New windows open as neighbours get cosy

S'pore and M'sia look to work on projects together, get industries to join hands

By CHUANG PECK MING
IN PUTRAJAYA

DECADES after they went their separate ways, Singapore and Malaysia are poised to get closer to each other than ever before.

Not only will crossing the border become a breeze, but the two countries plan to develop properties together, complement Singapore's manufacturing skills with Johor's abundant labour and pave the way for electricity sales.

'There are many more areas for potential cooperation,' Malaysian Prime Minister Najib Razak told reporters after what he described as 'productive and fruitful' talks with his Singapore counterpart yesterday.

And his guest, Prime Minister Lee Hsien Loong, agreed: 'There should be more new initiatives that should be taken between both countries,' he said at a joint press conference after an hour-long meeting that saw the biggest-ever Singapore delegation turn up at the regular Malaysia-Singapore Leaders' Retreat.

Two-thirds of Singapore's Cabinet ministers were present at yesterday's pow wow.

The Singapore leader said he had proposed that Malaysia, especially Johor which is keen to build up its Iskandar development region, work with Singapore in industrial and manufacturing projects.

Singapore, skilled in manufacturing, and Johor, which is abundant in land and labour, should complement each other in industries, according to him. And the gains will spread to other industries like logistics and create more jobs.

A new work group on industrial cooperation will be set up to promote economic cooperation between Iskandar Malaysia and Singapore.

The Joint Ministerial Committee will also see if ferry and water taxi services can provide another means of linkage between Singapore and Malaysia.

Mr Najib is keen to sell electricity to Singapore, which is building a framework for importing electricity from neighbouring countries. Mr Lee welcomes the initiative.

'Singapore is very open to importing a certain proportion of our electricity,' he said. 'If the terms are right, if it provides us with an attractive offer, which we can't refuse. Of course, we will be happy to buy subject to proper clearance and safeguards.'

On the likely impact on the environment, Mr Lee said: 'That's something we will be taking seriously in mind. It will affect the immediate neighbours of the power station, which causes cross borders implication as well. (It's) something we have to pay attention (to).'

Other likely areas of cooperation which the two leaders explored are:

Digital broadcasts: Aligning the radio frequency spectrum plans for digital broadcast and broadband service in Malaysia and Singapore will allow them to meet growing demand for digital TV and mobile broadband, improve regional mobile roaming and provide competitive mobile broadband services.

Aviation and airport services: A tie-up between Senai International Airport in Johor and Changi International Airport may provide 'synergy between the two airports and spill-over to business enterprises from Malaysia and Singapore'.

Education: The countries may cooperate in higher education, technical and vocational education and teaching and learning of English. Singapore private educational institutions may also set up campuses across the Causeway.

The leaders agreed that with the thorny Malayan Railway Land issue out of the way, Malaysia and Singapore have been able to explore new areas of cooperation, especially in Iskandar Malaysia. And they were happy with the progress of the joint ventures of their respective investment companies, Khazanah Nasional and Temasek Holdings.

These include the Marina South and Ophir-Rochor developments in Singapore and the 'Urban Wellness' and 'Resort Wellness' projects in Iskandar Malaysia.

Other joint projects in connectivity, immigration, tourism and the environment have also gone well, according to the joint statement. The Rapid Transit System (RTS) linking Singapore and Johor Bahru is on schedule to be completed by 2018.

'A tender was jointly called on Nov 18, 2011 to appoint a consultant to undertake a joint engineering study to develop possible alignments and proposals for the RTS link,' the joint statement said.

Mr Najib said once the study's done, Malaysia will go along with the option that's most viable.

Both leaders don't see the projects slowing down, even with slower growth in the world economy. 'Investments are actually proceeding according to schedule,' Mr Najib said.

Mr Lee said the projects are for the long haul, not based on 'quarter-to-quarter fluctuations'.

Joint projects on track despite uncertain global economy

PUTRAJAYA: Malaysia and Singapore are confident the uncertain global economic outlook will not affect joint venture projects between Khazanah Nasional Berhad and Temasek Holdings which are meant for long term development.

Prime Minister Datuk Seri Najib Tun Razak and his Singapore counterpart Lee Hsien Loong believe their respective countries’ projected economic growth would be sufficient to push the projects forward.

Najib said there were no signs that the overall development of Iskandar Malaysia was slowing down and that the investments were proceeding according to schedule.

“We believe the current economic situation in Malaysia and Singapore would continue at a level that will provide a basis for the private sector to continue to invest in Iskandar, barring something catastrophic,” he said at a joint press conference after the two leaders met at their retreat here yesterday.

Lee said investors in the Khazanah and Temasek projects were interested in the long-term outlook rather than quarter to quarter fluctuations.

He said Singapore, which recorded a growth of 4.3% last year, was expected to see between 1% and 3% growth for 2012, adding that while this was positive, it would also depend on the international scenario.

“The more difficult the external environment, the more important it is for Malaysia and Singapore to cooperate and work closely together,” Lee said.

The two Prime Ministers earlier witnessed the exchange of shareholders agreements between Khazanah and Temasek in relation to the joint investments in M+S Pte Ltd and Pulau Indah Ventures Sdn Bhd.

Owned 60-40 by Khazanah and Temasek respectively, M+S will develop land parcels in Marina South and Ophir-Rochor in Singapore while Pulau Indah, a 50-50 joint venture between Khazanah and Temasek, will develop projects in Iskandar Malaysia.

Khazanah and Temasek also reported to the Prime Ministers on progress made so far, including the appointment of architects and key consultants by M+S for the development of Marina South and Ophir-Rochor.

The two parties are also discussing with banks the financing for projects that have an estimated gross development value of S$11bil (RM27bil). The projects are expected to be completed over the next six years with construction starting in 2013.

Pulau Indah will develop the “Urban Wellness” project, a five-acre (2ha) site in Medini North and the “Resort Wellness” development on a 210-acre (84ha) site in Medini Central.

The gross development value of the projects, which include a wellness centre, serviced residence and a corporate training centre, is estimated at RM3bil.

http://thestar.com.my/news/story.asp?file=/2012/1/6/nation/10212044&sec=nation

Pengerang power plant likely to supply electricity to S’pore

PETALING JAYA: There is a possibility that the sale of electricity to Singapore may come from a power plant to be built at Petroliam Nasional Bhd’s (Petronas) refinery and petrochemical integrated development (Rapid) complex in Pengerang, Johor.

