MARKET UPDATES :
- THE Singapore government’s budget for FY2015 – to be delivered in Parliament on Feb 23, Monday – will be no ordinary one.Even as a celebratory tone is struck, the social and economic challenges confronting Singapore will need facing up to, too.Expectations run high for an expansionary budget, this being the year that Singapore celebrates 50 years of independence. That anticipation stems also from Budget 2015 being viewed as a pre-election budget.
- HDB resale prices in December 2014 dropped to a 41-month low since August 2011, data from Singapore Real Estate Exchange (SRX) Property revealed. This represents a 6.1 per cent decline from December 2013.Month-on-month, resale prices in December 2014 fell 0.4 per cent.The price slump was driven by HDB four- and five-room flats, whose resale prices fell 0.7 per cent and 0.3 per cent respectively.
- Singapore is updating guidelines on an accounting practice mired in controversy for helping multinational companies minimize their tax bills, as the city-state moves more in line with a crackdown by Western governments on aggressive tax avoidance. International taxation has come under scrutiny since a quirk of “transfer pricing” was found to have helped lower the tax bills of a number of multinationals, including Starbucks Corp , Google Inc and Amazon.com Inc. Such issues prompted the Organisation for Economic Co-operation and Development to call on governments to revise tax treaties, tighten rules and share more information, in a project due for completion by the end of this year.
- OLAM International is changing its fiscal year-end from June 30 to December 31. This is to enable the company to comply with the group consolidation and reporting requirements of its majority shareholder.With this change, the company’s current fiscal year, which began on July 1, 2014, will end on December 31, 2015. After this, the company will follow a January-to- December fiscal year.To facilitate comparison with previous years, Olam said that it would provide historical pro-forma financial information for the financial years ended December 31, 2014, 2013, 2012 and 2011. This will be done before June 30, 2015.
- Singapore continues its transition from what is effectively an emerging market economy (growth driven by increases in labor, 25% of GDP within manufacturing) to a developed market focused on productivity growth. A structural transformation-driven end to the 13-year bull market in the local currency will make unhedged Singapore holdings less attractive for yield investors. This drives a weak view for domestic consumption, but is also driving the already improving export numbers. This divergence will continue, therefore we focus our investment risk on rate sensitives and external demand sectors.
Triyards Holdings - 1QFY15: Bags US$75m Contracts From US-Based Operators
Triyards bagged US$75m liftboat contracts from US-based operators in 1QFY15, bringing its orderbook to some US350m. Management expects to secure another US$150m worth of contracts from Ezion in the near term. We expect demand for liftboats, which are mainly used in the servicing and maintenance of fixed platforms in shallow waters, to remain relatively resilient despite the recent sharp drop in oil prices.
Maintain BUY. Target price: S$1.04.
RESULTS
• 1QFY15 net profit up 13% yoy to US$8.2m, in line with expectations. Triyards’ 1QFY15 net profit of US$8.2m (+13% yoy) is in line with expectations, aided by higher gross margin and other income. Revenue dropped 37% yoy to S$57m on the back of lower contributions from Lewek Constellation and three SEUs which were completed or at the final stages of completion during the quarter. We expect higher revenue contributions in subsequent quarters from its newly-acquired yard and recent order wins.
• Healthy gross margin of 22%. Gross margin improved 8ppt yoy on the back of higher margin from an offshore fabrication project and a different product mix. Other income increased to US$4.2m due to provisonal negative goodwill of US$3.9m for SM Group and increased sales of scrap. Admin expenses rose to US$6.7m (+81% yoy) due to the acquisition of SM Group.
#STOCK IMPACT
• Shallow water segment more resilient to sharp oil price volatilities. Triyards specialises in building liftboats which are mainly used in the servicing and maintenance of fixed platforms in shallow waters. Based on Infield systems report, the breakeven cost for shallow-medium water depth is US$20-40 per barrel compared to US$40-80 per barrel for deeper waters. Additionally, while lower oil prices are likely to negatively impact capex budgets for oil majors (NOCs and IOCs), opex budgets (including liftboats) are relatively more resilient. Thus, we expect demand for liftboats to remain relatively more stable.
• Bags US$75m (excluding owner furnished equipment) from two liftboat contracts from US-based operators. The maiden contract win from an experienced US-based operator acts as an endorsement to Triyards’ superior liftboat building capabilities in Southeast Asia and paves way for more of such contracts wins. With the latest contract awards, Triyards has won three contracts worth US$127m for FY15 and five contracts worth US$240m over the last six months.
• Healthy orderbook of US$350m; expect another US$150m worth of contracts from Ezion in the near term. The latest contract wins take Triyards’ orderbook to some US$350m, excluding the A$40m-50m orderbook for its newly-acquired Vung Tau yard. This will provide earnings visibility for the next two years. Management is currently in the advanced stages of securing US$150m liftboat contracts from Ezion which are tied to the recent issuance of 29.5m warrants. In addition, Triyards is in the various stages of discussion to secure about US$200m worth of contracts for liftboats, OSVs and chemical tankers.
The ICE U.S. Dollar Index rose for the seventh-consecutive session Friday, boosted by rising crude-oil prices, a strong performance by U.S. stocks and the expectation that the European Central Bank will soon expand its program of asset purchases.
The euro extended more than a week of declines Thursday, falling to another nine-year low, after the European Union Commission’s report on eurozone economic sentiment showed no change from a weak reading in November.
The shared currency EURUSD, +0.11% fell to $1.175, its lowest since late 2005, around 8 a.m. Eastern time. It was valued at $1.179 in recent trade, down from $1.183 late Wednesday.
The dollar traded at USDJPY, -0.25% was at ¥119.63, compared with ¥119.16 late Wednesday in New York.
After hitting an 18-month low of around $1.503 earlier in the session, the pound GBPUSD, +0.03% recovered against the dollar, but remained slightly lower for the session, after the Bank of England left its benchmark interest rate at 0.5% and left its bond-buying stimulus program unchanged. The pound traded at $1.51 in recent trade.
