■ 3Q results - cut in earnings estimates continue; 3.5% cut in FY15F earnings and 4.9% for FY16F
■ Oil & Gas/Rigbuilders main drag on earnings; Banks and REITS stable
■ Key growth sectors for FY16F - Healthcare, Consumer Services and Oil & Gas
With one more week to go before the end of the 3Q results reporting season, we have cut FY15F and FY16F earnings by 3.5% and 4.9% respectively. There is still no respite from earnings downgrades which we have seen for the past one year. We now expect modest earnings growth of 0.4% and 8.5% for our basket of stocks for FY15F and FY16F respectively. For the STI component stocks, FY15F earnings are projected to dip 2%, followed by 7% growth in FY16F.
Oil & Gas/Rigbuilders saw the steepest cut in earnings. The sector has been plagued by weak day rates, rising deferments/cancellations and slow order wins amid weak oil prices.
Earnings for Banks and REITS were stable. Post results, Banks saw a slight cut in earnings of -0.8% and -3.3% for FY15F and FY16F respectively. There was minimal revision to REITS’ earnings forecasts. Selected retail REITs, Mapletree Commercial Trust/Mapletree Greater China Commercial Trust/CapitaLand Retail China Trust beat expectations while earnings of most of the other Singapore-focused retail REITs were in line. Industrials and office REITS continue to report steady results despite a weakening outlook while hospitality REITs fared the worst on the back of demand weakness.
We are now expecting earnings growth of 8.5% in FY16F, a 5 percentage point cut from the previous quarter. Key growth sectors include Healthcare, Consumer Services and Oil & Gas. Though we expect the Healthcare sector to deliver two consecutive years of double digit growth for FY15F and FY16F, led by IHH, we are overall Neutral on the sector given rich valuations. The Oil & Gas sector is expected to rebound from negative growth of 31% for FY15 to +16% for FY16, driven mainly by Ezion and Sembcorp Marine. (Read Report)
Source : DBS Group Research