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Singapore Daily Bulletin – 29/11/12

MAS Warns Of Some Risks Although Economy Remains Resilient
In its annual Financial Stability Review, the Monetary Authority of Singapore (MAS) warned that risks remain prevalent in the economy. With companies more leveraged today due to low borrowing costs, risks are heightened if economic conditions worsen or interest rates rise and bank loan quality could deteriorate substantially. MAS also highlighted that the corporate sector continues to face headwinds that could take a toll on earnings, weighed down further by the weak external demand; especially for external-oriented industries. MAS also flagged non-Singapore dollar funding as potential risk to banks’ foreign currency liquidity risks. It also notes that households which may have overextended and overleveraged will be vulnerable to the deteriorating economic conditions.

Significance: Singapore’s economy, while resilient, remains susceptible to the impact from global economic conditions and rest of Asia, which are vulnerable to sudden surges and reversals of capital flows. Singapore’s Gross Domestic Product growth this year is expected to come in at 1.5 percent, at the lower end of the forecasted range of 1.5 to 2.5 percent.

SembMarine Bags US$806.4m Drillship Contract
Sembcorp Marine (SembMarine) has secured a drillship contract worth US$806.4 million from Sete Brasil Participacǒes S.A. (Sete Brasil) for the design and construction of a drillship based on Jurong Shipyard’s proprietary Jurong Espadon drillship design. This contract marks the seventh unit of a series of drillships the company has secured with Sete Brasil since February 2012 that will be built based on the Jurong Espadon design. The Jurong Espadon design represents the next generation of high specification drillships with advanced capabilities; capable of operating at 10,000 feet of water depth and drilling to depths of 40,000 feet. The units are scheduled for deliveries ranging from 2Q15 to 4Q19 with this latest unit to be delivered by third quarter of 2016.

Significance: The award of the seventh drillship to SembMarine from Sete Brasil is testament to a long-standing partnership between both parties and also recognises SembMarine’s capability as a leading builder of drillships.

Keong Hong’s FY12 Earnings Doubles Despite Revenue Decline
Keong Hong Holdings reported a set of sterling results for the financial year ended 30 September 2012 with earnings doubling to a record $19.8 million despite an 11.7 percent decline in revenue to $167.4 million. The reduced revenue contribution was mainly due to lower revenue recognised from projects which received Temporary Occupation Permit but the record earnings were attributable to the increase in gross profit margin arising from projects with higher margins that were completed and new projects that had commenced works in FY12. As of FY12, Keong Hong had cash and cash equivalents of $57.7 million against $39.7 million recorded in FY11, representing a 45.2 percent year-on-year increase. Going forward, Keong Hong aims to seek out more opportunities to acquire new land parcels, expand overseas and explore strategic partnerships.

Significance: With a healthy pipeline of projects lined up till 2014, Keong Hong’s order book of $339 million will continue to support the company’s top and bottom line growth.