SG Market (27 Jan 14)

Market Roundup: US stocks skidded 2% to cap its worst week 2012 on fears about weakness in China and emerging markets. The Dow fell bleow the 16,000 mark while the broader-based S&P 500 tumbled below the critical 1,800 level and below its 50-day moving average, signaling possible further selling ahead. The VIX, a measure of investor anxiety, surged 32% to 18.14 and has rallied 48% for the biggest weekly increase since May 2010. Investors fled equities as emerging market currencies were hit by worries of slower growth in China and political instability in Turkey, Argentina and Ukraine ahead of this week’s Fed meeting when the central bank is expected to further cut back its monthly bond purchases. Stocks came under pressure despite decent corporate results from Microsoft, Starbucks and P&G. Lossese were borad-based but fell hardest on industrials, materials and financials. Treasuries rallied on the rush to safety with the yield on the 10-year note falling 6bps to 2.73%. The S’pore market is set to react negatively to the equity and emerging currency rout as well as freah news that HSBC may be in trouble. Downside support for the STI will be at 3,020 with technical indicators turning decidedly bearish. Stocks to watch: *Parkway Life: 4Q13 distributable income gained 4.5% y/y to $17m, translating to a DPU of 2.82¢ and takes FY13 DPU to 10.75¢ (+4.2%). NPI improved 3.4% to $23.2m, in tandem with the 3.1% growth in revenue to $24.7m as guaranteed rent revisions of 4.44% at its S’pore hospitals and contributions from 7 nursing homes acquired in Jul and Sep ’13 offset the JPY impact on its Japan porfolio. Group achieved full occupancy with average lease expiry of 10.6 years. JPY net income has been hedged for the next 5-6 years and 91% of properties have downside protection. Aggregate leverage remained at 33% with weighted term maturity of 3.16 years and low effective interest cost of 1.47%. Two AEIs in Japan and one in Malaysia are ongoing. End Dec NAV edged up to $1.63. *Starhill Global REIT: 4Q13 distributable income rose 20.6% to $26.5m alongside an 8.8% increase in DPU to 1.23¢, taking FY13 DPU to 5.00¢ (+13.9%). NPI climbed 3.4% y/y to $38.8m, in tandem with a 3.6% revenue gain to $49.1m, mainly attributed to high occupancy and positive rental reversions from its S’pore portfolio, (Wisma Atria and Ngee Ann City) and contributions from Plaza Arcade in Perth. There is also a net revaluation gain of $137.5m. Portfolio occupancy stood was steady at 99.4% with a weighted lease to expiry of 3.2 years. Aggregate leverage stood at a comfortable 29% with an average financing cost of 3.03%. End 2013 NAV was $0.93 per unit. *Guocoland: 2QFY14 net profit inched up 3% to $12.9m, while revenue was 8% higher at $254.3m supported by progressive recognition of its S’pore residential projects and profit recognition of its Seasons Park units in Tianjin, China. Gross margins dipped 5.5 ppt to 19.4% but bottom-line was underpinned by other income which more than quadrupled to $14.2m, led by FX gains and a forfeited deposit. NAV/share was $2.26 as at end Dec. *Fortune REIT: 4Q13 distributable income rose 27.8% to HK$182.1m, while DPU increased 16.1% y/y to HK9.72¢. NPI and revenue were 33% and 34.6% higher at HK$275.2m and HK$392.6m respectively, on higher occupancy rates, strong rental reversions and additional income from Fortune Kingswood. Portfolio occupancy rose to 98.7%, while aggregate leverage was 32.7%, up from 23.4% in FY12. NAV at end Dec was HK$10.26. *Grand Banks: Recorded first quarterly profit since 2009, with 2QFY14 net profit of $0.3m, reversing from a net loss of $0.8m a year earlier, benefitting from effeciency improvements, writebacks of doubtful debts and lower operating expenses (-29%) from reduced headcount. Revenue rose 42% y/y to $9.5m as the US luxury boat market continues to recover, although its recent Fort Lauderdale International boat show in Nov recorded lower-than-expected orders, which resulted in a dip in its net order book to $9m (-37% q/q and 46% y/y). *Micro-Mechanics: 2QFY14 net profit jumped 39% y/y to $1.4m on gross margin improvement to 50.4% (+1.8 ppts) arising from higher capacity utilization, rental income and an increase in scrap sales. Revenue grew 13% to $10.5m attributed to higher sales of both semiconductor tooling (+9.4%) and custom machining & assembly (+29.6%) divisions, but slowed 5.4% q/q due to seasonally factors. Interim DPS of 1¢ declared. *Technics O&G: 1QFY14 net profit slumped 52% y/y to $0.3m, while topline grew 40% to $15.7m on increased contributions from subsidiaries. Bottomline was impacted by thinning gross margins, which contracted 12 ppt to 32% and lower profit share from associates, which slumped 71% to $223,000. NAV at end Dec was 30¢. *Olam: Divested part of its forestry and saw milling assets in Gabon for US$18m, which will result in a one-off loss of US$4.5m. In addition, the group will record a one-time restructuring charge of US$6.5m. The sale is expected to generate annual cost savings of US$13.5m from FY15, reduce fixed capital by US$22.5m and release US$20m of average working capital invested. *Yoma: Proposed to acquire 30% of Asia Beverages Co’s (ABC) assets and businesses for US$11.1m. ABC is engaged in the production, branding, marketing and distribution of bottled water, spirits, wines, beers and alcoholic beverages in Myanmar, and currently operates a strong proprietary distribution network comprising over 22,000 points of sale across the country. *ASL Marine: Proposed to acquire a 12.2 ha Batam shipyard with berthing and 200m of repair quays for US$20m. *Hi-P: Group expects to report a loss in 4Q13, instead of a profit as previously guided due mainly to the Tianjin plant consolidation and relocation exercise. The loss is also due partly to an inventory provision of $4.7m on slow moving projects in 4Q13. *Serial Systems: Issued a positive profit guidance as group expects to achieve its $1b target revenue in FY13 (9M13 revenue: US$764m) with improvement in net margin. Group also outlined a three-pronged strategy to expand its product portfolio beyond semiconductor to other higher value added product segment such as auto, mobile devices, cloud solution and component modules and is seeking to establish JVs and M&A opportunities to establish a footprint major markets such as the US and Europe. *S’pore Shipping Corp: Sale of car carrier MV Singa Ace to Western Overseas for US$5.1m, which will result in a disposal gain of US$0.9m