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Stocks In Focus SG (Local Banks’ Earnings Outlook, CapitaMalls Asia, Yanlord) – 30/10/13
Analysts Expect Moderate Growth For DBS And UOB In 3Q13
Analysts are expecting earnings of DBS Group Holdings and United Overseas Bank (UOB) to moderate from the stellar second quarter, citing slower loan growth, softer capital market and weak wealth management fees. Oversea-Chinese Banking Corporation (OCBC), however, is expected to receive a boost from the absence of unrealised mark-to-market losses from its Great Eastern insurance unit, a BNP Paribas analyst noted. 3Q13 loan growth is expected to slow to 1 to 2 percent from the preceding quarter, given weakening mortgages and corporate loans. The banks’ non-interest income is also likely to be impacted due to the softer capital market and weak wealth management fees with the uncertainty in the investment environment. According to Bloomberg surveys, DBS, OCBC and UOB are expected to post net profits of $839 million, $648 million and $703 million respectively for the quarter ended September, compared to 2Q13 net profits of $887 million, $597 million and $783 million respectively. DBS and OCBC will release their 3Q13 results on 1 November 2013, while UOB will release its results on 5 November 2013.
Significance: Despite expectations that the local banks’ earnings may moderate in 3Q13, it is noteworthy that the banks, which had managed to hold their net interest margins steady in 2Q13, also expect the margins to remain steady for the remaining quarters. Also, the impact from slowing loan growth may not be as substantial this year and likely to remain at double digits still, due to drawdown from previously approved loans.
CMA Reports Stellar 3Q13 Performance
Capitamalls Asia (CMA) has reported a 6.2 percent in profit after tax and minority interest (PATMI) of $383.6 million from $361.2 million for the nine months ended 30 September 2013. For 3Q13, PATMI increased 4 percent on a year-on-year (y-o-y) basis. Secondly, 9M13’s operating PATMI has also increased by 35.8 percent from $136.5 million to $185.3 million and was up 4.3 percent in 3Q13 on a y-o-y basis. The increase was primarily due to a few factors namely, one-off gains from disposal of Bedok Residences, the opening of The Star Vista in September 2012, higher revenue generated from the completion of asset enhancement initiatives (AEI) of three malls in Singapore and the acquisition of stakes in four Japan malls in 2012. However, revenue slumped 10.1 percent from $102.1 million to $91.8 million in the quarter as there were lesser property management fees contributed from China due to fewer opened malls in 2013 than 2012.
Significance: In view of the good performance expected from key markets (Singapore, China, Malaysia and Japan) of CMA’s operations, its focus to develop new malls in China and Singapore and AEI works on existing malls, coupled with a sustained tenant sales growth of approximately 4.8 percent on average, CMA is expected to continue performing well.
Yanlord Acquires Rmb2.9b Site In Nanjing
Yanlord Land Group has acquired a development site in Nanjing with a gross floor area of 386,000 square metre (sqm) for Rmb2.9 billion, at approximately Rmb7,447 per sqm through a public land auction. The development site is located in Sino-Singapore Nanjing Eco Hi-Tech Island which is easily accessible by key roads and the metro line. Due to its locality, the development site is ideal for a prime integrated development project where the company plans to develop 274,000 sqm of high-quality residential apartments, 59,200 sqm of offices plus commercial units and 53,500 sqm of research and development facilities. In addition, as part of the site’s development, a 4,700 sqm kindergarten will also be included to further enhance the already comprehensive suite of amenities available to its residents.
Significance: Zhong Sheng Jian, the chairman and chief executive officer of Yanlord commented that the combination of qualities exhibited by the development site’s location such as its close proximity to key business locations and upcoming amenities, excellent connectivity and its scenic surroundings provides the necessary building blocks for a prime integrated development.
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