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3 major firms bag $1b worth of deals in past 9 months after decade-long slump

Korean contractors in Singapore are starting their crane engines again.

This year could be the biggest year for Korean contractors such as Samsung Corporation, Ssangyong Engineering & Construction Co and Hyundai Engineering & Construction Co after nearly a decade of construction slowdown in Singapore.

They are hoping to capture a bigger slice of the boom in the Singapore construction sector, which is expected to see record contracts totalling nearly $19 billion.

The three major Korean contractors have so far bagged $1 billion worth of contracts in the last nine months.

‘We are making a comeback through the Sentosa Cove project,’ Korea Ssangyong Engineering & Construction senior vice-president Ahn Kook Jin told BT. The company is handling a $130-million contract to build the 264-unit condominium on Sentosa Island.

Another major Korean contractor, Samsung, is involved in big projects such as the Island Power Plant ($450 million) in Jurong Island and Wacker Siltronics Semiconductor Wafer Plant ($225 million) in Tampines.

Hyundai is also enjoying a boom. It just clinched the $154-million contract for One Shenton for City Developments.

Korean contractors, which are well known for their efficiency and quality work, have always played a big role in Singapore’s construction scene.

Their best year was 1997 when they collectively secured orders exceeding $2 billion, according to information collated by the International Contractors Association of Korea.

During the heydays of the 1990s construction boom, Korean contractors were involved in big projects like Raffles Hotel, Raffles City, Suntec City and Capital Tower.

But the building slump since then affected Korean contractors badly.

Over the last five years, they managed to clinch contracts valued at less than $300 million annually.

‘Due to the construction slump in Singapore, we concentrated on Middle East instead of South-east Asia. Also, we need to do internal risk management that’s why we had a poor record in Singapore,’ said Thomas Cho, general manager of Samsung.

But the Koreans are now eyeing big spin-offs from the construction of the two mega integrated resorts and casinos at Marina Bay and Sentosa. The two projects, which are scheduled to be completed by the turn of the decade, are worth a total of more than $10 billion.

Marina Bay IR is being developed by Las Vegas Sands. The other IR project on Sentosa is being developed by Malaysia’s Genting group.

‘The number of order offers received is increasing but to focus on the IR we declined other offers,’ said Kim Seung Shik, deputy general manager of Ssangyong.

‘We hope to join Marina Bay IR project and the Overseas Union House project.’

Source : Business Times - 21 Feb 2007

Industry expands 4.7% in Q4; sand ban not expected to hit building works

CONTINUING its growth momentum, Singapore’s construction industry expanded by a decisive 4.7 per cent in the fourth quarter of 2006, and the positive outlook looks set to continue this year.

On a full-year basis, the growth was 2.7 per cent, and the Ministry of Trade & Industry (MTI) does not expect the recent sand ban to affect construction activity this year.

Construction cost is not expected to rise by more than 3 per cent this year, said Ng Wai Choong, deputy secretary of MTI at a briefing yesterday.

Year-on-year growth last quarter was slightly lower than the 5.8 per cent rise in the third quarter, but on a seasonally adjusted basis, the sector continued its recovery at a strong 12 per cent growth in Q4.

Full-year growth was up from 0.7 per cent a year earlier, with private commercial, industrial and residential projects accounting for much of the 41 per cent jump in construction demand to $16.1 billion.

Last year saw private contracts awarded rising by 1.7 times to $12.5 billion, the highest level since 1997. In tandem with the bullish private home market, residential construction demand grew strongly by 26 per cent to $3.3 billion in 2006.

Likewise, commercial construction demand and the demand for premium office space and prime shopping malls more than doubled to $2.2 billion in 2006, driven by projects like Marina Bay Financial Centre, Mapletree Lighthouse, Orchard Turn and City Square Mall.

On the other hand, public sector construction demand moderated as a result of a decline in industrial and institutional construction orders.

For the whole of last year, public contracts awarded fell by 8.3 per cent to $3.7 billion and its share of total construction demand also shrank from 35 per cent in 2005, to 23 per cent in 2006.

This year, the Building and Construction Authority expects total construction demand, excluding reclamation works, to be worth between $17 billion and $19 billion.

Public construction demand is expected to improve to $5.2 billion and $6 billion, fuelled by a possible rise in all development types.

Led by brisk sales, private construction demand is forecast to award between $12 billion and $13 billion worth of projects, MTI said in its report.

However, the stronger demand will also exert upward pressure on the price of basic construction materials and labour cost.

Still, MTI believes that this will be mitigated by the expected decline in global base metal prices in tandem with weaker US home construction, which could translate into lower cost of mechanical and electrical services for builders.

Source : Business Times - 15 Feb 2007

Singapore construction and property firm Chip Eng Seng, which has teamed up with Lehman Brothers to develop property, said it plans to tie up with the investment bank on more projects amid a booming market.

Pinnacle @ Duxton

Chip Eng Seng’s executive director Raymond Chia said in a recent interview that the partnership would give them more resources to undertake larger projects.

‘We like to have joint ventures to spread out risks,’ said Mr Chia, the son-in-law of company founder and executive chairman Lim Tiam Seng. ‘We want to move forward but at the same time, we have to be prudent.’

Last July, the firm formed a joint venture with US investment bank Lehman Brothers’ private equity real estate fund - Lehman Brothers Real Estate Partners II - to develop properties in Singapore including two high-rise apartment blocks in Singapore’s prime and suburban districts.

