SG Market (23 Jul 14)

US Market: US shares closed modestly higher, inspired by better-than-expected inflation and housing data as well as a slew of 2Q results, while geopolitical tensions in Ukraine and Gaza remained fluid. The DJIA advanced 62 pts to 17,114 (+0.4%), while the S&P 500 added 10 pts to 1,984 (+0.5%) after briefly touching an intraday record and the Nasdaq Composite jumped 31 pts to 4,456 (+0.7%). The markets rode a rebound in risk appetite, prompted by signs of cooperation from Ukraine's pro-Russian separatists over last week’s downing of a Malaysian jetliner, and a largely positive earnings season so far. Sentiment was boosted by upbeat economic news which showed consumer price index rose 0.3% in Jun, but the rise was not broad-based, driven manily by an increase in the cost of gasoline. Rising for a third month, existing home sales grew 2.6% in Jun at the highest pace since Oct ’13. Healthcare and technology stocks rose at least 0.8% to pace the gains. Intel rallied 2.1%, while Apple added 0.8%. Among key companies which released results, Chipotle Mexican Grill (+11.8%), Lockheed Marin (+3%) and Comcast (+1.5%) surged after 2Q earnings beat estimates, with both groups guiding for a more positive outlook. Underperformers include McDonald’s (-1.3%), Coca-Cola (-2.9%), DuPont (-0.9%) and Travelers (-3.8%) and Kimberly-Clark (-3.1%), all of which missed expectations. Netflix fell 4.6% after forecasting 3Q profit that trailed estimates. In other corporate news, Herbalife leapt 25.5%, after hedge fund manager Bill Ackman failed to convince inestors that the nutritional product seller was guilty of fraud. Apache Corp gained 4.6% after a hedge fund disclosed a US$1b stake in the energy firm. S’pore shares may trade sideways, keeping track of modest gains on Wall Street and regional bourses. The STI is likely to consolidate its position above the 3,210 level with the next hurdle at 3,260 and underlying support at 3,280. Stocks to watch: *CapitaMall Trust: 2Q14 DPU rose 6.3% y/y to 2.69¢, implying 5.4% annualized yield. Gross revenue grew 2.5% to $164.3m and NPI expanded 4.4% to $114.0m. During the quarter, 327 leases were renewed with growth of 6.6% over preceding rental rates typically contracted three years ago. Portfolio occupancy for its 16 malls remained high at 98.6%. Gearing of 34.3% with an average cost of debt of 3.6%. NAV per unit at $1.79. *Suntec REIT: 2Q14 DPU edged up 0.8% y/y to 2.266¢ while distributable income grew 11.3% to $56.6m. Revenue jumped 45% to $68.1m, and NPI surged 65% to $46.1m, boosted by the opening of Suntec Singapore Convention & Exhibition Centre following completion of AEI. Aggregate leverage stood at 34.1% with all-in financing cost of 2.62%. Office enjoyed portfolio occupancy of 99.7%, while retail occupancy stood at 97.6%. Phase 2 of Suntec City AEI was reopened in June, while Phase 3 is expected to be completed by end 2014. NAV per unit at $2.07. *Frasers Centrepoint Trust: 3QFY14 DPU grew 6% y/y to 3.0¢, taking 9MFY14 DPU to 8.4¢ (+5.7%). Gross revenue rose 3.1% to $41.2m and NPI improved 2.4% to $29.1m, supported by rental step-up of current leases, better rental rates achieved for new and renewed leases and the maiden contribution from Changi City Point (Acquired Jun '14). NAV per unit at $1.78. *Mapletree Industrial Trust: 1QFY15 distributable income and DPU grew to $42.8m (+6.3% y/y) and 2.51¢ (+3.3%), respectively. Gross revenue accelerated 4.3% to $78.4m and NPI gained 6.3% to $56.7m, mainly driven by higher rental rates secured for leases across all property segments except business park buildings. Portfolio occupancy dipped 0.6ppts to 90.7%, partly due to progressive relocation of tenants from the