Growth outlook for 2016 is not great

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WEDNESDAY DECEMBER 23, 2015
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Epicentre Holdings | Global Tech | OKP Holdings
BLOOMBERG
P8-10 STOCKS WITH MOMENTUM |
SINGAPORE
P4 HOME BUSINESS
Motorbikes
outside Vietnam’s
property
showrooms cheer
HSBC’s Wong
P6 HOME BUSINESS
Weak hiring
demand across the
board in Singapore
P11 MALAYSIA
P2 COVER STORY
Growth outlook
for 2016
is not great
GST, ringgit
decline hit
retailers, causing
40% drop in sales
P13-14 PROPERTY
Why your
retirement plan
is good news for
Iskandar Malaysia
W E D NES DAY DECE M B E R 23, 20 15 • THEEDGE SINGAPORE MARKET REPORT
2 COVE R S TO RY
SINGAPORE (Dec 22): Singapore’s stocks
are set for a 15% tumble this year, putting them in the same league as Greece.
Baring Asset Management and UBS Group
AG say shares need to get even cheaper
before they are prepared to buy.
Commodity trader Noble Group and
oil-rig builder Sembcorp Marine are down
at least 46% in 2015 amid a raw-materials
price rout, while DBS Group Holdings
has been the biggest drag on the Straits
Times Index as property prices decline
and bad debts increase.
Among developed markets tracked by
Bloomberg, the only benchmark measure that has fared worse is the ASE
Index in Athens, which is poised for a
24% plunge.
“While some value could emerge if
Singapore drops another 10%, there’s
not a lot of things to be wildly excited
about Singapore at the moment,” said
Soo Hai Lim, a Hong Kong-based money
manager at Baring. “Cheap valuations
aren’t a good enough reason these stocks
would deliver the kind of performance
we’re looking for. The growth outlook is
still quite soft for 2016.”
Following this year’s slump, shares
on the MSCI Singapore Index traded at
1.1 times the value of its companies’ net
assets, compared with a multiple of two
on a measure of global equities. The gap
between the two widened this month
to the most since May 2003. The MSCI
Asia Pacific Index is heading for a 5.7%
retreat in 2015.
Pessimistic outlook
While attractive valuations may spur a
rebound in the early part of next year,
the outlook for the whole year still looks
pessimistic, according to Mixo Das, a
strategist at Nomura Holdings Inc.
“Growth overall is slowing, particular-
BLOOMBERG
Singapore stock losses
rival Greece as Baring
sees little value
Malaysia and Indonesia aren’t doing
particularly well.”
Bad loans, credit risks
A customer, seen through a OverseaChinese Banking Corp logo. Singapore
lenders, including OCBC, DBS Group
and United Overseas Bank, account for
about 35% of the benchmark Straits
Times Index.
ly in China, and that raises the risk for
the earnings of banks and commodity
companies,” Das said. “That’s going to
drag on Singapore valuations.”
MSCI Inc reclassified Greece as an
emerging market in November 2013,
while fellow index compiler FTSE still
considers Greece a developed market.
Foreign investors have pulled US$6.7
billion ($9.4 billion) from Thai, Philippine and Indonesian equity markets this
year amid concerns the first US interest
rate increase in almost a decade and a
weakening Chinese economy will further
curb the region’s economic growth.
While Singapore averted recession in
the third quarter, the Monetary Authority
of Singapore has warned weaker corporate balance sheets and currency market volatility pose risks to the nation’s
lenders.
“The banks have exposure to the
Southeast Asia region,” Kelvin Tay,
regional chief investment officer at
UBS’s wealth management business in
Singapore, said by phone. “Thailand,
The non-performing loan ratio among
Singapore banks rose to 1.5% in the third
quarter of 2015, from 1.1% a year earlier,
the central bank said in November. Bad
loans have increased in the manufacturing sector, and banks with exposure
to trade may see higher credit risks, the
monetary authority said.
Still, Nader Naeimi, Sydney-based
head of dynamic markets at AMP Capital
Investors, said he is staying optimistic
because rising interest rates should help
boost bank profitability. Borrowing costs
in Singapore were rising even before the
Federal Reserve increased US interest
rates this month for the first time since
2006, helping to lift lender DBS Group’s
interest margins in the third quarter to
a four-year high.
Singapore lenders including DBS
Group, Oversea-Chinese Banking Corp
and United Overseas Bank account for
about 35% of the benchmark Straits Times
Index (STI), according to data compiled
by Bloomberg. “The key drag here is the
banks,” said Nomura’s Das. “Loan growth
is weak and is likely to remain so.”
While Das expects the STI to end 2016
little changed from current levels, other
brokerages are more optimistic, with
Credit Suisse Group AG forecasting an
advance to 3,000 and RHB Securities Pte
expecting a 12% gain by December next
year from Monday’s close. Still, Bank
Julius Baer & Co says it is too early to buy.
“The growth outlook isn’t great,” Jen
Chua, an analyst at Bank Julius Baer in
Singapore, said by phone. “Though the
downside from here may be limited, we
won’t get too positive on the market for
now.” — Bloomberg LP
W E D NES DAY DECE MB E R 23, 20 15 • THEEDGE SINGAPORE MARKET REPORT
3
WE D NES DAY DECE M B E R 23, 20 15 • THEEDGE SINGAPORE MARKET REPORT
4 H OM E
BLOOMBERG
Motorbikes outside Vietnam’s
property showrooms bring cheer
Workers twist silk
thread in Siem Reap,
Cambodia. The garmentmaking industry will
benefit from Chinese
manufacturers setting
up operations in
Vietnam.
