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LEGAL
’s Singapore
top accounting firms
Beware the data czars
M1’s 4G dilemma
RICHARD BRANSON:
WHAT YOU NEED TO KNOW ABOUT SOCIAL MEDIA
QE3 IN SINGAPORE
MICA(P) 244/07/2011 KDM No: PPS1645/3/2008
SMRT,
CD STILL STRUGGLING SINGAPORE BUSINESS REVIEW | OCTOBER 2012 1
2 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
FROM THE EDITOR This issue of Singapore Business Review begins
Publisher & EDITOR-IN-CHIEF Tim Charlton
what we hope will be a new and important part
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of our magazine, the rankings section. Every issue
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It has not been an easy task as much of the
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information on company size, staffing levels and
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turnover is not publicly available.
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Our research team had to tirelessly work through checking and vetting hundreds of companies to compile a list of what we believe is the 25 largest per industry. In this issue we ranked Singapore’s largest public accounting
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CONTENTS
ANALYSIS
The trouble with M1’s pricey 18 4G data plans
12
collect $200
printing mean for Singapore? reverse as labour tightens
REGULAR 20 Dealmakers
26 Land transport operator pays
the price of penance
SMRT to spend millions on rail upgrades after the December breakdown.
Published Bi-monthly on the Second week of the Month by Charlton Media Group #06-09 E, Maxwell House 20 Maxwell Road 4 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
a run for its money?
With close to 70% mobile penetration in Asia, the region may be ripe for a mobile banking revolution.
4G data plans
M1 may lose more than customer loyalty in the long run if its 15-25% higher pricing strategy fails.
17 How to connect with your customers through social media
18 The trouble with M1’s pricey
OPINION
42 Can mobile banking give cash
ANALYSIS
going, gone
With 3 in 4 group buying sites out of business over the last two years, who will survive?
PHILIPPINES
50 Numbers
11 What does QE3, Euro
48 Life & Style
11 Cheap rates and a QE3 loan
12 Services sector going into
36 Deal of the Day sites: Going,
34 Regional Economy Briefing:
10 SPH press monopoly: Pass go,
going, gone
24 Legal Briefing
FIRST
36 ANALYSIS Deal of the Day sites: Going,
FIRST Services sector going into reverse as labour tightens
44 Singapore’s Top 25 Accounting
Firms
How are accountants taking the proposed changes in the Accountants Act?
For the latest business news from Singapore visit the website
www.sbr.com.sg
Agenda PEOPLE | PLACES | EVENTS | OPPORTUNITIES
HILTI Hilti, a global company that provides products for the construction and oil & gas industry in Singapore, has received 5 Red Dot product design awards in 2012. The Hilti TE 60 Combihammer with Dust Removal System was named “best of the best” as a comprehensive product system. Additionally, awards were given to their new electric wall saw, cordless drill/driver, cordless grinder and automatic tripod. The Hilti design team was awarded in 2010 with the highest honorary award in the world of design, “Red Dot Design Team of the Year” for continuous design innovation.
SERVICES
RESOURCES GLOBAL PROFESSIONALS Resources Global Professionals is a multinational professional services firm. Their accomplished professionals have expertise in finance & accounting, information management, risk & compliance, human capital, legal & regulatory, corporate advisory & restructuring, strategic communications, and supply chain management. Founded in 1996, today it has over 2,900 professionals, in more than 80 practice offices, serving 1,900 clients worldwide. Resources Global has served 86 of the Fortune 100 companies and was named to Forbes.com’s 2009 list of 100 Most Trustworthy Companies. 6 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
PLACES SERVICES
KVH KVH, Asia’s Information Delivery Platform, is launching state-of-the-art network and data center offerings for businesses in Singapore & Hong Kong in Oct. Having established its reputation in serving the exacting needs of the financial services industry, KVH is broadening its portfolio to satisfy the demands of the financial, media, and manufacturing industries. KVH is offering data center, cloud, storage, network solutions and a range of managed services by leveraging its highly secure, lowlatency global network and international POPs that connect across Asia, Europe, and the US. For more information, please contact us @ (65) 6590-9008, Email:sales_sg@kvh.co.jp
LONG BEACH SEAFOOD RESTAURANT LONG BEACH SEAFOOD is the Original creator of Singapore’s world famous and best Black Pepper Crab. Established in 1946 at Bedok Rest House along Old Bedok Road, the restaurant has been conferred several prestigious culinary awards and accolades. For reservations call MAIN 6445 8833 Dempsey 6323 2222 IMM 6566 9933 LB UDMC 6448 3636 KING 6344 7722.
new 12 month MBA
visit
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FOR MORE INFORMATION on EVENTS AND ADVERTISING
NTU’s Nanyang Business School launched a new Master of Business Administration (MBA) curriculum this year to address the needs of the industry today. Starting August 2013, students will experience a 12-month programme that is more strongly focused on leadership, deeper industry application, and with emphasis on corporate governance and sustainability in Asia.
SINGAPORE BUSINESS REVIEW | OCTOBER 2012 7
Agenda PEOPLE | PLACES | EVENTS | OPPORTUNITIES
HOLCIM
SIXTH SENSE
Growing demand and complexity in construction industry require better solutions that meet today’s needs without compromising future generations. Holcim attaches a great commitment to sustainable development. The company specializes in innovative building material solutions with 100 years of accumulated expertise in construction industry. The new Centre of Excellence in Singapore will enable the company to further develop application-based solutions to propel the industry forward towards sustainable construction. Visit their website at www.holcim. com.sg or call them at 6265 1933 to explore opportunities for collaboration.
Established in 2001, Sixth Sense is an established Public Relations consultancy agency specialising in PR Consultancy and Marketing Communications services for clients in the Food & Beverage, Hospitality, Arts and Consumer Lifestyle industries. The creative and dedicated consultants at Sixth Sense are apt at crafting strategic PR campaigns and developing marketing communications tools. You can expect a high standard of professionalism, swift execution, prompt delivery and above all a dedication to personalised client servicing. Its current portfolio of clients includes Cold Storage, Guardian Health & Beauty, Goodwood Park Hotel, Carlsberg and Paradise Group. Visit www.sixthsense.com.sg
YOUR PERSONAL ADVERTISING BUTLER At DiseĂąo Advertising, we help our clients to maximise their advertising budget. Specialists will analyse and plan your advertising campaign effectively to give you the best value for your advertising dollar. Let Diseno help you with your advertising needs. Call them now and talk to one of their advertising butlers at 68365168 or drop them an email at sales@diseno.com.sg Visit them at www.diseno.com.sg 8 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
SERVICES
WOOLOOMOOLOO STEAKHOUSE Wooloomooloo Steakhouse, part of an independent group of steakhouses from Hong Kong, recently opened its first international branch at the third level of Swissotel at the Stamford. This 140-seater restaurant serves up premium Australian and USDA steaks under the expertise of Head Chef Kent Ho and his culinary team. Customers can indulge in a three-course set lunch from Mondays to Fridays with the menu changing weekly. They can also relax at the 40-seater Wooloomooloo Lounge daily from 4pm to 7pm to enjoy the Happy Hour after a hard day at the office. Call 6338-0261 or email www.woo-singapore@wooloomooloo.com for reservations today.
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Singapore Turf Club Looking forward to embark on a voyage of culinary pleasure at lunch, or enjoy a spectacular night after work with friends or business associates? You can adjourn to the chill-out lounge at V (China Square, Level 3). V, a premier hospitality destination by the Singapore Turf Club. The perfect venue for any meet. Please call 6879 1979 or email business_development@turfclub.com.sg for more information.
SINGAPORE BUSINESS REVIEW | OCTOBER 2012 9
FIRST its leading monopolistic newspaper and magazine publisher position in Singapore, the group can continue to garner steady cashflow.
UOB and SMU unveil plans for SMEs
Publishing business Meanwhile, the core newspaper and magazine group continues to withstand a stalling economy, with print and display ad revenue up for the 3rd quarter. The only weak area seems to be classified revenue, which fell sharply by 9%, largely due to the intense competition from online portals for classified dollars. Display ads make up the bulk of newspaper and advertising revenue at 61%, whilst classifieds accounted for 28% and magazines just 11% of the $583 million the company made in the 3rd quarter. Against this backdrop, it is worth remembering that SPH still makes a 35% profit margin on its publishing business, whereas in other countries many national newspapers are losing money. Time to roll the dice, pass go, and pick up another $200 then. SPH also has close to a billion dollars ready to invest, although around half of that is tied up in stocks, mainly its stake in M1 which has been a good dividend payer so far, but times look tougher there (see our analysis on page 18). The group also has around $162 million in bonds and the rest in funds and cash. Certainly enough money that, should they wish to, SPH could make another serious property play.
Amidst a challenging business environment, small and medium enterprises seeking to expand in Asia have reason to rejoice as United Overseas Bank and the Singapore Management University launch Asia’s first institute for the development of local SMEs. SMEs upgrade The UOB-SMU Asian Enterprise Institute is the first time that a research centre is being augmented to the status of an Institute. Through the SME Consulting Programme, its flagship programme endorsed by SPRING Singapore, the Institute will provide more SMEs with access to subsidised business consulting services especially to identify and address issues which could limit their growth in terms of market research/brand audit, market feasibility studies and brand strategies. SMEs can also get innovative expansion strategies from the Institute’s biannual business intelligence survey - a first in Asia. An online resource centre for SMEs will also be launched in 2013. UOB has donated S$3 million to the new Institute while its customers have pledged an additional S$2 million. A grant from the Ministry of Education will bring the total donation to S$10 million. Wee Ee Cheong, deputy chairman and group chief executive officer, UOB Group said, “Our ambition is for the Institute to become the centre of excellence and learning for SMEs in Asia.” 10 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
SPH press monopoly: Pass go, collect $200
W
hilst other media groups fret about falling advertising revenue and bemoan the decline of newspapers, Singapore Press Holdings has reason to cheer. But the reason is not so much about the newspapers, but its booming property portfolio which is buffering the dominant press player from a decline in advertising revenue. Property portfolio A rising property tide is lifting all boats, and a recent revaluation of SPH’s property holdings shows that its Paragon mall is now worth $2.43 billion, its Clementi Mall $590 million, and its yet to be developed Sengkang Mall $505 million. That’s a massive $3.53 billion shopping mall portfolio which continues to benefit from the casinodriven influx of tourists. Both Paragon and Clementi malls are full and the paper printers managed to increase rents by 3.2% over the year. SPH has always been a favourite of income investors, and Lisa Lee, an analyst with Nomura, reckons its expected dividend yield of 5.5% will remain attractive. “Management is still likely to maintain its track record of dividend payments of 85-95% of recurrent income,” noted Lee. She adds that as SPH maintains
Paper printers managed to increase rents by 3.2%
SPH newspaper advertising revenue y-y growth (%) Newspaper advertising growth trend lags GDP growth 40
25
30
20
20
15
10
10
0
5
-10
0
-20
-5
-30
-10
-40
-15 Display
Classified
Total
GDP
Source: Company data, Nomura research
SPH – EBIT margin trend 50% 46.1% 44.6%
45% 41.4%
39.5%
40%
38.2% 36.3%
35.6%
34.6%
35%
34.7% 34.1% 34.3%
31.9% 30.6% 30%
28.6%
25%
20% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 FY12F FY13F FY14F
Source: Company Data, Nomura estimates
FIRST market with 50 year mortgages, but it is possible this will be short lived as the government may follow Hong Kong’s lead. So how will 2012 end for Singapore property?
Cheap rates and a QE3 loan
S
ingapore’s real estate agents must think the property market is like the little red engine that could. In the children’s story a little red engine eggs itself on with positive self thought to go ever higher carrying increasing loads with the affirmation: “I can do it, I really can.” Likewise for Singapore’s property market, at every turn there are seemingly insurmountable price peaks to be crossed and government measures thrown in to cool the market to boot, yet the property engine continues chugging higher and higher. Property prices August proved no exception, with a record price paid for an HDB property and sales volumes picking up. Nomura property analyst Min Chow Sai noted August pre-sales performance of developers suggested
demand remains firm for mass-/ mid-market projects such as Bartley Residences, which sold 70 units in August, vs. 59 units in July; The Palette, which sold 37 units in August, vs. 31 units in July; and Archipelago which shifted 51 units in August, vs. 49 units in July. So what effect will “helicopter” Ben Benanke’s decision to print US$40 billion a month indefinitely have on the Singapore property market? No one is quite sure, and interest rates are already at record lows, but most analysts reckon it won’t help dampen prices. What the Singapore market may see is more administrative measures to cool the market. One thing up for consideration may be capping mortgage loan terms to 30 years or less, which the Hong Kong government did on 14 September. In Singapore UOB shocked the
More launches in 2012 Colliers Director of Research Chia Siew Chuin reckons the rest of the year until December should also be strong on the back of major new project launches such as the 752-unit eCO and the 920-unit Riversails. Sales figures for the last three months of the year are expected to continue at about 1,500 to 1,900 units per month, except for the month of December, when developers may hold their new launches during school holidays as many will be away. “Given that developers had already sold 15,621 units in the first eight months of the year, developers’ sale for the whole of 2012 is expected to reach around 21,000 – 23,000 units,” added Ms Chia.
