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Wisdom (3rd March 2012)

Poor Q4 results spark cautious outlook

1st March 2012 By Kenneth Lim The Business Times 2012 Singapore Press Holdings Limited Total profits of 301 firms down more than 20% for Oct-Dec quarter ANOTHER tough quarter, and more to come, analysts say. Corporate profits generally disappointed in the fourth quarter of 2011, and companies are painting a cautious outlook for the months ahead, analysts said. 'I see more disappointments than upside surprises,' said Maybank Kim Eng head of research Stephanie Wong. 'Actually it's quite a lot of disappointment. Generally it reflects a very tough fourth quarter last year as some of the reality started to kick in.' A total of 303 companies posted their 2011 fourth-quarter results as at 5.30 pm yesterday. Of this, 301 companies whose fourth quarter 2010 results were available for comparison showed a 23.7 per cent year-on-year fall in total profits to $10.3 billion, according to data compiled by BT. Total fourth-quarter profit for the 303 companies was $10.4 billion, with 242 companies in the black and 61 reporting losses. Companies that did worse outnumbered those that did better 186 to 115.

 Sharing Wisdom (3rd March 2012) For the full year, total profit in 2011 was $34.7 billion from 393 companies. Of the 387 with comparable results, earnings fell 4.5 per cent to $34.25 billion from 2010, reflecting a much weaker second half of the year. Worse performers outnumbered better performers 216 to 171. UOB-KayHian research head Andrew Chow said performance was uneven, with certain sectors doing better than others. 'I think it's been quite sector specific,' Mr Chow said. He added that fourth-quarter results were actually mostly in line, but that was only after aggressive downgrades over the year, especially in the second half of 2011. DMG & Partners analyst Leng Seng Choon said the banking sector was a mixed bag. DBS Group Holdings, which benefited from lower-than-expected taxes, and Oversea-Chinese Banking Corp, which saw better trading income, beat consensus estimates, while United Overseas Bank missed predictions because of higher provisions. Loans growth was a key concern in the fourth quarter, and sluggishness is expected in 2012. 'I'm looking at earnings contraction for all three banks in 2012,' Mr Leng said. Commodities-related names had a tough end to the year amid extremely volatile materials prices. 'Fourth-quarter was generally weak but in line with expectations,' said Kim Eng analyst James Koh. Wilmar International was highlighted by a number of analysts as a notable disappointment, as margins took a hit and core income missed estimates. The outlook for the sector remains muted. 'Commodity prices have seen some kind of stabilisation since the start of the year,' Mr Koh said. Property developers also saw a slowdown, although sales in Singapore beat expectations. 'For companies that are diversified into other countries and regions, you can see that the earnings actually came down in the last quarter or at least last half of 2011,' said AmFraser analyst Lau Wei Chong.

 Sharing Wisdom (3rd March 2012) CapitaLand and Keppel Land both faced headwinds in China, which could persist into 2012, Mr Lau said. City Developments came in better than expected, and 'hospitality was surprisingly resilient', he added. A new accounting treatment of project sales took effect in 2011 for the industry, leading to a slew of 2010 restatements and complicating year-on-year comparisons. The new rules require revenue for certain projects to be recognised only upon completion, instead of based on the percentage completion of the project. But the restatements should end for most developers in 2012, and make future numbers a little more useful, if still lumpy. 'FY12 will give better comparisons,' Mr Lau said. The technology sector was especially beaten in the fourth quarter, the culmination of the March earthquake in Japan, the eurozone crisis and the floods in Thailand, which wreaked havoc on supply chains. Venture Corp was surprisingly resilient, and gave a source of hope. 'The outlook is positive, especially for first quarter and going into second quarter, but visibility is still low,' said DBS analyst Tan Ai Teng. Neptune Orient Lines was the biggest lossmaker, reporting a US$320 million fourth- quarter deficit in a dismal year for shipping companies. 'For the shipping side, in a way, it is a very tough environment,' UOB-KayHian's Mr Chow said. 'Still a lot of oversupply, even with the proposed increase in (freight) rates.' Source: The Business Times Connect with Wisdom Capital: Like our Facebook Page (http://ow.ly/9jhni) Follow us on Twitter (http://ow.ly/9jhr2) Visit our website (http://www.wisdomcapital.com.sg/)