overseas union enterprise s$3.10 s$2.45 initiation...
Post on 11-Apr-2020
4 Views
Preview:
TRANSCRIPT
Important disclosures, including any required research certifications, are provided on the last two pages of this report.
David Lum, CFA (65) 6329 2102 david.lum@sg.daiwacm.com
What's new This initiation report offers our positive take on Overseas Union Enterprise (OUE), a diversified real-estate owner, operator and developer, controlled by Indonesia’s Lippo Group (68% shareholder). What's the impact We believe OUE offers the following compelling investment merits. 1) OUE has relatively high exposure to the Singapore office sector (50% of its revalued asset value, on our estimates), and we are still positive on this sector on a risk-reward basis. 2) OUE has negligible exposure (1% of revalued asset value) to the high-risk (in our view) residential sector (and no overseas residential exposure). We remain negative on Singapore’s residential market and property developers as we believe the risks of rising imbalances of unsold inventory and increased vacancies in the rental market are higher than ever. 3) OUE has moderate exposure to the Singapore hotel (28% of revalued
asset value) and retail-property (8%) sectors, which we believe offer positive medium-term prospects. 4) OUE’s valuations look attractive, trading at significant discounts to its BVPS of S$4.63 including the disclosed hotel valuation surplus, its BVPS of S$3.44, our estimated NAV per share of S$3.75, and our target price of S$3.10. 5) OUE is trading at the low end of its PBR range since Lippo took control of it in mid-2006. Also, it does not hold any listed entities (unlike the corporate structures of many larger peers). What we recommend We initiate coverage with a Buy (1) rating. In our view, OUE represents deep value and has fairly low execution risk as it operates mostly as a Singapore landlord. Our six-month target price of S$3.10 is pegged to our NAV of S$3.75, to which we ascribe a 20% asset-value discount to OUE’s Singapore office properties (below the current 10% implied asset-value discount for office S-REITs, to reflect different payout policies, financial transparency and tax treatment). Risks to our call would include a major acquisition or capital commitment in Singapore residential, or the emergence of some unforeseen corporate governance overhang.
How we differ Whereas some brokers have started to favour residential names, we are still very cautious on the sector; we prefer undervalued landlords in office, hotel, and retail property. OUE is an ideal fit and our top Singapore property pick. Share price performance
90
100
110
120
130
1.7
2.0
2.3
2.6
2.9
Sep-11 Dec-11 Mar-12 Jun-12 Sep-12
Overseas Union Enterprise (LHS)Relative to FSSTI (RHS)
(S$) (%)
12-month range 1.93-2.56
Market cap (US$bn) 1.79
Average daily turnover (US$m) 2.59
Shares outstanding (m) 910
Major shareholder Lippo, Stephen Riady (68.0%)
Financial summary (S$) Year to 31 Dec 12E 13E 14E
Revenue (m) 400 431 565
Operating profit (m) 178 184 223
Net profit (m) 103 101 142
Core EPS 0.113 0.111 0.156
EPS change (%) (67.1) (2.1) 40.8
Daiwa vs Cons. EPS (%) 2 (12) 4
PER (x) 21.7 22.1 15.7
Dividend yield (%) 2.4 2.9 3.7
DPS 0.060 0.070 0.090
PBR (x) 0.8 0.8 0.7
EV/EBITDA (x) 17.5 16.8 13.3
ROE (%) 3.5 3.4 4.7
Source: Bloomberg, Daiwa forecasts
Hotels, restaurants & leisure / Singapore
7 September 2012
Overseas Union Enterprise OUE SP
Target price: S$3.10 Up/downside: +26.6% Share price (6 Sep): S$2.45
Initiation: undervalued property play in all the right places
Coverage initiated with a Buy (1) rating and target price of S$3.10 OUE has high exposure to Singapore office and hotels, negligible
exposure to Singapore residential, none to overseas residential Awaiting next major acquisition, preferably in the office, hotel or
retail segments
How do we justify our view?How do we justify our view?
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 2 -
An undervalued property play in all the right places ...................................................................... 6 A Singapore landlord with almost no residential exposure ......................................................... 6 Valuation: basis for target price ................................................................................................... 7 Core assets – office ....................................................................................................................... 8 Residential exposure is negligible ................................................................................................ 9 Recent activity in land tenders ..................................................................................................... 9 Core assets – Singapore hotels ................................................................................................... 10 Overseas hotels ............................................................................................................................ 11 Core assets – retail ....................................................................................................................... 11 At the lower end of the PBR range .............................................................................................. 11 Balance sheet .............................................................................................................................. 12 Dividend policy ........................................................................................................................... 12 Lippo’s history at OUE ............................................................................................................... 12 Acquisitions – Lippo’s Singapore property vehicle ................................................................... 13 Recent history: hits and misses .................................................................................................. 13 Risks ............................................................................................................................................ 14
Appendix A ..................................................................................................................................... 15 Office: rental weakness, resilient capital values ........................................................................ 15
Appendix B ..................................................................................................................................... 18 Residential: mounting risks and imbalances ............................................................................. 18 Unsold inventory still at elevated levels ..................................................................................... 19 Rental market could blink first ................................................................................................... 20 Daiwa price and rental forecasts ................................................................................................ 21
Appendix C ..................................................................................................................................... 24 Hotels: Singapore well-positioned to be a global destination leader ........................................ 24
Appendix D ..................................................................................................................................... 26 Retail: suburban supply in 2013 should be manageable ........................................................... 26
Table of contents
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 3 -
Growth outlook OUE: forecasts for revenue, EBITDA and EPS
Even assuming no further acquisitions or corporate activity, OUE has already established a platform of sustainable EBITDA growth through its exposure to the underlying recovery of the Singapore office sector and the stable-to-mildly-positive prospects we see for the hotel and retail-property sectors, complemented by targeted asset enhancements (OUE Shenton Mall and the extension of Crowne Plaza Changi Airport Singapore). For the 2011-14 period we forecast CAGRs of 19% for gross revenue, 15% for EBITDA, and 18% for EPS (excluding revaluations).
332
400 431
565
159 199 205
244
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
0
100
200
300
400
500
600
2011 2012E 2013E 2014E
Gross revenue (LHS) EBITDA (LHS) EPS ex reval (RHS)
(S$)(S$m)
Source: Company, Daiwa forecasts
Valuation OUE: Daiwa NAV, target price and book values (S$)
OUE trades currently at a wide discount both to its BVPS of S$3.44 (as at end-June 2012) and its BVPS of S$4.63 inclusive of the valuation surplus of over S$1.08bn (S$1.19/share). The latter represents the difference between the company’s independent valuations for Mandarin Orchard Singapore and Crowne Plaza Changi Airport Singapore and their carry values. Our estimated NAV per share for OUE is S$3.75, with the major assets valued on a 10-year DCF. We have applied a 20% asset-value discount for the office assets (explained later this report) to derive our six-month target price of S$3.10.
3.10 3.44
0.65
1.19
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
Daiwa target/ NAV Book/disclosed revaluation surplus
Source: Company, Daiwa estimates
Note: in the first bar, the sum of the two values (ie, S$3.75) represents our NAV, while S$3.10 corresponds to our target price.
Earnings revisions OUE: Daiwa forecasts relative to Bloomberg consensus
Our EBITDA forecasts for OUE are higher than those of the Bloomberg consensus by 4% for 2012 and 6% for 2014, suggesting to us that the market could be underestimating the operating performance of OUE’s commercial-property portfolio. However, our 2013 EBITDA forecast is 2% lower than that of the consensus as we expect a lower YoY contribution from DBS Towers One and Two after the departure of the anchor tenant. Overall, we forecast EBITDA growth for OUE of 2.9% YoY for 2013 then a rebound to 19.4% YoY growth for 2014.
4%
-2%
6%6%
-11%
7%
2%
-12%
4%
(15%)
(10%)
(5%)
0%
5%
10%
2012E 2013E 2014E
EBITDA PBT EPS
Source: Bloomberg, Daiwa forecasts
How do we justify our view?
Growth outlook Valuation Earnings revisions
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 4 -
Key assumptionsYear to 31 Dec 2007 2008 2009 2010 2011 2012E 2013E 2014E
Hospitality EBITDA margin (%) 44.3 46.1 37.4 47.2 46.9 45.0 45.7 44.4 Property investments EBITDA margin (%)
55.4 (28.6) (2.2) 73.8 67.6 72.4 71.5 74.6
Property development EBITDA margin (%) (166.7) (195.3) (132.3) (286.7) (43.0) (1.1) (1.1) (1.1)
Overall EBITDA margin (%) 40.9 38.6 27.9 45.2 47.8 49.7 47.4 43.3
Profit and loss (S$m) Year to 31 Dec 2007 2008 2009 2010 2011 2012E 2013E 2014E Hospitality 155 149 131 174 216 238 247 297 Property investments 9 1 1 38 108 144 146 168 Others 6 4 5 3 8 18 39 99 Total revenue 170 153 138 216 332 400 431 565 Other income 0 2 3 8 1 0 0 0 COGS (87) (71) (74) (89) (129) (156) (173) (232) SG&A (16) (23) (21) (22) (31) (35) (36) (38) Other op. expenses (22) (25) (25) (35) (34) (30) (39) (72) Operating profit 44 37 21 78 140 178 184 223 Net-interest inc./(exp.) 13 (5) 2 (8) (50) (79) (79) (79) Assoc/forex/extraord./others 671 13 (120) 835 305 35 31 40 Pre-tax profit 728 45 (98) 905 395 134 136 184 Tax (83) (4) 5 (127) (57) (30) (34) (41) Min. int./pref. div./others 0 0 (1) (5) (2) (1) (1) (1) Net profit (reported) 646 41 (95) 772 336 103 101 142 Net profit (adjusted) 646 41 (95) 772 336 103 101 142 EPS (reported) (S$) 0.658 0.042 (0.096) 0.787 0.344 0.113 0.111 0.156 EPS (adjusted) (S$) 0.658 0.042 (0.096) 0.787 0.344 0.113 0.111 0.156 EPS (adjusted fully-diluted) (S$) 0.658 0.042 (0.096) 0.787 0.344 0.113 0.111 0.156 DPS (S$) 0.024 0.032 0.000 0.040 0.130 0.060 0.070 0.090 EBIT 44 37 21 78 140 178 184 223 EBITDA 343 174 (38) 158 199 213 225 269
Cash flow (S$m) Year to 31 Dec 2007 2008 2009 2010 2011 2012E 2013E 2014E Profit before tax 728 45 (98) 905 395 134 136 184 Depreciation and amortisation 25 22 18 17 20 20 21 21 Tax paid (7) (13) (12) (12) (18) (30) (34) (41) Change in working capital (350) (579) (11) (71) 0 (93) (10) 200 Other operational CF items (619) (9) 117 (829) (256) (171) 91 41 Cash flow from operations (222) (535) 14 10 141 (139) 204 405 Capex (3) (5) (18) (7) (15) (20) (61) (21) Net (acquisitions)/disposals 45 (109) 43 (972) (334) (35) (85) (55) Other investing CF items 24 19 4 10 6 27 28 29 Cash flow from investing 65 (95) 29 (969) (343) (28) (117) (47) Change in debt 164 366 8 1,040 534 438 (25) (200) Net share issues/(repurchases) 0 0 0 0 (83) (73) 0 0 Dividends paid (24) (31) 0 (20) (39) (127) (55) (73) Other financing CF items (7) (15) (36) (33) (70) (96) (95) (86) Cash flow from financing 134 320 (28) 988 343 142 (174) (359) Forex effect/others 0 0 0 0 0 0 0 0 Change in cash (23) (310) 15 28 141 (26) (88) (1) Free cash flow (225) (540) (4) 3 126 (159) 143 384
Source: Company, Daiwa forecasts
Financial summary
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 5 -
Balance sheet (S$m) As at 31 Dec 2007 2008 2009 2010 2011 2012E 2013E 2014E
Cash & short-term investment 493 183 198 226 368 342 254 253 Inventory 242 831 571 716 744 832 842 642 Accounts receivable 13 11 9 27 25 25 25 25 Other current assets 56 5 10 7 15 11 11 11 Total current assets 804 1,030 788 976 1,152 1,210 1,132 931 Fixed assets 230 220 213 243 508 491 491 531 Goodwill & intangibles 0 0 0 0 43 43 43 0 Other non-current assets 1,433 1,627 1,772 3,502 3,830 3,881 3,981 4,055 Total assets 2,466 2,876 2,772 4,721 5,533 5,625 5,647 5,517 Short-term debt 23 15 115 481 56 56 56 56 Accounts payable 34 58 59 70 103 90 90 90 Other current liabilities 29 24 18 25 23 27 27 27 Total current liabilities 87 97 192 577 182 173 173 173 Long-term debt 175 550 458 1,115 2,066 2,504 2,479 2,279 Other non-current liabilities 94 103 92 227 258 30 30 30 Total liabilities 356 749 743 1,919 2,505 2,707 2,682 2,482 Share capital 693 693 693 693 693 693 693 693 Reserves/R.E./others 1,423 1,440 1,342 2,112 2,334 2,224 2,272 2,342 Shareholders' equity 2,116 2,133 2,036 2,805 3,028 2,918 2,965 3,035 Minority interests (6) (6) (7) (2) 0 1 1 1 Total equity & liabilities 2,466 2,876 2,772 4,721 5,533 5,625 5,647 5,517 EV 1,512 2,088 2,161 3,102 3,357 3,729 3,787 3,584 Net debt/(cash) (294) 382 375 1,370 1,753 2,217 2,280 2,081 BVPS (S$) 2.156 2.173 2.074 2.857 3.211 3.207 3.259 3.336
Key ratios (%) Year to 31 Dec 2007 2008 2009 2010 2011 2012E 2013E 2014E Sales (YoY) (2.3) (9.8) (10.3) 56.8 54.2 20.2 7.9 31.0 EBITDA (YoY) (1.8) (49.3) n.a. n.a. 25.9 7.2 5.5 19.6 Operating profit (YoY) (85.7) (16.1) (44.4) 276.4 79.2 27.8 3.2 21.3 Net profit (YoY) 95.2 (93.7) n.a. n.a. (56.5) (69.3) (2.2) 40.8 EPS (YoY) 95.2 (93.7) n.a. n.a. (56.3) (67.1) (2.1) 40.8 Gross-profit margin 48.5 53.7 46.4 58.8 61.2 61.0 60.0 59.0 EBITDA margin n.m. n.m. n.a. 73.3 59.8 53.3 52.1 47.6 Operating-profit margin 26.1 24.3 15.0 36.1 42.0 44.6 42.7 39.5 ROAE 35.5 1.9 n.a. 31.9 11.5 3.5 3.4 4.7 ROAA 31.6 1.5 n.a. 20.6 6.5 1.8 1.8 2.5 ROCE 2.3 1.5 0.8 2.2 2.9 3.4 3.4 4.1 ROIC 2.8 1.6 0.8 2.0 2.7 2.8 2.6 3.3 Net debt to equity net cash 17.9 18.4 48.8 57.9 76.0 76.9 68.6 Effective tax rate 11.4 8.5 n.a. 14.1 14.6 22.4 25.2 22.3 Accounts receivable (days) 30.4 28.5 25.9 30.0 28.5 22.9 21.2 16.2 Payables (days) 71.4 109.1 154.4 109.0 94.8 88.3 76.6 58.5 Net interest cover (x) n.a. 7.1 n.a. 9.9 2.8 2.3 2.3 2.8 Net dividend payout 3.6 76.8 n.a. 5.1 37.8 53.0 63.2 57.7
Source: Company, Daiwa forecasts
Company profile Overseas Union Enterprise (OUE) is a diversified real estate owner, operator and developer, with a portfolio of properties, by 2011 revenue, in hospitality (65%), investment property (office and retail: 32%), property development (2%) and others (1%). Its geographical exposure by assets as at end-2011 was 96% in Singapore, 3% in China, and 1% unallocated assets.
