China giving greater support to agriculture to cool inflation 2008-03-26 21:33:08 BEIJING, March 26 (Xinhua) -- China promised on Wednesday to increase financial support for agricultural production as part of a larger effort to cool an inflation surge blamed on food shortages. "Reinforcing agriculture has a pivotal role in maintaining sound and fast economic development, curbing inflation and safeguarding stability," the State Council, or the Cabinet, said in a statement. The Cabinet agreed in an executive meeting chaired by Premier Wen Jiabao that China would "immediately" increase the subsidies for farmers' purchase of production materials and seeds, and raise the government's purchasing prices of grain. The move was meant to "mobilize the initiative of farmers to plant crops and ensure an adequate supply of agricultural and sideline products," it said. The announcement added to a string of efforts to end shortages of pork, China's staple meat, and other basic commodities that pushed the inflation rate to a near 12-year high of 8.7 percent in February. Pork production fell dramatically last summer on breeders' dampened enthusiasm due to rising feed costs in addition to a massive pig cull after the outbreak of blue-ear disease in some regions. The unusually harsh winter weather also dealt a serious blow to vegetable and rapeseed crops in many areas and killed many pigs and chickens. The central government's budget earmarked for agriculture, farmers and rural areas reached 562.5 billion yuan (79.2 billion U.S. dollars) this year, 130.7 billion yuan more than in 2007, according to the government work report delivered by Wen earlier this month. The sum included a subsidy of 48.2 billion yuan for production materials purchase, 4 billion yuan for farm tools and 7.07 billion yuan for seed. Editor: Du Guodong
...more financial support for agricultural products.... at present there are already a subsidy abt $2 per straw for bull semen :).... although not mention I think there might be more subsidy :)
...The raw milk condition is worsen by the pig problem (B E disease)... with culling of some cows. (most prob low yielding or older cows)
Wednesday, March 26, 2008
Sunday, March 23, 2008
Property Debt comfortable level
A good article on Wallstraits by Dennis on property loans advice
Below is what I shared at another forum, warning Forumers the dangers of over-borrowing and Never, Never, Never Over-borrow.
Cheers!Dennis Ng
If a person or household earns $5,000, keeping Debt-service ratio at 35% (or max Housing Loan instalment of S$1,750), and assuming a 25 years loan period, and an interest rate of 4% (it's better to assume a higher interest rate to be Prudent), the Maximum Housing Loan a person should take (assuming NO other debt) is about S$331,541.85.
Assuming this person takes a 80% Loan, max purchase price of Property is S$414,427. I read somewhere that the average Household income is over S$6,000 (not S$5,000). Using S$6,000 to calculate instead, max Purchase Price of Property is S$500,000. It does appear that current property prices are above what a person can comfortably afford, according to Prudent Personal Finance Principles. Note: banks are comfortable with 40% Debt-service ratio, if we use 40% instead, the max loan would work out to S$454,686 and max purchase price of properties would be S$568,357 instead.whether based on Median Income or Average Income, if we use Prudent Financial Principles as a guide, I agree that property prices are currently above the prices what a person can comfortably buy and comfortably borrow. I would advise a max loan financing of 80%.
If people NEED* to take 90% financing, they are buying/borrowing over their means. We should NEVER, NEVER, NEVER over-borrow. Over-borrowing can lead to a person's Financial Demise. *Note: this is different from a property investor who CHOOSES to take a 90% financing to minimise Cash Outlay but who have the Financial Means to make a 20% downpayment.
Another thing people should note is that current property prices are already much higher than say, 2 years ago, and as prices move higher, risks increase instead of reduce.And the economy is slowing down and there might be retrenchments in future due to economic uncertainties. Thus, anyone buying a property should standby Cash/CPF sufficient to pay for at least 12 months to 24 months of Housing Loan instalment as a "Safety Buffer". This will ensure he/she can continue to service the Housing Loan even if he/she lose his/her income. If they cannot afford to do what I advise, suggest that they NOT buy a property, they should continue to save some more money so that they can meet the guidelines I shared.
