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SINGAPORE
STRATEGY
LONG TERM
Conviction| |
Kenneth Ng CFA
T (65) 62108610 E kenneth.ng@cimb.com
6%
Citizen growth rate (% yoy) Total population growth rate (%) Foreigner population growth rate (%) - RHS
15%
Singapore will experience an unprecedented age shift between now and 2030. Over 900,000 Baby Boomers, will enter their silver years. From 2020 onwards, the number of working-age citizens will decline, as older Singaporeans retiring outnumber younger ones starting work
Population White Paper
4%
10%
0%
-5%
SOURCES: BLOOMBERG
The big problems are ageing and a low birth rate. The solution is to keep the current slow pace of population growth and accelerate infrastructure investments. Long-term beneficiaries are construction, healthcare and education; losers are industrial REITs and the manufacturing sector. Our Neutral rating and end-13 FSSTI target of 3,316 are unchanged.
to infinity and beyond but the number crunching suggests that it is hardly so. The implication for the country is that manpower will stay tight and GDP growth will probably slow to sub-3% range.
DBS Group
Cheapest Singapore bank with the right SingaporeGreater China profile. Lending should return with trade. Margin pressure to be less, without deposit -funding constraints. Best poised to capture IB fees from a booming debt capital market.
Wilmar
Commodities was 2012s worst performing sector. Wilmar is our pick in this unloved space. The stock has bounced off its 3-year P/BV lows but is still cheap. Oilseed and grains division is turning around, guidance of better timing of purchases.
IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
February 3, 2013
Property considerations
Planned population growth and available land for housing units suggest that the government wants to keep the growth of available housing units slightly ahead of population growth. This will do much to appease those who complain of the high cost of living. We do not see an environment where physical prices will make the same gains as 2005-2012. Better stock beneficiaries will be retail REITs and office stocks. The former will do well, especially if they have assets near locations where major redevelopment works are planned. The latter will do well as the growth of professional, managerial, executive and technical (PMET) jobs is expected to outpace population growth.
140 135 130 Retail sales (ex. auto) per sf Rental - Central Rental - Fringe
1Q2006 = 100
125 120 115 110 105 100 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1
In S$m 35,000
Public
Private
30,000
25,000
20,000
15,000
10,000
5,000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Africa (average)
Philippines
Malaysia
Indonesia
South Korea
India
Brazil
Thailand
South Korea
Germany
UK
Japan
0
SOURCE: CIMB, CIA The World Factbook
Hong Kong
China
Singapore
Taiwan
February 3, 2013
Calculations are performed using EFA Monthly Interpolated Annualisation and Aggregation algorithms to December year ends
February 3, 2013
1. POPULATION WHITE PAPER & LAND USE PLAN 1.1 Highlights from the Population White Paper
The Singapore government released two long-term strategic planning papers last week. The first, the Population White Paper, highlights the key problem of ageing. The current Singapore citizen population stands at 3.3m vs. a total population of 5.3m. With a quarter (900k) of the current citizen population heading towards retirement by 2020, the citizen workforce will decline as retirees outnumber incoming younger workers. The retirees-workforce ratio will shrink from the current 5.9 to 2.1 by 2030. This has implications of (at least) doubling the potential tax rate that future generations have to pay just to ensure that the retired generation enjoys the same subsidies. By 2025, the citizen population will also start to decline. To counter the ageing population, Singapore plans to accept 15k-25k conversion to new citizens each year while keeping a float of ~550k permanent residents (PRs) and accepting 30k new PRs each year. The base of citizens and PRs will rise from 3.8m now to 4.2m-4.4m by 2030. The foreign population base will rise from 1.5m now to 2.6m by 2030. The increase in the foreign population is necessary to take on lower value-add jobs and fill positions where there are insufficient locals with the required skillsets since 2-in-3 citizens will be taking PMET jobs by 2030, vs. 1-in-2 now.
