Published March 7, 2009

Power tariff to fall 22% in April

By ZEINAB YUSUF

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SINGAPOREANS can look forward to cheaper electricity when revised tariffs kick in on April 1.

Consumers on average will pay 18.03 cents per kilowatt hour (kWh) from April 1 to June 30 - a substantial 22 per cent drop from the current 22.93 cents per kWh.

This will be the lowest rate since April 2005 when the tariff was 16.06 cents per kWh.

The reduction is largely due to lower fuel oil prices, said Singapore Power subsidiary SP Services, which supplies electricity to all households and some industrial customers.

In line with the current tariff formula, the forward fuel oil price in January was used to set the tariff for the second quarter from April 1 to June 30.

The forward fuel oil price in January was $60.47 a barrel, which was 35 per cent lower than the $92.99 used to set the current tariff.

However, starting from the third quarter in July, tariffs will no longer be calculated using the current formula.

Instead, a revised formula will use the average fuel price in the preceding three months to determine the tariff for the subsequent quarter.

For example, the new formula would have used the average fuel oil price from January to March, rather than just January alone, to set the tariff for Q2 2009.

The revised formula will help reduce volatility in the tariff and allow for the use of more recent data to determine it.

The tariff is reviewed quarterly and adjusted in line with the changes in the cost of producing electricity.

Published March 7, 2009

Jardine posts 64% profit fall to US$666m

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(Singapore)

JARDINE Matheson Holdings, which owns real estate, supermarkets and drugstores in Asia and runs hotels worldwide, said 2008 profit fell 64 per cent on a decline in the value of its investment properties.

The Hong Kong-based company's net income dropped to US$666 million, or US$1.89 per share, from US$1.83 billion, or US$5.16, the company said yesterday. Sales climbed to US$36.2 billion from US$31.6 billion. 'While the prospects for our businesses remain sound in the year ahead, some are facing a greater impact than others from the deteriorating market conditions,' chairman Henry Keswick said.

Jardine is contending with a dim outlook for office rents. Demand for travel has also fallen, resulting in a 38 per cent drop in 2008 profit at Mandarin Oriental International, a Jardine unit. Hongkong Land Holdings, another Jardine unit, on Thursday posted a loss of US$109 million.

Jardine's net income excluding the revaluation of real estate rose 14 per cent to a record US$822 billion, or US$2.33 a share, from US$719 million, or US$2.03 a share as it benefited from higher rents negotiated in the first nine months of the year.

The company will pay a final dividend of 51 US cents. -- Bloomberg

Published March 7, 2009

80 units of Simei condo sold

UOL upbeat on project's future take-up, given 'terrific' response on 1st day of preview

By UMA SHANKARI

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UOL Group and Kheng Leong yesterday sold more than 80 units of their new Simei condominium Double Bay Residences on the first day of its preview, the companies said.

LUSH LIVING Two-thirds of Double Bay Residences are taken up by four swimming pools and landscape features such as a five-storey high waterfall, an elevated jacuzzi and a sports deck

Units at the 646-unit, 99-year leasehold project went for $600-650 per square foot (psf), UOL group chief operating officer Liam Wee Sin told BT.

UOL and Kheng Leong paid some $296 psf per plot ratio for the site in Jan 2008.

Mr Liam is upbeat about future take-up for the project as well. 'The response to the preview has been terrific and if the same momentum is sustained, we expect to sell at least 200 units by this weekend,' he said.

UOL released 250 units during yesterday's soft launch. The project will be officially launched on March 14.

Yesterday's transaction prices were slightly lower than the indicative prices that agents were giving out last week - which were in the range of $650-680 psf.

Mr Liam said that the $600-$650 selling price will be maintained: 'We are happy with the pricing and we have no intention of raising prices.'

One-bedroom apartments were priced at $420,000 to $480,000; two-bedders went for $570,000 to $620,000; three-bedders for $740,000 to $850,000; and four-bedroom units sold for $930,000 to $1.02 million.

Like with other recent launches, UOL is offering an interest absorption scheme to buyers, but this costs about 2 per cent more.

The project is expected to receive its temporary occupation permit in 2013.