BY C H AN CHAO PEH
SINGAPORE (Dec 22): The property market in Vietnam is gaining
more interest again and investors with longer memories might
recall an era of frenzied activity in the middle of the last decade.
Winfield Wong, head of banking at HSBC Vietnam, has a way
to tell if the underlying demand for property is driven by speculators or real local buyers.
“Look at what’s parked outside the showrooms: Do you see
cars or do you see motorbikes? When you see motorbikes, they
are genuine buyers,” says Wong, in an interview with The Edge
Singapore.
His optimism is driven by growing consumer income in the
country. In 2009, it was just around US$1,000 per capita. Since
then, it has more than doubled to US$2,200 ($3,096) today.
“We expect both demand as well as improvements in productivity to have a positive impact on this per capita income. As you
can imagine that this is starting from a very low base, percentage
of growth will be phenomenal,” says Wong.
The growth is driven by general growth in the country’s economy, as foreign investors make their moves in sectors in property but also in supporting industries and markets such as office
space, hospitality, food and beverage, as well as manufacturing.
Broader changes in the economy are helping too: Vietnam is
one of the 12 initial signatories of the Trans-Pacific Partnership,
which promises prospects of lower trade barriers. As a subset of
sorts, the Asean Economic Community, which aims for removal
of tariffs among the 10 member states, is also slated to take effect by end-2015.
Besides trading agreements, the Vietnamese government’s
active introduction of policies to stabilise its currency and interest
rates have helped as well, as foreign investors need that kind
of visibility before they can plan and commit. “The business
climate has become more conducive,” notes Wong.
Meanwhile, China’s growing cost of doing business has indirectly benefited Vietnam as well, as its still-abundant pool
of young labour force makes it increasingly compelling for
manufacturers to set up operations there, says Wong.
The garment-making industry, specifically, will be a big
beneficiary of the combination of these factors. Just by
reducing tariffs alone will help increase margins of these
companies by almost 25%, says Wong. Notable brands that
have contract manufacturing operations in Vietnam include Lululemon, Polo Ralph Lauren, Tommy Hilfiger and
Under Armour.
Other Vietnamese industries seen to benefit from the TPP
are electronics and, potentially, the automotive and fishery
sectors too.
Wong is unfazed by the slowdown that is inflicting emerging
economies. HSBC’s economists see Vietnam’s GDP growing at
6.9% for 4Q2015 and accelerating to 7.3% come 4Q2016.
He sees plenty of growth for HSBC, the leading foreign
bank operating in Vietnam and also one that has the strongest
balance sheet. In contrast, the banking sector in another large
Asean market, Indonesia, is dominated by local players. Foreign
banks have more room to play in Vietnam.
“If you look at per capita income, that’s going to grow by an
impressive percentage. Then definitely, demand for banking
is going to increase. The only question is, which segment?”
Wong says.
Perhaps where the motorbikes are parked could once again
provide a clue to the answer.
W E D NES DAY DECE MB E R 23, 20 15 • THEEDGE SINGAPORE MARKET REPORT
5
WE D NES DAY DECE M B E R 23, 20 15 • THEEDGE SINGAPORE MARKET REPORT
6 H OM E
IN BRIEF
Weak hiring demand across
the board in Singapore says
Monster.com
SINGAPORE (Dec 22): Singapore’s finance
and banking sector is seeing sluggish
hiring, according to the Monster Employment Index. In November, the MEI
for the banking and financial services
industry further weakened, with a 5%
drop y-o-y, extending the 2% y-o-y drop
in October and 1% dip in September.
The MEI, created by online hiring
platform Monster Worldwide, Inc, is a
monthly gauge of online posting activity. Unsurprisingly, demand for finance
and accounts hires was down as well.
The MEI for this group was down 9%
y-o-y in November, slightly more than
the 8% decline seen for both October
and September. To be sure, employment
demand is tepid across the board. MEI
for the whole of Singapore was down
8% for November, and there were no
sectors showing growth.
The “best-performing” industry,
according to MEI, was the healthcare
sector, down 2%. This was followed by
retail, trade and logistics, down 3%.
Three other sectors — advertising, market research, public relations, media
and entertainment; education; and IT,
telecommunications and business process outsourcing — were all down 4%.
On the other hand, the worst-performing industry was the collective of
consumer goods, food and packaged
food, home appliances, textiles, gems
and jewellery. MEI for this sector was
down 20% y-o-y in November. The shipping and marine sector was not doing
well either, with a 9% decline. Oil and
gas, and hospitality, were both down
10%, while government and public sector was down 13%. — By Chan Chao Peh
SGX introduces additional
safeguards for trading of newly
consolidated shares
SINGAPORE (Dec 22): The Singapore
Exchange (SGX) has added cum-entitlement (CE) and ex-entitlement (XE)
indicators as new safeguards for the
trading of newly consolidated shares,
with immediate effective.
Currently, shareholders are informed
of a share consolidation via a company’s announcement through SGXNet
and shareholder circulars.
With the indicators, SGX says investors will be reminded that a stock
is about to undergo, or has just undergone, a corporate action. The CE and
XE indicators will be displayed under
the “remarks”, or RMK, column of the
stock price pages on www.SGX.com.
Meanwhile, SGX will introduce a
reference price for newly consolidated
stocks effective Dec 23. The reference
price is based on a theoretical price derived from the last traded price of the
pre-consolidation trading counter. It
will be adjusted for the consolidation
or split ratio and any cash distribution
effective on the same date.
