SG Market (07 Nov 14)

US Market: US stocks climbed to new record highs for a second day in a row on positive policy and macro news as the ECB pledged to expand its stimulus measures to bolster the struggling euro zone and US jobless claims dropped to a 14-year low. The blue-chip DJIA advanced 70 pts to 17,485 (+0.6%), while the broad-based S&P 500 gained 11 pts to 2,024 (+0.6%) and the tech-heavy Nasdaq Composite added 18 pts to 4,638 (+0.4%). The CBOE VIX index fell 3.5% to 16.37. Investors cheered comments by ECB President Mario Draghi signaling that policy makers stand ready to take further stimulus action if necessary to ward off deflation and support the euro economy. As expected, the central bank held its key interest rates unchanged. Meanwhile, US weekly jobless claims fell 10,000 to 278,000, below consensus forecast of 285,000, fuelling optimism in the economy. Analysts are expecting Fri’s non-farm payroll report to show the economy added 235,000 jobs in Oct. Industrial shares, which are tied to the pace of economic growth, rose 1.1%, while the defensive utility and telecom sectors declined more than 0.8% as investors risk appetite grew. Energy shares gained despite WTI crude oil sliding 1% to US$77.91 per barrel after OPEC cuts its longer term demand forecast in the face of rising North American shale production. Electric car maker Tesla surged 4.4% after it prrojected several years of 50% growth as 3Q sales nearly doubled. Grocery chain Whole Foods rallied 12.2% after its 4Q profit topped estimates on market share gain. On the downside, Genworth Financial plunged 38.5% after posting a quarterly loss of US$844m, weighed by higher insurance costs, while chipmaker Qualcomm tumbled 8.6% after disclosing ongoing antitrust probe by China, as well as US and European regulators conducting checks on its licensing and phone-chip businesses. Trading was volatile with 6.8b shares exchanging hands on US exchanges, 6% above the three-month average. Advancing issues outnumbered declining ones by 1.3 to 1 on the NYSE and 1.4 to 1 on Nasdaq. S’pore shares are likely to pull back as the STI nears the 3,310 resistance level, with Stochastics indicators appearing a little stretched. Latest batch of results from SIA, SCI, STE and Sing Post were uninspiring and unlikelt to spur the market much higher. Downside risk remains at the 3,230 level. Stocks to watch: *Sembcorp Industries: 3Q14 results below consensus, as net profit fell 23% y/y to $197m, dragged by a 34% drop in Utilities earnings to $114m. Nevertheless, excluding one-off gains from the Salalah IPO and impairment for Teesside UK booked last year, Utilities core net profit would have achieved a 10% growth. Revenue edged up 3% y/y to $3.07b, on higher revenue recognition for rig building and offshore and conversion projects in the Marine segment, as well as higher gas offtake and steam demand for the Singapore Utilities operations, which partially offset de-consolidation of Salalah and lower High Sulphur Fuel Oil prices. *SIA: 2QFY15 net profit plunged 43% y/y to $90.9m, dragged by sharp losses at Tigerair. Revenue was flattish at $3.9b, though operating profit jumped 52% y/y to $131.7m, helped by lower fuel price and capacity reductions. SIA booked a $44.4m surplus on disposal of aircraft, spares and spare engines, but this was eroded by the $104m share of losses from associates (mainly Tigerair). Interim dividend halved to 5¢. BVPS at $11.26. *ST Engineering: 3Q14 net profit slipped 7.7% y/y to $121.3m, taking 9M14 net profit to $391.7m (-5.2%). Revenue was flat at $1.6b, with higher revenue from the Marine sector (+13.7%) largely offset by lower revenue recorded by the Aerospace sector (-7.4%), while revenue for the Electronics and Land Systems sectors were comparable y/y. Gross margin slid 0.9 ppt to 21.5% from a year ago. Bottom line was further weighed by a 17.5% rise in other operating expenses to $35.5m, due to impairment losses on intangible assets in the Land Systems sector. Order book at $13.2b. *Yangzijiang: 3Q14 net profit was flat at Rmb811.2m (-1% y/y), taking 9M14 net profit to Rmb2.8b (+21%). Revenue edged up 2% to Rmb3.7b, as revenue from the shipbuilding-related segment remained stable at Rmb3.3b, though revenue from the investment segment rose 24% to Rmb433.0m, led by increased contributions from