SG Market (15 May 14)

US Market: US stocks ended lower in thin trades as the Dow and S&P 500 retreated from record highs as the small cap sell-off resumed and consumer discretionary shares lagged. The DJIA dropped 101 pts to 16,614, while the S&P 500 fell 9 pts to 1,889 and the tech-heavy Nasdaq lost 30 pts to 4,101. Economic data showed potential signs that deflation may be ebbing as producer prices rose 0.6%, its largest gain in 1 1/2 years. However, bond yields fell with the 10Y Treasury bond dropping 8bps to to 2.54%. S’pore shares may open slightly weaker, taking cue from the downdraft from Wall Street and and below par 1Q earnings from NOL, City Dev and First Resources. Still, the STI is expected to remain range-bound between topside resistance at 3,285 and immediate support at 3,220. Stocks to watch: *NOL: 1Q14 net profit sank into a worse-than-expected US$97.9m loss from US$75.5m profit a year ago, which included a US$200m disposal gain. Revenue slipped 4% to US$2.28b despite higher shipping volumes (+2%) as overcapacity continued to exert downward pressure on freight rates (-6%), mainly on intra-Asia and Latin America routes. Cost savings and efficiency gains helped narrow its core EBIT loss to US$65m (liner: -US$83m, logistics: US$18m) from US$76m in 1Q13. Net gearing deteriorated to 2x from 1.8x end 2013, while NAV/share slid to US$0.76 (-5%). *City Dev: 1Q14 results missed as net profit dropped to $119.7m (-13% y/y, -46% q/q), on softer revenue of $734.2m (-5.4%) due to timing of profit recognition and absence of disposal gains, otherwise, earnings would have come in 4% higher. Property development pretax profit grew 4% on higher contributions by JV projects Bartley Ridge, The Inflora, Echelon and Bartley Residences and accounted for 61% of earnings. Hotel operations achieved higher revenue (+5%) from FX gains and higher RevPAR (+2.5%) but pretax profit fell 30% on weaker operating conditions in Asia, while rental income declined 33% due to one-off gains from sale of industrial units in 1Q13. Net gearing remains comfortable at 22%, while NAV stood at $8.36 per share. *SingTel: 4QFY14 results slight miss, dragged by Optus. Group net profit rose 3.5% y/y to $898m, even as the AUD and regional currencies weakened significantly against the SGD. In constant currency terms, net profit would have grown 13%. Earnings growth was driven by robust operating performance from the S’pore Consumer business and the regional mobile associates, led by Airtel in India. Group operating revenue fell 8% to $4.13b, as the strong revenue growth in S’pore was offset by lower Australian mobile service revenue and equipment sales. Final dividend of 10¢ (unchg y/y), bringing total FY14 payout to 16.8¢. *Golden Agri: 1Q14 net profit of US$104m slipped 8% y/y, missing street expectations, as gross margin declined 4.6ppts to 20.4% impacted by negative soybean crushing margin and compressed refining margin due to tight CPO supply. Revenue expanded 34% to US$1.9b, boosted by increased sales volumes from palm and laurics (+46%) following an expansion of downstream operations, improved production and higher CPO prices (+9% to US$865/mt), but partially offset by a 12% drop in oilseeds segment on lower average selling prices in China. *First Resources: 1Q14 net profit slumped 29% y/y to US$45m, below street expectations, as gross margin shrank to 42% (-18.2 ppts), on lower average selling prices for CPO and refined products. The group eked out a marginal 2% revenue growth to US$178m, buoyed by higher sales volumes from the refinery and processing segment following expansion of processing capacity. *CWT: Strong set of 1Q14 results that beat expectations. Revenue more than tripled to a record $4.5b, and net profit swelled 30% y/y to $35m. Commodity trading was the key surprise, delivering a 238% y/y gain in revenue to $4.2b. Gross profit growth was driven by the logistics and financial services divisions, with the latter likely getting a boost after CWT was granted the Capital Markets Services License, which allows the group to broker a wider range of commodity derivative products. Separately, the group is on track to obtain TOP for its CWT Cold Hub 2 in 2Q14, while its Pandan Logistics Centre is scheduled for completion in 4Q14. *Yanlord: Delivered a 4-fold y/y surge in 1Q14 net profit to Rmb266m, boosted by a net FX translation gain on its USD debt (Rmb96m), lower admin expenses (-Rmb50m) and share of contribution from its Sino-Singapore Nanjing Eco High-tech Island urban development JV (Rmb100m). Revenue grew 5% to Rmb1.76b, buoyed by a higher achieved ASP of Rmb26,704 psm (+26.7%) attributable to an improved product mix, which helped offset a decline in gfa delivered. NAV of Rmb9.27/sh. *Ying Li: 1Q14 net profit spiked more than 4-fold to Rmb33.7m (+337% y/y), as revenue surged 170% to Rmb279.7m, driven by revenue recognition of residential and retail units at Ying Li International Plaza (upon handover), and higher rental income from more office space leasings at International Finance Centre and retail leasings at Ying Li International Plaza mall. NAV of Rmb1.57/sh. *Oxley: 3QFY14 net profit collapsed 92% y/y to a mere $1m, despite strong revenue growth of 46% to $103.1m. Bottom line was impacted by an increase in compensation to tenants on early termination of tenancy agreement for project development purposes, and unrealised fair value losses on currency swaps entered to partially hedge against loans to overseas subsidiaries. Top line was underpinned by revenue recognition from 12 mixed-residential projects namely, Viva Vista, RV Point, Loft@Holland, Vibes@Kovan, Devonshire Residences, Suites@Braddell, Vibes@East Coast, The Promenade@Pelikat, Vibes@Upper Serangoon, Presto@Upper Serangoon, Oxley Edge and NEWest. No interim dividends (3QFY13: 0.1¢). NAV of $0.139/sh. *Jaya: 3QFY14 net profit spiked 251% y/y to US$14.1m on higher revenue of US$105.7m (+327%), underpinned by the sale of a ice-class vessel and improved charter utilization of 81% vs 64% a year ago. But the results are inconsequential as shareholders have approved its proposed business disposal, special dividend and cash distribution, which will turn the company into a cash shell and potential RTO target. *HanKore: Substantial shareholder, Alan Wang, acquired 51m shares from the open market at an average price of $0.0961 a piece on 12 May, raising his stake from 10.01% to 11.02%. *SMRT: 70% owned Kallang Wave Sport Hub mall (41,000 sqm, 80% pre-committed) will commence operations from mid Jun.