SG Markey (14 Nov 13)

Market Roundup: US stocks climbed back to record highs as Macy’s better-than-expected earnings fuelled optimism about the holiday shopping season and investors speculated that Fed chair designate Janet Yellen would continue the central bank’s easy monetary policy. After the bell, Yellen said that the US economy and labour markets are performing short of their potential ad must improve before the central bank can begin to taper its stilumus in a testimony prepared for her Senate nomination hearing on Thu. S’pore shares may get a slight lift from the positive Yellen’s remarks with the STI also meeting the 50-day moving average support at 3,177 within the broader 3,150-3,238 trading range. Stocks to watch: *SingTel: Stable 2QFY14 net profit of $870m (+0.2% y/y), and core net profit of $884m beat consensus estimates of $862m, as strong domestic sales in S’pore and successful cost management in Australia helped offset the negative impact of a stronger SGD. Revenue declined 9% to $4.16b, hurt by the weaker AUD amid a cautious business environment and lower mobile revenue from its Optus unit in Australia. Contributions from its regional mobile associates fell 9% to $498m. Interim DPS of 6.8¢ maintained. *ComfortDelgro: 3Q13 net profit expanded 5.4% y/y to $76.7m, pacing the 8.6% rise in revenue to $978.4m. Excluding the FX effect from weaker AUD and GBP, topline growth would have been 9.9%. Bus operations were boosted by maiden contributions from Metroline West in UK, driving up operating profit to $51.5m (+13.2%). SBS Transit continued to incur an operating loss of $0.9m due to a drop in average fare. Rail business operated at breakeven, while taxi services turned in higher operating profit of $41.6m (+5.3%) from gains in S’pore and China. Overseas operations accounted for 51% of total operating profit of $122.4m (+4.8%) with Australia contributing 22.2%, UK 17% and China 11.6%. *Tat Hong: No respite from 2QFY14 results; net profit toppled 53% y/y to $8.2m, while revenue sagged 14% to $185.3m as all units except tower crane division turned in weaker performances especially in Australia and Indonesia amid poor demand conditions. Earnings were also eroded by net FX losses of $5.2m and lower contributions from joint ventures (-68%) and associates (-20%). Interim DPS shaved to 1¢ from 1.5¢ previously. *Hankore: 1QFY14 net profit leapt 149% y/y to Rmb30.4m on a 50% jump in revenue to Rmb134.1m driven by a 34% and 28% surge in construction and recurring water treatment income respectively, as well as maiden contribution from its newly acquired subsidiary, Tongyong, which provides EPC activities. Gross margin widened to 46% from 37% y/y, boosted by margin expansion at its two key businesses. *Dyna-mac: 2Q13 net profit sank 47.9% y/y to $5.3m despite revenue advancing 11.7% to $66.8m as more projects were undertaken by its S’pore and overseas yards. However, gross margin contracted to 30.2% vs 33% in 3Q12 due to slimmer margins at its overseas yards. Bottomline was further depressed by a $2.6m jump in admin expenses due to higher staff costs and FX loss of $2.8m. *Cordlife: 1QFY14 net profit soared 210% y/y to $8.7m, boosted by a $3.1m fair value gain on long term investment and a $6.2m gain on transfer of investment in associate to long term investment, both related to China Cord Blood Corp. Excluding these one-off items and share of loss in associate of $2.1m, core earnings would have been $1.5m. Revenue surged 31.1% to $8.6m contributed by a 63% jump in client deliveries to 3,500 from India, Indonesia and the Philippines. *Interra: 3Q13 net profit ballooned 4.5x to US$5m, while revenue swelled 79% to US$14m due to higher sales of shareable production, which increased to 181,611 barrels from 97,570 barrels in 3Q12, albeit at a lower transacted price of US$105.57 (-4.3%). The increase was mainly from contributions from new wells in Myanmar and Tanjung Miring Timur concession in South Sumatra. Gross margin improved to 52.6% from 34.4% in 3Q12. Cash and cash equivalents stood at US$14.4m as at end Sep with no debt. *UMS: 3Q13 net profit leapt 126% y/y to $4.8m as revenue improved to $25.4m (+11% y/y, -23% q/q) fuelled by higher component sales from the semicon segment. The sequential decline in revenue was expected after 2 consecutive quarters of robust demand from foundaries’ investment programs. Gross margin remained healthy at 53% vs 54% in 3Q12. Lower depreciation charges plus reduced operating expenses arising from lower