Tuesday, January 24, 2017

SG Market (24 Jan 17)

Focus will be on the protectionist trade policies being rolled out by the new Trump administration and local corporate earnings.

Regional bourses opened mixed in Tokyo (-0.2%), Seoul (-0.2%) and Sydney (+0.5%).Technically, the STI remains in overbought territory with underlying support at 2,968 and topside resistance at 3,040.

Stocks to watch:
*Keppel DC REIT: 4Q16 results missed estimates as DPU of 1.31¢ (-20.1%) was diluted by an enlarged unit base arising from the acquisition of Keppel DC Singapore 3. This brought FY16 DPU to 6.14¢ (-5.7%). For the quarter. revenue grew 4.2% to $26.8m from increased contributions from Cardiff and Milan data centres, as well as higher variable income at its Singapore properties. NPI of $24.9m (+14.1%) was further lifted by lower property tax and expenses. Portfolio occupancy rose to 94.4% (+1.7ppt q/q) with WALE of 9.6 years (3Q16: 8.6 years), while aggregate leverage eased to 28.3% (-1.1ppt). NAV/share at $0.954.

*Mapletree Logistics Trust: Flat 3QFY17 of 1.87¢ was in line with estimates. Revenue of $95.5m (+7.4%) and NPI of $79.9m (+7.7%) were boosted by acquisitions/AEIs, as well as stronger performance in Hong Kong. However, distributable income of $46.8m (+0.8%) was crimped by a negative tax adjustment, while DPU was further diluted by increased distribution to perps holders. Occupancy slipped 0.3ppt q/q to 96.1% with WALE of 4.1 years. Aggregate leverage climbed 1.1% to 38.7%. NAV/unit at $1.03.

*Frasers Commercial Trust: Flat 1QFY17 DPU of 2.51¢ met expectations, while distributable income of $19.9m (+12%) was shored by capital distribution. Revenue of $39.7m (+0.1%) and NPI of $29.2m (-0.6%) stayed relatively flat as higher contribution from 357 Collins Street and a stronger AUD were offset by lower occupancy rates at China Square Central and Central Park due to redevelopment works and tenant adjustments. Overall portfolio occupancy was stable at 93% with WALE of 3.8 years, while aggregate leverage was unchanged at 36%. NAV/unit at $1.55.

*Ascott REIT: In line 4Q16; DPU slipped 1% y/y to 2.04¢, although distributable income rose 6% to $33.9m, which included a FX gain ($2m) arising from repayment of foreign currency bank loans with the divestment proceeds from Fortune Garden Apartments, and repayment of shareholders’ loan. Revenue grew 6% on increased contribution from recently-acquired Sheraton Tribeca New York Hotel in Apr '16, which lifted overall RevPAU by 2% to $148. However, excluding the acquisition, same-store-RevPAU tumbled 6% on weaker performances from China and UK assets. Aggregate leverage narrowed to 39.8% (-1.5ppt), and group remains on the lookout for accretive M&A opportunities in key gateway cities of Australia, Japan, Europe and the US. NAV/unit at $1.33.

*Cache Logistics Trust: 4Q16 results missed expectations as DPU tumbled 10.8% to 1.85¢ on a higher unit base, while distributable income fell 5.2% to $16.6m from increased finance costs and reduced capital distributions. Revenue and NPI rose to $27.3m (+13.5%) and $21.3m (+11.3%), respectively, driven by increased contribution from DHL Supply Chain Advanced Regional Centre and three Australian properties acquired in 4Q15. Portfolio occupancy remained stable at 96.4% with WALE of 3.9 years, while aggregate leverage crept up 1.9ppt q/q to 43.1%. NAV/unit at $0.78.

*Keppel Infra Trust: 4Q16 results met expectations although DPU was flat at 0.93¢, bringing FY16 DPU to 3.72¢ (+40.9%), post-merger of Keppel Merlimau Cogen in Jun '15. Quarter revenue fell to $152.2m (-5.2%) on lower tariffs at City Gas (-6.9%), reduced concessions (-27.9%) due to lower construction revenue following boiler upgrades in 4Q15, although partially offset by higher contribution from Basslink (+47.4%). NAV/share at $0.325..

