Published August 6, 2005 in BT,
In broker jargon, a 'mild correction'
IF this week were looked at in isolation, the Straits Times Index's movements would read: two days of gains followed by three days of losses culminating in yesterday's alarming 23.52-point drop to 2,338.97. Extend the frame of reference a bit further back, and the picture isn't so dramatic - in the two weeks leading up to the start of this week, the index had risen almost exactly 100 points or 4.3 per cent. This, by any standard, is a sizeable advance - fuelled in no small part by the government's property measures - so it stands to reason that a sizeable correction can reasonably be expected. As it turns out, the loss for this week was only 14 points or less than one per cent which in broking parlance would be considered a 'mild correction'. Wall Street's Thursday drop in response to oil crossing US$61 per barrel was probably the main reason for the selling yesterday, since all regional markets were similarly depressed.
Oil and gas, rig builders and shipping continued to play central roles throughout the week, with the likes of SPC, KS Energy, Ezra, SembCorp Maritime, STX PanOcean, NOL and Cosco all seeing active trading while posting big price rises.
What was noticeable was the loss of momentum in the previous week's big plays, namely, banks and property. CapitaLand and DBS, for instance, started off the week with a bang, shooting up 19 cents and 50 cents to $3.02 and $16.60 respectively, but by mid-week showed signs of strain. CapitaLand finished at $2.99 yesterday, down five cents while DBS was unchanged at $16.50.
Also noticeable was the significant impact that broker reports had on the stocks concerned - STX's Thursday rejuvenation, for example, came courtesy of a CSFB 'outperform'; Fu Yu's collapse came after 'hold' calls from Kim Eng and Phillip Securities.
Meanwhile, compact disc firm Anwell Technologies' shares plunged mid-week after the company issued a profit warning, while the seemingly unstoppable Hyflux Ltd encountered selling yesterday after it released its first-half results. Phillip Securities was among the houses to call a 'sell' on Hyflux's shares, saying it has adjusted its earnings forecasts downwards for FY05 from $54.1 million to $50.2 million to take into account lower margins and lower core earnings. 'By using 19x P/E and FY06 core EPS of 12 cents, we arrive at the fair value of $2.28. We think the stock is overvalued now. Downgrade from HOLD to SELL on valuations,' it said. Similarly, CIMB-GK Goh downgraded Hyflux from 'outperform' to 'neutral' stating that 'Hyflux's share price has soared nearly four-fold within a year, but its FY05-06 PE multiples have only moved from the 20-25x range to 30-35x due to earnings upgrades . . . current valuations appear rich, given the risk of unproven execution. Should there be any delay in the award of contracts, disappointment in 3Q core earnings could lead to share price weakness.' Hyflux yesterday lost 12 cents to $3.56.
Sunday, August 07, 2005
Friday, August 05, 2005
A-REIT : BT
Published August 5, 2005 in BT
A-Reit manager refutes talk it overpaid for assets
It says disclosures adequate for investors to form own judgement
(SINGAPORE) The manager of Ascendas Real Estate Investment Trust (A-Reit) yesterday refuted market comments that the trust has been overpaying for its asset acquisitions and then leasing back buildings to sellers at higher-than-market rents.
In the market, these are called sale-and-leaseback deals. And A-Reit suggested one reason why its purchase price and rentals for such deals are seen to be higher than market values. Its deals, said A-Reit, often comprise not only the real estate but also equipment like automated storage and retrieval systems (ASRS) in the case of logistics facilities.
ASRS allow the tenant to make full use of their space, by stacking goods right up to the ceiling. 'Given these features, we can achieve a 10 per cent higher per square foot monthly rental for such space compared with conventional warehouse space rental of $1 to $1.20 psf,' said Ascendas-MGM Funds Management CEO Tan Ser Ping. On account of this, A-Reit would pay the vendor a higher price and in return, the Reit is able to command a higher rental from leasing back both the property and ASRS to the seller.
Mr Tan also emphasised yesterday in an e-mail response to BT's queries that to minimise the business risks from such sale and lease-back (SLB) deals, Ascendas-MGM has stringent evaluation criteria.
