Thursday, June 30, 2016


GLP: Continued leasing activity in Japan
- On the new leases in GLP's Japanese facilities earlier this week, OCBC understands that two of these customers are new.
- The active leasing seen in the mature Japanese market is a positive for the group, and house continues to see long-term value in GLP’s shares at current levels.
- OCBC maintains BUY with an unchanged TP of $2.37.

Keppel DC

Keppel DC: CLSA initiate coverage with Buy and TP of $1.29
-72% exposure to Asia Pac datacentres seens as most direct play to ride on Asia data boom
-organically, rental step-up and development assets expected to support 3-year DPU CAGR of 4%
-Inorganically, Keppel DC is expected to double asset based to $2b by 2018 through acquisitions
-CLSA noted key risk stem from higher-than-expected capex given high fit-out costs
-House believes mgmt guidance for annual capex equivalent to 3.8% of revenue is sufficient
-Currently trading at forward yield of 6.4%, more than double the yield of US DC REITs

SG Market (30 Jun 16)

SG Market: The market could march higher on positive momentum after Wall Street scored another day of big gains on the oil price upswing and waning Brexit fears.

Regional bourses in Tokyo (+1.3%), Seoul (+0.3%), and Sydney (+1.4%) opened stronger.

From a chart perspective, STI is pushing against a bunch of resistance at the 2,790-2,820 range.

Stocks to watch:
*Economy: Moody's has shaved Singapore's 2016 GDP growth forecast to 1.6% from 1.8% on lacklustre global trade and its close economic ties to China's stuttering economy. In addition, a slowdown in retail and lowered private sector consumption are dragging overall growth.

*OCBC: 87.6% owned Great Eastern's capital adequacy ratio is expected to suffer in the short term due to the prolonged volatility in the equity markets, further exacerbated by UK's decision to leave the EU.

*UOB: Suspends its London property loans in the wake of the Brexit vote, which raised concerns over UK property values after the pound plunged.

*Civmec: Secured several new contracts worth A$50m for major infrastructure projects across New South Wales, Australia, including the supply of precast and site concrete works for Sydney's Northwest Rail Link.

*Second Chance: 3QFY16 net profit slumped 29% y/y to $6.8m, due to an absence of disposal gains from financial assets (3QFY15: $2.5m). Revenue slipped 8.9% to $26.9m, dragged by apparel (-22%), properties (-6.5%), and securities (-17.7%), but partially mitigated by the gold segment (+2.7%). Gross margin contracted 2.3ppt to 54.8% on the change in sales mix. NAV/share stood at $0.337.

*Geo Energy: Divesting its mining and coal haulage services business to PT Autumn Bara Sejahtera for US$10m and expects to book a disposal gain of US$2.8m. The disposal is estimated to generate annual cost-savings of US$10.8m.

*Vibrant: Proposed to dispose its entire 31% stake in office property at 139 Cecil Street for $75m.

*LHN: 50:50 JVCo has exercised an option to purchase a car park property at Golden Mile Tower for $26m.

*China Merchants Pacific: Exit offer of $1.02/share has been declared unconditional, after the offeror received valid acceptances of 96.9% of the maximum potential issued share capital. Closing date for the offer is on 11 Jul.

*Eu Yan Sang: Privatisation offer of $0.60/share has turned unconditional, after the offeror has obtained 63.2% of total issued shares. Closing date of the offer is extended to 18 Jul.

*MGCCT: CFO Jean Low Su-Im will step down on 19 Aug; Lawrence Ng Tzu Ann, VP of Finance will cover her role until a new permanent CFO is appointed.

Wednesday, June 29, 2016

Del Monte

Del Monte: ($0.355) Strong 4QFY16 backed by solid Asia performance
- Del Monte swung to 4QFY16 headline net profit of US$19.2m from a net loss of US$4.2m a year ago, bringing full year earnings to US$51.5m (FY15: US$43.2m loss), beating street estimates.
- Stripping out one-off gains, 4QFY16 core net profit was US$10.8m (4QFY15: US$0.8 loss), on the back of strong results across Asia.
- 4QFY16 revenue slid 2.8% to US$520.1m, as lower sales in the US (-7%) was partially offset by stronger performance in the Philippines (+6%, +12% local currency), and S&W brand (+8%) in the rest of Asia.
-Trading at 8.1x consensus FY17e P/E
- Street has 3 Buy and 1 Hold ratings with mean TP of $0.53


SATS: Cloudy outlook on the horizon
- In 4QFY16, growth in meal production was offset by declining ASPs. UBS expects this trend to continue in FY17.
- Passenger seat capacity data at Changi Airport points to slower meal production growth, and the house expects declining airline passenger yields to put further downward pressure on ASPs.
- UBS thinks it will be difficult for SATS' earnings to surprise on the upside in FY17, as Singapore aviation catering accounts for 40-50% of group net profit.


SGX: What will drive a rerating?
- UBS believes SGX provides a good long term story, backed by its monopoly in Singapore.
- However, the house remains sceptical about the prospect of meaningfully higher velocity at SGX in the near future.
- Whether derivatives could provide a re-rating remains elusive.
- UBS has upgraded its rating for SGX to Neutral from Sell, with TP of $7.30.


ComfortDelGro (CDG): OCBC believes earnings to remain resilient despite Brexit
- GBP depreciated 9.3% against the SGD. Based on CDG’s FY15/1Q16 exposure to UK/Ireland, impact to CDG’s total operating profit will be limited to 1.7%-2.1%.
- On the other area of concern- threat from private hire car services, CDG’s taxi hire-out rate was maintained at ~100%.
- OCBC cites that CDG’s earnings will continue to be resilient as long as hire-out rate sustain at ~100%.
- At the current price levels, OCBC thinks market has overpriced-in the potential impacts from both Brexit and threat of private hire car services.

Ascott REIT

Ascott REIT: CIMB takes a deeper look, and reinforces its non-consensus Hold call.
-The good is that serviced residence is a resilient accommodation model, and provides stable income for unit holders through master leases and management contracts with guaranteed income
-The bad is that DPU has not moved in lock-step with asset expansion due to gearing.
-The ugly is that exposure to UK and Europe could cause overhang on the stock.
-The house has Hold call with higher TP of $1.16 from $1.14.

mm2 Asia

mm2 Asia: Upstart's ambitions signal strong growth potential​
- mm2 is a service provider in the huge US$14.1b Asian film industry.
- The company boasts non-speculative revenue streams with production revenue (57% of FY16 revenue) being almost guaranteed once filming begins
- As it expands in the Greater China region, look out for larger production budgets (larger fees)
- Film production order book from Apr '16 to Sep '17 will see it produce 18 films in the GChina region or slightly under half of its total order book
- FY17 production titles: 20 vs FY16's 14


GuocoLand: (S$1.82) Emerged top bidder for upmarket residential site
- Placed the top bid of $595.1m, or $1,239 psf ppr, for a District 9 site
- 171,535 sf land parcel has a plot ratio of 2.8 that can yield a maximum gfa of 480,306 sf or ~450 housing units and potential GDV of $1.06b.
- We view the bid as a risky move as the group takes an ouright view that demand will return to the high end residential segment, or perhaps the cooling measures may be removed, when the project is ready for launch.
- GuocoLand is now trading at a 33.6% discount to its RNAV of $2.74.

SG Market (29 Jun 16)

SG Market: Rebounding global markets following the heavy Brexit sell-offs and higher oil prices could bring some respite to risk assets but we remain advocates of safe havens and favour telecos, consumer and yield plays.

Regional bourses opened positive in Tokyo (+1%), Seoul (+0.6%) and Sydney (+0.6%).

From a chart perspective, the STI faces immediate resistance at 2,785, with support at 2,710.

Stocks to watch:
*SGX: Extended the deadline for exclusive talks over its proposed acquisition of London-based Baltic Exchange for another two months till 31 Aug '16.

*GuocoLand: Submitted top bid of $595.1m ($1,239 psf ppr), beating 12 others, for a 99-year leasehold site in upmarket River Valley district under the confirmed list of Government Land Sales programme . The 171,535 sf land parcel has a plot ratio of 2.8 that can yield a maximum gfa of 480,306 sf or ~450 husing units and potential gross development value of $1.06b.

*Mapletree Logistics Trust (MLT): Acquired its fifth logistics facility in Shah Alam, Malaysia, for MYR160m, or a projected NPI yield of 7.5%. Post deal, MLT's aggregate leverage ratio will rise to 36.6%.

*REITs: Indon-centric REITs such as First REIT, and Lippo Malls Indonesia Retail Trust could be buoyed by the passing of Indonesia's tax amnesty bill, which will be a boon for the rupiah and fiscal budget.

*CNMC Goldmine: Acquiring a 51% stake in brownfield Pulai Mining for RM13.8m. The entity holds an exploration and mining concession spanning 3,8.4 sq km in Kelantan, Malaysia that is almost four times the size of its Sokor goldfield project. Between Mar ’11 to May ’13, the mine produced 9,171 oz of gold, compared to CNMC’s 1Q16 gold production of 7,271 oz.

*Sembcorp Marine: Acquired 50% stake in a process design and engineering group for NOK20m (5.6x P/B).

*Q&M Dental: Terminated the proposed 60% acquisition in Smilebay Dental Clinics in Penang, Malaysia, following the expiry of the points of agreement.

*Sim Lian: Launching the 504-unit executive condominium Treasure Crest in Jul. Units in the 99-year leasehold development is priced at between $735 and $755 psf. The project is expected to obtain TOP by 2019.

*China Merchants Pacific: Offeror has received valid acceptances for 96.8% of the maximum potential issued share capital. Closing date for the offer will be on 11 Jul.

*DeClout: Lodged the preliminary prospectus for the proposed listing of its subsidiary, tech equipment provider Procurri, on SGX Main Board.

*Polaris: Indonesian associate Trikomsel defaulted on its $100m 7.875% senior fixed rate notes after failing to repay a coupon in Nov '15.

*Yuexiu Property: Secured loan facilities of up to Rmb400m for a 12 month term, adding to its debt load of Rmb38.2b (net gearing of 73.1%). However, liquidity profile is improving due to its property sales.

Tuesday, June 28, 2016


SATS: Daiwa initiating coverage
- Leveraging on the planned expansion of Changi Airport
- Major share-price catalyst: margin improvement through automation
- Initiating with Outperform (2) rating and target price of SGD4.66


Super: CIMB says to enter for long term
- Strategy of branding, innovation and diversification already paying dividends.
- New products and markets will drive the branded consumer segment, which is recovering nicely and has now turned positive on a constant currency basis.
- Excess cash on the balance sheet could translate to a special dividend.
- EPS hikes come from lower tax rates; consensus has yet to account for this.
- Recent share price weakness offers good entry point. Upgrade from Reduce to Add. TP increased to $0.93 from $0.89


CityNeon: CIMB attended Avengers exhibit in Las Vegas
- Well-attended official opening of The Avengers exhibit in Las Vegas on 22 Jun.
- VHE aims to attract 1-1.5% of total visitors to Las Vegas, which is possible given its 1) strategic location, 2) focus on families, and 3) strong movie franchise appeal.
- Beneficiary of a growing “experience” economy.
- Increases FY16-18 EPS estimates by 4-21% and raise TP to S$1.09, now pegged to 15.5x CY17 P/E. Maintain Add. Near-term catalysts include winning of 3rd IP and stronger uptake of travelling sets.

