Q1 earnings of listed firms may be hit by big drop among a few

Statistics so far point to lower average first-quarter earnings among the listed companies here; of the first 14 that have reported results for the period ended Mar 31, 2013, total profits came in at $768.1 million - down 35.1 per cent from the same period last year.

This was due to four companies - including conglomerate Keppel Corporation and its property arm Keppel Land - reporting lower earnings from a year ago, which negated the higher profits made by the other 10 firms.

Keppel Corp, in particular, saw a huge slump in earnings given the absence of the income boost it saw the year before from Reflections at Keppel Bay.

The group reported a 52.5 per cent fall in its first-quarter net profit to $357 million, from $751 million a year ago. Earnings per share were 19.8 cents, down from 41.9 cents. Its revenue was down 35 per cent year-on-year to $2.76 billion.

Keppel Land, meanwhile, saw net profit slip 32 per cent to $96.6 million in the quarter just ended, from $141.9 million a year ago.

Its turnover rose 21.6 per cent to $207 million in the first quarter, mainly from the property trading, hotels and resorts and fund management segments, which was partly offset by lower takings from its property investment segment.

DMG Partners Research's Jason Saw and Lee Yue Jer noted that the Keppel Corp's overall results were also below consensus estimates, and that its offshore & marine (O&M) division reported lower revenue recognition. "We believe the normalising O&M margins and property-cooling measures are likely to cap the rerating process in the near term," said the researchers, who have a neutral call on the stock and target price of $11.21.

Maybank Kim Eng, however, said that it is not sweating over Keppel's weaker performance. "While the stock has been under pressure due to concerns (about) competition from Chinese shipbuilders, we remain confident in Keppel's strong position as a premium rigbuilder," said Maybank Kim Eng analyst Yeak Chee Keong.

Mr Yeak noted that Keppel's O&M operating margin for the quarter turned up higher at 14.1 per cent after treading near the 13 per cent level for the preceding three quarters.

"While Keppel maintains its conservative long-term margin guidance of 10-12 per cent, we have forecasted the O&M operating margin this year to be higher at 14.2 per cent. We believe that the current margin level is sustainable this year as 1Q13 turned up higher despite having incorporated conservative recognition of its first Sete Brasil semisub."

Meanwhile, Singapore's biggest real estate investment trust, CapitaMall Trust, saw earnings pushed up during the January to March period following renovations and upgrading works at three malls, which in turn boosted rental returns.

Gross revenue grew 14.8 per cent from $155.2 million last year to $178.2 million, while net property income was up 15.5 per cent at $125.1 million.

Its distributable income came in at $85.3 million, up 11.3 per cent on the $76.6 million recorded in the same period last year. First-quarter distribution per unit (DPU) rose 7 per cent to 2.46 cents from the same period last year.

The trust said it plans to start upgrading works at its Bugis Junction mall by June, which could contribute a return on investment of about 9 per cent once completed.

Telco M1, meanwhile, saw slightly higher first-quarter numbers from a year ago, helped along by lower operating expenses. Net profit for the period was 1.8 per cent higher at $41 million.

Operating revenue for the same period, however, was 7.4 per cent lower, falling from $262.5 million to $243 million.

Maybank Kim Eng's Gregory Yap said that the higher net profit shows "great promise for 2013 to be a good year".

"Service revenue rose 4 per cent year-on-year, the fastest growth since 2010, on the back of good growth in both mobile and fibre businesses. The number of 4G customers on tiered plans jumped from 43,000 in 4Q12, its launch quarter, to 223,000 in 1Q13, just about one per cent of its total postpaid subscribers but we expect rapid growth ahead in 2013 as M1 has the advantages of full island-wide coverage and a superior network."

PhillipCapital analyst Ken Ang expects M1 to deliver stable net profits moving forward. He said: "M1's dividend yield of 5 per cent continues to remain attractive at current prices. However, we expect limited upside capital gains, due to previous share price rally and lower earnings growth."

Ornamental fish seller Qian Hu continued to be affected by an oversupply of the mass market variety of the auspicious dragon fish, which hit its bottom line. It reported a net profit of $62,000 for the first three months of 2013, down 88.1 per cent from $523,000 in the same period a year ago.

But the situation is expected to stabilise by the middle of the year, once newer, lower-cost batches of such fish are sold and booked at a profit, Qian Hu boss Kenny Yap told BT last week. "Overall, the fish business is still profitable because fish exports are still intact," he said.

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