Keppel, other developers rev up for sales

KEPPEL Corporation and Keppel Land are releasing a new batch of 30 units at their Reflections at Keppel Bay condo today at an average price of $1,950 per square foot (psf), assuming buyers will take the deferred payment scheme (DPS).

Buyers who opt for the normal progressive payment scheme pay 3 per cent less. Sizes of units range from 900 sq ft to 1,600 sq ft. The 99-year development is still under construction.

Reflections at Keppel Bay comprises a total of 1,129 units, of which 638 were sold as at end-July, according to Urban Redevelopment Authority data released this week. In July alone, five units were sold at prices ranging from $1,641 psf to $2,195 psf.

Keppel is also riding on the current uptick in home buying to release for sale units at the completed Caribbean Residences nearby at an average price of $1,300-1,400 psf.

Caribbean Residences comprises a total of 168 apartments at the completed 99-year-leasehold Caribbean at Keppel Bay condo that the group had leased out as corporate residences earlier. The majority of the apartments are leased with tenancies ranging from six months to two years, and these units will be sold with the existing tenancies.

Most of the apartments at Caribbean Residences are located in two blocks which are eight and nine storeys high. So far, about 30 of the 168 units are said to have been sold in the past few weeks and the group is riding on the buyer interest to release more apartments.

‘However, not all the remaining units at Caribbean Residences are being put on the market at the same time,’ a Keppel spokeswoman said. The 30 units sold recently were mostly two-bedders.

Keppel is developing the two projects on the former Keppel Harbour site.

Property consultants say developers are working hard to release more projects, to take advantage of the pick-up in home-buying sentiment.

Next week, NTUC Choice Homes will preview its 39-storey Trevista condo in Toa Payoh. The 99-year-leasehold project will have a total of 590 units.

Singapore Land is also expected to begin selling next week Trizon, a freehold condo on the former Himiko Court site in the Mount Sinai area.

The 24-storey development comprises a total of 289 units.

SingLand bought Himiko Court in May 2007 for $336 million, or $821 psf of potential gross floor area, inclusive of an estimated $1.07 million development charge. Market watchers reckon Trizon may be priced about $1,400 psf on average.

Source: Business Times, 21 Aug 2009

Leng Beng muses on govt’s market cooling options

Scrapping IAS, reviving confirmed list possible, but care is needed

(SINGAPORE) City Developments Ltd’s (CDL) executive chairman Kwek Leng Beng reckons that the government may abolish the interest absorption scheme or reintroduce land sales through the confirmed list if it is concerned about a property bubble building up.

However, the authorities will deliberate carefully before introducing any measures to cool the market, given the government’s cautious economic outlook for the second half, Mr Kwek said yesterday.

‘In an uncertain time, you press the wrong button, (it may be) disastrous. I’m a strong believer that whatever the government wants to do, I think they’ve got to think very carefully – and they will,’ Mr Kwek said in response to an analyst’s question during CDL’s Q2 results briefing yesterday.

National Development Minister Mah Bow Tan last month observed that there are signs of speculation in the property market, and said that the government will act if it overheats. He also urged home seekers to buy only within their means.

The minister’s comments followed a strong pick-up in private home sales, with queues forming at some property launches and developers raising prices for some projects.

Yesterday, Mr Kwek noted that while ‘some amount of speculation is good for the market, excessive speculation can lead to disaster’. Like some other developers, he argued that the resurgence in housing sales ‘should not be viewed as over-exuberant or extraordinary, bearing in mind that developers had put on hold many launches last year’. He also said that ‘to-date, property prices for the low and mid-tier market have yet to recover since its peak of 1996’ – a point on which some market watchers begged to differ.

Mr Kwek attributed the strong home sales seen in the market in the first-half of this year to pent-up demand; developers’ willingness to trim prices to more realistic levels to move stock; low interest rates on home loans and fixed deposits; and property remaining a good hedge against inflation; among other factors. ‘Moreover, foreign investors are slowly returning to Asia, with increased confidence in its prospects.’

