SG Market (19 Jul 13)

SG Market: S’pore shares may be supported as US stocks rallied to new highs on robust economic data, earnings and reaffirmation that the Fed will keep its easy monetary policy in place for as long as necessary. Economic reports showed jobless claims fell a better-than-forecast 24,000 to 334,000 last week, the fewest since May. Investors were also encouraged by a surge in manufacturing activity in the mid-Atlamtic region to a two-year high. Meanwhile, a batch of earnings from IBM, Morgan Stanley and UnitedHealth topped expectations and helped prop up the market. On Capitol Hill, Fed chief Ben Bernanke again reiterated his flexible stance on bond purchases and told senators that one reason for the recent rise in long-term interest rates is the unwinding of leveraged and excessively risky investing. Apart from equities, the US dollar, Treasury yields, oil and gold all rose. Expect the STI to range trade with an upward bias with banks and blue chips in focus. Overhead resistance for the index is capped at 3,260, while downside support remains at 3,200. Stocks to watch for: *Keppel Corp: 2Q13 results fell short of estimates as net profit of $346.8m (-33% y/y) and revenue of $3.08b (-12%) declined on lower offshore volume and absence of profit gains from Reflections at Keppel Bay. Delivered eight rigs (vs five in 1Q) but O&M margin stayed flat and secured $1.3b worth of orders with healthy order book of $13.1b. Strong sales in China underpinned the property division, while infrastructure benefited from the completion of the 400MW cogen plant expansion. Group also sees a leadership change of two key executives. An interim DPS of 20.8¢ comprising a cash component of 10¢ and dividend-in-specie of Keppel REIT units equivalent to 10.8¢ (vs 18¢ in 1H12) has been declared. *Keppel Corp/Keppel REIT: Proposed dividend-in-specie of 80 Keppel REIT units for every 1,000 KepCorp shares held. Following the distribution, KepCorp’s stake in Keppel REIT will be reduced from 51.5% to 47.2%. As such, Keppel REIT will become an associate and its balance sheet will no longer be consolidated into KepCorp. On a proforma basis, KepCorp’s NTA will drop to $4.76 from $5.08 and net gearing will improve to 0.08x from 0.23x. *Mapletree Logistics Trust: 1QFY14 results in line, distributable income of $44m (+6.9% y/y) and DPU of 1.8¢ (+6.4%). NPI fell 3.3% to $65.3m due to a weaker JPY and higher property expenses incurred from conversions into multi-tenanted buildings. Occupancy fell slightly to 98.2% (-0.3 ppts) with weighted lease to expiry of 5.1 years. Gearing maintained at 34% with average term of debt at 4 years and cost of debt at 1.9%. NAV at $0.92 per unit. *CapitaMall Trust: 2Q13 results in line, distributable income of $87.7m (+10.2% y/y) and DPU of 2.53¢ (+6.3%), which translates to an annualized yield of 5.1%. Gross revenue grew 10.4% to $182.8m, while net property income rose 12.2% to $125.6m. The completed AEI works at JCube, Bigus+ and The Atrium@Orchard last year, together with 6.4% positive rental reversion were the main drivers to the revenue growth. Tenant sales continued to grow, rising 3.3% yoy in 1H13 and shopper traffic increased 4.8%. CMT ended 2Q13 with a gearing ratio of 34.9% and average cost of debt of 3.4%. NAV stood at $1.70 per unit. *Global Logistic Properties: Leased 24,000 sqm of space at GLP Park SND in Suzhou to one of the largest hypermarket chains in China. This deal marks the first collaboration between GLP and the unnamed customer. *Oxley Holdings: Acquiring a 10% interest in GD Capital for Rmb35.7m. GD Capital is a holding company that holds the land use rights to two plots of land with an aggregate area of 183,105 sqm in Xuancheng Economic and Technical Development Zone in Anhui, China, which are zoned for residential development. The vendor has also granted Oxley the right to participate up to 30% in the development projects of five other pieces of land in the same area. *CNA Group: Proposed its second placement this year of 60m new shares (16.3% of enlarged share base) to four individuals and three financial institutions at $0.1208 each, representing 11.8% discount to last traded price of $0.137. Net proceeds of $6.8m will be earmarked for general working capital and selected property projects in Thailand. The earlier placement of 37m shares was carried out in Apr at $0.081. *CitySpring Infrastructure: City-OG Gas Energy Services, the business venture between City Gas and Osaka Gas has been granted a gas retailer’s licence from the EMA to market and sell natural gas to industrial customers in certain parts of S’pore. Before the start of its operations in Aug 13, parent CitySpring will divest 49% of City-OG Gas to Osaka Gas for $39.2m. *GSH Corp: Entered into MOU to acquire Gabungan Granite Terengganu (GGT), A private Malaysian company that owns the rights to develop a 7.1-acre site in Kuala Lumpur into a commercial/residential development. *Hoe Leong: Malaysian associate Semua Shipping awarded two charter contracts worth RM150m by Shell Malaysia for three-year charters of two tankers, which started this month. The deal comes with options for another two years based on mutually agreed terms.