Friday, August 22, 2014

SG Market (22 Aug 14)

US Market: US stocks powered higher, logging its fourth straight day of gains, on a flurry of positive economic data and optimism that the Fed is committed to supporting the economy. The DJIA gained 60 pts to 17,039 (+0.4%), pushing back above 17,000 level, while the S&P 500 advanced 6 pts to a new record of 1,992 (+0.3%) and the Nasdaq Composite added 6 pts to 4,532 (+0.1%). About 4.5b shares exchanged hands, below the five-day average of 5.1b. Traders avoided making big bets ahead of Fed Chair Janet Yellen’s speech on Fri in Jackson Hole, which could provide some guidance on the potential timing of an interest rate hike. Markets took the cue from fresh signs of strength in the US economy with existing home sales jumping a 10-month high in Jul, weekly jobless claims falling to 298,000 from 312,000 the previous week and the Conference Board’s index of leading economic indicators improving sharply in Jul, topping estimates. Meanwhile, the Markit preliminary Aug index of US manufacturing jumped to its highest level since Apr 2010 as production orders and employment picked up, and the Aug reading for the Philadelphia Fed manufacturing index came in above forecasts. Financial stocks rallied 1.1% with BofA (+ 4.1%) leading the gains after the bank reached a US$16.7b settlement with the US government in relation to troubled mortgage-backed securities. The stock’s surge helped push the S&P 500 financial sector index to its highest level since Jun ’08. Technology stocks also outperformed, up 0.5% with Hewlett-Packard (+5.4%) after the tech giant posted its first sales growth in 12 quarters, while eBay (+4.7%) surged on a possible spin-off of its PayPal unit in 2015. Among the losers, retailer Sears Holdings tumbled 7.2% after reporting a wider 2Q loss as sales declined for the 30th straight quarter. Dollar Tree slid 1.3% after the discount chain cut its full year earnings forecast amid costs realted to its bid for rival Family Dollar (-0.5%). About 4.8b shares were traded on the US exchanges, the second slowest full day session this year. S’pore shares are expected to push the STI higher to the next objective at 3,388 after clearing the 3,320 hurdle. Downside support remains at 3,280. Stocks to watch: *OCBC/United Engineers: Approached by a party for a possible transaction for their combined 22.4% stake in United Engineers and WBL, which could lead to a share offer. Discussions are still preliminary. *Oxley: 4QFY14 results missed estimates. Net profit collapsed 74% y/y to $9.8m, impacted by a 226% spike in finance cost to $11.3m, attributable to the higher interest cost of its medium term notes. Revenue plunged 70% to $82.9m, due to lower revenue recognition from the construction of 12 mixed-residential projects. Final DPS slashed to 0.18¢ (FY13: 0.6¢). *Parkson Retail Asia: 4QFY14 net profit dropped 36% y/y to $3.2m, attributable to a 4% dip in revenue to $99.2m, losses from share of associates, and tax penalty levied by the Hanoi authorities which does not allow for offsetting of tax losses between the group’s companies. FY14 net profit declined 12.5% y/y to $34.6m, and revenue slipped 3.3% to $432m, due to negative same store sales growth (-4.2%) in Vietnam and a weaker IDR and MYR. Final dividend of 2.5¢, brings full year payout to 5.5¢. *Raffles Education: FY14 net profit doubled to $55.4m, attributable to disposal gains, and absence of last year’s net reversal of government grant receivable, though offset by lower fair value gains of $7.3m (FY13: $41.7m). Revenue declined marginally by 0.8% to $127.4m. Final dividend of 1¢. *Sin Ghee Huat: 4QFY14 net profit expanded 38% y/y to $1.5m on higher gross profit (+19.0% to $3.9m) but FY14 net profit dropped 14.4% to $3.7m as operating expenses rose. Final dividend of 1.5¢ (FY13: 1.8¢) *Sabana REIT: Acquiring a warehouse located at 10 Changi South Street 2 from Adviva Distribution for a total cost of $55.1m (including JTC upfront land premium of $4.3m). This compares with the independent valuation of $54.3m. The 189.6k sf property is a JTC leasehold estate with remaining tenure of 37 years. The initial annual net rent shall be $4m and is subject to rent escalation at 1.5% pa. The deal is expected to be completed in 4Q14. *GLP: Signed two new lease agreements totaling 34,000 sqm with two leading companies in Eastern and Northern China that will use the facilities for storage and distribution of packaged foods, including products with temperature-control requirements. *Sheng Siong: Entered into a non-binding letter of intent with Kunming LuChen Group to operate supermarkets in China. The initial JV equity investment is estimated at US$10m, with Sheng Siong to hold 60% interest. *NSL: Selling its lime business and assets in Malaysia and Singapore, and a proposed grant of a call option to acquire all of its limestone business in Malaysia, to Lhoist Singapore. The proposed deal is valued at ~$49.1m, implying a valuation of 7.5x FY13 P/EBITDA *Hoe Leong: In preliminary stage of exploring the establishment of a relationship with the Semua Group as strategic partner. Hoe Leong has a 41% deemed interest in Semua. *ASJ Holdings: De-listed following completion of compulsory acquisition by PPCF.

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