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Singapore Daily Bulletin – 02/01/12

Property Stocks Still Set To Shine In 2013
In 2012, the best performers on the Straits Times Index benchmark were property stocks. According to brokerage UOB Kay Hian, gains are expected to be extended for Singapore Property stocks on the back of higher demand for homes, offices and hotels. A 48 percent gain has been logged for 2012 by the benchmark’s property index, which tracks 40 developers. The best returns globally for 2012 have been reflected by Singapore’s real estate investment trusts (REITS), mainly driven by acquisitions and higher rents. Privatisation bids have also been one of the drivers of property stocks’ share price. Chong Yoon Chou, investment director at Aberdeen Asset Management Asia, said that the corporate themes led by the Fraser and Neave (F&N) saga and the privatisation of SC Global adds another layer of buoyancy to the property sector. F&N saw its share price jump 56 percent last year while SC Global saw its shares marking a 92 percent gain in 2012.

Significance: Vijay Natarajan, an analyst at UOB Kay Hian feels that developers will continue to benefit in 2013 as demand for real estate increases, coupled with rising popularity of Singapore as a destination for expatriates. He adds that investment plans by developers in markets including China will also help boost returns, these developers include City Developments, Wing Tai Holdings and CapitaLand.

Kirin’s Offer For F&N Might Have To Be Revised
Independent financial adviser of Fraser and Neave (F&N), JPMorgan (SEA) (JPMorgan) has found Kirin Holdings’ $2.7 billion offer for F&N’s food-and-beverage business to be “fair” but “not reasonable” from a financial point of view. Kirin Holdings (Kirin) might now have to revise its offer price if it wants to get its hands on the assets. Question pertaining Kirin’s arrangements with Overseas Union Enterprise (OUE) is construed as a “special deal” under the Singapore Code on Takeover and Mergers, was raised by JPMorgan. The takeover code stipulates that without the Securities Industry Council’s (SIC) approval, an offeror or parties in concert with it may not make arrangements with selected shareholders, cannot deal or enter into arrangements to deal or make purchases or sales of shares of the offeree company, or enter into arrangements concerning the acceptance. Although JPMorgan found Kirin’s $2.7 billion to be “fair”, in that the offer price by Kirin was within the range of the estimated sum-of-the-parts valuation of F&N’s food and beverage business, it noted that the sale process on which Kirin’s offer for F&B was based is a negotiated sale, rather than an auction, in which the company has not had an opportunity to participate in negotiations or to seek alternatives.

Significance: Although the SIC had confirmed on 12 December that OUE’s voting undertaking to approve of Kirin’s purchase of F&N’s assets did not constitute a special deal, it is still subject to JPMorgan publicly stating the terms of the offer by Kirin are fair and reasonable. If JPMorgan’s opinion was not this, Kirin would be entitled, but not obliged to revise the offer to make it fair and reasonable.

Singapore 4Q GDP Grows 1.8% On Quarter
Singapore’s gross domestic product (GDP) for the three months to 31 December 2012 grew 1.8 percent on a seasonally adjusted annualised basis, compared with a revised 6.3 percent contraction in the third quarter, according to advance estimates by the Ministry of Trade and Industry (MTI). On a year-on-year basis, MTI said Singapore’s economy grew at a modest pace of 1.1 percent in 4Q12, an improvement from the flat growth in the previous quarter. Despite escaping the technical definition of a recession, the economy expanded only 1.2 percent for 2012, a figure revealed by Prime Minister Lee Hsien Loong in a speech. The prime minister also made the point that Singapore’s success as a nation was not just defined in economic terms, but by ideals and values of its people.

Significance: In view of the global economy to remain sluggish and clouded with uncertainties, MTI expects the Singapore economy to grow by one to three percent in 2013.