Thursday, June 22, 2017

SG Market (22 Jun 17)

MARKET OVERVIEW
- The market is expected to bounce around as oil prices slumped to a 10-month low on growing worries of excess crude supply.
- However, property counters will be supported by possible privatisation of UIC.
- Technically, the STI breached its 50-dma at 3,212 and has also broken below the intermediate uptrend line drawn from late-2016. Immediate support is now at 3,190, with overhead resistance at 3,268.

POSITIVE NEWS
*CapitaLand
- Divested its entire 65% stake in Vietnam-based developer Sparkle Value Homes for US$4.6m ($6.4m), or 1.35x P/B.
- Deal expected to net a divestment gain of US$1.2m ($1.7m).
- MKE last had a Hold with TP $3.75.

*SIA Engineering
- MOA with Boeing to provide aircraft maintenance training services to Southeast Asian airlines.
- Aircraft types include current and new generation models including 737, 777 and 787.

*mm2 Asia
- Placement of 87.7m new shares at $0.57 each has been successfully placed out.

*QT Vascular
- Obtained favourable data from the 24-month follow-up of patients.
- Treatment was using group's Chocolate Heart drug-coated coronary balloon.
- Counter still loss-making and has net liability value of US$0.01/share.

*Imperium Crown
- Disposing two Japanese properties (New City Apartments Kuramae and Minowa) for ¥1.12b ($23.4m).
- Deal expected to reap disposal gain of $0.2m.
- Proceeds earmarked for acquisitions of other properties and investments in the Asia-Pacific region.

*Abterra
- Acquiring 51% stake in Tianjin Belong Faith Energy Minerals for Rmb74.2m.
- Funding via 48.6m new Abterra shares at $0.31 apiece, 8.8% below last traded.
- Pro forma FY16 NTA/share to inch up to 23.08¢ (+0.3%), while LPS will narrow from 9.47¢ to 7.34¢.

*KS Energy
- Maturity date for the $45m 6% convertible bond extended from 21 Jun '17 to 21 Sep '17.

NEGATIVE NEWS
*Genting Hong Kong
- 44.9% associate Travellers Int'l ordered to suspend gaming operations at Resorts World Manila.
- This is pending investigation into its alleged liability in a recent deadly attack at its hotel-casino complex.
- Travellers contributed US$32.7m share of profit to GENHK's core pretax loss of US$195.6m in FY16.
- Trades at 0.54x P/B.

NEUTRAL NEWS
*SGX
- Welcomed Taiwan-based Hua Nan Futures as a derivatives trading member.
- Participation to add liquidity and distribution.
- Trades at 22.8x forward P/E vs HKEx 35.3x.

*Perennial Real Estate
- 90:10 JV with Shanghai Broad Ocean Investments.
- JVCo to set up a specialist medical centre in China.
- Local JV partner is an investment firm with businesses in the consumer and logistics industries.
- Counter trades at a 44% discount to its NAV/share of $1.61.

*SHC Capital
- Appointed Asian Corporate Advisors as its IFA for the proposed RTO of Yoma's tourism business.

Wednesday, June 21, 2017

Cosco

Cosco: The only bright spot for Cosco Corp is the proposed Rmb1,465.8m buyout for its entire loss-making shipbuilding business by parent China COSCO Shipping Corp, which is pending China regulatory clearance and shareholder's approval at the upcoming EGM to be held in Jul/ Aug.Target closing date for the deal is in 2H17.Post-disposal, Cosco is expected to record a disposal gain of ~$285m, which will turn its balance sheet into a healthy net cash position of $300m ($0.13/share).

SG Market (21 Jun 17)

MARKET OVERVIEW
- Choppy trading likely to continue, particularly in oil-related counters as crude prices sagged to their lowest level this year, while the partial inclusion of China A-shares in MSCI EM Index might boost sentiment.
- Technically, STI dipped below its 20-dma and is sitting near its immediate support at 3,228, with next level at 3,190. Topside resistance remains at 3,268.

