SG Market (10 Jul 13)

SG Market: S’pore shares may inch higher as Wall Street rose for a fourth day in a row as the earnings season kicked off to a decent start and investors brushed aside IMF’s lowered growth forecasts for the US and global economies. Investors are hopeful of better-than-expected 2Q earnings after setting a low bar that leaves room for positive surprises. Analysts are projecting profit growth of 1.8% for S&P 500 companies, compared with a 8.3% forecast at the beginning of the year. The benchmark S&P 500 index has recovered all its losses following the 4.8% drop triggered when Fed chief Ben Bernanke said the central bank may taper its bond purchases later this year. The recent market gains suggest that investors are increasingly buying the idea that any scaling back of monetary stimulus would mean that the economy is picking up on its own steam and improving earnings would continue to drive equities. Global stocks remained higher even after the IMF trimmed global economic growth to 3.1% this year, less than the 3.3% forecast in Apr and reduced its 2013 projection for the US to 1.7% from 1.9%, while 2014’s outlook was cut to 2.7% from 3%. China and other emerging economies also faces new risks and longer growth slowdown as the anticipated unwinding of the Fed’s bond-buying program reverses capital flows. The STI may test the 3,200 resistance but market activity is generally expected to remain muted as Japanese and Hong Kong equity futures declined before the start of the Bank of Japan’s policy meeting and the release of Chinese trade data today. Support for the index can be found at the 3,130 level. Stocks to watch for: *SPH: Plans to raise up to $554m from its proposed listing of a retail REIT, offering 308.9m units (224.9m placement, 84m public) at price range of $0.85-0.90/unit. Another 251m units will be placed to cornerstone investors - GE Life Assurance, Hong Leong Asset Management, Morgan Stanley Investment Management, Newton Investment Management and Norges Bank. The trust assets will comprise the upmarket Paragon Mall and suburban Clementi Mall. The REIT spinoff is expected to bring in ~$1.0b in net cash proceeds for SPH, of which it will distribute $0.18 as special dividends. The REIT is projected to have an distribution yield of 5.8-6% for 2014. *Cosco: 51% owned units secured US$216m of shipbuilding contracts – four 111,000 dwt tanhers (plus two options) worth US$180m from European ship owner with delivery from 1H15, a stinger barge for a European company and a 22,000 dwt tanker for an Asian company with total value of >US$36m. The barge will be delivered in 1Q14, while the tanker in 4Q14. *Rotary Engineering: Bagged $60m worth of construction and maintenance contracts from S’pore petrochemical payers in 2Q13, including $30m E&I works for a specialty chemical company and a $17m piping and structural job from an oil major, both on Jurong Island. Adding the $300m oil terminal contract at Pulau Busing and $42m for two projects on Jurong Island, this takes total contracts won in 1H13 to >$400m. *Silverlake: Malaysian subsidiary Cyber Village Sdn Bhd (CVSB) has secured a contract to implement a new internet banking system for Bank Rakyat, the biggest Islamic cooperative bank in Malaysia. Under the contract, CVSB will also provide maintenance services to the system for five years. *Noble: 13.2% owned Yancoal Australia received a non-binding privatization proposal from its holding company and controlling shareholder Yanzhou Coal for remaining 22% minority stake via a share swap of 0.91 Yanzhou CDI (CHESS Depository Interests) for every Yancoal share held. Plan is subject to conditions, including unanimous recommendation by Yancoal's independent board committee and approval by relevant courts and regulatory authorities, including the Foreign Investment Review Board. *Europtronic/WE Holdings: Europtronic has entered into an MOU with WE Holdings for the proposed sale of its wholly owned subsidiary, Europtronic S’pore (ESPL) to be satisfied via the issuance of new WE Holdings shares, based on the NTA of ESPL and a premium of $2m. WE Holdings has a four-month exclusive period to conduct due diligence. *Yoma: 70% owned subsidiary, Myanmar Motors, has entered into a new JV to carry out the business of providing automotive related services and parts in Myanmar. Following approvals by the relevant authorities, the JV will issue new shares to third parties so that Myanmar Motors will ultimately own 50% interest in the JV with Yoma holding an effective 28% interest. Funding will be via internal resources.