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As credit crunch lays rivals low, it’s ready to swoop on bargains in next 2 years: CEO

A LOT of opportunities will be thrown up in the real estate market in the next two years and CapitaLand is well placed to take advantage of them, chief executive Liew Mun Leong says.

‘There will be distressed properties, distressed companies. We can probably buy land cheaper and even acquire companies,’ said Mr Liew in an interview with BT this week.

He said the current credit crunch is making borrowing very difficult for real estate companies whose balance sheets are not too strong. Meanwhile, it is also difficult to tap the capital market for funds.

‘If banks are now restricting their exposure to you in direct lending, and the capital market is now very cautious, then funding becomes a problem,’ he said. ‘For us, we are very well capitalised. Banks still trust us to do the normal borrowing. Our gearing is only 0.47. For every 0.1 increase in gearing, we can raise $1 billion. And we can still have access to the capital markets.’

CapitaLand group chief financial officer Olivier Lim pointed out a big difference between now and the Asian financial crisis 10 years ago: then, the cost of funds was going up; now, it is going down, with the US Federal Reserve continuing to ease interest rates. ‘So those who have access to funds are getting them cheaper,’ he said.

Added Mr Liew: ‘At the end of the day, some of our competitors will be weakened. And our relative combat power - to use a military term - will be stronger.’ With lower land costs and lower financing costs, CapitaLand will also be able to maintain its margin, he added.

In fact, CapitaLand currently has ready ammunition at its disposal.

In the last nine months, it raised $2.3 billion in convertible bonds, at 2.9 per cent and 3 per cent. And the conversion premium was pretty high.

In addition, CapitaLand has $12 billion worth of investible private equity funds for the different sectors of the market.

Mr Liew said CapitaLand’s failure to clinch the integrated resort (IR) projects might have been a blessing in disguise.

‘If we had a few billion dollars of debt for that kind of big-ticket item, in the current credit crunch landscape, I think it’s going to be a big burden on the balance sheet,’ he said.

Mr Liew does not think there will be a quick rebound from the current credit crunch.

He said: ‘The problem is getting worse. If you’d asked me last month, I would have said it’s still not so bad. This month, it’s worse. I can’t pretend to know when it will be over; some people say a few years. It’s like a sick man - the fever is rising, and now, worse, there’s diarrhoea. We need to stop the diarrhoea first, and then wait for the fever to go down. All I can say is, it’s not a pretty picture.’

CapitaLand, said Mr Liew, will continue to invest despite the strong headwinds ahead. It was through investing in the bad years of 2001 and 2003 that CapitaLand reaped record earnings in the last two years.

‘You have to invest. It takes time to plant the seeds and reap the rewards. Our fruits in the last two years were planted in those bad times when we had the perfect storm of the dotcom bust, the bombing of the US World Trade Center, Sars, the Iraq war and the two Bali bombings,’ he said.

Mr Liew’s vision is for CapitaLand to be the Nokia or Nestle of Singapore - that is, a truly international company.

‘In 5-10 years’ time, I aim to have CapitaLand as the top three or top five real estate companies in Asia; we are now Number 9 or 10. I want all our overseas businesses to be run by the locals. And I want each of our major markets to have a representative on our board of directors.

‘Singaporeans will look for new businesses to grow the group, look at asset allocation and have an overview of the various businesses,’ said Mr Liew.

Source : Business Times - 22 Mar 2008

NEWLY listed Roxy-Pacific Holdings, a Singapore specialty property and hospitality group, has posted a strong set of maiden results.

Group net profit surged to $19.3 million for the full year ended Dec 31, 2007, from $4.84 million the previous year as revenue more than doubled to $102.7 million from $48.8 million.

Earnings per share increased to 3.79 cents from 1.02 cents. The increase in revenue was driven by strong performances by both the key segments of property development and hotel ownership and property investment.

Revenue from property development rose to $64.2 million from $18.0 million as a result of the progressive recognition of revenue from the sales of seven development projects: The Nclave, The Treeline, The Montage, St Patrick’s Loft, Axis@Siglap, The Marque@Irrawaddy and The Medley.

Higher selling prices of the group’s property units resulted in improved gross profit margin of 21 per cent, up from 10 per cent.

The group’s gross profit margin for its hotel ownership and property investment segment also increased.

Said Teo Hong Lim, executive chairman and CEO of Roxy-Pacific: ‘In 2007, the strong property market and robust tourism industry augured well for us and we remain optimistic about the Singapore property market in 2008, in particular, prospects for the mid-tier and mass market segments which is the focus of all our existing projects.’

‘We intend to launch eight residential projects comprising about 290 units for FY2008 and expect these together with current ongoing projects to contribute positively to our performance for FY2008.’

The group announced a final cash dividend of one cent per share, which translates to a dividend yield of about 4 per cent.

Source : Business Times - 20 Mar 2008

Increasing presence in emerging markets makes CapitaLand a good bet for investors.

