Singapore MRT network length to double by 2020; two new lines to be built

Singapore MRT network length to double by 2020; two new lines to be built

By Asha Popatlal

SINGAPORE: In a massive new investment, the government will pump in another S$20 billion on new rail lines and extensions islandwide, Transport Minister Raymond Lim announced Friday.

This is over and above the S$20 billion the government has already committed for the on-going Boon Lay extension, the Circle Line and the Downtown Line.

Mr Lim said the new and extended lines will go to places as diverse as Marine Parade and even Tuas.

The rail update is the second in a series of three major policy announcements in a sweeping review of the land transport network. A bus system overhaul was announced last week.

When the plans come to fruition in 2020, there will be one MRT station within five minutes’ walk in the city, in a network that will become denser than Tokyo’s.

Outside the city, more areas will be served by high-speed MRT.

There are currently 138 kilometres of rail lines. By 2020, authorities hope to double the network length and expect it to carry three times as many journeys, from today’s 1.4 million a day to 4.6 million in 2020.

Two new lines will be built.

The Thomson Line, to be ready by 2018, will run from Marina Bay through the Central Business District, all the way up to Ang Mo Kio and Woodlands. It will connect to another new Line, the Eastern Region Line, at Marina Bay.

The Eastern Region Line, to be ready by 2020, will serve areas such as Siglap and Marine Parade.

Existing lines will also be extended.

The North-South Line will be extended one kilometre south to serve the Marina Bay area developments while the East-West Line will be extended another 14 kilometres west into Tuas.

To avoid long waiting time and crowded trains, there will be 93 additional train trips weekly during the morning and evening peaks.

The authorities will work with SMRT to increase the number of trains and to improve the infrastructure over the next four years to reduce waiting time from the current 2.5-4 minutes to two minutes at busy stations during peak periods.

“When all this is done, what will we have? We hope we would have transformed the public transport system… And by doing so, Singaporeans will indeed consider the public transport system as their other car,” said the transport minister.

Completion dates of the various lines are also being fast-forwarded. Part of the Circle Line which was due to open from 2010 onwards, will now open in mid-2009. Completion of the Downtown Line will also be brought forward by two years to 2016.

Mr Lim made the announcement when he visited Kim Chuan Depot on Friday morning.
Source : Channel NewsAsia - 25 Jan 2008

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Businesses can now use Singapore government assets without bidding for tender

Businesses can now use Singapore government assets without bidding for tender

By Hasnita A. Majid

SINGAPORE: If you have an innovative idea, you can make use of government’s assets.

But you need to be the first one to come up with the idea.

This comes under the Ministry of Trade and Industry’s ‘First Mover Framework’.

The framework allows businesses to directly use an asset, without going through a competitive tender.

The First Mover also doesn’t need to pay the full market price for the use of the asset.

For example, a First Mover had successfully applied to Nparks for the use of the beach for sandcastle building activities.

Another managed to use hawker centre table-tops as advertising space.

Those interested in this initiative can visit the website at www.firstmover.gov.sg

The role of Champion for the First Mover initiative is taken up by Head of Civil Service, Peter Ho, who chairs the Pro-Enterprise Panel (PEP).

To date, the panel has received 1,700 suggestions and half of these have been accepted for implementation.

The panel hopes that its initiative will lead to a more pro-enterprise environment for Singapore.

And in recognition of its efforts, the United Nations has accorded the PEP the distinction of being a Finalist in the UN Public Service Awards in 2008. -CNA/vm

Source : Channel NewsAsia - 25 Jan 2008

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Resorts World at S’pore Sentosa builds S$80m bridge to ease visitor traffic

Resorts World at S’pore Sentosa builds S$80m bridge to ease visitor traffic

By Hasnita A Majid/ Hoe Yeen Nie

SINGAPORE: Resorts World at Sentosa has started work on a new vehicular bridge which costs S$80 million.

The new bridge is aimed at easing visitor traffic as over 15 million of them are expected to visit the Resort when it opens in early 2010.

The 710-metre, 3-lane bridge will run parallel to the existing causeway which connects Sentosa to the mainland. When completed in September 2009, both will be merged.

To help alleviate congestion near the Telok Blangah junction, existing admission booths will be relocated by Sentosa Leisure Group within the island, along Gateway Avenue.

