Published February 16, 2009

Some firms emerge from bleak year unscathed

They may have stayed out of the red but total earnings shrank

By EMILYN YAP

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THE recession bear is swinging its claws but so far, some Singapore-listed companies have managed to pull out of FY2008 with mere scratches - if not unscathed.

For the 63 firms which had released their results for the financial year by Friday last week, a majority of 50 reaped net profits amounting to $7.57 billion.

Certainly, total earnings have shrunk as the market expected. For 59 companies which also reported FY2007 results last year, collective net earnings have fallen 47 per cent over a year.

But not every company is crying over its books. In fact, of the 63 mentioned, a respectable 25 still took in more than they did a year ago.

Some are real estate investment trusts (Reits) which benefited from higher rents or portfolio growth undertaken earlier. For instance, CapitaRetail China Trust enjoyed earning increases in both Q4 and FY08 - income available for distribution rose 43 per cent year-on-year to $45.9 million at the end of the financial year.

And for some blue-chips, profits did not increase but they still stayed above the $1 billion mark. Property group CapitaLand took home net earnings of $1.26 billion while conglomerate Keppel Corp reaped $1.10 billion for the full year.

DBS Group, first among the three local banks to release the latest results, also posted a net profit of $1.93 billion for FY08 on Friday last week.

But the economic slowdown has undoubtedly wounded several companies - 13 suffered losses for the full-year and among them, nine were actually profitable in FY07.

The cooling property sector dampened earnings for some real estate players. From net profits of over $1 billion, Singapore Land swung into the red with a net loss of $117.4 million for the full-year after accounting for fair-value losses on investment properties.

Few analysts expected others in the sector to turn in pretty results in the face of fewer launches and potential fair-value losses. 'It's a difficult picture if you look at consensus estimates,' said CIMB analyst Donald Chua.

The outlook is not rosy for most Reits too. One key concern now is 'whether they can sustain their distributions per unit', said DMG & Partners analyst Brandon Lee.

Telecommunication groups, traditionally seen as recession-proof, also showed signs of weakening. Both StarHub and MobileOne reported lower Q4 and FY08 results compared with a year ago.

'No stock is completely immune to recession,' said DBS Vickers analyst Sachin Mittal. But he believed that these telcos are still defensive plays because of 'good cash flow yields'.

And as the economic downturn continues, competition within the sector could ease, he added.

As companies - small to mid-cap ones in particular - continue to report results in the next few weeks, more corporate casualties could surface.

Already, several have tried to prepare the market for a poorer showing with profit warnings.

It looks like the recession bear may have gotten some companies in its grip after all and in the months to come, could soon catch up with those that got away.