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By Linus Chua and Bernard Lo
Jan. 23 (Bloomberg) -- SC Global Development Ltd., which builds luxury apartments in Singapore, said it plans to price homes at its downtown project ``north of S$3,000 ($1,947) per square foot,'' Chief Executive Officer Simon Cheong said.
The development, called the marQ on Paterson Hill, will be the latest project to sell homes close to the Orchard Road shopping belt. In June, billionaire Kwek Leng Beng's City Developments Ltd. set a record by selling homes at its St. Regis project at prices exceeding S$3,000 a square foot.
Singapore's home market is picking up from a decade-long slump as a recovering economy boosted job growth and confidence in the housing market. Singapore's private home prices rose for the 11th quarter in last three months of 2006, the government said earlier this month.
``The Singapore market has been in the doldrums for so long that when fundamentals improve, prices start to run ahead,'' said Leslie Chua, head of research at Jones Lang LaSalle, a real estate consulting company. ``Now, you also have international buyers who are more sophisticated and are able to spot these trends, which is good for the market.''
He expects luxury home prices in Singapore to rise 20 percent this year.
`Sentiment Game'
``Property is a sentiment game, and one cannot predict the prices just through demand and supply,'' Cheong said in an interview today. The Singapore government has ``taken very major steps to get us to be a global city, with that, you're looking at global pricing.''
Shares of SC Global have risen 63 percent since the start of the year, making them the best-performer on the Singapore property stock index.
The developer plans to start selling homes in the downtown development in the second half, he said. One of the two towers in the project will include a 15-meter private lap pool in every apartment, the developer said.
SC Global said in March it bought the property for S$266 million. It acquired the site from existing apartment owners.
To contact the reporter on this story: Linus Chua in Singapore at lchua@bloomberg.net . Last Updated: January 22, 2007 21:10 EST
SALES
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+44 (0)20 7588 2828 Hong Kong +852 2526 4211 New York +1 212 376 1225Singapore +65 6227 1511
+65 6227 1511London ? Frankfurt ? Paris ? Hong Kong ? Beijing ? Shanghai ? Singapore ? New York
? Frankfurt ? Paris ? Hong Kong ? Beijing ? Shanghai ? Singapore ? New YorkIMPORTANT DISCLOSURES ARE INCLUDED IN THE APPENDIX AT THE END OF THIS REPORT
Singapore
Research
Initiating coverage 18 January 2007
SC Global ? Simply compelling
STOCK RECOMMENDATION PRICE
OUTPERFORM S$3.12
S$3.12SECTOR REUTERS CODE BLOOMBERG CODE
Property SCGO.SI SCGD SP
12 MONTH RANGE MARKET CAPITALISATION PRINCIPAL LISTING
S$3.12 ? 1.25 S$631m (US$410m) SES
NEXT RESULTS DUE LAST RESULTS CHANGE IN STOCK RECOMMENDATION
February 2007 (FY) 10 November 2006 (Q3) n/a
n/aCHANGE IN EPS ESTIMATES
n/a
ANALYSTS
George.Koh@cazenove.com
@cazenove.comTel +65 6395 7686
+65 6395 7686Elaine.Khoo@cazenove.com
@cazenove.comTel +65 6395 7685
+65 6395 7685Share price performance
1.0
1.3
1.6
1.9
2.2
2.5
2.8
3.1
3.4
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
SCGD SCGD relative to STI (rebased) SCGD relative to SESPROP (rebased)
Source: Bloomberg
Share price (%) 1 mth 3 mth 12 mth
Ordinary shares +29 +29 +138
Relative to sector +16 0 +40
Relative to STI +24 +12 +86
Average daily volume shares 0.3m
STI 3037.66
Year to 31 Dec (S$m) 2005 2006E 2007E 2008E
Turnover 136.4 234.0 168.8 325.6
EBIT 13.1 57.9 23.5 52.5
Pretax profit 16.7 52.4 20.5 49.0
Tax (2.0) (9.4) (3.0) (9.6)
Profit after tax 14.7 43.0 17.5 39.4
14.7 43.0 17.5 39.4Minority interests (5.4) (14.7) (4.7) (0.0)
Net profit 9.4 28.3 12.8 39.4
Basic EPS (cents) 7.8 19.5 8.8 27.2
Fully diluted EPS (cents) 5.3 14.0 6.3 19.5
DPS (cents) 3.0 3.0 3.0 3.0
NAV (S$) 1.50 1.80 1.87 2.12
NAV fd (S$) 1.50 1.72 1.76 1.94
fd PE (x) 16.0 35.3 11.5
fd PNAV (x) 1.82 1.77 1.61
P/RNAV (x) 0.50
Total debt/ equity (%) 149 199 351 303
Major shareholders: Simon Cheong CEO & Chairman 55%
Legg Mason 6.21%
We initiate coverage on SC Global Developments (SCGD)
with an OUTPERFORM rating. We set a fair value of S$6.28,
potential upside of 101%.
