Saturday, April 2, 2011

Weekend Comment April 1: High-yield stocks for troubled times

THE G20 FINANCE chiefs who met over the one-day seminar in Nanjing, China, on March 31 discussed the prospects of adding the Chinese yuan to the currency basket of the International Monetary Fund’s Special Drawing Rights (SDRs) -- money used by the global fund as an alternative to debt financing for its member states. The SDR basket is currently made up of the Euro, US dollar, British pound and Japanese yen and is reviewed every five years, with the next change due in 2015.

The meeting, initiated by French President Nicholas Sarkozy, focused on balancing global economic trade crisis by reducing the world’s reliance on the Greenback and increasing the yuan’s weight in the international monetary system to limit the risk of another financial crisis.

However, China must first uphold flexible exchange rate systems and free capital flows before its currency can join the IMF’s basket, conditions it has yet to meet, US Treasury Secretary Timothy Geithner said. His comments came after the HSBC China Manufacturing Purchasing Managers’ Index (PMI) registered muted progress in Chinese production output for the month of March. The index rose a mere 0.1 points to 51.8 after eight months of continued growth, revealing a weaker rise in new businesses on supply shortages and inflation, HSBC said.

Nevertheless, the Bank of China Hong Kong has cut its annual interest rates for yuan deposits in Hong Kong to 0.629% from 0.865% following a record 10% rise in bank deposits to RMB407.7 billion ($78.6 billion) in February, the Hong Kong Monetary Authority said. The rise reflects higher demand for the yuan and expectations that the currency will appreciate. The yuan has indeed gained 4.2% over the past year to hit 6.5456 per US dollar in Shanghai on April 1, its highest level in 17 years, but still low enough for US lawmakers to argue that the currency gives the world’s biggest exporter an unfair advantage in global trade.

Meanwhile, the local bourse remained subdued ahead of the US non-farm and unemployment report, the crisis in the Middle-east and North African region and ongoing concerns about Japan’s radiation woes. The IMF has since downgraded Japan’s 2011 growth forecast to 1.4% from 1.6% previously as the country prepares to seal four of its nuclear plant reactors at Fukushima damaged during the March 11 earthquake and tsunami, at a cost of more than 1 trillion yen ($15 billion) to the Tokyo Electric Power Company, according to analysts’ estimates. The Japanese government now plans to take control of TEPCO by injecting public funds into it.

Against this backdrop of global uncertainty, local brokerage UOB KayHian recommends that investors seek refuge in high-yielding, ex-dividend status stocks even as the market continues to stay choppy. After falling 3.5% to 2,935.78 on March 18 after the earthquake, the benchmark Straits Times Index is now up 6.3%, closing April 1 at 3,120.47. “Despite the volatile market, some companies are going ex-dividend in the coming months with significant ordinary and special dividend pay-outs yielding up to 10%,” UOB says in a note to investors.

Based on a list of stocks going ex-dividend in April prepared by UOB on March 31, telecommunications solutions provider Nera Telecom will pay out a dividend of 4 cents a share on April 26, representing the highest yield on the list at 9.76%. Nera Tel trades at 41 cents and has a market cap of $145 million. Meanwhile, electronics company Elec & Eltek -- which trades at US$3.39 each with a market cap of US$626 million ($790 million) -- will pay a dividend of US 25 cents per share on April 4, representing a yield of 7.37%.

Other companies that will trade ex-dividend this month include printed circuit board manufacturer CEI Contract Manufacturing at a yield of 6.93% on April 19, mechanical engineer Mun Siong at 5% on April 27, technology equipment supplier Frencken Group at 4.8% on April 29 as well as M1 at a yield of 4.63% on April 11. Other larger blue-chip companies due to pay dividends include rig builders Sembcorp Marine and Keppel Corporation as well as Sembcorp Industries, Keppel Land, ST Engineering and ComfortDelgro Corp at yields of between 1.77% and 5.35%.

Publish date:01/04/11

地下水首次测出超万倍高放射物 福岛核电站污染扩大























Source/转贴/Extract/: 《联合早报》
Publish date:02/04/11

PhillipCapital Market Watch 01042011

Source/转贴/Extract/: youtube
Publish date:01/04/11

Earn a Safe, Secure Dividend on this Shipping King (HPHTrust)

Most U.S. investors don't realize that the best IPOs are found across the Pacific Ocean. Tony Sagami tells you about one of the most important and most profitable shipping companies in the world went public last week on the Singapore Stock Exchange.

Source/转贴/Extract/: youtube
Publish date:26/03/11

Roubini on Bloomberg Apr 1 2011: Fed, ECB Policy Divide May Be Destabilizing

April 1 (Bloomberg) -- Nouriel Roubini, the New York University economist who predicted the financial crisis, talks about the outlook for monetary policy by the Federal Reserve and the European Central Bank. He speaks from Cernobbio, Italy, with Maryam Nemazee on Bloomberg Television's "The Pulse."

Source/转贴/Extract/: youtube
Publish date:01/04/11

Stock to watch – Fajar (RM1.16)

Stock to watch – Fajar (RM1.16)
Fajar – Aiming RM1.25-1.30 targets amid breakout

 Fajar’s current order book stood at over RM400m, which should keep it busy over the next 2 years, after bagging a RM150m contract from Bina Puri and TRC for the construction of two LRT stations namely Awan Besar and Kelana Jaya. It is also tendering over RM1bn worth of contracts, mainly in the LRT extension project and runway project for permanent LCCT.  After peaking at 52-week high of RM1.30 (11 Jan), Fajar’s price corrected to as low as RM1.02 (3 March) before consolidating upwards to RM1.16 yesterday.

 With the positive triangle breakout yesterday, Fajar is likely to refill the RM1.15-1.20 gap down recorded on 24 Feb, followed by higher resistance targets of RM1.25 (23.6% FR) and RM1.30.

 With the candles still holding above its 30-d SMA (RM1.11) and mid Bollinger band (RM1.05), coupled with rising MACD and RSI, we think the bulls have the upper hand here.

 Supports are situated at RM1.11, RM1.05 and RM1.02. Accumulate but cut loss below RM1.02.

 As an alternative, investors can also consider Fajar-WA (expires in Oct 13), which is trading at slight premium of 0.9% and has a decent gearing of 1.74x

Source/转贴/Extract/: HLIB Research
Publish date:31/03/11

Friday, April 1, 2011


Created 04/01/2011 - 18:30






僑豐認為,今年馬股4月的表現,就如經典小說《化身博士》(The Strange Case of Dr.Jekyll and Mr.Hyde),月頭和月尾會有兩種完成不同的表現。《化身博士》主要寫一位有雙重人格的人,而4月表現將有大起和大跌的兩個可能性發生。



“投資大馬”大會即將在4月12及13日舉行,根據過往經驗,首相都會在大會上作出重要宣佈,預料有利股市表現。僑豐預期會捎來國庫控股脫售大馬郵政(POS, 4634, 主板貿服組)32%股權的詳盡消息、油田的服務合約以及宣佈政府地庫的產業發展計劃。
















Publish date:01/04/11

核廠套膠笠 擋輻射?

本福島第一核電廠的核輻射洩漏停不了。當局在核電廠附近水域檢測超標 3,355 倍的輻射量,是核災爆發以來最高的超標量。輻射水源源不絕流進大海,核電廠內泥土前天又驗出 鈈 ,反映這場核災已空前嚴峻,東電昨(周三)終於宣佈將核電廠的 1 至 6 號反應堆全部廢棄。但即使廢棄,當務之急仍是要力阻反應堆不斷洩漏輻射和擴散,當局正擬動用特殊塑膠布、樹脂和油輪等別樹一幟方法,全力拯救核災。

Source/转贴/Extract/: youtube
Publish date:31/03/11










Publish date:01/04/11

蘋果日報 - 2011-04-01 - 拒入核電廠 80公里範圍美生化部隊赴日救災

拒入核電廠 80公里範圍

日本核危機爆發兩周多,輻射洩漏不但未受控,反而不斷惡化,福島第一核電廠對開海水輻射量再創新高,超標 4,385倍,輻射塵昨天更殺到台灣。美軍海軍陸戰隊一支共 155人的生化事故反應部隊( CBIRF)今天奉命趕抵日本,但美軍不會進入核電廠方圓 80公里內救災,只會提供意見。


美國海軍陸戰隊 CBRIF一支 155人部隊,昨日已從美國出發,今日抵達日本。他們受過辨別化學物品、監察輻射水平和為人員淨化輻射污染的專門訓練,但他們不會進入核電廠方圓 80公里內,不會參與拯救反應堆的實質工作。

派 1.8萬美軍 史上最大救援


除了 CBRIF,五角大樓在地震後已派出 18,000名美軍全天候參與救災工作,是「史上最大救援行動」。美軍太平洋司令部行動總監斯威夫特說:「我們會逗留多久,將視乎日本人民,特別是日本自衞隊需要我們留多­久。」

法國總統薩爾科齊( Nicolas Sarkozy)昨日抵達東京,以示對日本的支持。他呼籲 20國集團內的核子國家舉行會談,建立國際性核安全標準。而正協助東京電力公司的法國核能公司 Areva,將為東電提供更多協助。

反應堆地下水碘超標 1萬倍

至於核電廠輻射的洩漏情況仍未受控,附近海水輻射量進一步超標 4,385倍,而 1號反應堆渦輪機房附近的地下水碘輻射量超標一萬倍,東電未來數日將利用美國借出的遙控機械人,協助評估高輻射地區情況。日本政府原定昨日向 1至 4號反應堆內牆噴灑特製合成樹脂,令核燃料棒釋出的輻射塵黏在牆壁,不會飄落到積水,再隨積水流入大海,但最終因天雨,行動要改期。

國際原子能機構( IAEA)在出事核電廠西北面約 40公里的飯館村,偵測到空氣中的輻射量超標兩倍,每平方米 200萬貝可( Bq)。該地住有約 7,000人。 IAEA建議日本政府將疏散範圍由現時核電廠方圓 20公里擴大至 40公里,但當局認為暫沒有擴大疏散範圍必要。

台灣北部和南部昨日測到微量輻射碘 131,相信是從福島飄來,當局強調不會對人體構成影響。


Source/转贴/Extract/: YOUTUBE
Publish date:01/04/11

Yields hopes offset earnings concerns

As expected, volume sales of duty-paid cigarettes in the country dropped sharply in the last quarter of 2010 — affected by the latest round of government tax hike and subsequent selling price increases.As expected, volume sales of duty-paid cigarettes in the country dropped sharply in the last quarter of 2010 — affected by the latest round of government tax hike and subsequent selling price increases.

Excise duty was raised by three sen per stick in October, prior to the Budget 2011. Following this, cigarette prices were raised by 80 sen per pack of 20s for both the premium and value brands to RM10 and RM8.50, respectively.

Steeper selling prices, and the reversal of trade speculation in 3Q10, drove volume sales down by a hefty 16.8% year-on-year (y-o-y) in 4Q10. The sharp drop reversed all the gains made in the first nine months of the year where volume sales increased by 5% from the previous corresponding period. Industry volume sales for the full year were lower by roughly 0.5%, extending the downtrend for the seventh straight year.

Outlook for the current year for cigarette manufacturers remains very challenging. Worsening inflationary pressures — including rising prices of basic food necessities, fuel and other goods and services — are expected to hurt consumer purchasing power in the coming months. This could, in turn, encourage further downtrading and worse, the turn to illicit cigarettes.

