Reports » Singapore

Singapore stock market and companies daily report (Hock Lian Seng Holdings and Meadows Bright Development, Ryobi Kiso) (September 27, 2012)

Contributed by Shares Investment

Unexpectedly Poor Aug MPI Heralds Possible Return To Recession
Yesterday’s release of August’s manufacturing production index (MPI) figures painted a fairly gloomy and unexpected picture. Singapore’s MPI fell 2.2 percent year-on-year due to a larger drag from the electronics sector as well as a surprise fall in transport engineering. The surprise fall in transport engineering could be attributed to a higher base recorded in August 2011 which saw the sector grow 22.6 percent year-on-year then. The sector shrunk by about 20.1 percent year-on-year for the first time in a year. However, analysts pointed out that the relatively strong order books of companies in the marine and offshore engineering segment could offer more support in the coming months. The same could not be said for the electronics sector as output there fell 5.3 percent, a third consecutive month of contraction. This comes even though the sector’s 2011 figures were already at a low base. This sustained drag has clipped off nearly 2 percentage points from MPI growth.
Significance: Analysts fear that the third straight month of electronics decline could have pushed a trade-reliant Singapore into a technical recession. Analysts said that Singapore is likely to experience a sequential decline of about 2 percent quarter-on-quarter after a 0.7 percent drop in 2Q12.

Local Group Awarded $244.3m Dairy Farm Site
A group of local construction companies have been awarded the tender for a 99-year leasehold private residential site at Dairy Farm Road. The group comprises of Hock Lian Seng Holdings and Meadows Bright Development (a joint venture owned by TA Corporation, King Wan Corporation and Far East Distillers). The Dairy Farm land site measures around 188,863 square feet and has a plot ratio of approximately 2.1 which means the maximum gross floor area would be approximately 396,621.1 square feet. The purchase price of $244.3 million translates to an estimated $616 per square feet per plot ratio. The site has a potential to be developed into a residential development of approximately 400 units and will enjoy good accessibility when the Hillview and Cashew MRT stations are operational. Neo Tiam Boon, chief executive officer of TA Corp felt that the combined knowledge and expertise of the group will help them to “roll-out a quality development that will be very appealing to the market”.
Significance: For Hock Lian Seng in particular, this award will mark the company’s foray into large-scale high-quality condominium development. This signals a significant milestone for the company since it incorporated property development as one of its core businesses.

Ryobi Kiso Secures More Contracts Worth $24 million
Specialist ground engineering solutions provider, Ryobi Kiso said that it has recently clinched several contracts worth approximately $24 million. Some of the contracts awarded for foundation and geoservices works include: 1) Downtown Line Stage 2; 2) an executive condominium contract; 3) a HDB public housing contract; 4) underground link between Orchard MRT and Tangs plaza upgrading contract; and several contracts in Australia. Ong Tiong Siew, chief executive officer of Ryobi Kiso said that the company’s contract momentum has continued since the beginning of 2012. Ong also felt that the company’s Australian entities “are also off to a healthy start since the completion of the acquisition in July 2012”. Ong notes that although Singapore’s construction industry could face some challenges ahead (due to macroeconomic factors), Ong felt that the company’s focus on quality and excellence will enable it to remain competitive.
Significance: The series of contract wins will now bring Ryobi Kiso’s total haul for calendar year, 2012 to over $132 million. The good run could help underpin the company’s future financial performance after somewhat poor earnings figures for its FY12 which ended on 30 June 2012.