18 ★ FINANCIAL TIMES Friday27 March 2020In Asia, the coronavirus outbreak has
suppressed demand for most luxury
purchases. An exception has been high-
end Singapore residential properties.
Sales of new homes including condos
almost tripled last month. For
investors chasing havens, but not
interested in an another house, local
developers’ stocks offer an alternative.
Singaporeans’ buying led the 187 per
cent rise in the number of purchases,
offsetting a steep drop of mainland
Chinese buyers — the biggest foreign
acquirers in the city-state’s residential
market. They have been deterred by
travel bans both by China’s lockdowns,
but also by Singapore entry bans. All
Chinese visitors and foreigners with a
recent travel history to China since
January have kept away. Virtual-home
tours have not made up for that fall.
For local investors, there are few safe
places left for their cash. The Straits
Times benchmark index is off almost a
quarter this year, near 2009 lows. The
Singapore dollar is at its weakest in a
decade against the US currency.
Pent-up demand for homes from the
government’s two-year-long curbs to
control prices has only encouraged
locals to splurge on housing.
Shares in the big local developers,
including CapitaLand, UOL Group and
City Developments, have sufferedthis
year. An expected slowdown in their
office and retail-leasing business as
well as hotel portfolios has hurt. The
latter — which also runs Singapore’s
largest hotel group — is down more
than a third this year.
Yet much has now been priced in.
The trio has staged a partial recovery.
Even so, City Developments’ shares
have hit near three-year lows at 12
times forward earnings. Low borrowing
costs coupled with a weak local dollar
should start bringing back foreign
investors as lockdowns ease in Asia.
A longer-lasting change may also
result from people spending so much
time locked away given current socialSingapore housing:
a place for shelterrestrictions. That should put a higher
priority on buying one’s dream home,
long after the outbreak has passed.Rishi Sunak garnered praise for the
speed and scale of proposals to keep
UK business alive. Pledges to pay the
bulk of wages were followed by support
for the self-employed yesterday. Tax
and rates holidays have been offered.
Big creditworthy businesses look well
placed. They will have access to
“unlimited” funding from a new Bank
of England commercial paper facility.
What about the little guys? SMEs can
access £330bn ofgovernment-backedUK SMEs/CBILS:
faulty powersloans ia the banking system. Thev
catch for the owners is that some banks
want personal guarantees before
agreeing to funds. Many SMEs do not
know how much they need to borrow.
The Coronavirus Business
Interruption Loan Scheme (CBILS)
allows non-financial businesses with
under £45m in sales to apply for up to
£5m in credit. The government will
guarantee 80 per cent of those new
balances to lenders. CBILS is effectively
an extension of the Enterprise Finance
Guarantee scheme (EFG) launched in
the wake of the financial crisis. Under
that, the government guaranteed
75 per cent of loans made. EFG uptake
has been just £3.3bn to 30,
businesses since 2009. A far cry from
Mr Sunak’s headline-grabbing figure.
Interest due on loans made underCBILS will be covered by the
government for the first year.
Thereafter responsibility for both
interest and principal falls on business
owners. Only a tiny proportion of
funds, up to £250,000 per business,
can be lent unsecured. One small
consolation is that primary residences
will not be accepted as security.
Business owners who accept loans
may not lose their homes. But they
could still be saddled with debts.
Another issue is lending banks must
show they have done everything to
recover debts to access guarantees.
That could mean hounding business
owners and further insolvencies.
Government intentions to save
Britain’s small businesses are right.
Unless the tools to do that begin
working, for many it will be too late.The 2010s could be defined as an era
when every last stream of cash flow
was transformed into a debt security.
The 2020s may be about desperately
unwinding those relationships.
asinos have been a highly lucrativeC
business for centuries. But, the land
they sit on in Las Vegas and across the
US has turned into an even better
activity. There are now three listed
gaming real estate investment trusts.
These Reits thrived by acting as tax-
advantaged landlords which collect
rent from the likes of Caesars Palace in
Las Vegas. The shutdown of casinos
and most physical spaces in America
has demonstrated that not even the
steadiest payment flow packaged into
debt can be considered risk-free.
Gaming and Leisure Properties, Vici
Properties, and MGM Properties had a
collective enterprise value in February
greater than $50bn. Today their share
prices are down between 30 and 45 per
cent. Their tenants will have short-
term revenue approaching zero. The
Reits are highly leveraged with total
debt-to-ebitda ratios above 4 times.