Anecdotal evidence suggests that exceptionally low priced cigarettes are sold for less than the government’s floor price of RM7 per pack of 20s while smuggled cigarettes, which do not pay taxes, are going for as low as RM3 per pack of 20s.

The vast and growing price disparity has seen the market share for sub-value brands expand to 9% by end-2010, up from 6.6% in September. Meanwhile, illicit trade is now estimated to account for almost four out of every 10 cigarettes sold in the country.

Despite the tough operating environment, share prices for British American Tobacco (BAT) and JT International — the two biggest players with a collective 80% share of the legitimate domestic market — have fared comparatively well.

JT International appears the better bet Indeed, given the uncertain outlook for the local bourse going forward, investor interest in the two stocks — for their higher than market average yields and low risk profile — may yet prevail.

Of the two companies, JT International has performed better over the past few years, financially — and thus, may be the better bet, at least for the near to medium term.
The company has a bigger share of its business in the value segment, which has fared better than premium brands against the backdrop of rising cigarette prices and consumer downtrading.

JT International’s share of the domestic market inched higher to 19.6% in 2010, up from 18.6% in the previous year. Its net profit grew a robust 23.6% to RM133.8 million in 2010, on the back of widening margins. Last year was the company’s third straight year of net profit growth.

By comparison, BAT’s earnings dropped for the second consecutive year, by 2.1% to RM731.1 million in 2010 — and if we were to adjust for the RM30 million one-off gains from the disposal of assets last year, the decline would be a sharper 6.2%.

The company’s profitability was affected by 1) its relatively outsized proportion of 14-stick packs of total sales, which were banned in June 2010, and 2) a portfolio that is biased towards premium brands.

The divergence in fortunes for both companies may well continue in the current year.

Market expectations for bumper dividends from JT International Based on our earnings forecast, JT International’s shares are trading at lower P/E valuations compared with that for BAT. However, the latter would offer higher yields at current prices assuming dividends for both companies remain at last year’s levels.

However, many market observers appear sanguine that a bumper payout for JT International is in the offing.

In addition to a growing cash pile, such expectations were bolstered by the devastating earthquake and tsunami in Japan, which raised the prospect of greater profits repatriation for rebuilding efforts. Japan Tobacco, which is the controlling shareholder with a 60.4% stake in the company, reported some production disruptions and damages at several of its factories.

In any case, JT International is certainly no stranger to distributing excess cash back to shareholders. In 1Q09, it completed a capital repayment exercise giving shareholders 75 sen per share, after net cash rose to a high of RM267 million at end-2008. A little further back, in 2007-2008, the company paid special net dividends of 15 sen and 28 sen per share, respectively.

With no special dividend paid — on top of its regular annual 30 sen per share gross dividends — since the capital repayment exercise, JT International’s cash pile has been growing, totalling RM189 million at end-2010. Based on our earnings forecast, its net cash will rise to roughly RM250 million by the end of this year — after taking into account its normal annual dividend payments — which is equivalent to 97 sen per share.

Hence, a special net dividend of up to 60-70 sen per share would be well within its means. That would translate into an additional return of about 8.5%-9.9% at the current share price.

Publish date:01/04/11

Sunway REIT Retail focused REIT (MIDF)

Sunway Real Estate Investment Trust
Recommend NEUTRAL
Target Price (TP): RM1.14
Retail focused REIT


• Largest in Malaysia: Sunway Real Estate Investment Trust (SUNREIT) is the largest REIT in Malaysia with RM3.7b worth of investment properties and market capital of RM2.8b. Free float of RM1b (36%) is also the highest among all M-REITS. Institutional investors hold 58% shareholding of SUNREIT, individual investors hold 5% and the rest hold by the sponsor and manager i.e. Sunway City Berhad. Foreign shareholding stands at 26% as at end Feb 2011. Government of Singapore Investment Pt Ltd holds approximately 10% with its direct holding and indirect interest via Sunway City Berhad. Substantial stake of the Singapore fund will be an anchor of stability and confidence for investors.

• Retail focuses REITS: SUNREIT comprises of 8 properties, each located at prime locality of Subang, Ipoh, KL and Seberang Jaya Penang. 67% of total gross floor area of assets is retail space (Sunway Pyramid Shopping Mall, Sunway Carnival Shopping Mall and SunCity Ipoh Hypermarket), 19.4% are hospitality asset (Sunway Resort Hotel & Spa, Pyramid Tower Hotel and Sunway Hotel Seberang Jaya) and 13.6% are office properties (the Sunway Tower and Menara Sunway). Total value of its retail assets are RM2.6b which is much higher than other retail focus REIT such as Capital Mall Malaysia Trust (RM2.1b) and Hektar (RM720m). As at end 1HFY11, SUNREIT derive 72% of rental income from retail asset. The retail properties consist of a diverse tenant mix. Diversified tenants will reduce their exposure to homogenous tenants with similar economic cycle.

• First right refusal on sponsor’s property: SUNREIT aims to double its asset value to exceed RM7 billion in 5-7 years. The target is attainable as SUNREIT was granted the first right refusal on Sunway City Berhad properties. Their future pipeline properties include Sunway Velocity Shopping Mall, Sunway Giza Shopping Mall, Sunway Medical Centre, Sunway University as well as Monash University, Sunway Campus. Combined NLA for Velocity and Giza shopping mall are 900K sq ft and GFA of 3 other assets are 2.2mn sq ft. Apart from the pipeline assets; they could also look for 3rd party asset which fit into their portfolio strategies. These properties would have to be yield accretive, retail & mixed use and located in fast growing locality.

• Rental guarantee: Hospitality segment is subject to economic cycle and stiff competition. SUNREIT mitigate potential fluctuation in earnings of hospitality assets by engaging in two separate Hotel Master Lease agreements with subsidiaries of Sunway City Berhad (the Sponsor). Assuming that hotel income falls below rental guarantee, SUNREIT will be compensated. Combine rental guarantee for all 3 hotels i.e. Sunway Resort Hotel and Spa, Pyramid Tower Hotel and Sunway Hotel Seberang Jaya are RM 46.5m p.a. for FY11 and FY12 as well as RM35m p.a. for FY13 to FY20. The rental guarantee will last for 10 years. • Distribution: SUNREIT plan to distribute 100% of the distributable income for the first 2 years and at least 90% in the subsequent financial years. As such we are expecting net distribution yield of 6.4% in FY2011

• Prime locality of assets ensures sustainable growth: 86% of SUNREIT asset value or 4 of its total 8 investment properties are located at the 800 acres Bandar Sunway. In 1HFY11, SUNREIT derived 84.5% of its rental income from properties located at Sunway City. Hence, growth potential of SUNREIT is highly correlated with future development of Bandar Sunway. Bandar Sunway as an integrated township sits on a 1.55 mn major population catchment area covering Subang Jaya, Petaling Jaya, Shah Alam and Puchong.

Positive synergies of commercial, hospitality, leisure, medical, convention (MICE), educational facilities, and new properties development will elevate the economic activities within the township, thus generating massive potential upside for properties rental, occupancies and valuation. Over the next 3 years, new visitation to Sunway Integrated Resort City is expected to increase by 10% from current annual visitation of 30m. Strong growth in visitation primarily driven by:
o The Pinnacle: A new grade A office building with potential of attracting 5000 new office staff once complete in 2013. The office building comes with 1,000 new car parks that link to Sunway Pyramid, Sunway Tower, and Sunway Hotels.

o New Wing of Sunway Pyramid: 50,000 sq ft of retail space will be added to Sunway Pyramid massive retail space of 1.69m sq ft. Additional 1,000 new carpark link to Sunway Pyramid, Sunway Tower, and Sunway Hotels will raise carpark space by 25%. A service apartment attached to the new wing will be developed. 200 units of service apartment is expected to house 1000 new residents.

o Expansion and upgrade of Sunway and Monash University: Both University expansion plan is expected to raise number of students by additional 5,000

o Sunway South Quay: Sunway South Quay is over 160 acres of residential and commercial land next to Sunway Lagoon Resort. The development comprises of luxury villas, condominiums, apartments, commercial and retail development. Total GDV for the development is RM5.2b. There will be potentially 4000 units new residential units accommodating 20,000 new residents with high spending power.

• Positive rental reversion had translated into strong earnings growth: Net rental income and net profit increase by 13.8%qoq and 16.3%qoq to RM62.8m and RM44.7m respectively in 2QFY11. Strong rental income and earnings growth primarily driven by positive rental reversion of 16.2%. SUNREIT gearing level as at end 1HFY11 stands at 31%. Under SC guideline, REITS gearing level shall not exceed 50% of asset value. Thus, for future acquisition SUNREIT could raise up to maximum RM719m through debt financing.

• Proven track record of asset: Over the past 3 years SUNREIT had registered consistent rental and occupancies growth. Sunway Pyramid occupancy improved significantly from 92.3% in FY08 to 99.3% in FY10. Average monthly rental also improved from RM8.41psf to RM8.99psf. IN 1HFY11 occupancies drop slightly mainly due to tenant’s renovation. Hospitality properties have experience a drop in occupancy rate in FY09-Y10 due to economic downturn. However in 1HFY10, occupancies and average room rate improved significantly. Menara Sunway Occupancies was relatively stable as majority of tenants are Sunway Group and related companies. Sunway Tower occupancies and rental improved significantly as at end 1HFY11 following the extensive refurbishment exercise completed in July CY09.

• Strong branding and management: Suncity REIT Management Sdn Bhd, a subsidiary f Sunway City Berhad is the REIT manager of SUNREIT. Thus, we are confidence on management team as majority has years of experience in the sector. Apart from strong management team, Sunway established branding in Malaysia would ensure strong bargaining power as well as pull factor towards attracting quality tenants to its retail properties i.e. Sunway Pyramid and Sunway Carnival Mall.

• Valuation: We are recommending NEUTRAL with target price of RM1.14 based on dividend discount model. SUNREIT is currently trading at P/NAV of 1.07, which is slight premium over average P/NAV of 1.0 for MREITS. Based on our estimation and management guidance distribution yield of SUNREIT for FY11 will be 6.5%, which is significantly lower than industry average of 8.2%. Investor buying into M-REITS would have to consider tradeoff of higher distribution yield of other M-REITS against higher free float and defensive earnings of SUNREIT. _

Source/转贴/Extract/: MIDF RESEARCH
Publish date:01/04/11

Singapore Strong underlying growth… with higher ination (CIMB)

28 March 2011
Strong underlying growth… with higher in ation
• Budget FY 2011 shares the spoils of a record 2010. The Singapore economy expanded by a record 14.5% in 2010, driven by broad-based expansion in the service sector (11% yoy) and a rebound in the goods-producing sector (30% yoy). With the economy recovering strongly, the government’s budget balance was 15% above projection, allowing it to share the nation’s windfall gains with Singaporeans. To  ne-tune the economy for the long run, programmes to enhance productivity have been expanded.

• Government maintains 2011 growth forecast, but raises in ation outlook. The government expects the economy to expand 4%-6% in 2011 while we expect 6%, assuming global economies normalise after an exceptional year. Tracking the economy’s strength, in ationary pressures have been building up in the economy. The government has upgraded its in ation forecast to 3%-4% from 2%-3% (2.8% in 2010). We expect in ation to be 3.6% in 2011, with prices staying high in 1H 2011. The base effect, budget measures to help households cope with rising costs, plus more stable food prices, are all expected to contribute to a moderation in 2H 2011.

