SG Market (24 Oct 13)

SG Market: S’pore shares are likely to face a softer opening after Wall Street retreated from a five-day rally on profit –taking and a mixed bag of earnings reports, including disappointing forecasts from Caterpillar and Broadcom. Adding to the pressure, a senior polcy advisor at the People’s Bank of China was quoted as saying the central bank may look to tighten liquidity to addres inflation risks. In addition, the ECB announced that it would begin a stress test for 130 banks in Nov to see whether they can withstand another financial crisis. The STI is expected t remain range-bound between 3,150 and 3,238 in the near term. Stocks to watch for: *CapitaMall Trust: 3Q13 DPU of 2.56¢ (+5.8% y/y) was in line with street estimates. NPI of $126.5m (+12.9%) was supported by full contributions from JCube, Bugis+ and Atrium AEIs and rent reversion (+6.2%) albeit dampened by lower revenue from IMM and Bugis Junction due to the ongoing AEIs. Portfolio occupancy rose 0.4ppts to 99.5% led by Bugis Junction but partly offset by lower occupancy at Funan and Clarke Quay. Balance sheet remains healthy at 34.8% gearing with debt cost of 3.4% and 3.6 years average term to maturity. NAV per unit was $1.71 as at Sep. Proposed AEI at Tampines Mall is expected to commence in 1Q14. *Frasers Commercial Trust: 4QFY13 DPU swelled to 2.08¢ (+ 19% y/y, -5% q/q) in line with the jump in distributable income to $13.7m (+21% y/y, -4.7% q/q), benefitting from a reduction in interest expense due to conversion and redemption of CPPU. Revenue and NPI dipped to $28.8m (-19% y/y) and $21.9m (-17% y/y) respectively as higher contributions from China Square Central were offset by weaker AUD, and disposal of KeyPoint and Japan properties in 2H12. Occupancy at its S’pore and Austrailian portfolios stayed at healthy 98.4% and 97.1% with weighted lease to expiry of 4.6 years. Gearing stood at 37.7% with an effective borrowing rate of 2.7%. A $100.5m fair value gain from an upward revalution of properties boosted its NAV to $1.57. *Cache Logistics: 3Q13 distributable income amounted to $16.5m (+9.6% y/y, -0.8% q/q), giving a DPU of 2.126¢ (-0.8% y/y, -1% q/q). Gross revenue rose to to $20.7m (+8.4% y/y, +1.3% q/q) on built-in rental escalation and new acquisitions made in 2012 and 2013. Portfolio occupancy was maintained at 100% with no renewal risk for 2013 and weighted lease to expiy of 3.4 years. Aggregate leverage stood at 29.2% with all-in financing cost of 3.45% average debt duration of 2.1 years. *Sheng Siong: 3Q13 net profit climbed 7.8% y/y to $10.6m, while revenue rose 4.8% to $177.8m, mainly on contribution from new stores of $12.6m. The growth was partly offset by declining sales in matured stores in older housing estates, competitors’ activities, and renovation works in Bedok Central and The Verge stores. The group now operates 33 outlets and may look to buy new retail space if renting becomes too expensive. It is also looking at renovating older stores to improve comparable same store sales. *Halcyon Agri: 3Q13 net profit grew 9.7% y/y to US$3.5m despite posting lower revenue of US$47.4m (-15.4%) in line with weaker natural rubber prices (-18.4%). But higher sales volume (+3.7%) and better gross margin (13.8% vs 10.1% in 3Q12) from lower material costs helped shore up the bottomline. The group had expanded extensively in Indonesia and Malaysia over 2013, with plans for further acquisitions and ambitions to be a top 10 global producer of natural rubber. *Aztech: 3Q13 results turned around to net profit of $2.4m vs $2.3m loss a year ago as revenue jumped 48% to $66.9m. The return to profitability was mainly due to higher sales contribution from the electronics and materials supply business segments. *Keppel Land: Acquired a 10.37 ha prime residential site in the Sino-S’pore Tianjin Eco-City for Rmb241.1m. The group plans to develop ~350 landed homes targeted at upper middle-income homebuyers. The project will be launched progressively from 2H14. *CapitaRetail China Trust: Proposed issue of 45.4m new units at $1.30 each (7.5% discount to last close) through a fully underwritten non-renounceable preferential offering to existing unitholders, on a 6-for-100 basis. Gross proceeds of $59m will be used to finance investments for the growth of CRCT’s portfolio, including the proposed acquisition of Grand Canyon Mall in Beijing. *Wee Hur: Ventures into workers' dormitory business via 60%-stake JV company, Active System, with partners TS Management Services (20%), WM Dormitory (10%) and Lucrum Dormitory (10%). Active System had recently been awarded by JTC Corporation to build and operate a 16,800-bed workers’ dormitory at Tuas South Avenue 1 to cater to foreign workers in the marine, manufacturing and process industries. The initial three-year lease on the land will have a monthly rental of $1.16m and construction is expected to complete in 2H2014. *Xpress Holdings: The print solutions provider signed a MOU with Sino-S’pore Guangzhou Knowledge City to spearhead the launch and growth of its 8→8 Biz Butler concepts outlets in Guangzhou and other parts of Souh China. Under the pact, Xpress will set up its the Operational HQ in the Guangzhou Knowledge City, and register a wholly foreign owned enterprise in Qianhai district, Shenzhen to capture market share as MNCs set up operations in the district. *Rowsley: Appointed Lock Wai Han as CEO from 1 Nov. Prior to joining Rowsley, Lock was based in Beijing as CEO of CapitaMalls Asia (China). Before joining the private sector, his 20-year track record in the civil service included Commissioner of Immigration & Checkpoints Authority, Director, CID and Deputy Secretary, Ministry of Information, Communications & the Arts, and held directorships in Int’l Enterprise S’pore and other statutory boards. *Courts: Starts construction for its first ‘Big Box’ Megastore in Indonesia in Kota Harapan Indah, East Jakarta. When operational in 2014, this will be the largest store in Court’s entire portfolio, covering 13,000 sqm of retail space. The two-storey megastore reaffirms Courts’ commitment to be a leading player in Indonesia. *CapitaLand: Surbana Int’l Consultants, which is 60:40 owned by Temasek and CapitaLand, has inked three MOUs with the Kazakhstan government to share its knowledge in affordable housing, urban planning and land management. *Transcu Group: In a bid to refocus its business, Transcu is looking to dispose its assets in the transdermal pharmaceutical devices and cosmetics business, two of its three core business segments, due to the liquidity issues face from its capital-intensive R&D activities. The group is now looking to concentrate on its remaining green technology business, to tap into the growing global need for environmental conservation and reduction of fuel consumption. Transcu intends to appoint a financial adviser to advise on the asset disposal and will update shareholders on material developments in due course.