Singapore First-quarter profit growth slows to 11%

Singapore First-quarter profit growth slows to 11% 

Earnings set to stay in doldrums, with single-digit gains projected

By Alvin Foo 
 
THOSE golden days of strong double-digit earnings growth may be over for now, but it is hardly gloom and doom for corporate Singapore.
First-quarter results of locally listed companies showed a rise in profits of just 11.2 per cent - small change compared with last year’s big numbers.

And it is not likely to change much soon, with analysts warning that corporate earnings may stay in the doldrums for some time yet.

‘Single-digit growth seems like the most optimistic scenario,’ said DMG & Partners Securities senior dealing director Gabriel Yap. ‘It’s already quite a good display as most analysts have revised their earnings forecasts downwards.’

Those downward revisions, especially for transport companies, look set to continue because of rising energy prices and raw material costs.

‘A V-shaped recovery seems improbable,’ Mr Yap added. ‘It’s likely to be an extended U. That’s because the full economic impact of the United States sub-prime crisis on corporate earnings has not been fully felt.’
By 7pm yesterday, 184 firms had reported results for the three months ended March 31. Their combined net earnings were up 11.2 per cent at $5.89 billion from last year, but 18 firms were in the red.

The lack of one-off gains, higher expenses and lower investment income were mostly to blame for a slowdown in the profits of large firms.

Banks occupied most of the top spots, with OCBC Bank leading the profits chart with its $622 million showing. This was 4 per cent down on the same period last year, despite higher divestment gains.

Its profits, however, trumped the $570 million average estimate of seven analysts polled by Bloomberg News.

DBS Group Holdings was third with $603 million, and United Overseas Bank fourth on $529 million.

A recent UBS report on the three local banks noted: ‘Core earnings met market expectations, but it was also clear that the very strong loans growth recorded in the past few quarters is likely to moderate, an outcome of slower global economic growth and the banks themselves exercising caution in this environment.’

In second spot was palm oil firm Golden Agri-Resources, which saw profits surge 102 per cent to $611.5 million due to sky- high palm oil prices.

In contrast, property firms had a mixed outing. Slower home sales and the lack of a one-off valuation gain sent CapitaLand’s profits down 59.3 per cent at $247.5 million.

However, MCL Land and Singapore Land both reported higher profits of $6.9 million and $33.7 million, respectively.

UOB Kay Hian upgraded the local property sector from ‘market weight’ to ‘overweight’ earlier this month, noting that it saw ‘fresh investment opportunities emerging from the recent rout in stocks’.

The figures were better on the shipping front, with companies riding on the wave of the sector’s revival.

Profits at South Korea’s STX Pan Ocean swelled a whopping 374 per cent to US$285 million (S$393.6 million), after China’s demand for coal and iron ore allowed the firm to raise freight rates.

China’s Cosco Corp saw its bottom line double to $83.9 million on higher sales.

Massage chair-maker Osim International had a good news-bad news quarter in which it narrowed its loss to $13.2 million from $17.3 million previously.

The first-quarter reporting season ends on Thursday, with Wilmar International, City Developments and Neptune Orient Lines among the firms announcing earnings just before the final whistle.
Source : Straits Times - 13 May 2008

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Singapore Luxury home prices down 2.1%, says report

Singapore Luxury home prices down 2.1%, says report 

Number of foreign purchases fall; many buying homes in suburban areas

By Fiona Chan, Property Reporter 
 
HIGH-END homes have become the first to buckle under the pressure of volatile market conditions and gloomy buyer sentiment.
Prices of luxury developments dipped in the first three months of this year, even as foreign buyers - a traditional source of demand for such properties - turned to cheaper options.

A report by property firm Savills Singapore released yesterday showed that prices of expensive homes fell 2.1 per cent in the first quarter, after a steady 21/2-year climb that saw values more than double.

Foreigners also began switching from the prime central districts to suburban areas, such as East Coast, Bukit Batok and Serangoon, said Savills.

Its analysis covered luxury developments located in districts 1, 4, 9, 10 and 11, which include Shenton Way, Sentosa, Orchard, Holland, Newton and Bukit Timah. The average price of these homes fell to $2,360 per sq ft (psf) in the period from January to March, from $2,410 psf in the previous three months.

At the very top end, the priciest condominiums registered a 2.9 per cent dip in prices to $3,577 psf in the first quarter, from $3,683 psf in the previous quarter, Savills said. These are developments that have crossed $2,500 psf.

While Savills would not disclose the names of the buildings it analysed, a check of caveats showed that luxury projects such as Ardmore Park and St Regis Residences in Cuscaden Road recently lodged sales at gradually lower prices.

Savills suggested that luxury condos might be more vulnerable to the global credit crisis.

On the bright side, foreign buying islandwide stayed strong despite the softening housing market, it added.

Foreign buyers took up 28 per cent of private homes in the first quarter, up from 25.9 per cent for the whole of last year.

