NRA Capital: Kevin Scully Blog

New measures to ensure a stable and sustainable property market might cool interest in property stocks for a while......what does this mean to Sing Holdings ??!! Saturday, 20 February, 2010 9:41 AM Posted by Kevin Scully Last night the Ministry of National Development announced two new measures to further cool the property market in Singapore. The measures included a stamp duty payable on properties sold within one year of purchase of 3% and a reduction in banking financing quantum from 90% to 80% of Loan to Value. This is the second round of measures after those introduced in September 2009 as according to the MND announcement, the property market was heating up again. These measures are not unexpected. Over the last couple of months, the issue of a private property bubble and even concerns about the affordability of public housing have emerged as serious areas of concern by Singaporeans. The Government has sought to address the issue of property affordability and limited supply since the third/fourth quarter of 2009 by its first set of measures and also by increasing the supply of land available for sale - but possibly because of the time lag and concerns about limited supply and run-away prices, property launches have been well received. In one of my earlier Blogs with the senior management of a listed property company in January 2010, we highlighted that the Government measures of September 2009 and even these measures were good because they were/are intended to curb speculation. However, because the measures are financing biased (in terms of upfront costs and penalties for early sale, ie within one year), my view is that they will impact mass market developers more than high end developers. What does this mean for Sing Holdings - the new addition to my stock pick list ??!! The basis for recommending Sing Holdings was the impending launch of its Laurels on Cairnhill Road - read my stock/pick premium section on the reasons and the financial impact of that development on the stock. I am expecting the Laurels to have a soft launch soon......I dont know whether they will rethink the launch or their pricing because of the new measures announced last night. My estimate for the average selling price of Laurels was S$2800 psf.....I was told on the golf course yesterday that its was S$2888.....even better BUT that was before the announcement of the new measures. While I would expect property stocks (especially those focussed in the mass market, to under perform for a while because of the new measures, I am of the view that high end developers should buck the trend. So I will still keep Sing Holdings in the stock pick list - at this price downside is very limited as its supported by its NTA of S$0.34. The true test is when the launch the project, what is the average selling price of the launch (if its above S$2800 - then no change in recommendation) and how well the soft launch or launch is received. I think with just over 200 units for sale with the gross floor area around the 1000-1200 sq ft level, absolute affordability in terms of price should be okay. Let's see what happens.

New measures to ensure a stable and sustainable property market might cool interest in property stocks for a while......what does this mean to Sing Holdings ??!!
Saturday, 20 February, 2010 9:41 AM
Posted by Kevin Scully

Last night the Ministry of National Development announced two new measures to further cool the property market in Singapore. The measures included a stamp duty payable on properties sold within one year of purchase of 3% and a reduction in banking financing quantum from 90% to 80% of Loan to Value. This is the second round of measures after those introduced in September 2009 as according to the MND announcement, the property market was heating up again.

These measures are not unexpected. Over the last couple of months, the issue of a private property bubble and even concerns about the affordability of public housing have emerged as serious areas of concern by Singaporeans. The Government has sought to address the issue of property affordability and limited supply since the third/fourth quarter of 2009 by its first set of measures and also by increasing the supply of land available for sale - but possibly because of the time lag and concerns about limited supply and run-away prices, property launches have been well received.

In one of my earlier Blogs with the senior management of a listed property company in January 2010, we highlighted that the Government measures of September 2009 and even these measures were good because they were/are intended to curb speculation. However, because the measures are financing biased (in terms of upfront costs and penalties for early sale, ie within one year), my view is that they will impact mass market developers more than high end developers.

What does this mean for Sing Holdings - the new addition to my stock pick list ??!!

The basis for recommending Sing Holdings was the impending launch of its Laurels on Cairnhill Road - read my stock/pick premium section on the reasons and the financial impact of that development on the stock.

I am expecting the Laurels to have a soft launch soon......I dont know whether they will rethink the launch or their pricing because of the new measures announced last night. My estimate for the average selling price of Laurels was S$2800 psf.....I was told on the golf course yesterday that its was S$2888.....even better BUT that was before the announcement of the new measures.