“In cases where this may be inappropriate, for example if multiple corporate
actions are effective on the same date,
SGX may choose an alternative means
of determination and will inform members accordingly,” it says. Further to
that, the reference price will be used to
determine the forced order range, the
application of dynamic circuit breakers and their price band, and the error
trade no-cancellation range.
The new measures have been introduced following the confusion over
the recent share consolidation of New
Silkroutes Group on Dec 16. Ninety-one
trades involving 52.3 million shares
of the company were declared “error
trades” by the bourse regulator.
SGX cautions investors to exercise
care when executing orders in stocks,
which are undergoing share consolidation and splits. — By Jeffrey Tan
SIA, CapitaLand, CDL, SATS,
Hongkong Land notch up largest
ROE in 2015
SINGAPORE (Dec 22): The five STI
stocks that achieved the greatest increases in return on equity (ROE) so
far this year were Singapore Airlines,
CapitaLand, City Developments, SATS,
Hongkong Land Holdings, according
to Singapore Exchange. The next five
STI stocks that recorded higher ROEs
were Singapore Telecommunications,
Singapore Exchange, Wilmar Interna-
tional, Oversea-Chinese Banking Corp
and ComfortDelGro. The ROEs of the
remaining Index constituents either
declined or remained unchanged.
Globally, ROE ratios have been on
a downtrend. The average ROE of the
MSCI World Index fell from 12.1% in
the first three quarters of 2014 to 11.0%
over the same period in 2015, while the
ROE of the STI declined from 10.3% to
9.0% over the same two periods.
ROE measures the past profitability
of the company as a percentage of common shareholders’ equity. Profits are
typically reported quarterly or semiannually. — By Benjamin Tan
Yoma Strategic says looking
for growth outside Yangon
SINGAPORE (Dec 22): Yoma Strategic
Holdings, a Myanmar-focused real estate developer, expects to grow its business outside Yangon, CEO Melvyn Pun
said, seeking to take advantage of growing wealth outside the country’s biggest
city. Yoma, chaired by tycoon Serge Pun,
has been expanding beyond real estate
by partnering international companies
trying to enter the Myanmar market.
It holds the franchise for Yum Brands
Inc’s KFC in the country and recently
formed a joint venture to distribute
Mitsubishi Motors Corp vehicles.
The company is seen as well-placed
to benefit from Aung San Suu Kyi’s landslide election win, if her government
accelerates economic development,
which would spur demand for property to passenger vehicles.
The clear mandate for change delivered in the Nov 8 election may also
usher in more foreign investment, another plus for Yoma, which has been the
go-to partner for foreign companies.
“We will look at the strategy of scaling up within the country into other cities. That will probably be our
next growth driver for the coming 12
months,” Pun said.
For example, the company is looking
at opening car showrooms in second-tier
cities. For its KFC business, the company
wants to build scale in Yangon, where
it has three outlets, before moving to
other cities, he added. — Reuters
7
W E D NES DAY DECE MB E R 23, 20 15 • THEEDGE SINGAPORE MARKET REPORT
7 H OM E
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W E D NES DAY DECE M B E R 23, 20 15 • THEEDGE SINGAPORE MARKET REPORT
8 S TOCKS WITH MO MENTUM
EPICENTRE HOLDINGS
The directors and significant shareholders of Epicentre have sold down
their stakes in the company in recent
months after the cancellation of the
acquisition of the company in a reverse
merger transaction.
On July 13, it was announced that
privately-held HealthTrends Medical Investments and its nine subsidiaries had
decided to abort their reverse merger
transaction of Epicentre under an agreement struck in December 2014.
Since then, Epicentre founder and
CEO Jimmy Fong has reduced his stake
in the company through a couple of
open-market transactions that have
seen his shareholding fall from 59% to
about 50.4%. Fong’s last transaction was
on Oct 26, when three million shares
were sold by him.
In addition, Epicentre director Siow
Chee Keong and one of their significant
shareholders, Johnson Goh, have also
been selling down their stakes in the
company, with the latter’s holdings
falling from 6.55% to 6.1%.
Siow, a non-executive director, does
not have a significant stake in the company and disposed of 60,000 shares in
late October, to bring his shareholding
down to 40,000 shares or less than 0.1%
of the company’s share capital.
In late August, Epicentre reported
its full-year results for FY2015 ended
June as a third consecutive year of
losses, with a deficit of $2.87 million.
The loss was only a marginal 1% lower
than FY2014, but occurred despite a
3.6% rise in revenues to $178.5 million.
But the company’s cost of goods sold
also rose by 4% to $161.7 million, which
left it with a smaller gross profit of $16.8
million compared with $17.1 million
in FY2014.
EPICENTRE HOLDINGS
Valuation score*
0.00
0.55
Fundamental score**
TTM P/E (x)
TTM PEG (x)
2.50
P/NAV (x)
TTM Dividend yield (%)
16.55
Market capitalisation (mil)
93.50
Shares outstanding (ex-treasury) mil
0.04
Beta
0.11-0.21
12-month price range
EPICENTRE HOLDINGS
(ALL FIGURES IN SGD MIL)
Financials
Turnover
EBITDA
Interest expense
Pre-tax profit
Net profit - owners of company
Fixed assets - PPE
Total assets
Shareholders' fund
Gross borrowings
Net debt/(cash)
EPICENTRE HOLDINGS
RATIOS
DPS ($)
Net asset per share ($)
ROE (%)
Turnover growth (%)
Net profit growth (%)
Net margin (%)
ROA (%)
Current ratio (x)
Gearing (%)
Interest cover (x)
This column is an analysis done
by The Edge Singapore on the
fundamentals of stocks with
momentum that were picked up
using proprietary algorithm by
Anticipatory Analytics Sdn Bhd
and that first appeared at www.
theedgemarkets.com. Please
exercise your own judgment
or seek professional advice
for your specific investment
needs. We are not responsible
for your investment decisions.