• Economy at full employment. Amid rising in ation, the labour market remains tight. Preliminary data from the Ministry of Manpower shows 113k jobs added in 2010 (+38k in 2009), nudging the unemployment rate down to a seasonallyadjusted 2.2% in 2010 from 2.3% at end-2009. With the economy growing at its long-term trend and supporting labour demand, we expect employers to face strong wage pressures in 2011.

• Central bank likely to tighten monetary policy. In view of the  rm economic recovery and in ationary pressures, we believe that in ation worries are likely to outweigh growth concerns at this juncture. As such, we expect the MAS to remain hawkish during its upcoming policy review in Apr.

Source/转贴/Extract/: CIMB Research
Publish date:28/03/11

Malaysia Growth slows but not stalling (CIMB)

28 March 2011
Regional Economic Compass March 2011 -Malaysia
Growth slows but not stalling

• Growth normalises after a bumper year. Malaysia’s real GDP growth slowed to 4.8% yoy in 4Q 2010 (5.3% in 3Q), the second consecutive quarter of moderation, hit by falling exports. Domestic demand still calls the shots, advancing 5.7% in 4Q on the back of resilient consumer spending (6.5%) as well as steady investment (9.2%). Private investment remains the swing factor for a sustainable recovery, underpinned by the Economic Transformation Programme (ETP), which has gained traction. We maintain this year’s GDP growth forecast of 5.5% (7.2% in 2010).

• Indicators point to continued growth. Both exports and industrial output paced slower to annual growth of 3.0% and 1.0% respectively in Jan, indicating a moderate growth momentum in the months ahead. Car sales rose 7.9% and household credit demand held up strongly at 13.4% in Jan, a sign that consumer demand is not letting up though rising price pressures should squeeze household spending.

• Cost-push factors have upper hand on in ation. Headline in ation has been creeping up, hitting 2.4% yoy in Jan, with the jump in food and fuel prices being key contributors. Upward pressures on in ation remain. We expect a small-step reduction in fuel subsidies ahead. Demand-pull in ation is not very apparent due to a moderate rise in wages. We estimate in ation to average 3.0% this year (1.7% in 2010).

• Rate hike remains on course. Bank Negara Malaysia (BNM) on 11 Mar kept the overnight policy rate (OPR) at 2.75% for the fourth time and raised the statutory reserve requirement (SRR) ratio from 1.0% to 2.0% to mop up excess liquidity. The tone of the Monetary Policy Committee hints at a review of the degree of monetary accommodation as the central bank weighs the balance of risks between growth and in ation. In our view, future rate moves will be at a measured pace to safeguard growth. As such, we expect BNM to start raising interest rates in 2Q-3Q, taking the OPR to 3.25% by end-2011. We also expect a further rise in SRR to 4.0% over the next six months in a pre-emptive move to manage the risk of excess liquidity.

Source/转贴/Extract/:CIMB Research
Publish date:28/03/11

以3.025买入美元 国行疑似干预令吉

以3.025买入美元 国行疑似干预令吉
2011/04/01 10:45:08 AM









令吉预测值 上修至RM2.85
(吉隆坡31日讯)市场揣测国家银行将允许令吉升值以抑制通货膨胀,高盛(Goldman Sachs)看好令吉未来的升值走势,并上修原本已经看涨的令吉预测。






另外,高盛建议投资令吉12个月无本金交割远期外汇交易(non-deliverable forward,NDF),预测该远期合约将上涨5.8%至1美元兑2.90令吉的水平。


Source/转贴/Extract/: 南洋商报
Publish date:01/04/11



戴庆成 (2011-03-30)



  李嘉诚昨日在长和系业绩记者会上表示,目前楼市的二手市场向好,香港市民对楼市仍然有需求,相信通胀将会来临,若市民有足够资金,有三成至四成的楼价作为首期,买单位自住最合适。  他指出,在过去几十年,即使最高价时买入单位,以现时计算仍然是便宜。

















Source/转贴/Extract/: 《联合早报》
Publish date:30/03/11

Genting Singapore: Outlook remains largely positive (OCBC)

The still upbeat outlook for tourist arrivals to Singapore in 2011 should continue to benefit Genting Singapore (GS). According to the Singapore Tourism Board (STB)1, it expects to welcome some 12-13m tourists this year, up from last year’s record 11.6m visitors, and see receipts of around S$22-24b (versus 2010’s S$18.8b). We believe that GS stands to benefit greatly, given that its integrated resort (IR), along with Universal Studios Singapore, is geared towards the family and vacation crowd. While there are valid concerns over the recent twin disasters in Japan having an impact on Asia’s tourism industry, we believe the impact to Singapore is only minimal. On the other hand, with the ongoing worry over the radiation contamination issue in Japan, tourists could also give the popular tourist destination a miss and visit alternative destinations such as Singapore. As such, we are maintaining our FY10 and FY11 estimates. Our DCF-based fair value also remains at S$2.53; maintain BUY.

Tourism outlook remains positive. The still upbeat outlook for tourist arrivals to Singapore in 2011 should continue to benefit Genting Singapore (GS). According to the Singapore Tourism Board (STB) , it expects to welcome some 12-13m tourists this year, up from last year’s record 11.6m visitors, and see receipts of around S$22-24b (versus 2010’s S$18.8b). The outlook for the region is also expected to remain upbeat, with the World Tourism Organization expecting international tourist arrivals to grow by a further 7-9% this year after hitting a record 204m in 2010.

Minimal impact from Japan’s twin disasters. While there are valid concerns over the recent twin disasters in Japan having an impact on Asia’s tourism industry, we believe that the impact to Singapore is only minimal. This as Japanese inbound tourists form only a very small percentage of the nation’s total; and it has also been declining over the years. On the other hand, with the ongoing worry over the radiation contamination issue in Japan, tourists could also give the once popular tourist destination a miss and visit alternative destinations such as Singapore.

RWS geared towards family and vacation crowd. And if this pans out, we believe that GS stands to benefit, given that its integrated resort (IR), along with Universal Studios Singapore, is geared towards the family and vacation crowd. And with the reopening of the “Battlestar Galactica” ride in Feb, the opening of the long-awaited Madagascar ride before 2H10, and other attractions such as the Maritime Xperiential Museum and Marine Life Park by 2012, these should ensure a steady stream of family-oriented crowd. We also expect RWS to try to capture part of the growing MICE (Meetings, Incentives, Conventions and Exhibitions) market in the future as Singapore becomes more attractive as a MICE destination (due to its good location, infrastructure and security).

US$5.5b gaming market potential. While the Casino Regulatory Authority (CRA) is taking longer than expected to approve the licensing of junket operators, industry watchers continue to maintain a pretty positive view of the gaming market. In line with our own view, we note that PricewaterhouseCoopers (PwC) expects both IRs to achieve casino revenues of US$5.5b this year, up from an estimated US$2.8b in 2010, and overtake Australia and South Korea to become Asia’s second largest gaming market after Macao .

Maintain BUY with S$2.53 fair value. As such, we are maintaining our FY10 and FY11 estimates. Our DCF-based fair value also remains at S$2.53; maintain BUY.

Source/转贴/Extract/: OCBC Investment Research
Publish date:31/03/11

Marc Faber - Implications of Libya on Gold

What is happening in the middle east is friendly for gold, friendly for oil, and friendly for other commodities. Nothing has been solved. It is mainly civil wars over there.

These events are confirming that central banks will continue their expansionary policies. This will drive commodities higher.

After the 20 year bear market in Japan, the prices are relatively rare. As the yields on bonds go lower, this will drive money into the equity markets. Bonds are unattractive, but Japanese shares are worthwhile to accumulate.

The Euro has rallied contrary to expectations. The next few months we might see a rebound in the dollar and US treasury bonds. On any weakness, accumulate gold.

Source/转贴/Extract/: youtube
Publish date:28/3/11

Warren Buffett - Best Hedge Against Inflation

It's a good idea to make investments anywhere in the world where you can find a great business that is run by people you admire. Inflation is something that only one man in a million understand. The best hedge against inflation is to improve your skills and your earning power. No one can tax you while you are doing that.

The goal is to leave your children enough that they can do anything, but not enough that they can do nothing.

Source/转贴/Extract/: youtube
Publish date:31/03/11

Thursday, March 31, 2011

Starhill Global: TRANSFORMING an Orchard Road icon

Starhill Global REIT is revamping Wisma Atria, one of the most significant assets in its portfolio. That could enhance the REIT’s dull image and prompt greater interest in its portfolio of disparate but strategically located retail properties.

Breathless and a little dishevelled, Ho Sing breezes into the meeting room apologising for his tardiness. The CEO of YTL Starhill Global REIT Manage- ment (YTL Starhill) is especially busy these days with preparations for a major revamp of one of Starhill Global REIT’s most prominent properties.

Last month, Starhill Global REIT announced the “asset redevelopment” of Wisma Atria to boost the mall’s positioning on Singapore’s main shopping street. If everything goes according to plan, the blue façade of the shopping mall that appeared in the 1980s will be replaced by a stunning glass-fronted structure by 3Q2012 that could redefine one of the busiest segments of Orchard Road. And, it could mark a new beginning of sorts for the real estate investment trust. “This is going to be the start of a journey,” Ho tells The Edge Singapore.

Starhill Global REIT’s key assets in Singapore comprise a 74% stake in Wisma Atria and a 27.2% stake in Ngee Ann City, arguably two of the most strategically located shopping mall-cum-office towers on Orchard Road. But, they have gradually been overshadowed by new properties as well as the refurbishment of established malls on the street over the past decade. Right next to Wisma Atria is ION Orchard, built by CapitaLand and Sun Hung Kai Properties. Across the road is Singapore Press Holdings’ recently updated Paragon. Further down the street is Knightsbridge, the new shopping complex carved out of Grand Park Hotel, formerly the Crown Prince Hotel.

And, at the far end of Orchard Road is Overseas Union Enterprise’s Mandarin Gallery, which artfully uses its flagship Mandarin Orchard’s street frontage. Now, Starhill Global REIT is leaping into the fray with its renewal plans for Wisma Atria. “If you say we are playing catch-up, that’s not a bad thing, because it allows us to learn from what others have done,” Ho says. “If I did this before ION Orchard, we would have been ahead of our time and spent the money for nothing. So, now that ION Orchard has come out and defined the space, we can create an appropriate response.”

In a nutshell, the plan is to make Wisma Atria more attractive for luxury brands and thus improve its image. Among other things, the new Wisma Atria will feature double-storey store fronts, much like ION Orchard and Mandarin Gallery. In addition, there will be better direct access to the stores from the street, complementing the tunnel access from the Orchard MRT station that has made its basement level retail space so popular.

“The basement will remain very much unchanged, but we’re going to improve and enhance the tenant mix on the upper floors,” says Chris Chong, asset manager at YTL Starhill. That should improve the overall earnings potential and value of Wisma Atria. “The actual net lettable area [NLA] increase is not that much, but in terms of the impact — if we enhance and push out the frontage, your entire room will become more valuable,” Chong explains.

Of course, the proof of the pudding will be in the retailers that Starhill Global REIT man-ages to bring in after the revamp. “A lot of people have been knocking on our doors,” Chong says. “With all these international retailers coming, we will see which offer the best retail mix.” Officials at the REIT’s manager decline to name the brands that will take up space at Wisma Atria next year, other than to say they are mid-range to high-end labels and that a good number will be new to Singapore. “[Singaporeans] will have heard of them [from] overseas magazines,” Chong says. “But, it will be their first interaction with the brands here.”

