Business Times Singapore
Huawei to stop making flagship chipsets as US pressure bites - The Business Times
HUAWEI Technologies Co will stop making its flagship Kirin chipsets next month, financial magazine Caixin said on Saturday, as the impact of US pressure on the Chinese tech giant grows.
Shanghai HUAWEI Technologies Co will stop making its flagship Kirin chipsets next month, financial magazine Caixin said on Saturday, as the impact of US pressure on the Chinese tech giant grows. US pressure on Huawei's suppliers has made it impossible for the company's HiSilicon chip division to keep making the chipsets, key components for mobile phone, Richard Yu, CEO of Huawei's Consumer Business Unit was quoted as saying at the launch of the company's new Mate 40 handset. With US-China relations at their worst in decades, Washington is pressing governments around to world to squeeze Huawei out, arguing it would hand over data to the Chinese government for spying. Huawei denies it spies for China. The United States is also seeking the extradition from Canada of Huawei's chief financial officer, Meng Wanzhou, on charges of bank fraud. Stay updated with BT newsletters In May, the US Commerce Department issued orders that required suppliers of software and manufacturing equipment to refrain from doing business with Huawei without first obtaining a licence. "From Sept 15 onward, our flagship Kirin processors cannot be produced," Mr Yu said, according to Caixin. "Our AI-powered chips also cannot be processed. This is a huge loss for us." Huawei's HiSilicon division relies on software from US companies such as Cadence Design Systems Inc or Synopsys Inc to design its chips and it outsources the production to Taiwan Semiconductor Manufacturing Co (TSMC), which uses equipment from US companies. Huawei declined comment on the Caixin report. TSMC, Cadence and Synopsys did not immediately respond to e-mail requests for comment. HiSilicon produces a wide range of chips including its line of Kirin processors, which power only Huawei smartphones and are the only Chinese processors that can rival those from Qualcomm in quality. "Huawei began exploring the chip sector over 10 years ago, starting from hugely lagging behind, to slightly lagging behind, to catching up, and then to a leader," Mr Yu was quoted as saying. "We invested massive resources for R&D, and went through a difficult process." REUTERS
Brazilian billionaire Lemann leads initiative to build Covid-19 vaccine factory - The Business Times
[SAO PAULO] Brazilian billionaire Jorge Lemann's foundation and other business interests will fund the building of factory to produce the Covid-19 vaccine being developed by Oxford University and pharmaceutical company AstraZeneca.
[SAO PAULO] Brazilian billionaire Jorge Lemann's foundation and other business interests will fund the building of factory to produce the Covid-19 vaccine being developed by Oxford University and pharmaceutical company AstraZeneca. The Lemann Foundation said in a statement on Friday that...
OCBC takes knife to offshore support sector exposure; Q2 profit down 40% - Business Times
OCBC's Q2 net profit fell by a larger-than-expected 40 per cent after it took S$350 million in provisions to write down the carrying value of the existing offshore support vessels (OSVs) that back corresponding impaired loans - a move that has crunched down i…
OCBC's Q2 net profit fell by a larger-than-expected 40 per cent after it took S$350 million in provisions to write down the carrying value of the existing offshore support vessels (OSVs) that back corresponding impaired loans - a move that has crunched down its exposure to the offshore support sector. The bank also joined its peers in bumping up overall allowances to buffer against bad loans to emerge amid the pandemic-fuelled crisis. Net profit for the three months ended June 30, 2020 stood at S$730 million, compared with S$1.22 billion a year ago, underperforming the S$930 million average estimate of eight analysts polled by Bloomberg. Allowances for the second quarter surged to S$750 million, compared with S$111 million a year go. It was also higher as compared with S$657 million in allowances posted in the previous quarter. The bank in Q2 "took the opportunity" to write down the carrying value of the existing OSVs that back corresponding non-performing loans by S$350 million - even as the portfolio performed "at the same level" as the previous quarter - amid a grim outlook of the sector, OCBC chief executive officer Samuel Tsien told reporters at a briefing on Friday. Stay updated with BT newsletters Consequently, the bank's OSV portfolio, excluding conglomerates, is now down to less than 0.3 per cent of total outstanding loans. "On a forward-looking basis, we believe that the demand for offshore support vessels will come down