SG Market (14 Nov 14)

US Market: US stocks pushed higher, spurred by strong Wal-Mart earnings and deal news, which overshadowed a rout in the energy sector as oil prices plunged to a four-year low. The blue-chip DJIA advanced 41 pts to a fresh record of 17,653 (+0.23%), while the broad-based S&P 500 edged up 1 pt to 2,039 (+0.05%) and the tech-heavy Nasdaq Composite added 5 pts to 4,680 (+0.11%). But the small-cap Russell 2000 sank 0.9% to halt a six-day rally. Economic data showed jobless claims climbed 12,000 to 290,000 las week, above the 280,000 forecast but below 300,000 for a ninth consecutive week. Separately, hiring picked up in Sep to its fastest pace in more than six years. Trading sentiment was buoyed by corporate deals. Baker Hughes surged 15.2% on news of a possible buyout by rival oil services company Halliburton (+1.1%), in what could become one of the largest US energy M&A deals. Separately, DreamWorks Animation jumped 14.1% on speculation that toymaker Hasbro (-4.3%) was in talks to buy the Hollywood studio for more than US$30 a share. P&G shed 1% after Warren Buffet’s Berkshire Hathaway agreed to pay US$4.7b in P&G shares to acquire P&G’s Duracell battery business. Technology shares gained 0.6% as Apple (+1.4%) hit a new high of US$113.45, while Microsoft (+1.7%) overtook ExxonMobil as the second largest market cap company after Apple. Cisco rose 2.3% despite forecasting sales that fell short of estimates. Blackberry jumped 7% after unveiling its new mobile management and security platform. Energy shares were hard hit, down 1.3% as a group after crude oil prices extended its sell off, with Brent sliding below US$78 a barrel, while WTI crude sank 3.8% to a four-year low of US$74.27. Both ExxonMobil (-1.1%) and Chevron (-1.2%) slid lower. Among other stocks in focus, Wal-Mart rose 4.7% to an all-time high and posted its best gain since 2008 after reporting a larger-than-expected profit as comparable sales grew for the first time in seven quarters. JC Penny crumbled 8.5% after posting a 3Q loss on weaker sales. Kohl’s declined 3.2% after its 3Q revenue and earnings missed estimates. Volume rebounded to 6.4b shares traded on US exchanges, on par with the three-month average. Despite the index gains, declining issues led advancing ones by 1.8 to 1 on the NYSE and 2 to 1 on the Nasdaq. S’pore shares are likely to remain range-bound as Wall Street heads into uncharted and heavily overbought territory. The continuous slump in oil prices could have an impact on the proliferation of oil-related counters (upstream explorers, rigbuilders, OSV providers) on SGX. A break of the 3,310 resistance on the STI could take the index higher to 3,360. Downside support is at 3,270. Stocks to watch: *Olam: 1QFY15 results missed, with net profit of $44.3m (-2.9% y/y) coming in at only 45% of Bloomberg consensus. Excluding exceptional gains on biological assets, core net profit fell even further to $32.2m (-29.4%). EBITDA declined 11.9% to $219.4m, despite growth across most platforms, mainly due to adverse price movement in the hazelnuts and dairy businesses, coupled with execution challenges in upstream dairy. Overall sales volume dropped 14.6% to 3.1m mt, mainly due to the discontinued / restructured lower margin businesses. BVPS at $1.71. *ComfortDelgro: Firm 3Q14 results that were in line with the street. Net profit grew 5.3% y/y to $80.8m, as revenue increased 6% to $1b, driven by growth from all business segments except the bus station business, as well as positive foreign currency translation. BVPS at $1.038. *SATS: 2QFY15 net profit slipped 3.3% y/y to $47.1m, as revenue dipped 2.2% to $442.2m. Revenue contribution from Food Solutions dropped 4.7% to $267.7m as the Japan subsidiary was impacted by weaker sales and a weaker yen, and post divestment of an Australian subsidiary in Jul. Revenue from Gateway Services rose 2.1% y/y to $173.4m. Share of income from associates and JVs declined 8.5% to $10.8m, affected by drop in cargo volumes and pressure on rates. *Centurion: 3Q14 core net expanded by a robust 49% y/y to $7.9m (+2.9% q/q), lifting 9M14 net profit to $21.0m (+58% y/y). For the quarter, revenue jumped 46% y/y to $21.0m, driven by the accommodation business which posted revenue growth of 61% to reach $19.4m. The contributions came mainly from the increase in bed capacity at Westlite Toh Guan upon completion of upgrading works in Jan ’14, increase in rental and occupancy rates of its workers accommodation in M’sia, as well as maiden revenue from its student accommodation assets in Australia and the UK. BVPS at $0.424. *Q&M Dental: 3Q14 beat expectations, as net profit ballooned 55% y/y to $2.3m, taking 9M14 net profit to $5.1m (+44%). For the quarter, revenue surged 52% to $28.4m, led by revenue from the dental and medical outlets (+32% to $22.4m), higher dental equipment & supplies distribution revenue (+104% to $3.5m) and maiden contributions of $2.5m from dental supplies manufacturing. Pretax margin widened to 12.9% from 8.5%. *Ho Bee Land: 3Q14 net profit surged 84% y/y to $13.5m, as revenue expanded 65% to $26.8m, driven by rental income from its office buildings - The Metropolis in Singapore, and Rose Court and 1 St Martin’s Le Grand in London. There were zero development sales in the quarter, though the group benefited from a