Figure 4: Entry and exit of citizens from working age - 2030
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The Marina Bay area can support the expansion of the current CBD by another 1m sf but to alleviate the strains of uniform travel patterns in morning and evening peak hours, Singapore will also develop commercial centres in the city fringe and the northern corridor as well as a new southern waterfront city. The southern waterfront city will be developed at the current site of port facilities which will move to reclaimed land in Tuas (western tip). Housing stock will increase by 700k (+37%) from the current stock of 1.9m homes, of which 200k (+10.5%) will be completed by 2016.
150,000
91,200
150,000
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89,400
59,600
61,100
61,100 2014F
57,000
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57,200
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43,700
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37,800
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28,900
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0
2013F 2014F 2015F 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
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2013F 2015F 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-50,000
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2. GDP growth will slow. The journey to a 6.9m population base will only see a workforce growth of 1% p.a. Since GDP is the sum of population growth and productivity gains, target productivity gains (2-3% this decade, 1-2% for 2020-2030) will support 3% GDP only if productivity gains come through. There is a big if here because historical numbers show that productivity gains have slowed from 3.1% in the 1990s to 1.8% in 2000-10. If Singapore fails to achieve its target productivity gains, GDP could be even lower than the 3% long-term range. In our opinion, it is not as easy to achieve productivity gains in services as in manufacturing. Also, when productivity gains are achieved, profits tend to filter more towards the providers of capital than the providers of labour, further widening the income divide.
36,910
61,100
100,000
100,000
77,500
130,000
191,200
Title: Source:
February 3, 2013
Title: Source:
Please fill in the values above to have them entered in your report
1Q88 1Q90 1Q92 1Q94 1Q96 1Q98 1Q00 1Q02 1Q04 1Q06 1Q08 1Q10 1Q12
SOURCES: CEIC
3. Some excess residential supply is planned for. Planned completed housing units of 700k from now till 2013 include a spurt of completion (200k) from now till 2016. Our ongoing concern that rising residential vacancies will depress physical property prices remains valid. Beyond 2016, the remaining 500k planned housing units till 2030 needs an incremental population base of 1.6m to absorb the supply but the 6.9m population target implies an incremental population base of only 1.3m-1.4m in the same period. 4. Support for commercial and suburban retail, less for industrial. The shift in the citizen workforce from 1-in-2 working as PMETs to 2-in-3 working as PMETs will keep up demand for office space. Suburban retail centres will continue to enjoy high footfall as new population hubs are developed. Industrial land will be a key loser. A clampdown on lower value-added activities and tighter industrial land supply could negatively impact industrial landlords. 5. Construction, healthcare and education to benefit. Outside of property, the clearest beneficiaries are construction and healthcare players. Education stocks could play a role as they complement the national education system by helping to provide many routes to success. Supermarkets will benefit as a larger population base provides the demand for consumer staples. Losers include companies like auto distributors as the fleet of cars available will be capped in increasingly crowded roads.
2. IMPLICATIONS FOR PROPERTY & BANKS 2.1 Residential: vacancy rates to remain elevated
Our expectations of rising vacancy rates remain unchanged. We believe that the government is now planning for some excess property supply, after the lessons of the past five years. The upcoming 700k supply includes 200k units due for completion by 2016. Our in-house model imputes 80k foreigner net add (vs. 61k) and 30k net add to residents per year (vs. 20k), and we still see vacancy rates rising to 8-10% by 2015. Beyond 2016, the fairly muted new population growth targets will raise vacancy rates for private residential units further, after the first 200k units are completed. The subsequent 500k units added after 2016 will cater to an additional 1.6m population (based on current household size of 3.2). If the population grows at 86k a year, this means an additional 1.2m people to populate the 500k housing units i.e. supply will still exceed demand. We present another perspective - we strip out demand for HDB and gauge how much household size has to shrink to absorb supply. The ratio of PRs to citizens stands at 16% in 2030, in line with 2011/12. The percentage of residents staying
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in HDB flats was 83%. This implies 27k residents a year demanding HDB flats, or 8k units based on household a size of 3.2 and 116k units cumulative from 2017 onwards. If the balance 380k units are private residential units, catering to non-residents and the balance 17% of residents totalling 61k population net add a year (860k in aggregate from 2017 onwards) implies a household size of 2.3 for private units vs. 3.4 on average.
