SG Market (12 Jul 13)

SG Market: S’pore shares are likely to follow the lead of Wall Street as investors welcomed comments from Fed chairman Ben Bernanke that the central bank would maintain its loose monetary policy for some time, suggesting a slower time-frame for scaling back its bond buying program. Both the blue-chip DJIA and broader-based S&P 500 soared into record territory, while the tech-heavy Nasdaq climbed to a 13-year high. US stocks rallied even after jobless claims unexpectedly jumped 16,000 to a two-month high of 360,000 last week. Markets are also hopeful that the upcoming earnings season will surprise on the upside, given the low expectations. Treasuries rose, sending the benchmark 10-year yield down 5.5 bps to 2.57%, while the USD slid 1.4% against 10 major peers and gold rallied 2.6% for its longest winning streak since Apr. The volatility in stocks, bonds and currencies underscored the tightrope the Fed is walking in winding down their stimulus plans without causing serious disruptons to the markets. For now, the STI has hurdled above its 200-day moving average at 3,200, negating its corrective phase and putting it squarely back on the recovery path. This is confirmed by the bullish crossover of its ADX directional indicators. Next resistance for the index is seen at the 3,270 level, represented by the 50-day moving average. Sentiment is expected to be boosted by 2Q GDP, which expanded by a faster-than-expected 3.7% versus 2.1% forecast. Stocks to watch for: *Vard Holdings: Dismal 2Q13 results, well below estimates. Group sank into net loss of NOK20m in 2Q13 vs NOK279m profit y/y as revenue sagged 12% to NOK2.95b. 1H13 earnings plunged 75% to NOK168m, making up 23% of full year forecast. EBITDA margins for 2Q13 shrank to 4.1% from 11.1% in 1Q13 due to delays and cost overruns on four old vessels at its Niteroi yard and start-up costs at its new Promar shipyard in Brazil. Elsewhere, worlkload in Romania remained high but utilization in Vietnam was sub-optimal. Order intake was NOK1.2b in 2Q, down from NOK2.8b in previous quarter, lowering order book to NOK14b from NOK15.5b as at end of 1Q13. *Ezra: Awarded US$505m worth of new projects spanning North Sea, Africa, Gulf of Mexico and Asia-Pacific region, which adds to its order backlog of more than US$2b, and extending it till 2016. This may quell concerns over its weak 3QFYAug13 results, which saw net profit dive 68% y/y to US$7.2m, due to sharp spike in cost of sales and leading to a 95% collapse in gross profit to US$2.2m. Operations at EMAS Marine (offshore support) were impacted by vessel offhire, while EMAS AMC (subsea) faced some delays in project execution and additional costs for certain projects. *Triyards: 3QFY13 results slightly missed; net profit of US$7.5m (-55% y/y) on revenue of US$65.7m (-61%). 9MFY13 net profit of US$21.1m reached 71% of full year estimates of US$30m. The revenue decline in 3Q was attributed to lower sales recognized for construction of subsea vessel Lewek Constellation, which peaked in 2HFY12. However, gross profit margin improved to 19% from 13% in 3Q12 due to the ramped-up work on three self-elevating units and better margins from two ship repair jobs and one offshore fabrication project. Its order book stood at US$264m as at end May 13. *ST Engineering: Its aerospace unit secured US$430m worth of new contracts in 2Q13 for services ranging from airframe, component and engine maintenance to interior modifications. It also launched three new initiatives to further expand its capabilities through 1) two long term agreements with UTC Aerospace Systems to provide MRO services for the B787 Dreamliner aircraft, 2) 16-month development effort to enhance its B757 freighter conversion solutions and 3) acquisition of Turbo Mach, a Texas-based designer and manufacturer of composite components and assemblies for the aerospace industry. *Dyna-Mac: Secured a new $135m contract from a regular client to fabricate topside modules, manifolds and flare towers for two FPSOs at its Singapore and Guangzhou yards. Production will commence in late 3Q13 and the orders are expected to contribute positively to the group’s bottomline in 2013. *OKP: Secured a $13.8m contract from PUB to improve roadside drains in the Geylang area. Work will start in Jul 13 with completion expected within two years. This brings the group’s order book to $428.8m. *Oxley Holdings: 49% associate has acquired two freehold land parcels in Phnom Penh, Cambodia for a total sum of US$62.4m. The first 3.8 ha plot costing US$13.2m is zoned for residential, while the second 1.2 ha plot costing US$49.8m is zoned for commercial purposes. The group plans to redevelop both properties after getting all necessary approvals. *Jackspeed: Entered into non-binding letter of intent with China Harhour Engineering Co to jointly bid for the upcoming open tender for the design and construction of the elevated section of the Ho Chi Minh Urban Mass Rapid Transit Line 2. The estimated value of the project is US$47.4m. *Courts Asia: Soft opened its first big-box megastore in Malaysia ahead of schedule. The 108,000 sf megastore will be the group’s largest store in Malaysia and strategically located in the major township of Bandar Sri Damansara in Klang Valley. In all, the group operates 61 stores in Malaysia. *Genting S’pore: Broke ground for its 550-room hotel at Jurong Lake District, which is scheduled to open in 1H15. The area has been earmarked by URA as a new growth hub with commercial, business and leisure facilities. The hotel will be the 7th hospitality development for GENS, which owns six other hotel properties at Resorts World Sentosa.