SG Market (16 May 13)

SG Market: S’pore shares may churn higher after Wall Street continued its gravity-defying risk-on rally to fresh highs in choppy trading as investors shrugged off the economic contraction in eurozone. Separately, weakness in US manufacturing and drop in wholesale inflation fueled bets that the Fed is in no rush to scale back stimulus. Despite overbought situation, STI may be shored up by liquidity flows flooding markets. Overhead resistance pegged at 3,480 with support at 3,400. Stocks to watch for: *Yongnam: 1Q13 net profit edged up 1% y/y to $11.5m on the back of a 22% jump in revenue to $81.9m. Ongoing projects like the S’pore Sports Hub, Suntec City Convention Centre and a belt conveyor project in Malaysia boosted revenue in structural steelworks segment by an impressive 91% to $45.4m. But a lower revenue mix from higher margin specialist civil engineering projects (45% vs 65% in 1Q12) and substantial completion of the Marina Coastal Expressway projects resulted in a lower gross margin of 23.8%, down from 29.7% y/y. *UE: 1Q13 net profit fell 24% y/y to $7.4m despite the 17% rise in revenue to $136.6m, which was buoyed by higher rental income from its investment properties (+37% to $27.6m) and increased contribution from construction arm UE E&C (+31% to $81.9m). But a $11m spike in administrative expenses arising from commencement of UE Bizhub East and Park Avenue Changi and lack of write-backs dampened earnings at the net level. *Hiap Hoe: 1Q13 net profit declined 28% y/y to $10.2m, while revenue fell 19% to $30.3m, mainly from progressive sale bookings of residential units at Skyline 360 and Waterscape at Cavenagh. But loss of rental income from Kallang Pudding (vacated for re-development), nil contribution from its JV project, The Beverly (already fully recognised) and higher administrative costs eroded bottom-line profit. *Centurion: 1Q13 net profit jumped 78% y/y to $2.2m following a 23% increase in revenue to $16m. The group’s accommodation business doubled its sales to $11.1m on improved occupancy as well as new dormitories acquired in 2012. But optical disc business saw lower turnover due to reduced market demand for physical storage media, resulting in a $0.3m net loss. The group also benefited from lower distribution costs and finance expenses, which led to its encouraging results. *Koh Brothers: 1Q13 net profit improved 16% y/y to $3.3m as higher contributions from its 486-unit residential project Parc Olympia lifted revenue by 38% to $80.8m. For the quarter, the group bagged a $100m PUB contract for its construction and building materials division and completed the acquisition of a 41% stake in Metax Engineering in Feb. *Sunvic: 1Q13 net profit ballooned to Rmb80.9m from Rmb0.6m a year earlier as revenue soared 88% y/y to Rmb1.47b on a doubling of sales volume of acrylic acid and acylate esters to 135,800 tonnes and production of PMIDA and glyphosate. Overall gross margin expanded to 12.6% from 9.4% in 1Q12 due to higher selling prices for all its products and smaller increases in operating expenses, which did not keep pace with the sales growth. There was a slight improvement in net gearing, which remained at an elevated 1.1x. *Hong Leong Asia: 1Q13 net profit edged up 4% to $14.4m, while revenue saw a marginal 1% increase to $1.1b, due to the inclusion of $6.4m revenue from climate control unit (Airwell), acquired in Apr 12 and higher sales from diesel engines unit (Yuchai). But its consumer products unit (Xinfei) continued to suffer from keen competition and overcapacity in the industry. Impact of higher labour costs and FX loss was mitigated by a gain on asset sale and significant reduction in finance costs. *JES: Sank into a net loss of Rmb92.5m in 1Q13 vs a net profit of Rmb14.4m in prior year. Apart from a 66% drop in revenue to Rmb669.2m due to lower vessel contract prices, equipment delivery delays and a sharp contraction in gross margin to 2.8% from 6.7% in 1Q12, the shipbuilder was plagued by a host of problems ranging from liquidated damages (Rmb20.2m) for potential delay in delivery of vessels, losses arising from disposal of raw materials (Rmb27.2m) to inventory impairment (Rmb29.2m) and FX losses (Rmb2.6m). *Ezion: Received a letter of intent from an Asian based national oil company for a 4-year service rig contract worth US$80.3m. The service rig is expected to be deployed in Southeast Asian waters by end 2013 after undergoing refurbishment and conversion works. *GLP: Signed an expansion agreement to lease GLP Tomiya IV annex, a 12,100 sqm facility in Miyagi Prefecture to Panasonic Logistics, one of its largest customers in Japan. Construction of this annex building is expected to be completed in Jul 14. *CSC: Expects to report a loss for 4QFY13 due to provision of doubtful debts. Group had earlier disclosed that it has $3.5m progress claims outstanding against main contractor Poh Lian Construction, which has been placed under judicial management. For 9MFY13, CSC posted a net profit of $2.7m (-59%) on revenue of $403.8m (+30%) amid a highly competitive operating environment.