Monday, December 11, 2006
[RealEdge] BT : Analysts chalk up gains all round from IRs
| Published December 11, 2006  | |||
| Analysts chalk up gains all round from IRs Resorts expected to bolster stock market, boost construction, tourism and property sectors
By DANIEL BUENAS
(SINGAPORE) The integrated resorts (IRs) at Sentosa and Marina Bay are likely to extend the stock market's rally, boost Singapore's struggling construction sector and provide longer-term downstream benefits for the hotel, F&B and property segments, analysts say.
Market watchers expect Genting International' But all is not lost for CapitaLand. Some analysts believe that CapitaLand's loss is unlikely to have long-term negative effects - and the property company could still gain from the secondary benefits from the two IRs. The benchmark ST index hit new highs last week, almost breaching the 3,000-point barrier before closing at 2,865.14 last Friday. Analysts feel the positive sentiment from the IR projects is likely to help sustain the run. 'It may not push the market to new highs, but the news certainly would add strength and buoyancy to the market,' said Roger Tan, lead investment analyst at Sias Research. Mr Tan added that while Genting is likely to see its stock rally in the coming days before moderating, he feels that CapitaLand's shares are unlikely to see a large downward adjustment. 'They (CapitaLand) are not building a company solely to service the IR, and to a certain extent the market has already taken into consideration that Genting was likely to win,' he said. The company's success with its China-linked real estate investment trust would help cushion any downward adjustment, he added. Taking a similar view is Wallace Chu of DBS Vickers. 'There might be some knee-jerk reaction, but I don't think it will make a whole lot of difference to CapitaLand,' he said. Kevin Scully, managing director of independent research house NetResearch Asia, believes that CapitaLand could still benefit from the IRs, even though it didn't win its bid for either Marina Bay or Sentosa. 'I think the IRs will benefit Singapore's economy as a whole, and CapitaLand could benefit from the secondary effects of that,' he said. In a report issued on Friday night, Merrill Lynch - which has a 'buy' call on Genting - upgraded its price target for the stock to 50 cents from 42 cents. A value of seven cents a share was given for winning the Sentosa project. Genting's shares have enjoyed a good run on the Singapore Exchange lately, hitting a one-year high of 44 cents on Tuesday. The stock closed at 41.5 cents on Friday, while CapitaLand's shares closed 10 cents down at $6.10. On the benefits to Singapore's economy, Mr Scully said the construction sector, which has been languishing in the doldrums for the past few years, will be the first to benefit from the IRs. 'After the construction is completed, the services sector and F&B should see a pick up as well as the secondary rental market as more expats are brought in, but it's too far down the road to judge the full effects of the IRs,' he said. Genting is confident that it will draw up to 15 million tourists by 2010 when its Sentosa resort opens - but the benefits to the Singapore economy are likely to extend beyond just tourism. 'I think the retail side will be positive with the increased tourists and there will be a slew of other benefits, like increased employment and more construction revenue,' Sias Research's Mr Tan said. 'It will be a chain effect where a lot of value will be created not just from tourism, which should push up the economy over the coming few years.' With the announcement of the Sentosa IR winner last week, Trade and Industry Minister Lim Hng Kiang said Genting's project at Sentosa will generate an estimated $2.7 billion in value-add - about 0.8 per cent of Singapore's gross domestic product (GDP) - and 30,000 jobs in 2015. The two integrated resorts in total will inject more than $10 billion into Singapore's economy, and AFP quoted a Citigroup report which estimated that the two resorts could boost Singapore's annual economic growth by 0.1-0.2 percentage points in 2007-2009 and as much as 0.3-0.5 percentage points from 2010 onwards when they are both in operation. Official government estimates peg this year's economic growth at 7.5-8 per cent, before moderating to 4-6 per cent next year. | |||
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