Towards Financial Freedom
DBS Equity Research: Wired Daily 1 Oct 2015
US equities not out of the woods despite yesterday's rebound, STI 2660-2760 provides accumulate opportunity
Riverstone Holdings - Initiate coverage with BUY call and target price of S$2.15. Both short and long-term trends indicate favourable demand growth prospects.
US stocks rose on possible quarter-end portfolio rebalancing and window dressing. Despite last night's rise, the S&P500 Index continues to track a 'lower-low' and 'lower-high' over the past 10 days. We are wary that the S&P500's choppy sideway's trend since August 24th could break to the downside, given the negative crossover between its 65-day and 200-day exponential moving averages. Immediate resistance is at either 1930 or 1946. Only a close above 1953 negates the cautious view.
For the Singapore market, sentiment remains cautious ahead of the release of 3Q GDP number and the MAS policy meeting around mid-October. There is also little optimism heading to the 3Q results season. But given the magnitude of correction since mid-April (-760pts, -21.4%), we below that further near-term downside should be limited relative to the decline so far. We see support at 2750 with an undershoot possibility to 2660 if global equity market's volatility continues. Any further weakness into the range from 2660-2760 provides accumulation opportunity.
We initiate coverage on Riverstone Holdings with BUY call and target price of S$2.15, offering potential upside of c. 34% to current price. Both short and long-term trends indicate favourable demand growth prospects. The global market for healthcare gloves is estimated to grow at 8-12% p.a. between now and 2020. As a relatively new entrant in the healthcare gloves industry, we project Riverstone's healthcare glove output to grow 133% from FY14-17 as it intends to grow revenue from this segment quickly to drive its earnings. In the longer term, Riverstone could also potentially benefit from the substitution of nitrile for latex gloves, which made up c. 53% of the global supply in 2014, from c. 74% 5 years ago. Riverstone is a beneficiary of strong US$ vs Ringgit and low commodity prices while capacity expansion is expected to underpin growth.
ST Engineering announced that current President & CEO Mr. Tan Pheng Hock will be stepping down from his position next year after more than a decade at the helm. Mr. Vincent Chong Sy Feng (currently Deputy CEO, Corporate Development) will succeed Mr. Tan as the CEO next year. Mr Chong will be appointed as the President & CEO (Designate) with effect from 1 October 2015 and is expected to assume leadership of ST Engineering in about a year's time. Prior to joining ST Engineering, Mr Chong spent the last decade in various senior management positions at global oil major ExxonMobil and clearly brings with him a lot of strategic experience.
Roxy-Pacific Holdings has entered into an agreement to acquire a freehold residential site near Marine Parade at the purchase price of S$21.5m. This works out to roughly S$789 per sq ft per plot ratio. The freehold residential site has a total land area of 19,474 sq ft and an existing plot ratio of 1.4 for residential apartment development.
Hong Leong Asia expects to report a loss for 3Q ended 30 Sep 15 which is likely to also result in a loss for 9-mth 2015.
The expected loss is mainly attributed to the Consumer Products unit (Xinfei) as a result of lower unit sales.
IEV Holdings has obtained an exclusive 5-year master license for the Oxifree corrosion control technology in India from the USA-based licensor, Oxifree Global. This is the fifth country in Asia for which the Group has acquired the exclusive rights to distribute, apply and maintain products utilising the Technology, after Vietnam, Malaysia, Brunei and Indonesia.
SBI Offshore has received a letter of award for the sale of solar power in the Maldives. This is a significant step to penetrate the Maldives market as the Government of Maldives is promoting greater use of renewable energy.
Nico Steel Holdings proposes to issue 2.0% redeemable convertible bonds due 2018 with an aggregate principal amount of up to S$50m. The net proceeds shall be applied towards making investments and for general working capital of the Group.
In property news, two residential sites have been released for sale by the Urban Redevelopment Authority (URA). The first is at Alexandra View near Redhill MRT. It is launched under the confirmed list, which means it is on the market immediately. The site can yield 400 units and has a firststorey commercial component. The site area is around 8,400 sq m. The second, a residential site at Jalan Kandis, is on sale on the reserve list and has a site area of around 7,000 sq m. It is near Sembawang Park. Both sites have a lease period of 99 years.
Singapore private home prices remain in longest losing streak since 2002. Preliminary 3Q data published by the URA shows prices fall 1.3% Q-o-Q, vs -0.9% in 2Q.
Singapore loan growth has moderated again. After a modest uptick to 2.2% YoY in the previous month, overall loan growth slipped to 1.5% in August. This is mainly driven by a sharp drop in business loan growth to 0.2%, from 1.1% in July. Separately, consumer loan growth also moderated by 0.5%-pt to 3.4%, led mainly by an easing in housing loans.
Source: DBS
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