*Soilbuild REIT: 4Q16 results in line despite a 2.7% slip in DPU to 1.57¢, which brought FY16 total payout to 6.091¢ (-6.1%), as an enlarged unit base offset the 4.1% growth in distributable income to $60.3m. Quarter revenue and NPI rose to $21.7m (+6.1%) and $18.9m (+8%), thanks to higher takings from Loyang Way, Bukit Batok Connection, Solaris and Eightrium properties. Overall portfolio occupancy slid to 89.6% (-5.2ppts q/q) with WALE of 3.4 years, while aggregate leverage stood at 37.6% (1.6ppts q/q). NAV/share at $0.72.

*UOL: Granted an option to purchase a residential freehold site at 45 Amber Road for $156m. The site currently holds a horticultural and gardening retail centre, which sits on a land area of 69,858 sf and plot ratio of 2.1, equating to a potential gfa of 146,702 sf ($1,063 psf ppr ex development charges).

*Genting HK: Expects to record a FY16 net loss in the range of US$500m-US$550m (FY15: US$2.1b net profit), mainly due an absence of a one-off accounting gain of US$1.57b and divestment gain of US658.6m, both arising from the partial stake sale in associate Norwegian Cruise Line (NCL) in 2015. Additionally, an impairment loss of ~US$300m will be taken on its remaining stake in NCL from a decline in fair value in late-2016. Further, group incurred a one-time start-up and marketing costs, as well as additional depreciation expenses related to its premium liner Crystal cruise brands and newly acquired German shipyards.

*Banyan Tree: Established 50:50 JVCo with China Vanke, via an asset injection of Banyan Tree's China properties to be determined by an independent valuation. The current book value of these assets is ~Rmb720m. In association with the JV, China Vanke will take a 5% equity take in Banyan Tree through a private placement at $0.60/share.

*IHC: EGM to remove current board members has been approved. Separately, OUE purchased 208.1m IHC shares on 23 Jan for $0.077 apiece, and has emerged as a substantial shareholder with a 12.5% stake.*Swing Media: Proposed placement of 8.5m new shares (19.1% share capital) at $0.60 each to seven individuals, to raise net proceeds of $5.1m intended for working capital (20%) and inorganic growth (80%).

Monday, January 23, 2017

SG Market (23 Jan 17)

The market will be on tenterhooks after US President Donald Trump took a decidedly protectionistic stance in his inauguration speech and withdrew the US from TPP on his first day in office. Traders are also watching UK’s court decision on Brexit, domestic inflation and industrial data as well as 4Q results from a host of REITs and the Keppel group this week.

Regional bourses opened negative in early trading this week in Tokyo (-1%), Seoul (flat) and Sydney (-0.4%).Technically, the STI is still correcting from overbought levels with underlying support at 2,968 and topside resistance at 3,040.

Stocks to watch:
*Frasers Centrepoint Trust: 1QFY17 DPU of 2.89¢ (+0.7%) met estimates although distributable income of $26.6m (+1.1%) was lifted by tax adjustments. However both revenue and NPI fell 6.4% and 5.7% to $44.1m and $31.6m respectively due to reduced takings from Northpoint, which is undergoing AEI. Causeway Point was the star performer, contributing 52.8% of NPI. Occupancy rose 1.9ppt q/q to 91.34% with WALE of 1.62 years, while aggregate leverage climbed 1.4ppt to 29.7%. NAV/unit at $1.93.

*GuocoLand: 2QFY17 net profit jumped 46.3% to $57.1m, mainly boosted by associates/JVs contribution of $44.8m arising from a land disposal by a Malaysian associate. Revenue slipped 3.1% to $232m, while gross margin contracted to 20.4% (-5ppts) due to a change in sales mix. Despite the challenging property market, the office and retail components of its Tanjong Pagar Centre, which obtained TOP in Oct, have achieved more than 80% commitment levels. NAV/share was little changed at $2.96.

*Bumitama Agri: 4Q16 FFB harvest climbed 11% to 1,087,484 MT, as yield improved to 5.3 MT/ha (4Q15: 5.1 MT/ha). CPO production also rose 11.1% to 246,864 MT, even though extraction rate was flat at 22.5% (+0.1ppt). MKE sees value in the stock, which is supported by a 25% FFB nucleus output growth in 2017. Buy with TP of $0.97.

