Published April 17, 2009

GuocoLand to open two Thistle hotels in Malaysia

Two existing hotels undergoing RM50m refurbishment

By PAULINE NG
IN KUALA LUMPUR

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HOSPITALITY and property company GuocoLand Malaysia is bringing the Thistle brand to Asia, kicking off with Malaysia where it hopes that the established name and a RM50 million (S$20.8 million) refurbishment exercise to two existing hotels would boost its earnings.

Although long established in the United Kingdom, Thistle Hotels does not have a presence in Asia. Malaysia - and later China - was a logical place to start given that Thistle Hotels and the two hotels are owned by GuocoLand, company executives said yesterday.

By the middle of the year, two hotels - formerly the Hyatt Johor Bahru and Guoman PD - would be reopened as Thistle hotels, the near one-year closure for refurbishment works to ensure that they meet five-star standards.

The average occupancy rate for the Hyatt JB was about half and for Guoman PD, which is in Negri Sembilan, about a third.

At a media briefing yesterday, GuocoLand Malaysia managing director Paul Poh said that Thistle Hotels aimed to boost the occupancy at the hotels to about 70 and 65 per cent respectively - more in line with the national average - and to increase the hotels' contribution to group profit to about 40 per cent from 30 per cent currently.

For the nine months ended March, the listed company made a profit of nearly RM6 million although it posted a loss of RM3.4 million for the third quarter.

Mr Poh said that he expects to recoup the amount invested in refurbishing the hotels in four to five years.

'We are not worried about the economic situation so long as we offer a good product,' said Thistle JB general manager Philip Skitch.

There are plans for a third Thistle Hotel - a 250-room property in Kuala Lumpur. But it is expected only in 2011-12, and would be built in the suburb of Damansara Heights as part of GuocoLand's mixed development project.

Mr Poh said that there were no immediate plans for a Thistle hotel in Singapore. In China, the company is looking at a hotel each in Shanghai and Beijing.

Business at Thistle's 34 hotels in the UK was 'down a bit', Mr Skitch said, 'but not doing as bad as some of the other industries', adding that more Americans were travelling to the UK owing to the weaker British pound.

In a statement, Guoman Hotels Asia regional director Ian Jones said that the 251-room PD hotel aimed to attract leisure and meetings, incentives, conventions and exhibitions (MICE) travellers while the 381-room JB hotel would capitalise on its location next to Singapore and cater primarily to the business community.

Published April 17, 2009

Court lifts suspension on Zambry, excos

Decision allows them to attend state assembly, gives Barisan slim majority

By S JAYASANKARAN
IN KUALA LUMPUR

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MALAYSIA'S Federal Court yesterday decreed that Perak Speaker V Sivakumar did not have the power to suspend the state's chief minister Zambry Abdul Kadir and six Barisan Nasional executive council members from the state assembly.

Mr Zambry: A suit over the legitimacy of his chief minister appointment may also be rendered irrelevant

The decision will allow the seven men to attend the state assembly and enable the Barisan to command a slim majority in the House. This can effectively block any attempt by the opposition to table a no-confidence motion against the Barisan government.

The decision also restores a semblance of order in the state which has been in constitutional limbo since Feb 6. On that day, Sultan Azlan Shah, the state's monarch, ruled out fresh polls and recognised Barisan as the government after four oppositionists resigned their respective parties to become 'independents' supportive of the BN. The crossovers toppled the opposition Pakatan Rakyat (PR) government.

Even so, the then chief minister, Nizar Jamaluddin, refused to resign and, indeed, still claims to be the state's legitimate leader. To compound the matter, Mr Sivakumar reduced the BN's numbers in the assembly by suspending the seven men on 'disciplinary' grounds.

Given that the decision came from the country's apex court, the ruling could also render a separate suit over the legitimacy of Mr Zambry's appointment as chief minister irrelevant and will be considered a major setback to the Pakatan Rakyat's attempts to regain power.

Even so, some lawyers are of the view that the Federal Court seemed to have overlooked the constitutional principle of the separation of powers between the executive, the judiciary and the legislative assembly. In five similar cases previously, the Federal Court had affirmed the principle in dismissing suits brought against Speakers belonging to the Barisan.

