Sembcorp, Seatrium, iFast, FLCT, Singtel, SIA could beat consensus this earnings season: CGSI

Among these names, KDCREIT and ESR-REIT reported their results on Jan 24.

REITs are hobbled by higher interest expenses, though pressure is easing, say the CGSI analysts. 

“We think REITs will report mixed 4Q2024 distribution per unit (DPU) performance as topline growth from high portfolio occupancy, positive rental reversions and accretive acquisitions could be partly eroded by higher interest expense,” they write in a Jan 22 note. 

They anticipate Singapore assets — across all asset classes — will enjoy positive revaluations, while value of selected overseas properties could be impacted by still-high funding costs and forex fluctuations. 

See also: UOBKH raises TP on SIA to $6.22, FY2026 earnings to see lift on fuel cost savings

“We forecast the momentum of funding cost hikes to decelerate q-o-q as S-REIT debt costs are re-priced to market,” they add. “Key risks to the sector include a steepening of the yield curve as a slower decline in long bond yields would likely cap equity valuation upside.”

Potential outperformers

Potential outperformers this earnings season include iFast, which is expected to report higher net profit of $17.6 million for the quarter, “primarily from progressive contributions from the onboarding of eMPF trustees”.

See also: Maybank lowers REITs’ earnings and DPU estimates, recommends investors remain ‘selective’ amid macro uncertainty

Apart from iFast’s Hong Kong ePension infrastructure, the analysts think iFast’s trading platform volumes may still be sustained over 4Q2024 from elevated regional risk sentiment.

Singtel, too, could post 10% higher earnings before interest and taxes (ebit) y-o-y, a beat as cost cuts gain traction. This may prompt the group to raise full-year ebit guidance slightly. They add. 

Net profit should be largely in line as associate profits remain pressured by a strong Singapore dollar, say the analysts. 

Finally, CGSI expects SIA to post a strong quarter with a fall in jet prices last quarter, coupled with seasonal strength in average ticket prices. This could result in 3QFY2025 core patmi of $600 million, only 3% lower y-o-y, compared to 54% lower y-o-y in 2QFY2025.

Banks mixed, but still a dividend play

Lock and Lim expect Singapore banks’ earnings to be affected by seasonal softness in 4QFY2024, with net interest margin (NIM) performance mixed across banks. 

DBS is likely to record a small expansion, with OCBC and UOB “slipping”, they add. 

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“We think fee momentum has likely slowed and wealth management income has pulled back,” says Lock and Lim, who maintain “neutral” on the sector. 

The CGSI analysts prefer DBS first, followed by OCBC, then UOB. 

DBS is expected to post 4QFY2024 net profit of $2.7 billion, down 11% q-o-q but up 13% y-o-y. 

With DBS’s 3QFY2024 exit NIM of 2.15% sustaining into October 24, CGSI expects some 2 basis point q-o-q uplift in 4QFY2024’s NIM to 2.13%. 

“Despite strong wealth management momentum in the preceding quarters, we expect seasonal factors to slow earnings from this segment. We expect DBS to raise its ordinary dividend per share to 60 cents from 4QFY2024, with $3 billion to $4 billion in excess capital still available for shareholder return,” they add. 

Meanwhile, CGSI expects OCBC to post a 4QFY2024 net profit of $1.8 billion, down 7% q-o-q and up 13% y-o-y. “OCBC reiterated that its FY2024 NIM should still trend at 2.2%. We expect a seasonally lower quarter of fees, with the wealth management segment not being spared.”

Treasury income likely trended lower in tandem, they add. “We estimate that OCBC has $3.6 billion in excess capital, which implies a potential return of up to 80 cents in DPS.”

Finally, CGSI expects UOB to post 4QFY2024 net profit of $1.44 billion, down 12% q-o-q and down 4% y-o-y. 

We think NIM could slip 2bps q-o-q to 2.03% in 4QFY2024 as asset yields get repriced on lower interest rates. 

Net interest income (NII) may still hold steady given a pick-up in loan growth, they add. Fees were likely impacted by seasonal factors. In its 3QFY2024 earnings briefing, UOB had mentioned $2.5 billion in excess capital that may be available for a share buyback programme or special dividends, implying $1.50 in DPS.

Nevertheless, the three banks remain an “attractive dividend play”, says CGSI, yielding 5% to 5.6% in FY2025. 

Upcoming dates

iFast, Elite UK REIT, Digital Core REIT and Oiltek will post their results on Feb 12, while SIA Engineering will post their results on Feb 14. 

Seatrium will post its results on Feb 21, while OCBC will release its results on Feb 26. 

ST Engineering, Sembcorp, CapitaLand Investment will post their results on Feb 27.