Singapore Business Review by Charlton Media Group

Display to 31 January 2014 S$5.90

Daily news at www.sbr.com.sg

14 InVESTMENT IDEAS FOR 2014 winning picks for the year of the horse

Asian private equityrebounds where didthe consumer go? BIG DATA, BIG PROBLEMS

rentsto fall as expats exit

MICA(P) 244/07/2011 KDM No: PPS1645/3/2008

as goes hong kong, so goes singapore?

2 SINGAPORE BUSINESS REVIEW | JANUARY 2014

SINGAPORE BUSINESS REVIEW | JANUARY 2013 51

FROM THE EDITOR Dear readers,

Publisher & EDITOR-IN-CHIEF Tim Charlton ASSOCIATE PUBLISHER Laarni Salazar-Navida

Last year, we brought you investment ideas with the goal of leading you to more informed investment decisions for the year of the dragon. Now for the year 2014, we explore 14 promising investment ideas that could help you pick the right horse.

Art Director Jonn Martin Herman Editorial Assistant Queenie Chan Editorial Assistant Alex Wong ADVERTISING CONTACTS Laarni Salazar-Navida lanie@charltonmediamail.com

In this issue, we also present two sets of rankings - the top 25 accounting firms and the top 15 engineering firms in Singapore. KPMG once again snagged the top spot in the accounting industry while Surbana International Consultants grabbed the first rank in the engineering industry.

ADMINISTRATION Lovelyn Labrador accounts@charltonmediamail.com Advertising advertising@charltonmediamail.com Editorial editorial@charltonmediamail.com

SINGAPORE Charlton Media Group #06-09 E, Maxwell House 20 Maxwell Road Singapore 069113

Our channel checks with analysts also revealed that new laws will make it harder for companies to employ expats on Employment passes if the salary is under $12,000 per month. Rents in mid range apartment levels are then expected to be acutely hit.

+65 62237660

HONG KONG Charlton Media Group 19/F, Yat Chau Building, 262 Des Voeux Road Central Hong Kong. +852 3972 7166 www.charltonmedia.com

Start flipping the pages for more in-depth features. Enjoy!

Printing Times Printers Private Limited 16 Tuas Ave 5 Singapore 639340 www.timesprinters.com a member of Times Publishing Limited

Can we help?

Tim Charlton Singapore Business Review is available at the airport lounges or onboard the following airlines:

Editorial Enquiries If you have a story idea or just a press release please Email: sbr@charltonmedia.com and our news editor will read it. For a personal message to the editor put the word “Tim” in the subject line. Media Partnerships Please Email: sbr@charltonmedia.com and put “partnership” on the subject line and it will forward to the right person. Subscriptions Email: subscriptions@charltonmedia.com Singapore Business Review is published by Charlton Media Group. All editorial is copyright and may not be reproduced without consent. Contributions are invited but copies of all work should be kept as Singapore Business Review can accept no responsibility for loss. We will however take the gains. Sold on newstands in Singapore, Malaysia, Hong Kong, London and New York *If you’re reading the small print you may be missing the big picture    

Singapore and Hong Kong residential property may well be a tale of two cities, but in this case home prices are telling the same story. If the 93% correlation between the two cities holds then what happens to Hong Kong residential property prices should also happen to Singapore. And the outlook for both markets is as ugly as a Dickensian character. Good thing the office market shows no signs of a slowdown. Investors may want to take chances in that segment.

24,700 Circulation

Singapore Business Review is available at the following clubs and hotels: American Club Hollandse Club Laguna National Orchid Country Club Raffles Country Club Raffles Town Club RSYC Seletar Club Sentosa Golf Club Singapore Cricket Club Singapore Island Country Club Swiss Club The Tanglin Club The China Club The Legends Fort Canning Park The Pines Club Tower Club Singapore Fullerton Hotel Grand Plaza Park

Royal Hotel Inter-Continental Le Meridien Orchard New Park Hotel Pan Pacific Raffles Hotel The Hilton The Regent Singapore The Ritz Carlton The Swiss Hotel Stamford Traders Hotel Singapore Darby Park And to 16 serviced residences

SINGAPORE BUSINESS REVIEW | JANUARY 2014 3

CONTENTS

insight asian private 22 FInancial equity rebounds

REPORT 40 THEMATIC property market

STORY 26 CoVER 14 investment ideas for 2014

headed for a glut

FIRST 10 Never say sorry

FIRST 14 TripAdvisor Singapore

10 As goes Hong Kong,

so goes Singapore?

REGULAR

detours from the ordinary

16 Rents to fall as expats exit

11 Office property shows no

20 Find out what is really derailing

signs of a slowdown

11 The Chartist: SHOULD SINGAPORE

14 Meet the man behind airport pay-in

lounge concept in Hong Kong

Published Bi-monthly on the Second week of the Month by Charlton Media Group #06-09 E, Maxwell House 20 Maxwell Road

4 SINGAPORE BUSINESS REVIEW | JANUARY 2014

50 Dining Feature

SMRTâ&#x20AC;&#x2122;s track to profit

ANALYSIS

BRACE ITSELF FOR GHOST TOWNS?

12 Where did the consumer go?

34 Legal Briefing 36 CMO Briefing 38 CIO Briefing

24 Singapore veers toward cruise

tourism potential

Singapore aims to maintain its lead as top home-port choice and hopes to receive 1.5 million passengers by 2016

For the latest business news from Singapore visit the website

www.sbr.com.sg

STACK ST BALMAIN EAST SYDNEY AUSTRALIA 5

FOR SALE A secluded setting within the tightly held St Marys Mews and glorious northerly views across to Ballast Point, create the perfect combination of a vibrant lifestyle location with intense privacy once you’re home. Featuring elegant floodlit interiors that open around a sandstone paved pool area this timeless home has an extremely generous floor plan that offers a myriad of options for easy family living. Step out to great cafes, ferries, restaurants and city buses.

• • • • • • • • • •

3.5

Spacious open plan formal lounge & dining area Large family area adjoins gourmet gas kitchen Parquetry flooring, ducted air-con, ceiling fans Wet bar, cellar, masses of internal storage th/out Guest bedroom with ensuite DLUG with internal access 4 x upper bedrooms, two with stunning water views Deluxe master suite, upper level casual living Private and picturesque manicured pool area Exclusive gated street in Balmain East’s best locale

PRICE Offers Over $4,200,000 AUD CONTACT Joan Smith +61 2 408 609 395 EMAIL joaneastend@bigpond.com VIEW By Appointment WEBSITE http://www.domain.com.au/Property/For-Sale/House/NSW/Balmain-East/?adid=2010847126

News from sbr.com.sg Daily news from Singapore most read

RESIDENTIAL PROPERTY

Why home prices won’t correct excessively next year According to OCBC, one significant headwind for the residential sector lies in the large physical supply expected over FY14-16. Including HDB, DBSS and EC completions, we anticipate that 50.0k, 49.7k and 73.6k homes will come into the physical supply in FY14, FY15 and FY16, respectively. Assuming a 6m population target by 2020, they forecast average population growth at ~86k individuals.

MARKETS & INVESTING

RESIDENTIAL PROPERTY

Hold the line: SGX seeks MIA SingTel shareholders Dividend checks awaiting missing investors. According to a release, Singapore Exchange wants to locate 89,000 investors who own $68.3 million in unclaimed shares and dividends. These unclaimed assets comprise $14.6 million of SingTel shares and dividends belonging to investors without Central Depository accounts. The 15,000 individuals who own these shares bought them at $2.00 each.

You won’t believe how much property taxes will go down in 2014 95% of owner-occupied homes to benefit. According to a release, most owner-occupied homes will pay lower property tax bills next year, as a result of the Progressive Property Tax Rates announced in Budget 2013. All owner-occupied HDB flats and three quarters of owneroccupied private homes will pay lower property tax in 2014. In total, 95% of owner-occupied homes will see lower property tax bills.

What Singaporeans must do to boost personal brand on LinkedIn BY CHRIS REED Whether you like it or not it’s how you are perceived and just like a corporate brand it’s made up of various brand attributes and values, some of which you may not be aware of and some of which you may not like. But you do have a brand. Everybody does.

Tapping the future of Singaporean football BY LUKA LALIC Time would be better spent asking: “how can we develop an effective youth (COE) league that can produce ready-to-play senior players?”; “how do we attract the best foreign youth coaches for the money available?”, and “how can we persuade schools to co-operate with external sports teams?”

FROM THE BLOG 3 things Singaporeans must consider when investing in overseas properties BY SEAN SEAH As I was flipping through the papers, I noticed there seems to be abundance of investment. Personally, I am always open to taking a look at investment opportunities but to all the buyers, we need to first arm ourselves with ideas.

6 SINGAPORE BUSINESS REVIEW | JANUARY 2014

Living up to the Tradition. Started off with a humble beginning 100 years ago in Swiss canton of Aargau, Holcim has grown into a global leader in building materials industry with footprints on over 70 countries and continues with the vision to provide foundations for society's future. Placing sustainability and innovation at the core of the company strategy, we have been partnering customers and delivering value to stakeholders in our commitment to sustainable construction by further developing resource- and energy-efficient solutions. This is Holcimâ&#x20AC;&#x2122;s aim in Singapore with the recently launched first Centre of Excellence in Asia: to build more with less.

100 years of Strength. Performance. Passion.

Holcim (Singapore) Pte Ltd 3A International Business Park #07-01/05 Icon @ IBP Tower A Singapore 609935 Phone +65 6265 1933 Fax +65 6268 4027 info-sgp@holcim.com www.holcim.com.sg

Agenda PEOPLE | PLACES | SERVICES | OPPORTUNITIES

SERVICES

XimLoc XimLoc is a revolutionary locating technology, developed by W-Locate. It uses information and signals that are available from the GSM (2G/3G/4G) networks to compute positions. It works in both indoor and outdoor environment when network coverage is available, without the limitations of GPS. Utilising SMS/USSD, XimLoc uses an applet (resides in a SIM card) to send information to server, which will then calculate the most probable location, based on our Patent-Pending algorithm. It has an intuitive dashboard with full functionalities for complete control. For more information: please visit http:// www.w-locate.com/ximloc.html Video link: http://www.youtube.com/ watch?v=uTDQ_TQj5h4

IFS IFS is a leading global enterprise software vendor to industries where asset management among others. More than 2,100 companies in over 60 countries rely on IFS Applications™, a componentbased suite for product & asset lifecycle management that can be configured for Enterprise Resource Planning (ERP), Enterprise Asset Management, project-based ERP, and field service management. IFS Applications has been evolving to meet changing customer needs since 1983 and is configured for agility, usability, and low total cost of ownership. 8 SINGAPORE BUSINESS REVIEW | JANUARY 2014

JURONG

PLACES

VINEYARD Located in the horticultural gem Hortpark, Vineyard possesses a quiet elegance perfect for a corporate lunch or a romantic dinner. The brand new menu launched this November marries the techniques of the French with the flavours from the east, providing a truly delightful dining experience. Interesting dishes to look out for include the Tea-smoked Tomato Consommé, Seared King Scallops, Pumpkin Risotto, and the Malabar Snapper. Pair your meal with a wide selection of old or new world wine labels or complete it with a Bailey’s Irish Cream Soufflé or the chef’s selection of fine cheeses. Vineyard @ HortPark 33 Hyderabad Road #02-02 Singapore 119578 For reservations, please call 6479 7977.

visit

charltonmedia.com

FOR MORE INFORMATION on EVENTS AND ADVERTISING

JURONG Consultants is the consultancy arm of JURONG International, a multidisciplinary group which provides a strategic suite of design and build, consultancy, and facilities management services to create distinctive buildings and community environments for public and private sector clients throughout Asia and beyond. We currently have representative offices across 10 cities in Singapore, China, India and the Middle East. 8 Jurong Town Hall Road #08-00 The JTC Summit Singapore 609434 Tel : (65) 6267 8333 Fax : (65) 6267 8182 Email: askjc@jurong.com Website:www.juronginternational.com

SERVICES

Rankine&Hill Since 1955, Rankine&Hill has established itself as a significant player in the engineering industry. Our space-saving and environmentally sensitive designs are installed in business establishments, institutional complexes, residential developments, places of worship and infrastructural projects throughout Asia. With the full complement of mechanical, electrical, fire, civil and structural expertise, Rankine&Hill offers a 360° solution for all your engineering needs. We are committed to the quality of our projects and the success of our clients. To this end, we aspire to be business collaborators who offer efficient, convenient and quality service.

FIRST Credit Suisse has a slightly more optimistic view on Singapore residential, noting that despite a 31% drop in new private condo sales in the nine months to September, prices held up. Yvonne Voon, an analyst with the firm, noted that mass market (OCR) prices continued to be resilient, supported by attractive launches and genuine demand. “Although it is increasingly becoming apparent that projects with a better location and more attractive pricing at less than S$1,500/sq ft levels are selling better,” she adds.

NEVER SAY SORRY

Sorry seems to be the hardest word especially for Asian business leaders who fear of looking incompetent in front of their subordinates. The Forum Corporation’s Leadership Pulse Survey recently revealed that trust in Asian leaders is slowly diminishing in the workplace. One in five employees and two in five leaders believe that trust in leadership is lower today as compared to the past. Cynthia Stuckey, Managing Director of Forum in Asia-Pacific, says that a decline in this critical element of the employee-manager relationship can be extremely detrimental as this directly reduces employee engagement and impacts morale and workforce productivity. “Employee trust in leadership is more important now than ever before as organisations grapple with mounting competitive, internal and external pressures.” Asian bosses fear losing face While leaders in Asia say they admit to (97.2%) and apologize (99%) for their mistakes, employees do not agree. In fact, five out of ten employees (50%) say that their leaders rarely or never apologize. The overwhelming fear of looking incompetent or weak is cited as the main reason why leaders in Asia do not shoulder up for their mistakes. Sixty-seven percent of leaders believe saying sorry will make them look incompetent, while another 25% believe they would look weak to their employees. According to Stuckey, the concept of “face” is highly important in Asia and very influential in leadership. ‘Losing face’ by demonstrating weakness and incompetence is considered to diminish the stature of the leaders in the eyes of his or her subordinates. By not owning up to their mistakes, leaders risk losing their employees’ trust. On the other hand, there is a strong agreement between leaders and employees around the importance of trust in leadership (96.5%). “Building and strengthening trust in leadership is a multifaceted process that requires leaders to truly understand what their employees expect of them,” says Stuckey.

10 SINGAPORE BUSINESS REVIEW | JANUARY 2014

A tale of two cities

As goes Hong Kong, so goes Singapore?

ingapore and Hong Kong residential property may well be a tale of two cities, but in this case home prices are telling the same story. Both Singapore’s URA Property Price Index (PPI) and Hong Kong’s Centa-City Leading (CCL) Index have demonstrated a 93% correlation since 1998 according to Barclays property analyst Paul Louie. If the connection holds then what happens to Hong Kong residential property prices should also happen to Singapore. And the outlook for both markets is as ugly as a Dickensian character. HK-SG correlation Mr Louie expects that Hong Kong residential prices will fall by 30% by 2015 and Singapore by 20% over the same time frame. Just why these markets should be so correlated is not entirely clear. Both markets are different in terms of supply and population growth and home ownership, where HK is at 70% and Singapore at 90%. “Hong Kong’s private home prices have risen 111% since the 4Q98 bottom, while Singapore’s have risen at a slower pace of 62%. In terms of affordability, Hong Kong’s c57% mortgage-to-income ratio is also higher than Singapore’s c33% level.