*Keppel Corp: Awarded a 25-year build-own-operate contract for Singapore's fourth water desalination plant, which is expected to commence operations by 2020. The plant will be able to treat sea water and produce 137,000 m3 of fresh drinking water per day. MKE sees downside risk from EPS downgrades and last had a Sell with TP of $4.57.

*CapitaLand: Invested $10.4m for a 90% stake in CapitaLand Thanh Nien, which owns a 0.8ha plot of land in Ho Chi Ming City, Vietnam, which will be developed into a 317-unit residential development. This is in line with its strategy to expand its residential portfolio in Vietnam. Saigon Commercial and Tourism Corp will hold the remaining 10% stake.

*Cambridge REIT: Proposed divestment of light industrial building, 55 Ubi Avenue 3, for $22.1m. The property has a gfa of 141,135 sf (1.7% of portfolio), with a remaining land tenure of approximately 39 years.

*CNMC Goldmine: Completed due diligence works for its proposed 51% stake acquisition of Pulai Mining for RM13.8m. The target owns a brownfield project in Kelantan, Malaysia, that is nearly four times the size of CNMC's existing Sokor gold field. Separately, the group has renewed the mining lease for the Sokor gold field with Kelantan state government for another 21 years till Dec 2034.

*HC Surgical Specialists: Extended the lease for its clinic space at 1 Farrer Park Station Road, Connexion, by three years to 2019, with total rental payment of $0.18m..

*Advanced Holdings: Entered a non-binding term sheet for the proposed $180m-240m acquisition of Agricore Global (AG), which would result in a RTO. AG owns concessions to 23 parcels of agricultural permits covering 232,102 ha in Sulawesi, Indonesia, that can be cultivated into crude palm oil plantations, as well as 2 forestry concessions for timber management.

*AsiaMedic: Acquiring LuyeEllium Healthcare for $42.2m via an issue of 527m new shares at $0.08 apiece, which will result in a RTO transaction. The target provides construction-related non-clinical support and consultancy services to medical institutions in South Korea and China, and will come with an annual profit guarantee of $3.4-4.2m over FY16-20.

*Dukang Distillers: Expects 2QFY17 revenue and earnings to be substantially lower due to ongoing restrictions to the high-end alcohol market in China, switch in consumers' drinking trend to red wine and beer, and severe air pollution hindering the group's operations.

*AA Group: Proposed to acquire Engineering Manufacturing Services (EMS) for $25m, or 4.3x 9M16 annualised P/E, in a bid to diversify its income stream. EMS provides value-added general warehousing and logistics services, industrial and office space and workers' dormitory facilities. Upon completion, pro forma FY15 LPS of 0.15¢ is expected to swing to an EPS of 4.94¢.

Friday, January 20, 2017

SG Market (20 Jan 17)

Investors are likely to stay cautious amid policy uncertainty on the eve of Trump's inauguration and ahead of a slew of corporate results from the REIT sector next week.

Regional bourses opened weaker in Sydney (-0.6%) and Seoul (-0.4%), but positive in Tokyo (+0.3%).Technically, the STI is still correcting from overbought levels with underlying support at 2,968 and topside resistance at 3,040.

Stocks to watch:
*SGX: 2QFY17 net profit of $88.3m (+5.5%) topped estimates as active securities trading (+17%) on the back of post US election rally lifted total revenue by 2.6% to $199.6m (+2.6%). However, derivatives revenue slipped 3.4% to $74.9m as higher volume (+5%) was offset by lower average fees per contract (-9.4%). Operating margin improved 1.2 ppt to 51.3% on tight cost control. Maintained interim DPS of $0.05. Expects a healthy pipeline of IPOs in 2HFY17.

*CapitaLand Mall Trust: Flat 4Q16; DPU of 2.88¢ brought FY16 payout to 11.13¢ (-1.1%), in line with estimates. For the quarter, both gross revenue of $169.3m (-6.1%) and NPI of $116.2m, (-7.6%) were dragged by the closure of Funan mall due to redevelopment works, and Rivervale Mall that was sold in Dec '15. Portfolio occupancy remained healthy at 98.5% (-0.1 ppt q/q), while aggregate leverage narrowed to 34.8% (-0.6ppt). NAV/unit at $1.89.

