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Stocks In Focus SG (Singapore Banks, GLP, Tat Hong) – 05/09/13
Singapore Banks’ Subdebt Ratings Downgraded By Moody’s
Credit rating agency Moody’s has downgraded the subordinated debt (subdebt) ratings of three local banks in Singapore, namely DBS Group Holdings, Overseas Chinese Banking Corporation and United Overseas Bank. All three banks will see their subdebt ratings fall from Aa2 to Aa3 due to the lower probability of any support coming from the Singapore regulator/government. However, the banks’ senior obligation ratings and the banks’ intrinsic credit quality will remain unchanged. The downgrade comes in line with Moody’s view of a reduced likelihood of any government support, given that the costs can be shared with subordinated creditors without triggering any fear of contagion. Moreover, past experience has indicated that a resolution framework can be formed in time should a need arise. This report follows Moody’s earlier downgrade in July this year where the outlook of Singapore’s banking system was rated negative underpinned by rapid loan growth and rising property prices.
Significance: Notably, subdebt holders would have to manage their exposure on these debts in view of the updated ratings. Nonetheless, the importance and high level of interconnectedness between the banks could prompt the government to support them in times of a crisis.
GLP To Start Large-Scale Development In Japan
Global Logistic Properties (GLP) will commence its development for GLP Zama, a multi-tenant logistics facility in Greater Tokyo. Acquired in December 2011, GLP Zama will be constructed on the site of a former automobile factory. The existing single-story building of 35,000 square meters (sqm) will be redeveloped into a five-story, modern logistics facility with an expected gross floor area of 130,000sqm. The project is expected to be completed in July 2015, with the total development cost estimated to be ¥20.9 billion (US$210 million). GLP Zama is the sixth development under a 50:50 joint venture between GLP and Canada Pension Plan Investment Board. To date, the venture has committed a total investment of ¥79.6 billion (US$802 million). This development comes after the announcement of sales of multiple properties in Japan to its GLP J-REIT.
Significance: GLP Zama will be the company’s fourth property in the Zama area and the seventh in Kanagawa prefecture. Built to offer best-in-class functionality and advanced features to ensure its clients’ business continuity, GLP Zama will be an attractive logistics facility for corporations and competitive to other third-party logistic providers in the Zama logistic hub.
Tat Hong Proceeds To Optimise Singapore Operations
Tat Hong Holdings, the largest crane company in the Asia-Pacific region, has announced its decision to optimise its Singapore operations. The programme will see Tat Hong divesting one of its properties at 11 Gul Cescent with a total gross floor area of 29,384.5sqm via a public tender. Consecutively, Tat Hong has obtained a 22-year lease from Jurong Town Corporation for 16,100sqm of industrial land located at Tuas South Street 10. To improve operating efficiencies, Tat Hong will consolidate its operations in the Tuas area and proceed to move some of its less time-critical operations to Malaysia thereby reducing operating costs.
Significance: By optimising its Singapore operations, Tat Hong will be able to improve on its operating efficiency, reduce cost and allow better use of its properties. It is expected to recognise a divestment gain in the current financial year, thereby improving its financial flexibility to tap onto any potential opportunities that may arise.
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