Thursday, April 30, 2015

IPS Securex

IPS Securex: Share price surged 20.2% in today’s trading, after the group announced that it has received a letter of intent (LOI) from a dealer for the supply of PepperBall Technologes worth US$54.8m to a government body in ASEAN over a period of two years commencing 3Q15.

Analysts guide that the Pepperball contract sets the precedence of many more to come, and the size and scale of the contracts are larger than what was previously estimated (US$25-30m), adding that the segment will offer positive surprises going forward.

As a guide, PepperBall is a newly designed forced compliance weapon which launches pepper-spray projectiles from a launcher, and has a much longer range compared to the traditional pepper spray. This makes PepperBall suitable to be deployed in times of conflict where employment of lethal force is prohibited or undesirable.

IPS added that the group is encouraged by the recognition of PepperBall’s technology by the market and are systematically looking to broaden its marketing efforts for PepperBall products to more customers in the Asia-Pacific region.

The above contracts is not expected to have a material impact on the earnings per share and net asset value per share of IPS Securex for JunFY15.

IPS Securex currently trades at 8.1x FY16 P/E.

Only one broker covers the stock with a Buy call and TP of $1.01.


OCBC: 1Q15 results above estimates. Net profit came in at $993m (+12% y/y, +26% q/q) versus consensus estimates of $911m, aided by a strong show in net interest income, lower than expected overhead expenses and strong trading income.

Net interest income came in at $1.3b (+15% y/y, -2% q/q), driven by total loans growth (+20%), with broad-based growth across OCBC’s key customer segments and markets. Customer deposits grew by 26% to $250m, setting the loan-to-deposit ratio at 83%. Excluding the acquisition of Wing Hang Bank, customer loans and deposits grew 4% and 8% y/y, respectively.

Net interest margin (NIM) however dipped to 1.62% (-8bps y/y, -5bps q/q), as a result of lower loan-deposit-ratio and weaker income from money market gapping activities.

Non-interest income was $859m (+7% y/y, +13% q/q), boosted by higher wealth management (+11%), brokerage (+49%), fund management (+16%) and credit card fees (+87%), as well as higher net trading income (+25%) and life assurance profit (+9%).

Overall operating expenses rose 24% to $922m, largely as a result of the acquisition of WHB. Otherwise, operating expenses would have risen 9%, due to higher staff cots and a 3% rise in headcount.

Total provisions rose 56% to $64m, with the increase partly contributed by the consolidation of WHB and higher allowances from Singapore.

Asset quality remained healthy, with NPL ratio at 0.6% (4Q13: 0.7%, 3Q14: 0.7%), while loan-loss coverage was at 171%.

ROE declined to 10.6% (4Q13: 11.9%, 3Q14: 13.1%) and capital adequacy ratios remained stable with fully-loaded CET1 CAR of 13.8% and Tier-1 CAR at 13.8%.

Going forward, management aims to deepen its presence in its core markets, and participate in opportunities arising from global market and consumer trends, while capturing trade, capital and wealth flows associated with increased economic interconnectivity between Greater China and Asean.

OCBC trades at 1.37x P/B versus DBS’s 1.36x P/B and UOB’s 1.41x P/B.

Starhill Global REIT

Starhill Global REIT: 5QFY15 DPU increased 1.6% y/y (against 1Q15) to 1.26¢, while distributable income rose 1.8% to $28.4m.

Revenue dipped 2.7% to $47.9m, mainly due to underperformance at the Chengdu mall and RM/A$/yen depreciation, although Wisma Atria and Ngee Ann City met expectations. NPI was shaved 0.6% to $38.8m, on a 10.9% y/y drop in property expenses, from tight cost control and lower property taxes in Malaysia.

Management attributed Chengdu mall’s underperformance to ongoing austerity measures, coupled with new competition. Meanwhile, Maybank-KE likes Wisma Atria’s rental reversions of 13.3%, underscoring a backdrop of a 2% dip in shopper traffic, and 9% fall in tenant sales.

Occupancy stood at 99.1% with WALE by NLA of 5.5 years.

Aggregate leverage will rise to 35.3% upon completion of the acquisition of Myer Centre Adelaide, from 28.6% in Dec.

Growth will likely come from the Myer Centre acquisition, as well as rent reviews for Ngee Ann City and Malaysian properties in 2016. Meanwhile, Maybank-KE will keep tabs on Chengdu and Singapore tourist numbers.

Starhill Global is currently trading at 5.9% annualized 5QFY15 yield, and 0.9x P/B.

Maybank-KE maintains Buy with TP of $0.93.

SG Market (30 Apr 15)

Singapore stocks are expected to open lower, following the negative close in Wall Street overnight, after US 1Q GDP came in below analysts’ estimates.

Regional bourses are trading lower this morning in Tokyo (-1.4%), Seoul (-0.3%) and Sydney (-1.1%).

Technically, a downward breach may take the index to the next support level at 3,443. Topside resistance lies at the 3,550 recent peak.

Stocks to watch:
*OCBC: 1Q15 results above estimates. Net profit came in at $993m (+12% y/y, +26% q/q) vs consensus estimates of $911m. Net interest income climbed 15% to $1.3b, supported by 20% loans growth, although NIMs dip 8bps to 1.62%. Non-interest income rose 7% to $859m, boosted by higher wealth management, brokerage, fund management and trade fees, as well as higher net trading income and profit from life assurance. Provisions expanded 56% to $64m but NPL ratio improved to 0.6% from 0.7%, with loan –loss coverage of 145%. Fully-loaded CET1 CAR was 13.5% with Tier 1 CAR of 13.5%. NAV/share of $7.80.

*UOB: 1Q15 results in line. Net profit came in at $801m (1.6% y/y, +1.9% q/q), with net interest income of $1.2b (+8.3%) driven mainly by loan growth (+7.8%) and higher net interest margin (+3bps to 1.76%). Non-interest income rose 17.5% to $755m, as fee and commission income recorded broad based growth (+9.5%) and trading and investment income surged (+50.6%). NPL ratio inched up to 1.2% from 1.1%, with loan-loss coverage of 147%. Fully loaded CET 1 was 14.3% with Tier 1 CAR of 14.3%. NAV/share of $17.88.

*Yangzijiang: 1Q15 results in line. Net profit came in at Rmb706.9m (+23%) on revenue of Rmb3.0b (-14%). Weaker top-line was due to the decrease in investment segment revenue (-53%) as the size of the group’s investment portfolio was reduced. The core shipbuilding business saw revenue up 26% to Rmb2.3b, as 10 vessels were delivered vs 7 from the previous year. Shipbuilding margin held steady at 21%, attributed to recognition of high-value 10,000 TEU containerships. Bottom-line was partly aided by Rmb55m of other gains from disposal of financial assets. YTD orders secured stood at US$373m, taking order book to US$4.6b. NAV/share of Rmb5.52.

*Jardine C&C: 1Q15 net profit made up 21% of street estimates, falling 18% y/y to US$178m, while revenue dropped 14% to US$4b. Astra contributed 85.4% of bottom line, as a 16% decline in rupiah earnings translated to a 24% fall in USD. Aside FX pressure, Astra’s performance was also affected by a general economic slow-down, lack of meaningful product launches, and heavy discounting. Meanwhile, direct motor interests contributed US$31m, or a 63% improvement y/y, primarily due to strong performance from Truong Hai Auto. NAV/share of US$12.92.

*Starhill Global REIT: 5QFY15 (change in financial year end to June) DPU in line, +1.6% y/y to 1.26¢, while distributable income rose 1.8% to $28.4m. Revenue dipped 2.7% to $47.9m, while NPI was shaved 0.6% to $38.8m, from weaker contribution from overseas properties, partially offset by stronger performance in Singapore properties. Occupancy stood at 99.1% with WALE by NLA of 5.5 years. Aggregate leverage will rise to 35.3% upon completion of the acquisition of Myer Centre Adelaide, from 28.6% in Dec. NAV/unit of $0.94.

*Broadway: 1Q15 net profit soared 447.3% to $1.1m, while revenue jumped 10.1% to US$168.2m, due to revenue increase in components division. Bottom line shored up by gross margin, which expanded 4.9% to 10.8%, from the components division’s entry into the mobile segment. Other expenses fell 67.5% to $1.4m due to fair value loss on financial derivatives. NAV/share of $0.53.

*Kim Heng Offshore: 1Q15 net profit fell 72% to $1.1m, while revenue slumped 31% to $16.3m from decline in revenue from offshore rig services and supply chain management segment, partially offset by increase in vessel sales and newbuild segment. Gross margin shrunk 11.5ppt to 30.1%. Bottom line partially aided by FX gains (+85%) from the stronger USD and lower operating expenses (-15%). NAV/share of $0.14.

*Memtech: 1Q15 net profit rose 11.3% y/y to US$1.2m, while revenue increased 14.7% to US$33.6m, driven by sales in automotive components and consumer electronics products. Gross margin improved 0.2ppt to 17.7%. SG&A expenses grew on increased staff costs and higher sales commissions. NAV/share of US$0.16.

*Tianjin Zhong Xin Pharma: 1Q15 net profit rose 16% to Rmb119.2m, while revenue climbed 4% to Rmb1.6b. Gross margin improved 1.3ppt to 34.3%. Bottom line also propped up by other gains and a 153% increase in share of associate’s profits to Rmb39.5m. NAV/share of Rmb3.91.

*Rex: 1Q15 loss widened 221% y/y to US$8.2m, while revenue was US$2.1m (1Q14: nil). Gross margin was 56%. Bottom line weighed by increased admin expenses, FX loss, and increased share of associates’ losses. NAV/share of US$0.143.

*Sinotel: 1Q15 net loss narrowed to Rmb8.5m versus a net loss of Rmb20.5m on revenue of Rmb156.9m (+254.2%). Top-line was led by an increase in sales of equipment arising from increase in sales in Hebei Province, Shanxi Province and Henan Province; increase in system integration arising from increase in sales in Beijing; and increase in services related projects arising from increase in sales in Beijing. Gross margin however fell to 4.9% from 11%, due to a decrease in gross margin from service related projects. Bottom-line was partially aided by a 51.5% decline in general and admin expenses. NAV/share at Rmb0.893.

*Global Testing: 1Q15 net profit soared 543.2% to US$0.7m, while revenue fell 6% to US$8.5m from the decrease in semiconductor / 3C industries demand. Bottom line shored up by gross margin which expanded 6.1ppt to 27.5%. NAV/share of US$0.122.

*Keppel Land/Keppel Corp: Expands hospitality business with the topping up of the new 29-storey Inya Wing at its Sedona Hotel Yangon, expected to be completed in end-2015.

*GLP: Signed agreements totalling 97,000 sqm with five third-party logistics providers in China, including Sinotrans and Goodaymart, a subsidy or Haier.

*Lian Beng/ Datapulse: Lian Beng is subscribing for 14.4% of the enlarged share base of Datapulse at 11.235¢, or 10%

Wednesday, April 29, 2015


Indonesia: The Jakarta Stock Exchange composite Index is down 3 .7% today, as investors speculated on potential repercussions following the execution of the "Bali Nine", which involved citizens from Australia, Brazil and Nigeria. While we think that this could just be a knee jerk reaction, as most countries would be unwilling to hurt their own economic ties, we note that SGX related counters with exposure to Indonesia could include First REIT (healthcare), Courts Asia (retail), Jardine C&C (automotive), UOB (banking), OCBC (banking), Gallant Venture (automotive), Halcyon Agri (rubber) and Petra Foods (chocolates).

Q&M Dental

Q&M Dental: Acquiring TP Dental, a multidisciplinary dental group in Singapore with 25 experienced dentists and 43 years of operating history, for $28.6m. Of this, $10.6m will be paid using new shares issued at $0.71 each. This is by far Q&M’s largest acquisition and Singapore’s largest dental group M&A.