While details on the sale were scarce at press time, sources told StarBizthat the electricity might come from Petronas’ planned power plant, which the state-owned oil firm’s executive vice-president for gas and power business Datuk Anuar Ahmad said last November was required for the Rapid project.

Prime Minister Datuk Seri Najib Tun Razak said following talks in Putrajaya with his Singaporean counterpart Lee Hsien Loong that Malaysian companies were prepared to sell electricity to Singapore.

The RM60bil Rapid project is expected to be commissioned by end-2016 and have multinational oil and gas companies as joint-venture partners.

Growth path: The electricity deal may be part of a strategy by Petronas to grow its gas and power business. Picture shows an aerial view of Petronas' gas processing plants (centre) in Kertih's Integrated Petrochemical Complex.

Besides the electricity sale, both leaders also announced that Malaysia and Singapore might construct an underground link as an expansion of the proposed rapid transit system between Johor Baru and Singapore.

Analysts believe the beneficiaries of an underground link project would beGamuda Bhd and MMC Corp Bhd, which were joint venture partners in the Stormwater Management and Road Tunnel or Smart project in downtown Kuala Lumpur.

Other areas of cooperation include the alignment of radio frequency spectrum plans for digital broadcast and mobile broadband services, the formation of a new work group on industrial cooperation to promote Iskandar Malaysia and Singapore.

Also in the pipeline are cooperation in aviation services between the Senai International Airport and Changi as well as education services. The electricity deal might be part of a strategy by Petronas to grow its gas and power business after acquiring a 30% stake in GMR Energy Singapore Pte Ltd in late September at an undisclosed price as well as investments in the Kimanis and Lahad Datu power plants in Sabah.

GMR is developing an 800MW combined cycle gas turbine power plant on Jurong island, Singapore while the Kimanis plant would be jointly developed by Petronas Gas Bhd in partnership with Yayasan Sabah through NRG Consortium (Sabah) Sdn Bhd.

The Lahad Datu plant would be built by a Tenaga Nasional Bhd-led consortium together with Petronas and a Sabah state entity.

http://biz.thestar.com.my/news/story.asp?file=/2012/1/6/business/10211890&sec=business

Undersea tunnel mulled

PUTRAJAYA: Malaysia and Singapore are looking at the possibility of constructing an underground tunnel to connect the two countries.

Datuk Seri Najib Tun Razak, who met his Singapore counterpart Lee Hsien Loong at their retreat here, said the two governments had commissioned a study on a viable option to improve connectivity.

The Prime Minister told a joint press conference: “We have also agreed to expand the study to include the possibility of an underground road connection between the two countries.”

The two leaders came out from their meeting yesterday smiling for the cameras with ties between the two countries, long hindered by the issue ofKTM Bhd land in Singapore, now at a satisfactory level for new areas of cooperation.

Lee said Singapore was also interested in buying electricity from Malaysia if the terms are right.

“Singapore is in the process of working out a framework to manage the import of electricity. Once it is ready, we welcome Malaysian companies to bid to supply electricity to Singapore. We hope some will succeed,” he added.

Najib said the sale of electricity would be a private sector initiative.

Towards better ties: Najib and Lee sharing a light moment during a press conference at Perdana Putra in Putrajaya yesterday.

“I believe the private sector of both sides will be in a position to determine the right price level when the time comes. I don’t see major difficulties,” he added.

The underground connection suggested is apart from the Malaysian proposed ferry service between Tuas and Puteri Harbour and comes under other means of transportation that the two countries are considering.

Najib said these modes of connectivity are in addition to the five new cross-border bus services launched in September 2010 and the Rapid Transit System link between Singapore and Johor Baru, scheduled for operation by 2018.

Lee also proposed that the two countries explore industrial cooperation in Iskandar Malaysia during the meeting, and the two leaders agreed that a new working group be formed under the Joint Ministerial Committee to promote mutually beneficial twinning of economic activities.

Lee said Singapore was a manufacturing country facing constraints of space and manpower, both of which Malaysia has, including in Iskandar.

He said Iskandar could provide industrial facilities and infrastructure that would allow Singapore companies and other investors to operate partly in the republic and Iskandar.

“The benefits are not just industrial (growth) but also spinoffs in terms of logistics, employment, residents, schools and services.

“Najib said this makes a lot of sense and this is something we want to work together,” Lee added.

Lee also called on the private sector to participate and invest in Iskandar as bilateral relations were good.

Other areas of collaboration discussed included cooperation in aviation and airport services between Senai International Airport and Changi International Airport.

The leaders encouraged the respective airport corporations to explore commerciallTy viable cooperation for synergy between the two airports, spilling over to business enterprises in Malaysia and Singapore.

Both leaders also welcomed Singapore-based private academic institutions to explore investment opportunities in education, including setting up campuses in Iskandar and Pagoh.

http://thestar.com.my/news/story.asp?file=/2012/1/6/nation/10213824&sec=nation

Petronas in talks with oil majors for petrochemical tie-ups

KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) is in talks with several global oil majors including Shell and Exxon Mobil to develop petrochemical plants within its US$20bil refinery complex in Johor, two sources with direct knowledge of the matter said.

The national oil company was also talking to Japanese firms Itochu Corpand Mitsubishi Corp as well as to Dow Chemical Co – the largest US chemical maker – as it sought to tap surging Asian demand and diversify its earnings, the sources told Reuters.

Petronas is expected to make a decision on the partnerships by mid-2012, which signals it is quickly moving beyond the feasibility stage of the project.

“Petronas is getting a lot of interest for the joint-venture undertakings,” said one source who declined to be identified as the talks are ongoing.

“They have moved to the basic engineering and design stage and after this, the tendering process for building the complex will start,” the source added.

Petronas, Shell and Mitsubishi officials in Malaysia declined to comment. Itochu, Dow Chemical and Exxon Mobil were not immediately available to comment.

Petronas first unveiled the Refinery and Petrochemicals Integrated Development (RAPID) project in May and has said the complex would be commissioned by end-2016, which both sources said was on track.

