Earnings to decline by 17% for 2008 and 6% for 2009:
In 3Q08, the earnings for Singapore listed companies under our coverage dropped 7% yoy and 22% qoq, of which 32% were below expectations. Dismal outlook for 4Q08 led us to further cut estimates, and we expect 25% qoq decline in 4Q08. We have cut our earnings for 2008F and 2009F by 5% and 19% respectively. This resulted in earnings decline of 17% for 2008F and 6% for 2009F for STI stocks.
Earnings downgrades have yet to bottom – earnings risk for property and banking sectors. The sharper than expected drop in October NODX implies there is downside risk for GDP, pushing the economy into recession next year. MTI has cut its GDP growth forecasts to –1% to +2% for 2009 and 2.5%for 2008, on the back of weak 3Q08 GDP growth of –0.6% yoy and –6.8% qoq.
Against this backdrop, we expect earnings downgrades to continue for the next few quarters, the biggest risk lies in property and bank earnings, as provisions and write downs take centrestage due to asset devaluation. In 1998, net earnings decline by 40%.
12-month STI target upside cut to 2010 (base case) :
At 1613, the STI istrading at PE of 8.5x(08F) and 9x(09F) with dividend yield of 7.1%(08F). Our bottom-up target has been cut from 2983 to 2010 on revised earnings and de-rating, translating to 11.2x on FY09 earnings.
Bear target of 1250 on STI :
Given the deterioration in earnings, and assuming a recession scenario of –2% in GDP growth next year, the STI could test a low of 1250 if we apply 1998’s valuation metrics. As we are still in the early phase of a recession, we will pick stocks whose earnings are more resilient, such as consumer staples, media, telecoms, and utilities. We will sell on strength asset plays, as we expect more downside in asset values next year, as the effects of recession, job cuts and financial deleveraging exercises take its toll on asset plays including Properties, REITS, Shipping and Hotels.
Friday, November 21, 2008
Wednesday, November 12, 2008
SGX to launch extended settlement contracts on 23 Jan 09
Singapore Exchange Limited (SGX) announced today that it will launch Extended Settlement (ES) contracts on 23 January 2009. The launch is aimed at expanding the current suite of equity products available to investors.Previously referred to as Single Stock Derivatives (SSDs), ES contracts will be a new product class on the SGX Securities Trading (SGX-ST) market. The new product allows investors to buy into an underlying stock listed on SGX at the transacted price on the day of the trade, for settlement at a specified future date. Investors will have to put up an initial margin to trade ES contracts, which will be marked to market. ES contracts provide investors with an exchange-listed and -traded alternative to unregulated over-the-counter trades.To familiarise investors with the benefits and risks of trading the new product, SGX will work with its Member firms to extend its current investor education programmes in the 2.5 months between now and when the contracts are launched. Among various activities, participating brokers will be organising product education seminars in collaboration with SGX at venues such as the SGX auditorium in Shenton Way. “Extended Settlement contracts will be the first margin-based product in our securities trading market. The launch of ES contracts on SGX's securities platform will fill the current pressing need in the equity derivatives space for Singapore-based retail investors. It will also pave the way for more varied exchange-traded equity products to be introduced, and allow for hedging and arbitraging opportunities,” said Mr Chew Sutat, SGX Executive Vice President & Head of Market Development.“The Securities Association of Singapore is pleased to have had the opportunity to work closely with SGX, and at many levels, to develop Extended Settlement contracts as a new product and to get the trading infrastructure ready for the launch. All 10 local brokers welcome the opportunity to play a key role in training and preparing the professionals and informing and educating the investing public on how this new product can serve them well. We are excited about Extended Settlement contracts creating new interest and adding depth to our securities market,” said Mr Lim Eng Hai, Chief Executive Officer of the Securities Association of Singapore. ES contracts will offer the following benefits:- Exchange-traded and -cleared ES contracts facilitate orderly and transparent trading of forwards/futures needs and reflect the views of investors. Specifically, all short positions in ES contracts will be matched against equivalent long positions and open interest will be transparent and published. Both long and short positions are margined and marked-to-market for system integrity.- ES contracts enable more efficient margin-based trading. This provides better risk management for the industry and increased capital efficiency for long investors, which are especially relevant in volatile markets.- SGX expects that with the participation of liquidity providers, exchange-traded ES contracts will facilitate increased liquidity in the cash market for underlying securities which are impacted, thus benefiting all investors in the marketplace.The 10 stockbroking companies supporting the development and launch of Extended Settlement contracts are AmFraser Securities, CIMB-GK Securities, DBS Vickers Securities, DMG & Partners Securities, Kim Eng Securities, Lim & Tan Securities, OCBC Securities, Phillip Securities, UOB Kay Hian and Westcomb Securities.The key features of ES contracts are detailed in the Annex.