According to Ho, the enhancement works are due to start in 2Q2011, at the tail end of the Great Singapore Sale, but the mall won’t shut down. Instead, the work will be carried out around its day-to-day operations. That will, no doubt, affect sales during Christmas, but Ho figures YTL Starhill will be able to minimise disruptions and maintain its revenues from the mall. “We expect a minimal hit. All these tenants will take advantage and ask for a rebate, which we’re not going to give.”

Wisma Atria is Starhill Global REIT’s second-largest asset, accounting for 27% of its net property income (NPI) and 32% of its asset value. According to Ho, the capital expenditure of $31 million is expected to generate a return on investment of at least 8%, and possibly as much as 12%. Beyond the financial numbers, however, successfully pulling off the revamp of a high-profile property like Wisma Atria could cast Starhill Global REIT in a more positive light with investors and help it garner a broader following in the market.

Turbulent past

With a turbulent history and a portfolio of disparate assets, Starhill Global REIT has been eyed warily by investors for years. Originally known as Macquarie MEAG Prime REIT, it was created and listed on the Singapore Exchange during the heyday of the securitisation boom six years ago. Its stakes in Wisma Atria and Ngee Ann City came from a group of private equity funds led by property investment firm Pacific Star, which injected the assets into the REIT as part of its exit strategy. Australia’s Macquarie Group took a 26% stake in the REIT and 50% in the REIT’s manager.

Without the backing of a strong property developer parent, however, units in the REIT traded at a relative discount. In search of yield-accretive acquisitions, it had to venture abroad. In April 2007, it managed to acquire seven properties in Tokyo for the equivalent of $182.5 million. The rationale at the time was geographical diversification and stable net property income for the REIT.

That same month, the REIT also acquired the 101,000 sq ft Renhe Spring Zongbei property in Chengdu for the equivalent of $70 million. The rationale for the Chinese acquisition was the property’s high yield and the first right of refusal to Renhe Spring Group’s two other prime retail properties in Chengdu with a combined gross floor area of more than one million sq ft. The Renhe Spring mall is currently 100% occupied and was valued at $80 million as at December. In 4Q2010, the China mall accounted for 9.2% of the REIT’s total NPI.

Yet, the addition of these far-flung assets only seemed to turn investors in Singapore off even more. REITs with significant regional assets tend to trade at a discount, according to analysts. That’s because of the perceived risks associated with fluctuations in foreign exchange rates and the risk-free rates of return in other markets.

Meanwhile, changes in the control and management of the REIT were unfolding. In 2008, in the midst of the global financial crisis, Malaysia’s YTL group paid $285 million for Macquarie’s stake in the REIT and its manager. Pacific Star still holds an effective 25% stake in YTL Starhill, but it does not have any board representation and will transfer that stake to YTL in April next year. Controlled by the family of Malaysian tycoon Francis Yeoh, the YTL group has invested billions of dollars over the last four years in assets in Singapore, including the acquisition of Power Seraya and the purchase of prime residential sites in District 10 and on Sentosa Island.

In December 2009, in a tragic twist, the REIT manager was suddenly left without a CEO when Franklin Heng died during a liposuction operation. In April 2010, Ho was appointed CEO in his place. Ironically, the 44-year-old had previously worked for GuocoLand, which is controlled by another Malaysian tycoon, Quek Leng Chan. At GuocoLand, he headed the company’s international investments division. Among other things, he oversaw development projects to completion in the troubled Vietnamese market. Ho’s sister Ho Ching is the head of government investment company Temasek Holdings and the wife of Prime Minister Lee Hsien Loong.

Besides preparing for the revamp of Wisma Atria, the last few weeks have been an eventful time for Ho. On March 21, Starhill Global REIT was included in the FTSE Singapore All Cap Index. On March 14, YTL Starhill rushed to update the market on the status of its properties in Japan following the earthquake and tsunami. Located in Tokyo, none of the properties have suffered any damage, the REIT manager says in a statement. In 4Q2010, the REIT’s Japanese portfolio contributed 4.4% to its NPI and was valued at the equivalent of $175.4 million, accounting for 6.4% of its assets.

Will Starhill Global REIT divest its Japanese holdings now that it has been taken over by Malaysia’s YTL group? Where will it invest next? What game plan have YTL and Ho come up with for the REIT?

Expanding profile

“There’s a lot of talk in the market about divesting [our] Japanese assets,” Ho concedes. “We suspect it’s a lot of brokers trying to sell our asset to drum up business. It is totally not true, at this point.” He adds that the Japanese assets, which comprise mostly retail properties and some offices, have a “blended occupancy” of 85%. Moreover, they are well located around Tokyo, in areas such as Shibuya, Roponggi and Ometosando. “We will continue to hold [the assets] in the short to intermediate term and try to maximise our income.”If anything, Starhill Global REIT’s portfolio of properties appears to be getting more diverse. Since YTL took control, the REIT has bought three properties, broadening its geographic profile significantly. The David Jones Building in Perth, Australia was bought for the equivalent of $148 million and now accounts for 5.7% of its assets.

The four-level property is located in the centre of Perth and enjoys dual frontage on Hay Street and Murray Street, the only two retail pedestrian malls in the city. The premises, which includes a heritage-listed building constructed circa 1910 that was formerly the Savoy Hotel, is anchored by the popular David Jones department store and six other speciality tenants. David Jones, which holds a lease until October 2032, occupies 22,903 sq m or 95% of the total gross lettable area and accounts for 75% of the annual gross rental.YTL also last year injected its flagship Kuala Lumpur malls, Starhill Gallery and Lot 10 Shopping Centre, into the REIT for the equivalent of $423.3 million. Together, the two properties account for 16% of the REIT’s assets, and contributed 20% to its NPI in 4Q2010.

Officials at YTL Starhill insist there is consistent logic to all these overseas acquisitions. In the first place, the two Kuala Lumpur properties are currently on master leases. That means the REIT’s manager doesn’t have to attend to a slew of individual tenants. “The so-called geographical risk is mitigated with all these master tenancies,” Ho says. “It’s not as though I have to fly there and handle every problem.”

Moreover, most of the assets Starhill Global REIT owns are centrally located retail properties that cater to relatively well-heeled consumers. “It’s all mid-[range] to high-end,” Ho says. Chong adds: “They are located in key public transport nodes, such as the metro stations, and they are able to enjoy a certain footfall.” That offers an assurance the properties have good potential to deliver decent income growth and capital gains over time.

Case in point: Ngee Ann City in Singapore.

The property is under a master lease to Toshin Development Singapore, a unit of Japanese department store Takashimaya, and Starhill Global REIT only owns a 27% stake in the property. That limits the REIT’s ability to enhance its returns directly. Yet, analysts agree that its income potential and capital value are gradually increasing, a reflection of its strategic location on Orchard Road.

The master lease agreement will expire in June 2013, and Toshin has the option to continue the lease for another 12 years. If Toshin decides against a lease renewal, it would allow the REIT the chance of negotiating a higher rental rate, notes Anni Kum, an analyst at Kim Eng Research. Starhill Global REIT’s 27% stake in Ngee Ann City accounts for 36% of its assets and 30% of its NPI. Toshin is the REIT’s top tenant by rental contribution.

And, as both Wisma Atria and Ngee Ann City have office tower blocks, there is an add-ed element to the REIT’s tenancies. Ho reckons the office sector in Orchard Road serves a tenant base separate from the CBD. “Our office tenants are differentiated,” he says.

He adds that the two properties house the offices of some of its retail tenants. “We have Coach, Tiffany, Dior, Leowe, Chanel and H&M.” All in, more than 87% of Starhill Global REIT’s assets consist of retail space, with the balance being offices.

As for properties that aren’t under a master lease, Starhill Global REIT can take a more hands-on approach to improve their value, through asset-enhancement programmes such as the one it is about to undertake at Wisma Atria. “In our road map, we have maybe four or five malls that we can see adding value to, barring any acquisitions,” Ho says, without providing specific details.

At the same time, with a debt-to-asset gearing of 30% as at Dec 31, Starhill Global REIT has some debt headroom to make acquisitions, without an immediate equity issue, according to Kum. Ho says the REIT is unlikely to stray too far from the types of retail property assets it already owns. “The first consideration is the location,” he says, adding that it will continue to focus on prime, non-suburban retail properties. “Secondly, [we would consider] the physical nature of the asset, the land itself. If it’s a hopeless building [or] a really old building with a small car park, I wouldn’t buy it.”

Then, the REIT manager would consider whether the property has the potential of supporting a mid-range to high-end tenant mix, and whether there is potential upside to its income and yield, he elaborates. “We can pursue [this strategy] further for five to six years before we run out of prime assets,” Ho says. “By that time, we plan to at least double our assets under management.”

Analyst opinion mixed

For 4Q2010, Starhill Global REIT reported a 22% y-o-y rise in NPI to $23.3 million, helped by the acquisitions in Kuala Lumpur and Perth. Distribution per unit (DPU) for the quarter was 7.2% higher, at 1.04 cents. For the full year to Dec 31, its DPU was 3.9% higher y-o-y, at 3.9 cents. That translates into an annualised yield of 6.3%, which is more than 100 basis points higher than CapitaMall Trust and Frasers Centrepoint Trust, whose malls (by NLA) are largely suburban.

Tony Darwell, property analyst at Nomura Securities, notes that the more positive outlook on office property “prompted the revaluations of both Wisma Atria and Ngee Ann, with their asset values raised 4.4% and 6.9%, respectively”. Darwell has a “buy” recommendation on the REIT, with a price target of 75 cents. That would value its units at 0.8 times projected book value for this year and 0.86 times fore-cast book value for 2012.

Vikrant Pandey, a property analyst at UOB Kay Hian, worries that an expanding supply of retail property on Orchard Road could threaten Starhill Global REIT. If that happens, the REIT’s diversified regional exposure may well be a good thing, despite the lower valuations that tend to be inflicted on such REITs, he says. “The diversified regional retail component provides a positive angle.” Pandey has a “neutral” rating on Starhill Global REIT at the moment, preferring office and industrial property REITs instead.

On the other hand, Kum of Kim Eng says most of the new supply of retail space on Orchard Road has already come onstream, and rents in the area are likely to remain firm going forward. “Suburban retail rents, on the other hand, may come under pressure as 1.3 million sq ft of new retail supply come to the market in the next two years,” she writes in a recent report. Among the suburban properties that are due to hit the market are Clementi Mall, with 193,750 sq ft of space; JCube, with 204,000 sq ft; and Changi City Point, with 207,000 sq ft. “That prime retail rents may increase and suburban retail rents may get squeezed indicates that the gap between the two could start to widen from the current narrow band. Starhill Global REIT, with its value proposition as an undervalued prime retail REIT, should benefit.”

For his part, Ho is betting that Starhill Global REIT’s focus on quality retail properties located in prime areas will eventually win it a better following in the market, despite its diversified geographical exposure. “We’re never short of demand,” he says, referring the REIT’s well-located assets. Realising the full potential of Wisma Atria on Orchard Road with its revamp could be just what Ho needs to prove his point.

Publish date:28/03/11

A Singapore business trust for PCCW?