Singapore?s SCGD is a pure luxury developer. It is renowned
for quality finishes at premium pricings, which often
establish higher benchmark pricing. With over 0.8m sq ft
of prime landbank, SCGD is in a good position to
take advantage of the current rerating cycle in the
highend residential segment.
We expect nearterm releases by its competitors at
Orchard Turn and Ascott Residences at circa S$3,000psf.
This supports our assumed ASPs of S$3,200 (the marQ
on Paterson Hill) and S$2,200 (Hilltops). Additionally,
we can expect further upside from its future launch at
Martin Road, and contributions from its Chinese JV with Lion
Group, as well as a potential rerating in its Australian
associate, AV Jennings. We estimate these projects will
result in a threefold increase in SCGD?s NAV to S$6.28.
Identifying (landbanking) opportunities and its ability to
recycle its capital at pace is crucial for SCGD to sustain its
niche strategy. Inevitably, the success of the group has
resulted in a substantial increase in borrowings and a high
debt/equity ratio. We believe this should be viewed as
assetbacked lending, within a secular asset inflationary
environment.
Despite the strong rally in its share price in recent months,
of prime landbank, SCGD is in a good position to
take advantage of the current rerating cycle in the
highend residential segment.
We expect nearterm releases by its competitors at
Orchard Turn and Ascott Residences at circa S$3,000psf.
This supports our assumed ASPs of S$3,200 (the marQ
on Paterson Hill) and S$2,200 (Hilltops). Additionally,
we can expect further upside from its future launch at
Martin Road, and contributions from its Chinese JV with Lion
Group, as well as a potential rerating in its Australian
associate, AV Jennings. We estimate these projects will
result in a threefold increase in SCGD?s NAV to S$6.28.
Identifying (landbanking) opportunities and its ability to
recycle its capital at pace is crucial for SCGD to sustain its
niche strategy. Inevitably, the success of the group has
resulted in a substantial increase in borrowings and a high
debt/equity ratio. We believe this should be viewed as
assetbacked lending, within a secular asset inflationary
environment.
Despite the strong rally in its share price in recent months,
take advantage of the current rerating cycle in the
highend residential segment.
We expect nearterm releases by its competitors at
Orchard Turn and Ascott Residences at circa S$3,000psf.
This supports our assumed ASPs of S$3,200 (the marQ
on Paterson Hill) and S$2,200 (Hilltops). Additionally,
we can expect further upside from its future launch at
Martin Road, and contributions from its Chinese JV with Lion
Group, as well as a potential rerating in its Australian
associate, AV Jennings. We estimate these projects will
result in a threefold increase in SCGD?s NAV to S$6.28.
Identifying (landbanking) opportunities and its ability to
recycle its capital at pace is crucial for SCGD to sustain its
niche strategy. Inevitably, the success of the group has
resulted in a substantial increase in borrowings and a high
debt/equity ratio. We believe this should be viewed as
assetbacked lending, within a secular asset inflationary
environment.
Despite the strong rally in its share price in recent months,
highend residential segment.
We expect nearterm releases by its competitors at
Orchard Turn and Ascott Residences at circa S$3,000psf.
This supports our assumed ASPs of S$3,200 (the marQ
on Paterson Hill) and S$2,200 (Hilltops). Additionally,
we can expect further upside from its future launch at
Martin Road, and contributions from its Chinese JV with Lion
Group, as well as a potential rerating in its Australian
associate, AV Jennings. We estimate these projects will
result in a threefold increase in SCGD?s NAV to S$6.28.
Identifying (landbanking) opportunities and its ability to
recycle its capital at pace is crucial for SCGD to sustain its
niche strategy. Inevitably, the success of the group has
resulted in a substantial increase in borrowings and a high
debt/equity ratio. We believe this should be viewed as
assetbacked lending, within a secular asset inflationary
environment.
Despite the strong rally in its share price in recent months,
on Paterson Hill) and S$2,200 (Hilltops). Additionally,
we can expect further upside from its future launch at
Martin Road, and contributions from its Chinese JV with Lion
Group, as well as a potential rerating in its Australian
associate, AV Jennings. We estimate these projects will
result in a threefold increase in SCGD?s NAV to S$6.28.
