SG Market (31 Mar 14)

US shares halted a two-day slide, as investors latched on positive US data. The S&P500 closed 0.5% higher at 1,858. Consumer spending rose 0.6% in Feb, extending a 0.2% gain in Jan. Shares in the sector rallied 0.8%. However, a late selloff in biotechnology shares weighed on the tech-centric Nasdaq, which pared most of its intraday gains to close at 4,156 (+0.1%). The recent decline in biotech stocks has been largely attributable to the reallocation of capital back to large companies with stable earnings, approaching the end of the quarter. For this week, investors will likely focus on Feb Chairman Janet Yellen’s speech at Chicago today, as well as payrolls data due Friday, for clues on the US interest rate outlook. In the region, both the Nikkei and Kospi are up 0.6% and 0.2% at 8.25am this morning. Similarly, expect the S’pore market to open on a firmer footing today. The STI has broken above its long term declining trend line and the 3,150 psychological resistance. The key RSI and Stochastic indicators are exhibiting strong upward momentum, which suggests the index could climb further to test 3,200 followed by ~3,240 (200day moving average peak in Oct ’13) in extension. Stocks to watch: *Low Keng Huat: 4Q13 net profit plunged 84% y/y to $6.7m, as gross margins halved to 34% from 67% a year ago. Revenue fell 13% to $22m, due to a decrease in construction activities. Final dividend of 3¢ (FY12: combined final and special dividend of 4.5¢). *Nam Cheong: Sold two AHTS vessels worth ~US$43.1m to new customer Kayfour, an emerging oil and gas player in M’sia. This lifts the group’s order book to RM1.4b. *Linc Energy: Successfully finished drilling and completion of its Umiat #23H well, in the Alaskan National Petroleum Reserve Area. Management is impressed by the ease of the well flows and quality of the light sweet crude oil, and is discussing with the State of Alaska to work together to finalize the permit process to take Umiat into full commercial production. Initial internal calculations suggest oil flows could achieve ~2,000 bopd. *Olam: The Republic of Gabon will invest an additional US$56.8m towards equity and increase its stakes in the palm (from 30% to 40%) and rubber (from 20% to 40%) joint ventures with Olam in Gabon. This is expected to release US$30m cash for Olam and will result in a gain of US$14.5m. Separately, Olam has terminated the agreement with Tata Chemicals and will not proceed with the proposed 25% equity participation in the greenfield ammonia-urea fertilizer manufacturing project in Gabon. *SIA: Increased its stake in Virgin Australia (VA) to 22.2% from 19.8% for A$30.4m, taking over Etihad Airways (19.9%) to become the second largest shareholder after ANZ (24.5%). *ST Engineering: Injects $216m in new equity into its aerospace arm, ST Aerospace to support the latter’s expansion. *TT Int’l: Updates that its Big Box warehouse retail project will be fully operational by Dec ’14, and become the group’s leading revenue driver. Management intends to carry out independent valuations that will likely result in a higher valuation for the Big Box (FY13 carrying value: $90.9m) and reverse the current negative equity position of TTI by FY15. *Broadway: Received confidential, non-binding approaches by parties in relations to transactions involving its business and/or shares. Nevertheless, discussions remain only at a preliminary stage. *Etika: Is in discussions with a third party that has expressed interest to purchase certain businesses of the group. *SP Ausnet: Requests for trading halt; in discussions with Singapore Power in relation to a management services agreement. *Ipco: Proposed to place 1.02b new shares at $0.0108 each to four individuals. Gross proceeds of $11m to be used for working capital, repayment of bank loans, short term investments, business expansion in China and real estate development in the US. *Interra Resources: Proposes to undertake a 1-for-10 free bonus warrant, that comes with additional 1 piggyback warrant for every 2 bonus warrants that are exercised. The bonus warrant has an exercise price of $0.27, while the piggyback warrant has an exercise price of $0.205. Both issues are exercisable within the same one year period from date of issue of the bonus warrants. *UMS: Proposes 1-for-4 free bonus share issue.