Cheers!Dennis Ng
Happy Good Friday
Went over to my sis-in-law for their house warming in Selangor (Bukit Jelutong).
I quite liked the spacious garden - brazilian trees/ palm trees, white and black big pebbles flooring at the porch and carpet grass. It is 7600 sq feet, very hugh. I also liked the high ceilings - giving it a cosy homely feeling. Also the AV hi-fi room was very professional. - with pre amp/ power amp, CDs and big speakers. The yellow lighting and carpet and sofa made the whole room very professional. I heard the house is about 1.4 Mio RM.
Visited Datuk's house in Bangsa - another high end residential district. What I liked was the curving / ovalish flooring. It has a fantastic view as well.
What did not look too good was that it did not have a spacious garden, and the ceilings was too short.
Another high end condominium popular with Singaporeans is Mont Kiara
I quite liked the spacious garden - brazilian trees/ palm trees, white and black big pebbles flooring at the porch and carpet grass. It is 7600 sq feet, very hugh. I also liked the high ceilings - giving it a cosy homely feeling. Also the AV hi-fi room was very professional. - with pre amp/ power amp, CDs and big speakers. The yellow lighting and carpet and sofa made the whole room very professional. I heard the house is about 1.4 Mio RM.
Visited Datuk's house in Bangsa - another high end residential district. What I liked was the curving / ovalish flooring. It has a fantastic view as well.
What did not look too good was that it did not have a spacious garden, and the ceilings was too short.
Another high end condominium popular with Singaporeans is Mont Kiara
Wednesday, March 19, 2008
CLSA: Sell The Milk And Milk Processors
CLSA: Sell The Milk And Milk Processors Positions must be cut entirely on pure Milk re-sellers like Anik, Modern, Heritage and Kwality Dairies, while exposure reduced to Britannia and Nestle.
China's Milk Dairies are sinking deep into the Red as Raw Milk prices rise, and the PRC Government imposes price controls on Milk and Milk products sold in Greater China region.
-Local Dairy Associations in Inner Mongolia, Heilongjiang and Shandong provinces have reported tight supplies of Raw Milk, with no signs of supply shortfalls easing in the near future.
-As price of Grain and Feed Stuff rises Breeding of Cows has been stopped in most Milk producing regions of China, with many farmers resorting to Culling the cows.
-As a pure statistic the number of Cows in the Shandong province have declined by 50 per cent in the period 2003-07.
-Very surprisingly new Milk processing plants have been set up in Shandong, Yili, Mengniu adding to the fierce competition that prevails in procuring Raw Milk.
-Raw Milk prices have consequently risen 67 per cent in the past 2 years, most of the price increases have not been passed on to consumers leading to a massive reduction in operating margins for Dairy producers.
-As a thumb rule, if Raw Milk prices rise by 5 per cent operating margins sink by 31 per cent.
A similar scenario could prevail in India as well, which is seeing the price of grain and raw feed prices going up in rural areas with direct and indirect price controls being imposed on Milk prices.
Positions must be cut entirely on pure Milk re-sellers like Anik, Modern, Heritage and Kwality Dairies, while exposure reduced to Britannia and Nestle.
With 150 tonnes of raw milk processing setting up in March by China Milk, look for further upside.
What about the bull sperm business ? It should be relatively unaffected as with the demand for raw milk, and limited land in China, there should be steady demand for high yielding bull sperms.
China's Milk Dairies are sinking deep into the Red as Raw Milk prices rise, and the PRC Government imposes price controls on Milk and Milk products sold in Greater China region.
-Local Dairy Associations in Inner Mongolia, Heilongjiang and Shandong provinces have reported tight supplies of Raw Milk, with no signs of supply shortfalls easing in the near future.
-As price of Grain and Feed Stuff rises Breeding of Cows has been stopped in most Milk producing regions of China, with many farmers resorting to Culling the cows.
-As a pure statistic the number of Cows in the Shandong province have declined by 50 per cent in the period 2003-07.
