Friday, May 11, 2018

Sharing will resume on 28 May 18.

SG Market (11 May 18)

MARKET OVERVIEW
- The market could edge higher after US stocks rallied to a 7-week high as a benign inflation data reduced the odds of aggressive Fed interest rate hikes.
- Technically, STI could continue to drift directionless in the near term within the broad 3,500-3,610 range.

CORPORATE RESULTS
*Genting Singapore
- 1Q18 net profit rose 3% to $217.2m, achieving 29% of full-year consensus estimate.
- Excluding one-off $96.3m gain from disposal of Jeju JV in 1Q17, earnings would have soared 156%.
- Revenue jumped 15% to $675.1m on robust growth in volumes across gaming (+17% to $507.4m) and non-gaming segments (+10% to $167.1m).
- Adjusted EBITDA leapt 27% $358.9m on 40% drop in bad debt provisions.
- Japan IR Implementation Bill has been submitted to Diet for debate, paving the way Japan gaming licence.
- Trades at 9.6x forward EV/EBITDA.

*Wilmar
- 1Q18 core net profit dived 37.4% to US$183.5m, below expectation at only 15.3% of full-year consensus estimate.
- Revenue rose 5.3% to US$11.1b due to stronger performance in oilseeds & grains (+27%) segment but dragged by weaker tropical oils (-5%) and sugar (-32%).
- EBITDA margin of 5% (-1.5ppt) was compressed by lower CPO prices, poor downstream margins and continued sugar losses.
- Risk of China imposing import tariff on US soybeans, which would adversely affect its crushing business and erode improvements in production yields and better downstream margins in the tropical oils segment.
- Trades at 14.2x forward P/E.

*ST Engineering
- 1Q17 net profit jumped 17.8% to $117.7m, landing at 21.5% of full-year consensus forecast.
- Revenue grew 9% to $1.65b on strength across across electronics (+22%), aerospace (+9%), land systems (+3%), except marine (-16%).
- Commercial and defence sales accounted for 63% and 37% of group revenue.
- Pretax profit margin held steady at 8.7% as all sectors showed profit growth. Marine was no longer a drag, mainly due to lower debt provisions
- Order book to $13.4b was sustained by contract win momentum and included Smart City projects.
- Guided for steady growth in FY18.
- Trades at 19.6x forward P/E and 4.3% yield.

*SingPost
- 4QFY18 core net profit declined 28.6% to $15.3m due to wider losses at associates and swing in taxes.
- This took FY18 core earnings to $105m (-9.2%), missing estimates.
- Revenue for the quarter grew 13.5% to $367.5m on growth in e-commerce related activities across the postal and logistics segments.
- Declared final DPS of 2.0¢, bringing FY18 payout to 3.5¢.
- Trades at 22.5 forward P/E.

*Wing Tai
- 3QFY18 net profit soared 817% from a low base to $68.2m, lifting 9MFY18 earnings to $89m, surpassing full-year consensus forecast.
- For the quarter, revenue dipped 4% to $70.3m despite clocking additional sales at Le Nouvel Ardmore in Singapore and contribution from BM Mahkota in Penang.
- Gross margin expanded 1.4% to 51.6% on higher development margin.
- Bottom line was bolstered mainly by a sharp increase in share of profits of associated/JVs to $71.9m (+326%).
- Trades at 0.5x P/B

*Frencken
- 1Q18 net profit plunged 58.5% to $6.8m. Excluding disposal gains, earnings would have risen 10.8%, making up 26% of full-year consensus estimate.
- Revenue rose 3.2% to $138.8m on higher contribution from mechatronics (19.3%) while the IMS segment declined 29.1% mainly due to absence of sales from PESB, which was divested in Mar '17.
- Gross margin narrowed 0.5ppt to 16.7% due to shift in sales mix.
- Trading at 8.6x forward P/E.

*EC World REIT
- 1Q17 DPU slipped 4.7% to 1.47¢, due to impact from withholding tax incurred during cash repatriation exercise in Mar.
- Gross revenue edged up 1.2% to $23.9m, but NPI dipped 0.5% to $21.5m due to higher maintenance and repair costs.
- Aggregate leverage eased to 28.9% (-0.3ppt), while underlying occupancy rate remain steady at 97.5%.
- Trades at annualised 1Q yield of 8% and 0.8x P/B.

*Creative Technology
-3QFY18 net loss shrank to US$3.8m (-19%), dragging 9MFY18 earnings to US$14.8m (9MFY17: US$17.3m loss),
- Revenue for the quarter fell 6% to US$15m, impacted by continued uncertainty and difficult market conditions.
- However, gross margin was maintained at 28%.
- Bottom line was marred by higher selling and admin costs of US$6.4m (-8%) on higher legal expenses and higher R&D costs of US$3.1m (+7%), but partially mitigated by US$1.1m FX gain.
- Trades at 16x trailing P/E.

*China Everbright Water
- 1Q18 net profit swelled 56% to HK$178.1m, attaining 28% of the full-year street estimate.
- Revenue jumped 35% to HK$1.04b on broad-based growth across construction (+HK$110.6m), operation service (+HK$117.6m) and finance income (+HK$38.7m).
- Gross margin expanded to 34.7% (+1.1ppt) on change in revenue mix towards operation services.
- Bottom line was supported by lower admin & other operating expenses (-26%) as well as reduced profit share to minority interests (-16%).
- Trades at 10.5x forward P/E.