By April, Gateway Avenue will be diverted to make way for the development of Resorts World at Sentosa.

From the vehicular bridge, drivers will then coast along Gateway Avenue, before the road fans out into seven lanes. Lanes and traffic directions are still being finalised.

The winning bid went to McConnell Dowell, an Australian-based engineering and construction company.

Resorts World at Sentosa said this is the first vehicular bridge of this scale to be built by a private developer in Singapore. - CNA/vm
Source : Channel NewsAsia - 25 Jan 2008

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S’pore Sports Hub’s tentative calendar of events ready by year-end

S’pore Sports Hub’s tentative calendar of events ready by year-end

SINGAPORE : The Singapore Sports Hub consortium is setting up a working committee to plan activities for the upcoming Sports Hub.

Their impressive programming calendar was the main reason the “dome-shaped” design was picked for the project.

In 3 years time, the Integrated Sports Hub, which will boast a retractable roof stadium, will also be a hive of activity - as numerous programmes have been lined up for the new facility.

These include annual international football tournaments, tennis and badminton events, and even the return of the Rugby Sevens.

An ASEAN Football League is also being planned to help bring back the Kallang Roar.

Seamus O’Brien, President and CEO, World Sports Group, said, “The national teams come together every two years in the ASEAN Championship, which has obviously been a big success.

“Now we are going to take that further into the club game and make sure that ASEAN, on a region-wide basis, is able to generate strong club sides, and good footballers that can compete with the rest of the region and hopefully in years to come, further afield.”

Another popular Asian sport - cricket - will also be making its presence felt at the new stadium.

For the man-in-the-street, Community Days will see free coaching clinics for the public to take up sports.

The fun does not end there.

Mr O’Brien said, “All of the activities of the Park on a daily basis can then be taken back out into the community in all forms of new digital media, which will give everybody a sense of belonging.”

The consortium will also engage experts and work with National Sports Associations to organise the multiple activities planned.

The consortium’s tentative calendar of events for its opening year will be ready by the end of this year. - CNA/ms
Source : Channel NewsAsia - 25 Jan 2008

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Average cash above valuation for Singapore HDB flats up 30% in Q4

Average cash above valuation for Singapore HDB flats up 30% in Q4

By Yvonne Cheong

SINGAPORE: HDB resale prices have gone up by a better-than-expected 17.5 per cent in 2007, the fastest rate since prices soared by 25 per cent in 1996, latest official figures by the Housing Development Board (HDB) showed.

Most homes in Singapore have appreciated to the highest levels since 1996. The price of a three-room HDB flat was an average of S$149,000 in the last quarter while a five-room flat in Marine Parade fetches an average of S$598,000.

Islandwide, the median price for an HDB flat was S$340,000.

Cash above valuation has also risen to an average of S$22,000, up from S$17,000 in the third quarter.

Knight Frank’s director for consultancy and research Nicholas Mak said, “It basically means that transacted prices are actually growing at a faster rate than the valuation. The effect can be quite positive for the private property market because it means that sellers of HDB flats will have more cash in hand for the down payment of their purchases of private properties. So that could lead to an increase in the demand for private properties.”

Rental prices have also gone up by S$100 a month for flats with four rooms or more. For instance, executive flats in Bishan are being let out for as much as S$2,200 a month.

Analysts said this is clearly a spillover-effect from the private property market.

Rents of private homes went up by 41.2 per cent in 2007. The increase in rents and sales prices, however, slowed to 6.8 per cent in the last quarter.

“In terms of prices of private homes, we realised areas that actually had the best performance in the fourth quarter (was) actually the fringe areas – just outside the prime districts of 9, 10 and 11, such as District 5 and in the Tanjong Rhu area. The reason is… I think there are some buyers who find that prices in the prime districts (have) already gone to quite a high level and they’re looking for homes that are near to the cities but just somewhere in the more-affordable areas.”

Analysts agreed that sales price and rent increases of both HDB and private properties are likely to be more subdued in the first quarter of 2008.

Jones Lang LaSalle’s head of research and consultancy Dr Chua Yang Liang said, “With the overhanging sub-prime issue that we’re not certain at this moment, what the impact is, I think it’d be a more cautionary leasing market in 2008.”

