SG Market (06 Nov 13)

Market Roundup: US stocks closed mostly weaker as lower eurozone growth forecasts outweighed a better-than-expected reading on the US services sector. The EU cut its forecast for euro-area growth next year and raised its unemployment estimate as the economy struggled to regain momentum. In the US, service industries accelerated in Oct as the ISM non-manufacturing index rose to 55.4 from 54.4 the previous month. On the S’pore corporate front, the staid results of UOB, Sembcorp Marine, Cosoco SATS and Vard, among others, are not expected to give any fillip to the market with the STI likely to consolidate within its current 3,150-3,238 trading range. Stocks to watch for: *UOB: 3Q13 net profit of $730m (+3.3% y/y) beat $701m street estimates. Net interest income rose 7.7% to another record $1.05b, led loans expansion of 16%, which offset a 13bps decline in net interest margin to 1.71%. Non-interest income fell 10.9% to $618m as higher fee income (+9.2%) from wealth management and trade-related services were dampened by a 17% drop in trading and investment income due to lower gains on sale of securities. Impairment charges fell 30% to $85m, while NPL continued to stay low at 1.2%. Tier-1 CAR slipped to 12.9% but NAV held up at $14.92. *Sembcorp Marine: 3Q13 results were sub par as net profit of $129.7m (+12%) was outpaced by surging revenue of $1.66b (+86%), buoyed by rigbuilding and repair jobs as five rigs achieved milestone completions vs only one rig a year ago. However, an unforeseen margin contraction coupled with lower contributions from associates Cosco Shipyard Group, Pacific Workboats and startup losses at Sembmarine Kakinda were drags on its performance. Order book stood at $13.5b at end Sep with deliveries stretching till 2019. *Cosco: Disastrous 3Q13 results. Net profit dived 84% y/y to $4.2m, while revenue rose 6% to $989.4m, supported by growth in marine engineering projects, which more than offset weaker shipbuilding and repair segments. Turnover from dry bulk shipping and other businesses held steady on renewal of short term charters at relatively similar rates. Gross margin collapsed to 7.4% from 12.3% in 2Q12 due to inventory write-down and provisions for expected losses. Still, total order book expanded to US$7.2b with deliveries up to 2015. *SATS: 2QFY14 net profit of $48.7m (-3.2% y/y, +5.4% q/q) missed estimates of $50.5m. Revenue slid 2% y/y to $452.1m as higher sales from gateway services (+5.1%) was weighed by its food solutions business (-5.9%), mainly from TFK due to the weaker JPY and lower volume of meals produced after Qatar Airways shifted its transit hub from S’pore to Dubai.. There was some margin slippage due as operating costs remained sticky but higher contributions from associates and JVs (+13.5%) in India and Indonesia plus reduced tax expenses helped shore up the bottom-line. Following the dividend payout in Aug, net cash position declined to $268.4m from $364m last quarter. Interim DPS of 5¢ was maintained. *Vard: 3Q13 results missed estimates with net profit of NOK76m (-67% y/y) and revenue of NOK2.37b (-4%). EBITDA margins slumped to 4.3% vs 13.5%. The weak performance was mainly attributable to its Brazilian operations, which are still plagued by an overload situation, leading to further delays and cost overruns. The group currently has an order book of ~NOK19.6b, which is the highest since 2009, although execution remains key. The yard also announced a NOK55m contract for the construction of a survey vessel for Circle Maritime Invest JSC with delivery in 3Q14. *Chip Eng Seng: 3Q13 net profit fell 10% y/y to $27.2m, while revenue slumped 66% to $89.9m. Construction sales were flat at $67.6m but property sales plunged 89% to $21.8m due to the delivery of completed residential project in Australia in 3Q12. Bootmline was shored up by share of profit of $27.9m from a completed project Rive, which obatined TOP status. *Tiong Seng: 3Q13 net profit tumbled 55% y/y to $2.3m despite revenue growth of 18% to $146.2m. Earnings was hurt by higher labour (+14%) and depreciation (+93%) costs, as well as a lower contributions from JVs (-96%). The steady topline growth came on the back of its construction sales of $142.4m (+19%) and sales of development properties in China (+114%). End Sep order book was $1.1b, stretching to 2015. *Broadway Industrial: 3Q13 net profit spiked 152.1% y/y to $0.65m from a low base as revenue increased 21% to $162.4m driven by increased growth in the foam plastics and precision component sales comprising both hard disk drive (+6.8%) and non-HDD (+121%) markets. Gross margins improved by 3 ppt to 8.8%, benefiting from better gross profits achieved by the foam plastics, semiconductor and HDD divisions. *Maxi-Cash: 3Q13 net profit tumbled 77% to $0.3m despite chalking 13% higher revenue to $28.4m as its topline benefitted from higher interest income from a larger pledge book and better gross margin from its retail business. However, bottomline was primarily weighed a decline in gold prices and general increase in other expenses. *OUE Hospitality: 3Q13 results were above estimates. Distributable income at $16.3m for 25 Jul - 30 Sep 13 was 2.7% ahead of forecast, while DPU for the same period came in at 1.24c, 2.5% higher than IPO forecast of 1.21c. *Kreuz/Swiber: SEA9, an investment holding company of The Headland Private Equity Fund has offered to acquire all of Kreuz shares, including the entire 57.5% stake held by Swiber, by way of a scheme of arrangement for $256.2m or $0.80 per share. Swiber is expected to record a net gain of US$90.6m from the proposed disposal, subject to shareholders’ approval. *Asia Enterprise: 3Q13 net profit +59% y/y to $350,000 while revenue fell 27% to $19.7m, dampened by soft end-user demand, lower average selling prices of steel products and intense competition. *Mencast: 3Q13 net profit jumped 40% y/y to $1.7m as revenue climbed 18% to $25.6m (+18%). The result brings 9M13 earnings to $9.5m (+16%). The increase in revenue was driven by strong improvement in the offshore & engineering segment, along with contributions from the new energy services segment, and a marginal increase in contribution from the marine segment.