While I would expect property stocks (especially those focussed in the mass market, to under perform for a while because of the new measures, I am of the view that high end developers should buck the trend. So I will still keep Sing Holdings in the stock pick list - at this price downside is very limited as its supported by its NTA of S$0.34. The true test is when the launch the project, what is the average selling price of the launch (if its above S$2800 - then no change in recommendation) and how well the soft launch or launch is received. I think with just over 200 units for sale with the gross floor area around the 1000-1200 sq ft level, absolute affordability in terms of price should be okay. Let's see what happens.

Comments

BUY AND HOLD STRATEGY DEAR KEVIN, I HAVE BEEN STOCK MARKET FOR A WHILE AND HAVE BECOME A SCEPTIC OVER TIME WHEN IT COMES TO EXPERT VALUATION. THROUH A MYRIAD OF EVENT,I WAS INTRODUCED TO MY WEBSITE AND HAVE BEEN BASING MY INVESTMENT CHOICE BASED ON YOUR RECOMMENDATION. I SEEK YOUR ADVISE ON THE FOLLOWING MATTER: 1) DO YOU BELIEVE THAT STOCK MARKET IS A LONG TERM INVESTMENT WHERE THE STRATEGY OF BUY AND HOLD PREVAIL? 2) IF THERE ANY EXIT STRATEGY THAT ONE SHOULD ADOPT? 3) SHOULD CONCENTRATION ON FEW STOCK OR DIVERSIFICATION PREVAIL? I AM OF MEDIUM RISK PROFILE WITH $10K HOLDING IN 30 STOCKS 4) IS STI AT CURRENT LEVEL OF 2700 A GOOD ENTRY POINT FOR A LONG TERM INVESTOR BASED STOCK RECOMMENDED 5) IS INVESTING IN STOCK A MATTER OF COMMON SENSE, WHICH IS KNOW WHY YOU BUY IT, MONITOR IT VIA NEWS EVENT, ADJUST YOUR HOLDING ACCORDINGLY, SELL IT WHEN IT IS FEVERISH AND EXCEED YOUR PROFIT MARGIN... OR IS IT MORE COMPLEX? I LOOK FORWARD YOU ANY OF YOUR RESPONSE AVAERAGE INVESTOR on 20 February 2010 03:15 PM
$10K HOLDING IN 30 STOCKS Hi Sir, how did u manage to split 10k into 30 stocks? I can't even think of how to split 100k into 30 stocks. It is better to buy an ETF to just track the index in this case. You have over diversified my friend Gohsip on 21 February 2010 09:16 PM
Property ETF Hi Kevin, I was wondering if you had recommendations on some property ETFs that invest in Singapore property? Or if there isn't one, could you point me to some property ETFs that you think would make good investments? Thx lots Kevin & thx for you analysis. Kerry on 21 February 2010 11:41 PM
Investment strategy Average Investor My own investment strategy is value investing and my time horizon for the investment to start yielding returns is about six months (results announcements). I always have a fair value target based on certain fundamentals. Once the price target is reached and if there is no change in outlook or new information - I would lock in my profits. On the downside, once any of my assumptions has changed to the negative - I would exit the stock and take my losses. I try not to chase stocks especially when valuations are high unless they are matched by equally strong earnings growth. Kevin on 23 February 2010 10:30 AM
Property ETFs Kerry In Asia where stock markets are less efficient, u can usually beat benchmarks by careful stock picking. I dont look at Property ETFs (sorry) - but for example given that STI Index is now looking less expensive, investment in the STI ETF might given u a decent return if you dont have the time to monitor stocks or the markets closely. The alternative is to find a good mutual fund which has a decent track record and leave it to them Kevin on 23 February 2010 10:38 AM
Jaya A Good Medium Term Investment Hi Kevin I have been following Jaya Holding for a while now, and I think following its better than expected release of financial results for the 2nd quarter 2009/2010 and the very easy credit terms of the re-structured debt profile, I believe the company is heading for good times. With a cash position of almost $200m providing more than adequate free resources for conducting its operations and with a moratorium in debt payment from now till 2012, it can only get better, with more net cash inflow in the next 4 to 6 quarters, by which time (assuming a low dividend payout rate, if any) it would have amassed enough cash resources to even pay off the entire $362m debt if it so wishes. That is already a plus point. However, it gets better, because in its scheduled first year of repayment under the re-structured debt, their cash obligation and outflow would be less than $50m representing a small portion of their cash hoard. The group would thus be poised to take stock of the upturn in the industry with sufficient internal resources, negating the