Wednesday, November 30, 2016


- Shocking 4QFY16 net loss of US$339.6m (4QFY15: US$7.8m loss), which ballooned FY16 loss to a whopping US$887.7m, wiping out FY15 profit of US$43.7m.
- For the quarter, revenue fell 8% from lower activity.
- The group swung from a gross profit of US$16m in 4QFY15 to a gross loss of US$29.9m.
- Bottom line was further dragged by impairment losses totalling US$270m.
- Operating cash flow tightened to US$35.9m (-5.5%) in 4QFY16 (FY16: US$51m outflow), net gearing spiked to a precarious 3.1x from 1.5x in 3QFY16.
- Accordingly, NAV/share shrank 71% q/q to US$0.0793 ($0.113) and the stock now trades at a P/B of 0.4x. However, P/B may not be a good measure for companies where asset values are inflated and are at risk of massive write-downs.

SG Market (30 Nov 16)

The Singapore market is likely to see cautious trading ahead of the OPEC meeting in Vienna tonight and Italian vote this weekend, which has potential to destabilise European markets. Consider defensive names in consumer, yield and telecoms.

Regional bourses are mostly flat in Tokyo (flat), Seoul (+0.1%) and Sydney (flat).Technically, STI is struggling near its 2,880 resistance, with downside support at 2,840 (50-dma).

Stocks to watch:
*Ezra: Shocking 4QFY16 net loss of US$339.6m (4QFY15: US$7.8m loss) blew the FY16 hole to a whopping US$887.7m, wiping out FY15 profit of US$43.7m. For the quarter, revenue fell 8% to US$136m on weakness in the offshore support industry, which resulted in a gross loss of US$29.9m (4QFY15: US$16m profit). Bottom line was further dragged by impairment loss of US$270m. Accordingly, NAV/share shrank 71% q/q to US$0.0793 ($0.113).

Ezra: Extended the long stop date for its proposed divestment of 37% owned PV Keez to PetroFirst Infrastructure 2, controlled by energy-focused private equity firm First Reserve, to 31 Dec.

*Marco Polo: 4QFY16 net loss widened to $9.4m (4QFY15: $3m loss), as weaker utilisation and charter rates dragged revenue to $8.9m (-42%), which resulted in gross loss of $1.4m (4QFY15: $6.6m profit). Bottom line was further impacted by JV loss of $8.1m due to asset impairments at PT Pelayaran Nasional Bina Buana Raya. NAV/share at $0.472.

*First Resources: Oct FFB harvest rose 5.6% to 312,817 tonnes, with yield stable at 2 tonnes/ha, while CPO production increased 8.9% to 74,752 tonnes, as extraction rate edged up 0.3ppt to 22.7%. MKE last had a Hold with TP of $1.97.

*Cordlife: Appointed new chairman Ho Sheng following the entry of new substantial shareholders, while prior chairman Dr Ho Choon Hou will continue to serve as the group's vice chairman.

*Lian Beng: Acquiring 50 Franklin Street, Melbourne for A$51.5m. The property is a freehold office building (NLA: 11,447 sqm) comprising 18 strata lots situated in the Melbourne CBD.

*Delfi: Received favorable ruling from Singapore Court of Appeal that the shape and packaging of its two and four finger chocolate wafer "Take-it" did not infringe the trademark rights of Nestle's chocolate bar "Kit Kat".

*ASL Marine: Proceeding to engage discussions with noteholders on a proposed consent solicitation exercise in relation to the potential breach of financial convenants on its $100m 4.75% and $50m 5.35% notes owing to the difficult business environment. The exercise will be formally launched in mid to late Dec with noteholders' meeting planned for mid Jan.

Tuesday, November 29, 2016


LHN's 4Q16 net profit surged to $9.2m (4Q15: $0.8m) from a low base, buttressed by fair value gains.

Revenue grew 1.1% to $26m, lifted by facilities management sales of $3.4m (+25.9%) from increased security services and car park contributions, as well as from improved logistics contributions of $4.3m (+19.4%), mainly from increased container depot turnover.

This was offset by lower space optimisation revenue of $18.3m (-5.7%) due to the expiry of leases.

While gross margin expanded 5.8ppt to 25.1% on lower rental costs, this was largely negated by increased operating expenses. Notably admin expenses rose 26.7% to $6m from higher depreciation and staff costs.

Bottom line was boosted by $9.2m of fair value gains, of which $7.1m was attributable at the associates' level, from investment properties. The balance $2.1m is attributable to a one-off revaluation of its industrial properties in Singapore.

On prospects, management is cautious, given intense rent pressures amid weak supply-demand dynamics.

However, 38 Ang Mo Kio Industrial Park 2 (acquired May '16), as well as Four Star Industries (acquired Oct '16) are expected to be operational and contribute in FY17. Four Star Industries includes a 6-storey flatted factory building, to which LHN can optimise.

Meanwhile, LHN is also expecting to expand its GreenHub office brand to a fourth location in Beach Road in Feb '17, together with the branch at 10 Raeburn Park. In total, these will add another 200 workstations, bringing its Singapore workstations to 606.

LHN is trading at ~13x core FY16 P/E.

Keong Hong

Keong Hong's 4QFY16 net profit slumped 24.4% to $17m, in tandem with its 24.8% decline in revenue to $57.1m. This brought FY16 earnings and revenue to $34.7m (-9%) and $248m (-12%) respectively.

For the year, the revenue drop was attributed to lower recognition of construction sales as two projects, Alexandra Central Phase 2 and SkyPark Residences, were largely completed in FY15. In addition, two new projects, Raffles Hospital Extension and Parc Life, were at its initial sales recognition stage.

Gross margin expanded to 15.6% (+5ppt), due to higher profitability for certain construction projects, and was further shored by retention sum received from completed projects.

Bottom line was however dragged by lower JV/associate contribution of $14m (-27.1%) following the TOP of residential development project, Twin Waterfalls Executive Condominium, in FY15.

Accordingly, management lowered the final DPS to 3¢ (4QFY15: 4¢), bringing full year payout to 3.5¢ (FY15: 4.5¢).

Keong Hong's construction order book contracted to $351m (3QFY16: $411.5m), providing revenue visibility through to FY18.

Management opines that 2017 will be a difficult year for the local construction sector, particularly in private residential construction. As such, it intends to focus on the commercial, industrial and institutional sector.

At the current price, Keong Hong trades at 6.6x trailing P/E and 0.81x P/B, and offers a 7.3% dividend yield.

SG Market (29 Nov 16)

Market could face some profit taking as investors may turn cautious ahead of the OPEC meeting tomorrow and the Italian referendum on Sun.

Regional bourses opened mixed in Tokyo (-0.4%), Seoul (+0.1%) and Sydney (+0.2%).Technically, immediate resistance for STI is still at 2,880 after a failed break yesterday with downside support at 2,840 (50-dma).

Stocks to watch:
*Perennial Real Estate/SPH: Both parties agreed to buy an additional 40%/20% of Chinatown Point Mall from two funds for $61.8m/$30.9m. Upon completion, Perennial and SPH will increase their stakes in the retail mall from 5.2% and 7.4% to 45.2% and 27.4%, respectively.

*Perennial Real Estate: Entered call option agreement to acquire 20% stake in Aviva Tower for £330.0m or 2.2% above current market valuation. Aviva Tower is a 24-storey office building in London and has received approval to triple its gfa to 154,100 sqm, and is the tallest building in the City of London.

*Keong Hong: 4QFY16 net profit slumped 24.4% to $17m in tandem with 24.8% decline in revenue to $57.1m. This brought FY16 earnings and revenue to $34.7m (-9%) and $248m (-12%) respectively. For the year, the revenue drop was attributed to lower contributions from construction as two projects were largely completed in FY15, while two new projects, Raffles Hospital Extension and Parc Life, were at initial sales recognition stage. Gross margin expanded to 15.6% (+5ppt) as certain construction projects were in advanced stages of completion. NAV/share at $0.595.

*ASL Marine: 1QFY17 net profit tumbled 69.5% to $1.6m, dragged by a $1.3m swing in unrealised FX loss and higher tax provision. Revenue rose 27.3% to $96.7m, lifted by improved contributions from shipbuilding (+26.7%), shipchartering (+40.7%), engineering (+68.8%), but partially mitigated by shiprepair and conversion (-3.5%). However, gross margin narrowed to 13.5% (-2.1ppt) due to cost overruns in the shipbuilding segment, despite a reversal in cost provision. Order book stood at $177m with deliveries up to 4QFY18, of which 59% is expected to be booked in FY17. NAV/share at $1.006.

*LHN: 4Q16 net profit surged to $9.2m (4Q15: $0.8m), driven mainly by fair value gains from investment properties and revaluation of industrial properties. Revenue crept up 1.1% to $26m, from an increase in facilities management and logistics services, while gross margin widened 5.8ppt to 25.1% on lower rental costs. Final DPS raised to 0.45¢ (4Q15: 0.3¢), bringing full year payout to 0.65¢. NAV/share at $0.193.

*Acromec: Swung to FY16 net loss of $0.6m, mainly due to cost overruns, project execution difficulties and delays in tender for new projects. While revenue rose 23% to $43.5m, gross margin was crushed to 11.8% (-9.3ppt). Bottom line was further impacted by IPO fees of $0.7m and a spike in admin expenses (+43%). Excluding IPO fees, pretax profit would have still plunged 95.7% to $0.2m. NAV/share at $0.0899.

*Astaka Holdings: Signed a RM308m agreement with Johor Bahru City Council to construct and develop a 15-storey Grade-A office tower, with gfa of 0.45m sf at One Bukit Senyum in Johor. There is also a potential RM35m supplemental agreement not awarded at this stage for the interior design of the tower.

*Trendlines: Received US$2.8m investment from Braun for one of its portfolio companies ApiFix, which develops minimally invasive and non-fusion spinal implant system to treat scoliosis.

*Thakral Corp: 50% owned JV Thakral Japan Properties invested in a 105-room business hotel property, the Hotel Oaks Reaze Tsukamoto, located at Osaka, Japan.*Equation: Proposed placement of 380m new shares (5.9% of share capital) at 0.99¢ each to three subscribers Teo Khiam Chong (58%), Chen Dawei (26%) and Island Asset Management (16%). Net proceeds of $3.8m are intended for expansion through acquisitions and JVs.

*Citic Envirotech: Proposed 1-into-2 stock split in a bid to improve trading liquidity, and to broaden shareholding base.

Monday, November 28, 2016

SG Market (28 Nov 16)

Key highlights this week include the OPEC meeting on Wed, which will set the course of crude prices, as well as US 3Q GDP (Tue) and China manufacturing PMI (Thu).

Regional bourses opened lower today in Tokyo (-0.5%), Seoul (-0.2%) and Sydney (-0.2%).Technically, the STI could test its immediate resistance at 2,860 followed by 2,900, with downside support at 2,830.

Stocks to watch:
*Jumbo: FY16 results in line with adjusted net profit of $15.5m (+18%). Revenue of $136.7m (+11.4%) was driven by existing stores, as well as two new outlets in Shanghai that were opened in Aug '15 and Jan '16. Gross margin widened 0.3ppt to 63.2%. Aggregate DPS of 1.7¢ (Final: 1¢, Special: 0.7¢) came above expectations, representing 70% payout ratio. MKE maintains Buy with TP of $0.78.