With Singapore’s property market cooling, analysts are looking at developers which have bought substantially into other promising places. To many, CapitaLand could be a good bet for investors.

Analysts say the company’s diversified business portfolio and increasing presence in emerging markets, including Vietnam and India, more than make up for the slowdown in Singapore’s property sector. Moreover, CapitaLand’s shares are beginning to look attractive after falling nearly 30 per cent since the start of November, when signs of a slowdown began emerging in Singapore.

“CapitaLand is once again ahead of the curve, selling down its Singapore exposure early last year and increasing exposure to exciting emerging markets such as Vietnam, India and China,” says Ian J Beattie, head of Asian equities at United Kingdom-based New Star Asset Management.

Mr Beattie says his firm is a “substantial” holder of the developer through two Asian funds and institutional accounts run on behalf of clients. New Star recently bought more shares after building up a larger stake a few years ago. At CapitaLand’s current price, the stock appears to be a “pretty good value,” he says.

CapitaLand, whose shares fell 2.4 per cent yesterday to $5.72, is 42 per cent-owned by Temasek Holdings.

CapitaLand’s businesses range from residential and retail developments to real-estate investment trusts. Last year, about 38 per cent of revenue came from Australia and New Zealand, followed by China with about 29 per cent, and Singapore with almost 24 per cent. A year earlier, Singapore accounted for about 29 per cent of revenue, while about 40 per cent was from Australia and New Zealand, and 21 per cent from China.

The company recently expanded in India through joint ventures to invest, develop and manage retail projects. In Abu Dhabi, it entered a venture for a real-estate development.

CapitaLand’s next big bet seems to be Vietnam, where strong economic growth is speeding up urbanisation. Last month, the developer said it planned to establish a US$300 million ($413 million) fund focused on Vietnamese real estate. CapitaLand aims to significantly accelerate the pace at which it develops housing units in Vietnam.

“There is a frenzy about the Vietnam market right now and I think Vietnam will be a good exposure for any developer,” says UOB Kay Hian analyst Vikrant Pandey.

The analyst, who has a “buy” rating and a 12-month target price of $6.90, says he likes CapitaLand because of its geographic and sectoral diversification as well its strong balance sheet. “Any share-price weakness is a good opportunity to accumulate this stock,” he says.

CapitaLand trades at about 16.5 times its projected earnings for this year, according to Thomson One Analytics. That makes the stock more expensive than most of its Singapore-listed competitors, including heavyweight City Developments, which trades around 12 times forecast 2008 earnings.

However, bullish analysts argue CapitaLand deserves a premium for its diversity, size and management strength.

Source : Today - 20 Mar 2008

DUBAI’S Al-Futtaim Group on Monday raised its takeover bid for Singapore retailer Robinson & Co to $7.00 a share, from $6.25 previously - pressured by the buoyant performance of Robinson’s stock, which has been trading at an average of $6.64 since the original offer was made two months ago.

All eyes are now on the Lippo Group, Robinson’s largest shareholder, to see if it will sell its stake to Al-Futtaim, hold onto its stake in hopes of the takeover failing, or mount a takeover bid of its own.

Much will depend on what Lippo thinks Robinson is worth - ie, are Al-Futtaim and investors right in betting that the retailer is worth $7.00 a share.

Lippo took up its stake in Robinson in April 2006, when OCBC Bank put its 35.96 per cent stake in the retailer up for sale.

Lippo paid a 17% premium

It won the closed tender by offering $7.90 a share, buying 29.9 per cent of Robinson for $203 million. It didn’t buy the remaining 6.06 per cent to avoid the need to make a general offer for the whole company.

Lippo’s offer price of $7.90 was a 17 per cent premium to Robinson’s last traded share price of $6.75 then - and rumoured to be well above the offers made by other interested parties. Lippo had justified the premium paid for Robinson at that time by referring to the retailer’s regional potential and hefty cash balance.

Lippo’s then-deputy chairman, Stephen Riady, had said: ‘This is a company that has: No 1, excellent branding; No 2, excellent management; and No 3, strong balance sheet. They have so much cash, they are ready to capitalise on the brand and expand in the region.’

Mr Riady said that Robinson should use its investments and cash pile to fuel its expansion into new markets like Indonesia, China and Malaysia, instead of returning it to shareholders.

The value of Robinson - and the strategic direction that has taken - appears to have altered somewhat since then. Its cash balance has been whittled down by payouts to shareholders - instead of being used solely to build the Robinson’s brand and presence in the region.

The retailer’s cash balance stood at $81.88 million as at the end of FY2007, down from a balance of $108.03 million the year before. Robinson had declared a bumper dividend payout amounting to a total of $120.3 million in FY2006 - 3.5 times its full-year net profit.

The regional potential of Robinson also appears to be less than fully exploited. Other than a sizeable presence in Malaysia, with 34 stores, albeit with limited success, Robinson has not aggressively expanded elsewhere in the region.

