SPH Q2 Profit Dips 6.3% To $99.6m

Source : The Business Times, April 15, 2008

Recurring earnings surge 36% but investment income down 83.7%

SINGAPORE Press Holdings (SPH) turned in strong second-quarter recurring earnings for its media and property businesses. But a fall in investment income resulted in a 6.3 per cent dip in net profit to $99.6 million, from $106.3 million a year earlier.

Mr Chan: Recurring earnings for the current year will be satisfactory

The decline in net profit for the three months ended Feb 29 was due to an 83.7 per cent fall in investment income to $5.1 million from $31.6 million a year ago.

Stripping out investment income, profit jumped 36 per cent to $111.8 million from $82.2 million a year ago. This was backed by the strong performance of its newspaper and magazine operations and contribution from its Sky@eleven property development.

The drop in investment income was due mainly to higher profit on sale of investments last year. Also, this year's fair valuation of investments was hit by the continued volatility in global financial markets. SPH restated its Q2 2007 results to take into account the retrospective adjustments relating to investment property under FRS (Financial Reporting Standard) 40.

Q2 earnings per share dropped to six cents from seven cents.

Operating revenue for the quarter grew 18.9 per cent to $298.1 million. Revenue from core newspaper and magazine operations rose 8.4 per cent to $236.4 million, with print advertisement revenue jumping 11.3 per cent to $179.8 million.

The property segment's revenue almost doubled to $54.3 million from $27.3 million, with a $24.2 million contribution from Sky@eleven and a 10.6 per cent or $2.9 million increase in income from rental and related services from Paragon.

Total operating expenses went up by 10.8 per cent to $190 million. Property development costs for Sky@eleven amounted to $6.9 million while staff costs were up 9.7 per cent or $7.1 million, mainly due to increased headcount and annual salary increments. Headcount at end-February reached 3,814, up from 3,628 a year ago, mainly because of staffing for its new media businesses and increased operational needs for the magazine business.

Other operating expenses increased by 11.1 per cent or $4.2 million in tandem with the increase in business activity.

For the half-year ended Feb 29, 2008, net profit, including investment income, dropped 2.4 per cent from a year ago to $211.5 million. Excluding investment income, profit was up 26.9 per cent at $238.3 million.

First-half investment income was lower by 75.5 per cent or $46.3 million due largely to higher profit on sale of investments last year and this year's lower fair valuation. H1 earnings per share fell to 13 cents from 14 cents last year.

SPH declared an interim dividend of eight cents a share, up from seven cents a year ago.

Chief executive Alan Chan said that recurring earnings for the current financial year are expected to be satisfactory. 'Advertisement revenue will continue to be driven by the Singapore economy which is expected to grow at a more moderate pace in 2008. Profits from Sky@eleven will continue to provide an added boost to the group's performance.'

He said that, in view of rising business costs amid the current inflationary climate, efforts will be focused on sustaining operating profit margins.

SPH shares fell eight cents to close at $4.43 yesterday, on volume of 3.9 million shares.

Stronger Sing$ May Weigh Down Interest Rates

Source : The Business Times, April 15, 2008

Inflows may increase, but stronger currency could hurt exports

Amid the clouds of uncertainty hanging over some sectors, there is good news for home loan borrowers. Interest rates are poised to fall to levels last seen in 2003 following the move to let the Singapore dollar appreciate strongly in an effort to fight imported inflation.

The Monetary Authority of Singapore (MAS) will be busier than ever - intervening in the banking system to mop up some of the extra liquidity in order to moderate the pressure on interest rates.

Low interest rates might negate some of MAS's anti-inflationary measures by helping fuel domestic growth. But economists say MAS will stick to its guns of using the exchange rate as a tool to fight inflation given Singapore's open economy.

Last week, data showed that the economy grew a stronger than expected 7.2 per cent in the first quarter against 5.4 per cent in Q4, 2007. Inflation rose to a 26-year high of 6.6 per cent.

Analysts expect the three-month Sibor to fall to between 0.75 and 1.00 per cent by the fourth quarter of this year as capital flows are attracted here by a rising Singapore dollar.

The record low for three-month Sibor was 0.56 per cent reached in August 2003, when the US Federal Funds rate was at one per cent, said Citigroup economist Kit Wei Zheng.

Since last Thursday when the MAS decided to reset the Singapore dollar higher, the key three-month Sibor, which is the interbank interest rate, has fallen some 19 basis points to 1.25 per cent.

'Foreigners are betting the Singdollar will appreciate ... the band re-centring would reinforce the market perception that MAS wants the exchange rate to appreciate and increase investor expectations of returns on Singapore dollar assets,' said Mr Kit. This would exert downward pressure on short-term interest rates.

The Singapore dollar is now expected to rally to $1.31 by the end of the year against the US dollar. It was $1.36 yesterday.

It is not clear if MAS's move last week will ease inflation significantly given the persistently high commodity prices, record rents and higher transportation charges.

But the more immediate impact of a stronger local dollar could weaken the demand for exports and hurt the profits of foreign companies operating here, given that their costs are in local currency terms, said some economists.

'There will be a slowdown in exports, likewise for foreign companies, their profit margins will be impacted,' said Mr Kit.

United Overseas Bank's Suan Teck Kin thinks there would be a margin rise in inflows by investors to pick up some gains on the appreciating Singapore dollar, but 'overall, we might not see a wholesale rush of capital inflows'.

'This is because from a foreign investor's point of view, currency return is only one component of total return,' said Mr Suan. 'So if an investor believes there is more upside to the equity/ bond/property market and the upside is better than other parts of the region, then the capital will follow.'

Still, the market is bracing for more MAS interventions and sterilisations.

'Investors should expect the MAS to continue sterilising aggressively, so as to moderate the fall in domestic interest rates as a result of its forex interventions,' said Mr Kit.

MAS has been sterilising in unprecedented amounts.

In February, data showed that MAS sterilised or removed about US$8 billion from the banking system, the second largest amount since May 2006 when it was over US$9 billion, said Mr Kit.

This means that Singapore's reserves will continue its climb to record levels.

At the end of March, spot reserves reached S$245 billion, up S$18.8 billion from October, he said.

'Our reserves are always climbing, the same for many Asian countries,' he said.

Malaysia's UEM Land, S'pore Firms In Talks

Source : The Business Times, April 15, 2008

Malaysian state property developer UEM Land is in talks with Singapore real estate firms about joint projects in a US$105 billion industrial and tourism zone in Malaysia's south.

Malaysia unveiled a blueprint in 2006 to transform the southern tip of Johor state into a regional economic zone for industry, logistics, trade and leisure.

'We are in various stages of discussion with Singapore interests,' UEM Land managing director Wan Abdullah Wan Ibrahim told Reuters in an interview on the sidelines of a real estate event in Singapore.

He said that the involvement of Singapore firms - in particular those linked to the government - would boost investor confidence in the Iskandar Malaysia project, just a few minutes drive across the narrow causeway linking the two countries.

Singapore developers that are part-owned by state investors Temasek include CapitaLand and Keppel Land.

