Thursday, December 31, 2015


Economy: IMF warns of disappointing growth in 2016
IMF has warned that global economic growth will be disappointing in 2016 and outlook for medium term has also deteriorated.

The prospects of rising interest rates in US and economic slowdown in China has both contributed to the worldwide uncertainty and increased risks of economic vulnerability.

In addition, Head of IMF Christine Lagarde sees a considerable slowdown in global trade and the decline in raw material prices is posing problems for economies that depend on it.

Meanwhile, the financial sector in many countries still has weaknesses and financial risks are rising in emerging markets due to the stronger USD.

In Singapore, Maybank-KE is of the view that the domestic economy will slowdown by 2% in 2016 (10M15: +2.2%; 2014: +2.9%), due mainly to the drag in the manufacturing sector.

SG Market (31 Dec 15)

Singapore shares will likely end the final day of the year on a quiet note, with liquidity remaining sapped as investors stay by the sidelines on the dearth of catalysts in the domestic market.

Regional bourses slipped in Seoul (-0.3%) and Sydneya (-0.1%). Japanese markets are closed today for New Year's Eve holiday.

From a chart perspective, the STI remains bounded within the tight trading range between immediate support at 2,860 (20-dma) and resistance at 2,920 (50-dma).

Stocks to watch
*Economy: IMF warns global economic growth will be disappointing in 2016 and outlook for medium term has also deteriorated. The prospects of rising interest rates in US and economic slowdown in China both contributed to uncertainty and higher risk of economic vulnerability worldwide. In addition, growth in global trade has slowed considerably and decline in raw material prices is posing problems for economies, while financial sector in many countries still has weaknesses and financial risks are rising in emerging markets.

*Property. National Development Minister Lawrence Wong notes that the industry is healthy and has stabilised, and is on track for a soft landing. But any loosening of cooling measures may still be a little premature. HDB would launch 18,000 new flats (+20%) in 2016 to accommodate higher demand following new policies announced this year.

*Olam. 60% JV sold long term lease rights for a 20,030-ha plot of land in Gabon, along with a sale and lease-back of plantation and milling assets, for US$130m as part of its asset light strategy.

*Noble. Opined that the recently announced divestment of Noble Agri will improve its credit rating metrics and challenged Moody's recent cut of its credit rating to junk status.

*Keppel Corp: Acquired remaining 30% interest in Keppel Bay Tower for $180.9m in share swap arrangement with Mapletree Investments. In turn, Keppel sold its 39% stake in Harbourfront Towers 1 and 2 for $225.7m. Both assets were priced at book value.

*Far East Orchard: Acquired a 1,616sqm land plot in Brighton, UK, for £5.4m to develop into a student accommodation by end-2018.

*Hiap Hoe: Forming a 51/49 JV with A. & J. Brady to develop the group's property at 374-380 Lonsdale Street in Melbourne, Australia, into two mixed-used towers comprising residential, commercial, office and hotel.

*Spackman: Proposed share swap of its 45.8% stake in Spackman Media Group Pte Ltd in exchange for 27.4% in Spackman Media Group Ltd, as part of its restructuring exercise in relation to its proposed spinoff of the media investment holding company on Hong Kong Stock Exchange.

*Serrano: Awarded new interior fit-out contracts worth $11.6m. Separately, group guided for a net loss for FY15, due to cost overruns and write-offs.

*SHS Holdings: Signed LOI with Bangladesh Power Development Board to construct a solar power plant based on US$0.17/kWh tariff for a period of 20 years, with a total development cost of US$70-80m. The plant is scheduled to be completed in 18 months.

*ISOTeam: Acquiring TMG Projects, a firm engaged in engineering works and contracting, for $4m (1.9x P/B).

*Yanlord Land: Sold six properties to relatives of its Chairman and CEO for about Rmb70m.

*Abterra: Extended the long-stop date of its proposed acquisition of a commercial property in Beijing, China, to an undisclosed date.

*Healthway Medical/IHC: IHC extended the long-stop date of its offer to acquire Healthway Medical via a scheme of arrangement to Jul ‘16.

*Rex Int’l: Completed drilling of exploration well 7130/4-1 in Barents Sea licence PL708 with discovery of oil & gas but of uncommercial quantities.

*China Merchants Pacific: Secured a five-year term loan facility of US$350m to refinance a bridging facility for the Guixing, Guiyang, and Yangping acquisitions.

Wednesday, December 30, 2015


Noble: (S$0.405) Downgraded to junk status despite agri unit sale
Noble sank nearly 7% after Moody’s downgraded its senior unsecured bond to junk status with a rating of Ba1 from Baa3 on concerns over the group's liquidity amidst a broad downturn in commodity prices.

The ratings agency had earlier warned that it would take action on Noble’s ratings after it initiated a review in Nov ‘15. Moody’s maintains a negative outlook on Noble’s new junk credit rating.

Noble tried to starve off the credit rating downgrade when it agreed to sell its remaining 49% stake in its agriculture unit, Noble Agri, to China’s Cofco Corp for US$750m ($1.06b).

Despite the improvement in Noble’s liquidity profile and adjusted net debt/EBITDA to 3.2x from 3Q15’s 7.2x, Moody’s opines that Noble could continue to to face low profitability and negative cash flows from core operations.

In particular, the downgrade reflects Moody’s expectations of a prolonged commodity downcycle, and the consequent negative sentiment that would affect Noble and other traders in general.

Overall, the ratings agency believes that Noble will continue to face pressure to move more of its bank funding to a secured platform if it faces challenges to access unsecured debt funding.

In response to the downgrade, Noble reiterated its stand that the Noble Agri sale would put its financial metrics in excess of those required of an investment grade credit.

Noble has shed more than 60% of its value since Feb when Iceberg Research alleged the group was inflating its assets amid concerns that tumbling commodity prices will hurt its business.

The group maintains an investment grade rating of BBB- with the other two major ratings agencies, S&P and Fitch.

The street is relatively sanguine on the prospects of Noble, mainly on valuation grounds with 4 Buy and 6 Hold ratings and a consensus TP of $0.64. The counter is trading at 0.37x P/B.


SingPost: SingPost’s e-commerce CEO Marcelo Wesseler gave a business update yesterday.

The group reported a 60% y/y jump in Nov cross border e-commerce volumes to 4.6m packages. This included key holiday events such as China’s Singles Day, Black Friday and Cyber Monday.

Aside, the surge was also bolstered by greater marketing on SingPost’s international shipping service vPost as well as consumers in SE Asia and Australia taking advantage of overseas sales events.

Within SE Asia and Australia, domestic e-commerce sales ballooned 384% in Nov, thanks to Black Friday and Cyber Monday. This excluded orders from TradeGlobal and Jagged Peak, which are newly acquired by SingPost.

The top five categories of items purchased include fashion apparel, health and beauty, sportswear, consumer electronics and toys.

SingPost’s share price has taken a 15.8% beating from a recent high $1.935 in Oct. Apart from weak market sentiment, the stock was spooked by the abrupt resignation of CEO Wolfgang Baier, the poster boy of SingPost’s transformation story from an traditional mail provider into a leading regional e-commerce logistics provider.

Making matters worse are corporate governance lapses raised by academic Mak Yuen Teen and Business Times, which prompted SingPost to launch a special audit to investigate an interested party transaction in 2014. The group admitted that it had not disclosed independent director Keith Tay Ah Kee’s interests in Stirling Coleman Capital, the arranger of the acquisition of FS Mackenzie.

Until the CEO and corporate governance issues are settled, SingPost's share price could continue to face an overhang despite this solid set of e-commerce statistics.

SingPost is currently trading at 20.4x FY3/16e consensus P/E and offers a 4.1% indicative yield. Presently, the street has 5 Buy and 3 Hold ratings on the counter with a TP of $2.18.

SBS Transit

SBS Transit: As part of the new government contracting model (GCM), LTA will be taking over a fleet of 396 buses from SBS Transit for an aggregate $187m.

The fleet comprises $164m purchase contracts for 346 new buses that are scheduled for delivery in 2016 and 2017, as well as 50 existing buses delivered between Jun and Dec this year, worth $23m or 6.8% of the group's NAV of $338m ($1.09/share).

Following the sale, SBS will lease back the buses from LTA for its operations, Under the new contracting model, LTA will determine the bus services to be provided and service standards, and operators will have to bid for the right to run the services. The operators will be paid to run the services, while the government will retain fare revenue.

Thus far, British transport operators Tower Transit and Go-Ahead Group have won the first two contracts under the new model. Tower Transit will run the Bulim bus depot and 26 routes serving the Bukit Batok, Clementi and Jurong East interchanges starting May 2016. Go-Ahead will operate 25 services out of the new Loyang depot as well as the Pasir Ris and Punggol bus interchanges.

The other nine packages will be run by the incumbent operators, SBS and SMRT, as negotiated bus contracts for about five years. Once these contracts expire, more bus parcels will be tendered out.

In line with this development, both ComfortDelGro (+0.3%) and SMRT (+0.7%) are trading higher in early trading, while thinly traded SBS Transit has yet to register any trades.

Maybank-KE estimates that under the asset-light regime, ComfortDelGro, which owns 75% of SBS, could derive a cash windfall of $800m ($0.37/share), which would give the group added flexibility for M&A growth or special dividend distribution.

The stock finds favor amongst investors for its relative earnings stability over SMRT, deriving a 2.8% yield and potential for M&A-driven growth.

The street has 7 Buy, 5 Hold and 2 Sell ratings on ComfortDelgro with a consensus TP of $3.27.

SG Market (30 Dec 15)

Singapore shares may be lifted by positive sentiment following the overnight rally on Wall Street, invigorated by a rebound in consumer confidence and oil prices.

Regional bourses opened higher with Tokyo (+0.6%), Seoul (+0.2%), and Sydney (+1%) heading higher on the final full day of trading in 2015.

From a chart perspective, the STI is likely to be bounded within the tight trading range between immediate support at 2,860 (20-dma) and resistance at 2,930 (50-dma).

Stocks to watch:
*Keppel Corp: Secured four contracts totalling $125m from repeat customers, two of which are FSU/FPSO conversions awarded by Bumi Armada and Yinson, while the third is a FPSO integration contract from Brazil’s MODEC. The fourth is a barge enhancement contract from BP Exploration.

*Noble: Credit rating has been cut to junk (Ba1 from Baa3) by Moody’s on concerns about its liquidity amidst a broad downturn in prices for energy and raw materials. In response, Noble said that its rating metrics will substantially exceed requirements once the sale of its Noble Agri business is completed.

*Sembcorp Industries: Investing Rmb925m ($202m) for a 49% stake in a 1,620 MW coal-fired power project in Chongqing, China.

*SBS Transit: Signed an LOI with the LTA for the sale of 50 existing buses for $23m, and bus purchase contracts for 346 new buses, totalling $164m in 2016/17.

*Triyards: Won contracts to build two oil barges worth NT$716m (US$21.8m) from a new client, CPC Corp, a Taiwanese state-owned company, for delivery in 2Q18.