Sales figures for the last three months of the year are expected to continue at about 1,500 to 1,900 units per month
Ex-EC, pre-sales volume -27% m-m in August Rolling 12-month average volume = 1,717 units per month 3,000
2,500
2,000
1,500
1,000
500
0 Aug 2011
Sep 2011
Oct 2011
Nov 2011
Dec 2011
Jan 2012
Feb 2012
Mar 2012
Apr 2012
May 2012
Jun 2012
Jul 2012
Aug 2012
Pre-sales ex-EC (units)
Source: URA, Nomura research
What does QE3, Euro printing mean for Singapore? It’s a question that has market pundits guessing and economists positing. David Carbon at DBS Research asks whether all the money that came rushing to Asia will push interest rates down and equity markets up. In other words, is Asia looking at 2010 all over again? Probably not, surmises Carbon. False advertising “First of all, one should recognize that most of the injections undertaken by both the Fed and the ECB never went into the real economy, the money stayed at the central banks in the form of reserves and deposits. The ECB calls this ‘sterilization.’’ This is false advertising, reckons
Carbon, as banks can withdraw these deposits any time they wish and put them wherever they want. “If voluntarily leaving money at the central bank is ‘sterilization’, then the Fed’s QE program has been sterilized even more effectively than the ECB’s – 80% of the increment in the Fed’s balance sheet since Mar08 has been absorbed by increases in reserves / deposits. Only 52% of the ECB’s balance sheet growth has been absorbed this way.” Inflows won’t come from QE Still, the point remains that most of the QE undertaken on both sides of the pond isn’t entering the economy, adds Carbon, and if it’s not entering the local economy,
it can’t come ‘flooding over to Asia’ a day later. Does this mean Asia won’t see any inflows in 2013? “Not at all. Inflows have been strong in recent years and they should rise modestly in 2013. But it’s not coming from QE at the Fed or the ECB. It’s coming from investors seeing growth and opportunity to profit from it in Asia. And it ebbs sharply when those investors see risks such as a break-up of the euro.” It’s worth reflecting on just how much extra money has been printed since the Fed and ECB began printing cash, or monetary easing if you prefer. Since Mar08, the Fed’s balance sheet has grown by 3.1x to USD 2900bn. SINGAPORE BUSINESS REVIEW | OCTOBER 2012 11
Singapore Economy Review Service Growth Easing
Source: DBS
High domestic inflationary pressure
Services sector going into a reverse Is inflation easing in Singapore? Unfortunately not, and signs are there may be more trouble ahead. Officially inflation is expected to remain at 4 to 4.5 % this year, but there are risks that it may move even higher. Economists at Bank of America Merrill Lynch warn that full year average inflation is more likely to come in around 4.5% as a result, which is the upper end of the MAS 4% - 4.5% forecast, but add that “there is a far higher chance of inflation breaching 4.5% than 4%.” DBS Economist Irvin Seah notes that after months of uncomfortably high (above 5% YoY) inflation, price pressures have finally eased. Yet, he too warns it is still too early to pop the champagne. “This easing in inflation was still largely attributed to the low base effects, mainly from sharply higher COE premiums, rentals and foreign labour cost in the second half of last year.” Underlying inflationary pressure in the economy is expected to remain high. What is to blame? Its still COE prices and property rents, which continue to climb. Domestic rather than imported inflation remain the main drivers, with accommodation and private road transport costs accounting for about 60% of CPI inflation in August. The MAS & MTI highlighted in the outlook that inflation will rise in September, “due to the surge in COE premiums in August as well as the base effects associated with the disbursement of government rebates.” DBS’s Seah adds that non-tradable inflation, the proxy for domestic inflation, has been largely responsible for the high inflation. “Nonetheless, inflation remains on track to meet our forecast of 4.5% this year and 3.1% next year.” OCBC analyst Song Seng Wun notes higher healthcare costs in August were offset by lower electricity and gas tariffs as well as stable food prices. Food CPI (22.1% weight) rose an unchanged 2.3% yoy for the third consecutive month. Key food prices remained stable due to ample supply and stocks. 12 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
Source: DBS
“However, food inflation is a risk in the mid-term, depending on the severity of the El Niño cycle.” Why are services slowing down? One big drag on the economy right now is Singapore’s services sector. Growth in the services sector has been easing over the last two years. More recently, growth in the services sector moderated further to 0.8% YoY,from 1.9% previously. From a sequential perspective, the sector contracted by0.6% QoQ saar in the second quarter, down from an expansion of 2.9% in 1Q12, notes DBS’ Seah. Judging from the current external economic conditions, such sluggish growth momentum will likely persist in the coming quarters. “Except for the transportation, infocomm and the financial services industries, ll segments within the services sector have shrunk in 2Q12.” And there is no sign of a turn around. While the externally driven services segments have bore the brunt of weaker global demand, there are signs that even the domestically driven segments are slowing down. Overall business receipts have been tapering off while receipts for domestic activities such as real state, rental and leasing have eased. The tightening measures on foreign labour probably have also suppressed growth momentum in some of those foreign labour-intensive industries. This is likely to be reflected in the continued poor performance by some services industries and the construction sector. On the latter, developers may also be slowing down the pace of construction amid a gradual cooling down in the property market, adds Seah.
Living up to the Tradition. Started off with a humble beginning 100 years ago in Swiss canton of Aargau, Holcim has grown into a global leader in building materials industry with footprints on over 70 countries and continues with the vision to provide foundations for society's future. Placing sustainability and innovation at the core of the company strategy, we have been partnering customers and delivering value to stakeholders in our commitment to sustainable construction by further developing resource- and energy-efficient solutions. This is Holcim’s aim in Singapore with the recently launched first Centre of Excellence in Asia: to build more with less.
100 years of Strength. Performance. Passion.
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SINGAPORE BUSINESS REVIEW | OCTOBER 2012 13
abacus
Olam braces for headwinds
investors that it will be able to reduce its over-reliance on property.” he added.
Bidding war continues
Corporate clash for F&N’s APB stakes Fraser and Neave sells the shares to Heineken after a ferocious bidding war.
H
eineken, through its wholly-owned subsidiary Heineken International B.V., agreed to a final offer of S$53 per APB share for F&N’s entire (direct and indirect) 39.7% effective stake in APB for a total consideration of S$5.4 billion. From S$5.1 billion from Heineken’s offer made on 20 July 2012, the total cash consideration to F&N has now increased from S$307 million to S$5.6 billion under the final offer. But the deal went through a bidding war over the APB shares before it arrived at that final offer. According to DBS Vickers, Kindest Place Groups Limited had made an unsolicited offer to F&N for its 7.3% directly owned APB shares for S$55 per share (a 10% premium to Heineken’s offer price of S$50 per share), equating to about S$1.03 billion. But Lee Hsien Yang, Chairman of F&N, said Heineken’s new offer of $53 per share is for its entire interest in APB, while Kindest Place Groups Limited’s offer, although marginally higher than Heineken’s on a per share basis, is only for F&N’s direct 7.3% stake. “The sale of F&N’s stakes in APB in its entirety to Heineken at the improved price would better maximise overall returns for F&N shareholders. If F&N shareholders approve the sale, all remaining APB shareholders will also stand to benefit from the higher mandatory offer price of $53 per share,” he added. According to CIMB analyst Donald Chua, the F&N board has proposed a S$4 billion payout bonanza to shareholders, via a capital reduction, if shareholders approve the sale of APB to Heineken. “The proposed payout is higher than our expectations, a move we believe will entice minority shareholders to vote for the APB sale in the EGM,” he said. The $4 billion payout is equivalent to 84% of the gain on disposal (S$4.8 billion) to the group. Nomura analyst Jit Soon Lim warns though, that without the contribution from APB, property will comprise about 80% of F&N’s group earnings. “F&N management will need to convince
14 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
Olam to face earnings headwinds in the next two quarters Olam suffered a 13.7% profit decline in FY 2012 to $370.9 million. Unfortunately, Maybank Kim Eng analyst James Koh warns that the company’s profits won’t recover soon as more earnings headwinds loom for the next one to two quarters. So who’s to blame for this profit slump? Koh notes that Olam’s industrial raw materials segment was the main drag this year, especially in 2HFY12 as net contribution declined 48% despite volume increase. “Other than Cotton, we may continue to see some weakness in the coming quarters if economic conditions remain stagnant,” he added. Despite the profit decline, Olam surprisingly stuck to its 2016 plan to achieve US$1 billion PAT (CAGR of ~38% from FY12) and said that current assets should be able to contribute ~65-70% of the target. But Nomura analyst Tanuj Shori is dubious on management claims, stating that even if Olam achieves US$650-700 million, it should be 17% CAGR. “We still believe it is unlikely, but we maintain asset momentum may pick up in one to two years, which should lead to growth trajectory.” Lee Wen Ching, an analyst at CIMB, believes that Olam has survived the worst of the earnings compression with
Dairy Farm’s cash cows
cotton expected to recover from 2Q13. She noted that EBIT margins came under pressure as the group front-loaded its planned investments. “Management has indicated that it will slow the pace of investments going forward, and will instead focus on extracting value from these investments, implying profit and margin uplift,” she said. Dairy Farm milks its cash cows Dairy Farm recently surprised competitors with 149 new stores in 1H12, lifting its store network to 5,555. “This compares with only two new stores in 1H11 when it consolidated its North Asia operations. It also opened eight Giant hypermarkets in 1H12 vs. five for 2011. With sites secured, we expect another eight openings in 2H,” said CIMB analyst Yeo Zhi Bin. As French hypermarket retailer Carrefour closes its Suntec and Plaza Singapura stores before end of 2012, analysts believe Dairy Farm could fill the gap. Yeo reckons that Dairy Farm holds more than 50% of the hypermarket market with its eight outlets, outmuscling its nearest competitor, co-operative NTUC FairPrice, which has five hypermarkets in the suburbs. “Even before Carrefour’s decision to leave Singapore, Dairy Farm was set on opening a new Giant hypermarket at Suntec (site secured). We estimate Carrefour’s sales at 100 million from its two outlets, or around 10% of Dairy Farm Singapore’s revenue,” he added.
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Work with the best PMs in the world www.acando.com/sg | 6407 1349 16 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
opinion
richard branson
How to connect with your customers through social media
“Whether you are launching a startup or leading an established company, you should start establishing your social media presence if you haven’t already.”
I
need to limit ourselves to placing ads with established media companies – we can just tell them directly.
Advantages of social media We soon found that these channels were an amazing tool for reaching our customers and the public. One of the first things we learned was that our new social media accounts gave us a real-time view of how we could improve. Through customers’ comments, we started learning about issues with our products and services more quickly than ever before. In response, we set up systems so that a customer who has a question or a problem can get a quick answer from our team. Today I have 2.4 million followers on Twitter, 250,000 on Facebook, and 2.9 million on Google+; each month, 500,000 people check out my blog. Many of our businesses have their own blogs and Twitter feeds as well, multiplying the number of people we can reach directly. If we need to talk to our customers, we no longer
Faster, real-time information dissemination Our online followers often help us to amplify our message by passing it along or linking to it. Just recently, our community of customers sprang into action when the British government decided to award the West Coast Main Line franchise – Virgin’s rail business – to a rival company rather than continuing with Virgin Trains, which has run it for 15 years. Our social media accounts and website were overrun with messages of support from our customers and the public. One passenger, Ross McKillop, posted a petition online challenging the government’s decision and asking officials to review the award. By enlisting the support of our customers and of famous British celebrities, we managed to gather more than 160,000 signatures in just over a week, which we hope will trigger a debate in the House of Commons. The process of spreading the word about a new business has changed now that we have a social media presence. When we bought Northern Rock, a bank in the U.K., in late 2011, people had a low opinion of banks, and we knew it would be hard to change their minds. Finally, we’ve been using our social media channels to spread the message that we are just as interested in making a difference as making a profit. I set up my
n the past few years, social media has revolutionised the way businesses interact with customers, making it easier to market new products and maintain a brand’s image. This wasn’t always obvious. Many companies were very cautious and slow to start using social media, putting in place all sorts of guidelines for their employees about what could be said and how to use these channels. My team and I jumped in quickly and started to experiment – over the years, we have always pushed each other to be innovative and approachable.
first entrepreneurial venture, a magazine called Student, to protest the Vietnam War, and in many ways I use my social media accounts today for the same purpose – to comment on issues I feel strongly about, such as the pointless war on drugs and the cruel practice of shark finning. Many followers respond, donate, or even volunteer. Maximising of social media Whether you are launching a startup or leading an established company, you should start establishing your social media presence if you haven’t already. The easiest way to start is often by setting up a help line so that customers can ask questions about your product or service. Listen and respond thoughtfully, and you’ll be on your way. Above all, remember to be authentic and organic, answering questions in a straightforward manner – there’s no need to check with your PR team first. You know your products and services, and people will see through any effort to parrot slogans or broadcast a marketing message. Like everything, if you’re having fun rather than just doing a job, you’re more likely to find success. I try to answer a few questions every day from followers. People often wonder how I find time to tweet and update my blog so regularly. How do they not find the time, I wonder? Social media is such a terrific way to connect with our customers that I would never miss out. Do you agree? Let me know with a tweet!
SINGAPORE BUSINESS REVIEW | OCTOBER 2012 17
company focus: M1
The trouble with M1’s pricey 4G data plans
M1 may lose more than customer loyalty in the long run if its 15-25% higher pricing strategy fails.
S
ingapore’s smallest of three mobile telecom players, M1, has a fight on its hands as it tries to woo customers to upgrade to its 4G network. Unlike its main competitor Singtel, which has decided that the rates for 3G and 4G should be the same for a given amount of data bundled, M1 has chosen a bold path of actually charging $10.70 a month more for its 4G plans compared to the similar 3G plan. This is an especially risky move as it prices its 4G 2GB and 3GB plans from 1525% higher than the market leader SingTel, although M1 does offer more bundled minutes. Perhaps one of the reasons M1 is choosing a higher pricing strategy than its rivals is that most of its customers are not heavy data users, and it is probably hoping it can keep these chatters happy with the extra minutes rather than data. Almost 4 in 5 of its customers use less than 2GB a month and 18 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
“M1 is still the minnow in the Singapore mobile market with just 26% market.”
less than 10% use over 5 GB. Still, by positioning itself as the more expensive data player in 4G at the lower bundled level and seemingly targeting talkers and texters not surfers, M1 could be seen to be taking a risky path to dissuade data users from signing on to its 4G platform. This is especially so now that 70% of all new postpaid contracts signed up for in Singapore are for smart phones which are, by definition, heavily data centric. Size matters M1 is still the minnow in the Singapore mobile market with just 26% market share in post-paid mobile, compared to Starhub on 28% and SingTel on 48%. Indeed, the new pricing structure, which is moving from a 12G standard package to a tiered package that closely mirrors the tiers of SingTel, does not look like a move likely to win M1 back any market share,
which it has been steadily losing. Kelvin Goh, an analyst with CIMB concurs that M1’s upward repricing and tiering of data bundles is unlikely to help M1 claw back market share, adding that SingTel’s bundles are still more attractive as it “also offers discounts for TV and broadband.” On the other hand, Sachin Gupta, an analyst with Nomura, believes that M1 actually has the lead on 4G coverage and could be the preferred choice should consumers go looking for faster speeds in the near term. “Most telcos around the world have struggled with data economics and a large number of these now are using the 4G/LTE launches as an opportunity to re-price data--either by charging more or reducing data allowance. M1 is basically doing both--and both SingTel and StarHub have adopted similar strategies too,” he remarks. But M1’s struggles with the transition of customers from text and chat to data are only just beginning. The rapid rise in data plans and smart phones has seen an equally rapid mix in the types of models sold by M1, and this matters in more ways than one. Serene Chan, an ICT analyst with Frost & Sullivan, warns that price-sensitive consumers would opt for SingTel as it is perceived to offer better value for the same service. However, Chan believes there would be consumers in favour of M1’s current value proposition. Firstly, she notes, M1 has claimed nationwide 4G coverage (with the exception of MRT train tunnels) whereas SingTel will achieve the same network coverage in the early part of next year. “Secondly, its average LTE speed is between 6.9 - 17.4 Mbps whereas SingTel offers a slower average speed of 3.4 - 12 Mbps. Hence, M1 is likely to be targeting early adoptors who tend to be less price sensitive in exchange for superior technology,” she further notes. Android subsidies Now 70% of new post-paid customers are selecting android based phones, which are subsidized upfront and treated as a
company focus: M1 one off expense rather than spread out over the life of a contract. Gupta also raised the prospect of subsidies from the iPhone 5 launch which is “again raising concerns in its impact on margins.” As an unexpected consequence, M1 surprised market watchers by posting both a decline in revenue and net profits for 2012, the latter of which was down 17.8% year-onyear. This matters greatly because one of the great strengths of M1 over the last decade has been its perception as solid “dividend play”, a cash cow of a share that would steadily and readily pay out high dividends to investors. Indeed M1 kept its interim dividend, announced June unchanged at 6.6 cents a share. But the company needs continued strong profits to drive that dividend, as it currently pays out 80% of its profit to shareholders. Getting the 4G rollout, pricing, and customer adoption right is crucial as the company takes the next great post 3G leap. These are a lot of unknowns, and going forward, could the dividend be under threat? Dividend threat? One ominous sign is that the management has not reiterated its usual predictions for “stable performance at both the top and bottom line.” Right now, both the top line sales and bottom
M1 postpaid ARPU trends
line profits are dropping, so the company will have to do something to revive its flagging fortunes and those of its investors. It is betting that the surge in customers signing up for new android smartphones, whilst costly up front given the subsidies, will pay off better over a two year contract. It needs to. Gupta shrugs off the issue of dividend doubt. “There is no threat to dividends. In fact, balance sheets are under-geared and telcos have the capacity to increase dividends, but it is unlikely given the current credit markets,” he emphasizes. In the meantime, whilst it claims it will be the first to rollout 4G in Singapore, it may take up to 2015 until the “adoption of this technology reaches an optimal level, and the higher roll-out cost could depress near-term margins,” notes OCBC analyst Carey Wong. Getting fresh customers may also not be easy, Wong adds, with 71% of M1’s post-paid customers already smartphone users there are “few low hanging fruits left to be harvested.” M1’s pricing plans clearly show it wants to migrate its average customer to 4G, earn better pricing power than Singtel on data, and compensate with more call minutes and texts bundled in. Chan advises M1 to include relevant content to make mobile data more appealing for targeted segments. Mobile data take-up
rate is most successful when it is driven by content rather than competitive pricing, she says. The operator could promote greater awareness of certain entertainment content such as games, sports or those targeted at specific segments to encourage greater use of mobile broadband. “Some of these content could be included in the operator’s bundling strategy comprising of voice, sms, mobile data and content. Alternatively, certain content could be given for free at the basic level to encourage subscribers to sign up for premium content,” she adds. But its current strategy does leave M1 exposed to customers switching at the lower tier to rivals like Singtel for cheaper data plans. And even then the problem is how to convince those customers to up their spend and make a financial payback for the 4G network rollout.
