Friday, May 29, 2015

Courts Asia

Courts Asia: Following its weak set of results yesterday, Maybank-KE maintains its Hold rating on Courts Asia with a reduced TP of $0.37, citing tepid sales in core markets amid restructuring efforts.

To recap, FY15 sales in core markets, Singapore and Malaysia, continue to remain tepid amid poor consumer sentiment. The former shrank 11% while the latter dropped 6% compared to the previous year.

In Singapore, Courts is trying to revive sales through new retail concepts, through collaboration with celebrity designers and partnerships with international brands.

In Malaysia, management intends to focus on profitability and will keep store count unchanged in the current financial year.

Its Indonesian operations also incurred estimated start-up losses of $1.3m compared to management's expectations of breakeven.

Post-results, the house cuts its FY16-17 earnings by 9% on weaker sales and sees little signs of a revival.


GLP: The logistics developer is syndicating a 45% interest in GLP US Income Partners 1 for US$1.47b or 1x P/B, to three investors, of which two are leading global institutional investors from Asia and one from US. This will pare down its stake from 55% to 10%.

GLP made its foray into the US market in Dec '14, setting up an initial 55/45 fund with GIC, which promptly acquired a US$8.1b portfolio, comprising a total gfa of 115m sf of logistics properties across 36 major markets, with an occupancy rate at 92%, and rising to 94% within next year.

Upon completion targeted in in 2QFY16, GLP will book an estimated divestment gain of US$30m. In addition, the group will swing from a net debt of US$1.4b (16% gearing) to a net cash position. This would enable the group to lever up (30% target gearing) to fund an aggressive US$8b development pipeline over FY16-18 and roll out its fund management platform in China.

Based on street estimates, GLP's core net profit is forecasted to grow by 30% in the current year, mainly driven by robust leasing demand in all its core markets amid rising rentals, underpinned by the projected 30% and 92% surge in development starts and completion in FY16.

Bloomberg consensus has 18 Buy and 1 Hold ratings, with average 12-month TP of $3.23. The stock remains on Market Insight's Growth portfolio.

SG Banks

Bank shares are the more notable index losers in early trading today, which continued for the third consecutive day.

This may be have been sparked by the pushback of expectations on the Fed interest rate hike from Jun to Sep this year, which led to the recent sharp drop in SIBOR.

Further, post 1Q15 the street remains relatively neutral on the banking sector given the lack of catalysts, unattractive valuations, uncertainty over asset quality, contracting reported ROEs and near term capital preservation.


Ezra: MergerMarket yesterday said Ezra could be working on a $200 CB cum equity combo with Credit Suisse to fund this year's obligations. They also said that to get the deal done would be tough given its already depressed share price, and the deal would cause significant dilution. MergerMarket suggested this was "Strong Evidence" based on their "proprietary intelligence"

The group currently trades at 0.21x P/B, perhaps a reflection of investor concerns about the group’s business outlook.


SingHaiyi: FY15 results were largely in line. RHB maintains BUY with a lower TP of $0.18 (from $0.19.

SingHaiyi has 30% RNAV exposure to the US. With rising US property prices and a stronger USD vis-à-vis SGD, the risk is skewed to the upside for SingHaiyi. In the near term, RHB expects another offshore acquisition and a potential special dividend next quarter, following TOP and income recognition of its Pasir Ris One DBSS project.

With persistent headwinds confronting the domestic front, house is eager to see more acquisitions in the US and other regions that may strengthen its earnings.

Keppel DC REIT

Keppel DC REIT: Announced that it has agreed to acquire the Intellicentre 2 asset for A$43.3m ($45.9m). The acquisition represents the first since IPO, and third in Australia.

The acquisition will be debt funded, lifting net gearing from 26.7% to 29.9%, and is expected to complete in 3Q16.

The property will provide an initial NPI yield of 7.2%, and is expected to be yield accretive. Deutsche estimates that the acquisition will increase FY16 DPU by 1.6%, assuming 30% onshore AUD funding at 3.75% and 70% SGD funding at 2.75%.

House believes that Keppel DC REIT remains well positioned for growth, with an additional $50-70m in debt headroom before reaching its 35% limit. Accounting for the latest acquisition, Deutshce raised its TP slightly to $1.15, translating to an attractive 6.2% yield for FY15, 6.6% for FY16.

SG Market (29 May 15)

Singapore shares are looking to open lower following the choppy session on Wall Street, which ended slightly lower as investors grapple with comments over Greece and the selloff in Chinese shares.

Regional bourses are trading mixed this morning in Tokyo (-0.04%), Seoul (+0.3%) and Sydney (+1.1%).

From a chart perspective, technical resistance is tipped at 3,460, with underlying support at 3,360 (200-dma).

Stocks to watch:
*GLP: Proposed to syndicate its stake in GLP US Income Partners 1 for US$1.47b (1x P/B), reducing its stake from 55% to 10%. The fund comprises 115m sf of logistics properties across US, with an occupancy rate of 92%. The stake will be taken up by three investors, of which two are leading global institutional investors from Asia and one from US. Upon completion, GLP expects to book a divestment gain equivalent to the net income earned from Dec’14 to the completion date, expected in 2QFYMar16.

*IHH Healthcare: 1Q15 in line, net profit rose 8% y/y (-6% q/q) to RM171.5m, as revenue climbed 14% (+3% q/q) to RM2b, buoyed by organic growth of existing operations and the commencement of operations of Acibadem Atakent Hospital (Jan ‘14) and Pantai Hospital Manjung (May ’14). EBITDA margin improved marginally to 25.3% (+0.3ppt y/y; -0.3ppt q/q). Bottom line was weighed by a 143% surge in finance cost due to FX translation loss on borrowings, partially offset by lower non-controlling interests (-69%).

*Falcon Energy: FY15 net profit crashed 62% to US$22.7m, while revenue slipped 2% to US$342.4m, dragged by all three divisions- marine (-0.5%), oilfield services (-2.7%) and oilfield projects (-8%). Gross margin more than halved to 15% (-18ppt) mainly due to reduced rates for third-party vessels and the absence of drilling services in the quarter. In addition, bottom line was weighed further by a one-off disposal loss of associate CH Offshore ($10.7m), higher admin expenses (+50%), finance costs (+42%) and lower share of associate profit (-50%), partially mitigated by a disposal gain of fixed assets. Maintained 1¢ final DPS, taking FY15 total to 1.5¢, similar to previous year.

*Resources Prima: 4QFY15 net profit swung to a net profit of US$5.2m (4QFY14: -US$3b), while revenue climbed 11.9% to US$18.4m, on a 45.5% increase in coal volumes to 1.6m MT, attributed to the continued development of its coal mine and completion of the all-weather road. Gross margin expanded to 30.1% (+24.1ppt y/y), despite the decrease of ASP, on improved economies of scale. This brought FY15 net loss to US$63.7m (FY14: -US$9.9m) and revenue to US$86.9m (+41%). BVPS at US$0.93.

*King Wan: Secured two mechanical and electrical contracts worth $20.7m, between the Mar to May period. The two projects comprise supply and installation works for a 6-storey light industrial factory in Yishun and sanitary, plumbing gas installation and minor sewer works for a public housing development in Sembawang. Projects are expected to be completed by 2015.

*Boustead Projects: Clinched its second project following its listing, with a $13m design-and-build contract for a central baking facility for a confectionary chain. The facility is located in Boon Lay and is expected to complete in 3Q16. Order book rose to $263m.

*TTJ: Secured new contracts worth $35m from repeat customers, for structural steel works at Jurong Island, as well as civil defence doors for the Thomson Line. This brings order book to $113m to date.

#Ascendas REIT: Proposed to divest BBR building at Changi South for $13.9m. Pro forma impact on FYMar15 net property income and DPU is expected to be $0.86m (-0.2%) and 0.03 cents respectively (-0.2%).

*Mermaid Maritime: 33.8% drilling associate, Asia Offshore Drilling (AOD), will reduce the day rates on three jackup rigs (AOD I, AOD II and AOD III) by 10%, currently contracted for drilling services to Saudi Aramco for operations in offshore Saudi Arabia. This reduces AOD’s backlog by US$20m.

Thursday, May 28, 2015

Fu Yu

Fu Yu: Rhb initiates coverage with a Buy call and TP of $0.30

Rpt as below:


Stratech: 4QFY15 swung to a net profit from $2.4m, a sequential improvement from $1.8m net loss in 3QFY15. Nevertheless, FY15 net profit was only half of last year’s at $732,000.

In the year, revenue expanded 48.3% to $16.5m, from both existing and new contracts, including the installation of iFerret at Dubai International Airport, Hong Kong International Airport, and at the airbase of a top air force.

Gross margin fell 24.8ppt to 58.4% due to higher proportion of third party components.

Bottom line dragged by a 14.1% increase in net operating expenses to $8.9m, as increased administrative expenses from the group restructuring was offset by lower amortization assets as some intangibles have been fully amortized.

Management is currently in negotiations to install the iFerret at a major international airport and securing orders for other products such as the iVACS (intelligent vehicle access control system), and Super BullsEye II (advanced weapon scoring system).

Meanwhile, the recently awarded contracts for airfield surveillance systems in Hong Kong and Singapore are expected to contribute to FY16 earnings.

Stratech is trading at trailing P/E of 8.4x


Biosensors: 4QFY14 well below, swinging to a net loss of US$247m, from US$6.1m a year earlier, mainly from a US$256.1m goodwill impairment and US$2.2m of professional fees. This brings full year net loss to US$224.8m, against a US$40.6m profit last year.

4QFY15 revenue fell 7% to US$75.9m, as licensing and royalties revenue nearly halved to US$5.4m. Product revenue was shaved 1% to US$70.5m as interventional cardiology revenue was partially offset by increases in critical care and cardiac diagnostic.

Gross margins fell 3.5ppt to 72.7%, from the distribution activities of Nobori stents in Japan, the cardiac diagnostic business, and price competition. Meanwhile operating margins held steady at 21.7% despite gross margin compression on lower operating expenses.

The goodwill impairment was relating to the JW Medical System acquisition, factoring into account dimmer China drug eluting stents growth prospects. When Biosensors bought the remaining 50% stake in JW Medical System in 2011, China revenue growth was in high double digits, but has been waning since.

On outlook, management cites headwinds like stiff competition, weakening licensing income from Terumo and FX pressure from potential translation losses.

Meanwhile, Biosensors guided that their clinical trials for BioFreedom and the next-generation Excel stent are progressing well.

Biosensors is trading at 22.8x consensus FY3/16e P/E, and 1x P/B.

SG Market (28 May 15)

Singapore shares could open higher, taking cue from the rebound in Wall Street overnight, as markets were lifted by “chatter” that Greece was nearing a debt agreement.

Regional bourses are trading higher this morning in Tokyo (+0.5%) and Seoul (+0.5%), although Sydney is down 0.2%.

From a chart perspective, technical resistance is tipped at 3,460 where the 20 and 50-day moving averages are converging with underlying support at 3,425 (100 dma).