Hong Kong’s private home prices have risen 111% since the 4Q98 bottom, while Singapore’s have risen at a slower pace of 62%.

Healthy household balance sheets Interestingly, over the past 40 years, prices have never corrected more than 5% except in periods of “shocks”. But it may be the strength of household balance sheets that will do the most to support Singapore housing prices. A proprietary property survey conducted by Credit Suisse found that household balance sheet remains healthy with only 49% of the respondents to the survey having mortgage liabilities and 83% of those are for self-occupied properties. But investment appetite has been impacted after four further rounds of tightening since our the July 2012 survey with 46% respondents indicating that they will not be buying residential property anytime soon. And in bad news for luxury developers, buyer appetite is still skewed for properties less than S$1 million.

SG-HK private home prices: 93% correlation since 1998, but HK’s has risen 111% since its recent though in 4Q08, while SG risen 62% 2Q09

Note: Both property indices are rebased to 100 in 4Q98 PPI: Property Price Index, only for private residential properties in Singapore Source: CCL, URA, Barclays Research

FIRST

Singapore is in its fourth straight year of a net increase in office demand.

Take your chances with office property

Office property shows no signs of a slowdown

nvestors concerned about the risks in falling residential property prices may prefer to take their chances with office property, which is showing no signs of a slowdown. Prime office rents may rise as much 16% through to 2015, reckons Barclays analyst Tricia Song, who notes that there is a below long term average of new office space completions averaging just 0.85 million sq ft over the next three years. In fact Singapore is in its fourth straight year of a net increase in office demand, with office occupancy

hovering around the 90% mark. The completion of the massive Asia Square Tower 2 with 1.3m sq ft of space but only a third pre-committed saw a slight decrease in occupancy in Singapore, but there is unlikely to be a reduction in rents. Property firm JLL noted Grade A rents have now climbed above the $10 psf level, whilst the CBD average was $8.84 psf. Another interesting feature in the office market is that the rent differential between grade A and B buildings is just 12%. That is a 16-year low and implies that either Grade

A rents will rise quickly, or Grade B office rents should fall. Credit Suisse analyst Yvonne Voon expects the latter, with downside risk to rents to be more prevalent at fringe CBD and the older central offices due to flight to quality, and sizeable decentralised supply and new business park space. This should be good news for REIT’s with better quality assets such as CCT and K-REIT which are able to maintain rents and are even seeing good improvements for small offices. REIT occupancy Occupancy also appears to be higher for REITs with Super Grade A office space in their portfolio. However there is still the demand equation and Ms Voon warns that “given that the outlook for the office sector is dragged by the sizeable supply outlook versus the relatively slow demand momentum, we maintain with our flattish rent assumptions.”

Grade A office rents have declined 14% since 3Q11, now at 49% below peak

Source: CBRE, Barclays Research

The Chartist: SHOULD SINGAPORE BRACE ITSELF FOR GHOST TOWNS? It seems like homes will be left unoccupied in the next 2 years or so as growth in completed units outpace demand. According to OCBC, there is a large physical supply expected over FY14-16. Including HDB, DBSS and EC completions, they anticipate that 50.0k, 49.7k and 73.6k homes will come into the physical supply in FY14, FY15 and FY16, respectively. They believe that vacancy rates would likely deteriorate from its current 6.1% levels to 6.7% as at end 2014. Moreover, according to Nomura, it also appears to that even the secondary market could deteriorate further in the near term. Estimates suggest over 14,000 units scheduled for completion in 2013F have already been sold by developers. Of these, 52% were sold before 30 August 2010. The potential secondary supply appears significant, especially in relation to the average secondary transactions of just 623 units a month in 9M13.

Potential secondary supply* to increase

*non-landed private housing excluding EC Sources: URA, REALIS, Nomura estimates

Physical completion rate exceeding population growth

Sources: URA, OIR estimates

SINGAPORE BUSINESS REVIEW | JANUARY 2014 11

FIRST

Where did the consumer go?

STARTUP WATCH

Liquidate invoices

here is growing concern that the Singapore consumer and his counterpart the tourist have both stopped spending, and this has shopkeepers worried. 2013 was supposed to be a year of continued spending, but locals kept their wallets well and truly shut. Particularly hard hit were in areas such as sales in the furniture, electronics and apparel categories, which actually declined. Such belt tightening was already foreshadowed in consumer sentiment surveys which showed consumers intended to cut back on discretionary spending. That would have been OK if tourist spending were able to make up the shortfall, but it didn’t. The only exception According to the Singapore Tourism Board, 2013 tourism receipts were forecast to increase 2.2-6.5% YoY. However, the latest figures released by the STB showed that overall tourism receipts fell 6% YoY in 1Q13, compared to a 13% YoY increase in the corresponding period in the previous year. Tourist spending fell across almost all categories including sightseeing, entertainment, accommodation and shopping. The only exception was in the F&B category, showing that more come to eat than shop. Problem is, there may

ApexPeak, co-founded by Gakim Solomons, offers invoicediscounting services to small and medium-sized businesses, allowing these businesses to liquidate their invoices earlier than expected through third party invoice sales. The usual 90-day process can be done within 5 days maximum. ApexPeak raised about SGD 2.3M SGD.

More tourists, less spending

have been an overall increase in tourists but there was a fall in business travellers to Singapore over the same period. If the numbers continue to run the same when they are fully counted sometime in 2014, then 2013 could mark the first year that tourist spending fell since the financial crisis of 2009. Toughest year for retailers OCBC analyst Lim Siyi noted that weaker currencies in neighbouring ASEAN countries such as Indonesia were also a factor in lower tourist spending. Facing both rising costs and falling sales growth, 2014 is shaping up as the toughest one in half a decade for Singapore’s retailers.

Viable 3D printing Facing both rising costs and falling sales growth, 2014 is shaping up as the toughest one in half a decade for Singapore’s retailers.

Singapore Business Review event

Learn helpful tips from Singapore’s best restaurateurs The last installment of SBR’s Eminent Speakers Series for 2013 highlighted the success stories of Singapore’s best multi-restaurateurs. Some of them have opened new restaurants in the last three years while others are seen starting new concepts in the future. More than 50 up and coming restaurant-owners learned from the success stories behind Deliciae Hospitality Management, Creative Eateries Group, and Osvaldo Group of Restaurants as shared by their founders, Olivier Bendel, Anthony Wong, and Osvaldo Forlino. The panelists shared their views on the latest trends and innovations in the food and beverage industry as well as the business scene here and abroad. They discussed the challenges they have overcome and the opportunities in those obstacles that led to their successes. SBR will be organizing four more Eminent Speaker Series in 2014. For more photos from the event, visit sbr.com.sg

12 SINGAPORE BUSINESS REVIEW | JANUARY 2014

Pirate3D aims to make 3D printing affordable at USD $347. According to the company’s Chief Executive “Pirate”, Cap’n Roger, “The consumer 3D printer we are producing is affordable and easy-to-use. This is different from current consumer 3D printers which are more novelty gadgets.” A US$482,000 funding was received through Red Dot Ventures and US$1,438,000 was raised through its Kickstarter campaign.

Physical Dropbox

Vault Dragon, founded by Tseng Ching Tse, offers a physical “Dropbox” that can be managed through web and mobile apps. It charges 45 cents a day for a standard box. Vault Dragon has showed promise, being chosen as one of the Top Ten Best Startups by Joyful Frog Digital Incubator who also serves as the business’ major investor.It currently has 115K total funding.

OCBC Business Banking

Together we can make your business a success From financing new business ideas to overseas growth, you can rely on our partnership to customise winning solutions that help you realise your business ambitions.

ollaboration To find out more, call our Business Banking Commercial Service Centre at (65) 6538 1111 or visit www.ocbc.com

Best SME Banking International Excellence in Retail Financial Services Awards The Asian Banker – 2012

Co. Reg. No.:193200032W

ASEAN SME Bank of the Year Asian Banking and Finance – 2011-2013

Best SME Bank in Singapore Global Banking & Finance Review – 2012, 2013 Alpha Southeast Asia – 2010, 2011, 2013

FIRST

Meet the man behind airport pay-in lounge concept in Hong Kong

ifteen years ago, a bad experience led founder & CEO of Plaza Premium Lounge Management Limited Song Hoi-see to an airport concept that would forever change business travelling. Singapore Business Review recently had the chance to speak with Song Hoi-see, founder and CEO of Plaza Premium Lounge Management. He shared his inspiration in pioneering the airport pay-in lounge concept in Hong Kong over a decade ago. SBR: How did you come up with the idea of an airport pay-in lounge? What was your inspiration? SH: I founded this concept based on my personal bad experience as a business traveller in the old Kai Tak Airport many years ago, when I started my own business leaving my bank job, I travelled on my own expenses (economy class) and I found the airport experience to be very unfriendly and uncomfortable. There was nowhere to fax or charge my old school laptop, moreover, sometimes the airport would be so full that you would struggle to find a seat. At my previous job in an American bank, I had enjoyed corporate privileges including business class travel, I had seen the advantages of efficient travel services, spanning from limousine services to

business centre facilities in the airport lounges. I saw an opportunity in the market, as like myself, 85 percent of travellers fly economy class, in other words they don’t enjoy such comfort and convenience, that’s when I started brainstorming and observing passenger behaviour, and consequently, launched Plaza Premium Lounge, an airport lounge opened to all travellers regardless of airlines or class of travel. I didn’t settle at that, I researched extensively and observed what travellers would want in a lounge facility, and introduced services to exceed the expectations of travellers. SBR: What three goals are you focused on right now? SH: We are actively opening many lounges globally, next year we will increase our network to London Heathrow, Sydney Kingsford, Mumbai, Abu Dhabi among other projects. We are very happy that travellers and airports are recognising the value that we bring to the airport, and we will focus on working with the airports to create premium airport service products, namely airport lounges, day hotels and meet and greet services, to enhance the airport experience for all travellers. My vision is to be the household name for premium airport

Song Hoi-see Founder and CEO Plaza Premium Lounge Management

services worldwide, we have an extensive network and it is my hope that when someone from Hong Kong travels abroad, they know that when they stay at Plaza Premium Lounge, they are well taken care of and at ease when they travel. Also, like I do when I travel internationally, I see Hong Kong brands abroad and feel proud of it. I would like for travellers to know that we are a Hong Kong brand, as this is a good reflection of the entrepreneurship opportunities and environment that Hong Kong presents.

OFFICE WATCH

TripAdvisor Singapore detours from the ordinary The folks in TripAdvisor get to travel a lot and it was scenes from around the world that influenced the design of the new office in Singapore with a world map collage hanging on the pantry wall. Designed by Kyoob-id, the 6,000 sq ft office at PwC building is a true testament of TripAdvisor’s playful environment: eclectic blend of materials, lots of open spaces, and exposed ceilings. In keeping with the travel mood, road directional signages are planted along passageways as wayfinding to various departments and resource areas. At the pantry, a world map collage reminiscent of a travel scrap book is also emblazoned on the wall lined with a row of bar-height chairs and tables. In keeping with the travel mood, road directional signages are planted along passageways as wayfinding to various departments and resource areas. Pillars are also erected with warm-lit lamp posts conjuring walks at the Hyde Park.” Chicken wire framed with a vintage blue acts as a screen divider between departments, too.

14 SINGAPORE BUSINESS REVIEW | JANUARY 2014

General office

Reception

Pantry

Meeting room

co-published Corporate profile

Ethiopian Airlines the first African carrier to fly to SG The Lion City will become the airline’s 78th international destination

or close to seven decades, Ethiopian Airlines has become one of the fastest growing airlines in Africa and one of the continent’s leading carriers excelling in efficiency and operational success. The airline commands the lion share of the pan-African passenger and cargo network operating the youngest and most modern fleet to more than 76 international destinations across five continents. Operating at the forefront of technology, the airline has also become one of Ethiopia’s major industries and a veritable institution in Africa. Their fleet includes ultra-modern and environmentally friendly aircraft such as the Boeing 787, Boeing 777-200LR, Boeing 777-200LR Freighter and Bombardier Q-400 with double cabin. In fact, Ethiopian is the first airline in Africa to own and operate these aircraft. The Addis Ababa Bole international Airport is the major hub for Ethiopian Airlines and one of the largest airports in Africa. This spacious terminal handles all international flights with its 21st century facilities. It is also the busiest airport in East Africa with a capacity of providing a world class passenger and cargo services to more than 6.5 million international and domestic passengers each year. Ethiopian is currently implementing a 15year strategic plan called Vision 2025 that will see it become the leading aviation group in Africa with seven business centers: Ethiopian Domestic and Regional Airline, Ethiopian International Passenger Airline, Ethiopian Cargo, Ethiopian MRO, Ethiopian Aviation Academy, Ethiopian In-flight Catering Services, and Ethiopian Ground Service.

The airline is also a multi-award winning airline registering an average growth of 25% in the past seven years. Recently, Ethiopian won the “African Airline of the Year” and “Best Cabin Crew in Africa” at the opening ceremony of the 9th Travel Market, AKWAAB, meeting in Nigeria at Eko Hotel Convention Centre. Its CEO, Tewolde Gebremariam, was also awarded with the distinction, 2013 Planet Africa Professional Excellence Award last November 2, 2013 during a ceremony held at the International Centre in Toronto, Canada. The first East African carrier to Singapore Singapore is one of the major global aviation hubs and a preferred gateway to Asia and Australia. Recently, the airline has announced that it will extend its wings to Singapore with scheduled three weekly flights. The new flights will be operated with Ethiopian Boeing 767-300 aircraft, with 24 seats in Ethiopian Cloud Nine Business Class and 211 seats in Economy class. Ethiopian flights will serve the growing traffic between Africa and Singapore, and is perfectly timed to give the best possible connectivity options to passengers travelling between most points in Australia/Asia and Africa in partnership with fellow Star member, Singapore Airlines, subject to regulatory approvals. With the start of Ethiopian flights, passengers will be able to enjoy smooth and seamless connection between destinations in Australia such as Sydney and Melbourne, and all the major cities in Africa such as Addis Ababa, Nairobi, Lagos, Accra, Luanda and Johannesburg with minimum layovers. “Singapore is a major and preferred

“People in Asia care greatly about sustainability. They want to know the source of the materials that go into the products they are buying.”