The project is key to Petronas’ plan to join the likes of India’s Reliance Industries in grabbing a larger share in the US$395bil global market for specialty chemicals – high-value raw materials used in products from diapers to higher performance tyres and LCD televisions.

“In terms of markets for petrochemicals coming from RAPID, Petronas is aiming for Myanmar, Bangladesh and parts of the subcontinent,” said a second source. “The potential is there as these are huge markets or in the case of Myanmar, just opening up.”

The RAPID project will include a 300,000 barrel-per-day refinery that produces naphtha, gasoline, jet fuel, diesel and fuel oil.

The first source said the crude feedstock would come mostly from Petronas’ equity projects in Sudan, Chad and eventually Venezuela instead of Malaysia’s own higher quality and expensive crude, domestic production of which is slowing.

The crude feedstock from Petronas equity projects will also be channelled into the petrochemicals and polymer complex, including a three-million-tonne per year naphtha cracker and petrochemical derivatives facility focusing on synthetic rubber.

“Over one million tonnes will be for ethylene and propylene and the rest for high grade specialty chemicals,” said the first source.

“Synthetic rubber is a big thing. Nearly 90% of a tyre is made of synthetic rubber because natural rubber production is declining in Asia, so there is an opportunity for Petronas,” the source added.

The RAPID project gives Petronas’ downstream operations a better chance of staying afloat in times of economic downturns and poor margins as it allows Malaysia’s only Fortune 500 company to tap into its global feedstock sources, analysts say.

“From a Petronas perspective, there is vertical integration opportunity,” said Andrew Wong, lead analyst covering Petronas at Standard & Poor’s in Singapore.

“I think the expectation for a recovery in the petrochemical sector in 2011 did not quite happen due to the external factors and there is concern whether the project will come onstream at a good point in time of the global economic cycle,” he added. — Reuters

http://biz.thestar.com.my/news/story.asp?file=/2011/12/24/business/10156177&sec=business

GIC connection may have given Sunway a leg up

Purchase of Iskandar land for RM25 psf is cheaper than recent deals in the area

By PAULINE NG
IN KUALA LUMPUR

THE Government of Singapore Investment Corporation (GIC) is believed to have played a significant role in Sunway Bhd's acquisition of 691 acres of land in Iskandar Malaysia for RM745 million (S$305.1 million) or RM25 psf, a transaction viewed as beneficial since it is cheaper than recent land deals in the area.

Analysts were mainly upbeat about the move although somewhat taken aback by Sunway's aggressive foray into the special economic zone.

'We are positively surprised by the size of the land,' CIMB said in a report yesterday, noting that the plot in question is the biggest for property development in Medini to-date.

Another broker, Hwang DBS-Vickers, noted its prime location 'at the southern-most tip' of the node. With infrastructure mostly in place, it will take only five to 10 minutes to drive to the Second Link.

This makes its RM25 psf cost even more impressive, observed Hwang analyst Chong Tjen San, especially when compared to recent land deals of RM38-RM65 psf. 'In our view, GIC's 12 per cent stake in Sunway helped consummate this landmark deal,' he said.

Seen more as a partner now, GIC became a shareholder in the wake of the Asian financial crisis of 1997-98 when Sunway founder Jeffrey Cheah sold equity to raise cash. Mr Cheah remains the biggest shareholder, holding nearly 48 per cent.

Already established in the central and northern regions of peninsular Malaysia, Sunway's entry into the Medini zone - albeit in joint venture with Malaysian sovereign wealth fund Khazanah Nasional - will strengthen its presence in the south.

Moreover, its partnership with both GIC and Khazanah could prove advantageous to its planned mixed development. To be completed over 10 years with 65 per cent residential and 35 per cent commercial components, the project has an estimated gross development value of RM12 billion.

Mr Chong believes the implied pricing of RM400 psf for the residential portion - and some 15-20 per cent higher for the commercial portion - is conservative given its prime location. If earmarked as 'an internationally recognised low-density development with a plot ratio of 1x', it would amount to only a fifth of similar developments in Singapore.

Moreover, UEM Land's recent luxury condo sales saw much higher average prices of more than RM700 psf.

However, Sunway Iskandar is not without risks. The increasing number of developments in Medini - as well as in other parts of Iskandar - is a cause for some concern.

Sunway Iskandar would be located next to a RM3 billion wellness township mixed development on 210 acres at Medini Central by E&O, in joint venture with Khazanah and Temasek Holdings.

RHB Research also observed that the high-end projects would start at about the same time - end-2012 or early 2013 - and aim for the same target market - mainly foreign buyers. Competition will also come in the form of other Malaysian builders in Medini, including UEM Land, WCT and Bina Puri.

Under the deal with Khazanah, Sunway will own an initial 38 per cent of the joint venture company and by additional equity subscriptions increase its stake to 60 per cent in 54 months.

Now you and I can also be an independent power producer

Households as clean, sustainable electricity producers?

In the mid-1990s, there were only “big” boys in electricity generation such as YTL Corp, Genting Sanyen and Malakoff. They were popularly known as Independent Power producers' or IPPs and were looked upon with envy as it was alleged that they were making big bucks because of relatively high rates they received from TNB.

Fast forward 15 years. Now you and I can also be an IPP (the term “clean and sustainable electricity producer” is preferred) albeit a very much smaller one but with a difference.

Any owner of a link, semi-detached or bungalow house can now be, subject to approval, a small clean and sustainable energy producer by generating green electricity (as opposed to fossil-fuelled electricity by the big IPPs) and distribution licensee (such as TNB) is obliged to purchase it. What all this means is that if you have a solar photovoltaic (PV) generator at home, you can apply to connect this generator to the grid, and get paid for selling the electricity generated to TNB over the next 21 years.

Solar energy is clean, environmentally friendly and has zero emissions. There is no depletion of natural resources and it is one of the fastest growing energy sources in the world.

And yes the rates are very attractive for generating electricity using solar photovoltaic (PV) technology; it is about four times the normal domestic TNB electricity rates (at RM0.40 per kWh). All you have to do is simply to apply and obtain a feed-in approval from the newly-established Sustainable Energy Development Authority Malaysia (Seda Malaysia), sign a renewable energy power purchase agreement (REPPA) with TNB and install the solar PV system on your rooftop.

