The M Hotel in Singapore’s business district once struggled to fill its rooms on weekends as visiting executives tended to leave by Friday. Now it enjoys 90 percent-plus occupancy even on Saturdays and Sundays.

A prime destination mainly for bankers and businessmen, Singapore also has started drawing tourists with a slew of new attractions, the most popular being two casino-complexes built at a cost of over $10 billion that opened earlier this year.

The two casinos and their related attractions represent the new face of a city that wants to transform itself from regional trade and financial centre into a place for both work and play.

“I’m looking out of my window at the new skyline. What has developed over the last five years has been amazing,” Hanspeter Brummer, CEO for Asia at Swiss private bank BSI, said from his office which overlooks the new Marina Bay financial district.

“Singapore is more than just Monte Carlo, which is a bit artificial. Singapore doesn’t just have one industry but a number of industries. People really have good reasons to come here,” said Brummer, a Swiss national who worked in the city-state from 1997 to 2000 and returned in 2006.

Unlike the existing central business district, Marina Bay, built on reclaimed land around the mouth of the Singapore River, comprises not just office skyscrapers but also shops, residences, theatres and the towering $5.5 billion Marina Bay Sands built by U.S. casino giant Las Vegas Sands.

Marina Bay is also home to the world’s biggest ferris wheel, restaurants fronted by Michelin-starred celebrity chefs and the world’s first night-time Formula One circuit.

Over at Sentosa, to the west of the central business district, Genting Singapore’s Resorts World casino and its Universal Studios theme park opened in February. The $4.8 billion complex earned S$503.5 million ($369.9 million) before interest, tax and depreciation in the three months ended June 2010.

Should Resorts World continue to rake in similar amount of money in subsequent quarters, it would surpass all rivals in Las Vegas and Macau in terms of profitability, analysts say.

Las Vegas Sands has not yet reported earnings for the June quarter but CEO Sheldon Adelson has said he expects Marina Bay Sands to generate gross earnings of over $1 billion annually.

TOURISTS AND TAXIS

Although both casinos have yet to complete all their attractions, which include what will be the world’s largest oceanarium, they have already created new business for hoteliers and taxi drivers.

Visitors to the city-state of 5.1 million people rose by over a-fifth to around 6.5 million in the seven months to July from a year ago. Hotel occupancy hit 90 percent in July, up 10.2 percentage points, while room rates rose 20 percent on average from a year earlier.

Taxi drivers say their takings are up by as much as 30 percent, helped by increased business in the wee hours of the morning from casino patrons.

“The integrated resorts are a catalyst to bigger and brighter things. We are seeing more entertainment centres popping up… We are in the incipient stages of what we call a change in the structural demand for such services in Singapore,” said Vincent Yeo, CEO of CDL Hospitality Trusts which owns M Hotel.

“There are still many attractions that are not opened yet,” he added, citing the two casinos’ unfinished projects as well as government initiatives such as new landscaped gardens, a river safari and an area for motorsports.

CDL’s Yeo said the 90 percent occupancy levels will continue for several months until new hotels open, meaning visitors may have difficulty finding rooms from time to time.

PROBLEM GAMBLING

Singapore’s transformation began in 2005 when the government legalised casinos as part of a plan to double visitor arrivals to 17 million by 2015. Singapore attracted 9.7 million visitors last year, and the number could rise to just under 12 million this year if the growth pace continues.

The figures do not include the thousands who cross over from Malaysia daily by land. In the past, many came to work and returned the same day but a growing number are here to gamble as seen from the large number of Malaysian-registered cars in casino carparks.

Tourism currently accounts for about 7 percent of Singapore’s economy but could grow to around 12 percent by 2015 based on government projections on visitor spending, economists’ estimate.

The transformation has detractors though — from Singaporeans unhappy about the large influx of foreigners who have contributed to soaring property prices and crowded roads to those who fear the casinos will bring with them crime and other vices.

The tiny city-state has long been a centre of trans-shipment and regional finance, coupled with strict government control over its people. It has near-zero crime and sparkling clean streets but also flogging, the death penalty, and a ban on chewing gum.

While Singapore appears to have successfully prevented a rise in prostitution and loan sharking, there has been an increase in problem gambling.

According to local TV station Channel NewsAsia, Singapore’s National Council for Problem Gambling has seen almost as many problem gambling cases in the first half of 2010 as it did for the whole of 2009.

