10 ★ FINANCIAL TIMES Thursday12 September 2019
Hong Kong’s unaffordable housing
angers its youth. Most of the land is
owned by tycoonswith sway over
government. Less than half of homes
are publicly owned. Singapore, which
has less land, has none of these
problems. More than 90 per cent of
Singaporean households own homes, of
which 80 per cent were government
provided. From yesterday, measures
will make it easier for Singaporeans to
move into public housing. The city-
state is providing affordable housing
while private homes and office prices
remain high. That combination will
benefit property developers.
Last year, developers’ shares fell.
Regulators worried aboutbuyers
driving up prices, prompting measures
tocoolthe market. Higher stamp duties
and stricter loan rules pushed prices
and demand down. But, historically,
cooling measures have limited
lifespans. Meanwhile, Hong Kong
unrest hasdriven demand from foreign
buyers into Singapore. Property prices
rebounded, exceeding government
estimates. Shares inCity Developments
and UOL, the developers with the most
local exposure, are up more than a
fifth. Singapore’s biggest,CapitaLand,
trades at 14 times forward earnings —
more than a fifth cheaper than Hong
Kong’sSwire Properties. The latter is
weatheringsouring ties with China.
Unlike Hong Kong, Singapore’s
prime office rents still increased, after
hitting a decade high in the first
quarter. Vacancy rates fell. Rents are
forecast to keep rising through 2022.
Another advantage that Singaporean
developers have s better relations withi
Beijing, which is important for projects
in mainland China. The value of
CapitaLand’s projects there have more
than doubled in two years. Raffles City
Chongqing development opened last
Friday with 95 per cent occupancy.
While boosting public housing, the
government has curtailed the supply of
private homes. That will further helpSingapore property:
home improvementsSingapore’s developers. Shares should
keep pace with the recovery in
property prices.Apple as held its iPhone customers inh
limbo for years. Instead of brand new
features it provides tweaks to existing
ones while it waits for the enhanced
mobile capabilities of 5G technology in- New smartphones announced on
Tuesday offer more of the same.
The iPhone 11 will have longer
battery life, two or three cameras on
the back depending on price and a
cute, slowed-down video mode for
“slofies” (slow-motion selfies). None of
Apple:
‘slofie’ hunterthis will reverse the global slowdown in
smartphone shipments, which
International Data Corp thinks will fall
2.2 per cent this year. Nor is it
guaranteed to raise revenue. Apple no
longer provides unit sales for phones so
it is impossible to know how well its
most important product is selling.
But in the nine months to the end of
June it reported net sales of $109bn for
iPhones, compared with $128bn the
year before. Sales of all other Apple
categories, such as wearables,rose. The
only good news is that innovation from
rivals posed no big threat after
Samsung’s foldable phone bombed.
The rainbow symbol Apple used to
advertise the product event seemed to
promise somethingdifferent. “We have
a huge morning for you with some
truly big announcements,” said chiefTim Cook. Yet the first presentation on
stage was for a new version ofFrogger
— a video game first released in 1981.
In the end the colourssymbolised
Apple’suniverse of products and
services. The $4.99 a month rate for a
TV streaming service was the only real
standout moment. Apple does not need
to undercutNetflix. Users who can
spend more than $1,000 on a phone are
not bargain hunters.
By making its streaming service one
of the cheapest — and free for a year
with a new gadget purchase — it will
also forgo a revenue bump.
Instead, Apple appears to be trying
to use its services business as a means
to persuade buyers to pick its hardware
over rivals. The prices may be low but
Apple is still staking its growth on
subscription services.Peloton will have to spin the wheels on
its pricey exercise bikes a lot harder to
convince investors it isworth $8bn.
The US home fitness start-up hopes
to sell 40m class A shares at $26-$29 a
pop. A listing at the top of that range
would raise $1.2bn, valuingPeloton ta
$8.1bn. That is a big step up from the
$4.2bn valuation of Peloton’s last
private funding round.
