[SINGAPORE] The recent reporting season has been something of a reality check for bullish investors in the Singapore market, with a number of high-flying Straits Times Index (STI) components suffering big sell-offs after releasing their financial numbers.
Most notably, ST Engineering – which has been the best-performing STI component this year – tumbled nearly 6.3 per cent on Aug 14, after reporting results for the first half of 2025 that were hardly disappointing. Earnings for the six months climbed 19.7 per cent to S$402.8 million, on a 7.2 per cent rise in revenue to S$5.92 billion.
The company also said that it secured new contracts worth S$9.1 billion in H1 2025, which put its order book at the end of the period at S$31.2 billion.
Following the earnings report, research houses CGS International and RHB made upward adjustments to their forecasts for ST Engineering’s earnings to reflect stronger margins going forward. CGS International hiked its target price for the stock from S$8.40 to S$8.70, while RHB raised its target price from S$8.70 to S$9.10.
So, why did ST Engineering suffer a sell-off? The day before its results report, the stock closed at an all-time-high of S$8.96 – which put its 2025 price-to-earnings ratio at 32 times, and its historical dividend yield to less than 2 per cent.
While ST Engineering’s H1 2025 financial performance was robust, it was evidently insufficient to sustain such optimism. Indeed, CGS International cut its recommendation on the stock to a “hold”, despite raising its target price.
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ST Engineering traded ex-dividend on Friday (Aug 22) for an interim payout of S$0.04 per share. It ended the day at S$7.84, down 12.5 per cent since its H1 2025 earnings report on Aug 14.
Earnings disappointments
Among other STI stocks that sank after reporting their financial numbers were Sembcorp Industries and Singapore Airlines (SIA). Unlike ST Engineering, however, both these companies reported financial numbers that actually had analysts cutting their forecasts.
On Aug 8, Sembcorp said its earnings for H1 2025 slipped 1.3 per cent to S$536 million, on an 8.3 per cent decline in revenue to S$2.94 billion – triggering a 13.9 per cent slump in its shares that day.
CGS International said Sembcorp’s numbers fell short of its forecasts because of weak contributions from its gas and related services segment. The research house lowered its forecasts for 2025 to 2027 by between 6 and 12 per cent, and reduced its target price for Sembcorp’s shares from S$8.54 to S$8.02.
OCBC Investment Research expressed a similar view, and cut its target price for the stock from S$8.45 to S$8.02.
Sembcorp closed Friday at S$6.12, down 21.5 per cent since reporting its results. The stock traded ex-dividend on Aug 15 for a H1 2025 payout of S$0.09 per share.
Meanwhile, SIA’s shares fell nearly 7.4 per cent on Jul 29, after it said its net profit for the three months to Jun 30 fell 58.8 per cent to S$186 million, on a 1.5 per cent rise in revenue to S$4.79 billion. The airline group achieved record passenger numbers, but suffered higher non-fuel costs as well as a decline in passenger yields on industry-wide capacity growth.
Maybank cut its forecasts for SIA’s FY2026-FY2028 earnings by between 25 and 29 per cent, and reduced its price target for the stock from S$6.85 to S$6.75.
SIA closed Friday at S$6.63, down 12.8 per cent since its recent results report.
Are these sell-offs an indication of froth in some corners of the market after the strong run-up since early 2024? Is the STI likely to lose momentum in the remaining months of 2025?
Positive surprises
My sense is that the market rally still has legs. For one thing, the earnings disappointments were not pervasive. In fact, several STI components delivered positive surprises over the past month.
Yangzijiang Shipbuilding rose nearly 8 per cent on Aug 7, after reporting a 36.7 per cent jump in H1 2025 earnings to 4.18 billion yuan, on a 1.3 per cent decline in revenue to 12.88 billion yuan.
CGS International said the company’s earnings exceeded expectations due to lower steel prices, and that demand for new vessels is likely to rise going forward. The research house raised its forecasts for Yangzijiang Shipbuilding’s earnings for 2025 to 2027 by between 4 and 15 per cent; and hiked its target price from S$2.72 to S$3.90.
Yangzijiang Shipbuilding closed Friday at S$2.87, up 9.1 per cent since its recent earnings report.
In another case, Keppel climbed 3.6 per cent on Jul 31 after reporting a 24.2 per cent increase in H1 2025 earnings to S$377.7 million, on a 5.2 per cent decline in revenue to S$3.06 billion.
While its reported earnings were below expectations, Keppel provided a detailed update on its ongoing multi-year transformation programme that seemed to impress the market. CGS International raised its target price for Keppel’s shares, based on a sum-of-parts model, from S$9.28 to S$10.23.
Keppel traded ex-dividend for an interim payout of S$0.15 per share on Aug 11. On the same day, Keppel announced the sale of M1’s telco business, in a deal that will see it rake in close to S$1 billion in cash proceeds.
Keppel closed Friday at S$8.36, up 2.2 per cent since its results report.
Then, there was DBS – the largest of the STI’s components. On Aug 7, its shares rose 1.8 per cent after it reported a 0.3 per cent decline in H1 2025 earnings to S$5.72 billion.
Despite the pressure of falling interest rates, its financial performance was widely seen as superior to its peers, OCBC and UOB. Research houses such as Maybank and Citi promptly hiked their target prices for its shares well past the S$50 threshold.
DBS closed Friday at S$50.81, up 4 per cent since its results report. It traded ex-dividend on Aug 14 for the payouts for the second quarter of 2025, totalling S$0.75 per share.
Eager investors
The way I see it, the manner in which the market reacted to the recent crop of earnings reports suggests that Singapore investors are eager to pay – perhaps even overpay – for companies that deliver good financial performance.
Whether the market keeps rising in the months ahead could depend on more companies coming up with viable plans to unlock value and strengthen their core businesses, and effectively communicating those plans to investors – as Keppel, Sembcorp, ST Engineering, and Singtel have done.
Among STI components that could be worth watching now are property counters City Developments Ltd (CDL) and UOL Group, both of which are trading at steep discounts to the value of their underlying assets.
On Aug 13, CDL surged 7.1 per cent after putting out its H1 2025 earnings report. Among the highlights were robust property development sales, contracted asset divestments that topped S$1.5 billion, and a special interim dividend of S$0.03 per share.
CDL closed Friday at S$6.79, up 6.9 per cent since reporting its results. The stock traded ex-dividend on Aug 19.
