Warrants Highlight

Sakari on Winning Streak after Results

Coal miner, Sakari Resources announced its 2Q12 earnings after markets last Monday. Since then, the share price went for a 7-day winning streak, gaining 18.1%. Over the same period, the Sakari call warrant Q3NW rose 67.2% to $0.107, while the call warrant QP1W rose 87.5% to $0.06.

Sakari closed at $1.50 on Wednesday, the same price as its early July peak. Investors who are bullish on the rally continuation could leverage their views with calls, while bearish investors who are sceptical on Sakari’s strength could consider buying puts.

A closer look at the earnings
Against the background of lower international coal prices, Sakari’s 2Q12 net profit fell 39% year-on-year to $24mn. However, this is a sharp improvement over their 1Q result which was only $14mn. The improvement was helped by stronger sales volumes (2.7mt, +34%), resilient pricing (flat at US$94.6/t) and 15% improvement in Jembayan's cash cost to US$57.6/t.

Sebuku mine
Sebuku production remains on track with a 30% production increase quarter-on-quarter. The management upgraded its 2012 production target to at least 2.5Mt as the production profile continues to increase. The focus remains on developing cost efficient mines within its Northern Leases.

Jembayan mine
In addition to its 46% quarter-on-quarter production increase, the Jembayan operations saw a sharp reduction in cash costs. The improved key cost drivers such as stripping ratio and dumping distances contributed to the $10/t reduction quarter-on-quarter.

Outlook
According to the management, Sebuku’s production rate is planned to continue towards its steady-state target of 4-4.5Mtpa over the next 18-24 months. After a slow start to 2012, Jembayan is now set to resume production increases with its order book showing a corresponding increase in shipments to customers in H2’12.

Singapore Market Wrap

Consumer goods lead fall in the STI

Asian indices had a mixed day on Wed, with some indices ending in the black while some ended in the red. The HSI closed at 20065.52, down a mere 0.04% dod while the STI closed at 3052.25, down 0.5% dod ahead of National day on Thursday.

The STI opened up during its trading session but fell intraday. The fall was led by the consumer goods sector, which fell 1.6% as a whole. Oil and gas was the best performing sector and was the only sector which added gains dod. The oil and gas sector increased 0.5% as a whole.

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.*

Sembcorp Marine secures US$4bil contract
Before the STI market started its trading session, Sembcorp Marine announced that it had secured contracts worth approximately US$4.032bil. According to terms of the contract, Sembcorp Marine has to design and construct five drillships based on the Jurong Espadon drillship design.

The drillships are scheduled for deliveries between 2Q2015 and 2Q2019, and will be charted to Petrobras for 15 years. In addion, Sembcorp Marine commented that barring any unforeseen circumstances, the company expects this contract to contribute positively to its earnings.

Sembcorp Marine closed $4.99, up 1.6% dod.

Call warrant SembMar MBeCW121203 (Q0OW) exercise price $5.00.*
Put warrant SembMar MBePW130103 (Q4GW) exercise price $4.70.*
Long dated call warrant SembMar MBeCW130603 (M8NW) exercise price $5.59.*

Ezion Holdings announces results and contract wins
Ezion reported their 1H2012 results on Wednesday along with a contract win. The company reported a net profit of USD42.2mil and this is an increase of 21.7% compared to the same period one year ago.

Along with their results, Ezion announced that they secured a contract worth approximately USD80mil. The contract is over a 5 year period to provide a third North Sea Class Service Rig to be used by an European oil major. The rig is expected to be deployed and working by the end of 2012. In addition, the group received a letter of intent valued at USD87.6mil to provide another Service Rig to support the offshore oil and gas activities in Europe. This rig is expected to be functional by mid 2014.

Investors celebrated the contract wins and earnings, closing at $0.985, up 1.6% dod.

Call warrant EzionHldMBeCW121002 (P9CW) exercise price $1.10.*

Overnight Market Wrap

Better jobless claims did little for the markets

The STI was closed for a public holiday yesterday due to National Day celebrations. Across Wednesday and Thursday, the US indices were pretty uneventful with the S&P closing at 1402.8, increasing a mere 0.1% across the two days.

The lacklustre performance was despite initial jobless claims coming in better than expected on Thursday. Jobless claims decreased to 361K from last week's data of 365K, and it beat the Bloomberg survey which called for an increase to 370K. This may be a sign that the labour market is improving and this may be re-enforced by previous data which showed that hiring in the US is increasing. However, with unemployment rates still hovering above 8% and consumer confidence falling, investors did not react much to the decrease in jobless claims.

Overnight Markets

Indices	Last	Change
STI	3052.25	-0.5%
HSI	20269.47	1.0%
DJIA	13165.19	-0.1%
S&P 500	1402.80	0.0%
Nasdaq	3018.64	0.3%
China A50	7633.41	0.6%

Corporate News

Corporate Announcements

Keppel secured 2 contracts from Petrobras worth US$950mn.

NOL lost US$117.8mn in 2Q12

Ezion 2Q12 net profit rose 130.4% year-on-year to US$28.1mn.

Results announcements:
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:
Wed 15 Aug: DBS ($0.28), SembMarine ($0.05)
Thu 30 Aug: Sakari ($0.02), UOB ($0.20)
Wed 26 Sep: SGX ($0.15)