*Keppel Corp: Reiterated its full support for KrisEnergy's proposed financial restructuring, and is currently in discussions to subscribe to its entitlement and any excess notes. MKE last had a Sell with TP of $4.57.

*Sembcorp Industries: Acquired 49% stake in Changi Mega Solar for $2.6m, which is developing a 3.6MW grid-tied solar photovaltaic system on the rooftop of SATS Airfreight Terminal 5 & 6.

*Viva Industrial Trust: Moody's assigned the REIT a corporate rating of Ba1, underpinned by its balanced portfolio, income diversification from its tenant base and continued improvement in cash flow generation as portfolio occupancy ramps up. REIT trades at an attractive 9.6% indicative yield and 0.97x P/B.

*Soilbuild REIT: Obtained TOP for an annex block at 39 Senoko Way, which has been leased out to Tellus Marine Engineering.

*Equation: Proposed placement of 300m new shares (4.9% share capital) to placement agent UOB Kay Hian at 0.99¢ apiece (10% discount to last close). Net proceeds of $2.8m will be used to repay accrued interest from the convertible loan and working capital.

* Completed the balance placement of 47m new shares placement to Zhong Hong New World at $0.20 apiece, lifting Zhong Hong's interest to 29.7%.

Friday, November 25, 2016

SG Market (25 Nov 16)

Profit taking is likely to take hold after MAS narrowed its 2016 GDP growth estimate to 1-1.5% from 1-2% previously, given weak conditions in the external environment.

Regional bourses opened slightly higher today in Tokyo (+0.3%), Seoul (+0.1%) and Sydney (+0.2%).Technically, the STI is range-bound between its topside resistance at 2,860 and support at 2,835.

Stocks to watch:
*Banks: UOB and DBS may face renewed pressure on additional impairments to their loan books, after court documents filed by beleaguered Swissco showed sums of US$167.1m and US$68.3m, owed respectively. A remaining US$38m is owed to seven other financial institutions including CIMB, Credit Suisse, OCBC and RHB. MKE remains Negative on the sector, with UOB its preferred pick (Hold, TP of $18.36).

*IHH: 3Q16 net profit of RM173.3m (+46%) was lifted by a 57% reduction in FX translation losses, bringing 9M16 earnings of RM954.9m (+26%) to meet 67% of street estimate. Revenue rose 18% to RM2.44b, driven by increased contribution from Parkway Pantai operations in Singapore, Malaysia and India, as well as Turkey's Acibadem Holdings. However, EBITDA margin narrowed 0.7ppt to 22.3% due to higher start-up costs for new hospitals. MKE last had a Hold with TP of RM6.52.

*Sarine: Disclosed that it has no significant exposure to India's largest diamond cutting firm Shrenuj & Co, after its supply arrangement with De Beers has been suspended due to continued pressure on the former's liquidity position.

*KrisEnergy: Reiterated that terms and conditions of its ongoing consent solicitation exercise for its $500m MTN programme are final. Group opines that the current debt restructuring is the only option for stakeholders to preserve value and concedes that failing which, on 9 Dec, will cause the risk of multiple defaults.

*BRC Asia: FY16 net profit almost halved to $8.3m (-46%), on a swing into net FX loss of $4.3m (FY15: $4.3m gain). Revenue slipped to $346.8m (-9.9%) from lower ASPs, arising from intense competition and lower steel prices, despite a higher volume sold. Gross margin stood pat at 8.3%. FY16 DPS reduced to 2.4¢ (FY15: 2.5¢), implying a 4.6% yield. NAV/share at $0.92.

*Cosco Corp: 51% owned Cosco Shipyard is acquiring the remaining 40% in JVCo Cosco Shipyard Total Automation, from its JV partner Wartsila Singapore, for Rmb6.67m. The target engages in automation system design, installation, commissioning, and repair services for the O&M sector.

*Rickmers Maritime: Became the latest victim in the distressed O&M sector to default, after failing to service interest payments for its $100m 8.45% notes due 2017.

*Geo Energy: Acquired 100% stake in PT Surya Tanbang Tolindo (STT), which owns a 4,600 ha concession area that has 20 years lease term (from 2012) at East Kalimantan, Indonesia. STT is still in pre-production stage and is estimated to hold 0.8m metric tonne coal reserves on a strip ratio of 17.

*Advanced Integrated Manufacturing: Privatisation offer by founder Tan Kim Yong at $0.21/share (22.8% above last close). Together with his family, Tan owns 88.24% of the group.

Thursday, November 24, 2016

Sen Yue

Sen Yue: Announced results. Net loss for FY9/16 deepened to $0.9m (FY15: $0.2m loss), partially due to a $3.5m adverse FX swing. Revenue surged 49.6%, mainly driven by strong sales from the commodities trading division (+60.6%), but the segment also narrowed gross margin by 1.6ppt to 7.8%. Bottom line was further hurt by a spike in finance costs (+60.3%). NAV/share at $0.0385.

SG Market (24 Nov 16)

The Singapore market could open higher today following fresh records set in Wall Street, spurred by firm US economic data and with a fully priced in Fed rate hike in Dec.

Regional bourses opened mixed, with Tokyo (+1%) stronger after a holiday break, while Seoul (-0.2%) and Sydney (-0.1%) lost ground.Technically, the STI could head towards the next resistance level at 2,860 after breaching the 50-dma at 2,835.

Stocks to watch:
*Economy: Singapore's final GDP grew 1.1% in 3Q16, beating expectations of 1% and advance reading: 0.6%, driven by electronics, infocomm and other services. The government trimmed its 2016 growth forecast to 1-1.5% and expects the economy to expand by 1-3% in 2017.

*CapitaLand: Serviced residence unit Ascott is targeting 10,000 “Lyf” units by 2020. “Lyf” is a new brand targeted at millennials, especially entrepreneurs that desire co-living and co-working experience. Management views Singapore and China will remain as core markets with Vietnam as the key growth market. Maybank KE has a Buy call with TP of $4.06

*F&N: Exercised call option to acquire the remaining 30% stake in 70%-owned Malaysian subsidiary Yoke Food Industries, which engages in manufacturing, marketing, distributing, and exporting beverages, for RM23.4m ($7.5m).

*Acromec: Acquiring 60% of Golden Harvest Engineering, which provides air-cond and ventilation maintenance services, for $1.86m, of which $0.86m will be satisfied via new shares at $0.375 and remaining in cash over three tranches. The deal comes with profit guarantee of $0.3m each for FY17/18, and could have lifted proforma FY15 EPS by 2.2% to 3.7¢.

*Moya Holdings: Forming 51:49 JV with Maynilad Water Services to engage in provision of water and wastewater services, and investment in Indonesia.

*MMP Resources: Entered into a service agreement with Sean Tedore to review several strategic winter travel and leisure acquisitions in Hokkaido, Japan. This is in line with its ongoing strategy to expand in the travel, hospitality and leisure sector.

*Cacola Furniture: Terminated its $45m placement agreement with Advance Opportunities Fund as well as a conditional unsecured $40m loan facility.

Wednesday, November 23, 2016

SG Market (23 Nov 16)

The Singapore market is likely to edge forward, taking cue from the record-breaking run on Wall Street and expectations of an OPEC agreement to cut output next week, but sentiment remains fragile over US President-elect Trump's anti-trade policies.

Regional bourses opened slightly higher in Seoul (+0.1%) and Sydney (+0.5%), while Tokyo is closed for Labour Thanksgiving Day. Technically, STI is sitting just above its 200-dma at 2,820 with immediate resistance at 2,840.

Stocks to watch:
*Economy: US President-elect Donald Trump's intention to pull out of the Trans-Pacific Partnership on the first day of his first day in office on 20 Jan would be a major setback for Asia and trade-reliant Singapore. Even if the other 11 other nations decide to go it alone, they may face a major hurdle as at least six members representing 85% of the total GDP of the original signatories are needed to ratify the agreement, which is not possible without the US.

*SGX: Signed MoU with Tokyo Commodity Exchange to jointly develop a LNG market in Asia. Singapore is already Asia's key trading hub for oil and refined fuel products, while Japan is the world's biggest consumer of LNG and the collaboration will make it difficult for other aspirant trading hubs like Shanghai and Seoul to break in.

*SPH/mm2 Asia: Both parties signed MoU with OTT platform RINGS.TV to jointly develop and manage a live and on-demand video application in Singapore over the next six months.

*SIIC Environment: Considering dual listing in Hong Kong next year, among fund raising options.

*Rickmers Maritime: In full default after the grace period to make interest payment of $4.3m on its 8.45% notes due in 2017 lapsed. The group continues to be in discussions with lenders to obtain standstills and/or waivers failing which, its ability to continue as a going concern will be impaired.

*DeClout: Realised disposal gain of $27.9m from the divestment of 72.1% owned Acclivis. It intends to use $7.2m of the sale proceeds to undertake an inaugural share buy-back at $0.315/share, subject to approval at an EGM on 7 Dec.

*Libra: Received US$0.8m from the termination of an option to subscribe for new shares in Neptune Aviation.

*Accrelist (formerly WE Holdings): Entered into a convertible loan agreement with Singapore Rixin Zhonghe Investment for $4m. Loans will be used for working capital purposes of its new corporate accretion services business that focuses on FinTech and Education.

*Swissco: Its JM application hearing will be held on 25 Nov.

Tuesday, November 22, 2016

SG Market (22 Nov 16)

The Singapore market will likely be positively buoyed by hopes of an OPEC production cut by month-end. Within the O&M space, MKE likes Ezion (Buy, TP SGD0.42), believed to be an early beneficiary of resumption in sector spending.Regional bourses opened largely higher in Tokyo (-0.1%), Seoul (+0.7%) and Sydney (+1%).Technically, STI could test its immediate resistance at 2,820 (200-dma) followed by 2,835 (50-dma), with support seen at 2,800.

Stocks to watch:
*REITs: Global house Jefferies is bullish on S-REITs, after analysis showed the sector has historically outperformed the broader market, except for periods of high growth and low inflation. The contrarian move came after most houses turned bearish on the sector due to increased expectations for higher treasury yields following the Trump election.

*Pacific Radiance: 50% owned JV CA Offshore Investment is suing two Chinese shipyards for US$5.6m on pre-delivery instalments, after the shipyards failed to deliver two platform supply vessels.

*Lian Beng/KSH Holdings/KOP: 32%/28%/25% JVCo Epic Land proposed to dispose 17 strata office units in Prudential Tower to a third party, which has been given eight weeks exclusivity for due diligence.

*Boustead Projects: Won a JTC tender with a $88.9m bid, to develop a business park at Mediapolis. The development sits on a 9,872.5 sqm site and has gfa of 39,490 sqm, with construction expected to commence in 1Q17 and schedule completion in 4Q18.

*Declout: Proposed to undertake an off-market equal access share buyback scheme at $0.315/share (65.8% above last close) for 23m shares (3.4% of share capital), from proceeds derived from the divestment of 72.1% owned Acclivis.

*Cedar Strategic: Successfully concluded all outstanding issues identified by Baker Tilly in its special audit report, including the rectification of lapses in corporate governance and internal controls.

