SG Market (03 Nov 15)

Singapore shares are likely to open higher, taking lead from the Wall Street rally, as investors switched to a risk-on mode but but upside for the local market will be capped by the lack of clear cut catalyst.

Regional bourses are trading lower higher this morning in Seoul (+0.7%) and Sydney (+1.4%), with Tokyo closed in celebration of Culture Day.

From a chart perspective, the STI may to attempt a test of the psychological 3,000 resistance mark although short term technical indicators are exhibiting bearish signals. Downside support is seen at 2,920.


Stocks to watch:
*SingPost: 2QFY16 core net profit was below estimates, coming in at $37.5m (-4.8%), on revenue of $263.2m (+19.4%). The stronger top-line was led by stronger contributions from its logistics (+43.3%) and retail & e-commerce businesses (+7.1%) pared by a slip in the mail business (-5.6%). Underlying profit margin however slipped 3.6ppt to 14.3% on higher volume related (+32.6%) and admin (+42.9%) expenses. Interim dividend raised to 1.5¢ (2QFY15: 1.25¢). NAV/share at $0.68.

*SIA Engineering: 2QFY16 results in line, with net profit up 5.7% y/y to $44.5m, while revenue fell 6.7% to $285.2m, as higher line maintenance revenue was offset by lower airframe and component overhaul and fleet revenue. Operating margin almost doubled to 10.2%, largely due to lower material and subcontract costs. Associates and JV’s contribution fell 35.7% to $18.7m. Interim DPS of 6¢ maintained. NAV/share at $1.19.

*Far East Hospitality Trust: 3Q15 results missed expectation as DPU and distributable income fell to 1.20¢ (-9.1% y/y) and $21.6m (-8%) respectively, weighed by higher finance cost driven by a spike in short term interest rate. Gross revenue and NPI ceded to $29.7m (-4.8%) and $26.9m (-4.6%) on softer room demand from both corporate and leisure segment. Room rates were lowered for both hotel (-6%) and serviced residences (SR, -7.2%) to sustain portfolio occupancy. Therefore, hotel and SR occupancy stood at 87.4% (+0.3ppt) and 90.2% (-2ppt), while hotel RevPAR and SR RevPAU were pressured to $151 (-5.6%) and $209 (-9.2%) respectively. Aggregate leverage stood at 31.4%, with average debt cost and tenor at 2.5% and 3.6 years. NAV/unit at $0.96.

*Sing Holdings: 3Q15 net profit jumped almost nine times on a y/y basis to $2.8m due partly to 3Q14’s low base as well as a 130.5% jump in revenue to $35.5m. Revenue was boosted by unit sales at Robin Residences. Gross margin was flat at 12.9% (-0.2ppt). Net profit was further buttressed by a 34.2% drop in sales and marketing expenses to $1.6m. NAV/share of $0.55.

*DBS: Guiding for top line growth of ~8% for 2016, led by loans linked to Singapore mortgages and trade.

*Ascott REIT: Divested Salcedo Residences in Makati City Philippines, comprising 71 condominium units and 71 parking lots, to Infinity Primetowers Makati for 240m peso ($7.2m) realising an estimated gain of $6.2m.

*China Enviornment: Disclosed it may have to raise capital if its customers fail to pay up on time due to the deteriorating operating conditions.

*Blumont: To report 3Q15 losses, weighed by fair value readjustments of investments in financial assets.