Tewolde Gebremariam CEO, Ethiopian Airlines gateway to Asia and Australia. That is why we have decided to make Singapore our main strategic point of access to the Oceania market and its huge Ethiopian/African Diaspora community by availing excellent connectivity options through our code-share agreement with fellow Star Alliance member, Singapore Airlines,” says Gebremariam. “Our flights to Singapore will also greatly contribute to the strengthening of trade, investment and tourism ties between a booming Africa and a highly developed, innovative and business-friendly Singapore,” he adds. Ethiopian will be the first East African carrier to start services to Singapore, which will become the airline’s 78th international destination. From Singapore to over 45 destinations across Africa, starting 3rd December 2013: Addis Ababa SGD1,472 Nairobi SGD1,436 Johannesburg SGD1,029 Cairo SGD1,531 Lagos SGD1,509 Kilimanjaro SGD1,527 *Above rates are return Economy class and inclusive of all taxes & fuel surcharge and could change due to currency fluctuation. *Valid for travel from 03 December 2013 to 31 March 2014. *Sales and ticketing period: immediate on/ before 31 Jan 2014. For more information or reservations, please contact 65-6538 5515. 133 New Bridge Road, #14-05, Chinatown Point, S059413 SINGAPORE BUSINESS REVIEW | JANUARY 2014 15

FIRST DEAL WATCH

AsiaPhos mines gold in SGX

October was a milestone for Rajah & Tann partner Cheng Yoke Ping when AsiaPhos group became the first mineral resources group listed on the SGX-ST. Along with partner Teo Yi Jing, Ping led the team in acting for UOB as sponsor and underwriter and Asiasons WFG Capital as placement agent in this deal. AsiaPhos launched its IPO of 122m invitation shares priced at S$0.25 each. Postinvitation, AsiaPhos has a market capitalisation of approximately S$200m. Ping’s expertise in mergers and acquisitions with focus on crossborder transactions and corporate finance also boosted the firm’s capability in sealing AsiaPhos deal. “My experience from Singapore legal practice and having lived and worked abroad gives me the edge to better advise clients in the global legal environment in which we operate,” she says.

EP holders to face more difficulties getting approvals

Rents to fall as expats exit

ne big unknown for 2014 and beyond is just how much new employment laws will hit the rental market. The pinch will be particularly acute in the mid range apartment levels where many Singaporeans are investors as new laws will make it harder for companies to employ expats on Employment passes if the salary is under $12,000 per month. Typically these low to mid level expats have a rental allowance of between $2,000 to $4,000 a month, so a reduction in their numbers will make it more difficult for property owners to find tenants at this level.

As tenant pool drops, so does rent Even before the new rules are introduced in 2014, there has been a reduction in the total number of Employment passes, down by 3,000 since 2011 to 172,100 by June 2013. This is not much of fall compared to the rise from just 99,000 in 2007, but what needs to be considered is that each year more properties are developed and bought by investors looking for tenants. If the tenant pool drops, so will the rents. Just how much Employment pass numbers will be curbed by the new rules is unknown, but set against tens of thousands of new apartments coming on to the market and the outlook for rents could be grim. Savills Head of Research Alan Cheong reckons that 16 SINGAPORE BUSINESS REVIEW | JANUARY 2014

the number of overseas nationals in Singapore will decline further, as EP holders will soon face more difficulties in getting approvals on both fresh and renewed applications. Singapore loses popularity Higher living costs and lower perceived job security due to the tightening employment laws are also affecting Singapore’s popularity, with the Expat Explorer Survey 2013 by HSBC showing that Singapore lost its top spot to China and Germany. The private housing market is already showing signs of stress with the vacancy rate of private residential units climbing to 6.1% from 5.6% over the third quarter of 2013. “This reflected a total of 17,459 vacant private homes island-wide, a significant jump of 10.3% QoQ from 15,833 units in Q2/2013,” added Cheong.

ICE takes home Singapore bourse The pinch will be particularly acute in the mid range apartment levels where many Singaporeans are investors.

Vacant units and vacancy rates of private homes, Q1/2010 - Q3/2013

Source: URA, Savills Research & Consultancy

An expert in financial services regulation, David Yeow and partners led Rajah & Tann in advising Financial Technologies (India) Limited and Financial Technologies Singapore Pte. Ltd. on the sale of Singapore Mercantile Exchange to Intercontinental Exchange Group (ICE). The US$150m deal marks a milestone in Asia’s commodity futures trading. In the financial services field, Yeow was also amongst others counsel to the then Singapore International Monetary Exchange in dealing with the fall outs both from the aberrant Nikkei Index Crash on the exchange in the late 1980s and the Baring’s debacle in the mid 1990s.

FIRST NUMBERS

A look at happiness levels in Asia Check out what makes Asians happy

Happiness Index 2013

The Sail @ Marina Bay - a waterfront lifestyle condominium

The 10 most profitable new launched private homes since 2000

aiting for properties to be completed before selling them pays off. Square Foot Research recent findings suggest that new launches are historically largely profitable at the point of completion. Looking at the average capital gain of new projects launched after the year 2000 with resale transactions occurring within a 365-day window before and after completion, out of a total of 581 projects with sufficient data, about 1 in 5 (22.3%) reflected a loss whereas 77.7% reflected a profit. The most profitable is The Sail @ Marina Bay with almost 97% capital gain upon completion in 2008 even in the wake of the collapse of investment bank Lehman Brother. The property, which is a joint venture by City Developments and AIG has an average selling price of $1,873 psf compared to its purchase price of only $965 psf. It was the first residential project to be launched and completed in Marina Bay and stands tallest in Singapore at 245 metres and 70 storey high. The 70-storey Tower 1 was launched in September 2004, followed by the 63-storey Tower 2 a year later. Second in rank is South Bank, a mixeduse development by Kings & Queens Development and with 87.2% capital gain. It’s selling price upon completion in 2006 fetch $1,332 psf on average against purchase price of merely $723psf. South Bank was a re-development of the former Eng Cheong Tower along North Bridge Road. The imposing towers showcase modern aluminium/glass façade and prominent

18 SINGAPORE BUSINESS REVIEW | JANUARY 2014

curved roof features. Third in the list is the upmarket 35-storey Urbana by Keppel Land, which is amongst tallest buildings in River Valley Road. Sellers of Urbana units during TOP year achieved capital gain of 74.19%. The 160unit condominium was purchased for $950 psf on average in 2004 and was sold for $1,653 psf three years after. Each unit has its own private lift lobby and features lofty bay windows for panoramic city views Singapore’s tallest condominium Far East Org’s ICON came in fourth with 70.15% capital gain. Targeted at young, affluent buyer, the selling price of a unit at ICON has gone up to $1,179 psf in 2007 from just $694 psf during 2003 launch. Launched in May, the 46-storey development was also advertised as Singapore’s tallest condominium. Fifth is Sherwood Development’s The Belvedere with 67.9% capital gain. The property located at Mayer Road was sold for $1,321 psf on average from just $785 psf in 2005. MCL Land’s The Metz is ranked sixth with 67.42% capital gain. The 169-unit property located at Devonshire was completed back in 2007. The Metz was followed by Watermark Robertson Quay with a capital gain of 65.8%. This 206-unit freehold condominium was constructed back in 2008 and provides residents starting at 10th floor a good view of the Singapore River. Rounding up the top 10 list of most profitable new launched private homes include; One Amber (65.35%); Caspian (65.30%); and CityLights (64.38%).

What gives you greatest happiness?

Source: Ipsos Q3 2013

EXPERIENCE TRUE MOBILITY. ACCELERATE YOUR EVERYDAY BUSINESS. Complete ERP solutions for your mobile workforce. IFS redefines remote working to give you complete project transparency in real time whatever device you use.

FOR AGILE BUSINESS

MOBILITY.IFSwORLD.COM

FIRST The Analysts’ call

What are SMRT’s silver linings? CIMB- Gary Ng

SMRT’s escalating staff costs detrimental to group margins

Find out what is really derailing SMRT’s track to profit

evenues of Singapore’s multi-modal public transport operator continue to rise, but an unhealthy mix of high operating costs and lack of a fare hike continue to put the company in a losing battle for profitability. CIMB Analyst Gary Ng blames the misalignment to relentlessly high operating costs, which effectively neutralized the effect of a 5.3% year-on-year rise in revenue. According to OSK DMG’s Edison Chen,

Bus operations will likely extend its run of 11 consecutive quarter losses. ballooning staff costs, depreciation and maintenance cost are to blame, and payment of bonuses don’t assist either. A lack of a fare increase adds to the problem, but even a fare hike isn’t enough to increase fare income, says Chen: “Even with an anticipated fare hike, its escalating staff costs may be detrimental to group margins.” Whilst the company’s fare revenue segments (train, LRT, bus) continue to post weak results, its non-fare revenue segments present a glimmer of hope, after recording a 10.9% EBIT growth in 2Q14, says DBS Group Research analyst Andy Sim. The non-fare segments which include rental, advertising, taxi and engineering and others, are growing domestically and overseas. 20 SINGAPORE BUSINESS REVIEW | JANUARY 2014

The transport operator’s rental business benefited from a price increment as well as growth in rental space, owing to improvements done at the Woodlands Xchange station, says OSK DMG. OSK DMG says the company’s advertising division similarly reported a 15% yearon-year EBIT, while taxi operations’ EBIT increased 55.1% to SGD2.1 million due to higher rentals from a newer fleet. However this was offset by lower diesel sales. Higher engineering projects also contribute positively to the non-fare segment. OCBC’s Lim Siyi says that on a segmental basis, bus operations will likely extend its run of 11 consecutive quarter losses, assuming there are no asset impairments. Rail profitability is predicted to be lower as well. “The taxi, rental and advertising segments should stay positive and provide some consolation to SMRT,” Lim adds. In terms of valuation, there is a consensus among analysts that the stock will continue to underperform until the company finds ways to properly align costs with its revenues. Ng confirms: “We believe that SMRT is making inroads with regulators regarding the accounting of asset transfers.” Lim adds that the lower frequency of bad publicity has definitely aided the company, and he believes that the street has already factored in the majority of the negative expectations for FY14 as well as concerns over capex requirements.

The only positives are that the risk of significant dividend cuts is lower now and management is proactive in growing its non-fare business domestically and overseas. We believe the risk of further dividend cuts is now less of a concern given the more robust cash flow structure.

OCBC - Lim Siyi

The free MRT ride scheme introduced on 24 Jun has seen rail ridership figures for July and August exceed 60m rides for the first time in SMRT’s history. The incentive to promote travel to 16 designated MRT stations in the city area before 8am has also aided in the alleviation of a congested rail system during the morning peak periods. SMRT will bear the cost of free travel up to S$5m and the relevant authorities will compensate the company for the remainder. Since the end of August, SMRT’s share price has stabilised between a tight band of 1.29-1.30, which has helped to arrest its slide of 10% following its 1Q14 results.

OSK DMG - Edison Chen

During the quarter, SMRT Corp (MRT)’s revenue increased by 5% year-on-year to SGD296.3m, underpinned by healthy ridership growth in both its rail and bus operations. Its average daily rail ridership grew 3.7% year-on-year to 2.0m/day, while that of its bus service unit increased by 4.0% to 971k/day. MRT’s taxi operation reported a 2QFY14 EBIT of SGD2.1m (+55.1% year-on-year). The stronger performance was due to higher rental from a newer fleet.

FINANCIAL INSIGHT

There is healthy limited partner appetite for Asian funds

PE in Asia rebounds from 2012 beatdown

The first half of 2013 showed a convincing turnaround for private equity.

he private equity market in Asia saw a marked slowdown in 2012, with deal, exit and closed funds values all heading south. But there are signs of strong recovery, with the first half of 2013 showing a convincing turnaround, delivering double-digit growth in buyout and exit deal values. In its 2013 Asia Pacific Equity Report, Bain and Company revealed that global deal value in the region, (including Japan), decreased to $49 billion in 2012, from a previous $61 billion in 2011 - roughly a $12 billion decline. In fact, throughout the Asia Pacific region, it was only Korea that saw an increase in deal value. Japan, Southeast Asia, India, Australia, New Zealand and China, suffered deal value decreases. However Bain points to a few factors believed to have contributed to the overall growth of private equity in 2012. Whilst private equity investors continued to expect high returns from the asset class in

22 SINGAPORE BUSINESS REVIEW | JANUARY 2014

Global deal value in the region, (including Japan), decreased to $49 billion in 2012, from a previous $61 billion in 2011 - roughly a $12 billion decline.

Asia, firms have not been able to deliver these returns, more so because of the increased macroeconomic uncertainty that prevailed during the year. Despite the turndown, mainland China still remains the epicenter for private equity activity, particularly in the countryâ&#x20AC;&#x2122;s real estate sector, which is driven by strong growth for secured loan financing. Competition has also increased, both from additional private equity funds and corporates, while options to drive successful exits dwindled due to initial public offering (IPO) markets experiencing a downturn. Rebound in 1H 2013 Thankfully the first half of 2013 showed some and deal values picked up. According to Mergermarketâ&#x20AC;&#x2122;s H1 2013 Mergers & Acquisitions Trend Report, private equity buyouts in Asia-Pacific (excluding Japan), have so far experienced a buoyant

2Q 2013, with deals values at US$6.5 billion, consisting of 61 deals in 1Q 2013. The 2Q 2013 value also contributed a healthy 12.5% to the total value of global buyouts for that quarter, registering the highest percentage in almost three years since 3Q 2011. Combining the first two quarters led to a 1H 2013 total of $14.8 billion for 111 deals, or 21.6% higher than the $11.4 billion for 110 deals posted the same period last year. Mergermarket identified the $4.5 billion bid to acquire Australia-based Port Botany as the biggest buyout deal of 1H 2013, single-handedly raising the deal value in the Transport sectors by 2,060% and making it the most active sector by value. Not only did private equity firms create more deals in 1H 2013, they were also able to secure more successful exits. The aggregate value of private equity exits in Asia Pacific, (excluding Japan), rose by 33.3% to $11.8 billion from 58 deals, from $8.9 billion from 44 deals during the same period last year. Almost the entire value of exits in the first half of the year was accounted for by trade sales, amounting to $11.4 billion from 52 deals. But Mergermarket noted

FINANCIAL INSIGHT lukewarm interest in India.”

Daniel Yong

Derek Cheng

Firm partners more cautious in PE investments

that 2Q 2013 delivered a weaker performance than 1Q 2013. Private equity was also supported by the record high exits registered in 1H 2013, where Industrials & Chemicals saw its exit value and deal count reach $3.1 billion and 13 deals, respectively, the highest on Mergermarket record since 2001. China still a focus With private equity activity picking up as we head towards 2014, analysts still point to China as the prime hotspot for the region, although interests in Japanese and Korean general partners and India limited partners have also increased. “The vast majority of the activity that we have witnessed has been China focused, particularly China real estate,” said Jeffrey Kirk, Corporate & Commercial partner at global law firm Appleby. Kirk says the year has been marked by the growth of private sector lending by private equity houses and funds, that provide secured loan financing to borrowers, particularly those who operate in and develop Chinese real estate. He also believes this trend is driven by two factors. Firstly, by a renewed interest by private equity houses in the Chinese property market, as Chinese residential housing prices have risen. Secondly, this trend is driven by demand for private sector financing has ballooned, especially given the

high interest returns generated, and which could indicate private equity houses using debt as a lucrative investment class. “If you look at the amount of investment activity across the Asia Pacific region, 40% occurs in China,” said Wen Tan, Partner at FLAG Squadron Asia, specifically an Asia Pacific focused private equity investment firm. “And then you get reasonable chunks or 10-15% in each of Japan, India, Australia. All the other markets are single digit percentages.” Other trends Limited partners of firms are now being more cautious when entering into private equity investments, says Daniel Yong, Corporate/Investment Funds Director at Stamford Law. “General partners can no longer afford to take their investor base for granted in fund raising exercises or that re-ups are automatic. Limited partners are more selective in capital allocation but general partners with a compelling track-record, clearly articulated strategies and who come to market at the opportune time will ride the momentum in fund raising,” said Yong. “We see increased interest in Japanese and Korean general partners and while China will continue to attract limited partner interest, there is, for the moment, continued

Jeffrey Kirk

Wen Tan

Future rankings and major deals UBS Investment Bank topped the Financial Advisor League during 1H 2013 by value, advising on three transactions totaling $6 billion. In addition, London and Sydney-based international law firm Herbert Smith Freehills, led the Legal Advisor rankings by value with four deals worth S$6.5 billion in the first half of the year, followed by the South Korean firm Kim & Chang which surged to second from 12th position. With Austin Sweeney as lead partner, Herbert Smith Freehills acted as the international legal counsel for Goldman Sachs on its equity investment of S$110 million in Den Networks Ltd, the largest private equity deal so far in India’s cable and satellite sector and one of Goldman Sachs’ largest private equity investments in Asia. Goldman Sachs was also attracted to the growth potential of Den Networks, currently India’s leading cable TV distribution company reaching an estimated 11 million households in over 150 cities across 13 key states. Den Networks is listed in India on the Bombay Stock Exchange and the National Stock Exchange. Led by partner Tommy Tong, Herbert Smith Freehills also advised Asia Coal, a Hong Kong listed company, on a HK$150 million subscription of new shares by a third party investor and convertible bond redemption, involving a change in control and an application for a SFC whitewash waiver from an obligation to make a mandatory general offer and approval of off-market share repurchase under the SFC Code on Share Repurchases.

