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More SMEs join ranks of fastest-growing companies

Wednesday, September 21, 2016 - 05:50

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Despite a weakening economy and challenging business conditions, the number of small and medium-sized enterprises (SMEs) among Singapore's 50 fastest-growing companies has reached its highest number in the past five years.

Singapore

DESPITE a weakening economy and challenging business conditions, the number of small and medium-sized enterprises (SMEs) among Singapore's 50 fastest-growing companies has reached its highest number in the past five years.

Going up from eight SMEs last year to 13 this year, they make up a quarter of the 2016 Fastest Growing 50 (FG50) Awards list.

The FG50, compiled by DP Information Group, identifies companies that achieved a minimum of 10 per cent turnover growth every year for the last three years while remaining profitable each year. The qualifying companies are then ranked by their three-year compounded annual growth rate (CAGR), with the top 50 receiving an FG50 Award.

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DP Information Group chief operating officer Lincoln Teo told BT that the 13 SMEs - comprising a good mix of industry sectors - have found "a formula for success".

He pointed out that smaller firms can move more quickly to take advantages of opportunities, and are often prepared to take a higher risk for greater returns.

But while the SMEs are growing quickly, their profit margins are well behind the larger companies in the list. The average profit margin of the SME is 20 per cent, while larger companies have an average profit margin of 52 per cent.

Mr Teo said it was not a cause for worry. "SMEs desire growth. That's why they reinvest much of their profit in their business. As a result, their level of profitability is often lower than that of larger companies."

The rise in SMEs was not the only change seen in the list; there is now a greater diversity of industries compared to before.

A decade ago, some 34 of the FG50 companies came from two industries: wholesale trade, and manufacturing. But this year, the two industries contributed only 16 altogether.

This year's winners came from industries such as services, infocomm, property, and transport.

Mr Teo said that this diversification was "good news" as the economy is not overly dependent on any one sector. "The old pillars of the Singapore economy such as manufacturing and wholesale trade are not as dominant as they once were . . . It shows the Singapore corporate sector has evolved with the times."

Among this year's winners, the top accolade goes to property developer Qingjian International (South Pacific) Group.

Despite the property cooling measures in place these last few years, Qingjian general manager Sun Yong said, there is still "solid demand" for residential buildings such as HDB flats and executive condominiums (ECs), which make up a significant proportion of the developer's projects here.

Outside of Singapore, Qingjian has also completed numerous property development projects in Myanmar and Indonesia.

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