*Wilmar Int'l: 93.5% owned Wadworth invested US$9.8m into a 49%-owned associate in Tanzania, East Africa, which manufactures and trades cooking oil, soaps and detergents, and plastic items. Wadworth also acquired a 49% stake in Tanzania Pasta Industries for about US$6.8m.

*IHH Healthcare: Terminated an agreement with City International Hospital to manage a hospital in Ho Chi Minh City, Vietnam.

*China Everbright Water: Won the tender for Jinon Xike WWT Project Phase II for Rmb240m. Phase II has a capacity of 70,000m3/day

*Tiong Seng: Awarded a $69.9m contract from the LTA for the construction of a bus depot at Ulu Pandan.

*ThaiBev: Entered into a new agreement with Thai Malaya Glass to purchase various new glass bottles for three years. Main changes include purchase prices, compensation, and additional charges for glass bottle customisation.

*Samudera: Sold two vessels to its controlling shareholder, PT Samudera Energi Tangguh for US$4.9m. It is expected to record a gain of US$0.3m on the sale.

* Secured a Rmb58m ($12.6m) loan with Chong Zhi Hong Kong Investment for planned expansion in China and for the bulk purchase of hotel rooms.

*TSH: Divesting subsidiary Explomo Consulting (EC), which engages in event management services for $0.65m, as the group plans to focus resources on its core businesses.

Tuesday, December 29, 2015

Industrial REITs

Industrial REITs: In the face of a looming supply glut, the government is moderating its industrial land supply by trimming its 1H16 land sales programme to an eight-year low.

Six sites will be released on the Confirmed List, and four sites under the Reserve List, with total site area of 12.2ha. The last time this was lower was in 1H08, when 9.3ha was released.

For the second time in a row, lease terms of the sites released under the Confirmed List have been cut to 20 years from 30 years. MTI clarified such 20-year leases are meant to make it more affordable for industrialists to custom-build their own facilities.

While some market watchers are unexcited about the shorter lease terms, consultants SLP International opines that this is not a material issue, as these sites, measuring less than 1ha each, are meant for end-users and not for developers or investors.

At latest, Maybank-KE prefers industrial REITs to other subsectors, although the house is generally Underweight the sector. It cites that between 2016 and 2018, supply for industrial space is 1.2x historical demand, contrasting with 1.4x for office and 2x for retail. In 2017-18, supply for industrial should taper below demand.

The house also views that downside in industrial REITs have been priced in. The house prefers Ascendas REIT (Hold, TP $2.28) and Mapletree Industrial Trust (Hold, TP $1.49) for investors seeking exposure.

SG Market (29 Dec 15)

Singapore shares are likely to stay muted following overnight losses on Wall Street on the resumption of a selloff in crude oil as well dearth of news catalysts.

Regional bourses opened mixed with Tokyo (-0.4%), and Seoul (-0.4%) slipping in the final days of trading in 2015 while Sydney (+0.4%) gained after markets reopened from its Boxing Day holiday.

From a chart perspective, the STI is likely to continue to hover at its current levels with immediate support at 2,860 (20-dma) with resistance at 2,930 (50-dma).

Stocks to watch:
*Economy: Market hopes for M&A activity to rebound in 2016, spurred by the restructuring trend of GLCs. As at mid-Dec, M&A activity in Singapore dropped to US$52.3b (-45%). Market watchers note strategic interest for transformative M&A remains high as leading domestic players across key industries have relatively strong balance sheets, and interest to grow inorganically.

*Property: Government is moderating industrial land supply with its 1H16 industrial GLS programme at an eight-year low in face of a looming space supply glut. In addition, the six sites on its Confirmed List will come with shorter lease term of 20 years (from 30), to discourage speculation.

*SIA: Deadline for SIA's $0.41/share takeover offer for Tiger Airways is extended to 8 Jan. As at 28 Dec, SIA has received 18.8% valid acceptances, bringing its total stake to 74.5%.

*SingPost: SGX will await for the results of SingPost’s upcoming audit before assessing its compliance with listing rules after the latter had admitted to not properly disclosing a conflict of interest in an acquisition it made in 2014.

*Oxley: Divesting Chiba Port Square, a property in Chiba Prefecture, Japan, to Greenland Hong Kong Investment Group and Laox for US$60m.

*Ying Li: Sold all 585 Soho units at 15.1%-owned Beijing Tongzhou project on the first day of launch for Rmb1.06b. Group is now working to launch the pre-sales of Tower Two ahead of its original schedule.

*Alliance Mineral: Successfully delivered its first order of tantalite concentrate to Japan, and has signed an MOU with Sinosteel Equipment & Engineering for strategic cooperation on the development of tantalite and other minerals.

*China Everbright Water: Its Wuzhong Chengnan WWT Project has obtained a subsidy of Rmb6.4m from the Jiangsu provincial government.

*China Yuanbang Property: Disposing 25% stake in Wanyuan Yuanbang Resort Development to Wanyuan City Qinba Electronic Commerce for Rmb37.5m ($8.2m).

*Cordlife: Received a prepayment of US$44.7m from Magnum Opus for a loan made in Aug ‘14. It will waive the remaining US$1.6m of the original loan amount in exchange for the prepayment.

*Pan Hong: Obtained a bank facility of up to HK$82m (US$10.5m) from Luso Int'l Banking for general working capital. The loan amount to be drawn down is secured through a standby letter of credit issued by Xiamen Int'l Bank.

*Chiwayland: 75% owned subsidiary Suzhou Chiway Jinhui Real Estate is disposing it's 5% interest in Suzhou Chiway Huayuan Real Estate to Shenzen Pingan Dahua Huitong Wealth Management for Rmb5m.

*Pacific Andes: Applied for further extension for the release of FYSep15 results to 28 Feb ’16, due to matters relating to the provisional liquidation of China Fishery Group and China Fisheries International.

*CSC: Received 72.7% in valid acceptances for its rights cum warrants issue.

Monday, December 28, 2015

SG Market (28 Dec 15)

Singapore market: The Singapore market is likely to end off the final week of trading in 2015 with a whimper, with liquidity expected to remain thin amid the lack of catalysts.

Crude oil continued to rebound with WTI crude adding 1.6% to US$38.10/bbl at the close of trading on Christmas Eve.

Regional bourses opened mixed with Tokyo (+0.3%) and Seoul (-0.4%). The Sydney market is closed for Boxing day.

From a chart perspective, the STI is likely to remain tight at its current levels with immediate support at 2,855 (20 dma) and resistance at 2,930 (50 dma).

Stocks to watch:
*Economy: Manufacturing output fell 5.5% y/y in Nov (Oct: -5.4%), the 10th consecutive month of contraction, dragged by a sharp decline in transport engineering cluster (-11.2%) and weak electronics output (-11.1%).

*Wee Hur: Purchased an office building and adjacent plot of land with a total land area of 5,478 sqm in Brisbane, Australia, for A$63m ($64m). The property has a net lettable area of about 14,000 sqm and is fully leased to the Queensland State Government for rental income.

*Singapore Myanmar Investco: To operate 6,725sqm of retail space at Yangon International Airport Terminal 2 for five years, and an option for another five, starting from Mar ‘16. The contract will provide the company with exposure to the expected growth in Myanmar’s tourism and business travel.

*Global Yellow Pages: Lodged a police report regarding potentially irregular transactions at its subsidiary, Singapore River Explorer.

*Geo Energy Resources: To acquire the remaining 34% of Borneo International Resources for US$25m. The company owns a 99% stake in PT Sungai Danau Jaya, which holds coal-mining concessions in Indonesia.

*Xyec: Two of its units, Neutral and ACLOX will be merged from Apr ‘16 onwards, as both offer similar IT activities to customers in major manufacturing industries.

*Boustead: Proposed acquisition target, Triangle Energy’s shareholders have approved a revised offer from rival, PT Enso Asia. Accordingly, the offer by Boustead and its partners will lapse by Feb ‘16.

*Advanced Integrated Manufacturing: Agreed to acquire a minimart business for $0.2m through a part cash, part treasury share agreement.

Thursday, December 24, 2015


SingPost: Will convene a special audit to investigate corporate governance issues flagged by The Business Times over a 2014 interested party transaction.

The auditors will report directly to the Board and the Audit Committee.

SingPost said that the independent audit will cover corporate governance and a review of the internal processes related to M&As.

The request was made by lead independent director Keith Tay Ah Kee, to which the Chairman had acceded.

Tay has also requested that the report be made available for inspection by the SGX, IDA and other regulators, as well as shareholders and other stakeholders. In addition, Tay will recuse himself from the investigation, and will cooperate fully as required.

This comes a day after SingPost admitted that it had not properly disclosed Tay’s interests in the 2014 acquisition of FS Mackenzie. Tay is also a director and shareholder of Stirling Coleman Capital, the arranger for the acquisition.

Although market watchers welcome the audit, the investigation would have its limits. For instance, the special audit might not be able to establish how Stirling Coleman became the financial adviser for several of SingPost’s acquisitions.

Until such concerns are fully addressed, the ongoing investigation could place a share price overhang on the stock.

SingPost is currently trading at 20.4x FY3/16e consensus P/E and 4.1% indicative yield.

At present, the street has 5 Buy and 3 Hold ratings on the counter with a TP of $2.18.


Wilmar: Establishes Brazilian JV in bid to be top sugar exporter
Wilmar is reportedly establishing a venture with Raizen Energia, a JV between Shell and Cosan, in a bid to be Brazil’s top sugar exporter.

The new entity is expected to strengthen existing production and trading operations in Sao Paulo-based Raizen, while providing Wilmar with more access to sugar supplies from Brazil. In the year-to-date, Raizen sold 3m tonnes of sugar, of which 1.04m tonnes went to Wilmar.

The Int'l Sugar Organisation recently stuck to its forecast of a 2.5m-tonne deficit on the global sugar market in 2015/2016. This is set to more than double to 6.2m tonnes, assuming that demand grows at about 2% per annum, with a more arid monsoon season in India as well as the potential effects of El Nino possibly curtailing supply.

Sugar futures have surged 50% to US15.15¢/lb since hitting its seven-year low of US10.13¢/lb in Aug. On an annual basis, sugar prices have fallen in each of the four years leading up to 2014, forcing the closure of 50 out of 340 Brazilian mills, with 10 more expected to halt operations in the current season.

Coupled with the slump in the Brazilian real, increased sugar exports would help bolster Wilmar’s sugar milling segment, which saw a 13.8% y/y revenue decline in 3Q15 to US$470.1m even though sales volume grew 19.5% to 1.9m tons.

Maybank-KE maintains its Buy call on the counter with TP of $4.14 as it sees El Nino crimping soft commodity supplies in 2016, in particular crude palm oil.

Wilmar is currently trading at 11.7x FY15eP/E and 0.9x P/B.

Ascendas REIT

Ascendas REIT: Acquiring a logistics property in Sydney, Australia, for A$76.6m ($76.6m) in the wake of its recent equity fund raising.

To recap, the industrial REIT recently raised funds via a private placement of 90m new units at $2.223 apiece, and is currently launching a 3-for-80 preferential offering at $2.218/unit.