“M1 surprised market watchers by posting both a decline in revenue and net profits for 2012, the latter of which was down 17.8% year on year.”
Postpaid subscriber market share
50%
Mkt Share
45%
40%
35%
30%
SingTel
Source: Company data, Nomura research
StarHub
2Q12
1Q12
4Q11
3Q11
2Q11
1Q11
4Q10
3Q10
2Q10
1Q10
4Q09
3Q09
2Q09
1Q09
4Q08
3Q08
2Q08
1Q08
4Q07
3Q07
2Q07
1Q07
25%
M1
Sources: Cimb, Company Reports
SINGAPORE BUSINESS REVIEW | OCTOBER 2012 19
DEALMAKERS
Philip Lee
Ng Wai King
WongPartnership brews strong M&As
I
t has been a lot of late nights for WongPartnership’s head of corporate mergers & acquisitions practice Ng Wai King, and the team at WongPartnership who have been busy acting for Thai Beverage in the long running takeover of Fraser & Neave. In a complicated deal involving more than one target, Ng Wai King handled Thai Beverage’s initial acquisition of approximately 22% of the issued share capital of Fraser and Neave; Kindest Place Groups Limited’s acquisition of more than 8% of the issued share capital of Asia Pacific Breweries Limited; and the mandatory general offer for F&N by TCC Assets Limited (a concert party of ThaiBev) for S$8.8 billion. The deal continues to make headlines and ThaiBev’s acquisition of the F&N stake and Kindest Place’s acquisition of the APB stake are respectively the largest and fourth-largest deals in the Asia-Pacific food and beverage sector in 2012. The amount by ThaiBev has led to a possible takeover bid by Heineken to acquire control of APB. The dealmaker, Ng Wai King, graduated from the National University of Singapore where he was awarded the AV Winslow Prize. His experience encompasses mergers & acquisitions, capital markets, financial services advisory and regulatory work, and telecommunications regulatory and transactional matters. The other partners involved in the transaction include Andrew Ang, Annabelle Yip, Hsiao-Huey Teo, Audrey Chng and Ameera Ashraf. WongPartnership also worked on DBS Group Holdings’ proposed S$9.1 billion acquisition to PT Bank Danamon Indonesia.
Indonesia malls
Herbert Smith capital markets partner Philip Lee has been busy organising the structuring of a $750 million financing for a Lippo group real estate investment trust. The financing of LMIRT Trust, which is the only Indonesian listed trust on the Singapore stock exchange, was handled by Standard Chartered bank and was done under two series of Euro medium term notes. Lee said the deal was interesting because in order to cater 20 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
for local Singapore investors who are accustomed to seeing financial covenants in bonds offered by unrated Singapore issuers, it was structured with a few financial covenants customary in the local Singapore dollar market which falls away once the issuer obtains an investment grade rating. “This structure allows the issuer to access a broader range of investors as it progresses to investment grade without having to change documentation,” Lee commented. Associates Felipe Duque and Nupur Kant also worked on the deal. It’s not the first time Lee and his team have worked on Euro notes programs. They also advised Standard Chartered, HSBC and Maybank Investment on the establishment of a US$2 billion EMTN programme for the Maybank Investment Bank Berhad, and acted for Standard Chartered and other dealers as sole transaction counsel on the establishment of a US$1 billion EMTN programme for the Rizal Commercial Banking Corporation. Lee is an international capital markets partner and focuses his practice on structured finance and general securities in the public and private financing space. His expertise includes advising on credit and equity linked securities, warrants and convertible and exchangeable bond issues, US GMTN, EMTN, CP and CD programmes, Islamic financing, hybrid securities, high yield and
Clifford Lee
investment grade bond issues, pre-IPO financings, right issues and other securities offerings.
Indian banks get their first taste of Singapore dollars
DBS is certainly stepping in where European banks fear to tread. It has just completed the first ever Singapore Dollar denominated bond issue for an Indian Bank. Traditionally Indian banks sought and got their funding from European or Japanese institutions, but the pullback in lending has opened up the opportunity for DBS to get into this market. Clifford Lee, head of fixed income at DBS, said the deal was all about diversifying the source of funding for the bank, which had previously raised funds in USD, CNH and CHF. The size of the issue was relatively small at $250 million, but after a 2-day intensive nondeal roadshow in Singapore the orderbook grew to $3 bn, $814 million of which came from DBS private banking clients. The demand enabled the coupon rate to drop from an initial 4% range to settle at 3.65%. The final orderbook was heavily driven by private banks, which were allocated 65%. Asset managers were allocated 17% and banks 18%. Singapore investors took up 78% of the issue. DBS hopes that upon having proven a market appetite for Indian bank bonds in Singapore, it will be able to get more of these deals away.
Crafting the
perfect caller experience THE VOICE
THE MUSIC
THE PROMOTIONAL MESSAGES
EXPERT MARKETING ADVICE
INDUSTRY LEADING TURNAROUND
THE UPDATING SCHEDULE
THE LANGUAGE
As the proud supplier of SingTel’s telephone voice brand, Messages On Hold leads the industry in producing beautifully-branded audio for Interactive Voice Response systems. Imagine what we can do for yours.
Find out more online at OnHold.com.sg/5seconds SINGAPORE BUSINESS REVIEW | OCTOBER 2012 21
GAME CHANGERS features like online classrooms, study groups (for group projects with a document store and task manager), bulletin board, and locker room.
Shivanu Shukla & Ashwin Singh
Studying has never been this exciting Singapore startup Teamie lets users connect with classmates and teachers online.
T
eamie, a local startup founded by Shivanu Shukla & Ashwin Singh, intends to address several challenges that the education sector currently faces including low student engagement, teacher productivity and quality, communication and transparency of information with stakeholders, and high cost of information technology solutions. Starting as a learning platform in 2011, Teamie has evolved its features to let users connect with classmates and teachers to discuss and ask questions, work and collaborate on projects, and access the school virtually. Singapore Business Review talked to the makers of Teamie to learn how this service works and how it differs from the traditional school experience. SBR: What new ideas or services are you bringing to the table? Teamie drives teacher productivity by allowing mobile and web access to grading tools and learning discussions beyond the physical classroom. It also leverages the cloud to offer a subscription service that is affordable and manageable with their limited IT resources, and not cost-prohibitive. Teamie provides a familiar social network-like workspace together with lessons and assignments that the teacher can post on their virtual classrooms. Hence Teamie mimics the school experience by providing
22 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
SBR: How does the new platform make learning more social, fun and engaging? Teamie has purpose-built the social collaboration tools to enhance learning. First, instead of just sharing a post, users can share a thought or ask a question. These capabilities allow teachers and students to quickly look at the important questions asked in class, and begin their discussion. Second, all social networks have a newsfeed. However, the newsfeed just keeps going on without allowing the user to search or filter. The noise-to-signal ratio on public social networks is extremely high. On a platform like Facebook, it is perhaps not that important. But on Teamie, where the discussions are related to learning, it is important for users to be able to get to the important and relevant discussions soonest. Teamie has enabled this by building filters by type of post (question or thought), by role (discussions where the teacher has interacted), by user (discussions where my friend Harry was involved), or by context (discussions about “Assignment 1”). Third, Teamie allows users to attach any document with their thoughts or questions. These documents play in-line in the browser itself, without the need for the users to have the application software installed on their computers. Fourth, Teamie allows teachers or students to be able to annotate attached documents, and leave their feedback or comments. This is extremely useful when students are working together on group projects, or when a teacher is marking an essay answer online. Fifth, Teamie brings information from the users’ social learning network and provides insights and more information. For example, when a student goes to any quiz on Teamie, the user sees what percentage of students have already attempted the quiz, all discussions that are related to that quiz, and basic information about the quiz in terms of weightage, number of questions, etc. Last, Teamie has a “Report” feature that enables users to be able to report any discussion that is inappropriate. This has been created to help prevent any cyber-bullying and provide an online tool for students to report incidents. SBR: What do you think keeps your users coming back to your website? Teamie has gamification elements built into the platform that reward positive behaviour through points and badges that are awarded for any action on the platform. The point scheme is designed to encourage users to share content, ask questions, answer questions, and take academic lessons or assignments on time. Teamie has the feature sets of a Learning Management System -- in effect, teachers can create and upload lessons and assignments on the platform. Teamie has online grading and reporting, and automatic grading for certain assignment types. Teamie allows teachers to create content which gets automatically populated in the school’s Knowledge bank, a repository and intellectual property for the institute.
PROPERTY
KRISANA GALLEZO
High-end developers lower prices under market pressure
T
he introduction of the Additional Buyer’s Stamp Duty (ABSD) in December last year brought the high-end market into a stalemate but a silver lining was seen over the last few months with the increase in sales across all segments. The surge, however, appears to be driven by the lowering of high-end property prices as developers heed the market call for markdowns. Surging sales in Q2 According to Savills Research & Consultancy, sales for high-end homes post-ABSD plunged to a three-year low of 453 non-landed units in Q1. It almost doubled to 914 units the following quarter. Notably, Savills said that demand for ultra-luxury homes priced above S$3,000 per sq. ft. (psf) also rose to 31 units in 2Q12 from just 11 units in 3Q11. Among them, two transactions were recorded at Scotts Square – one sold for S$4,566 psf in May and another for $4,803 psf in June. A newly launched project, Twentyone Angullia Park, also garnered keen market interest with five transactions completed over the last 3 months at prices between S$3,950 and S$4,338 psf.
“Sales for high-end homes post-ABSD plunged to a three-year low of 453 nonlanded units” MayBank KimEng meanwhile said that new home sales in the Core Central Region have shown initial signs of renewed interest, with 403 units sold in 2Q12, compared to 129 units in the previous quarter. Softening prices driving demand According to Savills, the ABSD and the consequent stall in demand for high-end homes have prompted some sellers to adjust their asking prices down. Compounded by a surge in luxury home completions over the past year, prices of some homes have softened recently with corrections between 10% and 30%. Some developers have also handed out perks such as rental guarantees and furniture vouchers to attract buyers. “With the rapidly narrowing price gap between homes in the suburban and prime areas, luxury homes are beginning to appear attractive. Some older condominiums in the prime districts are also gaining their fair share of attention, especially the larger, freehold units which are reasonably priced,” said Savills.
Krisana Gallezo Senior Reporter krisana@charltonmediamail.com
Non-landed luxury home sales by sales type, 2007-2012 New sale
70%
Resale
Sub-sale
60% 50% 40% 30% 20% 10% 0%
2007
2008
2009
2010
2011
2012
Source: URA, Savills Research & Consultancy
Jones Lang LaSalle also pointed out that Singapore is only among the few in Asia whose luxury residential prices fell in 2Q. Hong Kong prices in the same segment edged up during 2Q12 by 2% qoq because of more active mortgage lending by banks and improved market sentiment. Average prices in Singapore’s luxury prime market meanwhile declined by 2.9% qoq on the back of ongoing rental declines and property cooling measures in place.
Posh properties’ price pressure
Slew of property launches Property launches are back in full swing after a lull last year. Eight major projects, yielding about 1,200 new units, had been launched since the beginning of this year, of which the largest was the 510-unit V on Shenton developed by United Industrial Corp. The take-up for some of these projects was healthy thanks to attractive prices ranging from S$1,400 to S$2,800 psf. For example, the 75-unit 1919 was almost completely sold within its first month of launch, while Eon Shenton recorded a 73% take-up in the first two months after launch. Savills also noted that competing alongside these new projects are many other completed developments launched between 2007 and 2009 whose sales suffered after the onset of the global financial crisis. According to Savills, as many as 4,000 luxury condominiums were completed over the past year, which constitutes about 7% of the total nonlanded stock in the luxury market. Of this, 16% or over 600 units remain unsold. This brings the total unsold stock in the prime segment to 12,855 units, comprising 731 completed units and 12,124 uncompleted units, half of which are launch-ready. SINGAPORE BUSINESS REVIEW | OCTOBER 2012 23
legal briefing
All your data no longer belong to us Sick of being telemarketed by everyone who somehow has your mobile number ? Your luck may be about to change
W
e all know the story of how your data gets stolen or passed around from one company to another, and before you know it everyone seems to know your business. Recent international cases of stolen data, including that of Songy and UK-based Codemasters, make a consumer data protection bill timely. What’s it all about? Currently,Singapore does not have any overarching legislation to protect personal data. The Draft bill, which is due to be passed later this year, will be known as the Personal Data Protection Act. It proposes to extend its provisions to organisations which may not be physically located in Singapore but are engaged in data collection,processing or disclosure of such data within the country. Who is affected? Pretty much all companies in Singapore, but even those overseas using Singapore data will be liable under the act. There will be a new “Data Czar” at a new organisation to be known by yet another three-letter
“Consent under the DP Law may be expressed or deemed. The individual who had given his / her consent has the right to withdraw the consent.” acronym, this time the Date Protection Commission, or DPC. But here is the real thing companies need to take note of. Each company must designate one responsible person within the organisation to be responsible for data compliance, to be known as the “Personal Data Officer.” By law, companies must also have a well defined set of policies as well, such as the introduction of general rules and exclusions relating to the collection, use and/or disclosure of personal data. What information do I have to disclose? Here is where it gets complicated, and potentially burdensome for companies. According to Clifford Chance partner Martin Rogers, the law allows individuals to request access to their personal data held by an organisation in order to find out how organisations have used or are using the personal data collected, to correct any inaccurate information collected and to seek redress for suspected breaches of the PDPA. Naturally there will be the introduction of a penalty and enforcement regime for breaches of 24 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
the PDPA and the introduction of the “Do Not Call Registry.”
