Warrants Highlight

UOB Earnings Beat Forecast at $713mn

UOB reported 2Q12 earnings results after market yesterday. Its 2Q12 net profit grew 12% year-on-year to $713mn. UOB’s fee and commission income was at a record of $386mn.

UOB’s CEO, Mr Wee Ee Cheong, said: “We delivered record core earnings, with our key regional markets contributing strongly in both loans and fee income… We remain on track to achieve our regional growth targets through capturing the rise in intra-regional trade flows and consumer affluence”

The following are excerpts from Macquarie Equities Research (MER) report dated 7 Aug.

Victory Lap
UOB’s 2Q12 results soundly beat MER’s forecast for earnings and also pre-provisioning operating profit. This appears to be a standout among the three banks in 2Q12, as it was higher than expected revenues rather than lower than expected credit costs that drove most of the upside to earnings.

Non interest income was the main source of the surprise. Fee income was up 7% QoQ and came in 8% ahead of MER’s forecast on higher loan and investment-related fees. MER had anticipated a sharp decline in trading and investment related income, and the number was down 25% QoQ but still beat MER’s expectation. That was the main driver of the Pre-Provision Operating Profit (PPoP) and earnings beat.

NIM declined by 6bps QoQ on an 11bp decline in loan yields. Loan growth was just 1% QoQ, with 85% of the growth in SGD and MYR denominated loans. Group Loan to Deposit Ratio (LDR) rose to 89% largely due to a decline in SGD deposits.

MER retain UOB as top pick and only Outperform in the Singapore banks. Based on expected 11-12% ROE, UOB is trading at close to its fair value at 1.4x 2012 P/BV and 13x PER. The stock has been a sector star, rising 31% YTD. But given MER’s view that earnings have peaked, it is difficult to identify catalysts for a tremendous amount of further upside for the stock.

New Put warrants listing today
On a separate note, Macquarie is pleased to list the following new warrants this morning:

Singapore Market Wrap

STI - laggard amongst Asian indices

Ahead of Italy announcing its GDP for the second quarter, major Asian indices added gains. With Germany backing the European Central Bank's bond-buying plan, the outlook for Asia-Pacific exporters has brightened somewhat.

Reminiscent of the previous day, the HSI traded in a tight range of 133 points, with the bulls and bears fighting to break away from the 20000 level. At the end of yesterday's trading session, the bulls finally won and the HSI closed at 20072.55, up 0.4% day-on-day (dod). The STI experienced higher volatility and trended lower intraday, eventually closing near day low at 3067.74, down 0.1% dod.

Call STI 2950MBeCW120831 (QE8W) exercise level 2,950.*
Put STI 2850MBePW120831 (QE9W) exercise level 2,850.*

HSI20200MBeCW120830 (QS5W) exercise level 20,200.*
HSI19800MBePW120830 (QS7W) exercise level 19,800.*

SGX puts pen to paper
SGX announced that it has acquired 49% of Energy Market Company (EMC). EMC is a Singapore-based company and is the operator of the National Electricity Market of Singapore, the local market for wholesale electricity trading.

This acquisition will "affirm SGX's commitment towards building a leading presence in the energy and commodities market", said Mr Magnus Bocker, CEO of SGX. He added that "the demand for electricity and energy products will increase in line with Asia's growth and this acquisition will position SGX to take advantage of the opportunities".

SGX closed at $6.81, up 0.4% dod.

Call warrant SGX MB eCW121204 (Q0PW) exercise price $6.50.*
Call warrant SGX MB eCW121203 (Q0LW) exercise price $7.50.*
Put warrant SGX MB ePW121203 (Q0BW) exercise price $ 6.00.*

UOB announces earnings
After the STI closed for the day, UOB Group announced earnings of S$1.4bil for the first half of 2012. This showed a growth of 12.3% compared to the same period a year ago. The results were underpinned by strong growth across all business units as the group continues to benefit from strengthening its regional franchise.

UOB CEO, Mr Wee Ee Cheong said that UOB has an advantage in "capturing the rise in intra-regional trade flows and consumer affluence" and that the bank will continue to "invest in people, products and platform for the future".

Call warrant UOB MB eCW121101 (Q3YW) exercise price $21.00.*
Call warrant UOB MB eCW130103 (MW0W) exercise price $19.397.*
Put warrant UOB MB ePW121102 (Q3ZW) exercise price $19.00.*

Overnight Market Wrap

Borrowings decreased but hiring increased

Consumer borrowing in the US rose a mere USD6.46bil compared to the Bloomberg survey of USD10.25bil. Non-revolving debt, including educational loans and loans for motor vehicles and mobile homes rose in June while revolving debt, which includes credit cards fell in June. The less than expected borrowings could indicate that consumers are concerned about the future income prospects.

The US markets seemed to have expected that consumer credit would come in lower than estimates since unemployment has remained high, at 8.3% in July. Furthermore, job openings in the US rose in June, indicating that there may be employment gains in the second half of the year. The S&P gapped up and stayed positive through the trading session, closing 0.5% up dod.

Overnight Markets

Indices	Last	Change
STI	3067.74	-0.1%
HSI	20072.55	0.4%
DJIA	13168.60	0.4%
S&P 500	1401.35	0.5%
Nasdaq	3015.86	0.9%
China A50	7563.93	-0.1%

Corporate News

Corporate Announcements

Yangzijiang's 2Q12 net profit fell 9% year-on-year to RMB878.2mn

UOB's 2Q12 net profit rose 12% year-on-year to SG$713mn

Results announcements:
Wed 8 Aug: NOL 2Q12
Fri 10 Aug: FNN 3Q12, Genting 2Q12
Mon 13 Aug: Noble 2Q12
Tue 14 Aug: IndoFood Agri 2Q12, Wilmar 2Q12, Singtel 1Q13, STX OSV 2Q12
Tue 28 Aug: Olam 4Q12

Ex-dividend dates:
Mon 6 Aug: SingTel ($0.09)
Wed 8 Aug: OCBC ($0.16)
Wed 15 Aug: DBS ($0.28), SembMarine ($0.05)
Thu 30 Aug: Sakari ($0.02), UOB ($0.20)
Wed 26 Sep: SGX ($0.15)