need for incurring any additional interest expenses. I can only see a situation of a return to higher margin spread, and a stronger balance sheet than it has been previously. On hindsight or reverse analysis, perhaps the financial situation of Jaya was actually not that bad than had been presented. The reason for the jittery among its creditors (financial institutions) recently was because the debt(s) had not been properly structured vis-a-vis its operations. It was a financial management oversight. Had the majority of the loan been originally made on a secured basis with a defined repayment term the financial crisis would have been averted. As it so happened, the debts were entirely on an unsecured basis, and therefore, recallable upon notice. I am very optimistic that by this year end the market unit price of its stock would undoubtedly climb above $1.00 CC Low on 23 February 2010 05:18 PM
Jaya Holdings CC Thank you for your input. I did mention Jaya Holdings in my Blog on Feb 1, 2010 when the debt restructuring was announced (http://www.nracapital.com/NetResearchV4/Research/Blogs/GetBlog.aspx?blog_no=471) and also on February 10, 2010 after they announced their results (http://www.nracapital.com/NetResearchV4/Research/Blogs/GetBlog.aspx?blog_no=477). Definitely worth keeping on the radar screen - now that the debt restructuring has no dilution for existing shareholders. Key remains whether they can increase their utilisation rate which is about 50%. Think the catalyst for the price to move will when it secures new orders ! Kevin on 24 February 2010 08:36 AM
Sing Holding A Good Immediate Term Buy Hi Kevin I am in sync with you on the favourable outlook on Sing Holding, notably it being sitting on a potential big time earner in soon to be released The Laurels condo project. To increase their net earnings margin they have re-structured the units into smaller ones to take advantage of saleability based on $2,888 p.s.f. basis. With this positive bearing in sight, I had gone in on this counter in Jan/Feb 2009 immediately after its rights issue when the stocks were trading at all time low of 0.105 and I am digging in. My TP is probably somewhere near but not at its 2007 high of about 1.30. Regards. (P.S. Are you the brother of Patrick Scully? He was one of my trainees at School of Infantry Section Leaders in SAFTI in 1973.) CC Low on 24 February 2010 03:37 PM
apology Hi Kevin Sorry for the double shoot due to the sensitivity of my pc. As you can see it is trigger-happy and tends to overplay at a slightest touch. will get it rectified. CC Low on 24 February 2010 04:59 PM
Sing Holdings Dear CC Let's see what the management of Sing Holdings does in terms of the Laurels launch n pricing. Base case, I am expecting at least 20-30% upside. The shares won't be able to test the old high because on a theoretical ex the S$1.30 would be antS$0.78. Yes I am Pat Scully's brother. Kevin on 25 February 2010 11:39 AM
Sing Holdings with reference to the article on 27 feb, it was mention that "quoted a price range of $2,500 to $2,900 psf". and "sold more than 40 units at The Laurels" on the 1 day private preview day. Prospects looks good and according to your recommendation. thanks Buzz in private housing sales continues By Kalpana Rashiwala Sat, Feb 27, 2010 The Business Times Last Friday, just hours before the government's announcement, a joint venture between Sing Holdings and Forum Partners is said to have sold more than 40 units at The Laurels on Cairnhill Road, which is being developed on the former Hillcourt Apartments site. The units were sold at a one-day private preview held for former owners of Hillcourt Apartments as well as the developers' staff and business associates. Those who turned up for the preview were quoted a price range of $2,500 to $2,900 psf, although a one-bedder on the 18th floor is said to have sold at just a shade below $3,000 psf. In absolute quantum, the highest-priced unit transacted was a penthouse with four bedrooms and a garden that fetched almost $9.9 million or about $2,040 psf, BT understands. The buyers were mostly Singaporeans, although some Indonesians who had formerly lived in Hillcourt are also said to have bought. The Laurels will be next previewed in a fortnight, on March 13. full article on http://business.asiaone.com/Business/My%2BMoney/Property/Story/A1Story20100225-200879.html Victor on 1 March 2010 02:51 PM

BUY AND HOLD STRATEGY
DEAR KEVIN,

I HAVE BEEN STOCK MARKET FOR A WHILE AND HAVE BECOME A SCEPTIC OVER TIME WHEN IT COMES TO EXPERT VALUATION.

