SG Market (11 Oct 13)

SG Market: S’pore shares are poised for an uptick after US stocks soared with the DJIA notching its best one-day gain since Dec 2011 after Republican lawmakers offered a temporary extension of the debt ceiling in return for broader budget talks. As a gauge of investor sentiment, the VIX index slumped 16% to 16.48 for its biggest retreat since Apr. The White House welcomed the Republican proposal for a short term increase in the debt ceiling for six weeks till 22 Nov with no string attached and both sides pledged to continue discussions to try and break the deadlock. The plan could come up for a vote on the House as soon as today but does not include an end to the partial government shutdown. Treasury Secretary Jacob Lew warned Congress that uncertainty over the debt limit is starting to stress financial markets and trying to time a last minute increase could be very dangerous. A partial federal shutdown lasting till end of this week could pare 0.2 ppt from US economic growth and cost as much as 0.5% if it continues for another two weeks. Jobless claims jumped 66,000 to 374,000 last week, its highest level in six months, providing the first warning that the damage from the shurdown is starting to ripple through the economy. With Asian bourses in Tokyo (+1.3%) and Sydney (+1.7%) rallying in early trades, the STI may push above the 20-day moving average at 3,180 to test the overhead resistance at 3,200. Downside support remains at 3,100. Stocks to watch for: *Keppel Corp: Secured a contract from Mexico’s Perforadora Central worth US$240m, including owner furnished equipment to build a KFELS B Class jack-up rig, scheduled for delivery in 4Q15. This is its 5th jack-up rig that the group is building for Perforadora Central since 2002, making it the leading rig provider for the Mexican market with a total of 20 projects delivered or on order, and takes its total order wins this year to $5.3b. *Lian Beng: 1QFY14 net profit declined 30.9% y/y to $7.3m, dragged down by marketing expenses from its new property launches Spottiswoode Suites, The Midtown & Midtown Residences, as well as those from associates (NEWest, KAP Residences and Eco-Tech@Sunview), which sank into the red. Revenue jumped 44% to $163.5m on the back of higher sales recognition from its construction, property development and ready-mixed concrete segments as well as maiden contributions from its new dormitory business. Gross margins slid to 12.2% from 14.1% due to weaker construction margins and change in revenue mix. *Tiger Airways: Sep operating figures for Tigerair S'pore saw a 20.9% y/y jump in traffic, whilst capacity increased 23.3%. Consequently, passenger load factor dropped 1.5ppt to 77.5%. Tigerair Mandala recorded a load factor of 71.5% and carried 174,000 passengers, after expanding to 9 aircraft in Sep 2013 from only 3 aircraft in Sep 2012. Tigerair Philippines recorded 103,000 passengers and a load factor of 69.5% on its fleet of 5 aircraft. *STX Pan Ocean: Cancelled US$225m worth of shipbuilding orders, as part of its rehabilitation efforts while under court protection in Korea. *Innopac: Nomura Holdings sold 73.51m shares @ $0.10, reducing its stake from 5.64% to 3.31%. *Banyan Tree: The Dubai Internationl Arbitration Centre (DIAC) has awarded US$19.2m to the group as compensatory damages, plus interest at 3% p.a. for wrongful termination of a hotel management agreement by Meydan Group in 2009. In response, Meydan Group commenced 3 lawsuits against Banyan Tree, DIAC and the arbitration tribunal on the grounds that the arbitration process has expired and counterclaimed damages for alleged breaches of the agreement. The compensation works out to 3.2¢ per share for Banyan Tree. *Oakwell Engineering: Subsidiary, Oakwell Shipbuilding Engineering & Construction (OSEC) has filed a request for arbitration with the London Court of International Arbitration, claiming repeated breaches of a cooperation agreement by Fr Fassmer GmbH & Co. OSEC is claiming for costs and expenses to rectify and/or mitigate the breaches by Fassmer, refund of payments and fees made by OSEC under the cooperation agreement. *Declout: Resolved the litigation against Activ Technology for non-payment on work and services provided in Apr 2012, with the amicable settlement of $0.5m payable in three equal installments. *Karin Technology: Appointed by Beats Electronics as the sole distributor for its full range of premium sound products in HK and Macau. *Centurion: Its inaugrual $100m 5.25% notes saw strong demand from institutional investors and private banking accounts, with the offering close to 2x oversubscribed despite market uncertainties.