Monday, July 18, 2016

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.

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