*iX Biopharma: Secured a patent in South Africa for WaferiX drug delivery technology, a non-invasive and pain-free alternative way of delivering pharmacologically active compounds into patients’ blood stream.

*Swiber: Disposing Swiber Atlantis, which owns the Sea Horizon vessel for US$10.3m. The vessel is no longer capable of being utilized unless significant rectification works are done. Swiber expects a net gain of US$0.2m from the transaction.

Monday, November 21, 2016

SG Market (21 Nov 16)

Investors could take some gains off the table on a relatively quiet week for both the corporate and economic data fronts.Regional bourses opened mixed in Tokyo (+0.4%), Seoul (-0.4%) and Sydney (-0.4%).Technically, STI has broken above its 50MA and 200MA at 2,835 and 2,820, respectively, with next resistance at 2,855. Downside support seen at 2,800.

Stocks to watch:
*SGX: Partnered with a consortium of financial institutions including central bank MAS to form innovation group R3, to collaborate on a proof-of-concept project using blockchain infrastructure for interbank payments.

*ThaiBev: FY16 net profit rose 14.3% to to Bt18.92b, on revenue of Bt139.15b (+14.8%), boosted by stronger sales in all segments- spirits (+0.1%), beer (+62.3%), non-alcoholic beverages (+6.8%) and food (+1.4%). However, EBITDA margin narrowed to 19.2% (-0.8ppt) on increased staff costs in the spirits business. Final DPS reduced to Bt0.4, bringing FY16 DPS to Bt0.6 (FY15: Bt0.61).

*mm2 Asia: 51% owned UnUsUaL has secured pre-IPO investors SPH AsiaOne, Apex Capital and Maxi-Harvest, by way of subscription for a $1m convertible note with a two-year term each. The notes will be converted to shares in UnUsUaL upon its SGX listing at a 15% discount to the IPO price.

*EMAS Offshore: 49% owned associates SJR Marine, EMAS Victoria and Intan Offshore will have to observe an informal standstill with regards to proceedings against Perisai Petroleum Teknologi for the next 60 days, as Perisai prepares to submit a proposal for a debt restructuring scheme.

*Croesus Retail Trust: Purchased and cancelled $9.8m of the $100m 4.6% fixed rate notes due 2017. Post-purchase, there will be $90.3m in notes outstanding.

*China Minzhong: The $1.20/share buyout offer by Marvellous Glory has attained valid acceptances of 92.3%. Offer will close on 8 Dec.

*Equation Summit: Prominent investor Alan Wang Yu Huei of Asdew Acquisitions raised its stake to 7.87% from 0.75%, via a placement of 420m shares at 0.7¢ each.

*Fullerton Health: Called off IPO plans in light of market uncertainty, despite "significant interest" during its book-building process.

Friday, November 18, 2016


In a step towards unlocking value for its shareholders, Singtel has reportedly hired three banks, namely DBS, Morgan Stanley and UBS to manage the IPO of its broadband arm, NetLink Trust (NLT).

The IPO is estimated to raise >$2b and is likely to take place in 2Q or 3Q next year.

NLT owns broadband infrastructure and provides services to residential and enterprise customers in Singapore. With the IPO, market watchers are expecting Singtel to pare its stake from 100% to <25%, unlocking >$1.5b in the process.

Earlier this year, a foreign broker estimated the value of NLT to be around $3b, with enterprise value of $4-4.5b. In FY15, NLT contributed $23m (FY14: $14m), or 0.6% to Singtel's bottom line of $3.78b (FY14: $3.65b).

Should NLT be able to fetch similar valuations in the IPO next year, the broker believes that special dividends of up to $0.14 could be dished, translating to a total FY18E DPS of ~$0.314, or a yield of 8.6% based on the current price.

However, Maybank KE last reiterated its Hold rating for Singtel (TP $3.68) on the back of increased competition within the domestic mobile segment due to the incoming fourth telecom provider.

Best World

Best World has obtained the coveted approval from Ministry of Commerce (MOFCOM) to conduct direct selling in Hangzhou city, China.

The multi-channel distributor expects conversion of the current export business in China to shift incrementally to direct selling over 2017. Maybank KE expects the group to scale up its China operations at a faster pace, with membership base expected to be larger in the months ahead.

Further, Best World intends to expand its geographical coverage of its direct selling licence to the other regions in China to tap the mammoth potential of the country's direct selling market.

As a gauge, 80 direct selling licences have been approved to-date by MOFCOM since 2006, with 29 licences issued to foreign enterprises. In 2015, direct selling companies in China registered sales growth of 19% to US$35.5b, just behind US, the world's largest market, of US$36.1b (+4.8%).

Best World remains under-researched. Increasing market discovery, ROE expansion and scaling up in China could re-rate the stock closer to its peer P/E, where most have China presence and notable market share.

Maybank KE has a Buy with TP of $2.16, implying a 60% upside from the current price.

SG Market (18 Nov 16)

Positive mood could spill over to the Singapore market on the improving economic health in the US, as well as heightened certainty on a Fed rate hike next month. Regional bourses opened mixed in Tokyo (+0.9%), Seoul (-0.3%) and Sydney (+0.3%).Technically, STI could test its 200-dma at 2,817, followed by the next resistance at 2,840, with downside support seen at 2,780.

Stocks to watch:
*Keppel Corp/ KrisEnergy: Been granted a whitewash waiver exempting Keppel Corp from making a mandatory offer for its 39.99% owned KrisEnergy, as the former has irrevocably undertaken to underwrite KrisEnergy’s proposed pref offering of up to $140m senior secured zero coupon notes due 2024.

*Best World: Received authorisation from MOFCOM to conduct direct selling in Hangzhou city, China. Group expects conversion of the current export business to China into direct selling in incremental phases, and continues its geographic expansion into the other Chinese regions to accelerate growth. MKE last had a Buy with TP of $2.16.

*Sabana REIT: Entered into three master leases, each with a one-year tenor, with sponsor Vibrant Group. The leases have an aggregate gross rental of $10.1m, and will come with four successive options for an additional year of renewal.

*SIA: Issued $430m in notes priced at 3.13% due 2026.*Super: SGX has granted an extension for the release of its 3Q16 results up till 5 Dec.

*Ley Choon: Secured a contract worth $2.7m from PUB for the supply and laying of watermains.

*Joyas: Due to the expectation for weak sales in metal gifts and jewellery, group intends to scale down the businesses, which would incur restructuring costs and inventory disposal losses.

Thursday, November 17, 2016

Raffles Medical

Raffles Medical:
- A foreign broker has slashed its rating for Raffles Medical from Buy to Hold, after it cited that growth in Singapore's private healthcare sector could come under pressure.- The brick wall on growth stems from reduced private demand on the back of close working relations between the Ministry of Health and the insurance industry.
- Additionally, the upcoming increase in MediShield Life Integrated Plan premiums next year will also likely to dampen demand for private healthcare services in favour of public hospitals.
- Further, the broker sees public hospitals serving a rising proportion of elderly patients, from the 90% historically.
- Lastly, there is potential cost escalation from the Raffles Hospital extension, with their Chinese venture ramp-up.
- Hence, the house lowers its FY16-18e earnings forecast by 7-18%, below consensus estimates, but maintains its TP of $1.60/share.

SG Market (17 Nov 16)

Local stocks are expected to muddle along as investors weigh downbeat Oct NODX figures and await more clarity on US trade policies when president elect Donald Trump meets Japanese PM Shinzo Abe today.

Regional bourses had a lacklustre morning in Tokyo (-0.4%) and Sydney (-0.1%). Seoul will commence trading an hour later today owing to exams.STI failed to break above its 200-dma at 2,815 yesterday and is likely to inch towards its lower bound at 2,780.

Stocks to watch:
*Economy: Oct NODX slumped 12% (est: -3%, prior: -5%), dragged by a decline in both electronic (-6%) and non-electronic exports (-14.6%). Overall, shipments to top 10 markets fell, led by EU (-28.6%), Japan (-19.9%) and Indonesia (-13.1%).

*Telecom: IMDA has pre-qualified fibre service provider MyRepublic and Australian TPG Telecom to participate in the first of two spectrum auctions to be held and completed before year-end, which will pave the way for the entry of a fourth mobile operator. MKE maintains its negative view on the sector due to increased competition. M1 (Sell, TP of $1.90) will be most affected, while Singtel (Hold, TP: $3.68) is regionally more diversified and StarHub (Hold, TP: $3.50) is more focused on its enterprise business.

*Midas: 32.5% owned CRRC Nanjing Puzhen Rail Transport has secured four new metro train car supply contracts worth Rmb2.59b, with delivery slated between Aug ’17 and Mar ’19. With these orders, its JV would have accummulated Rmb7.17b of new projects YTD.

*Breadtalk: Disclosed that it has been in discussion with several third-parties to form a JV for a core business to be a franchisee and operator of an existing business in a new territory.

*Aspial: Proposed repurchase of up to $15m of its 4.5% notes due 2017 at 100.2% of principal amount from noteholders. The partial redemption will commence on 17 Nov - 2 Dec.

*Ramba: Spudded first oil from the Akatara Field of the Lemang block, South Sumatra.

*Resources Prima: Disclosed that Executive Chairman and CEO Agus Sugiono has been formally served with a notice of arbitration by Tan Kim Sing. Agus intends to seek legal advice and will defend against the claim.

*Acesian Partners: Client Takenaka Corp terminated the subcontract for works relating to the proposed development of Terminal 4 at Changi Airport.

*Asia Fashion: Entered into an agreement with G Music (HK) to organise and promote the Camomile Acoustic Night - Emi Fujiata Live in HK 2016 concert.

*Neo Group: Exiting its umisushi operations in Indonesia after ceasing renewal of its licence with PT Ubi Sushi Indonesia. Separately, it established a 51:49 JV with Gomtz to cater and manufacture cooked-food preparations.

*Swiber: Under probe by the Commercial Affairs Department for possible regulatory breaches under the Securities and Futures Act.

*Jason Holdings: Faced winding up action from creditor ANZ Bank for failing to meet a $1.7m repayment claim. The application is fixed for hearing on 2 Dec and ANZ has proposed the appointment of Nexia TS Risk Advisory as the liquidator.

Wednesday, November 16, 2016

MM2 Asia

MM2 Asia:
- 1HFY17 net profit nearly doubled to $7.8m (+95%), meeting 43% of full year consensus forecast.
- Revenue surged 175.6% to $35m, boosted by the consolidation of newly acquired businesses in concert production as well as cinemas.
- Despite the slightly below par performance, management shared that its 2HFY17 could see an uptick in its core business- Recently, mm2 announced three major acquisitions that are aligned to its strategy of developing media platforms with good content.
- While its forward P/E of 26.1x is arguably not cheap, the media company is set on a growth trajectory that could justify the steeper valuations.

The street has 2 Buy and 1 Hold ratings on the stock with a mean TP of $0.51.

SG Market (16 Nov 16)

Oil-linked counters may see some interest following the sharp upswing crude prices from renewed efforts to shore up proposed production cuts, although investors remained wary about US president-elect Trump's incoming policies.