But the total number of foreign purchases fell, in line with the general slowdown in market activity. Foreigners bought only 901 private homes from January to March this year, less than half the 2,245 homes they took up in the same period last year.

Surprisingly, many of the homes they bought were well away from their usual stronghold of districts 9 to 11.

Savills’ report showed that areas as far-flung as Changi and Hougang made it to the most-bought list, while traditionally foreigner-friendly areas such as Shenton Way dropped out of the top 10.

This could be because more of the foreign buyers now are expatriates living here with their families, rather than investors looking for prime assets, said Mr Ku Swee Yong, Savills’ director of business development and marketing.

‘Rentals are still holding up at high levels, and many expats who are more price-sensitive may now be converting from leasing homes to buying them,’ he said.

‘Some of these expats postponed buying homes last year, but now they could be taking advantage of the slowdown in the market to get a good deal.’

This would explain the foreign demand for suburban areas, as expatriates are likely to buy homes in neighbourhoods that have good schools or where they are currently renting houses.

Bolstering this theory is a sudden drop in the number of leasing transactions this year, said Mr Ku. Based on leases that were signed in 2006, there should be a lot more renewals this year than had actually taken place, he explained.

Savills expects private home prices to grow a moderate 5 per cent to 10 per cent this year.

Source : Straits Times - 13 May 2008

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WHEN SELLER’S AGENT CLAIMS FEE FROM HOME BUYER - Singapore

WHEN SELLER’S AGENT CLAIMS FEE FROM HOME BUYER - Singapore

To pay or not to pay 

By Tan Hui Yee 
FEE DEBATE: The PropNex case is not unique in the HDB resale market, where more and more people are dispensing with agents. — ST FILE PHOTO
 
ONE week after The Straits Times reported that housing agency PropNex was suing two independent home buyers for not paying its agent a fee, the firm withdrew its case.
The agent, Mr Ricky Low Yong Sern, had been hired by the seller of a $400,000 terrace house in Whampoa which marketing specialist Loh Yi Min and his wife, polytechnic lecturer Ariel Wee, bought last year. The couple had acted on their own without hiring an agent. They refused to sign the commission agreement to pay Mr Loh a fee equivalent to 1 per cent of the price of the property, which was classified as an HDB flat. Mr Low claimed he was entitled to the commission or a fee commensurate with the services that he said he had provided.

PropNex dropped its landmark suit as part of a confidential deal both sides reached through mediation last Tuesday. Given that the sum at stake - about $4,000 or less - would have been dwarfed by the roughly $10,000-per-day cost of a trial, it was surprising the case went as far as it did.

But the case is not unique in the HDB resale market, where a growing proportion of buyers and sellers is transacting without agents. Last year, 3.6 per cent - or 1,060 people - submitted their applications through the HDB’s e-Resale system, which caters to buyers and sellers without agents. This figure has been creeping up - it was 2 per cent in 2003 and 3 per cent in 2005.

Growing awareness of consumer rights has given momentum to the debate over whether independent buyers need to pay a fee to sellers’ agents. Adding to the controversy are rogue agents who mislead buyers into signing commission forms at the last minute by claiming it is a ‘rule’.

Although the law does not stipulate who should pay the fee and how much is payable, it is common for sellers to pay their agents a sum equivalent to 2 per cent of the property’s price, while buyers foot 1 per cent. If both sellers and buyers are represented by agents in an HDB flat transaction, both parties pay the fee to their own agents. This practice is known as co-broking.

Questions crop up when buyers act on their own - which is more common than sellers acting on their own. Many agents hired by sellers then try to claim a 1 per cent cut from buyers. This fee, peculiar to the HDB resale market, is levied because the quantum of commission on HDB deals is lower than that for private property deals, says the Institute of Estate Agents.

Agents and agencies cite other arguments:

Firstly, by advertising a property for sale, helping the buyer to make contact with its owner and negotiating the deal, the seller’s agent provides a service to the buyer.

Secondly, when the deal is inked, the seller’s agent has to do paperwork for the buyer, such as filling up the sale and purchase agreement and submitting the document.

Thirdly, since this 1 per cent fee is ‘market practice’, it is up to independent buyers to declare upfront they do not wish to pay it. If the buyer seals a deal without bringing up the matter, he would be tacitly agreeing a fee is payable.

But in the absence of a written commission agreement between an independent buyer and the seller’s agent, these arguments hold little weight, say lawyers. Under Singapore law, commission deals can be verbal, so refusing to sign a form does not solve the problem. The bigger question is whether both sides are aware of the commission and agree that it should be paid at all.

Drew & Napier director Hri Kumar says that while the courts will take note of the prevailing ‘market practice’, an agent will find it difficult to prove that the buyer was aware of this ‘practice’ if the buyer is a layman.

Ramdas & Wong consultant Ellen Lee says the agents - deemed the ‘experts’ in this scenario - are obliged to inform the buyer upfront that they are levying a fee. ‘If someone doesn’t know (about the fee), he doesn’t even know that he should say he is not paying it.’

