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Singapore stock market and companies daily report (DBS Group Holdings, UOB, ST Engineering) (October 05, 2012)

October 5, 2012, Friday, 05:56 GMT | 00:56 EST | 10:26 IST | 12:56 SGT
Contributed by Shares Investment


GTS Business Props Up DBS Earnings
DBS Group Holdings’ global transaction services (GTS) continues to grow substantially, and has become a key earnings driver for the group. For 1H12, GTS revenues rose 62 percent to $726 million while profit before allowances surged an even faster 93 percent to $503 million. GTS now contributes 21.6 percent of group profit before allowances of $2.3 billion, more than double the 9.6 percent contribution it made in 2010. GTS involves providing trade finance, cash management and foreign exchange services to companies. The business which is very profitable with little risk has traditionally been dominated by global banks such as HSBC and Citi. Hence, DBS will have to compete on an international level with investments pouring into the business, especially in Asia. Tom McCabe, DBS managing director and head of GTS said: “There’s a shift to Asia and why it is accelerating is because of the shareholders’ aspect [return on equity (ROE) is high for banks which have scale] and the consistency of earnings.”
Significance: In Asia, GTS revenue are projected to grow about 12 percent per year to US$298 billion, from US$168 billion in 2010, according to McKinsey. DBS’ excess capital gives it an edge as the new capital regime set to begin January 2013 would constrict many of the global banks, making the Group well positioned to capitalise on this huge growth opportunity.

UOB Targets Regional Small Business Banking Expansion
United Overseas Bank (UOB) aims to double loans to South-east Asian small businesses by 2015 and expects strong loan growth to come from Thailand and Indonesia. To tap on an expected rise in demand for funding from small businesses, UOB intends to invest in new technology and hire at least 100 relationship managers in the next year, growing its team of regional business bankers by at least 10 percent. In Singapore, UOB has grown its sales force by 50 percent over the last two years to station business banking managers in all 67 branches. Victor Lee, UOB group head of business banking said: “It now serves one in every two small businesses in Singapore, which now accounts for half of UOB’s business banking revenue.” He thus expects the next phase of growth to come from Malaysia, Thailand and Indonesia. Each of the three markets should contribute at least as much as Singapore does to business banking revenue by 2015.
Significance: Though bank lending growth in general has slowed this year on the back of economic uncertainty, thus far, loans to small businesses has been resilient. Locally, UOB has seen strong growth in property loans to businesses due to increased asset ownership, while elsewhere in the region, equipment financing has been its strength.

ST Engineering’s Electronic Arm Clinches $166m Contracts
The electronic arm of ST Engineering, ST Electronics, announced that it has won about $166 million worth of contracts for its Rail Electronics and Satellite Communications (Satcom) and Sensor solutions in 3Q12. On Rail Electronics solutions, a consortium it led was awarded a Rmb198 million (approximately $39 million) contract in Wuxi, China. Work has started and will be completed by the end of 2014. Another $13 million will come from supplying, installing and maintaining half height platform screen doors for the BTS SkyTrain in Bangkok, Thailand. Work has also commenced and expected to be completed at the end of 2013. Separately on Satcom and Sensor solutions, ST Electronic secured $114 million worth of contracts for the supply of Satcom systems to mostly international customers in 3Q12.
Significance: ST Engineering has been on a roll with these new contracts adding to its robust 2Q12 performance. As at 30 June 2012, the Group announced total contract value of $1.46 billion from its Aerospace, Electronics and Marine sectors and its order book stood at a record level of $12.7 billion of which it expects to deliver about $2.5 billion in the remaining months of 2012.

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