Quoteworthy: "The man from the Kremlin is obviously very afraid and probably hiding somewhere." –— Ukrainian President Volodymyr Zelensky on June 25, referring to his Russian counterpart Vladimir Putin, as the Wagner mercenaries drove towards Moscow. The mutiny ended the next day.
Singapore businesses ‘unsure’, ‘pessimistic’ on three-year outlook, hampering sustainability efforts: Paessler
Businesses in Singapore view sustainability and digital transformation in silos and not intertwined, says IT monitoring firm Paessler at the release of its new study on June 27, and as the market outlook darkens, firms opt for one over the other.
The German multinational company’s Keeping Watch: Monitoring Your Path to a Sustainable IT report found that 58% of the businesses in Singapore already have a sustainable IT strategy in place, while 33% are expected to begin in the next year.
While most businesses across Asean and the Australia and New Zealand region are optimistic about the business outlook over the next three years, businesses in Singapore, however, are most conservative, with 23% being unsure or pessimistic about their business outlook.
Businesses in Singapore are focused on digital transformation, sustainability and increasing productivity and efficiency to be better positioned as the global economy slows, says Paessler, which sells network monitoring software to companies.
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Many businesses see sustainability and profitability as a contradiction, says Felix Berndt, regional sales manager of Asia-Pacific at Paessler. “But when the right values are measured, it results in cost efficiency and a competitive lead. It is imperative to build a robust IT strategy, a digital transformation strategy and develop a sustainability framework integrated by a comprehensive IT monitoring framework.”
Intuit Research conducted Paessler’s study between December 2022 and March this year to understand the current state of sustainability practices among businesses and drivers and barriers in deploying sustainability IT practices.
The researchers interviewed key business decision-makers from six countries — Singapore, Thailand, Malaysia, Indonesia, Australia and New Zealand — working in manufacturing, essential services, technology, telecommunications and data centres. These companies had revenue from US$50 million ($67 million) to over US$1 billion.
See also: MAS set to hold monetary policy as inflation persists
The region’s organisations are developing sustainability frameworks and digital transformation strategies “in a piecemeal manner”, says Paessler. Businesses are focusing instead on “easy-to-achieve” corporate metrics, such as product safety and quality (72%), recycling (60%), water or energy saving (58%) and transparent financial reporting (59%).
One decision-maker from an Indonesian garment manufacturer tells researchers: “Sustainability cannot come at the expense of customer experience or business profitability. It is a good corporate metric and warranted by our investors and industry regulators. Unfortunately, during an economic downturn, sustainability metrics take a backseat.”
While sustainability is one of the top business priorities for the next three years, it only features as one of the top five challenges for businesses across markets and sectors surveyed, says Paessler.
Instead, businesses see challenges such as increasing competition, digital transformation, driving topline growth, improving profitability and talent management as the top five challenges.
The top three drivers for adopting sustainable frameworks are reputation (45%), following industry operations standards (36%) and adhering to the regulatory framework and compliance (24%), according to the study.
Within Asean, Indonesia lags behind other markets while businesses in Australia and New Zealand are ahead on their sustainability journey, says Paessler. One food manufacturing company leader in Indonesia says: “Since the pandemic, business focus has shifted to survival and growth. Sustainability has taken a backseat within the organisation, and we will focus on it again in two years.”
Although the sustainable IT strategy is on companies’ radar, most businesses believe a lot can still be done, says Paessler. — Jovi Ho
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MAS proposes to increase deposit insurance coverage to $100,000
The Monetary Authority of Singapore (MAS) published a public consultation paper on June 27 proposing to increase deposit insurance (DI) coverage per depositor to $100,000 and improve the clarity and operational efficiency of the DI Scheme.
Currently, the DI coverage per depositor per scheme member is $75,000. The proposed increase will ensure that the vast majority of smaller depositors will remain fully covered, keeping pace with the growth in average deposit balances.
The proposed change will result in 91% of depositors being fully covered by deposit insurance and will ensure that DI continues to fulfil its primary objective of protecting small depositors in the event of a bank failure.
This level of DI coverage strikes the appropriate balance between achieving a high degree of coverage for depositors and managing the coverage cost, which — if too high — will ultimately be passed on to customers.
Other proposals include providing the MAS with powers to stipulate a specific time when deposit balances are taken as final to enhance clarity on how DI compensation is computed and introducing a time limit for DI compensation claims to help keep administration costs low.
MAS deputy managing director (financial supervision) Ho Hern Shin says the central bank’s proposals are not in response to the stresses faced by some banks abroad earlier in the year.
“The key to ensuring a safe and resilient banking system is through pre-emptive safeguards, meaning sound regulation, rigorous supervision by MAS, and effective governance and risk management by banks,” she adds. “DI complements these safeguards by providing a safety net for small depositors if banks fail. The DI safety net helps to provide confidence to small depositors but is no substitute to sound risk management and effective supervision.”
The consultation paper is available on MAS’ website. Interested parties are invited to submit their comments by July 31. — Khairani Afifi Noordin
Singapore sends businessman to jail for role in Wirecard fraud
A Singapore judge handed a 12-month prison term to a businessman for conspiring to misappropriate money in the Wirecard AG scandal.