held-to-maturity investments as well as the micro finance business. Gross margin slipped 1.2 ppt to 28.4%. Other income dropped 46% to Rmb68.7m due to lower interest income earned from bank deposits, and other gains declined 25% to Rmb74.7m due to lower subsidy income and FX gains. Shipbuilding order book at US$4.6b. BVPS at Rmb 5.14 ($1.08). *Sing Post: 2QFY15 net profit increased 5.5% grew to $37.6m. Excluding one-offs (namely restructuring costs last year), underlying net profit edged up 0.8% to $37.5m. Revenue rose 8.1% to $220m, mainly driven by ecommerce related activities, particularly in the logistics segment (+15% to $109m). Group operating margin inched down 0.2ppt to 21.3% as total expenses rose 10.2% to $188.7m on higher labor expenses. Interim DPU of 1.25¢ maintained. *Far East Hospitality: 3Q14 DPU declined 6.4% y/y to 1.32¢, dragged by dilution from an enlarged unit base, while distributable income dipped 3.1% to $23.5m. Gross revenue and NPI slipped 1.0% and 1.2%, to $31.1m and $28.2m, respectively, hurt by a protracted challenging operating environment. While average occupancy for its hotels improved 0.8 ppt to 87.1%, lower rates dragged RevPAR to $160 (-3.9%). RevPAU for the serviced residences was flat at $230 (+0.3%). Aggregate leverage stood at 31.4%, with debt to maturity of 2.5 years and debt cost of 2.2%. BVPS at $0.976. *CWT: 3Q14 net profit and revenue both swelled 70% y/y to $32.5m and $3.8b, respectively. All business segments expanded, with the largest growth coming from Commodity Marketing and Financial Services. Gross margin roughly flat at 2.36% (-0.4 ppt). BVPS at $1.23. *Hafary Holdings: 1QFY15 net profit soared 60% y/y to $3.2m. Revenue rose 15% to $27m, driven by improved sales of tiles and building materials in both the general (+2.3%) and project (+28.2%) segments. Gross profit margin improved 0.5 ppt to 39.1%. 1¢ interim DPS declared (1QFY14: nil). *Neratel: 3Q14 net profit advanced 7.5% y/y to $3.5m taking 9M14 net profit to $11.6m (-40.9%). Revenue dipped 1.0% to $49.7m due to lower turnover from the Telecom business segment (-30%), partially offset by higher turnover from the Infocomm business segment (+21.5%). Gross margin was relatively stable at 30.2%, while bottom line was largely aided by a 38.6% drop in taxation expenses to $0.7m. BVPS at $0.156. *Hiap Hoe: 3Q14 net profit evaporated to a mere $0.6m (-98% y/y), as revenue dived 26% to $58.0m, due to softer sales income from development properties. Admin expenses surged (+$20.8m) due to the acquisition of SuperBowl (+$12.5m), investment properties in Australia (+$0.8m) and a $7.5m stamp duty. BVPS almost doubled to $1.52 following the SupoerBowl acquisition. *FJ Benjamin: 1QFY15 net profit surged 180% y/y to $1.1m, buoyed by a tax credit of $0.2 (1QFY14 tax expense of $1m). Revenue fell 21.5% to $75.4m, as contribution from the fashion business declined 13% to $59.7m, and sales of timepieces tumbled 44% to $15.3m. Gross margin improved 2 ppt to 44%. BVPS at $0.183. *United Engineers: Its 41.45%-owned Multi-Fineline Electronix (NASDAQ-listed) returned to profitability in 4QFY14, posting a net profit of US$5.9m (4QFY13:-US$18.5m). *Tiong Seng: plunged into $11.5m losses in 3Q14 despite 10%y/y jump in revenue to $161.5m. Cost of sales of development properties and other expenses surged $26.3m and $17.1m respectively, mainly due to fair value reduction in development properties. BVPS = 27.48cents. *Challenger: 3Q14 earnings slipped 10% y/y to $3.6m on the back of 16% y/y drop in revenue to $82.5m as cessation of Malaysia retail and lower Malaysia corporate sales more than offsets higher sales from Singapore retail. BVPS = 17.73cents. #TIH: turned profitable in 3Q14 with bottomline earnings of $0.436m, but has another $11.4m fair value loss on available-for-sale investments. BVPS decreased from $0.49 in Dec13 to $0.42 in Sep14. *RH Petrogas: completed 2D seismic acquisition program in onshore Sarawak, data interpretation and analysis to follow *Uni-Asia: 3Q14 profits plunged 89% y/y to US$0.281m on 8% y/y decline in revenue as increases in Fee (+20% y/y to US$6.8m) and Hotel (+8% y/y to US$9.7m) are offset by lower Investment (-86% y/y to US$0.4m), Interest (-23% y/y to US$0.2m) and Other (-88% y/y to US$0.1m). Company is looking to expand its recurrent fee-based business. BVPS = US$0.30.