SG Market (29 Aug 14)

US Market: US stocks stepped back, with the S&P 500 retreating back below the 2,000 level, as intensified fighting in Ukraine overshadowed a batch of encouraging economic data. The blue-chip DJIA slid 42 pts to 17,080 (-0.3%), while the broader-based S&P 500 dipped 3 pts to 1,997 (-0.2%) and the tech-heavy Nasdaq Composite shed 12 pts to 4,558 (-0.3%). Volume continued to be light ahead of the long-weekend with just 4.2b shares exchanging hands, below the 5.3b month average. Markets were pressured by news that Russian forces backing pro-separatist rebels gained ground inside Ukraine, with NATO reporting that Russia had set up a southern front with 20,000 troops. The latest flare-up in Ukraine cast a cloud over positive economic data, which showed the US economy expanded 4.2%, up from an initial 4% estimate, in the 2Q, propelled by the biggest gain in business investment in more than two years. Meanwhile, jobless claims fell for the second straight week to 298,000, off a seven-year low, while pending home sales climbed in Jul to a 11-month high. Financial stocks were amongst the biggest losers (-0.4%), with JPMorgan dropping 0.7% leading decliners amid a FBI investigation into a possible cyber-attack on the bank. Visa (-1.2%) fared poorly following a broker downgrade on a lack of positive catalysts. Earnings from from retailers mainly disappointed. Abercombie & Fitch lost 4.8% after its 2Q results missed estimates, while Guess sank 8.8% after the retailer cut its earnings forecast, but Signet Jewelers gained 7.7% after its results beat expectations. Among other stocks in focus, discount store chain Dollar General rose 0.8% after its 2Q sales trended higher but cookware and home furnishing seller William-Sonoma tanked 12% after its 3Q earnings forecast fell short of estimates. Radioshack jumped 31% on speculation that it will get a rescue financing package to stave off bankruptcy. Volume was the lowest for a full day session this year with only 4.2b shares traded on the US exchanges and advancing stocks outnumbered declining ones by 1.4 to 1 ratio on the NYSE. S’pore shares are likely to pull back following the retreat on Wall Street and softer openings on Asian bourses. Lastest FYJun14 results from Olam, Wing Tai, Amtek and ASL Marine all appeared to have missed estimates. The STI is exhibiting a bearish engulfing pattern, suggesting some short term downward pressure to immediate support at 3,320 level, while topside resistance remains capped at 3,380. Stocks to watch: *Olam: 4QFY14 results missed. Net profit plunged 44% y/y to $31.8m, against consensus of $116m, impacted by an exceptional loss of $16.7m (4QFY13: exceptional profit of $9m). Excluding the one-offs, a targeted volume reduction in lower margin businesses helped to shore up core net profit to $48.5m (+1.5%). Revenue fell 11% to $5.76b, as overall sales volume declined 18.6% to 3.5m mt. Net gearing improved to 1.82x (FY13: 1.93x), well below the FY16 target of 2.0x. Final DPS of 5¢ and an additional special Silver Jubilee DPS of 2.5¢ proposed. *Wing Tai: 4QFY14 results below estimates, mainly due to timing of development profit recognition. Revenue plunged 42% y/y to $179.8m, and net profit collapsed 48% to $143.1m. For the full year, revenue was down 40% to $803.4m, and net profit halved to $254.4m. Final DPS of 3¢ and special DPS of 3¢ proposed, bringing FY14 payout to 6¢ (FY13:12¢). BVPS at $3.78. *GuocoLand: 4QFY14 surged nearly six-fold to $186.1m (+478% y/y), boosted by higher fair value gains and stronger revenue recognition for its projects. Revenue almost tripled to $492.9m, attributable to units sold for Goodwood Residence in Singapore and Seasons Park in Tianjin, China. Other income jumped 158% to $129.0m driven by fair value gain on its investment properties. DPS of 5¢ maintained. BVPS at $2.36. *Sim Lian: FY14 net profit inched up 2% to $171.0m on revenue of $714.7m (-4%). Top line was weighed by the property division segment (-14% to $506.7m), due to lower contribution from Waterview and several completed property development projects. This was offset slightly by a 34% increase in construction revenue to $172.4m, due to an increase in percentage of work done. The effect of better margins was negated by fair value losses on investment properties of $15.5m (FY13 fair value gain: $1.6m). DPS maintained at 4.6¢. BVPS at $0.98. *Sin Heng: 4QFY14 net profit fell 21% y/y to $3.4m, taking full year net profit to $13.8m (+0.3%). 4QFY14 revenue dipped 4.7% to $59.0m, due to lower contributions from both the equipment rental (-6.1%) and trading (-4.2%) segments. Gross margin rose to 15.5% (+1.6ppt), helped by lower repair and maintenance costs from the equipment rental business. Bottom line was impacted by a 63% decline in other operating income to $1.0m, due to lower spare part sales, and the absence of income from forfeited deposits received in the previous year. First and final DPS of 0.65¢ (FY13: 0.45¢). *GuocoLeisure: FY14 net profit slipped 11.4% to US$39.0m, weighed by a jump in personnel expenses (+18%) for additional staff in hotel management in UK, as well as lower Bass Strait oil and gas royalty of US$41.5m (-7%). Revenue rose 6.8% to US$406.0m on higher hotel RevPAR and gaming win ratio. Management guides for lower room sales in FY15 due to planned hotel refurbishment. DPS maintained at 2¢. BVPS at US$0.93 ($1.16). *ASL Marine: Fell into a 4QFY14 net loss of $3m, from a net profit of $14.4m a year ago. Revenue plummeted 83% y/y to $26.2m, dragged by reversal of revenue recognition due to cancellation of a $51.8m shipbuilding contract and lower completion of projects from shiprepair and conversion. Bottom line was further weighed by absence of one-off gains last year. The group’s shipbuilding order book stood at $321m, of which 21% is expected to be booked in 1H15, and its shipchartering order book was $74m. DPS halved to 1¢. *Amtek: 4QFY14 net profit collapsed 84% y/y to US$1.8m, mainly due to the absence of one-off gains and higher finance costs relating to the acquisition of Interplex Group. Revenue dipped 5% to US$152m, attributable to overall weak end-market demand across the Enterprise Server/Storage, Mass Storage products and IT products industries, partially mitigated by higher sales of home appliance and electronic products. Final DPS of 1¢, brings FY14 payout to 2.3¢ (FY13: 3.3¢). *GLP: Signed new leases for 49,000 sqm of space in Eastern and Northern China to three leading e-commerce companies, of which two are existing customers. *Lum Chang: Awarded a $87m contract to design and construct a six-storey ramp-up warehouse at 5B Toh Guan Road East over an 18-month period. Construction to commence Aug ’14. Order book raised to $490m. *Boustead: Partnering Abu Dhabi Investment Council to develop / redevelop modern logistics and high quality industrial facilities in Singapore. The initial combined equity contribution in Boustead Development Partnership (BDP) will be $250m, which will allow investment of up to $600m with leverage. BDP will be the investor for Boustead’s future design-build-and-lease projects. *TEE Land: 49%-owned associate, Chewathai, will acquire a freehold 792-unit shoe-box condo project in Bangkok for not more than THB780m, with the price to be finalized upon project completion (target Mar ’15). *Cosco: Market talk that Sevan Drilling may delay or cancel its US$525m rig contract with Cosco on grounds of late delivery, due to the current weak ultra-deepwater market.