SG Market (11 Jul 13)

SG Market: S’pore shares are likely to be range-bound after Wall Street closed little changed as the minutes from the latest FOMC policy meeting offered nothing new. The US market was initially encouraged that the Fed will wait for more evidence of jobs improvement before pulling the plug on its monetary stimulus but the gains were short-lived after several Fed officials supported ending the asset purchases by year end. Dovish comments by Fed chairman Ben Bernanke delivered after market close that the highly accommodative monetary policy is needed for the foreseeable future calmed some nerves and sent stock index futures higher. While the Fed’s quantitative easing measures have been a key driver of the global market rally, the focal point now is on the timing and scale of the rollback of the program. The US market appear to have taken a more positive tone on optimism that the economy would be able to stand on it own two feet when the monetary tap shuts. Meanwhile, the unexpected contraction in China’s Jun exports and rise in consumer inflation gives the central bank less flexibility to ease as all eyes turn to the GDP numbers out on Mon. If, it turns out bad, expect more capital flow to head west. The STI is again tipped to test the 3,200 resistance boundary after failing to clear it yesterday but China’s disappointing trade data are likely to limit the gains with next resistance seen at 3,235 and underlying support at 3,130. OUE is likely to be in focus with investors anticipating a special dividend after the group filed its listing prospectus for its hospitality REIT. Stocks to watch for: *OUE: Filed a preliminary prospectus with MAS to list its hospitality assets on SGX. The group is seeking to raise $614m, offering 434.6m stapled securities to the public and institutions, of which 51.1m will be for retail, and additional 247.2m units to cornerstone investors at $0.88-0.90 apiece. OUE will retain a 47.9% stake in OUE Hospitality Trust, which will initially comprise two assets - the Mandarin Orchard hotel and the Mandarin Gallery mall along Orchard Road. Based on the earnings projections, the trust will offer a distribution yield of between 7% and 7.2% this year and up to 7.5% for 2014. *Global Logistic Properties: Signed agreement with BMW Brillance Automotive to develop a 75,000 sqm build-to-suit facility at GLP Lingang, Shanghai. This will be BMW’s largest distribution centre in China. Construction of the first phase (55,000 sqm) will commence in 2013. *Mencast: Won two separate MRO contract extensions to Dec 15 (plus one-year option to renew) from Keppel Corp, which include underwater inspection and maintenance works, seabed survey inspection, hydrographic survey, side scan sonar survey. Keppel is a long time customer of Mencast. *Mirach Energy: Updates that the KM-606 pdtn well at the Kampung Minyak Oil Field that was drilled in Dec 12 and suspended due to extreme bad weather conditions in the earlier months, is now ready for production after well perforations at a targeted layer recorded production of 40 bpd. The KM team is moving on to drill another four targeted wells based on the promising shows from the two producing wells in the first week of Aug. *LionGold: Raised its annualised gold production target for 2014 from 120,000 oz to 200,000 oz. It acquired interests in six gold companies with a combined transaction value of $190m in FY13. The group’s mining portfolio now includes 5.5m oz of gold resources (~900,000 oz are classified as reserves). Maiden gold sales reached $33.5m with the successful production rampup at Castlemaine Goldfield’s Ballarat Mine. *Tiger Airways: Jun operating figures saw an 18.4% y/y jump in passengers carried to 432,000. Load factor rose 0.3 ppt to 86.5%. Tiger Australia recorded a 76.8% spike in pax carried to 244,000, and 6.5ppt rise in load factor to 88.2%, recovering smartly from the flight suspension last year, which resulted in reduced capacity. *Boustead/Ausgroup: Boustead has proposed to acquire an industrial workshop with ancillary office at 36 Tuas Road in a sale and lease-back transaction with AusGroup for $39.4m. The 30,000 sqm property is held under a lease issued by JTC for a 30 + 30 year term commencing 1995. The pro forma financial effects of the acquisition will increase NTA from $0.60 to $0.604, and EPS from 16.16¢ to 16.53¢. AusGroup expects to recognize a profit of A$14.5m. *Oxley: Sets up units in Cambodia as part of its expansion plans to develop property in the country. In early 2013, the group signed a deal to buy a freehold land parcel in Phnom Penh. Also recently acquired various parcels of land in Kuala Lumpur, Selangor, Johor Bahru, and Penang.