, SGX's premium valuations over its close peer, the Hong Kong exchange, suggests further downside in the share price,' she added.
Most bullish was CIMB's Kenneth Ng, who kept an 'outperform' call on the stock with a target price of $7.78. 'Bearish stock markets aside, the structural derivatives potential should not be overlooked,' he said.
'SGX has been benefiting handsomely from the ban on P-notes (offshore derivative instruments) in India, which has channelled international funds to Singapore for India exposure via the Nifty50 contract,' he added.
SGX had reported that net derivatives clearing revenue rose 23.6 per cent to $46.1 million, due to a 40 per cent jump in futures trading volume to 17.4 million contracts compared with 12.5 million contracts in the same period a year ago.
DMG's Leng Seng Choon said that he expected derivatives clearing fees for FY09 to match that of securities clearing fees. 'This is the consequence of the very robust futures market versus the lacklustre securities market,' he said.
OCBC's Ms Lee said that with recent volatility in the market, 'trading volume on the local bourse has picked up in the past two weeks', adding that if this month's early positive trend continues, the second quarter could be slightly better, although the second half 'could be hurt by heightened recession worries'.
Others are less sanguine. DBS Vickers said: 'We remain bearish on equities for the rest of this year and do not expect any significant turnaround in 2009.'
It is assuming volume of one billion units on the stock exchange for FY2009 and 1.2 billion for FY2010, with turnover value hovering around the billion dollar mark in each year.
In its bear case scenario, average volume could fall below 900 million units, DBS Vickers said, with turnover value below $855 million. Fair value could, in this scenario, decline to just $3.75 a share.
Analysts maintain 'sell' call on SGX
They cite bearish market, the global crisis; set average target price at $5.56
By CHEW XIANG
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ANALYSTS largely maintained their 'sell' calls on the Singapore Exchange after it reported a 35 per cent plunge in its first-quarter earnings on Wednesday.
And OCBC Investment Research, which had a 'buy' call, yesterday downgraded the stock to 'hold'.
According to Bloomberg data, 10 houses that had issued reports following the latest results reported an average target price of $5.56. SGX closed yesterday 35 cents down at $5.54.
OCBC's Carmen Lee explained that the house was cutting its valuation parameter in line with the sharp drop in market valuations, and also lowered its fair value estimate from $8.50 to $5.80.
Kim Eng analyst Pauline Lee maintained a 'sell' call, saying that 'SGX's stable dividend payout and its monopolistic status will be overshadowed by the global financial crisis'.
'Furthermore, SGX's premium valuations over its close peer, the Hong Kong exchange, suggests further downside in the share price,' she added.
Most bullish was CIMB's Kenneth Ng, who kept an 'outperform' call on the stock with a target price of $7.78. 'Bearish stock markets aside, the structural derivatives potential should not be overlooked,' he said.
'SGX has been benefiting handsomely from the ban on P-notes (offshore derivative instruments) in India, which has channelled international funds to Singapore for India exposure via the Nifty50 contract,' he added.
SGX had reported that net derivatives clearing revenue rose 23.6 per cent to $46.1 million, due to a 40 per cent jump in futures trading volume to 17.4 million contracts compared with 12.5 million contracts in the same period a year ago.
DMG's Leng Seng Choon said that he expected derivatives clearing fees for FY09 to match that of securities clearing fees. 'This is the consequence of the very robust futures market versus the lacklustre securities market,' he said.
OCBC's Ms Lee said that with recent volatility in the market, 'trading volume on the local bourse has picked up in the past two weeks', adding that if this month's early positive trend continues, the second quarter could be slightly better, although the second half 'could be hurt by heightened recession worries'.
Others are less sanguine. DBS Vickers said: 'We remain bearish on equities for the rest of this year and do not expect any significant turnaround in 2009.'
It is assuming volume of one billion units on the stock exchange for FY2009 and 1.2 billion for FY2010, with turnover value hovering around the billion dollar mark in each year.
In its bear case scenario, average volume could fall below 900 million units, DBS Vickers said, with turnover value below $855 million. Fair value could, in this scenario, decline to just $3.75 a share.
Published October 17, 2008
A black mood seizes markets worldwide
Gloomy outlook for major economies sends equities into violent tailspin
By CONRAD TAN
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(SINGAPORE) Stocks in Asia went into free-fall yesterday as gloom replaced hope and more banks in Europe turned to governments for funding.
Nail-biting finish: Fears that major hedge funds could fail after being overwhelmed by huge losses in the past few weeks added to the strain in equity markets after US equities suffered a near meltdown on Wednesday
UBS, Switzerland's biggest bank, received nearly US$60 billion in support from the Swiss government, while its smaller rival Credit Suisse raised 10 billion francs (S$12.9 billion) from other investors including Qatar's sovereign wealth fund, avoiding a state bailout.
Both banks suffered massive losses in their investment banking divisions, which they blamed on the extreme turbulence in financial markets over the past few weeks.
UBS made further writedowns of US$4.4 billion in the third quarter, while Credit Suisse wrote down 2.4 billion francs.
Banks worldwide have suffered some US$650 billion in asset writedowns and credit losses since the start of last year, according to Bloomberg estimates.
The news compounded fears that the trillions of dollars committed so far to rescue financial institutions in the US and parts of Europe may not be enough to recapitalise the banking system, given the enormous losses that banks still face.
Analysts warn that banks worldwide could suffer further losses from their exposure to the vast credit-default swaps market, as well as losses from ordinary loans to businesses and consumers, as major economies in the US and Europe plunge into recession.
Japan's Nikkei-225 index was the biggest loser in the region yesterday, plummeting 11.4 per cent by the end of trading. The fall snapped a two-day rally in which the stock benchmark rose 15.4 per cent.
On Wednesday, US equities suffered a near meltdown as fears of a severe economic downturn sent shares into a tailspin.
Stocks there were savaged after retail sales data signalled a slump in consumer spending, feeding fears that the consumer-driven US economy could be facing its worst recession in decades. In the UK, a jump in the unemployment rate suggested that the outlook for other major economies is also bleak.
Fears that major hedge funds could fail after being overwhelmed by huge losses in the past few weeks also added to the strain in equity markets.
Here, the Straits Times Index finished 108.19 points, or 5.25 per cent, lower at 1,951.20. Yesterday's decline extended the stock benchmark's two-day loss to 8.3 per cent, erasing almost all its gains earlier in the week.
Hong Kong's Hang Seng Index slumped 4.8 per cent, after sliding 8.8 per cent earlier. The benchmark has lost 9.5 per cent since Tuesday's close, though it is still up for the week.
All other major share indices in Asia also ended lower.
In Europe, equity benchmarks also fell sharply. The FTSE 100 index staged the biggest two-day decline since October 1987, sliding 218.2, or 5.4 percent, to close at 3,861.39.
One bright spot was the money markets. Interbank lending rates in most major economies in Asia and Europe fell for the fourth straight day, a reassuring sign that the trillions of dollars committed by governments worldwide to support the banking system is slowly restoring confidence among financial institutions. But indices tracking credit-default swap spreads - a measure of the perceived risk of debt defaults by big companies or governments - rose in Asia and Europe for a second day, after easing earlier in the week.