Figure 13: Vacancy rates will still trend upwards beyond 2015
(Units) 28,000 23,000 18,000 13,000 8,000 3,000 -2,000 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12
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ss (LHS) dd (LHS) 10-yr average dd (LHS) Vacancy (RHS)
476
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900,000
800,000 2006 2007 2008 2009 2010 2011 2012 2013F 2014F
Net supply
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Obviously, supply can be adjusted along the way, but with plans for 700k additional units till 2013, we expect physical property prices to be capped. We remain negative on developers with significant Singapore residential exposure, including CityDev (Underperform) and Wingtai (Underperform).
Figure 18: Suburban retail rents rising in tandem with retail sales psf
50.5
140 135 130
Title: Source: Please fill in the values above to have them entered in your report
1Q2006 = 100
40 30 20 10 0
(20 09 Ko ) rea n (20 10 Ja ) pa n( 20 Au 09 ) str ali a( 20 10 ) US A (2 01 0) 1) 4) 20 1 20 1 g( 20 09 )
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re (
re (
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Rental - Central
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We believe that the rising population and commercial space allocation locally will benefit retail REITs, especially those with assets near major planned new towns. Apart from retail tailwinds, MCT (Outperform) would benefit from redevelopment plans at the Southern Corridor - the government is hoping to decant container port facilities (at City Terminals and Pasir Panjang when the lease expires in 2027) which could free up 325ha and 600ha of waterfront land, respectively for new commercial and housing developments, all of which would benefit both assets within its portfolio and its pipeline from its sponsor. FCT (Outperform) could also be a beneficiary given tailwinds at its two larger
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12 Q
ina
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assets: NorthPoint could benefit from the addition of homes in Yishun while Causeway Point could benefit from increased catchment at the upcoming Woodlands Regional Centre. Likewise, CMT (Underperform) may benefit from its suburban retail exposure at Jurong Gateway and Tampines Regional Centre though we remain cautious on valuations.
The expected increase in PMET jobs will drive demand for office space and, in turn. provide support for the office market and rents. Grade A rents are currently at their widest discount to office rents in Hong Kong (~40% cheaper) since 1994 and just 15-20% above trough during the last crisis, suggesting upside for rents over the longer term. Increased supply for office sites could provide development/acquisition opportunities for office developments/landlords. Overall, we remain positive on the office sector, particularly with a bottoming expected over the nearer term. Within the sector, our preferred exposure is through developers with office exposure given their more attractive valuations. We like UOL (Outperform), a diversified landlord with exposure to the office sector and OUE (Outperform) for its Grade A office exposure and potential catalyst from asset-recycling. We retain our more cautious stance on the office REITs (CCT, KREIT, Suntec), given expectations of a more flattish DPU growth with the fall-off of income supports in 2013 and with valuations having caught up in 2012.
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2.5 Industrial: Ongoing shift towards higher value-added and land-efficient activities
We believe that industrial players stand out as losers. As land become increasingly scarce amidst rising population and housing needs, land optimisation will be increasingly critical. Land previously used for industrial purposes would have to give way. We expect Singapore to maintain its strategic shift towards higher value-added and more land-efficient economic activities. Traditional and more labour-intensive manufacturing activities could increasingly be squeezed out by higher operating costs and be compelled to seek lower-cost alternatives like Malaysias Iskandar. This emphasis on high value-added companies will also trigger scrutiny of industrialists economic development contribution in the allocation of industrial sites. This might impede industrial landlords flexibility and speed in engaging prospective tenants during developments or lease renewals. The Land Use Paper has, in fact, noted a potential need to recycle land such as older lower-intensity industrial areas to make way for housing or commercial uses in the Land Use Plan. Older centrally-located industrial estates may thus be unable to extend their land leases on expiry or may face compulsory acquisition by the government if there are more pressing land use needs.