Prices of private properties went up by an expected 31.5 per cent last year. - CNA/ac
Source : Channel NewsAsia - 25 Jan 2008

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Analysts say Singapore properties will see boost from MRT expansion plans

Analysts say Singapore properties will see boost from MRT expansion plans

By Rachel Kelly

SINGAPORE: Property prices are expected to rise around ten to 15 per cent around the 100 new MRT stations to be built, analysts said.

The government announced Friday that it would pump S$20 billion to double the rail network by 2020.

Properties are going to be hot around the new 100 stations, with malls and public facilities expected to draw crowds to the stations.

Property consultants are forecasting price increases of ten to 15 per cent.

But with the new MRT lines to be completed only by 2020, they said the impact on the property market will not kick in until the next five to ten years.

Savills’ director of corporate business and residential Ku Swee Yong said, “Generally, properties that are (within) 200 metres of an MRT station do trade at what about ten to 15% premium over properties that are less accessible but still within the same neighbour hood. It is too early to speculate because the government hasn’t announced exactly where the line is going to pass through.”

The rail plans include pushing forward opening dates for announced projects and extending existing lines. Two new lines will also be built, the first in the Thomson area, which goes up as far north as Woodlands, and the second along the East Coast, starting from Marina Bay.

Property analysts said properties along the Eastern Region Line will see the largest benefit as MRT coverage will be extended to those areas for the first time.

But until the new lines are fully operational, analysts said residents living near the new lines may experience inconvenience because of the construction works and government land acquisitions involved in the projects. - CNA/ac

Source : Channel NewsAsia - 25 Jan 2008

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The Ascott Group reports 8% rise in full-year net profit - Singapore

The Ascott Group reports 8% rise in full-year net profit - Singapore

By Pamela Almeda,

SINGAPORE : The Ascott Group has reported an 8 percent increase in full-year earnings, in line with market forecasts.

Net profit came in at S$177.3 million.

The jump was due to an increase in rental rates as well as higher portfolio gains from asset divestment and revaluation.

The owner-cum-operator of serviced residences said it is looking to further grow its portfolio in the next two years.

The Ascott Group now has 20,618 units worldwide, crossing its 20,000 target in December.

It aims to add another 5,000 more units by 2010 - pushing its portfolio up to 25,000.

Over the past year, Ascott said it saw strong revenue growth, both in new as well as its more established markets.

Chong Kee Hiong, Deputy CEO, Finance and Investment, The Ascott Group, said, “Europe has been a great contributor, contributing about close to 50 percent of our revenue. And the growth has been very good, more than 10 percent in all the regions within Europe. And over than above that, Singapore grew well (with) double digit growth as well as Philippines.”

Net portfolio gains, including revaluation, came in at S$154.6 million.

Net gains from the divestment of properties came in at S$112.8 million, while revaluation gains from the Ascott Residence’s Trust’s properties was S$41.8 million.

Ascott opened nearly 1,500 units in nine properties last year, mostly in China.

It is looking to expand its footprint even more - with an eye on cities attracting strong foreign investment.

Mr Chong said, “What is most important to us is grow in cities where it makes economic sense for us and grow it well. In Asia, we are looking at China, India and Vietnam, In Europe we’re looking at the established cities like Paris, London.”

Ascott on Friday announced that it was pumping in more than S$170 million to grow its presence in Australia.

It is developing Citadines Melbourne on Bourke, a new serviced residence in Melbourne.

CapitaLand - which owns 66.5 percent of Ascott - has announced plans to take the serviced residence operator private.

Ascott plans to release a circular to shareholders later next month after all the details of CapitaLand’s offer comes next week.

For the whole year, Ascott is proposing a dividend of 6 cents per share, which includes a first and final dividend of 1.2 cents and a bonus dividend of 4.8 cents. - CNA/ms

Source : Channel NewsAsia - 25 Jan 2008

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S’pore’s private home prices up 6.8% in Q4

S’pore’s private home prices up 6.8% in Q4

SINGAPORE - Singapore’s private home prices rose a slower 6.8 percent in the October-December from the previous quarter.

The price index for private home sold rose 8.3 percent in the previous quarter, bringing prices to their highest in a decade.