UEM Land is the flagship property company of the UEM Group, formerly called United Engineers Malaysia, which is in turn owned by Malaysia's state investment company Khazanah Nasional.

Under a revamp of the group announced earlier this year, UEM will list on the Malaysian stock exchange in September by taking over the listing status of UEM World, which last year reported a 4-fold rise in net profit to RM939 million (US$297 million).

Mr Wan Abdullah said UEM Land aimed to be a regional developer with projects in neighbouring countries by 2010 but its immediate priority was to develop its 9,713-ha Nusajaya development in the Iskandar region.

'There are opportunities today but the board feels we should not divert our attention...but we definitely have the desire to be a global developer.'

Malaysia announced in 2006 plans to set aside 2,200sq-km of land in Johor for a special economic zone that would provide residents and companies in neighbouring Singapore with land for leisure and industry.

Covering an area three times the size of Singapore, Iskandar has attracted Middle Eastern investors including Dubai World as well as multinational companies such as General Electric.

UEM is overseeing the development of a 9,712ha site within the development. -- REUTERS

Betting On Retail Assets

Asia's retail and hospitality sectors are expected to benefit from strong growth in intra-regional travel

DEVELOPERS are investing in the retail and hospitality sectors in Singapore and the rest of Asia in a big way, banking on an expected surge in retail spending and tourism.

Spending more: Singapore's retail sales totalled some $23.8 billion last year - 7.1 per cent higher than in 2006. This year, sales are expected to grow about 5-10 per cent and demand for retail space is expected to remain strong

Consumer spending in the region is supported by rising income levels that are translating into retail sales and the development of the shopping scene into something closer to that in the US and Europe. One clear sign of positive retail sentiment is that many international and luxury brands are expanding into major retail hubs across Asia, CB Richard Ellis (CBRE) points out.

Some of the world's biggest names, including Bulgari and Giorgio Armani, unveiled flagship stores in Tokyo in the fourth quarter of 2007 - despite Japan's overall sluggish economic recovery.

The rise in retail spending in Asia is also driven by growing intra-regional tourism, industry players say.

Asia continues to benefit from its position as the world's second-most visited region after Europe, achieving record growth in terms of hotel occupancy and average room rates in 2007.

South Asia and South-east Asia in particular enjoyed double-digit growth in revenue per available room, with South Asia seeing a 40.4 per cent increase and South-east Asia seeing 16.9 per cent growth, according to data from industry body, the Pacific Asia Travel Association (Pata).

Cushman & Wakefield (C&W) noted in a recent report: 'Inter-regional in-bound visitors are expected to continue in the medium-term, but the greatest growth will be intra-regional through the continuing expansion of road and air routes throughout Asia, including budget airlines, as well as the enhanced capacity of the new aircraft - the A380 and B787.'

Intra-Asia travel is expected to be especially strong on two routes - Hong Kong traffic into Japan is expected to grow 17 per cent from 2007 to 2009, while the number of visitors from the Chinese mainland to Singapore is expected to grow 16 per cent in the same period.

In view of all this, it is perhaps not surprising that investors and developers are forking out big bucks for retail and hospitality property such as hotels, serviced apartments and malls, as well as assets such as retail and hotel-based real estate investment trusts (Reits).

The interest in retail assets is driven by expectations of a broad-based increase in rents and capital values in Singapore, brought on by increased retail spending.

Singapore's retail sector was especially active in 2007, with retail sales totalling some $23.8 billion - 7.1 per cent higher than in 2006. This year, retail sales are expected to grow about 5-10 per cent and demand for retail space is expected to remain strong.

In a recent report, Credit Suisse said it expects retail growth here to be supported by benign economic indicators, high population growth, increasing household income, tourism growth and other 'feel-good' factors.

'This is expected to drive rentals up 5-10 per cent, translating into 10 per cent rental revenue growth for suburban malls and 20 per cent for central malls in 2008 given strong reversions,' Credit Suisse analysts Shirley Wong and Leng Chye Teo said.

The research team recently initiated coverage of three Singapore-listed retail Reits: CapitaMall Trust, Frasers Centrepoint Trust and Macquarie Meag Prime Reit, with 'outperform' calls on the first two and a 'neutral' call on the third.

CBRE said similarly that retail rents are likely to increase in 2008, albeit at a more moderate rate due to an abundance of choice for retailers as a significant amount of new space comes on stream. 'We expect both Orchard Road and suburban mall rents to increase 3-5 per cent in 2008, down from our earlier estimate of 4-7 per cent for Orchard Road and 3-6 per cent for suburban malls,' CBRE said.

However, the retail sector here will have to grapple with downside risks such as rising inflation, the trickle- down impact of the US sub-prime mortgage crisis and lacklustre global stock markets, property analysts say.

The outlook for the hospitality sector is a bit more bullish. In particular, Singapore, which enjoyed record growth in terms of both occupancy and room rates in 2007, is expected to see more corporate and meetings, incentives, conventions & exhibitions (MICE) travellers. Industry players believe this segment will continue to grow even if leisure tourism were to slow.

Hoteliers here have told BT they expect room rates to shoot up another 25-40 per cent this year, driven by the Formula One Grand Prix race and the tight supply of hotel rooms. Room rates rose 15-25 per cent in 2007.

One new trend that is expected to shake up both the retail and hospitality sectors across Asia is the arrival of gaming in a big way.

Right now, roulette wheels are spinning and jackpot machines are whirring in casinos across a dozen Asian countries, C&W noted in a report.

Investment in casinos is continuing apace in Macau - thought by many to be Asia's gambling capital - where there are currently more than 20 casino complexes. Singapore is about to open its own two integrated resorts, while Japan is moving closer to an overhaul of its strict gambling laws - which could see luxury casino complexes opening in Tokyo and on the southern island of Okinawa by 2012. Other countries reportedly considering lifting bans on casinos include Taiwan, Thailand and Indonesia.

Said C&W: 'Governments may not always be totally happy with the idea of their citizens gambling, or tourists pouring in for slot machines and blackjack, but Macau's US$7.2 billion in gaming income, US$15 billion in investment in just five years, 68.7 per cent surge in construction investment, an 80 per cent rise in property transactions, large-scale convention centre and hotel construction, thousands of new jobs and 19 per cent per annum retail sales growth are mighty powerful inducements - and most (governments) seem to think these are numbers worth betting on.'

MPCB To Build Hub For Trade In IDR

Source : The Business Times, April 15, 2008

PROPERTY developer Malaysia Pacific Corporation Berhad (MPCB) is planning a giant retail and wholesale trading hub as part of its flagship development LakeHill Resort City in Johor's Iskandar Development Region (IDR).

IDR is a special economic zone aimed at garnering both domestic and foreign investment.

Bill Ch'ng, CEO of MPCB, told BT last week that its Asia-Pacific Trade & Expo City (Aptec) would be a 'platform for greater regional collaboration, bringing about greater socio-economic benefits'.

He also said that it would create a strategic partnership between Singapore and Malaysia - one that could, among other things, tap the mass consumer market of Asia-Pacific's 800 million population.