Peter Ow, executive director for residential marketing at Knight Frank (which is marketing the project), said that most of the buyers were HDB upgraders. Units on higher floors were also proving to be more popular, he said.

Mr Liam pointed out that the last condo project in Simei was launched a decade ago.

'So we believe there's pent-up interest for condo living in the area,' he said, noting that there is latent demand from owners of HDB five-room and executive flats in Bedok, Pasir Ris, Punggol, Sengkang and Tampines.

UOL and Kheng Leong also said that apartments will be fitted with 'elegant finishings comparable to district 10 condos', which they expect will be a selling point.

Two-thirds of Double Bay Residences are taken up by four swimming pools and landscape features such as a five-storey high waterfall, an elevated jacuzzi and a sports deck.

UOL Group and Kheng Leong also sold six shop units within the project at $1,150 psf to a single buyer.

Published March 7, 2009

Asian credit seen to be rewarding

By OH BOON PING

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INVESTMENT grade Asian credit may be the next big thing, as returns on equities continue to slide.

At a finance forum on Thursday, DBS Asset Management chief Deborah Ho said that returns on credit risks are now looking attractive, adding that the 'repair' stage of the market cycle is likely to begin this year.

In such a scenario, credit instruments should outperform equities, as companies carry out their 'balance sheet repairs'.

This comes as credit are typically senior to equities, and these instruments now yield much higher returns. As a result, this gives credit instruments a better risk-adjusted reward this year.

Investments that give such exposure are high-quality Asian credit or bonds exchange traded funds.

In her presentation, Ms Ho also touched on the past financial crises and the recovery rates for each market downturn.

Typically, she says, the recovery takes between one and five years, depending on the severity of the downturn. For the current crisis, the recovery duration is more likely to be at the upper-end of the range.

Also speaking at the forum was Peter Kerger, head of Asia-Pacific for DB Advisors. He felt that the current crisis will bring about a change in the investment landscape, even as investors now have a more realistic expectation of returns.

He believes that balanced investing, global stock-picking, climate change investments and foreign exchange are some of the investment trends that will survive the present turmoil. 'Commodities, metals and energy investments will continue to dominate a lot of space,' he added.

Those likely to disappear include pure emerging market strategies, synthetic collateralised debt obligations and hedge fund replication strategies.

Published March 7, 2009

Corporate Commentary

Not quite a clean bill of health

By CHEN HUIFEN
JOURNALIST

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AS MUCH as health care providers would like to be known as recession-proof, the diagnosis is clear. They are not.

CATCHING THE CONTAGION Parkway Holdings reported a 7-8% decline in foreign patients last year even though it posted a 4% Q4 topline gain

The latest results are telling. Parkway Holdings, the biggest private hospital operator here, suffered a 7-8 per cent decline in foreign patients last year.

Even though it reported a commendable top line gain of 4 per cent in the fourth quarter, the pace of growth was slowing - down from 7 per cent in the third quarter and second quarter, and 19 per cent in the first quarter, not to mention 30 per cent in Q4 2007.

Quarter on quarter, revenue growth is withering. Between Q1 and Q2 the gain was 3.2 per cent - but the subsequent quarterly gains were 1.4 per cent and then 0.75 per cent.

Over at Raffles Medical Group, revenue continued to grow by double digits last year. But as at Parkway, the speed of growth has dropped.

In 2007, revenue growth was as high as 30 per cent. In Q2 2008, it was still 22.3 per cent. But in Q3, it was 17 per cent. And by Q4, it was 12 per cent.

Quarter on quarter, growth was 6.8 per cent from Q1 to Q2, before slipping to 1.4 per cent in Q3 and 0.14 per cent in Q4.

Parkway and Raffles are the two biggest private hospital groups in Singapore - which makes their combined figures a barometer of demand for private health care services.

If history is a guide, the drop in demand could continue, as price-sensitive local patients opt for public hospitals and medical tourists stay away.

In 1998, after the start of the Asian financial crisis, the number of foreigners visiting Singapore for medical treatment dropped almost 35 per cent to 10,698, from 16,418 in 1997. About the same time, the public hospitals' market share of in-patient admissions went up, while the private hospital pie shrank.