THROUH A MYRIAD OF EVENT,I WAS INTRODUCED TO MY WEBSITE AND HAVE BEEN BASING MY INVESTMENT CHOICE BASED ON YOUR RECOMMENDATION.

I SEEK YOUR ADVISE ON THE FOLLOWING MATTER:

1) DO YOU BELIEVE THAT STOCK MARKET IS A LONG TERM INVESTMENT WHERE THE STRATEGY OF BUY AND HOLD PREVAIL?

2) IF THERE ANY EXIT STRATEGY THAT ONE SHOULD ADOPT?

3) SHOULD CONCENTRATION ON FEW STOCK OR DIVERSIFICATION PREVAIL? I AM OF MEDIUM RISK PROFILE WITH $10K HOLDING IN 30 STOCKS

4) IS STI AT CURRENT LEVEL OF 2700 A GOOD ENTRY POINT FOR A LONG TERM INVESTOR BASED STOCK RECOMMENDED

5) IS INVESTING IN STOCK A MATTER OF COMMON SENSE, WHICH IS KNOW WHY YOU BUY IT, MONITOR IT VIA NEWS EVENT, ADJUST YOUR HOLDING ACCORDINGLY, SELL IT WHEN IT IS FEVERISH AND EXCEED YOUR PROFIT MARGIN... OR IS IT MORE COMPLEX?

I LOOK FORWARD YOU ANY OF YOUR RESPONSE

AVAERAGE INVESTOR on 20 February 2010 03:15 PM

$10K HOLDING IN 30 STOCKS
Hi Sir, how did u manage to split 10k into 30 stocks? I can't even think of how to split 100k into 30 stocks.

It is better to buy an ETF to just track the index in this case. You have over diversified my friend

Gohsip on 21 February 2010 09:16 PM

Property ETF
Hi Kevin, I was wondering if you had recommendations on some property ETFs that invest in Singapore property? Or if there isn't one, could you point me to some property ETFs that you think would make good investments?

Thx lots Kevin & thx for you analysis.

Kerry on 21 February 2010 11:41 PM

Investment strategy
Average Investor My own investment strategy is value investing and my time horizon for the investment to start yielding returns is about six months (results announcements). I always have a fair value target based on certain fundamentals. Once the price target is reached and if there is no change in outlook or new information - I would lock in my profits. On the downside, once any of my assumptions has changed to the negative - I would exit the stock and take my losses. I try not to chase stocks especially when valuations are high unless they are matched by equally strong earnings growth.

Kevin on 23 February 2010 10:30 AM

Property ETFs
Kerry In Asia where stock markets are less efficient, u can usually beat benchmarks by careful stock picking. I dont look at Property ETFs (sorry) - but for example given that STI Index is now looking less expensive, investment in the STI ETF might given u a decent return if you dont have the time to monitor stocks or the markets closely. The alternative is to find a good mutual fund which has a decent track record and leave it to them

Kevin on 23 February 2010 10:38 AM

Jaya A Good Medium Term Investment
Hi Kevin

I have been following Jaya Holding for a while now, and I think following its better than expected release of financial results for the 2nd quarter 2009/2010 and the very easy credit terms of the re-structured debt profile, I believe the company is heading for good times. With a cash position of almost $200m providing more than adequate free resources for conducting its operations and with a moratorium in debt payment from now till 2012, it can only get better, with more net cash inflow in the next 4 to 6 quarters, by which time (assuming a low dividend payout rate, if any) it would have amassed enough cash resources to even pay off the entire $362m debt if it so wishes.

