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CONSTRUCTION and property company United Engineers (UE) said yesterday that its net profit rose five-fold to $176.2 million for 2007 - from 2006’s $34.83 million - on the back of revaluation gains.

UE saw a fair value gain of $186 million on the value of UE Square, as well as fair-value adjustments and gains from the divestment of investments.

Revenue for the year fell 12 per cent to $539.8 million, from $614.1 million the year before. The company’s engineering and construction (E&C) division - from which it made most of its revenue in 2006 and 2007 - reported a 21 per cent slide in revenue to $405.9 million in 2007.

UE said that yearly comparisons of E&C results are not meaningful as progress billings vary from project to project.

The group’s integrated facility management division, which includes property development, lifted revenue 19 per cent to $138.1 million in 2007. This was mainly due to higher rental income and occupancy in an improving economy, UE said.

Earnings per share rose to 80.4 cents, from 16.1 cents in 2006.

The company has declared a dividend of 10 cents a share for 2007, comprising a normal dividend and a special dividend of five cents each. It will also pay a dividend of 7.5 cents for each preference share.

UE, which had an order book of $1.1 billion at end-2007, said that it will continue to carry out large building and infrastructure projects in Singapore and the region in 2008.

‘Additionally, the rapidly developing economies of China, Middle East, Indonesia and Vietnam are expected to contribute to the region’s strong demand for infrastructure development,’ UE said.

UE’s shares closed 12 cents up at $3.84 yesterday.

Source : Business Times - 1 Mar 2008

Property , banking and agricultural groups lead list in exceptional year.

LISTED companies in Singapore enjoyed exceptional growth last year, with their combined profits surging 39.1 per cent to $33.58 billion.

Sizzling economic growth meant healthy growth across just about all sectors.

But not surprisingly, the top performer in absolute numbers among companies with financial years ending in December came from the booming property sector.

CapitaLand, with a market value of about $17.7 billion, posted $2.76 billion in net profits - more than double its 2006 showing - and outpaced the local banks.

However, a large proportion of the developer’s profit was due to revaluation gains for its investment portfolio amounting to some $1.1 billion.

As at 6pm yesterday, 389 companies had reported their full-year results for the 12 months ended Dec 31.

Of these, 349, or close to 90 per cent of them, were in the black. And 227, or over 58 per cent of all companies, reported an increase in profits from 2006.

In all, 85 firms saw their profits shrink and 24 firms went from a net loss to a net gain. Another 13 did not have 2006 figures for comparative purposes.

The remaining 10 per cent, or 40 firms, had their report cards tainted by red ink. Of those, 19 firms went from the black to the red, and 11 sank deeper into the red while seven saw their losses narrow.

Another three did not have comparable figures in 2006.

Other strong performers included firms linked to palm oil, which is used as a feedstock for biofuel.

Profits at both Wilmar International and Golden Agri-Resources more than doubled on the back of what was considered a golden harvest for commodity players.

Industry experts say that last year was an unprecedented year of growth during which earnings surpassed expectations - but they caution that growth will be much tamer this year, dampened partly by rising cost pressures.

‘Last year was an exceptional year. I can’t see a repeat as there are so many more risks in the market now,’ said DBS Vickers head of research Janice Chua, adding that growth is expected to halve this year.

The brokerage saw average earnings growth of 28 per cent last year for the 170 firms under its coverage, but it expects growth of about 14 per cent only this year, she said.

The property sector will see a scale-back in property launches as well as a softening in selling prices, which may dampen earnings growth.

CIMB-GK economist Song Seng Wun agreed that growth will be moderated.

‘The operating environment is more uncertain and bankers are more cautious. Consumers are watching their discretionary spending as well. It will be a much tougher environment than that last year.’

He pointed out that ‘the whole region has been supported by strong domestic demand, across a whole range of industries’.

But growth began to falter late last year, as higher material costs started to squeeze margins.

In expectation of weaker earnings growth this year, numerous brokerages have also started trimming price targets for companies.

Inflation, as well as higher material and labour costs, will be bugbears for companies and will add further to margin pressure, said Sias Research investment analyst Alan Lok.

He added that those firms which are able to bite the bullet and pass on more than 50 per cent of their costs will be able to survive in the challenging environment this year.

GROWTH TO EASE

Analysts expect a much tougher environment this year, due partly to rising cost pressures. DBS Vickers, for one, expects average earnings growth to halve to 14 per cent among the 170 companies which it covers.

Source : Straits Times - 1 Mar 2008

Small revision of fees points to dwindling deals, slow price growth.

IT’S official: the property market has gone deathly quiet.

The Government barely tweaked development charges in its semi-annual revision of fees yesterday, reflecting the property sector’s subdued state over the last six months.

Development charges, which can run in the millions of dollars, are what a developer has to pay to buy and redevelop an existing site.

Average islandwide charges for office, hospital, hotel and non-landed housing sites merely inched up, while landed residential sites saw no change in the fee at all.

This marks a big reversal from last year, when the frantic pace of land acquisition led to record hikes in development charges for many sectors.