JOBS, OPPORTUNITIES

Economists such as Citigroup ’s Kit said Singapore had little choice but to develop tourism, as it needs to create relatively low-skilled hotel, restaurant and retail jobs to replace those lost at factories that move to China and other cheaper places.

“Rebranding Singapore as a global city and tourism hub fits in very well with its natural advantage, which is its strategic location in the centre of Southeast Asia and good transportation links,” said Kit.

“If well managed, services can be a more sustainable source of competitive advantage than manufacturing, which is footloose and very price-sensitive,” he said.

Singapore’s manufacturing sector, which accounts for one quarter of the economy, shed jobs in the second quarter of 2010 despite expanding at a 44.5 percent year-on-year pace. The services industries, in contrast, continued to create jobs despite growing at a much slower pace of 11.2 percent.

The government has warned manufacturing will slow in the second half, although growth for the full year will come in at 13-15 percent, which will make Singapore the world’s fastest-growing economy.

“Manufacturing is going to slow down, but you’ll see stronger contributions from services in the second half as the integrated resorts ramp up,” said Endre Pedersen, who helps manage $16 billion in fixed income assets at MFC Global, the asset management arm of Canadian insurer Manulife.

Pedersen is betting on Singapore dollar-denominated bonds as he sees the local currency rising faster than most other Asian currencies against the dollar.

DTZ, meanwhile, says Singapore commercial property are undervalued by 9-12 percent, given the strong demand for offices and mall space that has arisen as Singapore attracts more banks and tourists. It ranks Singapore as the third most attractive city for investments in retail and number eight for offices on a risk-adjusted basis.

As for stocks, most analysts see few opportunities, noting the share prices of Genting and hoteliers such as CDL have already rallied this year.

Nomura analyst Tony Darwell warns of potential downside arising from slowing visitor growth as the novelty factor of two casinos wear off. CDL’s Yeo argued, however, that casinos are more likely to attract repeat visitations than other attractions.

To Citi ’s Kit, the risks facing Singapore’s shift to services and tourism are more long-term.

“We’ve developed the hardware but we’ve not got the software yet. At the lower level, Singapore still needs to develop a more service-oriented culture,” he said, referring to high turnover of staff at hotels and restaurants.

“To be a global city also requires a more open mindset and willingness to accept alternative views even if they are poorly formed.”

singapore stock market,singapore stock market news

Stock futures surged Wednesday after upbeat signs of growth in China and Australia lessened worries about a global economic slowdown.

Overseas markets rose sharply after reports showed the pace of growth in China’s manufacturing sector rose in August for the first time in four months and Australia economy grew by the fastest pace in three years during the second quarter.

The sharp jump in U.S. stock futures is surprising given the domestic economic reports due out later in the morning. Traders in the U.S. are waiting for the Institute for Supply Management’s monthly manufacturing report and payroll company ADP’s report on private employment.

Often investors don’t make big bets heading into key economic reports, particularly in recent weeks as data has consistently showed growth is slowing. Both the ISM manufacturing and payroll reports are expected to follow that trend.

Stocks have been volatile over the past month because traders are unsure about the direction of the economy. Data continues to point to meager growth, but exactly where the pace of growth settles remains a major question. By sending stocks lower throughout August though, traders were betting that weak growth will eventually be a drag on corporate earnings.

Ahead of the opening bell, Dow Jones industrial average futures rose 98, or 1 percent, to 10,104. Standard & Poor’s 500 index futures rose 12.50, or 1.2 percent, to 1,060.80, while Nasdaq 100 index futures rose 24.50, or 1.4 percent, to 1,791.00.

With stock markets rising worldwide, U.S. Treasury prices dropped and interest rates rose. The yield on the 10-year Treasury note, which moves opposite its price, fell to 2.52 percent from 2.47 percent late Tuesday. Its yield is often used as a gauge to set interest rates on mortgages and other consumer loans.

Economists polled by Thomson Reuters forecast the ISM manufacturing index slipped to 53.0 in August from 55.5 a month earlier. Any reading above 50 indicates expansion in the sector.

Regional surveys of manufacturing activity in recent weeks also pointed to slowing growth in the sector, which had been among the strongest during the first half of the year.

Economists expect the ADP report will show private employers added just 19,000 jobs last month after hiring 42,000 new workers in July. The slowdown in hiring during August is further evidence that the jobs market remains weak.

