SG Market (27 May 15)

Singapore shares are expected to open lower, with major indices on Wall Street closing down more than 1%, weighed by interest rate rise “chatter” and anxiety over Greece’s debt situation, with the debt laden country scheduled to repay back €300m to the IMF next week

Regional bourses are trading lower this morning in Tokyo (-0.3%), Seoul (-0.9%) and Sydney (-0.6%).

From a chart perspective, the STI is again testing resistance at around 3,460 where the 20 and 50-day moving averages are converging. A clear breakout from this point could take the index back to the recent peak at 3550. Otherwise, immediate support lies at 3,425. Looking at technical indicators, the RSI is neutral, while MACD has yet to trigger a bullish crossover

Stocks to watch:
*Economy: Spore's Ministry of Trade and Industry sees slower 2-4% p.a. economic growth from now till 2020 versus the 3-5% previously forecast, citing a litany of factors behind the challenging external environment, including continued risk of hard landing in China, EU deflation fears and decelerating workforce growth. Productivity growth "has been relatively lacklustre" at just 0.3% p.a. from 2010-2014, although the ministry expects to achieve the government's target of 2-3% pa productivity growth from 2009-2019.

*Banks: 3M Sibor has fallen ~20% to 0.83% from Apr's 1.027% high, while 3M SOR has fallen 32% to 0.767% from Mar's 1.132% high. After MAS left its monetary policy unchanged in Apr review, the SGD recovered partially against the USD, but has since begun retreating again. Economists expect the USD strength to remain intact and for S’pore interest rates to zip higher again, if US interest rates are hiked in 2H15.

*Hiap Seng: 4QFY15 net loss came in at $4.3m versus a net profit of $1.3m the previous year, taking FY15 net loss to $13.2m (FY14 net loss $3.4m). Revenue for the quarter was down 29.8% to $48.1m, mainly due to lower recognition of project revenue, while gross margin inched up 8% from 7.6%. Bottom-line was weighed by a 79.5% rise in admin costs to $9.4m, due to the allowance for impairment of receivables provided by a Malaysia subsidiary which had completed certain projects in East Malaysia. NAV/share at $0.21.

*Boustead Singapore: 4QFY15 net profit fell 30% to $17.9m taking FY15 net profit to $68.3m (-10%). Revenue for FY15 was up 8% to $556.4m, with higher contributions from the real estate solutions division (+22%) and geo-spatial technology division (+3%), offset partly by a 4% drop from the energy-related engineering division, as a result of the challenging operating conditions in the O&G industry. Gross margin dipped marginally to 33% from 34%, while bottom-line was weighed by higher admin expenses (+21%) and finance costs (+163%). Proposed final DPS of 2¢, taking FY15 DPS to 4¢ (FY14:7¢). NAV/share at $0.73.

*Boustead Projects: FY15 net profit fell 31% to $24.7m on revenue of $225.4m (+22%). Topline was led by both the design and build (+22%) and leasing (+21%) segment, although gross margin fell to 22.4% from 25.3% as a result of the challenging and competitive industrial real estate solutions market in Singapore, which placed additional pressure on the margins of design-and-build projects. Bottom-line was further weighed by a 14% rise in selling and distribution expenses, as well as a 21% spike in other operating expenses which was in line with the growth in the industrial leasehold portfolio. NAV/share at $0.17.

*EuroSports Global: The Lamborghini authorised distributor crashed into net loss of $4m for FY15 (FY14: +$17m), dragged by the absence of a one-off property disposal gain ($16.3m) and impairment loss of goodwill arising from an acquisition ($2m). Revenue inched 1.6% to $40.4m from increased sales in pre-owned automobiles of 24 compared to 13 in FY14, attributed to the acquisition of pre-owned dealer AutoInc EuroSports in Aug'14, but the gain was offset by fewer sales in new Lamborghini models (13 vs 15 a year ago) from the increased additional registration fees and the tightening of loan financing restrictions. Gross margin decreased to 18.2% (-4ppt) from the change in sales mix. NAV/share at 9.46¢.

*Q & M Dental: Subsidiary Shenyang Aoxin Q & M Stomatology Hospital (SASH) has been designated to be the teaching and training institute for Liaoning Medical University, with the founder of SASH appointed as the Dean of the institute. The recognition extends the group's position as the market leader for the dental industry and put the group in a position to ensure necessary manpower to further expand its operations in China.

*ISOTeam: To issue up to 9m new shares (6.7% current share capital) at $0.58 apiece to placement agent OCBC Securities. Net proceeds of $5m is intended for capex (59%), new investments and business expansion (30%) and general working capital (11%).

*Keppel Corp: Acquired remaining 50.1%-stake in Norwegian wind turbine maker, OWEC Tower (AS), for NOK2.8m ($0.5m).

*First Sponsor: Launched and priced $50m 4% fixed rate notes due 2018, under its $1b multicurrency debt issuance programme.

*KTL Global: In negotiations to buy a South Korean supplier of lifting equipment.