He acknowledged that the fast pace of recovery in overall market sentiments had taken even him by surprise.

In its results statement, CDL said that it has ‘always advocated that property investors should take a medium to long-term perspective and be able to service their loans’. It added: ‘With all the readily available statistical data about the property market and its transactions, home buyers today are more savvy and far-sighted, and they should be able to make discerning decisions about their investments.’

Last October, amid the global financial crisis, the government suspended sales of sites through the confirmed list – under which land parcels are launched for tender according to scheduled dates. However, sites remain on offer through the reserve list, under which the state will launch a plot for sale only upon successful application by a developer which undertakes to offer a minimum price acceptable to the state. In his pronouncement on the private residential market in late July, Mr Mah said that the government is considering whether it should reintroduce the confirmed list for first-half 2010.

In October 2007, the government scrapped the deferred payment scheme (DPS) amid complaints that it had fuelled property speculation. However, the now-popular interest absorption scheme (IAS) that is being offered by developers and banks mimics DPS in that buyers do not make any payments beyond the initial 20 per cent until the project is completed. However, IAS buyers have to sign up for a bank loan immediately and hence undergo a credit assessment for better risk management.

Mr Kwek yesterday was enthusiastic about the Urban Redevelopment Authority’s survey to establish lifestyle needs and trends here. Singapore will have ‘a different platform when the two integrated resorts are ready’, he said, as they will attract different types of customers, some of whom will want to buy residential property in Singapore, citing the experience in Macau.

The luxury residential market here will recover ‘when the casinos open and are performing reasonably well, and the world economy is more or less recovered to a good extent’, he added.

The increase in overseas visitor arrivals expected to be generated from the IRs’ casinos and the conventions business is also expected to create spillover demand for other hotels on the island.

Source: Business Times, 14 Aug 2009

Fragrance Group unit buys Telok Kurau land for S$36.5m

SINGAPORE: Mainboard-listed Fragrance Group said one of its units has bought a property at Telok Kurau for S$36.5 million.

The freehold land parcel has a total site area of nearly 48,000 square feet. It can yield a maximum permissible gross floor area of some 93,000 square feet.

Fragrance said it plans to turn the site into a five-storey mixed development, comprising commercial shops and residential apartments.

It will fund the purchase and development through internal funds and bank borrowings.

The firm said it plans to start the construction and sale of the project in the second half of the financial year.

Depending on the number of units sold and the progress of construction, Fragrance said the development would contribute to the firm’s earnings in the current financial year and beyond.

Source: Channel News Asia, 24 July 2009

KepLand to launch two projects soon

Bukit Timah, Cairnhill Circle projects to cash in on market optimism

TWO new residential projects will soon be launched by property developer Keppel Land (KepLand) in an indication of the rebound in market sentiment.

The firm has yet to launch any residential projects this year, unlike other developers which have launched projects week after week in recent months to capitalise on the new-found optimism.

KepLand said yesterday it will be launching luxury projects Madison Residences in Bukit Timah and The Promont at Cairnhill Circle in the next two months.

This comes only four months after it made the decision to defer the construction of Madison Residences in March, citing weak market conditions.

The Promont is due for completion this year, said the firm.

Group chief executive Kevin Wong said yesterday at its financial results briefing that as markets in the region improve, ‘we will accelerate our project launches in Singapore, China and Vietnam to achieve faster returns’.

The firm posted a 10.4 per cent increase in net profit to $58.2 million for the three months ended June 30, compared to the same quarter last year.

Revenue came in at $250 million for the second quarter, up 34.4 per cent from a year ago due to progressive sales from launched projects in Singapore such as Park Infinia at Wee Nam and The Tresor at Duchess Road.

Keppel Land’s growing footprint overseas also helped to boost turnover, as sales from projects in China and Indonesia were registered.