On the average, the bungalow is able to produce about 1,000 kWh of electricity per month (based on 10kW installed PV capacity). Given this, the owner may earn about RM1,200 per month (based on FiT rate RM1.20 per kWh if the PV system is commissioned by 2012) and recoup his investment within eight to nine years. The earnings may be even higher if the house owner meets other bonus criteria such as installing as a building-integrated PV system. The current cost of 1 kW solar PV system ranges from RM12,000 to RM14,000.

The interesting thing is that for your average household needs, you purchase the electricity from TNB at between RM0.33 to 42.6 per kWh but when you produce the clean electricity, you can sell it at between RM1.20 to RM1.70 per kWh depending on the installed capacity and the qualifying bonus criteria for solar PV.

The longer the sun shines, the more one can “export” electricity to the national grid during daylight hours (when power is urgently needed) and earn income. The downside and risk is that during cloudy days, the income can be reduced significantly when the sun is not shining. If you apply now, you can lock in these premium rates for the next 21 years!

Unlike the huge IPPs which use natural gas or coal as feedstock to generate electricity, the household does not need to pay for any raw material or fuel because sunshine is free. For as long as the sun is shining, the solar PV panels will generate electricity. Another advantage of solar power is that no extra space is required because the panels can be installed on the rooftop. (Suddenly rooftops have income potential. Many factory owners are now contemplating installing solar PV panels on their rooftop to earn extra revenue while others are approaching factory owners to rent them their roofs.)

On Dec 1 2011, Seda Malaysia invited the public including households, small and not-so-big IPPs (maximum size is 30 MW but only 5 MWp rated capacity for solar PV) to apply and book the amount of green electricity they intended to produce to sell it to the distribution licensee. There are fixed quotas for each of the four renewable energy sources namely biomass (including solid waste), biogas (including landfill), small hydro and solar PV. There was overwhelming response to solar PV especially for the non-individuals.

The good news is that bookings are still open for individuals and households intending to install solar PV systems as there is still available capacity for this category. As at Dec 7, Seda reported that the total unfulfilled quota for solar PV is 6,650 kW; 1,650 kW to be commissioned by the first half 2013, 2500 kW each for second half of 2013 and first half of 2014.

Translating these figures into households, it would mean that about 665 bungalow owners can avail themselves to the remaining capacity (assuming their average capacity is 10 kW). If all of the remaining capacity is taken up by semi-detached owners, the number will increase to 1,330 assuming their installed PV capacity is 5 kW. The figure for typical link houses, assuming an installed capacity of 3 kW, is 2,217 households.

The price guarantee for 21 years has been made possible by the Feed-in Tariff (FiT) scheme implemented by Seda Malaysia. This scheme will be financed by the newly-established Renewable Energy (RE) Fund, to which all electricity users (except for those domestic customers consuming less than 300 kWh per month) will be required to contribute an additional 1% of their electricity bill.

House-owners who do not participate in solar PV electricity generation should not begrudge the payment of the additional 1%. Instead they should view it as one of their contributions to a cleaner and healthier environment. This is their social contribution for cleaner air. The public and community must also share in undertaking this heavy responsibility with the Government.

Dr Pola Singh is a board member of the Sustainable Energy Development Authority (Seda), Malaysia. The views expressed are his own. The public can apply for the feed-in approval via efit.seda.gov.my and more information can be obtained from Seda's official portal at www.seda.gov.my

http://biz.thestar.com.my/news/story.asp?file=/2011/12/13/business/10081546&sec=business

Iskandar Malaysia beats investment target: Najib

Key announcements to come after he meets PM Lee Hsien Loong next month

By MALMINDERJIT SINGH
IN NUSAJAYA, MALAYSIA

MALAYSIAN Prime Minister Najib Razak yesterday announced that the cumulative committed investment into Iskandar Malaysia has reached RM77.8 billion (S$31.9 billion), surpassing its initial five-year target, of RM47 billion by more than 60 per cent.

Mr Najib: Even though 'the prospects for the Iskandar region look brighter than ever', closer links with Singapore could maximise these opportunities for entire region

'So much has been achieved in so short a time, with Iskandar Malaysia already driving the development of a thriving modern metropolis in this southern part of Johor,' said Mr Najib. He was speaking at the fifth anniversary celebrations of Iskandar Malaysia, where he spent the day touring developments in the economic region as well as launching its Five-Year Progress Report.

Ismail Ibrahim, chief executive of Iskandar Regional Development Authority (IRDA), provided a more detailed breakdown of the investments into Iskandar Malaysia. 'Of the total committed investments for the first phase, 59 per cent were domestic investment while foreign direct investment (FDI) made up the remaining 41 per cent, making for a healthy mix of sources of funds.'

According to Mr Ismail, about RM38 billion of the total committed investments have already been actualised and the private sector has played a major role in raising all investments thus far. 'Out of the total cumulative committed investments of RM77.8 billion to date, only RM6.3 billion are funds provided by the government of Malaysia, to fund the development and enhancement of critical enabling infrastructure in Iskandar Malaysia.'

However, he added that the Malaysian government's investment in the region has helped attract more private investments, translating into a ratio of one to 11. 'For every RM1 that the government invests in Iskandar Malaysia, it helps to bring in RM11 of private investment.'

Reflecting this interest from the private sector, 12 new investment commitments were announced yesterday, including a RM100 million agreement with Singapore-based Raffles Campus to develop an international school in Iskandar Malaysia.

While noting the additional 'RM1.73 billion to the current total of RM77.8 billion' these new projects have generated, Mr Najib announced that additional 'RM1.05 billion in projected investments would be generated from the knowledge-economy over the next seven years', as a key pillar of Malaysia's Economic Transformation Programme.

Mr Najib was confident that the private sector participation, domestically and overseas, would allow 'Iskandar Malaysia to continue to thrive' even if growth in this part of the world was set to slow due to the current global economic uncertainties.

'Despite being cautious and preparing ourselves for contingencies, we expect the Malaysian economy to continue growing at a robust 5 per cent in the coming year.'