Nicholas Kwan, Asia regional head of research at Standard Chartered Bank in Hong Kong, warned that 'what we have experienced is far from the end'.
'Usually, the outbreak of a crisis is the most shocking time, but the most challenging time comes some time later, when damage to the economy bites deeper,' he said in a note.
The top priority for governments in the region should be to unblock money markets, reinforce confidence in their respective banking systems, he added.
Last night, the Singapore government said that it would guarantee the full amount of all Sing-dollar and foreign currency deposits of individuals and non-bank customers in banks, finance companies and merchant banks licensed by the Monetary Authority of Singapore, following similar moves in Hong Kong and Europe.
A black mood seizes markets worldwide
Gloomy outlook for major economies sends equities into violent tailspin
By CONRAD TAN
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(SINGAPORE) Stocks in Asia went into free-fall yesterday as gloom replaced hope and more banks in Europe turned to governments for funding.
Nail-biting finish: Fears that major hedge funds could fail after being overwhelmed by huge losses in the past few weeks added to the strain in equity markets after US equities suffered a near meltdown on Wednesday
UBS, Switzerland's biggest bank, received nearly US$60 billion in support from the Swiss government, while its smaller rival Credit Suisse raised 10 billion francs (S$12.9 billion) from other investors including Qatar's sovereign wealth fund, avoiding a state bailout.
Both banks suffered massive losses in their investment banking divisions, which they blamed on the extreme turbulence in financial markets over the past few weeks.
UBS made further writedowns of US$4.4 billion in the third quarter, while Credit Suisse wrote down 2.4 billion francs.
Banks worldwide have suffered some US$650 billion in asset writedowns and credit losses since the start of last year, according to Bloomberg estimates.
The news compounded fears that the trillions of dollars committed so far to rescue financial institutions in the US and parts of Europe may not be enough to recapitalise the banking system, given the enormous losses that banks still face.
Analysts warn that banks worldwide could suffer further losses from their exposure to the vast credit-default swaps market, as well as losses from ordinary loans to businesses and consumers, as major economies in the US and Europe plunge into recession.
Japan's Nikkei-225 index was the biggest loser in the region yesterday, plummeting 11.4 per cent by the end of trading. The fall snapped a two-day rally in which the stock benchmark rose 15.4 per cent.
On Wednesday, US equities suffered a near meltdown as fears of a severe economic downturn sent shares into a tailspin.
Stocks there were savaged after retail sales data signalled a slump in consumer spending, feeding fears that the consumer-driven US economy could be facing its worst recession in decades. In the UK, a jump in the unemployment rate suggested that the outlook for other major economies is also bleak.
Fears that major hedge funds could fail after being overwhelmed by huge losses in the past few weeks also added to the strain in equity markets.
Here, the Straits Times Index finished 108.19 points, or 5.25 per cent, lower at 1,951.20. Yesterday's decline extended the stock benchmark's two-day loss to 8.3 per cent, erasing almost all its gains earlier in the week.
Hong Kong's Hang Seng Index slumped 4.8 per cent, after sliding 8.8 per cent earlier. The benchmark has lost 9.5 per cent since Tuesday's close, though it is still up for the week.
All other major share indices in Asia also ended lower.
In Europe, equity benchmarks also fell sharply. The FTSE 100 index staged the biggest two-day decline since October 1987, sliding 218.2, or 5.4 percent, to close at 3,861.39.
One bright spot was the money markets. Interbank lending rates in most major economies in Asia and Europe fell for the fourth straight day, a reassuring sign that the trillions of dollars committed by governments worldwide to support the banking system is slowly restoring confidence among financial institutions. But indices tracking credit-default swap spreads - a measure of the perceived risk of debt defaults by big companies or governments - rose in Asia and Europe for a second day, after easing earlier in the week.
Nicholas Kwan, Asia regional head of research at Standard Chartered Bank in Hong Kong, warned that 'what we have experienced is far from the end'.
'Usually, the outbreak of a crisis is the most shocking time, but the most challenging time comes some time later, when damage to the economy bites deeper,' he said in a note.
The top priority for governments in the region should be to unblock money markets, reinforce confidence in their respective banking systems, he added.
Last night, the Singapore government said that it would guarantee the full amount of all Sing-dollar and foreign currency deposits of individuals and non-bank customers in banks, finance companies and merchant banks licensed by the Monetary Authority of Singapore, following similar moves in Hong Kong and Europe.
Published October 17, 2008
Swiss bailout for UBS dilutes GIC stake
By CONRAD TAN
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(SINGAPORE) Switzerland's government yesterday announced a sweeping rescue of its entire banking sector, including emergency cash infusions from the public purse for its biggest bank and a toxic-asset dump for removing troubled assets from banks' balance sheets.
Cash and cover: UBS has received a big cash injection and state backing for its soured debt securities
UBS, the country's biggest bank, received some US$60 billion in support from the Swiss government, comprising US$54 billion in state backing for the bank's soured debt securities, and a direct capital injection of six billion Swiss francs (S$7.86 billion). The move effectively dilutes the stakes of existing shareholders, including the Government of Singapore Investment Corp (GIC), which pumped 11 billion francs into UBS last December.
Credit Suisse, UBS' smaller rival, avoided a Swiss government bailout and instead raised 10 billion francs from other investors, with the biggest contribution from a unit of the Qatar Investment Authority.
The two largest Swiss banks also announced estimates of their third-quarter results, ahead of their scheduled earnings reports. UBS said it made a small net profit of 296 million francs - in line with its earlier guidance and reversing a net loss of 358 million francs in the second quarter. But the group suffered massive outflows of money as private banking customers and other clients withdrew funds or closed their accounts completely.
Its wealth management and business banking division continued to bleed badly, with net outflows of 49.3 billion francs for the three months to end-September, more than double the 19.3 billion francs recorded in the second quarter. Its global asset management division also saw net outflows of 34.4 billion francs, up from 24.5 billion in Q2.
'With today's measures, in addition to its earlier steps, UBS is confident that it has created the conditions necessary to reverse the outflow of client assets,' said the bank in a statement.
Credit Suisse expects a third-quarter net loss of about 1.3 billion francs compared to a Q2 profit of 1.2 billion francs - a result that is 'clearly disappointing', but 'understandable' given the turbulence in markets, said Brady Dougan, its chief executive.
Profits from its private banking business were dwarfed by losses from its investment banking division, which recorded a pretax loss of 3.2 billion francs, after suffering further writedowns of 2.4 billion francs. Its private banking business grew strongly, even as rival UBS faltered.
Credit Suisse said its wealth management division saw net inflows of 11 billion francs in new money during the quarter, while its Swiss corporate banking and retail banking business recorded net inflows of three billion francs.
Under yesterday's agreement, the Swiss government will buy six billion francs of mandatory convertible notes issued by UBS. That translates into a 9.3 per cent equity stake in the bank on conversion, which would make the Swiss government the biggest shareholder in UBS.
