SG Market (23 Oct 14)

US Market: US stocks erased earlier gains and continued thier roller-coaster ride, snapping a four-day winning streak, as weaker oil prices and an attack on Canada’s parliament offset some encouraging economic news. The blue-chip DJIA dropped 153 19 pts to 16,461 (-0.9%), while the broad-based S&P 500 retreated 14 pts to 1,927 (-0.7%) and the tech-heavy Nasdaq Composite lost 37 pts to 4,383 (-0.8). Reflecting increased market anxiety, the CBOE Volatility Index jumped 11% to 17.87. Markets had opened in positive territory in the morning session before a fatal shooting at the Canadian parliament unnerved investors. The decline was also hastened by falling oil prices, which saw US crude slid 2.4% to US$80.52 a barrel, its lowest level since Jun 2012 as US stockpiles surged by 7.1m barrels last week, heightening oversupply and demand concerns. Inflation stayed muted with the CPI rose 1.7% in Sep, well below the Fed’s 2% gaol, giving the central bank room to keep interest rates low. Eight of 10 main industries declined. Energy shares slipped 1.7% for the biggest decline, while utilities advanced 0.6%. Boeing dropped 4.5% on concerns over the high production costs of its 787 Dreamliner aircraft even as it reported higher-than-expected 3Q earnings and lifted its 2014 forecast. Biotech company Biogen slumped 5.4% as 3Q sales of its multyiple sclerosis drug fell short of estimates amid safety issues. Cloud company VMware plunged 7.1% on lower bookings growth. On the upside, both Yahoo (+4.5%) and Broadcom (+5.5%) climbed after 3Q revenues topped estimates. After the bell, AT&T dipped more than 2% as revenue missed expectations. About 7b shares were traded on US exchanges, 12% above the three-month average. Declining issues outnumbered advancing ones by 2.3 to 1 on the NYSE and 2.28to 1 on Nasdaq. S’pore shares are likely to stay on course on its technical rebound from oversold levels despite Wall Street’s retreat but upiside is expected to be capped at the 3,220-3,230 resistance zone with downside support at 3,120. Stocks to watch: *Keppel Corp: Despite weaker profits from property, 3Q14 net profit of $414.2m (-9.5% y/y, +2.0% q/q) was broadly in line with consensus, with 9M14 net profit (-0.2% y/y) forming 74% of full-year forecast. O&M operating margin held firm at 15.0% (2Q14: 14.7%, 3Q13: 16.5%), however net order book fell sharply to $12.7b from $14.1b a quarter ago. While management says enquiries remain healthy, year-to-date orders of just $3.7b suggests there is increasing downside risk to Keppel meeting consensus order win target for FY14e. Maintain Hold with TP $10.74. *SGX: 1QFY15 net profit contracted 16% y/y to $78m, as revenue declined 8% to $169m. Securities revenue tanked 29% to $49.1m, as the daily average traded value fell 27% amid a challenging market conditions and reduced trading volatility. This was partially offset by derivatives revenue (+4%), driven by strong interest in the FTSE China A50 futures and iron ore products. Unchanged interim DPS of 4¢ declared. *Suntec REIT: 3Q14 DPU climbed 1.7% y/y to 2.33¢, while distributable income rose 12.4% to $58.3m. Revenue grew 8.5% to $71.5m, while NPI increased 21.1% to $48.8m, driven by completion of Phase 2 of Suntec City AEI. Occupancy for office and retail were 100% and 98.4% respectively. Aggregate leverage stood at 35.5%, with all-in financing cost of 2.42%. BVPS at $2.056. *Mapletree Industrial Trust: 2QFY15 DPU grew 5.3% y/y to 2.6¢, while distributable income expanded 10.4% to $45.4m. Revenue climbed 6.2% to $77.9m, and NPI rose 4.1% to $56.2m, mainly due to positive rental reversions and new contribution from completed development projects. Occupancy stood at 91.5% with WALE of 2.7 years. Aggregate leverage stood at 33.1%. BVPS at $1.20. *Cambridge Industrial Trust: 3Q14 distributable income inched up 2.5% y/y to $15.8m, while DPU dipped 0.1% to 1.25¢. Gross revenue improved 5% to $25m, while NPI edged 1.8% higher to $19.7m, driven by additional revenue from acquisitions net of divestments and the completion of an AEI. Portfolio occupancy stood at 96% with WALE of 3.7 years. Aggregate leverage of 33.9%, with 3.66% cost of debt, and a term to expiry of 1.9 years. Three AEIs on track for completion in 4Q14 and 1Q15. BVPS at $0.684. *Soilbuild Business Space REIT: 3QFY14 DPU of 1.546¢ and distributable income of $12.5m beat IPO forecasts by 2.1% and 2%, respectively, while gross revenue and NPI of $16.9m and $14.2m beat by 1% and 1.7%. This was due to higher revenue attributable to income from recently-acquired Tellus Marine and lower maintenance costs for multi-tenanted properties. Gearing at 30.3% with cost of debt of 3.08%. Portfolio occupancy at nearly 100%. BVPS remained at $0.80. *Soilbuild Business Space REIT: Acquiring two adjacent factories at 61 & 71 Tuas Bay Drive, along with the equipment onsite, for $55.7m (0.5% discount to NAV). The property, with remaining tenure till 2066, has a gfa of 208,057 sf, and is currently leased to three tenants at $3.7m/year (6.6% yield), subject to 2.5% rental escalation of 2.5% per two years. Post-acquisition, aggregate leverage is expected to increase to 35.6% from 30.3%, while DPU is expected to rise to 2.33¢ (+2.6%). *Hwa Hong: 3Q14 net profit soared 72% y/y to $4.0m, despite an 11% fall in revenue to $4.3m, dragged by lower rental revenue from the UK properties and from investments. Bottom line was buoyed by a one off gain from disposal of investment properties ($6.9m) which helped offset unrealized forex losses. *ST Engineering: Its aerospace arm won $450m worth of contracts in 3Q14. Works include heavy checks and interior modification projects for narrow and wide-body aircraft from international airline customers. *Sunvic Chemical: Completed the first stage of the Rmb3.9b sale of its Taixing plant, involving the initial transfer of a 55% equity interest in the plant for Rmb1.45b. This will positively impact Sunvic’s FY14 results, with the group expected to book a net gain of Rmb762.6m (~$0.30 per share). The balance payment of Rmb2.45b for the remaining 45% stake will be carried out in subsequent stages by Dec ‘16. *Ascott REIT: Acquiring three serviced residence properties (comprising 312 units with total gfa of 20,564 sqm) in Greater Sydney, NSW, Australia, for A$83m ($93m). The purchase price comes at a 2% discount to market value, and the deal is expected to lift proforma FY13 DPU to 8.46¢ (+0.7%). *Sino Grandness: Strongly rejects the baseless and unsubstantiated assertions made in a recent short sell report circulating on the internet. Separately, the group provided the following operational updates on its new Hubei plant which officially commenced production in Oct ’14, and disclosed that it had received ~Rmb300m of indicative orders at the recent Chongqing Trade Exhibition that took place between 7 and 15 Oct. 3Q14 results due on or about 14 Nov. *Communication Design Int’l: Proposed to acquire Richwood Asia I Investments and One Room Mansion for an aggregate $31m (0.85x P/B). Both are trust vehicles which hold the beneficial interest to urban Japanese properties. Post-acquisition, FYJun14 proforma NTA/share is expected to remain at 8.86¢, while EPS will improve 23% to 0.76¢. *Seroja Investments: Its vessel under a JV has been served with an arrest warrant by its customer, Conirma Marine.