At 4 million sq ft, Aptec aims to be the largest trade, expo and wholesale distribution centre in the region. It is projected to create over 50,000 jobs directly as well as an additional 200,000- plus jobs in supporting industries.

Costing RM1.2 billion (S$517 million) to build, Aptec is slated for completion within three years once plans for construction have been given the green light.

Besides housing a wide variety of products from India, China and the Asean countries, it will also boast an entertainment and tourism complex.

Aptec will be part of the 196 hectare LakeHill Resort City, an integrated resort town that will hold about 12,000 residential units, a shopping mall, office suites as well as a heritage and cultural village.

Taking into account the property market here, young Singaporeans may want to look across the Causeway for more affordable properties, suggested Mr Ch'ng, especially with the recent relaxing of certain Malaysian laws such as long-stay visas.

To be developed at a cost of some RM3 billion, LakeHill Resort City is expected to generate an estimated gross development value of RM6.3 billion over 8-10 years.

This Year's Hot Real Estate Destinations In India

Source : The Business Times, April 15, 2008

For investment, emerging localities are preferable to established and often saturated ones any time

IN Indian real estate today, the only constant is change. Hot destinations of the last year are not assuredly the best options this year, and the next year brings its unique set of emerging investment destinations with it.

The reason for this state of flux is that the real estate boom is causing many of the country's metros and even some of the previously popular Tier II towns to saturate at an incredible pace.

Property prices there skyrocket beyond the reach of middle-income home buyers, causing them to look a little further afield each year. Investors observe these migration trends, analyse the magnitude and scope of activity, and identify one or the other new town as the next destination.

Information technology (IT) companies, which are now the primary drivers in the Indian real estate market, are not dependent on central business locations.

The crux of the whole outsourcing boom is that it makes more sense for foreign-based companies to offload back-office functions and even research processes to India than to undertake these in their home countries.

However, what would necessarily be a CBD-based business function in, say, the US, can be a non-CBD-dependent function in India.

After all, both the sellers and final buyers of IT-based products and services are based abroad anyway. This means that IT/ITES (information technology enabled services) companies can operate from anywhere in India, as long as there is access to skilled manpower and necessary resources.

The fact that such companies can benefit from the advantage of cheaper real estate prices in smaller towns has led to the Tier II/III city boom. IT/ITES companies catalyse every other sector of real estate wherever they go, so the retail, residential and infrastructure sectors soon start perking up in those localities.

A fundamental real estate investment mantra is that emerging localities are preferable to established and often saturated ones. Established areas eventually reach a peak in terms of appreciation potential, after which the growth rate either slows down or stagnates.

Moreover, there is little scope for new market drivers such as malls to find a place in saturated localities - meanwhile, prices remain high.

This is not the best of scenarios from an investment point of view, since optimal investment requires low entry levels and appreciable growth within a realistic time-frame. Therefore, as one or the other destination reaches its peak potential on all these counts, new ones come into the limelight.

It follows that in 2008, we will be looking at an entirely new set of hotspots in the Indian real estate market.

A few of these are given below, along with some vital statistics and the basic reasons for their emerging high profiles on the Indian property landscape.

Vizag - Andhra Pradesh

Vizag's growth drivers are availability of land at cheaper cost vis-à-vis Hyderabad, relatively lower cost of skilled manpower (as well as lower attrition rates), improving infrastructure, and considerable demand. The market also has less competition and project costs are lower, leading to increased margins.

Meanwhile, overall purchasing power in Vizag is high. The upcoming commercial and retail destinations in Vizag are Dwarakanagar, Seethamadhara, Gajuwaka, Rushikonda, Anakapalli, Bheemili and Paarwada.

For residential investment, the best areas now are Madhurawada, Pendurthy, Parawada, Bheemunipatnam and the areas towards the Anakapalli Corridor.

Property rates:

# Seethammadhara (1,400-3,000 rupees per square foot)

# Murali Nagar (1,400-2,200 rupees psf)

# Beach Road, MVP colony (2,800- 3,500 rupees psf)

# Siripuram (2,500-3,200 rupees psf)

# Parwada (1,200-2,000 rupees psf)

Vadodara - Gujarat

Vadodara definitely ranks high among the emerging investment destinations.

The prime residential areas are Alkapuri, Race Course Road, Old Padra Road, Jetalpur, Akota and Fatehganj.

Property rates:

# Old Padra Rd (1,200-1,500 rupees psf)

# Alkapuri (1,900-2,300 rupees psf)

# Race Course Road (1,500-1,800 rupees psf)

# Fatehganj (1,300-1,700 rupees psf)

Dehradun - Uttrakhand

Dehradun is seeing a gradual but definite boom associated with the rise of malls in the region. Land rates are rising and there is considerable infrastructure development. Another driver is the growth of the IT sector in the region.

The State Industrial Development Corporation of Uttaranchal is setting up a high-tech software park on more than 1,000 hectares of land in Dehradun. Chatrata Road, Mussoorie Bypass and Sahastradhara Road are the best locations for small to medium-sized investments.

Here, investors can expect between 10 and 12 per cent appreciation over the next three years.

Indore - Madhya Pradesh

Indore's real estate star is on the rise, and offers good investment opportunities in projects with low entry cost that are located in an area with good appreciation potential.

Property rates:

# Vijay Nagar (3,000-10,000 rupees psf)

# Bypass, AB Road (3,000-10,000 rupees psf)

# Rau (600-1,200 rupees psf)

# Gulmohur Colony (3,500-6,500 rupees psf)

# Green Park Colony (800-3,500 rupees psf)

Nashik - Maharashtra

Nashik is displaying an increasingly buoyant industrial scenario, with considerable growth expected in the IT/ITES industry.

Overall infrastructure and connectivity to Mumbai and other regional towns is improving rapidly, lending increased credibility to Nashik's real estate market. It is the vertex of the Pune-Mumbai-Nashik Urban Golden Triangle.

The upcoming suburbs of Anandwalli (Gangapur Road), Indiranagar, Untwadi, Aadgaon (off Mumbai-Agra Road) and along Pathardi Link Road bear watching.

Property rates:

# Gangapur Road (1,200-1,900 rupees psf)

# Mumbai Agra Road (800-1,600 rupees psf)

# Agra Road (600-1,000 rupees psf)

Guwahati - Assam

The capital city of Assam has witnessed a population growth of over 40 per cent over the last 10 years. This extensive population growth has been responsible for a quiet revolution in Guwahati's real estate market.

There is an upsurge in the retail sector, and outskirt locations such as Khanapara, Zoo-Narengi Road, Basistha and Beltola are emerging as the new residential destinations.

Current rates are between 1,800 and 2,500 rupees psf. The upcoming Games Village at Sarusajai will add a new flavour to the residential market along NH-37.

Chandigarh - Union Territory

Though there has been a lot of speculation in Punjab's real estate market, this joint capital of Punjab and Haryana states is among the emerging cities that are seeing very encouraging real estate trends.

Chandigarh is India's first planned city, and it conforms perfectly to the key parameters by which we judge a city's growth - property market, people, physical infrastructure, social infrastructure, and business environment.

Chandigarh scores high on these counts, especially in terms of the potential of its property market. Its boom derives from the rapid development taking place on its outskirts.