One of the key strategic imperatives provided in the Five-Year Progress Report to underpin the continued robust growth of the Iskandar Malaysia development over the next five-years and beyond is closer relations with Singapore.

The report said that there was a need to target investors from Singapore and focus on strengthening Iskandar Malaysia-Singapore partnerships in identified growth sectors that can bring mutual benefit so as to attract more capital.

Mr Najib noted this as he said that even though 'the prospects for the Iskandar region look brighter than ever', closer links with Singapore could maximise these opportunities for the entire region. 'Further improvements in links between JB (Johor Bahru) and Singapore will also help create a mutually beneficial economic unit - for in today's increasingly urbanised world, competition is between regions as much as it between countries, and regions must work hard to make themselves truly competitive on a global scale.'

Mr Najib added that due to the strategic location of Iskandar Malaysia, 'there is synergistic complementarity between Iskandar and Singapore' and therefore it makes sense for the two to collaborate in mutually beneficial projects.

He stopped short of identifying these projects and said that these will be announced in January next year when he meets Singapore Prime Minister Lee Hsien Loong for bilateral consultations as there were 'significant announcements to be made then' and he 'did not want to take the shine off them' by talking about them now.

Mr Najib did however say that the resolution of the POA (Points of Agreement) impasse between both countries last year has cleared the way for closer cooperation and that he will be looking to update on initiatives to improve connectivity between Iskandar and Singapore, as well as on an iconic project between both sides in the communique issued when both leaders meet.

NOL (LIM&TAN)

S$1.12-NOLS.SI

? NOL said it is “currently not making another bid for a stake in Hapag-Lloyd (Hapag) . . . . . it will make necessary announcements when appropriate”.

? A German paper last week reported of talks between NOL and TUI, which owns 38% of Hapag. The article also noted that NOL’s previous bid had valued Hapag at 3.5 bln euros / S$6 bln at today’s exchange rate, and that a deal between TUI and an investment company in 2009 had valued Hapag at 4.45 bln euros.

? NOL’s “clarification” however does not, in our opinion, at all rule out it making another go for Hapag, not when the case for acquisition (or merger) is as valid as ever.

(Last week, Mediterranean Shipping of Switzerland, and CMA CGM of France announced an alliance, which will make them the largest in the world with 21.7% market share, vs the current leader Maersk with 15.8%.)

? Assuming NOL does go after Hapag, let’s examine likely impact.

- Because of the steep drop in its share price, NOL’s current market cap is only about S$2.9 bln.

- And with its massive order for new large vessels (as has Hapag according to media reports), the main issue would be funding.

- International banks, especially European, are not presently, in the mood to lend given the ongoing crisis.

- Convertible bond issue is not an attractive option (for sure unlikely an “acceptable” convertible premium), given NOL’s depressed share price.

- Which means a massive rights issue, and unfortunately, we have seen rather violent market reaction, eg K-Reit, which recently fell 16% on such news.

- Furthermore, with its latest NAV of US$1.14 / S$1.46, a deeply discounted pricing for the rights would be shareholders value destruction.

? NOL therefore merits at best a NEUTRAL rating given its unattractive fundaments (eg operating in a depressed sector: also last week, MISC of Malaysia said it would quit container shipping after losing US$789 mln over 3 years.).

? Technically, NOL has been stuck in the $1.00-1.17 range for the last 4 months.

United Engineers - Milking mixed developments (CIMB)

Current S$1.94

Target S$2.14

Previous Target S$2.12

Up/downside 10.4%

Balance sheet has been boosted by development properties, with mixed developments at one-north and UE BizHub East also contributing soon. In any softening of the property market, UE should be well-placed to make acquisitions.

We factor in less bearish assumptions for mixed developments, offset by lower ASPs for its Bendemeer site, resulting in +2%/-30% EPS adjustments, and a slightly higher RNAV and TP (still at 45% disc to RNAV). Maintain Outperform.

Balance sheet ideal for acquisitions

We expect stronger operating cash flows in 2012/13 with recurring income from the one-north mixed development and UE BizHub East. Cash flows should be further boosted by proceeds from completion of The Rochester residential development.

With operating cash balances more than sufficient to meet capex requirements, net gearing is estimated to drop to 0.4x (from 0.5-0.7x in 2008/09). This leaves ample room for acquisitions to 2008’s net gearing of 0.7x and management’s target of 1x, with a S$500m MTN programme as an available funding facility.

Mixed developments as resilient assets

We expect earnings from mixed developments to be rather resilient. Rents at UE Square had been less volatile in 2008/09 with occupancy staying consistently close to 100%. Given their non-prime locations, we expect affordable rental rates and similar profiles for upcoming mixed developments. The Rochester Mall has also been almost 100% leased.

Undemanding valuations

The market is pricing in an additional 9-11% drop in asset values, in our estimation. This compares with an implied 1.5% drop in RNAV if current asset values are pegged to 2009 levels. With its balance sheet stronger in this cycle than in 2009, and earnings from more cash-generative assets, we believe such valuations are unwarranted.

Don’t rule out special dividends as 2012 is UE’s 100th anniversary, with cash flows benefiting from Rochester sales proceeds. Special dividends could lift its dividend yields beyond 5%.

Raffles Medical Group: Strong track record; still a BUY (DBSV)

Expect good track record to continue. Raffles Medical Group (RMG) has delivered consistent core earnings growth over the years, even amidst turbulent times. Its strong track record makes it a good stock to own as we enter into 2012, given the global macroeconomic uncertainties. From FY06 to FY10, RMG's revenue and core earnings expanded at a healthy CAGR of 15.5% and 28.1%, respectively. We forecast its core earnings to increase at 15.0% for FY11 and a further 19.5% in FY12. This would be driven by continued patient load growth, higher revenue intensity per patient, expansion of specialist services (especially sub-specialties) and further traction gains from its Shanghai medical centre (currently still loss-making).

Defensive earnings provide stability. We see limited risks from RMG's defensive earnings, although the group is not entirely immune to a macroeconomic slowdown as some patients might practice restraint over their discretionary spending. This would come in the form of postponing elective surgeries and/or seeking cheaper alternatives in the public sector or regional competitors.

