Published March 28, 2009

Strong Q4 lifts profit of Low Keng Huat

Full year profit hits $29.35 million, more than doubling earnings of $13.69 million for preceding year

By JOYCE HOOI

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GENERAL contractor Low Keng Huat has built up a tidy haul for the full year ended Jan 31, 2009, by posting a net profit of $29.35 million, more than doubling its net profit of $13.69 million for the preceding year.

This was helped by a strong fiscal fourth-quarter finish, with net profit standing at $6 million, a 163 per cent increase from the previous correspondng quarter's $2.3 million.

Revenue for fiscal full year also more than doubled to $274.6 million from $113.3 million.

Almost half of the revenue was booked in the last three months of its fiscal year, with the fourth-quarter revenue skyrocketing from $23.97 million for the same period a year ago to $126.5 million, boosted mostly by construction revenue.

The group's construction revenue soared by 287.3 per cent to $220 million for its fiscal year.

'The increase was due to the higher percentage of completion for on-going projects one-north Residences and South Bank and the commencement of new projects Hard Rock Hotel at Sentosa and Meritus Mandarin Hotel,' the group said.

On the group's hotel and food and beverage front, revenue dipped 3.2 per cent from $56.1 million the year before to $54.3 million for the full year ended Jan 31, 2009, because of lower revenue from Duxton Hotel Perth due to the weaker Australian dollar.

The group's gaming centre operations in Duxton Hotel Saigon saw it recording a negative concessionary income of $2.2 million for its fiscal year, due to the centre's lower takings and an additional tax provision of $3.5 million.

The centre's licence had been suspended by the Vietnamese government in November 2008.

'We have submitted our appeal to the authorities to re-instate the licence but its outcome remains unknown as of 31 January 2009,' the group said.

Earnings per share for the group stood at 0.81 cents for the quarter and 3.97 cents for the fiscal year, up from earnings per share of 0.31 cents and 1.85 cents for the same periods a year ago, respectively.

The group said that it will continue to focus on its core business, amidst the poor economic climate.

It has proposed a first and final cash dividend of 1.5 cents per share.

Low Keng Huat's share price rose half a cent, closing at 15.5 cents yesterday.

Published March 28, 2009

A bit of Wall Street cheer before the earnings season

Beyond that, it's anybody's guess as to how stocks will hold up

By ANDREW MARKS
NEW YORK CORRESPONDENT

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MARCH has been kind to US stocks. The market posted a whopping 12 per cent rise on the month on Thursday after a powerful rally saw blue chips breaking through 7,900 points.

TAKING IT IN With Thursday's rally the Dow is now up 21 per cent from the 12-year closing low posted on March 9

Despite that rise and an early pullback yesterday, Wall Street expects to see US equities close the month with a continuation of the rally that has seen the Dow Industrials bounce 1,300 points since the 6,547.05 close on March 9, the index's 12-year low point.

Thursday's late push to 7,924.56 means that the Dow is now up 21 per cent from that 12-year closing low. In other words, the Dow is in a bull market, technically speaking.

Investors now are clearly considering whether and how much more room there is to run in a rally that still leaves the Dow more than 850 points, or about 10 per cent, below its close on Dec 31, and 44 per cent below its record close on Oct 9, 2007.

Stocks opened lower yesterday. By noon, the Dow was down 103.62 points at 7,820.94.

A pullback is hardly surprising to Wall Street analysts following Thursday's big run-up. 'Giving back one or two per cent today (Friday) isn't a big deal, given how far up we've travelled in such a short time,' said John O'Donoghue, head equity trader at S G Cowen & Company yesterday. 'I expect that absent any significant negative news, the stock rally will resume, if not by the end of Friday, then on Monday.'

Mr O'Donoghue expects that investors who had shifted into defensive stock plays like McDonald's and Wal Mart during the past several months will continue to reallocate into more aggressive investments.

'That defensive trade is coming off, and you're going to continue to see more sideline cash being put to work. Being in cash in an up market is the equivalent of being short right now, and with the end of the quarter almost here, I expect more buying due to window dressing by money managers moving into stocks,' he said.