Some of these areas are:

# Panchkula (2,500-3,000 rupees psf)

# Mohali (1,500-2,500 rupees psf)

# Dera Bassi (1,300-2,000 rupees psf); and

# Zirakpur (2,700-3,200 rupees psf).

The writer is chairman and country head, Jones Lang LaSalle Meghraj

F&N Gets Boost From Buy Calls

Source　：The Business Times, April 14, 2008

SHARES of Fraser & Neave have received a boost after two 'buy' recommendations from Kim Eng Research and DBS Vickers.

Its shares surged 18 cents or 3.8 per cent on Friday to close at $4.87.

Kim Eng initiated coverage of F&N with a $6 target price in a report on Thursday, saying: 'The market is not fully recognising the value of F&N's property division.'

The 'buy' call aside, Kim Eng had much to say about how F&N could improve its operations. Its report suggested that the conglomerate do more to reconnect with its food and beverage brands, because it is 'not fully enhancing shareholder value by continuing to focus so heavily on property'.

The report also noted that with former SingTel CEO Lee Hsien Yang's having come on board as F&N's chairman, and with Temasek Holdings' involvement as a substantial shareholder, 'there will never be a better time than now to shake things up by more than a bit'.

Kim Eng proposed two strategies for F&N. One is to sell its property assets to a player 'who knows the real value of its property assets and capabilities'. Possible buyers are said by Kim Eng to be CapitaLand, which shares the same asset profile and strategy with F&N, and Far East Organization, Singapore's largest private residential developer.

When contacted, a CapitaLand spokesperson said: 'CapitaLand is not considering buying F&N's property arm.' Far East Organization was unable to provide a response.

According to Kim Eng, the other strategy is for F&N to break up and list each of its units separately, The report said: 'It is not clear which business the market is giving a premium to and which is being discounted.'

The second shot in the arm for F&N's shares came from DBS Vickers, which set a target price of $5.85. Among other things, its Thursday report said F&N's management is confident of preserving strong margins for property development and expects to maintain profit-growth plans for the food and beverage business.

Despite the rise in F&N's share price on Friday, when 1.4 million shares changed hands, the stock is still some distance away from its $5.80 high since the start of the year.

More Than $8b Of Govt Tenders Up For Grabs

Source : The Straits Times, Apr 15, 2008

THE Government will tender out more than $8 billion worth of projects over the next 12 months - more than double last year's budget and the largest amount in recent years.

The lion's share - about $5.8 billion - will be used for building and construction works, the Ministry of Finance (MOF) said yesterday. The rest will be earmarked for buying goods and services and information technology.

This is the most the Government has spent since it started releasing its yearly pre-procurement plans in 2003. These plans, which outline upcoming tenders worth $200,000 and above between April each year and the following March, aim to give potential suppliers early information, so they can make preparations for the tenders.

The $5.8 billion allocated for building and construction already excludes projects put off to ease pressure on resources in the hectic building industry. In total, the deferred projects amount to $3 billion.

Major building works over the next year include those on the Gardens at the Bay in Marina Bay, runway works at Seletar Airport, the Prisons headquarters and several flat-construction programmes.

The Defence Science and Technology Agency is also planning construction at the Pasir Ris Camp, Mandai Camp 2 and Sungei Gedong Camp.

To improve traffic, there will also be large-scale road works implemented, including a new road network at the Jurong Regional Centre.

The Seletar Expressway will be widened from Woodlands Avenue 2 to Upper Thomson Road. The Central Expressway (CTE) will also be widened between its junction with the Pan Island Expressway and Yio Chu Kang Road, and a new major road will link the CTE with Yishun Avenue 7. The Tampines Expressway will get a new interchange and a road connection to Seletar Aerospace Park.

Meanwhile, another $1.2 billion will go towards procuring goods and services, such as equipment and utilities.

Of this, $90 million has been set aside for electricity for the Civil Aviation Authority of Singapore, Land Transport Authority, and the Maritime and Port Authority of Singapore.

The police force will also spend more than $10 million leasing 2000cc Volvo saloon cars for a three-year period.

Tenders for information technology projects are also expected to be worth at least another $1 billion, the MOF said.

Details on these projects will be announced next month during the Infocomm Development Authority's annual industry briefing.

Some major tenders in this sector will include those for the new ultra-fast broadband network likely to be kicked off this month. More than $30 million will also be spent on a new human resource system for the civil service.

The list of tenders is on the Government e-Business website at www.gebiz.gov.sg.

S'pore Inflation To Stay Near 26-Year High

Source : The Business Times, April 15, 2008

SINGAPORE'S inflation will run at its highest levels in nearly three decades in the first half of the year, Trade Minister Lim Hng Kiang said on Tuesday, even after the central bank tightened monetary policy last week.

The government's official forecast is for full-year inflation at the upper end of a 4.5-5.5 per cent range

The annual rate of inflation climbed to 6.6 per cent in January, the highest level since 1982, and the minister said it would hold at similar levels until June.

'Our projection is that inflation will stay fairly high at this current level, above 6.5 per cent for the first half of the year. And then we expect it to go down in the second half of the year,' Mr Lim told reporters on the sidelines of a conference.

Analysts said price pressures from rising food and raw material prices are threatening the government's forecast of keeping inflation for the year as a whole in a range of 4.5 per cent to 5.5 per cent.

Reflecting the inflation threat, Singapore's central bank last week tightened monetary policy by allowing a rise in the Singapore dollar, its main policy tool. It reviews policy again in October.

'Inflation will come in more than 5.5 per cent for the year but it will peak in the first half. It reflects resilient domestic demand and commodity prices,' said Mr Robert Prior-Wandesforde, an economist at HSBC.

'The central bank may not necessarily revert to a more neutral stance in October because the economy is performing well,' he said.

The Monetary Authority of Singapore (MAS) conducts policy by steering the Singapore dollar within a secret trade-weighted band against a basket of currencies, unlike most central banks which use interest rates as their main policy tool.

Last week, the MAS said it had raised the central point of the trading band, prompting the currency to hit a record high against the US dollar.

Economists said the policy move could backfire. They argue that a rising Singapore dollar will encourage capital inflows, putting more cash into the local market. That could push interest rates down and stoke inflation further.

'Overall, I think we have a wide array of levers to address the inflation problem,' Mr Lim said. 'The exchange rate, that's our main lever. At the same time we also tackle supply constraints, whether it is office space, commercial space, industrial space, or wages through our flexibility in our labour markets.'

Economists said unexpectedly strong first-quarter growth, running at an annualised seasonally adjusted rate of 16.9 per cent, had calmed fears the weakness of the US economy would drag on the Singapore economy, giving the central bank room to tighten policy.

Mr Lim predicted annual growth would come in closer to the country's medium-term trend rate of 4-6 per cent, which is also the government's growth forecast for this year.

He suggested that Singapore's trade, which is largely dependent on Europe and the US, was doing well in tough times.

'Specifically, we have faced headwinds in the electronics sector - not because the volume has not gone up, in fact the volume has gone up - but the prices have come down so the value of the trade has also come down,' Mr Lim said.

