Saturday, June 25, 2011

歐債擔憂擴大 瑞士法郎跌新低

歐債擔憂擴大 瑞士法郎跌新低

(布魯塞爾25日訊)隨著歐元區債務擔憂在週五擴大至意大利,投資者對危機可能擴散的恐懼,推動歐元兌瑞士法郎跌至歷史新低,以及拖累美國股市和金價下跌。


歐元兌瑞士法郎最低跌至1.1844瑞士法郎,因市場擔心希臘主權債務危機向該國以外地區和歐元區銀行體系進一步蔓延。

此外,穆迪表示,正在考慮下調意大利多家銀行的信用評級。此消息導致數家意大利銀行的股價出現劇烈波動,被暫停交易。至於10年期意大利國債與德國國債的收益率之差,也擴大至213個基點,創1999年1月歐元誕生以來的最高水平。

歐元危機擴散的憂慮拖累美國股市收低。同時,也使黃金期貨在週五走低,結算價僅略高於1500美元。


Source/转贴/Extract/: Oriental Daily
Publish date:25/06/11

冷眼: 财富不能无中生有

财富不能无中生有

这些原则包括:

1.一定要相信:财富不能“无中生有”,一定要有“价值”作为后盾,才能持久。没有价值的资产,就是“泡沫”,随时会消失。没有价值的股票,有如建在沙丘上的大厦,随时会倒塌。

2.没有成长的股票不会增值,成长时有时无,甚至负成长的股票价值飘浮不定,股价随之起舞,很难捉摸。

3.最好的股票,是盈利长期保持稳健成长的公司的股票,稳健但长期成长,胜过高成长但不稳健的股票。成长率不必高,只要年年取得15%以上的成长,就可以成为蓝筹股,值得长期持有。

4.价值“需要时间去创造,不能一蹴即成。果子需要时间成熟,树木需要时间成长,同样的,生意需要时间去完成。

生意是一种过程,从买原料,制成产品、销售、收账,每个环节都需要时间去完成,需要按步就班进行,绝无魔术可变。

你必须给时间让你所投资的公司去完成这个过程,为你创造价值,故投资宜长期,长期才能累积财富,并无捷径可循,快餐式的投资无法致富,快速致富根本行不通。

5.长期投资只需看股市大势,不必理会短期的波动,预测短期股市成功的巴仙率很低,不值得去尝试。


Source/转贴/Extract/:南洋商报 (分享锦集:为何没有第二个巴菲特?(下))
Publish date:25/06/11

Weekend Comment Jun 24: Yangzijiang breaks into large vessel sector with 2 wins

IN WHAT ANALYST are calling a “positive endorsement of its shipbuilding capabilities and track record”, Yangzijiang Shipbuilding this month bagged new orders to build 15 10,000 TEU container ships of its own design, making it the first privately-owned shipyard in China capable of building ships of that size.

On June 23, the Jiangsu-based shipyard signed a Letter of Intent (LOI) to build eight of its 10,000 TEU mega ships at an estimated value of US$800 million ($990 million) in total for German shipping fund Peter Dohle. With Yangzijiang’s help, the fund has also successfully obtained up to US$1 billion in loans from the China Development Bank to pay for the ships over the next five years. The three parties also inked an agreement to cooperate on other projects in the future.

The deal comes just two weeks after Yangzijiang officially announced a long-awaited contract to build seven similar ships for New York-listed Seaspan Corporation. Due for delivery between 2014 and 2015, the contract also comes with options to build an additional 18 units, which, if fully exercised, could boost Yangzijiang’s revenues by US$2.5 billion over the next few years.

All in, the two new contracts will grow Yangzijiang’s order book by 28% from US$5.4 billion in 1Q2011. But more importantly, the wins underscore Yangzijiang’s successful move out of the 4,500 TEU and below segment stronghold -- where it has a 22% market share - and into the large-sized container ship sector, where demand is now stronger. Increasingly, ship operators are replacing smaller vessels with larger ones to improve load efficiency and save on bunker costs. In fact, Yangzijiang had actually been in talks with Seaspan to build the ships since February.

But while the new orders will keep Yangzijiang busy amid a weak shipping market, Low Pei Han of OCBC Research warns: “Despite encouraging news from the large container vessels’ front, the outlook for the newbuild bulk carrier segment is relatively weak, and vessel values are pressurised partly due to the high volume of deliveries expected in 2011. Though Yangzijiang has successfully received orders for its 10,000 TEU container ships and should benefit from increased demand from such products, the group may still be affected by weaker sentiment in the bulk carrier segment.”

Meanwhile, other analysts caution that the timing of the Peter Dohle orders will be dependent on Seaspan’s decision to exercise its vessel options. “The timeline for the LOI with Peter Dohle to be made effective is unclear at this juncture and is dependent on the number of options taken up by Seaspan and scheduling of vessel deliveries. Hence, we exclude this LOI from new orders secured for now,” Lim Siew Khee of CIMB writes in her report.

But Jon Windham of Barclays Capital points out that Peter Dohle has actually placed over 30 vessel orders with Yangzijiang in the past decade, four of which are still on order, adding validity to the agreement. “We continue to believe that the primary advantage of Chinese yards is the ability of Chinese banks to provide funding and filling the void of lower ship financing from European banks,” writes Windham, who expects “established yards (such as Yangzijiang) to continue to win the lion's share of new order flow for the balance of the year.”

On the whole, most analysts who cover Yangzijiang appear to be bullish. Eric Ong of Kim Eng, who initiated coverage on the stock on June 7, believes the shipbuilder is “well‐positioned for more sustainable earnings in the light of its plan to double its production capacity over the next five years.” He recommends a buy and values the stock at $2.15 each, representing an upside of about 40% from current levels. Shares of Yangzijiang have fallen more than 20% since the start of the year, closing June 24 at $1.45 each.



Source/转贴/Extract/: www.theedgesingapore.com
Publish date:24/06/11

The world, as Roubini sees it

Business Times - 25 Jun 2011


The world, as Roubini sees it

It's not a pretty picture - 2011 has so far been a 'good' year for any prophet of doom. The renowned economist discusses what else could go wrong

By VIKRAM KHANNA
ASSOCIATE EDITOR

NOURIEL Roubini, who predicted - in astounding detail - the 2008 global financial crisis, is the new 'Dr Doom' among economists. He also probably represents the closest an economist can come to being a rock star.

Although he still has the demeanour of a slightly dishevelled academic (he is professor of economics at New York University's Stern School of Business, currently on sabbatical), he is a celebrity, chased by the media and sought for speaking engagements.

He spends most of his time roaming the globe, consulting with clients, which include governments, corporations and hedge funds. He is booked for breakfasts, lunches, dinners and even teas. He writes his columns (which appear on his website, RGEMonitor.com and are also syndicated to newspapers) on long-distance flights. He has people to handle his schedule of appointments.

At a recent roundtable discussion over tea with some 20 financial industry people at the Bloomberg offices in Singapore, Professor Roubini was in his element. He spoke for some 90 minutes, non-stop, without notes and with the fluency of an actor delivering his lines. He covered a vast amount of territory, alerting his audience to current crises and potential crises across the world.

Flood of negative news

2011 has so far been a 'good' year for any prophet of doom, given the flood of negative news: the turmoil in the Middle East; the earthquake and tsunami in Japan; the debt woes of Greece, Ireland and Portugal; concerns of a renewed economic slowdown in the United States; rising inflation in Asia; and unrest in China. Any or all of these problems could get worse.

But Prof Roubini prefers to begin on a positive note. Some good things have happened post-crisis, he points out. Output in the major economies has recovered to pre-crisis levels. The tail risks of a double- dip recession in the United States and a disorderly collapse of the eurozone are lower than a year ago. High-grade companies have strong balance sheets, and are sitting on some US$2 trillion in cash. If they get more confident, they will spend more on capex, hiring and acquisitions, and may even become engines of a growth revival.

The world is witnessing the secular rise of emerging economies - not just China and India, but also countries in Latin America, Eastern Europe and Africa, as well as the oil-rich Middle East.

An illustration of how much less skittish and panicky the markets, at least, have become: last year, the problems in Greece, which accounts for barely 2 per cent of eurozone GDP, triggered an equity market correction of almost 20 per cent. This year, potentially much greater risks, such as rising commodity prices, the mayhem in North Africa and the Middle East and the disaster in Japan - on top of continuing problems in Greece - have led to a much smaller correction.

However, during the last month, things have taken a turn for the worse. The downside risks to the global economy have been magnified, according to the don.

Take the world's largest economy. Optimists suggest it has hit a soft patch, but Prof Roubini insists that it's worse than that. After a weak first half, the US economy looks set to remain weak for the rest of the year and into 2012. The US public sector (including state and local governments) is deleveraging through spending cuts, which is hurting the private sector; the labour market is in a funk, with unemployment stuck at 9 per cent plus; the housing market has fallen every month since last August, and is nowhere near turning. A year from now, he suggests that about half of US mortgages will be underwater. The result: more foreclosures, more housing supply, and still lower prices.

On Wednesday, the US Federal Reserve confirmed that the economy is indeed doing worse than expected. It projected growth in 2011 to come in at 2.7-2.9 per cent - about the same as in 2010.

Fed chairman Ben Bernanke appeared nonplussed. 'We don't have a precise read on why this slower pace of growth is persisting,' he said.

If the future for the US economy is bleak, the prospects for the eurozone are even worse, according to Dr Doom.

The sovereign debt problems of the countries of the so-called periphery of the eurozone - Greece, Ireland and Portugal - are chronic. In the immediate aftermath of the global financial crisis, banking risk became sovereign risk because the bad debts of banks were taken over by governments. Now, sovereign risks are becoming banking risks because the large debts of distressed governments are sitting mostly on the balance sheets of banks. The eurozone's banks need to be cleaned up - but it's not happening. This is all the more urgent for the fact that banks play a much bigger role in financing the real economy in Europe than in the US, where the capital markets are more active.

The peripheral countries face issues of insolvency, not illiquidity, said Prof Roubini. Even if Greece endures every austerity prescribed by the International Monetary Fund (IMF), its public debt will be 160 per cent of GDP; remember, he adds, that Argentina defaulted in 2002 when its public debt was about 50 per cent of GDP. So the question for Greece is not whether debt restructuring will occur, but when. The sooner the better, or else the risk of a disorderly restructuring will rise.

Portugal and Ireland will be like Greece, he said. One to two years out, they too will lose access to capital markets and their debts will need to be restructured.

But the elephant in the room is Spain. It's too big to fail, but maybe also too big to save, under existing arrangements for emergency funding in the eurozone. Prof Roubini sees 'a meaningful chance' of Spain also losing market access in the next 18 months - which is not yet priced in.

More shocks in eurozone

After the bursting of a humongous property bubble, Spanish home prices have fallen only 11 per cent from their peak. They will probably fall 30-40 per cent, said the professor. And like elsewhere, the losses will end up on the books of the government - which could lead to the eurozone's biggest sovereign debt crisis yet.

You would expect that the European Central Bank (ECB) would be trying to help the eurozone's struggling periphery. But in many ways, it's making the situation worse, according to Prof Roubini. 'The ECB is on an inflation jihad; inflation is its single mandate. It doesn't care about growth, unemployment, banking problems or competitiveness.'