Beyond the end of first quarter, however, Mr O'Donoghue and many other Wall Street professionals are feeling far more circumspect.

Still, there has been some encouraging signs from economic data and corporate reports of late.

Indeed, a growing list of indicators is pointing to an easing in the recession. Thursday's rally was helped by job news that while dismal was better than Wall Street's expectations.

Yesterday's consumer spending report for February, showing a second straight month of gains, was seen as another sign of stability after six consecutive declines.

'Despite the loss of jobs and income, consumer spending is holding up surprisingly well, that is very positive for the economy,' observed Joel Naroff, president and chief economist at Naroff Economic Advisors.

Still, Mr O'Donoghue reflects the consensus on Wall Street that is cautious when it comes to the rally. 'I'm not sure we've started the next bull market. This is more of a relief rally that the financial system didn't shut down,' he said.

It is hard to see the market continuing to rally much beyond the first half of next week, once the first quarter's been put to bed, analysts said, noting that the first-quarter earnings season is on the horizon.

'After such a massive rally, you're going to see investors start looking for reasons to take some of those gains off the table,' said Jim Awad, managing director of Mercury Asset Management.

And there are still many reasons to be found. 'The fact is we don't know how well the latest bank rescue plan will work, companies are continuing to lose money and lay off workers, and now we're starting to see potential undercurrents of inflationary pressures,' he said.

Indicators to look for over the next few trading sessions are whether the stock market can keep advancing without help from the financials. Thursday's rally was especially encouraging to traders because it occurred without the bank stocks.

Both Citigroup and JPMorgan Chase fell by more than 2 per cent while the overall market soared, after Treasury Secretary Timothy Geithner said the Obama administration will seek to regulate the market for credit default swaps and other types of derivatives.

'The fact that the banks can take one in the chops and you still see the overall stock market making solid gains, that's an important positive for the market and speaks to the fact that a lot of investors feel that we're at least out of the woods in terms of the possibility of real systemic failure in the financial system,' Mr Awad said.

Published March 28, 2009

PSA full-year profit takes 46% tumble

The outlook remains weak, with throughput continuing to slide 19.8% year-on-year in Feb

By VINCENT WEE

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INEVITABLY, the malaise in global trade has hit PSA International, the world's second-biggest container terminal operator.

Plunging container volume and smaller margins in the last quarter of 2008 cut PSA's full- year net profit 46 per cent to $1.04 billion, from $1.93 billion in 2007. It was the first drop in profit in six years.

Although volume grew 7.3 per cent year-on-year in 2008 to 63.2 million twenty-foot equivalent units (TEUs), a collapse in demand on major trade lanes in the fourth quarter led to a contraction in throughput at the port of Singapore for the first time in over six years in November.

And the 1.5 per cent drop that month snowballed into a double-digit decline in December.

The outlook remains weak, with throughput continuing to slide 19.8 per cent year-on-year in February and 6.3 per cent from the month before.

PSA's revenue rose 5.8 per cent in 2008 to $4.39 billion, from $4.15 billion in 2007. But other income plunged by more than half to $491.4 million, from $1.12 billion previously. And current borrowings due this year ballooned to $1.78 billion, from $660.9 million previously.

The group's flagship Singapore terminal handled 29 million TEUs in 2008, helping Singapore maintain its position as the world's busiest container port for a fourth consecutive year.

PSA's overseas terminals handled 34.2 million TEUs last year, 7.7 per cent more than in 2007.

'2008 was shaping up to be another record-breaking year, with the first seven months bringing strong volume surge and record volumes,' said PSA chairman Fock Siew Wah.

'Unexpectedly, there was a sharp and abrupt business decline in the latter part of the year as the global financial crisis rapidly deteriorated into a major global slump and recession.'

PSA's chief executive Eddie Teh said: 'I see an extremely tough and increasingly challenging year in 2009, with more and more economies falling prey to the collapse of the financial systems, and global trade almost grinding to a halt.'

PSA's 2008 revenue contribution breakdown was similar to that in 2007 - almost equally split between Singapore operations and those elsewhere.