Singapore will release March trade data on Thursday. - REUTERS

S'pore Inflation To Stay Above 6.5% For First 6 Months: Minister

Source : The Straits Times, Apr 15, 2008

SINGAPORE'S inflation will run at its highest levels in nearly three decades in the first half of the year, Trade Minister Lim Hng Kiang said on Tuesday, even after the central bank tightened monetary policy last week.

The annual rate of inflation climbed to 6.6 per cent in January, the highest level since 1982, and the minister said it would hold at similar levels until June.

'Our projection is that inflation will stay fairly high at this current level, above 6.5 per cent for the first half of the year. And then we expect it to go down in the second half of the year,' Mr Lim told reporters on the sidelines of a conference.

Analysts said price pressures from rising food and raw material prices are threatening the government's forecast of keeping inflation for the year as a whole in a range of 4.5 per cent to 5.5 per cent.

Reflecting the inflation threat, Singapore's central bank last week tightened monetary policy by allowing a rise in the Singapore dollar, its main policy tool. It reviews policy again in October.

'Inflation will come in more than 5.5 per cent for the year but it will peak in the first half. It reflects resilient domestic demand and commodity prices,' said Mr Robert Prior-Wandesforde, an economist at HSBC.

'The central bank may not necessarily revert to a more neutral stance in October because the economy is performing well,' he said.

The Monetary Authority of Singapore (MAS) conducts policy by steering the Singapore dollar within a secret trade-weighted band against a basket of currencies, unlike most central banks which use interest rates as their main policy tool.

Last week, the MAS said it had raised the central point of the trading band, prompting the currency to hit a record high against the US dollar.

Economists said the policy move could backfire. They argue that a rising Singapore dollar will encourage capital inflows, putting more cash into the local market. That could push interest rates down and stoke inflation further.

'Overall, I think we have a wide array of levers to address the inflation problem,' Mr Lim said. 'The exchange rate, that's our main lever. At the same time we also tackle supply constraints, whether it is office space, commercial space, industrial space, or wages through our flexibility in our labour markets.'

Economists said unexpectedly strong first-quarter growth, running at an annualised seasonally adjusted rate of 16.9 per cent, had calmed fears the weakness of the US economy would drag on the Singapore economy, giving the central bank room to tighten policy.

Mr Lim predicted annual growth would come in closer to the country's medium-term trend rate of 4-6 per cent, which is also the government's growth forecast for this year.

He suggested that Singapore's trade, which is largely dependent on Europe and the US, was doing well in tough times.

'Specifically, we have faced headwinds in the electronics sector - not because the volume has not gone up, in fact the volume has gone up - but the prices have come down so the value of the trade has also come down,' Mr Lim said.

Singapore will release March trade data on Thursday. -- REUTERS

Govt Tenders In FY 2008 Projected To Exceed $8b

Source : Channel NewsAsia, 14 Apr 2008

The Finance Ministry has announced that the government will be calling S$8 billion worth of tenders this financial year.

The bulk of it or S$5.8 billion will go to building and construction projects which are proceeding as planned.

Artist impression of part of Gardens at Marina South

Projects that improve the flow of traffic at the central expressway (CTE) and those that go into the making of Gardens by the Bay are just some of the projects which tenders are being called for, according to the Finance Ministry statement.

Song Seng Wun, CEO & Regional Economist, CIMB-GK Research, said: "We have got probably this year around S$27 billion worth of contracts in the construction sector to be awarded, with the government accounting for about a quarter of that.

“At the end of the day, it will still be seen as to accommodating what the overall industry needs itself. Essentially, we see government spending on areas they need to spend rather than all things and sunder because everything has cost a lot more this year."

And costing the government S$1.2 billion are goods and services, including those that operate the automated toll system at the checkpoints.

Much attention is given to developing Info-Comm and Technology (ICT).

The Ministry said ICT projects are expected to be worth at least an additional S$1 billion.

More details of these will be revealed at an industry briefing by the Infocomm Development Authority (IDA) in May.

Also expected to remain strong this year is Singapore's job market. As a result, economists said the pressure on wages in Singapore will continue to remain high.

Mr Song added: "We talk about very strong demand for labour within the construction sector itself as many countries are embarking on many big projects. Within the services side we see a lot of domestic activities driven by a robust demand for leisure and hospitality and creative industry.

“We don't know when the effect of the slowdown of the external economy will affect the job market but certainly for this year, most sectors will see fairly strong demand for labour. Hence, wages are still facing upward pressure."

That's why economists believe there are still jobs being created in Singapore despite widespread fears of a US recession. - CNA/vm

Singapore Press Holding Profit Down 6.3% on-year

Source : Channel NewsAsia, 14 April 2008

Singapore Press Holdings Ltd. on Monday reported a 6.3 percent drop in second-quarter net profit after a further decline in investment income.

Net profit for the three months ended February 29 was S$99.6 million (US$73.3 million) compared with a restated S$106.3 million a year earlier, the company said.

Group investment income of S$5.1 million was 83.7 percent lower than the S$31.6 million recorded in the second quarter of 2007, mainly due to higher profit on sale of investments last year, it said.

"In addition, this year's fair valuation of investments was impacted by the continued volatility in global financial markets," SPH added.

The comparative financial statements from last year were restated to include a different way of accounting for leased-out properties, it said.

Profit before investment income jumped 36.0 percent to S$111.8 million from S$82.2 million a year ago, boosted by a "sterling performance" from core newspaper and magazine operations as well as the contribution from the "Skyeleven" condominium development, SPH said.

Newspaper and magazine revenue rose 8.4 percent to S$236.4 million while property revenue jumped 99.4 percent to S$54.3 million, it said.

The 14 Singapore newspapers published by the firm in four languages include the English-language The Straits Times.

SPH owns and manages Paragon, a retail and office complex in the prime Orchard Road area.

Alan Chan, the company's chief executive officer, reiterated comments made last quarter that advertisement revenue will continue to be driven by the Singapore economy which is expected to grow at a more moderate pace this year.

"In view of rising business costs amid the current inflationary climate, efforts will be focused on sustaining operating profit margins," he said. - AFP/ac

World Faces First Financial Crisis Of Globalisation Era: Brown

Source : The Straits Times, Apr 15, 2008

LONDON - BRITISH leader Gordon Brown wants quick action to tackle higher food prices, saying the world faces the first financial crisis of the new era of globalisation, according to an advance copy of a speech.


















Mr Brown said the international community should urgently examine the impact of biofuels on the cost of food and wants international aid for some food importing countries.

'People will probably look back to say this is the first financial crisis of this new era of globalisation,' Mr Brown will tell a group of invited guests at Goldman Sachs on Tuesday, according to the prepared text.

He will say the global financial system had fallen victim to the 'under-pricing and under-reporting of risk' and 'inadequate credit rating services.'

The prime minister also blames inflationary pressures from global commodity prices, explaining that oil, coal and gas prices were up 60 per cent and that wheat and rice prices had doubled.

