SG Market (08 Aug 14)

US Market: US shares ended lower on escalating geopolitical conflict in Russia and Iraq, which overshadowed positive US jobs data. The DJIA fell 75 pts to 16,368 (-0.5%), while the S&P 500 declined 11 pts to 1,910 (-0.6%), dragging it below its 100-day moving average, and the Nasdaq lost 20 pts to 4,335 (-0.5%). About 6.2b shares exchanged hands, 6.8% above the three month average. Sentiment took a hit after Jihadists seized Qaraqosh, Iraq’s largest Christian town, sparking widespread panic among residents, with reports that the US was considering air strikes against the militants. In addition, Russia has massed its troops along its border with Ukraine and the downing of a Ukrainian fighter jet prompted fears of an impending invasion. Moscow’s ban on food imports from the West in response to Western sanctions also raised the risk to the recovery in Europe. The uncertainty over the situation in Iraq and Ukraine outweighed the sharp drop in US jobless claims to 289,000, lower than the 300,000 estimate. Telecoms, healthcare and resource companies lost more than 0.9%, while utilities advanced 1.1%. Among stocks in focus, Tyson Foods fell 2% on concerns about the impact of Russian sanctions on its business, while 21st Century Fox rose 5% after its 4Q profit topped estimates on strong ticket sales of two blockbuster films - X-Men: Days of Future Past and Rio 2. Netflix rallied 4.5% after its subscriber revenue surpassed HBO in last quarter, while Symantec climbed 1% as demand for its anti-hacking software picked up with revenue and earnings beating forecasts. About 6.2b shares exchanged hands on the US exchanges, 7% above the three month average. About 6.5b shares changed hands on the US exchanges, 12% above the three-month moving average as advancing issues outpace declines one by 1.5 to 1 on the NYSE. S’pore shares may come under renewed pressure, taking the lead from Wall Street as well as poor corporate results from Wilmar and NOL. After breaking below the 3,320 level, next support for STI lies at 3,280 with topside pegged at 3.380. Stocks to watch: *Wilmar: 2Q14 missed, as net profit declined 22% y/y to US$170.7m, driven by margin contraction in palm & laurics and losses from its China associates (pretax loss of US$4m vs pretax profit of US$24.9m). Excluding non-operating items, core net profit declined 34% to US$163.1m. Revenue edged up 0.9% to US$10.5b, as higher sales volume in oilseeds & grains and higher palm prices were offset by lower sales volume in sugar. Management believes there will be improvement in 2H14, on seasonal improvement from the sugar and mills business. Interim DPS fell 20% to 2¢. *NOL: Disappointing 2Q14 results, with the liner in the red for the third consecutive quarter. Net loss widened 55% y/y to US$53.7m, as finance expenses ballooned to US$33m (2Q13: US$0.6m) in the absence of a gain from financial hedging instruments booked a year ago. However, core EBIT loss improved 52% y/y to US$15m, thanks to cost savings of US$115m achieved during the quarter. Revenue dipped 1% to US$2.05b on the back of a 6% decrease in volume. Management believes the capacity oversupply situation will persist with accelerating deliveries of mega vessels, thereby limiting the pace of the industry’s recovery. NAV per share at US$0.74. *Nam Cheong: 2Q14 results beat expectations. Net profit surged 55% y/y to RM63.3m, as revenue grew 38% to RM378.8m, buoyed by progressive recognition from sales of PSVs and higher chartering revenue from the contribution of two new vessels. Gross margin slipped 1.9ppt to 17.7% mainly from a re-negotiation on an extended charter contract, but bottom line was bolstered by fair value gain on derivatives (RM1.7m), FX gain (RM4.8m), as well as higher contribution from jointly-controlled entities from asset deployment. Order book remained robust at RM1.7b. NAV/share at 47.6sen. *Noble: Core 2Q14 results appear to be at the lower end of estimates. The group restated its financials for the quarter to account for the on-going stake sale of its agricultural division to COFCO. Accordingly, net profit rose 5% y/y to US$65.8m, taking 1H14 net profit to US$218.1m (+110% y/y), aided by lower post-tax losses from the held-for-sale agri operations. 2Q14 revenue rose 13% to US$23.6b, as total sales volume grew 25.3% to 72.3m tons. Operating income however fell 29% to US$277.4m, as operating margins declined from 1.94% to 1.36%. *CWT: 2Q14 net profit soared 67% y/y to $30.3m, driven by the financial services segment which returned strong earnings from trade services, and capacity growth at the logistics business. Revenue more than doubled to $3.7b, driven by the commodity marketing business. CWT also announced plans to build a new generation 2.2m sf integrated warehouse-cum-container port logistics complex in Jalan Buroh. Construction will take about 36 months, with piling to begin by year end. Meanwhile, CWT’s Cold Hub 2 (ie. The Singapore Wine Vault) has received TOP in Jul with customers to be phased in over the next two months, and the CWT Pandan Logistics Centre remains on track for TOP in 4Q14. *Hyflux: 2QFY14 net profit jumped 247% y/y to $61.4m, propped by a surge in other income of $85.2m (from $4.5m a year ago) attributable to the sale-and-lease back of Hyflux Innovation Centre toward the end of the quarter. Revenue however, plunged 42% to $80.6m, due to the lack of major projects coming on stream. Following the asset recycling, the group’s cash position increased to $481m (Dec ’13: $243.9m) and net gearing improved to 0.54x (Dec ’13: 1.15x). Interim DPS maintained at 0.7¢. *Maxi-Cash: 1H14 net profit collapsed 79% y/y to $0.3m, as expenses increased across the major cost categories along with the expansion in number of pawnshops and retail outlets from 30 stores to 36. Revenue dipped 2% to $55.5m, mainly due to slower retail and trading of pre-owned jewelleries (-3.3%) in tandem with softer gold prices, though partially offset by a higher pawnbroking business (+2.6%). *Yeo Hiap Seng: 2Q14 net profit plunged to $5.2m (-82% y/y) taking 1H14 net profit to $12.5m (-74%). For the quarter, revenue tumbled 24% to $111.7m, in the absence of property-related activities following the sale of the last residential property unit in Dec '13. F&B revenue dipped 2.2% to $107.1m. Bottom line was weighed by “other losses” of $1.6m losses, without the disposal gains of $9.6m recorded last year. *HPL: 2Q14 earnings shrank 81% y/y to $7.0m on lower gross profit, larger operating expenses and finance costs, and decrease in share of profits from associates and JVs mainly arising from lower profits from The Interlace condominium (completed in Sep ’13). Revenue fell 22% to $122.0m, due in part to completion of Tomlinson Heights condominium, and gross margin dipped 1.5 ppt to 25.4%. NAV per share at $3.11.