POSITIVE NEWS
*Haw Par/UOL/UIC
- All three of UOB's Wee family controlled companies have requested for trading halt pending announcement.
- Potential corporate action includes the long-awaited major restructuring and unwinding of cross-holdings to unlock value for shareholders, particularly for Haw Par.
- UOB owns a 9.9% interest in Haw Par, which holds direct stakes in UIC (0.5%) and UOL (5.6%). UOL, in turn, owns 44.6% of UIC.

*Manulife US REIT
- Private placement of 73.6m new units was over-subscribed, triggering the upsize option. In total, 97m new units were issued at US$0.83 apiece, raising gross proceeds of US$80.5m.
- Bulk of proceeds will be used to part-fund its maiden acquisition since IPO of a New Jersey office building for US$115m.
- The street is bullish on MUST with 4 Buys and consensus TP of US$0.97.

*Ho Bee Land
- Acquiring freehold property at 67 Lombard Street in London for £129.3m ($228m) giving 4.1% net yield.
- The property is currently multi-let to six tenants with WALE of 10.2 years.
- MKE has a Buy with TP of $3.00 or 29% discount to its RNAV/share of $4.23.

*OKP Holdings:
- Secured $8.8m eight-month project from JTC to construct a temporary road at Bulim in Jurong West.
- The contract will raise its net construction order book to $326.6m, extending till 2019.

*Ouhua Energy
- Removed from the SGX watchlist (financial criteria) in view of its return to profitability in FY15 and FY16.
- However, it remains on the SGX MTP watchlist.

NEGATIVE NEWS
*Nam Cheong
- Received a writ of summons from OCBC in Malaysia, claiming for US$10m arising from owings.
- Last traded at 0.14x P/B.

NEUTRAL NEWS
*mm2 Asia
- Obtained SGX approval in-principle to transfer from Catalist to the Mainboard.

*DMX Tech
- Divesting 60% stake in PT Packet Systems Indonesia for $10.4m (US$7.5m).
- This will raise cash to pay audit fees relating to investigations by the Hong Kong police.
- Expects to reap a nominal gain of $17,873 from the sale.

Tuesday, June 20, 2017

SG Market (20 Jun 17)

MARKET OVERVIEW
- Local shares could push higher after the Dow, S&P 500 and DAX rallied to record highs as large tech stocks reversed a spate of weakness.
- Play in tech manufacturers could return; proxies include Venture (Buy, TP: $13.35), AEM, UMS and Micro-Mechanics.
- Technically, the STI held its ground above the 20 and 50-dmas and appears to be forming a pennant pattern. A breakout of the topside resistance at 3,268 could signal the resumption of its uptrend. Immediate support lies at 3,228.

POSITIVE NEWS
*Noble Group
- Updated that the senior secured revolving credit facility at Noble Americas Corp will be extended by 120 days from 20 Jun 2017.
- Continues to be in talks with potential investors concerning the sale of an interest in the group or parts of its business.
- Discussions with bankers are continuing in relation to its revolving credit facility due May 2018. Deferred the coupon payment of its US$400m perpetual capital securities due on 26 Jun 2017.
- Expects to complete its strategic review once discussions with banks and potential investors become clearer, with results likely to include an asset realisation programme and further reduction in overhead expenses.

*SIA Engineering
- 49:51 JV with Pratt & Whitney, Eagle Services Asia, has been designated as an MRO facility in Singapore for one of two engines that power the Airbus A320neo aircraft.
- ESA will invest US$85m to equip the facility and services are expected to commence in 2019 to tap on growth opportunities arising from large orders of A320neos in the region.
- Trading at 24.1x FY3/18 consensus P/E with indicative dividend yield of 3.1%.

*Manulife US REIT
- Proposed private placement of 73.6m new units (11.7% of unit base) to institutional and other investors at US$0.817-0.842/unit.
- Bulk of the gross proceeds of up to US$80.5m (including 24.9m upsize option) is intended to part fund the US$115m acquisition of an 11-storey prime office building in New Jersey, US.
- The property will increase its total NLA by 25.9% to 2.25m sf and is underpinned by a long WALE of 9.2 years with built-in rental escalation and high occupancy of 98.9%.
- Post-deal, pro forma FY16 DPU will rise 2.3% to US$0.0363.

