Thursday, October 31, 2013

SG Market (31 Oct 13)

SG Market: Asian markets opened on a slight softer note after US stocks backed down from record highs after a four-day winning streak on profit-taking with the Fed keeping its easy monetary policy in place, citing tight fiscal restraints and elevated unemployment rate. Semtiment is likely to remain lacklustre in S’pore with no standout results from CapitaLand and NOL lastest lackustre results. Expect the benchmarket STI is stay within its 3,150-3,238 trading range in the near term, while broader market remains weak. Stocks to watch for: *CapitaLand: 3Q13 net profit fell 8.7% y/y to $135.5m due to higher project costs which shaved gross margins to 26.1% from 41.5% and lower portfolio gains from asset disposal. Revenue was up 53% to $1.05b led by higher contribution from development projects in S’pore, China, Vietnam and Australia, as well as higher rental revenue from its shopping malls. NAV rose 5.4% to $3.74. The group remains upbeat on the long term prospects of its key markets in S’pore and China although short term performances may moderate due to market curbs and slowing economic growth. *NOL: 3Q13 results came in below estimates with net profit of US$20m (-60% y/y vs US$35m loss q/q) boosted by FX gain of US$31.8m, without which the shipper would have been loss-making. Revenue sank 10% to a 4-year low of US$2.06b, depressed by a 5% decline in container volume and 9% contraction in freight rates. Core EBIT swung around from US$31m loss to US$22m profit (liner: US$3m, logistics: US$19m), shored by operational cost efficiencies and lower bunker prices. CEO highlighted this is one of the weakest peak seasons in recent years marked by weak demand and industry overcapacity. *SingPost: 2QFY14 net profit climbed 8.5% y/y to $35.6m as revenue surged 32.6% to $203.8 driven by growth in e-commerce activities, new logistics acquisitions and increased rental income. Stripping out restructuring costs of an overseas operation, core earnings would be 13.8% higher at $37.3m. Interim DPS of 1.25¢ has been declared. *Tuan Sing: 3Q13 net profit tumbled 52% y/y to $5.8m along with the 35% drop in revenue to $54.2m, bringing 9M13 revenue and earnings to $237m and $26.7m respectively. For 9M13, property sales dipped 13% to $110.2m due to the absence of contributions from Mont Timah, Robinson Towers and Int’l Factors Building, while sales from industrial services (SP Corp) and results of hotel investments (Grand Hyatt Melbourne & Hyatt Regency Perth) came in lower. NAV edged up to $0.624. *Fragrance Group: 3Q13 net profit eased 3.7% y/y to $22.8m, while revenue was lifted by 6.5% to $129.2m. Property made up 88% of revenue with significant contributions from Parc Rosewood, Novena Regency, Wak Hassan, Suites@Bukit Timah, Le Regal and Urban Vista. However, a doubling in finance charges due to drawdown of term loans for hotel division and two new investment properties dragged down its bottomline. Net gearing expanded to 1.57x with NAV of $0.14. *Global Premium Hotels: 3Q13 net profit improved 18.7% y/y to $4.9m as revenue rose 5.7% to $15.7m due to contributions from Fragrance Hotel-Ruby post AEI works. RevPar remained relatively stable at $97.10 with marginal uptick in occupancy rate to 91.6%. End Sep NAV stood at $0.396. *MTQ: 2QFY14 net profit expanded 10% y/y to $5.5m, while revenue leapt 62% to $64.9m, due to the inclusion of Neptune subsea business, which masked weaker oilfield engineering sales. Gross margins remained healthy at 36.6% but sharp increases in staff and overhead expenses, and finance costs cut into its profitability at the pretax level. Interim DPS of 2¢ maintained post bonus issue. *Soilbuild REIT: Maiden 3Q13 DPU of 0.76¢ and distributable income of $6.1m were both 3% ahead of IPO forecasts. Gross revenue of $8.2m and NPI of $6.9m came in higher than expected by 0.8% and 2% respectively, on the back of 7.9% rental uplift from three lease renewals in Eightrium and Tuas Connection. Portfolio occupancy stayed at 99.8% with average lease expiry of 3.9 years, while gearing stood at 29.4% with average debt maturity of 2.9 years and average cost of 3.11%. NAV per unit was $0.80. *China Environment: Secured five contracts worth Rmb119.1m for the supply of its hybrid dust collectors to an aluminium company in Shandong province and thermal power plants in Shanxi and Guangdong province. The contracts are expected to be delivered in 1H14. *Yongnam: Issued a profit warning for 3Q13 as the group expects to record an operating loss, despite a healthy increase in revenue. The loss is due to cost overruns from three on-going projects which pared operating margin to new lows, as