IN A Monday report on the property sector issued before the government’s anti-speculation real estate measures were announced in Parliament, a foreign broker said it was positive on stocks of developers because not only was Singapore in the early stages of a residential sector upswing, but there were also no indications that the government would do anything to derail the recovery.
In the various ‘buy’ calls on Genting Singapore which were issued during the stock’s run-up over the past six weeks or so – some of which went so far as to describe the stock as potentially being worth $2 to $3 – not one drew attention to the fact that the company had yet to announce a profit. All instead relied on the promise of possible riches available from the start of casino season in Singapore next year, based mainly on forecasts from the company’s management.
When formulating its calls for various blue chips, a foreign broker employs long-term forecasting models which project cash flows or ‘value creation’ for a period of up to 10-18 years, ie, up to the year 2019- 2027. Details of the model, however, are only given deep inside the report and are, in some cases, sketchy.
There’s more, but by now a common thread should be obvious – because of the rebound in equity markets since March, rising complacency in the financial markets has led to increased exuberance in the broking community. This in itself is fine – in an upward, frenzied market, investors are typically hungry for ideas and there’s nothing like a juicy investment story with a high target price to stir the senses. Continue reading
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