Overseas earnings accounted for 30 per cent of net profit, compared to 18 per cent for the same quarter last year, said KepLand.

The firm is determined to expand its presence in China, recently announcing its proposal to delist Evergro, a China-focused property group, to merge both entities.

It had offered 29 cents per share – a 16 per cent premium over Evergro’s last traded share price of 25 cents on the Friday before the announcement.

Shareholders can also opt for one new Keppel Land share for every seven Evergro shares they own. This plan will allow KepLand to ‘tap on combined operational expertise, industry knowledge and extensive networks’ for expansion in China, said Mr Wong.

KepLand had raised some $708 million in a fully subscribed, nine-for-10 rights issue at $1.09 a share in June.

This has improved the firm’s borrowing position, and it is now looking for land to buy, said its finance chief Lim Kei Hin.

For the first half of this year, net profit was down 15.8 per cent at $95.1 million from the same period last year because of poorer first-quarter sales arising from lower revenue recognition for projects in Singapore and overseas.

Overall, turnover was down 13.8 per cent at $395.6 million compared to the first half of last year.
Earnings per share for the half-year ended June 30 was 8.2 cents, down from 11.1 cents previously.

Net asset value per share stood at $2.29 as at June 30, compared to $3.39 as of Dec 31, 2008.
Keppel Land shares closed five cents up at $2.54 yesterday.

Source: Straits Times, 23 July 2009

Keppel Land Q2 net profit rises 10.4%

Property group will speed up launches as market recovers in S’pore and region

KEPPEL Land – which reported a 10.4 per cent year-on-year rise in second-quarter earnings yesterday – says it will speed up launches in Singapore and the region as the property market picks up.

‘With improved market sentiment, we plan to launch Madison Residences and The Promont in the second half of 2009,’ said group CEO Kevin Wong at a briefing. They will debut in 1-2 months’ time at market prices, which are hard to fix now because prices can move very quickly nowadays, he added.

For the second quarter ended June 30, Keppel Land posted a net profit of $58.2 million – up 10.4 per cent from a year ago. This was driven by a 34.4 per cent increase in sales to $249.9 million.

Reflecting the recent upturn in the property sector, Keppel Land’s performance was markedly better than it was a quarter ago. Its Q2 net profit was 57.7 per cent higher than that in Q1, boosted by a 60.3 per cent higher contribution from property trading.

These contributions came from local and overseas residential projects. Here, Marina Bay Residences, The Sixth Avenue Residences and The Tresor were some which did well. Also, Park Infinia at Wee Nam is almost fully sold. Buyers took up 26 units there from January to June at about $1,400 per square foot on average – some $500 psf more than when the project was launched in Q2 2005.

Keppel Land is still holding back on the Marina Bay Suites project and may launch it if the market improves further.

Keppel Land also sold over 1,440 units in China in the first half of the year and resumed sales at The Estella in Vietnam. The company will accelerate project launches in both countries.

Besides property trading, property investment also improved from the previous quarter, by 5.2 per cent. This came on the back of higher rental income from Singapore and a greater share of profit from K-Reit Asia.

Keppel Land noted that the office leasing market has become more active as the economy stabilises. Pre-lease negotiations have also begun for Ocean Financial Centre, and more leasing enquiries have come in for Phases One and Two at Marina Bay Financial Centre, which have pre-commitment rates of around 66 and 55 per cent respectively.

In contrast, earnings from fund management fell from Q1 while hotels, resorts and other businesses registered a small loss.

Keppel Land’s private fund management vehicle Alpha Investment Partners runs a few funds. Its Alpha Asia Macro Trends Fund raised $1.7 billion and has invested around 11 per cent of this. The portfolio includes a retail property in Tokyo.

As at June 30, Keppel Land’s net debt-to-equity ratio stood at 0.23. This fell from 0.54 a year ago after the company undertook a rights issue in April, raising gross proceeds of some $707 million.
Supported by a cash position of around $1.2 billion, Keppel Land said that its property development and fund management divisions are actively looking to acquire assets.