Healthy industry fundamentals. We remain sanguine on the prospects of Singapore's healthcare sector. Growth is expected to be fuelled by demographic changes and rising affluence in the region, resulting in higher medical tourism dollars. Although RMG's new Specialist Medical Centre in the Orchard area would come on stream in 1H13 and its hospital expansion (additional 102,408 sf) estimated to be ready only by FY14, this would be partially mitigated by the creation of ~15,000 sf of new medical space at its existing hospital in 1H12. This involves the relocation of its back office operations, thus allowing the group to open new specialist clinics to cater to rising demand for higher quality private healthcare services.

But competitive landscape is intensifying. The targeted opening of Parkway Novena Hospital in Jul 2012 and Singapore HealthPartners' Connexion in 2013 would undoubtedly create additional competitive pressures for RMG. But we believe that these developments could raise the reputation of Singapore's medical hub status and attract more foreign patients and other health services here.

Quality healthcare play. Current valuations for RMG do not appear demanding, in our view, with the stock trading at 19.9x FY12F PER. While this is comparable to its peers' average of 19.7x, RMG commands significantly stronger margins and ROE. Maintain BUY with an unchanged fair value estimate of S$2.61, based on 24x FY12F EPS.

Ascendas REIT: Acquisition of two Singapore assets (OCBC)

New additions expected to be yield accretive. Ascendas REIT (A-REIT) yesterday announced that it had completed the acquisition of two Singapore assets, namely Corporation Place and 3 Changi Business Park Vista, for a purchase consideration of S$99m (S$159.6 psf NLA) and S$80m (S$487.0 psf NLA), respectively. The acquisitions are likely to strengthen the group's market position in the Jurong Lake District and Changi Business Park area, and provide opportunity for greater operational efficiency, given the location and specifications of the properties. According to management, the acquisitions are also expected to be yield accretive, adding an annualized 0.10 S cents per unit to its DPU (based on 40% debt and 60% equity funding).

Details on Corporation Place. Corporation Place is a seven-storey highspec industrial building in the established Jurong industrial estate with a GFA of 76,185 sqm and NLA of 57,645 sqm, and features good building specifications and excellent footage. Current occupancy is understood to be around 80%, with quality tenants such as Rockwell Automation, Hewlett Packard and Panasonic. Given its quality specifications, configuration and good location, A-REIT is optimistic of its future leasing and renewal prospects.

Details on 3 Changi Business Park Vista. 3 Changi Business Park Vista is a six-storey building and A-REIT's sixth property within the Changi Business Park. It has a GFA of 18,388 sqm and NLA of 15,261 sqm, and is easily accessible via expressways. Currency occupancy is also strong at 95.0%, in line with its existing business park occupancy of 94.8%, as at 30 Sep. Management expects greater efficiency and economies of scale in operations, given its close proximity to its other properties.

Maintain BUY. We understand that A-REIT is expected to incur an estimated transaction cost totaling S$2.21m, including S$1.79m in acquisition fees payable. We estimate that the blended NPI yield for the acquisitions to be around 7% (above the overall FY11 NPI yield of 6.5%), and the group's aggregate leverage to rise to around 36%, up from 31.5% seen in Sep end. Factoring in contributions from the two acquisitions, our DDM-based fair value is now raised marginally to S$2.24 (S$2.23 previously). We continue to like A-REIT's proven track record, market leadership and well-diversified portfolio. Even funding all its committed investments, we believe A-REIT still has close to S$400m of debt headroom before its leverage hits the 40% mark, placing it in a comfortable position to fund future investment opportunities. Maintain BUY on A-REIT.

FJ Benjamin Holdings Ltd - Expect weaker consumer demand (DBSV)

HOLD S$0.28 STI : 2,728.31

Downgrade from Buy

Price Target : 12-Month S$ 0.33 (Prev S$ 0.48)

Reason for Report : Company update

Potential Catalyst: Store growth and better discretionary consumption

DBSV vs Consensus: FY13F below on weaker discretionary spending

• Turning cautious on mid-term outlook even though 1Q12 results in line

• FY12F/FY13F earnings cut by 11%/12%

• Downgrade to Hold, TP lowered to S$0.33

Turning cautious on mid-term discretionary spending. Consumer sentiment is expected to weaken, hence we are turning cautious on FJB’s mid-term outlook. As a regional mid-to-high end fashion and apparel distributor and retailer, we believe FJB will be sensitive to changes in consumer demand. The 2012 outlook for GDP growth globally is now largely lower than when we first initiated coverage of FJB in August this year.

1Q12 results in line but outlook is weaker. 1Q12 results met our expectations, supported by contributions from HK timepieces. We will be keeping tabs on FJB’s performance over the seasonally stronger 2Q12 (Christmas shopping and year-end holiday season) as well as retail sales generally, as an indicator to 2H12’s performance. We believe consumer sentiment will weaken on expectations of slower economic growth, and we expect discretionary spending to be affected. Management is targeting for 190 stores by FY12F vs 165 currently. However, we believe this to be aggressive.

FY12F/FY13F earnings lowered by 11%/12%. Given the poorer regional economic outlook, we are reducing our earnings expectations for FY12F/FY13F by 11%/12%.

Downgrade to Hold, TP reduced from S$0.48 to S$0.33. The stock currently trades at 11x FY12F PE. Given the lowered earnings estimates, TP lowered from S$0.48 to S$0.33 based on 12x FY12F earnings, in line with peer average. Downgrade to Hold.

PROPERTY / SHARE TRANSACTIONS (LIM&TAN)

? Only 3 property companies bought back their own shares yesterday when property stocks came under selling pressure:

- SC Global bought back 100,000 shares at $1.0959 each. It last bought 100,000 shares on Oct 6th at 98 cents each. The curious thing is SC Global’s sales have been crawling at a snail’s pace even before the latest measures to deter foreign buying (only 2 units at the Marq were sold between May - Nov, albeit at record prices).

- OUE, which has hardly any exposure to residential segment, bought 900,000 shares at $2.0918. It bought a total of 3.14 mln shares between Nov 30 and Dec 6, when the stock fell below $2.10, paying $2.03 average.

- HO BEE bought 452,000 shares at $1.13 each (low of $1.09). Ho Bee has since May 24th bought back 29.6 mln shares, at prices ranging from $1.09 - 1.43, representing 40% of the current mandate to buy up to 73.31 mln shares.