Based on its profit guarantee, TP Dental could contribute at least $2m a year in earnings to Q&M. TP Dental registered a $1.9m net profit in 2013. Maybank-KE expects the latest acuqistion to provide a 9% uplift to Q&M’s FY16-17 earnings per share.

Overall, the house is maintaining its Buy call, but lifts its TP to $0.92 from $0.71, as it rolls over its 45x earnings multiple to FY16. This is 1SD above its 5-year mean to capture Q&M’s strong earnings growh trajectory, M&A record and scarcity value.

With $42m of cash untapped from its recent MTN, market watchers are expecting more acquisitions to come.

Far East Hospitality Trust

Far East Hospitality Trust: 1Q15 results below estimates, with DPU of 1.07¢ (-17.7%) alongside distributable income of $19.2m (-16.9%).

Gross revenue fell 10.8% to $27.4m and NPI was down 11.3% to $24.5m, mainly due to softer demand for accommodation, in line with the fall in visitor arrivals and uncertain economy.

In addition, the hotel portfolio experienced less demand from the higher-yielding corporate segment, with occupancy rate down 1ppt y/y to 82.3%, resulting in RevPAR declining 11.0% to $141.

Meanwhile, serviced residences (SRs) occupancy fell 1.5ppt to 85.8% as it saw a reduction in bookings from project groups, resulting in a 7.1% decline in RevPAU to $206 .

A spike in short-term interest rates in 1Q15 resulted in an increase in finance costs (+19.4%), which partially weighed on DPU.

Going forward, FEHT cautions that the uncertain global economic environment and the relative strength of the SGD will continue to weigh on the sector. Visitor arrivals to S’pore for the first two months of 2015 remained weak, registering a fall of 5.5% y/y, coming on the heels of a 3.1% decline in 2014. The STB has moderated its forecast for 2015, expecting visitor arrivals to remain flat or to grow modestly by up to 3% to 15.5m.

On the supply front, ~3,300 new hotel rooms are expected to come on-stream in 2015. With the increase in room supply coupled with the soft demand, competition within the Singapore hospitality market is expected to remain intense.

Later in the year, however, the tourism industry can expect to benefit from the opening of new attractions such as the National Gallery Singapore and major events such as the 2015 ASEAN Games and FINA Swimming World Cup 2015.

Leverage ratio stood at 31.5%, with average debt cost of 2.5% and tenor of 3.2 years.

At the current price, FEHT trades at 0.85x P/B and 5.2% annualized 1Q15 yield versus its peer average of 0.98x P/B and 6.9% yield.

Parkway Life REIT

Parkway Life REIT: 1Q15 results in line, with DPU of 3.21¢ (+14%) and distributable income of $19.5m (+14%), largely buoyed by divestment gains ($2.3m) from seven Japanese properties in Dec ’14, barring which distributable income would have been up just 0.7%.

Gross revenue inched up 0.7% to $24.8m while NPI was up 0.8% to $23.2m, driven primarily by higher rent from the Singapore properties due to increased growth rate of CPI + 1% in year 8 of lease commencing 23 Aug ‘14. The five Japan properties acquired on 23 Mar ’15 contributed just 9 days of rental income which was not significant.

An FX gain of $1.5m was realised, comprising of $0.7m from the delivery of quarterly Japan net income hedge, and the balance FX arising from the capital repatriation for the cash trap in Japan, which unlocked the FX gains in the foreign currency translation reserve for its earlier Japan acquisitions.
Going forward, PLife REIT expects the recent acquisition in Mar ‘15 to start contributing to the group’s results, adding that the long-term prospects of the regional healthcare industry will continue to be robust due to rising demand for better quality private healthcare services driven by the fast-ageing populations.

The REIT’s enlarged portfolio of 47 high-quality healthcare and healthcare-related assets places it in a good position to benefit from the resilient growth of the healthcare industry in Asia-Pacific.

Occupancy rate stood at 100%, leverage ratio at 34.4% (4Q14: 35.2%) and average cost of debt of 1.5% and tenor of 3.6 years.

At the current price, the REIT trades at 1.4x P/B and a forward yield of 5.3%, versus closest peer First REIT’s 1.4x P/B and 6.2% yield.

Ho Bee

Ho Bee: 1Q15 net profit soared 182% to $11.6m, while revenue jumped 81% to $31m from higher rental contributions from The Metropolis in Singapore and 1 St Martin’s Le Grand in London. No development revenue was recognized in the quarter, as Australian projects will only be recognized upon completion, while there were no units sold in Sentosa.

Share of associates losses was $1.3m versus nil last year, while share of JVs’ losses narrowed 66.8% to $0.3m.

Management continues to guide for a challenging Singapore residential market, though it expects support from rental income.

Maybank-KE maintains view that Ho Bee has deep value, with potential upside from any privatisation. There is strong valuation support from its office assets, which is already worth S$2.3b, based on the house’s estimates.

Ho Bee is currently trading at 0.6x P/B.
Maybank-KE reiterates its Buy call on Ho Bee with TP of $2.75, or based on a 35% discount to RNAV.

SG Market (29 Apr 15)

Singapore shares may take a breather despite the positive close on Wall Street, which saw stocks recovering from an early sell-off and the S&P 500 bouncing off its 50-dma, as many STI index stocks go ex-dividend.

Regional bourses are trading higher this morning in Tokyo (+0.4%) and Seoul (+0.2%), although Sydney is down 0.3%.

Technically, the STI is sits precariously at the 3,495 immediate support and with momentum indicators showing some signs of weakness, a downward breach may take the index to the next support level at 3,443. Topside resistance lies at the 3,550 recent peak.

Stocks to watch:
*Ho Bee: 1Q15 results in line. Net profit soared 182% to $11.6m, while revenue jumped 81% to $31m from higher rental contributions from The Metropolis in Singapore and 1st Martin’s Le Grand in London. Operating margin improved to 70.2% versus 62.3% from the previous year, although bottom-line was partially weighed by associate losses of $1.3m versus nil last year, while share of JVs narrowed 66.8% to $0.3m. NAV/share of $3.93.

*Parkway Life REIT: 1Q15 results in line, with DPU at 3.21¢ (+14%) largely buoyed by divestment gains of seven Japanese properties in Dec ’14, barring which distributable income would have been up just 0.7%. Gross revenue inched up 0.7% to $24.8m while NPI was up 0.8% to $23.2m, driven primarily by higher rent from the Singapore properties due to increased growth rate of CPI + 1% in year 8 of lease commencing 23 Aug ‘14. The five Japan properties acquired on 23 Mar ’15 contributed just 9 days of rental income which was not significant. Occupancy rate stood at 100%, leverage ratio at 34.4% (4Q14: 35.2%) and average cost of debt of 1.5% and tenor of 3.6 years. NAV/share of $1.71.

*Far East Hospitality Trust: 1Q15 results below estimates, with DPU at 1.07¢ (-17.7%). Gross revenue fell 10.8% to $27.4m and NPI was down 11.3% to $24.5m, mainly due to softer demand for accommodation, in line with the fall in visitor arrivals and uncertain economy. In addition, the hotel portfolio experienced less demand from the higher-yielding corporate segment, resulting in RevPAR declining 11.0% to $141, while serviced residences (SRs) RevPar fell 7.1% to $206 as it saw a reduction in bookings from project groups. A spike in short-term interest rates in 1Q15 resulted in an increase in a 19.4% rise in finance costs, which weighed on DPU. Occupancy rate for hotels fell 1ppt y/y to 82.3%, and was down 1.5ppt to 85.8% for SRs. Leverage ratio stood at 31.5%, with average debt cost of 2.5% and tenor of 3.2 years. NAV/share of $0.968.

*China Environment: 1Q15 net profit slumped 59% y/y to Rmb6.6m, while revenue fell 71.9% to Rmb 45.3m, as only two dust collectors projects were completed in the quarter, compared to 13 projects in 1Q14. Gross margin narrowed 3.2ppt to 21.3%. Bottom line was also weighed by Rmb4.5m of tax expenses versus a Rmb3.9m tax credit a year ago. NAV/share of Rmb1.123. Separately, the group announced the successful launch of its first megawatt class transcritical carbon dioxide heat pump system in China, which has effectively enabled the reduction of the use of ~3,365 tonnes or 34% of standard coal p.a. during its pilot project in Fujian Province.

*Samudera Shipping: 1Q15 net profit soared nearly 14x to US$6.2m, although revenue dipped 6.8% to US$80.4m, as the group exited non-profitable services, especially the Indonesia domestic routes. Gross margin expanded 5.8ppt to 10.8%, on lower container volume handled, fewer vessels operated, lower bunker prices and renewal of a charter at cheaper rates for a portion of the fleet. Bottom line also aided by a US$1.2m gain on FX versus a US$0.3m loss last year. NAV/share of US47.7¢.

*Q&M Dental: Acquiring TP Dental for $28.6m. CEO highlights that it is highly possible that the group would do more M&As in S’pore. TP Dental is a high-end dental centre in Ngee Ann City with 25 dentists while most of Q&M's ~60 clinics are in suburban areas. The S’pore dental market remains very fragmented with ~630 dental clinics and 1,800 dentists. The deal comes with a $4m profit target per 2-yr term, which will be in place for total 8 years.

*CSE: Won two major contracts amounting $40m for telecommunication system and maintenance works in Abu Dhabi and Mexico respectively. For the latter maintenance contract, the time period is for three years, for a national oil company.

Tuesday, April 28, 2015

Q&M Dental

Q&M Dental is planning to acquire TP Dental Surgeons for $28.6m. Founded in 1973, TP Dental is a multi-disciplinary centre offering a complete range of dental services with dentists on call outside normal office hours. It is located at Ngee Ann City. For FY13, it earned post-tax net profits of $1.9m against a turnover of about $12.4m.


Aviation: Changi Airport has announced several reductions and rebates to aeronautical fees, which includes reductions to passenger service fees for transfer/transit passengers, landing fees for larger aircraft types, and franchise fees for flight catering and ground handling services. Existing rebates on landing fees for long-haul flights, aircraft parking and aerobridge charges will also be extended.

The latest move should increase the competitiveness of Singapore as an air hub and boost traffic flow, boding well for aviation services companies. Aviation services companies, such as SATS and Dnata (private), will also receive a 20% rebate on inflight catering and ground handling fees from May ‘15 to Mar ’17, while receive grants to support their productivity drive over the next two years.

SATS incurs licencing fees of around $77m a year (4% of sales). Assuming a 20% reduction in total licencing fees, Maybank-KE expects an EBIT uplift of 8%, ceteris paribus, and view the latest development as positive for SATS. The house is however maintaining its Hold call (TP $2.80) on the counter as valuations appear fair even after taking into account the potential earnings boost.

Other aviation service providers, such as SIA Engineering (Sell, TP $3.50) and ST Engineering (Hold, TP $3.45), could also benefit from the higher traffic throughput at the airport, although Maybank-KE believes that the impact is less immediate.

The house is still maintaining a negative stance on SIA Engineering as the overarching theme of lower engine maintenance workload will continue to weigh on near-term earnings. Meanwhile, airport operations are a small part of ST Engineering’s business and this announcement should not have a material stock impact.


Cordlife: Major shareholder Golden Meditech (GM) has put out a much-anticipated privatisation bid of US$6.40 per share for China Cord Blood Corporation (CCBC).

While the offer price appears on the low side, it is still above the US$6.00 valuation for CCBC used in Maybank-KE’s SOTP valuation for Cordlife.

