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Singapore stock market and companies daily report (Dow Jones Industrial, Jaya Holdings , Rotary Engineering, Singapore Mercantile Exchange) (August 20, 2010)

Contributed by Shares Investment

By Shares Investment

US Stocks Down On Disappointing Economic Reports

The Dow Jones Industrial Average ended down 1.4% to 10,271.21 after falling sharply most of the day, accelerated by a weak report on manufacturing out of the Mid-Atlantic region. Both the S&P 500 and the Nasdaq fell 1.7%, breaking a 3-day winning streak for both indexes. The key S&P 500 sectors were all lower, with financials, materials and industrials faring the worst. According to a report by the Labour Department, first-time claims for jobless benefits was higher-than-expected, rising 12k to 500k, the highest level in 9 months, for the week ended Aug 14. Meanwhile, gold hit a 7-week high, settling higher at US$1,233.80 an ounce while oil prices ended down below US$75 a barrel.

Jaya’s FY10 Net Profit Surges To $103.72m

Jaya Holdings (Jaya) has posted a surge in net profit to $103.72m for FY10, up from just $1.2m for FY09. The huge jump was mainly due to impairment losses and provisions for associated costs of $99.4m made in FY09 for certain projects after the group reconfigured its shipbuilding programme under its restructuring exercise. Jaya also incurred foreign exchange losses of $69.5m, against FY10’s $2.6m gain. For FY10, revenue rose 36% to $357.06m on the strong performance of its shipbuilding/vessel sale business segment. Looking ahead, Jaya has contracted 4 vessels for sale for some US$52m, for delivery in the next quarter, though it expects lower vessel sale/disposal compared to FY10 as it plans to grow its charter fleet.

Significance: Jaya’s strong performance is a testament to the resilience of its vertically integrated business model. Now with a stronger financial position, the group will be able to capitalize on a sustained recovery of the offshore oil and gas sector when the opportunity arises.

Rotary Moves Towards Build-Own-Operate Projects

Rotary Engineering (Rotary) said it is expanding its horizon to building, owning and operating oil storage terminals in South-East Asia (SEA) and the Middle East. The firm has done early engineering and design work on a few projects worth US$150-350m each in the United Arab Emirates and SEA, according to Rotary’s chairman and MD, Chia Kim Piow. He added that Rotary had the capacity to take up to a 30-40% stake in such projects in Indonesia, Malaysia and Vietnam. Any outlay on these projects would likely be 70% funded through project financing and the rest using internal resources. An analyst at CIMB Research regarded the move towards build-own-operate or build-own-transfer as a positive development but noted how much it is going to contribute to the firm’s bottom line remains unclear yet.

Significance: The move will allow Rotary to participate more actively in the oil and gas sector, giving the firm recurring income. Moreover, working with the equipment built themselves, there is a quality assurance.

SMX Plans To Launch 33 New Tradable Contracts

The Singapore Mercantile Exchange (SMX) plans to launch 33 new tradable contracts over the next 18-24 months. These contracts will be across energy, agriculture and metals. The SMX will launch its exchange platform on Aug 31, beginning with West Texas Intermediate Crude, Brent crude oil, gold and Euro-US dollar currency futures. Apart from trading contracts, the SMX said Asian investors will also be able to take physical delivery of the commodities in the region, putting SMX head-to-head with the likes of the London Metals Exchange. But the SMX will differentiate from competitors via new contracts and pricing for various commodities. So far, the SMX had identified 68 members in clearing, broking and trading, with more players coming onboard in the months ahead.

Significance: The SMX establishes a reliable platform to trade a diverse range of products. The new contracts will increase the vibrancy of the local commodities scene, given that Asia is slated to account for a major portion of the total global demand for commodities in the coming years.

This article is contributed by Shares Investment. Visit Sharesinv.com for the latest Singapore, Malaysia and China stock market news and reports.