For the whole of 2007, private home prices rose 31.2 percent, the Urban Redevelopment Authority (URA) said.
Source : Channel NewsAsia - 25 Jan 2008

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Wing Tai reports 25% rise in H1 earnings to S$105m - Singapore

Wing Tai reports 25% rise in H1 earnings to S$105m - Singapore

By Loh Kim Chin

SINGAPORE : Property developer Wing Tai has reported a 25 percent rise in half-time earnings to S$105 million.

This is due mainly to higher contributions from the sale of its condominium projects.

Revenue fell 52 percent to S$211 million.

In the second quarter, earnings fell 19 percent to S$44 million, following a 59 percent fall in the topline figure to S$111 million.

Wing Tai did not give a guidance on its outlook, but said it would monitor the market closely in light of the volatility. - CNA/ms

Source : Channel NewsAsia - 25 Jan 2008

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Japanese firm clinches Downtown Line job with winning bid of $230m -Singapore

Japanese firm clinches Downtown Line job with winning bid of $230m -Singapore

JAPANESE construction giant Taisei Corp this week clinched the latest major contract awarded for the construction of the MRT’s Downtown Line (DTL).
It will build the line’s Landmark Station, which is located at Central Boulevard near the Marina Bay Financial Centre, for $230 million. The job includes building the adjoining MRT tunnels and the main trunk road, Central Boulevard, above the station.

Taisei’s winning bid was the lowest among five bidders. Hock Lian Seng Infrastructure, Samsung Corp, Sato Kogyo and Sembawang Engineers tendered between $289.3 million and $362.9 million for the job.

Construction of the line is well underway, with almost $1.2 billion worth of civil contracts awarded so far, including Taisei’s contract.

The $12 billion, 40km Downtown Line is being built in three stages. The first stage, a 4.3km stretch with six stations, will serve the new downtown in Marina Bay.

The six stations are Bugis, Promenade, Bayfront, Landmark, Cross Street and Chinatown. Except for the first two, major civil works for the rest have been contracted.

Taisei’s contract brings the total amount of major works awarded for the Downtown Line to nearly $1.2 billion.

The first stage of the line is expected to be completed in 2013, and the whole project, by 2018.

Source : Straits Times - 25 Jan 2008

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Resorts World to build new $80m bridge to Singapore Sentosa

Resorts World to build new $80m bridge to Singapore Sentosa

RESORTS World at Sentosa (RWS) yesterday announced the award of a $80 million contract to Australian-based engineering and construction company McConnell Dowell to build a new vehicular bridge to Sentosa.
Work on the bridge begins this week and is expected to be completed by end-September 2009.

The 710-metre three-lane bridge will connect Singapore to Sentosa and provide visitors with a smooth and convenient entry into Sentosa and RWS. It will be built parallel to the present four-lane Sentosa bridge. When the new link is completed, the two bridges will be merged.

RWS anticipates 15 million visitors calling on its $5.2 billion resort when it opens in early 2010. ‘This is the first vehicular bridge infrastructure of this scale built by a private developer in Singapore,’ said RWS’s senior director of projects Michael Chin. ‘We are committed to provide our visitors with a once-in-a-lifetime holiday experience, and that includes hassle-free access to the resort,’ he added.

According to Sentosa Leisure Group executive director for special projects, planning and development Low Tien Sio, the new link is ’set to take on up to four times more traffic when it opens . . . and will not only facilitate travel to RWS, but also drive traffic smoothly to Sentosa’s popular destinations and give our Cove residents a welcome ride home’.

To help ease congestion near the Telok Blangah junction, the existing admission booths to Sentosa will be relocated on the island along Gateway Avenue and by April, Gateway Avenue will be diverted to make way for the development of RWS.

From the vehicular bridge, drivers will then travel along Gateway Avenue, before the road fans out into seven lanes to expedite island admission.
Source : Business Times - 25 Jan 2008

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Singapore 79 Anson Rd stake sold for 3rd time in 2 years

Singapore 79 Anson Rd stake sold for 3rd time in 2 years

SEB Asian Property Fund pays $215m for 55% stake
By KALPANA RASHIWALA

TRADING office buildings continues to be flavour of the month in the real estate market. A 55 per cent stake in the freehold 79 Anson Road has changed hands for the third time in about two years. The latest deal involves a fund managed by Ferrell Asset Management selling the space to an SEB Asset Management fund for $215 million.
Ferrell’s fund, FAM Maximilian Real Estate Investment Fund, last year bought the space - spread over 12 floors of the 23-storey building, for $149 million from two parties, at least one of which is linked to the Lippo group.

