Daily Morning Watch - 16 August 2012

SINGAPORE

SingTel (ST): Moody's has downgraded the Co's senior unsecured ratings to "Aa3" from "Aa2" with "Stable" outlook. The rating firm pointed out: "SingTel's leverage is now embedded at levels viewed as high for the rating level as the Co's focus moves away from absolute debt repayment to higher shareholder returns. We expect net debt/EBITDA to remain at or above 1.5x over the near to medium term, which is no longer consistent with the previous rating of Aa2, (...) At the same time, the higher dividend payout and special dividend paid in FY2012 has resulted in substantially lower RCF/Debt metric of 13% for FY2012 as compared to 38% for the previous year. Higher payouts - specifically the special dividend - coupled with high capex have resulted in SingTel moving to a negative free cash flow position."

Singapore Airlines (SIA) reported July passenger traffic edged down to 1.55M from 1.51M million a year earlier with the passenger load factor declining 1.1 percentage points to 80.5%. In July, its cargo load factor fell 2.0 percentage points to 63.0%.

US indices were mixed on Wednesday. On the US economic data front, MBA mortgage applications for the week ended August 10th fell 4.5%, the consumer price index (CPI) was flat for July (+0.2% expected), the Empire Manufacturing index for August drop to 5.85 (+7.00 expected), industrial production rose 0.6% in July (+0.5% expected) and the NAHB Housing Market Index for August increased to 37 points (35 expected). Stocks in the retailing and transportation sectors traded higher while shares in the energy and utilities sectors were under pressure. Looking at some US corporate releases, JDS Uniphase (JDSU +8.24% to $11.56) posted a 4Q LPS of $0.10 vs EPS of $0.04 a year earlier (adjusted EPS of $0.15 vs $0.23) on revenue of $439M, up 7.4%. Separately, Deere & Co (DE -6.28% to $75.1) reported for its 3Q ended July 31 net income of $788M or $1.98 per share compared with $712.3M or $1.69 per share for the same period last year. In other news, Staples (SPLS -14.6% to $11.49) said its 2Q sales were down 6% YoY to $5.5B with a diluted EPS down 28% to $0.18. After the US market close, Cisco Systems (CSCO) posted a 4Q ADJ EPS of $0.47 vs $0.46 expected ($0.40 a year ago) on revenue of $11.69B vs $11.60B expected ($11.19B a year ago).

In Europe, UK jobless claims dropped 5.9K in July (+6K expected) vs +1K in June (revised from +6.1K). ILO unemployment rate was 8% during the April-June period vs 8% during the March-May period. Regarding the stocks, Vodafone lost ground as the stock was downgraded to "neutral" from "buy" at Bank of America. This morning, the Nikkei225 index opened higher.

CHINA - HK

China 's state-owned enterprises recorded combined profits of 1.2T yuan in the January-July period, down 13.2% YoY, according to the Ministry of Finance. Tobacco, power and auto industries achieved substantial profit gains, while chemicals, nonferrous metals, transportation, petrochemical and construction materials industries saw sharp profit declines.

Lenovo Group (992) announced 1Q net income up 29.9% YoY to $141M on revenue of $8.0B, up 35.3%.

Tencent Holdings (700) posted 2Q net income up 32.0% YoY to 3.1B yuan and operating profit up 41.4% to 3.9B yuan on revenue of 10.5B yuan, up 56.2%. Revenues from internet value-added services (IVAS) grew 44.6% YoY to 7.8B yuan, those from mobile & telecommunications value-added services (MVAS) increased 17.0% to 929M yuan while those from online advertising surged 71.7% to 880M yuan.

Chinese Estates Holdings (127) reported 1H net income down 8.7% YoY to HK$4.2B on revenue of HK$864M, down 15.6%. 1H net investment income surged to HK$753M from HK$183M a year earlier and fair value gains on investment properties grew 6.1% to HK$2.8B. Hong Kong Economic Journal cited the Co as saying it plans to appeal against the Macau government's decision to declare land sales to the Co as invalid.

Tsingtao Brewery (168) posted 1H net income up 1.8% YoY to 1.0B yuan and operating profit up 3.0% to 1.3B yuan on revenue of 13.4B yuan, up 11.2%.

China Yurun Food Group (1068) said 1H net income plunged to HK$105M from HK$1.6B a year earlier on turnover of HK$12.5B, down 23.8%.

Dah Chong Hong Holdings (1828) reported 1H net income down 18.9% YoY to HK$650M on turnover of HK$23.6B, up 19.3%.

Daphne International Holdings (210) unveiled 1H net income up 9.6% YoY to HK$483M on turnover of HK$5.1B, up 28.9%.

Shandong Weigao Group Medical Polymer Co (1066) posted 1H net income up 18.6% YoY to 495M on turnover of 1.9B yuan, up 24.8%.

Ping An Bank (000001) posted 1H net income up 42.9% YoY to 6.8B yuan on revenue of 19.6B yuan, up 61.7%. Core capital adequacy ratio edged up 0.02 percentage point to 8.44% while non-performing loan ratio rose to 0.73% from 0.53%.

Citic Pacific Limited (267): 1H results expected.

Xi'an Aircraft International Corp (000768), Inner Mongolia Pingzhuang Energy (000780), Yunnan Copper Industry Co (000878), Fujian Sunner Development Co (002299), Palm Landscape Architecture Co (002431), Chongqing Brewery Co (600132), China Railway Erju (600528), Shandong Gold Mining (600547), China National Chemical Engineering (601117): 2Q results expected.

CITIC Guoan Information Industry (000839): ex-div CNY0.1 Xinjiang Goldwind Science & Technology (002202): ex-div CNY0.05