'It will be interesting to see how the Court distinguishes this case from the five others,' a constitutional lawyer told BT. The decision, from a five-man bench, was unanimous and a written judgement is expected later.

As a result of its ruling, the suspensions on Mr Zambry and his executive council have been lifted and they can now attend sittings. Mr Zambry told reporters a notice calling for the legislature to sit will be issued next week.

The decision was also timely which, in itself, dealt another blow to the opposition. The reason: the state assembly must, by law, be convened by May 13 or else it will be automatically dissolved. Dissolution was exactly what the opposition was hoping for because they had thought they could win the state if fresh polls were called.

Published April 17, 2009

Is SGX price surge overdone?

By JAMIE LEE

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THE stock market, they say, is driven by hope, greed and fear.

In simple terms, greed led investors to push stock prices to dizzying heights some two years back, while fear drove investors out as the economy headed south.

And judging by the recent stock market rally, hope appears to be creeping back into the system.

Anecdotally, there is evidence that investors starved for some stock market action have been nibbling away.

This has benefited the stock of Singapore Exchange (SGX) as some investors went on a buying spree in the hope that the market could have bottomed.

Within a short span of three months, the stock has recovered some 25 per cent in price and has even outperformed the Straits Times Index.

But should investors be hopeful? Several analysts have noted in their comments on SGX's Q3 earnings that the speed of the stock's recovery was not justified.

The exchange reported a 45.5 per cent dive in quarterly net profit to $55.3 million from $101.5 million a year ago.

Though the earnings broadly met expectations, there were surprises in the derivatives trading segment, as net derivatives clearing revenue dropped 20 per cent to $31.2 million.

This suggests that SGX's derivatives trading - seen as the means to offset the slump in securities revenue - may not have been as strong as earlier touted.

'As the derivatives engine sputtered, SGX's earnings stream is not looking as robust anymore,' said CIMB-GK analyst Kenneth Ng, who downgraded the stock to 'underperform' from 'outperform'. 'Time to take money off the table,' he said in a client note.

'On a more structural note, we wonder if the blow-up over the S-chip asset class means that listing pipelines and turnover velocities for SGX will be hampered in the years ahead, making HKSE (Hong Kong stock exchange) the preferred exchange,' he added.

Many have also hesitated to call a bottom, despite the improved average daily trading value seen in April. It now hovers around $1 billion, as compared with $910 million in Q3.

OCBC analyst Carmen Lee noted yesterday that it was too early to call for a recovery. 'While some indicators have shown signs of bottoming-out, our view remains that a sustained economic recovery is necessary for confidence to return to the market.'

While some see the GDP figures of Q1 as indicating that the economy has hit the floor, analysts have cautioned that other factors such as consumer spending would determine a turnaround.

And as unemployment is set to rise, spending will be crimped, indicating a potential fall in investor interest over the next few quarters as pent-up demand pushing the markets up now fades away.

As Kim Eng analyst Pauline Lee puts it, there has been 'an overdose of optimism'. 'SGX's sharp price rally . . . and premium valuations to its peers look overdone,' she said in a report yesterday.

So take a swig from your cup and call it half-empty. This burst of hope that shares of SGX are riding on could pop soon.

Published April 17, 2009

NOL forecasts US$240m Q1 loss

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NEPTUNE Orient Lines (NOL), South-east Asia's biggest container carrier, expects its 2009 first quarter results to show an estimated net loss of US$240 million.

It said this estimate, which is 'subject to finalisation', is more than the net loss of US$149 million it reported for Q4 2008. Q1 results are due to be reported on May 12.

'The first quarter of the year is a seasonally slower period for the global container shipping sector,' said NOL in a filing to the Singapore Exchange last night.

'However, this deterioration in performance is also due to a worsening of business operating conditions in the first quarter.'

NOL also expects its full year loss to be 'significantly worse than financial analysts' current estimates', as adverse business operating conditions are expected to continue.

This is despite the ongoing increased cost savings and mitigation efforts the company has taken, it said.

On Wednesday, the company said it will increase cost-saving measures. NOL lifted its cost-savings target for the year to as much as US$550 million, from an initial plan of US$250 million.

Measures to cut costs included paying its chief executive and directors less, with chief executive Ron Widdows taking a voluntary 20 per cent cut in basic pay from March.

NOL lost nine cents, or 6 per cent, to close at $1.42 yesterday.

