Friday, July 29, 2016

Sembcorp Marine

Sembcorp Marine's (SMM) 2Q16 net profit sank 90% to $11.5m after taking hits from rig delivery deferments, FX loss, higher finance costs and asset impairment. This brought 1H16 earnings of $66.3m (-69.2%), which included one-off gains, only met 31% of full-year consensus forecast.

For the quarter, revenue tanked 25% to $908.5m, as improvement in its offshore platform activities (+31.1%) business was unable to overturn the delays in its rigbuilding projects (-46.3%) because of customer delivery deferments and weaker repairs & upgrade business (-12%). In all, another four jackups (3 for Oro Negero, I for Perisai) were deferred.

Operating margin narrowed to 5.9% (1Q16: 7.8%, 2Q15: 12.2%) as the yard booked a $35m FX translation loss on revaluation of its UK and US assets, as well as increased depreciation charges from its new Tuas and Brazilian yards.

Bottom line was further pummelled by:
1) Doubling in finance cost to $22.5m on higher borrowings
2) $8.4m impairment loss on asset available-for-sale
3) 80.4% spike in losses from associates and JVs to $4.7m

While net gearing crept up to 1.1x from 1.03x in FY15, management resassured that this has since fallen below 1.0x following receipt of $900m cash payment from the recent delivery of a Noble jackup, Modec FPSO and Ivar Aasen topsides.

In view of the dismal results, interim DPS has ben slashed to 1.5¢ (1H15: 4¢).

The group secured $260m of variation orders relating to platforms and floaters in 2Q16, bringing its 1H16 contract wins to $320m, or just 20% of Maybank KE's full year estimate of $1.6b and 10% of the FY15 contracts ($3.2b).

Accordingly, net order book continued to deteriorate to $9.2b (FY15: $10.4b, FY14: $11.4b). Excluding the financially distressed Sete Brasil contracts, this would have shrunk to $6b.

On outlook, management expects the offshore downturn to persist, and business environment to remain challenging amid substantial cuts in capex among oil and gas firms.

There was also no significant progress since Sete Brasil filed for judicial restructuring on 29 Apr '16 and arbitration proceedings for a terminated Marco Polo Marine jackup rig is underway.

Maybank KE retains its negative view on SMM as rigbuilding activities will be among the last to benefit from any industry recovery. With China emerging a major offshore rig player, local yards are at risk that the next upcycle may not return to Singapore.

Sembcorp Marine is currently trading at historical low of 1.2x P/B, but this may no longer be a useful measure after fire sales of several drillships at a fraction of original costs. Consensus forward P/E of 14.6x is also susceptible to downgrades by the street.

Latest broker ratings:
Maybank KE maintains Sell, with TP of $1.00
CIMB maintains Reduce, with TP of $0.90
Credit Suisse maintains Neutral with TP of $1.20
Deutsche maintains Buy, with TP $1.44

SG Market (29 Jul 16)

SG Market: The market remains in a corrective phase with no clear direction as investors await BoJ's policy statement today.

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

From a chart perspective, immediate support for the STI is seen at 2,917, followed by 2,900, with topside resistance at 2,964.

Stocks to watch:
*DBS: Disclosed that it has $700m exposure (comprising loans, bonds, off-balance sheet items) to Swiber or ~0.3% of its gross loan book. As this is partially secured, DBS expects to recover half of it and will provide fully for the anticipated shortfall from its surplus general allowances. Net provision charge is estimated at $150m, and there will be minimal impact on its capital adequacy ratio. MKE maintains Sell with TP of $13.40.

*Sembcorp Marine: 2Q16 net profit sank 90% to $11.5m, torpedoed by a quadruple whammy of rig delivery deferments, FX translation losses, higher finance costs and impairment of AFS assets. Revenue shrank 25% to $908.5m (-25%) as weaker rigbuilding overshadowed improvement in offshore platform projects. Operating margin narrowed to 5.9% (1Q16: 7.8%, 2Q15: 12.2%) due to FX loss on revaluation of UK and US assets. Order book of $9.2b inflated by troubled Sete Brazil contracts. Interim DPS slashed to 1.5¢ (1H15: 4¢). MKE maintains Sell with TP of $1.00.

*SIA: 1QFY17 net profit nearly tripled to $256.6m (+182%), boosted by cheaper fuel and divestment gains. Revenue dipped -2.1% on weaker passenger carriage (-1.7%) and yield (-3.7%) and weaker cargo yield (-17.4%) at the parent airline, but partially compensated by improved performances from SilkAir and Scoot. Outlook remains challenging as yields continued to be pressured by global economic uncertainty, intense competition and aggressive capacity expansion. NAV/share at $11.44.

*CDL Hospitality: 2Q16 results came in at the lower end of forecasts with DPU of 2.23¢ (-0.9%). Revenue of $42.5m (+8.9%) was lifted by contribution from recently acquired Hilton Cambridge City Centre and completion from refurbished mall Claymore Connect, which more than offset the weaker performance from Singapore hotels and Maldives resorts. NAV/unit at $1.5726.

*SMRT: Temasek and SMRT will hold shareholder meetings to discuss the proposed acquisition, after concerns were raised by investor activist group SIAS over the buyout offer.

*Dairy Farm: 1H16 results missed; net profit climbed 3% y/y to US$199m, buttressed by full contribution from China associate Yonghui, while revenue slipped to US$5.56b (-1%) on lower sales from supermarkets in Singapore and Indonesia. Maintained interim DPS of US$0.065.

*China Aviation Oil: 2Q16 net profit grew 32.8% y/y to US$23.6m on revenue of US$3.02b (+19.8%), boosted by increased contribution from other oil products (+138%). Gross margin contracted to 0.3% (-0.1 ppt) on a shift in sales mix, while bottom line was buttressed by stronger associate contribution of US$19.6m (+43.7%).

*Singapore Shipping: 1QFY17 net profit tumbled to US$1.6m (-20.1%) despite higher revenue of US$10.8m (+1.2%), as improvement in agency & logistic business was outweighed by the slump in ship owning segment. Operating margin shrank 4.6ppt to 21.9% on higher depreciation, logistics, and staff costs, while bottom line was dragged by higher finance costs (+25.8%). NAV/share at US$0.164.

*GuocoLand: Disclosed that pre-commitment levels for its integrated office development Guoco Tower has reached >60% (Apr: 14%). While this may improve sentiment on office space demand, MKE opines that rents could continue to fall on the oversupply.

*Ascendas India Trust: Acquiring the fourth aVance Business Hub in Hyderabad India for an estimated $36.4m. The IT building with floor area of 0.39m sf has leasing commitment of 46.3%, and construction is expected to complete by 31 Mar '17.

*Vard: Secured a US$70m contract for the design and construction of three vessels for an undisclosed client.

*GKE: Entered MOU to purchase maritime logistics provider TNS Ocean Lines for $9m. Funding will be partly satisfied in cash ($2.7m) and 52.5m new shares at 12¢ apiece.

*Chiwayland: Investing Rmb4.9m into a 49:51 JV with HK-listed Modern Land China to develop its first science residential project on a 13,270 sqm land in Wuhan, China.

*Ntegrator: Secured a $11.3m contract from a regional service provider to supply outside plants services, involving pipeline and manhole works. The contract will commence in Aug '16 and target to complete in three years.

Wednesday, July 20, 2016


Noble: (S$0.17) Investors better off elsewhere
- Reported to exit its European power and natural gas trading business by end-2016.
- This follows Noble's intention to sell its prized energy business, Noble Americas Energy Solutions, a month ago.
- Raises questions on the group's future.
- Despite fund raising measures, credit agency S&P has previously cited that Noble's liquidity was less than adequate; could be cut further over the next 12 months.
- Outcome for Noble now remains uncertain at this point with the potential sale of its assets, as well as the resignations of key management personnel.
- Investors are better off elsewhere.

Keppel REIT

Keppel REIT: (S$1.07) 2Q16 DPU in line but supply headwinds loom
-2Q16 results met expectations even though DPU fell to 1.61¢ (-6.4%) as distributable income dropped 4.2% to $52.5m (including capital top-up).
-Revenue and NPI slipped to $40.6m (-5.6%) and $32.5m (-6.5%) respectively, due to the divestment of 77 King Street in Sydney earlier in the year.
-Occupancy was healthy at 99.7% (+30 bps q/q) with weighted average lease to expiry of 6 years. Aggregate leverage was stable at 39% with average cost of debt at 2.55% (-3 bps q/q)
-Management has proactively engaged tenants to renew leases expiring in 2017-18. Lease expiry profile is now 0.6%/ 9.5%/5.5% for 2H16/ FY17/ FY18.
-Broadly, Maybank KE advises investors not to chase the yield-driven rally before the office supply cycle peaks out in 2017/18.
-Keppel REIT is currently trading at 6% annualised 2Q16 yield and 0.75x P/B.
-Maybank KE maintains Hold, raises TP to $1.05 from $0.97


Wilmar: Expects to report a net loss of approx. US$230m for 2Q16
- The losses were due mainly to untimely purchases of soybeans
- CIMB negative on this as its 2Q results will be significantly below expectations
- Cuts its FY16-18 earnings estimates by 9-31% and our SOP-based target price drops to S$3.23
-Downgrade to Reduce due to concerns over its near-term prospects

Capitaland Commercial Trust

Capitaland Commercial Trust: (S$1.555) 2Q in line; waning demand now a reality
- Gross revenue and NPI slid 2.2% and 4.5% on lower occupancies, increased property tax and leasing commission incurred.
- Distributable income rose 1% thanks to higher JV contribution from the commencement of leases at 40% owned CapitaGreen.
- Leases expiring in 2016 have been mostly secured, with 11%/5% of office/retail leases to expire from now to end-2017.
- Going forward, CCT expects the ongoing acquisition of the remaining 60% stake in CapitaGreen to be the REIT's growth driver for DPU in 2016 and 2017.
- Estimated pro forma DPU of 2.24¢ implies distribution yield of 5.8%.

