Currency trading profitability largely depends on exchange rate developments. The exchange rate witnessed significant fluctuations last year, according to industry insiders.

In 2015, the State Bank of Vietnam (SBV) devalued the dong three times and loosened its trading bands twice, leading to cumulative depreciation of five per cent in the domestic currency compared to the dollar.

“Dealing in foreign exchange was truly risky over the past months, especially for banks having a negative foreign currency balance,” said Nguyen Tri Hieu, a banking and finance expert.

Since the beginning of this year, central bank has been adjusting the dollar/dong rate daily instead of maintaining a long-term fixed rate.

The rate is now set based on exchange rate changes in the inter-bank foreign exchange market, as well as on monetary developments in countries involved in Vietnam’s trade, investment and financing ventures.

The SBV expects the daily-adjusted rate to enable it to ensure its management objectives, while allowing exchange rate flexibility as per global monetary fluctuations.

According to news website ttvn.vn, VPBank lost 290 billion dong ($12.9 million), an increase of 220 per cent over the previous year.

Techcombank lost 192 billion dong ($8.5 million), after the bank earned a profit of nearly 23 billion dong ($1 million) in 2014.

Currency trading whittled away profits of Vietnam International Bank, as the bank lost 24 billion dong ($1.1 million) in the foreign exchange market in 2014, and 10.5 billion dong ($467,000) in this market in 2015.

Several other banks profitted from currency trading last year, but profitability diminished significantly.

Vietinbank, one of the largest banks in Vietnam, earned a profit of 19.7 billion dong ($876,000) in the foreign exchange market last year, a 95 per cent decline from the previous year.

Eximbank, at which currency trading was a major service, earned a profit of more than 62 billion dong ($2.8 million) in the foreign exchange market in 2015, 64 per cent less than in 2014.

Vietcombank posted a profit of 44 billion dong ($1.9 million) from currency trading in the fourth quarter of 2015 alone, an 83 per cent fall from the same period in 2014.

Specialists at Vietcombank securities say opportunities exist for banks to improve their foreign currency business earnings, with the central SBV applying a daily-adjusted reference exchange rate.

Many may be aware that the likes of Australia’s Optus and India’s Bharti Airtel are part of the Singtel stable, but they may not realise the extent of the contribution of these overseas entities and associates.

In fact, as much as three-quarters of Singtel’s revenue comes from its overseas units.

Singtel group chief executive Chua Sock Koong said in an exclusive interview with The Straits Times: “The realisation that we had to make changes came as early as the 1980s, when we were still a statutory board.

“We started preparing for competition way back when the deregulation of the telecoindustry worldwide had already started as we knew that it would reach our shores in time to come and change our fate dramatically.”

Take the example of Telkomsel, Indonesia’s leading telco. When Singtel first invested in Indonesia’s Telkomsel in 2001, it had more than two million mobile customers. The number is now 150 million.

Singtel now has 595 million mobile customers across 25 countries in Asia, Australia and Africa.

But it cannot afford to stand still. The liberalisation of the telco sector here in the 1980s cannot be compared with the scale of the challenges it faces now. As technology disrupts the industry and makes IDD calls almost a thing of the past, Singtel faces threats on all fronts.

Singtel has reinvented itself before; it is doing so again. Worried about cybercrime? Ask Singtel and it can provide your company with cyber security services. Need help with an online marketing campaign? Singtel has the tools to help push the ad when the most number of eyeballs are active.

Chua said: “We have transformed ourselves many times over; from a statutory board, to corporatisation, to a public-listed entity and now to a global communications company.”

DIGITAL – THE NEW FRONTIER

Entering the telco fray are global Internet players and a host of OTT (over-the-top) firms. These OTT players are a relatively new phenomenon and a threat because they are able to offer video and audio without needing to use a traditional telco like Singtel.

Chua said: “How have we responded to this ongoing technological disruption? We’ve had to adapt. We no longer see ourselves as just a telco. While the telco business remains the bedrock of our business, we are also identifying new ways to use our telco assets to develop new revenue streams, especially in the digital space.”