Regional bourses opened higher in Tokyo (+1%), Seoul (+0.8%) and Sydney (+0.2%).Technically, STI is hovering below its 200-dma at 2,815 with downside risk at 2,780.

Stocks to watch:
*Property: Non-landed private home sales (excluding ECs) spiked to 1,252 units in Oct (+146% y/y, +128% m/m), sparked by new launches by CDL (Forest Woods) and MCC Land (The Alps Residences). Last month's sales were the highest so far this year, and the best showing since Jul '15 (1,655 units).

*SIA: Group pax load factor slipped 2.1ppts to 76.7% in Oct as traffic (+0.8%) lagged capacity increase (+3.6%), with load factors declining across all regions due to softer demand amidst a competitive landscape. Cargo load factor grew to 66.2% (+1.2ppts) from higher carriage (+7.7%), on capacity growth of 5.7%. Subsidiary carriers Scoot (-10.1ppts to 75.1%), TigerAir (-0.7ppts to 79.1%) and SilkAir (-0.7ppts to 67.3) also recorded lower load factors. MKE last had a Hold call with TP of $9.70.

*SembCorp Marine: Disposing its entire 30% direct interest in Cosco Shipyard Group to China Ocean Shipping for Rmb1.06b ($220.68m), or 1.2x P/B. While the group will realise a net gain of $48.3m, this was against an earlier impairment of $171m made in FY15. Apart from improving liquidity, this divestment also removes any overhang of further writedowns/ losses to be incurred at the associate level. MKE maintains Sell with TP of $1.00.

*Rickmers Maritime: Failure to make an interest payment of $4.3m on its US$100m, 8.45% notes maturing in May '17 within the next five business days would trigger a default and affect its ability to continue as a going concern. It joins a growing list of debt-laden offshore marine companies such as Swiber, Technics Oil & Gas and Swissco, which are currently under judicial management, or about to file for one.

*GLP: Signed 204,000 sqm (2.2m sf) of leases in China, Japan, US and Brazil, with third party logistics service providers servicing the pharmaceutical, auto parts and consumer goods industries.

*CapitaLand: Serviced residence arm Ascott has added 10,000 units of apartment units across 51 properties in 2016, bringing its portfolio to 52,000 units globally.

*Silverlake: Intends to sell up to 20.8m shares of Global InfoTech (GIT) on ChiNext in the Shenzhen Stock Exchange from 6 Dec till Jun '17. According to Bloomberg, Silverlake's cost per share was Rmb27.04, above GIT's last closing price of Rmb24.51.

*Ramba Energy: Received forestry lease permit to explore and produce oil at Akatara Field in Lemang block, Sumatra. Initial production is expected to commence on 16 Nov, which is estimated to yield ~500bpd from the Akatara-2 well.

*TEE Land: Based on a preliminary assessment, the group disclosed that none of its two properties- Workotel and Thistle Guest House in Christchurch, New Zealand, suffered visible damage from the recent earthquake.

*AnnAik: 60% owned ChangXing HengYi Wastewater Treatment has entered into a built-operate-transfer water treatment project with the municipal government of Lijiaxiang in China. Total investment for the plant is estimated to be Rmb10m, with daily treatment capacity of 10,000 MT.

*Ley Choon: Re-applying for a proposed transfer to the SGX Catalist Board.

Tuesday, November 15, 2016

Sinarmas Land

Sinarmas Land's 3Q16 net profit tumbled 62.6% to $17.4m, due to negative leverage as well as absence of negative goodwill.

Revenue fell 23.6% to $145.9m, from lower commercial and industrial land sales. This was partially offset by leasing income from Alphabeta building in London (acquired 4Q15), as well as higher leasing income from Indonesia investment properties.

Gross margin inched up 0.1ppt to 72.5% on the back of lower industrial land cost.

Despite the revenue decline, operating expenses rose 5.2% to $61m, weighing on bottom line. This was exacerbated by the absence of $30.6m negative goodwill as well as a 85.6% reduction in FX gain to $1.6m.

But contributions from JVs and associates jumped to $5m (3Q15: $0.3m).

Net gearing stood at 15.8% (-2.8ppt q/q).

Sinarmas Land is a proxy to the favourable long-term outlook of the Indonesia property sector.

Subsidiary Bumi Serpong Damai will be jointly developing a 19-ha mixed use project in BSD city in West Jakarta. The project is expected to commence in FY17 and will comprise 1,000 landed houses and shop houses.

Maybank KE notes that investor interest has been building up for JSE-listed Bumi Serpong Damai given government and central bank support to drive pre-sales for low-to-mid end properties in the longer run.

Meanwhile, Sinarmas' projects would also likely be a beneficiary of the Indonesia tax amnesty programme, as repatriated assets can be invested in land and buildings, with the exception of subsidised housing.

Sinarmas Land is currently trading at 1x P/B.

China Everbright Water

China Everbright Water's (CEW) 3Q16 net profit crept up 3% to HK$91.1m, bringing 9M16 net profit to HK$271.7m (-9%), or 61% of full year street forecast.

For the quarter, revenue of HK$553.5m (+35%) was boosted by the expansion and upgrading of several BOT projects under construction.

Gross margin fell 7ppt to 40% due to higher construction mix.

There was a five-fold jump in other income to HK$38.2m, mainly from VAT refund. However, this was negated by 1) admin expenses of HK$64m (+28%) due to business expansion and FX loss of HK$7m on USD borrowings, and 2) finance costs of HK$57.9m (+300%), due to higher borrowing balances.

Operating cash flow was still a negative HK$75m (9M16: -HK$180.8m) but is a marked improvement from the HK$190.3m outflow in 3Q15. Nevertheless, net gearing was stable at 43% (-0.1ppt q/q)

CEW secured eight environmental water projects in Shandong and Jiangsu in 9M16. Looking ahead, it plans to expand into other areas, including integrated environmental water services, industrial waste water treatment, river-basin ecological repair, and river training.

CEW is currently trading at 16.8x FY16e consensus P/E.

The street has 5 Buy and 1 Hold calls on CEW with mean TP of $0.67. CEW is a constituent of the Market Insight Growth portfolio.


Centurion's 3Q16 net profit rose 6% to $7.8m, bringing 9M16 earnings to $26m (-2%), or 73% of full year consensus estimate.

For the quarter, revenue climbed 14% to $28.1m, boosted by 18% increase in accommodation segment, due to ramp-up at Weslite Woodlands (TOP: Jul '15, occupancy 75%) and maiden contributions from ASPRI-Westlite Papan (TOP: May '16, occupancy: 20%). This was offset by reduced contributions from its optical disc business.

Gross margin shrank 6ppt to 60%, hurt by operating loss at ASPRI-Westlite Papan. Bottom line was also weighed by higher finance cost of $5.7m (+23%), due to increased borrowings to finance ASPRI-Weslite Papan, as well as UK Braemar.

Net gearing was steady q/q at 54%.

Centurion currently has 22 worker and student dormitories, totalling 64,408 beds across four countries.

In Singapore, Centurion has managed to maintain above-average occupancy rates despite a slowing economy, particularly in the O&M sector. It is currently in the midst of extension discussions with authorities, regarding Westlite Tuas (expiry: Apr '17).

In Nov, its appeal to increase bed capacity at Westlite Toh Guan has been rejected by URA. Accordingly, capacity at the dormitory will be reduced by 808 beds. This would result in a maximum impact of up to $2m/year or 5.9% of FY15 net profit.

In Malaysia, the government had showed signs of relaxing the foreign labour hiring freeze in certain sectors, including manufacturing. Although management acknowledges a challenging outlook, it is optimistic of long term prospects.

Management is sanguine about the prospects of its student accommodation business, and now has 10 student dormitories across UK, Australia and Singapore, following the acquisition of four assets in Jul '16. Despite the Brexit outcome, its UK accommodation assets are operating at close to full occupancy.

Centurion is currently trading undemanding 6.8x FY16E consensus P/E and 0.6x P/B. The street also sees a 6% indicative yield for the counter.


3Q16 net profit for the Chinese property developer surged 10-fold to Rmb564.2m, taking its 9M16 earnings to Rmb1.15b (+374%) or 77% of full year street estimate.

Quarterly revenue jumped 83.9% to Rmb5.51b on higher GFA delivery of 224,985 sqm (+70.1%) as well as higher average selling price of Rmb24,187/sqm (+18.6%).

During the quarter, it launched two new projects, namely, Oasis New Island Gardens (Phase 1) in Nanjing and Yanlord Marina Peninsula Gardens (Phase 1) in Zhuhai, which accounted for 47.5% and 18% of its gross revenue respectively.

Gross margin expanded to 27.2% (+3.3ppts), mainly due to a shift in its product mix as its Oasis New Island (Phase 1) development enjoyed much higher margins.

Bottom line was further buoyed by net interest income of Rmb12.5m (3Q15: Rmb20.4 loss) as well as a Rmb203.2m FX swing to Rmb9.6m gain. This was mainly due to the stronger greenback, which resulted in a translation loss on its USD-debt in 3Q15.

Despite the strong quarterly performance, operating cash flow contracted to Rmb2.15b (-59.8%) on sharply lower working capital inflow of Rmb1.91b (-66.5%). Net gearing stood at 10.3% (2Q16: 2%) as it drew down debt to facilitate the development of various projects.

Looking ahead, management opines that China's property sector will continue to be supported by healthy demand for residential properties. It notes that prices for housing rose faster in first and second tier cities such as Nanjing (+40.6%), Shenzhen (+34.1%) and Shanghai (+32.7%) driven by declines in supply levels.

As at 30 Sep '16, the group has received advances for pre-sale properties amounting close to Rmb25b (2Q16: Rmb24.44b) with accumulated pre-sales of Rmb29.36b (2Q16: Rmb28.88b).

Post 3Q16, Yanlord launched its latest batch of apartment units in Yanlord Eastern Gardens in Shanghai, which attracted strong buyer support with 142 out of 177 (80%) units snapped in one day, drawing Rmb1.07b worth of new pre-sales.

Moving into 4Q16, Yanlord plans to launch new projects and phases of existing projects in Nanjing, Tianjin, Shanghai, Zhuhai and Sanya.

Yanlord currently trades at 8.9x forward P/E and 0.6x P/B. The street is fairly bullish on its prospects with 5 Buy and 1 Hold ratings on the counter and a consensus TP of $1.46.


Innotek: Swung into 3Q16 net profit of $5m (3Q15: $3.5m loss), lifted by a turnaround to profitability for JV Mansfield Group on reduced operating costs and increased automation via technology.However, revenue slipped 4.8% to $55.8m on reduced sales from precision components and tooling due to lower demand for office automation and consumer products.Group expects to record an operating profit for 2H16.

Golden Agri

Golden Agri (GAR) 3Q16 results turned around to US$219.7m from a US$16.4m loss a year earlier, benefitting from a tax credit of US$104.3m (3Q15: US$19.8m). This brought 9M16 earnings to US$353.3m (9M15: US$9.2m loss).

Revenue climbed 16.6% to US$1.84b from growth in its palm & laurics (+15.6%) and others (+6.3%) segments but was pared by a contraction in its oilseeds business (-5.3%).

Overall EBITDA margin of 9% (+0.9ppts) was mainly boosted by the improved oilseeds environment in China as well as improved palm & laurics operations.