Asia-Pacific (excl. Japan) buyout trend

Source: Mergermarket

SINGAPORE BUSINESS REVIEW | JANUARY 2014 23

ANALYSIS: CRUISE

Mariner of the Seas at Marina Bay Cruise Centre Singapore

Singapore veers toward cruise tourism potential

Singapore aims to maintain its lead as top home-port choice and hopes to receive 1.5 million passengers by 2016.

ith a population of 3 billion people, tremendous growth potential in the cruise industry awaits Asia - and Singapore is aiming to maintain its lead as the top home-port choice. The cruise market is booming, and operators, governments and tourist boards are keen to get involved, hoping to record 1.5 million passengers by 2016. Neeta Lachmandas, Assistant Chief Executive of Business Development Group at Singapore Tourism Board (STB), says the number of cruise passengers in Asia is projected to reach 7 million by 2020, representing over 20% of the global cruise market. Kevin Leong, General Manager of Asian Cruise Association (ACA) echoes this projection, estimating that the group estimates that by end 2013, there would be 1.47 million Asians who would have taken a cruise 24 SINGAPORE BUSINESS REVIEW | JANUARY 2014

Investors are now developing a lower risk appetite, and will soon shift their preference from highyield corporate bonds to lowerrisk investmentgrade sector issues.

in Asian waters. Leong also notes that there is an increased interest in the cruise industry by many Asian countries, already working together to develop the South East Asia cruise region. Extended Asia According to a white paper presented by the ACA, 21 international cruise lines are currently serving Asia in 2013, operating a collective 43 ships, some year-round, some seasonally. Their 762 cruises (totally within Asia) plus 58 voyages (starting or ending outside of Asia), are providing the opportunity for 1,473,042 passengers to cruise Asia this year. This represents passage revenue of roughly US$ 2 billion. Short cruises, those of only 2-3 and 4-6 night stays dominate the capacity deployed, accounting for 368 and 261 cruises respectively, which equates to 77% of the total.

Ports serving as hubs for Large Ships with short cruises naturally are at the top of the frequency list: Singapore, Jeju Island, Shanghai, Phuket, Halong Bay, Keelung, Penang, Ho Chi Minh, Hong Kong and Port Klang being the top 10 in rank order with 90 or more calls each. Farriek Tawfik, Director for Southeast Asia Princess Cruises, says the company intends to expand the cruise market in Singapore and the region, and boost international tourism by bringing Asian and nonAsian tourists to the country. Due to the huge potential of the regional cruise industry, Princess Cruises Sapphire Princess, will be homeporting in Singapore for a season of cruise trips, the first premium cruise line to be based in Singapore for an extended period. “Princess Cruises will be operating 15 roundtrip cruises carrying approximately 40,000 passengers, for a four-month season from November 2014 to February 2015 – increasing tourism arrivals and spending,” Tawfik says, adding that passengers will be sourced from Singapore and throughout Asia, and other international markets such as North America, the United Kingdom and Australia. “The local

ANALYSIS: CRUISE economic impact from Princess Cruises’ Singapore-based deployment is estimated to make a total contribution of nearly $50 million SGD. This Includes passenger and crew spending in each port, port and other local costs Carnival Corporation will pay to bring Princess ships to Singapore, travel agent commissions and marketing costs.” Tawfik also notes that the opening of the Marina Bay Cruise Centre Singapore (MBCCS) effectively doubles Singapore’s berth capacity, and allows Singapore to cater to larger cruise ships. However, he cautions that challenges that can hinder the growth, including the long waits at immigration points, shortage of taxis at disembarkation points, limited capacity of attractions and restaurants, and shortage of tourist guides and coaches.

A larger proportion of 18 to 30-year-old travellers (35% in Singapore) aspire to go on a cruise holiday compared with those aged over 65 (25% in Singapore).

Maintaining its lead Singapore Cruise Center (SCC) is confident Singapore will maintain its leadership position in Asia, despite a continuing decline in ship calls as more gaming ships terminate their operations after the city’s two integrated resorts opened in 2010. In 2012, SCC said that 334 ship calls were made in Singapore ports, down by over 60% from 926 in 2009. Consequently, cruise passenger throughput also declined by 20% to 913,000. Singapore’s closest competitor is China, who only received 630,000 cruise passengers. As of to-date, data provided by ACA show that there are 230 ship calls plus 39 overnight calls for 2013 in Singapore. Shanghai came next with 106 ship calls plus 22 overnight calls. “With our 2 world-class cruise terminals and excellent global air Total cruise calls all countries by ship type 2013

Source: Asia Cruise Association

Azamara Journey

connectivity for fly-cruise itineraries, Singapore is the choice home-port for cruise sailings within Southeast Asia, said Lachmandas. Citing a study by STB from 2010, Lachmandas indicates that the cruise industry in Singapore generated some $520 million in direct spending, which included spending by cruise lines, passengers, and crew. $217 million of this was contributed by international passengers and crew members spending on accommodation, shopping, dining and other expenses. Future Growth and Expansion Professor Kaye Chon, tourism professor at the Hong Kong Polytechnic University, explains that the international cruise industry will keep its eyes in Asia, especially on the Chinese consumers. According to Chon, a large number of Chinese consumers are interested in ocean travels and Singapore is consistently amongst top 10 destinations of Chinese outbound tourists from 1999-2009. Tawfik also confirms that Singapore, with cruise passenger arrivals growing at 6.5% over the last 10 years, is well-placed to capitalise on the growing Asian cruising. He noted that there has been a greater variety of people travelling and new traveller segments are emerging. Particularly, he mentioned that there is an increase in first time cruisers and young Asians have a strong desire to go on a cruise. “A larger proportion of 18 to 30-year-old travellers (35% in Singapore) aspire to go on a cruise

holiday compared with those aged over 65 (25% in Singapore). Increase in younger passengers and cruising is less regarded as for the elderly,” he said. Crystal Cruises VP of Land & Port Operations, John Stoll, further observes an increase in the number of incentive group requests, and the number of groups of passengers who are traveling. These incentive groups are generally clients from all over southeast Asia, despite the fact that HQ is located in Singapore. “From banks to car dealers, there is tremendous upside in presenting a cruise as a reward. Travel professionals may find new business by expanding to incentive houses and business professionals they know. The corporate guest turns into the independent traveler, and brings with them repeat business,” Stoll says. Crystal Cruises is also expanding its port presence in China, Japan, Thailand, Singapore, Vietnam, Cambodia, Indonesia, Malaysia and even Brunei. Stoll confirms that they plan to carry out 34 voyages across Asia in 2014; 30 more previously than in 2012. The cruise line will welcome both the “Symphony and Serenity” liners to Singapore on March 11, 2014. Of the 25% of its guests that originate from outside the United States, 41% of these are from Asia, a figure that has doubled since the previous year. “Since 2012, we have seen an increase of 71% in the number of our guests from Singapore; 70% from Thailand; 48% from Hong Kong; and 41% from Taiwan.” SINGAPORE BUSINESS REVIEW | JANUARY 2014 25

COVER STORY

Find out where you should invest your hard-earned cash

14 promising investment picks for 2014

Place your bets on these winning investments for the Year of the Horse.

y most accounts, a nascent and patchy global economic recovery is underway, promising new opportunities for investors. But the question remains: should investors remain cautious, or take the risk and take bigger gambles? Are equities still attractive? Which markets will outperform in the next 12 months? Singapore Business Review interviewed several top investment analysts to get the answers to these critical questions. In doing so, we uncovered 14 of the most promising investment picks for 2014 – picks that could bring great returns amid the prevailing uncertainty and risk.

1. US equities According to most analysts interviewed, US Equities are predicted to shine in 2014, and are a steal given their current valuations and projected returns. Karen Lim, Head of Retail Sales, Southeast Asia at Alli-

“US equities are a good buy and will likely remain so in the long term.”

ance Bernstein, is confident that US equities are a good investment. “We believe that current valuations suggest that US equities are a good buy and will likely remain so in the long term, even in a higher-interest-rate environment brought about by the end of the Fed’s expansive monetary support,” Lim concurred. A survey by online brokerage firm E*TRADE revealed 63% of Asia Pacific customers said they were very confident or confident about the short-term performance of the US equity markets. “Our survey findings demonstrate that despite global economic uncertainty, individual investors remain confident in the foundations of the US economy and see considerable prospects for growth,” said Helen Chan, VP of Asia Pacific at E*TRADE. However, equities in general are considered to be a good investment given their valuations, and projected

returns relative to other asset classes, says Herve Lievore, Senior Macro and Investment Strategist at HSBC Global Asset Management. Lievore says; “With the current economic backdrop, corporate assets are the preferred asset classes relative to top quality government bonds based on valuation and expected earnings over the medium to long term.” 2. China equities Whilst equities in general are projected to shine in 2014, China equities will measure up with US equities as two of the most preferred picks in the category. Gary Dugan, CIO of Asia & Middle East at Coutts think this could be China’s year. “Although some investors may be disappointed with the slower pace of growth in China next year the growing awareness of the better quality of the Chinese economy should encourage larger foreign investment inflows and more domestic investment in the equity market.” The same E*TRADE survey found that around 51% of Asia Pacific investors were either confident or very confident of the short-term

COVER STORY performance of Asian equity markets. 3. RMB investments Aside from investing in equities, stakeholders in China should also consider buying up RMB investments, as the currency could hold well into next year. “The long-term economic prospects of the mainland China market and the trend of currency appreciation have made RMB investments appealing, especially to investors with close proximity to mainland China, such as in Hong Kong,” said Vineet Vohra, Regional Head of Wealth Development, Asia-Pacific, HSBC. Vohra also cited the latest Hong Kong Monetary Authority statistics, which show that total RMB deposits have reached CNY695 billion at the end of July, a year-on-year increase of 23.4%. And whilst its appreciation has tempered, Vohra argues that the RMB has been the best performing Asian currency so far this year, up almost 4% against the US dollar over the last 12 months since August. 4. Domestic currency time deposits Asia’s increasingly cash-flush investors are leading the way in RMB investments, and will veer towards domestic currency time deposits in 2014. “Over the next 12 months, domestic currency time deposits are generally a hot pick by Asia’s affluent,” says Vohra. This prediction is a shift from 2013, which has seen most Asian investors loading up predominantly on managed funds, mutual funds, unit trusts and domestic stock. 5. North Asian markets China will share the investment limelight with neighbors Korea and Taiwan, to become the most preferred markets in North Asia. Haren Shah, Chief Investment Strategist, Investment Strategy Group, Wealth Management, at Citi Asia Pacific, says their company favor the North Asian markets, especially China, Korea and Taiwan. “Valuations are cheap, and they are cyclical and export-oriented

economies. We do feel in 2014, these markets will get rerated and outperform other Emerging markets.” 6. Asian bonds Although some analysts have professed their aversion towards bonds as a worthwhile investment opportunity, others are not ruling out Asian bonds altogether, given their relative strength compared to other regional bonds. HSBC’s Lievore again champions Asian issuers to provide a better risk profile relative to their Latin American or Europe, the Middle East and Africa counterparts, offering a comparative advantage in times of uncertainty. “Asian bonds offer resistance in terms of credit quality. Yields in Emerging Market bonds have risen since the beginning of the year amid higher US yields and, more importantly, widening credit spreads.” 7. Emerging market ex-Asia bonds However Lievore notes that Emerging Market ex-Asia bonds could offer “good” opportunities for those looking at a longer term horizon. Emerging Market bonds in general are also viewed more positively by investors compared to government bonds, and are very competitive compared with other regional bonds. “Though only a few investors liked government bonds, we found

Albert Cheng

Gary Dugan

Greg Davis

that if forced to buy bonds, onethird would prefer Europe peripheral bonds, one-third would choose Emerging Market bonds and only 6% would favor Japanese Government bonds,” said Ajay Singh Kapur, CFA, Equity Strategist, Merrill Lynch (Hong Kong), BofAML. 8. Corporate and emerging debt markets Longer-term investors who are able to ride out the pending volatility in 2014, primarily caused by the expected quantitative easing by the US Fed, should also look into corporate and emerging debt markets. Lievore predicts that if spreads widen and bond markets correct significantly, this may potentially create opportunities in corporate and emerging debt markets for long term investors. He concludes that HSBC does not think these markets are overvalued, but rather that short term volatility is likely.

My favorite asset class for 2014

Sources: BofA Merrill Lynch Global Research

Asian bonds have relative strength compared to other regional bonds

COVER STORY 9. Indian stocks Surprisingly, in South Asia Indian stocks are catching the attention investors due to their stellar earnings. But Lievore again cautions against investors playing the market only in the short-term: “On India, despite the strong profitability for Indian stocks, the market continued to be driven down by macroeconomic factors. While the medium to long term prospect of Indian stocks remains intact, short term risks are sufficient to justify a move from overweight to neutral.” 10. European markets Investors eyeing the European markets are advised to opt for the bigger European economies, which are expected to ride the tailwind of a US market recovery. “Within the European markets, the markets that we favour will be Germany, France and the UK. These markets will benefit from recovery in the US plus their valuations are some of the cheapest among the major markets,” said Alliance Bernstein’s Lim. “It is important to follow the liquidity and as such feel that the European and Japanese markets will outperform the US among the developed markets,” she added. 11. Consumer and IT In terms of specific sector picks, analysts and investors are also favoring Asian consumer and IT

sectors, which have been among the best-performing areas in the region. BofAML’s Kapur, citing response from his company’s recent investor survey, says: “The consensus seems to going with the year-to-date winners – consumer and information technology sectors.” He also warned investors to avoid several underperforming and therefore riskier picks, based on their investment strategy: “Energy and materials are the least favorite sectors in Asia. Contrarians should buy cyclicals and financials and reduce exposure to high flyers.” 12. Data defined storage The area of IT is currently a blazing investment hotspot in Asia, and this includes the area of data defined storage. “‘Big data’ has been a buzzword for several years as organisations grapple to gain value from increasingly large and complex data sets,” says Shahbaz Ali, CEO of Tarmin, a data defined storage provider. “This focus will continue in 2014, though investors would do well to explore the Data Defined Storage.” Ali explains further, stating that this new data-centric approach optimizes the value of big data analytics and shuns the usual media-centric approach to storage, letting the data define the infrastructure rather than the other way around. He also says that KPMG’s £66 million big data investment fund is indicative of the

Pick the right idea for you and you’re on your way to success!

burgeoning value and importance of data and analytics solutions.