'We look at the location and quality of the property, as well as building specifications. It's important that the building isn't highly specialised so that it will allow for alternative uses by other tenants if the existing one vacates,' he said. A-Reit also evaluates the credit-worthiness of the SLB tenant and typically requires either security deposits or bankers' guarantees for up to 24 months from the tenant, Mr Tan noted. 'In fact, there have been instances where we rejected investment opportunities on grounds that we were not comfortable with the credit-worthiness and long-term sustainability of the proposed tenant's business, but were subsequently picked up by another investor,' he added.
A-Reit has come under scrutiny following Temasek chief executive Ho Ching's speech last week, in which she warned investors of the potential hazards in the Singapore Reit market. Without naming any Reit, she pointed, among other things, to the potential dangers when a Reit manager agrees to buy assets at highly inflated prices and the seller or vendor agrees to lease back the asset, also at inflated rents which are well above market rates. Such an arrangement enables both buyer and seller to meet their respective financial targets, but may prove dangerous to Reit unit holders. Said Ms Ho: 'Imagine what happens if the economy takes a nose dive, and the troubled vendor goes belly up. The trust manager would have to scramble to find replacement tenants. Rentals would realistically be much lower than the previously inflated level. 'The unit holders would be hit with a drop in distribution yield. The value of the asset in the trust will similarly take a serious beating.'
Not everyone is convinced with A-Reit's answers yesterday. 'The point about getting a higher price and rent because of the ASRS is, I think, a red herring. How many properties in A-Reit's total portfolio have ASRS?' said a seasoned industry observer. He may have a point. An Ascendas-MGM Funds spokeswoman told BT that it had only two logistics assets with ASRS. The trust's portfolio also includes light industrial, high-tech and business park space.
Industry sources told BT that A-Reit bought IDS Logistics Corporate HQ, TT International Tradepark, C&P Logistics Hub, Fedex Building and 7 Changi South at prices ranging from $140 to $217 psf of net lettable area. This represents premiums of 75 to 97 per cent above the current replacement costs of the buildings.
A veteran property valuer told BT an ASRS system in a logistics facility would account for about 5 per cent of the facility's real estate value. So that would not account for the big spread between A-Reit's purchase price of the assets and the buildings' replacement costs. 'Perhaps they are counting on property rental and capital values appreciating in the future. So it depends on the view you take of the market,' he suggested.
In a similar vein, Ascendas-MGM's Mr Tan said: 'Price and value are essentially based on business judgement on a willing buyer, willing seller basis. 'Price at a point in time is one's perception of not only the current intrinsic value of an asset, but more importantly, also of its future potential. 'Every asset has a price. The questions are: Where is the benchmark, and what is the right price? 'We've acquired some income-producing investment properties at prices which we think represent fair value based on our investment criteria and assessment of the market.' At the end of the day, it's up to investors to decide whether they want to invest in A-Reit. 'We are very transparent and our disclosures are certainly adequate for discerning investors to evaluate and form their own judgement on our performance,' said Mr Tan.
A-Reit has delivered total returns to unitholders of 192 per cent since its listing in November 2002. This comprises 166 per cent from capital gains from appreciation of A-Reit's unit price, and another 26 per cent from distributions paid out to unitholders. Its property portfolio has increased from eight properties worth about $607 million at listing to 44 worth $2.3 billion.
Comments - BT shifts focus fm Suntec to A-REIT. Time to monitor A-REIT price and pick up bargains when the yield hits above 5%. Based on the latest quarter DPU, that would be $2.37. I started to buy today at $2.38.
A-REIT is in the midst of new acquisitions which should bring their yield up even further. Based on recent SGX announcements, they'd done a new revaluation (higher) of their existing properties which shld be a precursor to increasing their debts for the new acquisitions. So, either they are planning the new acquisitions without issuing new shares or likely, issuing fewer new units.