SG Market (28 Jun 16)

SG Market: Brexit uncertainty and FX volatility will likely continue to stifle risk assets, with shift towards safe havens such as telecoms, REITs and yield plays.

Regional bourses opened lower in Tokyo (-1.7%), Seoul (-0.5%) and Sydney (-1.3%).

From a chart perspective, STI tested and bounced off its 2,710 support yesterday. If crossed below that today, the index may extend its downside towards the next support at 2,670. Immediate resistance is at 2,785.

Stocks to watch:
*Top Glove: Secondary listing on SGX at $1.585/share, or 15.5x forward P/E, could boost trading interests in other glovemakers such as Riverstone and UG Healthcare, which trades at 12.5x and 16.3x, respectively.

*Vard: Terminating a shipbuilding contract for one offshore construction and anchor handling vessel, originally scheduled for delivery in 1Q16, with distressed Norwegian firm Rem Offshore. In return, Vard will receive 4% of shares in Rem post-restructuring.

*Sheng Siong: MKE reinitiating coverage on counter with a Buy and TP of $1.12. Supermarket chain has outperformed market by 7% over the last 3 months, implying defensive qualities. Key catalysts incl: supply chain strength, resumption of same store sales growth & new store openings.

*XMH: 4Q16 net profit surged to $3.2m (4Q15: $0.6m), mainly boosted by FX gains of $2.8m (4Q15: nil). Revenue jumped 36.1% to $31.9m from improved sales in projects and distribution segments, while gross margin narrowed to 22.8% (-10.9ppt) from the intense competition. For FY16, earnings gained 45% to $7.9m. Group disclosed a higher final DPS of 2¢ (FY15: 0.8¢). NAV/share at $0.6243.

*Oxley: Disclosed its exposure to UK, consisting 1) a 363,000 sqm waterfront township development Royal Wharf, 2) 20% stakeholding in leading UK property developer Galliard, as well as 3) an undeveloped plot of land at Deanston Wharf. Group disclosed it has a natural hedge on currency fluctuation as cost of construction and bank loans are settled in pounds, and the cheaper currency has generated more enquiries from overseas potential buyers the past week. Group is of the view that business outlook for its Ireland project is expected to improve.

*GLP: Signed a new lease to provide 1.6m sf of logistics facilities to ASKUL, a leading e-commerce player and one of the group's top client in Japan. It also signed another three leases for a total of 0.7m sf of facilities in Japan, of which two are with new customers.

*Yangzijiang: Investing Rmb1b for a 11.6% stake in an investment holding JV with three other non-state-owned enterprises in Jiangsu province. The JVCo will support the transformation and consolidation process for enterprises in Jiangsu through financial assistances in exchange for investment returns.

*China Merchants Pacific: Exit offer of $1.02 has been declared unconditional, after the offeror received valid acceptances of 96.6% of the maximum potential issued share capital. Closing date for the offer has been extended to 11 Jul.

*Noble: The embattled commodity trader goes ex-rights (1-for-1 rights issue at $0.11) today. Theoretical-ex price is $0.1625.
*Ryobi Kiso: Clinched $56.7m worth of foundation and geoservices contracts, bringing year-to-date new contracts to $90m. Order book as at 31 Mar stood at $127.9m.

*QT Vascular: Received FDA’s clearance for the use of its Chocolate XD catheter in the US.

*San Teh: Disposed 45% owned associate, Dali San Teh Construction & Installation Engineering, for Rmb5.17m ($1.11m).

*Lereno Bio-Chem: Terminated a proposed RTO worth RM70m ($23.3m) with Majubana Projects. It has been a cash company since Nov ’15 and will have till Nov ’16 to find another suitable deal.

*Ziwo: Acquiring 60% stake in Longrunn International Incheon for $2.4m through the issuance of 152.1m shares. Longrunn is a real estate consultant and project manager for 700,000 sqm worth of land in South Korea.

Monday, June 27, 2016


O&M: Cold headwinds from Brexit buffeting oil companies
- Oil prices were not spared after the UK voted for Brexit with WTI collapsing about 5% to US$47.56/bbl
- With economic uncertainties weighing down on oil prices, the already weak demand for offshore and marine services (O&M) could be further pressured.
- With offshore investments likely to be low for the medium term, we believe that investors who are looking for contrarian buys should look to US-based oil majors instead of the domestic O&M names.
- Maybank-KE last had a Negative rating on the O&M sector.
- The house reiterates its Sell ratings on Sembcorp Marine (TP: $1) and Keppel Corp (TP: $4.42).

Keppel DC

Keppel DC - Deutsche sees minimal impact from Brexit vote
-Keppel DC holds a single asset, GV7 data centre in London - generates c.7.2% of NPI
-the REIT has hedged FX exposure up to 2H17 as at 1Q. this should reduce FX impact on income
-With a triple net lease through 2027, occupancy risk at the GV7 data centre is minimal
-Keppel DC also largely matched its UK and Euro assets with debts in respective currencies, yielding a natural balance sheet hedge
-the house maintains its Buy rating and TP of $1.15
-this is also in line with Maybank KE's defensive strategy post Brexit

SG Market (27 Jun 16)

SG Market: Volatility is expected to rule the day following the Brexit shockwave, which will likely precipitate weaker growth in Europe and years of uncertainty. Short term, possible central bank action may shore up sentiment.

Regional bourses opened mixed today in Tokyo (+1.7%), Seoul (-0.5%) and Sydney (-0.1%).

From a chart perspective, immediate support for the STI is seen at 2,710, with topside resistance at 2,810.

Stocks to watch:
*Strategy: Singapore's direct exposure to UK is limited but the indirect impact from EU and its repercussions on the global economy present far greater risks. Prefer defensive yields, telecoms and companies with USD revenues to growth-oriented plays.

*City Dev: Assured that its UK development projects cater to local demand, which will help to insulate its projects from the potential impact of UK's impending exit from EU. Subsidiary M&C Hotels sees medium-term uncertainty. Group exposure to UK is 12%/11%/12% in terms of revenue/asset/debt.

*PACC Offshore: Clinched a contract by Technip Oceania to support Shell's Prelude FLNG facility, with its 750-pax semi-submersible accommodation vessel, POSH Arcadia. MKE last had a Buy with TP of $0.42.

*Anchor Resources: Proposed acquisition of loss-making granite quarry in Terengganu, Malaysia, for $100m, which will result in a RTO transaction. Funding will be via a placement of 30.8m new shares at $0.104 apiece. Pro forma FY15 NTA/share is expected to fall from 1.24¢ to 1.05¢.

*China Environmental Resources: Entered MOU for a possible JV in a specialist sports car manufacturer. The group also intends to be the manufacturer's sole distributor in Asia.

*Federal Int'l: Disclosed that it will go on its first roadshow in China and expects to meet over 100 fund managers.

*Ace Achieve: FY15 net profit jumped 16% to Rmb15.2m, buttressed up by write-backs of Rmb3.8m. Revenue inched up 1% to Rmb237.6m on stronger business support solutions (+27%), and maintenance and servicing (+53%), offset by a decline in ICT system integration (-16%). Gross margin narrowed to 21% (-5ppt) on a change in sales mix, while bottom line was supported by lower operating (-23%) and financing (-28%) expenses. NAV at Rmb0.23.

Friday, June 24, 2016

UK Referendum

UK Referendum: Britain Got Balls!
With all the results of the UK referendum already in, it is clear that the Brexit camp has won a decisive victory wth a 51.89% majority to go alone outside the European Union.

Now begins the painful task of divorce, So, what is in store for Britain, EU and the international community?

Most economists, the UK government, leading international institutions, and major businesses and research houses, believe the economic costs to Britain, if it leaves the EU, will be very heavily negative.

Britain has signed more than 13,000 treaties and international conventions. What will happen to these? Few in the Leave campaign are unaware that immigration is the main reason why UK has one of the most favorable demographic outlook in Europe.

The uncertainty that global markets confront has many dimensions. It is important to note, that the referendum is merely advisory – the UK parliament would have to vote to withdraw from the EU. It is not certain that the House of Commons will agree to start exit negotiations with the EU.

A further political uncertainty involves Scotland. 60% of Scottish voters overwhelmingly voted to stay in the EU. This could prompt the Scots to hold another referendum to split from the UK.

The decision to leave would force PM David Cameron to notify Brussels that Britain wishes to enter discussions and thus begin a two-year negotiation on the terms of the exit. Some have suggested that Britain need not exit but roll iback common EU laws and seek informal talks on new trade agreements instead. The EU would very likely strongly oppose such an approach.

Should Britain vote to leave, it would be excluded from the European Council. But European treaties would continue to apply in the UK, which means common EU laws would still be in effect. The UK’s future trade relations with both the EU and the rest of the world would be thrown into uncertainty, thus affecting global markets.

Negotiations with the EU would very likely be difficult as the EU would not wish to make it an attractive option for other member countries. The EU accounts for 43% of the UK’s exports. Yet the UK could not realistically expect a deal that gives it continued full access to the single market without EU rules.

One possibility would be for the UK to seek a position similar to Norway’s in the European Economic Area. That would keep the UK in the single market, but exports would be subject to costly checks for country of origin. The UK would have to make large payments into the EU budget that could be close to its present contribtuions and would have to continue to accept almost all of the EU’s regulations while having no say.

Alternatively, Britain could seek a bilateral treaty with the EU similar to what Switzerland has. But these do not include most financial services, and EU accounts for 40% of the UK’s financial exports.

Finally, the UK could fall back on its membership in the WTO. That would mean tariffs on UK exports to the EU and no free access for services, which account for 80% of the UK’s GDP and 45% of its global exports. Moreover, the UK then would have to negotiate with each of the 53 countries that have free-trade agreements with the EU.

Along with the uncertainties about the UK’s future trade relations, markets are concerned about implications for investment and the banking sector. Withdrawal from the EU would likely have a negative effect on the attraction of the UK for foreign direct investment, both because of reduced access to EU markets and an increase in uncertainty.

The banking sectors in both the UK and Europe would be hit. Banks would face a prolonged period of regulatory uncertainty. Earnings would suffer from weaker economic growth. Banks in London doing cross-border investments and euro transactions may feel compelled to move to EU financial hubs.

Investors must also be concerned about further risks that relate to the Brexit referendum. Its exit could be the beginning of an unraveling of the EU should other nations decide to withdraw, too. An EU deprived of its second-largest economy will also be weaker economically and less likely to follow liberal, market-friendly policies and would diminish the standing of both Britain and Europe.

Markets do not like uncertainty. A vote to leave would very likely precipitate a recession in the UK, weaker growth in Europe, and years of uncertainty for UK and European markets, with high volatility.

Brexit impacts on HK

UK votes to leave EU, impacts on HK listed companies (courtesy from HK research team)

HSBC (5) – approximately 25-30% revenue from UK/Europe
Standard Chartered (2888) – approximately 6% revenue from UK/Europe
Textile companies – 15-20% exports are to EU and sales dominated in Euro

Yashili (1230) – 50% of raw milk cost of sales in Euro
Brilliance China (1114) – Certain components are imported from EU

Brexit Strategy

Strategy: What to buy on Brexit.

Taking cue from MKE's FX desk,
- Safe haven proxies like CHF, JPY, USD and gold will surge
- Oil prices would come under pressure...-15%

- Stronger USD
Stocks (under MKE's coverage) that benefit include Venture, Innovalues, ST Engineering, SIAEC, Riverstone, and UG Healthcare.