And so, the ECB goes on raising interest rates. It will probably hike by a total of 75 basis points in 2011, and then some more in 2012. It views the problems of the periphery as being structural and fiscal - in other words, not its business. 'But the reality,' said Prof Roubini, 'is that the more the ECB raises rates, the stronger the euro becomes, the greater the loss of competitiveness. Growth won't recover, and fiscal, banking and debt problems will get worse.'

Japan in a jam

Okay, so the US and Europe look bad. What about Japan?

Prof Roubini noted that normally, earthquakes and tsunamis do not have enduring economic consequences. But this time it may be different in the case of Japan, for four reasons.

First, we still don't know the full extent of the nuclear contamination resulting from the damage to the Fukushima nuclear facility. Second, one consequence of the disaster has been a reconsideration of nuclear power around the world, especially in Europe. This will put upward pressure on oil prices, which is bad for the global economy. Third, the Japanese disaster has disrupted the global supply chain for key components such as semiconductors and auto parts, hurting production. Finally, there are questions about how Japan - which is already running a fiscal deficit of 10 per cent of GDP - will finance reconstruction.

If it does so through tax increases, this would deepen Japan's recession. If it increases public debt, this would lead to higher rates on Japanese government bonds, which would crowd out investment and weaken growth. If it tries to repatriate savings from overseas, the yen would soar - and the last thing Japan needs right now is a stronger yen. The only pro-growth way of financing reconstruction is through monetisation, but the Bank of Japan (BOJ) is opposed to this option.

You might think emerging economies such as those in Asia are the saving grace of the global economy. But their strengths are, in many ways, also weaknesses, according to Dr Doom.

Most Asian economies are growing at faster than their potential (long-term) growth rates, leading to overheating, high inflation and frothy real estate markets - as is evident in parts of China, India, Hong Kong and Singapore.

Some of these countries - those which use interest rates as a policy instrument - are 'behind the curve on monetary policy', Prof Roubini said. One of the key problems is that they are reluctant to let their currencies strengthen unless China takes the lead - which is not really happening. Right now, the risk of a hard landing for Asian economies is small, he said. But the longer they take to rein in their monetary policies and frothy asset markets, the more that risk will increase.

Of particular concern, according to the professor, is that China's economy will have a hard landing sometime around 2013-14.

Recall that during the global crisis in 2008/09, China's exports collapsed from 11 per cent of GDP to 5 per cent of GDP. Yet China was still able to get 8 per cent growth in 2009 when most other economies in the region tanked. How did it achieve this miracle? Essentially by ramping up investment, which rose from 42 per cent of GDP to almost 50 per cent in two years. (China's consumption remained at 35 per cent of GDP.)

China basically went on a massive investment binge, building commercial and residential real estate, infrastructure, railroads, highways, airports, ghost towns - you name it.

State-owned banks gave cheap loans to state-owned enterprises who were directed to produce more capacity, when there was already a glut.

According to Prof Roubini, if history is any guide, China's economy is headed for trouble. 'Every episode of overinvestment historically has ended up in a hard landing,' he pointed out. 'The Soviet Union in the 1960s and 1970s, Latin America in the '70s, East Asia in the '90s. There is not a single case in the last 50 years where it hasn't happened.'

What's more, China's overinvestment has been bigger than these past cases. 'In East Asia, investment was 40 per cent of GDP at bust time,' he noted. 'In China, it's already 50 per cent of GDP.'

Overinvestment typically leads to two problems, he added. One: a massive nonperforming loan problem in the banking system. That's on the cards for China, where about one-third of infrastructure projects have zero cash return. And two, the emergence of massive overcapacity, which implies an investment bust will occur.

'Three-quarters of global capacity for cement, steel and aluminium comes from China,' he pointed out. 'So when they run out of building highways, airports and railroads, where will this capacity go? It will be dumped on global markets. It will be a source of global deflation. It will also lead to protectionism. Nobody will accept China dumping its steel on global markets. It's going to be a problem not only for China but for the global economy.'

But that's a story for 2013-14, he said. For now, there are other sources of gloom to worry about.



Source/转贴/Extract/: www.businesstimes.com.sg
Publish date:25/06/11

DXN Holdings (icapital)

By taking charge of its upstream activities, the costs of producing its products can be better managed, However, it does face cost price inflation for ingredients such as cocoa and coffee powders which are sourced from third parties. Cocoa and coffee powders are ingredients used in its best­selling products - Lingzhi coffee product series and Cocozhi (cocoa beverage with Ganoderma extract). Some of its other popular products include Lingzhi health food supplement and Spirulina product series. In 2010, the group increased its product prices by 3-5% to protect its profit margin from rising cost. The group is also currently developing its own technology to process coffee powder, It has a pilot coffee processing plant that has recently produced a new variant of the DXN Lingzhi Coffee series, known as Lingzhi Coffee 3 in 1 Lite. However, the group will need to fine­ tune its aroma extraction process before expanding the pilot plant into a bigger scale.

Comments on Revenue
Revenue has increased at an annual compound growth rate of 19.5% over the past decade. This is driven by two factors: [1] new products launched and [2]. expansion into new markets. DXN initiates the launch of new products, while its members are the driving force behind the expansion into new markets. Under the "One World, One market" concept, its members are the entrepreneurs in introducing DXN business to different parts of the world. They are strong marketers who have the sensitivity and knowledge in assessing the potential in overseas markets. DXN will consider incorporating a subsidiary and setting up a branch in the particular country when there are sufficient sales and active members. Driven by the entrepreneurial spirit of its members, the group has actively ventured into countries in Latin America, the Middle East, Europe, and Africa. Revenue growth in countries such as Mexico and Peru (recorded under the "others" segment) have, in recent years, helped to offset the lacklustre performance in matured markets such as Malaysia, Philippines, and Thailand

Comments on Expansion

With its expansion into faraway countries, the group faces new set of challenges such as product registration, inventory management, and currency risk.

Although Lingzhi is well-known in Asian countries for its health benefits of improving immunity and metabolism, it is largely unheard of in Africa and Latin America. As such, the group faced delays in product registration for its Lingzhi health supplement in countries such as Mexico, where the product took three years to be verified and classified as an agricultural product by the country's health authority. Knowing that health supplement products will take a longer time to be approved in certain countries, the group has thus changed it strategy to introduce commonly accepted products such as Lingzhi coffee product series and Cocozhi in new markets. Its members will also be more accepting in purchasing the higher-priced Lingzhi health supplements after they have realised the benefit of Lingzhi through the consumption of Lingzhi beverages. As such, sales in new markets such as Mexico has increased significantly despite the delay in product registration for the higher-margin health supplement products for its first three years in the market.

The longer shipment time in faraway countries and the initial uncertainty in forecasting the demand in new markets have led to inventory management issues. For instance, the group has to opt for the higher cost air shipment when there was a serious shortage of its products in Peru. Typically, the goods are transported via ships which takes about 45 days versus 7 days through air shipment. As such, the group has suffered losses in its initial operations in Peru.

Comments on Currency Risk
Given that the group's costs are mainly incurred in RM, it faces currency risk as the revenue are collected in various currencies, particularly in US$. With the RM appreciating against the US$, the group's margin has been affected by foreign exchange losses. To mitigate its foreign exchange risk, the group has used natural hedging such as having part of its cash balance deposit in US$ and borrowing in US$. It has also recently entered into a forward currency contract at a rate of RM3.1 per US$ for 1 year till May 2012.

Comments on Property Division
Another business segment of the group is the property business, where it is involved in residential development project in Penang and Perlis as well as a mixed development project in Alor Setaro The residential property project in Penang has been completed, with all the units obtaining the certificates of fitness. Out of the 94 housing units, 20 units remain unsold, which the group hopes to sell out at a price of about RM700,000 per unit. Meanwhile, the company has also acquired a few pieces of freehold land in Perlis with the intention to carry out the development for 19 shop units and 71 residential units. The group expects to obtain the regulatory approval and embark on the project in Perlis by year end. The mixed development project in Alor Setar is known as the Stargate Project that involves about 300 acres of land to be developed in five phases. The group has completed the first phase which consists of 220 shop office units and a hypermarket, Tesco.

With Tesco as the main draw, all the shop units in phase 1 are sold with the exception of 27 units that are rented out for recurring income. The group has completed the land acquisition for the second phase, which consists of 112 shop units. However, as the next Kedah state election could see the current housing policy of 50% bumiputera ownership reduced to 30%, the group will only actively market the shop units after it has received a clear direction of the housing quota policy.

Conclusion and Advice
With the stellar performance of its MLM business over the past decade, the continual success of DXN hinges on its products' quality and the entrepreneurial spirit of its members in penetrating new markets. In the near term, the revenue growth drivers for DXN will come from Mexico and Peru as well as newly penetrated countries such as Chile, Russia, and Argentina. The group's property business is not expected to contribute significantly at the profit level, and the group intends to exit the property business once it has completed the outstanding projects.

Although the MLM business generates stable operating cashflow and requires low capital expenditure, the group has incurred substantial debts in recent years due to its diversification into capital intensive but unrelated businesses such as biodiesel projects, trading of timber concession rights, and property development. Except for property development, the group has exited the other businesses. It has also paid off the RM85 min collateralised loan obligation, which bears a high interest rate of about 7.20% per annum. Going forward, the group's cashflow position and balance sheet is expected to strengthen as it focuses on developing its scalable MLM business. In Sep 2010, the group has announced its new dividend policy of distributing at least 50% of its profit to shareholders, which will be distributed every quarter.

Although DXN's business fundamentals remain intact, taking into account the turbulent outlook of the global economy, iCapital revises the rating for DXN Holdings to Buy below RM1.20 for the long term.





Source/转贴/Extract/: icapital
Publish date:24/06/11

美联储无新招式 如何自保为大事

美国联邦储备局在周三举行了公开市场操作委员会会议,也就是讨论美联储利率走势,结果就如市场所预料,美联储的利率维持不变,保持在0-0.25%,换句话说,也就是相当于零利率的环境,美联储也承诺会长时间维持此利率在低水平,也重申会继续把债券收益再投入政府债券市场,以维持资产负责表的规模。

承认经济转趋疲弱

  更重要的讯息是在会议后的声明,美联储承认经济转趋疲弱,复苏速度较预期为慢,劳工市场指标也较预期疲弱。与此同时,因美元弱,通胀上升,但声明指出导致经济转弱及通胀上升的原因都是暂时性的,其中的一个因素是日本311地震,故过了一阵子,经济会好转,通胀会回落。

  美联储认为经济增长速度放慢,是因为食品及能源价格上升,削弱了消费者购买力,故经济复苏速度会在未来数季重回正轨,失业率也会下调至美联储预期水平。

  从这些资讯中,可知美联储应该不会推出第三轮的量化宽松货币政策(QE3),因为美联储将会用回笼资金,而不是再印钞票去购买政府债券。换句话说,接着下来的12个月,也就是一年内,要有足够的经济复苏速度才能令美联储真正开始加息。

  也许美联储也发觉用了二轮的量化宽松货币政策后对美国股市有很大的帮助,但在刺激经济的作用似乎不是很大。毕竟,美国目前的经济信心依然非常脆弱,导致银行体系内的流动资金很多。而造成这一现象的原因正是经济信心不足,银行为避免坏账增加而不敢放贷。

  一句话,美国以依赖国内消费来推动经济增长的管道似乎已逐渐枯竭,因此量化宽松货币政策这贴药所发挥的作用有限。

  另一方面,由于美联储应该不会推出第三轮的量化宽松货币政策,有理由相信美元的走势应该会停止总体跌势,一旦经济数据有所改善,走势应该会是掉头向上!