Identifying (landbanking) opportunities and its ability to
recycle its capital at pace is crucial for SCGD to sustain its
niche strategy. Inevitably, the success of the group has
resulted in a substantial increase in borrowings and a high
debt/equity ratio. We believe this should be viewed as
assetbacked lending, within a secular asset inflationary
environment.
Despite the strong rally in its share price in recent months,
we can expect further upside from its future launch at
Martin Road, and contributions from its Chinese JV with Lion
Group, as well as a potential rerating in its Australian
associate, AV Jennings. We estimate these projects will
result in a threefold increase in SCGD?s NAV to S$6.28.
Identifying (landbanking) opportunities and its ability to
recycle its capital at pace is crucial for SCGD to sustain its
niche strategy. Inevitably, the success of the group has
resulted in a substantial increase in borrowings and a high
debt/equity ratio. We believe this should be viewed as
assetbacked lending, within a secular asset inflationary
environment.
Despite the strong rally in its share price in recent months,
SCGD trades at only 49% of our RNAV. This implies the
profitability of SCGD?s landbank at only S$330psf, or a
27% correction in the market price. We initiate coverage
on SC Global Developments with an OUTPERFORM rating.
We set our fair value at S$6.28 (101% upside potential).
profitability of SCGD?s landbank at only S$330psf, or a
27% correction in the market price. We initiate coverage
on SC Global Developments with an OUTPERFORM rating.
We set our fair value at S$6.28 (101% upside potential).
fair value at S$6.28 (101% upside potential).Source: Company, Cazenove
SC Global ? Simply compelling
2 C
C1.0 Executive Summary 3
2.0 Valuation 4
3.0 Background 8
4.0 Market dynamics 11
5.0 Australia & China 13
5.1 Australia?s AV Jennings (42% owned)13
5.2 New venture in Liaoning, China 15
6.0 Financials 17
SC Global ? Simply compelling
C 3
31.0
Executive Summary
We met with CEO Simon Cheong and David Tsang (an executive director) prior to initiating our
report on SC Global Developments (SCGD). We are impressed with management?s depth of
knowledge on the real estate cycle and its pursuit of excellence. We discussed key issues such as
its landbanking strategy, its outlook on the sustainability of price inflation in Singapore?s high
end residential segment, developments at AV Jennings and its recent foray into China.
Echoing its corporate mantra of delivering "The Ultimate Living Experience", we find that SCGD is
uncompromising in its application throughout its entire organisational and project developmental
chains. Focused quality enhancements, as opposed to quantity economics, are prevalent at all
levels; ranging from basic material selection, to intimate ergonomic designs and ultimately, quality
finishes to deliver a holistic and luxurious living environment. It projects are supported by its
marketing team, which embeds itself from the conception phase of each project, makes input
based on sales feedback through to the concluding phases. This approach helps drive full
subscription and at premium rates for all their projects in our view.
Despite its strategic and operational parallels with other manufacturers of "premium" products,
and perhaps because of its short history, SCGD unfortunately does not trade at their average
premium multiples to its peer group. In other luxury brand segments, the likes of Porsche AG
consistently trade at premiums to their peer groups. In Porsche?s case, this is despite its low
liquidity levels. SCGD, meanwhile, has never traded close to its peer averages.
Furthermore, SCGD?s current market capitalisation implies a future net profit of only S$330psf on
its current landbank, which implies a 27% contraction in current property prices (compared to
current transactions at neighbouring projects).
Additionally, we concur with management that AV Jennings, its 42% associate in Australia, is on
the cusp of a strong recovery after 4 years of uninterrupted declines brought about by more than
200bp of interest rate hikes. We expect a declining rate cycle going forward, continuing
government inertia in housing approvals and a sharply declining residential vacancy rate. These
factors should translate into a structural rerating of AV Jennings. Its announcement of recent
losses was largely due to compliance with International accounting standards, which backlog
profit recognition. Hence, applying an average midcycle P/NTA multiple of 1.5x, its stake in AV
Jennings would equate to S$0.31 for SCGD.
We have strong expectations of SCGD?s recent foray into China. The joint venture with the Lion
Group [RM0.67, LION MK, No Recommendation], a Malaysian group that owns 55.5% of the
Parkson retail brand [HK$41, 3368 HK, No Recommendation], targets the midtier residential
segment, where there is negligible foreign competition at this stage. There is also a retail
component, which the Parkson chain is expected to manage. We believe this niche strategy will
not only allow SCGD tremendous handson residential experience, but it will also lower its
investment risk. Given the project?s short duration, we expect residential sales to commence by
H2 2007 with estimated TOP by Q1 2008.