To re-highlight, financial investor Jayhawk Capital (second largest shareholder with 14.6% stake) had earlier in March written an open letter to the board of CCBC, pointing out CCBC’s undervaluation. As such, some market watchers are speculating that the latest offer might not be attractive enough to entice current shareholders.

The offer however does set a floor for CCBC’s share price and opens up room for higher counter-offers, possibly from financial investors like Jayhawk.

Given Cordlife’s 14.2% stake in CCBC, Maybank-KE is of the view that securing control of Cordlife would prove valuable to both sides, as they attempt to lock in Cordlife’s stake in CCBC.

Overall, Maybank-KE is maintaining its Buy call on Cordlife, but raises its TP to $1.62 from $1.35 (SOTP methodology) as the houses bumps up CCBC’s valuation to US$7.00.


SMM: 1Q15 net profit badly missed estimates, falling 13.6% to $105.9m, while revenue dipped 2.4% to $1.3b.

The dip in top line was largely driven by weakness in ship repair revenue, which fell 36.5% y/y and q/q to $100.1m. 116 ships were repaired in 1Q15 vs 106 in 1Q14, but average revenue per ship was lower. Meanwhile, rigbuilding revenue fell -5.4% y/y (-13.8% q/q) to $753m.

Operating margins fell 0.5ppt y/y (-5.5ppt q/q) to 10.6%, in part due to a $10.9m of FX loss and $2.2m of fair value loss of financial instruments.
An accommodation semi-submersible and a jack-up rig were delivered in the quarter, while there are nine other rigs to be delivered in the year. YTD, only $56m worth of contracts was secured. Net order book shrunk to $10.6b from $12.9b in 1Q14, with deliveries stretching to 2019.

SMM has a sizeable LOI for a semi-submersible crane vessel with Hareema Offshore, which could be worth between US$700-US$1b, which should materialize this year. Nevertheless, Maybank-KE cuts order-win target to $2.7b from $3.6b on expectations that SMM could fall short.

Management also expressed bearishness, citing a scarcity of orders, and customers are either not renewing their charter contracts or are renewing at significantly lower rates. New rigs also face the prospect of not securing charters despite being more sophisticated.

On the Brazilian drill ships that SMM has not received payment since Nov’14, management is exploring all options, including slowing down construction.

SMM is currently trading at 11.7x FY15 consensus P/E, and 2x P/B.

Latest broker ratings:
UOB KayHian maintains Hold with TP of $2.92
Daiwa maintains Underperform with TP of $2.80
CIMB maintains Reduce with TP cut to $2.61 from $2.82
Goldman Sachs maintains Neutral with TP shaved to $2.60 from $2.70
Deutsche Bank maintains Sell with TP of $2.50
Maybank-KE maintains Sell with TP cut to $2.45 from $2.65

China Sunsine

China Sunsine: 1Q15 net profit more than doubled to Rmb47.4m, despite the China-based producer of rubber accelerators achieving just a 1% increase in revenue to Rmb432.1m.

The strong performance was driven by a 12.5ppt jump in gross margin to 31.7%, as the group benefitted from lower raw material costs, in particular, aniline, which is an oil by-product and the main ingredient in the production of rubber accelerators.

Top-line was led by a 6% rise in sales volume to 25,377 tons, but offset by a 5% drop in average selling price to Rmb17,009 per ton as cost savings were passed on to customers.

The quarter saw domestic sales volume increasing 16.2%, while international sales declined 9.8%, as the group rejected some low-priced overseas orders.

Bottom-line was weighed by a 63% rise in admin expenses to Rmb58.1m, due mainly to increase in staff salaries & bonus, increase in doubtful debt provisions, as well as higher R&D expenses.

Going forward, China Sunsine cautions that US anti-dumping and countervailing measures against China’s tyre makers, as well as the over-capacity and under-utilisation issues faced by the China tyre industry, may dampen demand for its rubber chemical products.

Additionally, its selling prices may increasingly come under pressure, given that international crude oil prices have remained depressed, which has resulted in the group’s main raw material prices remaining at low levels.

Furthermore, during the consolidation process in China’s tire industry, some tire makers may face higher insolvency risk, thus the group’s receivables may also face a higher risk of impairment.

At the current price, China Sunsine trades at an annualized 5.2x 1QFY15 P/E.

In light of the negative guidance and a lack of near-term catalysts going forward, Market Insight is removing China Sunsine from its growth portfolio, locking in attractive gains of 12.5% year-to-date and total of 48% since its inclusion into our model portfolio on Aug ’14.

SG Market (28 Apr 15)

Singapore shares are likely to face a muted opening following the pullback on Wall Street, as investors were unwilling to make big bets ahead of the US FOMC meeting this week.

Regional bourses are trading mixed this morning in Tokyo (+0.6%), Seoul (-0.2%) and Sydney (flat).

Technically, immediate support/resistance levels for the STI are at 3,485 (20-dma) and 3,550 respectively.

Stocks to watch:
*Sembcorp Marine: 1Q15 profit fell 13.6% y/y to $105.9m, well below forecasts, while revenue dipped 2.4% to $1.3b, largely due to a decline from the rigbuilding (-5.4% to $753m) and repair (-36.5% to $431.1m) segments, offset partially by higher sales recognition for offshore and conversion projects (+19.2% to $431.1m). Operating margin narrowed 0.5% to 10.6%, hit by a FX loss, and bottom line was further squeezed by a sharp spike in interest expense. Ytd, only $56m worth of contracts was secured. Net orderbook shrank to $10.6b from $12.9b in 1Q14. Management issued a bleak outlook with poor prospects for new rig orders and charters. NAV/share of $1.487.

*Hutchinson Port Holdings: 1Q15 results below estimates. Net profit fell 48.9% to HK$285.8m, while revenue was flat y/y at HK$2.95b. Throughput at HIT was flattish, while throughput at Yantian grew 10%, from growth in US, transhipment and empty cargoes. Average revenue per TEU for HK increased from tariff increment but was partially offset by adverse throughput mix from liners, while in China, average revenue/TEU was lower than last year due to higher empty container ratio. Bottom line was dragged by the absence of net gain of HK$243m from the disposal of 60% effective stake in ACT in 2014. NAV/unit of HK$4.90

*China Sunsine: 1Q15 net profit more than doubled to $47.4m, despite just a 1% increase in revenue to Rmb432.1m, as bottom-line was aided by a 12.5ppt jump in gross margin to 31.7%, due mainly to the decrease in the cost of raw materials, in particular, Aniline, the main raw material for accelerators. Top-line was led by a 6% rise in sales volume to 25,377 tons, but offset by a 5% decrease in average selling price to Rmb17,009 per ton. NAV/unit of Rmb2.27.

*QAF: 1Q15 net profit inched higher by 3% to $13.1m, while revenue climbed 6% to $256.4m, driven by increases in all segments, i.e. bakery (from new products), meat production (increased volume) and trading and logistics from higher exports. Total expenses grew in tandem with top line. Bottom line was partly weighed by increased tax expenses of 19% to $3.4m. NAV/share at $0.76.

*DBS: Loans growth for FY15 is expected to come in at 6%, with CEO Piyush Gupta highlighting that China’s trade contraction is moderating, adding that NIMs should rise by a few basis points in 2Q, as the bank sees the full impact from the recent rise in Sibor.

*CSE Global: Secured new contracts worth US$33.8m in the Americas region during 1Q15, which involves projects ranging from instrumentation and electrical design, fabrication and construction, engineering and integration of subsea control systems, etc. These projects are expected to contribute positively to the group’s financial performance in FY15.

*Yangzijiang: Proposing to submit an applocagtion to delist its Taiwan Depository Receipts on the Taiwan Stock Exchange.

*Yuuzoo: Expects to earn $33.4m in profits from the sale of licenses o new franchisees, following a through valuation by a big 4 audit firm. The new franchisees are committed to register a combined minimum of 5.7m new users within 12 months from launch, and 40m users within 36 months from launch.

Monday, April 27, 2015

SG Property

SG Property: Latest URA data showed that prices for private residential properties fell 1% q/q in 1Q15, registering its sixth straight quarterly price decline.

The decline was seen across the whole private housing sector, with non-landed properties in the Rest of Central Region (RCR) leading with a 1.7% drop. Meanwhile, prices for Core Central Regional (CCR) dipped 0.4%, while the Outside Central Region (OCR) slid 1.1%. Landed property prices slipped 0.9%.

Rentals for private residential properties also fell in tandem, as the rental index fell 1.7% q/q to 112.2, with the drop seen across all segments.

Overall, Maybank-KE continues to believe that the depressed high-end property market leaves it ripe for selective policy easing. Mass-market prices are still elevated, going by the recent launches of North Park Residences and Botanique at Bartley. This implies the cooling measures this market segment are unlikely to be lifted soon.

The house top picks are Wing Tai (Buy: TP $2.37), Ho Bee Land (Buy: TP $2.75) and City Developments (Buy: TP $11.40).

Raffles Medical

Raffles Medical: 1Q15 results were at the bottom end of estimates, with net profit inching up 2.8% y/y to $15.1m on revenue of $95.0m (+8.5%).

All divisions contributed positively, with sales from healthcare and hospital services divisions rising 13.7% and 6.2% respectively.

Bottom-line was however weighed by a 15.2% jump in staff costs to $48.3m, due to increased staffing for new and expanded operations at RafflesHospital and upcoming new medical centres at Shaw Centre and Raffles Holland V, as well as additional bonus paid to nurses this quarter.

Balance sheet remains healthy, with net cash of $120.9m.

Going forward, construction for Raffles Hospital Extension is scheduled in 1Q17, and is expected to add an additional 220,000 sf (+73%) to its present 300,000 sf gfa upon completion. Meanwhile, its five-storey commercial building on the site of the former POSB Building in Holland Village is on track to complete in 1Q16.

The group will continue to benefit from the government initiated Community Health Assist Scheme and Pioneer Generation package. The new FlexiMedisave scheme announced by the Government in Jan 2015 should also contribute positively to the group.

Raffles Medical is valued at 30x forward P/E and 4.1x P/B.


DBS: 1Q15 results ahead of forecasts, with core net profit of $1.13b (+10% y/y, +35% q/q) versus consensus estimate of $1.05b. This was led by a strong show in net interest income of $1.69b (+14% y/y), driven by loan growth (+11%) from corporate borrowings and secured consumer loans, but partially offset by a decline in trade loans.

Net interest margin came in at 1.69% (+3ppt y/y, -2 ppt q/q), as the effect of higher SGD rates on non-trade loan margins was weighed by tighter trade loan pricing plus a larger deployment of USD to lower-yielding money markets. Customer deposits rose 8% to $324.5m, setting the loan-to-deposit ratio at 86.5% (1Q14: 84%, 4Q14: 86.9%).

Non-interest income crossed $1b for the first time, at $1.05b (+8%), as higher fee and commission income of $560m (+10%) was led by wealth management (+43%) and fees from credit and debit cards (+23%), reflecting a continuing strengthening of the wealth management and consumer banking franchises. The group also recorded investments gains of $103m (+171%) from government securities.

Overall expenses rose 13% to $1.2b, in line with income growth, with cost-to-income ratio well contained at 43.2% (1Q14: 42.5%). Total provisions were up 20% to $181m, but similar to recent quarters.

Asset quality remained healthy, with NPL ratio of 0.9% (1Q14: 1.0%, 4Q14: 0.9%), while loan-loss coverage was near its a historical high of 161%.

ROE was stable at 12.2% (1Q14: 12.3%, 4Q14: 9.0%) and capital adequacy ratios remained stable with fully-loaded CET1 CAR of 13.4% and Tier-1 CAR at 13.4%.

Management highlighted that DBS started the year on a solid footing, with strong all-round performance yet again. Despite a slowdown in trade volumes, the bank’s 1Q earnings reached a record high, which is testament to the strength and resilience of the DBS franchise.

