SG Market (26 Jan 15)

Singapore shares are likely to take a short pause after an unexpected rally took the STI above the psychological 2,400 level last week on several positive factors - ECB’s massive quatitative easing, sliding oil prices which fuelled airline and shipping stocks, an impending fare hike that pushed the land transport operators and finally, Keppel Corp’s cash offer for its property arm, which lifted the property sector. All eyes will be on Keppel Corp and Keppel Land shares this morning, following a three-day trading halt, which may have a bearing on the index performance. In short, we view the half-hearted privatization attempt as a financial engineering deal that offers little strategic value. And the bigger question that shareholders might want to ask is whether there will be a shift in focus from buildining businesses to an asset management model marked by deal making. But what is a bane for Keppel Corp may be a boon for the other conglomerates (Sembcorp Industries, ST Engineering) and property counters (CapitaLand). From a chart perspective, the STI has broken past the key 3,400 psychological mark and is headed towards the next summit at 3,465 set in May 2013. Downside support is now raised to the previous resistance at 3,375. Stocks to watch: *Keppel Corp/Keppel Land: Parent Keppel Corp launched a voluntary unconditional cash offer for 54.6% owned property arm Keppel Land in a two-tier price approach, with base offer price of $4.38/share, or privitisation offer price of $4.60/share. The base and higher offer prices translate to discounts of 11.5% and 7% to Keppel Land's latest NAV/share of $4.95 and compares to consensus RNAV of $5.48. The offer price will include Keppel Land’s FY14 DPS of 0.14¢. Keppel Group will not be revising its offer prices. *Tiger Airways: 3QFY15 results turned around to deliver net profit of $2.2m from loss of $118.5m a year ago, due to the absence of impairment on associates ($58m), disposal loss ($30m) and share of associates' loss ($23m). Meanwhile, revenue grew 5.9% to $182.3m due to better yields and higher traffic volume, while lower expenses lifted group into operating profitability of 2.2%. BVPS of $0.0911. *Fraser Centrepoint Trust: 1QFY15 DPU and distributable income surged 10% y/y and 22.1% to 2.75¢ and $25.2m. Revenue climbed 18.3% to $47.2m, while NPI grew 16.2% to $32.9m, mainly boosted by the addition of Changi City Point, as well as step-up rents and positive rental reversion from Causeway Point. Occupancy dipped 2.5ppt q/q to 96.4%, with WALE of 1.7 years. Aggregate leverage stood at 29.3% with all-in borrowing cost of 2.7%. BVPU at $1.85. *K1 Ventures: 2QFY15 net profit surged from $0.6m to $31m, on revenue of $51.5m (2QFY15: $2.8m), boosted by sale of China Grand Automotive ($45.6m), which resulted in a gain of $27.4m. With cash per share of 3.07¢, group has determined not to make any new investments, but will focus its efforts on managing the current portfolio and realise them. Interim DPS of 1.5¢ declared (2QFY14: nil). BVPS of $0.11. *F&N: Secured 11 year 7 month licensing agreement with Nestlé, to manufacture and distribute Carnation, Bear Brand, Bear Brand Gold, Ideal Milk and Milkmaid in ASEAN, including Singapore, Thailand, Malaysia and Brunei. The agreement comes with an option to extend the licenses for an addition 10 years until 31 Jan 2037. *United Fiber System: Received SGX’s approval-in-principle for its proposed RTO acquisition of PT Golden Energy Mines. The long-stop date for the acquisition has been extended from 31 Dec 2014 to 3 Jun 2015. *Popular Holdings: Appointed PrimePartners Corporate Finance as its independent financial adviser for the voluntary conditional cash offer of $0.32/share by Grand Apex Holdings. *International Healthway Corporation: Established $500m multi-currency MTN programme, which will be used to fund general corporate purposes including financing investments, debt repayment, working capital and capex requirements. *CSC Holdings: Issued profit warning for 3QFY15.