The 38,579 sqm gfa warehouse and office property at 6-20 Clunies Ross Street, Pemulwuy, is located within Sydney's premium logistics and distribution hub and is currently tenanted to two government-related entities, Australia Post and New South Wales Police, generating a NPI yield of 7.1%.

On an annualised basis, pro forma DPU contribution from the acquisition is estimated at 0.7¢, which is a 4.2% accretion to its 2QFY16 annualised DPU of 16.64¢.

Maybank-KE's last rating on Ascendas REIT is a Hold, with TP of $2.28.


Interplex: Barings Private Equity Asia (via investment vehicle Slater) has launched a pre-conditional voluntary offer for Interplex (formerly Amtek Engineering), at $0.82/share.

The deal values the precision engineering company at $450m, or 15.5% above its last traded price. The offer is conditional upon, amongst others, the approval of the holders of $200m 6.9% notes due 2019. The offer price also exceeds the highest closing price over the past four years.

Barings does not intend to change the management team nor introduce major business changes, although it retains the option to do so but will seek a delisting should it end up with more than 90% ownership.

The private equity firm was the winning bidder in a stake sale carried out by CVC Capital Partners and Standard Chartered Private Equity, which have a combined stake of 57.7%.

Amtek had bought US firm Interplex Industries in Mar last year, to expand its manufacturing scope beyond hard disk components. Interplex Industries made parts for blue chip customers like Apple, Bosch, Denso, and Continental.

For 1QFY16, its net profit grew nearly three times to US$11.6m on the back of a 4% rise In revenue to US$234.8m. The bottom line boost was from the absence of acquisition-related costs and FX gains from the stronger USD. The group's net gearing stood at 1.1x

Based on the offer price and street estimates, Interplex is valued at 7.3x/5.6x/4.7x FY15/FY16e/FY17e P/Es and 1.6x P/B.

Ascendas Hospitality Trust

Ascendas Hospitality Trust (AHT): Received an unsolicited expression of interest (EOI) from an unnamed party, relating to the possible acquisition of all units in the trust.

The manager of AHT is currently undertaking a strategic review to evaluate the viability of the EOI and emphasises that discussions are at an early stage.

AHT's portfolio comprises 11 hotels with over 4,100 rooms across Australia, China, Japan and Singapore.

AHT spiked 5% to $0.73 in early trading, valuing the reit at 1.02x P/B, below its 5-year historical average of 1.18x. This is compared to hospitality reits' average of 0.81x P/B.

There is only one broker coverage on the reit, where the house has maintained its Buy rating and TP of $0.74 on the release of the potential takeover offer.

SG Market (24 Dec 15)

SG Market: Singapore shares may see some positive spillover sentiment from the extended rally on Wall Street on firmer crude oil prices, with consumer spending boosting optimism on the outlook of the US economy.

Regional bourses opened positive today in Tokyo (+0.7%), Seoul (+0.2%) and Sydney (1.1%).

Technically, the STI could head towards the next objective at 2,940 if it breached past the immediate resistance at 2,860. Downside support remains at 2,800.

Stocks to watch
*Ascendas Hospitality Trust: Reviewing strategic options after receiving an unsolicited expression of interest from unnamed party to buy over the trust.

*SingPost: Setting up a special corporate governance audit in wake of questions over its disclosure standards and own admission of administrative oversight in a Jul 2014 deal, relating to an interested party transaction.

*Interplex: Baring Private Equity Asia has launched a pre-conditional voluntary offer at $0.82/share, 15.5% above the last trading price. The offer is conditional upon the consent of noteholders for its $200m 6.9% notes due 2019.

*Ascendas REIT: Acquiring 6-20 Clunies Ross Street in Sydney, Australia, for A$76.6m. The logistics property is currently tenanted by two government-related entities, Australia Post and New South Wales Police, and is expected to generate a NPI yield of 7.1%. Annualised pro forma DPU contribution is estimated at 0.7¢.

*Noble: Fitch Ratings notes that the sale of Noble Agri may provide relief to its liquidity crunch. The credit rating agency last had a BBB- rating for the group.

*Courage Marine: Signed MOU to buy 70% of stake in Hope View International, a Chinese company that provides logistics, customs clearance services and import of export of goods.

*Mercator Lines: Received a notice of enforcement from its lender to sell three vessels to a related company for an aggregate US$14.8m, to reduce its debt obligations.

*Cosco Corp: Cancelled one contract to build a bulk carrier originally scheduled for delivery in 1Q16 for COSCO Dalian, and pushed back delivery for another from 4Q15 to 3Q17. Construction of both vessels has commenced and the downpayment received for the cancelled vessel will be applied towards the other vessel.

*Chiwayland: Won a tender for a land parcel in Sydney, Australia, for A$18.6m. The 2,980 sqm site is expected to be developed into residential units.

*Yamada Green Resources: To acquire a 45% stake in Fujian Tianwang Foods for Rmb39.9m. Tianwang manufactures and supplies processed food products.

*DuTech: To acquire Krauth Technology in Germany and product know-how for a total of €0.45m. It will also extend a loan of €2.02m to Krauth. Krauth is a developer and producer of solution products.

*IFS Capital: Accept a loan facility of $50m from Phillip Credit for general working capital requirements.

Wednesday, December 23, 2015


Noble: The commodity trader has entered into an agreement to sell its remaining 49% stake in Noble Agri to Chinese food giant COFCO for US$750m, with a deferred consideration of up to US$200m subject to future growth of the unit.

Recall just a year ago, COFCO forked out US$1.5b for the initial 51% stake in the agriculture unit.

While the disposal is expected to be cash flow positive, Noble is expected to net an estimated book loss of US$546m, taking into account the carrying value of US$1.3b as at end-3Q15.

The group intends to use the net proceeds from the sale to repay loans, in a bid to alleviate its debt load and ease concerns raised by credit rating agencies in the past two months. On a proforma 3Q15 basis, the sale would shave its adjusted net debt to US$1.8b from US$2.5m and net debt/capitalization to 43.1% from 45.1%.

The transaction will also release the group from existing guarantees for Noble Agri's debt and fulfills its earlier commitment to raise US$500m through asset disposals in order to meet investment rating metrics.

Bloomberg consensus currently has 4 Buy and 6 Hold ratings on the counter, with an average TP of $0.64.


Banks: Singapore bank share prices look set to end 2015 in negative territory. However, CLSA believes a further de-rating is likely in 2016. The sector is trading at an average 1.3x trailing P/TCE for high-single-digit ROE and negative earnings momentum. House remains Underweight the sector but downgrade UOB to U-PF from O-PF (TP: $18.90), OCBC to SELL from U-PF (TP: $8.00) and DBS to SELL from U-PF (TP: $15.00). UOB remains its preferred pick among the three banks, while DBS is least preferred.

Like 2015, the focus next year will likely be on revenue and asset quality headwinds due to the unsupportive macro environment. However, CLSA believes asset quality will take centre stage with revenue challenges acting as runner up. Singapore, HK, Malaysia, Indonesia and Thailand are likely to experience higher NPLs while India will remain challenging.

Margin expansion will likely be held back by the divergent rate environment and competition while non-interest income is likely to be low-single digit as activity remains weak and one-off gains should largely be non-existent.

Meanwhile, expense growth will likely equal or outstrip revenue growth due to investments in staff, technology and compliance.

The combination of the above plus negative-mark-to-markets on liquid asset holdings and FX mean that book value and capital progression will likely be limited.

CLSA expects regulation overhang to continue until at least the end of 2016.


O&M: A Business Times feature flags that offshore drilling demand recovery nowhere in sight, as oil companies’ capex cut extends into 2016.

The vulnerability of rig cancellations is especially so in the both the floaters and jack-up segment. For the latter, a sizeable percentage of orders have been placed on a speculative basis.

Icarus Consultants cited that of over 120 jack-up rigs under construction, more than 50 are from owners with no rig operating experience.

For these rig-owner aspirants, little is holding them back from putting the incoming rigs for resale, or simply walking away from contracts, the consultant opines.

However, resale prospects are dim amid a drastic reduction in offshore drilling contracting activity.

Icarus Consultants sees that drilling for field developments will only recover in 2018, although activity in existing fields could continue where costs are low.

The BT feature also flagged that 30 rigs orginally scheduled for delivery in 2015 will be delayed 2016, where 60 units are scheduled. This further exacerbates the supply glut build up, with rig owners and operators already struggling to secure contracts ahead of scheduled deliveries.

In turn, rig builders such as Keppel O&M and Sembcorp Marine will face increasing inquiries for deferments, or to take ownership of the rigs.

The feature also highlighted five Keppel rigs which were slated for delivery in 3Q remains outstanding. For Sembcorp Marine, PPL Shipyard has two jack-up rig deliveries to Oro Negro in 4Q, aside the currently disputed rig with Marco Polo Marine.

Maybank-KE opines that even in a case where, oil prices rise to US$60-70/barrel, oil companies will first need to first mend their balance sheets before resuming spending, portending to delayed recovery for the O&M sector.

Maybank-KE has the following ratings:
Ezion (Buy, TP $1.28)
Keppel Corp (Hold, TP $7.70)
Nam Cheong (Sell, TP $0.12)
PACC Offshore (Buy, TP $0.50)
Pacific Radiance (Sell, TP $0.33)
Sembcorp Industries (Hold, TP $3.53)
Sembcorp Marine (Sell, TP $1.75)
Vard (Sell, TP $0.22)
Yangzijiang (Sell, TP $1.12)

SG Market (23 Dec 15)

Singapore market may see slight gains today, following overnight gains in Wall Street on improved sentiment from stabilising oil prices and possible stimulus out of China. But trading is expected to remain thin ahead of the holiday season.

Regional bourses opened positive today in Korea (+0.4%) and Sydney (+0.8%). The Japanese market is closed today for Emperor's Birthday.

Technically, the STI faces immediate resistance at 2,860 and support at 2,800.

Stocks to watch
*O&M: Upstream O&G firms expected to extend budget cuts in 2016, with offshore recovery nowhere in sight. Street sees downside risks stemming from order cancellations, particularly in the jack-up segment, dragged by declining utilisation and deteriorating day rates.

*Noble: Proposed disposal of its remaining 49% stake in agriculture unit to Chinese food giant Cofco for US$750m. The sale is expected to net a book loss of US$546m. Proceeds will be used to reduce debt.

*Swiber: Acquiring a construction barge for US$10m, 33% below its market value, as part of its strategy to support ongoing projects.

*Cosco Corp: 51%-owned subsidiary Cosco Shipyard Group is exploring various options to improve business operations, including the expansion of funding sources and optimising its asset structure.

*ARA Asset Management: Established the ARA Harmony Fund V with Singhaiyi, and Suntec REIT to undertake the redevelopment of Park Mall to enhance the gross floor area of the asset.

*Li Heng Chemical: Majority shareholder Precious Joy Management intends to make a voluntary unconditional general offer at $1/share, 115% above the last traded price of $0.465.

*Mercurius Capital: Change in controlling shareholder from Zhang Zhize to Chang Wei Lu, following the completion of a married deal involving 23.1% stake for $2.3m (0.9¢/share). Chang currently owns 23.8% of the group.