DBS trades at 1.37x P/B versus UOB’s 1.45x P/B and OCBC’s 1.45x.

Capita Retail China Trust

Capita Retail China Trust: 1Q15 DPU was in line, rising 10% y/y to 2.64¢, while distributable income increased 13% to $22.2m.

Revenue climbed 13.3% to $54.5m, while NPI increased 6.8% to $34.5m, from rental growth from multi-tenanted malls, and FX gains from the stronger Rmb vs. SGD, offset by lower revenue from CapitaMall Wuhu which is undergoing tenancy adjustments.

In the quarter, tenant sales growth of 14.3% y/y (-3.6% q/q) outgrew the national retail sales growth of 10.6% y/y. Shopper traffic grew 1.6% y/y.

Positive rental reversions of 12.8% (4Q14: +20.6%, 1Q14: +23%) were clocked in, driven by CapitaMall Wangjing (+18.3%) and CapitaMall Wuhu (+16.7%).

Occupancy dipped 0.8ppt q/q to 95.1%, with WALE by NLA of 8.8 years. Aggregate leverage stood at 28.6% with cost of borrowing of 2.99%. 76.7% of debt is hedged with no major refinancing needs in 2015.

On outlook, management remains on the lookout for suitable acquisitions for non-organic growth. Meanwhile, ongoing initiatives include AEI works at CapitaMall Grand Canyon and CapitaMall Wangjing, as well as tenant management at CapitaMall Minzhongleqyuan.

CRCT is currently trading at 6.2% annualized yield, and 1x P/B.

SG Market (27 Apr 15)

Singapore shares are expected to open higher, taking cue from the positive close in Wall Street last Friday, which saw both the S&P 500 and Nasdaq reaching record highs.

Regional bourses are trading higher this morning in Seoul (+0.1%) and Sydney (+0.6%), although Tokyo is down 0.6%.

Technically, key support/resistance levels for the STI are tipped at 3,485 (20-dma) and 3,550 respectively.

Stocks to watch:
*Property: URA 1Q overall private home price fell 1% q/q, registering its 6th straight quarterly decline as buyers remain side-lined, on concerns of looming supply and interest rate uncertainty. URA's data showed price weakness across all segments of private residential mkt. Amid subdued interest, some developers offered discounts to lure buyers back into mkt. Consultants are expecting 3-5% decline in property prices for 2015, especially with ~19k private residential units scheduled to be completed by this year.

*DBS: 1Q15 results above estimates. Core net profit came in at $1.13b (+10% y/y, +35% q/q) versus consensus estimates of $1.05b. Net interest income was up 14% to $1.7b, driven by loans growth of 11% and improvement in net interest margin to 1.69% (+3bps) on a y/y basis. Non-interest income was up 9% to $1.05b, led by wealth management (+43%) and gains from investment securities (+171%), while other fee segments were generally maintained at the previous year. Provision was up 20% to $181m but NPL ratio remained stable at 0.9% with loan-loss coverage at around historical highs of 161%. Fully-loaded CET1 CAR was stable at 13.4% with Tier 1 CAR at 13.4%. NAV/share of $15.30.

*Raffles medical group: 1Q15 results at the bottom-end of estimates, with net profit inching up 2.8% to $15.1m on revenue of $95.0m (+8.5%). All divisions contributed positively to top-line, with revenue from Healthcare and Hospital Services divisions increasing 13.7% and 6.2% respectively. Bottom-line was however weighed by a 15.2% rise in staff costs to $48.3m, due to the recruitment of more staff for new and expanded operations at RafflesHospital and upcoming new medical centres at Shaw Centre and Raffles Holland V. NAV/share of $0.984.

*CRCT: 1Q15 results in line. DPU rose 10% to 2.64¢, while distributable income increased 13% to $22.2m. Gross revenue rose 13.3% to $54.5m and NPI was up 6.8% to $34.5m, led by rental growth from multi-tenanted malls, and FX gains, partially offset by lower revenue from CapitaMall Wuhu which is undergoing tenancy adjustments. Occupancy dipped 0.8ppt q/q to 95.1%, with WALE of 8.8 years. Aggregate leverage stood at 28.6% with average debt cost of 2.99%. NAV/unit of $1.65

*UIC: 1Q15 net profit jumped 39% to $60.8m, while revenue rose 30% to $193.2m, driven by the progressive sales recognition of V on Shenton, Mon Jervois and Alex Residences. Gross margin fell 5.8ppt to 40.6%. NAV/share of $4.14

*K1 Ventures: 3QFY15 net profit jumped more than 4x to $5.0m on revenue of $3.1m (-3.4%), with bottom-line largely aided by FX gains of $3.9m, which included gains from the revaluation of assets that were distributed upon the voluntary liquidation of K1 Holdings.. The decline in top-line was largely due to a fall in investment income. Operating margin improved to 66.3% from 64.8%. NAV/unit of $0.10.

*Soilbuild Construction: 1Q15 net profit advanced 15% to $4.5m, despite revenue being down 19% to $70.4m, as gross margin improved 3.2ppt to 10.4% as a result of higher profit margin projects undertaken during the quarter, which included projects like Mandai Connection, Yishun HDB, Xin Ming Hua industrial development in Tuas Crescent, Ang Mo Kio HDB, etc. NAV/share of $0.135.

*Rickmers Maritime: 1Q15 net profit fell 29% to US$7m, while revenue slumped 16% to US$28.6m, from reduced charter rates contracted on six vessels. Bottom line slump could not be mitigated despite an exchange gain on MTNs of US$2.4m due to the Trust’s low operating leverage. NAV/share of $0.59.

*SIIC Environment: Sets foot in China's sludge treatment industry via the investment of US$4m in the preference shares of MTI Environment group (MTI), alongside International Finance Corporation which will also invest a similar amount into MTI. MTI is a well-known enterprise in the domestic sludge treatment industry and an engineering, procurement and Ccnstruction contractor in the water treatment industry.

*Sembcorp Industries: Awarded $300m contract to develop and operate a 225-megawatt gas-fired power plant in central Myanmar by the Ministry of Electric Power of Myanmar.

*Nordic Group: Awarded $4m contract to provide labour and materials to perform scaffolding works for a chemical plant at Jurong Island under ExxonMobil Chemical Asia Pacific – Aurora Project. The facilities is expected to be completed in 2017.

*Sarine: Substantial shareholder Fidelity Worldwide Investment has decreased its stake from 9.14% to 8.77%, via the sale of 1.28m shares at an average price of ~$2.10 in the open market.

*Artivision: Signed a three-year exclusive business contract with Walla! Communications, Israel’s leading Internet portal. Artivision is of the view that the Contract will bring substantial value to Israeli advertisers, providing them with an exclusive and effective video advertising solution for programmatic media buying of a premium video advertisement inventory.

Friday, April 24, 2015

SG Economy

SG Economy: Singapore’s headline inflation rate in Mar ‘15 fell further by 0.3% y/y (Feb: -0.3% y/y), mainly on lower costs of housing & fueland- energy-related items such as petrol pump prices and electricity tariffs. This is the fifth consecutive month of deflation.

Nevertheless, from the previous month, headline inflation rose 0.2% m/m (Feb ‘15: +0.1% m/m), the first back-to-back m/m increase since Oct - Nov ‘13. For Jan - Mar ‘15, headline inflation was down by 0.3% y/y while core inflation averaged +1.1% y/y.

Core inflation rate was up, albeit slower, by 1.0% y/y (Feb ‘15: +1.3% YoY), as food prices increased at a slower pace of +2.1% y/y in Mar ‘15 (Feb ‘15: +2.5%y/y), attributed to the normalisation in demand after the Lunar New Year festive period.

Overall, Maybank-KE is maintaining its 2015 inflation forecast of 0% - 1.0%, reflecting subdued outlook on “Transport” cost given the low crude oil price effect on fuel prices, the continued depressed “Housing & Utilities” cost as well as stable-to-soft global commodity prices offsetting the labour cost impact of the tight job market. This is further supported by lower electricity tariffs starting Jan ‘15 which averages -8.0% q/q in 1Q15 and Budget 2015’s measures to alleviate living costs.

Mapletree Greater China Commercial Trusts

Mapletree Greater China Commercial Trusts: 4QFY15 results were ahead of its IPO forecasts, with DPU of 1.74¢ (+24.1% y/y) taking FY15 DPU to 6.54¢ (+15.4%).

For the quarter, gross revenue and NPI jumped to $76.2m (+22.1%) and $62.3m (+24.5%) respectively, as strong rental reversions from new leases boosted revenue growth at Festival Walk (+16.7%) and Gateway Plaza (+19.3%).

NPI margin rose to 82% from 81%, as the improvement in revenue outpaced the increase in property expenses.

As of 31 Mar ‘15, all retail leases at Festival Walk expiring in FY14/15 had been renewed/re-let with aggregate 22% rental uplift, while at Gateway Plaza, about 98.7% of the leases expiring in FY14/15 were committed and renewed at an aggregate rental uplift of 30%

Portfolio occupancy rate stood at 98.8% (3QFY15 at 99.4%), leverage ratio fell 1.8ppt to 36.2%, with average debt cost at 2.55% and tenor of 2.75 years.

Going forward, management believes that both of its properties remain well-positioned to benefit from resilient leasing demand and the limited supply in in Hong Kong retail and Beijing office sectors.

At the current price, MGCCT trades at 6.1% FY15 yield and 0.95x P/B.

MGCCT continues to sit in Market Insight’s Yield portfolio.

Suntec REIT

Suntec REIT: 1QFY15 results fell short of estimates, with DPU of 2.23¢ (flat y/y, -13.6% q/q). Adjusting for its private placement of 218.1m shares last year, DPU should have been up 6%.

Gross revenue was $74.5m (+12.9% y/y, -3.1% q/q), taking NPI to $51.4m (+17.3, -3.1% q/q), mainly due to the opening of Suntec City mall (Phase 2) following the completion of the asset enhancement works and stronger performance from Suntec Singapore.

Office occupancy eased to 99.6% from 100% in 4Q14, while retail occupancy dropped to 93.5% from 99.7%, with Phase 3 of AEI at Suntec City receiving TOP in Feb ’15 and tenants gradually moving in.

Stabilised passing rents for Suntec City is now at $12.15 psf, lower than the $12.27 in Dec ’14, although management is guiding that the rest of the space on level 1 should command better rents. Shopper traffic is also improving and is not far from pre-AEI levels.

Aggregate leverage stood at 34.8%, with slightly higher all-in interest cost of 2.53%, lower average debt tenor of 3.39 years (4Q14: 3.63 years) and no refinancing needs in 2015

Notwithstanding the resilient office leasing environment, management is flagging a more challenging outlook for retail space amid a labour crunch and peaking rentals. Downside risks would include disappointment over rental and occupancy rates at Phase 3 of Suntec City mall and concerns about the looming supply of office space expected in 2016.

Valuations for Suntec REIT are fairly rich with forward DPU yield compressed to 5.4% and P/B at 0.9x.

Latest broker ratings:
Maybank-KE maintains Hold, cuts TP to $1.89 from $1.94
Daiwa maintains Hold with TP of $1.88
CLSA maintains Sell with TP of $1.80
Deutsche maintains Sell with TP of $1.73

Sheng Siong

Sheng Siong: 1QFY15 net profit rose 12.2% to $14.1m, while revenue increased 4.6% to $198.4m, where 1.7% was contributed by the two stores, which opened in Dec ’14 and Jan ’15 respectively, while 2.9% was from same-store sales growth.

Management highlighted that 1Q15 began strong during the festive season, but demand faded in March, likely on weak conditions as seen in FY14. Bedok Central store’s revenue growth recovered, but Tekka store’s growth stayed flat.

