Earnings set to stay in doldrums, with single-digit gains projected By Alvin Foo

THOSE golden days of strong double-digit earnings growth may be over for now, but it is hardly gloom and doom for corporate Singapore.

First-quarter results of locally listed companies showed a rise in profits of just 11.2 per cent - small change compared with last year’s big numbers.

And it is not likely to change much soon, with analysts warning that corporate earnings may stay in the doldrums for some time yet.

‘Single-digit growth seems like the most optimistic scenario,’ said DMG & Partners Securities senior dealing director Gabriel Yap. ‘It’s already quite a good display as most analysts have revised their earnings forecasts downwards.’

Those downward revisions, especially for transport companies, look set to continue because of rising energy prices and raw material costs.

‘A V-shaped recovery seems improbable,’ Mr Yap added. ‘It’s likely to be an extended U. That’s because the full economic impact of the United States sub-prime crisis on corporate earnings has not been fully felt.’

By 7pm yesterday, 184 firms had reported results for the three months ended March 31. Their combined net earnings were up 11.2 per cent at $5.89 billion from last year, but 18 firms were in the red.

The lack of one-off gains, higher expenses and lower investment income were mostly to blame for a slowdown in the profits of large firms.

Banks occupied most of the top spots, with OCBC Bank leading the profits chart with its $622 million showing. This was 4 per cent down on the same period last year, despite higher divestment gains.

Its profits, however, trumped the $570 million average estimate of seven analysts polled by Bloomberg News.

DBS Group Holdings was third with $603 million, and United Overseas Bank fourth on $529 million.

A recent UBS report on the three local banks noted: ‘Core earnings met market expectations, but it was also clear that the very strong loans growth recorded in the past few quarters is likely to moderate, an outcome of slower global economic growth and the banks themselves exercising caution in this environment.’

In second spot was palm oil firm Golden Agri-Resources, which saw profits surge 102 per cent to $611.5 million due to sky- high palm oil prices.

In contrast, property firms had a mixed outing. Slower home sales and the lack of a one-off valuation gain sent CapitaLand’s profits down 59.3 per cent at $247.5 million.

However, MCL Land and Singapore Land both reported higher profits of $6.9 million and $33.7 million, respectively.

UOB Kay Hian upgraded the local property sector from ‘market weight’ to ‘overweight’ earlier this month, noting that it saw ‘fresh investment opportunities emerging from the recent rout in stocks’.

The figures were better on the shipping front, with companies riding on the wave of the sector’s revival.

Profits at South Korea’s STX Pan Ocean swelled a whopping 374 per cent to US$285 million (S$393.6 million), after China’s demand for coal and iron ore allowed the firm to raise freight rates.

China’s Cosco Corp saw its bottom line double to $83.9 million on higher sales.

Massage chair-maker Osim International had a good news-bad news quarter in which it narrowed its loss to $13.2 million from $17.3 million previously.

The first-quarter reporting season ends on Thursday, with Wilmar International, City Developments and Neptune Orient Lines among the firms announcing earnings just before the final whistle.

Click Here To Research On Current Property Market Prices

For More Property Advice You Can Contact

Winston Yap
Mobile: +(65)92282058
Email: Winston@privatepropertysingapore.com
Author Of “Singapore Property Reference Guide”