SG Market (15 Aug 14)

US stocks advanced as traders shrugged off dismal 2Q economic data from Europe and a larger-than-expected increase in US jobless claims, as conciliatory comments from Russia helped soothe fears about the escalating violence in Ukraine. The DJIA rose 62 pts to 16,714 (+0.4%), while the S&P 500 gained 8 pts to 1,955 (+0.4%) and the Nasdaq Composite added 19 pts to 4,453 (+0.4%). The CBOE Volatility Index slid 3.7% to 12.42 for its longest losing streak since May. Markets initially reacted negatively to data which showed the eurozone’s recovery stalled in 2Q with flat growth in Italy, France, and Germany, while US jobless claims climbed 21,000 to 311,111 last week, more than the 295,000 forecast, sparking speculation that US interest rates will continue to remain low. Equites pared early losses after Russia’s President Vladimir Putin softened his tough stance and declared that Russia would try to end the conflict in eastern Ukraine. Health stocks were in favour with Pfizer (+1.8%) and Merck (+1.6%) leading the gainers. Retailer Walmart rose 0.5% after reporting quarterly results which met expectations, but lowered its profit forecast. Department store chain Kohl’s jumped 3.3% to a four-month high after its 2Q results beat estimates. Boeing climbed 1.7% after the aircraft manufacturer guided that demand for its commercial jetliners remained very strong, and cited the possibility of accelerating output. Berkshire Hathaway rose 1.6% to top US$200,000 per share for the first time. Cisco declined 2.6% despite posting results which came in ahead of estimates, as the group guided for a tepid outlook in the current quarter, and announced massive job cuts. After the bell, Nordstrom slid 1.7% after the fashion retailer reported 2Q earnings in line with expectations, while JC Penney closed flat on narrowing quarterly loss. Volume was light with about 4.8b shares traded on US exchanges, the slowest since 2 July. Stocks to watch: *Genting SP: 2Q14 results missed street expectations. Net profit fell 22% y/y to $131.7m, while adjusted EBITDA rose 1% to $313.8m (against consensus of $347m), as bad debts hit a new high of $82m amid tight credit conditions in China. Group revenue rose 6% to $751m, buoyed by higher gaming revenue (+9% to $596.9m) which offset a decline in non-gaming revenue (-3% to $153.6m). VIP volume grew by an estimated 12% y/y, but fell 17% q/q. Luck factor remained slightly above average with a win rate of 3%. Growth in the mass segment was flat y/y and q/q, as a stronger SGD deterred tourists. Outlook expected to remain weak, particularly if GENS extends less credit to Chinese VIPs and ends up ceding volume share to MBS going forward. *Golden Agri: Disappointing 2Q14 results. Net profit slumped 40% y/y to US$27.3m (-74% q/q), despite a 21% y/y rise in revenue to US$2.04b. The better top line was driven by stronger production from its upstream plantations (FFB output +27% y/y), higher sales volumes and improved ASP on a y/y basis. However, bottom line was impacted by heavy losses in soybean crushing in China (US$40m EBITDA loss) and higher operating costs attributable to lower refining margins and increased third party CPO purchases. *PACC Offshore (POSH): 2Q14 disappointed. Net profit plummeted 57% y/y to US$11.9m, weighed by weaker gross margin (-5.5ppt to 30.1%), higher operating expenses and a slump in share of JV profits. Revenue dipped 4% to US$58.3m, due mainly to lower utilisation of vessels from the Transportation and Installation and Harbour Services and Emergency Response segment, which more than offset improvements in the OSV and Offshore Accomodation segments. *Midas: 2Q14 results below expectations, as costs outpaced revenue growth. Net profit plunged 44% y/y to Rmb 8.3m, due to significantly higher admin expenses (+45%) and finance costs (+57%) related to the setting up of two new plants. Revenue grew 18% to Rmb 336.3m, driven by an increase in the sale of aluminium alloy extrusion products, while associate contribution expanded by 170% to $8.5m. BVPS at Rmb2.44. *United Engineers: 2Q14 net profit jumped 165% y/y to $40.8m, as revenue expanded four-fold to $1.2b, driven by full recognition of sales at Austville Residences (TOP Apr ’14), progressive recognition at Eight Riversuits and the consolidation of WBL’s full quarter revenue ($520.2m_. Gross margin dropped 6.8ppt to 12.9%, attributable to losses incurred by Nasdaq-listed subsidiary Multi-Fineline Electronix. Bottom line was further impacted by an 84% drop in other income and increased operating expense. BVPS at $2.79. *Straits Trading: Reversed into a2Q14 net loss of $5.8m from a net profit of $69.7m a year ago, as revenue declined 23% y/y to $173.1m, following the group's divestment of its hospitality business and sale of its securities portfolio, and transformation into an investment company. BVPS at $3.24. *Frencken: 2Q14 profit rose 11.4% y/y to $4.6m, as revenue grew 15.9%. Contribution from the Mechatronics segment jumped 27.7%, lifted by back-end equipment sales in Asia, and the IMS segment achieved 13.1% growth due to a large increase in the automotive segment driven by new and existing projects. Management is cautious on the macro outlook but remains optimistic on stable growth in both divisions. *QT Vascular: 2Q14 net loss widened 46% y/y to US$22.7m, weighed by a jump in admin costs (IPO fees), R&D costs, and interest costs. However, revenue swelled 262% to US$6.1m, driven by a surge in the unit sales of its Chocolate PTA to 8,321 units (+368%). Management is hopeful that meaningful earnings will kick-in from 2015-16, when the company moves past the start-up stage. *Dyna-Mac: 2Q14 net profit shrank 20% to $6.7m, even though revenue expanded 27% to $97.4m driven by higher activity levels across all its yards. The bulk of cost increase came from higher employee compensation ($3.5m) arising from an increase in headcount and salaries. Finance costs also increased as borrowings doubled, though gearing remains acceptable at 0.14x. *Sino Grandness: Is engaged in discussion with a potential strategic investor for possible investment of a substantial stake in the company. The deal is still under negotiation and the terms of investment have yet to be finalized. *Swissco: Secured charter contracts worth an aggregate US$94.8m, for four mobile ofshore driling units to an oil major, to be deployed in Latin America. *Japfa: The Indonesian meat processor and dairy farm operator will make its trading debut at 9am today. The offer was priced at $0.80 per share, with the invitation of 248m shares (16.8m public and 231.2m offer shares) 5x subscribed.