Gross margin improved 0.6ppt to 24.4%, from cost savings from the distribution centre. Higher rental income, which grew 2.6x to $0.9m from tenants at Block 506 Tampines Central, as well as government grants also contributed to bottom line.

Operating expenses increased 7.7% to $33.9m, driven primarily by staff costs (higher bonus provisioning and new stores headcount), FX, and higher depreciation from new trucks.
On operational updates, management secured new leases at Bukit Panjang (5,220 sf) and Punggol (3,360) from HDB, and these stores should commence operations in May. Meanwhile, Sheng Siong is currently awaiting HDB to grant the lease for another new store at Pasir Ris (3,200 sf). The McNair store which is closed for refurbishment in Apr should continue operations in May.

On the JV with LuChen Group to operate supermarkets in Kunming, operations should begin in 2H15, but management does not expect to be profitable this year.
Sheng Siong is trading at 23x consensus FY15 P/E.

Latest broker ratings:
JPMorgan maintains Overweight with TP of $0.81

SG Market (24 Apr 15)

Singapore stocks are expected to open higher, taking cue from the positive close in Wall Street overnight, buoyed by tech stocks, which saw the Nasdaq closing at a record high since March 2000.

Regional bourses are trading higher this morning in Sydney (+1.1%) and Seoul (+0.7%), although Tokyo is down 0.3%.

Technically, key support/resistance levels for the STI are tipped at 3,468 and 3,561 respectively.

Stocks to watch:
*Suntec REIT: 1QFY15 results were below estimates, with DPU at 2.23¢ (flat y/y), representing an annualized yield of 4.8%. Adjusting for its share placement last year, DPU should have been up 6%. Gross revenue came in at $74.5m (+12.9%) and NPI at $51.4m (+17.3%), mainly led by the opening of Suntec City mall (Phase 2) following the completion of the asset enhancement works, and higher revenue achieved by Suntec Convention & Exhibition Centre. Office portfolio occupancy was at 99.6% with retail at 93.5%, gearing ratio relatively unchanged at 34.8%, with average debt cost at 2.53% and tenor of 3.9 years. NAV/unit of $2.085.

*Mapletree Greater China: 4QFY15 results were above estimates, with DPU at 1.74¢ (+24.1%) taking FY15 DPU to 6.54¢ (+15.4%), representing a yield of 6.1%. Gross revenue for the quarter rose 22.1% to $76.2m and NPI was up 24.5% to $62.3m, as strong rental reversions from new leases signed in the quarter resulted in a 16.7% growth in Festival Walk’s revenue and 19.3% growth in Gateway Plaza’s revenue. Portfolio occupancy rate stood at 98.8% (3QFY15 at 99.4%), gearing ratio fell 1.8ppt to 36.2%, with average debt cost at 2.55% and tenor of 2.75 years. NAV/unit of $1.198.

*Ascendas REIT: 4QFY15 results in line, with DPU up 3.3% to 3.71¢ taking FY15 DPU to 14.6¢ (+2.5%), representing a yield of 5.6%. Gross revenue for the quarter inched higher by 1.2% to $173.8m while NPI climbed 2.3% to $117.2m, mainly due to the contribution of Aperia, which was acquired in Aug ’14, and higher occupancy in certain properties, partially offset by the impact from the changes in the lease structure arising from the conversion of single-tenant to multi-tenants. Occupancy improved 0.9ppt to 87.7% with WALE of 3.8 years. Gearing ratio stood at 33.5% with all-in cost of debt of 2.7%. NAV/unit of $2.08

*Ascott REIT: 1Q15 results inline, with DPU and distributable income inching higher 1% to 1.76¢ and $27m respectively, representing an annualized yield of 5.5%. Gross revenue grew 12% to $90m, while gross profit increased 10% to $43.1m, mainly contributed by properties acquired in 2014, partially offset by lower revenue from existing properties and expiry of deed of yield protection for Somerset West Lake Hanoi. Aggregate leverage stood at 38.7%, with average debt cost of 2.9%. NAV/unit of $1.36.

*Frasers Commercial Trust: 2QFY15 results in line, with DPU up 16% to 2.38¢, representing an annualized yield of 6.2%. Gross revenue grew 22% to $34.8m, while NPI climbed 14% to $24.7m, from higher contribution from Alexandra Technopark, China Square Central and 55 Market Street, partially offset by the weakening AUD and lower occupancy for Central Park. Occupancy stood at 96.5% with WALE of 3.5 years. Aggregate leverage stood at 37.2% with all-in borrowing cost of 2.9%. NAV/unit of $1.55.

*SGX: Exchange seeking to double market value of companies listed on SGX in 3-5 years as Asian bourses compete for IPOs, highlighting that it will happen through listings from China, India and from other locations.

*OCBC: Sees its fresh expansion into Myanmar as catalyst for growth in its commercial banking business, as it opened its 1st branch in Myanmar. Expect to double revenue from regional business of its SME and mid-cap clients within 3 years.

Thursday, April 23, 2015


OUE H-T: Share price hit a new all-time high of $0.97 this morning. The outperformance of the REIT could perhaps be attributed to the hotel trust boasting the highest forward yield of 7.3% versus peer average of 6.9%.

Additionally, the slated completion of Crowne Plaza Changi Airport acquisition in Feb '15 is also expected to be income accretive. The construction of Crowne Plaza’s future extension is targeted to be completed by end 2015 and would leverage on the expansion plans of Changi Airport including the addition of a fourth terminal and Jewel retail development.

Looking into 2015, while sentiment in the tourism industry may be slightly dented by the uncertain global economic outlook, this may be mitigated by domestic events as Singapore celebrates its Golden Jubilee year and hosts the 2015 SEA Games and World Rugby Sevens.

OUE HT currently sits in Market Insight’s yield model portfolio (entry price at $0.91), and has since reaped a total return of ~8.5% year-to-date.

Overall, the street has 7 Buy, 2 Hold and 2 Sell ratings with a consensus TP of $0.99 on the stock.

Genting SP

Genting SP: Marina Bay Sands (MBS) reported adjusted 1Q15 EBITDA of US$415.3m (-4.6% y/y), with total gross revenue coming in at US$784.8m (-6.1% y/y)

Rolling Chip win percentage of 3.41% in 1Q15 was above the expected range and in-line with the 3.41% achieved in in the previous year, on rolling chip volumes of US$10.1b (-22% y/y), indicating a drop in VIP business.

Meanwhile, the mass market held steady, with slot handle US$3.1b (+1.1%) and hold rate of 4.6% (1Q14: 4.8%) and non-rolling chip drop of US$1.1b (-4.2%) and win rate of 25.3% (1Q14: 23.4%).

MBS’ hotel business saw a 4.5ppt drop in occupancy rates of 94.8% and average daily room rates of US$414 (-3.3%).

Core adjusted EBITDA margin was at 52.9%.

The latest set of data could offer a read-through for Genting SP (GENS) upcoming 1Q15 results, which could similarly show a drop in VIP volumes and lacklustre performance from its hotel businesses.

Maybank-KE recently upgraded Genting Singapore to Buy with TP of $1.08. Overall, the house believes short-term headwinds have been largely priced in while the longer-term positive catalysts are ignored.

SG Market (23 Apr 15)

Singapore stocks are expected to open higher, following the positive close on Wall Street, which was led by a jump in US existing home sales and a mixed bag or earnings reports from major corporates.

Regional bourses are trading mixed this morning in Tokyo (+0.4%), Seoul (-0.2%) and Sydney (flat).

Technically, key support/resistance levels for the STI are tipped at 3,468 and 3,561 respectively.

Stocks to watch:
*SGX: 3QFY15 results came in at the top end of estimates, with net profit up 16.4% y/y to $88.2m, while revenue gained 20.4% to $199.3m, driven by a 52.4% surge in derivatives revenue to $79.7m, as a result of strong China A50 Index and India Nifty Index futures volumes. Topline was also aided by the market data and connectivity segment (+11% to $21.1m) and the depository services segment (+14% to $25.8m). Meanwhile, securities revenue inched higher by 1% to $52.8m, as an increase in daily average volume of 8% was offset by a dip in average clearing fee to 2.9bps (-0.2bps). Operating margin was at 51.7% versus 53.3% from the previous year. 4¢ interim DPS maintained.

*Mapletree Commercial Trust: 4QFY15 results in line. DPU grew 2.4% y/y to 2¢ taking FY15 DPU to 8¢ (+8.5%), representing a yield of 4.9%. Gross revenue for the quarter increased 3.5% to $71.0m, while NPI gained 4.6% to $53.2m, led by improved contributions from all portfolio properties. Portfolio occupancy stood at 95.7% (-2.5ppt) with WALE of 2.1 years. Aggregate leverage stood at 36.4% with average debt cost of 2.3%. NAV/unit of $1.24.

*Cache Logistics Trust: 1Q15 results in line. DPU was flat (+0.3% y/y) at 2.15¢, while distributable income inched 0.9% to $16.8m. Gross revenue climbed 1.6% to $21m, while NPI remained flat (+0.6%) to $19.7m, driven by the build-in rental escalation within the portfolio’s lease and contribution from Australian properties, offset by vacancies and higher property maintenance expenses and lease commissions. Occupancy stood at 99.1% with WALE of 4.5 years. Aggregate leverage stood at 36.6% with average debt cost of 2.8%. NAV/unit of $0.98.

*Frasers Centrepoint Trust: 2QFY15 results above expectations. DPU climbed 2.9% y/y to 2.96¢, yielding 5.6% annualized yield. Gross revenue rose 15.9% to $47.5m on new contribution from Changi City Point and organic growth from other malls, except Bedok Point. Despite challenging retail environment, rental reversion is +3.8% and portfolio occupancy improved 0.7pp q/q to 97.1%. WALE stands at 1.62 years. NPI and distributable income each increased 14.4% and 14.1% but DPU was diluted by new units. Leverage was pared down 0.7ppt from the previous year to 28.6%, while average debt cost rose from 2.51% to 2.79%. NAV/unit of $1.86.

*Viva Industrial Trust: 1QFY15 DPU grew 8.6% y/y to 1.87¢, translating to an 9.2% annualized yield. Gross revenue gained 20.8% to $18.1m and NPI jumped 25.8% to $12.4m, beating its own IPO forecasts by 22.0% and 27.6% respectively. Strong performance came from higher-than-expected rent at UE BizHub EAST and new contribution from Jackson Square and Jackson Design Hub acquired in November 2014, offset by lower-than-expected revenue at Technopark@Chai Chee ahead of AEI. Leverage is high at 43.4% though 85.7% is fixed, borrowing costs increased marginally to 3.83%, debt to maturity stands at 2.5 years. NAV/unit of $0.77.

*Creative Technology: 3QFY15 net loss widened to US$11.7m versus US$8.8m from the previous year. Revenue fell 9% to US$22.7m due to the uncertain and difficult market conditions which continued to affect the sales of the group's products. Gross margin rose 7ppt to 29% due to the sales mix. Bottom-line was further weighed by other losses of US$4.7m versus gains of US$0.6m, largely as a result of FX losses. NAV/share of US$1.50.

*Genting Singapore: Read through on MBS performance from Las Vegas Sands 1Q15 results. MBS - reported adjusted 1Q15 EBITDA of US$415.3m (-4.6%), with total gross revenue coming in at US$748.8m (-6.1%)

*Noble: Has been barred from taking part in reporting agency, Platt’s, oil pricing process. When contacted, Noble would not comment on its specific involvement in Platts’ pricing process.

*Cosco: 51% subsidiary COSCO Shipyard has secured a FPSO conversion contract worth ~ US$95m from MODEC Offshore Production Systems. Delivery is expected in 4Q16.