Stocks to watch:
*United Envirotech: FY15 results in line, as net profit jumped almost three-fold to $59.3m on revenue of $349.0m (+72.5%). Revenue was largely led by contributions from the engineering business (+42.6%), the treatment business (+63.3%), and the addition of $47.7m of membrane sales following the acquisition of Memstar’s assets. Other income jumped more than 6-fold to $23.4m, due to disposal of available-for-sale investments and FX gains. Gross margin improved to 25% from 23.7%. Other costs increase, including staff, depreciation and other operating expenses, were expected, as a result of newly acquired water-treatment plants during the year and Memstar’s consolidation. Proposed first and final DPS of 0.5¢ (FY14: 0.3¢). NAV/share at $0.77.

*Courts Asia: FY15 results slightly above estimates. 4QFY15 net profit fell 16.4% to $6.5m taking FY15 net profit to 17.4m (-38.7%). FY15 revenue declined 8.6% to $758.5m, weighed by weaker sales from Singapore (-11%) and Malaysia (-5.8%), due to the lacklustre retail environment in both markets, while contributions from the Indonesia megastore at Bekasi were inconsequential. Gross margin rose to 32.8% from 30.9%, due to the shift in sales mix towards furniture and electrical categories. Bottom-line weighed by 8.1% rise in admin expenses, offset partially by a 53% decline in tax expenses. Proposed first and final DPS of 1.29¢ (FY14: 0.76¢). NAV/share at $0.55.

*Biosensors: 4QFY14 results well below estimates, as the group swung to a net loss of US$247m, from US$6m a year earlier, mainly from a US$256.1m goodwill impairment related to its JWMS’ acquisition. On a core basis, 4QFY15 net profit would have been 9% lower at US$15.7m (FY15: US$51.2m, -25%). Revenue for the quarter fell 7% to US$75.9m, as product revenue fell 1% and licensing and royalties nearly halved. Gross margin fell 3.5ppt to 72.7%, due to lower margin from distribution activities of Nobori stents in Japan and the cardiac diagnostic business, and the impact of price reductions in various geographic regions. NAV/share at US$0.60.

*Bukit Sembawang: 4QFY15 net profit fell 62.1% y/y to $6.9m, taking FY15 net profit to $92.7m (-16.6%). Revenue for the quarter declined 24.9% to $67.3m, from lower recognition on development projects from Luxus Hills Phases 5&6, The Vermont on Cairnhill and Skyline Residences. Gross margin held relatively steady at 44.8%. Operating expenses which fell from lower provision on foreseeable losses of $13.3m (FY14: $17.5m) could not mitigate the bottom line slump. Proposed final and special DPS of 4¢ and 29¢, taking full year DPS to 33¢ (FY14: 16¢). NAV/share at $4.96.

*SingHaiyi: 4Q15 net profit advanced 35.5% to $15.5m, taking FY15 net profit to $22.8m (-12.9%). Revenue for the quarter fell 75.8% to $5.0m, mainly due to lower property development income of $0.8m (4Q14: $16.3m), as the previous year saw contributions from Charlton Residences which was fully completed in FY14. Meanwhile both rental income and management fee income were relatively unchanged at $3.9m and $0.2m respectively. Gross margin improved by 18.7ppt to 60.4%, mainly due to the contributions by US projects. Bottom-line saw contributions from other income of $18.1m (-29.7%), due to adjustments of property carrying value and FX gains, as well as the absence of a $10.5m provision made in the previous year. NAV/share at $0.155.

*Stratech: FY15 net profit halved to $732k , while revenue expanded 48.3% to $16.5m, from new contracts, in addition to existing ones. Gross margin fell 24.8ppt to 58.4% due to higher proportion of third party components. Bottom line dragged by a 14.1% increase in operating expenses. NAV/share at 0.42¢.

*OLS: Proposed to acquire Malaysian Phosphate Additives (MPA) in a $300m RTO deal. The RM1.5b energy-intensive plant will be South East Asia’s largest integrated phosphate complex. MPA is 40%-owned by a wholly-owned subsidiary of Malaysian sovereign wealth fund, Khazanah Nasional. The acquisition will be satisfied in full by way of an allotment and issue of OLS shares. The newly issued shares will represent not less than 70% of the enlarged share capital of the company.

*China New Town: Entered into strategic agreement with Sino IC Capital, the sole manager of the National IC Industry Fund (AUM at over Rmb120m), to build long-term strategic partnership, which will focus on the intersectional value chains of the integrated circuit industry and township developments.

*IEV: Secured five new contracts for the provision of structural pile grouting in Argentina and free span correction services in India, worth ~US$2.2m. The contracts are expected to have a positive impact on the net tangible assets per share and earnings per share of the group for FY15.

*Singapore Windsor: Secures exclusive 10 year agreement with DFS group to develop and operate duty-free retail outlets at Yangon International Airport and Naypyitaw International Airport. The group expects to manage 2,000 sf of duty-free retail space by end 2015.

Wednesday, May 27, 2015


Riverstone: Despite a higher ROE and dividend yield, Riverstone is trading at an attractive 12.8x2016F PE vs peer average of 15.9x. UOB Kay Hian continues to like the group for its ability tosustain healthy margins and maintain its dominant market share within the high-endcleanroom glove segment.

Expansion plans are on track and production capacitywill reach 5.2b pieces by 2015.

House believes Riverstone is truly growing in stature.Maintain BUY with a higher TP of $1.59.

Genting SP

Genting SP: OCBC upgraded to Hold rating on valuations grounds, with TP unchanged at $0.95.

House notes that at current levels, most of bad news may have already been priced in. For one, Genting SP has already warned for some time that VIP volumes are likely to remain sluggish in the medium term, as Chinese high rollers are still affected by the ongoing anti-graft campaign in China. It had also warned of further credit tightening for its VIP business and more provisions may be needed as collection of debt from these players are more difficult and could remain challenging to do so.

Meanwhile, OCBC does see some near-term positives on the horizon. Universal Studios Singapore will re-open its main attraction – the Battlestar Galactica ride on 28 May, just in time for the Jun school holidays; this after being closed for nearly two years. In addition, media reports suggest that occupancy rate at its newly-opened Genting Hotel Jurong has been better than expected, even though it has just opened 25% of its 557 rooms in Apr. When fully opened in Jun, GS is hopeful that it can attract as much as 1.5k additional daily visitors to its IR this year.


Boustead: 4QFY15 net profit for the engineering group sagged 30% y/y to $17.9m, bringing FY15 earnings to $68.3m (-10%). Adjusting for non-recurring items and tax adjustments, core net profit for FY15 should have risen 3%.

Revenue for FY15 rose 8% to $556.4m, with the performance of its three main divisions as follows:
1) Energy-related engineering division - Revenue fell 4% to $190.3m, due to the challenging operating conditions in the O&G industry, which resulted in a slow depletion of the group’s order book backlog.

2) Geo-spatial technology division – Revenue crept up 3% to $110.6m, as demand remained firm across Australia and ASEAN.

3) Real estate solutions division – Revenue jumped 22% to $255.4m on more design-and-build sales. The on-going strategy is to expand the industrial leasehold portfolio to increase future recurring rental income.

Gross margin dipped marginally to 33% from 34%, while bottom-line was weighed by higher admin expenses (+21% to $52.4m), and a 36% spike in income tax to $22.6m, due to contributions from jurisdictions with higher tax rates.

The group's order book backlog currently stands at $388m, which should underpin revenue visibility over the year. It is however cautious of its business prospects given the current headwinds in the global O&G and industrial property markets.

While Boustead expects to remain profitable for FY16, the level of profitability is unlikely to match that of FY15 due mainly to the impact of the downturn in the O&G industry.

Proposed final DPS of 2¢, shaving FY15 payout (excluding dividend-in-specie of Boustead Projects) to 4¢ (FY14: 7¢), representing a yield of 2.8%.

At the current price, Boustead trades at 11.5x FY15 P/E and 1.93x P/B.


Q&M: Maybank-KE highlights that following two proposed rounds of acquisitions, costing $29m, Q&M still has a cash balance of $31m since issuing its $60m MTN in Mar ’15.

Assuming that half of the remaining cash hoard ($15.5m) is used for acquisitions, the group could acquire another $31m of assets, via a 50% cash and 50% new shares deal.

Based on recent acquisitions which were done at 12x forward P/E by the group, this could represent earnings per share (EPS) contribution of $2.6m, which could potentially raise Maybank-KE’s earnings per share estimates for FY16/17 by 11%/10% respectively. Alternatively, if the entire $31m is used for acquisitions, FY16 EPS will increase by 22%. The above scenarios would translate to a higher TP, ranging from $1.11 - 1.22.

Additionally, Q&M’s market share is still low in Singapore. Even after completing its four proposed acquisitions, the group’s market share by number of dentists is estimated to only climb to 13% from 10%, far behind its long-term target of 40%, capped by the Competitive Commission of Singapore.

In China, Q&M only owns three dental hospitals and four dental clinics, against a backdrop of about 10,000 dental outlets in the country, of which 1,000 are private.

Going forward, catalysts are expected to come from more acquisitions and Maybank-KE is maintaining its Buy call with TP of $1.00, based on 45x FY16 P/E.

Overseas Education (OEL)

Overseas Education (OEL): Increased tuition fees by an average of 10% for its 2015-16 academic year, which will start in Aug 2015. This is higher than Maybank-KE's forecast of 8.3%. House believes it went for the strong hike on the
back of confidence in its brand-new facilities at Pasir Ris.

House maintains BUY with higher TP of $1.27, with further catalysts expected from student enrolments.

Keppel Corp/ Sembcorp Marine (SMM)

Keppel Corp/ Sembcorp Marine (SMM): Recent newsflow out of Brazil suggests Sete Brasil’s restructuring may be completed by end-Jun, which will provide clarity on expected earnings from the Brazilian portion of Keppel and SMM’s backlog.

Initial indications are that Sete Brasil will reduce the size of its shipbuilding programme from 29 to around 13-19 vessels. However, the street and CLSA's forecasts have not factored in any order cancellations and thus even a best-case scenario would not lead to any upgrades.

CLSA maintains its SELLs on Keppel (TP: $6.98) and SMM (TP: $1.99) on concern about the lack of new orders.

SG Market (27 May 15)

Singapore shares are expected to open lower, with major indices on Wall Street closing down more than 1%, weighed by interest rate rise “chatter” and anxiety over Greece’s debt situation, with the debt laden country scheduled to repay back €300m to the IMF next week

Regional bourses are trading lower this morning in Tokyo (-0.3%), Seoul (-0.9%) and Sydney (-0.6%).

From a chart perspective, the STI is again testing resistance at around 3,460 where the 20 and 50-day moving averages are converging. A clear breakout from this point could take the index back to the recent peak at 3550. Otherwise, immediate support lies at 3,425. Looking at technical indicators, the RSI is neutral, while MACD has yet to trigger a bullish crossover

Stocks to watch:
*Economy: Spore's Ministry of Trade and Industry sees slower 2-4% p.a. economic growth from now till 2020 versus the 3-5% previously forecast, citing a litany of factors behind the challenging external environment, including continued risk of hard landing in China, EU deflation fears and decelerating workforce growth. Productivity growth "has been relatively lacklustre" at just 0.3% p.a. from 2010-2014, although the ministry expects to achieve the government's target of 2-3% pa productivity growth from 2009-2019.

*Banks: 3M Sibor has fallen ~20% to 0.83% from Apr's 1.027% high, while 3M SOR has fallen 32% to 0.767% from Mar's 1.132% high. After MAS left its monetary policy unchanged in Apr review, the SGD recovered partially against the USD, but has since begun retreating again. Economists expect the USD strength to remain intact and for S’pore interest rates to zip higher again, if US interest rates are hiked in 2H15.

