Published October 28, 2008

Prominent firms' Q3 results out this week

Top of the list is Cosco which will release its report card on Thursday

By OH BOON PING

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THE third quarter corporate results season continues this week with a number of high-profile companies expected to turn in their Q3 report cards.

What will they show? Analysts slash their target prices for Cosco (above), while UOB (next) will be the first local bank to report its Q3 results

Top of the list is Chinese shipbuilder Cosco Corp which is scheduled to release its financial results on Thursday.

The firm was hit by news of its Norwegian client MPF Corp filing for bankruptcy, amid growing fears that the credit crisis could squeeze demand for new shipbuilding and lead to order cancellations. Accordingly, analysts have slashed their target prices for the stock by as much as 50 per cent.

And on Thursday, both analysts and investors alike will be watching out for signs of weakness in its order books, before deciding if the stock is worth holding in the short to medium term.

Next in line is United Overseas Bank (UOB) - the first local bank to report its Q3 performance this season.

To be sure, the banking sector is at the epicentre of the credit tsunami, but UOB's third quarter financial results might not be a good indication of the recessionary impact on the banking sector, according to analysts.

Some pointed out that loans growth is still positive, even though most are bracing for more write-downs and nasty numbers coming from the banks' treasury activities.

Not surprisingly, the three banks have seen their share prices hammered since 158-year-old Lehman filed for bankruptcy protection, and all three lost more than 40 per cent of their value in the year-to-date.

Joining UOB in reporting its results on Friday is property giant CapitaLand. Analysts expect the stock to register weak sales and average selling prices (ASPs), and face the risk of provisions.

Market watchers also pointed out that most developers here, which reflects investment properties at cost, may start chalking up revaluation losses against investment properties and especially, lower sales from overseas.

At developer GuocoLand, group revenue fell 20 per cent to $153.1 million from a year ago due mainly to lower revenue recognised from development projects in China.

Other prominent stocks that will disclose their performance in the next two weeks include OCBC, DBS, SembCorp Marine and ST Engineering.

Published October 28, 2008

World markets slump as Nikkei hits 26-year low

Seoul slashes interest rates as recession fears mount

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(LONDON) European stock markets fell heavily yesterday after the Nikkei index in Japan closed at its lowest in 26 years as the financial crisis raised recession fears and drove up the yen, piling the pressure on the country's exporters.

Tokyo's Nikkei 225 index closed down 6.4 per cent to 7,162.90 - the lowest since October 1982 - with exporters such as Toyota Motor Corp and Sony Corp hit hard. The losses came despite a report that the government was considering massive capital injection into struggling banks in a bid to calm jittery financial markets.

Even Japanese banks that have avoided the worst of the losses that are weighing on their Western counterparts are now struggling as the value of their stock portfolios is hammered. Mitsubishi UFJ Financial Group, one of Japan's largest lenders, said yesterday that it would seek to replenish its capital, raising billions of dollars by selling new shares.

In New York, shares marched lower again as trading began in New York, extending global losses. The Dow Jones industrials fell more than 150 points or 1.6 per cent at the open.

The Standard & Poor's 500-stock index was down 2 per cent and the Nasdaq composite index lost 1.9 per cent.

Yesterday's sharp stock market declines in Asia came amid another round of government measures to boost markets. In South Korea, the central bank slashed its key interest rate yesterday by three-quarters of a percentage point - its biggest cut ever - to prevent Asia's fourth-largest economy from lurching into recession, while Australian and Hong Kong central bankers injected funds into their markets to ensure liquidity.

In mainland China, the benchmark index slumped to its lowest level in more than two years as investors reacted to dismal earnings reports. The Shanghai Composite Index lost 6.3 per cent, or 116.27 points, to 1,723.35. It is now down about 72 per cent from its peak about a year ago.

Hong Kong's Hang Seng Index tumbled 12.7 per cent to 11,015.84, its lowest close in more than four years and biggest daily decline since 1991.

In the Philippines, the key index plummeted 12.3 per cent to 1,713.83 points, triggering a circuit-breaker that automatically halted trading for 15 minutes.

Only South Korea's market managed to eke out gains, perhaps in part because of the big rate cut there. The benchmark Kospi ended 0.8 per cent higher at 946.45.

The MSCI index of Asian stocks outside Japan fell for a fourth consecutive session, losing more than 5 per cent to levels not seen since the first half of 2004.

