IHH Healthcare - Strong Rebound Suggests Further Recovery

SG - IHH Healthcare - Strong rebound suggests further recovery

Strong rebound suggests further recovery

Immediate resistance conquered. IHH Healthcare could see more upside ahead after rebounding off its 5-month uptrend support and $1.55 support on significant trading volume yesterday; its 3-month downtrend resistance was also conquered at the same time.

Indicator turning bullish. The MACD has just rebounded off its centerline as well, suggesting that the upside momentum is building up again.

Next resistance at $1.70. The counter is likely to head towards the $1.70 immediate obstacle (psychological resistance) in the weeks ahead, with the next hurdle pegged at the $1.80 key peak.

Immediate support at $1.55. Meanwhile, we advocate a stop-loss exit at around $1.50, which is slightly below the firm support at $1.55.

Singapore Stock to Watch- Rex International Holdings

Rex To Raise $85.3m From Catalist IPO
Rex International Holdings, an exploration and production player, launched its initial public offering (IPO) on 22 July 2013 with a public offer of 2.5 million shares at $0.50 per share. Including over-allotment, the company expects to place out 168 million shares and raise proceeds up to $85.3 million. Debt free barring for a $2.4 million loan from a controlling shareholder, Rex will use most of the net IPO proceeds for active drilling programmes in the Middle East and Norway, as well as direct investments in new oil and gas opportunities and general working capital. Rex’s business is modeled to reduce its exposure to the expensive and time-consuming costs spanning from the acquisition of licences to exploration and development of oil wells. The Swedish oil and gas group essentially partakes in ventures with already secured exploration and production licences through utilisation of its leading-edge technology in exchange for an equity stake.

Significance: Rex plans to drill two offshore wells in its Oman concession later this year and the first well in each of its other two offshore concessions in the Middle East next year. Its recently started 80-well onshore drilling in the US, while in Norway it will drill three to five new offshore exploration wells as well as grow its licence portfolio. First oil production for its US assets in North Dakota is expected in 4Q13.

Singapore Stock Views - Thai Beverage Likely further correction after bearish break.

SG - Thai Beverage - Likely further correction after bearish break

Likely further correction after bearish break.

Key supports breached. Thai Beverage is likely to see more downside ahead after violating the lower boundary of its 1-year uptrend channel recently; this was followed by another bearish break of the $0.58 key support on heavy volume yesterday.

Indicator is bearish. The MACD has just initiated a sharp bearish crossover, suggesting that the downside momentum is building up.

Next key support at $0.50. The counter could possibly slip further towards the next key base at $0.50 (key trough) in the weeks ahead.

Immediate resistance at $0.58. Meanwhile, $0.58 is now the newly established support-turned-resistance.

Stocks to Watch - CapitaMall Trust; another promising quarter

CapitaMall Trust (CMT) reported DPU of 2.53 S cents, up 6.3% YoY. Together with 1Q DPU of 2.46 S cents, 1H13 DPU totaled 4.99 S cents (+6.6%), forming 50.9% of FY13F DPU. This is above our expectations given that a total of S$12.3m or c.0.36 S cents retained over 1H is available for distribution in 2H13. As at 30 Jun, CMT’s portfolio occupancy stood at 99.1%, up 0.9ppt QoQ, while positive rental reversion of 6.4% achieved in 1H was slightly higher than 1Q’s growth of 6.2%. CMT’s financial position also improved during the quarter, with gearing ratio down to 34.9% from 35.2% in 1Q. On 2 Jul, CMT redeemed all its outstanding convertible bonds due 2013, thereby fully addressing its refinancing needs for 2013. All 14 properties held directly by CMT, we note, are also unencumbered as a result. We now update our model to incorporate the better results and higher risk free rate assumptions. Consequently, our fair value eases from S$2.43 to S$2.35. However, given the strong upside potential, we maintain BUY on CMT.

Robust growth in 2Q13

CapitaMall Trust (CMT) reported a commendable 2Q13 scorecard last Friday. NPI grew by 12.2% YoY to S$125.6m, while distributable income to unitholders rose by 10.2% to S$87.7m. The completed asset enhancement works at JCube, Bugis+ and The Atrium@Orchard last year, together with higher rental rates achieved from the portfolio’s new and renewed leases, were the key drivers for the quarter. DPU was up 6.3% YoY to 2.53 S cents and, together with 1Q DPU of 2.46 S cents, brings the 1H13 DPU to 4.99 S cents (+6.6%). This forms 50.9% of FY13F DPU, above our expectations given that a total of S$12.3m or c.0.36 S cents retained over 1H is available for distribution in 2H13.

Continued strong execution

As at 30 Jun, CMT’s portfolio occupancy stood at 99.1%, up 0.9ppt QoQ due to significantly improved occupancy rates at Plaza Singapura and The Atrium@Orchard. Positive rental reversion of 6.4% was also achieved in 1H, slightly higher than 1Q’s growth of 6.2%. In addition, underlying fundamentals remained sound, with 1H13 shopper traffic and tenants’ sales rising 4.8% and 3.3% YoY respectively. For the rest of 2013, we note that only 11.9% of leases by rental income is left for renewal. This reflects CMT’s continued strong execution in our view.

Maintain BUY

CMT’s financial position also improved during the quarter, with gearing ratio down to 34.9% from 35.2% in 1Q. This is boosted mainly by an asset revaluation gain of S$104.0m arising from a 15bps compression of cap rates at several of its malls. On 2 Jul, CMT redeemed all its outstanding convertible bonds due 2013, thereby fully addressing its refinancing needs for 2013 and releasing The Atrium@Orchard from legal mortgage. All 14 properties held directly by CMT, we note, are unencumbered as a result. We now update our model to incorporate the better results and higher risk free rate assumptions. Consequently, our fair value eases from S$2.43 to S$2.35. However, given the strong upside potential, we maintain BUY on CMT.