Financial summary continued …
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 6 -
An undervalued property play in all the right places
Established landlord in Singapore office, hotel and retail sectors; negligible exposure to residential is a positive
A Singapore landlord with almost no residential exposure
We initiate coverage of OUE with a Buy (1) rating and a six-month target price of S$3.10. Our target price is pegged to our estimated NAV, to which we have ascribed an asset-value discount (to what we consider as our cautious asset valuations) of 20% for its Singapore office assets and no discounts for its hotel and retail assets. In the current market, we believe OUE offers several compelling investment merits: 1) OUE has relatively high exposure to the Singapore office sector (50% of its revalued asset value, on our estimates), and we remain positive on this sector on a risk-reward basis. 2) OUE has negligible exposure (1% of its revalued asset value) to the high-risk (in our opinion) residential sector. We remain negative on the Singapore residential market and Singapore property developers, because we believe the risks of rising imbalances of unsold inventory and increased vacancies in the rental market are higher than ever. (For details, see our sector update on the Singapore Property Developers, Rising risks and imbalances point to multi-year market decline, published on 23 August 2012). 3) OUE has moderate exposure to the Singapore hotel (28% of its revalued asset value) and retail-property (8%) sectors, which we believe offer favourable prospects in the medium term. 4) Its valuations look attractive to us. OUE is trading currently at significant discounts to its BVPS of S$4.63 inclusive of a disclosed hotel valuation surplus, its
BVPS of S$3.44 (excluding the revaluation surplus), our NAV of S$3.75, and our target price of S$3.10. 5) OUE is trading currently at the low end of its PBR range since Lippo took control of the company in mid-2006. Although many other Singapore property companies are also trading at the lower end of their historical PBR ranges, OUE has negligible exposure to Singapore residential, no exposure to overseas residential, and does not hold any listed entities, unlike the corporate structures of many of its larger peers. Core operations in Singapore commercial OUE’s largest exposures are Singapore office, hotels, and retail, which we estimate in aggregate make up 86% of its revalued assets. OUE has negligible exposure (1% of revalued assets, included under ‘Others’ in the following chart) to residential property. OUE: Daiwa revalued asset breakdown
Cash8.5%
Singapore office49.7%
Singapore hotels27.5%
Other hotels2.2%
Singapore retail8.4%
Others3.7%
Source: Daiwa estimates
OUE: Daiwa NAV valuation
Value (S$m) Share of value Cash and equivalents 472 8.5% Hotels Mandarin Orchard Singapore 1,072 19.3% Crown Plaza Changi Airport 352 6.3% Meritus Mandarin Haikou 58 1.1% Meritus Shantou China 61 1.1% Total value of hotel assets 1,544 27.8% Available-for-sale financial assets 128 2.3% Stake in OUB Centre (One Raffles Place) 619 11.1% Stake in Marina Mandarin 104 1.9% Investment properties OUE Bayfront 981 17.7% Mandarin Gallery 469 8.4% DBS Building 1,162 20.9% Total investment properties 2,611 47.0% Present value of development property 75 1.3% Total revalued assets 5,554 100.0% Adjusted borrowings (2,052) Other liabilities (91) Total liabilities (2,143) Net asset value 3,411 Shares outstanding (m) 909.9 NAV per share (S$) 3.75
Source: Daiwa estimates
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 7 -
Valuation: basis for target price
10-year DCF to determine asset values We start off by valuing each of OUE’s major assets on a 10-year DCF basis (illustrated in the table below). That is, we discount the after-tax net profit (effectively, the unleveraged funds from operations) over 10 years, including a terminal-value assumption (a finite-life Gordon Growth Model) in year 10, based on the remaining leasehold tenure for the asset, which varies from 43.9 years to 94.3 years. OUE: Daiwa asset valuations vs. appraised values
Long-term Effective Discount growth cap Residual Daiwa Daiwa Appraised Appraised
rate rate rate leasehold value value value value Variance (%) (%) (%) years (S$m) (S$/sq ft) (S$m) (S$/sq ft) (%)
Office OUE Bayfront 5.50 1.50 4.00 94.3 981 2,398 1,073 2,623 (9) DBS Towers 6.25 1.50 4.75 53.9 1,111 1,269 1,400 1,600 (21) OUE Shenton Mall* 7.00 1.50 5.50 53.9 51 n.a One Raffles Place (office) 5.75 1.50 4.25 72.2 1,749 2,301 n.a One Raffles Place (retail) 7.00 1.50 5.50 72.2 200 2,000 n.a One Raffles Place (blended) 2,266 2,056 2,390 (5) Retail Mandarin Gallery 6.50 1.50 5.00 43.9 469 2,809 520 3,116 (10) Hotel S$/room S$/room Mandarin Orchard 8.50 1.50 7.00 43.9 1,072 1,019,940 1,180 1,122,740 (9) Crowne Plaza Changi ** 8.50 1.50 7.00 71.3 392 754,175 269 840,000 (10) Marina Mandarin n.a n.a n.a 67.1 435 756,522 435 756,522 0 Total value (S$m) 6,409 6,932 (8)
Source: OUE, Daiwa estimates Note: *Daiwa’s estimate of NPV of development, ** Daiwa’s value assumes completion of extension
About 8% lower than appraised value Our valuations of OUE’s assets are more conservative than its appraised valuations, as we have found that our 10-year DCF valuations are, on average, about 8% lower than the aggregate independent valuations (as at December 2011) provided by OUE. For Marina Mandarin Singapore, in which OUE has an effective interest of 30%, in the absence of operating data, we use the company’s appraised value of S$435m (S$756,522 per room), which appears reasonable to us. After incorporating our 10-year DCF valuations for its major assets, our NAV per share for OUE comes to S$3.75. Asset-value discount of 20% for office As a final step in setting our target price, we ascribe an asset-value discount to OUE’s commercial-property exposures in view of the market’s current valuations for pure-play office, hospitality, and retail S-REITs. Currently, office S-REITs are trading at a weighted-average implied-asset discount of 10%, while retail and hospitality S-REITs are trading at implied-asset premiums of 10% and 7%, respectively, based on our estimates.
Compared with the 10% discount that the market is currently pricing in for office S-REITs, we have applied a discount of 20% to our estimated asset values for all of OUE’s Singapore office properties, to reflect the differing payout policies, financial transparency, and tax treatments between S-REITs and property companies. Although the market is more bullish on Singapore hotel and retail assets at present (relative to their December 2011 valuations and current book values), for the sake of prudence, we have chosen not to ascribe asset premiums to our valuations for OUE’s hotel and retail assets even though our 10-year DCF valuations are discernibly lower than the company’s appraised values for these assets. We recognise that OUE is mainly a property landlord (in the office, hotel and retail segments) and not a REIT. However, we would argue, as discussed in our sector report of 4 July 2012 (Pan-Asia REITs: A new spin on valuing REITs), that their business activities are similar, and arguably, even identical. Therefore, the market’s implied valuations for the office assets of CapitaCommercial Trust (CCT SP, S$1.41, Buy [1]) and Suntec REIT (SUN SP, S$1.45, Buy [1]) should not differ significantly from their valuations of OUE’s office assets. Moreover, the market’s valuations for office S-
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 8 -
REITs should reflect not only their yields but also other factors, including the directional outlook of their underlying asset values, and these factors are just as relevant for OUE’s office assets, in our view. OUE: Daiwa NAV vs. target-price valuation breakdown
NAV Valuation for target (S$m) price (S$m)
Cash and equivalents 472 472 Hotels Mandarin Orchard Singapore 1,072 1,072 Crown Plaza Changi Airport 352 352 Meritus Mandarin Haikou 58 58 Meritus Shantou China 61 61 Total value of hotel assets 1,544 1,544 Available-for-sale financial assets 128 128 Stake in OUB Centre 619 460 Stake in Marina Mandarin 104 104 Investment properties OUE Bayfront 981 785 Mandarin Gallery 469 469 DBS Building 1,162 929 Total investment properties 2,611 2,183 Present value of development property 75 75 Total assets 5,554 4,966 Adjusted borrowings (2,052) (2,052) Other liabilities (91) (91) Total liabilities (2,143) (2,143) Net-asset value 3,411 2,823 Shares outstanding (m) 909.9 909.9 NAV/ target value per share (S$) 3.75 3.10
Source: Daiwa estimates
Core assets – office
We present our view of the Singapore office sector in Appendix A – Office: rental weakness, resilient capital values. We note that although office rents have been trending down for several quarters, the decline as stabilised in 2Q12, suggesting that they might bottom out in 2H12. In contrast, capital values have remained resilient (flat QoQ since 3Q11) and might not decline much during 2H12. OUE’s exposure to the Singapore office sector consists of three properties: OUE Bayfront, DBS Building Towers One and Two, and a 40.8% effective stake in One Raffles Place. Given our view that rents in the sector are set to stabilise by 1H13, we believe these exposures are positive. OUE Bayfront OUE Bayfront, the company’s flagship commercial property, is an 18-storey prime grade-A office development along Marina Bay, with a total gross floor area (GFA) of 503,502 sq ft and a remaining leasehold of 94 years. The office tower features column-free floor plates of 26,000-30,000 sq ft.
OUE Bayfront is a redevelopment of Overseas Union House (OUH), one of the company’s legacy assets. The S$250m redevelopment, completed in January 2011, also comprises retail and F&B space through OUE Tower (the former Change Alley Aerial Tower) with a net lettable area (NLA) of 11,900 sq ft and OUE Link (the former Change Alley Linkbridge), a dual-passage overhead link with an NLA of 2,854 sq ft. OUE Bayfront’s committed occupancy was 82.3% as at the end of December 2011. At the end of 2Q12, the occupancy rate was about 86%, while the weighted average rent was S$10.40/sq ft, compared with asking rents of S$12-14/sq ft for the remaining unlet space, according to management. OUE Bayfront was valued at S$1,073m (S$2,623/sq ft) as at the end of December 2011. DBS Building Towers One and Two DBS Building Towers One and Two (DBS Building) is an office development on Shenton Way with over 870,000 sq ft of NLA and a GFA of 1.24m sq ft. The property’s remaining lease tenure is about 54 years. OUE plans to redevelop (for about S$140m) the podium of the property, currently occupied by the DBS banking hall to a retail mall. The asset enhancement initiative (AEI) is scheduled to start from the end of 2012 when DBS’s lease expires. DBS occupies about 55% of the property and has been paying S$4.90/sq ft. The passing rental for the property at the end of 2Q12, according to management, was about S$5.70, implying that the other tenants were paying an average of S$6.70/sq ft. Management also disclosed that the occupancy rate at the property was 95% at the end of 2Q12 and that its (monthly) asking rents were S$6-7/sq ft. The valuation for DBS Building, as reflected on the balance sheet, is S$1.4bn (S$1,600/sq ft assuming an NLA of 875,000 sq ft). In an astute move, OUE acquired the property for S$870.5m (S$995/sq ft) in 3Q10. One Raffles Place (formerly OUB Centre) OUE owns an effective stake of 40.8% in One Raffles Place, an integrated development featuring two grade-A office towers (the 62-storey One Raffles Place Tower 1 and the 38-storey One Raffles Place Tower 2) and a five-storey retail podium with one basement level. OUE holds a 50% stake in OUB Centre Limited, which in turn, owns 81.54% of One Raffles Place. One Raffles Place Tower 2 was completed in 4Q11-1Q12.
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 9 -
At the end of 2Q12, Tower 2 was 60% occupied while Tower 1 was 80% occupied following the departure of ANZ to Ocean Financial Centre (OFC). Management said that it was signing new tenants for both towers at monthly rents of over S$9.50/sq ft. The retail mall, the largest shopping space in Raffles Place, was about 85% occupied and the owners plan a modest redevelopment (S$40-50m) to reposition it as a higher-end mall. One Raffles Place’s approximate GFA was 1.28m sq ft, while the valuation attributed to OUB Centre was S$1,676.1m, according to its 2001 annual report, implying a value of S$2,056m (S$2,390/sq ft, based on NLA of 860,000 sq ft) on a 100% basis, based on our calculations. The development sits on an 841-year and 99-year lease from 1 November 1985 and a 99-year lease from 26 May 1983.
Residential exposure is negligible
Compared with its peers, OUE has negligible exposure to the Singapore residential sector. We regard this as highly positive, in view of our negative rating for the sector. We present our view in Appendix B – Singapore residential: Mounting risks and imbalances. Twin Peaks OUE’s sole residential exposure now is its development of Twin Peaks, a 462-unit, a prime 99-year leasehold property on Leonie Hill, a short walk from Orchard Road. In August 2007, it acquired the former The Grangeford in an en-bloc sale from its strata-titled owners for S$625m (S$1,810/sq ft per plot ratio), the highest en-bloc sale price for a 99-year leasehold property in Singapore. We estimate a breakeven sales price of S$2,350/sq ft. OUE rented the property temporarily during the global financial crisis. Twin Peaks was launched in 3Q10 with 48 units sold to date at an ASP of S$2,831/sq ft, according to URA’s Realis database. We have assumed that the company can clear the remaining units over several years at a 20% discount, or an overall ASP of S$2,324/sq ft, so the contribution to GAAP earnings would be negligible. We estimate an NPV of S$75m As for what Twin Peaks is actually worth to OUE shareholders today, we have excluded all acquisition and development costs (including capitalised interest) up to 30 June 2012, as they are sunk costs. Instead, we assume that the value of the project is simply the present value of the remaining revenue streams (at an ASP assumption of S$2,324/sq ft) less additional property development commitments of S$161m (as at
30 June 2012) and less the secured bank loan of S$365m on the development, for a total NPV of about S$75m. Negligible for now We note that OUE has been active recently in several residential government land tenders through its wholly-owned residential development unit, OUE Reef Development. Fortunately, it has not topped any tender, which indicates a combination of bad luck (its bid for the Pheng Gheck Avenue site was just 1% below the top bid) and, more importantly, a bidding strategy that has been disciplined so far. One major risk would be overbidding and winning a future government land tender, after missing out on so many so far this year.
Recent activity in land tenders
Tanah Merah Kechil Road OUE participated in the tender for the Tanah Merah Kechil Road site, which attracted 13 bids and closed on 31 July 2012. OUE made the 12th-highest bid of S$223.1m, or S$528.8/sq ft per plot ratio. Pheng Gheck Avenue The company was the under-bidder (by just 1%) for the Pheng Gheck Avenue (parcel B) site near the Potong Pasir mass rapid transit (MRT) station, which attracted 13 bids and closed on 28 June 2012. OUE made a bid of S$113.75m, or S$622.5/sq ft per plot ratio. Pasir Ris Drive 3 The company participated in the tender for the Pasir Ris Drive 3 site, which attracted five bids and closed on 5 June 2012. OUE made the third-highest bid of S$198.1m, or S$392.7/sq ft per plot ratio. Sengkang Square/Compassvale Drive The company participated in the tender for the Sengkang Square/Compassvale Drive site, which attracted five bids and closed on 31 May 2012. OUE made the third-highest bid of S$340.1m, or S$468.1/sq ft per plot ratio. Boon Lay Way OUE participated in the tender for the Boon Lay Way (Jurong Gateway) site, which attracted 12 bids and closed on 29 May 2012. OUE made the eighth-highest bid of S$310.5m, or S$592.7/sq ft per plot ratio.
