A soft start to the 3Q earnings season dragged US indices lower. Concerns about how the 3Q earnings season may turn out has prompted profit taking after the stock market's recent run. Dow component Alcoa reported better-than-expected results but cut its growth outlook while Chevron warned about its 3Q earnings. Discount retailer Wal-mart rose following comments about a strong 'back-to-school' season. Meanwhile, Spain's debt rating is downgraded 2 notches to BBB- by S&P.

For STI, a softer start to the trading session is seen but down-side should be limited with a bounce off around the 3020 immediate support expected. Still, the STI's unsustainable rise above 3100 last Friday is a noteworthy. Concerns about a lack lustre 3Q results season, slowing economy, the upcoming November US election and year-end 'fiscal cliff' should see the STI contained below 3088 in coming weeks as the year-end holiday lull draws closer. The immediate resistance at the down-side gap of 3045-65 caps near-term bounce.

Nam Cheong has secured vessel sale contracts for two Platform Supply Vessels (PSVs) worth a total of US$52.1m from two new West African customers. The group is on track to realising its built-to-stock programmes for FY12/13. We expect stronger earnings in 2H12-FY14. Maintain BUY with higher TP of S$0.30 (Prev S$ 0.24) as we roll over our valuation to reflect FY13F earnings and based on a higher target PE multiple of 9x (from 8x previously).

Malaysia's Sep12 palm oil output jumped 20% m-o-m to 2.004m MT, exceeding our expectations by 8%. Against the higher production, the pace of Sep12 exports had decelerated to 4% m-o-m from 11% in Aug12. Reflecting this, end-Sep12 palm oil inventory leaped 17% m-o-m to 2.481m MT (mostly CPO) vs. expectation of 2.206m MT. At current level, we suspect CPO storage are close to tanks capacity. This could lead to: (1) CPO exports need to be jolted at fire sale prices; and (2) planters need to cut down on harvesting to prevent wastage and to conserve cash ahead of imminent drop in CPO prices. We believe these actions should temporarily address Malaysia's inventory overhang. However, the refinery industry's feedstock cost issue still needs to be tabled to provide a more lasting solution. Against the backdrop of flat price outlook over the next three years, we continue to recommend Bumitama Agri as our pick in the sector.

Separately, it was reported in newswire that the Malaysian Cabinet has approved the lowering of the CPO tax; although they have not yet decided on the quantum. According to the article, the Palm Oil Refiners Association of Malaysia (Poram) had proposed to the government to lower the CPO export tax to between 8 and 10% and do away with duty-free CPO.

However oil palm planters said that a more practical rate is between 4 and 5%. We believe that as long as refiners are not competitive relative to Indonesian refiners, then there would be continued build up in CPO inventory.

Tiger Airwaysoperating statistics for September 2012 show Tiger Australia continues to show encouraging signs but Singapore operations disappoint. At the Australian operations, passenger carriage (RPK) increased 10% m-o-m to 262m p-km, as more sectors were introduced during the month, as part of the ramp up to pre-grounding scale. Load factors stayed robust at 84% for the month. Singapore operations disappoint but could be a one-off due to the move from Budget Terminal to Terminal 2 in Singapore on September 23rd, which may have deterred some passengers from booking flights close to that period. Load factors and passenger carriage dip during the month. Though the month is a seasonally low period, a passenger carriage dip of 7% m-o-m to 588m p-km was below expectations. Load factor at 79% also dipped below 80% for the first time in 6 months. On a y-o-y basis, load factor stayed flat.

Overall, passenger carriage for 2Q-FY13 (July to September period) for the group thus came in at 2591m p-km, about 2% below our forecast for the quarter. This will likely mean that losses for the quarter will likely be higher than we had earlier estimated. While that could affect near term sentiment, the turnaround story for Tiger, premised on improvements in Australian operations, still remains largely intact. Maintain BUY and S$0.90 TP.

STX OSV has secured orders for 2 subsea construction vessels from Siem Offshore. These orders are understood to be the exercise of options following an earlier order for 2 vessels in April 2012. To be delivered in 2Q 2014, we estimate these orders to be worth a total of c. NOK1.2bn (US$158m). This brings YTD order wins to c. NOK9.4bn, closer to our current FY12 order wins assumption of NOK10.0bn.

Ezra is disposing its 50% stake in AMC Connector for US$45.5m. Ezra will then charter this vessel back on a 10-year bareboat charter. The proceeds from the sale will be used to fully satisfy the amount for its purchase of this stake in 2010, hence, no disposal gains will be realised. We are positive on this development as it further lightens Ezra's stretched balance sheet. We now project end FY12F net gearing to be 0.94x from 0.96x. Note that Ezra now trades ex-div (the dividend in specie of Triyards shares). Triyards shares will commence trading on 18 October 2012.

SingTel has secured Barclays Premier League (BPL) rights for the 2013-16 season on non-exclusive basis. SingTel does not have to share the content with StarHub as cross-carriage implies to exclusive content only. There was no bidding for the rights (as for exclusive rights) and SingTel negotiated the price with the premier league bilaterally. This implies status quo with SingTel retaining the BPL rights. While positive for StarHubin the near term as it does not need to cough out more money (estimate at S$400m), loss of content rights may be interpreted as negative in the long term. Maintain HOLD on SingTel and StarHub.

ST Aerospace, the aerospace arm of ST Engineering, secured new deals worth $590m in 3Q 2012 for airframe, component and engine maintenance and engineering design support. This is in addition to the US$80m contract won in July for the repair and maintenance of Malaysian low-cost airline AirAsia's aircraft components.

Tiong Seng has been awarded the contract to build 97 terrace houses with five bedrooms, family/entertainment areas, attics and basements in Serangoon Garden. The project will be jointly developed by City Developments and Hong Realty. The contract is worth approximately S$93m.

Yongnam has entered into discussions with a sponsor in the USA to review the probability of listing OTC American Depository Receipts (ADRs). The discussions are still at a preliminary stage.

Singapore advance GDP estimates for 3Q12 will be released Friday morning. Although a technical recession appeared to be on the cards, recent comments by the Prime Minister is that Singapore will avert a technical recession on account of an upward revision to the second quarter GDP growth figure (originally at -0.7% QoQ saar). The outlook for the Singapore economy is deteriorating, not improving. Risk of a contraction in 3Q has risen significantly with weak non-oil domestic exports (NODX) and industrial production figures in recent months. Other indicators are also pointing to a rough patch ahead for the economy too. Singapore's Purchasing Manager Index (PMI) as well as the PMIs of key markets have been sliding toward contraction territory (<50).

Source: DBSV