Our shareholders, directors and
employees may have positions
in any of the stocks mentioned.
*Valuation factor — Composite measure of historical return & valuation
**Fundamental factor — Composite
measure of balance sheet strength
& profitability
Note: A score of 3.0 is the best to
have and 0.0 is the worst
to have
FY12
FY13
FY14
FY2015Q4
30/6/2012
30/6/2013
30/6/2014
30/6/2015
181.5
3.7
0.0
2.1
1.0
3.6
17.1
16.9
3.6
(9.4)
178.3
0.5
0.1
(1.2)
(3.5)
2.4
12.3
12.7
6.2
(5.5)
172.4
(1.3)
0.1
(2.8)
(2.9)
1.6
9.4
9.8
9.1
3.1
82.7
(2.2)
0.1
(2.9)
(3.1)
1.5
6.3
6.6
7.1
1.9
FY12
FY13
30/6/2012
30/6/2013
30/6/2014
FY14 ROLLING 12-MTH
0.01
0.18
5.38
11.64
(79.36)
0.54
5.31
1.60
118.06
0.14
(23.97)
(1.78)
(1.99)
(24.14)
1.49
4.83
0.10
(25.81)
(3.32)
(1.68)
(26.68)
1.36
31.31
(9.73)
0.07
(28.01)
3.55
(1.61)
(28.99)
1.28
29.17
(7.02)
W E D NES DAY DECE MB E R 23, 20 15 • THEEDGE SINGAPORE MARKET REPORT
9 S TOCKS WITH MOMENTU M
GLOBAL TECH HOLDINGS
Global Tech (Holdings) continued its steep
rise. At the close on Tuesday, the stock
was up 25% to 4 cents with 50.4 million
shares traded.
On Dec 14, the mobile phone equipment distributor requested a halt in the
trading of its shares, “pending the release
of an announcement of a transaction
regarding a change in control of the company”. It has a primary listing on the Hong
Kong Stock Exchange and a secondary
listing on SGX. The company requested
halts on both bourses.
Last month, Global Tech announced
that controlling shareholder Optimum
Pace International was approached by
an independent third party. The firms
discussed a potential purchase of the
existing shares of Global Tech, “which,
if materialised, may lead to a change in
control of the company”.
Optimum Pace International holds
56.96% of Global Tech which, through its
subsidiaries, sells and distributes cellular
handsets and related accessories in Hong
Kong and mainland China.
On Dec 18, Hong Kong-listed Global
Tech (Holdings) Ltd said a unit controlled
by Citic Guoan Group planned to take
over the Hong Kong-listed company in a
deal valued at as much as HK$600 million
($109.3 million).
The company said Citic Guoan will pay
HK$318 million for a 53% stake from Optimum Pace International Ltd, which is
controlled by a family trust of chairman
SY Ethan Timothy.
The offer price of HK$0.11615 a share
represented a 7.1% discount to the stock’s
latest trading price before it halted trade
on Dec 14.
Altus Capital Ltd and Yicko Securities
Ltd will make a HK$282 million cash offer
on behalf of Citic Guoan for the remaining
shares held by minority shareholders at
the same offer price, it said.
Global Tech sank deeper into the
red in FY2015 ended Sept 30. Its net
loss widened to HK$23.3 million from
HK$16 million a year earlier. Revenue
was HK$86.7 million, down from HK$89.8
million in 2014. No dividend was declared.
Year-to-date, Global Tech has risen by
344%, giving it a market cap of $201.5
million.
GLOBAL TECH HOLDINGS
Valuation score*
0.00
2.25
Fundamental score**
TTM P/E (x)
TTM PEG (x)
27.60
P/NAV (x)
TTM Dividend yield (%)
165.31
Market capitalisation (mil)
Shares outstanding (ex-treasury) mil 5,165.97
0.30
Beta
0.01-0.03
12-month price range
GLOBAL TECH HOLDINGS
(ALL FIGURES IN HKD100 MIL)
Financials
Turnover
EBITDA
Interest expense
Pre-tax profit
Net profit - owners of company
Fixed assets - PPE
Total assets
Shareholders' fund
Gross borrowings
Net debt/(cash)
GLOBAL TECH HOLDINGS
RATIOS
DPS ($)
Net asset per share ($)
ROE (%)
Turnover growth (%)
Net profit growth (%)
Net margin (%)
ROA (%)
Current ratio (x)
Gearing (%)
Interest cover (x)
This column is an analysis done
by The Edge Singapore on the
fundamentals of stocks with
momentum that were picked up
using proprietary algorithm by
Anticipatory Analytics Sdn Bhd
and that first appeared at www.
theedgemarkets.com. Please
exercise your own judgment
or seek professional advice
for your specific investment
needs. We are not responsible
for your investment decisions.
Our shareholders, directors and
employees may have positions
in any of the stocks mentioned.
