Singapore intends to construct a retail and recreational centre,
replacing the current Terminal 1 car park, as its crown ‘Jewel’ to
further cement its place as a leading global airport. To be
designed by Moshe Safdie, the man behind the iconic Marina Bay
Sands, it has been reported that the multi-storey complex will
have a glass and steel design, feature a 5-storey high waterfall
and serve as hub connecting the current 3 terminals. Changi
Airport will partner CapitaMalls Asia (BUY, TP $2.34) for this
project. The expected completion date is 2018.
Additionally, T1 will undergo an expansion to increase its capacity
to 24m passengers from 21m currently and together with T4 to
be completed by 2017, Changi Airport’s total capacity will rise to
85m passengers by 2018.
We see such plans as positive for the long-term growth and
development of Singapore-based aviation companies. Already a
leading airport hub in the region, the continuous improvement
and upgrade in terms of both capacity and facilities of Changi
Airport should help Singapore stay ahead of regional peers such
as Hong Kong as an aviation hub.
Closer to home, we do not see
Suvarnabhumi Airport in
Bangkok, Jakarta’s Soekarno-Hatta Airport, or even KLIA as
Singapore competitors as much of their traffic caters to a
different segment. In fact, one can make the argument that
Changi’s growth has, in fact, been somewhat restricted by the
fact that there are very limited slots in Jakarta as an example, and
that the skies in ASEAN are yet to be fully liberalised. From the
chart above, we can see that most of the major airports in ASEAN
are already operating well above their design capacity.
Nonetheless, the plans to further improve and expand Changi
Airport should help it keep its widely acclaimed ‘Best Airport in
the world’ position well into the next decade.
By the time T5 is completed, Changi Airport’s annual capacity will
reach 132m passengers, which is double that of the current
capacity and will allow for growth well beyond 2025, assuming
5% CAGR from 2012 onwards.
Airlines such as SIA (HOLD, TP S$11) and Tigerair (BUY, TP
S$0.74) should benefit from Singapore’s continuous
enhancement as a leading airport hub in this region, as
airport facilities and amenities can play an important factor
in determining travellers’ choice of airlines. At the same
time, Changi’s forward looking expansion means that there
should be no worries for airlines looking for more slots to
grow (although this would also allow for more competition).
Companies with strong track records could benefit from Changi’s
expansion plans in the long term. This will include Yongnam Holdings (FULLY VALUED, TP S$0.24) , which is a key provider of
structural steelworks for regional airport projects and formerly
involved in Changi Airports Terminal 1 expansion, as well as Pan
United Corp (BUY, S$1.21), which fulfilled the entire ready mix
concrete requirement for Terminal 3.
Relocation of Paya Lebar Airbase positive for ST Engineering and
SIA Engineering
The planned shift of Paya Lebar Airbase along with aviation
related industries to Changi, should provide a platform (and
room) for the aviation sector’s future growth. This will also be an
important growth driver for Singapore, as airport and related
services provide over 160,000 jobs and account for 6% of GDP,
according to the Prime Minister.
We believe the clearest winners should be MRO players such as
ST Engineering (BUY, TP S$4.80) and SIA Engineering (HOLD, TP
S$5.10) as Changi’s expansion will support sustained growth in
the number of flights (without a bottleneck seen in airports such
as Jakarta), and there remains very low risk of a new entrant into
this market given the high barriers of entry.
Secondly, the planned move of Paya Lebar Airbase to a Changi
East site beyond 2030 should also provide more room for the
MRO sector’s growth in the long-term, in addition to being closer
in proximity to complementary operations at Changi Airport. This
will help MRO players like ST Engineering, which has significant
MRO operations at Paya Lebar, to consolidate operations and
better service both military and commercial customers.
On the other hand, this development could be seen as mixed for
SATS (HOLD, TP S$3.29) as a bigger pie could now attract even
more players into this segment, bearing in mind that Airport
Service International Group (ASIG) was just recently awarded
Singapore’s 3rd ground handling license in 2011.
One of the key beneficiary sectors in the long term is the
industrial sector, as the Paya Lebar and Ubi area have
significant proportion of industrial properties. S-REITs that have
a more significant exposure as a % of total portfolio near the
Paya Lear region include Sabana (49%) , Mapletree Industrial
Trust ( 29%) and Cambridge REIT ( 19%). Should the plot
ratios be raised in the long run, these assets could enjoy capital
value expansion.
Redevelopment of Southern Corridor benefits MCOT and
Keppel Land
Redevelopment plans for the Southern Corridor was reiterated.
The Tanjong Pagar area where container port land is located
will be freed up for an exciting Southern Waterfront City. This
city will cover 1000ha of land from Shenton Way to Pasir
Panjang and would likely include a proposed new waterfront
city at the existing port site at Tanjong Pagar and Pulau Brani
(300ha) as well as redeveloping the former Keretapi Tanah
Melayu Bhd railway station site. Essentially, it would expand
the CBD with quality housing, hotels, lifestyle and amenities.
This will happen after the relocation of the City and Pasir
Panjang Terminals to Tuas from 2027 onwards.
Companies with landbank or exposure in this corridor would
be Mapletree Commercial Trust and Keppel Land, through its
Telok Blangah landbank. The prospect of turning into a vibrant
waterfront locale would have a positive knock-on effect on
capital values in the long run. Mapletree Commercial Trust’s
VivoCity and PSA Building make up c60-65% of portfolio value
and is a key beneficiary of this southern corridor. For Keppel
Land, the group has a total of 262,000sf of attributable
residential landbank in Telok Blangah and Tanjong Pagar,
representing 25% of its Singapore landholdings.
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