quite significantly for a period of time. We don't know when the market is going to pick up, because we don't know when all the markets will open up,' said Mr Tsien. He noted that the transport sector - hard-hit by travel restrictions - is a "fairly important" source of demand for the oil industry. It was estimated that demand for fuel from the transport sector fell by 35 per cent during lockdowns. Overall, total allowances for H1 2020 jumped to S$1.4 billion, compared with S$360 million in the year-ago period. Some S$793 million were specific provisions for a Singapore-based corporate customer in the oil trading sector recognised in the first quarter, and further provisions made in the second quarter for the OSV portfolio. General provisions made up the remaining S$614 million of H1 allowances, which include S$300 million of management overlays and macroeconomic variables adjustments of S$197 million. The bank declared an interim dividend of 15.9 cents per share, compared with the dividend of 25 cents per share declared in the year-ago period. The scrip dividend scheme will be applicable to the interim dividend, with the issue price of the shares set at a 10 per cent discount. The payout represents half of the maximum 31.8 cents dividend per share that can be paid out in 2020, representing 60 per cent of 2019s 53 cents per share. In July, the Monetary Authority of Singapore nudged the Singapore banks to cap total dividends this year at 60 per cent of that for 2019. The bank factored in a peak NPL ratio of 2.5-3.5 per cent through to 2021 as government relief measures begin to taper off towards the end of this year. NPL ratio for Q2 ticked higher to 1.6 per cent, up from 1.5 per cent in both a year ago, and quarter ago. OCBC's moratorium relief across the group amounted to S$27 billion, or 10 per cent of its total loan book. About 6.8 per cent of total loans in Singapore are under moratoria; and 59 per cent in Malaysia due to the automatic moratorium scheme. Mr Tsien said around 88 per cent of total loans under moratoria are fully secured. "Even if the exit from the relief programme will see some challenges because the market may not have fully recovered by that time, we still expect that the primary and secondary source of repayment from collaterals will be able to provide us comfort that repayments will be available." Total general provisions set aside by OCBC as at June 30, 2020 stood at S$1.67 billion, up from S$1.44 billion in the previous quarter. The regulatory loss allowance reserve (RLAR) set aside by OCBC remained unchanged from a quarter ago at S$874 million. For perspective, the non-performing asset (NPA) coverage ratio now for OCBC is at 101 per cent. DBS has the highest NPA coverage ratio of the trio at 106 per cent. For UOB, it is at 96 per cent. To add, both OCBC and UOB calculate NPA allowance coverage by including what they have set aside under RLAR, a separate reserve in equity - in other words, coming out from retained earnings - that can be used to reflect more coverage against non-performing assets. But it does not substitute for provisions deducted against income earned in each quarter. Stripping out RLAR, OCBC's NPA coverage ratio ex-RLAR would be 81 per cent, while that for UOB would be 88 per cent. DBS has not set aside RLAR in this period, and to be clear, its total general provisions of S$3.8 billion exceeds the regulator's requirement by 24 per cent. OCBC's net interest income for the second quarter fell 7 per cent from the year-ago period to S$1.48 billion, as asset growth was more than offset by margin compression. Its net interest margin (NIM) stood at 1.6 per cent, falling 16 basis points from the quarter. A year ago, its NIM stood at 1.79 per cent. OCBC guided for NIM to maintain at the "high 1.5 per cent range" for the second half of 2020. "The magnitude of downward adjustment will not be as high as what we saw in the second quarter, versus the first quarter," said Mr Tsien. Non-interest income in the second quarter rose 11 per cent from a year ago to S$1.14 billion, on increased trading and insurance income. Operating expenses fell 4 per cent from the year-ago period to S$1.11 billion. Annualised return on equity was 6.1 per cent in H1 2020, as compared with 11.7 per cent a year ago. Its CET1 ratio was 14.2 per cent. As at lunchtime break, shares of OCBC fell 16 cents or 1.82 per cent to S$8.64, while shares of UOB shed 38 cents, or 1.92 per cent, to S$19.38. DBS bucked the trend, gaining 20 cents or just shy of one per cent, to trade at S$20.60.
Hot stock: SGX queries iFast after shares rise 12% - Business Times
THE Singapore Exchange (SGX) on Friday morning queried mainboard-listed wealth management and brokerage platform iFast Corporation about its "unusual price movements" after iFast shares rose more than 12 per cent.