- Stronger spot gold price
Beneficiaries include gold ETF (GLD US$), miners (CNMC Goldmine & Anchor Resources)

- Lower oil prices
Negative for all oil-related counters including heavyweights Keppel Corp & Sembcorp Marine, service providers Ezion & Ezra, as well as upstream oil producers KrisEnergy, Rex, Ramba, etc.


Referendum heads for close result

The outcome is predicted to be close with Leave performing better than expected in the north of England and parts of Wales, while Remain is doing well in London.

Genting SP

Genting SP (GENS): Worth a spot in your watchlist
- Recent announcement on additional cash injection into Jeju integrated resort have caused the market to question the viability of the project, amid its challenging gaming business.
- However, we notice that brokers are mostly maintaining their hold rating on the stock, with the fundamental view on GENS still the same.
- Most houses, including MKE, are seeing the most pressing issue, its doubtful debts, to moderate from 3Q16 onwards.
- We believe the stock may be worth placing the stock on your watchlist.
- Any uptick in Singapore's and Macau's tourist arrivals may spark renewed interest in the counter.

SG Market (24 Jun 16)

SG Market: The local market could be in for a volatile ride as early Brexit results showed a slim victory for the pro-EU camp, but it is still touch and go and the final outcome will only be known after 2pm SG time.

Regional bourses opened higher in Tokyo (+0.6%), Seoul (+0.2%) and Sydney (+0.7%).

From a chart perspective, STI may test resistance at 2,820, with downside support at 2,740.

Stocks to watch:
*Economy: May headline CPI slid for the 19th consecutive month to a 30-year low of -1.6% (est: -0.8%, Apr: -0.5%), while core inflation picked up 1% (Apr: +0.8%).

*Hospitality REITs: Credit rating agency Fitch expects income for Singapore hospitality REITs’ to stabilise this year, on higher tourist arrivals and income from new assets.

*Frasers Centrepoint: Hospitality arm Frasers Hospitality Group is collaborating with Sekisui House, to open a 223-unit serviced residence in Tokyo. The new development will bring the group's pipeline to 22,800 units across 80 cities, a step closer to achieve its goal of 30,000 units by 2019.

*Sabana REIT: Requested S&P to withdraw its ratings after the ratings agency downgraded the industrial trust's long term corporate credit rating from investment grade (BBB-) to junk (BB+) with stable outlook, citing a weakened balance sheet and declining profitability, hurt by negative rental reversions and higher borrowing costs.

*Midas: 32.5% owned Nanjing Puzhen Rail Transport secured four contracts worth Rmb3.3b in China, adding to the associate's Rmb1.28b contracts clinched year-to-date. Delivery for the trains is expected from this year till 2019.

*Chip Eng Seng: Terminated the proposed 70% stake subscription in P99, after both parties were unable to reach a consensus on the share structure. Separately, cash shell P99 updated that it is currently in talks for another acquisition opportunity.

*China Taisan: Non-Executive Chairman Choi Cheung Kong and CEO Lin Wen Chang, are seeking legal advice on their change in shareholding interests, after collateralised shares were sold under a non-recourse loan agreement. Choi's stake has shrunk to 19.2% from 34.4%, while Lin is no long a shareholder (from 9.4%).

Thursday, June 23, 2016


Economy: Headline CPI slides for 19th month in a row to a 30-year low
-Headline consumer prices slid 1.6% in May (est: -0.8%, Apr: -0.5%), marking its 19th consecutive month of decline to a 30-year low.
-The previous three occasions when the monthly CPI dipped below minus 1% were in Apr 2002 (-1.1%), Oct 1998 (-1.5%) and Aug 1986 (-2.5%).
-May's contraction was largely contributed by a 6.4% plunge in accommodation costs (Apr: -0.9%). Private road transport costs tumbled 7.6% (Apr: -7.1%), depressed by a decline in pump prices from the relatively high base last year.
-However, core inflation picked up to 1% (Apr: +0.8%) on more costly services (May: 1.5%, Apr: 0.7%), as the disinflationary effect from the reduction in foreign domestic worker concessionary levy since May 2015 dissipated.
-Meanwhile, food prices rose 2.2% (Apr: +2.3%) as the increases in price for prepared meals

Keppel Corp

Keppel Corp: Substantial shareholder Aberdeen Asset Management disposed 107,000 shares @ $5.45, reducing its stake to just under 5%. The fund manager has been gradually cutting back its holdings from 7% since May ’15.


ARA Asset Management: Said to be bidding for Capital Square Office Tower
- Reportedly seeking 50% stake in the 388,215 sf building
- 16-storey prime office building in Raffles Place financial district
- Includes finance tenants such as Morgan Stanley, Citigroup
- Building was bought over by Alpha Investment Partners (Keppel Land) and NTUC Income in 2011 for $889m or $2,300 psf
- Estimates at the tower could fetch about $2,500 psf, with the 50% stake possibly seeing a $415m price tag.

Raffles Medical

Raffles Medical: OCBC is not overly concerned with HV mall
- Share price recently turned south, following recent reports on the longer than expected completion of Holland Village Mall.
- OCBC estimates that this project only account for 1-2% of FY16F/17F revenue forecast.
- Separately, OCBC believes prospects for the healthcare sector should continue to be healthy
- The house maintains its HOLD rating with TP of $1.57.


SIA: Could become largest shareholder in Virgin Australia
-Virgin Australia (VAH) has proposed a A$852 mn one-for-one rights issue at A$0.21/sh as part of a capital structure review outcome. Singapore Airlines (SIA) has undertaken to take up its entitlement, and excess shares in VAH, up to a 25.9% cap.
- SIA, HNA, Virgin Group, Nanshan Group, and Air New Zealand have undertaken to take up their pro-rata entitlements. Assuming Etihad does not take up its share, SIA could be the largest shareholder in VAH at 25.9%.
- CS sees the possible emergence of SIA as the largest shareholder from the recent ownership changes for VAH as a positive outcome. It will also quell concerns that SIA could lose its influence on VAH. The HNA partnership will give VAH exposure to the booming Chinese aviation market, one that it has been missing out on compared to domestic rival Qantas.
- CS maintain OUTPERFORM on confidence SIA's portfolio strategy. SIA currently trades at 1.0x P/B, below that of its peers and historical average at 1.2x and 1.1x respectively.


Riverstone: CIMB expects better 2H
-The phase III expansion capacity (6 lines; totaling 1bn pieces p.a.) is slated to start contribution in 2H16.
- After a slower 1Q16, demand for cleanroom gloves has shown signs of improvement in 2Q; management expects demand to pick up further in 2H16.
- The healthcare glove segment should continue to face ASP and margin pressure due to stiff competition.
- Upgrades Riverstone from Reduce to Hold, with an unchanged target price of S$0.91, still pegged to the peer average of 17x CY17 core P/E.

Brexit Timeline

Brexit: Time line for the referendum​
- Polls to open 7am and close at 10pm local time. SG Time: 3pm (Thu) - 6am (Fri)
- First results to arrive at 12midnight local time. SG Time: 8am (Fri)
- Final results: 6am local time. SG Time: 12pm (Fri)


OUE: Deep value, Deutsche reiterate Buy
-risk of QC charges on its Twin Peak project is diminishing
-house noted that more than 120 units were sold since it rolled-out discounts back in Apr
-only around 15 units remain unsold in the first tower
-for 2nd tower, OUE maintains plans to divest units via en-bloc sale before QC charges kick in
-upcoming completion/TOP of OUE downtown by Dec '16 may also narrow OUE's discount to RNAV
-currently trading at 55% discount to RNAV
-Deutsche opines that valuation is attractive and maintains but, but with a lower TP of $2.10 from $2.35

SG Market (23 Jun 16)

SG Market: Trading expected to be cautious and quiet as investors remain on edge on the eve of the UK referendum.

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

From a chart perspective, downside support for the STI is at 2,740, with resistance at 2,820.

Stocks to watch:
*Banks: Industry consultant McKinsey opines that slowing global growth, the emergence of fintech start-ups and rising bad loans are combining to create a powerful storm for the Asia Pacific banking industry. MKE is negative on the three banks UOB (Hold, TP $16.96), DBS (Sell, TP $13.40) and OCBC (Sell, TP $7.20).

*Noble: Proposed 1-for-1 rights issue at $0.11/share will go ex on 28 Jun.

*GuocoLand: Secured Japan's largest rail operator, East Japan Railway, as an anchor tenant at Tanjong Pagar Centre, bringing the 100,000 sf retail space take-up to 70%. The mixed use residential and commercial development is slated for completion in 3Q16.

*China Merchants Pacific: Exit offer of $1.02 has been declared unconditional, after the offeror received valid acceptances of 91.7% of the maximum potential issued share capital. Closing date for the offer has been extended to 11 Jul.

*HTL: Agreed to a buyout offer by Shanghai-listed Guangdong Yihua Timber Industry at $1.00/share (24% premium) via a scheme of arrangement. Shareholders holding 50.5% of share capital have undertaken to accept the offer.

*CityNeon: Opened Avengers S.T.A.T.I.O.N. at Treasure Island Hotel and Casino in Las Vegas, marking the group's debut in western US.

*Cosco Corp: 51%-owned Cosco Shipyard delivered a 111,000 dwt oil tanker to its European buyer.

*Magnus Energy: Awarded EPC and operation/maintenance contracts to Algae Farm Engineering to build and manage its 30 tpd microalgae oil cultivation facility in Selangor, which will commence operations by Dec ’16. The contractor also undertakes to secure offtake agreements with buyers for Magnus. The group is expected to generate profit of US$3m annually from this new US$12.8m bio-oil facility.

*Full Apex: Disposing its Qingdao subsidiary for Rmb23.8m. It is expected to book a disposal gain of Rmb16m.

*Serrano: Engaged consultancy firm to source for potential investors and M&A targets, to improve its current financial position.

Wednesday, June 22, 2016

CSE Global

CSE Global: CIMB likes CSE for its management quality, attractive FY16 dividend yield of 5.2%, net cash of c.S$60m (US$45m) and resilience vs. other small-cap O&M companies.
- It targets double infrastructure projects to comprise 30% of group revenue by FY17, lifting overall margins as infrastructure fetches EBIT of 14% vs. 6% for oil & gas.
- ERP 2 could also add S$40m-50m (US30m-37m) to CSE’s orders in FY16, bringing total wins to S$400m (US$298m) or 10% higher than in FY15.
- The house raises EPS by 3-5% for FY17-18, on higher gross margins to incorporate more infrastructure projects.
- Maintain Add with higher target price of S$0.57, based on 9.7x CY17 P/E (1 s.d. below 5-year mean). Stronger-than-expected order wins could catalyse the stock.

Retail SREITs

Retail SREITs: Disruption a clear and present danger. CLSA reiterates Negative stance​
- Ecommerce playing a clear disruptor for retail malls and there is little that landlords can do to fight it
- Existing efforts of tenant remixing, improving events/promotions, and changing lease structures are insufficient
- Retail landlords to continue to suffer
- Top Sell calls: CapitaMall Trust (Sell, TP: $1.82) and Suntec REIT (Sell, TP: $1.38)
- Top Buy: Mapletree Greater China Commercial Trust (Buy, TP: $1.08), Mapletree Commercial Trust (Outperform, TP: $1.46)

Manulife US REIT

Manulife US REIT: Deutsche initiate coverage due to stable yield with embedded growth
-96% of FY16 and 87% of FY17 cash rental expected from existing leases, providing stable income base
-long WALE of 5.7 years and healthy occupancy of 96.5%
-hence limited risk to tenant movements and distributable income
-99% of existing leases also have built-in rental increases
-sponsor Manulife has a robust real estate deal pipeline that could help the REIT grow inorganically
-Deutsche initiates with a Buy and TP of US$90 (11% potential upside from last close)
-Forecast 7.5% distribution yield of FY17

SG Market (22 Jun 16)

SG Market: Investors are likely to stay by the sidelines ahead of the Brexit referendum this Thu, leaning towards safe havens in telecoms, consumer and gold.

