02 Oct 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 : Our greatest glory is not in never falling, but in rising every time we fall.
- CONFUCIUS
Singapore: The Day AheadSINGAPORE DAYBOOK :Debt servicing rule dents prices, volumes Q3 private property prices up 0.4% but certain segments show decline: URA flash estimates [SINGAPORE] The Total Debt Servicing Ratio (TDSR) framework has made its presence felt, crimping prices and volumes in pocket segments of the private and public residential markets.
Prices of Singapore's private homes rose a marginal 0.4 per cent in Q3, according to the Urban Redevelopment Authority's (URA) flash estimate, compared with the one per cent gain seen in the previous quarter.
Specifically, prices of non-landed homes in the Core Central Region (CCR) slipped 0.5 per cent in Q3, compared with a 0.2 per cent dip the previous quarter.
In a similar vein, prices of city-fringe homes dropped 1.1 per cent, reversing a 0.2 per cent rise in Q2. This is the first decrease since the first quarter of last year.
"The third quarter's price changes are significant in that two market segments, that is, CCR and Rest of Central Region (RCR) posted price declines simultaneously. As these two segments rely more on investor demand, this group of buyers has been affected more significantly by all the cooling measures in place, including the TDSR curbs," said Ong Teck Hui, national director, research and consultancy, at Jones Lang LaSalle.
But the prices of city-fringe homes might register a larger drop when the finalised index is released, given that the preliminary numbers are based on caveats lodged during the first 10 weeks of the quarter, said Desmond Sim, associate director, CBRE Research.
"CBRE expects that when the transactions from recent new launches such as Thomson Three and Sky Vue have been included, the final Q3 2013 islandwide price index might turn out to be the same level as the Q2 2013 index," he said.
Lowering price expectations in light of the new curbs on housing loans has been one way developers have tried to overcome the slower sales momentum, said Chia Siew Chuin, director of research and advisory at Colliers International.
Some developers have also opened showflats a couple of weeks before sales bookings begin to allow potential homebuyers time to obtain approval for housing loans.
That being said, transaction volumes have dropped across all market segments. According to data provided by Knight Frank Singapore, total volume in the CCR and RCR fell 61 per cent and 72 per cent quarter-on-quarter. In the Outside Central Region (OCR), where mass market homes are located, transaction volumes fell 50 per cent quarter-on-quarter.
While prices in the OCR rose in Q3, the increase of 2.1 per cent was overshadowed by the 3.8 per cent gain seen in Q2.
According to Knight Frank, average prices of new sale private non-landed homes in the OCR was around $1,332 psf in Q3, compared with $1,096 in Q2.
Looking ahead, Mr Ong said that he expects the OCR price increase to continue moderating over the next few quarters, while CCR and RCR prices could show a gradual softening trend.
He noted: "Year-to-date, OCR prices have risen 7.4 per cent while CCR and RCR prices are practically flat. The vulnerability of CCR and RCR is more apparent since over the last seven quarters, CCR had three quarters of price dips while RCR had two."
Said Nicholas Mak, executive director, research and consultancy department at SLP International: "For the whole of 2013, the private residential property price index is projected to increase by 1-3 per cent year-on-year. The price index for CCR and RCR could register a 0 to -2 per cent year-on-year change. For non-landed properties located in the OCR, the price index is likely to increase 7-9 per cent year-on-year," he said.
Indeed, the sustained interest in mass market homes is partially supported by the introduction of another group of buyers, mainly the newly minted Singapore permanent residents who have to wait out three years before they can buy resale HDB flats, said Eugene Lim, key executive officer at ERA Singapore.
This has resulted in those with sufficient funds purchasing suburban homes instead of waiting to buy a resale HDB flat, he said.
That being said, the projected weaker resale prices of HDB flats ahead could affect the affordability of the upgrader's segment of the private residential market, pointed out Ms Chia.
"All things considered and barring any unforeseen shocks, overall private residential home prices are expected to flat line in Q4 and register a mild increase for the whole of 2013," she said.
