SG Market (17 Aug 15)

Singapore shares could tick higher, taking cue from the positive close on Wall Street last Fri, following upbeat economic US data as well as approval for Greece’s third bailout package.

But sentiment may be dampened by Japan’s 1.6% 2Q GDP contraction and 0.8% drop in Singapore’s Jul non-oil domestic exports.

Regional bourses are trading higher this morning in Tokyo (+0.7%) and Sydney (+0.6%) but weaker in Seoul (-0.2%).

From a chart perspective, the STI may attempt to close the breakdown gap at 2,150 from deeply oversold levels but longer term trends are still pointing to a downward direction with immediate supports at 3,090, followed by 2,950 (Feb ’14 low).

Stocks to watch:
*OUE: 2Q15 results below estimates. Bottom line swung to a net loss of $16.3m (2Q14: net profit at $4.4m) as revenue fell 4.5% to $95.7m on lower revPAR for hospitality division and weaker sales from property development division, but partially supported by property investment division which have seen higher occupancy. Bottom line was hit by $20.5m of fair value losses, arising from mark-to-market of investment mutual fund. Management declared a 1¢ interim DPS and 3¢ special DPS on divestment proceeds from Crowne Plaza Changi Airport (2Q14: 1¢). NAV/share at $4.30.

*United Engineers: 2Q15 net profit tumbled 57% y/y to $17.6m mainly from higher non-controlling interests (2Q15: $9.2m vs 2Q14: -$1.9m), partially mitigated by higher JV contribution arising from a property sale ($6.5m). Revenue fell 59% to $468.2m from the absence of sales from Austville Residences which received TOP in 2014, as well as the lack of contributions from divested Wearnes and MFS Technology. Gross margin increased 5ppt to 16.1%, boosted by Multi-Fineline Electronix. NAV/share at $2.91.

*Midas: 2Q15 results below estimates. Net profit jumped 39.4% y/y to Rmb11.6m, boosted by lower withholding tax expense (-71.4% to Rmb2.5m) and absence of non-controlling interests (2Q14: Rmb2.3m). Otherwise, profit before tax slipped 5.2%. Revenue gained 11.3% to Rmb374.3m, attributed to higher contribution from the aluminium alloy extruded products division (+13.5%). Gross margin at 27.7% (2Q14: 25.4%) was led by a shift in product mix. Meanwhile, associate contributions from Nanjing SR Puzhen Rail Transport fell due to a different project mix (-18.7% to Rmb6.9m). Maintained interim DPS of 0.25¢. NAV/share at Rmb2.48.

*Swiber: 2Q15 results below estimates, as the group registered a net loss of US$4.6m versus 2Q14’s net profit of US$7.5m. Revenue slipped 8.7% y/y to US$200.2m as revenue from Asia slumped 61% to US$67m mitigated by a 2-fold increase in Latin American revenue contributions. Gross margin increased 3ppt to 10.8% on operating cost control measures. However, bottom line was severely weighed on by the absence of FX (US$4.6m), disposal (US$4m), and fair value (US$3.5m) gains booked in 2Q14. NAV/share at US$0.62.

*Straco: 2Q15 results in line with estimates, with net profit at 10.5m (+25.6% y/y) on revenue of $29.4m (+49.4%). Top line was led by revenue contributions by the Singapore Flyer, which was acquired in Nov ‘14, as well as increased revenue from Shanghai Ocean Aquarium (SOA) arising from more visitor arrival as well as the stronger RMB currency against SGD during the quarter compared to 2Q14. Total expenses (excluding finance cost) increased 80% to $6.40m, mainly due to the expenses incurred by the Singapore Flyer. NAV/share at $0.23.

*Tat Hong: 1QFY16 results below estimates. Net profit fell 53% y/y to $2.8m as revenue ceded 15% to $139.3m, mainly due to disposal of crane rental subsidiary, completion of projects and a weaker AUD/SGD. Gross margin narrowed 4.4ppt to 32% on lower utilisation rates as well as higher cross-hire charges and freight costs in Australia. Bottom line was further dented by FX losses of $4.4m and lower associates/JV contributions (-91% to $0.1m) but partially offset by divestment gains of $8.5m. NAV/share at $1.02.

*Mermaid: 2Q15 net profit grew 19.8% y/y to US$15.6m, while revenue expanded 38.2% to US$107.5m, led by subsea segment’s cable lay and IRM projects in the Middle East, as well as higher utilization for previously non-performing vessels. Bottom line gain partially negated by services costs that climbed at a 43.9% clip. NAV/share at US$0.39.

*Ying Li: 2Q15 net profit dipped 36.5% y/y to Rmb8.9m, while revenue plunged 60.3% to Rmb97.8m from lower recognition of development sales, partially cushioned by increased rental income, mainly from Ying Li IMIX Park Jie Fang Bei Mall. Gross margin expanded by 30.2ppt to 66.3%, largely due to a higher proportion of gross profit coming from rental. Bottom line slump was partially mitigated by increased interest income and lower finance costs. NAV/share at Rmb1.94.

*KS Energy: 2Q15 net loss of $25.2m versus net profit of $46.7m in 2Q14 on a 65.2% y/y plummet in revenue to $20.8m. The revenue plummet was due to a 67.2% slump in its drilling business to $18.3m on the back of reduced deployment of rigs coupled with the absence of charter contract revenue (2Q14: $3.3m). Consequently, gross margin crashed 46.2ppt to 4.6%. Bottom line was further weighed by the absence of disposal gains ($54.4m) booked in 2Q14, costs relating to idle rigs, as well as an impairment charge of $3.9m. NAV/share at $0.67.

*Cambridge Industrial Trust: Major shareholder, Oxley Global, has received several bids for its 24% stake in the trust’s manager. No firm decision has been made as yet.

*Lizhong Wheel: Delivery of 60 cargo containers at the Tianjin port has been delayed due to recent explosions. It is looking to reroute the containers, which may increase transportation costs. The level of damage to containers have not been ascertained.

*k1 Ventures: Proposed capital reduction comprising cash distribution of 1.5¢, followed by a 5-into-1 share consolidation.