Henry Yeo, a director at Jacobson Fareast Marketing Services, was convicted after pleading guilty to three charges on June 27. “Wirecard Asia suffered a total loss of $123,070 as a result of the accused’s participation in the conspiracy to misappropriate money from its account dishonestly,” deputy public prosecutor Vincent Ong said in court.
Two ex-employees of Wirecard Asia Holdings had jail sentences imposed last week for conspiring to misappropriate money in the first criminal convictions linked to the massive fraud at the German payments firm. Singapore’s financial regulator also imposed $3.8 million in penalties on four financial institutions for breaches related to Wirecard.
Wirecard filed for bankruptcy in 2020 after acknowledging that EUR1.9 billion ($2.8 billion) it had listed as assets probably did not exist. In April, EY’s German business was banned for two years from accepting major new audit mandates after it failed to uncover fraud at Wirecard AG. — Bloomberg
Yangzijiang on a roll with ‘mind-blowing’ contract wins
Yangzijiang Shipbuilding, a component stock of the Straits Times Index, saw heavy trading after it announced a higher-than-expected spate of new order wins on June 26, described by DBS as “mind-blowing”. The company’s shares closed June 27 at $1.45, up 10 cents from the previous day’s close.
On June 26, the China-based, Singapore-listed shipbuilder announced new orders of some US$5.6 billion ($7.5 billion) year to date, bringing its total order book to a record US$14.6 billion.
The orders were from customers including leading shipping lines Maersk and AP Moeller and for vessels running on cleaner fuel as the industry joins the sustainability movement.
The new orders included so-called ‘combination carriers’ ordered by a repeat customer from Norway, which can carry both ‘dry’ and ‘wet’ cargo, making these ships more flexible in the cargo they carry.
In a report on June 27, DBS believes that the order wins should “rejuvenate” the “muted” performance of the company’s share price, which is trading at an “unwarrantedly” low valuation of 8.5 times forward FY2023 earnings and 1.35x P/B — below the industry average of 1.6 times P/B. This is so even with superior financials of 16% earnings CAGR, return of equity of 17% to 18%, and 4% to 5% dividend yield.
With the contract wins, the company’s yards will be kept busy through 2027, providing over 4 years of revenue visibility. “We surmise that the likelihood of them expanding current capacity and expediting delivery is increasing with the huge order intakes in 2Q.
“We could also expect further yard efficiency and productivity gain. These could prompt the street to upgrade earnings for the next two years, especially if margins surprise on the upside in the upcoming 1H23 results,” adds DBS, who has a “buy” call and $1.70 target price, which is based on a 1.7 times FY2023 P/B and 10.8 times P/E.
On the other hand, there is “cost risk” from unfavourable forex, and steel, potentially impacting margins. In any case, citing market prices compiled by Clarksons, the contract prices fetched by Yangzijiang seems “quite in line” with the peers. “We believe reasonable buffers have been built to mitigate cost inflationary risks,” says DBS.
Meanwhile, CGS-CIMB’s Lim Siew Khee has kept her “add” call and $1.66 target price on the stock, based on 1.7 times P/B. “We believe decarbonisation and green financing availability could spur more dual-fuel ships orders in the near term,” notes Lim, referring to the significant wins of ships with newer, more sustainable designs.
Following news of the order wins, UOB Kay Hian’s Adrian Loh has kept his “buy” call on Yangzijiang Shipbuilding but with a revised target price of $1.65, up from $1.58. “With revenue visibility now out to 2027, our bullish thesis on the company remains intact, and we believe the company is well placed to win more orders for delivery between 2026 to 2027,” writes Loh in his June 28 note.
Loh expects the company to secure further orders and lift the year-to-date number to at least US$7 billion when it announces its half-year earnings in mid to late August.
With the higher-than-expected new orders, Loh has upgraded his earnings estimate by between 1 and 7% for FY2023 to FY2025. “While the year-to-date order wins have been impressive, construction only commences in 2HFY24 at the earliest, since deliveries are largely between 2025 to 2027, and thus the positive impact on revenue and profit will start in 2024,” he explains.
With the earnings visibility, Loh expects the company to potentially pay higher dividends, which will help the company address one of the ongoing perceived issues of capital management. As at the end of FY2022 ended Dec 2022, the company had the equivalent of 31 cents per share in cash but chose to maintain its dividend at just 5 cents per share, the same as the preceding year.
Loh says Yangzijiang’s management had stated it would look to change its dividend policy from a flat payout to one tied to a stated percentage of the earnings. His current assumption is for a payout of 4.5 cents per share, equal to a payout ratio of 25%. If the ratio is lifted to 40%, that would lift the dividend to 7 cents.
“In our view, this is a positive move as a payout ratio is more flexible, aligns the interests of shareholders and management, and provides greater stability in dividend payments over time as it adjusts to changes in earnings,” says Loh. His revised target price of $1.65 is based on 8.7 times earnings, which is 1 standard deviation above the company’s five-year average of 6.5 times.
Loh adds that Yangzijiang Shipbuilding is not an expensive stock at current levels. Even at the target price of $1.65, 1.2 times FY2023 P/B, a level last seen in 2012. — The Edge Singapore
