Singapore Daily Bulletin – 08/11/12

UOB Posts 35.5% Jump In 3Q12 Net Profit; Surpasses Estimates
In an earnings release filed with the Singapore Exchange yesterday, United Overseas Bank registered a 35.5 percent increase in net profit to $707 million for the third quarter ended 30 September 2012. This compared with the $652 million forecast of analysts polled by Thomson Reuters. The improved performance came on the back of an 8.2 percent climb in interest income while strong fee and commission income and trading gains further augmented results. Net interest margin was down 5 basis points year-on-year and 8 basis points lower on a quarter-on-quarter basis. For the first nine months of the year, net profit rose 19.1 percent to $2.1 billion on a year-on-year basis. As the second Singapore banking group to report third quarter results after DBS Group Holdings, UOB has overtaken its bigger rival in the home loan stakes. Home loan book for the bank stood at $44.3 billion in the quarter while that of DBS stood at $44.1 billion.

Significance: Despite beating market projections, it was bittersweet for UOB as its non-interest income segment continues to drive profitability, which calls into the question the issue of sustainability.

ST Engineering’s 3Q12 Performance In Line With Consensus
Singapore Technologies Engineering, an integrated engineering solutions provider, posted a 9.5 percent growth in earnings to $146.4 million for the third quarter ended 30 September 2012. Revenue for the quarter jumped 10.6 percent to $1,542 million, in line with analysts’ estimates of $1,576 million according to data compiled by FactSet. The better results were underpinned by higher revenue contribution across most business segments led by a 27.4 percent rise in revenue from Land Systems division. Higher project deliveries in the Automotive and Munitions & Weapon business groups were the reason behind the rise. The one segment that was a drag was ST Engineering’s Marine sector. This was mainly due to lower shipbuilding revenue. For the cumulative nine-month period, revenue grew 4.6 percent to $4,653 million while earnings ballooned 12.9 percent to $424 million.

Significance: As compared to FY11, ST Engineering expects to achieve higher revenue and profit before tax in FY12. This is supported by a robust order book totalling $12.5 billion as at 30 September, beefed up by $1.04 billion contracts clinched in 3Q12. About $1.4 billion of projects is expected to be delivered in the fourth quarter.

Surge In Costs And One-Time Charge Send UMS’ 3Q12 Profit Slumping 71%
For the three months ended 30 September 2012, UMS Holdings’ net profit dived 71 percent to $2.1 million in spite of a 6 percent climb in revenue. Performance was hammered by a massive increase in raw material purchases and sub-contractors charges as well as one-off charge of $1.7 million. An exchange gain and a one-off $3.5 million gain on the sale of properties were recorded in the previous corresponding period. For the period of nine months, revenue edged 2.6 percent higher to $91.6 million while net profit was down 28 percent at $15.8 million. The strategic integration partner in manufacturing and engineering for front-end semiconductor equipment manufacturers continued to exhibit its good track record of generating good cash flow. For 3Q12, UMS generated positive operating cash flow of $9 million as well as free cash flow of $8.1 million, compared to those of $7 million and $6.9 million respectively in 3Q11. A dividend per share of $0.01 has been declared. Looking forward, UMS will continue to shift more of its operations to Penang so as to reduce operating costs and alleviate the shortage of skilled labour in Singapore.

Significance: The weaker performance was within UMS’ projections. Continued European crisis and global economic uncertainties kept sentiments among semiconductor equipment manufacturers depressed and UMS does not expect an early recovery in 4Q12.