Employers are avoiding making any new hires in large numbers because of the uncertain direction of the economy. They are also worried about the potential impact of government health care and financial regulation reforms as well as possible increases in taxes.

With unemployment still high, people concerned about their jobs have cut back on spending, which has further slowed growth.

The ADP report is often considered a gauge for the government’s monthly employment report, which is due out Friday. The Labor Department’s data also includes government employment so it is a broader reading on the jobs market.

Economists expect the government report to show 100,000 jobs were cut last month, but that was largely due to laying off temporary census workers. Private employers likely added just 41,000 jobs last month.

Overall, the unemployment rate is expected to have climbed to 9.6 percent last month from 9.5 percent in July.

Australia’s S&P/ASX 200 index jumped 2.1 percent on the upbeat growth report. Hong Kong’s Hang Seng index rose 0.4 percent, while Japan’s Nikkei stock average rose 1.2 percent.

European markets followed Asian markets higher. Britain’s FTSE 100 rose 1.5 percent, Germany’s DAX index gained 1.1 percent, and France’s CAC-40 climbed 1.8 percent.

Singapore 25th most expensive city for travellers

Singapore has been ranked as the world’s 25th most expensive city for business travellers from the United Kingdom, up from 44th spot last year, according to the Global Hotel Market Survey.

The leap in Singapore’s ranking is in line with reports from the Ministry of Trade and Industry saying that the average room rates in the country have increased 20 percent this year.

Hong Kong leapt seven places to become the world’s third most expensive city for UK travellers, posting a 13 percent growth in the local currency because of increased demand from the banking and finance sector.

Among the cities surveyed, Hong Kong saw the highest growth, with an 11 percent and 17 percent increase in Q1 and Q2, respectively.

Moscow remained the most expensive city for UK travellers despite a weaker rouble.

Abu Dhabi dropped six places to rank eight this year from second spot last year. It recorded the highest average room rate decline of 25 percent in the local currency.

S’pore’s richest keep getting richer

The latest list of Forbes wealthiest individuals and families in Singapore indicated that the top 40 richest Singaporeans are now worth US$45.7 billion (S$62 billion), up 17 percent from US$39 billion in 2009. The list is made up of popular entrepreneurs, business leaders and philanthropists.

In the number one spot again this year is the family of the country’s richest man and late property tycoon Ng Teng Fong. Mr. Ng, who passed away in February, has a net worth of US$7.8 billion, a slight drop from US$8 billion last year after a stake in HK developer Tsim Sha Tsui Properties fell 18 percent in the past one year..

The Khoo family, who has a minor stake in Orchard Parade Holdings and owns Goodwood Group of Hotels, still stays on in second place with US$5.9 billion.

Wee Cho Yaw, chairman of United Overseas Bank, came in third and has assets worth US$3.6 billion. He was among the two biggest gainers in dollar terms. Mr. Wee regained the third position after adding US$500 million to his wealth. 

According to Forbes Asia magazine, the increase in collective net worth highlights Singapore’s economic resurgence. The country is set for record growth this year after contracting by 1.3 percent last year. The official growth forecast for 2010 was revised upwards in June from 7 to 9 percent to 13 to 15 percent.

In the collection, a half-bottle of the 2001 Chateau d’Yquem – one of the exceedingly few wines that wine critics Robert Parker and the Wine Spectator both rated 100 points. Yquem is a Sauterne, what some people call a dessert wine, though pigeonholing it as such is no more accurate that pigeonholing Wayne Gretzky as a Canadian athlete.

I was, at the end, literally licking the inside of my glass, and running my finger across the bottom of my wife’s glass to get the last precious drops of what is, without question, the finest liquid to ever coat my tongue.

Through Dave, I bought four half-bottles of the stuff at a nice discount. But the current price runs between $275 and $400 for a half-bottle depending on where you find it. Yet, as much as I love this wine, I have no intention of drinking them. (Well, I’ll drink one with my young son when he turns 21.) Instead, they now rest, properly cooled and humidified, in a small cellar I built in my home to house “investment-grade wine”.

I share this story because it speaks to the value of wine – not just the drinkable liquid, but, as the title of Dave’s book announces, the liquid asset (literally) that can juice a portfolio’s returns.

