SG Market (05 Nov 15)

Expect a Singapore shares to open lower, after US stocks retreated from a three-month high overnight, as investors weighed data on payrolls and Fed Chair Janet Yellen reiterated that a Dec rate hike remains a possibility.

Regional bourses are trading lower this morning in Seoul (-0.4%) and Sydney (-1.4%), but higher in Tokyo (+0.6%).

From a chart perspective, support for the STI is now seen at the 20-dma of 3,016 and the psychological 3,000 level.

Stocks to watch:
*SATS: 2QFY16 results met expectations with net profit soaring 26.8% y/y to $59.7m on softer revenue of $422.7m (-4.4%), due to divestment of Urangan Fisheries, a weaker JPY and the transfer of its food distribution business to new JV SATS BRF Food in Jun ’15. Operating margin expanded 4.4ppt to 14%, largely on lower expenses for raw materials, licensing and other costs. Interim DPS of 5¢ maintained. NAV/share at $1.31.

*Parkway Life REIT: 3Q15 results in line, with both distributable income and DPU up 15.6% to $18m and 3.4¢, respectively, boosted by partial distribution of divestment gains. Gross revenue and NPI of $26m (+2.5%) and $24.3m (+2.4%) came from higher rental income, but partially offset by the weaker JPY. Portfolio occupancy remained at 100% with WALE of 9.39 years. Aggregate leverage rose to 35.8% (1.7ppt q/q) with average debt cost of 1.5% and tenor of 3.7 years. NAV/unit at $1.70.

*Innovalues: 3Q15 results topped estimate as net profit jumped 61% y/y to $6.7m, on a $3.1m FX gain from a stronger USD. Revenue dipped 3.3% to $28.2m on fewer orders for automotive segment (-6.8%), but partially offset by strong demand from Thailand for office automation segment (+16%). Gross margin increased 1.1ppt to 28.4% due to better operational efficient and favourable FX movements. NAV/share is $0.24.

*Hyflux: 3Q15 net profit plummeted 42.9% y/y to $6.4m despite a spike in revenue to $133.5m (+32.1%), mainly driven by solid growth from the municipal sector (+45.6%), but partially negated by industrial sector (-38.5%). Gross margin narrowed 16.8ppt to 42.8%, undermined by swelling costs for raw materials, consumables and subcontractors. Bottom line was further hit by FX losses, financial receivable write-offs, deeper losses from associates and JVs, and the absence of tax credits. NAV/share at $0.54.

*Rotary Engineering: 3Q15 net profit plunged 41.7% y/y to $6.3m in tandem with lower revenue of
$60.3m (-64.9%), as some of its major projects have come to conclusion. Gross margin widen by 5.5ppt to 22.4% due to productivity initiatives and project closures. Drop in bottom line was further cushioned by a $5.2m FX gain and a $4m decline in admin expenses. Net cash position stood at $122.2m. NAV/share at $0.46.

*Jardine C&C: 3Q15 results was at bottom end of expectations with a lower net profit of U$182.2m (-14.5% y/y) and revenue of US$3.7b (-19.8%). 9M15 net profit was dragged down to US$544m (-15.8%) by the absence of a one-time gain from the acquisition of Astra Aviva Life last year, and lower contribution from Astra amid the faltering Indonesian economy and a weaker Rupiah. NAV/ share at US$5.17.

*Hock Lian Seng: 9M15 net profit soared more than 3.5x to $25.2m on a more than 3.2x jump in revenue to $149.8m largely due to revenue recognition from Ark@KB and additional units sold at Ark@Gambas as well as increased contributions from its civil engineering segment (+35.6%). Gross margin was eroded (-7.6ppt to 21.1%) by lower margins from its civil engineering projects. Bottom line was buttressed by improved sales and further progress from its JV (+565.1% to $3.8m). Net cash position stood at $139m. NAV/share of $0.41.

*Haw Par: 3Q15 net profit jumped 31.1% y/y to $34.9m on 23.6% growth in revenue to $48.1m due to a 33% rise in healthcare revenue pared by leisure (-11.2%) and property (-19.1%) revenue. Gross margin improved 2.9ppt to 59.7%. Bottom line was further aided by soaring investment income (+23.9%) but partially offset by a jump in marketing costs (+24.4%). NAV/share at $11.06.

*Rowsley: Sank into the red with 3Q15 net loss of $4.2m (3Q14: +$52.6m) largely due to absence of fair value gains ($52.1m) recorded in 3Q14. Revenue slipped 16.1% y/y to $17.6m, weighed by the continued softness in the Singapore market. Bottom line was further dragged by $1.7m in finance costs (3Q14: 0). NAV /share at $0.11.

*Halcyon Agri: 3Q15 results missed estimates despite turning in a net profit of US$47k (3Q14: -US$12.2m). Revenue of US$274.6m (+141.6%) was boosted by a jump in total sales volume to 183.8k ton (+175.8%) but offset by lower average selling prices of US$1,494/ton (-12.4%). Gross margin improved 2.3ppt to 7% mainly due to higher margins from its distribution segment. NAV/share at $0.395.

*Tigerair: Signed a 10-year contract with Airbus for the latter to provide fleet and inventory technical management services for its A320ceo fleet, which is expected to save US$20m in cost over the entire term as it commences in early 2016.

*Suntec REIT: Acquiring three floors of strata office space at Suntec Tower Two from Maybank Kim Eng Properties for $105.7m and subsequently lease back to the vendor by end Nov ’15.

*Parkson Retail Asia: Entered into a 70/30 JV (Super Gem Resources) with Superb Apparel Supply for selling mass market focused apparels in outlets under the brand name “LOL”.

*Pteris Global: Acquiring CIMC Air Marrel for $2.3m. The company manufactures and exports ground support equipment and will help expand Pteris’s airport equipment business.

*Profit warning:
- United Food Holdings
- Tiong Woon
- Delong
- Kencana Agri