SG Market (09 May 16)

SG Market: Market is expected to stabilise after several index constituents went ex-date last week, damping the performance of the STI. Oil-related counters may see some near-term volatility the wake the Canadian wildfire disrupting supplies and shake-up in Saudi Arabia’s oil ministry.

Regional bourses opened mixed in Tokyo (+1%), Seoul (-0.2%) and Sydney (+0.3%).

From a chart perspective, immediate support for the oversold index is at 2,710, with upside resistance at 2,805.

Stocks to watch:
*China Merchants Pacific: Received conditional privatization offer at $1.02/share (1.07x P/B) or 22.9% premium over last close from parent China Merchants Group which holds 75.88% stake.

*NOL: 1Q16 net loss widened to US$105.1m from US$36.2m a year ago despite lower bunker costs and cost efficiencies. Liner revenue shrank to US$1.1b (-28% y/y) on weaker shipment volume (-6%) and freight rates (-23%). NAV/share at US$0.92.

*OUE Hospitality Trust: 1Q results missed estimates; DPU of 1.10¢ (-31.7% y/y) was dragged by a rights-enlarged unit base. Otherwise, it would have declined 8.7% due to higher financing costs (+52%). Revenue and NPI rose to $30.1m (+2.8%) and $26.3m (+2.2%), as better operating performance in the hospitality business helped offset a weaker retail segment amid lower occupancy of 88% (-6ppt q/q) due to fit out periods for new tenants. Aggregate leverage was 42.2% (37.9% post rights in Apr '16), with average finance cost of 2.8% and debt tenor of 2.2 years. NAV/unit at $0.89.

*Frasers Hospitality Trust: Proposed acquisition of Maritim Hotel Dresden in Germany for €63m ($97.6m). The freehold, 328-room hotel is located in the historical city centre of Dresden, which sits next to the State Parliament building and within the vicinity of major tourist attractions. Pro forma FY15 DPS and NAV/unit are expected to rise to 7.63¢ (+0.9%) and $0.9297 (+7.7%), respectively.

*Wing Tai: 3QFY16 net profit is $2.1m (-27% y/y), bringing 9M earnings to $5.2m (-85% y/y). 9MFY16 revenue fell 12% to $403.8m on lower progressive sales, while bottom line was dragged by the absence of a $21m divestment gain, but partially offset by higher contribution from associate Wing Tai Properties HK. NAV/share at $4.08.

*Sarine: 1Q16 net profit trailed estimates despite soaring 240% y/y to US$3m. Revenue of US$15.5m (+27.4%) was buoyed by sales in India (+38.6%) and Israel (+29.5%), with 18 Galaxy systems delivered (4Q15: 13). Gross margin expanded to 67.6% (+1.7 ppt y/y) on the absence of amortisation cost. NAV/share at US21.55¢.

*Vard: Notified that Harkand Group has entered into administration. The client has one diving support and construction vessel in advanced stages of construction for delivery in 2Q16 and 20% of the contract price has already been received.

*Cosco Corp: Swung to 1Q16 net loss of $14.4m (1Q15: $0.8m profit), on a spike in interest expenses and adverse FX impact. Revenue slid to $722.3m (-27%) owing to pressure in shipyard (-27%) and dry bulk shipping (-45%) segments, while gross margin widened to 12.4% (+5ppt) on the shift in sales mix. Net gearing deteriorated to 3.9x (FY15: 3.7x) as operating cash flow worsened 84% q/q to negative $184m. NAV/share at $0.3471.

*Cosco Corp: Secured contract for two crude oil tankers for an undisclosed sum, scheduled for delivery in 1Q18 and 2Q18, respectively. The European buyer has been given the option to purchase another two units before Nov '16.

*Vallianz: 1Q16 net profit slipped 1.6% y/y to US$4.9m weighed by losses from JVs and associates of US$0.2m (1Q15: US$1m profit). Revenue fell 18.8% to US$49.3m due to the absence of ship management projects in S.America and lower charter rates. Gross margin widened to 29.3% (+2.9ppt), while operating profit was supported by positive cost control measures. NAV/share at US6.96¢.

*Vallianz: Secured a 7-year time charter contract worth up to US$63m to supply two OSVs to a Middle East national oil company. This boosts chartering services order book to US$950m with charters stretching up to 2024.

*CWT: In response to a trading query, group disclosed it has been approached by various parties interested in its business and assets, and is still in the process of reviewing the proposals.

*mm2 Asia: Supplemental term sheet entered for the proposed acquisition of Mega Cinemas in Malaysia. The RM22m (7.5x P/B) acquisition for three cinemas with an aggregate 13 screens and 2,712 seats is in line with the group’s intention to diversify into the downstream value chain of film production. Funding will be via cash (RM13m) and new shares (RM9m) at $0.6351 apiece.

*Profit warning:
*Parkson Retail Asia
*Goodland Group
*A-Sonic Aerospace
*Ausgroup
*PSL
*CEFC International