SG Market (08 Aug 16)

SG Market: Investors will have plenty to chew on in a short trading week (public hoilday on 9 Aug) with release of China trade (8 Aug), inflation (9 Aug) and industrial production (12 Aug) figures, as well as 2Q results from blue-chips Singtel, Wilmar on Thu, and Golden Agri, GLP On Fri.

Regional bourses are up in Tokyo (+1.7%), Seoul (+0.5%), and Sydney (+0.8%).

STI sees immediate downside support at 2,810, with resistance at 2,900.

Stocks to watch:
*DBS: 2Q16 net profit of $1.05b (-6% y/y, -13% q/q) met expectations on stronger NII of $1.83b (+5% y/y, flat q/q), as NIM widened to 1.87% (+12bps y/y, +2bps q/q) and loans grew (+1.7% y/y, +3.9% q/q). Non-interest income rose to $1.09b (+5.2% y/y, +13.5% q/q) on higher investment banking fees and gains from investment securities. Provisions spiked to $366m (+167% y/y, +115% q/q) due to a $150m charge for Swiber, with NPL of 1.1% (2Q15: 0.9%, 1Q16: 1.0%). Interim DPS of $0.30 unchanged. NAV/share stood at $16.48.

*Venture: 2Q16 results in line as net profit climbed 20.3% to $43.4m on higher revenue of $683.3m (+3.4%), supported by increased customer traction. Pretax margin improved to 7.6% (+1.2ppt), largely from FX gains and reduced R&D costs (-28.7%). NAV/share at $6.437.

*Frasers Centrepoint: 2Q16 core net profit slumped 62.4% to $68.2m largely on FX losses (+74.8%), while revenue fell 32.5% to $682.1m on weaker contributions from development properties (-69%), partly mitigated by gains in commercial properties (+2%), hospitality (+63%) and its Australian arm (+32%). NAV/share at $2.19.

*China Everbright Water: 2Q16 net profit of HK$77.5m (-30%) came in short of estimates. Revenue jumped 31% to HK$668.5m on an increase in lower margin construction income. Accordingly, gross margin narrowed 10.1ppt to 34.1%. Bottom line was weighed by higher expansion expenses, FX losses, and higher interest costs on increased borrowings. NAV/share at HK$2.72

*Cosco Corp: 2Q16 net loss deepened to $36.8m (2Q15: $4.8m loss) due to a spike in interest expense and adverse FX impact. Revenue sank 11% to $762.9m owing to pressure in shipyard (-10.5%) and dry bulk shipping (-17.8%) takings. Gross margin shrunk to 1.5% (-5.4 ppt) on lower charter rates. Net gearing deteriorated further to 4.3x (1Q16; 3.9x) as its continued to bleed cash and took up $7.2b in debt to finance shipyard operations. NAV/share at $0.3249.

*Suntec REIT: Acquired 50% stake in Southgate Complex in Melbourne for A$289m. The 820,324 sf freehold commercial complex has locked-in rental escalations of 3-4% p.a. Post-deal, aggregate leverage is estimated to rise 2ppt to 38%. MKE has a Hold with TP of $1.69.

*Singapore Medical Group: Acquired the remaining 61.9% stake in associate Lifescan Imaging, a diagnostic imaging business, for $8.5m with the issuance of 33.4m shares ($0.256/share). Lifescan recorded a 1H16 net profit of $0.3m, implying a 12.3x P/E, and the price was also 11.6% lower than an independent valuation by Delotte.

*Dyna-Mac: 2Q results turned around to a net profit of $6.4m (2Q15: $8.5m loss), despite revenue slipping 6.6% to $34.1m, as existing projects were near tail end of completion. Gross margin was abnormally high at 42.1% (2Q15: -8.5%) due to revenue recognition of certain variation orders after final approval from customers, of which costs of such orders were recognised when they were committed in prior periods. Net cash position improved to $36.6m from almost zero. Net order book at $38m, with completion extending to just 2H16. NAV/share at $0.1785.

*Kim Heng Offshore: 2Q16 net loss narrowed to $1.4m (2Q15: $3m loss) on an expanded gross margin of 33.4% (+24.1ppt) on the absence of low margin sales. However, revenue plunged 31% to $7.7m from lower demand for new vessels and maintenance services for rigs and related assets due to the sustained downturn in oil prices. NAV/share at $0.119.

*Chiwayland: 2Q16 results slumped into a net loss of Rmb35m (2Q15: Rmb14.7m profit) in the absence of a Rmb32.5m tax credit. Revenue fell 47% y/y to Rmb398.7m on a 13.6% lower total GFA sold and reduced ASP (-38%). Bottom line was further weighed by jumps in selling and distribution (+57%), and other operating (+241%) expenses. NAV/share at Rmb1.467.

*Tiong Seng: 2Q16 net profit surged 3x to $4.5m on positive operating leverage, as revenue jumped 67% to $158m on broad based growth across construction (+54%), sale of development properties (+335%) and goods (+14%). NAV/share at $0.5438.

*ISOTeam: Won contracts worth about $20.1m with works stretching till Jul ’20.