We expect SCGD to launch "The MarQ on Paterson Hill" and "Hilltops" over the next six months.
Management is quietly bullish on the prospects despite competing sales in its vicinity. We believe
"The MarQ on Paterson Hill" will set benchmark pricing in Singapore. We estimate it is likely to
achieve average sales above S$3,200psf. We expect "Hilltops" to fetch average sales of
S$2,200psf. At these levels, SCGD?s RNAV would be S$6.28, which will offer investors compelling
potential upside of 120%. We initiate coverage on SCGD with an OUTPERFORM recommendation.
SC Global ? Simply compelling
4 C
C2.0
Valuation
We use a sumoftheparts approach to value SC Global Developments. For its current projects
not yet fully sold, we assume the remainder will sell at the project?s average selling prices. With
regards to new launches, for the marQ on Paterson Hill we assume it will fetch S$3,200psf on the
premise that upcoming launches at Orchard Turn and Ascott Residences will launch at
S$3,000psf. We assume average selling prices at Hilltops and Martin Road using 30% and 10%
premium, respectively, to the average transacted prices from recent Q4 2006 sales at "The Light
@ Cairnhill" and "RiverGate". We value 200 Newton using a 6% cap rate, while we expect
associate AVJennings to rerate on the back of recovering property cycle, especially in New
South Wales, hence we assume 1.5x book.
Fig 2.1 NAV table
NAV tableRNAV Valuation Current Future projects
S$m $ per share S$m $ per share
SCGD Q3 2006 NAV 237.7 1.64
Assume Wt conversion 86.31 0.43
NAV FD Q3 2006 324.02 1.60
Quoted Associate AV Jennings @ 1.5x book 61.4 0.30
Surpluses not yet recognised;
The LadyHill 18 0.09
Thelincolnmodern 2.3 0.01
The Boulevard Residence 11 0.05
Thr3e Thre3 Robin 0 0.00
The Tomlinson (80% owned) 7.3 0.04
the marQ on Paterson Hill 369.0 1.82
Hilltops 342.4 1.69
Martin Road 79.9 0.39
200 Newton 29.3 0.14
Shenyang, China
Residential 16.9 0.08
Retail 11.2 0.06
Total RNAV FD 362.7 1.79
Last traded price of SCGD 631.4 3.12
Premium / (discount) 74%
Redevelopment surpluses 910.1 4.50
The Boulevard Residence 11 0.05
Thr3e Thre3 Robin 0 0.00
The Tomlinson (80% owned) 7.3 0.04
the marQ on Paterson Hill 369.0 1.82
Hilltops 342.4 1.69
Martin Road 79.9 0.39
200 Newton 29.3 0.14
Shenyang, China
Residential 16.9 0.08
Retail 11.2 0.06
Total RNAV FD 362.7 1.79
Last traded price of SCGD 631.4 3.12
Premium / (discount) 74%
Redevelopment surpluses 910.1 4.50
Total RNAV 1,273 6.28
Last traded price of SCGD 631.4 3.12
Premium / (discount) 50%
Source: Company data and Cazenove estimates
In the above table, we use the latest Q3 2006 NAV release from the company. We assume full
conversion on its warrants to reflect the fully diluted (FD) basis for our calculations.
The current FD RNAV estimate of S$1.79 implies market price of S$3.12 at 74% premium.
However, if we were to include future surpluses from projects not yet launched, our RNAV
estimate would go up to S$6.28. This would offer investors potential upside of 101%.
SC Global ? Simply compelling
C 5
5Fig 2.2 Current implied profitability of landbank
Current implied profitability of landbankSurplus $m Landbank (sqft) Nett surplus $/psf
Cazenove's
assumed ASP $psf implied ASP Implied profit psf
the marQ on Paterson Hill 369.0 241,406 1,528.5 3,200 1,595 137
Hilltops 342.4 448,695 763.1 2,200 1,384 137
Martin Road 79.9 124,536 641.3 1,600 936 137
Hilltops 342.4 448,695 763.1 2,200 1,384 137
Martin Road 79.9 124,536 641.3 1,600 936 137
Martin Road 79.9 124,536 641.3 1,600 936 137
936 137subtotal 791.3 814,637 971.3
Mkt cap less NAV 268.8
Implied net profit psf 330
Difference 66%
Source: Cazenove estimates
Conversely, if we were to take the current market capitalization, the implied average net profit is
S$330psf of landbank. This works out to an average ASP margin of S$137psf for each of the 3
projects. This implies an average selling price for Paterson Hill at S$1,595psf (29% discount to
Q4 2006 BLVD purchases) or S$1,676psf for Hilltops (17% discount to "The Light@ Cairnhill"),
and S$1,452psf for Martin Road (36% discount to "RiverGate").
