Kalpana Rashiwala | The Business Times | Thursday, May 23, 2013

SINGAPORE companies reported weaker profits for the first three months of the year as banks outperformed and transport and commodity companies disappointed.

Data compiled by BT for companies with a financial first quarter that ends on March 31 show total net profit for 353 listed companies at $7.7 billion, down 3.5 per cent from the same period last year. About a quarter of these companies were in the red – slightly more than a year ago.

Of the 260 companies in the black, about half made higher profits and two-fifths made lower profits. The remainder went from losses to profits.

CIMB research head Kenneth Ng said in a Sunday note that misses outnumbered outperformers and investors thus could not stray from the “safety bubble” of stocks with yield and earnings visibility.

“Tellingly, EPS (earnings per share) cuts are coming from most of the externally exposed sectors,” he said.

“As with all bubbles, this one will burst eventually also, but in the meantime, as the names go up, it will be painful to sit it out.”

Analysts are neutral on the Singapore market. They point out that while it is a defensive market with quality companies, there are more attractive options.

According to a Credit Suisse report on the Asian economy and markets, Singapore brings up the rear in terms of projected EPS growth for 2013 and 2014..

Projected year-on-year EPS growth this year is just one per cent. By contrast, Japan is at 57.6 per cent, Taiwan 36.3 per cent and South Korea at 34.5 per cent.

Valuations are not too detached from reality, but not cheap either. The Singapore market is trading near 15 times of its 12-month forward price-to-earnings ratio, around its 10-year average. The Straits Times Index is above 3,400 points. Valuations are still below the heady years of 2007-8 when the market traded above two standard deviations from the historical price to earnings mean.

Chew Soon Gek, Credit Suisse Private Banking head of strategy and economic research for Asia-Pacific, said that average real estate investment trust (Reit) yields of 5 per cent and blue chip yields of 3.5 per cent are “still attractive”.

“We are overweight on property developers. The risk of more cooling measures is not high,” she said.

For the first quarter, the three local banks outperformed and drew upgrades. UOB posted better than expected results of $722 million, up 5 per cent, on higher fee income and strong loan growth. DBS net profit was up 2 per cent to a record $950 million. OCBC’s was down 16 per cent to $696 million – but that still beat analyst estimates. Bank shares have soared as a result.

Transport operators such as SIA, SMRT and NOL, and commodity companies came up short.

Noble Group’s Q1 earnings plunged 62 per cent to US$41.3 million amid a challenging environment for its agriculture business. Indofood Agri Resources was hit by lower commodity prices and higher cost of sales. Its first-quarter earnings plunged 72 per cent to 107 billion rupiah.

On the transport front, local rail operator SMRT fell into the red with a net loss of $12 million for its fourth quarter ended March 31, as it recorded higher salary costs and maintenance expenses. Shipper NOL posted a US$76 million profit due to a one-time US$200 million gain from the sale of its headquarters building in Singapore, but remained loss-making otherwise amid overcapacity in the shipping sector.

SIA was in the black and was boosted by a gain of disposal of aircraft, spares and spare engines. But it continued to face competitive pressures and operating losses deepened from $5.2 million a year ago to $44.2 million for its fourth quarter ended March 31.

Taxi and bus operator ComfortDelGro is still doing well, however, having reported higher net profit of $57.7 million for the first quarter, up 7.9 per cent, due to broad-based revenue growth.

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