But the buyer who is informed of such a fee and does not intend to pay has to object to it at the earliest possible instance. If he does not, he can be said to have agreed implicitly to pay, says Mr Freddi Lim, a partner at Trinity Law Corporation.

Awareness aside, what kind of acts can be considered ’services’ that sellers’ agents render buyers? The lawyers found it unlikely that introducing a buyer to a seller could be considered a service. Ms Lee points out that the seller’s agent places a property ad and makes contact with potential buyers because he is duty-bound to market the home on behalf of his client. His role as a liaison does not give him an inherent right to claim a fee from the buyer. However, if that potential buyer subsequently asks the agent to, say, recommend suitable properties, he may be said to be soliciting the agent’s services.

The question of whether handling paperwork constitutes a service to buyers is less clear-cut. This is because only one set of sale and purchase documents needs to be submitted to the Housing Board for the resale of a flat. Although the HDB does not stipulate which party should submit the form, the design of its online application system - through which most applications are made - places the burden of submission on the seller’s agent if the buyer is not represented by an agent. This often means that sellers’ agents fill up the form and submit the applications for both parties.

Assuming that the independent buyer has done his own checks to make sure he qualifies to buy the particular apartment, it is questionable whether a fee can be levied for such paperwork. Infinitus Law Corporation director Leo Cheng Suan, for example, feels such paperwork is simply part and parcel of the steps needed to complete a deal.

The HDB says: ‘The submission mode should not be misused by housing agents as a basis for charging commissions (which), like payment for all types of services, are subject to negotiation.’

A large part of the validity of housing agents’ claims hinges on what the agents disclose and when they do so in the dealings leading up to a sale. Unfortunately, many agents today produce commission payment slips only after a purchase is sealed. As Ms Wee says after settling her lawsuit with PropNex: ‘Agents should state clearly the services they are providing to justify the fee they are charging.’

Until that happens, the industry will continue to be dogged by doubts over the ethics of its rank and file.

Source : Straits Times - 13 May 2008

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Shaw House, Shaw Centre may undergo major revamp next year - Singapore

Shaw House, Shaw Centre may undergo major revamp next year - Singapore

By Timothy Ouyang,
  
Another landmark near Orchard Road may soon get a facelift. Channel NewsAsia understands that Shaw Organisation is considering a major redevelopment of Shaw House and its neighbouring Shaw Centre.

According to some sources, an official announcement is expected by August. The news comes even as some tenants have moved out in recent months following a spike in rentals.

Shaw House has been a major landmark near Orchard Road for years - but it may soon take on a different look.

According to sources, plans are in the pipeline to expand Shaw Organisation’s Lido Cineplex, and to add more retail space.

Channel NewsAsia understands that Shaw Organisation is currently in talks with various architects on its redevelopment plans. However, it has not decided if this would include its office and retail spaces in Shaw Centre.

The tenants have not been informed officially, although they have heard word on the grapevine. They declined to be interviewed.

The present Shaw House opened in 1993, and includes anchor tenant Isetan. It adjoins Shaw Centre, which has retail, F&B and office space, as well as a bank.

Retail rentals there have jumped from S$6 a square foot to as much as S$16 a square foot in recent months, and a number of tenants have moved out.

Market watchers said that it is likely the new site may even include new residential spaces.

Nicholas Mak, Director, Consultancy and Research, Knight Frank, said: “I think that if any residential development were to be redeveloped on that site, and if it is priced reasonably, demand would be quite strong.”

But they do not expect the re-development to have a major impact on retail space and shop rentals along Orchard Road.

Mr Mak said, “In about 12 months or so, we’re going to see some new developments coming up on Orchard Road. So, if a major retail mall were to temporarily be taken offline, I think that vacuum could be filled by some of these new malls.”

Channel NewsAsia understands that re-development is likely to start in the second half of next year. - CNA/ms
Source : Channel NewsAsia - 13 May 2008

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Asia Food & Properties posts Q1 net profit of S$45m - SINGAPORE

Asia Food & Properties posts Q1 net profit of S$45m - SINGAPORE

SINGAPORE : Asia Food & Properties has returned to the black in the first quarter of this year. The firm reported a profit of S$45 million, overturning a loss of S$2.7 million in the year-ago period.

Revenue rose 9.5 percent to S$195 million, mainly from its China property business and its food operations.

Asia Food & Properties said the outlook for the commercial and hotel sector of the China property business remains competitive, despite positive foreign investment interest and buoyant business activities.

Increasing corporate demand is expected to bolster the Grade A office market. But the company expects demand in the residential market to be affected by government policies on residential market in China.

As for its food business, the firm said its priority is to focus on higher margin products and increasing its sales volume to stay competitive in China.

Meanwhile, its palm oil unit Golden Agri-Resources has posted sterling results for the first quarter.

Net profit doubled on-year in the first quarter to US$443 million, thanks to higher crude palm oil (CPO) production and a surge in CPO market prices of close to 100 percent.