Wednesday, April 22, 2015

Sembcorp Marine

Sembcorp Marine: (S$3.10) Clinched its first contract of 2015
Sembcorp Marine (SMM) finally received its first new order after more than a five-month drought with a relatively small contract worth $56m from Teekay Offshore, to convert a shuttle tanker into a floating storage and offloading vessel.

The vessel is expected to arrive at SMM's Jurong Shipyard in Jun 15 and will be worked on for 11 months, before being deployed for the Gina Krog Field in Norwegian's North Sea.

We note that the new project is termed by management to be "important" and will be fast tracked, which raises questions on whether SMM's yard may be running low on utilization as order book wanes.

In Nov '14, management was surprisingly optimistic on its order outlook, citing that enquiries were strong, especially for production assets, and noted its enlarged Tuas yard would allow it to capture those orders.

As at 4Q14, SMM had an order book of $11.4b, its lowest since 2Q12 and we do not rule out that the shipbuilding industry may see vessel deliveries pushed back.

Maybank-KE believes the contract win unlikely to have material impact on stock price and maintains their Sell rating (TP of $2.65), on weak order momentum and the overhang on Brazil corruption probe.

SG Market (22 Apr 15)

Regional bourses are trading mixed this morning in Tokyo (+0.4%), Seoul (+0.4%) and Sydney (-0.3%).

Technically, STI is still trading in upward trend channel, with key support-resistance levels tipped at 3,468 and 3,561 respectively. Momentum indicators are also correcting from overbought territory.

Stocks to watch:
*Cambridge Industrial Trust: 1Q15 DPU slipped 2.1% y/y to 1.225¢, while distributable income improved 0.6% to $15.7m, which included income support of $1.1m for properties undergoing asset repositioning. The drag came from higher property expenses and lower capital gain distribution gains shaved bottom line. Meanwhile, gross revenue shot 16.7% to $27.5m, while NPI spiked 11.9% to $21.2m, from full contribution of five recently-acquired properties. Portfolio occupancy dipped to 95% (4Q14 at 96%), while leverage climbed 1.6 ppts q/q to 36.4%, with average debt cost of 3.6% and tenor of 2.3 years. At NAV/unit at $0.68.

*CapitaCommercial Trust: 1Q15 results in line, as DPU and distributable income improved 3.9% y/y and 4.7% to 2.12¢ and $62.7m respectively. Gross revenue and NPI rose 6.5% and 6.4% to $68.2m and $54m, mainly driven by higher rents and occupancy. Portfolio occupancy (excluding CapitaGreen) improved to 99.7% (4Q14 at 99.5%) with WALE of 7.9 years, while aggregate leverage is maintained at 29.9%, with average cost of 2.4%. NAV/unit at $1.70.

*Mapletree Industrial Trust: 4QFY15 results ahead of estimates, with DPU up 5.6% y/y to 2.65¢, bringing FY15 DPU 5.1% higher to 10.4¢, representing a 6.5% yield. Gross revenue rose 5.6% to $79.4m, led by higher rental rates and occupancies in hi-tech buildings, business parks and light industrial buildings, as well as new contribution from 2A Changi North Street 2 and the completion of build-to-suit project for Equinix. NPI advanced 8.4% to $57.8m, aided by electricity bulk purchasing and lower electricity tariffs. Portfolio occupancy dipped 0.6ppt q/q to 90.2% due to progressive relocation of tenants at Telok Blangah Cluster that is due for redevelopment, tenant retention at 55.9%, WALE of 3.1 years. Aggregate leverage fell to 30.6%, with average cost of debt of 2.3% and tenor of 3.7 years. NAV/unit at $1.32.

*NOL: Orient Overseas International (OOIL) chairman highlights that a merger with NOL is unlikely despite consolidation in shipping industry as integrating the two large companies would be too challenging. However, he expects more M&A deals among smaller firms seeking economies of scale, which would find integration easier due to their size.

*Noble: Investing in 3 companies which together will form a fuel storage, supply and distribution network in Indonesia's Sumatra and Java regions to meet demand from palm oil, power, and mining industries. Accordingly, Noble will acquire 51% stake in PT Sriwijaya Inti Daya and 49% each in PT Sriwijaya Multi Terminal and PT Karimata Baru Terminal for total US$7.5m.

*Straits Trading: Sets up unit, SRE Capital, to form and manage funds invested in REITs, asset-backed trusts and corporate securities in Asia-Pacific's real estate and infrastructure sectors. The group will commit $130m initial seed capital to the fund, with plans to raise capital from accredited investors including HNWIs, institutions and family offices globally. Straits Trading expects the fund to yield 8-10% returns versus the 5-6% yield that REITSs are typically offering.

*Sembcorp Marine: Secured a relatively small contract, the first for the year, worth $56m from Teekay Offshore, for the conversion of a shuttle tanker into an FSO to be deployed in the North Sea. Works are expected at Jurong Shipyard in Jun 15 for 11 months.

*Sembcorp Industries: JV Vietnam Singapore Industrial Park and Township Development Joint Stock company (VSIP) has agreed to purchase an industrial park in northern Vietnam. The site, which is secured with land use right certificates, provides access to 110 ha of industrial land, thereby enabling VSIP to further meet the demands of customers in northern Vietnam.

*China New Town Development: Controlling shareholder, China Development Bank Capital Corporation, provided an unconditional guarantee for a five-year Rmb260m loan from ICBC, with interest rate no higher than the benchmark PBOC rate (currently at 5.75%). Proceeds of the loan will be used to fund primary land development and for general working capital.

*Grand Banks: Announced that its order book is currently at a six-year high of $31.6m, lifted by five boat orders secured in 1Q. Orders from the US make up about 75% of the group’s total order book.

*Perennial Real Estate: Entered into 50:50 JV with IJM Land to acquire and develop 1.4m sf freehold waterfront site into a large-scale integrated mixed-use development in Gelugor, Penang. The total development cost is expected to be over RM3b.

*Ezion: Substantial shareholder, Franklin Resources, disposed 2m shares at an average of $1.2267/share on 16 Apr, which lowered its stake from 5.05% to 4.93%.

*Karin: Secured distributorship in Hong Kong for IT products by Huawei, including servers, storage systems, cloud computing products, and data center solutions.

*Geo Energy Resources: To issue 28m new shares (2.4% enlarged share capital) at $0.18 apiece to EVA Capital SP, a closed-ended fund. Net proceeds of $4.9m is intended for general working capital.

*OEL: In relation to its arbitration proceedings against BW Marine (Cyprus), OEL is required to pay a total of $203k to BW Marine.

*China Sunsine: Positive profit guidance for 1Q15, buoyed by an increase in gross profits due to higher sales volume and lower cost of raw materials. Results will be released on 27 Apr.

*Asia Enterprises: Negative guidance for 1Q15, dragged by the significant slowdown for steel products, mainly from the marine and offshore segment. Group expects to report of loss of less than $1m compared to a profit in 1Q14. Results will be released in the week of 4 May.

Tuesday, April 21, 2015


Oil: Sudden downward spike from US$56.41 to $55.84 (-1%) on expectations of another rise in U.S. stockpiles and as Saudi Arabia keeps output near record highs, but prices remained near a 2015 peak reached last week. Saudi Oil Minister Ali al-Naimi told Reuters in Seoul that the No. 1 crude exporter expected to produce at near record highs of around 10m bpd in Apr. Analysts warn that OPEC's ability to cope with an unexpected surge in demand is diminishing fast.

Mapletree Logistics Trust

Mapletree Logistics Trust: 4Q15 DPU dipped 2% y/y to 1.85¢, bringing full year DPU to 7.5¢, on the lower end of street forecasts. Distributable income was shaved 1% to $45.9m.

Revenue rose 6% to $84.7m, while NPI increased 3% to $70.3m, from higher contributions from six properties acquired in China, Singapore, Malaysia and Korea during the financial year, offset by lower occupancy in several conversions of single user properties to multi-tenanted in Singapore and absence of revenue from 5B Toh Guan Road East, which is undergoing AEI.
For the year, HK and Singapore helped MLT achieve positive average rental reversion of 8%.

Portfolio occupancy stood at 96.7% (-0.2ppt q/q) with WALE of 4.3 years.

Aggregate leverage stood at 34.3%, with weighted average annualized interest of 2.1%. 80% of debt is fixed-rate.

On outlook, 24% of leases are renewable in FY16, of which 10% constitute single-user buildings. Some of these could be converted into multi-tenanted buildings, especially in Singapore. Such transition will pressure DPU as expenses rise and occupancy dips during the transition.

Meanwhile, AEI at 5B Toh Guan Road East should be completed in early FY17, while redevelopment at 76 Pioneer Road will commence this year. These projects should not materially impact FY16 DPU.

In Hong Kong (14.9% revenue), rentals and occupancies should be buoyed by a supply shortage.

MLT is currently trading at 1.2x P/B, and trading at 5.9% annualized 4Q15 yield.

Latest broker ratings:
CIMB maintains Hold with TP of $1.30
OCBC maintains Hold with TP increased to $1.14 from $1.12


Banks: Once again revenues and contained asset quality are likely to be the key drivers for NPAT in 1Q15. CLSA expects 1Q15 to be seasonally strong but overall, 2015 will be the most challenging operating environment for the banks vs
recent history.

House is Neutral on the Singapore banks relative to the FSSTI and roll forward its valuations to 2016 and upgrade UOB from U-PF to O-PF on valuation grounds. Order of preference is UOB (O-PF; $25.55), DBS (O-PF; $22.00) followed by OCBC (U-PF; $11.00).


Yangzijiang: DB maintains Buy and raised its TP from $1.40 to a street-high $1.90.

As the shipbuilding industry consolidates further in China, weaker yards will become marginalized and a select group of larger/stronger yards will remain. YZJ will be one of the winners as the industry evolves to look more like the landscape in South Korea where only a few major yards dominate.

Recent order wins for LNG vessels have been announced and YZJ is close to containership new orders, reinforcing its established position.

Sinarmas Land

Sinarmas Land (SML): Unrated report by CLSA on the company, citing that at a 51% discount to RNAV, Sinarmas Land is a cheap proxy to the rising Indonesia property market through it stakes in BSDE IJ and DUTI IJ which accounts for 56% of valuations.

House believes valuation gap can narrow further versus peers given SML’s strong net cash balance sheet, offering acquisition opportunities while overseas investments have also delivered a proven track record.

CLSA has a fair value can range from $0.93 to $1.16/share.

SG Market (21 Apr 15)

Singapore stocks are expected to open higher this morning, following the rebound in Wall Street, taking cue from China’s RRR cuts over the weekend and strong gains in tech companies.

Regional bourses are trading higher this morning in Tokyo (+0.4%) and Sydney (+0.9%), although Seoul (-0.1%) opened slightly softer.

Technically, STI is still trading in upward trend channel, with key support-resistance levels tipped at 3,500 and 3,561 respectively.

Stocks to watch:
*CapitaMall Trust: 1Q15 DPU results in line, with DPU at 2.68¢ (+4.2% y/y, -6.4% q/q), representing an annualized yield of 4.8%. Gross revenue of $167.4m (+1.6%) was aided by the completion of AEI works at Bugis Junction, while the other malls, except for IMM, saw higher rental achieved on new and renewed leases. NPI grew 3% to $117.7m, as a result of lower utilities expenses partially offset by higher marketing expenses. Portfolio occupancy was at 97.2% (4Q14 at 98.8%), while leverage unchanged at 33.8%, with average debt cost of 3.4% and tenor of 5.1 years. NAV/unit at $1.83.

