SG Market (28 Oct 14)

SG Market : Expect a lacklustre open for the S’pore market given the lack of direction from the US, as well as weakness in the regional markets. Both the Nikkei and Kospi are trading 0.3% lower this morning. There is more reason for investors to remain on the side lines, with the critical FOMC meeting on 28-29 Oct, when the central bank is expected to end its monthly bond purchases after reducing it to US$15b last month. The fall in WTI crude (-0.4% to US$80.65) has extended into its third day, and will likely continue to pressure the O&G and O&M sector, with the blue chips names - Keppel Corp and Sembcorp Marine likely to lead the pack. Meanwhile, a string of 3Q results from local index heavyweights are due this week: OCBC, UOB (30 Oct) and DBS (31 Oct), several REITs (CDL Hospitality Trusts, Starhill Global, OUE Commercial), Hutchison Port, Indofood Agri, SMRT and others. Two new IPOs to make their listing debut this morning – eye care specialist, ISEC Healthcare (offer price: $0.28) and interior outfit solutions provider, Serrano (offer price: $0.23). The STI is hovering around the critical 3,225 level (200 day moving average) and a break below this leaves 3,200 as the next psychological support level. Any upside may be capped at 3,260 in the near term. Stocks to watch: *HPH Trust: 3Q14 net profit fell 9% y/y to HK$490.7m, mainly due to an increase in effective tax rate to 21% from 10% in 3Q13, as the tax concession has almost expired in the Yantian terminal, which more than offset a HK$30m exchange gain on Rmb deposits. Revenue inched higher by 1.7% to HK$3.4b, buoyed by robust operations, but offset by the deconsolidation of Asia Container Terminals (now 40% JV). Container throughput in Hong Kong increased 2.1% due to higher transshipment volume, offset by weaker intra-Asia cargoes. Meanwhile, container throughput at Yantian expanded 12.4% due to growth in transshipment and US cargoes. Average revenue/TEU for Hong Kong grew from a favourable throughput mix from liners, although rates for Yantian were lower due to higher proportion of transshipment throughput handled. Management maintained its HK$0.41 DPU guidance intact, implying ~7.8% yield. BVPS at HK7.23 (US$0.93). *CDL Hospitality Trust: 3Q14 results came in slightly above expectations, with distributable income of $25.6m (-0.5% y/y), and DPU of 2.61¢ (-1.1%). Gross revenue rose 11.9% to $40.1m, while NPI edged up 2.4% to $33.8m, boosted by full contribution from Jumeirah Dhevanafushi (JD) (acquired Dec ’13), though offset by lower income from Claymore Link due to ongoing AEI works. Bottom line was impacted by higher depreciation cost attributable to JD. Occupancy for the Singapore hotels rose 4.4 ppt to 92%, although average daily rates dropped 4.1% to $209, due to higher competition. RevPar maintained at $192. Aggregate leverage increased 0.7 ppts q/q to 30.2%, while weighted average debt to maturity was extended slightly to 2.4 years. BVPS at $1.60. *Excelpoint: 3Q14 net profit rose 8.3% y/y to US$1.9m, as revenue grew 10.9% to US$200.6m, driven by strong demand for memory products. However, gross margins slipped 0.8ppt to 6.2%, due to a change in product mix. Management remains optimistic about prospects for 4Q14. BVPS at US$0.105. *Second Chance Properties: FY14 net profit plummeted 71% to $16.5m, due to the absence of $42.9m of fair value gains on investment properties booked in the previous year. Revenue declined 10% to $48.5m, due to lower sales from the apparel and gold businesses, which fell 11% and 20%, respectively. *GLP: Its fund management platform in Brazil has grown by US$1.5b to US$3.7b. GLP formed a US$1.1b partnership, GLP Brazil Income Partners II (GLP BDP II), in which GLP will own a 40% stake, and Canada Pension Plan Investment Board and a leading US institutional investor each taking a 30% stake. Separately, GLP’s 40% owned GLP BDP I, has also been expanded by US$0.4b. However, GLP expects to recognize an FX loss of US$24.6m in 2QFY15, due to depreciation of the BRL against the USD. *Nam Cheong: With regard to a news article published by The Edge M’sia on 20 Oct titled “Nam Cheong weighs Bursa, Oslo listings”, management clarifies that it has yet to deliberate or make any decision on dual-listing, and has not appointed any professionals for this purpose. *KLW: Acquiring a 45.45% stake in Mega Sun Development for Rmb85m, which will be funded through proceeds from prior fund raising exercises. Mega Sun holds 55% equity in Suzhou Jiaxin Real Estate Development Co, a property development and construction player in Suzhou which is currently developing the Fu Yuan Luxury Villas (51 units). The project is expected to be launched in 4Q14, with completion slated around 2017. *Perennial China Retail Trust (PCRT): Perennial Real Estate Holdings (PREHL) has made a $0.70 per unit offer for PCRT, to be satisfied by the issue of 0.52423 PREHL shares at ~$1.3353 each. The offeror and its concert parties have a combined interest of ~33.6% in PCRT. Investors holding an additional 15.8% of PCRT units have also committed to tender their units. The offer will become unconditional upon the offeror achieving more than 50% control. PCRT will be privatised and delisted if the offeror receives more than 90% control. First closing date of the offer is 8 Dec. *Boustead Singapore: Awarded a construction management and construction contract for a medical device manufacturing facility at the Kulim Hi-Tech Park in M’sia for a US MNC. The contract value is in excess of RM90m and raises the group’s order book backlog to over $487m. *Asiatravel: Says it is the first online travel agency based in the Asia-Pacific region to participate in the TripAdvisor instant booking feature, which allows users to make hotel reservations through TripAdvisor partners while remaining on the TripAdvisor site. *Linc Energy: Updates that the first of its three wells (PATA1) is progressing on time and on budget in its 100% owned 103m boe petroleum exploration licence (PEL) 121 in the Arckaringa Basin. *Communication Design: Extended the cuff-off date to 30 Nov, for the fulfilment of conditions in the placement agreement, change in use of proceeds to be for the proposed acquisition of Richwood Asia I Investments and One Room Mansion, as well as for diversification into property development and investments.