*GL: 1HFY17 net profit tumbled 52% to US$24.6m on weaker revenue of US$184.5m (-20%), mainly due to an 18% drop in GBP against USD, despite improvements in hotel RevPAR (+3%). Bottom line was further hit by the absence of a one-off $13m gain from the compensation for hotel management contract cessation last year, as well as $11m of other opex comprising a legal claim and asset write-offs. NAV/share at US$0.759.

*Oxley: 2QFY17 net profit surged 163% to $123.7m on revenue of $605.7m (+241%), due to the completion of commercial project Oxley Tower, and handover of certain plots in The Royal Wharf Phase 1A. Gross margin contracted to 33.3% (-4.9ppt) on a change in sales mix, while bottom line was impacted by the absence of marked-to-market FX gains (2QFY16: $12.9m) and JV/associate losses of $4.5m (2QFY16: $26.5m profit) due to fair value adjustments. Total unbilled contract value amounted to $2.6b. Net gearing eased from 2.1x to 1.8x as the group continued to pare its debt pile, underpinned by healthy operating cash flow of $273.6m. Interim DPS shaved to 0.5¢ (0.75¢). NAV/share rose 16% to $0.3105.

*mm2 Asia: Executive chairman and CEO Melvin Ang sold 10m vendor shares to Timothy Mou En-Kuang at $0.485 each. Industry verteran Mou manages Chinese superstar Fan Bingbing and is the CEO of several film studios in China. The group believes Mou's ownership of a 0.95% stake would enhance its business development in the North Asia market.

*AIMS AMP Capital Industrial REIT: In clarification to the media report citing that the REIT is studying potential investment targets, management stated that it is always on the lookout for M&A opportunities, but has not entered into any firm commitment for acquisition.

*Dasin Retail Trust: Public offer of 2m IPO units at $0.80 apiece was 7.6x oversubscribed. The Chinese business trust will commence trading at 2pm today.

Thursday, January 19, 2017

SG Market (19 Jan 17)

Market participants are expected to tread lightly in the next few weeks as they wait for a clearer picture of 4Q corporate results and the outlook for 2017, and Trump's trade policies after he steps into office.

Regional bourses opened higher in Tokyo (+0.9%), Seoul (+0.2%) and Sydney (+0.4%).Technically, the STI is pulling back from overbought level with underlying support at 2,968 and topside resistance at 3,040.

Stocks to watch:
*Sembcorp Industries: Awarded a US$300m build-own-transfer contract by Ministry of Electricity and Energy of Myanmar for a 225MW gas-fired power plant in Mandalay, with concession period of 22 years. MKE last had a Hold with TP of $2.40.

*ST Engineering: Conditionally agreed to purchase a 51% stake in SP Telecommunications, which owns an extensive network of fibre optic back-haul infrastructure and facilities in Singapore, for $54-60m.

*City Dev: Proposed acquisition of a 24% stake in Distrii, a China-based operator of co-working spaces in Shanghai for Rmb72m ($14.9m). Distrii currently has a capacity for >2,200 members across nine different locations, of which 80% is filled. Distrii will be opening a new facility in Beijing in 1H17 and plans to further expand into Guangzhou, Shenzhen and other global gateway cities. Additionally, Distrii will take up ~60,000 sf of space (currently leased out) in CDL's Republic Plaza Tower 1, and expects to commence operations in 1H18.

*Straits Trading: Acquiring a freehold 14-storey rental residential apartment in Osaka, Japan, for ¥924.7m ($11.6m). The property has NLA of 2,992.8 sqm and 95% occupancy, as at end-Dec '16, for its 120 apartment units.

*Sunpower: Formed a 51:10:39 JVCo with CITIC Envirotech and Guangdong Keying Zhiran Environmental, to undertake a Rmb1.6b ($331m) project in Shantou, Guangdong. The JVCo will undertake the investment, design, build and operation of a cogeneration plant, with construction expected for completion by 1H18.

*Sino Grandness: Entered into strategic agreement with LYZB E-Commerce to distribute the group's products including Garden Fresh beverages and Grandness canned food, through the latter's mobile internet platform "Ji Shi Hui".

