11 Oct 2013 ~ Good Morning Singapore!
Central Execution Team - The Excellence of Execution
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Global Flash: While You Were Sleeping
Source: Marketwatch
Quote for the day : And the things that we fear are a weapon to be held against us.
- IAN RUSH
Singapore: The Day AheadSINGAPORE DAYBOOK : Contingency plans in focus after SingTel fire. IDA to conduct 'thorough study' of incident, even as telco sorts through the mess [SINGAPORE] SingTel's engineers spent the day piecing together fibre optic strands by hand amid charred post-fire debris at the telco's Bukit Panjang facility yesterday.
Finding the cause of Wednesday's fire and the subsequent service disruptions, however, will preoccupy the firm during the coming weeks.
The fire, which had disrupted services for consumers and businesses over the past two days, had burnt 149 fibre optic cables in a chamber at the telco's Bukit Panjang exchange, 81 of which were OpenNet's. The other two chambers in the building were not affected.
Fibre cable repairs for corporate customers were completed last night, while the remaining services were on track for restoration by 7am today.
There is no preliminary estimate for the financial fallout of the fire or the service disruption, SingTel's CEO Consumer Singapore, Yuen Kuan Moon, told the media in a briefing at ComCentre yesterday.
In response to questions about what could have caused the fire and what role, if any, the facility's fire suppression system had played, Mr Yuen said, "We are currently investigating. Our priority is to first ensure that service is being restored."
In the coming weeks, the questions will begin in earnest. Within the telco, an inquiry will be convened to determine the cause of the fire and how its distribution network can be reinforced, Mr Yuen said.
SingTel also defended its business continuity plans yesterday, saying that it has physical location diversity - the Bukit Panjang building is one of nine such locations in Singapore - and electronic diversity, in which some switches are replicated.
"Unfortunately, in the case of the Bukit Panjang office, the damage caused by the fire is physical," the telco said.
The restoration task was made harder because the colour codes used to differentiate one kind of cable from another had been razed off by the fire. Engineers had to either divert cables to an undamaged chamber or cut out burnt portions and splice together the undamaged fibres - each thinner than a human hair - by hand.
Each cable can carry 96, 192 or 288 fibre strands, each strand supporting up to 16 corporate customers or 24 residential ones.
SingTel will not be the only entity asking hard questions of itself. The industry regulator, the Infocomm Development Authority of Singapore (IDA), will carry out a "thorough study" of the incident, said Minister for Communications and Information Yaacob Ibrahim yesterday. "We have to wait for the police report . . . and then we will start our investigation," he said, speaking at SingTel's Bukit Panjang building yesterday.
An IDA investigation has the potential to result in mammoth fines. Just last week, M1 was fined a history-making $1.5 million for the outage of its 2G and 3G mobile phone services in January.
Dr Yaacob called what happened on Wednesday a "major incident that we are concerned about". Telephone exchanges are considered critical pieces of infrastructure, he noted.
Other quarters, too, will look askance at SingTel. DBS, which saw some of its branches and ATMs affected on Wednesday, told The Business Times that it has a "diverse network contingency plan that ensures minimal disruption to our businesses in the event of an incident such as the fire at SingTel's Bukit Panjang exchange".
DBS is "working with SingTel to understand why the network contingency plan was not effective for the small proportion of DBS/POSB branches that were impacted," the bank's spokeswoman added.
Two of UOB's branches and 11 of OCBC's ATMs were also affected by SingTel's fire on Wednesday. All three banks saw services resume either that night itself or early yesterday morning before the start of business.
"Our branches were not impacted as our network was designed to be able to be supported by a secondary exchange if the primary one fails," an OCBC spokesman said.
BT understands that a bank's ATM might be able to shrug off a service disruption if it has a backup network line, as long as both the main and backup line are not connected to the same exchange.
Yesterday, Dr Yaacob said the IDA had always been concerned about the need for backup systems, even before the SingTel fire happened. "We've been looking at it closely. Every incident will be a learning point for us . . . clearly, there are things (that) we will begin to learn because the systems are becoming very complex," he said.
By yesterday, the collateral damage from the fire appeared to have been contained. By 6pm, OpenNet had restored service to 25 per cent of M1's 1,000 affected fibre broadband customers.
StarHub, which leases optical fibre capacity from SingTel, said that cable TV, cable broadband and digital voice services for affected customers were fully restored yesterday afternoon, while 36 per cent of its fibre broadband services had been restored by yesterday evening.
(Source: The Business Times)
MARKET SCOOP
Lian Beng Q1 net profit down 31%
S'pore bourse probes short-selling in Blumont, Asiasons
Merger talks between LionGold and smaller miner IRL halted
Grave digger to gold digger: S'pore business shifts feed governance worries
Trafigura renews Asian term loan facility at US$1.76b
Resale prices of non-landed private homes down; HDB COV lowest in 4 yrs
(Source: The Business Times)
OCBC Securities says ...