*UG Healthcare
- 3QFY18 net profit rose 16.7% to $1.1m, helped by FX swing to $0.7m gain (3QFY17: $0.6m loss).
- This brought 9MFY18 earnings to $3m (+28.8%), reaching 86% of full-year eatimate.
- Revenue for the quarter climbed 10% to $19.4m on higher sales volume of gloves.
- Gross margin fell 1.6ppt to 17.1% due to delay in pricing revision amid prior commitment to customers, while latex and nitrile raw material prices were stable at higher levels.
- Bottom line was also pared by higher admin cost from the expansion of its distribution network in UK, China, and Nigeria.
- Trades at 10x forward P/E.
- MKE last had a Sell with TP of $0.21.

*OUE Commercial REIT
- 1Q18 DPU sank 9% to 1.12¢ , in line with estimate, amid a private-placement-enlarged unit base (+19%), while distributable income rose 4.7% to $17.4m on lower finance cost (-14%).
- Revenue eased 1.6% to $44.1m on weaker rental income, but NPI improved 1.8% to $35.3m on lower utilities and maintenance costs.
- Portfolio occupancy grinded 0.1ppt higher q/q to 96.9%.
- Aggregate leverage increased 3.2ppt q/q to 40.5%.
- Trading at annualised 1Q yield of 6.2% and 0.9x P/B.

*SBS Transit
- 1Q18 net profit jumped 63.7% to $16.7m on operating leverage.
- Revenue leapt 15.8% to $328.2m, driven by higher fees earned under the Bus Contracting Model, and higher rail ridership after the opening of DTL3, but partly offset by rail fare reduction in Dec '17.
- Average daily ridership improved across DTL (+75.8%), NEL (+0.9%), and LRT (+4.6%).
- EBITDA margin widened 0.4ppt to 13.6%.
- Trades at 15x trailing P/E and 1.7x P/B.

*Vard
- 1Q18 net loss worsened to NOK36m (1Q17: NOK25m loss), partly hit by restructuring cost of NOK11m (1Q17: NOK6m).
- Revenue grew 29% to NOK2.29b, underpinned by on-going construction of six expedition cruise vessels at its Romanian yards.
- EBITDA margin narrowed 1.2ppt to 1.1% due to pressure from higher material and subcontractor costs.
- Trades at 0.86x P/B.

*IREIT Global
- 1Q18 DPU edged up 1.4% to 1.46¢ on favorable EUR/SGD movements, while distributable income slipped 2.9% to €6.3m.
- Revenue and NPI dipped to €8.6m (-2%) and €7.7m (-1.9%) respectively, amid lower rental income from Münster South Building.
- Portfolio occupancy was flat q/q at 98.3%.
- Aggregate leverage ticked up 0.2ppt q/q to 40.5%.
- Trading at annualised 1Q yield of 7.5% and 1.13x P/B.

*OKH
- 3QFY18 net loss narrowed to $3.6m (3QFY17: -$25m), bringing 9MFY18 net loss to $0.9m (9MFY18: -$26m).
- Revenue for the quarter dived 93.8% to $6.6m largely due to lower property development income (-97.2%) after its ACE@Buroh attained TOP in 3QFY17.
- Fell into a gross loss of $0.3m (3QFY17: $2.1m profit) following the bulk sale of several units at loss compared to the developments costs.
- Bottom line was supported by lower general & admin (-93.6%) as well as finance (-4%) expenses.
- Trades at 0.52x P/B.

*Sing Holdings
- 1Q18 net profit soared 269.8% to $3m from low base.
- Revenue jumped 20.5% to $16.6m on progressive recognition from development projects and higher rental income from investment property.
- Gross profit expanded to 35.2% (+10.1ppt) on slower pace of cost expansion (+4.2% to $10.8m).
- Bottom line was eroded by higher share of minority interest of $0.8m (1Q17: $2,000), but was partially offset by lower effective tax rate of 15.5% (1Q17: 39.8%).
- Trades at 31.8x trailing P/B.

*Kingsmen Creatives
- 1Q18 net profit grew 16.2% to $445,000, albeit from a low base of $383,000.
- Revenue slipped 7.8% to $61m as weakness in its retail & corporate interiors (-29.1%) overshadowed gains in exhibitions & thematic (+18.5%) and research & design (+14.6%).
- However, gross margin expanded to 25.2% (+1.7ppt) on the change in sales mix.
- Bottom line was supported by a $0.m swing to associate profits as well as losses attributable to minority interests of $0.3m (1Q17: $34,000 profit).
- Order book stood at $195m as at 30 Apr, of which $156m is expected to be recognised in FY18.
- Trades at 12x trailing P/E.

*Gallant Venture
- 1Q18 net loss was reduced to $9.8m (1Q17: $39.2m) due to a $3.6m profit (1Q17: $15m loss) from associates.
- Main automotive retailing subsidiary IMAS turned around to a net profit $5.8m (1Q17: 17.6m loss).
- Group's revenue rose 4% to $453.5m on higher sales of trucks and heavy duty equipment, car rental income, and contribution from resort segment.
- Gross margin expanded 0.9ppt to 19.4%.
- Bottom line was also buttressed by lower operating expenses, FX loss, and finance cost.
- Trades at 0.49x P/B.

*JB Foods
- 1Q18 surged 302% to US$4.7m, partly on operating leverage.
- Revenue rose 4% to US$74.1m on higher shipment volume, albeit ASP eased due to lower cocoa bean prices (input material).
- Gross margin expanded 9.5ppt to 15.4% on improved processing margin.
- Growth in bottom line was pared by a US$1.5m increase in FX loss, and US$0.6m loss (1Q17: US$0.3m gain) on financial derivatives.
- Trades at 6.4x trailing P/E.