*Hotung Investment: Investee company, Nien Made Enterprise, has listed on the Taiwan stock exchange.

*Annaik: To transfer listing from the SGX Mainboard to Catalist in view of the minimum trading price requirement on the mainboard.

*Cogent: Commenced arbitration against Crane Specialist after gantry crane works at its logistics complex at Tanjong Kling Road was not satisfactorily completed.

Tuesday, December 22, 2015

GS Holdings (IPO)

GS Holdings: Centralised dishwashing specialist to list on Catalist
GS Holdings, a centralised commercial dishware washing company is seeking to list on the Catalist board.

GS provides dishwashing services for Singapore’s F&B industry, where it commands a 40% market share. The group has a diversified customer base comprising food courts, coffee shops, restaurants, hawker centres, and a public hospital.

Its main value proposition is to help food centres reduce manpower reliance and labour costs, while ensuring the cleanliness of utensils and crockery.

The group is capitalising on the following trends to underpin its prospects:
1) Strong domestic “eating-out” culture
2) Rising income and living standards
3) Stricter regulations on food hygiene after recent spats of food poisoning cases

To this end, the group is looking to fully automate its dishware washing processes and relocate its existing Senoko facility to a larger one at Loyang.

The new facility is expected to commence operations from Mar ‘16 and will help the group cater to an expanding customer base while reducing costs through greater economies of scale.

It is also exploring other value-added services such as the management of waste disposal and kitchen workflow design to complement its current cleaning services.

GS achieved $3.4m (+183.3% y/y) revenue in 1H15, buoyed by additional contracts from Big Box, F&B tenants in shopping malls such as IMM, The Star Vista, and Westgate, as well as increased sales from the Paradise Group and a hospital.

No profit figures or indicative pricing have been disclosed at this point.


Property: Unsurprisingly, the government trimmed its 1H16 government land sales supply by 5.2% sequentially to 7,415 units, as it continues to rein in supply amid sluggish sales.

Hospital supply has also been reined in. Since 2H13, hotel supply has been kept in check with no supply offered under both the confirmed or reserve list.

Commercial supply eased 1.8% sequentially to 272,580 sqm with only 11,000sqm offered under the confirmed list with the balance coming from three mixed developments Central Boulevard, Woodlands Square and Holland Road) and one commercial site on Beach Road.

The abovementioned sites are well located and therefore should see decent level of interest among developers, but the huge quantum will limit available and qualified bidders.

Key sites under the confirmed list include Martin Place, one of the few sites located in the centra region, which should attract more bids. CLSA expects a bid of ~$800psf for this site.

CLSA remains overweight developers. Top picks include City Dev, FCL and Capitaland.

SG Market (22 Dec 15)

Singapore shares are likely to see a slight respite today following the overnight bounce in Wall Street, as investors shrugged off concerns of weak crude oil price. However, liquidity is expected to remain thin on the dearth of macro news before the holiday season.

Regional bourses opened mixed today in Tokyo (-0.4%), Korea (-0.3%) and Sydney (+0.2%).

Technically, the STI faces immediate resistance at 2,865 (20-dma), with support at 2,800.

Stocks to watch:
*Sabana REIT: Proposing asset recycling with the disposal of industrial property at 200 Pandan Loop to BS Pantech for $38m. This sale price is 3.3% above market value, with rather poor NPI yield of 1.5%.

*Fortune REIT: Converted to secondary listing status on SGX Mainboard, with primary listing in Hong Kong.

*Hiap Hoe: Entered formal contract to sell freehold asset on 206 Bourke Street, Melbourne for A$116.3m.

*GSS Energy: Proposed placement of 102.5m new shares (21.7% share capital) at no less than 7.9¢ apiece. Estimated net proceeds of $8m will be used for working capital and expansion of operations in Indonesia.

*Chasen Holdings: Exploring a potential spin-off for part of its business on the National Equities Exchange and Quotations in China.

*Linc Energy: Received in principle support from 69% of noteholders to amend the terms for its 7% convertible notes due 2018. Proposed terms include the removal of redemption option, reduction of interest coupon to 0% with immediate effect, and the reset of the conversion price.

Monday, December 21, 2015


CapitaLand: (S$3.25) Expanding into Vietnamese offices
CapitaLand is looking to broaden its scope into Vietnam’s office property segment, beyond its current portfolio of residential development and serviced apartments in the emerging economy.

Aside from acquiring land, the group is looking to buy completed office buildings, particularly if the building has the potential for future asset enhancements.

This comes as CapitaLand faces an office supply glut on domestic soil, with the Marina Bay region experiencing the most weakness in end-2016/early-2017, on the back of lower demand from tenant relocation to decentralised areas.

Market observers are of the view that Vietnam's property market is riding into a boom, backed by the government’s push to ease restrictions on overseas buyers.

Underlying demand is also expected to stem from the country's middle class, which has benefited from the country's 6.3% growth bagged in 1H15, its fastest since 2008.

CapitaLand currently has eight residential projects in Vietnam with a total of 4,114 units launched, of which 3,181 (77%) has been sold. The group also manages 2,464 serviced apartment units in the country.

CapitaLand is currently trading at a 21.5% discount to its NAV of $4.14. The street is relatively bullish on the counter with 17 Buy and 4 Hold ratings with a consensus TP of $3.91.


DBS: Citi gives 5 reasons why DBS would not (and should not) buy Stan Chart:

1) Onerous regulatory hurdles – Given multiple jurisdictions that DBS and Stan Chart overlap, this is nothing short of a regulatory nightmare.

2) Too much to use of scarce management resource – Even assuming no regulatory resistance, the sheer complexity of bringing together these two organizations would tie up excessive amounts of top management time and distract from growing the core business, which itself is increasingly challenging in the present soft macro environment.

3) Digital expansion the way forward. DBS has cited that the key challenge that the banking industry must address over the five years is the threat of digital disruption. But equally, digital channels can be used by DBS as a means to broaden its retail access in countries such as India.

4) M&A remains tactical. DBS’ recent actions suggest that it is only willing to consider M&A of specific tactical portfolios — in the past 18 months this included a cards portfolio in Hong Kong and an Asian private-bank portfolio.

5) Wrong time of the cycle - In Citi’s view, buying any bank (let alone one as large and complex as STAN) into a weakening growth backdrop carries a greater risk of failing to deliver shareholder value.

Citi has a Buy call on DBS with TP of $19.37

Insider Trade

For the week ending 18 Dec, buying rebounded strongly, while buyback activity remained high.

Insider purchases: 25 companies saw 59 purchases worth $11.6m, vs. 17 firms, 51 purchases worth $3.39m the week prior.

Insider sales: Two companies saw two disposals at $0.426m, vs. one disposal worth $0.004m the week before.

Buybacks: 26 companies posted 89 repurchases worth $15.5m, vs. 21 companies, 82 buybacks worth $19.6m.

Notable transactions:
HG Metal: Made its first buybacks since Dec ’12. 529,000 shares were purchased at an average of $0.04 each, accounting for 33% of the stock’s trading volume, and on the back of a 60% drop in share price since Mar.

Kingsmen Creatives : Recorded its first buybacks since Oct ’08, with 725,000 shares purchased at average $0.633. The trades were 60% of activity, and were made on the back of a 20% drop in share price since Nov.

Q&M: Recorded its maiden buybacks with 233,000 shares purchased at an average price of $0.699. The trades were made on the back of a 12% drop in share price since Oct.

GL Ltd (formerly GuocoLeisure): Non-executive chairman Quek Leng Chan continued where he left off in Sept, purchasing 525,000 shares at an average of $0.835. The trades accounted for 41% of the stock’s trading volume. The Asia Insider notes that the stock rose on average of 8% three months after the chairman bought, based on 181 purchases since 2004.

SG Market (21 Dec 15)

Singapore market: Shares may see a weak start to the short trading week following continued weakness in US and Europe equities trading last Fri. Trading activity likely to be thin ahead of the Christmas holidays, with economic data light as well.

Regional bourses opened a tad lower in Tokyo (-0.6%) and Sydney (-0.5%), while Korea (+0.2%) opened stronger.

From a chart perspective, the STI faces immediate resistance at the 2,870 level (20 DMA), followed by 2,940. Support is currently at 2,810.

Stocks to watch:

*Yangzijiang: Won shipbuilding contracts for 11 vessels worth a total value of US$626m with deliveries in 2018. During the current quarter, there was a contract termination for a bulk carrier. However, the same customer placed new orders for three combination carriers. It will thus receive compensation for the contract termination through the 10% deposit received.

*Ezra: Subsea Services division, EMAS AMC, secured contracts worth US$70m, including a new NOC client in the Middle East. Works include the lifting of 3,000 metric tonnes of offshore structures.

*DBS: Bank highlights "no basis" to reports on its interests in Standard Chartered, cited by media and brokerage reports recently.

*Ley Choon: Transfer application to from Mainboard to Catalist rejected by SGX. The group will thus have to look into other ways to comply with the minimum trading price requirement.

*AA Group: Acquiring Toko Construction, a building construction company, from Chew Liang Kwang and Chew Meng Seng for $2m.

Friday, December 18, 2015


Economy: Post interest rate liftoff; what's next?
While the US interest rate hike was largely expected, Maybank-KE notes that the speed and scope of future hikes remains as a huge guessing game. Future hikes are expected to be driven by data even though the Fed’s “dot plot” chart indicates that the Fed is likely to hike four times in 2016.

Despite this, Maybank-KE feels that the Fed’s views and forecasts on inflation are optimistic particularly in view of depressed energy prices. The house thus expects the Fed to hike two to three times in 2016 for a total increase in rates by 50-75 bps.

Other key takeaways from the Fed hike points to the relative strength of the world’s largest economy which is expected to grow 2.4% in 2016 on an inflation-adjusted basis.

Another point to note is the fact that the Fed will be reinvesting principal payments from its holdings of maturing securities purchased under QE and rolling over maturing Treasury securities. This means that the Fed’s balance sheet will not shrink anytime indicating that the Fed is still in accommodative monetary policy mode.

While the jury is still out on the impact of the rate hike, downside risks with the end of the three super cycles are becoming apparent.
1. USD index downward trend appears to have been broken, implying greater strength in the USD
2. Conversely, the global commodity price index has seen its upward trend broken in line with a slowdown in China as well as the strong USD
3. The global bond index is now trading sideways, breaking a previous upward trend.

Looking elsewhere, Hong Kong adjusted its base rate immediately after the Fed liftoff in view of the HKD’s hard peg to the USD.

Other than HK, major central banks, namely the BoJ and ECB are seen as maintaining the status quo of zero-bound/negative interest rates and QE stimulus measures.

While the house expects most Asian economies to maintain their current interest rate levels throughout most of 2016, China, India, and Vietnam are likely to see interest rate cuts as the central banks there try to boost economic growth.

SG Market (18 Dec 15)

From a chart perspective, the STI is likely to continue to hovering around its current levels with immediate support at 2,810 followed by 2,800. Resistance is currently at 2,870 (20 dma).