-Very surprisingly new Milk processing plants have been set up in Shandong, Yili, Mengniu adding to the fierce competition that prevails in procuring Raw Milk.
-Raw Milk prices have consequently risen 67 per cent in the past 2 years, most of the price increases have not been passed on to consumers leading to a massive reduction in operating margins for Dairy producers.
-As a thumb rule, if Raw Milk prices rise by 5 per cent operating margins sink by 31 per cent.
A similar scenario could prevail in India as well, which is seeing the price of grain and raw feed prices going up in rural areas with direct and indirect price controls being imposed on Milk prices.
Positions must be cut entirely on pure Milk re-sellers like Anik, Modern, Heritage and Kwality Dairies, while exposure reduced to Britannia and Nestle.
With 150 tonnes of raw milk processing setting up in March by China Milk, look for further upside.
What about the bull sperm business ? It should be relatively unaffected as with the demand for raw milk, and limited land in China, there should be steady demand for high yielding bull sperms.
Thursday, March 13, 2008
Agricultural Commodity Stock - China Milk
Something I find interesting and the price very appetising.
It has with other China stocks badly beaten up, dropping ( 60%) from a high of 1.63 to now 67 cents.
1 - cheap
2 - recession proof
3 - good ride on agriculture commodity play. Agricultural commodity run is in its infant stage. The metal commodities with all the infrastructure boom has started from 1999 to now. For Agricultural Commodity, I believe it started around 2003, which means it has 4-5 more years to run to catch up with the metal commodities. And at presently, AC is at 1st of 3 stages.
4 - a recent report which mentions that funds have the intention to put 10% of their money to agricultural commoditiy stocks.
5 - A remark by China's prime minister Wen Jiabao: "I have a dream - a dream to be able to provide all Chinese, especially our children, with half a litre of milk a day." The result has been a huge increase in milk consumption in China and demand is growing at a rate of around 25% a year. China’s milk consumption continues to be spurred by consumers demanding healthier and more nutritious foods. With rising affluence in the world’s fast-growing consumer market, there is a rapidly growing penchant for international food and beverage concepts which use a lot of milk and milk products. The PRC government has also been promoting the need for nutrition as evidenced by the government’s nation-wide School Milk Programme.
Why China Milk,
- With limited pasture land, China cannot continue to increase the number of cows to enhance its milk supply. China has much to catch up in terms of improving the milk yield of its cows.
- Based in the Heilongjiang Province, our subsidiary is the largest company specialising in the production of bull semen, dairy cow embryos and raw milk in China *
* According to China Dairy Industry Association
- It is building a 150 000 tonnes raw milk processing factory. They have signed a contract to provide OEM with raw milk, As of Jan qtr report, it has installed the milk machines by early march and will commence trial production for 1 month.
- The outbreak of mad cow disease in Canada and the U.S. in 2003 knocked the North American cattle industry on its back. The largest importers of U.S. and Canadian beef, including Japan, South Korea, and China, banned the import of beef from North America. But for China Milk Products, the restrictions proved to be a blessing in disguise. The privately owned raw milk company had already purchased 970 Canadian Holstein cattle. Its state-owned rivals failed to import as many cattle because they had to navigate government bureaucracy to get bank loans. Today, China Milk owns the largest herd of Holstein cattle in China and ranks 50th in BusinessWeek's annual Hot Growth rankings of Asia companies
Any rancher wanting to breed his cows with a Canadian Holstein has to go to China Milk. The company charges its customers $9.50 per sample of bull semen from a Canadian Holstein, compared with $6.75 from Australian Holsteins and $2.70 from Chinese Holsteins. However, Chinese ranchers are still willing to pay a premium for Canadian Holsteins, especially after receiving a little help from the government.
Starting this year, the Chinese government is giving Chinese ranchers a subsidy of $2 toward each sample of bull semen.
- China consumption of dairy products is about 20kg in 2006. It is a low base compared to other countries. With a greater awareness of nourishment with drinking of milk, and better life style (ice cream/butter/ yoghurt), demand will continue to increase
- Tourism will continue to be strong after the China Olympics. With more Ang mos visiting China, they will want their daily milk, butter, pasta, yoghurt, boosting demand.
