Published September 20, 2008
SingTel may cut spending, rates amid market turmoil
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(Singapore)
SINGAPORE Telecommunications Ltd (SingTel), South-east Asia's largest telecommunication services company, may spend less than planned in its domestic market and cut rates as slowing economic growth and financial-market turmoil curb customer spending.
'The tea leaves are indicating that things are going to be very uncertain,' Allen Lew, chief executive officer of SingTel's operations in the city-state, said in a Bloomberg Television interview broadcast yesterday. The company will 'start to curtail some of our unnecessary spending and be a bit more cautious', he said.
SingTel, whose operating expenses in Singapore rose 14 per cent in the quarter ended June, said it plans to cut costs and reduce some fees on concern that clients will delay orders.
The US government bailed out American International Group Inc for US$85 billion and Lehman Brothers Holdings Inc filed for bankruptcy this week, following the collapse of Bear Stearns Cos in March.
'The tea leaves are indicating that things are going to be very uncertain.'
- Allen Lew,
SingTel CEO for S'pore (above)
'SingTel will have to be very aggressive in trying to cut costs and minimise the impact on margins as everyone else looks to delay orders now,' said Voon San Lai, an analyst at Cazenove Asia Ltd in Singapore who rates the company 'underperform'.
The phone operator 'could also cut handset subsidies and staffing might be reduced', he said.
Mr Lew, 53, declined to elaborate on the cost cuts. Operating expenses in Singapore rose to S$743 million in the three months to June 30, from S$652 million a year earlier.
SingTel on May 14 projected that capital spending in Singapore will rise to a 'mid-teens' percentage of revenue, as the company adds mobile capacity and upgrades its fixed-line network. It spent 8.8 per cent of sales for the 12 months ended March 31, compared with 8.5 per cent a year earlier.
The company had 10,651 employees in the city-state at the end of June, or about half of its total workforce. 'We've a lot of corporate banking customers and you know these are the areas where there're a lot of challenges right now,' Mr Lew said.
SingTel is seeing some companies 'being more cautious in terms of their capital expenditure and their expansion plans', he said. The operator will consider cutting charges for business clients on a case-by-case basis, Mr Lew said.
Global economic growth will slow to 4.1 per cent this year and 3.9 per cent in 2009 from 5 per cent last year, the International Monetary Fund predicted in July.
SingTel joins Tata Consultancy Services Ltd and Infosys Technologies Ltd, India's largest software-services companies, in expecting financial firms to delay orders.
Nortel Networks Corp, North America's biggest phone-equipment maker, on Wednesday said sales will fall this year as companies hold back investments. Bloomberg
Monday, 22 September 2008
Published September 20, 2008
Sector In Focus
Property risks back in spotlight
Developers with overseas exposure stay upbeat amid downturn. By Uma Shankari
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THE property business has come full circle for listed developers here. A few years ago, with land prices on the upswing and intensifying competition in Singapore, many property companies ventured overseas into untapped markets in search of better returns. Their overseas units flourished. And for the past few years, these units have been fattening the bottom lines of many property firms here.
While the going was good, there was a tendency, when it came to evaluating such companies, to overlook the commonly-acknowledged risks inherent in developing markets - such as changing regulatory environments and the tendency of foreign investors to flee when the going gets even a bit rough. But now, with the property markets in China (and to a lesser extent Vietnam) taking a beating - in part due to government actions - those risks are being thrown into the spotlight once again.
Last week, China Vanke, China's largest listed property developer, reported a 35 per cent drop in its August real estate sales. The developer also reportedly cut prices in Nanjing, Guangzhou, Shanghai and Beijing by as much as 20 per cent. Soon after, news emerged of other developers following suit with substantial price cuts.
There are no signs of the Chinese government stepping out to halt the slump in the property market. In an announcement by the People's Bank of China in late August, the central bank continued to call on commercial banks to tighten their lending to property developers and restated its curbs on bank loans directly for land purchases by developers.