*Dyna-Mac
- Clinched two contracts from new customers worth a total provisional sum of $30m.
- First was awarded by Schlumberger for fabrication of a MEG reclamation unit, expected to be completed by 3Q18.
- Second is fabrication of a skid package for Papua New Guinea, expected to be completed by 2Q18.
- Group is loss-making and trades at 0.95x P/B.

*Sarine Tech
- Launched Advisor 7.0, the latest version of its industry-leading rough planning software tool.
- Updated software includes many new features that further revolutionise rough planning, helping diamond manufacturers to further streamline the planning process and optimise the polished yield.
- Trading at 24.3x trailing P/E and 5.1x P/B.

*Ley Choon
- Bagged five new contracts worth $51.4m for underground utility infrastructure and construction works.
- The contracts lift order book to $172.3m.

*Wong Fong Industries
- Collaborating with two European principals Bucher Industries and Europress to supply a range of waste management products and solutions in Singapore and Myanmar.
- Under the agreement, it will be the exclusive distributor for Bucher's sweeper vehicles for two years till May '19.
- The group was also appointed to develop and market waste compactors for Europress, with the first shipment to be delivered for field testing in Jul '17.

NEUTRAL NEWS
*China Flex Packaging
- Voluntary unconditional management buyout at $1.25/share or 0.53x P/B.
- Offeror and concert parties currently own 58.4% of the loss-making plastic film manufacturer.

*Nobel Design
- Extended the offer period of its mandatory unconditional offer at $0.51/share to 20 Jun.
- As at 19 Jun, offeror Gland Slam RF18 Investments has garnered 82.51% control.

*Eurosports Global
- 51:49 JV with S Agata to distribute automobiles, parts and related accessories in Indonesia.
- S Agata is owned by a third party with business interest in the property and services sector in Indonesia.
- The group is currently loss-making and trades at 5.2x P/B.

*TIH
- Updated that discussions on the potential share sale and change of control are still on-going.
- Trading at 13.5x trailing P/E and 1.03x P/B.

*Vallianz
- Issuing 156.3m new shares at $0.02 apiece, for settlement of $3.1m in trade payables.
- This will result in NAV/share falling to US4.07¢ from US4.17¢
- Implied P/B valuation of 0.3x.

Monday, June 19, 2017

SG Market (19 Jun 17)

MARKET OVERVIEW
- Investors may be in cautious mood following the mixed close on Wall Street on weaker-than-expected economic data coming against a hawkish Fed policy plan.
- Key events that could move markets this week include the annual MSCI review, which will decide whether to include China A-shares in its emerging market index, and the formal Brexit negotiations, which start today.
- Technically, the STI looks poised to re-test its 3,228 support line, with next level at 3,190, while upside resistance capped at 3,275.

POSITIVE NEWS
*GLP
- China Vanke is reportedly in talks to join Chinese consortium, led by Hopu Investment and Hillhouse Capital, to bid for GLP.
- Shortlisted bidders, including Blackstone and Warburg Pincus, will have until end Jun to submit their final proposals.
- Currently trading at P/B of 1.15x, well below that of US peer Prologis at 2.1x.

*Noble
- Reportedly won a 4-month reprieve after key lenders agreed to extend a US$2b credit facility until mid-Oct for it to sell its assets or find a white knight.
- Group remains under severe pressure after enduring several turbulent years marked by massive losses, credit rating downgrades and allegations of improper accounting.
- Trading at distressed valuation of 0.08x P/B but worth noting that 74% of its equity base is tied to net fair value gains from commodity derivatives contracts.

*Sarine Tech
- Secured entry into the Thai market after Aurora Group adopted Sarine's light performance technologies.
- Provides a testament of consumer demand for tech-based information on diamonds.
- Trading at 22.6x trailing P/E and 4.9x P/B.

*Darco Water
- Acquired a 12%-stake in Wuhan Kaidi Water Services for $1.9m or 8.6x FY16 P/E.
- Funded via 3.8m new shares at $0.50 apiece.
- Wuhan Kaidi is a China water treatment and management specialist and has 22 ongoing projects worth Rmb487.5m across 14 provinces.
- The group intends to use Wuhan Kaidi's permits and licenses to bid for projects in China.

