Local Banks Well Positioned To Weather Global Downturn
Fitch Ratings noted that the three Singapore banks will be able to weather a global downturn given their robust capital positions and strong government backing of the domestic economy. Director of financial institutions at Fitch Ratings Singapore, Alfred Chan highlighted that despite escalating risks from the troubled Eurozone to the global economy and increasing challenges from a slowing China, the outlook for the local banks (which are rated AA-) remains stable. Notably, Singapore banks have about 60 percent of their businesses locally. While they will be impacted from their operations in Asean and China, where they have branches and sizeable businesses, Chan noted that the local banks’ exposure to China, which surged last year, is easing with China relaxing its credit rules and corporates are able to borrow domestically. Chan expects the impact of a global downturn on the three banks will be through the property market as the banks have large exposure to the real estate segment – at close to 40 percent of loans – of which two-thirds are mortgages and the rest to property developers and investors.
Significance: Although Fitch is projecting Singapore to grow a slower 2.5 percent this year, it remains confident that in the event of a more severe downturn, the Singapore government, with their resources, will step in. Singapore is rated triple A by Fitch.
Boustead’s Order Book Backlog Raised To $351m
Boustead Singapore announced that its subsidiary, Boustead Projects, has been awarded a $14 million contract to design and build an integrated food processing and office facility for RE&S Enterprises to be located at the Paya Lebar iPark. The facility will have a gross floor area of approximately 9,650 square metres spread across seven floors and is expected to be completed in calendar year 2Q13. The contract marks the company’s first win in FY13 ending March 2013. Notably, this facility represents its eighth project the company is undertaking within the Paya Lebar iPark and its fourth project in the food processing industry. The latest contract has also raised Boustead’s order book backlog (as at end of March plus new orders since then) to $351 million.
Significance: While the latest contract will not have a material impact on its profitability, the company’s strong order book backlog will generate a healthy revenue stream going forward.
Medi-Flex Posts 61% Jump In 3Q12
Medi-Flex announced a 61 percent increase in its net profit to RM1.5 million from RM1 million on the back of a marginal growth in revenue to RM40.1 million from RM39.9 million for the third quarter ended 31 May 2012. The significant rise in earnings was attributed from the sales of nitrile glove through more aggressive marketing and continuous quality improvement. For the nine months period, revenue was up 20 percent to RM121.6 million while earnings jumped 17 percent to RM4 million, led by the higher sales volume due to rising demand in most countries. As gloves are deemed as basic necessities, especially in the healthcare industry, the greater emphasis on workplace safety, safety compliance regulations, ongoing education and awareness to promote health and safety benefits have helped to spur the demand spike.
Significance: Medi-Flex expects the strengthening of US dollar and easing of raw material prices to boost its top line as latex prices are expected to trend below RM7 per kg in the short term. This was due to the anticipated reduction in demand from downstream tyre makers that were hit by the economic slowdown in China and Eurozone crisis.