SG Market (05 Aug 15)

Singapore shares are poised for a lacklustre opening after Wall Street ended lower overnight, with Atlanta Fed President Dennis Lockhart indicating that the Fed is ready to raise short-term rates in Sep.

Regional bourses are trading lower this morning in Tokyo (-0.2%), Seoul (-0.1%) and Sydney (-0.7%).

From a chart perspective, the STI is struggling to find its footing in a steep downtrend although technical indicators are deeply oversold. Below 3,180, the next support lies at 3,150, while upside resistance is at 3,250.

Stocks to watch:
*CapitaLand: 2Q15 net profit climbed 5.8% y/y to $464m as revenue gained 17.8% to $1.03b on higher contributions from development projects in China and increased rental from shopping malls and serviced residences, but partially offset by weaker development sales in Singapore and Vietnam. Bottom line was crimped by a $63m provision for Tianjin project, lower net fair value gains, reduced contributions from associates/JVs, as well as a jump in tax (+128.5%) due to the upward revaluation of properties and absence of tax write-back (2Q14: $6.4m). This was partially mitigated by a one-off gain ($17.9m) arising from refinancing of convertible bonds. NAV/share at $4.04.

*Yangzijiang: 2Q15 results in line with estimates. Net profit slipped 17% y/y to Rmb1.03b, despite a 34% increase in revenue to Rmb5.71b, attributed to more vessels delivered (11 versus 9 in 2Q14), as well as maturity of several high return investments under its investment segment. Shipbuilding margin tumbled to 15% (2Q14: 24%, 1Q15: 21%), on a higher mix from less profitable vessels. Bottom-line was partially boosted by disposal gains from financial assets (Rmb157m), FX gains (Rmb155m) and government subsidy (Rmb124m), compared to a loss of Rmb30m in 2Q14. Order book stood at US$4.14b (1Q15: US$4.6b). NAV/share at Rmb5.527.

*Sembcorp Industries: 2Q15 results in line with estimates. Net profit grew 24.9% y/y to $223.6m due in part to a gain on its sale of Sembcorp Bournemouth Water Investment in Apr ’15 ($54.7m). Stripping that out, net profit would have declined 5.7% to $168.9m. Revenue fell 5.8% to $2.4b amidst broad based declines across its segments, with the Marine segment recording a 9.9% drop to $1.2b. Gross margin improved by 1.6ppt to 14.8% due to higher margins from the utilities and marine segments. Finance costs jumped (+241.7% to $56.6m) on the consolidation of recently acquired Green Infra, commencement of operations at Thermal Powertech (India) as well as Sembcorp Marine’s higher bank borrowings. Interim dividend of 5¢ declared. NAV/share at $3.61.

*Riverstone: 2Q15 net profit beat estimates as it accelerated 68.1% y/y to RM27.0m on higher revenue of RM129.0m (+33.2%), fuelled by increased gloves demand. Gross margin improved 3.4ppt to 30.1%. Bottom line was also aided by an FX gain of RM1.5m (2Q14: loss of RM0.8m). Riverstone is currently in a net cash position of RM95.9m. Interim dividend of RM2.4¢ declared (2Q14: RM2.35¢). NAV/share at RM1.11.

*PACC Offshore: 2Q15 net profit halved to US$6.1m (-49%), despite a 22% rise in revenue to US$71m, boosted by maiden contribution from two vessels, POSH Xanadu and POSH Endurance, partially offset by lower revenue from its core OSV segment due to lower charter rates and utilisation rate. Gross margin slipped to 20% (2Q14: 30%, 1Q15: 13.9%). Bottom line further dragged by lower gain from vessels disposal and decreased interest income, as well as higher allowance for doubtful debt. NAV/share at US$0.659.

*Chip Eng Seng: 2Q15 net profit grew 14.9% y/y to $21.4m, while revenue soared 59.4% to $197.1m, driven by development revenue that spiked 2.9x to $106.5m from the progressive recognition of Nine Residences & Junction Nine. Bottom line growth slowed as 1) marketing expenses ballooned 3.1x to $8.5m, principally for the newly launched Williamsons Estate in Melbourne, and pre-sales costs for High Park Residences, 2) finance costs jumped 4.4x to $3.8m, 3) associate contributions plunged 82.3% from the absence of contribution of the Belsysa JV and 4) normalizing taxes, as there was a write back last year. NAV/share at $1.12.

*Rotary: 2Q15 net profit plunged 72% y/y to $3.7m, while revenue dropped 65% to $67.4m, as the group reached completion of some of its major projects. Gross margin improved 8ppt to 25% on project closures and continued productivity improvement efforts. Operating costs declined with revenue. NAV/share at $0.45.

*First Ship Lease Trust: 2Q15 net profit soared 6.15x to US$6.15m, while revenue climbed 19.9% to US$27.5m, on back of stronger bareboat charter/ bareboat charter equivalent. Bottom line soared as opex grew at a slower rate, plus the recognition of US$1m of other income and a 16.2% reduction in finance expenses to US$3.3m. NAV/share at US$0.43.

*Perennial Real Estate: 4QFY15 net profit was $8.8m (4Q14 net loss: $0.3m), while revenue was $39.3m (4Q14: $4.9m) from the consolidation St. James, post its RTO of PCRT in Oct’14. Revenue contributors were CHIJMES and TripleOne Somerset in Singapore and Perennial Jihua Mall, and Perennial Qingyang Mall in China. The consolidated group had $14.3m of interest costs, mainly from bank borrowings and MTNs. NAV/share at $1.70.

*Hafaray: 4QFY15 net profit jumped 2.8x to $4.1m, taking FY15 net profit to $13.4m (+66.5%). Revenue for the quarter was up 40.9% to $33.9m, led by increases from the general segment (+24.5%) and project segment (+62.9%). Gross margin inched up 3.4ppt to 39.7%. NAV/share at $0.101.

*Swiber: Secured US$80m LOI to install pipelines and supporting structures for a global energy company in Latin America. The order win will take Swiber’s order book to ~US$1.9b.

*Frasers Centrepoint: Announced 90% committed occupancy at Waterway Point (located at Punggol Waterway). The mall is expected to open in 1Q16.

*Genting SP: Profit warning for 2Q15 due to fair value loss on derivative financial instruments as a result of unfavourable market conditions and unrealised FX translation losses. Notwithstanding, group expects adjusted EBITDA to be comparable to 2Q14.