S’pore property stocks ‘cheap, but not hot’

S’pore property stocks ‘cheap, but not hot’

By Joyce Teo

STOCKS here are cheap now but there is nothing to support any aggressive buying of Singapore property firms, says asset manager Henderson Global Investors.
Hong Kong and mainland China are the region’s best bets for now, it said.

At the moment, Singapore property market fundamentals just do not look as good as these alternative markets.

‘There is an oversupply issue in Singapore and the balance sheets of developers and to some extent, the real estate investment trusts (Reits), are more stretched,’ said Mr Patrick Sumner, who heads Henderson’s property equities team, at a media briefing yesterday.

Indeed, Singapore developers and Reits are still looking to raise quite a lot of funds, said Mr Frankie Lee, Henderson’s co-head of property equities (Asia).

‘We need to see some sort of stabilisation in the banks, in manufacturing, a bit of growth in jobs before we can see confidence come back into the property market. So, stocks are cheap.. but are we having a new driver of economic growth?’ asked Mr Lee.

Private home prices in Singapore may fall by another 15 per cent before hitting the bottom - and recovery may only come in the second half of 2010, he said.

Vacancies in the home and office sectors have yet to peak, he added.

Hong Kong and mainland China, however, ‘have emerged from a bruising 2008 with some resilient production numbers since the start of the year,’ said Mr Lee.

‘We think both will continue to outperform in the long term, relative to both developed and emerging Asia property markets. We believe that the sector fundamentals are gradually improving rather than deteriorating.’

Asian stocks that Henderson favours include Sun Hung Kai Properties, China Overseas Land and Yanlord Land.

Globally, the outlook is generally not rosy. While property has outperformed general equities, the global property total return index is back where it was at the start of the new millennium, said Mr Sumner. This will be a year of rights issues, uncertainty and opportunity for property firms, he added.

Source : Business Times - 29 April 2009

Singapore Property - Buy, Sell, Rent, Invest

Mindy Yong

(+65)91002985

mindy@mindyyong.com

Mexican swine fears inflict more damage

Mexican swine fears inflict more damage

By R SIVANITHY
SENIOR CORRESPONDENT

CAN pigs fly? Most species can’t but it appeared to dealers that Mexican swine can, in the way that a mutating flu virus can manifest fear thousands of miles away from its source, thus giving the illusion of flight.

For the second consecutive day yesterday, the Straits Times Index came under pressure, which is said to be due to more deaths in Central America from a deadly new strain of flu found in pigs, stoking fears of an epidemic that hark back to the days when this region suffered from the Sars (Severe Acute Respiratory Syndrome) outbreak.

However, as some correctly pointed out, Sars brought pressure on only regional markets when it hit at end-2002/early 2003, and didn’t have discernible impact on Western markets, so logically, the swine flu outbreak should be similarly confined to its domestic and surrounding areas. For some unknown reason this time, markets have decided on being non-discriminating, supposedly because the swine flu has the potential to evolve into a global pandemic.

Whatever the case, a 2 per cent fall in Hong Kong’s Hang Seng Index and an average fall of slightly more than 2 per cent Europe-wide when markets there opened meant a weak day here - the Straits Times Index fell 10.2 points to 1,808.41, though just like on Monday, it was off its intra-day low.

Among the notable losses was Neptune Orient Lines, whose shares fell 12 cents, or 9.4 per cent, to $1.15 on volume of 9.9 million shares following release of the company’s March operational data. In a ’sell’ report on Monday, Citi Investment Research said that it expects NOL to report peak losses in Q1 and has cut its estimates further. ‘We expect lower losses in Q2 when cost-saving measures take effect. NOL has US$467m short-term debt due in FY2009, with negative operating cash flows this year, debt refinancing may be an option.’

Citi said that although the company has ruled out a rights issue, this cannot be totally dismissed given recent cash calls by Temasek-linked companies. It set a 90-cent target price based on 0.5x book value found in past down cycles.

Morgan Stanley in the meantime, weighed in with an ‘equal-weight’ rating and $1.20 target price for NOL, saying that the latest data confirm its view of a challenging environment. ‘With steep losses likely, we expect book value deterioration in 2009-2010,’ said MS. It said that the worst of the demand contraction is expected in Q1 2009 and volume contraction could be less negative thereafter. It recommended accumulating at $1 and selling above $1.40.