Short, gregarious Richard Li Tzar Kai has a strong handshake grip that exudes confidence. The 44-year-old younger son of Hong Kong tycoon Li Ka-shing is a billionaire and an entrepreneur in his own right. When he speaks, he has the habit of using the royal “we” to describe his corporate moves. At the age of 24, with a loan from his dad (since repaid), Li set up Star TV, a pan-Asian satellite TV operator that he quickly flipped to Rupert Murdoch for US$1 billion just days before his 25th birthday. In the late 1990s, he re-emerged as an Internet entrepreneur and owner of Pacific Century CyberWorks (later renamed PCCW) with a daring deal in early 2000 that won him control of Hong Kong Telecom.

Eleven years on, Li is itching to do another big deal. It hasn’t been for the lack of trying that he hasn’t done groundbreaking transactions like his first two. Li controls Hong Kong-listed PCCW through SGX-listed, thinly traded Pacific Century Regional Developments, which is majority-owned by private company Pacific Century Group. PCRD, other Pacific Century Group companies and Li own a nearly 29% stake in PCCW. Last week, PCCW and PCRD shares suddenly soared in the wake of market buzz that Li might seek to imitate his father in listing a large business trust in Singapore.

Funds raised from the trust’s listing could be ammunition he needs for his next big deal.On March 21, PCCW said in a statement that it was in the preliminary stages of “exploring the feasibility of a spin-off and separate listing” of its telecom business as a business trust. The spin-off is one way to unlock value for shareholders, the company said. Though no details of the proposed plan to spin off the business trust were made available, Hong Kong media and analysts who cover PCCW have speculated the trust will most probably be listed in Singapore since Hong Kong laws are not conducive to such a listing at the moment. Regulators and the Hong Kong Exchange are currently studying how the rules could be tweaked to allow for business trusts to be listed.

Unusual trading activity

The announcement followed heavy trading and a strong 5.5% run-up in PCCW stock on March 18. “I believe PCCW’s hand was forced and it had to make a statement because [Hong Kong’s] Securities and Futures Commission would have queried it about unusual trading [activity] anyway,” says Marvin Lo, Daiwa Capital’s telco analyst in Hong Kong. PCCW has had more than its share of run-ins with regulators over the years. On March 21, the day the spin-off was announced, PCCW’s share price surged a further 4.6%. “The market clearly likes the fact that it is thinking about a business trust,” says Lo.

Whether the trust lists in Singapore or PCCW waits a year or so before Hong Kong laws are amended to facilitate such a listing, any spin-off would still need to clear a maze of other regulatory hurdles in Hong Kong as well as a contentious shareholder vote. PCCW says it has begun discussions on related regulatory issues with Hong Kong regulators and intends to engage all stakeholders before deciding on the timing of the listing.

The announcement of PCCW’s intention to explore a spin-off came 48 hours after Hutchison Port Holdings, which houses the southern China and Hong Kong port assets of Hutchison Whampoa, began trading in Singapore. Li’s father controls Hutchison Whampoa through his property and investment holding company Cheung Kong (Holdings). Li and PCCW’s CEO, Alex Arena, were unavailable to respond to queries from The Edge Singapore and PCCW officials refused to elaborate on the spin-off plans, saying only the company had yet to finalise them.

The spin-off of the telco assets into a Singapore-listed business trust is Li’s fifth attempt to wash his hands of what was once one of Asia’s most treasured telcos and the bluest of blue-chip companies in Hong Kong. Singapore Telecommunications had agreed to merge with HK Telecom in January 2000 in a US$28 billion deal, but Li, riding on Chinese nationalist sentiment that was against a coveted firm being snatched by a Singapore telco, jumped into the fray with an audacious bid using his Internet firm’s over-valued shares. He made a counter-bid through PCCW, then an Internet start-up whose stock had risen nearly 250-fold over the previous 18 months. In the wake of the announcement of his bid, PCCW’s stock peaked at a reverse split-adjusted price of over HK$99.40 in March 2000. In recent weeks, the stock has traded at between HK$3.10 and HK$3.50 — down 97% from its peak.

In the aftermath of the bursting of the tech bubble, Li sold some key PCCW assets, injected new equity and raised cash through bond issues to pay down US$11 billion in short- and medium-term debt that PCCW had accumulated as part of the deal to buy HK Telecom. In 2005, PCCW brought in China Network Communications Group (CNC) as a shareholder after the Chinese firm injected US$1 billion in cash into the firm for a 20% stake to help Li pay down some of the company’s debt. Over the past decade, Li has gradually expanded PCCW into a pay-TV player by paying top dollar for key sports broadcasting franchises, broadband access as well as luxury property development projects from its core businesses such as fixed-line, cellular services, data centres and ownership of an undersea cable network. Although PCCW is one of the smaller cellular players in Hong Kong, behind its former subsidiary CSL (now part of Australia’s Telstra) and Hutchison’s 3 (part of Li Ka-shing’s corporate stable), it has some of the highest margins. In the pay-TV sector, PCCW’s Now Broadband has 65% of the Hong Kong market, compared with rival iCable’s 35%.

Low-growth business

Analysts say PCCW wants to spin off telco assets because they are a low-growth business in a mature but fiercely competitive environment. On March 22, PCCW reported that its 2010 net profit rose 28% to HK$1.93 billion ($312.2 million) from HK$1.51 billion after revaluation gains on its property and financial investments. PCCW’s core earnings before interest, taxes, depreciation and amortisation (Ebitda) rose 5% to HK$7.07 billion from HK$6.72 billion in 2009. Core telecom, broadband and pay-TV operations make up just two-thirds of PCCW’s revenue, with property and other businesses making up the rest. Some analysts actually believe PCCW is already a growth play. “PCCW’s core telecom business grew 18% y-o-y in 2010 and it pays 4.5% annual dividend,” Daiwa’s Lo says. “There aren’t many listed telcos in mature markets who can match it.”

It took Li five years to pay down much of PCCW’s debts and restructure it into a profitable telco again. But just as soon, he was ready to flog it off to the highest bidder. In mid-2006, he announced that he had received competing offers by two consortia, led by Australia’s Macquarie Bank and private equity firm Texas Pacific Group/Newbridge, to acquire PCCW’s core telco and media assets.

The deal to sell off telco assets to private equity players was blocked by CNC, which was wary of foreigners controlling strategic Hong Kong telco assets.

Barely a month after two private equity bids were withdrawn, Li announced that his Singapore-listed PCRD would sell a 24% stake in PCCW to former investment banker Francis Leung, a co-founder of the now-defunct regional investment banking group Peregrine. While CNC was willing to go along with the deal, Li abruptly quashed it after media reported that companies connected to his billionaire father were helping Leung fund the deal. In 2008, Li again announced that PCCW would sell a 45% stake in its telco assets, but as the global financial crisis took hold, he quashed those plans too.

In 2009, a US$2.2 billion deal to privatise PCCW was scrapped after the Securities and Futures Commission reprimanded Li’s firm for alleged irregularities in a shareholders’ vote to approve the buyout. Lawyers for the commission had alleged that hundreds of agents at Fortis Insurance Co (Asia), once part of Li’s Pacific Century group, were given board lots of 1,000 PCCW shares. Li denied the allegations and challenged the decision. Hong Kong’s Court of Appeal later ruled in favour of the regulator, effectively blocking the buyout.

Daiwa’s Lo, who has a “buy” recommendation on PCCW stock, with a 12-month price target of HK$4, says it’s far too early to speculate about the business trust. He cites PCCW’s CEO Arena as saying that the latest move is not an asset sale. “PCCW will retain majority control of the business trust. It will manage it and earn a fee to run the trust, just like Hutchison Whampoa does with Hutchison Port Holdings in Singapore.”

Lo believes over the next few months, Li and PCCW will begin articulating what exactly they want to do with the cash they raise from the spin-off. “They might announce a special dividend or invest in a new venture,” he says. PCCW may have a chequered past, but over the years, it has emerged as a high-dividend-paying telco with consistently strong growth, he adds. Lo acknowledges that because of its history, many investors remain wary of PCCW. Still, he says the Hong Kong telco is now well positioned and is gradually proving doubters wrong by delivering more than it promises. Li, who has publicly moaned about living a “goldfish bowl” life in Hong Kong and was recently estranged from Macau-born, Toronto-based Cantonese movie-star girlfriend Isabella Leong, the mother of his three children, needs to do another deal to prove that his first two weren’t a fluke. He has publicly said he doesn’t want to run any part of his father’s empire. His elder brother, Victor will take the helm. Though Richard Li declined a request from The Edge Singapore for an interview, he has in the past been quoted as saying that he just wants to prove himself and wants to be known as his own man rather than his father’s son. If the market’s lukewarm reception to his father’s port operator trust is anything to go by, young Li may have his work cut out for him.

Publish date:28/03/11

USD to stay weak, euro to strengthen, says DBS’s Philip Wee

The US dollar has far too dominant a position in the global financial system, says Philip Wee, senior currency strategist at DBS Bank. That situation has to change for the global financial system to gain equilibrium, and it will, Wee says.

As at 3Q2010, Wee estimates that US dollars accounted for 61% of the world’s allocated foreign reserves. Although he doesn’t expect that the USD’s share of foreign reserves will fall below 50% in the near future, he sees it as becoming less dominant.

As countries try to diversify their foreign reserves away from the greenback, Wee believes they will buy euros instead. That suggests a weaker USD and a stronger euro in 2011.

In fact, the USD is already ceding its position as a safe-haven currency and a reserve of wealth. Through the recent crisis in the Middle East and North Africa, the value of the USD has been steadily falling. Meanwhile, a second round of quantitative easing by the US government is expected to push up the supply of USD in the global financial system.

The deficits in both trade and the budget will continue to put pressure on the currency, Wee says. “The US debt is increasing at a faster rate than the nominal economy in the US, so the country can’t hope to grow its way out of the debt situation.” Rising oil prices are a further negative, because they add to the US trade deficit with the Organization of the Petroleum Exporting Countries.

“Meanwhile, China has been complaining about the value of its reserves being eroded as the value of the USD falls,” Wee says. He expects that China will diversify its holdings by buying into the euro, which will provide some support for the currency. Also supporting his case for a stronger euro, Wee notes that since the 17-nation currency hit bottom in mid -2010 on Greek sovereign debt worries, it has shown a steady uptrend, despite some small corrections here and there over euro-zone debt concerns.

This strength can be partially attributed to expectations that the European Central Bank will raise its interest rates, perhaps as early as next month. Wee expects the ECB to intervene in the markets in order to stabilise its currency and normalise interest rates. He forecasts the EUR/USD rate to reach 1.50 in 4Q2011, from 1.42 at present.

Asian currencies can be expected to strengthen against the world’s major currencies too, he says. He sees the Singapore dollar strengthening to as much as 1.19 against the USD in 4Q2011, while the Malaysian ringgit could hit 2.82.Driving the strength, he says, are the global imbalances that are creating inflation in emerging markets despite slow growth in the developing ones. “Last year, global imbalances were about trade surpluses and deficits,” he says. “This year, the global imbalances are showing up as inflation in emerging economies.”

Wee says Asian central banks will be forced to deal with this inflation through currency adjustments. “Emerging economies are risking inflation with their inflexible exchange rate policies,” he says.

He also sees further policy rate hikes in Asian countries. And, in Singapore, he expects the Monetary Authority of Singapore to tighten the nominal effective exchange rate even further.

