SG Market (11 Jul 14)

US Market: US shares fell but ended off session lows as a banking turmoil in Portugal re-stoked concerns over the financial health of the European banking system. The DJIA lost 71 pts to 16,915 (-0.4%), while the S&P 500 shed 8 pts to 1,965 (-0.4%) and the Nasdaq Composite slid 22 pts to 4,396 (-0.5%). The VIX or Wall Street’s gauge of investor anxiety jumped 8.5% to 12.64 after hitting a seven-year low last week. Investor worries centred on missed debt payments by the parent of Espirito Santo Financial Group, one of the largest banks in Portugal, sending shudders through the Europe’s financial markets. Disappointing French and Italian industrial production further compounded concerns about euro-zone growth. But markets recovered after the initial reaction as traders rode on the belief that the bank woes in Portugal would be contained and that investors were just using the downbeat news as an excuse to cash in after the 6% rally in just six weeks. Meanwhile, US economic data continue to show an improving economy with initial jobless claims dropping to a seven-year low of 304,000 versus estimates of 315,000. Shares of energy producers and consumer discretionary companies tumbled at least 0.9% as investors shifted out of cyclicals to high dividend yielding sectors such as utilities and telecoms. ExxonMobil (-1%) and Chevron (-0.9%) slipped as crude prices climbed after a nine-day losing streak, while Verison (+1.5%) advanced as US Treasuries gained. Among stocks in focus, United Continental leapt 12.7% after posting better-than-expected passenger traffic in 2Q, while TRW Automotive surged 7.8% after confirming that it had received a buyout offer. The S’pore market is likely to trade lower amid the renewed uncertainty in Europe and a weary Wall Street. A downward break of 3,270 may take the STI towards the next support at 3,220. Topside resistance remains at 3,310. Stocks to watch: *Ezra: 3QFY14 net profit grew 16% y/y to US$8.3m, as revenue surged 27% to US$402.1m, buoyed by an increase in the number and value of projects undertaken across all its three divisions. Gross margin improved 1ppt to 16%, helped by the absence of cost overruns and delays in its subsea project deliveries. Order book stood at US$2b and management is cautiously optimistic on the group’s FY14 core operating performance. *Ezra: Injecting its EMAS Marine unit into associate EOC, in exchange for US$150m cash and new EOC shares that will promote EOC to an 84.6% owned subsidiary. Separately, EOC is seeking a potential secondary listing on SGX Mainboard, to take place by 4Q14. *Triyards: 3QFY14 net profit fell 17% y/y to US$6.3m, in tandem with a 16% decline in revenue to US$55.3m, due to lower revenue recognized for one self-elevating unit (SEU) in lieu of sea trials conducted at the end of the quarter. Gross margin improved 3.4ppt to 22.6%, but was offset by an increase in finance and tax expenses. *AusGroup/Ezion: Ausgroup entered into a collaboration agreement with Ezion to market each other to potential counterparties, jointly identify, target and bid for projects, share expertise and hard resources needed for projects and businesses, and finance and procure together. The agreement expires 31 Dec 15, with one-year extension option available at every subsequent year end, unless terminated. *Technics Oil & Gas: Acquiring 80% of Marinelift Tesing & Supply, and Rigging & Marine Services for a combined $16.5m. *Tigerair: Singapore Jun traffic rose 14.1% y/y, while capacity increased 14.3%, leading passenger load factor to fall 0.2ppt to 86.3%. Tigerair’s Indonesian unit, Mandala ceased operations wef 1 Jul. *Singapore Post: To purchase The Store House (TSH) for HK$75m ($12.1m), valuing the Hong Kong self-storage provider at 6.8x P/B. *Fragrance: Acquiring properties at 374-396 Murray Street, located in Perth’s CBD, for A$40m. The 4,926 sqm freehold property is currently used as a car park. The project has been earmarked for a residential, office and retail mixed-use development. *First Sponsor Group: The China-focused property group has launched its IPO for an SGX Mainboard listing; to offer ~34m shares at $1.50 each. The stock is expected to make its trading debut on 22 Jul with an initial market cap of $885m. *Creative: Launched the MUVO Mini Weatherproof Tiny Bluetooth Portable Wireless Speaker - designed to work in harsh weather conditions. *Ascendas India Trust: Appoints Sanjeev Dasgupta as CEO-designate