In a Monday report, Schroder Investment Management said that its latest survey of its top clients found that while the majority are still underweight risk assets, over 45 per cent expect to increase their allocation within the next quarter. Schroders concludes that demand for risk assets is growing.

In its Singapore Strategy dated April 24, Nomura Singapore said that domestic liquidity factors favour a continued re-rating of the local market.

‘Although the STI has recovered 28 per cent from the lows in March, it is only up 5 per cent YTD, with price-to-book valuations still at an undemanding 1.1x compared to the long-term price-book (P/B) average of 1.7x. Meanwhile, Singapore remains one of the most inexpensive markets in Asia on a P/B basis,’ said Nomura.

Source : Business Times - 29 April 2009

Singapore Property - Buy, Sell, Rent, Invest

Mindy Yong

(+65)91002985

mindy@mindyyong.com

Developers meet valuers in search for common ground

Developers meet valuers in search for common ground

Finger pointed at banks as some buyers struggle to raise enough loans

By KALPANA RASHIWALA

(SINGAPORE) Developers last week held a meeting with valuers amid recent complaints in some quarters that conservative valuations have derailed some home sale deals as potential buyers could not secure the required loan quantum from banks.

BT understands that the valuers disagreed with the developers that their valuations had been too conservative, and that it was the banks that were just not lending.

‘Generally, if there are transactions, we’ll match (with valuations). It’s the banks that are more cautious about lending to certain profiles of borrowers like investors, especially if they are foreigners,’ a valuer told BT.

The valuers also raised issues that they had been facing in recent months, such as a dearth of comparable transactions, and explained the methods that they use to arrive at valuations in such situations.

‘We explained that some banks require valuers to look at three comparable transactions, and how we generally do not take into account outlier transactions that may perhaps reflect ‘depressed’ prices,’ another valuer said.

Sources say that the meeting was amicable, drawing more than 20 valuers and heads of property consulting groups and the executive committee members of the Real Estate Developers Association of Singapore led by its president, Simon Cheong.

When contacted, a Redas spokesman said: ‘We wanted to better understand issues that valuers may have in their day-to-day valuation and what else the profession may need from developers to enable them to give (as) updated and relevant (a) valuation as possible.

‘The discussions were general in nature and discrepancies in valuations in some instances were highlighted and analysed. Valuers shared with us some of the constraints they are facing such as the lack of or insufficient comparable sales data and other issues.

‘The session was fruitful as it helped us understand one another better and we agreed to look into areas where communication and interaction could be improved upon.’

A property consultant told BT that he found it odd that the same banks that were willing to give a 75 per cent or 80 per cent loan on a high-end residential unit when it was priced at $2,000 psf (thus assuming an exposure for about $1,500 to $1,600 psf) are now reluctant to give even 50 or 60 per cent loan when the property is going for a much lower price of $1,200 psf (which works out to $600-720 psf exposure for the bank).

‘It’s particularly difficult for foreign buyers, even PRs in some instances, to get loans for investment properties. Banks are more willing to lend to Singaporeans buying residential properties for owner occupation.

‘Some of the bigger banks should take the lead and be more proactive in lending to property buyers, not just for entry-level but also luxury homes, given that spot prices have already come off about 40 per cent.’

Agreeing, another valuer said: ‘We provide the valuations. It’s up to the banks whether they want to lend, and how much. It’s a commercial decision for them.’

Giving his take on the challenges facing the profession, a senior valuer said: ‘We have to be as level headed as possible and (assign) a sensible value. Valuers play a very important role in the financial system and economy, as we’re marking everybody’s asset values.’

This was the first time Redas has met valuers as a group, at least in recent years, and this follows its maiden meeting in November with analysts in stockbroking research houses covering the sector.

Redas also holds regular dialogues with government agencies such as Urban Redevelopment Authority, and Building and Construction Authority. ‘Such dialogues provide learning opportunities for Redas and promote better understanding across the industry leading to a healthy property market,’ the association’s spokesman added.

Source : Business Times - 29 April 2009

Singapore Property - Buy, Sell, Rent, Invest

Mindy Yong

(+65)91002985

mindy@mindyyong.com