THE Jardine group continued to play a pivotal role in the Straits Times Index's movements yesterday when the index finished a nett 4.08 lower at 3,067.74. Volume remained as thin as it has been for 4-5 months now at 1.7 billion worth $1.07 billion, excluding foreign currency issues, the unit average of 62 cents highlighting that low-priced speculatives were still very much where the market's preferences lay.
Over in Hong Kong the Hang Seng's movements dictated the STI's fate, at least until European markets opened mixed in the late afternoon.
The broad market recorded 150 rises versus 233 falls excluding warrants. IPC Corp was the most active stock for the second day running with a 1.3 cent rise to 15.3 cents on volume of 224.4 million traded.
As far as the index components were concerned, Jardine stocks - which have been instrumental in the index's rise over the past fortnight - were again in the spotlight. Rises in Jardine Strategic, Jardine Matheson and Cycle & Carriage added about four points to the STI.
Among the other index heavyweights, Keppel Corp fell seven cents to $11.30 with 2.1 million done. The company yesterday announced that it has firmed up an order from Sete Brazil for five rigs worth US$4.1 billion following a letter of intent signed in April. In its "buy" on Keppel, OSK DMG said it estimates that the contracts lifted Keppel's year-to-date order win to $7.1 billion and net order book to $12.8 billion.
"The order book is near its record level of $13 billion achieved in 2008. We keep our FY12-14F earnings estimates unchanged as we have factored in the five semisub orders," said the broker. "The stock is now trading at 10.7x FY12F P/E and 13.0x FY13F P/E. Our target price of $13.80 implies 13.0x FY12F P/E and 15.8x FY13F P/E."
It added that it remains positive on Keppel because of its high order book which allows Keppel to select jobs with higher margins and it thinks the company has the capacity to win $3-4 billion of new jobs in the near-term before order momentum slows down.
Elsewhere in the offshore marine sector, SembCorp Marine ended one cent up at $4.91 with 2.5 million traded. In a report last week, Macquarie Warrants said Macquarie Equities Research (MER) believes the market has not correctly accounted for the way SembCorp Marine books its rig revenues.
"MER feels that 2013 will be a massive year for SembMarine's revenues with growth of 40 per cent YoY thus driving 33 per cent earnings growth," said Macquarie Warrants.
It added that not only has SembMarine positioned itself for long-term growth with new yards in Brazil and Singapore, its strong balance sheet and net cash of $1.4 billion means it is able to counter any order cancellations. MER's target price for SembMarine is $6.08.
In its Aug 6 Asean Equity Strategy, Morgan Stanley reported that 56 out of 136 MSCI Southeast Asian companies have reported their earnings so far. It said: "32 companies beat expectations, whereas 23 have missed consensus expectations."
"Overall, SEA companies that have reported so far have beaten expectations by 330 bps (basis points). Excluding three volatile sectors, Indonesia and Thailand Energy & Materials and Singapore Real Estate, the beat is even better at 610 bps. Banks earnings have stood out, beating consensus by 1,890 bps, 420 bps and 210 bps in Indonesia, Thailand and Singapore, respectively."