THE SINGAPORE EXCHANGE is home to 43 listed retail companies with a combined market cap of about S$30 billion (as at end-2015). The SGX recently engaged Frost & Sullivan to produce a paper on ASEAN RETAIL: Overview, Trends, and Outlook, with a focus on SGX-listed Companies. The in-depth report looks at numerous drivers -- and restraints -- of the retail industry. To give you a flavour of the report, we publish excerpts, and share our two cents' worth:
| ♦1. E-commerce beginning to alter consumption in ASEAN |
| Frost & Sullivan report: "Electronic commerce (e-commerce) continues to change the dynamics of the retail sector globally, with many “new economy” companies emerging in this region. New retail models are arising out of innovations in technology, and threatening the position of well-established retailers than ever before. While e-commerce is highly evolved in the US, Europe, and Japan, it is beginning to alter the consumption landscape rapidly in the ASEAN region. With a relatively young population, growing Internet and smartphone penetration, and a wide array of payment options, the ASEAN region offers lucrative opportunities for e-commerce growth. In 2014, the region had 199 million Internet users (39% penetration) and is forecast to rise to 294 million users (48% penetration) by 2017." |
Challenger reported $18.3 million in net profit for FY15 on revenue of $352.2 million. Photo: funan.com.sgNextInsight: A company to watch is Challenger Technologies.
For more than 40 years, Challenger has been largely a brick-and-mortar business. That's going to change radically.
In April 2016, it launched its online marketplace Hachi.tech with a goal of earning 50% of the group's revenue within three to five years. 
Loo Pei Fen, chief marketing officer of Challenger Technologies, at an SGX event. Photo: SGXFor perspective, Challenger's revenue averaged S$364 million a year over the past three years.
Its online marketplace will be unconstrained to selling the range of IT products that are sold in its physical stores -- in fact, the range will escalate sharply as there are no physical constraints anymore.
In transforming itself, Challenger has also begun investing in online companies that are part of the e-commerce ecoystem.
With a budget of $20 million, Challenger has already invested $10 million in businesses such as mobile wallet firm Xfers and on-demand delivery service Zyllem.
Challenger reported $20.3 million in net profit for FY16 on revenue of $770.4 million. Photo: http://www.marketing-interactive.com/An early adopter of e-commerce is Courts Asia, which had a full-fledged online store by 2008. From 7,000 product offerings in Oct 2012, it has grown to more than 15,000 as of last year.
Like Challenger, Courts sells stuff online that it does not carry in its physical stores, such as health and wellness equipment for yoga and pilates.
According to UBS, Courts' online store was the 9th largest shopping site in Singapore based on monthly traffic, and Courts was the top multi-channel retailer in the country.
Singapore is its key market, contributing about 66% of the S$770.4 million total revenue in FY16 (ended March 2016).
SingPost reported $153.6 million in net profit for FY16 on revenue of $1.15 billion. Photo: www.yebber.comSingapore Post -- it is not conventionally categorised in the retail industry, the fact is that a large proportion of its users are simply individuals whose purchased or sold items are transported by Singapore Post.
The company said it processes more than S$5 billion of gross merchandise value a year across its e-commerce networks and provide end-to-end e-commerce solutions to more than 100 leading brands including adidas, Calvin Klein, Cole Haan and Muji.
| ♦2. Old-style pawnbrokers turn contemprorary |
| Frost & Sullivan report: "The 3 leading pawnbrokers in Singapore have a strong foothold and continue to expand their retail base by contemporising their business with a modern retail look, implementing efficient management controls, and striving to serve customers in a transparent and fair manner. Although the sector faces challenges in terms of higher rental costs and intense competition, participants are expanding their bases and exploring markets beyond Singapore to Malaysia." |
ValueMax reported $10.0 million in net profit for FY15 on revenue of $269.9 million. Photo: CompanyNextInsight: ValueMax and MoneyMax fit the above description well. We would add that ValueMax has just made a significant move into a new business -- secured money lending. It raised S$50 million through the issue of bonds and is lending the money to borrowers with property as collateral. (For more, see our article: VALUEMAX: To get boost from new secured money-lending business).
MoneyMax, for its part, has just showed its ability to move with the times by paving the way for people to pawn branded or buy pre-owned bags or sell them. (For more, see our article: @ MONEYMAX: People (women, take note) can now pawn, sell, or buy pre-owned luxury bags)
| ♦3. Strong retail growth in Indonesia and Malaysia owing to growth in population and middle class |
| Frost & Sullivan report: "Indonesia is expected to lead growth in retail sales, which is estimated to increase annually by 19.3%, from US$377 billion in 2015 to US$639 billion in 2018. Malaysia is likely to follow with retail sales growth at a CAGR of 12.1% over the same period. The projected double-digit growth in both Indonesia and Malaysia can be attributed to their growing populations, youth dependency ratio, and the rapid rise of the middle class. Retail sales in Thailand and Singapore are also predicted to grow, though at a slower annual rate of 8.9% and 6.4% respectively, between 2015 and 2018.." |
NextInsight: Singapore-listed companies with broad exposure to Asean's growing population include Jardine Cycle & Carriage, Japfa, Petra Foods and Stamford Tyres.
Jardine Cycle & Carriage has an interest of just over 50% in Astra International, the largest independent automotive group in Southeast Asia, with further interests in financial services, heavy equipment and mining, agribusiness, infrastructure, logistics and others, and information technology. Jardine C&C's direct motor Interests operate in Singapore, Malaysia, Myanmar, Vietnam as well as Indonesia. 
Petra Foods markets and distributes its own brand of chocolate confectionery products in Indonesia, Philippines, Singapore and Malaysia. 
Stamford Tyres is involved in the wholesale and retail activities of tyres and wheels in Southeast Asia, North Asia and Africa. It offers a wide range of tyres for cars, trucks, mining vehicles, etc.
Japfa is an industrial agri-food company specializing in producing quality dairy, protein staples (poultry, beef, swine & aquaculture) and packaged food. Headquartered in Singapore, it employs over 28,000 people across an integrated network of modern farming, processing and distribution facilities in Indonesia, China, Vietnam, India and Myanmar.
| ♦4. Singapore tourism recovery |
| Frost & Sullivan report: "Tourists create significant demand for fashion, apparel, electronics, and watches. Malaysia, Thailand and Singapore are known to be popular shopping havens in the region, with visitors to these countries contributing substantially to the retail spend in the respective markets. According to the Singapore Tourism Board, tourists to the country spent approximately S$4 billion on retail shopping in 2015. "However, the slowdown in China and a higher degree of attraction from neighbouring countries, mainly Thailand and Malaysia, are stagnating the growth of tourist arrivals to Singapore, and adversely impacting consumer demand for luxury goods." |
NextInsight: As an update, Singapore's tourism sector is putting up a strong show this year. Official figures estimate that visitor arrivals to Singapore have rebounded, rising around 14% y-o-y in the first four months to 5.53 million. This was fuelled in part by a surge in arrivals from China (+53%) and Indonesia (+ nearly 10%).
Straco reported $49.0 million in net profit for FY15 on revenue of $127.7 million. NextInsight file photoA company to watch is Straco Corporation, which owns and operates the Singapore Flyer, the only tourism icon of its kind in Singapore and the region.
DBS Vickers' 14 June 2016 report said: "Ranked as the top landmark in Singapore by visitors (based on polled rankings on TripAdvisor), we believe that the Singapore Flyer should see good growth ahead as it is well positioned to feed off the higher tourist numbers."
For more, see our article: STRACO: To benefit from higher S'pore tourist arrivals, Shanghai Disneyland opening
Infographics: SGX