The group sells fitness equipment,
namely stationary bikes ($2,245) and
treadmills ($4,295) equipped with
internet-connected screens. Users pay
$39 a month to watch its classes from
the comfort of home.
eloton’s IPO prospectus has all theP
right buzzwords. It pitches its spinning-
streaming mash-up as a “new,
immersive and connected” experience.
Taking a page from the hype for
WeWork, Peloton chief executiveJohn
Foley peaks in evangelistic termss ,
saying: “On the most basic level,
Peloton sells happiness.”
But, like the flexible office space
group, Peloton is also burning through
cash. While sales more than doubled to
$915m in the year to June 30, losses
also ballooned, from $48m to $196m.
There is nothing wrong with that, if
the business can convince investors it
is not pedalling hard but going
nowhere.Four-fifths of revenues come
from equipment sales. Longstanding
customers re not going to buy newa
bikes or treadmills every year.
To invest in the IPO, you have to
believe in Peloton’s ability to lure a
steady stream of new purchasers.
This is not a sure bet and at an
implied valuation of about 8.7 times
price to sales, it is a risky one. All the
more so, given a dual-class stock
structure that would give early
investors super voting rights.
itness fads come and go. (ZumbaF
anyone?) Nor is there any shortage of
competition fromgyms, copycat
providers or the tendency of back
sliders to revert to a life of sloth. The
shelving last year of an IPO from
SoulCycle, which runs indoor cycling
classes, serves as a cautionary tale.Peloton:
pedalling a dreamLondon investors sent a message to
Hong Kong Exchanges nd Clearinga
yesterday: “Pull the other one — it’s got
bells on.” That old British expression of
disbelief was apparent in the feeble
5 per cent jump in theLondon Stock
Exchange’s shares. HKEX hopes to buy
LSE for an enterprise value of £31.6bn.
If this was likely to succeed, shares
should have jumped by the 23 per cent
premium offered.
The world’s great bourses are
national institutions, or at least civic
ones. Takeovers and mergers typically
fail for this reason. The bosses of
exchange groups — whose real
businesses these days are data, clearing
and derivatives — should not fool
themselves otherwise. Thanks to
Brexit, the UK government is in chaos.
Even so, it cannot meekly nod this
takeover through.
HKEX is both too close to China and
too divorced from it. As a big business
based in a troubled autonomous
territory, HKEX is more exposed to the
hostility of the Chinese government
than to its lucrative favour. The US
may object to the deal on security
grounds, even if the UK does not.
The attractions for HKEX boss
Charles Li re clear. The takeovera
would create a new conduit for east
and west to exchange capital,
information and securities. It
would dilute Chinese political risks
borne by his business. Returns
would surely beat those achieved by
HKEX on its overpriced £1.4bn
acquisition of theLondon Metal
Exchange n 2012.i
HKEX is offering £83.61 per share, a
steep 26 times forward multiple of
enterprise value to ebitda. But that is
more affordable than it looks. First,
sterling is weak. Second, HKEX could
save hefty costs. Cash intended to cover
an overhaul of creaky trading systems
would instead help pay for a target
with superior IT.
But cash constitutes less than a
quarter of the price. The rest is in
HKEX’s volatile stock. This has
been buoyed by fees from a series
of big floats that civil unrest imperils.
Meanwhile, LSE shares have surged
in response to its $27bn agreed bid for
Refinitiv, the data and trading group.
HKEX would only bid for LSE
LSE/HKEX:
bid rings wrong bells
if this popular deal was dropped.