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 10 -
Elias Road/Pasir Ris Drive 3 OUE was the under bidder (by 16%) for the Elias Road/Pasir Ris Drive 3 site, which attracted nine bids and closed on 11 April 2012. OUE made a bid of S$139.0m, or S$395.5/sq ft per plot ratio. Punggol Central EC OUE participated in the tender for the Punggol Central executive-condominium (EC) site, which attracted ten bids and closed on 29 March 2012. OUE made the seventh-highest bid of S$117m, or S$273.6/sq ft per plot ratio.
Core assets – Singapore hotels
We present our view of the Singapore hotel sector in Appendix C - Hotels: Singapore well-positioned to be a global destination leader. Although the relative weakness of revenue per available room (RevPAR) growth (excluding the integrated resort [IR] hotels) for 1H12 should be a source of concern, as well as the uncertainty in 2H12, we believe the medium-term prospects are still positive. OUE’s exposure to Singapore hotels consists of its 100% ownership in Mandarin Orchard Singapore, and Crowne Plaza Changi Airport Singapore and 30% effective interest in Marina Mandarin Singapore. Mandarin Orchard Singapore Located on Orchard Link, directly opposite Ngee Ann City and Takashimaya Shopping Centre on Orchard Road, Mandarin Orchard Singapore is a 1,051-room hotel consisting of a 37-storey main tower and a 39-storey Orchard Wing. The hotel’s main attraction is its prime Orchard Road location which has a strong following from visitors from Southeast Asia. For 2011, Mandarin Orchard Singapore’s average daily room rate (ADR) was S$277.3. For 2Q12, the hotel achieved an ADR of S$283, an average occupancy rate (AOR) of 87% and RevPAR of S$245. The remaining leasehold tenure for Mandarin Orchard Singapore is about 44 years (with a 99-year lease from 1 July 1957). Mandarin Orchard Singapore, based on an independent valuation, was valued at S$1,180m (S$1.12m per room) as at December 2011. Classified as property, plant, and equipment, the hotel’s carrying value on OUE’s balance sheet was only S$119.3m, implying an unrecognised revaluation surplus of S$1.06bn.
Crowne Plaza Changi Airport Singapore Opened in 2008, Crowne Plaza Changi Airport Singapore is a 320-room hotel located within Singapore’s Changi Airport with a direct link to Terminal 3. OUE announced the acquisition of Crowne Plaza Changi Airport Singapore on 15 April 2011 for S$250m in addition to an adjacent plot of land for S$43m, on which OUE plans to develop a further 200 rooms for S$37m. The acquisition cost works out at S$781,000 per room for the existing 320-rooom hotel and S$635,000 per room after the completion of the additional development. The hotel was acquired on 25 July 2011. Crowne Plaza Changi Airport Singapore’s AOR for 2011 was 90.3%, the highest among OUE’s hotels. For 2Q12, the hotel achieved an ADR of S$272, an AOR of 85%, and RevPAR of S$232. Crowne Plaza Changi Airport Singapore has a remaining leasehold tenure of about 71 years (a 77-year lease running from 12 December 2006). Crowne Plaza Changi Airport Singapore was valued at S$268.8m by independent valuers as at December 2011, compared with OUE’s carrying value of S$244.9m, implying an unrecognised revaluation surplus of S$23.8m. Marina Mandarin Singapore OUE owns an effective stake of 30% in Marina Mandarin Singapore, a 21-storey 575-room hotel on Raffles Boulevard, within the Marina Square complex and opposite Suntec City and the Pan Pacific Hotel Singapore. It also boasts a strategic location for the annual Formula 1 Singapore Grand Prix. Its fair value, according to independent valuations, was S$435m (S$668,000 per room). Marina Mandarin Singapore has a remaining leasehold tenure of about 67 years (a 99-year lease running from 9 September 1980).
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 11 -
Overseas hotels
We regard OUE’s overseas hotels as non-core assets, for their relatively small size and minor contribution to the company’s overall net profit. However, they do complement OUE’s Meritus Hotels & Resorts brand, comprising three properties outside of Singapore. Meritus Mandarin Haikou Meritus Mandarin Haikou is a 23-storey hotel with 318 rooms in Haikou City, China. Its fair value, according to independent valuations, was Rmb298 as at December 2011. It has a remaining leasehold tenure of about 47 years (a 70-year lease running from 31 March 1989). Meritus Shantou China Meritus Shantou China is a 21-storey hotel with 318 rooms in the financial district of Shantou, Guangdong, China. Its fair value, according to independent valuations, was Rmb313m as at December 2011. It has a remaining leasehold tenure of about 35 years (a 50-year lease running from 24 September 1997). Meritus Pelangi Beach Resort & Spa, Langkawi, Malaysia OUE manages the 331-room Meritus Pelangi Beach Resort & Spa. The resort is situated on 35 acres along a 1km stretch of Langkawi’s Cenang Beach.
Core assets – retail
We present our view on the Singapore retail sector in Appendix D – Retail: suburban supply in 2013 should be manageable. OUE’s exposure to the retail sector is mainly through its Mandarin Gallery on Orchard Road. Its stake in One Raffles Place includes an exposure to its retail mall. Moreover, OUE plans to add a retail mall within the podium of DBS Towers One and Two. Mandarin Gallery Mandarin Gallery is a 196,337 sq ft GFA retail podium on Orchard Road consisting of four levels and six duplexes catering to 103 shops offering luxury, fashion, and lifestyle brands. Mandarin Galley has a remaining leasehold tenure of about 44 years (99-year lease from 1 July 1957). At the end of 2Q12, the occupancy rate was 99.5% (effectively
fully occupied) with a passing monthly rent of S$22/sq ft, according to management. Prime, first floor rents are in the range of S$45-55/sq ft, while fourth floor rents are in the range of S$10-15/sq ft. The valuation for Mandarin Gallery, as reflected on the balance sheet, was S$520m (S$3,116/sq ft assuming NLA of 166,886 sq ft) as at December 2011.
At the lower end of the PBR range
Since Lippo, OUE’s current controlling shareholder, took control of OUE from United Overseas Bank (UOB) in late May 2006, its shares have traded at an average PBR of 1.10x and a standard deviation (SD) of 0.33. The shares are now trading near the low end of their valuation range since June 2006, and more than 1SD below their mean. OUE: PBR trend (x)
0.0
0.5
1.0
1.5
2.0
Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12
PBR (x) Mean (1.10x) +1 Std -1 Std
Source: Bloomberg
One reason that OUE shares have traded (on average) above their book value since June-2006 is that the company’s core hotel property assets are carried on the balance sheet as property, plant and equipment. They are not revalued annually (unless there is an impairment charge), unlike the accounting treatment for office and retail properties. Trading at the low end of its PBR range is not unique to OUE and appears to be a trend in the Singapore property sector. However, we reiterate that OUE’s current discount might not be deserved since, compared with its peers, it has negligible exposure to Singapore residential and also to overseas residential (in ASEAN and China). Moreover, OUE is not a holding company (it does not own any listed entity), unlike the corporate structures of many of its larger peers, so it does not warrant a holding-company discount. Its stated dividend policy of a 50% payout is also more generous compared with its peers.
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 12 -
PBR trend of major Singapore property companies (x)
0
1
2
3
4
5
Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12
CAPL SP Equity CIT SP Equity
KPLD SP Equity OUE SP Equity
Source: Bloomberg
The OUE stock has generally underperformed its peers over six-month and one-year periods, as the next table shows. Singapore-listed property companies: share-price performances
Share price Mkt cap (S$m) 1-Month 3-Month 6-Month 1-Year
Bloomberg 31-Aug-12 31-Aug-12 % % % % HKL SP US$ 6.1 14,318 1.7% 8.9% 10.3% 5.2% CAPL SP S$ 3.01 12,794 0.3% 18.5% -2.3% 14.9% CIT SP S$ 11.52 10,475 -1.5% 15.8% 3.5% 14.3% GLP SP S$ 2.37 10,894 5.3% 13.9% 8.7% 41.9% CMA SP S$ 1.655 6,434 1.5% 17.4% 7.5% 21.7% UIC SP S$ 2.61 3,597 -1.5% 3.6% -6.1% -3.3% KPLD SP S$ 3.39 5,235 -1.5% 18.5% -0.9% 9.7% UOL SP S$ 5.27 4,052 1.7% 19.8% 12.4% 15.3% SL SP S$ 6.01 2,479 1.0% 10.3% 5.3% -9.5% YLLG SP S$ 1.165 2,270 -4.1% 13.7% -15.6% 28.7% OUE SP S$ 2.5 2,275 -2.0% 17.4% 0.4% 5.9% GUOL SP S$ 1.7 2,012 2.1% 8.6% -11.5% -18.3% WP SP S$ 1.81 2,166 -0.3% 9.4% 10.4% 6.5% BS SP S$ 4.85 1,256 3.2% 5.4% 6.6% 20.0% FRAG SP S$ 0.545 1,831 9.0% 17.2% 47.3% 70.3% HOBEE SP S$ 1.285 902 3.2% 14.7% -4.1% -5.5% WINGT SP S$ 1.53 1,196 8.5% 18.6% 20.0% 12.5% YINGLI SP S$ 0.32 692 4.9% 23.1% -14.7% 4.9% OHL SP S$ 0.395 588 0.0% 9.7% 25.4% 19.7% SCGD SP S$ 0.985 409 1.5% 0.0% -7.1% -19.9% FSSTI 3025.46 -0.4% 9.1% 1.0% 4.9% FSTREI 725.13 2.7% 13.3% 16.0% 12.7%
Source: Bloomberg
Balance sheet
As at 30 June 2012, OUE’s net-debt to (total) equity was 0.61x, while its ratio of net debt to total assets was 0.34x. Its gearing might appear on the high side relative to other Singapore property companies, but its total equity value does not include the valuation surplus of its hotels (of about S$1bn, based on their December 2011 valuations). Including this surplus, we estimate that the net-debt-to-equity ratio would be 0.45x, which for a property landlord would be a comfortable level, in our opinion. The increase in gearing in 3Q10 was due to borrowings incurred for the acquisition of DBS Towers.
OUE: gearing trend (x)
0.25 0.27 0.22
0.18 0.18 0.18
0.59
0.46 0.45 0.48
0.55 0.54 0.56 0.61
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Net debt to equity Net debt to assets
Source: Company, Daiwa
Dividend policy
OUE’s dividend policy (announced on 7 June 2010) is to pay annual dividends of at least 50% of its profit after tax, after adjusting for fair-value gains and taking into account the group’s capital requirements, expansion plans and other funding requirements. Based on our DPS forecasts of S$0.06-0.09 for 2012-14 and OUE’s share price of 6 September 2012, the projected dividend yield is 2.4-3.7%.
Lippo’s history at OUE
In late May 2006, Lippo and Malaysian billionaire Ananda Krishnan teamed up in a 60/40 joint venture to buy a 55% stake in OUE from UOB, shortly ahead of the 17 July 2006 deadline imposed by the Monetary Authority of Singapore for Singapore banks to divest their non-core assets. UOB had acquired OUE when it succeeded in the takeover of OUE’s former parent, the former Overseas Union Bank, in late 2001. In retrospect, we believe the timing of the acquisition was highly favourable for Lippo, as it was secured during a reasonably attractive phase of the Singapore property cycle. Lippo also read correctly the potential for the IRs to drive the Singapore hospitality market to the next level. Lippo also bought OUE from what most observers would regard as an astute Singapore real-estate player, UOB (in particular, its chairman Wee Cho Yaw), although UOB faced a deadline to considerably pare down its stake in OUE. In March 2010, Lippo bought out Ananda Krishnan’s stake for S$957m (valuing OUE at the time at S$11 per share), raising its effective stake in OUE to 88.5%. Lippo said that it intended to retain OUE’s listing on the Singapore Exchange.
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 13 -
Acquisitions – Lippo’s Singapore property vehicle
According to its chairman, Stephen Riady, the son of Mochtar Riady, who controls the Indonesian conglomerate, Lippo Group, OUE has been planning at least one investment a year in Singapore to boost its property portfolio. These investments include office towers, hotels, malls, and residential developments. Value creation for investment-property portfolio Since Lippo’s acquisition there has been clear evidence of value creation within OUE’s portfolio, helped in part by the property cycle. The redevelopments of OUE Bayfront (for S$460m) and Mandarin Gallery (for S$200m) were timely moves to upgrade, modernise and augment its investment properties, in our view, while OUE’s acquisition of DBS Towers One and Two for S$870.5m, or about S$995/sq ft (announced on 11 August 2010) looks prescient now despite anchor tenant DBS’s withdrawal. Residential has been a drag OUE was not as fortunate in the luxury residential market. It is still saddled with Twin Peaks, acquired at an en-bloc sale in August 2007 for S$625m (S$1,810/sq ft per plot ratio), the highest en-bloc sale price for a 99-year leasehold property in Singapore. Fortunately, it was nimble enough to offload another luxury development, a freehold site at Anguilia Park, to China Sonangol Land for S$283m in October 2009. OUE acquired the site (the former The Parisian) in December 2006 for S$228.1m to reduce its high-end residential exposure. We reiterate that one acquisition-related risk would be to overpay for any future residential government land tender, since OUE has been relatively active in tenders so far this year.
Recent history: hits and misses
Placing out vendor shares The company announced on 15 June 2010 that it would not proceed with a proposed convertible note issue, but that its controlling shareholder, Golden Concord Asia Limited (GCAL) would place out 18m vendor shares at a price of S$11.50 per vendor share, reducing its stake to 79.35%. On 16 June 2010, OUE shareholders at the extraordinary general meeting (EGM) unanimously approved a five-for-one subdivision of the company’s ordinary shares. GCAL announced on 7 October 2010 that it would place out 120.5m vendor shares at S$2.80 per vendor share, reducing its stake in OUE from 79.35% to 67.07%. The transaction was settled on 10 October 2010. The ‘financing’ transaction and its overhang GCAL entered into a financing transaction in January 2011, whereby it delivered 53.3m OUE shares (5.43% of issued capital) to Credit Suisse with a right of return. Economically, this was an attractive financing transaction from Golden Concord Asia’s perspective. However, when Credit Suisse disposed of 42.6m OUE shares in a block trade, it confused many OUE investors, and probably created an overhang for OUE’s share price. GCAL subsequently announced on 23 August 2011 that it had decided to unwind the transaction (receiving 13m shares back but relinquishing the right of return for the remaining shares). Comes through on share buybacks On 28 September 2011, the shareholders at the EGM unanimously approved a share buyback mandate, allowing buybacks of up to 10% of issued shares. OUE promptly began share buybacks on 30 September 2011. By the end of 2011, it had purchased 38.5m shares at an average price of S$2.15/share. The share buyback continued into 2012 (mostly in 1Q12), with the company buying back 33.2m shares year-to-date at an average price of S$2.21/share.
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 14 -
Risks
Returning to residential Given our negative view on the Singapore residential market and negative stock ratings for the property developers we cover, we believe acquiring a residential site for development now, at the peak of the market (and we expect a multi-year correction of 20-23% in prices), would be likely to destroy value. If OUE decides to make a major investment in the residential market, it would probably be in the mass-market, where the company has been active in recent government land tenders. Even in this segment, we would still be extremely wary of any move since OUE has not established a track record of fast turnarounds, a critical skill over the next 6-9 months, in our opinion, in the mass-market. Lippo and corporate governance We believe OUE will be Lippo’s preferred vehicle to expand in the Singapore property market and that Mr. Stephen Riady is committed to raising OUE’s profile in a transparent manner through strategic acquisitions and asset enhancements. OUE has clearly gained traction in the hotel and office space since Lippo took over. For all of the positive developments, however, there have been setbacks related to the controlling shareholder from time to time, including the placement of vendor shares and the GCAL ‘financing’ transaction in 1H11. Although the risk appears to be receding, we believe any negative corporate governance (or perceived corporate governance) issue in the future could lead to underperformance of the shares.
