SG Market (08 Jul 13)

SG Market: S’pore shares are likely to retain its upward bias after Wall Street closed broadly higher last Fri in light trading on better-than-forecastjobs growth in Jun. The US economy added 195,000 jobs last month, higher than the 160,000 economists had expected and the unemployment rate held steady at 7.6%. Investors have been watching the employment data closely with the Fed pointing to the jobs outlook as a key determinant of any decision to scale back monetary stimulus measures. The reaction from the bond market was swift as Treasuries sank, sending the 10-year yield up 22 bps to 2.72%, its highest level since Aug 01, while the USD rallied 1.5% to a three-year high. Mortgage REITs slumped on 3.9% on the spike in interest rates but banks rose 2.2% to lead the gains as they are seen to benefit from a steepening yield curve. Investors stayed on the sidelines given the slew of economic data due this week with new loan and mney supply on Mon, inflation in China on Tue and trade statistics on Wed. Alcoa will also kick off the results season on 8 Jul and S&P 500 earnings are projected to rise 1.8% in the 2Q but decline 1% if financials firms are excluded. Banks in S’pore are expected to enjoy a firm undertone, while REITs may continue to face downside pressure. The STI may test resistance at 3,200 (200-day moving average with underlying support at 3,090. Stocks to watch for: *ST Engineering: Electronics arm ST Electronics has secured $206.8m of rail electonics, satellite and communications contracts in 2Q13. Its rail-related projects are worth some $24.8m and include $18m awarded by LTA for MRT, LRT and Circle Line systems with completion expected by end 2016. The satcom and communications contracts are for the supply of network infrastructure, converters, amolifiers, satellite hubs and remote terminals to government enterprises, oil and gas and martime customers. *Viz Branz: Pluto Rising (owned by group’s MD) made a cash offer at $0.78 per share, representing a 9.1% premium over last closing price of $0.715. This comes after Pluto Rising raised its stake in Viz Branz by 38.25% to 58.09%, triggering the mandatory unconditional takeover offer. It intends to make the compay its wholly owned subsidiary and to delist it. The offer values the group at 2.6x P/B and 15x forward P/E. *Armstrong Industrial: Controlling Ong family, which owns 46.5% of the group and Polyfoam (part of Japan-based INOAC Corp) has made an exit offer of $0.40 per share in a bid to delist the company from SGX. *Tung Lok: Proposes a 2-for-5 rights issue at $0.16 per rights share to raise between $6.7m and $9m. Assuming the issue is fully subscribed, the rights shares would represent 40% of the group's existing issued share capital. Tung Lok has already received irrevocable undertakings from its major shareholders, Zhou Holdings, which holds a 38% stake, Goodview Properties and Tee Yih Jia (Sam Goi), holding 19.26% and 17.87% stakes respectively. *Moya Asia: Entered into a contract with Regional Owned Drinking Water Company of Makassar City, Indonesia, to undertake a build, operate and transfer (BOT) of a 600 litre/second drinking water treatment plant, dam and distribution pipes as well as the sale of the treated water. The BOT concession will expire 25 yrs after the first sale of drinking water. The total investment value of the project is estimated to be US$20m and will span from 1Q14 to 1Q16. *Starhill Global: Controlling shareholder YTL has converted 152.7m convertible preferred units into 210.2m Starhill Global units @ $0.7266, raising its stake to 36.3% from 29.4%. The pro forma effect of the conversion will reduce its NAV per unit from $0.97 to $0.87 and dilute its DPU by 1.1%. Unitholders have approved a whitewash resolution allowing YTL to avoid making a manatory takeover offer. *Ho Bee: Acquired a residential site in Doncaster, Victoria, Australia for A$8.5m. The freehold site sits on a land area of 58,738 sf and has planning approval for the development of 185 apartments with a total gross floor area of 202,000 sf. The land and development costs of this project will be funded by internal funds and bank borrowings. *HPL: Disposed its one third interest in four London properties for £46.9m. As part of the sale, the purchaser also discharged the debt of ~ £175.3m associated with the properties. HPL stands to record a net gain of £11m ($21.2m) from the sale. *Advanced Integrated Manufacturing: Acquired a bungalow lot and three penthouses in Penang, Malaysia for RM24.2m. The group intends to hold onto the 19,791 sf vacant bungalow plot at the Martinque-Luxury Villas By The Sea development for future development into a luxury bungalow and lease out the three seafront condominium units, with gross area of 9,533 sf each, upon their completion to generate rental yield. *Falcon Energy: Auditors Deloitte & Touche issued a “qualified opinion” for the FYMar13 financial statements as they were unable to conclude whether any allowance is required in respect of US$44m receivables from one of the group’s associates, CH Offshore. *International Healthway Corp: The Catalist listing debutante will commence trading wef 9am today. The IHC shares comprise 189.9m shares from a distribution-in-specie to Healthway Medical shareholders and 104.4m placement shares at $0.48 apiece.