SG Market (06 Nov 15)

Singapore shares are likely to be muted as US stocks were little changed overnight, with investors waiting for Fri’s jobs report to gauge the Fed’s next steps.

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

Investors will be eyeing the companies likely to capitalise on several pacts to be signed during Chinese President Xi Jinping's state visit starting today, including an upgrade to the bilateral FTA, a third government-to-government project in western China, as well as cooperation in education, urban management and customs. Banks, SGX, CapitaLand, Keppel Corp, Sembcorp Industries, Ying Li are touted to be among the possible beneficiaries.

From a chart perspective, the STI is likely to range trade between 3,000 and 3,050.

Stocks to watch:
*SIA: 2QFY16 core results was below estimates, as net profit soared 135% y/y to $213.6m, primarily due to higher dividends received from long-term investments ($91.1m) and the return to profitability at the associate level following the reclassification of Tiger Airways as a subsidiary. Revenue fell 1.5% to $3.84b, amid a 4.7% decline in passenger yield for the parent airline, lower belly hold and other incidental revenue. Operating margin was flat at 3.3%, with the decrease in fuel costs offset by other operating expenses. Interim DPS of 10¢ (2QFY15: 5¢). NAV/share at $10.83.

*ST Engineering: 3Q15 results in line, with net profit of $133.3m (+10% y/y) boosted by FX gains and the absence of an impairment loss. Revenue slipped to $1.5b (-3%) as higher sales from electronics (+21%) and aerospace (+8%) sectors was shaved by weaker marine (-39%) and land systems (-11%) segments. Operating margin slipped to 8% (-1.2ppt) mainly from the weak marine business. Order book of $12.2b. NAV/share at $0.65.

*China Merchants Pacific: 3Q15 results in line, despite net profit being down 20.2% y/y to HK$168.4m, in the absence of a HK$22.8m bargain purchase gain recorded in 3Q14. Revenue grew 3.8% to HK$548.8m driven by growth from Yongtaiwen expressway as well as the consolidation of Jiurui and Yangping expressways, partially offset by lower revenue from Beilun Port expressway. Meanwhile, lower toll revenue at the Gui Lui JVs resulted in JV contributions being down 11% to HK$63.5m. NAV/share at HK$5.44.

*CWT: 3Q15 results in line as net profit fell 16% y/y to $27.2m, while revenue plunged 49% to $1.93b on lower trading volume of naphtha and a drop in commodity prices. Gross margin more than doubled to 4.9%, largely attributed to better showing by higher margin commodity marketing and financial services segments. Bottom line was weighed by a net impairment loss of $6.3m due to the loss of properties and equipment in the Tianjin blasts in Aug ’15. NAV/share at $1.37.

*Riverstone: 3Q15 results beat estimates, with net profit more than doubling to RM35.3m. Revenue grew 46.7% to RM150.6m on higher gloves demand while gross margin improved 6.1 ppt to 31.9%. Bottom-line was boosted by a RM17.3m FX gain, but partially offset by RM12.5m of fair value losses on derivatives. Net cash position stood at RM69.8m. NAV/share at RM1.23.

*Asian Pay TV: 2Q15 results in line, with DPU of 2¢. Management reaffirmed its distribution guidance of at least 8.25¢ for FY15, representing an annualized yield of 9.7%. Revenue rose to $81.6m (+1.3% y/y) on positive contribution from the premium digital (+10.2% to $3.8m) and broadband (+5.9% to $13.0m) led by rising subscribers, while contributions from basic cable was flat at $64.7m. EBITDA margin remained stable at 60.1%. Aggregate leverage was flat q/q at 46%. NAV/unit at $0.87.

*Religare Health Trust: 2QFY16 DPU rose 8.9% y/y to 1.96¢ along distributable income of $15.6m (+8.8%). Revenue climbed 10.3% to $36.7m, mainly driven by a stronger INR, rising base and variable fees from clinical establishments, as well as higher hospital income due to more cases of dengue and seasonal diseases during the quarter. Portfolio occupancy improved 0.8ppt q/q to 80% with WALE of 12 years. Aggregate leverage was at 14.7%, but may be nudged up to 23.9% after accounting for the on-going acquisition of Mohali Land and other AEI in FY16. NAV/unit at $0.95.

*Lippo Malls Trust: 3Q15 distributable income surged to $21.5m (+25.9% y/y), lifting DPU to 0.77¢ (+11.6%). Gross revenue and NPI rose to $44.1m (+32.7%) and $40.3m (+30.4%), on acquisition of Lippo Mall Kemang in 4Q14, and Lippo Plaza Batu and Palembang Icon in 3Q15, as well as positive rental reversion at existing malls, partially offset by the weaker IDR. Occupancy slipped to 93.9% (-0.5ppt q/q), with WALE of 5.13 years, while aggregate leverage remained at 35% with average debt tenor of 1.84 years. NAV/unit at $0.37.

*Chip Eng Seng: 3Q15 net profit plunged 81% y/y to $13.5m amid a sharp drop in revenue to $158.5m (-62%), mainly due to absence of revenue from Belvia property development project which was recognised in 3Q14, and lower recognition from construction projects. Top line was marginally supported by Park Hotel Alexandra (+$6.2m) which commenced operations in May '15. Bottom line was hit by a surge in marketing expenses (+984.2%), due to the launch of High Park Residences. NAV/share at $1.18.

*ISEC Healthcare: 3Q15 net profit surged 243% to $0.68m, while revenue climbed 28% to $6.3m from improved contributions from Singapore and Malaysia operations. Gross margin improved 5.5ppt to 42.8%. NAV/share at $0.1

*China Everbright Water: Announced a tariff raise of 17.3% for its Binzhou Boxing Waste Water Treatment Project, which has been effective since July '15. Zibo Reusable Water Project Phase II has also completed construction and commenced operations in Sep '15.

*Tiger Airways: Parent SIA launched a voluntary conditional offer for 55.8% owned Tiger Airways at $0.41/share, subject to a minimum 90% acceptance.

*Eu Yan Sang: Acquiring seven health food retail stores in Greater Sydney from Venture Integrity Health, which will be financed by a mixed of cash and shares, target to complete between 2016 and 2017.

*Profit warning:
- LH Group
- China Yuanbang Property