*Valuation factor — Composite measure of historical return & valuation
**Fundamental factor — Composite
measure of balance sheet strength
& profitability
Note: A score of 3.0 is the best to
have and 0.0 is the worst
to have
FY12
FY13
FY14
FY2015Q2
30/9/2012
30/9/2013
30/9/2014
31/3/2015
100.6
(18.8)
(20.6)
(20.6)
4.5
41.8
41.8
(48.4)
110.5
(38.3)
(40.1)
12.9
3.9
54.9
54.9
(37.9)
89.8
(14.8)
(16.0)
(16.0)
2.7
40.6
40.6
(24.6)
35.3
(8.9)
(9.4)
(9.4)
2.5
32.9
32.9
(17.8)
FY12
FY13
30/9/2012
30/9/2013
30/9/2014
FY14 ROLLING 12-MTH
0.01
(39.11)
158.58
(20.51)
(39.11)
1.48
-
0.01
26.67
9.91
11.66
26.67
4.60
-
0.01
(33.49)
(18.78)
(17.81)
(33.49)
4.64
-
0.01
(38.55)
(22.64)
(22.19)
(38.55)
3.75
-
W E D NES DAY DECE M B E R 23, 20 15 • THEEDGE SINGAPORE MARKET REPORT
1 0 STOCKS WITH MO MENT UM
OKP HOLDINGS
It was on Nov 30 that OKP Holdings, the
infrastructural and civil engineering
firm, announced its latest contract win.
OKP announced in a Singapore
Exchange filing that the group secured
a $94.6 million contract from the Land
Transport Authority for the construction of a viaduct from the Tampines
Expressway to the Pan Island Expressway (Westbound) and Upper Changi
Road East.
The contract began on Nov 23 and
is expected to be completed by the first
quarter of 2020, OKP said. It brings the
total value of contracts won by OKP in
2015 to $291.3 million.
In the third quarter ended Sept 30,
earnings for OKP more than tripled to
$997,000 from $281,000 a year ago. This
was despite a 7.5% slide year-on-year
in revenue to $24.21 million, owing to
lower revenue from its maintenance
segment.
Earnings per share came to 0.32 cent,
up from 0.09 cent in the corresponding
quarter a year ago. Gross profit margins
also rose 4.4 percentage points to 12.5%
from 8.1%.
In its outlook, group managing director Or Toh Wat said, “Although the
business environment remains challenging, particularly with the increased
cost of doing business as well as the
shortage in experienced and skill labour, given the pipeline of contracts
that we secured for the year, we are
optimistic on the outlook for the remaining part of 2015.
“Going forward, our strategic focus
will continue to be on construction and
maintenance works, where we have
secured a strong foothold within the
industry.
“On the geographical front, other than
Indonesia, which holds good growth
potential for us, we will explore suitable opportunities around the region
when they arise. This is in addition to
our established home base in Singapore, where we have built a proven
track record and which remains our
core business market,” Or said.
Year-to-date, shares of OKP have fallen
13.73% to close at 22 cents on Tuesday.
This gives it a market cap of $68 million.
OKP HOLDINGS
Valuation score*
2.00
2.50
Fundamental score**
10.94
TTM P/E (x)
0.12
TTM PEG (x)
0.63
P/NAV (x)
0.95
TTM Dividend yield (%)
64.77
Market capitalisation (mil)
Shares outstanding (ex-treasury) mil 308.43
0.30
Beta
0.19-0.26
12-month price range
OKP HOLDINGS
(ALL FIGURES IN SGD MIL)
Financials
Turnover
EBITDA
Interest expense
Pre-tax profit
Net profit - owners of company
Fixed assets - PPE
Total assets
Shareholders' fund
Gross borrowings
Net debt/(cash)
OKP HOLDINGS
RATIOS
DPS ($)
Net asset per share ($)
ROE (%)
Turnover growth (%)
Net profit growth (%)
Net margin (%)
ROA (%)
Current ratio (x)
Gearing (%)
Interest cover (x)
This column is an analysis done
by The Edge Singapore on the
fundamentals of stocks with
momentum that were picked up
using proprietary algorithm by
Anticipatory Analytics Sdn Bhd
and that first appeared at www.
theedgemarkets.com. Please
exercise your own judgment
or seek professional advice
for your specific investment
needs. We are not responsible
for your investment decisions.
Our shareholders, directors and
employees may have positions
in any of the stocks mentioned.
*Valuation factor — Composite measure of historical return & valuation
**Fundamental factor — Composite
measure of balance sheet strength
& profitability
Note: A score of 3.0 is the best to
have and 0.0 is the worst
to have
FY12
FY13
FY14
FY2015Q3
31/12/2012
31/12/2013
31/12/2014
30/9/2015
104.5
17.5
0.1
14.8
12.4
19.2
98.1
96.3
(54.0)
107.0
6.6
0.1
5.3
4.8
19.1
99.7
96.7
(37.6)
109.5
4.4
0.1
2.2
2.5
18.5
100.4
98.3
(34.0)
24.2
1.8
0.0
1.1
1.0
18.7
105.2
102.7
(50.7)
FY12
FY13
31/12/2012
31/12/2013
31/12/2014
FY14 ROLLING 12-MTH
0.02
0.31
13.40
(4.86)
(53.45)
11.83
13.20
2.27
195.76
0.00
0.31
4.99
2.40
(61.08)
4.50
4.86
2.15
112.98
0.00
0.32
2.61
2.32
(47.19)
2.32
2.54
2.30
81.22
0.00
0.33
5.98
(7.89)
89.14
5.67
5.83
2.73
140.45
W E D NES DAY DECE M B E R 23, 20 15 • THEEDGE SINGAPORE MARKET REPORT
1 1 MAL AYS IA
BLOOMBERG
GST, ringgit decline hit retailers,
causing 40% drop in sales, says
employers group
Malaysian
retailers are
struggling
because the GST
and the ringgit’s
depreciation have
let to a major
drop in sales
BY T H E M A L AYSI A N I NSI DER
KUALA LUMPUR (Dec 22): Retailers have experienced a
major drop in sales, with some registering a more than 40%
decline over festive periods in the second half of the year,
the Malaysian Employers’ Federation (MEF) said today.
