SG Market (12 May 14)

US Market: US stocks rose, with the Dow notching a fresh record as Internet shares rebounded and Gap led retailers higher. The blue-chip DJIA advanced 32 pts to a new high of 16,583 (+0.2%), while the broad-based S&P 500 added 3 pts to 1,878 and the tech-heavy Nasdaq gained 20 pts to 4,072. Trading was quiet with the major indices spending most of the day in the red. Groupon (+7%), Linkedin (+2.5%) and Netflix (+2.1%) rallied to pace gains among Internet stocks, while apparel retailer Gap jumped 3.3% amid a surprise increase in Apr sales. But Ralph Lauren fell 2.1% on lower sales and profit margin forecasts. S’pore shares are likely to open flat, tracking with the lacklustre trading in regional and US markets, despite the record Dow close and as investors stay on the sidelines ahead of Vesak Day holiday tomorrow. There is little to stir the local market except for the bumper 1Q14 earnings from OUE ($1b), Centurion (earnings surged five-fold) and HanKore (RTO deal with CEI at risk, unexpected 3Q14 and 9M14 profit warning). In the near term, the benchmark STI is expected to remain trapped within its 3230-3,285 trading boundary. Stocks to watch: *HanKore: Profit warning. Expects to report a net loss for 3Q14 and 9M14, due to fair value losses on a contingent liability from an acquisition, and on outstanding warrants. In addition, Moore Stephens has resigned as auditors of the company. HanKore shares plunged ~20% Friday after reports of a corruption investigation into China Everbright group (CEI) raised fears whether HanKore’s proposed reverse takeover (RTO) of CEI’s water assets may fall through. *OUE: 1Q14 net profit surged to $945.6.m (1Q13: $1.8m), boosted by disposal gains from the sale of Mandarin Orchard Singapore and Mandarin Gallery to OUEHT ($986.4m), and fair value gains from Lippo Plaza ($153.1m), offset by loss provision for Twin Peaks ($105m). Revenue edged up 1.5% y/y to $106.9m, on higher revenue from Lippo Plaza and US Bank Tower. *Centurion: Net profit soared 6-fold y/y to $22.6m, lifted by associates’ and JV contributions of $18.8m arising from the revaluation gains from the Mandai dormitory ($1.5m) and recognition of profits from sales of industrial property development, M Space ($17.3m). On a core basis, net profit would still have been 40% higher at $5.4m. Revenue grew 21% to $19.4m driven by Toh Guan dormitory which saw expansion in bed capacity and maiden revenue from RMIT village. Gross margin rose from 50% to 59%. *Wee Hur: 1Q14 net profit surged 4-fold y/y to $7.1m, as revenue jumped 49% to $77.9m on higher contributions from residential development projects - particularly the fully sold Parc Centros. Gross margin ballooned to 20.3% (1Q13: 8.4%). At end Mar, orderbook stood at $381.4m. Management expects its Tuas View Dorm to be completed in 2H14. *Bumitama: 1Q14 core net profit of Rp275b (+69% y/y, -18% q/q) met expectations. Revenue expanded 55% y/y to Rp1.36t, driven by, 1) strong FFB nucleus output (+24%), 2) higher CPO ASP (+35%). Gross margin held steady at 39%. *Midas: 1Q14 in line. Bottom line swung to a profit of Rmb11.5m, reversing from a loss of Rmb4.9m a year ago, boosted by strong performance of its associate Nanjing SR Puzhen Rail Transport (NPRT). Revenue soared 47% y/y to Rmb297m, on increased sale of aluminium alloy extrusion products, although gross margin contracted 1.2 ppt to 24%. *Sarine Tech: Record 1Q14 net profit of US$9.1m (+104% y/y, +13% q/q), in line with expectation. Sarine’s Galaxy product penetration continued to increase with 15 more units deployed in 1Q14 (4Q13: 15, 1Q13: 9) bringing total installed units to 157. Revenue grew 21% y/y to US$24.4m, and would have been higher if not for a deterioration in credit availability in India, which likely impaired manufacturers’ ability to purchase big ticket items in 1Q14. *Amtek: 3QFY14 net profit halved y/y to US$1.85m, weighed by a decline in gross margin to 12.8% (-6 ppt). Revenue was flat at US$147m (-1%), as growth in Networking and Enterprise Server Enclosures and Industrial Products were offset by weakness in the Consumer Electronics, Mass Storage and Imaging/Printing product segments. *GuocoLeisure: 9MFY14 net profit edged up 3% y/y to US$29.9m, while revenue grew 10% to US$305m, driven by the hotel (improved RevPAR), gaming (higher luck factor) and property development (land disposal) segments. Bass Strait oil and gas royalty fell 12% y/y to US$31.4m, but was partially mitigated by a US$1.3 gain from the sale of dormant casino licenses. NAV at US$0.908/sh. *CMA: Independent financial adviser Deutsche says CapitaLand's $2.2025 (ex-dividend) delisting offer is "fair and reasonable” in the context of a non-change of control transaction. CapitaLand currently controls 70.4% of shares (needs 90% for offer to turn unconditional). *Otto Marine: Profit warning. Expects 1Q14 loss due to lower utilisation arising from docking of several vessels for periodic survey.