SG Market (15 Jun 15)

Singapore shares are likely to face downside risks following the selloff on Wall Street last Fri as uncertainty over the Greek crisis and a two-day FOMC meeting this week weigh on investor sentiment.

Regional bourses opened sharply lower this morning in Tokyo (-0..7%), Seoul (-0.3%) and Sydney (-0.9%).

From a chart perspective, the STI is hovering below its 200-dma at 3,360, with downside support at 3,268. A convincing break above the 3.360 resistance would be needed to negative the downtrend.

Stocks to watch:
*REITS: The Business Times reported that the unclear timing of the Fed interest rate hike is causing volatility in unit prices. While REITs have hedged ~80% of their borrowings, there is a divided view on whether current prices have already priced in any rate increases. Some analysts commented that any selldown on a rate hike will be “more of a relief” rather than a clear downside trend, and unlikely to be significant.

*Mapletree Greater China Commercial Trust: Maiden acquisition of Sandhill Plaza for Rmb1,888.1m ($412.2m), a premium business park property located in Shanghai’s Free Trade Zone. The 83,801.5 sqm gfa property at Zhangjiang Hi-tech Park has a lease term up to 2060 and an occupancy rate of 96.2%. Post acquisition, the new property is expected to boost total lettable area to 2.6m sf (+37%) and pro forma FY14 DPU by 0.1% to 6.55¢. The acquisition will be funded by exisiting available banking facilities and net gearing is expected to increase from 36.2% to 40.6%.

*Ezra: Secured contracts under its subsea services and energy services divisions worth US$115m, including rigid pipelay for the Aviat field development in the UK North Sea, as well as engineering and offshore support works in West Africa for an oil major.

*SIIC Environment: 91.2%-owned Nanfang Water awarded the Meihu Water Treatment Centre Phase three BOT wastewater treatment project, which entails the construction and operation of a plant with design capacity of 100,000 tons/day for a concessionary period of 27 years.

*Lizhong Wheel: Acquiring a 60% stake in Baotou Shengtai Automobile Accessories Manufacturing, which manufacturies and sells aluminum alloy automobile wheels and accessories, for Rmb48m. The acquisition is expected to broaden the revenue stream of Lizhong and facilitate sustained profitability for the group moving forward. The acquisition will be funded by internal resources.

*Low Keng Huat: 1QFY16 net profit slumped 74% to $3.8m despite revenue climbing 10% to $26.8m, buoyed by leasing income from Paya Lebar Square Mall and the increased construction activity at Genting Hotel Jurong. Gross margin widened 29.1ppt to 48.3% on higher proportion of leasing income and write back of project cost for completed construction projects. But bottom line was dragged by $2.1m loss from associates, against a $14.6m gain last year (from disposal of land at Jalan Conlay). NAV/share at $0.85.

*EcoWise: Recorded a 2QFY15 net profit of $0.2m versus a net loss of $0.1m. Revenue fell 14.7% to $15.1m, mainly due to lower lower sales recorded by the rubber compounds and retreaded tyres businesses. Gross margin improved 2.5ppt to 24% from the higher margin renewable energy segment. Bottom-line was shored by a 21.5% decline in admin expenses, mainly due to lower manpower related cost. NAV/share at 4.89¢.

*Ramba: Extended the completion date under the placement agreement with Win World Profits and Harry Wangidjaja to 17 Jun.