SG Market (19 Nov 14)

US Market: US stocks rallied, sending the Dow and S&P 500 to fresh records on supportive economic data from Europe and US, with a mega biotech M&A driving gains in the healthcare sector. The blue-chip DJIA climbed 40 pts to 17,688 (+0.23%), while the broad-based S&P 500 advanced 10 pts to 2,052 (+0.51%) and the tech-heavy Nasdaq Composite added 31 pts to 4,702 (+0.67%). The small cap Russell 2000 rebounded 0.5% after three days of losses. Markets had a positive start as investor sentiment in Germany rebounded strongly in Nov in its biggest increase in 11 months, suggesting that the economy could be turning around. Meanwhile, European auto sales rose for the 14th consecutive month in Oct. Investors also cheered news that Japan would delay a planned sales tax hike as PM Shinzo Abe called for snap elections. The enthusiasm spilled over to the US, which reported a nice rebound in home-builder confidence and benign wholesale inflation in Oct, as higher costs of services and food outweighed a slump in enery prices. Among the 9 out of 10 industry groups that advanced, healthcare (+1.6%) and raw materials (+1.1%) outperformed. Newmont Mining surged 3.4% as gold advanced to a two-week high. The healthcare sector was led by biotech stocks that continued to surge following the US$66b takeover of Botox maker Allergan (+2%) by drug firm Actavis (+8.7%) in the year’s biggest pharmaceutical deal. Medical equipment maker Medtronic jumped 4.7% after its 2Q earnings met expectations and on possibility of a repeal of a medical device tax. The group will also go ahead with its proposed acquisition of Ireland-based Covidien (3.7%) despite new offshore tax rules. Other healthcare gainers include UnitedHealth (+1.8%) and Gilead Sciences (+3.3%).. Home Depot slid 2.1% after the home improvement chain reaffirmed its FY14 guidance amid slowing home prices abd sales and reported 3Q earnings that slightly missed estimates. Clothing retailer Urban Outfitters tumbled 6.6% after its 3Q earnings came in below expectations. Among other stocks in focus, Intel rose 1.4% on plans to merge its mobile phone and tablet businesses with its PC chip unit, while Apple was up 1.3% to US$115.47. Volume was light with 6.1b shares traded on US exchanges, 5% below the three-month average. Advancing issues outnumbered declines ones by 1.5 to 1 on both the NYSE and Nasdaq. S’pore shares may track the positive overseas leads from Wall Street and early moves on Asian bourses in Tokyo (+0.5%) and Seoul (+0.1%) but upside for STI is lieklty to be capped at 3,360 with support at 3,270. Stocks to watch: *Keppel Infrastructure Trust/CitySpring Infrastructure Trust: Will merge to create the largest infrastructure-focused business trust listed on SGX, with an estimated market cap of $1.9b and assets of $4.0b. CIT will acquire KIT’s assets for $1.3b via issuance of new units, on the basis of 2.106 new CIT units for every KIT unit. The enlarged trust will acquire a 51% stake in Keppel Merlimau Cogen which owns a 1300MW combined cycle gas turbine power plant on Jurong Island for ~$510m, resulting in an equity fund raising of up to $525m, via issuance of new units (preferential offering and placement). Keppel Corp (22.9% stake) and Temasek (19.97% stake) intends to subscribe for their pro-rata entitlements under the preferential offering. The deal is expected to be earnings accretive and CIT unit holders will receive a special distribution of $30m before the completion of the merger, and another $30m post-merger but before the equity fund raising. The expected completion of the merger is 2Q15. *Keppel Corp: Selling its 51%-stake in Keppel Merlimau Cogen (KMC) to Keppel Infrastructure Trust for $510m, via shares ($255m) and interest-bearing notes ($255m) issued by KMC to KIT. KMC is a 1,300 MW combined cycle gas turbine power generation facility, which will enter into a 15-year capacity tolling agreement with Keppel Electric. The maximum capacity fee is $108m p.a. as long as KMC meets the availability and capacity test targets. *Genting Hong Kong: Acquiring a 50%-stake in Magical Gains Holdings for KRW130b (HK$917.4m), which will subsequently develop, manage and operate the casino business at the Hyatt Regency Jeju Hotel in South Korea. *Tiong Seng: Awarded a $132.4m contract by DBS Trustee (for Mapletree Industrial Trust) to construct a high-tech industrial facility. Works include the erection of two blocks of 8 and 11- storey high-tech industrial buildings and will be located in the Telok Blangah Industrial Estate at Depot Road. Construction is expected to commence in Nov’14. Latest contract brings Tiong Seng’s order book to $1.5b, stretching revenue visibility till 2020. *Sincap: Entered into a sales and purchase agreement to acquire LTN Land for $38.5m. LTN Land has a 59.5% indirect interest in Richardson Trust, which holds a land parcel in South Perth, WA, Australia. The acquisition will be funded via the issue of 260m new shares at $0.148 apiece. The land will be developed into a mix-property development consisting of a 10-storey office building and a 14-storey mixed-use development comprising a ground floor commercial unit and residential apartments. *Asiatic Group: Entered into a non-binding MOU with CGNPC Solar-Biofuel Power to pursue joint development of renewable energy type projects throughout the Asia Pacific region.