Rajesh Sreenivasan
Martin Rogers
How will the “Do Not Call Registry” work in practice? The DNC Registry will consist of one or more registers for individuals to register their Singapore telephone numbers in order to stop receiving marketing messages. These registers cover messages addressed to a Singapore telephone number and therefore would not include messages delivered by post. The DNC Registry adopts an “opt-out” approach such that individuals. Rajah & Tann partner Rajesh Sreenivasan notes that people can register their Singapore telephone number if they do not wish to receive marketing voice calls, smses /mmses (short message service / multimedia messaging service) or facsimiles. That’s great for people but bad for sms and fax marketers. Do I have to be upfront with people when collecting their data? Yes, but the law is even more onerous than that as you must have in place a way for people to withdraw their consent for you to use or keep their data. Mr Sreenivasan notes that the DP Law requires an individual’s consent be obtained before an organisation can collect, use or disclose personal data. “Consent under the DP Law may be expressed or deemed. The individual who had given his / her consent has the right to withdraw the consent. Once the individual has withdrawn his / her consent, the organisation is required to cease processing of his / her personal data.” Mr Sreenivasan also added that when seeking consent, organisations are required to inform an individual the purposes for which they are collecting, using or disclosing his / her personal data.” Organisations may collect, use or disclose personal data only for purposes that a reasonable person would consider appropriate in the circumstances; and that was informed to the individual on or before collecting the personal data. If consent was obtained for a specified purpose, fresh consent would need to be obtained if the personal data collected is to be used for a different purpose.” What are the penalties ? The DPC has the power to direct a non-complying organisation to pay a financial penalty of up to S$1 million. But people can also sue over their data. Any individual who suffers loss or damage directly as a result of an organisation contravening the provisions of the PDPA shall have a right to take civil action against the organisation but only after the DPC’s decision on the said contravention has become final, noted Mr Rogers.
co-published Corporate profile
Clear vision in today’s murky economy Tips for effective credit management and risk assessment
A
ccording to the World Economic Situation and Prospects 2012 midyear report released by the UN, global growth would likely remain tepid for the rest of 2012 with its biggest threat coming from the seemingly unending Euro-debt crisis. The report estimated that world trade growth would slow further to 4.1 per cent this year, down from 13.1 per cent in 2010 and 6.6 per cent in 2011. While trouble seems to be brewing more in the West, export-driven open economies like Singapore and Hong Kong are not immune. The inter-linking of global trade, export consumption and capital markets means that businesses need to carefully consider their counterparties in every transaction and ensure they mitigate risks associated especially with non-payments. Risk is everywhere and the key to business success and stability often comes down to recognizing and managing these potential risks. Good credit management and risk assessment plays a significant role in helping protect businesses from the prospect of payment default, by signalling potential risks before any transaction has even been conducted. This essential process helps maintain a company’s cash flow, and also makes a significant contribution to its financial health and strength. The following are some good credit management and risk assessment tips to ensure your business stays clear of the red: A. Credit Vetting The potential for payment default or bad debt due to insolvency is an ever-present risk when trading on credit, so the process of assessing the creditworthiness of customers i.e. credit vetting is vital. Such information helps the supplier company decide how much credit to allow their customers as well as what credit period should be allowed under terms of business. While specialized credit vetting agencies can provide a range of up-to-date and robust information, individual businesses should also undertake their own research, using publicly available information or through direct contact with their customers. These include company name, registration details, principal activities, directors and shareholder details, legal civil judgments or cases pending, internet news and information, company accounts, etc. Obtaining the information is one thing. Interpreting this information correctly is more vital to build an accurate picture, so investing in credit information can often help avoid bad debts later. B. Terms & Conditions The importance of terms and conditions (T&C’s) are often overlooked, however they are
integral in providing a sound basis in the event of a dispute. Some points to note include: - T&C’s help provide trade protection. Ensure they are up to date - When possible always include a ‘Retention of Title’ (ROT) clause - Avoid buyer ‘purchase agreements’ as they can over-ride the T&C’s - Ensure customers are aware of the T&C’s before the goods are dispatched - When trading overseas, ensure the T&C’s reflect legal practices for credit terms in both the buyer’s country as well as the supplier’s - Establish a clear and robust credit policy that is applied consistently in line with the T&C’s - Always ensure buyers are credit checked before trading with them - T&C’s should be verified or prepared by qualified legal professionals - Always obtain a signature from buyers on any agreed contract incorporating T&C’s C. Collections There is a natural tendency for businesses to want to hold on to their cash, particularly in times of financial uncertainty, as it provides the added benefit of improving liquidity, even though the bills will have to be paid at some point. So what can be done to tackle overdue debts? - Send an early reminder that payment is becoming due - Segment accounts by size and amounts owing - Ensure the invoice is correct - Check there are no outstanding disputes - Set a DSO (Days Sales Outstanding) tolerance and adhere to it - Call in third party help
Michael Frigo, Atradius Country Manager – Singapore
offer an integrated collection service. Conclusion Good credit management and constant risk assessment is vital to the financial health of companies. Businesses that spend time and effort on the aforementioned processes enhance their collections successes when their invoices are due as well as are protected against any risks.
D. Credit Insurance Credit insurance is a way of protecting your domestic and export contracts of sale against the risk of not getting paid when you’re trading on credit payment terms. Having such a policy covers you against financial loss in the event a customer becomes insolvent or defaults on an amount owing, a contract cannot be performed due to political intervention or other reasons, and ultimately protects your bottom line. As part of this service credit insurers underwrite (credit vet) your buyers for you, and
About Atradius The Atradius Group provides trade credit insurance, surety and collections services worldwide, and has a presence through 160 offices in 45 countries. Atradius has access to credit information on 100 million companies worldwide and makes more than 20,000 trade credit limit decisions daily. Its products help to protect companies throughout the world from payment default risks associated with selling products and services on credit.www.atradius.com
“Good credit management and constant risk assessment is vital to the financial health of companies. ”
Atradius Credit Insurance NV (Singapore) #31-02, AXA Tower, 8 Shenton Way Singapore 068811 Tel: +65 - 6372 5316 Web: www.atradius.sg Email: Michael.Frigo@atradius.com SINGAPORE BUSINESS REVIEW | OCTOBER 2012 25
ANALYSIS: TRANSPORTATION
Land transport operator pays the price of penance
SMRT to spend millions on rail upgrades after the December breakdown.
C
omfortDelgro (CD) and SMRT drew increased public scrutiny on their maintenance capabilities after their rail services suffered a spate of disruptions since December of last year. Following a series of investigations, the Committee of Inquiry (COI) released its report with recommendations to improve the rail network and crisis management of both land transport operators, but heavily more so for SMRT. Part of the responsibility for the December rail disruptions was still apportioned to the Land Transport Authority (LTA), but the more significant question is what share of the upgrade costs it will bear vis-a-vis the land transport operators. Out of the recommendations made by the COI, Maybank Kim Eng analyst Bernard Chin estimates that approximately a third of them calls for investment in new maintenance or surveillance equipment. “We make a further provision to capex
26 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
“Staff and energy costs account for 40.7% and 22.8% of SBS Transit’s 2011 revenues respectively, while that for SMRT’s is at 37.4% and 17.3%”
of S$10m for SMRT’s share of new equipment such as third rail assembly improvements, train-specific faultdetection systems, back-up battery replacements, emergency lighting, and other staff-equipped detectors,” he said. Concerns of CD suffering collateral damage meanwhile appears unwarranted, says Chin, as their involvement remains limited to LTA’s announcements of more stringent regulatory standards. Cost pressures According to UOB Kay Hian, the demand for better standards has already led to increased staff and energy costs as a result of more train and bus trips added to the system. Staff and energy costs account for 40.7% and 22.8% of SBS Transit’s 2011 revenues respectively, while that for SMRT’s is at 37.4% and 17.3% respectively. In order to attract more bus drivers, CD has increased the
basic pay of its drivers by 16% while SMRT has raised its own by 35% with an arrangement for a longer six-day work week. With cost pressures mounting, SMRT’s 1Q13 results yielded no surprises. According to CIMB analyst Lee Wen Ching, the group continued to contend with margin erosion arising from higher repair and maintenance costs. The expansion of its fleet of trains, buses, and taxis had also elevated depreciation expenses. SMRT posted a 9% yoy increase in revenue to S$275m in 1Q13 amid broad-based growth. Fare revenue was supported by higher ridership and the full contribution of the new Circle Line stations, while non-fare revenue grew due to increased rental space and advertisements. However, earnings grew by a smaller 5% to S$37m as higher repairs, maintenance, and depreciation costs eroded profitability. EBIT margin declined 0.8%pt to 16% while net profit margin slipped 0.5%pt to 13.3%. Going forward, CIMB expects SMRT to struggle further with margin pressures. Lee says that efforts to improve service reliability will not only lift maintenance costs but will also raise staff costs as it expands its technical team. SMRT plans to expand its headcount by 10% this year. “We estimate profit margin to fall from 13.4% last financial year to 13.1% over the next two years. After enjoying a net cash position for the past few years, we expect the group to slip into a net debt position this financial year as it gears up to fund its S$500m capex bill. Of this $500m, half will go towards the funding of new trains, 22% has been budgeted for its taxi business, 17% for buses, and the remainder will be used to fund its asset renewal plan, where costs are being borne by LTA and SMRT,” she said. CD, on the other hand, has yet to submit financial results but is expected to be barely hurt as the COI recommendations were largely addressed to SMRT and to some extent the LTA. Also, the company is globally diversified where almost 50% of its operating profit in 1Q2012 was derived from its overseas businesses. “Not only does this leave CD relatively shielded
ANALYSIS: TRANSPORTATION from country-specific events such as the aforementioned regulatory framework changes, it also provides avenues for further growth in the relatively resilient business of land transport. It is worth refreshing that a significant portion of CD’s overseas businesses are based on a vehiclerental business model (e.g., all taxi businesses) and hence have limited exposure to fares. Other segments such as its contracted bus businesses in Australia and the UK also have no exposure to fares, with the additional sweetener of having a cost indexation mechanism built in contracts to limit its exposure to cost inflation,” said Maybank Kim Eng’s Chin. LTA shares the blame at what cost? Chin says that SMRT is likely to continue facing an uphill challenge to comply with all recommendations but he does not rule out LTA bearing some of the structural asset upgrade costs especially since they are now being held partially responsible for events leading to the December 2011 disruptions. Meanwhile UOB Kay Hian analyst Toh Yong Rui strongly believes that the government will lend a helping hand that will likely be in the form of financial packages or subsidies provided to maintain the aging rail infrastructure, as well as bearing part of the operating expenses associated with additional bus routes. “The operating and regulatory environment is now more positive.
The government has been paying more attention to public opinion on transport issues since the 2011 General Elections. A recent example would be the implementation of measures to ensure a smoother transition to lower vehicle growth rates, after sharp increases in prices of certificates of entitlement (COE) since the beginning of this year. After it was announced that the vehicle growth rate would be raised to 1% by August 2012 vs the initial proposal of 0.5% COE prices weakened in June 2012,” he said. Furthermore, Toh says that operators could also benefit from the government’s announcement of its commitment to invest in and improve the public transport system. In March, the government announced a Bus Service Enhancement (BSE) plan to add 800 new buses to the public transport system for five years. The government will commit S$1.1b to buy and pay for the running of 550 additional buses. Bus operators will also get advertising revenue from bus stops. He says besides this, the fund may also be used to subsidise public operators for plying new routes to new housing estates, which will likely be loss-making due to lower utilisation. The bus operations for both operators are currently loss-making, and the government has indicated that bus financials on their own ought to be viable and sustainable over the long term. To this end, the
Domestic bus operations have been bleeding losses with EBIT margins in negative territory 6% 4% 2% 0% -2%
1QCY10
2QCY10
3QCY10
4QCY10
1QCY11
2QCY11
3QCY11
-4% -6% -8% -10% SBS Transit
Sources: CIMB, Company Reports
SMRT
4QCY11
1QCY12
2QCY12
“ComfortDelgro has hedged 80% of its diesel and electricity requirements through end-2012.”
LTA is now given additional power to implement programmes such as BSE and provide financial assistance to various bus operators in the form of loans, grants, and guarantees. “In our view, new financing frameworks for both bus and rail transport will be key catalysts for the sector. The government has demonstrated its willingness to share the burden to improve the bus infrastructure in the short term. We expect a similar stance to be adopted for the rail system,” said Toh. “In the older financing framework for the North South and East West (NSEW) lines operated by SMRT, the state pays for the infrastructure and the first set of operating assets, such as the trains. SMRT will pay for the subsequent sets of operating assets at subsidised rates. In the current financing framework for the Downtown Line, the government will pay for and build the infrastructure but will lease the operating assets to the operators,” he added. To upgrade the NSEW rail system, SMRT announced a S$900m asset renewal plan in April, with ongoing discussions with the LTA to determine the cost split. Should SMRT adopt this new framework for the Circle Line, it would greatly reduce the capex burden on the operator. Lower electricity costs While outlook for the land transport sector is generally dim, operators may find some relief from lower electricity costs. The global economic slowdown has led to a general decline in diesel and electricity prices. According to Maybank Kim Eng’s Chin, this offers public transport operators an attractive window of opportunity to hedge their fuel and electricity costs. CD has hedged 80% of its diesel and electricity requirements through end-2012. Similarly, SMRT has hedged its fuel until November 2012 and electricity requirements until September 2013. However, the analyst notes that energy costs will be mainly driven by energy consumption rate, which in turn is driven by train and bus trip frequencies. He thus expects energy costs to continue on an uptrend despite the lower electricity costs due to higher trip frequencies to reduce congestion and waiting time. SINGAPORE BUSINESS REVIEW | OCTOBER 2012 27
INTERVIEW
Kris Hendrieckx talks about the next two Sibos events in Asia Sibos, the world’s largest banking event, will be back in Singapore in 2015 and Singapore Business Review interviewed Sibos Head Kris Hendrieckx to talk about what Asian bankers can expect from the next two Sibos events in Asia.