It has with other China stocks badly beaten up, dropping ( 60%) from a high of 1.63 to now 67 cents.
1 - cheap
2 - recession proof
3 - good ride on agriculture commodity play. Agricultural commodity run is in its infant stage. The metal commodities with all the infrastructure boom has started from 1999 to now. For Agricultural Commodity, I believe it started around 2003, which means it has 4-5 more years to run to catch up with the metal commodities. And at presently, AC is at 1st of 3 stages.
4 - a recent report which mentions that funds have the intention to put 10% of their money to agricultural commoditiy stocks.
5 - A remark by China's prime minister Wen Jiabao: "I have a dream - a dream to be able to provide all Chinese, especially our children, with half a litre of milk a day." The result has been a huge increase in milk consumption in China and demand is growing at a rate of around 25% a year. China’s milk consumption continues to be spurred by consumers demanding healthier and more nutritious foods. With rising affluence in the world’s fast-growing consumer market, there is a rapidly growing penchant for international food and beverage concepts which use a lot of milk and milk products. The PRC government has also been promoting the need for nutrition as evidenced by the government’s nation-wide School Milk Programme.
Why China Milk,
- With limited pasture land, China cannot continue to increase the number of cows to enhance its milk supply. China has much to catch up in terms of improving the milk yield of its cows.
- Based in the Heilongjiang Province, our subsidiary is the largest company specialising in the production of bull semen, dairy cow embryos and raw milk in China *
* According to China Dairy Industry Association
- It is building a 150 000 tonnes raw milk processing factory. They have signed a contract to provide OEM with raw milk, As of Jan qtr report, it has installed the milk machines by early march and will commence trial production for 1 month.
- The outbreak of mad cow disease in Canada and the U.S. in 2003 knocked the North American cattle industry on its back. The largest importers of U.S. and Canadian beef, including Japan, South Korea, and China, banned the import of beef from North America. But for China Milk Products, the restrictions proved to be a blessing in disguise. The privately owned raw milk company had already purchased 970 Canadian Holstein cattle. Its state-owned rivals failed to import as many cattle because they had to navigate government bureaucracy to get bank loans. Today, China Milk owns the largest herd of Holstein cattle in China and ranks 50th in BusinessWeek's annual Hot Growth rankings of Asia companies
Any rancher wanting to breed his cows with a Canadian Holstein has to go to China Milk. The company charges its customers $9.50 per sample of bull semen from a Canadian Holstein, compared with $6.75 from Australian Holsteins and $2.70 from Chinese Holsteins. However, Chinese ranchers are still willing to pay a premium for Canadian Holsteins, especially after receiving a little help from the government.
Starting this year, the Chinese government is giving Chinese ranchers a subsidy of $2 toward each sample of bull semen.
- China consumption of dairy products is about 20kg in 2006. It is a low base compared to other countries. With a greater awareness of nourishment with drinking of milk, and better life style (ice cream/butter/ yoghurt), demand will continue to increase
- Tourism will continue to be strong after the China Olympics. With more Ang mos visiting China, they will want their daily milk, butter, pasta, yoghurt, boosting demand.
