The Company With The Highest Revenue In Singapore

Bigger is better. Or at least to some.

Many investors prefer to invest only in reputable companies with a large capitalisation. To them, the company needs to have a large revenue, the larger the better. Through a search of the 30 constituents in The Straits Times Index (SGX: ^STI), I found the company with the largest revenue. The revenue of this company is so huge that the next largest company has revenues less than half of its amount.

If bigger is better, is this company the best?

Enter the commodity trader

Noble Group Limited (SGX: N21) has the largest revenue base of all the companies listed in Singapore. Booking in a revenue of US$97.9 billion in FY2013, Noble Group produced revenue larger than Wilmar International Limited (SGX: F34), Jardine Matheson Holdings Limited (SGX:J36) and Olam International Limited (SGX: O32), combined! How is it that Noble Group is able to achieve such great revenue base?

Noble Group Limited is a global commodity supplier chain company. It helps link the producer of commodities with the customers of these products. Noble Group operates in three main segments of business;

1)      Energy segment: Distributing oil, gas and power

2)      Metal, Minerals and Ores segment: Distributing commodity metals and ores such as iron ore and aluminum

3)      Agriculture segment: Distributing products ranging from sugar, grains, and oilseeds to coffee and cocoa.

Yet, having a large revenue is not necessary a good thing. Noble Group Limited operates at a very thin margins. Its gross margins for the past 3 years has been around 2%. That means that Noble Group typically buy its inventory at 98 cents and selling it for a dollar, earning 2 cents for the product. On top of that, it need to pay for the transportation, storage, staff cost and financing cost to maintain the business. At the end of it, Noble Group earns about 0.25 cent for every dollar of sale in FY2013, a net profit margin of 0.25%.

Foolish Summary

At the end of the day, profits are what you earn for the shareholders. A company with huge revenue does not necessarily mean very much to an investor if it is not able to translate that to earnings for the shareholders. Noble Group Limited has done well over the past few years to grow its revenue, now it just need to prove to investors that it can translate that into higher profits for shareholders.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim owns Wilmar International Ltd