Kris Hendrieckx
What will be different about Sibos in Singapore 2015? Kris: Size. Sibos has been continuously growing since it was last in Singapore in 2003, and we expect Sibos 2015 to be much bigger than Hong Kong. For Sibos 2012 in Osaka, registrations are encouraging and the exhibition space is completely sold out and it is larger than Sibos 2009 which was in Hong Kong. Why bring Sibos back to Singapore rather than another country like China? Kris: We make our venue selection based on a set of criteria as well as the availability of dates. These two factors play a very important role in the selection process. We usually have a couple of venues that we pick from so we have to start scouting for venues years in advance. We chose Singapore for 2015 because we felt that we’ve been away too long from one of our key Asia Pacific markets. The last Sibos that was hosted here was in 2003 and since then, a lot has changed in Singapore. Also, some of the venues in other countries we looked into were not available. For example, we have not had Sibos in China before because up until recently, there have not been convention centres in China that are up to the standards in terms of size and structure, that we require to host a Sibos conference. Another important thing that we have had to consider is that the entire 28 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
Chinese banks.
Sibos conference takes occupation of a centre for a full two weeks. Therefore, whichever city we choose to host Sibos will also need to have ample accommodation facilities and easily accessible public transportation to ensure our delegates and speakers are able to get around easily and enjoy the city as well. For Sibos 2015, we have estimated that the economical impact of hosting it in the Lion-city will be at least SGD 100 million which is really positive news for Singapore.
What is SWIFT doing around corporate and social responsibility around Sibos? Kris: Every Sibos we support a local charity together with the local banking community. In Japan we are supporting Ashinaga, a charity for orphans which provides emotional and financial support to children who have lost either one or both of their parents to ensure these children receive a full education. So far, more than 60,000 orphans have graduated from schools with Ashinaga scholarship support.
How are delegate numbers looking for Sibos in Osaka this year? Kris: Since we are still registering delegates the numbers are steadily increasing as the conference draws closer, I’ll give you figures from pastSibos events in this region, so you can better gauge what we can expect for Sibos in Osaka. For Sydney we had 5,700 delegates and in Hong Kong we had 5,800, and we expect to do better than that with Osaka. From our experience and surveys carried out while at Sibos, we are seeing that the pull-factor for Sibos seems to be the wealth of networking opportunities that one can partake in during the conference. On the conference side, people are looking for new information relevant to their business from the high calibre of speakers that participate.. For delegates who opt in they can now pre-arrange meetings through a minisocial network. What can we expect in the exhibitor space ? Kris: It is an 80/20 mix with 80% being financial institutions. Wesee there are more regional banks trying to showcase their best efforts and practices. In Japan we will have all the large banks in attendance as well as some Japanese software developers. That is reflected in the conference program as a lot of the speakers come from the region including some key
What can delegates expect from Sibos in Osaka this year ? Kris: The conference program for Japan is now live and during July we will announce more speakers. There will also be more specialty streams. We will add a Technology forum on Monday and Tuesday, the Corporate forum will be Tuesday and Wednesday and there will be a Compliance forum on Wednesday and Thursday. We offer two-day passes for these forums. This is the first time Sibos has been held in Japan and I think we will get a lot of senior people attending from the local industry which we haven’t had before. The fact that there will be a lot more Japanese delegates coming along is a huge pull factor for the region. We are also seeing a lot more interest coming from Korea and China.
Sibos has been continuously growing since it was last in Singapore in 2003, and we expect Sibos 2015 to be much bigger than Hong Kong.
Who has the biggest stand in Japan? Kris: SWIFT does! But after SWIFT, there is a maximum size we offer which is an 8 unit stand (192 square meters) and a number of banks have purchased this size. At last count I believe it is somewhere between ten to fifteen banks. Sibos is a place where people want to showcase their best and this year’s event will be great with a variety of stand sizes and the full support from the local community.
SINGAPORE BUSINESS REVIEW | OCTOBER 2012 29
BIG ISSUE 1 public. For our industry that thrives on positive motivation, grades like “Fair” or “Poor” immediately generate negative impression. Once applied, the public will keep that in mind for a long time. Also, as agents are not paid a salary, if they misrepresent the agency, they can easily leave the company in the event that they misrepresent the agency. However, the agency will have to solely bear the consequences of the grading, especially if a large group of agents leave them.
Is public grading of property agencies fair or foul? Find out why the CEA plan seems contentious.
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he Council for Estate Agencies (CEA) said early August that property agencies will soon be publicly graded based on the quality of their agents. According to a newspaper report, the grades will be decided by the number of public complaints lodged with the CEA against an agency, as well as instances of disciplinary action taken against its agents. The CEA said that rather than issuing letter grades like “A” or “B”, it will more likely use performance bands such as “Excellent”, “Fair”, and “Poor”. While such public grading system is generally deemed effective in discouraging agent abuse, property agencies interviewed by Singapore Business Review points out several downsides. George Tan, director, Savills Being judged purely on the number of complaints may not be truly representative of the actual conduct of the agency. Anybody can make a complaint on frivolous grounds. Take these two examples. Vendors can lodge complaints if they don’t want to pay fees or if they can’t get what they want, even if the agent is doing his 30 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
“Having a “Fair” and “Poor” category lowers the image of the whole industry.“
job well. Giving “Excellent” as a commendation is good. However, it should stop at that grade for the exceptional companies. If the agencies did not reach the “Excellent” grade, don’t give any. It’s just like the Asia Property Awards: Having a “Fair” and “Poor” category lowers the image of the whole industry. Also, where does one cut off the definitions for “Excellent”, “Fair”, or “Poor”? A small agency with just a handful of agents that hardly deals in a year can fall into the “Excellent” category whereas a large agency that is active in all segments of the market, who by nature is active, is almost bound to receive complaints and thus be unfairly penalized. The Asia Property Awards has terms like “Excellent” and “Commendable” which is more politically correct, and using these can be a positive rather than a negative motivational force. Agencies awarded with an “Excellent” or “Commendable” grade will be looked up to while agencies that have not made the grade will strive to get the award without being weighed down by the sneering mentality of the
Sze Teck, senior manager, Dennis Wee Group Research IT is neither a good nor fair initiative. Salespersons are still very mobile in this industry and hence it is meaningless to grade estate agencies when the rogue salespersons can just simply move on to another estate agency and leave the current agency to bear the repercussions of an unfavorable grading. As it is now, the public can search the CEA website to find out whether a salesperson has an unfavourable record. Salespersons also receive letters of compliments from their clients -shouldn’t this be considered as well? Estate agencies may have to suffer the repercussions of an unsatisfactory grading for up to a year even though there may have been significant improvements or absence of complaints, since such a grading system can only be done periodically, likely on an annual basis. Conversely, clients may engage a salesperson on the assumption of his or her service based on the agency’s grading. Should the experience be unsatisfactory, the client may feel shortchanged by the grading. Past records may not be indications of future performance. In the end, consumers may be lulled into thinking that this grading is indicative of service levels. Their interests are not served at all. There should be no grading system. Institutions for professionals have never been graded so far. Instead, CEA should consider just a simple acknowledgement system on the level of service - a merit, star or excellence recognition for those agencies who have done well and simply remain silent on those that have not.
THOUGHT LEADERSHIP SERIES 1: TRAINING & DEVELOPMENT
NTU steps up with a new MBA curriculum The take up of MBA programmes has dropped as more people hold on to their jobs than spend more in MBAs. Find out why it makes sense to pursue Nanyang Business School’s new MBA programme amid the economic downturn.
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ake up of MBA programmes globally has dropped as more people hold on to their jobs than invest in upgrading their management skill sets. Find out how Nanyang Business School shines amidst an economic downturn. According to Associate Professor Chung Lai Hong, Associate Dean (MBA) at the Nanyang Business School, it used to be that people would grab the opportunity to enroll in an MBA programme during a downturn, hoping to re-enter the workforce with an advanced degree when the economy picks up. But in the last couple of years, this has not happened. Potential applicants are considering a lot more things before taking a year or two off to pursue an MBA. “We were hoping that there would be more applications, but in fact the number of applications has remained largely constant. During this latest economic downturn, people have held on to their jobs rather than take the opportunity to get an MBA because of prolonged uncertainties about when the economy will recover. At the same time, the number of MBA programmes offered globally has gone up, giving more choices to MBA seekers. This has increased the intensity of competition for everyone,” she said. As competition rises with more MBA programmes available globally, the Nanyang Business School keeps its edge over other schools with a more comprehensive curriculum, ensuring a holistic leadership training for prospective students. Stepping up NTU’s Nanyang Business School launched a new Master of Business Administration
(MBA) curriculum this year to address the needs of the industry today. Starting August 2013, students will experience a 12-month programme that is more strongly focused on leadership, deeper industry application, and with emphasis on corporate governance and sustainability in Asia. Chung revealed that 3 issues spurred the launch at this time. First, with rapid changes occurring in the industry, issues arose about the educators’ role as well as the competencies learnt in finance and other MBA modules. Second, companies are subject to increasing scrutiny by the public demanding proper governance. “And third, Asia’s preeminence in the past few years is steadily rising. So MBA participants come to Asia to learn about business practices here,” she said. According to Nick Soriano, Director of Marketing & Admissions for The Nanyang MBA, the new curriculum will prepare students to be more capable in the new global business environment. “Our new MBA programme addresses these three issues – challenging and rapidly changing environment, rise of Asia and corporate governance and sustainability, simultaneously,” he added. Standing out So what sets this new programme apart
“The new programme will help students understand leadership practices and business models across Asia.”
Chung Lai Hong, Associate Dean (MBA) at the Nanyang Business School from the old curriculum and that of other MBAs? Chung noted that one component of the new curriculum is to address the changing concept of leadership by making it compulsory for students to go through a leadership development module focusing on skills needed to lead multi-cultural teams. The new programme will help students understand leadership practices and business models across Asia, as they will be required to solve management dilemmas presented in cases, network with experienced practitioners at industry talks, and complete projects, including a 20-hour module on corporate governance and ethics. Holding up As the flagship programme of the Nanyang Business School, the Nanyang MBA has been ranked among the world’s top 35 MBA programmes for the past four years by the Financial Times, and has been rated Singapore’s best MBA programme by The Economist since 2004. As Chung puts it, the key mission of the business school is to produce leaders for a sustainable world. “If you want a programme that helps you become a leader today, and that prepares you to manage challenges in corporate Asia, come to us.” “I have no doubt that other schools will also make changes to their programmes, but ours is ready to meet your needs today,” she concluded. SINGAPORE BUSINESS REVIEW | OCTOBER 2012 31
BIG ISSUE 2
Can extended maternity leave spur a baby boom?
Giving mothers a longer, six-month paid maternity leave may not be the answer.
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ingapore’s current fertility rate has fallen to 1.2 children per woman of childbearing age, far below the replacement rate of 2.1. To encourage women to bear more children, the National Trades Union Congress (NTUC) has proposed that mothers be given six months work off to care for their children while being fully compensated. Experts interviewed by Singapore Business Review, however, think the lavish benefit might be too burdensome for businesses and might even be counterproductive to working women. Joo Lee Aw, Managing Consultant, The People at Work Pte Ltd As a mother, the suggestion to extend the current maternity leave will not help. The question asked by NTUC is akin to asking how much pay one wants—which is always “More!” because nothing is ever enough. There are other constructive solutions such as provision of childcare facilities that are nearer workplaces, flexible work arrangements, or alleviation of new parents’ fears due to a pressure-
32 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
“The extended maternity leave is going to place female executives— single or married—in disadvantaged positions in terms of their job prospects and career planning.“
cooker schooling system, among others. As a professional who helps companies source high potential talent, I am concerned that the extended maternity leave is going to place female executives—single or married—in disadvantaged positions in terms of their job prospects and career planning. Extended maternity leave may cause this gap to widen. While there may be companies who continue to provide equal opportunities, such a “benefit” may compel others to choose men over women, or singles over married women. It is undeniable that the modern woman seeks fulfilment in family and in career. Balancing both is a personal choice, but this extended maternity leave will be a disservice to many women. Lau Chuen Wei, Executive Director, Singapore Retailers Association Giving the mother some additional time with the child is certainly a good thing, but there are many implications. The operational cost in Singapore is already very high, and the cost of
labour is escalating tremendously. These will not see any let-ups in a full employment market, particularly so in the service sector where jobs are not appealing to the local worker and the conditions for importing foreign workers have been tightened. To make the employer hold the job for a new mother and pay her her full salary for that length of time will be an added burden on the employer. If such a recommendation becomes law, then the added burden on the employer is not only paying for an absent headcount, but he has to pay for a temporary staff to fill the gap, plus, shoulder the intangible costs of orientation, training and having the other staff members go through adjustments, and then contend with another round of assimilation when the mother returns to work six months later. Perhaps another way of dealing with this is to give the new mother the legislated four months paid maternity leave, then offer an optional two months unpaid leave. This way, both the employer and the employee share the “costs”. If indeed the goal is to encourage Singaporeans to marry and bear more children, then the government should also bear some of this cost. Declan O’Sullivan, Managing Director, Kerry Consulting Pte Ltd My guess is that this would not have a huge impact on the birth rate. One might consider that such a policy is not cost-free. One is really asking the (often private sector) employer to shoulder a cost relating to state policy. In a sense, it would amount to a form of potential indirect tax, on the employer, when employing females. This might well generate unforeseen, possibly negative, outcome. It might be more useful to address the perception that child rearing is an expensive activity, for the typical dual income Singaporean couple. Major components of this expense include all the obvious direct costs, together with possible loss in salary if a parent decides to stay at home in order to raise the child(ren) and/or spend on third-party childcare. Has the possibility of some form of state subsidy or childcare been examined? Ultimately all policy decisions are trade-offs.
co-published Corporate profile
Boehringer Ingelheim: Bringing tremendous impact to the pharmaceutical market Boehringer Ingelheim takes ‘value through innovation’ to new heights as it brings the biggest groundbreaking product in 50 years.