*Hiap Seng: 4QFY15 net loss came in at $4.3m versus a net profit of $1.3m the previous year, taking FY15 net loss to $13.2m (FY14 net loss $3.4m). Revenue for the quarter was down 29.8% to $48.1m, mainly due to lower recognition of project revenue, while gross margin inched up 8% from 7.6%. Bottom-line was weighed by a 79.5% rise in admin costs to $9.4m, due to the allowance for impairment of receivables provided by a Malaysia subsidiary which had completed certain projects in East Malaysia. NAV/share at $0.21.

*Boustead Singapore: 4QFY15 net profit fell 30% to $17.9m taking FY15 net profit to $68.3m (-10%). Revenue for FY15 was up 8% to $556.4m, with higher contributions from the real estate solutions division (+22%) and geo-spatial technology division (+3%), offset partly by a 4% drop from the energy-related engineering division, as a result of the challenging operating conditions in the O&G industry. Gross margin dipped marginally to 33% from 34%, while bottom-line was weighed by higher admin expenses (+21%) and finance costs (+163%). Proposed final DPS of 2¢, taking FY15 DPS to 4¢ (FY14:7¢). NAV/share at $0.73.

*Boustead Projects: FY15 net profit fell 31% to $24.7m on revenue of $225.4m (+22%). Topline was led by both the design and build (+22%) and leasing (+21%) segment, although gross margin fell to 22.4% from 25.3% as a result of the challenging and competitive industrial real estate solutions market in Singapore, which placed additional pressure on the margins of design-and-build projects. Bottom-line was further weighed by a 14% rise in selling and distribution expenses, as well as a 21% spike in other operating expenses which was in line with the growth in the industrial leasehold portfolio. NAV/share at $0.17.

*EuroSports Global: The Lamborghini authorised distributor crashed into net loss of $4m for FY15 (FY14: +$17m), dragged by the absence of a one-off property disposal gain ($16.3m) and impairment loss of goodwill arising from an acquisition ($2m). Revenue inched 1.6% to $40.4m from increased sales in pre-owned automobiles of 24 compared to 13 in FY14, attributed to the acquisition of pre-owned dealer AutoInc EuroSports in Aug'14, but the gain was offset by fewer sales in new Lamborghini models (13 vs 15 a year ago) from the increased additional registration fees and the tightening of loan financing restrictions. Gross margin decreased to 18.2% (-4ppt) from the change in sales mix. NAV/share at 9.46¢.

*Q & M Dental: Subsidiary Shenyang Aoxin Q & M Stomatology Hospital (SASH) has been designated to be the teaching and training institute for Liaoning Medical University, with the founder of SASH appointed as the Dean of the institute. The recognition extends the group's position as the market leader for the dental industry and put the group in a position to ensure necessary manpower to further expand its operations in China.

*ISOTeam: To issue up to 9m new shares (6.7% current share capital) at $0.58 apiece to placement agent OCBC Securities. Net proceeds of $5m is intended for capex (59%), new investments and business expansion (30%) and general working capital (11%).

*Keppel Corp: Acquired remaining 50.1%-stake in Norwegian wind turbine maker, OWEC Tower (AS), for NOK2.8m ($0.5m).

*First Sponsor: Launched and priced $50m 4% fixed rate notes due 2018, under its $1b multicurrency debt issuance programme.

*KTL Global: In negotiations to buy a South Korean supplier of lifting equipment.

Tuesday, May 26, 2015


Yangzijiang: CS downgrades to Neutral following the strong share price performance year-to-date, as the house believe its prospects of benefiting from improved newbuild orders have been priced in. At a P/B of 1.26x and 2015E P/E of 7.4x, Yangzijiang continues to trade at a significant discount to peers. However, expect nearterm overhang from 330 mn of warrants exercisable at Rmb6.60 ($1.42), representing a potential dilution of 8.6%.


ComfortDelgro: Counter trading in range between $2.85 - $3.10 levels, supported by rising RSI and Stochastics, both currently at the neutral region. Near-term support at the psychological $3.00 level, coincided with its 14 and 50 MA, followed by the long-term trend support at $2.90 region.


Valuetronics: 4QFY15 net profit crept up 0.8% y/y (+1.5% q/q) to HK$39.8m, bringing full year earnings to $149.2m (+0.9%), 10% ahead of street estimates.

Revenue for the quarter was weaker at HK$578.8m (-5.6% y/y, -2.9% q/q) but full year revenue of HK$2,429.3m (-0.2%) was flat.

For the year, its core consumer electronics (CE) segment (-10.9%) saw a slowdown from its LED customers, but was mitigated by increased demand and a new customer within its industrial and commercial electronics (ICE) business (+22.6%).

Overall gross margin improved 0.2ppt to 13.6% from the change in product mix.

Bottom line was partly boosted by higher interest income (+105%), which partially offset higher staff costs in China (+11.2%).

Meanwhile, free cash flow generated remained strong, with net cash position fattening from HK$477.9m to HK$505.8m ($0.234/share).

Management maintains its guidance of continued growth in the ICE segment, supported by a bigger customer base and opportunities in the pipeline, but its CE business is expected to face aggressive competition with price reduction on mass market LED lighting products.

First and final DPS of HK$0.20 (16¢ final, 4¢ special) is maintained, translating to a 6.8% dividend yield.

At $0.51, Valuetronics trades at 8.1x and forward earnings (3.5x ex-cash) and 1.38x P/B.


OUE (Update of OUE Downtown): Daiwa received an update recently on the ‘revitalisation’ of OUE Downtown 2 from OUE. Downtown Gallery is expected to be completed in 4Q16, with 160,000 sq ft of retail space (wide array of retail, dining and entertainment) added from B1 to level 5. In addition, OUE recently received approval to replace current aluminium-cladded façade with a new glass curtain wall façade. Low and mid zone of Downtown 1 is transformed into Meritus Serviced Suites, 265 fully-furnished apartments with swimming pool and gym.

The House reiterates their BUY rating and believe OUE remains one of their deep value stocks. Price target of $3.30, up 50% from its current price of $2.18 (highest among 12 brokers on Bloomberg). Risks to their call include delays in the completion of its refurbishment activities or a poorly perceived investment initiative.

OUE (Deutsche Asia Conference 2015 highlights): Management looking into making acquisitions in order to replenish its asset pipeline. One Raffles Place could be sold in 2H15. Management stated that CPF building would be an attractive acquisition given its location next to OUE Downtown. OUE looks to acquire a platform where they could add value by repositioning or re-developing assets. The House has a 12 month price target of $2.49, up 14% from its current price of $2.18.


GLP: Second largest shareholder UK-based hedge fund Lone Pine Capital (LPC), has bowed out of its entire 7.27% stake in GLP on 21 May, disposing to Chinese investment fund Hillhouse Capital Management for $963.5m.

The married deal of 351.6m shares was crossed at market price of $2.74/share against its three-month volume weighted average price of $2.64/share.

According to its website, Hillhouse is founded by Zhang Lei and is a long-term investor which manages capital for institutional clients such as university endowments, foundations, sovereign wealth funds, pensions and family offices. Coincidentally in 2012, Hillhouse was likened to LPC by Financial Times, owing to its low profile but high returns.

GLP has been well sought after by Chinese investors in the past few months. In Feb '14, it entered into a landmark US$2.5b investment agreement with a Chinese consortium, including Bank of China, China Life and HOPU Funds, which now owns 33.8% of GLP China.

Following the deal, GLP struck several collaborative tie-ups with Chinese partners:
- Apr '14: A convenient financing deal with Bank of China
- Aug '14: JV with China's largest state-owned logistics firm China Materials Storage and Transportation Development Co to be its exclusive developer
- Oct '14: Strategic partnership agreement with China Development Bank Capital to develop logistics infrastructure

These alliances have given GLP a unique advantage over its competitors, by providing access to development land banks and financial resources in China that would otherwise not be easily available to foreign companies. Of the 3.3m sf of development starts in FY15, 21% or 700,000 sqm was facilitated by its consortium investors.

With an estimated US$2.5t to be invested in the industry over the next 15 years, China’s logistics demand per capita is expected to catch up to within one-third that of the US.

Market Insight remains sanguine on the counter, which sits in the Growth portfolio.

Bloomberg consensus has 18 Buy and 2 Hold ratings on the logistics player, with average 12-month TP of $3.17.

SG Market (26 May 15)

With Wall Street closed for Memorial Day holiday on Mon, Singapore will shares are likely to take direction from China and Hong Kong markets, as well as the upwardly revised 1Q GDP growth of 2.6%.

Regional bourses opened mixed this morning in Tokyo (+0.1%), Seoul (-0.4%) and Sydney (+0.3%).

From a chart perspective, the STI is again testing reistance at around 3,460 where the 20 and 50-day moving averages are converging. A clear breakout from this point could take the index back to the recent peak at 3550. Otherwise, immediate support lies at 3,425. Looking at technical indicators, the RSI is neutral, while MACD has yet to trigger a bullish crossover.

Stocks to watch:
*Economy: Singapore’s GDP gew 2.6% in 1Q15, faster than the 2.1% expansion in 4Q14, despite the continued contraction in the manufacturing sector. With global conditions expected to improve for the rest of the year, driven by a pick up in US and Europe, the government is maintaining its 2015 growth forecast of 2-4%. NODX posted a faster expansion of 4.8% in 1Q15 compared to 4Q14’s gain of 0.5%.

*Property: CBRE expects total leasing volume to decline by 5-10% for the rest of the year, with overall rents softening by 5-7%, on back of an estimated 19,018 completions in the pipeline which will bring the number of new homes to ~22,000, 10.4% higher than the 19,921 new homes completed in 2014.

*Valuetronics: FY15 results beat estimates, as net profit inched up 0.9% to HK$149.2m, boosted by higher interest income but partially offset by higher staff costs in China (+11.2%). Revenue slipped marginally to HK$2,429.3m (-0.2%), attributed to a slowdown in demand from its consumer electronics segment (-10.9%), mitigated by higher sales from industrial and commercial electronics (+22.6%). Gross margin improved 0.2ppt to 13.6% from a change in product mix. Net cash position grew HK$27.9m to HK$505.8m. NAV/share at HK$2.158.

*Stamford Land: 4QFY15 net profit almost doubled to $5.4m, taking FY15 net profit to $29.7m (+9.7%). Revenue for the quarter was up 80% to $112m, driven by revenue from the property development segment of $61.7m (+792.5%), due to the disposal of DH site. Contributions from the other three main revenue segments were lower, with hotel owning & management (-9.3%), property investment (-2.5%) and trading (-22.1%). Bottom-line was dragged by an almost 6-fold surge in expenses for properties sold to $37.3m, as well as a 17-fold jump in other losses to $9.8m which was largely due to fair value losses on investment properties. NAV/share at $0.53.

*Jason Marine: FY15 net profit climbed 39.8% y/y to $3.9m, as revenue improved 12.4% to $56.4m, mainly from the sale of goods due to more project deliveries, but partially mitigated by lower revenue from rendering of services (-6.7%). Subsequently, gross margin dropped 1ppt to 26.1% from a change in product mix. The bottom line was partly weighed by higher staff costs and bonuses (+7.4%), as well as higher taxes (+130%). NAV/share at $0.28.

