SG Market (05 Nov 14)

US Market: US stocks ended mostly lower amid global growth concerns as another big drop in oil prices dragged down energy shares and weak forecasts from Sprint and Priceline disappointed. The blue-chip DJIA ticked up 18 pts to 17,384 (+0.1%), while the broad-based S&P 500 dipped 6 pts to 2,012 (-0.3%) and the tech-heavy Nasdaq Composite lost 15 pts to 4,624 (-0.3%). In economic news, factory orders fell 0.6% in Sep, while the trade deficit widened as exports cooled and imports remained flat. Adding further jitters to the market, the European Commission cut its growth forecast for the euro zone to 0.8% from 1.2% for this year ahead of Thu’s ECB meeting. Energy shares were pounded for the second straight day, sliding 1.9% as a group, as US crude touched a three-year low of US$75.84 a barrel following the Saudi export price cut. Chevron (-1.2%), ExxonMobil (-0.8%) and Transocean (-5.3%) all retreated. Airlines were amongst the biggest gainers up 2.8% as the slump in oil prices boosted their earnings prospects. Delta Air Lines climbed 4.2%, as with United Continental and American Airlines, both rising 1.7%. Sprint plunged 16% after wireless carrier lowered its earnings forecast for the year, citing ongoing loss of subscribers, while Priceline tumbled 8.4% despite 3Q revenue topping estimates, as its 4Q revenue forecast fell short of expectations. Chinese e-commerce giant Alibaba advanced 4.2% to US$106.07, a new high after reporting a 15% gain in 3Q profit to US$1.1b in its first earnings release since IPO. Fashion apparel maker Micheal Kors slumped 8.4% after same store sales missed estimates and gave a disappointing outlook, while L Brands (+2.5%), the owner of Victoria’s Secret lingerie brand, and Office Depot (+25%) jumped after raising their forecasts. After the bell, TripAdvisor tanked 13.9% following the release of its results. About 7b shares were traded on US exchanges, 10% above the three-month average. Declining issues outnumbered advancing ones by 1.5 to 1 on the NYSE and 1.3 to 1 on Nasdaq. The session closed with all eyes on the US mid-term elections where a handful of hotly contested Senate seats could determine if there would be a post-election rally or more market volatility. S’pore shares are likely to consolidate its gains following the edgy close on Wall Street as traders take some chips off the table after the big run the past two weeks. Expect the STI to pull back slight before resuming its uptrend. Immediate resistance for the benchmark index is seen at 3,310 with downside support at 3,230. Stocks to watch: *SIA Engineering: Disappointing 2QFY15 results, as net income fell by a sharp 41% y/y to $42.1m. There were multiple headwinds, as revenue declined 3% to $285.2m (driven by lower airframe and component overhaul sales) coupled with a 1.5% rise in operating expenses to $269.3m (arising from higher subcontract costs), compressing EBIT margins to a wafer thin 5.6% (1QFY15: 7.0%, 2QFY14: 9.7%). Interim DPS lowered to 6¢ (1HFY14: 7¢). Current valuations (30x P/E, 3.3% yield) look stretched against a challenging outlook. Maybank-KE reiterates Sell. *OUE: Posted a 3Q14 net profit of $26.1m (3Q13 net loss: $6.2m), aided by a 48% reduction in finance expenses to $13.2m, a 177% surge in share of JV and associate’s profits to $13m, a $3.6m gain in fair value of investments and an absence of a $5m loss on disposal of subsidiaries. However, revenue tumbled 10.8% to $106.3m, mainly due to lower contribution by hospitality and development property divisions, partly offset by higher dividend income. BVPS at $4.06. *Roxy-Pacific: 3Q14 net profit slumped 23% y/y to $12.4m, weighed by fair value loss on FX swaps and higher finance cost, mitigated by a tripling of