SG Market (28 May 15)

Singapore shares could open higher, taking cue from the rebound in Wall Street overnight, as markets were lifted by “chatter” that Greece was nearing a debt agreement.

Regional bourses are trading higher this morning in Tokyo (+0.5%) and Seoul (+0.5%), although Sydney is down 0.2%.

From a chart perspective, technical resistance is tipped at 3,460 where the 20 and 50-day moving averages are converging with underlying support at 3,425 (100 dma).

Stocks to watch:
*United Envirotech: FY15 results in line, as net profit jumped almost three-fold to $59.3m on revenue of $349.0m (+72.5%). Revenue was largely led by contributions from the engineering business (+42.6%), the treatment business (+63.3%), and the addition of $47.7m of membrane sales following the acquisition of Memstar’s assets. Other income jumped more than 6-fold to $23.4m, due to disposal of available-for-sale investments and FX gains. Gross margin improved to 25% from 23.7%. Other costs increase, including staff, depreciation and other operating expenses, were expected, as a result of newly acquired water-treatment plants during the year and Memstar’s consolidation. Proposed first and final DPS of 0.5¢ (FY14: 0.3¢). NAV/share at $0.77.

*Courts Asia: FY15 results slightly above estimates. 4QFY15 net profit fell 16.4% to $6.5m taking FY15 net profit to 17.4m (-38.7%). FY15 revenue declined 8.6% to $758.5m, weighed by weaker sales from Singapore (-11%) and Malaysia (-5.8%), due to the lacklustre retail environment in both markets, while contributions from the Indonesia megastore at Bekasi were inconsequential. Gross margin rose to 32.8% from 30.9%, due to the shift in sales mix towards furniture and electrical categories. Bottom-line weighed by 8.1% rise in admin expenses, offset partially by a 53% decline in tax expenses. Proposed first and final DPS of 1.29¢ (FY14: 0.76¢). NAV/share at $0.55.

*Biosensors: 4QFY14 results well below estimates, as the group swung to a net loss of US$247m, from US$6m a year earlier, mainly from a US$256.1m goodwill impairment related to its JWMS’ acquisition. On a core basis, 4QFY15 net profit would have been 9% lower at US$15.7m (FY15: US$51.2m, -25%). Revenue for the quarter fell 7% to US$75.9m, as product revenue fell 1% and licensing and royalties nearly halved. Gross margin fell 3.5ppt to 72.7%, due to lower margin from distribution activities of Nobori stents in Japan and the cardiac diagnostic business, and the impact of price reductions in various geographic regions. NAV/share at US$0.60.

*Bukit Sembawang: 4QFY15 net profit fell 62.1% y/y to $6.9m, taking FY15 net profit to $92.7m (-16.6%). Revenue for the quarter declined 24.9% to $67.3m, from lower recognition on development projects from Luxus Hills Phases 5&6, The Vermont on Cairnhill and Skyline Residences. Gross margin held relatively steady at 44.8%. Operating expenses which fell from lower provision on foreseeable losses of $13.3m (FY14: $17.5m) could not mitigate the bottom line slump. Proposed final and special DPS of 4¢ and 29¢, taking full year DPS to 33¢ (FY14: 16¢). NAV/share at $4.96.

*SingHaiyi: 4Q15 net profit advanced 35.5% to $15.5m, taking FY15 net profit to $22.8m (-12.9%). Revenue for the quarter fell 75.8% to $5.0m, mainly due to lower property development income of $0.8m (4Q14: $16.3m), as the previous year saw contributions from Charlton Residences which was fully completed in FY14. Meanwhile both rental income and management fee income were relatively unchanged at $3.9m and $0.2m respectively. Gross margin improved by 18.7ppt to 60.4%, mainly due to the contributions by US projects. Bottom-line saw contributions from other income of $18.1m (-29.7%), due to adjustments of property carrying value and FX gains, as well as the absence of a $10.5m provision made in the previous year. NAV/share at $0.155.

*Stratech: FY15 net profit halved to $732k , while revenue expanded 48.3% to $16.5m, from new contracts, in addition to existing ones. Gross margin fell 24.8ppt to 58.4% due to higher proportion of third party components. Bottom line dragged by a 14.1% increase in operating expenses. NAV/share at 0.42¢.

*OLS: Proposed to acquire Malaysian Phosphate Additives (MPA) in a $300m RTO deal. The RM1.5b energy-intensive plant will be South East Asia’s largest integrated phosphate complex. MPA is 40%-owned by a wholly-owned subsidiary of Malaysian sovereign wealth fund, Khazanah Nasional. The acquisition will be satisfied in full by way of an allotment and issue of OLS shares. The newly issued shares will represent not less than 70% of the enlarged share capital of the company.

*China New Town: Entered into strategic agreement with Sino IC Capital, the sole manager of the National IC Industry Fund (AUM at over Rmb120m), to build long-term strategic partnership, which will focus on the intersectional value chains of the integrated circuit industry and township developments.

*IEV: Secured five new contracts for the provision of structural pile grouting in Argentina and free span correction services in India, worth ~US$2.2m. The contracts are expected to have a positive impact on the net tangible assets per share and earnings per share of the group for FY15.

*Singapore Windsor: Secures exclusive 10 year agreement with DFS group to develop and operate duty-free retail outlets at Yangon International Airport and Naypyitaw International Airport. The group expects to manage 2,000 sf of duty-free retail space by end 2015.