CSM sees light in the tunnel
By Mano Sabnani, Business and Financial Consultant
First published in TODAY
15-16 Feb 2003

Indications are that GLCs like CapitaLand and SembCorp are now more positive about their profit outlook than they have been for some time. Massive restructuring and disposal of poorly performing or non-core assets has taken place in the last two years.

Road maps appear to have been put in place for growth in the next economic upcycle and analysts are re-looking these companies and their shares. Could we be witnessing the turnaround of these important local companies?

The answer to that question will be clearer once the current geopolitical uncertainties are out of the way, hopefully by the middle of this year.

Chartered Semiconductor Manufacturing, another member of the Singapore Technologies stable, is struggling to restructure and position itself for recovery, and hoping to enjoy the same re-rating by investors that the other GLCs mentioned above are anticipating. But the depressed industry it is in may thwart its hopes.

The company announced on Thursday that it was shutting down its oldest wafer fabrication plant and laying off a further 500 employees by March 2004, while raising its capacity for the production of high-end 0.18 and 0.13 micron chips to 50 per cent of total capacity by end 2004, from 15 per cent currently.

These actions will have a long-term positive impact but CSM group's bottomline or PATMI will not be lifted out of the red until demand improves.

Sadly, though, most analysts do not see a recovery until late this year or next year. So, CSM could lag behind the likes of SembCorp in returning to investors' favour. But once the shares get going, they could really get going. Downside for them limited now, below 70 cents.