'We think recent price cuts could further depress pricing of residential properties and lead to prolonged weakness in an already ailing China property market as other developers may undercut prices for their properties and buyers are likely to avoid the market on concerns of further price cuts,' said OCBC Investment Research analyst Foo Sze Ming.
In Vietnam, prices could also head south. Like in China, the government in Vietnam is fighting inflation with various regulatory measures to cool the economy. A liquidity crunch also means that smaller and non-reputable developers could be forced out of the market.
Many Singapore-listed property companies have targeted China, Vietnam, and also India, another emerging market, for expansion over the past few years. Now, with the property market in Singapore taking a pause, developers with large stakes in these emerging markets, such as CapitaLand, Keppel Land and GuocoLand, have to assure investors that they have not over-stretched themselves.
Partly in response to the negative newsflow about China's property market over the past few weeks, property stocks with exposure in that country have been punished by the market over the past week. Adding to the problem was the current global stock market turmoil.
But looking ahead, analysts are throwing their weight behind those developers who have stayed put in Singapore. Kim Eng Research, for example, said yesterday that its picks for the sector are Singapore-centric property developers City Developments and Wing Tai as beta plays for a recovery in the Singapore property market in the future.
On their part, developers with assets in emerging markets have been pointing to the strong fundamentals in these countries. Growing middle classes, increasing disposable incomes and housing affordabilities as well as rapid urbanisation are all key drivers for real estate demand, they say. Some also point out that their overseas exposure is not as large as their presence in the relatively more stable Singapore.
'CapitaLand's exposure in China is a balanced one with exposure to the residential, commercial, retail, serviced residence and financial services sectors across multiple regions,' said Lim Ming Yan, chief executive of CapitaLand China. As at June 30, 2008, CapitaLand's assets in China came to some $7.4 billion and accounted for 27 per cent of CapitaLand's total assets.
CapitaLand's presence in Vietnam, on the other hand, is much smaller, the developer said. 'CapitaLand is relatively early in expansion in Vietnam and our current exposure is just under one per cent of the group's total balance sheet,' said Chen Lian Pang, chief executive for South-east Asia for CapitaLand Commercial.
Similarly, both Keppel Land and GuocoLand have stressed that their portfolios are balanced.
Some developers, sitting on a pile of cash, are also taking this opportunity to hunt for distressed assets they could pick up at bargain prices. 'I am still looking to buy in those markets (China and Vietnam) but only if the price is right,' a developer told BT. If smaller developers are forced to sell because of refinancing or other issues, bigger companies could buy assets and wait for the market to turn around, he said.
CapitaLand shared the view. With its strong balance sheet, the developer is in a very good position to take advantage of the current market to continue to expand selectively in China and Vietnam, it said.
Sector In Focus
Property risks back in spotlight
Developers with overseas exposure stay upbeat amid downturn. By Uma Shankari
Email this article
Print article
Feedback
THE property business has come full circle for listed developers here. A few years ago, with land prices on the upswing and intensifying competition in Singapore, many property companies ventured overseas into untapped markets in search of better returns. Their overseas units flourished. And for the past few years, these units have been fattening the bottom lines of many property firms here.
While the going was good, there was a tendency, when it came to evaluating such companies, to overlook the commonly-acknowledged risks inherent in developing markets - such as changing regulatory environments and the tendency of foreign investors to flee when the going gets even a bit rough. But now, with the property markets in China (and to a lesser extent Vietnam) taking a beating - in part due to government actions - those risks are being thrown into the spotlight once again.
Last week, China Vanke, China's largest listed property developer, reported a 35 per cent drop in its August real estate sales. The developer also reportedly cut prices in Nanjing, Guangzhou, Shanghai and Beijing by as much as 20 per cent. Soon after, news emerged of other developers following suit with substantial price cuts.