Disclaimer : The above is just my opinion, do not rely on it to make your investment decisions
A-Reit manager refutes talk it overpaid for assets
It says disclosures adequate for investors to form own judgement
(SINGAPORE) The manager of Ascendas Real Estate Investment Trust (A-Reit) yesterday refuted market comments that the trust has been overpaying for its asset acquisitions and then leasing back buildings to sellers at higher-than-market rents.
In the market, these are called sale-and-leaseback deals. And A-Reit suggested one reason why its purchase price and rentals for such deals are seen to be higher than market values. Its deals, said A-Reit, often comprise not only the real estate but also equipment like automated storage and retrieval systems (ASRS) in the case of logistics facilities.
ASRS allow the tenant to make full use of their space, by stacking goods right up to the ceiling. 'Given these features, we can achieve a 10 per cent higher per square foot monthly rental for such space compared with conventional warehouse space rental of $1 to $1.20 psf,' said Ascendas-MGM Funds Management CEO Tan Ser Ping. On account of this, A-Reit would pay the vendor a higher price and in return, the Reit is able to command a higher rental from leasing back both the property and ASRS to the seller.
Mr Tan also emphasised yesterday in an e-mail response to BT's queries that to minimise the business risks from such sale and lease-back (SLB) deals, Ascendas-MGM has stringent evaluation criteria.
'We look at the location and quality of the property, as well as building specifications. It's important that the building isn't highly specialised so that it will allow for alternative uses by other tenants if the existing one vacates,' he said. A-Reit also evaluates the credit-worthiness of the SLB tenant and typically requires either security deposits or bankers' guarantees for up to 24 months from the tenant, Mr Tan noted. 'In fact, there have been instances where we rejected investment opportunities on grounds that we were not comfortable with the credit-worthiness and long-term sustainability of the proposed tenant's business, but were subsequently picked up by another investor,' he added.
A-Reit has come under scrutiny following Temasek chief executive Ho Ching's speech last week, in which she warned investors of the potential hazards in the Singapore Reit market. Without naming any Reit, she pointed, among other things, to the potential dangers when a Reit manager agrees to buy assets at highly inflated prices and the seller or vendor agrees to lease back the asset, also at inflated rents which are well above market rates. Such an arrangement enables both buyer and seller to meet their respective financial targets, but may prove dangerous to Reit unit holders. Said Ms Ho: 'Imagine what happens if the economy takes a nose dive, and the troubled vendor goes belly up. The trust manager would have to scramble to find replacement tenants. Rentals would realistically be much lower than the previously inflated level. 'The unit holders would be hit with a drop in distribution yield. The value of the asset in the trust will similarly take a serious beating.'
Not everyone is convinced with A-Reit's answers yesterday. 'The point about getting a higher price and rent because of the ASRS is, I think, a red herring. How many properties in A-Reit's total portfolio have ASRS?' said a seasoned industry observer. He may have a point. An Ascendas-MGM Funds spokeswoman told BT that it had only two logistics assets with ASRS. The trust's portfolio also includes light industrial, high-tech and business park space.
Industry sources told BT that A-Reit bought IDS Logistics Corporate HQ, TT International Tradepark, C&P Logistics Hub, Fedex Building and 7 Changi South at prices ranging from $140 to $217 psf of net lettable area. This represents premiums of 75 to 97 per cent above the current replacement costs of the buildings.
A veteran property valuer told BT an ASRS system in a logistics facility would account for about 5 per cent of the facility's real estate value. So that would not account for the big spread between A-Reit's purchase price of the assets and the buildings' replacement costs. 'Perhaps they are counting on property rental and capital values appreciating in the future. So it depends on the view you take of the market,' he suggested.
In a similar vein, Ascendas-MGM's Mr Tan said: 'Price and value are essentially based on business judgement on a willing buyer, willing seller basis. 'Price at a point in time is one's perception of not only the current intrinsic value of an asset, but more importantly, also of its future potential. 'Every asset has a price. The questions are: Where is the benchmark, and what is the right price? 'We've acquired some income-producing investment properties at prices which we think represent fair value based on our investment criteria and assessment of the market.' At the end of the day, it's up to investors to decide whether they want to invest in A-Reit. 'We are very transparent and our disclosures are certainly adequate for discerning investors to evaluate and form their own judgement on our performance,' said Mr Tan.