AnnexThe key features of ES contracts are:- Each contract will be for 35 days, starting from the 25th of each month until the last trading day (LTD) of the contract month, i.e. the 31st of the following month. - If the 25th and/or 31st are non-trading days, the contract will start from and end on the last trading days before those dates. For example, an ES contract that starts trading on 23 January 2009 will have its LTD on 27 February 2009.- Settlement will take place by way of delivery of the underlying securities on LTD plus three days (LTD+3). If bought on the first day of the ES contract, this gives investors up to 38 days to settle the contracts with the actual securities – 35 days longer than for normal securities investments.- Margins, which are a fraction of the full trade value, are required to be paid to trade ES contracts. The margins range from 5% to 20% of the cost of one lot of the underlying stock. The full amount of the trade is payable on settlement day, which is LTD+3.
AnnexThe key features of ES contracts are:- Each contract will be for 35 days, starting from the 25th of each month until the last trading day (LTD) of the contract month, i.e. the 31st of the following month. - If the 25th and/or 31st are non-trading days, the contract will start from and end on the last trading days before those dates. For example, an ES contract that starts trading on 23 January 2009 will have its LTD on 27 February 2009.- Settlement will take place by way of delivery of the underlying securities on LTD plus three days (LTD+3). If bought on the first day of the ES contract, this gives investors up to 38 days to settle the contracts with the actual securities – 35 days longer than for normal securities investments.- Margins, which are a fraction of the full trade value, are required to be paid to trade ES contracts. The margins range from 5% to 20% of the cost of one lot of the underlying stock. The full amount of the trade is payable on settlement day, which is LTD+3.
Friday, November 7, 2008
DBS to lay off staff
This is not a good sign.
Singapore's DBS Group, Southeast Asia's biggest bank by assets, said Friday it was cutting 900 staff to trim costs amid the global credit crisis, and reported a slump in third quarter net profit. Chief executive Richard Stanley said most of the cuts, to be carried out at the end of the month, will come from its offices in Singapore and Hong Kong and will account for six per cent of the workforce. He added that this was the largest job cut ever. The job cut will be across all businesses and all levels. Laid off staff will be paid the equivalent of one month's salary for every year of service as per market practice. DBS said it has no plans to cut beyond this and also clarified that there are no plans for salary cuts.
Back in 2001, DBS laid off 200 staff in Singapore and implemented pay cuts. “To be a streamlined organisation, I believe we must run a tighter ship," he told reporters." We have been vigilant on costs but as the economy enters a more difficult and uncertain phase, many financial institutions around the world and in Asia have made headcount reductions," he added. "To be more productive and efficient, we will restructure and streamline the organisation. Regrettably, this has resulted in the need to reduce our workforce by six percent or about 900 people, primarily (in) Singapore and Hong Kong, by the end of the month."