As a producer of premium real estate products, we certainly think SC Global is comparable to the
likes of what Porsche is to discerning automobile owners.
Fig 2.3 Porsche vs peers Fig 2.4 SCGD vs peers
Porsche vs peers Fig 2.4 SCGD vs peersSource: Bloomberg & Cazenove estimates
However, in terms of valuations, Porsche AG trades at a huge premium to its domestic peers, as
in figure 2.3, whereas SCGD still lags substantially behind its larger peers as we show in figure
2.4.
0
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3
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7
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28Dec01
28Apr02
28Aug02
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28Dec05
28Apr06 VOW BMW POR3 NSU DCX
0.75
1.25
1.75
2.25
2.75
3.25
3.75
0.0 0.5 1.0 1.5
Historical P/B (x)
0.75
1.25
1.75
2.25
2.75
3.25
3.75
0.0 0.5 1.0 1.5
Historical P/B (x)
Current P/B (x)
Kland
Capl CDL
SCGD
WINGT
AG
WP
SC Global ? Simply compelling
6 C
CFig 2.5 SCGD?s capital structure and gearing
SCGD?s capital structure and gearingSource: Company data, Bloomberg & Cazenove estimates
The above figure 2.6 shows SCGD?s recent capital raising activities, through which it managed to
reduce its gearing from over 200% to 1x equity. With upcoming cashcalls for Paterson Hill and
Hilltops, however, we estimate that the group?s gearing will increase from 1x to circa 3x equity.
While this may seem prohibitively high, we should view this in the context of project financing as
these are assetbacked loans, which typically have 70% debt funding, equal to what we assume.
Given the secular trend in highend property, plus the company?s successful record, we are
confident that SCGD will secure all its necessary funding requirements.
Fig 2.6 SCGD?s capital raising and debt/total assets
SCGD?s capital raising and debt/total assetsSource: Company data, Bloomberg & Cazenove estimates
0%
50%
100%
150%
200%
250%
300%
350%
400%
Jan05
Mar05
Jun05
Aug05
Sep05
Oct05
Nov05
Dec05
Feb06
Mar06
Apr06
May06
Jul06
Aug06
Sep06
Oct06
Nov06
Nov06
Dec06
Feb07
Mar07
0.00
0.50
1.00
1.50
2.00
2.50
3.00
S$
Debt/Equity (LHS) Share price (RHS)
20/7/05: Placed out 19.18m
new shares to Chip Lian
Investments, Mark Well
Investments & Dr. Choo Yeow
Ming @ S$1.23 per share
27/9/05: 1for2 rights
issue of 54.54m warrants
@ S$0.05, exercise price
of S$1.50 per share
9/12/05: Placed out 5.75m new shares to
Mass Noble (unit of Yawson Invt Group) @
S$1.35 per share
6/9/06: Placed out 24m new
shares @ S$1.95 per share
20%
30%
40%
50%
60%
70%
80%
Jan05
Mar05
Jun05
Aug05
Sep05
Oct05
Nov05
Dec05
Feb06
Mar06
Apr06
May06
Jul06
Aug06
Sep06
Oct06
Nov06
Nov06
Dec06
Feb07
Mar07
0.00
0.50
1.00
1.50
2.00
2.50
3.00
S$
Debt/Assets (LHS) Share price (RHS)
20/7/05: Placed out 19.18m
new shares to Chip Lian
Investments, Mark Well
Investments & Dr. Choo Yeow
Ming @ S$1.23 per share
27/9/05: 1for2 rights issue of
54.54m warrants @ S$0.05,
exercise price of S$1.50 per share
9/12/05: Placed out 5.75m
new shares to Mass Noble
(unit of Yawson Invt Group) @
S$1.35 per share
6/9/06: Placed out 24m new
shares @ S$1.95 per share
SC Global ? Simply compelling
C 7
7Fig 2.7 SCGD?s capital raising activities
SCGD?s capital raising activities2004 2005 2006
No of shares issued ('000) 95,904 95,904 120,838
Add: New share issues ('000)
Jul05 Chip Lian Investments (Oei Hong Leong) @ S$1.23 9,590
Aug05 Mark Well Investments @ S$1.23 5,275
Sep05 Choo Yeow Ming @ S$1.23 4,315
Dec05 Mass Noble (Yawson Investment Group) @ S$1.35 5,754
120,838
Sep06 Placement @ 1.95 24,000
144,838
Add: Warrants ('000)
Sep05 57542
Total diluted no. of shares (?000) 202,380