THE Singapore Exchange (SGX) on Friday morning queried mainboard-listed wealth management and brokerage platform iFast Corporation about its "unusual price movements" after iFast shares rose more than 12 per cent. iFast shares hit an intra-day high of S$2.17 as at 11.41am on Friday, up 12.4 per cent or S$0.24. They eased slightly to trade at S$2.14 by 1.33pm, up 10.9 per cent or S$0.21 from the previous day's close, after 4.4 million shares changed hands. ShareInvestor data showed there were no married trades. SGX asked iFast whether it was aware of any possible explanation for the trading activity. iFast responded during the midday break, noting a Bloomberg article earlier this week that Hong Kong had shortlisted two finalists to digitise its retirement funds system. The finalists are a consortium led by Oneconnect Financial Technology and a group led by telecommunications provider PCCW, with the latter said to be working with iFast, according to Bloomberg's report. In its reply to SGX, iFast said it did not provide comments in the media report, and that it may from time to time take part in the bidding for projects or tenders. Stay updated with BT newsletters "Due to the confidentiality requirements and uncertainty of outcome linked to the bidding of projects or tenders, the group would like to add that it is unable to provide any comments at this point of time," it said. iFast also noted that the trading in its shares has increased in recent months. This could be linked to the group's net profit doubling year-on-year to S$8.2 million in H1 2020, and its assets under administration reaching a new high of S$11.15 billion as at June 30, it said. iFast reported its latest results on July 23, when chief executive and chairman Lim Chung Chun also said that the company was growing its staff size in anticipation of a Singapore digital banking licence, and on "considerable" growth in its business in the city-state.
UOB starts restructure work for debts paused on payments; Q2 profit down 40% - Business Times
UOB has set up restructuring teams to assess borrowers who have taken a debt holiday amid the gradual unwinding of government relief measures towards the end of the year.
UOB has set up restructuring teams to assess borrowers who have taken a debt holiday amid the gradual unwinding of government relief measures towards the end of the year. But given the enormous government support around the world, asset prices are unlikely to collapse, with the bank guiding that it does not expect a fallout that was seen during the Asian Financial Crisis. The bank posted a 40 per cent drop in second-quarter net profit to S$703 million for the three months ended June 30, hurt by weaker income and a surge in provisions set aside to brace for the easing of loan moratoria, UOB chief Wee Ee Cheong told analysts and media at a briefing on Thursday morning. Net profit for Q2 stood at S$703 million, compared with S$1.17 billion the same period a year ago. This was weaker than the consensus forecast of S$815 million in net income estimated by four analysts in a Bloomberg poll. Provisions against bad loans in the second quarter surged to S$396 million, compared with just S$51 million a year ago, with credit costs rising to 67 basis points. Total general provisions as at June 30 stood at S$2.39 billion, 20 per cent from S$1.99 billion a quarter ago. The bank has guided for total provisions to remain between S$2 to S$3 billion for "the next few quarters". Stay updated with BT newsletters At the briefing, UOB's group chief financial officer Lee Wai Fai said: "Various relief programmes and laws put in place now might result in low non-performing loans and low delinquency during this period. While we remain committed to support customers through difficult times, we are also expecting credit costs to rise when most moratoria end as not all customers can emerge out of this crisis the same." Roughly 16 per cent of UOB's loan book is currently under moratorium programmes. About 10 per cent of loans in Singapore are under moratorium; and 63 per cent and over-30 per cent in Malaysia and Thailand respectively due to automatic moratorium schemes. UOB has projected for about 10-15 per cent of loans under moratoria to sour into bad debt at worst-case. For the remaining loans, majority will probably require some commercial-base restructuring, said UOB group chief risk officer Chan Kok Seong. "There will be some restructuring required because we cannot expect all businesses to catch up with the clawback for deferment from day one. So those businesses that have a viable business model, we will look at them