Staff costs could be another sticky point. Health care workers in general are in short supply, so hospital operators have to walk a tightrope between keeping wages attractive and keeping a lid on costs.

Both Parkway and Raffles have been taking steps to deal with the downturn in business.

Parkway has cut headcount and slashed senior management salaries - moves that are expected to cut costs by 10 per cent. This month, Parkway also introduced 32 fixed-fee surgical packages to try to entice local patients.

Raffles has been keeping its staff costs stable at under 50 per cent of revenue. But having hired a new international marketing head - Singapore Tourism Board health care services director Jason Yap - it appears to favour tackling the situation on the demand side.

In any case, the fall in revenue in the private health care sector will not be as dramatic as in sectors that are mainly driven by export-led demand.

With a network of GP clinics behind them, Parkway and Raffles should enjoy stable income from outpatient business, part of which is backed by corporate contracts.

A report by Nomura Singapore this week gave a positive prognosis on the two companies, saying that they have robust operating margins, brand equity and a more diversified patient base than a decade ago.

Although Nomura projected an 8 per cent fall in in-patient admissions for Parkway and a 2 per cent dip for Raffles this year, the decline is likely to be buffered by an increase in day surgery cases and the increasing complexity of cases handled, correlating to higher average revenue per patient.

So, private health care players will feel the impact from the economic contagion. They are not immune. But they are more resilient than some other businesses.

Published March 7, 2009

Prices of golf club membership holding steady - for now

By VEN SREENIVASAN

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STOCK prices have tumbled to their lowest levels since 2003. On the property front, asset writedowns and landbank provisions have begun. The job market is facing its worst crisis in years. And the global financial market and system remain in meltdown mode.

Yet, golf club membership prices here have stayed steady, if not moved up slightly.

The BT Golf Index last month hovered at 143.78 points, barely a quarter of a point down from January's 144.03 points.

In fact some quoted open market club membership prices actually rose during the month. Singapore Island Country Club was going at $150,000, up 5.6 per cent from January's $142,000. Sentosa Country Club membership had an asking price of $160,000, compared to $155,000 a month earlier. Even second-tier Seletar was up $1,000 at $42,000.

So what gives?

A check with club membership brokers drew a blank. Some noted that the first round of selling was done and the market had 'dried up' somewhat, with very few transactions taking place.

Whatever the reason, there seems to be a disconnect between the valuation of this asset class and the prevailing economic realities.

It is generally recognised that movement in asset prices is symptomatic of the prevailing economic condition. But it would be quite a stretch to conclude that the new-found resilience in club membership prices is indicative of a potential bottoming out in the underlying economic fundamentals and financial markets.

Rather, as some membership brokers suggest, what we could now be seeing is the eye of the hurricane. That eerily quiet and calm moment before the second wave hits.

The first wave came when the people got their pink slips between October and December last year. Many were from the financial sector, and a significant number were expatriates who were forced to return home.

Then things got somewhat quiet in January and into February, leading into the Chinese New Year festive period. But looking ahead, the indications are that the economic and financial circumstances can only get worse before getting better. The Singapore economy is expected to shrink some 8 per cent this year.

Last week, DBS forecast almost 100,000 job losses this year, with 10,000 layoffs in this quarter alone. While the earlier job losses were largely from the financial sector, this is likely to spread to the services and manufacturing sectors in the months ahead.

Meanwhile, the stock market continues plumbing new multi-year lows. Property prices, which have been relatively resilient so far, could soon collapse, according to many analysts.

In short, the 'other shoe' could drop anytime in the coming months. That being the case, one should not expect this surreal resilience in the golf clubs memberships market to hold for long. After all, it is the least critical of the five Cs.

Published March 7, 2009

Neste basks in a green glow

Growing market for S'pore renewable diesel plant

By RONNIE LIM

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OTHER investors may be scrapping their projects but it's flashing 'green' for Neste Oil's $2.4 billion investment in Singapore and Rotterdam. The Finnish giant is brimming with confidence about its two renewable-diesel refinery plants that cost $1.2 billion apiece and that will start operations in 2010 and 2011 respectively.

