13 November 2010

Casino Singapore 1: Who's the idiot? Citizens/Gahmen lost Big Time

Who turned this little red dot into Casino Singapore?

1. Who is the idiot? On 4 Nov 2010, after giving a speech at the inaugural forum, "A Free Press for a Global Society" at the Columbia University, Minister for Law, Mr K Shangumam, said the following during the Q and A session:

"The point is this, if you actually sit down and look at what is it that is needed for a healthy, robust debate in public life. You want to talk about issues, you want to talk about what the government is doing right or wrong. How people can offer a different perspective, what are the different viewpoints there are, ALL OF THAT IS FAIR GAME. The point about the classic common law defamation theory is that when you descend into a personal attack against someone and it’s not comment. YOU CAN CALL SOMEONE AN IDIOT, HE CAN'T SUE YOU FOR THAT. YOU CAN MAKE A WHOLE LOT OF COMMENTS ABOUT A PERSON, YOU CAN CALL HIM INCOMPETENT, HE CAN'T SUE YOU FOR THAT, but if you make a personal factual allegation, “he stole”, or “he is corrupt” then the real issue is, should the press be given any greater privilege to make those allegations compared with an individual? [Capitalization emphasis is by The Pariah.]

After you read this blog posting about corporate disclosures, I wonder who will you call "an idiot" ... could it be me? It's OK - I won't sue. I can't sue anyway - so my Law Minister tells me.

2. Who increased net profit by 666% in FY2009/10? Yes - 666% increase in NET profit! I'm not kidding (and let me assure you that I am not even into biblical revelations of any genre). Before reading on, you may want to slip on your sunshades (and whatever else that can be slipped on) and lug along your binoculars because the figures are bedazzling eye-poppers in this financial striptease:

Awwwww ..... Shock and Awe:
Who makes this kind of profits in this little red dot?

(a) "profit before taxation for 3Q 2009 improved significantly by 126%"
Allgreen, 2 Nov 2009

(b) "profit after tax and minority interests (PATMI) increased by 76.7% ... in Q4 2009"
City Developments Ltd, 25 Feb 2010, who also described it a week later as: "... the year was also a record one of sorts, as it achieved its highest-ever full-year revenue ... and the second-highest-ever net profit".

(c) "144% surge in net profit ... for the financial year ended 31 December 2009"
Heeton Holdings, 24 Feb 2010

(d) "net profit after tax and minority interests ... for nine months ended 30 Sep 2009, up 259%" and "net profit after tax and minority interest ...for the full year ended Dec 31 2009, up 262%"
Ho Bee Group, 12 Nov 2009 and 12 Feb 2010, respectively

(e) "417.9% y-o-y surge in net profit for 2Q"
SC Global, 23 Aug 2010

(f) "net profit for 2Q2010 ended Dec 31, 2009 surged 220% y-o-y" and "posted a 173% y-o-y jump in net profit ... for FY2010"
Sim Lian Group, 15 Feb 2010 and 30 Aug 2010, respectively

(g) "net profit attributable for the six months ended Nov 30, 2009 (HY2010), rose 129.2%"
Tee International, 8 Jan 2010

(h) "188% rise in net attributable profit ... for the financial year ended 31 December 2009 with revenue crossing $1 billion for the first time"
UOL, 23 Feb 2010

(i) "for the half year ended Dec 31, 2009 ... group’s operating profit ... an increase of 123%",
"in the nine months ended 31 March 2009 ... operating profit ... an increase of 81%" and
"net profit for the full year ended June 30 (FY2010) rose to $160.75 million from $20.98 million a year ago"
Wing Tai Group, 5 Feb 2010, 13 May 2010 and 23 Aug 2010, respectively

The above examples are based on my random extractions of 9 public listed Singapore companies from The Edge, a business weekly. They span a spectrum of new and entrenched en bloc buyers over past year, high-end and mass market players, small and big developers, some more diversified than others in business focus.

Do read The Edge articles in full and you may immediately recognize the en bloc redevelopments cited therein:

Soooooooo .....
Mirror, mirror on the wall
Who is the fairest of them all?

Answer: Whoever made 666% increase in net profit for the full year. Tsk, tsk ... if you were reading carefully, you would have found the answer above. [Hint: Please re-read item (i).]

3. Casino Singapore. With property prices racheting up at such rates to yield net profit of triple-digit percentage gains for developers, ... when Owners sell at so-called "en bloc premium" to earn so-called "en bloc windfall" at $xxx psf only to see Developer-buyers soft-launch the redevelopment at three times (!!!) $xxx psf a few months after collecting en bloc sale proceeds, ... when the super Majority Consenters realise that the pre-en bloc promise of Utopia has landed them in Ethiopia post-en bloc, ... when the law has MAJOR structural flaws, viz, (i) locks-in Reserve Price for up to 12+12=24 months in a likely upward-moving volatile market, (ii) opens side gate when public tender fails to allow NON-expert Sale Committee volunteers to sign private treaty with expert Developer-buyer in the back-room and tell Owners only AFTER the deal has been signed, sealed and delivered and (iii) prohibits the super Majority from filing any objection to Strata Titles Boards/the courts, ... when the super Majority therefore have no choice but to keep mum and lump the "en bloc shortfall" as they are already cooked, ... when such "en bloc shortfall" will continue to haunt the super Majority Consenters 15-20 years later into their twilight years because of too-early monetization of their only crown jewel, ... and when my pet camel mutated into a 3.5-hump monster within a mere 1.5 decade (from 1995-2010), another question arises:

Do we just have two casinos? Or have we willy-nilly morphed into "The Biggest Casino in the World" at 710.3 sq km (Singapore's area size as of 2009 - Department of Statistics)?