Keppel Land’s first half results were dragged by weak performance in Q1. For the half year ended June 30, net profit was $95.1 million, down 15.8 per cent from a year ago. Sales fell 13.8 per cent to $395.6 million. The company did not declare a dividend for the period.

In its best showing in more than a month, the counter yesterday gained five cents to close at $2.54.

Source: Business Times, 23 July 2009

Fragrance to launch at least 6 more home projects in H2

Group posts 11.4% rise in Q2 net profit to $17.7 million

FRAGRANCE Group says it intends to launch at least another six residential projects with about 480 units in the second half of this year.

It said this in its latest financial results statement, which showed it posted an 11.4 per cent year-on-year increase in net profit for the second quarter ended June 30 to $17.7 million. Turnover rose 33.1 per cent to $79.5 million.

For the first half, the group’s net earnings slipped 8.9 per cent year- on-year to $27.8 million despite a 15.5 per cent improvement in turnover to $130.3 million. The lower bottom line was partly due to lower profit margins by the property development business as a result of lower selling prices.

Earnings per share increased from 1.9 cents in Q2 2008 to 2.1 cents in Q2 2009. Net asset value per share rose from 15.3 cents on Dec 31 last year to 18 cents on June 30, 2009.

For Q2 2009, profit before taxation (PBT) from property rose 9.8 per cent year-on-year to $15 million and PBT from hotels increased 7.6 per cent to $5.9 million.

The group’s cash and bank balances stood at $25.7 million on June 30, 2009, up from $13.8 million on Dec 31, 2008. Its total borrowings decreased to $178.4 million from $212.1 million on Dec 31, 2008, mainly due to loan repayment relating to sold and completed projects, which was partly offset by new loans for development projects.

The group generated a positive cash flow from operations of $53.6 million during the first half of 2009. This arose mainly from the projects that were sold and completed during the period.

These proceeds were used to settle the borrowings pertaining to the sold and completed projects as well as purchase of property, plant and equipment.

Source: Business Times, 22 July 2009

Developers begin raising prices of new projects

Brisk weekend sales indicate continuation of strong momentum

SALES of new condominium projects continued at a robust pace last weekend, despite some developers starting to test the market with slightly higher prices.

Buyers picked up 120 units at Waterfront Key in Bedok Reservoir at an average price of $735 per sq ft (psf), even though that price is higher than that at the neighbouring Waterfront Waves condo, where units are going at $700 psf on average.

Both are 99-year leasehold projects and are being jointly developed by Far East Organization and Frasers Centrepoint.

In the Upper Changi area, Hong Leong Group sold 50 more units of The Gale on Flora Road at prices ranging from $650 to $725 psf – up from $650 to $700 psf the previous weekend. This makes 265 units sold to date at the 329-unit freehold development, or about 80 per cent.

In the higher-end segment of the market, City Developments (CDL) has also raised prices for its newly launched Volari@Balmoral by 2 per cent, after it saw a fairly good take-up rate over the weekend.

CDL released 65 units out of a total of 85, and sold about 55 of them. The average price of the units sold was over $2,000 psf, it said in a press release.

The developer added that almost half the buyers were foreigners. Prices start from $2.7 million for a two-bedroom unit.

The transactions over the weekend indicate that this month’s home sales figures are likely to maintain the strong momentum started in February, which has seen more than 1,000 new homes sold every month.

Another interesting point: fewer buyers appear to be taking up the interest absorption scheme, which allows them to defer the bulk of their payments until their apartment is completed but often at a higher price.

Only a third of the buyers at The Gale took up the interest absorption scheme. About 20 per cent of Volari@Balmoral‘s buyers opted for the scheme, which means they paid 2 per cent more for their units.