A-Reit has delivered total returns to unitholders of 192 per cent since its listing in November 2002. This comprises 166 per cent from capital gains from appreciation of A-Reit's unit price, and another 26 per cent from distributions paid out to unitholders. Its property portfolio has increased from eight properties worth about $607 million at listing to 44 worth $2.3 billion.
Comments - BT shifts focus fm Suntec to A-REIT. Time to monitor A-REIT price and pick up bargains when the yield hits above 5%. Based on the latest quarter DPU, that would be $2.37. I started to buy today at $2.38.
A-REIT is in the midst of new acquisitions which should bring their yield up even further. Based on recent SGX announcements, they'd done a new revaluation (higher) of their existing properties which shld be a precursor to increasing their debts for the new acquisitions. So, either they are planning the new acquisitions without issuing new shares or likely, issuing fewer new units.
Disclaimer : The above is just my opinion, do not rely on it to make your investment decisions
Thursday, August 04, 2005
SingTel - Q1 Results
SingTel profit up 9.5 pct on Asian mobile growth
SINGAPORE, Aug 4 (Reuters) - Singapore Telecommunications Ltd. , Asia's fifth-largest phone firm, posted a 9.5 percent gain in quarterly profit on Thursday as strong regional mobile phone growth offset a margin squeeze at its Australian unit.
SingTel, the city-state's biggest listed firm, has spent $17 billion in the last four years buying firms in Australia and high-growth Asian nations as it battles fierce competition at home, where nine out of 10 people already own a mobile phone. It derives about 75 percent of revenues and two-thirds of pretax earnings from operations outside Singapore. Its Optus unit in Australia is now SingTel's top revenue earner, but subscriber growth is expected to slow as its market matures.
"We are pleased with the profitable regional mobile business," Chief Executive Lee Hsien Yang said in a statement. "Bharti and Telkomsel continue to contribute strongly to the group's earnings growth."
SingTel, majority owned by the government, made an underlying profit before goodwill and exceptionals of S$762 million ($460 million) in its fiscal first quarter to June, compared with S$696 million in the year-earlier quarter.
This was below an average underlying profit forecast of S$778 million, according to a Reuters poll of eight analysts whose estimates ranged from S$743 million to S$797 million.
Attributable net profit was S$796 million, up 14 percent, thanks to a one-off gain of S$34 million through a stock transaction related to its stake in Indian mobile firm Bharti. Operating revenue grew 6.4 percent to S$3.21 billion.
SingTel's Optus division has a one-third share of Australia's mobile phone market, where more than eight in 10 people own a handset and competition is heating up. Optus reported net profit of A$150 million ($115 million) for the quarter, on a 4.8 percent rise in revenue to A$1.74 billion. Optus Mobile, which boosted sales by 5 percent in the first quarter, contributed 56 percent of overall revenue growth, with the fixed-line divisions contributing 44 percent. Rivals Telstra Corp. Ltd. , Hutchison Telecommunications (Australia) Ltd. and Vodafone Group Plc. have been wooing new users with price deals. New regulations might also squeeze margins, analysts said. Last year, the Australian Competition and Consumer Commission cut fees telecom companies charge each other when their customers make calls to people on rival networks. "This quarter, revenue and EBITDA (earnings before interest, tax, depreciation and amortisation) were impacted by increasing levels of competition, especially in the mobile and fixed business markets across the industry," Optus Chief Executive Paul O'Sullivan said in a statement.
But SingTel's profits were boosted by robust contributions from fast-growing Asian markets, where cellphone users are fewer. The company owns major stakes in five operators: 21.5 percent of Thailand's Advanced Info Service Plc. , 30.8 percent of India's Bharti Group, 44.6 percent of Globe Telecom Inc. in the Philippines, 35 percent of Indonesia's PT Telkomsel and 45 percent of Pacific Bangladesh Telecom Ltd., purchased in June.
