SG Market (31 Oct 16)

SG Market: Heightened uncertainty is set to rule the Singapore market this week with a BoJ policy update tomorrow, Fed meeting on Thu, which is anticipated to stand pat on rates, as well as more corporate earnings lined up, including:
- DBS (Mon am)
- SIAE (Tue)
- StarHub (Wed)
- SIA, Genting Sp (Thu)
- Sing Post (Fri)

But the biggest risk event will be the upcoming US presidential election on 8 Nov where a potential Trump victory could rock investor sentiment and create market volatility.Regional bourses opened weaker in Tokyo (-0.3%), Seoul (-0.2%) and Sydney (flat).Technically, STI could test the lower bound of its 2,800-2,880 consolidation band.

Stocks to watch:
*DBS: 3Q16 net profit of $1.07b (unch y/y, +2% q/q) came above expectations on higher non-interest income of $1.11b (+24% y/y, +2.6% q/q) due to higher contributions from wealth management, increased trading income and gains from investment securities, as well as lower expenses. Net interest income stayed relatively flat at $1.82b (unch y/y, -1% q/q) on narrower NIM of 1.77% (-1bps y/y, -10bps q/q) and tepid loan growth (+1.8% y/y, +1.9% q/q). Provisions spiked to $436m (+145% y/y, +19% q/q) on increase in general allowances, raising NPL ratio to 1.3% (3Q15: 0.9%, 2Q16: 1.1%). Tier 1 CAR improved to 14.4 (2Q16: 14.2). NAV/share stood at $16.68.

*DBS: Agreed to acquire ANZ's wealth management and retail banking business in five Asian countries (Singapore, Hong Kong, China, Taiwan and Indonesia) for a price tag $110m above book value. The portfolio of businesses comprises total deposits of $17b, loans of $11b, investment AUM of $6.5b. This will add $23b to the group's current wealth AUM of $159b, as well as $200m/600m to its FY17/18 income, with projected earnings accretion of $200m within three years.

*Frasers Hospitality Trust: 4QFY16 DPU to fell 9.4% to 1.19¢ on an enlarged unit base, bringing FY16 payout to 5.23¢ (-10.1%), missing estimates. Otherwise, revenue of $33.5m (+8.6%) and NPI of $28.6m (+11.5%) for the quarter were lifted by new contributions from Maritim Hotel Dresden and strong performance from Singapore and Australian properties. Aggregate leverage narrowed to 37.7% (-0.6ppt q/q) with effective borrowing cost of 2.55%. Trading at 7.6% yield and 0.83x P/B.

*Starhill Global: In-line 1QFY17 DPU of 1.3¢ (-0.8% y/y). Gross revenue slipped 2.7% to $55.3m on weaker contributions from properties in Australia, China and Japan, partially offset by stronger rentals from Singapore and Malaysia, while NPI fell at a slower pace of 1.7% to $42.9m on lower property expenses (-6%). Portfolio occupancy slipped to 93.8% (-1.3ppt q/q) on tenant transition in China. Aggregate leverage stood at 35.1% (+0.1ppt q/q) with average interest rate of 3.06%. P/B. NAV/unit at $0.91.

*Roxy-Pacific: 3Q16 net profit slid 39% to $8.1m, despite higher revenue of $90.9m (+3.7%) led by property development (+4.8%), although partially mitigated by the hotel ownership (-1.6%) segment. Gross margin shrank 6.1ppt to 20.3% on absence of write-back in provision for development cost, lower RevPAR for hotel business, and higher leasing and maintenance costs from the property investment segment. NAV/share at $0.4015.

*UIC: 3Q16 net profit slipped 1.9% to $64m on a $14.2m drop in contribution from JVs, amid completion of residential projects in earlier quarters. Revenue jumped 38% to $262m on stronger property sales, but gross margin shrank 4.5ppt to 35.5%. NAV/share at $4.35.

*Tianjin Zhong Xin Pharmaceutical: 3Q16 net profit eased to Rmb90.6m (-5.8%) on softer revenue of Rmb1.49b (-10.1%). Gross margin widened 5.5ppt to 31.6%, as direct costs declined faster than top line. Bottom line was further eroded by a Rmb57.4m drop in gains on associate disposal. NAV/share at Rmb5.39..

*Sino Grandness: Strenuously refutes allegations in the report released by GeoInvesting last week, citing misconstrued, erroneous and/or inappropriate interpretation of information that is likely to mislead shareholders and potential investors.

*MTQ: 2QFY17 net loss deepened to $4.3m (2QFY16: $0.5m) on a drop in revenue to $24.8m (-46%), due to weaker oilfield and subsea activities, and project deferrals. Gross margin narrowed 7ppt to 17% on pricing pressures. Bottom line was also further weighed by absence of insurance claims. NAV/share at $0.64.

*YuuZoo: Investing between US$50m and US$150m in film producer and distributor Relativity for up to a full buyout, to be funded by debt and other fund raising exercises to be carried out. Separately, group drew down $2.1m in funds from its facility provided by GEM Global Yield Fund through the issuance of 15m new shares at $0.14/share, for a major marketing push to launch a number of products on its platform. Under the facility agreement, GEM Global cannot sell more than 1m shares on any given day in the open market.

*GKE: Acquiring 100% interest in port operations and logistics service provider TNS Ocean Lines for $9m, to be satisfied with cash ($2.7m) and 52.5m shares at $0.12 each. The deal also include a profit guarantee of $3.5m p.a. for three years.

*Luzhou Bio-Chem Technology: Proposed to set up production facilities in Xinjiang, China, with an initial investment of Rmb120m. The investment may be increased to Rmb300m, subject to favourable market conditions in the future. The move is aimed at capturing demand for corn sweetener in North West China from major players such as Coca-Cola, and Pepsico.

*Vibrant: Proposing to acquire ASX-listed Chongqing based thermal coal producer, Blackgold International Holdings, for $137.6m via a scheme of arrangement. Post-deal, pro forma FY16 EPS is expected to surge to 3.76¢ from 1.86¢.

*Novo Group: Swung to 1QFY17 net profit of US$2.5m (1QFY16net loss: US$3.2m), boosted only by US$4.2m disposal gains. Revenue jumped 33% to US$22.4m, driven by higher trading revenue. Net liability/share at US0.6¢.