Tuesday, August 11, 2015

SG Market (11 Aug 15)

Singapore stocks could open higher, taking cue from the rally on Wall Street, buoyed by a rebound in energy and metals stocks.

Regional bourses are trading higher this morning in Toyko (+0.5%), Seoul (+0.6%) and Sydney (+0.3%).

From a chart perspective, the STI may get a bounce from its 10-month low last week as technical indicators are deeply oversold. Topside resistance is seen at 3,250 (top of a breakdown gap) while immediate support is at 3,180.

Stocks to watch:
*Noble: 2Q15 results below estimates, with net profit down 5% y/y to US$62.6m on revenue of US$18.4b (-22%). Despite the weaker top-line, operating income from supply chain fell only 4% to US$328.9m, as overall gross margin improved to 1.79% from 1.46%. The energy division achieved strong growth, led by the oil-liquids business, however this was weighed by operating losses from the mining & metals segment as both spot and forward pricing came under sustained pressure. Meanwhile, the gas & power segment turned in an inline performance. Associate and JV losses (notably Noble Agri) widened to US$70.6m from US$21.5m. Noble also announced the results of PwC’s review of its mark-to market models, valuations and governance framework, with PwC giving assurance that Noble’s valuations comply with relevant requirements. NAV/share at US$0.77.

*Far East Hospitality Trust: 2Q15 results below estimates, with DPU of 1.16¢ (-6.5% y/y). Gross revenue and NPI declined to $28.7m (-3.0%) and $26.0m (-2.3%) respectively, mainly due to an influx of new hotel rooms as well as softer room demand. Rates were lowered across both its hotel and serviced residences (SR) properties to drive occupancy. As a result, hotel and SR occupancy rates grew 6.6ppt and 2.1ppt to 86.7% and 89.3% while hotel RevPAR and SR RevPAU fell 2.1% and 5.1% to $147 and $207 respectively. A spike in short-term interest rates in 2Q15 resulted in finance costs growing to $4.9m (+17%). Leverage ratio was 31.4%, with average cost of debt at 2.5% while debt tenor was 3 years. NAV/share at $0.97.

*Ascendas Hospitality Trust: 1QFY16 DPU climbed 3.2% to 1.28¢, while distributable income (after working capital retention) grew 4.1% to $14.2m. Revenue fell 2.7% to $52.8m, while NPI was shaved 0.9% to $21.4m, as a general improvement in hotel portfolio (except China) was offset by weaker AUD and JPY. Aggregate leverage inched up 0.8ppt to 38% with weighted average interest rate of 3.4%. NAV/share at $0.71

*Ho Bee Land: 2Q15 results slightly missed estimates, even as net profit jumped to $16.7m (+36.9%) on a 13.4% increase in revenue to $31.1m, led by higher rental contributions from The Metropolis in Singapore. Operating margins fattened 2.2ppt to 78.2%, aided by $2.9m (+153.1%) FX gains, but partially pared by a 105% increase in other operating expenses to $3.4m. Bottom line was negatively affected by $1.3m in total losses from its associates (+13%) and JVs (+101%). NAV/share at $3.90.

*Sarine: 2Q15 results missed estimates, as net profit fell 68.7% y/y to $2.7m on revenue of $14.4m (-41.7%). The weaker topline was weighed by a decline in capital equipment sales and recurring revenue, due to significantly lower diamond manufacturing activities. Gross margin relatively stable at 72.3%. Interim dividend of US1.5¢ declared (2Q14: US3.0¢). NAV/share at $0.297.

*ARA Asset Management: 2Q15 earnings missed with 1H attaining only 38% of full year estimates. Net profit for the quarter plummeted 21.1% y/y to $16.4m on a 8.9% decline in revenue to $36.8m as gains in management fees (+1.2%) and acquisition, divestment and performance fees (+256.4%) were negated by a steep fall (-53.3%) in finance income. Bottom line suffered from a more than 12-fold explosion in finance costs to $2.8m although a jump in its share of associate’s portfolio (+106%) helped to par the decline. Interim dividend of 2.3¢ maintained. NAV/share at $0.41.

*Hyflux: 2Q15 net profit fell to $26m (-57.8% y/y) despite revenue growing to $94.8 (+17.6%) mainly due to the absence of an $83.5m one-time gain that was realised in 2Q14. Revenue was stronger on the back of increased contributions from its municipal sector to $90.1m (+34.5%) pared by declines in its industrial sector to $3.8m (-66.4%). Gross margin ballooned 33.2ppt to 75.1% on lower raw materials, consumables used, and subcontractors’ cost. Order book stood at $2.9b. Interim dividend of 0.7¢ maintained. NAV/share at $0.56.

*Mencast: 2Q15 net profit plunged 76% to $1.3m, while revenue fell 39% to $26.8m, largely from a slump in the offshore and engineering segment, weighed by a weak market with major projects being completed last year. Slower revenue from the marine segment also contributed to top line slump, but was slightly offset by higher energy services revenue. Gross margin fell 3.8ppt to 24.4%. NAV/share at $0.36.

*Talkmed: 2Q15 net profit flattish at $9.6m, while revenue inched 1.7% higher to $16m from patients requiring higher intensity care. Bottom line slowed by $0.3m of share of associates’ losses. NAV/share at 8.17¢.

*China Everbright Water: Signed agreement with Ji’nan Municipal Government, Shandong Province for the expansion of Ji’nan Waste Water Treatment (WWT) Project. The total investment for the expansion is ~ RMB112m, with an increase in daily WWT capacity of 50,000m³.

*GLP: Selling five properties in Japan to GLP J-REIT for ¥31.8b, comprising total GFA of 203,000 sqm in line with market value. Transaction expected to complete in Sep.

*Cosco: Announced delay in delivery of two floating accommodation units. One will be delayed till 2Q17 (originally by end of 4Q16), and the other by one year (originally by 4Q15).

*United Engineers: Commenced legal action against three former employees and third parties with regards to irregular transactions at its property development subsidiaries. It hopes to recoup losses and damages from the defendants.

*SIA Engineering: Sold 9% shareholding in Safra Electronics Asia to Sagem for US$3.6m (78% premium to NTA). It will now only hold 40% in the JV.

*CEFC: Entered subscription agreement with Northern International Capital Holdings, Huanghe Exploration & Technology, and Hong Kong Great Wall Economic Cooperation to issue 705.5m new shares at $0.35.

*Profit warning:
- Kim Heng Offshore & Marine
- Courage Marine

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