Temasek invests in commodity firm Olam

Temasek invests in commodity firm Olam

Company’s shares soar on news of 13.7% stake by investment agency

By Gabriel Chen

TEMASEK Holdings has agreed to buy a stake in Olam International for $437.5 million, its first foray into commodities after it named former mining boss Charles ‘Chip’ Goodyear as chief executive officer (CEO)-designate in February.
Olam, a global supply chain manager of agricultural products and food ingredients, announced yesterday that it is selling 13.76 per cent of its enlarged capital to Temasek at $1.60 a share, a 17.5 per cent discount to Friday’s close.

The deal, if approved by Olam shareholders, will make the Singapore investment agency its second largest shareholder after Indian conglomerate Kewalram Chanrai Group.

As part of the deal, Temasek will also get a seat on Olam’s board.

Olam’s group managing director and chief executive Sunny Verghese lauded Temasek yesterday for being a long-term oriented investor with an excellent track record. ‘The investment from a discerning investor like Temasek is a clear vote of confidence in Olam’s competitive position, strong supplier and customer franchise and its future prospects,’ he said in a briefing.

Mr Verghese expects at least 80 per cent of the capital-raising proceeds to be used for acquisition and strategic investment purposes.

The market reacted positively to the deal, sending Olam shares 22 cents higher to close at $2.16. With the rise, Temasek is already sitting on paper gains of 35 per cent. The stock has gained about 87 per cent this year as against a more than 30 per cent climb in the benchmark Straits Times Index.

Olam was founded by Indian conglomerate Kewalram Chanrai and Mr Verghese in 1989. The firm, which began as a cashew-nut exporter based in Nigeria, now has a presence in 60 countries.

Mr Verghese said that Olam first approached investors two months ago to discuss raising funds that would allow it to tap the long-term growth potential of the agricultural sector.

After some deliberation, it settled on the Temasek option as it proved to be the ‘best fit’, he added.

This is not Temasek’s first involvement with Olam. It held a 4.9 per cent stake in the firm between 2002 and 2006, but sold its entire stake of about 75 million shares to institutional investors at $1.57 a share some three years ago.

‘We’re investing in Olam because it fits well with our investment theme of supporting emerging global champions,’ said Temasek’s managing director for investments David Heng.

Analysts say Temasek’s interest in a blue-chip commodity player like Olam comes on the back of a global credit crunch that has crimped gains from its financial assets, making its exposure to raw materials a welcome diversification.

‘Equity markets have had a run-up, clearly making some of these equity investments more expensive than they were three to four months ago, but still there are plenty of opportunities in the commodities space,’ said Mr Sutha Kandiah, UBS’ joint head of investment banking for Singapore and Malaysia.

Last month, Temasek said it had tweaked its long-term investment direction to focus more on Asia and emerging markets such as Brazil and Russia, with reduced emphasis on developed markets such as the United States and Europe.

Dubbed ‘10-20-30-40′, the approach aims for about 10 per cent of the agency’s portfolio allocated to Latin America, Russia and Africa; about 20 per cent to Organisation for Economic Cooperation and Development (OECD) countries, that is, developed countries; 30 per cent to Singapore investments; and the remaining 40 per cent to the rest of Asia.

‘We fit all those brackets,’ Mr Verghese said yesterday.

Analysts expect Temasek to raise its investments in energy and resources in the months ahead, as they will be guided by a man who knows the resources business inside out. Mr Goodyear, former CEO of Australia’s BHP Billiton, the world’s biggest mining firm, joined Temasek’s board on Feb 1 and is taking over from Ms Ho Ching, who steps down as CEO on Oct 1.

Veteran investor Jim Rogers, an Olam shareholder, said Temasek was getting into a company that has the ‘right management’. ‘Sunny’s a smart guy, and they’ve done a great job,’ he said.

QUOTE

‘The investment from a discerning investor like Temasek is a clear vote of confidence in Olam’s competitive position, strong supplier and customer franchise and its future prospects.’

Mr Sunny Verghese, Olam’s group managing director and chief executive

Source : Straits Times - 2 June 2009

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Condo tenants told to vacate in 3 days

Condo tenants told to vacate in 3 days

Landlord told a month ago to tear down partitions by June 3 as planning rules breached, but it kept mum
By Tan Weizhen

A group of residents who had gathered at The Grangeford condo lobby on Sunday night to debate their options decided to call the police, who came and recorded their complaint.

