SG Market (01 Nov 13)

Market Roundup: US stocks fell for its first two-day slide in three weeks as investors mulled over mixed corporate reports and the timing of tapering monetary stimulus by the Fed. In a replay of the good news is bad news logic, the market slumped after reports showed business activity in US expanded in Oct and jobless claims fell last week. Some market strategists see equities taking a break after a strong Oct, which left the S&P 500 near record highs and up more than 23% for the year to date. Some traders are also worried that the Fed could pull the plug before the widely expected March time frame. Added to this is a new round of budget negotiations which faces a deadline in mid-Jan. S’pore banks and blue-chips will be in focus after earnings from DBS and OCBC came in ahead of estimates but the broader market remains in a limbo after being caught in the penny stock fiasco. Upside resistance for the STI is seen at 3,238 with downside support at 3,150. Stocks to watch for: *DBS: 3Q13 net profit of $862m (+1% y/y) beat $840m consensus estimate. Net interest income rose 6% to a record $1.41b as loans expanded 19% but net interest margin fell 7 bps to 1.6% amid tighter spreads and investment yields. Non-interest income increased 11% to $744m with fee income up 9% led by higher contributions from trade and transaction services, wealth management and cards. Trading income jumped 45% higher at $188m from higher trading gains and treasury flows. Total allowances tripled to $151m with NPL staying constant at 1.2%. End Sep NAV was $13.26 with Tier-1 CAR at 13.3%. *OCBC: 3Q13 net profit of $759m (-59%) beat street estimates of $651m. Excluding divestment gains from F&N and APB last year, core earnings were up 5% as strong asset growth, improved fee and insurance income offset lower net interest margin and trading revenues. Net interest income rose 4% to $978m driven by 16% increase in customer loans, which offset a 12bps reduction in NIM, while non-interest income rose 3% to $779m despite a 68% drop in trading income. Loan provisions rose 34% to $94m but asset quality remained sound with NPL ratio unchanged at 0.8% and Tier-1 CAR at 14.3%. *SMRT: Bleak 2QFY14 results with net profit of $14.4m (-56.8% y/y, -11.8% q/q) falling short of FY14 earnings estimate of $79.5m with revenue coming in at $296.3m (+5.3% y/y, +4% q/q). Operating performance was adversely affected by sharply reduced train profitability to $1m from $24.3m in 2Q13, and higher LRT and bus losses of $7.5m as operating costs (+16%) continued to outpace fare revenue growth. Providing some saving grace was taxi operations and rentals, which saw healthy increases in operating profit to $2.1m (+55%) and $18.6m (+8%) respectively. Not surprising, interim DPS shaved to 1¢ from 1.5¢ a year earlier. *Osim: 3Q12 results largely in line with net profit of $22.7m (+16.1%) on revenue of $153m (+7.5%). The credible performance was driven by higher consumer demand for its products and nutritional supplements as well as better productivity. The group saw positive growth across its key markets in North Asia (+8%), South Asia (+5%) and Rest of World (+18%). Pretax margins stayed within the 18-21% range. Proposing 3Q interim DPS of 1¢, taking 9M13 total to 4¢. *Jaya: Reported 1QFY14 net profit of US$7.6m (-24% y/y) on revenue of US$29.6m (-24%). Excluding vessel sales, charter revenue was 12% higher due to improved fleet utilization of 91% against 84% in 1QFY13. Stripping out non-recurring items (FX gain, write-backs) and gain from a vessel sale, core earnings would be 15% stronger than previous year. Future revenue stream is backed by a robust chartering order book of US$255m (+30%) amid a pick-up in demand for specialized OSVs and services. *Hi-P: 3Q13 revenue leapt 34.5% y/y to $365.2m, benefitting from a change in product mix to high component content assembly projects but gross margin (6.5% vs 8.8% in 3Q12 and 10% in 2Q13) was hit by lower margin assembly work and a $4.4m inventory provision following the end of life of a major project. This led to a smaller 5.2% increase in net earnings to $3.1m. Following a sharp reduction in cash and cash equivalents, the group has reversed from a net cash to a net debt position of $31.6m. *MGCCT: Reported a distributable income of $85m and DPU of 3.183¢ for 7 months to Sep, exceeding forecasts by ~10.5. Gross revenue of $136.9m and NPI of $110.3m beat forecasts by 6.1% and 8.6% respectively on the back of a robust rental reversion in Festival Walk (+22%) and Gateway Plaza (+81%). Achieved overall portfolio occupancy of 99% with a weighted average lease expiry of 2.6 years. Gearing improved to 40.1% with debt maturity of 3.5 years and interest cost of 2%. NAV per unit was $0.98. *Sin Heng: 1QFY14 net profit rose 15.8% y/y to $3.8m as revenue grew 10.1% to $47.4m on higher volume of cranes and aerial lifts sold, which offset the drop in equipment rental business due to the completion of some local projects. Gross margin was maintained at 16.8% with higher servicing income and unrealized fair value gain on forward currency contract helping to lift its bottomline. *Serial System: 3Q13 net profit climbed 29% y/y to US$2.9m in tandem with the 24% increase in revenue to US$222.7m. Sales in North Asia (82% of revenue) grew at a faster 28% clip driven by growth in major product lines and addition of new customers. But gross margin slipped from 9.1% to 8.8% due to stiff competition in South Korea and higher sales of low margin products in SE Asia. Proposed interim DPS of 0.25¢. *IPC: 3Q13 net profit turned around to $0.4m from $0.3m loss previously on revenue of $3.5m (+20.7%), derived from income of eight business hotels in Japan and sale of apartment units from its Oppama project. There results included revaluation gains of $2.4m, which were set off against FX losses of $2.1m. NAV was $0.211 as at Sep. *Boustead: Awarded a contract to design, build and lease contract an integrated manufacturing and distribution facility to Energy Alloys in S’pore. To be completed in 3Q14, the facility will have a gross floor area of 10,520 sqm and will be the group’s 14th industrial facility in its portfolio totaling over 163,000 sqm GFA. *Ntegrator: Won two contracts worth $3.4m to supply communications equipment to Myanmar Economic Corp in Myanmar and repeat customer Viettel Group in Mozambique and Cambodia. Both contracts are slated for delivery this year and bring its year-to-date order wins to over $74m. *Blumont: Consortium led by Blumont (40%), CEO Alexander Molyneux (20%) and Pacific Advisors (20%) has terminated the subscription agreement to acquire a 43.47% stake in ASX-listed gold exploration company Prospect Resources. *Kencana Agri: Issued profit warning that it is expects to report a loss for 3Q13 due to unrealized FX losses caused by the depreciation of the IDR against the USD.