SG Market (18 Aug 15)

Singapore shares are likely to have a muted opening despite the positive close on Wall Street, which saw gains by Apple, Disney and other large caps lift key indices.

Regional bourses are trading near the flatline this morning in Tokyo (+0.1%), Seoul (+0.1%) and Sydney (-0.1%).

From a chart perspective, longer term trends are still pointing to a downward direction for the STI, with immediate supports at 3,050, followed by 2,950 (Feb ’14 low).

Stocks to watch:
*Property: Data from URA showed that Jul developers' private home sales (ex EC) was at 1,594 units vs 375 in Jun, the highest monthly figure in 2 yrs, but due largely to just 1 project - Chip Eng Seng's sale of 1,169 units of High Park Residence, which accounted for 73% of total volume. The combination of sub-$1,000/psf ASP pricing and good proportion of small-format units resulted in vast majority of the units being sold below $1.0m. Property Consultants do not expect Jul's sales momentum to be sustained due to the jubilee celebrations, election fever, and Hungry Ghost month. Consultants forecast developers to sell 6,500-9,000 private homes this year.

*Noble: In an investor meeting yesterday, Noble announced that it will review all options, including selling its core businesses, to build a strong and liquid balance sheet. The group believes that it has provided for sufficient downside risk by using a 60% haircut in valuing its net Fair Value assets, and highlighted that continued growth in its production volumes in 2Q15 proves to show that the group’s stakeholders remain confident in its business proposition.

*SIA: Jul passenger traffic improved 6.6% y/y against a 0.1% increase in capacity. Consequently, passenger load factor (PLF) improved 2.8ppt to 84.1%. Management maintained that the operating environment continues to be challenging and that the growth in passenger carriage was mainly due to promotional activities at SIA as well as improved PLFs across its other carriers namel, SilkAir (+3.8 ppt to 74.3%), Scoot (+0.7ppt to 84.8%), and Tigerair (+2.7ppt to 85.3%). Cargo load factor however, slipped 4.1ppt as cargo traffic declined 5% against capacity growth of 1.6%. Load factors declined across all route regions with the exception of South West Pacific as demand could not keep pace with capacity increases.

*SATS / SingPost: SATS will set up an eCommerce airhub at a 6,000 sqm facility in Changi Airfreight Terminal 1 by Dec’16, and SingPost has entered into an agreement with SATS to outsource its airport consignment operations by end 2016. The automated facility will improve efficiency and space utilisation, as well as enhance consignment handling capabilities for both SingPost and SATS. When fully operational, the facility is expected to achieve a productivity gain of more than 30%.

*Lizhong Wheel: Privatising via a voluntary conditional cash offer at $0.50/share, or 96.1% above the last transacted price. Rationales include: to allow an avenue for shareholders to exit given absence of liquidity over the past few years, greater management flexibility, and save on listing expenses. Offer is conditional upon not less than 90% acceptances, and shareholders owning 66.7% have undertaken to accept the offer. The deal is priced at 0.6x P/B and 4.1x trailing P/E.

*Koh Brothers: Unveiled the new Sun Plaza following a $33m AEI jointly developed with Heeton Holdings (50:50). The new mall has a total net lettable area of 158,000 sqf (+5,772sqf). Both partners remarked that the suburban shopping mall has close to full occupancy and has secured anchor tenants such as NTUC Fairprice, National Library Board and Kopitiam.

*KrisEnergy: Announced that oil production from the Wassana oil field in the Gulf of Thailand commenced on 14 Aug’15. Peak rate of production is expected to hit 10,000 bbl/day.

*Japfa: 61.9%-owned subsidiary, AustAsia Investment, will form a 10%/90% JV with European-based dairy and milk processing company Food Union Group, to develop a US$200m premium milk processing plant in Shandong Province, China. The plant is expected to commence operations in 1Q17 and Japfa will supply premium raw milk to the plant, based on a long term (five-year renewable) offtake contract. When production is fully ramped up within the following two to three years, Japfa could potentially supply up to 900 metric tonnes of raw milk per day.

*CSC Holdings: Proposed renounceable non-underwritten 1-for-3 rights issue at $0.03, attached with five free warrants with exercise price at $0.01 apiece, for every rights share subscribed. Net proceeds are intended for new business ventures (47-59%) and working capital (41-53%).

*Global Invacom: Renewed sales contract with one of its major customers, a leading Southeast Asia broadcaster. In addition, all of its delayed orders of satellite dishes and low-noise blocks by major customers in US, UK and Asia have restarted since delays in 1H15.