Revenue was also a record US$747 million, up 172 percent on-year. - CNA/ms

Source : Channel NewsAsia - 13 May 2008

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Global Infrastructure Partners closes US$6b fund

Global Infrastructure Partners closes US$6b fund

By CHOW PENN NEE
PRIVATE equity fund Global Infrastructure Partners, which counts Credit Suisse Group and General Electric Co as founding investors, completed its fund-raising yesterday with US$5.64 billion raised.
The fund invests in global infrastructure assets such as airports, waste-management companies, energy generation pipelines, and water, across both OECD and select emerging market.

The fund, formed in 2006, is already a cornerstone investor in London’s City Airport, and is invested in port assets in the United Kingdom and Argentina, and in a liquid petroleum product storage facility in India. It also recently completed its acquisition of 46 per cent of Biffa, the leading UK integrated waste management business.

Earlier this year, it teamed up with Singapore’s PSA International to develop Argentina’s second largest container terminal - International Trade Logistics - and complementary logistics and warehousing businesses. Last year, GIP’s International Port Holdings also formed a joint-venture company with PSA International to operate a short sea container terminal at the Great Yarmouth Port.
The fund will continue to look at opportunities that Singapore presents, notably in the energy sector, said Adebayo Ogunlesi, a former senior Credit Suisse investment banker who runs GIP. With Temasek divesting its two remaining generating companies, Senoko Power and PowerSeraya, he said that they are monitoring developments in this area. ‘We will certainly follow developments closely, and look out for opportunities.’

‘Singapore is an attractive place to buy assets,’ he noted.

‘Our approach is to look at opportunities in places with strong economic fundamentals where we can improve operating efficiency and therefore benefit all stakeholders,’ he explained, adding that the fund is also looking at markets such as China and Australia to invest in.

The turmoil in the financial markets has not affected investor interest in the fund, and they see investors interested in making a play for infrastructure, believing this asset class to be able to withstand the current market volatility. ‘Infrastructure assets are a defensive play during market turmoil. These assets tend to have stable cash flows and are for the long term,’ Mr Ogunlesi noted.

The fund’s investors include institutions and high net worth individuals from 21 countries such as the US, Canada, UK, Middle East, Japan, and Hong Kong.

Its institutional investors include public and corporate pension plans, endowments, foundations and financial institutions.
Source : Business Times  - 13 May 2008

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Underground ‘city’ to free up space - Singapore

Underground ‘city’ to free up space - Singapore

Possibilities include power stations and logistics centres beneath the surface
By RONNIE LIM
(SINGAPORE) Singapore is looking at building underground power stations, water reclamation plants, wafer fabs and R&D labs, data centres, warehouses and port and airport logistics centres to free up surface land for other economic uses.
Industrial landlord Jurong Town Corporation has called a tender for a wide-ranging ‘underground rock cavern (URC) usage feasibility study’ to see how best caverns beneath the island can be used.

The consultant awarded the study will have to work with various government agencies on possible uses for the caverns.

For instance, it will have to work with the Energy Market Authority on power stations, the Civil Aviation Authority of Singapore on airport logistics, or the Public Utilities Board on water reclamation plants.

The study will cover such ’space, technical and functional requirements, operation and maintenance requirements and identification of issues of concern’, the tender document says.
Industrial landlord Jurong Town Corporation has called a tender for a wide-ranging ‘underground rock cavern usage feasibility study’ to see how best caverns beneath the island can be used.
 
 
The tender, called on Friday last week, closes on June 6. Due to the specialised nature of the project, only tenderers with proven URC expertise and experience are eligible.

The winning consultant will have to identify and study proven URC usage in other countries and determine the technical and operational feasibility of such usage here.

The consultant will also have to look at the environment, health and the likely public reaction on such matters as radiation and pollution, harmful airborne particles and damage to existing buildings or infrastructure, among other things.

A JTC spokeswoman said yesterday JTC will be the facilitator for the multi-agency study. ‘The study will look at possible uses for URCs as well as costs,’ she said. ‘The latter include costs for excavation and facility construction for each specific use.’

JTC declined to say which areas of Singapore have potential for URCs. ‘The latest feasibility study is looking just at usage, and not sites,’ the spokeswoman noted.

Singapore has so far used underground caverns for munitions storage for the defence forces. It blasted caverns out of granite beneath the disused Mandai Quarry.

And it is currently constructing Phase 1 of the $700 million Jurong Rock Cavern (JRC) project beneath Jurong Island to store 1.485 million cu m of crude oil and oil products like naphtha, condensate and gas oil.

JRC will be used by petrochemical companies such as Jurong Aromatics Corporation, which is building a US$2 billion aromatics complex and is the first committed customer.

The first of five caverns being built under Phase 1 will start operating at end-2010. Phase 2 of the project will add another 1.3 million cu m of storage.