individually...look at their cash flow, their business model. If we believe they are viable, we will look at how to do a comprehensive commercial-based restructuring," said Mr Chan. "If not, then we may have to exit that relationship a bit earlier." Mr Chan added that credit losses are expected to be spread out over two financial years, noting that credit accommodation across the region, and globally, has made a lot of difference for many businesses with liquidity issues. "Asset prices are unlikely to collapse because of government support around the world. We dont expect the situation to play out like the Asian Financial Crisis," he said. UOB's non-performing loan (NPL) ratio in the second quarter stood at 1.6 per cent, up from a year ago's 1.5 per cent, and unchanged from a quarter ago. The bank has factored in a peak NPL ratio of 3-3.2 per cent. While UOB is one the largest users of Enterprise Singapore's risk-sharing loan facility to support the bank's small and medium-sized enterprise (SME) customers, Mr Wee noted that only 50 per cent of the loans accepted by SME customers has been drawn down. This signals that their liquidity concerns are manageable, said Mr Wee. The bank's SME book is mostly made up of mid to larger SMEs with turnovers of between S$10 million to S$100 million. UOB's regulatory loss allowance reserve (RLAR) set aside as at the second quarter also rose slightly to total S$379 million. As at the end of the first quarter, UOB had pre-emptively upped RLAR above the minimum requirement to boost allowance coverage. RLAR is a separate reserve in equity - in other words, coming out from retained earnings - that can be used to reflect more coverage against non-performing assets. But it does not substitute for provisions deducted against income earned in each quarter. The board declared an interim dividend of 39 cents per share, down from the year-ago quarter of 55 cents per share. The scrip dividend scheme will be applied. The move is in line with MASs guidance for local banks to moderate their dividends for 2020. Total income fell 12 per cent to S$2.26 billion, with both net interest income and fee income down. Net interest margin (NIM) for the quarter stood at 1.48 per cent, a sharp fall from the 1.81 per cent earned on loans a year ago, and the 1.71 per cent earned on loans a quarter ago. The one-month Sibor as at Wednesday stood at an all-time record low of 0.25 per cent; the three-month Sibor of 0.438 per cent was at a level not seen since 2014. Expenses for the second quarter fell 8 per cent from the year-ago period to S$1.04 billion. The bank's return on equity for the second quarter stood at 7.1 per cent, sliding from 8.8 per cent in the first quarter, and down again from 12.5 per cent in the year-ago quarter. CET1 ratio stood at 14 per cent. As at 11.37am, shares of UOB were trading higher, gaining 28 cents to S$19.70.
SpaceX completes test flight of Mars rocket prototype - The Business Times
[HOUSTON] SpaceX on Tuesday successfully completed a flight of less than a minute of the largest prototype ever tested of the future rocket Starship, which the company hopes to use one day to colonise Mars.
[HOUSTON] SpaceX on Tuesday successfully completed a flight of less than a minute of the largest prototype ever tested of the future rocket Starship, which the company hopes to use one day to colonise Mars. "Mars is looking real," SpaceX founder Elon Musk tweeted in response to a fan. The current Starship prototype is fairly crude: it's a large metallic cylinder, built in a few weeks by SpaceX teams on the Texas coast, in Boca Chica - but it's still smaller than the actual rocket will be. Several previous prototypes exploded during ground tests, during a learning process of trial and error. In images shared Tuesday by several space specialists, including the space news website NASASpaceFlight.com, the latest prototype - dubbed SN5 - reached an undetermined altitude before descending to land in a cloud of dust, demonstrating good trajectory control. Stay updated with BT newsletters "And when the smoke cleared, she stood there majestically, after the 150 metre flight!" tweeted Nasa's top scientist, Thomas Zurbuchen. The so-called "hop test" was planned to reach a 150m altitude, but SpaceX has not confirmed any details about the test flight. In 2019, an earlier prototype - the smaller Starhopper - flew to 150m altitude and returned to land. The Starship envisioned by Mr Musk will be 120m tall and will be able to land vertically on Mars. "We are going to the Moon, we are going to have a base on the Moon, we are going to send people to Mars and make life multi-planetary," Mr Musk said Sunday, after welcoming two Nasa astronauts back from the International Space Station. The astronauts had traveled in the Dragon capsule developed by SpaceX. AFP