SMRT CORPORATION | HOLD | TP: S$1.30
The free MRT ride scheme introduced on 24 Jun has seen rail ridership figures for Jul and Aug exceed 60m rides for the first time in SMRT's history
The incentive to promote travel to 16 designated MRT stations in the city area before 8am has also aided in the alleviation of a congested rail system during the morning peak periods
In terms of financials, SMRT will bear the cost of free travel up to S$5m and the
relevant authorities will compensate the company for the remainder
We expect SMRT's upcoming 2Q14 results to be similar with 1Q14: slight revenue growth with higher operating expenses - namely staff, depreciation and repair/maintenance - causing operating profit to decline by double-digits YoY
On a segmental basis, bus operations will likely extend its streak of 11 consecutive quarters of losses (but we assume no asset impairments); rail profitability will be lower as well
The taxi, rental and advertising segments should stay positive and provide some consolation to SMRT
SMRT is unlikely to see an uptick in its share price due to the lack of a fare increase (delay by the Fare Review Mechanism Committee) and pressures on operating expenses
However, since the end of Aug, SMRT's share price has stabilised between a tight band of 1.29-1.30, which has helped to arrest its slide of 10% following its 1Q14 results
The lower frequency of bad publicity has definitely aided the company, and we believe that the street has already factored in the majority of the negative expectations for FY14 as well as concerns over capex requirements
As SMRT is currently trading close to our unchanged fair value estimate of S$1.30, we upgrade the counter to HOLD on valuation grounds ahead of its 2Q14 results release at the end of the month
DMG OSK Securities says ...
ST ENGINEERING | BUY | TP: S$4.70
ST Engineering has announced that its electronics arm, ST Electronics has secured SGD416m of contracts for rail electronics, satellite communications and communications projects in 3Q2013
Out of this, about SGD238m was for communications and electronics systems, advance IT systems and rail electronics solutions, while SGD178m was for satcoms products and broadband communications solutions
STE's orderbook stood at SGD12.7bn as of end Jun 2013, out of which about SGD2.8bn is expected to be delivered in 2H2013
We estimate the new contracts lifted net order book to SGD13.1bn, equivalent to 2x annual revenue
We have a BUY on ST Engineering with a DCF derived TP of SGD4.70
We like STE for its solid fundamentals: 31% ROE, 10- EPS CAGR of 5%, and 4.2% yield. STE currently trades at 20.7x FY13 P/E, below its historical peak of 24.5x
UOB KAY HIAN says...
OVERSEA-CHINESE BANKING CORP | BUY | TP: S$11.86
Bank of Singapore (BOS), OCBC's private banking arm, experienced a lower volume of client activities in July and August
Investors have become more risk averse since concerns over the tapering of QE3 surfaced
Clients have switched from exotic structured products to savings products, such as
fixed deposits
Nevertheless, OCBC continues to benefit from inflows due to wealth creation within Asia and investors seeking to capture global opportunities, which has a positive impact on transaction volume
Assets under management (AUM) have expanded from US$23b during BOS' inception to US$46b over the last three years
Management targets to double AUM to US$80b over the next three years
OCBC's wealth management business also benefits from growth in bancassurance, where it dominates with a market share of about 34% in Singapore
According to The Business Times, OCBC's bancassurance business grew in excess of 50% yoy based on weighted premium in 2012
Endowment products were the largest contributor while mortgage insurance also gained popularity
OCBC NISP is conservatively managed with a low NPL ratio of 0.4%, based on MAS
Guidelines
Management does not see signs of stress and expects NPL ratio to remain low
SMEs, corporations and consumers account for 50%, 20% and 30% of total loans
OCBC NISP provides rupiah funding for domestic industries, such as tobacco, textiles, white goods and trading, which are less affected by the plunge in the value of rupiah
Indonesia contributed to 8.4% of total income in 2Q13
Management guided high single-digit loan growth for 2013 despite already having achieved a 10.3% growth in 1H13
A third of the growth in 1H13 came from short-dated trade finance facilities, where contribution could soften in 2H13
The ringgit and the rupiah have depreciated 4% and 15.1% against the Singapore
dollar in 3Q13 respectively
Malaysia and Indonesia accounted for 15.6% and 7.6% of total loans as of Jun 13
The depreciation of regional currencies will dampen loan growth in 2H13
CASA (current and savings account) ratio has expanded from 46% as at Jun 12 to 50.1% as at Jun 13
The improvement was driven by a 26.6% expansion in current accounts
OCBC has captured more operating accounts from multinational companies through providing cash management services
Wealth management business remains resilient
While transaction volume for existing clients is affected by higher risk aversion, contributions from new clients have increased due to inflows and expansion of AUM
In Indonesia, asset quality was resilient as OCBC NISP is conservatively managed and
provides rupiah funding for domestic industries
We maintain our earnings forecasts
Our target price of S$11.86 is based on 1.71x P/B, derived from Gordon Growth Model (ROE: 11.2, required return: 7.8% and growth: 3.0%) |
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