SG Market (22 May 14)

US Market: US stocks finished Wed with sharp gains as retailers bounced back after a broad selloff and the latest Fed minutes reassured investors with its stated policy course and offered no faster time-table to raising interest rates. The DJIA rallied 159 pts to 16,533 (+1%), while the S&P 500 advanced 15 pts to 1,888 (+0.8%) and the tech-heavy Nasdaq added 35 pts to 4,132 (+0.9%). The VIX Index, which is a measure for market volatility, fell 8.1% to 11.91, it lowest level since Aug last year. The minutes of the latest FOMC meeting in Apr showed policy makers discussing ways to manage the impact of an interest rate hike expected in mid-2015. Retail stocks (+1.2%) were again in the spotlight with Tiffany (+9.2%) and Target Corp (+1%) after reporting results, while TJX rebounded 4.9%. Internet shares also gained led by Facebook (+3.3%), TripAdvisor (+2.7%) and Linkedin (+1.9%). Netflix jumped 5.1% after unveiling big plans to expand in Europe. Energy shares ExxonMobil (+1.4%) and Chevron (+1.4%) advanced as oil rose to a one-month high after US stockpiles tumbled last week as imports driopped to a 17-year low. Regional markets have a positive opening with Tokyo (+1%) and Seoul (+0.2%). S’pore shares are likely to track Wall Street with an upward bias but upside is expected to be capped at the 3,285 resistance with immediate support at the 3,255 level. Stocks to watch: *Land Transport: Singapore's public bus industry is set for a major overhaul to a contracting model starting 2H14, under which the government will own all the bus assets and infrastructure, set routes and service standards and retain the face revenue and outsource the operations of bus services (bundled into 12 bus packages) through a competitive bidding. SBS Transit and SMRT will continue to run 9 bus packages comprising 80% of buses, until their existing licenses expire in Aug ’16, after which LTA will re-negotiate the contracts for another 5 years under the new scheme. *SATS: 4QFY14 results missed estimates, as net profit fell 7.8% y/y to $42.6m on lower revenue of $434.6m (-3.2%), weighed by continued cost pressure and poorer performances from gateway associates (-46%) due to lower cargo volumes and higher staff costs. Revenue was affected by translation loss on the weakening JPY and decreased unit meal volumes (-6.3%) after Qantas moved its hub for European flights to Dubai, partially mitigated by the modest growth in flights (+6.7%) and airfreight (+4.4%) handled. Final DPS of 8¢ declared, bringing FY14 total payout to 13¢ (FY13: 15¢). *Manhattan Resources: Acquiring Singxin Resources for $1b via an issue of 1,369.9m new shares @ $0.73, which will result in a RTO. Post acquisition, the group will offer a 1-for-1 bonus issue of warrants at an exercise price of $1.00 each. Singxin Resources is in the business of mining serpentine, chrome, nickel and other minerals and holds exploration permits for chrome over 27 sq km in Xinjiang, China. Post acquisition NTA/share will rise to $0.796 from $0.222, assuming all warrants are exercised. *KrisEnergy: Acquiring MP G10 (Thailand) from Mubadala Petroleum for a base consideration of US$102.5m, subject to a working capital adjustment and an earn-out payment. MP G10 holds a 75% working interest (KrisEnergy has remaining 25%) in the G10/48 concession in the Gulf of Thailand, which covers 4,696 sq km of the Pattani Basin, and estimated to hold 2C resources of 19.6m barrels of oil. To-date, there have been three oil discoveries, which are under development with first production in 2H15 and expected to peak at 10,000 bpd. Another 17 oil prospects have been identified and will be drilled in 2014 and 2015. *Lian Beng: Secured a $44.5m contract from Westlite Dormitory to build a 13-storey workers’ dormitory at Woodlands Avenue 10. Work will commence in May with completion in 12.5 months. *Oxley: Appointed Accor, the world’s leading hotel operator and market leader in Europe, to operate its two new hotels on the former Pines Country Club site along Stevens Road. Scheduled to open in late 2016, Novotel S’pore on Stevens will have 254 rooms, while Ibis S’pore on Stevens will have 528 rooms. The projects mark the group’s maiden venture into the hospitality business.