Warren Buffett invest $3 Billion in G.E

Mr. Buffett, the billionaire investor, announced on Wednesday that he would invest $3 billion in General Electric, the industrial giant that is also the nation’s largest nonbank financial company.

He is betting when other investors remain fearful and on the sidelines. And his investments, analysts say, are based on the assumption that these two companies will come through the financial turmoil in good shape — helped by a government economic rescue package that will not only emerge but will bring confidence to shaky markets.

Mr. Buffett, the chief executive of Berkshire Hathaway, said in a statement, “G.E. is the symbol of American business to the world,” adding that he has known the company’s leaders for decades. “They have strong global brands and businesses with which I am quite familiar. I am confident that G.E. will continue to be successful in the years to come,” he said.

Golden Agri-Resources delivers record revenue and profit

The Group posted an all-time-high quarterly revenue of US$747 million, up 172% from a
year ago. Net profit attributable to shareholders for the quarter was also a record at
US$443 million, two times the profit recorded in the last corresponding quarter.
The outstanding performance was the result of higher CPO production and a surge in
CPO market prices of close to 100%. CPO production rose due to recovering weather
conditions following the effect of El Nino in the first half of 2007.
Sales volume for the quarter increased by 48% as a result of improved production and
delayed sales brought over from end-2007 (caused by bad coastal weather).
At the bottomline, there was a US$307 million net gain from changes in fair value of the
Group’s biological assets (after tax and minority interests). Excluding this gain and
exceptional items, the net profit for the quarter still grew by a robust 177% to US$136
million.
Mr Franky Widjaja, Group CEO, said that the Group has had an excellent start to the
year. “We are seeing a continuation of a Golden Era for Golden Agri and are reaping
the benefits of our large hectarage of oil palm plantation and our continual efforts to
improve yields and optimise resources. Our fresh fruit bunch yield and CPO extraction
rate are among the highest in the industry.”

OPERATIONAL HIGHLIGHTS
During the quarter, GAR increased its planted area to 364,000 hectares. On more than
244,000 hectares, or two thirds, of the planted area, the trees are between seven and 18
years of age, the prime producing years for oil palms. This large mature planted area
puts GAR in a strong position to capitalise on the historically high CPO prices.
GAR has maintained its production efficiency, raising palm products production by 31%
to 538,000 tons. The fresh fruit bunch yield has been recovered after the drought in late
2006 and early 2007, increasing by about 20% to 5.8 tons per hectare for the quarter.
The CPO extraction rate was stable at 23.43%.

AusGroup wins A$12m Aussie offshore contract

ENERGY and resources specialist AusGroup has secured a new contract worth A$12 million (S$15.2 million) from an unnamed international offshore construction services client.

AusGroup will supply supervision and labour to the client for the offshore installation of a production platform topside, jacket and offshore pipeline on the construction work on the Montara offshore oilfield development project off the north-west coast of Australia.

Work is expected to start next month and scheduled for completion by October.

The latest deal brings AusGroup's contracts secured in less than two weeks to about A$38 million, taking its total order book to more than A$190 million.

'These new orders represent a new market sector for AusGroup,' said AusGroup managing director John Sheridan.

'It is a good start and we look forward to continue the growth.'

AusGroup is primarily based in Australia, where it is a supplier of total engineering solutions in the oil, gas and resource-mining sectors.

The new contract will provide it with exposure to the offshore construction services sector in Australia. AusGroup believes its ability to recruit specialist offshore personnel, as well as manage associated safety and industrial relations issues, puts it in good stead to secure additional offshore construction services-related contracts.

Just last week, the group announced a new contract from a 'blue-chip' client worth about A$26 million.

That contract - for which work is to begin in May and finish in December - came from a global mining resources firm and is for the fabrication, supply and installation of structural and mechanical piping and electrical systems for a new iron ore facility in Western Australia.

AusGroup also has in the pipeline plans to increase the output of its subsidiary Cactus Engineering, a manufacturer of subsea equipment, with the recent purchase of a new facility in Tuas.

For the half-year ended Dec 31, 2007, AusGroup's net profit hit A$12.1 million, an increase of 47 per cent. Revenue rose 60.4 per cent to A$202.2 million.

STI Market Update

STI should grind higher towards the next near-term resistance at 3310, followed possibly by 3428 to 3470 subsequently. Short-term, buy near 3150; sell near 3310. Upside bias to the next resistance level at 3310 before a pullback to test the rising trend line and 15-day moving average support at 3150 to 3200.