Mr Brown says he wants to boost agricultural production in developing countries through a 'trade for aid' package and to evaluate the consequences of the increasing use of biofuels, which many economists blame for helping jack up food prices worldwide. -- AP

S'pore Sees H1 Inflation Above 6.5%

Source : The Straits Times, Apr 15, 2008

SINGAPORE'S inflation will remain high in the first half of the year at above 6.5 per cent, the country's trade minister said on Tuesday, despite the central bank tightening monetary policy last week to fight rising prices.

'Our projection is that inflation will stay fairly high at this current level, above 6.5 per cent for the first half of the year. And then we expect it to go down in the second half of the year,' Trade Minister Lim Hng Kiang told reporters on the sidelines of a conference.

The government's official forecast is for full-year inflation at the upper end of a 4.5-5.5 per cent range, after annual inflation climbed to 6.6 per cent in January, the highest since 1982.

The comments came after Singapore's central bank last week tightened monetary policy to fight soaring prices by allowing its currency to rise.

Mr Lim said that monetary policy was one of several levers, such as fiscal policies, to tackle rising prices.

The country's export-dependent economy, whose performance is seen by economists as a barometer of demand for Asian goods, expanded at an annualised, seasonally adjusted rate of 16.9 per cent in the first quarter - far stronger than expected. -- REUTERS

Slew Of Events To Add Buzz To F1

Source : The Straits Times, Apr 15, 2008

A DIZZYING array of events will ride shotgun with the Singapore Grand Prix when it motors into town in September.

Tourism officials and the private sector have lined up everything from jazz concerts to float parades to capitalise on the influx of visitors expected for the Formula One weekend, which runs from Sept 26 to 28.

To date, eight events have been arranged under the banner of the Singapore Grand Prix Season, which takes place from Sept 20 to Oct 5.

More events are expected to be announced, and the season will be promoted through advertising campaigns in regional markets such as Australia, China and India, said the Singapore Tourism Board (STB).

Ms Lynette Pang, director of cluster development (events and entertainment) for STB, said planning for the event started last year.

'By encouraging the private sector to organise or coincide their events with the season, we hope not only to up the buzz in Singapore's events and entertainment calendar... but also to give stakeholders a greater sense of participation in Singapore's first F1 race,' she told The Straits Times via e-mail.

Mr Adrian Hobbs, chief executive of events company One Lifestyle Group, is bringing in jazz singer Diana Krall for a concert at the Marina at Keppel Bay - one of the key events of the season.

The company will also be sailing in a luxury yacht to host private parties for clients at the same venue.

It hopes to launch a jazz festival during next year's F1season.

'I envisage a clamour for luxury events during the Singapore Grand Prix,' said MrHobbs.

'By next year, there should be an even bigger smorgasbord of activities.'

__________________________________________________
Tantalising line-up

Singapore River Festival, Sept 19 to 28

Expect concerts, outdoor parties and a float parade that will pass nightspots such as Ministry of Sound and Zouk.

# Amber Lounge party at Conrad Centennial Singapore, Sept 27 and 28

An all-night fiesta for F1 drivers, sponsors and other glitterati.

# Formula One - The Great Design Race at the National Museum of Singapore, Aug 25 to Oct 2

Check out designs of F1 cars over the past 50years and other engineering marvels from London's Design Museum.

# The Hefner Collection at the National Museum of Singapore, Sept 1 to 28

American businessman Robert Hefner's collection of 70 pieces by modern Chinese artists will make its Asian debut.

# Singapore Biennale at City Hall, the former Non-Commissioned Officers' Club Building in Beach Road and Marina Bay, Sept 11 to Nov 16

This showcase of contemporary art returns for its sophomore instalment, and will feature a new Boutique Show segment for international gallery owners and collectors.

# Bvlgari Watch Exhibition at Paragon, Sept 18 to 28

More than 100 timepieces from the European jeweller will be on show, including limited editions created just for this event.

# Diana Krall Live In Concert at the Marina at Keppel Bay, Sept 26

The best-selling Canadian chanteuse will be the first performer to hold a concert at the open-air venue.

# The Singapore Motorshow 2008 at Suntec, Sept 26 to Oct 5

This biennial event returns with cutting-edge cars and other related bells and whistles.

Prices Of Homes Drop Worldwide

Source : The Straits Times, April 15, 2008

As effects of US housing slump spread...

Global slowdown could become wholesale collapse, warn analysts

DUBLIN - THE collapse of the housing bubble in the US is mutating into a global phenomenon, with real estate prices swooning from the Irish countryside and the Spanish coast to Baltic seaports and even parts of northern India.

This synchronised global slowdown, which has become increasingly stark in recent months, is hobbling economic growth worldwide, affecting not just homes but jobs as well.

GOING DOWN: Average house prices in Britain dropped by 2.5 per cent in March, the biggest monthly decline since 1992. -- PHOTO: REUTERS

In Ireland, Spain, Britain and elsewhere, housing markets that soared over the past decade are falling back to earth.

Property analysts predict that some countries will face an even more wrenching adjustment than the United States, including the possibility that the downturn could become a wholesale collapse.

To some extent, the world's problems are a result of American contagion.

As home financing and credit tightens in response to the crisis that began in the sub-prime mortgage market, analysts worry that other countries could suffer the mortgage defaults and foreclosures that have afflicted California, Florida and other American states.

Citing the reverberations of the US housing bust and credit squeeze, the International Monetary Fund last Wednesday cut its forecast for global economic growth this year and warned that the malaise could extend into next year.

'The problems in the US are being transmitted to Europe,' said Mr Michael Ball, professor of urban and property economics at the University of Reading in Britain who studies housing prices.

'What is happening now is an awful lot more grief than we expected,' he said.

For countries like Ireland, where prices were even more inflated than in the US, it has been a painful education as home owners learn the American vocabulary of misery.

'We know we are already in negative equity,' said Ms Emma Linnane, a 31-year-old university administrator.

She bought a cosy one-bedroom apartment in the Dublin suburbs with her fiance, Mr Paul Colgan, in May 2006 at the peak of the market.

They paid US$575,000 (S$780,000) - at least US$100,000 more than it would fetch today. 'I sometimes get shivers thinking about it,' Ms Linnane said. 'But I will let the reality hit me when I go to sell it.'

That reality is spreading.

Once-sizzling housing markets in eastern Europe and the Baltic states are cooling rapidly as nervous western Europeans stop buying investment properties in Warsaw, Tallinn, Estonia and other real estate Klondikes.

Further east, in India and southern China, prices are no longer surging.

With stock markets down sharply after reaching heady levels, people do not have as much cash to buy property.

With low interest rates helping to inflate housing bubbles in many countries, economists said the confluence of falling prices was predictable, if unsettling.

This is not the first housing downturn to cross borders, but its reverberations have been amplified by the integration of financial markets.

When faulty American mortgages end up on the books of European banks, the problems of the US aggravate the world's problems.

Consider Britain, which had one of Europe's most robust housing markets, with less of an oversupply than in Ireland or Spain. Then last summer came the sub-prime crisis across the Atlantic.

Within two months, mortgage approvals dropped 31 per cent, compared with the previous year. And in March, average housing prices had fallen 2.5 per cent, the largest monthly decline since 1992.

