25 Oct 2013 ~ Good Morning Singapore!
Central Execution Team - The Excellence of Execution
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Global Flash: While You Were Sleeping
Source: Marketwatch
Quote for the day : Action is the real measure of intelligence.
- NAPOLEON HILL
Singapore: The Day AheadSINGAPORE DAYBOOK : MAS, SGX reviewing penny stock saga. 'Extensive and thorough review' may lead to public consultation on broader issues raised [SINGAPORE] Singapore's financial market regulators, the Monetary Authority of Singapore (MAS) and the Singapore Exchange (SGX), are conducting an "extensive review" of the activities around the now-infamous trio of stocks that crashed dramatically earlier this month after spectacular spikes over the past year.
The MAS has also been tracking the exposure of brokers to the three stocks - Blumont Group, Asiasons Capital and LionGold Corp - though it said their operations and financials remain sound. There had been talk that some brokers and remisiers may be saddled with bad debts after billions were wiped out from the market value of the three stocks.
MAS' remarks, made in response to queries from the media, were the first confirmation that authorities are investigating the circumstances surrounding the incredible rise of the three over the past year, way beyond their fundamentals, before their spectacular crash.
When the dust has settled, more than $8 billion had been wiped out from their collective market value. The fiasco had led to criticisms of whether SGX could have acted earlier to protect the interests of retail investors caught up in the bubble, and calls for a probe by authorities.
MAS said last night: "MAS and SGX are conducting an extensive review of the activities around these stocks.
"We cannot divulge more information at this point so as not to undermine potential investigations. This episode has also surfaced broader issues regarding the market structure and practices which MAS and SGX intend to review thoroughly." A public consultation could take place if changes are required after the review is completed, MAS said.
Investor Mano Sabnani said: "It's about time. If nothing is done, the credibility of the market would have been affected."
"It is necessary to do the investigation but at the same time, we can't pre-judge what caused the bubble or whether there had been any wrongdoing."
Asked about what areas could be reviewed, UOB Kay Hian's Jimmy Ho, president of the Society of Remisiers, told The Business Times that one issue is how to detect manipulation early enough. "To do so requires resources. Given the current structure, I believe SGX might not be able to do so in a proactive manner," Mr Ho said.
On the micro level, he said that the procedures followed - when SGX "designated" the stocks for nine days before lifting them - could also be questioned.
"When you come in with the designation, people expect an investigation. But before you can give them an answer, you open it up and allow opportunists to make money," he said, referring to how people carted cash to brokers to buy the stocks during the designated period, and how the stocks almost doubled in price when the restrictions were lifted.
But no matter how the review pans out, the "buyer beware rule" should still apply, said Mr Sabnani. "There's no way in which SGX and MAS can protect greedy, naive investors who want to plonk their money into... companies at high prices, but at the same time, there are laws to prevent manipulation and cornering of stocks that regulators will be looking into for violations."
The crash on Oct 4 led to SGX labelling Blumont, Asiasons and LionGold designated stocks, meaning a ban on short-selling and contra positions. This meant people had to bring cash to their brokers to settle their trades. When trading resumed on Oct 7, the three stocks fell further.
The restrictions were lifted on Monday, and prices almost doubled. Nevertheless, as of yesterday, Blumont and Asiasons were trading at 10 per cent of pre-crash levels, and LionGold at about 20 per cent.
The other area MAS said it was monitoring was the exposure of broking firms to the three stocks. It said it had been collecting reports on losses and major counterparty exposure arising from the brokers' exposures to the three counters.
"The operations and financial positions of the broking firms remain sound. We will continue to monitor the situation closely," it said.
Major brokerages DBS Vickers Securities, OCBC Securities and Maybank Kim Eng had said they suffered insignificant losses because risk controls were put in place. UOB Kay Hian, the largest retail brokerage here, had also put their own curbs on various penny stocks.
US online discount brokerage Interactive Brokers Group, however, said it has accounts in the deficit of US$68 million. This was revealed by Thomas Peterffy, the firm's chairman and CEO, in the firm's third-quarter earnings call on Oct 15. "The accounts were margined and we were able to liquidate only a small part of the position," he said.
Without naming the stocks, Mr Peterffy said there were four of them that lost over 90 per cent of their value in a short timeframe in early October. The customers, however, were about seven individuals who were "well-known industrialists" with positions in other companies.
"We believe that the customers have substantial assets independent of the companies involved and we are currently organising our legal team to collect on these debts. We are currently also in the process of modifying our margin lending methodology to limit the chances of similar events happening in the future," he said.