SG Market (20 Jul 16)

SG Market: The overbought market is likely to see some profit taking pending 2Q results releases by some heavyweights this week.

Regional bourses in Tokyo (-0.7%), Seoul (-0.4%) and Sydney (flat) are mostly seeing profit taking in place.

From a chart perspective, underlying support for STI is at 2,880, with upside resistance at 2,964.

Stocks to watch:
*Wilmar: Warns of a 2Q16 net loss of US$230m (1Q16: US$239m profit) on challenging operating conditions within its oilseeds and grains, and sugar segments. The shock profit warning could drag its 1H16 earnings down to ~US$9m, well below its full year estimate of US$1.2b. Results to be released on 11 Aug.

*Keppel REIT: 2Q16 DPU of 1.61¢ (-6.4% y/y) was in line. Revenue and NPI slipped 5.6% and 6.4% to $40.6m and $32.5m, respectively, following the divestment of Sydney office 77 King Street in 1Q16. Portfolio occupancy rose to 99.7% (+0.3ppt) with WALE of 6 years, while aggregate leverage remained at 39% with average cost of debt at 2.55%. Trades at 6% annualised yield and 0.77x P/B. MKE rates it as Hold and raises TP to $1.05 from $0.97.

*Capitaland Commercial Trust: 2Q16 results in line with DPU of 2.2¢ (+0.5% y/y) as higher JV contribution from the commencement of leases at CapitaGreen helped buffer gross revenue of $67.6m (-2.2%), due to lower portfolio occupancy of 97.2% (-0.9ppt). Trades at 5.6% annualised yield and 0.89x P/B.

*Procurri: IPO of 68.8m new shares at $0.56 apiece was 1.9x subscribed, of which the public tranche of 6.9m shares was 10x subscribed. Notable investors include Temasek, NTUC Income, Eastspring Investments, Havenport Asset Management and Pheim Asset Management. Valued at 17.8x FY15 P/E and 1.3x P/B, the networking equipment supplier will debut today.

*IREIT Global: Adjacent property owner of IREIT’s Darmstadt Campus Carpark (DCC) is trying to claim public access to a portion of space, which IREIT intends to defend. Outcome not expected to be material given that the contested assets contribute just 1% to gross rent.

*Lifebrandz: Signed non-binding term sheet to issue $20m of two-year convertible senior notes at 6% p.a. in four tranches to US investment firm Crede Capital Group. Net proceeds will be used to fund the proposed acquisition of Tolukuma Gold Mines.

*China Fibretech: Trading is suspended after three customers are claiming a total of Rmb466m in compensation, as they alleged that group's product failed to meet requirement and de-coloured, resulting in substantial financial losses.

Tuesday, July 19, 2016

Genting Singapore

Genting Singapore: (S$0.81) Appears overstretched after recent surge
- Appears a little overstretched following its recent 12% jump over the past two weeks.
- The boost may be attributed to:
1) Strong May tourist arrivals (+9.8% y/y; 5M16: +13.3%);
2) Moderating doubtful debt from 3Q16.
- Investors would be keeping their eyes peeled on the release of results by Las Vegas Sands on 27 Jul, which could provide a read through to GENS' performance in 2Q.
- The street currently has 9 Buy, 9 Hold and 3 Sell ratings on the stock, with an average TP at $0.83.


SGX: CLSA maintains Sell with TP of $6.70 on last week's trading disruption
- Improvement in governance seen as a positive after announcing the establishing of a subsidiary by 2H17 to house its market surveillance/member supervision functions
- CLSA does not anticipate substantial changes in regulatory intensity as a result of the change
- More concerned about recent equity trading disruption.
- Moratorium on fee increases could be extended along with possible fines, higher capex to improve systems
- Liquidity could also be depressed by weaker confidence in the exchange.
- SGX to report results on 27 Jul.

SG Market (19 Jul 16)

SG Market: The Singapore market may consolidate its heady 7.3% gains since late Jun, as investors look for fresh direction from upcoming 2Q results.

Genting Singapore appears a little overextended following its recent surge on news of strong visitor arrivals in May. The upcoming earnings release by Marina Bay Sands on 27 Jul could provide a good read-through as to how Genting Singapore performed in 2Q.

Regional bourses opened mixed in Tokyo (+0.9%), Seoul (-0.2%) and Sydney (flat).

Technical indicators are in overdrive as STI approaches topside resistance at 2,964, with underlying support at 2,880.

Stocks to watch:
*Keppel Infra Trust: Flat 2Q16 DPU of 0.93¢ was in line with estimates despite a larger unit base. Revenue of $137.4m (-10.2%) was impacted by lower tariffs from City Gas (-10.1%) and outages at Basslink (-65.1%), partially mitigated by stronger contributions from its concessions (+7.7%), while distributable cash flows jumped 15.5% to $38m on lower operating expenses (-9.4%). Trading at 7.3% annualised yield and 1.6x P/B.

*Keppel DC REIT: 2Q16 DPU of 1.67¢ (+3.1%) met expectations. While gross revenue of $24.9m was hit by lower rental income at Keppel DC Dublin 1, as well as reduced contributions from overseas properties on weaker FX against SGD, this was mitigated by reduced property expenses (-32.7%). Portfolio occupancy inched up to 92.3% (+0.3ppt q/q), with WALE of 8.7 years, while aggregate leverage stood at 29.1% (-0.5 ppt q/q) with cost of debt of 2.4%. Offers 5.7% annualised yield at 1.3x P/B.

*SMRT: Remains halted pending an announcement. Media sources tout that controlling shareholder Temasek Holdings, which owns a 54% stake is mulling to take the transport operator private.

*Innovalues: Disclosed that discussions with parties in connection with a possible M&A transaction are still ongoing, allaying market fears that it might have been cancelled following the 14% selldown yesterday. MKE maintains Buy with TP of $1.15.

*Keppel T&T: Entered into a collaboration with managed security services provider Quann to provide cyber security solutions for its data centre customers.

*Halcyon Agri: Mandatory conditional cash offer by Shanghai-listed Sinochem for $0.75/share. Undertakings on the offer are expected to lift Sinochem's stake to at least 54%.

*GKE: Redeveloping 39 Benoi Road into a five-storey ramp up warehouse, which will more than double existing space from 0.2m sf to 0.53m sf. The development is targeted for completion in Jul '17.

*Fisher Tech: Acquiring a 41,195 sqm leasehold property with 39 years of remaining lease in Suzhou, China, for Rmb56m, with the intention to consolidate its manufacturing operations.

*Otto Marine: Submitted $2.8m claim against Robert Knutzen Shipholdings, which has defaulted on charter payments for two vessels. Separately, Otto received a US$0.2m claim by a vendor and disclosed that it is in the midst of making payment.

Monday, July 18, 2016


SPH (S$4.07): 3QFY16 results disappoint in struggle to cope with the digital age
- 3QFY16 results missed street expectations as net profit slumped 46.4% to $52.7m, hurt by impairment charges
- Revenue fell 5.7% to $296.7m, dragged by a 7.1% drop in its core media business to $216.6m on weaker advertising sales
- Impairments were made to its magazine business whose performance was affected by the ongoing shift in consumer behaviour.
- Challenging operating environment to persist in view of the uncertain economic outlook and the continued evolution of consumer behaviour and media landscape
- Valuations for the media group appear relatively demanding
- Street is bearish on the counter with 6 Hold, 5 Sell ratings and consensus TP of $3.52, implying downside of 13.5% from last close.


Acromec: CIMB has unrated note
-Niche mechanical, electrical and process (MEP) service provider specialising in controlled environments, such as cleanrooms, high containment laboratories, etc.
- Listed on 18 April 2016 on Catalist via issuance of 27m new shares.
-Revenue derived from blue-chip clients in Singapore. Minimal FX exposure.
-Company aims to grow via M&A and expansion outside Singapore.
- Acromec trades at CY17 P/E of 9.6x (Bloomberg) versus peer average of 10.7x. The Singapore healthcare sector trades at CY17 P/E of 32.5x.