Haren Shah

Herve Lievore

Karen Lim

Shahbaz Ali

13. Gold For those investors looking at relatively safe gambles, gold still remains a popular choice, but only when integrated in a well-balanced portfolio. “Despite the trend towards equity investments, the World Gold Council believes that investors should continue to allocate a portion of their portfolio to gold as a form of long-term wealth preservation and diversification of assets,” said Albert L. H. Cheng, Managing Director, Far East, World Gold Council. “We found that a 5%-6% allocation to gold is ‘optimal’ for investors with a well-balanced 60/40 portfolio,” said Cheng. He further explains the 60/40 portfolio concept as allocating investments with approximately 60% in equities and alternative assets, and 40% in cash and bonds. “This holds true even for investors that already hold commodities, real estate and hedge funds,” says Cheng. He also advises that riskier portfolios should hold a higher percentage of gold investments, because gold can help manage risk and provide core stability to portfolios by protecting purchasing power, reducing portfolio volatility, and serving as a high-quality liquid asset. 14. Index funds and Exchangetraded funds (ETFs) The idea of a well-balanced portfolio, capable of surviving the volatility of 2014, is also at the core of why index funds and exchange-traded funds will be in demand going forward. Gregory Davis, CIO for Asia Pacific, The Vanguard Group, says that index funds and ETFs can help investors avoid many of the risks of market timing and manager and stock selection, whilst still keeping costs and tax to a minimum. “There is a deep body of academic research that highlights that the single most important decision any investor makes is the asset allocation decision and it is in capturing market returns and balancing your portfolio’s asset allocation that indexing can be effective,” says Davis.

We may be an oil company, but our real job is to refine your ideas.

Most oil companies see oil as a source of energy, a consumable that vanishes the instant itâ&#x20AC;&#x2122;s used. We see oil as a tool for creating sustainable value. www.nynas.com

Singapore’s top 25 ACCOUNTING firms

Making sure all Singapore accountants are accounted for

The 25 largest accounting firms employed 5% more The Big Four accounts for 80% of the total employment.

PMG has once again topped Singapore Business Review’s second year ranking of 25 largest accounting firms based on staff strength. It retained 2,400 employees. The data was primarily obtained from company surveys. KPMG was closely followed by PwC with 2,300 staff. The number was unchanged from last year. EY (formerly Ernst & Young) is ranked third with 2100 employees. It added 100 more employees from last year. Alongside its adoption of EY as its global brand name in July, the company also unveiled a new logo and took on “Building a better working world” as its tagline and purpose. “The new tagline and purpose is central to the role we play - in a better world, trust increases, so capital flows smoothly and investors make informed decisions. 30 SINGAPORE BUSINESS REVIEW | JANUARY 2014

Singapore’s 25 largest accounting firms have a total employment of 11,833, of which 80% belongs to the big four.

Businesses grow sustainably, employment rises, consumers spend and businesses invest in their communities. More than just growth, a better working world harnesses and develops talent in all its forms and encourages collaboration,” said a spokesperson from EY. Deloitte & Touche came fourth with 1800 staff. The number is almost 6% higher than in 2012. Outside the Big Four Singapore’s 25 largest accounting firms have a total employment of 11,833, of which 80% belongs to the big four. The total employment is 5% higher than last year with 14 of the 25 increasing staff strength this year. Seven have retained their numbers while three of the 25 reduced employment. Fifth is RSM Chio Lim with 775 employees. The staff strength is

19% more than last year. Foo Kon Tan Grant Thornton is sixth with reduced number to 350 from 360 in 2012. BDO is ranked seventh with 320 employees in 2013 from just 300 last year. Baker Tilly and Moore Stephens tied at eighth place. Moore Stephens retained its 200 staff while Baker Tilly, previously at 10th place, increased its number from 180. RT is ranked 10th with 190 employees. RT CEO and managing partner Ravi Arumugam says the formation of an RT network is a reason for the nearly doubling of its staff strength from 100 in 2012. It is a Singapore based first network of professional business solution providers that span across the region who provide multidisciplinary expertise. RT is followed by Nexia TS Public Accounting Corp with 180 employees. It is 24% more than its number the previous year. Rank movers Mazars landed at 12th post, ranking up one notch from the previous year after its staff strength grew by 35% to 150. Mazars merged with Nebis Services last September and boasts of hiring high profile tax partner Chan Huang Chay last November. HLB-Atrede ranked two notches up to 13th after growing its staff strength by nearly 10% to 90. Lo Hock Ling & Co. came next with 86 staff. BSL Public Accounting Corp. ranked four notches up to 14th with staff growing by 21% to 75. Three firms are at 16th place - PKF-CAP, Ng Lee & Associates and Crowe Horwarth First Trust. Crowe Horwarth First Trust’s ranking slipped to 16th from previously 12th after its total number of employees was reduced by 42% to 70. Ng Lee & Associates meanwhile ranked two notches up with staff growing by over 4%.

Singaporeâ&#x20AC;&#x2122;s top 25 ACCOUNTING firms

25 largest accounting firms in Singapore Company Name

Staff 2012 2013 2012 Ranking Total Staff Total Staff Growth

2013 Accounting Professionals

Managing Partner

KPMG

2400

<2400

Tham Sai Choy

PwC

2300

<2300

Yeoh Oon Jin

Ernst & Young

2100

2000

<2100

Max Loh

Deloitte & Touche

1800

1700

<1800

Philip Yuen

RSM Chio Lim

775

650

<775

Paul Lee

Foo Kon Tan Grant Thornton

350

360

-3

<350

Kon Yin Tong

BDO

320

300

293

Frankie Chia

Baker Tilly TFW

200

180

Sim Guan Seng

Moore Stephens

200

180

Mick Aw

190

100

<190

Ravi Arumugam

Nexia TS Public Accounting CoRP.

180

145

165

Henry Tan

Mazars

150

111

135

Denis Usher

HLB-Atrede

Andrew Tan Beng Hwee

Lo Hock Ling & Co.

-1

Pearlyn Chong

BSL Public Accounting Corp.

Lim Siow Jane

Crowe Horwath First Trust

120

-42

<70

Tan Kuang Hui

Ng, Lee & Associates DFK

Jerry Lee

PKF-CAP

<70

Sajjad Akhtar

Cypress Singapore PAC

Lok Lai Cheng

Kreston David Yeung PAC

-14

David Yeung

Heng Lee Seng

<60

Heng Lee Seng

Infinity Assurance

Jack Lam and Kuah Hong Woon

CPA TRUST PAC

380

Paul Tan

K.G.Tan & Co.PAC

Tan Khoon Guan

Adept PAC

Yin Kum Choy

*The list is based on the information provided by the company or their website.

SINGAPORE BUSINESS REVIEW | JANUARY 2014 31

Singapore’s top 15 ENGINEERING firms

See which engineering firms stood out

Surbana leads the pack of local engineering firms

Each boasted of playing key roles in sculpting Singapore landscape.

urbana International Consultants has topped Singapore Business Review’s inaugural list of 15 largest engineering firms in Singapore based on the number of employed engineers. The data was primarily obtained from the Professional Engineers Board and company surveys. Surbana, with 47 engineers, claimed to have played a key role in sculpting the unique skyline of Singapore, reclaiming almost 10% of the island and creating over one million homes for more than 80% of the population. “In recent years, we have successfully exported our expertise overseas and delivered many award-winning solutions for different project types including commercial, industrial, infrastructure and mixed-use developments.”

32 SINGAPORE BUSINESS REVIEW | JANUARY 2014

CPG Consultants, the corporatised entity of the former Singapore Public Works Department, ranked fifth with 37 engineers.

Jurong Consultants came next with 42 engineers. AECOM Singapore is third with 40 engineers. AECOM has been actively contributing to the development of Singapore’s landscape since the inaugural project in 1969 – the design and supervision of the premier dry dock in Sembawang Shipyard. Fourth is US firm Parsons Brinckerhoff with 39 engineers. CPG Consultants, the corporatised entity of the former Singapore Public Works Department, ranked fifth with 37 engineers. Outside the Big Five Sixth is Arup with 28 engineers. Arup is central to the transformation of Singapore’s premier waterfront destination, having contributed to three major developments including Marina

Bay Sands Integrated Resort, The Helix and The Singapore Flyer. WorleyParsons and Beca Carter Hollings & Ferner tied at seventh place with 24 engineers each. Meinhardt Singapore landed at ninth post with 22 engineers. T.Y.Lin International is at 10th place with 19 engineers. T.Y Lin have been serving Singapore and the Region for over 40 years, delivering over 600 projects for over 400 clients. T.Y Lin have contributed to the development of a significant portion of the MRT network and it’s associated infrastructure including Kim Chuan Depot and the proposed Mandai Depot for the Thomson Line. J.M.Pang & Seah tied with Mott Macdonald (MM) at 11th place. Both employ 14 engineers. J.M Pang & Seah became part of PON Asia Holding on 1 June 2012. MM just celebrated its 40th anniversary in Singapore this year.MM has been involved in the growth of Singapore’s key infrastructures such as the MRT, road tunnels and cable tunnels for more than 30 years. The bottom three Three firms are ranked 13th with 11 engineers each - Black & Veatch (SEA), CH2MHILL Singapore and Rankine & Hill. Black & Veatch, with total staff strength of 102, has established presence in Singapore for more than 90 years and have been playing a role in helping support the country’s water supply. It is involved in a number of projects in 2013 including major improvement works at Changi Water Reclamation Plant and Jurong Water Reclamation Plant, as well as the development of a 60 million imperial gallons per day water treatment facility at a green field site at Lower Seletar. Black & Veatch was also the owner’s engineer to PUB on Singapore’s second and largest desalination plant, Tuaspring Desalination Plant, which opened in September 2013.

Singaporeâ&#x20AC;&#x2122;s top 15 ENGINEERING firms

15 largest engineering firms in Singapore Number of Mechanical Engineers

Architecture firms

Civil

Electrical

CEO/ Singapore HEAD

Surbana International Consultants

Alfred Neo

Jurong Consultants

Er. Tang Tat Kwong

AECOM Singapore

Tony C.K. Shum

Parsons Brinckerhoff

Guy Templeton

CPG Consultants

Vincent Loh

Arup

Russell Cole

WorleyParsons Beca Carter Hollings & Ferner (S. E. ASIA)

24 24

3 8

18 10

3 6

Denis Lucey Lee Chuan Seng

Meinhardt Singapore

Dr Shahzad Nasim

T.Y.Lin International

Teh Hee Seang

J.M.Pang & Seah Mott Macdonald Singapore

14 14

2 2

0 9

12 3

Keith Howells

Black & Veatch (SEA) CH2MHILL Singapore Rankine&Hill (Singapore)

11 11 11

3 2 2

6 8 5

2 1 4

Len C. Rodman Lee McIntire Tan Peck Khoo

We put security at the core of a sustainable mPOS solution.

legal briefing

New labor rules to favor local applicants Local job seekers are privileged to be evaluated for vacancies before everyone else.

ingaporean jobseekers will soon be considered for job vacancies before non-local applicants, according to a recent announcement by Singapore’s Ministry of Manpower (MOM). The MOM has introduced a new Fair Consideration Framework (FCF), that will take effect next year and require firms to consider Singaporean applicants before Employment Pass (EP) holders. Not only must firms consider Singaporean applicants, they must show that they considered Singaporean applicants first, ensuring firms review their labor policies and procedures prior to implementation of the rules on August 1, 2014.

However Kala Anandarajah, from Rajah and Tann stresses:“Young graduates from good educational institutions can qualify if they earn $3,300, whereas older applicants will be required to have higher qualifying salaries, which will be linked to their work experience and the quality they are expected to bring in.” Kelvin Poa

“Young graduates from good educational institutions can qualify if they earn $3,300, whereas older applicants will be required to have higher qualifying salaries.”

What are some practical requirements post-implementation? Once the new labor rules take effect, firms must advertise all job vacancies on a new “jobs bank”, administered by the Singapore Workforce Development Agency, at least 14 days before making the EP application. “The position must be open to Singaporeans, comply with the Tripartite Guidelines on Fair Employment Practices and run for at least 14 calendar days,” says Michelle Foo, from Allen and Gledhill. Information in the advertisements should also include the job title, closing date for application, requisite skills, qualifications and experience, and salary range. The advertisements will be free of charge, and is scheduled for launch mid-2014. Foo also notes that firms can still advertise job postings through other platforms or websites, provided all employers consider Singaporeans fairly for jobs, based on merit. However, there are some firms that will not need to worry about the impending FCF rules, according to Cheung. Those firms with less than 25 employees, and those with job positions that pay more than a fixed monthly salary of $12,000, do not fall within the guidelines. “Interestingly, there is no mechanism for unsuccessful Singaporean applicants to lodge a complaint with MOM, however, feedback can be given through its website,” Cheung adds.

external recruitment agencies are prepared,” says Cheung. Kelvin Poa, from Baker & McKenzie, advises that firms most likely to be affected are those that hire a number of EP holders already, and are still looking to hire non-Singaporean applicants in the future. Firms who are already receiving discrimination complaints from applicants, are most likely already subject to the new labor rules, Poa says. Those who do not advertise in the national job bank will have the foreigners’ Employment Pass (EP) applications rejected. As part of the new framework, the MOM has imposed an increased qualifying salary requirement, also due to commence on 1 January 2014. In order to keep in line with rising salary rates in Singapore, this requirement ensures new EP applications meet the $3,300 monthly salary, an increase from the current $3,000.

What are the concerns going forward? Despite this, firms not required to follow the new FCF rules may still have additional requirements placed upon them, reporting certain to MOM. Firms that have a disproportionately low concentration of Singaporeans holding professional jobs will have their hiring practices come under greater scrutiny by the ministry. Poa highlights: “This would include firms that have a relatively low concentration of Singaporeans at the professional, managerial and executive level compared to others in their industry, and firms which have received repeated complaints of nationality-based or other discriminatory human resource practices.” The MOM will not, however, name these firms. “It is important for businesses to review their employment policies and processes to ensure that they will be in full compliance with the FCF rules,” Poa stressed.