Singtel may not have envisioned the entry of the fourth player in 2012, but it certainly had an eye on the challenges of the future when it launched its transformation strategy to invest in “next-generation growth engines” in the digital space.

As at Dec 31, Singtel had ploughed nearly $1 billion into these new digital business streams.

It spent US$321 million (S$451 million) in 2012 to buy Amobee and another US$385 million for Amobee’s acquisitions Adconion and Kontera, all of which are in the digital mobile advertising industry. Most recently, Amobee has signed up new customers, including Microsoft and Lexus, with new products to help advertisers better target audiences for video advertisements and improve the return on mobile ads.

Another area that Singtel is trying to develop is advanced analytics. DataSpark is now aiding planners of transport infrastructure in Singapore. Dataspark taps Singtel’s network to track when people travel, what transport they use and where they are going. DataSpark gathers this information to get insights into travel patterns. It may sound somewhat intrusive but Singtel says the data is gathered only on an aggregated basis so no detail about an individual is made available.

There is also premium OTT video under HOOQ which saw Singtel work with Sony and Warner Brothers to launch its regional video-on-demand subscription service.

HOOQ taps the unmet demand in emerging markets, where consumers would be keen to watch Hollywood movies on the go but online videos have often been illegal. It has now expanded its content library to more than 35,000 hours.

Singtel’s venture capital arm, Singtel Innov8, complements these new businesses as they work to identify the latest innovations and bring these into the Singtel group.

ENTERPRISE – HELPING FIRMEET THE DIGITAL CHALLENGE

Even in one of its two traditional businesses, enterprise – the other is consumer – Singtel is working on developing new areas. To reduce its reliance on the carriage business, it is looking at three emerging areas. These are cyber security, cloud services and smart cities.

Cyber security is on everyone’s lips now. Research shows that about 70 per cent of organisations have experienced some form of intrusion, be it via e-mail, mobile or by networks.

Being one of the largest telcos in South-east Asia gives Singtel an advantage in growing in this market, reckons Chua: “Our IT and telco capabilities enable us to move into the cyber security space and address a huge market opportunity.”

She noted: “We have gone out to strike strategic partnerships with FireEye and others to build up Singapore as a hub for cyber security activities. (This contributes to making) Singapore a trusted business centre and financial hub.”

Through its partnership with FireEye, Singtel has been able to launch the Singtel FireEye Advanced Security Operations Centre here and in Australia. These new centres provide companies with real-time intelligence on cyber attacks.

With links to Singtel’s network and Akamai’s security solutions, a better overall picture of Internet traffic is achieved, which means faster detection and response to threats.

What has taken Singtel’s business in cyber security a big step forward is its US$770 million acquisition of Trustwave, completed in September last year.

Trustwave, with seven security centres around the world, brings over 1,000 professionals to the table, serving over 10,000 customers. It is expanding as it partners telcos like Rogers in Canada and Singtel’s regional mobile associate Globe Telecom in the Philippines.

CONSUMER: A BETTER EXPERIENCE

But even as Singtel focuses on these new businesses, its core consumer business is very much a priority.

Last month, it caused a ripple of excitement among consumers here with news of being the first to partner video streaming service Netflix to bring some of its programmes to Singtel-TV.

Research house Nomura’s take on the deal is that telcos, instead of competing with these OTT players, may choose to partner them.

Singtel sees partnering Netflix as a way of improving the experience for customers, by offering them better and exclusive content.

Since the Netflix tie-up, Singtel has inked a deal with Korean video streaming service Viu.

And it is also making sure that its regional telco units also capitalise on the growth potential of mobile data, with fewer than half the people in these emerging markets owning a smartphone. After having spent $13 billion on capital expenditure and spectrum over the last two financial years, the Singtel units will pump another $9 billion into these areas this financial year .

