SG Market (30 Oct 14)

US Market: US stocks finished with modest losses, off session lows, after the Fed dropped its asset purchase stimulus and gave a hawkish view of the labour market and inflation but kept to its ultra-low interest rate policy. The blue-chip DJIA declined 31 pts to 16,974 (-0.2%), while the broad-based S&P 500 dipped 3 pts to 1,982 (-0.1%) and the tech-heavy Nasdaq Composite lost 15 pts to 4,549 (+1.8%). The CBOE Volatility Index rebounded 5.3% to 15.15 after falling for the past four days. As expected, the Fed confirmed that it will end the last round of its monthly bond-buying programme, citing substantial improvement in labour market conditions and diminishing risk of persistently low inflation. Nevetheless, the central banks retained its commitment to keep interest rates low for a considerable time. The slightly bullish turn by the Fed pushed USD and Treasury yields higher, with the 10Y bond giving 2.34% (+6bps). Commodity, industrial and utility stocks led the losses, while financial and energy shares gained with WTI crude rising for a second day, after the EIA reported a slowdown in growth of US oil inventories. Facebook tumbled 6.1% after projecting its slowest sales growth and increased spending in 4Q, which overshadowed its impressive 3Q earnings. Gilead Sciences declined 2.4% after its 3Q profit missed estimates as sales of its hepatitis drug came in short. Among the outperformers, US Steel (+5.1%), Goodyear (+5.1%) and Newfield Exploration (+10.9%) all jumped after reporting better-than expected-results. BofA gained 1.1% after its CEO declared that legal costs stemming from the housing bust are behind it. After the bell, Visa climbed 3.6% after announcing its 3Q results and a US$5b share buyback scheme. About 7.3b shares traded on US exchanges, 18% above the three-month average. Declining issues outnumbered advancing ones by 1.3 to 1 on the NYSE and 1.2 to 1 on Nasdaq. S’pore shares are likely to be muted following the directionless trading on Wall Street with the STI struggling to break out of the 3,220-3,230 congestion area between the 20 and 50-dma. Immediate resistance sits at the 3,260 level, while downside support lies at 3,180. Among the latest results, OCBC appears to be in line with expectations, while Indofood Agri missed. Stocks to watch: *OCBC: 3Q14 net profit surged 62% y/y to $1.23b, boosted by a one-off gain of $391m arising from a fair value gain on its stake in Bank of Ningbo. Otherwise, core net profit grew 11% y/y to $841m (+6% excluding its 97.5%-owned Wing Hang’s $38m net profit contribution). Net interest income expanded 27% y/y driven by strong asset growth, and as net interest margin improved 5bps to 1.68%. Customer loans swelled 27% y/y to $42.9b, with Wing Hang contributing $24.9b to the increase. Excluding Wing Hang, loan growth of 11% was broad based, led by general commerce loans, housing loans and loans to individuals. Although non-interest income was flat at $801m (+3%), fee and commission income jumped 16% to a new high of $406m, driven by strong growth in wealth management, loan and trade fees. Operating expenses were 28% higher y/y from consolidation of Wing Hang and higher staff costs. Asset quality remained healthy, with NPL ratio of 0.7% (-0.1ppt y/y). Capital position remained strong post acquisition of Wing Hang, with CET1 and Tier 1 at 13.2%. BVPS of $7.22. *IndoAgri: 3Q14 net profit flat at Rp124.8b (+1.6%), mainly due to higher contribution from non-controlling interests (+38% to Rp82b). Revenue grew 17.1% y/y to Rp3.6t, driven by the plantation division (+31%) which benefitted from both higher sales volume and average selling prices of palm products. Revenue from the EOF division grew at a slower 7% on higher average selling prices for edible oil and fat products. For 9M14, the group continued to deliver strong palm production with FFB nucleus production of 2.4m mt (+18%), and CPO production of 707k mt (+25%). BVPS at $1.065. *ParkwayLife REIT: 3Q14 DPU and distributable income each rose 8.9% y/y to 2.9¢ and $17.6m, respectively. Revenue grew 8.5% to $25.3m, and NPI climbed 8.6% to $23.7m, mainly driven by the Japan properties acquired in 2H13 and 1Q14, and higher CPI adjusted rent renewals, helping to offset the Yen depreciation. Aggregate leverage stood at 34.6%, with all-in cost of debt of 1.43%. There are no major refinancing needs till FY16. BVPS of $1.63. *Creative Technology: 1QFY15 net loss widened to US$9.8m from a net loss of US$5.5m a year ago. Revenue fell 20% y/y to US$24.3m, due to the uncertain and difficult market conditions which continued to affect the sales of the group’s products. Gross margin was relatively unchanged at 28%, while bottom-line was weighed by other losses of US$3.6m (1QFY14: other gains of US$1.4m) comprising mainly FX losses. *Hoe Leong: Turned profitable in 3Q14, posting net profit of $0.6m as revenue grew 4.4% y/y to $19.2m; nevertheless at 9M14, the group’s losses were still more than double y/y at $3.9m. During the quarter, revenue growth in Vessel Chartering (+105.8% y/y to $3.5m) helped offset a dip in revenue from Design & Manufacture (-4.4% y/y to $10.7m) and Trading & Distribution (-9.3% y/y to $4.9m). Bottom line was helped by smaller FX losses (-$0.1m vs -$0.8m) and lower share of losses of associates and JVs (-$0.3m vs -$0.7m). BVPS at $0.223. *Yongnam: Its consortium with Changi Airport and Japan’s JGC Corp has secured a US$1.4b contract to build and operate the Hanthwaddy International Airport in Yangon under a 30-year concession. Slated for completion by Dec ’19, this will be Myanmar’s second international airport. *Ezion: Commonwealth Bank of Australia has increased its stake from 7.84% to 8.05% for its client funds via the purchase of 3.4m shares at an average price of $1.48 in the open market. *SMRT: Launched Hailo, a taxi booking smartphone app touted as the world’s highest rated app which is used by more than 1.4m passengers in London, NYC, Ireland, Madrid, Barcelona, Osaka and Singapore. SMRT is joined by Prime Taxi in supporting this new platform. *Olam: Acquired a 20% stake in ProClass, the largest independent cotton testing and classing house in Australia. Upon completion, Olam Australia will move its cotton classing processes to ProClass facility in Goondiwindi. *Europtronic: Received requisition for EGM for vote of no confidence requiring the executive directors to step down. Previously, a letter had been submitted through SGXnet by seven shareholders demanding clarification on the state of affairs of the company and the lack of direction thereof, to which the company had ignored. In response, Europtronic invalidates the requisition and said queries will be addressed in the upcoming quarterly announcement.