*GLP: Second largest shareholder, Greenwich-based hedge fund Lone Pine Capital has sold its entire 7.27% stake to Chinese investment fund Hillhouse Capital Management on 21 May at $2.74/share.

Monday, May 25, 2015

Viva Industrial Trust

Viva Industrial Trust: Maybank-KE issued an unrated note on Viva Industrial Trust (VIT), citing the industrial trust as a defensive play through late-2018 amidst the backdrop of a supply glut in the industrial space.

VIT has six properties in Singapore - two business parks (72% of 1Q15 revenue), two factories (15.9%), one hotel (9.9%), and one warehouse (2.2%), with total NLA of 2.3m sf, long weighted average land lease to expiry of 40.6 years and gross development value of $850m.

69% of income is locked in under long-term master leases with rental support. As such, income cyclicality for VIT is lower relative to other industrial REITs, and especially crucial when the supply glut is expected to last till 2019.

For VIT, DPU growth in FY16 is expected to be anchored by the completion of AEI work at Technopark @ Chai Chee (31% of revenue). This involves the conversion of under-utilized carpark and business-park space into retail, which has since secured an anchor tenant agreement with Decathlon.

At the current price, VIT is trading at 1.07x P/B and an indicative yield of 9.3%.

Mercator Lines

Mercator Lines: Share price tumbles 18%, after the dry bulk shipping company posted its third consecutive annual loss, as FY15 net loss widened to US$125.4m (FY14: US$22.8m).

Revenue declined 25% to US$56.3m, largely due to a fall in spot/contract rates and unscheduled repairs. Meanwhile, other expenses surged more than 10-fold to US$8.8m, mainly because of allowances for bad debt.

Earnings were also hit by massive impairments of US$63.5m, as the group took on a more prudent approach to estimate the recoverable value of its vessels on the basis of discounted cash flows from expected future earnings using a projected 10 year charter rate, as compared to the historical 10 years charter rate previously used.

In light of the falling freight rates, the group also made a US$18.9m provision for an onerous contract.

Going forward, management guides that the dry bulk shipping industry continue to remain volatile, stressing that the Baltic Dry Index dropped to 602 pts on 31 Mar ’15, as compared to its peak of 11,793 in 2008. The industry is expected to remain challenging due to continued new delivery of vessels and the slowdown in the Chinese economy.

Meanwhile, the financial strength of the company has come under strain, and the group has appointed an independent financial advisor to assist with an assessment of its financial position and to advice on options available.

At the current price, Mercator trades at 0.18x P/B, with a high net gearing of 0.94x and weak current ratio of 0.43x.


Dukang: Substantial shareholder Fidelity Int'l has raised its deemed interest in the baijiu maker from 6.98% to 7.01%, via open market purchase of 239,100 shares at an average price of 13.6¢ on 19 May.

Dukang recently reported a 76% y/y plunge in 3QFY15 net profit to Rmb1.8m, but it marked the group’s second consecutive quarter of profitability.

While some reports suggest that there may be a slight turnaround in China's baijiu market, Dukang has yet to see any clear trend, although it is expected to stabilise in 2015.

Dukang’s share price performance has lagged those of its larger peers in China, with Kweichow Moutai (+105%), Wuliangye Yibin (+71%), Luzhou Laojiao (+77%) all rallying in the past 12 months in contrast to Dukang’s 28% decline.

At the current price, Dukang trades at 0.26x P/B compared to Kweichow Moutai’s 5.5x, Wuliangye Yibin’s 2.5x and Luzhou Laojiao’s 3.6x.


Reits: Proposed changes may be announced soon
Market watchers expect the proposed changes for REITs- first published in Oct '14, to be announced by the end of Jun, with one citing as early as end-May.

To recap, the set of proposals was aimed to give S-REITs more balance sheet and operational flexibility, improve transparency for unit holders and foster stronger corporate governance.

Key changes include:
1) Single-tier leverage limit of 45% for all REITs (currently 35% cap for unrated REITs and 60% cap for rated REITS)
2) Raising the development limit to 25% (from 10%) of property assets
- additional 15% allowance to be used solely for redevelopment of an existing property that has been held by the REIT for at least three years and which it will continue to hold for another three years after redevelopment.
3) Linking performance fee to “an appropriate metric” to align with the long-term interests of REIT investors
4) Limiting the acquisition/ divestment fee only to recover the managers’ costs
5) Requiring managers to provide more comprehensive disclosures to investors on income support, lease expiry profile, refinancing needs and remuneration policy

Overall, the proposed actions are seen as being positive for REIT investors in the long run, where observers expect yield compression to result over the longer term.

In addition, the impending announcement is expected to remove a major overhang on the Singapore REIT market, and news flow is likely to pick up on any potential acquisitions and project redevelopments.

Maybank-KE is Underweight on S-REITs due to the weak fundamentals, mainly strong supply, weak demand, rising interest costs and stretched valuations.

Top Sells are CapitaLand Mall Trust (TP: $1.87) and Ascendas REIT (TP: $2.27), while the house has Buy ratings for Mapletree Industrial Trust (TP: $1.77), Cache Logistics Trust (TP: $1.33), Starhill Global REIT (TP: $0.93) and Keppel REIT (TP: $1.32).

SG Market (25 May 15)

Singapore shares are likely to again stumble at the open, following the late sell-off on Wall Street last Fri on profit-taking ahead of the long weekend, as well as Fed Chair Janet Yellen’s remarks that the central bank will stick to its plans to hike the fed funds rate this year.

Regional bourses are trading higher in Tokyo (+0.3%) and Sydney (+0.1%), while Seoul and Hong Kong are closed today in celebration of Buddha’s Birthday.

In the week ahead, Singapore will release its industrial production and final 1Q GDP growth on Tue.

From a chart perspective, the STI is still stuggling below its 20 and 50-day moving averages, with next support at the recent low of 3,425 and immediate resistance at 3,466. Looking at technical indicators, the RSI is neutral and MACD has yet to trigger a bullish crossover.

Stocks to watch:
*Mercartor: FY15 net loss deepened to US$125.4m from US$22.8m, on lower revenue of US$56.3m (-25%) that was largely due to a fall in spot/contract rates and unscheduled repairs. Other expenses surged more than 10-fold to US$8.8m, mainly because of allowances for bad debt. Earnings were also hit by massive impairments of US$63.5m from property and equipment and US$18.9m provision for an onerous contract..NAV/share at US$0.13.

*Thai Beverage: CEO plans to ramp up marketing and promotion efforts in its non-alcoholic beverage business and will await for the right time to look at its substantial but non-core 29% stake in Frasers Centrepoint. The group wants to be focused purely on F&B and aims to derive more than half of its revenue from non-alcoholic beverage and from outside Thailand by 2020.

*Hiap Seng: Awarded contract worth ~$43m for the provision of mechanical works for the Mogas-Cogen Project on Jurong Island. The works have commenced and are scheduled for completion by Sep '16.

*Edition: Proposed renounceable non-underwritten rights issue of up to 4.7b new shares at an issue price of $0.01, on the basis of eight rights shares for every one held, to raise net proceeds of between $18.2m (minimum subscription scenario) to $46.8m (maximum subscription scenario). Proceeds raised have been earmarked to further develop the property development business, fund general corporate activities of the company and general working capital.

*Mapletree Logistics Trust: Announced two proposed acquisitions: 1) One warehouse in Vietnam (MLPBN1) and 2) One warehouse in South Korea (DLC), for a total consideration of $42.2m. The acquisitions are expected to generate initial NPI yields of 10% for MLPBN1 and 8% for DLC, and will be accretive at the distribution level. The transactions will be fully funded by debt. Upon completion, MLT's aggregate leverage will be ~34.9%.

*SGX: MOU with Zhengzhou Commodity Exchange to collaborate on efforts to jointly develop and expand the commodities markets in China and Singapore.

Friday, May 22, 2015

Sing Holdings

Sing Holdings: The developer was featured in an unrated report by RHB, which calculated the group’s RNAV to be $0.69 per share.

Sing Holdings has an established track record in both investment and development properties spanning landed houses, apartments, office, industrial buildings, factories and warehouses.

Some of the its recent developments include residential projects such as Meyer Residence at Katong, BelleRive at Bukit Timah and The Laurels at Cairnhill. The group also developed industrial and commercial buildings such as BizTech Centre, EastGate in the East Coast area and Ocean Towers, a Grade-A office building in Shanghai.

On-going projects comprise Robin Residences, a condominium project at Robin Drive and Waterwoods, an EC development at Punggol Field Walk/Punggol East.

Sales at Waterwoods are progressing well, with about 91% of the project already sold, at an average price of $800 psf. The project is expected to TOP by end 2015, which will boost the group’s profit recognition.

Robin Residences has sold ~30% of its units, with a price range of $2,300-2,450 psf. The development is expected to TOP by 1Q16, which coincides with the opening of the Stevens MRT station along the Downtown Line. Given the strong site attributes, management remains confident that the project will be able to sell well and generate healthy margins.

With expected profit recognition from the residential projects, Sing Holdings is expected to post an earnings turnaround in 2015/16 versus a net loss in 2014. Management also intends to reward shareholders with higher dividends should the expected uptick in earnings materialise.

At the current price, Sing Holdings trades at hefty 40% and 52% discounts to its books value and RNAV.

Kep Infra Tr fka CIT

Kep Infra Tr fka CIT: There has been some confusion regarding the recent merger between Keppel Infrastructure Trust (KIT) and CitySpring Infrastructure Trust (CIT). The enlarged entity has subsequently been renamed into Kep Infra Tr fka CIT (KITfkaCIT).

Currently, KITfkaCIT is in the midst of a 51%-stake acquisition of Keppel Merlimau Cogen (KMC) for $510m. Post-acquisition, the enlarged trust will be renamed to Keppel Infrastructure Trust (KI).

Briefly, KI will have a pro forma estimated total asset base of over $4b, aggregate leverage of 39% and annualised FY14 DPU of $0.0373.

For more details, listed below are the key developments in chronological order (as of 22 May):
Past events:
- CIT made a special distribution of $30m ($0.0198/unit) to its unitholders.
- KIT swapped its assets in exchange for new CIT units, where KIT's unitholders were issued 2.106 new CIT units for each KIT unit.
- Enlarged CIT renamed to KITfkaCIT.

Ongoing/ Future:
- KITfkaCIT will make a special distribution of $30m ($0.0105/unit) and a stub distribution of 0.11¢ to unitholders
- KITfkaCIT to raise equity via a non-renounceable 13-for-1 preferential offering of units at $0.515 each.
**Counter will go XD and XO on 26 May for the two corporate actions above.

- Eligible unitholders for the preferential offering will need to make payment before 11 Jun.
- New units from the offering can be traded on 22 Jun.
- KITfkaCIT to be renamed to KI


Yoma: (S$0.515) 4QFY15 results marking time, no word on landmark project
Yoma's 4QFY15 net profit climbed 28% y/y to $8.2m, while revenue was flat at $27.6m, taking its FY15 earnings and revenue to $28.1m (+71%) and $110.9m (+10%), respectively.

In the quarter, sales of residential units and land development rights fell 47% as the group deferred sales at Pun Hlaing Golf Estate (PHGE) in hope of better pricing in future.