Published April 17, 2009

Tan Kwi Kin handing over SembMarine helm

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SEMBCORP Marine yesterday announced a leadership change with old stalwart Tan Kwi Kin retiring next month as group president and chief executive officer, and chief operating officer Wong Weng Sun assuming the two roles.

Change of guard: Mr Tan (above) will retire next month as group president and CEO after 43 years with the company. COO Wong Weng Sun (next) will be taking over.

Mr Tan, 70, will be appointed senior adviser and remain on the board, continuing to provide advice to the board and management.

The handover is not unexpected as most of the recent results briefings have been led by Mr Wong in what was seen as an indication of things to come.

Mr Wong, 47, joined the shipyard as an engineer in 1988 and worked his way through the ranks, having also served as deputy president. He will inject new blood at the top of SembMarine and will also be appointed as a director.

SembMarine chairman Goh Geok Ling thanked Mr Tan for his contributions and said: 'Mr Tan's strong leadership has steered the Sembcorp Marine Group to greater heights. The strategies that have been put in place for the last five years and the group's research and development in implementing rig technologies have paid off.

'More importantly, Mr Tan has put in place a successor and personally mentored him for many years. He laid a solid foundation of strong fundamentals which I am sure Weng Sun will continue to build upon to bring the company to the next level of excellence.'

On the succession, Mr Tan said: 'The economic conditions ahead of us are challenging. Having witnessed and weathered several economic down-cycles since joining the company 43 years ago, I believe Sembcorp Marine has proven its resilience.

'I am glad that the board has appointed Weng Sun as my successor. He has proven himself to be a man of integrity and ability - a technically competent, production-oriented and hands-on leader who cares for the welfare of the employees. Being young, IT- savvy and proficient in new technology, he is well poised to lead the group into its next phase of growth.'

Mr Wong said: 'I am grateful to my mentor Mr Tan, who has been the group president and CEO of Sembcorp Marine since 1999. An engineer at heart, Mr Tan is frugal, humble, yet visionary and a good boss to work with. He patiently guided and supported me for the past 20 years, sharing with me his work ethos, philosophy and, most importantly, his business acumen.'

Published April 17, 2009

CityDev sells 150 units of The Arte for $190m

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THE buzz continues at property launches on the island. City Developments said yesterday that it achieved about $190 million of sales from selling about 150 units at The Arte at Thomson since March 21.

The freehold project is priced at $880 psf on average. No premium is being being charged for an interest absorption scheme (IAS) that CDL has extended to buyers. The scheme means buyers pay just the initial 20 per cent to CDL and defer paying the bulk of their purchase price until The Arte is completed. However, buyers have to take up a housing loan at the point of purchase.

CDL has released 180 of the total 336 units in the project, which comprises two 36-storey high towers.

The majority of The Arte's buyers have private home addresses. Most of the units are going for under $2 million.

Over at Holland Road, Bukit Sembawang is releasing more units at its freehold Verdure from today. It has sold 14 of the 34 apartments in the five-storey project released last weekend. Verdure comprises 69 apartments, with an average price of about $1,350 psf, and six strata semi-detached homes, which cost about $4.8 million on average.

Bukit Sembawang had previously offered an IAS without charging any premium, but from today, buyers will have to pay 2 per cent more to benefit from the IAS.

Over at Tembeling Road in the Katong area, Alpha Land International is offering a small development with a total of 12 apartments. Prices in the five-storey freehold project, which is expected to be completed towards the end of this year or early next year, range from $663,840 (for an 818 sq ft two-bedroom unit) to $1.64 million (for a 2,379 sq ft four-bedder penthouse).

Alpha Land is offering an early bird discount in the form of renovation packages ranging from $10,000 to $25,000, depending on the size of the units. Tembeling Court is being marketed by Texan Associates.

Sim Lian Group will also launch its 360-unit HDB project Parc Lumiere tomorrow. Offered under HDB's design, build and sell scheme, units in the Simei development have an average selling price of $425 psf. Parc Lumiere has four and five-room flats, with four-room flats selling for $378,000-$425,000 and five-room flats going for $462,000-$575,000.

Published April 17, 2009

Merrill sees SIA facing tougher times this year

By VEN SREENIVASAN

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IF ever there was a perfect storm for Singapore Airlines (SIA), this must be it.

