SG Market (31 Jul 15)

Singapore shares are expected to open in negative territory today following a weak results season and a tepid trading session overnight in Wall Street.

Regional bourses are mixed this morning in Tokyo (-0.12%), Seoul (+0.04%) and Sydney (+0.39%).

From a chart perspective, the STI has fallen below its support level at 3,250 yesterday and may portend towards further downside to the next support at 3,200.

Stocks to watch:

*UOB: 2Q15 missed estimates as net profit dipped more-than-expected to $762m (+5.7% y/y, -4.9% q/q), dragged by higher overall expenses (+11.4% y/y, +2.8% q/q) on increased staff costs and IT-related expenses. Total income inched to $1.93b (+2.2% y/y, -1.5% q/q), led by net interest income of $1.21b (+7.9% y/y, +1% q/q) on loan growth of 4.8% and higher NIM of 1.77% (+6bps y/y, +1bps q/q), fee and commission income of $465m (+13.4% y/y, +2.6% q/q), but partially mitigated by a drop in other income to $248m (-29% y/y, -17.5% q/q). NPL ratio remained at 1.2%, while Tier-1 CAR slipped 0.3ppt to 14%. Interim DPS raised to $0.35 (2Q14: $0.20). NAV/share rose 9.5% to $17.71.

*OCBC: 2Q15 results slight beat with net profit of $1.05b (+14% y/y, +5% q/q). Net interest income climbed 14% to $1.28b, supported by 18% loans growth, although NIM narrowed 3bps to 1.67%. Non-interest income rose 10% y/y to $939m, led by wealth management, brokerage and loan-related fee income. Provisions surged 23% to $80m, but NPL ratio was steady at 0.7%, with loan-loss coverage of 153%. Fully-loaded CET1 CAR was 14.1%, with Tier 1 CAR of 14.1%. NAV/share at $7.80. Interim DPS of 18¢ (1H14: 17.5¢).

*GLP: 1QFY16 headline net profit jumped 49.4% y/y to US$268.1m, mainly boosted by higher fair value gains and the inclusion of the US portfolio. Excluding revaluation gains, earnings dropped 7% y/y to US$57m, 18% of street's full year estimates. Revenue gained 12.3% to US$169.3m from completion of development projects in China with increasing rents and inclusion of management fee income from GLP US Income Partners I, but partially offset the absence of contribution from nine properties in Japan sold to GLP J-REIT in Sep '14 and weaker JPY against USD (-19%). Bottom line was weighed by increased property-related expenses (+21.1%) on the enlarged portfolio and other expenses (+44.3%) due to higher staff and business costs from its expansion. NAV/share at US$1.86.

*IndoAgri: 2Q15 far below expectations as net profit tumbled 99% y/y to Rp2.06b, despite a 3.4% gain in revenue to Rp4.13t driven by increased external sales in the Plantations segment (+47.3%), but mitigated by lower ASPs for palm products. Subsequently, gross margin shrank 9.1ppt to 21.8%. Further, bottom line was dragged by higher losses from share of JVs of Rp86.46b (2Q14: -Rp6b) from lower prices of sugar and electricity. NAV/share at Rp10,330.

*Hongkong Land: 1H15 results above estimates although underlying net profit slipped 3.1% y/y to US$419.2m due largely to higher taxes (+19.8%) due to the geographic mix of sales. Revenue soared 50.3% to US$905.1m, led by a 3.6x surge in sales of properties to US$419.9m attributed to residential developments in China and Singapore, while service income and rental income remained relatively stable at US$63.2m (+1.8%) and US$422m (-0.5%), respectively. Maintained interim DPS of US$0.06. NAV/share at US$11.76.

*Dairy Farm: 1H15 underlying net profit dropped 14% y/y to US$193, dragged by margin pressures across its food businesses and disappointing trading in Guardian in Malaysia. Revenue including 100% of associates and JVs rose 27% to US$8.01b, which includes contributions from newly-acquired supermarkets Yonghui in China and San Miu in Macau, while continuing businesses rose 3% (+7% at constant FX rates). Interim DPS of US$0.065 maintained.

*NOL: 2Q15 earnings missed estimates despite core net loss narrowing 85.6% y/y to US$10.9m (2Q14: -US$X). Revenue fell 22% to US$1.32b (2Q14: US$1.7b) on lower shipment volume (-12%) and average revenue/FEU (-16.7%), although utilisation rate remained above >90%. Cost of sales per FEU lowered 15% on operational efficiencies and lower bunker costs. Subsequently, core Liner EBIT turned around to US$20m (2Q14: -US$28m). NAV/share at US$1.02.

