SG Market (01 Jul 15)

Singapore stocks are expected to open higher, taking cue from the positive close on Wall Street, although uncertainty over the looming Greek referendum this Sunday is likely to put a cap on any meaningful upside.

Regional bourses are trading higher this morning in Seoul (+0.1%) and Sydney (+0.8%) but flat in Tokyo.

From a chart perspective, resistance for the STI is tipped at its 200-dma at 3,360, with downside support seen at the 2015 low of 3,268.

Stocks to watch:
*Banks: Singapore bank lending in May fell for the first time since Oct '09 to $597b (-0.1%), with the main drag from the trade, manufacturing and financial sectors. Economists noted that bank loans may remain soft but are unlikely to contract for an extended period as global growth, while sluggish, is not signalling a recession at this juncture. Singapore banks are guiding for ~5% overall loan growth this year.

*Hospitality: SIA, Changi Airport Group and the Singapore Tourism Board are ramping up joint efforts to boost inbound travel to Singapore and Changi Airport by reaching out to more than 15 markets. Markets targeted include Asia-Pacific, specific European markets and the US. In addition to targeting leisure and business travellers, the group will focus on the MICE segment. STB data showed that visitor arrivals to Singapore fell 5% y/y to 4.85m visitors (-5% y/y) between Jan - Apr'15.

*ST Engineering: ST Aerospace clinched a six year engine maintenance contract worth US$350m ($472m) from India’s second largest airline Jet Airways and its subsidiary JetLite. Works include provision of engine MRO services for the CFM56-7B engines for Jet Airways’ and JetLite’s fleet of Boeing 737 Next Generation aircraft. The contract extends an existing ten-year CFM56-7B engine maintenance agreement signed in 2010.

*Mapletree Logistics Trust: Proposed to acquire Coles Chilled Distribution Centre, a premium cold store warehouse located in New South Wales, Australia, for A$253.0m ($261.5m). The 55,395 sqm gfa property sits on 165,200 sqm of freehold land, of which 15,000 sqm of reserve land can potentially yield an additional GFA of 7,000 sqm. The property is currently leased to Coles Group with a weighted average lease to expiry of 19 years with built-in annual escalations. The accretive acquisition is priced at NPI yield of 5.6%, will be fully debt funded and expected to increase aggregate leverage ratio from 34.9% to 38.5%. Pro forma FYMar15 DPU is expected to improve to 0.5% to 7.54¢, while NAV/unit will remain at $1.03.

*Hyflux: To set up 25:75 investment holding company (InvestCo) with TUS-Holdings as a vehicle for strategic investments in water projects in China. Subsequently, Hyflux will divest five wholly-owned treatment plants to the InvestCo for Rmb890m ($195m), to be payable in tranches subject to fulfilment of conditions. Post-sale, the group will recognize a net gain of $42m.

*Atlantic Navigation: Secured a 3-year crew boat charter from a Norwegian oil and gas company. The total contract value is US$6m, with an option to extend for one year. The vessel is expected to be deployed for service in the Oman offshore area by mid-Aug ’15.

*Artivision: Chosen by Israeli government to manage programmatic video campaigns through its automated video buying platform. Separately, it has also signed contracts with four other Israeli advertising agencies which is expected to contribute not less than 6.5m Israeli Shekel of revenue from commencement till 31 Dec ’15.

*Rex: 30.3% owned FRAM Exploration (FRAM) is terminating its existing 5-year leases for two rigs with Loyz Energy for a termination fee of US$13.8m, to be paid to FRAM. The termination will be settled via US$2.5m in cash and US$11.3m in 136m new shares issued.
*Polaris: Proposed 1-for-6 renounceable non-underwritten rights issue at $0.02 each to raise up to $59.8m. Proceeds are intended for general corporate activities and working capital.

*IPC: Will not proceed with the sale of its 7 hotels in Japan.

*United Food Holdings: Profit warning for 2Q15, with net loss before tax of up to Rmb550m, due to higher operating expenses and weak Chinese economy.