Outside Singapore, European terminals were the biggest contributors, raking in revenue of $1.4 billion that represented 32 per cent of group turnover. Revenue from China terminals remained at 4 per cent of total turnover, while newly acquired terminals in the Americas contributed 3 per cent of the total.

Profit from port operations was $1.44 billion, 21.7 per cent down from the previous year's $1.84 billion.

Singapore port operations continued to be the major contributor, posting more than 50 per cent of profit from port operations.

Non-port revenue declined to $305 million after the divestment of the group's offshore marine business in 2007, while profit plunged 83.2 per cent to $106 million from $632 million previously.

Published March 28, 2009

Fast cars, hot tickets and a quick buck

F1 season kicks off and someone could try to sell you race tickets that go sour

By NISHA RAMCHANDANI

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YOU know the saying, if it's too good to be true, it probably is? That could ring true when purchasing tickets for this year's Formula One (F1) race, as it appears some unauthorised vendors are trying to make a quick buck out of it.

The new season kicks off this weekend and the business of snapping up race tickets is already underway. Meanwhile, BT has learnt that several unauthorised vendors were warned for purchasing tickets for the 2008 Singapore race and reselling them at a profit.

In some cases, people bought packages from an unauthorised vendor expecting corporate suites, only to find themselves saddled with grandstand passes. To make matters worse, not all the seats were adjacent to each other.

The dinner promised as part of the package was at a nearby hotel as opposed to the race-track itself. In addition, the 'famous F1 driver' who was to mingle with guests turned out to be someone who had only briefly driven many years ago for the bottom-placed and now-defunct Minardi team.

Other buyers had it worse.

Last May, Singaporean Yvonne Koh, who is based in Beijing, bought two grandstand tickets for the 2008 F1 race off an online merchant for about US$500. In addition, Ms Koh had to cough up US$50 for 'courier fees'.

The tickets - an anniversary present for her race fan husband - were supposed to arrive by early September in time for the race.

While the merchant would respond to her email messages which made it seem legitimate, 'the tickets never arrived', Ms Koh said. 'The promise to refund the US$500 to me wasn't delivered.'

Ms Koh wound up having to pay S$100 extra for each three-day walkabout pass (usually S$168) she later purchased from someone else, as all tickets to the 2008 race had sold out by then.

By January this year, the merchant had stopped responding to her email messages. An enquiry by BT sent to the company - which lists an address in Bali, a fax number but no phone number - did not receive a response.

Singapore GP is aware of the problem and sent out warning letters to several vendors in connection with the 2008 race. 'We have always actively discouraged the on-selling of tickets above their face value,' said Darren Chen, SGP's director of corporate sales. This is in breach of SGP's published terms of sale.

It is also a good idea to check the fine print, as additional charges can ratchet up the total price.

According to its brochure, corporate hospitality packages by one company come with a rather hefty service charge of a whopping 24 per cent. This works out to be in the region of some US$7,000 in service charge alone per US$29,500 group package. Repeated calls to the company were not returned by press time.

Meanwhile, corporate outfits get approached with plausible stories - with no guarantee that they're true. One source told BT that an unauthorised vendor called him recently with the line that a bank had pulled out after paying a non-refundable deposit for a corporate hospitality package. As such, the promoter was able to let it go at a lower price of close to US$20,000, approximately some US$2,000 per head.

On face value this is attractive as the cheapest corporate hospitality suite this year is worth S$3,388 per head. But as some buyers found out last year, they were bundled off to grandstands, which started at S$248. It may turn out to be a gamble gone bad or a sign of the times.

'I have been approached on numerous occasions both here and in other markets with similar propositions,' said one CEO who declined to be named. 'Reading between the lines, it suggests that there is pressure to sign up anchor sponsors in the current environment.'

He went on to add that the marketing ploy of a client pulling out after paying a deposit made it that much easier 'to close deals quickly on the spot'.

While such hard-sell tactics aren't exactly new, the recession lends added gravitas. It's common knowledge by now that banks such as Credit Suisse, ING Group and the Royal Bank of Scotland (RBS) which have been hard hit by the economic downturn have all either bowed out as F1 team sponsors or plan to do so once contractual obligations are fulfilled.