Thursday, February 21, 2008
A good analysis of Singapore property from a writer Qiaofeng from Channelnewsasia
Quote:
Experts say Grade A office rentals to continue rising in 2008 By Pamela Almeda, Channel NewsAsia Posted: 22 February 2008 0054 hrs
SINGAPORE : Rentals of Grade A offices in Singapore are expected to continue rising this year. According to property consultant Savills, average office rentals here may even nudge above that of Hong Kong's, currently the highest in the region. They added that Singapore's office property sector will continue to remain buoyant despite worries over the US sub-prime crisis. "Even in the current environment which is rather uncertain, we noticed that the financial services community is continuing to grow in Asia. And we noticed this in HK and in Singapore, so demand remains very strong here. That is going to continue to push up rents in the grade A office market," said Simon Smith, Deputy Managing Director, Savills Valuation and Professional Services. Savills is expecting prime office rents in Singapore to jump by 15-20% this year, down from the 90% jump in 2007. Vacancy rates for offices hit as low as 0.2% late last year. Savills said Singapore is attractive to overseas investors looking at the office property sector in the region. Robert McKellar, CEO (Asia Pacific), Savills Asia Pacific said: "Office is primarily very attractive. Of course, (there are) very few assets for sale and that makes it very difficult for any overseas investor to get access to stock. Nevertheless, if the opportunity arises, then definitely we'll go for a secure investment in Singapore. "For example some of the German open-ended funds that are increasingly wanting to have a bigger slice of the Asian real estate markets; they see Singapore as an attractive market because of the fact that its lots are risk-free. "They are looking to have a base from which to invest into the region, and (it's) ideal for them, acquiring an asset in Singapore which is risk-free, which has stabilised market, strong economy and low taxation." Meanwhile, another property consultant CB Richard Ellis (CBRE) is estimating that about 10.1 million square feet of new office space in Singapore will be completed by end of 2012. Some 67% of the supply coming into stream within the next three years is expected to be Grade A office space. This means a doubling of prime office space. CBRE said monthly rentals for prime office space averaged S$15 per square foot from October to December of last year, up 92% on year. It is expecting these to average S$17 per square foot by the end of the year. Meanwhile, luxury residences will also see prices jumping between 8-12% in 2008. - CNA /
Who to believe? Savills and CBRE...says Supply is catching up with demand and they say Office rentals will still rise.... as much as 15-20% this year.... CitiGroup....Wendy Koh .. plays contrarian ....... and says Supply will exceed demand... and cites oncoming demand averaging 3.2 m sq ft per year....... Who to believe? Careful study of the CitiGroup figures reveal they are using historical demand of 1.5 m sq ft per year....... So they are using historical demand to compare with future projected supply....Somehow the logic ......just don't jive...... but the report by CitiGroup seems to carry weight........ An update of current demand and a projection of future demand will be more enlightening.......
Quote:
Oversupply Looms In Singapore Office Sector: Citigroup 28/11/2007 It downgrades two stocks with key exposure to sector - KepLand, CityDev. Singapore is in danger of seeing an oversupply of office space from 2010 onwards, Citigroup is warning. The bank’s research unit has also downgraded two Singapore stocks with significant exposure to the office market here - Keppel Land and City Developments. ‘The market is underestimating the potential supply of new office space in 2010 and beyond, in our view,’ said Citigroup analyst Wendy Koh in research report dated Monday. ‘Based on our estimates, occupancy rates are likely to peak in 2008-09 and decline thereafter with the impending supply.’ Since May 2007, six new sites with a total gross floor area of 5 million sq ft have been awarded amidst fears of an office space crunch. These sites could add some 3 million sq ft of new office space in 2010-11, Citigroup estimates. Altogether, on average, 3.2 million sq ft of new supply could hit the market from 2010-12, the bank said. This compares to a historical average demand of 1.5 million sq ft per year. Supply estimates could rise even further with more government land sales in the first half of 2008, Citigroup said. All this will mean that buildings in core Central Business District will be competing for tenants. Key projects that are scheduled to be completed in 2010-12 include Marina Bay Financial Centre, the redeveloped Ocean Building One Financial Centre and the South Beach Road and Marina View land parcels. In response, Citigroup downgraded its ratings on office landlords Keppel Land and City Developments. Keppel Land was downgraded to a ’sell’ from a ‘hold’, while CityDev was rated a ‘hold’, from a ‘buy’ previously. ‘Going forward, we expect Keppel Land to face keen competition while marketing the remaining space at the Marina Bay Finance Centre and One Financial Centre,’ Ms Koh said. She cut KepLand’s revalued net asset value (RNAV) estimate to $7.83 (from $8.85) and target price to $6.26 (from $8.97). For CityDev, Citigroup cut its RNAV estimate to $14.47 from $15.28 and target price to $15.90 from $18.00 to reflect lower capital values of office buildings. Other analysts however said that all the new projects coming onstream will not cause an oversupply - rather, they will ensure that supply catches up with demand. ‘I think that there will be significant pent-up demand for office space that will only be satisfied when supply hits the market in 2010-11,’ said Moray Armstrong, CB Richard Ellis’ executive director for office services. This pent-up demand means that demand in 2010-11 will be significantly higher than the historical average, Mr Armstrong said.