Singapore’s smaller real estate firms are scouting for bigger partners in order to improve their chances against property giants such as CapitaLand and City Developments in the city-state’s land auctions.

Besides Lehman Brothers, Chip Eng Seng has also joined up with Chicago-based hedge fund Citadel Investment Group to develop properties in Singapore. Sing Holdings tied up with United States-based fund Forum Partners.

Chip Eng Seng, which means ‘united and eternally successful’ in Mandarin, has developed five high-rise residential apartments since it ventured into property development in 2001.

With a market value of US$162 million, Chip Eng Seng ranks sixth out of 23 companies in the Singapore Construction Index . Its stock has nearly doubled over the past six months.

Although two-thirds of the firm’s profits come from property development, Mr Chia said he remains focused on construction amid a recovery in the city-state’s building market.

Chip Eng Seng is building Pinnacle@Duxton, Singapore’s tallest public housing apartment block with 50-storeys and a sky bridge.

Peter Khoo, the firm’s chief financial officer, said the builder’s current order book stands at S$560 million, adding that it might grow to S$800 million in the next three to four years.

Mr Chia declined to give a profit forecast. However, he said that UOB Kay Hian’s forecast of a S$36 million net profit for 2007, is ‘close enough’. UOB Kay Hian forecast a net profit of S$12.3 million for 2006. Chip Eng Seng is due to report its full-year earnings on Feb 13.

Singapore’s two planned casinos, which are due to open in 2009-2010 and cost a total of US$6.6 billion, will generate more business for local construction firms, and Mr Chia said that he hopes to make an acquisition in the sector to benefit from that demand. ‘Foreign companies that come in would likely need a local firm to help them execute the project. They would need specialist sub-contractors as it’ll be extremely expensive to bring theirs in,’ he said.

‘To me, the best way for an expansion plan is not through organic growth, I would have to go into acquisitions.’

Mr Chia said that the company plans to issue a two-year bond of up to S$150 million in tranches to finance its current projects, acquisitions and for working capital. - Reuters

Source : Business Times - 12 Feb 2007

It will share up to 75% of the extra cost for existing public building contracts

CONTRACTORS worried about the rising price of sand were assured yesterday that the Government will share their burden on existing public building contracts.

Industry players expect a spike in sand prices to above $50 per tonne from $20 per tonne about two weeks ago after Indonesia announced an immediate ban on the sale of sand to Singapore.

Minister for National Development Mah Bow Tan said the Government is prepared to share up to 75 per cent of the additional cost and hoped that private developers will do the same.

He said: ‘Bearing in mind that this is a very sudden disruption, we think it’s only fair that all the parties involved share in the additional cost.

‘By that, I mean not just the concrete manufacturers but also the contractors and, ultimately, the developers.’

Speaking to reporters yesterday at the Tampines Town Hall Forum, Mr Mah said the proportion shouldered by the Government would vary with each project, depending on what stage it is at and the terms of the contract.

He emphasised that this would only be a one-off measure for existing contracts. Future contracts would have to factor in the additional cost.

Indonesia said its ban on sand was to prevent further damage to its environment and protect its borders.

The move stunned the building industry here which is anticipating $19 billion worth of contracts this year, the highest since 1997.

Singapore’s construction industry has imported about six to eight million tonnes of sand a year, almost all of it from Indonesia since 1997, when Malaysia banned exports to the Republic.

Yesterday, the Indonesian government announced that it would beef up security between Indonesia and Singapore to enforce the ban.

It ordered security personnel to be on high alert and said it would take strong action against those smuggling Indonesian sand overseas.

Singapore started releasing sand from its stockpile on Thursday, which Mr Mah said would be ‘enough for us’.

He has provided assurance that supplies are coming in from regional countries, but did not specify which ones.

‘I think in the last two days, we’ve already had two shipments coming in and the flow is coming in regularly from now,’ he said.

The need for the industry to look at exploring alternative methods and construction materials to reduce the demand for sand remained, he said.

Source : Sunday Times - 4 Feb 2007

WHEELOCK Properties yesterday said that it has awarded a $168 million main contract for the construction of its retail-cum-residential development Scotts Square to Shimizu Corporation of Japan.

Construction work is expected to begin in the third quarter of this year, and to be completed by 2010.

Shimizu, which is listed on the Tokyo Stock Exchange, was chosen because of its track record in constructing high-end condominiums including Ardmore Park and Grange Residences, said Wheelock in a statement.

Shimizu was also behind the construction of Orchard Road mainstay Ngee Ann City and is now involved in the building of Changi Airport’s Terminal 3.

Wheelock said: ‘The company has established a strong reputation in its field and is renowned for its high quality work.’

Located on Scotts Road between the Grand Hyatt and Marriott hotels, Scotts Square will be a ’super luxury’ residential and retail development.

It will comprise two residential towers - one with 43 storeys and the other with 34 - and an 80,000 sq ft retail podium.

The freehold development will offer 338 luxury one, two and three-bedroom apartments.

Wheelock acquired the site, comprising the freehold Scotts Shopping Centre and the 23-storey The Ascott Singapore Serviced Residences above it, for $345 million in June 2004.

David Lawrence, chief executive of Wheelock Properties, said that Scotts Square will be built with the highest construction standards.

‘Once completed, it will be one of the most ’sexy’ buildings in town with every apartment offering an astounding view of Scotts Road, Orchard Road and beyond,’ he said.

In the stock market yesterday, Wheelock shares closed three cents up at $2.76.

Source : Business Times - 3 Feb 2007