SG Market (11 Nov 14)

US Market: US stocks pushed to fresh records in thin trading as health and transport shares rallied amid sharp drops in gold and oil prices. The blue-chip DJIA advanced 40 pts to 17,614 (+0.2%), breaking its all-time high for the fourth session, while the broad-based S&P 500 gained 6 pts to 2,038 (+0.3%) and the tech-heavy Nasdaq Composite added 19 pts to 4,652 (+0.4%). Market volatility as measured by the CBOE VIX index slipped 3.4% to 12.67, its lowest level in seven weeks. Oil prices extended recent losses with US crude below US$78 a barrel, helping the transport stocks (+1.3%) such as railroads and airlines,with Union Pacific (+1.8%) and JetBlue (+4.2%) leading the gainers. On the flip side, energy stocks sold off 0.8%. Heathcare rebounded 1% after its 0.9% decline yesterday, which was prompted by news of a pending review of the Obamacare health bill by the Supreme Court that would hear a challenge to the subsidies that help Americans pay their insurance premiums. Homebuilders also outperformed (+1.3%), after Toll Brothers (+2.3%) guided for sales to beat estimates, sending rivals Lennar Corp (+1.7%) and PulteGroup (+1.8%) higher. Among tech stocks, Amazon gained 1.8%, while Chinese e-commerce giant Alibaba soared 4% to US$119.15 ahead of Tue’s Singles Day in China, which has become the biggest day of online sales globally. Internet service providers Time Warner Cable (-4.9%), Comcast (-4%) and Charter Communications (-6.2%) were all badly hit after President Obama called for rules to protect the open Internet and prevent differential charging based on broadband access and speeds. Dendreon plunged 81% after the maker of prostate cancer treatment filed for bankruptcy, while Merck fell 0.9% following the failure of tests for an accelerated hepatitis drug. Among other stocks in focus, Dean Foods jumped 14% after reporting 3Q results which topped estinates, while Abercome & Fitch retreated 2.8% following a broker downgrade. About 6.1b shares were traded on US exchanges, 5% below the three-month average. The S&P 500 has rebounded 9.4% from its mid-Oct low, buoyed by better-than-expected corporate results and strong economic data. Amongst the S&P 500 companies that have reported earnings so far, 80% beat earnings estimates, raising hopes that the economy would be sturdy enough to weather a global slowdown and end to Fed’s stimulus. S’pore shares may attempt to break out of its resistance levels as Asian bourses continue the upward march in tandem with Wall Street. A break of the downward resistance line at 3,310 would open the door for the STI to head towards the next stop at 3,360. Downside support is seen at 3,270. Stocks to watch: *ARA Asset Management: 3Q14 net profit jumped 52% y/y to $31.4m, roughly keeping pace with the 60% surge in revenue to $52.8m. Top line growth was mainly driven by, i) an increase in recurring management fees (+15% to $32m) from better asset performance and fee contributions from its Reits, and ii) performance fees of $16.1m (nil in 3Q13) receivable from the ARA Harmony Fund for achieving strong returns for its investors. Group AUM increased to ~$26.1b as at 30 Sep, backed by AUM growth of over $1b year-to-date, partially offset by divestment of assets within its ADF 1 portfolis. *Silverlake Axis: 1QFY15 net profit rose 17% y/y to RM59.7m, as revenue climbed 15% to RM116.3m, driven by software licensing (+84% to RM38m) and maintenance and enhancement services (+22% to RM56m), offset by software project services (-43% to RM12.6m) and sale of software and hardware products (-78% to RM0.8m). Backed by a favorable mix, gross margin jumped 7ppt to 65%. Bottom line was further boosted by a 164% jump in share of associate’s profits arising from higher contribution of Global InfoTech. Interim DPS of 0.8¢ maintained. BVPS at RM0.30. *Nam Cheong 3Q14 results came in ahead of estimates, as net profit more than doubled to RM126.3m (+115% y/y), taking 9M14 net profit to RM260.7m (+93%). Revenue jumped 81% to RM618.6m, led by the shipbuilding segment (+86%) which was underpinned by the 16 vessel orders secured in 3Q14 (3Q13: 7 vessels). The vessel chartering segment grew 9%. Overall gross margin held steady at 24.0%, while bottom line was boosted by a 34% drop in selling and admin expenses to RM14.9m, offset partly by an almost five-fold jump in finance expenses to RM7.5m. *AusGroup: 1QFY15 reversed last year’s A$15.1m loss to turn a net profit of A$2.8m. Revenue surged 69% y/y to A$130.5m (+55% q/q), on the back of continued increase in activity within the LNG and maintenance sectors. Gross profit rose to A$13.0m, up from A$9.3m q/q, and turning around sharply from the gross loss of A$20.9m a year ago. Current order book at A$455.1m. BVPS at A$0.31. *Mencast: 3Q14 net profit jumped 53% y/y to $2.4m, taking 9M14 net profit to $10.3m (+12%). For the nine months, revenue was up 48% to $105.6m led by improvements across all segments - offshore & engineering (+59% to $62.9m), marine (+31% to $32.6m) and energy services (+10% to $10.1m). Gross margin fell 7.2 ppt to 25.7%, while finance expenses more than tripled to $3.7m. BVPS at $0.33. *Vard: Dismal 3Q14 results as per its profit warning. The group swung back into a net loss of NOK37m, from a net profit of NOK76m a year ago, dragged mainly by substantial cost overruns for some projects at its European yards after the introduction of new production methodologies arising from an organizational change program. Revenue grew 19% y/y to NOK2.81b, underpinned by delivery of five vessels and two newbuild contracts secured in the quarter. No provisions were made with regards to its Brazil tax claim. Order book contracted by NOK1b to NOK20.1b. BVPS at $0.65. *CNMC Goldmine: 3Q14 net profit spiked 103% y/y to US$3.4m, as revenue soared 59% to US$10m, boosted by a significant increase in fine gold production (+61%) and sales volume (+59% to 7,667.2 oz), driven by new facilities and higher productivity from its three leaching yards. *Kingwan: 2QFY15 net profit tanked 63% y/y to $0.8m, on revenue of $21.1m (-14%). The decrease in revenue was due to lower recognition of revenue from Mechanical and Electrical contracts. Bottom line was weighed by a near halving of gross margin to 8.7% from 16.2%, offset partly by lower tax expense of $0.1m (-80%). Interim DPS of 0.7¢ declared. BVPS at $0.34. *Tritech: Together with consortium partner Black & Veatch, have been awarded an $18.5m water pipeline consultancy project from PUB. Tritech’s share of contract is $8.8m. *XMH: Its subsidiary MPG secured two new contracts worth $11.3m for the provision of standby generators for Changi Airport’s upcoming Terminal 4 project, as well as an upcoming five-storey data centre project in Jurong Industrial Estate. *YuuZoo: Acquired Sandbox’s registered user base of over 5m users at US$0.1 per user. *Ezion / Triyards: Triyards will issue 29.5m warrants to Ezion, with each warrant carrying the right to subscribe for one new Triyard share at US$0.5626 ($0.725). *RH Petrogas: Profit warning. Expects 3Q14 and FY14 loss due to a US$20.5m goodwill write-off on its working interests in the Basin PSC and Island PSC.