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10-10-2014, 10:47 PM
Mrs Fang said while there were bigger currency fluctuations than in the past, the company — which owns $1.3bn of Australian real estate — would continue to use Australian debt as a natural hedge.
Singaporeans count the cost as Australian dollar falls
THE AUSTRALIAN OCTOBER 11, 2014 12:00AM
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Kylar Loussikian
Journalist
Sydney
THE dramatic fall in the Australian dollar will have a disproportionate impact on a number of Singaporean firms, according to local economists, with the dollar trading at its lowest level against the Singaporean dollar in five years.
The dollar has fallen from a high of $S1.99 last year to $S1.10 in the past week, down a further S6c since September, after the Reserve Bank decided to keep interest rates at historic lows for a 14th consecutive month.
SingTel, the Singapore-based telecommunications giant, will be hardest hit, with its Australian subsidiary Optus accounting for 30 per cent of group revenues.
Optus generated $8.466 billion in revenue for the financial year ending in March, 5 per cent down from the previous year. But that translated to a 13 per cent fall after currency effects were factored in.
A sensitivity analysis suggested a 10 per cent weakening of the Australian dollar would see a $S98 million drop in SingTel’s profits.
Shares in SingTel are down 4 per cent since the start of September, amid concerns that the continued weakness in the Australian dollar would have a significant drag on the company earnings.
Irene Cheung, a foreign exchange strategist at ANZ, said the dollar would eventually stabilise, albeit at the lower rate of $S1.11 or $S1.12.
Kenneth Ng, chief economist for Kuala Lumpur-based bank CIMB, said the impact would also be felt by Singapore-listed companies that had the majority of their operations in Australia.
“Tat Hong, for instance, sells cranes but buys them in yen. When the Aussie falls, do they take a hit on margins or raise prices so sales fall?” he said.
But there would be limited impact on Singapore’s real estate investment sector, which has increasingly targeting Australia for acquisitions and developments.
Mun Yee Lock, a property analyst for CIMB, said while there was some risk on asset valuations, most of the existing investments have been “bite size” relative to total assets on the balance sheet of Singaporean real estate investment trusts. “There could be a translation impact, but most of the developers are hedging by taking loans in Australian dollars.”
But some, including Keppel REIT, one of Singapore’s largest with five properties in Australia, has the bulk of its debt in Singaporean dollars.
For some companies looking to acquire property in Australia, the weaker dollar is an opportunity.
Fang Ai Lian, chair of Far East Organisation’s Australian division, said while she focused on the property fundamentals, the fall of the Australian dollar had made acquisitions more attractive.
Mrs Fang said while there were bigger currency fluctuations than in the past, the company — which owns $1.3bn of Australian real estate — would continue to use Australian debt as a natural hedge.
Singaporeans count the cost as Australian dollar falls
THE AUSTRALIAN OCTOBER 11, 2014 12:00AM
Save for later
Kylar Loussikian
Journalist
Sydney
THE dramatic fall in the Australian dollar will have a disproportionate impact on a number of Singaporean firms, according to local economists, with the dollar trading at its lowest level against the Singaporean dollar in five years.
The dollar has fallen from a high of $S1.99 last year to $S1.10 in the past week, down a further S6c since September, after the Reserve Bank decided to keep interest rates at historic lows for a 14th consecutive month.
SingTel, the Singapore-based telecommunications giant, will be hardest hit, with its Australian subsidiary Optus accounting for 30 per cent of group revenues.
Optus generated $8.466 billion in revenue for the financial year ending in March, 5 per cent down from the previous year. But that translated to a 13 per cent fall after currency effects were factored in.
A sensitivity analysis suggested a 10 per cent weakening of the Australian dollar would see a $S98 million drop in SingTel’s profits.
Shares in SingTel are down 4 per cent since the start of September, amid concerns that the continued weakness in the Australian dollar would have a significant drag on the company earnings.
Irene Cheung, a foreign exchange strategist at ANZ, said the dollar would eventually stabilise, albeit at the lower rate of $S1.11 or $S1.12.
Kenneth Ng, chief economist for Kuala Lumpur-based bank CIMB, said the impact would also be felt by Singapore-listed companies that had the majority of their operations in Australia.
“Tat Hong, for instance, sells cranes but buys them in yen. When the Aussie falls, do they take a hit on margins or raise prices so sales fall?” he said.
But there would be limited impact on Singapore’s real estate investment sector, which has increasingly targeting Australia for acquisitions and developments.
Mun Yee Lock, a property analyst for CIMB, said while there was some risk on asset valuations, most of the existing investments have been “bite size” relative to total assets on the balance sheet of Singaporean real estate investment trusts. “There could be a translation impact, but most of the developers are hedging by taking loans in Australian dollars.”
But some, including Keppel REIT, one of Singapore’s largest with five properties in Australia, has the bulk of its debt in Singaporean dollars.
For some companies looking to acquire property in Australia, the weaker dollar is an opportunity.
Fang Ai Lian, chair of Far East Organisation’s Australian division, said while she focused on the property fundamentals, the fall of the Australian dollar had made acquisitions more attractive.
Mrs Fang said while there were bigger currency fluctuations than in the past, the company — which owns $1.3bn of Australian real estate — would continue to use Australian debt as a natural hedge.
