Friday, January 16, 2015

Singapore Property - Downhill continues

Dec-14 new home sales fell 46% MoM to 230 units, extending the decline in the preceding month. Prices remain stagnant in view of developers’ strong balance sheets and rising difficulty in landbank replenishment. We expect 2015 to be another subdued year for the residential sub-sector, marked by marginally higher mortgage rates, tepid volumes and declining market share. Unless existing cooling measures are relaxed, we find it difficult to turn positive on residential-focused developers. GLP and CAPL remain our top picks.

· Dec-14 new home sales fell 46% MoM (-11% YoY) to 230 units, similar to Nov-14’s decline of 46%. Including executive condominiums (ECs), monthly volumes would have plunged 68% MoM (+22% YoY) to 406 units. Aside from existing cooling measures, we believe the significant decline is due to the traditionally slow period in Dec and scarcity of new launches (-94% MoM to 53 units). Full-year 2014 new home sales of 7,378 units represent a YoY decline of 51% and slightly missed our forecasted 8,000 units.
· Mass market (Outside Central Region) comprised 76% of total sales, followed by Rest of Central Region (15%) and Core Central Region (9%). 80% of transactions were done below S$1,500 psf. The Terrace, an EC, which was the top selling project (128 units; S$813 psf; 17% take-up), was the only new launch. Other projects which sold well include Bellewaters (16 units; S$804 psf) and Lakeville (16 units; S$1,259 psf).
· Market share remains tepid, as major developers accounted for only 24% of total sales in Dec-14. This was led by UOL (10%), City Developments (10%), CapitaLand (2%) and Keppel Land (2%). For the full-year 2014, their market share was 35% and similar to 2013’s 34%. However, we expect this to narrow to below 30%, in view of other non traditional players’ more aggressive bids in land tenders.

Singapore Exchange - Not getting overly excited about the A50

Derivatives keep shining

Last quarter was one of the strongest for derivatives on record for SGX. Derivative daily average volumes grew 53% y/y last quarter. A50 (SGX FTSE China A50 Index Futures) volumes were up 340% y/y in December. These are strong indicators of the transformation of SGX. They also underline the exchange’s strong competitive position in Asia. This growth is welcome particularly when the securities business has been lack lustre. Derivatives revenues have grown by about 70% since mid-2010, while securities revenues have declined 30% over the same period. As a share of the total revenues, derivatives recently overtook securities and account for almost a third.

Blended revenue per contract for derivatives could see a significant decline
A50 is one of the lowest margin products (based on our estimates). SGX does not disclose the revenue per contract individually for their product offerings. It might be dangerous to extrapolate the average blended revenue per contract for the new higher volumes. Based on our estimates the blended rate might decline by 10-15% in 2Q15 (Oct-Dec14). This is probably not a positive catalyst for the share price.

Thursday, January 15, 2015

Singapore Strategy - Watch Out For Reversal Of Yield Compression

Coffee could see a strong 1H following its recent reversal from the year low earlier in the month.

Based on our wave count, we reckon that coffee is now on the way to complete the final leg of its large a-b-c correction that began in late November 2013.

The recent low of 160.10 is the critical support at the moment
If our count is right, we expect Coffee to rally to new highs above the 2014 high of 229.10, targeting 267, where wave-c is equal in length as wave-a. 
Taking out 201.35 would further boost our bullish view. Continue to buy on weakness here with a stop placed below 160.10.

Singapore shares edge higher; oil and gas plays up

SINGAPORE (Jan 15): Singapore stocks traded higher despite Wall Street's pullback on weak US retail sales, as buyers took advantage of a rebound in oil prices overnight to nibble.
At 10:47am (0247 GMT), the Straits Times Index was 0.1% higher at 3,329.85. Market breadth was slightly positive.
"(The) best bet is to look to oil again - and to keep your common sense to try to make a few nickels and dimes," said Michael Every, head of Asia financial markets research at Rabobank.