Chip Eng Seng

Some of the selling at CES today could be due to an article in The Age about Melbourne Mayor Doyle fighting against the planned building due to the shadow issue.

There is fear that the project could be slashed in terms of height and if so, becomes unviable. One comment, “Realistically, from an economic perspective, the developer couldn’t proceed if that was the case”, could be the most negative in that article. Perhaps some traders had taken the opportunity to short, or some longer term investors decided to liquidate “just in case”.

Personally I think even a 300-400 unit project would still be profitable for CES, based on the following:

1. The company had a few years ago paid A$20.2m for a piece of land that was subsequently developed into 33M, a 300+ unit project, and from which it made quite a good profit.

2. It also paid A$19.3m for the Doncaster site, which will be developed into 177 units, including some townhouses (which are not much more pricier than apartments in CBD).

If CES found profit in 33M and is expecting profit from Doncaster, I do not see why it should not make a profit from a 400-unit project at Victoria Street, especially when there is also a retail portion, as the land cost is only about A$10m more compared to the other 2 sites.

However, this is just simple maths, and we will have to await more information on how this situation unfolds, hopefully from CES itself.

Meanwhile, Belysa’s profit was below my expectation. I hope this is due to the spreading out of the reporting into 2 quarters despite the project having TOP in Q2. This is possible as CES may just report what its associate is entitled to, and what this associate is entitled to is not clearly specified. There is also a possibility of post-TOP payments not accounted for.

CES and Unique Rezi emerged top bidders for Parcel A & B at Fernvale Road.

CES holds a 60% stake while Unique Rezi, a JV between Heeton and KSH hold the remaining 40%.

The winning bids were $234,933,000 and $252,122,000 for parcels A & B respectively. This works out to be an average price psdppr of $443.

This price is is substantially lower than the $533 psfppr paid by Far East for the land now knows as Rivertrees and also lower than the $488.8 psfppr paid by UOL for land now known as Riverbank.

While the market is currently weak, going by the selling prices of Rivertree and Riverbank at $1100 and $1000 psf respectively, I believe CES did not over pay for the project and thus should be a profitable venture even though margins might not be as high as back then in 2010 and 2011

Source: infopub.sgx.com/FileOpen/PROVISIONAL%20T...cement&FileID=308844

My estimation of EPS for Fernvale project is about 13 cents EPS.

What is the chance that CES' project at Carlton (net profit easily worth >$100mil SGD) get rejected, going by the approval history of Matthew Guy?

I would put it at 5% based on his "approving history".

www.theage.com.au/victoria/planni...2gb1x.html


Planning Minister Matthew Guy has been dubbed ''Mr Skyscraper'' after approving 20 high-rise developments for inner Melbourne and rejecting just one since taking on the portfolio about two years ago.

Mr Guy announced on Monday that he had approved plans for the tallest tower in the southern hemisphere - Australia 108 - which will stand at 388 metres and be 90 metres higher than Eureka Tower.

His decision to approve the Fender Katsalidis-designed apartment project on Southbank Boulevard will upset critics of the plan, including Melbourne lord mayor Robert Doyle, who argued it would cast a shadow over the Shrine of Remembrance.

The latest permit caps 19 other approvals Mr Guy has issued for tower projects in the Melbourne CBD and inner suburbs that range from 19 to 71 storeys high, since the Coalition won the 2010 election. He has also rezoned swaths of land at Fishermans Bend, Footscray and North Melbourne for high-rise development.

RMIT University planning professor Michael Buxton said the minister should be called ''Mr Skyscraper'' because he was single-handedly changing the skyline of Melbourne.

''Anything goes in Melbourne as far as high rise is concerned, there are no rules,'' he said. ''Matthew Guy is sending the signal to the international development community that they can build anything they want.''

Professor Buxton said Melbourne's economy was based on its liveability, but parts of the city would become ''unliveable'' because of the wind, shade, traffic and alienating scale that comes with towers.

''It's a terrible legacy of mess he's going to leave when he moves on as minister. He will have changed the shape of Melbourne forever and how it functions.''

Mr Guy responded in a statement: ''The Victorian Coalition government is facilitating jobs and investment through approving Australia 108, while taking high-rise development pressures off quiet neighbourhood streets.''

He had earlier announced the approval on Twitter, saying there was no objection from the shrine's trustees: ''Australia 108 is a $600m investment, hundreds of jobs. Takes high density pressures off existing suburbs and out of suburbs.''

During his time as minster, Mr Guy has stepped in to stop one tower proposal from going ahead.

His maiden intervention as planning minister was to impose height controls near the Shrine of Remembrance that stopped an 88-metre apartment tower at 35 Albert Road from being approved at VCAT the following week. The development would have blocked views to the bay from an existing apartment tower in which some of Melbourne's richest businessmen, active Liberal Party supporters, MP Andrea Coote and former Howard minister Peter Reith live.

While happenings in Melbourne are casting a shadow on CES’ rosy image, yesterday’s results presentation and land wins provide some welcoming sunshine:

1. The presentation shows that CES has been quite successful in moving units at its various projects: 9 Residences has 144 units sold now vs 119 in Feb 14, Junction 9’s 143 (only 3 units left) vs 134, 100PP’s 54 (only 12 units left) vs 43.

2. It is no wonder that CES tendered for 2 sites at Sengkang, with the fewer unsold units it has in hand. Based on my calculation, I suspect the company could gross $100m profit from the 2 sites, based on its 60% share. My assumptions are: Net Saleable Area (NSA) of 536,171 + 562,327 = 1,098,498 sq ft (equal to the GFA as 10% free balcony space is allowed, hence allowing me to assume 100% efficiency. Note that 9 Residences’ NSA is 102% of GFA), construction and other costs of $380 psf, and average selling price (ASP) of $935 psf. The $935 psf selling price is about 10% discount from nearby projects.

3. I have been to the area around the sites, and I quite like the fact that one side faces the landed estate of Jalan Kayu, providing a very good unblocked view to as far away as Yishun. It is also very near to the eating haunt of Jalan Kayu, the new Seletar Mall (walking distance or just 1 LRT station away), quick access to TPE, and the fast growing Seletar Aerospace Park. Moreover, with a planned 1,400 units (vs URA estimate of 1,130 units), I believe many of them will be of bite-sizes and hence “affordable”.

4. CES’ latest wins remind me again why I like its management: it’s up and about working hard for shareholders. And in the absence of China developers overbidding sites in Singapore this time, CES has quietly slipped in to win 2 sites in one day!

despite all these good news, CES is still under lots of selling pressure...