This brought 9M16 revenue to US$5.07b (+2.3%) and EBITDA to US$393m (-2.1%) or about 74% of street estimates respectively.

3Q16 segmental breakdown:
Plantation & Palm Oil Mills - Revenue: US$379m (+5%), EBITDA: US$90m (-6%)
The recovery in revenue came from the improvement in CPO price to US$677/MT (+27%), which more than offset the decline in palm product output of 624,400 MT (-22%). EBITDA margin was slightly affected by an export levy that was implemented in Jul '15.

Palm & Laurics - Revenue: US$1.63b (+16%), EBITDA: US$61m (+121%)
Better market conditions as well as improved downstream operations helped the group to realise higher margins and EBITDA during the quarter.

Oilseeds & Others - Revenue: US$193m (-3%), EBITDA: US$18m (+429%)
Reduced revenue was mainly due to lower sales volume of 256,000 MT (-13%). However, EBTIDA was supported by the better oilseed crushing margin in China.

Aside to the tax credit, bottomline was also shored up by US$19.8m in FX gain (3Q15: US$45.4m loss) as well as US$45.3m in fair value gain on biological assets (3Q15: US$6.4m loss).

The profit reversal saw operating cash flow balloon to US$276.5m (3Q15: US$23.7m), in line with a seasonally stronger 2H16.

Moving forward, management expects to benefit from the global slowdown in production, coupled with domestic demand growth through the implementation of the biodiesel policy in Indonesia. With about 82% (43% aged 7-18 years) of its trees in the prime producing stage, the group could potentially see a significant uptick in production going into 4Q16.

On its downstream prospects, GAR is currently constructing new biodiesel processing capacity. In total, GAR has pencilled in FY16 capex of US$180m.

The plantation counter is currently trading at forward P/E of 15.6x relative to pure upstream producers First Resources (22.3x) and Bumitama Agri (16.5x).

The street has 6 Buy, 4 Hold and 7 Sell ratings on GAR with average TP of $0.38.

Latest broker ratings:
UOB Kay Hian maintains Buy with TP of $0.42
CIMB maintains Reduce but raises TP to $0.38 from $0.35
OCBC maintains Hold but raises TP to $0.37 from $0.34
CLSA maintains Sell but raises TP to $0.35 from $0.33

SG Market (15 Nov 16)

Sentiment will remain jittery as the Trump rally fizzled out, but increased odds of US deficit spending and Fed rate hike next month could favour USD beneficiaries at the expense of yield plays.

Regional bourses opened weaker today in Tokyo (flat), Seoul (-0.2%) and Sydney (-0.6%).Technically, STI could test its immediate support at 2,780, with topside resistance at 2,840 (50-dma).

Stocks to watch:
*O&G: Sector could face another round of selling pressure as debt-laden offshore service provider Swissco prepares to file for judicial management after its main lenders (UOB, DBS) rejected its restructuring plan. For 3Q16, the chartering group reported a whopping loss of US$296m and total debt of $255.7m, against negative equity of US$29.1m.

*Golden Agri: 3Q16 results in line as net profit turned around to US$219.7m (3Q15: US$16.4m loss), benefitting from a significant tax credit of US$104.3m (3Q15: US$19.8m credit). Revenue grew 16.6% to US$1.8b from growth in palm & laurics (+15.6%) as a 27% increase in CPO prices was pared by a 22% slide in output. EBITDA margin widened to 9% (+0.9ppts) on improved profitability from palm & laurics (+1.8ppts) and oilseeds (+7.6ppts). NAV/share at US$0.31.

*Bumitama Agri: 3Q16 results were a slight miss as net profit of Rp206.4b (+29.2%) brought 9M16 earnings of Rp543.5b (+11.5%) to 69% of full year street estimate. Revenue jumped 26.8% to Rp1,494.7b on higher ASPs for CPO (+16%) and palm kernel (+90.9%), as well as a sharp increase in biodiesel sales volume (+358%). However, gross margin narrowed 1.8ppt to 28.4% due to higher fertiliser cost. MKE maintains Buy with TP of $0.97.

*mm2 Asia: 1HFY17 net profit nearly doubled to $7.8m (+95%), meeting 43% of FY17 street estimates. Revenue surged 176% to $35m from maiden contributions from newly acquired UnUsUaL ($5.2m) and cinemas ($6.1m) as well as growth in its core production business (+104.7%), while gross margin contracted to 56.4% (-9.7ppts) on the shift in revenue mix.

*Sinarmas Land: 3Q16 net profit tumbled 62.6% to $17.4m, due to absence of $30.6m negative goodwill booked last year. Revenue fell 23.6% to $145.9m from lower commercial and industrial land sales, while bottom line was partially shored by JV/associate contributions of $5m (3Q15: $0.3m). NAV/share at $0.43.

*Halcyon Agri: Sank into 3Q16 net loss of US$12.1m from breakeven last year, dragged by a 31.9% slump in revenue to US$187.1m due to lower selling prices (-4%) and volumes (-28.6%). Bottom line was squeezed by negative operating leverage after gross margin compressed to 3.8% (-3.1ppt). NAV/share at $0.45.

*Yanlord: 3Q16 net profit surged more than 10x to Rmb564.2m (+913%) on stronger gross margin of 27.2% (+3.3ppts), due to a shift towards more profitable projects. Revenue spiked 83.9% to Rmb5.51b on the launch of two new projects in Nanjing and Zhuhai. Bottom line was further buoyed by net interest income of Rmb12.5m (3Q15: -Rmb20.4) as well as a Rmb203.2m swing to FX gains of Rmb9.6m. Separately, credit ratings agency Moody’s has confirmed Yanlord’s Ba3 corporate family and senior unsecured debt ratings, with positive outlook; cites it has demonstrated strong sales growth and better financial profile than Ba3 China property peers. NAV/share at Rmb10.85..

*China Everbright Water: 3Q16 net profit missed estimates despite a 3% rise to HK$91.1m. Revenue jumped 35% to HK$553.5m, boosted by expansion and upgrading of several BOT projects under construction, while gross margin fell 7ppt to 40% due to a higher mix in construction. Bottom line was partially shored up by VAT refund, government grant and other sundry income of HK$38.2m. NAV/share at HK$2.70.

*Midas: 3Q16 results miss despite a 62.5% surge in net profit to Rmb22.6m, mainly from a 4.9x jump in associate contribution to Rmb10m due to increased delivery to customers. Revenue edged up to Rmb420.8m (+2.1%), as higher contribution from aluminium alloy stretched plates outweighed reduced sales of aluminium alloy extruded products. Gross margin narrowed 1.9ppt to 24% on a change in sales mix. NAV/share at Rmb2.32.

*Centurion: 3Q16 net profit climbed 6% to $7.8m, in line with street estimates. Revenue of $28.1m (+14%) was boosted by a 18% jump from the accommodation segment, offset by weaker optical disc sales. Gross margin fell 6ppt to 60% from start-up losses at Westlite Papan. NAV/share at $0.53.

*Tat Hong: 2QFY17 missed; sank into net loss of $5.4m (2QFY16: $4.4m profit), weighed by a drop in gain on disposal of fixed assets and higher asset impairment losses. Revenue tumbled 20% to $109.8m, from lower crane rental utilisation and weaker crane distribution. NAV/share at $0.92.*Mermaid Maritime: 3Q16 net profit plunged to US$7.5m (-54.6%), hurt by weaker associates/ JVs contribution (-72.8%). Revenue slumped to US$51.8m (-46.3%) on less cable lay projects, lower vessel utilisation and reduced day rates, while the drilling segment recorded zero activity. Net gearing improved to 0.1x from 0.15x in FY15. NAV/share at US$0.24.

*KSH: 2QFY17 net profit slumped 65.5% to $8m, weighed by a plummet in associate contribution (-87.8%). Revenue grew 9.8% to $68.2m, led by improved project business (+10.6%), but pared by contraction in rental income (-17.4%). Bottom line was further pressured by higher construction costs (+13.8%). Interim DPS maintained at 1.25¢, although without a special DPS (2QFY16: 0.3¢). NAV/share at $0.668.

*Hong Fok: 3Q16 turned in net loss of $0.8m (3Q15: $56.6m profit) on the absence of a disposal gain of $81.9m. Revenue slipped to $14m (-3%) on lower property management income, partially offset by an increase in rental income from unsold residential units at Concourse Skyline. NAV/share remained at $2.12.

*QT Vascular: 3Q16 net loss narrowed to US$9.6m (3Q15: US$33.3m loss) on the absence of a $21.2m legal provision. Revenue contracted 5.4% to US$2.3m, as the decrease in sales of Chocolate PTA Balloon Catheter to US distributor, Cordis, overshadowed direct sales growth for Chocolate PTCA Balloon Catheter and Glider PTCA. Net liability/share at US$0.01..

*Sembcorp Industries: Officially opened its 49:51 JV for the development of the 2,700-hectare integrated township, Park by the Bay in Semarang, Indonesia. The township will include industrial, commercial and residential space to be developed over several phases. So far, the project has attracted US$330m worth of investments.

*KSH: Received letter of intent for a $139.1m construction contract, to build three residential towers from an undisclosed party. The project is expected to commence in Feb ’17 and could boost its order book to $257m.

*F J Benjamin: Entered into a term sheet with a third party regarding a potential transaction.

*Loyz Energy: Placed out 3.5m new shares (0.33% share capital) at 2.12¢ apiece to seven subscribers, of which one of them is former independent director and current advisor to the board, Simon Charles Lockett, for payment of fees.

Monday, November 14, 2016


Parent Fincantieri has returned to the table with its second cash offer at $0.24/share or 4.4% premium to the last close, for the Norwegian OSV shipbuilder.

Back in 2013, Italian-listed shipbuilding group Fincantieri tried to take Vard (formerly known as STX OSV) private at $1.22/share during its heydays, before the oil market took a turn for the worse in 2H14.

Since then, Vard has fallen 90% to a low of $0.124 in Feb 2016, before recovering to its last closing price of $0.23.

The cash offer of $0.24/share values Vard at its historical -1sd of 0.67x P/B. Maybank KE views the offer price as fair in the current environment, where many related peers are trading at 0.3-0.5x.

As at 13 Nov, Fincantieri owns 55.6% of Vard and the offer will turn unconditional upon valid acceptances of over 90%.

In the latest 3Q16 results released late last week, Vard reported a pick-up in activity amid its strategy to reduce its offshore O&G exposure, which could mark a bottom in its valuations.

However, shareholders marred by the experience of seeing their shareholding value dissipate over the past three years and tired of the prolonged depressed state of the industry may consider tendering their shares to the majority shareholder.

SG Market (14 Nov 16)

Expect more volatility as Asian investors are still unclear about the possible impact of a Trump presidency amid weaker currencies, oil prices and moderating credit in China. Local corporate results will wind to an end today after a largely uninspiring quarter.

Regional bourses opened mixed in Tokyo (+0.5%), Seoul (-0.1%) and Sydney (-0.8%).Technically, STI is still hemmed between its immediate resistance at 2,840 (50-dma) and near term support seen at 2,780.