Regional bourses opened mixed in Tokyo (-0.5%), Seoul (+0.5%) and Sydney (+0.3%).

From a chart perspective, resistance for the STI remains at 2,820, with downside support at 2,740.

Stocks to watch:
*Sing Post: COO Dr Sascha Hower quit, making this the 3rd senior management resignation in less than a year, following that of its CFO and CEO. The Chairman and three more directors have also stepped down. MKE’s key argument for contrarian Sell call is predicated on intensifying competition in the industry; TP $1.29.

*Eu Yan Sang: The Foreign Investment Review Board of Australia has approved the conditional cash offer at $0.60/share. The offer has not yet turned unconditional in all respects.

*Ezion: Acquired a 49% stake in an Indonesian company which owns, charters, and operates vessels, for an undisclosed sum.

*Cosco Corp: 51%-owned Cosco Shipyard Group delivered a module carrier to its European buyer.

*Blumont: 10.7%-owned Kidman Resources plans to extend exploratory drilling at its Blue Vein gold deposit in Western Australia. The mine currently has a combined measure, indicated, and inferred resource of 372,000 oz of gold at 2.39gold/tonne. Separately, Kidman completed the sale of its Gunga West gold project for A$1.5m.

*Frasers Centrepoint Trust: Issued $50m medium term notes at 2.76% due 2021.

Tuesday, June 21, 2016


CNMC: KGI initiated on the counter with a Buy and TP of $0.48.
- Cited CNMC is a severely undervalued gold producer with a proven track record.
- Lowest cost gold producer with rising profits, with average realised price of US$1,156/ozt in 1Q16, vs all‐in‐sustaining cost of US$474/ozt.
- KGI expects CNMC to pay dividends of at least 0.945¢, implying a yield of 3%.
- TP of $0.48 is based on a P/E valuation of 9.3x, which is still at a 61% discount to its junior gold mining peers.


CDL: DBSV removes counter from its model portfolio.
- The stock returned 6% since its inclusion, outperforming STI’s 0.8% decline, since its inclusion on 26 May.
- CDL has a high 35% GBP exposure.
- Stock has been held up leading to and following its inclusion into the FTSE EPRA/NAREIT Global Real Estate Index.
- DBSV thinks the stock is susceptible to profit taking post index inclusion and ahead of 23 June BREXIT referendum.

GS Holdings

GS Holdings: (S$0.395) Unrated; 5 key takeaways from meeting
- Economic moat against competitors has helped in securing contracts.
- New Loyang facility has capacity for more volume.
- Large untapped market from hotel banquet, MICE and public institutions.
- Third on-site facility at Suntec Singapore can service surrounding F&B services establishments.
- Minimal execution risks on day-to-day operations from off-site dishware washing.


ComfortDelgro: [UOBKH] Share price underperformance amid Brexit concerns unwarranted
-88-90% of CD's UK revenue stems from the resilient bus segment
-Bus passenger journeys continued to increase from 2005 to 2015
-passenger journeys also increased during the UK recession and GFC period of 2008-09
-expects Brexit impact to be from GBP depreciation, but mostly translational and limited CF impact, due to natural hedge of the UK business
-But house suggested to watch out on Uber wrestling drivers away from CD over the long-term
-UOB Kay Hian maintain Buy with TP of $3.16


Singtel: CIMB likes it for yield for now; and growth in FY18-19
-Optus: FY17 earnings t o be held back by rising depreciation and falling A$.
- S’pore: flattish FY17 Consumer & Enterprise EBITDA. Wider Digital Life losses.
- Associates: dragged by dip at AIS and flat contribution from Bharti & Globe in FY17.
- NetLink Trust selldown could result in special DPS of 12.6-17.6 Scts.
-Maintain Add with unchanged target price of S$4.50. Attractive yields: 4.5-5.5%.


EC World REIT: Hangzhou logistics landlord to be 3rd REIT listing this year?
-EC World REIT, which holds six logistics assets in Hangzhou, China could be the third REIT to list in Singapore this year.
-Reportedly seeking to raise up to $450m. The logistics trust is backed by Shanghai-based Forchn Holdings Group, which is a co-founder and shareholder of Cainiao Network (Alibaba’s logistics division).
-Its initial portfolio of six assets has a combined gfa of 577,072 sqm, with total appraised value was Rmb6.4b.
-Top 10 tenants contribute to 96.6% gross rental income last year. Occupancy is said to be 92.3% at end 2015, which could rise to 99.1% by end 2017.
-IFR reported the REIT could offer FY16 yield of around 7%, while FinanceAsia cites a possible range of 7.4%-8%.
-Business Times, which also covered this story, echoed the market view that Singapore’s future REIT listings would comprise mainly foreign assets.

Sing Post

Sing Post: (S$1.57) Catching tailwinds
- CLSA believes SingPost is among the few names to successfully transform itself to remain relevant.
- The rise of e-commerce has severely impacted physical retail stores but has benefitted logistics companies, which plays into SingPost's strengths given its focus on e-commerce and logistics.
- Although earnings could increasingly be more volatile as it embarked on its ecommerce strategy, it should be able to sustain FY17CL 4.5% dividend yield.
- CLSA retains Outperform on SingPost with TP of $1.64.


OCBC: (S$8.36) Steady and positive progression in WHB
- Deutsche sees small but still positive progression through WHB's own annual report disclosure.
- Deutsche expects it to extract more synergies as the entities integrate further.
- Maintains Hold with TP of $9.50.


HTL: (S$0.805) Pre-conditions of takeover deal complete
- Finally received its final approval to carry out an all-or-nothing takeover deal by Guangdong Yihua Timber at $1.00/share.
- While further details on the scheme of arrangement is penned out, HTL will remain halted in the mean time.
- Based on an offer price of $1.00/share, the leather sofa manufacturer will be valued at 1.6x P/B, compared to its 10-year historical P/B of 0.85x.

SG Market (21 Jun 16)

SG Market: Positive momentum from short covering yesterday may ease, as market participants await the British referendum on Thu.

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

From a chart perspective, STI sees immediate resistance at 2,820, with downside support at 2,740.

Stocks to watch:
*Frasers Logistics & Industrial Trust: Trading debut today. The Australian industrial REIT is offering indicative yields of 6.8%/7.3% for FY16/FY17, respectively, based on its IPO price of $0.89/unit.

*EC World REIT: Reportedly mulling IPO to raise $450m. The trust holds Chinese logistics assets and is backed by Shanghai-based Forchn Holdings, a co-founder and shareholder of Cainiao (Alibaba’s logistics division). The REIT could reportedly offer 7-8% yield for FY16.

*GLP: Signed new leases totalling 98,000 sqm with five companies in China, including Alibaba affiliate Cainiao, Best Logistics, and three new customers.

*Ezra: Secured several new deepwater projects worth USD300m from international oil majors for work in the Gulf of Mexico, Southeast Asia, and West Africa.

*OKP: Awarded $18m worth of projects from PUB, for drainage improvement works in Singapore. The new contracts will raise the group's net construction order book to $394.8m, with visibility till 2019.

*ST Engineering: 55:45 JVCo with Airbus is establishing a new 30,000 sqm site for components manufacturing in Germany, with a planned investment of $61.5m. The facility is expected to commence production by 1H18.

*China Merchants Pacific: Voluntary privatisation offer of $1.02 has received acceptances of up to 89.6%, just short of the 90% delisting mark. Offer will close on 27 Jun.

*HTL: Secured approval from the Chinese regulatory board on the proposed buyout of HTL. Accordingly, the group will enter into an agreement with the offeror Guangdong Yihua Timber Industry, on the proposed buyout via a scheme of arrangement.

*Starland: Entered agreement for a $157.5m RTO of Switzerland-based fintech and brokerage firm Ayondo, which provides social trading services such as allowing individuals to replicate performances of top traders onto their portfolio automatically and in real time. The firm is licensed by financial authorities in the UK and Germany.

*MYP: Proposed acquisition of Straits Trading Building for $560m, in a bid to expand its property business.

*Rowsley: Acquiring a 65% stake in Squire Mech for $19.5m (7.5x P/E) through the issuance of up to 130m shares at $0.15/share. The deal for the mechanical and electrical engineering consultancy services company is subject to a three-year cumulative net profit of $12m.

*Miyoshi: Acquiring a 15% stake in Core Power (Fujian) New Energy Automobile, which develops, manufactures, assembles and sells light electric vehicles in China, for $8.8m.

*China Medical Int’l: HK-based subsidiary CMIC Hemodialysis granted a HK$20m ($3.5m) loan by lender Concorde Global, at an interest of 12% p.a., and to be fully repaid by 19 Dec '16.

*SGX: Launched the Sustainability Reporting Guide, which requires companies to discuss sustainability practices with reference to five components at least once a year, no later than five months after the end of each FY.

Monday, June 20, 2016


In a Business Times interview, GLP CEO Ming Z Mei opines that the stock's risk profile and accounting treatment are being misunderstood and allays concerns that a slowdown in its key market China, will hurt its financial performance.

On earnings:
China will continue to deliver strong FY17 profits from development completions, which are going to be the same or higher than last year, while its US assets are expected to benefit from strong rental growth on renewal leases due to many leases inked during the GFC.

On domestic consumption in China:
While China's consumption and services sector has surpassed 50% of GDP, the street has underestimated China's domestic consumption growth, where retail sales is expanding at 10% and backed by the growing trend of chain stores and e-commerce fuelling demand for modern logistics demand in China.

On mark-to-market treatment of development completions
Mei notes that analysts are not giving GLP credit for value creation via revaluation gains from operating assets and fair value gains from development projects upon completion, which it monetises via its fund management platforms in Japan, US and China. To-date, the group has unlocked US$6.3b of assets and realised US$1.6b profit through such capital recycling.

On development starts:
FY17 total development starts expected to be weaker at US$2.1b (FY16: US$2.8b), and completions at US$1.5b (FY16: US$2.1b). Same-property net property income growth in China may narrow to 7-10% (FY16: 10.7%), but GLP expects the economy to pick up in a year or two.

On cap rate compression:
GLP sees scope for cap rate compression in China where yields for logistics facilities are higher than office/retail, as well as in Japan, where assets are transacted at lower cap rates than GLP's, which bodes well for future revaluation gains.

The street currently has 12 Buys, 3 Holds and 1 Sell on GLP with mean TP of $2.28.

CDL Hospitality

CDL Hospitality: Attractive valuations.
- DBSV maintains its BUY call with a revised TP of $1.51.
- Counter faces negative headlines such as (1) excess new room supply in Singapore, and (2) weakness in its Maldives operations due to soft demand.
- DBSV believes that it still offers compelling long term value – thus rewarding investors who wait (6.5% yield based on 90% payout ratio) for the eventual upturn.