'The boom in house prices was actually much bigger here than in the US,' said Mr Kelvin Davidson, an economist at Capital Economics in London.

'If anything, people should be more worried than in the US.'- NEW YORK TIMES


Hard-hit countries

# Britain: Halifax, a mortgage lender, said recently that March house prices had dropped 2.5 per cent, the sharpest fall in nearly 16 years.

# Spain: The nation is one of the hardest hit in Europe. Prices have tumbled 8.8 per cent in a year.

# India: In New Delhi and other parts of northern India, prices have fallen 20 per cent over the past year.

# Australia: New housing loans have suffered their biggest drop in four years, recent data shows.

Some Upside In Failed En Bloc Deals

Source : The Business Times, April 15, 2008

LOOKING for a silver lining when nothing looms but storm clouds may seem a futile exercise.

But recent events surrounding the failed collective sales of Tulip Garden and Makeway View to Bravo Building Construction may just be a ray of hope in an increasingly gloomy property market.

To be sure, when Bravo decided it could no longer proceed with the collective-sale deals, some considered it yet another in a series of ominous events signalling the end of 'irrational exuberance' in the property market here.

Another was the pullout of Kuwait Finance House from a deal to buy 97 units at Goodwood Residence.

But putting a positive spin on the failed deals, Bravo has actually helped the market by withdrawing almost 400 potential units from future supply. If the Bravo deal to acquire another en bloc site (Pender Court) falls through, the number of potential units removed from future supply could be closer to 500.

This may be less than 3 per cent of the 17,800 new units CB Richard Ellis estimates could be launched this year, but if more developers were to follow Bravo's move, enough potential units could be removed from the future market to mitigate a more serious oversupply situation - especially in the light of drastically falling sales; only 185 new private homes were sold in February.

Emergency exit

Any developer considering the emergency exit that Bravo took will have to ask itself - as Bravo probably did - whether it has the holding power to build and hang on to units until it is profitable to sell them.

Perhaps the pivotal number to emerge in the failed Tulip Garden deal is the $25.8 million figure representing the 5 per cent deposit on the $516 million transaction that Bravo will now forfeit.

While $25.8 million is no small sum to lose, it is probably less than what Bravo could have lost had it proceeded.

Based on a loan quantum of 60-70 per cent of the land price, the loan for the Tulip Garden project would have amounted to $310-$360 million.

While it is not unusual for a bank to extend loans to preferred developers at interest rates close to Sibor, an interest rate of 5 per cent per annum would have been more likely, considering the times. In which case the cost of the loan could have been between $15.5 million and $18 million for the first year alone. This, also allowing that banks still feel comfortable extending loans of over 50 per cent.

Another loan the developer would have had to take would have been for construction costs. And based on a cost of $400 psf, this would have amounted to about $200 million for the Tulip Garden project. The quantum a bank will lend a developer varies. Assuming Bravo were to have taken a 50 per cent loan, the cost of this would have been around $5 million for the first year based on a 5 per cent interest rate.

Bravo's interest payments for the first year could have totalled $20.5-$23 million.

Developers do not generally borrow more because they expect progress payments from the initial sale of units, which go into a project account, to cover some of the costs.

But falling sales volumes would have made it difficult for Bravo to depend on the project account to finance construction.

Lower selling prices would have been a concern too.

Breaking even

When the market was at its most bullish last year, Bravo had hoped to launch the new development on the Tulip Garden site at around $2,000 psf.

However, the US sub-prime crisis has taken its toll on the market, with neighbouring developments Duet and The Cornwall peaking at around $1,500 and $1,700 psf respectively last October.

It was estimated earlier that Bravo would have to sell all the new units at Tulip Garden for at least $1,500 psf just to break even.

Developers who are likely to be swayed by this line of reasoning to reconsider developing en bloc sites are more likely to be the smaller, newer players in the field.

Based on available data, an estimate by Savills Singapore puts the number of new units from en bloc sites bought by construction companies in 2007 at more than 800, excluding Tulip Garden and Makeway View.

If some of these potential units were to be removed from the future market, supply pressure would be eased.

It would, of course, be much simpler if the potential units from a large en bloc site like Gillman Heights or Tampines Court were removed from the market.

But this is unlikely as it has become almost a mantra that big developers have holding power, even if they are losing money at the same time.

Crossroads For Real Estate Investment Opportunities

Source : The Business Times, April 15, 2008

Cityscape Asia is drawing a great deal of interest from major western developers

THE global real estate sector is going through big changes and this could not be more apparent at this year's Cityscape Asia 2008.

While Cityscape Asia is an Asia-focused real estate exhibition and conference, several major western developers are offering developments to Asian investors seeking to take advantage of favourable exchange rates to buy US real estate.

And MGM Mirage's CityCenter being developed on the Las Vegas strip will be difficult to miss.

Costing over US$7.8 billion, CityCenter is a mega hotel, casino and condo development. It is the largest privately financed development in the US and is now on show in Asia too.

Rohan Marwaha, managing director of Cityscape, said: 'Two months ago, we found that many real estate players were watching global events unfold with a sense of unreality. Now they are already moving on with their plans and actively looking at the new opportunities to emerge since the upheaval, with deal-making strongly back in the frame.'

The importance of identifying the latest trends in real estate, architecture, urban planning and design from around the world is underscored by the state of flux in many property markets today.

Kwek Leng Beng, executive chairman of Singapore-based City Developments Ltd, which is exhibiting as part of the Green Pavilion at Cityscape Asia 2008, said: 'Today, the mood is not one of panic, unlike the Asian financial crisis of 1997.

'We are not in recession today, but rather we are the victims of our own success. Because we did not anticipate that our economy would be firing on all cylinders, we have a shortage of almost every type of property today.'

Dubai International Capital's announcement that it intends to invest US$5 billion in Asia over the next three to four years gives clear indication of where the action would be in the future.

Emerging markets

Cityscape Asia 2008 exhibitions director Theresa Gan expects interest to focus on emerging regional markets such as Malaysia, Indonesia and Vietnam.

'There will be a thorough debate of 'where to next' for the mature but still dynamic Singapore market where the Urban Redevelopment Authority and the Building and Construction Authority will spearhead a strong government sector contingent educating the market,' Ms Gan said.

Real estate consultancy CB Richard Ellis recently reported strong demand in all sectors of the Vietnam real estate market and estimates that around US$5 billion - much of it from foreign direct investment - was invested in Vietnam property in 2007.

Graham Wood, Cityscape Asia exhibition director and organiser, added that Middle Eastern investors will continue to make their presence felt, both in offering major Middle Eastern developments to Asian investors, and investing their own capital to increase their own portfolios across Asia in 2008.

'This year's Cityscape Asia will effectively provide a crossroads for these inter-regional investment trends to play out.'

Over three days, Cityscape Asia will give an insight into both the emerging and mature property markets in Asia by being the only international property event in Asia to combine a conference and exhibition that maximises both learning and networking opportunities with more than 6,000 international and regional real estate professionals.