Rough season: One critical problem for SIA is plummeting premium traffic

Deteriorating operating conditions, falling loads, plunging premium traffic, overcapacity - and, lately, negative calls by leading investment houses.

Merrill Lynch has joined a growing chorus of analysts who note that SIA's traffic numbers have been 'far weaker than all of its major rivals', largely due to the company's reluctance to drop ticket prices aggressively.

'We think it (SIA) has tried to stick to its 'pre- mium price for a premium product' philosophy, while also trying to recover its high hedged fuel costs,' Merrill said in a report yesterday. 'Simply put, the market is highly price-sensitive and unwilling to pay for SIA's frills. Yields will still be sharply down due to the collapse of lucrative business class traffic (40 per cent of passenger revenue).'

This comes as the airline this week disclosed that its passenger load factors plunged to 69.4 per cent last month, from 80.8 per cent a year ago and down from 69.7 per cent in February.

This is below its breakeven points, which have recently been in the 70-75 per cent levels.

System-wide passenger carriage plunged a whopping 21.8 per cent, outpacing capacity cuts of 9 per cent.

On the cargo front, losses would have widened as load factor fell to 58.5 per cent, from 62.8 per cent a year ago.

SIA, one of Asia's biggest air freight operators, has seen its cargo load factors steadily slide in recent months. SIA Cargo, which lost about $113 million in the nine months to Dec 31, 2008, has put 25 of its 300 pilots on no-pay leave and grounded one of its 13 freighters

Overall load factor was 62.6 per cent, compared to 69.9 per cent a year ago, and just marginally up from 62.1 per cent in February.

In its report, Merrill said it expected SIA to post only its second ever quarterly pre-tax loss in the January-March quarter when it reports FY09 earnings on May 14 (the only other time it posted a quarterly loss was in June-September 2003, during the severe acute respiratory syndrome, or Sars, crisis). The research house added that a net loss was possible for the April-June quarter too.

'Although airlines have historically rebounded early in cyclical recoveries, we think it will be different this time,' analysts Paul Drewberry and Ying Ying Hou noted. 'Leisure demand is unlikely to recover until job security improves, while premium traffic needs a turnaround in the financial services sector.'

Merrill's FY10 net profit forecast of $713 million for the airline is about 30 per cent below market consensus.

One critical problem for SIA is plummeting premium traffic, which has traditionally accounted for 40 per cent of its income.

In its latest premium traffic monitor, released yesterday, the International Air Transport Association (Iata) noted that global premium traffic fell 21.1 per cent in February, following the 16.7 per cent decline in January, and a 13.3 per cent drop in December 2008.

The declines were sharpest in Asia, where bookings fell 27.3 per cent in February, after diving 23 per cent in January. March figures have not been released yet, but are expected to be even worse.

The deteriorating operating conditions forced Iata to recently hike its loss forecast for the global air transport industry to US$4.7 billion in 2009 - a sharp rise from the US$2.5 billion loss forecast made last December.

Faced with a perfect storm, SIA has announced capacity cuts of 11 per cent and is grounding 17 of its over 100 aircraft for the financial year ending March 31, 2010. It has also implemented a shorter workmonth for management, forced employees - especially pilots and cabin crew - to take extended unpaid leave, and cut wages. Many industry insiders expect job cuts to follow if the current situation does not improve.

The stock pulled back to $10.88 yesterday, after rising to a high of $11.46 last week on the back of the recent market upsurge.

Published April 17, 2009

China Sky CEO faces sale of pledged shares

This could lead to change of control at firm and loss of his CEO position

By LYNETTE KHOO

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IN a situation reminiscent of that at Sino-Environment, the chief executive officer and controlling shareholder of another S-chip company, China Sky Chemical Fibre, has found his pledged shares the subject of claims by lenders.

China Sky said in a filing yesterday that the possibility of sale of CEO Huang Zhong Xuan's stake in the company could result in a change of his substantial shareholding and his loss of the CEO position.

The company said this to explain why it called for a share trading halt, which began on Monday and was lifted yesterday.

Mr Huang holds his stake in China Sky through Rock Mart Equities which, according to yesterday's announcement, owns 37.72 per cent of China Sky. And to secure personal loans from two lenders, Mr Huang 'had procured Rock Mart to pledge Mr Huang's 50 per cent share of Rock Mart's entire portfolio of the shares' in China Sky.

