SG Market (01 Jul 13)

SG Market: S’pore shares are likely to be range-bound following weak cues from Wall Street on the on-off stimulus talk as another Fed governor Jeremy Stein weighed in with suggestions that the central banks may start to pull back in Sep. Property stocks may come into the limelight after the government tightened loan measures further over the weekend to quell buyers over-leveraging on their property purchases. Sembcorp Marine may ride on its twin rig orders worth US$417m but investors may lost patience over Vard’s profit warning. With no more quarter end window dressing to support the market, we could see the STI consolidating around current levels with overhead resistance pegged at 3,170 (20-day moving average) and 3,200 (20-day moving average) and support at 3,090. Stocks to watch for: *Property: MAS tightens housing loan rule by pegging total debt servicing ratio at 60%, taking into account all of a borrower's outstanding debt obligations and 70% of variable income to compute the threshold. Government also closes loophole on buyers who purchase properties using proxies and children to circumvent lower loan-to-value ratio and additional buyers stamp duty, by specifying guarantors will now be viewed as co-borrowers and requiring banks to use the income-weighted average age of all co-borrowers based on their gross monthly income, when applying the rules on loan tenure. *Hongkong Land: All 738 units of its 99-year leasehold J Gateway condominium project have been sold on launch at average sale price of $1,480 psf. The development is located near Jurong East MRT station, beside shopping malls JCube and Jem, and is expected to be completed by mid-2016. *Vard Holdings: Issues profit warning for 2Q results; expects earnings to be lower than current consensus estimates as margins continue to be impacted by further delays and cost overruns at its Brazilian yard due to low productivity, additional costs for outsourcing of hull construction to subcontractors and revisions to estimates of start-up costs at it new Vard Promar shipyard. Group will announce its results on 11 Jul. *Sembcorp Marine: Secured additional orders for two turnkey contracts worth a combined value of US$417m from repeat customer Oro Negro, for the construction of two units of high-spec jackup rigs. Delivery is scheduled for end Jul 2015 and end 3Q15 respectively. Including the earlier contracts of two identical jack-up rigs placed in Nov 12 and another two similar rig units in Mar 13, this brings the total number of Pacific Class 400 jack up rigs ordered by Oro Negro to six units. *Keppel Corp: Amended the terms of a call option for a further 16% stake in KrisEnergy. Subject to KrisEnergy successfully launching its proposed IPO on SGX by 15 Aug 2013, Keppel Corp will pay a maximum consideration of US$122.7m for the exercise of the call option, from US$35m previously agreed upon. Keppel currently owns a 20% stake in KrisEnergy, which holds a portfolio of oil and gas assets in SE Asia. *AusGroup: Awarded further fabrication work with CB&I and Kentz JV on the Chevron-operated Gorgon project. The contract extension takes the group’s total contract value on the Gorgon project to more than A$110m. With this latest contract, its order book now stands at A$230m. *Low Keng Huat: Won a $114.3m contract from Genting Singapore to design and build a hotel with ancillary facilities at Jurong Town Hall Road. The hotel is expected to be completed in 1H15. *Cityneon: Secured a subcontract from Nantong Co to supply and provide all temporary overlays including marquees, modular houses, electrical and water works, fencing, flag and associated equipment for the 2013 Asian Youth Games in Nanjing. Nantong was awarded a Rmb42m contract by the games organizer. The contract is expected to contribute positively to the group’s earnings in the current financial year. *Pteris: Secured a $19m baggage handling contract for the checked baggage inspection system at Will Rogers World Airport in Oklahoma City, US. *Sound Global: Received letter of intent from controlling shareholder and chairman Wen Yibo on a possible delisting from SGX, while keeping its primary listing on HKSE. Exit offer may be not less than $0.70 per share. The proposal is subject to financing arrangements and approvals from the board, shareholders and relevant authorities. *Mapletree Logistics: Signs 10-year lease of 48,700 sqm , representing 55% of space at Mapletree Benoi Logistics Hub (MBLH) to Menlo Worldwide Logistics, a subsidiary of global logistics giant Con-way. This elevates Menlo to be MLT’s largest tenant, occupying four warehouses in Singapore and Hong Kong. The redevelopment of MBLH into a modern five-storey ramp-up facility will be completed in 4Q13. *STATS ChipPAC: Plans to consolidate its leaded wirebond packaging and related test operations into its Shanghai facility over several phases in 2013 and 2014 and close off its Malaysian plant by end 2014. It expects to incur total charges of $39m, of which $37m will be recognized in 2Q13. Separately, the group revised down its 2Q revenue guidance to show a 3-4% decline from an earlier 2-6% growth. *Advanced Integrated Manufacturing: Plans to diversify into property business, and proposes a renounceable non-underwritten 1-for-2 rights @ $0.01 plus 3 free warrants. Each warrant can be exercised to 1 share at $0.015. *Soup Restaurant: Discovers $1.05m in irregular transactions, paid out to various vendors between 2004 and 2013. Investigations found these involved documents forged by a senior manager whose services have since been terminated. *China Essence: Cautions that it is unable to raise sufficient funds to redeem two tranches of HK$30m convertible bonds that were overdue in Dec 12 and Jun 13, citing challenging operating environment over the past year amid declining potato starch prices, weak seasonal sales and slow recovery of receivables from customers. The group is currently in discussions with bondholders on ways to meet its obligations as soon as possible. *DeClout: Wholly owned subsidiary, Corous360, has signed an MOU with Take5 Games Asia and IAHGames to operate the Take5 platform in SE Asia, Taiwan, HK and Macau, along with right of first refusal for Mainland China for a period of 18 months. Take5 is an online skill-gaming platform that allows players from across the globe to compete with one another on multiple device formats to win points, rewards and prizes. The initial version is expected to launch before end 2013. Separately, the group proposes a 1-for-2 rights issue @ $0.11. to raise net proceeds of $11m. *SCI: celebrated the groundbreaking of its US$200m expansion project for its Fujairah 1 Independent Water and Power Plant (IWPP) in the UAE, which will increase the plant’s seawater desalination capacity by 30m imperial gallons per day. The expansion is expected to be completed by 1H15, and will make SCI’s facility the largest reverse osmosis desalination facility in the Middle east. *Hartawan: halted pending release of material announcement *Metech: Proposed to sell 51% stake in its wholly owned subsidiary Tonkin Recycling for $2.3m. Tonkin owns a 100% stake in Aton Sludge Treatment (Jiangyin) Co, a wholly owned foreign enterprise in the PRC, which has a concession to own and operate a sludge treatment plant in Jiangsu province for 30 yrs from Jul 2009.