FX loss, inventory provision and no doubtful debts all added to bolster the bottomline. Balance sheet is debt free with cash of $30.1m. Interim DPS o 1¢ was maintained, bringing total 9M13 DPS to 3¢. *Olam: Sells 12 ha of almond orchards in Victoria, Australia for S$200m to Adveq Almond Trust, an Australian trust structure. Group will reap capital gain of A$45m from the sale but lease back the orchard for 18 years and retain the production economics of the entire almond harvest from the orchards, which produce ~45% of Australia's almonds. *S’pore Land: Sold 150 units out of 200 units released at its 99-year 429-unit Alex Residences condo project, near Redhill MRT. ASP of $1,650psf is slightly lower than the $1,700psf achieved for City Dev’s launch of Echelon next door last Dec. *RH Petrogas: Dived into a 3Q13 net loss of US$10.9m vs net profit of US$0.07m in 3Q12 on revenue of US$19.2m (-4%). Bottomline was weighed largely by an US$18.5m charge in other expenses, coming from US$14m write-off for 3 unsuccessful exploration wells drilled in the Basin PSC and allowance for inventory obsolescence of US$3.8m in Basin PSC and Island PSC. *Croesus Retail Trust: Maiden 1QFY14 distributable income of ¥1.1b and DPU of 3.26¢ exceeded IPO forecast by 8.3% and 4.6%, mainly due to property tax rebates and a decrease in tax. Despite the impact of Typhoon Man-yi that hit Japan in Sep, as well as a colder July resulting in lower summer sales, gross revenue of ¥2b came in line with forecast. NPI of ¥1.3b was 3.1% ahead due to a 4% lower than expected property expenses. Portfolio occupancy rate reached almost 100%. Gearing was at 42.3% with NAV per unit of ¥72.4. *KS Energy: 3Q13 net profit barely broke even at $0.3m on revenue of $173.3m (+7.4%). The higher revenue was led by the distribution business (+6.1%), which accounted for 75% of total turnover, and the commencement of charter contracts for the additional assets recently deployed in Indonesia by its drilling business (+29.5%). Gross margin was stable at 20% but higher admin expenses and minority interest cut into its bottomline. *BH Global: Awarded multiple contracts worth $8.1m from Cameron & Schlumberger for subsea work in the North Sea and a reputable Japanese contractor for the design, supply and fabrication of two modules of an LNG plant in Southeast Asia. Other contracts include the supply of electrical cables, lightings and consumables. *Koh Brothers: 3Q13 net profit slipped 6% y/y to $6.9m despite revenue boost of 24% to $91.8m, mainly due to a $3.5m write-back in 3Q12 and lower gross margin of 14.2% (-4ppts) on the back of a change in sales mix. The topline growth was achieved from a 111% surge in the construction and building material sales to $30.7m. *Overseas Education: Unexciting 3Q13 results, with net profit up 9% to $5.6m and higher revenue of $25.9m (+5%). The bottomline was aided by a 10% drop in depreciation as more fixed assets were fully depreciated. NAV rose 34% to $0.34. *CCM Group: Awarded 3 contracts worth $5.6m from Bishan-Toa Payoh Town Council, for repairs and renovation works to 44 blocks of HDB flats with completion due by Nov 14. *Ley Choon: 3Q13 reversed last year’s net loss to net profit of $12.8m although revenue fell 18.6% y/y to $35.3m due to lower revenue recognition from projects nearing completion vs 3Q12. Other items boosting bottomline are gains from disposal at 61 Senoko Drive as well as the absence of impairment of goodwill. NAV as at end Sep was 18.69¢ *Hotel Grand Central: 3Q13 net profit grew 38% y/y to $4.8m despite revenue falling 10% to $34.1m due to the closure of Orchard Road hotel since Aug 12. Growth in Australian portfolio was not reflected in the turnover due to weakness in AUD against SGD. This was mitigated by improved performance at the Auckland airport coupled with stronger NZD. NAV at end Sep was $1.44 *Banyan Tree: 3Q13 net loss deepened 49% y/y to $1.4m, while revenue was flat at $79.6m. Higher revenue from hotel investments (higher RevPar from Maldives, TH, CN), was offset by weaker fee based income and property sales respectively. Net asset value end Sep was $0.74 *Fuxing: 3Q13 net loss widened 28% y/y to Rmb17.2m although revenue was up 9% to Rmb165.3m, mainly due to a rise from the trading segment, partially offset by a lower contributions from zipper sliders and processing. Other income rose from Rmb2m to Rmb12.6m due to a gain on disposal of a subsidiary. Bottomline was weighed increased operating expenses and finance charges.