Singapore Daily Bulletin – 08/10/12
Shares Investment
Global Risks Flag Danger Of Entrenched Economic Weakness
Apart from the wide affirmation that Singapore have entered into a “technical” recession, pending only the gross domestic product data to be released on Friday to confirm it, more weaknesses could lie ahead for the real economy and a third consecutive quarter of contraction cannot be ruled out. Most economists are pencilling in a two-quarter long technical recession, but will not rule out a third contraction over the October to December period. Many observers have said that if the US Congress does not agree on a deal to avert the “fiscal cliff” combo of steep tax increases and government spending cuts scheduled to kick in January 2013, the US economy could fall back into recession.
Amid Europe’s continued debt woes, there are also concerns over whether and how the European Central Bank’s bond-buying programme will work. China also plays a crucial role to Singapore’s performance in 4Q12 and a deferring of large stimulus in the nation due to leadership transition diminishes one potential source of growth for the current quarter.
Significance: Should economic conditions deteriorate, the Singapore government has ample fiscal scope to act quickly. Furthermore, it is consensus view that the Monetary Authority of Singapore will likely ease policy this Friday, by slowing the appreciation pace of the Singapore dollar as slowing growth will keep inflationary pressures in check.
Olam Expands Africa Presence Through Acacia Investments
Olam International, a leading global, integrated supply chain manager and processor of agricultural products and food ingredients, announced on 5 October 2012 that it has acquired 50 percent of shares and voting rights in Acacia Investments (AI) for a total consideration of US$35 million. Al is a business group based in the United Arab Emirates with a significant presence in edible oil refining and distribution in East Africa. Ranveer Chauhan, Olam’s managing director and global head of palm explained the benefits of the joint venture: “Al has developed a strong brand franchise and deep knowledge of the local edible oil refining industry in East Africa. Olam on the other hand offers a strong distribution network. More importantly, we both share the same ambition of building a leading market position in palm oil refining and distribution in the region and we look forward to working closely with them in this partnership.”
Significance: This downstream investment exemplifies Olam’s commitment and strength in the palm oil business. The joint venture will benefit it through increased regional presence in the African continent and allows it to participate in the downstream process, potentially increasing margins.
Sembcorp Marine Secures A Repeat Order
Sembcorp Marine’s subsidiary, Jurong Shipyard has signed a letter of intent to build a semi-submersible accommodation rig for repeat customer Prosafe AS. The contract is one of two options granted by Sembcorp Marine to Prosafe last December when it ordered a US$291.6 million accommodation rig, the Safe Boreas. Prosafe’s new rig with Jurong Shipyard will be ready for operation in the North Sea in 2015. Analysts estimate the latest contract value to be about US$295 million, slightly higher than Safe Boreas’ contract.
With that, Sembcorp Marine’s order haul for 2012 could be lifted to about $9.5 billion as its order book for 2012 swells to a record level. As part of the contract, Jurong Shipyard was awarded two additional options for newbuild rigs, so Prosafe has altogether three option units with Sembcorp Marine.
Significance: Buoyed by about US$7 billion in orders for Brazil oil giant Petrobras, analyst expects Non-Brazilian orders to catch up towards the year-end. In addition, they expect the Prosafe rig to yield higher profit margins because it is a repeat project and Prosafe to exercise all three vested options.
Shares Investment
Global Risks Flag Danger Of Entrenched Economic Weakness
Apart from the wide affirmation that Singapore have entered into a “technical” recession, pending only the gross domestic product data to be released on Friday to confirm it, more weaknesses could lie ahead for the real economy and a third consecutive quarter of contraction cannot be ruled out. Most economists are pencilling in a two-quarter long technical recession, but will not rule out a third contraction over the October to December period. Many observers have said that if the US Congress does not agree on a deal to avert the “fiscal cliff” combo of steep tax increases and government spending cuts scheduled to kick in January 2013, the US economy could fall back into recession.
Amid Europe’s continued debt woes, there are also concerns over whether and how the European Central Bank’s bond-buying programme will work. China also plays a crucial role to Singapore’s performance in 4Q12 and a deferring of large stimulus in the nation due to leadership transition diminishes one potential source of growth for the current quarter.
Significance: Should economic conditions deteriorate, the Singapore government has ample fiscal scope to act quickly. Furthermore, it is consensus view that the Monetary Authority of Singapore will likely ease policy this Friday, by slowing the appreciation pace of the Singapore dollar as slowing growth will keep inflationary pressures in check.
Olam Expands Africa Presence Through Acacia Investments
Olam International, a leading global, integrated supply chain manager and processor of agricultural products and food ingredients, announced on 5 October 2012 that it has acquired 50 percent of shares and voting rights in Acacia Investments (AI) for a total consideration of US$35 million. Al is a business group based in the United Arab Emirates with a significant presence in edible oil refining and distribution in East Africa. Ranveer Chauhan, Olam’s managing director and global head of palm explained the benefits of the joint venture: “Al has developed a strong brand franchise and deep knowledge of the local edible oil refining industry in East Africa. Olam on the other hand offers a strong distribution network. More importantly, we both share the same ambition of building a leading market position in palm oil refining and distribution in the region and we look forward to working closely with them in this partnership.”
Significance: This downstream investment exemplifies Olam’s commitment and strength in the palm oil business. The joint venture will benefit it through increased regional presence in the African continent and allows it to participate in the downstream process, potentially increasing margins.
Sembcorp Marine Secures A Repeat Order
Sembcorp Marine’s subsidiary, Jurong Shipyard has signed a letter of intent to build a semi-submersible accommodation rig for repeat customer Prosafe AS. The contract is one of two options granted by Sembcorp Marine to Prosafe last December when it ordered a US$291.6 million accommodation rig, the Safe Boreas. Prosafe’s new rig with Jurong Shipyard will be ready for operation in the North Sea in 2015. Analysts estimate the latest contract value to be about US$295 million, slightly higher than Safe Boreas’ contract.
With that, Sembcorp Marine’s order haul for 2012 could be lifted to about $9.5 billion as its order book for 2012 swells to a record level. As part of the contract, Jurong Shipyard was awarded two additional options for newbuild rigs, so Prosafe has altogether three option units with Sembcorp Marine.
Significance: Buoyed by about US$7 billion in orders for Brazil oil giant Petrobras, analyst expects Non-Brazilian orders to catch up towards the year-end. In addition, they expect the Prosafe rig to yield higher profit margins because it is a repeat project and Prosafe to exercise all three vested options.