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 15 -
Appendix A
Office: rental weakness, resilient capital values
Not a bad place to hide We believe the Singapore office sector is not a bad place to hide amid the current global uncertainties. Although office rents are still on a downtrend, they appear to be stabilising. According to Jones Lang LaSalle, prime grade-A office rentals declined by 4.4% QoQ for 4Q11, 4.6% QoQ for 1Q12, and 1.1% QoQ for 2Q12. We believe the current market correction will be relatively mild in relation to the collapse in rents that occurred during the global financial crisis. Moreover, the most-recent peak of S$10.20/sq ft in 3Q11 was not particularly high, at about where office rent levels were in late 2006. We believe it was fortunate, in retrospect, that the record supply of new office space from 2009-11 (mostly in the new-downtown, Marina Bay area) kept rents from appreciating too rapidly during the post-global financial crisis recovery period, when Singapore’s GDP growth rebounded to 14.8% YoY for 2010 and 4.9% YoY for 2011. We regard current core Central Business District (CBD) rents as undemanding. We see 17% downside risk for rents from 3Q11 to 1H13 Nevertheless, we expect the combination of weak economic growth (for 2012), renewed Eurozone concerns, and still-elevated overall vacancy levels in the CBD to continue to exert negative pressure on rents until 1H13. Even today, the supply overhang has not been removed completely, with overall vacancy rates (13.2% for the downtown core, according to URA data, and 7.7% for the CBD core, according to JLL data) at the end of June 2012, above their long-term average levels. We assume that office rents will continue to decline gradually and bottom out at S$8.50/sq ft in 1H13, representing a peak-to-trough decline of 17% from S$10.20/sq ft in 3Q11.
So far, we see no reason to expect prime grade-A office rents to breach the global-financial-crisis trough level of S$7.75/sq ft. Prime grade-A office monthly rentals (S$/sq ft)
0
2
4
6
8
10
12
14
16
18
20
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
10.20
8.507.75
18.40
Source: JLL, Daiwa forecasts (from 3Q12)
Demand should catch up from 2013 Annual net demand (net take-up of office space) was extremely robust in 2010 and 2011 compared with previous years, but it was outpaced by the sheer volume of new supply. The annual increase in new office space for 2009-11 was probably the highest ever over a three-year period in Singapore. Downtown core: annual supply and demand (m sq ft)
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
E
2013
E
2014
E
2015
E
Supply Demand
Source: URA, Daiwa forecasts
Singapore office market: vacancy rates (%)
19.6 17.6
13.4 11.4
4.9
7.5
13.3 13.5 13.9 14.0 13.1 11.5
9.8
16.8
14.0
8.6
3.6 2.7 4.1
10.2
5.4 7.8 7.9 7.0
5.4 3.7
0
5
10
15
20
25
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E
URA downtown core (%) JLL CBD core (%)
Source: URA, JLL, Daiwa forecasts
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 16 -
We expect supply to outstrip demand again in 2012 before take-up exceeds the new supply additions over 2013-14. By then, we expect the vacancy rate to improve gradually. More new office space scheduled from 2015 Following the likely lull in 2013-14, there will be no shortage of new office space available in the downtown core, with several schemes scheduled for completion in 2015, sites available on the reserve list, as well as a choice of white sites with considerable office-space content (Rochor/Orphir and Marina South) that will eventually be released for development by the Temasek/Khazanah joint venture. Over the longer term, we expect these new additions to be paced broadly with demand from tenants, economic growth, and the state of the office market. While short-term supply-demand imbalances can most probably never be eliminated, we believe it is premature to be overly concerned about the state of the office market in 2015. The office sector in the CBD will also face a structural change, from the availability of new and decentralised office space in targeted suburban regional centres, such as the Jurong Gateway, one-North, and the Tampines Regional Centre, which includes Changi Business Park. Core CBD: scheduled new-office supply Scheduled Development NLA Completion (sq ft) 2012 1 Raffles Place Tower 2 334,783
MBFC Tower 3 1,304,585 2012 subtotal 1,639,368
2013 Asia Square Tower 2 775,100 2013 subtotal 775,100
2014 CapitaGreen 700,000 2014 subtotal 700,000
2015 PS100 (SOHO) 50,000 V on Shenton 270,000 South Beach Development* 502,000 2015 subtotal 822,000
2016 and after Peck Seah St/ Choon Guan St 800,000 Robinson Square 35,355 Oxley Tower (The Corporate Office) 111,713 Int'l Factors & Robinson Towers 215,283 EON Shenton 103,021 Marina One (M+S) 1,830,000 Ophir-Rochor (M+S) 580,000 Marina View/Union Street 764,022 2016 and after subtotal 4,439,394
Source: JLL, Daiwa
Note: *South Beach is not within the core CBD, but would certainly compete for CBD tenants, in our view
Asset values more resilient now Compared with our office-rent forecasts, we expect asset values during the downward phase of the current office cycle to be more resilient. We note that since the global financial crisis, Singapore office capital values, compared with rentals, have declined less during market corrections and appreciated more during recoveries. We expect this trend to continue in the current low-interest-rate and high-liquidity environment. Moreover, the increasing investment restrictions in the private-residential market have made commercial properties, as an asset class, even more attractive to investors. This newfound demand can be seen from the rapid convergence of strata-titled office values and en-bloc office values. Hence, although we forecast a peak-to-trough decline of about 17% for office rents, we do not expect capital values to decline by more than 5% (from peak to trough) during the current office-market downturn. Currently, office capital values are flat compared with their 3Q11 levels, and our forecast for even a 5% capital-value decline could prove too bearish. Prime grade-A office capital values (S$/sq ft)
500
1,000
1,500
2,000
2,500
3,000
3,500
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1,700
2,315
2,900
2,430
Source: JLL, Daiwa forecasts (from 1Q12)
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 17 -
Negatives look priced in Since the sharp sell-down in 3Q11, we believe the stock market has fully discounted the negative consequences for the listed office plays (office S-REITs as well as property companies with high office exposure, such as OUE and Keppel Land [Not rated]), of a local office-market downturn and the eventual fallout from a bad outcome in Europe.
Although these uncertainties are still relevant and cannot be ignored, we believe the Singapore office market is on a better footing compared with expectations 9-12 months ago, following a relatively resilient operational performance from the office S-REITs in 1H12. With share prices still discounting what we believe to be an unrealistically bleak scenario, we believe the risk is now firmly on the upside, and any positive data over the coming quarters (such as better-than-expected office rent trajectories or stronger-than-expected take-up rates) could trigger a sector rerating.
Singapore office market: core assumptions Singapore office Unit 2007 2008 2009 2010 2011 2012E 2013E 2014E Comment
Supply (private downtown core) m sq ft (0.60) 0.08 1.08 1.69 2.20 1.44 0.58 0.50 Some respite likely in 2013-14 Demand (private downtown core) m sq ft 1.23 (0.62) (0.68) 1.41 1.77 1.21 0.81 0.99 Underlying demand appears resilient Vacancy URA downtown core (yr end) % 4.9 7.5 13.3 13.5 13.9 14.0 13.1 11.5 Still structurally higher after the additions in 2009-12 Vacancy JLL CBD core avg. (yr end) % 2.7 4.1 10.2 5.4 7.8 7.9 7.0 5.4 Rents (Q4) Prime grade-A office (JLL) S$/sq ft/mth 16.00 14.95 7.80 9.35 9.75 8.75 8.84 9.67 We expect this cycle to bottom in 1H13 YoY change % 66.7 (6.6) (47.8) 19.9 4.3 (10.3) 1.1 9.3 Capital values (end of year) Prime grade-A office (JLL) S$/sq ft 2,900 2,480 1,700 2,200 2,430 2,349 2,315 2,409 Capital values could be resilient due to liquidity YoY change % 70.6 (14.5) (31.5) 29.4 10.5 (3.3) (1.5) 4.1 Yield (JLL core CBD) (end of quarter) % 4.00 4.70 4.50 3.75 3.80 3.65 3.64 3.71 We expect yield compression in 2012
Source: Singapore URA, Jones Lang LaSalle, Daiwa forecasts
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 18 -
Appendix B
Residential: mounting risks and imbalances
The following is an excerpt from our 23 August 2012 report, Rising risks and imbalances point to a multi-year market decline. We reiterate our negative stance on the Singapore residential property market, as all the reasons to remain wary, as detailed in our 16 November 2011 report, Singapore Residential Property - Heading for a prolonged downturn remain intact. After incorporating the YTD resilience of the property market (stable prices and record sales volume) since our 16 November 2011 report, and since the imposition of the fifth round of property cooling measures, announced on 7 December 2011, our core assumptions have not changed much. Singapore residential: monthly developer launches and sales
0
500
1,000
1,500
2,000
2,500
3,000
Jul-1
1
Aug-
11
Sep-
11
Oct
-11
Nov-
11
Dec-
11
Jan-
12
Feb-
12
Mar
-12
Apr-1
2
May
-12
Jun-
12
Jul-1
2
Units launched Units sold
Source: Singapore URA
Strong, record take-up, so far Despite the cumulative impact of five rounds of property cooling measures, 2012 is shaping up to be a record year for home sales, helped partly by the proliferation of ‘shoebox units’ (units of less than 50 sq m accounted for 27% of home sales in 1Q12 and 19% in 4Q11) and the popularity of affordable units (42% of sales in 1Q12 and 27% in 2Q12 were for properties worth less than S$750,000). YTD (January-July) home sales by developers (excluding executive condominiums) totalled 14,185, compared with 15,904 units for the entire year of 2011. The YTD take-up rate was also a healthy 95%.
Given the strong YTD pace of launches, home sales and government land sales (GLS) programme, we have recently revised up our 2012-15 annual launch assumptions by 20-31% and our annual home sales assumptions by 22-46%. In both cases, the greatest revisions occur for 2012. Singapore residential: annual units launched and sold by developers
0
5,000
10,000
15,000
20,000
25,000
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
E
2013
E
2014
E
2015
E
Units launched Units sold Source: Singapore URA, Daiwa forecasts
Units launched and sold by developers Launched Sold % sold 1996 11,520 9,565 83.0 1997 9,869 5,520 55.9 1998 5,324 6,096 114.5 1999 5,087 8,815 173.3 2000 8,143 5,406 66.4 2001 8,357 7,189 86.0 2002 9,507 9,485 99.8 2003 5,216 5,156 98.8 2004 5,881 5,785 98.4 2005 8,201 8,955 109.2 2006 11,069 11,147 100.7 2007 14,016 14,811 105.7 2008 6,107 4,264 69.8 2009 14,103 14,688 104.1 2010 16,575 16,292 98.3 2011 17,710 15,904 89.8 2012E 21,989 20,890 95.0 2013E 18,743 16,868 90.0 2014E 17,495 15,746 90.0 2015E 16,248 14,623 90.0
Source: Singapore URA, Daiwa forecasts
However, the pace of home sales and take-up in the future is highly uncertain, in our opinion. It requires a big leap of faith to assume that the sustainability of YTD home sales – driven by factors such as the absolute affordability of shoebox units, the appeal of suburban projects with proximity to mass rapid transit (MRT) stations or with a significant retail component, the apparently voracious local appetite for investment-property assets, and low interest rates – will last indefinitely.
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 19 -
Moreover, we believe the risk of a system-wide build-up of inventory to unprecedented levels will only increase if the take-up rates for launches over the next several months weaken considerably. The strong home sales have not improved the imminent build-up of two major supply-related imbalances: 1) unsold inventory, and 2) vacant units in the rental market, the principal sources of our concerns.
Unsold inventory still at elevated levels
Slight QoQ improvement in unsold inventory Our current tally of unsold inventory* is 13,080 units at the end of 2Q12. Although it has declined slightly QoQ, it is still at an elevated level, exceeding the global financial crisis peak of 11,288 units at the end of 1Q09. * This is the sum of: 1) the unsold units in completed developments, 2) unsold units that have been launched for sale for uncompleted developments, and 3) the remaining un-launched units in uncompleted developments, which have been partially launched.
Singapore private residential: inventory (Units) 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Unsold completed units 1,006 1,292 1,279 1,246 1,218 1,233 Launched and unsold units 4,179 4,603 5,044 5,584 6,024 6,762 Launch ready and unsold units 5,943 5,759 5,712 6,003 5,925 5,085 Total unsold inventory (units) 11,128 11,654 12,035 12,833 13,167 13,080 YoY increase in inventory (units) 1,700 1,958 2,088 1,692 2,039 1,426 YoY increase in inventory (%) 18.0 20.2 21.0 15.2 18.3 12.2 QoQ increase in inventory (units) (13) 526 381 798 334 (87) QoQ% increase in inventory (0.1) 4.7 3.3 6.6 2.6 (0.7)
Source: Singapore URA, Daiwa
Unsold inventory of residential units (no. of units)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
Unsold completed units Launched and unsold units
Launch ready and unsold units Source: Singapore URA, Daiwa
Unsold units in the pipeline still a concern A broader gauge of unsold inventory would be the number of unsold units out of all units of projects in the pipeline. There were 38,175 unsold units at the end of 2Q12, an increase from 36,552 unsold units at the end of 1Q12, but still below the peak at the end of 4Q08 of 43,414 units. (The URA data of unsold units is only available from 3Q06.) No doubt the strong home sales so far in 2012 have stabilised the level of unsold units. However, the number of unsold units only declined by 1,009 units from the end of 4Q11 to the end of 2Q12, when home sales for 1H12 reached a record of 11,928 units, suggesting that the overall pipeline of units continues to build up. This build-up is evident in the total units of uncompleted properties ‘in the pipeline’ (those under construction and with written or provisional-permission approvals), which were at an all-time high of 82,251 units at the end of 2Q12, surpassing the pre-global financial crisis and pre-Asian financial crisis peaks. Singapore residential: units in pipeline and unsold units (no. of units)
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
1Q91
1Q92
1Q93
1Q94
1Q95
1Q96
1Q97
1Q98
1Q99
1Q00
1Q01
1Q02
1Q03
1Q04
1Q05
1Q06
1Q07
1Q08
1Q09
1Q10
1Q11
1Q12
Units in pipeline Unsold pipeline Source: Singapore URA
Since 1990, the (unit) pipeline of private residential supply has been highly correlated with property prices, a reflection of the government’s consistent supply-driven policy to address rising property prices. Although the sharp declines in property prices from their peaks have been caused by external factors, we believe it is no coincidence that peak levels of supply have been highly correlated with peak prices. It is possible that the low interest-rate environment could foster a prolonged plateau in prices (we have ruled out further price increases because they would be met promptly with more government cooling measures, in our opinion), we do not regard the current situation as stable and believe the risk for home prices is clearly on the downside.