Where to for existing EP holders? For existing EP holders who hold a pass that expires before 30 June 2014, a one-time renewal with their employer based on the existing criteria will apply. However passes which expire between 1 January and 30 June 2014 (inclusive), will be limited to a renewal of up to one year. Passes that expire after 30 June 2014 will need to meet the new criteria. Christopher Cheung, from Herbert Smith Freehills, says there will be action items placed upon employers with the introduction of these new rules: “Employers will need to be aware of the changes to EP applications and renewals, and ensure their internal human resources teams and

34 SINGAPORE BUSINESS REVIEW | JANUARY 2014

Kala Anandarajah

Michelle Foo

CO-PUBLISHED CORPORATE PROFILE

Not your average accounting practice

K.G. Tan & Co. PAC’s principal describes how the intricacies of legal, accounting, tax and management consultation combine to form a learning culture.

he accountancy profession has long been associated with dry, humourless pencil-pushers ploughing through client tax returns, and has been the subject of myriad clichés and gentle jokes aligning the profession with all things conservative. While some of these clichés are necessarily true – it is a virtue that a good accountant possesses a keen eye for fine detail and enjoys masterful numeracy – many are more dying stereotypes than clichés. Imagine an accountancy practice with a brightly lit and colourful reception, more akin to a young, dynamic infocomm start-up; one that speaks of its clients as business partners, understands their businesses and makes a point of creating symbiosis within its clientele. K.G. Tan & Co. PAC is one such practice. K.G. Tan & Co. PAC’s, eponymous founding director (“KG” to his friends) long ago broke the mould of the typical accountant. After a successful career with one of the “Big Four” international accountancy firms, followed by a stint with a major organisation as CFO, KG mustered the courage that few can – he went solo… well almost. KG started his practice with his cousin in a serviced office. Despite the challenges of starting out, they were fortunate to be presented with more opportunities even amidst post-2009 crisis. From strength to

strength is an understatement. K.G. Tan & Co. PAC - which offers an atypically broad range of corporate services, including audit, tax, accounting, transaction and advisory services has grown to 40 staff since 2006, a tremendous growth rate in a highly competitive industry of some 600 firms, and a rise to prominence that sees the firm ranked 24th on Singapore Business Review’s list, the youngest among the 25 Largest Accounting Firms in Singapore, having started only seven years ago. In 2011 K.G. Tan & Co. PAC was admitted to the Alliott Group, a legal, accounting and management consultancy alliance that includes 180 members and spans 80 countries. Admission to the Group is rigorous, however, once a member, the benefits in terms of branding, the global network and knowledge sharing is massive. Being part of the Alliott Group also enables K.G. Tan & Co. PAC to provide a platform to assist its clients in globalising their businesses. “One excellent example involved our assistance in providing professional services to global brand Mango when it established a presence in Singapore.”

“Our practice is imbibed with a learning culture rather than a training culture. We could never lose our belief.”

From strength to strength: the dynamic team at K.G. Tan & Co. PAC

Tan Khoon Guan, Founding Director Another major factor spurring K.G. Tan & Co. PAC’s greater than 30% annual growth since inception is the firm’s development of a groundbreaking, proprietary practice management solution. KG places enormous focus on innovation and it is this in-house technology that has allowed the practice to expand its pipeline in a manner that would have otherwise not been possible. “We believe that we are the only accounting firm to develop a web-based practice management application that automates the entire workflow of our operation and integrates fully with our accounting, payroll, administrative and CRM functions.” This application is currently being adopted by 28 accounting firms, supported by the IDA’s push for collaboration between accountancy firms and IT vendors. IT may be the spine of K.G. Tan & Co. PAC but the heart is its people. “Our practice is imbibed with a learning culture rather than a training culture – our people are naturally placed at the centre of the firm, it is quite a flat culture which is unusual in this profession. We could never lose our belief and foundations and if you want to run a successful business, you have to put your people first – and select people that will put their clients first.” SINGAPORE BUSINESS REVIEW | JANUARY 2014 35

CMO Briefing

Making your brand’s info stand out

Experts explain how saying the words is not enough in the content marketing environment.

ontent Marketing is one of the biggest buzz words of 2013. It aims to attract customers by constantly creating valuable content, but how do companies best execute an effective strategy to communicate this content in the market? The best information in the world is useless unless it is adequately marketed, and it needs to stand out from the other junk that already clutters up a customer’s inbox. Dave Murray, Director of the Content ROI Center at the CMO Council says that whilst the market is still young in Southeast Asia, there is the potential of content marketing to build brand presence, predispose buyer markets, prime sales pipelines, and up-sell and cross sell customers. However according to Ms. Ho Lee Yen, Chief Marketing Officer of AIA Singapore, content marketing strategies still need to strike a balance between consumer engagement to build brand affinity and meet clear business objectives. Social media branding Brand affinity and reputation is the approach taken by CMO Chris J Reed, from mig33. “The key to this is the content, it’s free and compelling. LinkedIn gives opinion leaders and business leaders a dedicated, targeted platform for them to express themselves and market their personal brand and their thoughts on business. Simply put the LinkedIn content engagement model makes LinkedIn money. Anyone with a B2B platform can do the same, and a B2B Content Marketing Strategy should be making money, not costing money.” This is a view echoed by Steven Tan, Regional Director, CMO Council Asia Pacific. According to Tan, companies look to build their brand, attracting website visitors, blog subscribers, and social followers. “At Aspect Software, I started 36 SINGAPORE BUSINESS REVIEW | JANUARY 2014

The best information in the world is useless unless it is adequately marketed.

the Aspect Customer Experience (ACE) and the BPO CXO Exchange leveraging great contents to nurture and engage our customers through inbound lead generation. The objective is to build greater customer intimacy, understand the voice of the customers better and to solicit inputs and feedback for better decision making.” In addition, Tan says at Seagate Technology, separate dashboards measuring lead generation effectiveness also complements the automation analysis. “Social media has become an important vehicle for marketers to use to create content,” says Senior Director of Global CRM Marketing, Nicholas Kontopoulos. “Whether people are discussing social issues, what’s trending in the cultural or sports worlds – or what will be the next Gangnam style viral video – all of these are opportunities to engage your customers. But unlike traditional marketing, which focuses on talking at people, content marketing is about talking with them.” A traditional approach Other companies are more conservative in their approach, trusting that well-crafted content can be used in both traditional and on-line environments. Laura Ashton, VP Marketing at Philips Lighting - Growth Markets explains: “In my experience, content still needs to be delivered through both offline and online media,” Ashton says. “SEM and digital campaigns are vital but many customers throughout Asia still like the immediacy and hightouch of a quality brochure or catalogue, receive mail and attend face to face events rather than going online.” But Kontopoulos stresses that creating content is the easy part. “You are doing that every time you post something on Facebook, Twitter or Instagram. What is difficult is creating content that moves people. You still need to listen to your customers: hear what they are talking about, when did they talk about it and where, who is doing the talking and why.” One thing appears clear in today’s market: organizations need to bring more precision and strategic thinking to content specification from an end to end process. Roger Stadler, Managing Director from MediaBuzz says the rule of thumb when communicating with customers is to create and distribute only relevant quality content to influence purchasing decisions, especially in the era of social media, but warns that there is no silver bullet when it comes to content marketing strategy. “Copying individuality is kind of impossible, so staying active in social media, writing articles and blogs, sending newsletters and creating engaging videos are still the best way to gain attention.” Real content marketing is a task that involves a brand truly becoming a publisher, not just a marketer, and too many companies are still engaged with customers without having developed solid and consistent strategies in place.

ontent Marketing is one of the biggest buzz words of 2013. It aims to attract customers by constantly creating valuable content, but how do companies best execute an effective strategy to communicate this content in the market? The best information in the world is useless unless it is adequately marketed, and it needs to stand out from the other junk that already clutters up a customer’s inbox. Dave Murray, Director of the Content ROI Center at the CMO Council says that whilst the market is still young in Southeast Asia, there is the potential of content marketing to build brand presence, predispose buyer markets, prime sales pipelines, and up-sell and cross sell customers. However according to Ms. Ho Lee Yen, Chief Marketing Officer of AIA Singapore, content marketing strategies still need to strike a balance between consumer engagement to build brand affinity and meet clear business objectives. Social media branding Brand affinity and reputation is the approach taken by CMO Chris J Reed, from mig33. Reed believes that social media outlets such as LinkedIn are the platforms of choice for this type of focus. “The key to this is the content, it’s free and compelling. LinkedIn gives opinion leaders and business leaders a dedicated, targeted platform for them to express themselves and market their personal brand and their thoughts on business. Simply put the LinkedIn content engagement model makes LinkedIn money. Anyone with a B2B platform can do the same, and a B2B Content Marketing Strategy should be making money, not costing money.” This is a view echoed by Steven Tan, Regional Director, CMO Council Asia Pacific. According to Tan, companies look to build their brand, attracting website visitors, blog subscribers, and social followers. “At Aspect Software, I started the Aspect Customer Experience SINGAPORE BUSINESS REVIEW | JANUARY 2014 37

CIO Briefing CIOs are facing many challenges which can quickly overwhelm a traditional organized IT department.

Big Data, or just big problems? See how companies are preparing for the technology phenomenon in the local market.

ig Data is set to impose both challenges and opportunities for growth in the Asian market, testing the adaptation of local companies to this new technology. The technology phenomenon will impose both challenges and opportunities for companies, but what does that really mean for the local market? Miao Song, Group Chief Information Officer at Golden-Agri Resources sees key opportunities with this growth. “It becomes a core competitiveness advantage for enterprise to differentiate from other others,” Song says. But she stresses that to achieve this, the concept must “start from small”, and be a step-by-approach to achieve goals. Key opportunities Ofir Shalev, CIO Employee Health & Benefits APAC at Mercer sees the market from a big industry growth perspective. “Combined with the rate and penetration of mobile phones, the growing flow in social media and the growing connectivity of the consumers, it is a great opportunity for companies to leverage Big Data and Analytics to gain new market insights, developing a 360-degree view of the customer, developing new products and services based on data and addressing threat, fraud and security issues.” “We are also currently implementing an analytics project, pulling medical benefits data, claims data and financial data from various sources and systems, making information easily accessible and transforming the raw data into meaningful and useful information.” There are just as many challenges surrounding the adoption of this technology. Craig Stires, Research Director of Big Data and Analytics at IDC Asia/Pacific, says

38 SINGAPORE BUSINESS REVIEW | JANUARY 2014

39% of organizations in AsiaPac are not analysing whole sets of data they are collecting.

research shows that 39% of organizations in AsiaPac are not analysing whole sets of data they are collecting, and there is a need to mitigate future risk driving a boom in storage of data. But actually driving profits has proved a challenge. “Lacking a business case with expected returns, the costs of doing more with that data is too much for many organizations to bear,” he says. “Compounding this issue there are precious few data scientists in the market, who also have the specific industry expertise and business acumen. Without these people to lead the process, many organizations don’t know where to look for the lowhanging fruit.” Key challenges But Paul Toohey, Global Portfolio Director, Advanced Analytics, Hewlett-Packard Company thinks that the Big Data phenomenon could cause more problems than solutions unless CIOs are well prepared and move from the suppliers of technology to the provider of business solutions. “The explosion in both internal and external data sources creates many headaches around storage, processing power and the ability to integrate and conduct analytics across multiple data types,” Toohey says. “Combined with the heightened expectations of business users to have a single view in near to real time, CIOs are facing many challenges which can quickly overwhelm a traditional organized IT department.” Ruoyu Bao, Director, Global Analytics Hub, Lenovo echoes Toohey’s concerns, raising the issue that when companies launch projects aimed at gaining a competitive advantage, they fail to implement the execution capability for the outcome. Song agrees that complexity, volatility and volume can be problematic, but perhaps the hardest issue to control is with regards to maintaining professional skill sets. Whilst Bao also acknowledges the company is the process of setting up a Global Analytics Hub, most of the candidates interviewed at Lenovo are overseas and are students. “Leveraging big data is going to be increasingly important for us to widen our lead,” he says. Shalev also believes that the major challenge with the adoption of this technology is related to a potential gap in skill sets. “A good Data Scientist is problem solver with a business acumen, strong analytical skills with a solid background in statistics, machine learning and computer science.” Big Data may only work well for those prepared to up skill in order to mitigate future risk.

co-published Corporate profile

Top-notch People, Outstanding Investments See how Solomon Alliance Management became first-rate in four years

Seah Kian Peng (Deputy Speaker for Parliament of Singapore, Member of Parliament, Marine Parade GRC.), Desmond Chong (Managing Director of Solomon Alliance Management Pte Ltd) and Brans Ong (Chairman of APF Group)

olomon Alliance Management was incepted in August 2009 by Helen Chong, Capellan Pang, and Desmond Chong. They came together with the ambition of bringing products, perceived to only be available to the wealthy and affluent, to every man on the street. They slowly built market awareness and acceptance through numerous seminars in major investment fairs and road shows in prime locations within Singapore’s Central Business District. These events introduced the public to the advantages of asset backed investments. “In a short span of four years, we have served 1,500 clients who had invested some $145 million collectively. Since then, our business has gained momentum and has grown into an operation with 50 personnel,” says Desmond Chong, Managing Director of Solomon Alliance Management. Turning challenges into opportunities In this fast-paced industry, Solomon is keenly aware of the investors’ appetite for diversification, inflation protection, risk reduction, crisis resistance, and increased yield. According to Mr. Chong, their breakthrough came when, despite Hong Kong’s reputation for land scarcity, they were able to secure the Hong Kong Land Acquisition to the Singapore market

Solomon Alliance Management’s team of dedicated professionals

in July 2010. “In collaboration with the principal, we were the first agency to bring the German Government Listed Building investment in July 2011 which was met with overwhelming response. This unique investment product has paid back over $40 million to more than a thousand investors in less than 18 months,” says Mr. Chong. Immediately after, Solomon helped structure and launch its first Brazilian Quasi Development project, Palm Springs Natal which was fully sold out within a year. A value for the workforce “Our strength lies in our accumulated experiences, know-how and our treasured professionals,” says Mr. Chong. Recognizing and rewarding employees is how the company show their commitment to them. “We are like a big family that values collective effort and teamwork, while providing numerous opportunities for individuals and teams to achieve their personal and team goals,” says Mr. Chong. “To ensure maximum security for clients,

“Our strength lies in our accumulated experiences, know-how and our treasured professionals.”

