SG Market (25 Jul 13)

SG Market: S’pore shares are likely to turn their attention to events in China after US stock retreated as investors weighed stronger economic data against disappointing earnings from Caterpillar, Broadcom and AT&T although better-than-forecast results from Apple, Facebook and Baidu limited the losses. US new home sales climbed 8.3% to an annualized pace of 497,000 homes, the highest level since May 2008, while an manufacturing index rose to 53.2 in July from 51.9 a month earlier, lending support to the view that the Fed will trim its monetary stimulus measures soon. But focus will be on the weak China PMI numbers, which has prompted the government to scrap taxes for small firms, offer more help for ailing exporters and widen funding channels to speed railway investment in an effort to boost the flagging economy. The STI index appears a little overextended and some pullback may be imminent. Expect the benchmark index to face some resistance at the 3,260 level with the next hurdle pegged at 3,310. Underlying support remains at 3,200. Stocks to watch for: *CapitaLand: 2Q13 net profit was almost flat at $383.1m (-0.7% y/y), bringing 1H13 earnings to $571.3m (+10.1%). Excluding the $27.7m one-time loss incurred on repurchase of convertible bonds, net profit would be 6.5% higher at $410.8m on revenue of $1.18b (+37.1%). The group sold 139 (vs 202 in 2Q12) units in S’pore with a sales value of $300m (vs $379m) and 736 (vs 812 in 2Q12) units with a sales value of $1.3b (vs $1.8b) in China. Net gearing remains healthy at 45% with cash reserves of $5.2b. End Jun NAV was $3.69. *Mapletree Commercial Trust: 1QFY14 distributable income +26.4% y/y to $36.3m, DPU +14.1% to 1.753¢. Gross revenue and NPI climbed to $64.4 (+26%) and $47.1m (+31.4%) respectively with sharp rental uplift in Vivio City, higher occupancy at PSA Building and maiden contributions from Mapletree Anson (acquired in Feb 13). Overall portfolio occupancy reached 98.3% with a weighted lease to expiy of 2.5 years. Gearing stayed at 40.2% with average debt maturity of 3.2 years and borrowing cost of 2.22%. *Cache Logistics: 2Q13 distributable income +19.8% y/y to $16.6m, DPU +8.4% to 2.147¢, which translates to an annualised yield of 6.9%. Gross revenue grew 16.5% to $20.4m, while NPI jumped 17% to $19.6m due to rental escalation at existing assets and contributions from new properties. Portfolio occupancy was maintained at 100% with a weighted lease to expiy of 3.6 years. Aggregate leverage stood at 29.2% with average debt duration of 2.4 years. *Frasers Commercial Trust: 3QFY13 distributable income fell 6.9% y/y to $14.6m but DPU leapt 31% to 2.19% due to savings from the CPPU redemptions. Revenue declined 16.1% to $30m, while NPI dipped 13.4% to $23.1m as positive rental reversion of 0.5-17.4% and contributions from additional 50% interest in Caroline Chisholm Centre were offset a weaker AUD and divestment of KeyPoint and Japan properties. Occupancy at its S’pore and Austrailian portfolios stayed at healthy 97.4% and 99.5% respectively with weighted lease to expiry of 4.6 years. Gearing is at 39.5% with an effective interest rate of 2.8%. NAV slid to $1.47. *MTQ: 1QFY14 net profit swelled 38% y/y to $6.5m as revenue soared 146% to $94.4m, boosted by inclusion of results from oilfield engineering subsidiary Neptune Marine Services. But operating profit eased from 15.8% to 9.3% due to change in sales mix, higher staff and operating costs following the acquisition of Neptune. *Hisaka Holdings: Entered MOU to acquire Temasek Regal for $127.3m in a reverse takeover deal via the issue of 195m new shares at a post 2-into-1 consolidation price of $0.55 each plus cash consideration of $20m. Upon completion, the vendors would own 65% of the enlarged share capital of the group. Temasek Regal is a Malaysian property development, construction, building materials trading and asset management company based in Kuching, Sarawak. *Keppel Land: Divesting its 51% stake in integrated township Jakarta Garden City to its JV partner PT Modernland Realty for $290.5m. The group will reap a net gain of $186m from the sale, and increase its proforma NTA per share by 13¢ to $4.24. *Sarin: Announced that EXELCO one of the world’s leading manufacturers and wholesale suppliers of high quality polished diamonds is offering the Sarine LightTM Light Performance grading of its polished diamonds for use by its retail customers worldwide. *Mirach Energy: Commenced drilling for four new infill wells in South Sumatra, Indonesia.