SG Market (02 Jun 15)

Singapore shares may inch higher, after Wall Street kicked off the month of Jun with modest gains, but traders are likely to remain cautious ahead of a big week of economic news.

Regional markets are trading mixed this morning in Tokyo (+0.2%), Seoul (-0.3%) and Sydney (-0.8%).

From a chart perspective, technical resistance is tipped at 3,460, with underlying support at 3,360 (200-dma).

Stocks to watch:
*Tat Hong: Plunged into a 4Q15 net loss of $17.1m from a net profit of $4.2m, taking FY15 net profit to $4.9m (-85%). Revenue for the quarter fell 12% to $136.6m with lower contributions across all the group's segments, namely crane rental (-20%), tower crane rental (-3%), general equipment rental (-23%) and distribution (-6%). Gross margin shrank to 31.9% from 36.8%, attributable to lower utilisation rates of tower cranes during the lunar New Year break, lower rental rates in Australia and higher crane operating and relocation costs. Total operating expenses jumped 49% to $49.1m, due to impairments, excluding which total operating expenses for the quarter would have been down 8%. NAV/share at $1.03.

*Kingwan: Plunged into a 4Q15 net loss of $9.7m from a net profit of $2.1m, taking FY15 net profit to $17.1m (+154%). Revenue for the quarter advanced 15% to $23.8m, due to higher recognition of revenue from Mechanical and Electrical (M&E) contracts during the quarter. Gross margin improved to 13.5% from 17.1%. Bottom-line was largely weighed by a $12m impairment allowance made on loans to the group’s associate, Dalian Shicheng Property Development. The allowance was made in view of the continuing depressed real estate market in Dalian, China. Final DPS of 1¢ declared, taking FY15 payout to 1.7¢ per share (FY14: 2¢). NAV/share at $0.281.

*KSH: FY15 net profit fell 7% to $41.7m on revenue of $246.1m (-16%). The weaker top-line was weighed by a 16% drop in revenue from the construction business to $239.9m. Bottom-line was partly aided by a 38.6% rise in other income to $13.1m, mainly due to higher interest income. Meanwhile total operating expenses declined 14.2% to $239.5m, in line with the drop in revenue. NAV/share at $0.61.

*Elektromotive: FY15 net loss narrowed slightly to $2.7m from $2.9m, on revenue of $7.8m (+27.1%). Top-line was led by the electric vehicles charges equipment segment with revenue at $5.5m (+37.4%), with marginal positive contributions from both the advertisement (+6.1%) and circulation (+15.5%) segment. Total operating expenses rose 8.2% to $10.9m. NAV/share at 0.86 cents.

*Fabchem China: Swung back into a FY15 net profit of Rmb13.1m from a net loss of Rmb57.5m the previous year. Revenue declined 11% to Rmb349.8m, weighed by the industrial detonators (-18.1%) and ammonium nitrate (-56.7%) segments, but offset by higher contributions from the explosive devices (+12.6%) and industrial fuse and initiating explosive devices (+6.4%) segments. Gross margin expended by 6.9ppt to 30.9%, as the group was no longer affected by the temporary cease production directive which weighed on FY14, and also as a result of higher margin products. Bottom-line largely aided by the 85.8% reduction of other losses to $8.9m, due to lower write-offs. NAV/share at Rmb0.17.

*Ezra: Proposed 200-for-100 renounceable underwritten rights issue (US$150m) and issue of 5-year convertible bonds (US$150m) to raise up to US$300m. Rights issue price will be not more than 50% to the theoretical ex-rights price for each rights share. Ezra's founder and largest shareholder have undertaken to fully subscribe for their respective entitlements in aggregate of 24.7%, while the remaining 75.3% will be fully underwritten by Credit Suisse and DBS.

*ISOTeam: Secured five contracts worth an aggregate $24.8m, for repair and redecoration works for the period up to Feb ’17.

*Cache Logistics Trust: Divested the smallest property in its portfolio, Kim Heng Warehouse, for $9.7m. After completion, Cache will own 16 logistics warehouse properties (including the soon-to-complete build-to-suit logistics warehouse development for DHL Supply Chain Singapore) in Singapore, Australia and China with a total property value of ~$1.2b and a gfa of 6.7m sf.

*Otto Marine: Subsidiary Surf Subsea entered a US$20m loan agreement with OCBC, which comes with an option for OCBC to have a right to subscribe for new shares upon the listing of Surf Subsea or its investment vehicle up to the loan amount. In addition, another subsidiary Go Sirius entered into a US$34m credit facility agreement with OCBC.

*ZICO: Acquired business and management consultancy services firms, Finova Singapore and Finova Associates, for up to an aggregate US$6.6m ($8.8m), which includes an earn-out consideration equal or exceeding US$0.8m. Pro forma FY14 NTA/share is expected to be lowered to RM0.1482 (-20.7%), while earnings per share is expected to rise to RM0.0453 (+15.9%).

*Hyflux: Awarded a US$48m contract from state-owned Saline Water Conversion Corporation to design, build and supply 10 modular containerised desalination system units with a total designed capacity of 30,000 cubic metres per day to Saudi Arabia. The project is expected to be completed in ~eight months.

*Koyo International: Secured a $11.2m contract for air conditioning and mechanical ventilation services at various Ascendas Real Estate Investment Trust properties for a period of two years and, with an option to renew for another four years. Works scheduled to commence on 1 Jul ‘15.

*GSS Energy: JV with oil trading firm AFCO Energy, a subsidiary of FinCo Fuel Holding, to create a platform for marketing and distribution of mineral oil and crude oil products in Indonesia.

*SHC Capital Asia: To acquire China-based medical equipment manufacturer and supplier Tong Da Medical Device (TDMD) for $120m (10x FY14 core P/E), which will result in a RTO transaction.