Receive $80 Grab vouchers valid for use on all Grab services except GrabHitch and GrabShuttle when you subscribe to BT All-Digital at only $0.99*/month.
Find out more at btsub.sg/promo
THERE was an animated TV series in the 1980s called The Transformers which had a mega robot called Devastator, who was formed by the merging of several smaller construction robots.
Why the need for such a huge piece of hardware? Because, simply put, the other guys had a big robot as well - and size mattered.
Observers say some of those same principles may be driving the decision by Temasek Holdings and JTC Corp to merge four infrastructure and development units.
Those units will not be going after warrior machines, but they will be hunting down large-scale urbanisation projects, of which many more are expected to emerge over the next decade. And while it may be too early to speculate on the impact on other Singapore businesses, some trickle-down benefits could be possible.
"It does make sense," DMG & Partners head of research Terence Wong said. "If you're looking at the urbanisation trend, you want a competent force to compete."
Sovereign wealth fund manager Temasek is in talks with industrial development agency JTC to possibly merge Temasek's SingBridge Group and Surbana International Consultants Holdings with JTC's Ascendas and Jurong International Holdings.
The four entities combined will boast expertise that spans the value chain in urban development, from architecture and master planning through building and management. They will also be huge, with annual revenue north of S$1 billion, based on official estimates.
"There's definitely financial clout to go in there and get deals," Mr Wong said. "With a billion dollars of revenue, that's fairly hefty, and very good headcount over there. They can do a lot more."
Just how much more can they do? A private McKinsey report this year predicted that rapid urbanisation in the world's 600 largest cities will drive about 80 per cent of global GDP growth, with the top cities in emerging markets contributing about 47 per cent of that growth. "Such urbanisation will result in significant large-scale project opportunities emerging over the next 10 years," McKinsey wrote.
The consultancy predicted that capital investment in China could grow at about 6 per cent per year to US$6.9 trillion between 2014 and 2022. In India, the firm forecast about 11 per cent annual growth to US$1.5 trillion over the same period. The expectation for Indonesia is growth of about 13 per cent per year to US$785 billion.
Looking at projects that have struggled in the past, McKinsey argued that urbanisation specialists must provide an integrated solution to succeed.
"There is a strong strategic rationale and emerging evidence that an integrated approach combining economic development, accelerated infrastructure build-up, and smart technology development will provide players with a competitive advantage in securing such projects," it reported.
If the combined companies do find success, there could be follow-on benefits for other Singapore companies, Mr Wong said. "They want to be master city planners. So they will probably need a lot of help on the peripheries," he said. "I think there will be beneficiaries - maybe construction guys, developers, mall guys."
For now, investors are taking a wait-and-see approach. Ascendas's three real estate investment trusts (Reits) all had a quiet day on the stock market on Friday. Ascendas Reit slipped 0.4 per cent, or a cent, to close at S$2.36; Ascendas Hospitality Trust was flat at 71.5 Singapore cents while Ascendas India Trust was also unchanged at 83 Singapore cents.
The potential merger is not expected to trigger any general offers for the trusts.
DBS Vickers analyst Derek Tan said: "Maybe there will be more streamlined decision-making in the group structure at the top. But whether there will be flow-through impact, it's still early days."