SG Market (26 Oct 16)

Market could face a sell-off after the MAS gave a gloomy outlook for the trade-reliant economy, warning that external headwinds are unlikely to go away anytime soon and does not expect any significant pick-up in growth in near term. Meanwhile, investors are struggling to find any catalysts from the latest 3Q results.

Regional bourses opened in the red in Tokyo (-0.2%), Seoul (-0.8%) and Sydney (-1.4%).Technically, STI remains trapped between the upside resistance at 2,880 and underlying support at 2,800.

Stocks to watch:
*Economy: MAS sees no significant pickup in Singapore GDP growth in the near term and maintains its 2016 forecast to come in at the lower end of the 1-2% range, and only slightly higher in 2017. The central bank cited that the trade-reliant economy is in a cyclical downturn and lacklustre external demand and weak global trade remain key drags.

*Sembcorp Marine: Sank into a 3Q16 net loss of $21.8m from $32.1m profit in 3Q15, dragged mainly by an adverse FX swing of $54m, bringing 9M16 earnings of $44.5m (-82%) to just 25% of full year consensus estimate. Revenue tumbled to $888m (-21.4%) on delivery deferment of rigs and weak contribution from ship repair. No new contracts secured; order book shrank to $5.2b from $6b in preceding quarter. The group continue to grapple with a severe downturn and onward margins are expected to be lower. MKE maintains Sell with $1.00 TP.

*Innovalues: 3Q16 results were on track although net profit fell 10.9% to $6m (-10.9%) on the absence of FX gains. Revenue rose to $31.5m (+11.5%), driven by increased automotive orders from Chinese clients, while gross margin expanded to 32.9% (+4.5ppt) on operational efficiency. The stock offers good value at 11x P/E and 4% yield. MKE maintains Buy with TP of $1.15.

*Starhub: Claims that broadband service outages on 22 and 24 Oct were due to intentional and malicious DDoS attacks on its servers.

*Cambridge Industrial Trust: 3Q16 results in line. DPU of 0.987¢ (-18%) was mainly diluted by cash payment of management fees. Otherwise, adjusted DPU would have dipped 13.1%, on lower gross revenue of $27.6m (-2.9%) and NPI of $19.9m (-8.3%), attributed to the conversion of properties from single-tenancy to multi-tenancy, as well as increased property expenses. Portfolio occupancy was stable at 93.6% (+0.2ppt q/q) with WALE of 3.8 years, while aggregate leverage narrowed to 36.9% (-0.5ppt q/q) with average cost of debt of 3.65%. NAV/share at $0.669.

*Sin Heng Heavy Machinery: 1QFY17 net profit spiked close to five-fold from a low base to $1.8m, bolstered by reduced admin expenses (-15.3%), disposal gain ($0.3m) and lower FX loss. Revenue of $37.7m (+32.3%) saw stronger contributions from both heavy equipment rental (+9.6%) and trading (+46%), while gross margin shrank 1.8ppt to 16% on lower utilisation of rental equipment. Net gearing crept up to 0.17x from 0.1x in FY16. NAV/share at $1.0843.

*China Everbright Water: Won a bid with consortium partner Jinan Urban Construction, for the Nanjing Municipal Water Public-Private Partnership Project. It will own a 100% stake in the project while Jinan Urban will handle the construction. The project will require a total investment of Rmb275m and have an operating concession period of ten years.

*Pacific Radiance: Successfully refinanced term loans and renewed revolving credit facilities totalling ~US$185m, with maturity profile of these debt facilities extended from 2019 to 2021. Consequently, group's principal repayment burden has been reduced by US$103m up to 2019.

*Civmec: Secured A$30m worth of contracts for projects on Australia's east coast, comprising works for NRT Infrastructure JV, Acciona Infrastructure, ThyssenKrupp and the WestConnex project..

*Cosco Corp: Orders for two float accommodation units (N381 & N675) at its 51% owned Cosco Shipyard were terminated by the owners. Separately, the subsidiary also extended the delivery date for one semi-submersible accommodation vessel for Prosafe Rigs by three years to 31 Dec 2019.

*Samudera Shipping: Slumped into a 3Q16 net loss of US$3.8m (3Q15: US$1.2m profit), on a slide in revenue to US$61m (-18.8%) due to reduced container shipping volume stemming from Hanjin Shipping's bankruptcy and lower charter rates for its bulk & tanker divisions. Bottom line took a US$2.4m provision relating to Hanjin Shipping. NAV/share at US$0.456.

*Advancer Global: Acquiring three companies that offer pest control and fumigation businesses for an initial sum of $3m, with further consideration to be determined as at 31 Dec ’17.

*Huationg Global: Clinched three new civil engineering contracts worth $26.6m from HDB.

*LionGold: Value Capital Asset Management disposed 97.5m shares, trimming its stake to 3.8% from 6.2%, and has ceased to be a substantial shareholder.

*China Environment: Disclosed that it is unable to access financial records, which are locked within a premise of the landlord.