Stocks to watch:
*Triyards: Announced orders worth US$45.5m, including construction for a scientific research vessel, slated for delivery Aug ’17, and two crew transfer vessels.

*SIA: Will be adding new capacity to cities such as Bangkok, Colombo and Milan in 2016 to cater to rising travel demand.

*Mencast: Renewed its service contract for another three years with a publicly owned oil company for environmental remediation services which includes a two-year extension option. In addition, it also revised another contract with the same client to expand scope of services and increased volume for the remaining term, which expires on 14 Mar '18. The two contracts are expected to generate $20m revenue over the next three years.

*Best World: Lost an appeal in Indonesia regarding FY08 income tax resulting in a payment of $0.8m which will have to be made in FY15.

*Mm2Asia: Acquiring a 70% stake in Millinillion for $0.4m to foray into the digital media and technology sector. Millinillion specialises in developing B2C mobile apps.

*Spackman: Its upcoming movie MASTER, has confirmed its main cast of Gang Dong-won, Lee Byung-hun, and Kim Woo-bin. MASTER is directed by Cho Ui-seok, who helmed the movie COLD EYES (2013). The 2013 movie sold 5.5m tickets and was one of the top 10 films at the Korean box office for 2013. MASTER is expected to commence filming in 1H16.

*Singapore Myanmar Investco: Entered into a 50:50 JV with Japan-listed, Senco to provide logistics and warehousing services in Myanmar. It will invest an initial US$0.7m in the JVco.

*Courage Marine: Disposing MV Courage, a Panamax size vessel, to AHM, a scrapyard operator in Liberia, for close to US$2.5m.

*CMC Infocomm: Expects to report losses for 1H16 on substantial IPO fees as well as increased overhead expenses in Singapore and Malaysia.

Thursday, December 17, 2015

IPC Corp

IPC Corp: IPC Corp plans to pay out $1.60/share as part of its capital reduction exercise after the company completed the 14.9 billion yen sale of seven hotels in Japan.


Yangzijiang: The Business Times reported that Yangzijiang is aiming for higher-value orders for specialised vessels in niche markets to tide over downturn, and already the shipbuilder has benefited from a steady stream of commercial shipbuilding orders backed by new international regulations coming into force from 2016.

The group announced in Nov that it had secured 12 vessel orders totalling US$730m for containerships ranging from 1,900 to 11,800 TEU and 84,000 cubic meter very large gas carriers for deliveries from 2017 – 2018.

Yangzijiang’s chairman Ren Yuanlin guided that the shipbuilder is seeking to build momentum in the gas segment, as competition for newbuild gas transportation vessels are typically restricted among selected yards with the required shipbuilding capabilities.

Yet despite the group’s attempt to diversify its operations, Ren acknowledged that operating conditions remained tough, and the current weakness is expected to persit for three years or more.

Already, the number of shipyards in China has shrunk from 3,000 to 300 and may fall below 50 in another three years. On a more positive note, Yangzjiang has since doubled its market share as it navigates itself through a multi-year consolidation.
Amidst the challenging outlook, only quality yards with strong execution and balance sheet are likely to emerge as industry winners versus peers.


DBS: According to newswires, DBS and IDFC bank are among the final bidders for RBS India assets. While no transaction details were announced, analysts had earlier estimated that a deal could fetch about $200m.
Based on RBS India's latest financial report, loans and assets were around $2.4b and $4b respectively, which formed just 0.8% and 0.9% of DBS’ loans and assets using 2014 figures. Therefore, any major impact if DBS is successful in this acquisition will be unlikely, and a potential acquisition will most likely be funded by internal sources.
A successful acquisition will however be a positive forward for DBS to expand its footprint in India, assuming no further asset quality risks. DBS aims to scale up its corporate banking business in India, particularly for the SMEs segment, with CEO Piyush Gupta guiding that the bank will need to expand its branches to up to 75 from 10 now to better cater to SMEs.
In the longer term, DBS plans to scale up its operations in India from being a large corporate bank to a universal banking model.
Maybank-KE currently has a Sell rating on DBS with TP of $16.05, based on 1.0x FY15 P/BV, close to 1SD below its mean since 2005.

SG Market (17 Dec 15)

Singapore equities are likely to open in positive territory as investors see the first US interest rate hike in a decade as a vote of confidence in the world’s largest economy.

However, sentiment is likely to be dampened by an overnight selloff in crude oil with WTI slumping to US$35.52/bbl on a surge in US petroleum stockpiles.

Regional bourses opened higher today with Tokyo (+1.8%%), Seoul (+0.4%), and Sydney (+1.6%) extending the Fed-bounce.

From a chart perspective, the STI is likely to test its immediate resistance of 2,873 (20 dma) with the next meaningful level of resistance at 2,948 (50 dma). Support is currently at the 2,800 level.

Stocks to watch:
*Banks: Fitch reiterates its stable outlook for the three local banks as well as the overall sector, citing that the banks’ diversification and selective lending in China will help stymie a potential sag in earnings growth.

*DBS: Among final bidders for RBS' India assets, with deal reportedly worth US$200m. RBS India has an asset base of S$4b and loan book of S$2.4b, forming 0.9% and 0.8% of DBS' assets and loans. Move is in line with plans to expand footprint and scale up its corporate banking business in India.

*Yangzijiang: Aiming for higher-value orders for specialised vessels in niche markets to tide over downturn, and has benefited from a steady stream of commercial shipbuilding orders backed by new international regulations coming into force from 2016.

*AusGroup: Won contract awards and extensions for clients within the energy and industrial sectors totaling A$100m since Oct ‘15.

*Roxy-Pacific: Aquiring a development property in Australia for A$27.5m, financed through internal funds and bank borrowings. The property sits on a 930sqm site, which has approval for the construction of 46 residential units and one retail unit with a total gfa of 3,581sqm.

*Emas Offshore: Ezra undertakes to buy from EMAS its 12.13% stake in Perisai Petroleum Teknologi for US$56m, about a 500% premium to current prices. The price was determined based on EMAS’ investment, and the transaction is to consolidate Perisai in a single entity at Ezra’s level.

*Vibropower: Its power plant in Shanxi, China is now fully operational and will contribute positively to its financial performance in FY16.

*Ntegrator: Clinched three contracts totalling $9m, two of which are equipment supply contracts from Myanmar's government and Vietnam's largest mobile network operator, while the third is a pipeline installation and maintenance services contract in Singapore.

*Trendlines Group : Subsidiary Trendlines Medical renewed its incubator franchise for another eight years.

Wednesday, December 16, 2015

City Developments

City Developments: (S$7.37) Second PPS transaction helps to unlock more value
City Dev (CDL) is partnering with Keppel-managed Alpha Asia Macro Trends Fund II to establish its second profit participation securities (PPS) scheme on an initial 40:60 basis with three of CDL’s prime office assets, worth $1.1b.

The three assets are Central Mall’s office tower ($218m), 7 & 9 Tampines Grande ($366m), and Manulife Centre ($487.5m). Occupancy across the three properties stood at 98% and will continue to be managed by CDL.

CDL and Alpha will contribute $133.3m and $200.2m for their respective stakes in the PPS and receive fixed coupons of 5% per annum for five years. In addition to this fixed coupon, Alpha will receive preferred IRR of 12.6% p.a. while CDL will receive the balance cashflow until its initial capital is repaid.

Thereafter, further upside will be shared between CDL and Alpha on a 60:40 basis. This means that CDL will continue to benefit from future gains after delivering the promised returns to Alpha. This includes future potential divestments, etc.

The transaction is largely seen as a positive with Maybank-KE noting that the PPS serves as an avenue for CDL to recycle capital, expecting gains of about $0.25/share. The proceeds from the sale will enable future investments and lower CDL’s net gearing to 0.21x from 9M15’s 0.29x.

The house maintains its Buy call and lifts its TP to $10.64 from $10.40.

The counter is currently trading at a 22.7% discount to its NAV of $9.53 and sits on Market Insight’s Value portfolio.


Noble: Newswires reported that Noble is in advanced talks with Chinese food giant Cofco to sell its remaining 49% stake in its agricultural unit, Noble Agri, for US$700m. Just a year ago, Cofco had forked out US$1.5b for its initial 51% stake in Noble Agri.

Analysts guide that a potential stake sale is likely to be seen as a positive move for the “embattled” Noble, especially at a time when tumbling commodity prices are making asset sales challenging.

The stake sale is also likely to take some pressure off Noble’s earnings, given that JV and associate contributions in recent quarters had been largely weighed by losses from Nobel Agri, primarily as a result of lower sugar prices.

In response to the latest news, Noble confirmed in an SGX announcement that it was in advanced talks for a potential stake sale, although the commodities trader stopped short of disclosing the buyer and the value of the sale.

Noble recently announced that It was looking to raise more than US$500m either via asset disposals or other transactions, with major credit rating agencies like Moody’s and Standard & Poor’s guiding that they were likely to downgrade the group’s investment grade rating to “junk status” if its financials did not improve.

At the current price, Noble trades at 0.4x P/B.

The street has 5 Buy and 6 Hold ratings with a consensus TP of $0.65.

Healthcare/ Raffles Med

Healthcare/ Raffles Med: OCBC notes that the healthcare sector has generally been rewarding this year, with a comparably better gain of 25.7% vs. the benchmark STI’s decline of 16.5% YTD as of 14 Dec. It thinks that he sector would likely continue to be favoured by investors, given the early stage of growth for the sector across the region and range of long term opportunities. On the other hand, some sub-sectors such as the medical device industry are still characterized by intense competition and pricing pressures.

Nevertheless, it remains Neutral on Healthcare, noting that valuations do not seem sufficiently attractive on a broad-based level. There is preference for stocks that can deliver decent earnings. Longer term investors should consider Raffles Medical [BUY, S$4.59] as their pipeline of expansion plans would sustain growth, and their outlook is comparably comforting in uncertain times.


O&M: Although WTI rallied to US$37.35/bbl after breaching below the US$35 mark a few days ago, the weakness is far from over.

A foreign broker argues that prices may fall into the high US$20s if storage tanks fill up before producers sufficiently cut output. The house opines this scenario may occur in 1H16.

U.S. crude stockpiles are now 120m barrels above the five-year seasonal average, and outlook ahead appears more bearish. This is as stubborn OPEC’s refusal to budge on output and US shale’s surprising resilience meets the return of Iranian oil, as sanctions gets lifted.

Another downside risk to oil price is the upside risk of the USD, which may happen if the Fed raises rates in the FOMC meeting this week.

For the O&M sector, Maybank-KE does not see a turn in the near term. In fact, it foresees further spending cuts in 2016. Also, even if oil prices rise to US$60-70/barrel, oil companies will first need to first mend their balance sheets before resuming spending.

Post 3Q15 results, Maybank-KE’s EPS forecasts are 7-8% below consensus. Ezion (Buy, TP: $1.28) is the preferred counter for exposure, while top Sells include SMM (TP: $1.75) and Vard (TP: $0.22)

SG Market (16 Dec 15)

From a chart perspective, the STI is just above its 2,800 psychological support with next downside level marked by Sep low of 2,740. Immediate resistance is seen at 2,875 (20-dma).