*Sapphire
-1Q18 net profit fell 15.9% to Rmb4.1m given the disposal of its Mining Services Business in Feb 2017.
- Revenue increased 61.4% to Rmb303.6m on account of a higher number of ongoing projects in China and the sale of railway sleepers.
- Gross margin dipped 8.7ppt to 8.9%, due to higher costs of materials (which Ranken generally has to absorb 5% of material price fluctuation both ways), lower margins from the sale of railway sleepers and higher margins in 1Q17 arising from clients' acceptance of variation orders.
- The group has secured a growing number of contracts for rail engineering and construction works, which boosts its order book to Rmb2.9b.
- Trades at 6.8x trailing P/E and 0.6x P/B

*Dasin Retail Trust
- 1Q18 DPU of 1.83c came in largely in line with its IPO forecast on lower than expected finance costs
- Revenue and NPI also exceeded own estimates by 6% and 3% to $18.5m and $14.9m respectively, due to better operational metrics and contribution from the acquisition of Shiqi Metro Mall in June 2017.
- Achieved 100% occupancy in its portfolio while WALE remains healthy at 6.24 years (by NLA).
- Aggregate leverage of 30.4% with average all-in cost of 5.28% for onshore and 4.9% for offshore borrowings.
- Trades at 1Q18 annualised yield of 8.4% and 0.56x P/B

POSITIVE NEWS
*Tiong Seng
- Secured a $53.9m contract to build another primary school at Punggol Central.
- The construction of the school compound will commence alongside the group's Punggol Way project in May '18.

NEUTRAL NEWS
*mm2
- Enters into slate financing partnership with South Korea's largest content company, CJ E&M.
- From '18 till '21, mm2 will finance 6 Southeast Asian (4 Thai and 2 Indonesian) films that CJ E&M finances and produces, of which 3 will commence production this year.
- Trades at 22.3x forward P/E.

*KOP Limited
- Its indirect wholly-owned subsidiary, Dalvey Breeze has entered into a S&P Agreement with owners of the units to purchase all the strata lots in a development known as Villa D'Este, Singapore for $93m.
- The development located at Dalvey Road, Singapore, is a piece of freehold land with an area of 55,000 sf.
- The group intends to redevelop the development into a high-end condominium, and will be funded through a mix of external borrowings and internal resources.

Thursday, May 10, 2018

SG Market (10 May 18)

MARKET OVERVIEW
- The market could be off to a nervy start following the shock election result in Malaysia but oil-linked counters may stand to gain from 3.3% jump in crude prices in the wake of the US exit from Iran and an unexpected drop in US stockpiles.
- Technically, STI could continue to trade sideways in the near term within the broad 3,500-3,610 range.

CORPORATE RESULTS
*CSE Global
- 1Q18 net profit surged 90% to $5.7m, achieving 37% of full-year consensus estimate.
- Revenue jumped 23.7% to $92.2m from growth in oil & gas (+23.3%) and infrastructure (+24%) segments. These were mainly driven by oil & gas projects in the Americas (+66.7%).
- Gross margin narrowed 2.4ppt to 26.8% but operating expenses were well contained, reflecting higher labour productivity and cost efficiencies.
- Fewer new orders secured (-41.5% to $68.9m) further depleled order book to $148.6m (-15% q/q).
- Going forward, several large projects are expected to reach billing milestones in 2Q18 and 3Q18.
- Based on latest results, forward P/E of 14.7x appear to be conservative.

*China Aviation Oil
- 1Q18 net profit rose 13.9% to US$26.9m, reaching 29% of full-year consensus forecast.
- Revenue climbed 23.9% to US$4.1b due to higher oil prices and trading volume (+4.4%), particularly in gas oil (+38.8%) and other oil products (+22.4%), while jet fuel supply was weak (-14.1%).
- Gross margin contracted to 0.32% (1Q17: 0.47%) due to lower trading gains. This resulted in a 14.6% drop in gross profit to US$13.2m.
- But associate contribution jumped 40.7% to US$21m, stemming largely from its 33% stake in Pudong airport fuel supply company.
- Trading at 10.6x forward P/E.

*Hyflux
- 1Q18 net loss deepened to $22.2m from near breakeven a year ago, drageed by Tuaspring.
- Excluding Tuaspring, it would have turned in a $1m profit vs $27m in 1Q17, which included a $16.5m gain on disposal of its Galaxy Newspring portfolio.
- Revenue slid 21% to $72m on slower EPC timeline from the TuasOne WTE project in Singapore and Qurayyat IWP project in Oman.
- Tuaspring incurred a slimmer loss of $23.2m (1Q17: $27m) due to an uptick in wholesale electricity prices.
- Municipal projects contributed 81% of revenue, with Singapore (58%) and Mid-East (32%) the key markets.
- Operating cash flow continued to bleed $51.2m as net gearing deteriorated to 1.3x and cash balance shrank to $233.8m (Dec '17: $314.2m).
- Discussions to divest Tuaspring and Tianjin Dagang plants are still ongoing.
- Trades at 1.6x P/B.

*HMI
- 3QFY18 net profit turned around to RM15.9m from RM1.6m loss a year ago, bringing 9MFY18 earnings to RM45.4m, meeting estimates.
- Revenue for the quarter rose 7% to RM115.4m on higher patient load (+2.7%) and average bill sizes (outpatient: +9%, inpatient: +3.8%) in Mahkota Medical Centre and Regency Specialist Hospital.
- Gross margin improved 4ppt to 35.9% on slower pace of cost expansion (+1%).
- Bottom line was helped by lower admin costs (-26%) in absence of M&A fees and lower debt provision, as well as reduced effective tax rate of 28% (3QFY18:48.2%).
- Trades at 27.7x forward P/E.