Memtech: (S$0.66) Transforming into a New Age component supplier​
- On a recent plant visit to China, Memtech appeared to be gearing to transform itself into a new age component manufacturer
- Recap: Relatively disappointing 1Q16 as net profit slumped 53% y/y due to a delay of its first project with Apple's Beats Electronics, which had to be renegotiated due to Apple's cost cutting measures.
- FY16 looks set to be a milestone year for Memtech to transition from a run-of-the-mill component manufacturer to a new age one with a client portfolio made up of brand names that encapsulate various pop culture themes.
- These include: Electric vehicles (Tesla), sharing economy (Roku), virtual reality (Parrot), audiophilia (Beats).
- Memtech is targeting FY16 net profit of US$8-9m (FY15: US$8.1m) and revenue of US$150m (FY15: US$142.2m).
- At current price, this would translate into a FY16 P/E of 7-7.7x relatively cheap compared to China-listed peers average of 33x. FY16 DPS expected to come in at ~SG2.5 cents translating into a yield of 3.8%.

Tat Hong

Tat Hong: Buy out discussions still ongoing
- Since the first announcement released on 15 Mar, there has been no further information provided regarding the said discussions.
- OCBC notes that crane players have been facing tough competition amid a sustained weak outlook and with valuations at inexpensive levels, further consolidation may naturally occur in the sector.
- Notwithstanding the potential acquisition, OCBC expect the group to further scale down their non-core, unprofitable businesses.
- The tower crane rental segment based in China continues to offer a bright spot for the firm.
- OCBC has a Hold with TP of $0.50.


SIA: Cheaper fuel still the main earnings driver (BY OCBC)
- Operating results for May 16 came in weak for the parent airline, while both SilkAir and Scoot continued to show growth momentum.
- In the strategic alliance with HNA, OCBC believes it will help Virgin Airlines compete against Qantas with enhanced connectivity to China and Europe through China over the longer-term.
- However, OCBC thinks the industry is still operating in weak yields environment, and expect SIA’s FY17F earnings to be largely driven by much lower hedging losses and more fuel savings from new aircraft being delivered over the year.
- OCBC maintains its Buy with unchanged TP of $12.00.


Property: Brexit impact (from CLSA)
- FHT, FCL and ART are the most earnings-sensitive to the UK Brexit.
- Additionally, residential and hospitality businesses of CAPL, CIT, FCL, ART, CDREIT, FHT and KDCREIT, may be impacted.
- CLSA assumes a stronger GBP/SGD, it will benefit earnings but will possibly be offset by higher operating costs & taxes, driving margin erosion.
- However, with rates likely to remain low in the near term, any correction in non-hospitality S-Reits are good buying opportunities.
- CLSA's top picks are CIT, FCL, MINT & MAGIC.

SG Market (20 Jun 16)

SG Market: Investors will be bracing for a busy trading week with the British referendum on Thu, and re-balancing of the FTSE Russell indices on Fri. Trades may be focused in safe-havens, including telcos, consumer and gold.

Regional bourses opened higher in Tokyo (+1.6%), Seoul (+1%) and Sydney (+1.2%).

From a chart perspective, downside support for the STI at 2,720, with immediate resistance at 2,820.

Stocks to watch:
*Frasers Logistics & Industrial Trust: Placement tranche was more than 6x subscribed, while public tranche was ~3.9x subscribed. REIT is offering indicative yields of 6.8%/7.3% for FY16/FY17 respectively. Trading debut on 21 Jun.

*GLP: CEO Ming Z Mei opines prospects for the stock are misunderstood on risk profile and accounting treatment. Firmer earnings in 2016 is anticipated, while 2017 is expected to be relatively softer, before picking up subsequently.

*NOL: Buyout offer by CMA CGM has received acceptances of up to 86.8%. Closing date for the offer on 4 Jul.

*China Merchants: Voluntary privatisation offer from parent China Merchants Group has received acceptances of up to 89.3%. Offer will close on 27 Jun.

*City Dev: The 452-room Grand Millenium Hotel Auckland at 71 Mayoral Drive, which is the largest hotel in New Zealand, will open on 7 Sep '16.

*Cacola: Extended timeline to 31 Jul '16 to sign a definitive agreement with BH Investments, on its proposed acqusition of the medical services provider.

* Updated that investor Zhonghong Holding is unable to make full payment for its proposed placement (500m shares @ $0.20), as the amount exceeds the monthly repatriation limit for Chinese firms. Consequently, Zhonghong has proposed that the balance of $91.7m be paid before 31 Dec 2016, with an option to complete the subscription of remaining 458.5m shares before the extended date.

*MMP Resources: Entered into underwriting agreement Maiora Asian Structured Finance Fund for a potential placement to raise between $1m and $2.4m.

*Asia Fashion: Currently in talks with SME bond holders for the extension of the repayment schedule as it has insufficient cash (5QFY16: Rmb6.6m) to repay the Rmb180m debt issue.

Friday, June 17, 2016


Chiwayland: (S$0.082) Expanding its Australian exposure; trades at deep discount to book
- Received endorsement from city council to more than double floor space ratio at its Parramatta residential project.
- Final hurdle from the state government expected before Nov 2016.
- Potential effective surplus of A$193m from the project, more than double its current market cap of $54.7m.
- Trading at significantly discounted 0.26x P/B.


POSH: Tipped to win 2nd contract with a Shell-operated FLNG project.
-The tender is to deploy the Arcadia semi-submersible accommodation vessel (SSAV) to support the installation of the Prelude FLNG off Western Australia.
-The work is expected to be for six months, with extension options. Contract value undisclosed, but similar SSAV, the Safe Boreas was recently contracted at US$60m for eight months to provide production support in the North Sea.
-A contract win would boost POSH's offshore accommodation business.
-MKE likes PACC Offshore (Buy, TP $0.42) due to strong balance sheet and Kuok Group backing.


SingPost: Key changes of director's code and policies to boost corporate governance:
- Director tenure is now capped at nine years (Former chairman Lim Ho Kee and independent director Keith Tay, the man at the centre of a recent controversy, were on the board for 18 years)
- Board exco that was in charge of approving investments and divestments has been dissolved
- Nominations committee is now replaced by a “nominations & corporate governance committee” which will also oversee code of conduct
- Where directors may have actual or perceived conflict of interest, they must recuse themselves from discussions.

This is a step at the right direction. That said, investors should be open to the possibility of a new CEO doing a round of kitchen sinking.

MKE has Sell call on SingPost with TP of $1.29.


800Super: CIMB has non-rated note.
- Recession-proof business as waste continues to be generated even in an
economic downturn.
- Oligopolistic industry – only 4 players, with little risk of new entrants.
- No FX risk as revenue is entirely derived from Singapore.
- Three contracts awarded over FY13-14 have started profit contribution.
- Historical CY15 P/E of 6.8x versus 8.7x for Colex Holdings. Average forward P/E


Economy: Exports post surprise 11.6% rebound
- NODX jumped 11.6% in May (Apr: 7.9% decline), ahead of economists' expectation for a 2.3% decline.
- Rebound led by a surge in exports of non-electronic shipments (+19%), which outweighed the decline in shipments of electronic products (-6%).
- Positive contributions from US, Taiwan and Malaysia, but regional markets were lacklustre including China, South Korea, Hong Kong and Japan.
- In May, trade agency International Enterprise Singapore cut its NODX forecast for 2016 to -3% to -5%, from its earlier projection of a 0% to 2% expansion, amid weak global demand.

SG Market (17 Jun 16)

SG Market: Market could see a slight rebound today, although outsized gains may be capped over the potential fallout of a Brexit vote next week.

Regional bourses opened higher in Tokyo (+1.6%), Seoul (+0.6%) and Sydney (+0.6%).

From a chart perspective, downside support for the STI is seen at 2,720 with immediate resistance at 2,830.

Stocks to watch:
*Noble: Disagrees with S&P's assessment that its liquidity has weakened, citing its US$500m rights issue, intended sale of Noble Americas Energy Solutions and other cost cutting measures.

*SGX: Kazakhstan’s Air Astana reportedly eyeing for an IPO in 2018. The state-owned carrier is considering a secondary listing in in London, Hong Kong, or Singapore.

*CWT: Updated that discussions on a potential transaction are still ongoing. To recap, substantial shareholder C & P is in exclusive negotiations with HNA Group over its 31.9% stake in CWT. Deal touted to be valued at ~US$1b ($1.36b), which would imply a share price of $2.27.

*CDL Hospitality Trust (CDLHT): Extended lease agreement at Grand Millennium Auckland with tenant Millennium & Copthorne for three years, including two renewal terms. CDLHT will receive rent equivalent to the net operating profit of the hotel, subject to an annual base rent of NZ$6m (excluding GST).

*GL: Collaborating with Hard Rock International to convert the existing Cumberland Hotel at Marble Arch on Hyde Park, London, into a 900-room Hard Rock Hotel London. Completion is expected in summer 2018.

*SHS: Secured a NZ$11.2m (US$8.2m) contract to construct an 88-room hotel in Christchurch, New Zealand. In addition, it signed a letter of intent for a US$19m contract, with a major private equity fund that invests in hotel properties for the development of a 200-room hotel in Yangon, Myanmar.

*Chiwayland: Received endorsement from Sydney's city council to more than double floor space ratio at its 75% owned Parramatta residential project, from 4 to 11.5, translating to an enlarged gfa of 32,545 sqm. Prevailing ASP at the upcoming alternative CBD of Sydney is ~A$12,500 psm ppr, implying a gross development value of A$406.8m for the property. Final approval from the state government is expected before Nov 2016.

*First REIT: Secured 20-year lease extension on the land title for Siloam Hospital Kebon Jeruk from the National Land Office of Indonesia.

*PACC Offshore: Tipped to be ahead of the tender for a multi-billion dollar contract to support the installation of Shell’s Prelude FLNG located off-Western Australia. The work is estimated to take six-months, with extension options.

*NauticAWT: Placement of 15m new shares (7.9% of enlarged share capital) at $0.174/share to HARPS Holdings. Net proceeds of $2.6m is intended to boost working capital.

*HTL: Downsizing its Singapore office in stages over the remainder of 2016 and shifting its key manufacturing functions and warehousing activities to China. The restructuring is expected to involve a one-time retrenchment cost of $4.5m–5m, and give rise to annual cost savings of $3.5m-$4m.

*China Environment: Regulatory board Accounting and Corporate Regulatory Authority has directed the company to restate and re-file its FY13 and FY14 financial statements due to various non-compliant issues in its reporting, including its construction contract revenue recognition approach.

*Fabchem China: Disposing 100% stake in loss making and heavily indebted ammonium nitrate manufacturer Hebei Yinguang Chemical, which has a net liability position of Rmb26.8m (after a waiver for Rmb32.7m shareholder loan), for Rmb1. The buyer Wang Jian is the general manager of the company.

*Asiaphos: Ceased exploration activities at one of its two mines, Sichuan Mine 2, after exploration rights expired. Group is still pending regulatory approval for its permit renewal application submitted on 14 Jun.

*Trendlines: In negotiations to sell its 26.5% owned E.T. View Medical for US$16m. If completed, Trendlines expects to receive net proceeds of ~US$3.3m and a divestment gain of ~US$2m before tax.

*Secura: Entered agreement to purchase cybersecurity tech solutions provider Red Sentry for $2.7m. The deal is believed to complement Secura's product offerings and enlarge its market share in Singapore.

