Singapore Strategy - CIMB Research 2018-03-05: Earnings Bubbling ~ 4Q17 Results Review

Singapore Strategy - CIMB Research 2018-03-05: Earnings Bubbling Singapore Stock Market 4Q17 Earnings Review Sector Outlook

Singapore Strategy - Earnings Bubbling

  • The 4Q17 results of Singapore corporates were not impressive, with underachievers outnumbering those that beat expectations 15 to 7. This shows that corporates are still grappling with costs and kitchen-sinking. However, overall EPS still held up, mainly led by banks and manufacturing sectors.
  • Order book upgrade in capital goods also added meat to forward EPS expectations; we see risks of disappointment by mid-18 if orders do not trickle in.
  • Our bottom-up target for FSSTI now stands at 3,705, based on 14.2x 2018F P/E (+0.5 10-year mean) vs. 10% y-o-y EPS growth for 2018F.



4Q17 review: notable events in the past two months of results 



Results were not good again in 4Q17. 




Banks (OVERWEIGHT) and Telcos (UNDERWEIGHT) 

  • Banks have cleaned up their oil & gas loan book with FRS 109. Higher NII and fees, and benign credit costs are tailwinds for all three banks. We are OW on banks as they seem most defensive, trading at mean of CY18F 1.35x P/BV with 11.3% ROE. 
  • All three telcos disappointed in 4Q17 on higher-than-expected costs and weak associate contribution. Earnings outlook is still grim given the impending entry of a fourth telco. Valuations are also not screamingly attractive at 16x CY19F P/E vs. 10-year average of 15x.


Property (OVERWEIGHT) and REITS (NEUTRAL) 



Capital Goods (OVERWEIGHT) 



Tech & manufacturing (OVERWEIGHT), Gaming (OVERWEIGHT) 




Will we see some downgrades by 1H18? 

  • Following the earnings upgrade, we now project y-o-y core profit growth of 10% for 2018F and 7% for 2019F. Our end-2018 FSSTI target now stands at 3,705 based on 14x CY18F P/E (+0.5 s.d. of 10-year mean). 
  • We think analysts have generally penned in blue-sky expectations for 2018F and 2019F. While banks may not see much cuts, we see risks from capital goods and manufacturing if orders and sales expectations were overhyped.





Reinvent oneself to outperform 






LIM Siew Khee CIMB Research | CIMB Research Team CIMB Research | http://research.itradecimb.com/ 2018-03-05
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 3.010 Same 3.010
ADD Maintain ADD 30.810 Same 30.810
ADD Maintain ADD 9.670 Same 9.670
ADD Maintain ADD 1.490 Same 1.490



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