Latest news with #CPFOrdinaryAccount
Business Times
5 days ago
- Business
- Business Times
SG60: Property valuation amid growing real estate sophistication
THE SG60 Singapore real estate market is a mature one, marked by a large number of buyers and sellers, landlords and tenants, financiers, lawyers, appraisers and brokers; considerable data transparency; and a breadth of options across all real estate types. Reflecting growing sophistication, public housing now includes standard, plus and prime, and the public-private hybrid executive condo. Similarly, private housing covers apartments and condominiums, landed terrace, semi-detached, detached, bungalows and the hybrid strata landed. New asset types emerge from time to time: real estate investment trusts (Reits) where real estate and financial markets intersect, fractionalised real estate using cryptocurrency, data centres to support the new economy, high-specification buildings for biotech companies, student housing, foreign workers dormitories, co-living, co-working spaces, and so on. Against such a backdrop, valuing this array of real estate assets becomes increasingly complex. Property valuations underpin many household and commercial transactions, such as how much banks lend money for a house purchase and the extent to which CPF Ordinary Account balances can be used. They are the basis for gauging a chunk of a company's net asset value (NAV). Valuations also act as a 'check' against overpaying for corporate real estate acquisitions. For example, a Reit buying an asset often uses the formal valuation of the asset as the benchmark to determine the acquisition price and secure shareholder approval. Likewise, a valuation provides a guide to the 'right' price for the disposal of an asset in the books. A NEWSLETTER FOR YOU Tuesday, 12 pm Property Insights Get an exclusive analysis of real estate and property news in Singapore and beyond. Sign Up Sign Up 'Open source' policy Singapore has an 'open source' policy when it comes to property transactions. There is a free public database of prices from public agencies such as the Housing and Development Board (HDB) and the Urban Redevelopment Authority (URA). For the past three years from 2022 to 2024, the total volume of both HDB and private homes sold averaged well over 40,000 units per annum. It is not difficult to interpolate or extrapolate from this rich data set to gauge what a typical property might be worth. Portals such as Edge or SRX also offer free property 'valuations' driven by artificial intelligence (AI). But these 'lay' approaches to valuation typically work well with what are often called 'conventional' properties – HDB resale flats, apartments and condominiums – where the drivers of value are generally well understood, the market is sizeable and data is plentiful. But, there are a host of properties that characterise the SG60 real estate market that will not be easily analysed in the same way. Take a simple example: The value of strata shops in a mall is a function of its micro location (what level is it on, and what direction does it face?), its neighbours (is it near a popular supermarket?), its size (there is such a thing as a discount for large units), and its shape (regular shaped shop units are easier to fit out with little wastage). For such a property, there are generally fewer comparable transactions. Whatever data exists will not easily yield insights into its 'correct' value because of the varied factors that can influence how market participants perceive their worth. The more specialised the property – think a cement plant in Jurong, your neighbourhood petrol station or the Singapore Flyer – the more difficult the valuation assignment. Enter the property valuer. Laymen can claim to be 'experts', especially in residential property valuation – since most of us own or live in one and will inevitably hold an opinion on its value. But, the property valuer is licensed by the Inland Revenue Authority of Singapore (Iras) and undergoes formal tertiary training comprising a three or four-year university course in real estate or its equivalent. Such a course typically covers four pillars of foundational real estate knowledge – law, building technology, urban planning and economics – that collectively underpin the theory and practice of valuation. Beyond academics, the aspiring valuer must be a member of the Singapore Institute of Surveyors and Valuers (SISV), the sole body representing valuation professionals with a history spanning 40 years, before being eligible for licensing. SISV members are subject to the institute's regulations and disciplinary protocols to act professionally and ethically, in accordance with its practice standards. Because the value of a property is often the subject of ubiquitous coffee-shop talk, the true importance and complexity of valuation is often underappreciated, more so in the context of the growing sophistication of the SG60 property market. Here are some examples. In October 2024, a 60-year leasehold site tender at Media Circle in one-north was not awarded because the sole bid of S$461 per square foot per gross floor area (psf GFA), by a Frasers-led consortium, was deemed too low. Media reports had indicated that analysts preliminarily assessed the land at between S$650 and S$1,100 psf GFA. The gap is significant but, arguably, a big part of the divergence can be explained by the zoning of this parcel for long-stay service apartments (or 'SA2' in URA's parlance), a 'pilot housing typology for occupants seeking long-term rental accommodation' of three months or more. Strata subdivision for