Still, gaming companies have plenty
of near-term liquidity to meet fixed
costs. Moreover, lease payments owed
to gaming Reits are senior obligations.
Landlords and their casino tenants
have some tough decisions ahead.
Yesterday, restaurant chain
Cheesecake Factory said it would defer
paying its April rent, in what could be a
trend among retail companies trying to
preserve liquidity. Analysts at Nomura
Instinet speculate gaming Reits could
relax collections of rent in exchange for
equity in gaming companies.
In an extreme scenario, the gaming
operator and gaming Reit could merge,
so operators would no longer have to
pay rent. That arrangement was the
norm when casinos just owned the land
underneathslot machines.
Advocates of Reitswill argue their
inventions have led to incremental
capital flowing into deserving sectors.
While that may be true, it is equally
true the leverage they created through
the financial sector was unnecessary.US casino property:
know when to fold ’emUK companies are gettingtwo months’
extra leeway rom regulators to publishf
their results. Chief executives may feel
relieved. Investors, less so. For them,
the real issue is the slew of Covid-
updates. These are intended to show
how financially resilient listed
companies are. But levels of detail vary.
There are caveats to this criticism.
Auditors cannot get into their offices,
never mind those of their clients. The
pandemic is moving fast, as are
government responses. It is sensible to
delay results.
Covid-19 statements are appearing in
their place, triggered by regulations
requiring timely publication of “inside
information”. These sometimes
provide useful insights. But the updates
have become a standard category of
stock market disclosure in just over a
fortnight, without standards applying
to what is disclosed.
Some statements have been
unhelpfully vague. If Associated British
Foods,Next nd Dixons Carphone — toa
name three — are able to do the sums
on lost revenues from closed stores and
pencil in savings, so can others.
Dixons s a model. Perhaps thei
electrical goods retailer has more to
shout about, with plenty of headroom
on its loan covenants. But it has not
shied away from telling investors shut
stores will cost it £400m in lost sales.
Dixons also gave a glimpse of what
government support means for
corporate bottom lines: some £200m
in saved salaries and rates, and about
£200m from tax deferrals — together
nearly one quarter of last year’s
operating expenses.
Lost earnings and bailouts are just
two pieces of the resilience jigsaw.
There are other elements. First,
borrowings. Will net debt to ebitda
breach loan covenants? And how well
do earnings, discounted for the
pandemic, cover interest costs? Second,
how much self-help can companies
apply? Operating expenses, which
should drop anyway, can be cut. Most
businesses are suspending dividends
too. Third, liquidity. What gross cash
and credit lines does the business have?
Lex s uspects the less detail a
company gives, the more likely it is to
be facing difficulties. The Financial
Conduct Authority should set outCoronavirus resilience/
FCA: muffled reportsguidelines on the information Covid-
statements should contain. It should
nudge shaky businesses into publishing
updates. The market has worked out
they look stretched. The question is
this: what are they doing about it?CROSSWORD
No. 16,436 Set by BRADMAN
JOTTER PAD
ACROSS
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materiel dished, I suspect,
explosive got rid of (13)
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historian (5)
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gets one collapsing (9)
13 Put down the German male by old
entrance (8)
15 Old film report of country (6)
18 Tree is cut, chopped up by front of
forest (6)
19 It would be most useful if death
and sin were destroyed (8)
22 Dining out, social worker becomes
angry (9)
24 Office assistant embraced by
friend of important bishop (5)
25 What is sharp – that includes a
knife (7)
26 Report of maybe escaped eagle in
city (7)
27 Alert horse ye’d get trained – one
of these running in the Derby?
