SGX listcos eke out 0.4% higher quarterly profits in Q4; analysts generally positive for 2024 

EARNINGS of companies listed on the Singapore Exchange (SGX) rose marginally in the fourth quarter of 2023 ended December, despite gains from banks that reported record profits and aviation-related stocks on the back of air travel recovery.

According to data compiled by The Business Times as at Mar 7, the aggregate profits of the 64 SGX-listed companies that had released their quarterly financial results or updates for the quarter stood at S$6.92 billion, up 0.37 per cent from the corresponding year-ago period.

Some 38 of these companies were profitable in the quarter to December, while 26 were in the red.

Of the profitable companies, 16 posted a smaller bottom line. Another 15 managed to improve their earnings, and seven swung back into profitability from a loss in the year-ago period.

Nine of the companies in the red managed to trim their losses, but 11 had their losses balloon, and six became loss-making during the quarter.

The gains in overall profits for the quarter were led by the trio of local lenders, driven by the higher interest rate environment.

OCBC saw its Q4 net profit climb 12 per cent to S$1.6 billion from S$1.4 billion a year prior. This was spearheaded by a 2 per cent increase in operating profit as well as lower allowances.

UOB’s net profit for Q4 rose 21.8 per cent to S$1.4 billion, compared with S$1.2 billion a year earlier, due to higher net fee income and other non-interest income.

This included S$94 million in one-off expenses from its acquisition of Citigroup’s retail portfolio in Malaysia, Indonesia, Thailand and Vietnam. If not for the one-off expenses, its core net profit for Q4 would have been higher at S$1.5 billion.

DBS’ Q4 net profit dipped 3 per cent on year to S$2.27 billion, from S$2.34 billion in the year-ago period.

Excluding one-time costs from the acquisition of Citigroup’s Taiwan retail business and a corporate social responsibility commitment, its net profit would have been up 2 per cent at S$2.39 billion.

Analysts expect the banks to stay resilient given their well-supported asset quality, although risks from the uncertain macroeconomic outlook remain.

While the anticipated US Federal Reserve pivot will likely crimp return ratios for Singapore banks and put pressure on net interest margins, lower policy rates could boost appetites for loans.

“A likely easing by the US Federal Reserve, combined with impending Basel III reforms, will lead to a shift in dynamics,” said S&P Global Ratings credit analyst Ivan Tan. “This has important implications for bank profitability, loan growth and capitalisation trends.”

“Overall, however, the Singapore banks remain in good shape.”

Flying high

SGX listcos’ gains for the quarter were also boosted by the aviation-related counters, as they continued to ride on the tailwinds of a return in air travel post-pandemic.

Flagship carrier Singapore Airlines (SIA) recorded a net profit of S$659 million for its Q3 ended December, rising 4.9 per cent from S$628 million in the corresponding year-ago period.

This was driven by robust passenger demand, led by a rebound in North Asian markets with the reopening of China, Hong Kong, Japan and Taiwan.

OCBC Investment Research analyst Ada Lim said SIA is expected to post a record performance for the full year ended March 2024, on the back of “robust travel demand” and its “sustained lead in capacity post-reopening”.

“Regional airlines have struggled with manpower shortages and other operational issues, which may allow SIA to enjoy higher-for-longer passenger yields vis-a-vis pre-Covid levels,” Lim said.

Inflight caterer and ground handler Sats also benefited, with its Q3 net profit jumping to S$31.5 million, from S$0.5 million in the year-ago period.

This was attributed to improved business performance, strong seasonal demand for cargo, and the management’s focus on managing inflationary costs through yield and productivity improvements.

Aircraft maintenance provider SIA Engineering Company (SIAEC) saw its Q3 net profit more than double to S$26.9 million, from S$12.8 million in the corresponding year-ago period.

The group said demand for aircraft maintenance, repair and overhaul (MRO) services “remained healthy” in the quarter, as global flight activities steadily return to pre-pandemic levels.

Meanwhile, IHH Healthcare was among the biggest SGX-listed gainers during the quarter.

The integrated healthcare provider saw its Q4 earnings soar to RM727.5 million (S$206.9 million) on the back of “strong operational performance”, from RM191.3 million in the corresponding quarter a year earlier.

DBS Group Research analyst Rachel Tan noted that IHH’s Q4 and FY2023 Ebitda (earnings before interest, taxes, depreciation and amortisation) margins “appear to have softened marginally”.

However, she added that as one of Asia’s largest healthcare service providers, IHH could ride on the growth of private healthcare in various key markets in the region.

“Despite operational disruptions in the past few years, we believe operations have started to return to normal. The strong return of local and foreign patients could likely keep earnings elevated and above pre-Covid levels,” she said.

Keeping watch on S-Reits

Singapore-listed real estate investment trusts (S-Reits) – a favourite asset class for investors here – however, saw mixed results as higher interest costs continued to weigh on distributions.

More than three-quarters of the S-Reits that disclosed distribution per unit (DPU) figures in their latest earnings reports posted year-on-year declines.

Market watchers, however, noted the “continued strength of operational performance” in Q4, with Singapore-centric Reits “broadly outperforming expectations on rental growth across sectors”.

“Majority of the S-Reits’ results met our expectations,” said RHB analyst Vijay Natarajan.

“While financing cost pressures continue to be the key headwind, S-Reits broadly expect interest costs to peak and stabilise later this year,” he added. “Financing costs are expected to rise for the next two to three quarters, with a peak expected later this year.”

In the meantime, he expects the S-Reits to continue to display operational strength in 2024, as underlying economic data remains strong.

“With the easing of cost pressures, we expect net property income margins to see a slight improvement,” Natarajan said.