  自2008/09年美国因金融危机以来,为了救市,推出了第一轮及第二轮量化宽松货币政策,共2万3000亿美元,通过购买金融资产为银行体系创造流动性资金,先解决金融系统性风险,再以超低利息环境鼓励银行增加商业信贷,从而刺激经济复苏。好了,前期的目标是达到,但后期目标却是事与愿违。

  现在看来,二轮的量化宽松货币政策不但不能挽救美国经济,更因大量流动性资金而向全世界输出通胀,以及引起债务危机。由于美元供给大增,故其价格必定下跌,这样一来却对利差交易有益,造成了国际游资及热钱四出炒作,资产泡沫成形,商品价格大升,全球通货膨胀。

  但是我们也不能低估美国,由于美元相对的弱,目前如果以制造业来说,一件商品在美国生产并不会比在传统的世界工厂地生产来得贵,由此观之,若跨国制造业大商家在精打细算下觉得生产总体成本在美国还比在世界工厂便宜,那么生产外包的流程绝对有可能迁回本土。果真如此,美国的失业率指标肯定会大大改善,这真是此一时,彼一时,风水轮流转也!

  反观中国,本周一才又从银行体系中抽掉数千亿人民币的流动资金,因为储备金率又调高了0.5%,看了世界经济体规模排第一的美国和排第二的中国的情况,有天渊之别呀!

  只是目前的经济前景的确不乐观,而在亚洲的二大主要金融中心的香港与新加坡,资产泡沫是明显的,尤其是香港,过去30个月,楼价几乎是每个月以约平均2%增长,太恐怖了。

  说真的,大家都没有水晶球,唯有自保吧。



Source/转贴/Extract/: 联合早报
Publish date:24/06/11

Drop in oil price boosts airline stocks

The Star Online > Business
Saturday June 25, 2011

Drop in oil price boosts airline stocks

By TEE LIN SAY
linsay@thestar.com.my

PETALING JAYA: Airline stocks in the region gained after Thursday's 5% drop in crude oil futures price to US$91, following the International Energy Agency's (IEA) announcment that members would release 60 million barrels of oil from emergency supplies to replace lost Libyan oil exports.

Malaysian Airline System Bhd (MAS) rose to its highest level in almost a month. Shares of the national carrier closed 8 sen higher at RM1.53 on volume of 9.74 million shares. The stock's year high was RM2.22 on Jan 7. Low-cost carrier AirAsia Bhd was up 13 sen at RM3.29 on volume of 6.13 million shares.

Across the region, Korea Air Lines was up 3.9% in Seoul, and Cathay Pacific rose 4.1% in Hong Kong. In Shanghai, China Southern Airlines was 4.2% higher, All Nippon Airways gained 0.4% in Tokyo and Qantas Airways rose 2.2% in Sydney.

Analysts said that lower oil prices were positive for MAS as it was only 33% hedged. Thus, when MAS has more exposure to the spot market, and oil prices go down, this benefits the company.

Nonetheless, analysts aren't ready to cheer just yet, particularly since MAS is still having difficulty raising fares.

Furthermore, MAS' second-quarter losses are expected to be much larger than that in the the first quarter.

For its first quarter just ended, MAS saw its cost per available seat kilometre (ASK) escalate by 3.4% year-on-year to 26.6 sen/ASK due to increase in fuel prices, advertising and non-aircraft depreciation expenses. Fuel cost now contributes to 38% of total operating expenditure.

“The second-quarter loss could expand from the first-quarter level as it is the seasonally weakest quarter and jet fuel prices will average US$133 per barrel in the second quarter compared with US$111 in the first quarter. However, we expect MAS to turn profitable in the third to fourth quarter, which are seasonally the strongest quarters for the airline,” said an analyst from CIMB Research.

On MAS' recent deal to buy an additional 10 next-generation 737-800 aircraft from Boeing in a deal said to be worth over US$800mil (RM2.43bil), an airline analyst said there had yet to be any impact, as deliveries would only happen in 2015 onwards.

MAS also recently join the oneworld alliance membership, which is one of the three major international alliances which provide convenient marketing branding to facilitate travellers making inter-airline code-share connections with countries.

On this membership, MAS said the benefits to passengers included tapping into a global network of connectivity, having a seamless travel experience, frequent flier benefits and airport lounge access.

While analysts said that joining oneworld is the right move, particularly on its tie-up with Qantas, benefits would only start flowing through in 2013.

Source/转贴/Extract/: TODAYonline
Publish date:24/06/11

High-speed rail will spur growth in hub cities

The Star Online > Business
Saturday June 25, 2011

High-speed rail will spur growth in hub cities

REALTY CHECK
By DATUK ABDUL RAHIM RAHMAN

THE Kuala Lumpur-Singapore High Speed Rail (HSR) has been highly anticipated ever since the Malaysian Prime Minister announced in September 2010 the instigation of the HSR connecting the two neighbours. Initiated by YTL Corp Bhd way back in the late 90s, this RM8bil to RM14bil project has so far received mixed views from the public.

HSR has been operating long ago in our Asian counterparts especially in Japan, China, Taiwan and South Korea. For comparison, China's HSR network by the year 2013 will be at 6,000 km, exceeding Japan's HSR network of 2,459 km. Last year, in the United States, the Obama administration invested US$8bil in federal stimulus money to create 13 high-speed rail corridors and billions of dollars of new business and tens of thousands of jobs are expected to flow to four hub cities Los Angeles, Chicago, Orlando and Albany, NY where plans for major high-speed rail networks are located.

It was reported at the Conference of Mayors that the benefits of travelling between 110 mph and 220 mph will mean better connectivity, shorter travel times and new development around train stations. The changes will create 150,000 new jobs and some US$19bil in new businesses by 2035. The rail network is also expected to spur tourism, give businesses a wider pool of workers to choose from and help grow technology clusters in cities.

Similar to experiences in other countries, in Malaysia, HSR will also generate substantial economic benefit to both countries, particularly Kuala Lumpur City Centre and the Iskandar region. The availability of HSR will shorten the distance between Malaysia and Singapore in terms of travelling time, hence attracting a larger pool of market catchment to stay in Malaysia and work in Singapore or vice versa. Straddling around 400 km, the proposed HSR will reduce travelling time to Singapore to 90 minutes compared to existing trains which take about seven hours. The significant reduction in travelling time will attract foreign companies to operate in Kuala Lumpur or Iskandar.

While the occupation cost (gross rental rate) for prime office space in KL City Centre range between RM6 per sq ft (psf) and RM8 psf, the cost in Singapore range between RM25 psf and RM30 psf. Meanwhile, the current rental rate in Johor Baru, where most of the buildings are more than ten years old, range from RM1.40 psf to RM3 psf. The low rental market in Johor Baru is hardly surprising as it is mainly domestic-demand driven. With ambitious Iskandar initiatives coupled with various investment friendly policies, the HSR will further augur the Johor Baru office market, hence attracting more MNCs to operate in Johor Baru. Upon completion of the HSR, gross rental rate for new Grade A office towers in Iskandar is expected to hover between RM4.50 psf and RM4.80 psf, 50% to 60% higher than the highest rate achieved in Johor Baru city centre.

Meanwhile, average selling price for existing condominiums in Johor Baru range from RM230 psf to RM370 psf. Capital value for existing condominiums in Johor Baru registered mixed performance from as high as 23% growth while some even noted depreciated values by -19%. Imperial@Puteri Harbour registered the highest selling price at RM400 psf. I believe the HSR will add vibrancy to the high rise properties in Johor Baru. Current average rental rate at RM2 psf in Johor Baru is estimated to increase by 50% to 60% arriving at RM3 psf, which is still below Kuala Lumpur rental rates, averaging at RM4.50 psf. Therefore, it is timely for the HSR to be in place as it will help improve demand from locals and Singaporeans for high-rise residential properties.

The tourism industry has grown favourably, with tourist arrivals increasing from 5.2 million in 1997 to 24.6 million in 2010 in Malaysia and 10.2 million to 11.6 million in Singapore during the same period. The proposed HSR is also expected to create positive impacts to the tourism industry of both nations. With combined tourist arrival of about 35 million coupled with 90 minutes commuting time, Kuala Lumpur-Iskandar-Singapore will be able to position themselves as the transportation hub of South-East Asia as it will provide tourists a wider airline selection to choose from either in KLIA, LCCT or in Changi Airport hence, improving international access to the region. In addition, the HSR in Shanghai and Tokyo are one of the “must see” tourists' attractions in the respective countries.

Manufacturing will remain as one of the sources of income to both nations. As land in Singapore is becoming scarce with limited land for expansion, coupled with escalating business costs, the HSR would enable some companies to expand or relocate to Malaysia, particularly in the Iskandar region. Moving manufacturing activities to Iskandar would allow the land to be used for even higher value activities. Malaysia's relatively liberal immigration policies and substantially cheaper labour costs in Iskandar compared to Singapore will reduce the operating costs. The relocation of manufacturing activities to Iskandar via the availability of HSR is expected to raise the contribution of the manufacturing sector to the nation's GDP by 6.5%.

The closer cross-border link between Malaysia and Singapore will eventually position the region as the first South-East Asian “mega region” similar to Tokyo-Osaka via the Shinkansen Bullet Train, and Shanghai-Hangzhou via the Huhang High Speed Rail among others. While it is noted that existing mega regions are within the same country under the same political driver, with strong political determination, deeper mutual understanding and putting aside all long standing aggravation, Malaysia and Singapore can materialise the idea. We should learn from the European experience; the Eurostar train link has helped to strengthen economic activities in both London and Paris.

In essence, the HSR will economically benefit both nations and strengthen economic ties between the two nations. A larger joint economy will result in larger land area, larger population and larger market, offering greater economies of scale. In addition, larger joint economy with a more diverse mix of skills, types of companies, types of business activities and greater variety of business locations, could accommodate the diversity of talents, business activities, consumer preferences and skill sets. All this will be made possible via improved connectivity by the High Speed Rail, which has been proven to stimulate local economies and act as a driver of growth and thus help spur property prices.


Senator Datuk Abdul Rahim Rahman is executive chairman of Rahim & Co group of companies

Source/转贴/Extract/: TODAYonline
Publish date:24/06/11

Genting HK to raise RM600mil bonds

The Star Online > Business
Saturday June 25, 2011

Genting HK to raise RM600mil bonds

KUALA LUMPUR: Genting Hong Kong Ltd, formerly known as Star Cruises Ltd, is raising bonds worth about 1.28 billion yuan (RM600.18mil) for general corporate purposes, said a source in its associate company.

The bonds are three-year bonds with a yield of 3.95%. It was reported that Genting Hong Kong had hired CIMB Group Holdings Bhd, HSBC Holdings Plc, Malayan Banking Bhd and UBS AG to help with the sale of three-year, yuan-denominated bonds in Hong Kong.

