Published January 28, 2009

Firms report 55.1% slide in Q4 earnings

The numbers were boosted by the real estate investment trust sector

By UMA SHANKARI

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THE earnings scorecard for the first companies that reported their Q4 and full-year results this month shows the slowdown has begun - and is gathering pace.

As of yesterday, 20 Singapore-listed companies had released their Q4 earnings. They reported a combined $611.9 million in net profit - a 55.1 per cent fall from a year earlier.

All but one of the companies were profitable. And 11 of them reported higher year-on-year earnings. The numbers were boosted by the real estate investment trust (Reit) sector.

Many trusts posted higher year-on-year distributable income in Q4 on high rents locked in in earlier years. One company, Koyo, posted a loss, which it managed to narrow.

For full-year 2008, 21 SGX-listed companies reported a combined $2.86 billion in net profit. The total profit for 20 companies with a 2007 comparison available fell to $2.66 billion - 20.8 per cent lower than a year earlier.

The Reit sector has gained favour with analysts for the relatively stable income flow forecast for the next 1-2 years, underpinned by leases locked in during the boom.

Keppel Corp, the largest company to post its full- year results so far, saw 2008 net profit dip 2.9 per cent to $1.1 billion in the absence of one-time gains.

But chief executive Choo Chiau Beng warned of further order cancellations and payment rescheduling negotiations. And despite maintaining its earnings, Keppel cut its dividend payout ratio to 51 per cent from 2007's 99 per cent, signalling its caution.

Analysts, unimpressed, issued a slew of 'hold' and 'neutral' calls on the stock following the announcement. 'Given the lacklustre outlook, in particular an expected cyclical downturn in the offshore business, our 'hold' recommendation is maintained,' Kim Eng analyst Rohan Suppiah said in a note.

Two of Keppel's largest units - Singapore Petroleum Company (SPC) and Keppel Land - also posted lower earnings in 2008. SPC's 2008 net profit fell 55.4 per cent as refining operations were hit by oil price volatility.

And Keppel Land's 2008 earnings fell 70.8 per cent in the absence of one-off gains.

On the other hand, Keppel Land's listed trust K-Reit Asia, reported a 167 per cent surge in distributable income - in line with the better 2008 showing by most Reits.

The Reit sector has gained favour with analysts for the relatively stable income flow forecast for the next one to two years, underpinned by leases locked in during the boom.

Singapore's biggest Reit, CapitaMall Trust, saw distributable income rise 12.9 per cent in 2008 on higher revenue from new and renewed leases and asset enhancement works.

Analysts have issued 'buy' calls on the stock, as well as for other Reits.