On Thursday (3 July 2014), four property shares in our local share market in Singapore moved up by as much as 9.5% in price. I thought it seemed odd, so I wanted to answer the question: What caused the excitement?
Turns out, OCBC Investment Research had released a report on the same day about how Singapore’s very own West End at Orchard Road (London has a West End – an area with a very high concentration of attractions and activities – and so do we!) may be in for a revival.
According to the report, that part of Orchard Road could see value being unlocked due to an expected shortage of retail space in the main Orchard Road shopping district over the next few years. The area – the west end of Orchard – is home to many assets that are considered dated especially when compared to the newer retail malls and buildings in the region nearer to the Orchard and Somerset MRT stations. This gives rise to a high chance of seeing “strategic redevelopments” there.
Also, the upcoming Orchard Boulevard MRT station on the new Thomson Mass Rapid-Transit Line, which will be built near Camden Medical Centre and is to be completed by the end of 2021, could bring more foot traffic to the area.
Hotel Properties owns four properties – Forum The Shopping Mall, Hilton Singapore Hotel, Four Seasons Hotel, and HPL House – that are located in close proximity to each other in west Orchard. If all are redeveloped, they may become a “mega mixed project” that is slated to be bigger than Ion Orchard. For some sense of scale, Ion Orchard was a $2 billion development that opened in July 2009 and is valued at S$3.0 billion as of 31 December 2013; the total asset base for Hotel Properties right now is at S$3.12 billion.
Meanwhile, along the western end of Orchard Road, you have Wheelock Properties which owns Wheelock Place, Hong Fok which owns International Building, and Liat Towers which is owned by Bonvests. And of course, these could all be part of any future “strategic redevelopments” to revitalise Orchard Road’s West End.
Following the bullish report by OCBC Investment Research, shares of Hotel Properties had jumped by 9.5% to close at $4.40 on Thursday while Wheelock surged 7% to $1.91. Elsewhere, Hong Fok had gained 2.3% to S$1.10 and Bonvests’ shares closed 1.4% higher at S$1.44.
Having said all that – and despite the favourable and bullish report – investors should always do their own due diligence and take a closer at the companies involved before purchasing shares in them.
Shares represent part ownership of a business and thus, investors should not buy shares based on positive reports alone. What if the mega redevelopment does not come to fruition? Is there value in the companies even without the Orchard Road catalyst? What are other properties these companies hold? Those are some questions that investors should ponder before putting their hard earned money into any or all of the quartet.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.