Stocks to watch: Singapore Airlines, SGX, Sabana Reit, Yanlord, ARA H-Trust - Business Times
THE following companies saw new developments that may affect trading of their securities on Wednesday:
THE following companies saw new developments that may affect trading of their securities on Wednesday: Singapore Airlines (SIA):The flag carrier will likely see a delay in the launch of its new First and Business Class seats, which were poised to debut on the Boeing 777-9 in 2022. SIA is also in talks with the world's biggest planemakers Airbus and Boeing to postpone taking delivery of new aircraft as it seeks to defer capital expenditure. SIA shares gained S$0.06 or 1.8 per cent to close at S$3.37 on Tuesday. Singapore Exchange (SGX):The bourse operator will launch two international real estate investment trust (Reit) futures, based on indices tracking Reits listed in Singapore, Hong Kong, Malaysia and Thailand. These products will be Asias first international Reit futures. Shares of SGX closed at S$8.73 on Tuesday, up S$0.22 or 2.6 per cent, before the announcement. Sabana Shari'ah Compliant Industrial Real Estate Investment Trust (Sabana Reit), ESR-Reit: Responding to criticism from activist fund Quarz Capital Management over the implied offer price for the proposed merger with ESR-Reit, Sabana Reit's manager on Wednesday emphasised that the deal was not an asset sale, and will allow Sabana Reit unitholders to stay invested in a "stronger, larger and more resilient enlarged Reit". Sabana Reit units ended Tuesday at 38 Singapore cents, down 0.5 cent or 1.3 per cent, while ESR-Reit closed flat at 38.5 cents. Yanlord Land Group:The real estate developers wholly-owned subsidiary and a GIC affiliate have inked an investment agreement of up to seven billion yuan (S$1.4 billion) to co-invest in China residential projects. Shares of Yanlord closed at S$1.22 on Tuesday, up S$0.01 or 0.8 per cent, before the announcement. Stay updated with BT newsletters ARA US Hospitality Trust (ARA H-Trust):The stapled hospitality group on Wednesday posted a net property loss of US$2 million and no distributable income for the half year ended June 30, 2020 as its earnings took a hit amid the Covid-19 pandemic. ARA H-Trust stapled securities closed at US$0.38 on Tuesday, up US$0.01 or 2.7 per cent. First Ship Lease Trust:With a weaker showing in its top line, the trust saw net profit decline by 34.7 per cent to US$1.33 million for the second quarter of this year, dragged by an 11 per cent drop in revenue and a US$3.27 million impairment. Before the results were released, the counter finished Tuesday at 8.2 Singapore cents, up 0.1 cent or 1.2 per cent. OUE Limited: The property developer on Tuesday night reported a S$207.2 million net loss for the first half of this year, plunging the mainboard-listed company into the red from a S$61.9 million net profit a year ago. OUE shares advanced S$0.04 or 3.4 per cent to S$1.21 at Tuesdays close. AEM Holdings:Shares in the semiconductor play climbed to a record high a day after reporting a 147.9 per cent increase in its first-half earnings. The mainboard-listed stock hit an intra-day high of S$4.23, before easing to S$4.19 by Tuesdays closing bell, gaining S$0.53 or 14.5 per cent. Challenger Technologies:The mainboard-listed consumer electronics retailers first-half revenue fell 27 per cent, as contributions from the IT products and services business segment tumbled 27 per cent due to the lack of trade shows and weaker retail sales amid the coronavirus pandemic. Challenger shares moved up by 0.5 Singapore cent or 1.1 per cent to end at 46.5 cents on Tuesday, before the results were released. Teckwah Industrial Corporation:In response to calls from activist fund Quarz Capital Management to raise dividend payouts, printing and logistics firm Teckwah has stressed the need for a sound cash management policy, the mainboard-listed firm said in a filing after market close. The counter was up 1.5 Singapore cents or 2.8 per cent to end trading at 55.5 cents. Hatten Land: Blockchain firm ECXX Global, in which Catalist-listed property developer Hatten Land is acquiring a 20 per cent stake, is set to launch a digital securities exchange targeted at institutional and accredited, non-individual investors. Hatten shares last traded on July 29 at 5.7 Singapore cents. Trading halt:Accordia Golf Trust on Wednesday morning requested a trading halt. Its units closed at S$0.65 on Tuesday, down S$0.01.
