SG Market (06 Nov 14)

US Market: US stocks soared, sending benchmark indices to fresh highs after the Republicans scored a resounding victory in mid-term elections, sparking hopes for more pro-business and energy-friendly policies. The blue-chip DJIA jumped 101 pts to a new record of 17,485 (+0.6%), along with DJ Transport and DJ Utilities in a rare occurrence when all three Dow averages hit all-time highs. This happened 26 times in Dow’s history, with the last event occurring in Apr 2007. The broad-based S&P 500 advanced 44 pts to 2,024 (+0.6%) but the tech-heavy Nasdaq Composite dipped 3 pts to 4,621 (-0.1%) on weakness in biotehnology and Internet shares. Investors welcomed the results of the mid-term elections, which saw the Republicans take control of both the House and Senate, allaying fears of political gridlock from a divided Congress and government shutdowns from debt defaults, and raising prospects for tax and energy reforms, including more support for oil and gas pipelines and crude and natural gas exports. According to the Stock Trader’s Alamac, post mid-term election rallies have produced average six-month equity returns of 16% in the past 65 years, regardless of the outcome. Sentiment was further buoyed by positive economic data which showed that the US private sector added 230,000 jobs in Oct, exceeding the 220,000 forecast. This could raise hopes for Fri’s closely watched official payrolls report. Separately, US service sectors grew at a slower pace in Oct but was still faster than the expansion in first half of the year. Not surprising, energy shares extended their advance by another 1.8% on the back of the Republican victory and higher oil prices as US crude oil rebounded 1.9% to US$78.68 per barrel, following a report showed that a smaller-than-projected increase in US supplies. Devon Energy (+10%), Chesapeake Energy (6.9%) and EOG Resources (+6.5%) all rallied for the best gains in the sector. Coal producers Alpha Natural Resources (+16.8%) and Peabody Energy (+4.8%) surged on expectations that the Republicans will lift restrctions on carbon emissions. Banking stocks also rose with Citigroup (+1.6%), JPMorgan (+1.5%) and BofA (+0.8%) all posting gains. Hospital operators Tenet Healthcare (-3.1%) and Community Health Systems (-3.3%) fell on concerns that Obamacare will be repealed. Technology stocks fell, led by Google (-1.5%), Intel (-2.3%) and Amazon (-2.1%). Among other stocks in focus, Time Warner jumped 4% after earnings topped estimates led by higher fees for its TV channels, while Marks & Spencer surged 9.7% after raising its full year earnings forecast. On the downside, TripAdvisor plunged 14.1% after reporting a drop in 3Q earnings despite strong revenue growth. About 6.4b shares were traded on US exchanges, on par with the three-month average. Advancing issues outnumbered declining ones by 1.4 to 1 on the NYSE and 1.3 to 1 on Nasdaq. Investors will have their eyes fixated today, where the ECB is scheduled to meet for the first time since the BOJ widened its monetary stimulus. S’pore shares are likely to continue where it left off yesterday following a massive outage, which crippled SGX trading systems for the afternoon session. Immediate resistance for the STI is capped at 3,310 with downside support at 3,230. Stocks to watch: *Sembcorp Marine: 3Q14 net profit of $132m (+1.8% y/y, +0.3% q/q) missed expectations on weaker margin and flat ship repair revenue. Revenue grew to $1.7b (+3.2% y/y, +28% q/q) on higher revenue recognition for rig building and offshore conversion projects. Operating margin dipped q/q to 10.0% (2Q14: 11.5%, 3Q13: 10.1%), attributable to conservative recognition during procurement phase of two Sete Brazil drillships. Year-to-date, the group secured $4.2b of contracts, bringing order book to $12.6b with deliveries till 2019. *StarHub: 3Q14 in line. Net profit rose 