Earlier Friday DBS said net profit in the three months to September fell 38 per cent as market-related income took a hit from the global financial crisis and bigger provisions. Third quarter net profit totalled S$379 million (US$256 million), down from S$610 million in the same period last year, it said in a statement. Analysts polled by Dow Jones Newswires had predicted an average S$572 million net profit. "The operating environment is increasingly challenging for financial institutions the world over," Stanley said. "We took upfront prudential levels of allowances to strengthen our balance sheet and with strong capital and liquidity, I believe we are well positioned to ride out the uncertainties ahead." Net interest income in the September quarter grew two per cent to S$1.07 billion from last year but net fee and commission revenues dropped 22 per cent to S$316 million. Other non-interest income plunged 87 per cent on the year to S$11 million. The bank said it set aside S$129 million in provisions, compared with just S$10 million a year ago, partly to cover its collateralised debt obligations (CDOs) portfolio. CDOs are securities backed by a range of assets including bonds, loans and their derivatives, including corporate loans, high-grade mortgages, subprime mortgages, car loans and credit card debt.
DBS was the last of three local banks to report earnings for the September quarter. Oversea-Chinese Banking Corp (OCBC) said earlier this week third quarter net profit fell 13 per cent while United Overseas Bank reported last week a 5.1 per cent drop in profit for the same period. -
Singapore's DBS Group, Southeast Asia's biggest bank by assets, said Friday it was cutting 900 staff to trim costs amid the global credit crisis, and reported a slump in third quarter net profit. Chief executive Richard Stanley said most of the cuts, to be carried out at the end of the month, will come from its offices in Singapore and Hong Kong and will account for six per cent of the workforce. He added that this was the largest job cut ever. The job cut will be across all businesses and all levels. Laid off staff will be paid the equivalent of one month's salary for every year of service as per market practice. DBS said it has no plans to cut beyond this and also clarified that there are no plans for salary cuts.
Back in 2001, DBS laid off 200 staff in Singapore and implemented pay cuts. “To be a streamlined organisation, I believe we must run a tighter ship," he told reporters." We have been vigilant on costs but as the economy enters a more difficult and uncertain phase, many financial institutions around the world and in Asia have made headcount reductions," he added. "To be more productive and efficient, we will restructure and streamline the organisation. Regrettably, this has resulted in the need to reduce our workforce by six percent or about 900 people, primarily (in) Singapore and Hong Kong, by the end of the month."
Earlier Friday DBS said net profit in the three months to September fell 38 per cent as market-related income took a hit from the global financial crisis and bigger provisions. Third quarter net profit totalled S$379 million (US$256 million), down from S$610 million in the same period last year, it said in a statement. Analysts polled by Dow Jones Newswires had predicted an average S$572 million net profit. "The operating environment is increasingly challenging for financial institutions the world over," Stanley said. "We took upfront prudential levels of allowances to strengthen our balance sheet and with strong capital and liquidity, I believe we are well positioned to ride out the uncertainties ahead." Net interest income in the September quarter grew two per cent to S$1.07 billion from last year but net fee and commission revenues dropped 22 per cent to S$316 million. Other non-interest income plunged 87 per cent on the year to S$11 million. The bank said it set aside S$129 million in provisions, compared with just S$10 million a year ago, partly to cover its collateralised debt obligations (CDOs) portfolio. CDOs are securities backed by a range of assets including bonds, loans and their derivatives, including corporate loans, high-grade mortgages, subprime mortgages, car loans and credit card debt.
DBS was the last of three local banks to report earnings for the September quarter. Oversea-Chinese Banking Corp (OCBC) said earlier this week third quarter net profit fell 13 per cent while United Overseas Bank reported last week a 5.1 per cent drop in profit for the same period. -
Thursday, November 6, 2008
European Markets Down Despite Interest Rate Cut- Not a very good sign for the stock market
Thursday November 6, 8:44 am ET By Pan Pylas, AP Business Writer
LONDON (AP) -- European stock markets traded down Thursday after heavy sell-offs on Wall Street and Asia despite interest rate cuts across the continent, including a much bigger than anticipated reduction from the Bank of England.
The FTSE 100 index of leading British shares was down 167.72 points, or 3.7 percent, at 4,363.01, while Germany's DAX was 211.66, or 4.1 percent, lower at 4,955.21. France's CAC-40 was down 127.33 points, or 3.5 percent, at 3,490.78.
Except for some volatility after the interest rate cuts from the Bank of England and the European Central Bank and an unscheduled reduction by the Swiss Central Bank, Europe's stock indexes were still more or less at the level they were before the decisions.