associate income related to the sale completion of strata units in HK. Revenue declined 12% to $67.2m, mainly from Property Development (-19%), partly offset by Property Investment (+581%) and Hotel Ownership (+2%) segments. BVPS at $0.30; RNAV at $0.67. Separately, Roxy is relaunching its freehold Trilive condo at Kovan with ~8% price reductions on selected units. The 222-unit project has sold only about 20 units to date. *PCRT: Flat 3Q14 distributable income of $10.9m and DPU of 0.95¢, which continue to be supported by the existing earn-out deed. Revenue soared 287% y/y to $5.2m, while NPI swung to $2.1m (from -$2m a year earlier), mainly due to improved performance from Perennial Jihua Mall in Foshan (opened Aug ’13), and new contributions from Perennial Qingyang Mall in Chengdu (opened Apr ‘14). BVPS at $0.75. *Riverstone: 3Q14 results were in line. Net profit rose 5.2% to RM16.5m, and revenue grew 9.2% to RM102.7m, driven by higher demand for gloves and efficiency improvements to increase production volume. Gross margin dipped 2.1ppt to 25.8%, as higher costs from a gas price hike in May were passed on to customers only in Jun (50%) and Jul (50%). Riverstone remains undervalued at 12x FY15e P/E. Maybank-KE keeps at Buy with TP $1.21. *BreadTalk: In line 3Q14 results. Net profit rose 15.6% y/y to $3.9m, on revenue growth of 8.3% to $154.5m. For 9M14, net profit edged up 3.8% to $8.3m, while revenue grew 11.6% to $434.8. For the nine months, revenue contribution improved across the Bakery (+10.2% y/y), Restaurant (+13.5%) and Food Atrium divisions (+17.9%), though the group experienced significant cost pressures from wages and rental in Singapore and Mainland China. BVPS at $0.344. *Valuetronics: Disappointing 2QFY15 results, with net profit down 8% y/y to HK$36.3m. Revenue slipped 1% to HK$627.6m, mainly dragged by a slowdown in demand in its LED lighting segment. Bottom line was weighed by lower ASP which resulted in lower gross margin of 13.1% (-0.2 ppt), as well as increased admin expenses (+17%) from higher headcount. Cash per share stood at $0.19. BVPS at HK$1.95 ($0.32). *Rickmers Maritime: Sank into a 3Q14 net loss of US$53m, reversing from a net profit of $13.1m a year earlier. Revenue fell 10% y/y to US$33m, on reduced charter rates for two vessel charters renewed in 1Q14. Bottom line was weighed by a US$44.5m provision for impairment for six vessels and $18.6m impairment of goodwill. Excluding the one-offs, core net profit would have been US$10m. Unchanged interim DPS of US0.6¢. BVPS at US$0.58. #Charisma Energy: Posted 3Q14 net profit of US$0.5m (from a loss of US$0.2m a year ago), on US$1.3m revenue (3Q13: nil), driven by commencement of new businesses - the leasing of hydro-electric power generation equipment (HEPGE) and chartering of an OSV. BVPS as US0.6¢. Separately, in response to a trading query from SGX, Charisma says it is planning to implement a multicurrency debt issuance program. *Tiong Seng: Awarded a $276m contract to design and build 1,327 units,a 4-storey carpark, swimming pool and ancillary facilities for the Choa Chu Kang Grove EC project. Completion is expected by 2020. Current order book stands at $1.4b. *Tritech: Awarded a $11.5m contract “Proposed Sewers in Woodlands Road Area” by PUB. Works to take place over mid-Nov ’14 to Mar ‘17. *Serrano: Secured a ~$20.7m interior fit-out contract from main contractor Who Hup, for a private condo project at Pasir Ris Grove. Project completion is expected by Jan ’18. This brings the group’s order book to $83.9m. *Singapore Medical Group: Proposed placement of 27m shares at $0.162 apiece to 12 individual parties. Separately, group proposed to undertake a 1-for-10 renounceable non-underwritten rights issue at $0.153 each.