Thursday, September 3, 2015

SG Market (03 Sept 15)

Singapore shares could open higher, taking cue from the rebound on Wall Street on a positive economic report alongside some relief that China markets will be closed for the next two days to commemorate the end of World War Two.

Regional bourses are trading higher this morning in Tokyo (+1.7%), Korea (+0.6%) and Sydney (+0.8%).

From a chart perspective, the STI has broken below its 2,950 support-turned-resistance, with its next support level tipped at 2,750, followed by 2,680.

Stocks to watch:
*Economy: Economists are lowering Singapore's average GDP growth expectations for 2015 from 2.7% down to 2.2% and expect more downgrades ahead. This may raise the odds for a technical recession in 3Q15, should other engines of growth, namely services, also falter amid the on-going pullback in consumer and business sentiments due to China and FOMC-related uncertainties.

*Interest rates: S’pore interest rates continue to rise amidst on-going economic weakness from China. 3M SOR has risen now to 1.54% (last seen in Dec '08), more than tripling the 0.48% on 19 Jan. 3M Sibor unchanged at 1.07%, but higher than the 1% a week ago. Economists noted that external headwinds and heightened risk aversion continue to put upward pressure on already elevated SORs, which could result in MAS easing its policies next month.

*Office: URA data showed that 2Q office rents in Central Region fell 2.6% q/q versus +0.6% in 1Q, with some consultants highlighting that S’pore CDB office rents likely peaked in 1Q15, with further softening expected as more tenants opt for cheaper decentralised offices and financials consolidate amid an uncertain economic outlook. Key projects weighing down on office rents in Raffles Place and Marina Bay area in 2Q were Asia Square and CapitaGreen. Cushman & Wakefield projects decline of 2% in overall CBD prime office rents for each quarter in 2H15.

*Perennial Real Estate: Acquiring 13,000 shares or 10% stake in Perennial China Retail Trust Management (PCRTM) from Asdew Acquisitions for $3.9m, which will be financed via the issuance of 2.9m shares of the group at $1.3353. Upon deal completion, PCRTM will be wholly-owned by the group.

*Lasseters Int'l: Secured a 16-year extension (up to June 2031) to its exclusive casino license in Alice Springs and other areas in Northern Territory (NT), Australia plus an option to extend for another five years beyond 2031. In addition, NT state government has effectively lowered a community benefit levy of 10% on gross profit of electronic gaming machines to the group's gaming tax rate and increased the threshold of shareholding in the group from 5% to 10%.

*Otto Marine: Secured two long term charter contracts worth US$25.m, for two AHTS vessels with a large oil and gas company. The contracts are expected to contribute positively to earnings for FY15.

*Medtecs International: Placing out 81m new shares to Xia Junwei at a price of $0.07/share (49% premium to average price on 1 Sep). Net proceeds of $5.5m raised will be used to develop the group’s business in China, in particular, Hangzhou as well as to repay bank loans. The new shares represent 17.5% of issued shares and post-placement, Xia will own a 14.9% stake in Medtecs.

*MDR: Deferring further discussions on the potential acquisition of a Japan-based company, that is engaged in developing and providing mobile content, to 1Q16.

*Micro Mechanics: Adopted a dividend policy of paying no less than 40% of its consolidated net profit.

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