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Firms post strong gains so far, but all eyes are on bank results

Keppel Corp leads at half-time with record full-year earnings of $1.13b

THE stock market may have had a torrid time of late, but the financial reporting season has so far brought little but big smiles for investors.

With the reporting season for companies with Dec 31 year-ends now at the halfway mark, Singapore has so far registered another sterling year of profits.

Among the 32 Singapore- listed early birds that had reported by 5pm last Friday, total profits were $4.07 billion, up a dazzling 68.3 per cent on the $2.42 billion for 2006.

Of those that reported full- year results, 31 were in the black. And 22 of them posted higher earnings.

Racking up the largest profit number, in absolute terms, was Keppel Corp. The company’s earnings for the 12 months ended Dec 31 last year rose 50.6 per cent to $1.13 billion, thanks mainly to booming business at its oil rig and shipbuilding unit.

Keppel’s record gain calmed jittery investors concerned over whether it might face foreign-exchange losses similar to those that rocked other offshore and marine companies like SembCorp Marine (SembMarine) last year.

SembMarine, now mired in a lawsuit with BNP Paribas over forex losses, will report full-year results on Feb 22.

The sharp spikes in crude oil prices last year also helped propel the full-year net earnings of Keppel associate, Singapore Petroleum Company, to a record of $508.3 million.

On the property front, many real estate investment trusts have unveiled strong full-year profit scorecards.

One of the top performers in that category is CapitaMall Trust, whose net income available for distribution for last year came to $211.2 million, up 25 per cent from the $169.4 million posted in the same period a year earlier.

One of the poorest performers was Evergro Properties – a member of the Keppel group – which reported a 97.4 per cent plunge in full-year net profit for last year on the back of lower divestment gains.

Several big-cap counters – including StarHub, ComfortDelGro, City Developments, Great Eastern Holdings and SembCorp Industries – are due to report their results this month.

However, it is the traditional top earners – DBS Group Holdings, United Overseas Bank (UOB) and OCBC Bank – that are likely to come under the most scrutiny, with analysts not ruling out more write-downs on assets linked to United States sub-prime mortgages.

‘What is currently of utmost concern are the results of the local banks, as great uncertainty and anxiety rule in the wake of the big casualties surfacing from the sub-prime fiasco affecting the top banks and brokerages in the world,’ said Mr Najeeb Jarhom, the senior vice-president of research at AmFraser Securities.

Another concern is how the net interest margins of local banks will be affected by the falling Singapore interbank offered rate (Sibor) – the rate at which banks lend to one another.

‘A falling Sibor environment is likely to post a threat to the net interest margins of Singapore banks, as all three of them are net interbank lenders,’ said Kim Eng analyst Pauline Lee.

Economists expect the Sibor to go even lower by midyear, due partly to the US cutting its key interest rate.

Phillip Securities Research investment analyst Brandon Ng has declared OCBC his top pick. OCBC is a conservative bank and made the largest provisions in the last quarter to cover the fallout from risky debt, compared with UOB and DBS, he said.

Deutsche Bank analyst Michael Chang feels Singapore banks offer cheap valuations for their rapidly improving fundamentals.

‘We recommend an overweight position,’ he noted.


Source: The Straits Times 4 Feb 08


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