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Property , banking and agricultural groups lead list in exceptional year.

LISTED companies in Singapore enjoyed exceptional growth last year, with their combined profits surging 39.1 per cent to $33.58 billion.

Sizzling economic growth meant healthy growth across just about all sectors.

But not surprisingly, the top performer in absolute numbers among companies with financial years ending in December came from the booming property sector.

CapitaLand, with a market value of about $17.7 billion, posted $2.76 billion in net profits - more than double its 2006 showing - and outpaced the local banks.

However, a large proportion of the developer’s profit was due to revaluation gains for its investment portfolio amounting to some $1.1 billion.

As at 6pm yesterday, 389 companies had reported their full-year results for the 12 months ended Dec 31.

Of these, 349, or close to 90 per cent of them, were in the black. And 227, or over 58 per cent of all companies, reported an increase in profits from 2006.

In all, 85 firms saw their profits shrink and 24 firms went from a net loss to a net gain. Another 13 did not have 2006 figures for comparative purposes.

The remaining 10 per cent, or 40 firms, had their report cards tainted by red ink. Of those, 19 firms went from the black to the red, and 11 sank deeper into the red while seven saw their losses narrow.

Another three did not have comparable figures in 2006.

Other strong performers included firms linked to palm oil, which is used as a feedstock for biofuel.

Profits at both Wilmar International and Golden Agri-Resources more than doubled on the back of what was considered a golden harvest for commodity players.

Industry experts say that last year was an unprecedented year of growth during which earnings surpassed expectations - but they caution that growth will be much tamer this year, dampened partly by rising cost pressures.

‘Last year was an exceptional year. I can’t see a repeat as there are so many more risks in the market now,’ said DBS Vickers head of research Janice Chua, adding that growth is expected to halve this year.

The brokerage saw average earnings growth of 28 per cent last year for the 170 firms under its coverage, but it expects growth of about 14 per cent only this year, she said.

The property sector will see a scale-back in property launches as well as a softening in selling prices, which may dampen earnings growth.

CIMB-GK economist Song Seng Wun agreed that growth will be moderated.

‘The operating environment is more uncertain and bankers are more cautious. Consumers are watching their discretionary spending as well. It will be a much tougher environment than that last year.’

He pointed out that ‘the whole region has been supported by strong domestic demand, across a whole range of industries’.

But growth began to falter late last year, as higher material costs started to squeeze margins.

In expectation of weaker earnings growth this year, numerous brokerages have also started trimming price targets for companies.

Inflation, as well as higher material and labour costs, will be bugbears for companies and will add further to margin pressure, said Sias Research investment analyst Alan Lok.

He added that those firms which are able to bite the bullet and pass on more than 50 per cent of their costs will be able to survive in the challenging environment this year.

GROWTH TO EASE

Analysts expect a much tougher environment this year, due partly to rising cost pressures. DBS Vickers, for one, expects average earnings growth to halve to 14 per cent among the 170 companies which it covers.

Source : Straits Times - 1 Mar 2008