SG Market (03 Aug 15)

Regional bourses all opened in the red this morning in Tokyo (-0.3%), Seoul (-0.7%) and Sydney (-0.1%).

Key corporate results that may move the market this week include Sembcorp Industries, Wilmar, StarHub and CapitaLand.

From a chart perspective, the STI bounced off its 38.2% fibonacci support at 3,180 last Fri but may struggle to find direction on weak strength. Looking at technical indicators, the RSI is oversold at 28.41 but the MACD remains in a bearish downtrend. Below 3,180, the next support lies at 3,150.

Stocks to watch:
*Cosco: Slipped into the red as expected from its profit warning with 2Q15 net loss of $4.8m vs $14.3m profit a year ago, as revenue slid 25.6% y/y to $853.5m, on lower shipyard sales. Operating margin narrowed to 2.4% from 5.3% in 2Q14 on weaker gross margin and lower sale value of scrap materials. Bottom line was further eroded by a 13.8% rise in interest expenses from higher bank borrowings and a $34m loss provision for construction contracts. Order book stood unchanged q/q at US$8.1b. NAV/share: $0.6137.

*China Everbright Water: 2Q15 net profit rose 12% y/y to HK$110.4m, while revenue spiked 93% to HK$509.8m, boosted by enlarged constuction revenue due to expansion and upgrading of several projects, operation services income and finance income. Gross margin shrank 22.4ppt to 44.3% from a larger portion of lower margin construction segment. Bottom line was dragged by higher admin expenses (+308%) attributed to the inclusion of HanKore Group after the RTO and increased bank borrowings (+72%), partially mitigated mainly by a government grant (HK$4.9m) and FX gain (HK$5.7m). NAV/share at HK$2.85.

*United Envirotech: 1QFY16 net profit crashed 85.2% y/y to $3.3m mainly weighed by one-offs, which include advisory and introduction fees ($6.5m) and absence of disposal gain of Memstar Technology in 1QFY15 ($14.2m). Otherwise, earnings grew 20% to $10.2m. Revenue rose 26.4% to $83.8m on treatment (+75.6% to $36m), membrane sales (+28.4% to $9.5m), partially offset by a marginal decline in the engineering segment (-0.3% to $38.3m). Meanwhile, bottom line was dragged by increased finance costs (+52.1% to $9.4m) from a newly issued bond and higher bank borrowings. NAV/share at $0.7562.

*Mapletree GCCT: 1QFY16 DPU grew 8.7% to 1.696¢, while distributable expanded 10.1% to $46.3m. Revenue and NPI climbed 19.1% and 18.7% to $75.9m and $62.4m respectively, driven by positive rental uplifts from Festival Walk and Gateway Plaza. Occupancy climbed 0.2ppt q/q to 99% with WALE of 2.4 years, while aggregate leverage rose 5ppt to 41.2% due to the Sandhill Plaza acquisition. All-in debt cost at 2.64%. NAV/unit fell 4.4% to $1.145.

*Soilbuild Construction: 2Q15 net profit climbed 5% to $5.5m, while revenue grew 21% to $81.6m, from projects like the industrial developments at Tuas Crescent and 60 Jalan Lam Huat, and public housing development at Ang Mo Kio. Gross margin fell 1.1ppt. Overall increase in expenses and taxes slowed bottom line growth. NAV/share at $0.1279. Interim DPS of 0.5¢ maintained.

*GMG Global: 2Q15 net loss narrowed y/y to $5.3m (2Q14: -$17.4m). Revenue plunged 23.9% to $165.3m, in tandem to the fall in average price of natural rubber (-23.6%) to $2,000. Gross profit margin edged up 7ppt on improved procurement planning, production cost management and favourable FX movement from USD. NAV/share at $0.9436.

*Top Global: 2Q15 net profit plunged 64% to $0.5m, although revenue soared 666% to $41.2m from the recognition of Braddell and Bartley developments, and the consolidation of Suryamas. Bottom line plunge was due to higher share of profits attributed to minority interests.

*SIIC: 75.5% owned subsidiary was awarded Build-Operate-Transfer wastewater treatment project by Dalian government. The facility has design capacity of 105,000 m 3 /day for a concessionary period of 22 years, inclusive of construction and operation.

*Straits Trading: Acquiring a 25-storey office building in Melbourne, Australia, for A$125m.

*STATS ChipPAC: Offer declared unconditional after Jiangsu Changjiang obtained 88.68% of share capital. Offer will remain open for acceptance until 27 Aug.

*Kitchen Culture: Awarded $1.2m contract for the supply and delivery of imported high-end Kuppersbusch and Liebherr kitchen appliances for a premium development project at Spottiswoode Park Road.

*Profit warnings:
- Green Build Technology
- Mencast
- Heatec Jietong
- PSL Holdings
- Ziwo
- Seroja Investments