'If approached by a third party you should check with Singapore GP that they are authorised to sell on our behalf,' advised Mr Chen. SGP has a list of its official partners - both local and overseas - on its website.

Published March 27, 2009

Muhyiddin to be next M'sian DPM

He wins race for Umno deputy presidency by landslide margin of more than 600 votes

By S JAYASANKARAN
IN KUALA LUMPUR

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INTERNATIONAL Trade and Industry Minister Muhyiddin Yassin, 62, is set to become Malaysia's next deputy premier after he trounced challenger Muhammad Muhammad Taib in the race for the deputy presidency of the United Malays National Organisation (Umno) last night.

Mr Muhyiddin: In celebratory mood

By Umno standards, Mr Muhyiddin won big-time, by over 600 votes. In fairness, however, Mr Muhammad, the Land and Regional Minister by way of the Senate, had never been expected to make it although tongues had wagged that supporters of another popular candidate - Ali Rustam of Malacca who had been blocked from contesting after being found guilty of vote buying - would throw their support behind him.

Mr Muhyiddin has had a long record in Umno. He stuck by former prime minister Mahathir Mohamad when the latter was challenged by Tengku Razaleigh Hamzah in 1987 and after that was appointed Johor Mentri Besar before joining the federal cabinet as Sports Minister, Agricultural Minister and later International Trade and Industry Minister.

His leap will now be meteoric. By virtue of the fact that Umno is the dominant party in Malaysia's ruling Barisan Nasional coalition, its senior leaders routinely occupy senior positions in government. Thus, although the position of deputy premier is not specified in the Constitution, it is conventionally given to whoever is elected deputy president of Umno.

Similarly, the party's three elected vice-presidents plus its two ex-officio vice-presidents - the head of the Youth and Wanita wings, respectively - are generally acknowledged to be at government level.

Last night, the party elected three new vice-presidents in this electoral order: Zahid Hamidi, the Religious Affairs Minister; Education Minister Hishamuddin Hussein; and Culture and Heritage Minister Shafie Apdal.

The results were not unexpected. All three men are close to incoming prime minister Najib Razak and the result was, in some ways historic. Mr Shafie is the first from Malaysia's eastern Sabah state to ascend to such rarefied ranks in the party hierarchy.

Mr Zahid used to be Mr Najib's political secretary while Mr Hishamuddin, a son of Malaysia's third premier Hussein Onn, is the putative premier's first cousin.

The Supreme Council that Mr Najib will inherit, however, was altogether different. Stalwarts such as Johor's Shahrir Samad and Ghani Othman, and Negri Sembilan's Mohamad Hassan lost altogether while a number of Malay right-wing conservatives - Sabah's Bung Mokhtar, and Perak's Hamzah Zainuddin and Tajuddin Abdul Rahman - easily made the cut. But Tourism Minister Azalina Othman did not make the list.

It looks like Mr Najib may have his hands full.

Published March 27, 2009

ST Engg unit acquiring two China firms

Eventual 75% stakes in road building equipment firms to cost 162m yuan

By CONRAD TAN

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SINGAPORE Technologies Engineering is buying majority stakes in two Chinese makers of road construction and maintenance equipment for a total of 162 million yuan (S$36 million).

ST Engineering said yesterday its land systems arm ST Kinetics has signed two agreements to buy a 59 per cent stake in the two firms - Zhenjiang Huachen Huatong Road Machinery Co (HCHT) and Zhenjiang Huatong Aran Machinery Co (HTAR) - from their majority shareholder for 85 million yuan.

The acquisitions are subject to ST Kinetics buying a further 33.11 per cent stake in HCHT and another 16.3 per cent of HTAR from the two companies' other shareholder, Jiangsu Huatong Machinery Co - which owns the remaining 41 per cent of both firms - for a total of 52 million yuan.

If the acquisitions are approved by Chinese regulators, ST Kinetics will own 92.11 per cent of Huachen Huatong and 75.3 per cent of Huatong Aran.

ST Kinetics plans to inject a further 25 million yuan in cash into HCHT after the deals are completed, while Jiangsu Huatong Machinery will inject land, on which some of the factory buildings of HCHT are situated, into the firm.