(Source: The Business Times)
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(Source: The Business Times) OCBC Securities says... NOBLE GROUP | SELL | TP: S$0.76
Noble Group (Noble) has announced that it has agreed to invest in a newly established private mining venture - X2 Resources - where Noble, X2, TPG will each put in US$500m
The move is to create a new mid-tier diversified mining and metals group by leveraging the extensive track record of the X2 Team in identifying and acquiring assets/businesses at an opportune time in the cycle and applying their proven approach to integration and value enhancement to the resulting portfolio of operations
Under the agreement, Noble will be X2 Resources' preferred marketer and provider of supply chain management (SCM) and logistics services
According to management, the investment is consistent with Noble's previously communicated strategy of primarily focusing on its core competence as a supply chain manager, rather than a producer of natural resources
Management also believes that the relationship with X2 will open opportunities for Noble to provide energy, manage X2's freight requirements and risk-manage the supply chain for example
While we do see benefits from the investment, we note that most will need some time to flow through i.e. more medium to long term in nature
Hence, we will not be making any adjustments to our forecasts (we have already previously cut FY13 earnings estimate by 43% after a dismal 1H showing)
But for now, we believe that headwinds could continue to come from the sluggish economy in China
We further expect its Agriculture segment to remain a drag on its overall profitability
Separately, the potential shutdown in Washington could also weigh on sentiment
As such, we maintain our SELL rating and S$0.76 fair value
We would be buyers below S$0.80 (recent low was S$0.785)
DBS Securities says ...
EZION HOLDINGS LTD | BUY | TP: S$3.10
Ezion is proposing to inject its marine supply base asset into Ocean Sky at cost via a share swap
Post exercise, Ezion will hold 45.15% in Ocean Sky while the latter will have a 2% stake in Ezion
Valuation of Ocean Sky seems reasonable at 1x P/BV, based on an estimated NTA of S$108m
This is a strategic move to enable Ezion to tap into the growth potential of the marine supply base business in Australia without stretching its balance sheet and resources further, while allowing the company to stay focused on its core liftboat and service rigs business
In addition, c. US$30m capex spent on the marine supply base will be freed up for re-investment
We have reduced the earnings contribution from marine supply base from 100% to 45.15% and imputed in the 2% share cap increase
This leads us to trim FY13/14/15F EPS by 2.2/3.3/3.8%
There is EPS dilution in the near term due to the time lag between investment and earnings contribution from the marine supply base expansion, which is still in its infancy Post exercise, Ocean Sky is projected to have cash of c.S$60m for business expansion
We have not factored in any potential from this
Our TP is adjusted to S$3.10 following the EPS revision, still pegged to 14x FY13/14F PE
The share price weakness post announcement is unwarranted and we advocate to BUY the shares on weakness
Ezion offers strong growth of 54% EPS CAGR (FY12-15F) and earnings visibility is high as c.90% of revenue over FY13-14 is backed by secured contracts UOB KAY HIAN says... WILMAR INTERNATIONAL | BUY | TP: S$3.80
The sugar division will be the growth focus for Wilmar which is targeting new emerging markets Africa and Indochina
Growth from the sugar division is expected to outshine soybean crushing operations in China, which are still in overcapacity and putting pressure on margins
Palm operations should perform in line with expectation with the upstream affected by lower ASP and downstream driven by volume growth
The key takeaway from our recent meeting with management is that sugar will be the growth focus for Wilmar with its recent acquisition in Africa and expansion into new emerging markets in Indochina
The growth in the sugar division will cushion the volatility from the soybean crushing division, which is seeing declining contribution to group pre-tax profit (PBT) (2011: 20.3% of PBT, 2013F: 11.7%)
From our recent meeting with management and noting the developments in the key industries, we conclude that:
a) The sugar division will do well as crushing volume is ahead of schedule while early harvesting allows farmers to replant affected areas to minimise the low yield impact in next year's harvest. 3Q13 will see stronger yoy contribution in volume and margins
b) Palm & lauric margin continues to do well despite rising competition in Indonesia, thanks to the integrated processing and good margins from its niche products
c) Soybean crushing margin is still a challenge despite industry data showing positive back-to-back margins since late-Aug 13. Wilmar tends not to benefit much from rising soybean prices as its soybean purchases are mostly hedged when orders are made
Maintain BUY and target price of S$3.80, based on the sum-of-the-parts (SOTP) method, implying blended PE of 14.0x 2013F and 12.1x 2014F PE
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