Garuda delays direct Jakarta-London flight due to ageing airport

Aug 1 (Reuters) - Garuda Indonesia has delayed the launch of its first direct Jakarta-London service by six months due to the capital's ageing airport in another example of creaking infrastructure hitting business in Southeast Asia's largest economy.

State-run Garuda will now start the service in May 2014. The new route was part of Garuda's plans to expand further into the long-haul and premium market.

The airline said the surface of the runways and apron at Soekarno-Hatta airport were not strong enough to support a full capacity, heavy duty commercial aircraft, such as a Boeing B777-300ER, at the maximum take-off weight on the London route.

After years of "fatigue", the 28-year-old runway at the airport must be upgraded, Garuda Chief Executive Emirsyah Satar said in a statement.

The airport operator could not be reached for comment.

"This highlights the fact that we really need to seriously fix our infrastructure to be able to boost growth in aviation sector," said Harry Su, head of research at Jakarta-based PT Bahana Securities.

Privately held Lion Air, AirAsia Bhd and PT Mandala Airlines, part-owned by Tiger Airways Holdings Ltd , are expanding capacity in one of the world's fastest growing but most competitive aviation markets, while regional carriers are also expanding international flights.

Jakarta's main airport was ranked as the world's ninth busiest based on passenger traffic of 57.8 million in 2012, according to preliminary results from the Airports Council International.

Three Shares That Lost to the Market

The Straits Times Index (SGX: ^STI) had slipped by 0.7% today to 3,222. That’s not a particular good result for the overall share market, but some companies had it even worse. Let’s take a look at three in particular.

First up, we have Golden Agri Resources (SGX: E5H), which dropped 3.7% today to S$0.525. Earlier in the morning, the vertically-integrated palm-oil producer announced that its Indonesian subsidiary, PT Sinar Mas Agro Resources and Technology Tbk had released its half-yearly results.

Golden Agri owns 97.2% of PT Sinar (as of 31 Dec 2012), which is also a palm oil producer and is listed on the Indonesian Stock Exchange. PT Sinar’s half-yearly results saw sales for the six month period ended 30 June 2013 decline by 18% year-on-year to Rp11,183b (approximately S$1.34b). Meanwhile, profits for the same period dropped by 28% to Rp795.4b (approximately S$95.5m).

As PT Sinar’s main business interests are similar to Golden Agri, investors seemed to have been spooked by the implications of the former’s poor showing in regard to the latter’s own results.

In any case, investors will get a better picture of Golden Agri’s results soon. The company’s set to announce its second quarter earnings on 2 August after the market closes.

Soilbuild Construction Group (SGX: S7P) is up next as its shares slipped by 8.3% to S$0.275. The company, which only just made its debut on the Mainboard stock exchange on 27 May this year, provides turnkey construction project services, in addition to acting as consultants for project management work.

Yesterday was a busy time for the company. First, the company sent out a press release to clarify certain business developments described in The Business Times in an article titled “Soilbuild inks condo venture in Yangon”.

The article stated that “while the construction contract, which is estimated to be about US$50m, has not yet been awarded, Ho Toon Bah, executive director at [Soilbuild] said there is a “good expectation” that [the company] will clinch it”.

SCG’s board wished to clarify, through the press release, that “the company is in the process of submitting a proposal to Soilbuild Group Holdings with respect to the construction contract and [as of 30 July 2013], the construction contract has not been awarded to the group.”

Next, SCG had filed a preliminary prospectus for a real estate investment trust with the Monetary Authority of Singapore dated 30 July 2013. The REIT’s named as Soilbuild Business Space REIT and according to the prospectus, will be priced at S$0.77 to S$0.80 per unit. A total of seven properties – a mixture of business parks and industrial properties – will be bought by the REIT for a combined price of S$921m.

Rounding up the trio of market-losers, we have Cogent Holdings (KJ9). The logistics, ware-housing, and transportation company’s shares had dropped by 4.6% to S$0.21. Yesterday evening, Cogent announced a proposal to sell a piece of property for S$10m toCrane World Asia Pte Ltd.