Solomon exercises rigorous due diligence in the selection of investment products, thereby achieving an unparalleled track record. This has been, and will continue to be our mission,” he adds. In fact, in the recent SME One Asia Awards 2013, Solomon snagged two distinctions: the Emerging Category Award and the Judges’ Mention Customer Centric Award. “It is an appreciation of the commitment to our investors by the sales professionals. Through this honorable achievement, we hope to garner a higher exposure for us to share our passion and dedication of investment opportunities to investors. In time to come, Solomon will continually expand and witness vast growth,” says Mr. Chong. “It is our people, for they are the soul of the company. The award is an honorable recognition of the professionalism of our people, who are committed to service excellence,” Mr. Chong says. Solomon is steadily harnessing and building the potential of the next generation, grooming them into future leaders. They are constantly partnering reliable principals, offering a variance of investment options to their valued clients. Mr. Chong adds, “We are also exploring collaboration opportunities with various investment marketing firms, expanding our force beyond Singapore.” SINGAPORE BUSINESS REVIEW | JANUARY 2014 39

THEMATIC REPORT: PROPERTY

A skyrocketing supply of units in Singapore

Property market headed for a glut

TDSR, rising land prices, stiff competition weigh on bleak short-term prospects of the industry.

ingapore’s residential property market has ballooned under a heavy load of market factors, where acquisitions will not likely match the surge in supply from the beginning of next year. Previously a lucrative industry in the city-state, experts predict that the Singaporeans will witness the opening of 173,300 more completed units in 2014 - more than has been seen over last three years. This includes completions from HDB (50,000 units), DBSS (49,700 units), and EC (73,600 units), where analysts anticipate homes will come into the physical supply in 2014, 2015 and 2016 respectively. However, a skyrocketing physical supply of units is predominantly higher than the projected average incremental demand of around 29,000 physical homes per year, (i.e., a little below 90,000 in three years). This predicted forecast was derived from an average population growth of 86,000 a year, from 2014 to 2020. “In our view, this mismatch points to a fairly clear physical oversupply situation ahead,” 40 SINGAPORE BUSINESS REVIEW | JANUARY 2014

Singaporeans will witness the opening of 173,300 more completed units in 2014 - more than has been seen over last three years.

says Eli Lee of OCBC Research. Oversupply and TDSR According to Lee, increased caution in the market resulting from heavy physical supply and persistent cooling measures, is applying pressure to the Urban Redevelopment Authority (URA) price index. This, Eli Lee advises, takes place in the face of positive price appreciation in the URA, which appreciated 2% in the first nine months of the year. “Over the last nine consecutive quarters, the URA residential price index showed an average quarterly price appreciation of 0.7% quarter-on-quarter (QoQ), which is significantly lower than the 10-year quarterly average of 1.7% QoQ,” Lee pointed out. Accordingly, the bulk of this price appreciation was due to buoyant activity in the mass property market in Outside Central Region (OCR). Over the last four quarters, the URA “nonlanded” OCR price index appreciated an average of 2.8% per quarter, versus 0.2% and 0.1% per quarter for the

high-end, or Core Central Region and mid-tier or Rest of Central Region, respectively. Lee also adds that not only was the price slowed, but the number of units sold also decreased during the period. Based on the recently released September 2013 sales numbers, only 1,219 homes were sold, down 53% from a year ago. This has a take-up rate of only 70.5% for the 1,728 units launched over the month. Therefore the inventory of launched and unsold inventory stood at 6,275 units as at end September 2013, up 21.3% versus the 5,177 units as at end December 2012. Authorities implemented its latest set of property cooling measures in July 2013 – Total Debt Servicing Ratio (TDSR) framework – whereby financial institutions will take into account borrowers’ other debt obligations when granting property loans. “This set of measures further constricted financing for home buyers, particularly for those with existing property loans,” confirms Lee, adding that the incremental curbs resulted in the drop

THEMATIC REPORT: PROPERTY in homes sold. “The number of homes sold in the primary market (excluding EC and landed units) decreased 30% year-on-year (YoY) to 12,500 units over 9M13,” he said. Brandon Lee of Macquarie Research says that estimates show GLSP sites have risen by a three-year compounded annual growth rate of 25%, from 2010 to 2013, significantly more than the 4% of private residential prices. “We do not expect land prices to moderate, in view of developers’ need to replenish their shrinking land banks amid improving balance sheets,” (Brandon) Lee said. Overall, Brandon Lee predicted forecast residential prices to decline by 4% in 2014, led by high-end (-5%) that resulted from the absence of foreign buyers, impact of Additional Buyer’s Stamp Duty (ABSD), and sizeable completions (30% of 2014 supply). Further, he stated that mid-end and mass markets would decline by a lower 4% and 3%, respectively, due to continued interest from HDB upgraders and investors in a seemingly improved macroeconomic environment, and low short-term interest rates. Other factors - stiff competition Rising competition in both rental and secondary markets, has been highlighted as another challenge to the developers amid the introduction of sellers’ stamp duty (SSD) in February

2010, according to Min Chow Sai of Nomura Group. The company predicts that sellers will be willing to pay the SSD to move their units into the secondary market. In the first nine months of the year, 192 units changed hands, compared to 99 units in the same period in 2012. The average SSD paid per transaction was also higher during this period, at SGD32, 185 versus one year ago. “More sellers are apparently willing to sell at a net loss, taking into account stamp duties and agents’ commissions,” Chow Sai explained. Chow Sai also confirmed that of the 192 units sold with SSD paid, and the 26 units sold at a net loss in the first nine months of the year, 136 units and 16 units, respectively, are scheduled for completion in the 2013-14 financial year. “It seems to us property owners are increasingly mindful of rising competition and are looking to sell their units even if it means paying SSD or making a net loss in some cases,” he said. “We believe the secondary market could deteriorate further with about 10,000 units sold units completing in 2013F having minimal or no SSD restriction (vs. average monthly secondary transactions of 623 units in 9M13), on our numbers.” Chow Sai also noted that with more competition in the secondary market and a smaller pool of potential buyers

Despite the slowdown of the real estate market, a price crash in property stocks is still unlikely.

on account of restrictions on home purchases, Nomura expects the takeup of developers’ new launches in the primary market to slow. Price crash still unlikely Eli Lee says that despite the slowdown of the real estate market, a price crash in property stocks is still unlikely. He predicts that headline prices will not correct excessively (>20%) in 2014 for three main reasons. Firstly, because the physical oversupply of homes which are already sold will initially affect vacancy rates and then rental prices. “While falling rents will pressure home prices, we do not see many homeowners force-selling into a softening market given that a negative rental carry is the norm in Singapore historically and that the average individual balance sheet remains fairly benign,” Eli Lee explained. Second, he noted that the level of unsold pipeline held by developers, currently at 36,000 units, is still lower than the 10-year historical average of 43,000 units and is not overly burdensome. “While developers will likely ease prices ahead to move inventory, a fire-sale situation is unlikely to ensue given relatively strong balance sheets,” he added. Eli Lee believes market data points to a high priced elasticity of demand, where a sizeable number of buyers will come into the market at every incremental price dip. Despite this, both OCBC’s Eli Lee and Macquarie’s Brandon Lee agree that developers with exposure beyond the Singapore market will support the belief amid upheaval in the real property sector.

Historical Units Launched and Sold

Sellers will be willing to pay the SSD

Source: URA, OIR

SINGAPORE BUSINESS REVIEW | JANUARY 2014 41

REGIONAL INDUSTRY REPORT: MOBILE GAMING

Rising smartphone penetration boosts mobile gaming market

What you need to know about mobile gaming in Asia Asia Pacific is expected to account for the largest pie with a 48.4% market share. By Alicia Yap, Head of China Internet Research, Barclays

e are in the midst of an exciting period in which growing smartphone penetration globally has brought both opportunities and challenges to many internet companies around the world. Some have made a smooth transition migrating from PC to mobile, while many are still exploring ways to cope with the change and catch up with investments while protecting their core PC business growth. Newzoo, a Netherlands-based market research firm that focuses on the games industry, estimates that global mobile games (including smartphone and tablet games) revenues will grow 34% y/y to reach US$12.2bn in 2013, accounting for 17.4% of the total global gaming market. Benefiting from rising smartphone

42 SINGAPORE BUSINESS REVIEW | JANUARY 2014

iResearch estimates the China mobile games market to grow 47% y/y to Rmb11.6bn in 2013E.

penetration, especially in emerging markets, Newzoo estimates that the global mobile gaming market will reach US$23.9bn by 2016E, representing a 25% CAGR over 2013-16E. Of the total market, the Asia Pacific region is expected to account for the largest pie, with a 48.4% market share, or US$5.9bn revenues in 2013E, followed by North America with a 25% share, or US$3bn revenues. Mobile games – “new hope” for gaming industry After many years of difficult development and operational environment during the feature phone era, 2013 finally saw the China mobile games industry show signs of taking off. This was mainly due to rising smartphone penetration and the availability of cheap/low-end smartphones

and data network connections. iResearch estimates the China mobile games market to grow 47% y/y to Rmb11.6bn in 2013E, and to reach Rmb25.8bn by 2016E, at three-year CAGR of 31% over 2013-16E). In terms of revenue breakdown by phone type, smartphonebased mobile games are expected to contribute about Rmb4.8bn (or 41% of total mobile games revenues), while feature phone-based mobile games will still contribute 59% of total mobile games revenues, or Rmb6.8bn. This is a material change compared with 24% for smartphone-based games and 76% for feature phone-based games in 2012. With the continued rise in smartphone penetration and more second- and third-tier cities migrating from feature phones to smartphones, iResearch estimates that total smartphone-based mobile games will generate revenue of Rmb17.8bn and account for 69% of total mobile games revenues in 2016. On the other hand, feature phone-based games will only grow at a 5% CAGR and reach Rmb8bn by 2016, with their percentage contribution falling to 31%. Extrapolating from Newzoo’s global estimates and iResearch’s estimates, we estimate that China will account for c32% of Asia Pacific revenues, or US$1.9bn a reasonable estimate, given the lower smartphone penetration in China compared to Korea and Japan. The global mobile games development Looking across the top mobile games publishing ecosystems around the world, Apple IOS and Google Play are the app store users tend to use to download their games. Most mobile games developers would agree that publishing self-developed mobile games on the IOS platform in China is considered relatively easier

REGIONAL INDUSTRY REPORT: MOBILE GAMING compared to the Android platform. Since officially Google Play barely exists in China, this creates a lot of opportunities for third-party Android-based app stores, which we have seen emerging over the past two years. Other than the app stores of the handset manufacturers and telecom operators, there are a number of popular third-party app stores such as Qihoo’s Mobile Assistant and 91 Wireless’ app store that are gaining meaningful market share in China. According to Barclays’ proprietary survey of smartphone users in China, Qihoo’s mobile assistant and Baidu’s 91 Wireless app store ranked head-to head with penetration rates of 39% and 38.5%, respectively, for users to search and download apps. In Japan and Korea, the games publishing value chain also involves three players: the developer, the publisher and the distribution platform. By leveraging the social graph (ie, the friends circle within the social networking sites) and strong user stickiness, mobile messaging apps such as LINE (Japan) and KakaoTalk (Korea) have emerged as successful mobile games distribution platforms. According to App Annie Index (a third-party analytic firm with offices in the US and China), as of September 2013, eight of the top ten global publishers on Google Play by revenue were from Japan and South Korea, and nine of the top ten games on Google Play by Global mobile games revenue breakdown by region (US$mn)

Source: Newzoo, Barclays Research

As of September 2013, eight of the top ten global publishers on Google Play by revenue were from Japan and South Korea.

Apple iOS and Google Play are gamers’ favorites

revenue were games from Japan and Korea publishers. Similar to the success LINE and KakaoTalk have had, we believe Tencent is best positioned in China to capture mobile games exposure, in light of its successful track record of proprietary mobile games recently released on WeChat and Wireless QQ game center. Global app store performance Analyzing recent app store data metrics (as of September 2013) provided by App Annie, we conclude that virtual item sales for mobile games remain as the most profitable and easiest way to monetize among all the apps available on app stores globally. Because of the size of the smartphone user populations in the US and China, we were not surprised that the app stores in those countries were ranked number 1 and 2, respectively, by total number of app downloads. However, we were surprised by the size and profitability levels of the Japan and Korea app markets in terms of revenues and monetization. We attribute this to highly profitable and high user traction of mobile games in these markets. According to App Annie (dated 30 Oct 2013), the US is ranked number 1 with the largest number of apps download from iOS App Store during 3Q13, followed by China, Japan, the UK and Russia.

In terms of the top app store by gross revenues generated, the US also held its No.1, followed by Japan, China, the UK and Australia. Specifically, the US and China jointly contributed 40% of total app downloads from the iOS App Store in 3Q13, while the US, Japan and China jointly contributed to 50% of total revenues generated from the iOS App Store globally. As for Google Play, interestingly, while the US hold the number 1 position in terms of total number of apps downloaded, it is ranked number 3 in terms of total gross revenues generated. Some emerging countries, like India and Brazil along with Korea, were able to capture the top 5 spots, suggesting Android-based smartphones are likely to be more dominant in those countries. Another interesting conclusion, when we look at top countries by revenues generated, three Asian countries – Japan, Korea and Taiwan – were able to capture top five spots, which we believe is mainly due to gaming revenues contribution from those countries (particularly in Japan and Korea), especially following the success of social gaming influence by LINE and KakaoTalk. There is no doubt that games consistently rank as number 1 in both iOS App Store and Google Play, whether by number of total app downloads or by revenues generated. SINGAPORE BUSINESS REVIEW | JANUARY 2014 43

SPECIAL FEATURE: DINING

Check out these 3 international restaurants that every Singaporean raves about

A lot of foreign cuisines have found their home in Singapore, but three particular restaurants stand out.

ingapore has become a hodgepodge of nationalities, cultures, and even cuisines. Restaurants from all over the world make sure the Lion City is one of the first stops their branches make when they start venturing overseas. With the numerous choices that diners have, how do restaurants make themselves distinguishable among a sea of cuisines? Singapore Business Review got in touch with 3 restaurants that offer foreign and fusion cuisine, and delved into their menu to give you a glimpse of what each has to offer. Morton’s The Steakhouse stands up to its name as the restaurant that offers the best steak. As the only Morton’s branch in Singapore, it brewed up creative ideas to be the only go-to steakhouse with its weekday happy hours featuring their signature MORtinis. SUMIYA gives a full Japanese experience with its old school Japan ambiance. NUVO Singapore gives the JapaneseItalian fusion a new twist with a chef’s table where diners can watch the head

Happy hour at Morton’s

44 SINGAPORE BUSINESS REVIEW | JANUARY 2014

chef and his team at work. Morton’s The Steakhouse Known for “the best steak anywhere”, is now offering the ever-popular MORtini nights on Sundays as well, giving guests the opportunity to indulge in their favourite martinis from 5 to 7pm, 7 days a week. The Bar at Morton’s offers martinis that are priced attractively at $14.95++ and comes with complimentary filet mignon steak sandwiches served butler-style. Raise a glass to the original martini night, featuring Morton’s signature MORtinis -- Classic, Cosmopolitan, Appletini, Chocolate Mortini and Lycheetini. Pair your favourite drink with a selection of gourmet bar bites including the Prime Cheese Burger, Mini Crab Cake BLT and the USDA Prime Burger (better known

“Restaurants make themselves distinguishable among a sea of cuisines.”

Indulge in Morton’s signature MORtinis at The Bar

as the “Million-Dollar Hamburger”), made from a 12oz USDA hand ground premium beef patty set between two crisp hamburger buns with a choice of swiss, crumbled blue or cheddar cheese; crisp bacon, sautéed mushrooms or onions, all served with a generous portion of hand-cut Idaho Potato French Fries. The only Morton’s in Asia to extend its famous weekday happy hour to Saturdays and Sundays, MORtini Hour is available at both Bar 12.21 and The Bar at Morton’s with its Pagoda topped roof, resplendently located at the Mandarin Oriental Hotel’s atrium. Complete your Morton’s experience by heading on to dinner. Check out the restaurant’s prime ocean platters, which feature a selection of fresh, chilled, baked and grilled seafood. You can also opt for all-time favourites, such as prime steaks and chops. Top off your evening with Morton’s heavenly desserts such as Morton’s Legendary Hot Chocolate Cake, Key Lime Pie, Double Chocolate Mousse, or Morton’s Legendary Sundae. Morton’s is renowned worldwide for remaining true to its founders’ original vision of combining generous portions of high quality food, prepared to exacting standards with exceptional service in an enjoyable dining environment. Every detail, from the succulent steaks and seafood and vast wine selections to the seamless service, makes Morton’s the classic dining experience. In Singapore, Morton’s of Chicago is located at: Mandarin Oriental Singapore, Fourth Storey, 5 Raffles Avenue, Singapore. Reservations: (65) 6339 3740 Online reservations can also be made at: www.mortons.com. SUMIYA Charcoal Grill Izakaya Sumiya, which literally translates to charcoal (sumi) house (ya) exudes old school Japan with an enthralling touch. Enjoy aromatic char-grilled skewers and a wide variety of Japanese style tapas dishes created by the Japanese master chef. Prices start as low as $4++ per dish.