MEF executive director Datuk Shamsuddin Bardan said
retailers attribute the decline to the combined impact from
the implementation of the goods and services tax (GST) in
April and the ringgit’s depreciation against the US dollar.
He added that consumers became more prudent in their
spending after the GST came into effect and this was reflected in the Hari Raya and Deepavali shopping in the second
half of the year.
The cost of goods was “seemingly” higher because the
tax and the exchange rate had also affected all players in
the retail sector, both big and small companies, he added.
“The challenges are very high for the retail sector. The
sector has very much to do with domestic market outlook,
especially when the rakyat is very careful with their spending and choosy with their purchases. As such, the retail
sector will be affected very much,” Shamsuddin told The
Malaysian Insider.
Poor consumer sentiment saw retailers grappling with
a drop of more than 40% of the usual spending during the
last two festive seasons in July and November.
“You look at Hari Raya and Deepavali. Many retailers
say that their sales were affected, some by more than 40%.
“In this kind of revenue outlook, this sector has no choice
but to actually restructure their manpower and, unfortunately, when they talk about restructuring, they are talking
about retrenchment.”
Shamsuddin said many retailers were struggling, although
MEF had yet to receive any reports on closures or retrenchments.
The Edge Financial Daily last week reported that independent retail research firm Retail Group Malaysia (RGM)
has cut its forecast for retail sales this year for the fifth
time, attributing it to poor figures in the second and third
quarters of the year.
The firm said the decision to revise its forecast downward
was owing to the weakening ringgit in the past few months,
which led to higher import costs.
RGM, however, forecast that 4Q (October to December)
growth to 3.8% year-on-year is higher than the Malaysia
Retailers Association’s (MRA) forecast of 1.3% growth for
the same period.
This was because RGM believed the higher cost of overseas travel would encourage domestic spending.
MRA also said it did not expect its businesses
to recover strongly for the period as it expected a 2.6%
contraction in sales.
W E D NES DAY DECE MB E R 23, 20 15 • THEEDGE SINGAPORE MARKET REPORT
1 2 M ALAYS IA
Berjaya Sports Toto’s 2Q net
profit takes a dive
BY A L L I ANC EDB S RESEA RCH
Berjaya Sports Toto Bhd maintained a
“hold” with a lowered price target of
RM3.06. Second-quarter (2QFY2016)
core net profit dropped 29% yearon-year and 2.6% quarter-on-quarter despite higher revenue, mainly
dragged by a higher prize payout
ratio — estimated at 63% in 2QFY2016
versus 58% in 2QFY2015).
Strong top-line growth for
2QFY2016 (15% y-o-y, 8% q-o-q) was
driven by higher revenue contributions from HR Owen plc and its core
gaming business. This brings its six
months of FY2016 core earnings to
RM143 million ($46.6 million), accounting for about 43% of our and
consensus full-year estimates.
The group declared an interim dividend
of five sen a share, bringing its year-to-date
dividend payout to 10 sen a share. This
implies a payout ratio of 93.8%.
We cut our FY2016 earnings by 6.3%,
accounting for a higher prize payout ratio of 62% (previously 60.5%).
We retain our earnings forecasts for
FY2017 and FY2018.
The ongoing competition within
the number forecast operator (NFO)
industry and continued weak consumer spending post implementation of the Goods and Services Tax
in April 2015 could continue to be
a drag on its earnings.
Post-earnings adjustment, we
trimmed our price target for the
group to RM3.06 from RM3.08, based
on a dividend discount model.
Key risks include increasing industry competition and weak consumer sentiment, which could hurt
ticket sales. Under the recent budget,
NFOs remain vulnerable to potential higher
gaming tax going forward. (Pool betting tax
was last raised in 2010; gaming tax in 1998.)
SapuraKencana’s 3Q net profit falls 62.7%
KUALA LUMPUR (Dec 22): SapuraKencana Petroleum Bhd saw
its net profit for the third quarter ended Oct 31 (3QFY2016)
fall 62.73% to RM129.86 million ($42.4 million), or 2.17 sen a
share, owing to provision for impairment on property, plant and
equipment and oil and gas (O&G) properties of RM317.3 million.
SapuraKencana posted a net profit of RM348.4 million or
5.81 sen a share in 3QFY2015.
Excluding the RM317.3 million impairment loss, the group
recorded profit before taxation of RM462.7 million, which was
RM51.7 million or 12.6% higher than the RM411 million recognised in 3QFY2015.
Aside from the impairment provision, the O&G services provider told Bursa Malaysia in a filing today that the lower profit
before taxation from the energy division has also weighed
down its net income.
But it was partially cushioned by higher contribution from
the engineering and construction (E&C) division, it said.
Revenue for the quarter improved 19.92% to RM2.89 billion from RM2.41 billion a year earlier, attributable to higher
revenue recorded by the E&C division, driven by newly executed international projects combined with higher scope of
works for domestic projects.
No dividend was declared for the current quarter under
review. It paid a two sen dividend in the previous corresponding quarter.