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in charge, making one slightly
depressed (7)
2 Stars – some croon dreadfully (9)
3 Crazy little room overlooking US
city (5)
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showing desirable bodily feature
(8)5 Destroy old city to the north with
attack (3,3)
6 Hurried from temporary
accommodation in home counties,
looking embarrassed (9)
7 Indian city – old Greek city is less
quiet (5)
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creature (6)
14 Practising for examination (5,4)
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(9)
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having minimal energy? Here’s
something to suck (8)
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20 One on the prowl beginning
to end gets people gossiping
perhaps (7)
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time? (5)
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Miami Fair 30
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Montreal Sun 10
Moscow Fair 15
Mumbai Sun 34
Munich Sun 15
Naples Shower 14
New York Shower 19
Nice Cloudy 15
Nicosia Shower 20
Oslo Cloudy 9
Paris Fair 14
Prague Sun 15
Reykjavik Cloudy 2
Riga Sun 13
Rio Sun 29
Rome Cloudy 15
San Francisco Fair 15
Singapore Thunder 31
Stockholm Sun 11
Strasbourg Sun 16
Sydney Fair 23
Tokyo Drizzle 20
Toronto Sun 10
Vancouver Rain 9
Vienna Sun 15
Warsaw Sun 14
Washington Cloudy 23
Zagreb Cloudy 15
Zurich Sun 14Amsterdam Sun 13
Ankara Cloudy 16
Athens Shower 15
Bahrain Fair 27
Barcelona Fair 15
Beijing Sun 14
Belfast Cloudy 11
Belgrade Fair 15
Berlin Sun 15
Brussels Sun 13
Budapest Sun 17
Cairo Sun 28
Cardiff Sun 13
Chicago Rain 11
Cologne Sun 19
Copenhagen Sun 10
Delhi Cloudy 27
Doha Sun 27
Dubai Sun 30
Dublin Cloudy 10
Edinburgh Cloudy 8
Frankfurt Sun 19
Geneva Fair 14
Hamburg Sun 14
Helsinki Fair 9
Hong Kong Fair 27
Istanbul Cloudy 12
Lisbon Sun 18
London Sun 12
Los Angeles Sun 18
Luxembourg Sun 15
Madrid Fair 12Today’s temperaturesForecasts by
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Lex on the web
For notes on today’s breaking
stories go towww.ft.com/lex
Twitter: @FTLex
Hyped up for years, 5G wireless
technology was supposed to give
sluggish smartphone sales a shot in
the arm this year. The global
pandemic has put paid to that. Unless
lockdowns end andsupply chains iref
back up soon, new launches will have
to go on hold until 2021.
This may be a problem forApple. A
worldwide drop in phone sales last
year spurred the US gadgets giant to
raise prices, lifting revenues at the
same time. Demand for a new 5G
model due this autumn was expected
to drive up sales by volume too.
Without a rollout of 5G phones,
consumers may continue to avoid
upgrading their handsets.
In 2019, smartphone sales fell 2 per
cent by volume, according to data
from technology research firm Gartner.
It expected a resurgence this year,
largely because of new 5G models.
Gartner predicted sales would rise
3 per cent on the previous year in 2020
to 1.57bn.
If sales fall back 2 per cent instead,
shipments will dip to 1.49bn.
There is little Apple can do. The
company has been praised for its rapid
and responsible response to the
pandemic. It closed stores quickly and
while launching the iPad Pro and
Macs. Further launches will be more
difficult.
Even if the crisis abates by the
autumn, mass production would need
to begin in a month for a new model to
be ready in time.
The company cannot make up lost
sales in other arms of its business
either. Services are in high demand as
bored customers sit at home. They
hit a sales record in the three months
to the end of December and should a
print a fresh record in the next
quarter. But at $13bn, they are just a
quarter of iPhone sales. iPhone sales
will not seize up, even without a new
5G phone. About a third of iPhones
are due an upgrade according to
analysts at Wedbush.
Perhaps some consumers will opt
for last year’s model instead. It may
not boast novel bells and whistles,
but iPhone revenue growth in the last
quarter was thebestin a year,
proving iPhone 11’s popularity.
Not every customer is waiting for a
5G phone.
FT graphic Sources: Gartner: company
Global smartphone shipments
Million
Gartner
forecastLex
forecastGreater ChinaEmerging
Asia-PacificNorth AmericaWestern EuropeLatin AmericaSub-Saharan
AfricaRest of
the worldApple net sales
Q ()iPhone
Services
Wearables
Mac
iPad
Apple: 5G shock
Global smartphone shipments have stalled in the past year as users opt to hang on to old models for longer,
but 5G could change that. Apple, which derives most of its revenues from iPhone sales, is expected to see a
sales boost if a new 5G model is popular. But its rollout is likely to be delayed by the pandemic.Legal Notices
MARCH 27 2020 Section:FrontBack Time: 3/202026/ - 18:46 User: joe.russ Page Name:1BACK, Part,Page,Edition:EUR , 18, 1