Source: Company data
Fig 2.8 Sensitivity of fair value to launch price assumptions
Sensitivity of fair value to launch price assumptionsthe marQ on Paterson Hill (S$ psf)
2,600 2,800 3,000 3,200 3,400 3,600 3,800
1,600 4.62 4.82 5.02 5.22 5.43 5.63 5.83
1,800 4.98 5.18 5.38 5.58 5.78 5.98 6.18
2,000 5.33 5.53 5.73 5.93 6.13 6.34 6.54
2,200 5.69 5.89 6.09 6.28 6.49 6.69 6.89
2,400 6.04 6.24 6.44 6.64 6.84 7.05 7.25
2,600 6.40 6.60 6.80 7.00 7.20 7.40 7.60
2,400 6.04 6.24 6.44 6.64 6.84 7.05 7.25
2,600 6.40 6.60 6.80 7.00 7.20 7.40 7.60
Hilltops (S$ psf)
2,800 7.75 6.95 7.15 7.35 7.55 7.75 7.96
Source: Cazenove estimates
In figure 2.8, we present our sensitivity table of our RNAV against the two key projects, namely
the marQ on Paterson Hill and Hilltops. A variation of S$200psf for both projects would impact
our RNAV by 9%.
our ASP assumption on
the marQ and Hilltops
largely drives our RNAV
of S$6.28
SC Global ? Simply compelling
8 C
C3.0
Background
SCGD was born out of the former ANA Hotels (hotel proprietor) back in 1999 through a reverse
takeover. The group has since repositioned itself as developer of prime residential properties. It
has successfully developed and sold 4 residential projects; The Ladyhill, BLVD, Thr3e Thr3e Robin
and The Lincoln Modern, are all almost fully sold. Its niche strategy to be the leader in the high
end segment of the residential market is underpinned by management?s ability to recycle its
capital and to push prices to the next level. It does this by targeting 25% sales to recoup its initial
development costs and then releasing the rest at higher prices over an extended period.
Essentially its transactions typically command at least a 15% premium over neighbouring projects.
Its first residential launch was "The Ladyhill", which marked SCGD?s entry into the market as a
credible highend luxury developer. Set on one hectare of prime freehold land opposite the
ShangriLa hotel, this exclusive 4storey development with 55 plush residences was launched in
Dec 2000 and fetched an average of S$1,700psf or S$4.3m per unit.
Fig 3.1 The Ladyhill ? sales at launch Fig 3.2 Resale transactions at The Ladyhill
The Ladyhill ? sales at launch Fig 3.2 Resale transactions at The LadyhillSource: URA, Cazenove estimates
SCGD achieved operational breakeven with its initial sales. Thereafter it was able to hold back its
launches to maximise its yield on the project, as in figure 3.1. Despite being the most expensively
constructed development (construction costs estimated at S$400psf) in Singapore, SCGD was
still able to post a decent net profit surplus of S$350psf, despite the weak property sentiment at
that time.
Resale values of "The Ladyhill", as in figure 3.2, have generated substantially higher price
appreciation in the after market. This is to become a recurring feature in most of SCGD projects.
The next launch was "Thelincolnmodern", located in prime Newton area. This is a unique
architectural development with 20foot high ceilings in all apartments. It was recognised with the
RIBA Worldwide Award.
architectural development with 20foot high ceilings in all apartments. It was recognised with the
RIBA Worldwide Award.
Fig 3.3 Thelincolnmodern ? sales at launch Fig 3.4 Resale transactions at Thelincolnmodern
Thelincolnmodern ? sales at launch Fig 3.4 Resale transactions at ThelincolnmodernSource: URA, Cazenove estimates
recycling capital and
pushing prices to the next
level is key.
The Ladyhill is SCGD?s first
test case project and it
won tremendous credibility
with design, finishes and
established new pricing
benchmarks.
