Towards Financial Freedom
DBS Equity Research: Wired Daily, 17 March 2015
Singapore Property - Weak February home sales. Slow EC sales momentum a concern; further erosion in investment demand expected
In Feb-15, home sales fell to 447 units from 556 in Jan-15 -the lowest monthly sales volume since Jan-14, if we exclude the traditionally weak December period. Sales were largely dragged down by a steep decline in EC sales volume (65 in Feb vs 184 in Jan), although we note that there was a marginal improvement in non-EC private residential sales (382 in Feb vs 372 in Jan). Overall, YTD Feb-15 sales volume of 1,003 units represents a 30% drop over the same period in 2014 (YTD Feb-14: 1,407 units). The only new launch in Feb-15 was Sims Urban Oasis, a 1,024-unit condominium at Sims Drive, developed by Guocoland. Of the 200 units launched, 112 units were sold at a range of S$1,280-1,550 psf, with a median selling price of S$1,400 psf. The slow EC sales momentum is a concern, given the large number of units in the pipeline. Further erosion in investment demand is expected amid ongoing cooling measures and the spike in 3M SIBOR.
Soilbuild REIT(SBREIT) announced its conditional sale and purchase agreement with Technics Offshore Engineering for the acquisition of 72 Loyang Way for S$97m, on an estimated initial 7.8% NPI yield. Besides further diversifying its portfolio, the acquisition will increase the WALE from 4.1 to 5.4 years. While the funding structure has not been finalised, assuming the deal is 100% debt funded, we project a 5-8% uplift to our FY15-17F DPU but gearing is likely to rise to an unsustainable 40.8% from 35%. Maintain BUY, TP S$0.92.
Singapore Airlines said that it is in discussions to purchase a shareholding in South Korea's Jeju Air. These discussions may not result in a transaction. Singapore Airlines will make further public announcements as necessary. In February 2015, Singapore Airlines' systemwide passenger carriage declined 3.5% over last year, with 1.3% reduction in capacity. Consequently, passenger load factor (PLF) declined 1.6 percentage points to 75.2%. Overall cargo load factor (CLF) improved by 5.2 percentage points as cargo traffic was 17.1% higher against an overall capacity increase of 7.6%. Load factor improved on all route regions as the capacity changes were closely matched with demand.
SIA Engineering has signed a Maintenance Training Services Agreement with Airbus to enter into a maintenance training collaboration leading to the appointment of SIAEC as an Airbus Maintenance Training Centre.
Boustead Singapore has secured a 2nd development project under the Boustead Development Partnership. The MRO Facility will be located at the world-class Seletar Aerospace Park in Singapore. Boustead Group's order book backlog is raised to over S$411m.
YuuZoo Corporation announced that it has launched a complete localised version of its virtual shopping mall in Turkey, in joint venture with a strong local partner. This follows hot on the heels of YuuZoo's recent announcement of launch of a complete localised version of its virtual shopping mall through a joint venture with a local partner in South Korea.
The Competition Commission of Singapore (CCS) said that it had blocked last week the S$137m proposed acquisition of RadLink-Asia and its subsidiaries by Parkway Holdings. Both Fortis Healthcare Singapore, which owns RadLink-Asia, and Parkway, have since announced that the acquisition is off. The acquisition would have been undertaken by Medi-Rad Associates Ltd, an indirect wholly owned subsidiary of IHH Healthcare Berhad. CCS stated that the proposed transaction would result in a substantial lessening of competition in the affected markets.
In China, the Shanghai Composite rallied 2.3% yesterday after Li Keqiang pledged to take action if slowing growth threatens job creation or wages. Our technical view for the SSEC (refer to ETF strategy) has been for an eventual rise towards 3700. The current strength since early February should head towards 3660 but from there, expect a correction.
US stocks rebounded, bond yields rose and the dollar declined after weaker-than-expected factory numbers fueled speculation the FED may not raise interest rates as soon as estimated. The March Empire State Manufacturing (actual 6.9, consensus 8), Feb industrial production (actual 0.1%, consensus 0.2%) and Feb capacity utilization (actual 78.9%, consensus 79.5%) all came in weaker-thanexpected.
Source: DBS
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