SG Market (05 May 16)

SG Market: Risk off mood lingers as investors digest a deluge of weak global economic data and poor 1Q earnings.

Australia's ASX 200 opened flat today, while markets in Japan and Korea are closed for Childen's Day.

From a chart perspective, the STI has breached the 50-dma with next support at 2,740 and immediate resistance at 2,805.

Stocks to watch:
*Sembcorp Industries: 1Q16 net profit of $107m (-25% y/y) missed expectations on weaker revenue of $1.89b (-19%), hurt by rigbuilding contract deferments, as well as lower HSFO prices in Singapore. Gross margin expanded to 14.1% (+1.8ppt), while the bottom line was eroded by a spike in finance expenses (+176%). Management highlighted that the global downturn in O&G sector and competition in Singapore's power market are expected to dampen prospects in 2016.

*POSH: 1Q16 core net profit of US$4.5m (1Q15: US$0.02m) in line, boosted by a turnaround in service contractor JV POSH Terasea. Revenue remained stable at US$58.7m (+2% y/y), as higher contribution from the full employment of an accommodation vessel was offset by reduced charter rates and utilisation across all segments. Overall gross margin expanded 10ppt to 23.9% on a shift in sales mix, while the bottom line was weighed by an allowance for doubtful debts (US$4.7m) and lower disposal gains. NAV/share at US$0.5879. MKE maintains Buy with TP of $0.42.

*Suntec REIT/ Abterra: Abterra disposed two office units at Suntec Tower 1 for SGD2,100 psf, 21% below 2015's transacted average. Management also highlighted a competitive leasing market with units laying vacant for 2.5 months and MKE believes this may signal potential weakness for Suntec REIT.

*Asia Enterprises: Turnaround to 1Q16 net profit of $0.7m (1Q15 loss: $0.6m), boosted by the absence of an inventory write-off. Revenue fell 2% y/y to $9.7m, dragged by lower average steel prices which offset the higher sales volume, while gross margin widened to 25.6% (+11.7ppt) on lower cost of inventory. NAV/share at $0.2733.

*iFAST: Entered 25:75 JV with PC International (HK), a financial firm that holds relevant licenses to sell products distributed on iFast's platform.

*SHS: Signed non-binding term sheet for the proposed acquisition of a 60% stake in Thao Li Construction for a sum between US$3.7m and US$4.3m. Thao Li provides the design, construction and manufacturing services for modular construction projects.

*HLH: Received an apology letter from SGX for two erroneous announcements on SGX StockFacts portal. The anouncement cited that the group has cancelled a land acquisition in Sihanoukville, Cambodia, where in fact, the land is the development site for HLH's D’Seaview project.

*AnnAik: Secured a BOT contract for a wastewater treatment plant in LiJiaXiang, China, from the municipal government. The project entails the expansion of an existing plant by 83% to 55,000mt/day, and will come with a 30-year concession period to operate the plant after its expected completion by Oct ’16. Total investment for the project is expected to be up to Rmb20m.

*Universal Resource and Services: Extended the deadline for the takeover of a drilling machine lease to 4 Aug.

*SMJ Int’l: Seeking shareholders’ approval for the proposed diversification from its core carpet business to include property investment and management.

*Pharmesis: Independent director Dr Pu Weidong will step down from Jul 2016, after being charged for insider trading of a former Mainboard listed company in 2009.

*Profit warning:
-Union Steel