UBS will transfer as much as US$60 billion in mortgage-backed securities and other troubled assets to a special fund backed by the Swiss central bank, which has pledged to lend UBS up to 90 per cent or US$54 billion of the fund's value. That will reduce UBS's exposure to such assets to nearly zero, said Marcel Rohner, its chief executive. 'UBS has emphatically eliminated the issues that have been affecting it as a result of its exposure to US residential real estate securities and other illiquid risk assets,' he said.
'Our client businesses in Asia-Pacific continue to perform well,' said Rory Tapner, UBS Asia-Pacific chairman and chief executive.
'We applaud this move as it should relieve fears about further writedowns and eventually stem money outflows in its core wealth management franchise,' Pangiotis Spilopoulos, an analyst at banking group Vontobel, told Reuters in Zurich.
Kai Nargolwala, Credit Suisse's Asia-Pacific chief executive, told BT that a similar offer to offload soured assets into a state-backed fund and receive a capital infusion from the government was also offered to the bank, but it felt no need to take it up as it could still attract investments from other sources. 'The offer remains with us, but we don't see the necessity to do so.'
Yesterday, GIC said it welcomed the latest action by the Swiss government, which 'demonstrates the Swiss government's commitment to the stability of the Swiss financial system'.
'GIC is comfortable with our present investment in UBS,' said GIC, in response to questions from BT as to whether it would raise its stake in UBS, now diluted by the Swiss government's cash injection.
Swiss bailout for UBS dilutes GIC stake
By CONRAD TAN
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(SINGAPORE) Switzerland's government yesterday announced a sweeping rescue of its entire banking sector, including emergency cash infusions from the public purse for its biggest bank and a toxic-asset dump for removing troubled assets from banks' balance sheets.
Cash and cover: UBS has received a big cash injection and state backing for its soured debt securities
UBS, the country's biggest bank, received some US$60 billion in support from the Swiss government, comprising US$54 billion in state backing for the bank's soured debt securities, and a direct capital injection of six billion Swiss francs (S$7.86 billion). The move effectively dilutes the stakes of existing shareholders, including the Government of Singapore Investment Corp (GIC), which pumped 11 billion francs into UBS last December.
Credit Suisse, UBS' smaller rival, avoided a Swiss government bailout and instead raised 10 billion francs from other investors, with the biggest contribution from a unit of the Qatar Investment Authority.
The two largest Swiss banks also announced estimates of their third-quarter results, ahead of their scheduled earnings reports. UBS said it made a small net profit of 296 million francs - in line with its earlier guidance and reversing a net loss of 358 million francs in the second quarter. But the group suffered massive outflows of money as private banking customers and other clients withdrew funds or closed their accounts completely.
Its wealth management and business banking division continued to bleed badly, with net outflows of 49.3 billion francs for the three months to end-September, more than double the 19.3 billion francs recorded in the second quarter. Its global asset management division also saw net outflows of 34.4 billion francs, up from 24.5 billion in Q2.
'With today's measures, in addition to its earlier steps, UBS is confident that it has created the conditions necessary to reverse the outflow of client assets,' said the bank in a statement.
Credit Suisse expects a third-quarter net loss of about 1.3 billion francs compared to a Q2 profit of 1.2 billion francs - a result that is 'clearly disappointing', but 'understandable' given the turbulence in markets, said Brady Dougan, its chief executive.
Profits from its private banking business were dwarfed by losses from its investment banking division, which recorded a pretax loss of 3.2 billion francs, after suffering further writedowns of 2.4 billion francs. Its private banking business grew strongly, even as rival UBS faltered.
Credit Suisse said its wealth management division saw net inflows of 11 billion francs in new money during the quarter, while its Swiss corporate banking and retail banking business recorded net inflows of three billion francs.
Under yesterday's agreement, the Swiss government will buy six billion francs of mandatory convertible notes issued by UBS. That translates into a 9.3 per cent equity stake in the bank on conversion, which would make the Swiss government the biggest shareholder in UBS.
UBS will transfer as much as US$60 billion in mortgage-backed securities and other troubled assets to a special fund backed by the Swiss central bank, which has pledged to lend UBS up to 90 per cent or US$54 billion of the fund's value. That will reduce UBS's exposure to such assets to nearly zero, said Marcel Rohner, its chief executive. 'UBS has emphatically eliminated the issues that have been affecting it as a result of its exposure to US residential real estate securities and other illiquid risk assets,' he said.
'Our client businesses in Asia-Pacific continue to perform well,' said Rory Tapner, UBS Asia-Pacific chairman and chief executive.
'We applaud this move as it should relieve fears about further writedowns and eventually stem money outflows in its core wealth management franchise,' Pangiotis Spilopoulos, an analyst at banking group Vontobel, told Reuters in Zurich.
Kai Nargolwala, Credit Suisse's Asia-Pacific chief executive, told BT that a similar offer to offload soured assets into a state-backed fund and receive a capital infusion from the government was also offered to the bank, but it felt no need to take it up as it could still attract investments from other sources. 'The offer remains with us, but we don't see the necessity to do so.'
Yesterday, GIC said it welcomed the latest action by the Swiss government, which 'demonstrates the Swiss government's commitment to the stability of the Swiss financial system'.
'GIC is comfortable with our present investment in UBS,' said GIC, in response to questions from BT as to whether it would raise its stake in UBS, now diluted by the Swiss government's cash injection.
Published October 16, 2008
CIMB believes STI could fall further to 1,613
Analysts' comments follow last week's massive sell-down
By OH BOON PING
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ANALYSTS reckon the worst is not over for Singapore's stock market. Instead, they see further downside for the Straits Times Index (STI).
Likely scenario: Using an average of trough values in recent crisis years, downside of 17 per cent from current levels for the ST Index (at 1,613) appears possible, says a CIMB report
According to a CIMB report: 'Using an average of trough values in recent crisis years, downside of 17 per cent from current levels for the STI (at 1,613) appears possible. If banks and properties fall back to Asian financial crisis P/BV levels, the STI could drift even lower to 974.'
OCBC Investment Research feels the deteriorating economic situation means highly geared companies and those that face near-term refinancing obligations will be hit by concerns over their ability to secure refinancing and soaring finance costs.
The analysts' comments come after last week's massive sell-down of stocks amid a tightening credit market. Also, Singapore's economy has slipped into a technical recession. The government is predicting a half percentage-point contraction in GDP in Q3 and has cut its full-year growth forecast to 3 per cent.
CIMB analyst Kenneth Ng paints a gloomy picture. 'STI earnings are predominantly propped up by the domestic banking and property sectors,' he says.
In the property sector, 'as global equity prices melt, sellers have become more desperate and are more willing to take discounts to sell out. Eroding prices in the secondary market will have an impact on the primary market and the current turmoil clouds the outlook for developers all the way till 2009'.
Banks also face the risk of higher delinquencies due to unemployment, Mr Ng says. 'From our understanding, banks do not typically ask for capital top-ups when the values of collateral fall. As long as monthly payments continue, non-performing loans are not recognised. Trouble arises only when payments lag. This typically unfolds when unemployment rises. On the ground, we are hearing of the beginning of job cuts in the financial sector.'
