Published December 8, 2006
Keppel, SingTel push STI above 2,900
Meanwhile, momentum in banks and property sector hitting a bump
By R SIVANITHY
SENIOR CORRESPONDENT
EVEN as momentum in the banks and property sector faltered, SingTel, Keppel Corp and SembCorp Industries yesterday came to the fore to keep the Straits Times Index afloat - up 6.78 points at 2,901.8. The second line, meanwhile, saw the same hectic churning that characterised trading over the past few weeks although this time the outcome was more mixed than firm, probably because of a steep drop in Hong Kong. Excluding warrants and bonds, the advance-decline score was 206-190 with 372 counters either not traded or unchanged.
'We're in a trading market at the moment,' said a dealer. 'People are frustrated at maybe having missed out, yet are mindful of the levels we're at, so it's in and out as quickly as possible.'
The conglomerates Keppel and SCI have been in the news lately, thanks to the winning of large contracts which, in turn, led brokers to issue 'buy' recommendations. Keppel's 50-cent rise to $18.10 boosted the index by 4.5 points, SingTel's seven-cent bounce to $2.98 added almost five points, while SCI's 10-cent gain at $3.94 contributed about two points.
In Keppel's case, the latest news is of a US$371 million rig order. In a 'buy' that set a $19.60 target price, OCBC Investment Research said this has pushed Keppel's total new orders for 2006 to US$4.3 billion, surpassing the previous record of about US$4.1 billion in 2005.
'While the total new contract value difference is insignificant when we consider the usual lumpiness of new rig contracts, KepCorp has also scored with consistently better pricing for jack-up and semi-submersible rig newbuilds from repeat customers in 2006,' said OCBCIR. Its target price was based on a sum-of-parts valuation.
Counter-balancing the effect of this conglomerate play was a 25-cent slide in CapitaLand to $6.20 that cut almost six points off the index, while UOB's 20-cent drop to $18.60 - despite a 'buy' from USB Investment Research - took a further 3.7 points off.
Activity in the second line comprised a familiar mix of penny stocks, China plays, broker-recommended counters and technology stocks, the latter enjoying a re-rating by various brokers.
The latest to upgrade the tech sector is Credit Suisse, which in an Asian Tech Strategy outlook for 2007 report said: 'Our buy argument for tech runs as follows: unit demand has been robust and is likely to remain that way (or improve slightly) in 2007. Over the past few years the tech cycle has become low beta and capex discipline has improved significantly, resulting in much improved cash flows.
'However, the lower beta nature of tech at a time of significant strength in other technicals has meant that the high beta money that used to play tech has moved elsewhere . . . Consequently, tech has become less expensive just as its fundamentals have improved.' Credit Suisse believes tech stocks offer the best value versus growth proposition in the region and, as such, should start to attract attention from hitherto uninterested investors.
