Singapore Daily Bulletin – 22/11/12

Uncertainties Clouds DBS Bid For Danamon
DBS Group’s US$6.8 billion takeover proposal to buy Danamon is in limbo as the Singaporean bank awaits regulatory approval from Indonesia. While new rules governing ownership of Indonesian lenders offer DBS a route to full control, Danamon’s share price closed 15 percent below the bid yesterday, indicating that traders who profit from acquisitions are not optimistic on this transaction closing than any other pending acquisition deal greater than US$1 billion in Asia. As it weighs DBS’s request, Indonesia’s central bank is pushing for more access for its own lenders in Singapore. That is a request the Monetary Authority of Singapore will not easily grant as it seeks to maintain control over the city’s banking system, said Religare Capital Markets Ltd. A collapsed deal would send Danamon shares plummeting as much as 23 percent to levels last seen before the bid was announced in April 2012, according to OSK Research.

Significance: PT Bank Danamon Indonesia is trading at the biggest discount to any pending takeover offer in excess of US$1 billion in Asia, showing that arbitrageurs are not convinced that Singapore and Jakarta would resolve differences over bank access any time soon for the deal to materialise.

Amara Builds Its First EC Project
Hospitality and property group Amara Holdings is jumping on the executive condominium (EC) bandwagon. It will develop its first public housing EC project at a Tampines site with Singxpress Land and Kay Lim Holdings. Reflecting the core hospitality business of Amara Holdings, the EC project will feature hotel-inspired facilities such as six sky gardens, resort-style landscaping and home concierge services to distinguish CityLife@Tampines from other ECs. Albert Teo, Amara Holdings’ chief executive officer said that the group is entering the market when the needs of the burgeoning sandwiched class and the rising aspirations of HDB upgraders are to be catered to. Given the healthy demand for ECs and affordable property in general, Teo added that: “We will continue to participate in property development projects when we see the right opportunities, and that in turn is largely subject to land pricing and construction costs.”

Significance: When the state tender for the subject site closed in May, it recorded the second highest land price for an EC site since land sales resumed in 2010 with a price tag of $233.5 million, or $373.40 per square foot (psf). Market observers expect the pricing of CityLife@Tampines to be comparable to other nearby EC projects which are priced at $780 to $850 psf for three-bedroom units.

Keppel Bagged New Tender From Naftogaz
In late June 2012, Naftogaz Ukariny executives visited Keppel Fels yard to take delivery of and christen a jack-up rig built at the yard. Naftogaz had bought two jack-ups from Standard Drilling, which through orders and acquisitions, possessed seven KFELS B Class rigs built at Keppel Fels. Fast-forwarding five months after the delivery of the two jack-up rigs, Naftogaz has awarded the Singapore rigbuilder a tender for the construction of two fresh newbuilds. Keppel Fels beat three other bidders in the race to supply Naftogaz with a pair of semi-submersible drilling rigs at a tender price of US$1.2 billion. The final contract value and delivery schedule, however, will be determined during negotiations and will be announced when the contract is signed, said Keppel Corporation in an update of the Singapore Exchange on 21 November 2012.

Significance: Ukraine, albeit rich in oil and gas reserves, has been trying to wean itself off Russia’s Gazprom for natural gas by announcing to cut Russian gas imports by more than a quarter to 18-20 billion cubic metres (cm) in 2013 from an earlier 27 billion cm. This latest tender allows it to acquire the drilling capabilities to drill at greater depth to unlock some of its one trillion cm of proven gas reserves.