Due to the worsening economic climate, CIMB recommends investors take 'overweight' positions in offshore and marine, media, S-Reits and land transport.
Its top picks include A-Reit, City Development, SembCorp Marine, Singapore Press Holdings (SPH), Venture Corp and UOB. And its respective target prices are $2.60, $13.05, $5.25, $5.13, $13.42 and $21.78, respectively.
CIMB believes value has also emerged among mid-cap stocks after last week's sell-down, and has issued 'outperform' calls on China Sky, China Hongxing and China Zaino.
OCBC favours stocks in strong cash positions and has issued 'buy' calls on Biosensors ($1.02), Ezra ($3.30), SembCorp Marine ($4.98) and SPH ($5.14).
CIMB believes STI could fall further to 1,613
Analysts' comments follow last week's massive sell-down
By OH BOON PING
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ANALYSTS reckon the worst is not over for Singapore's stock market. Instead, they see further downside for the Straits Times Index (STI).
Likely scenario: Using an average of trough values in recent crisis years, downside of 17 per cent from current levels for the ST Index (at 1,613) appears possible, says a CIMB report
According to a CIMB report: 'Using an average of trough values in recent crisis years, downside of 17 per cent from current levels for the STI (at 1,613) appears possible. If banks and properties fall back to Asian financial crisis P/BV levels, the STI could drift even lower to 974.'
OCBC Investment Research feels the deteriorating economic situation means highly geared companies and those that face near-term refinancing obligations will be hit by concerns over their ability to secure refinancing and soaring finance costs.
The analysts' comments come after last week's massive sell-down of stocks amid a tightening credit market. Also, Singapore's economy has slipped into a technical recession. The government is predicting a half percentage-point contraction in GDP in Q3 and has cut its full-year growth forecast to 3 per cent.
CIMB analyst Kenneth Ng paints a gloomy picture. 'STI earnings are predominantly propped up by the domestic banking and property sectors,' he says.
In the property sector, 'as global equity prices melt, sellers have become more desperate and are more willing to take discounts to sell out. Eroding prices in the secondary market will have an impact on the primary market and the current turmoil clouds the outlook for developers all the way till 2009'.
Banks also face the risk of higher delinquencies due to unemployment, Mr Ng says. 'From our understanding, banks do not typically ask for capital top-ups when the values of collateral fall. As long as monthly payments continue, non-performing loans are not recognised. Trouble arises only when payments lag. This typically unfolds when unemployment rises. On the ground, we are hearing of the beginning of job cuts in the financial sector.'
Due to the worsening economic climate, CIMB recommends investors take 'overweight' positions in offshore and marine, media, S-Reits and land transport.
Its top picks include A-Reit, City Development, SembCorp Marine, Singapore Press Holdings (SPH), Venture Corp and UOB. And its respective target prices are $2.60, $13.05, $5.25, $5.13, $13.42 and $21.78, respectively.
CIMB believes value has also emerged among mid-cap stocks after last week's sell-down, and has issued 'outperform' calls on China Sky, China Hongxing and China Zaino.
OCBC favours stocks in strong cash positions and has issued 'buy' calls on Biosensors ($1.02), Ezra ($3.30), SembCorp Marine ($4.98) and SPH ($5.14).
Published October 16, 2008
Jade saga impacts other takeover bids
Now, cash must be deposited with the financial institution
By CHEW XIANG
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'AFTER Jade happened, we started cursing because for takeovers we now need to deposit cash with the financial institution,' says lawyer Nicholas Narayan.
'We cannot just be relying on 'letters of comfort' any more.'
It's just one sign of the impact of the botched takeover of Jade Technologies, a tiny Catalist-listed company. On Tuesday, the Securities Industry Council released an 86-page report, the result of a six month investigation into breaches of the non-statutory Singapore Code on takeovers and mergers. In a no-holds barred review, few came out smelling of roses.
Anthony Soh, who had made and then withdrawn the 22.5 cent offer in April, was banned from making any takeover offer for five years, and from dealing in shares for three years.
The SIC also opined that he was unsuitable to be a director of a listed company for five years.
His financial adviser, OCBC Bank, too was censured for 'serious lapses' in failing to ensure Dr Soh had sufficient resources. The bank had signed off on the offer document, confirming that Dr Soh had the funds and the shares to go through with the offer, although it's now clear that this was not the case.
OCBC failed to verify this before the offer announcement went out, and is claiming instead that it was a victim of fraud. The bank remains adamant that there is 'no issue' of compensating anyone for losses suffered, says Koh Ching Ching, its head of group corporate communications.
'OCBC Bank has been legally advised that it is not responsible for and is not the effective cause of the withdrawal . . . (it) was a disclosed risk that ultimately and unfortunately materialised,' she said.
Lawyers say that for aggrieved investors to take action against the bank, they must be able to show that they relied on OCBC's representations. 'It's not so easy for the investor,' says Mr Narayan, while another points out that the SIC had not ordered any compensation paid.
One party which escaped relatively scot free was Merrill Lynch. When Australian broker Opes Prime failed in March, Merrill seized more than 200 million Jade shares to enforce its claims on Opes as a creditor.
Dr Soh had earlier pledged 300 million shares to Opes in return for loans.
On Tuesday, Merrill was faulted by the SIC but was not censured. Investors were upset that the bank had sold shares in Jade before the bid collapsed, benefiting from the market's then ignorance.
Merrill said that it had notified the company, fulfilling its duty as a substantial shareholder. But the SIC said that as an 'associate' of the takeover, it should also have informed the council and the public.
This it did not do, but the council accepted the breach was 'neither opportunistic nor intentional' and that Merrill had acted in good faith. Meanwhile, the police are investigating why disclosures to the company was not made public.
Jade saga impacts other takeover bids
Now, cash must be deposited with the financial institution
By CHEW XIANG
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'AFTER Jade happened, we started cursing because for takeovers we now need to deposit cash with the financial institution,' says lawyer Nicholas Narayan.
'We cannot just be relying on 'letters of comfort' any more.'
It's just one sign of the impact of the botched takeover of Jade Technologies, a tiny Catalist-listed company. On Tuesday, the Securities Industry Council released an 86-page report, the result of a six month investigation into breaches of the non-statutory Singapore Code on takeovers and mergers. In a no-holds barred review, few came out smelling of roses.
Anthony Soh, who had made and then withdrawn the 22.5 cent offer in April, was banned from making any takeover offer for five years, and from dealing in shares for three years.
The SIC also opined that he was unsuitable to be a director of a listed company for five years.
His financial adviser, OCBC Bank, too was censured for 'serious lapses' in failing to ensure Dr Soh had sufficient resources. The bank had signed off on the offer document, confirming that Dr Soh had the funds and the shares to go through with the offer, although it's now clear that this was not the case.
