Tally So Far: First-Half Earnings Of SGX Firms Up 27%

Source : The Business Times, Mon, Aug 13, 2007

PROFITS of corporate Singapore rose more than 27 per cent in the first half of this year, led by strong gains in earnings in the property sector.

By 3 pm yesterday, 266 SGX-listed companies had released their first-half financial results for the six months ended June 2007. They racked in more than $13.3 billion in combined profits (after taxes and minority interests) during this period.

More than half of these companies reported an improved bottom line. Of these, 16 had climbed from the red back into the black, 154 boosted their net profits while six narrowed their losses.

Overall, 236 companies were in the black for the first half of this year, while 30 - 11.3 per cent - made losses. Of the latter group, 13 had been profitable in H1 last year.

Excluding the 11 companies which had no comparative results for H1 2006, the remaining reported total profits of $13.2 billion in the first six months of this year.

This represents a 27.4 per cent jump in combined first-half earnings from H1 2006.

Property and construction companies reported some of the most spectacular increases in earnings, in part due to the Financial Reporting Standard 40 (FRS 40) adopted from the start of the year.

The FRS 40 requires fair-value gains and losses on investment properties to be recorded in the profit-and-loss account.

The run-up in property prices has meant revaluation gains being recorded in the earnings of many property companies.

Property giant CapitaLand reported a year-on-year jump of 430.3 per cent in first-half earnings to $1.52 billion, putting it at No. 2 position in the earnings league table.

CapitaLand's earnings were boosted in the second quarter by fair-value and portfolio gains and higher profits from development projects.

'The group's ambitions to expand into new markets, increase its fee-based business, maintain a considerable exposure to Singapore's mid to high-end residential market and its capital recycling model will be the main drivers for growth,' said Kim Eng analyst Wilson Liew in a recent research note. He has a 'buy' call on the stock.

Taking the top earner spot was HongKong Land, which reported a net profit of $1.8 billion. This was fuelled also by fair-value gains as well as higher net rental income.

Other property players such as UOL, Keppel Land, Hwa Hong, Heeton, Tuan Sing, Orchard Parade and Pan Hong also put in a strong performance in the first half of the year.

The three local banks rounded up the top five earners, with each reporting more than $1.1 billion in net profits.

DBS, OCBC and UOB all benefited from higher lending activity and increased fee income. But the effects of these on their net profit had been largely masked by exceptional items, leading to less than stellar gains in their net profits from a year ago. Their core earnings, however, showed strong growth.

Companies in the offshore and energy also continued to be in good form. Keppel Corp, the world's largest builder of offshore rigs, reported a near-40 per cent increase in net profit to $510 million, while SembCorp Marine saw a 62 per cent rise in net profit to $158.8 million.

Smaller players in the sector such as Beng Kuang, Penguin Boat and Courage Marine also saw robust gains in their bottom line.

Not all was rosy in the corporate scene here, however. For example, lower freight rates in the first quarter of the year drove Neptune Orient Lines' first-half net profits down 27 per cent to $208 million. The group's second-quarter performance was, however, an improvement over last year.

Chartered Semiconductor also sank into the red with first-half losses amounting to $35.56 million, down from a net profit of $46.1 million a year ago. It suffered from consumer sector weakness and higher tax expense.

It was the second-worst performing company in terms of first-half earnings.

The company with the biggest net losses was Hup Soon, which made a net loss of $62.2 million, down from a net profit of $5.3 million. This was due to a large write-off of US$42.5 million in goodwill which resulted from the completion of its reverse takeover of Twinwood Engineering in April.