Looking ahead to 2016

Braced for challenges in the new year

Soo Kee Group's chief executive officer, Mr Daniel Lim, says he hopes the firm's plans to add value to its services will help the group to grow its business.
Soo Kee Group's chief executive officer, Mr Daniel Lim, says he hopes the firm's plans to add value to its services will help the group to grow its business.ST PHOTO: YEO KAI WEN
Mr Seah Kian Peng said FairPrice regards social objectives as being as important as business objectives.
Mr Seah Kian Peng said FairPrice regards social objectives as being as important as business objectives. ST FILE PHOTO
Lim Hock Chee
Lim Hock Chee
CAO chief executive Meng Fanqiu says the global aviation industry still offers “significant growth opportunities, especially in Asia”.
CAO chief executive Meng Fanqiu says the global aviation industry still offers “significant growth opportunities, especially in Asia”.ST PHOTO: YEO KAI WEN
Ademco’s group managing director Toby Koh says the company’s main challenge is attracting, training and retaining talent in the six countries it operates in.
Ademco’s group managing director Toby Koh says the company’s main challenge is attracting, training and retaining talent in the six countries it operates in. PHOTO: ADEMCO SECURITY GROUP
CapitaLand group chief executive Lim Ming Yan says firms can tap its presence in over 20 countries globally to grow regionally and internationally.
CapitaLand group chief executive Lim Ming Yan says firms can tap its presence in over 20 countries globally to grow regionally and internationally. ST PHOTO: AZIZ HUSSIN
Mr Choe Peng Sum expects continued strong demand for the company’s serviced apartments, hotel residences and boutique lifestyle hotels.
Mr Choe Peng Sum expects continued strong demand for the company’s serviced apartments, hotel residences and boutique lifestyle hotels. ST FILE PHOTO
Ms Judy Hsu, chief of Standard Chartered Singapore, plans to build on the bank’s leadership in digital banking.
Ms Judy Hsu, chief of Standard Chartered Singapore, plans to build on the bank’s leadership in digital banking. PHOTO: STANDARD CHARTERED

Market volatility, China's slowdown, tumbling oil prices and the broader commodities rout: 2016 could well see a rerun of these grim themes and more. But Singapore companies are bracing themselves for such headwinds, and ready to face the new year head on. Chong Koh Ping and Rupali Karekar of the Business Desk talk to local industry leaders to seek their views on the 2016 business outlook.

Soo Kee Group 

Adding value to services the way to go

For jewellery maker and retailer Soo Kee Group, highlights last year included an initial public offering on the Singapore Exchange's Catalist board and starting its first portal.

This year, the group hopes to add value to its services - such as launching new products, integrating online and offline channels to keep customers engaged and streamline operational efficiencies, improving productivity and enhancing product research and development.

"We foresee the jewellery sector remaining more or less the same although consumer behaviour and demand are constantly changing," chief executive officer Daniel Lim told The Straits Times.

He said: "The group will continue to present products of intrinsic value comprising both quality and design in order to tap on this...behaviour."

With more than 20 years' experience in the retail sector, the Soo Kee Group has more than 60 retail stores in total in Singapore and Malaysia, and has three core brands under its umbrella - Soo Kee Jewellery, SK Jewellery, and Love & Co.

The SK Jewellery brand has exclusive distributorship for ALLOVE Diamonds which have an all-new 81-facet, 10-heart and 10-arrow cut that is specifically created to maximise light performance.

"The launch will help to garner continued support and loyalty from our customers," Mr Lim said.

But the group is not immune to headwinds. Its current share price is trading below IPO levels of 30 Singapore cents.

Increasing rental costs and wages will also remain a challenge for the group in the new year, but the company aims to expand distribution channels to drive growth in both revenues and profits.

The regional macroeconomic conditions, such as employment rates and inflation, may also affect consumer discretionary income.

But Mr Lim is hopeful that relatively stable diamond prices can translate to healthy demand for their products, even as business is expected to do well with tourist arrivals remaining robust this year.

"Continuing to value-add to our services will be the foundation of our business growth," he said.


FairPrice

Ongoing push to keep goods affordable

The bad news is that 2016 will be a challenging year for many businesses as market conditions remain soft and they struggle to keep things on an even keel, let alone grow.

But the good news is that customers will benefit as most businesses will be more customer-focused and strive to stay relevant, NTUC FairPrice chief executive Seah Kian Peng told The Straits Times.

For consumers, 2015 brought positives and negatives.

Inflation stayed in negative territory for a 13th straight month in November, amid the soft housing rental market and low oil prices.

That meant prices were largely flat. But food prices may come under pressure from the ongoing El Nino weather phenomenon.

All these factors make Singapore susceptible to increasingly common global hikes in food prices.

