Blue Chip Stocks Focus: Biggest Winners and Losers for Q3 2017
Earnings seasons for Q3 2017 is at its tail end and Singapore blue chip stocks had all announced their financial results for period ended 30 September 2017. The financials for these companies are a mixed bag, with some reported favourable increase in net profit while some reported dip in revenues and profits. We have rounded up some of the blue chip winners and losers in terms of fundamental performance for the third quarter of 2017.
Winners of 3Q2017
First up on the winners list is OCBC Bank, one of Singapore’s big 3 bank with exposure to Hong Kong financial markets since acquiring Wing Hang Bank. Its Q3 2017 net profit grew 12% as compared to Q3 2016, trumping all analyst predictions which provide a surprise on the upside. Its net interest income was the biggest contributor with a 12% rise. Wealth management department had also experienced strong growth which pushed total income from fees and commissions to a 14% rise. OCBC CEO is optimistic on the uptick of business and economic sentiment across its key service markets ie Singapore, Malaysia, Indonesia and Greater China. The only weak spot is the oil and gas loan book which still remained under stressed conditions as a result of oil price plunge which started in 2015. Overall OCBC would be performing relatively well for the rest of the year with the impending interest rate hikes and wealth management business gaining further traction.
UOB is another undisputed winner with a 12% rise in net income as compared to Q3 2016. Net interest income was the main earnings growth contributor, rising 15% with the remaining earnings growth coming from wealth management fees. Similar to OCBC, its oil and gas loan book has dented its earnings but overall performance remained solid. Rising interest rate has been a boon to Singapore banks and outlook for UOB remained bright in the coming quarters.
SGX, the sole financial exchange in Singapore is a clear winner as well with net profit for quarter ended 30 September 2017 coming in 9% higher as compared to the corresponding quarter a year ago. Revenue in all key business segments ie equities and fixed income trading, listing revenue and derivatives revenue all experienced healthy growth where trading activity is starting to recover. SGX is actively seeking strategic partnerships with global exchange such as Nasdaq to increase product offerings and range. IPO pipeline remained strong as well which may boost equities trading revenue. A rising market has boosted overall participation from all institutional and retail investors. SGX is expected to perform reasonably well following a strong local economy.
Singtel’s quarter results for period ended Q3 2017 had been boosted by a one-off divestment gain in Netlink Trust, powering its net profit to record an increase of almost 200% as compared to a year ago for the similar quarter. Singtel has been a winner for this quarter and duly declared a special dividend to distribute the proceeds from the IPO spin off of Netlink Trust. Excluding the one-off gains, Singtel core net profit dipped slightly by 4%. Singtel will be pushing its digital and ICT services business segment further going forward to be a major revenue contributor in order to offset stiff competition from voice and mobile data communication segment.
Keppel Corp’s recovery story continues with a solid Q3 2017 result where net profit was up 30% as compared to Q3 2016. Its higher profits from China and Vietnam property trading and sale of investments more than make up for the disappointment in offshore and marine division. Keppel Corp diversified earnings base has served it well since the start of the oil and gas sector downturn and is reaping the benefits.
Genting Singapore has been making headlines as a result of a strong set of Q3 2017 earnings where net profit jumped 35%. Gaming revenue recorded an increase of 11%, and VIP premium business has been the biggest contributor. Its attractions business is seeing better times as well with a higher visitorship rate. It will be building on its RWS (Resorts World) brand with a suite of events to welcome the year end festive period.
Capitaland belonged to the winners category as a result of 28% rise in net profit in Q3 2017. Net profit jump was mainly attributable to fair value gains in its Singapore and China property stakes. Revenue has been seeing steady growth as well mainly from Singapore development projects and higher rental revenue from newly acquired malls and serviced residences. Property market is expected to turnaround locally which may see Capitaland recording stronger rentals and fair value gains.
Losers of 3Q2017
DBS Bank recorded a surprise dip in net profit, where net income fell 23% in Q3 2017 as compared to Q3 2016, making it one of the losers in terms of financial scorecard for Q3 2017. This is largely due to loss provisions on its oil and gas book. Analysts remained optimistic of DBS’s future growth prospects with rising interest rate a boon across all banking sector. Oil and gas is a well-recognized stress area for Singapore banks and banks are actively managing their exposures. DBS is no exception and will continue to push for asset growth in its wealth management business.
Starhub’s earnings were lackluster in Q3 2017, where net profit dropped 11% mainly from fall in mobile, PayTV and broadband services. Telcos in general are facing stiff competition among the big 3 services providers, and are stepping up their product offerings in order to capture new customers.
M1, a telco service provider and listed blue chip entity, experienced a similar fate as the other telco service providers, albeit a smaller profit dip of 4.8% in Q3 2017 as compared to Q3 2016 on the back of higher depreciation and interest expenses. Industry newcomer Circles.life has not helped its cause of securing more customers sign ups and increasing revenue base. Telco industry as a whole will underperform in the coming quarters, as predicted by analysts and industry insiders.
Wilmar, a commodities giant, experienced a 5.7% dip in net profit due to lower earnings from tropical oils and sugar businesses. The dip was mainly caused by lower tropical oil processing margins, where tropical oils business segment saw a 51% drop in profit before tax. Wilmar CEO remained bullish on Asia’s economic future where Wilmar is well positioned to tap on the growth in sale of consumer staple and agriculture products.