SG Market (28 Aug 15)

Singapore shares are expected to open higher, after Wall Street posted its second day of rally, led by a strong GDP report, which saw the US economy growing at 3.7% in 2Q versus estimates of 3.3%.

Regional bourses are trading higher this morning in Tokyo (+2.1%), Seoul (+1.3%) and Sydney (+0.9%).

From a chart perspective, the oversold STI is likely to rebound with immediate resistance at 3,000 and baseline support at 2,680.

Stocks to watch:
*Cordlife: FY15 results below estimates, with headline net profit up 6.4% to $32.5m, boosted by net fair value gains (+24% to $23.3m) from its investment in US-listed China Cord Blood Corp, unrealised FX gain ($4.7m), and net finance income of $2m (FY14: nil). Excluding those, pretax profit from operations fell 33% to $6.1m from higher marketing expenses which stemmed from promotional activities in India. Revenue expanded 17.3% to $57.6m, driven by increased awareness of its products as a result of more marketing and client acquisition efforts. Gross margin slipped 1.5ppt to 69.5% from a change in sales mix. Final DPS of 1¢, bringing FY15 total to 2¢ (FY14: 2¢). NAV/share at $0.62.

*Guocoleisure: FY15 net profit grew 23% to US$47.9m, while revenue fell 8% to US$423.2m, mainly from lower Bass Strait royalty and gaming revenue. Meanwhile, while hotel revenue was stable in GBP terms, but lower by 4% in USD terms as a result of the weakening GBP. Gross margin was relatively unchanged at 57.6%. Bottom line shored up by lower financing costs and taxes. DPS of 2.2¢ (FY14: 2.0¢). NAV/ share at US$0.89.

*ASL Marine: swung to 4QFY15 profit of $1.5m versus 4Q15 net loss of $4.1m, taking FY15 net profit to $7.9m (-64.1%). Revenue for the quarter soared 179.5% to $73.3m, driven by improvements in all segments, particularly in shipbuilding and shiprepair and conversion. Gross margin fell 9.6ppt to 14.7%. Bottom line also benefitted from lower admin expenses and finance costs. Separately, ASL won a contract to build tug and barges worth $140m. Final DPS of 0.4¢ (FY14: 1¢). NAV/share at $1.00.

*ISOTeam: FY15 net profit expanded 34.1% to $8.1m, while revenue grew 16.9% to $81.7m, largely from substantial increase in the repairs and redecoration segment, and others segment. Gross margin improved 5.4ppt to 24.7% on better R&R margins. Bottom line growth slightly slowed by increased admin and other operating expenses. Final DPS of 1.15¢ (FY14: 1¢). NAV/share at $0.324.

*Raffles Education: FY15 net profit plunged 69% to $17.0m on weaker revenue of $119.9m (-4%), mainly due to the absent of a $7.3m revenue contribution from Langfang Oriental Institute of Technology in FY14 following an equity interest swap arrangement in Jun '14. Other operating income tumbled 87% to $7.9m as $45.5m in divestment gains, $5.9m in government grant from Langfang Development Zone Treasurty Authority and $4.1m in compensation income from Langfang City Government recognised in FY14 were not repeated this year. Final DPS of 1¢ maintained. NAV/share at $0.57.

*Health Management International: 4QFY15 net profit jumped 49% to RM7.8m, taking FY15 net profit to $27.6m (+72%). Revenue for the quarter advanced 21% to RM95.3m, driven by the hospital and other healthcare services segment, led by higher patient load and average bill sizes. Gross margin expanded 2.1ppt to 28.1%. Bottom line boosted by a RM5.6m tax credit from the recognition of deferred tax assets. NAV/share at RM0.25.

*Olam: Proposed placement of 332.7m new shares (13.6% share capital) at $2.75 apiece to Mitsubishi Corporation (MC) to form a strategic partnership. Both parties intend to subsequently form a JV in Japan to tap onto MC's strong distribution and retail presence to distribute Olam products. Separately, MC will acquire 222m Olam shares from existing shareholder Kewalram Chanrai Group, bringing its stake to 20% of enlarged share capital. Post-issue, Temasek will remain as Olam's majority shareholder with a controlling 51.4% stake.

*Ezra: Divesting 50% stake in Emas AMC to Chiyoda and form a 50:50 JV, Emas Chiyoda Subsea to undertake larger and more complex offshore EPCI projects. According to sources quoted by Bloomberg, the transaction could be worth more than US$1b ($1.4b).

*Rowsley: Acquiring 75% stake in St Michael's for GBP40m ($88m), a JV set up to develop a 1.43 acre integrated development in Manchester, UK with estimated GDV of GBP200m ($440m), comprising a five-star hotel, luxury apartments, high quality office space, restaurants and bars. The equity partners are Beijing Construction Engineering (21%) plus former Manchester United football stars Gary Neville (2%) and Ryan Giggs (2%). In addition, it will pay GBP29.1m ($64.1m) to acquire 75% stake in three separate companies that respectively own Hotel Football, a 133-room boutique hotel located across Old Trafford stadium, Cafe Football, a 120-seat restaurant in east London, and GG Collections, a hotel management company that manages Hotel Football and Cafe Football. The stakes will come from Rowsley's controlling shareholder, Peter Lim and five former Manchester United football stars.

*Civmec: Decided not to proceed with acquisition of PT Global Industries Asia Pacific, a subsidiary of Technip, as the relevant parties could not reach a commercial agreement.