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Augusto Muench, Regional Managing Director of Boeringer Ingelheim Southeast Asia and Singapore
“Boehringer Ingelheim’s success can be largely attributed to its strong foundation in research and development.”
here is no stopping Boehringer Ingelheim from delivering groundbreaking innovations to the pharmaceutical market even after 127 years in the industry. Founded in 1885 by German entrepreneur Albert Boehringer, the company remains one of the most successful family-owned pharmaceutical companies globally. With its principle of bringing “Value through Innovation,” Boehringer Ingelheim’s success can be largely attributed to its strong foundation in research and development, which continues to be the major driver of innovative, new medicines for the treatment of diseases with an unmet therapeutic need. They focus on six major therapeutic areas, namely: Respiratory diseases, Cardiometabolic diseases, Oncology, Neurological diseases, Immunology and Infectious diseases. Innovation at work According to Augusto Muench, Regional Managing Director of Boehringer Ingelheim Southeast Asia and Singapore, the company has brought products to the global pharmaceutical market that have had a tremendous impact. Boehringer Ingelheim has been a long time player in the respiratory area. The latest product that was launched in this area was Spiriva which is indicated for COPD (Chronic Obstructive Pulmonary Disease). “Along the way, we’re doing additional research for Tiotropium, for the molecule that we have for Spiriva that might bring also additional indications in the future,” says Muench. In terms of Oncology, Boehringer Ingelheim has two targeted therapies that will hopefully reach the market in
the near term. The first product is Afatinib, a targeted therapy for non-small cell lung cancer. “We’re looking into expanding our products for breast cancer or head and neck cancer. Along the path, we also have one oncology product that will be used mainly for liquid tumours, for leukemia, for blood type of malignancies.” Biggest innovation in 50 years Boehringer Ingelheim launched Pradaxa, a prescription bloodthinning medicine used to reduce the risk of stroke and blood clots in people with atrial fibrillation (AFib) not caused by a heart valve problem. Muench notes that the anti-coalgulant was launched in Singapore in 2011 and in the rest of South East Asia. Pradaxa is the first oral anti-coagulant for stroke prevention that was approved by international regulatory agencies in the last 50 years after Warfarin which was understood to be the golden standard, says Muench. “Pradaxa has been by far the biggest groundbreaking innovation that Boehringer Ingelheim had seen because it offered an unmet area for 50 years. The excitement that you would see in patients when you talk about the product was fantastic. It was the satisfaction that gets the feeling to you that you are doing something useful for them,” reckons Muench. The real-life trial of Pradaxa involved more than 18,000 patients across different countries like Korea, Japan, Indonesia, Singapore and India. And after doing research across all these countries, Muench sees more highlevel research arising in Asia. More pharmaceutical research Muench sees an increased relevance of research being done
supported by governments like Singapore. Research in Indonesia, Philippines and Thailand will also increase. “We recognize that Vietnam offers a good opportunity for clinical research” More countries and companies are getting agreements in the relevant Asian population and I think that’s fantastic because that will offer different perspectives to molecules and products being developed,” adds Muench. He reckons that another trend that may guide the way the healthcare industries work in SE Asia is that countries have realized that cooperation is essential for the enrichment of countries. “It’ll be really interesting to see how the new legal setting under the ASEAN +10 has repercussions in the healthcare industry because I think it will offer increased fl exibility for patients and an additional portfolio of opportunities that I believe could come for pharmaceutical companies, for governments, for patients in general.” It is clear that Boehringer Ingelheim is paving its way for a stronger footprint in Asia. “We’re not only working to put the company in a position of recognition in Southeast Asia but we’re working to put Asia in the global market within Boehringer Ingelheim in a different position. That’s always a guiding principle that we keep in our heads,” says Muench. Bringing 13 years of experience in Boehringer, Muench is firm to take part in this expansion in Asia. He concludes: “ When I look at time back and when I question myself ‘what did I do in Southeast Asia?,’ I would like to think that I was able to provide justice to the talents and the teams that work so hard here to make sure that our products get to where they need to be.”
SINGAPORE BUSINESS REVIEW | OCTOBER 2012 33
Regional EConOmy Briefing: PHILIPPINES Fiscal impulse vs the output gap Fiscal impulse Output gap
% of GDP 3.0 2.5
Expansionary
2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0 2003 GDP growth - It’s more fun in the Philippines
Philippines posts stellar growth
Philippine GDP grew 6.1% in the 1H, exceeding expectations.
The Philippines kicked off with a good start in 2012, growing 6.4% YoY in the first three months, the strongest in Southeast Asia and the second-strongest in Asia behind China, thanks to the robust service sector which accounted for more than half of its GDP. The growth momentum was sustained in 2Q with a better than expected 5.9%. According to Moody’s economist Katrina Ell, an interesting trend within services is the outperformance of business process outsourcing, which already employs around 600,000 Filipinos or almost 1% of the population. The Philippines’ closest competitor in the BPO space is India, still considered an easier environment to do business in according to the World Bank. Ell however argued that the Philippines is taking steps to improve, while India has stumbled recently. Nomura meanwhile believes that improved government spending is also acting as catalyst. The fiscal deficit in H1 was PHP34.5 billion or 2.1% of GDP, well below the government’s target of PHP109.3 billion. Nomura analyst Euben Paracuelles however notes that compared to last year, expenditures rose by a much faster 13.6% YoY from just 2.3% in 2011. “We estimate that the fiscal impulse turned positive in H1, which means that fiscal policy has become expansionary, reversing last year’s trend and hence has started to boost GDP growth. Yet, we see scope for stronger fiscal support this year, with the government addressing spending bottlenecks and increasing overall expenditures.” Moody’s Ell believes the same, adding that while government consumption is only 10% of GDP, it will continue to lift growth in the runup to the general elections in May 2013. As of July this year, disbursements were 52% of the 2012 budget and the government has reiterated its commitment to accelerate spending and invest in necessary infrastructure. What does it take to sustain growth? The Philippine government targets a 5% to 6% growth this year
34 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
2005
2007
2009
2011
but for it to be achieved, Ell says that the Philippine economy needs both exports and remittances to be growing solidly. The Philippines has been fortunate that remittances from offshore workers have so far held up, but Ell cautions that if the global environment takes a turn for the worse, labour demand and remittances could dry up, weighing on household consumption. She warns that a more severe European recession would crimp export growth and that higher government consumption will not be enough to alleviate the impact. Exports were still relatively resilient, rising 8.3% in Q2 versus 10.9% in Q1, which Nomura believes were partially due to some outsourcing of electronics production following the Thai floods. The contribution of net exports was still positive but fell to 2.1pp from 7.1pp in Q1. Is inflation posing risk? The recent floods in the Philippines, which caused supply disruptions, higher global commodity prices, and high domestic demand drove up August inflation. It rose at the fastest pace since January at 3.8% YoY. Nevertheless, experts say that inflation remains manageable as it remains within the 3-5% target, giving more room for the central bank to be more accommodative. According to Trinh Nguyen, while the Bangko Sentral ng Pilipinas remains “mindful of weather, calamityrelated disturbances as it affects supply,” it would not be able to deny the elevated costs of commodity prices such as oil as well as pent-up demand in the economy. Nomura however believes otherwise, noting that a further rate cut cannot be ruled out. According to Paracuelles, BSP cutting rates for the third time by 25bps in July signalled a neutral stance. “What is more surprising to us are the reasons cited for the decision. First, BSP said that inflation is likely to remain within the low end of the 3-5% target. This is not a change from its previous assessment, and while oil prices are below the levels when it last cut in early March, they have started to creep up once again. In addition, there are looming risks of weather-related food supply shocks to which the Philippines tend to be vulnerable. Second, and more interestingly, BSP said this is ‘a pre-emptive move against the risks associated with the global slowdown.’ GDP growth surged in Q1, driven by both public and private sector spending, and the latest trade data in May suggested that domestic demand strength has been sustained into Q2. Because of this backdrop, our thinking was that it was more prudent for BSP to save space to be able to cut rates given the unusually high level of uncertainty in the external outlook.”
Co-published corporate profile
Time for Great Achievements
Forex trading is no longer currency rate speculation. The essence of investment in Forex market has become closer to the conventional idea of investment and even moved beyond its borders.
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t is not the first year that financial market faces significant challenges: instability, low demand for instruments, and low volatility move from one market segment to another. Corporations cannot guarantee investors stable growth, sovereign bonds and other securities are too long to kindle private investors’ interest while commodity market is too conservative to be attractive during the period when currency instruments are demonstrating profitable for short-term investments oscillations. In fact, instruments demonstrating such fluctuations imply well-liked currency and Forex market which is favored by tradersinvestors. This market became a real shelter for active private investors especially when investments are regarded as lottery rather than management. Looking after its investors Forex 2012 is a little bit more than Forex 2011 but less than Forex 2010, the year of world financial crisis. Yet in 2010 Forex was alpha
and omega of private investments. However, no significant recovery was seen and those investors who changed their markets to Forex, do not hurry to come back to their previous positions. Forex is still of much investors’ interest. Only here one can reap the fruits of all negative and positive processes happening on global financial market. Profit is movement After all, Forex is just currency but profit is movement. Many can say that movement can be unprofitable. But risk and investment are inseparable. The main thing for trader is to know that he should and must use any market movement for his own benefit. We have clarified Forex advantages for now. As for the very first steps made on market, they are all executed by Forex broker. With the help of any search engine available, you will find thousands of brokers which promise comfortable trading conditions, low spreads and quick deal’s execution. However, not all of them can boast of such terms. The
“InstaForex broker is famous for its innovative services such as the best PAMM system on the market, free VPS hosting, and many others.”
current situation on Forex brokers’ market can be compared to the most popular market of mobile phones (smart phones) where there is a certain amount of producers but, properly, 90% of the market is occupied by a limited list of companies which are able to provide a customer (consumer) with the most comfortable and convenient goods (services) rather than the others that share just 10%. Of course, there are more than 3 or 4 Forex brokers but less than 100. There are companies that have established reputation as the leaders having accumulated muscle bulk. Those can offer something that worth clients’ attention: something that is comfortable, efficient, safe, and of low risk, in other words, the most important things that Forex broker can give to its clients. The big fish broker At the moment, there is a wide range of large broker companies in Asian region but there is one that stands out the most due to its leadership for over 3 years. It is InstaForex international broker which belongs to a large financial group. Such title is rightfully gifted to the company. The British magazine World Finance Media has awarded InstaForex Company the Best Broker in Asia at the prestigious World Finance Awards for the third year in a row. In 2011 InstaForex Company was awarded The Best Retail Broker title at the prestigious international European CEO Awards. Apart from 15 prizes and awards, InstaForex broker is famous for its innovative services such as the best PAMM system on the market, free VPS hosting, option trading and many other. Now more than half a million of traders are InstaForex clients and most of them represent the Asian region. If private investor found Forex market interesting, he should look closely at InstaForex Company. The company is demonstrating stable results and can be found among top leaders. Moreover, it entered so-called innovative pool of brokers which is able to provide the market with the pioneering technologies. But first and foremost, the main company’s aim is guarantee of comfortable conditions for the clients. It is extremely important to competently enter Forex market which mostly depends on the choice of the broker. This crucial choice can predetermine the length of your trading career as well as its success. SINGAPORE BUSINESS REVIEW | OCTOBER 2012 35
Deal of the Day sites: Going, going, gone With 3 in 4 group buying sites out of business over the last two years, who will survive?
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aily deal sites burst onto the Singapore e-commerce scene like flowers after a shower over the last two years. But over the last 18 months over 2 dozen sites have already shut down and the ones that remain complain of a bitterly tough market. So why is Singapore doing it harder than other countries, what does it take to succeed, and who will last the distance? Of course, Groupon, which founded the industry and entered the Singapore market via an acquisition of Beeconomic in 2010, remains the 800-pound gorilla on the block. Groupon 36 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
Groupon reckons that 74% of group buying sites in Singapore have shut down in the past two years
reckons that 74% of group buying sites in Singapore have shut down in the past two years, with the latest being outlet.com.sg. This leaves just 19 companies competing for a slice of the market in Singapore. Out of the companies that have ceased operations, 84% of them lasted less than 12 months, an indication of the intense competition that is present in the industry. Clones of daily deal sites Mr Karl Chong, Chief Executive Officer, Groupon Singapore said groupon clones are likely to struggle to acquire and retain
customers and merchants without ensuring quality, service and trust. “Also, later entrants to the market oftentimes underestimate the amount of resources needed to run the business in order to develop the scalability to be sustainable,” Mr Chong noted. Singapore has an e-commerce market size that was worth an estimated S$1.1 billion in 2010 and is forecasted to hit S$4.4 billion in 2015. But group buying sites may only be a $100m a year business in Singapore, for now. Jason Lee, co-founder All Deals Leak, a website that reviews daily deals, says the figures published by Groupon are pretty much in accordance with data on their side. “As mentioned by Beeconomic founder himself, if Groupon did not inject the necessary capital, Beeconomic would be hard to sustain in the long term as well. Many have underestimated the bulk of overhead costs that goes into building the daily deals
COVER STORY business before seeing profits,” said Mr Lee. Venture capital One of the main reasons local daily deals sites are floundering is that they are not venturebacked. “Of the top 5 deal sites in Singapore currently, all 5 of them are venture capital funded. Startup deal sites also chose to multihome all their deals right from the start which lead to consumers being unable to differentiate. At this moment, any new entrant to this scene will have very slim chance of success unless the business model is much innovated,” added Lee. Anthony Condouris, co-founder of Future Books, a small business accounting service firm, said the Singapore experience is not unique, and that China’s group buying sites have followed a similar trend. Fifty percent of China’s groupbuying sites have shut down since the industry peaked. 2,859 group buying sites have shut down, leaving 3,210 still in operation, said Coundouris citing a report from the China e-Business Research Center. “In 2011, barriers to entry were low. Any entrepreneur could download free source code and launch a group buying site in a day. Low barriers to entry attracted many competitors, eager to become Groupon’s next acquisition,” he added. Difficult Singapore But what is it about Singapore that makes it particularly difficult for group buying sites? The small size of the market has made it difficult for deal of the day sites to prosper, notes Condouris. “The number of competitors compared to Singapore’s population was twice that of China. Intense competition led to discount wars and shady business dealings and some group-buying sites posted discount deals as high as 90%,” he said. One daily deals website, AllDealsAsia, says it is making money with customer acquisition costs between S$5-15 per customer and an average spend is between S$30-40 per customer.
Active and Dormant sites as of December 2011
Source: All Deals Leak
Co-founder Yiping Goh said the costs of operating a business and customer acquisition in Singapore are generally higher than the rest of South East Asia, except Hong Kong. “Manpower, rental, marketing costs all add up. However having said that, Singaporeans also have a higher disposable income to spend on purchasing goods and services,” she added. The positive for the industry is that the whole group buying scene is still growing. According to AllDealsLeak.com, the aggregate players contributed S$11.5 mn transactions in August 2012, compared to S$8.19mn in January 2012. Goh said that the issue with many group buying sites shutting down is because there were just too many deal sites trying to take a pie of the market.
Intense competition led to discount wars and shady business dealings and some groupbuying sites posted discount deals as high as 90%.
“While the market is easy to enter, with almost no barriers to entry, it is difficult to sustain a long term position as costs of acquiring a large base of customers is high and so are marketing and operational costs. In the end, even with a rapidly growing industry, it cannot sustain too many players,” she said. And then there was Groupon How many players will survive? According to one veteran of the industry, Singapore can probably only sustain ten maximum, but maybe even as few as six daily deal sites. The companies that have come and gone generally were not first movers and were not well capitalised enough to last the distance, he said. “It requires a long term view and you need to be willing to invest SINGAPORE BUSINESS REVIEW | OCTOBER 2012 37
COVER STORY for three years before you start to see any real return on investment. Obviously no one can replicate the trajectory and growth that Groupon had except for the ones who saw it and started straight away. If you are trying to do this within a six month period and become cash flow neutral thats not going to work. In Singapore we had a dozen staff and our monthly burn rate was around $70 K, which included $10K for marketing. If you assume that on average the deal site gets to keep 25 % of the sales value, that meant we needed to sell close to $300,000 a month to break even,” he added. In his opinion, the winners in Singapore are in reality the first movers who had the advantage. One interesting trend was that of large companies doing their own deal sites to members. “NTUC bought Bigdeal.sg and they plugged it into their database so they have the biggest database because its everybody. Great Eastern has a site which they built just for their customers.” “That’s an interesting twist where you have a company that has a huge database it becomes just one of your products that you can sell to your database,“ he said. The magic number to survive in SIngapore is probably 100,000 customers at a minimum, whilst some of the larger players have half a million or more on their databases. “Just doing the math if you sell a deal to 1% of your base and you have 500,000, that’s 5,000 items sold. Sites with small member bases will find it hard to generate sufficient sales to survive,” he added.