At Waterfront Key, ‘practically all’ the buyers went with the normal progressive payment scheme, said Far East Organization’s chief operating officer Chia Boon Kuah. This could be because interest absorption for this project comes at a 4 per cent premium.

When asked why the prices were higher at Waterfront Key than at Waterfront Waves, Mr Chia mentioned the project’s ‘thoughtful facilities’, including three outdoor villas and two ‘island villas’, as well as the fact that all units would have views of either the park, reservoir or pool.

The developers released 176 units at Waterfront Key last Friday. A further 102 units will be released during the project’s public launch this Saturday. The condo has 437 units in all.

Of the buyers last weekend, about 60 per cent were HDB upgraders, said Mr Chia. They bought mainly the smaller units: all the 57 two-bedroom units from the first to 15th storeys have been sold, at prices starting from $593,000. The four-bedders, which are 1,518 sq ft in size, are going for up to $1.42 million each.

Source: Straits Times, 21 July 2009

Developer set to bid $62m for Bt Panjang condo site

If sold, it will be first state-owned residential site sale in 10 months

EVER since the collapse of Lehman Brothers in the United States and Singapore’s slide into recession, the Government has been unable to attract bids for residential development sites.

But yesterday – after 10 straight months without selling a single residential site – the Government said it had finally received an offer for a condominium parcel in Bukit Panjang.

An unnamed property developer has committed to bid at least $62 million for the 244,347 sq ft plot, in what consultants say is a further sign of the property market’s rebound.

The 99-year leasehold site located along Chestnut Avenue has been sitting on the Government’s reserve list since March last year. Sites on the reserve list are made available for sale, but are not launched for tender until a developer puts in a minimum bid.

Now that the Chestnut Avenue plot has been triggered for sale, it will be put up for tender by the Housing Board by the end of this week, HDB said yesterday.

The bid submitted works out to about $120 per sq ft (psf) of potential gross floor area, as compared with the $220 to $270 psf expected when the site was first made available in March last year.

Mr Li Hiaw Ho, executive director of CB Richard Ellis Research, thinks the final winning bid will be $150 to $160 psf of potential gross floor area, or $76 million to $82 million in total.

The Chestnut Avenue site can accommodate a development of about 450 units.

If sold, it will be the first state-owned residential development sale since Sept 10 last year – just before Lehman’s demise – when a condo site at the junction of New Upper Changi Road and Tanah Merah Kechil Avenue went for $84 million.

A few days later, on Sept 16, the HDB launched an executive condominium site at Punggol Field, but found no takers.

Now that buyers are returning in large numbers to showflats, developers’ confidence appears to be on the rise, according to consultants.

Home buyers have been snapping up more than 1,000 new homes each month since February, culminating in a record 1,825 new homes sold last month – even more than the number sold in August 2007, the peak of the boom two years ago.

Last week, owners of the freehold Dragon Mansion in Spottiswoode Park Road launched the year’s first collective sale, with a bullish price tag of $120 million.

Yesterday’s offer for Chestnut Avenue shows that there is renewed interest in the market, according to Jones Lang LaSalle’s head of Singapore research Chua Yang Liang, who is still only cautiously optimistic.

‘The market is stirring and some developers may be excited, but by and large I don’t think there’s an overall bullishness in the market,’ he said.

And he predicts just a handful of bids for the Chestnut Avenue land.

‘I’m not sure if the rest of the developers will bite, considering there is still uncertainty in the larger economy.’

The site is located near other property developments such as Maysprings, Cashew Heights Condominium and Hazel Park Condominium. In recent months, units at the 99-year leasehold Maysprings have been sold at just below $500 psf, while those at the other two condos – both freehold – have gone for $560 to $600 psf, said CB Richard Ellis Research’s Mr Li.

He expects the developer who buys the Chestnut Avenue site to plan to sell finished units at more than $600 psf. Such entry-level private homes would be targeted at HDB upgraders – a promising segment of buyers unaffected by fears of a possible oversupply of mid-tier and high-end homes.