800
1,000
1,200
1,400
1,600
1,800
2,000
Jul00
Jan01
Jul01
Jan02
Jul02
Dec02
Jun03
Dec03
Jun04
Dec04
Jun05
Dec05
As of end
S$ psf
est.
breakeven
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
Jun05
Dec05
Jun06
Dec06
Jun07
As at end
S$ psf
est.
breakeven
following closely behind
was Thelincolnmodern, its
first attempt in creating a
niche within the middle
market segment
first attempt in creating a
niche within the middle
market segment
600
700
800
900
1,000
1,100
1,200
Aug00
Feb01
Jul01
Jan02
Jul02
Jan03
Jun03
Dec03
As at end
S$ psf
est.
breakeven
700
750
800
850
900
950
1,000
1,050
1,100
Jun04
Dec04
Jun05
Dec05
Jun06
Dec06
Jun07
As at end
S$ psf
est.
breakeven
SC Global ? Simply compelling
C 9
9As seen in figure 3.3 and 3.4, the project was marginally breaking even at best, given that the
timing of the launch was during a lull in the domestic property cycle. It was, however, able to
establish itself as a serious niche developer with great architectural flair.
Thr3e Thre3 Robin, was the third launch by SCGD. It was similar to Thelincolnmodern with its
own unique style and exquisite features. With 36 units in 10 different apartment or penthouse
layouts, it is located in District 10 nested in the private enclave of Stevens Road and Balmoral
Road.
own unique style and exquisite features. With 36 units in 10 different apartment or penthouse
layouts, it is located in District 10 nested in the private enclave of Stevens Road and Balmoral
Road.
Fig 3.5 Thr3e Thre3 Robin ? sales at launch Fig 3.6 Resale transactions at Thr3e Thre3 Robin
Thr3e Thre3 Robin ? sales at launch Fig 3.6 Resale transactions at Thr3e Thre3 RobinSource: URA, Cazenove estimates
Although its project profitability was depressed given the launch timing, it has, nevertheless,
consolidated its position as a lifestyle developer and the development sold out within 10 months
from its construction completion.
Again, similar to aftermarket activity at "The Ladyhill", figure 3.6 shows the strong resale value
of 33 Robin, where units recently transacted in Q4 2006 at a 20% premium to the project?s
average sales. The lack of transaction volume is testament to the fact that most of the units are
owneroccupied, in our view.
SCGD?s latest launch, "The Boulevard Residence", better known as BLVD, is the tallest residential
landmark development in the prime Orchard road area. It consists of two slender 36storey
towers linked by a sky bridge and offers a compelling view of the Orchard skyline. It has 46
apartments (two junior and two super penthouses).
Fig 3.7 BLVD ? sales at launch Fig 3.8 Resale transactions at The Tomlinson
BLVD ? sales at launch Fig 3.8 Resale transactions at The TomlinsonSource: URA, Cazenove estimates
In October 2005, BLVD set benchmark pricing with transactions at S$2,200. It continued to post
records in 2006 with units exceeding S$2,300psf. In May 2006, a super penthouse was sold for
S$16m (US$10.3m) or S$2,286psf and is among the highest recorded for Singapore.
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
Jan04
Apr04
Aug04
Nov04
Feb05
May05
Sep05
Dec05
Mar06
Jul06
Oct06
Jan07
est.
breakeven
1,050
1,100
1,150
1,200
1,250
1,300
1,350
1,400
1,450
1,500
Oct06 Nov06 Dec06
est.
breakeven
1,200
1,400
1,600
1,800
2,000
2,200
2,400
Dec02
Jun03
Dec03
Jun04
Dec04
Jun05
Dec05
Jun06
Dec06
Jun07
As at end
S$ psf
est.
breakeven
1,400
1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2,300
2,400
Dec05 Jun06 Dec06 Jun07
As at end
S$ psf
est.
breakeven
BLVD established a series
of benchmark pricing over
the last 12 months ?
? while The Tomlinson
was a trading opportunity
SC Global ? Simply compelling
10 C
CManagement?s keen eye for opportunity has resulted in its acquisition of assets at The Tomlinson
apartments plus recent acquisition of Newton 200. SCGD acquired the remaining 13 units (total
35,866 sq ft) of "The Tomlinson", an upmarket luxury condominium developed by WingTai. As we
show figure 3.8, SCGD resold it at substantial premiums on the back of improving market
conditions.
We expect the acquisition of Newton 200 for redevelopment into an office asset to generate a
surplus of almost S$30m (or S$0.14 per shr). Again, similar to the acquisition of The Tomlinson, it
was a trading opportunity with attractively priced assets.