For the cumulative nine-month period (9MFY2016), SapuraKencana posted a 61.95% year-on-year decrease in net profit to
RM494.63 million or 8.28 sen a share from RM1.3 billion, or 21.76
sen a share, owing to RM857.2 million impairment provision.
Its revenue for the period came in 5.3% higher at RM7.95
billion from RM7.55 billion in 9MFY2015.
Going forward, SapuraKencana expects the O&G industry to
continue to face challenges over the medium term, because of
the weak oil price and the resultant reduced capital spending
by producers.
Hence, the group said its focus remains on strengthening positions in key markets, optimising costs and enhancing operational
efficiency. “The group continues to take proactive measures to
prepare for long-term resilience,” it added.
SapuraKencana is confident that it has the fundamentals
necessary to navigate through this period.
Shares in SapuraKencana gained one sen or 0.59% to trade
at RM1.70 as at the 12.30pm midday break today, giving it a
market capitalisation of RM10.31 billion. — By Gho Chee Yuan
WE D NES DAY DECE M B E R 23, 20 15 • THEEDGE SINGAPORE MARKET REPORT
1 3 P ROPE RTY
Why your retirement plan is good
news for Iskandar Malaysia
BY RYA N KH OO
One major trend that is highly positive for Iskandar Malaysia is
Singapore’s ageing population. According to Singapore’s Department of Statistics, there will be 900,000 residents aged at least 65
by 2030 in the city state.
This effectively creates two outcomes. The first is that Singapore, with its low birth rates and an ageing society, has to continue its policy of population growth via immigration. The old
age support ratio (OASR) was 6:1 in 2014, which means there
were six working adults to support each retiree in the country.
By 2030, the ratio could fall to 2:1, which would be disastrous for
economic productivity. A clear example of that today is Japan,
where the economy has stagnated for more than two decades.
To avoid a similar fate, Singapore would have to continue pursuing population growth via immigration — thereby increasing
population density on the island owing to limited land — as per
the much-maligned 2013 Population White Paper, to hit a 6.9
million population by 2030. Singapore is currently the third
most-densely-populated country in the world, according to a
recent government statistic. Hence, the cost of space here will
remain high and climb higher in the longer run, making the
business case for Iskandar Malaysia stronger.
The second outcome is how Iskandar Malaysia has become
an option for retirement planning for Singapore’s elderly. The
median age for Singapore today is 40 years, and observations
on the ground show that much of the real demand for properties in Iskandar Malaysia has been by the country’s older
population. Many in this segment are sitting on cash savings of
$100,000 to $200,000, yet are not able to buy a second or third
property because of lower loan amounts owing to the total debt
servicing ratio and additional buyer’s stamp duty for additional
properties. So, buying a property in Iskandar Malaysia becomes
a viable option because of the affordable pricing and the proximity to Singapore.
Property in Iskandar Malaysia can serve as a potential retirement home and an investment. Other overseas property
investments will not be able to achieve both these objectives.
Those who buy properties in faraway locations such as Australia
or the UK cannot possibly expect to retire there unless they
emigrate, thus weakening links to Singapore, and only if they
can afford the higher cost of living in these countries. Iskandar
remains the only practical retirement option as they can enjoy
Malaysia’s lower cost of living, a bigger living space, and family
ties, convenience and a sense of familiarity.
Many who buy properties in Iskandar today may not have
retired yet, but are planning for when they do. With another 10
to 15 years to go before retirement, they can afford to look at
the long term for Malaysian properties and not be affected by
short-term market sentiments. There are several more reasons
retiring in Malaysia is attractive.
Healthcare options in Malaysia are attractive
Healthcare is one promising area for Iskandar to target as the
Singapore consumer gets older, richer and better informed.
Healthcare costs in Malaysia are between 30% and 50% cheaper
than in Singapore and Iskandar is just an hour’s drive from most
parts of the city state. The local healthcare market is also significant and growing as Malaysians living in Iskandar — many
of whom work or do business with Singapore — become more
affluent as well.
Private healthcare in Iskandar Malaysia is still underdeveloped,
but big plans are on the cards. Gleneagles Medini, which was recently launched, is emblematic of the rapid growth in greenfield
Nusajaya, located just across the famed Legoland Theme Park
and Afiniti Medini, the urban wellness joint-venture project
by Singapore’s Temasek and Malaysia’s Khazanah. Gleneagles
Medini has a generous 15 acres of land for future expansion and
immediate plans include a 17-storey tower for specialist suites.
The next highly anticipated player is billionaire Peter Lim’s
Vantage Bay healthcare city in Johor Baru City Centre. Lim’s Vantage
Bay mixed-development project covers 23 acres, with plans of it
being a healthcare and wellness hub, and healthcare education
hub. His privately owned Thomson Medical will operate the recently named Iskandariah Hospital, scheduled to open by 2018.
Other private players in the market include US-based Columbia
Asia, Singapore-operated Regency Specialist Hospital and Malaysialisted KPJ Healthcare. There are also numerous smaller operators
that cater for another tier of the healthcare market — nursing
homes and privately managed retirement villages.
A little known fact is that Singaporeans can use their Medisave
in selected Medisave accredited hospitals in Malaysia. Today, this
includes Regency Specialist Hospital in Johor Baru and Gleneagles
Medini, and will likely be extended to all other privately operated
hospitals in Iskandar Malaysia in the future.