SingTel shares have gained about 10.6 percent in the last three months, in line with the rise in the MSCI AsiaPacific telecoms sector average. The stock has outperformed a 3.9 percent increase in Telstra shares and a 7.3 percent gain in Taiwan's Chunghwa Telecom Co. Ltd. .
Previous Post on Singtel
SINGAPORE, Aug 4 (Reuters) - Singapore Telecommunications Ltd. , Asia's fifth-largest phone firm, posted a 9.5 percent gain in quarterly profit on Thursday as strong regional mobile phone growth offset a margin squeeze at its Australian unit.
SingTel, the city-state's biggest listed firm, has spent $17 billion in the last four years buying firms in Australia and high-growth Asian nations as it battles fierce competition at home, where nine out of 10 people already own a mobile phone. It derives about 75 percent of revenues and two-thirds of pretax earnings from operations outside Singapore. Its Optus unit in Australia is now SingTel's top revenue earner, but subscriber growth is expected to slow as its market matures.
"We are pleased with the profitable regional mobile business," Chief Executive Lee Hsien Yang said in a statement. "Bharti and Telkomsel continue to contribute strongly to the group's earnings growth."
SingTel, majority owned by the government, made an underlying profit before goodwill and exceptionals of S$762 million ($460 million) in its fiscal first quarter to June, compared with S$696 million in the year-earlier quarter.
This was below an average underlying profit forecast of S$778 million, according to a Reuters poll of eight analysts whose estimates ranged from S$743 million to S$797 million.
Attributable net profit was S$796 million, up 14 percent, thanks to a one-off gain of S$34 million through a stock transaction related to its stake in Indian mobile firm Bharti. Operating revenue grew 6.4 percent to S$3.21 billion.
SingTel's Optus division has a one-third share of Australia's mobile phone market, where more than eight in 10 people own a handset and competition is heating up. Optus reported net profit of A$150 million ($115 million) for the quarter, on a 4.8 percent rise in revenue to A$1.74 billion. Optus Mobile, which boosted sales by 5 percent in the first quarter, contributed 56 percent of overall revenue growth, with the fixed-line divisions contributing 44 percent. Rivals Telstra Corp. Ltd. , Hutchison Telecommunications (Australia) Ltd. and Vodafone Group Plc. have been wooing new users with price deals. New regulations might also squeeze margins, analysts said. Last year, the Australian Competition and Consumer Commission cut fees telecom companies charge each other when their customers make calls to people on rival networks. "This quarter, revenue and EBITDA (earnings before interest, tax, depreciation and amortisation) were impacted by increasing levels of competition, especially in the mobile and fixed business markets across the industry," Optus Chief Executive Paul O'Sullivan said in a statement.
But SingTel's profits were boosted by robust contributions from fast-growing Asian markets, where cellphone users are fewer. The company owns major stakes in five operators: 21.5 percent of Thailand's Advanced Info Service Plc. , 30.8 percent of India's Bharti Group, 44.6 percent of Globe Telecom Inc. in the Philippines, 35 percent of Indonesia's PT Telkomsel and 45 percent of Pacific Bangladesh Telecom Ltd., purchased in June.
SingTel shares have gained about 10.6 percent in the last three months, in line with the rise in the MSCI AsiaPacific telecoms sector average. The stock has outperformed a 3.9 percent increase in Telstra shares and a 7.3 percent gain in Taiwan's Chunghwa Telecom Co. Ltd. .
Previous Post on Singtel
Wednesday, August 03, 2005
Singapore Visitor Arrivals
After the SARS outbreak, the tourist industry in Singapore is badly affected in the past few years but with the recent annoucement on Integrated Resort and the recent Olympics Selection meeting, the visitor arrivals is on tracks to hit 2005 target of 8.9 million vistors set by Singapore Tourism Board. During the first half year, there are about 4.2 million tourists visited Singapore, which is almost half way mark of the target. The bulk of the tourists were from Indonesia, China and then Australia. Together with India and Malaysia, the vistors from these five countries contribute almost 50% of the visitor in the first half year. I think the second half of the year will be better as normally tourist vist peak at the second half of the year.