The McClellan Oscillator should trend higher towards the overbought level near 50 as the STI heads for 3310 and ease back, in line with STI behaviour. If the STI rises above 3310 subsequently, the next level is 3428 to 3470.

DBS Research sees the USD strengthening from 1.36 currently to 1.39 during 2Q to 3Q. This is positive for shipping trusts Rickmers Maritime, Pacific Shipping Trust and First Ship Lease given their USD-based cashflows and attractive yield. DBS Research has Buy recommendations for Rickmers Maritime (S$1.07; TP: S$1.80; FY08 yield: 11.3%) and Pacific Shipping Trust (US$0.45; TP: US$0.52; FY08 yield: 10.5%). No rating for First Ship Lease (S$1.06; FY08 yield: 13.9%, based on consensus). From a technical prospective, we like Rickmers Maritime and see a trading objective of $1.24. Buy at $1.05 support or slightly above.

The Master Plan, to be exhibited in its draft form in late May this year as part of a review every 5 years, is the statutory land use plan aimed to assist in guiding the physical development of Singapore in the medium-term over the next 10 to 15 years.

We have identified the Property sector as a key and obvious beneficiary.

Stronger planning initiatives and an improved sense of fundamentals will bring foreign investment into Singapore, directly benefiting developers over time.

Our top picks in the sector are City Dev (BUY, TP S$12.81), CapitaLand (BUY, TP S$7.50), Fraser and Neave (BUY, TP S$5.85) and Allgreen (BUY, S$1.66). Among the S-Reits, we favour CMT (BUY, TP S$3.93) and Suntec REIT (BUY, TP S$1.98) for their exposure to the resilient retail sector.

We also continue to like CCT (BUY, TP S$2.93) for its strong organic growth with positive rental reversions likely up to 2010; and CDL HT (BUY, TP S$2.90) for its exposure to the booming hotel sector.

Apart from the Property sector, also standing to benefit from this strategic outline are the Hotel, Aerospace, Healthcare, Transport and Construction sectors. Within the construction sector, we prefer the building material suppliers like Hong Leong Asia (BUY, S$4.30) and Pan-United Corp (BUY, TP S$1.16). For the healthcare and transport sectors, likely long-term beneficiaries would include Raffles Medical (BUY, TP S$1.74), Parkway Life REIT (BUY, TP S$1.50), SMRT (BUY, TP S$2.00) and ComfortDelgro (BUY, TP S$2.15).

Coporate Results Update

Indofood Agri Resources announced a 586% rise in quarterly profit, mostly driven by additional revenue from its recent acquisition of subsidiaries. This is in line with the broad rise in commodity prices this year.

For the medical healthcare sector, Raffles Medical announced a 48% rise in quarterly profit.

For the transport sector, SMRT announced a -5.5% fall in quarterly profit despite a 14.3% rise in revenue, largely due to higher operating expenses, especially higher oil prices.

for the retail sector, Jardine C&C, one of the region's largest automotive retailers, announced a 64% rise in quarterly profit, which is surprising given that rising inflation and poor economic outlook is supposed to reduce consumer spending.

For the property sector, Capitaland announced a -59% fall in quarterly profit. But upon closer examination, its revenue and gross profit actually registered -1% and 9% respectively, and that the fall was mostly attributed to the exceptional fair value gains of its investment properties last year.

Cosco Corp, one of the leading S-shares in terms of growth potential and market cap, announced a 110% rise in quarterly profit.

Market Update

After the Dow's strong showing last night (see here), I received an sms from a trusted broker friend of mine informing me that he believes that we are almost 80% through this current crisis.

His view was substantiated when I logged into Sgfunds this morning and read what Starry had to say:

1st statement posted last night:

If tonight DJI closes above 12800, be ready for the above moment.

Things will go crazy one more time.

Forget about all the noises and all the never ending debates on sub-prime and recession. Never believe in them from the first day except that they make good reading.

The doom day will come, but everyone before they die will have a good day. But then people have called me crazy after they read what I said above, so up to you to believe in my judgement and evidence.

2nd statement posted this morning:

In response to this statement: Something is very wrong...banks announce losses and share price surges??? eg Citigroup and Merril.

I know abt EMH and rational expectations but this is a bit stretching it don't u think.

It has nothing to do with the banks. Sub-prime was never the main factor of dragging the market down over the last few months anyway. I have said that so many times till I am blue on my face.