Genting Malaysia Bhd owns an 18% stake in Genting Hong Kong. Apart from owning Star Cruises, Genting Hong Kong is a co-owner of Resorts World Manila and also has a 50% stake in Norwegian Cruise Lines (NCL).

Star Cruises together with NCL is the third largest cruise operator in the world, with a combined fleet of 18 ships cruising to over 200 destinations, offering about 35,000 lower berths. Resorts World Manila is Genting Hong Kong’s first foray in a land-based attraction. – By Tee Lin Say

Source/转贴/Extract/: TODAYonline
Publish date:24/06/11

Genting HK to raise RM600mil bonds

The Star Online > Business
Saturday June 25, 2011

Genting HK to raise RM600mil bonds

KUALA LUMPUR: Genting Hong Kong Ltd, formerly known as Star Cruises Ltd, is raising bonds worth about 1.28 billion yuan (RM600.18mil) for general corporate purposes, said a source in its associate company.

The bonds are three-year bonds with a yield of 3.95%. It was reported that Genting Hong Kong had hired CIMB Group Holdings Bhd, HSBC Holdings Plc, Malayan Banking Bhd and UBS AG to help with the sale of three-year, yuan-denominated bonds in Hong Kong.

Genting Malaysia Bhd owns an 18% stake in Genting Hong Kong. Apart from owning Star Cruises, Genting Hong Kong is a co-owner of Resorts World Manila and also has a 50% stake in Norwegian Cruise Lines (NCL).

Star Cruises together with NCL is the third largest cruise operator in the world, with a combined fleet of 18 ships cruising to over 200 destinations, offering about 35,000 lower berths. Resorts World Manila is Genting Hong Kong’s first foray in a land-based attraction. – By Tee Lin Say

Source/转贴/Extract/: TODAYonline
Publish date:24/06/11

Genting making inroads into overseas markets

The Star Online > Business
Saturday June 25, 2011

Genting making inroads into overseas markets

By CECILIA KOK
cecilia_kok@thestar.com.my

YOU cannot accuse Genting Malaysia Bhd of allowing its cash pile to remain idle. Not when it is busy ploughing funds into its global expansion programme.

The Malaysian resort and gaming giant has been making some headway in the global leisure and hospitality industry over the last one year, as it gains a foothold in the European and American markets.

In October last year, for instance, the company completed its acquisition of Genting Singapore plc's casino operations in the United Kingdom for a total cash consideration of 340mil (RM1.67bil). The operations there boast the largest number of casino properties in the United Kingdom, with 44 units, including five in London.

Last month, Genting Malaysia announced its second venture in the United States. This latest project, centered in the city of Miami in the southern state of Florida, comes after the company won the bid to build a video lottery facility at the Aqueduct Racetrack in New York City in August last year.

“Genting Malaysia is well positioned to expand its business overseas given its huge cash reserves; we expect such endeavour to boost the company's earnings potential over the medium to longer term,” an analyst shares with StarBizWeek.

As at the end of the first quarter (Q1) to March 2011, Genting Malaysia had an estimated net cash of RM2bil. The company had an accumulated cash hoard of RM2.87bil at the end of financial year (FY) ended Dec 31, 2010, compared with RM5.25bil at the end of FY2009.

“Unless a portion of its money is put to work, sitting on such a huge pile of cash could prove to be a costly luxury in terms of good investment opportunities foregone if it's not invested in high-growth markets,” the analyst explains.

Miami-wise

Genting Malaysia announced its acquisition of a 13.9 acres in Miami for US$236mil (RM718mil) last month. It plans to finance the deal through a combination of internally-generated funds and bank borrowings.

The acquisition, which was done through subsidiary Bayfront 2011 Property LLC, worked out to be US$390 per sq ft, which most analysts considered a fair price to pay for the premium location, and some considered the deal was to Genting Malaysia's advantage, given the still-strong ringgit against the dollar.

In OSK Research's recent analysis of Genting Malaysia's Miami venture, the local research house said Genting Malaysia's cash hoard has rightly put the group in a position as first-mover in a potentially lucrative integrated casino market should Florida liberalise the industry.

Gaming operations are currently banned from being built outside tribal lands by the state, although gaming giants such as the US-based Las Vegas Sands Corp have been lobbying to persuade lawmakers to allow for full casino gambling in the state.

According to OSK Research, casino income typically contributes more than 80% of Genting Malaysia's integrated property portfolios.

Hence, the liberalisation of the casino industry in Florida is crucial for the company to unlock value from its Miami investment.

Genting Malaysia has said that it plans to build a US$3bil (RM9.12bil) mixed development project comprising hotel, convention centres, restaurants, shopping malls and residential towers on the land it bought in Miami.

Last week, the company announced it had already appointed a local architect, Arquitectonica, to draw the master plan for its Resorts World Miami project, with the initial draft expected to be ready by the end of August.

What's missing at this point in time is the local authority's approval to build a casino operation there.

“Should it get a licence to operate a casino there, the payback for its investments in the Miami project would definitely be much faster, and that would serve as a much bigger catalyst in earnings potential,” an analyst explains.

According to market observers, the process of the company securing a casino licence in Florida, if it ever will, could take several years.

Hence, it is widely believed that Genting Malaysia would not rush into developing the Miami land. Pending further details, most analysts therefore remain neutral to mildly positive on the company's prospects there.


Overseas profits

Meanwhile, construction of Genting Malaysia's New York operations is steadily making progress, with the opening of Resorts World New York slated for the fourth quarter of this year. Contributions from the New York venture will likely be more meaningful after its full launch in the first quarter of next year.

To recap, Genting Malaysia won the bid to develop and operate a video lottery facility at the Aqueduct Racetrack in New York City in September last year through its subsidiary Genting New York LLC.

The facility, now known as Resorts World New York, will feature about 4,500 video lottery terminals, convention halls and food and beverage outlets and other resort facilities.

Earlier reports said Resorts World New York could potentially contribute around RM600mil and RM200mil to Genting Malaysia's revenue and profits, respectively, by 2013. This estimate was based on an assumption of a daily win per terminal of US$300.

An analyst tells StarBizWeek that the initial period of Resorts World New York's operations could still likely be plagued by some teething problems that could affect earnings contributions, but the longer-term prospects remain bright, and could potentially generate better-than-expected earnings like what the group's UK operations did recently.

Genting Malaysia's UK casino operations have started contributing to the group's revenue since the fourth quarter of last year. In its latest reported quarter, contributions from the UK business were surprisingly strong that they lifted the company's earnings above market expectations.

Genting Malaysia saw its net profit for 1QFY11 soared to RM417.7mil on revenue of RM1.95bil, compared with a net profit of RM272.3mil and revenue of RM1.35bil in the corresponding period last year.

In a statement, the group said it attributed its encouraging financial performance during the quarter in review partly to its UK casino operations, which generated a profit of RM60.1mil on revenue of RM346.6mil.

In the preceding quarter, Genting Malaysia's UK operations actually posted loss of RM2.1mil on a maiden revenue contribution of RM188.4mil to the group.

“The group's UK operations seemed to have turned around now, and we expect earnings from the operations there to continue improving in the coming quarters, albeit at a more volatile rate, considering the uncertainties surrounding the UK's economy,” an analyst says.

But what's more reassuring, as indicated by Genting Malaysia's first-quarter result, is the fact that the cannibalisation of market share, expected to result from the rising competition from the two new casinos in Singapore, did not seem to have happened at a scale that would significantly impact the company's existing casino and resort operations in Malaysia.

“The company's core operations in Malaysia remain resilient despite the competition from the two casinos in Singapore, and this trend will likely continue in the coming quarters,” the analyst explains.

Genting Malaysia's parent, Genting Bhd, holds a majority stake in the Resorts World Sentosa in Singapore, which happens to be the country's first casino resort.

Apart from a casino, the facility there houses the Universal Studios Singapore theme park, Marine Life Park, hotels and a host of other dining, shopping and entertainment offerings. The group's Singapore operations compete with the Marina Bay Sands casino resort built by Las Vegas Sands.

“Growth in Asia remains exciting for the industry, but in Malaysia, the market has already matured. Venturing abroad is the right option to diversify its business and avoid hitting a revenue plateau,” an analyst says.

Source/转贴/Extract/: TODAYonline
Publish date:24/06/11

AirAsia flying high with 200 A320neos order

The Star Online > Business
Saturday June 25, 2011

AirAsia flying high with 200 A320neos order

By B.K. SIDHU
bksidhu@thestar.com.my

PETALING JAYA: AirAsia Bhd has come long way from its humble beginning, marked by a landmark order of 200 A320neos in Paris on Thursday. Its share price climbed 5 sen as it reacted to the news.

This new order would ensure that this carrier would always have a youngish fleet, vital in terms of product offering and costs and drive Air Asia's longer-term business direction, said analysts.

“We reckon that bulk of the new order comprises replacement aircraft to keep AirAsia's fleet young.

“At the current average fleet age of three-four years, the delivery of the A320neos come 2016, will ensure that the fleet averages five to six years, in line with Singapore Airlines' (SIA) in the longer term. Keeping its aircraft young ensures savings in the form of low maintenance charges and more efficient fuel burn,'' says OSK Research in its report.

This new variant of the A320 jets are 15% more fuel efficient and “assuming that AirAsia's current fleet consists entirely of A320neos, the airline's EBITDA would be 18.2% higher on the back of a 17% savings in fuel consumption.''

AirAsia became Airbus largest airline at the finale of the Paris Air Show on Thursday. The deliveries are stretched over a 10-year period beginning 2016 to 2026 which will see it accumulating 375 aircraft.

The new aircraft, with a seat capacity of 180, will be used on routes of up to four hours on AirAsia's extensive route network of 130 routes and 63 destinations in South-East Asia, China, India and Australia via Bali, Indonesia.

This new order, worth US$18.2bil (RM55.2bil) will be financed via company's internal reserves and cashflow.

“We are not entirely worried about AirAsia's gearing as we see the group returning to positive free cashflow by 2014.

“Nonetheless, despite its gearing, AirAsia has been able to generate strong bottom-lines and superior margins compared with its peers,'' OSK said.

The research house maintains its “buy” call on the stock with its future value at RM3.89.

CIMB Research said the new orders was a positive development and felt that the airline will not overstretch its balance sheet as its Thai and Indonesian associates should be able to take these planes in their own names post-listing and AirAsia has the option to dispose of the older model.

The new planes are also needed to grow its Philippines and in future, Vietnam operations.

CIMB maintains its forecasts, RM4.20 target price which is 9 times the price-earning ratio.

“AirAsia's low-operating costs and strong demand put it in the best position to ride out high oil prices and global overcapacity. A potential catalyst is the listing of its two associates,'' it said.

At 375, the fleet is still 125 short of 500.

That's the number AirAsia boss Tan Sri Tony Fernandes wants the fleet size for AirAsia to be eventually.

Fernandes wants to turn the low-cost carrier which now has hubs in Thailand, Indonesia, Vietnam, Philippines and probably in Singapore soon (subject to relevant approvals) into a global airline with the largest fleet that will rival US-based Southwest Airlines. The US carrier has a fleet size of 522 aircraft.

AirAsia now has in operations 89 of the 175 planes ordered in 2007 and the last delivery for that batch is in 2016. Along with the new order the airline also confirmed the purchase of engines that will be developed by CFM International.

