Warrants Highlight

YZJ in unchartered waters

Macquarie’s Yangzijiang warrants

Debut offshore order
Traditionally a shipbuilder, 3rd December 2012 was a milestone for Yangzijiang Shipbuilding (YZJ) as it secured its first ever offshore order worth US$170 million for a jack-up Drill Rig. The unit is scheduled for delivery by 2Q2015 and is a pivotal development for the company as it officially joins the offshore oil and gas league.

Keppel Chief Executive Choo Chiau Beng said in a December interview that the contract which YZJ won is “an indicator of lower margins in the future”. Keppel was awarded a contract for a similar product in April but its contract was valued higher, at $205 million. However, YZJ said in an email that it does not expect prices to drop because of the competition.

At the start of the year, YZJ crossed the $1.00 mark to close at $1.005 on 3rd January. The last time it traded above $1.00 was on the 21st September.

Warrants issue to raise funds
Yesterday before the market opened, YZJ announced on the SGX that it is proposing a placement of 330,000,000 warrants at an issue price of RMB0.3072 (S$0.0605) for each warrant. The warrant has an expiry of 29 April 2016 and will allow the warrant holder to subscribe to one new ordinary share at a price of RMB7.617 (S$1.50) for each new share.

According to PortNMews, YZJ said that “with the exception that the market conditions of the shipping industry will improve gradually over the next few years, the board believes that the net proceeds from the warrant issue will further strengthen the working capital of the company and the proceeds arising from the exercise of the warrants will enhance the capital base of the company and provide additional financial flexibility to the group to facilitate the group’s future market expansion and explore potential development opportunities which may be brought to its attention”.

With the warrants issue, YZJ will raise RMB98.17 million and an additional RMB2.51 billion if all the warrants are exercised. With concerns over share dilution, the counter fell 7.3% yesterday to close at $1.02.

Singapore Market Wrap

First positive day for the week

The STI rose 0.4% to 3,208.5 on Wednesday to make it the first positive session for the week. This is also the first rebound after sliding for 3 consecutive days. Investors remain cautious of the economy as the STI failed to make a significant breakthrough and has been oscillating between 3,160.8 and 3,237.8 for 2013.

Call STI 3250MBeCW130430 (R5XW) exercise level 3,250.*
Put STI 3100MBePW130430 (R5WW) exercise level 3,100.*

Yangzijiang falls 7.3%
Investors aggressively sold shares of the shipbuilder after it announced a placement proposal of 330 million warrants at an issue price of RMB$0.3072 (S$0.0605). Each warrant allows the right to subscribe for 1 underlying share at the price of RMB$7.617 (S$1.50). Yangzijiang plunged 7.3% day-on-day to close at $1.02.

Call YangzijiMBeCW130701 (RG2W) exercise price $1.10.*

Ezion wins letter of intent for Liftboat
Ezion announced the awarding of a letter of intent worth roughly US$116.8 million for the charter of a Liftboat. This letter of intent comes from a South East Asian State-linked corporation with the charter expecting to be commenced in the first quarter of 2015. Ezion rose 1.9% to $1.855 for the day.

Call Ezion MBeCW130801 (R9QW) exercise price $2.10.*

Overnight Market Wrap

S&P little changed despite good economic data and earnings

The S&P ended less than 0.1% up yesterday after the World Bank cut its global growth forecast for 2013. It claims that austerity measures, low business confidence weighed on developed countries.

JP Morgan Chase and Goldman Sachs reported unexpectedly good earnings yesterday and the counters rallied 1% and 4.1% respectively.

Industrial production climbed for the second month in December, indicating that factories were still expanding. It rose 0.3%, within expectations of the median forecast in the Bloomberg survey. Manufacturing, which makes up 75% of total production, rose 0.8%, more than expected.

Overnight Markets

Indices	Last	Change
STI	3208.50	0.4%
HSI	23357.00	-0.1%
DJIA	13511.20	-0.2%
S&P 500	1472.63	0.0%
Nasdaq	3050.39	-
China A50	8390.54	-1.4%

Corporate News

Corporate Announcements

Ezion is awarded a letter of intent worth roughly US$116.8 million for the charter of a Liftboat.

Earnings release dates:
Fri 18 Jan: CapitaMall Trust (FY12)
Tue 22 Jan: MapleTree Industrial Trust (3Q13)
Tue 22 Jan: SGX (2Q13)
Tue 22 Jan: Suntec REIT (FY12)
Wed 23 Jan: Keppel Land (FY12)
Wed 23 Jan: CapitaCommercial Trust (FY12)
Thurs 24 Jan: Keppel Corp (FY12)
Wed 30 Jan: SATS (3Q13)
Wed 6 Feb: DBS (FY12)
Wed 6 Feb: GLP (3Q13)
Fri 15 Feb: OCBC (FY12)
Fri 22 Feb: Wilmar (FY12)
Wed 27 Feb: UOB (FY12)
Thurs 28 Feb: Noble (FY12)

Ex-dividend dates:
Mon 21 Jan: AREIT ($0.0362)