*ISEC Healthcare
- 1Q18 net profit rose 26% to $2.1m in tandem with higher revenue of $9.6m (+14%), mainly driven by increased patient visits from its specialised eye care services in Malaysia and Singapore.
- Gross margin expanded 1.6ppt to 48.2%, arising from the increased business activities.
- Balance sheet in a net cash position of $27m (5.2c/share).
- While healthcare industry remains competitive, growth prospects are encouraging in view of the greying population, with higher demand for age-related eye diseases.
- Trades at 19.6x trailing P/E

*HRnetGroup
- 1Q18 net profit jumped 46% to $16.3m, beating estimates, following the acquisition of certain co-owners' stakes.
- Revenue rose 12.2% to $107m led by flexible staffing and professional recruitment in Singapore (+12.8%) and North Asia (+9.9%), particularly in Hong Kong and China.
- All its 10 cities of operation are profitable. RecruitFirst HK, which was commenced business in Jan '17, has turned profitable.
- Bottomline was also boosted by other income of $6.6m (+42.8%), mainly due to $0.8m gain on revaluation of marketable securities, $0.6m increase in interest income and $0.5m additional government subsidies.
- PT HRnet Rimbun JV will commence operations in Jakarta once its licence is approved.
- Trades at 15.6x forward P/E

*APAC Realty
- 1Q18 net profits jumped 46.8% to $5.9m, forming 19% of full-year estimate in seasonally weak quarter.
- Revenue climbed 56.7% to $105.2m mainly due to increase in brokerage income from new home sales (+127.6% to $34.1m), resale and rental (+37% to $68.4m) of properties.
- Gross margin narrowed 2.9ppt to 12.2% on higher pace of cost expansion (+62%).
- On outlook, Singapore's residential property market is expected to be active as underlying demand remains robust.
- Trades at 12x forward P/E.

*Hock Lian Seng
- 1Q18 earnings slipped 13.6% to $1.6m, forming just 7% of sole full-year estimate.
- But revenue almost doubled to $40.9m (+97.5%) on higher construction activities for its Changi Airport JV.
- Gross margin collapsed to 6.2% (-4ppt), squeezed by lower profitability for on-going projects.
- Net cash position strengthened to $122.4m (4Q17: $117m).
- Civil engineering order book stood at $790m (4Q17: $775m).
- Contruction of Shine@Tuas South has begun and Is expected to be completed by Jun '18.
- Trading at 10x forward P/E and 1.1x P/B

*Valuemax
- 1Q18 earnings jumped 25.3% to $6.2m on increased contribution from higher margin segments.
- Revenue fell 6.5% to $57.2m due to weaker contributions from retail and trading of pre-owned jewellery and gold business, partially offset by higher takings from pawnbroking and moneylending business.
- Gross margin expanded 4.9ppt to 21.4% due to shift in revenue mix.
- Trading at 9x trailing P/E.

*Maxi-Cash
- 1Q18 net profit tumbled 39% to $1.8m despite higher revenue of $52.8m (+20%).
- Revenue growth was attributed to pawnbroking and retail & trading of jewellery & branded merchandise as well as its secured lending business.
- Bottom line was hit by higher finance costs of $2.5m (+117%) and FX loss of $2.2m.
- Trades at 11.1x trailing P/E.

*Aspial
- 1Q18 net profit climbed 20% to $7.6m on stronger revenue of $212.4m (+51%).
- Revenue growth was seen across its real estate (+96.9% to $133.7m), financial services (+19.7% to $52.8m) as well as its jewellery (+2.6% to $30.2m) segments.
- Bottom line was hit by a $10.1m swing to FX loss of $5.9m as well as higher finance cost of $1.5m (+12%).
- Trades at 1.5x P/B.

*Vicom
- 1Q18 net profit grew 2.3% to $7m on higher revenue of $4.5m (+1.6%) due to higher business volumes.
- Operating costs (+0.7%) rose by a smaller degree, which led to a slight expansion in margin to 33.5% (+0.6ppt).
- Net cash position improved 5.2%% to $113.1m (1Q17: $107.5m), representing 21% of market cap.
- On outlook, vehicle testing business is expected to improve, while non-vehicle testing business is expected to remain stable.
- Trades at 20.1x trailing P/E.

*Trendlines
- 1Q18 net loss came in at US$1.3m (-22.7%) while total income was US$0.6m (-51.7%), primarily reflects a reduction in the fair value of Trendlines' portfolio companies and write-off of one portfolio company in the amount of US$0.8m, as a result of lack of funding for this company.
- The losses were partially offset by a gain in fair value of US$0.2m of one Portfolio Company as a result of the completion of fund raising exercises at higher valuation and a gain of US$0.3m due to deconsolidation of a Portfolio Company
- Total expenses fell by 25.7% to US$1.9m, mainly due to reductions in employment costs and other general and administrative budget cutting as part of the Group's cost reduction plan announced in Oct 2017.
- Going forward, the group will continue to expand on its strategic network with the establishment of the partnership between Trendlines Medical Singapore and K2 Global in the start-up program by SPRING SEEDS Capital.
- Additionally, it signed an MOU to collaborate with Nutreco Investments B.V. on developments in the agrifood tech sector.
- Trades at 9.8x P/E and 0.65x P/B

*Nordic
- 1Q18 earnings up 22% on higher revenue of $22.7m (+14%), mainly due to increased contribution from the group's Maintenance Services business segment (+71%), following the acquisition of Ensure Engineering on 28 April 2017.
- Gross margin remained constant at 30%
- The group's outstanding order book stood at $99.3m, which will generate sustainable revenue streams till FY2021.
- Management remains positive over the long-term prospects in the marine, offshore O&G industries, petrochemical sectors, pharmaceutical and infrastructure industries.
- Trades at trailing P/E of 13.2x

NEUTRAL NEWS
*Frasers Logistics & Industrial Trust
- Launching an equity fund raising comprising a private placement of 333.2m-345.8m new units at $0.962-0.987 each and 1-for-10 non-renounceable preferential offering of 152.2m new units at $0.942-$0.967.
- Gross proceds of $476n will be used to finance the purchase of 21 industrial properties in Germany and the Netherlands.
- Trades at annualised yield of 7% and 1.1x P/B

*Noble
- Clarified that it is still in discussion with its perpetual security holders for its proposed restructuring, as opposed to recent news reports that suggested an agreement has been reached.

