Towards Financial Freedom

DBSV S'pore Wired Daily 4 December 2013

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Publish date: Wed, 04 Dec 2013, 10:43 AM

Today's Focus

Singapore Banks - proxy for positive GDP momentum

Banks are a proxy for positive GDP momentum. Our economist has upgraded Singapore 2014 GDP growth to 4.0% (from 3.5%). While banks have generally guided for high single digit loan growth in 2014, there is room for upside surprises given the positive outlook on the global front which should pair nicely with Singapore's GDP growth outlook. NIM (net interest margin) may start to inch up as credit spreads are expected to widen and we do not have to wait for an upswing in the interest rate cycle. In the event of an interest rate cycle revival, NIM and earnings would almost certainly see an upswing. In terms of stock pick, we are sticking to OCBC(BUY, TP: S$12.40) vs UOB (HOLD, TP: S$21.90), a contrarian view.

CDL Hospitality Trusts is acquiring a second Maldives property, Jumeirah Dhevanafushi. To be acquired at US$59.6m at a pro forma annualised net property income yield of 6.2% for the nine months ended 30 September
2013, this acquisition is DPS accretion of 2.2%, with potential upside as the resort is currently still undergoing gestation. This new high quality resort is well-positioned in the luxury segment to benefit from the growing affluence of Asian travellers and attendant demand for top-tier resort experiences, presenting opportunity for CDLHT to further participate in the buoyant hospitality sector of the premium Maldives market, one of the highest RevPAR markets in the world.
Tiong Seng Holdings has secured a S$204.5m contract from Housing and Development Board (HDB) to construct 11 blocks of 14/16-storey residential building together with two blocks of multi-storey carpark, commercial/community facilities, precinct pavilion at Woodlands Crescent and Woodlands Rise. The new contract win brings latest order book to S$1.28 bn.

Global Logistic Properties has signed a lease agreement of approximately 30,000 sqm with Womai.com, the B2C ecommerce platform of COFCO, China's largest food processing, manufacturing and trading company. GLP's partnership with COFCO now extends to three cities.

WE Holdings has entered into an agreement to acquire Everbest Industrial with profit guarantee from vendor of at least US$1m a year for each of FY2015, FY2016 and FY2017. Everbest Industrial is a Hong Kong-based components distributor with 13 years of history and profitable track record for past three financial years. This acquisition is in line with the group's plan to achieve economies of scale in its electronic and component business and to broaden the revenue stream.

Singapore's latest purchasing managers' index (PMI) reflects a mixed manufacturing performance in November. While the overall PMI reading fell short of expectations mainly due to dips in orders and output - dipping 0.4 to expand at 50.8 last month - the electronics index continued to strengthen. The electronics PMI - which expanded further to 51.2 from 51 in October - gels well with recent economic indicators; just a week ago, another double- digit jump in electronics output boosted Singapore's manufacturing performance in October.

Singapore households have been given a clean bill of health as far as their debt is concerned. Despite warnings of an increasing exposure to mortgages, net wealth has grown robustly over the past decade and stands at about four times GDP, according to the Monetary Authority of Singapore Financial Stability Review 2013. While household debt continues to increase, savings are piling up faster and massive cash deposits outweigh total liabilities, the review showed. Alongside firm growth of household sector assets and net wealth over the past few years, household debt has trended up, with mortgages accounting for a large share of household sector liabilities. Property assets account for a large share of household assets, and property price increases have been the
key driver of the significant rise in household net wealth over the past few years. Housing loans account for about three quarters of total household liabilities, and could be a significant source of risk for households, MAS said.


The household debt-to-income ratio has risen from a low of 1.9 times in 2008 during the Lehman crisis to 2.1 times in 2012. In addition, household debt has grown more quickly than household assets since Q2 2011. In Q3 2013, household debt grew by 7.9% y-o-y, while household assets grew by 6.8%.

Source: DBSV
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