Source: Business Times
Looking at CitiGroup's figures..... one wonders if URA and SLA..... are releasing too much supply...... and are missing the total supply picture? Or are they deliberately planning for the higher supply...... given that they are in touch with current projected demand? So Is City Dev.....Kepland......a BUY ing opportunity or a SELL...... U decide..... I was reading Capitaland' 2007 FY report and they have CBRE's figures.... in their report.... I have gleaned some figures from the Capitaland report released today… Source: URA, CBRE & CapitaLand Research (Jan 2008) • Average annual supply ('93-'07)…………….1.14 mil sq ft • CBRE projected annual take-up for 2007-2012 ..... 1.6 mil sq ft • Some future supplies have already been pre-committed, e.g. 1.6 mil sq ft in 2010 (MBFC) So lets look at the Overall picture..... Supply and Demand Forecast Figures by CBRE………taken from the report....
………….. … ….Supply………………….Demand……………Diff
2007 ……….- 0.5* mil sq ft …………...0.9*…..……….-1.4
2008………… 1.0 mil sq ft ……………...1.6………..…...-0.6
2009………… 1.4 mil sq ft ……………….1.6…….…....….-0.2
2010………… 2.7 mil sq ft …………… 1.6+1.6**………-0.5
2011………….3.8 mil sq ft………………. 1.6………..…...+2.2
2012………….1.1 mil sq ft ………….... 1.6……..…..…..-0.5
Total…………...8.4mil sq ft…….…....8.9……….…….-0.5
*Estimates from graph read-off **1.6 m sq ft pre-committed in MBFC So we see supply trying to catch up with demand until 2011...when supply exceeds demand....... then a reversion back in 2012..... Note these are estimates...and properties .....due to long gestation and construction periods ...have huge lag effects.... Nevertheless..... the whole scenario depends on the outlook....... that one has for the government globalistion plans for Sg The Remaking of Singapore into global city.... are U optimistic.....? - Will current growth in our efforts to be a regional financial centre pan out.....? - Will current trends like the Open Skies Treaties lead to better air connectivity and hence enhance Sg desirability as a regional centre.... - Will the Quality of living.....IRs...F1...YOG....Sg Flyer... New Botanic Gardens.....Enhanced by vibrant arts and entertainment scene...think Collyer and Boat Quays..... and Museums...lead to a higher desirability for expats to stay put..... and more HNWIs to relocate here....? For now CBRE is still projecting 10-15% rental growth and Savills ...see previous article by BT ...is projecting rental growth of 15-20% for prime office space... ...which will underpin capital values.....and Savills is saying German open ended funds...outlook on demand for ownership of Office properties are still strong.....showing high pre-commitment interests in future projects.... So maybe.... the Office Property scene is not as dour as CitiGroup......is projecting....... in its contrarian take on the Sg Office mkt.....