Publish date:28/03/11

Meltdown-or-not future for nuclear seen in diminutive reactors

Nuclear engineer Jose Reyes jolted awake at 4.45am on March 11 when his son called to warn him that a massive earthquake had unleashed a tsunami that rocked Japan. Giant waves were heading for the Oregon coast, about an hour from Reyes’ Corvallis office.

As news poured in that the cooling system at a Tokyo Electric Power Co nuclear plant had been damaged, Reyes’ anxiety grew. People were using the words “potential meltdown” with alarming frequency.

Reyes, 55, who founded NuScale Power Inc in 2007 to design a slimmed-down, 45MW reactor, contemplated the blot on the already beleaguered nuclear industry — and the prospects for his nascent company.

“We’ve been hard-pressed but not crushed,” he says. “Stopping the progress being made would be a mistake.”

Convinced that today’s large nuclear projects are burdened by too much financial risk, NuScale is designing and testing a 60ft-high reactor encased in a thermos-like metal sheath. It would cost about US$200 million ($252 million) and could be used to light and heat villages, desalinate ocean water or be strung together side by side to form a midsize power plant — virtually free of carbon emissions. Reyes plans to ask the US Nuclear Regulatory Commission for a licence in late 2012.

“More and more people see small nuclear as a green technology,” he says.

Decades after accidents at Three Mile Island and Chernobyl poisoned attitudes and the environment, Reyes and a cadre of scientists, engineers and investors have been betting that small-scale reactors can spark a nuclear revival.

Hyperion Power Generation Inc in Santa Fe, New Mexico, is working on 25MW, refrigerator-sized designs costing US$50 million each that could power remote locations or be used in hospitals and factories. By 2020, Russian nuclear company Rosatom Corp expects to sell seven barges equipped with twin 35MW reactors for the Arctic and Africa.

Microsoft Corp co-founder Bill Gates is backing a more powerful, 500MW reactor designed by TerraPower LLC in Bellevue, Washington. Its travelling-wave technology uses uranium-238 to fuel a reaction in what functions like a 13ft-tall candle.

As improbable as it may sound amid the devastation in northeastern Japan, the nuclear accident may increase the appeal of innovative, small-scale reactors, says Chris Gadomski, a Bloomberg New Energy Finance analyst.

“We’re seeing a knee-jerk reaction saying, ‘Get rid of nuclear,’ but that’s not going to happen in the long run,” he says. “There is no other good solution if you want to decarbonise the energy sector. As far as small reactors go, these events in Japan will strengthen their hand as opposed to weakening it.”

Maurice Gunderson, a partner at San Francisco-based CMEA Ventures, invested in NuScale four years ago and predicts he’ll raise an additional US$200 million by June 1, even after the Japanese disaster.

He says the world has few good options to replace the one-seventh of its electricity produced by nuclear reactors.

“Powering a society as large as the one we have means using nuclear power and coal,” he says. “Nothing else we have at the present time is big enough to do it in a sustained way. And coal means lopping off mountaintops, air pollution and mining deaths.”

Mycle Schneider, a Paris-based nuclear industry analyst who has advised the governments of Belgium, France and Germany on atomic energy, says small reactors would have been vulnerable to the twin forces of Japan’s earthquake and tsunami. Nuclear proponents can’t recover by painting rosy views of a carbon-free atomic future, Schneider says. “This was a big one for the nuclear industry,” he says.

Reyes says his preliminary data shows that his reactor would have survived the Japanese earthquake — and held up under one that shook the ground even harder. NuScale’s reactor core is housed inside a vessel that’s 10 times stronger than the one in Japan, he says, and that’s placed in a pool of water and buried underground.

More important, his design doesn’t require pumps or external power to cool the reactor. Fukushima Dai-Ichi reactors overheated when power sources failed and pumps couldn’t deliver cooling water.

NuScale’s design relies on so-called passive safety systems that take advantage of natural circulation created by the heating and cooling of water inside and outside the reactor. NuScale’s design, which uses about 5% of the amount of fuel of the big models, produces less heat after it’s idled.

The planet has 40 years to slice carbon emissions in half or suffer a deadly rise in temperatures, the International Energy Agency says. Nuclear proponents say meeting this challenge requires inventions including reactors that are smaller, safer and cheaper — even after the crisis in Japan.

“There is still a need for clean energy and for getting away from fossil fuels,” Reyes says. “That part of the equation doesn’t change.”

Publish date:28/03/11

More trouble in the S-chip universe

Hardly a week seems to go by without an S-chip revealing that it may have been cooking its books, and then suspending trading in its shares.

On March 24, China Gaoxian Fibre Fabric confirmed what the market had been suspecting since the beginning of the week. The polyester yarn maker disclosed that its auditors, Ernst & Young, were unable to verify the bank balances of two of its subsidiaries. The irregularities appear to involve its FY2010 results. The company has called for a thorough check on its accounts and its audit committee has pledged to safeguard its assets.

Shares in Gaoxian, which collapsed 24% on March 21 on enormous volume, had been halted from trading for the maximum allowable three days. With its disclosure of irregularities at its subsidiaries, the company has now suspended trading of its shares indefinitely.

The trouble at Gaoxian bears a disturbing resemblance to what happened at China Hongxing Sports and Hongwei Technologies only last month. Trading in the shares of both companies were halted after they sank 14% and 5%, respectively. Then, China Hongxing and Hongwei revealed that their auditors had discovered accounting irregularities, and suspended trading in their shares indefinitely in order to get to the bottom of the problem. Interestingly, Ernst & Young are the auditors for China Hongxing and Hongwei, the very same firm that turned up the problems at Gaoxian.

Yet, the differences between what happened at Gaoxian versus China Hongxing and Hongwei are just as worrying. China Hongxing and Hongwei sought trading halts on their own accord after seeing their shares sell off. On the face of it, the share price action seemed to inform the market of the bad news that the two companies were about to deliver.

Gaoxian, on the other hand, halted trading only after the Singapore Exchange sought an explanation for its share-price tumble. Even then, trading in its Korean Depository Receipts weren’t halted until a day later, on March 23.

As with all such SGX queries, Gaoxian was asked whether it was aware of any information not previously disclosed that might explain the trading of its shares, and if it complied with Rule 703 of the listing manual, which requires an issuer to provide timely disclosure of material information. Gaoxian’s response was only that it was “investigating the matters prompting SGX’s queries regarding its trading activities”.

Was this a case of the market informing a company that all was not well with its books?

Or, did officials at Gaoxian already have an inkling of imminent trouble before its shares began falling? Why didn’t it halt trading of its shares more quickly?

Whatever the case, shareholders of Gaoxian, China Hongxing and Hongwei are now all in the same boat. They can neither liquidate their holdings and walk away nor speculate that the irregularities aren’t that serious and buy more shares. That has triggered a debate about whether these trading suspensions are justified.

Those in favour of the suspensions argue that continued trading might unnecessarily crush the companies’ shares. It might also give some market players with inside information an unfair advantage. Critics say, quite rightly, that markets ought to determine the fate of stocks, even in the midst of panics and manias.

They are all missing the point. The “caveat emptor” maxim doesn’t excuse companies from being unable to provide crucial financial information to the market that can be relied upon to be true. Yes, companies make mistakes, and fraud happens. But, the similarity of the problems at Gaoxian, China Hongxing and Hongwei, not to mention the numerous other corporate governance scandals in recent years, suggests that the rot runs deep in the S-chip universe.

To its credit, regulators such as the SGX and the Monetary Authority of Singapore have made efforts to beef up corporate governance standards and improve recourse for investors. These include calling on companies, boards and audit practitioners to increase vigilance and conduct more stringent checks.Yet, S-chips are what they are. They operate in an environment in which business practices aren’t always in keeping with the standards of a developed market such as Singapore. Trying to reform them isn’t the

solution. It is time for local regulators to admit that they have been too lax in admitting S-chips to the local market, and impose tougher standards on listing aspirants and their promoters.

Publish date:28/03/11

金錢爆(菅直人消失一周 梅克爾下台負責?

2011-0329-57金錢爆(菅直人消失一周 梅克爾下台負責?)

Source/转贴/Extract/: youtube
Publish date:29/03/11

Are Reits a better alternative to Hutchison Port trust?

Business Times - 31 Mar 2011

Are Reits a better alternative to Hutchison Port trust?


HUTCHISON Port Holdings (HPH) Trust's initial public offering has clearly been a letdown for punters who are in for a quick ride. The container port business trust sank in its stock market debut almost two weeks ago and has not recovered past its offer price of US$1.01 per unit since.

But for long-term investors seeking yields, the verdict remains open. The lower unit price means a chance of securing higher yields by buying in now, assuming that the projected distributions to unitholders (DPUs) materialise. Is HPH Trust worth a shot for this purpose?

The answer may be 'no', because better options exist in the form of real estate investment trusts (Reits).

To be fair, HPH Trust is dangling attractive yields. Its forecast seasonally annualised DPU for 2011 is 45.88 Hong Kong cents and at yesterday's closing unit price of 98.5 US cents, after currency conversions, the yield comes up to almost 6 per cent. This is high in today's low interest rate environment. For 2012, based on the same closing unit price, the yield could be 6.7 per cent.

What is uncertain is whether HPH Trust will eventually pay out the same DPUs as projected, and also maintain reasonable distributions in future.

In the first place, business trusts are not required to make minimum levels of payout. This is something that a number of investors may not have noticed, because they assume that business trusts and Reits are the same. They are not.

HPH Trust said in its prospectus that its policy is to give out all of its distributable income. But in any case, it has flexibility to change this, especially if hard times come along.

Recall what shipping trust Rickmers Maritime did in 2009 when it had to conserve cash during the financial crisis. Even though income available for distribution in Q2 rose 42 per cent year-on-year, Rickmers still cut DPU and unitholders received 73 per cent less from the previous year.

By contrast, Reits have to pay out at least 90 per cent of their distributable income to unitholders to enjoy tax transparency on the amount they pay out. This alone puts Reits ahead of business trusts for investors keen on steady yields.

Unitholders can be pretty sure that this rule will not change. Even in the face of 2009's credit crunch, the authorities rejected requests from some Reit managers to lower the minimum payout ratio, emphasising that Reits' characteristics as a stable, high-payout, pass-through vehicle must be preserved.

Reits look even safer when we consider the currency exposures HPH Trust investors face. Most of HPH Trust's revenue is recognised in Hong Kong and US dollars; its units are priced in US dollars; and its DPUs are in Hong Kong dollars. The risks are worth repeating given how the Singapore dollar looks poised to continue strengthening.

The Sing dollar was trading at around S$1.26 to the US dollar yesterday and one of the more bullish research houses believes this could reach S$1.19 by year-end. If the forecast materialises, HPH Trust investors will have to pray that unit prices go up by more than 5 per cent just to make up for foreign exchange losses.

The Singapore Exchange (SGX) is looking at ways to facilitate the quotation and trading of HPH Trust in Singapore dollars as well as US dollars. But until details emerge, it is not clear if the arrangement will remove currency exposure on that front.

Also, assuming that the Sing dollar appreciates against the Hong Kong dollar at the same pace (since the latter is pegged to the greenback), HPH Trust's distributions would lose value after currency conversion.

Investors can easily minimise foreign exchange risks by investing in Reits. All but one of them listed on SGX trade in Sing dollars, and most pay out distributions in Sing dollars. It is even possible to find Reits which hold only assets in Singapore, meaning that income streams are insulated from currency movements.