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 20 -
Singapore residential: price index and units in pipeline
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
50
100
150
200
250
1Q91
1Q92
1Q93
1Q94
1Q95
1Q96
1Q97
1Q98
1Q99
1Q00
1Q01
1Q02
1Q03
1Q04
1Q05
1Q06
1Q07
1Q08
1Q09
1Q10
1Q11
1Q12
Residential price index (LHS) Units in pipeline (RHS)
Source: Singapore URA
GLS supply-driven policy stays aggressive We believe the government will continue to inject a generous number of units into the overall supply pipeline to address the perceived ‘imbalances’ in the residential market. Since 1H11, each semi-annual GLS has exceeded 14,000 units, consisting of projects from both the confirmed and reserved lists. So far, injecting new sites has had a limited impact on dampening private-home prices, given the time lag from when a site is available for auction to when the winning bidder actually launches new units for sale in the project. The immediate consequence of injecting new sites for sale is a relentless build-up of the supply pipeline. GLS programme: reserved and confirmed list Confirmed Reserved Total 2H05 0 3,685 3,685 1H06 0 4,320 4,320 2H06 0 4,670 4,670 1H07 3,014 5,020 8,034 2H07 2,579 4,505 7,084 1H08 2,839 4,990 4,990 2H08 1,122 6,840 7,829 1H09 0 7,962 7,962 2H09 0 8,655 8,655 1H10 2,925 7,625 7,625 2H10 8,135 5,770 10,550 1H11 8,125 6,185 14,310 2H11 8,115 6,080 14,195 1H12 7,020 7,120 14,140 2H12 7,060 7,125 14,185
Source: URA
More launches ahead We expect private-residential launches to continue at a rapid pace (16,250-22,000 annually for 2012-15 compared with an annual average of 9,793 units for 1996-2011), with unit launches a product of ‘forced supply’ as a consequence of the GLS.
Rental market could blink first
The other aspect of a rising pipeline of new supply is its impact on the rental market. We forecast 13,213-18,000 completed units annually over 2012-16 (peaking at 18,000 units in 2014 and 2015), compared with the previous peak of over 14,000 units in both 1997 and 1998. Completions and future pipeline (no. of units)
14,5
82
14,0
38
13,2
13
13,7
66 18
,000
18
,000
15
,000
0
5,000
10,000
15,000
20,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
E20
13E
2014
E20
15E
2016
E
Completions Daiwa forecast
Source: Singapore URA, Daiwa forecasts from 2012E
Developers, specifically of private sector projects, have some leeway in deferring the completions of their projects, so our forecast completions for 2014-16 is 9-33% lower than the URA’s total pipeline tally, which includes all development projects under construction and those with planning (written or provisional permission) approvals. Residential supply pipeline (units) Daiwa forecast URA total Under construction With approvals 2012E 13,213 13,213 8,292 0 2013E 13,766 13,782 13,766 16 2014E 18,000 19,813 16,366 3,465 2015E 18,000 26,843 15,266 11,577 2016E 15,000 20,570 2,736 17,834
Source: Singapore URA, Daiwa forecasts
Note: *as at 2Q12; approvals refer to projects with written or provisional permission
Vacancies look set to rise We forecast the vacant stock to rise steadily from 12,388 units at the end of 2009, and surpass the previous all-time high of 19,276 units (at end-2005) by 2013, when we expect over 20,200 vacant units. From 5.9% as at end-2Q12, we forecast the vacancy rate to rise steadily to 8.0% by 2016.
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 21 -
Singapore residential: vacancy build-up
0
2
4
6
8
10
0
5,000
10,000
15,000
20,000
25,000
30,000
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
E20
13E
2014
E20
15E
2016
E
Vacant units (LHS) Vacany rate (%) (RHS)
Source: Singapore URA, Daiwa forecasts (from 2012E)
Private residential: supply and demand (units)
Chg in stock Completions Demolitions* Chg in occupied stock 1997 12,159 14,582 (2,423) 6,954 1998 12,300 14,038 (1,738) 11,155 1999 9,978 11,079 (1,101) 10,880 2000 9,477 10,811 (1,334) 10,846 2001 5,326 6,817 (1,491) 2,460 2002 6,843 7,730 (887) 5,596 2003 5,737 6,619 (882) 6,852 2004 10,969 11,799 (830) 9,392 2005 7,453 8,697 (1,244) 6,093 2006 4,008 6,520 (2,512) 9,027 2007 1,448 6,513 (5,065) 2,571 2008 6,392 10,122 (3,730) 4,903 2009 8,285 10,488 (2,203) 10,520 2010 8,754 10,399 (1,645) 8,259 2011 10,525 12,469 (1,944) 7,428 2012E 11,574 13,213 (1,639) 9,403 2013E 11,766 13,766 (2,000) 9,684 2014E 16,000 18,000 (2,000) 13,672 2015E 16,000 18,000 (2,000) 13,672 2016E 13,000 15,000 (2,000) 10,846
Source: Singapore URA, Daiwa forecasts
* Note: implied from completions and change in stock
Supply likely to exceed demand in 2H12 We believe the strong completion pipeline could have a negative impact on the overall vacancy rate as early as 2H12. According to the URA’s most recent tally (as at end-2Q12), there are 8,292 units under construction scheduled for completion in 2H12 (compared with 4,921 units actually completed in 1H12). In view of the net demand (the overall increase in occupied units) of only 4,147 units in 1H12, we expect the overall vacancy rate to increase from 5.9% as at end-2Q12 to 6.5% as at end-4Q12 (assuming net demand of 5,256 units for 2H12 and assuming demolitions of 500 units each quarter). The rapid pace of completions is likely to add a considerable number of units in the rental market, and this could exert negative pressure on rents.
Daiwa price and rental forecasts
We have toned down our forecasts for private home-price declines slightly, but still forecast mass-market home prices to decline by 20% (from 22% previously) from the end of 2011 to the end of 2014. For the high-end segment, we project a decline over the same period of 23% (from 26% previously). We still see negative pressures on rents and capital values from the current lingering global economic uncertainty and below-potential GDP growth for Singapore for 2012 and possibly 2013. Over the medium term (2013-16), we see rising imbalances in unsold inventory and vacant units in the rental market keeping prices (and rents) in check, though these negative factors should be tempered by the current capacity for Singapore home buyers to service mortgages, given the low level of unemployment and historically low interest rates. Singapore: private-residential capital values (S$/sq ft) Outside central Chg Core central Chg End of year region (OCR) YoY (%) region (CCR) YoY (%)
2004 461 842 2005 466 1.0 892 6.0 2006 485 4.3 1,043 16.9 2007 613 26.4 1,384 32.7 2008 596 (2.9) 1,306 (5.6) 2009 666 11.8 1,282 (1.8) 2010 765 15.0 1,465 14.2 2011 824 7.7 1,523 4.0 2012E 821 (0.4) 1,477 (3.0) 2013E 727 (11.5) 1,308 (11.5) 2014E 663 (8.7) 1,170 (10.6) 2015E 663 0.0 1,170 0.0 Chg end 2011-15E (19.5) (23.2)
Source: URA, Daiwa forecasts
Gradual, multi-year declines We do not envisage sharp declines (in excess of 20%) in rents or capital values in any one year. Instead, we expect a subdued residential-property market to persist for several consecutive years. Multi-year declines in prices and rents are nothing new in Singapore, which experienced half a decade of gradual declines in the early 2000s, due to a major supply-demand imbalance (pre-Asian financial crisis overbuilding followed shortly by extremely weak demand in 2000-04). We believe the sector could see a repeat of a multi-year property-market downturn in 2012-14.
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 22 -
Singapore private residential: boom and bust periods Magnitude* Period URA (%) JLL (%) 4Q90-2Q96 Tiger-economy rise fuelled by FDIs 222 186^ 2Q96-4Q98 Asian financial crisis (45) (33) 4Q98-2Q00 Post AFC rebound 40 25 2Q00-1Q04 Dotcom bust, 9-11, SARs (20) (22) 1Q04-2Q08 Pre GFC recovery 58 132 2Q08-2Q09 GFC (25) (36) 2Q09-4Q11 Post GFC recovery 54 39
Source: URA, Jones Lange LaSalle, Daiwa
Note:*From trough to peak (or peak to trough)
^Data from 1Q91 – 2Q96
We project a 20-23% decline in private home prices We forecast an overall decline in capital values of about 20% from the end of 2011 to the end of 2014 for the outside central region (a proxy for the private mass-residential market), and 23% over the same period for the core central region (a broad proxy for the high-end residential market). We believe mass residential prices will hold up slightly better than the high-end segment because mass-residential demand should be better underpinned, to some extent, by affordability and public (HDB) resale prices, though we suspect that the resilience of the resale market in several years’ time would depend on immigration and the overall rate of population growth. The government’s injection of new supply in the public, HDB, market could eventually moderate the resale market and affect demand for private units, but the resale market could still remain tight for several years, as homeowners of newly-built HDB flats would have to fulfil their minimum occupation requirement of five years before they can put their unit up for sale.
The high-end segment has been more subdued year-to-date, with prices in the core central regional flat from end-2011 to end-2Q12, compared with a 2.6% increase in the outside central region. Foreigners’ share of private home purchases has fallen from 20% in 2011 to 7% for 1H12, according to National Development Minister Khaw Boon Wan. Although demand for high-end properties could return as foreign buyers begin to gradually accept the 10% additional buyer’s stamp duty (ABSD), we believe other issues such as a strict regulatory application of the Residential Property Act – which requires foreign developers and those with qualifying certificates (QCs) to complete their residential developments within the stipulated project completion period (and sell all units within two years of obtaining temporary occupancy permit [TOP]) or face prohibitive extension charges – could disrupt the market and cause some developers to lower prices on their unsold completed inventory. The wildcard: government intervention The resilience of transaction volumes in the primary market and property prices so far in 2012 have not entirely diminished the risk of another set of property cooling measures, directed possibly at financing. We believe policy risk cannot be ignored unless the price trajectories of all segments of the market are consistent with the government’s desire for a ‘soft landing’. However, with all government rule changes, the risk is that the next property measures, which would have to be more severe than the previous measures to have the intended effect, could finally trigger a severe property market downturn given the rising levels of unsold inventory and vacant units in the system.
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 23 -
Singapore private residential market: core assumptions Singapore residential 2007 2008 2009 2010 2011 2012E 2013E 2014E Comment
Core assumptions Private (excluding ECs) Units launched by developers units 14,016 6,107 14,103 16,575 17,710 21,989 18,743 17,495 Elevated launch schedules to continue Units sold by developers units 14,811 4,264 14,688 16,292 15,904 20,890 16,868 15,746 Sales should hold, but unlikely to outpace launches Take-up rate of launches % 105.7 69.8 104.1 98.3 89.8 95.0 90.0 90.0 Supply creates demand, but only to a certain extent Private housing stock Net supply units 1,448 6,392 8,285 8,754 10,525 11,574 11,766 16,000 Record home sales imply record completions Net demand units 2,571 4,903 10,520 8,259 7,428 9,403 9,684 13,672 Rental prospects of new units highly uncertain Vacancy rate % 5.6 6.1 5.0 5.0 5.9 6.5 6.9 7.3 Vacancy rate to creep up steadily Rents (annual average) Median rental non-landed core central S$/sq ft/mth 3.43 4.06 3.32 3.69 3.95 3.92 3.58 3.24 Record completions, uncertain population picture YoY change % 37.0 18.3 (18.1) 11.0 7.2 (0.7) (8.8) (9.3) Median rental non-landed outside central S$/sq ft/mth 1.76 2.15 1.82 1.99 2.17 2.19 2.02 1.87 Record completions, uncertain population picture YoY change % 32.7 22.0 (15.4) 9.5 9.3 0.7 (7.7) (7.2) Capital values (end of year) Median price non-landed core central S$/sq ft 1,384 1,306 1,282 1,465 1,523 1,477 1,308 1,170 We expect a multi-year correction YoY change % 32.7 (5.6) (1.8) 14.2 4.0 (3.0) (11.5) (10.6) Median price non-landed outside central S$/sq ft 613 596 666 765 824 821 727 663 We expect a multi-year correction YoY change % 26.4 (2.9) 11.8 15.0 7.7 (0.4) (11.5) (8.7) Yield, non-landed core central (end of quarter) % 3.35 3.57 3.06 3.17 3.13 3.09 3.16 3.22 Rentals more resilient, but yields still low Yield, non-landed outside central (end of quarter) % 3.94 4.14 3.18 3.30 3.20 3.13 3.21 3.33
Source: Singapore URA, Daiwa forecasts
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 24 -
Appendix C
Hotels: Singapore well-positioned to be a global destination leader
We have observed that most medium-term forecasts for the Singapore hotel sector are predicated on attaining the Singapore Tourism Board’s (STB) medium-term target of attracting 17m visitors annually to Singapore by 2015. To reach the target would imply a CAGR in visitor arrivals of 6.6% over 2012-15. One possible trajectory is our base-case forecast, which assumes annual growth of 6% for 2012, 6.5% for 2013, and 7.0% for 2014 and 2015. We believe this growth trajectory is attainable considering that the 10-year CAGR up to 2011 (a period which captures two major negative shocks [SARS and the global financial crisis] as well as the transformational benefit from the opening of the two IRs) was 5.8%. As long as global economic growth recovers in a sustainable fashion from 2013, we see a reasonable chance of reaching or coming close to the STB’s 17m annual target by 2015. Singapore annual visitor arrivals (m)
7.6 6.1
8.3 8.9 9.8 10.3 10.1 9.7
11.6 13.2
14.0 14.9
15.9 17.0
0
2
4
6
8
10
12
14
16
18
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
E
2013
E
2014
E
2015
E
Source: JLL, Daiwa forecasts (from 2012)
Asian-based visitors For January-May 2012, about 76% of the 5.9m visitors to Singapore came from Asia, with the top-five markets being: Indonesia, China, Malaysia, India, and Australia. The total year-to-date growth has been 12.3%, though it slowed to 8.8% YoY for May 2012.
Singapore visitor arrivals for January-May 2012 % of %
Country Visitors total YoY chg Indonesia 1,112,527 18.8 14.5 PR China 855,577 14.4 30.7 Malaysia 481,878 8.1 11.0 India 384,805 6.5 7.0 Australia 384,341 6.5 1.2 Philippines 299,366 5.1 (0.2) Japan 292,181 4.9 18.3 UK 204,569 3.5 (0.7) Thailand 203,924 3.4 (2.9) USA 198,514 3.4 8.1 South Korea 189,672 3.2 12.1 Hong Kong 184,802 3.1 (3.0) Others 1,132,223 19.1 Total 5,924,379 12.3
Source: STB
In general, the YoY growth rates for 2012 have been stronger from the Asian markets, particularly from the top-three markets, so the medium-term prospects for the sector still appear encouraging. Industry drivers Visitor arrivals and the broader tourism and hotel sector rely on several trends for growth, including, at the macro level, Singapore’s economic growth, foreign direct investments, its location, and trade and business connectivity with the rest of the world. More recent developments in the sector include the rapid growth of the meetings, incentives, conventions, and exhibitions (MICE) events (with over 6,000 business events, Singapore is the top global MICE city in several surveys), the rise of medical tourism (according to the STB, 725,264 visitors came to Singapore for medical-related reasons in 2010, a 30% increase from 2007), the proliferation of low-cost carriers (LCCs) (the market share of LCCs at Changi Airport rose from 5.6% of total passenger traffic in 2005 to 25.6% in 2011), the successful hosting of major events including the Formula 1 Singapore Grand Prix, the Singapore Biennale, and the Singapore Food Festival, and the opening of several attractions including the two IRs (and the drawing power of their casinos and unique offerings including Universal Studios at Sentosa), new retail additions on Orchard Road, the Gardens by the Bay, and The River Safari (2H12). Visitor arrivals to underpin RevPAR The overall RevPAR for the Singapore hotel industry has been highly correlated with Singapore visitor arrivals. We forecast annual RevPAR growth of 4.6-6.8% for 2012-14 compared with 6-7% over the same period for visitor arrivals.