TWO hundred tenants living in 140 apartments in a condominium off Orchard Road were caught off-guard after being told on Sunday night that they have to clear out by tomorrow.
Their landlord, Ideal Accommodation, had known for at least a month that the tenants - a mix of mostly young expatriate and local professionals and college students - would have to leave, but kept the news from them. As a result, many of the tenants are now livid.

Ideal, which had leased The Grangeford condo from Overseas United Enterprise (OUE), had converted 140 apartments into 600 self-contained rooms. It began sub-letting them this year.

Doing so, however, breached planning rules, and on April 29, the Urban Redevelopment Authority (URA) told Ideal that it would have to tear down the partitions by June 3.

However, the company kept mum, and began telling tenants that they had to move out only last week. Even then, not all residents were told. Most found out only on Sunday, when they happened to walk past the property office, or got wind of it from their neighbours.

The affected residents - from places such as the United States, Hong Kong, South Korea, India and Vietnam - had signed tenancy agreements of between six months and a year.

British citizen Bernard Johnson, 23, had a rude shock yesterday when friends living in the same block told him they would have to move out.

‘I didn’t know what was happening. No notices pasted in the lobby, nothing. If I had not found out from friends, would my belongings have been rudely thrown out?’ asked the hotel designer, who is looking for temporary accommodation and has contacted his embassy for help.

The condo building was sold en-bloc to OUE in 2007. However, the company decided to sub-let the building, rather than redevelop the site, because of the deteriorating economic climate.

Ideal spent $3 million to divide up the apartments into smaller units, and rented each out for between $900 and $1,400.

The partitioned units each came equipped with a washing machine, LCD television set and Internet connection.

According to calculations by residents and property agents, dividing an apartment into several units this way can fetch rentals of up to $8,000, compared to about $4,600 if a flat is leased to just one tenant.

The Straits Times has learnt that Ideal’s managing director, Mr Tang Yong, appealed to the Ministry of National Development last week for more time to vacate the condo.

He claimed he had been given just seven days to do so, despite being told more than a month ago by the URA.

In a letter obtained by The Straits Times, he said: ‘This feat is impossible to achieve within the given seven-day period as we have yet to notify 200 tenants and properly relocate them.’

He said they would need two to three more months.

Calls and text messages to the management of Ideal Accommodation went unanswered. URA would only say it was looking into the appeal.

Meanwhile, about 100 infuriated residents gathered at the lobby on Sunday night to debate their options.

One said he feared that his deposit and upfront rental money, which are with Ideal, would be lost.

Another resident, Hong Konger Dave Chan, 24, who works at the Marina Bay Sands resort, said he found out that he had to leave from a notice thrust under his door.

‘Ideal should grant us a meeting to explain what we should do now or give us some options,’ he said.

Another angry resident, Singaporean Danny Wong, 38, said: ‘Why tell us only now? It’s totally insane to find another place within three days.

‘We didn’t create this room problem in the first place, the people who rented it out did. We’re the victims here.’

Source : Straits Times - 2 June 2009

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Momentum spurs series of project launches

Momentum spurs series of project launches

But consultants warn that the buying drive may not be sustainable

By EMILYN YAP

STRIKING while the iron is hot, more developers - big and small - are riding on buying momentum to relaunch or spur interest in their properties.

Shelford 23: Close to half of the development’s 33 apartments have been sold at an average price of $1,250 and buyers can opt for an interest absorption scheme at no extra cost
Hoi Hup Realty has soft-launched the freehold Shelford 23 in the Bukit Timah area. Of the project’s 33 apartments, close to half have been sold at an average price of $1,250 per square foot (psf).

Buyers can opt for an interest absorption scheme at no extra cost, Hoi Hup told BT. The project is expected to receive a Temporary Occupation Permit (TOP) in 2012.

Hoi Hup opened Shelford 23’s showflat for preview in September last year but later closed it. The average launch price then was $1,400 psf. Based on Urban Redevelopment Authority (URA) data, no units had been taken up by April this year.

Preparations to launch the freehold Holland Residences near Holland Village also appear to be under way. The development, by Allgreen Properties, comprises three five-storey blocks with a total of 83 units. It is due to obtain TOP in a few years. BT understands that private previews may start from end-June and that agents are currently ascertaining interest.

