SG Market (14 Aug 14)

US Market: US shares pushed to a two-week high in another quiet session as the earnings season winds down and fading geopolitical tensions helped investors shrug off lacklustre retail sales data and disappointing earnings from retailers. The DJIA rose 91 pts to 4,434 (+0.6%), lifting the index back into the black for this year, while the S&P 500 gained 13 pts to 1,947 (+0.7%) and the Nasdaq Composite rallied 45 pts to 4,434 (+1.0%). US retail sales unexpectedly stalled in Jul, marking its worst performance in six months, pointing to some loss of momentum in the economy it enters into the 3Q. This spurred hopes that the Fed would not rush to raise interest rates. Consequently, the yield on the 10Y Treasury dropped 3bps to 2.41%. Amid weaker retail sales numbers, retailers Macy’s (-5.5%) and Fossil Group (-5.6%) cut their sales forecasts after quarterly earnings fell short of estimates. Agricultural equipment maker Deere lost 2.3% after projecting a 6% drop in sales for 2014. King Digital Entertainment plummeted 23.1% after disappointing results from Candy Crush triggered a wave of ratings downgrades. Seaworld Entertainment sank 32.9% after it warned of a 6-7% decline in revenue, pending legislation to ban the use of killer whales for entertainment at its San Diego park Among the gainers, Amazon climbed 2.2% after sales surge 40% in Jul and it unveiled a new mobile payment app. Biotechnology gained 2.1% after InterMune soared 14.4% on reports that it has received takeover bids from some European drug makers. Healthcare stocks jumped 1.2%, led by Vertex Pharmaceuticals (+3.9%). After the bell, Cisco lost 2.9% after reporting a drop in revenue. Volume was thin with 5.1m shares traded, 11% below its three-month average. S’pore shares are likely to be range-bound following the modest advance on Wall Street and underwhelming results from index stock SingTel. The STI is likely to trade within the 3,320-3,280 range in the short term. Stocks to watch: *SingTel: 1QFY15 headline net profit fell 17% y/y to $835m, mainly due to exceptional items. Adjusting for a $150m gain on dilution of its Airtel stake last year, $24m of staff restructuring costs in Australia, and $17m of Airtel’s exceptional losses, underlying net profit was slightly lower at $881m (-2%). Operating revenue fell 3.4% to $4,148m and EBITDA dipped 3.2% to $1,254m, mainly due to the depreciation of the AUD (-5%) and INR (-19%). Otherwise in constant currency terms, underlying net profit grew 4.9% on higher associate contributions (+20%) driven by strong data growth momentum, and EBITDA was stable. The Singapore performance was strong, driven by growth in across its pay TV, internet fibre and mobile segments. However, Australia was a drag on weaker fixed revenue and equipment sales. *City Dev: Excluding one-off divestment gains booked last year, 2Q14 core net profit soared 90% y/y to $137.9m, taking 1H14 net profit to $257.5m (+37%). The property segment was the main earnings growth driver, boosted by maiden profit contribution from JV projects including Echelon, Bartley Ridge, The Inflora and progressive bookings from Bartley Residences. This helped offset weaker hotel earnings, which were affected by geopolitical events amid higher operating costs and ongoing room refurbishments. For the quarter, revenue edged up 5.9% to $861.1m. Special interim dividend halved to 4¢. BVPS at $8.67. *ComfortDelgro: 2Q14 net profit rose 10% y/y to $75.7m, in line with expectations. Revenue climbed 12% to cross the $1b mark for the first time, driven by growth from all business segments. Bus revenue rose 18% to $517.2m buoyed by the UK and Singapore operations, which offset Australia and China. The taxi business rose 6.7% to $320.1m, with growth from all countries except Australia. Meanwhile, the rail segment grew 21% to $48.8m with the opening of Downtown Line 1. Interim dividend of 3.75¢ (2Q13: 3¢) *Ascendas Hospitality Trust: 1QFY15 DPU dipped 3.9% y/y to 1.24¢, affected by a partial unwinding of cross-currency swaps ($1.8m loss) and a larger unit base following a private placement in Apr this year . Revenue grew 11% to $53.3m, driven by new contributions from Park Hotel Clarke Quay in Singapore and Osaka Hotel in Japan, while NPI expanded 33% to $21.5m. Average occupancy and room rates improved in both Australia and China. Aggregate leverage at 38.2%. BVPS at $0.74. *Centurion: Excluding exceptionals, such as the disposal gains from an associate ($20m) and fair value gains on investment properties ($36.4m) booked last year, core net profit surged 62% y/y to $7.5m, driven by growth in the accommodation business. Revenue expanded 41% to $19.9m, attributable to an increase in bed capacity at Westlite Toh Guan dormitory and maiden revenue from the Group’s student accommodation RMIT Village (RMITV) located in Melbourne, Australia. Gross margin improved 10 ppt to 65.5% from 55.5%. BVPS at $0.42. *Courts: 1QFY15 net profit plunged 28% y/y to $5.1m, falling short of expectations. Sales dipped 1.5% y/y to $194.1m, dragged by Singapore (-5.9%), which more than offset growth in Malaysia (+8.2%) due to contribution from new stores. Gross margin improved 2.1ppt to 32.7% driven by shift in sales mix towards higher-margin electrical and furniture and higher service charge income from Malaysia. But higher selling and admin expenses (13.9% to $53.6m) due to business expansion weighed on bottom line. Management expects the retail environment in Singapore and Malaysia to remain lacklustre. *Sino Grandness: Strong 2Q14 which beat expectations. Net profit surged 57% y/y to Rmb 161.1m, while revenue rose 38% to Rmb816.6m, driven by growth in the beverage business (+55%) and domestic growth in canned products (+53%), on the back of the expansion of its China distribution network. Gross margin expanded to 39.1% (+3.6ppt), boosted by higher ASP for its canned products and lower cost of materials for beverages. *United Envirotech: Solid 1QFY15 results, with core net profit up 40% y/y, in line with expectation. Revenue jumped 51% y/y to $66.3m, while net profit swelled 274% to $26m, boosted by a $14.2m gain from disposal of Memstar shares. Both the Engineering and Water Treatment sectors performed well, clocking 23% and 59% revenue growth, respectively. *Pacific Radiance: 2Q14 net profit accelerated 52% y/y to US$32.4m, helped by a US$9.3m gain in sale of vessels, partially offset by the weaker USD/SGD and IDR/USD. Revenue climbed 6% to US$48.7m from improved utilisation and new vessels in offshore support services (+15%) and subsea (+14%) segments. BVPS at US$0.57. *KrisEnergy: 2Q14 net loss narrowed to US$5.8m from a loss of US$8.2m a year ago. Revenue accelerated 34% y/y to US$22.3m on the back of increased production and higher average selling prices (+5%). Bottom line benefitted from farm-in income received for joint studies and time-writing income (US$2.5m), offset by higher staff costs (+48%) on the ramp up of development activities. *UOL: Bought Heron Plaza, a prime development site on Bishopsgate in London, for £97m. The site has consent for an iconic 43-storey tower, designed by PLP Architecture, comprising ~562,000 sf gfa of 5-star luxury hotel, residential apartments and retail component. UOL will operate the hotel under its flagship “Pan Pacific” hotel brand. *GLP: Signed five new lease agreements totalling 90,000 sqm in multiple locations across China, four of which were signed with leading express delivery providers in China. *Cosco: 51% subsidiary COSCO Shipyard Group secured a contract valued over US$56m to build two 64,000dwt bulk carriers, scheduled for delivery in 4Q16 and 1Q17, respectively.