The decline in property development sales was offset by contributions from recently-acquired automotive distributor, Convenience Prosperity, as well as its property rental and leisure businesses.

Gross margin improved to 47.2% from 46.3% in 4QFY14 following the change in sales mix.

Bottom line was boosted mainly by an unrealised FX translation gain of $6.1m (4QFY14: -$1m) arising from the stronger USD/SGD, but slightly offset by higher taxes (+98%) and minority interests (+121%).

On its outlook, management is cautious of the real estate sector, which is facing increasing supply headwinds and uncertainty over the forthcoming elections. But its other domestic businesses is expected to grow in line with the overall economy.

One of the newer areas of focus for Yoma is in the consumer space with the imminent launch of its first KFC store in Myanmar. The group also expects Balloons over Bagan, one of Myanmar's main tourist attractions to grow from increased visitors.

There was no mention on the status of the landmark commercial development in Yangon despite Yoma receiving approval for the master lease extension to 70 years in Mar '15. The proposed mixed use project has seen multiple delays since 2013 and remains a key overhang on the stock price.

At $0.515, Yoma is trading 25.8x forward earnings and 1.3x P/B.

Kep Infra Tr fka CIT (CO)

The CO is a preferential offering price of S$0.515 per unit, where existing unitholders will be entitled to subscribe to 1 new unit for every 13 units owned as at 28 May 5pm. As part of the distribution-in-specie, unitholders received 2.106 units in the enlarged trust for every one Crystal Trust unit held.


Yangzijiang: A foreign broker has reiterated its Buy call on Yangzijiang and raised its TP to $1.70, based on an unchanged 1.2x forward P/B.

Year-to-date, Yangzijiang’s share price has outperformed most of its peers, yielding an attractive return of 25%, where according to Clarkson Research, Yangzijiang ranks as the number one shipyard in China and 8th in the world in terms of outstanding orders.

The foreign broker highlighted that Yangzijiang’s valuation is supported by its huge order backlog of US$4.6b as at end 1Q15, while the group is also expected to benefit from its on-going de-risking of its balance sheet, via the paring down of its held-to-maturity investments.

Recent meetings with Chinese and Korean yards also points to healthy client enquires on LNG carrier orders for 2015, which could translate to more orders going forward for the Chinese yard.

Separately, investor sentiment could have taken a lift, after recent SGX filings showed that BlackRock, the world’s largest asset manager, has emerged to become a substantial shareholder in Yangzijiang, with a 5.0% stake.

Overall, the street has 13 Buy, 3 Hold and 3 Sell ratings with a consensus TP of$1.53.

SG Market (22 May 15)

Singapore stocks could open higher, with the S&P 500 rising to new record overnight, led by strong earnings from Best Buy and on news that CVS Heath will be acquiring Omnicare for US$12.7b.

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

From a chart perspective, the STI recently breached its 50-dma at 3,454, with its next support tipped at the recent low of 3,425, with immediate resistance at 3,466. Looking at technical indicators, the RSI has turned weaker, while a bullish crossover on the MACD is unlikely to materialize in the near term.

Stocks to watch:
*Yoma: 4QFY15 net profit spiked 28% y/y to $8.2m, boosted mainly by unrealised translation gain of $6.1m (4QFY14: -$1m) due to the stronger USD/SGD, but partially offset by higher taxes (+98%) and enlarged non-controlling interests (+121%). Revenue remained flat at $27.6m despite a 47% drop in sales of residential units and land development rights, led by higher contributions from automotive, property rental and tourism segments. Gross margin grew 0.9ppt to 47.2% from the change in sales mix. The results brought FY15 earnings and revenue to $28.1m (+71%) and $110.9m (+10%) respectively. NAV/share at $0.3826.

*Rex Int’l: Acquires 30% stake in offshore WA-488-P licence in Western Australia from MEO Australia at ground-floor terms. The prospect identified in WA-488-P is believed to be a potential giant oilfield, with total gross unrisked prospective recoverable resources of 926m stock tank barrels in lower carboniferous and ordovician formations. The group has also signed a farm-in agreement, which gives Rex the option of either acquiring an additional 20% stake in return for procuring full interest funding of a 3D seismic survey and US$500k cash payment to MEO before 30 Jun '15; or acquiring additional 10% stake by fully funding a 3D seismic survey after 30 Jun'15.

*Technics Oil and Gas: Secured contracts worth $5.3m, for an EPCI contract for the fabrication of steel structure. The contract is expected to contribute positively towards FY9/2015.

*iFAST: Launched distribution of bonds and ETFs, adding on to its distribution of unit trusts and SGS.

*Mandarin Oriental: 50:50 JV with Saudi Arabia's The Olayan Group to acquire Hotel Ritz, Madrid for €130m (US$148m). The hotel will undergo a comprehensive renovation in 2017 for an estimated €90m (US$103m) and Mandarin Oriental will manage the hotel subsequently.

*OLS: Intends to transfer listing from the Main Board to Catalist Board. OLS is currently under the SGX watch list and the 20¢ minimum trading price imposed on main board companies could impede on the group’s turnaround plans.

*USP Group (former Unionmet): Expects to report a return to profit after several years of losses for FYMar15, mainly due to investment gains.

Thursday, May 21, 2015

Global Testing

Global Testing: Company will pay out a a special distribution of $0.075/share, followed by the 20-into-1 share consolidation.

Assuming the counter closes at $0.139 today, the theoretical opening price will be:
(Ex special div) $0.139 - $0.075 = $0.064
(After share consol) $0.064 * 20 = $1.28

You may refer to the circular for more info.


CitySpring: CIT (now renamed as Keppel Infrastructure Trust, on trading platform “Kep Infra Tr fka CIT”, on SGX “Keppel Infra Trust WEF 2015”) completed the acquisition of the former KIT (now temporarily known as Crystal Trust, which will be delisted tomorrow)

KIT will resume trading on 22 May, and the special cash distribution of and the Pre EFR stub distribution of 1.05¢ and 0.11¢ respectively for KIT unitholders, and these will go ex on 26 May.

Also, KIT launched its fund raising initiative for $525m. In part done by equity placement, and a separate non-renounceable preferential offering to existing KIT unitholders. The preferential offer period is between 3 Jun – 11 Jun. The proceeds is to fund the 51% Merlimau Cogen acquisition. Presentation here: EFR Presentation 21 May.ashx?App=Announcement&FileID=352705


Ezion: Management held an analyst briefing yesterday to provide more clarity on its on-going lawsuit by JV partner Atlantic Marine Services (AMS), which alleged that Ezion was behind a conspiracy to induce Maersk Oil to breach charter agreements over three service rigs by creating the impression that AMS was in financial trouble.

Management disclosed that it has three service rigs in the North Seas that are operated by AMS for Maersk Oil but the former had failed to meet contractual and operational obligations, prompting the oil major to approach Ezion to take over the operations of the rigs.

Additionally, Ezion clarified that AMS had originally been granted options to acquire 50% stake in 2 rigs, although these options have been revoked, as AMS did not pay for additional costs incurred despite initially agreeing to bear the cost of overruns.

On the inflated charter rates, Ezion clarified that AMG had agreed to the higher rates because of additional cost incurred to upgrade the rigs which its JV partner did not want to bear.

Accordingly, Ezion has also gained control of AMS’ stake in the JV rigs, as AMS had pledged its shares to Ezion and was unable to fulfil its financial obligations.

Overall, Maybank-KE believes that the sell-down is overdone and that the earnings impact is likely to be immaterial. The house has a Buy rating and TP of $1.57 on Ezion, labelling the group as the most resilient asset owner.

Raffles Medical Group

Raffles Medical Group: Maybank-KE upgrades to buy from Hold with TP of $5.10.

The house believes that demand for quality healthcare in China is being fed by growing affluence and life expectancies, with a 2010 survey by the Economist Intelligence Unit suggesting that the quality of healthcare tops the concerns of the wealthier Chinese.

Chinese hospitals are currently overstretched, compounded by quality issues, which presents Raffles Medical with opportunities to plug the gap with its strong focus on service quality.

Maybank-KE opines that Raffles Medical (RMG) can be considered an early entrant into an attractive industry, while lengthy bureaucratic processes and operation risks form high barriers to entry. The new Shanghai New Bund International Hospital will be the first to be developed and managed by a foreign-local JV in China.

Overall, the house is positive on RMG’s China expansion to meet growing demand, and believes that RMG will be able to leverage its 15 years of expertise in hospital operations to break into China’s market. Other catalysts are expected from further developments in China and contributions from local expansion.

At the current price, RMG trades at 33.9x forward P/E.

Genting HK

Genting HK: (US$0.36) Monetizing stake in NCL; trades at significant discount to stub valuation
Genting HK has proposed to divest 10m shares (4.4% stake) in Norwegian Cruise Lines (NCL) to Goldman Sachs for a net consideration of US$546.1m. Post sale, group's stake in NCL will fall from 22% to 17.7%

The net sale price of US$54.61 per NCL share is almost par with its last closing price of US$54.78, and translates to a historical P/E of 27.2x and P/B of 3.6x.

The group is expected to realise a capital gain of US$389.3m (US$0.048/share) from the disposal and an one-off accounting gain of US$1,688.5m (US$0.21/share) from the revaluation of its remaining NCL shares in its books. This would boost its net cash position to US$790m (US$0.98/share) and raise its pro forma FY14 NAV/share by 65% to US$0.656.

Based on the sale price, Genting HK's stake in NCL is worth US$2.76b, which almost equates to the group's market cap of US$2.89b, implying that investors are getting the rest of its other businesses (Crystal Cruises, Star Cruise, 45% stake in Travellers currently worth US$1b, 6.6% in Echo Australia) for just US$13m.

At the current price, Genting HK trades at a significant 45% discount to its post sale book value. The cash rich leisure stock currently sits in Market Insight's Value portfolio.

SG Market (21 May 15)

Investors will be looking ahead to a Fri speech by Fed chief Janet Yellen for new clues on the economic outlook and direction of interest rates.

Singapore shares are likely to open weaker today, following the mixed close on Wall Street, which had FOMC minutes showing most Fed officials view a June rate hike as being unlikely.

Regional bourses are also trading without much direction this morning in Tokyo (+0.1%), Seoul (-0.2%) and Sydney (+0.2%).

From a chart perspective, the STI has just breached its 50-dma at 3,454, with its next support tipped at the recent low of 3,425, with immediate resistance at 3,466. Looking at technical indicators, the RSI has turned weaker, while the MACD is invalidating a possible bullish crossover.

Stocks to watch:
*Informatics: FY15 net loss was at $4.9m versus a net profit of $0.2m on revenue of $15.9m (-33%). The drop in revenue was largely due to lower students enrolled in Singapore and UK operations. The UK business has been affected by the Ebola outbreak in Africa during the financial year. Bottom-line was further weighed by higher employee expenses (+7%), but partially mitigated by lower depreciation (-34%) and other operating expenses (-26%). NAV/share at $1.23.

*Rex: Acquired 30% participating interest in offshore WA-488-P licence in Western Australia, located in the Petrel Sub-basin between the producing Blacktip gas field and the undeveloped Turtle and Barnett oil discoveries. The 4,074 sq km Beehive prospect has been identified to be a potential giant oilfield, with total gross unrisked prospective recoverable resources of 926m stock tank barrels.