Challenges will also come in the form of rising overheads and labour crunch for all retailers.

"For FairPrice, being a social enterprise also means we regard social objectives as being just as important as our business objectives," said Mr Seah.

To address the labour crunch, a self-checkout system and iCash system have been introduced.

A pilot store with special features has been launched to cater to the needs of the elderly.

The company will continue to employ strategies such as food source diversification, forward buying, and contract farming to ensure essentials remain available and affordable for Singaporeans.

"We have and will remain true to our social mission to moderate the cost of living in Singapore, as we have done over the years," Mr Seah said.


Sheng Siong

Steady growth expected amid global volatility

Supermarket chain operator Sheng Siong has enjoyed remarkable success since its initial public offering in 2011, ringing up robust sales.

The firm already has one of the largest supermarket chains in the country with 37 outlets.

This year, chief executive Lim Hock Chee (right) sees the business growing at a steady pace despite global volatility caused by low oil and commodity prices.

"Given our business nature of dealing with consumers' staples, our business may not be that seriously impacted," he told The Straits Times, adding that the consumer staples sector tends to be more resilient than other sectors in tough times.

Analysts expect slowing economic growth in Asia in the year ahead, as the region faces challenges amid high debt and weak exports.

"Revenue growth will be lumpy across various sectors, but for our industry, we may still see some growth," Mr Lim said.

Sheng Siong has been focusing on international expansion and margin improvements to drive bottom-line growth over the past few years. It entered into a joint venture with China-based Kunming LuChen Group, a manufacturer and distributor of sauces and condiments, to set up supermarkets in 2014.

The local retailer has a 60 per cent stake with an initial investment of US$6 million (S$8.5 million).

"Besides growing the new outlets that were opened recently, Sheng Siong has in the past taken advantage of lower costs during economic downturns to secure new retail space and invest in new plant and machinery," Mr Lim said.

"It may also be a good time to train/retrain our staff."

Mr Lim also sees that wage inflation may moderate because of the macroeconomic climate, but cost pressures will ease because of the supply of more labour and falling rentals.


China Aviation Oil

Poised to build stronger business

Business was mixed in the second half of last year for China Aviation Oil (CAO), as the jet-fuel provider recorded a 142 per cent rise in third-quarter net profit to US$17.7 million (S$25 million) on the back of higher gains from its jet-fuel trading business and lower expenses.

But revenue plunged nearly 50 per cent to US$2.4 billion, largely owing to lower oil prices. Profit shares from associate companies also fell.

But chief executive Meng Fanqiu believes that CAO is well-poised to build an even stronger business this year due to its core operating fundamentals and a sound business climate. "The global aviation industry continues to present significant growth opportunities, especially in Asia," Mr Meng told The Straits Times.

A robust Chinese civil aviation industry and its strong demand for jet fuel will help CAO, the sole importer of the aviation fuel into China. Robust tourism, trading and logistics sectors in the Asia-Pacific will also bring positive sentiment.

CAO has had a few hits and misses in recent years, and a slowing China and low commodity prices reduced trading margins at times. Economic and geopolitical uncertainties will also affect global markets in the coming year.

But Mr Meng is confident the jet fuel business will help generate stable returns. The firm also aims to expand its operations outside China and grow its international presence. It remains on the lookout for growth opportunities in the form of investments and acquisitions.

"We will move forward with the diversification of business portfolio under which fuel oil will be the focused product," said Mr Meng.


Ademco Security

Not resting on laurels despite a great 2015

For security solutions and services firm Ademco Security Group, 2015 has been its best in terms of revenue and earnings before tax.

Its China market is booming and overseas offices are likely to have contributed more than 40 per cent of total group turnover by the end of the financial year.

But group managing director Toby Koh is not resting on his laurels. He aims to carry the momentum into 2016. "The focus continues on creating security platforms that not only strengthen security, but help our clients increase operational efficiency and profits," Mr Koh told The Straits Times.

Besides home and office security, the company provides services like closed-circuit television and surveillance facilities, biometrics and identity security, 24-hour integrated services and AES wireless networks.

As manpower costs shoot up, clients are looking to use remotely managed services to reduce their monthly expenditure on security guards.

Asia is also prone to natural disasters, and is experiencing growing income disparity, which could sometimes lead to petty crimes, even as threats of terrorism and cybercrime linger in the background.

"We believe cybercrime will rear its head even more in the new year and Ademco is working on prevention and detection strategies with our clients," Mr Koh said.

"Our main challenge is to attract, train and retain the best talent we can find in all the six countries we operate in," he said.

"We also hope to navigate the government legislation in regional countries and obtain the licences needed to expand and operate our business."


CapitaLand

Connectivity in Asia key to future growth

Local developer CapitaLand is forging ahead with confidence this year.