Thursday, June 16, 2016

Thai Beverage

Thai Beverage: Downgraded to Neutral at OCBC
- Looking ahead, OCBC believes that beer will drive growth in the coming years while the spirits segment would see a largely stable performance given the maturity of the industry.
- Two other factors that could help to expedite achieving the group’s vision2020 aims would be M&A as well as corporate restructuring involving the entities (TCC, F&N, FCL, Thai Bev).
- However, following the share price run up and limited upside, OCBC is downgrading the stock to a HOLD.
- TP lifted from $0.83 to $0.89 as the house rolls its valuation one-year forward.


Noble: (S$0.23) S&P cuts rating deeper into junk; outlook negative
- Dealt another blow as S&P cuts its credit rating deeper into junk territory to B+ from BB-, with negative outlook.
- Ratings agency also warned that it could reduce the rating further over the next 12 months.
- Reflects the commodity group's weakened liquidity position despite the recent refinancing of its revolving credit facilities and its proposed $500m fully underwritten rights issue.
- The downgrade is expected to see funding costs rising, and further erode its razor thin margins.
- At current price, Noble is trading at 0.37x P/B, just a slight discount to closest competitor Glencore’s 0.67x, which is backed by an investment grade credit rating.

SG Market (16 Jun 16)

SG Market: The market could get a slight lift as the Fed pared its expectations for future rate hikes amid a more uncertain economic outlook but any upside gains may be capped by the upcoming Brexit vote on 23 Jun.

Regional bourses opened mixed this morning in Tokyo (-0.4%), Seoul (-0.1%) and Sydney (+0.9%).

From a chart perspective, downside support for the STI is seen at 2,720 with immediate resistance at 2,830.

Stocks to watch:
*Economy: Economists have pared Singapore's 2016 growth estimate to 1.8%, the fifth consecutive downward revision in five quarters, on sluggish external conditions and bank lending contraction. Market observers have warned more cuts may be in store the next quarter.

*Noble Group: Credit rating cut to B+ from BB- by S&P with negative outlook, reflecting the group's weakened liquidity, despite completion of financing and the proposed rights issue.

*SIA: May passenger load factor declined 0.9ppt to 72.7%, as traffic slipped at a faster pace of 2.9% from all routes except East Asia, amid a 1.6% reduction in capacity. Apart from SilkAir (+0.9ppt to 69.5%), its other subsidiary carriers Scoot (-1.6ppt to 78.1%) and Tigerair (-1.1ppt to 81.9%) suffered deterioration in load factors, while cargo load factor improved 0.7ppt to 62.3%.

*F&N: Acquiring 100% of Warburg's vending business for $29m. The target has been a partner of the group since 2011 and the deal will increase the group's vending network by three-fold and raise brand visibility.

*GLP: Syndicating a further 9.09% stake in its US industrial assets portfolio to New Western Holdings for US$181.7m, taking the total syndicated so far to 84.7%. GLP intends to ultimately retain ~10% stake in the US portfolio. Separately, it leased a 340,000 sf facility in Northern New Jersey, US to a repeat customer, a leading global logistics firm.

*CapitaLand: Disposed Indian subsidiary Citadines Hitec City Aparthotel, which owns a land parcel in Hyderabad with no development activities, for Rp401.3m ($8.3m).

*SATS: Divested 17.8% stake in a dormant company International Airport Cleaning for ¥16.8m ($0.2m) to streamline performance.

*mm2 Asia: Partnering with FOX Networks Group Asia to co-produce two Taiwanese films, following the success of two recent co-productions including Ah Boys to Men 3:Frogmen and 1965.

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

*Low Keng Huat: 1QFY17 net profit fell 13% to $3.3m, while revenue shrank 41% to $15.8m, mainly due to the absence of construction revenue, offset by the sale of an office unit at Paya Lebar Square. Gross margin expanded to 59.3% (+11ppt), while bottom line was cushioned by the absence of provisions. NAV/share at $0.86.

Wednesday, June 15, 2016


Brexit: Singapore stocks with UK exposure

-Singapore listed stocks with UK exposure would be impacted by a weaker sterling and disrupted economy if Brexit were to occur.

List of Singapore-listed stocks with UK exposure:
GuocoLeisure (91% of revenue)
AF Global (35%)
Ho Bee Land (31%)
Hwa Hong (26%)
ComfortDelgro (25%)
UG Healthcare (23%)
KOP (23%)
Frasers Hospitality Trust (19%)
MTQ (17%)
Ascott REIT (14%)
City Developments (12%)
Sembcorp Industries (5%)
Heeton (~10% assets in UK)

Genting SP

Genting SP (GENS): Closer look at Jeju
- Resorts World Jeju (RWJ) is set to open progressively in 2017-19 and could contribute $145m (US$107m) recurring net profit p.a. to GENS.
- Unlike the rest of South Korea, Jeju has a unique visa-free policy for Chinese tourists, making it a prime destination for visitors from North and East China.
- Concerns about high bad debt charges and possible injection of RWLV could create buying opportunity ahead of consensus earnings upgrades for RWJ.
- CIMB maintains Add with higher TP of $0.89.


SATS Ltd: Strong tourism statistics benefit SATS
- Encouraging visitor arrivals to Singapore and strong traffic statistics at Changi Airport, driven mainly by visitors coming from China (+40.8%), Indonesia (+13.1%) and Thailand (+28.6%) for 4M16.
- OCBC believes that while passenger yields remain weak, loads are expected to increase ahead.
- Management is guiding for sustainable growth in dividend payout.
- OCBC believes SATS is currently fairly valued. TP at $4.20.

SG Market (15 Jun 16)

SG Market: Risk-off mood is likely to take hold with defensive sectors such as telecoms and consumer to benefit, as investors rush into safe-havens amid lingering fears from upcoming risk events.

Regional bourses languished in the red again in Tokyo (-0.6%), Seoul (-0.4%) and Sydney (-0.6%).

From a chart perspective, downside support for the STI remains at 2,720, with immediate resistance at 2,830.

Stocks to watch:
*Strategy: MSCI emerging markets index to delay inclusion of Chinese mainland stocks again, due mainly to lingering concerns on market accessibility, particularly with the 20% monthly repatriation limit being a significant hurdle.

*CapitaLand: Taps start-ups with $100m global tech venture fund in its ongoing effort to innovate and build real estate of the future.

*SATS: Signed partnership with Swiss airfreight handling service provider Cargologic, to establish a secure temperature-controlled corridor between Singapore and Zurich, targeting temperature-sensitive airfreight in the pharmaceutical industry.

*NOL: Newly reconstituted Board chaired by Rodolphe Saade, who succeeded Kwa Chong Seng. Nicolas Sartini has been appointed CEO, replacing Ng Yat Chun, while Serge Corbel will be its CFO, taking over Cedric Foo.

*Soilbuild REIT: Acquiring a nine-storey light industrial development known as Bukit Batok Connection at market value of $96.3m. The building has a land tenure up to 2042, with a net lettable area of 377,776 sf. Upon completion, the property will be leased to SB Westview for a 7-year term on a double net lease basis, with rental escalation of up to 2% per annum.

*Hyflux: Obtained a US$185m loan facility for Qurayyat Independent Water Project, the largest seawater reverse osmosis desalination plant in Oman. The plant has a water purchase agreement with the only purchaser for IPP/IWPP projects within the country, to supply water for 20 years from 2017.

*Mermaid Maritime: Secured a one year charter contract for dive support vessel, Mermaid Nusantara, to PT Seascape Surveys Indonesia. The contract comes with a additional year extension option, and the vessel is expected to be delivered in Aug 2016.

*Mencast: Subsequent to the lapse of its long-stop date to acquire Stone Marine Singapore (SMS), the group has now conditionally agreed to purchase certain target assets (instead of SMS), for $2.45m. The transaction will yield a bargain purchase gain of $0.9m.

*GS Holdings: Proposed placement of 8m new shares at $0.285 apiece to private investor Lee Sai Sing, who will hold a 10.6% stake upon completion. Net proceeds of $2.3m is intended for the group's expansion of its dishwashing operations.

Tuesday, June 14, 2016


O&M: Petrobras graft scandal implicates Keppel, Sembcorp agents
- Corruption scandal engulfing Petrobras has widened, implicating Singapore rigbuilders Keppel Corp and Sembcorp Marine.
- Documents alleged that US$9.5m ($13m) in bribes and kickbacks were paid by agents of the two Singapore firms.
- Ongoing investigations expected to linger for a while. More pertinently, will clients continue to award new contracts to the two rigbuilders knowing that there is a potentially damaging US lawsuit hanging over their heads?
- MKE has Sell on Keppel Corp (TP: $4.42) and Sembcorp Marine (TP: $1.00).
- House prefers asset owners such as Ezion (Buy, TP: $0.72) and PACC Offshore (Buy, TP: $0.42).

Croesus Retail Trust

Croesus Retail Trust: Internalisation of trustee-manager
- Proposes to bring management of trust “in-house”
- To acquire trustee-manager from Sponsor/Strategic Partners for $50m, partially funded by underwritten non-renounceable preferential offering
- 1% accretion to proforma FY15 DPU
- DBSV maintains BUY with TP of $0.90

Singapore O&G

Singapore O&G: Poised to benefit from pro-birth policies in Singapore
- UOB Kay Hian believes the company is resilient amid economic uncertainties.
- Potential earnings upside should there be accretive acquisitions or higher-than-expected earnings contribution from M&A.
- House maintains BUY with a TP of $1.01

Wing Tai

Wing Tai: (S$1.69) Sells unit at Le Nouvel Ardmore for $21m; overhang still looms
- An apartment unit was sold at Wing Tai's high-end residential development Le Nouvel Ardmore for $21m, 9% above the last transaction price.
- The luxury project is liable for QC charges.
- Market watchers estimate that the total QC payable by Wing Tai could be $156m, or 12% of its market cap.
- Maybank KE's last rating for Wing Tai was a Hold with TP of $1.93, citing the overhang from QC charges.

SG Market (14 Jun 16)

SG Market: The market is likely to remain jittery as investors brace for several key economic data releases and risk events in the coming days.

Regional bourses opened in the red in Tokyo (flat), Seoul (-0.1%) and Sydney (-1.4%).

From a chart perspective, the benchmark STI has breached its 2,790 support, with next level at 2,720 and immediate resistance at 2,830. Momentum indicators are flashing negative signals.

Stocks to watch:
*Wing Tai: Sold an apartment unit at high-end development Le Nouvel Ardmore for $21m, or $4,006 psf (9% above last transacted price). The sale makes it the sixth unit to be sold in the 43-unit project.

*Cordlife: Appointed veteran doctor Wong Chiang Yin as CEO. Wong was previously President of Thompson International, as well as CEO of Malaysia-listed TMC Life Sciences, and has 20 years of healthcare management experience.

*CityNeon: Plans to showcase Marvel Avengers S.T.A.T.I.O.N. in Singapore for four months beginning in Oct ’16, following its successful turnout in New York, Korea, Paris and Las Vegas. The strong pipeline is expected to underpin earnings going forward.

*Ley Choon: Awarded a $33.6m contract by PUB to supply and lay steel potable water pipeline in Singapore.

*Oxley: Acquired a 50% stake in Peninsular Teamwork, the owner of a residential land in Negeri Selangor, Malaysia, for RM40m.

*Jackspeed: Acquiring 14% interest in property development company Wenul Asset Industrial for $3.6m.

*Neo Group: Acquiring a 55% stake in two food retailers, Joo Chiat Kim Choo rice dumplings and U-Market, for $1.9m, to expand into upstream business that would complement and support its existing operations.