Analysts are anticipating more developers to resume buying land in the second half of this year, given that the Urban Redevelopment Authority has received inquiries about some of the other sites on its reserve list.

Also, as market sentiment improves, developers have started to pick up land meant for hotel and industrial development.

Earlier this month, $43.9 million was offered for a hotel site in New Bridge Road, prompting a public tender for the plot. And last month, 14 valid bids were received for a hotel site in Short Street.

Source: Straits Times, 21 July 2009

Developer set to bid $62m for Bt Panjang condo site

If sold, it will be first state-owned residential site sale in 10 months

EVER since the collapse of Lehman Brothers in the United States and Singapore’s slide into recession, the Government has been unable to attract bids for residential development sites.

But yesterday – after 10 straight months without selling a single residential site – the Government said it had finally received an offer for a condominium parcel in Bukit Panjang.

An unnamed property developer has committed to bid at least $62 million for the 244,347 sq ft plot, in what consultants say is a further sign of the property market’s rebound.

The 99-year leasehold site located along Chestnut Avenue has been sitting on the Government’s reserve list since March last year. Sites on the reserve list are made available for sale, but are not launched for tender until a developer puts in a minimum bid.

Now that the Chestnut Avenue plot has been triggered for sale, it will be put up for tender by the Housing Board by the end of this week, HDB said yesterday.

The bid submitted works out to about $120 per sq ft (psf) of potential gross floor area, as compared with the $220 to $270 psf expected when the site was first made available in March last year.

Mr Li Hiaw Ho, executive director of CB Richard Ellis Research, thinks the final winning bid will be $150 to $160 psf of potential gross floor area, or $76 million to $82 million in total.

The Chestnut Avenue site can accommodate a development of about 450 units.

If sold, it will be the first state-owned residential development sale since Sept 10 last year – just before Lehman’s demise – when a condo site at the junction of New Upper Changi Road and Tanah Merah Kechil Avenue went for $84 million.

A few days later, on Sept 16, the HDB launched an executive condominium site at Punggol Field, but found no takers.

Now that buyers are returning in large numbers to showflats, developers’ confidence appears to be on the rise, according to consultants.

Home buyers have been snapping up more than 1,000 new homes each month since February, culminating in a record 1,825 new homes sold last month – even more than the number sold in August 2007, the peak of the boom two years ago.

Last week, owners of the freehold Dragon Mansion in Spottiswoode Park Road launched the year’s first collective sale, with a bullish price tag of $120 million.

Yesterday’s offer for Chestnut Avenue shows that there is renewed interest in the market, according to Jones Lang LaSalle’s head of Singapore research Chua Yang Liang, who is still only cautiously optimistic.

‘The market is stirring and some developers may be excited, but by and large I don’t think there’s an overall bullishness in the market,’ he said.

And he predicts just a handful of bids for the Chestnut Avenue land.

‘I’m not sure if the rest of the developers will bite, considering there is still uncertainty in the larger economy.’

The site is located near other property developments such as Maysprings, Cashew Heights Condominium and Hazel Park Condominium. In recent months, units at the 99-year leasehold Maysprings have been sold at just below $500 psf, while those at the other two condos – both freehold – have gone for $560 to $600 psf, said CB Richard Ellis Research’s Mr Li.

He expects the developer who buys the Chestnut Avenue site to plan to sell finished units at more than $600 psf. Such entry-level private homes would be targeted at HDB upgraders – a promising segment of buyers unaffected by fears of a possible oversupply of mid-tier and high-end homes.

Analysts are anticipating more developers to resume buying land in the second half of this year, given that the Urban Redevelopment Authority has received inquiries about some of the other sites on its reserve list.

Also, as market sentiment improves, developers have started to pick up land meant for hotel and industrial development.

Earlier this month, $43.9 million was offered for a hotel site in New Bridge Road, prompting a public tender for the plot. And last month, 14 valid bids were received for a hotel site in Short Street.

