SGX listcos post 16.7% higher quarterly profits in April-June quarter

COMPANIES listed on the Singapore Exchange (SGX) that have released quarterly financial results or updates for the quarter to June reported aggregate profits of S$7.1 billion, a 16.7 per cent increase year on year.

A compilation of the results by The Business Times (BT) as at end-August showed 57 of the 82 issuers were profitable for the quarter to June, while 25 were in the red. Of the 57 profitable companies, 26 posted a smaller bottom line. Another 23 managed to improve their earnings, and eight swung back into profitability from a loss in the year-ago period.

Nine of the companies in the red managed to cut their losses, but 12 saw their losses balloon, and four became loss-making during the quarter.

CGS-CIMB Securities (Singapore) noted that companies with earnings beats were from the sectors of finance, capital goods (excepting Seatrium , due to its higher-than-expected kitchen-sinking provisions), transport, gaming and healthcare.

The local banking trio topped the earnings tally, with national carrier Singapore Airlines just behind.

DBS ’ bottom line rose 44.8 per cent year on year to S$2.6 billion, as its net interest margin (NIM) edged up to 2.16 per cent from 2.12 per cent in the preceding quarter.

UOB posted S$1.4 billion in earnings, 27.1 per cent higher than the corresponding period in the previous year. NIM for the lender’s second quarter stood at 2.12 per cent, down from 2.14 per cent a quarter earlier.

OCBC delivered S$1.7 billion at the bottom line, up 33.5 per cent year on year. Its NIM was the highest among the trio, at 2.26 per cent, but that represented a marginal decline from 2.3 per cent in the prior quarter.

Phillip Securities Research made a modest upgrade to its expectations of bank earnings – of around 5 per cent – due to higher-than-expected interest margins.

The research house has, however, downgraded its earnings expectations for issuers in other sectors, due to softer-than-expected revenue amid sluggish macro conditions, a stronger Singapore dollar and rising interest rates.

“This was prominent in the electronics and consumer sectors,” said Paul Chew, head of research at Phillip.

CGS-CIMB also pointed out that the slowdown in the technology sector continued to bite amid a sluggish economy. Results of semiconductor test solutions provider AEM Holdings and precision manufacturer Grand Venture Technology came in below its forecasts.

Nanofilm Technologies International ’s results were in line only because CGS-CIMB had adjusted its expectation following the nanotechnology solutions provider’s prior profit warning.

DBS Group Research, however, is cautiously optimistic that Q2 2023 represented an inflection point, with a gradual recovery from H2 2023 led by demand for artificial intelligence.

UMS Holdings is one of the issuers the research team expects to do well because of its key customer’s latest above-expectation guidance, as well as recent contracts bagged by the precision engineering group specialising in front-end semiconductor components.

Meanwhile, companies in the industrial sector have reinforced the bullish views of DBS Group Research. Sembcorp Industries , Yangzijiang Shipbuilding and reopening beneficiaries Singapore Technologies Engineering as well as airline maintenance, repair and overhaul services provider SIA Engineering delivered earnings that beat the research house’s expectations.

DBS Group Research also said Seatrium (formerly Sembcorp Marine) and in-flight caterer and ground handler Sats have their ongoing earnings recoveries intact. It had expected wider net losses from these two Straits Times Index component stocks because of higher non-operating expenses or provisions from their recent corporate actions.

Wong Di Ming, research analyst at bond information platform Bondsupermart, observed that companies with a focus on real estate development, such as Heeton Holdings and Tuan Sing Holdings , posted “poor” performances.

It reflected the impact of burgeoning finance costs even as these developers reported an increase in revenues, Wong said.

CGS-CIMB attributed the lacklustre results of property developers and brokers to a lack of divestment gains, slower monetisation activities and reduced market transaction volumes.

The two macro factors dictating earnings in H2 2023 will be the trajectory of interest rates and the pace of recovery in electronic exports, Phillip’s Chew told BT.

Although banks should do well for the second half, upside might be capped.

Wong of Bondsupermart said banks in Singapore are expected to continue benefiting from high net interest income, although they might start to see a slight increase in funding costs. The main concern will be the management of operating costs given the continued inflationary pressure.

He added: “On the other hand, the loan books for the Singapore banks remain relatively healthy (given their exposures compared with foreign banks), and currently appear unlikely to be further impacted by the uncertain economic outlook.”

DBS Group Research favours industrials for their resilience and robust order book.

ComfortDelGro is one of DBS Group Research’s other picks as its public transport and taxi and private hire segments recover, the newly introduced platform booking fee lifts its earnings and improvement in overseas businesses pave the way for better sequential earnings.

CGS-CIMB has lowered its earnings forecasts for seven sectors for H2, including commodities, technology, telecommunications and property.