Telok Blangah cluster. Weighted average lease to expiry stood at 2.6 years. Aggregate leverage ratio improved 0.8ppts to 33.6%, with average interest cost of 2.1% and debt tenor of 2.9 years. NAV per unit at $1.20. *SATS: 1QFY15 results below expectations, as underlying net income fell 9.4% y/y to $43.4m. Revenue was flat at $435.2m, as a 0.9% decline in Food Solutions offset the marginal improvement in Gateway Services (+2.0%). Meanwhile, incremental contribution from a higher stake in PT CAS was insufficient to offset air cargo weakness, leading to significantly lower contributions from its associates ($10.4m, -16.8%). *Tee Int’l: 4QFYMay14 results disappointing, with revenue nearly halving y/y to $46.6m, and net profit plunging 65% to $2.3m. Nevertheless, management continues to expect new orders to come in and new contract wins for FY15. Separately, the group is selling its entire 55% stake in non-core subsidiary, Interlift for $3.2m, to its existing business partners. *Keppel T&T: 2Q14 net profit fell 12.8% y/y to $14.3m, due to higher operating expenses. Revenue however, increased 27% to $51.3m on the back of higher revenue from Data Centre and Logistics divisions. *AusGroup / Ezion: AusGroup is acquiring 100% of Ezion Offshore Logistics Hub and 90% of Teras Australia for a combined $55m, which will be satisfied by $14m in cash, and the issue of 92.2m new AusGroup shares at $0.445 each. AusGroup’s strategy is to expand its businesses to provide both onshore and off-shore marine services. Based on FYJun13 numbers, post-acquisition, AusGroup’s NTA would rise to A$0.32 (from A$0.31), but EPS would fall to A0.9¢ (from A2.0¢) *GLP: Signed new lease agreement totaling 15,000 sqm with a new leading multi-channel retailer customer in China, which is seeking to expand in Midwestern China. *Cosco: 51%-owned Cosco Shipyard secured ~US$300m worth of contracts to build 1 accommodation barge and 7 bulk carriers. The orders are due for delivery through 2016 and 2Q17. *Sino Construction: Acquiring a 52% stake in JEMS Exploration (JEPL) for US$20m, which owns the Grey Range Project in the Eromanga Basin in South West Queensland, Australia. Grey Range is proposing to mine 5m mt of thermal coal p.a., and has an inferred coal resource of 858m mt, based on JORC estimates. The consideration will be satisfied by the issue of 1-year non-interest bearing convertible promissory notes. Assuming full conversion into 126m new Sino Construction shares at $0.20 each, proforma FY13 NTA/share will drop from 0.76¢ to 0.68¢, while loss per share will narrow from 2.72¢ to 2.42¢. *Singapore Medical Group: Its two flagship clinics, Lasik Surgery Clinic in Singapore and Ciputra SMG Eye Clinic in Jakarta, have purchased the ZEISS Visumax Femtosecond Laser Systems, allowing them to be the first private eye clinics in S’pore and in Jakarta, to offer the most complete suite of refractive surgeries. *Xpress: Several creditors have commenced legal proceedings against Xpress and its subsidiary Xpress Print, for sums owed in aggregate of ~$2.4m. Separately, Xpress has issued 480m new placement shares to two subscribers at $0.021 each. The net proceeds of $9.5m will be used to repay creditors (55%) and for working capital (45%). *Next-Generation Satellite Communications: Issued a civil summon by the Head of the District Court of Central Jakarta, relating to an outstanding dispute arising prior to the acquisition of PT MSN by the group. The plaintiffs are claiming for a sum of ~$5.6m and all costs, interest and damages. *AEI: Profit warning. Expects 1H14 operating loss due to waning HDD sales *Intraco: Profit warning. Expects 1H14 loss due to low trading margins amid intense market competition.