Towards Financial Freedom
DBS Equity Research: Wired Daily 4 Nov 2015
Technicals - S&P500's resistance 2120, 13% rally since late Sept set to stall
Japfa - Better-than-expected earnings. BUY call reiterated; TP raised to S$0.90
US stocks rose, led by commodity and energy stocks as oil price rebounded. The S&P500 has rallied back to July levels, recovering fully from its Aug-Sept sell-down. At 2109, it's within 1.1% of the 2134 resistance that had led to a retreat in the index numerous times this year. Using Fibonacci projection, the upside objective for the rally that started from October is 2120. Yesterday's high of 2116 came within a hairline of that. We see a strong likelihood that the 13% rally in the S&P500 since late September will stall very soon. For the STI, our view is for range-bound trade from 2950-3050 over the next 1-2 weeks. Within this range, we also note resistance at 3035.
Japfa's 3Q15 core earnings of US$14.1m were above US$7.4-10.1m expected. The strong result was driven by stronger-than-expected Japfa Comfeed contribution, partly offset by sequentially softer contributions from other segments. We raised FY15F/16F earnings by 25%/6%, as we impute better ASP except for China raw milk prices. BUY call reiterated on 128% upside to revised TP of S$0.90 (Prev S$0.46), as we roll forward base year to FY16F.
2Q16 net profit of S$44.5m for SIA Engineering was in line with expectations. Operating profit margin normalised to 10% in 2Q16 on the back of lower subcontracting costs. However, contributions from engine repair shops remained weak; JV/ associate income down 41% y-o-y so far in 1H16. A 6Scts interim dividend was declared. Maintain HOLD with higher TP of S$3.84 (Prev S$3.52).
According to Bloomberg, quoting Saigon Times, F&N is offering US$4bn for Vietnam's State Capital Investment
Corporation's (SCIC) 45.1% stake in Vinamilk (VNM VN). FNN has issued an announcement indicating that it "has not submitted any offer letter to Vinamilk or SICC with regards to any offer to purchase SCIC's stake in Vinamilk". It is not surprising for FNN to show interest, as it already owns 11% stake in Vinamilk. It would be a strategic game-changer if deal sees fruition. This would allow FNN to firmly entrench its entry into Vietnam, one of the largest consumer markets in Indochina.
Yangzijiang reported 3Q15 total revenue increased by 10% y-o-y to RMB4.1bn, primarily supported by hipbuilding related segment. Core profit in 3Q15 was largely in line but saw unexpected losses on disposal of financial assets and subsidiaries as well as forex losses resulting from strengthening USD in the quarter. This was partly offset by the recognition of relocation fees. Yangzijiang has also secured sizeable contracts totaling US$730m, bringing YTD wins to US$1.6bn, 80% of our expectation of US$2.0bn. Outstanding order book as of 30 Sep 2015 stands at US$4.8bn, comprising 107 vessels.
CapitaLand's net profit for 3Q15 surged 48.3% to S$192.7m, attributable to better performance across all business units, as well as higher portfolio gains and revaluation gains. Revenue rose 17.1% y-o-y to S$1.08 bn on the back of higher contribution from development projects in China as well as higher rental revenue from shopping mall and serviced residence businesses.
mm2reported an impressive 31% increase in revenue for 1H2016 to S$12.7m, largely due to the completion of half of the movie projects for this fiscal year. The Group's gross profit for 1H2016 improved by 48% to S$8.4m in 1H2016 while the gross profit margin of the Group improved from 58.7% in 1H2015 to 66.1% in 1H2016. Acquisition of cinema business is expected to start contributing to the Group's financial performance in second half of FY2016.
Atlantic Navigation has signed a shipbuilding agreement with a shipyard in China for a new liftboat at a total cost of approximately US$56m. The Group expects to take delivery of the new vessel in December 2015. The new vessel is intended to be deployed as part of a tender for projects being carried out by a customer that is based in the Middle East.
Singapore's October PMI remained in contraction mode - although it rose 0.3 point to 48.9. This is mainly attributable to another month of declines in new orders, new export orders and production output. The electronics PMI also stayed below the 50-point mark in October, with a marginal 0.1 point rise to 48.6.
Source: DBS
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