The land injection from Jiangsu Huatong Machinery will dilute ST Kinetics' final stake in HCHT to 75.3 per cent, the same as its stake in HTAR.

Jiangsu Huatong Machinery will own the remaining 24.7 per cent stake in each of the two companies.

The acquisitions 'are in line with ST Kinetics' strategy to grow its specialty vehicles business in China and the region', ST Engineering said in a statement.

ST Kinetics already has two other specialty-vehicle joint ventures in China - one that makes off-road dump trucks and another that produces wheeled excavators. It hopes the latest acquisitions in China will also expand its product development and production capabilities in road construction and maintenance equipment, adding to those of VT LeeBoy, its wholly owned US subsidiary.

'These acquisitions would allow us to extract value from the relationships between VT LeeBoy in the US and HCHT and HTAR in China to offer our dealers and customers in both countries and beyond, a more comprehensive range of road construction and maintenance equipment,' said ST Kinetics president Sew Chee Jhuen.

Published March 27, 2009

CMT's rights issue over-subscribed

By UMA SHANKARI

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CAPITAMALL Trust (CMT), Singapore's largest real estate investment trust by market capitalisation, yesterday said that its $1.23 billion rights offer was over-subscribed based on initial tallies at the close of the rights offer on March 25.

'Acceptances and excess applications have been received for more than the total number of rights units offered pursuant to the rights issue,' CMT said in a filing to the Singapore Exchange.

The trust did not provide details of the amount of the oversubscription. Parent company CapitaLand similarly said on March 13 that its $1.84 billion rights issue had been over-subscribed.

CMT shares gained 16 cents, or 12.5 per cent, to close at $1.44 yesterday amid a broad gain in the market. The benchmark Straits Times Index closed 4 per cent up at a two-month high.

CMT on Feb 9 announced the $1.23 billion rights issue in a 9-for-10 rights offer. The trust, which is 29.7 per cent owned by CapitaLand, said that it will use most of the proceeds to pay off $956.2 million of debt due this year.

The balance will be used to pay for asset enhancement initiatives as well as for general corporate and working capital purposes. The rights issue will also reduce CMT's gearing from 43.2 per cent to 29.1 per cent.

In a report earlier this month, UBS Investment Research forecast an 8.3 per cent distribution per unit (DPU) yield for CMT this year - even on conservative assumptions, which included signing rents in suburban and central areas falling 8 per cent and 18 per cent respectively in 2009 as well as a 10 per cent rental rebate for central area malls.

'We maintain our 'buy' rating as CMT is relatively defensive with 50 per cent of its portfolio in suburban malls, and there is little doubt on its capital structure.'

Published March 27, 2009

Bondholders query Sino-Environment

Company says terms between CEO and hedge fund confidential

By CONRAD TAN

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SINO-ENVIRONMENT Technology Group has said that the terms of the financing agreements between its biggest shareholder and a hedge-fund manager threatening to force-sell its shares are confidential and cannot be disclosed.

In an announcement last night listing responses to bondholders' queries, Sino-Environment said that Stark Investments (Hong Kong), the hedge-fund manager, has insisted on the confidentiality agreement and objects to the company disclosing details of the arrangement to its bondholders.

On the request for details on executive chairman and chief executive officer Sun Jiangrong's liquid assets, the response was a two-word answer: 'personal information'.

The responses were from the company and the adviser of Mr Sun, Sino-Environment said, adding: 'The company has not verified the information provided by Mr Sun's adviser and accept no responsibility for the information provided whatsoever.'

On March 5, it stunned the market when it said that Thumb (China) Holdings Group, an investment vehicle of Mr Sun that owned a 56.29 per cent stake in the firm, had defaulted on certain financial obligations to hedge funds managed by Stark and that enforcement action could include the forced sale of some or all of Sino-Environment shares held by the vehicle.

Sino-Environment also warned then that any change in control of the company if the shares were forcibly sold could trigger bondholders' rights to convert or redeem S$149 million worth of bonds issued by the company, raising doubts about its ability to continue as a going concern.

Yesterday, the responses said that 'various options are being pursued' with Stark and other investors to resolve Mr Sun's difficulties and that 'discussion is ongoing'.

