On Friday, 15 September 2017, it was announced that Singapore would continue to remain a part of the Formula One (F1) World Championship, with the Singapore Grand Prix being held in our city-state until at least 2021.
And while racing enthusiasts and CBD workers whose offices overlook the racetrack will continue to enjoy live F1 action for at least four more years, a more interesting question surfaced in our mind, who will be the next title sponsor for the Singapore Grand Prix?
With the cost of organising the race each year in Singapore estimated to be about $135 million, the need to have a title sponsor is important in order for the race to be financially sustainable.
Being an iconic event in Singapore, any title sponsor is likely to be a large company with its roots based in Singapore but at the same time, having global operations that would allow it to benefit from the worldwide attention that F1 is able to bring.
Here are four companies that we think are prime candidates to be the title sponsor for the Singapore Grand Prix from 2018 onwards.
#1 Singapore Airline
As the current title sponsor, it makes sense that Singapore Airline (SIA) would be one of the prime candidates to sponsor the Singapore Grand Prix. SIA has been the title sponsor since 2014.
There are a few reasons SIA should be the title sponsor. Firstly, SIA flies the Singapore flag, both literally and figuratively speaking. Being a title sponsor for a F1 race watched by millions of people around the world will help it build brand equity, something that is of tangible value for SIA since it’s an international carrier.
However, sponsoring the Singapore Grand Prix isn’t cheap with reports indicating that the amount is just shy of $10 million a year. In recent times, SIA have also seen its profits decline due to greater competition. The company also reported a surprising $138 million loss for the period of January to March 2017 and has indicated that retrenchment may also be a possibility going forward..
Before SIA took on the title sponsor role, Singtel was the incumbent, having sponsored the race since its inception from 2008 till 2013 (6 years). Hence, Singtel too would be a prime candidate for the organisers to turn to for support.
With a net profit of $3.85 billion for its last financial year, sponsoring the Singapore Grand Prix isn’t exactly going to be a cost concern for this cash rich company. The bigger concern for Singtel will be just how much value they can get from being title sponsor, having already been the main sponsor for six years in the past.
If there is one company in Singapore that can rival the size of Singtel, DBS would be it. Its market capitalisation based on current share price is at $51 billion, just slightly lower than Singtel market capitalisation of $60 billion.
With a 1H2017 profit of $2.35 billion, the cost of sponsoring the race isn’t going to a huge financial consideration for DBS. At the same time, being a global bank with key operations in Hong Kong, China, and South East Asia means that the global exposure F1 brings will be of value to DBS.
If the race organisers were to find a new title sponsor, DBS is certainly a prime candidate that they should be considering.
#4 Singapore Exchange
A somewhat unorthodox choice, there are a few reasons why the Singapore Exchange (SGX) should sponsor the Singapore Grand Prix.
Being a global exchange, SGX will reaches out to two main kinds of people.
The first would be business owners looking to list their companies. SGX is always on the lookout for quality companies to be listed and F1 provides a good brand-building platform to showcase to business owners why they should choose Singapore.
The second is of course investors. SGX will enjoy brand exposure to both local and overseas investors and that’s you hope to achieve when you are title sponsor.
In terms of size, SGX has a market capitalisation of about $8 billion, which puts it a few billion behind Singapore Airlines ($12 billion).
It’s also interesting to note that similar to DBS, Singtel and SIA, SGX counts on Temasek Holdings as its biggest investor. Being an investment company owned by Singapore’s Ministry of Finance, one could argue that Temasek Holdings and the Singapore Government would have similar interest to see both their investment companies and the Singapore Grand Prix becoming successful.
Which of these companies do you think will be the next title sponsor for the Singapore Grand Prix? Share with us your views on Facebook.
4 Stocks This Week is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.
DollarsAndSense.sg is a website that aims to provide interesting, bite-sized financial articles which are relevant to the average Singaporean. Subscribe to our free e-newsletter to receive exclusive content not available on our website. Follow us as well on Instagram @DNSsingapore to get your daily dose of finance knowledge through photos.
More Info: dollarsandsense.sg