The property’s located at No.1 Chia Ping Road, Singapore and occupies a land area of approximately 14,900 square metres. According to Cogent, the sale was made to “consolidate and rationalise [the company’s] logistics operations… The [sale] will also enable the [company] to unlock shareholders’ value, improve its cash flows and gearing, thereby resulting in a more efficient use of capital.”

The market apparently did not seem to agree with Cogent’s rationale of the sale, judging from the company’s share price movement.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned. 

Developed Economies Add Strength as China Revives Policy Hopes

SUMMARY

• US equities flat, attention switches from QE taper to data and earnings
• Emerging market equities rebound on China stimulus hopes
• China outlines policy framework and minimum acceptable GDP growth rates
• Euro area recovery gaining momentum with stronger July PMI Developed economies continue to strengthen. The US saw better-than- expected manufacturing purchasing managers’ index (PMI) and durable goods orders readings. Although this was offset by weak Richmond Fed manufacturing and existing home sales numbers, the broad trend remains up. Meanwhile, Euro area data suggests the economy is climbing out of recession.

Chinese PMI data however continued to disappoint, highlighting the divergence between the economic growth trajectories of emerging and developed markets. Emerging market equities gained some courage from Chinese fiscal policy initiatives and the Government’s commitment to minimum growth targets. But this is unlikely to be sufficient to reverse the underperformance of Chinese equities over coming weeks and possibly months, as large scale monetary or fiscal expansion remains unlikely while the government pursues long-term and possibly painful structural reforms. These developments continue to support our near-term overweight on US and Japanese equities and our longer-term overweight for Asia ex-Japan equities.

READ MORE

Why Facebook Is Still a Risky Stock, Numbers Be Damned

Right about now it would be tempting for Facebook investors to take a victory lap. After a botched IPO and a year of queasy financials, the company finally posted a monster quarter, with revenue shooting up 53 percent to $1.8 billion behind big gains in mobile advertising. Facebook shares surged nearly 30 percent Thursday, and Facebook seemed poised to enter a new, much more optimistic era for its business.

But before the celebrations get too out of hand, let’s take a look at how sustainable that revenue growth really is. Certainly a big chunk of Facebook’s income is healthy and repeatable, coming from long-term clients who have made serious commitments to the platform. But a lot of that business — Facebook executives won’t say exactly how much — comes from advertisements promoting mobile apps. Many of those

ads are short-term deals, purchased with venture capital as part of a land-grab to ramp up user bases. In other words, exactly the kind of ads that would disappear should the tech investment bubble burst.

Before investors dive into Facebook, they’ll want to figure out exactly how reliant Facebook is on such ads, especially if they want to calibrate their exposure to potentially overheated startup investment flows. Carlos Kirjner, a sell-side stock analyst and early, prescient Facebook pessimist, says a thinning of the ranks among mobile app makers could hurt Facebook in a manner similar to the decline of Zynga, a videogame maker that once supplied 12 percent of Facebook’s revenue and which is now struggling just to keep its head above water. READ MORE

SP: Keppel REIT (KREIT SP): Private Placement to raise S$120m.

Keppel REIT (KREIT SP)   HOLD
Price/Tgt: S$1.305/S$1.46        Mkt Cap: S$3,500m/ US$2,759m        Daily Vol:  US$15.4m        1-Yr Hi/Lo: S$1.61/S$1.10              Current/Forward Dividend Yield: 6.0%/6.1%

SP: Keppel REIT (KREIT SP): Private Placement to raise S$120m. 
Analyst: Vikrant Pandey/Terence Khi       Tel: (65) 6590 6623/6590 6614 

