SG Market (09 Nov 15)

Singapore shares may face some selling pressure in reaction to the robust US jobs report, which bolstered the case for a Dec rate hike, and the worst-than-expected China trade data.

Highly geared and yield sensitive O&M, REIT sectors likely to take hits, while beneficiaries include banks and USD revenue based counters such as ST Engineering, Venture, glove makers.

Regional bourses are seeing sharp divergences this morning with Tokyo (+1.3%) trading higher but Seoul (-0.7%) and Sydney (-1%) retreating.

From a chart perspective, a downside breach of the psychological 3,000 level may send the STI down to the next support at 2,950. Immediate resistance is capped at 3,050.

Stocks to watch:
*NOL: Confirmed it is in separate talks with France's CMA CGM and Denmark's AP Moeller-Maersk on a potential sale. CMA has made a preliminary offer and is now conducting due diligence on the loss-making liner, currently valued at 0.76x P/B.

*SMRT: The Business Times reported that SMRT’s rail reform may be imminent, citing its stellar performance since Aug, despite the street’s negative outlook on the stock.

SG: Starhub. 3Q15 met expectations as net profit jumped 22% y/y to $118.7m (+22%) largely on gains from partial divestment of a 70% subsidiary.Revenue inched to $603m (+1.9as equipment sales (+14%), fixed network (+4.3%) and broadband (+3.8%) offset the flat mobile and pay TV segments. Post-paid customer base (+5.3%) and ARPU (+4.4%) outperformed that of the shrinking prepaid segment. EBITDA margin widened 1.1ppt to 35.7%. Interim DPS of 5¢ maintained.

*Venture: 3Q15 net profit rose 12.2% y/y to $40.5m, on back of robust revenue of $692.9m (+15.7%), driven by both existing and new customers, as well as favourable FX movements. Pretax margin inched 0.1ppt to 6.9%, while bottom line was pared by higher effective tax rate of 15.6% (3Q14: 11.7%) due to expiry of tax incentives. NAV/share at $6.92.

*Perennial Real Estate: Net profit for 5Q of the 15-month ending 30 Sep ‘15 came in at $4.7m versus a $0.36m loss in the prior year. Revenue jumped more than 3x to $22.9m, following the RTO of St James in Oct ‘14, with contributions from CHIJMES and TripleOne Somerset in Singapore ($14.9m), as well as Perennial Jihua Mall and Perennial Qingyang Mall in China ($7m). Bottom line was hit by a spike in finance costs of $15.3m, but partially cushioned by a $3.4m gain from associates and JVs. NAV/share at $1.73.

*Frasers Centrepoint: FY15 results below estimates, despite core net profit up 15.8% to $543.8m. Revenue soared 61.7% to $3.56b, primarily driven by the acquisition of Australand, the acquisition of 6 hotels by Frasers Hospitality Trust, sale of Crosspoint Mall and Completions of Twin Waterfalls EC. Bottom-line growth was however slowed by the faster clip of cost increases. Final DPS of 6.2¢ maintained, taking full year DPS to 8.4¢. NAV/share at $2.25

*Sarine: 3Q15 results consistent with profit warning, with net loss of US$1.4m (3Q14 net profit: US$5.7m), while revenue halved to US$9.5m, amid continued negative conditions in the midstream of the diamond industry. Gross margin fell 6.7ppt to 63.2%. NAV/share at US$0.20

*IHC: 3Q15 net profit tumbled 87.6% y/y to $0.3m despite revenue climbing 29.8% to $11.7m, with top line led by contributions from its recent acquisition of a drug distribution company. Gross margin slipped 9.7ppt 46.4% on changes in revenue mix. Bottom line was weighed by higher admin (+137.3%), and finance (+36.6%) expenses, partly mitigated by rental income from its newly acquired Australian properties. NAV/share at $0.15.

*Federal Int’l: 3Q15 results saw a turnaround in net profit to $0.6m (3Q14: -$19.6m) even as revenue slumped 48.4% to $14.9m due to lower sales from its trading business. However, gross margin jumped 15.3ppt to 35.3% on a change in sales mix. Bottom line was buttressed by a $1.1m FX gain as well as an absence of disposal losses ($24.1m) recognised in 3Q14. NAV/share at $0.54.

*CapitaLand: Investing US$137m in two prime properties in Paris and Tokyo through its Ascott Serviced Residence Global Fund. With these acquisitions, Ascott now has more than 43,000 units across 277 properties in 95 cities, on track to meet its target of 80,000 units by 2020.

*Hyflux: Entered into a 49/51 JV with Crystal Developers to develop infrastructure, utilities and environmental solutions for an integrated township project in Morogoro, Tanzania. Initial investment in the JV is US$5m, and the group prepares to increase funding up to US$22.5m over the next seven years.

*Sino Grandness: Launched new range of Garden Fresh Loquat Yogurt Drink at Nanjing Trade show in late October.

*Profit warning:
- Abterra
- Regal International
- Asia Fashion
- Eastern Holdings