It was reported in the Straits Times (12 Nov 2010) that for 3Q2010:

- Resorts World Sentosa: S$732mn revenue; S$346.5mn pre-tax profit; 47% profit margin
- Marina Bay Sands: S$631mn revenue; S$315mn pre-tax profit; 49.7% profit margin

Yawn ... the figures in casinos are just not as sexy and seductive compared to developers!

4. Contextualized against a time-scale. 666% increase in net profit, or 417.9% surge, or up 262%, or 188% rise ... are they obscene or what? Especially when you CONTEXTUALIZE these developers' net profits of such epic proportions to the timescale below. Now, now ... please bear in mind this question as we put things into context: "What were the two factors that likely contributed towards such obscene profits by the developers?" ... and let's see if your answer matches mine.


- Many of these developer companies pre-existed LTSA inception of Oct 1999 but they achieved such record highs only in FY2009-10 - SO WHAT CHANGED?

- Published articles span a near-year of 2009/10 to give a more representative perspective

- Second bout of en bloc frenzy started in earnest in 2006 and peaked in 2Q2007

- Typical two-three year lag time for construction/redevelopment

- Accounting conventions for developers with inherent lag time in income/profit recognition

- Private Residential Property Index first surpassed the last peak only in 2Q2010

- 2008/09 Great Recession triggered by Wall Street meltdown

- 2009/10 Resilence Package of S$20.5bn for FY 1 Apr 2009-31 Mar 2010 with advance roll-out from 22 Jan 2009 and step-down Job Credit Scheme until 30 Jun 2010 where the Gahmen dipped into past reserves for the first time in history for S$4.9bn to fund the Job Credit Scheme and Special Risk-Sharing Initiative

- Corollary to 2009 Resilence Package were (a) corporate income tax rate cut from 18% to 17% for YA2010, (b) tax exemption on foreign-sourced income earned before 21 Jan 2009 and remitted between 22 Jan 2009-21 Jan 2010 and (c) special accommodations for developers, viz:

(i) deferred property tax starting from the later of 22 Jan 2009 or Provisional/Written Permission date,

(ii) one-year extension of Project Completion Period for private residential projects,

(iii) another two-year extension for developers' disposal of residential units, aggregating to a four-year leeway, etc,

all of such special accommodations for developers (together with other mind-boggling and backbending accommodations by MND/URA/BCA in DELAYING THE POLICY IMPACT of withdrawn Deferred Payment/Interest Absorption Schemes (DPS/IAS), withdrawal of Gross Floor Area bonuses, etc) and the "voluntary caveat" loopholes of Singapore Land Authority (SLA) likely contributed to the 3 Nov 2010 STARK EXPOSÉ when URA were caught with their pants down because the figures for expected supply of housing units even within the near future were seriously out-of-whack.

Instead of reaping policy results upon announcement, these super business-friendly civil servants allow developers to piggy-back on building plans long approved by BCA for, say, 100 fancy duplexes even when they revamp the entire project into, say, 700 shoe-box units, but retaining the old GFA bonus for planters/bay windows with consequent startling incongruence. Likewise, developers can significantly delay sales/phased releases under URA extensions and yet hang on to the DPS/IAS competitive advantage under old BCA building plan approval. Flippers and property agents join developers in merrily exploiting SLA's "laxity" by not filing caveats, delaying/timing the filing or even aggregating/misfiling in order to paint a distorted picture about last-done prices, speculative profitability, flipping dominance, etc. Well, the "joke" has backfired on the Gahmen as these super business-friendly civil servants have crossed sides either to sit on the boards of corporate developers or to be on their payroll whilst the rest of us are still scratching our heads as to how deeply and how widely the GIGO-based systems (Garbage In, Garbage Out) of URA/SLA/BCA have skewed statistics and indices. Your guess is as good as mine!

No doubt, there are other multi-factorial justifications for profit hikes of 666%, 417.9%, 262%, 188%, etc (eg, accounting treatment of fair value gains by different companies, contributions from non-en bloc redevelopment, hot money inflows, pre-dominance of Mickey Mouse (shoebox) units sold at astronomical psf price, etc).

That was why I have been advocating since late 2009 that MinLaw should invoke the amended Statistics Act and extract from MAS the data on developer project financing to affirm/debunk allegations and facilitate MinLaw's on-target policy/legislative refinement of LTSA. Alas, it remains a classic Rumsfeldian case of Unknown Unknowns except that the unknowing (whoever that idiot is) doesn't want to know.

