SG Market (18 Oct 16)

Singapore stocks are likely to thread water as investors adopt wait-and-see mode ahead of local company results.

Regional bourses opened mixed in early trading in Tokyo (-0.2%), Seoul (+0.3%) and Sydney (0.3%).Immediate support for STI is at 2,800 (200-dma), with topside resistance at 2,852 (50-dma).

Stocks to watch:
*Keppel DC REIT: 3Q16 results in line with DPU of 1.9¢ (+15.9%), bolstered by derivative gains and finance income. Revenue tumbled to $22.7m (-12%) on lower rental from overseas assets and weaker variable income at local properties, but NPI was lifted back to $22.7m (+6.2%) on a one-off property tax refund and lower costs. Portfolio occupancy edged up 0.4ppt q/q to 92.7% with WALE of 8.6 years. Aggregate leverage was steady at 29.4%, but will increase to 36.1% upon completion of asset acquisitions in Cardiff and Dublin, while average debt cost was 2.4% and tenor at 2.5 years. NAV/unit at $0.889.

*Keppel DC REIT: Acquiring a 90% stake in a fully-committed data centre (Keppel DC Singapore 3) for $202.5m from a 70:30 JV between Keppel T&T and Keppel Land. The deal will be funded by a fully underwritten 274-for1,000 preferential offering of 242m shares at $1.155 apiece. The proposed acquisition will expand its portfolio assets to $1.35b from $1.14b, comprising 11 data centres globally. FY15 pro forma DPU is estimated to increase to 6.88¢ (+5.7%), while aggregate leverage will fall to 27.7% (-8.4ppt).

*Keppel Corp/Keppel T&T: Divestment of Keppel DC Singapore 3 (formerly T27) held by a 30:70 JV between Keppel Corp and Keppel T&T is expected to unlock ~$141m in cash, which will be used to fund investments in logistics/ data centres, with the remaining for general corporate and working capital purposes.

*Keppel Corp: Divesting an effective 44.05% share in Chengdu Century Development (CCD) for Rmb150.7m ($30.8m), in a bid to recycle capital. CCD owns and develops the Botanica, a township project in Jinjiang District, Chengdu. MKE estimates that the sale would net a gain of $9m and support its argument that the O&M segment could no longer be relied upon to fund other businesses. MKE last had a Sell with TP of $4.54.

*Keppel Infra Trust: Flat 3Q16 DPU of 0.93¢ came in line. Revenue dipped to $160.3m (-0.2%) on lower tariffs at City Gas (-10.5%) and reduced concessions (-4.7%) at the SingSpring Desalination plant, partially offset by increased contributions from Basslink (+79.5%). NAV/share at $0.316.

*Sabana REIT: 3QFY16 DPU tumbled 32.2% to 1.2¢, as revenue ($23m,-9.7%) and NPI ($13.9m, -24%) were dragged by negative rental reversions at certain master leases, lower occupancies and higher expenses arising from multi-tenanted lease conversions. Portfolio occupancy improved to 89.2% (+0.4ppt q/q) with WALE of 2.5 years, while aggregate leverage inched up to 41.2% (+0.3ppt q/q). NAV/unit at $0.81.

*SIA: Group pax load factor slipped 2.3ppts to 77.9% in Sep as traffic (+1.7%) lagged capacity increase (+3.1%), while cargo load factor eased to 62.4% (-0.5 ppts) on similar carriage (+5.3%) and capacity (+5.2%) growth. Load factors declined across all its regions except East Asia (flat) for its parent airline, and across subsidiary carriers Scoot (-4.9ppts to 78.6%), TigerAir (-2.7ppts to 79%) and SilkAir (-1ppt to 65.7%). MKE last had a Hold with TP of $10.00.

*ST Engineering: Electronics arm secured contracts worth $480m (+29.8% y/y, -26.2% q/q) in 3Q16, comprising work in rail electronics & intelligent transportation, satellite & broadband communications, as well as advanced electronics & ICT solutions sectors..

*GLP: Signed 218,000 sqm of e-commerce related leases in China (153,000 sqm), US (55,000 sqm) and Japan (10,000 sqm).

*SMRT: Privatisation offer at $1.68/share from parent Temasek Holdings has been sanctioned by the High Court. Last day of trading will be on 18 Oct.

*Ascendas Hospitality Trust: Appointed ONYX Hospitality Group as the operator of the serviced apartments component at Aurora Melbourne Central.

*SPH: Merging My Paper and The New Paper to a revamped product, which will be distributed for free from Dec. Consequently, SPH expects to cut up to 10% of its staff force over the next two years.

*mm2 Asia: Entered MOU to acquire 30% stake in Rings.TV for $4.5m. The group intends to tap on the interactive live-streaming broadcasting platform to broadcast exclusive material from its movie productions and unlock new revenue streams from concert producer/ organiser UnUsUaL. Subsequently if Rings.TV successfully lists in five years, it will grant mm2 with a guaranteed investment buyback plus coupon of 5% per annum on the deal.

*Lian Beng: Acquired Khong Guan Industrial Building for $31m, or $544 psf. The freehold light industrial building sits on a fully maxed-out gfa of 57,019 sf, and will be held for rental income.

*Yongnam: CEO Seow Soon Yong exercised a call option to acquire 10m shares in the company from CIMB Securities Singapore for $2.1m, or $0.21/share, lifting his stake from 20.31% to 22.41%.

*Cosco Corp: Deferring delivery again for the Sevan 650 drilling unit by six months to 15 Apr ’17, and the final payment of the contract will be reduced to US$499.7m (original price: US$526m). A US$26.3m refund will be made to the client in 4Q16 as part of the deferment agreement.

*China New Town: Proposed voluntary delisting via a selective share buyback scheme of 7¢/share, for shareholders who do not wish to continue holding their shares and trade on the primary listing in Hong Kong.

*Asia Fashion: 60-day MOU with Xamax Development to negotiate on the development and production of a theatrical movie project. If firmed up, production is expected to run throughout 2017, with the premiere anticipated in early 2018.

*Sing Holdings: Acquiring its first hotel property in Melbourne, Australia, for A$107m. The freehold, 291-room asset is intended to boost recurring income.

*Ley Choon: Secured a $3m contract from PUB for the supply and laying of water mains in the east from 2016 to 2019.*Asian Micro: Embarking on LNG and related businesses from Jan ’17 onwards, after it was appointed as the authorised importer, installer and distributor for three companies specialising in LNG storage systems, LNG vaporisers, LNG engines and power generators.