A quick scan on Bloomberg turns out a few Reits that generate yields of over 6 per cent and pay out distributions in Sing dollars. Some examples are Ascendas Reit and Frasers Commercial Trust.

Some may argue that HPH Trust has greater growth potential because its Shenzhen ports still have a lot of room for expansion. Also, unlike Reits, business trusts are not hampered by limits on borrowings or development asset size.

These are good reasons for the growth-seeking investor to consider HPH Trust. But investors hungry for yields and stability may sleep better with their money parked in Reits.

Publish date:31/03/11

Regional Market Strategy (CIMB)

Regional Market Strategy

Strong oil outlook for 2011 and beyond

• Strong oil outlook for 2011 and beyond. We raise our oil price forecasts for 2011- 13 and beyond. This brings us to $110/bbl oil price forecasts for 2012-13 and $90/bbl for the long term with our new forecasts now 10% above market consensus. We examine the impact on key sectors and raise our earnings estimates and target prices for energy and petrochemical stocks accordingly. Transportation is the other key sector where we cut our earnings forecasts on higher fuel cost assumptions. The growth impact is marginally negative with our macro team revising Sino-Asean GDP for 2011-12 down by 0.2-0.8%. Our recommended picks to ride the strong oil theme are PTTEP, TOP, IVL, PChem, Keppel Corp, Sembmarine, Kencana, Sapura Crest and Ezra.

• Oil demand likely to outpace supply from 2012. We expect oil prices to continue to rise as the sector moves from a cyclical recovery in 2011 to a structural bull market starting 2012. We believe market fundamentals will remain structurally bullish in the long term due to demand growth outpacing supply growth. We raise our oil price assumptions from US$95/bbl to US$105/bbl for 2011 and from US$100/bbl to US$110/bbl for 2012-13 and lift our long-term estimate from US$85/bbl to US$90/bbl based on higher demand, cost inflation and premiums driven by the risk of supply disruptions.

• Earnings boost for energy and petrochemicals, hit on transport stocks. On the heels of our oil price upgrade, we raise earnings and target prices for energy and petrochemical stocks within our coverage with the largest upgrades seen for PChem and PTTEP. On the other hand, higher fuel cost expectations have translated into earnings cuts for our transport stocks. Companies with low profit margins, higher fuel costs-to-sales ratios and slower expected pass-through bear the brunt of our earnings cuts with a more significant impact for MAS, BLTA and CSCL. We remain selective on aviation picks with SIA as the sector top pick and maintain our Underweight position on tanker and dry bulk shipping, but Overweight on container shipping.

• Recommended picks to ride strong oil theme. We like PTTEP for its high leverage to higher oil prices; TOP for its wider margins and strong earnings growth as the largest refiner in Thailand; IVL for its strong earnings momentum on an acquisition and polyester boom; PChem for its highest leverage to oil prices and solid earnings growth; Keppel Corp and Sembmarine as proxies for the rig replacement cycle; Kencana, Sapura Crest and Ezra as offshore service providers that we expect to benefit from increased E&P and marginal field development.

Oil: from cyclical recovery to structural bull

We believe the oil market is entering a transitional phase between a cyclical recovery in 2011, precipitated by the drawdown of high inventory levels, and a structural bull market given the reduction of spare OPEC capacity to satisfy demand growth. This could shift the demand-supply balance from a situation of oversupply into an undersupply-driven bull market, which had taken place in 2006-08.

Even before crude oil prices spiked due to geopolitical concerns in Feb 11, oil prices were high at above US$90/bbl for Brent and Dubai while WTI stayed weaker at slightly below US$90/bbl due to poorer demand and a higher inventory level. We believe high sustained oil prices reflected the inflation in the cost of oil production and a long-term structural undersupply in the market, resulting in a contango oil curve

We raise our oil price assumptions by 10-11% for 2011-13. Hence, our estimates are lifted from US$95/bbl to US$105/bbl for 2011 and from US$100/bbl to US$110/bbl for 2012-13. Meanwhile, we increase our long-term oil price from US$85/bbl to US$90/bbl. As a result, our oil forecasts are now 10% above market consensus. We use Brent oil price forecasts rather than WTI as we think the Brent market has a higher correlation with Dubai oil prices, which is the most relevant benchmark for oil and gas companies in Asia.

2011: We believe higher oil prices in 2011 will be driven by high premiums arising from geopolitical tensions and greater demand in the medium term as a result of the earthquake-tsunami and subsequent nuclear threat in Japan.

2012-13: We see higher oil prices driven by tighter demand-supply as spare OPEC capacity will be used to satisfy rising demand growth.

Long-term oil prices post-2013: We raise our long-term oil price assumption by US$5/bbl to US$90/bbl as we think the higher cost of the global marginal production unit of oil sand of US$80-90/bbl will become the oil price floor average as demand for oil will start to outpace supply by 2012. Hence, certain cost premiums are likely.

First stage: cyclical recovery in 2009-11

Since 2008 when the global financial crisis hit the oil market, oil inventory drawdown has improved, growing from only 0.01mbpd in 2009 to 0.38mbpd in 2010. This resulted in a marginal drawdown of inventory of 0.4mbpd in 2009-10, compared with 1.76mbpd in 2007. However, on a seasonal basis, there was a clear gradual improvement in the inventory amount drawn now and we expect this trend to continue in 2011-12 on the back of demand growth, which we expect to outpace that of supply.

Second stage: structural bull market from 2012

We expect the oil market to enter a structural bull phase by 1H12 as spare OPEC capacity could flood the oil market after the global oil inventory normalises. Historically, spare OPEC capacity has an inverse relationship with world oil prices with oil prices rising as spare capacity declines. In 2008, when spare OPEC capacity dipped below 2mbpd, Brent oil prices hit a record high of over US$140/bbl. In 2012, we believe demand growth will outpace non-OPEC supply growth, necessitating the entrance of spare capacity from OPEC into the oil market to fill the gap.

We expect average oil prices to hit a record high of US$110/bbl in 2012, surpassing the US$98/bbl posted in 2008. Spot Brent oil prices, on the other hand, may or may not exceed its record high of US$146/bbl on 3 Jul 08.

Rising long-term oil trends

In the short term, oil price volatility is influenced more by hedging transactions and geopolitical concerns while long-term oil price levels are inflated by rising production costs and demand-supply imbalances. Higher demand growth is expected to outpace supply growth, which is constrained by limited new discoveries and operational difficulties in unstable oil production areas.

Roaring demand, waning supply
In 2010, oil demand grew 2.4mbpd, exceeding consensus expectations and marking one of the highest levels on record. Assuming that oil prices will average US$110/bbl, we expect demand to grow at a solid pace by 1.5mbpd in 2011 and 1.7mbpd in 2012. Supply will be more challenging as insufficient non-OPEC supply growth will necessitate the drawdown of spare OPEC capacity, leading to higher oil prices.

Demand growth. World oil demand is expected to grow 1.5mbpd in 2011 and 1.7mbpd in 2012, following a strong increase of 2.4mbpd in 2010. Despite being weaker than in 2010, the growth pace exceeded the increase of 1.0mbpd in 2007, which pushed oil prices to record highs. Unless oil prices exceed US$130/bbl, which we believe is the level oil demand will be extinguished, we expect demand to continue to grow and drive oil prices higher above US$100/bbl by 2012.

Non-OECD growth a key driver. We continue to expect growth from non-OECD countries over the next few years. China remains the key oil-consuming country and is expected to absorb 0.5mbpd more in 2011-12 following solid demand growth of 0.85mbpd in 2010. Despite improvements, US demand is expected to grow only 0.1mbpd in 2011, a decline from 0.3mbpd in 2010.

Strong car sales to be sustained. We believe China will see strong car sales growth of above 15% p.a. despite higher oil prices. This is supported by China’s growing personal wealth, which should allow its emerging middle class to absorb high oil prices. We believe that as long as oil prices do not surpass US$130/bbl, car sales will maintain their solid growth pace.

In the US, car sales turned positive in Sep-Nov 10 and grew marginally. We believe the growth rate will remain positive though small, leading to a gradual improvement in oil demand in 2011.

Supply growth constraints. As demand growth is expected to remain strong, we expect global demand-supply to hit an equilibrium in 2011. However, we see the balance upset in 2012 as non-OPEC supply growth is expected to decline sharply, forcing additional supply to come mainly from OPEC to fill the gap in demand. This should lead to a decline in spare OPEC capacity from 5mbpd currently to below 3mbpd by 2013.

Cost inflation provides a floor for oil prices

Oil prices have been volatile in the short term, driven by market concerns over supply disruptions caused by geopolitical tensions. The volatility is further exacerbated by financial hedging. However, in the long term, we believe oil prices will see a higher “price floor”, supported by rising production costs mainly for the production of Canadian oil sand, which has been the new key oil supply over the past few years. We believe the cost of Canadian oil sand of US$85/bbl will become the floor for global oil prices, given its importance as one of the largest marginal production units of global oil. Oil sand currently accounts for 3% of global oil production and over 70% of Canadian oil production.

The cost of Canadian oil sand is one of the highest in oil production. However, we believe that on the back of the twin factors of limited non-OPEC supply growth and solid demand growth, the 3mbpd marginal supply unit of oil sand will need to enter the oil market as a supply crunch is inevitable over the next few years. Also, the transportation cost of oil sand from the Alberta province in Canada to the US market has declined as more pipelines have been built. Many more are scheduled over the next five years.

Near term, watchful on price volatility

Net positions of oil futures, both in terms of non-commercial net futures positions and open futures interests, have hit record highs, surpassing the peaks in 2007-08. We believe this could result in higher oil prices over the next 2-3 months, followed by a sharp plunge after the spike. Currently, oil prices remain at a high of US$115/bbl, still far from its previous peak of US$147/bbl.

The higher the price, the sharper the subsequent drop. We, however, believe that speculation over oil futures is likely to have only a short-term impact on oil prices. Long-term prices, in our view, are driven by costs and the demand-supply balance. In any case, we believe the annual average oil price is less likely to exceed US$110/bbl. Should oil prices spike over US$130/bbl over the course of 2-3 months in 1H11 on the back of excessive speculation, demand for oil could be threatened during the latter part of the year, similar to what happened in 2H08. This would effectively result in a lower-than-expected annual average oil price. However, if geopolitical tensions in MENA end within the next 2-3 months and if the unrest does not spread to the big five oil producing countries in the Middle East – Saudi Arabia, UAE, Qatar, Kuwait, and Iran, oil prices should decline to their normal fundamental cost-based level of US$90-100/bbl. This would also result in an annual average oil price of US$105/bbl in 2011, in our view.

Impact on oil price volatility and levels. Oil futures price curves have fluctuated following concerns that geopolitical risks may cause supply disruptions and that Japan’s temblor-tsunami could result in lower demand for oil in the short term. While oil prices have ranged wide in the short term, long-dated oil prices have moved in a much narrower band of US$102/bbl and US$107/bbl for Brent and between US$98/bbl and US$103/bbl for WTI. In our view, these data support our thesis of higher oil prices, which is based on the cost-plus basis of higher production costs given the marginal unit of oil sand and deepwater oil production of US$85-95/bbl plus future premiums on the back of a potential tight demand-supply situation when demand for oil starts to outpace supply by 2012.