“The magic number to survive in SIngapore is probably 100,000 customers at a minimum.”
Merchant pressure But with the decline in daily deal sites also comes less pressure on the merchants and life is easier for the sites. Back when there were 60 daily deal sites merchants were sick of getting 5 calls a day and had bargaining power. Now with just 6 large players in the market, the merchants are not getting called as much and power goes back to the deal sites. Many of the deal sites insist on exclusivity with a merchant, and require that the merchant cannot work with a competitor for a period of time. Which brings us back to Groupon. What does Groupon do differently from competitors? According to Groupon’s Chong, it was the first group buying site to introduce retail goods as a dedicated channel, through its Groupon Goods and the first to have a physical shop via the Groupon Shop. Groupon conducts
Groupon’s Competitors Launched in the past two years
Lifespan of Deal Sites
Source: Groupon
Source: Groupon
38 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
monthly merchant and customer surveys and says overall customer satisfaction with their Groupon experience was at 88%. The merchant survey found that the top three reasons merchants enjoyed working with Groupon were its ability to reach out to new customers (82%), Groupon’s good reputation (45%) and its sizeable subscriber base (45%). Almost half of the merchants indicated a good reputation was one of the top reasons for working with Groupon, an indication that trust is of utmost importance when working with a daily deal site. Despite closures, merchants appear to be unfazed in Groupon, added Chong, noting that where 87% of merchants maintained confidence in Groupon. And for the others? There is more room for some Gorillas in the deal of the day jungle, but not that many. Everyone will be looking at who of the 19 remaining sites will be next to go.
Every business has a different story and a different goal. We understand that. Over many years in this market of unique opportunities, we’ve developed the local knowledge, resources and connections needed to turn ambitions into reality. That’s why we’re one of the most well-established northern European banks in the region. For corporates, financial institutions and private banking clients, we’re ready to listen and cater to your needs – in Beijing, Shanghai, Hong Kong, Singapore and New Delhi. For further information, please call us on +65 6223 5644 or visit sebgroup.com/asia SINGAPORE BUSINESS REVIEW | OCTOBER 2012 39
Jon Hicks/Corbis/Scanpix
When it’s time to do business, we’re exceptionally open.
COUNTRY REPORT: Switzerland
Alberto Magrans, Senior Managing Director of LAUFEN
Swiss companies dare to offer unconventional solutions in Singapore
Find out how Swiss companies LAUFEN, Holcim, and Hilti redefine quality, sustainability, and customer service in Singapore.
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ince its foundation in 1892, LAUFEN has revolutionized sanitary ware manufacturing. Being the only sanitary ceramic manufacturer producing exclusively in Europe, the company has greatly raised the standards for sanitary products. LAUFEN stands out with its products’ Swiss design that unites emotional Italian design from southern Europe with the north European Germanic tradition of design, precision and clarity. The Swiss DNA According to LAUFEN Senior Managing Director Alberto Magrans, design, cutting-edge technology, innovation and internationality are part of LAUFEN’s Swiss DNA. Therefore LAUFEN is constantly working together with internationally renowned architects on many projects and is inspired by the latest trends in architecture. “We are working very hard to support project planners and architects and have recently established teams for the main centers of architecture, like London, New 40 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
“Whilst offering excellent customer service and a comprehensive product range, it is evident that Swiss companies put special attention on sustainability.”
York and, of course, Singapore. These teams are specialized on questions of this clientele – they speak their language – and are linked directly to Laufen’s factories,” adds Magrans. LAUFEN aims to achieve utmost competence in technology, service, and design to be the leading bathroom brand within the project business and high-end residential market. Apart from a wide range of products and excellent service, LAUFEN redefines bathrooms from being mere sanitary venues to sophisticated ones by cooperating with great designers. Magrans notes that in the 1990s, LAUFEN brought its first fully equipped designer bathroom onto the market, designed by F. A. Porsche. “In 2002, we had sensational success with the bathroom concept “ILBAGNOALESSI One” which was developed with the famous Italian design creator Alessi,” reveals Magrans. LAUFEN’s promise of Swiss quality The company introduced the Laufen Clean Coat (LCC), a high-
tech material with unique surface properties developed with ceramic experts and German universities. “With LCC we have a dirt-repellent surface finish in our range that facilitates the cleaning of sanitary facilities and significantly improves hygiene. Particles of dirt, limescale, grease and bacteria have virtually no chance on this exceptionally smooth surface which saves both time and costs for the user,” says Magrans. As a manufacturer of holistic bathroom concepts, LAUFEN’s products allow water to be used sparingly - from water saving toilets to energy saving faucets, which proves the company’s commitment to sustainability. Whilst offering excellent customer service and a comprehensive product range, it is evident that Swiss companies put special attention on sustainability. Another Swiss company, Holcim, one of the world’s leading suppliers of cement and aggregates, also operates under the concept of ‘sustainable construction.’ Holcim’s triple bottom line Holcim was established in Swiss canton of Aargau in 1912 with a vision of providing foundations for society’s future. Holcim has been actively involved in large and infrastructure projects, including the iconic projects such as Henderson Wave, Reflections by the Bay, Marina Bay Sands, and Gardens by the Bay. Holcim takes a balanced approach in business with the triple bottom line of ‘People, Planet, Profit.’ “With sustainable development strongly embedded in Holcim’s business foundation, the company has been putting continuous effort to implement it across our business operation, like obtaining Green Labels for our products, run zerodischarge plant operations and certifying our office green as well,” says Ghosh. “Holcim firmly believes that ‘profit’ entails our wholehearted commitment in ‘people’ and ‘planet’. For instance, when we take copper slag –a by-product from ship repairing industry– as substitute for sand, apart from reducing 400,000 tons of potential landfill every year, we are also increasing our resiliency for sand supply disruption,” he adds.
COUNTRY REPORT: Switzerland Commitment to sustainable construction With 50% contribution of the construction industry to global CO2 emissions, the concept of ‘sustainable construction’ has emerged. According to Dr. Sujit Ghosh, CEO for Holcim (Singapore) Pte Ltd, Holcim’s commitment to Sustainable Development is adopted throughout its global operations in 70 countries. The company was even named as ‘Leader of the Industry’ in the Dow Jones Sustainability Index (DJSI) for 9 consecutive years. Holcim Singapore operations has reduced 20% of its carbon emissions in 10 years period, and another 5% reduction targeted by 2015. “In Singapore, we have pioneered the use of alternative materials such as copper slag sand into our production. The use of washed copper slag as a partial sand substitute is now widely practiced by other concrete suppliers as well and stipulated in the Singapore Standards for concrete production,” adds Ghosh. Holcim Singapore also has established its Centre of Excellence recently, which will enable further development of value-added solutions in areas of productivity enhancement and resource-efficiency which subsequently help their clients to obtain Green Mark certification and Productivity Improvement Project Scheme of Building and Construction Authority (BCA). Not only do Swiss companies have special focus on sustainability, they also offer unconventional solutions with matchless added value. One such company is Hilti Group, a small family company that started in 1941, which offers professional innovative solutions to its customers with outstanding added value. Hilti provides leading-
Andrew Hunt, Hilti’s Head of SEA
Sujit Ghosh, CEO of Holcim (Singapore) Pte Ltd edge technology to the global construction, oil & gas and mining industries with 20,000 employees in more than 120 countries. Hilti’s outstanding added value Andrew Hunt, Hilti’s Head of SEA, states, “Every Hilti product is developed to outperform and outlast, which translates into increased productivity for our customers.” Hilti designs products that revolutionize construction methods for companies to cut costs and time required to finish a project. For example, Hilti’s TE 3000-AVR electric breaker is able to generate the breaking power of an air tool, without the need for an air compressor. “Imagine the productivity gains in not having to install and move a bulky air compressor around the jobsite, but instead plugging a tool to a normal electric outlet,” explains Hunt. Apart from innovative products, strong engineering competence has always been one of the key differentiators of Hilti. Twenty highly trained engineers consult and provide solutions to professional engineers.
“Not only do Swiss companies have special focus on sustainability, they also offer unconventional solutions with matchless added value.”
“Our engineers are available to conduct customized training seminars to consultants on anchoring solutions, Hilti Installation (strut) Systems, passive fire protection and controlled demolition,” adds Hunt. Safety first for Hilti As a leading supplier of construction equipment, improving jobsite health and safety has always been a guiding principle for Hilti.Apart from providing free professional training to users as well as health and safety seminars on jobsites, Hilti uses multiple technologies to ensure safety. Since prolonged exposure to concrete dust leads to irreversible and fatal lung diseases such as silicosis, Hilti has developed a Dust Removal System (DRS) for its tools, which removes up to 98% of harmful dust particles from the workers’ environment minimizing their exposure and enabling increased safe working time – particularly in confined spaces. Hunt adds that the continuous use of hand-held machinery can cause permanent damage to nerves, joints, and muscles. “Our Active Vibration Reduction (AVR) technology minimizes the vibration that is transferred from the tool to the hands of the operator improving worker conditions and prolonging work hours. Staying true to its culture of integrity, courage, teamwork and commitment, Hilti focuses on offering outstanding products to its clients while prioritizing safety and reducing injuries. Going forward, Hilti will continue to innovate, differentiate, and focus on adding value to customers. SINGAPORE BUSINESS REVIEW | OCTOBER 2012 41
BANKING ANALYSIS: MOBILE BANKING at HSBC, reckons that more businesses in Asia move onto the internet and banking infrastructure, providing immediate settlements already easily accessed via different applications. Mobile platforms whether smart phone or tablet – are leading to a significant increase in transaction volumes and that the mobile environment has developed into a fast-evolving, innovative space, he adds. So which countries are embracing the mobile banking hype?
Can mobile banking give cash a run for its money?
With close to 70% mobile penetration in Asia, the region may be ripe for a mobile banking revolution.
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n emerging markets, a mobile phone is more of a necessity than a bank account. In countries such as India and Indonesia, for example, a high telecom-low banking penetration prevails. Such a trend has stoked the prospects of mobile banking across Asia. Only 20-30% of the emerging markets’ population are currently being “banked” due primarily to limited access to banks and financial markets. Mobile penetration, on the other hand, has steadily climbed to 60-70%, and is still rising rapidly. According to Nomura analyst Sachin Gupta, telecommunication companies are well positioned to leverage their existing billing relationships to bridge this gap. However, even though mobile banking may help increase revenues, the 0-5% commission rate on transactions is very low to even contribute significantly to profitability in the next few years.
42 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
“M-payment users could reach 160 million subscribers by FY16F in Asia, implying an adoption rate of around 5%.”
How then can the potential market opportunity translate to mobile banking reality in Asia? Market opportunity in Asia According to Gupta, Gartner estimates that the number of mobile payment or m-payment users could reach 160 million subscribers by FY16F in Asia, implying an adoption rate of around 5%. In transaction value, m-payments could rise to USD156 billion or a CAGR of 35% from current levels as per Gartner. “We note Gartner includes transactions that are conducted on bank accounts, cash, credit/ debit cards, prepaid cards including mobile or e-wallets. But it does not take into consideration carrier billing or point of sale transactions and therefore its outlook for transaction value is likely to be conservative,” said Gupta. John Laurens, Head of Global Payments and Cash Management
Mobile banking around the world Mobile banking in India and Africa got a boost when Bharti recently launched its m-wallet. In the Philippines, Globe Telecom’s GCash now has over 1 million customers. Gupta adds that all three Chinese telcos have equity stakes and alliances with local banks, and are trialling near field communication (NFC) technology. Meanwhile, the three Thai operators have their own form of m-payment service. In developed countries, however, banking penetration is significantly higher. The high access to automated teller machines (ATMs) and other facilities combined with the issues in security, costs of clearance, lack of infrastructure and stores for payments are among the reasons for the low take-up of mobile banking in the developed world. Japan is one of the few markets where m-money adoption has been relatively successful to date, but the financial contribution to telcos is still minimal, notes Gupta. “In May 2012, Softbank in Japan tied up with PayPal in a JV to offer NFC-based wallet solutions. The commission rate for PayPal in Japan is being set at 5%, higher than the 3.9% in Hong Kong and 2.7% in the US.” A recent study by Asian Banking and Finance reveals that banks in Malaysia, Cambodia, Taiwan, and the Philippines are currently implementing a mobile banking service but their main concern is how to provide more personalised and differentiated services. They acknowledged though that developing and maintaining mobile banking service for different mobile devices is costly and challenging.
BANKING ANALYSIS: MOBILE BANKING Currently, there appears to be a mixed adoption rate of mobile banking in Asia. Gupta explains that in India, China, and Indonesia, mobile banking could surprise on the upside, given the ability of the telco to play a dominant role in the value chain, relatively lower competition from alternative solutions and the ability to drive scale, given the size of the market. “However, there could be challenges in identifying compelling transaction propositions suitable for the local market needs, and telcos will also need to invest in increasing subscriber awareness and in building a transparent and efficient ecosystem,” he cautioned. Developed markets are likely to have ‘convenience’ as a key value proposition as mobile banking could complement other forms of payment. As Gupta puts it: “We think a successful m-banking solution should encompass a complete range of services, including integration to bank accounts and credit cards, and the ability to use it at different points of sale (online and offline) to offer consumer convenience – which will be a key selling proposition for take-up.” Mobile banking drivers As countries with populations with the least access to financial infrastructure, India, Indonesia, and the Philippines present an untapped opportunity for m-banking services. Gupta also cites a Euromonitor study which states that cash
payments account for 60% of total transactions in APAC, which could mean there is room for alternative payment mechanisms such as mobile money. Rising Asian smartphone penetration of 20% with data usage at 15% of revenues is also another key driver. “Rising smartphone adoption bodes well, which should allow for a bigger proportion of online transactions to be conducted on mobile devices over time. For example, PayPal notes a 4x increase in transactions conducted through mobile devices in 2011. Lastly, a sophisticated technology and infrastructure that could definitely support mobile banking is also a plus. Korea, Japan, and Singapore rank high in this regard. Asia’s m-banking jewels Iswaraan Suppiah, CIMB’s Head of Group Information and Operations Division, reveals that CIMB Group holds a stake in Touch ‘n Go Sdn Bhd, a Malaysian company that offers near field communication (NFC)-based stored value cards to consumers, currently focused primarily on transportation. “Touch ‘n Go cards can currently be topped up at special purpose vending machines located in transport hubs and stations, and ATMs of CIMB as well as other participating Malaysian banks. From predominantly being used to pay public transport fares, the infrastructure for Touch ’n Go has been extended to parking, road toll, and usage at selected retail chain
“Cash payments account for 60% of total transactions in APAC, which could mean there is room for alternative payment mechanisms such as mobile money.”
outlets,” added Suppiah. Gupta reckons that the mobile banking potential in Asia cannot be dismissed so easily despite the significant hurdles barring its full throttle. Even at a 5% adoption rate, it could be USD30 billion in value in Asia. “Success of m-banking in Kenya, which now has +50% adoption and contributes 16% to revenues to Safaricom, is well touted by the market. It benefited from favourable industry dynamics, regulations, and an appealing product – secured P2P transfers. Operators in India, China, Indonesia, and the Philippines have similar potential, and we will continue to observe these developments.” The success factor Gupta adds that success factors are likely to differ from market to market based on socioeconomic behaviour, needs, demographics, and regulations, among others. Take-up will also likely be gradual, as has been evident in markets such as the Philippines which, despite offering the service for a few years now and having a large ‘unbanked’ population, has seen limited success so far. “Hence, we think it could be another two to three years before a success story similar to that of Safaricom’s M-Pesa in Kenya emerges in Asia. One could also view this as a ‘new business’ segment which could emerge over the medium term,” concluded Gupta.