*Pacific Radiance: Issued two notices of arbitration in Hong Kong against two Chinese shipyards, Shanghai Waigaoqiao Shipbuilding & Offshore and China Shipbuilding Trading, for the failure to deliver two PSVs.

*YuuZoo: Signed partnership agreement with Africa and UAE's largest mobile network operator, Etisalat, to set up an e-commerce platform for SMEs in Nigeria. In addition, the group purchased the contract rights for Etisalat for US$2m, to be paid via issue of 14.9m new shares at $0.1788/share.

*MMP Resources: Signed a 12-month agreement with Maiora Asset Management and Maiora Asian Structured Finance Fund (MASFF) to seek advisory services for fund raising and M&A activities. Payment for the services of US$0.5m will be via an issue of new shares at a price to be disclosed. MASFF currently has 7.87% stake in MMP.

*Secura Group: Signed an MOU with the Union of Security Employees to develop a wage model to allow its security officers to pursue other career tracks, in a bid to alleviate its manpower shortage issues.

Monday, June 13, 2016


OCBC: (S$8.43) Potential sale of associate Hong Kong Life Insurance
- OCBC's 33% owned Hong Kong Life Insurance could be put up for sale in a deal worth ~US$600m.
- Estimated deal price values the life insurer at ~6.3x P/B, just below the recently completed buyout of Dah Sing Financial's life insurance unit.
- Great Eastern (GE), 87.6% owned by OCBC, is one of the potential bidders.
- Maybank KE estimates that if GE succeeds, OCBC will net a gain of US$158m ($214m) and an effective goodwill of US$442m ($599m).
- Assuming a 15% increase of risk-weighted assets for Hong Kong Life Insurance, OCBC's fully-loaded CET1 ratio is estimated to decline by 55bps to 11.8%.
- Maybank KE maintains its Sell rating on OCBC and TP of $7.20.


Noble: (S$0.24) Willingly trudges ahead on prized asset disposal
- Appointed Morgan Stanley and HSBC to advise on the divestment of its prized energy business.
- Intended sale has garnered significant interest from a broad spectrum of potential buyers.
- While the move is expected to unlock value for Noble, the cash-generative unit was previously touted as the core asset to help the group turn around from its flagging commodity trading business.
- Counter has shed 20% of market value amid the management reshuffle.
- Investors can expect revisions to street estimates.

Frasers Logistics & Industrial Trust

Frasers Logistics & Industrial Trust (FLIT), one of the largest pure-play Australian industrial REIT, is seeking a listing on the Mainboard of SGX.

The IPO offer of 521.7m new units is priced at the top end of the offering price range of $0.89 each, with 84.7% assigned to a placement tranche for institutional investors, and remaining 15.3% for the general public. Another 492.8m units is reserved for 15 cornerstone investors, including Morgan Stanley (4.3%), Lion Global Investors (3.9%) and Affin Hwang Asset Management (3.9%). Post IPO, sponsor Frasers Centrepoint will own 20-22.5% of FLIT.

This will give rise to a gross proceeds of $876.7m, and will be support the REIT in acquisition of properties, working capital and transaction fees.

FLIT will have a total portfolio value of $1.6b, comprising of 51 logistic and industrial properties, with a gross lettable area of 1.16m sqm, mainly spread across three cities of Melbourne (40%), Sydney (28%) and Brisbane (28%).

60% of the portfolio is freehold, while the remaining assets have long leases of 80 years. Portfolio occupancy stood at 98.3%, with weighted average lease to expiry of 6.9 years, which is way higher than most Singapore industrial landlords.

Aggregate leverage is at 25%, but may be elevated to 31% next year if the REIT successfully exercises its call option to acquire three more properties.

Gross revenue and NPI and grew at CAGR of 5% and 4.1% respectively over the last three years, mainly boosted by property acquisitions.

Going forward, the REIT will continue to source and pursue inorganic growth with an initial focus in Australia, but is not limited to opportunities within the country. It will also consider to undertake selective property development projects.

FLIT expects to offer an annualised distribution yield of 6.83% for FY9/16, and 7.02% in FY17. This may be boosted to 7.3% if the REIT exercises its call option on Oct 1.

Based on the IPO price, FLIT has a P/B of 1.04x, which is higher than the average of its Singapore-listed peers of 0.87x. However, it is priced lower than other Australian peers such as BWP Trust (1.46x) and Industria REIT (1.05x) and yield is of 6.8-7% is attractive given that the bulk of its assets are freehold and locked on long term leases.

The public offer has commenced at 9pm, 10 Jun, and will close on 12pm, 16 Jun. First day of trading is expected to be on 21 Jun.

mm2 Asia

mm2 Asia: (S$0.685) Downgraded to Hold (from Add) with TP of $0.73
- Proposed listing of Unusual Group unlocks value for mm2 but stake dilution would dent mm2’s FY3/17 earnings slightly.
- To recap, mm2 proposed to acquire 51% in Unusual for $26m (US$19m) via a mix of cash and new shares; positive on synergies for content production.
- The spinoff would position Unusual for the next phase of growth, while unlocking value for mm2.


KSH (S$0.545): UOB initiated with a Buy and TP of $0.69
- One of the best local construction firms in terms of margins and balance sheet.
- Offers earnings visibility for the next two years with orders recovering, development profits locked in and overseas projects in the pipeline.
- FY16 net cash of $53.4m positions KSH well for an upturn.
- Dividend yield attractive at 5.5%.


Ezra proposed to divest a 10% stake in 50% owned JV EMAS Chiyoda Subsea (ECS) to new strategic partner Nippon Yusen Kabushiki Kaisha (NYK) for US$14.4m (1.2x P/B).

Concurrently, JV partner Chiyoda will also sell 15% of its stake in the subsea services business to NYK.

If completed, Ezra, Chiyoda and NYK will hold 40%, 35% and 25%, respectively, in the JVCo.

While the addition of Chiyoda in Mar '16 added depth and breadth to ECS' operational offerings, NYK's participation is expected to augment the expertise in global expansion and fortify the group's presence in the Japanese and international markets, through NYK's 130-year experience in ship management and operation.

Long stop date for the deal is on 30 Sep '16.

At the current price, Ezra is trading at a heavily discounted 0.18x P/B.

SG Market (13 June 16)

SG Market: Investors are likely to take profit and hold off fresh positions in anticipation of a packed week of central bank meetings, US/China economic data and MSCI decision on China A-share inclusion.

Regional bourses opened in the red in Tokyo (-2.1%) and Seoul (-1.4%). Sydney market is closed for Queen's Birthday.

From a chart perspective, STI could find next support at 2,790, with topside capped by previous support turned resistance at 2,830.

Stocks to watch:
*Strategy: MSCI will decide tomorrow on the potential inclusion of Chinese-listed shares in its emerging markets index. If implemented, this could have an impact on current MSCI country weightings as funds re-adjust their allocation to accommodate the massive China market.

*Frasers Logistics & Industrial Trust: IPO priced at $0.89/unit, indicating a distribution yield of 6.8%/7.3% in FY16/17 for its portfolio of 51 Australian industrial properties worth $1.6b, and attracted 6x oversubscription for its placement tranche. Public offer between 9pm on 10 Jun and 12pm on 16 Jun; trading debut expected on 21 Jun.

*Ezra: Divesting 10% stake in 50% owned JV EMAS Chiyoda Subsea to new strategic partner Nippon Yusen Kabushiki Kaisha (NYK) for US$14.4m (1.2x P/B) to fortify its presence in the Japanese and international markets. Post sale, Ezra, Chiyoda and NYK will hold 40%, 35% and 25% in the JVCo.

*Noble Group: Appointed Morgan Stanley and HSBC to advise on the sale of its prized energy business, with deal completion targeted in 2H16.

*Genting SP: Retrenching 400 staff out of 12,000-strong workforce to right-size its headcount to meet business needs, citing regional slowdown and slower higher roller traffic.

*Tiong Seng: Awarded $98.3m worth of contracts from PUB for the supply and installation of steel potable water pipelines.

*OKP: Secured $54.7m LTA projects for road resurfacing works, boosting construction order book to $376.8m.

*Q&M: Announced the proposed spin-off of its operating dental hospitals and clinics and a dental equipment distribution company on the Catalist board.

*City Dev: Subsidiary City e-Solutions extended the exclusivity period for a potential takeover offer for another 45 days to 26 Jul.

*Spackman Entertainment: Recent production "Life Risking Romance" will be screened at the 19th Shanghai International Film Festival, and is expected to be released in Korea and China in 2H16.

*Xpress: Proposed to acquire 70% of e-commerce developer Amplify Me for $1m (5.4x P/B; 47.6x P/E) via cash ($0.5m) and new shares issue at $0.75 each.

Friday, June 10, 2016


Telecoms: MyRepublic's misfortune could be M1's gain​
- M1 could be in the running to be a market dark horse
- Channel checks suggest that the two frontrunners, MyRepublic and Consistel are still seeking to raise substantial funds
- spectrum auction that is expected to be held in 3Q16
- M1 (Hold, TP: $3.09) could potentially see a substantial re-rating particularly since it is currently trading at a relatively attractive FY16E yield of 6%
- Notwithstanding, Maybank KE continues to like Singtel (Buy, TP: $4.50), and StarHub (Buy, TP: $4.15)


Terratech: (S$0.045) RTO to see Malaysian property developer to list on SGX​
- to acquire the entire stake in Malaysian property developer, Capital City Property for $300m
- issuance of 4.3b new shares at $0.07/share, a 37% premium over Terratech’s last closing price
- deal will result in the reverse takeover of the marble decor company
- Deal values the loss-making property developer at 16.4x P/B based on its NAV of $18.3m as at 30 Jun ‘15. FY15 losses amounted to $9m.

IHH Healthcare

IHH Healthcare: Greenfield venture in Shanghai
-Entered into 70/30 JV with Shanghai Hongxin Medical Investment
-JV will develop a 450-bed tertiary hospital in Shanghai New Hongqiao Int'l Medical Centre
-the new tertiary hospital is expected to open in 2020 and provide a range of specialist and healthcare services
-the hospital will target the premium market and hire the top local doctors
-In other parts of China, IHH is opening a 350-bed hospital in Chengdu in 2H17, and currently operates 9 clinics in the mainland
-Nevertheless, Maybank KE believes positives for IHH have been priced in, and hence maintains a hold call with TP of MYR6.13

Deutsche Strategy

Strategy: Deutsche include SMM into top five picks, replacing City Dev
-City Dev share price rose 18% YTD
-SMM may have limited downside and better upside potential due to:
1) O&M sector currently under-owned
2) SMM fallen significantly since crude price downturn in 2014
3) Majority of delivery in SMM order book is 2-3 years out, higher odds for oil price to strengthen, reducing deferment/impairment risk
4) bulk of order book exposure is not in the oversupplied shallow water space
-Deutsche has Buy rating with TP of $1.95 on SMM
-Remain 4 top picks include Comfort (TP $3.51), DBS ($19.80), First resources ($2), and Singtel ($4.60).

SG market (10 Jun 16)

SG Market: Risk-off mood is likely to weigh on the market as investors face lingering uncertainties from upcoming series of events next week, which could set the tone of financial markets in the mid-term.

Regional bourses opened in the red in Tokyo (-0.5%), Seoul (-0.3%) and Sydney (-1.1%).

From a chart perspective, STI sees downside support at 2,830, with resistance at 2,890.