While the Bank of England slashed its benchmark rate by 1.5 percentage points to 3.00 percent, its biggest cut since March 1981, the European Central Bank and the Swiss National Bank opted for more modest half-point reductions. The Czech Republic's central bank cut by three-quarters of a point.
The Bank of England's bigger than anticipated rate cut stoked expectations that the European Central Bank would be more aggressive than expected. Its decision to cut by only a half-percent disappointed investors looking for more aggressive action.
"The ECB rate cut came as a disappointment in the end after far more aggressive action from the Bank of England," said Jennifer McKeown, European economist at Capital Economics.
The failure of the FTSE to rally strongly in the wake of the Bank of England's aggressive interest rate cut indicated that the bank may have further reinforced fears about the length and depth of the recession in Britain.
"Traders are thinking, if we've really got to cut rates to 3 percent, then how bad is it out there," said Mic Mills, senior trader at ETX Capital.
"Recessionary fears were bad before; they just got a whole lot worse," he added.
LONDON (AP) -- European stock markets traded down Thursday after heavy sell-offs on Wall Street and Asia despite interest rate cuts across the continent, including a much bigger than anticipated reduction from the Bank of England.
The FTSE 100 index of leading British shares was down 167.72 points, or 3.7 percent, at 4,363.01, while Germany's DAX was 211.66, or 4.1 percent, lower at 4,955.21. France's CAC-40 was down 127.33 points, or 3.5 percent, at 3,490.78.
Except for some volatility after the interest rate cuts from the Bank of England and the European Central Bank and an unscheduled reduction by the Swiss Central Bank, Europe's stock indexes were still more or less at the level they were before the decisions.
While the Bank of England slashed its benchmark rate by 1.5 percentage points to 3.00 percent, its biggest cut since March 1981, the European Central Bank and the Swiss National Bank opted for more modest half-point reductions. The Czech Republic's central bank cut by three-quarters of a point.
The Bank of England's bigger than anticipated rate cut stoked expectations that the European Central Bank would be more aggressive than expected. Its decision to cut by only a half-percent disappointed investors looking for more aggressive action.
"The ECB rate cut came as a disappointment in the end after far more aggressive action from the Bank of England," said Jennifer McKeown, European economist at Capital Economics.
The failure of the FTSE to rally strongly in the wake of the Bank of England's aggressive interest rate cut indicated that the bank may have further reinforced fears about the length and depth of the recession in Britain.
"Traders are thinking, if we've really got to cut rates to 3 percent, then how bad is it out there," said Mic Mills, senior trader at ETX Capital.
"Recessionary fears were bad before; they just got a whole lot worse," he added.
Tuesday, November 4, 2008
Company result and news
FibreChem Technologies Ltd. (FBCM SP): The manufacturer andseller of chemical fiber products said third-quarter net incomefell 19 percent from a year earlier to HK$120.6 million ($16million) because of higher raw material costs and other expenses.FibreChem was unchanged at 27.5 Singapore cents.
Frasers Centrepoint Trust (FCT SP): The owner of shoppingmalls in Singapore said it will distribute S$8.1 million ($5.5million) to shareholders for the third quarter, 27 percent lessthan a year earlier. Frasers Centrepoint retreated 1.5 Singaporecents, or 2.2 percent, to 66.5 cents.
Great Eastern Holdings Ltd. (GE SP): The biggest lifeinsurer by assets in Singapore and Malaysia said third-quarterprofit rose 9 percent from a year earlier to S$135.2 million.Shares of the company were upgraded to ``buy'' from ``sell'' atCitigroup Inc. following the earnings. Great Eastern climbed 3 cents, or 0.3 percent, to S$9.18.Oversea-Chinese Banking Corp. (OCBC SP), the largest shareholderin the insurer, gained 29 cents, or 5.9 percent, to S$5.19.
