Thursday, June 26, 2014

SG Market (26 Jun 14)

US Market: US shares closed higher led by drugmakers and broadcasters despite a dismal 1Q GDP report, which showed the US economy contracted much more than previous estimate of -1%. The DJIA rebounded 49 pts to 16,818 (+0.3%), while the S&P 500 climbed 10 pts to 1,960 (+0.5%) and the Nasdaq climbed 29 pts to 4,380 (+0.7%). The final reading of 1Q economic growth showed GDP shrank 2.9%, its worst since 2009, which was largely blamed on an extremely harsh winter. Orders for durable goods also fell 1% in May following three months of gains but excluding aircraft, new bookings for non-military capital goods rose 0.7%, reflecting the strong trend in the manufacturing sector. Shares of major broadcasters and cable companies including CBS (+6.2%), 21st Century Fox (+2%), Disney (+1.5%) and Time Warner Cable (+1.3%) and Comcast (+1.1%) rallied after the Supreme Court ruled that online TV startup Aereo violated copyright laws. But oil refiners Valero Energy (-8.3%), Marathon Petroleum (-6.3%) and Phillips 66 (-4.2%) slumped after the US relaxed restrictions on oil exports, allowing energy companies to export unrefined light crude oil. Among other stocks in focus, agro giant Mosanto jumped 5.1% after it beat its 3Q profit estimates and announced a US$10b share buyback plan. But General Mills fell 3.6% as its 4Q earnings came in well below expectations. With the end of quarter approaching, some market watchers are expecting some funds to take profit on equities and buying bonds as part of their portfolio rebalancing. Taking cue from Wall Street and possible window dressing from the half-year portfolio reviews by fund managers, S’pore shares are expected to rebound from oversold levels with overhead resistance for STI capped at 3,285 and underlying support at 3,220. Stocks to watch: *Hyflux: Signed MOU with Banco Interacciones, Mexico’s leading infrastructure bank, to cooperate on a sole and exclusive basis to explore early stage and pre-specified greenfield water-related and infrastructure projects in Mexico. Interacciones management believes the tie-up could lead to three projects this year, and up to 200 over the next five years, with each one being valued from US$10m to US$150m. *A-REIT / Hyflux: Proposed to acquire Hyflux Innovation Centre for $191.2m, via a sale-and-leaseback arrangement. Hyflux has committed to lease 50% of gfa for 15 years, thereby extending A-REIT’s WALE to 3.96 years (from 3.85 years). Post-acquisition, A-REIT estimates a proforma FYMar14 DPU accretion of 0.118¢, and net property income yield of 6.98% (assuming 100% occupancy). The acquisition is expected to complete on 30 Jun. *Keppel Land: Is selling its entire stake in Equity Plaza in Raffles Place for $550m, or $2,181psf NLA. Keppel Land expects to book a divestment gain of $59.5m, and receive net proceeds of ~$195.3m. On a proforma basis, the group’s FY13 NTA is expected to increase from $4.52 to $4.56. The transaction is expected to be completed by 3Q. *GSH / Vibrant (previously Freight Links Express): GSH is leading a consortium that has jointly invested $550m to acquire the entire stake in Equity Plaza from Keppel Land. The deal is estimated to be priced at ~3% net yield. The consortium comprises GSH (51% stake), Vibrant’s 51%-owned Vibrant DB2 JV (35%) and Sam Goi’s investment vehicle TJY Group (14%). GSH intends to retrofit the building, which has a 74-yr remaining lease life, to make it “on par with the top buildings in the area”. *Equation: Entered into a JV agreement with Tengah Engineering & Hardware, and Lim Hong Kia to invest in Tengah GreenTech, which shall provide oil dialysis services and distribute oil dialysis machines for the external cleaning of lubricants using micro filtration. Equation’s share of investment is $0.2m, which will be funded by the proceeds from the recent rights Issue. *China Yongsheng: In response to SGX’s query on trading activity, the company says it has received a letter from controlling shareholder Ever Universe Investments (68.1% stake), informing that the latter is considering various options in relation to its shares. *Etika: Entered into supplemental agreement with Asahi, that the completion of sale of its dairies and packaging business shall take place as soon as practicable on 30 Jun. *Vallianz: Completed the issue of 230m placement shares and 170m subscription shares at $0.13545 apiece.

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