On April 6, Mr Huang and Rock Mart received a letter from the first lender, setting out various terms to settle outstanding loans. This lender had on April 2 sold 500,000 shares to recover part of the loan owed to it.

Among the terms stated in the letter, the first lender required Rock Mart and Mr Huang to settle the debts in instalment, failing which it will exercise its legal rights, including its rights to dispose the pledged shares held by Rock Mart. This offer from the first lender expired on April 8.

China Sky noted that since early this year, Mr Huang had been in discussions with the two lenders to settle the debts without any forced sale of the pledged shares.

But as at Sunday, Mr Huang had not been able to obtain any written confirmation from the lenders that they would not proceed to dispose the pledged shares to reduce the debts.

According to China Sky's board, Rock Mart and Mr Huang are in the course of negotiating an amicable settlement with the lenders.

Rock Mart is jointly owned by Mr Huang and the chairman Cheung Wing Lin. But Mr Cheung and Mr Huang both confirmed that these issues only concern and affect Mr Huang.

When China Sky shares resumed trading yesterday, the stock closed 12.9 per cent higher at 17.5 cents. It was either a case of market players shrugging off the bad news or the stock playing catch-up in a market which has seen penny stocks in play this week.

Meanwhile, at Sino-Environment, executive chairman and CEO Sun Jianrong saw his stake in the company further pared down as his creditor enforced its rights on Mr Sun's pledged shares.

More of the pledged shares in Sino-Environment were transferred from Mr Sun to Stark Investments (Hong Kong) Ltd, reducing his stake held through Thumb (China) Holdings Group from 51.23 per cent to 31.23 per cent. This made Stark Investment a substantial shareholder with a 20 per cent stake.

Some 5.0565 per cent of his Sino-Environment stake that were earlier transferred to Stark Investments last month were forced-sold within a week.

Sino-Environment had disclosed last month that Mr Sun had defaulted on repayment of an outstanding debt of $65 million owed to hedge funds managed by Stark Investments (Hong Kong) Ltd and faced the risk of losing his controlling stake and potentially management control.

Any change in control of Sino-Environment could trigger bondholders' rights to convert or redeem $149 million worth of bonds issued by the company, raising doubts about its ability to continue as a going concern.

Published April 17, 2009

Singapore talent a big draw for MNCs in China

By ANNA TEO

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(SINGAPORE) Singaporeans - along with Hongkongers - are, and will continue to be, a key source of foreign labour for China, a survey has found.

In turn, multinationals here that hire executives and other skilled staff from China say that almost half (48 per cent) of their foreign employees come from the mainland - and expect the proportion to grow over the next three years.

This reciprocal labour dependence between Singapore and China is one of the findings from the survey by KPMG International of 260 MNC senior executives in 11 economies on their priorities when deciding where and how to locate their businesses, and their hiring practices.

Some 18 per cent of the respondents from China indicated that they recruit from Singapore. Of these, 34 per cent of their foreign workforce are Singaporeans, according to the findings.

By far, Hong Kong and Singapore stand out as the biggest sources of foreign skills for China, with smaller 'contributions' from Korea, Japan and the US, although Malaysia, Australia and India are expected to make inroads into China's expatriate scene in the next three years.

Singaporeans also figure as a key source of foreign labour for MNCs in Hong Kong, accounting for 46 per cent of their non-local staff. Other countries that list Singapore among their top 15 sources of foreign staff are Japan, Australia, Switzerland and the United States - but not the United Kingdom nor India.

Overall, what emerged from the survey conducted late last year is a growing pool of Chinese expatriates worldwide, with companies in Australia, India, Japan, Spain, the UK and US all planning big increases in the number of Chinese they employ.

The survey also found that while countries in Asia Pacific tend to rely on a small number of other states for workers, companies in the UK, Spain and the US show no particular preference as to where their foreign workers come from.

But some 60 per cent of suggested that 'businesses' preferred to hire local workers while a further 37 per cent had no preference.

And while there is growing pressure in many countries to protect domestic labour, and despite rising recruitment and wage costs, businesses recognise the advantages of diversifying their sources of skilled labour.