There are no signs of the Chinese government stepping out to halt the slump in the property market. In an announcement by the People's Bank of China in late August, the central bank continued to call on commercial banks to tighten their lending to property developers and restated its curbs on bank loans directly for land purchases by developers.
'We think recent price cuts could further depress pricing of residential properties and lead to prolonged weakness in an already ailing China property market as other developers may undercut prices for their properties and buyers are likely to avoid the market on concerns of further price cuts,' said OCBC Investment Research analyst Foo Sze Ming.
In Vietnam, prices could also head south. Like in China, the government in Vietnam is fighting inflation with various regulatory measures to cool the economy. A liquidity crunch also means that smaller and non-reputable developers could be forced out of the market.
Many Singapore-listed property companies have targeted China, Vietnam, and also India, another emerging market, for expansion over the past few years. Now, with the property market in Singapore taking a pause, developers with large stakes in these emerging markets, such as CapitaLand, Keppel Land and GuocoLand, have to assure investors that they have not over-stretched themselves.
Partly in response to the negative newsflow about China's property market over the past few weeks, property stocks with exposure in that country have been punished by the market over the past week. Adding to the problem was the current global stock market turmoil.
But looking ahead, analysts are throwing their weight behind those developers who have stayed put in Singapore. Kim Eng Research, for example, said yesterday that its picks for the sector are Singapore-centric property developers City Developments and Wing Tai as beta plays for a recovery in the Singapore property market in the future.
On their part, developers with assets in emerging markets have been pointing to the strong fundamentals in these countries. Growing middle classes, increasing disposable incomes and housing affordabilities as well as rapid urbanisation are all key drivers for real estate demand, they say. Some also point out that their overseas exposure is not as large as their presence in the relatively more stable Singapore.
'CapitaLand's exposure in China is a balanced one with exposure to the residential, commercial, retail, serviced residence and financial services sectors across multiple regions,' said Lim Ming Yan, chief executive of CapitaLand China. As at June 30, 2008, CapitaLand's assets in China came to some $7.4 billion and accounted for 27 per cent of CapitaLand's total assets.
CapitaLand's presence in Vietnam, on the other hand, is much smaller, the developer said. 'CapitaLand is relatively early in expansion in Vietnam and our current exposure is just under one per cent of the group's total balance sheet,' said Chen Lian Pang, chief executive for South-east Asia for CapitaLand Commercial.
Similarly, both Keppel Land and GuocoLand have stressed that their portfolios are balanced.
Some developers, sitting on a pile of cash, are also taking this opportunity to hunt for distressed assets they could pick up at bargain prices. 'I am still looking to buy in those markets (China and Vietnam) but only if the price is right,' a developer told BT. If smaller developers are forced to sell because of refinancing or other issues, bigger companies could buy assets and wait for the market to turn around, he said.
CapitaLand shared the view. With its strong balance sheet, the developer is in a very good position to take advantage of the current market to continue to expand selectively in China and Vietnam, it said.
Published September 20, 2008
China Milk, China Dairy give assurance on their products
By LYNETTE KHOO
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TWO Chinese companies listed in Singapore have come out to give assurance about the quality of their milk and milk-related products amid a melamine-tainted milk powder and ready-to-drink milk scandal in China.
YOUCAN PRODUCTS
Youcan said on Thursday that besides sending its ice-cream products for testing in China, it will also submit samples to AVA
Melamine is a chemical used to make plastics. Three companies reportedly implicated were Mengniu, Yili and Bright Dairy & Food, which dominate 70 per cent of China's packaged milk market.
China Milk Products Group, which produces raw milk, said in a filing to Singapore Exchange on Thursday that it is not affected by this issue as it does not put additives to its raw milk.
'The group also confirms it does not add melamine into its raw milk to raise protein content,' China Milk said.
To control and ensure the quality of raw milk it produces, its herd of about 21,000 dairy cows of superior breed are fed with specially blended feedstuffs formulated by its experts for different cattle groups.