IT TAKES TIME

Despite these ambitious plans, revenue for the nine months for these digital businesses, at $334 million, still pales in comparison with the total revenue of $12.9 billion. Ditto with Trustwave, whose revenue is also only around $75 million, a fraction of the $4.7 billion generated by the enterprise division. Still, this is the first quarter since the deal was completed and it made an operating profit of around $3 million.

Chua’s view is that transformation will take time but Singtel is well placed to succeed.

She said: “Rather than seeing the glass half-empty, we see the glass half-full. Better yet, we’re trying to fill up the glass even more by building new businesses from this disruption… We’re working with OTT players in new partnerships either directly or indirectly through our subsidiaries and associates.”

She concluded: “Our business is highly diversified in terof both industry and geography and we’ve been schooled in the business. We’ve transformed successfully many times before and I’m confident we can do so again.”

Thai Ambassador to Brunei Chirdchu Raktabutr said getting information and finding local business partners remain one of the challenges in setting up a business in the sultanate.

“Businessmen from Thailand require local partners to invest in the sultanate,” he told The Brunei Times on the sidelines of the Second Thai Halal Product Fair held in conjunction with the ongoing Brunei International Trade and Consumer Exhibition (BITC) at the BRIDEX in Jerudong.

“Thai entrepreneurs are currently testing the Brunei market. If our products cater to the needs of the market in Brunei, then there is a good opportunity for Thai entrepreneurs to start a business here,” he said.

Chirdchu said the number of participating Thai businesses at the five-day product fair has increased from 17 to 24 compared with the First Thai Halal Product Fair in 2015.

This, he said, reflects the eagerness of Thai entrepreneurs and companies to tap the Brunei market.

He said out of the 17 participants last year, three or four Thai entrepreneurs have found local partners to set up joint ventures in Brunei.

“Mostly, the business partnerships are in food supplements as Thai entrepreneurs want to leverage on the Brunei Halal brand certification,” said the ambassador.

Since Brunei is still a new market to most Thai entrepreneurs, Chirdchu said the trade fair aims to help Thai entrepreneurs meet potential business partners.

“Brunei wishes to have Thai investors here (in Brunei) and Thai also aims to get Bruneian investors to partner with Thai entrepreneurs (in Thailand),” he said.

The strength of Brunei Halal’s product branding is widely attributed to its certification system which is recognised worldwide and has the advantage of a single accreditation body under Brunei’s Ministry of Religious Affairs, industry players had previously said.

The brand was launched in cooperation with the Ministry of Primary Resources and Tourism (formerly known as the Ministry of Industry and Primary Resources).

This is also in line with the sultanate’s goal to diversify its economy by developing several industries such as halal food manufacturing.

Brunei Halal accreditation starts at the source and only producers that meet the standards of halal and the high quality and safety associated with it will get Brunei Halal certification.

The health and cosmetics products are intended for distribution in both Laos and other countries.

An agreement on the Building and Factory Construction of Herbal Food Supplements and Cosmetics (under GMP St andards) between VT Greater Pharma Co., Ltd. and All In One Development Engineering Co., Ltd. was signed recently at VITA Park.

The agreement was signed by the Managing Director of VT Greater Pharma Co., Ltd. Chernporn Tengamnuay and the Managing Director of Viengthong P harma Co., Ltd. Thongpheuane Khantivong.

VT Greater Pharma Co., Ltd. is a joint venture between Thailand’s Greater Pharma Co., Ltd. and Laos’ Viengthong Pharma Co., Ltd.

VT Greater Pharma Co., Ltd. has a strong policy to promote Lao farmers to grow medicinal plants to be used as the raw materials for the herbal products.

Some investment has been provided by the Netherlands Enterprise Agency, an agency under the Netherlands’ Ministry for Foreign Trade and Development Cooperation.

Vice President of VITA Park Thongkhanh Vongphrachanh said construction of the factory, financed by VT G reater Pharma Co., Ltd., will begin in the near future.

“Currently they are levelling the land on a one hectare site at VITA Park before building the complex,” he said, adding that it should be complete in not more than one year.