In super-hot locations, the fees were even doubled.

This time, the only major change was in the industrial sector, where charges jumped 16.8 per cent - compared to 2 per cent in the last round.

This was due to a previous low base, as well as rising demand for back-office space, which led to recent land sales at benchmark prices in areas such as Commonwealth and Ubi, said experts.

Development charges are set by the chief valuer based on recent land and property values, and are adjusted every six months, so their growth rate can be used to indicate market activity.

Property watchers said yesterday’s small rises show what the market has known for some time: Property deals are dwindling and the pace of price growth has slowed.

‘The rates have been moderated as a result of the limited transactions over the last six months, attributed in part to the more cautionary sentiment,’ said Mr Lui Seng Fatt, the regional director and head of investments at Jones Lang LaSalle.

But fees rose for areas on the city fringe, showing that activity is spilling out from prime spots, said Savills Singapore’s Mr Ku Swee Yong.

Development charges rose for non-landed residential sites in Upper Thomson, Tiong Bahru, Balestier and Chancery, among others.

This was probably due to some collective sales late last year, said Mr Nicholas Mak of Knight Frank.

These include the sale of Toho Gardens in Yio Chu Kang and 15 terrace houses in Balestier.

Mr Mak said the fee rises in these areas could further affect the already cautious sentiment in the market.

The overall impact, however, is ‘not as major’ as that from the last round of hikes in charges, he added.

Still, developers looking for new land will probably start relying more on government sales - which do not involve development charges - than on collective sales, said Mr Li Hiaw Ho, the executive director of CB Richard Ellis Research.

In the office and shops sector, the recent sales of transitional office land helped boost development charges in Tampines and Scotts Road.

Thomson and Paya Lebar also saw bigger hikes than the rest.

Hotel sites had increases mainly in central areas, while the fees for industrial sites rose across the board.

Source : Straits Times - 1 Mar 2008

The Urban Redevelopment Authority (URA) is auctioning 11 land parcels along Sembawang Road/Andrews Avenue as part of its plans for a landed housing estate in the area.

The plots constitute the Phase 2 development of the Sembawang Greenvale project, and can accommodate 90 dwellings, comprising of one bungalow, 16 semi-detached houses and 73 terrace houses. Phase 1 of the project, which consists of 12 plots along the same stretch of road and accommodates 57 dwellings, was fully sold last October.

Property watchers said yesterday’s announcement of the URA tender would likely draw interest from small property developers, contractors and engineering firms, despite projected slower economic growth and a volatile stock market.

“The landed segment is still a very stable market and the sites are targeted at local buyers, especially displaced owners from collective sales. But there is a strong chance that developers will factor in the current market uncertainty, and this will translate into a lower price,” said Mr Donald Han, managing director of Cushman and Wakefield.

Mr Han expects prices to be 5 to 10 per cent lower than those transacted at last year’s auction, which fetched an average $285 per sq foot of land.

Mr Nicholas Mak, director of research and consultancy at Knight Frank, however, is more optimistic. He noted that the median unit price for landed housing in the area had increased 12 per cent in the fourth quarter of last year from the previous three months.

Mr Mak expects prices in Phase 2 to be higher than those of Phase 1, and fetch $320 to $380 psf for terrace plots, $300 to $350 for semi-detached plots, and $200 to $260 for L-shaped bungalow and semi-detached plots.

Source : Weekend Today - 1 Mar 2008

In the latest signal that the market for private homes has cooled, the Ministry of National Development (MND) yesterday announced minimal changes in the development charges for residential sites.

A tax on property developers for site enhancement, the development charges payable in the next six months for non-landed residential sites were raised on average by a marginal 2.6 per cent.

The latest hike, which the MND said was calculated after having “taken into account current market values” following a half-yearly review, compares with a 58-per-cent rise in the same category last September.

On average, development charges were raised 1.5 per cent for commercial sites such as those for offices and shopping centres, 3.3 per cent for hotel and hospital sites and 16.8 per cent for industrial and warehouse sites. Charges in the other categories, including landed residential, remained unchanged.

“It is encouraging to know that the Government has made minimal changes to the development charges for residential use, a reflection that it is mindful of the current market sentiment and the uncertainties ahead,” said Mr Li Hiaw Ho, executive director of CBRE Research.

Mr Donald Han, managing director of Cushman and Wakefield, attributed the virtually “flat” rates to the lacklustre market for private homes, as well as sales of residential sites, in recent months. He noted that the property market started deteriorating in December as sentiment turned cautious amid uncertainty over the extent of the fallout from the sub-prime crisis in the United States and stock market volatility.

Statistics from the Urban Redevelopment Authority showed that the number of new private homes sold in December shrunk by half from the month earlier, while January numbers were flat. Fewer units were also launched by developers in the past two months.

The double-digit rate of increase in development charges for industrial sites was “a good indication of healthy demand for such land as well as a continued stream of foreign investments into Singapore’s manufacturing sector”, said Mr Li.

Source : Weekend Today - 1 Mar 2008