The Top Corporations of Singapore

How Are They Faring?

Despite a year faced with challenging global issues such as rising oil prices, US sub-prime mortgage crisis, inflationary pressure and currency volatilities, Singapore’s economy grew by 7.7 per cent in 2007.

A close-up on the annual Singapore 1000 (S1000) and SME500 Ranking Exercise conducted by DP Information Group saw higher absolute turnover and profit reported by the S1000 companies and SME500 companies.

Leading this year’s S1000 Companies by Turnover Rank are the Construction, Communication / Transport & Storage, Finance and Hotels / Food Establishments sectors which registered at least 20.0% growth in their absolute turnover.

The Construction sector, which recorded negative growth in the previous year, powered ahead with an impressive 51.3% jump in absolute turnover. In fact, the number of construction companies ranked this year has leapfrog from 26 a year earlier, to the current 32, among which 31 of them are profit making.

Despite a 2.1% contraction in turnover growth registered by companies ranked by Turnover from the Property sector, 90 companies from the Property sector ranked this year accounted for 9.9% of the total absolute net profit. A total of 11 companies made to the top 100 for this year’s ranking exercise.

Mapletree Investments Pte Ltd outshined the rest with an impressive jump from the 90th position to the 17th position. The surge in net profit is attributable to the net revaluation gain on investment properties, which amounted to $1,184 million.

Though the percentage growth of absolute turnover reported by this year’s SME500 companies may not be as significant as the S1000 companies, the increment at 3.3% is a remarkable growth from the 0.04% a year earlier.

SMEs in the Property sector have recovered from the plunge in the previous year, reporting 14.1% increase in absolute turnover to $364.7 million in FY07. Besides the Property sector, both the Finance and Wholesale sectors have also rebounded with 17.0% and 6.3% growth respectively. The improvement from the Finance sector is driven primarily by Investment/ Stockbroking SMEs, which accounted for 74.9% of the total absolute turnover reported by this sector.

Following the introduction of ranking of companies by Net Profit in 2005, the annual Singapore 1000 (S1000) and SME500 Ranking Exercise will now also recognize companies with strong Return on Equity (ROE).

The ROE, which measures a company’s efficiency at generating profits from every dollar of net assets, takes into account the retained earnings from previous years, and assesses the effectiveness of the capital reinvested. The ROE serves as a gauge of the management’s fiscal adeptness in growing their companies.

Being profit-driven, the ranking of companies by ROE is an alternative platform to recognize companies, who may not be generating high turnover and net profit, but are reinvesting their capital most effectively.

The S1000 and SME500 Ranking by ROE see the top 1000 companies reporting a generally higher ROE than the 500 SMEs.

Of the 259 Public Listed Companies (PLCs) that made it to the Top 1000 ranking by Net Profit, close to 70% are ranked in the S1000 companies by ROE.

Starhub Limited, which reported a 62.68% jump in net profit is one of the best performing PLC in the S1000 ranking by ROE. The strong profitability was driven primarily by the steady increase in turnover and more efficient operation. On a significant note, despite the entry of new pay TV providers, which ended the Company’s 10 years of sole provider status in 2006, its Cable TV business saw a 9% rise in customer base, becoming profitable for the first time in 2006.

SME500 Companies from the Wholesale sector dominated the list of SME500 companies ranked by ROE, with 185 SMEs recording a total absolute profit of $147.1 million and absolute shareholder’s funds amounting to $560.3 million.

On a significant note, among the 500 SMEs ranked by ROE, 422 of these companies are repeat winners from the SME500 Ranking by Net Profit. 4 of the 5 ranked SMEs with net profit exceeding $10 million were among the top 50 in the SME500 ranking by ROE.

Superworld Electronics (S) Pte Ltd, ranked 39th in SME500 by Net Profit, was 4th in the SME500 ranking by ROE. The Company has been registering healthy growth in its profitability and declaring dividends pay-out in the past few years.

Since its inception in 1987, S1000 together with SME500 ranking have served effectively as the barometer of Singapore’s economy. While the Singapore economy has seen a healthy 7.5% growth in the year 2007, 2008 is set to be a challenging year for large and small companies alike. Increasing operating costs, especially in face of rising oil prices and weakening consumer sentiments and spending in US as a result of the sub-prime mortgage crisis, are likely to put pressure on most companies’ margins.

Nonetheless, 2008 is not without its silver linings. Surging oil prices is likely to drive oil exploration efforts, further spurring demand for oil-rigs and rig-conversion projects. In addition, regional growth is set to support the Services sector. Singapore’s tourism-related industries will benefit from continued strong inflows of tourists and big-scale events in 2008, including the Singapore Formula One (F1) Grand Prix in September.