SG Market (18 Feb 15)

Singapore shares are expected to open on a cautious note in today’s half trading session following the subdued Wall Street close as traders may be unwilling to take fresh bets ahead of the long Chinese New Year holiday.

From a chart perspective, the STI is expected to consolidate within the 3,450-3,390 trading band.

Stocks to watch:
*Sembcorp Industries: 4Q14 results above estimates. Net profit gained 7.5% y/y to $240.6m, mainly due to 20% higher gross profit of $423.5m. Revenue stood at $2.66b (-10%) as turnover were slower across all segments, but mainly Utilities (-5%, $1.173tr) due to de-consolidation of Salalah and lower electricity sales, lower gas offtake and lower HSFO prices, as well as Marine (-15%, $1.445tr) due to slower recognition from rig building projects. Margins were significantly higher in Utilities. Management guides challenging business environment in Utilities and Marine. Final dividend is 11¢ (vs 15¢ in FY13), bring total FY14 dividends to 16¢ (vs 17¢ in FY13). NAV/share at $3.15

*PACC Offshore: 4Q14 results below estimates. Net loss was at US$10.0m, which weighed on FY14 net profit to $53.2m (-27%). Revenue for the quarter inched up 1% to US$55.8m, supported by the offshore supply vessels (+11%) and harbour services and emergency response (+68%) segments. Gross margin fell 10ppt to 12%, mainly due to the OSV and T&I shallow water segments. Bottom-line was dragged by the absence of sale of vessels from the previous year, with other operating income down 88% to US$1.8m. DPS of 1.5¢ declared (FY13: 4.5¢). NAV/share at US$0.67.

*Breadtalk: 4Q14 net profit fell 9.1% to $5.3m taking FY14 net profit to $13.7m (-8%). Revenue was up only 5.3% to $154.8m, as the traditionally strong 4Q revenue performance did not materialise due to softer than expected demand across all markets especially China. Gross margin was maintained at 53.2%, although bottom-line was weighed by a rise in distribution and selling expenses to $59.2m (+6.4%), higher admin expenses at $19.7m (+8.6%), and higher taxes at $2.6m (+85.7%). DPS of 1¢ declared, taking full year payout to 1.5¢ (FY13: 1.8¢). NAV/share at $0.364.

*Valuemax: 4Q14 profit surged 170% y/y mostly attributable to higher gross profit, which soared 27% to $6.2m despite 44% lower revenue at $627.1m. Gross margin was up 5.4ppt to 9.8%, achieved on decrease in interest expense from lower utilisation of bank borrowings by pawnbroking segment and better retail and trading margin of pre-owned jewellery and gold business. NAV/share at $0.283. First and final DPS maintained at 0.88¢.

*NOL: Confirms disposal of APL Logistics to Kintetsu World Express for JPY140n (~US$1.18b), at 15x APL’s core FY14 EBITDA or 3.7x P/B. This will pare down net gearing from 2.25x to 1.08x but leave NOL with its loss-making Liner business. Pro-forma NAV rises to US$1.004 (~$1.36) from US$0.67 (~$0.91).

*Noble: In response to short seller Iceberg Research allegations, Noble highlighted that it reports its results in accordance with IFRS, and its annual financial statements have been audited by Ernst &Young who issued unqualified opinions. The carrying values of its associates are tested for impairment using discounted cash flow models that are updated every quarter, and these valuations are currently being audited as part of the FY14 audit.

*Lum Chang: Awarded tender for construction of a mixed development at Yishun worth $487m. Project construction will commence on 15 Apr ‘15 and is expected to be complete in 2H18. Latest award brings orderbook to $1b.

*TEE Land: Expressed interest to acquire three plots of land totalling 188,149 sqm, in Batam for $4.9m, to be developed into affordable housing and commercial development, conditional upon due diligence and HPL certificates on the land being issued by 30 Aug and HGB certificate being issued within 2 months thereafter. The group will finance the cost of the transaction by internal funds and bank borrowings.

*Boustead: Entered agreement to purchase 20% shareholding in Mason Energy Ltd for $8.0m (~1.7x P/B), to be funded by internal resources. Mason supplies valves and other equipment to the O&G industry in China. Boustead hopes to tap on Mason’s strong network of Chinese O&G clients and achieve synergies such as prequalifying for projects undertaken by Mason’s international clients.

*Cambridge Industrial Trust: Proposed acquisition of an industrial building at 160A Gul Circle for $19.9m. The 7,997 sqm gfa property has remaining land tenure of 26 years, and will be leased-back to Unicable (the seller) for five years.

*Frasers Centrepoint: Unveiled Frasers Tower, a Premium Grade A office tower located in Singapore's CBD with a total net lettable area of 690,000 sf, scheduled for completion in 2018.

*Sinjia Land: To sell its power generation system in Myanmar for US$2.2m (1.2x NAV) to Tembusu Industries.

*CCT: Issues ¥8.6b floating rate (3m JPY LIBOR + 0.3%) notes due Feb ‘23 under the $2b multicurrency MTN Programme, hedged into $100m at 3.05%.

*Elektromotive: Awarded damages of $0.5m for repudiatory breach of JVA by KTNT and Tom N Toms.

*Profit warning:
- Ntegrator: Due to a cost write-off for a developmental project from an unsuccessful tender.
- Pan Asian Holdings: Due to impairment and lower revenue.
- Fuji Offset Plates: Due to impairment loss
- Annica: Operating losses from biomass projects and engineering services segments, as well as unrealised fair value loss, loss on disposal of investments and impairment loss on goodwill from the investment holding segment.
- Innotek: Due to recognition of non-cash impairment on its fixed assets in Mansfield subsidiary in Suzhou.