I read TODAY's and it says that local property sales have drop like 46% compare to the last quarter because people are all waiting at the sidelines? Wait a minute....it says people are doing the "wait and see", hence poor sales. It didn't say people "gave up". Can't be any better setting for the property market to continue shooting up.

I know many people are hoping the property prices to come down, but looking at the current situation, it's not going to happen anytime soon. People who are doing the wait and see now is going to be sorry.

3rd statement posted this morning:

In response to this statement: the surge most likely, is due to pent up money looking for a good return. those money on the sidelines are itching to find something good. its the flow of funds and the presence of it that matters. anything else is pretty secondary.

look at tech.

The surge more likely due to the breach in the critical 12750-12800 level. It's a breach against a near triple resistance. It's a matter of time anyway, just look at the weekly charts and you know what I mean.

Expect it to come back down to near these levels before gaining strength again.

Conclusion:

The timing of these views nicely coincide with my own view that it may be a good time to buy in again once the next set of corporate results are in and stock prices are reevaluated based on their earnings revisions.

Watch this space for updates on stocks worth buying soon!

Recent STI Index

STI tested 3000-3050 support zone and poised to recover back to 3100-3150.

The market is unlikely to sustain any downtrend all the way below 3000 to 2900 or 2800 during the current earnings season without making significant rebounds as the macro picture has not deteriorated.

At this stage the market is not reacting too negatively to the same old bearish views that the worst of the sub-prime is still to come and that the US is headed for the worst economic and financial woes since the oil crisis of the 70s or even since WW2 or the Great Depression of the 30s.

Even the likes of Ben Bernanke and Alan Greenspan have acknowledged that the balance sheets of US corporations are sound with strong cash positions and that the real economy “appears to be reasonably good” which implies that core corporate earnings should underpin the market in the event of more sub-prime related credit losses.

After the first quarter market turmoil, analysts too have become increasingly cautious in earnings forecasts which should help to mitigate any investor disappointments during this latest reporting season.

Having seen the STI plunged some 28% from its 3831 peak to 2746, with the 2750-2800 area well-defended after being tested 3 to 4 times, there is less fear of a major crack of this support level anytime soon.

Although the future remains bleak the market has a way of adapting itself to bearish situations always trying to discount them quickly and try to read the fundamental picture 6 to 9 months going forward.

Thus even if the credit losses reach the US$945b IMF figure or $1.2tr Goldman Sachs estimate, Wall Street’s reaction may not be worse than it had been in q1 which had seen the Dow plunged to below 12000 to around 11600.

Investors have been encouraged by the consistent rebounds to above 12000 with the Dow showing single digit year to date loss (currently 7.4% down at 12302).

This will lead to more widespread views that Wall Street will be sticky on the downside and the STI too will not easily break the established 2750-2800 support.

The recent strong rebound to as high as 3181 shows the market’s potential to look at the bright side of things especially with the Singapore economy rebounding strongly in q1, the strong S$ which will mitigate inflationary pressures and the continued bullish economic picture with tens of billions to be pumped into transport and building projects.

The STI’s recent rebound and relatively tame pullback notwithstanding yesterday’s 84 point plunge (lows of 3035 yesterday/today), shows the market had read the local economic and hence earnings picture well and will not over-react to bearish overseas leads more than it had done earlier.

The STI after all is down 12.4% YTD against 7.4% for the Dow when our economic and earnings picture look much better than the US.

Thus there is still a good possibility that the STI will meet our 50% retracement target of 3250-3300 in the next one to 2 months. At this level it will still be 5-6% below 2007 close of 3466.

CapitaLand, HPL secure S$2b financing facilities for Farrer Court acquisition

Property developers CapitaLand and Hotel Properties Limited (HPL) have secured financing facilities worth nearly S$2 billion for their collective purchase of Farrer Court estate in prime district 10.

CapitaLand and HPL, along with their partners, had bought Farrer Court for S$1.34 billion last June.

The financing facilities will be used to refinance the acquisition costs of the purchase, as well as to fund the construction and development of the new project.

CapitaLand, which owns a 35-percent stake in the joint venture, intends to redevelop the site into a 36-storey condominium project with some 1,500 high-end units.

Other than HPL, the other partners in the JV are Wachovia Development Corp and a Morgan Stanley real estate fund.

Farrer Court currently comprises 618 units and has a remaining lease of 69 years.

According to estimates, the total acquisition cost works out to about S$783 per sq ft per plot ratio.

