SG Market (04 Aug 14)

US Market: US shares finished lower despite a solid jobs report and generally upbeat corporate earnings as investors took a cautious stance following Thursday’s market rout. The DJIA shed 70 pts to 16,493 (-0.4%), while the S&P 500 slid 6 pts to 1,925 (-0.3%) and the Nasdaq lost 17 pts to 4,353 (-0.4%). European stock markets tanked for a second day running with the German DAX sinking 2.1%, France’s CAC tumbling 1% and UK’s FTSE 100 declining 0.8%amid news that Potugal’s Banco Espirito Santo shares were suspended after it plunged as much as 50%. The US economy added 209,000 jobs in Jul, maintaining the above 200,000-plus monthly streak since Feb althought this was short of the 230,000 gain that the markets were expecting. The unemployment rate climbed unexpectedly to 6.2% from 6.1% in Jun, while wages were unchanged. Manufacturing expanded in Jul at the fastest pace in more than three years. Financial stocks were amongst the biggest losers, including Citigroup (-1.7%), JPMorgan (-2.1%) and Morgan Stanley (-2.3%), as Argentina’s failure to pay interest on its debt raised fears of a credit event on US$1b of default swaps. In corporate earnings, Proctor & Gamble was the Dow biggest gainer, rising 3%, after its 4Q results topped estimates amid cost reductions. Linkedin jumped 11.7% after projecting 3Q revenue that beat forecasts. Expedia advanced 6.4% after its 2Q results surpassed expectations. At the losing end, Chevorn dipped 1% despite reporting a better-than-expected 2Q profit, partially weighed by news on Thu that its Litimat LNG project is in doubt as JV partner Apache Corp is pulling out. S’pore shares are in correction mode as the STI is pulling back from an overbought situation with short term support at the 3,320 level and topside resistance at the last peak of 3,388. Stocks to watch: *SIIC: 2Q14 EPS fell 23% y/y to 0.77¢, despite the 20% rise in net profit to Rmb64.8m (flat q/q), arising from a large 56% dilution in the weighted average number of shares. Revenue jumped 35% y/y to Rmb381.8m (+28% q/q), mainly driven by higher construction revenue (+89%) on the substantial completion of projects. However, operating profit declined 23% to Rmb63.9m, as gross margin narrowed 5.1 ppt to 27.4%. Bottom line was shored up by a surge in JV contributions to $16.2m from $1.3m a year ago. Proforma NAV per share at Rmb0.38 (7.7¢) following completion of a 1b share placement to raise net proceeds of $154.8m post results (14 Jul). *OUE: 2Q14 results below expectations. Net profit plunged 70% y/y to $4.4m due to timing of profit recognition from its Twin Peaks residential development. Revenue slipped 11% to $100.2m, following the disposal of two China hotels (in 3Q13), though partially offset by higher rental property income from Lippo Plaza (acquired by OUE Commercial REIT in Jan ’14) and US Bank Tower (acquired in Jun ’13). In addition, OUE Hospitality Trust was deconsolidated in 1Q14, and is now an associate of OUE. Accordingly, OUE’s associate contributions jumped to $12.2m from $4.6m a year ago. Interim DPS maintained at 1¢ (excluding 1H13 special DPS of $0.20). NAV per share at $4.04. *Cosco: 2Q14 net profit was in line, rising 19% y/y to $14.3m. Revenue grew 29% to $1.1b, on increased ship repair, ship building and marine engineering segments. However gross profit slipped 4% to $92m, as gross margin slid 2.7ppt to 8.0%. Bottom line was buoyed by a 122% increase in other income of $35.4m, derived from mostly the sale of scrap materials and interest income. Order book at 31 Jun stood at US$8.1 with progressive deliveries up to 2016. Management expects margins to remain under pressure as these projects were secured at low contract values. *ParkwayLife REIT: 2Q14 DPU and distributable income each climbed 10% y/y to 2.9¢ and $17.5m, respectively. Gross revenue and NPI each rose 12% to $25.3m and 23.6m, respectively, driven mainly by acquisitions and higher rent from the Singapore hospitals. WALE stood at 13.75 years. Aggregate leverage was 35.3%, with average term to maturity of 3.5 years and all-in cost of debt of 1.46%. NAV per unit at $1.63. *UIC: 2Q14 net profit jumped 27% y/y to $171.5m, as revenue climbed 10% to $167.7m on, i) higher trading property sales (+29% to $42.4m) driven by revenue recognition of V on Shenton, Alex Residences and Mon Jervois, and ii) higher revenue from the hotel operations (+8% to $34.2m) due to higher occupancy and F&B contribution from Pan Pacific Singapore. NAV per share at $3.94. *Asiaphos: 2QFY14 net loss narrowed to $0.4m from $1.9m a year ago, taking 1H14 net loss to $0.8m (1H13: net loss of $2.6m), mainly due to the absence of $1.4m in fees associated with last year’s IPO. For the quarter, revenue surged 366% to $3.9m mainly due to higher quantities of phosphate rock sold and also revenue from the sale of P4, a phosphate-based chemical. *HL Global: 2Q14 net loss narrowed to $0.5m from $4.5m a year ago, due to the absence of disposal loss associated with the sale of Shanghai International Equatorial Hotel and Scientex Park (M) in 2Q13. Revenue inched up 2.3% to $1.4m, buoyed by higher contribution from Elite Residences, but offset by the decline from lower sales at Cameron Highlands. The group’s hospitality operations in Shanghai and Qingdao continue to operate under challenging conditions. NAV per share of -$0.01. *KLW: Secured a $3m contract for the supply and installation of doors for a private residential development, J Gateway, at Boon Lay Way, with completion slated for 24 Jul ’16. *Metal Component Engineering: Profit warning. Expects 1H14 net loss due to weaker performance in its hard drive components business, and from its Malaysia operations. *Kim Heng Offshore: Profit warning. Expects lower 2Q14 net profit despite higher revenue, due to a lower margin project mix and delay in arrival of certain rigs. *Luzhou Bio-Chem: Profit warning. Expects to report loss for 2Q14.