Singapore's family-owned firms doing well, survey shows

Family-owned companies here are in a class of their own, according to a new survey yesterday.

The study focused on mid-to large-cap listed firms in which the family or founder held at least 20 per cent of shares and spoke for at least 20 per cent of voting rights.

Researchers polled almost 1,000 such firms globally, with 90 per cent of them having a market capitalisation of at least US$1 billion (S$1.4 billion), although the ones here had an average market cap of US$7.5 billion.

That ranked Singapore at No. 16 globally in terms of average market capitalisation, and third in Asia Pacific excluding Japan, after South Korea and Hong Kong.

Since 2006, the shares of family-owned firms here have generated annual average returns of 7 per cent, higher than that of the stock of non-family-owned companies.

The regional average was just 3 per cent, said the report, which was compiled by Credit Suisse.

It said Singapore-listed Chinese developer Yanlord Land Group was among the top 50 family-owned firms globally in terms of average revenue growth since 2014. The firm has racked up average revenue growth of 29 per cent a year.

Mr Eugene Klerk, head analyst of thematic investments at Credit Suisse, said in a statement: "Family-owned businesses are outperforming their peers in every region, every sector, whatever their size."

Also, those across global emerging markets are much younger than their peers in developed markets, at an average age of 37 in the Asia-Pacific excluding Japan, compared with 82 years in Europe.

The report found that in terms of share price performance by generation, younger family-owned companies - by the first or second generation - tend to do better than older firms, generating share price returns of around 9 per cent a year.

Returns drop as firms move into the third generation of ownership or beyond, to less than 6.5 per cent.

"This drop could be due to younger family-owned companies being on average smaller, reflecting a 'small-cap growth' factor", said Credit Suisse.

Mr Klerk noted that research seems to suggest investors are not too concerned about the level of ownership, but rather how involved family owners are in the daily running of the business. "This seems to be at the core of the success of family-owned companies, in our view."

A version of this article appeared in the print edition of The Straits Times on October 27, 2017, with the headline 'Singapore's family-owned firms doing well, survey shows'. Print Edition | Subscribe