Nomura Financial Advisory and Securities is of the view that a consolidation is more likely. It cited a study conducted by McKinsey in 2002 on European and American low-cost carriers that revealed that a winner-takes-all dynamic heavily favours the first mover, while later entrants face more challenges with some going bankruptcy.

Based on that and the population similarities to Europe, “we think this large aircraft order (assuming its on track) may precipitate other airlines around the region to either shape up or ship out.''

AirAsia has also been named the world's best low-cost airline for the third consecutive year, according to London-based aviation consultants, Skytrax yesterday.

“Not bad from where we started ... it just makes me emotional,'' Fernandes said.

AirAsia is also the world's third largest low-cost carrier by market cap, behind Southwest (market cap of US$8.53bil (RM25.89bil) and RyanAir US$8.84bil (RM26.83bil).

However, HwangDBS Vickers remains concerned on the stock in the near term given the current high oil price which could affect demand and dampen earnings. Oil prices is indeed a concern even though price traced back a bit yesterday.

Early this month, the International Air Transport Association slashed its profit forecast for airlines by half to US$4bil. On Monday it also warned that premium air travel had also slumped because of Japan's nuclear crisis, weakening world trade and Middle East turmoil but economy class rebounded slightly. However, demand for low-cost travel remains good.

Source/转贴/Extract/: The Star Online
Publish date:25/06/11

Economic Compass: Singapore Another good year in store

Another good year in store
• Good start to the year. Singapore’s economy grew 22.5% qoq seasonally adjusted and annualised (SAAR) or 8.3% yoy in 1Q 2011 (3.9% qoq SAAR, 12% yoy in 4Q 2010). Growth was powered by the manufacturing sector, which grew 75.4% qoq SAAR, while services expanded 8.8% qoq SAAR in 1Q 2011. We expect growth to stay resilient in 2011 and maintain our growth forecast of 5.7% for 2011.

• Though inflationary worries remain. Inflation has started to rise in tandem with the strengthening economy, up 5.0% yoy in Jan-Apr 2011. However, the worst could be over. COE premiums are expected to remain flat in the months ahead. Rental growth is expected to taper off while rebates from the government should help to lessen the burden on housing costs. Food costs are expected to ease as supply conditions improve. As such, we maintain our 2011 inflation forecast of 3.8% yoy.

• MAS tightens monetary policy. With 1Q 2011 growth stronger than expected, the MTI has raised its 2011 GDP growth forecast from 4.0-6.0% to 5.0-7.0%. With economic growth not an issue, the focus remains on containing inflation. In line with market expectations, the MAS has decided to re-centre its exchange-rate policy band upwards with no change to the slope or width of the band during its Apr policy review.

• Elections signifying a change? In the most recently held general elections, the ruling party’s share of the popular vote slipped to 60.1%, its lowest ever since independence. A completely-revamped cabinet is telling evidence that popular grouses on high housing costs; rapid foreign-population growth; and spiraling transport costs will be addressed ahead. This might lead to structurally higher wages and a higher neutral rate of inflation. Nonetheless, we expect major economic policies to be kept in place and Singapore to remain a low-incometaxation, pro-business and pro-investment nation for the foreseeable future.



Source/转贴/Extract/: CIMB Research
Publish date:16/06/11

Economic Compass:Malaysia Anchored by domestic demand

Malaysia
Anchored by domestic demand
• Growth remains on track. Real GDP growth eased a little to 4.6% in 1Q 2011 (4.8% in 4Q 2010), supported by sustained domestic spending. We expect the economy to expand at a slower rate of 4-4.5% in 2Q and early-3Q, partly because of Japan’s supply snag. Industrial output contracted 2.2% yoy in Apr (+2.8% in 1Q), the first time in 17 months. Overall, firm domestic demand should drive growth higher to 6-6.5% in 2H amid prudent household spending as inflation and subsidy cuts bite. Private investment will accelerate as the Economic Transformation Programme moves into high gear. We maintain 2011’s average GDP growth estimate of 5.5% (7.1% in 2010).

• Inflation risks become more apparent. Headline inflation extended its rise to a 24-month high of 3.2% yoy in Apr as higher food and energy prices feed into consumer prices. Core inflation also climbed to 1.6% in Apr, indicating incipient signs of broad-based price pressures. We expect inflation to peak at between 3.4-3.6% in May-Jun before decelerating to average 3.0-3.2% in 2H on the back of sustained subsidy cuts. We project inflation to average 3.2% in 2011 (1.7% in 2010). In the worst-case scenario, inflation could accelerate to 3.5-4.0% this year if fuel subsidy is cut more than expected.

• Managing excess liquidity and capital flows. The large sustained capital inflows have led Bank Negara Malaysia (BNM) to utilise a combination of remedies to effectively manage capital inflows. If not properly managed, the subsequent reversal of capital could be detrimental to financial stability, wrecking havoc on economic growth. Portfolio inflows amounted to RM79.7bn between 3Q 2009 and 1Q 2011 while foreign reserves jumped US$18.9bn between end-Mar and end-May. The policy responses taken so far to restrain the buildup of financial imbalances include raising the statutory reserve requirement (SRR) ratio, capping credit card spending limits, lowering the loan-to-value ratio for the purchase of property as well as implementing prudent lending guidelines in 3Q.

• More rate hikes ahead. As the economy is growing at a steady clip and inflation is on the rise, the central bank is likely to maintain its guard and focus on the risks of excess liquidity and simmering inflation. But interest rates should remain at appropriate levels to support growth. As such, we expect BNM to raise the overnight policy rate by another 25bp in 3Q, taking it to 3.25% by end-2011. The SRR ratio will be raised by another 100bp to 4.0% in Jul.


Source/转贴/Extract/: CIMB Research
Publish date:16/06/11

Economic Compass: China – Still tilted towards taming inflation

EconomicCompass

China – Still tilted towards taming inflation
No let-up in growth momentum. China started the year on a strong note, with real GDP growth of 9.7% in 1Q 2011 (9.8% in 4Q 2010). On a seasonally adjusted qoq basis, the economy expanded 2.1% (2.4% in 4Q 2010). Despite several monetary tightening measures and hard landing concerns, the strong rebound in production and domestic demand continued to support overall expansion. All key sectors – primary, secondary and tertiary – remained buoyant. We believe that growth of 9.2-9.4% in 2Q is probable and a full-year expansion of 9.2% is still in the cards.

Feeling the pinch of policy tightening. The Purchasing Manager Indices (PMIs) have come off for two straight months to 52.0 in May and 52.9 in Apr (52.8 in 1Q 2011), adding to signs that economic growth is cooling as the tightening measures bite into credit lending. Industrial production also eased slightly due to the combined impact of higher costs, tighter credit conditions and electricity curbs. That said, we do not think that it is worrying and we believe that the growth concerns are overblown. The rise in property prices appears to have tapered off in recent months amid aggressive credit tightening. Although the restrictions appear to have affected transaction volumes, we believe that there is still speculative demand.

Inflation battling remains a challenge. Reining in inflationary expectations remains a challenge for the government. Inflation was roughly stable in Mar-Apr but continued to hover at the highest levels in almost three years. We expect inflation to remain at the current elevated levels before easing slightly in 2H 2011 as the impact of tighter monetary conditions, slower growth momentum, more stable food and housing costs, and higher year-ago bases kick in. We expect CPI growth to average 4.6% in 2H vs. 5.2% in 1H, or 5.0% for the full year, well above the government’s 4.0% inflation target.

Policy tightening continues. Despite cumulative 100bp benchmark rate hikes to 6.31% and the 500bp total increase in the reserve requirement ratio (RRR) to 21.0% since the beginning of 2010, we expect more policy tightening in the months ahead. The People’s Bank of China (PBOC) faces three problems in its fight against inflation (i) maturing government papers, (ii) inflows of foreign capital, and (iii) negative real interest rates. Apart from raising the RRR, it has allowed the renminbi to appreciate and sold government papers more aggressively to lock up liquidity from maturing government papers. However, the PBOC has been reluctant to move on interest rates. As around Rmb838bn worth of government papers will be rolled over in May-Jun, we expect the RRR to be increased by another 100bp to 22.0% while the 1-year lending rate should rise 50bp to 6.81% by year-end.


Source/转贴/Extract/: CIMB Research
Publish date:16/06/11

Economic Compass: Eurozone – More of the two-speed recovery

EconomicCompass
Eurozone – More of the two-speed recovery
Recovery gains traction amid renewed debt concerns. The region’s growth has improved (2.5% yoy in 1Q 2011 vs. 1.9% yoy in 4Q 2010), underpinned by exports and firm factory activity. However, we continue to see significant growth differentials for core and peripheral economies in the eurozone. The two-speed nature of the upturn remains entrenched, with Germany and France registering strong performance, in contrast to the modest growth performance of Spain, Italy and Ireland. The lack of growth in these countries will threaten budget deficit reduction plans via lower tax receipts and higher welfare spending. Growth is looking weaker in 2Q and strengthening headwinds will make it more challenging for the region to sustain a similar robust expansion as was seen in the first three months of this year. We expect the eurozone to expand by 1.0-1.5% in 2011 (1.7% in 2010).

Slower gains in manufacturing and services. The euro area’s Purchasing Manager Indices (PMIs) continued to expand though the rate of increase slipped to a five-month low in May (55.8 vs. 57.8 in Apr). The slowdown featured in both manufacturing and services but the slowing was sharper for manufacturing, where production rose at the weakest pace in seven months. The ratio of manufacturing new orders to inventories, which is a guide to near-term output growth, also fell sharply to the second-lowest reading since Jun 2009. Meanwhile, services growth cooled to reach a four-month low in May because of concerns over the wider economic environment and the outlook.

Inflation pressures abound. Eurozone inflation eased a little to 2.7% yoy in May (2.8% in Apr), largely thanks to lower oil prices, but the dip is likely to be temporary and will not deter the European Central Bank (ECB) from raising interest rates in Jul. Inflationary pressures are most evident in France and Germany where domestic demand is the strongest. Rising inflation expectations have fuelled expectations of rate hikes by the ECB. The ECB raised its benchmark interest rate by 25bp to 1.25% on 7 Apr. Even though the central bank kept it at 1.25% in May and Jun, it reiterated its concern over the rising inflation pressure, which it expects will remain elevated for some time. The good news is that the recent fall in crude oil and commodity prices should feed through and help slow the rate of inflation.

Resurgence in worries about debt problems. The focus remained firmly on the European debt crisis as investors pared risk across asset classes. The fear among investors was reflected in sovereign credit default swaps, which widened across the board in peripheral Europe. Concerns over fiscal reform fatigue, access to capital markets to bridge the funding gap, mixed signals from EU officials and the downgrading of Greece’s credit rating to junk bond status have ratcheted up the tension in eurozone’s sovereign debt markets.

