SG Market (29 Jul 14)

US Market: US shares ended nearly flat on Mon in a choppy session as investors weighed soft housing data against a flurry of M&A news ahead of key Fed policy decision, earnings and labour reports. The DJIA gained 22 pts to 16,983 (+0.13%), while the S&P 500 crept up 1 pt to 1,979 (+0.03%) but the Nasdaq Composite lost 5 pts to 4,445 (-0.1%). Markets initially slumped as US pending home sales slipped 1.1% in Jun following a 8.1% drop in new home sales, while the latest preliminary reading on the services sector showed activity stayed at its highest level in 4 1/2 years. But stocks recovered later in the day as traders bought on dips. Utility companies advanced 1.5%, while homebuilders declined 1.2% to the lowest level since Apr. Microsoft fell 1.2% after coming under an antitrust probe in China. Diesel engine maker Cummins slid 3.2% to lead the declines among industrials. In merger news, Dollar Tree (+1.2%) announced a US$9.2b deal to acquire fellow discount retailer Family Dollar (+25%), while real estate website Trilia (+15%) surged on a takeover bid by rival Zillow (+0.9%) in a US$3.5b deal. Tyson Foods (+2.6%) rose on plans to divest its Mexican and Brazilian poultry businesses to rival Pigrim Pride’s parent JBS for US$575m. After the bell, nutrition firm Herbalife tumbled 10.2% after reporting a 17% drop in quarterly profit. Investors were generally avoiding making big bets ahead of a busy calendar that includes a Fed policy statement and 2Q GDP growth on Wed, employment report on Fri and earnings from Pfizer, ExxonMobil and other corporate giants. S’pore shares likely to see cautious trade as the STI appears overstetched amid a miced bag of corporate results from SIA Engineering, Hutchison Port, MGCCT, Indo Agri and Raffles Medical among others. Topside resistance for the benchmark index is capped ta 3,260 with underlying support at 3,280. Stocks to watch: *SIA Engineering: Disappointing 1QFY15, as net profit slumped 23% y/y to $53.5m. Revenue was little changed at $294.1m (+1.6% y/y) with higher fleet management sales offset by lower heavy maintenance workload. However EBIT margin contract to a mere 7%, the lowest in five years, due to higher subcontract cost. Share of profit from associates and JVs also fell 29% to $30.6m due to a drop off in contribution from the engine repair and overhaul centres. Management has turned bearish on outlook. *Raffles Medical: 2Q14 net profit rose 8.5% y/y to $15.6m. Revenue grew 6.6% y/y to $92.6m, as the healthcare and hospital services segments expanded 14.7% and 4.9%, respectively. The group continued to see higher patient load, further clinic network expansion, and secured new corporate contracts both locally and overseas, as it added more Specialist Consultants. Interim dividend of 1.5¢, up from 1¢ in 2Q13. *Mapletree Greater China Commercial Trust (MGCCT): 1QFY15 DPU jumped 11.9% y/y to 1.56cts, coming in 9.3% above the IPO forecast. Gross revenue grew 8.6% to $63.8m and NPI increased 9.9% to $52.6m, thanks to higher than expected rental rates. Portfolio occupancy remained high at 99.2%, with 82% of the expiring leases in FY15 renewed with robust rental reversions (between 21% and 33%). MGCCT had net gearing of 38.6% with a weighted debt maturity of 2.7 years, and average cost of debt of 2%. NAV at $1.018. *Fortune Reit: 1H14 DPU rose 16% y/y to HK20.88¢ while distributable income rose 27% to HK$390.5m. Revenue jumped 34% to HK$813.5m, and NPI climbed 33% to HK$581m, on strong rental reversions (+21%), good returns post AEIs, and additional income from Fortune Kingswood (acquired Oct ’13). Aggregate leverage stood at 31.1%, with all in cost of debt of 2.2%. Portfolio occupancy remained strong at 99.1%. NAV at HK$11.01. *HPH Trust: 2Q14 DPU maintained at HK18.7¢. Net profit dropped 12% y/y to HK$368.4m, mainly due to higher tax (+62%). Otherwise, revenue edged up 1% to HK$3.1b, despite the financial deconsolidation of Asia Container Terminals (now a 40% associate). Container throughput of HIT increased 13.9% due to higher transshipment volume, though average revenue per TEU dipped due to adverse throughput mix from liners. Throughput of Yantian rose 7.7% due to growth in transhipment and US cargoes, though average revenue TEI was also lower, due to the higher proportion of transhipment throughput handled. NAV at HK$7.36 *Indofood Agri: 2Q14 revenue surged 19% y/y to Rp4tr driven by a strong recovery in CPO prices and higher sales from the Edible Oils & Fats division. Gross margin almost doubled from 16.1% to 30.9%, resulting in net profit more than tripling to Rp224b (+240%). CPO production grew 25% to 440,000 mt in 1H14 arising from higher nucleus production (+18% to 1.488m mt) as well as higher purchases of fresh fruit bunches from external parties. *GMG Global: Dived into 2Q14 net loss of $17.4m, from a net profit of $1.2m a year ago. Revenue declined 16.2% to $217.5m, due to the sharp decline of ASP of natural rubber (-31.2% to US$2,409/mt). Bottom line was further weighed by share of loss of associates ($1.9m) and forex loss (3.6m). *China Minzhong: 4QFY14 revenue declined 18% y/y to Rmb664m and net profit fell 23% to Rmb126m, as contribution from the cultivation and processed business segments continued to experience structural declines, driven by rising labour costs in China. Gross margin declined 2.9 ppt to 33.2%. *Genting HK: Positive profit alert. Expects to report net profit of more than US$180 for 1H14 (1H13: US$23m), mainly attributable to i) US$153m gain arising from disposal of certain stakes in NCL in Mar, and ii) US$15m fair value arising from revaluation of certain financial assets. Separately, 28% owned NCL reported 2Q earnings that marginally beat street expectations, thanks to lower fuel expenses which offset higher non-fuel related costs. *Keppel Land: Commited to invest ~US$70m cash in a new residential development with a retail component in Manhattan, New York. The development will be undertaken by Macklowe Properties, an established NY real estate developer, and managed by KPLD’s Alpha Investment Partners. *CapitaLand: Completed the acquisition of an additional 80% stake in CapitaLand (Beijing) Kai Heng for $41.8m, which owns the Beaufort residential development site in Chaoyang District. *See Hup Seng / ISDN: See Hup Seng is in talks to invest US$8m for a 25% stake in the enlarged capital of Aenergy, which is in the midst of developing a series of mini-hydropower plants in Indonesia with a combined installed base capacity of ~53MW. Aenergy is the energy investment vehicle of ISDN. *Armarda: Placed 1.44b new shares at HK$0.05 each to six individuals. The new shares will be traded on Catalist wef today.