Similarly, the freehold Nathan Residences in the River Valley area may soon be back on the market. Indicative asking prices appear to start from $1,200 psf. According to URA data, developer Tat Aik Property launched the 91-unit freehold project in September last year but nothing had been sold by April this year.

Projects in the east are also getting in on the action. Private previews of Oasis@Elias in the Pasir Ris area could start in the next few weeks. BT understands that launch prices could be in the range of $600 psf. The 99-year leasehold Chip Eng Seng development has 388 units.

Meanwhile, marketing of the 26-unit Spring@Langsat near the Eunos MRT station began last Friday night.

Over in the west, City Developments (CDL) said last Friday that it is accelerating plans to launch a project at the former Hong Leong Garden Condominium.

Sentiment in the residential property sector has improved in the past few months. And brisk sales recently have encouraged more developers to try their luck.

Evan Lim & Co said last Friday that it sold the last 44 units at Parc Centennial after a relaunch some two weeks ago. And CDL said that its Botannia is fully sold, with the 33 remaining units having been taken up in the past few weeks.

Despite the activity, some property consultants warned that the buying momentum may not be sustainable until there are clear signs of a global economic recovery.

Source : Business Times - 2 June 2009

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Developers sell close to 1,200 homes in May

Developers sell close to 1,200 homes in May

Estimated number based on BT survey comparable to April figures; Frasers Centrepoint leads the pack

By KALPANA RASHIWALA AND EMILYN YAP

DEVELOPERS sold an estimated 1,200 private home units in May, according to market watchers. This is comparable to the 1,207 units they sold in April, based on official Urban Redevelopment Authority (URA) numbers.

Some developers may have lowered the level of discounts for projects that have sold well but they are doing this carefully.

A BT survey across nine developers as well as some property agents yesterday already showed that some 1,130 units were sold last month. ‘Developers could have easily sold about 1,200 units in May if you include all the smaller pockets of developments as well,’ a seasoned residential property consultant estimated.

However, BT understands that some units may also be returned by buyers who may have got caught up in the home-buying frenzy fuelled by the stockmarket rally in the past few weeks.

Frasers Centrepoint sold a total 294 units in May - comprising 186 units at Martin Place Residences at Kim Yam Road, 46 at Caspian in the Jurong Lake District, 22 units at Woodsville 28, and 40 homes at Waterfront Waves.

Frasers Centrepoint is developing Waterfront Waves, near Bedok Reservoir, jointly with Far East Organization. The latter sold a total of 165 units (inclusive of Waterfront Waves) last month.

BT eliminated the double-counting for joint-venture projects in arriving at the May sales tally.

City Developments reported total sales of 138 units (of which 97 units came from The Arte at Thomson and 36 units from Livia in Pasir Ris) in May.

CapitaLand also achieved brisk sales for The Wharf Residence at Tong Watt Road.

EL Development also found buyers for a total of 74 units last month (comprising Parc Centennial at Kampong Java Road and Rosewood Suites in Woodlands).

Soilbuild is understood to have sold close to 90 units at The Mezzo in the Balestier location. In other developments, sales of around 30 units were seen for Kovan Residences and 21 units at BelleRive in Bukit Timah.

According to official government numbers, developers sold 1,332 private homes in February, followed by 1,220 units in March and 1,207 units in April.

Lower property prices have been the main attraction for buyers, said DTZ executive director Ong Choon Fah.

Many developers have either re-priced or re-sized their units to make them more affordable.

Many people also feel that residential property prices have corrected substantially, she added.

‘The thinking is: whether it’s the bottom or not, probably the worst is over so it’s about time to go in.’

The recent stockmarket rally has also helped to improve sentiments, Mrs Ong said.

With sales momentum gathering, developers have been gradually inching up prices for mass-market and mid/upper segment projects, following earlier price reductions from the 2007 peak levels.

However, pricing power is not expected to return to developers of luxury projects anytime soon. ‘The price push in 2006-2007 period came from overseas buyers; this segment is still out of action,’ a developer said.

A veteran developer observed that buyers now include those who had been sidelined by the rapid price surge in 2007.

Whereas the 2006/2007 residential property bullrun was substantially wealth-driven, with a strong element of overseas money, the current recovery in home buying has started in the mass-market and is now permeating to the mid/upper-middle segments, he added.