In March, when Defence Minister Teo Chee Hean commissioned the underground munitions facility at Mandai, he said it would free up 300 ha of land - half the size of Pasir Ris Town - and need 20 per cent less manpower to operate than a surface facility.

Likewise, JRC will free up 60 ha of surface space - bigger than Bishan Park - to accommodate the storage needs of the oil industry here.

Land on Jurong Island is being snapped up by new petrochemical investors. BT understands that no more land is available from JTC for above-ground oil storage terminals, after Hin Leong’s Universal Terminal and Emirates National Oil Company’s Horizon Terminal.

Industrial landlord Jurong Town Corporation has called a tender for a wide-ranging ‘underground rock cavern usage feasibility study’ to see how best caverns beneath the island can be used.
Source : Business Times  - 13 May 2008

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Top audit firms set to march on the LLP route - Singapore

Top audit firms set to march on the LLP route - Singapore

Three of the Big Four look to restructure, taking a cue from US outfits
By ANNA TEO

(SINGAPORE) After mulling over the pros and cons in recent years, three of the Big Four audit firms in Singapore have decided to convert to limited liability partnerships (LLPs), with at least one of them expected to effect the restructuring quite soon.
Deloitte Singapore, KPMG and PricewaterhouseCoopers (PwC) are gearing up to become LLPs, with Deloitte likely to be the first to add the three letters to its name, possibly within weeks. Ernst & Young is understood to be still looking into the issue.

Among other key features, a LLP offers its partners limited liability in the event that the firm is sued. In a traditional general partnership - the current business structure of the Big Four and most other audit firms in Singapore - the partners are personally liable for the acts of fellow partners.

The idea of corporatising professional firms such as accounting and law practices - so as to inject outside capital and expertise, leading perhaps to multi-disciplinary practices - came up back in 1990. But it was only about a decade later that the law allowing the corporatisation of professional firms with limited liability was passed in Singapore. And by that time, the accounting fraternity here - taking the cue from the United States and the United Kingdom - was leaning more towards the LLP option, which affords limited liability along with the flexibility of operating as a partnership.
 
In 2005, the LLP Act introducing the new business vehicle in Singapore was passed, though it was more than a year later that the Accountants Act was amended to add the LLP option.

The Big Four and other leading audit firms in town have since been weighing the costs and benefits of becoming LLPs.

Chaly Mah, CEO of Deloitte Singapore, told BT late last week: ‘We believe that the LLP is a good structure for a partnership model as it is consistent with practices in well-developed markets like the US and UK. We are looking into converting our general partnership into an LLP and will inform our stakeholders in due course.’

He did not say when exactly, but it is believed to be fairly soon, possibly within weeks.

KPMG Singapore is also well along the way to becoming a LLP.

Says its managing partner, Danny Teoh: ‘KPMG is planning to move towards a limited liability partnership structure in Singapore, and we are currently at an advanced stage. Operating under this structure is logical for us, and several firms in KPMG’s global network have already taken on this form where local legislation permits.’

Likewise, Gautam Banerjee, executive chairman of PwC Singapore, describes LLPs as a ‘good vehicle’ for professional services organisations.

‘Many accounting firms in other jurisdictions, including those in the USA, already operate as LLPs. PwC Singapore plans to convert to a LLP but have yet to firm up the exact timing, probably within the next couple of years,’ he says.

While many of the leading law firms in town have become LLPs, most local audit firms here operate as general partnerships or sole proprietorships.

One mid-tier local audit firm cited the high costs of professional indemnity insurance as one reason why the smaller firms may not restructure.
Source : Business Times  - 13 May 2008

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Succession planning crucial: Headhunter

Succession planning crucial: Headhunter 

By Michelle Tay 
STRONG INFLUX FROM THE WEST: ‘The sophistication level of businesses in Singapore is very high. This tends to be the hub of regions, so it’s not just the local market you’re dealing with. As things are slowing in the West, more people will absolutely think about moving over to Asia.’ - MR SULLIVAN, on why more talent is likely to come in from abroad. — PHOTO: CTPARTNERS
 
SINGAPORE has a vital edge over rival financial centres in the battle to address a critical shortage of senior executives, according to a top American headhunter.
The Republic is looking increasingly attractive to Western executives whose home economies might be slowing, Mr Brian Sullivan, the chief executive (CEO) of New York executive search firm CTPartners, said.

He was referring specifically to ‘C-suite executives’: CEOs, chief financial officers (CFOs) and chief operating officers.

In recent months, a shortage of talent in this segment, especially at banks, has forced employers to look abroad - and to offer big pay packets.

Mr Sullivan said Singapore has a strong advantage.

‘The sophistication level of businesses in Singapore is very high. This tends to be the hub of regions, so it’s not just the local market you’re dealing with,’ he told The Straits Times last week.

He added: ‘As things are slowing in the West, more people will absolutely think about moving over to Asia.’

He said Singapore offers an added benefit: a high quality of life.

This makes it a more attractive destination than other financial centres such as Hong Kong, where executives are concerned about lifestyle factors such as air quality and accessibility to schools.