To give you an example of what individual wine prices can do over time, consider the 1961 Chateau Latour. Back in the day, you could have bought a case for £25. Today, 50 years on, that same case fetches, at the low end, £35,000.

A bit of spreadsheet work and you see the return is about 15.6% annually.

Or let’s look at something more recent: the 1990 Cheval Blanc – released at £400 a case and now trading near £9,200 an annualized return of a 37%.

Or even more recent: the 2000 Chateau Lafite-Rothschild – released at $300 a bottle, it now fetches between $1,500 and $4,300 a bottle, depending on where you find it. Either way, you’re looking at annualized returns of between 17% and 31%

singapore stock market news,singapore stock market ‘

RPT-Singapore’s NOL places $1.2 bln ship orders from Daewoo

Holland Tower, a freehold residential redevelopment site  located in District 10 has been put up for sale through a public tender by Jones Lang LaSalle (JLL).

The URA said the redevelopment of the 21,879-sq-ft site, which is zoned for residential use, can maintain its current height and can be redeveloped into a boutique residential development with 52 units of 82 sq ft with no development charge.

Holland Tower is located at 10 Holland Heights and sits in the Holland Park Good Class Bungalow Area. It has a maximum gross floor area of 43,691 sq ft and comprises a single 14-storey tower development with 19 units. It is well served by Holland Road, Queensway and Farrer Road, as well as major expressways including the AYE and the PIE.

The site is only minutes away from Orchard Road and the Botanic Gardens, and is close to the lifestyle facilities at Dempsey Cluster and Holland Village.

“With strong take up rate of residential new launches in the vicinity, this elevated site is expected to draw strong interest due to its locality, proximity to amenities and the potential to be redeveloped into a boutique development offering exclusivity and lush greenery. The site is totally unblocked as its surrounding area is prestigious landed housing under the ‘Good Class Bungalow’ segment,” said Ms. Stella Hoh, National Director and Head of Investments at JLL, which is the sole marketing agent for the property.

The public tender for the site will close on 25 August.

Buying a magic box

Let’s say for the sake of example that you do acquire this mystical item for a tidy $1500, and duly receive a crisp $100 note after 12 months (an initial yield of 6.67% as expected). The second year brings even greater rewards:

Over five years the box has increased its output by 35% paying out $135 in cash in the final year, which is an average increase of just over 6% each year. Based on your purchase price, you have received a total of $579 over the period, which is 39% of the initial purchase price. In regard to the 5th year only, you received a yield of 9% ($135/$1500). Few investors would be disappointed with this outcome.

But surely you would have still done better with a higher yielding, yet safer, investment in a bond. Not necessarily, as the box itself has value and can be sold to other eager investors…

Parkway Life REIT
Company update - Optimising Japanese exposure - by Janice Ding
(PREIT SP / PWLR.SI, OUTPERFORM - Maintained, S$1.39 - Tgt. S$1.57,
Property)

Maintain Outperform and target price of S$1.57 for PLife REIT. PLife REIT
has acquired 11 nursing homes in Japan for S$107.3m at an average net
property yield of 6.6% after withholding tax. With this acquisition,
income contributions from Japan had increased to 38% from 28% in 1Q10. We
maintain our DDM-based target price of S$1.57 (discount rate 7.2%) as we
had earlier factored in S$170m of acquisitions for FY10. Stock catalysts
could include early debt refinancing on lower costs in 2H10 and a change
of the holding structure for its Japanese assets in 1H11 which would lower
the withholding tax for its Japanese assets.

China, the worst-performing stock market
after Greece, looks like a buy by almost any measure, according to
top-ranked analysts of the Asian nation’s shares.
   The Shanghai Composite Index’s 26 percent plunge this year,
including yesterday’s 4.3 percent slump, sent its price-earnings ratio
to 18, the lowest level versus the MSCI Emerging Markets Index in a
decade. The largest owners of yuan-denominated stocks have turned net
buyers for the first time since equities bottomed in 2008, while
international investors are paying the biggest premium in 21 months to
bet on a rally in funds that hold China’s yuan-denominated or A shares,
data compiled by Macquarie Group Ltd. and Bloomberg show.
   Morgan Stanley, BNP Paribas SA and Nomura Holdings Inc. say stocks
will rally as China’s June 19 decision to end the yuan’s two-year peg to
the dollar helps curb inflation and asset bubbles. The Shanghai index
rose 62 percent in 12 months after China last allowed a more flexible
exchange rate in July 2005.
   ”We are very bullish,” said Jerry Lou, the Hong Kong- based
strategist at Morgan Stanley, among the top-ranked analysts for China
stocks by Institutional Investor, who predicts the Shanghai Composite
may climb 65 percent to 4,000 by June 2011. “We like valuations and
inflation will peak. All we need is a catalyst such as a change in yuan
policy.”
   Prospects for a stock rebound may be cut as China’s exports face
“strong headwinds” in the second half and loan growth may slow by the
end of 2010, Citigroup Inc. said this week, even as the average of 14
economist estimates in a Bloomberg survey calls for economic growth of
10.2 percent this year and 9.2 percent in 2011.