individual unit sale – which would enable the developer to get his money back earlier – is also not permitted. The valuation challenge in this case is the novel nature of this typology that currently has no direct benchmarks to go by, and that requires perhaps a different operating model compared to conventional service apartments and hotels. Such cases can only be properly analysed by experienced professional valuers, although the level of the final bid vests solely in the developer who, for whatever reason, may prefer to bid at a premium or discount to the value arrived at by the valuer. It is commonly asserted that valuers interpret the market and do not make the market. In other words, they are price takers, and not price setters. Underlying this assertion is the premise that markets are generally efficient, and that buyers and sellers, taken as a collective, behave rationally. So, if there is a large body of bona fide transactions supporting, say, property prices at a particular level, the valuer's role is to 'let the market speak'. Take another example. Commercial properties are being transacted at a gross rental yield of 3 per cent (that is, gross rent as a percentage of value) – which may just about cover interest cost, including spreads, and, therefore, appear low, considering the risks that accompany real estate investment. Why then do market participants accept this level of yield? They are certainly not uninformed or ignorant. There could be various reasons, including the 'Singapore premium' arising from all the oft-cited strengths of Singapore's economy, the robust local currency, the history of upward trending prices over the long term, and so on. Whatever the reasons, that 3 per cent yield is widely believed to be the appropriate 'market' rate and sets the benchmark for how similar properties ought to be valued. But to be defensible, valuations need to be grounded on 'comparables', which are past transactions of similar properties. This process often gives rise to the divergence between what is known as the 'private' market and 'public' market. This is perhaps best illustrated by the hefty discount that asset-heavy listed property companies are trading as a percentage of the company's NAV. The property company's NAV itself is often assessed by the valuation of that company's real estate. The idea is that if the NAV is, say, $1 billion, then the market capitalisation of that company should not deviate sharply from the NAV. This is because rather than trading in the company's shares at undervalued prices, shareholders can be better served by winding up the company, selling off the assets (at or close to valuation) and distributing the net sales proceeds – that is, effectively the NAV – to them. In practice, private and public markets sometimes diverge quite significantly, again for a host of reasons, such as management's (in)ability to grow the business, shareholder fights, high debt levels which may raise the risk of default, and a lack of liquidity. But one main reason is that NAV is anchored historically, that is, valuation is based on past transactions, and is typically done once or twice a year for financial reporting purposes, and therefore tend to adjust much more slowly. By contrast, stock prices are forward-looking and public markets are generally far more efficient, rapidly reacting (or some might say, overreacting) to market 'noise'. Valuation extends not just to capital values or prices, but also to rentals. There's been some public discussion of high rentals for clinics and beloved food and beverage stores. These rentals have been blamed for retail closures and driving costs higher for ordinary people. One executive from a very large landlord has responded recently with a very thoughtful LinkedIn piece on why such perceptions may not do justice to the reality on the ground. For public rental tenders, the routine use of price-quality (PQ) criteria in tender evaluation helps to mitigate the effects of pure price competition. To bring in a valuation perspective to this matter, in the case of clinics, a single high rental bid does not represent the market as a whole. These 'outliers' do occur from time to time and could represent a wide range of possibilities: temporary exuberance, some commercial advantage accruing to the winning bid not recognised by the rest of the market, enormous competitive pressures, and so on. A valuer asked to appraise such properties would arrive at values which are more aligned with the general market, rather than figures which deviate hugely from investor expectations. Of course, for parties transacting a deal, the valuation of the property – be it for sale or purchase, taxation, or an initial public offering – is best seen as a guide rather than the correct 'answer' to how much the property is worth. Breathtaking technological advances in large language models raise the question if valuers will be collateral damage from the all-conquering AI wave. Even complexity cannot be a bulwark against the AI tsunami. Deep implications But for now, the licensed property valuer's training, nous, and judgement set him apart. Just as important, his affiliation with SISV – with its standards of professional practice and ethical conduct – enables him to extend his role beyond the layman's approach of interpolating or extrapolating publicly available data on property prices. He applies his knowledge and experience to a wide variety of situations – increasingly novel and challenging – that have implications on marital choices, childbearing, household wealth, business decisions and public policy options. The writer is first vice-president, valuation & general practice division, Singapore Institute of Surveyors and Valuers