*SMRT: 1QFY16 results missed as net profit tumbled 10% y/y to $20.1m albeit a higher revenue (+7.8% to $320.3m) contributed by all segments. Net profit margin narrowed 1.2ppt to 6.3%, hampered by higher cost from staff (+8.3% to $128.9m), depreciation (+13% to $53.5m), repair and maintenance (+19.6% to $33.8m), other opex (24.5% to $60.5m) and financing (+11.6% to $3.1m). Fare segment operating losses widened to $3.8m (1Q15: $-1.1m) as train and LRT lost $3.7m (1Q15: $+5.0m) and $1.6m (1Q15: $-0.6m) respectively, but partially offset by bus profits of $1.5m (1Q15: $-1.1m). Non-fare segment profits improved to $31.5m (+5.5%) on higher taxi (+32.2%) and rental profits (+5.3%). NAV/share climbed 2.3% to $0.5778.

*Stamford Land: 1QFY16 net profit surged 268% y/y to $$17.2m, as revenue rose 16% to $64.7m, mainly driven by significantly higher contribution from the sale of three units in its property development segment, but partially offset by lower hotel contribution from the closure of Stamford Grand North Ryde (SGNR) which made way for a new development, as well lower AUD/SGD. Bottom line was boosted improved operating margin of 26.6% (+18.2ppt) from the change in sales mix, as well as lower staff costs (-30%) from the closure of SGNR. NAV/share of $0.53.

*Tuan Sing: 2Q15 net profit scaled 92% y/y to $22.3m as revenue surged 138% to $194.1m, led by higher revenue recognised for three residential developments and consolidation of revenue of Grand Hotel Group (GHG) following the acquisition in Dec ’14. Gross margin inched 2.7ppt to 19.8% from a change in sale mix due to GHG. However, net profit growth was crimped by a jump in administrative expenses (+73%), finance costs (+366%) and reduced associate profit (-75.3%) due to the GHG consolidation and lower contribution 44.5% owned GulTech, weighed by lower margin and start-up expenses of its new Jiangsu plant. NAV/share at $0.705.

*China Merchants Pacific: 2Q15 net profit fell 22% y/y to HK$195.1m, while revenue climbed 9% to HK$536.8m, driven by growth from Yongtaiwen Expressway and the consolidation of revenue from Jiurui Expressway, partially offset by lower contribution from Beilun Port Expressway. Bottom line was dragged by the absence of gains from the disposal of development business last year. Otherwise, net profit from continuing operations would have grown 10% to HK$290.4m (inclusive of MI). Interim DPS of 3.5¢ maintained. NAV/share at HK$5.84.

*Roxy-Pacific: 2Q15 net profit plunged 43% y/y to $13.0m on weaker revenue of $93.7m (-9%) due to lower contribution from property development and hotel ownership segments. Net profit margin narrowed 8.2ppt to 13.9%, depressed by fair value loss on interest rate swaps and higher financing cost. NAV/share increased 9.9% to $0.3689.

*Sysma: Exiting energy business by disposing 51% stake in Sysma Energy for $1.02m. This will allow the group t ofocus on core construction business. As part of disposal agreement, Sysma Land (subsidiary) will write-off an outstanding $1.3m shareholders loan that was extended to Sysma Energy for the purchase of a factory in 2014.

*Terratech: Awarded a Rmb240m ($53.7m) contract for the supply and installation works for a property development project in Beijing Lido 10 in China. Commencement of the one-year contract is in early Sep.

*Hyflux: Acquiring remaining 50% stake in H.J. NewSpring and H.J. Technical Consultant, which holds the Tianjin Dagang Desalination Plant in China for US$30m ($40m), as part of a portfolio rationalisation.

*Natural Cool: Acquiring paint and basic chemicals manufacturer Loh & Sons Paint Co for $7m (14.8x P/E, 5.4x P/B), which also owns an industrial property at 38 Lok Yang Way valued at $5.9m. The acquisition is expected to result in better synergy for the group and provide an additional revenue stream.

*GuocoLand: Saw a rise in enquiries for purchase at Leedon Residence, with the development recognising the sale of 24 units worth more than $110m in the past six weeks. To date, a total of 181 units representing 80% of all unit marketed have been sold.

*Hi-P: Received a $25m credit facility lasting up to six month from UOB for general working capital.

*YuuZoo: Invested $1.5m in China to hire more than 20 locals to replace current middle-man agreements in favour of direct relationships for its e-gaming business.

*Profit warnings:
- TA Corp
- ES Group
- LH Group