Friday, September 23, 2016

SGX

SGX (S$7.49): Striving for leadership in LNG pricing through derivatives
- attempting to gain pricing dominance in liquefied natural gas (LNG), as it launch more derivative products for LNG in 2Q17
- new contracts will be based on a new North Asia LNG price index that SGX introduced on Mon
- if successful, SGX could see an influx of derivative trading- this would boost commodities derivative trading, which was one of the rare bright spots in Aug (trading volume +59% y/y)
- But SGX is likely to face competition for these price indices, and the race is still wide open
- SGX is currently trading at 21.9x forward P/E and offers an indicative dividend yield of 3.7%
- The street does not have conviction on going long on SGX, as it has 7 Buy, 8 Hold, and 2 Sell rating, with a consensus TP of $7.78, on the counter.

SG Market (23 Sep 16)

The local market is still struggling on a dearth of news flow and catalysts despite the Fed clearing the way for low interest rate environment to persist for a little longer. That said, rising oil prices could bring some relief for the battered O&M sector.

Regional markets opened mixed, with Tokyo (-0.2%) lower, although Seoul (+0.2%) and Sydney (+0.3%) were firmer.Judging by yesterday's performance, the STI faces heavy resistance near the 2,880 level, with bottom-side support at 2,800.

Stocks to watch:
*CapitaLand: Acquired prime 0.50ha land site in Ho Chi Minh City for USD51.9m, which will be redeveloped into a mixed-used development, comprising 304 residential units and serviced apartments, with estimated project value of US$106m.

*SGX: Launching more LNG derivative products in 2Q17, in its bid to gain pricing dominance for that commodity. The new contracts will be based on its new North Asia price index.

*Lum Chang: 50% JV Dorado Holdings is acquiring property investment firm Corwin Holding, which owns Chill@The Verge (8-storey shopping mall), for S$189.8m.

*CNMC Goldmine: Its Sokor gold mine has to-date produced more than 100,000oz of fine gold since production commenced in 2010, far exceeding initial reserve estimates of 70,300oz of gold ore in its Aug ’11 technical review.

*Santak Holdings: Updated that the discussion with a potential buyer for the proposed disposal of its loss-making China operations is still on-going, and has not arrived at any definitive agreements.

*Golden Energy & Resources (suspended): 67%-owned PT Golden Energy Mines, and 99.9%-owned PT Kuansing have jointly acquired 100% stake in PT Era Mitra Selaras for US$37.2m, which was fully funded by internal resources. The target has proven plus probable coal reserves of 68m tonnes.

*Overseas Education: Repurchased $7m worth of 5.2% bonds issued on 17 Apr ’14 due in 2019. It currently has a remaining $143m in bonds due in the same year.

Thursday, September 22, 2016

Gold

Gold: Expect gold miners to benefit from Fed inaction
- CNMC Goldmine up 2.7% to $0.565 in morning trade as gold prices (+0.4% to US$1,337.30/oz) continue on overnight rally.
- Gold is currently being bought as the market takes the Fed's inaction into consideration as well as a 2017 FOMC board that appears to be more dovish
- Other precious commodities also rose, silver (+0.7% to US$19.90/oz), platinum (+0.2% to US$1,053.20/oz)

SG Market (22 Sep 16)

The market will likely open stronger after supportive policy decisions by BoJ and FOMC spurred a rally in global equities.It may also get a further boost from a jump in oil prices overnight, offering some breathing space to oil & gas counters.

Regional markets such as Seoul (+0.9%) and Sydney (+0.8%) opened notably higher, while Tokyo is closed for a public holiday.From a technical stand-point, Topside resistance for STI is at 2,880 with underlying support is at 2,800.

Stocks to watch:
*Vard: Secured a US$40m contract to build two module carrier vessels for Topaz Energy & Marine. Delivery of both vessels is scheduled in 2Q18. But, investors should remain cautious, as its net gearing remains high at 3.6x as at Jun '16, and interest coverage is less than 0.5x.

*Secura: Clinched a service contract from Singtel worth up to $7.9m to provide unarmed security guarding services at certain premises for two years, effective from Oct ’16- Sep’ 18.

*HLH Group: Terminated to US$36.8m contract it awarded to Yanjian Group Cambodia for the construction of D'Seaview, a 737-unit residential project, as the latter was unable to comply with the terms of the contract. HLH has re-awarded the contract to Sinohydro Corp. for US$35.3m. Sales of the project currently stand at 53%.

*Fragrance Group: Obtained a planning permit for its property at 555 Collins Street, Melbourne CBD, Australia. The 2,300sqm freehold site with plot ratio of 24 will be developed into a mixed use property comprising retail outlets, 625 residential units and four basement levels.