He said the calibre of the talent from abroad is very high, but ’so is the shortage of talent’.

Companies that fail to make succession plans for key senior roles will be hard-hit by this problem. If a company’s top brass leaves without a replacement, then it will not have a senior management team capable of continuing its business strategy.

‘If there’s no methodology in place to invest in the next tier of people and cross-train them, then you’re in the compensation-chasing, external recruitment game, which can really have a negative impact on your profit and loss statement,’ said Mr Sullivan.

Take the plight faced by United States financial giant Merrill Lynch, which lost two top executives - CEO Stan O’Neal and CFO Jeffrey Edwards - between October and December last year in the subprime mortgage fallout.

Mr Sullivan advised organisations in Asia to take succession planning seriously so as to avoid such a scenario in their own boardrooms.

‘Succession planning is something that’s underdeveloped around the world but especially in Asia, because of the rapid growth and rapid sophistication of Asian organisations or Asian divisions of multinationals,’ said Mr Sullivan.

He added that it is now time to prioritise succession planning ‘because of this exacerbated talent shortage’.

He also believes that compensation packages are key in retaining talent, and that C-suite executives ’should be able to make as much money as humanly possible’.

However, the amount should be linked to the success that they achieve in driving an organisation and to the long-term profitability of the organisation.

‘Two-thirds of their basic salary base should be variable and computed based on how well they do. This ensures the interests of the executives are aligned with those of the shareholders,’ Mr Sullivan said.

He said Asia is a ‘developed region that still has hyper growth attached to it’.

To take advantage of that growth, he noted: ‘The board of any organisation needs to have on it Asians who are running businesses in Asia and understand the Asian way of business.’

He said: ‘You’re not interested in just the heritage of Asians - you’re interested in what business conditions are in the region and how to do business here.’
Source : Straits Times  - 12 May 2008

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Sales of Singapore strata offices down, may fall further

Sales of Singapore strata offices down, may fall further
 
Prices holding for now but may suffer if wider market weakens

By Fiona Chan, Property Reporter 
 
THE dispirited housing market has claimed another casualty: Sales of strata-titled offices have taken a nosedive this year.
And while prices are holding steady for now, they might start to dip in the coming months, predicted property firm CB Richard Ellis (CBRE).

It analysed data for seven major strata-titled office buildings and found that, in the first three months of the year, only 11 sales of strata office units took place. These properties are not sold as entire office blocks; instead, units are sold singly.

The figure is less than half of that in the previous quarter and a fifth of that for the same period a year ago. In the first quarter, most of the buildings saw only one sale or none at all.

The slowdown in deals comes despite a continuing shortage of office supply, which helped boost sales and prices of strata office units to record highs last year. Some $1.7 billion of offices changed hands last year.

Since the office crunch has not improved much, this implies that the sombre mood in the market is behind the lacklustre activity, said Mr Jeremy Lake, CBRE’s executive director of investment properties.

‘In the strata-titled market, most transactions are relatively small, so buyers are high net worth individuals or companies rather than property funds,’ he said.

‘They are more likely to be sentiment-driven, and no doubt, sentiment now is not as strong as it was a year ago.’

The stalled office activity echoes the current housing market situation in Singapore, Mr Lake added.

Homebuyers and sellers are at a stand-off now, after private property prices soared 31 per cent last year only to hit the brakes towards year-end following the sub-prime mortgage crisis in the United States.

‘For the secondary markets in the residential and office segments, most vendors will hold on if they can’t get their price,’ said Mr Lake.

‘Because rentals are very good and mortgage rates are low, investors have strong holding power.’

Across property types, offices saw the smallest increase in prices in the first three months of this year, perhaps because of the slowdown in activity. They inched up 1.1 per cent in the January to March period.

Mr Lake said he believes office prices are now ‘largely flat’ rather than on an uptrend.

CBRE data shows that in some buildings, the average price of offices sold has actually come down this year.

At International Plaza, for instance, the average price of units sold in January to March was $1,375 per sq ft (psf), down from $1,449 psf in the previous three months.

But Mr Lake said it is too soon yet to say if prices are peaking. ‘It’s a lull at the moment. Whether it will turn into a peak, we shall see.’

However, he added that investors ’should not expect to see exciting capital gains going forward’.

‘We’re likely to see easing of activity and easing of capital values with the market stalled as it is,’ he said.
Source : Straits Times  - 12 May 2008

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Opportunities abound despite uncertainties

Opportunities abound despite uncertainties
 
Inflation, record oil prices dampen mood, but some sectors offer hope

By Goh Eng Yeow, Markets Correspondent 
PROMISING AREAS: The construction and building materials sector, as well as property, give stock market investors reasons to cheer up, according to analysts. — ST PHOTO: TERENCE TAN
 
UNTIL recently, there was euphoria in the stock market reminiscent of last year’s super-bull run.
Blue chips such as DBS Group Holdings, United Overseas Bank and the Singapore Exchange enjoyed sharp run-ups, as investors bet on a V-shaped recovery in stock prices across the globe.

