Wednesday, July 30, 2014

SG Market (30 Jul 14)

US Market: US shares finished lower after EU and US broadened sanctions on Russia overshadowing mixed economic data and earnings reports. The DJIA dropped 70 pts to 16,912 (-0.4%), while the S&P 500 shed 9 pts to 1,970 (-0.5%) and the Nasdaq Composite lost 2 pts to 4,443 (-0.05%). Better-than-expected earnings and upbeat consumer confidence sent the Dow above 17,000 and the S&P 500 near its record but gains soon petered out as investors turned cautious after the US imposed new restrictions on the finance, defence and energy sectors in Russia, following similar moves by EU against Moscow for supporting the civil war in Ukraine. In economic news, US consumer confidence jumped to 90.9 in Jul to its highest level since Oct 2007, but home price gains slowed to 9.3% in May from a 10.8% increase in Apr, underscoring a lull in the housing market. A rally in telecom stocks (+2.2%) helped to limit the broader market decline after Windstream (+12.3%) filed to spin off its telecom assets into a REIT, opening the door for other phone carriers to consider similar deals. UPS fell 3.7% after the world’s largest courier company slashed its earnings forecast following its disappointing 2Q results, dragging down rival FedEx (-1.6%). Drug makers Pfizer (-1.2%) and Merck (+1.1%) both reported results that surpassed expectations although the former lowered its sales outlook on patent expiry. Herbalife tumbled 14% after reporting a drop in quarterly profit, while Corning slumped 9.3% as eanings missed estimates. After the bell, Twitter rallied 33% as its 2Q sales more than doubled, exceeding forecasts. Investors were generally avoiding making big bets ahead of a busy calendar that includes a Fed policy statement and 2Q GDP growth on Wed, employment report on Fri and earnings from Pfizer, ExxonMobil and other corporate giants. S’pore shares likely to hover around current levels as an overstretched STI struggle near its topside resistance at 3,360 with underlying support at 3,280. Stocks to watch: *StarHill Global: 2Q14 DPU rose 5% y/y to 1.25¢, broadly in line with expectations. Similarly, distributable income grew 5.5% to $28.2m. Gross revenue fell 1.4% to $48.4m, due to weak contributions from Chengdu, loss of income following a Japan divestment and currency translation losses. Nevertheless, NPI edged up 0.2% to $39.2m, thanks to lower operating expenses for the S’pore, Japan and China properties. Portfolio occupancy climbed back to its historical high of 99.6%, supported by an increase from all regions except Australia, which stayed flat at 99.3%. Overall Lease expiry profile is evenly distributed. Aggregate leverage remained comfortable at 29.4%, with an average interest rate of 3.22% and weighted debt maturity of 3.2 years. NAV per unit at $0.93. *Soilbuild Business Space REIT: 2Q14 DPU grew 3.5% y/y to 1.5¢, coming in at 1.3% above IPO forecast, and implying an annualised yield of 7.4%. Gross revenue climbed 3.5% to $16.7m buoyed by the newly acquired Tellus Marine. NPI expanded 4.1% to $14.0m, helped by lower maintenance costs for Eightrium @ Changi Business Park and Tuas Connection. Portfolio occupancy stood at 98.5% with a WALE of 3.8 years. Aggregate leverage at 30.3% with an all-in interest cost of 3.08%. NAV per unit at $0.80. *Singapore Shipping Corp: 1QFY15 net profit fell 7.5% y/y to US$1.8m, as revenue plunged 20.1% to US$7.3m. Ship owning revenue declined 18.2% to US$3.7m and agency and logistics revenue plunged 22% to US$3.6m. Operating margins improved 2.2 ppt to 23.7% supported by a narrowing of operating expenses across the board *OCBC: Secured 97.5% of Wing Hang Bank at the close of its HK$125/sh offer, allowing it to proceed with the privatisation of the Hong Kong bank. *Singapore Windsor: Entered into a 65/35 JV agreement with ARCC Offices to set up and operate serviced offices in Myanmar. Separately, Windsor signed an MOU with Sany for the distribution of Sany products in Myanmar via a dealership model. *Sysma: Secured a $8.8m contract to erect a two-storey detached dwelling house at Second Avenue, commencing in Aug for a period of 24 months. *China Sunsine Chemical: Positive profit alert for results due 7 Aug. Expects a substantial y/y increase in 1H14 net profit, driven by to an increase in both ASP and sales volume. The market experienced a shortage of rubber chemical supply after certain players who failed to meet the relevant environmental regulations were forced to suspend production. *SATS: Divested its non-core 51% stake in Urangan Fisheries for A$2.4m for a gain of 370%. *Rotary: Disposed its 100% stake in Rotary Shanghai for Rmb22.2m, a premium over the unit’s end May '14 NTA of Rmb20.1m. *Terratech: The Malaysian marble miner will commence trading on Catalist today at 9am.

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