Source: Straits Times, 21 July 2009

Horizon brightens for property groups

THE outlook is more sanguine, as listed property developers get ready to announce their financial results for the six months ended June 30. The strong pick-up in private home sales in the past five months – and a nascent recovery in prices – is providing cheer, contrasting with the gloom that lasted until the early part of 2009 after the financial meltdown.

JP Morgan analyst Christopher Gee is tracking ‘if developers’ own outlooks and strategies have changed as a result of the upturn in home sales and general economic prospects’.

Against a brighter horizon, some concerns prevalent among property analysts six months ago have lessened. The pressure on developers to write down the values of their Singapore residential sites has abated. So too has the risk of buyers who bought on deferred payment schemes (DPS) not completing their purchases.

‘The secondary market is getting more active, so it should be easier for DPS buyers to sell their properties before the projects receive Temporary Occupation Permit,’ says DMG & Partners Securities analyst Brandon Lee.

Macquarie Securities research head Soong Tuck Yin says an interesting development to watch out for is an amendment to Financial Reporting Standard FRS 40 requiring that investment properties under construction be valued, and the increase or decrease be taken to the income statement.

The change took effect at the start of this year, and with many major listed companies doing valuations at half-year and full-year, there could be bottomline implications for the likes of CapitaLand for its ION Orchard mall and Vista Xchange at one-north for instance; and Keppel Land for its Ocean Financial Centre and Marina Bay Financial Centre projects, Mr Soong suggests.

Before the rule change, these companies were required to state only their completed investment properties at fair value. KPMG Singapore’s head of real estate Yap Chee Meng explains: ‘In the past, investment properties under construction were carried at cost unless there was impairment. Financial Reporting Standards now require these to be fair-valued where the fair-value model is used for investment properties, and where the fair value can be reliably determined.

‘For Singapore, this was effective from Jan 1, 2009. I would expect property companies to start reflecting it in their income statements from this current reporting season (the quarter ended June 30), as property companies normally revalue their investment properties once or twice a year.’

Analysts say City Developments’ bottom line is unlikely to be affected by the change to FRS 40 as it currently accounts for all its investment properties using the cost model.

For other listed developers that use the fair-value model, there is also the issue of how aggressively they will write down valuations of completed investment properties, particularly office blocks. ‘Asset write-downs, especially for commercial assets, have not materialised in a meaningful way,’ says CIMB-GK analyst Donald Chua. ‘With rents and occupancies falling, it will be interesting to see if property groups devalue their assets more aggressively this reporting season.’
Mr Gee, however, notes that the policy of stating investment properties, completed or otherwise, at fair value affects a developer’s accounting bottomline – but does not have any real cashflow impact.

As for profit from residential projects, Mr Soong says that strong home sales by developers lately will translate into profits to be recognised, although for projects in the initial stage of construction, earnings may be booked only in the current second half or next year.

CIMB-GK’s Mr Chua expects developers’ latest report cards to show declines in gearing ratios. Some of the bigger boys have recapitalised through rights issues, he says. Smaller players should also be able to use proceeds from strong home sales recently to pare debt.

A key thing to monitor in H2 is whether residential sales momentum continues. Mr Chua is keeping tabs on ‘prices and take-up rates at the high end and the level of foreign demand, especially as we draw closer to the opening dates of the integrated resorts’. ‘It may be interesting to see if projects on Sentosa Cove are released closer to the end of the year.’

Home buyers defaulting on purchases or returning options issued on high-end projects sold in the past month will also be on his watch-list.

DMG’s Mr Lee expects developers to launch more mid and prime sector projects in H2 and to start buying residential sites again, ‘especially those with drying land banks’.

JP Morgan’s Mr Gee said stockmarket investors are looking out for sustained increases in physical property prices and upgrades in revalued net asset values for listed property groups.

Source: Business Times, 17 July 2009