The MSCI index has now lost more than 40 per cent since Sept 12, right before the collapse of investment bank Lehman Brothers set off heavy selling. The index is down over 60 per cent for the year.

Taiwan shed 4.7 per cent while Australia lost 1.6 per cent. India's main share index closed 2.2 per cent lower after falling 11.5 per cent during trade to its lowest in three years, with local institutions and short covering pulling it off lows.

The Thai bourse was suspended for 30 minutes after it dived more than 10 per cent, triggering an automatic shut-down. It closed 10.5 per cent lower. Jakarta was down 6.3 per cent. Meanwhile, Wellington, Kuala Lumpur and Singapore were all closed for public holidays.

In afternoon trading, Britain's FTSE 100 fell 1.63 per cent, Germany's DAX Index lost 2.57 per cent, and France's CAC-40 declined 4.91 per cent.

In oil, crude prices weakened after Opec's move to cut production in an attempt to halt the declines. Light, sweet crude for December delivery was down US$1.95 to US$62.20 a barrel.

In another development, the US government will begin doling out US$125 billion to nine major banks this week as part of its effort to contain a growing financial crisis, a top Treasury official said yesterday.

Assistant Treasury Secretary David Nason said that the deals with the nine banks were signed last Sunday night, and the government will make the stock purchases this week. The deals are designed to bolster the banks' balance sheets so they will begin more normal lending.

The action will mark the first deployment of resources from the government's US$700 billion financial rescue package.

Meanwhile, sales of newly constructed US single-family homes rose in September and inventories shrank as builders slashed prices to their lowest level in four years to move property as a financial crisis deepens.

The annual sales pace of 464,000 homes was up 2.7 per cent from the revised August figure of 452,000, originally reported as 460,000 homes, Commerce Department data showed yesterday.

Economists polled by Reuters expected the new homes sales pace to dip to 450,000 homes from that original figure. -- AP, Reuters, AFP, NYT

Published October 25, 2008

Keppel down on outlook concerns

By VINCENT WEE

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KEPPEL Corp's Q3 results briefing sought to assure investors that at least one of its three pillars of growth remains strong, with continued strong topline numbers contributed by the offshore and marine division.

Executive chairman Lim Chee Onn emphasised that 'a slowdown in rig orders over the next 12-15 months should not have too significant an impact on us as Keppel O&M has about $13 billion in orders stretching up to 2012'.

But investors remained worried, selling off the stock during the course of the day after it rose a little in the morning on initial relief at the better-than-expected results. Keppel shares closed 25 cents lower at $3.75 yesterday.

Chief among concerns was the outlook ahead. Revenue and profit recognition for the offshore and marine division (O&M) in Q3 came from the earlier still-buoyant market. But costs increased 21 per cent from the preceding quarter from $2.4 billion to $2.9 billion although revenue kept pace and rose 23 per cent from $2.6 billion to $3.2 billion in the corresponding period. These costs were mainly due to expansion of work at the O&M division.

Keppel management explained that the business remained secure despite the uncertainties ahead and further deterioration in global economies. 'We believe that the fundamentals underpinning rig and FPSO demand are still intact, although in the foreseeable future, some rig owners' ability to expand their fleet could be constrained by tight credit,' said Mr Lim.

'We do not expect this situation to have a significant impact on full-year financial performance,' said group finance director Teo Soon Hoe. The group would make more stringent assessments of investments but will also seize opportunities, he added.

'Keppel O&M will deliver its performance and results in 2008,' said senior executive director Choo Chiau Beng. While deferring to the oil companies to make newbuild decisions, he said that he believed rigs are still viable at an oil price anywhere above US$50 per barrel.

DMG analyst Serene Lim noted in a report released yesterday that operating margins remain intact despite a rise in staff costs and operating expenses. 'Although we noted a considerable jump in staff costs and/or operating expenses, the improvement in margin on a year-on-year comparison (up 180 basis points) could possibly be due to a marked improvement in its execution of projects and/or a shift towards higher-margin product mix (more ship repairs and conversion projects, higher percentage towards projects with owner-furnished equipment) over the past year,' she said.

DMG maintained a neutral rating on Keppel but cut its target price to $4.52 on a reduction in FY08-09 earnings by 2-6 per cent.