*SMRT: Entered 60:40 JV with Cyclect Electrical Engineering to provide electrical system solutions for land transportation in ASEAN, Australia, and New Zealand. Total investment cost is $1m.

*Asiamedic: Responded to SGX irregular trading query for its price surge, that it is having ongoing discussions on prospective business opportunities, including possible M&A, but has not attained any definitive agreement at this point.

*PSL Holdings: Placing out 7.7m new shares to three individuals, Atan, Edison, and Melda Veronica, at $0.3825 per share to raise gross proceeds of $2.96m.

*Annica Holdings: Disposing a single-storey intermediate terrace factory at 38 Kallang Place, which occupies 1,034sqm of land, for $3.33m.

*Jiutian Chemical: Received approval from SGX to transfer its listing from the Mainboard to the Catalist board. The move is now pending shareholders’ approval at an upcoming EGM.

*Trek 2000: Auditor EY disclaims from making an audit opinion due to inconsistencies in Trek’s accounting records, the ongoing investigation by CAD, as well as certain interested-party transactions that were previously not disclosed.

Wednesday, September 21, 2016

Keppel Corp

Keppel Corp (S$5.26): Limited divestment options to cushion against any cash crunch
- Depressed O&M business and limited divestment options hinder ability to free up capital should it face a cash crunch
- two most likely divestment options are M1 (potential threat of new entrants), and its T27 data centre to Keppel DC
- M1 and T27 are expected to fetch proceeds of $342m and $200m respectively
- but the positive impact is insufficient to swing the house to take a more bullish stance on the group
- Odds to sell KrisEnergy and Dyna-Mac is low, as the group would need to realise significant losses at market values
- Borrowing ability may also be capped by its net-debt/EBITDA of 5.5x, and EBITDA-interest-coverage of 6.3x
- Maybank KE maintains Sell, although TP was raised by 4¢ to $4.54 to account for a lift in market values of its listed entities.

Cogent Holdings

Cogent Holdings (S$0.885): Potential offer for peer could be an upward re-rating catalyst
- Shareholders with 41.3% stake in Poh Tiong Choon Logistics (PTC) are seeking a strategic review of shareholdings
- PTC surged more than 17% early this week to $1.30, implying 1H16 annualised P/E of 18.8x- This could spark a re-rating of Cogent, which was recently granted approval to develop another iconic logistics hub
- If PTC transaction materialises, Cogent could trade between 11-15x P/E, implying fair value of $0.94-$1.28.
- Cogent continues to sit in Market Insight's Value portfolio.

SG Market (21 Sep 16)

Traders will be in a waiting mode heading into the policy decisions by BoJ and Fed, which have the potential to trigger market volatility. Meanwhile interest is dominated by microcaps.

Regional markets opened generally muted in Tokyo (-0.1%), Seoul (-0.1%) and Sydney (+0.2%).From a technical perspective, topside resistance for STI is at 2,880, with underlying support at 2,800.

Stocks to watch:
*Economy: Credit agency Fitch has cut its growth forecast for Singapore to 1.8% from its earlier forecast of 2.1% and expects growth to only recover gradually to 2% by 2018.

*Poh Tiong Choon: Co-founders and substantial shareholders are undertaking a strategic review of their 41.3% stake and are in the process of appointing an independent corporate advisory firm. A potential offer at attractive valuations could spark a re-rating for other logistics players like Cogent Holdings.

*Asian Pay Television Trust: Instructed CDP to transfer units held by mainland Chinese investors to its trustee-manager for subsequent sale in the open market, to comply with Taiwanese regulations that limits the sectors in which Chinese investors are allowed to invest.

*Sunpower: Awarded a Rmb22.6m contract by China Shenhua Coal to Liquid and Chemical Co to provide EPC services to the E1 concentrated liquid crystallisation project in Ordos City, Mongolia. The project will be completed in 2017, and expected to have a positive impact to FY17 earnings.

*Japfa: Entered 40:60 JV with Cargill Food Investment Indonesia to manufacture unbranded cooked poultry products for the Indonesian market. The JV will lease the Boyolali factory from Japfa, and expects to commence operations in 1Q17.

*Hotel Properties: Inked management agreement with InterContinental Hotels Group to manage an 83-room resort in Maldives, scheduled to open in 3-5 years.

*China International: Currently engaged in preliminary discussions with various investors regarding a potential deal relating to its subsidiary.

*GSH: Launched 200 of the 632 units at high-end condominium Eaton Residences in Kuala Lumpur, and has received bookings for 150 units. Prices for the units measuring between 635 sf and 2,982 sf are in the range of RM1.1m-2.6m.

*Lippo Malls: Issuing $140m 7% perpetual securities, the highest priced debt this year amid the challenging environment. The retail landlord is trading at 9.1% annualised yield and 1x P/B.