Stocks to watch:
*Vard: Received cash offer of $0.24/share, or 0.67x P/B, from parent Fincantieri to take it private. As at 13 Nov, Fincantieri owns 55.6% of Vard and the offer will turn unconditional upon valid acceptances of >90%.

*ComfortDelGro: 3Q16 results met expectations, as net profit edged up to $87.3m (+2.5%), on lower fuel (-24.4%) and material (-27.1%) costs. However, revenue slipped 3.1% to $1.02b, weighed by bus (-7.3%), automotive engineering services (-10%) and adverse FX movements, which overshadowed growth in the rail business (+26.3%), while taxi operations remained flat. EBITDA margin widened slightly to 22.2% (+0.5ppt). MKE last had a Hold with TP of $2.63.

*Olam: 3Q16 results trailed estimates although core net profit slipped 20.2% to $20.5m, bringing 9M16 earnings of $261.4m (+2.3%) to 72% of FY16 street forecast. Quarter revenue rose 6% to $4.74b, buoyed by higher overall volume (+15.8%), and sales in the food category (+1.7%) and non-food segment (+32.7%). EBITDA margin was stable at 4.3%, while bottom line was dragged by higher depreciation charges (+43.5%) due to a higher fixed asset base. NAV/share at $1.8528.

*Q&M: 3Q16 core net profit grew 3% to $2.8m, bringing 9M16 earnings of $10.2m (+10%) to 65% of FY16 street estimate. Revenue jumped 22% to $29m on contribution from existing and new dental outlets in Singapore, coupled with new acquisition of dental companies in Singapore and China. MKE last had a Buy with TP of $1.08.

*Silverlake: 1QFY17 results missed despite a 2.5x jump in net profit to RM168.6m, boosted by a RM143.7m gain from partial disposal of associate Global InfoTech. Revenue slipped 3% to RM126.7m due to weaker software licensing, software project services and sale of software & hardware products. Gross margin narrowed 2ppt to 58% on a change in sales mix. NAV/share at RM0.29.

*Haw Par: 3Q16 net profit jumped 21.3% to $42.3m, on higher revenue of $49.7m (+3.3%), driven by healthcare (+7.1%) and property (+32%) divisions, but the leisure (-76.5%) business sagged on closure of Underwater World Singapore. Gross margin expanded 5.5ppt to 65.2%, while bottom line was further lifted by an absence of disposal loss. NAV/share at $10.88.

*United Engineers: 3Q16 headline net profit soared 7.2x to $134.6m, largely boosted by $122m gains from disposal of subsidiaries, including US-listed Multi-Fineline Electronix. Earnings from continuing operations climbed 10% to $11.7m on higher other income (+89%), and increased JV/associate contributions of $2.4m. However, revenue plunged 43% to $101.7m from weaker property development sales following completion of Eight Riversuites. NAV/share at $3.06.

*Cordlife: Tumbled to 3Q16 net loss of $0.6m (3Q15: $7.2m profit) amid absence of fair value and FX gains, as well as finance income. Revenue inched up 0.8% to $14.6m on increased contribution from the relatively lower value service cord tissue banking, but was smothered by higher discounts offered for its India business to stay competitive. No dividend was declared (3Q15: special DPS 13¢). NAV/share at $0.5092..

*Cogent: 3Q16 net profit rose 13% to $7.8m on firmer revenue of $34.1m (+4%), as improvements from container depot, automotive logistics and warehouse operations continued to outweigh weakness in transport management segment, which is still reeling from the depressed O&G sector. Operating margin widened 2.8ppt to 29.8% as rental expenses (-9%) trended down. NAV/share at $0.2466.

*Sarine: Turned in 3Q16 net profit of $4m (3Q15: $1.4m loss), which brought 9M16 earnings to $13m (+515%), or 65% of FY16 street estimate. Quarter revenue soared 82% to US$17.3m, buoyed by sales in Europe (+142.9%) and India (+115.2%), primarily due to increased diamond manufacturing equipment sales, including recurring revenues from Galaxy systems. Gross margin expanded to 69% (+6 ppt). NAV/share at $0.2894.

*QAF: 3Q16 net profit leapt 84% to $19.4m, mainly from the de-consolidation of Gardenia Bakeries (KL) after a 20% stake sale to 50% in Apr. Accordingly, operating costs were reduced by 16%, while bottom line was lifted by $2.7m from the former subsidiary turned JV. Revenue slipped 13% to $212.4m from the loss of KL unit but was partially mitigated by improved contribution from all other business segments on new product launches and increased market penetration, as well as higher sales volume and ASPs from Rivalea. NAV/share at $0.843.

*Oxley: 1QFY17 net profit plunged 80% to $7.1m as revenue slumped to $126.5m (-71%) due to the completion of of industrial property Ecotech@Sunview in 1QFY16. However, gross margin improved to 37.6% (+13.7ppt) from five ongoing residential and mixed-use projects, some handover units at The Royal Wharf Phase 1 and rental properties. Total unbilled contract value amounted to $2.66b, of which $1.37b will be booked in the next 12 months. Net gearing eased from 2.2x to 2.1x as the group continued to pare its debt pile, supported by stable operating cash flow of $146m. NAV/share at $0.2695.

*Hiap Hoe: 3Q16 results turned in a net profit of $13.7m (3Q15: $3m loss), stemming from a disposal gain of $20m and FX gain of $4.4m (3Q15: $2.4m loss). However, revenue slumped 48.2% to $19.9m on the absence of contribution from development properties (3Q15: $15.2m), as well as declines across rental (-27.2%), leisure (-7.6%) and hotel (-4.9%) businesses. NAV/share at $1.4607.

*Starburst: 9M16 net loss deepened to $7.8m, despite higher revenue of $18.2m (+73%), underpinned by contribution from Singapore architectural steel project Marina One, and increased contribution from firearm shooting range projects in the Middle East. However, bottom line was dragged by higher costs and provision losses (+144.5%) for projects. NAV/share at $0.1476.

*Cosco Corp: Dismal 3Q16 as net loss deepened to $102.3m (3Q15: $82.1m loss), on
1) higher impairment of trade receivables due to rising credit risk from some customers,
2) increased FX loss and
3) a jump in finance costs (+26%). Revenue tumbled to $662.3m (-30%), on weaker shipyard (-30.3%) and shipping (-21%) businesses.
NAV/share at $0.2825.

*Fu Yu: 3Q16 net profit slumped 61.2% to $1.8m, mainly on lower FX gains of $0.8m (3Q15: $3.4m) and absence of lower rental income and liquidation gain (3Q15: $0.4m). Revenue fell 13.6% to $48.1m on a slowdown in demand from Chinese customers, while gross margin contracted to 14.6% (-1.1ppts) due to fixed overhead costs. Interim DPS of 0.25¢ maintained. NAV/share at $0.225.

*Boustead Singapore: 2QFY16 net profit fell 25.9% to $7.6m, as gross margin contracted to 31.9% (-3ppts), with pressure continuing to build up. Revenue slipped 1.4% to $113.5m on declines in energy-related engineering (-27.8%) and geo-spatial technology (-1.5%) segments, mitigated by growth in its real estate solutions (+15.6%) segment. Interim DPS shaved to 0.5¢ (2QFY17: 1¢). NAV/share at $0.583..

*SUTL: 3Q16 core net profit rose 8% to $0.5m, while revenue inched up 3% to $6.4m, on higher sale of goods and services (+4%), although membership-related fees slipped (-4%). NAV/share at $0.604.

*Food Empire: 3Q16 net profit surged 782.3% from a low base to US$5.8m (3Q15: $0.6m), as FX loss narrowed to US$0.2m from US$6.4m previously. Revenue grew 10.7% to US$68.3m, lifted by increased sales to Russia (+7.4%), Indochina (+36%) and other markets (+38.1%), while gross margin expanded 1.4ppt to 38.3%. NAV/share at US$0.283.

*EuroSports: 1HFY17 net loss widened to $3.4m (1HFY16: $1.7m loss), on a 9.7% drop in revenue to $29.4m mainly on fewer sales of new Lamborghini models (10 vs 1HFY16’s 15). Gross margin also reduced from 15.2% to 12.9% on lower profitability of sales for pre-owned automobiles. NAV/share at 6.43¢.

*GSS Energy: 3Q16 net profit halved to $1.5m (-51.7%), on absence of a $3m land compensation in China. Revenue rose 15.1% to $20.2m from higher orders in the precision engineering segment, although gross profit margin contracted to 23.8% (-3.6ppt) due to changes in product mix and price adjustment. NAV/share at 7.23¢.

*Nordic: 3Q16 net profit grew 12.1% to $3.6m on stronger gross margin of 31.4% (+3ppts), led by increased profitability in maintenance services. Revenue slipped 1.5% to $21.4m on lower contributions from project services (-12.4%). Bottomline was supported by declines in marketing & distribution (-58.1%) and admin (-9.4%) expenses. NAV/share at $0.16.

*Dyna-Mac: 3Q16 results swung back into net loss of $1m ($0.5m profit), as revenue tumbled to $34.2m (-59.2%) due to lower workload. Despite that, gross margin expanded to 32.8% (+18ppts) on higher contribution from order variation, while bottom line was dragged by a tax expense of $0.3m (3Q15: $1.5m credit). NAV/share at $0.172.

*Trek 2000: 3Q16 net profit spiked 70.7% from a low base to US$1.8m, boosted by increased gross margin of 11.1% (+2.4ppt) attributed to cost containment and lower R&D expenses. Revenue fell 1.9% to US$43.2m from decreased sales in customer solutions division and lower licensing fees. NAV/share at US$0.174.

*iX Biopharma: Narrowed 1QFY17 net losses to $0.8m (1QFY16: $2.4m), mainly from R&D tax incentives of $0.5m (1QFY16: $0.1m). Revenue slipped to $1.5m (-1.3%) on a decline in chemical analysis (-1.6%), while gross margin contracted to 22.9% (-8.3ppts) on a one-off cost for operating efficiency. NAV/share at 6.5¢.

*YuuZoo: 3Q16 jumped 50.8% to $8.4m on a $2.5m swing to FX gains of $1.3m ($3Q15: $1.2m loss), as well as lower cost of services (-53.5%), amortisation (-72%) and employee benefits (-35.6%). However, revenue fell 15.5% to $14.6m on reduced e-commerce revenue (-52.9%) and franchise sales (-8.2%). Group continued to bleed cash with operating cash outflow of $1.7m (3Q15: $3.4m inflow). Separately, it announced the resignation of its CEO after slightly more than one year at the helm. NAV/share at $0.201.

*SunMoon Food: Swung into 3Q16 net loss of $1.5m (3Q15: $0.4m profit), as gross margin tumbled to 1.1% (-6.5ppts) due to the return of frozen durian. Revenue jumped 36% to $8m on increased sales in Indonesia after the government lifted trade restrictions on fresh fruits from China. NAV/share of $2.16¢..

*Ramba: 3Q16 net loss widened to $3.7m (3Q15: $1.8m loss), on lower revenue of $13.6m (-12.7%) from reduced logistics volume. Bottom line was further dragged by one-time costs relating to a legal proceeding and lower FX gains. NAV/share of 11.58¢.