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 25 -
Singapore visitor arrivals (m) and hotel RevPAR (S$/day)
6
8
10
12
14
16
18
20
0
50
100
150
200
250
300
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
E
2013
E
2014
E
2015
E
Visi
tor a
rriva
ls (m
)
RevP
aR S
$/da
y
Industry RevPAR (S$) Visitor arrivals (m)
Source: Singapore Tourism Board, Daiwa forecasts
Table of annual visitor arrivals and RevPAR
Visitor arrivals YoY chg RevPAR YoY chg (m) (%) (S$/day) (%)
2001 7.5 (2.2) 102 (6.0) 2002 7.6 0.6 94 (7.8) 2003 6.1 (19.0) 78 (17.2) 2004 8.3 35.9 98 26.4 2005 8.9 7.4 115 16.9 2006 9.8 9.0 140 22.0 2007 10.3 5.5 176 25.3 2008 10.1 (1.6) 199 13.5 2009 9.7 (4.3) 144 (27.9) 2010 11.6 20.2 185 28.5 2011 13.2 13.1 212 14.8 2012E 14.0 6.0 226 6.8 2013E 14.9 6.5 237 4.6 2014E 15.9 7.0 251 6.0 2015E 17.0 7.0 266 6.0 Source: STB, Daiwa forecasts
Supply increase of 3.7-6% for 2012-14E According to CBRE Hotels, the number of gazetted hotels increased by 10 to 149 in 2001, while the number of (net) rooms increased by 4.9% to 41,687. Including 160 non-gazetted hotels, total rooms in Singapore increased by 5.1% to 49,719 for 2011. For our room-supply forecasts for 2012-14, we have assumed increases of 4.3% YoY for 2012, 6.0% YoY for 2013, and 3.7% YoY for 2014. These assumptions are the simple average of the room supply forecasts provided by two independent consultants, CBRE Hotels and Horwath HTL, for 2012-14. We have also assumed that the AOR will stabilise at 87% for 2013-14, the upper end of its annual range since 2001.
Singapore annual hotel supply, demand and AOR* Available Gross lettings AOR*
room nights (m) YoY chg room nights (m) YoY chg (%) 2001 10.38 (%) 7.92 (%) 76.3 2002 10.44 0.6 7.77 (1.9) 74.4 2003 9.57 (8.3) 6.44 (17.2) 67.2 2004 10.25 7.1 8.26 28.3 80.6 2005 10.42 1.6 8.73 5.7 83.8 2006 10.51 0.9 8.96 2.6 85.2 2007 10.51 0.0 9.15 2.1 87.0 2008 10.45 (0.6) 8.46 (7.5) 81.0 2009 10.83 3.7 8.21 (3.0) 75.8 2010 10.99 1.5 9.36 13.9 85.1 2011 12.24 11.4 10.58 13.1 86.5 2012E 12.76 4.3 11.04 4.3 86.5 2013E 13.53 6.0 11.77 6.6 87.0 2014E 14.03 3.7 12.21 3.7 87.0 Source: STB, Daiwa forecasts
*average occupancy rate
Based on our forecasts, we believe a 3.7-6.6% YoY increase in demand (gross lettings) for 2012-14 would be consistent with RevPAR growth of 4.6-6.8% YoY over the same period. One of a few major players In Singapore, internationally branded hotels dominate the market. According to CBRE Hotels (as disclosed in the Far East Hospitality Trusts Prospectus dated 16 August 2012) OUE is the fourth-largest hotel owner in Singapore, with 1,946 rooms. CBRE Hotels also ranked Meritus Hotels & Resorts as the eighth-largest hotel operator in Singapore with 1,626 rooms. Largest hotel operators in Singapore (no. of rooms)
2,609
2,561
2,391
2,310
1,861
1,750
1,735
1,626
1,553
1,538
0 1,000 2,000 3,000
Fairmont Raffles Hotels International
Las Vegas Sands
Far East Organisation
Millennium and Copthorne
Pan Pacific Hotels and Resorts
Shangri-La Hotels and Resorts
Accor
Meritus Hotels and Resorts
IHG
Resorts World Sentosa
Source: CBRE Hotels (16 August 2012)
Singapore hotel market: core assumptions Singapore hotel Unit 2007 2008 2009 2010 2011 2012E 2013E 2014E Comment Available room nights m 10.51 10.45 10.83 10.99 12.24 12.76 13.53 14.03 Moderate supply coming through YoY change % 0.0 (0.6) 3.7 1.5 11.4 4.3 6.0 3.7 Gross lettings (room nights) m 9.15 8.46 8.21 9.36 10.58 11.04 11.77 12.21 Supported by Singapore's growing attractions YoY change % 2.1 (7.5) (3.0) 13.9 13.1 4.3 6.6 3.7 Average occupancy rate % 87.0 81.0 75.8 85.1 86.5 86.5 87.0 87.0 Average daily rate S$/day 202 246 190 217 245 262 272 289 Some scope for hotels to raise rates YoY change % 22.7 21.9 (22.9) 14.5 12.9 6.8 4.0 6.0 RevPAR S$/day 176 199 144 185 212 226 237 251 Medium-term outlook is positive YoY change % 25.3 13.5 (27.9) 28.5 14.8 6.8 4.6 6.0 Visitor arrivals m 10.28 10.12 9.68 11.64 13.17 13.96 14.87 15.91 On target for 17m by 2015
5.5 (1.6) (4.3) 20.2 13.1 6.0 6.5 7.0 Source: STB, Daiwa forecasts
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 26 -
Appendix D
Retail: suburban supply in 2013 should be manageable
We believe the retail-property sector is still supported by positive fundamentals, although the short-term economic uncertainty could moderate rental growth for 2012. A soft economic outlook for 2012 For 2011, Singapore’s real GDP grew by 4.9% YoY, compared with 14.8% YoY for 2010. It appears that economic growth for 2012 will be positive, but extremely weak. Daiwa forecasts 2012 GDP growth of 2.3% YoY, while the Singapore Government’s current real GDP growth forecast range is 1.5-2.5% YoY. Entering a downturn with strong momentum Even with the muted GDP-growth outlook, most signs suggest that the underlying fundamentals of the Singapore retail sector remain highly favourable. The country’s unemployment rate for June 2012 was 2.0%, a 14-year low. Barring a severe and prolonged recession, we do not expect a sharp rise in the unemployment rate, which peaked at 3.3% during the global financial crisis. Retail sales remain resilient, though subdued, affected to some extent by the lingering global uncertainty. For June 2012, retail sales (excluding motor vehicles) increased by 2.3% YoY, and 1.9% QoQ. The growth in footfall (-3% YoY) and tenant sales (+1.5% YoY) for 1H12 at CapitaMall Trust (CT SP, S$1.975, Hold [3]), Singapore’s largest shopping mall REIT, is consistent with the retail sales trend. Visitor arrivals from January-May 2012 of 5.92m continued to show growth momentum, up 12.3% YoY, although we expect some moderation for the remainder of the year. Tourists in Singapore typically shop in the primary, Orchard Road, shopping area.
Stable outlook for retail rents Given the uncertain economic outlook, we expect discretionary, high-end spending and possibly tourist-related spending to be more vulnerable than non-discretionary, suburban-mall spending. Grade-A retail rents, prime-level shops (S$/sq ft/month)
20
25
30
35
40
45
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
E
1Q13
E
3Q13
E
1Q14
E
3Q14
E
Primary Suburban
Source: JLL, Daiwa forecasts (from 3Q12)
For the primary shopping area (Orchard Road), we forecast rents to decline by 0.6% YoY for 2012 and 0.3% YoY for 2013 before increasing by 1.9% YoY for 2014. Since considerable new supply was added on Orchard Road in 2009, the rental market has been stable but soft for several years, due possibly to natural tenant volatility arising from the new supply. For suburban rents, we forecast almost no change for 2012 and 2013, before appreciating by 1.7% YoY for 2014. Our stable but flat (for 2012-13) outlook for retail rentals is underpinned by what we believe will be healthy tenant demand, offset by a considerable amount of new supply in the Jurong Gateway area in 2014. Annual average (monthly) rents for prime retail space in Grade-A centres Table Primary* YoY chg Suburban YoY chg
S$/sq ft % S$/sq ft % 2003 36.84 0.1 25.03 0.1 2004 37.10 0.7 25.30 1.1 2005 37.44 0.9 25.94 2.5 2006 39.05 4.3 26.82 3.4 2007 40.34 3.3 28.02 4.5 2008 41.16 2.0 28.43 1.4 2009 38.71 (6.0) 27.64 (2.8) 2010 38.10 (1.6) 27.28 (1.3) 2011 37.80 (0.8) 28.15 3.2 2012E 37.57 (0.6) 28.17 0.1 2013E 37.46 (0.3) 28.18 0.0 2014E 38.17 1.9 28.65 1.7 2015E 38.94 2.0 29.42 2.7
Source: Jones Lang LaSalle, Daiwa forecasts; * primary shopping area (Orchard Road)
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 27 -
A manageable, well-paced pipeline For new retail space on Orchard Road, we regard projects such as The Atrium @ Orchard extension (integrated with Plaza Singapura) and Orchard Gateway as relatively modest additions, which could be easily absorbed by existing (or a few new) retail concepts. These malls also appear to complement (and not cannibalise) the major retail malls in their vicinity and along the rest of Orchard Road. Singapore retail pipeline
Project Location NLA (sq ft) 2012 Supply
A The Atrium @ Orchard Extension Dhoby Ghaut 126,982 B Marina Bay Link Mall Tower 3 Marina Bay 82,200 B Bugis+ Bugis Road 194,306 B 100AM (Amara Shopping Centre) Tanjong Pagar Road 127,000 B One Raffles Place addition Raffles Place 12,282 C JCube Jurong East 204,000 C Thomson V Two Sin Ming Road 23,680 C Alexis Alexandra Road 27,986 C UE Bizhub East Changi Business Park 41,366 C Star Vista One-North 163,000
Sub-total 1,002,802 2013 Supply
A Orchard Gateway Orchard Road 144,000 A The Heeren Orchard Road 165,075 B Chinatown Point New Bridge Road 205,000 B Asia Square Tower 2 - retail Marina View 27,000 B Suntec City - phase 1 Temasek Boulevard 187,000 C JEM by Land Lease Boon Lay Way 572,600 C Big Box Boon Lay Way 258,334 C Westgate Boon Lay Way 402,272 C Light industrial/commercial Kallang Bahru 43,099 C Shopping development Lavender Street 96,746 C Connexion Parrer Park Station Rd 9,343 C Hotel/office/shopping Balestier Road 46,941
Sub-total 2,157,410 2014 Supply
A 268 Orchard Orchard Road 103,226 B DBS Building - retail Shenton Way 160,000 B Capitol site - retail Stamford Road 109,000 C Shopping at Sports Hub Stadium Boulevard 370,000 C Office/shopping development Benoi Road 74,820 C Bedok Mall Bedok Town Centre 262,683 C One KM Tanjong Katong Road 210,000 C Paya Lebar Square Paya Lebar Road 95,000
Sub-total 1,384,729 2015 Supply
A Tangs - additional retail Orchard Road 7,000 B South Beach - retail Beach Road 110,610 C Waterway Point Punggol Central 365,020 C CentroPod @ Changi Changi Road 12,809 C The Promenade @ Pelikat Jalan Pelikat 58,394 C The Springside Sembawang Road 26,070
Sub-total 579,903 2012-15 total 5,124,844
Source: Jones Lang LaSalle, Daiwa estimates
Note: A= Orchard Road, B = downtown core, C = rest of island (suburbs)
Orchard Road: annual supply, demand (m sq ft) and occupancy rate (%)
96.7 97.0
96.5
95.6
96.7
94.2
95.0 94.6 94.6
94.3
95.0
92.593.0
93.5
94.0
94.5
95.0
95.5
96.0
96.5
97.097.5
-0.20
0.00
0.20
0.40
0.60
0.80
1.00
1.20
2004
2005
2006
2007
2008
2009
2010
2011
2012
E
2013
E
2014
E
Net supply (LHS) Net demand (LHS) Occupancy (RHS)
Source: Singapore URA, Daiwa forecasts
Suburban supply concentrated in regional centres For new suburban retail space, there will be a clear concentration in 2013 in Jurong Gateway, an up-and-coming commercial hub in western Singapore next to the Jurong East MRT station. Jurong Gateway is one of three regional centres under the Urban Redevelopment Authority’s (URA) concept plan and decentralisation strategy. With the government targeting the development of this regional centre, which includes new homes, parks, and recreational areas, and proven developers and mall operators such as Lend Lease (Not rated) and CapitaMalls Asia (Not rated) leasing the new projects, we do not see any major vacancy risk over the medium-to-long term. Suburbs: annual supply, demand (m sq ft) and occupancy rate (%)
90.2
91.6 91.0
91.4 92.0
92.9
93.9
93.1 93.2 92.9 93.6
88
89
90
91
92
93
94
95
-0.50
0.00
0.50
1.00
1.50
2.00
2004
2005
2006
2007
2008
2009
2010
2011
2012
E
2013
E
2014
E
Net supply (LHS) Net demand (LHS) Occupancy (RHS)
Source: Singapore URA, Daiwa forecasts
On an aggregate level, the amount of private shop space under construction (4.67m sq ft) at the end of 2Q12 appears to be returning to previous peaks in 2008 and 1994, but the new supply will be concentrated in the regional centres and not on Orchard Road.