STI Market Live

Sembcorp Industries: Not your typical utilities company Summary: Sembcorp Industries (SCI) is a major industrial group primarily involved in the businesses of 1) utilities, 2) marine and 3) urban development. The nature of its utilities business is relatively stable, while growth is driven by asset acquisition and construction. SCI's marine arm is also well-positioned to capitalise on demand from the offshore oil and gas industry, given its market-leading position. Finally, the urban development segment possesses growth potential with its focus on emerging markets. The long-term outlook for its businesses look bright, though the Singapore utilities business may, in the short term, be impacted by an expected increase in competition. The group has been consistent in paying out dividends of at least S$0.15/share each year since 2009, implying a minimum dividend yield of 3.1% at current prices. Initiate with BUY and S$6.48 (based on sum-of-parts method) fair value estimate. MORE REPORTS Tat Hong Holdings: Time to take profit Summary: Since our last upgrade on Tat Hong Holdings ("Poised for Recovery", 9/1/2012), the group's crane fleet grew by ~20% (in tonnage), utilization rate by 5 ppt and rental rates by an estimated 10-15%, resulting in a 66% jump in FY13 PATMI. In our view, the easy money has already been made. Investors who have heeded our call would have made 45% return in 1.5 years and should now consider taking some profit. Looking ahead, the macro environment looks increasingly uncertain with sluggish data points coming out of China. Tat Hong's crane fleet expansion is also expected to slow after a 79% surge in crane tonnage over the past five years. Finally, there is a possible share overhang resulting from private equity AIF Capital's conversion of convertible preference shares to 53.3m ordinary shares. Downgrade to HOLD with lower FV estimate of S$1.31 (previously S$1.75). (Chia Jiunyang)

NEWS HEADLINES

- AusGroup is suing Karara Mining Limited for A$54.7m for works carried out in Western Australia. - Baker Technology has divested its entire 20.29% stake in Discovery Offshore SA for NOK199m (S$41.9m). - Swissco has secured contracts worth S$8.24m for three of its crew boats. - Yongnam Holdings has secured two new specialist civil engineering subcontracts worth HK$166m (S$27m). - Z-Obee's FY13 net income fell 17% to US$4.26m as impairment losses from the group's asset portfolio wiped out an increase in fair value gains.

Singapore’s equity top picks tips

key themes in Singapore’s equity space: 1) earnings quality with an overseas bias; 2) China domestic demand; 3) visitor arrivals to Singapore; 4) stock-specific stories.

For the first, it likes SembCorp Marine (S51.SG) as it is well-positioned for an expected order surge in 2H and has a healthy order book, Vard (MS7.SG) with its improving order outlook and asset enhancement investments, and Genting Hong Kong (S21.SG) given its valuations and improving asset performance.


For the second, it likes CapitaMalls Asia (JS8.SG) as Singapore’s best play on Asian retail and consumption, Global Logistic Properties (MC0.SG) as China’s 12th five-year plan highlighted the logistics sector as a pillar industry, and China Minzhong Food (K2N.SG) as its large-scale vegetables origination and processing business in China is well poised to grow given a burgeoning population and urbanisation trend.


On the third, it likes Genting Singapore (G13.SG) as it runs a high-traffic casino in Singapore’s protected two-player market, which has 25-year concession visibility. On the fourth, it likes Hongkong Land (H78.SG) as it provides the greatest leverage to a recovery in the Hong Kong Central office market, Neptune Orient Lines (N03.SG) on expectations for a rebound in net profit, and ARA Asset Management (D1R.SG) given its track record of growing assets under management and its scalable business model.

OVERNIGHT MARKET : Implications for Singapore

US equities posted modest gains on Friday but still fell for the week as fears over stimulus withdrawal dominated investor sentiment.

P&G (+2.9%) led gains for the Dow on Fri but the index fell 1.8% for its worst week performance since Apr. The S&P 500 saw some bargain hunting for defensive sectors on Fri but lost 2.1% for the week. Rounding off the major indices, the NASDAQ Composite declined 1.9% for the week. NYSE composite volume exceeded 5.6b (4.8b previously).

WTI Crude for Aug lost US$1.45, or 1.5%, to end at US$93.69/barrel while Brent for Aug delivery lost US$1.24, or 1.2%, to settle at US$100.91/barrel. For the week, WTI and Brent lost 4.5% and 4.7% each.

Gold for Aug delivery added US$5.80, or 0.5%, to end at US$1,292.10/ounce while Silver for Jul gained 14 cents, or 0.7%, to settle at US$19.96/ounce. For the week, gold and silver lost 6.9% and 9.1% each. 

Implications for Singapore

The modest gains by the US indices last Friday night and the positive Nikkei start (up 0.9% now) could provide some mild inspiration to the local bourse this morning.

Despite plunging below the 3100 key support intraday on Friday, the STI managed to regain most of its earlier losses and close back above this vital level.

With today's tone likely to turn a tad more optimistic, the index could inch higher in the direction of the 3230 key resistance; however, the risk of investors selling into strength again as the index recovers still remains.

Beyond the 3230 level, the next obstacle is pegged at the 3320 resistance. On the downside, 3100 is still the immediate support, followed by the next base at the 3000 psychological level.