writeback of $7.6m accruals upon finalization of construction cost for development properties. BVPS at $3.44 *Religare Health Trust: 2QFY15 DPU grew 22% y/y to 1.81¢, taking 1HFY15 DPU to 3.61¢. Distributable income was $28.7m (+24%). Revenue expanded 38% to $32.0m, mainly due to the increase in service fee arising from additional contribution from the Mohali clinic for the full quarter. However, costs also rose, driven by higher service fee and hospital expenses (+27.3%) as well as other expenses (+13.1%). BVPS at $0.867. *UMS Holdings: 3Q14 net profit improved 14% y/y to $5.5m, boosted by lower raw material purchases and subcontractor charges (-3%), taxes (-47%), and a FX gain ($0.5m) from the appreciation of USD. Revenue slipped 2% to $24.8m, mainly due to a stall in the contract equipment manufacturing segment, but the core semiconductor business held steady. Gross margin remained at 54% (+1 ppt), on higher semiconductor component sales. Interim DPS of 1¢ maintained. BVPS at $0.458. *Amtek: 1QFY15 net profit roughly halved to US$4.0m from a year ago, despite a 33% jump in revenue to US$225.5m. Top line was boosted by consolidation of Interplex Industries (acquired in Aug). Bottom line weighed by one-off US$4.7m of acquisition related expenses. Excluding one-offs, core net profit would have been higher 23% y/y at US$9.9m. BVPS at US$0.32. *Otto Marine: 3Q14 net profit halved y/y to US$2m, despite a 17% surge in revenue to US$96.8m. Top line was buoyed by completion of more repairs and fabrication orders, higher daily charter rate for its chartering segment and the addition of one vessel in its subsea services segment. However, bottom line was dragged by lower gross margin of 15.4% (-1 ppt) from the shift in business mix towards chartering, absence of a disposal gain, partially offset by FX gain and higher associate income. BVPS at US$0.072. *Dyna-Mac: 3Q14 net profit advanced 32% y/y to $7.6m, lifted by the absence of unrealized FX losses on receivables ($2.8m) and a 18% drop in admin expenses (due to lower bonus provision). Revenue rose 19% to $79.4m, as more projects were carried out, although gross profit margin slipped to 22.2% (-8 ppts) due to higher costs from overseas yards. Net order book stood at $223m with activities on-going into 2016. BVPS at $0.192. *F&N: FYSep14 net profit was flat at $143.9m. Revenue grew 5.5% to $2.4b, and operating margin improved from 9% to 11%, driven by favourable product mix and lower input cost for its beverages (beer, soft drinks) and Dairies Malaysia. Final DPS of 3¢, bringing full year DPS to 5¢. BVPS at $1.11. *Raffles Education: 1QFY15 swung to net profit of $7m (1QFY14 net loss: $2.6m), while revenue fell 5% y/y to $29.1m, as Langfang Oriental Institute of Technology was deconsolidated following a swap of equity interests. Bottom line improved by reduced losses from JVs. BVPS of $0.5611 *Sri Trang Agro: 3Q14 profits doubled to THB456.4m despite 22% lower revenue (THB16.812b) and 33% lower gross profit (THB941.0m) due to lower rubber prices. Bottom line was propped up by other gains. For the 9M, bottom line shrank 20.4% y/y to THB 1.025b on 15% lower sales revenue (THB57.987b), BVPS at THB15.82. *HPL: 3Q14 profits tumbled 70% y/y to $15.1m on the back of 18.9% decrease in revenue, due mainly to completion of Tomlinson Heights development partially offset by higher contributions from resorts in Maldives and Bali. Share of income from associates shrank 98.7% to $0.3m due to lower profits from The Interlace and d’Leedon, as well as an absence of one-off gain on disposal. BVPS at $3.15. *Food Empire: 3Q14 swung to net loss of US$0.8m, while revenue increased 9.8% y/y to US$72.6m, across all geographical segments. Bottom line weighed by weak Ruble and Hryvnia, compounded by staff costs, restructuring related costs, startup costs, and costs associated with investments in new markets. BVPS of US$0.2924 *KSH: net profit tumbled 44.6% y/y to $6.7m on 20.2% lower revenue ($62.7m), +$1.0m (248%) finance costs due to term notes issued, +$0.7m in FX losses and -$2.3m (29.1%) lower share of profits from associates and JVs. BVPS at 54.88 cents. *Courage Marine: 3Q14 net loss widened to US$2.3m. as revenue tumbled 48% y/y to US$2.6m, from decreased fleet utilisation due to the low demand in the dry bulk market. Management expects 2014 to be adversely affected by the challenging economic conditions and uncertain outlook, although BDI climbed up to the 1400 level in Nov. Notably, demand of commodities in China is low, weighed further by over-supply of dry bulk vessels. BVPS at US$0.0598. *Parkson Retail: net profit for 3Q14 down 33.1% y/y to $6.9m, despite 1.2% increase in revenue to $110m, mainly contributed by higher sales in Indonesia and ramp up in sales in the new Yangon store. Profits were eroded by incremental costs in all areas, and share of profits from associates tumbled 94% from 300k to 18k. BVPS at $0.37 *Yuzoo Corporation: 3Q net loss was at $16.3m versus a net profit of $2.0m from the previous year, largely weighed by its RTO expenses of $23.0m, baring which, income before tax was up four-fold to $6.8m. Revenue advanced 37.9% to $10.2m led by increased business activities, while gross margin jumped to 91.8% from 45.2%, mainly due to the recognition of franchise fee during the quarter. BVPS at $0.082.