DBS Bank, UOB Asia, Standard Chartered, OCBC Bank and The Royal Bank of Scotland are the lead arrangers and bookrunners for the secured term loan, revolving credit and bank guarantee facilities.

In its stock exchange filing, CapitaLand said United Overseas Bank will act as facility agent and security agent for the facilities.

These will be secured by a mortgage over the Farrer Court property and a debenture over the assets of the joint venture.

Bear or Bull Run

This article was published in The Business Times today:

Recent rebound does not signal a V-shape recovery

In just a short span of three weeks, the benchmark Straits Times Index (STI) has staged an impressive rebound, recovering over 360 points, or some 13 per cent, from its lows in March - a balm for investors' rattled nerves.

Even so, analysts say that there are no signs of a bottoming-out in valuations, and a near-term market rally is still not in the bag.

The continuing market weakness was reflected in a dip in the STI last Friday of 15.99 points or 0.5 per cent to 3,155.56, ahead of key jobs data from the US later that day.

This left the STI still reeling, with a year-to-date loss of 310.07 points or 9 per cent, largely mimicking the Hang Seng Index. The HSI is also nursing a year-to-date loss of 12.8 per cent despite steep gains over the past three weeks.

Technical chartists call the recent spike in the STI a 'rebound in a downtrend' or a bear rally, without any shift in the short-term trend of the index.

'We are at a crossroads. We have the first-quarter reporting season where the STI may face some resistance when the results start to stream in,' said Kelive Research technical analyst Ken Tai. 'It's too early to call for a bottom at this moment.'

From a technical point, the market looks overbought in the past two weeks, he said.

He is pegging STI resistance at 3,306 points and eyes a bottom for this year at 2,650 points, a level which he expects to be cleared in the next three months and a signal for re-entry into the market.

UOB KayHian analyst K Ajith believes that a V-shape recovery is unlikely but instead, sees a base formation for the STI on retesting of lows or sideways drifting over the next three to six months.

What the market could be seeing now is a 'major low' and not a real bottoming-out, Mr Ajith said.

'We are not seeing a broad-based rally - some small caps are still underperforming, some laggard stocks are rallying and property stocks are underperforming.

'It's not sufficient to bring the market index to a new high.'

Mr Ajith sees STI support at 3,050 points, which was formed earlier last week, and technical resistance at 3,190 points.

These views resonate with that of billionaire George Soros, who told Bloomberg last week that the markets would fall further this year after a temporary reprieve, and that the recent bottom touched by the market would probably not be the final bottom.

Chief investment officer of Fullerton Fund Management Chan Chia Lin also said in a recent interview with Reuters that a decisive rally in the global equity markets is not imminent, held back by the US economic woes and slower earnings.

Analysts here say that the market could see further volatility as the earnings reporting season kicks in by end-April, when investors would look for signs of further damage from the US sub-prime crisis and the global economic slowdown.

'At this stage, the market still looks attractive on a fundamental basis but if you are talking about sentiment-driven, nobody can really tell whether the worst is over,' said Terence Wong, senior vice-president for research at DMG & Partners Securities. 'I do suspect there will still be some volatility at least for the next couple of months.'

He added that, at least for the first and second quarters, there will be further revelations of collateralised debt obligation (CDO) writedowns by banks, though it would be less shocking than previously.

'Earnings may not have bottomed out but hopefully sentiment has become more resilient,' Mr Wong said.

On a medium to long-term outlook, analysts remain optimistic of the STI's uptrend since there has been no fundamental shift in the Singapore economy, and recommend stock picking in select industries.

Mr Ajith of UOB KayHian recommends switching to laggard mid-cap and low-beta defensive stocks such as SingTel, ST Engineering, Parkway Life and SMRT.

DMG's Mr Wong said that it is time to look at stocks with growth prospects and defensive qualities, such as those in the oil and gas sector and telecommunications.

In the same vein, Mr Tai of Kelive said: 'We would look at low betas to tide over.'

These are stocks that have lower sensitivity to market volatility, such as SPH and real estate investment trusts (Reits).

Investors will be looking out for Singapore's first-quarter GDP data on Thursday, Westcomb research head Goh Mou Lih said, which he expects to include some positive numbers given the stronger loans growth, index of industrial production and stronger exports and retail sales seen in January and February.

But the latest snapshot of the US job market last Friday, which showed US employers slashing 80,000 jobs and the jobless rate rising to 5.1 per cent last month, provides yet another sign of a shrinking US economy and this might cap any upside on the markets this week, analysts say.