SG Market (30 Aug 16)

SG Market: Rising odds of a US Fed rate hike could give a slight lift to the banks, but cast a shadow over the broader market and economy.

Regional markets opened mixed in Tokyo (-0.3%), Seoul (+0.7%) and Sydney (+0.5%).

STI is sitting at 2,830 support, with next level at 2,800, while topside resistance remains at 2,880.

Stocks to watch:
*GL: FY16 net profit of US$67.6m (+41%) was buttressed by interest cost savings arising from refinancing, while revenue slipped 7% to US$393.9m from reduced hotel revenue as a result of the weaker GBP, as well as lower Bass Strait oil and gas royalty income due to the decline in crude price and weaker AUD/USD. First and final DPS of 2.2¢ maintained. NAV/share at US$0.809.

*Viva Industrial Trust: Secured a leading household name as the latest anchor tenant, which took up 38,000 of white space (for sports and fitness, F&B and family-oriented amenities) at Viva Business Park. This lifts pre-committed leases for white space to over 90%. Final phase of AEI works at the property, which contributed ~30% of the REIT's gross revenue growth in 2Q16, is on track for completion in 4Q16.

*Yanlord: Moody’s has placed its Ba3 long term rating on the group under review with a possible upgrade within the next 12-18 months. The ratings agency pointed out the group’s good brand name and quality products as support for its healthy gross margins.

*Ausgroup: Following a profit warning, Ausgroup reported a whopping 4QFY16 net loss of A$99.5m (4QFY15: A$0.3m net profit) as it incurred impairment losses of A$75.7m, as well as shut-down costs related to the Singapore fabrication business. While revenue rose 14.1% to A$103.4m from more projects, gross margin shrank to 3.9% from 23% in 4QFY15, reflecting intense price competition in the O&G services industry stemming from the cutback in capex spending. Cash of A$22.1m and debt of A$179.2m pushed net gearing to 3.1x, with $110m notes expiring on 20 Oct. NAV/share collapsed to A$0.069 from $0.326 a year ago.

*Healthway Medical: Proposed placement of 133.3m new shares (5.73% of existing share capital) at 3¢ apiece, or 11% above last close, to KGI Fraser Securities as its agent. Net proceeds of $3.8m are intended for expansion (55%) and working capital (45%).

*Oxley: Company bought 0.9m shares via its share buyback scheme on 29 Aug, at $0.4056 apiece.

*Micro-Mechanics: FY16 net profit slipped 1.1% y/y to $11.9m on revenue of $51.3m (-1.8%) due to the depreciation of the RMB and MYR. Gross margin expanded 1.9 ppt to 56.9% on stronger margin across its semiconductor tooling (+0.4 ppt) and CMA (+4.1 ppt) divisions. Final DPS of 3¢ with special DPS of 1¢ brought FY16 DPS to 6¢ (FY15: 5¢). NAV/share at $0.3614.

*PEC: 4QFY16 net profit of $8.1m (4QFY15: $7.8m loss) helped lift FY16 earnings into $18.8m (FY15: $6.9m loss). For the year, revenue rose to $575.1m (+15%) on higher contribution from overseas projects, while bottom line was boosted by disposal gains ($9.2m) and an absence of provision for trade receivables (FY15: $14.4m). Net cash of $132.5m or $0.52/share is 19% higher than market cap. Raised first and final DPS to 2¢ (FY15: 1¢), and special DPS of 1¢ (FY15: nil), bringing full-year payout to 3¢. NAV/share at $0.867.

*Eu Yan Sang: Righteous Crane, a consortium comprising a PE firm (42%), Temasek Holdings (30%) and founding Eu family (28%) has extended the closing date for its privatisation offer at $0.60/share for the fifth time, after failing to convince two substantial shareholders Hillhouse Capital Management and Target Asset Management, which collectively own 10.6% stake, to accept the offer. Closing date extended to 12 Sep. As of 29 Aug, the offeror has received valid acceptances of 84.05%.