Genting's higher Q1 profit lifts STI

Traders have become accustomed to the banks driving the Straits Times Index (STI).

So it probably came as a surprise that yesterday, the role of prime index mover was assumed by Genting Singapore, its $0.07 or 6.5 per cent jump to $1.15 on volume of 71.7 million accounting for slightly more than half of the STI's gain of 8.92 points at 3,264.21.

However, unfamiliar though the sight of Genting driving the index might be, what was familiar was that the broad market did not mirror the STI's strength - excluding warrants, there were only 202 rises versus 271 falls throughout.

Turnover, in the meantime, was a decent 2.8 billion units worth $1.4 billion.

Providing the external backdrop to the day's trading were strong rises in Hong Kong and the Dow futures, the former gaining for the sixth consecutive session and reaching a new 21-month high.

For Genting though, the reason was obvious - the casino operator reported that first-quarter net profit at $181.1 million was 16.7 times higher than in the first quarter of last year.

Most houses reiterated previous "buy" calls on Genting, among them Nomura, OCBC Investment Research and Maybank Kim Eng (MKE).

Nomura's target price was the highest at $1.38.

OCBC Investment Research said that looking ahead, it expects Genting to continue to benefit from higher operating margins as well as steady revenues from both its gaming and non-gaming segments and maintained its $1.17 fair value.

MKE lifted its core net profit estimates by 4 per cent to 14 per cent and maintained its $1.25 target price based on 12 times FY2017 estimated EV/Ebitda (enterprise value/earnings before interest, tax, depreciation and amortisation).

In the second line, shares of Jadason Enterprises dropped $0.014 or 16 per cent on volume of 55.8 million, possibly a victim of "buy in anticipation, sell on news", as the stock had tripled in the past two months prior to the company reporting its latest results on Friday.

In a May 15 report, RHB - which had on May 8 called a "buy" on Jadason - said that going forward, management has indicated its profitable manufacturing and support services segment is likely to do well in H2 2017, as its long-term customers have indicated their intention to increase production capacities.

"We expect this to bump its segment revenue by 30 per cent and expect it to enjoy bumper profits in FY17F-18F.

"Maintain buy with a discounted cashflow-based target price of $0.15," said RHB.

Nomura in its Asean Strategy: Positioning For A Reversal Of ROE Downtrend report said that while several persistent factors (including weak growth, weak currencies, weak commodity prices and lack of investment) have driven top lines and margins lower, recently there has been some stabilisation in ROEs (returns on equity) in Indonesia, Malaysia and the Philippines, and some recovery in Thailand and Singapore.

"Our view that many of these macro drags on Asean's performance are fading is thus further reinforced by this tentative ROE decompression," said Nomura.

In its latest Asian Insights, DBS chief investment office said developed markets have started edging lower in the beginning of a correction from what it described last week as "stall speed".

"That is, the flat, sideways moves of recent weeks cannot sustain. Markets will be challenged for an encore performance, after having priced in a stronger global economy and aggressive corporate earnings growth," said DBS.

"The weight of generous valuations will drag on prices, demanding a correction... It is about the price of stocks and how much of the good news is already in the price. In short, the market needs new drivers."

This article appears in The Business Times today. For full listings of SGX prices, go to btd.sg/BTmkts