SG Market (28 Oct 16)

Singapore market will continue to struggle as corporate earnings offer little catalyst to justify a rally to higher ground. Prefer USD beneficiaries such as STE, Venture, UMS and Innovalues.

Regional bourses opened mixed in Tokyo (+0.6%), Seoul (-0.2%) and Sydney (-0.1%).Technically, STI remains range-bound between the 2,800-2,880 consolidation band.

Stocks to watch:
*UOB: 3Q16 net profit of $791m (-7.8% y/y, -1.2% q/q) came in at upper end of estimates. Net interest income was stable at $1.23b (-0.4% y/y, +1.6% q/q) amid healthy loan growth (+7% y/y, +2.4% q/q) but was offset by tighter NIM of 1.69% (-8bps y/y, +1bps q/q)), while non-interest income slipped to $810m (-4.7% y/y, -0.4% q/q) mainly due to an absence of a one-off gain from sale of securities. Provisions jumped to $185m (+15.7% y/y, +15% q/q) largely stemming from the O&G sector. NPL ratio ticked up to 1.6% (3Q15: 1.4%; 2Q16: 1.3%). Tier-1 CAR improved to 13.4% (2Q16: 13.1%). NAV/share at $18.54.

*Sembcorp Industries; 3Q16 net profit plummeted 55.9% to $53.9m, eroded by 1) impairment losses, 2) unfavourable FX, 3) spike in finance costs and 4) an absence of divestment gains. Revenue slid 10.8% to $2.14b on reduced contributions from O&M and its specialised construction units. Net gearing climbed to 0.85x from 0.65x in FY15. MKE maintains its Hold and TP of $2.40.

*Mapletree Greater China Commercial Trust: 2QFY17 DPU of 1.765¢ (-2.4%) was in line. Revenue of $83.1m (-1.9%) and NPI of $67.3m (-3.2%) were dragged by weaker HKD & CNY against SGD, offset by higher rental income from Festival Walk. Occupancy slipped 2.1ppt q/q to 95.7%. Aggregate leverage remained at 39.9% (-0.2 ppt q/q). NAV/share at $1.19.*Indofood Agri: 3Q16 core net profit jumped to Rp129.9b (+128%), bringing 9M16 earnings to Rp50.2b (-71%), or 14% of full year consensus estimate. Revenue rose to Rp3.55t (+8.7%) on stronger sales volume of edible oil products, which lifted gross margin to 23.3% (+2ppt). NAV/share at Rp8,298..

*CDL Hospitality: 3Q16 DPU of 2.44¢ (+3.4%) came in line. Revenue of $45.4m (+10.5%) was lifted by contribution from recently acquired Hilton Cambridge City Centre in Oct '15, but partially offset by weaker performance from Singapore hotels and Maldives resorts. NAV/unit at $1.5586.

*SingPost: JV with Alibaba through a 34% sale of stake in subsidiary Quantum Solutions has completed. Also, SingPost has obtained approval for Alibaba to raise its stake to 14.4% at $1.74/share, which is expected to be completed by 28 Feb 2017. MKE maintains Buy with TP of $1.77.

*Ascendas REIT: Divesting Shanghai business park A-REIT City @ Jinqiao to China Vanke for $221.6m, equivalent to 1.8x of its purchase price back in 2013, and 8.6% above its book value. This is expected to complete by 4Q16, and would increase pro-forma FY3/16 DPU by 0.13¢ to 15.487¢.

*Frasers Centrepoint: Marked its foray into Spain with the opening of its 97-unit Capri-branded hotel apartment in Barcelona. Hospitality group intends to follow up with new openings in the near-term across Shanghai, Shenzhen, Jakarta and others, as it looks to open 19 Capri-branded properties by 2020.

*Japfa: 3Q16 net profit leapt to US$48m (3Q15: US$8m), lifted by FX gains of US$1.6m (3Q15: US$28.9m loss). Revenue grew to US$788m (+13.3%) on broad-based growth across animal proteins (+14.4%), dairy (+3%) and consumer food (+10.2%) segments, while gross margin expanded to 23.8% (+3.9ppts) on a better pricing environment for the Indonesian poultry business and lower feed costs. NAV/share at US$0.42.

*Wing Tai: Lacklustre 1QFY17 net profit of $1.1m (-48%) came below estimates, on reduced revenue of $70.2m (-59%) due to a drop in contribution from property development. Operating margin shrank 6.7ppt to 3.3%. On a positive note, net gearing was lowered to 0.05x from 0.2x in FY16. NAV/share at $4.05. MKE maintains Hold with TP of $1.75..

*Tuan Sing: 3Q16 net profit tumbled 60% to $6.4m, while revenue fell 51% to $90.3m, following the completions of Seletar Park Residence, Sennett Residence and Cluny Park Residence earlier this year. NAV/share at $0.746.

*Sunningdale Tech: 3Q16 net profit plunged 35.9% to $10.2m on a $8.8m drop in FX gains. Excluding FX, bottom line would have surged 48.7% to $7.9m. Revenue slipped to $172.5m (-2.3%), dragged by weaker healthcare (-8.8%) and mould fabrication (-21.6%) businesses. NAV/share at $1.74.

*Hiap Hoe: Intends to sell its unsold properties Cavenagh Road to its parent, Hiap Hoe Holdings, for $30m. The deal is expected to net a divestment gain of $24m for the group and avoid payment for extension charges for the units.

*Super 800: Awarded a $133.7m contract by PUB for the treatment and disposal of sludge from water reclamation plants for a period of 15.5 years till 6 May ’32. *Delong: Guided that 3Q16 net profit will be significantly higher year-on-year due to higher sales volume and average selling price for its steel products, amid tighter industry supply in China following production cuts in 2015.

*Kitchen Culture: To issue $2m worth of 9% two-year bonds on a crowdfunding platform. Proceeds will be used to fund its general working capital needs.

*Swiber: Will be defaulting on its upcoming coupon payment of its $50m 6.25% notes due in 2017.