Pramerica Asia had sold the property to Lippo entities for over $90 million in early 2006.

The latest acquisition, by SEB Asian Property Fund SICAV-FIS, for $215 million works out to about $1,937 per square foot based on a lettable area of 110,976 sq ft.

The fund, which was launched in late-August last year, invests in Asia only. The plan is to develop a broad-based portfolio, primarily in China, Japan, South Korea and Singapore, over the coming months.

This is not the German group’s first acquisition in the Singapore office sector. It made at least two purchases last year.

In September, SEB bought 12 floors at Springleaf Tower nearby for $2,088 psf of net lettable area. And a few months before that, in April, the group bought SIA Building for about $526 million or $1,783 psf from TSO Investment, a fully owned subsidiary of a property fund managed by CLSA Capital Partners.

TSO had purchased the office block from Singapore Airlines in June 2006 for $343.88 million, or about $1,165 psf.

A Ferrell-SEB joint release yesterday said the space transacted at 79 Anson Road is currently about 98 per cent occupied. Major tenants include Kellogg Brown & Root, Mitsubishi Chemicals, interTouch and Infor Global Solutions.

Ferrell Group managing director David Lee said the group will keep searching for development and investment opportunities in the commercial property sector.

SEB Immobilien-Investment managing director Choy-Soon Chua said the group expects to capitalise on the ‘extremely positive growth prospects’ in the Singapore office sector due to rising demand and limited supply.

The remaining 45 per cent of 79 Anson Road is owned by the Central Provident Fund Board.
Source : Business Times - 25 Jan 2008

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Staff costs, inflation major issues this year - Singapore

Staff costs, inflation major issues this year - Singapore

By CHUANG PECK MING

SINGAPORE’S economy is strong enough to weather the fallout of a US recession this year, while escalating staff costs will be the top problem bosses have to grapple with in 2008, human resource practitioners were told at a conference yesterday.
Speaking at the SHRI Outlook 2008 conference, Hui Cheung Tai, regional economist at Standard Chartered Bank, said the robust domestic demand which drove Singapore’s growth last year will continue in 2008. And this will help soften the blow of a US recession.

But Mr Hui dismissed the ‘decoupling’ notion that a booming Asia, including Singapore, has acquired its own dynamism to escape a US recession without a scratch. China may now have become the largest export market for many trade-dependent countries in the region, but many of the exports to China - half by Stanchart’s reckoning - eventually end up in the US or the EU, he said.

By that measure, Mr Hui finds Hong Kong to have the biggest exposure to a US downturn, followed by Singapore. China, Indonesia and India are the least exposed. So Stanchart is projecting the Singapore economy to expand by 4.5 per cent this year - at the lower end of the official forecast of 4.5-6.5 per cent. The economy rose 7.5 per cent in 2007.

Mr Hui warned that a US recession would not be followed by a quick bounce-back - it would be a U-shaped rather than a V-shaped recession. According to him, a US downturn is likely to last for about two quarters. The subsequent pick-up would be ‘prolonged’, stretching into 2009.

Meanwhile, Mr Hui noted, inflation has made its comeback and has become a hot issue in the region. Everywhere, including in Singapore, people are complaining that price increases are higher than what the official figures reflect. Stanchart expects the inflation rate in Singapore to rise to around 5.0 per cent in the first half of the year, before easing to 4.0 per cent in the second half.

While inflation has reared its ugly head as the economy slips into slower gear, the job market is likely to remain tight. ‘It will still be a challenge to fill vacancies,’ Mr Hui said.

A panel led by David Ang, executive director of the Singapore Human Resources Institute, picked escalating pay, fanned by job-hopping, to be the number one headache for employers.

Jacqueline Streimer, employment law editor at CCH Southeast Asia, one of the region’s leading professional publishing companies, said employees in the banking and finance sector get as much as a 50 per cent increase in pay when they jump ship to sign on with another bank. Such turnover leads to a spiral in wage costs because the employer who loses a staff member will then have to pay to advertise for a replacement, suffer downtime and lost productivity as well as need to offer a premium in higher salary to secure a new employee, Ms Streimer said.
Source : Business Times - 25 Jan 2008

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Sustainable development a priority for Singapore: PM Lee

Sustainable development a priority for Singapore: PM Lee

A top-level panel of ministers has been formed to chart the way forward, he says
By ANNA TEO
IN DAVOS
PURSUE economic growth, but with an eye on the Earth.