Yahoo
25-03-2025
- Business
- Yahoo
4 Dependable Dividend-Paying Singapore Stocks for Your CPF Investment Account
Singapore's Central Provident Fund (CPF) system is a great way to save consistently and grow your retirement funds. The good news is that the CPF Ordinary Account (OA) offers you the option to invest your CPF monies to enjoy even better returns through the CPF Investment Account (CPFIA). You can use your CPFIA to invest in a wide range of Singapore stocks and REITs. For such investments, the company in question must possess strong characteristics such as a robust business model, a consistent dividend track record and steady earnings growth. Here are four reliable Singapore stocks that you can consider for your CPFIA. Haw Par is a conglomerate with four key divisions – healthcare, leisure, property, and investments. Its healthcare division owns the famous Tiger Balm brand which manufactures and distributes ointments, salves, and pain patches. The group reported a commendable set of earnings for 2024. Revenue rose 5.5% year on year to S$244.8 million although gross profit dipped slightly by 0.6% year on year to S$134.1 million. Net profit came in at S$228.3 million, up 5.4% year on year. The business also generated a positive free cash flow of S$50.3 million and received a total of S$149.1 million in dividend income, a step up from the S$136.2 million received in 2023. A final dividend of S$0.20 was declared, unchanged from a year ago. In addition, Haw Par also declared a special dividend of S$1 per share, taking the total dividend for 2024 to S$1.40 per share (inclusive of a S$0.20 interim dividend). The conglomerate has a long, storied history of paying out increasing dividends and this special dividend is akin to extra icing on the cake. Sheng Siong is one of the largest supermarket chains in Singapore with 77 outlets across the island. The retailer sells a wide variety of products including live, and chilled produce along with toiletries, general merchandise, and daily necessities. Sheng Siong demonstrated steady store growth since 2020 when the pandemic broke out, with its store count increasing from 63 to 77 today. 2024 saw continued growth in the retailer's top and bottom lines. Revenue rose 4.5% year on year to S$1.4 billion while operating profit inched up 2.7% year on year to S$159.7 million. Net profit increased by 2.6% year on year to S$137.5 million. The supermarket operator's free cash flow jumped 20.3% year on year to S$200.8 million. Sheng Siong paid out a total dividend of S$0.064, a step up from the S$0.0625 paid for 2023. The group intends to open at least three new stores per year and for 2024, it doubled this target by opening six new stores. Management is waiting for the results of the tender for eight additional stores to be released which could see the retailer opening more stores this year in addition to the two that opened in the first two months of 2025. CapitaLand Integrated Commercial Trust, or CICT, is a retail and commercial REIT with a portfolio of 21 properties in Singapore, two properties in Germany, and three properties in Australia. The REIT had assets under management (AUM) of S$26 billion as of 31 December 2024. CICT reported a commendable performance despite the presence of headwinds such as high interest rates and persistent inflation. For 2024, gross revenue edged up 1.7% year on year to S$1.6 billion while net property income improved by 3.4% year on year to S$1.15 billion. Distribution per unit (DPU) crept up 1.2% year on year to S$0.1088. Apart from a resilient financial performance, CICT also displayed solid operating metrics. The portfolio's committed occupancy stood at 96.7% while rental reversion came in positive at 8.8% and 11.1% for the REIT's retail and office divisions, respectively. The REIT has two asset enhancement initiatives (AEIs) slated for completion in the second half of this year and should see a full-year contribution from the acquisition of ION Orchard Mall. Parkway Life REIT, or PLife REIT, is a healthcare REIT with a portfolio of 75 properties – three in Singapore, 60 in Japan, 11 in France, and one in Malaysia. Its total AUM stood at around S$2.46 billion as of 31 December 2024. PLife REIT reported a mixed set of earnings for 2024. Gross revenue and NPI dipped by 1.5% and 1.8% year on year, respectively, to S$145.3 million and S$136.6 million. However, DPU stood at S$0.1492, up 1% year on year. The healthcare REIT maintained a moderate gearing level of 34.8% and had a very low cost of debt of just 1.48%. The REIT has also hedged 87% of its interest rate exposure to mitigate further rises in its finance costs. PLife REIT has an enviable of uninterrupted increases in its core DPU since its IPO back in 2007. Close to 91% of its leases (by gross revenue) also have downside protection. Just 2% of the REIT's loans are due for refinancing this year. Want to protect your child's money from inflation? Transform your child's 'piggy bank' into a 'golden goose' that keeps giving even until they have grandchildren. Our latest FREE report shows you a stress-free method and 3 superstar stocks that could protect your child's money from inflation. Click HERE to get a copy of our latest guide. Follow us on Facebook and Telegram for the latest investing news and analyses! Disclosure: Royston Yang does not own shares in any of the companies mentioned. The post 4 Dependable Dividend-Paying Singapore Stocks for Your CPF Investment Account appeared first on The Smart Investor.
