SG Market (08 May 15)

Singapore shares could recover some ground from oversold territory this morning, following the slight rebound on Wall Street, which saw stocks reversed early weakness to rally ahead of key jobs data on Fri as the turmoil in European and US bond markets appear to recede.

Regional bourses are trading higher this morning in Tokyo (+0.2%) and Sydney (+0.6%), with Seoul relatively flat (-0.1%).

From a chart perspective, the STI has broken technical support at 3,445 and would have to climb back above the level to keep the uptrend intact. Below that, next support is seen at 3,360, with topside resistance at 3,520.

Stocks to watch:
*Wilmar: 1Q15 results in line. Net profit improved 49.1% to US$263.3, while core net profit improved 22.7% to US$241.2m. Revenue fell 8.3% to US$9.4b on lower commodities prices, although volumes generally increased (except Tropical Oils manufacturing). Bottom line boost was from a 12x surge in oilseeds and grains PBT to US$166.1m due to improved crush margins in China, improvement in associate’s contributions, and reverse from last year’s FX loss, offsetting weakness in tropical oils and sugar divisions. NAV/share of US$2.42.

*Sembcorp Industries: 1Q15 results missed. Net profit fell 23.1% to $142.2m on revenue of $2.34b (-11%), with top-line led by a decrease in utilities revenue (-21%) from lower gas offtake and lower HSFO prices from its S’pore operations. Meanwhile marine’s (-2%) decrease was due to lower revenue recognition for rig building projects and lower average revenue per repair vessels. Gross margin inched up 0.4ppt to 12.3%. Bottom-line was further weighed by $10.2m fair value losses on FX forward contracts and a 71.9% rise in finance expenses to $31.2m as a result of the consolidation of SGI and Marine’s higher bank borrowings. Associate and JV contributions fell 25% to $40.0m, due to lower contribution from Urban Development’s China operations and Marine’s associates. NAV/share of $3.31.

*F&N: 2Q15 core net profit fell 1.5% to $25.7m on revenue of $608.3m (+3.2%), with topline led by growth across most segments . Beverages revenue (+5%) was led by increased contribution from Beer operations while Dairies (+2%) recorded higher revenue contribution from its operations in Thailand. Printing and Publishing revenue increased 2%, driven mainly by the publishing and distribution divisions. Gross margin inched up 1.2ppt to 35.5%. Interim DPS of 2¢ declared. NAV/share of $1.16.

*OUE Hospitality Trust: 1Q15 results missed, with DPU down 4.2% to 1.61¢. Gross revenue came in at $29.3m (+2.1%) with NPI of $25.7m (+0.3%), as the quarter saw maiden contributions from Crowne Plaza Changi Airport which was acquired on 30 Jan ’15. This was however offset by weaker operating performance of Mandarin Orchard Singapore (MOS), largely as a result of the absence of the biennial Singapore Airshow in Feb this year and the weaker tourism sentiment which impacted the hospitality demand in 1Q15. Leverage ratio stood at 42.1% with average debt of cost a 2.5% and tenor of 3.2 years. NAV/unit of $0.90.

*IREIT: 1Q15 DPU of 1.61¢ was 8% below its IPO forecast. Revenue and NPI were 1.1% lower than forecast at €5.6m and €5m respectively, where the unfavorable variance was due to pro-rata effects of the upward rental adjustment for the Bonn Campus, which was forecast to only take place in 2H15. Occupancy stood at 100% with WALE of 6.2 years. Aggregate leverage stood at 31.8% with 2.1% effective interest rate. NAV/unit of €0.48.

*Hock Lian Seng: 1Q15 net profit soared more than 7x to $18.6m on a more than 5x rise in revenue to $103.9m. The jump in topline was largely due to the recognition of revenue from the industrial development property project, Ark@KB and additional units sold for Ark@Gambas. Ark@KB obtained TOP in Mar '15. Meanwhile, the civil engineering segment revenue was marginally lower (-4%) as the new projects were still at the early phase of construction. Overall gross margin rose to 23.9% from 21.7%. Net cash position stood at $173.3m, representing $0.34 per share. NAV/share of $0.439.

*Frencken: 1Q15 net profit slumped 88.5% to $0.4m, while revenue inched up 0.7% to $111.7m, as improvement in mechatronics division was offset by the IMS division. Bottom line was weighed by a 2.4ppt slump in gross margins to 13.2% from challenging operational conditions at the Penang plant, and negative operating leverage. A general increase in opex also weighed. NAV/share of $0.511.

*Tiong Woon: 3Q15 net profit fell 41% to $2.3m on revenue of $34.5m (-6%). The decrease in revenue was mainly due to the decrease in contribution from the main heavy lift and haulage segment (-13% to $30.0m), partially offset by higher contributions from marine transportation (+2%), engineering services (+240%) and trading (+196%) segment. Gross margin fell to 22.7% from 29.6%, mainly due to lower gross margin from the increasingly challenging heavy lift and haulage segment. NAV/share of $0.581.

*FJ Benjamin: 3QFY15 net loss tumbled 43% to $7m, weighed by a $1.1m loss on disposal of subsidiary, while turnover fell 23% to $69.7m from the slowdown in China’s economy, which dampened tourism in Southeast Asia. However, gross margin improved 4 ppts to 43% as a result of fewer markdowns and better inventory management, while overall expenses were reduced by 19% from restructuring and streamlining efforts. Management expects to record a loss for FY15.

*Perennial Real Estate: Five months post-RTO, recorded 3QFY15 net profit of $3.4m and revenue of $27.1m, largely contributed by rental income from investment properties- CHIJMES and TripleOne Somerset in Singapore, Perennial Jihua Mall, Foshan and Perennial Qingyang Mall in China. NAV/share of $1.628.

*Fragrance Group: 1Q15 net profit dropped 32.2% to $16.4m, as revenue fell to $87.8m (-21.3%), weighed by both property development (-20.1%) and investment (-37.1%) segments as a result of lesser ongoing projects and absence of contribution from asset enhancement works at a property. Bottom line was dragged by a $1.1m share of losses from JV (1Q14: nil), offset by a positive change in fair value of investment property ($0.8m) compared to a loss in 1Q14. NAV/share of $0.146.

*Health Management International: Received non-binding expressions of interest for group’s Mahkota Medical Centre in Malacca, but no firm decision has been made on its potential sale.

*Ziwo: Expects to report a net loss for 1Q15, mainly attributed to a share award expense amounting to Rmb2.4m.