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 28 -
Private shop space under construction (m sq ft)
0
1
2
3
4
5
6
7
1991
Q2
1992
Q2
1993
Q2
1994
Q2
1995
Q2
1996
Q2
1997
Q2
1998
Q2
1999
Q2
2000
Q2
2001
Q2
2002
Q2
2003
Q2
2004
Q2
2005
Q2
2006
Q2
2007
Q2
2008
Q2
2009
Q2
2010
Q2
2011
Q2
2012
Q2
Source: Singapore URA
Stable occupancy rates, with a positive medium-term bias We expect demand and new supply to be fairly balanced for 2012-14 and believe there will be modest increases (of less than 50bps from the end of 2011 to the end of 2014) in occupancy rates for both Orchard Road and the suburbs. All in, we forecast the overall island-wide (private-sector) occupancy rate to rise from 93.7% at the end of 2011 to 94.2% at the end of 2014. Some secular potential Compared with the major developed economies and the major economies in Asia, Singapore still appears to be under-shopped on a retail space per-capita basis. Although this might not be evident to visitors on Orchard Road (or even many expatriate residents), we believe the country’s retail potential lies in its most populous towns, dominated by public housing (HDB) estates, which could probably support many more malls. However, the viability of suburban malls is no longer a secret to developers or investors, judging by the aggressive bids in recent government land tenders and the high asking prices of suburban-mall owners. Total retail floor space per capita (sq ft)
10.8
11.8
11.8
14.4
16.6
23.7
50.5
0.0 10.0 20.0 30.0 40.0 50.0 60.0
Singapore (2011)
Hong Kong (2009)
China (2010)
South Korea (2010)
Japan (2009)
Australia (2010)
US (2010)
Source: Urbis (from CMT 2011 annual report)
Singapore’s total private retail space (25.1m sq ft as at 30 June 2012) consists of Orchard Road (the primary shopping area), the downtown core, and everything else (suburbs). Singapore: breakdown of retail-space stock
Downtown core12.5%
Orchard19.8%
Suburbs67.7%
Source: Singapore URA
A few major players In Singapore, the top-10 owners (assuming that CMT and CMA are one entity) of the major shopping centres (those over 100,000 sq ft) account for less than 60% of the market. After CMT/CMA, the scale of the remaining large owners drops off considerably. Relative to its competitors, CMT/CMA’s network of malls should provide it with superior economies of scale and market information. However, despite CMT/CMA's advantages, the other major malls, with few exceptions, also appear to be thriving. We expect a long-term trend of industry consolidation, but judging by recent third-party acquisitions, such as CMT's acquisition of Iluma, single-asset owners will probably require hefty premiums to market values for them to sell their assets. Shares of major shopping-centre floor space (%)
42.2
1.5 2.7 2.7 3.1 3.7 4.0 4.4 5.6 6.6 6.9
16.6
0.0 5.0
10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0
Oth
ers
Capi
taM
alls
Asi
a
Sing
apor
e Pr
ess
Hold
ings
Las
Vega
s Sa
nds
Mar
ina
Cent
re
Hold
ings
Far E
ast O
rgan
isat
ion
Lend
Lea
se
Sunt
ec R
EIT
Map
letre
e
Fras
ers
Cent
repo
int
Trus
t
Pram
eric
a
Capi
taM
all T
rust
Source: Urbis (from CMT 2011 annual report)
Note: for malls greater than 100,000 sq ft NLA as at end of 2011
Hotels, restaurants & leisure / Singapore OUE SP
7 September 2012
- 29 -
Singapore retail market: core assumptions Singapore retail 2007 2008 2009 2010 2011 2012E 2013E 2014E Comment
Core assumptions Supply (private islandwide) m sq ft (0.42) 0.20 1.70 0.80 0.28 1.00 2.16 1.38 Jurong Gateway regional centre represents bulk of 2013E supply Demand (private islandwide) m sq ft (0.27) 0.30 1.59 0.89 0.19 0.96 1.97 1.47 Vacancy (end of year) % 7.2 6.7 6.7 6.1 6.3 6.3 6.4 5.8 Barring a severe recession, we expect stable vacancy rates Rents (4Q) Prime grade-A Orchard S$/sq ft/mth 40.70 41.20 37.90 38.10 37.80 37.32 37.70 38.46 Stable outlook for retail rents, with modest recovery likely in 2013-14 YoY change % 2.9 1.2 (8.0) 0.5 (0.8) (1.3) 1.0 2.0 Prime grade-A suburban S$/sq ft/mth 28.25 28.45 27.00 27.60 28.20 28.14 28.28 28.91 … with suburban rents slightly more resilient than Orchard YoY change % 2.8 0.7 (5.1) 2.2 2.2 (0.2) 0.5 2.2 Capital values (end of year) 1st storey Orchard S$/sq ft 3,555 3,660 3,345 3,450 3,700 3,658 3,695 3,769 YoY change % 14.3 3.0 (8.6) 3.1 7.2 (1.1) 1.0 2.0 1st storey suburban S$/sq ft 1,185 1,230 1,130 1,185 1,350 1,347 1,354 1,384 New supply should help moderate suburban capital-value growth YoY change % 16.2 3.8 (8.1) 4.9 13.9 (0.2) 0.5 2.2 Yield (Orchard) (end of quarter) % 5.3 5.6 5.5 5.0 4.9 5.0 4.9 4.9
Source: Singapore URA, Jones Lang LaSalle, Daiwa forecasts
- 30 -
Daiwa’s Asia Pacific Research Directory
HONG KONG
Nagahisa MIYABE (852) 2848 4971 nagahisa.miyabe@hk.daiwacm.com Regional Research Head
John HETHERINGTON (852) 2773 8787 john.hetherington@hk.daiwacm.com Regional Head of Product Management
Pranab Kumar SARMAH (852) 2848 4441 pranab.sarmah@hk.daiwacm.com Regional Head of Research Promotion
Mingchun SUN (852) 2773 8751 mingchun.sun@hk.daiwacm.com Head of China Research; Chief Economist (Regional)
Dave DAI (852) 2848 4068 dave.dai@hk.daiwacm.com Deputy Head of Hong Kong and China Research; Pan-Asia/Regional Head of Clean Energy and Utilities; Utilities; Power Equipment; Renewables (Hong Kong, China)
Kevin LAI (852) 2848 4926 kevin.lai@hk.daiwacm.com Deputy Head of Regional Economics; Macro Economics (Regional)
Chi SUN (852) 2848 4427 chi.sun@hk.daiwacm.com Macro Economics (China)
Jonas KAN (852) 2848 4439 jonas.kan@hk.daiwacm.com Head of Hong Kong Research; Head of Hong Kong and China Property; Regional Property Coordinator; Property Developers (Hong Kong)
Jeff CHUNG (852) 2773 8783 jeff.chung@hk.daiwacm.com Automobiles and Components (China)
Grace WU (852) 2532 4383 grace.wu@hk.daiwacm.com Head of Greater China FIG; Banking (Hong Kong, China) Jerry YANG (852) 2773 8842 jerry.yang@hk.daiwacm.com Banking/Diversified Financials (Taiwan)
Joseph HO (852) 2848 4443 joseph.ho@hk.daiwacm.com Head of Industrials and Machineries (Hong Kong, China); Capital Goods –Electronics Equipments and Machinery (Hong Kong, China)
Bing ZHOU (852) 2773 8782 bing.zhou@hk.daiwacm.com Consumer/Retail (Hong Kong, China)
Hongxia ZHU (852) 2848 4460 hongxia.zhu@hk.daiwacm.com Consumer, Pharmaceuticals and Healthcare (China)
Eric CHEN (852) 2773 8702 eric.chen@hk.daiwacm.com Pan-Asia/Regional Head of IT/Electronics; Semiconductor/IC Design (Regional)
Felix LAM (852) 2532 4341 felix.lam@hk.daiwacm.com Head of Materials (Hong Kong, China) – Cement and Building Materials (China and Taiwan); China Property
John CHOI (852) 2773 8730 john.choi@hk.daiwacm.com Head of Multi-Industries (Hong Kong, China); Small/Mid Cap (Regional); Internet (China)
Kelvin LAU (852) 2848 4467 kelvin.lau@hk.daiwacm.com Head of Transportation (Hong Kong, China); Hong Kong and China Research Coordinator; Transportation (Regional)
Jibo MA (852) 2848 4489 jibo.ma@hk.daiwacm.com Head of Custom Products Group; Custom Products Group
Thomas HO (852) 2773 8716 thomas.ho@hk.daiwacm.com Custom Products Group
PHILIPPINES
Rommel RODRIGO (63) 2 813 7344 ext 302
rommel.rodrigo@dbpdaiwacm.com.ph
Head of Philippines Research; Strategy; Capital Goods; Materials
Danielo PICACHE (63) 2 813 7344 ext 293
danielo.picache@dbpdaiwacm.com.ph
Property; Banking; Transportation – Port
SOUTH KOREA
Chang H LEE (82) 2 787 9177 chlee@kr.daiwacm.com Head of Korea Research; Strategy; Banking/Finance
Sung Yop CHUNG (82) 2 787 9157 sychung@kr.daiwacm.com Pan-Asia Co-head/Regional Head of Automobiles and Components; Automobiles; Shipbuilding; Steel
Anderson CHA (82) 2 787 9185 anderson.cha@kr.daiwacm.com Banking/Finance
Mike OH (82) 2 787 9179 mike.oh@kr.daiwacm.com Capital Goods (Construction and Machinery)
Sang Hee PARK (82) 2 787 9165 sanghee.park@kr.daiwacm.com Consumer/Retail
Jae H LEE (82) 2 787 9173 jhlee@kr.daiwacm.com IT/Electronics (Tech Hardware and Memory Chips)
Thomas Y KWON (82) 2 787 9181 yskwon@kr.daiwacm.com Pan-Asia Head of Internet & Telecommunications; Software (Korea) – Internet/On-line Game
Shannen PARK (82) 2 787 9184 shannen.park@kr.daiwacm.com Custom Products Group
TAIWAN
Mark CHANG (886) 2 8758 6245 mark.chang@daiwacm-cathay.com.tw Head of Research; Regional Head of Small/Medium Cap; Small/Medium Cap (Regional)
Yoshihiko KAWASHIMA (886) 2 8758 6247 y.kawashima@daiwacm-cathay.com.tw Consumer/Retail
Birdy LU (886) 2 8758 6248 birdy.lu@daiwacm-cathay.com.tw IT/Technology Hardware (Handsets and Components)
Christine WANG (886) 2 8758 6249 christine.wang@daiwacm-cathay.com.tw IT/Technology Hardware (PC Hardware)
Chris LIN (886) 2 8758 6251 chris.lin@daiwacm-cathay.com.tw IT/Technology Hardware (Panels)
INDIA
Punit SRIVASTAVA (91) 22 6622 1013 punit.srivastava@in.daiwacm.com Head of Research; Strategy; Banking/Finance
Navin MATTA (91) 22 6622 8411 navin.matta@in.daiwacm.com Automobiles and Components
Saurabh MEHTA (91) 22 6622 1009 saurabh.mehta@in.daiwacm.com Capital Goods; Utilities
Mihir SHAH (91) 22 6622 1020 mihir.shah@in.daiwacm.com FMCG/Consumer
Deepak PODDAR (91) 22 6622 1016 deepak.poddar@in.daiwacm.com
Materials
Nirmal RAGHAVAN (91) 22 6622 1018 nirmal.raghavan@in.daiwacm.com Oil and Gas; Utilities
SINGAPORE
Tony DARWELL (65) 6321 3050 tony.darwell@sg.daiwacm.com
Head of Singapore Research, Pan-Asia Head of Property
Srikanth VADLAMANI (65) 6499 6570 srikanth.vadlamani@sg.daiwacm.com Banking (ASEAN)
Adrian LOH (65) 6499 6548 adrian.loh@sg.daiwacm.com Regional Head of Oil and Gas; Oil and Gas (ASEAN and China); Capital Goods (Singapore)
David LUM (65) 6329 2102 david.lum@sg.daiwacm.com Property and REITs
Ramakrishna MARUVADA (65) 6499 6543 ramakrishna.maruvada@sg.daiwacm.com Head of ASEAN & India Telecommunications; Telecommunications (ASEAN & India)
- 31 -
Daiwa’s Offices
Office / Branch / Affiliate Address Tel Fax
DAIWA SECURITIES GROUP INC
HEAD OFFICE Gran Tokyo North Tower, 1-9-1, Marunouchi, Chiyoda-ku, Tokyo, 100-6753 (81) 3 5555 3111 (81) 3 5555 0661
Daiwa Securities Trust Company One Evertrust Plaza, Jersey City, NJ 07302, U.S.A. (1) 201 333 7300 (1) 201 333 7726
Daiwa Securities Trust and Banking (Europe) PLC (Head Office) 5 King William Street, London EC4N 7JB, United Kingdom (44) 207 320 8000 (44) 207 410 0129
Daiwa Europe Trustees (Ireland) Ltd Level 3, Block 5, Harcourt Centre, Harcourt Road, Dublin 2, Ireland (353) 1 603 9900 (353) 1 478 3469
Daiwa Capital Markets America Inc Financial Square, 32 Old Slip, New York, NY10005, U.S.A. (1) 212 612 7000 (1) 212 612 7100
Daiwa Capital Markets America Inc. San Francisco Branch 555 California Street, Suite 3360, San Francisco, CA 94104, U.S.A. (1) 415 955 8100 (1) 415 956 1935
Daiwa Capital Markets Europe Limited 5 King William Street, London EC4N 7AX, United Kingdom (44) 20 7597 8000 (44) 20 7597 8600
Daiwa Capital Markets Europe Limited, Frankfurt Branch Trianon Building, Mainzer Landstrasse 16, 60325 Frankfurt am Main, Federal Republic of Germany
(49) 69 717 080 (49) 69 723 340
Daiwa Capital Markets Europe Limited, Paris Representative Office 36, rue de Naples, 75008 Paris, France (33) 1 56 262 200 (33) 1 47 550 808
Daiwa Capital Markets Europe Limited, London, Geneva Branch 50 rue du Rhône, P.O.Box 3198, 1211 Geneva 3, Switzerland (41) 22 818 7400 (41) 22 818 7441
Daiwa Capital Markets Europe Limited, Moscow Representative Office
Midland Plaza 7th Floor, 10 Arbat Street, Moscow 119002, Russian Federation
(7) 495 641 3416 (7) 495 775 6238
Daiwa Capital Markets Europe Limited, Bahrain Branch 7th Floor, The Tower, Bahrain Commercial Complex, P.O. Box 30069, Manama, Bahrain
(973) 17 534 452 (973) 17 535 113
Daiwa Capital Markets Hong Kong Limited Level 28, One Pacific Place, 88 Queensway, Hong Kong (852) 2525 0121 (852) 2845 1621
Daiwa Capital Markets Singapore Limited 6 Shenton Way #26-08, DBS Building Tower Two, Singapore 068809, Republic of Singapore
(65) 6220 3666 (65) 6223 6198
Daiwa Capital Markets Australia Limited Level 34, Rialto North Tower, 525 Collins Street, Melbourne, Victoria 3000, Australia
(61) 3 9916 1300 (61) 3 9916 1330
DBP-Daiwa Capital Markets Philippines, Inc 18th Floor, Citibank Tower, 8741 Paseo de Roxas, Salcedo Village, Makati City, Republic of the Philippines
(632) 813 7344 (632) 848 0105
Daiwa-Cathay Capital Markets Co Ltd 14/F, 200, Keelung Road, Sec 1, Taipei, Taiwan, R.O.C. (886) 2 2723 9698 (886) 2 2345 3638
Daiwa Securities Capital Markets Korea Co., Ltd. One IFC, 10 Gukjegeumyung-Ro, Yeouido-dong, Yeongdeungpo-gu, Seoul, 150-876, Korea
(82) 2 787 9100 (82) 2 787 9191
Daiwa Securities Capital Markets Co Ltd, Beijing Representative Office
Room 3503/3504, SK Tower, No.6 Jia Jianguomen Wai Avenue, Chaoyang District, Beijing 100022, People’s Republic of China
(86) 10 6500 6688 (86) 10 6500 3594
Daiwa SSC Securities Co Ltd 45/F, Hang Seng Tower, 1000 Lujiazui Ring Road, Pudong, Shanghai 200120, People’s Republic of China
(86) 21 3858 2000 (86) 21 3858 2111
Daiwa Securities Capital Markets Co. Ltd, Bangkok Representative Office
18th Floor, M Thai Tower, All Seasons Place, 87 Wireless Road, Lumpini, Pathumwan, Bangkok 10330, Thailand
(66) 2 252 5650 (66) 2 252 5665
Daiwa Capital Markets India Private Ltd 10th Floor, 3 North Avenue, Maker Maxity, Bandra Kurla Complex, Bandra East, Mumbai – 400051, India
(91) 22 6622 1000 (91) 22 6622 1019
Daiwa Securities Capital Markets Co. Ltd, Hanoi Representative Office
Suite 405, Pacific Palace Building, 83B, Ly Thuong Kiet Street, Hoan Kiem Dist. Hanoi, Vietnam
(84) 4 3946 0460 (84) 4 3946 0461
DAIWA INSTITUTE OF RESEARCH LTD
HEAD OFFICE 15-6, Fuyuki, Koto-ku, Tokyo, 135-8460, Japan (81) 3 5620 5100 (81) 3 5620 5603
MARUNOUCHI OFFICE Gran Tokyo North Tower, 1-9-1, Marunouchi, Chiyoda-ku, Tokyo, 100-6756 (81) 3 5555 7011 (81) 3 5202 2021
New York Research Center 11th Floor, Financial Square, 32 Old Slip, NY, NY 10005-3504, U.S.A. (1) 212 612 6100 (1) 212 612 8417
London Research Centre 3/F, 5 King William Street, London, EC4N 7AX, United Kingdom (44) 207 597 8000 (44) 207 597 8550
- 32 -
Disclaimer This publication is produced by Daiwa Securities Group Inc. and/or its non-U.S. affiliates, and distributed by Daiwa Securities Group Inc. and/or its non-U.S. affiliates, except to the extent expressly provided herein. This publication and the contents hereof are intended for information purposes only, and may be subject to change without further notice. Any use, disclosure, distribution, dissemination, copying, printing or reliance on this publication for any other purpose without our prior consent or approval is strictly prohibited. Neither Daiwa Securities Group Inc. nor any of its respective parent, holding, subsidiaries or affiliates, nor any of its respective directors, officers, servants and employees, represent nor warrant the accuracy or completeness of the information contained herein or as to the existence of other facts which might be significant, and will not accept any responsibility or liability whatsoever for any use of or reliance upon this publication or any of the contents hereof. Neither this publication, nor any content hereof, constitute, or are to be construed as, an offer or solicitation of an offer to buy or sell any of the securities or investments mentioned herein in any country or jurisdiction nor, unless expressly provided, any recommendation or investment opinion or advice. Any view, recommendation, opinion or advice expressed in this publication may not necessarily reflect those of Daiwa Securities Capital Markets Co. Ltd., and/or its affiliates nor any of its respective directors, officers, servants and employees except where the publication states otherwise. This research report is not to be relied upon by any person in making any investment decision or otherwise advising with respect to, or dealing in, the securities mentioned, as it does not take into account the specific investment objectives, financial situation and particular needs of any person.
