Daily Morning Watch - 3 Aug 2012

SINGAPORE

DBS Group (DBS) posted 2Q net income up 10.2% YoY to S$810M, adding: "Net interest income of S$1.32B was 10% higher than a year ago and little changed from the previous quarter. Loans rose 22% from a year ago (...) Net interest margin of 1.72% were five basis points lower than the previous quarter. (...) Fee income fell 2% from a year ago and 7% from the previous quarter to S$379M. Contributions from investment banking and stockbroking were lower than both comparative periods (...) The non-performing loan rate remained stable at 1.3% (...) Total allowances amounted to $104M and included $64M of general allowances. Allowance coverage was at 129% of non-performing assets and at 171% if collateral was considered. Return on equity was 10.9%, above the 10.6% a year ago and below the 12.8% in the previous quarter. (...) both Tier 1 and core Tier 1 at 12.8% (both at 13.5% in 2Q11)." The Group declared an 1H interim dividend of S$0.28, the same as in 1H11. Separately the Group announced the appointment of Derrick Goh as the new Head of POSB to replace Koh Kar Siong, who will succeed Pearlyn Phau as the Regional Head of DBS Treasures as Phau will become the Head of Consumer Banking in Hong Kong .

Sembcorp Marine (SMM) said 2Q net income fell 4.6% YoY to S$143M on turnover of S$1.2B, up 46.5%. The Co received S$3.1B in new orders this year, while the order book worth totaled S$6.6B at the end of June. The Co said: "Amid the economic uncertainty and volatile global market conditions, the fundamentals for offshore oil and gas activities remain intact driven by demand for technically advanced, versatile and efficient rigs that are capable of shallow and deepwater drilling.".

Sembcorp Industries (SCI): 2Q results expected.

US indices closed lower on Thursday pressured by automobiles & components and diversified financials sectors. US Dollar rose against most of its major counterparts on Thursday. On the US economic data front, initial jobless claims climbed by 8,000 to 365,000 (370K expected) in the week ended July 28th. Factory orders dropped 0.5% MoM (+0.5% expected) in June. Looking at some major US company news, General Motors (GM -2.64% to $19.14) announced that 2Q net income was down 38% to $1.85B. Adjusted EPS was $0.90 a share vs $1.54 a year earlier. Separately, Apache Corp (APA -4.93% to $82.58) unveiled 2Q net income down 72% to $356M, or $0.86 a share. Adjusted EPS was $2.07 a share, below estimates. After the US market close, Linkedin (LNKD) posted a 2Q ADJ EPS of $0.16 vs $0.16 expected on revenue of $228.2M vs $216.5M expected. In other news, Kraft Foods (KFT) reported a 2Q OPER EPS of $0.68 vs $0.66 expected on revenue of $13.29B vs $13.96B expected.

In Europe , ECB kept its benchmark interest rate at 0.75%. Mario Draghi said that ECB is ready to buy bonds with governments but admitted that Bundesbank has reservations about a bond plan. BoE kept its benchmark interest rate at 0.5%. The Euro was under pressure against its major counterparts. Regarding the stocks, Veolia Environnement plunged on disappointing 1H results. This morning, the Nikkei225 index opened lower with a bearish gap.

CHINA - HK

China Securities Regulatory Commission said it is studying the possibility of lowering stamp duties (HKEJ).

Hong Kong 's retail sales grew 11.0% YoY to HK$34.8B in value and were up 8.5% in volume in June according to the government.

Cheung Kong Holdings (1) posted 1H net income down 53.5% YoY to HK$15.5B (EPS of HK$6.67 vs HK$14.36 a year earlier) on turnover of HK$17.7B, down 32.1%. Profit before investment property revaluation and profit share of Hutchison Whampoa Group was down 8.8% to HK$7.6B. The Co declared an interim dividend of HK$0.53 per share, the same as in 1H11. The Co pointed out: "The Group's share of results of the Hutchison Whampoa Group decreased during the 1H2012. This comparative decline against the same period last year was primarily attributable to the significant one-off gain included in the 2011 interim results arising from the disposal of part of the Hutchison Whampoa Group's interests in port businesses. Excluding this significant one-off gain in 2011, the 2012 interim results would show an increase of 5% as compared to the 2011 interim results. (...) Turnover of property sales for the first half year, including share of property sales of jointly controlled entities, was HK$15,521M (2011: HK$24,118M), a decrease of HK$8,597M when compared with the same period last year, and comprised mainly the sale of residential units of two property projects completed last year."

Hutchison Whampoa (13) reported 1H net income down 78.0% YoY to HK$10.2B (EPS of HK$2.39 vs HK$10.86 a year earlier) on turnover of HK$195.0B, up 6.3%. Profit before property revaluation and gains on disposal of investments grew 12.7% to HK$9.8B. The Co declared an interim dividend of HK$0.55 per share, the same as in 1H11. The Co's chairman said: "Despite the difficult economic situation in Europe and continued uncertainty in the global financial markets in the second half, barring unforeseen material adverse circumstances, I expect that the Group's business performance will continue to improve."

Chalco (2600) announced it has agreed with Ivanhoe Mines Ltd to extend the time for Chalco to make a C$8.48-per-share proportional takeover bid for up to 60%, but not less than 56%, of SouthGobi Resources Ltd by 30 days to September 4.

China Railway Construction (1186) made a clarification saying it is not involved in buying a stake in Italian football team Internazionale Milano, adding: "China Railway 15th Bureau Group Co Ltd, a subsidiary of the Co, is currently engaged in negotiations with the relevant parties including Internazionale Milano on EPC matters regarding a new soccer stadium of Internazionale Milano to be built in San Donato Site, Milan, Italy."

Orient Overseas (International) Ltd (316) announced it has placed $347M worth of orders with Shanghai Zhenhua Heavy Industries Co for the purchase of terminal equipment including ship-to-shore cranes.

Samsonite International (1910) announced the acquisition of Hartmann, "a US -based manufacturer and distributor of luggage, business cases, tote bags and leather accessories under the Hartmann brand", for $35M in cash.

Shanxi Xishan Coal & Electricity Power (000983), China Dongfanghong Spacesat (600118), Zhengzhou Coal Mining Machinery Group Co (601717): 2Q results expected.

Changsha Zoomlion Heavy Industry Science & Technology Development (000157): ex-div CNY0.25