SG Market (29 May 14)

US Market: US shares ended slightly lower after flirting with new record highs, as investors turned skittish after benchmark Treasury yields fell to lows not seen since last summer ahead of US GDP data out on Thurday. The DJIA fell 42 pts to 16,633 (-0.3%), while the S&P 500 slipped 11 pts to 1,910 (-0.1%) and the Nasdaq dipped 12 pts to 4,225 (-0.3%). Sentiment was hit after yields on US 10-year Treasury yield fell 8bps to 2.44%, its lowest level since Jul ’13. There is a clear disconnect with stock markets buoyed by supportive economic data, improving earnings and expectations of monetary easing by the ECB but the bond markets signaling caution With a dearth of economic releases on Wed, investors were looking ahead to a busier Thursday, which features the second GDP estimate for 1Q14, pending home sales and weekly jobless claims. Earnings came in mixed after apparel retailer Michael Kors (+1.3%) reported better-than-expected profits, while budget store-chain DSW’s (-27.4%) 1Q14 earnings missed estimates. Among other stocks in focus, Twitter surged 10.7% following a broker upgrade, while homebuilder Toll Brothers rose 2.1% after earnings topped estimates and its CEO guided that the housing market is in a ‘levelling’ period, before it takes off again. Following the negative US market close, the STI is expected to open lower with support tipped at 3,255 and topside resistance at 3,285. Stocks to watch: *STI Index: Ascendas REIT has been included as one of STI constituent stocks wef 4 Jun in place of CapitaMalls Asia, which has been deleted following its takeover offer, while Ezra has been added to the FTSE ST Mid Cap Index. *Transport: LTA has unveiled the first bus package under the government contracting model, which will be tendered out in 2H14. This will comprise 24 existing bus services operated by SBS (16) and SMRT (8), largely serving the Jurong East and Bukit Batok areas and will be based at the new Bulim bus depot to be completed in 2015. It will start with 380 buses in 2016 before growing to 500 buses in 2021, in tandem with the ridership growth and development of Tengah New Town and Bukit Batok West. *Biosensors: 4QFY14 net profit slumped 80% y/y to US$6.1m taking FY14 net profit to US$40.6m (-65%). Revenue slid 8% to US$81.6m due to lower product revenue of $71m (-7%), attributable to reduced stent sales of $63m (-14%) as well as a 14.4% drop in licensing and royalty fees. Gross margin of 76.2% (-7.7ppts) was compressed by its distribution activities in Japan for the Nobori stents and consolidation its cardiac diagnostic unit, while bottomline was further eroded by increased trial expenses and higher marketing costs. *The Hour Glass: FY14 net profit rose 4% to $54.9m on revenue of $682.8m (+13%) as the group continued its sales growth momentum throughout the year. Gross margins held at 23% despite severe global pricing pressure but bottomline was weighed by rsisng wages, selling and promotion expenses and rental expenses. *Global Yellow Pages: FY14 results turned around to net profit of $5.1m from loss of $124.3m in FY13 mainly due to the absence of the one-off impairment charge, as well as new associate income from Yamada Green and lower operating expenses. Revenue slipped 10% to $27.2m due to a decline in search solutions as well as the effects of the Personal Data Protection Act on the direct sales solutions business, offset partially by Singapore River Tour and Taxi Services business. *Stratech Systems: FY14 net profit came in at $1.4m, reversing a net loss of $9.4m in FY13 on revenue of $11.1m (+337.7%) generated from projects, maintenance contracts and sales of products. Gross margins widened to 83.3% from 30.9% a year ago due to higher profit margins from the group’s executed projects. *Soilbuild Construction: Awarded $21.3m contract to provide excavation and earthworks for development of a 7-storey industrial development at 60 Jalan Lam Huat with works expected to begin in Jul and to be completed within 9 months. Meanwhile, its 60/40 consortium with Enviro-Hub has also won the $179.5m construction contract for the project, which is scheduled to commence on Aug ’14 with expected completion by 4Q16. The contracts bring its latest order book to $512.8m. *WE Holdings: Secured US$1.7m contract from China-based Ningbo Foreign Trade Co to sell 30,000 tonnes of iron ore lumps at US$57/tonne by 30 Jun 2014. *Sarine: Cooperating with Rapaport's RapNet Diamond Trading Network to provide Sarine Loupe imagery on polished diamonds showcased for sale on Rapaport’s its industry-standard website. *ASJ Holdings: Offer of $0.065 by Ralec Electronic has turned unconditional upon receiving 50.42% acceptances; closing date has been extended to 7 Jul. *Sunlight Group: FY14 net loss of $0.9m vs loss of $1.2m in FY13, while revenue dipped 7% to $39m on lower project value. Despite this, gross margin improved 3.4ppts to 20.2% through better projects selection. Group continues its focus on reducing unit cost through standardisation of products and parts, and also exploring a few new market segments both locally and regionally.