(Source: The Business Times)
MARKET SCOOP
Triyards Q4 net profit down 32% at US$10.3m
Digiland scales down share placement
Stamford Tyres appoints UAE dealer
Del Monte Pacific net profit down 13.4%
Aztech back in the black for Q3
SIA, SingTel win India approval for investment plans
OCBC weighing bid for Wing Hang Bank: source
(Source: The Business Times)
DBS VICKERS Securities says ...
SHENG SIONG GROUP | BUY | TP: S$0.80
3Q13 results were in line with our expectations
Sales grew 5% y-o-y to S$178m while earnings grew 8% to S$12m
Growth was driven by contribution from new stores and better margins, despite weak SSSG of -3.5% due to a decline in sales from matured stores in older housing estates, competitors' promotions and renovation works at Bedok Central and The Verge stores
Gross and operating margins hit a record high at 23.8% and 7%, respectively
This was a result of lower input costs from centralised bulk purchasing and distribution, as well as better sales mix of fresh vs dried groceries
We believe the coming quarters will be flat as store openings are likely to moderate
We see revenue growth supported by performance from the new stores and the newly refurbished stores
We expect store openings to be slow at <5 p.a. going forward, as competition for retail space has become challenging
Management's expectation to open 3 new stores a year is reasonable in our view
SSG could now be looking to buy new retail space as opposed to renting and will focus on locations where it is under represented
SSG has 33 stores currently and targets to reach 50 stores eventually
We understand that the launch of the pilot test on the e-commerce front has been delayed due to internal human resource constraints
We have not factored in the potential from e-commerce in our forecast
Share price has declined 13% since end-April and the shares are now attractively priced at 19.6x FY14F PE, 4.6% dividend yield with ROE of 27.9%
Maintain BUY and S$0.80 TP based on 25x FY14F earnings
CREDIT SUISSE Securities says ...
SINGAPORE AIRLINES | OUTPERFORM | TP: S$12.50
Singapore Airlines (SQ) will report its 2Q FY14 results after market close on 12 November, with an analyst briefing the next morning
we expect pre-ex NPAT of S$185 mn, 76% ahead of 2Q FY13 and ahead of consensus, currently listed as S$113 mn by Bloomberg
Most inputs have been reasonably stable YoY with currency slightly weaker against the USD, offsetting some of the benefits of a 4% drop in jet fuel
Parent company loads have been marginally better, although freight has continued to slump
While we expect the recovery in front-end traffic to remain the highlight of the results, a weak AUD and promotional pricing in that market as load factors decline are expected to have limited the extent to which yields expand
With passenger traffic still generally keeping its shape and both the EU and US markets firming, we remain optimistic around the balance of the year
We have made no change to our estimates (pending the results) and neither our S$12.50 target price nor our OUTPERFORM rating has been altered
OCBC Securities says...
YOMA STRATEGIC HOLDINGS | HOLD | TP: S$0.84
Yoma reported that it will operate Volkswagen's first service center in Yangon, which is expected to begin operations in Oct 2013
Yoma's 70% owned subsidiary, German Car Industries Company will enter into a service partner agreement with Volkswagen Aktiengesellschaft ("VW") to provide maintenance and repair services
We understand that the automotive market in Myanmar is currently dominated by
Japanese vehicles and that VW has no manufacturing facilities or car show room in Myanmar
Therefore, this agreement is expected to have limited financial impact over the near term
That said, we see this deal further strengthening the growth potential of the group's
automotive division which, together with a similar service agreement with Mitsubishi earlier, is one that is steadily growing
To recap, Yoma has a similar agreement with Mitsubishi to operate its automotive after-sales service center in Yangon
In addition, the group also recently announced an MOU for Mitsubishi Corp. and
Mitsubishi Estate to invest in the Landmark project (excluding the Peninsula Yangon), and that it would enter into a strategic alliance with Mitsubishi Corp. to jointly explore business opportunities in Myanmar
We see these as major positives which points to management's continued deal-making ability and ambitions to grow as a major conglomerate
In our view, the alliance with the blue-chip Mitsubishi also further cements Yoma's reputation as a solid name (note that Mitsubishi Estate and CapitaLand are partners in
Singapore) and would likely widen its access to capital and business opportunities in Myanmar
The group will report 2QFY14 results in early Nov and we anticipate a set of stronger numbers QoQ on the back of firmer contributions from sales in Zone B of Star City
Maintain HOLD
Our fair value estimate dips slightly to S$0.84, from S$0.87 earlier, as we update our
valuation model to reflect higher risk-free and discount rates |
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