Mr Sun's stake in the firm has already been reduced to 51.23 per cent, after some 17.1 million of his shares were transferred to Stark on March 10.

Based on the information available, 'Stark has yet to take possession of the remaining shares', the responses said yesterday.

On the group's cash position, the responses said that it had some 300 million yuan (S$66.2 million) in cash as at March 6, mostly earmarked for capital expenditure and working capital.

Published March 27, 2009

CDL sells 60 units in The Arte at Thomson

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CITY Developments Ltd (CDL) sold about 60 apartments at its 336-unit project The Arte at Thomson last weekend.

The Arte at Thomson: The freehold project comprises two-, three- and four-bedroom apartments, as well as penthouses

The developer said yesterday that the average selling price was $880 per sq foot (psf). It released 100 units during the 'private preview' and will release more this weekend.

The freehold project comprises two-, three- and four-bedroom apartments, as well as penthouses. Most of the units sold last weekend were smaller two- and three-bedders.

Unlike other recently launched projects, units at The Arte are large, which means buyers have to fork out more.

For example, two-bedders are 1,055 sq ft and three-bedders range from 1,399 sq ft to 1,625 sq ft. Assuming $880 psf for a two-bedder, the price of the smallest unit would be $928,400.

But according to CDL general manager Chia Ngiang Hong: 'The Arte offers superb value for a prime freehold property in the Thomson area. Buyers get a luxurious condo without paying a premium price.'

CDL is offering an interest absorption scheme.

Analysts expect more projects to be launched in coming weeks as developers try to capitalise on a recent surge in buying interest. They sold 1,323 new private homes last month - eleven times more than in January. Numbers are expected to be strong for March as well, on the back of sales at The Arte, and at UOL Group and Kheng Leong's Simei condominium Double Bay Residences, where more than 200 units were sold this month.

Amid the buying surge, BT understands that Far East Organization is set to launch its mass market project Mi Casa. The 457-unit development near Choa Chu Kang MRT is expected to be popular with HDB upgraders in neighbouring estates.

Separately, Tee International and Hup Soon Global said that they are teaming up with a Bangkok-based company for the Singapore launch of a freehold luxury condominium located in the Thai capital. The Surawong will be launched this weekend at the Grand Hyatt Hotel here.

Published March 27, 2009

Don't be quick to pan SGX's ES contract

By R SIVANITHY

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THE Singapore Exchange (SGX) has had to deal with a bit of criticism in the local press over the past week for launching a new product known as an Extended Settlement (ES) contract, which is essentially an exchange- traded futures contract on an individual stock.

One critic asked if there was a need for the Singapore market to feature yet another set of derivatives that really only amount to gambling tools, while another warned of the similarities between ES and risky forward contracts that played a pivotal role in the Pan-Electric crisis of the mid-1980s.

Objectors in the industry, meanwhile, voiced fears as to whether a market as small as ours can support more of such instruments, especially one that is perceived as being difficult to understand.

While all of these concerns are valid and should not be understated (ES contracts are leveraged instruments, which means risks and losses are magnified), SGX realistically has no choice if it is to achieve its goal of being a top Asian financial centre. The alternative is to stand still and do nothing while competing exchanges forge ahead with new products of their own. Hong Kong, for example, last year launched its hugely successful 'callable bull/bear contracts' or CBBCs, which have complemented its already thriving structured warrants segment. In a bear market, where volume has dropped sharply, doing nothing would be tantamount to competitive suicide for a commercially driven exchange.

Moreover, claims of ES being difficult to understand are actually overstated. With a few differences, ES trading is similar to margin trading - something the majority of players here would already be familiar with. Essentially, investors take a view on where prices might head over the next 35 days, buy or sell accordingly and pay margins upfront, and again if prices move against them.

In the case of drastic movements, the margin calls can be substantial, so SGX provides guidelines on how much margin is needed. However, brokers will have to assess each client's creditworthiness before deciding on the actual margin amounts on a case-by-case basis.

When so doing, it is incumbent on brokers to check if clients have thoroughly familiarised themselves with the risks associated with ES because, like any leveraged product, losses can be large.