OCBC failed to verify this before the offer announcement went out, and is claiming instead that it was a victim of fraud. The bank remains adamant that there is 'no issue' of compensating anyone for losses suffered, says Koh Ching Ching, its head of group corporate communications.
'OCBC Bank has been legally advised that it is not responsible for and is not the effective cause of the withdrawal . . . (it) was a disclosed risk that ultimately and unfortunately materialised,' she said.
Lawyers say that for aggrieved investors to take action against the bank, they must be able to show that they relied on OCBC's representations. 'It's not so easy for the investor,' says Mr Narayan, while another points out that the SIC had not ordered any compensation paid.
One party which escaped relatively scot free was Merrill Lynch. When Australian broker Opes Prime failed in March, Merrill seized more than 200 million Jade shares to enforce its claims on Opes as a creditor.
Dr Soh had earlier pledged 300 million shares to Opes in return for loans.
On Tuesday, Merrill was faulted by the SIC but was not censured. Investors were upset that the bank had sold shares in Jade before the bid collapsed, benefiting from the market's then ignorance.
Merrill said that it had notified the company, fulfilling its duty as a substantial shareholder. But the SIC said that as an 'associate' of the takeover, it should also have informed the council and the public.
This it did not do, but the council accepted the breach was 'neither opportunistic nor intentional' and that Merrill had acted in good faith. Meanwhile, the police are investigating why disclosures to the company was not made public.
Published October 16, 2008
Cosco S'pore responds to SGX queries on price fall
It says no official notification of Cosco Dalian's client filing for bankruptcy
By WONG WEI KONG
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COSCO Corp Singapore finally broke its silence yesterday on several issues which had driven down its share price, after it was prompted by several queries from the Singapore Exchange (SGX) to issue a statement.
News of Cosco's Norwegian client MPF Corp filing for bankruptcy recently had spooked the market, and fanned worries that the credit crisis could squeeze demand for new shipbuilding and lead to order cancellations. Cosco shares lost around 37 per cent over two days to close at 79.5 cents yesterday.
In its statement after the close of trading, Cosco said that it was brought to its attention that MPF, the buyer of a floating, production, drilling, storage and off-loading (FPDSO) unit being built by subsidiary Cosco Dalian, had sought bankruptcy protection. However, it has not received any official notification of the bankruptcy protection sought by MPF.
The value of the MPF contract is about US$119 million. MPF has made payments for the first three instalments amounting to US$98 million. The fourth (and final) payment of some US$21 million is due to be paid upon delivery of the vessel, scheduled for Dec 15.
'To date, Cosco Dalian has not received any indication from MPF that it is not willing or not able to make payment of the last instalment, and Cosco Dalian continues to perform its obligations under the building contract,' Cosco said.
Under the building contract, Cosco Dalian also has the right to sell the vessel if the payment of any instalment is not made by MPF. Based on current market prices, proceeds from the sale of the vessel would be more than sufficient to cover the sum of the outstanding instalment, Cosco added.
Giving an update on its dry bulk carrier delivery schedule, Cosco said that its subsidiary, Cosco Shipyard (Zhoushan) Co Ltd, had contracted with certain subsidiaries of the wider Cosco group for the construction and delivery of the first 10 units of 57,000 dwt dry bulk carriers.
An understanding has been reached with the counterparties that the first of these vessels will be delivered by Dec 31. The remaining nine vessels will be delivered progressively.
'To date, all the other remaining vessel building contracts being undertaken by the company's subsidiaries at Dalian and Guangdong are proceeding according to original schedule,' it said.
Other than a previously announced cancellation in April 2008, there has been no other cancellations of orders, Cosco said. 'The company is not aware of any solvency issues relating to its suppliers and/or customers.'
No profit warning is required and 23 per cent of the company's shipbuilding contracts are with companies within the wider Cosco group, it added.
Cosco S'pore responds to SGX queries on price fall
It says no official notification of Cosco Dalian's client filing for bankruptcy
By WONG WEI KONG
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COSCO Corp Singapore finally broke its silence yesterday on several issues which had driven down its share price, after it was prompted by several queries from the Singapore Exchange (SGX) to issue a statement.
News of Cosco's Norwegian client MPF Corp filing for bankruptcy recently had spooked the market, and fanned worries that the credit crisis could squeeze demand for new shipbuilding and lead to order cancellations. Cosco shares lost around 37 per cent over two days to close at 79.5 cents yesterday.
In its statement after the close of trading, Cosco said that it was brought to its attention that MPF, the buyer of a floating, production, drilling, storage and off-loading (FPDSO) unit being built by subsidiary Cosco Dalian, had sought bankruptcy protection. However, it has not received any official notification of the bankruptcy protection sought by MPF.
The value of the MPF contract is about US$119 million. MPF has made payments for the first three instalments amounting to US$98 million. The fourth (and final) payment of some US$21 million is due to be paid upon delivery of the vessel, scheduled for Dec 15.
'To date, Cosco Dalian has not received any indication from MPF that it is not willing or not able to make payment of the last instalment, and Cosco Dalian continues to perform its obligations under the building contract,' Cosco said.
Under the building contract, Cosco Dalian also has the right to sell the vessel if the payment of any instalment is not made by MPF. Based on current market prices, proceeds from the sale of the vessel would be more than sufficient to cover the sum of the outstanding instalment, Cosco added.
Giving an update on its dry bulk carrier delivery schedule, Cosco said that its subsidiary, Cosco Shipyard (Zhoushan) Co Ltd, had contracted with certain subsidiaries of the wider Cosco group for the construction and delivery of the first 10 units of 57,000 dwt dry bulk carriers.
An understanding has been reached with the counterparties that the first of these vessels will be delivered by Dec 31. The remaining nine vessels will be delivered progressively.
'To date, all the other remaining vessel building contracts being undertaken by the company's subsidiaries at Dalian and Guangdong are proceeding according to original schedule,' it said.
Other than a previously announced cancellation in April 2008, there has been no other cancellations of orders, Cosco said. 'The company is not aware of any solvency issues relating to its suppliers and/or customers.'
No profit warning is required and 23 per cent of the company's shipbuilding contracts are with companies within the wider Cosco group, it added.
Published October 16, 2008
SGX quarterly profit slides 35%
Derivatives to remain bright spot for SGX amid market meltdown: analysts
By JAMIE LEE
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THE Singapore Exchange (SGX) yesterday reported a 35 per cent plunge in quarterly earnings, which did not surprise analysts, given the recent market rout. SGX posted a net profit of $84.5 million for the first quarter of fiscal 2009, compared with $130 million previously. Securities market revenue was nearly halved to $74.4 million from $141.2 million registered a year ago. The daily average trading value for the three months ended Sept 30 slumped 51 per cent to $1.27 billion.
Related links:
Click here for SGX's news release
Financial statements
The number of new IPOs also tumbled to 10 issues worth about $300 million from 21 IPOs that raised $1.9 billion a year ago. But SGX continued to see growth in the derivatives segment. Net derivatives clearing revenue rose 23.6 per cent to $46.1 million. This was thanks to a near 40 per cent jump in the futures trading volume to 17.4 million contracts compared with 12.5 million contracts in the same period a year ago. The company has also declared an interim base dividend of 3.5 cents per share on a tax exempt one-tier basis.
