Two thirds of Asian companies have strong balance sheets and good revenue growth expectations with many planning to deploy excess cash in 2011, according to Fidelity International research.
The survey, conducted on Fidelity’s analysts working in the Asia Pacific region, found a majority of leading Asian companies were looking to spend their excess cash through acquisitions, capital expenditure (capex) or dividend payouts.
“The vast majority of companies meeting with us in the region continue to have very strong balance sheets – 63 per cent – and deploying their excess cash through capex, dividends and buy-backs will improve shareholder returns and make another strong year of market performance more likely,” Fidelity’s Asia Pacific head of research team Matthew Sutherland said.
More than 77 per cent of Fidelity’s analysts said the companies they met with during 2010 expect to see sales growth of over 10 per cent in 2011, while 50 per cent of analysts said they expect operating margins to grow in excess of 10 per cent.
“While this expectation is typical for Asia Pacific companies and in line with previous years, it does highlight the fact that 2011 may be another year of solid growth across the region,” Sutherland said.
Respondents to the survey said the surplus cash they are seeing in Asia Pacific companies is likely to be spent on dividend payouts, capital expenditure or acquisitions, with all three scoring 23.5 per cent.
“Aside from revenue growth, additional benefits may come from an increased willingness of companies to be constructive with the overly-large cash piles they built as a reaction to the problems of 2008/9,” Sutherland said.
“Interestingly, whilst they are likely to spend on capex, capex may not grow as a percentage of sales. More importantly, they are likely to give more back to shareholders via increased dividends and buybacks.”
