Tuesday, October 16, 2012

Singapore-listed firms likely to disappoint in Q3 reports: analysts

SINGAPORE: Third quarter report cards for Singapore-listed firms will not see much upside surprises as ongoing crisis in the eurozone and slowing growth in US and China impact their balance sheets.

Analysts say companies in the electronics, shipping and commodities sectors likely took a beating in the past quarter.

Earnings for airlines and plantation stocks may also disappoint, while banks see flat bottom lines on weaker net interest margins.

Head of Premium Client Management at IG Markets Singapore, Jason Hughes said, "We're going to see less companies beating expectations. You know, there is a hope that they will come in line, but on the whole, there's a lot of uncertainties in the global market place.

"You're going to expect to see that filter through into the corporate earnings season."

CEO of SIAS Research, Roger Tan said, "The Q3 results (season) is where we will see the downturns, the worries and the lower demand from the West start kicking in to the export-oriented companies -- the manufacturing and the industrials."

In contrast, rigbuilders and offshore and marine counters likely did well, owing to strong demand and new contracts.

Apart from Keppel and Sembcorp Marine, SIAS Research says Nam Cheong and Technics Oil & Gas could also benefit from the sector's prospects.

Good sales could also translate to better earnings for property counters, while the telco, REITs and construction sectors are expected to have held steady.

UBS Wealth Management's Regional CIO Southern APAC Kelvin Tay said, "The domestic economy is still holding up pretty well. Consumption is still pretty high and that's largely because unemployment in Singapore is at a historical low still and the economy here is actually operating at almost full capacity.

"I would advise investors to look at domestic sectors. Sectors relating to consumption, maybe perhaps some of the telecoms companies as well where the earnings are not impacted by exports to that extent."

UBS said economic recovery in the US and China will be key for a positive fourth quarter.

But the bank says a turnaround may not happen until the first quarter of next year.

With the economic outlook remaining bleak, some analysts say companies will be more prudent and could put more provisions than necessary. And this, could lead to more investors shifting their focus from earnings to dividends as they look for companies which can pay a decent dividend of at least 5 to 8 per cent, says Kevin Scully, Executive Chairman of NRA Capital.

Experts say new regulations to cap bank loans on property could also put pressure on counters in these sectors.

Against the backdrop of falling trade and challenging economic environment, "Singapore banks are unlikely to sustain their broadly steady performance into H212 and possibly 2013, with a likely deterioration in earnings and asset quality," said Alfred Chan, Director of Financial Institutions at Fitch Ratings Singapore.

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