Comments:
I think companies related to tourism industry would see their revenue increased this year. Industries like Hotel, airlines, airport service, Food & Beverage as well as retail segments should show good result this finanical year. Keep a look out at these stocks. :)
Any good suggestion, please feel free to let us know.
Suntec - SGX Announcement
Just out, hot fm SGX announcements,
ARA pledges support of Madam Ho Ching’s views on REITs and waives acquisition fees
3 Aug 2005, Singapore – The ARA Group and its subsidiary companies, ARA Asset Management (Singapore) Limited (“ARASL”) – the manager of Fortune REIT – and ARA Trust Management (Suntec) Limited (“ARATMSL”) – the manager of Suntec REIT pledge their support of the views on the REIT industry given by Madam Ho Ching, Chief Executive Officer of Temasek Holdings Pte Ltd, on 28th July 2005.
The ARA Group is fully committed to the long-term growth of Singapore’s REIT industry and firmly supports carrying out best practices to ensure that the interests of REIT unitholders are upheld. As manager of Fortune REIT and Suntec REIT, the ARA Group pledges to act in the best interests of unitholders. The ARA Group would be pleased to consider any improvements and new practices to enhance the REIT industry in Singapore.
“To show our commitment to the long-term interests of unitholders, the ARA Group will waive our front-end acquisition fees in respect of future deals which Fortune REIT and Suntec REIT may enter into. By doing so, we would like to demonstrate that our motivation is aligned to that of unitholders in the long-term. We believe in the sustainability of the assets’ cash flow and are managing the portfolio with the unitholders’ long-term interests in mind. The ARA Group believes that this waiver should set a new industry standard for REIT managers in Singapore,” commented Mr Justin Chiu, Chairman of the ARA Group.
“The ARA Group concurs with Madam Ho’s concerns regarding the use of financial engineering in REITs. In light of this recent development, we will review the recent proposed acquisitions by Suntec REIT and may initiate discussions with the relevant parties,” expressed Mr. Chiu.
Previous Post on Suntec in this blog
Comments - Finally, a response fm Suntec mgmt. Looks good enough to me. Suntec shares will likely move up tomorrow from the low of $1.16 today.
ARA pledges support of Madam Ho Ching’s views on REITs and waives acquisition fees
3 Aug 2005, Singapore – The ARA Group and its subsidiary companies, ARA Asset Management (Singapore) Limited (“ARASL”) – the manager of Fortune REIT – and ARA Trust Management (Suntec) Limited (“ARATMSL”) – the manager of Suntec REIT pledge their support of the views on the REIT industry given by Madam Ho Ching, Chief Executive Officer of Temasek Holdings Pte Ltd, on 28th July 2005.
The ARA Group is fully committed to the long-term growth of Singapore’s REIT industry and firmly supports carrying out best practices to ensure that the interests of REIT unitholders are upheld. As manager of Fortune REIT and Suntec REIT, the ARA Group pledges to act in the best interests of unitholders. The ARA Group would be pleased to consider any improvements and new practices to enhance the REIT industry in Singapore.
“To show our commitment to the long-term interests of unitholders, the ARA Group will waive our front-end acquisition fees in respect of future deals which Fortune REIT and Suntec REIT may enter into. By doing so, we would like to demonstrate that our motivation is aligned to that of unitholders in the long-term. We believe in the sustainability of the assets’ cash flow and are managing the portfolio with the unitholders’ long-term interests in mind. The ARA Group believes that this waiver should set a new industry standard for REIT managers in Singapore,” commented Mr Justin Chiu, Chairman of the ARA Group.
“The ARA Group concurs with Madam Ho’s concerns regarding the use of financial engineering in REITs. In light of this recent development, we will review the recent proposed acquisitions by Suntec REIT and may initiate discussions with the relevant parties,” expressed Mr. Chiu.
Previous Post on Suntec in this blog
Comments - Finally, a response fm Suntec mgmt. Looks good enough to me. Suntec shares will likely move up tomorrow from the low of $1.16 today.
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