well as a significant one-off loss on disposal of fixed assets. *CSE Global: Proceeding with the divestment of its wholly owned UK IT solutions business via a proposed listing of Servelec Group on the mainboard of the London Stock Exchange. For FY12, Servelec recorded revenue of £39.4m and adjusted pretax profit of £11.9m. Full details of the IPO offer will be available on its prospectus to be released in due course. *Eu Yan Sang announced 1QFY14 results which saw net profit at $1.4m (+317%) and revenue at $79.5m (+13%). The stronger top-line was due to a good performance in Hong Kong and Australia, with the Group’s gross margin maintaining at 51%. Operating expenses for the quarter also increased less proportionately than revenue growth, as such operating profit improved 48%, which translated to a strong bottom-line. *Miyoshi Precisions announced 4Q13 results, with the group registering a net loss of -$2.3m (-0.3%) and revenue at $36.6m (-32%). The result brings FY13 net loss to -$ 4.7m (-36%). The drop in revenue was mainly due to the slow down of orders for new consumer Electronics (CE) product, which was launched in 3Q12. Revenue from other segments, namely Data Storage, Medical and Automotive, Microshaft and Others, recorded similar levels as versus the corresponding quarter. *Mun Siong Engineering: Reported 3Q13 net loss of $31k, compared to a net profit of $1.2m in 3Q12, while revenue slumped 14.4% to $19.2m. This was mainly due to the completion of work, as well as lower volume of project activities. Labour costs continued to escalate due to the tight labour market, as well as the foreign workers' levy, which the group faces a challenge in passing the costs to customers. As a result, the group is currently reviewing the possibility of a relocation of certain parts of its operations to Malaysia to lower costs. Mun Siong currently has an order book of $38.7m. *Tianjin Zhong Xin Pharm: 3Q13 net profit fell 6% to Rmb47.6m despite a 10% improvement in revenue to Rmb1,396.2m, mainly due to a 20% drop in contributions from associate Sino-American Tianjin Smithkline & French Lab, as well as the disposal of subsidiary Tianjin Central which the group recognized in 3Q12. Going forward, the company expects to face challenges from the increase in costs of raw materials, energy and human resources, price controls of pharmaceutical products by the govt and relatively high financial costs. *Creative Technology: 1QFY14 net loss increased to US$5.5m from US$4.5m in 1QFY12, while revenue declined 15% y/y to US$30.4m due to the uncertain and difficult market conditions. Gross margin increased 5ppts to 28% on the back of a change in sales mix towards higher margin newer products. Group recorded lower R&D expenses (-16%) due to the divestment of its subsidiary, ZiiLABS Limited, in 2QFY13. Creative expects no major improvements on the challenging market going forward, although sales are expected to be higher q/q on the back of the holiday season, which may result in an improvement in operations. *BH Global: 3Q13 net loss decreased to $638k compared to the loss of $3.5m in 3Q12, while revenue ticked up 2% to $25.6m mainly from a 27% improvement in its manufacturing segment, on a delivery of a substantial order of marine switchboard to a major customer in the quarter. This was partially mitigated by 57% slump in revenue from galvanized steel wire due to increased price competition and a 14% decline in its core segment, marine cables and accessories, as a result of the slowdown in the marine sector. Management will continue its focus on expanding its network in the region, in view of a good position upon a recovery *Metax Engineering: Awarded a tender by PUB worth $6.7m to expand the Greasy Waste Receiving Facility (from 5,500 m3/mth to 11,000 m3/mth) and the Associated Digestion Facility at the Jurong Water Reclamation Plant. The expansion works commenced yday and is expected to be completed by Apr 15. The award will increase Metax’s orderbook as of 30 Jun ’13 from $25.1m to $31.8m. *Sapphire Corporation: Profit warning for 3Q13 due to the weak demand for steel in China which resulted in overcapacity in the industry with declining steel prices. Current steel prices are reportedly close to break-even levels due to rising costs, and is not expected to improve during the industry's destocking phase. Group provided an update that it is currently reviewing its steelmaking business in China, and had on 9 Oct, entered into a conditional sale and purchase agreement to acquire the entire equity stake in Mancala Holdings Pty Ltd, a specialist mining services company based in Australia.

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