DOING THE SPADE WORK (From left) Mr Honkamaa, Mr Lim, Mr Lievonen and Neste Oil managing director Olli Virtas laying the foundation for Neste Oil's renewable diesel plant in Singapore

In fact, it is already considering adding second lines at both to produce either more renewable diesel, or even renewable jet fuel for aircraft.

'We have no other competitor in 2G, or second-generation, biodiesel manufacturing,' Matti Lievonen, Neste's president and CEO, told media after a foundation stone-laying ceremony at its Tuas site. The two plants, when completed, will make Neste - until now, mainly a traditional oil refiner - the leading global producer of renewable diesel.

Both plants are 'on schedule and on budget', he said. Financing is not an issue at all, as Neste has a credit line of 1.6 billion euros (S$3.1 billion) until 2011, plus it has over 500 million euros in cash flow from last year.

Besides, given growing environmental concerns, the European Union is expected to pass legislation enforcing greater use of such renewable fuels soon. 'This is the whole logic for our renewable diesel - a market which mandates use of biofuels,' said deputy CEO Jarmo Honkamaa.

After earlier targeting 5.75 per cent mandatory biofuel use by 2010, the latest EU directive is that measures must be taken by all member countries to replace a minimum 10 per cent of all transport fossil fuels (petrol and diesel) with biofuels by 2010.

The Neste officials said this in response to questions on whether today's low oil prices of around US$40 - which means that normal diesel is roughly half the price of biodiesel - would impact the economics of its Singapore and Rotterdam biodiesel investments.

Each plant will produce 800,000 tonnes per annum (tpa) of renewable diesel - the largest such facility in the world - from one million tpa of renewable materials comprising vegetable oils such as palm oil, animal fat or tallow.

Neste - which operates two crude-oil refineries in Porvoo and Naantali with a total capacity of 260,000 barrels - already has a 170,000 tpa biodiesel plant at Porvoo, and is set to start up a second biodiesel plant of similar scale there this July.

'Neste is sourcing its biodiesel raw materials like palm oil and tallow on a group-wide basis, and is in talks with suppliers, like for instance, for jatropha in Thailand,' Mr Honkamaa said. Depending on the costs, over half of each plant's raw materials can be palm oil, with the rest tallow, although the biofuel refineries are completely flexible in their feedstock mix.

Neste is already in talks with big oil companies to take biodiesel from its Singapore and Rotterdam plants. 'We don't see a challenge in (securing) markets, the challenge is more in raw materials,' Mr Honkamaa said.

Speaking at the ceremony, Trade & Industry Minister Lim Hng Kiang said that Neste's project 'affirms Singapore's position as a trusted business destination', adding that 'the outlook of the energy and chemicals industries remains positive'. Underlying this, he said, are two main factors: the increasing emphasis on addressing environmental challenges and the Asian growth story, especially in China and India, and increasingly, Asean.

Published March 7, 2009

Latest US Data

Gloom deepens as US jobless rate hits 8.1%

No light at the end of the tunnel, says economist

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(Washington)

THE US unemployment rate bolted to 8.1 per cent in February, the highest since late 1983, as cost-cutting employers slashed 651,000 jobs amid a deepening recession.

Both figures were worse than analysts expected and the Labor Department's report shows America's workers being clobbered by a wave of layoffs unlikely to ease in the coming months.

'There is no light at the end of the tunnel with these numbers,' said Nigel Gault, economist at IHS Global Insight. 'Job losses were everywhere and there's no hope for a turnaround any time soon.'

The net loss of 651,000 jobs in February came after even deeper payroll reductions in the prior two months according to revised figures released yesterday. The economy lost 681,000 jobs in December and another 655,000 in January.

Employers are shrinking their workforces and turning to other ways to slash costs - including trimming workers' hours, freezing wages or cutting pay - because the recession has eaten into their sales and profits. Customers at home and abroad are cutting back as other countries cope with their own problems.

Since the recession began in December 2007, the economy has lost 4.4 million jobs, more than half of which occurred in the past four months.

