SG Market (16 May 16)

SG Market: Sentiment may be spooked by poor corporate earnings, as well as disappointing Chinese economic data (loans, industrial production), which could raise doubts that the economy is stabilising.

Regional bourses are mainly positive in Tokyo (+0.8%), Seoul (-0.1%) and Sydney (+0.5%).

From a chart perspective, topside for STI remains at 2,805, with underlying support at 2,710.

Stocks to watch:
*Genting SP. Dismal 1Q16 net profit of $10.8m (-83%), crushed by a 9% fall in overall GGR, record bad debt provision and FX loss. Adjusted EBITDA fell 16% to $192.5m, but was a slight 6% improvement over 4Q15. VIP gaming business remains difficult but the mass market segment and non-gaming attractions started 2016 on an encouraging note. MKE maintains Hold with TP of $0.78.

*Golden Agri: 1Q16 core net profit of US$40.4m (+65.4%) represented 19% of FY16 street estimate. Revenue slipped to US$1.49b (-3.8%) from softer CPO prices, but EBITDA margin widened to 9.5% (+1.3ppt) on improved crushing margin. Headline net profit of US$94.1m (1Q15: US$3.2m loss) was bolstered by FX gains (US$51.9m), tax credit (US$14.5m) and JV contributions (US$3.5m). NAV/share at US$0.30.

*Q&M: 1Q16 net profit jumped 28% to $3.7m, meeting estimates, as revenue of $34.4m (+18.6%) was underpinned by existing and new dental outlets in Singapore, and contribution from dental clinics in China, partially offset by reduced dental equipment and supplies distribution sales (-5%) and Aidite (-16%) due to a shift in factory location. Gross margin expanded to 86.2% (+2.8ppt), benefitting from more profitable dental supplies manufacturing. MKE maintains Buy rating with TP of $0.88.

*Jumbo: 2QFY16 beat estimate; net profit leapt 49.4% to $5.8m (+49.4%), on higher revenue of $39.6m (+18.5%), thanks to contributions from all three Shanghai outlets in China and increased sales in Singapore restaurants on the back of more Chinese tourist arrivals. Gross margin slipped to 60.4% (-3.5ppt). MKE maintains Buy and raised TP of $0.62 (from $0.58).

*Thai Bev: 1Q16 net profit surged 30% to Bt8.6b, bolstered by lower finance costs (-35%) and increased associates' profit (+25%). Revenue jumped 21% to Bt55.2b on broad-based growth in beer (+71%), spirits (+5%), and non-alcoholic beverage (+13%) segments, while EBITDA margin widened to 19.3% (+0.5ppt) from reduced losses in non-alcoholic, a favourable product mix and lower packaging costs.

*China Everbright Water: 1Q16 net profit crept up 2% to HK$103.1m, boosted by a VAT refund of HK$29.3m. Revenue jumped 51% to HK$657.2m, on increased construction income from the expansion and upgrading of several BOT projects. Gross margin contracted to 36% (1Q15: 50%) due to the shift in business mix. NAV/share at HK$2.75.

*Midas: 1Q16 net profit of Rmb10m (-8.6%) made up just 9% of full year street estimate, as revenue slipped 5.3% to Rmb303.5m from lower sales in aluminimum alloy extruded products. Gross margin expanded to 31% (+2.2ppt) but associate contribution from NPRT plunged 72.2% to Rmb2.6m. Management remains buoyant on industry tailwinds.

*Halcyon Agri: 1Q16 swung into red with net loss of US$6.6m (1Q15: US1.2m profit), mainly dragged by FX loss of US$6.3m (1Q15: US$2.4m gain) from the strengthening SGD against USD. Revenue tumbled 12.1% to US$183.2m due to lower selling prices of natural rubber of US$1,220/tonne (-21.4%), partly offset by higher sales volume (+12%) on increased utilisation. Gross margin slipped to 6.6% (-0.2ppt). NAV/share at $0.287.