Thongkhanh said VITA Park now has 42 companies working there on an area covering at least 80 percent of the park.

Nine companies have built factories and are making products for export and about 11 companies are in the process of building facilities while the remainder are preparing for factory construction.

It is expected that this fiscal year, all business operations will be ready to go into production. More than 1,200 people are currently employed at the park, according to Thongkhanh.

Nestlé (Malaysia) Bhd managing director Alois Hofbauer was confident that Malaysia would bounce back strongly because the private sector was reacting well to the changes in the economic landscape.

He said the consumer giant had already invested about RM1bil in manufacturing plants in Malaysia over the last five years, reflecting its confidence in the local market.

Addressing the StarLIVE Business Series: Power Talks yesterday, he said the company had never innovated as much as it did the last three years.

Last year, Nestlé Malaysia came out with products such as Milo Nutri G, Nescafé Blend & Brew, Nescafé Mountain Wash, Kit Kat Green Tea and Mat Kool Butterfly ice cream to suit the ever-changing consumer market.

Nestlé also introduced a one-off programme this year to reward innovative ideas from its employees with US$10,000 (RM42,000) and business class tickets to Switzerland.

“We want all the people in our company to come up with ideas. And you know, all the best ones never come from the research and development department,” he joked.

He said Nestlé staff had been with the company for 10 to 20 years and were still very attached to the company.

“The company is their life. We even have a second generation, third generation of employees,” he said.

For almost 150 years, Nestlé has set a benchmark for employee satisfaction across the globe.

While diversity and employees’ welfare have only just reached the top of most corporate agendas, the food-and-beverage giant has been pioneering its “Nestlé Way” for years around the globe, championing simple strategies to develop and sustain conducive working environments, strong leadership and winning cultures.

Hofbauer also said Nestlé went to each factory and engaged with 6,000 employees over eight weeks to explain the company’s situation and what should be done.

“From that engagement, we got 50,000 proposals from our people telling us how we could improve.

“I can tell you we got savings beyond RM100mil a year,” he said, adding that company employees were the best consultants.

In its latest report, S&P downgraded Sime Darby to BBB+ from A- with a negative outlook.

“We lowered the ratings because of uncertainties in the implementation of Sime Darby’s deleveraging measures,” said S&P credit analyst Bertrand Jabouley in a statement yesterday.

These measures are key to offsetting the impact of higher debt from the company’s acquisition of New Britain Palm Oil Ltd for RM6bil in 2015. We also anticipate that the company’s capability to generate cash could remain modest over the next 12-18 months, making debt reduction demanding,” he adds.

The downgrade comes as Sime Darby Bhd is in the midst of bulking up its pockets to pay up about RM17bil in debt from selling its assets.

S&P, however, says it may revise the outlook to stable if Sime Darby articulates and starts to implement a credible and comprehensive plan to reduce its net debt to about RM10bil by June 30, 2017.

Sime Darby, the world’s largest listed palm-oil producer by market value, is considering selling RM1.8bil worth of real estate assets in Australia and Singapore to lower its borrowings.

President and group chief executive Tan Sri Mohd Bakke Salleh expects the completion of the asset monetisation plan by the end of March. The monetisation programme would include assets such as commercial and industrial properties.

He says the company had identified 13 assets in Australia and three in Singapore for the planned asset monetisation.

Bakke says the company had a target to reduce the gearing level to 0.54 times by the end of the financial year ending June 30 from 0.61 times as at end-2015 through asset monetisation and an RM3bil perpetual sukuk programme.

The speed of the debt rationalisation is important as S&P says the amount of debt it needs to reduce is large.

“Sime Darby needs to reduce its debt by about RM7bil by the end of fiscal 2017 (year ending June) under our assumption of ebitda of close to RM5bil in that year, for its debt-to-ebitda ratio to converge to about 2.5 times, our rating threshold,” it said.

Another hindrance is Sime Darby’s cashflow. S&P says Sime Darby’s weaker operating performance makes de-leveraging harder because cash flows from operations are not enough to cover capital expenditures and cash dividends.