Last week, however, the mood began to sour. For lack of a better reason on which to pin their misgivings, investors blamed escalating inflation and soaring oil prices for the jitters that had started creeping in.

Also singularly lacking were the positive signals investors had been hoping to get from the current corporate reporting season.

The insurance giant American International Group, for example, posted a record loss of US$7.8 billion (S$10.7 billion) for the quarter because of the collapse in the value of securities tied to the crisis-hit United States mortgage market.

This dispelled a widely-held belief among investors that the worst of the credit crisis was over for global financial markets, after the Federal Reserve made a dramatic effort to bail out ailing investment bank Bear Stearns in March.

On the local front, banks distinguished themselves by registering sharp falls in prices during the week, despite posting better-than-expected first-quarter results.

Still, the angst among investors is understandable.

While local banks may be flush with liquidity, unlike their global counterparts, which are scrambling to raise fresh capital, their outlook may be less clear.

After a sunny first quarter, when blizzards from the global financial storm hardly touched Singapore’s shores, few are expecting the local economy to escape the backlash from a weakening in US consumer demand.

This may cause banks’ profitability to slow, as loan growth drops.

And soaring oil prices bring their own set of problems.

After a Goldman Sachs analyst predicted that each barrel of oil may fetch an eye-popping US$200 in the next two years, market strategists rushed to examine the impact such a development would have on the global economy.

For investors, it meant a wholesale switching out of transport stocks across the region.

Even quality carriers such as Singapore Airlines could not escape the onslaught, as the stock sank 3.8 per cent to $15.54 last week.

So, it is not surprising that after gaining 310 points, or 10.6 per cent, in the past two months, the benchmark Straits Times Index slipped 74.07 points, or 2.3 per cent, last week to 3,162.03.

Stock pundits noted, however, that the rapid recovery in share prices since March did have one benefit.

It at least put to rest earlier fears that stock markets would be stuck in an L-

shaped limbo, as one financial crisis after another on Wall Street threatened to pull down the global financial system.

And the debate now is whether stock markets will experience a U-shaped or a W-shaped recovery.

At this point, it is useful to take some pointers from top bankers with their pulse on Singapore’s economy.

Unlike the glum mood encountered at another bank in February, with its chief executive (CEO) describing this year as a challenging one, the atmosphere at OCBC Bank’s first-quarter results press conference last week was a lot more relaxed and cheerful.

While CEO David Conner took pains to repeat several times that the bank was on the alert for a further deterioration in the global economy, those present came away with the impression that there were abundant business opportunities.

Yes, the US economy will probably suffer for a few more quarters, but there are sectors in Singapore that will continue to thrive.

The construction and building materials sector will benefit from mega investments as ExxonMobil, for instance, presses ahead with its US$4 billion (S$5.48 billion) petrochemical plant.

There may even be something to cheer about in the moribund residential property market.

Mr Conner sniffed opportunities in lending to buyers who had purchased on deferred payment terms, reckoning that they would pick up their purchases because rental demand was so strong.

So, like OCBC, stock investors will have to sniff out buying opportunities in sectors that will continue to do well in the current uncertain economic climate.

While the super-bull run of yesteryear may not return any time soon, that does not mean that share prices will languish at current levels.

Indeed, for some sectors, the going will be very balmy, even though there may be an overcast sky elsewhere.

Where pitfalls and chances for gains lie

The mood has begun to sour since a recent euphoric rise in the stock market as rising inflation and soaring oil prices again stoke concerns among investors.

Corporate reports, meanwhile, have been lacking in positive signals.

LThe construction and building materials sector will benefit from investments like ExxonMobil’s US$4 billion (S$5.48 billion) petrochemical plant.

Lending to buyers on deferred payment terms also presents opportunities.

Source : Straits Times  - 12 May 2008

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

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mindy@mindyyong.com

Condo won’t prune trees over Singapore MRT tracks

Condo won’t prune trees over Singapore MRT tracks 

Branches deemed safety hazard, but condo won’t foot bill
By Esther Tan 
THE problem: About a dozen 12m-tall trees on the premises of a condominium in the east coast area, encroaching on the raised MRT tracks.
SMRT says the overgrown branches may be a safety hazard to train operations.

But the condominium, Stratford Court, has balked at spending over $2,000 to prune them.

It noted that the Land Transport Authority (LTA) guide classified the planting of trees with full-grown height extending above the railway barrier as a restricted activity.

However, the condominium’s management committee (MC) added that the guide dated back to August 2000 - and those trees were planted in 1998.

The condominium was therefore not obliged to comply with the demands of the guide, said MC chairman Lionel De Souza.

SMRT could not provide ‘legal justification’ for the condominium to foot the tree-pruning bill, he said.

The face-off marks the first time a tree- pruning request by the MRT operator has been challenged.