Figure 21: Occupancy cost on the rise
11.0%
Title: Source:
2011
2003
20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 E
SOURCES: CIMB, URA, SINGSTATS
Discouragement of lower value-added activities and tighter industrial land supply are likely to impact industrial landlords negatively over the longer term. Landlords with higher exposure to tenants in low value-added industries could be particularly affected. Those with shorter-tenure assets in centrally-located industrial estates may not be able to extend land leases. Any potential pullback in allocation of industrial sites could affect the acquisition momentum of industrial landlords, prompting more to seek greener pastures overseas for growth. We are cautious over the longer term on asset classes with higher exposure to traditional manufacturing and SMEs: AREIT (10% electronics, 20% conventional manufacturing,), MINT (40% manufacturing; 23% electronics) and Cambridge (22% manufacturing). MINT (Neutral), in particular, also has exposure to the Kallang Basin where it may be difficult to extend land leases as they lapse. AREIT (Outperform) clearly looks a safer bet for its business parks given its exposure to higher-value-added manufacturing tenants.
February 3, 2013
Title: Source:
8.0
1300.0
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7.0
1100.0
900.0
6.0
900.0
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4.0
Figure 25: Key features of old vs. new rail financing framework
Old License period 30-40 years New 15 years Implications on operators Increases contestability between operators
Ownership of assets
LTA will own rail operating assets License charge corresponds to what operators would have spent on asset purchases under the old framework. Comprises fixed and vairable components, annual charge is a function of revenue and ridership Borne by operator
License charge
Costs are better matched with fare revenue. Margins expected to be lower under new framework
Borne by operator
Operators are responsible for maintenance costs even though the assets now belong to LTA.
SOURCES: CIMB, COMPANY
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The reprieve comes later. By 2030, most, if not all, rail lines will be operating under a new rail financing framework. Under this framework, ComfortDelGro (CD) and SMRT will be pure operators while the government will own all operating assets and will determine the frequency of train runs. The new rail financing framework was introduced in 2010 with the objectives of 1) facilitating future expansion of the rail network in a financially sustainable manner, and 2) stepping up contestability among the rail operators. The Downtown Line will be the first awarded under the new framework. The Thomson Line, Cross Island Line and other new lines will similarly be awarded under the new framework. Below are the key features. The new framework is positive for public transport operators and makes their business model more viable. First, it lowers capex burden and puts less strain on cash flow since assets will be purchased by LTA. Second, balance sheets will be lighter since rail operating assets are not included in their books; this implies higher ROAs and ROEs than in the past. Third, costs are better matched by fare revenue. Under the new framework, licence charges are pegged to fare revenues and ridership, which will be backend-loaded. Under the old framework, operators incurred high upfront costs and depreciation even before ridership gained traction. We see ComfortDelGro (Neutral) as a greater beneficiary of the change in the rail financing framework given its limited exposure to the old framework. ComfortDelGro has only one line (NEL) under the old framework whereas SMRTs North-South, East-West Line and Circle Line are subject to heavy capex under the old framework, which could remain a drag on the companys financials.
2010 13,194.5 5,677.2 5,298.5 1,440.8 456.9 14.3 119,235.1 57,742.5 904.6 18,289.3 7,075.5 5,063.0 3,913.6 3,196.4 815.5 243.0 22.3 40,483.8 28,947.1 16,632.7 10,321.1 5,446.5
SOURCES: WEO Database, September 2011 published online by IMF and countries data
An ageing population, particularly, needs more healthcare services; we believe that ageing populations healthcare needs stem from 1) higher incidence of non-communicable lifestyle diseases such as cardiovascular diseases as well as cancer and age-related diseases such as arthritis and diabetes, 2) higher requirements for diagnosis and hospital-based inpatient and outpatient treatment, and 3) longer durations of care. Theoretically, Singapore healthcare
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plays will benefit. However, the problem in the short-term is a significant hospital bed shortage. In terms of hospital bed capacity, Singapore has a lower bed ratio (2.22 beds per 1,000 people in 2010) than other developed nations. Though the government has been increasing the bed capacity of public hospitals periodically (through expansion and new developments), public hospitals are still unable to cater to the rising demand for hospital beds.