·        Private placement of 95m units.  Keppel REIT (KREIT) has announced a private placement of 95m new units at an issue price of S$1.26 per unit to raise gross proceeds of S$119.7m.  Net proceeds are approximately S$118.3m after fees.  The issue manager is DBS Bank. 
·        Placement price at 2.6% discount to adjusted VWAP. The placement price of S$1.26 per unit is at a 2.58% discount to the adjusted Volume Weighted Average Price (VWAP) of S$1.2934 per unit for trades done on 25 July (less the proposed advanced distribution) and at a 3.4% discount to the last traded price of S$1.305 per unit.  The issue price also represents a 0.8% discount to the adjusted NAV per unit of S$1.27 as at 30 Jun 2013. 
·        Proceeds used to fund acquisition of 8 Exhibition Street. The net proceeds of S$118m will be used to fund the S$192m acquisition of 8 Exhibition Street, Melbourne, which was announced on 26 June.  Based on the acquisition price, the equity/debt funding ratio of 61:39 is in-line with our earlier estimates of a 60:40 equity/debt funding ratio for the property which we have already factored in. 
·        DPU accretive despite minimal 3.5% dilution. The 95m new units represents a minimal 3.55% increase in the total number of units from the 2.676b units in issue.    Given that the new units will be used to fund the acquisition, the acquisition and equity fund raising remains DPU accretive to the portfolio.  We had factored in a 0-2% increase in 2013-15F DPU in our previous note. 
·        Advance distribution of S0.69-0.75c. KREIT has also announced an estimated advanced distribution of S0.69-0.75c for the period 1 July to the date prior to which the new units are issued (estimated 6 August 2013).  Details will be announced at a later date when the management accounts for the period has been finalised. 
·        Near-term equity overhang removed.  The private placement removes the current near-term equity fund raising overhang for the acquisition which we had highlighted in our earlier note.  We currently have a HOLD on KREIT with a target of S$1.46 based on DDM (required rate of return:7.1%, terminal growth: 2.2%).  Entry price is at S$1.27. 


This transmission has been issued by a member of the UOB Kay Hian Group for the information of the addressee only and should not be reproduced and/or distributed to any other person. Each page attached hereto must be read in conjunction with any disclaimer which forms part of it. Unless otherwise stated, this transmission is neither an offer nor the solicitation of an offer to sell or purchase any investment. Its comments are based on information obtained from sources believed to be reliable but UOB Kay Hian Group makes no representations and accepts no responsibility or liability as to its completeness or accuracy.

Learn how to trade US market

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No other international financial market comes close to the size, accessibility, transparency and liquidity of U.S. stock markets. Liquidity is particularly important for investors as it will enhanced our risk management capabilities.

With almost 5,000 companies to select from in US equities, one can invest in major companies and well-known brands from all over the world.
Given the diversity of industries and financial instruments in the US market, there are significant investment opportunities in the world’s largest stock market.

Learn more about the dynamics of the US equity market and identify a portfolio of US shares for your investment portfolio.

Date: 15 Aug 2013 (Thur)
Time: 7pm to 10.30pm
Venue: 10 Anson Road #26-13 London Room International Plaza Singapore 679903

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Three Shares That Beat the Market Yesterday

The US stock market closed at a record high as the S&P 500 Index inched up 0.2% to 1,696 points. The Straits Times Index (SGX: ^STI), which is still some way off its peak of 3,876 points, closed 0.6% higher at 3,254 points.

Golden Agri Resources (SGX: E5H) rose 1.8% to $0.56. The company, which owns 464,300 hectares of oil palm plantations in Indonesia, will release second-quarter results on 2 August. In the first quarter, Golden Agri’s profits fell by 30% to US$112.8m and investors will be hoping for something better next month.

Golden Agri has been in the spotlight due to its vast palm oil plantations in Indonesia. However, the company has denied any links to the forest fires. It released a press statement stating that it is “absolutely against burning”.

Shares in United Overseas Bank (SGX: U11) climbed 2.3% to $21.77. Last Monday, UOB announced that it plans to issue S$850m worth of non-convertible perpetual securities. The securities will carry a distribution rate of 4.9% per year (amounting to an annual payment of around S$41.7m to holders of the perpetual securities) and can be redeemed by the bank in 2018.

