SG Market (18 May 15)

Singapore shares are expected to stay in consolidation mode given the mixed close on Wall Street and a very lacklustre local corporate earnings season, marked by more misses than hits.

Investors will also eye a slew of US housing data (Tue/Thu), Fed meeting notes (Wed) key China manufacturing PMI (Thu) as well as Singapore’s trade figures due today for fresh clues on the market direction.

From a chart perspective, the STI is still trying to hold its ground above the 50-dma support at 3,450 with topside resistance at 3,520. Looking at technical indicators, the RSI appears neutral, while the MACD ould be gearing up for a bullish crossover.

Stocks to watch:
*Property: URA data showed that developer sales of private homes ex ECs surged in Apr to an 11 month high of 1124 units (+47.5% y/y, +83.4% m/m), due to 2 large project launches. Developers launched 1344 units in Apr, more than 3x m/m. Consultants highlight that while there has been an improvement in primary market activity, it is premature to say that market confidence is returning, expecting May volume to moderate to 300-700 units as launches slow down.

*StarHub: 1Q15 results below estimates. Net profit fell 12.4% to $73.7m, while revenue increased 8.1% to $617.9m, driven by an 180.9% surge in equipment sales to $77.5m from strong demand for smartphones. Meanwhile, total service revenue inched down 0.6% to $540.4, as mobile revenue fell 0.2% on weaker prepaid, while broadband revenue fell 10.8% as a result of higher price competition. Bottom-line how however weighed by EBIDTA margin which fell 2.6ppt to 30%, due largely to a spike in cost of equipment sold (+79.6% to $157m). Interim DPS of $0.05 maintained. NAV/share at $0.131.

*Amtek: 3QFY15 results in line. Net profit soared to US$10.1m (3QFY14: US$1.9m), while revenue surged 65% to US$242.6m, from the consolidation of Interplex, which drove sales in the Automotive and Industrial Products segments. Bottom line surge also buoyed by a 4.5ppt expansion in gross margins, due to improved operating efficiencies existing operations as well as contributions from higher-margin product mix. This was partly offset by a 78% increase in admin expenses and finance cost that grew 2.9x to $4.9m as a result of the Interplex consolidation. NAV/share at US$0.31.

*United Engineers: 1Q15 net profit surged 215% to $25m, while revenue fell 24% to $515.3m, as corporate services revenue crashed 92.7% to $22.7m, offset by progressive recognition of Eight Riversuites (property development), and contributions from MFLEX (technology and manufacturing). Bottom line aided by a 6.2ppt expansion in gross margin from MFLEX’s contributions, and from an overall reduction in operating expenses. This was partially mitigated an absence of disposal gain from last year and a share of loss from associates and JVs. NAV/share at $3.00

*Ying Li: 1Q15 results below estimates, as it swung into a 1Q15 net loss of Rmb0.5m (1Q14 net profit: Rmb33.7m), while revenue tanked 64.2% Rmb100.2m from lower recognition from ongoing projects, partially cushioned by increase in rental income. Gross margin improved 16.2ppt to 55%, as sales of properties mainly comprised of office units that tend to have higher margin. The increase in other income was offset by a spike in admin expenses attributable to FX losses that arose from adverse movements in the USD/SGD. NAV/share at Rmb1.96.

*Tiong Seng: 1Q15 net profit spiked 94% y/y to $3.2m, despite a 41% drop in revenue to $97.9m, mainly due to a lesser amount of construction work done. Meanwhile, bottom line was boosted by lower cost of construction (-44%), net finance income of $0.4m from FX gain compared to loss ($0.9m) in 1Q14, as well as JV contributions of $0.5m (1Q14: nil). Order book stands at $1.2b, stretching revenue visibility till 2020. NAV/share at $0.29.

*Mermaid: 1Q15 results below estimates, with net loss of US$15.8m versus a net profit of US$5.2m. Revenue fell 4.6% to US$60.8m, largely as a result of lower service income. The group reported gross loss of US$11.0m versus gross profit of US$6m from the previous year, due to three high performing vessels were off-hire for dry docking almost throughout the period and low utilization of charter-in vessels. NAV/share at US$0.38.

*YuuZoo: Swung to 1Q15 net profit of $3.2m (1Q14 net loss: $1.1m), while revenue surged 56% to US$9.6m from the phased recognition of the sale of franchise licenses in Turkey and South Korea, offset by decreased payment revenue from the discontinuation from AmEx agreement. Cost of sales decreased in line with lower payments revenue, offset by increased staff expenses, FX loss and increase in amortization of intangibles. NAV/share at US7.2¢

*Mencast Holdings: 1Q15 net profit fell 10% to $2.2m on revenue of $27.3m (-11%). Top-line was largely weighed by a 22% decline in revenue from the offshore & engineering segment, offset by the growth in energy services segment of 33%. Gross margin was relatively flat at 8.1%. Bottom-line partially aided by lower admin expenses of $4.6m (-12%). NAV/share at $35.85.

*Hong Fok: 1Q15 net profit crashed 88% y/y to $0.9m, as revenue tumbled 71% to $15.6m due to the absence of sales from residential units at Concourse Skyline. Bottom line was further weighed by lower associate contributions (-93%), but partly offset by absence of cost of sales of development properties (-70%). NAV/share remained at $2.11.

*EMS Energy: Proposed 88m new shares (5.5% enlarged share capital) placement at $0.023 apiece to seven separate parties. Net proceeds of $1.9m is intended for the funding of order book and working capital.