SG Market (07 Aug 13)

SG Market: S’pore shares could face downside risk following the drop in Wall Street as more data and fresh comments by two Fed officials pointed to the likely pullback of its monetary stimulus in the coming months. Trade data for Jun showed a narrowing trade deficit, which suggests a firm pick-up in the economy. Meanwhile, the Fed chiefs of Chicago and Atlanta, Charles Evans and Dennis Lockhart both indicated that the central bank could start to unwind its monthly US$85b bond purchases next month. In S’pore, the latest batch of corporate results has seen more misses than hits with Genting S’pore, Wilmar and SCI the latest casualties.Near term support for STI lies at 3,200 with upside resistance at 3,260. Stocks to watch for: *Genting S’pore: 2Q13 results missed estimates with net profit +1% y/y to $140.2m and revenue +1% to $707.9m on poor luck factor despite stronger VIP volume growth. Adjusted EBITDA was $310.8m (+1% y/y, +24% q/q), again negatively affected by below theoretical VIP hold of 2.5% (vs 2.12% in 1Q and 3.1% in 2Q13), despite a significant increase in VIP rolling chip volume (+29% y/y). Gaming revenue slipped 2.4% to $548.6m, while non-gaming revenue rose 19% to $158.8m. Impairment losses on trade receivables/bad debt provisions flat at $31.9m. No dividend declared. *Wilmar: 2Q13 results came in well below estimates even though net profit jumped 87% y/y to US$218.5m. Excluding non-operating items, core earnings were up 42% to US$245.4m. Despite robust volume growth in palm & laurics, consumer products and sugar segments, revenue slipped 5% to US$10.4b due to significantly lower CPO prices. Improved performances from other divisions and positive crushing margins were unable to overturn the weak plantation earnings due to poor CPO prices and production yields. Still, group is proposing an interim DPS of 2.5¢ vs 2¢ in 1H12. *Starhub: 2Q13 results slightly above expectations with net profit of $100.6m (+16% y/y) lifted by margin improvement, and further boosted by a doubling of government-subsidised NGNBN adoption grants. Operating revenue was flat at $586.8m, due to fewer handsets sold, but also reflecting weaknesses in pay TV and broadband although mobile data expanded. EBITDA margin widened to 34.1% from 32% in prior year, driven by reductions in traffic and other expenses. Quarterly DPS of 5¢ maintained. *Sembcorp Industries: Muted 2Q13 results with net profit of $165.4m (-13.3% y/y, -6.5% q/q) on revenue of $2.5b (-6.3% y/y, +6.4% q/q). Marine profit fell 13% to $75.7m as competition from Chinese and Korean yards eroded margins, which was partially mitigated by gains from asset sales and 18% higher utilities contribution of $111.9m from recently acquired power assets in China and Mid-East plants. Earnings from its urban development business plunged 53% to $3.6m due to a debt provisions in its China associate. Interest in the 2H12 may be piqued by the expected IPO of its US$1b Sembcorp Salalah Power & Water Company in Oman. *Hyflux: 2Q13 net profit was flat at $17.7m despite a 25% fall in revenue to $138.4m due to effective cost control, which led to improved gross margin of 42% vs 33% in 2Q12. The municipal sector and Asia ex-China continued to be the main revenue drivers, accounting for 91% and 86% of sales respectively. Gearing was 0.8x as at Jun with a cash position of $375.1m. Unchanged interim DPS of 0.7¢ has been declared. *Swissco: 2Q13 net profit dived 51.8% y/y to $2m, in line with a similar drop in revenue to $10.4m as it saw reduced activities in all three business segments – maritime services (fewer transactions), ship repair (completed less jobs) and vessel chartering (sold three vessels). *NeraTel: 2Q13 earnings spiked 213.4% y/y to $10.5m, mainly due to a negative goodwill gain of $7.1m. Otherwise, 2Q earnings would have been up 1% at $3.4m and 1H13 earnings slightly off at $9.3m. Revenue rose 13.1% to $47.2m due to an impressive 75.5% growth in its telecom sales to $19.3m on back of higher sales of microwave radio equipment in Mid-East and North Africa. This was partially mitigated by a 9.1% dip in its infocomm segment to $27.9m due to project delays and lesser delivery of point-of-sale terminals. Gross margin improved slightly to 30.8% from 29% in 2Q12. Interim DPS was halved to 2¢. *Maxi-Cash: 2Q13 earnings tanked 88% to a breakeven $0.05m although revenue rose 28% to $30m as the group incurred a $1.5m loss from the reversal of accrued interest from unredeemed pledges as well as losses from disposal of unredeemed items due to the mpact of the substantial drop in gold prices. NAV fell to 14.74¢ from 17.91¢ in Dec 12. Group is proposing a 1-for-10 bonus issue. *The Hour Glass: 1QFY14 revenue grew 14% y/y to $154.7m on an expanded retail network and increased marketing activities but margins were crimped by competition and higer operating expenses from wages and rentals, resulting in a 6% drop in net profit to $8.8m. *Wheelock Properties: 2Q13 net profit tumbled 70.7% y/y to $14.2m (1H13: $119.5m) along with the 71.3% revenue drop to $33.5m as sales recognition from Ardmore Three was much lower than that from Orchard View and Scotts Square in the previous year. This was partially offset by higher dividend and interest income received from the group’s investments and revenue from its retail malls. End 2Q NAV saw a marginal decline to $2.57. *DMX: 2Q13 net profit declined 14.1% y/y to US$4.1m, while revenue rose 3.1% to US$93.9m. Double-digit growth in software and sevice businesses boosted gross margins to 23.5% vs 22.9% previously but higher admin and headcount costs to support its new business initiatives and amortization of goodwill ate into its bottom-line. *Creative Technology: 4QFY13 loss narrowed to US$6.5m even as revenue declined 18.3% to US$30.2m, impacted by lower sales across all its geographical markets due to the uncertain and tough market conditions. But FY13 earnings turned around to US$16.7m, compared to its net loss of US$83.9m the previous year, due to a one time licensing income of US$20m, a US$26.7m divestment of ZiiLABS, a decrease in operating expenses of US$19.1m. A final DPS of 10¢ was declared, double from the 5¢ paid last year. *Next-Generation Satellite Communications: Entered into a non-binding agreement with Mobile Media (China) to acquire 75% stake in its mobile video business for $27.6m. The acquisition will be funded via a 1.9b new shares at $0.012 each plus $4.8m cash. *Swee Hong: Secured a $134.7m contract from LTA to construct a dual four-lane road between MacRitchie viaduct and Adam flyover via the Bukit Brown cemetery. Work will be done in stages with completion due in Oct 2017.