17 August 2013

Singapore Investment - Some Thoughts - Aug 2013

From recent financial reports released on SGX website, I noticed that there is a trend for listed companies to venture into property business. It seems that Singapore Property business is a "Sure Win" business for them.

Even though at least 7 rounds of cooling measures have been applied by Singapore government, I do not see a significant impact to stop developers to reduce their property investment. Instead, you may see > S$1,000 psf in suburb area such as Jurong East by Genting Singapore. It seems that the only way we could stop the property price from climbing up is to increase the interest rate or whenever a financial crisis to come again.

With current labor tightening policy (reduce the increase of foreign workforce) and increasing rental rate in property, we do see that the impact in retail sector especially F&B suffers from the reduce EBITDA (Earning Before Interest, Tax, Depreciation and Amortization). It is quite sad when I read the reports from F&B companies. Their bargaining power towards REITs (Real Estate Investment Trusts) manager is too small that they have to pay for the rental increment as most crowd would go to convenient places near to MRT station for dining & shopping activities.

Singapore Local Banks enjoy average ROA of about 1%, which I think also is due to the low interest rate environment. They may enjoy a better ROA later if the interest rate increases later.

With current unfavorable environment for Commodities market, I do see some undervalued counters may come into picture if the commodities price drops further. As I am not sure when the downtrend of the commodities price could go back to the uptrend, but I do see that with steady population growth & increased use of bio diesel, the price wont drop so much below the operating cost.

1st Half of the year, we did see strong interest in Burma and O&G related companies, now we see a stock price normalization until we get more good news from both sectors.

With current Straight Times Index of below 3200, I believe there are more investment opportunities compared to 3 months ago. Let's try our best to find out hidden gems in Singapore stock market. Good luck in your trading / investing.

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