SMRT: Transferring rail operating assets, including trains to LTA for $991m (net book value). While capex obligations are relieved, SMRT does not intend to pay special dividend with the sale proceeds and MKE sees sharp margin decline in the new regime. House downgrades to Sell with TP of $1.36.

SG Market (18 Jul 16)

SG Market: The market may pull back from overbought levels as investors trawl for fresh leads with several blue chips including Keppel Corp, SATS and CMT reporting results this week.

Singapore Jun exports fell 2.3% y/y (est: -3%, prior: +11.6%) amid weakness in both electronic (-1.7%, prior: -6%) and non-electronic (-2.5%, prior: +19%) shipments. Among the top export markets, EU (-5.8%), China (-9.9%) and Indonesia (-15.9%) fared the worst, while US (+5.9%) and Taiwan (+23%) continued to recover.

Regional bourses opened mixed in Seoul (-0.2%) and Sydney (+0.1%), while Japan is closed for Marine Day.

From a chart's perspective, STI appears overstretched with topside resistance at 2.964 and underlying support at 2,880.

Stocks to watch:
*SMRT: Transfer of operating assets to LTA for $991m (net book value) will improve balance sheet and relieve it of large capex obligations. But rail business will suffer from structurally lower profitability as margins will be capped under new regime and investors will be disappointed that the group does not intend to pay a special dividend. MKE downgrades to Sell with TP of $1.36.

*M1: 2Q16 net profit came in low at $41m (-7.5%) as sales dropped 13.2% to $240.4m on lower handset sales (-50%) and flat service revenue (-0.1%). While overall customer base rose 6.4% to 2.1m, ARPU deteriorated across the board and pressured EBITDA margin to 40.3% (-0.6ppt q/q). Management lowered its full-year earnings guidance to single-digit decline from stable. MKE maintains Hold with TP of $2.94.

*Frasers Centrepoint Trust. 3QFY16 DPU of 3.04¢ (+0.1% y/y) met expectations. Gross revenue slipped 4.4% to $45m on lower contribution from Northpoint arising from AEI works, while NPI fell a deeper 5.1% to $31.2m from a jump in provision for doubtful debts. REIT trading at an annualised 5.7% yield and 1.1x.

*SPH: 3QFY16 results missed estimates as net profit slumped 46.3% to $52.7m, dragged by impairment charges of $28.4m relating to its magazine business and lower investment income. Revenue slipped 5% to $291.6m on weaker advertising revenue (-9.2%), while operating margin contracted 12.9 ppt to 20.5%. The group has embarked on a comprehensive review of its media business given the challenging conditions. NAV/share at $2.11.

*SIA: Jun passenger load factor slid 2.1ppt to 77.8%, as capacity reduction (-1.3%) lagged traffic (-3.8%), while cargo load factor was lifted by 0.8ppt to 61.1%. Apart from operational improvement at Scoot (+0.9ppt to 83.5%), its other subsidiary carriers SilkAir (-4.2ppt to 68.1%) and Tigerair (-1.5ppt to 83.5%) suffered weaker load factors.

*GLP: Acquired a 70% stake in logistics service provider China X-G Tech for US$21.9m, which is expected to supplement its China portfolio.

*CWT: Updated that discussions on a potential buyout is still ongoing.

*Tat Hong: Disclosed it is still in discussions on a potential buyout.

*TalkMed: ED and CEO Ang Peng Tiam was found liable on two out of four charges brought against him, in relation to a complaint stemming from a treatment rendered in 2010 and fined $25,000. Ang intends to appeal against the decision.

*YuuZoo: Reprimanded by SGX for inappropriately posting a favourable research report by Edison Research in May 2015, which presented a blue-sky scenario of a fair value without any basis.

*Geo Energy: Disclosed it is in non-binding negotiations for a potential acquisition in response to SGX's query on Fri for its recent surge in share price.

Friday, July 15, 2016


Flash: SMRT said to be moving towards an asset-light rail operating model​
- Trading halt requested at noon
- No new model likely to see SMRT focus on operations as well as maintenance of trains
- If true, SMRT could see substantial buying interest as the new model would allow the company to pare down capex significantly, depending on amount of details provided.
- More info will be shared upon official announcement.


SingPost: Key takeaways from Chairman Simon Israel at AGM include that future dividends, M&A integration and goodwill impairment could be tested.

1) Board highlighted that dividend needs to be reviewed, so the 7¢ dividend could be at risk, as more investment might be needed
2) On M&A, the focus will be on integration, and how it boosts bottom line. 3QFY3/17, a peak quarter for ecommerce, will be key to watch
3) Lastly, goodwill impairment cannot be ruled out. If acquisitions cannot deliver, there will be no hesitation to write down goodwill.

Maybank KE has Sell call on SingPost with TP of $1.29


REITS: CLSA remains Overweight and adjusts TPs across the board
- Lowered its risk free rate assumption on expectations that rates will be lower for longer
- Sector preference: Industrial>Retail>Office>Hospitality
- Top picks: Keppel DC REIT (Buy, TP: $1.33), Mapletree Industrial Trust (Outperform, TP: $1.91), Mapletree Commercial Trust (Outperform, TP: $1.65), and Ascendas Reit (Outperform, TP: $2.59)


SIA: Deutsche is cutting earnings forecast and TP
-Cutting earnings forecast of FY17 by 7.9% and FY18by 11.7%
-this accounts for lower than expected capacity increase and weaker yields
-competition from LCCs and Middle East airlines continue to rise
-jet fuel cost expected to increase going forward, eroding fuel savings
-Capex to grow 50% in FY19 from FY17, hence future dividends may not be as generous
-Deutsche maintains Hold, but cuts TP to $9.80 from $10.85

SG Market (15 Jul 16)

SG Market: The Singapore market is likely to play catch-up with the global rally after trading was halted mid-day due to a technical hitch at SGX yesterday.

Following the technical lapse at SGX which caused disruption yesterday, some market watchers opine if investors would now peg a valuation discount on the exchange due to operational risks.

Regional bourses opened higher in Tokyo (+0.3%), Seoul (+0.6%) and Sydney (+0.2%).

From a chart's perspective, near term STI appears a little overstretched with topside resistance at 2,964, and support at 2,880.

Stocks to watch:
*Noble: Trading deadline of nil-paid rights extended to the close of session today following the half day trading on SGX yesterday. Selling pressure may persist should Chairman Richard Elman continue to pare his remaining 263.6m rights (excluding the 625.9m he has undertaken to underwrite). At 4.8¢, the rights trade at a 5.4% discount to the mother share of $0.167.

*SingPost: Key takeaways from chairman Simon Israel at AGM - 1) departure of former CEO Wolfgang Baier was due to fractured board-management relationship, 2) diversification from its core postal business is necessary and this is expected to lower blended ROEs, and 3) dividend policy needs to be reviewed, amid its transition into an e-commerce logistics player.

*Ezra: Sank into a 3QFY16 net loss of US$247m (3QFY15: US$0.4m profit), bringing 9MFY16 loss to US$583.4m vs FY16 street forecast of US$154.1m loss and market cap of $197m. Quarter revenue fell 10% to US$125.7m, dragged by weakness in the offshore industry, while bottom line was impacted by a US$181.3m disposal loss. NAV/share at US$0.2715 ($0.365) implies the stock is valued at 0.18x P/B.

*First REIT: 2Q16 results in line with DPU of 2.11¢ (+1.9%), despite an enlarged unit base. Distributable income grew 5.5% to $16.2m, driven by maiden contribution from a newly acquired Kupang hospital cum retail mall. The Indonesian-based healthcare trust is trading at 6.5% annualised yield and 1.3x P/B.

*Ezion: Formed a 33:67 JV with Pacific International Offshore to provide additional assets to a national oil company, an existing client, for development and production related work.

*China Everbright Water: Secured a BOT wastewater treatment project in China's Shudong Ju County, which has a 30-year concession period and capacity of 20,000 tpd. Total investment required is Rmb50m and operations are expected to commence in 2017.

*Sapphire: Secured new rail infrastructure contracts in China worth Rmb873m, boosting its order book to ~Rmb2.75b. It is also in talks with governments in South Asia on business opportunities in the region.

Thursday, July 14, 2016

Geo Energy

Geo Energy (S$0.125): Thermal coal price surge suggest earnings upside​
- Thermal coal prices have jumped 11% YTD on renewed Chinese buying fervour
- This comes as Chinese domestic thermal coal surged 41% YTD, forcing Chinese buyers to seek out cheaper coal
- We adjust Geo Energy's FY16 earnings to factor in higher coal prices
- It is currently trading at 16.6x FY16 P/E vs 19x blended forward P/E of Chinese and Indon peers.

