SG Market (06 Aug 13)

SG Market: S’pore shares are likely to drift down following the retreat on Wall Street from record highs as investors fretted about a possible pullback of the Fed’s aggressive bond purchases to stimulate the economy. This follows the the stronger-than-expected growth in the ISM services index in July and hawkish comments by Fed official Richard Fisher that the central bank cannot keep markets levitating indefinitely as it distorts pricing of financial assets and causes serious misallocation of capital. In S’pore, the broader market has been taking a decidedly bearish undertone although this is not reflected in the STI with blue-chips supporting the key index. The uncertainty is expected to persist until there is further clarity on the tapering of the Fed’s quantitative easing program. Near term support for the STI lies at around the 3,210-3,230 zone where several key moving averages are converging. Upside resistance remains at 3,260. Stocks to watch for: *City Dev: 2Q13 net profit jumped 48% y/y to $203.8m as one-time gains from disposal of industrial properties in S’pore offset weaker hotel operations. Topline performance was tepid with revenue up 1.8% to $801.6m. Balance sheet remains strong, backed by cash of $2.5b and healthy net gearing ratio of 22%. Group declared a special interim DPS of 8¢ vs nil in 1H12. *Yongnam: 2Q13 net profit slumped 28.6% y/y to $8.6m despite revenue climbing 47.5% to $115.1m, as a result of a $5.1m provision for its exposure to bankrupt MRT contractor Alpine Bau GmbH. Strong top-line was due to an impressive 119% growth from its structural steelwork segment with ongoing projects like the S’pore Sports Hub, National Art Gallery, Suntec City, Market Street commercial development and a belt conveyor project in Malaysia. But gross margins slipped 6.9 ppt to 19.4% on lower revenue mix from higher margin specialist civil engineering projects. Gearing increased to 50% from 37% at end 2012; order book remained healthy at $266m. *ARA Asset Management: 1H13 net profit slid 9% y/y to US$32.1m despite revenue gaining 18% to $56.2m on the back of higher REIT management fees, portfolio and real estate management fees as AUM rose 7% to US$23.5b. Excluding unrealized mark-to-market losses and one-off acquisition, divestment and performance fees, the group would have achieved 17% rise in recurrent net earnings to $27m. Group has declared an interim 1H13 DPS of 2.3¢ (+10% post bonus issue). *Interra: 2Q13 net profit soared to US$4.5m (EPS: US1¢) vs US$0.5m y/y. Revenue spiked 94% to US$13.8m as share of oil production more than doubled to 190,000 barrels due to new oil wells in Tanjung Miring Timur concession in South Sumatra and plans to drill another 4 wells in 2H13. In Myanmar, 10 wells have been drilled so far this year and another 14 more are targeted to be drilled by year end. Cash and cash equivalents stood at US$10.4m at end 2Q with no debt. *Hiap Hoe: 2Q13 net profit jumped 75.9% y/y to $29.3m, pushing 1H13 earnings to $39.5m (+28.5%). Revenue surged 87% to $80.3m driven by higher progressive sale recognition from Waterscape at Cavanagh, Signature at Lewis and Skyline 3600. Contributions also came from Days Hotel S’pore and Ramada S’pore, which opened in Dec 12 and May 13 and its Zhongshan Mall and office towers, which were inaugurated in May and Jun and achieved 91% and 60% occupancy rates respectively. Gross margins widened to 47.7% vs 38.2% a year ago, while NAV rose to $0.73 from $0.65 per share. Record interim DPS of 1.2¢ proposed. CSC: 1QFY14 net profit was down 36% y/y to $1.1m but reversed from a $5.5m loss in 4QFY13, which was hit by a bad debt provision. Revenue was relatively flat at $130.3m but intense price competition and high onstruction costs led to a operating margin contraction to 1.7% from 2.8% a year ago. *Consciencefood: 2Q13 net profit jumped 41.9% y/y to Rp41.2b on 4.6% growth in revenue to Rp199.4b due to increased sales volume of instant noodles in the Indonesian market. But gross margin was squeezed by higher raw material, labour, depreciation expenses, other production costs, as well a factory fire, which disrupted its warehousing operations in Dec. Excluding a Rp30.9b fire insurance claim, its bottom-line would have sagged 66% to Rp10.3b. *CH Offshore: FY13 net profit sank into the red with a loss of US$7.1m vs a US$33.4m profit in the previous year. The poor performance was attributable to a 7.2% revenue drop to US$47.8m as two vessels were docked for mandatory overhaul after completing their contracts in Jan, absence of gains from vessel sales (FY12: US$3.9m) and a hefty doubtful debt provision of US$44m. Group is proposing a FY13 DPS of 1.5¢, significantly lower than FY12 total of 4.75¢. *Heallthway Medical: 2Q13 net profit leapt 12x y/y to $23m, bolstered by a $22.4m net gain on disposal of available-for-sale financial assets, which were use to repay convertible debt instruments. Otherwise, revenue was flat at $40.4m. *BBR Holdings: Wholly-owned subsidiary BBR Development and JV partners Evia Real Estate, CNH Investment and OKP Land, were awarded an executive condominium plot at Yuan Ching Road for $272.8m. The 99-year leasehold land plot has an area of 20,187.7 sqm and will consist of 500 units. *Ley Choon: Awarded a $6.5m contract by PUB for the supply, laying and diversion of ductile iron and steel watermains.