An SMRT spokesman said the company had notified and made arrangements with various landowners and maintenance agents to prune overgrown trees or vegetation 64 times last year.

The Stratford Court matter first arose in late March, when SMRT first contacted its MC, asking it to prune the branches of its khaya trees near the tracks between the Simei and Tanah Merah MRT stations.

The condominium, which sits at the junction of Upper Changi Road East and Bedok Road, duly obtained quotations for the job.

Its regular landscaping contractor asked for $2,145.

Mr De Souza, 65, said of the quoted price: ‘That is not a small amount, so I checked up on the matter myself. As chairman, I have a duty to protect the money in the condominium’s fund. I must be very careful with how I spend this money.’

This was when he found out that the guide put out by the LTA - which owns the train viaducts - went back to 2000, and that Stratford Court’s trees pre-dated that.

In its reply on April 4, SMRT agreed that, going by the LTA guide, the condominium was not obliged to engage a contractor to prune the trees and pay for it as well.

But it later cited the Parks and Trees Act, which gives the Commissioner of Parks and Recreation - the chief operating officer of the National Parks Board (NParks) - the right to issue an order for the condominium to prune its trees if they are obstructing MRT trains.

The cost of non-compliance: A fine of up to $20,000.

NParks said the Commissioner has never had to issue such an enforcement notice before - and he is not about to do so if the matter can be resolved in other ways.

The Stratford Court MC is standing its ground.

Mr De Souza said the MC had so far not received any notice from the Commissioner, and that until it did, it would not arrange to prune the trees.

SMRT has passed the matter to LTA.

When contacted, LTA said it was working with SMRT, NParks and the condominium to resolve the matter amicably.

Source : Straits Times  - 12 May 2008

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Mindy Yong

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Singapore ERP cuts traffic while keeping Orchard buzz

Singapore ERP cuts traffic while keeping Orchard buzz
 
5 new gantries to form S’pore River cordon, as speeds down to 18kmh; negative retail impact unlikely

By Maria Almenoar 
WHEN an Electronic Road Pricing (ERP) cordon went up around the Orchard Road area in 2005, there were concerns not just from motorists but from retailers as well.
These businesses were worried that the move would drive customers away.

The Government’s counter: The measures were necessary to keep up the buzz of the shopping belt as traffic had slowed down to 15kmh on Orchard Road.

Not everyone was convinced, but the gantries went up and ERP hours were extended to Saturdays and for an hour more on weekdays.

The aim: To discourage motorists from using the shopping belt as a way of getting to other destinations, such as Marina Bay.

Three years on, a study has shown that vehicles have indeed been able to move along faster. Traffic speeds went up to 25kmh and have since stabilised at an average of 23kmh; the volume of traffic has shrunk by 20 per cent.

And the retailers have stopped complaining - shoppers are still making their way to the strip.

Orchard Road Business Association spokesman Stephen Goh noted that the cordon had noticeably reduced the amount of pass-through traffic on weekday afternoons.

‘The overall effect is something positive because what we are left with are the ‘real shoppers’, not people just using the road to get elsewhere.’

The Transport Ministry presented the positive effects of the Orchard Road cordon on Thursday, ahead of giving updates for the second cordon in the business district, which will take effect in July.

The five gantries in the new cordon - at Eu Tong Sen Street, New Bridge Road, South Bridge Road and two at Fullerton Road - will begin evening operations to reduce traffic going through the Singapore River area. This kind of traffic now makes up more than a third of the traffic in the area.

The Land Transport Review first pointed out in January that a motorist travelling in the area - say, from Bugis to Chinatown - can now go at only 18kmh, down from 25kmh five years ago.

With the Singapore River cordon of gantries, the commercial and shopping areas of Bugis, Marina Centre and Bras Basah will be separated from the office areas of Shenton Way and Raffles Place.

Yesterday, construction work began on two of the five new gantries. Already, some businesses in the area are jittery about what this could mean for them.

Mr Colin MacDonald, the outgoing president of the Boat Quay Business Association, said: ‘It seems to go against the tourism board’s intention of injecting life and vibrancy into the river area.

‘If locals are put off because of the charges, tourists are likely to follow suit.’

But the Singapore Retailers Association said it had not received complaints from its members in the area, and that there were few retail shops there anyway.

Said Ms Lau Chuen Wei, the association’s executive director: ‘Most of the shops along the river area are specialist shops; shoppers can plan their shopping trips there around the gantry timings.’

The Esplanade said it did not think the gantries would be a ’significant deterrent to patrons genuinely interested in catching arts performances at the centre’.

The Transport Ministry said the concern of some stakeholders thus far was not how business would be affected, but whether enough taxis would ply the area.

It said it was working with taxi operators to provide rebates for cabbies who cannot find fares when they enter the ERP zones. At the moment, only ComfortDelGro has such a scheme to give rebates to its cabbies.

Source : Straits Times  - 12 May 2008

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

(+65)91002985

mindy@mindyyong.com