Value creation potential
Various m-payment linked services
Source: Oliver Wyman report on M-banking
Source: eBay investor presentation, Jun 05, 2012
SINGAPORE BUSINESS REVIEW | OCTOBER 2012 43
Singapore’s top 25 accounting firms
Accountants brace for tougher rules on auditing
How are accountants taking the proposed changes in the Accountants Act?
A
s Singapore seeks to become world’s leading financial and business hub, the Accounting and Corporate Regulatory Authority (ACRA) has deemed it timely to review the 8-year old Accountants Act to ensure that it stays relevant. Amendments were aimed at improving oversight on audit firms and tighten the requirements on accountant registration and were generally accepted by accounting professionals except for some ambiguities particularly in licensing schemes. How will it particularly improve auditing practices? According to ACRA, the aim of the proposed revisions can be summarized into three focal points. First is to ensure good quality control frameworks for the audit and review of entities that have a significant public interest. Second is to enhance ACRA’s ability to inspect audit quality controls and policies of audit firms and require audit firms to improve, where necessary. And last, to make practical experience in key audit functions a core requirement for registration as a public accountant. KMPG head of audit Ong Pang Thye notes that it is essential that
44 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
The proposed amendments intended to reinforce ACRA’s monitoring of firmwide quality controls and policies will enhance audit quality.
Singapore public accountants have a wide range of skill sets, specific knowledge in a variety of areas, as well as knowledge of various professional standards and practices. To enable this, the registration processes for public accountants must be clear, consistent and timely and therein lays the reasoning behind the proposed changes to the practical experience requirements for public accountants to register with ACRA. He also mentioned that the experience gained in other jurisdictions which have standards and regulations that are comparable to those in Singapore should count as equivalent to Singaporean experience. According to Association of Chartered Certified Accountants (ACCA), one particularly important feature of the proposed changes is the introduction of Professional Indemnity Insurance. “Currently there is no mandatory requirement for public accountants practicing on their own account or in an accounting firm, whether as a sole proprietor or partnership, to hold PII when it is actually necessary to meet claims which may arise, protecting the public and various stakeholders in the event of an audit failure,” said ACCA country head Darryl Wee.
Licensing scheme But here’s the gray area. ACCA supports lay involvement in ACRA’s Complaints and Disciplinary Committees to ensure independence and impartiality. It believes that the proposed amendments intended to reinforce ACRA’s monitoring of firmwide quality controls and policies will enhance audit quality and are in line with best practices in the US, UK and Ireland, except that the specific question relating to firm licensing has not been included or discussed explicitly in the Consultation Paper. “In most jurisdictions, entities appoint firms as auditors, not individuals; and audit reports are signed in the firm’s name, with all the partners in a firm being jointly and severally liable in respect of any claims arising from defective audit work,” he said. Lastly, ACCA, based on its experience as a statutory regulator of auditors in the UK and Ireland, believes that licensing firms provides a more effective basis for regulation than licensing individuals. “More than 95% of accounting entities in Singapore are sole-proprietorships. In these cases, the PMP review of the public accountant and firm review are effectively coterminous. Hence, for most entities, the move to a firm licensing scheme would entail little additional preparation in terms of review and monitoring procedures,” he said. Ernst & Young Assurance partner echoes the same adding that ACRA may not need to establish a separate licensing for accounting firms that audit public interest entities (PIE) engagements and those that do not. “While ACRA has decided not to recommend the publication of firm reports as a standard practice after every inspection, we support the objective of publishing or sharing the firm report. We believe the publication of a balanced firm report will help to promote transparency and audit quality as differentiators among audit firms. If an appropriate process is put in place, we believe there will not be a need for ACRA to establish a separate licensing for accounting firms that audit PIEs. This will help to avoid the concentration of market for audits of listed companies.Market forces should be allowed to decide on the choice of auditors,” he said.
Singapore’s top 25 accounting firms
Largest Accounting Firms in Singapore Largest Accounting Firms
Accouting Professionals headcount (SG)
Managing Partner
Website
Tham Sai Choy
www.kpmg.com.sg
1
KPMG
2400
2
PwC LLP
2200
3
ERNST & YOUNG LLP
2000
Max Loh
www.ey.com
4
DELOITTE & TOUCHE LLP
1700
PHILIP YUEN
www.deloitte.com
5
RSM CHIO LIM LLP
650
Paul Lee
www.rsmchiolim.com.sg
6
FOO KON TAN GRANT THORNTON LLP
360
Kon Yin Tong
www.grantthornton.com.sg
7
BDO LLP
300
Frankie Chia
www.bdo.com.sg
8
MOORE STEPHENS
200
Mick Aw
www.moorestephens.com.sg
9
BAKER TILLY TFW LLP
180
Sim Guan Geng
www.bakertillytfw.com
10
NEXIA TS PUBLIC ACCOUNTING
145
Henry Tan
www.nexiats.com.sg
GAUTAM BANERJEE
www.pwc.com
CORPORATION www.crowehorwath.com.sg
11
CROWE HORWATH FIRST TRUST LLP
121
Tan Kuang HUI
12
MAZARS LLP
111
Denis Usher
www.mazars.com
13
PKF-CAP LLP
70
Sajjad Akhtar
www.pkfsingapore.com
KRESTON DAVID YEUNG PAC
70
David Yeung
www.davidyeung.com.sg
14
NG, LEE & ASSOCIATES DFK
67
Jerry Lee
www.nglee-dfk.com
15
BSL PAC
62
Poon Yew Wah
www.bslpac.com.sg
16
LTC LLP
60
Ravi Arumugan
www.ltc-cpa.com
HENG LEE SENG LLP
60
Michael Heng
www.hlsllp.com.sg
SHINEWING LLP
60
Lim Yew Si
www.shinewing.com.sg
CYPRESS SINGAPORE PAC
50
Lok Lai Cheng
www.cypresspac.com.sg
INFINITY ASSURANCE LLP
50
Jack Lam, Kuah Hong Woon
www.infinityglb.com
LO HOCK LING & CO.
50
22
PRUDENTIAL PAC
24
K. Ramanujam
www.prudenpractice.com
23
VERITY PARTNERS
20
Ed Rader
www.verityconsult.com
ADEPT PAC
19
Yin Kum Choy
http://www.adeptpac.com.sg
KWAN WONG TAN & HONG
19
Mrs Min Y Hong
www.kwth-cpa.com/
19
25
PEARLYN CHONG
www.lohocklingco.com.sg
SINGAPORE BUSINESS REVIEW | OCTOBER 2012 45
DINING
A taste of Spain in Singapore Indulge your tastebuds in world-class treats, all in Singapore.
Japan’s finest at Sushi Ichi
Launched earlier this year, the famed fine dining Japanese restaurant Sushi Ichi has been awarded the prestigious Michelin Star award. Hailing from the Ginza district of Japan, it offers a degustation menu of Kyoto Kaiseki Ryori complemented with the finest sushi. Importing ingredients from Tsujiki Market four times a week, the restaurant offers an exquisite menu that takes on classic favorites such as tuna and sea urchin and serves them alongside creative sushi rolls and fresh sashimi. With Head Sushi Chef Yuji Yabe, who is considered as one of the most respected sushi artisans in Ginza, Japan, along with Head Kyoto Kaiseki Ryori Chef Hiroki Sudou, perfection sits upon every meal prepared. Ingenious twists and refreshing elements come to play as these highly regarded chefs maintain the art of Kaiseki in every dish to capture the sophisticated balance between seasonality and taste. With a wide collection of vintage wines, sakes, and shochu, Sushi Ichi sets new standards in Japanese fine dining.
A taste of Spain at Catalunya
Smell the flowers at Pollen
Brit Michelin Star Chef Jason Atherton, the former head chef of Gordon Ramsey’s Maze and owner of London’s Pollen Street Social, is not new to Singapore. After he successfully opened ‘Esquina’, his first tapas bar in Singapore nestled in the streets of Chinatown, Atherton moved on to greener pastures with the opening of Pollen at the climate-controlled Flower Dome Gardens By The Bay. Transporting diners to the South of France, the restaurant is tucked inside the Dome’s Mediterranean Garden and surrounded by olive trees, lavender bushes, various herbs, and “cool weather”. Here, diners get a taste of signature items (such as Scallop Carapaccio and slow cooked egg) from his famous restaurant in London, the Pollen Street Social. Other dishes make use of Asian ingredients, giving a fresh take on English treats. After dinner, guests are ushered towards the nine-meter-long dessert table, where the PB&J is a sure hit! 46 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
In the heart of the city, facing the dynamic waterfront and nestled in the Fullerton Pavilion, is the newly opened Catalunya. Helmed by an international team of award-winning culinary professionals, the contemporary Spanish restaurant melds the finesse of Asian hospitality and classic Spanish charm. With a talented team trained by the experts at elBulli, Santi, Barcelona’s One Michelin-Starred Drolma, and Pierre Gagnaire’s Sketch, diners will be in for a treat as they feast on some of the most mouth-watering dishes in the world. Housed under a glass-encased dome floating atop the waters of Marina Bay, the 120-seater restaurant creates an intimate ambience with a panoramic view of the city and provides a complete multi-sensory ambience.
SINGAPORE BUSINESS REVIEW | OCTOBER 2012 47
LIFE & STYLE
Singapore’s most soothing massages Offering anything from a full body rub to sole-and-soul pampering, these four massage services will try to remedy your physical, mental, and even spiritual aches. Sole Service
Sole Service, +65 6221 7002 and +65 9635 6271 Ayuthaya Spa, The Royal Thai Spa
182 Telok Ayer Street Singapore 068630, +65 6223 9180 For an authentic Thai-style spa, visit Ayuthaya Spa. Its specialties include traditional forms of Thai Massage along with a menu which covers Thai Traditional Massage, Royal Court Thai Massage, and Aromatherapy Body Massage. It also has an assortment of Thai beauty treatments which make use of traditional Thai herbs and natural products. Located in three convenient locations, the spa is your perfect pit-stop after long business trips or if you are simply in need of some body, mind, and soul relaxation.
Sole Service provides luxurious pampering for your feet, or foot reflexology, right at the comfort of your home. It gives you a relaxing experience that is reliable, effortless, and personalised. Working around your erratic schedules, Sole Service is available 12 hours a day, seven days a week with ‘Sole Mates’ therapists available at your convenience. To make an appointment, contact the numbers above. Remède Spa
29 Tanglin Road · Singapore 247911, +65 6506 6896 Escape into a decadent urban sanctuary for a bespoke pampering experience-of-a-lifetime at Remède Spa. With holistic traditions from ancient Rome to China, Remède Spa offers an extensive menu such as the balancing, tension-easing Warm Jade Stone Massage and the purifying and invigorating Olive and Eucalyptus Black Soap Body Wash and Scrub. Sports Solutions
108 Amoy Street, Singapore 069928, +65 6223 6078 Sports Solutions aims to treat any post-injury issues or post-operation troubles you might have. Sports Solutions massages the foundation tissues directed specifically at the muscles that are causing you pain using a combination of classic Swedish-style massage with trigger points compression and electromuscular techniques to reduce soreness. Verita Advanced Wellness
308 Tanglin Road, Phoenix Park, Singapore 247974 Verita aims to offer guests optimal health by providing a variety of holistic health care services ranging from comprehensive wellness programmes to therapies and fitness. These include detox and cleansing regimens, as well as four kinds of massages such as lymphatic drainage, deep tissue and aromatherapy, with an option to custom make your personalized blend as well as a full spectrum infrared sauna with healing techniques focused on the soft tissues in your head and spine. Verita aims not merely to pamper (though there is plenty of that), but for complete health and wellness. Recommended by Quintessentially Lifestyle, the world’s leading Members Only Concierge Club. Contact: singaporebusiness@quintessentially.com 48 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
SINGAPORE BUSINESS REVIEW | OCTOBER 2012 49
numbers
Business leaders stay optimistic Very optimistic Quite optimistic Not very optimistic Not at all optimistic
84%
5% 8%
decision makers are expecting their business to grow in 2012
42% 45% Business leaders are optimistic about their local economic outlook
5%
3%
6%
1%
24%
31% 29%
Source: Ipsos Business Consulting Business Outlook Survey, Q3 2012
Business leaders plan to increase investment in sales & marketing efforts and to get into new markets.
1% 11% 4% 10% 9%
Source: Ipsos Business Consulting Business Outlook Survey, Q3 2012
Logistic Operations Sales and Marketing New Market Developement Technology
20%
15%
GROW BY >10% GROW BY 5-10% GROW BY 1-5% NO CHANGE
Source: Ipsos Business Consulting Business Outlook Survey, Q3 2012
14%
16%
Product Development/R&D Human Resource Distribution/Retail Network Others
Stocks are the most popular asset class for investment portfolio.
Men tend to be more active investors than women in Asia Pacific but with small difference between genders % of Population that have investments
38% 51% Global Average Asia Pacific
33% 48%
28% 44%
Source: Copyright Š 2012 The Nielsen Company
Source: Copyright Š 2012 The Nielsen Company
For more information contact: Ipsos, Tim Hill (tim.hill@ipsos.com); Nielsen, Jackie Helliker (Jackie.Helliker@nielsen.com) 50 SINGAPORE BUSINESS REVIEW | OCTOBER 2012
SHRINK BY 1-5% SHRINK BY 5-10% SHRINK BY MORE THAN 10%
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© 2012 Western Union Holdings Inc. All rights reserved. Western Union® Business Solutions is an operating division of The Western Union Company. Western Union acquired Travelex Singapore Pte Ltd and Travelex Global Financial Services (Singapore) Pte Limited in 2011. Services in Singapore are provided by Travelex Singapore Pte Ltd and Travelex Global Financial Services (Singapore) Pte Limited (collectively referred to as “WUBS” or “Western Union Business Solutions”). Western Union® Business Solutions is an operating division of The Western Union Company. “Travelex” is a registered trademark of Travellers Exchange Corporation Limited and is used by Travelex Global Business Payments Limited and its affiliates under license. This brochure has been prepared solely for informational purposes and does not in any way create any binding obligations on either party. Relations between you and WUBS shall be governed by the applicable terms and conditions provided to you before you trade. No representations, warranties or conditions of any kind, express or implied, are made in this brochure. SINGAPORE BUSINESS REVIEW | OCTOBER 2012 51
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