SG Market (15 Nov 13)

Market Roundup: Wall Street barrelled to new record highs on growing confidence that the Fed will wait before scaling back its stimulus policy. This comes after US Fed chair nominee defended the Fed’s US$85b monthly bond purchases and dismissed suggestions that the program had generated asset bubbles in the property or stockmarkets. Investors are likely to cheer the dovist stance of the incoming Fed chief. Technicals on the STI are also exhibiting signs of a technical rebound with the index poised for a recovery after a two-month consolidation. Immediate resistance is seen at 3,200 with stiffer cap at 3,235, while underlying support lies at 3,180. Among S’pore stocks, Sino Grandness and Ezion may come into the spotlight after both posted exceptional results. Stocks to watch: *Sino Grandness: 3Q13 results continued its growth trajectory with net profit and revenue surging to Rmb168.1m (+97% y/y, +63% q/q) and Rmb746.3m (+56% y/y, +25% q/q) respectively. 9M13 earnings of Rmb341.7m has already exceeded that of full year FY12 and reached 86% of FY13 forecast. Sales for both beverage (+79%) and domestic canned food products (+94%) soared on strong orders. Gross margin stabilised at 39.2% as lower admin expenses and slower growth in other operating expenses propelled its bottomline. *Olam: 1QFY14 net profit grew 5.7% y/y to $45.6m despite a 7.9% decline in revenue to $4.32b, dragged by lower commodity prices, namely coffee. Sales volume was maintained at 3.67m tonnes with strong growth in almond and cotton business offset by lower volumes in grain, rice and wood products. EBITDA margin widened to 5.8% from 4.8% in 1QFY13 despite the trading division incurring losses of $8.3m. Net gearing at 1.93x stayed below the 2x ceiling. Free cash flow was a negative $117.2m, but a significant improvement from the outflow of $844.3m a year ago. *GLP: 2QFY14 net profit declined 25.5% y/y to US$145m, which included fair value gains of US$107m (2QFY13: US$114.8m) arising from its China ($96m) and Japan (US$11m) assets. Excluding revaluation gains, earnings would have sagged 48% to US$53.7m. Revenue fell 19.2% to US$139.8m attributable to the divestment of 33 properties to GLP J-REIT in Nov 12 and depreciation of JPY against USD. This was partially offset by a 38% jump in China revenue to US$81.6m (58% share), supported by development completions, rental growth and contributions from GLP Suzhou and GLP Wangting, acquired in Nov 12 and Mar 13. Balance sheet remained sturdy with leverage ratio of 12%, average debt maturity of 4.7 years and NAV of US$1.81. *Ezion: 3Q13 net profit rocketed to US$38.2m (+137% y/y) as revenue shot up to US$76.2m (+97%), propelled by additional service rigs under its liftboat and jack-up rig segment, and higher OSV services for three projects in Australia. This brings 9M13 earnings to US$120.6m (+107%), reaching 90% of full year estimates. The group expects more assets to be deployed in 4Q 2013. *Midas: 3Q13 net profit turned around to Rmb16.4m from a loss of Rmb6.1m in 3Q12 on the back of a 49% leap in revenue to Rmb301m and a reversal of contributions from 32.5% associate NPRT from a loss of Rmb7m to a profit of Rmb10.9m due to more train car deliveries. The strong topline was mainly driven by its aluminium alloy extruded products division. Gross profit margin shrank to 20.8% from 31.5% due to higher production cost and a change in product mix. Group sees the return of high-speed train tenders an encouraging development for the industry. *Thai Bev: 3Q13 results below street estimates, as total sales dipped 7% y/y to Bt35b, while net profit climbed 33% to Bt4.1b (excluding one-off gains related to F&N sale of APB last year), mainly boosted by the associate contribution from F&N. Stripping out F&N, core earnings from the Thai business declined 23% to Bt3.7b. Gross profit slid 10% to Bt10b, impacted by a decline in the spirits business (-8%) following an upward revision in excise tax wef 3 Sep and non-alcoholic beverages business (-49%), due to a drop off in sales from its Sermsuk products after its licensed brand products was terminated. Higher labuor costs from the