*Tung Lok Restaurants
- Prominent investor and substantial shareholder Sam Goi acquired 25,000 shares in the open market at $0.121 each on 15 Jun, lifting his stake to 18.62% from 18.611%.
- Trading at hefty trailing P/E of 86.2x but market cap of $36.2m is supported by net cash position of $11.7m.

NEGATIVE NEWS
*F J Benjamin
- Exclusive distribution agreement in Singapore for French leather goods, Goyard, has expired.
- Facing retail headwinds mainly from e-commerce.
- Loss-making and trading at 0.56x P/B.

NEUTRAL NEWS
*Hi-P Int'l
- Entered 20:80 JV with Sino Coffee Machine Mfg to undertake the production of coffee machines, packaging and products related to the business.
- The group's initial investment of Rmb22.8m in the JVCo will include a Rmb19.8m shareholder loan.
- Trading at 10.2x trailing P/E and 1.3x P/B.

Friday, June 16, 2017

SG Market (16 Jun 17)

MARKET OVERVIEW
- Investors are likely to sit on the sidelines as soft US economic data, Trump and Fed worries, as well as domestic politics weigh on confidence.
- Local tech and oil names may suffer another bout of weakness as US tech selloff worsens, while crude oil held below US$45/bbl.
- Technically, momentum indicators are flashing bearish near term signals, with the STI poised to re-test its 3,228 support line. Below that, the next line of defence is at 3,188. Upside resistance is capped at 3,275.

*POSITIVE NEWS
*SIA
- Group passenger load factor rose 3.4ppt to 77% as traffic (+6.5%) outpaced capacity (+1.8%) growth.
- Load factor for parent on routes to Americas (+3.3ppt), Europe (+9.3ppt), West Asia and Africa (+4.6ppt) climbed the most.
- Load factor for SilkAir (+0.8ppt to 70.3%) and budget carrier subsidiary (+1.5ppt to 81.4%) also improved.
- Cargo load factor grew 4.2ppt to 66.5%.
- Trading at 0.9x P/B, at lower end of historical valuation range.

*HRnetGroup
- Saw robust demand for its IPO; offer of 89.5m new shares at $0.90 each was 14.3x oversubscribed.
- Separately, cornerstone investors Aberdeen, Affin Hwang, Credit Suisse, en-Japan inc, FIL, Meiji Yasuda, TechnoPro will take up 103.9m new shares.
- The group is the largest Asia-based recruitment agency with a 20.5% market share in Singapore.
- Trading debut today with listing market cap of $920m and 22.4x trailing P/E vs Asian industry average of 28.4x.

*Low Keng Huat
- 1QFY18 net profit surged 65% to $5.4m, helped by a $0.6m fair value gain on financial assets and lower costs.
- Revenue rose 7% to $16.9m on increased development sales to $6.4m (+256%) from sale of two office units at Paya Lebar Square (fully sold) and four residential units at Parkland Residences (one unit left).
- Investment income soared more than 4-fold to $2.7m due to reduced losses from Westgate Tower and higher contributions from AXA Tower.
- Hotel and F&B business declined 35.8% to $6.1m, mainly due to lower rates and occupancy at Duxton Perth and absence of contributions from Duxton Saigon, which was disposed in 1QFY16.
- Going forward, the group is targetting to launch 50-unit Kismis Residences in 2QFY18, while 200-unit Perumal is in the planning stage.
- Last traded at 0.7x P/B.

*Silverlake Axis
- Won a contract from an insurance trade association to develop and deliver a digital platform for life insurance and takaful insurers in Malaysia.
- The platform will be able to integrate with new digital insurance platforms and be the source for greater insights into the industry.

*Yongnam
- Bagged four contracts worth $36.2m for projects in Singapore comprising:.
- Two structural steelwork projects for Evonik's Jurong island plant and a proposed commercial development.
- Two specialist civil engineering contracts for Changi Airport's three-runway operations and Thomson-East Coast Line.

*Pacific Radiance
- Secured US$45.3m worth of new contracts, including options for ten offshore support vessels, to support projects in Asia and Middle East.
- Management opines that market conditions will remain challenging even as global spending on exploration and production is expected to rise.

