Debt is not the problem; sustainability is

SINGAPORE (Sept 21): There were at least 102 Singapore-listed companies with net gearing ratios of above 100%, with 17 operate in the property management and development industry, according to 12-month trailing data from Bloomberg.

Even so, there are wide differences in the financial strength of individual companies within each sector. Take the two largest developers City Developments (CDL) and CapitaLand, Each has net gearing below 50%, whereas several of the smallest developers, such as Aspial Corp and Chip Eng Seng, have net gearing levels of around two times or higher.

Still, that does not necessarily mean that the smaller developers are at risk. Analysts say loans make up two-thirds of the debt composition of some property developers, while one-third represents bonds. Typically, smaller developers tend to have a high proportion of debt that is secured compared with larger developers.

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