OCBC - Upgrade to BUY, TP raised to S$12.40; rolled valuation base to FY14.

Light trading activity is likely in this holiday shortened week that could exaggerate price action even as the 2Q results soldiers on. To date, slightly less than half of the stocks in our portfolio have reported their quarterly earnings. 71% came in within while 24% was below expectations. However, we have cut FY13F and FY14F earnings by 1.2% and 0.6% respectively. Results on tap next week include ARAon Monday; City Dev, Genting, Wilmar, StarHub and SembCorp Inds on Tuesday and Biosensors, Ezion, UOL and NOL on Wednesday.

OCBC reported strong revenues ex-GEH. 2Q13 earnings were in line with our expectations but below consensus. Loan growth was strong at 7% q-o-q /15% y-o-y; this prompted higher general provisions. Indonesian and Malaysian operations improved q-o-q largely from strong loan growth.However, guidance remains cautious. We have assumed a conservative run rate of 1% loan growth per quarter (1H13 YTD: 10%), raising FY13F loan growth to 12% (FY14-15F at 9% per year). OCBC has declared 17 Scts DPS, no scrip dividend applied. Upgrade to BUY, TP raised to S$12.40 (Prev S$ 11.50), as we rolled valuation base to FY14.

1Q13 underlying profit for Singapore Post of S$36.2m (-0.9% y-o-y, +13.8% q-o-q) was slightly below estimate due to forex losses; declared S$1.25 Scts interim DPS, in line. We have trimmed FY14F/15F earnings by 3%. SingPost is transforming into a major E-commerce player in Asia, where it can ride on last mile delivery network of postal peers in various countries. Maintain BUY with a revised TP of S$1.50 (Prev S$ 1.56). SingPost has S$146m net cash for more acquisitions.

Golden Agri (GGR) booked 2Q13 core earnings of US$45m (-60% q-o-q, -58% y-o-y), significantly below our expected range of US$110-126m. 2Q13 earnings thus brought 1H13 earnings to US$158m (-41% y-o-y), or 37% of our initial FY13F earnings of US$423.8m. Compared to FY12 consensus expectations of US$417mm the group's earnings were also below on annualised basis. The poor results were dragged by drop in CPO prices, drop in output and higher than expected operating expenses. We lowered our FY13F/FY14F/FY15F earnings by 20%/20%/16% to US$332.5m / US$388.6m /US$485.4m, respectively. This consequently lowers our DCF valuation on the stock to S$0.45/share, or 15% lower than our previous estimate of S$0.53. Counter is NOT RATED.

United Envirotechreported a 37.5% increase in revenue to S$44.1m for 1Q14, due to higher revenue from both engineering and recurring water treatment business segments. Revenue from recurring water treatment business segment jumped 89.7% to S$12.9m. Net profit was S$6.1m, up 3.5%, due to increase in operating expenses.

We are now more positive on the sustainability of Hi-P's recovery momentum, post dialogue with management during results briefing. Hi-P now has a more diversified wireless customer base including Blackberry, Apple, Motorola and Amazon. For each of the customers, Hi-P has also picked up more product models than before. In the past, Hi-P was doing one to two phone models. They were hit badly when these two models did not sell well.  Now, they produce for as much as 6 different models. Margins are also more likely to improve with further restructuring. Hi-P is also focusing on growing nonwireless to 50% of sales. 

RH Petrogas is expected to report loss for 2Q13 mainly due to write off for two unsuccessful exploration wells drilled and seismic option that has lapsed.

Technics Oil & Gas is expected to report a net loss for Q3 FY2013.

Leader Environmental Technologies is expected to report a loss for 2Q13, mainly due to no revenue derived from desulphurization contracts and impairment of trade receivables.

Jubilee Industriesis expected to report a net loss for the HY2013 results, mainly due to lower revenue and lower gross profit margin.

China's July non-manufacturing PMI rose to 54.1 last month from June's 53.9. The improvement came as Beijing's recent support measures for small firms helped improve sentiment, though companies noted that inflation is picking up and pushing up costs. 

               

US indices recovered from earlier session loss to end higher, reacting to the 162k increase in July non-farm payrolls that was the lowest in 4 months that followed a revised 188k rise in June that was also less than initially estimated. Consensus had expected a185k gain. Meanwhile, the unemployment rate dropped to 7.4% from 7.6%. Equities pared losses after a FED official said the central bank should wait for evidence the labour market and economy are strengthening before tapering purchases.

Source: DBSV