*Mermaid Maritime
- Won two contracts worth a total of US$4.3m comprising:.
- 16-day subsea pipeline freespan rectification project for a national oil company in Thailand.
- Two-year contract to offer site survey & offshore navigation services in Indonesia for an international oil company.

NEUTRAL
*Hiap Hoe
- Strenghtening recurring income base with the acquistion of Holiday Inn Express Trafford City, Manchester, UK.
- Purchase consideration of £26.3m is on par with its book value.
- Trading at 0.45x P/B.

*Oceanus
- Entered into an MOU with WSRC to expand its abalone and seafood business in China, particularly the distribution of its seafood products.
- WSRC has agreed to purchase 250 cartons of canned abalones worth $250,000 and is expected to set up a retail outlet in Chengdu, China to sell its products.
- The outlet is expected to commence operations in FY17.

*Innopac
- Entered into an MOU to acquire a 75% stake in Dongwoo Bioenergy from Low Hyon Young for $0.8m in cash.
- Deal includes an option to acquire a further 24% stake for $0.4m through the issue of 400m shares at 0.1¢/share.
- Dongwoo produces wood waste pellets from sawdust for biomass power plants and will be primarily sold to South Korea.

Thursday, June 15, 2017

SG Market (15 Jun 17)

MARKET OVERVIEW
- The market could be in for some turbulence after the Fed lifted interest rates and signalled the beginning of its balance sheet taper this year even as economists raised Singapore's growth forecast.
- Local technology and oil names could come under pressure on a continued US tech sell-off, while crude prices tanked following a bearish US oil inventory buildup and IEA report that global oil output will expand faster than demand in 2018.
- Technically, the STI is capped at topside resistance of 3,275 in near term, with underlying support at 3,228.

MACRO/SECTOR NEWS
*Economy
o Economists are more upbeat about Singapore's economy as global outlook brightens.
o 2017 GDP growth forecast raised to 2.5% from 2.3% in previous MAS survey.
o But pick-up is not broad-based. Trade-related industries, especially electronics manufacturing are enjoying a boost from stronger global demand but domestic-oriented sectors such as construction and F&B are not out of the woods.
o MKE retains its growth estimate of 3% for 2017.

POSITIVE NEWS
*OKP
- Won a 10-month project from JTV for $11.7m which entails the construction of new roads and drains, trunk sewers and junction improvement works in the northern part of Singapore.
- The contract will lift its net order book to $317.8m (1Q17: $306.1m), extending visibility till 2019.

*Kimly
- Acquiring a coffee shop in Bedok for $0.85m via issue of 1.7m shares at $0.50 apiece.
- Also taking over a F&B business within an industrial canteen in Woodlands for $0.65m via issue of 1.3m shares at $0.50 apiece.
- Consideration shares are priced 22.5% higher than average price of $0.4081 on 13 Jun '17.

*Sanli Environmental
- Private equity firm ICH Gemini became a substantial shareholder after acquiring 0.6m shares at $0.34 each in open market, raising its stake to 5.062% from 4.838%.
- Current price of $0.34 implies FY3/16 P/E of 15.5x.

*TLV Holdings
- 70% owned Taka HK Venture made its first foray into the China retail jewellery market with a 49:51 JV with China's Maoming LiuTao ZhuBao Chuangyi Chanye, one of Guangdong's biggest jewellery consortiums.
- The proposed JV plans to open a chain of retail stores/counters in the Miaoming area and expand to other parts of China.
- This will depart from its current sale of jewellery to China market on a wholesale basis through its participation in exhibitions and significantly change the risk profile of the group in future.

NEUTRAL NEWS
*Cambridge Industrial Trust
- Proposed to divest 23 Woodlands Terrace for $17.68m or 1x P/B.
- Property is a 4-storey industrial building (124,425 sf) at JTC Woodlands East Industrial estate, with remaining land tenure of 39 years.
- Proceeds will used be for debt repayment, acquisitions, AEIs and/or working capital.

*World Class Global
- Aspial property spin-off saw a good response to its IPO.
- Offer of 136m new and vendor shares at $0.26 each was oversubscribed by 1.1x.
- The group has property development projects in Australia and Malaysia.
- Making its trading debut today with listing market cap of $235.5m and P/B of 2.2x.