taken from my blog
1st Half 2016 Results and Review
First of all, I would like to thank all my readers for your support on SGXcafe, as my number of likes crossed the 50 mark. SGXcafe is 100% Local made and 100% Free to use site for all your portfolio management needs, I would strongly recommend all to use it if you have not tried it out before.
In February 2016 the market was all gloom and doom as the STI ETF traded at a low of 2.56, it has since rebounded off and now trades around 2.90. From a peak of 3500+ the index fell close to 30% to a low of 2500+ and I very much think that the worst is behind us... at least for this year.
I honestly do not think this oil crisis is as bad as the 2007 GFC, in which I saw the STI falling from 3800 to 1600 a mega bear correction of over 50%. During those dark periods, even US blue chips like Lehman Brothers, General Motors, Citi Bank, Fannie Mae, Las Vegas Sands when into or were near bankruptcy. Currently I do not foresee any of the SG blue chips going down, but a few more cases like Swiber is likely to occur in the small caps segment from now to end of 2017.
Most investors keep thinking and worrying about what to do when facing a crisis, but what actually matters most is how you have positioned yourself! During this oil crisis, Swiber when down mainly because it failed to renew/rollover its debt, its bonds reached maturity and it was unable to inject any new cash from banks/bonds/investors to stay afloat... If you compare this to other companies of the same industry, say Semb Marine... which also has a very high gearing level, however SMM still manages to stay float with constant funding mainly due to its blue chip status as well as its in-direct government backing. In short to say, investors holding highly geared small caps are very badly positioned... and you should be holding high quality companies that can survive this crisis and emerge stronger.
Banks - Earnings were slightly down and was pretty disappointing as it was dragged down by higher non performing loans (DBS) as well as poor performance of equities portfolio (Great Eastern, the insurance arm of OCBC). The biggest concern investors currently have, would be their exposure to the O&G segment. I think that at 5-10% discount to book, the banks are fearfully priced... I expect earnings to remain weak but the write offs of bad loans are unlikely eat into their book values. On the positive side, dividend payouts were maintain and I feel that the 4% yield remains attractive and stable.
Telcos - Earnings were slightly down too as the price war began even before the official appearance of the 4th telco. Starhub reported higher earnings only due to 1 time gains from their stakes in MM2... on the other hand their Pay TV segment is showing sharp declines. Currently I think there's a 1/4 chance that we may not see a 4th telco due to their funding issues, if that happens M1/SH may rally sharply... however the more likely scenario is still OMGtel emerging as the 4th player as such I foresee Starhub reducing their dividends, down from the current 20 cents. M1 has already cut dividends since last year... which lead to its previous massive sell off.
Property - ARA and CCT both reported great results with ARA showing better earnings and CCT showing a slightly higher DPU. FCL on the other hand saw a 15% drop in earnings due to weakness in the property development segment... which forms 30% of their earnings, on the other hand 70% of their earnings still comes from recurring income which remains stable, I expect them to maintain the same level of dividends which final dividends will be announced next quarter.
Energy - SCI saw flat earnings in their utilities segment, mainly due to hiccups in their new India power plants. Looking forward utilities earnings should improved sharply in the second half as all the technical problems have been fixed. On the downside the marine segment continues to be weak, but as long as SMM does not report a loss that would be fine for me. At the current price of 2.70, the market is pricing SCI only for its utilities business... shareholders are getting the marine business almost for free.
1st Half 2016 Results and Review
First of all, I would like to thank all my readers for your support on SGXcafe, as my number of likes crossed the 50 mark. SGXcafe is 100% Local made and 100% Free to use site for all your portfolio management needs, I would strongly recommend all to use it if you have not tried it out before.
In February 2016 the market was all gloom and doom as the STI ETF traded at a low of 2.56, it has since rebounded off and now trades around 2.90. From a peak of 3500+ the index fell close to 30% to a low of 2500+ and I very much think that the worst is behind us... at least for this year.
I honestly do not think this oil crisis is as bad as the 2007 GFC, in which I saw the STI falling from 3800 to 1600 a mega bear correction of over 50%. During those dark periods, even US blue chips like Lehman Brothers, General Motors, Citi Bank, Fannie Mae, Las Vegas Sands when into or were near bankruptcy. Currently I do not foresee any of the SG blue chips going down, but a few more cases like Swiber is likely to occur in the small caps segment from now to end of 2017.
Most investors keep thinking and worrying about what to do when facing a crisis, but what actually matters most is how you have positioned yourself! During this oil crisis, Swiber when down mainly because it failed to renew/rollover its debt, its bonds reached maturity and it was unable to inject any new cash from banks/bonds/investors to stay afloat... If you compare this to other companies of the same industry, say Semb Marine... which also has a very high gearing level, however SMM still manages to stay float with constant funding mainly due to its blue chip status as well as its in-direct government backing. In short to say, investors holding highly geared small caps are very badly positioned... and you should be holding high quality companies that can survive this crisis and emerge stronger.
Banks - Earnings were slightly down and was pretty disappointing as it was dragged down by higher non performing loans (DBS) as well as poor performance of equities portfolio (Great Eastern, the insurance arm of OCBC). The biggest concern investors currently have, would be their exposure to the O&G segment. I think that at 5-10% discount to book, the banks are fearfully priced... I expect earnings to remain weak but the write offs of bad loans are unlikely eat into their book values. On the positive side, dividend payouts were maintain and I feel that the 4% yield remains attractive and stable.
Telcos - Earnings were slightly down too as the price war began even before the official appearance of the 4th telco. Starhub reported higher earnings only due to 1 time gains from their stakes in MM2... on the other hand their Pay TV segment is showing sharp declines. Currently I think there's a 1/4 chance that we may not see a 4th telco due to their funding issues, if that happens M1/SH may rally sharply... however the more likely scenario is still OMGtel emerging as the 4th player as such I foresee Starhub reducing their dividends, down from the current 20 cents. M1 has already cut dividends since last year... which lead to its previous massive sell off.
Property - ARA and CCT both reported great results with ARA showing better earnings and CCT showing a slightly higher DPU. FCL on the other hand saw a 15% drop in earnings due to weakness in the property development segment... which forms 30% of their earnings, on the other hand 70% of their earnings still comes from recurring income which remains stable, I expect them to maintain the same level of dividends which final dividends will be announced next quarter.
Energy - SCI saw flat earnings in their utilities segment, mainly due to hiccups in their new India power plants. Looking forward utilities earnings should improved sharply in the second half as all the technical problems have been fixed. On the downside the marine segment continues to be weak, but as long as SMM does not report a loss that would be fine for me. At the current price of 2.70, the market is pricing SCI only for its utilities business... shareholders are getting the marine business almost for free.