That is already a plus point. However, it gets better, because in its scheduled first year of repayment under the re-structured debt, their cash obligation and outflow would be less than $50m representing a small portion of their cash hoard. The group would thus be poised to take stock of the upturn in the industry with sufficient internal resources, negating the need for incurring any additional interest expenses. I can only see a situation of a return to higher margin spread, and a stronger balance sheet than it has been previously.

On hindsight or reverse analysis, perhaps the financial situation of Jaya was actually not that bad than had been presented. The reason for the jittery among its creditors (financial institutions) recently was because the debt(s) had not been properly structured vis-a-vis its operations. It was a financial management oversight. Had the majority of the loan been originally made on a secured basis with a defined repayment term the financial crisis would have been averted. As it so happened, the debts were entirely on an unsecured basis, and therefore, recallable upon notice.

I am very optimistic that by this year end the market unit price of its stock would undoubtedly climb above $1.00

CC Low on 23 February 2010 05:18 PM

Jaya Holdings
CC Thank you for your input. I did mention Jaya Holdings in my Blog on Feb 1, 2010 when the debt restructuring was announced (http://www.nracapital.com/NetResearchV4/Research/Blogs/GetBlog.aspx?blog_no=471) and also on February 10, 2010 after they announced their results (http://www.nracapital.com/NetResearchV4/Research/Blogs/GetBlog.aspx?blog_no=477). Definitely worth keeping on the radar screen - now that the debt restructuring has no dilution for existing shareholders. Key remains whether they can increase their utilisation rate which is about 50%. Think the catalyst for the price to move will when it secures new orders !

Kevin on 24 February 2010 08:36 AM

Sing Holding A Good Immediate Term Buy
Hi Kevin

I am in sync with you on the favourable outlook on Sing Holding, notably it being sitting on a potential big time earner in soon to be released The Laurels condo project. To increase their net earnings margin they have re-structured the units into smaller ones to take advantage of saleability based on $2,888 p.s.f. basis.

With this positive bearing in sight, I had gone in on this counter in Jan/Feb 2009 immediately after its rights issue when the stocks were trading at all time low of 0.105 and I am digging in. My TP is probably somewhere near but not at its 2007 high of about 1.30.

Regards. (P.S. Are you the brother of Patrick Scully? He was one of my trainees at School of Infantry Section Leaders in SAFTI in 1973.)

CC Low on 24 February 2010 03:37 PM

apology
Hi Kevin

Sorry for the double shoot due to the sensitivity of my pc. As you can see it is trigger-happy and tends to overplay at a slightest touch. will get it rectified.

CC Low on 24 February 2010 04:59 PM

Sing Holdings
Dear CC Let's see what the management of Sing Holdings does in terms of the Laurels launch n pricing. Base case, I am expecting at least 20-30% upside. The shares won't be able to test the old high because on a theoretical ex the S$1.30 would be antS$0.78. Yes I am Pat Scully's brother.

Kevin on 25 February 2010 11:39 AM

Sing Holdings
with reference to the article on 27 feb, it was mention that "quoted a price range of $2,500 to $2,900 psf". and "sold more than 40 units at The Laurels" on the 1 day private preview day. Prospects looks good and according to your recommendation. thanks

Buzz in private housing sales continues By Kalpana Rashiwala

Sat, Feb 27, 2010 The Business Times

Last Friday, just hours before the government's announcement, a joint venture between Sing Holdings and Forum Partners is said to have sold more than 40 units at The Laurels on Cairnhill Road, which is being developed on the former Hillcourt Apartments site.

The units were sold at a one-day private preview held for former owners of Hillcourt Apartments as well as the developers' staff and business associates. Those who turned up for the preview were quoted a price range of $2,500 to $2,900 psf, although a one-bedder on the 18th floor is said to have sold at just a shade below $3,000 psf. In absolute quantum, the highest-priced unit transacted was a penthouse with four bedrooms and a garden that fetched almost $9.9 million or about $2,040 psf, BT understands.

The buyers were mostly Singaporeans, although some Indonesians who had formerly lived in Hillcourt are also said to have bought. The Laurels will be next previewed in a fortnight, on March 13.

full article on http://business.asiaone.com/Business/My%2BMoney/Property/Story/A1Story20100225-200879.html

Victor on 1 March 2010 02:51 PM

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