? Chris Lim, non-family director at HOTEL PROP bought 112,000 shares at $1.787 a share, which is almost 10 cents or 5.2% below what he paid for 138,000 shares the day before.

? ST ’s headline today carried analysts’ warning that home prices may fall 30%, implying that the authorities here would knowingly implement measures that would end up more than wiping out home buyers’ equity! (The current LTV limit is 80%.) History has shown that property prices would suffer severe decline when the overall macro picture really turns, and usually because of external factors, eg the 1997/98 Asian crisis; 9/11; 2004/5 SARS; 2008 Financial Crisis.

Ascendas REIT - Small but accretive (DBSV)

HOLD S$1.92 STI : 2,728.31

Price Target : 12-Month S$ 2.14

Reason for Report : Acquisition

Potential Catalyst: Acquisitions/ strong operational earnings

DBSV vs Consensus: In line, we have not factored in acqusitions in our numbers

• Acquires 2 industrial properties for S$179m

• Deepens presence within Jurong Lake District and Changi Business Park

• Maintain HOLD and S$2.14 TP

Acquires 2 industrial properties for S$179m. A-REIT announced the acquisition of 2 buildings in Singapore - 2 Corporation Place (S$99m,S$189psf GFA) and 3 Changi Business Park Vista (S$80m, S$482 psf GFA) - for a total consideration of S$179m. Located within Jurong Lake District and Changi Business Park respectively, the acquisitions will further deepen their already established presence within the 2 industrial hubs. The properties are multi-tenanted buildings housing quality tenants i.e MNCs involved in a variety of valued added sectors like IT, Electronics and engineering.

Initial yields estimated at 7.0%; accretive to earnings with potential upside. Initial yields for the properties are estimated to be in the range of c7.0%, higher when compared to its implied trading yield of close to c6.25%.The properties will be funded by debt - gearing as of Sept’11 is 31.5% and is expected to head to c37.5% after accounting for all its capex requirements by end 2013. We have revised our estimates slightly up by 0.7% in FY13 as we incorporate the acquisition in our numbers. In addition, we see potential upside at 2 Corporation Place, which is only 80% occupied currently; the manager remains confident of improving that given the property’s good accessibility.

Positive long-term prospects in Jurong/Changi Business Park regions; maintain HOLD and S$2.14 TP. While we remain cautious on the outlook of Business Parks/Hi-tech space performance in the immediate term (refer to Industrial REIT sector report dated 8th Dec’11), we acknowledge the longer term benefits of having an increasing exposure in these 2 established hubs. This allows A-REIT to offer new/existing tenants a variety of space choices in these locations. Maintain HOLD. S-REIT offers a FY12-13F yield of 6.7-7.0%.

Techcomp (Holdings) Limited (KE)

Background: Techcomp is a manufacturer and distributor of advanced scientific instruments. Its proprietary brand of analytical instruments is mainly used in laboratories for diverse industries, ranging from materials analysis and testing to biotechnology, pharmaceuticals, medicine, food and beverage, and forensics. It has manufacturing facilities in Shanghai and Europe, and distribution networks throughout Southeast Asia, South Asia, Australia, the Middle East and Europe.

Recent developments: Techcomp has received approval in principle for its proposed dual listing on the Stock Exchange of Hong Kong (SEHK). Subject to final approval, the stock is expected to commence trading on SEHK on 21 December 2011 and its stock code would be 1298.HK. The rationale for the listing is to gain access to a larger pool of capital market investors.

Key ratios…

Price-to-earnings: 6.9x

Price-to-NTA: 1.5x

Dividend per share / yield: S$0.01 / 2.5%

Net gearing: 26.8%

Net debt as % of market cap: (21.2%)

Share price S$0.400

Issued shares (m) 232.50

Market cap (S$m) 93.0

Free float (%) 40.7

Recent fundraising activities Nil

Financial YE

31 Dec Major shareholders

Founder Lo Yat Keung – 48.4% Kabouter Management – 10.0%

YTD change -4.76%

52-week price range S$0.300-0.510

Our view

Demand expected to be stable. Government and academic institutions are key spenders on life sciences and analytical instruments. Their budget is usually more long-term in nature, and consequently, ensures stable demand for Techcomp’s products. The increase in such demand is expected to offset some private-sector decline. The company has also identified Asia as a key region of growth, particularly in China and India, while European demand would remain steady as customers there are driven to buy lower-priced products. Overall, management expects to see continual growth in its topline next year.

One-off expense would drag down net margin. Techcomp’s net profit this year would be affected by a one-off expense related to its dual listing. In addition, administrative expenses were comparatively higher following increased business activities and the acquisition of Precisa in 1Q10. Its second-half is seasonally stronger, but with net profit of only US$0.5m in 1H11, it would need a very strong 2H11 just to match its FY10 performance.

Can dual listing lift valuation? In general, the valuation on the SEHK is higher than that on the SGX. Techcomp hopes to achieve a higher valuation for its shareholders through such a listing. Its peers are trading at trailing PERs of 13-27x on various exchanges, while it currently trades at FY10 PER of 6.9x. Given that this is a listing by way of introduction, no new shares would be issued and liquidity could be a concern. Therefore, it remains to be seen how Techcomp would perform when it starts to trade on 21 December 2011.

ComfortDelgro (KE)

Room for earnings upgrade. Following ComfortDelgro’s revision of its taxi fare structure early this week, we caught up with management yesterday. While the fare changes should go some way towards helping taxi drivers cope with the rising costs, particularly diesel prices, we see no immediate impact on the group’s profitability. Management said the group currently has no plan to raise its cab rental charges, but we believe there is leeway to do so in the future as the fees were last adjusted in 2000. We also see the ever-increasing prices of certificates of entitlement as another cost-push factor.

Taking the lead. The fare changes will take effect from Monday. ComfortDelgro said the revision, which included both increases and reductions in fares and surcharges, was made to better match the changing pattern in the demand for services (the last adjustment was in December 2007). The group is the largest taxi operator in Singapore with about 15,700 taxis out of a total fleet of 26,970, according to Land Transport Authority figures as of end-October. Hence, we expect other smaller operators to follow suit and announce fare revisions in due time.

