SG Market (25 Oct 13)

SG Market: S’pore shares are likely to stay cautious despite the recovery on Wall Street with the S&P 500 regaining its footing above 1,750 amid upbeat corporate earnings and signs that slower economic growth will prompt the Fed to saty the course for monetary stimulus. The market gained as eanings from PulteGroup, Ford, 3M, Amazon and Microsoft beat estimates. Of the 217 S&P 500 companies that have released results so far, 77% exceeded profit expectations, while 53% topped sales forecasts. Economic data initial jobless claims fell less-than-expected 12,000 to 350,000 last week, while the Markit Oct manufacturing PMI reading grew at the slowest pace in a year. Meanwhile, euro services and factory output also missed projections but China’s manufacturing activity strengthened to a three-month high in Oct. In S’pore, Penny stocks may come into focus following revelation that the authorities have launched a probe into the infamous trio of inter-linked companies (Asiasons, Blumont, LionGold) that crashed spectacularly this month with the STI still expected to trade within the 3,150-3,238 range in the near term. Stocks to watch for: *Tiger Airways: Swung to a 2QFY14 net profit of $23.8m from losses of $18.3m y/y and $32.8m q/q, after booking a $106.1m gain from the partial disposal of Tigerair Australia and netting off impairment losses of $48.3m from associates. Tigerair S’pore recorded a 13.8% increase in revenue to $151.3m, driven by traffic volume (+21.9%) but higher passenger service charges at Changi Airport T2 led to weaker yields (-5.6%) and wider operating loss of $12.8m vs $11.5m a year ago and associate carriers in Indonesia (-$7.7m), Philippines (-$9m) and Australia (-$7.3m) continued to bleed. Pax load factor declined 3.6 ppt to 78.5% as capacity expansion (+27.5%) outpaced traffic growth (+21.9%), resulting in higher breakeven load factor of 88.9%. NAV stood at $0.51 per share. *Mapletree Commercial Trust: 2QFY14 distributable income surged 29.1% y/y to $37.3m, while DPU climbed 16.5% to 1.801¢. NPI jumped 31.4% to $48m along with the 27.1% rise in gross revenue to $65.8m on rental uplift from VivioCity and PSA Building, and new revenue stream from Mapletree Anson (acquired in Feb 13). Overall portfolio occupancy reached 98.9% with a weighted lease to expiy of 2.5 years. Gearing slightly elevated at 40.8% with average debt maturity of 3 years and all-in borrowing cost of 2.19%. *Suntec REIT: 2Q13 distributable income dipped 1.8% y/y to $51.8m, which included capital distribution of $4.5m from the sale proceeds of Chijmes, while DPU eased 2.6% to 2.289¢. Gross revenue rose 5.3% to $65.9m following the completion of Phase 1 AEI works at Suntec City, higher rental income from Suntec City office, offset by closure of Suntec malll (Phase 2), which achieved a pre-committed occupancy of 83.7%. The overall occupancy of its office portfolio stood at 99.8% and retail at 98.3%. Leverage ratio was 37.2% with cost of debt at 2.67% and average term of expiry of 2.28 years (assuming full drawdown of new $500m loan facility). NAV ended at $2.05. *Del Monte: 3Q13 core net profit rose 7% to US$8.9m in tandem with the 8.9% growth in revenue to US$127m, buoyed mainly by strong performance of its non branded business (+19%) and S&W segment, both processed (+47%) and fresh (+31%), while branded business grew 4% to US$82m and accounted for 65% of total sales. The group recognized lower share of loss of US$1.2m for its Indian FieldFresh JV. Margins were relatively stable. *Triyards: 4QFY13 net profit came in at US$10.3m (-32% y/y, +37% q/q) on revenue of US$76.7m (-7% y/y, +17% q/q). This takes FY13 net profit to US$31.4m (-29%), which is ahead of estimates. Lower topline for 4Q was due to lower revenue recognized for subsea construction vessel Lewek Constellation, which was in preparatory stage of sea trial. Demand for offshore support vessels and self-elevating units is expected to add to its net order book of US$217m as at Aug 13. Final DPS of 2¢ declared. *SIA: Given initial green light by Indian authorities to set up a 49/51 JV airline in India with partner Tata Group after clearing the Foreign Investment Promotion Board. SIA and Tata will next seek approval from the civil avaiation ministry. Entering India will enable SIA to get a foothold in a market where no of air pax is forecast to triple to 452m by 2020. *Tiong Seng: Awarded a $42.7m contract by Mapletree Industrial Trust to construct a seven-storey industrial building with underground tanks at One-North. This is the first design and build project for the group and brings its order book to $1.1b for FY13. *Stamford Tyres: Expands presence in Mid-East with the appointment of Al Habtoor Motors as official dealer for Sumo Firenza tyres in UAE. Al Habtoor is also the exclusive distributor for several renowed automotive brands including Mitsubishi, Bentley, McLaren, Bugatti, TEMSA, JAC, Fuso and Cherry in UAE. *Digiland: Scaled down its proposed share placement to a maximum of 2.05b new shares from 5.8b shares, because of the cap by the general share issue mandate. The issue price will remain at 0.1¢. This means that the net proceeds will fall to just under $2m from $5.78m, though the money will still be used for working capital. *Asiasons/Blumont/LionGold: MAS and SGX confirmed that they are conducting "extensive review" of recent share price volatility in the three inter-linked companies that crashed dramatically earlier this month, wiping out billions of combined market cap. The authorities are investigating the circumstances surrounding the incredible rise of the trio over the past year before their spectacular crash, as well as broader issues regarding the market structure and practices. *Changtian Plastic & Chemical: Profit warning for 3Q13 due to an impairment loss, resulting in a loss for the quarter.