Banks, STI stocks come out tops as Singapore Q4 corporate earnings rise 24.6%

THE trio of local lenders, as well as the constituent stocks of the Straits Times Index, turned in strong earnings in the fourth quarter of 2022 as the local economy shrugged off worries over high inflation levels and risks of a global recession.

As at Mar 8, 86 companies listed on the Singapore Exchange (SGX) had released their financial results for the quarter ended December last year. Of these, 47 companies reported a profit, and 39 ended the quarter in the red.

These companies reported a total net profit of S$5.9 billion, up 24.6 per cent from the corresponding quarter in 2021, data compiled by The Business Times showed.

Of the 47 companies that reported profits, seven counters had swung back into the black. The number of companies with improved bottom-line figures came in at 19; 21 companies reported thinner profits.

On the other hand, 10 out of the 39 loss-making companies in Q4 had reversed into the red. Companies that deepened their losses stood at 16; another 13 companies narrowed their losses.

The banking trio – DBS , UOB and OCBC – led the pack in terms of earnings performance for the quarter, amid higher interest rates that in turn boosted their net interest margins.

Other stocks on the benchmark STI, too, had a strong showing. Singapore Airlines (SIA), which suffered greatly during a large part of the Covid-19 pandemic, grew its net profit for the three months ended December to S$628 million from S$85 million in the corresponding prior-year period.

The airline also booked record operating profits for the quarter on the back of robust demand for air travel across its network.

Local real estate investment trusts (Reits) Mapletree Pan Asia Commercial Trust , Mapletree Logistics Trust and Mapletree Industrial Trust were also among the top profit gainers in Q4. Meanwhile, the earnings of tech player Venture Corporation rose 3.6 per cent to S$98 million. 

At the bottom of the pack was electric vehicle player Nio . It posted a net loss of S$1.1 billion for Q4, versus a net loss of S$420.8 million in the prior year.

The company did, however, book a 60.2 per cent increase in vehicle sales to 14.8 billion yuan (S$2.9 billion).

Singapore companies ended their full financial years on a more upbeat note. As at Mar 8, 367 SGX-listed companies had released their full-year results.

Of these, 262 companies ended the year in the black, and 105 in the red.

Their combined profits came to S$43.3 billion, up 10.3 per cent from 2021.

DBS analysts said in a recent report that most companies’ financial results were in line with their expectations, despite rising macroeconomic headwinds such as inflation levels and interest rates.

“Earnings across our coverage were largely stable, with significant downward revisions confined to selected names,” the analysts said. Of the 14 STI stocks under the bank’s coverage, nine raised dividend payouts.

DBS has revised its earnings expectations for several companies on the back of a better outlook. The brokerage expects SIA to deliver stronger earnings due to China’s earlier-than-expected reopening.

It is optimistic on the prospects of conglomerate ST Engineering due to its organic and inorganic growth with lower-than-expected financing costs, and on chocolate-treats maker Delfi on the back of strong domestic chocolate consumption.

Positive earnings performance may not be sufficient to turn investors positive on these stocks, though. The stocks of several companies – the banking trio among them – fell after posting strong financials.

“There has been some detouring from the focus on earnings this season, with key developments in the overarching global macro themes of inflation and regional growth,” said SGX market strategist Geoff Howie. He noted that expectations for the US Federal Reserve’s Fund Rates have moved to “higher for longer”.

“At the same time, the decidedly optimistic outlook for the China economic reopening, which spanned November through to January, has moderated over the past six weeks to a more cautiously optimistic outlook,” he added.

Against this risk-averse backdrop, DBS analysts suggested investors “seek shelter” in stocks that have decent earnings or dividend cushions.

“UOB and OCBC are clear beneficiaries,” said DBS. Both banks are widely expected to deliver dividend increases this year.

The brokerage also highlighted stocks with earnings-per-share growth of more than 50 per cent in 2023 and earnings visibility in the near term. Among them are grocery store operator DFI Retail Group (which will be able to ride the tailwinds of North Asia’s reopening), and Reits such as CapitaLand India Trust and CapitaLand China Trust .

Ports operator Hutchison Port Holdings Trust , Delfi, engineering group Civmec , land transport operator ComfortDelGro Corp , and supermarket operator Sheng Siong Group are also of interest, DBS said, thanks to their net-cash positions or low debt levels, positive earnings growth in the current year, as well as a decent dividend yield.