‘So this is a traditional, bottom-up recovery, which is more sustainable. Upward price movements will be constrained by affordability at the end of the day,’ he added.

DTZ’s Mrs Ong too agrees that while there is ‘cautious optimism’ in the property market, developers are unlikely to raise prices significantly at this point in time.

Some developers may have lowered the level of discounts for projects that have sold well but they are doing this carefully.

‘You don’t want to derail the momentum that has been built up,’ she said.

Source : Business Times - 2 June 2009

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GM files for bankruptcy protection

GM files for bankruptcy protection

Judge approves sale of Chrysler to Fiat, driving out more than 300 objections

(NEW YORK) General Motors filed for bankruptcy protection yesterday as part of the Obama administration’s plan to shrink the automaker to a sustainable size and give a majority ownership stake to the federal government.

Final chapter: Outside US Bankruptcy Court in New York yesterday as GM files for bankruptcy protection. It has US$172.8 billion in debt and US$82.3 billion in assets
Meanwhile, the other ailing American carmaker, Chrysler LLC won court approval late on Sunday to sell most of its business to a group led by Italy’s Fiat SpA, a deal intended to fire up its idled manufacturing plants and resume an 84-year history of selling American cars.

US Bankruptcy Judge Arthur Gonzalez approved Chrysler’s sale in a ruling filed at 11.15 pm on Sunday in Manhattan. The sale faced more than 300 objections. Judge Gonzalez overruled those that weren’t withdrawn or resolved.

The carmaker is selling itself to an entity owned by Fiat, a union benefit trust, the US Treasury and the Canadian government. The company will get US$2 billion in cash to distribute to secured lenders holding US$6.9 billion in loans. Turin-based Fiat can walk away from the sale if it isn’t completed by June 15, with a one-month extension for antitrust approvals. The company didn’t receive any other bids for its assets, attorneys said.

‘Not one penny of value of the debtors’ assets is going to anyone other than’ lenders who deserve it, the judge wrote in the 47-page ruling.

GM’s bankruptcy filing is the fourth-largest in US history and the largest for an industrial company. The company said it has US$172.81 billion in debt and US$82.29 billion in assets.

‘It’s been a long time coming, but the reality of a GM bankruptcy is still a bitter pill to swallow - it’s a bit like the Titanic sinking,’ said Stephen Pope, chief global strategist at Cantor Fitzgerald in London. ‘This is a step they should have taken more than a year ago, which could have put them in much better shape before the economy went down.’

The fallen icon of American industrial might will rely on US$30 billion of additional financial assistance from the Treasury Department as it reorganises. That’s on top of about US$20 billion in taxpayer money GM already has received in the form of low-interest loans.

GM will follow a similar course taken by Chrysler LLC, which filed for bankruptcy protection in April and hopes to emerge from its government-sponsored bankruptcy this week.

The plan is for the federal government to take a 60 per cent ownership stake in the new GM. The Canadian government would take a 12.5 per cent stake, with the United Auto Workers getting a 17.5 per cent stake and unsecured bondholders receiving 10 per cent. Existing GM shareholders are expected to be wiped out.

President Barack Obama was scheduled to address the nation about GM’s future at midday from Washington, and GM CEO Fritz Henderson was to follow him with a news conference in New York.

Beyond the bankruptcy announcement yesterday, GM is expected to reveal 14 plants it intends to close. One of those plants, however, will be retooled to build a small car.

The third of the one-time Big Three, Ford Motor, has also been stung hard by the sales slump, but it avoided bankruptcy by mortgaging all of its assets in 2006 to borrow roughly US$25 billion, giving it a financial cushion GM and Chrysler lacked.

The downsized GM’s brands will be limited to Chevrolet, Cadillac, GMC and Buick. Its Pontiac, Saturn, Hummer and Saab operations will be either sold or closed. GM said it was finalising a deal to sell Hummer, and plans for Saturn are expected to be announced within weeks.

Trading of GM shares was halted early yesterday after they plunged on Friday as low as 74 cents, the lowest price in the company’s 100-year history.

GM will be kicked out of the Dow Jones Industrial Average because rules established by the News Corp. unit that oversees the index prohibit it from including companies that have filed for bankruptcy. — AP, Bloomberg

Source : Business Times - 2 June 2009

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