SG Market (24 Jul 15)

Singapore shares are expected to remain range-bound as corporate earnings have largely met expectations, although negative sentiment may spill over from the weak Wall Street overnight caused by weak earnings and a cautious mood.

Regional bourses are mixed this morning in Tokyo (+0.44%), Seoul (-0.63%) and Sydney (-0.27%).

From a chart perspective, the STI is trading just under its key 200-dma at 3,360, with technical indicators coming off from the overbought region. Next downside support for the index at 3,330 (14-dma).

Stocks to watch:

*Keppel Corp: 2Q15 results sorely missed, as net profit fell 2.3% to $396.7m despite being massively propped up by one-off gains of $273.9m, mainly due to an unexpected ~$200m loss on the Doha EPC project from cost over runs. Revenue fell 19.3% to $2.56b, dragged by weaker O&M contributions (-23% y/y) on less work, project deferment, as well as infrastructure segment (-28% y/y) from weak power generation business and less revenue from EPC projects. The property division gained 24% from increased sales in China. O&M EBIT margin was weak at 13% (-1.7ppt y/y, +1ppt q/q), while order book stood at $11b (1Q15: $11.3b), with YTD order wins of $1.5b (none in 2Q). Maintained interim DPS of 12¢. NAV/share at 5.96.

*OSIM: 2Q15 in line with net profit of $22.5m (-24% y/y), as revenue sagged to $159.5m (-12.7%), on broad-based weakness in all operating markets. Bottom line was weighed by startup costs for TWG and higher rental costs of outlets. Second interim DPS of 2¢ maintained, bringing 1H15 DPS to 3¢.

*SATS: 1QFY16 underlying net profit of $47.1m (+8.5% y/y) came in-line. Revenue fell 4.2% to $416.9m due to 1) soft underlying performance from Japanese subsidiary TFK Corporation, 2) weaker JPY, 3) divestment of Urangan Fisheries in Jul ’14 and 4) loss of revenue from SATS BRF Food (SBRF) after the transfer to a JV. EBIT margin improved 1.4ppt to 10.6% on productivity improvement and cost control initiatives. Bottom line excludes a one-off gain of $2.5m from SBRF.

*Suntec REIT: 2Q15 DPU and distributable income advanced 10.3% y/y and 11.1% to 2.5¢ and $62.9m, respectively. Gross revenue surged 19.6% to $81.4m and NPI jumped 23.5% to $56.9m, from the completion of Phase 2 AEI works at Suntec City, as well as stronger performance from Suntec Singapore (Convention). Overall office and retail occupancy rates were 99% (-60bps q/q) and 95.1% (+160bps q/q), respectively. Aggregate leverage rose 50 bps q/q to 36.2%, with average debt-to-maturity of 3.08 years and cost of debt at 2.7%. NAV/unit stood at $2.101.

*CapitaLand Commercial Trust: 2Q15 at the lower end of estimates with both distributable income and DPU inched 0.5% y/y to $64.4m and 2.19¢. Gross revenue grew 5% y/y to $69.1m, while NPI climbed 3.6% to $53.9m, from higher rents and occupancy rate, but partially offset by increased property tax. Overall portfolio occupancy (excluding CapitaGreen) maintained at 99.7%, with weighted average lease to expiry of 7.7 years. Including 40%-owned CapitaGreen, occupancy rate would have expanded to 98% (1Q15: 97%). Aggregate leverage at 29.5% (-0.4ppt) and average cost maintained at 2.4%. NAV/unit at $1.76.

*Mapletree Commercial Trust: 1QFY16 results in line as DPU rose 3.1% y/y to 2.01¢. Gross revenue inched 1.6% to $69.7m boosted by higher rental at VivoCity, while NPI climbed 5% to $54.3m on lower electricity expenses, partially offset by increased property taxes and maintenance expenses. Occupancy dipped 0.2ppt q/q to 95.5% with WALE of 2.2 years, while aggregate leverage remained at 36.4% with average debt cost of 2.41% (+0.13ppt q/q). NAV/unit at $1.24.

*Ascendas India Trust: 1QFY16 results met estimates with DPU of 1.37¢ (+19% y/y) and distributable income of $12.7m (+20%). Gross revenue grew 7% to $34.2m, boosted by new contribution from CyberVale acquired in Mar ’15, positive rental reversions and higher occupancy at one of its properties. NPI jumped 17.1% amid lower utilities expenses and drop in provision for doubtful debts. Overall occupancy stood at 97% with WALE of 3.2 years, while aggregate leverage at 26% and all-in cost of debt of 6.8%. NAV/unit at $0.64.

*Sheng Siong: 2Q15 net profit in line at $13.6m (+23.1% y/y), on revenue of $179m (+4.3%), mainly boosted by five new stores, as well as same store sales growth (+0.3% y/y, -2.9% q/q). Gross margin gained 50 bps to 25.2% (24.7% in 2Q14) from lower input cost and efficiency gains derived from the central distribution centre. Earnings further boosted by higher rental income from leasing of excess space and government grants. Interim DPS of 1.75¢ declared (2Q14: 1.5¢).

*Bumitama Agri: 2Q15 CPO production rose 14.8% y/y to 178,347 mt, while extraction rate fell 0.5ppt to 22.8%. Palm kernel (PK) production surged 26.1% to 35,956 mt, as extraction rate climbed 0.3ppt to 4.6%. For 6M15, CPO production was 338,738 mt (+15.4%), while that for PK was 66,532 mt (+22.7%).

*GLP: Clinched leasing contracts in China totalling 81,000 sqm with five industry leaders in retail, e-commerce, and third-party logistics companies.

*Frasers Commercial Trust: Private placement for 96m new units at $1.48 apiece, to part finance the acquisition of a Melbourne property, reduce debt and/or for working capital. An advanced distribution of ~0.7805¢ will be made prior to the issue of new units for the period from 3 Aug - 30 Sep.

*IEV: Gas distributor IEV secured a 2.7 mmbtu feed gas source worth US$23m, through a 40-month gas supply agreement with PT Rabana Gasindo Makmur. The contract is based on an agreed off-take of 80% and will commence in 4Q15.

*Artivision: MOU worth 18m shekels (US$4.7m) per year to provide video advertising network to a global advertising agency in Israel. Separately, it also signed an exclusive contract with Yediot Internet to purchase 15m video views per month.

*SIIC Environment: Substantial shareholder Global Environment Investment reduced its stake on 22 Jul from 13.98% to 9.05%, selling down 550m shares at $0.183 each via a married deal.