17 June 2013~ Good Morning Singapore!
Central Execution Team - The Excellence of Execution
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Global Flash: While You Were Sleeping
Source: Marketwatch
Quote for the day : Small deeds done are better than great deeds planned.
- PETER MARSHALL
Singapore: The Day AheadSINGAPORE DAYBOOK:Outsourced service sector caught in bind. Rising costs, tough tender pricing make it hard for many firms to raise wages [SINGAPORE] The recent wage hike recommendation by the National Wages Council (NWC) has drawn much cheers, and deservingly so in the interest of the Republic's low-wage workers. But are companies in low-wage sectors like cleaning, landscaping, security and laundry services able to fulfil their dual roles as employers and outsourced service providers amid the current business environment?
As it is, overall business costs in these industries have been on the rise, and are expected to continue surging this year. Major players from the respective industries estimate that overall business costs could go up by 5 per cent in landscaping, 10 per cent in security, and up to 25 per cent in laundry.
With labour costs constituting about 40 per cent of overall business costs in the laundry sector, and a further 70 to 80 per cent in the cleaning, landscaping and security sectors, the moral obligation to raise wages is a challenging one to meet, especially when service providers face difficulties in passing on enough increases in costs to stay viable.
To make matters worse, existing cost challenges caused by the tight labour market - driven by the foreign worker levies and dependency ratio ceilings, as well as the lack of Singaporean workers - have exacerbated service providers' inabilities to pass on costs. This has further crippled their abilities as employers to increase salaries for low-wage workers. (Source: The Business Times)
MARKET SCOOP
UBS says cooperating with Singapore regulator in rate review
Sinapore revamps benchmark rate setting
KXD Digital Entertainment gets lifeline
S'pore retail sales down 0.5% in April
SIAS bullish on F&B sectors
OCBC cuts CDL Hospitality target, keeps 'hold'
S'pore May exports likely flat from year ago
Oxley unit buys Cambodian land for US$4.1m
March jobless rate at 1.9%: MOM
(Source: The Business Times)
NOMURA Securities says...
ASCENDAS HOSPITALITY TRUST | NEUTRAL | TP: S$0.92
The management team of Ascendas Hospitality Trust (ASHT) attended the Nomura Investment Forum Asia (NIFA) conference held over June 10-12
According to management, the timing of ASHT's Park Hotel acquisition and subsequent equity raising exercise in hindsight could have been better
Recent macroeconomic uncertainties, coupled with the spike in global interest rates, have placed downward pressure on REITs' valuations and dampened investment appetite
Management indicated that the A$30m asset enhancement initiatives (AEI) on ASHT's Australia (AU) portfolio continue to progress as planned, although the uplift to RevPAR has yet to materialize
The weakening of demand in resource-driven cities like Brisbane has put pressure on ADRs and the manager has opted to put more emphasis on maintaining higher levels of occupancy
We also understand that certain local government agencies have cut back conference/travel budgets, which have translated into weakened demand for conference and business space
Nonetheless, we have factored in a slower RevPAR growth outlook for the trust's AU portfolio
The trust's master-leased hotel (Ariake Sunroute) in Japan has been impacted negatively by the much weakened yen
Book value has taken a hit of 17%, down to SGD210.7mn
Whilst the manager has entered into forward contracts to hedge distributions, the asset value of the hotel remains un-hedged and could thus face further downside risk should the yen continue to depreciate
At current levels, ASHT is trading at a FY14F DPU yield of 7.2%, implying a trading discount of 0.6% to CDL Hospitality (CDREIT SP), vs. a historical average discount of 1.6%
We expect the stock price to remain volatile in the near term and maintain Neutral
CIMB Securities says ...
TAT HONG HOLDINGS | OUTPERFORM | TP: S$1.80
We are not alarmed by the drop in the group's crawler/mobile-crane utilisation in 4QFY13
There were two reasons for that: 1) slight delays in the redeployment of its fleet in Thailand, from late Mar to Apr/May. The cranes have now been redeployed for various projects within the country; and 2) TAT had actually eliminated lorry cranes from this segment in FY13, which resulted in perceived lower utilisation rates
Like-for-like, its optimised utilisation rate was still a respectable low 70+%
That said, we lower our blended utilisation for this division from 75% to 72% for FY14 to be more conservative
Higher revenue contributions had been coming from Singapore and other ASEAN markets, at the expense of Australia in recent quarters
We stick to our view that earnings will largely be powered by Singapore and ASEAN going forward
Crane rental growth in Hong Kong should follow next
We believe that this will translate into better margin sustainability as crane rentals offer double the typical distribution margins
Perhaps the only non-operational issue that can cause its share overhang is AIF CRPS conversion
Fundamentally, the group should be able to turn in good performances with efficient capital usage, organically and without the need for massive capex
Accretive M&As with the aid of a better balance sheet could catapult TAT to higher growth, in our view
We lower our target price, still based on 11x CY14 P/E (its 5-year average forward P/E)
Reiterate Outperform with strong Asian operations still its main catalyst while potential M&As could catapult TAT's growth
DEUTSCHE BANK says...
FRASER & NEAVE LTD | HOLD | TP: S$9.83
Fraser & Neave in a 40:30:30 JV with Far East Organization and Sekisui House has submitted the top bid of S$257m (S$533psf GFA), 3% above the next highest bidder MCC Land for a residential site at Fernvale Close
The 482,131 sqft GFA site is estimated to yield c.490 units
Interest in the well located site was strong, with 9 bidders taking part, with the winning bid coming in above the top range of market expectations of S$500-520psf ppr
We believe that the strong interest was driven by the site's location near the Layar LRT station, Sengkang Bus Interchange, Compass Point Shopping Centre, and Nan Chiau Primary School
Recall that City Developments acquired an adjacent EC site in November 2012 at S$296psf
We estimate a breakeven of S$907psf. Assuming an ASP of S$1050; this would imply a margin of 14% and c.1.3cts accretion to our RNAV
As a comparison, City Development's Jewel@Buangkok, located 1 MRT stop away recently launched at an ASP of S$1150psf, while H2O Residences (launched in 1Q11), located beside the site last transacted at c.S$993psf in April
La Fiesta, located closer to the Sengkang MRT was launched at c.S$1175psf
With strategic direction still unclear and free float restoration an overhang, we maintain our Hold recommendation with the current share price implying 13% upside to our target price |
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