Olam International Ltd. (OLAM SP): The Singapore-basedcommodities supplier had its share-price forecast cut to 69Singapore cents from 94 cents at ABN Amro Holdings NV, which saidthat the credit crunch could restrict trade and hamper thecompany's volume growth. The brokerage has a ``neutral'' ratingon the stock. Olam added 4 cents, or 3.2 percent, to S$1.30.
Singapore Airport Terminal Services Ltd. (SATS SP): Thecatering and ground-handling unit of Singapore Airlines Ltd. (SIASP) said second-quarter net income fell 33 percent from a yearearlier to S$32.4 million because of a decline in contributionsfrom its units and higher expenses. The stock rallied 6 cents, or4.1 percent to S$1.53.
Singapore Exchange Ltd. (SGX SP): The operator of the city-state's securities and derivatives markets said it entered into apreliminary agreement with the Fujian government to encouragecompanies in the Chinese province to list their shares inSingapore. Singapore Exchange rose 25 cents, or 4.9 percent, toS$5.35.
Singapore Telecommunications Ltd. (ST SP): Southeast Asia'slargest phone company said currency movements hurt fiscal second-quarter earnings because of contributions from overseasoperations. Singapore Telecom advanced 8 cents, or 3.3 percent,to S$2.51.
Frasers Centrepoint Trust (FCT SP): The owner of shoppingmalls in Singapore said it will distribute S$8.1 million ($5.5million) to shareholders for the third quarter, 27 percent lessthan a year earlier. Frasers Centrepoint retreated 1.5 Singaporecents, or 2.2 percent, to 66.5 cents.
Great Eastern Holdings Ltd. (GE SP): The biggest lifeinsurer by assets in Singapore and Malaysia said third-quarterprofit rose 9 percent from a year earlier to S$135.2 million.Shares of the company were upgraded to ``buy'' from ``sell'' atCitigroup Inc. following the earnings. Great Eastern climbed 3 cents, or 0.3 percent, to S$9.18.Oversea-Chinese Banking Corp. (OCBC SP), the largest shareholderin the insurer, gained 29 cents, or 5.9 percent, to S$5.19.
Olam International Ltd. (OLAM SP): The Singapore-basedcommodities supplier had its share-price forecast cut to 69Singapore cents from 94 cents at ABN Amro Holdings NV, which saidthat the credit crunch could restrict trade and hamper thecompany's volume growth. The brokerage has a ``neutral'' ratingon the stock. Olam added 4 cents, or 3.2 percent, to S$1.30.
Singapore Airport Terminal Services Ltd. (SATS SP): Thecatering and ground-handling unit of Singapore Airlines Ltd. (SIASP) said second-quarter net income fell 33 percent from a yearearlier to S$32.4 million because of a decline in contributionsfrom its units and higher expenses. The stock rallied 6 cents, or4.1 percent to S$1.53.
Singapore Exchange Ltd. (SGX SP): The operator of the city-state's securities and derivatives markets said it entered into apreliminary agreement with the Fujian government to encouragecompanies in the Chinese province to list their shares inSingapore. Singapore Exchange rose 25 cents, or 4.9 percent, toS$5.35.
Singapore Telecommunications Ltd. (ST SP): Southeast Asia'slargest phone company said currency movements hurt fiscal second-quarter earnings because of contributions from overseasoperations. Singapore Telecom advanced 8 cents, or 3.3 percent,to S$2.51.
Monday, November 3, 2008
STI : Good Volume; Election Boost - CIMB
Dow Jones] Singapore shares holding onto good gains in decent volume as imminent U.S. election eyed as potential catalyst; STI +4.8% at 1880.88 at midday with resistance tipped at Oct. 22 intraday high of 1895. "Expectations that the new government will have to get down to the job of turning around the U.S. economy may continue to support optimism that the worst is over for holders of equities," says CIMB. Gains widely based with all sub-sector indexes higher; biggest blue chip risers include Golden Agri (E5H.SG) +15.8% at S$0.22, Keppel Corp. (BN4.SG) +9.8% at S$4.92. Broad market volume markedly higher than in recent weeks; gainers outnumber losers 4 to 1.
Subscribe to:
Posts (Atom)