Tag Archives: OCBC

Local banks sees rise in bad home loans

in today’s news, it was reported that Singaporean banks are piling up on their share of bad loans. This is especially so due to the sliding housing prices in the current lull market. UOB has increased its share of non-performing loans to S$502M in the past 2 consecutive quarters, due to borrowers investing in a particular high-end project (S$166M). According to UOB, this non performing loan book was well collateralised and has minimal impairment charge. Acccording to Maybank Kim Eng report, the project is Turquoise in Sentosa.

OCBC also saw its non-performing loan rose in the high-end sector. It rose 20% from S$227M from a year ago.

DBS’s non performing loans sector is about 0.2% of its S$110M  loan portfolio.

According to recent property news, it seems like that the Singapore property prices looks to face downward pressure. According to DPM Tharman’s recent comments “…meaningful reversal after each upswing …” may indicate more drops before it starts to rise.

 

Local banks likely shielded from property lull

http://business.asiaone.com/news/local-banks-likely-safe-housing-slowdown-report

HOME sales here may be waning but local banks should be shielded from the worst effects of a property market decline, according to a brokerage report released yesterday.

Maybank Kim Eng research head Ng Wee Siang said in the note that anti-speculation measures and positive economic factors should help the local banks to shrug off any mortgage weakness they may face.

Anti-speculation measures, imposed as early as late 2009, helped to curb demand in the residential property market.

They included the imposition of a 50 per cent loan-to-value ratio on second housing loans for individuals and a 40 per cent one for their third and subsequent home loans.

The loan-to-value ratio indicates how much cash a buyer has to put down when buying a home, with higher out-of-pocket cash for a lower ratio.

“These anti-speculation measures should shield our banks from a sharp slowdown in the housing market, to a certain extent,” said Mr Ng.

Local banks could also get support from an expected modest 3 per cent growth in Singapore’s economy, which should keep employment high and stave off a scenario of runaway non-performing loans.

Property developers are now in better shape than before the onset of the 2008 global financial crisis, observed Mr Ng.

Financially stronger developers would imply a less urgent need for aggressive price cuts in their projects which could dampen market sentiment, he added.

Banks should also be able to benefit from a gradual and modest increase in interest rates, which will allow the market to digest the impact of a hike.

“This should protect their portfolio quality as interest rates rise,” Mr Ng said.

Maybank Kim Eng is projecting that the three- month Singapore Interbank Offered Rate (Sibor) will be unchanged at 0.4 per cent this year, before rising to 1 per cent by the end of next year.

The Sibor is the rate that banks lend to one another and is commonly used to set mortgage levels.

There had been concerns that banks’ profitability could be held back by weakness in their home loan books.

But Mr Ng noted that throughout the periods of recession here, such as during the 1998 Asian financial crisis and the 2003 severe acute respiratory syndrome crisis, Singapore banks’ housing non- performing loans ratio by and large stayed below 5 per cent.

The exception was OCBC Bank, which saw a peak housing non-performing loans ratio during the Asian financial crisis of 9.8 per cent.

Maybank Kim Eng has chosen DBS Bank as its top pick in the sector, with a possible 26.3 per cent upside in the target share price, followed by United Overseas Bank with a 9.8 per cent upside and OCBC with 3.4 per cent.

It is remaining cautious on OCBC, given the execution risks in its acquisition of Wing Hang Bank.

– See more at: http://business.asiaone.com/news/local-banks-likely-safe-housing-slowdown-report#sthash.vgdm1bqs.dpuf

Unlock value in Western end of Orchard Road

http://www.straitstimes.com/news/business/property/story/western-end-orchard-road-has-potential-report-20140704#sthash.rIsTUoIw.dpuf

THE sleepy western end of the Orchard Road retail district has plenty of untapped redevelopment potential, and investors should keep an eye on firms that own these choice sites, OCBC Investment Research said yesterday.

The area stretching from Far East Shopping Centre to Tanglin Mall stands to gain from possible redevelopment plus the upcoming Orchard Boulevard MRT station, said analyst Eli Lee in a report.

Its value could also get a boost from an expected shortage of retail space in the main Orchard Road shopping district over the next few years.

The winners in all this could be the listed landlords whose “crown jewels” are in the area – Hotel Properties Limited (HPL), Wheelock Properties, Hong Fok and Bonvests, Mr Lee said.

http://www.ocbcresearch.com/Article.aspx?type=strategy&id=20140703144334_52977

From OCBC:

With a dearth of upcoming projects in the Orchard retail space pipeline over 2015-17, we believe there could be a greater impetus for strategic redevelopments along the western end of Orchard Road – a neglected area with relatively dated assets. In particular, Hotel Properties Ltd (HPL), which owns a large combined site in that area, has been long reported in the media to be considering a mega-development and recently saw a general offer made by a consortium comprising strategic partners, Mr. Ong Beng Seng and Wheelock Properties Ltd. (Wheelock). Our research reveals the meaningful confluence of fundamental drivers supporting the revitalization of West Orchard ahead, and we identify four developers with key assets in the area. We initiate coverage on HPL with a BUY and fair value of S$5.32 (35% RNAV disc.), and on Wheelock with a BUY and fair value of S$2.38 (30% RNAV disc.). Other potential beneficiaries in West Orchard include Hong Fok (unrated) and Bonvests (unrated), which are trading at 35%-47% discounts to RNAV.

Dry retail space supply in Orchard pipeline over 2015-17 could set up a crunch ahead
A dearth of upcoming projects in the Orchard retail space pipeline over 2015-17 would likely set up a crunch for space over that period, in our view. From 2013-17, our base case is that occupancy rates will rise from 95.8% to 97.2%, and Orchard prime retail rents will grow at a CAGR of 2.0% p.a. to S$36.9 psf pm.

Turning our eyes to quiet western end of Orchard Rd for deep value
Given this, we believe forward-looking investors should turn their eyes to the western end of Orchard Road – from Far East Shopping Center to Tanglin Mall – a neglected area of relatively dated assets that holds significant potential for redevelopment and expansion. In particular, Hotel Properties Ltd (HPL), which owns a large combined site in that area, has been long reported in the media to be considering a mega-development and recently saw a general offer made by a consortium comprising strategic partners, Mr. Ong Beng Seng and Wheelock Properties Ltd. (Wheelock).

A meaningful confluence of drivers for West Orchard revitalization ahead
From our research, we believe there is a meaningful confluence of fundamental drivers supporting the revitalization of West Orchard ahead. For instance, authorities have planned comprehensive underground links from the key Orchard MRT station to the area, and also a new MRT station near Tanglin Mall, in addition to various incentives for redevelopments through the Master Plan.

Initiate with BUY ratings on HPL and Wheelock
In this piece, we identify four developers with key assets in the West Orchard area. In addition, our estimates indicate that a potential HPL mega-development could yield as much as S$1.25bn in surplus net present value for the company. We initiate coverage on HPL with a BUY and fair value of S$5.32 (35% RNAV disc.), and also on Wheelock with a BUY and S$2.38 fair value (30% RNAV disc.). Other potential beneficiaries in West Orchard include Hong Fok and Bonvests, which are trading at 35%-47% discounts to RNAV.