Has the ES launch been poorly timed? Maybe - even its most sympathetic critics have said introducing a new product in the depths of a bear market is bad timing because if interest in underlying stocks is already weak, then interest in new derivatives on those stocks would likely be non-existent.

As way of proof, they point to the present low daily volume in ES since its launch a few weeks ago. Had it been launched when the market was active and bullish, the chances of success would have been greater, or so it is believed.

While this sounds plausible, it has to be said that SGX is not in the business of timing the market and cannot afford to wait for an upturn before it offers new products. To elevate the local market's status as a financial centre, the exchange's role is to offer investors as wide a range of useful products as possible whenever it can, and to take all precautions to ensure no parties are unduly advantaged or disadvantaged. To achieve this, education and familiarisation are key so that risks are understood and factored in. Timing, however, cannot be an issue, at least not for the exchange.

Consider, for example, that when structured warrants were introduced back in 2002, annual turnover in the segment amounted to only $42 million. This was largely due to a post-dotcom crash bear market, uncertainty surrounding the US invasion of Iraq, a lack of understanding about the product among investors and the beginnings of the Sars epidemic - all factors that led to turnover dropping to a paltry $25 million in 2003.

Once the rebound started and familiarity with the instrument spread, turnover grew exponentially, hitting $28 billion in 2007. Note that this was slightly more than 1,000 times the business done in 2003 and today, even though volume has dropped because of the bear market, structured warrants are an established feature of our financial market.

Throughout the early years of the warrant segment's growth, concerns were raised similar to those now surrounding ES - namely, warrants are risky and difficult to understand, and since they are thinly disguised gambling tools, they increase risk in the market and therefore have no place here.

Those concerns have since been laid to rest; hopefully, in time, so will those surrounding ES - provided investors give the instrument the chance it deserves and take the time to study it thoroughly.

Published March 27, 2009

Start-ups feeling impact of economic downturn

They are moving to protect their businesses, reassessing priorities

By MICHELLE YEO

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START-UP companies are feeling the full force of the economic downturn, with 90 per cent reporting slower sales and 10 per cent suffering order cancellations, a study has found.

But the third annual DP Information-ACE Start-up Enterprise Survey also found that start-ups are taking steps to protect their businesses and reassessing their priorities to reflect economic reality.

For instance, 21 per cent have frozen recruitment. And to reverse declining sales, start-ups are focusing on customer acquisition, competitive pricing and branding as their top priorities over the next 12 months.

DP Information Group's managing director Chen Yew Nah said: 'A high 54 per cent of start-ups are profitable now, compared with 39 per cent in the last survey. And close to half of start-ups turned a profit within 12 months of starting the business. This shows start-ups have the potential to do well if they can ride out the storm.'

The survey showed that raising capital (46 per cent of respondents) and manpower issues (27 per cent) are the most common challenges facing start-ups, though the prominence of these two challenges has declined. Manpower issues should ease this year, with experienced staff becoming more readily available as bigger companies lay people off.

As for capital availability, the government has introduced new and enhanced funding schemes. Spring Singapore and IE Singapore have schemes for start-ups such as the new Young Entrepreneur Scheme and the SEEDS programme to inject equity into innovative start-ups. And the total loan amount under SEEDS has been increased to $1 million, from $300,000.

Government agencies will help 'match start-ups and the loans they need from banks', said Spring's group director for enterprise promotion Chew Mok Lee.

Spring focuses mainly on providing funds for infrastructure, and research and development, since start-up companies do not have the money for costly research, Ms Chew said.

Loan approvals for such companies have increased, from an average of 250 a month last year to 875 this month. And among these loans, micro loans have quadrupled since the fourth quarter of last year.

However, the DP-ACE survey results show that three-quarters of start-ups have no intention to spend on IT in the next 12 months, up from 66 per cent last year. Also, these companies are not aware of government programmes available to start-ups.

Recommendations from the survey include stepping up efforts to promote the adoption of IT and infocomm solutions by start-ups, and increasing their awareness of business assistance through various means.

The Start-up Enterprise Conference 2009 will be held on April 15. Existing and aspiring entrepreneurs are encouraged to attend.