Positive signs are emerging from South-east Asia, China and India as they all urbanise rapidly.

Plans for inter- and intra-regional connectivity in Asia are expected to spur future growth, fostering greater collaboration, cross-border investment and new global alliances.

China's "One Belt, One Road" strategy coupled with Singapore-China's third government-to-government project in Chongqing will spur international and domestic demand for real estate as well as increase overall consumer spending, said its chief.

"Given our presence in over 20 countries globally, local businesses will be able to tap our network in Asia, Europe and the Americas to grow regionally and internationally," says group chief executive Lim Ming Yan.

CapitaLand, one of Asia's largest real estate developers, has, in recent years, taken steps to simplify the organisational structure to gain competitive advantage in integrated developments.

Through Ascott, its wholly owned service residence arm, it made its first foray into the United States in July last year, and expects to make more inroads into new markets with an aim to double the portfolio by 2020.

As the younger generation steps into the work culture, technology is bound to dominate the way people buy real estate, and the challenge for CapitaLand is to connect and communicate better with the digital generation, Mr Lim said.

This is also true in retail, as stores in malls have to be integrated with value-added services, such as restaurants and cinema halls, to provide convenience for consumers.

"CapitaLand is already leading the way in leveraging on technology to serve our customers better," he said. "Given the current times of increasing competition, complexity and change, CapitaLand will maintain a culture of transformation to stay ahead of the curve."


Frasers Hospitality

Expand and explore new opportunities

Last year, Frasers Hospitality further expanded its offshore footprint, taking its global portfolio to 136 properties across 78 cities and more than 21,000 rooms.

Chief executive Choe Peng Sum says 2016 will also be a year of expansion, with an aim to grow the global inventory to 30,000 serviced residences by 2019.

The goal is to "strengthen our position in cities where we already have an established presence and to continue exploring new opportunities, particularly in emerging markets with steady foreign direct investment inflows," Mr Choe said.

The landscape for the hospitality industry has been steadily changing in recent years, what with the advent of alternative sources of rental accommodation like Airbnb, HomeAway and Flipkey.

Mr Choe has acknowledged the challenges in the evolving consumer landscape that are causing companies to rethink their distribution strategy. "It has kept us on our toes, pushed us to enhance our guests' experience, be more efficient," he said. But Frasers has positive factors in its business plan for the new year.

Shorter and more frequent trips are expected as businessmen explore opportunities while merging business with leisure time, extending their trips to join their family on holidays. Such factors will fuel "continued strong demand for our serviced apartments, hotel residences and boutique lifestyle hotels", Mr Choe said.

Frasers' investment in technology and innovation, through e-concierge, 24/7 call centres and Chinese-focused websites, would give them an edge.

While competition is inevitable, brand recognition and trust will continue to be important factors. "The delivery of a quality, consistent service with a differentiated appeal to that of other brands will be crucial in demonstrating the ability to understand and meet the changing needs of the business and leisure traveller," he said.


Standard Chartered

Keeping lean, with eye on the long term

As Standard Chartered's London-based chief executive Bill Winters revamps the bank's management style, his Singapore chief, Ms Judy Hsu, has a clear vision for the local operations.

Under her leadership, Standard Chartered in Singapore will focus on building a leaner and fitter organisation while investing in clients to deliver long-term growth.

Macro headwinds are expected this year, at least in the first half, but the bank will position itself to weather these short-term uncertainties, Ms Hsu said.

"We are maintaining a tight discipline on costs, including employment and wage; but we will continue to invest in people, attracting, training and up-skilling to build the best team," she said.

Under Mr Winters, the embattled British lender is overhauling its operations to deal with souring loans from companies hit by the commodities rout, and tough business and regulatory conditions.

A major restructuring plan involves axing 15,000 jobs globally and raising US$5.1 billion (S$7.2 billion) in capital.

In Singapore, the bank employs about 7,000 staff, supporting both the local franchise and global businesses and functions such as technology and operations.

Ms Hsu sees Asia as one of the fastest-growing regions for this year and the years ahead.

She plans to build on the bank's leadership in digital banking by introducing new capabilities and one-stop solutions in retail banking, an area Mr Winters is himself keen to refocus on.

Challenges such as market volatility owing to potentially higher United States interest rates and their impact on neighbouring economies may hit businesses of StanChart customers. But they also represent "new opportunities to innovate and create greater value to support our clients through challenging times", she said.

"We are the second-largest contributor to the Group and a major driver of performance for Asean and South Asia," she said.

This year, her plan is to live up to that reputation.

A version of this article appeared in the print edition of The Straits Times on January 01, 2016, with the headline 'Braced for challenges in the new year'. Print Edition | Subscribe