Stocks to watch: CapitaLand, Keppel, SGX, Frasers Logistics & Commercial Trust - Business Times
THE following companies saw new developments that may affect trading of their securities on Tuesday:
THE following companies saw new developments that may affect trading of their securities on Tuesday: CapitaLand: CapitaLand and other shareholders have divested an aggregate 40 per cent equity stake in a Guangzhou development unit to an unrelated purchaser for 395.7 million yuan (S$78.6 million). The counter closed at S$2.71 on Monday, down S$0.05 or 1.8 per cent, before this announcement. Keppel Corporation: Some analysts are keeping faith with Temasek Holdings going through with its partial offer for Keppel Corp, given the need for consolidation in the sector. But the offer price may be lowered, leading them to cut their target prices, even though they are keeping their "buy" calls. Shares of Keppel Corp tumbled on Monday, closing S$0.22 or 4.1 per cent lower at S$5.18. Singapore Exchange (SGX):SGX shares gained on Monday, bucking the broad market trend after the bourse operator made a surprise move to raise its final quarterly dividend to eight Singapore cents per share, up from 7.5 cents a year ago. The stock closed at S$8.51 on Monday, up S$0.34 or 4.2 per cent. Frasers Property, Frasers Logistics & Commercial Trust (FLCT): The trust's revenue almost doubled for its third quarter ended June 30, its manager said on Monday night. FLCT also plans to acquire a logistics property in Australia and a business park in the UK for S$89.9 million from its sponsor Frasers Property, as well as sell its remaining half stake in an Australian cold storage facility. Frasers Property shares were trading flat at S$1.16 as at 9.26am on Tuesday, while units of FLCT were at S$1.35, up S$0.03 or 2.3 per cent. Stay updated with BT newsletters Suntec Real Estate Investment Trust (Suntec Reit): Suntec Reit announced on Monday that its office development, Olderfleet, at 477 Collins Street in Melbourne, Australia, received practical completion on July 31. Units of the Reit closed at S$1.31 on Monday, down S$0.03 or 2.2 per cent, before this announcement. AEM Holdings: Semiconductor play AEM Holdings on Monday reported a more than doubling in first-half net profit to S$55.3 million, from S$22.3 million a year ago. This came on the back of higher revenue, favourable product mix and operational cost efficiency. AEM shares closed at S$3.66 on Monday, up S$0.09 or 2.5 per cent, before its results release. Chip Eng Seng: The property development and construction firm on Monday posted a net loss of S$24.4 million for its first half ended June 30, reversing from a net profit of S$15.2 million a year ago. Shares of Chip Eng Seng closed at 42.5 Singapore cents on Monday, down two cents or 4.5 per cent, before the release of its results. Hong Leong Asia: Hong Leong Asia on Monday said it has garnered 97.23 per cent shareholding in cement manufacturer Tasek Corp Bhd as at the close of the unconditional voluntary takeover offer. The counter finished at 46.5 Singapore cents on Monday before this announcement, down 0.5 cent or 1.1 per cent. Lippo Malls Indonesia Retail Trust (LMIRT): The manager of LMIRT said on Monday that it had completed the divestment of Binjai Supermall for 262 billion rupiah (S$24.5 million). LMIRT units closed at 11.3 Singapore cents on Monday, down 0.4 cent or 3.4 per cent, before this announcement. iX Biopharma: The Catalist-listed firm on Tuesday said it has received enhanced patent protection in the US for its lead drug Wafermine. Shares of iX Biopharma closed up S$0.01 or 3.7 per cent to S$0.28 on Monday.
More aerospace firms jettison jobs; further pain if pandemic drags on - Business Times
ENGINE maker Pratt & Whitney (P&W) and plane-maker Boeing are the latest among the aerospace firms which have cut jobs in Singapore, with some analysts saying that the aerospace sector may need to brace for more pain if the pandemic drags on.
Singapore ENGINE maker Pratt & Whitney (P&W) and plane-maker Boeing are the latest among the aerospace firms which have cut jobs in Singapore, with some analysts saying that the aerospace sector may need to brace for more pain if the pandemic drags on. P&W on Monday carried out a retrenchment exercise at most of its sites across Singapore which affected nearly 20 per cent of its headcount, while plane-maker Boeing recently let go of some employees. A few positions in Singapore were impacted, said Boeing, without revealing numbers. Other companies in the aerospace and aviation ecosystem which have recently shed jobs here include European plane-maker Airbus, engine-maker Rolls Royce and budget airline Jetstar Asia. The layoffs were "openly communicated in advance with employees", P&W said in a joint statement with the Singapore Industrial and Services Employees' Union (SISEU) on Monday, adding that the layoffs will affect more foreigners than locals. The "Singapore core" will continue to form more than 77 per cent of the workforce after the exercise. The group employs more than 2,000 staff here. Stay updated with BT newsletters P&W companies that are unionised under SISEU include Turbine Overhaul Services, Pratt & Whitney Component Solutions, P&W NFPG Manufacturing Company Singapore and Component