Figure 27: Hospital beds: projection and shortfall analysis, 2011-16
Desired Beds [A] Projected Beds [B] Public Hospital Licensed Beds Private Hospital Licensed Beds Projected per 1,000 population Shortfall of beds [A] minus [B] 2011E 15,634 11,509 8,881 2,628 2.19 4,125 2012F 15,904 11,873 8,881 2,992 2.22 4,031 2013F 16,181 12,093 8,881 3,212 2.22 4,088 2014F 16,464 13,043 9,831 3,212 2.36 3,421 2015F 16,749 14,143 10,931 3,212 2.51 2,606 2016F 17,041 14,393 11,181 3,212 2.51 2,648
The Ministry of Health (MOH Singapore) provides access to quality and affordable basic medical services to all residents (citizens and permanent residents; but excludes non-residents). This leave a good proportion of the 1.5m non-residents population requiring healthcare services from the private sector. There are other developments driving a migration of healthcare consumption to the private sector in recent years. The introduction of means testing in 2009 was one. Means testing in 2009 effectively adjusted subsidies provided to eligible patients in public hospitals based on their annual income. The subsidies decrease with increasing annual income, thereby shifting healthcare costs to individuals who can afford treatment in private hospitals. This is expected to enhance the growth potential of the private hospital sector in the long term. As a reference, during 2006-11, public healthcare spending recorded a CAGR of 15.9% compared to 9.2% for private healthcare spending. The growth in public healthcare spending is attributable to the government s introduction of additional healthcare subsidies and various healthcare schemes during the global financial crisis. In dollar terms, private healthcare spending increased by S$2.93bn while public spending increased by S$2.48bn.
Figure 28: Healthcare expenditure in Singapore
Healthcare Expenditure Total (S$ billion) Public Contribution Private Contribution Public as a % of total Private as a % of total Total as a % of GDP 2006 7.52 2.26 5.26 30.1 69.9 3.3 2007 8.51 2.53 5.98 29.8 70.2 3.2 2008 9.69 3.09 6.6 31.9 68.1 3.6 2009 11.02 3.98 7.04 36.1 63.9 4.1 2010 12.02 4.37 7.66 36.3 63.7 4 2011E 12.92 4.74 8.19 36.7 63.3 3.9 CAGR (%) 2006 2011E 11.4 15.9 9.2 -
The Achilles heel for hospitals is manpower and resource usage. With tighter restriction of foreign labour plus initiatives for expansion, rising costs can depress margins. In this aspect, IHHs ability to pluck nurses from its own training school serves to alleviate the healthcare workers crunch. We think that IHH (Outperform) is one of the long-term winners.
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Public
Private
Title: Source:
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38% 60% 72% 58% 63%
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40% 30% 67% 51% 20% 42% 29% 10% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 18% 17% 40% 28% 42% 37% 62%
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Figure 31: Public construction demand breakdown - Residential and civil engineering works are biggest drivers
Residential In S$ m 14,000 Commercial Industrial Others C. Engineering
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Figure 32: Private construction demand breakdown residential, commercial and industrial projects biggest drivers
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Last year, the Building and Construction Authority (BCA) estimated total construction contracts awarded in 2012 to be in the range of S$21bn-27bn. Construction contracts awarded are estimated to be in the range of S$19bn to S$27bn for 2013 and 2014. According to BCAs estimation, around 60% of total
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contracts awarded (S$12bn-15bn) will come from public projects. We think that BCAs estimation could be a tad conservative. Although property sales will slow after the recently introduced property measures, construction demand will still be supported by the completion of previous private unit launches and planned commercial, industrial, civil engineering and MRT expansion projects. This will be given an added boost by the recently unveiled plans for DUO, one of two M+S development projects worth S$3bn, targeted for completion by 2017. We think that a more realistic estimate could be closer to S$28bn-30bn for the next two years, and ~S$27bn in 2015. The best thing for the sector is that all these government infrastructure initiatives will provide a stable source of contracts to bid for and put the feast-and-famine days behind the contractors.