Source/转贴/Extract/: CIMB Research
Publish date:16/06/11

Economic Compass: United States – Life after QE2

EconomicCompass
United States – Life after QE2
A slow cruise. The US economy lost considerable momentum in 1Q 2011 (1.8% qoq vs. 3.1% qoq in 4Q 2010) as high fuel prices crimped household spending and the recovery of investments slowed down. The housing sector remains depressed. Though the manufacturing sector remains in an expansionary mode, the ISM manufacturing index dropped a hefty 7pt to a 20-month low of 53.5pt in May, which is the biggest monthly decline in 27 years. Durable goods orders fell 3.6% mom in Apr (+4.4% in Mar), due partly to disruptions in supplies of auto parts stemming from Japan’s quake. The ISM non-manufacturing index bounced back a little to 54.6 in May from 52.8 in Apr, with the new orders and employment indices leading the improvement. But, the index is significantly below the 57.0-59.0 range that it maintained between Dec 2010 and Mar 2011. Consumer confidence dipped in May, a sign that rising costs, uneven job outlook and weak housing market are taking a toll on consumers. Given that services dominate the US economy, the odds of GDP growth accelerating in 2Q are low. We continue to project GDP growth of 2.0-3.0% for 2011 (2.9% in 2010).

Housing market blues. The housing sector remains the weakest link in the economy. House prices are still depressed by tight credit conditions, weak demand and high inventory. Home prices dropped 5.5% yoy in 1Q, the biggest decline in almost two years, as sales of discounted foreclosures undermined real estate values. Distressed home sales remain large at 40% of all existing home sales. Housing starts and permits for future home construction fell in Apr as the overhang of homes in the market discouraged builders from taking on new projects. This points to prolonged weakness in the housing sector. The index of pending home sales declined by 11.6% mom in Apr (+3.5% in Mar), a sign the industry continues to struggle.

Jobless in Seattle. US nonfarm payrolls growth slowed sharply to 54,000 in May from 232,000 in Apr, pushing the unemployment rate back to 9.1% in May from a low of 8.8% in Mar. The renewed weakness in employment growth will undoubtedly lead to calls for the Fed to continue its large-scale asset purchases beyond the scheduled completion of QE2 at end-Jun. Even though rising inflation expectations is a compelling reason for the Fed to consider some degree of monetary tightening but the damper that higher prices have already started to throw on consumer spending suggests that the economy is not quite ready for higher interest rates. The Fed noted the upside risks to inflation given the headwinds from higher energy and food prices but said “so far, so good” in its assessment of expectations for future prices. This suggests that it is in no rush to raise rates. As such, we expect the Fed to keep overnight rates at 0.00-0.25% until year-end.

What to expect when QE2 docks? The recent string of weak US data has stirred expectations of QE3. QE2 is on track to end this month. We think it is unlikely that the Fed will go for another round of asset purchases as the current soft patch may be transitory. With inflation and unemployment ticking up at the same time, the Fed will find it difficult to justify yet another cash injection. The Fed may consider other policy options if there were firmer signs of faltering recovery. First, the Fed could adjust forward guidance to push back expectations of the timing of the first hike, and second, they could shift back expectations regarding the timing of when the Fed contracts its balance sheet. The Fed would need to see significant slippage on its dual mandate and a re-emergence of deflation before considering the need for further monetary stimulus.

The Fed has announced in Apr that it will end its quantitative easing at end- Jun, as scheduled. As that date approaches, markets are turning cautious and volatility has increased, especially in some of the commodity markets. We see a few possible scenarios when financial markets transit to a less accommodative monetary policy:
(i) Bond yields are unlikely to jump dramatically as the Fed has signalled that it may reinvest proceeds from its bond purchases when they mature, meaning that it may not completely exit the market.
(ii) Stocks could take a hit if the supply of cheap money shrinks and short-term rates start to move higher, making it less attractive to hold riskier assets.
(iii) Commodity prices could see a slowdown in their rally as demand, which has been driven by both liquidity and speculation, adjusts. Higher interest rates could rein in economic growth and cool the demand for resources.
(iv) Private capital may gradually pull out from emerging markets and return to the US market due to a narrowing of the interest rate differential. This would provide a short-term boost to the US dollar.

Impact of rating downgrade. The S&P has put the country’s triple A credit rating on negative watch while rating the odds of a downgrade within the next two years as high as 1-in-3. Moody’s Investors Service also warned of a potential downgrade unless there is progress on increasing the debt limit by mid-Jul. Theoretically, a rating downgrade would increase the Treasury’s borrowing costs. Treasury securities set the benchmark interest rate for a wide range of credit products including mortgages, car loans, student loans, credit cards, business loans and municipal bonds. This means that the downgrade will drive up interest rates, push down household wealth and dampen overall demand. But it is also quite probable that US debt will remain attractive and yields may not rise that much due to the downward pressure on borrowing costs from the weak economic and financial environment in which a downgrade takes place. Also, as investors are still dealing with European sovereign debt worries, prolonged tensions in the MENA region and Japan’s nuclear crisis, these events will continue to drive a steady stream of safe-haven flows.

Source/转贴/Extract/: CIMB Research
Publish date:16/06/11

REGIONAL ECONOMIC COMPASS (overview)

REGIONAL ECONOMIC COMPASS
Summary
• A tale of two economic groups. The global economy continues to recharge its batteries, going by the global current and forward indicators. But as we noted in our last issue, the developed and developing economies are still going at different speeds. We think that the impact of the recent nasty surprises (MENA tensions and Japan’s quake) as well as Europe’s sovereign debt concerns and a sluggish US recovery is likely to be transient and should not be significant enough to stifle the global momentum. We expect global growth to bounce back in the second half of the year after moderating in the first half of the year.

• A good start to the year for emerging Asia. Regional economies are still growing steadily, with China and India leading the pack. The implications of Japan’s quake for the global supply chain are surfacing in the latest manufacturing production and trade data but the knock-on effects of Japan’s crisis are manageable. Asia should still show GDP growth as continued domestic demand and intra-Asia trade will offset the drag from weak demand conditions in the advanced economies. However, inflation poses a threat to a sustained Asian upturn. Rising inflation pressures have forced central banks in the region to maintain a hawkish stance and continue raising interest rates.

• Inflation fears take centre stage for now. Continuing the upward trend in 2H 2010, inflation picked up pace in 1Q 2011 as the global economy continued to recover and domestic demand strengthened. Excess liquidity and cheap credit also fuelled asset price inflation. Inflation pressures remain uneven in the advanced economies but are more prominent in the emerging economies. Supply-side factors are dominant as food and energy costs remain elevated and feed into domestic inflation. With the output gap narrowing and capacity constraints emerging in the developing economies, core inflation has started to rise as non-core inflation spills over to the core components.

• What next for commodity prices? We do not view the recent rout in commodity prices as a secular trend. Though risks abound, the outlook for commodity prices remains positive because of a confluence of factors (i) the continued global economic recovery, (ii) robust growth in China and India, (iii) massive reconstruction in Japan which will drive demand for various commodities including energy, and (iv) MENA tensions. But there are downside risks for commodities (i) faster than expected cooling of emerging economies such as China and India which may weaken demand for commodities, and (ii) the unwinding of QE2 by the Fed as it prepares the market for rate hikes in 2012. This will reduce the excess liquidity that has been financing speculative investment in commodities.

• Volatile capital still a concern as flows are unabated. We believe that economic conditions and fundamentals remain supportive of capital flows into emerging markets. The inflows are extraordinarily large for some countries including China, Indonesia and the Philippines. Capital is expected to continue flowing into Asia in 2012, attracted by the region's strong growth prospects and fuelled by abundant global liquidity and risk appetite. The challenge is to manage the large and volatile shift in capital flows without provoking destabilising forces on the domestic financial system including fuelling asset bubbles.

Global overview
Diverging recovery rates. Global current and forward indicators point to a continuation of the global economic recovery though the developed and developing economies are still going at different speeds. OECD composite leading indicators (CLI) are still on the expansion path, with the CLI showing mixed growth for major advanced economies. Growth is also mixed for global industrial production and trade activity eased in Mar.

Growth of the US economy lost traction, falling from 3.1% qoq in 4Q 2010 to 1.8% in 1Q 2011 as rising food and petrol prices acted as a drag on consumer spending. In contrast, the eurozone gained momentum as growth picked up from 1.9% yoy in 4Q 2010 to 2.5% in 1Q 2011 despite the recent external turbulence (MENA tensions and Japan’s quake) as well as tensions in the sovereign debt market. Japan, however, is reeling from the aftermath of the earthquake-tsunami. The 1.0% yoy GDP decline in 1Q 2011 was worse than expected as industrial production slumped and consumer confidence plunged to a record low.

In our view, the impact of the recent nasty surprises (MENA tensions and Japan’s quake) as well as Europe’s sovereign debt concerns and a sluggish US recovery is likely to be transient and should not be significant enough to stifle the global momentum. We expect global growth to bounce back in the second half of the year after moderating in the first half of the year.

Emerging Asia gets off to a decent start. As expected, emerging economies continued their recovery in 1Q 2011. However, the rate of expansion returned to a more normal and sustainable pace as the unprecedented fiscal support and monetary stimulus as well as base effects started to fade. The impact of Japan’s earthquake-tsunami on regional Asian economies is still manageable though the indications are that supply bottlenecks will only start to subside in 3Q. The latest reports from Japanese automakers suggest that the disruptions are expected to peak in Apr-May but it will take some time for production to normalise, notwithstanding the risks of aftershocks, power disruptions and logistics issues. Toyota and Honda operations in Thailand are expected to resume normal production from Sep onwards. Some initial global supply chain issues are surfacing in the latest manufacturing production and trade data for China, Thailand and Singapore.

Asia should still show GDP growth as continued domestic demand and intra-Asia trade will offset the drag from weak demand conditions in the advanced economies. However, inflation poses a threat to a sustained Asian upturn. Rising inflation pressures have forced central banks in the region to maintain a hawkish stance and continue raising interest rates. Capital inflows are posing additional challenges for policymakers in emerging Asia.

Inflation fears take centre stage for now. Continuing the upward trend in 2H 2010, inflation picked up pace in 1Q 2011 as the global economy continued to recover and domestic demand strengthened. Excess liquidity and cheap credit also fuelled asset price inflation. Inflation pressures remain uneven in the advanced economies. Due to the lagged effects of previous increases in commodity prices, food and energy inflation are likely to accelerate in the coming months. However, the existence of spare capacity, high unemployment and moderate wage growth are likely to prevent inflation from spiralling upwards.

It is a different story in the emerging markets where price pressures are mounting and inflation is becoming more broad-based. Supply-side factors are dominant as food and energy costs stay elevated and feed into domestic inflation. But there are elements of demand-pull and wage-induced inflation, which means that inflation has become a more generalised phenomenon in some economies. With the output gap narrowing and capacity constraints emerging in the developing economies, core inflation has started to rise as non-core inflation spills over to the core components of food and energy.

When will inflation peak? As highlighted in our Macro Pulse report dated 6 Apr, we expect headline inflation to peak in 2Q-3Q for most emerging economies as monetary tightening is expected to tame inflation expectations though the underlying pressures will not dissipate so fast. The authorities have implemented some interim anti-inflation initiatives to shield consumers from rising inflation. Malaysia is mulling some flexibility in fuel subsidy cuts, increasing short-term food supply and setting up shops to sell goods at discounted prices to consumers. The Indonesian government has stepped up the import of rice, postponed the implementation of limits on subsidised fuel and allowed the rupiah to strengthen to cool imported inflation. The Thai government is also using its oil fund to subsidise diesel retail price.