'Notwithstanding the current turbulence in global financial markets, SGX business remains robust and profitable, bolstered by derivatives trading,' said chief executive Hsieh Fu Hua yesterday.
'SGX continues to be vigilant and stands ready to maintain the integrity and orderliness of its markets, while actively managing its clearing risk exposure,' added Mr Hsieh, who is expected to step down from his post next year.
SGX's first-quarter results were in line with expectations, analysts told BT, adding that derivatives revenue is likely to remain as the one bright spot amid the stock market meltdown.
'This is the saving grace for the entire revenue stream,' said DBS analyst Lim Sue Lin. 'It is building up very well on a year-on-year basis.'
She added that Mr Hsieh's expected departure is unlikely to introduce significant changes to the management of the bourse. 'I don't think there's going to be a big change in the direction,' she said.
SGX quarterly profit slides 35%
Derivatives to remain bright spot for SGX amid market meltdown: analysts
By JAMIE LEE
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THE Singapore Exchange (SGX) yesterday reported a 35 per cent plunge in quarterly earnings, which did not surprise analysts, given the recent market rout. SGX posted a net profit of $84.5 million for the first quarter of fiscal 2009, compared with $130 million previously. Securities market revenue was nearly halved to $74.4 million from $141.2 million registered a year ago. The daily average trading value for the three months ended Sept 30 slumped 51 per cent to $1.27 billion.
Related links:
Click here for SGX's news release
Financial statements
The number of new IPOs also tumbled to 10 issues worth about $300 million from 21 IPOs that raised $1.9 billion a year ago. But SGX continued to see growth in the derivatives segment. Net derivatives clearing revenue rose 23.6 per cent to $46.1 million. This was thanks to a near 40 per cent jump in the futures trading volume to 17.4 million contracts compared with 12.5 million contracts in the same period a year ago. The company has also declared an interim base dividend of 3.5 cents per share on a tax exempt one-tier basis.
'Notwithstanding the current turbulence in global financial markets, SGX business remains robust and profitable, bolstered by derivatives trading,' said chief executive Hsieh Fu Hua yesterday.
'SGX continues to be vigilant and stands ready to maintain the integrity and orderliness of its markets, while actively managing its clearing risk exposure,' added Mr Hsieh, who is expected to step down from his post next year.
SGX's first-quarter results were in line with expectations, analysts told BT, adding that derivatives revenue is likely to remain as the one bright spot amid the stock market meltdown.
'This is the saving grace for the entire revenue stream,' said DBS analyst Lim Sue Lin. 'It is building up very well on a year-on-year basis.'
She added that Mr Hsieh's expected departure is unlikely to introduce significant changes to the management of the bourse. 'I don't think there's going to be a big change in the direction,' she said.
Published October 16, 2008
Downturn hits SIA passenger numbers in Sept
By VEN SREENIVASAN
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IT'S a sign of the times when one of the world's most profitable carrier suffers a fall in passenger numbers for the first time in three years.
Singapore Airlines said yesterday that passenger numbers in raw terms dipped 1.6 per cent to 1.51 million in September from a year ago.
However, there was a 1.3 per cent growth in systemwide passenger carriage (measured in revenue passenger kilometres), largely due to good loads on its 'kangaroo route' - London-Singapore-Sydney.
But with capacity (measured in available seat kilometres) up by 6.8 per cent during the month, the passenger load factor declined 4.1 percentage points to 76.9 per cent in September.
Meanwhile, a 7.3 per cent drop in cargo traffic, against a 4.2 per cent reduction in capacity, translated to a 2.1 percentage points decline in cargo load factor to 61.1 per cent.
As a result, overall load factor fell to 67.4 per cent - one of the lowest levels in recent years.
But it's the passenger side which is of concern, say analysts.
All route regions recorded declines in passenger load factor as new capacity introductions were not matched by a commensurate increase in passenger traffic.
The airline attributed this to softening demand caused by weakening global economic conditions.
'Uplifts for the East Asia route region have additionally been affected by the political unrest in Thailand and the stringent visa restrictions for travel to China imposed for the Beijing Olympic Games (although the visa restrictions have been lifted for most of the affected countries from mid-September),' it said in a statement.
'Ramadhan, occurring earlier in the month of September this year, contributed to the decline in travel to and from countries in the West Asia and Africa region.'
The airline's head of communications Stephen Forshaw said SIA would plan its capacity deployment carefully in light of the changing economic conditions globally.
'We will watch for changes in demand across routes carefully and manage capacity flows, and look at some changes of schedules on routes that have multiple daily frequencies to ensure capacity best matches demand,' he said.
Amongst the services likely to be looked at are the long-haul routes to the US, given the rapidly weakening US economy.
BT understands that the airline may be replacing its 375-seater B747-400s on the Singapore-Hong Kong- San Francisco route with the 275-seater B777- 300ER.
The airline is also likely to be watching closely its loads on its daily services to Los Angeles and New York, especially its recently introduced all-business class A340-500 services. It also recently started a service to Houston, Texas, which could come under capacity review as well.
SIA gets about half its income from premium seats. But with global economic conditions rapidly deteriorating, and forcing sharp cutbacks in travel budgets, it remains to be seen how badly the airline could be hit.
SIA's share price has already plunged 29 per cent this year, closing at $12.32 yesterday.
Downturn hits SIA passenger numbers in Sept
By VEN SREENIVASAN
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IT'S a sign of the times when one of the world's most profitable carrier suffers a fall in passenger numbers for the first time in three years.
Singapore Airlines said yesterday that passenger numbers in raw terms dipped 1.6 per cent to 1.51 million in September from a year ago.
However, there was a 1.3 per cent growth in systemwide passenger carriage (measured in revenue passenger kilometres), largely due to good loads on its 'kangaroo route' - London-Singapore-Sydney.
But with capacity (measured in available seat kilometres) up by 6.8 per cent during the month, the passenger load factor declined 4.1 percentage points to 76.9 per cent in September.
Meanwhile, a 7.3 per cent drop in cargo traffic, against a 4.2 per cent reduction in capacity, translated to a 2.1 percentage points decline in cargo load factor to 61.1 per cent.
As a result, overall load factor fell to 67.4 per cent - one of the lowest levels in recent years.
But it's the passenger side which is of concern, say analysts.
All route regions recorded declines in passenger load factor as new capacity introductions were not matched by a commensurate increase in passenger traffic.
The airline attributed this to softening demand caused by weakening global economic conditions.
'Uplifts for the East Asia route region have additionally been affected by the political unrest in Thailand and the stringent visa restrictions for travel to China imposed for the Beijing Olympic Games (although the visa restrictions have been lifted for most of the affected countries from mid-September),' it said in a statement.
'Ramadhan, occurring earlier in the month of September this year, contributed to the decline in travel to and from countries in the West Asia and Africa region.'
The airline's head of communications Stephen Forshaw said SIA would plan its capacity deployment carefully in light of the changing economic conditions globally.
