SG Market (29 Apr 15)

Singapore shares may take a breather despite the positive close on Wall Street, which saw stocks recovering from an early sell-off and the S&P 500 bouncing off its 50-dma, as many STI index stocks go ex-dividend.

Regional bourses are trading higher this morning in Tokyo (+0.4%) and Seoul (+0.2%), although Sydney is down 0.3%.

Technically, the STI is sits precariously at the 3,495 immediate support and with momentum indicators showing some signs of weakness, a downward breach may take the index to the next support level at 3,443. Topside resistance lies at the 3,550 recent peak.

Stocks to watch:
*Ho Bee: 1Q15 results in line. Net profit soared 182% to $11.6m, while revenue jumped 81% to $31m from higher rental contributions from The Metropolis in Singapore and 1st Martin’s Le Grand in London. Operating margin improved to 70.2% versus 62.3% from the previous year, although bottom-line was partially weighed by associate losses of $1.3m versus nil last year, while share of JVs narrowed 66.8% to $0.3m. NAV/share of $3.93.

*Parkway Life REIT: 1Q15 results in line, with DPU at 3.21¢ (+14%) largely buoyed by divestment gains of seven Japanese properties in Dec ’14, barring which distributable income would have been up just 0.7%. Gross revenue inched up 0.7% to $24.8m while NPI was up 0.8% to $23.2m, driven primarily by higher rent from the Singapore properties due to increased growth rate of CPI + 1% in year 8 of lease commencing 23 Aug ‘14. The five Japan properties acquired on 23 Mar ’15 contributed just 9 days of rental income which was not significant. Occupancy rate stood at 100%, leverage ratio at 34.4% (4Q14: 35.2%) and average cost of debt of 1.5% and tenor of 3.6 years. NAV/share of $1.71.

*Far East Hospitality Trust: 1Q15 results below estimates, with DPU at 1.07¢ (-17.7%). Gross revenue fell 10.8% to $27.4m and NPI was down 11.3% to $24.5m, mainly due to softer demand for accommodation, in line with the fall in visitor arrivals and uncertain economy. In addition, the hotel portfolio experienced less demand from the higher-yielding corporate segment, resulting in RevPAR declining 11.0% to $141, while serviced residences (SRs) RevPar fell 7.1% to $206 as it saw a reduction in bookings from project groups. A spike in short-term interest rates in 1Q15 resulted in an increase in a 19.4% rise in finance costs, which weighed on DPU. Occupancy rate for hotels fell 1ppt y/y to 82.3%, and was down 1.5ppt to 85.8% for SRs. Leverage ratio stood at 31.5%, with average debt cost of 2.5% and tenor of 3.2 years. NAV/share of $0.968.

*China Environment: 1Q15 net profit slumped 59% y/y to Rmb6.6m, while revenue fell 71.9% to Rmb 45.3m, as only two dust collectors projects were completed in the quarter, compared to 13 projects in 1Q14. Gross margin narrowed 3.2ppt to 21.3%. Bottom line was also weighed by Rmb4.5m of tax expenses versus a Rmb3.9m tax credit a year ago. NAV/share of Rmb1.123. Separately, the group announced the successful launch of its first megawatt class transcritical carbon dioxide heat pump system in China, which has effectively enabled the reduction of the use of ~3,365 tonnes or 34% of standard coal p.a. during its pilot project in Fujian Province.

*Samudera Shipping: 1Q15 net profit soared nearly 14x to US$6.2m, although revenue dipped 6.8% to US$80.4m, as the group exited non-profitable services, especially the Indonesia domestic routes. Gross margin expanded 5.8ppt to 10.8%, on lower container volume handled, fewer vessels operated, lower bunker prices and renewal of a charter at cheaper rates for a portion of the fleet. Bottom line also aided by a US$1.2m gain on FX versus a US$0.3m loss last year. NAV/share of US47.7¢.

*Q&M Dental: Acquiring TP Dental for $28.6m. CEO highlights that it is highly possible that the group would do more M&As in S’pore. TP Dental is a high-end dental centre in Ngee Ann City with 25 dentists while most of Q&M's ~60 clinics are in suburban areas. The S’pore dental market remains very fragmented with ~630 dental clinics and 1,800 dentists. The deal comes with a $4m profit target per 2-yr term, which will be in place for total 8 years.

*CSE: Won two major contracts amounting $40m for telecommunication system and maintenance works in Abu Dhabi and Mexico respectively. For the latter maintenance contract, the time period is for three years, for a national oil company.