Towards Financial Freedom
DBSV S'pore Wired Daily 29 July 2013
Today's Focus
CDL Hospitality Trusts - Improving signs come 2H13; upgrade to BUY, TP S$1.89
STI has rebounded 210pts over the past month since the June 3066 low. A choppy trend could be in stall for August ahead of consensus expectation for QE tapering to start in September. Still, follow the line projection towards 3430 by year-end positions the STI at 3345 by early October. Thus, we expect a higher low on the pullback. We currently peg index support at 3170, which is the 50% downward retracement level, assuming a short-term high last week at 3277.
We prefer companies that offer good earnings visibility, are in a net cash position and offer good dividend yield. Our picks continue to be ST Engineering, Comfort Delgro and SingPost. For ST Engineering and Comfort Delgro, we prefer to be buyers on pullback as both stocks have performed well over the past month.
The 2Q results season that's currently in progress has been unable to fire up optimism thus far as most companies have reported either in-line results or outlook lacked shine. Singapore banks will be releasing results this week. Shares of OCBC have continued to lag behind UOB. This is likely because of concerns about possible mark-to-market losses on Great Eastern's non-par insurance portfolio in the upcoming results. Support for OCBC shares is at $10.22. UOB shares have clearly outperformed, rising to a touch below $22 that lifted it back to the previous YTD high. Technically, we think the stock has touched near-touch resistance last week. A pullback to $20.9 is likely.
Results for Hi-P will be out on Friday. The group reported a strong set of 1Q13 results. Shares of Hi-P rose 11.4% last week ahead of its results release. The stock currently offers a modest 6% upside to our 88cts TP. Technically, immediate term upside looks capped at $0.85 ahead of earnings release. Immediate support is at $0.79.
2Q13 results CDL Hospitality Trusts was weak but in line. Gross revenue and NPI declined by 3% and 4% y-o-y to S$35.6m and S$32.6m respectively. Looking ahead, the group is seeing demand stabilizing in 3Q13 with bookings for the Sept'13 Formula One race looking brighter compared to a year ago. Thus, 2H13 performance is likely see a sequential improvement. Acquisitions are likely catalysts. We believe CDL HT deserves a re-look, Upgrade to BUY, TP S$1.89 (prev S$ 2.07) (adjusted for higher risk free of 2.8% vs 2.1%).
DPU of 2.43 Scts for Mapletree Industrial Trust in line. Looking ahead, the manager expects steady earnings growth backed by decent operational performance and completion of development projects. Maintain BUY, TP revised to S$1.52 (prev S$ 1.63) as we raise our risk free assumption to 2.6% from 1.8%.
Swiber Holdings has clinched sizeable contracts worth approximately US$435m. Contract wins comprise of approximately US$330m under the Swiber Group and approximately US$105m under Swiber Group Joint venture company. These contracts will commence immediately and are expected to be completed by 2015.
Otto Marine announced that it has sold 2 Anchor Handling Tug Supply Vessels to a renowned unrelated third party for US$170m. This will significantly improve its cash flow and reduce its gearing ratio. The vessels would be chartered by the buyer to the group for a period of 8 years.
WBL Corporation warned that it was expecting a net loss for the third quarter ended June 30. The loss was attributed to lower net sales from its Nasdaq-listed subsidiary, Multi-Fineline Electronix.
Armarda Group expects to report a loss for the first quarter of FY2014 ended 30 June 2013. The loss is mainly attributed to low revenue.
Samudera Shipping Line expects to report a net loss after tax for 2Q 2013. The loss was due mainly to lower freight rate(s) and charter rate(s) as a result of oversupply of vessels across all three business segments of the Group namely Regional Container Shipping, Indonesia Domestic Container Shipping and Bulk Carrier, Offshore & Tanker business.
AsiaMedic expects to report a loss for 1H2013 due mainly to the increase in operating costs and market development expenses for China and Myanmar.
Goodpack has priced S$50m 4.15% Notes due 2018, to be issued under its S$600m Multicurrency Medium Term Note Programme.
Singapore's manufacturing sector shrank a slightly larger than expected 5.9% in June compared to a year ago, and lower than market expectation of a 5.7% contraction, due to a sharp fall in pharmaceutical output. Excluding the volatile biomedical sector, output fell 0.5%. After seasonal adjustments, overall factory output declined 3.1% m-o-m in June - the first slump following three consecutive months of sequential expansion. Excluding biomedical output, production fell 0.5%. Although the electronics sector continued to show signs of improvement in June (growing 2.6% y-o-y), the rise was not enough to offset a 28.9% plunge in pharmaceutical output. The electronics sector owed its increased output in June to the computer peripherals and other electronic modules & computer segments, which expanded 30.9% and 14.9% respectively thanks to higher export demand. The semiconductors segment increased 2%.
The construction industry may be able to reduce its overall workforce by 20 to 30% by 2020 if it attains a similar increase in productivity. This is assuming that the volume of construction work stays unchanged from now, according to the chief executive of the Building and Construction Authority (BCA), John Keung. BCA has set itself a productivity improvement target of at least 30% by 2020. Dr Keung reiterated the stance that construction companies need to be less reliant on a large pool of manpower and change their perception of what building means. Demand for construction will remain strong over the next few years, with contracts worth about $20 bn to $28 bn a year in 2014 and 2015, according to BCA.
US indices recovered from earlier session losses to end marginally higher but concerns about when the FED will start to taper QE remained. Shares of bellwether Caterpillar fell quarterly earnings missed estimates and the company cut its forecast. McDonald's shares fell as well after the company said forward earnings will be affected by economic weakness.
This is a heavy week for US economic data releases that culminate with July non-farm payrolls on Friday. Consensus expects the figure to be 185k (previous month 195k) while the closely watched unemployment rate is seen improving to 7.5% from 7.6% in June.
Source: DBSV
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