Stocks to watch:
*Keppel Corp: News reports cite the group is close to clinching its first significant offshore contract this year worth more than US$500m, giving it a much needed boost amid the slump in rig demand.

*NOL: Buyout offer declared unconditional after CMA CGM secured 67.3% control. Closing date for the offer has been extended to 4 Jul.

*mm2 Asia: Appointed professionals to prepare for the listing of UnUsUal on the Catalist board following its proposed acquisition of a 51% stake in the concert producer for $26m.

*Atlantic Navigation: Signed shipbuilding agreements worth US$45m with a Chinese shipyard to supply five utility and two AHTS vessels, to be delivered in 3Q17. The vessels will subsequently be deployed in the Arabian Gulf under five-year charters to a Mid-East national oil company.

*Tritech: Awarded a $36.6m consultancy contract by LTA to provide construction supervision and review services for the proposed east coast section of Thomson East Coast Line Xilin station, as well as new infrastructures attached to existing Tanah Merah station.

*Otto Marine: Secured a shipbuilding contract worth US$14m from an Indonesian state-owned enterprise. Delivery for the tanker is expected in 2Q18.

*Terratech: Entered RTO agreement to sell $300m worth of shares at $0.07/share to Capital City Property, a Malaysian property developer.

*iX Biopharma: Granted a patent in South Korea for its WaferiX drug delivery technology. The patent will expire on 26 Oct ‘30.

*Ausgroup: Held an informal meeting with noteholders with the aim of discussing further steps to relax debt covenants of its Series 001 $110m 7.45% notes.

*Hoe Leong: Updated that the winding-up petitions filed against two of its associates have been withdrawn in Malaysia.

Thursday, June 9, 2016

SG Market (09 Jun 16)

SG Market: The market could see continued interest in O&M counters as crude broke clear of the US$51 mark.

Regional bourses opened mixed, with Tokyo (-0.4%) weaker, but firmer in Seoul (+0.2%) and Sydney (+0.2%).

From a chart perspective, stochastics suggest the STI is entering overbought territory. Immediate resistance for the benchmark index is seen at 2,890 with bottomside support at 2,830.

Stocks to watch:
*Otto Marine: Exit offer by executive chairman and controlling shareholder Datuk Yaw Chee Saw (61.2% stake) at $0.32/share, 39% above last traded price of $0.23. The deal values loss-making Otto at 0.24x P/B.

*Starhill Global: Renewed the master lease with Toshin in Ngee Ann City for three years at 5.5% higher base rent, effective 8 Jun. The lease contributed ~20% to the REIT's gross rent.

*Olam: Expands peanut shelling presence in US with acquisition of Brooks Peanut Company for US$85m. The deal is expected to be earnings accretive in 2016 and meet the targeted EBITDA on invested capital range of 13-16% from 2017.

*Japfa: Partial divestment of Indonesian subsidiary PT Japfa Tbk to PE firm KKR, which is taking a 10.44% stake for US$81.2m. Post deal, Japfa will hold 51% interest, and record a divestment gain of US$21.2m, or 1.25¢ per share.

*Ascendas REIT: Proposed divestment of Jiashan Logistics Centre in Shanghai, China, for Rmb125m ($26m) or 1.3x P/B. This will reduce its aggregate leverage to 37% (-0.2ppt).

*China Everbright Water: Setting up a 51:49 JV with Jiangsu Xinyi municipal government to undertake PPP wastewater projects. Total investment is ~Rmb300m, with designed wastewater treatment capacity of 90,000 m3/day.

*Tuan Sing: Entered into a 90/10 JV with controlling shareholder Michelle Liem Mei Fung for $39.3m to develop an 85-ha land at Marina City Batam, Indonesia, into a mixed development. Initial phase will comprise a 400-room resort hotel, 30,000 sqm retail zone, and close to 2,000 residential apartments, while future phases may include educational, medical tourism and new entertainment facilities. Project expected to be launched between end 2017 and early 2018.

*Trek 2000: Appointed forensic accounting firm, RSM Corporate Advisory, to review past interested party transactions.

*Tianjin Zhongxin: Following review of a product recall in Hong Kong, authorities have reinstated the good manufacturing practices certification for its Long Shun Rong pharmaceutical factory. Production has re-commenced since.

*Hi-P: Deputy Announced resignation of deputy CEO Tay Ewee Liang, aged 59.

Wednesday, June 8, 2016

Genting Singapore

Genting Singapore: Deutche believes that share price has bottomed out, upgrade to Hold
-1Q GGR market share recovered to 45% vs 41% in previous quarters
-Deutsche estimates sizable bad debt provisions to end by 3Q16
-FY17 EBITDA expected to grow 29%y/y to $950m
-But short term catalyst is limited, as regional GGR growth remains tepid
-Future contribution from Korean resort is still two years away, and profitability in doubt due to challenging environment in Korea
-Deutsche upgrades to Hold from Sell, raises TP to $0.80 from $0.50

SG Market (08 Jun 16)

SG Market: Taking cue from mixed US performance overnight, the market could consolidate gains made over the past five sessions.

Regional bourses in Tokyo (-0.1%), Seoul (-0.1%) and Sydney (-0.5%) opened weaker.

From a chart perspective, the STI may retrace to close the gap between 2,834 and 2,840, before marching higher. Bottomside support is seen at now 2,830 with topside resistance at 2,890.

Stocks to watch:
*Macro: Based on transactions of top five stocks, ShareInvestor and IPREO estimates net sells of $890.1m by global mutual funds, overshadowing a net buys of $536.6m, for the three months leading up to 1 Jun.

*Sembcorp Marine: Delivery deferral of semi-submersible drilling rig, West Rigel, to North Atlantic Drilling has been extended to 2 Sep '16, from Jun '16.

*Mermaid Maritime: Awarded six subsea works across Asia worth US$15m which are expected to be completed by Nov ‘16.

*TTJ: 3QFY16 net profit surged to $13.4m from $1.6m a year ago as revenue soared 262% to $53.7m, boosted by its structural steel business. Gross margin of 33.8% (+8.9ppt) was buoyed by fatter project margins. NAV/share at 35.54¢

*Yuexiu Property: Contracted sales in May fell 13% y/y to Rmb2.12b with 174,500 sqm of gfa sold (-24%). From Jan to May, total contracted sales saw a 66% jump to Rmb13.51b with 1.3m sqm of gfa sold, representing about 52% of its FY16 sales target of Rmb25.8b.

*Frasers Centrepoint: Entered into a 70/30 JV with An Duong Thao Dien Real Estate Trading Investment (ADTD) and other shareholders to jointly develop a residential-cum-commercial project on a 1-ha prime residential site in Ho Chi Minh City, Vietnam. The project has an estimated total development cost of US$85m ($115m).

*Bumitama Agri: Acquired 95% interest in PT Langgeng Makmur Sejahtera, which has a negative book value of Rp16.64b, for Rp237.5m. The target holds a location and plantation permit for a 4,810-ha land in Kalimantan, of which 87% is planted. Remaining 5% stake was acquired by an associate of the group's controlling shareholder to satisfy Indonesia ownership law.

*China Merchants Pacific: Voluntary privatisation offer from parent China Merchants Group has received acceptances of up to 78.55%.

Tuesday, June 7, 2016


Q&M: Positive acquisition in China (Buy, TP $1.05)
-Acquiring effective stake of 33% in a Chinese business that provide custom-made dental prostheses for $13.75m (13.3x FY17 P/E), to be paid in cash
-3rd largest deal in China, with 16 labs across 15 cities in China
-3 individual vendors signed 12-year service agreement
-12-year profit guarantee, and contribution to Q&M is 6%/5% of FY16E/17E earnings
-Maybank KE expects deal to complete by FY17
-Maintain Buy with TP of $1.05.

SG Market (07 Jun 16)

SG Market: The market may continue the positive momentum as traders increasingly push back expectations of a US rate hike.

Regional bourses in Tokyo (+0.3%), Seoul (+0.8%), and Sydney (+0.2%) opened stronger.

From a chart perspective, the STI is testing resistance at 2,830, with next objective at 2,890, while underlying support is seen at 2,760.

Stocks to watch:
*SGX: A study in Australia found that large companies of a certain size are able to price their IPOs at a lesser discount on SGX than a US listing. This may be due to the higher amount of institutional investors targeting such large companies in Singapore compared to the US. Positive for SGX if it could attract more of such large listings.

*Swiber: Secured three new contracts totalling US$215m, lifting order book to about US$1.2b. Works are to be done in Qatar, Myanmar, and Vietnam, with scheduled completion between 3Q16 and 1Q18. Swiber also fully redeemed its Series 16 $130m fixed rate notes.

*Yongnam: Awarded two contracts in Singapore (light industrial development) and Hong Kong (infrastructure works) worth SGD29.6m, adding to order book of SGD399m as of Mar.

*OCBC/Great Eastern: Selling Great Eastern Life Vietnam for $48.2m to FWD Group, the insurance arm of Pacific Century Group, as GE plans to increase focus on Singapore, Malaysia, Indonesia and Brunei.

*GLP: Acquired a 89% stake in two investment management firms in China for Rmb448m.

*Q&M Dental: Acquiring 47.1% stake in Shenzhen New Perfect Dental Research, which provides custom-made prostheses to dental patients, for Rmb66m. The deal comes with a 12-year profit guarantee of $1-2m p.a.

*Hyflux: Divesting a wastewater treatment plant in Yangkou Port, Jiangsu province, to a Chinese state-owned company for Rmb52m, payable in tranches. The plant has been classified as asset held for sale since FY15, and management do not expect any significant impact to FY16 financials.

*Rex International: Disposing 10% stake in Lime Petroleum Norway and 5% stake in Masirah Oil to Schroder & Co Banque for US$5m and US$4.75m respectively, which will be settled via shares equivalent to a 25% stake in Dahan Petroleum.

*Otto Marine: Extended trading halt for two days till 8 Jun after receiving a delisting proposal from an offeror advised by RHB. A further announcement will be made after a board discussion.

*China Merchants Pacific: Voluntary privatisation offer from parent China Merchants Group has received acceptances of up to 78.49%.

*Lantrovision: The court has approved MIRAIT's scheme of arrangement offer of $3.25/share (1.5x 2QFY16 P/B). The last date of trading will be on 7 Jun.

*Novo Group: Received waiver from seeking shareholders' approval for its proposed disposal of three office units in China Merchants Tower, Shun Tak Centre, Hong Kong.

*Chip Eng Seng: Issuing $120m 4.75% notes due 2021 with net proceeds to be used for the financing of new property developments and investments.

*Vibrant Group: Clarified on media reports (23 May) that the group is currently in discussions for issuing Rmb1b panda bonds in China, but it is not in any binding agreement yet to assure the transaction would be completed.

Monday, June 6, 2016

Mapletree Commercial Trust

Mapletree Commercial Trust: strong potential for acquisition that might catalyse the stock
-CLSA sees high probability for an impending acquisition of Mapletree Business City Phase 1 (MBC)
-Current valuation is strong at 1.1x P/B, conducive to raise some equity funding for acquisition
-Sponsor, Mapletree Investments (MI) has strong interest to divest:
1)need to free up capital for investment based on 5-year biz plan
2)net gearing approaching 0.5x, a level where MI typically divest assets
-House estimate MBC to be valued at $1.3b-1.5b, and MCT to raise $0.6b-0.9b, assuming 40-50% debt
-DPU accretion expected to be around 1-8%
-CLSA maintains outperform with TP of $1.46