Sime Darby’s operating cash flows of less than RM500mil in the period were low compared to S&P’s forecast of RM2.5bil for the year.

In addition, it points out that a substantial part of the company’s debt is denominated in foreign currency.

“We estimate that the ringgit’s depreciation against the US dollar has increased the company’s absolute debt figure by about RM1.5bil,” it says.

Sime Darby’s reported Ebitda of RM1.8bil for the first two quarters of fiscal 2016 represented only about 40% of S&P’s full-year expectations.

For the second quarter ended Dec 31, 2015, Sime Darby reported a 38% decline in net profit to RM273.3mil from RM437.4mil in the same quarter previously due to lower crude palm oil (CPO) prices, while lower coal prices had hit its industrial unit’s profitability.

Revenue for the quarter, however, was up 10% to RM11.82bil from RM10.74bil previously.

Cumulatively, for the first half of financial year ending June 30, 2016 (FY16), Sime Darby’s earnings fell 35.8% to RM601.7mil from RM938.1mil a year ago. Its revenue for the period was higher at RM22bil from RM20.9bil.

Besides sweating its assets, Sime Darby had also planned a RM3bil perpetual sukuk, where the firm had made a lodgement to the Securities Commission on Jan 29.

“The first issuance would depend on the market and also on the credit rating,” Sime Darby’s chief financial officer Datuk Tong Poh Keow said recently.

It will bear watching what impact the downgrade on Sime’s ratings by S&P will have on the rating of its perpetual debt.

Earlier, Malaysian Rating Corp Bhd (MARC) accorded a preliminary AA-IS rating with a “negative” outlook on Sime Darby’s proposed RM3bil perpetual subordinated Sukuk programme.

The rating house says the “negative” outlook was consistent with its revised outlook on Sime Darby’s existing RM500mil Islamic Commercial Paper/Islamic Medium-Term Note (ICP/IMTN) programme to “negative” from “stable”.

The “negative” outlook revision, it said, reflected the “slower-than-expected” measures taken to deal with the group’s increased borrowings, following the debt-funded RM6bil acquisition of New Britain Palm Oil Ltd in March last year.

Despite the negative ratings, analysts expect Sime Darby to deliver a stronger second half mainly from its plantation and property divisions, especially in the final quarter where results typically peak.

From the said asset monetisation, analysts expect this exercise to potentially bring in after-tax disposal gains of RM200mil to RM300mil, adding that its property division will be a growth driver for the company in the coming years.

Dan Lachica, president of the Semiconductor and Electronics Industries in the Philippines Inc. (Seipi), said in a statement that imports of electronic products in December 2015 showed a 30-percent decline compared to the $1.8 billion recorded for the same month in 2014.

“Three out of nine product sectors went down from (the previous) year’s figures led by components/devices or semiconductors. The other two sectors that registered decreases (in import receipts) were automotive electronics and telecommunication,” Lachica reported

“On the other hand, six sectors recorded increases led by the medical/industrial instrumentation segment, followed by control and instrumentation; office equipment; consumer electronics; communication/radar; and electronic data processing,” he said.

Compared to the previous month, electronic imports in December 2015 reflected a 40-percent decline compared to $2.13 billion worth of receipts recorded in November last year, as all nine produce sectors “posted negative growth.”

Cumulatively, imports of electronics and semiconductor products meanwhile rose by 32.09 percent to $20.2 billion in 2015 from $15.3 billion in 2014.

The growth can be attributed to the increase in import receipts across eight product sectors namely office equipment; control and instrumentation; communication/radar; telecommunication; medical/industrial instrumentation; components/devices (semiconductors); electronic data processing; and consumer electronics. Only imports of automotive electronics declined last year.

For December 2015, the Philippines’ top source for its electronics imports was the United States, which accounted for 16.1 percent of total import receipts during the month. The second biggest source was Japan (14.8 percent), followed by the People’s Republic of China (14.7 percent); Taiwan (13.8 percent) and Singapore (11.3 percent).