5. En bloc gang robbery-cum-rape and looting of public coffers. As for the question posed in Point 4:

"What were the two factors that likely contributed towards such obscene profits by the developers?"

My answer: Developers made obscene profit at the expense of (i) CITIZENS (especially from their en bloc purchases) and (ii) GAHMEN (milking the 2009 Resilience Package).
And what's your answer?

I can't help but wonder how the en bloc gang robbery-cum-rape could have escaped radar detection by our world-class PAP Gahmen who even opened wide the treasury doors, ostensibly WITHOUT conditions, WITHOUT tracking and WITHOUT provision for any clawbacks or nimble re-adjustment. And Finance Minister Tharman wasn't even under the same pressures as Paulson or Geithner at the time! Well, well ... the 75% (or lower?) syndrome inflicts even our very best, eh?

Bottomline: In the sparring practice round in Feb 2010, REDAS (Real Estate Developers Association of Singapore) were slightly outfoxed by the Gahmen when REDAS' pressure tactics to get the Gahmen to disclose Reserve Price for Government Land Sales backfired. But for this major championship fight, it appears that the PAP Gahmen lost Big Time - they have been summarily outclassed by the corporate developers who achieved such sparkling results within the above contextualized time-scale! Developers, being inherently astute, likely merrily milked the maximum out from 2009 Resilience Package even whilst they "cry-father-cry-mother" (literally translated from the visceral "kow bei, kow boo" Hokkien-dialectic expression for "plaintive whining and whinging") about the Great Recession!

Sigh ... that's what happens when the fine line is crossed ... when Gahmen not only got incestuous with Big Biz but also when increasing one-upmanship and internal competition further calcified the already entrenched silo mentality within each ministry, statutory board and government agency. DOUBLE JEOPARDY, DOUBLE WHAMMY!
6. Preview summary of Parts 2 and 3. In "Casino Singapore 2: Who's the idiot?? No to gang robbery-cum-rape", I will set out:
– How and why the en bloc gang robbery-cum-rape was allowed to happen.
– How to counter the gang robber-cum-rapist.


In a way, it's calling their bluff when the Gahmen used national needs for urban rejuvenation and higher land-use intensity to justify passing a law that is calibrated towards such gang robbery-cum-rape. It will give an insight as to why private condos were targetted instead of HDB public housing when land area used for private condos is miniscule relative to that used for HDB public housing and the lessons that Singapore could draw from South Korea, Taiwan and Hongkong in en bloc redevelopment.

In "Casino Singapore 3: Who's the idiot??? Smoking gun with spent bullets", I will attempt to gather the incriminating evidence of such gang robbery-cum-rape although the gang rapist is still virulent and not quite "spent" and is on the prowl again! It will remind us of the hollow parliamentary promise made by MinLaw in 1999 during en bloc law inception that the primary objective of this law was to create "many more housing units in PRIME 999-year leasehold or freehold AREAS FOR SINGAPOREANS".

There are also observations and reflections of “too little, too late, too diffident” approach in formulating and effecting laws, regulations and policies without sufficient checks-and-balances within a holistic framework (eg, tax man consulting tax-payers on a proposed clarification and then withdrawing such proposal). Then you evaluate and decide for yourself whether the former Minister for Law, Prof S Jayakumar, had any basis for his ministerial allegations and fear-mongering attempts, especially when the facts in this 3-part Casino Singapore blog posting affirmed how en bloc law effectively unlocked land value for Developer-buyers, NOT extant Owners who instead face the Hobson’s Choice of being Squatters, Refugees, Downgraders and Downsizers:


Fan Pi Again said...

Huh? You asked questions about Resilience Package that MPs should bne asking the Finance Minister.

They increased GST from 5% to 7% but they cut corporate tax from 18% to 17%. This just confirms that we are Singapore Inc yet again!

Maybe they just allow the company CEOs to vote in the next General Election? Or maybe if you are CEO, CIO, CFO, then you get 10 votes and ordinary workers get 0.1 vote.

The Pariah said...

Dear Fan Pi:

In my 2007 blog posting, I hypothecated that Singapore Inc has morphed into Hotel Singapore Inc.

Hotel Singapore Inc status was reaffirmed with each passing year as the Dept of Statistics published the data on the deluge of foreigner influx.

Latest 2010 mid-year estimates by the Dept of Statistics shows that out of 5,076,000 Total Population, there are only 3,230,700 Singapore Citizens (63.6%). It is not disclosed how many are newly minted Singaporeans of foreign culture.

So I'd hazard that nearly 40% of our population are likely of foreign culture. [PRs number 541,000 and foreigners aggregate 1,305,000.]

By now ...

- with the extent of hot money inflows,

- the record-high SGD1.2 trillion of AUM (Assets Under Management) of Singapore-based asset managers as at end-2009, out of which 80% came from outside Singapore,

- with the full operation of two IRs,

- with the extent of en bloc and other property flips,

Hotel Singapore Inc has since reinvented herself into Casino Singapore, I reckon.