'We will watch for changes in demand across routes carefully and manage capacity flows, and look at some changes of schedules on routes that have multiple daily frequencies to ensure capacity best matches demand,' he said.
Amongst the services likely to be looked at are the long-haul routes to the US, given the rapidly weakening US economy.
BT understands that the airline may be replacing its 375-seater B747-400s on the Singapore-Hong Kong- San Francisco route with the 275-seater B777- 300ER.
The airline is also likely to be watching closely its loads on its daily services to Los Angeles and New York, especially its recently introduced all-business class A340-500 services. It also recently started a service to Houston, Texas, which could come under capacity review as well.
SIA gets about half its income from premium seats. But with global economic conditions rapidly deteriorating, and forcing sharp cutbacks in travel budgets, it remains to be seen how badly the airline could be hit.
SIA's share price has already plunged 29 per cent this year, closing at $12.32 yesterday.
Published October 16, 2008
When silence was not golden
By WONG WEI KONG
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COSCO Corp Singapore truly became a penny stock yesterday, with another tumble in its share price in what was an acute crisis of confidence.
The stock fell 20.5 per cent or 20.5 cents to 79.5 cents yesterday - this coming after it crashed almost 17 per cent on Tuesday.
That slide will likely be checked, now that Cosco has come out to address some of the concerns the market had over the company.
But the question remains why the company waited so long to clear the air, and did so only after it was queried by the Singapore Exchange.
Tuesday's fall was attributed to a downgrade in Cosco's target price by Credit Suisse to 55 cents from $1.20, with an 'underperform' rating. Credit Suisse said in a report that it expects Cosco shares to drift lower on concerns over shipbuilding demand, risk of order cancellations and delivery delays.
The view that the current credit condition could squeeze demand for new shipbuilding and lead to order cancellations by clients hit by tighter credit lines is one that was widely held, especially after news of Cosco's Norwegian client MPF filing for bankruptcy.
Cosco declined, however, to address these issues when presented with the chance on Tuesday, when the media asked the company to comment on the market's concerns. It was an opportunity missed, and one with costly consequences for its shareholders. Not surprisingly, given the lack of any assurances from the company, the stock continued its slide yesterday on heavy volumes, as more joined in the downgrades.
Why was it so difficult for Cosco to provide timely assurances to the market? Other companies had provided updates and assurances on their businesses when there was a need to. When the tainted milk scandal broke out in China, Chinese food-related companies here issued statements to tell investors what the impact, if any, was on their operations. Similarly, when the Sichuan earthquake took place, listed companies with operations in the region all issued statements to update shareholders. So too when hurricanes struck the US.
In sharp contrast, FSL Trust Management Pte Ltd, the trustee-manager of First Ship Lease Trust (FSL Trust), took the initiative to assure investors after its units also fell in heavy trade. It said yesterday that FSL Trust continues to receive steady lease rental payments from its eight lessees, has a robust set of risk management protocols and is in regular dialogue with its lessees with regard to their credit-worthiness, and reaffirmed its earlier distribution per unit guidance.
Cosco's reticence is all the more surprising given that the lack of communication from the company was cited as a key factor for the market's loss in confidence. Said Credit Suisse in its report: 'Inadequate disclosure on dry bulk newbuild schedule and no announcements on successful delivery of dry bulk vessel to customer to-date (against 10 planned deliveries in 2008 and 41 vessels in 2009) heighten our concerns on execution risk.'
There was clearly an information gap regarding Cosco. As one investor noted in an email to BT, CIMB also made a call on Cosco on Tuesday, the same day Credit Suisse issued its downgrade. But the two calls were poles apart. In opposition to Credit Suisse, CIMB said: 'Key catalysts for Cosco include better-than-expected offshore and conversion orders coupled with falling steel prices. We maintain a 'buy' call with a target price of $2.89.'
The sharply contrasting calls indicated that Cosco had given little guidance to the market, leaving analysts to make their best or worst assumptions. The company's silence simply fanned speculation that bad news may lie just around the corner.
Cosco's statement last night may arrest the fall in its share price. But it may have come too late. Two days of fear-driven selling have destroyed a huge chunk of shareholder value, and more importantly, shattered trust in the company. Rebuilding credibility may prove a major challenge for Cosco.
When silence was not golden
By WONG WEI KONG
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COSCO Corp Singapore truly became a penny stock yesterday, with another tumble in its share price in what was an acute crisis of confidence.
The stock fell 20.5 per cent or 20.5 cents to 79.5 cents yesterday - this coming after it crashed almost 17 per cent on Tuesday.
That slide will likely be checked, now that Cosco has come out to address some of the concerns the market had over the company.
But the question remains why the company waited so long to clear the air, and did so only after it was queried by the Singapore Exchange.
Tuesday's fall was attributed to a downgrade in Cosco's target price by Credit Suisse to 55 cents from $1.20, with an 'underperform' rating. Credit Suisse said in a report that it expects Cosco shares to drift lower on concerns over shipbuilding demand, risk of order cancellations and delivery delays.
The view that the current credit condition could squeeze demand for new shipbuilding and lead to order cancellations by clients hit by tighter credit lines is one that was widely held, especially after news of Cosco's Norwegian client MPF filing for bankruptcy.
Cosco declined, however, to address these issues when presented with the chance on Tuesday, when the media asked the company to comment on the market's concerns. It was an opportunity missed, and one with costly consequences for its shareholders. Not surprisingly, given the lack of any assurances from the company, the stock continued its slide yesterday on heavy volumes, as more joined in the downgrades.
Why was it so difficult for Cosco to provide timely assurances to the market? Other companies had provided updates and assurances on their businesses when there was a need to. When the tainted milk scandal broke out in China, Chinese food-related companies here issued statements to tell investors what the impact, if any, was on their operations. Similarly, when the Sichuan earthquake took place, listed companies with operations in the region all issued statements to update shareholders. So too when hurricanes struck the US.
In sharp contrast, FSL Trust Management Pte Ltd, the trustee-manager of First Ship Lease Trust (FSL Trust), took the initiative to assure investors after its units also fell in heavy trade. It said yesterday that FSL Trust continues to receive steady lease rental payments from its eight lessees, has a robust set of risk management protocols and is in regular dialogue with its lessees with regard to their credit-worthiness, and reaffirmed its earlier distribution per unit guidance.
Cosco's reticence is all the more surprising given that the lack of communication from the company was cited as a key factor for the market's loss in confidence. Said Credit Suisse in its report: 'Inadequate disclosure on dry bulk newbuild schedule and no announcements on successful delivery of dry bulk vessel to customer to-date (against 10 planned deliveries in 2008 and 41 vessels in 2009) heighten our concerns on execution risk.'
There was clearly an information gap regarding Cosco. As one investor noted in an email to BT, CIMB also made a call on Cosco on Tuesday, the same day Credit Suisse issued its downgrade. But the two calls were poles apart. In opposition to Credit Suisse, CIMB said: 'Key catalysts for Cosco include better-than-expected offshore and conversion orders coupled with falling steel prices. We maintain a 'buy' call with a target price of $2.89.'
