SG Market (23 Jul 13)

SG Market: S’pore shares are likely to trade sideways following the marginal gains on Wall Street as disappointing results from McDonald’s and an unexpected 1.2% drop in existing home sales in Jun limited the buying enthusiasm. Meanwhile oil slipped 1.1% to US$106.91 a barrel and copper and gold rallied while the JPY strengthened. While the focus in the US has switched to corporate earnings, local investors will have to turn to events in Asia for direction. Attention will be on the release of Chinese manufacturing data that may provide fresh clues on the state of the economy and on local inflation data due later today. Results from local corpoartes so far have also been lacklustre and unlikely to lead the market although oil-related stocks seem to be riiding on the current high crude prices. The STI may test its immediate resistance at 3,342 (as represented by the downward sloping 50-day moving average) with downside support remaining at 3,200. Stocks to watch for: *SIA Engineering: 1QFY14 net profit dipped 1.6% y/y to $69m as revenue fell a larger 3.7% to $289.4m. Operating profit dived 19.5% to $27.7m, weighed by lower material and fleet management sales and accompanied by a marginal drop in expenses but strong contribution from associates and JVs of $45.6m (+14%) helped shore up and accounted for 58% of pretax profit. Balance sheet remains solid as net cash position ballooned to $628.7m, translating to $0.566/share with NAV at $1.253. *Tiger Airways: Net loss for 1QFY14 widened to $32.8m from $13.7m due share of losses in associate airlines Tigerair Mandala ($20.6m, of which $13.3m was past losses) and Tigerair Phillippines ($6m). At the operating level, revenue soared to $181.3m (+30.3%), buoyed by increased passenger traffic (+32.6%) but partially offset by lower yield (-1.8%). Operating loss narrowed to $6.2m vs $11.8m in 1QFY13 but reversed from two consecutive quarters of profit. Passenger load factor improved slightly to 84.8% (+1.5 ppt), even as capacity expanded 30.2%, while breakeven load factor dipped to 88.5% (-1.6 ppt). Following two capital raising exercises in Apr, NAV stood at $0.48. *Ascott Residence Trust: Muted 2Q13 results. Although distributable income iincome jumped 14% y/y to $30.9m, this was mainly due to a reversal of over-provision of prior years’ tax expense of $2.7m, and lower finance costs. DPU grew 3% to 2.45¢, due to new placement units issued in 1Q13. Revenue declined 2% to $77.4m, while gross profit dipped 4% to $40.9m as RevPAR dropped 9% to $142/day, due to lower contributions from existing properties in China, Vietnam, S’pore and Japan (JPY impact), and following the divestment of two higher yielding properties in Melbourne and S’pore in 2012. ART ended 2Q13 with gearing of 40.2% and NAV of $1.36. *CaptaLand: Completed its strategic review of 59% owned Australand and concluded that the Australian developer will continue as a key investment as none of the offers it received were compelling enough. Group believes Australand will provide a stable stream of recurring income from its portfolio of commercial and industrial properties and is well placed to benefit form the improving housing outlook in Australia. *Courts Asia: Ties up with Sinar Mas Land to build two Big-Box stores in Indonesia. Under the MOU, Courts will lease the two megastores in Bekasi (170,000 sf) and BSD City (130,000 sf) in Serpong, which will be built by Sinar Mas. Once opened, the two stores will increase Courts retail store footprint by 20%. *Global Logistics Properties: Signed agreement to lease 13,000 sqm of space at GLP Chikushino in Fukuoka, Japan to CL Co, an expanding third-party logistics company dealing in consumer and pharmaceutical products. CL Co is a new customer for GLP and will utilize this facility as it main distribution centre in the region. With this lease, GLP Chikushimo will be 100% committed. *TEE Int’l/AnnAik: Both have inked an MOU to evaluate possibility of investing in a waste water treatment plant in Huzhou, China. Meanwhile, TEE’s 49% Thai associate Global Environmental Technology has formed a 30/50/20 consortium with Cisco Engineering and Lam Water Soultion, which was awarded a $8.6m three-year contract to manage and control the water level at Makkasan Water Catchment area in Thailand. *Osim: Increased its shareholding in associate TWG Tea by 10% to 45% for a minimal purchase consideration of $2 after founding members of TWG failed to meet performance targets for FY13. Osim had bought its 35% stake in TWG for $31.4m in Apr 2011. *See Hup Seng: Shareholders voted out MD Jimmy Tan and reinstated founder Thomas Lim as executive chairman at an EGM. Also appointed was Ng Keng Sing as executive director to manage the group’s refined petroleum business. Tan tendered his resignation as chairman of TAT Petroleum, its refined petroleum unit, along with deputy chairman Ang Keng Boon and CEO Chan Huan Yong. *BH Global: Informed that the two vessels that were forcefully removed from its Batam shipyard on 14 Jul have been retrieved by the Indonesian Navy are handed over to the Batam Police. Both vessels are reportedly undamaged and the group is unlikely to incur any losses as a result of the incident. *Manufacturing Integration Technology: Issued profit guidance for a 1H13 net loss due to current weakness in the global semiconductor equipment market.