*Genting HK: Proposed to sell 10m shares (4.4% stake) in Norwegian Cruise Lines (NCL) for a net consideration of US$546.1m. Group expects to realise a gain of US$389.3m (US$0.048/share) from the disposal, as well as a fair value gain of US$1,688.5m (US$0.21/share). Upon completion, Genting HK's stake in NCL will fall from 22.0% to 17.7%.

*Biosensors: First study to demonstrate rapid early healing for BioFreedom, was presented at
EuroPCR 2015. Results in the first 12 months demonstrate rapid strut coverage, suggesting an early healing profile for patients using BioFreedom.

*Singapore Windsor: Secured an exclusive five-year franchise agreement with European car hire company, Europcar, to provide vehicle rental and limousine services throughout Myanmar. The agreement is effective from 1 Apr ‘15 and is renewable for a further five years.

*China Kunda Technology: Expects to record a net profit for FY15 compared to a net loss of HK$85.1m for FY14, mainly attributed to: i) disposal and FX translation gains ii) higher gross profit from automobile component segment; iii) absence of significant impairment losses; iv) write back of prior years’ provision for taxation and v) decrease in loss from discontinued operations.

Wednesday, May 20, 2015


iFAST: Counter is up 5.7% today, after DBS Vickers initiated coverage on the funds and investments distribution provider with a Buy call and TP of $1.60.

The investment thesis on iFast stems from the group being a direct proxy to the growing wealth management industry, while benefiting from digital finance. Overall, the broker expects the group to register a 20% growth in AUM for FY15-17.

Other new business initiatives undertaken by iFast, will include the recent approval by MAS for iFast to provide custodial services for securities to include bonds and ETFs (subjected to additional licensing conditions). Plans to distribute these products should take place by 2Q15, which will help to improve the group's AUM over time.

Going forward, other potential catalysts for iFast will include M&As and the successful execution of its China operations, with 70% of its IPO proceeds being earmarked for the use of M&As and expansion into the Chinese market.

At the current price, iFast trades at 30.8x FY15E P/E, versus its peer average of 21.

Keppel Corp

Keppel Corp: (S$8.75) Transocean delays taking delivery of rigs by another 18 months
Keppel Corp sank 1.2% to $8.72 in early trading, after one of its major rig customers, drilling contractor Transocean, confirmed that it has further delayed deliveries for five newbuild high-specification jack-up rigs it ordered in Nov ’13 by another 18 months.

This is in addition to the six-month extension announced in Feb ‘15. The postponement means that the first rig will now be handed over in early 2018, a full two years later than originally planned, with the rest of the rigs to be progressively delivered by 1Q 2020.

The rigs are valued at $1.4b or 12.4% of Keppel Corp's outstanding order book of $11.3b. Another three rigs for Fecon International worth US$650m may also be at risk.

With oil prices falling to a six-year low, the offshore market is now facing a rig downcycle with significant drop in rig utililisation and charter rates as upstream players cut back on exploration and production capex.

This has taken a toll on the rigbuilders, which has yet to see a single order placed since the start of the year and pushed back the timetable for construction of new rigs.

Maybank-KE is Underweight the O&M sector, and has a Hold rating on Keppel Corp, with a TP of $8.50.

Silverlake Axis

Silverlake Axis: (S$1.31) 27%-owned Global Infotech files for listing in Shenzhen
Silverlake Axis' 27%-owned Global Infotech (GIT) has filed its IPO prospectus for a listing on ChiNext of the Shenzhen Stock Exchange, for 33.3m new shares of Rmb11.26 apiece.

The IPO price translates to an adjusted P/E ratio of 22.9x FY14 earnings compared with average P/E multiples of 143.5x of peers disclosed by the company.

Post-issue, Silverlake Axis' stake will be diluted to 20.2% and its 27m shares will be worth Rmb304m ($65.4m), just 2% of Silverlake's current market cap of $2.9b.

While the spin-off may not be a material share price mover, Maybank-KE believes that a listing would help raise GIT's profile and provide fresh funds for growth in the medium term.

The house currently has a HOLD rating and TP of $1.38.

QT Vascular

QT Vascular: QT Vascular has enrolled the first 11 patients in its First-In-Human study of its novel Chocolate Touch PTCA (Coronary Drug Coated Chocolate) in the Dominican Republic.

If successful, the study would provide initial evidence of a new and unique device that could be able to treat the most common coronary disease in a way that minimizes the placement of stents in at least some lesion subsets.

The initial procedural outcomes with Chocolate Touch PTCA were successful in all 11 patients and importantly, no stent placement was required, while no cases with abrupt closure and no significant dissections were observed.

Separately, QT vascular recently reported 1Q15 results, which saw net loss narrowed to US$5.6m from US$9.2m on revenue of US$3.3m (+16.1%). The increase in revenue was mainly due to an increase in sales of its Chocolate® PTA Balloon Catheter, Chocolate PTCA, GliderXtreme and Glider PTCA.

Gross margin also jumped to 51.8% from 12%, as a result of continued pricing improvements from suppliers and the increase in the group’s production yields. Meanwhile other operating expenses were relatively unchanged.

At the current price, QT Vascular trades at 5.7x P/B.

Overall, the street has only 1 broker covering the stock with a Buy call and TP of $0.50.

Retail REITs

Retail REITs: An article on BT today highlighted that Singapore is the second hottest target market in the world for global retailers, according to a recent study by research firm CBRE.

Food and beverage operators were the most active with expansions, followed by retailers of mid-market apparel and accessories such as sports goods, ladies fashion, footwear and handbags.

The study also found that the Orchard Road strip continues to be the most popular shopping location for retailers.

To recap, retail REITs generally reported a stronger y/y result in 1Q15, mainly due to the timing of Chinese New Year in late Feb, giving malls a longer runway for pre-CNY sales.

Despite the sector's resilience however, the street is generally not positive on the segment given the structural headwinds, which includes deteriorating retail data, sluggish sales growth and labour shortages.

We opine that investors should remain selective on the counters, choosing those with the potential for upward rental reversion and the ability to capture the return of tenant sales (when it returns).

As a guide, retail REITs that derive a portion of revenue from the Orchard Road region are Starhill Global, Capitamall Trust and SPH REIT, as well as property developer Wheelock properties.

SG Market (20 May 15)

Regional bourses are mostly trading higher in Tokyo (+0.9%), Seoul (+0.4%), although Sydney is flat.

From a chart perspective, the STI is still trying to hold its ground above the 50-dma support at 3,450 with topside resistance at 3,520. Looking at technical indicators, the RSI appears neutral, while the MACD could be gearing up for a bullish crossover.

Stocks to watch:
*Property: According to Cushman & Wakefield, S’pore developers may incur up to $90m in extension charges for unsold units from Apr-Dec '15, followed by $238m in 2016 if housing market conditions does not improve. As at end 1Q15, developers had paid ~$119m in extension fees for unsold units for condos completed from 2010 onwards. Listed developers which could see considerable QC charges by end 2016 are CapitaLand, City Dev, Wheelock Properties, Wing Tai and Heeton.

*QT Vascular: Has enrolled the first 11 patients in its First-In-Human study of its novel Chocolate Touch PTCA (Coronary Drug Coated Chocolate) in the Dominican Republic. If successful, the study would provide initial evidence of a new and unique device that could be able to treat the most common coronary disease in a way that minimizes the placement of stents.

*Ramba Energy / GSS Energy: GSS Energyis investing US$5m in Ramba's exploration programme at West Jambi block in Sumatra, where 2 onshore wells are expected to be drilled from 2H15. This marks the third major investment that Ramba has secured in less than one month, with the group successfully raising ~$30m in total funds. International petroleum consultancy DeGolyer & MacNaughton estimates the West Jambi block as holding gross contingent resources of ~23.1m barrels of oil, 0.81m barrels of condensate and 97b cubic feet of marketable gas, as at 31 Dec ’14.

*LHN: Expands regional presence with new master leases in Myanmar and Indonesia. In its first business venture in Yangon, LHN has signed a master lease with a local developer to open its first SOHO-style serviced residence in the region by Sept '15. Meanwhile, the group's second GreenHub Suited Office in Jakarta is expected to open by 3Q15.

*Silverlake Axis: China associate Global InfoTech released its prospectus on ChiNext of Shenzhen Stock Exchange for 33.34m new shares at IPO price of Rmb11.26. Closing date of application is 20 May.

*Longcheer: Received a confidentiality agreement for a potential investment opportunity.

Tuesday, May 19, 2015

GSS Energy

GSS Energy: (S$0.275) Investing in Ramba's West Jambi block
GSS Energy will invest up to US$6m into Ramba's oil and gas operating assets located in West Jambi block in Sumatra, Indonesia, adding to its current operations in Central and East Java.

The investment is intended to cover all related costs, fees and expenses required to complete drilling of two onshore exploration wells, which sits in a proven region, with transportation infrastructure nearby.

Ramba currently holds a 100% working-interest (as the operator) for the West Jambi block in an operation cooperation agreement (KSO scheme) with Indonesia's Pertamina, which gives it the rights to explore and exploit the concession area for 20 years till 2031.

In a nutshell, the scheme essentially allows for any oil produced from the concession to be sold to Pertamina at a price which covers the unit production cost plus an unspecified profit element.

International petroleum consultancy company, RISC Operations, has reviewed nine prospects and eight lead wells at the West Jambi block and has identified ~426m barrels of un-risked gross prospective potential oil equivalent (mmboe) and risked gross prospective oil potential of 83 mmboe.

However, the investment agreement between GSS and Ramba is still preliminary and lacks specifics on how GSS is able to get a return on its investment, as well as Ramba's specified operating conditions. The details are expected to be released soon, given that the two wells are scheduled to commence drilling operations in 2H15.

Currently, only one broker on the street has coverage on the counter, with a Buy rating and TP of $0.65.


Centurion: (S$0.545) New student accommodation in Singapore
Centurion has been awarded a tender to operate a student hostel at Short Street, its first in Singapore.

The 10-storey property will have a lease term of 8 years and will be renovated to house 400 students, with commercial spaces for F&B outlets, with completion in 2H15.

This brings the total number of beds in Centurion’s student accommodation portfolio to 2,770 by end-2015.

Separately, we note that Centurion is currently conducting a non-deal roadshow in Hong Kong to raise investor awareness.

Post-1Q15 results released last week, the street has maintained its bullish view on Centurion, largely due to its:
1) leadership position in Singapore as a foreign workers' accommodation provider;
2) stable growth from its student accommodation portfolio in UK and Australia; and
3) strong pipeline to grow accommodation portfolio from 45,662 beds at present to over 74,100 (+62%) by end-2017.

Market Insight continues to favour Centurion's unique business model and maintains the counter's position in the Growth portfolio.

Latest broker ratings (post-results):
DBSV maintains Buy with TP at $0.85
RHB maintains Buy with TP at $0.75
Maybank-KE maintains Buy with TP at $0.70

Mapletree Commercial Trust

Mapletree Commercial Trust: CIMB upgrades to Hold from Reduce, but with TP of $1.54 intact, on more palatable valuations.

CIMB says VivoCity is a well-run mall, and its latest $5.5m AEI is expected to deliver 25% ROI. The house also thinks that it should be able to weather the weak retail environment given good management and location.