Aerospace Singapore. With demand for aircraft and services cratering in the wake of the pandemic, Boeing has had to slash jet production rates and has announced it will cull some 16,000 roles worldwide or about 10 per cent of its global workforce. A number of retrenchments has been carried out in Singapore, spread across Boeing's local operations and its supporting functions here. "The number of Singapore positions impacted by the reductions are few," said a spokesperson for Boeing in response to queries from The Business Times. "While the number is relatively small when compared to the number of job losses in the US - more than 15 per cent across Boeing Commercial Airplanes - and elsewhere in the world, this remains a difficult decision for the local team." The US planemaker employs over 300 people in Singapore across different units, which includes its corporate office, pilot training centre and parts distribution business. Affected employees will be supported with career transition services by HR consultancy Lee Hecht Harrison and can continue to seek assistance via Boeing's Employee Assistance Programme, it said. With the pandemic still ongoing and a resurgence of cases emerging in countries such as Australia and the United States, firms are turning cautious, said Terence Fan, Assistant Prof (strategic management) at Singapore Management University. "I think (companies) are trying to hunker down and lower the burn rate as much as possible (in the) hope that they will have enough cash to outlast this crisis," said Prof Fan. "We may see even more pain if this drags on or if the uncertainty continues." Some companies may go the route of salary cuts instead of outright lay-offs or a combination of the two to mitigate the fall-out, he added. Janesh Janardhanan, senior director (aerospace & defense), at Frost & Sullivan, said companies have to pull off a balancing act of shedding workforce and rationalising costs to match current revenues, while trying to maintain their pool of skilled workers, such as those in manufacturing and maintenance, repair and overhaul (MRO). "Depending on how long the whole situation continues, there could be further adjustments," said Mr Janardhanan, adding however, that a vaccine could help revive sentiment and deliver a quicker rebound. While the crisis has been a major setback for aerospace in Singapore, Mr Janardhanan suggested the Republic may be better-positioned to weather the storm than the global aerospace industry. Pointing out that Singapore has in the past catered adeptly to industry needs, he said: "Singapore's great strength has always been the speed and efficiency at which it responds." Prof Fan said companies should be creative and consider deploying their talent in different or adjacent industries. "If they're (aerospace) engineers, think of them as engineers. We need to think about capabilities." Where investments might be required at the company level, state support in the form of targeted initiatives could help, he added. P&W's announcement on Monday came days after NTUC and three other unions publicly censured a separate round of "unfair" layoffs that affected more than a hundred workers at Eagle Services Asia, P&W's majority-owned joint venture with SIA Engineering. The under-20 per cent figure disclosed on Monday includes Eagle's axed staff. Eagle had prematurely told 144 employees on July 22 and 24 that they may be retrenched, even though negotiations were still ongoing with the Air Transport Executive Staff Union, the SIA Engineering Company Engineers and Executives Union, and the Singapore Airlines Staff Union. Eagle employs about 800 workers. On Monday, P&W said its companies had notified SISEU in early July of their intention to carry out a retrenchment exercise. Since then, the union has been working closely with the group, said Sylvia Choo, SISEU executive secretary. Overall, the latest exercise was carried out "smoothly", Ms Choo told BT. The union and the companies have together ensured that the entire process was done in a fair and transparent manner, and that affected employees are treated with dignity and respect, she added. SISEU and the National Trades Union Congress' (NTUC) Employment and Employability Institute will arrange for those affected to attend job fairs and employability workshops. SISEU had asked the firms to provide retrenched staff with a one-off training grant, on top of the retrenchment packages. P&W will continue to support course-related expenses for all affected staff on its Employee Scholar Programme for 12 months after they leave. Those affected will get paid NTUC union memberships till the end of this year if they are union members, so that they can continue to access membership benefits such as bursary awards, financial relief, insurance coverage as well as personal development and training assistance. P&W said it resorted to layoffs after it had implemented other cost-saving measures such as temporary pay cuts and shorter work weeks, cancellation of merit increases, hiring freezes and discretionary spending cuts.
Hot stock: Keppel sheds over 4% in early trade on uncertainty over Temasek offer - Business Times
SHARES of Keppel Corp tumbled in early trade on Monday, amid a broad market decline on the Singapore bourse.