Figure 33: Construction contracts awarded - historical and estimated
Contruction contracts aw arded (S$ bn) 40 36 35
30.0
Figure 34: Historical and estimated basic building materials market size
In S$ bn
35.0 30.9 Total basic building materials
Title: Source:
Construction output
30.9
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10.3% 26.2 27.4 27.7 27.7 10%
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2% 2.2 1.8 1.6 2.1 1.3 2.7 2.4 2.5 2.4 0% 2007 2008 2009 2010 2011 1H12 2012F 2013F 2014F 2015F
5 2004 2005 2006 2007 2008 2009 2010 2011 9M12 2012F 2013F 2014F 2015F
While topline prospects are excellent, margin consideration will be key to the investment thesis in this sector. One constraint for construction firms is labour supply. We favour construction specialist names such as Yongnam (steel), OKP Holding (road and civil engineering). Pan United, the largest cement and concrete supplier, is poised to ride on the upcycle of the construction industry. Soaring rental rates and supply shortage played the game into Tat Hongs hands favourably. Builders of mass housing and public projects include Lian Beng, Chip Eng Seng and Tiong Seng.
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Figure 35: Positive relationship between population and grocery retailer revenues
Support services: The push towards a 6.9m population could also spur demand for various services in general. Depending on the profile of the new addition to the population, there could be higher demand for domestic help and childcare services. Perhaps it is time to explore setting up childcare centres and elderly homes. Casinos could be another unintended beneficiary should the growing foreign population additions translate into a larger captive market for the two casinos.
Auto distributors: Motor car distributors might also not benefit. The Land Use Paper makes it clear that In Singapore, travel needs must be met largely by public transport as it is the most space efficient way of transporting large numbers of people. Our limited land supply also does not allow us to build ever more roads and other facilities for private transport in an unrestrained way. We aim to achieve a public transport mode share of 70% of journeys during the morning peak hours by 2020, and 75% by 2030 given our limited land and greater priority for housing and work, we will have to reduce our reliance on private transport and focus on improving public transport. Our car population per capita and road density are already higher than Hong Kongs today. We will continue to tightly control the vehicle growth rate and implement usage restraint measures such as the Electronic Road Pricing (ERP) and manage road growth at a slower and sustainable pace.
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Jardine Cycle & Carriage (through Cycle & Carriage) distributes Mercedes-Benz, Mitsubishi, Kia and Citron motor vehicles in Singapore. But any negative impact is largely diluted for the company as its Singapore contribution to group revenue was just 7.2% in FY11. Elsewhere, the automotive distribution business contributed 36.2% to WBL Corporations FY12 revenue. In autom otive, WBL represents 11 world-renowned brands with operations throughout the region: Bentley, BMW, Bugatti, Infiniti, Jaguar, Land Rover, Mazda, McLaren, Renault, Volkswagen and Volvo. Given that WBL carries luxury brands and operates in diversified geographies, there is unlikely to be a significant negative impact on the company as well.
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The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBR has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only. If the recipient of this research report is not an accredited investor, expert investor or institutional investor, CIMBR accepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBR. As of February 2, 2013, CIMBR does not have a proprietary position in the recommended securities in this report. South Korea: This report is issued and distributed in South Korea by CIMB Securities Limited, Korea Branch ("CIMB Korea") which is licensed as a cash equity broker, and regulated by the Financial Services Commission and Financial Supervisory Service of Korea. The views and opinions in this research report are our own as of the date hereof and are subject to change, and this report shall not be considered as an offer to subscribe to, or used in connection with, any offer for subscription or sale or marketing or direct or indirect distribution of financial investment instruments and it is not intended as a solicitation for the purchase of any financial investment instrument. This publication is strictly confidential and is for private circulation only, and no part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB Korea. Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. 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Corporate Governance Report: The disclosure of the survey result of the Thai Institute of Directors Association (IOD) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. CIMBS does not confirm nor certify the accuracy of such survey result. Score Range 90 100 80 89 70 79 Below 70 or No Survey Result Description Excellent Very Good Good N/A United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates.