The Conference Board yesterday revised its leading economic index
for China, contributing to the biggest sell-off in Chinese equities in
six weeks. Agricultural Bank of China Ltd., which priced the Shanghai
portion of its $20.1 billion initial share sale, also drove banking
stocks lower.
   The Shanghai Composite fell for a sixth day today, losing
0.8 percent to 2,408.46 at 10:14 a.m. Its slump this year is second only
to the 35 percent plunge in Greece’s ASE Index among the world’s 60
biggest stock markets, according to data compiled by Bloomberg.
Companies on the Shanghai gauge will increase earnings by 40 percent in
12 months, more than double the pace of the ASE, analysts’ estimates by
Bloomberg show.
   Rising profits reduced the Shanghai Composite’s valuation premium
over the MSCI emerging index to 26 percent, down from an average of 140
percent since 1997, based on weekly price- earnings ratios compiled by
Bloomberg. The last time the gap was so small in February 2000, the
Shanghai Composite gained 27 percent in 12 months, while the MSCI
measure sank 26 percent.

                      Lower Valuations

   Lower valuations spurred the biggest Chinese investors to buy last
month. Shareholders who own at least 5 percent of a company’s stock
boosted their holdings by 1.1 billion yuan ($162 million), according to
Macquarie analysts Michael Kurtz and Shirley Zhao in Shanghai, basing
their analysis on data from Wind Information. Similar purchases in
October 2008 signaled the end of the Shanghai Composite’s year-long bear
market, with the gauge rallying 82 percent from its low on Oct. 28,
2008, through October 2009.
   Yuan-denominated shares, restricted almost exclusively to local
investors, fell below Chinese stocks traded in Hong Kong this month for
the first time in almost four years, according to the Hang Seng China AH
Premium Index. When A shares last traded at a discount in November 2006,
the Shanghai Composite tripled in 12 months, outpacing a 156 percent
gain in the Hong Kong benchmark index and a 58 percent rise in the MSCI
gauge.

                      ‘Pay for Exposure’

   ”The premium between A and H shares is disappearing,”
said Hao Hong, Beijing-based global equity strategist at China
International Capital Corp., the top-ranked brokerage for China research
in Asiamoney’s annual survey. That indicates “foreign investors are
willing to pay for exposure to China’s stocks.”
   International investors pushed the price of BlackRock Inc.’s
iShares FTSE/Xinhua A50 China Index exchange-traded fund to 11 percent
above the value of its underlying assets last week, the highest level in
almost two years, according to data compiled by Bloomberg. The fund
trades in Hong Kong and tracks the 50 biggest A-share companies.
   The Shanghai Composite fell 22 percent this quarter, lagging behind
gauges in the other so-called BRIC markets of the largest developing
economies, after China raised banks’ reserve requirements to the highest
level in at least three years and curbed real-estate speculation.
Property prices rose 12.4 percent in May from a year earlier, the
second-fastest pace after April’s 12.8 percent record gain.

                        BRIC Markets

   Brazil’s Bovespa index dropped 8.7 percent during the period and
Russia’s Micex slipped 8 percent, while India’s Bombay Stock Exchange
Sensitive Index advanced 0.2 percent. The MSCI emerging gauge lost 7.6
percent.
   The New York-based Conference Board corrected its April gauge for
the outlook of China’s economy this week, saying its leading index for
the country rose the least since November, rather than registering the
biggest gain in 14 months.
   A flood of new stock may also weigh on the market, according to
Credit Suisse Group AG’s Sakthi Siva. Chinese companies will sell about
320 billion yuan ($47 billion) of new shares in Shanghai and Shenzhen
this year as they fund expansion and banks bolster capital after a
record amount of government- led lending, PricewaterhouseCoopers
predicts.
   Agricultural Bank’s share sale in Shanghai and Hong Kong is the
biggest initial public offering since Industrial & Commercial Bank of
China Ltd.’s $21.9 billion sale almost four years ago.

