SG Market (09 Apr 15)

Expect Singapore shares to open higher, following the positive close in Wall Street overnight, with minutes from the FOMC meeting revealing that the US Fed appears split on the timing of a potential rate hike.

Regional bourses are trading higher this morning in Tokyo (+0.4%) and Seoul (+0.1%).

From a chart perspective, the STI is likely to be bounded by upper resistance at 3,500 and downside support at around 3,416 (20-dma).

Stocks to watch:
*DBS: Manulife Financial is paying US$1.2b to DBS to exclusively distribute its life and health insurance products through DBS branches in S’pore, HK, China and Indonesia. The 15 year deal starts 1st Jan'16 and payment will be amortised by both parties over the period.

*Ezra: Announced it plans job cuts and other cost reductions, and that it is in talks regarding various equity fundraising options to refinance its debt. CEO also does not expect any write-downs on value of its vessels. The group is also eyeing long-term contracts in west Africa. Contract backlog now stands at ~US$2.3b, with the company bidding for ~US$10bn worth of contracts in total. Ezra aims to lower its net gearing from 1.1x now to ~0.6-0.7x in the long term.

*United Envirotech: Acquiring Bishui Lantian for Rmb500m, which will enable United Envirotech to secure Rmb800m of Transfer-Operate-Transfer cum build-operate-transfer projects in Gaoyang County, Hebei Province. Assuming the deal was completed at end FY3/14, EPS would have been 4.34¢ instead of 3.54¢, though NTA drops to 51¢ from 53.5¢. The acquisition will be funded by a mix of internal resources and borrowings.

*MM2 Asia: Acquiring 51% of Vividthree Productions, which is a leading player in Singapore’s 3D animation field for $3.1m, with an initial payment of $600,000, and the balance subject to Vividthree achieving its earn-out targets. In an event where the Vividthree fails to meet earn-out targets, the balance of consideration will be proportionately reduced. The acquisition will be funded by a mix of internal funds and issuance of new shares. Assuming the deal was completed in FY3/14, EPS would have increased from 1.33¢ to 1.44¢ (factoring issuance of new shares) while NTA would have increased from 1.83¢ to 2.36¢ (new shares issued)

*Heeton/Lian Beng/KSH: Completes purchase of freehold property at 28-36 Glenthorne Road, London, for £14.9m (approx. S$31m). Property currently has 42 hotel units and will be redeveloped into 85 units of service apartments.

*GuocoLand: 3QFY15 profits rose 130% y/y to $49.5m, while revenue climbed 21% to $325.9m mostly due to sale of serviced apartments in Shanghai Guoson Centre. Bottom line was shored up by gross margin expansion of 6.1% to 32.3%, whilst operating expenses grew 5.8% as increase in admin expenses were offset by reduced finance costs. NAV/share at $2.60.

*Noble: Secures US$2.25b syndicated committed unsecured revolving loan facility

*IndoFood Agri: Corrects news articles, and clarifies that it does not have any present plants to invest in a new sugar mill in Indonesia.

*CNMC Goldmine: Completed on-site fine ore agglomeration test-work and has applied to government to restart existing vat leach operations at the Sokor Gold Project.