Inflation in China may already have passed its peak, having eased slightly to 5.3% in Apr. Core inflation is very low, at just above 2% and we expect headline inflation to fall back towards that level next year as food prices fall. Indonesia’s headline inflation continued to ease for the fourth month to 5.98% in May (6.16% in Apr), helped by lower raw food prices. As the government will be maintaining its fuel price subsidy this year, inflationary pressure may be lower than we expected. At this point, the government is still benefiting from rupiah appreciation in the managing of its fuel subsidy. As such, this triggered a cut to our year-end inflation estimate from 7.2% to 6.0%. Nevertheless, we still sense risks on the supply side (lower stocks of rice and other staple foods) in 2H 2011. For Singapore, despite likely higher electricity tariffs in 3Q 2011 and increased food inflation, CPI growth should moderate from 5.2% in 1Q to 4.0-4.5% in 2Q and 2.5-3.5% in 2H as high year-ago bases kick in. Government rebates and the MAS’s move to allow the strengthening of the tradeweighted S$ should help to contain runaway costs. Inflation in Malaysia is expected to peak at between 3.4-3.6% in May-Jun on the back of sustained subsidy cuts before decelerating to an average of 3.0-3.2% in 2H 2011. In contrast, we anticipate a rise in headline inflation in Thailand as subsidies and other price control measures are gradually lifted. We expect inflation to average 4.5% in 2H from 3.6% in 1H.

What next for commodity prices? We do not view the recent rout in commodity prices as a secular trend. Though risks abound, the outlook for commodity prices remains positive because of a confluence of factors (i) the continued global economic recovery, (ii) robust growth in China and India, (iii) massive reconstruction in Japan which will drive demand for various commodities including energy, and (iv) MENA crisis. But there are downside risks for commodities (i) rate hikes by emerging economies such as China and India which may weaken demand for commodities, and (ii) the unwinding of QE2 by the Fed as it prepares the market for rate hikes in 2012. This will reduce the excess liquidity that has been financing speculative investment in commodities.

There are a number of major drivers of commodity prices. Prices are driven not only by supply and demand dynamics but also geopolitical risks, speculative behaviour and international monetary linkages. The key influence on the commodity prices is the Fed’s monetary stance and the US dollar movement. QE2 had a significant impact on commodity prices. The MENA crisis provided support to oil price as one-third of the world’s production comes from the MENA region. Gold prices have surged for the ninth consecutive year because of strong safe haven demand by investors hedging against inflation. It is likely to be supported by a prolonged loose US monetary policy, fears of a sovereign debt crisis in Europe and concerns over the future of the US dollar. Central banks in emerging economies are also diversifying their reserve holdings in favour of gold, which helped to lift gold prices.

Volatile capital still a concern as flows are unabated. We believe that economic conditions and fundamentals remain supportive of capital flows into emerging markets, after a brief bout of capital reversal in early Feb and May. The International Monetary Fund (IMF) called the private capital flows "extraordinarily large" for some countries including China, Indonesia and the Philippines. The surge in capital inflows is also responsible for the rapid accumulation of foreign reserves which hit historical highs for China, Malaysia, Indonesia and Thailand. Capital is expected to continue flowing into Asia in 2012, attracted by the region's strong growth prospects and fuelled by abundant global liquidity and risk appetite.

The challenge is to manage the large and volatile shift in capital flows without provoking destabilising forces on the domestic financial system including fuelling asset bubbles. The IMF warned that capital flows into Asia's surging economies remain a "key concern" for policymakers in a region that is already battling rising inflation. Some countries including South Korea, Indonesia, India and Thailand have tightened policy or implemented quasi capital controls to try to head off huge inflows of foreign capital from investors seeking better returns on their money than in the sluggish west.


Source/转贴/Extract/: CIMB Research
Publish date:16/06/11

Treasury China Trust China consumer play (NRA)

Treasury China Trust
Overweight
Current Price S$1.98
16 June 2011
Fair Value S$2.23


China consumer play
 Increasing concentration on retail space to ride on China consumerism. According to the 12th 5-year plan, with the strategy of focusing on domestic consumption, China plans to double its retail sales to RMB30 trillion by 2015, translating into a compounded annual growth rate of about 15% over the period. Treasury China Trust (TCT) is well-positioned to benefit from this rising consumption trend with the recent acquisition of Central Avenue Mall and three adjoining land sites, located in Qingdao’s Laoshan district, the newly designated Central Business District (CBD), as well as proposed purchase of Huai Hai Mall in Shanghai, which is located in one of Shanghai’s strongest and highest profile luxury retail goods precinct. These purchases will substantially add to TCT’s retail property space (by gross floor area) under management from 29% to 58%.
 Total return and capital re-cycling strategies. TCT employs a total return strategy, through a well balanced portfolio of quality income producing assets producing stable income and development opportunities offering growth potential. Over the past one year, TCT has successfully disposed assets, realising a total profit of S$26.8m which contributes to distributions. Within the portfolio, TCT is currently developing Beijing International Logistics Park and City Centre Extension, which are expected to reap increases in gross yield upon completion. TCT has also entered into formal negotiation for the sale of a majority stake in Central Plaza, reflecting a price in excess of TCT’s 31 Dec 2010 net asset value of S$3.74/unit. To recycle the capital, TCT has entered into formal negotiations for the acquisition of a high-quality retail opportunity in close proximity to the Shanghai central business district.
 Relevant property expertise and deal-sourcing relationship. TCT has a high calibre management and operational team of 80 staff armed with the relevant expertise in property development and management and business relationship for deal-sourcing.

 Risks. Inflation is the major macro risk ahead. To tame inflationary pressures and prevent overheating risk of the economy, the Chinese government has imposed capital control and tightening of monetary policy on the housing market. The liquidity flow into the commercial property market creates increasing risk of overheating. With all of TCT’s assets in the PRC, TCT is fully vulnerable to a down cycle in the Chinese real estate market.
 Valuation and Recommendation. Using cap-rate approach, we value TCT’s assets and arrive at RNAV per unit of S$5.10 (FY12). We apply a 50% discount for share illiquidity and execution risk in the PRC market and arrive at a target price of S$2.23, providing a potential upside of about 12%. Further, TCT offers a distribution yield of about 5% (based on annual distribution profile of 10.0Scts (FY11F)). At S$1.98, TCT is trading at a steep 56% discount to RNAV (FY11) and 46% discount to NAV (compared to industry discount to NAV of about 10%). The recent approval of share buyback mandate will facilitate to close the discount gap. Overweight.

Background of Company
TCT is a Singapore based business trust established with the principal objective of delivering total return to unitholders through proactively owning, managing and developing high quality, income producing commercial real estate in China. The trustee manager is an indirect wholly-owned subsidiary of TCT’s Sponsor, Treasury Holdings.

Treasury Holdings is Ireland’s leading global property company established in 1989 by John Ronan and Richard Barrett (Chairman of TCT). Treasury Holdings is headquartered in Dublin, Ireland and has four major global divisions, namely, Treasury Holdings Ireland, Treasury Holdings UK, Treasury Holdings China and Treasury Holdings International. The Sponsor is recognised for its quality, large-scale commercial and mixed-use developments. Treasury Holdings and affiliates currently holds 30.79% stake in TCT.

TCT was listed on the main board of Singapore Exchange Securities Trading Limited (SGX-ST), on 21 June 2010 via a scheme of arrangement.
TCT has assets under management (AUM) of about RMB12.0bil (including proposed acquisition of Huai Hai Mall, Shanghai) and a quality portfolio principally in Shanghai, of about 800,000 sqm in gross floor area of retail, office and logistics properties comprising income producing assets and development assets, which are administered by a team of 80 on-the-ground staff.

China Economy
The Chinese economy grew at a compounded annual growth rate of 14.5% from 2000 to 2009 and continued its strong performance in recent years to record a 10.3% expansion in 2010 and for the first time finishing the year as the world’s second largest economy, over-taking Japan. The strong growth momentum continued into 1Q2011 with GDP growth of 9.7% YoY.

China’s rapid growth has accelerated urbanization. According to the National Bureau of Statistics of the PRC, urbanisation rate has grown from 36.2% in 2000 to 45.7% in 2008 and this growing trend will provide growth opportunities in China retail and services scene.

The growing importance of domestic demand is reflected in the growth in total retail sales of 18.4% in 2010, underpinned by an 11.3% rise in urban disposable income and a 14.9% rise in income for rural dwellers. The steady growth momentum continued into 1Q2011 with total retail sales growing by 16.3% YoY to RMB4.29 trillion. Domestic consumption demand continued to find support from rapid income growth. Urban disposable income per capita grew by 12.3% YoY in 1Q2011 while rural income growth rose much faster at 20.6% YoY.

China’s rapid economic growth and pace of urbanisation continue to support the momentum for expansion in China’s real estate sector. For TCT, the continued strength of the Chinese economy reaffirms the expansion of its geographical base into regional markets and its increasing concentration on the retail sector.

Shanghai Office Property Scene and Outlook
Shanghai is one of the most prosperous cities in China. A large number of foreign companies and investors have located their China operations or regional operations in Shanghai, attracted by a flexible investment environment and the city’s continued investment in infrastructure enhancements, including six metro lines and light railways scheduled for completion in 2012 and the Shanghai-Beijing Expressway Railway due to complete by 2012.

After witnessing a market-wide vacancy rate of 11.5% at the end of 2009, ensuing from the global economic fallout in 2009, the Shanghai office property market rebounded strongly in 2010, recording a year-end 2010 vacancy rate of 8.5%. This resulted in a 21% rise in rental during the year to register average rent of RMB7.51/sqm/day for Grade A office space, according to Jones Lang LaSalle (JLL).

Leasing activity for Grade A office space remained active in 1Q2011, backed by strong expansion and upgrading demand from both foreign and domestic companies in Shanghai. Average rents in Puxi rose 8.8% QoQ to reach RMB8.2/sqm/day at the end of 1Q2011 while Pudong average rents picked up 3.7% QoQ to RMB7.7/sqm/day.

According to DTZ, over 2010 to 2014, an estimated 4.3mil sqm of new office space will enter the Grade A office leasing market, which is expected to place some pressure on the city-wide availability ratio. However, in light of the strong GDP expectations of 8% in 2011 and ongoing development making Shanghai into an international financial centre, office space in the city is expected to be high demand. Of about 1.0mil sqm of new office space coming on-stream in 2011, about 90% has been pre-committed for lease. Investment into office spaces for owner-occupation by companies will also absorb the new supply. Accordingly, rental of Grade A office space is expected to rise marginally in 2011.

Shanghai Retail Property Scene and Outlook
The retail property market in Shanghai has performed strongly throughout the global downturn of the past three years and as a result, registered a vacancy rate of less than 1% for premium retail sector (generally defined as CBD located property) at year-end 2010.
According to DTZ, between 2011 and end of 2013, an estimated 1.0mil sqm of new high-end retail space is expected to come on-stream in downtown Shanghai. The new supply over the next three years represents about 50% of existing high-end retail space of 2.2mil sqm and this large amount of new supply is expected to pull down the occupancy rate and dampen rental rates of non-downtown retail hubs.
However, the new supply in the key retail hubs remains much sought after as the strength of the PRC economy continues to attract popular local and global brands to set up or expand their outlets in Shanghai, especially in the downtown area. Accordingly, demand is expected to keep rental rates and occupancy rates of high-end retail space high.