*Q&M Dental
- Aborted the proposed acquisition of 20% stake in Shenzhen Superline Technology as no agreement could be reached.

NEGATIVE NEWS
*Federal Int'l (2000)
- Warned of a net loss for its 1Q18 results due to lower sales from trading business segment.

Wednesday, May 9, 2018

SG Market (09 May 18)

MARKET OVERVIEW
- Stocks are set a mixed start as investors assess the implications of President Trump's decision to scrap the Iran nuclear deal amid a volatile crude market. Concerns over heightening geopolitical tension could weigh on sentiment along with higher US Treasury yields and a stronger USD.
- Technically, STI likely to consolidate in the near term with immediate support at 3,500 and topside resistance is at 3,640.

CORPORATE RESULTS
*Centurion
- 1Q18 core net profit fell 27% to $9.1m, meeting expectations.
- Revenue declined 17% to $30.1m, mainly due to the expiry of the lease on Westlite Tuas in Singapore, which ceased operations in Dec '17
- Gross margin expanded 5ppt to 72% in the absence of $1.2m amortisation cost for Westlite Tuas.
- ASPRI-Westlite Papan and the six worker dormitories in Malaysia reported stronger average occupancy of close to full and about 91% respectively.
- The group has a steady pipeline of assets under development, including Westlite Bukit Minyak, dwell Adelaide and AEI at RMIT Village, which are on track to be completed by 4Q18, adding 7,040 beds to its portfolio.
- Trades at 10.3x forward P/E and 0.83x P/B

*Perennial Real Estate
- 1Q18 net profit plunged 86.7% to $5.1m due to absence of one-time $55.7m gain from the partial divestment of a 20.2% stake in TripleOne Somerset.
- Excluding TripleOne Somerset, revenue grew 10.1% to $15m, largely attributable to Perennial Qingyang Mall in Chengdu, while EBIT would have soared 184% to $24.4m, boosted by $22.8m (1Q17: $0.7m) share of results from associates WBL, Chinatown Point and a Shenyang mall.
- Completed acquisition of Capitol Singapore and finalising appointment of operator for the hotel component.
- Trades at 0.51x P/B.

*F&N
- 2QFY18 core net profit swelled 303% to $15.4m, bringing 1HFY18 earnings to $41.5m (+57.9%), representing 27.5% of full-year consensus estimate.
- Revenue grew 4.8% to $473.1m on borad-based sales f=growth in its core markets of Singapore, Malaysia and Thailand.
- EBIT jumped 63% to $36.3m, driven by higher dairy and soft drink sales, reduced operating costs and maiden contrinution from 20% owned Vinamilk.
- Maintained interim DPS of 1.5¢.

*Riverstone
- 1Q18 net profit fell 7.6% to RM31.1m, maling up 21% of full-year consensus estimate.
- Revenue edged up 2% to RM209.8m as increased demand for healthcare and cleanroom gloves was eroded by by lower ASPs.
- Gross margin narrowed to 22.4% (-2.8ppt) mainly due to a 23% hike in gas input prices.
- Bottom line was weighted by a FX loss of RM0.9m (1Q17: RM5.7m) and a RM3.9m swing in fair value loss on derivatives to RM0.7m.
- Phase 5 is in full swing, which will raise annual production capacity to 9b (+18%) by Dec '18 and plans to commence Phase 6 expansion to raise capacity to 10.4b (+36.8%) by Dec '19.
- Trades at 14.4x forward P/E.

*Ellipsiz
- Swung to 3QFY18 net loss of $1.5m (3QFY17: $0.7m profit), dragging 9MFY18 earnings to $4m (9MFY17: $0.7m loss).
- Revenue for the quarter jumped 23% to $12.5m on improved contributions from its Singapore and Taiwan operations.
- Gross margin slipped 21% (-1ppt).
- Bottomline was hit by absence of disposal gain of $1.2m recognised in 3QFY17 as well as FX loss of $1.5m (3QFY18: $0.3m).
- Trades at 12.3x trailing P/E.

*Kimly
- 2QFY18 net profit rose 20.2% to $5.5m mainly due to grant received from Wage Credit Scheme and Special Employment Credit.
- This brought 1HFY18 earnings to $11.2m (-0.1%).
- Revenue for the quarter climbed 3.8% to $49.2m on stronger contributions from its outlet management division (+$0.5m) as well as its food retail division (+$1.3m).
- Gross margin contracted to 19.6% (-1.4ppt) on higher staff costs (+10.5%) attributable to its central kitchen and outlet/stalls as well as higher operating lease expenses (+11.7%).
- Bottom line was partially shored up by lower admin expenses (-10.2%) as well as interest income of $0.2m (2QFY17: nil).
- Maintained interim DPS of 0.28¢.
- Trades at 17.2x forward P/E

POSITIVE NEWS
*Miyoshi
- 15%-owned subsidiary, Core Power (Fujian) has secured two new sales contracts with Jiangxi Changhe Automotive, a subsidiary of Beijing Automotive Group for the supply of all-electric cars.
- Under the contracts, Core Power will sell 50,000 all-electric cars to Jiangxi Changhe within three years.
- The consideration is not fixed and the parties will determine the price by reference to the then prevailing prices of raw materials such as steel, lithium batteries, etc.
- Trades at ~11x FY18e P/E and 0.6x P/B