With employers showing no appetite to hire, the unemployment jumped to 8.1 per cent from 7.6 per cent in January. That was the highest since December 1983, when the jobless rate was 8.3 per cent. All told, the number of unemployed people climbed to 12.5 million. In addition, the number of people forced to work part time for 'economic reasons' rose by a sharp 787,000 to 8.6 million.

Meanwhile, the average work week in February stayed at 33.3 hours, matching the record low set in December.

Job losses were widespread last month in most sectors.The few areas spared: education and health services, as well as government, which boosted employment last month.

'There's no way that we could or should put a positive spin on these,' Christina Romer, chair of the White House Council of Economic Advisers. 'The American people are clearly suffering.'

'We will continue to do whatever is necessary to break the destructive cycle of job loss in this country and put Americans back to work,' Labor Secretary Hilda Solis, adding that her department is releasing US$3.5 billion to states to help pay for education, training and employment services.

Even in the best-case scenario that the relief efforts work and the recession ends later in 2009, the unemployment rate is expected to keep climbing, hitting 9 per cent or higher this year. In fact, the Federal Reserve thinks the unemployment rate will stay elevated into 2011. Economists say the job market may not get back to normal - meaning a 5 per cent unemployment rate - until 2013. -- AP, Reuters, Bloomberg

Published March 7, 2009

S'pore's best-kept secret

A register of 400 talented women, some qualified to serve on boards, if only companies would seek them out

By EMILYN YAP

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'WE love the men,' said women's association member Noor Quek with a smile. The question is, do men love women back, at least on Singapore's corporate scene? Maybe not enough, going by findings from a recent Watson Wyatt study about women in the workplace.

FEMALE RESOURCE Members of the Women's Register (from left) Juanita Woodward, Junie Foo and Noor Quek

Looking at the 100 largest companies here, it found that 72 did not have a single female non-executive director on their board. This gives Singapore the dubious distinction of being the least inclusive when stacked up against Australia, Hong Kong and the United Kingdom.

A shortage of talent in the female ranks, you murmur? Then obviously you have never heard of the Women's Register - an initiative that offers companies here access to a huge female talent pool to appoint to their boards, if only they'd care to ask.

It is a gathering of more than 400 women - 63 per cent of whom have bachelor's degrees, master's degrees or PhDs and 60 per cent of whom are in the prime ages of 30-49. The irony is that few businesses here have actually used it in their search for talent.

'We want to increase the awareness of WR. We want corporations and people to know that there is such a resource they can tap on,' said Junie Foo, chairwoman of the WR committee and also director of origination and client coverage at Standard Chartered Singapore.

A follow-up in January showed little improvement - women now take up 5.7 per cent of board seats in STI firms. The Watson Wyatt study confirms the trend. The question is: what can be done about this?

The WR is a project of the Singapore Council of Women's Organisations (SCWO). 'The whole aim of this project is to promote women and leadership in the public and private sectors, especially with a focus on women on boards,' Juanita Woodward, a WR committee member and Eurogiro's director of Asia Pacific customer relations.

'(We are) looking to see how we can, through the WR, match women to boards and also look at the talents which perhaps in a few years would be eligible to sit on a board.'

The issue of low female representation on the boards of Singapore-listed companies is well-known. A BT study in 2006 found that women occupied just 3.8 per cent of board seats in 50 STI companies, and it helped spur the launch of the WR on International Women's Day (March 8) in 2007.

A follow-up in January showed little improvement - women now take up 5.7 per cent of board seats in STI firms. The Watson Wyatt study confirms the trend. The question is: what can be done about this?

Having a register is 'very good' as it identifies a pool of potential women directors, said Senior Minister of State for Finance and Transport, Lim Hwee Hua. But 'if companies somehow are not conscious or aware of the availability of such women, then they won't be looking'.

In the last two years, most users of the WR were non-profit organisations such as the Disabled People's Association and the National Volunteer & Philanthropy Centre. Organisations can only contact candidates through the WR web engine - there is no direct access until those interested reply directly.

