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Shipyards & Oil Services - Statoil lays up 2nd rig on overcapacity; Triyards S$20.6mn placement

Shared By Stock Fanatic on Friday, September 19, 2014 | 19.9.14

Singapore/Malaysia Offshore & Marine News
Dayang Enterprise Holdings Bhd has received the greenlight from Bursa Securities for its proposed private placement, which is expected to raise up to RM304.4mil. The proceeds from the fund raising exercise will be utilised for the group’s working capital/potential investment projects. Based on an indicative issue price of RM3.69 per placement share, the exercise is expected to raise up to gross proceeds of RM304.4 mil. (The Star, Sep 17)

Vallianz Holdings - Vessel owner with revenue recognition till 2018

Vallianz owns and operates a fleet of offshore support vessels (OSV) comprising Anchor Handling Tug vessels (AHT), Anchor Handling Tugs with Supply capability vessels (AHTS) and Platform Supply Vessels (PSV).

Over the last five years, the company has grown its fleet size to 29 OSVs from 5 in 2010 as the company ventured into the Middle East and Latin America, boosting orderbook to US$494m with revenue recognition that stretches to 2018.

First Resources - Strong Production In August

First Resources reported exceptionally strong FFB production in August (+54.2% mom, +35.8% yoy) mainly due to the yield recovery at its Sumatra estates and the spillover from July when workers were on the Hari Raya break. 8M14 OER was 22.5% (8M13: 23.1%). We reduce our OER assumption to factor in the dilution from higher external crops. 

Maintain BUY with a lower target price of S$2.65.

DBS Group - Rising rate beneficiary

Shared By Stock Fanatic on Thursday, September 18, 2014 | 18.9.14

Immediate beneficiary of turn in rate cycle
DBS Group is estimated to see the largest and most immediate impact from a turn in the interest rate cycle. This is expected to be a positive catalyst for the stock assuming the US interest rate cycle turns next year. Historically, there is a strong positive correlation between the 3 month SIBOR rate and DBS’ net interest margin (NIM). 

The latter has also seen a convergence with the sector average with the gap closing to only 3bp by year end from a peak of 16bp.

United Overseas Bank - Rate cycle beneficiary

Potential but delayed benefit in interest rates
UOB is expected to be a beneficiary of the potential turn in interest rates. Historically, its net interest margin (NIM) has also seen a fairly close relationship with the 3 month SIBOR although there appears to be a time lag. This was seen in 2004 to 2006 when the 3MSIBOR rose but was not reflected in UOB’s NIM until 2008. 

We believe the delayed impact of the interbank interest rate on its NIM can be partly attributed to its higher S$ loan-to-deposit ratio (LDR) which would suggest less liquid assets to benefit initially but only later through the rise in lending rates.

Traders' Corner - M1, Centurion Corp, Silverlake Axis & HongKong Land

Daily Chart
M1 (M1 SP, B2F)
Technical BUY with 7.7% potential return
Last price: S$3.60
Target price: S$3.88
Protective stop: S$3.48

BUY with a target price of S$3.88 with protective stops placed at S$3.48. The stock has rebounded from the rising 200-day EMA in confluence with the resistance-turned support at S$3.50. A break above S$3.65, or the 50- day EMA, is likely to see further upside. Watch if the 14-day Stochastic indicator could move out of the oversold region after forming a bullish crossover.

Expected timeframe: 1 to 2 months

Our institutional research has a fundamental BUY with a target price of S$4.05.

Top pick for the day - Cotton

Rebound to end soon?

Cotton has been on a downtrend since March and we think that the downtrend is not over yet

The current move up from 61.34 appears to be forming higher lows and higher highs but the move is still holding within a channel, making it more likely a corrective rebound rather than the beginning of a new uptrend. 

Singapore - NODX boosted by pharma, others softer in August

Singapore’s August non-oil domestic exports (NODX) rose 3.4%m/m sa in US$ terms, leaving the headline better than expected for the second consecutive month at 8.0%oya (J.P. Morgan 5.6%oya; consensus 4.5%oya). Despite the firm headline number, strength in NODX was narrowly concentrated in the pharma and chemical sectors, both of which tend to be volatile. This brings the underlying trend to 13.8%3m/3m saar—the strongest print since early 2012—largely reflecting the recent gains in pharma and other non-electronics exports.

Scottish Referendum - To be or not to be

Summary points
On Sep 18, voters in Scotland will choose whether to remain in the UK or become an independent nation.

Recent polls have been showing a narrowing gap between the two camps, with the latest poll by ICM/Guardian suggesting that the “Yes” for independence camp had gained dominance of late (54% on Sept ‘14 vs 36% on Feb ’14).

The immediate uncertainty surrounding an independent Scotland could cause some financial turmoil in the interim, creating volatility for Singapore investors with Sterling and also UK property exposures.

Latest opinion polls by YouGov reveals that the Scots are the most pro-EU in the UK. Should Scotland break away from the rest of the UK and therefore not vote in the EU referendum due in 2017, the results of the referendum might swing in favour of those wanting UK to leave the EU.

A Brexit (still a low probability scenario for now) might present challenges to EU’s commitment to free trade. It is also unclear if Singapore would have to renegotiate trade terms with a UK that does not belong to the EU.

Sep14 FOMC: what’s next?

- FOMC’s stance: dovish or hawkish or both?

While the FOMC statement retained the “considerable time” phrase, suggesting that policymakers were in no immediate hurry to move up the timeline for the first rate hike, nevertheless there were also a few caveats to take note of. Essentially Yellen’s focus is still on the labor market, which she described as “yet to recover”, and complemented by the subdued inflationary environment (“inflation has been running below the committee’s 2 percent objective”). She also stressed no “mechanical interpretation” of the considerable time phrase and reiterated it is “data-dependent”, which is not new either.

Parkson Retail Asia - Selling Sri Lanka, maybe

Parkson Retail Asia has received an offer for its stake in Odel PLC, a Sri Lankan chain of departmental stores. Selling this business will cut FY14 EPS by about 2% but will add ~S$27m to PRA’s cash pile. Management has yet to decide on its course of action. We maintain our Hold rating and target price of S$0.83, still based on 18x FY15 P/E, as the sale of this unit is not significant

Catalysts for re-rating remain 
1) the turnaround of its Vietnam operations in Hanoi, 

2) a pick-up in Indonesia earnings post the store-opening drag, and 

3) stronger performance out of Malaysia.
**** Recommendation ****

Intra-Day Summary

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