The retailer has sought to boost its stable of brands within Singapore by adding River Island, Fat Face, Coast, Trucco and Principles to its Robinsons, John Little and Marks & Spencer brands. But growing competition from the deluge of international brand names being brought into Singapore - the likes of Mango, Zara, Massimo Dutti, Gap and Banana Republic - has threatened Robinson’s hold on the local retail market.

And, on paper, Robinson’s net asset value per share was $2.67 as at Dec 31, 2007 - a far cry from Al-Futtaim’s offer price of $7.00.

Al-Futtaim has justified its interest by saying that Robinson will be able to leverage on the group’s extensive retail expertise - Al-Futtaim represents such leading brands as Ikea, Marks & Spencer and Chrysler - while serving as a platform for Al-Futtaim’s geographical diversification in the South-east Asian region.

But does this sort of investment make the same sense for Lippo?

It would be hard to imagine Lippo making a counter-offer for Robinson at above $7.00 a share. Its reluctance to take over the retailer can be gleaned from its refusal, back in April 2006, to buy more than 30 per cent of Robinson and on what little it’s done with the retailer - in terms of leveraging on and building up its brand name and regional presence - since taking up its stake.

It might be easier to fathom Lippo selling its stake in Robinson to Al-Futtaim, which would free up the Indonesian group to concentrate on its heavy investments in property . The $180 million it would receive from Al-Futtaim, for its 25.78 million shares in Robinson, would come in handy in this respect.

Reluctance to bear a loss?

Still, given that Lippo paid $7.90 a share for its Robinson shares in April 2006, it might be reluctant to bear a loss by accepting Al-Futtaim’s offer of $7.00 a share.

Lippo might choose to continue to do nothing, as it has done so far - and hope for Al-Futtaim’s bid to fail. The offer will lapse if Al-Futtaim fails to get acceptances amounting to at least 50 per cent of Robinson, which would make the offer unconditional.

Al-Futtaim already has acceptances amounting to 26.69 per cent - which includes the 23.19 per cent pledged to it by Silchester International, Aberdeen Asset Management Asia and Tecity.

Without Lippo’s help, Al-Futtaim will have to secure the remaining 23 per cent or so worth of acceptances by itself. OCBC’s stake of some 6 per cent could go far in deciding the outcome, by the offer deadline of April 3.

Source : Business Times - 19 Mar 2008

It will also field a car in this year’s Porsche Carrera Cup Asia series.

Luxury residential property developer SC Global Developments is zooming into the motorsports arena by fielding a car in this year’s Porsche Carrera Cup Asia series and becoming the title sponsor of the Singapore round of the race.

As a result, the September event will be officially named the ‘Porsche SC Global Carrera Cup Asia - Singapore 2008′ and it will take place before the inaugural 2008 Formula 1 SingTel Singapore Grand Prix as a support race.

‘The attention of motorsports fans around the world will undoubtedly be focused on Singapore later this year when it stages its first Formula 1 Grand Prix and the first ever Formula 1 night race,’ said SC Global chairman and CEO Simon Cheong yesterday in a speech to announce the sponsorship.

‘SC Global is proud to contribute to what will be both an enormously successful event, and one which will put the spotlight firmly on this dynamic city.’

SC Global will be the title sponsor for only the Singapore race, not the whole series, which begins with next weekend’s F1 race in Sepang, Kuala Lumpur, and ends with the Macau Grand Prix in November.

This means that during the Singapore race, all 18 Porsche cars in the competition will have the SC Global name plastered on the front windscreen - considered the most prominent spot on the car. In the other races, only the Porsche name will occupy that position.

No mention was made of the sponsorship amount, with Porsche Asia Pacific citing confidentiality agreements. But within motorsports circles, a title sponsor is understood to typically pay a six-figure sum for what is the highest level of sponsorship. In this case, it is expected to be more than 100,000 euros ($213S,703) but likely to be less than 500,000 euros.

In addition, SC Global will be paying up to 300,000 euros for running a team for the season total of seven race weekends.

This includes the Porsche 911 GT3 Cup car (under 130,000 euros), a services package (about 65,000 euros), parts and tyres, as well as travel and accommodation costs.

It was also announced at yesterday’s press conference that DBS would be the official financial services partner for the Porsche Carrera Cup Asia 2008 season. Like SC Global, Singapore’s largest bank’s sponsorship will also have a ’special focus’ on the race in Singapore.

SC Global and DBS will be joining international names such as Mobil, Michelin and adidas, among others, as Carrera Cup sponsors.

Meanwhile, the Porsche Centre Singapore has donated $50,000 each to the Mainly I Love Kids (MILK) Fund and The Straits Times School Pocket Money Fund.

Karsono Kwee, executive chairman of the Eurokars group of companies, ceremonially handed over the cheques yesterday at the Porsche Pit Stop Singapore held at the Padang.

S Iswaran, Minister of State for Trade and Industry, who attended the function said that preparation for September’s Formula One race was in ‘advanced stages’, with the completion of road works and the pit building expected by end May and end June respectively.

Source : Business Times - 15 Mar 2008