Geopolitical risk a wild card

We maintain our base-case view that the impact of supply disruptions in Libya and Algeria will be limited and are unlikely to push short-term oil prices beyond US$130/bbl. Sufficient spare capacity from OPEC and a high global inventory should be enough to make up for supply disruptions in Libya and Algeria, assuming the unrest does not spread to five key OPEC oil producers, Saudi Arabia, Iran, UAE, Qatar, and Kuwait.

Currently, the global inventory is high at 3,750m bbl, equivalent to around 43 days of global consumption. Spare OPEC capacity is also expected to be sufficient to help make up for the shortfall in supply from Libya and Algeria, assuming that the disruptions in these two countries are not permanent. However, if Libya’s and Algeria’s entire oil production is halted, OPEC’s spare capacity is likely drop close to 2mbpd, as seen in Jul 08 when oil prices hit record highs due to market concerns over insufficient supply.

But risk hinges on the big five. While we believe OPEC’s spare capacity will sufficiently cushion the impact arising from the decline in oil production in Libya and Algeria, we highlight that risks will mount if the unrest spreads to any of the big five oil producing countries – Saudi Arabia, Iran, Kuwait, UAE and Qatar. Together, these five countries account for 80% of total OPEC capacity. Historically, OPEC members have complied strictly with their oil production quotas, effectively supporting oil prices when demand is depressed. Hence, we believe if oil prices rise too fast to over US$120- 130/bbl, OPEC will act aggressively to boost the group’s oil production to prevent oil prices from getting too high and threatening demand.

With almost all spare global oil capacity coming from the Middle East’s OPEC countries, we believe the recent uprising in Bahrain, Saudi Arabia’s neighbourhood, and future developments will play a critical role in oil price movements. While Bahrain, a non-OPEC Middle East country, has oil production of only 40kbpd, 0.05% of global oil production, with limited oil reserves, its strategic location smack in the middle of the Middle East oil-producing countries, renders oil supply vulnerable and increases the risk of supply disruptions. Hence, we believe oil price premiums can only get higher on the back of unrest in the MENA countries.

Macro impact

Based on our new oil price assumptions (from US$95/bbl to US$105/bbl for 2011 and from US$100/bbl to US$110/bbl for 2012-13), we have tweaked our macro variables for 2011-12, to reflect the first-round and second-round effects through trade and income channels.

We continue to expect the global recovery to remain on course albeit with some hiccups. While sustained high oil prices due to supply disruptions would short-circuit growth, the likely damage should be manageable for this year. Emerging economies may be hit harder due to their higher usage of oil per unit of output though the oil intensity in emerging economies has been falling in recent years. Manufacturing industries have become more fuel efficient amid the development of less-energyintensive service industries. Overall, the impact of higher oil prices will be spread over two years, with the effect felt more in 2012.

On GDP, we lower our growth estimates by 0.2-0.8% pt for China, Hong Kong, Indonesia, Malaysia, Singapore and Thailand in 2011-12. If oil prices reach US$150/bbl for a sustained period of six months or more, the economic impact would almost certainly be larger. Figure 24 shows the sensitivity impact for every US$10/bbl rise in oil prices.

On inflation, upward risks remain, not only due to supply factors but also to the risk of headline inflation feeding into a wage-price spiral. For those economies that have been operating at full capacity and experiencing tight labour market conditions, both headline and core inflation have risen, and some have stayed above the central bank’s comfort zone. China’s inflation rose to 4.9% yoy in Feb, Hong Kong (3.7% in Feb), Indonesia (6.8% in Feb), Singapore (5.0% in Feb). Thailand’s and Malaysia’s inflation remain relatively low at 2.9% in Feb and 2.4% in Jan respectively. As food (19.6-36.1% of total CPI basket) and transport (9.1-26.8% of total CPI basket) are core elements in Asian household budgets, sustained price increases not only erode consumers’ real purchasing power but would also spill over to general price increases for other goods and services. We tweak our headline inflation forecasts higher by 0.2- 0.9% pt for ASEAN-4, China and Hong Kong in 2011-12, reflecting the partial passthrough of higher energy costs. We think the government will absorb part of the impact through fuel subsidies to manage the effects of high oil prices on consumers and businesses.

On interest rates, we maintain our outlook except for Thailand. We believe policymakers will strike a balance between supporting growth and managing risks to inflation.

Earnings revisions: cuts to Transportation

Jet fuel prices rise faster than Brent crude oil. On top of our hike in Brent crude oil price forecasts by US$10/bbl today, we have also raised our crack spread assumption by US$5/bbl. Consequently, our jet fuel price assumptions have been increased by 13-14% for all forecast years to average US$125/bbl in 2011, and US$130/bbl from 2012-13. This is because the refinery outages in Japan as a consequence of earthquake damage and shortage of electricity could reduce jet fuel supplies in the market. Japan produces 3-4% of the world’s jet fuel. This is expected to increase the crack spread between Singapore jet fuel and Brent crude oil. We had previously assumed a crack spread of US$15/bbl, but now raise it to US$20/bbl. Jet fuel averaged only US$90/bbl in 2010, and is now expected to average almost 40% higher at US$125/bbl in 2011. The price of jet fuel is currently US$133/bbl and averages US$119/bbl year-to-date.

AirAsia the least affected; MAS the most. The impact of the above revisions is to reduce the earnings estimates for airlines under coverage. Among the four stocks in our universe, MAS will bear the brunt of the deepest earnings cuts of 13-49% for CY11-13. This is followed by Tiger Airways with core EPS cuts of 15-28%, then SIA of 14-26% and finally AirAsia with the least cuts of only 3-12%. AirAsia and SIA are the two airlines with the lowest downward adjustments due to their strong profitability and relatively low proportion of fuel cost relative to revenue. Our EPS adjustments assume that each airline recovers 50% of the fuel price hike via higher base fares, surcharges or ancillary revenue.

Raising fares or fees. Since early December, SIA has increased its surcharges three times by 36-49% cumulative. MAS has also raised surcharges for international routes. AirAsia still does not have any fuel surcharges, but has increased the charges for certain ancillary services, while also raising base fares in February. Tiger Airways similarly does not have fuel surcharges, but it has also raised base fares and is pushing customer adoption of its ancillary products. We estimate that AirAsia can offset US$3.10/bbl of fuel price for every 1% rise in its average fare, against US$2.50/bbl for SIA, US$2.45/bbl for MAS, and US$2.30/bbl for Tiger.

We maintain OVERWEIGHT on the aviation sector as we believe the industry will benefit from still-strong global economic growth for several more years. Potential rerating catalysts include benefits to Asian airlines from robust GDP growth in the region and rising spending power. Traffic for both economy and premium class is well correlated to the business cycle and we expect continued growth in passenger numbers. In particular, while economy class traffic is 2% above its pre-recession peak, premium traffic is still 12% below, leaving plenty of room left for a continued recovery. This should help airlines improve average yields on a better passenger mix. Finally, air freight traffic and yields are expected to benefit from rising OECD composite leading indicators and purchasing managers’ indices. On balance, airlines should see continued topline expansion in 2011 though cost headwinds could affect earnings.

We have cut our earnings forecasts across our universe because we have raised our oil price assumptions, with MAS suffering the greatest core EPS cuts of 13-49%, followed by Tiger Airways of 15-28% (FY12-14), SIA of 14-26% (FY12-14), and finally AirAsia with the least cuts of 3-12%. Our target prices have been cut 3% for Tiger and 8% for MAS, while we leave our target price unchanged for SIA. We make an exception for AirAsia whose target price is raised from RM3 to RM3.40 as we now apply a higher P/E multiple of 9x instead of 7x, as a likely move by MAS to raise domestic surcharges will allow it to follow suit.

We recommend lower-risk stock picks for 2011, with SIA as our top regional airline pick followed by AirAsia. SIA provides the best mix of risk and reward as its share price of S$13.46 is at only a small premium to its S$11.70 book value per share. Its fuel price sensitivity is also the second-lowest in our universe, while dividends may surprise on the upside should its Virgin Atlantic stake be sold. SIA is expected to have net cash per share of around S$4 this financial year. Such balance sheet strength is important in an environment where high oil prices continue to pose risks. At the same time, SIA can also benefit from the continued recovery of business-class travel demand that will help it to increase its weighted-average yields. It has executed well and had never reported a full-year loss during past crises like the Asian financial crisis of 1997-98, 9/11, SARS crisis in 2003, the mega oil price surge in 2008 and the most recent great financial crisis of 2008-09. SIA has also been very responsive to the current challenges, quickly raising fuel surcharges three times in succession over the past three months and pulling one of its four daily flights to Tokyo effective yesterday due to weak demand.

Meanwhile, AirAsia has built a very robust business model at a very low unit cost that should help buffer it from unexpected fuel cost increases. If it successfully lists Thai AirAsia and Indonesia AirAsia by the end of this year, it may be able to benefit from better liquidity at its associates to speed up the repayment of intercompany balances owed to it. This could reduce net gearing to below our current expectations. AirAsia also has the lowest fuel price sensitivity in our universe.


Raising bunker price assumptions. In conjunction with the hike in our Brent crude oil price forecasts by US$10/bbl today, we increase our Singapore bunker price assumptions by a similar percentage rise, and now forecast bunker prices of US$641/tonne in 2011, and US$673/tonne for 2012-13. Bunker fuel averaged only US$475/tonne in 2010 and is now expected to average US$641/tonne in 2011, 35% higher yoy. The price of bunker fuel is currently US$664/tonne and averages US$605/tonne YTD.

The factors that determine effective pass-through. The varying impact of rising bunker on shipping companies largely depends on the contractual arrangements that have been put in place to pass on the bunker costs. Under time charter arrangements, the charterer bears the cost of fuel, not the ship owner. Under spot/voyage charter arrangements, the cost of bunker is usually added on to the base freight rate, and therefore also indirectly borne by the charterer. Under contracts of affreightment, effective bunker pass through will depend on whether there are bunker adjustment factors that are continually revised to reflect the prevailing cost of fuel.

BLTA the most affected; MISC and SITC the least. Within our tanker and container shipping universe, BLTA bears the greatest brunt of the higher oil prices because of its high operating and financial leverage, hence we have cut EPS for BLTA by 18-22% for 2011-12. CSCL is also very sensitive, as most if not all of CSCL’s contracts do not have BAF clauses and successful pass-through may be difficult under current weak spot market conditions. Meanwhile, MISC and SITC are relatively insensitive due to time-charter contracts for MISC’s LNG shipping and offshore vessels, and SITC’s logistics contributions. NOL is moderately sensitive, and we cut EPS by 6-20%. Although NOL either hedges or adopts floating BAF clauses for its contracts, the onequarter adjustment lag could still hurt in a rising oil price environment. We have cut target prices across the board except for BLTA.

We maintain NEUTRAL on the overall shipping sector, with an Overweight rating on container shipping and Underweight ratings for both tanker and dry bulk sectors.

Higher oil prices are negative for tanker and container shipping, and we have cut earnings forecasts across the board. On the other hand, the dry bulk sector is resilient to higher fuel costs. The two stocks most greatly affected by higher oil prices are BLTA (TP: Rp495), due to its low profitability, and CSCL (TP: HK$3.80) due to its lack of formal cost pass-through formula. Our top pick remains NOL (TP: S$2.45) as it has floating bunker pass-through formulas for most of its contracts, while it will also benefit from structural cost reductions over the next 2-3 years when it takes deliveries of its newbuildings.

Source/转贴/Extract/: CIMB Research
Publish date:28/03/11
Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)

乔治·索罗斯(George Soros)



高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo

There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
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