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Q4 net profit rises 34% to $25.6m, helped by fair-value gains

The property development and investment division of Metro Holdings, which is better known here as a retailer, is providing a bigger share of its earnings as retail revenue dips.

For the financial year ended March 31, Metro Holdings reported revenue of $224.4 million, up 4.8 per cent from the preceding year.

On a business segment basis, its property arm accounted for $49.2 million, up from $35.9 million previously.

For FY 2008, the property division contributed $75.6 million or 87.4 per cent to group pre-tax profit, up from 84 per cent previously. But revenue from retail business eased to $176.4 million, from $179.5 million.

Net profit for the year was $65.97 million, a 3.95 per cent drop. Earnings per share dipped to 10.46 cents from 10.89.

Net earnings were up 34.4 per cent at $25.6 million for the fourth quarter, helped by $14.9 million in fair-value gains from investment properties, while revenue was down 2.69 per cent at $53.2 million.

Metro Holdings, which has office and retail properties in China, said that for the quarter, its property division revenue was $17.2 million, up from $8.9 million in the previous corresponding quarter, due to initial income from Metro City Beijing, higher income from Metro City Shanghai and a one-time recognition of service charges of $4 million.

But Metro is not neglecting its retail business. It confirmed an earlier BT report that it will open a new outlet at City Square Mall near Little India. It will also open a new retail outlet in Jakarta’s Grandaria City.

Metro Holdings occupies more than 821,000 square feet of retail space here, but its group general manager Jopi Ong said that the costs of doing retail business in Singapore is prohibitive.

‘The prices here are definitely too high.’ he said. ‘To operate a department store, you need a lot of real estate.’

Metro Holdings chairman Winston Choo, who joined the company in July 2007, added: ‘In terms of property development and investment, we have no plans for Singapore because I think the opportunities are better in China.’

And Metro’s Chinese property portfolio is set to grow as it increasingly becomes a China play.

It now has 200,000 square metres of net lettable area in China, including Metro Tower Shanghai and GIE Tower Guangzhou.

Also in China, it has 127,500 properties under development including 1 Financial Street, Metropolis Tower and EC Mall, all in Beijing.

Occupancy rates in Metro City Shanghai and Beijing, in which Metro Holdings holds 60 and 50 per cent stakes, were 99.4 and 81.1 per cent respectively.

At Metro Tower Shanghai and GIE Tower Guangzhou, in which it holds 60 and 100 per cent stakes, occupancy was 97.9 and 68.1 per cent respectively.

Metro Holdings said that the lower occupancy at GIE Tower was due to not being able to provide existing tenant KPMG with the extra floor space that it required in the building.

A final dividend of one cent per ordinary share has been proposed.

Metro Holding’s share price closed half a cent down at 78 cents yesterday.

Source : Business Times - 29 May 2008

Heavily subsidised HDB units, which are much in demand, are often sub-let to foreigners

Some tenants in heavily subsidised HDB rental flats have been illegally sub-letting their homes to cash in on surging demand for cheap accommodation.

There are no official figures but tenants in some estates say that as many as one in five rental flats is rented out to foreign workers - a clear breach of HDB rules.

The flats are often leased to workers from Malaysia, China and India - who are either unaware that they are renting illegally or do so because the units are the cheapest option.

Property agents and tenants told The Straits Times that there is an increasing number of such flats put up for rent by people keen to cash in on foreign workers’ demand for cheap housing.

A Malaysian, who declined to be named, told The Straits Times that she leases a two-room HDB rental flat in Toa Payoh with a friend for $700 a month.

That could be as much as $650 more than the subsidised rent - a tidy profit for the original tenant.

Their ‘landlord’ told them to keep windows shut and not to answer the door. The 35-year-old said she knew the deal was illegal but she was ‘desperate for cheap housing’, adding in Mandarin that ‘If I didn’t rent this flat, I can’t afford anything else’.

The abuse of HDB rental flats comes amid soaring demand for such homes, which are meant for needy Singaporean families.

The waiting list has shot up by at least 30 per cent over the past few months, with about 4,000 applicants in the queue. This translates to a 15-month wait, which is double the time in 2006.

Eligible Singaporeans can apply for HDB rental flats and pay $26 to $205 for a one-roomer and $44 to $275 for a two-roomer, depending on household income and other factors. The HDB manages about 43,000 such flats and plans to add 20 per cent more.

A Member of Parliament for Ang Mo Kio GRC, Ms Lee Bee Wah, told The Straits Times that residents had complained about the problem when she visited Teck Ghee last month.

‘People tell me their neighbours are renting their flats out. They should not be hogging the flats if they have an alternative place to stay,’ said Ms Lee.