Green call: The need to be environmentally friendly is patently clear, PM Lee said in Davos yesterday
Going forward, sustainable development will be a priority for Singapore - and a top-level panel of ministers has been formed to chart the way forward.

On the sidelines of the World Economic Forum, where he will today take part in a key session on climate change, Prime Minister Lee Hsien Loong told Singapore reporters that an Inter-Ministerial Committee on Sustainable Development will be looking into drawing up a holistic sustainable development strategy for Singapore.

The need to be environmentally friendly is patently clear, ‘but at the same time, we don’t want to have to sacrifice economic growth’, he said. Hence the premise and promise of sustainable development - to ‘grow in an environmentally friendly way, where you build into your whole development strategy an awareness of the environment, of conservation, of efficiency, so that your buildings use less energy for air conditioning, your public transport is convenient and people use public transport instead of driving cars’.

While there are no plans to levy any carbon tax, Mr Lee would not rule it out entirely, but emphasised the need to be mindful about cost and competitiveness, particularly in imposing any regulatory requirements that effectively add to business costs.

The committee is co-chaired by Minister for National Development Mah Bow Tan and Minister for the Environment and Water Resources Yaacob Ibrahim. Other members include Finance Minister Tharman Shanmugaratnam, Transport Minister Raymond Lim and Minister of State for Trade & Industry S Iswaran.

A joint statement by MND and MEWR says the committee will, for a start, ‘articulate a clear national framework and strategy to achieve a sustainable and high-quality living environment that is consistent with economic growth’.

It will also seek to build new competencies and encourage mind-share across the public, private and people sectors to develop Singapore as an ‘Eco-Hub’ - ‘an innovative thought-centre and hub for urban and environmental sustainability’.

Noting that Singapore is already a model of urban planning, Mr Lee said that if Singapore’s efforts on sustainable development are successful, it will spell one more area of expertise that it can share with other countries.

Mr Lee arrived in Davos on Wednesday afternoon from Paris, where he had been on a three-day official visit. In Davos yesterday, he had a busy day of meetings with various people, including US Deputy Secretary of Treasury Robert Kimmitt; former US Secretary of State Henry Kissinger, Harvard professor Larry Summers, as well as UBS chairman Marcel Ospel and Google chairman Eric Schmidt.
Source : Business Times - 25 Jan 2008

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Singapore SIA proves luckier than smart by losing China Eastern deal

Singapore SIA proves luckier than smart by losing China Eastern deal
(SINGAPORE) Singapore Airlines may have won by losing.
While SIA’s failure to secure a 24 per cent stake in money-losing China Eastern Airlines Corp thwarted CEO Chew Choon Seng’s plan for a Shanghai hub, it has US$3 billion in cash and two new fuel-saving Airbus SAS A380 aircraft - and gets 40 per cent of sales from business-class passengers. The combination gives SIA, the world’s most profitable carrier, an edge over competitors such as Australia’s Qantas Airways Ltd as fuel costs rise.

Saying ‘nothing is a must-have’, Mr Chew, 61, pledged last month not to raise his HK$3.80-a-share bid for China Eastern (CEA), which the airline made jointly with parent Temasek Holdings. Minority stockholders vetoed the offer on Jan 8 after China National Aviation Holding Co (whose Air China is the nation’s biggest international carrier) said on Jan 6 that it would offer at least HK$5 a share.

‘The investment would not have added to earnings in a year or two,’ said Tan Teng Boo, who oversees about US$300 million at Capital Dynamics Asset Management in Kuala Lumpur. ‘You have to deal with cultural differences and the management of staff.’ SIA posted record earnings last fiscal year amid rising Asian air-travel demand. It fell 19 per cent in three months amid speculation that the HK$7.16 billion (S$1.3 billion) CEA deal would fall apart and is now priced lower than most peers.

Of 14 analysts tracked by Bloomberg, 13 recommend buying SIA shares. The carrier may rise 49 per cent from Wednesday’s closing price of S$15.58, to S$23.29, according to the survey. Even Citigroup Inc’s Corrine Png, the only one who recommended selling, expects the stock to reach S$18.90, a 21 per cent increase.

