SINGAPORE (Nov 20): CIMB Research believes all could be well for Singapore companies in 2018, after earnings upgrades continued for the sixth consecutive quarter in 3Q17 despite more misses than beats.
“Singapore will do well when the world does well. If the latest monthly global purchasing managers' index (PMI) is of any guide, the global economy started 4Q 2017 on a strong footing,” says lead analyst Lim Siew Khee.
“For export-oriented Asia, and especially Singapore, these ‘soft’ data are supportive of ‘hard’ data growth in the coming months, in terms of industrial output and exports growth,” she adds.
For example, Lim points out that Singapore’s container throughput grew 16.7% y-o-y in October 2017 – the strongest annual growth since February 2010.
“We believe the current growth is likely to be sustained into 1Q18F, driven by manufacturing and broadening growth across [the property, logistics and finance] sectors,” she says.
On the back of this positive sentiment, CIMB is raising its estimates for aggregate earnings growth to 8% in FY18-19F, significantly higher than original expectations of the 2-5% growth forecast at the start of this year.
See also: Test debug host entity
“We are excited about the ‘quality’ beats, led by Venture Corporation, Genting Singapore and Keppel Corporation, on topline growth, margin expansion, leaner operations and structural benefits from past years’ investments,” says Lim.
The analyst believes Venture Corp could repeat its stellar 3Q performance in the next quarter, on the back of positive results from US tech companies.
Venture saw its earnings more than double to $111.4 million in 3Q, driven by strong revenue growth, value creation through R&D capabilities, cost management, and operational excellence.
See also: Maybank downgrades ComfortDelGro in contrarian call over Addison Lee acquisition worries
Revenue swelled to $1.06 billion in 3Q17, improving 50.5% from $705.7 million a year ago.
“2H is seasonally stronger and we see no sign of customer disruption,” says Lim.
See: Venture Corp's 3Q earnings more than double to $111.4 mil as quarterly revenue crosses $1 bil mark
CIMB has an “add” call on Venture Corp with a target price of $24.74.
As at 12.42pm, shares of Venture Corp are trading down 6 cents at $20.89.
Meanwhile, Lim opines that Genting Singapore, which is trading below its six-year mean EV/EBITDA of 11 times, could be “a relative play versus other Singapore cash-generative companies that are above mean valuation.”
GENS saw its earnings increase 35% to $143.8 million in 3Q17, beating quarterly forecasts on the back of growth in both VIP volume and mass market gross gaming revenue (GGR).
For more stories about where money flows, click here for Capital Section
Driven by VIP GGR and tight cost controls, adjusted EBITDA surged 37% to $320.1 million during the quarter.
“Potential re-rating catalysts are higher margins and better gaming revenues,” Lim says.
See: Genting Singapore posts 35% increase in 3Q earnings to $143.8 mil
CIMB has an “add” call on Genting Singapore with a target price of $1.45.
As at 12.42pm, shares of Genting Singapore are trading down 2 cents at $1.34.
At the same time, Lim believes that Keppel Corp could gain from the potential recovery of the offshore & marine (O&M) sector. “We think the negative revision cycle for the offshore & marine (O&M) industry could be over,” she says.
“Re-rating catalysts could come from a stronger order momentum and redevelopment plans for its Singapore land bank and Tianjin Eco City,” she adds.
Keppel Corp announced a 30% rise in 3Q earnings to $291.8 million for the quarter ended September, on the back of higher profits from the group’s China and Vietnam property trading, power & gas and asset management businesses, as well as the sale of investments.
See: Keppel posts 30% rise in 3Q earnings to $292 mil; announces new urban solutions unit
CIMB has an “add” call on Keppel Corp with a target price of $8.58.
As at 12.42pm, shares of Keppel Corp are trading down 1 cent at $7.37.