Stocks to watch:
*Property: Private home sales totalled 759 units (+39% m/m; +79% y/y) in Nov. Top selling projects were Capitaland’s Sky Vue, and UOL’s Principal Garden.

*Noble: Reportedly in advanced talks with Cofco to sell its remaining 49% stake in agri unit for US$700-750m. The state run company acquired 51% of the agribusiness for US$1.5b in Apr 2014. This follows a commitment by the group’s CEO to raise US$500m, in order to retain its investment grade credit rating and repair investor confidence.

*City Dev: Injecting three office properties (Central Mall, 7/ 9 Tampines Grande, Manulife Centre), worth $1.1b into a 60/40 investment platform, co-owned by Keppel-managed Alpha Asia Macro Trends Fund II. This move will free up capital for recycling in new investments and lower its net gearing to 0.21x from 0.29x.

*City Dev: Millennium & Copthorne Hotels New Zealand's franchise and management agreement for Kingsgate Hotel Hamilton and Kingsgate Hotel Whangarei will end in Jan and Feb '16 respectively, as the hotel owners have decided to sell the hotels.

*China Everbright: Won the tender for Nanjing Pukou Reusable Water Project in China. The project has a daily capacity of 40,000m3 and will be built on a build-operate-transfer basis with a total investment of Rmb45.7m.

*SIA: Nov’s group passenger traffic rose 4.9% y/y against a 1% expansion in capacity, lifting passenger load factor (PLF) by 2.9ppts to 79%. PLF improved as the group adjusted capacity and held promotions on selected markets. PLFs for its namesake carrier (+3.1ppt to 78.8%), SilkAir (+0.4ppt to 71.3%), Scoot (+2.7ppt to 83.6%), and TigerAir (+2.6ppt to 83.1%) improved. However, overall cargo load factor deteriorated 1.2ppt to 66.4% as cargo traffic (+5.4%) failed to keep up with capacity growth (+7.4%).

*First Resources: Reported a jump in FFB harvest to 218,309 toones (+8.2% y/y) with a slightly lower FFB yield of 1.6 tonnes/ha. CPO production fell 3.5% to 54,226 tonnes on a 0.8ppt fall in CPO extraction rate to 22.3%.

*Genting HK: Entered a conditional underwriting agreement, where it will repurchase 10.3m Norwegian Cruise Lines shares sold by Apollo funds to Goldman Sachs. The consideration is ~US$20m.

*Hor Kew: Has been debarred by the Ministry of Finance from building construction tenders until Nov '16 on grounds of withdrawals of tenders before award was made. It had previously diverted resources to precast and prefabrication activities amid poor returns from construction activities over the past two years.

*China Environment: Mulling the potential listing of its 80%-owned Xiamen Gongyuan Environmental Protection Technology on one of the stock exchanges in China to unlock value and raise funds for its further expansion into China’s environmental protection sector. The company produces a heat pump system and has no significant operations yet.

*PACC Offshore: Issued profit warning for 4Q15 and FY15 mainly because of an impairment charge to its goodwill of US$295m (makes up 24% of its book value of USD1.2b) on its balance sheet given the industry downturn.

Tuesday, December 15, 2015


Ezion:(S$0.57) China's wind farm developments to provide some need up-lift?
Ezion has entered into an agreement with a Chinese SOE to support offshore wind power installation projects along coastal China.

According to the announcement, Ezion will support the SOE with its service rigs for loading, construction, transportation, and installation of wind turbine development projects. It will also provide technical expertise for the construction, and installation of the wind turbine foundation and components.

The agreement comes after Ezion mentioned that it would be looking to diversify away from the oil and gas sector in view of the industry downturn.

With the Paris climate change deal, COP21, finalised, and continued domestic support in developing renewable energy such as wind power to reduce carbon emissions, Ezion has found itself an additional avenue to deploy its service rigs.

This avenue is less subjected to price pressures and additional operational requirements that its current oil and gas customers are pressing Ezion for in this downturn, which saw Ezion recording poorer 3Q15 gross margins of 29% (-22.1 ppt y/y).

Notably, however, Ezion vessels are currently contracted to various clients. Hence, the newly inked agreement could mean that the group might:
1. use it as a backup plan in case of contract/charter terminations,
2. rescind contracts with clients who offer no long-term strategic prospects and are asking for unreasonable terms,
3. see new contract opportunities after the current ones expire.

While no specific contract or value was mentioned, Market Insight notes that China has set a target of 5GW of installed offshore wind capacity by 2015 and 30 GW by 2020. As these targets have yet to be met, more offshore wind power installation projects are expected over the next few years.

Maybank-KE opines that this development is a positive for the counter. The house has a Buy call on Ezion with a TP of $1.28.

Ezion is currently trading at 0.49x P/B and 4.87x forward P/E. The counter is an overall favourite of the street with 11 Buy and a sole Sell rating with consensus TP of $1.01.

SG Market (15 Dec 15)

Singapore shares could open higher, taking cue from Wall Street, which halted a global sell-down to close in positive territory in the final moments of trading amidst crude oil’s rebound from a six-year low.

However, sentiment is likely to remain fragile with underlying trends pointing to a global risk-off mode.

Regional bourses are trading higher in Seoul (+0.2%) and Australia (+0.4%) but lower in Tokyo (-0.3%).

From a chart perspective, the STI is hovering above its 2,800 support level with the next level of support forming at 2,780. Immediate resistance is seen at 2,880 (20-dma).

Stocks to watch:
*Ezion: Diversifying from the O&G segment, as it entered into an agreement with a Chinese SOE to support offshore wind power installation projects in China, located mainly along the coastal regions of China.

*OSIM: Exiting its Australian nutrition business after suffering losses of $3.5m/year for the past three years.

*Interra Resources: Entered into an MOU with Sany Heavy Industry in conjunction with the “One Belt, One Road” initiative in China. The partnership will focus on investing in energy projects.

*KrisEnergy: Abandoning an exploration well in the Sakti field after indications from wireline logs revealed that the field was below the economic threshold for a commercial discovery.

*Vallianz: Subsidiary Rawabi intends to refinance loans amounting SAR1.1b (~US$293.3m) secured against 20 vessels. Exercise involves the transfer of vessels to an SPV, and a sukuk financing.

*MMP Resources: Announced that its restructuring which began in Feb has reduced much of its debt and narrowed its business focus into micro power plants. The group is now looking for inorganic growth opportunities in renewable energy, building materials, and commercial & retail construction. It is also seeking SGX approval for a listing transfer from Mainboard to Catalist board.

*GLP: Incorporated three indirect subsidiaries in China, namely GLP Jinan Hi-Tech Logistics Facilities (capital: US$18.7m), Haipu Cold Storage Management (Rmb5.5m), and GLP Nanjing Pujiang Logistics Facilities (US$20.1m) for the provision of distribution facilities and services.

*Envictus International: Agreed to acquire an 85% stake in Lyndarahim Ventures for RM20.4m. The company operates 28 coffee outlets in Malaysia.

*Rickmers Maritime: Issued profit warning for 4Q15 after recognising impairment charges on its vessels amounting to US$129m in light of the depressed chartering markets.

Monday, December 14, 2015


Vard(S$0.245) Another contract termination casualty in O&M

Vard Promar, a 50.5%-owned subsidiary of the group, received termination notice from Petrobras Transportes (Transpetro) for two liquefied petroleum gas (LPG) carriers.

The vessels are among the last two of a series of eight carriers which Brazilian-based Transpetro ordered from Vard Promar for US$536m in Jun ’10, and were scheduled for delivery between 2014 and 2016.

While the group plans to pursue compensation for the termination of contracts, it is also reviewing its overall exposure to the Brazilian market, where Transpetro’s parent, state-backed Petrobras is hard hit by depressed oil prices and entangled with corruption scandals involving local politicians and businessmen.

The turbulent oil market took its toll on Brazil, as the world’s seventh-largest economy slipped into recession in 2015 with soaring unemployment, as well as losing its investment grade credit rating from S&P rating agency.

Maybank-KE has a sell rating on Vard, with a TP of $0.22.

Insider Trades

Insider Trades: Asia Insider notes that buying fell for the first time in the past five weeks for the week ending 11 Dec.

Insider purchases: 17 companies saw 51 purchases worth $3.4m, vs. 20 corporates and 52 transactions worth $11.3m the week prior.

Insider selling: One firm recorded a disposal worth $0.004m, vs. four companies, six transactions worth $0.71m the week before.

Buybacks: 21 firms posted 79 buybacks worth $19.53m, vs. 23 companies, 84 repurchases worth $8.38m.

Notable transactions:
GCCP Resources: Maiden buyback since its April Catalist listing. 13m shares were bought at average 13.4¢. The trades were 38% of the stock’s trading volume. Buyback price lower than 23¢ IPO price.

LH Group: Buying back heavily in the past three weeks with 161,000 shares bought from 26 Nov to 10 Dec at average of 48.2¢ each. The trades accounted for 89% of the stock’s trading volume. The transactions were made on the back of a 76% drop in share price since April.

DBS: Bought back 300,000 shares at $16.44, picking up where it left off in October. The trades were made on the back of a 9% drop in share price since the final week of October.

ST Engineering: Picked up where it left off in November, with 893,000 shares purchased at average of $2.91, accounting for 15% of the stock’s trading volume.

SG Market (14 Dec 15)

Singapore shares are likely to open lower today, tracking steep Friday losses in the US and regional opening losses, as crude oil prices slumped to its lowest level since Feb ‘09.

Investors’ sentiment will likely continue to be fragile with the underlying trend still pointing to the downside and as investors look towards a highly anticipated US interest rate hike.

Regional bourses opened sharply lower today in Tokyo (-2.4%), Seoul (-1.1%), and Sydney (-1.5%).

From a chart perspective, the STI is now looking to test its 2,800 support with the next level of support at 2,780. Immediate resistance is seen at 2,885 level (20-dma).

Stocks to watch:
*COSCO: Proposed merger between the shipping businesses of its Chinese parent, China Ocean Shipping, and China Shipping Group has been granted the regulatory green light to proceed. The reorganisation of its parent will not involve the company for the time being. Trading in its share will resume this morning.

*Marco Polo Marine: Group financial controller Ho Kian Teck resigned, and will be replaced by group finance manager Grace Khaw Siaw Geit, with effect from 11 Dec.

*UOL/UIC: Awarded a tender for the residential site at Clementi Ave 1 at a tender price of $302.1m. The 99-year leasehold site has a total area of 13,037.8 sqm with a gross plot ratio of 3.5. Both UOL and UIC will jointly develop the site on a 50:50 basis.

*IPCO: 2QFY16 earnings returned back to positive territory with net profit of $5.1m (2QFY15 loss of $0.4m) as revenue soared 76.7% y/y to $15.6m on a jump in semiconductor sales (+156.9%) as well as increasing gas consumption in China (+50.6%). Bottom line was buttressed by FX gains (+96%) as well as a decrease in fair value losses (-81.1%). NAV/share of $0.02.

