SG Market (18 Nov 13)

Morning Bites The US market Friday capped a sixth week of gains, setting new record highs after Jane Yellen, nominated to succeed Ben Bernanke as Fed Chairman, remarked that the central bank “should take care not to withdraw stimulus too early”, raising investor hopes that interest rates could continue to remain low, and extend the positive environment for equities. Meanwhile, late Friday, China’s leaders released the full report of their four-day meeting, known as the Third Plenum. Their conclusions will chart the country’s economic reform in the coming years. Changes include more private investment in the state sector, a loosening of its one-child policy, land reforms to benefit farmers, accelerated liberation of the interest rate and RMB, amongst others. Nevertheless, with S’pore corporates mostly having wrapped their 3Q13 reporting last week, trading activity may start to slow down as the holiday season unfolds. Technicals on the STI exhibiting signs of a technical rebound with the index poised for a recovery after a two-month consolidation. The close above 3,200 is a positive indication, with next resistance at 3,235 (200 day moving average). Underlying support lies at 3,180. Stocks to watch: #Suntec REIT: To acquire a 31-storey freehold grade A property in North Sydney CBD that is under development for A$413.2m, marking its maiden overseas acquisition. Scheduled for completion in early 2016, occupancy is already 100% pre-committed, with the Leighton Group having taken up head lease of 76% of the building’s net lettable area of 0.42m sf. The purchase will be funded entirely by debt. The acquisition is expected to be DPU accretive, as Suntec will be paid a coupon yield of 6.3% until completion, and an initial yield of 6.9% after completion. #UOL: 60%-owned subsidiary, Suasana Simfoni Sdn Bhd, has entered into a conditional offer to sell its 172,149 sf land site near the Bukit Bintang shopping area in KL for Rm568m. Upon scheduled completion in 2Q14, this will result in a pre-tax gain of Rm247m ($96m) for the group. The net proceeds will be used to reduce borrowings, and for working capital. #SIA: Oct systemwide passenger carriage grew 1.1% y/y against a 0.2% rise in capacity. Consequently, load factor grew by 0.7 ppt to 78.5%, with improvements for all route regions except South West Pacific and West Asia & Africa. Cargo remained weak as traffic fell 3.5% y/y, while load factor decreased by 0.3 ppt to 63.6%. #NSL: Has agreed to sell its 22.8% stake in Bangkok Synthetics (BST) to SCG Chemicals for ~$328.3m ($0.88 per share), subject to potential additional consideration contingent on certain conditions and post-completion adjustments. NSL will evaluate the opportunities to use the sale proceeds. The divestment will result in an estimated accounting gain of $119.8m to NSL ($0.32 per share). NSL shares last closed at $1.44. #SingHaiyi: Acquired a partially completed commercial condominium development project known as Vietnam Town, located in San Jose, California, for an aggregate US$33.1m. The freehold 0.85m sf site comprises a 256-units spanning nine buildings, of which 115 units have been built and 51 units remain unsold. SingHaiyi intends to sell off the 51 unsold units in one to two years time, and will proceed with the construction and sale of the remaining 141 units over the next three to five years. #KLW: Will raise proceeds of up to $50m, via the issue of 500m new placement shares at $0.02 each, with put and call options over up to an additional 2b new shares, to Brunei’s Prince Abdul Qawi, the eldest son of Prince Mohamed Bolkiah, who will emerge as a significant shareholder with a ~17% of KLW’s enlarged share base. Separately, KLW has entered into a non-binding MOU to acquire at least 30% interest in Wah Loon Engineering for $60m, with possibility of acquiring the remaining 70% stake for $140m. To raise additional funding, KLW is also planning to issue 2.44b new shares at $0.02 a piece by way of a rights issue with free detachable warrants. #Otto Marine: Subsidiary, PT Batamec shipyard, clinched two new shipbuilding contracts from a repeat Indonesian customer to build two 3,000 HP Habour Tugs for an aggregate US$9m, with expected completion by 4Q14.