                      ‘Quite Cautious’

   ”I’m still quite cautious,” Siva, the Singapore-based top-ranked
Asia strategist in Institutional Investor’s 2010 poll, said in an
interview. “There’s quite a lot of supply.”
   Ending the fixed 6.83 yuan peg to the dollar should help “contain
inflation and asset bubbles,” China’s central bank said in a June 20
statement. Inflation will probably peak at 3.7 percent toward the end of
the third quarter then “level off”
the rest of the year, according to CICC’s Hong.
   Chinese authorities had prevented the currency from strengthening
against the dollar since July 2008 to help exporters cope with the
global financial crisis.
   The yuan appreciated 21 percent in the three years after a managed
float against a basket of currencies was introduced in 2005.
Twelve-month non-deliverable forwards yesterday indicate investors are
betting the yuan will strengthen 1.6 percent. A yuan revaluation won’t
happen quickly or fix all of the global economy’s imbalances,
International Monetary Fund Managing Director Dominique Strauss-Kahn
said this week.

                    Vanke, China Merchants

   China Vanke Co., the Shenzhen-based property developer that sank 37
percent this year, trades for 13 times reported profits, down from 35
times a year ago, according to data compiled by Bloomberg. Earnings
growth of 29 percent this year will help lift the stock 42 percent,
according to analyst estimates on Bloomberg.
   China Merchants Bank Co.’s 2.7 price-to-book ratio is near a record
low relative to the MSCI Emerging Markets Financials Index after the
Shenzhen-based company declined 24 percent this year. The stock is
poised to surge 49 percent in 12 months, according to analysts, who have
35 “buy” ratings and one “sell,” according to data compiled by
Bloomberg.
   Consumer-related shares will benefit from a shift in the economy to
increase domestic spending, said Leo Gao, who helps oversee about $600
million at APS Asset Management Ltd. in Shanghai, whose APS China Alpha
Fund has beaten 87 percent of peers in the past year, according to
Bloomberg data.
   ”Stocks will end the year higher,” Gao said.

Singapore’s factory output sees record rise in May

Singapore said Friday that manufacturing output surged a record 58.6 percent year on year in May as factories raced to meet robust foreign orders for electronics and pharmaceuticals.

Last month’s factory production, which eclipsed the previous record high of 49.7 percent posted in April, was almost double the 32.1 percent forecast in a Dow Jones Newswires’ poll of analysts.

The monthly data from the Economic Development Board (EDB) said factory production in May was boosted by electronics and biomedical which includes pharmaceuticals.

Electronics output rose an annual 51.8 percent while biomedical manufacturing expanded 117 percent with the main boost coming from a 121.8 percent jump in pharmaceuticals, the EDB said.

For the other sectors, chemicals surged 19.6 percent, precision engineering rose 40.5 percent and transport engineering increased 0.3 percent.

Overall manufacturing output was up 45.1 percent in the January-May period, the EDB said.

Economists said the latest data suggested the government may have to revise its 2010 growth targets of 7.0-9.0 percent amid signs the economy is recovering strongly from last year’s slump.

“Another revision is on the cards despite the uncertainties in Europe and whether the US enters into a period of jobless recovery,” said Song Seng Wun, a regional economist with CIMB equity research house.

“The lion (Singapore economy) is charging ahead… Nine percent will be an underachievement with the kind of numbers we have got,” he told AFP.

Singapore’s monthly factory data is a barometer of how its economy is doing as the bulk of output from the sector is shipped out either as final goods or as components to foreign factories.

The economy shrank 1.3 percent last year as exports declined sharply amid the global downturn, which hit Singapore’s major markets, particularly the US, hard.

The deal of the year fell through in a week when global markets look to be
recovering. On Wednesday, Prudential pulled out of the deal to buy the Asian arm of US insurer AIG after failing to negotiate a lower price. British newspapers pointed out
that several major shareholders had welcomed the collapse of the deal,
unconvinced that the US$35.5 billion ($50 billion) takeover would have
been a success. Prudential’s secondary listing on the Singapore Exchange is intact, but it remains to be seen whether the market makers have
provided sufficient liquidity.