*OCBC: Established a wealth management company, BOS Wealth Management in the UK to serve European customers and is currently awaiting approval from UK regulators to commence business.

*Sim Lian: To acquire two retail properties, Woolworths Shopping Centre, and Masters Home Improvement Everton Park located at Queensland, Australia for AU$70m compared to an open market valuation of AU$70.1m. The two sites measure a total of 55,730 sqm. The group intends to fund the acquisition through internal funds and bank borrowings.

*Blue Sky Power: To acquire Fox Smart for HK$136m in a part cash, debt, and shares deal. Fox Smart is engaged in the trading of LNG as well as the investment of LNG refuelling stations for vehicles and vessels in China.

*Eucon: Conditionally agreed to issue up to 5.2b shares at 1.8¢/share for an aggregate amount of $93.7m to Oriental Straits Fund III and Mr Wen Yao-Long

*Ryobi Kiso: Secured new contracts worth $26.4m, bringing total contract value secured this year to $114.7m.

*USP: Proposing to expand into trading of marine equipment and industrial machinery equipment via the acquisition of Supratechnic for $12.3m cash and $2.5m new share issuance. The proposed transaction is priced at 0.8x P/NTA

*Global Yellow Pages: Ceasing the Singapore River Water Taxis project on 31 Dec, and it's 50%-owned subsidiary Singapore River Explorer, incorporated for the project is still owing the group up to $7.15m, which it may not be able to repay amid the project closure, and could materially impact the group financials in FY6/16.

*GP Batteries Int'l: Entered into 80:20 JV with 30% owned associate, Hanoi Battery Joint Stock, with both contributing a total US$6m ($8.4m) to manufacture and sell battery products in Vietnam.

*ST Engineering: Injected US$5m into subsidiary Keystone Holdings for the expansion of its aircraft leasing business through the purchase of an Airbus A320 aircraft currently on lease to a European airline.

*A-Sonic: Acquired 51% stake in a UK-based logistics company for £0.07m ($0.15m) to serve as a gateway for its e-fulfilment logistics business to Europe and UK.

*Asiaphos: Applied to renew its mining rights at its Mianzhu Norwest Mine 1. Although seen as procedural in nature, should the application not be granted, the group’s mining output and financial performance should not be affected although its estimated resource would decrease by 2.9m tonnes.

*Rex Int'l: Divested 16.67% stake in Rexonic AG to Ogsonic AG for $1.9m, thereby reducing its stake in Rexonic to 50%.

*PS Group: Issued profit warning for FY15.

Friday, December 11, 2015


APTT: Stock in freefall since 3Q15 results release. It has declined 19.5% since 6 Nov.

While 3Q15 results were in line, investors might be punishing the counter on its high debt loads. Its net gearing as at 3Q15 is 0.93x while its interest coverage ratio stood at 2.9x.

Also worthy to note is that its Earnings per cent stood at 1.01 cents/unit while it paid out 2cents/unit.

While APTT has maintained its guidance to distribute the same amount of cash as it did in 2014, there are questions about how the trust would raise the funds given that earnings have underperformed vis-a-vis last year.

APTT has only $52.8m in cash reserves, implying the need to raise funds through debt or equity to keep up with the payout.

Counter has 3 buys, 3 hold calls with TP of 0.86.


Gold: Bullion will drop each quarter to US$950 ($1,335.72) an ounce by the end of 2016, according to OCBC.

The bearish outlook reflects an improving U.S. economy and an increase in borrowing costs to 1.5% by the end of next year after an initial rise of 25 basis points at the Federal Open Market Committee meeting on Dec. 15-16

With the improving growth sentiment and higher interest rates in the U.S., the love for yield and the love for risk-taking would dominate. Gold being a safe haven, there’s little reason to put money into assets that yield nothing.

OCBC’s prediction puts gold at the end of 2016 about 12% below prices now of US$1,075.

SG Market (11 Dec 15)

From a chart perspective, the STI is struggling near its 2,850 support with the next line of defence at 2,800. Immediate resistance is seen at 2,890 level (20-dma).

Stocks to watch:
*Strategy: Goldman Sachs is upgrading the Singapore market to “market weight” with a 12-month STI target of 3,100, highlighting that valuations for the MSCI Singapore are undemanding. The firm expects the Singapore market to register a total USD return of 7% over the next year.

*Office: Office rents could ease until 2016, with some analysts forecasting the slide to possibly continue to 2018, on back of a surge in supply in 2016. CBRE adds that the downturn in the energy and commodity sectors, as well as continued challenges in the financial sector have also impacted office space demand.

*SingPost: CEO Wolfgang Baier abruptly resigned, sparking speculation that he could have been poached by a global firm in a similar space. The key question now is how long will SingPost be able to hunt for a new CEO, given that it took one and a half years to appoint a suitable CEO the previous round. Baier will stay on for another six months to ensure a smooth handover.

*GLP: Acquired 15.5% stake in China Materials Storage and Transportation Development (CMSTD) for Rmb2b (US$311m). GLP will also set up a 49/50 JV with CMSTD which is expected to invest more than Rmb3.6b (US$562m) to develop 1.3m sqm across China. In light of the acquisition, GLP has become CMSTD's priority partner for redevelopment of the latter's existing land and facilities, and the JV has the right of first look for all future logistic land sourced by CMSTD.

*UMS: Signed MOU with All Star Fortress (ASF) to invest RM0.1m and extend US$7.5m in secured convertible loans to the latter for business development. ASF will also relocate its manufacturing operations to UMS' Penang premises.

*Tigerair: Nov operating statistics in Singapore recorded a 0.3% y/y increase in passenger traffic, with passengers carried up 3.7%, while capacity shrank 2.8%. Consequently, passenger load factor was lifted by 2.6ppt to 83.1%.

*Challenger: Despite the closure of its flagship megastore at Funan Mall, its opening of outlets across the island will help to mitigate any loss of income. Coupled with a mobile-first revamp due to start in early 2016, the company is looking to achieve top line performance of $1b in five years time.

*Vibropower: Its power plant in Shanxi, China has successfully synchronised with the state grid and is expected to contribute positively to its financial performance in FY16.

Thursday, December 10, 2015

City Dev

City Dev (S$7.20): Re-entering Australian market via Brisbane housing project

City Dev (CDL) is partnering leading Australian developers to jointly develop a prime residential land site in Brisbane’s South Bank precinct.

The 2,733sqm freehold site is located at Merivale Street, South Brisbane and will be developed into two 30-storey towers, housing a total of 472 apartments, with a gross development value of A$275m..

The project has good connectivity to Brisbane’s CBD and the future Queens Wharf integrated resort. Besides, it is also in close proximity to South Brisbane train station and major universities such as University of Queensland and Queensland University of Technology.

Among the joint developers Abacus Property and KPG Capital, Abacus and City Dev will inject equity funding of A$30m each via preferred equity interest.

Early works have commenced and pre-sales for both towers have received positive response. In addition, the project is also expected to benefit from a proposed A$5b infrastructure investment in South Brisbane.

Maybank-KE believes City Dev's current share price weakness is a reflection of the tepid Singapore office market, but the stock's low valuation is not warranted.

The counter is Maybank-KE's top sector pick, with a TP of $10.40, representing 44% potential upside, and currently trades at 0.8x P/B.


BHG Retail REIT (S$0.80): Poor public demand on unattractive yields
The Singapore Exchange’s first main board listing this year might be off to a shaky start with BHG Retail REIT’s IPO attracting just 6% more unit applications for its public tranche.

In all, only 584 subscribers applied for a total of 8.5m out of the 8m offer shares available for the public.

To provide some context, the last mainboard listing, Keppel DC REIT, saw 7,024 public subscriptions for 514.7m units in the REIT, with only 53.8m units on offer.

This could mean relatively soft demand for the float probably due to concerns of the sponsor's waiver of distribution, which artificially inflates the yield of the REIT.

The distribution waiver, lasting from 2016 to 2020, is expected to boost BHG Retail REIT’s yield from 4.5% to 6.3% in 2016. It is hoped that by then, the REIT’s shopping malls would have stable operations to support the 6.3% yield, post waiver.

Another possible reason for the lack of demand from the public could be the attractive valuations of rival trusts, CapitaLand Retail China Trust, and Mapletree Greater China Commercial Trust which have strong sponsor backing and pipeline in China

The two rival trusts are currently offering DPU yields of 7.3% and 7.6% respectively.

Nevertheless, BHG is going ahead with its PO at $0.80 per unit, with trading expected to begin at 2pm on 11 Dec.

CapitaLand Mall Trust

CapitaLand Mall Trust: (S$1.86) Unlocking space in Funan DigitaLife Mall
CapitaLand Mall Trust (CMT) will redevelop Funan DigitaLife Mall into an experiential creative hub for an undisclosed sum.

The mall located in North Bridge Road in the downtown core is expected to be shut down in 3Q16 for three years for the integrated development.

The project is expected to unlock GFA of 388,000 sf based on the site's gross plot ratio of 7.0, boosting the total gfa for the redeveloped asset to a significant 862,000.

Maybank-KE estimates that the space would be used mainly for office (75%), with the remaining for retail.

By 2019 when construction is completed, the house believes the impending oversupply of office would have passed and Singapore may be hit by a supply crunch situation given the lack of office land sales now.

Maybank-KE believes that CMT may potential recognise a fair value gain of ~$600m ($0.17/unit), and an estimated DPU uplift of 0.8¢, bringing FY19-20 DPU to ~12.8¢.

While CMT has the balance sheet capacity of $1.3b cash for the entire redevelopment by itself, it has not confirmed that.

On the back of falling prime rental rates at Orchard Road, CMT is likely to face some challenges to its malls in Downtown Core Raffles City, Jurong, and Bukit Panjang next year.

Maybank-KE still maintains its Sell rating on CMT with TP of $1.96. House cites that the present fwd yields of 5.1-5.4% are also not compelling.

SG Market (10 Dec 15)

Singapore shares face downside risks today on the unrelenting oil rout and economists cutting S’pore’s 2015 GDP growth estimate from 2.2% to 1.9% amid the ongoing manufacturing weakness and a regional slowdown. For 2016, the street is forecasting the economy to expand by 2.2%, down from 2.8% previously.

Fed watchers are now expecting a 25bps rate hike to 0.25%-0.5%, to be announced following the FOMC meeting to be held on 15-16 Dec.

Regional bourses are generally down today in Tokyo (-1.2%), Seoul (+0.1%) and Sydney (-0.7).

From a chart perspective, the STI is pinned below 2,895 (20-dma), with immediate support at the 2,850, followed by 2,800 level.

Stocks to watch:
*Property: Rental rates for both private and HDB flats continue to weaken further in Nov, with rents down 1.1% and 0.5% m/m respectively. R’ST Research cautions that with substantial private residential properties completed in 2015 and 2016, average non-landed private residential rents will likely decline by ~5% both in 2015 and 2016, which will continue to weigh down on the HDB rental market.

*DBS. Invests Rmb1.55b ($340m) for less than a 1% stake in Postal Savings Bank of China, the sixth-largest lender in China, prior to its planned 2016 IPO in Hong Kong.

