STI narrows valuation gap as earnings take focus

Investors will place greater emphasis on profits, cash flow, dividends, and capital discipline.

Singapore equities entered the second half on stronger footing after the Straits Times Index (STI) narrowed its gap to analysts' consensus price targets, according to the Singapore Exchange (SGX).

With less room for further valuation gains, investors are expected to shift their focus to corporate earnings. Based on current London Stock Exchange (LSEG) Workspace consensus forecasts, the STI is projected to deliver earnings per share (EPS) growth of around 12%, placing greater emphasis on profits, cash flow, dividends and capital discipline.

The post-first-half 2026 earnings season will therefore be a key test of how broadly earnings growth is spread across the market. Consensus forecasts point to earnings growth across all sectors in the following financial year. However, REITs, consumer cyclicals and utilities are still expected to post negative earnings growth in the current financial year, highlighting a more uneven near-term outlook.

At the company level, more than 20 SGX-listed firms returned to profitability in their latest results, spanning manufacturing, industrial, consumer, property-related and China-exposed businesses. Industrial and manufacturing companies featured prominently, whilst Aedge Group and UG Healthcare have also guided a return to profit.

SGX said the recoveries were driven by different factors. IPS Securex Holdings and Nera Telecommunications cited stronger project execution, higher gross profit, and lower foreign-exchange, restructuring and finance costs. Fuxing China Group benefited from improving margins and lower finance costs, whilst Shanghai Turbo Enterprises, Shanaya and Vin's Holdings pointed to stronger revenue or margin recovery.

Other companies benefited mainly from one-off or accounting-related items. Soon Hock Enterprise, Trendlines Group, Creative Technology and Heeton Holdings reported gains from project revenue recognition, portfolio fair-value gains, tariff refunds, disposal gains or fair-value movements.

Ouhua Energy Holdings returned to profit in the first half of 2026, reporting attributable profit of $18.11m (RMB95.8m) after recording a loss of $6.33m (RMB33.5m) a year earlier. The turnaround was driven by stronger LPG margins as prices rose following Middle East supply disruptions, whilst lower-cost inventory secured before the conflict escalated further boosted margins.

Although revenue fell 8.3% year-on-year as sales volumes declined, gross profit increased on a wider spread between procurement costs and selling prices. Lower finance costs following reduced borrowings also supported earnings.

Food Empire Holdings also swung back to profit, posting attributable earnings of $44.98m (US$35.4m) compared with a loss of $1.91m (US$1.5m) in the first half of 2025.

The improvement was helped by the absence of the prior-period fair-value loss on its Renaissance Energy investment. Revenue climbed 15% to a record $400.41m (US$315.1m), with growth across all reporting regions led by Russia and Central Asia, where sales rose 24.6% and 33.6%, respectively. The company also increased its interim dividend to 4 Singapore cents per share from 3 Singapore cents.

Nera Telecommunications likewise returned to profitability, reporting attributable profit of $500k after a loss of $1.8m a year earlier. Revenue increased 1.1% to $45.2m, whilst gross profit rose 8.1% to $10m. Lower foreign-exchange losses, restructuring costs and finance expenses also supported the turnaround. Order intake grew 40.9% to $56.8m, with the order backlog reaching $116.1m at the end of June.