Third-quarter profits take a hit

Source : Business Times - 15 Nov 2008

PROPERTY was the theme of the week as developers such as City Developments and Ho Bee Investment took a hit from lower sales this quarter.
This brings the total number of Singapore Exchange-listed companies reporting Q3 results to 298. Of these, 296 which have comparative results for the previous corresponding period have posted earnings of $6.51 billion, down 11.3 per cent.
For the nine months ended September, 293 firms with comparative results posted earnings of $22.9 billion, up 3.4 per cent from a year ago.
Bellwether City Developments posted an 11 per cent fall in net profit to $150.8 million due to a smaller revenue recognition from its residential projects in Singapore. The group also said that it would defer its South Beach development project ’till construction cost reverts to more reasonable levels’.
DMG research analyst Brandon Lee said yesterday that this is also likely a move to preserve capital given the tight credit conditions.
Mr Lee, who held a ‘neutral’ rating for the stock, sees a delay in the sale and launch schedules for the company’s domestic residential projects and assumes price declines of up to 8 per cent for the remaining 2008 and as much as 20 per cent fall for 2009.
Ho Bee Investment reported a 52 per cent slump in Q3 net profit to $18.7 million. Revenue slid 59.4 per cent to $52.5 million from a year ago, due to the deferment of revenue recognition from units sold under the deferred payment scheme.
The developer is ‘holding out for the good times’, said DBS Vickers analyst Adrian Chua in a research note yesterday, noting that the firm sees a lower risk of default on the five projects slated for completion in the first half of next year.
‘Although FY09 earnings will be strong, longer-term visibility is lacking given that its remaining projects at Sentosa were acquired at relatively high land costs, coupled with the tepid sentiment for high-end property,’ wrote Mr Chua, who kept a ‘hold’ rating on the stock.
Malaysian casino operator Genting International posted a net loss of $116.83 million for the quarter, compared with a net loss of $393.38 million in the same period last year, on bad debts and forex losses.
‘Not a winning bet yet,’ wrote CIMB-GK analyst Soh May Yee, who said that the traditionally stronger summer period did little to offset the dragging effects of UK’s weak economic conditions and last year’s smoking ban on its operations.
But she added that the company’s cash coffers are not expected to ‘dwindle materially’ from $774 million as at end-September, as it has fully contributed its equity position for the Sentosa casino project and has up to $4.2 billion loans set aside for the project.
Ms Soh downgraded the stock to ’underperform’ from ‘neutral’.
ComfortDelgro Corporation said on Thursday that third-quarter net profit fell 18.1 per cent to $48.3 million from the same period last year due to the earlier spike in fuel costs.
Kim Eng analyst Gregory Yap said in a research note yesterday that 5 per cent quarter-on-quarter drop in fuel energy costs to $78.7 million was not as steep as the drop in crude oil suggests ‘as hedging was done when oil first started to fall’.
Mr Yap added that domestic profits, which almost tripled by a quarterly comparison, and its Shenyang operations were bright spots.
Noting that Comfort is still ‘a defensive place to park funds during volatile times’, he kept a ‘buy’ rating.
Merrill Lynch said in a Nov 13 report that while profits from Asia are expected to fall about 20 per cent next year, there has been a negative co-relation between earning growth and regional stock market returns.
‘Asian markets don’t follow earnings’, it said.
The report pointed out that while Asian earnings growth has been negative in 10 of the past 33 years, seven of those 10 years saw stock market gains. In both 1983 and 1993, earnings fell more than 20 per cent, but saw higher markets.
‘Putting it all together, we see limited downside, but at the same time little reason to expect a sustained bull market,’ it said.
‘Rather, the environment is more likely to be direction-less.’