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United Kingdom and Europe: In the United Kingdom and European Economic Area, this report is being disseminated by CIMB Securities (UK) Limited (CIMB UK). CIMB UK is authorised and regulated by the Financial Services Authority and its registered office is at 27 Knightsbridge, London, SW1X 7YB. This report is for distribution only to, and is solely directed at, selected persons on the basis that those persons: (a) are persons that are eligible counterparties and professional clients of CIMB UK; (b) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the Order); (c) are persons falling within Article 49 (2) (a) to (d) (high net worth companies, unincorporated associations etc) of the Order; (d) are outside the United Kingdom; or (e) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with any investments to which this report relates may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as relevant persons). This report is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will be engaged in only with relevant persons. Only where this report is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent "investment research" under the applicable rules of the Financial Services Authority in the UK. Consequently, any such non-independent report will not have been prepared in accordance with legal requirements designed to promote the independence of investment research and will not subject to any prohibition on dealing ahead of the dissemination of investment research. United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S.-registered broker-dealer and a related company of CIMB Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand) Co. Ltd, CIMB Securities Limited, and is distributed solely to persons who qualify as "U.S. Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this communication. The delivery of this research report to any person in the United States of America is not a recommendation to effect any transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CIMB Securities (USA) Inc, is a FINRA/SIPC member and takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc. Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.
Distribution of stock ratings and investment banking clients for quarter ended on 31 December 2012 820 companies under coverage Rating Distribution (%) Outperform/Buy/Trading Buy Neutral Underperform/Sell/Trading Sell 54.5% 34.0% 11.5% Investment Banking clients (%) 9.0% 3.4% 8.6%
Recommendation Framework #1 *
Stock OUTPERFORM: The stock's total return is expected to exceed a relevant benchmark's total return by 5% or more over the next 12 months. NEUTRAL: The stock's total return is expected to be within +/-5% of a relevant benchmark's total return. UNDERPERFORM: The stock's total return is expected to be below a relevant benchmark's total return by 5% or more over the next 12 months. TRADING BUY: The stock's total return is expected to exceed a relevant benchmark's total return by 5% or more over the next 3 months. TRADING SELL: The stock's total return is expected to be below a relevant benchmark's total return by 5% or more over the next 3 months. Sector OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 12 months. TRADING BUY: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 3 months. TRADING SELL: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 3 months.
* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Jakarta Stock Exchange, Australian Securities Exchange, Korea Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons. CIMB Research Pte Ltd (Co. Reg. No. 198701620M)
Recommendation Framework #2 **
Stock OUTPERFORM: Expected positive total returns of 10% or more over the next 12 months. NEUTRAL: Expected total returns of between -10% and +10% over the next 12 months. Sector OVERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +10% or better over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, has either (i) an equal number of stocks that are expected to have total returns of +10% (or better) or -10% (or worse), or (ii) stocks that are predominantly expected to have total returns that will range from +10% to -10%; both over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -10% or worse over the next 12 months. TRADING BUY: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +10% or better over the next 3 months. TRADING SELL: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -10% or worse over the next 3 months.
UNDERPERFORM: Expected negative total returns of 10% or more over the next 12 months. TRADING BUY: Expected positive total returns of 10% or more over the next 3 months. TRADING SELL: Expected negative total returns of 10% or more over the next 3 months.
** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons. Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2011. AAV not available, ADVANC - Excellent, AMATA - Very Good, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent , BBL - Excellent, BCH - Good, BEC - Very Good, BECL - Very Good, BGH - not available, BH - Very Good, BIGC - Very Good, BTS - Very Good, CCET - Good, CK - Very Good, CPALL - Very Good, CPF - Very Good, CPN - Excellent, DELTA - Very Good, DTAC - Very Good, GLOBAL - not available, GLOW - Very Good, GRAMMY Excellent, HANA - Very Good, HEMRAJ - Excellent, HMPRO - Very Good, INTUCH Very Good, ITD - Good, IVL - Very Good, JAS Very Good, KAMART not available, KBANK - Excellent, KK Excellent, KTB - Excellent, LH - Very Good, LPN - Excellent, MAJOR - Very Good, MCOT - Excellent, MINT - Very Good, PS - Excellent, PSL - Excellent, PTT - Excellent, PTTGC - not available, PTTEP - Excellent, QH - Excellent, RATCH - Excellent, ROBINS - Excellent, RS Excellent, SC Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good,
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SIRI - Very Good, SPALI - Very Good, STA - Very Good, STEC - Very Good, TCAP - Very Good, THAI - Very Good, THCOM Very Good, TICON Good, TISCO - Excellent, TMB - Excellent, TOP Excellent, TRUE - Very Good, TUF - Very Good, WORK Good.
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