It will feature more than 50 speakers including CEOs, managing directors and government officials, and will examine the opportunities in Asia including real estate investment trusts, derivatives and even an Asian investment property databank.

Leaders in their fields will also deliver presentations on clusters and hubs for financial institutions, and investment opportunities in airport cities.

Closer to home, the impact of integrated resorts on the Singapore market will be examined.

Building on the success of the inaugural Cityscape Asia 2007 that saw more than 100 exhibitors from 35 countries sell out 6,000 square metres of exhibition space, Cityscape Asia is a showcase of opportunities and iconic architecture from Malaysia, Thailand, Indonesia, Vietnam, Singapore, Japan and the surrounding Pacific region.

But this year, the notion of 'the sustainable city' is set to be a key theme for discourse.

Going green

Apart from the Green Pavilion, Cityscape Asia will host the World Architecture Congress where techniques to reduce the ecological footprint of modern buildings and cities in Asia will be introduced.

In addition to this, there is a Building Green Seminar where key exhibitors will share their vision of a sustainable future.

Mr Wood highlighted that a recent Jones Lang LaSalle survey of 414 companies revealed that 12 per cent in Asia said that they were willing to pay premiums of over 10 per cent for 'sustainable' buildings, compared to just 3 per cent in North America and Europe.

'Asian countries, led by Japan, Singapore, Hong Kong and India, are introducing green building ratings along the lines of systems operating in Britain and the United States and the concept is catching on,' added Mr Wood.

Record $8b Worth Of Govt Tenders Up For Grabs

Source : The Business Times, April 15, 2008

Lion's share goes to building projects but boom could add to cost pressure

It may have pushed back building projects worth $3 billion to ease the crunch, but the government is still calling for tenders to the tune of a record $5.8 billion in the construction sector this fiscal year.













In all, its tenders for FY2008 will touch $8 billion - surpassing the previous record set in FY2006 when it called for some $7.5 billion worth of tenders.

The bulk, this year, will be splashed out on building and construction projects. This includes moves to improve traffic on the Central Expressway and the Gardens by the Bay project that will keep the Marina Bay area development on schedule, the Ministry of Finance (MOF) said yesterday.

The bumper $6.4 billion budget surplus has allowed the government to spend generously, economists said.

'We had a very healthy budget surplus last year and essentially, that provides some deep pockets for the government to embark on a more robust expansion policy,' said DBS economist Irvin Seah.

Economists also noted that the record amount of tenders involving building and construction projects reinforces the government's long-term goal to beef up its infrastructure to boost the country's competitiveness.

'I tend to see this building and construction project as a long-term effort to improve the competitiveness of our economy,' Citi economist Kit Wei Zheng said, pointing to the strains that the rising population and growing economy have imposed on infrastructure.

'In terms of construction, it's all well and good because it supports our thesis that demand remains very healthy,' he added.

Of the government tenders announced yesterday by MOF, some $1.2 billion will go towards the purchase of goods and services, such as the supply of equipment, appliances and the operation of the automated toll system at the checkpoints.

Tenders in information and communications technology (ICT) projects are also expected to be worth at least $1 billion. The Infocomm Development Authority of Singapore (IDA) will be announcing further details on the upcoming ICT projects during their annual industry briefing next month.

The plan for public sector procurement was first introduced in 2003 by MOF to inform suppliers about the public sector's indicative purchasing plan for the financial year between April and March. Its objective is to make the government marketplace more attractive and transparent to suppliers and purchases exceeding $200,000 are listed in the plan.

While economists believe that the large government tenders for building and construction projects are generally good for the industry, some felt there was still a need to address tightness in construction resources and rising costs.

'The growth is still there for the construction sector but it has to be measured against rising building costs,' Standard Chartered economist Alvin Liew said. 'Although we see that the $3 billion of deferred projects will mitigate some of the building costs pressures, a lot of the demand is global, whether it is steel or cement and construction workers. These are all globally priced.'

Mr Kit of Citi noted that the industry has already been squeezed by supply-side tightness in the first quarter, when the construction sector grew at an easier pace of 14.6 per cent year-on-year after growing by 24.3 per cent in the preceding quarter.

'It does suggest that supply-side constraints are already beginning to bite into construction growth,' he added. 'Growth would have been faster if not for the supply-side constraints.'

MOF said yesterday that it will continue to monitor the construction industry closely with BCA and other relevant agencies and make appropriate adjustments when necessary.

The timing of the large government tenders against the backdrop of a global demand slowdown could also alleviate any potential shortfall of investments in the private sector.

In response to a BT query on this, MOF said these government tenders are only based on the actual requirements of the government agencies.

Said Mr Kit from Citi: 'This move is probably quite timely but how effective it will be in boosting the economy is a question mark.

'I think the government will have to do more to ease the supply-side constraints if they want this to contribute fully to GDP growth... and prevent prices from spiralling upwards,' he added.

On a more positive note, Mr Seah of DBS said a bigger outlay from the government 'will certainly be helpful to businesses, especially when external demand is weakening.'

CityDev Declines 5.2% After UBS Downgrades Stock To 'Neutral'

Source : The Business Times, April 15, 2008

UBS analyst Regina Lim cites falling home prices in city-state

City Developments Ltd, Singapore's second-largest real estate company, led declines in developers after UBS AG downgraded the stock to 'neutral', citing falling home prices in the city-state.

CityDev, controlled by billionaire Kwek Leng Beng, fell 62 Singapore cents, or 5.2 per cent, to S$11.30 at the 5:05pm close in Singapore, a two-week low.

UBS analyst Regina Lim cut City Developments from 'buy' and reduced her price estimate to S$12.30 from S$14.12.

'UBS economists expect 2008 and 2009 growth to be 3.5 per cent and 5.9 per cent, respectively,' Ms Lim said in a report yesterday. 'We downgrade our residential price forecasts for 2008 and 2009 by up to 20 per cent. We remain cautious on developers with substantial exposure to Singapore.'

Singapore private home prices gained 4.2 per cent in the first three months of this year, the slowest pace in more than a year, after gaining 31 per cent in 2007, according to data from the Urban Redevelopment Authority released on April 2.

New home sales fell to 170 units in February, the lowest in at least nine months, the authority's data showed last month.

The FTSE Straits Times Real Estate Index, consisting of 43 companies on the Singapore stock exchange, has declined 13 per cent this year and the benchmark Straits Times Index has fallen 12 per cent.

Prime property prices could fall by 20 per cent this year and 2009, Ms Lim said in the report, with so-called middle-segment homes declining 10 per cent, and mass-market dwellings unchanged.

SC Global Developments Ltd, a builder of luxury homes in the city-state, fell five cents, or 3.6 per cent, to S$1.35, the most since April 9, when it plunged 4.9 per cent.

Keppel Land Ltd, the third-largest developer, fell 26 cents, or 4.4 per cent, the most since March 17, to S$5.66. UBS said both were vulnerable to slowing home sales in Singapore.

Ms Lim said UBS estimates for Singapore's economic growth indicate home prices may decline this year before recovering in 2009.

'In previous corrections, home prices recovered one to three quarters after GDP picks up,' she noted. -- Bloomberg