Analysts slash growth forecasts as dismal reporting season draws to a close

Overall earnings per share will grow at a measly pace.

Growth forecasts for Singapore’s listed companies were slashed sharply after another disappointing reporting season. Analysts at UOB Kay Hian now forecast market earnings per share (EPS) growth to hover at just 0.4% year-on-year in 2016, a far cry from initial forecasts of 8.9% year-on-year growth.

After adjusting for market weighting, UOB Kay Hian said that the biggest impact is in the banking sector, where it reckons that core EPS will plunge by as much as 20% year-on-year this year on back of rising credit costs and asset quality deterioration.

Unsurprisingly, the oil services sector also suffered a deep cut in earnings forecast for 2016, on back of lower charter rates and lower utilisation.

UOB Kay Hian noted that the FSSTI is current(P/B of 1.08x and 1.20x respectively)ly trading at 1.11x P/B, which is comparable to levels during SARS and 9/11 but still above that during the Asian financial crisis and the global financial crisis.

“We estimate the market is pricing in a 0% to -3% EPS growth in 2016. Taking a more conservative assumption that the market should trade at -1SD to long-term mean," UOB Kay Hian said.