For the full Singapore Monthly for April 2018 report.
Dairy Farm partner with Robinsons Retail Holdings Inc.
Dairy Farm will partner Robinson Retail Holdings (RRHI is listed on Philippine Stock Exchange) to build a leading food retail business in the Philippines. Dairy Farm will combine its interest in wholly-owned Rustan Supercenters, Inc. with RRHI to leverage the combined strengths of both groups and create a new platform for growth in one of the most vibrant retail markets in Asia.
Comment: After completion of these transactions, Dairy Farm will hold c.18.25% of interest in Robinsons with the Gokongwei family will at 51%. Dairy Farm will have the right to nominate two directors to the Board of Robinsons. The merger will enhance Robinsons’ position as one of the top three retailers in the Philippines, as well as strengthening Dairy Farm’s presence in the fast-growing country. The other two retail giants are SM Retail Inc, and Puregold Price Club. Rustan Supercenters operated 12 hypermarkets and 61 supermarkets. Meanwhile, Robinsons Retail Holdings operated 1,718 retail stores in the Philippines, including 154 supermarkets.
Robinsons recorded PHP5bn (c.US$0.1bn) of earnings in 2017 (+12.7% to our FY18e forecast for contributions from assoc. and JVs), as compared to the insignificant contribution from Rustan in 2017. We currently maintain our BUY rating and TP of US$9.83, and will review our FY18-19 estimates in conjunction with the upcoming quarterly results from its associates.
Asia’s big developers ‘more vulnerable’ to shocks, BIS warns
Asia’s big developers are “more vulnerable” to shocks after their profitability waned from the boom years at the start of the decade, the Bank for International Settlements warned.
Comment: As BIS had highlighted, loans to property developers and construction companies are as large as the aggregate household mortgage debt in Hong Kong and Indonesia. Singapore was a close runner-up, with its real estate and constructions loans representing 60% of mortgage loans. In Singapore, while gearing remained flattish through the past few years, pre-2017 interest coverage ratios have been falling due to lacklustre sales – this will, however, improve in 2018 with the rise in transaction volumes.
Buyers snap up 70% of units launched at The Tapestry
About 315, or 70%, of the 450 units released at The Tapestry in Tampines were snapped up over the weekend. The average price per sq ft is $1,310.As part of Budget 2018, the government has raised the Buyer Stamp Duty (BSD) rate on the portion of residential property value in excess of S$1 million. The existing 1% to 3% BSD rates still apply to the portion of residential property valued at S$1 million and below.
Comment: This works out to almost 37% of the total number of available units in the project (861). One and two-bedroom units were particularly popular. At an average price of S$1,310psf, this represents a >20% premium over the median prices for the last year of adjacent projects The Santorini (99y leasehold from 2013 by MCC Land) and the Alps Residences (99y from 2015 by MCC Land). We are encouraged by the sales pace given the premium over neighbouring projects. We maintain overweight on the property developers, with an ACCUMULATE call on CDL.
Chip Eng Seng exits Tower Melbourne project
Chip Eng Seng Corporation is exiting an Australian redevelopment project named Tower Melbourne, now that it has found a buyer willing to pay A$55 million (S$56.5 million) for the site
Comment: This property was acquired by the group in September 2011 for A$25.5mn. We have not factored in contributions from Melbourne Tower previously for our RNAV owing to the uncertainties surrounding the project. Divestment gain should contribute c.S$0.05 to RNAV by our estimates. We maintain our BUY call on CES with target price of S$1.21, representing a c.23% upside from the last close.
Sembcorp Marine unit bags vessel contract
Sembcorp Marine Rigs & Floaters has secured a contract from TechnipFMC to undertake the engineering, procurement and construction of hull and living quarters for a newbuild floating production, storage and offloading vessel. It is scheduled for completion in the fourth quarter of 2020, and will be deployed at the Energean-operated Karish and Tanin deepwater field developments in the Eastern Mediterranean, about 90km offshore Israel.
Comment: The contract amount of this order was not announced. Based on the size of the FPSO (227m long and 50m wide) order, it is a bit smaller than the order of FPSO (295m long and 55m wide) from Statoil Petroleum AS secured in Dec-17 that was worth of US$490mn. This is the first contract announced in FY18, which is a positive signal and there is some momentum in the current market recovery. We also do not expect these contracts to improve profit margins materially. For FY18e, we have already assumed S$2.5bn of new orders. Maintain our REDUCE recommendation with target price of S$1.91.
Phillip On The Ground – excerpts from our various conversations
Oil and Gas
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