SG Market (27 May 13)

SG Market: Last week’s market about-turn has brought to life the age-old dictum of “Sell in May and go away” and prompted many market watchers to wonder if the sell-off is an overdue technical correction or start of a new trend that will see funds withdrawing from Asia to return to the US. On one hand, there are mounting concerns of a rapid slowdown in China and signs of overheating in some of the emerging economies in Asia, while on the other hand, we see a improving economic recovery in the US. For the STI, immediate support is at 3,380 level followed by 3,320 with overhead resistance now reset at 3,424. Stocks to watch for: *GLP: 4QFY13 net profit surged 43% y/y to US$224m on revaluation gains of US$164m and US$28.8m FX gains from hedging of JPY forward contracts. But revenue slipped 18% to US$125m due to loss of 33 properties that were injected into a J-Reit earlier this year. For FY13, net earnings rose 27% to US$684m on strong development momentum and rental growth in China, boosted by revaluation gains of US$425m from both subsidiaries and jointly-controlled entities. Rents and lease ratios were stable across its portfolio. NAV stood at US$1.77. Group proposed a final DPS of 4¢, 33% higher than previous year. *Yoma: 4QFY13 earnings jumped 452% to $11.5m, mainly due to fair value gain of $9.1m from the consolidation of the group’s Grand Central project in Dalian. Excluding the one-off gain, earnings grew 46% to $3m. Core full year earnings doubled to $12.3. 4Q and FY13 revenues soared 27% and 54% to $4.3m and $60.5m respectively as a result from the increase in the sales of residences and land development rights in Myanmar. NAV rose to $0.309 per share. Group is proposing a final DPS of 0.5¢. *IHH Healthcare: 1Q13 earnings crept up 4% y/y to Rm127.3m, mainly due to Mount Elizabeth Novena Hospital's significant improvement in earnings, partially offset by increasing staff costs and operating lease expenses. 1Q13 revenues grew 29% to RM1.6b as a result of the increased capacity from Parkway Pantai's Mount Elizabeth Novena Hospital, as well as the full contribution of Acibadem Holdings which the group acquired on 24 Jan 12. Operating loss from Mount Elizabeth Novena Hospital has narrowed to RM3m from RM15.6m in 1Q12. *Stamford Land: FY13 net profit fell 41% to $31.7m, in line with the 45% drop in revenue to $266.7m on reduced sales from its hotel segment due to lower FX and revaluation gains and weak performance from two Adelaide hotels as well as lower profit recognition from completed sales of properties at The Stamford Residences and Reynell Terraces compared to FY12. NAV slid 1¢ to $0.60. Group is proposing a final DPS of 3¢, down from 4¢ last year. *CSC: The construction group turned in an expected 4QFY13 loss of $2m as a result of a $3.6m provision made for doubtful debts from Poh Lian Construction. Consequently, full year earnings were pulled sown 72% to $2.8m even though revenue rose 21% to $531.3m due to recent acquisitions and increased business activities. The highly competitive environment exerted demand pressure on tender prices, depressing gross margin to 7.2% vs 9.1% in FY12. Order book stayed at a healthy $220m. Final DPS of 0.06¢ declared, taking full year DPS to 0.1¢ vs 0.17¢ in FY12. *CDL Hospitality Trust: Announced $25m asset enhancement initiative (AEI) for its Orchard Hotel Shopping Arcade, which includes the loss of rental income during the period. AEI works are scheduled to commence in late 2013 and expected to complete in 12 months. Upon completion, the net lettable space of the shopping arcade will increase to 10,000 sf, with incremental rental income of more than $2m per year, translating to a return on investment of 8%. *Oakwell Engineering: Entered into letter of intent to dispose its distribution business (mainly in electrical and mechanical products and accessories and related engineering and assembly services) plus a warehouse in Houston, Texas to logistics and electrical equipment distribution group Sonepar for a base consideration of $70m (book value $28.6m), The transaction price is based on 8x EBITDA multiple and may rise to $74.5m if there are no subsequent write-offs. The proposed disposal will potentially raise its pro forma NAV to 11.6¢ from 4.42¢. Proceeds will be deployed to fund future acquisitions, pare down debt and provide working capital and dividend distribution. *Yongxin: Acquiring Oriental Land (OL) in a $340m reverse takeover (RTO) deal via issue of 601.8m 2-to-1 consolidated shares at $0.565 each. OL is an integrated developer operating in Tangshan city and Inner Mongolia and recorded net profit of Rmb70.4m, Rmb110.4m and Rmb78.8m in FY10, FY11 and FY12 respectively. The transaction will be pegged at 70% of OL’s RNAV as at Jun 13. Meanwhile, the group will sell its existing businesses to its current shareholder for $7.4m cash. Upon completion of the RTO, the vendor will own 84.9% of the group’s enlarged share capital. *China Yuanbang: Proposed disposal of a five-star hotel under development in Nanchang city, Jiangxi for Rmb268m. This is a non-core asset among its many properties owned and developed by the group as part of the Aqua Lake Grand City development in Nanchang. As the book value of this property is Rmb245.5m, the sale will enable the group to reap a surplus of Rmb22.5m. *Hiap Seng: Formed a strategic alliance with Malaysian industrial building system contractor KUB Builders to jointly bid for the Petronas refinery and petrochemical integrated development tank farm project in Malaysia. *Cordlife: Clarifies that the umbilical cord tissue banking services in S’pore announced on 9 May is still under research and clinical trial and not yet licensed by the Ministry of Health. The group is presently only licensed by MOH to provide cord blood banking services for autologous use. *Fabchem: Announced that its Shandong factory will temporarily suspend all operations after the Chinese authorities issued a cease production order on all commercial explosives firms in Shandong province for safety checks with effect from 20 May. This follows a recent explosion accident at an unrelated seismic charge manufacturing plant in Shandong. This does not affect its Hebei ammonium nitrate facilities.