*Singapore Myanmar Investco: JV partner Golden Infrastructure Group plans to submit a criminal complaint against its directors and management for possible breaches, relating to the JVCo's proposed US$12.7m divestment of its 97% stake in a telecom tower business.

*IHC: Disclosed the letter from activist investor Quarz Capital Management, which called for the entire replacement of IHC's board due to their inactivity to stop destruction to shareholder value. In response, IHC's board deems the accusations not accurate and imperative for existing members to stay on to assure continuity to the group's business partners and financial supporters.

*Wong Fong: Established a 60% owned subsidiary in Myanmar with three other individuals to undertake distribution of heavy and construction machinery in the country.

*China New Town: Disclosed that an administrative lapse caused the trading delay up to 10.15am on 18 Jan.

*Cosco: 51% subsidiary Cosco Shipyard delivered a salvage lifting vessel and a bulk carrier to their Chinese and European buyers.

*Ipco: Terminated the proposed placement of 1.06b new shares at 0.18¢ each after the long stop date has passed.

Wednesday, January 18, 2017

SG Market (18 Jan 17)

The local market will likely continue to be wary of US policy risks as Trump takes an increasing strident view over trade, with the latest charge that the yuan is making dollar too expensive.

Regional bourses opened in negative territory in Tokyo (-0.5%), Seoul (-0.6%) and Sydney (-0.7%).STI remains overbought with psychological support at 3,000 level and topside resistance at 3,040.

Stocks to watch:
*CCT: 4Q16 DPU jumped 10.1% to 2.39¢, taking FY16 payout to 9.08¢ (+5.3%), meeting estimates. For the quarter, revenue and NPI surged to $89.7m (+32.7%) and $70.8m (+35.4%), boosted by the acquisition of the remaining 60% stake in CapitaGreen in Sep '16 (4Q15: 40% stake). Portfolio occupancy remained healthy at 97.1% (3Q16: 97.4%), with aggregate leverage unchanged at 37.8%. NAV/unit at $1.78.

*First REIT: 4Q16 DPU of 2.13¢ (+1.9%) grew at a slower clip to distributable income ($16.5m, +5.1%), due to the issuance of new units. This brought FY16 payout to 8.45¢ (+2%), in line with estimates. For the quarter, growth in revenue ($27m, +5.1%) and NPI ($26.7m, +5.2%) was mainly lifted by the Kupang Property, acquired in Dec '15. Aggregate leverage stood at 31.1% (+1.1ppt q/q). NAV/unit at $1.01.

*GLP: Another co-investor of its US Income Partners III fund has made its initial capital contribution of US$26m, representing 8.1% of the aggregate capital contributions to-date. Following this third syndication, GLP’s interest in the fund has been reduced to 74.1% from 82.2%.

*Lippo Malls Trust: Terminated a JV with First REIT to acquire Siloam Hospitals Yogyakarta (SHYG) and retail mall Lippo Plaza Jogja (LPJ). The parties intend to resume talks after AEI works on LPJ is completed, and upon SHYG obtaining required licenses for operations by end-2017.

*Next-Gen Satellite Communications: Entered 55:45 JV with AR Evans Financial to provide investment management, economic publication, investment research and fund raising activities.

*Huationg Global: Formed 40:60 JV with construction peer Samwoh, to participate in a BCA tender.

*Sen Yue: 50% owned SMC Industrial entered into an agreement to purchase a Singapore property located at No 3 Jalan Pesawat for $7.3m.

Tuesday, January 17, 2017

SG Market (17 Jan 17)

SG MarketSentiment is turning increasingly jittery over US president-elect Donald Trump's incoming policies following his sweeping criticisms of China, EU, Nato, German Chancellor Angela Merkel, as well as foreign automakers ahead of British PM's Brexit speech this evening.

Regional bourses are mostly lower in Tokyo (-0.4%), Seoul (+0.4%) and Sydney (-0.7%).Technically, STI is overbought and could test the psychological 3,000 level, with underlying support at 2,968 and upside resistance remains at 3,040.