*Mapletree Logistics Trust: 4QFY15 results in-line, with DPU down 2% y/y to 1.85¢, taking FY15 DPU to 7.5¢ (+2%), or a yield of 6.1%. Gross revenue rose 6% to $84.7m, while NPI was up 3% to $70.3m, led by higher contributions from six properties acquired in China, Singapore, Malaysia and Korea during the financial year, offset by lower occupancy in several conversions of single user properties in Singapore and absence of revenue from 5B Toh Guan Road Ease, which is undergoing AEI. Portfolio occupancy stood at 96.7% (3QFY15 at 96.9%) with WALE of 4.3 years, and average debt tenor of 3.6 years. Leverage stood at 34.3%. NAV/unit at $1.03.

*Sabana Shariah REIT: 1QFY15 DPU of 1.78¢ came in 5.3% lower y/y but flat q/q, yielding 8.1% annualized yield. Gross revenue and NPI was at 3.2% and 1.1% respectively, led by higher contributions from 10 Changi South Street 2, which was acquired in Dec ‘14, but DPU was lower due to smaller gains on fair value derivatives and dilution effect of new units issued. Portfolio occupancy was at 90.6%, WALE of 2.2 years, leverage at 38.0% and average debt cost of 4.2% and tenor of 2.8 years. NAV/unit at $1.06.

*Noble: Business Times highlighted that last Friday’s AGM saw Noble’s chairman and its largest shareholder, Richard Elman repeatedly dodging shareholder’s queries on the group's accounting practices, but steering AGM's focus to resolutions on Noble's financial statements and reports of its directors and auditors. The rebuff of shareholders queries has raised further concern, and also triggered responses from Iceberg Research which said that Mr Elman's responses to shareholders reveal "insecurity and arrogance". Meanwhile, SIAS announced that it will be seeking clarification from Noble as to whether concerns of shareholders expressed in the media are correct, and if so, why?

*Starhill Global: Enters conditional agreement to buy Myer Center Adelaide for A$288m. Property comprises 620,000sf retail space, 98,000sf of office space and four basement levels of 467 carpark lots. Acquisition yields 6.6% and is 2.8% yield accretive on pro-forma basis but will raise leverage from 28.6% to 35.3%.

*OKH Global: Entered MOU with government of Shuangliu County, China, to acquire 1.4m sf of land to develop an automotive parts logistics park within 3 years. The local government will also support and facilitate the project.

*KSH: Secured $33.2m construction project for a proposed 3-storey University Sports Centre Building at NUS, with completion targeted in May 2017.

*SGX: Chengdu Municipal Finance Affairs Office announced that they have signed a MOU to cooperate on facilitating capital raising by companies from Chengdu on SGX.

*Technics O&G: Won an ECPI contract to fabricate steel structure worth $5.1m.

*Luzhou Bio-Chem Technology: Expects 1Q15 to be profitable due to favourable domestic market conditions, reflected in higher ASPs and volume sold.

*UOL: Unconditionally and irrevocably guarantees $175m 2.50% notes due 2018 issued by subsidiary under its $1b multicurrency MTN programme.

Monday, April 20, 2015

Sino Construction

Sino Construction, auditor issued disclaimer for their opinion as key operating subsidiaries in China are under tax investigation and its accounting records are submitted to authorities, hence unavailable for auditing. This may affect the integrity of its financial statements.

SG Market (20 Apr 15)

Singapore market is likely to track U.S. lower today.

On the other hand, China announced it will cut RRR by a further 100bps effective today. This may provide some support for Singapore market, especially stocks with Chinese exposure.

Technically, STI is still trading in upward trend channel but is headed for the lower trend channel now. Support-resistance at 3500-3561 respectively.

Stocks to Watch:

#ISEC: Entered into non-binding MOU with Cao Thang Corp (CTC) and Mr Nguyen Danh Khoi to operate and administer eye hospitals, ophthalmology centres and eye clinics in Vietnam. CTC holds and operates a private eye hospital and eye clinics.

#LHN: Secures seven-year master lease with seven-year option to renew for 18 Tampines Industrial Crescent with Oxley Bliss Pt Ltd. The property comprises a 3-storey and a 7-storey ramp-up building, classified B2 Clean Industrial, has 440,000 sf NLA. The master lease covers second and third floors of the 3-storey block and second to seventh storey of the 7-storey block. Expected TOP: May-June 2015.

#Envictus: Subsidiary entered into conditional sale and purchase agreement with Central Spectrum (M) Sdn Bhd to purchase eight plots of land in Selangor Halal Hub, Pulau Indah, for RM57.6m for the construction of new facilities for Envictus. The land has 82 years lease remaining.

#TT International: Will be offering Scheme Creditor (under scheme of arrangement dated 9 Sep 2009) to covert a number of their RCBs into Dilution Shares.

#Halcyon: Announces it will not renew SICOM average long-term contracts with dealers, reserve long-term contracts exclusively for Group’s consumers, and substantially increase premiums relative to SICOM price for long-term contracts.

#SIA: Receives Regulatory approval to establish Singapore-based JV with Airbus to perform civial aviation flight training for Airbus. SIA now holds 45% of JV.

#United Envirotech: Increases limit of US$300m MTN programme to US$500m

#China Taisan: Proposes consolidation of every 20 existing shares into 1 ordinary share.

#Japfa: Warns losses in 1Q2015 due to continuing weakness in poultry market and in purchasing power of low-income consumers. And (ii) translation loss from USD loans due to weakening IDR.

#Tat Hong: Expect loss for 4QFY15 as a result of significant charges for impairment of goodwill and assets as the anticipated recovery in activity levels in Australian construction sector did not materialise amidst protracted sluggish Australian economy.

Friday, April 17, 2015


FX: Maybank Global Markets daily views on key currency pair movements:

1) Dollar Index (DXY) - USD continued to backpedal on disappointing housing starts and initial claims data overnight. DXY has fallen for 3 consecutive sessions; overnight closed at 97.40 levels. Day ahead may continue to see consolidation with a downside bias; intra-day range of 96.30 – 98.00. Daily stochastics is falling from overbought territories; momentum is bearish bias. On technicals, the setup remains bearish with double-top formation formed near 100 levels; the support at 96.90 (50DMA) is key to watch. March CPI will be in focus tonight, for indication of sustained USD weakness in the short term. Consensus is looking for +0.3% m/m. A weaker reading should see USD weakness continues. Over the medium term, Maybank remains convicted to its USD bullish bias and reiterate its view for the first rate hike to begin in Sep ‘15, and continue to favor buying USD on dips.

2) USD/JPY - In consolidation mode around the 119-region after dipping lower yesterday. Helping to support the JPY today was news that large Japanese companies have agreed to increase monthly wages by an average 2.59% in FY15, sparking some life back into Abenomics. Intraday MACD continues to point to bullish momentum though slow stochastics is indicating little bias in either direction, suggesting that further downside could be limited. Double-top formation at 121.85 continues to act as resistance in the short term, though in the interim, intraday trades within 118.30 – 119.50 should continue to hold.

3) EUR/USD - Continued to push higher towards 1.0818 overnight high on USD weakness despite mounting concerns over Greece’s ability to meet repayment schedule. Pair trades around 1.0780 levels this morning and looks to test higher. Intra-day in Asia could see 1.0730 – 1.0850 range; watch out for US CPI numbers tonight which could see if USD managed to sustain its near term weakness. Maybank continues to maintain its bearish EUR/USD view amid structural decline in Europe fundamentals, concerns over Greece ability to meet repayment schedules, and diverging monetary policies between US and EU.

4) USD/SGD - Bears remained at the forefront, dragging the pair back below the 1.35-levels, weighed first by softer dollar and then by NODX outperformance in Mar. Mar NODX surprised on the upside, rebounding by 18.5% y/y from Feb’s -9.7% vs. expectations of -1.1%, helped by a bounce in electronics and pharmaceutical shipments (+10.4% and 65.9% y/y respectively). The pair is currently hovering around 1.3495 with intraday MACD still showing bearish momentum, though stochastics are now at oversold levels, suggesting a rebound ahead is possible. Strong support remains at 1.3470-levels and should hold in the near term. Maybank’s preference remains accumulating on dips. Any rebounds should be capped around 1.3530.

SG Market (17 Apr 15)

Singapore shares are expected to open lower, taking cue from the negative close in Wall Street overnight, following mixed earnings and a weaker than expected economic data.

Regional bourses are trading lower this morning in Tokyo (-0.5%), Seoul (-0.2%) and Sydney (-0.4%).

From a chart perspective, the STI recently breached past the psychological resistance level of 3,500 yesterday to close at a seven-year high at 3,540. We caution however that technical indicators are looking overbought, as indicated by both the RSI and Stochastics. Topside resistance is at 3,620, while support lies at 3,465.

Stocks to watch:
*Keppel Corp: 1Q15 results came in below estimates. Net profit rose 6.4% to $360.2m, reflecting a bigger share of Keppel Land’s earnings and sale of some equity investments. O&M revenue was flat at $1.9b, mainly from higher recognition from on-going projects, while property division ($$327m, -1%) and infrastructure division ($509m, -31%) weighed on top line. O&M’s operating margins narrowed 2.2ppt to 12%, as a result of higher staff costs (+26.1%). $500m of new orders were won in 1Q15, bringing order book to $11.3b. Five jack-up rigs were delivered in the quarter. NAV/share at $5.97.

*SATS: Set up JV with the world’s seventh largest food company, Brazilian meat producer BRF group, to provide meat processing and manufacturing of branded food products for distribution to retailers, restaurants, wholesalers, distributors and ship chandlers. The 51/49 JV will have an issued and paid up capital of $48m, and intends to grow its portfolio of branded food products for the Singapore market and expand into other Southeast Asian markets over time.

*Courts: Partners international brands Ace Hardware and JYSK (Danish-brand selling home-living necessities). Products from these brands will be available at Courts stores in Singapore, and the first two shop-in-shop concepts,which is expected be operational in FY4/16.

*Vallianz: Clarifies that BT article quoting Vallianz to be in talks for more deals at “more than US$100m each” is speculative as no deal is firmed up and no value of contracts has been disclosed in any discussion. Trading halt has been lifted.

*ISOTeam: Awarded nine contracts worth ~$31.1m in aggregate, with works ranging from improvement works at multi-storey car parks to painting works and repairs and redecoration works.

*United Envirotech: Unconditional offer of $1.65/share by CITIC Environment has closed, with the valid acceptances of 85.8% of total issued share capital.

*Polaris: 44.9%-owned associate, PT Trikomsel, has partnered PT Transindo Digital Retail (TDR) to sell telco products in Indonesia. TDR is a retail store player which distributes various brand of mobile phones, tablets and accessories such as Advan, Apple, Asus, Hewlett Packard, Huawei, Lenovo, Microsoft, Oppo Samsung, Smartfren, Xiaomi and several other leading brands, at its Trans Hello retail outlets. TDR currently has about 50 outlets and targets to expand another 100 outlets by end Apr 2015.

*Alliance Mineral Assets: Granted an operating licence for its on-site processing plant at its Bald Hill Project by the Western Australia authorities. Simultaneously, group has completed the refurbishment of its primary processing treatment plant and mining contractors had been fully mobilised to commence work with the goal of restarting tantalite production at the Boreline pit.

*Keong Hong: JV Pristine Islands Investment appointed Accor to manage its first two hotels in Maldives. Acoor will provide the full spectrum of hotel management services, including consultancy on the design and construction of the two new-build hotels.

*Sysma: Disclosed that two directors of its JV company are currently assisting CPIB in investigations. Group cited that investigations appear to relate to events that occurred prior to the employment of these directors before the JV company was incorporated.

Thursday, April 16, 2015

China Water

China Water: China's central government has finally announced its long-awaited Water Pollution Prevention Plan today, with the contents largely similar to what the street was expecting.