Qingdao Retail Property Scene and Outlook
Qingdao is located in the south of Shandong Peninsula with the eastern and southern sides bordering the Yellow Sea and is one hour flight from Seoul, Beijing and Shanghai. During the last decade, Qingdao’s economy expanded at a CAGR of 13.8% and Qingdao’s Qianwan Port is home to the fifth largest sea port in China and 9th largest globally.

Major infrastructure developments. The local government has stepped up infrastructure development in Qingdao with three metro lines in the city under construction. Two on-going infrastructure projects, namely Qingdao Jiaozhou Bay Undersea Tunnel and Qingdao Haiwan Bridge, will also provide a valuable intra-city link to remote areas.

Growing retail sales. According to PRC government statistics, 39 million Chinese tourists visited Qingdao in 2009 with over 1 million international tourists arriving in 2009. In 2010, total retail sales in Qingdao hit RMB190 bil, representing an 18.7% YoY growth and a CAGR of 16.6% over the past 10 years. Of the total amount, sales of luxury goods are estimated at RMB6.5bil in 2010 and are expected to triple in the next five years, according to McKinsey.

New supply will double existing low stock of retail space. According to JLL, the retail rental market in Qingdao remained relatively stable throughout the global downturn of the past three years. The average rental of prime retail space in Qingdao rose steadily, with rents increasing 1.6% QoQ to reach RMB511/sqm/month in 1Q2011. Vacancy rate stood at 14.7% in 1Q2011 due to tenant positioning in one of the retail mall. Over 2011 to 2013, an estimated 1.0mil sqm of prime retail space is expected to come on-stream in downtown Qingdao. This new supply over the next three years represents more than 100% of existing high-end retail space of about 900,000 sqm but the large increment in supply is coming from a relatively a low base of retail stock, compared to other tier 2 cities in the PRC. Moreover, about 50% of the new supply is expected to be sold via strata-title, largely for owner occupation while the remaining 50% are owned by single-owner landlords and for lease. With international brands such as H&M expanding more outlets in Qingdao, the new supply is expected to be absorbed.

Laoshan, a newly designated CBD. As the retail scene in Shinan (old CBD of Qingdao) becomes more congested, retailers are increasingly moving towards Laoshan, Qingdao’s newly designated CBD for the city. This up-and-coming area has a population of about 220,000 people and an undersupply of supporting amenities and retail outlets.

Strategy and Growth Prospects
Track record for capital growth and rental reversion. TCT employs a total return strategy, through a well balanced portfolio of quality income producing assets producing stable income and development opportunities offering growth potential. This is done through acquisition of under-performing assets for asset enhancement or redevelopment to achieve accretive yields and returns
TCT generally disposes mature assets and over the past one year, has successfully disposed assets, including its 50% interest in Tangdao Bay mixed-use development site and 7.2% interest in units in Hong Kong-listed RREEF China Commercial Trust, which have realised a profit of S$22.6m and S$4.2m respectively. About S$8.3m has been utilised for distribution payment for FY10 and the balance of S$18.5m will be available for future distributions to unitholders.

Within the portfolio, TCT is currently developing Beijing International Logistics Park and City Centre Extension, which are expected to reap increases in gross yield upon completion.

A comprehensive asset enhancement involving refurbishment and repositioning has recently been completed on Central Plaza, which resulted in a 17.5% rise in capital value and a 25% increase in rental yield and the building now houses tenants including Boston Consulting Group, Prudential, H&M and anchor tenant MetLife. Recently, TCT has entered into formal negotiation for the sale of a majority stake in Central Plaza, reflecting a price in excess of TCT’s 31 Dec 2010 net asset value of S$3.74/unit. To recycle the capital, TCT has entered into formal negotiations for the acquisition of a high-quality retail opportunity in close proximity to the Shanghai central business district.

High calibre team with relevant expertise and business relationship. TCT has a high calibre management and operational staff of about 80. The staff force comprises a management team with international and local experience in pro-active property management, asset development as well as well-connected personnel for deal-sourcing. The operational staffs are locally trained professionals working in China covering all aspects of property and funds management.

Duplicating success in Shanghai to regional markets. Armed with success in Shanghai, TCT is seeking regional diversification on a value-added basis where land and completed real estate is at a steep discount compared to values in Shanghai while rental levels are relatively higher.

Its recent acquisition of a 55% stake in Central Avenue Mall in Laoshan, Qingdao allows TCT to join forces with TRIO, a local developer, which has been operating in Qingdao and the broader Shandong Province for over 15 years with more than 20 high quality property projects totaling more than 3mil sqm predominantly in the residential sector. Bringing its expertise in the commercial real estate to the deal, TCT will maintain equity and management control on a project comprising an income-producing developed mall together with three undeveloped adjoining sites which could be developed and amalgamated into a large integrated shopping mall.

The Lasohan area, a newly-designated CBD in Qingdao, is an up-and-coming area with about 220,000 people and an undersupply of supporting amenities and retail outlets. The project presents strong upside potential upon completion as retailers are increasingly moving towards Laoshan for business expansion with the current retail city in Shinan ( located in the old CBD of Qingdao) becoming more congested.

Well-positioned to ride on consumerism in the PRC. Domestic demand has been the fundamental growth driver in China and the growing importance of domestic demand is reflected in total retail sales of 18.4% in 2010, underpinned by an 11.3% increase in urban disposable income and a 14.9% growth in income from rural dwellers, according to China National Statistic Bureau.
The retail growth momentum continued strongly into 2011 with total retail sales rising steadily by 16.3% YoY in 1Q2011 to RMB4.29 trillion, supported by rapid income growth. Urban disposal income per capita grew 12.3% YoY while rural income rose at a higher rate of 20.6% YoY.

The continued strength of the Chinese economy reaffirms the expansion of TCT’s geographical case into regional markets and its increasing concentration on the retail sector with the recent acquisition into Central Avenue Mall and three adjoining sites, for retail development, in Qingdao’s Laoshan district, the newly designated Central Business District (CBD). In addition, TCT is purchasing Huai Hai Mall in Shanghai, which is located in one of Shanghai’s strongest and highest profile luxury retail goods precinct, and is expected to complete in mid 2011.

Risks
Risk of asset bubble in the PRC real estate market amid rising interest rate environment. All of TCT’s assets are based in the PRC which puts TCT fully vulnerable to a downturn in the Chinese real estate market. As part of the Chinese government’s attempt to rein in inflationary pressures, so far, much focus has been placed to cool the residential housing prices and these measures include capital restriction by banks into the housing market and rising interest rates. As a result of these housing measures, liquidity flow has moved to the commercial market. For example, the capital values of Grade A office space appreciated by about 50%-55% since the global financial crisis in 2009. There is increasing risk of an asset bubble forming in the commercial property sector.

Loss of key management. TCT depends on a high calibre management team with international and local experience to successfully manage and develop its properties and source for property deals. Loss of any key management staff will negatively impact business operations and plans.

Anchor tenant may pull down yields of assets. To attract key anchor tenants into a newly completed or refurbished commercial property, particularly retail malls, key anchor tenants typically enjoy favourable terms, locking in long-term leases (as long as 15 to 20 years) at rental rates at steep discounts. As a result, TCT’s assets may not command the required expected rental yield.

Financial Highlights
1QFY11 Results
1QFY11 gross rental revenue dipped 4.9% QoQ to S$19.5m largely due to timing differences relating to lease commitment dates. However, net property income rose 3.5% QoQ to S$12.0m ensuing from TCT’s focus on cost control for 2011, which led to a 17% QoQ decline in total property operating expenses to S$7.0m.

1QFY11 net profit of S$7.0mil amounted to EPU of 2.7Scts.

1QFY11, loan-to-value (LTV) rose to 39.1% from 35.0% in 4QFY10 due to convertible bonds issued for the proposed acquisition of Huai Hai Mall, Shanghai.

1QFY11 NAV per share of S$3.67 per unit dipped 1.9% from S$3.74 in 4QFY10, a reflection of the continued appreciation of the Singapore dollar which rose 1.2% against the Chinese yuan during the quarter.

TCT reaffirms the distribution of 10Scts per unit for 2011, with the payment of distribution of 5 Scts per unit as at 30 June 2011 and as at 31 December 2011.

Going forward
TCT’s FY10 financial numbers reflected the period from 19 May 2010 (date of constitution) to 31 Dec 2010. Comparing on an annualized basis, gross revenue is expected to improve 15.7% (FY11) with the completion of acquisition of Central Avenue Mall in April 2011 and expected completion of Huai Hai Mall by mid 2011. Revenue is expected to grow by 14.4% (FY12) with full year contributions from FY11 acquisitions and the completion of Beijing International Logistics Park development and by 40.7% (FY13) with expected contributions from the completion of City Centre extension development in early 2013.

NPI growth is expected to grow at a faster rate of 26.9% (FY11), 19.2% (FY12) and 55.4% (FY13) as TCT continues to benefit from cost efficiency.

We also expect growth at NOI level over FY11 to FY13 with the exception of FY12 when NOI is expected to decline about 30% ensuing from higher financing costs with the development of City Centre Extension during FY12. Accordingly, LTV in FY12 is expected to hit about 42%, but still within TCT’s LTV covenant of 45%, before the ratios tapers off to about 39% in FY13 with the completion of this project in early 2013.
We are expecting distribution of 10 Scts per unit in FY11 to be maintained in FY12 as cashflow from operations, together with the balance of collective sales proceeds of S$18.5m from the disposal of Tangdao Bay development in December 2009 and RREEF China Commercial Trust in 1QFY10, are expected to be sufficient to support distributions for FY11 and FY12. However, distribution in FY13 is expected to ease to about 6Scts per unit as TCT allocates more cashflow for proposed development projects, including Central Avenue Mall Phases 2 and 3.

Valuations
We value TCT’s stabilised income-producing assets and developments assets using cap-rate approach to arrive at RNAV per unit for FY12 of S$5.10. We apply a discount of 50% to account for share illiquidity and execution risk in the PRC market and arrive at a target price of S$2.23. Further, TCT also offers a distribution yield of about 5% (based on annual dividend profile of 10.0Scts (FY11F)).
At S$1.98, TCT is trading at a steep 56% discount to RNAV for FY11. Comparing to industry price-to-book (P/B) of 0.9x of listed peers, TCT is trading at a steep 46% discount to NAV.


Source/转贴/Extract/: NRA Capital
Publish date:16/06/11
Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
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做自己熟悉的事,等到发现大好机会才投钱下去

乔治·索罗斯(George Soros)

“犯错误并没有什么好羞耻的,只有知错不改才是耻辱。”

如果操作过量,即使对市场判断正确,仍会一败涂地。

李驰(中国巴菲特)
高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo


There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
冷眼(冯时能)投资概念
“买股票就是买公司的股份,买股份就是与陌生人合股做生意”。
合股做生意,则公司股份的业绩高于一切,而股票的价值决定于盈利。
价值是本,价格是末,故公司比股市重要百倍。
曹仁超-香港股神/港股明灯
1.有智慧,不如趁势
2.止损不止盈
成功者所以成功,是因为不怕失败!失败者所以失败,是失败后不再尝试!
曾淵滄-散户明灯
每逢灾难就是机会,而是在灾难发生时贱价买股票,然后放在一边,耐性地等灾难结束
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