Investor sentiment is likely to be dampened by the pullback in oil prices on profit-taking and poor 3Q results from bellwether Keppel Corp, which could be the precursor for the O&M sector.
Regional bourses opened mixed today in Tokyo (+0.3%), Seoul (-0.5%) and Sydney (-0.4%).STI remains largely range bound between its topside resistance at 2,850 (50-dma) and support at 2,800 (200-dma).
Stocks to watch:
*Keppel Corp: 3Q16 net profit slumped to $224.5m (-38.1%) despite being shored up by property divestment gains, jobs and pay cuts. The results brought 9M16 core earnings to just 55% of lowered FY16 estimates. Revenue of $1.46b (-56%) was mainly weighed by reduced O&M activity from project deferments and suspension of Sete Brasil contracts, which squeezed operating O&M margin to 9.5% (3Q15: 12.3%). The property division (+3.7%) is now the group's largest earnings contributor, with better showing in Singapore but lower sales from China. No O&M orders secured in 3Q and order book contracted to $4.1b (2Q16: $4.3b). MKE maintains Sell with TP of $4.57.
*Suntec REIT: 3Q16 results in line with DPU of 2.535¢ (+0.5%) on stronger income contribution from JVs (Marina Bay Financial Centre and One Raffles Quay). Gross revenue and NPI of $82.4m (-4.3%) and $57.2m (-2.1%), slipped on absence of contribution from Park Mall (divested in Dec ’15), partly offset by takings from new property 177 Pacific Highway (acquired in Aug ’16). Office portfolio occupancy inched up to 99.4% (+0.6ppt q/q), while its retail portfolio slipped to 97.3% (-0.4ppt q/q). Aggregate leverage expanded to 37.8% (+3.1 ppt q/q), while cost of debt lowered to 2.28% (-0.49ppt q/q). NAV/unit at $2.128.
*Ascendas REIT: 2QFY17 results in line with DPU of 4.03¢ (-3.1%) on an enlarged unit base. Gross revenue and NPI rose to $205.4m (+12.5%) and $152.4m (+23.1%), respectively, mainly boosted by the acquisition of its Australian portfolio and ONE@Changi City, as well as lower property taxes (-37.2%). Portfolio occupancy inched up to 89% (+0.8 ppt q/q), while aggregate leverage was reduced to 34.2% (-2.8ppt q/q), with average debt cost steady at 3.02%. NAV/unit at $2.05.
*Frasers Centrepoint Trust: 4QFY16 DPU of 2.815¢ (-1.5%) brought FY16 DPU to 11.764¢ (+1.3%), in line with expectations. Gross revenue slipped 6% to $44.6m on lower contribution from Northpoint arising from ongoing AEI works and a changeover in anchor tenant at Changi City Point. NPI slipped a slower 0.9% to $31.5m on lower utilities tariff rates. Occupancy contracted to 89.4% (-1.4ppt), with WALE of 1.38 years. NAV/unit at $1.93.
*Viva Industrial Trust: In line 3Q16; DPU jumped 9.9% to 1.81¢, led by higher gross revenue and NPI of $24.3m (+31.9%) and $17.4m (+39.2%), respectively, on additional rental income from two newly acquired light industrial properties and higher rental income from Viva Business Park. Portfolio occupancy remained stable at 88.6% (+0.7ppt q/q), with WALE of 3.3 years. Aggregate leverage remained at 39.8% (-0.2ppt q/q), with average debt cost of 3.9% and tenor of 3.5 years. NAV/unit at $0.803.
*Ascott REIT: 3Q16 DPU of 2.35¢ (+14%) was a slight beat, lifted by FX gains of $3.3m. Revenue of $123.9m (+9%) and gross profit of $57.5m (+4%) were buoyed by seven new properties acquired between Jul ’15 and Mar ’16. RevPAU rose 2% to $144 from the new acquisitions, but excluding that, same-store-RevPAU tumbled 11% on weaker performance from the China, Singapore, Philippines (arising from renovation) and UK (on GBP/SGD depreciation). Aggregate leverage remained steady, but high at 41%, while group remains on the lookout for accretive M&A opportunities in key gateway cities of Australia, Japan, Europe and the US. NAV/unit at $1.30..
*City Dev: To sell Nouvel 18 through a profit participation securities scheme and unlock $977.6m, representing an implied ASP of $2,750 psf, above MKE's current assumptions of $2,500 psf. Last call was a Hold with TP of $9.43.
*Kim Heng Offshore & Marine: Reallocating $5m out of $20 of IPO proceeds initially designated for yard facility enhancement and fleet expansion, to general working capital due to the depressed oil & gas market sentiment.
*Natural Cool: Proposed private placement of 27m new shares (12.1% share capital) at 6.5¢ (7.1% discount on last close) apiece to strategic investor Ng Quek Peng, who has >30 years of corporate finance experience. Net proceeds of $1.7m will be used to fund growth and expansion of the group’s aircon and paint businesses.
*Advanced Integrated Manufacturing: Disposed a freehold bungalow in Penang for RM11m, and is expecting to book a gain of RM2.7m.
Profit warning:
- United Food
- MMP Resources
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