SHARES of Keppel Corp tumbled in early trade on Monday, amid a broad market decline on the Singapore bourse. As at 9.04am, Keppel was down 4.6 per cent or S$0.25 to S$5.15, with some 963,000 shares traded. By 11.59am, the counter recovered slightly to trade at S$5.19, down S$0.21 or 3.9 per cent with almost 4.7 million shares changing hands. Over the weekend, Morgan Stanley Asia (Singapore) had said on behalf of Temasek's wholly-owned subsidiary Kyanite Investment that the latter will decide by end-August whether to invoke the material adverse change (MAC) clause in its partial offer for Keppel. The conglomerate last Thursday posted a record quarterly net loss of S$697.6 million for the second quarter ended June 30, dragged by a massive S$919 million impairment, breaching certain conditions for the offer. Under the MAC, Keppel's profit after tax must not fall by more than 20 per cent or about S$557 million over the cumulative four quarters from Q3 2019. Stay updated with BT newsletters Given the MAC non-fulfillment, Temasek now has three options: waive the breach and continue with the offer at the S$7.35 per share price, invoke the MAC clause and walk away from the deal entirely, or lower the offer price with the approval of the Security Industry Council. If completed, the S$4 billion pre-conditional partial offer would raise the state investment firm's stake in the conglomerate to 51 per cent. Analysts have maintained their "buy" or "add" recommendations on Keppel, although they reduced their target prices on the stock. CGS-CIMB slashed its target price to S$6.46, from S$7.48 previously, while keeping its "add" rating. Analyst Lim Siew Khee wrote on Friday: "We believe the current share price has factored in some risk of deal cancellation." If Temasek walks away from the deal, Keppel's share price could react in a shock and touch its previous trough of 0.82 times price to book value (P/BV) in early 2016 during last oil crisis, or S$4.88, Ms Lim added. Meanwhile, DBS Group Research analyst Ho Pei Hwa on Monday pointed out that there is now uncertainty regarding Temasek's partial offer. The validity of the offer price of S$7.35 per share (including the S$0.15 dividend declared after the proposal date) remains unclear, as Temasek will decide whether to waive the MAC non-fulfillment by Aug 31, Ms Ho wrote. Assuming a successful tender of about 39 per cent of Keppel shares, the partial divestment gains could lower the cost per share by about S$0.70 at the current share price, she said. With Keppel's latest results, the 12-month trailing profit after tax now stands at a loss of S$165 million and will require S$887 million in profit after tax in Q3 2020 in order to meet the MAC clause. "This seems rather unrealistic, given the average quarterly profit of S$200 million over the past four years," Ms Ho added. DBS, which has a "buy" call on the stock, revised its 12-month price target to S$6.40, down from S$6.80 previously. The lower target price also takes into account the "whopping" second-quarter impairment of S$919 million largely for the offshore and marine (O&M) segment, according to the research team. "The stock has been beaten down since the emergence of impairment news, trading 7.5 per cent below the pre-offer share price (S$5.84), which we believe has discounted the partial offer premium and factored in a challenging outlook. Valuation is undemanding at 0.9 times P/BV, which is about one standard deviation below the mean," Ms Ho said. In another research note on Monday, UOB Kay Hian said it remained "reasonably confident" that Temasek will continue with the offer, albeit likely at a lower offer price. This is considering that Keppel's price to net asset value (P/NAV) ratio was 1.3 times at the end of June 2020, which is higher than the 1.2 times at the end of September 2019 when the initial partial offer was announced, wrote UOB Kay Hian analyst Adrian Loh. He noted that the extraordinary general meetings for Sembcorp Industries and Sembcorp Marine's proposed rights issue and demerger will take place on Aug 11. Should these two companies' shareholders vote for the demerger, the likelihood of Temasek going forward with the Keppel partial offer will be "much higher", in the brokerage's view, Mr Loh added. "At the end of the day, the game plan to create a single Singapore-based O&M company to compete with the likes of the Korean or Chinese O&M behemoths makes economic sense, and is better carried out during a cycle trough rather than mid or peak cycle," he said. UOB Kay Hian lowered its target price on Keppel to S$7.10, from S$7.15 previously, while maintaining its "buy" rating. Echoing similar views, Joel Ng, research head at investment service firm KGI Securities, told The Business Times on Monday: "We still believe that Temasek will drive the consolidation of Singapore's O&M sector, and that the deal will likely go through." This comes as the global O&M industry is undergoing significant structural shifts, exacerbated by the Covid-19 pandemic. "Furthermore, cost reductions in the O&M sector are limited this time around, given that most of the efficiency gains occurred in 2015-2018. Therefore, there is no choice but to consolidate and lay the proper groundwork to capitalise on long-term industry trends," Mr Ng said.