With CEA behind him, Mr Chew can concentrate on extending a record of earnings every year since his company went public in 1985. Its 14.7 per cent profit margin, or the percentage of sales remaining after operating costs, is the widest among Asia’s 10 biggest airlines, according to data compiled by Bloomberg.

The airline boosted net income 72 per cent to S$2.13 billion last fiscal year - the highest of any carrier in the world. It may report earnings of S$1.86 billion in the year ending March, based on analyst estimates compiled by Bloomberg.

SIA is luring business-class travellers with free champagne and seats as wide as 76cm, the equivalent of two economy-class seats. ‘They have a niche market in premium travel and that’s not going to go away,’ said Rohan Suppiah, an analyst at Kim Eng Securities Pte in Singapore, who recommends buying the stock. ‘As a result, they are able to charge premium pricing and able to offset the increase in jet fuel prices with surcharges.’

A one-way business-class ticket on SIA costs S$4,126, including taxes and fees, for travel from its home base to Sydney on the Airbus A380. That compares with Qantas’s fare of S$3,849 on the same route, according to company websites. SIA filled an average of 80.7 per cent of seats last year even after raising fuel surcharges five times. That compares with 78.4 per cent in 2006, according to Bloomberg calculations based on figures released by the airline.

The company is the first to fly the A380 superjumbo, the world’s biggest commercial aircraft. It ordered 19 of the double-deckers, worth at least US$304.4 million each at list prices, and has received two. SIA will have four in service before Airbus delivers any to competitors including Qantas. On average, more than 90 per cent of the 471 seats on the first A380, which began flying between Singapore and Sydney last Oct 25, are filled, said SIA spokesman Stephen Forshaw.

Passengers flying ’suite’ class pay at least 20 per cent more than those in first class on Boeing 747-400s used on the same route, SIA said last October. The newer jets use less fuel than the 747-400, adding to profitability.

The company has had little success with past investments. It took a S$266.9 million loss on a 25 per cent stake in Air New Zealand in 2001 and saw the shareholding trimmed to 6.3 per cent as part of a 2002 government bailout of the Auckland-based company. The remaining shares were sold for about NZ$62 million (S$68 million) in 2004.

Mr Chew said last July that he’s ‘exploring options’ for SIA’s 49 per cent interest in Virgin Atlantic Airways, bought in 1999 for £pounds;600 million (S$1.7 billion). ‘The investment in Virgin Atlantic has not paid a financial dividend,’ Mr Forshaw said.

After passing on China Eastern, Mr Chew will still need a strategy for the world’s most populous country, where traffic rose 15 per cent in 2006, according to the General Administration of Civil Aviation. CEA lost money in 2005, 2006 and the first half of last year. ‘Looking at profit and loss at China Eastern, it certainly doesn’t make sense to buy into the carrier,’ said Louis Wong, who helps manage US$40 million at Phillip Securities Ltd in Hong Kong and doesn’t own SIA shares. ‘Raising the bid too high would have made it a risky investment.’

Mr Chew may still try to build a foothold in Shanghai to challenge Air China and Hong Kong affiliate Cathay Pacific Airways. He may start talks with Shanghai Airlines or China Southern Airlines, Raymond Yap, an analyst at CIMB Bhd in Kuala Lumpur, wrote in a Jan 9 note to clients.

CEA accounted for 31 per cent of scheduled service from Shanghai Pudong International Airport and nearly 37 per cent from Hongqiao Airport in 2006, according to a November report by Bear Stearns Cos.

‘SIA basically lost out in a very big market,’ said Desmond Tjiang, who manages US$1.3 billion in Asian equities at Fortis Investment Management in Hong Kong. ‘They should have looked at it at a more strategic level, rather than just at the price.’ The failure to land CEA has left SIA undervalued, according to analysts. It has a price-earnings ratio of 8.38, compared with 12.45 for Qantas and 13.57 for Cathay Pacific. ‘Singapore Air has been punished for not letting that deal come through,’ said Christoffer Moltke-Leth, head of Asia sales trading at Saxo Capital Markets Pte in Singapore. The stock ‘has come down 20 to 25 per cent. That’s a buying opportunity.’ - Bloomberg
Source : Business Times - 25 Jan 2008

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