HPH Trust

HPH Trust: Brexit implications and debt amortization
- Brexit would negatively impact topline should it result in depressed economic activity in the region or in a severely weakened euro.
- However due to the lack of clarity regarding the implications of Brexit, OCBC keep its FY16 growth assumptions.
- Further, OCBC expects management to adjust their pace of debt repayment given the slower than expected pace of rate normalization.
- OCBC's FY17's DPU forecast rises from HK28¢ to HK30¢ and TP increases from US$0.41 to US$0.43.
- HPHT is currently trading at a FY16 yield of 7.9% and FY17 yield of 8.5%.

SG Market (14 Jul 16)

SG Market: The recent rally is expected to take a breather ahead of the start of 2Q results season tomorrow, with eyes remain peeled on potential BoE rate cut today.

Defensive plays telecoms and consumer, as well as yield plays such as S-REITs look to outperform today, taking cue from fund flows in Wall Street overnight.

The recent coal price spike to a 10-month high due to higher demand from China could boost interest in SGX-listed Geo Energy.

Regional bourses opened mixed today in Tokyo (+0.5%), Seoul (-0.2%) and Sydney (+0.2%).

STI appears overextended with immediate support at 2,880 and resistance at 2,964.

Stocks to watch:
*Economy: Singapore's 2Q GDP grew 2.2% y/y (1Q16: +2.1%) in line with estimates. The manufacturing sector expanded 0.8%, reversing from the 0.5% decline in previous quarter, supported by higher output from the biomedical and electronics clusters.

*Noble: Chairman Richard Elman disposed another 89m nil-paid rights on the open market at 5.1¢ apiece, giving rise to speculation if Elman would pare an additional 263.6m rights (excluding the 625.9m he has underwritten) on the final trading day for the rights today. Rights at 4.8¢ trades at 5.4% discount to the mother share of 16.7¢, after taking into account the 11¢ subscription cost.

*Soilbuild REIT: 2QFY16 results in line with DPU of 1.56¢ (-3.1%) diluted by enlarged unit base. Distributable income rose 3% to $14.7m, thanks to a forfeit of deposit after one of its tenants filed for judicial management, as well as lower property taxes at West Park BizCentral. REIT offers 8.9% annualised yield and trades at 0.9x P/B.

*Q&M Dental: Conducted swift action against its Malaysian managaging partner, which under-reported earnings by only meeting the profit guarantee. Q&M will be taking legal action to recover its fair share of profit and assume full ownership of all four dental clinics in Johor. Limited impact to Q&M's earnings and operations as the clinics contribute less than 1% to group’s earnings. MKE maintains Buy with TP of $1.08.

*Best World: Invested $2.5m for a 52.1% stake in a dental stem cell bank to expand its product offering of health and wellness-related products. The JVCo intends to leverage on the direct seller's distributor network across 10 countries to market stem cell banking services.

*CITIC Envirotech: Opened doors to its new 5,100 sqm innovation centre and membrane production facility in Singapore, which is expected to double production capacity to 10m sqm of high-tech membrane per annum to meet demand. In conjunction, group signed an agreement with global membrane technology leader Hydranautics on the design, fabrication and sales of containerised membrane systems.

*Mermaid Maritime: Clinched US$5.8m contract to provide technical support service personnel to a national offshore oil and gas company for a year.

Wednesday, July 13, 2016

Procurri (IPO)

Procurri: Premium IPO valuation for networking equipment supplier​
- IPO of DeClout's 69%-owned subsidiary will comprise of 68.9m new shares at $0.56 apiece. Post offering, DeClout will hold a 46.5% stake, free float: 33.6%
- Procurri supplies data centre equipment and provides maintenance services
- FY15: Earnings jumped 2-fold to $8.8m on $122.8m (+59.7%) revenue. Mainly attributable to inorganic growth
- FY16E: To book $2.2m in listing expenses. Relatively small order book of $6.8m
- Offers exposure to emerging trends such as cloud computing
- Public tranche (6.9m shares) open for balloting from 13 Jul till 18 Jul (noon). Trading to commence on 20 Jul


SingPost:(S$1.565) Collaboration between Lazada and China Post, without SingPost..
- Lazada and China's state-owned postal provider China Post have entered into a collaboration to enhance cross-border logistics solutions.
- To the surprise of some, the collaboration does not involve SingPost, which was touted to be a beneficiary to Lazada's fast-growing presence in Asean as an eCommerce marketplace.
- Anticipating a potential impairment of up to $493.5m due to questionable acquisition goodwill, which amounts to more than 30% of SingPost's total equity.
- Maybank KE has a contrarian Sell call on the counter with a street low TP of $1.29.

First Resources

First Resources: MKE upgrades to Buy from Hold with TP of $1.71
- Unduly sold down despite unchanged fundamentals
- 2Q16 earnings to remain week due to lower FFB output
- We expect 2H16 earnings to recover on output pickup
- 2H16 CPO likely to average RM2,450/t (+7%) with FY16 ASP
- Currently trading at 15.4x FY16e P/E vs Malaysian peers of 26.9x and Indon peers of 20.9x


Yoma: CLSA reiterates Buy with TP of $0.79
- Agreement to rope in Mitsubishi Corp/Mitsubishi Estate, IFC, and ADB as equity stakeholders in Landmark Development
- New partners - strong brand names - provide yet another vote of confidence in the project
- Agreement will see Yoma's stake be reduced to 48% (prior: 80%)
- Also removes any equity raising overhang needed for construction costs

Sembcorp Industries

Sembcorp Industries: Deutsche believes utility business is markedly undervalued
-Utility FY16e P/E 4.4x vs. 10Y avg of 7.8x, close to -1 SD below 10Y mean
-Overall SCI FY16e P/E 7.9x lower than electric utility peers (14x), IPP (10.3x), water peers (15.9x)
-Low valuation is due to execution risk and outages of power plants, but Deutsche believes its overdone
-close to 4GW of new capacity to come on stream from now till 2018
-expected to grow utility earnings around 80% by 2018
-Operation experience at earlier power plants to help reduce execution risk at upcoming facilities
-Jack-up rigs order book risk at SembMarine is also fading
-Deutsche maintains Buy with TP of $3.60

ST Engineering

ST Engineering: Aerospace division secured orders of $770m in 2Q16, bringing its 1H16 orders to $1.2bn (1H15: $1.2bn).
- CIMB expects q/q improvements in 2Q16 earnings backed by stronger electronics and marine.
- The house maintains Add with higher target price of $3.60, now pegging to higher P/E of 22x from 20x on the back of seady earnings backed by orders.
- The house likes STE for its net cash, decent dividend yield, and high ROE vs. other industrial names in Singapore that are facing headwinds in offshore orders.

SG Market (13 Jul 16)

SG Market: Singapore shares are likely to be swept along with the rising risk tide amid the easing of Brexit fears and continuation of easy central bank policies, as well as the overnight surge in crude prices.

Basic materials, oil-related companies and CPO-related plays could pop. Counters include Ezion, Ezra, KrisEnergy, First Resources and Golden Agri.

In addition, traders can seek exposure in high-beta stocks to play the risk-on momentum. Top five beta STI names are:
1) Sembcorp Industries
2) Sembcorp Marine
3) Keppel Corp
4) Ezion
5) Golden Agri

Further, S-REITs should continue to edge higher as investors anticipate a pushback on interest rate hikes. MKE's top Buys in the sector are Ascendas REIT (TP: $2.57) and Mapletree Industrial Trust (TP $1.78).

Regional bourses opened firm this morning in Tokyo (+1.6%), Seoul (+1%) and Sydney (+0.6%).

From a chart's perspective, momentum indicators suggest strength in the STI as it heads towards its recent peak at 2,964, with support reset at 2,880.

Stocks to watch:
*Macro: IMF urged the US Fed to hold off on raising interest rates if Brexit materializes but foresees negligible economic fallout.

*Property: Market watchers cite that the earliest timing for policy relaxation is in 2017.

*GLP: To syndicate a final 5.45% stake in its US industrial asset portfolio for US$108m. GLP will subsequently retain a 9.85% stake in the portfolio, which is expected to generate returns within the first year of investment from share of operating results and fund management fees. Stock trades at 0.8x P/B.

*SCI: Wholly owned Nanjing International Water Hub established a strategic partnership with two respected Chinese state level research institutes, with an aim to raise expertise in wastewater treatment.

*ST Engineering: Secured $770m new aerospace contracts in 2Q16 (1Q16: $443m), including airframe maintenance and other repair and overhaul works. MKE's last rating was a Hold with TP of $3.17.

*Vard: Obtained a NOK100m contract from UK's shipbuilder Cammell Laird to supply engineering and provide electrical installation services.

*Declout: Filed the final IPO prospectus of 69% owned tech equipment provider Procurii on the SGX Main Board. The unit will issue 68.9m new shares at $0.56 apiece, with enlarged share base of 280m shares. Declout will retain a 46.5% stake in Procurri, and the spinoff is expected to unlock $40.6m, bringing the group into a net cash position of $5.9m.

*OKP: Secured a 15-month contract worth $19.3m to construct new roads and underground basement linkways at Punggol Road. This brings total contract value secured year-to-date to $101.8m, and net construction order book to $414.1m.

