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Singapore Daily Bulletin – 29/03/10
Daily Bulletin | 29 March 2010
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Food Prices Expected To Resume Their Climb
With Asian economies recovering fast and bad weather already affecting harvests, food prices are now expected to resume their climb. To help stabilize food prices, Singapore relies heavily on stockpiling. The amount of rice that can be stockpiled, for instance,is set by the Ministry of Trade and Industry (MTI). ‘All traders of white rice are required to maintain a stockpile equivalent to twice their monthly import quantity to ensure sufficient supplies and stability of domestic rice prices, ‘ explained an MTI spokesman.

PSC Corporation, which is listed on the Singapore Exchange mainboard, is one of Singapore’s largest importers of rice. Its best known brand is Royal Umbrella fragant rice. PSC does expect food prices to increase in 2010. Alan Tang, senior vice- president (group consumer business/corporate planning) says this could be due to inflation, supply-and-demand rebalancing, foreign exchange fluctuation, and rising shipping costs. ‘As a responsible importer and distributor, we will always do our best to contain costs, and will pass on higher costs only when they go beyond our cost-holding capability. Our outlook for prices for rice and soybean products for this year is that prices will not fall and have high chances of increasing in the short to medium term,’ he added.

NTUC FairPrice was set up specifically to moderate the cost of living and ensure that essential items remain affordable to everyone. ‘ As one of Singapore’ major rice importers, FairPrice stockpiles more than three month’s supply of rice at any time – above the two months’ stockpiles required, to help ensure the reliability of supply and stability of rice prices. Depending on the situation, we will review the need to increase this stockpile, taking into account the additional costs required to do so’, said Tng Ah Yiam, director of integrated purchasing at NTUC FairPrice.

Spotlight on Dairy Farm, China XLX Fertilizer
A recent Citigroup report said that in an inflationary environment, Dairy Farm for one is able to ‘pass on increased costs and some margin gain to customers’. Daily Farm, has extensive supermarket operations in Asia. In Singapore, it owns Cold Storage and Giant supermarkets. In 2009, Dairy Farm’s earnings before interest and tax margin increased to 6% from 5.8% in 2008. ‘We expect this to expand to 6.3% in 2010. We also believe inflation to reach on average 5.8% across Dairy Farm’s respective countries and expect 6.2% in GDP growth in 2010, which should help domestic consumption,’ it added.

CIMB-GK Research released a report on China XLX Fertilizer, maintaining its ‘outperform’ rating for the stock. According to the report, as of late February this year, drought-affected farmlands in China reached 4.6m ha, with crops in 4.1m ha ruined. ‘The main concern is how agriculture production in the whole year would be affected. Against such a backdrop, we expect fertilizer and urea consumption to recover soon,’ it added.

HTL International Restores Investors’ Faith
On 25th Feb, the mainboard-listed tanner and luxury sofa manufacturer announced a full-year net profit of $48.3m for FY09, a striking rebound from FY08 net loss of $20.3m. This turnaround was the result of a concerted restructuring which saw the company slashing costs, shutting down unproductive facilities in Asia, closing down and relocating underperforming stores in Europes and the United States, re-calibrating its forex risks and building up cash reserves.

This is quite a remarkable achievement for a company which slipped into the red to the tune of$20.3m in 2008,after posting a net profit of $10.2m in 2007. The losses in 2008 were largely due to ‘mark-to-market’ loss on its outstanding forex options and forward contracts it used to hedge against forex exposure. It was hit particularly hard by derivatives losses from forex options it entered into to hedge the US unit against currencies such as the Euro, the Yen and the Singapore dollar. Apart from benefiting from its restructuring and strong recovery in its key markets in Europe, US and Asia, HTL is also picking up market-share left by a hollowing out of the industry after many of its global competitors fell by the wayside during the past two years.

Hanwell Hldgs  0.225 -0.005 -2.17%   
Business: Supply of provisions and household consumer products. [FY18 Turnover] Packaging (66.4%), consumer essentials (33.5%), others (0.1%).

Insight: May-19, 1Q19 revenue slid 6.8% due to lower revenu... Read More
Dairy Farm Int'l Hldgs  7.820 -0.06 -0.76%   
Business: Asian retail co that operates supermarkets, convenience stores & others. [FY18 Turnover] Food (70.3%), health & beauty (14.6%), restaurants (11.8%), home furnishings (3.3%).

Insight: Feb-19, FY18 net profit plunged 77% to US$92m due ... Read More

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