Office portfolio is also stable despite an onslaught of office space coming in 2H15, as only 9.8% and 2.6% leases are set to expire in FY15/16


Memtech: Updated investors at CIMB hosted NDR. On its switch from handset keypad supplier to an automotive player, Memtech expects 50% sales contribution from Auto by 2017, but should cap dependence of auto sales at 60% of sales, with the remaining to be filled by selected products in consumer electronics/ industrial/ medical/ others.

Memtech’s key advantage over peers is fast response time. Investors agreed that risks lies in Memtech’s execution as well as in product delays on customers’end.

CIMB maintains Add on Memtech with TP of $0.22


Midas: Subsidiary Jilin Midas Aluminium Industries has secured a series of contracts worth Rmb328.9m for the supply of high-speed train car body components in China.

These are within expectations, and Maybank-KE expects Midas to win between Rmb800m- Rmb1b of high speed related contracts in 2015.

Maybank-KE also likes Midas given that it is a cheaper proxy to the China high-speed rail industry, relative to HK/ China listed players.

Midas is currently trading at 27x FY15e consensus P/E and 0.7x P/B

The street has 2 Buys, 2 Holds and 1 Sell on Midas with a mean TP of $0.43.

SG Market (19 May 15)

Singapore stocks could inch higher at the open, after the S&P 500 and Dow closed at all-time highs, as market shrugged off early concerns about Greek debt and a renewed rise in bond yields after Carl Ichan tweeted that Apple is worth almost double to its current price.

Regional bourses are trading higher mixed this morning in Tokyo (+0.4%), Seoul (-0.1%) and Sydney (-0.8%).

From a chart perspective, the STI is still trying to hold its ground above the 50-dma support at 3,450 with topside resistance at 3,520. Looking at technical indicators, the RSI appears neutral, while the MACD could be gearing up for a bullish crossover.

Stocks to watch:
*Accordia Golf Trust: 4QFY15 DPU of 1.79¢ missed IPO forecast of 1.82¢ due to the depreciation of JPY/SGD. Otherwise, DPU and distributable income of ¥1.62 and ¥1,776m, respectively, would have been 9% higher-than-estimated. Operating income of ¥9,811m also came in 5% lower-than-forecast from an unfavourable weather conditions and lower average play fees, as well as lesser-than-expected membership revenue from a drop in the number of members. Subsequently, operating loss came in worst-than-expected at ¥1,131m vs ¥361m. Aggregate leverage of 30.3%, while NAV/unit stood at $0.85.

*Ezion: Rejects Atlantic Marine Services (AMS) claims as "frivolous and without merit". AMS claims company was behind a conspiracy to induce an AP Moeller-Maersk unit to breach charter agreements by creating impression that AMS was in financial trouble.

*Midas: Subsidiary Jilin Midas Aluminium Industries has secured a series of contracts worth Rmb328.9m for the supply of high-speed train car body components in China. These contracts are expected to contribute materially to FY15.

*Centurion: Awarded tender to operate a student accommodation at Short Street, Singapore. The 10-storey property with a lease term of 8 years will be renovated to house 400 students with commercial spaces for F&B outlets. This brings the total number of beds in Centurion’s student accommodation portfolio to 2,770 by end-2015. Separately, group is conducting a non-deal roadshow in Hong Kong.

*Boustead Projects: Awarded $32m contract to design and build an integrated commercial and logistics facility for the World Furnishing Hub in Sungei Kadut Industrial Estate in Singapore. The contract will raise Boustead Projects Group order book backlog to $296m.

*Nera Telecommunications: Announced a $13.1m contract to supply, install and maintain a nation-wide broadband project in South East Asia.

*CapitaLand: 100% owned The Ascott aims to double its service apartment units in Europe by 2020. Targets 10,000 apartment units in Europe in 5 years through acquisitions of turnkey developments or existing buildings which can be converted into serviced residences, management contracts and franchises. The group also has plans to refurbish 33 properties in Europe by end 2016.

*GSS Energy: Will invest up to US$6m into Ramba's oil and gas operating assets located in West Jambi block in Sumatra, Indonesia, intended to cover all related costs, fees and expenses to complete drilling of two onshore exploration wells. Further details are expected to be released prior to the investment that is scheduled to commence in 2H15. The investment would help GSS gain presence into a new geographical location, adding to its current operations in Central and East Java.

*Keppel Corp: Keppel Seghers have handed over Phase 2 of the Runcorn Energy-from-Waste (EfW) facility in UK to the client in April, after successfully completing a 30-day reliability test.

*SIIC Environment: CFO, Raymond Tan, has resigned to pursue other career interest.

*STATS ChipPAC: Appointed Maybank Kim Eng Securities as the independent financial adviser for the voluntary conditional offer.

Monday, May 18, 2015


Ezion: Bloomberg reported that Ezion was sued by a partner, Atlantic Marine, for inducing an A.P. Moeller-Maersk A/S unit to breach charter agreements. Ezion cited that claims are frivolous and without merit, with a closed hearing scheduled for 2 Jun.


Singtel: 4QFY15 numbers came in line with CLSA and consensus forecasts. Importantly, the outlook statement for FY16 points to healthy mid-single-digit revenue and low-single-digit Ebitda growth, which is within expectations.

While nothing in this set of results is incrementally bullish, house believes Singtel is the best placed among the three telcos and continues to be its top pick in the sector.

CLSA maintains OUTPERFORM and revised TP upwards to $4.57 (from $4.55).


CapitaLand: CapitaLand's recently proposed issuance of convertible bonds (CBs) to refinance existing CBs maturing in 2016, 2018 and 2022 is viewed as a positive by CLSA, as it will extend the company’s debt maturity profile and provide cost savings of some $1.3m per annum.

House maintains its High-Conviction BUY with TP of $4.30, with key catalysts being improving China sales momentum on the back of policy easing and potential asset divestments for its stabilised commercial portfolio in Singapore and China.

Genting SP

Genting SP: Nomura downgraded Genting SP to Neutral after the disappointing 1Q15 results, citing the lack of earnings visibility and catalysts.

Near-term headwinds like weakness in Chinese traffic, high impairments, and a strong SGD deterring tourist arrivals imply that FY15F EBITDA will be down over 2014.

House now value the Singapore business at a FY16F EV/EBITDA of 9x, closer to mature market peers in the US, UK and Australia, and at a 40%, discount to Macau names, translating to a TP of $1.00

In addition, Nomura thinks more downside might be limited, supported by share buybacks, as well as a zero-terminal growth DCF implied valuation.

SG Market (18 May 15)

Singapore shares are expected to stay in consolidation mode given the mixed close on Wall Street and a very lacklustre local corporate earnings season, marked by more misses than hits.

Investors will also eye a slew of US housing data (Tue/Thu), Fed meeting notes (Wed) key China manufacturing PMI (Thu) as well as Singapore’s trade figures due today for fresh clues on the market direction.

From a chart perspective, the STI is still trying to hold its ground above the 50-dma support at 3,450 with topside resistance at 3,520. Looking at technical indicators, the RSI appears neutral, while the MACD ould be gearing up for a bullish crossover.

Stocks to watch:
*Property: URA data showed that developer sales of private homes ex ECs surged in Apr to an 11 month high of 1124 units (+47.5% y/y, +83.4% m/m), due to 2 large project launches. Developers launched 1344 units in Apr, more than 3x m/m. Consultants highlight that while there has been an improvement in primary market activity, it is premature to say that market confidence is returning, expecting May volume to moderate to 300-700 units as launches slow down.

*StarHub: 1Q15 results below estimates. Net profit fell 12.4% to $73.7m, while revenue increased 8.1% to $617.9m, driven by an 180.9% surge in equipment sales to $77.5m from strong demand for smartphones. Meanwhile, total service revenue inched down 0.6% to $540.4, as mobile revenue fell 0.2% on weaker prepaid, while broadband revenue fell 10.8% as a result of higher price competition. Bottom-line how however weighed by EBIDTA margin which fell 2.6ppt to 30%, due largely to a spike in cost of equipment sold (+79.6% to $157m). Interim DPS of $0.05 maintained. NAV/share at $0.131.

*Amtek: 3QFY15 results in line. Net profit soared to US$10.1m (3QFY14: US$1.9m), while revenue surged 65% to US$242.6m, from the consolidation of Interplex, which drove sales in the Automotive and Industrial Products segments. Bottom line surge also buoyed by a 4.5ppt expansion in gross margins, due to improved operating efficiencies existing operations as well as contributions from higher-margin product mix. This was partly offset by a 78% increase in admin expenses and finance cost that grew 2.9x to $4.9m as a result of the Interplex consolidation. NAV/share at US$0.31.

*United Engineers: 1Q15 net profit surged 215% to $25m, while revenue fell 24% to $515.3m, as corporate services revenue crashed 92.7% to $22.7m, offset by progressive recognition of Eight Riversuites (property development), and contributions from MFLEX (technology and manufacturing). Bottom line aided by a 6.2ppt expansion in gross margin from MFLEX’s contributions, and from an overall reduction in operating expenses. This was partially mitigated an absence of disposal gain from last year and a share of loss from associates and JVs. NAV/share at $3.00

*Ying Li: 1Q15 results below estimates, as it swung into a 1Q15 net loss of Rmb0.5m (1Q14 net profit: Rmb33.7m), while revenue tanked 64.2% Rmb100.2m from lower recognition from ongoing projects, partially cushioned by increase in rental income. Gross margin improved 16.2ppt to 55%, as sales of properties mainly comprised of office units that tend to have higher margin. The increase in other income was offset by a spike in admin expenses attributable to FX losses that arose from adverse movements in the USD/SGD. NAV/share at Rmb1.96.

*Tiong Seng: 1Q15 net profit spiked 94% y/y to $3.2m, despite a 41% drop in revenue to $97.9m, mainly due to a lesser amount of construction work done. Meanwhile, bottom line was boosted by lower cost of construction (-44%), net finance income of $0.4m from FX gain compared to loss ($0.9m) in 1Q14, as well as JV contributions of $0.5m (1Q14: nil). Order book stands at $1.2b, stretching revenue visibility till 2020. NAV/share at $0.29.

*Mermaid: 1Q15 results below estimates, with net loss of US$15.8m versus a net profit of US$5.2m. Revenue fell 4.6% to US$60.8m, largely as a result of lower service income. The group reported gross loss of US$11.0m versus gross profit of US$6m from the previous year, due to three high performing vessels were off-hire for dry docking almost throughout the period and low utilization of charter-in vessels. NAV/share at US$0.38.

*YuuZoo: Swung to 1Q15 net profit of $3.2m (1Q14 net loss: $1.1m), while revenue surged 56% to US$9.6m from the phased recognition of the sale of franchise licenses in Turkey and South Korea, offset by decreased payment revenue from the discontinuation from AmEx agreement. Cost of sales decreased in line with lower payments revenue, offset by increased staff expenses, FX loss and increase in amortization of intangibles. NAV/share at US7.2¢

*Mencast Holdings: 1Q15 net profit fell 10% to $2.2m on revenue of $27.3m (-11%). Top-line was largely weighed by a 22% decline in revenue from the offshore & engineering segment, offset by the growth in energy services segment of 33%. Gross margin was relatively flat at 8.1%. Bottom-line partially aided by lower admin expenses of $4.6m (-12%). NAV/share at $35.85.