*AusGroup: Clinched contract from Technip Oceania Pty Ltd to supply scaffolding and rope access services on the Shell-operated Prelude FLNG project in Perth and Korea.

*Lifebranz: Terminated proposed acquisition of four medical aesthetics clinics after pre-conditions were not met. Separately, group entered a non-binding term sheet to acquire Tolukuma Gold Mines, which owns a non-operational gold mine in Papua New Guinea, for US$212m.

Tuesday, July 12, 2016

SG Market (12 Jul 16)

SG Market: The broad market is likely to push higher on revival in global risk appetite and potential easing in Japan.

Regional bourses opened positive this morning in Tokyo (+1.6%), Seoul (+0.2%) and Sydney (+0.5%).

STI is poised to break above its minor double top resistance at 2,880, towards the recent peak at 2,964.

Stocks to watch:
*Macro: DPM and Acting Finance Minister Tharman expects Brexit to dampen global growth and create more market volatility and economic uncertainty. However, the MTI believes the impact on Singapore’s short-term growth is not significant unless it coincides with other major shocks.

*Capitaland: 50:50 JV between Ascott and Qatar Investment Authority is acquiring a 221-unit serviced residence in Melbourne, Australia for A$71m, which will be subsequently leased to Quest Apartment Hotels when launched in 2019.

*GLP: Issuance of Rmb1.5b panda bonds, comprising a 3-year 3.12% bond and 5-year 3.58% bond, on Shanghai Stock Exchange was more than 3x subscribed. Proceeds will be used for debt repayment and business growth in China.

*China Everbright Water: Completed two wastewater treatment projects in Ji'nan with daily capacity of 50,000 tpd and 70,000 tpd.

*Perennial Real Estate: Investing Rmb189m into a 70:30 China JV with local developer Guangzhou Tongjie Real Estate, to engage in a property management business.

*Chiwayland: Marks maiden foray into US with a 50:50 JV with established developer Urban Commons, to develop a US$69m premium residential and hotel project in LA's Wilshire Corridor.

*Tee Land: 51:49 JV with KSH Holdings acquired a 1,115 sqm freehold site in Geylang for $20m, to develop a block of residential flats.

*Cheung Woh Tech: 1QFY17 net profit crept up 0.8% to $3.2m on higher associate contribution from Jiangsu Tysan Precision Engineering. But revenue dipped 1% to $21m, as deterioration in precision metal stamping (-16.7%) segment outweighed improvements in HDD components business (+2.6%). Gross margin narrowed to 18% (-3.8 ppt) on higher HDD material and labour costs. NAV/share at $0.3723.

*Sincap: Proposed placement of 36.7m new shares at 6¢ apiece, or 131% above the last closing price, to two individuals who owns a motorcycle trading business. The placement shares represent 7.6% of the existing share capital and 7% of the enlarged base. Net proceeds of $2.2m is intended to fund an acquisition.

*Pteris Global: Sharp Vision has obtained 91% acceptance level for its cash offer and the counter will be suspended for trading. Closing date for the $0.85/share buyout offer will be on 25 Jul.

Monday, July 11, 2016


OCBC: As Brexit may lead to a weaker global economic environment, RHB has cut its loan growth assumption for OCBC to 1.5%.
- Whilst its NPL ratio may only inch up in 2Q16, house sees further deterioration in 2H16.
- Hence, RHB also cuts its 2016-2017F net profit by 6%/12% respectively.
- RHB maintains NEUTRAL with lower TP of $8.68 (from $9.50), on the back of higher loan loss provisioning and weaker loan expansion.

Del Monte Pacific

Del Monte Pacific: CIMB visited Del Monte Pacific recently for an update post its 4Q16 results.
- DMFI lost US$5.4m on a core basis and was in negative operating cash flow.
- DMPL continues to gain strength in the Philippines and the S&W brand did well.
- 1Q17 could be loss-making as this is a seasonally weak quarter. DMFI may need another 2 years to realize full potential.
- Still targeting preference share issuance by end 2016. Investors should not hope for a repeat of the 1.33 UScts DPS if the preference share issuance is successfully completed.
- CIMB maintains Buy with TP of $0.38


Triyards: 3QFY16: Lower Earnings On One-Off Costs And Higher Interest Expense
- Reported a lower-than-expected net profit of US$4.1m (-24% yoy), on lower gross profit margin and higher interest expense.
- Net gearing rose higher to 67% but was as expected.
- US$175m order for a pair of liftboats was shifted from end-FY16 to 2QFY17.
- The contracting environment remains challenging and UOB Kay Hian cuts TP to $0.44.


GLP: Company share buybacks continue unabated
- Company begun to repurchase its shares in the open market since 19 May, in the range between $1.70 and $1.95.
- So far, GLP has gone into the market on 35 occasions to purchase 57.8m shares for $104.1m (average price of $1.80/share).
- OCBC believes that these share buybacks are accretive to shareholders at currently undervalued share prices.
- OCBC continues to take a positive view on management team’s pragmatic and disciplined approach to capital allocation in current conditions, and continue to see long-term value in GLP’s shares.
- OCBC maintains BUY with an unchanged fair value estimate of $2.37.

SG Market (11 Jul 16)

SG Market: Positive sentiment is expected to spill over to the local market following the blowout US jobs report last Fri. China looms large in the calendar for the week ahead, with 2Q GDP and Jun industrial output, trade and credit data, as well as 2Q GDP data in Singapore.

The relief rally should benefit the broad market today, with outperformance from beaten down sectors such as basic materials, industrials and financials.

Regional bourses opened positive this morning in Tokyo (+1.8%), Seoul (+1%), and Sydney (+1.7%).

From a chart perspective, STI may attempt to test its minor double top resistance at 2,880, with support at 2,810.

Stocks to watch:
*Macro: Economists do not expect MAS to adjust its exchange rate policy despite the SGD strengthening 10-15% against the sterling pound since the Brexit vote, given the influx of safe haven funds.

*SIA: EU Commission has approved a JV between SIA and Airbus to undetake MRO services, with a focus on heavy and line maintenance to commercial airlines operating Airbus aircraft in the Asia-Pacific region. MKE last had a Hold rating on SIA and TP of $10.00.

*Halcyon Agri: Shareholders have met all pre-conditions relating to the proposed acquisition of a 30.1% stake by Sinochem, which will trigger a mandatory buyout offer at $0.75 each.

*Spackman Entertainment: Revised its proposed sale consideration of loss-making Opus Pictures (100%) and UAA Korea (51.5%) from US$1.9m via selective share buyback of 14.2m shares to US$1m cash. It expects to book a net gain of US$1.4m and will use the proceeds to fund working capital requirements and/or investment opportunities.

*Datapulse Technology: Divesting seven Taipei commercial/office units to GSiMedia for NT$144.5m ($6m), and expects to realise a net gain of $5.6m.

*Swiber: Disclosed that it has outstanding letters of demand for an aggregate US$4.8m of trade claims. The group is currently seeking legal advice and is confident that it has sufficient resources to satisfy all claims. Separately, AMTC has delayed its proposed subscription of preference shares in Swiber for US$200m. prompting the latter to issue a letter of demand.

*Advancer Global: Trading debut for the domestic worker and facilities management provider on SGX Catalist board today. IPO is priced at $0.22/share, which works out to FY15 P/E of 7.2x, based on an enlarged share base.

*Asiaphos: Renewed exploration rights to its 14.43 sq km Feng Tai mine till 12 Dec ’17.

Friday, July 8, 2016

China Aviation Oil

China Aviation Oil: (S$1.35) Cruising high on monopoly status and favourable trends​
- DBSV initiated with Buy rating and street high TP of $1.62
- Investment premise lies in CAO's stranglehood on bonded jet fuel supply and its unique exposure to Shanghai Pudong International
- Also embarked on an internationalisation strategy to diversify from China
- 1Q16 saw gross profit/tonne double to US$2.70 with broker expecting margins to improve further
- FY16e earnings should come in north of US$71m (+16.2%) = 12x P/E.
- Upside catalysts include potential earnings accretive deal making


Breadtalk: The dough will rise again
- RHB reiterate its BUY on BreadTalk with higher TP of $1.45 from $1.42.
- House believes profitability is set to increase with the following initiatives:
1. More Din Tai Fung restaurants;
2. Store rationalisation in the food atriums segment;
3. Focusing on operational efficiencies.


Venture: Well poised for growth
- USD expected to further appreciate against SGD.
- With more than 90% of Venture’s revenue denominated in USD, the forecasted strengthening of USD against SGD will likely boost its revenue growth in at least 2H16 and 1H17.
- More recently, VMS has completed the acquisition of a 123,706 sqm plot of land in Penang, Malaysia, for MYR33.3m.
- OCBC believes Venture is now better poised for further expansion, given that average utilization is already at ~80%, especially since it has been acquiring new customers and gaining market share with existing customers over the past few years.
- OCBC reiterates Buy with TP raised to $9.35 from $9.00.