When The Straits Times called five property agents last week, four said they had one- and two-room flats available for rent. Most of these flats would be rental units, said HDB.

And it is not just low-paid foreign workers renting such flats.

A Singapore permanent resident from Malaysia said he used to rent such flats as they were the cheapest on the market.

The 28-year-old finance executive rented a two-room subsidised flat in Owen Road for $550 in 2006. A similar unit on the open market would cost at least $1,000. Now, government-subsidised flats can fetch $1,000 in good locations, he added.

When The Straits Times visited Toa Payoh rental blocks last week, some tenants said they noticed an increasing number of workers from China and Bangladesh living in their blocks.

Coffeeshop worker Poh Lee Tee, 45, said her neighbour frequently rented out his flat to Indian workers, who kept her up when they came home from work.

‘But I don’t want to report my neighbours, in case I get into trouble,’ said Madam Poh.

Mr Wu Mu Song, 74, who has lived in one of the rental blocks for the past 30 years, estimated that two out of 10 flats are rented out illegally. ‘This is unfair; there are others who need these flats more,’ he said in Mandarin.

Although abuse of rental units is on the rise, Mr Wu said it was hard to catch illegal tenants as they often ignore visitors - including HDB officers.

Tenants illegally renting out their home can lose the flat and face a five-year ban from renting or buying HDB property.

The HDB recovered 17 flats in 2005 and 27 last year. The increase was due ‘to better public awareness and feedback’, it said.

It also conducts inspections at least once a year and carries out regular ‘enforcement blitzes’.

One blitz recovered 57 rental flats in three months in 2003 and 35 in a crackdown that began last year in areas like Tampines, Ang Mo Kio, Toa Payoh and Bukit Merah.

Anyone aware of illegal renting can contact the HDB at flw1@hdb.gov.sg. or call 6490 2410.

Source : Straits Times - 29 May 2008

Firms to turn to local talent as Asian developing nations mature: Survey

Top executives at large companies in emerging Asian powerhouses such as China and India are likely to be local talent in five years’ time, instead of high-cost expatriates.

This is among the key findings of a new survey conducted by the Association of Executive Search Consultants (AESC), the global grouping representing top-level headhunting firms in 70 countries around the world.

The survey focused on trends in senior executive recruitment in emerging markets such as China, India, the Middle East and Brazil.

It showed that many of the 62 respondents, comprising executive search professionals around the world, believed local talent would supersede expats by 2013.

AESC said 54 per cent of respondents had estimated that in 1998, most senior executive roles were filled by expats.

‘But only 8 per cent of the respondents thought this group would still be filling the same roles in 2013,’ AESC said in a statement.

Senior executives are defined as those whose minimum responsibilities would be those of a director, vice-president or general manager. They encompass the ‘C-suite’ officers such as chief executives and chief financial officers, as well as technical heads.

AESC president Peter Felix said in an interview on Tuesday that top expatriate executives had taken off in popularity when emerging economies started booming around 10 years ago.

‘But as these markets have begun to mature, so too has the pool of talent that can be hired locally.’

He clarified that the increasing proportion of local talent reflects the growing number of new posts which will be filled by such professionals and did not imply that existing expatriates would lose their jobs.

Mr Mark Ellwood, the managing director of leading recruitment consultancy Robert Walters Singapore, agreed with the survey’s findings.

‘Most organisations prefer to hire at a local level if they can, because this provides more stability for succession planning and creates a more stable management team than hiring expatriates, who have more options to leave.

‘Markets such as China and India also have unique cultural characteristics which are more easily addressed by locals.’

Singapore International Chamber of Commerce chief executive Phillip Overmyer has come across many local managers with experience overseas returning to take up senior leadership positions.

‘In fact, what we see more today is many expatriates in middle-management roles, and technical specialists or individuals who have been sent abroad for international exposure, rather than senior executives.

‘Singapore has always been ahead of the trend and I am sure other Asian markets will soon follow suit.’

Source : Straits Times - 29 May 2008

Chief executive Geoghegan warns of long-term problems unless central banks take action now

It is not often you hear bankers advocating higher interest rates - this can jack up the costs of lending, after all - but HSBC is making just such a call.

Chief executive Michael Geoghegan wants central banks around the world to hike rates to tackle inflation, which is becoming a key concern.

He told a conference after an informal shareholders’ meeting in Hong Kong yesterday that ‘many banks like inflation’, but warned that it poses ‘long-term problems’.

Mr Geoghegan noted that the spiralling cost of food, petrol and other basic goods will hit the poor the hardest.