broader implementation of a minimum wage policy also weighed on margins. *ASL Marine: 1QFY14 net profit improved 19% y/y to $11.7m, while revenue surged 67% to $148.3m mainly boosted by shipbuilding sales of $103.1m (+138%) on higher progressive bookings of OSVs and a dredger. This was mitigated by lower shiprepair and conversion (-19%) and shipchartering (-22%) revenue. Overall gross profit margin contracted to 16.2% from 24.8% y/y due to the change in sales mix. The outlook for the shipbuilding industry remains challenging due to overcapacity and lower weak demand, while margin are affected by depressed pricing and rising labour costs. *United Engineers: 3Q13 net profit eased 2% y/y to $12.5m while revenue ballooned 380% to $732m. The big jump was mainly due to consolidation of WBL Group’s contribution of $573.1m (mainly from its automotive and techology businesses). Gross profit margin more than halved to 12.8% on losses from WBL tech subsidiary, MFLEX. Operating profit was also weighed by higher distribution, admin and finance expenses but increased rental and contribution from UE E&C shored up the bottomline. *Ho Bee Land: 3Q13 net profit slid 76.7% y/y to $7.3m as revenue declined 71.1% to $16.3m, attributed to lesser revenue recognition for development properties, while contributions from JVs was knocked down 76% $4.8m. The Metropolis, with 1.08m sf lettable commercial space at One-North has been fully completed in Nov 13, with more than 90% being pre-committed. NAV was $2.70 at end Sep. *Cosco Corp: 51% owned Cosco Shipyard Group secured offshore and shipbuilding contracts totaling over US$380m to build 2 LeTourneau Super 116E jackup drilling rigs (with options for 2 additional units) for delivery in 2016 and one 64,000 dwt bulk carrier for a European buyer with delivery in 2H14. *Parkson: 1QFY14 net profit fell 11.4% y/y to $10.3m while revenue slipped 4.1% to $108.7m due to a decline in commissions from concessionaire sales and direct sales revenue. In Malaysia same store sales growth (SSSG) was -0.1% (1QFY13: +5.7%) on contributing factors such as fuel price hike and tightening measures to curb household debt. Vietnam incurred a loss of $0.2m due to SSSG of -1.1% (1QFY13: -6.3%) compounded by cost pressure. Pretax earnings for Indonesian operations declined 13.3% due to significant pre-opening expenses on the new Bekasi Store, plus the weakening of IDR. Excluding pre-opening expenses, petax profit was up 2.6%, with 3.9% SSSG. *Bukit Sembawang: 2QFY14 net profit tumbled 33% y/y to $23.4m, in line with a 29% slip in revenue to $87.8m, mainly due to lower profit recognition on development projects. This brought 1HFY14 earnings to $74.5m (+14%) and revenue to $249.4m (+9%). Group expects demand in the private residential market to dampen following successive cooling measures by the government, which will negatively impact its sales performance going forward. NAV edged up 3% to $4.62. *Swing Media: 1HFY14 net profit improved 4% to HK$33.9m on the back of a 7% advancement in revenue to HK$518.4m, as the manufacturer of data storage products saw growth from all its segments. There was a 80% decline from other income mainly from non-recurrent profits from forward contracts last year. The group expects to continue its stable growth in its core data storage business, while the green energy business is still in progress, with more petrol stations to be completed in the coming financial year. Swing Media trades at 1HFY14 annualized P/E of 4.8x and 0.3x P/B. *King Wan: 2QFY14 net profit doubled to $2m, bolstered by higher receipts from operating activities and higher interest income. Accordingly, revenue surged 93% to $24.5m on the back of higher recognition from mechanical and electrical (M&E) contracts. Gross profit margin dipped 4.4ppts to 16.2% due to the completion of a number of contracts with better margins in 2QFY13. Group has M&E order book of $146.7m, with work up to 2016. Meanwhile, the listing of Kaset Thai Industry Sugar Company (KTIS) is still in progress, with the expiry of the share sale agreement extended to 15 Feb 2014. Counter trades at 1HFY14 annualized P/E of 11x and 1.2x P/B.