Telcos: CS previews 2Q16. They expect lower handset subsidies to continue providing tailwinds for M1 and Starhub’s EBITDA, and are expecting 1.8% and 3.1% y/y growth for the quarter for M1 and StarHub respectively.
-For SingTel, consolidated EBITDA is expected to rise 1.3% y/y, impacted by depreciation of AUD.
-Singapore telco stocks have rose 6-9% post the UK referendum. For now the house sees most favourable risk-reward for SingTel compared to M1 and StarHub. Clarity on the potential entry of fourth telco should emerge by 3Q16
-CS’ ratings for telcos: StarHub (U/PF, TP $3.00), SingTel (O/PF, TP $4.45), and M1 (U/PF, TP $2.05)

Sembcorp Industries

Sembcorp Industries: CLSA maintains Sell with TP of $2.61 on uninspiring growth
- Stub valuations currently not expensive, trading below long historical 10x P/E average
- However, growth in utilities not expected to offset weakness from marine
- Utilities business to continue to face start-up costs in India and weak spark spread in Singapore
- India to account for 1/3 of group’s power capacity but long term PPA contract has yet to be secured for Sembcorp Gayatri (1,320 MW power plant in Andhra Pradesh)

SG Market (08 Jul 16)

SG Market: Some profit-taking may set in after oil prices tanked almost 5% and took a toll on Wall Street ahead of a key jobs report.

Key indicator to watch is USDJPY, as it attempts to test the psychological 100 level again. A breach below the crucial support could spur risk-off sentiment before the weekend, boosting flows into safe haven sectors.

Regional bourses opened mixed this morning in Tokyo (-0.2%), Seoul (+1.1%), and Sydney (+0.6%).

Positive S-REITs - Investors continue to seek relative certainty in yield stocks, such as PLife, MGCCT, FCT. Longer term, MKE prefers industrial REITs, with A-REIT (Buy, TP $2.57) and MIT (Buy, TP $1.78) as its top picks.

On telcos, investors may consider switching into Starhub (+6.1%) as a laggard play following the strong price run-up in M1 (+14.6%) and Singtel (+10.3%) since mid-Jun.

From a chart perspective, support for the STI remains at 2,810, with small double top resistance at 2,880.

Stocks to watch:
*SPH REIT: 3QFY16 DPU of 1.36¢ (+0.7%) met expectations, on firmer revenue and NPI of $52.2m (+1.9%) and $40m (+1.8%), respectively, underpinned by higher rental income from Paragon Mall. The portfolio achieved 100% occupancy and has a WALE of 2.1 years. Aggregate leverage remained stable at 25.7%, with an average debt cost of 2.84% and debt tenor of 2.2 years. NAV/unit at $0.94.

*Triyards: 3QFY16 net profit of US$4.9m (-13% y/y) missed expectations, dragged by gross margin compression to 16.9% (-5.2ppt) due to less favourable project mix. Revenue rose 28% to US$82.1m, contributed by four self-elevating units, two multi-purpose support vessels, and three chemical tankers. NAV/share at US$0.684.

*SGX: Jun securities turnover stayed muted at $22.5b (-9% y/y, +4% m/m) even with an additional day of trading, while derivatives volume hit 14.1m contracts (-35% y/y, +4% m/m).

*GLP: Commenced development of a 71,000 sqm multi-tenanted logistic property in Osaka, Japan. The ¥10.5b facility is expected to be completed in 2H18.

*Keppel Corp: Clinched four marine projects worth $120m from repeat clients. Separately, the group will partner Shell in a 50:50 JV to establish a LNG bunkering business in Singapore.

*Swiber: Expects a delay to its US$710m offshore field development project in West Africa, due to weakness in the oil and gas sector since 2H14. Separately, the group redeemed its $75m 7% fixed rate notes that were due for maturity on 6 Jul.

*Ellipsiz: Mandatory conditional cash offer at $0.38/share by its largest shareholder, former Lum Chang managing director Lum Kok Seng.

*China Fishery: Executive Director, Chief Restructuring Officer Paul Jeremy Brough has resigned. Stock has been suspended since 26 Nov.

Thursday, July 7, 2016

Wing Tai

Wing Tai (S$6.685): Sells 50% in condo project to JV partner to alleviate QC charges​
- Divesting stake in Nouvel 18 to JV partner, CityDev for $411m
- Project is expected to face $38.2m in extension charges relating to QC rules in Nov
- Maybank KE maintains Hold rating on CityDev but with higher TP of $9.17 with expectations of the company offloading the property before QC deadline
- Maintains Hold rating on Wing Tai with TP of $1.71 despite improvement to balance sheet and QC pressure. Wing Tai still has to move substantial units from its other properties.


SMRT: News article revealed that several of Singapore’s first China-made trains are being shipped back to their manufacturers (i.e. CSR Qingdao Sifang and Kawasaki Heavy Industries) for structural defects.
- According to Ministry of Transport, these repair works will be completed by 2019.
- While SMRT has yet to state how sending back these trains will affect operations, OCBC notes that it is unlikely SMRT will be required to pay for any costs involved since these defects are still under manufacturer’s warranty.

Viva Industrial Trust

Viva Industrial Trust (VIT): OCBC initiates with BUY
- OCBC projects VIT’s distributable income to increase by 27%/6.2% in FY16/FY17, with DPU expected to decrease 1.2% to 6.916¢ in FY16, before increasing 6.9% to 7.392¢ in FY17.
- OCBC values VIT using the DDM and derive a TP of $0.75.
- Based on $0.705, VIT is trading at a forward FY16F DPU yield of 9.8% and a FY17F yield of 10.5%.

SG Market (07 Jul 16)

Regional bourses opened mixed in Tokyo (-0.2%), Seoul (+1.1%), and Sydney (+0.6%).

From a chart perspective, STI may attempt to test its resistance at 2,880, with support sitting comfortable at 2,810.

Stocks to watch:
*Wing Tai/City Dev: Wing Tai sold its entire 50% stake in the 156-unit luxury residential development Nouvel 18 to JV partner City Dev for $411m to avoid QC extension charges on unsold units of $38.2m in Nov ’16. City Dev is exploring ways to optimize and unlock the value of Nouvel 18, including bulk sales or a capital market transaction. MKE last had Hold ratings on Wing Tai (TP of $1.93) and City Dev (TP: $9.17).

*SIIC Environment: Taking a 75% stake in Henan Zhonghui Lianhe Investment for Rmb225m (4.3x P/B), which owns two sludge treatment BOT projects in Xinxiang (300tpd) and Nanyang (200tpd), as well as 65% interest in a BOT waste water treatment project in Nanyang (100,000tpd).

*Nordic: Clinched $4.2m worth of contracts from repeat customers, for the supply of valve remote control and tank gauging systems, insulation works and maintenance works.

*Wilmar: 45:45:10 JV with US-listed Bunge and Vietnam's Quang Dong is expanding its business in the domestic oil and feed markets in Vietnam.

*Venture: Acquired a 30.57-acre, 60-year leasehold land in Penang, Malaysia, for RM33.3m ($11.2m) for business operations.

*TIH: Investing US$9.9m in a 49.5% stake in CHF II Fund, which has a focus on special situation investments, particularly in companies that are adversely affected by market shocks.

*Saizen REIT: Received a proposal regarding a possible transaction, following the recent disposal of all its assets. The cash shell currently has about $28m in cash after the expiry of its liability claim period.

*Sarine Technologies: Delivered a record 20 Galaxy inclusion mapping systems in 2Q16 (1Q16: 18 systems), bringing installed base to 253 units. It expects 2Q16 revenue to hit US$20m (+39% y/y, +29% q/q) with continued improvement to its profitability. MKE’s last call was a Buy with TP of $1.94.

*Global Invacom: Disclosed that the weaker GBP will have a favourable impact on its financial performance in the near to medium term, as significant operational and R&D expenses are booked in GBP, while revenue is mostly denominated in USD. As a gauge, the group reported US$0.2m of FX gains in 1Q16 (1Q15: US$0.4m).

*Frasers Centrepoint Trust: Renewed the appointment of Frasers Centrepoint Property Management Services as property manager of five out of its six retail properties in Singapore for five years. The renewal comes with fees that hinge on gross revenue (2%), and NPI (~2.5%). MKE’s last had a Sell rating with TP of $1.78.

*United Global: IPO of 42.8m new shares priced at $0.25 apiece has been successfully placed out. Net proceeds of $9.2m will mainly be used for expanding its lubricant business via M&A and general working capital. Trading debut on 8 Jul.