During the week, the STI rose 67 points. First quarter net earnings were
in line with expectations, notes DBS Group Research in a report on June 4.
But risk of earnings downgrades is rising as visibility deteriorates with
the sovereign debt crisis in Europe clouding the outlook for the second
half, the report adds. “Indeed, we note that earnings upgrade momentum for
FY10 has been tapering off, from +5% in the previous 4Q09 results season
to +1% in the recent 1Q10 results,” DBS states.

According to the report, the industrial and tech sectors could be affected
by lower demand and order cancellations. Meanwhile, the combination of
domestic policy tightening and weak global sentiment could also have a
knock-on impact on property prices.
Sectors that could face potential downgrades on a deteriorating global
outlook include technology and shipping companies. The yards could also be
hit if contracts fail to come through by 4Q10 due to tightening credit in
the EU, affecting capital expenditure plans of oil majors.

Locally, the property sector would be vulnerable to a slowdown in volume
sales or the decline in average selling prices. The government land sales
programme will release a significant number of new units ? more than
13,000 ? into the market.

Plantation earnings could be cut if harvest is low leading to lower volume
sales in the next two quarters.

As a result, DBS is recommending stocks where downside is protected by
dividend yields, or exposed to Asian consumption as opposed to the global
economy. These include M1, Tiger Airways, Singapore Press Holdings, Singapore Airlines, SIA Engineering, and Raffles Medical Group. Among the REITs, DBS prefers CapitaMall Trust, Frasers Centrepoint Trust, Mapletree Logistics and ParkwayLife.

Back in London, Prudential’s board will face its shareholders on Monday at
an AGM. The plan was to ask investors to approve a dilutive 14.5 billion
pounds rights issue to fund the AIA deal. Now, market pundits reckon
management could be facing angry shareholders demanding a shakeup of the
board. Prudential’s share price traded at 565p, up 24p on Friday, and in
Singapore, the stock ended the week at US$8.45, up 65 cents, for a gain of
8.3%.

Chart View
The STI (2,806) closed comfortably above the 200-day moving average and a
resistance level at the 200-day moving average at 2,781. Since prices have
been able to end the week above an important resistance at the 200-day
moving average, support should be raised to 2,750. Resistance is initially
at the 100-day moving average which shows signs of flattening at 2,849.
The declining 50-day moving average is at 2,886. ? Goola Warden

The recent articles in this series on Santos (STO:ASX) have been inspired by a lesson from the WD Gann Stock Market Course where he teaches his Mechanical Stock Trading Method and tests it over a 15-year period in US Steel. In the last section of the lesson he covers a situation very similar to ours in Santos last week. Here are Gann’s instructions on US Steel:

Cover all shorts and buy for long account at 135, because this is the 1/2 point between 8-3/8 and 261¾, being half of the life fluctuation and the strongest point since 150.

8-3/8 was the lowest price at which US Steel ever traded, in May 1904. 261¾ was the all-time high in September 1929 (these prices are still the all-time low and high for US Steel by the way). 135 was the 50% level or mid-point between these.

Chart 1 – Half-Point of Lifetime Range

click to enlarge

Chart 1 shows that the recent low on 21st May, Santos fell straight to this 50% level and then rebounded.

The quote from Gann also mentions that the price at 135 was ‘the strongest point since 150.’ This was another major 50% level, from a major low in 1915 to the all-time high in 1929. You can see from Chart 2 that the equivalent in Santos is the range from the 2003 low to the all-time high in 2008 that started our run of trades in February.

Chart 2 – Major Monthly Range

click to enlarge

In addition, the low of 21st May completed a repeat of the range from 27th March to 9th July 2009 – a significant range on the weekly chart. As you’ll remember from last week, it also hit the 1 x 2 trading day angle from the October 2008 low.

Chart 3 – Set-Up on 21 May

click to enlarge

Now that I have spent some time showing you the set-up, back to Gann’s instructions at the top of the article. He said ‘cover shorts and buy at 135’. Translating that to our situation, on 21st May, when Santos gapped down, opened just below the 1 x 2 angle and the major 50% level, and then moved up, we should take profits on all our short trades and go long. The exact price of the 50% level is 11.37. Last week I suggested covering shorts at 11.40, just to be certain.