The distribution rate for the securities is also subject to a reset every five years after 23 July 2018 if they are not redeemed by the bank. The distribution rate after the reset would be equal to 3.195% plus the five-year Singapore dollar SOR (Swap Offer Rate).

UOB is pencilled in for second-quarter results on Thursday, 1 August 2013.

Finally, Q&M Dental Group (SGX: QC7) jumped 3.3% to $0.31. The company, which runs dental clinics and centres, has been busy with acquisitions. Two weeks ago, Q&M announced that it had acquired 70% of AR Dental Supplies, a distributor of dental equipment and supplies in Malaysia, for around S$3.4m. AR Dental has been providing support services for Q&M’s Malaysian operations.

With the acquisition, Q&M thinks it will be able to “effectively enhance its presence in the dental supplies distribution market in South East Asia when ARD’s operations are complemented by the distribution companies owned by [the former] in Singapore.”

Q&M also plans to use ADR’s contacts and network to recruit more dentists and dental practices to grow its business.

Keppel Land and Tat Hong

Keppel Land: To dispose stake in Jakarta Garden City for S$290.5m. 

Keppel Land plans to transfer its 51% interest in integrated township Jakarta Garden City to its partner PT Modernland Realty for S$290.5m. Of the 1,287 homes and shophouses launched in the project, 93% has been sold. Keppel expects a net proceed of S$275m from the sale, for a profit after tax of S$186m. (Source: The Business Times)

Tat Hong: Restructures holdings in China. 

Tat Hong has agreed to allot shares in its wholly-owned Tat Hong Equipment (China) unit to 23.9% associate Yongmao in exchange for Yongmao's stake in two China subsidiaries. The value of the Tat Hong Equipment shares is Rmb78.7m (S$16.3m), which is equal to Yongmao's original cost of investment in the two China subsidiaries. The proposed restructuring agreement will allow the company to rationalise its shareholdings in its various subsidiaries in China and achieve a more efficient shareholding structure. (Source: The Business Times)

Dollar firms broadly, Aussie slips on China growth worries

(Reuters) - The dollar edged higher versus a basket of currencies and the Australian dollar slipped on Wednesday, as fresh signs of a slowdown in China's manufacturing sector dampened appetites for risk.

The Australian dollar had set a one-month high earlier in the session as key measures of underlying inflation in Australia were taken as reducing chances for an interest rate cut next month. Still, the data was mixed and views remained split on the likelihood of a rate trim.

The Aussie, however, declined after the flash HSBC/Markit Purchasing Managers' Index for China came in at an 11-month low in July, while the U.S. dollar pushed broadly higher.

"Risk appetite is likely to be muted and the dollar should benefit as a result," said Roy Teo, FX strategist for ABN AMRO Bank, referring to the weakness in the gauge of Chinese manufacturing activity.

 

The dollar index, which measures the greenback's value against a basket of currencies, rose 0.3 percent to 82.203 .DXY, pulling away from a one-month low of 81.926 set on Tuesday.

The Australian dollar slipped 0.4 percent to $0.9254, down from an intraday high of $0.9320, the Australian dollar's strongest level since late June.

The Aussie dollar is sensitive to economic data out of China, which is Australia's biggest export market.

The U.S. dollar took a breather from a recent bout of weakness. The euro fell 0.2 percent to $1.3193, down from a one-month high of $1.3239 that was touched on Tuesday.

The dollar rose 0.5 percent against the yen to 99.94 yen.

Still, some market players were cautious on the near-term outlook for the greenback, which has declined after Federal Reserve Chairman Ben Bernanke recently stressed the Fed will keep rates low for a long time to come, even if it started to scale back its asset purchases.

Recent price action in the euro versus the dollar, for example, suggests that some market players are still long the dollar and such positioning could temper any gains for the greenback, said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.

Data from the U.S. Commodity Futures Trading Commission shows that in the week ended July 16, currency speculators boosted their bets in favor of the U.S. dollar to the highest in six weeks.

(Additional reporting by Ian Chua in Sydney; Editing by Richard Borsuk)