At a talk earlier that afternoon organised by the Asia Society, he had also touched on the issue, arguing that while governments may not wish to face up to raising interest rates now, ‘I urge them to, because inflation out of control is a very difficult thing to control later’.

The banker warned shareholders that while HSBC expected its write-downs and losses linked to sub-prime mortgages to lessen in the coming quarters, it could not rule out further problems. It has already taken US$19.5 billion (S$26.5 billion) in write-downs and losses since the start of last year.

Nonetheless, the bank, the world’s largest by assets, posted record profits last year and stayed in the black in the first quarter of this year.

This has prompted HSBC’s remuneration committee to propose a new executive pay plan that will be unveiled at its annual meeting in London tomorrow. The Financial Times reported on Tuesday that HSBC may pay its most senior executives more than £100 million (S$269 million) over the next three years.

Mr Geoghegan said on Tuesday that HSBC’s executive pay falls within the median range for the world’s biggest banks.

He added that the bank has raised the issue with shareholders controlling about half of the group’s shares, and a ‘vast majority’ recognised that HSBC needed to offer competitive pay to retain talent.

In a separate interview on Tuesday, HSBC’s chief executive for the Asia-Pacific, Mr Sandy Flockhart, noted that the bank’s business in Singapore ‘has grown quite strongly’.

This was largely due to its focus on tapping the ‘growth in disposable income’ of customers, including clients with at least $200,000 in investible assets with a bank. HSBC said it is one of the top three banks in terms of market share for this affluent segment of Singapore.

Singapore also remains ‘an important booking centre’ for some of HSBC’s regional businesses, he said. HSBC Private Bank, which is among the world’s top five wealth management units by assets under management, has clients with high net worth from Asia and beyond who book their wealth here.

Many companies have also set up their headquarters in Singapore, said Mr Flockhart.

By offering an international network of branches and services to these companies, HSBC has grown pre-tax profit from its Singapore commercial banking services for small and medium-sized companies to more than 20 per cent.

The commercial banking unit in Singapore grew pre-tax profits to US$112 million last year, up 24 per cent on 2006.

The largest segment of HSBC Singapore’s business, the global business and markets unit, grew a whopping 65 per cent to US$240 million in pre-tax profits.

On the whole, HSBC Singapore’s pre-tax profits grew 51 per cent to US$550 million last year, making it the fourth fastest-growing market among HSBC’s Asia operations after China, Taiwan and South Korea.

Source : Straits Times - 29 May 2008

Investors have been cautious about the property sector amid expectations that the muted residential property market will weaken further. However, some property consultants are taking a slightly more positive stance, saying that this situation is temporary.

Transaction volumes for private homes have been thin, with developers holding back launches or cutting prices. And recently, there have been a slew of bearish reports from the likes of JP Morgan and Nomura, which are further dampening sentiment.

They said that private home prices could drop by as much as 35 per cent in the upper-end segments of the private residential property market by 2010 due to excess supply and poor sentiment.

They argue that marginal speculative sellers are likely to drive prices lower amid low transaction volumes and higher unsold pre-sale inventories.

Lower rental expectations and a large increase in supply are also seen compounding the situation in the longer term. Some also said the middle and low-end segments will not be spared.

But there are some property consultants who said that while things are slow now, dynamics will change going forward.

While the consensus view is that prices will continue to remain under pressure for the rest of the year and into 2009, some consultants said that the main reasons for falling prices are external.

Chua Chor Hoon, Senior Director, Research, DTZ Debenham Tie Leung, said: “It’s mainly the external factor, because of what’s happening in US, so sentiments are really weak now.

“(It’s also) partly because prices have gone up quite a lot last year - especially after the deferred payment scheme has been removed that made buyers more cautious. It’s a combination of factors, but I believe it’s the US economy that has a greater impact.”

She believes that prices will continue falling for the rest of this year and even into the year ahead, but a glimmer of hope exists.

Ms Chua said: “Prices are likely to fall for the rest of this year and they could continue to fall next year depending on how the US economy pans out.

“But we have a lot of good things coming up in 2010 - Youth Olympics, integrated resorts. So our fundamentals are quite strong. When the US economy picks up, I believe sentiments will follow suit.”

And some point out that the bearish reports are due to an over-estimation of supply numbers.

Ku Swee Yong, Director, Marketing & Business Development, Savills (Singapore), said: “The differences arose because of variance in the interpretation of a very basic set of data - the supply numbers - how many apartments will be completed in the next three years.

“We believe that the supply numbers have been overstated because there have been many projects filed and we know that these projects have been delayed.”

What is clear though is that shares in property developers have been taking a hit amid concerns over the property outlook. Most of them closed lower on Wednesday. - CNA/vm

Source : Channel NewsAsia - 28 May 2008