The plan set specific targets for the industry such as water standards for surface water/underground water, wastewater treatment coverage ratio requirements for different areas as well as detailed measures the government will take to achieve those targets.

Accordingly, China will ban water-polluting industrial plants e.g small paper mills and oil refineries, by the end of 2016.

Overall, Maybank-KE is upbeat on the anti-water pollution plan, as it is likely to trigger a new round of investments. Amid a still-fragmented market, the Chinese government’s unrelenting push for consolidation should also sustain the M&A wave and market sentiment.

The house is Overweight on the sector, with Buy calls on all three companies under coverage, namely SIIC Environment (TP $1.26), China Everbright Water (TP $1.17) and United Envirotech

Hongkong Land

Hongkong Land: CLSA highlighted that HKLand’s recent underperformance was largely driven by strong fund flows into the HK equity market but the stock should also benefit given its high correlation with the HK market.

Fundamentally, office vacancy rates in Central has improved significantly while rentals continue to rise for the five consecutive quarter.

The possible inclusion into the MSCI HK Index is likely another positive catalyst to make it a more relevant stock. CLSA maintains Buy with TP of US$8.70.


Telco: SMRT partners Consistel to bid for telco license
SMRT is partnering OMGTEL in its bid to be the fourth telco in Singapore.

OMGTEL is a unit of Consistel, a system integrator which manufactures its own proprietary technology and software to provide in-building solutions for improved coverage. The group is best known as the builder of the wireless network at SportsHub.

Maybank-KE believes if OMGTEL could execute its plans well, the group may be a game-changer, given SMRT's access to 2m rail commuters.

Together with MyRepublic, this raises the risk to two potential entrants in the telco market after a decade of having only three operators.

Spectrum auctions are expected to be held later this year or 1Q16.

With the new interests in the sector, Maybank-KE has recently reshuffled its order of preference for the telcos and favors StarHub for its strong bundled plans and compelling TV content.

Maybank-KE telco ratings:
StarHub: Buy with TP of $5.00
SingTel: Hold with TP of $4.55
M1: Hold with TP of $3.65

SG Market (16 Apr 15)

Singapore shares are expected to open higher, following the positive close in Wall Street overnight, which was led by a rebound in oil prices and on Intel’s strong optimism for 2Q15.

Regional bourses are trading higher this morning in Tokyo (+0.1%), Seoul (+0.6%) and Sydney (+0.8%).

From a chart perspective, the STI recently breached past the psychological resistance level of 3,500 yesterday to close at a seven-year high at 3,540. We caution however that technical indicators are looking overbought, as indicated by both the RSI and Stochastics. Topside resistance is at 3,620, while support lies at 3,465.

Stocks to watch:
*Property: Developers' Mar private home sales 613 units (+57% m/m, +28% y/y), was the highest in 5 months units, driven by Kingsford Waterbay in Upper Serangoon View which sold 155 units at ASP $1,111/psf, and Sims Urban Oasis which sold 107 units at ASP $1,401/psf. The 2 projects accounted for 43% of Mar primary market private home sales. The street expects April's numbers to be good as well on back of brisk sales at North Park Residences in Yishun (413 sold of 600 released) and Botanique at Bartley (>200 sold of 797 released).

*Keppel Land: 1Q15 net profit fell 17.2% to $72.6m, while revenue dipped 2.3% to $278.4m from the absence of revenue from The Lakefront Residences, and lower revenue from Plot 2-2 of The Springdale in Shanghai which was completed in March. These were mitigated by increases in revenues from The Luxurie in Singapore and Phases 4 and 5 of 8 Park Avenue Shanghai, and new revenue streams from Phase 1 of Seasons Residence in Shanghai and Phase 1 of Park Avenue Heights in Chengdu, both completed in Dec’14. Gross margin improved 0.6ppt to 31.4%. Bottom line was weighed by increased admin and interest expenses, and a dip in associates’ and JV’s contributions from the absence of contributions from Equity Plaza and MBFC T3 following their divestments. NAV/share at $5.11.

*SGX: In relation to market rumour on a possible stock trading link along the lines of the Shanghai-Hong Kong Stock Connect, SGX disclosed that group is not currently in the process of establishing such a link, but remains open to future collaborations.

*SIA: Mar systemwide passenger carriage grew 1.2% y/y, against a 1% capacity fall. Consequently, passenger load factor improved 1.6ppt to 76.6%. PLF for South West Pacific and West Asia/Africa improved on demand growth and capacity reduction, while East Asia routes load factor fell as capacity growth outstripped demand. SilkAir’s PLF grew 12.8% y/y, versus a 13.2% increase in capacity. Consequently PLF fell 0.2ppt to 68.3%. Cargo load factor was 0.2ppt at 67.8% lower as traffic dropped 1.8% against a capacity reduction of 1.6%.

*ST Engineering: ST Electronics secured $382.5m worth of contracts in 1Q15 for Rail Electronics & Intelligent Transportation, Satellite & Broadband Communications, as well as Advanced Electronics & Information Communications Technologies (ICT) solutions.

*SIA Engineering: Clinched renewed contract with SIA to provide comprehensive services, including maintenance, repair and overhaul as well as fleet management support services, for 3 years, with options to renew for 3 years and a further period of 2 years. The total 8-year term is expected to yield $2.6-2.9b revenue.

*SATS: Announced partnerships with international and local stakeholders to enhance cargo handling productivity, by building the capabilities of cold-chain professionals locally and regionally and transforming Changi Airport’s cargo acceptance process.

SMRT: Partnering OMG to bid for the fourth wireless telco license. OMG is a company set up by Consistel to bid for said license.

*Sembcorp Industries: Expanding renewable energy business in Hebei by developing two wind farms, via 49%-owned JV with Guohua Energy Investment. SCI’s equity share of investments is Rmb0.2b, which will be funded through a mix if internal and external borrowings. Separately, the group has completed the sale of UK subsidiary, Sembcorp Bournemouth Water Investment, and expects to mark a net gain of £25m (~S$50m) for FY15.

*Ezion: Substantial shareholder, Templeton International, disposed 3.7m shares via the open market at an average $1.08 on 7 Apr, lowering its stake from 6% to 5.8%.

*Ezra: Clinched multiple new awards from various companies worth US$55m. Work has commenced for several projects, with the others slated for offshore execution from 3QFY2015 onwards. Orderbook of US$2.3b is expected to be executed over the next 24 months.

*OUE: Issued S$300m 3.80% unsecured fixed rate notes due 2020 under its $3b multicurrency debt issuance programme.

Wednesday, April 15, 2015


NOL - No co specific news, although we recently highlighted that NOL bounced back into the scene today after a foreign broker upgraded the shipping group Buy from Netural and lifted its TP of $1.30 from $1.00.

Echoing other market watches, the house favors container shipping over dry bulk shipping. In particular, container shipping along Transpacific routes are expected to outperform in 2015 in view of the favourable supply-demand outlook and industry structure.

NOL derives ~50% of its revenue from the Transpacific container segment. As such, 2015 could be turning point for the group after four consecutive years of losses.

On balance sheet concerns, the house believes that this will be mitigated by the disposal of APL Logistics for US$1.2b, which will pare its gearing to 100%.

Overall, the broker believes that current valuations are undemanding, with the stock trading at just 0.7x FY15e P/B, well below industry peers.

Separately, Bloomberg highlighted NOL’s appeal as a takeover candidate has increased following the sale of APL Logistics, with analysts adding that now could be a good time to enter into the shipping cycle.

Some sceptics however argued that following the disposal, NOL has become more of an asset buyer than a takeover target, and with the group often viewed as a symbol of Singapore's shipping industry, an exit by Temasek is unlikely.

Overall, ratings by the street suggest that the worst is over for NOL, with 10 Buy and 8 Hold calls and a consensus TP of $1.18.

City Dev

City Dev: Deutsche says could play catch up in RNAV discount narrowing. City Dev is now trading at 27% discount to Deutsche’s RNAV vs LT average of 9%, vs Wing Tai’s current 35% discount to RNAV, relative to a 30% LT average.
Deutsche says this is one of the rate times WT’s discount narrowing came ahead of City Dev, in part due to privatization rumours.

The house expects City Dev’s price to catch up in terms of performance


SGX: Share price continues moving to new 5-year highs, as market watchers expect that the exchange will benefit from the recent increase in securities activity, and the surge in China/HK shares will result in higher turnover of derivatives e.g the China A50 futures.

Separately, market watchers pointed to a report by a foreign broker last week, which mooted the idea of a Singapore-China link connect one day, highlighting that Singapore boasts good relationship with China, being the second destination after Hong Kong to offer Rmb clearing services, while with sufficient Rmb liquidity, Singapore will also have the ability to clear these transactions.

Additionally, Chinese investors could find themselves familiar to some of the PRC companies listed on SGX, while the established REITs and business trusts sector in Singapore could attract them given the high dividend yields. Furthermore, SGX also offers exposure into the high growth markets of Asean.

Going forward, investors could also expect SGX to be on the lookout for further tie-ups and JVs in the commodities and derivatives segment as it attempts to diversify from its traditional securities business and increase its product offering.

At the current price, SGX trades at 27.2x forward P/E, versus Hong Kong Exchange’s 46.2x and Bursa Malaysia’s 22.5x.

Overall, the street has 6 Buy, 11 Hold and 3 Sell ratings with a consensus TP of $7.89.

El Niño

The Australia Burea of Meterological (ABM) has raised the probability of an El Nino occurring in 2015 to 70% from 50%, highlighting that ocean temperatures in the tropical Pacific continue to be warmer than average, while trade winds remain weaker than normal.

All climate models monitored by the ABM indicate that El Niño thresholds will be reached or exceeded by Jun. However, the accuracy of the model made during the El Niño–Southern Oscillation (ENSO) transition period (ie. Feb to May) is lower than for forecasts made at other times of the year.

The return of the weather phenomenon could bring below-average rainfall to this region, impacting yield but offset by higher CPO price.

Maybank-KE highlights that the timing of this weather alert is almost identical to 2014’s episode, which eventually disappointed the market as the El Niño threat faded in 2H15. Still, the house believes that this year could be different and is worthwhile to closely monitor the situation.

A clearer picture could shape up closer to Jun 2015. While the palm oil sector in general lacks short term re-rating catalyst, the advent of this El Niño may quickly change the sentiment.

For now, Maybank-KE has a Neutral call on the sector, with top picks being First Resources (TP $2.32), Wilmar (TP $4.04) and Bumitama Agri ($1.30).

Keppel T&T

Keppel T&T: 1Q15 net profit climbed 2.3% y/y to $15.8m, while revenue dipped 1.6% to $47.9m, as lower revenue from Data Centre division was offset by higher revenue from Logistics Division.

Operating profit fell 15% to $6.3m (operating margin narrowed 2.1ppt to 13.1%) from the absence of contribution from the two data centres disposed in Dec, partly offset by fixed asset disposal gains.

Bottom line was buoyed by a 9.4% growth in share of associates’ and JV’s driven by the 30.1% stake in Keppel DC REIT, in which the data centres were divested into last year.

Net gearing stood at 0.5x.

Going forward, earnings should be buoyed by new logistics centres as they come on line. The new Tampines Logistics Hub began operating in the quarter, and had received healthy demand. The Vietnam Singapore Industrial Park 1 is partially fitted out and is operational, while the distribution centre in Tianjin Eco-city is near completion.

Meanwhile, Keppel Datahub 2’s occupancy rate is 60% and ramping up steadily. The Almere Data Centre 2 in Netherlands is expected to commence operations in 3Q15, and should also contribute.

Keppel T&T is currently trading at 17x annualized 1Q15 P/E.

Latest broker ratings:
CIMB maintains Add with TP $2.05