Tuesday, July 5, 2016


Cityneon: (S$0.955) Deepens partnership with Walt Disney with Taiwan exhibition
- Signed term sheet with Beast Kingdom to host and operate four-month touring exhibition in Taiwan
- Comes after it recently announced the same attraction to Singapore (Oct '16) and Australia (Dec '17)
- Attests to popular demand for interactive movie attractions based on popular movie franchises such as Walt Disney's Avengers as well as close business ties with the media giant.
- Forward demand well supported by Marvel's phase 3 cinematic pipeline that stretches to May 2019
- Also looking to increase IP stable through its working relationship with Walt Disney
- Currently trading at 35x FY16e net profit of $6.7m. Street has 3 Buy ratings with TP of $1.10


MCT: (S$1.48) Favourable move towards business parks
- Acquiring an office tower and three business park blocks at Mapletree Business City (Phase 1) for $1.78b, or $1,042 psf NLA.
- Acquisition is priced at 5.6% NPI yield, and is accretive to DPU (+3.2%) and NAV (+2.1%).
- Funding will be via $920m debt, assumed at an interest cost of 3.25% per annum, as well as an issue of up to 795m new units (37% of existing unit base) via a placement.
- Maybank KE is positive on the deal, as the purchase will give MCT exposure to business parks, which will constitute 22% of its portfolio upon completion.
- MCT is valued at a pro forma 1.1x P/B and distribution yield of 5.8%.


Vallianz: CIMB initiates with Add and TP of $0.072
- Earnings visibility from charter backlog of c.US$1.2bn, mostly to national oil companies in the Middle East, with utilisation of 80-90% vs. 50-60% in Asia Pacific.
- Potential further contract wins from Saudi Aramco by leveraging partner Rawabi Holding’s firm relationship with the national oil company (NOC).
-Sharp fall in net gearing from the highs of 2-3x to 0.7x.

SG Market (05 Jul 16)

SG Market: Activity is expected to be muted ahead of the midweek break, with US closed for Independence Day holiday and European markets losing steam.

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

From a chart perspective, STI would likely trade between its 2,800 support and resistance at 2,880.

Stocks to watch:
*Economy: Jun manufacturing PMI of 49.6 fell short of expectations (49.8), weighed by weak new and export orders and marking its 12th consecutive month of contraction.

*Mapletree Commercial Trust: Proposed acquisition of Mapletree Business City (Phase 1) for $1.78b or $1,042 psf NLA, comprising an office tower and three business park blocks totaling 1.71m sf, which will be funded via $920m debt and 795m new units (37% of existing unit base) at ~$1.181 each. The property enjoys occupancy of 97.8% with WALE of 3.5 years and forecast NPI yield of 5.6%. Pro forma FY3/16 NPI will increase by 45% to $320.2m, while aggregate leverage is expected rise from 35.1% to 38.4%.

*SingPost: Independent consulting firm Heidrick & Struggles released a string of recommendations on management succession, conflicts of interest and disclosures, processes for M&A and market disclosures following recent corporate governance lapses and spate of resignations. The group intends to adopt the recommendations within three months.

*Cityneon: Entered non-binding term sheet with Taiwanese media firm Beast Kingdom, to host and operate the Marvel's Avengers touring exhibition in Taiwan. The exhibition is expected to be opened before 15 Jun 2017, and would positively contribute to earnings.

*Ezion: Adjusting down the exercise price of its outstanding bonus warrants issued on 25 Apr 2016 from $0.50 to $0.45 in relation to its proposed 3-for-10 rights issue. The group is also revising down the redemption price of its preference shares from $1.5136 to $1.3591.

*First Resources: May FFB harvest tumbled 18.1% y/y to 169,629 tonnes, on lower yield of 1.1 tonnes/ha (May '15: 1.4 tonnes/ha). CPO production slid 23.5% to 39,957 tonnes, although extraction rate was slightly higher at 22.7% (+0.1ppt). Maybank-KE’s last had a Hold rating with TP of $1.70.

*Tiong Seng: Awarded contract from Ministry of Home Affairs for the development and construction of Selarang Park Complex in Singapore for an undisclosed sum.

*CNMC Goldmine: Produced 9,807.4 oz (+34.9% q/q) of gold in 2Q16, the highest quarterly output on record. For 6M16, CNMC has produced 17,078.7 oz of gold, or 54.7% of FY15’s production of 31,205.85 oz.

*Tat Hong: Called off the proposed spin-off for its China business on Taiwan Stock Exchange, due to concerns on weak valuation amid turmoil in global economy and equity markets.

*CapitaLand Commercial Trust: Issued $75m of medium-term notes at a fixed rate of 2.77% due 2022.

Monday, July 4, 2016


SATS: (S$4.17) Engaging in a damaging price war with competitor​
- Price war has emerged between SATS and Dnata with rates falling by as much as 30%
- Price war has triggered aggressive negotiations by airlines when their contracts come up for renewal
- As such Maybank-KE notes that there is risk that rates could decline faster than productivity improvement
- Any earnings disappointment could result in the market punishing SATS particularly due to its current rich valuations
- Valued at 14.6x FY16F EV/EBITDA, 30% premium over recent sale pricing of Swissport to HNA Group (10.9x FY15 EBITDA)
- Last call on SATS: Sell, TP: $3.76

Singapore O&G

Singapore O&G - DBSV initiates with Buy and TP $1.05​
- Expects 3 year earnings CAGR of 29% driven by inorganic growth.
- Diversified into higher-margin complementary services such as women's cancer treatment. Other potential services include paediatrics, IVF, and child care
- Organically, market share also expected to increase on recruitment of new doctors. Current market share in O&G at 6.7% (2015) from 2012's 4.3%.
- Low base indicates high potential for substantial growth
- Boasts high dividend payout policy of 90% translating into a yield of about 4-5%.
- Currently trades at 21x FY17F P/E, looks to be a steal compared to other healthcare peers.


SingPost: Deutsche initiating with Buy and TP of $1.85
-Net profit to grow at 20% CAGR FY17-19; FY19 NP forecast is 14% above consensus
- bolstered by widening margins of its logistics and e-commerce businesses that could be driven by:
a)increasing scale of e-commerce business
b)deeper horizontal integration between various regional logistics units
c) closer collaboration between logistics & e-commerce business
-meanwhile, average revenue growth for next three years is expected to be 20% p.a. underpin by
1)rising logistics and e-commerce flows between US & Asia Pac
2)Alibaba’s upcoming increase in stake from 10.3% to 14.5%, despite 4 delays
3)penetration into new markets, eg: FMCG e-commerce
-Recent concerns about leadership changes should be viewed positively, amid appointment of strong chairman, and departure of legacy management.

Best World

Best World: CIMB lifts TP from $1.12 to $1.61 and reiterated its Add rating for the stock
- The multi-level-marketer secured its eagerly awaited direct selling licence in China last week, but will have to set up eight service centres in Hangzhou by Dec 2016 before it can commencing direct selling activities.
- Management sees the milestone achievement as laying the group's growth foundation for the next 5-8 years.
- As focus now shifts to Best World's execution, the gestation period is not expected to be long.
- The broker has revised up Best World's FY17/18e EPS of 12%-47% after factoring higher ASPs for its China business under a direct selling model and raised its TP based on 12.4x FY17e P/E.

SG Market (04 Jul 16)

SG Market: Recent risk rally may cool off amid a shortened trading week in US and several regional markets, with traders watching key updates from BoE, Fed and BoJ, as well as economic releases from China (inflation, reserves, Caixin services PMI) and US (non-farm payrolls).

Regional bourses opened mixed in Tokyo (-0.7%), Seoul (+0.1%), and Sydney (-0.5%).

From a chart perspective, underlying support for the STI is at 2,800, with immediate resistance at 2,910.

Stocks to watch:
*Crude oil: Saudi energy minister sees oil market heading toward a balance, with prices beginning to settle.

*Ezra: Divesting FPSO Lewek EMAS to a JV comprising leading PE and energy infrastructure investment firm First Reserve and LSE-listed O&G service provider Petrofac for US$166.3m. Lewek EMAS is currently chartered to Premier Oil Vietnam Offshore for Vietnam’s Chim Sao oil project. Pro forma 2Q16 net gain is estimated to be US$2.8m.

*Innovalues: Updated it is still in discussion with parties on a potential buyout. MKE's last rating was Buy with TP of $1.15.

*Best World: Awarded the long awaited China direct selling licence, subject to the establishment of 8 service centres in Hangzhou within six months from 7 Jun. Management sees the milestone achievement laying the group's growth foundation for the next 5-8 years.

*Centurion: Updated that Brexit vote has minimal impact on the domestic demand for the UK educational sector, and the weaker pound may attract more international students. Disclosed that UK operations accounts for 14% of group's NAV, while FX exposure is hedged with local debt.

*Pteris Global: Buyout offer raised to $0.85 from $0.735 by Sharp Vision Holdings and has turned unconditional. Closing date has been extended to 25 Jul.

*Keppel T&T: Disposing half its stake in wholly owned Keppel DC REIT Management to Keppel Corp for $38m. It is expected to book a divestment gain of $56m on the disposal, and pro forma FY15 NTA/share will be increased to $1.40 from $1.27.

*mm2: Completed the acquisition of three Mega cinemas in Malaysia. This brings its cinema operations portfolio to 43 (+13) screens and 8,010 (+2,721) seats. As part of the deal, Mega has FY17/18 earnings target of RM3.4m.