Newton 200 another
trading play, but on supply
shortage in office space
SC Global ? Simply compelling
C 11
114.0
Market dynamics
Residential prices in Singapore increased by 10% in 2006, with an estimated takeup rate of
9,700 new homes (Source: CBRE), supported by a strong Q4 2006 of about 3,000 units. Looking
ahead, we expect momentum to carry through over the next 18 months, largely on foreign
purchases and replacement demand from enbloc activities. Unlike the two previous property
cycles, whereby increasing enbloc activities were a factor in both corrections, the current en
bloc cycle is not driven by changes in plot ratios and consequently does not stress the supply
situation as much as previously.
Fig 4.1 URA Price Index Fig 4.2 Total residential takeup for new units
URA Price Index Fig 4.2 Total residential takeup for new unitsSource: URA
Although the overall index is still some 8% below the minipeak in Q2 2000 (see figure 4.1),
transaction prices of some projects in the highend segment are setting all time highs (MBFC &
St Regis both achieved above S$3,000psf). In Q4 2006, almost 3,000 units were sold.
Despite the sharp rise, the price index is still 29% below the 1996 peak. We believe residential
prices in the highend are likely to continue its upward trend and could rise by another 1015% in
the next 12 months with continued strong demand from foreigners (see figure 4.4 below);
accounting for a significant portion (almost half) of the buyers in districts 9 (Orchard Road), 1
(Marina BFC) and 4 (Sentosa). SCGD?s projects have historically attracted a higher proportion of
foreign buyers (50%) vs sector wide.
Fig 4.3 Enbloc supply in districts 9, 10, 11 Fig 4.4 2006 Profile of buyers in districts 9, 10, 11
Enbloc supply in districts 9, 10, 11 Fig 4.4 2006 Profile of buyers in districts 9, 10, 11Source: Cazenove estimates, URA
As we show in figure 4.3, the current enbloc activities have generated only an additional 116%
increase in supply vs 3x and 4x increases for the previous two cycles. This implies that current
replacement demand can help reduce oversupply concerns to a large extent by absorbing at least
half the projected supply. Given that foreigners account for 40% of new purchases in the prime
districts, we anticipate full take up of upcoming stocks.
40
60
80
100
120
140
160
180
200
Q190
Q191
Q192
Q193
Q194
Q195
Q196
Q197
Q198
Q199
Q100
Q101
Q102
Q103
Q104
Q105
Q106
2Q96: 181.4
2Q00: 140.4
4Q06:130
0
2,000
4,000
6,000
8,000
10,000
12,000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006E
10,043
8,269
7,845
6,688
9,700
foreign buyers make up
50% of SCGD?s
purchases, higher than
prime district average
of 39%.
previous enblocs
destabilized supply
situation with significant
increases in plot ratios
?
? as replacement
demand then accounted
for only 25%30% of
new enbloc supply vs
almost 50% currently
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
20042006 19992002 19941997
No. of units preen bloc No. of units posten bloc
116%
294%
396%
Malaysia
5%
Australia
2%
United
Kingdom
4%
India
3%
USA
2%
Others
13%
Singapore
61%
Indonesia
10%
SC Global ? Simply compelling
12 C
CFig 4.5 Transactions for Prime districts (9, 10, 11) in 2006
Transactions for Prime districts (9, 10, 11) in 2006Source: URA
As an indicator of the degree of speculative activity (see figure 4.5), the current situation is not
yet approaching the excesses of 1996 whereby subsales (resale of new purchases before
project completion) accounted for 40% of new unit transactions vs the current level of only 13%.
In other words, newly sold units were being turned over almost 2x back in 1996 vs the 25%
turnover currently.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
New sale Resale Subsale
subsale activity
accounted for 40% of
new transactions in
1996 vs 13% currently
SC Global ? Simply compelling
C 13
I still think there must be a reason for Mr. Ooi's exit. He is so shrewd that it's a bit weird that he would exit given the current favourable condition. Since he exited at 2.6 just 10 days back, it has skyrocketed! Imagine his opportunity lost is more than $10 millions. (9.6 mil share and it has gone up by 1.3 per share). Maybe peanuts to him. BUT IT IS $10millions.
Just be careful. Even Mah BT referred to certain gps of people talking up the market in tonight's news.
zhuge_liang, can point us to where we can find the report?
Blue chip property counters basically all moves up today....
Seeing this counter shot up makes my heartache. Does anyone know why it has gone up so much so soon? It has now reached uncharted territory, what is the upside? Any shi fu like to share his advice.