Wednesday, August 10, 2016

SG Market (10 Aug 16)

SG Market: Singapore market likely to be underpinned by the global search for yield, although upside gains could be capped by the lacklustre 2Q corporate results so far.

Regional bourses opened mixed in Tokyo (-0.6%), Seoul (+0.1%) and Sydney (-0.2%).

From a chart perspective, STI faces immediate resistance at 2,900, with downside support at 2,810.

Stocks to watch:
*SMRT: 1QFY17 net profit of $15.5m (-22.9%) missed on lower revenue of $313.9m (-2%). Rail operating loss widened due to the 1.9% fare reduction in Dec '15 and cannibalisation from the Downtown Line 2, while performance for bus and taxi businesses also deteriorated on higher staff costs and a smaller hired-out fleet. EBIT margin narrowed 1.6ppt to 7%. MKE recommends shareholders accept Temasek's $1.68 privatization offer.

*Chip Eng Seng: 2Q16 net profit slumped 33.3% to $14.3m on property impairment ($5m) and FX (43m) losses, as well as higher effective tax. Revenue jumped 18.9% to $234.3m, bolstered by a property divestment in Melbourne, Australia, and full quarter contribution from Park Hotel Alexandra in Singapore. Net gearing nearly doubled to 1x from 0.56x in FY15 on increased borrowings for acquisition and development of a site at New Upper Changi Road. NAV/share at $1.1847.

*SGX: Jul securities turnover declined to $21b (-13% y/y, -7% m/m) on less trading days during the month, while daily average turnover value slipped to $1.1b (-4% y/y, +3% m/m). Derivatives volume also tumbled to 12.9m contracts (-40% y/y, -9% m/m) on lower Nikkei (-10% y/y, -29% m/m) and Nifty (-10% y/y, -14% m/m) index futures volumes.

*Sim Lian: Received a voluntary conditional management buyout offer at $1.08/share, 14.9% above the last close. Offeror Coronation 3G has secured irrevocable undertakings representing 80.36% of the total issued shares, and does not intend to raise the offer price.

*Sembcorp Industries: Secured long-term power purchase agreement with Bangladesh Power Development Board to supply 414MW of electricity over 22.5 years from its 70% owned Sirajani gas-fired power plant o be completed in 2018. Separately, group acquired a 74% stake in Mulanur Renewable Energy, which owns 25.5MW of wind power assets in Tamil Nadu, India, for $32m.

*ValueMax: 2Q16 net profit jumped 46% to $3.9m on a shift in sales towards more profitable pawnbroking and moneylending businesses. However, revenue slipped 10% to $64.9m due to reduced retail and trading of pre-owned jewellery and gold. Gross margin expanded to 13.3% (+3.9ppt), but bottom line was partially pared by higher finance costs and provisions. Net gearing spiked to 0.97x from 0.59x in FY15 on increased borrowings for acquisition of properties at Waterloo Centre and Aljunied. NAV/share at $0.2961.

*Cosco Corp: 51%-owned subsidiary, Cosco Shipyard Group secured an order for three units of 1,750 TEU container vessels from a European buyer. The vessels are scheduled to be delivered between 2Q19 and 3Q19.

*IHC: Terminated the proposed acquisition of Healthway Medical Corp via a scheme of arrangement.

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