*ABR Holdings: Acquiring an Australian development site located in Yarraville, Victoria, for A$20m. The 1.5-ha land will be re-developed into residential houses.

*ISEC: Disposing 15% of ISEC Penang for RM0.3m to Dr Adrian Tey. ISEC’s resultant stake will fall to 51%.

*Tai Sin Electric: Purchased the remaining 20.9% stake in subsidiary Cast Laboratories for $3.4m.

*IHC/Healthway Medical: Updated that the proposed acquisition of Healthway Medical by IHC via a scheme of arrangement has lapsed, after failing to meet preconditions of the deal.

*Miyoshi: Swung to a 3QFY16 net loss of $0.4m from $0.8m profit a year ago as revenue tumbled 14% to $11.6m on weaker sales of hard disks and consumer electronics, but partially offset by lower cost of goods sold and other operating expenses. NAV/share at $0.1185.

Friday, July 1, 2016

mm2 Asia

mm2 Asia: DBSV hikes TP to $0.83 (prior: $0.74) on strategy clarity in North Asia. Maintain Buy​
- Its key focus in North Asia will be to target niche markets and replicating successful business model
- In particular, it intends to adapt and remake successful Singapore titles like The Journey, I Not Stupid in specific provinces like Suchuan.
- Expects EPS to grow further, underpinned by growth in productions, expansion into China, contribution from cinema operations, and newly acquired UnUsUaL Group.

- mm2 Asia is currently a constituent in Market Insight's Growth portfolio.


SingPost: Legal threat withdrawn; goodwill issues raised
-Chairman instructed the group to withdraw its legal letter to SIAS, backing down from its earlier threat to sue the investor lobby group
-SIAS previously refused to disclose if it had shared an anonymous letter, deemed defamatory to the group
-A Business Times article also raised concerns about questionable goodwill recognition and financial estimates ahead of group AGM on 14 Jul
-Maybank KE maintains Sell, with TP of $1.29


Ezion: (S$0.475) Cash call to capitalise on SEA and windfarm opportunities​
- Announced a 3-for-10 rights issue to raise net proceeds of $135m-$137.5m
- Intends to use proceeds to acquire new assets and/or upgrade and modify existing assets
- Sees pent up demand in offshore industry particularly in Southeast Asia where investment by oil majors have been low
- 1Q16 net gearing at 1.1x or 1.3x (plus perps) is on the high side. We feel that this rights issue is an astute move
- Trading at 7.3x forward P/E. 8 Buy, 3 Hold, 1 Sell ratings with consensus TP of $0.66
-MKE last had an above consensus TP of $0.72 and a Buy rating.


EC World REIT: Proxy to bustling Hangzhou e-commerce
- To raise up to $637.6m from IPO. Issuing between 172.4m and 191m new units between $0.76 and $0.82 per unit to public and private investors.
- 6 logistics and e-commerce assets in Hangzhou. Proxy to e-commerce volume growth in Hangzhou.
- Sponsor is Forchn Holdings (co-founder of Cainiao, Alibaba’s logistic’s arm)
- Has ROFR to pipeline of income-producing e-commerce and logistics properties located in China.
- Based on $0.82 offer price, this translates to yields of 7%/7.2% for FY16/FY17 respectively.
- Priced at ~0.9x P/B


Chiwayland: (S$0.105) Acquires 7th development site in Australia
- Bought 114,270 sqm land parcel in Penrith, Sydney Australia, for A$40m.
- Well-located site next to University of Western Sydney's Penrith campus; suburb expected to benefit from increased accessibility with the establishment of a high-speed rail linking to the second Sydney Airport.
- Group to invest A$320m into the development, slated for completion by 2020.
- From a low base, home price in Penrith has surged at a CAGR of 13.5% in the last five years, caused by the shift towards the west as local buyers shun the inner Sydney price boom.
- Stock currently trading at a significantly discounted 0.34x P/B.

Best World

Best World: (S$1.15) Awarded China direct selling license; major re-rating catalyst
- MOFCOM has granted multi-channel distributor Best World its highly anticipated direct selling license in China, 9-12 months ahead of its schedule.
- Management expects sales growth ahead to be explosive given the immense size of the Chinese market.
- We expect sales mix derived in China to convert from export segment to direct sales, where profitability will be enhanced as products are priced higher in direct selling.
- On valuations at $1.15/share, Best World trades at a forward P/E of 11x, an undeserved 68% discount to the global peer average of 18.5x.


Ezion: Rights issuance on basis of 3:10 existing shares at $0.29/rights share
- Theoretical ex-rights price at $0.467 as at last close of $0.52
- It has successfully forayed into Chinese and European offshore wind farm market
- Intends to use proceeds to fit and repurpose its current fleet and/or acquire new assets.

China Fishery/ Pacific Andes

China Fishery files for Chapter 11 bankruptcy; Pacific Andes files for Chapter 15 proceedings. Both counters remain suspended since Nov last year.

PACC Offshore

PACC Offshore: Secures Prelude floatel job
- operations for the charter may only begin in Mar 2017.
- OCBC estimates that the charter rate would be higher than the .US$125k/day rate for the POSH Xanadu in Brazil, but operating costs are also likely to be high in Australia.
- Looking ahead, pressure on charter rates and vessel utilization will continue to weigh on the group.
- It may also take some time before POSH can see a boost in earnings from POSH Arcadia, unless it secures work prior to Mar 2017.
- OCBC maintains Hold with TP of $0.35.


UOL: CIMB believes that concerns are overdone
- Exposure to UK is low at 3.5% of total assets and even less on earnings.
- Residential projects seeing higher take up, $750m of attributable locked in sales.
- Large rental income base underpinned by high occupancies and slight positive rental reversion.
- UIC’s residential projects a potential dampener, but only slight.
- CIMB maintains Add rating, with TP of $8.06 (20% discount to RNAV).

SG Market (01 Jul 16)

SG Market: The market could continue to be swept up by the post-Brexit recovery, bolstered by Singapore’s safe haven status.

Regional bourses are up in Tokyo (+1%), Seoul (+0.7%), and Sydney (+0.6%).

From a chart perspective, rising momentum indicators look to extend STI's upside towards recent high of 2,910, with support at 2,800.

Stocks to watch:
*Banks: Total bank lending remained sluggish, contracting for its 8th straight month in May. System loan growth slipped 0.7% y/y, dragged by a 3.1% decline in business lending, while consumer loans improved 2.8% despite the gloomy economic outlook. MKE remains negative on Singapore banks on challenging growth environment and risk of rising NPLs from oil rout. UOB is the top sector pick (Hold, TP: $16.96).

*Frasers Logistics & Industrial Trust: Completed a 74,546 sqm property in Victoria, Australia, ahead of target completion date in Jul 2016 with occupancy fully pre-committed by CEVA Logistics, and the tenancy to commence on 30 Jun.

*Yanlord Land: Partnering China Merchants Property Development and Poly Real Estate in 33% owned JVC to develop a 170,000 sqm site in Nanjing, China, which was acquired for Rmb4.82b.

*Ezion: Established JVCo in China with Sinotrans and CSC, to participate in the offshore wind farm energy market. Ezion expects to deploy two service rigs for an initial project by end-2016. To recap, Ezion is still suffering from lower contract prices for its charters, as reflected by the sharp contraction in its 1Q16 gross margin

*Chiwayland: Acquired a 114,270 sqm land parcel in Sydney, Australia, for A$40m. The group will invest A$320m to develop 400 apartments and 364 townhouses, with sales launch expected in 2H17 and 2H18, for apartments and townhouses, respectively.

*Sim Lian: Acquiring Dalyellup Shopping Centre in Western Australia, for A$31.6m. The property has gross lettable area of 6,446 sqm, of which 68% is anchored by Woolworths Supermarket, one of largest supermarket chains in Australia.

*SMRT: Acquiring a 20% stake in a Dutch automated vehicle firm 2 Getthere for €4m, to market, install and operate raid transit systems in Singapore and Asia Pacific.

*China Merchants Pacific: Exit offer of $1.02/share has been declared unconditional, after the offeror received valid acceptances of 97% of the maximum potential issued share capital. Closing date for the offer is on 11 Jul.

*Wing Tai: Disposed 100% stake in Japanese fast food chain Yoshinoya for $4.5m.

*Yeo Hiap Seng: Exclusive bottling agreement for Pepsi products in Singapore has ceased on 30 Jun, but will be extended for four-months to facilitate disengagement. FY17 earnings is expected to be impacted.

*Longcheer: Proposing a special dividend payout of US$18.2m (S$0.70/share), subject to the completion of its 21.9% stake disposal in electronics manufacturer Mentech Investment.

*Natural Cool: Terminated its proposed disposal in Cougar Paint, after failing to meet the pre-conditions set.

*TalkMed: Approached by an undisclosed party for a potential collaboration.

*Xpress: Extended the deadline for completion of its proposed disposal of Xpress Print (Shenzhen) and Shenzhen Jiaxingda Printing, to 29 Jul ‘16.