China Dairy Group, which produces liquid milk and milk powder, said on Wednesday that the Chinese authorities have declared that its infant milk powder products manufactured by subsidiary Yinqiao, are safe and free from melamine.
Yinqiao is on the 'safe-list' of 87 dairy manufacturers released by the Chinese authorities.
As a precautionary measure, AVA said yesterday it is suspending the import and sale of all milk and milk products from China with immediate effect.
Retailers and importers have been instructed to recall these products.
Local food manufacturers have also been instructed to cease the use of milk and milk products from China as ingredients until AVA completes its investigations.
These new measures could hit Singapore-listed Youcan Foods International, a frozen food and ice-cream manufacturer in China, which exports ice-cream to Singapore. Some of Youcan ice-cream products use milk powder as one of its ingredients.
Youcan had on Thursday, made an announcement to SGX, assuring shareholders and consumers of its emphasis on quality control in its production processes.
Some of its ice-cream products use milk powder as an ingredient, which it sources from several suppliers.
Youcan said since the reports of tainted milk powder, it has called for a detailed safety assessment of the group's ice-cream products, especially those that are exported.
In addition to sending its ice-cream products for testing in China, it will also be submitting samples to the AVA for screening, Youcan said in its Thursday announcement.
Yesterday, S-shares recovered some grounds along with the broader market, with China Milk up 8.3 per cent to 45.5 cents, China Dairy up 8.7 per cent to 12.5 cents. Youcan was last traded at 29 cents.
China Milk, China Dairy give assurance on their products
By LYNETTE KHOO
Email this article
Print article
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TWO Chinese companies listed in Singapore have come out to give assurance about the quality of their milk and milk-related products amid a melamine-tainted milk powder and ready-to-drink milk scandal in China.
YOUCAN PRODUCTS
Youcan said on Thursday that besides sending its ice-cream products for testing in China, it will also submit samples to AVA
Melamine is a chemical used to make plastics. Three companies reportedly implicated were Mengniu, Yili and Bright Dairy & Food, which dominate 70 per cent of China's packaged milk market.
China Milk Products Group, which produces raw milk, said in a filing to Singapore Exchange on Thursday that it is not affected by this issue as it does not put additives to its raw milk.
'The group also confirms it does not add melamine into its raw milk to raise protein content,' China Milk said.
To control and ensure the quality of raw milk it produces, its herd of about 21,000 dairy cows of superior breed are fed with specially blended feedstuffs formulated by its experts for different cattle groups.
China Dairy Group, which produces liquid milk and milk powder, said on Wednesday that the Chinese authorities have declared that its infant milk powder products manufactured by subsidiary Yinqiao, are safe and free from melamine.
Yinqiao is on the 'safe-list' of 87 dairy manufacturers released by the Chinese authorities.
As a precautionary measure, AVA said yesterday it is suspending the import and sale of all milk and milk products from China with immediate effect.
Retailers and importers have been instructed to recall these products.
Local food manufacturers have also been instructed to cease the use of milk and milk products from China as ingredients until AVA completes its investigations.
These new measures could hit Singapore-listed Youcan Foods International, a frozen food and ice-cream manufacturer in China, which exports ice-cream to Singapore. Some of Youcan ice-cream products use milk powder as one of its ingredients.
Youcan had on Thursday, made an announcement to SGX, assuring shareholders and consumers of its emphasis on quality control in its production processes.
Some of its ice-cream products use milk powder as an ingredient, which it sources from several suppliers.
Youcan said since the reports of tainted milk powder, it has called for a detailed safety assessment of the group's ice-cream products, especially those that are exported.
In addition to sending its ice-cream products for testing in China, it will also be submitting samples to the AVA for screening, Youcan said in its Thursday announcement.
Yesterday, S-shares recovered some grounds along with the broader market, with China Milk up 8.3 per cent to 45.5 cents, China Dairy up 8.7 per cent to 12.5 cents. Youcan was last traded at 29 cents.
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