Singapore Stocks Q2 Earnings Preview: Boom or Bust for Investors?

July 21, 2023

The next earnings results season is right around the corner, and the market is expecting corporate earnings in Singapore to be a mixed bag.

Here is a quick look at some of the expectations on the upcoming earnings season based on the different stock market sectors of the Singapore Exchange (SGX).

1. Capital goods sector

Capital goods are looking rosy with projected year-on-year (yoy) increase especially after the restructuring phase for companies like Seatrium Limited (SGX: S51) and Keppel Corporation Limited (SGX: BN4).

2. Tourism recovery continues

The recovery in tourism continues, and Singapore has benefitted from the return of tourists.

The transport and hospitality sectors are poised for positive outcomes with increasing travel numbers.

Hospitality REITs and hotel operators stand to gain from the increase in travel activity.

3. Tech earnings cut looming

A word of caution here as the tech sector has been wobbly with earnings cut looming.

The market is looking at projected earnings cut of around 7.6% and 6% for the upcoming financial year amid the rising cost, inflationary pressure and stalling recovery.

Stocks to watch

1. Singapore banks

Singapore’s three largest banks are expected to benefit from the rising interest rate environment.

Their net interest margin (NIM) expansion should keep earnings robust in the second quarter’s numbers.

With the rising Hong Kong Interbank Offered Rate (HIBOR), DBS Group Holdings Ltd (SGX: D05) remains a standout. Positive shifts in the sector’s margin guidance could also be anticipated.

Meanwhile, for United Overseas Bank Ltd (SGX: U11), rising loan growth could support earnings but wealth and trading income remain potential drags on earnings amid reduced market volatility.

Finally Oversea-Chinese Banking Corp (SGX: O39) could see NIM taper off amid a shift away from risk that impacts its wealth management business.

Considering OCBC’s adoption of SFRS(I) 17, the consistent income from insurance may fluctuate in the upcoming results.

2. Genting Singapore

Genting Singapore Limited (SGX: G13) is another stock to keep an eye on as the leading integrated resort and casino operator could benefit from the growing number of Chinese tourists to Singapore.

The increasing influx of Chinese tourists to Singapore will boost Genting Singapore’s performance in the second half of this year.

The latest data in June puts Chinese tourists among Singapore’s top three tourist sources.

With sustainable dividends, Genting Singapore is poised to emerge as a yield play, with a forward dividend yield of 4.5%.

3. Hospitality REITs

Hospitality REITs are poised to see significant growth, driven by superior revenue per available room (RevPAR) performance.

Meanwhile, the overall Singapore REITs market could see diverse fortunes, but topline performance should remain resilient – supported by positive rental reversions and consistent occupancies.

However, distribution growth might be more subdued due to rising interest costs and the Aussie dollar, pound, yen, and euro depreciative effects.

4. ComfortDelGro

ComfortDelGro Corporation Limited (SGX: C52), a renowned taxi and transport operator in Singapore, stands as a significant beneficiary of the country’s concert boom and ongoing post-COVID-19 economic recovery.

The company shows promise with rail ridership almost back to pre-pandemic levels and a significant bus contract win in Australia.

Additionally, despite challenges in its UK operations in FY2022, a turnaround is expected by FY2023.

Overall, indications are suggesting a potential earnings recovery and a robust finish by the year’s end.

Opportunities in Singapore’s stable stock market

The upcoming earnings season in Singapore will bring varied results across sectors.

The capital goods sector, especially companies like Seatrium Limited (SGX: S51) and Keppel Corporation Limited (SGX: BN4), anticipates a year-on-year increase after restructuring.

Singapore’s tourism sector, including transport and hospitality REITs, is on the rise due to returning tourists.

Conversely, the tech sector faces potential earnings cuts due to various market pressures.

Meanwhile, the banking sector is expected to thrive in the rising interest rate scenario.

Genting Singapore, benefitting from an influx of Chinese tourists, could see a robust H2 2023 performance while ComfortDelGro, riding the concert boom and other recoveries, hints at a promising year-end.

As we edge closer to the year-end, there is a lot happening in the Singapore investment world.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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