Sadly, Hong Kong unrest means
HKEX looks more like a refugee than a
gatekeeper to fast-growing Asia. As
things stand, its bid approach for LSE is
uncompelling.CROSSWORD
No. 16,270 Set by CHALMIE
JOTTER PAD
ACROSS
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replacing you, causing irritation
(9)
10 Round electrical component is
functional (2,3)
11 Foul lie about source of power
(4,3)
12 Writer of series about writers
(7)
13 Increase speed turning over ....
over .... not over (3)
14 Big break from work one left
earlier (11)
17 One leaving retail organisation
set off again (5)
18 Flamingo’s foreign friend (3)
19 Reschedule return of concerning
American agent (5)
21 Working harder broke film
actress (7,4)
23 Remains quiet after acceleration
(3)
25 Ear picked up at Delphi? (7)
27 Thanks to cap gun (7)
28 Nothing found in smaller
deposit (5)
29 Defender shoots, which works
out badly (9)
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his enemy’s coat (3,3)
2 Break travel in resort (8)
3 Top grocery distributed flyer
(10)
4 Colouring of Gregorian
illuminations (4)
5 China problem – get a grip (3,7)6 The French supporting second
breakwater (4)
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breakfast food (6)
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breaking trust (8)
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every Spice Girl is sweet (5,5)
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empty chair (10)
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sunk in breaks (3,5)
20 1 ingeniously engineers break
(8)
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boxer perhaps did (6)
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(6)
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For notes on today’s breaking
stories go towww.ft.com/lexTwitter: FTLex@
After years of complaints over its
failure to create big internet
companies, Europe can at last claim a
tech giant of its own. How galling that
the engineers responsible specialise
in finance, not software. Yesterday,
South Africa’sNaspers oosted itsb
value by listing a holding vehicle
in Amsterdam. With more than
$100bn of assets, the demerger is one
of the 10 largest consumer tech
companies.
The new company Prosus is named
after the Latin for “forwards”. But it
is dominated by past achievements.
Naspers was transformed by a 2001
bet on a then-unknown Chinese
start-up,Tencent. That 31 per cent
stake in the internet and gaming
giant is worth a colossal $128bn. Itovershadows other stakes, however
chunky, in online classified, payments,
travel and food delivery.
n March when Naspers said that itI
would spin off international interests,
its shares traded at a yawning discount
of over 40 per cent to underlying net
asset value. That was partly down to a
conglomerate structure and
governance issues that the Amsterdam
listing cannot mitigate. Another —
more fixable — cause was that Naspers
had outgrown the Johannesburg
bourse.
Yesterday’s listing helps solve that,
by shifting about a quarter of its
market value to the Amsterdam free
float, where many more fund managers
will be free to invest. By mid-morning,
Prosus’s shares were trading on adiscount to net assets of about 20 per
cent. Meanwhile, the discount on
shares in Naspers, which retains
three-quarters of Prosus shares, had
narrowed to about 35 per cent.
It is not the first to attempt this
type of trick.SoftBank, a pioneering
backer ofAlibaba, had some success
when it floated its mobile telecoms
unit last December.
Naspers’ manoeuvre has benefited
investors. Others could gain too. A
listed vehicle could help with
acquisitions. It could start by bidding
for Just Eat, the UK food-delivery
group undervalued by a bid from
Takeaway.com f the Netherlands.o
Europe’s tech ambitions will
benefit if Prosus’s bets lead to
homegrown success.FT graphic
Source: Company prospectus - (m)TencentEtailClassifiedsFood
deliveryPayments
& FintechMail.ruTravelProfit/loss RevenueProsus financial profile
Group’s interest in each company*Consumer internet portfolio
-
-
-
-
- MakemytripeMagPer centLetgoDubizzleAvitoOlxFood deliveryEtailTravelPayments & FintechClassifiedsDelivery HeroSwiggyiFoodRemitlyPayU* Excluding ventures and stake in Tencent and in Mail.ruNaspers/Prosus: EU’s springbok tech giant
South African ecommerce group Naspers created Europe’s largest consumer-technology company by listing
its international internet assets in Amsterdam. Prosus has stakes in sectors ranging from fintech to food
delivery. But the business is dominated by the 31 per cent stake in China’s Tencent.