Commuters expected to pay more. Besides extending the peak periods to include weekends and public holidays, ComfortDelgro has increased flag down fares by $0.20 and distance fares by $0.02. Peak period surcharge, on the other hand, will be lowered to 25% of the metered fare from 35% currently. Call booking charges, too, will be reduced to encourage commuters to call for a cab. At present, the group handles 2.4m bookings a month, up about 47% since SMS and smartphone taxi booking services were introduced three years ago.

Preferred land transport pick. ComfortDelgro remains our top pick in the land transport sector for its relatively more resilient earnings profile and compelling valuation vis-à-vis its peer, SMRT Corp. We keep our FY11-13 EPS forecasts largely unchanged for now. Our target price of $1.70 is still pegged at 15x FY12F PER. Reiterate Buy.

Olam International - Well-anchored (CIMB)

Current S$2.37

Target S$3.17

Previous Target S$3.17

Up/downside 33.8%

Olam stands out among peers for its recession-proof portfolio and earnings track record. It proved its mettle in 3QCY11 when peers had fallen prey to economic turbulence.

Olam remains our top pick in the commodities sector. Fears over its cotton exposure have been overdone, in our view. Valuations are attractive at 1 std deviation below its historical 6-year mean. We maintain our forecasts, Outperform and TP (15x CY13 P/E).

Anchored by defensive portfolio

We expect Olam to outperform its peers as investors come to appreciate its earnings resilience amid macroeconomic uncertainties. While industry players have been caught by gyrating commodity prices and slowing demand, Olam has continued to lift its earnings, volume and margins. A defensive portfolio, comprising mainly demand-inelastic edibles, is a desirable trait, especially in uncertain times.

Cotton fears overdone

We believe recent fears of potential cotton impairments have been overplayed. The worst should be over as cotton markets are back in contango.

Olam was not spared from industry-wide defaults, but these had been accounted for in 4QFY11 and 1QFY12. Its cotton division remained profitable throughout and we do not expect a resurgence of the same problems.

Financial flexibility

We believe Olam is in a position to capitalise on M&A opportunities amid industry consolidation, thanks to its strong balance sheet and access to Asian sources of funding.

We see value emerging at 1 std deviation below its historical 6-year mean. Our TP remains based on 15x CY13 P/E, its mean during the 2009 downturn.

Riverstone Holdings (KE)

Background: Riverstone is an established cleanroom and healthcare glove manufacturer with production facilities in China, Malaysia and Thailand. It also produces other cleanroom consumables such as finger cots and face masks.

Recent development: In 3Q11, Riverstone recorded a 29.8% YoY rise in revenue to RM71.0m, attributed to higher production volume from additional production lines. However, gross margins contracted by 9.8ppt YoY, reflecting escalating raw material costs and the depreciating US$.

Key ratios…

Forward price-to-earnings: 8.1x

Price-to-NTA: 1.4x

Dividend per share / yield: (interim) RM0.022 / 2.2%

Net cash/(debt) per share: RM0.10/$0.25

Net cash as % of market cap: 25.5%

Share price S$0.400

Issued shares (m) 317.9

Market cap (S$m) 127.146

Free float (%) 33.6

Recent fundraising activities Aug ’10: 1-for-5 rights issue of 61.9m warrants (issue price S$0.02, ex price S$0.31; 53m outstanding warrants remaining)

Financial YE 31 December

Major shareholders CEO Wong Teek Son (50.6%) ED & COO Lee Kai Keong (13.0%) ED & Grp Bus. Dev. Mgr Wong Trech Choon (4.0%)

YTD change -15.6%

52-week price range S$0.33-0.52

Our view

Reversal of raw material prices and US$. Raw material prices have experienced record-highs in the first half of the year. Since then, prices for nitrile fell by 46% from their peak and latex slipped by 38%. This coupled with a rally in the US$ against the ringgit will be fully reflected in 1Q12.

Quick on its feet. A few of Riverstone’s customers in Thailand, such as HDD maker Western Digital, were affected by the Thai floods and had temporarily suspended orders. The firm was quick to divert its orders to new customers and avoid any excess inventories. Its Thai plant still operates at almost full capacity, accounting for 15.1% of its FY10 revenue.

Steady expansion. Riverstone is expected to record higher production volume from the completion of an additional single line this month. Another single line will be added in 1Q12 to maintain its expansion momentum, bringing its total annual capacity to 2.5b gloves. The company plans to add more lines to its existing factories in the coming year.

Dividends maintained. The company is expected to continue to pay out at least 45% of its profits. According to Bloomberg consensus, the stock is trading at forward PER of 8.1x, largely in line with its competitors’ 9.3x.

SINGAPORE PROPERTY (LIM&TAN)

? The latest measure - additional buyers’ stamp duty (ABSD), is hardly a “complete” surprise:

- Primary sales have been strong, no doubt due to depressed borrowing costs, and which has attracted attention of the authorities, especially the Finance Minister (this bears watching ).

- Property prices have continued to rise, albeit more moderately in recent times, despite concerns of likely impact of the eurocrisis, and slowdown in the US.

- Signs of increased speculative activity, evidenced in recent overnight queue at launch of Bedok Residences going for $1300 psf (!).

- Significantly increased participation by foreigners and PRs.

? The way ABSD will work is as follows:

- Foreigners and corporate entities have to pay an additional 10%;

- PRs will pay the additional 10% when they buy second and subsequent homes;

- Singaporeans will pay additional 3% when buying their third property or more.

? The growing presence or participation of foreigners in the private residential market can be seen thus:

- 19% of all private properties sold in H1 ’11 vs 7% in H1 ’09;

- In the prime-and-mid-prime districts, nearly 25% of caveats lodged in Q3 ’11 vs 16% in 2010 and 13% in 2009;

- In the suburban mass market segment, from 5% in 2009 to 7% in 2010 and 15% in Q3 ’11.

? Property stocks will no doubt take a hit, and likely centered on the purer local residential plays - City Dev, SC Global, Wing Tai, Oxley.

? Stocks like CapitaLand, Keppel Land may be less adversely affected given their increased focus outside Singapore; Ho Bee, having sold off most of its residential properties and now focusing on One North.