Quote:
Experts say Grade A office rentals to continue rising in 2008 By Pamela Almeda, Channel NewsAsia Posted: 22 February 2008 0054 hrs
SINGAPORE : Rentals of Grade A offices in Singapore are expected to continue rising this year. According to property consultant Savills, average office rentals here may even nudge above that of Hong Kong's, currently the highest in the region. They added that Singapore's office property sector will continue to remain buoyant despite worries over the US sub-prime crisis. "Even in the current environment which is rather uncertain, we noticed that the financial services community is continuing to grow in Asia. And we noticed this in HK and in Singapore, so demand remains very strong here. That is going to continue to push up rents in the grade A office market," said Simon Smith, Deputy Managing Director, Savills Valuation and Professional Services. Savills is expecting prime office rents in Singapore to jump by 15-20% this year, down from the 90% jump in 2007. Vacancy rates for offices hit as low as 0.2% late last year. Savills said Singapore is attractive to overseas investors looking at the office property sector in the region. Robert McKellar, CEO (Asia Pacific), Savills Asia Pacific said: "Office is primarily very attractive. Of course, (there are) very few assets for sale and that makes it very difficult for any overseas investor to get access to stock. Nevertheless, if the opportunity arises, then definitely we'll go for a secure investment in Singapore. "For example some of the German open-ended funds that are increasingly wanting to have a bigger slice of the Asian real estate markets; they see Singapore as an attractive market because of the fact that its lots are risk-free. "They are looking to have a base from which to invest into the region, and (it's) ideal for them, acquiring an asset in Singapore which is risk-free, which has stabilised market, strong economy and low taxation." Meanwhile, another property consultant CB Richard Ellis (CBRE) is estimating that about 10.1 million square feet of new office space in Singapore will be completed by end of 2012. Some 67% of the supply coming into stream within the next three years is expected to be Grade A office space. This means a doubling of prime office space. CBRE said monthly rentals for prime office space averaged S$15 per square foot from October to December of last year, up 92% on year. It is expecting these to average S$17 per square foot by the end of the year. Meanwhile, luxury residences will also see prices jumping between 8-12% in 2008. - CNA /
Who to believe? Savills and CBRE...says Supply is catching up with demand and they say Office rentals will still rise.... as much as 15-20% this year.... CitiGroup....Wendy Koh .. plays contrarian ....... and says Supply will exceed demand... and cites oncoming demand averaging 3.2 m sq ft per year....... Who to believe? Careful study of the CitiGroup figures reveal they are using historical demand of 1.5 m sq ft per year....... So they are using historical demand to compare with future projected supply....Somehow the logic ......just don't jive...... but the report by CitiGroup seems to carry weight........ An update of current demand and a projection of future demand will be more enlightening.......
Quote:
Oversupply Looms In Singapore Office Sector: Citigroup 28/11/2007 It downgrades two stocks with key exposure to sector - KepLand, CityDev. Singapore is in danger of seeing an oversupply of office space from 2010 onwards, Citigroup is warning. The bank’s research unit has also downgraded two Singapore stocks with significant exposure to the office market here - Keppel Land and City Developments. ‘The market is underestimating the potential supply of new office space in 2010 and beyond, in our view,’ said Citigroup analyst Wendy Koh in research report dated Monday. ‘Based on our estimates, occupancy rates are likely to peak in 2008-09 and decline thereafter with the impending supply.’ Since May 2007, six new sites with a total gross floor area of 5 million sq ft have been awarded amidst fears of an office space crunch. These sites could add some 3 million sq ft of new office space in 2010-11, Citigroup estimates. Altogether, on average, 3.2 million sq ft of new supply could hit the market from 2010-12, the bank said. This compares to a historical average demand of 1.5 million sq ft per year. Supply estimates could rise even further with more government land sales in the first half of 2008, Citigroup said. All this will mean that buildings in core Central Business District will be competing for tenants. Key projects that are scheduled to be completed in 2010-12 include Marina Bay Financial Centre, the redeveloped Ocean Building One Financial Centre and the South Beach Road and Marina View land parcels. In response, Citigroup downgraded its ratings on office landlords Keppel Land and City Developments. Keppel Land was downgraded to a ’sell’ from a ‘hold’, while CityDev was rated a ‘hold’, from a ‘buy’ previously. ‘Going forward, we expect Keppel Land to face keen competition while marketing the remaining space at the Marina Bay Finance Centre and One Financial Centre,’ Ms Koh said. She cut KepLand’s revalued net asset value (RNAV) estimate to $7.83 (from $8.85) and target price to $6.26 (from $8.97). For CityDev, Citigroup cut its RNAV estimate to $14.47 from $15.28 and target price to $15.90 from $18.00 to reflect lower capital values of office buildings. Other analysts however said that all the new projects coming onstream will not cause an oversupply - rather, they will ensure that supply catches up with demand. ‘I think that there will be significant pent-up demand for office space that will only be satisfied when supply hits the market in 2010-11,’ said Moray Armstrong, CB Richard Ellis’ executive director for office services. This pent-up demand means that demand in 2010-11 will be significantly higher than the historical average, Mr Armstrong said.