*Oxley
- Entered a 7-year lease agreement with Córas Iompair Éireann (CIE) to develop a 1,963-ha site at Connolly Station, Dublin.
- Upon phased completion, CIE will grant Oxley a 300-year ground lease and allow the group to sub-let the premises to third parties.
- During the term, the group will pay CIE annual license fee of €2m for first 6 years and €3.05mfor the 7th year, and annual rent of not less than €3.05m for the ground lease.
- Trades at over 54% discount to RNAV

*Ausgroup
- Awarded A$11.7m contract for turnaround services at Yara Pilbara liquid ammonia plant in Western Australia

NEUTRAL NEWS
*Capitaland
- Ascott, wholly owned subsidiary of Capitaland, enters into JV with Nasdaq-listed Huazhu Hotels Group to grow Citadines brand in China.
- Ascott, Huazhu and CJIA (a subsidiary of Huazhu) will hold 50%, 10%, and 40% stake in the JV.
- Management opines the JV will accelerate Ascott's growth in China and boost its recurring fee income.
- JV has a target to sign 16,000 units under Citadines by 2025, more than triple its existing Citadines portfolio in China.
- Trades at 0.81x P/B

*Nordic
- Disposing its property at 5 Kwong Min Road to Geonamics for $2.4m. The property sits on a land area of 4,024.8 sqm.
- It is expected to reap net gain of $0.3m on the disposal.
- Proceeds will be used to repay debt and improve its overall cash position.

*FSL Trust
- In view of the current poor market conditions for vessel disposals, the Trust considers that refinancing options in respect of the Trust's chemical tankers, FSL New York and FSL London should be explored.
- As such, discussions with Banks to re-finance the chemical tankers are now in progress, and a further announcement will be made should an agreement be reached.

NEGATIVE NEWS
*Ezion
- Warned that the group is likely to record a net loss in 1Q18, due to the delays in re-deploying some of its assets even as it finalizes the refinancing exercise. While this has adversely affected the group's revenue and the profitability, it remains operationally cashflow positive.

*Raffles United
- Assisting Commercial Affairs Department (CAD) with investigations on a potential breach of the Securities and Futures Act.
- Managing Director, Executive Director, CFO, Business Development Director, Adviser, as well as staffs and former employees, were interviewed by CAD.
- To recap, requested documents and IT equipment dating back to 1 Jan '15 have been handed over to CAD.

Tuesday, May 8, 2018

SG Market (08 May 18)

MARKET OVERVIEW
- The market is exhibiting some technical weakness and could continue to drift downwards amid an uninspiring 1Q corporate results season so far.
- With crude staying above US$70/bbl, oil-linked counters may be in focus as investors weigh the repercussions of US exiting the Iran nuclear deal.
- Technically, the MACD on the STI is exhibiting a bearish crossover, suggesting some near term weakness. Immediate support for the key index lies at 3,500 with topside resistance at 3,640.

CORPORATE RESULTS
*Frasers Logistics & Industrial Trust
- 2QFY18 DPU grew 3.4% to 1.81c (+3.4%), in tandem with estimates and distributable income of A$25.9m (+3.2%) and a higher hedged exchange rate
- Gross revenue and NPI climbed 6.4% and 8.1% respectively to A$43.6m and A$33.4m on additional contributions from four completed industrial properties in Australia acquired in mid-2017 as well as Beaulieu and Stanley Black & Decker facilities completed in 4Q17.
- Three leases totalling 34,527 sqm in New South Wales and Victoria were signed during the quarter.
- Portfolio was 99.4% occupied with a WALE of 6.75 years, and minimal lease expiries (1.1%) in FY18.
- Aggregate leverage was 30.5% with weighted borrowing rate of 2.9%. 85% of total borrowings on fixed interest rates.
- Trades at annulaised 2QFY18 yield of 7.1% and 1.12x P/B.

*Mindchamps
- 1Q18 net proflt of $0.34m (-51%) appears to fall short of consensus estimate in a seasonally weak quarter.
- Revenue rose 36% to $6.0m, driven by the increased number of enrolled students following the acquisitions of four preschool centres in Australia in Nov '17.
- Gross margin narrowed by 1.8ppt to 57% due to a hike in staff cost, which resulted from the increased number of academic staff following the acquisition of the Australian company owned and operated centres.
- Bottom line was hit by higher admin expenses post listing as well as currency translation loss of $0.6m due to the weakening of AUD against SGD.
- Balance sheet remains healthy with a net cash position of $29.4m (12.2c/share)
- Trades at 32x trailing P/E.

*United Engineers
- 1Q18 net profit up 3% to $9m mainly due operating losses from its property development segment narrowing 81% to $0.5m while operating profit from its engineering and distribution business soared 200% to $2.7m.
- Revenue decreased 1% to $105m due to lower revenues from all segments (2%-11%) except engineering & distribution (+7%).
- Gross margin improved 1.3ppt to 43.9% amid a shift in revenue mix.
- On outlook, the group intends to embark on AEIs for its SG investment properties and make selective acquisitions if and when such opportunities arise.
- Trades at 0.86x P/B

*OKP Holdings
- 1Q18 net profit sank 43.7% to $2.8m due to a $1.9m drop in profits from associates/JVs amid completion of an exec. condo project.
- Revenue tumbled 22.7% to $22.9m, as higher recognition from maintenance projects failed to offset weakness in construction segment, particularly after the collapse of a viaduct along PIE in 2017.
- Gross margin widened 4.2ppt to 24.2% amid a shift in revenue mix.
- Bottom line was also hit by a higher effective tax rate of 15.7% (1Q17: 8.5%).
- Order book depleted to $249.4m (Dec '17: $268m).
- Trades at 0.85x P/B.

