SG Market (30 May 14)

US Market: US shares rose, sending the S&P 500 to its 13th record close for the year as investors shrugged off disappointing 1Q GDP data and focused on better-than-expected jobless claims and deal new in the F&B industry amid a very thin trading session which saw 4.88b shares exchanging hands. The DJIA gained 66 pts to 16,699 (+0.4%), while the S&P 500 advanced 10 pts to 1,920 (+0.5%) and the Nasdaq added 23 pts to 4,248 (+0.5%). The US economy contracted for the first time in three years as 1Q14 GDP fell 1% as harsh weather disrupted business operations and hampered inventory growth, suggesting that the setback is temporary, giving scope for pent-up demand and new orders in the next few quarters. Meanwhile, initial jobless claims fell to 300,000 last week, pointing to a strengthening labour market. Among stocks in focus, Apple gained 1.8% to hit its highest level in a year, after announcing a US$3b deal to buy Beats Music, while Hillshire Brands jumped 17.7% after Tyson Foods offer of US$50 per share trumped Pilgrim’s Pride bid of US$45. Following the positive US market close, the STI is expected to stay above its previous 3,285 peak with next resistance at 3,320 and underlying support at 3,260 (20-day moving average). Stocks to watch: *Tat Hong: 4QFY14 net profit plunged 77% y/y to $4.2m (-77%), taking FY14 net profit to $32.8m (-53%). Revenue slid 22% across most segments except tower crane rental to $155.9m (-22%), impacted by subdued activities due to weaker commodities and mining/LNG sectors in Indonesia and Australia, declining rupiah, increased competition in S’pore as well as completion of major projects in Malaysia. Bottomline was shored partly by a 43% rise in other operating income to $5.1m, from a disposal gain and government subsidies. Final DPS cut to 1¢, bringing FY14 total payout to 2¢ vs 4¢ in FY13. *Courts Asia: 4QFY14 net profit slumped 25% y/y to $11.8m as margins shrank and finance and admin costs rose despite revenue growth of 10% to $207m. This brought FY14 earnings to $28.3 (-32%) on revenue of $830.3m (+5%). The sales improvement came from increased bulk sales of digital & electrical products, two new stores in Singapore (+4.4%) and higher credit sales plus six new stores in Malaysia (+5.1%). But gross margins narrowed to 30.9% from 31.5% due to shift in sales mix towards electrical and bulk sales of digital products. Earnings were also hit by higher impairment allowances on trade receivables, increased rents and higher interest costs. Final DPS of 0.76¢ proposed, taking FY14 DPS to 1.52¢. *King Wan: 4QFY14 net profit fell 29% y/y to $2.1m, taking FY14 net profit to $6.7m (-4%). Revenue declined 30% to $20.7m on lower recognition of M&E contracts. Gross margins widened to 17.1% from 9.9% but earnings was damped by lower interst income and higher admin expenses related to doubtful debts, higher inventories, staff costs and FX losses. Final DPS of 1.5¢ brings FY14 total payout to 2¢, higher than the 1.5¢ in FY13. *PEC: Secured new contracts worth $100m, including EPC works for crude oil storage and handling facilities in UAE for an existing client with completion in May ’16 and a range of mechanical, piping and structural steelworks for a tankage project in Jurong Island, to be completed in 10 months. #ASL Marine: Secured $91m worth of shipbuilding contracts for the construction of three units of infield support vessels and one seismic support vessel, from customers in Australia and Norway. The four vessels are scheduled to be completed in 1Q16. *Frasers Centrepoint Trust: Raised net proceeds of $157.7m through a private placement of 88m new units at between $1.79 and $1.835 per unit, to part finance the recently-announced $312.5m acquisition of Changi City Point. *Pacific Andes: Disposing 26.5m shares in Tassal Group (18.1% stake) at A$3.65/share for A$96.7m, realizing a gain of A$36.9m ($0.009/share). Post-completion, group will have 6.8m (4.64%) shares remaining in Tassal. This follows the group's inability to leverage on Tassal to capture growing demand for its products internationally, as Tassal has maintained its focus on production for the Australian domestic market. *GRP: Terminated LOI with MGS Resort & Entertainment Co to acquire 30-year leasehold rights to a 32,670 sf land plot in Tamwe Township in Myanmar, which includes the rights to develop, manage and operate service apartments on the site. #Chasen Holdings: 4QFY14 net profit turned around y/y to $2.1m vs loss of $7.4m, on the absence of arbitration write off, lower provision for doubtful trade debts and less legal and professional fees. Revenue surged 46% to $26.5m mainly from its relocation business to $10.7m (+231%) from the continuation of several projects, but partially offset from its technical and engineering segment of $9.1m (-6%) from fewer projects secured. Gross margin improved 13pts to 25% from the change in sales mix. This brought FY14 earnings to $2.5m, from loss of $5.4m, and revenue of $101.5m (+28%). Final dividend to be announced. #GP Batteries: 4QFY14 net loss widened y/y to $26m from loss of $19.2m, mainly due to a provision for impairment loss of $17.6m on Gold Peak Industries (Taiwan) from the shutdown and consolidation of its battery plants, and a $5m provision for compensation from an unfinished project caused by the shut down of operation of Vectrix. This was partially offset from lower loss from associate, Vectrix, and decreased admin expenses due streamlining efforts. Meanwhile, revenue climbed 3% to $165.5m from higher sales of primary batteries. Group declared final DPS of 1¢, bringing FY14 DPS to 1¢ (FY13: 2¢).