Singapore respondents, it seems, are second only to the Chinese in their enthusiasm for a strong government hand in attracting and retaining workers; elsewhere, in Europe particularly, businesses see that as their own responsibility.

In all, some 90 per cent of all respondents agreed that governments should collaborate by introducing more flexible immigration policies to attract workers to sectors where they are most required. Eight in 10 said immigration requirements should be relaxed overall.

And while tax policies aimed at improving labour flows are welcome, companies generally prefer direct incentives. They also value 'favourable business conditions' rather more than a well-qualified workforce when considering a new business location.

When asked where they would locate themselves if they were to start afresh next year, and again in five years' time, China came out the clear favourite, with the US in second spot for 2009 but overtaken by India for 2013.

In fourth and fifth positions are Singapore and Hong Kong, 'both punching well above their weight in GDP terms', the report notes.

Published April 17, 2009

China growth grinds to slowest pace in a decade

Q1 growth sinks to 6.1%, but late spurt points to stronger growth ahead

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(BEIJING) China's economy, battered by collapsing exports, grew at the slowest pace in almost 10 years, probably marking its low point.

There's still pain: Workers removing signs from a recently closed store in Beijing

The economy struggled out of the gate this year with its weakest quarter on record, but a pick-up in March showed that the world's third-largest economy may be on track for stronger growth in the coming months.

Gross domestic product expanded 6.1 per cent in the first quarter from a year earlier, after a 6.8 per cent gain in the previous three months, the statistics bureau said.

But a 30 per cent surge in urban fixed-asset investment in March and a jump in industrial output, both reported yesterday, added to evidence that the government's four trillion yuan (S$880.4 billion) stimulus plan is working. Premier Wen Jiabao cautioned that while the world's third-biggest economy is in better-than-expected shape, China is yet to establish a solid foundation for a recovery.

'They've stabilised the economy and now the challenge is to think about how to support consumption and how to support private investment,' said Stephen Green, head of China research at Standard Chartered Plc in Shanghai. 'We're still looking for stimulus measures to encourage consumption.'

Yesterday's report follows a statement from US Treasury Secretary Timothy Geithner that China is not a currency manipulator. His stance eases pressure on China to allow its currency to rise, which would hurt efforts to revive exports.

'We will continue to advance reform of the renminbi exchange rate formation mechanism. Our goal is to maintain the renminbi basically stable at a reasonable and balanced level,' Chinese Foreign Ministry spokeswoman Jiang Yu said in response to the report.

'This is in the interest of not only China but also the world economy,' she said, repeating Beijing's assertion that a stable yuan can serve a steadying role in volatile global financial markets.

While stimulus measures have started to produce results, China faces faltering export demand, industrial overcapacity, unemployment and weak private investment sentiment, Mr Wen said in a statement after a meeting of China's Cabinet. A rebound in industrial output growth lacks momentum, the premier said.

He pledged that the government would 'continuously improve' stimulus measures, prepare more contingency plans for the economy, add measures to spur private investment, and stick with a 'moderately loose' monetary policy.

Industrial production expanded 8.3 per cent in March from a year earlier, up from 3.8 per cent in the first two months, the statistics bureau said yesterday. Retail sales rose 14.7 per cent.

Consumer prices fell 1.2 per cent in March from a year earlier, compared with a drop of 1.6 per cent in February. Producer prices fell 6 per cent, the most since Bloomberg data began in 1999.

China's expansion was the weakest since the fourth quarter of 1999, according to Bloomberg data, and less than the 6.2 per cent median estimate of 13 economists.

Growth has slowed from 9 per cent for all of 2008 and 13 per cent in 2007 and remains below the 8 per cent level that the government deems necessary to create enough jobs.

'Exports will continue to drag on growth at least until the final quarter of the year,' said Mark Williams, an economist with Capital Economics Ltd in London. Any recovery this year, will be 'lacklustre at best'. The closure of thousands of factories has cost the jobs of millions of migrant workers, raising the risk of social unrest as China approaches the anniversary of the anti-government protests and crackdown in Tiananmen Square in June 1989.

China's expansion contrasts with recessions around the world. The Organization for Economic Cooperation and Development (OECD) predicts 6.3 per cent growth for China this year, compared with a 4 per cent contraction in the US and a 6.6 per cent decline in Japan. -- Bloomberg, Reuters, AFP