*Hong Fok: 1Q15 net profit crashed 88% y/y to $0.9m, as revenue tumbled 71% to $15.6m due to the absence of sales from residential units at Concourse Skyline. Bottom line was further weighed by lower associate contributions (-93%), but partly offset by absence of cost of sales of development properties (-70%). NAV/share remained at $2.11.

*EMS Energy: Proposed 88m new shares (5.5% enlarged share capital) placement at $0.023 apiece to seven separate parties. Net proceeds of $1.9m is intended for the funding of order book and working capital.

Friday, May 15, 2015

P-life REIT

P-life REIT - Latest news was its 1Q15 results, which were in line, with both distributable income and DPU rising 14% y/y to $19.5m and 3.21¢ respectively, largely buoyed by divestment gains ($2.3m) from seven Japanese properties in Dec ’14. Excluding the one-off gains, distributable income would have edged up just 0.7%.

Gross revenue and NPI inched up to $24.8m (+0.7%) and $23.2m (+0.8%), underpinned by stepped-up rents from Singapore properties. The five Japan properties acquired on 23 Mar ’15 contributed just nine days of rental income which was not significant.

The trust booked a FX gain of $1.5m, arising from net income hedge ($0.7m) and capital repatriation from Japan, which unlocked the gains in the foreign currency translation reserve.

Going forward, P-Life expects its recent acquisitions in Mar ‘15 to start contributing to the group’s results, and believes the long-term prospects of the healthcare industry will continue to be healthy given the rising demand for better quality private healthcare services.

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 industry in Asia-Pacific.

Occupancy rate stood at 100%, reflecting good demand. Aggregate leverage dipped to 34.4% (4Q14: 35.2%) with low average cost of debt of 1.5% and comfortable tenor of 3.6 years.

At the current price, the hospitality 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.


Midas: 1Q15 results below estimates. Net profit fell 5.3% to Rmb10.9m despite achieving higher revenue of Rmb320.6m (+8%), driven by its aluminium alloy extruded products division (+7.8%), which accounted for 90% of total turnover.

Gross margin widened to 28.8% (+4.8ppts), led by higher gross margin from the aluminium alloy extruded products division.

Operating profit was however hit by higher admin (+20.2% to Rmb40.4m), selling and distribution (+20.1% to Rmb16.5m) and finance costs (+53.2% to Rmb35.2m).

Associate contributions from Nanjin SR Puzhen Railway fell 27.6% to Rmb9.4m due to different project mix in the respective periods. Bottom-line was partially aided by lower tax expenses of Rmb1.4m (-71.1%), mainly due to recognition of deferred tax asset of Rmb2.9m in Luoyang Midas and JMLA during the quarter.

Going forward, Midas remains positive on its outlook, highlighting that for 2015, the PRC government has announced plans to invest Rmb800b into domestic railway construction, while the recent draft plan of the National Railway Administration, highlights additional plans to invest RMB2.8t over the next five years on railway spending.

Net gearing remains high at 94.8%, partially mitigated by current ratio of 1.36x and interest coverage of 1.35x.

At the current price, Midas trades at 26.3x forward P/E.

Latest broker ratings:
OCBC maintains Hold but places TP of $0.375 under review

SG Market (15 May 15)

Singapore shares are expected to open higher today, following the positive close in Wall Street, as strong gains in tech companies and a weakened USD propelled the S&P 500 to a new all-time high.

Regional bourses are trading higher this morning in Tokyo (+0.8%), Seoul (+0.3%) and Sydney (+0.4%).

From a chart perspective, support is tipped at around the 50-dma of 3,450 with resistance seen at 3,520.

Stocks to watch:
*Olam: 1Q15 results missed estimates, with net profit down 92% y/y to $31.3m mainly weighed by absence of a revaluation gain and asset sale and leaseback in 1Q14 ($293.9m), and an exceptional loss from its bond buyback ($97.2m). Otherwise, group's core net profit improved 25.7% to $128.5m. Revenue dropped 10.7% to $4.3b as sales volume slumped 33.2% from reduced sales volume of lower margin or discontinued businesses, but partly offset by higher prices of almonds, pepper and hazelnuts. EBITDA margin inched up to 7.6% from 6.9%, as all business segments except the food staples and packaged goods achieved higher EBITDA. Net gearing lowered to 1.85x (4Q14: 1.83x). NAV/share at $1.666.

*Genting Singapore: 1Q15 badly missed.Net profit crashed 73% to $62.7m, while adjusted EBITDA fell 43% to $228.1m. Revenue slumped 23% to $639.2m. Gaming revenue fell 26% to $494.9m, held up by mass market volumes (1Q15 mkt share: 41%, 1Q14: 45%). VIP segment was weak from a steep fall in China VIP players, lower average spend and lower win rate of 2.5% (1Q14: 3%). Non-gaming revenue fell 8% to $156.4m on lower RevPAR and lower average spend at attractions. EBITDA margin fell to 35.7% from 48.3%, as a result of weak hold rates and Chinese VIP plays. Bottom-line weighed by FX losses on financial instruments of $118.0m (1Q14: $15.0m gain) but offset by other operating income of $135.0m (+546%). NAV/share at $0.614.

*SIA: FY15 results in line. Net profit jumped 46.7% to $39.6m taking FY15 net profit to $367.9m (+2.3%). Excluding tiger airways which became a subsidiary on Oct '14, full year revenue was down marginally to $15.2b (-0.2%). Passenger revenue rose 0.9%, as group passenger carriage and yields saw slight improvement. Cargo revenue fell 0.9%, notwithstanding a higher load factor (+0.8% points) and yield (+0.3%), due to capacity reduction (-2.4%). Engineering services revenue declined with reduced overhaul activities, and lower incidental revenue recorded. Overall operating margin rose to 2.6% from 1.7%, aided by a 2.1% drop in fuel costs and 1.9% decline in other operating expenses. Bottom-line weighed by impairments of $14.3m (FY14: $1.9m gain), associate losses of $129.1m (FY14: $45.2m) and lower JV contributions of $52m (-44.7%). Final DPS of 17¢ declared, taking FY15 payout to 22¢ (FY14: 46¢). NAV/share at $10.66.

*NOL: 1Q15 results below estimates. Net loss narrowed 71% to $36.2m, while revenue fell 16% to US$1.58b, on a 15% slump in volume on planned capacity cuts and US West Port congestion, and lower average freight rates (-8%). Logistics division has been discontinued post divestment. Gross margin advanced 7.6ppt to 8.6% on lower bunker costs and increased operational efficiencies. Nevertheless, this was partially offset by a reduction in other gains (-64%), increased finance expenses (+30%), and other operating expenses of $26.7m (1Q14: US$3.1m gain). NAV/share at US$0.66.

*Thai Beverage: 1Q15 net profit rose 10% to THB6.58b on revenue of THB45.7b (+11%). Top-line led by an increase in sales revenue of spirits business (+9.9%), beer business (+17.5%), non-alcoholic beverages business (+7.9%) and food business (+8.2%). Gross margin was flat at 30%. Bottom-line weighed by higher selling (+15%) and admin (+14%) expenses and lower other income (-30%), but partially offset by higher FX gains of THB57.9m (+818%). NAV/share at THB4.22.

*CWT: 1Q15 results below estimates. Net profit fell 16% to $29.2m, while revenue declined 59% to $1.9m due to lower naphtha trading volume and a significant drop in commodity prices. Bottom line slump was mitigated by gross margin that improved 2.6ppt to 4.5%, and a $4.7m gain on sale of REIT units, partially offset by a $4.9m write-off on intangible assets/ goodwill and other foreign assets. NAV/share at $1.338

*Midas: 1Q15 results below estimates. Net profit fell 5.3% to Rmb10.9m on revenue of Rmb320.6m (+8%). Topline was largely led by higher revenue from the Aluminium Alloy Extruded Products Division (+7.8%), which contributed to 90.1% of total revenue, and was also key in improving overall gross margin to 28.8% from 24.0%. Bottom-line weighed by higher selling and distribution expenses (+20.1%), admin expenses (+20.2%) and finance costs (+53.2%). Associate contributions from Nanjin SR Puzhen Ralway fell 27.6% due to different project mix in the respective periods. NAV/share at Rmb2.49.

*Silverlake: 3QFY15 results in line. Net profit increased 22% to RM76.2m, while revenue climbed 5% to RM143.3m, driven by a 38% increase in maintenance and enhancement revenue following the completion of GST enhancement projects, and increased software licensing sales, offset by weakness in software project services. Gross margin expanded 10ppt to 68% on better product mix. Other income soared to RM5m, from RM0.3m a year earlier, in part driven by FX gains. However, bottom line growth was partially negated by an 87% swell in admin expenses to RM17.2m. Third interim DPS of 1.1¢ declared (3QFY14: 1¢). 1-for-5 bonus issue announced. NAV/share of RM0.281.

*Hyflux: 1Q15 net profit crashed 85% to $5.6m, while revenue fell 32% to $60.4m, mainly from lower engineering, procurement and construction activities. Gross margin improved 6.2ppt to 65.5%. The bottom line slump came from a slump in other income (-53% to $27.0m), which included a $15.8m gain from disposal of a leasehold building, versus a $54.1m gain from sale of financial asset last year. Associate and JV losses also doubled to $7.9m. NAV/share at $0.557.

*Haw Par: 1Q15 net profit increased 10.6% to $13.5m, while revenue increased 18.6% to $45.6m, from increased healthcare sales (+29%) in key markets. This was offset by leisure segment (-28.5%) on lower visitations at Underwater World Singapore and Pattaya. Property segment revenue fell 7.6 on lower occupancy rates. Bottom line boosted by gross margin expansion of 0.6ppt to 60.5%, but partially offset by share of associate’s profits which tanked 90% to $0.2m. NAV/share at $12.63

*Otto Marine: 1Q15 net loss narrowed 8% to US$13.2m, despite a 92% surge in revenue to US$148.1m, mainly from a vessel sale, partially offset by lower utilisation and rates for its chartering operations. Bottom

Thursday, May 14, 2015


SATS: (S$3.21) Better-than-expected 4QFY15 on good cost control and associates gains
SATS' 4QFY15 results beat estimates as net profit swelled 21.1% y/y to $51.6m, bringing FY15 earnings to $195.7m (+8.5%) or almost 5% above consensus estimates.

For the quarter, revenue slipped 2.2% to $425.1m, mainly caused by lower contribution of $250.9m (-5.8%) from its food solutions segment (-5.8%), which was affected by weaker performance of its Japanese unit TFK, and the divestment of an Australian subsidiary, Urangan Fisheries in Jul '14. This was partially mitigated by higher sales of $173m (+3.5%) from its gateway services.

Operating margin improved to 10.5% (+0.9ppt), benefitting from lower cost of raw materials (-8.5%), depreciation charges (-9.4%) and other costs (-16.5%), while bottom line was further boosted by a 32.3% surge in share of profits from associates/joint ventures to $13.1m.

Balance sheet remains sturdy with net cash position rising from $226.6m to $305.6m, backed by continuous operating cash flow of $263m.

Proposed final DPS of 9¢ takes its FY15 dividend payout to 14¢ (FY14: 13¢).

At current price, SATS is trading at a forward P/E of 18.2x and offers a 4.4% yield, relatively more attractive compared to other aviation support services peers of 21.3x and 4.1%, respectively.