The WR committee hopes to acquaint more companies with the database. Firms have to first sign up as corporate members by paying a one-time registration fee of $10 and an annual fee of $200. The annual fee is $10 for non-profit organisations.

The intention is to get companies to recognise talent, both male and female, Ms Foo underlined. 'We're not pushing a gender issue per se,' she stressed.

Several executive search firms agree that companies generally focus on candidates' skills only. According to Korn/Ferry International's managing director in Singapore and Indonesia Gerard Chai, most here do not ask specifically for male or female directors.

'The shortage of women at the board level could be explained by a combination of companies themselves not making more of a conscious effort to recruit women directors, fewer numbers of high-profile women to recruit from and women themselves shying away from the role,' he said.

Recognising that there are other factors keeping women from the boardroom, the WR also helps women network and share advice. As Ms Quek, a WR committee member and managing director of consultancy firm NQ International highlighted, some underestimate their own capabilities. 'That's why we also reach out to them - we recognise your skills and we think you can contribute.'

And women can contribute at a time when the economy is flagging, said Ms Woodward. Companies should tap all the resources available and with the WR, hopefully they will 'throw the net out wider'.

The SCWO has met up with the Singapore Institute of Directors (SID) to promote the WR. According to the SID, there was in-principle agreement on general collaboration between the two organisations.

The WR itself plans to reach out to more women by organising one or two events every month - it is in fact having a lunch today to discuss how women can be leaders. 'We're out there, we're hunting,' Ms Quek said. 

Published March 6, 2009

Malaysia sets aside RM10b for second stimulus package

By PAULINE NG
IN KUALA LUMPUR

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MALAYSIA has indicated that RM10 billion (S$4.1 billion) would be allocated for its second stimulus package to be unveiled next week, with half of the funds earmarked for development and the balance for operations.

Details of the mini-budget - as it is being described - were not revealed at the first reading of the Supplementary Bill 2009 in Parliament yesterday by Deputy Finance Minister Kong Cho Ha, but the size was a big letdown to those advocating a larger package to avert a recession this year.

Together with the RM7 billion package announced in November, the cumulative RM17 billion would only amount to 2.6 per cent of gross domestic product (GDP), said Bank Islam economist Azrul Azwa who is of the view the total ought to be closer to RM32 billion or 5 per cent of GDP.

Compared to Singapore's stimulus - 8 per cent of GDP, or China's - 16 per cent, he said the RM17 billion is too little 'given the severity of the crisis'.

The second reading of the bill is to be tabled by Finance Minister Najib Razak on Tuesday, where details would be revealed as well as the revised GDP forecast for the year.

An earlier projection of 3.5 per cent growth has been discarded as unrealistic in the current global slump.

With exports tanking 15 per cent year-on-year in December and its major trading partners deep in recession, Malaysia would be hard put to avoid a contraction this year.

Many expect the economy to shrink this quarter, after it only managed a dismal 0.1 per cent growth in the last quarter.

Although the new allocation is likely to swell the budget deficit to about 6 per cent of GDP, Mr Azrul maintained growth should be the priority.

Provided Malaysia could commit to a time-frame of how and when it intended to return to a fiscal balance, spending could have been increased, he said.

Already the slow pace with which the earlier package is being implemented has been criticised by businesses.

Mr Azrul said the details would reveal if the package 'is well-framed', but hoped the mooted projects would be focused and transparent with regular updates.

Mohd Othman Zainal Azim, chief operating officer of the project management unit - a unit in the finance ministry established specifically to manage the disbursement of the funds - said RM5.29 billion or three-quarters of the first allocation had been disbursed.

According to local wire agency Bernama, Mr Othman told a media conference that the funds had been disbursed for some 38,000 projects nationwide, mainly for the building of houses as well as rural roads.

The projects would be rolled out by end-April and completed by August, with the full impact of the injection 'hopefully felt in May and contributing one per cent of GDP growth'.

Mr Othman added the projects would mainly benefit Class F contractors - those entitled to bid for projects up to RM200,000, and who incidentally form the bulk of supporters of Umno, the country's dominant party.

Needing few qualifications, Class F contractors form the bulk of the estimated 60,000 contractors in the country.