Source: Business Times
Looking at CitiGroup's figures..... one wonders if URA and SLA..... are releasing too much supply...... and are missing the total supply picture? Or are they deliberately planning for the higher supply...... given that they are in touch with current projected demand? So Is City Dev.....Kepland......a BUY ing opportunity or a SELL...... U decide..... I was reading Capitaland' 2007 FY report and they have CBRE's figures.... in their report.... I have gleaned some figures from the Capitaland report released today… Source: URA, CBRE & CapitaLand Research (Jan 2008) • Average annual supply ('93-'07)…………….1.14 mil sq ft • CBRE projected annual take-up for 2007-2012 ..... 1.6 mil sq ft • Some future supplies have already been pre-committed, e.g. 1.6 mil sq ft in 2010 (MBFC) So lets look at the Overall picture..... Supply and Demand Forecast Figures by CBRE………taken from the report....
………….. … ….Supply………………….Demand……………Diff
2007 ……….- 0.5* mil sq ft …………...0.9*…..……….-1.4
2008………… 1.0 mil sq ft ……………...1.6………..…...-0.6
2009………… 1.4 mil sq ft ……………….1.6…….…....….-0.2
2010………… 2.7 mil sq ft …………… 1.6+1.6**………-0.5
2011………….3.8 mil sq ft………………. 1.6………..…...+2.2
2012………….1.1 mil sq ft ………….... 1.6……..…..…..-0.5
Total…………...8.4mil sq ft…….…....8.9……….…….-0.5
*Estimates from graph read-off **1.6 m sq ft pre-committed in MBFC So we see supply trying to catch up with demand until 2011...when supply exceeds demand....... then a reversion back in 2012..... Note these are estimates...and properties .....due to long gestation and construction periods ...have huge lag effects.... Nevertheless..... the whole scenario depends on the outlook....... that one has for the government globalistion plans for Sg The Remaking of Singapore into global city.... are U optimistic.....? - Will current growth in our efforts to be a regional financial centre pan out.....? - Will current trends like the Open Skies Treaties lead to better air connectivity and hence enhance Sg desirability as a regional centre.... - Will the Quality of living.....IRs...F1...YOG....Sg Flyer... New Botanic Gardens.....Enhanced by vibrant arts and entertainment scene...think Collyer and Boat Quays..... and Museums...lead to a higher desirability for expats to stay put..... and more HNWIs to relocate here....? For now CBRE is still projecting 10-15% rental growth and Savills ...see previous article by BT ...is projecting rental growth of 15-20% for prime office space... ...which will underpin capital values.....and Savills is saying German open ended funds...outlook on demand for ownership of Office properties are still strong.....showing high pre-commitment interests in future projects.... So maybe.... the Office Property scene is not as dour as CitiGroup......is projecting....... in its contrarian take on the Sg Office mkt.....
Thursday, February 14, 2008
Happy Chinese New Year - Good Food
May the year of the Rat bring health and prosperity to everyone :)
I went over to my in-laws place on the 2nd day.
We went to "Fei Cui" Crystal Jade at Pegarang - Sungei Ringit.
The good food include Lobster (with herbs), Hor fun, and Fish(Assam and fried/baked).
I remember just before reaching there, go right (at the slight Y diversion road), right again , coming to Shell then turn left.
I went over to my in-laws place on the 2nd day.
We went to "Fei Cui" Crystal Jade at Pegarang - Sungei Ringit.
The good food include Lobster (with herbs), Hor fun, and Fish(Assam and fried/baked).
I remember just before reaching there, go right (at the slight Y diversion road), right again , coming to Shell then turn left.
Subscribe to:
Posts (Atom)