*IHH Healthcare: Divesting 29.9% stake (20.7m shares) in PCH (formerly known as Parkway China Holdings) to Taikang Insurance, for Rmb 291.1m (RM182.8m). *Silverlake Axis: Sold a block of 4m Global InfoTech shares on ChiNex via block trade at Rmb24.65/share, expected to reap RM47.5m gain from the sale.

*iFAST: Acquired Hong Kong insurance brokerage Canadian Financial Consultants for HK$5.4m. The deal is intended to expand the range of products available on its investment platform.

*Cosco Shipping: 51%-owned subsidiary Cosco Guangdong Shipyard has mutually agreed with rig owner Edrill 3, to defer delivery for a semi-submersible tender assist drilling rig by one year to 30 Nov 2017.

*ValueMax: Granted a $42m bridging loan facility as part of its moneylending business.

*Global Yellow Pages: Disposed 21.6m shares of Yamada Green Resources in a married deal at $0.31/share to substantial shareholder Sam Goi Seng Hui. Net proceeds of $6.7m is intended for general working capital purposes and/ or investment opportunities in the property market.

*QT Vascular: Secured a legal victory over Angioscore, as the Federal Court of Appeals denied a petition for a rehearing and maintained its reversal of a previous judgement for US$20m in damages payable to AngioScore.

*Swissco: Guided for losses in 3Q16 and 9M16 results, due to impairments on its fleet of vessels, rigs and receivables, as well as two 50% owned drilling rigs which continue to be off-charter.

Friday, November 11, 2016


Noble swung into 3Q16 net loss of US$28.1m (3Q15: US$24.7m profit, 2Q16: US$54.9m loss), crimped by working capital constraints, which restricted activity in the energy segment amid a rising price environment.

This brought 9M16 loss to US$42.5m (9M15: US$193.9m profit), a far cry from full year consensus profit forecast of US$115.5m.

For the quarter, revenue tumbled 34.8% to US$11.44b, due to lower sales tonnage of 56.8mt (-20.1%), as well as lower prices across the energy spectrum.

Segment performance:
Energy - Revenue: US$10.25b (-30% y/y, -1.4% q/q); operating income: US$11m (-95% y/y, -92% q/q)
Top line was weighed by depressed oil prices, further dragged by reduced volume of 38.9mt (-5%). Operationally, working capital constraints restricted trading activity but are expected to moderate going into 2017 following significant progress to bolster liquidity.

Gas & Power - Revenue: US$151m (-22% y/y, -0.7% q/q); operating income: US$75m (-17% y/y, +44% q/q)
Sales was dragged by lower volume of 92.5m MWh (-8%) and the ongoing sale of Noble Americas Energy Solutions as well as its European gas & power book. Operating margin improved to 49.7% (+15.5ppt) on higher US natural gas and power prices due to increased power demand from rising temperatures.

Mining & Metals - Revenue: US$965m (-48% y/y, -32.2% q/q); operating income: US$117m (3Q15: US$30m loss, 2Q16: US$4m)
Top line performance was affected by the restructuring and rationalisation of the business, as well as working capital constraints. However, operating income improved, bolstered by increased volume of 7.6mt (+10% y/y, +18.8% q/q), led by Chinese demand in raw material imports, including iron ore, metallurgical coke, bulk ores and alloys, due to the resurgent real estate sector.

At group level, operating cash flow remains negative at US$46m (2Q16: US$84m outflow) although the bleeding appears to have abated. Following the recent rights issue, adjusted net debt (less readily marketable inventory) has fallen to US$1.9b (2Q16: US$2.4b), with headroom now at US$1.2b from US$0.8b in 2Q16.

With the upcoming sale of Noble Americas Energy Solutions scheduled to complete in Dec, liquidity is expected to improve further, easing the belt-tightening on the commodity trader.

At the current price, Noble is currently trading at 0.46x P/B. The street has 2 Buy and 5 Hold ratings on the stock, with average TP of $0.27.

Latest broker ratings:
Morgan Stanley retains Overweight with TP of $0.23
Credit Suisse maintains Neutral and raises TP to $0.21 from $0.15

SG Market (11 Nov 16)

The market is likely to be swept up by expectations of a US reflationary theme under a Trump presidency, which could revive the battered commodity and resource sectors.

Regional bourses gapped up in Tokyo (+0.9%), Seoul (-0.9%) and Sydney (+0.4%).Technically, STI could test its immediate resistance at 2,840 (50-dma), with underlying support seen at 2,780.

Stocks to watch:
*Noble: Swung into 3Q16 net loss of US$28.1m (3Q15: US$24.7m profit, 2Q16: US$54.9m loss), as revenue tumbled 34.8% to US$11.4b due to lower sales tonnage (-20.1%). While operating margin of supply chains inched up 0.1ppt to 1.76%, bottom line was weighed by higher admin costs (+44%), and loss from discontinuing businesses (US$60m). Operating cash flow remains negative, but adjusted net debt has been pared down to US$1.9b (2Q16: US$2.4b, FY15: US$2.26b), with improved liquidity headroom of US$1.2b from US$0.8b in 2Q16. NAV/share at US$0.30.

*Wilmar: 3Q16 results missed although core net profit rose 9.8% to US$384.9m on improved profitability at downstream businesses tropical oil segment (+80.7%) and oilseeds and grains (+1.9%), but sugar (-20.6%) was watered down by wet weather. Revenue rose 4.1% to US$11.1b on stronger commodity prices, despite reduced sales volume for upstream products. EBITDA margin expanded 1.8ppt to 7.2% on the shift towards the more profitable downstream segment. NAV/share at US$2.264.

*SATS: 2QFY17 net profit of $62.1m (+4%) was in line as revenue grew 3.7% to $438.5m on stronger contribution from food solutions (+4%) and gateway solutions (+3.4%). Operating margin expanded to 14.5%(+0.5ppts) on reduced cost of raw materials (-5%), as well as lower company premise & utilities expenses (-1.8%). Interim DPS raised to $0.06 (2QFY16: $0.05). MKE maintains Sell with TP of $3.76 on stretched valuations.

*Lippo Malls Trust: 3Q16 DPU of 0.86¢ (+11.7%) came in line, as revenue ($47m, +6.6%) and NPI ($43.3m, +7.6%) were bolstered by higher rents and increased carpark income. Occupancy stood was steady at 94.8%, with WALE of 4.63 years, while aggregate leverage stood at 32.7% (-3ppt q/q). NAV/unit at $0.39.

*Croesus Retail Trust: 1QFY17 DPU of 1.79¢ (+9.8%) came in line, as revenue surged to ¥3.13b (+55.8%), mainly led by new contributions from Torius (acquired in Oct '15), Fuji Grand Natalie (Apr '16) and Mallage Saga and Feeeal Asahikawa (May '16). NPI rose at a slower pace to ¥1.60b (+29.5%) due to higher expense ratios at the new malls. Portfolio occupancy remained healthy at 97.8% (-0.3ppt q/q), with WALE at 6.8 years. Aggregate leverage eased to 44.6% (-0.7ppt q/q), with average debt cost and tenor stable at 1.93% and 2.2 years, respectively. NAV/share at ¥75.14.

*UMS: 3Q16 net profit fell 20% to $6.8m, on a 15% drop in revenue to $26.1m due to reduced semiconductor sales. While gross margin expanded 2ppt to 57% from lower input costs, bottom line was weighed by an inventory provision of $1m, and reduced FX gains. Kept interim DPS at 1¢. NAV/share at $0.4512.

*UOL: 3Q16 net profit of $87.1m (-14%) missed, on an adverse $14.2m swing in JV loss to $3.9m. Revenue grew to $393.4m (+11%) on broad-based growth in property development (+19%), property investments (+2%), hotel operations (+5%) and dividend income (+2%), although gross margin slipped to 33% (-6ppts) on lower profitability in property development. NAV/share at $9.91..

*Ho Bee Land: 3Q16 net profit leapt to $26.7m (+31.8%), as revenue surged to $46.9m (44.4%) from sales recognition of two residential development projects in Melbourne and Gold Coast, Australia. However, growth at the bottom line was pared by an absence of $6.9m gain from investment property disposal. NAV/share at $4.17.

*Ying Li: 3Q16 fell to almost breakeven (3Q15 profit: Rmb2.9m) on lower interest income, bringing 9M16 net profit to Rmb21.8m or 13% of FY16 street estimate. Revenue surged to Rmb251m (+124.4%) from increased handovers for lower margin residential project San Ya Wan. Consequently, gross margin shrank 31.2ppt to 24%. Net asset value at Rmb1.94.

*Vard: 3Q16 continue to linger in the red with net loss of NOK80m (3Q15: NOK486m loss), bringing 9M16 loss to NOK96m versus FY16 street forecast of NOK138m loss. For the quarter, revenue slumped 34% to NOK1,503m due to reduced activity at its shipyards and cessation of operations in Vard NiterĂ³i, while EBITDA turned around to NOK33m (3Q15: NOK467m loss) from absence of loss provisions. Order book jumped to NOK14.08b (2Q16: NOK11.93b). NAV/share at $0.36.

*Parkson Retail Asia: Dismal 1QFY17 as it swung to a net loss of $5.2m (1QFY16: $49.5m profit), due to the absence of disposal gain (1QFY16: $46m). While revenue inched up to $93.3m (+0.7%) on increased direct sale of goods, same store sales across key markets declined between 6.6 and 28.2%. NAV/share at $0.23.

*Aspial: 9M16 net profit more than doubled to $9.4m (+113%), helped by a favorable FX swing of $19.3m. Revenue increased to $450.8m (+33%) on improved real estate (+57.2%) and financial service (+29.6%) businesses. but gross margin tumbled to 25.7% (-7.9ppt), on higher material and subcontract costs outpaced top line growth. NAV/share at $0.1655.

*Straco: 3Q16 net profit slipped 3.6% to $22.7m on a softer revenue of $47.6m (-3.4%), weighed by a contraction in overall visitor numbers (-1.1% to 2.01m) and a weaker RMB against SGD. Weakness was seen at Underwater World Xiamen and Lixing Cable Car, which more than offset improved contribution from Shanghai Ocean Aquarium and the Singapore Flyer. NAV/share at $0.2717.

*Boustead Projects: 2QFY17 net profit climbed 33% to $7.2m, on the back of a 16% jump in revenue to $62.2m, from stronger contribution from its design-and-build business, which also lifted gross margin by 1ppt to 25%. NAV/share at $0.646.

*SBS Transit: 3Q16 net profit jumped 43.2% to $7.8m, on firmer revenue of $274.4m (+4.8%), as growth in rail (+26.3%) mitigated the slight drop in bus (-1%). Operating margin widened 0.7ppt to 3.6% on savings in fuel and electricity (-26.5%), while bottom line was lifted by a 26.2% reduction in finance costs. NAV/share at $1.31.

*HMI: 1QFY17 net profit surge close to 4.5x to RM6.2m, bolstered by a RM3.5m reduction in FX losses. Revenue rose 16% to RM109.5m, mainly on higher patient load and average bill sizes at two of its key hospitals in Malaysia. Bottom line was also underpinned by a 56% drop in finance costs. Separately, HMI will buy out the remaining 51% stake in Mahkota Medical Centre in Malacca, as well as the remaining 39% stake in Regency Specialist Hospital in Johor for an aggregate RM556.5m. The acquisitions will be funded via a mix of debt and equity raising. Pro forma FY16 EPS is expected to increase by 30.4% post-completion. NAV/share at RM0.1974.