With an account balance now of over $120,000, we would be able to take 50,000 CFDs and place stops 5 cents below the low of the day (just in case the market re-tests the low).

Chart 4 – Going Long

click to enlarge

On 25th May there was a higher swing bottom, confirmed on the 27th. Our rules would state to take an additional position here, as this is a First Higher Swing Bottom trade from the Number One Trading Plan.

On 1st June there was what appeared to be an Outside Continuation Day, which would also have given a signal to take an additional position. The next day, however, was actually a down day, so it became an Outside Reversal Day. We will take this up in the next issue, but note what Volume has been doing since the 21 May low.

Knowledge is Power!

Wilmar International Limited (Wilmar) has make an offer to Benso Oil Palm
Plantation Ltd (BOPP) (listed in Ghana Stock Exchange) acquire at least
58.45% of the entire issued ordinary share capital. Unilever Ghana
Limited, which holds in aggregate 58.45% of the issued share capital of
BOPP, has provided the Company with a written irrevocable undertaking to
accept the Proposed Offer in respect of its BOPP shares.

Wilmar Africa has also entered into an agreement with Unilever Ghana
Limited to acquire the “Frytol” cooking oil brand and its oil processing
activities in Ghana.

Impact on Stock

The offer price for the stakes in BOPP is at GHS0.83/share or for a total
consideration of US$20.3m assuming 100% stakes in BOPP. The offer price is
5.1% above BOPP’s last closing price of GHS0.79/share (up from GHS0.66 @
21 May 10).  No information on purchase price disclosed with regards to
the acquisition of “Frytol” cooking oil brand and oil processing from
Unilever Ghana. Financial data for BOPP was not available for comment on
valuation.

BOPP is involved in growing of oil palm and other agricultural products,
processors of oil palm fruits to produce palm oil and palm kernels and
dealers and traders in palm oil, palm kernels and other agricultural
products.  BOPP is in the Mpohor Wassa East District in the Western Region
of Ghana where the plantation is 42km from Takoradi.

These acquisitions of BOPP, cooking brand and oil processing activities in
Ghana are consistent with the Wilmar’s plans to develop a fully integrated
oil palm business in the emerging markets.  Wilmar also owns other oil
palm plantations in Africa through its joint ventures in Uganda and Ivory
Coast. Thus the downstream acquisition would be able to complement its
upstream investment in Uganda and Ivory Coast.

Wilmar investment in Africa is to capture the domestic market, which is
not new to palm oil market. Oil palm was originated from West Africa and
palm oil is widely used as cooking oil in West Africa due to its cost
competitiveness and its availability domestically.

Earnings Impact
No major earnings impact to Wilmar as this is a small acquisitions vs its
current operation in Asia.

Recommendation
We reiterate our BUY call with a lower target price of S$7.40 based on sum-of-the-parts valuation to value its palm-base business at
16x 2011F PE and 20x for its China operations.  We still like Wilmar for
(1) market leader in China consumer cooking oil with pricing power (2)
wide marketing and distribution network enable quick response to take
market opportunity (3) Experience management team.

Well-established in SE Asian markets, a pioneer in 3-in-1 coffee. According to Euromonitor, instant coffee consumption is expected to experience a 2009-11 CAGR of 6.6 and 10.9% in Malaysia and Thailand respectively.

Super Group (Super) is one of the leading brands in the instant coffee-mix market and is in the position to benefit from this growing trend in SE Asia. The company has also moved upstream and entered the ingredient market, which products are mainly sold to industrial customers in China and Taiwan.

• Ingredient – the sales growth driver. Super’s branded consumer segment (ie.coffee and cereal) provides steady recurring income, and we expect FY10 sales from this segment to reach S$246.8m, up 9% yoy.

Meanwhile, ingredient sales are expected to be the growth driver, with sales growth of 39% yoy to S$43m in FY10. Driven by robust demand, Super is doubling its productioncapacity in China by 2010.

• Undemanding valuations, potential upside of 38%. Super’s plan of a TDR issue will add some speculative appeal to the company. It is currently trading at core FY10 earnings of 9.5x, lowest among its peers.

We set our target valuation at FY10 core PER of 13.2x, which is close to the average valuation of its peers. This implies a target price of S$1.28/share, and a potential upside of 38.4% from the current price level.

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