Stocks to watch:
*SIA: Group pax load factor rose 0.6ppt to 82.9% in Dec, as passenger traffic growth (+5.3%) outpaced capacity expansion (+4.5%). Load factors improved across East Asia (+3.3ppt), Americas (+0.6ppt), and Europe (+0.5ppt), due to stronger demand from year-end holiday travel, but deteriorated in SW Pacific (-3.2ppt), West Asia and Africa (-0.9ppt). Load factors at SilkAir (+0.4ppt to 75.5%), Scoot (+1.4ppt to 87.4%), and Tigerair (+2.1ppt to 88.3%) also recovered. Cargo load factor rose 1.5ppt to 64.9% as carriage growth (+8.8%) was stronger than the increase in capacity (+6.3%). MKE last had a Hold with TP of $9.70.

*CapitaLand: Divested 45 unsold units at upmarket condo The Nassim, to veteran banker Wee Cho Yaw's family vehicle Kheng Leong for $411.6m or $2,300 psf (~18% discount), uplifting its EPS by 3.8¢. While the pricing for this deal is not particularly compelling, MKE believe the avoidance of hefty QC penalties and the ability to recycle capital into new projects are key positives. Separately, the group will acquire a 0.6-ha prime commercial site in Ho Chi Minh City, Vietnam to develop a Grade A office tower, to be ready in 2020. MKE last had a Buy with TP of $3.46.

*GLP: Signed 128,000 sqm of new leases in China and Japan for domestic distribution, catering to demand from industries such as auto parts, e-commerce and consumer goods.*STE: Aerospace arm ST Aerospace secured $840m new contracts in 4Q16 (3Q16: $520m, 4Q15: $415m) for services ranging from line and airframe maintenance to component repair and overhaul.

*Best World: Terminated the JV agreement with Prolife Biobank and Celcott Biobank to distribute stem cell banking services.

*Vard: Signed LOI to design and construct an expedition cruise vessel for an undisclosed international cruise company for ~NOK1b. If agreed upon, delivery is scheduled from one of Vard's Norwegian yards in 2019.

*Hi-P: Arbitration proceedings between Hi-P and Yota Devices have resulted in a settlement of US$17m ($24.6m) to be paid by to Hi-P, which will continue to sell the existing inventory of Yotaphone 2. The settlement is expected to result in a $9.4m impact ($8.1m bad debt, $1.3m inventory provision) on its 4Q16 profit.

*Sunpower: Secured a Rmb338m build-own-operate centralised heat transfer oil project in Liutuan Industrial Park, Shandong Province, China. The project is expected to be carried out by a 75:25 JVCo, and will be financed via proceeds from its US$110m convertible bonds, bank loans and internal funds.

*SIIC Environment: Proposed placement of 350m new shares (15.5% share capital) at $0.63 apiece (5.9% premium to last close) to controlling shareholder Shanghai Industrial Holdings. Net proceeds of $220m will be used to repay existing borrowings (60%) and finance business expansion.

*United Food: Proposed placement of 22m new shares (20% share capital) at 3.8¢/share to two private investors Christine Mak (14.3m shares) and Ip Ka Kit (7.7m shares). Net proceeds of $0.8m will be used to strengthen its working capital to further expand business operations.

*Vallianz: Proposed placement of 350m new shares (9.7% share capital) at 2¢ apiece to Greatwill Asset Global, owned by Lim Oon Cheng, brother of the founder of oil trading firm Hin Leong. Net proceeds of $6.8m will be used for strengthening JVs/ strategic alliances and working capital..

*Koh Brothers: Entered into an MOU with Koracle to form a JV to set up beauty clinics and wellness spas in Singapore and Johore, Malaysia.

*Advancer Global: Wholly owned Nation Employment unit joined the Advance Placement Scheme, to allow it to source for and bring in a specific number of foreign domestic workers prior to employment, which facilitates better matching.

*United Global: Invested US$0.1m worth of products into a JVCo in Myanmar as its initial capital to sell lubricants in the country for a three-year period.

Monday, January 16, 2017

Best World

Best World
- CLSA initiated with a Buy and TP of $2.50, translating to an upside of 78%.
- Despite the share-price rally (480% over the past one year), the stock remains undervalued vs regional peers.
- The stock trades at a large discount to regional peers at 9.9x/7.8x FY17/18 P/E, despite its superior earnings, dividend yield and ROE.
- With the stock seeing its first coverage from a foreign broker, we do not rule out increased interests in the stock, particularly in the year ahead, as Best World increases its penetration into China.