Daiwa Securities Group Inc., its subsidiaries or affiliates, or its or their respective directors, officers and employees from time to time have trades as principals, or have positions in, or have other interests in the securities of the company under research including derivatives in respect of such securities or may have also performed investment banking and other services for the issuer of such securities. The following are additional disclosures.
Japan
Daiwa Securities Co. Ltd. and Daiwa Securities Group Inc. Daiwa Securities Co. Ltd. is a subsidiary of Daiwa Securities Group Inc. Investment Banking Relationship
Within the preceding 12 months, The subsidiaries and/or affiliates of Daiwa Securities Group Inc. * has lead-managed public offerings and/or secondary offerings (excluding straight bonds) of the securities of the following companies: SBI Holdings Inc. (6488 HK); Shunfeng Photovoltaic International Ltd. (1165 HK); Rexlot Holdings Limited (555 HK); China Outfitters Holdings Limited (1146 HK); Beijing Jingneng Clean Energy Co. Limited (579 HK); Infraware Inc. (041020 KS)
*Subsidiaries of Daiwa Securities Group Inc. for the purposes of this section shall mean any one or more of: Daiwa Capital Markets Hong Kong Limited, Daiwa Capital Markets Singapore Limited, Daiwa Capital Markets Australia Limited, Daiwa Capital Markets India Private Limited, Daiwa-Cathay Capital Markets Co., Ltd., Daiwa Securities Capital Markets Korea Co., Ltd.
Hong Kong
This research is distributed in Hong Kong by Daiwa Capital Markets Hong Kong Limited (“DHK”) which is regulated by the Hong Kong Securities and Futures Commission. Recipients of this research in Hong Kong may contact DHK in respect of any matter arising from or in connection with this research. Ownership of Securities For “Ownership of Securities” information, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Investment Banking Relationship For “Investment Banking Relationship”, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Relevant Relationship (DHK) DHK may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage. DHK market making DHK may from time to time make a market in securities covered by this research.
Singapore
This research is distributed in Singapore by Daiwa Capital Markets Singapore Limited and it may only be distributed in Singapore to accredited investors, expert investors and institutional investors as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. By virtue of distribution to these category of investors, Daiwa Capital Markets Singapore Limited and its representatives are not required to comply with Section 36 of the Financial Advisers Act (Chapter 110) (Section 36 relates to disclosure of Daiwa Capital Markets Singapore Limited’s interest and/or its representative’s interest in securities). Recipients of this research in Singapore may contact Daiwa Capital Markets Singapore Limited in respect of any matter arising from or in connection with the research.
Australia
This research is distributed in Australia by Daiwa Capital Markets Stockbroking Limited and it may only be distributed in Australia to wholesale investors within the meaning of the Corporations Act. Recipients of this research in Australia may contact Daiwa Capital Markets Stockbroking Limited in respect of any matter arising from or in connection with the research. Ownership of Securities For “Ownership of Securities” information, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.
India
This research is distributed by Daiwa Capital Markets India Private Limited (DAIWA) which is an intermediary registered with Securities & Exchange Board of India. This report is not to be considered as an offer or solicitation for any dealings in securities. While the information in this report has been compiled by DAIWA in good faith from sources believed to be reliable, no representation or warranty, express of implied, is made or given as to its accuracy, completeness or correctness. DAIWA its officers, employees, representatives and agents accept no liability whatsoever for any loss or damage whether direct, indirect, consequential or otherwise howsoever arising (whether in negligence or otherwise) out of or in connection with or from any use of or reliance on the contents of and/or omissions from this document. Consequently DAIWA expressly disclaims any and all liability for, or based on or relating to any such information contained in or errors in or omissions in this report. Accordingly, you are recommended to seek your own legal, tax or other advice and should rely solely on your own judgment, review and analysis, in evaluating the information in this document. The data contained in this document is subject to change without any prior notice DAIWA reserves its right to modify this report as maybe required from time to time. DAIWA is committed to providing independent recommendations to its Clients and would be happy to provide any information in response to any query from its Clients. This report is strictly confidential and is being furnished to you solely for your information. The information contained in this document should not be reproduced (in whole or in part) or redistributed in any form to any other person. We and our group companies, affiliates, officers, directors and employees may from time to time, have long or short positions, in and buy sell the securities thereof, of company(ies) mentioned herein or be engaged in any other transactions involving such securities and earn brokerage or other compensation or act as advisor or have the potential conflict of interest with respect to any recommendation and related information or opinion. DAIWA prohibits its analyst and their family members from maintaining a financial interest in the securities or derivatives of any companies that the analyst cover. This report is not intended or directed for distribution to, or use by any person, citizen or entity which is resident or located in any state or country or jurisdiction where such publication, distribution or use would be contrary to any statutory legislation, or regulation which would require DAIWA and its affiliates/ group companies to any registration or licensing requirements. The views expressed in the report accurately reflect the analyst’s personal views about the securities and issuers that are subject of the Report, and that no part of the analyst’s compensation was, is or will be directly or indirectly, related to the recommendations or views expressed in the Report. This report does not recommend to US recipients the use of Daiwa Capital Markets India Private Limited or any of its non – US affiliates to effect trades in any securities and is not supplied with any understanding that US recipients will direct commission business to Daiwa Capital Markets India Private Limited.
Taiwan
This research is distributed in Taiwan by Daiwa-Cathay Capital Markets Co., Ltd and it may only be distributed in Taiwan to institutional investors or specific investors who have signed recommendation contracts with Daiwa-Cathay Capital Markets Co., Ltd in accordance with the Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers. Recipients of this research in Taiwan may contact Daiwa-Cathay Capital Markets Co., Ltd in respect of any matter arising from or in connection with the research.
Philippines
This research is distributed in the Philippines by DBP-Daiwa Capital Markets Philippines, Inc. which is regulated by the Philippines Securities and Exchange Commission and the Philippines Stock Exchange, Inc. Recipients of this research in the Philippines may contact DBP-Daiwa Capital Markets Philippines, Inc. in respect of any matter arising from or in connection with the research. DBP-Daiwa Capital Markets Philippines, Inc. recommends that investors independently assess, with a professional advisor, the specific financial risks as well as the legal, regulatory, tax, accounting, and other consequences of a proposed transaction. DBP-Daiwa Capital Markets Philippines, Inc. may have positions or may be materially interested in the securities in any of the markets mentioned in the publication or may have performed other services for the issuers of such securities.
For relevant securities and trading rules please visit SEC and PSE Link at http://www.sec.gov.ph/irr/AmendedIRRfinalversion.pdf and http://www.pse.com.ph/ respectively.
United Kingdom
This research report is produced by Daiwa Securities Capital Markets Co., Ltd and/or its affiliates and is distributed by Daiwa Capital Markets Europe Limited in the European Union, Iceland, Liechtenstein, Norway and Switzerland. Daiwa Capital Markets Europe Limited is authorised and regulated by The Financial Services Authority (“FSA”) and is a member of the London Stock Exchange, Chi-X, Eurex and NYSE Liffe. Daiwa Capital Markets Europe Limited and its affiliates may, from time to time, to the extent permitted by law, participate or invest in other financing transactions with the issuers of the securities referred to herein (the “Securities”), perform services for or solicit business from such issuers, and/or have a position or effect transactions in the Securities or options thereof and/or may have acted as an underwriter during the past twelve months for the issuer of such securities. In addition, employees of Daiwa Capital Markets Europe Limited and its affiliates may have positions and effect transactions in such securities or options and may serve as Directors of such issuers. Daiwa Capital Markets Europe Limited may, to the extent permitted by applicable UK law and other applicable law or regulation, effect transactions in the Securities before this material is published to recipients.
- 33 -
This publication is intended for investors who are not Retail Clients in the United Kingdom within the meaning of the Rules of the FSA and should not therefore be distributed to such Retail Clients in the United Kingdom. Should you enter into investment business with Daiwa Capital Markets Europe’s affiliates outside the United Kingdom, we are obliged to advise that the protection afforded by the United Kingdom regulatory system may not apply; in particular, the benefits of the Financial Services Compensation Scheme may not be available.
Daiwa Capital Markets Europe Limited has in place organisational arrangements for the prevention and avoidance of conflicts of interest. Our conflict management policy is available at http://www.uk.daiwacm.com/about-us/corporate-governance-and-regulatory. Regulatory disclosures of investment banking relationships are available at https://daiwa3.bluematrix.com/sellside/Disclosures.action.
Germany
This document has been approved by Daiwa Capital Markets Europe Limited and is distributed in Germany by Daiwa Capital Markets Europe Limited, Niederlassung Frankfurt which is regulated by BaFin (Bundesanstalt fuer Finanzdienstleistungsaufsicht) for the conduct of business in Germany.
Bahrain
This research material is issued/compiled by Daiwa Capital Markets Europe Limited, Bahrain Branch, regulated by The Central Bank of Bahrain and holds Investment Business Firm – Category 2 license and having its official place of business at the Bahrain World Trade Centre, South Tower, 7th floor, P.O. Box 30069, Manama, Kingdom of Bahrain. Tel No. +973 17534452 Fax No. +973 535113
This material is provided as a reference for making investment decisions and is not intended to be a solicitation for investment. Investment decisions should be made at your own discretion and risk. Accordingly, no representation or warranty, express or implied, is made as to and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information and opinions contained in this document, Content herein is based on information available at the time the research material was prepared and may be amended or otherwise changed in the future without notice. All information is intended for the private use of the person to whom it is provided without any liability whatsoever on the part of Daiwa Capital Markets Europe Limited, Bahrain Branch, any associated company or the employees thereof. If you are in doubt about the suitability of the product or the research material itself, please consult your own financial adviser. Daiwa Capital Markets Europe Limited, Bahrain Branch retains all rights related to the content of this material, which may not be redistributed or otherwise transmitted without prior consent.
United States
This report is distributed in the U.S. by Daiwa Capital Markets America Inc. (DCMA). It may not be accurate or complete and should not be relied upon as such. It reflects the preparer’s views at the time of its preparation, but may not reflect events occurring after its preparation; nor does it reflect DCMA’s views at any time. Neither DCMA nor the preparer has any obligation to update this report or to continue to prepare research on this subject. This report is not an offer to sell or the solicitation of any offer to buy securities. Unless this report says otherwise, any recommendation it makes is risky and appropriate only for sophisticated speculative investors able to incur significant losses. Readers should consult their financial advisors to determine whether any such recommendation is consistent with their own investment objectives, financial situation and needs. This report does not recommend to U.S. recipients the use of any of DCMA’s non-U.S. affiliates to effect trades in any security and is not supplied with any understanding that U.S. recipients of this report will direct commission business to such non-U.S. entities. Unless applicable law permits otherwise, non-U.S. customers wishing to effect a transaction in any securities referenced in this material should contact a Daiwa entity in their local jurisdiction. Most countries throughout the world have their own laws regulating the types of securities and other investment products which may be offered to their residents, as well as a process for doing so. As a result, the securities discussed in this report may not be eligible for sales in some jurisdictions. Customers wishing to obtain further information about this report should contact DCMA: Daiwa Capital Markets America Inc., Financial Square, 32 Old Slip, New York, New York 10005 (telephone 212-612-7000). Ownership of Securities For “Ownership of Securities” information please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Investment Banking Relationships For “Investment Banking Relationships” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. DCMA Market Making For “DCMA Market Making” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Research Analyst Conflicts For updates on “Research Analyst Conflicts” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The principal research analysts who prepared this report have no financial interest in securities of the issuers covered in the report, are not (nor are any members of their household) an officer, director or advisory board member of the issuer(s) covered in the report, and are not aware of any material relevant conflict of interest involving the analyst or DCMA, and did not receive any compensation from the issuer during the past 12 months except as noted: no exceptions. Research Analyst Certification For updates on “Research Analyst Certification” and “Rating System” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The views about any and all of the subject securities and issuers expressed in this Research Report accurately reflect the personal views of the research analyst(s) primarily responsible for this report (or the views of the firm producing the report if no individual analysts[s] is named on the report); and no part of the compensation of such analyst(s) (or no part of the compensation of the firm if no individual analyst[s)] is named on the report) was, is, or will be directly or indirectly related to the specific recommendations or views contained in this Research Report.
The following explains the rating system in the report as compared to relevant local indices, based on the beliefs of the author of the report. "1": the security could outperform the local index by more than 15% over the next six months. "2": the security is expected to outperform the local index by 5-15% over the next six months. "3": the security is expected to perform within 5% of the local index (better or worse) over the next six months. "4": the security is expected to underperform the local index by 5-15% over the next six months. "5": the security could underperform the local index by more than 15% over the next six months.
Additional information may be available upon request.
Japan - additional notification items pursuant to Article 37 of the Financial Instruments and Exchange Law (This Notification is only applicable where report is distributed by Daiwa Securities Co. Ltd.) If you decide to enter into a business arrangement with us based on the information described in materials presented along with this document, we ask you to pay close attention to the following items. In addition to the purchase price of a financial instrument, we will collect a trading commission* for each transaction as agreed beforehand with you. Since commissions may be included in
the purchase price or may not be charged for certain transactions, we recommend that you confirm the commission for each transaction. In some cases, we may also charge a maximum of ¥ 2 million (including tax) per year as a standing proxy fee for our deposit of your securities, if you are a non-resident of Japan. For derivative and margin transactions etc., we may require collateral or margin requirements in accordance with an agreement made beforehand with you. Ordinarily in such cases, the
amount of the transaction will be in excess of the required collateral or margin requirements. There is a risk that you will incur losses on your transactions due to changes in the market price of financial instruments based on fluctuations in interest rates, exchange rates, stock prices,
real estate prices, commodity prices, and others. In addition, depending on the content of the transaction, the loss could exceed the amount of the collateral or margin requirements. There may be a difference between bid price etc. and ask price etc. of OTC derivatives handled by us. Before engaging in any trading, please thoroughly confirm accounting and tax treatments regarding your trading in financial instruments with such experts as certified public accountants.
*The amount of the trading commission cannot be stated here in advance because it will be determined between our company and you based on current market conditions and the content of each transaction etc.
When making an actual transaction, please be sure to carefully read the materials presented to you prior to the execution of agreement, and to take responsibility for your own decisions regarding the signing of the agreement with us. Corporate Name: Daiwa Securities Co. Ltd. Financial instruments firm: chief of Kanto Local Finance Bureau (Kin-sho) No.108 Memberships: Japan Securities Dealers Association, The Financial Futures Association of Japan Japan Investment Advisers Association Type II Financial Instruments Firms Association
top related