SPECIAL FEATURE: DINING

Savour Sumiya’s signature chargoal grills and tapas-style dishes

Enjoy SUMIYA’s cool retro vibe And kanpai with a round of cool refreshing Asahi Draft Beer – at an unbeatable price of $4.90++. With its cool retro vibe and crispy hot bites, Sumiya is an amazing place to dine! Its rooftop location with outdoor garden terrace is an added attraction. Your five senses are enlivened with blazing breaths of flames while drums beat and staff let out raucous cries of jubilation. Wind down and chill out at Sumiya. Rooftop #12-02 Orchard Central, 181 Orchard Road, Singapore 238896 (Use the orange lift to go up to 11th floor. Then take escalator to 12th floor) Tel: 6509-9618 Fax: 6509-3886 E-mail: orchard@sumiya.com.sg Business Hours: Lunch 12:00 to 3pm (Last Order at 2:30pm) Dinner: 6:30pm to 10:30pm (Last Order at 10:00pm) Open daily Website: www.sumiya.com.sg Convenient online reservation is available on the website. Visit us on Facebook.com/sumiya.sg NUVO SIngapore Singaporeans now have a new place to check out if you want to enjoy an exciting twist to your usual sashimi or ravioli. Caerus Holdings recently unveiled

Sit comfortably in Nuvo’s cozy circular dining rooms

Delight in NUVO’s Japanese and Italian cuisine NUVO, a 4,000 sq ft Japanese and Italian restaurant at The Dining Edition of Marina Square. Customers can delight in a playful fusion menu that presents the best of both cuisines from ingredients to cooking techniques, served in a vibrant yet cozy series of circular dining rooms. The Japanese executive chef is responsible for the contemporary menu and signature communal dishes include Salmon with sautéed Gobou (burdock root) in Shiitake Broth, Lamb with Romesco Sauce and Corn. Its non-sharing menu features modern twists on old favorites such as Crispy Risotto with Hokkigai (surf clam) and Spaghettini with Sakura Ebi (prawn) in Tomato Sauce. The six-seater chef’s table, where diners can preview and interact with the head chef and his team at work, will serve off menu dishes inspired only by his creativity. At the bar, award-winning mixologist

“Restaurants from all over the world make sure the Lion City is one of the first stops their branches make when they start venturing overseas.”

Ethan Leslie Leong has created five cocktails exclusive to NUVO, alongside some favourite classics. NUVO executes the philosophy that “the best food is food that is shared” with interlocking circles that unite the restaurant, chef’s table, lounge and bar. There are also quiet booths for intimate meals, with long tables for reunions with friends and family and a cozy lounge for lazy Sunday afternoons. “We have chosen Marina Square’s new dining wing to launch our new resturant concept in Southeast Asia, as we believe there are strong synergies between the brands. NUVO aims to marry Singaporean’s love affair with Italian and Japanese cuisine in the same way, The Dining Edition aims to marry good food with quality shopping experiences,” says Vijay Pillai, Director of Caerus Holdings Group. NUVO is Caerus Holdings’ second contribution to The Dining Edition, Marina Square’s new gourmet wing. In early August, Caerus Group had launched New York’s most celebrated cake boutique Lady M® Confections to Marina Square. The pioneer of the Mille Crêpe cake, Singapore represents the brand’s debut in Asia and the first Lady M® cake boutique outside the United States of America since it was founded 12 years ago. SINGAPORE BUSINESS REVIEW | JANUARY 2014 45

SPECIAL FEATURE: DINING

Experience authentic Indonesian cuisine at The Moluccas Room Get a taste of a wide range of signature sates and all day ala carte buffet known as the Rijsttafel Gala.

ingapore is a multicultural country home to people with diverse ethnicities. Craving for different cuisines is therefore not much of a problem in the Lion City, with lots of restaurants offering various Asian and Western specialties. One such restaurant is The Moluccas Room, which serves authentic and traditional Indonesian food prepared by Indonesian chefs. Moluccas, the former name of present day Maluku, is an Indonesian province consisting of islands that produce spices such as nutmeg, clove and mace, among others. At the Moluccas Room, this rich spice heritage is celebrated through the restaurant’s traditional Indonesian menu. The restaurant offers diners a dining concept featuring authentic Indonesian cuisine from the finest Indonesian chefs. Nestled along the Marina Bay Sands Promenade, overlooking the city outline, and the Singapore River as a backdrop, it is perfect for fine dining enthusiasts who crave for Indonesian cuisine. Jessica Welirang, Director of The Moluccas Room, says, “We strive for our esteemed customers to experience exotic, authentic Indonesian Cuisine in a welcoming, warm and luxurious setting.” Besides the food at The Moluccas Room,

the blend of authentic and contemporary is further reflected in the interior decors featuring stylish dark wood furniture, illuminated intricate batil motifs, and custom made tableware. Full glass windows on one side of the restaurant offer a scenic view of the Marina Bay. The restaurant’s menu is very extensive but Welirang considers sates as their bestseller. “Our range of signature sates is very popular and unique since it is marinated with spices, charcoal grilled, and served with authentic Indonesian sauces. Must try sates at the Moluccas Room are our Sate Ayam Madura, Sate Angus and Sate Padang Lidah Sapi,” she recommends. 120 new Indonesian dishes a year Welirang notes that a memorable experience that diners can enjoy at The Moluccas Room is their range of signature sates and all day ala carte buffet, known as the Rijsttafel Gala, which is a colonial meal setting of 10 authentic signature Indonesian dishes served in a single setting to share. “Our dishes changes every month. So in 12 months, we will introduce dishes from 12 different regions from Indonesia, so that’s 12 different menus

“We strive for our esteemed customers to experience exotic, authentic Indonesian cuisine in a welcoming, warm and luxurious setting.”

A taste of Indonesian food in a luxurious setting

46 SINGAPORE BUSINESS REVIEW | JANUARY 2014

and 120 new dishes to savour throughout the year,” she adds. With its contemporary culinary interpretations of authentic Indonesian cuisine and its Marina Bayfront locale, The Moluccas Room is positioned to introduce a refreshingly unique Indonesian contemporary concept to any event. Covered with lustrous warm wooden parquette throughout their 2500 sq ft restaurant with “Mega Mendung” Batik-patterned, floor to ceiling columns, the Moluccas Room exudes luxury and warmth.

CONTACT The Moluccas Room The Shoppes at Marina Bay Sands 2 Bayfront Avenue L1-81 Singapore 018972 Contact & Reservation Email: info@themoluccasroom.com Hotline: +(65) 6688 7367

CO-PUBLISHED CORPORATE PROFILE

Chang Cheng’s pursuit of excellence revealed Find out how Chang Cheng has grown from a single stall to over 230 food stalls and 30 food shops.

hang Cheng Group was established in 2001 as a holding company for its food and beverage businesses. Spurred by the visionary leadership of its Founder and Managing Director, Ricky Kok Kuan Hwa, and Executive Director, Yap Wing Sang, it has expanded rapidly from its initial brand of economic Chinese mixed vegetables rice stalls to numerous brands and outlets. Today, it has over 230 outlets all over Singapore, bringing easy reach and convenience to all its customers. A success story from a stall Twenty years ago, Chang Cheng was a single-location, mixed vegetables rice stall with an initial outlay of S$12,000 and two employees. It has now grown into a food and beverage corporation with over 230 food stalls and approximately 30 food shops spanning across Singapore, with more than 1,500 employees and turnover recording to the tune of hundreds of millions. From a modest business owner 20 years ago, Ricky now achieved one of the top 5 positions in the Distinguished Category and a special mention in the SME One Asia Awards 2013. Ricky recalls that as the business started to expand, he began to consider the scalability of operations, as well as the hierarchical progression of employees, such as how they could develop themselves in various roles such as a chef, a supervisor

and a manager. He also believed that if he operated 10 stalls simultaneously, as opposed to operating just one, he’ll save nine years of his time. Following the Asian Financial Crisis in 1997, Ricky rode on the bandwagon of S11, Kopitiam, and Yu Hua coffee shops. He saw the crisis as an opportunity to strengthen the reputation of Chang Cheng when firms were scaling down their businesses while they, on the other hand, expand. “I have always insisted that I fulfill the three-year contracts even if the stalls were making losses. Establishing amicable relationship and credibility amongst the landlords was my priority. And if there were vacant lots, I would be the first to come to the minds of the landlords.” A healthy dose of challenges But all success stories are not without hurdles. According to Ricky, the biggest blow for the business was the 2003 SARS crisis, coupled with rising rentals and cost of ingredients, and manpower shortages. He shares that he first decided to buy over

“Ricky now achieved one of the top 5 positions in the Distinguished Category and a special mention in the SME One Asia Awards 2013.”

Managing Director and Executive Director with Chang Cheng Group senior management and friends

48 SINGAPORE BUSINESS REVIEW | JANUARY 2014

coffee shops to overcome problems with increasing rentals. Second, he sourced for Thai Fragrant white rice directly from Thailand to avert exorbitant prices set by the middlemen. Lastly, raw meats, vegetables, and sauces were processed in respective centralized locations, and distributed to individual outlets in order to minimize manpower requirements. A competitive edge All businesses have their own success stories, but what sets Chang Cheng apart? Ricky considers affordability, healthy food and quality service, as well as convenience as their top 3 competitive advantages. He believes any non-utilitarian attachment to food, aside good service, is a masquerade and he wants to give their customers quality food and service without masquerade. By eliminating these non-utilitarian attachments, Ricky says they can channel the surplus energy and resources into the integrity of their products and services. This way, Chang Cheng is providing the most of the best to the greatest number of consumers for the least cost. “We also create value for our customers, firstly, by rationalizing our business operations, secondly, upgrading our food and service quality, and lastly, educating consumers our values through branding,” he adds. Ricky notes that their continual pursuit for innovation and quality has won them the approval of customers islandwide. Their products and services target consumers from all walks of life, and more than 80% of their customers are regulars. “We take pride in offering our customers a sumptuous spread of Chinese homecooked fares of more than 30 dishes, spoiling them for choice. We take our customers’ feedbacks seriously, and pay heed to constructive suggestions. That is probably one of the many reasons why we are able to capture the palates of the masses.” The seven progressive steps According to Ricky, the Seven Progressive Steps serve as a guide for Chang Cheng’s

CO-PUBLISHED CORPORATE PROFILE

Ricky Kok Kuan Hwa, Managing Director, Chang Cheng Group expansion. “Our plans may change, but our direction remains unchanged,” he says. The first step they undertake is to elevate the efficiency of existing food stalls and food shops, and venture into food kiosks and restaurant operations. “I have always wanted good food to reach out to customers at a good price. By expanding our target market segments, we are able to bring greater value to the masses,” Ricky notes. Second is to optimize profits and consolidate financial resources, so as to facilitate business expansion in a prudent and judicious fashion.“It is imperative that we understand the internal and external aspects of the business. We have to observe current market conditions, examine dynamics of the market, and evaluate the long-term health of the company before we consider any expansion programme,” he explains. Third is to leverage on innovation and technology to increase production capacity and productivity, as well as endeavor to exceed present business operations expectations. “We are able to take advantage of economies of scale derived from large scale F&B operations to lower the costs of ingredients, equipment and particularly labour, which is scarce and costly.” “We have established a central kitchen and production facilities, as well as invested in machinery and equipment to assert better control over food safety standards and quality of food products,” he adds. Fourth is to develop new food products, standardize kitchen operations, and conform to ISO 22,000

Managing Director and Executive Director with Chang Cheng Group senior management and HACCP food safety and hygiene standards. “Achievement of internationally recognized standards will be the hallmark of our success. It is a testament of our commitment to the health, safety and wellbeing of our employees and customers. Take care of your employees and they will take care of your customers,” he shares. Fifth is to develop Chang Cheng Brand into a household name. “Brand conveys quality, credibility and experience, and we intend to keep it consistent in the minds of consumers. Making profit doesn’t matter; it’s how we make the profit that matters,” says Ricky. Sixth is to encourage more locals to join the food and beverage industry, support re-employment of older employees and alleviate food inflation through economies of scale. “As part of our Corporate Social Responsibility programme, we are determined to play our part for the society.” Lastly is to endeavor to set the standard for food production, food safety and hygiene in the food and beverage

“Today, Singapore’s food and beverage market has become very saturated and highly competitive; therefore, it is imperative we continually seek innovative ways to improve ourselves.”

industry. “We aspire to be the yardstick of excellence; the yardstick against which all others are measured.” Developments to come Ricky says that they are presently expanding new product lines such as frozen food, premixes, sauces and catering services. Owing to the popularity of Chang Cheng Mixed Vegetables homecooked fares, they are also in the midst of launching a series of Singapore’s very own packaged sauces. Furthermore, they are also in the process of integrating Chang Cheng’s commissary kitchen, warehouse, vegetables processing facility, meat processing facility and corporate office into a single commercial building. “We are looking into establishing a comprehensive Supply Chain Management system to minimize lead time and maximize logistics capacity, an effective Inventory Management system to minimize holding cost and the deviation of surplus and shortage, an efficient Production Management system to minimize wastages and maximize output capacity, and an optimal Operations Schedule to minimize attrition and maximize productivity,” says Ricky. He adds that they have, in fact, acquired a plot land at Woodlands Link, where the construction of the new building is slated for completion in 2015. “Today, Singapore’s food and beverage market has become very saturated and highly competitive; therefore, it is imperative we continually seek innovative ways to improve ourselves.” he concludes. SINGAPORE BUSINESS REVIEW | JANUARY 2014 49

DINING

Dinner and drinks in downtown SG Indulge in these restaurants that offer a mix of cocktails and good food to entertain clients.

The Tippling Club 38 Tanjong Pagar Road, Singapore 088461 After their time at Dempsey Hill, Tippling Club moves to its new address in the CBD this December. The move is not just a change in location, but also a change in the menu, décor and overall experience. Featuring a bar, dining room and upstairs private room- Tippling Club brings something new into the CBD. With Chef Clift’s brand of modern gastronomy that is fun, playful and fresh expect award winning cuisine with world-class cocktails, pushing the extremes of ingredients and textures to create an ever evolving dining experience. Those looking for after work cocktails, Set Menu’s for their business lunches or Bar snacks can venture into the new Tippling Club at Tanjong Pagar.

The Black Swan 19 Cecil Street, Singapore 049704 Jazzing up the Central Business District is The Black Swan. Recently opened at The Quadrant on Cecil, The Black Swan aims to add fresh glamour into the neighborhood. Nestled in a building constructed in the thirties, the space has been carefully restored to its original Art Deco glory. With curved walls, high ceilings and a grand mezzanine floor overlooking the main dining room, The Black Swan offers a stunning location to enjoy its lunch, dinner, drinks and supper service. Indulge in their oyster bar, serving up fresh oysters from Normandy or delight in the star of the cured meats section, the mouth-watering Jamón Ibérico de Bellota. Recommended by QUINTESSENTIALLY LIFESTYLE, the world’s leading luxury lifestyle group with a 24-hour global concierge service. Contact singaporebusiness@ quintessentially.com.

50 SINGAPORE BUSINESS REVIEW | JANUARY 2014

Me@OUE OUE Bayfront Rooftop, 50 Collyer Quay, Singapore 049321 With three different menus, Me@OUE is great for those business lunches for people with different demands. ME@OUE provides an easy solution by bringing together three award winning chefs and their specialty Chinese, French and Japanese dishes everyone gets a bit of what they want. The restaurant and the recently opened lounge is perched at the top floor of OUE Bayfront, with an uninterrupted and panoramic view of the Marina Bay. Artfully chic and tastefully whimsical, ME@OUE presents a sensory experience featuring the most prolific gourmet offerings with a visually stunning backdrop.

skycargo.com