As the world reopens and economies sputter back to life, many companies are also seeing improved prospects.
Investors who have endured a tough two years can now rejoice.
Blue-chip stocks are no different, with many enjoying healthy tailwinds that look set to lift revenue, net profits and free cash flow.
The good news is that some of these names may even raise their dividends in line with their improved results.
We profile three such blue-chip names that could spring a pleasant surprise for investors in the upcoming earnings season.
DBS Group (SGX: D05)
Singapore’s largest bank has been a bastion of strength over the last two years.
The lender had ended 2021 with a record S$6.8 billion in net profit as it wrote back provisions and chalked up a healthy surge in fee income.
That momentum has carried over into the first half of 2022 (1H2022) as the bank reported a net profit of S$3.6 billion along with a stronger loan book and higher net interest margins (NIMs).
DBS has also rewarded shareholders with quarterly dividends of S$0.36 per share, translating to a forward dividend yield of 4.4% on its shares.
There could be more upside for the group.
Surging interest rates are a tailwind for the bank as it can loan out money at higher rates, thereby translating into a higher NIM.
As DBS’ NIM rises, it will also lift its net interest income and flow through to higher profits.
The extent of this improvement will only be known when the bank releases its third-quarter results on 3 November.
In a sneak peek of what’s to come, DBS had already disclosed that its July NIM was “above 1.8%” when its 1H2022 reported NIM was just 1.52%.
Singapore Airlines Limited (SGX: C6L)
Singapore Airlines Limited, or SIA, is Singapore’s flagship airline.
The group saw its fortunes turn around dramatically as air travel exploded due to pent-up demand.
For its fiscal 2023’s first quarter ending 30 June 2022, the carrier reported its second-highest quarterly operating profit as total revenue tripled year on year to S$3.9 billion.
As the end of the year approaches, more families are gearing up for holidays and will book air tickets in advance, further boosting passenger numbers for the airline.
SIA reported that passenger numbers hit 2.1 million for September, up sharply from the 159,700 logged a year earlier.
The government is also gearing up for an air travel resurgence.
Earlier this month, Changi Airport opened its revamped Terminal Two departure hall to much fanfare.
With this reopening, all four terminals are now in operation and the airport’s handling capacity has also been restored to the pre-pandemic level of 70 million passengers per year.
There’s more to look forward to.
At this year’s National Day Rally, Prime Minister Lee Hsien Loong announced that the construction of Terminal Five will add capacity for around 50 million passengers a year.
To be completed in the mid-2030s, the planned construction of this massive new terminal is a sign of steady confidence in Singapore’s air hub status, of which SIA is one of the main beneficiaries.
Singapore Technologies Engineering Ltd (SGX: S63)
Singapore Technologies Engineering Ltd, or STE, is a global technology, engineering, and defence group that serves the aerospace, smart city, and public security sectors.
The group has enjoyed steady business growth as it snags contracts to build up its order book.
For the second quarter of 2022 (2Q2022), STE clinched S$3.1 billion of new contracts, taking its order book to a record-high of S$22.2 billion.
The group’s latest earnings report was also encouraging, with 1H2022 revenue increasing by 17% year on year to S$4.3 billion.
Stripping out the effects of one-off expenses and government support, operating profit would have surged by 45% year on year to S$333 million.
STE enjoyed a strong boost to its commercial aerospace business by chalking up a 25% year on year revenue growth in 2Q2022 as borders reopened.
With air travel booming, the group should see this division clinch more contracts in time to come.
STE also recently secured a S$1.4 billion turnkey rail contract for a new MRT line in Kaohsiung, Taiwan.
This contract will commence later this year and run for 10 years.
Meanwhile, CEO Vincent Chong remains confident that STE’s TransCore acquisition will accelerate the growth of the group’s smart city division.
With its divisions firing on all cylinders, investors should expect the group’s order book to grow more in the coming quarters.
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Disclaimer: Royston Yang owns shares of DBS Group.