*Halcyon Agri
- 1Q18 net profit plunged 98.3% to $0.3m mainly due to a 52.7% drop in gross profit to US$22.8m partially offset by a 32% reduction in net finance costs to US$4.4m.
- Revenue fell 15.6% to US$429.9m from lower rubber prices (-20.1%), partially offset by higher sales volume (+5.6%).
- Consequently, gross margin narrowed 4.2ppt to 5.3%.
- For the remainder of 2018, management is focused on the integration of five newly acquired SIR factories
- Trades at 33x trailing P/E and 0.81x P/B

*Bumitama Agri
- 1Q18 net profit fell 16.8% to Rp271.8b, bringing earnings to 22% of full-year forecast.
- Revenue slid 9.1% to Rp1.91t as lower selling prices of CPO (-7.6%) and palm kernel (-21.5%) outweighed the increased volume of CPO (+3.2%) and palm kernel (+13.6%).
- Gross margin expanded 1.3ppt to 27.2% on lower costs of sales (-10.8%).
- Bottom line was dragged by FX loss of Rp15.9m (1Q17: 11.3m gain), higher finance costs (+22.2%), admin expenses (+8.8%)
- Trading at 1.7x P/B.

POSITIVE NEWS
*Keppel DC Reit
- Acquiring a 99% interest in Kingsland Data Centre for $295.1m. The facility (to be renamed as Keppel DC Singapore 5) is located in Jurong and has 98,769 sf of NLA with a committed occupancy of 84.2%.
- Upon completion in 2Q18, the acquisition is expected to be DPU accretive and will further boost its footprint in Singapore to nearly 300,000 sf of aggregate lettable area.
- Separately, the private placement of 224m new Units at $1.353 apiece, which will raise gross proceeds of $303.1m was over 2x covered and saw strong participation from new and existing institutional, accredited and other investors.
- Based on the pro forma as at 1Q18, the REIT's aggregate leverage will improve from 37.4% to 32.1% following the transactions.
- Trades at 1Q18 annualised yield of 5.0% and 1.5x P/B

*China Everbright
- Secured Pulandian Project Phase II in Liaoning Province.
- Daily wastewater treatment capacity of 30,000 m3.
- BOT model with 20-year concession period on an estimated CAPEX commitment of Rmb82m.
- Expected to commence operation by end 2018.
- Trades at 13.8x trailing P/E.

Keppel Corp
- Divesting its 99.8%stake in Keppel Bay Property Development (Shenyang) to Shenyang Vanke Property Development for Rmb502m ($104.8m).
- Expected to reap net gain of ~Rmb176m.
- Divestment completion should take place by Jun.
- Trades at 12.8x P/E

NEUTRAL NEWS
*HC Surgical
- Acquires 51% stake in Jason Lim Endoscopy & Surgery (JLES) for $832k.
- $628k will be paid in cash while the remaining to be paid via 0.3m new shares at $0.68 apiece, a premium 0.7% to last close.
- Deal also comes with an agreement to buy remaining 49% stake at a valuation of 10x JLES's FY22 NPAT.
- Trades at 27.7x trailing P/E.

*ISOTeam
- Acquiring Chinensis Enterprise from Koh Chong Meng for $0.1m (2.6x P/B).
- Chinensis provides landscape planting, care and maintenance services.

NEGATIVE NEWS
*PACC offshore Services
- Has filed a Notice of Arbitration against Mexico under the Agreement between both countries on the Promotion and Reciprocal Protection of Investments.
- The arbitration is in relation to certain of the Group's investments in Mexico, specifically those made to charter certain vessels for use by Petróleos Mexicanos (Pemex), Mexico's state-owned oil company.
- Beginning in 2014, Mexico took actions, in violation of its obligations under Chapter II of the Bilateral Investment Treaty.
- These actions prevented the company from continuing to charter those vessels to Pemex, and thereby destroyed those investments that it made in Mexico.
- The Company is seeking compensation from Mexico for the value of those investments.

*Hiap Hoe
- Warned that it is expected to report a loss for 1Q18, primarily due to FX loss and the fair value changes in financial instruments.

Monday, May 7, 2018

SG Market (07 May 18)

MARKET OVERVIEW
- The market could advance this morning after US stocks rose the most in almost 4 weeks on Friday as the country's jobless rate hit an 18-year low. Oil-linked counters may be in play following higher oil futures as traders braced for a re-imposition of some US sanctions on Iran.

- While still stuck in a downward trend, STI could recover on strong US market. Immediate support for the key index is at 3,555 with topside resistance at 3,640.

CORPORATE RESULTS
*OCBC Group
- 1Q18 net profit of $1.11b (+29%) missed expectations at 23% of consensus.
- Net interest income grew 11% to $1.42b from $1.27b a year ago, underscored by strong asset growth (+4% q/q, +10% y/y) but NIM remains flat q/q at 1.67% (+5bps y/y), offset by higher cost of funding.
- Non-interest income of $918m (-24% q/q, +8% y/y) as Fee and commission income increased 11% to $536mn, led by a 19% rise in wealth management fee income but offset by the decline in net trading income of $94m (-5% q/q; -41% y/y). The decline q/q was partly due to GE's profits from life assurance which fell 38% q/q.
- Operating expenses rose 6% to $1.03b, largely driven by a rise in staff costs. The Group's cost-to-income ratio fell from 45.9% to 44.2%, as a result of strong income growth and effective cost management.
- Overall, the NPL ratio fell to 1.4% from 1.5% q/q but higher compared to 1.3% a year ago while annualised ROE improved to 11.8% from 9.6% in 1Q17. CET1 capital position remained stable at 13.1% (4Q17: 13.1%), but this is lower than peers at 14-14.9%.
- Trades at 1.4x P/B. MKE last had a buy with TP of $14.83

*Chip Eng Seng
- 1Q18 net profit slumped 30% to $6.1m, meeting only 15% of full year estimates.
- Revenue jumped 22.3% to $204.3m as stronger contributions from property development (+52.3%) and hospitality (+147.4%) businesses outweighed weakness in construction (-29.4%).
- Gross margin widened 2.4ppt to 21.8%.
- Bottom line was eroded by higher admin costs (+42.6%) and effective tax rate of 32.8% (1Q17: 20.5%), as well as higher share of profit attributed to non-controlling shareholders (+18%).
- Construction order book rose to $524.6m (4Q18: $403.6m) after it secured a HDB design and build contract
- Trading at 15.5x FY18 P/E and 0.75x P/B.

*Nam Lee Metal
- 1H18 net profit up 2.9% to $5.5m (1H17: $5.4m) on higher revenues offset by FX and fair value derivative losses
- Revenue increased 27.6% to $85.8 (1H17: $67.2m) due to higher contribution from aluminium segment
- Consequently, gross profit grew 22% to $15.5m (1H17: $12.7m) while gross margin dipped 0.8ppt to 18.1%
- Trades at 8.4x trailing P/E and 0.68x P/B

POSITIVE NEWS
*Sunpower
- Secured Rmb80m worth of contracts from a subsidiary of Shanghai listed TBEA Co. Ltd, a provider of systematic solutions for the global energy industry.
- The deal involves the supply of fluidized bed reactors and heat exchangers, to be delivered in 2018.
- Expected to contribute positively to FY18 financial results.
- Trades at 11.2x trailing P/E

*Spackman
- The Board has approved the spin-off of the Group's 51%-owned subsidiary, Novus Mediacorp ("Novus Medicorp") and the Group's wholly-owned subsidiary, Frame Pictures Co., Ltd. ("Frame Pictures") ("Proposed Spin-off"), for the combined entity to seek listing on the Catalist Board.
- The Company has appointed RHT Capital as the financial adviser in relation to the Proposed Spin-off and the issue manager and full sponsor in relation to the Proposed Listing.
- The Company believes that the Proposed Spin-off and Proposed Listing shall allow the combined entity of Novus Mediacorp and Frame Pictures to independently raise the capital necessary to unlock the full potential of its operations and projects, and to capitalize on the rapidly growing post-theatrical and camera equipment leasing markets.

NEUTRAL NEWS
*Sembcorp Industries
- North-West Power Generation Company (NWPGC), a state-owned power generation company of the government of Bangladesh, has injected US$12.8m in equity into Sembcorp North-West Power Company, Sembcorp's project company that is developing the Sirajganj Unit 4 power project in Bangladesh.
- Following this equity injection and receipt of relevant local regulatory approvals, NWPGC has taken up a 17% stake in Sembcorp North-West Power Company, with the remaining 83% effectively owned by Sembcorp.
- The cash proceeds would go towards funding the ongoing construction of the Sirajganj Unit 4 power plant.
- NWPGC plans to make further equity injection(s) by the end of this year, which will result in Sembcorp North-West Power Company being 71% owned by Sembcorp and 29% by NWPGC.
- Trades at 16x P/E and 0.8x P/B

Lippo Mall

Lippo Malls' (LMIR) 1Q18 DPU of 0.67¢ was in line with estimates but fell 24.7% due to the 9.1% depreciation of IDR against SGD and an increase in tax as a result of a new tax regulation.

This new tax ruling, which came into effect in Jan 2018, levies a 10% tax on outsourced service and utilities recovery charges.

In local currency terms, gross revenue grew 10.3% to Rp504b, boosted by contributions from three new acquisitions namely Lippo Plaza Kendari (acquired in Jun '17), Lippo Plaza Jogja and Kediri Town Square (Dec '17). This was partially offset by the non-renewal of the master leases at seven retail malls.

However, net property rose at a slower 4.1% to Rp450.9, mainly due to higher property operating expenses, which more than doubled to $5.2m from $2.5m (last year's expenses included a one-off reversal of allowance on doubtful receivables).

During the quarter, the Indonesian mall operator renewed 7,912 sqm of space at a positive rental reversion of 5.3%.

Portfolio occupancy of 94% was above the industry average of 84.8%. The weighted average lease term was 4.06 years, with a balanced mix of long-term anchor leases and shorter-term ones to provide both stability and growth potential.

Aggregate leverage stood at 35%, with weighted average all-in cost (including perps) of 5.28% and debt maturity of 1.87 years. About 46.8% of its total borrowings are on fixed rate but refinancing risk is a key concern given that $280m of loans are due in 2018.

On the retail outlook, Indonesia's retail sales grew 1.5% in Feb, reversing a contraction of 1.8% in the preceding quarter. Based on Bank Indonesia's Retail Sales Survey Feb 2018 of 700 retailers in 10 major cities, March retail sales is projected to rise 1.7%.

Nonetheless, the trust is not over-reliant on any one single tenant and will actively work with its mall operator to improve tenant mix and organise events and promotional activities to increase shopper traffic.

Moving forward, LMIR is also exploring new ways to strengthen its ability to hedge its cash flow and reduce the impact of currency fluctuations so as to mitigate the risk of further depreciation of the rupiah in the coming quarters as well as the effects of the new tax ruling.

At current level, LMIR trades at annualised yield of 8.1% and 1x P/B.

The street is bearish on the retiail trust with 2 Sells and an average TP of $0.32.