SG Market (06 Aug 15)

Singapore stocks could open higher, taking cue from the positive close on Wall Street overnight, in a session which saw upbeat reports on America's services sector and a weaker-than-expected private payrolls print from ADP.

Regional bourses are trading higher this morning in Tokyo (+0.8%) and Seoul (+0.4%), although Sydney is down 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:
*Wilmar: 2Q15 core net profit came in below estimates, despite being up 18.8% y/y to US$193.6m on revenue of US$9.3b (-11.7%). The weaker topline was largely attributable to a 26% decline in revenue from the tropical oils business, which was weighed by lower palm oil prices. Overall EBITDA margin was at 4.7% versus 3.7% in the previous year, as the Oilseeds and Grains segment contributed strongly on back of positive crushing margin and another solid quarter by the group’s Consumer Products businesses. Bottom-line was dragged by a 2.6x rise in associate losses to US$10.3m, due to losses from Wilmar’s sugar business in India. Adjusted debt to equity ratio remained low at 0.39x. Interim DPS of $0.025 (2Q14: $0.02). NAV/share at US$2.41.

*StarHub: 2Q15 results below estimates. Net profit gained 5% y/y to $99.1m on slightly muted revenue gains of 2.3% to $589.5m which was bolstered by a 42.6% rise in sale of equipment to $35.2m due to higher re-contracts for new smartphones. Service revenue eked out a 0.5% gain to $554.3m, with the increase mainly contributed by Fixed Network Services (+5% to $96.7m) but depressed by 3.9% drop in broadband services to $49m as well as weaker Pay TV (-0.6% to $97.8m). Postpaid customer base expanded by 5.6% to 1.3m customers while post-paid ARPU increased marginally by $2 to $70 per month. EBITDA margin was relatively stable at 35.1%. Interim DPS of $0.05 maintained.

*Venture Corp: 2Q15 results in line with estimates, with net profit rising 7.5% y/y to $36.1m on higher revenue of $661m (+10%), driven by higher shipment and favorable exchange rate movement. Pretax margin inched up by 0.2ppt to 6.4%. NAV/share at $6.60.

*Innovalues: 2Q15 results in line with bullish estimates, as net profit accelerated 65.5% y/y to $5.9m on back of a 9.5% growth in revenue as well as a $1m FX gain. Revenue was driven by its automotive (+6% to $22.8m) segment from increased orders in the US and China as well as office automation (+21.3% to $6.6m) segment from increased orders in Thailand and China. Gross margin improved 4.5ppt to 29.9% from a favourable sales mix and improved operational efficiency. Interim DPS doubled to $0.012. NAV/share at $0.2364.

*Hi-P’s 2Q15 results below estimates, as net loss deepened to $7.9m (-163.7% y/y) despite revenue jumping 48.2% to $314.7m on higher customer orders. Gross margin fell 2.5ppt to 4.1% amid higher costs from inventory provisions, scrap and rework, product introduction, direct labor and depreciation. Bottom line was weighed by higher selling and distribution expenses (+85.8%) and admin expenses (+13.3%). Net debt position worsened to $169m (FY14: $2.2m). NAV/share at $0.714.

*Halcyon Agri: 2Q15 results sorely missed consensus estimates despite net profit jumping 420.4% y/y to US$3.2m albeit from a low base of US$622k. Revenue of US$298.3m (+701.9%) was boosted by a jump in total sales volume (+897.2% to 192.8k ton), but partially pared by lower average selling prices (-19.6% to US$1,547/ton). Gross margin slid 2.2ppt to 7% as it sold more third party products. Management guided that prices remain extremely volatile and challenging. NAV/share at $0.47.

*Breadtalk: 2Q15 results below estimates. Net profit climbed 10% to $2.9m, while revenue grew 10.7% to $154.9m, driven by an increase of 86 bakery outlets, resilient same stores performance at Food Atrium’s HK outlets, and strong performances in Din Tai Fung Singapore and Thailand. Gross margin was maintained at 52.7%. 0.5¢ interim DPS maintained. NAV/share at $0.43.

*Rex International: 2Q15 net loss widened to US$3.9m from US$3.6m. The group recorded revenue of US$2.1m, which arose from technical services rendered to clients by RTM and sale of oil by Caribbean Rex. No revenue was recorded in the previous year, as the group was primarily involved in exploration and drilling activities during that period. Admin expenses increased 48% to US$3.5m mainly due to the consolidation of admin expenses of RTM and Caribbean Rex in 2Q15. NAV/share at US$0.140.

*RH Petrogas: Swung to 2Q15 net loss of US$2m versus a net profit of US$1.0 from the previous year, while revenue fell 25% to US$14.3m due to a significant decrease in average realized oil prices for the period, and decline in production due to power disruption in both Basin and Island PSCs. Gross margin crashed to 6.9% from 32.5%, on higher depletion and amortisation of oil and gas
properties in Basin PSC and Island PSC. Bottom line also weighed by increased admin expenses (+46%). NAV/share at $0.201.

*Marco Polo Marine: 3QFY15 net profit plunged 74% to $0.3m, while revenue fell 17% to $22.3m from lower ship chartering revenue, partially offset by ship building and repair operations. Gross margin grew 3.1ppt to 28.2%. Bottom line weighed by a doubling of other operating expenses. NAV/share at $0.53¢.

*Hock Lian Seng: 1H15 net profit soared 476.1% to $20.9m, while revenue spiked 338.9% to $125.3m, mainly due to the recognition of revenue from industrial development property Ark@KB, and additional units sold for Ark@Gambas. Civil engineering revenue (+26.7%) also climbed from the progress of the Maxwell Station and Airport projects in recent months. Gross margin fell 5.7% to 22.3%. Bottom line growth sped up by $2.0m associate contributions (1H14 loss: $43,000) from improved sales and further progress in the construction stages for the Skywoods project. NAV/share at $0.404.

*Sembcorp Industries: Increased stake in Sembcorp Green Infra to 64.06% after it subscribed to the entire rights issue while its partner, IDFC Private Equity Fund II

*Manufacturing Integration Technology: 1H15 net profit surged 15-fold y/y to $12.9m (1H14: $0.8m), as revenue spiked 139% to $53.3m, boosted by new solar orders, continued growth in the semiconductor sector and steady increase in contract equipment manufacturing sales. Besides a marked improvement in gross margin to 43% (+21ppt), bottom line was also boosted by higher interest income (+394%), rental income, disposal gain of development projects and FX gains. NAV/share at $0.198.

*MFS Technology: Proposed capital reduction of 10¢ per share.