SG Market (02 Nov 15)

Singapore shares may get a little reprieve from the slight DBS 3Q earnings beat but sentiment remains fragile ahead of China’s Caixin PMI data for Oct.

Regional bourses opened lower this morning in Tokyo (-1.6%) and Sydney (-0.8%).

From a chart perspective, technicals are losing momentum after the STI broke below the psychological 3,000 mark last Fri and now sees immediate support at 2,980, followed by 2,920, while upside is pegged at 3,120.

Stocks to watch:
*DBS: 3Q15 results net profit of $1.07b (+6% y/y, -5% q/q) was slightly ahead on robust net interest income of $1.81b (+13% y/y, +4% q/q), driven by currency effects in loan growth (+9% y/y, +2% q/q) and wider NIM of 1.78% (+10bps y/y, +3bps q/q). Non-interest income declined to $899m (- 1% y/y, -5% q/q) due to a drop in investment banking, wealth management fees, as well as a $50m charge on derivatives. Total provisions remained stable at $178m (+1% y/y, +30% q/q), with flat NPL ratio of 0.9%. Tier 1 CAR of 12.9% (3Q14: 13.4%, 2Q15: 13.4%). NAV/share at $15.42.

*NOL: Dived deeper into the red with 3Q15 loss of US$96.1m (3Q14: -US$52.3m). Revenue sank 28% to US$1.2b, due to lower shipment volume (-10.7%) and freight rates (-21.2%) although utilisation rate remained stable at 93%. Core liner registered operating losses of US$66m (3Q14: profit of US$7m) even as cost per FEU was reduced 17% on operational cost efficiencies and lower bunker costs. Post divestment of APL Logistics, net gearing improved to 1.03x from 2.25x at end 2014. NAV/share rose 45% to US$0.97.

*UIC: 3Q15 net profit grew 9.4% y/y to $65.3m in tandem with a 6.2% increase in revenue to $189.4m. The increase in revenue was led by a jump in sale of properties held for sale (+25.5%) pared by declines in rental income (-1.8%) and hotel operations (-3.7%). Bottom-line was buttressed by $2.6m in dividends as well as a 12.1% increase in contributions from associates and JVs. NAV/share at $4.19.

*Japfa: 3Q15 net profit dived 25.8% y/y to US$7.9m on lower revenue of US$695.3m (-11.4%), largely dragged by the depreciation of IDR. Operating margin expanded 4ppt to 9.5% on wider margins from Indonesia Animal Protein operations. Bottom line was weighed by huge FX and biological assets fair value losses. NAV/share at US$0.35.

*Soilbuild Construction: 3Q15 net profit slid 24.8% y/y to $3.0m on higher revenue of $78.2m (+25.7%), contributed by Xin Ming Hua and Jalan Lam Huat industrial developments, HDB projects, and Pepper + Fuchs project. Gross margin shrank 2.6ppt to 8%. Bottom line was further hit by fixed assets divestment losses, FX losses and higher staff expenses. NAV/share at $0.128.

*Creative: 1QFY16 net loss widened 42% to US$13.9m, while sales fell 7% to US$22.5m, as difficult market conditions continued to affect product sales. Gross margin fell 2ppt to 26%. Bottom line further dragged by a 52% increase in selling and admin costs due to legal costs for ongoing litigation. The group has settled with Apple regarding a patent infringement lawsuit filed in Mar. Apple will take a license for Creative's ZiiLab's license. The license payment is expected to boost 2QFY16 EPS by US$0.23. NAV/share at $1.21

*Roxy Pacific: 3Q15 net profit was up 7% to $13.3m, while revenue jumped 31% to $87.6m, driven by increased contribution from property development and property investment, offset by hotel segment. Gross margin was flattish at 26%. Bottom line growth was slowed by lower associate contributions. NAV/share at $0.37.

*Tianjin Zhong Xin Pharm: 3Q15 net profit jumped 64.4% y/y to Rmb96.2m on a Rmb60.5m gain on disposal of its two associates. Revenue slipped 5% as demand for western medicine fell. Gross margin dipped 0.6ppt to 26.1%. Bottom line was pressured by a 61.1% decline in associate contributions to Rmb9.1m. NAV/share of Rmb4.93.

*China Minzhong: 1QFY16 net profit dived 73.1% y/y to Rmb15.5m on a Rmb21.2m FX loss (1QFY15: gain of Rmb2.4m). Revenue slipped 4% to Rmb467.7m as the 72.6% jump in its mushroom spores business segment to Rmb67.3m was negated by a 47.6% slump in its beverage business to Rmb58.8m. Bottomline weighed by a 17% rise in finance costs to Rmb36.9m. NAV/share at Rmb7.95.

*IPC: Swung to 3Q15 net loss of $1.5m (3Q14 net profit: $3.7m), while top line slumped 48.3% to $4.8m, due to the absence of sales from Olso project in Japan, as well as the absence of rental income from two Sapporo hotels post disposal at end FY14. Bottom line further dragged by FX losses. NAV/share at $2.48.

*GLP: Commenced development of its largest logistics park in Greater Tokyo which will provide 319,000 sqm of gross floor area for ¥59b.

*Oxley: Second development project in Phnom Penh, Cambodia, The Peak, has achieved sales of more than 50% of Phase 1 of the development, comprising 507 residential units in Tower 1.

*Tiong Seng: Awarded $72.9m contract for the proposed construction of a bus depot at Sungei Seletar.

*Profit warning:
- Oveas Education
- Fabchem China
- Seroja Investments: