Friday, December 9, 2016

SGX

SGX saw renewed market fervour on possible spillover effects from Trumponomics with securities turnover surged to $29.3b (+51%y/y, +49% m/m) in Nov albeit with one additional trading day versus Oct and two more compared to last year. Nonetheless, securities daily average value jumped to $1.3b (+37% y/y, +43% m/m).

During the month, there was one new Catalist listing (HC Surgical Specialists) which raised $8.1m. There were 24 new bond listings which raised $8.5b.

Derivatives trading volume also saw a substantial uptick to 16.6m contracts (+22% y/y, +43% m/m), reflecting the risk-on sentiment across Nifty 50 (+31% y/y, +16% m/m) and Nikkei 225 (+22% y/y, +52% m/m) index futures although performance was more mixed for the China A50 (-2% y/y, +53% m/m) and MSCI India (-72% y/y, +7% m/m) index futures.

Meanwhile, FX futures volume stood at 701,870 contracts (+51% y/y, +41% m/m), testament of the renewed volatility in currency markets following Trump's surprise election.

The Exchange's strongest growth engine continued to come from the commodities derivatives trading which bolted to 2.4m (+147% y/y, +101% m/m), buoyed by iron ore (+145% y/y, +111% m/m), forward freight (+34% y/y, +52% m/m), and rubber (+273% y/y, +42% m/m) derivatives.

While the strong trading flows were reflective of overseas events such as Trump's election win, there is little to indicate that such flows will continue with similar strength in the coming months.

SGX is currently trading at 22.2x forward P/E with indicative yield of 3.8%, seemingly cheaper to its closest peer, HKEx (38.4x, 2.6%). However, the latter's premium valuation is backed by stronger growth prospects arising from its closer proximity and ties to China coupled with two stock connects (Shanghai and Shenzhen).

The street has 8 Buy, 10 Hold ratings on the exchange with a consensus TP of $7.79, indicating little potential upside (>5%) from current prices.

SG Market (09 Dec 16)

The market is likely to trade sideways, as any positive sentiment overflowing from Wall Street and higher oil prices could be met with profit-taking amid an overbought market.

Regional bourses opened mixed, with Tokyo (+0.6%) and Sydney (+0.3%) stronger, and Seoul (-0.4%) lower.Technically, the overstretched STI could face some resistance at the 2,960 triple-top, with next objective at 3,040. Underlying support is at the 2,882 breakaway gap.

Stocks to watch:
*Property: Consultant JLL expects the recent mild recovery in private residential transactions to spill into 2017, as buyers feel that residential prices have fallen to more acceptable levels. However, expected higher interest rates will cap home demand and price upside. MKE’s top call is UOL (Buy, TP SGD7.39).

*SGX: Nov securities turnover jumped on renewed market favour to $29.3b (+51% y/y, +49% m/m), with daily average turnover value at $1.3b (+37% y/y, +43% m/m). Derivatives volume totalled 16.6m contracts (+22% y/y, +43% m/m) on stronger performance across equity index (+10% y/y, +36% m/m) and FX futures (+51% y/y, +41% m/m) volume.

*SMM: Denied that it is putting up PPL Shipyard or any other yards for sale. This came as a response from a press query, as SMM was understood to have sought valuation for one or more of PPL’s assets.

*Wilmar: South African subsidiary Wilmar Continental Edible Oils and Fats was raided as part of an industry-wide investigation by the Competition Commission.

*Sabana REIT: Entered into a put and call option agreement with LHN Group to purchase a six-storey single-user light industrial building at 72 Eunos Avenue 7 for $20m conditional upon HDB’s approval. The building has a GFA of 67,977 sf with a remaining lease of 24 years. Upon completion of the acquisition, LHN will lease back 71% of the total GFA of the building for 10 years and be appointed as the property’s manager.

*Low Keng Huat: 3QFY17 net profit plunged 74.4% y/y to $3m, as 1) gross margin normalised from 104% to 41.8% on the absence of cost writeback and 2) Other income plunged 76% to $2.5m, due to an absence of disposal gains. Revenue of $12.4m (-33.7%) was dragged by lower construction (-50%), hotel and F&B (-25.5%), and investments (-2.2%) performance, on top of zero contribution from its development business (3QFY16: $$3.2m) as it sold no residential units during the quarter. NAV/share at $0.88.

*Vibrant: 2QFY17 net profit surged 159.5% y/y to $9m on stronger associates’ contributions of $3.8m (+572.4%) from the sale of strata units at GSH Plaza. Revenue slipped 4.5% to $45m due to lower warehousing revenue, partially offset by contributions from its housing project in Jiangyin, China. Gross margin expanded to 34% (+7.4ppt) on the cost rationalisation in its freight and logistics business, as well as divestment of a loss making arm. Bottomline was further supported by FV gains of $3.4m (2QFY17: $1.6m loss), FX gains of $1.7m (2QFY17: $0.5m) as well as $1.2m in divestment gains. NAV/share at $0.63.

*Hotel Properties: Acquired an effective 73.99% stake in Boathouse Kata for 44.6m baht. In addition, it acquired 539.8m baht worth of notes issued by Boathouse. Boathouse owns a 38-unit boutique resort at Kata Beach, Phuket, Thailand.

*MMP Resources: Entered into a settlement agreement with its parent, Primeforth to commence repayment of $1m worth of fees owing to Magnum Energy from 1 Apr ’17.

Thursday, December 8, 2016

SG Market (08 Dec 16)

Funds flow may continue to power the hugely overbought market with rotational play shifting to the small mid-caps. Regional bourses in Tokyo (+1.2%), Seoul (+1.2%) and Sydney (+1.1%) opened higher.Technically, the overstretched STI could face some resistance at the 2,960 triple-top, with next objective at 3,040. Underlying support is at the 2,882 breakaway gap.

Stocks to watch:
*Riverstone. MKE believes that recent share price correction due to Malaysia’s new FX repatriation policy has been overdone, as it has a limited earnings impact. Maintain Hold with TP of $0.92 (pegged to 16x FY17e P/E), as current valuation of 15x is not compelling.

*Citic Envirotech/ Sunpower: A consortium comprising the two, together with Guangdong Keying Zhiran Environmental has been awarded a Rmb3.2b PPP project consisting co-gen power and steam facilities, an industrial wastewater treatment plant, water cycling plant and other ancillary assets in Guangdong, China. Phase 1 will see an investment of Rmb2b to design and build a 40,000 m3/day industrial wastewater treatment plant and a 30,000 m3/day recycling plant, with completion by end-2017.

*Mermaid Maritime: Terminated a contract to construct a DP2 dive support and construction vessel for China Merchants Industry on mutual terms. The pre-paid installment of US$20.4m has been impaired in FY15, and no further obligations are due. Trading at 0.5x P/B.

*TTJ: 1QFY17 net profit was mostly flat at $4.1m (-1%) on revenue of $26.5m (+3.6%) due to stronger contributions from its structural steel business. However, gross margin contracted to 20.4% (-9.8ppts) due to lower margin projects executed during the period. Bottomline was supported by FX gains of $0.2m (1QFY16: $1.4m loss) as well as lower admin expenses (-9.6%). NAV/share at $0.372.

*Tianjin Zhong Xin Pharmaceutical: Obtained the certification from Zhongzhi (Beijing) Certification, indicating that the company has systems of intellectual property management which are compliant with the national standards. The certification will allow it to pursue higher standards in the management of its IP as it innovates in the Chinese medicine space.

*Foreland Fabrictech: Lodged a complaint against its former Executive Chairman with the CAD in relation to possible breach(es) of securities law or other offences.

*Asia Fashion: Proposed a placement of 35m shares at $0.11 apiece, representing a 37.5% premium to the average price on 7 Dec to four individuals to raise $3.75m for working capital. The placement shares will make up 40.94% of the enlarged share capital.

*Jason Holdings: The application for a scheme or arrangement has been granted by the Singapore High Court, and the company is expected to meet with creditors by 1 Feb ’17 to approve the scheme.

*Amplefield: To be removed from the SGX watchlist on 9 Dec in light of its proposed transfer to the Catalist board.

Wednesday, December 7, 2016

SG Market (07 Dec 16)

Singapore shares are likely to consolidate gains from a grossly overbought market. The benchmark STI has surged almost uninterruptedly by 5.8% since mid-Nov and is due for a pause.

Regional bourses in Tokyo (+0.5%), Seoul (+0.3%) and Sydney (+0.5%) opened stronger.Technically, the STI just less than a point shy of the 2,950 resistance, with underlying support at the 2,882 breakaway gap.

Stocks to watch:
*Del Monte: Del Monte. 2QFY17 net profit slumped 57.8% to US$20.2m, missing street estimates, due to the absence of a US$39.4m remeasurement gain. Revenue of US$636.2m (-4.6%) was weighed by lower sales in the US (-9.3%) and Europe (-57.8%), but partially cushioned by strong performance in Asia (+20.9%). Bottomline was further impacted by a US$1.5m one-off charge arising from the closure of its North Carolina plant. NAV/share at US$0.177.

*XMH: 2QFY17 net profit collapsed 96.5% to barely breakeven $0.1m on increased expenses associated with its new factory. Revenue slipped 2.8% to $25.1m on reduced contributions from its project business, which was affected by weak market sentiment, partially offset by improved sales of its distribution business. Amid the shift in revenue mix, gross margin contracted to 21.1% (-3.1ppt). Bottom line was further crushed by lower FX gains of $0.2m (-87.6%). NAV/share at $0.622.

*Swiber: Its chairman and several directors, including the CFO were hauled for questioning by CAD and released on bail for possible breach relating to false and misleading disclosures. Trading of the troubled offshore oil and gas contractor has been suspended and the company is under judicial management.

*Spackman Entertainment: Sold the distribution rights of Master, its crime-action film to 31 countries prior to its initial box office release in Korea. The film is expected to screen on 21 Dec.

*CWG Int’l: Obtained approval from authorities to increase the plot ratio of a land site in Parramata, Sydney to 8:1 from 4:1, with a further 15% uplift to 9.2 through a design excellence bonus mechanism subject to approval. It intends to develop the land site into a residential building which is expected to be completed in 2019.

*Cordlife: Garnered a 92.79% stake in StemLife following its voluntary take-over offer at 54 sen/share.

*Viva Industrial Trust: Requested S&P to withdraw its BB+ credit rating (ie. non-investment grade speculative), after the ratings agency reaffirmed the rating with a stable outlook.

*Olam: Priced its US$175m US private placement debt at a fixed coupon of 3.9% for five years. Proceeds will be used to repay existing bank debt and general corporate purposes.

Tuesday, December 6, 2016

SG Market (06 Dec 16)

Blue chips may track overnight gains on Wall Street on funds inflow as the Trump rally continues, although upside might be capped by an overbought market.

Regional bourses in Tokyo (+1%), Seoul (+1.1%) and Sydney (+0.7%) opened firmer.Technically, the overstretched STI looks poised test the 2,950 topside resistance, while underlying support is seen at the 2,882 breakaway gap.

Stocks to watch:
*UOL: Maybank KE initiates on UOL with Buy and TP of $7.39 (27% upside), implying a 24% discount to RNAV. Risk-averse market will favour its conservative trading portfolio and strong recurring income. Downside supported by its stub value, which is currently at a 42% discount to its underlying assets. Recommend a switch from City Dev (Hold, TP: $8.90) for Singapore property exposure.

*Ascendas REIT: Proposing to acquire DSO National Laboratories buildings and DNV GL Technology Centre for $420m from sponsor Ascendas. Deal will be partially funded by issuance of new units amounting $100m. The acquisition is expected to generate 6% NPI yield in the first year, and would have been accretive to FY3/16 DPU by 0.059¢ to $0.1542 on a proforma basis.

*Super: Flat 3Q16 net profit of $7.4m (-0.1%) missed estimates. Revenue slipped 1.2% to $119.5m due to weaker contributions from food ingredients (-4.8%) but partially cushioned by stable brand consumer sales (+0.7%). Gross margin widened 2ppt to 34.6% from sales mix shift, but bottom line was weighed by 9% increase in admin expenses due to severance expenses related to the consolidation of its non-dairy creamer facilities in Singapore. Maybank KE has Hold call with TP of $1.30.

*Sabana REIT: Divesting 218 Pandan Loop to X Properties Inc for $14.8m. The property has a gfa of 50.374 sf, representing about 1.1% of its portfolio. The industrial trust expects to book a gain of $1.8m from the sale and proceeds will be used to repay borrowings, pursue acquisition opportunities and for working capital purposes.

*8Telecom: Granted a facilities-base operations licence by the IMDA. This would allow it to utilise 1.79-1.8 GHz spectrum to provide dedicated LTE network services to the public transportation, public safety, security, surveillance and other vertical industries.

*Samudera: Expects to record a net loss for 4Q16 and FY16 due to provisions for impairment of its fleet as well as bad debt for Hanjin Shipping, which filed for receivership.

*Pacific Radiance: Executive Director Mok Weng Vai was arrested by CPIB on 2 Dec, on the suspicion of an offence under Section 6(c) of the Prevention of Corruption Act (Cap. 241).*SMJ: Investing US$0.2m in 33:47:20 JVCo, PT Spektrum with Jusuf Wijaya and Gergorious Janus. Spektrum will supply and distribute carpets and other furnishing materials in Indonesia.

*YuuZoo: Launched YuuWallet, an e-wallet that enables secure payments and money transfer without credit cards. *Civmec: Incorporated ForgacsValco with JV partner Valco Group. ForgacsValco will provide repair, overhaul and testing services of valves in the oil & gas, water, mining and defence markets.

*MS Holdings: Profit warning

Monday, December 5, 2016

SG Market (05 Dec 16)

Recent bullish sentiment may be thwarted as Wall Street retreated on profit-taking and investors mull tail risks in the eurozone after Italian PM Matteo Renzi conceded defeat in the constitutional reform referendum and will resign. For the coming week, investors will chew on the ECB meeting on Thu following the outcome of the Austrian elections and Italian referendum as well as China's trade data on Thu and consumer and producer prices on Fri.Regional bourses are pulling back, with Tokyo (-0.5%), Seoul (-0.4%) and Sydney (-0.9%) opening weaker.Technically, the STI appears overstretched with topside resistance at 2,950 and underlying support at the 2,882 breakaway gap.

Stocks to watch:
*Banks: Rallied 8-18% post-Trump’s victory, sentimentally driven by expectations of higher interest rates, and firmer oil prices. That said, MKE maintains a Negative stance on Singapore banks, as fundamental outlook of sluggish loan growth and worsening asset quality is unchanged. MKE prefers UOB (Hold, TP $18.36) for exposure.

*CapitaLand: Inked agreement to work with Chinese co-working space operator UrWork to provide co-working spaces in CapitaLand’s properties in China and Singapore. MKE has Buy on CapitaLand with TP of $4.06.

*SPH REIT: Remains interested in acquiring The Seletar Mall from sponsor but cited timing and pricing as two determining factors. Trades at 5.9% indicative yield and 1x P/B.*Nam Cheong: Received termination notice from Perdana Petroleum for one accommodation work barge order, which is expected to impact FY16 earnings. Trades at 0.34x P/B.

*Jason Holdings: Seeking High Court approval for a scheme of arrangement between the company and its creditors, as part of efforts to restructure debts and liabilities.

*USP Group: Appointed as exclusive distributor of Mercury Marine’s products in Singapore and Malaysia wef 1 Dec ’16. The agreement is for three years and with option to extend for another three years, subject to performance conditions.

*Hiap Seng/Rowsley/Enviro-Hub/Samko Timber: Will be removed from SGX Watch-list wef 5 Dec.

*Swee Hong/FJ Benjamin: Entering SGX Watch-list wef 5 Dec.

Friday, December 2, 2016

SG Market (02 Dec 16)

Investors are likely to take some gains off the table on renewed fears of a potential political crisis in EU ahead of the Italy referendum this weekend. Regional bourses opened lower today in Tokyo (-0.5%), Seoul (-0.6%) and Sydney (-0.3%).Technically, STI appears a little stretched, with topside resistance at 2,950 and support at 2,882 breakaway gap.

Stocks to watch:
*STI: No change will be made to the constituents of the FTSE STI in its Dec quarterly review. The reserve list comprises Suntec REIT, Mapletree Commercial Trust, Keppel REIT, First Resources and Sing Post.

*GLP: Appointed JP Morgan as its financial adviser to undertake an independent strategic review to enhance shareholder value after it reportedly attracted unsolicited interest from a consortium comprising China's sovereign fund, CIC, Hopu Investment Management and Hillhouse Capital Management. GIC holds a 37% stake in GLP, while Hillhouse owns 8.2%. Hopu was part of a consortium that invested US$2.5b in GLP China in 2014. GLP trades at 0.79x P/B.

*Midas: Secured two new contracts in China worth Rmb79.8m, two in Europe totalling Rmb137.7m and one in the Middle East for Rmb14.6m. These orders are slated for delivery in 2017 and expected to contribute positively to FY17 earnings.

*Noble: Completed the disposal of Noble Americas Energy Solutions business for US$1.16b.

*Vard: Closing date of the privatisation offer from parent Fincantieri at $0.24/share will be on 29 Dec.

*Ezra: Extended the put option exercise date granted to Perisai Petroleum for sale of its 51% stake in SJR Marine to the group for US$43m to within one month from 9 Dec.

*Jasper Investments: Appointed as the project manager by main contractor Guangdong Zhuhai LuYuan Construction (GZLY) for marine transportation of aggregates and other construction materials to support the HK-Zhuhai-Macau Bridge projects. The assignment is expected to commence soon for a period of two years. The group is confident of winning more assignments from GZLY.

*Allied Technologies: Seeking approvals to transfer from Mainboard to the Catalist, as group sees difficulty in meeting the $0.20 minimum trading price requirement.

*Epicentre: Entered MOU to negotiate exclusively with hair removal and skin rejuvenation group Japan IPL Holdings on a potential cooperation, JV and/or acquisition for a two-month period.

*OKH: Disclosed that Executive Director and Deputy CEO Bon Ween Fong have been removed from Interpol Red Notice list.

*ISR Capital: ISR CEO Quah Su-Yin claimed that there is no direct or indirect link between the group and the 2013 penny stock saga, save for the fact that she is the sister of one of the co-accused persons. Shares of ISR have been suspended since 27 Nov.

*Swiber: Singapore High Court has granted Swiber an extension until 23 Mar ’17, for judicial managers to send creditors a statement of proposals and summon a creditors’ meeting.