SG Market (17 Jul 14)

US Market: US shares rose with the Dow bolting to a new record high in a busy day headlined by merger news and some strong earnings. The DJIA rallied 78 pts to 17,138 (+0.5%), while the S&P 500 gained 8 pts to 1,982 (+0.4%) and the Nasdaq Composite added 10 pts to 4,426 (+0.2%). Markets were lifted by a second day of testimony from Janet Yellen reinforcing the idea that the Fed will keep rates low for an extended period and positive news flow from Intel, IBM and Time Warner. Separately, US industrial production climbed 0.2% in Jun, capping its strongest quarter in almost four years, while the Fed’s Biege Book business survey showed economic activity continued to expand in all 12 of its districts in recent weeks. Biotechnology (-1.3%) and Internet (-0.5%) stocks sold off for a second day after yesterday’s Fed report raised concerns about their valuation. However, Yellen did clarify that equity ratios in general are not out of line with historical norms. Energy producers rose 1.6% for the biggest gain, while technology shares advanced 1%. Homebuilders jumped 1.3% as confidence grew more than forecast in Jul to its higest level in six months. In corporate news, Time Warner soared 17.1% after 21st Century Fox (-6.2%) launced a US$80b takeover bid offer, while Intel surged 9.3% after releasing an upbeat 3Q sales forecast on optimisim that that the tech giant is emerging from a two-year slump. IBM rose 2.1% after unveiling a partnership with Apple (-0.6%) to collaborate on applications for Apple’s iOS system. Microsoft jumped 3.8% ahead of a major reorgainsation. But Yahoo tumbled 5.1% as 2Q revenue slumped due to disappointing online advertising. Among other stocks in focus, BofA slid 1.9% after announcing a 43% decline in profits, weighed by litigation costs and a mortgage settlement with AIG, while General Electric rose 1.5% after unveiling that it was in talks with potential acquirers in regards to the sale of its household appliance business. The S’pore market may get another lift from Wall Street’s rally and positive openings in Tokyo (+0.4%) and Seoul (+0.4%) with the STI continuing its march towards the near term objective of 3,310. Beyond that, the next hurdle lies at 3,360. Downside support is at 3,270. Stocks to watch: *Sabana REIT: 2Q14 DPU fell to 1.86¢ (-22.5% y/y, -1.1% q/q), representings an annualized yield of 7.1%. Gross revenue of $25.4m (+17.6% y/y, +3.2% q/q) was led by contribution from 508 Chai Chee Lane (acquired Sep '13) and 151 Lorong Chuan, which was converted into a multi-tenanted lease in 4Q13. Net property income however fell to $18.4m (-9.3% y/y, -0.2% q/q), weighed by a rise in property expenses. NAV per unit stood at $1.09. *ST Engineering: Its electronics arm, ST Electronics has secured $580m worth of contracts in 2Q14 for rail electronics and intelligent transportation ($272m), satellite and broadband communications ($93m), as well as advanced electronics and information communications technologies solutions ($211m). *Tee Int’l: Won a $42m contract from repeat client, Changi Airport Group for the construction of underground ducts for high tension cables and optic cables. Together with another $16m worth of engineering contracts in S’pore, this brings the group’s total outstanding order book to ~$400m. *SBI Offshore: Expected to complete an engineering, procurement, construction and commissioning (EPCC) project worth US$30m for a M’sian client by end Jul ’14. The balance of revenue to be recognized is ~$2m *KSH: Awarded a $147.8m contract for the design, construction, and maintenance of a proposed integrated community building at Bedok North Street 1. The project is expected to be completed in 2017, and is expected to materially contribute to the group’s FY17 financials. *Lian Beng/KSH/Heeton: Terminated their JV to redevelop land in Cambodia. *Sincap: Acquiring its first real estate property at 581 Murray Street, Perth, Australia, for A$11.4m. The property has a freehold tenure with combined area of 2,575 sqm, and houses a two-level office building. *Rex: Its 64.2% owned Caribbean Rex will divest its 100% working interest in the Inniss-Trinity field to Leni Gas & Oil, for US$5m. *ISDN: Partnering Indonesia-based PT Jodo Alam Titra, to create a portfolio of mini hydropower projects in Indonesia with a combined capacity of 100MW. For a start, ISDN will take an 88% stake, and PT Jodo will own the remaining 12% of three Indonesian energy companies, which have obtained in-principle permit from the Indonesian government to build, own and operate mini hydroelectric plants with combined capacity of 22.1MW, within Central Sulawesi. *Biosensors: Second largest shareholder Hony Capital pares down stake from 15.9% to 9.4%. The private equity firm transferred 109.6m shares at US$0.7467 ($0.933) each to third parties as repayment for loans granted. *CapitaMalls Asia: Will be delisted from SGX and HKSE wef 22 Jul.