2.6% y/y to $97.7m, as revenue edged up 2.3% to $592m. Service revenue dipped 0.6%, mainly due to weak broadband revenue and a flattish mobile business. Bright spots were found in Pay TV (positive net-add and stable ARPU) and fixed network services (stronger enterprise business), each growing revenue by 2% - 3%. Management maintained full year EBITDA margin guidance of 32% (9M14: 33.7%) suggesting a weaker 4Q, with margins to be under pressure from the new iPhone 6 and Samsung Note 4 launches. Quarterly DPS of 5¢ maintained. *Ezion: 3Q14 net profit jumped 30% y/y to US$49.5m, taking 9M14 net profit to US$140.0m (+16%). For the quarter, gross margin improved 2.8 ppt to 51.0%. Bottom line was also boosted by a tripling in other income to US$5.9m arising from higher FX gain and fees charged to JVs. Revenue advanced 25% to US$94.9m, led by chartering contributions from the deployment of additional units of the group's liftboat and service rigs. *Ascott Residence Trust: Although 3Q14 distributable income rose 8% y/y to $32.3m, DPU contracted 11% y/y to 2.11¢, due to dilution from the 1-for-5 rights issue (Dec '13). Both revenue and gross profit grew 9% to $93.7m and $48.8m, respectively, driven by additional contribution from new properties acquired in 2014, partially offset by a decrease in revenue from the cessation of operations for Somerset Grand Fortune Garden Property Beijing arising from the ongoing strata sale of units. RevPAU slipped 4% to $128, mainly due to weaker performance in Singapore and Vietnam properties and lower average daily rate from the China properties acquired in Aug '14. Aggregate leverage increased 3.6 ppt to 40%, with effective borrowing rate maintained at 2.9% and weighted average debt to maturity of 3.8 years. BVPS at $1.35. *Hyflux: Adjusted for $11.8m of dividends attributable to the perpetual securities holders, the group reversed into a 3Q14 net loss of $0.6m, from a net profit of $19.3m a year ago. Revenue plunged 46% y/y to $101.0m, due to the timing of project commencement, with the slowdown coming mainly from the municipal sector. Management expects 4Q14 to remain slow due to the mixed global economic conditions, and warned that the delay in the connection of the national power grid to the Tuaspring power plant would incur operating costs over the next few quarters. BVPS at $0.62. *Maxi-Cash: 3Q14 net profit doubled y/y to $0.7m, albeit from a low base. Gross margin improved 5 ppt to 30.5%, helping to offset a 2% dip in revenue to $27.9m, and higher wages and depreciation from newly opened stores. Net gearing ballooned from 1x to 1.7x over 9M14, as borrowings swelled 55%. BVPS at $0.113. *Rowsley: Reported 3Q14 net profit of $52.6m, of which $52.1m was attributable to re-measurement gains on RSP Architects. The latter is formulated to be inversely correlated with Rowsley’s stock price. Otherwise, Rowsley achieved core net profit of $0.5m on $21.0m of revenue. BVPS at $0.123. *Tiong Woon: 1QFY15 net profit fell 24% y/y to $3.5m, as revenue dropped 17% to $36.8m, driven by a decline in all segments - heavy lift and haulage (-10% to $32.8m) and engineering services (-83% to $0.3m) on lower projects undertaken. BVPS at $0.57. *Kim Heng Offshore & Marine: 3Q14 net profit plummeted 62% y/y to $1.2m, as gross margin tumbled 7 ppt to 36%, due to a change in mix towards less profitable businesses. Revenue fell 23% to $13.8m, due to further delays in the arrival of drilling rigs and offshore support vessels. BVPS at $0.14. *Far East Orchard: 3Q14 net profit fell 18% y/y to $4.4m, revenue tripling to $94.8m, as expenses quadrupled with the addition of new hospitality business acquired in 4Q13. Management is aware of Singapore’s market conditions and will selectively expand its hospitality business by acquiring strategic assets. BVPS at $2.92. *Profit warnings: Beng Kuang, HengYang PetroChemical Log