The sharply contrasting calls indicated that Cosco had given little guidance to the market, leaving analysts to make their best or worst assumptions. The company's silence simply fanned speculation that bad news may lie just around the corner.
Cosco's statement last night may arrest the fall in its share price. But it may have come too late. Two days of fear-driven selling have destroyed a huge chunk of shareholder value, and more importantly, shattered trust in the company. Rebuilding credibility may prove a major challenge for Cosco.
Published October 16, 2008
2009 growth may slow: Zeti
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(WASHINGTON) Malaysia's economy may expand as little as 4 per cent in 2009, the slowest pace in eight years, and the central bank is ready to shift its focus to boosting growth as inflation worries ease, governor Zeti Akhtar Aziz said. 'What is very vital is the economy should not be allowed to slip into a sharp economic downturn,' Ms Zeti said here on Tuesday. 'We have the capacity and the capability to implement fiscal, monetary and other measures to prevent such an economic downturn.'
The economy will probably expand 5-5.5 per cent this year, Ms Zeti said. That's below the official forecast of 5.7 per cent. Finance Minister Najib Razak on Tuesday said the growth prediction for 2009 of 5.4 per cent may be revised. - Bloomberg
2009 growth may slow: Zeti
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(WASHINGTON) Malaysia's economy may expand as little as 4 per cent in 2009, the slowest pace in eight years, and the central bank is ready to shift its focus to boosting growth as inflation worries ease, governor Zeti Akhtar Aziz said. 'What is very vital is the economy should not be allowed to slip into a sharp economic downturn,' Ms Zeti said here on Tuesday. 'We have the capacity and the capability to implement fiscal, monetary and other measures to prevent such an economic downturn.'
The economy will probably expand 5-5.5 per cent this year, Ms Zeti said. That's below the official forecast of 5.7 per cent. Finance Minister Najib Razak on Tuesday said the growth prediction for 2009 of 5.4 per cent may be revised. - Bloomberg
Published October 16, 2008
Equine Capital, associate taken over by Malton units
By S JAYASANKARAN IN KUALA LUMPUR
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UNITS linked to listed developer Malton Berhad are believed to have taken over Equine Capital and its 25 per cent associate Abad Naluri which holds the exclusive development rights to 101 ha of land in Penang that currently houses the island's Turf Club.
Late last week, Patrick Lim Soon Kit stepped down as Equine's chairman and executive director after months of speculation about his impending departure. Mr Lim had been under pressure since Penang was taken over by the Opposition in March this year and his plan to redevelop the turf club land into a RM20 billion (S$8.37 billion) Penang Global City Centre was cancelled by the new government.
Equine shares now trade at around 41 sen, sharply down from their highs of more than RM4 in mid-2007.
Businessmen familiar with the matter said that the Malton units were believed to have bought Mr Lim's 29 per cent interest in Equine. Malton is a medium-sized developer owned by low-profile tycoon Lim Siew Choon and is best known for building Kuala Lumpur's The Pavilion, a wildly successful high-end retail complex that is one of the largest of its kind in the city.
The exit of Equine's Mr Lim marks the first casualty among businessmen closely associated to Prime Minister Abdullah Ahmad Badawi who has indicated that he will step down in March 2009.
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Mr Lim came from nowhere in 2003 - during the tenure of former premier Mahathir Mohamad - to bag the prestigious Penang Turf Club project. He is also associated with the million-dollar Monsoon Cup regatta in Terengganu state in a deal clinched during Mr Abdullah's tenure.
Mr Lim's Abad won an open tender to redevelop the turf club in 2003, but the project was only formally launched in August last year by Mr Abdullah despite complaints that it hadn't yet received approvals from the Penang municipality.
Such outcomes have fuelled speculation about the businessman's connections, and Mr Lim's exit illustrates the perils of being too closely identified with the Malaysian leader as anything he did was often misconstrued. Even Dr Mahathir singled Mr Lim out for criticism, dubbing him 'Patrick Badawi' in an apparent reference to the businessman's links to Mr Abdullah's family.
In any case, the entry of new investors into Equine would mean that Abad's objectives could still be realised. These include the construction of a new Turf Club on land that Abad owns in Batu Kawan on the mainland and near the site where the second bridge to the island will begin. Since the election, all work on the project seems to have been shelved.
Whatever the outcome, the Turf Club land remains very valuable as it was re-zoned for development in 2007 and there is nothing to stop its owners from submitting a fresh development proposal to an opposition state government anxious to create jobs for the electorate.
Equine Capital, associate taken over by Malton units
By S JAYASANKARAN IN KUALA LUMPUR
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UNITS linked to listed developer Malton Berhad are believed to have taken over Equine Capital and its 25 per cent associate Abad Naluri which holds the exclusive development rights to 101 ha of land in Penang that currently houses the island's Turf Club.
Late last week, Patrick Lim Soon Kit stepped down as Equine's chairman and executive director after months of speculation about his impending departure. Mr Lim had been under pressure since Penang was taken over by the Opposition in March this year and his plan to redevelop the turf club land into a RM20 billion (S$8.37 billion) Penang Global City Centre was cancelled by the new government.
Equine shares now trade at around 41 sen, sharply down from their highs of more than RM4 in mid-2007.
Businessmen familiar with the matter said that the Malton units were believed to have bought Mr Lim's 29 per cent interest in Equine. Malton is a medium-sized developer owned by low-profile tycoon Lim Siew Choon and is best known for building Kuala Lumpur's The Pavilion, a wildly successful high-end retail complex that is one of the largest of its kind in the city.
The exit of Equine's Mr Lim marks the first casualty among businessmen closely associated to Prime Minister Abdullah Ahmad Badawi who has indicated that he will step down in March 2009.
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Mr Lim came from nowhere in 2003 - during the tenure of former premier Mahathir Mohamad - to bag the prestigious Penang Turf Club project. He is also associated with the million-dollar Monsoon Cup regatta in Terengganu state in a deal clinched during Mr Abdullah's tenure.
Mr Lim's Abad won an open tender to redevelop the turf club in 2003, but the project was only formally launched in August last year by Mr Abdullah despite complaints that it hadn't yet received approvals from the Penang municipality.
Such outcomes have fuelled speculation about the businessman's connections, and Mr Lim's exit illustrates the perils of being too closely identified with the Malaysian leader as anything he did was often misconstrued. Even Dr Mahathir singled Mr Lim out for criticism, dubbing him 'Patrick Badawi' in an apparent reference to the businessman's links to Mr Abdullah's family.
In any case, the entry of new investors into Equine would mean that Abad's objectives could still be realised. These include the construction of a new Turf Club on land that Abad owns in Batu Kawan on the mainland and near the site where the second bridge to the island will begin. Since the election, all work on the project seems to have been shelved.
Whatever the outcome, the Turf Club land remains very valuable as it was re-zoned for development in 2007 and there is nothing to stop its owners from submitting a fresh development proposal to an opposition state government anxious to create jobs for the electorate.
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