Another big opportunity for healthcare in Iskandar Malaysia
is healthcare tourism, with Indonesians being the largest number of medical tourists in Malaysia today. Medical tourists from
the West, China and Japan are also significant. Private hospitals
in Singapore’s Novena and Orchard Road do big business in this
sector and as more options open up in Iskandar Malaysia, there is
a large opportunity to tap into the trend. Frost & Sullivan expects
healthcare expenditure in Malaysia to hit US$25 billion ($35.3
billion)by 2020, growing at 8% to 10% per annum.
High Speed Rail and Rapid Transit System
will improve links
Travelling between Singapore and Iskandar Malaysia today can
be a big hassle. Thousands cross the border daily, with Malaysians going into Singapore during the morning rush hour, and
heading back home in hordes in the evening. Traffic jams on the
Causeway and the Second Link have throttled further growth.
While plans for a third bridge are unlikely to materialise
W E D NES DAY DECE MB E R 23, 20 15 • THEEDGE SINGAPORE MARKET REPORT
14 PROPE RT Y
anytime soon, discussions on the Rapid Transit System linking
Woodlands North and Johor Baru City Centre have been going on
for several years. Recently, the site for the Johor Baru RTS station
was identified at Bukit Chagar, an empty plot of land that currently serves as a huge open-air carpark. With this confirmation,
plans can now proceed towards detailed engineering studies.
The High Speed Rail has also seen progress, with the Malaysian government setting up MyHSR Corp, a company dedicated to
building the HSR in Malaysia. Recently a Request for Information
initiated by Singapore’s Land Transport Authority and Malaysia’s
SPAD (Land Public Transport Commission) saw more than 150
firms responding, indicating high interest to participate in this
massive infrastructure project. The location of the HSR stations
for Iskandar and Singapore will be at Gerbang Nusajaya and
Jurong East (Jurong Country Club) respectively.
These rail links are important as experience in other cities
shows that three to six times more people can be moved
when such rail links are in place. For Singaporeans planning
to retire in Iskandar in the future, these rail links will make it
easier to travel and save a lot of travel ling time, opening up
opportunities in services and the retail industry, serving the
Singapore market on top of its own growing local population.
Imagine the economic benefits that Iskandar will enjoy if the
Singapore consumer market can be unleashed onto Johor
Baru in its entirety.
Because of the proximity of both countries, Singaporeans
retiring in Iskandar will not need to apply for the Malaysia My
Second Home programme. Singaporeans currently enjoy 30
days’ visa-free entry into Malaysia. My personal experience is
that with the city state so close by, retirees can easily spend one
day in 30 to renew their entry documents. Living here and in
Hiap Hoe to offload
Melbourne property
for A$116.3 mil
Hiap Hoe Ltd has agreed to sell its property located at 206
Bourke Street in Melbourne for A$116.3 million ($118.3 million) to ISPT Pty Ltd. The sale is expected to be completed by
January 2016.
The freehold property is a mixed-use development with
a total net lettable area of 128,237 sq ft, comprising a mix of
retail and office space. Hiap Hoe has an approved planning
permit to build a 142-room hotel above the fourth level of the
existing development.
The total purchase consideration for the asset is A$116,280,000
before tax. Five per cent of this sum, amounting to A$5,814,000,
has been paid upon signing.
The balance 95% of the sum, or A$110,466,000, will be paid
upon full settlement of the contract, which is scheduled to take
place next Jan 21. — By Tan Chee Yuen
Iskandar concurrently will be a reality for many, especially with
the upcoming rail links linking both cities.
Cost of living in Malaysia is significantly
lower than in Singapore
Depending on which survey you refer to, living costs in Iskandar Malaysia are between two and three times cheaper than in
Singapore. Again, for retirees, this is an important consideration
to stretch their savings. The lower costs of food and other essentials have been well documented, so let me focus on transport.
While public transport in Malaysia is still behind Singapore’s,
you can consider buying a car in Iskandar. Say, a brand new car
costs about RM85,000 ($28,333) in Malaysia. You could get as high
as 90% financing and up to a 10-year loan. The car is “freehold”,
with no Certificate of Entitlement cost; in Singapore, it comes
with only a 10-year lease. A more practical option would be to
get a second-hand car; small sedans are available for between
RM15,000 and RM50,000. What is a car worth to you if you live in
Iskandar? Well, it buys you freedom of movement — something
quite close to priceless if you have spent years travelling via buses
and MRTs in Singapore. And that is part of the draw of having an
Iskandar “retirement plan” and why an ageing Singapore population is good news for the Iskandar region.
Ryan Khoo is co-founder of Singapore-based Alpha Marketing, a
real estate investment consultancy that focuses on the Malaysian
market, especially Iskandar Malaysia. The views expressed here are
his own. He can be contacted at [email protected].
This article appeared in The Edge Property pullout (Issue 708,
(Dec 21) of The Edge Singapore
Sabana REIT to
sell its industrial
property for $38 mil
Sabana Shari’ah Compliant Industrial Real Estate
Investment Trust has entered into a conditional sale
and purchase agreement for the divestment of its
property located at 200 Pandan Loop with BS Pantech
Pte Ltd for $38 million.
The industrial building comprises an eight-storey
building and a basement car park. It has a gross floor
area of approximately 180,186 sq ft.
The purchaser has arranged for the payment of
a cash deposit of $4.066 million, or 10.0% of the sale
consideration with the goods and services tax, which
is to be paid into an escrow account. The remaining
balance will be paid in cash upon completion of the
divestment, which is expected to take place in the first
quarter of 2016. — By Tan Chee Yuen