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Singapore stock market and companies daily report (Oversea-Chinese Banking Corp’s, COSCO Corp) (August 03, 2010)

Contributed by Shares Investment

By Shares Investment

US Stocks Advance As Earnings Top Estimates
The Dow Jones Industrial Average gained 2% as all 30 Dow components finished higher, after a better-than-expected manufacturing reading and some strong bank earnings out of Europe. The S&P gained 2.2%, while the Nasdaq climbed 1.8%. HSBC, Europe’s biggest bank, said pretax profit more than doubled to US$11.1b in the first half, while BNP Paribas posted a 31% increase in net income as provisions for bad loans dropped. Meanwhile, oil rose 3% to break above US$80 a barrel, its highest level in nearly 3 months, while gold was largely flat as solid gains in equity markets driven by strong economic sentiment took a toll on the metal’s safe-haven appeal. The euro strengthened against US$ as confidence in the eurozone returned.

OCBC’s 2Q10 Net Profit Misses Analysts’ Estimates
Oversea-Chinese Banking Corp’s (OCBC) net profit rose 8% YoY to $503m in 2Q10, missing analysts’ estimates, as the group struggled to boost its lending income amid low interest rates, while investment income halved due to turbulent financial markets. However, OCBC raised its dividend for 1H10 to $0.15 per share, from $0.14 previously – signalling confidence that its earnings growth can be sustained. Lending to all major consumer and business segments rose during the quarter – another sign of improving business and consumer sentiment in the group’s biggest markets. Though OCBC made more loans in 2Q10, its lending was less profitable compared to a year ago and 1Q10, resulting in a modest 1% YoY rise in its net interest income. Meanwhile, non-interest income was 5% higher YoY, at $516m, but 24% lower than in 1Q10. For 1H10, OCBC’s net profit was $1.18b, up 17% YoY.

Significance: OCBC remains strongly capitalised as its total capital adequacy ratio strengthened. Coupled with its underlying business and business of its recently-acquired Bank of Singapore doing well, the group seems well equipped to face the challenges ahead.

COSCO’s 2Q10 Earnings Surge 85%
COSCO Corp (S) reported an 85% YoY surge in net profit to $68.4m for 2Q10, resulting in a 43% rise in 1H10 net profit to $100.1m. COSCO’s 2Q10 revenue rose 34% YoY to $962.5m, helped by higher contributions from shipbuilding and marine engineering projects and higher dry bulk shipping revenue. Higher charter rates for dry bulk shipping accounted for $35.6m of 2Q10 revenue, up 6.3%. The main revenue driver came from COSCO’s shipyard operations, which contributed a 2Q10 turnover of $923.5m, a surge of 35.5%. For 1H10, revenue climbed 25% to about $1.8b. Other income also climbed 30% to $54.3m, mainly due to higher sales value of scrap materials and higher net currency exchange gain. COSCO has an order book of $7.4b with progressive deliveries up to 1Q13.

Significance: Even with a strong 2Q10 performance and healthy order book, COSCO maintains a cautious outlook as an expected slowdown in China’s economic growth, the gradual appreciation of the Rmb against the US$ and a potential rise in general Chinese labor wages may together put new pressure on its operating margins going forward.

This article is contributed by Shares Investment. Visit Sharesinv.com for the latest Singapore, Malaysia and China stock market news and reports.