*Ascendas REIT: Acquiring One@Changi City for $420m from its sponsor, based on a 5.9% net property income yield. 50% of the funding will paid via an issue of new units and the balance in cash. Reit also plans to raise $408m, comprising 90m new placement units at $2.223-2.290 each, and a pro-rata and non-renounceable preferential offering of 93.8m new units on a 3-for-80 basis.

*CapitaLand Mall Trust. To redevelop Funan DigitaLife Mall for an undisclosed amount. The project will unlock untapped GFA of 388,000 sf and will turn into an integrated development.

*SGX: "Trade with caution" alerts to be more detailed and targeted on a case-by-case basis, instead of the automatic slaps previously.

*SingTel: Teams up with GrabTaxi to offer Southeast Asian commuters a mobile wallet option to pay for their rides.

*Frasers Centrepoint: Selling its 19% stake in the JV, Gemshine Investment for $80.3m to its JV partner, a fund owned by Prudential. The JV owns the Compass Point in Sengkang. FCT is expected to record a gain of $19.6m as a result of the sale.

*Spackman: Completes the filming of Life Risking Romance, starring Korean actress Ha Ji-won, Korean actor Chun Jung-myung, and Taiwanese actor Chen Bolin. The movie is expected to be released in theatres in 1H16. The film is presented and co-produced by its 51%-owned subsidiary Novus Mediacorp and co-presented and distributed by indirect wholly-owned subsidiary Opus Pictures.

*Chaswood: Proposed placement of 23.8m new shares at 5.1¢ each to two substantial shareholders, Posh Corridor (17.5m) and Andrew Roach Reddy (6.3m). Net proceeds of $1.2m is intended for working capital.

*China Environment: Received approval-in-principle letter from Citic Bank for its application for refinancing a Rmb30m loan. Upon successful completion, the credit record of the company in the China Credit Bureau System will be back to normal status. The new loan will be guaranteed by the group's Executive Chairman Huang Min and his spouse.

*Boustead Singapore: Updated that its rival bidder, PT Enso Asia has revised its acquisition offer for a gas field in Aceh, Indonesia. PT Enso Asia is now offering a deal up to US$39.9m, which is higher than a joint offer of US$32.4m tabled by the group and its consortium partners.

*KSH: 45% owned associate to raise its stake in JV Co Sino-Singapore KAP Construction for Rmb8.3m, bringing its stake from 18% to 22.5%. Subsequently, further injection of Rmb36.9m will be made into the JV Co.

*Hengxin Technology: Won tenders for its leaky coaxial cable range worth Rmb110m in 2015, marking its maiden foray into the subway and rail infrastructure and telco sectors. Separately, it entered into a patent licensing agreement with an antenna manufacturer on a connector type.

*The Trendlines Group: Partners Boston-based private investor Saviva Capital, to jointly bid for Israeli government incubator franchise focused on agriculture and food technologies. Saviva has committed to invest $9.2m.

*Cosco Corp.: Issued profit warning for 4Q15 and FY15 due to significant inventory write-downs and provisions for impairment of trade receivables.

Wednesday, December 9, 2015


Yangzijiang (YZJ): About 50% of YZJ’s US$4.8b order book is dominated by bulk carriers which face heightened cancellation and deferral risks amidst recession in the dry bulk sector. This is expected to be weighed by contracting demand for iron ore and coal, especially in China.

CIMB believes that other than coping with lower order momentum, YZJ could also face deferrals and cancellation of the 71 units of bulk carriers on order, amounting to US$2.34b. Some customers in Japan and the US have downsized their operations and may not be able to take on delivery.

House reckons earnings will continue to deteriorate in 2016-17 on lower margin jobs, deferral of deliveries, weak order momentum and investment in lower-return investments.

CIMB maintains Hold rating with TP of $1.21.

Del Monte Pacific

Del Monte Pacific (S$0.375): 2QFY16 met full-year earnings estimate on one-off adjustment

Del Monte Pacific (DMP) 2QFY4/16 net profit spiked to US$53.3m (2QFY15: US$0.2m) on stronger revenue and a one-time favourable adjustment to its US subsidiary’s retirement plan. This helped turn around 1HFY16 and lifted earnings to US$41.3m, topping full-year consensus estimate of US$41m.

Revenue for 2QFY16 surged 20.1% y/y to US$658.3m, mainly driven by its US subsidiary, Del Monte Foods (DMF), which contributed 82% of group sales. DMF top line soared 25% after it acquired the vegetable business of Sager Creek Vegetable and overcame a tight supply issue that plagued 1QFY16.

Excluding DMF, DMP sales were flat, weighed by lower pineapple supply amid the El Nino weather pattern, which resulted in a fall in exports of packaged pineapple.

Gross margin inched up 2.4ppt to 23.3%, and operating profit skyrocketed almost 3.8x to US$96.1m, due to a one-time US$39.4m favourable adjustment to DMF’s retirement plan, which offset the entire quarter’s general and administrative expenses.

However, net gearing increased to 5.56x from 5.04x in FY15.

Management highlighted that DMF’s 2QFY16 performance reflects the fundamentals that have been restored, after the group suffered two years of losses amid acquisition and transition expenses following the announcement of the DMF takeover in Oct ’13.

The group expects DMF results to improve further as the subsidiary unlock more growth potential, accelerate penetration into the food service sector and enter new vegetable market segments.

Coupled with the group’s businesses in Asia and Middle East, which are also expected to grow, DMP forecast that it will swing back to profitable times in FY16.

In addition, DMP intends to issue US$360m worth of USD denominated perpetual preference shares in 1H16 in Philippines as part of its deleveraging plan.

After a 29% jump earlier today, Del Monte Pacific is currently trading at 12.9x FY16 consensus P/E.


Construction: Business Times reported that Singapore’s builders are entering 2016 with large debts due, alongside falling confidence and declining earnings, with data from Bloomberg showing that a record $9.6b worth of bonds were repaid this year, with $6.4b expected to mature in 2016, $2.3b in 2017 and $7.4b in 2018.

Recent SGX filings reveal that contractors Ley Choon and Swee Hong are restructuring their debt with lenders, while crane operator Tat Hong is attempting to get bondholders to ease its financial covenants for its Jul ’18 notes.

A recent quarterly survey of local firms by Singapore Commercial Credit Bureau, revealed that the construction sector emerged as one of the least optimistic industry, while separately, government statics showed that building and construction awards appear set to decline for the first time since 2012.
The situation also is not helped by some of Singapore’s biggest property developers building up their overseas land banks, as they look for newer avenues of growth in light of the lacklustre domestic property market.

Best World

Best World: Direct seller gaining traction; entry into Growth portfolio
9M15 earnings soared 219% y/y to $6.4m, exceeding FY14’s record $4.1m (+84%). This was achieved mainly from operational leverage on revenue growth of 21% to $60.7m, attributed to strong contribution from Taiwan and China, due to greater product demand from increased customer acceptance.

Best World is a multi-channel distributor which sells premium skincare, personal-care, nutritional and wellness products. It is also the only direct-selling company listed on SGX, and has presence in 10 countries across the region, supported by a sales force of 388,138 members.

The company is awaiting its direct selling licence in China, and according to management, is expected sometime between Mar 2016 and Mar 2017.

It has already gained entry into this market since 2014 via two distribution channels, export and wholesale. Management guides that products in China grew at a steady pace and saw a tipping point in 4Q14 on customer acceptance.

If the direct selling licence is obtained, management foresees a rise in profitability, stemming from a shift in sales mix and further operational leverage.

As at end-3Q15, Best World had net cash of $39.9m or $0.181/share. This represents 53% of its current market cap, underpinned by free cash flow generation of $8.7m in FY14.

Based on FY14’s payout ratio of 43.5% and trailing 12M profit, dividend yield is at a respectable 4.8% at $0.345/share. The stock is currently priced at 9x trailing P/E and 4.3x on an ex-cash basis, compared to larger peers’ average of 14.2x.

As such, we are including Best World into Market Insight Growth portfolio with an entry price of $0.345.

Capitaland Mall Trust

Capitaland Mall Trust: Nomura reiterates its Buy rating for Capitaland Mall Trust with TP of $2.20, citing that the reit provides a potential total return of 19% for FY16.

The upside is attributable to DPU growth, expected to accelerate to 3.8% in FY16, largely on account of the maiden full-year income contribution from recently-acquired Bedok Mall. The reit manager also guides that the lower supply of new retail space in 2016-17F is also likely to provide some support for retail rents.

The reit is currently trading at an undemanding yield of 5.9%.

Genting SP

Deutsche reiterated its Sell rating and TP of $0.50 on Genting as it thinks that Genting’s receivable clean up exercise poses a major downside risks to the street’s estimates. The house notes that the counter is currently trading at 15x FY16E EV/EBITDA and 53x PE on its forecast. As such, it might still be too early to bottom fish particularly as no near term positive catalyst is in sight.

SG Market (09 Dec 15)

Singapore Market: Sentiment in Singapore is likely to be dampened from the continued rout in crude oil and growth slowdown in China.

China CPI data for Nov is expected to be released at 9.30am.

Regional bourses are mixed today in Tokyo (-0.3%), Seoul (+0.2%) and Sydney (flat).

From a chart perspective, the STI sees immediate resistance at the 2,900 region, with downside support at 2,855.

Stocks to watch:
*Construction: Builders enter 2016 with wall of debt coming due, falling confidence and declining earnings. Contractors Ley Choon and Swee Hong are restructuring their debt with lenders, while Tat Hong is requesting for financial covenants for its notes to be eased.

*Best World: Maybank-KE issued an unrated note on the company, citing that the direct seller is gaining traction in Taiwan and China. 9M15 earnings of $6.4m (+219% y/y) has exceeded FY14's record $4.1m, attributed to operational leverage due to greater product demand from increased customer acceptance.

*Keong Hong: Acquired property in Osaka, Japan, for ¥938m ($10.6m). The 344.7 sqm site comprises a 9-storey commercial building with a net rentable area of 1,686.2 sqm, which is 92.8% tenanted. Post-acquisition, proforma EPS is expected to rise 1.3% to 16.69¢.

*Sembcorp Industries: Commenced operations of its 40% owned Fujairah 1 water and power plant in the UAE. The US$200m expansion boosted the plant's capacity by 30%.

*Zagro Asia: Rumakita Investments disclosed it does not intend to raise its cash offer price of $0.30/share for its voluntary delisting proposal.

*Charisma Energy: Issued 200m new shares to Patrick Tan Choon Hock to raise $2.3m. Funds will be used to invest in renewable energy projects and working capital.

*A-Sonic Aerospace: Established a 33:67 JV with China Merchants to engage in air logistics, cargo handling support, and ground services in China and Hong Kong. The company will inject an initial investment of HK$3.3m into the JV co.

*HLH: Acquired 30% interest in two plots of lands, spanning 4,295sqm and 5,427sqm respectively, in Cambodia, for property development. The total purchase price of US$2.8m will be funded via a mix of internal funds and borrowings.