SG Market (31 Oct 14)

US Market: US stocks powered higher on the back of a surprisingly strong 3Q GDP growth estimate and solid earnings reports from two credit card companies. The blue-chip DJIA rallied 221 pts to 17,195 (+1.3%), with Visa (141 pts) and Merck (+71 pts) contributing to the bulk of the gains, while the broad-based S&P 500 advanced 12 pts to 1,995 (+0.6%) and the tech-heavy Nasdaq Composite added 17 pts to 4,566 (+0.4%). Confirming the Fed’s upbeat view of the economy, the first reading of 3Q GDP came in at a better-than-expected 3.5%, led by a rise in government spending and a shrinking trade deficit. Separately, weekly jobless claims ticked up 4,000 to 287,000 but remained below 300,000, pointing to an improving labour market. In corporate earnings, Visa (+10.2%) and MasterCard (+9.4%) took centre stage after the two payment network companies reported earnings results that topped estimates on higher customer spending Healthcare stocks got a boost from Bristol-Myers Squibb (+8.9%) after a clinical trial of its lung cancer drug showed encouraging results. Other blue-chip winners included Merck (+2%), Johnson & Johnson (+1.4%), DuPont (+1.3%) and Pfizer (1.2%). Technology stocks took a beating, led by Intel (-4%) after some chipmakers turned in disappointing results, dragging down Facebook (-2.3%), Microsoft (-1.2%) and Texas Instruments (-1.7%). Energy shares were also big losers as oil prices fell after two days of modest gains, with WTI shedding US$1.08 to US$81.12 a barrel, on higher US oil production, which rose to its highest level since the 1980s. Halliburton declined 0.9% while Transocean lost 1.4%. Among other stocks in focus, NY Times fell 4.9% despite narrowing its 3Q loss and touting progress in the digital space, while Avon Products tumbled 9% after 3Q earnings missed estimates. About 6.9b shares traded on US exchanges, 12% above the three-month average. Advancing issues outnumbered declining ones by 1.8 to 1 on the NYSE and 1.7 to 1 on Nasdaq. S’pore shares are poised to march higher following the positive leads from Wall Street as well as earnings beat from both UOB and DBS. Having broken out of the 3,220-3,230 congestion area yesterday, the STI is headed towards the next resistance at 3,260. Donwside support can be found at 3,180. Stocks to watch: *UOB: 3Q14 results beat, with record quarterly net profit of $866m (+7% q/q, +19% y/y). After a weaker 2Q14, the operating trends turned more positive, and we expect the market to view this set of results positively. Net interest income expanded 11% y/y, driven by net customer loans growth of 11% and supported by a stabilised net interest margin of 1.71%. Non-interest income provided the main kicker, surging 62% y/y to $341m, boosted by fees +16.8% y/y) and net trading and investment income of $258m (+80.4% y/y). Singapore housing NPLs edged higher by 12.3% q/q for the second consecutive quarter, but management does not foresee any more to come. BVPS at $16.51. *DBS: Strong 3Q14 results that beat estimates, with net profit of $1b (+17% y/y), posting its third straight quarter of growth. Net interest income expanded 14% y/y to $1.6b, driven by loans growth of 8%, and improvement in net interest margin to 1.68% (+8bps), the highest in nine quarters. Non-interest income jumped 23% to $912m, with growth across the board in fee income (+20%), investment banking (> +100%), wealth management (+39%), income from treasury customer flows (+23%), and trading gains. NPL ratio remained stable at 0.9% with allowance coverage near historical highs at 160%. Management continues to see “very strong earnings momentum” fuelled by broad-based growth across its businesses. BVPS at $14.46. *Starhill Global REIT: 3Q14 DPU rose 5% y/y to 1.27¢, taking 9M14 DPU to 3.76¢ (+5.0%). For the quarter, gross revenue inched down 0.4% to $48.6m, mainly due to weaker contribution from Renhe Spring Zongbei Property and Japan Properties, although NPI rose 4.1% to $39.6m. Other property expenses fell 44.5% to $2.2m, helped by lower operating expenses incurred by the Singapore properties, Japan properties and Renhe Spring Zongbei property. Annualized 3Q14 DPU yield stands at 6.4%, with BVPS at $0.92. *Tuan Sing: 3Q14 net profit tripled y/y to $17.5m, as revenue soared 84% to $100m, bringing 9M14 net profit to $37m (+38% y/y), and revenue to $243m (+2% y/y). For 9M14, revenues were underpinned by progressive revenue recognition for units sold at Seletar Park Residence and Sennett Residence, as well as an initial 20% recognition on new bookings at Cluny Park Residence. Gross margin improved 1.7ppt to 18.4%. BVPS at 66.4¢ *MTQ: 2QFY15 net profit dipped 3% y/y to $5.3m, despite the 24% jump in revenue to $80.3m, lifted by financial consolidation of the Binder Group, and higher revenue from Neptune and Bahrain. Bottom line was weighed by a 4.2ppt decrease in gross margins to 32.8%. Interim DPS flat at 2¢. *CH Offshore: 1QFY15 net profit contracted 25% y/y to US$5.6m, despite revenue rising 15% to US$9m on higher utilization of its fleet of vessels. Bottom line was impacted by normalization of cost of sales, which was a credit in 1QFY14 due to reversal of certain provisions for two vessels. BVPS at US$0.348. *Yamada Green: 1QFY15 net profit surged more than seven-fold y/y to Rmb4.8m, on revenue of Rmb56.0m (+39.5%), and a rise in gross margin to 32.4% f(+3.7ppt). The stronger top-line was derived from higher sales of processed food products (+25%) and new contributions from moso bamboo trees. *Asia-Pacific Strategic Investments: With regard to the proposed acquisition of Coeur Gold Armenia, the vendor provided a reserves calculation report update that showed the Azatek Mine has 183.8 tons of gold and 4,060.86 tons of silver, representing a significant increase to the previous estimate. The company has commissioned another consultant to verify the estimates and will provide further updates accordingly. *Boustead: Its energy-related engineering division has secured $33m contracts from the O&G industries globally. These contracts include the design, process engineering and supply of key large-scale direct-fired process heaters, waste heat recovery units and process control systems for upstream and downstream O&G developments across the world. This brings the group’s order book backlog to $520m. *Keppel T&T: Confirmed that efforts for an IPO for a data centre REIT on the SGX mainboard is currently underway. A successful listing will make this the first data centre trust in Asia.