Yahoo
28-02-2025
- Business
- Yahoo
4 Reliable Singapore Stocks That Are Perfectly Suited for Your CPF Investment Account
The Central Provident Fund (CPF) Account is one of the best ways to save for retirement. By socking your money away in your CPF Ordinary Account (OA), you can slowly build a large enough nest egg that can generate regular income for yourself. However, the CPF OA pays an interest rate of just 2.5%, which is barely enough to keep pace with long-term inflation, which runs between 3% to 4% annually. Hence, you should invest your CPF OA money to achieve a better long-term return, and a good place to start is to select solid businesses with long, dividend-paying track records. To do so, you need to open a CPF Investment Account. Click HERE for more details. Here are four reliable Singapore stocks that you can sock into your CPF Investment Account. Venture Corporation is a blue-chip contract manufacturer and a provider of technology products, services, and solutions. The group has clients in many technology domains such as life science, genomics, medical devices and equipment, and healthcare. Venture reported a downbeat set of earnings for 2024 as the group is still affected by the current semiconductor downturn. Revenue dipped by 9.6% year on year to S$2.7 billion and net profit fell by 9.3% year on year to S$245 million. Despite the lower profit, Venture generated a positive free cash flow of S$466 million for 2024, comparable to the S$473.9 million churned out in 2023. In terms of dividends, the group has also been very consistent, paying a total of S$0.75 per year in two tranches (S$0.25 interim and S$0.50 final) since 2020. At a share price of S$12.63, Venture's shares provide an attractive historical dividend yield of 5.9%. Venture has also purchased 1.7 million shares under its share buyback plan, out of a total authorised repurchase amount of 10 million shares. The board has approved the acceleration of this plan to buy back the remaining 8.3 million shares. The contract manufacturer is also implementing new business wins in design and manufacturing and targets for growth this year. Frasers Centrepoint Trust, or FCT, is a blue-chip retail REIT with a portfolio of nine suburban malls and an office building. The REIT has shown resilience in the face of tough times as interest rates surged and inflation hit highs back in 2022 and 2023. For its fiscal 2024 (FY2024) ending 30 September 2024, FCT reported a 4.9% year-on-year dip in gross revenue to S$351.7 million. Net property income came in 4.6% lower than the previous year at S$253.3 million. These declines were attributed to the sale of Changi City Point in October 2023 along with Tampines 1 Mall being impacted by asset enhancement works. Stripping these out, revenue and net property income would have increased by 3.5% and 3.4%, respectively. Distribution per unit for FY2024 slipped just 0.9% year on year to S$0.12042, giving the retail REIT's units a trailing distribution yield of 5.8%. For the latest quarter, FCT saw committed retail occupancy stay high at 99.5% while shopper traffic and tenant sales also saw year-on-year growth. These operating metrics attest to the strength of demand for its suburban mall portfolio. Singapore Technologies Engineering, or STE, is a technology and engineering group that serves customers in the aerospace, smart city, and defence sectors. The group provided an encouraging market update for the first nine months of 2024 (9M 2024) which saw revenue climb 14% year on year to S$8.3 billion. All three of its divisions recorded year-on-year revenue growth. A total of S$8.3 billion of new contracts was secured in 9M 2024, taking the order book to S$26.9 billion. Meanwhile, another S$4.3 billion of contracts was snagged by STE in 4Q 2024, which was nearly double the S$2.2 billion secured in 3Q 2024. The engineering giant has been paying quarterly dividends of S$0.04 each, with the annual dividend of S$0.16 being paid out since 2022. At a share price of S$5.06, STE's shares offer a trailing dividend yield of 3.2%. VICOM may not be a blue-chip stock, but the test and inspection specialist has a strong competitive edge. The group has a 72.9% market share of the vehicle inspection market and inspected a total of 525,108 vehicles last year. VICOM is also one of the authorised partners appointed by the Land Transport Authority to install onboard units in vehicles as part of the ERP 2.0 exercise. Thus far, 77,000 of such units have been installed. VICOM reported a commendable set of earnings for 2024 with revenue rising 6.8% year on year to S$119.5 million. Operating profit increased by 4.8% year on year to S$34.6 million while net profit improved by 6.1% year on year to S$29.3 million. The group also generated a positive free cash flow of S$23 million, 22% higher than a year ago. A S$0.03 final dividend was declared for 2024, up from S$0.0275 last year. For 2024, the total dividend stood at S$0.058, giving shares of VICOM a historical dividend yield of 4.4%. Which SGX companies will reach S$100 billion next? Our latest FREE report provides detailed financial analysis and growth prospects of 5 potential candidates. The results? Surprising. You'll want to grab a copy now and see whether what everyone else says is true. Click here to download now. Follow us on Facebook and Telegram for the latest investing news and analyses! Disclosure: Royston Yang owns shares of VICOM. The post 4 Reliable Singapore Stocks That Are Perfectly Suited for Your CPF Investment Account appeared first on The Smart Investor.