*Perennial Real Estate: 1Q16 net profit of $8.5m (+148%) was boosted by a fair value gain of $7.5m. Otherwise, earnings slumped 71.6% on a spike in admin expenses (+97%) due to a $1.9m write-off of intangible asset. Revenue grew 9% to $29.5m from increased project management fees and new contribution from Perennial Qingyang Mall in Chengdu. NAV/share at $1.688.

*Wheelock: 1Q16 net profit slipped 9.1% to $11.1m, in tandem with the 7.5% decline in revenue to $91.8m on the absence of dividend income and lower sales recognition from residential project, The Panorama and reduced rental income from Scotts Square Retail. Gross margin narrowed to 16.9% (-3.1ppt) on a shift in sales mix. NAV/share at $2.53.

*CWT: Entered exclusive negotiations with HNA Group on a potential transaction. Market watchers estimated that the deal could be valued at US$1b ($1.36b), which would imply a share price of $2.27.

*Oxley: Disclosed plans to enter the Australian market and is currently looking at Sydney’s Bays Precinct and the fish market site at Pyrmont as a potential redevelopment site. Identified Brookfield Multiplex as a potential local partner.

*Tat Hong: Updated that it is still in discussions on the potential buyout, since its initial announcement on 15 Mar.

*Civmec: 3QFY16 net profit slumped 53.9% to $4.8m, on lower revenue of $73m (-17%), as projects continued to wind down to completion and a 10% decline in the AUDSGD. Gross margin slid to 9.6% (-3.3ppt), while earnings was partially supported by a $2m JV contribution from the Sedgman Civmec (3Q15: nil). NAV/share at $0.329.

*Marco Polo Marine: Dismal 2QFY16; turned into net loss of $1.1m (2QFY15: $3.8m profit), as revenue crashed 60% to $11.9m, dragged by reduced fleet utilisation and charter rates amid weak demand for commodity shipments. Gross margin spiked to 34.4% (+11.5%) on a shift in sales mix. Guides for challenging conditions to persist. NAV/share at $0.518.

*Swiber: 1Q16 net loss deepened to US$2.6m (-2.4%) mainly on FX loss of US$2.8m, lower associate/JV contributions and higher taxes. Revenue improved to US$191.3m (+16%) from increased number of projects in South Asia, while gross margin expanded to 15.5% (+3.7ppt) on cost controls and reduced procurement and subcontract costs. NAV/share at US$1.056.

*Mermaid Maritime: 1Q16 results turned around to US$1.3m, lifted by cost cuts and a reversal of bonus accrued. Revenue slid 35% to US$39.6m due to fewer cable lay projects and zero contribution from drilling due to rigs cold stacking. NAV/share at US$0.23.

*Otto Marine: 1Q16 turned into net profit of US$0.1m (1Q15: US$13.3m loss), thanks to higher gross margin of 20.6% (1Q15: 1.3%) on a shift in sales mix. Revenue slumped to US$94.9m (-35.9%) from smaller sale of vessel and lower fabrication sales, partly offset by higher utilisation in chartering. NAV/share at US$0.9772.

*Vard: Signed LOI to design and construct two expedition cruise vessels for an international cruise company, with the intention to be entered into in 3Q16.

*Atlantic Navigation: Secured US$236m worth of charters for 10 vessels with a Middle Eastern National Oil Company for five years and a two year extension.

*Dukang Distillers: 3QFY16 results swung to net loss of Rmb2.7m (3QY15: Rmb1.8m profit), despite higher revenue of Rmb278.9m (+11%) from new products launch. Gross margin widened 4.6ppt to 33.6% on changes in product mix, but bottom line was eroded by intensified advertising and promotional activities to improve awareness of products. NAV/share at Rmb17.97.

*Sunpower: Granted a 30-year concession agreement with the Hebei Gaoyang authorities to build, operate, and transfer a centralised steam and electricity facility with low carbon emissions.

*Darco Water: Secured contracts worth $11.5m to treat complex wastewaters in China and Malaysia, expected to have a positive impact on FY16 financials.

*Profit warning:
- Tat Hong
- CSC Holdings