Thursday, November 10, 2016

SG Market (10 Nov 16)

Continued volatility and uncertainty is likely to prevail over the market in the near term, in wake of Donald Trump’s shock election win and what his protectionist stance would mean for trade dependent countries like Singapore.

Regional bourses gapped up in Tokyo (+5.7%), Seoul (+1.8%) and Sydney (+3%).Technically, downside support for STI seen at 2,740 with immediate resistance at 2,840.

Stocks to watch:
*Singtel: 2QFY17 results in line. Core net profit of $978m was flat as stronger operating results from associates (+7%), Telkomsel & Airtel India, helped offset lower EBITDA (-4%) due to investments in customer acquisition and higher content costs in Australia. Revenue slid 2% to $4.09b on a decline in mobile termination rates and higher device repayment service credits in Australia, but offset by growth in mobile data, cyber security, data & internet and digital services. Interim DPS of 6.8¢ was maintained. Trimmed full year guidance for revenue growth and expects EBITDA to be stable. MKE retains Hold with TP of $4.41.

*City Dev: 3Q16 net profit of $170.3m (+60.1%) was lifted by one-offs, including the disposal gain in City E-Solutions, increased realisation of investment in a private real estate fund and a write-back following an insurance settlement for the 2011 New Zealand earthquake. This brought 9M16 earnings of $409.4m (+12.8) to 70% of FY16 street estimate. Quarter revenue rose to $922.8m (+32.4%), underpinned by the maiden contribution from both Gramercy Park in Singapore and Hanover House in UK, coupled with revenue recognition from Coco Palms, D’Nest and The Venue Residences and Shoppes. NAV/share at $9.91. MKE last had a Hold with TP of $9.17.

*ST Engineering: 3Q16 missed target as net profit tumbled to $76.7m (-42%), on asset impairment and provision for closure costs for its Chinese road construction equipment business, Jiangsu Huatong Kinetics. Revenue grew to $1.61b (+7.5%), mainly from aerospace (+11%) and electronics (+9%) segments, but EBIT margin contracted to 5.1% (-2.9ppt). Order book remained healthy at $11.4b (2Q16: $11.6b). Guided for higher FY16 revenue, but lower pretax profit. MKE has a Hold with TP of $3.17.

*Ezion: 3Q16 net profit tanked 66.4% to US$10.4m, which MKE deems to be in line. Revenue fell to US$79.8m (-7.4%) due to modifications and routine class surveys on a few jack-up rigs, reduced charter rates and project delays. Gross margin compressed to 17.5% (-11.4ppt) on increased deployment cost of additional service rigs. NAV/share at US$0.667. MKE last had a Buy with TP of $0.45.

*First Resources: 3Q16 net profit of US$28.4m (+26.2%) missed, while revenue of US$151.5m (+40.6%) was bolstered by both refinery and processing (+45.8%) and plantations (+35.1%), partially offset by reduced production volume (-8.9%) from lingering effects of El Nino. Consequently, gross and EBITDA margins contracted to 53.1% (-8ppt) and 51.1% (-6.1ppt). NAV/share at US$0.54..

*Far East Hospitality Trust: 3Q16 DPU of 1.12¢ (-6.7%) met, bringing 9M16 DPU of 3.21¢ to 75% of full year estimate. Quarter gross revenue and NPI slumped to $28m (-5.5%) and $25.3m (-5.8%), mainly due to reduced RevPAR of $142 (-5.8%) stemming from the weak operating environment for hotels, which resulted in lower average daily rates (-6.9%), despite a 1ppt increase in occupancy to 88.4%. Aggregate leverage remained stable at 32.8%, with average debt cost and tenor at 2.5% and 2.6 years. NAV/unit at $0.9279.

*Ascendas Hospitality Trust: 2QFY17 results met expectations as DPU held steady at 1.38¢ on adjusted distributable income of $15.5m (+0.1%). Revenue grew 2.5% to 55.6% while NPI advanced at a faster pace of 7.7% to $24.3m on stronger contributions from Japan (+41.6%) and China (+12.4%), but pared by contraction in Australia (-0.2%) and Singapore (-9.3%). Aggregate leverage edged lower to 32.4% (-0.8ppts q/q) with average cost of debt of 3.3% and tenor of 2.8 years. NAV/share at $0.88.

*Nam Cheong: 3Q16 would have been in the red if not for an FX gain of RM12.2m, which lifted net profit to RM0.7m (3Q15: RM6,000). Revenue plunged to RM25.8m (-86%) on slower revenue recognition of vessels sold, and gross margin got crushed to 3% (-8ppt). NAV/share at RM0.621.

*Delfi: Swung to 3Q16 net profit of US$5.9m, due to the absence of US$19.4m settlement. Revenue of US$86.6m was 2.4% higher, as improved Indonesia sales (+5.6%) offset regional markets (-4.4%). Gross margin expanded 7.1ppt to 35.5% on higher sales for its own brand, as well as other rationalization initiatives. NAV/share at US$0.333.

*Riverstone: 3Q16 results in line, even as net profit slid 15.6% to RM29.8m on a drop in FX gains. Excluding FX, core earnings would have fallen 4.1% to RM29.3m. Revenue grew 10.9% to RM166.9m on increased capacity, but gross margin narrowed 5.8ppt to 26.1% due to lower ASP for healthcare gloves, although it recovered 1.7ppt q/q on better sales mix. Net cash position remains healthy at RM110m (FY15: RM128.7m). Maybank KE last call was a Hold with TP of $0.92.

*Courts Asia: 2QFY17 results came ahead of expectations, as net profit climbed to $6.7m (+11.3%) on a $1.1m drop in FX losses. Revenue edged lower to $180.5m (-3%), as weakness in Malaysia sales (-12.9%) outweighed improvements in Singapore (+0.5%) and Indonesia (+70.2%). Gross margin shrank 1.4ppt to 33.9% on lower service charge income in Malaysia, weaker merchandise margin and a shift in Hari Raya festival to 1QFY17. NAV/share at $0.564..

*Maxi-Cash: 3Q16 net profit surged 3.2x to $3.3m, as revenue jumped to $40.9m (+28%) on higher interest income from pawnbroking business, as well as higher sales from retail and trading segment. But, net gearing rose to 2.2x from 1.8x in FY15. NAV/share at $0.1237.

*CSE Global: 3Q16 net profit slumped 52.7% to $4m on revenue of $81m (-21.6%) attributable to the lack of large greenfield projects which caused contraction across its operations in Asia-Pacific (-3.3%), Americas (-33.1%) and Europe/Middle East/Africa (-15.1%). Despite the poorer topline performance, operating expenses fell only 4.5%, narrowing operating margin to 6.9% (-3.6ppts). NAV/share at $0.453.

*Sapphire: 3Q16 net profit surged 80.3% to $2.8m, while revenue skyrocketed 415.5% to $68m from the consolidation of China rail EPC firm Ranken, which contributed the bulk of sales ($61.9m) attributable to project recognitions, that offset the 53.7% drop in mining revenue. Gross margin fell 12ppt to 14.1% in the shift in sales mix. NAV/share at 28.63¢.

*Raffles Education: 1QFY17 results swung to a net loss of $1.7m (1QFY16: $0.9m profit) due to a $1.3m drop in FX gains. Revenue fell to $24.8m (-15%), mainly weighed by discontinuation of Raffles Shanghai JV college, reduction in foreign student intake in Raffles Sydney and Raffles Singapore, as well as lower utility income from Oriental University City. NAV/share at $0.5447.

*Ellipsiz: 1QFY17 net profit dived 70.5% to $0.7m on impairment loss of $1.1m (1QFY16: nil). Revenue grew 9.4% to $27.7m on growth across its distribution & services solutions (+13%) and probe card solutions (+8.3%) segments. Bottomline was further pressured by the absence of bad debt recovery of $1.4m recorded in 1QFY16. NAV/share at $0.7747.

*SingPost: S&P Global Ratings downgrades long-term corporate credit rating to BBB+ from A-, with stable outlook, as it opines that SingPost’s emphasis on reducing leverage has diminished.*iFAST: Received in-principle approval from MAS to provide discretionary portfolio management and stock dealing services in Singapore.

*Isoteam: Acquiring a four-storey factory at Changi North Street 1 for $12.6m to consolidate the various divisions it has into a single premise. The property has land and built-in area of 3,401 and 4,232 sqm respectively, as well as 10 years of remaining leasehold tenure, with the option to renew for another 30 years.

*Swissco: Received notice from vendor X-Drill Holding that the latter has obtained a court order in the Republic of Equatorial Guinea for the arrest of the group's rigs, and thereafter subject to a judicial sale.

Wednesday, November 9, 2016

SG Market (09 Nov 16)

Much will depend on the US election voting results as they stream in during Asian trading hours, with 12 noon the earliest possible time for a winner to be called.

Regional bourses opened slightly higher in Tokyo (+0.6%), Seoul (+0.2%) and Sydney (+0.3%).Technically, upside resistance for the STI is at 2,880, with immediate support at 2,800.

Stocks to watch:
*Property: IOI Properties emerged as the top bidder for the white site at Central Boulevard with a record tender price of $2.57b ($1,689 psf ppr), 20% above a comparable site transacted in Sep 2007. This could have positive implications on capital values of office assets and REITs, which currently trades below book. CCT (Buy, TP $1.81) and KREIT (Buy, TP $1.21) are MKE's preferred exposure.

*CapitaLand: Headline 3Q16 net profit rose 28.4% to $247.5m, while core earnings of $251.8m (+54.5%) was lifted by higher fair value gain from change in a property use. This brought 9M16 earnings to 75% of full year consensus estimate. Revenue jumped 27.7% to $1.37b on increased contributions from development projects in Singapore and China, higher rental income from Singapore commercial portfolio, as well as serviced residences. Trades at 24% discount to its NAV/share at $4.01. MKE last had a Buy with TP of $3.93.

*Frasers Centrepoint: FY16 core net profit of $479.9m (-11.8%) missed estimates, dragged by lower income from JV/associates (-38.7%). Revenue slipped 3.4% to $3.44b on reduced contribution from Singapore (-16.8%) due to lower sale of residential properties, although partially offset by increased sale of completed development projects in Australia (+5.6%) and new acquisitions in hospitality (+39.4%). NAV/share at $2.30.

*Jardine Cycle & Carriage: 9M16 core net profit of US$518m (-4%) came in line, on a softer revenue of US$11.6b (-3%) due to reduced contributions from Astra's financial services, heavy equipment, and mining businesses. NAV/share at US$14.46.

*Yangzijiang: 3Q16net profit tanked 59% to Rmb281.2m, dragging 9M16 earnings to Rmb1.14b (+12%), or 60% of full year street forecast. Quarter revenue slipped 6% to Rmb3.88b, from fewer vessel deliveries and reduced net interest income. While the group recognized Rmb434m of advances from terminated contracts and Rmb107m of subsidy income, these were more than offset by impairment (Rmb750m) and JV/associates losses (Rmb95.8m). Trades at 32% discount to NAV/share of Rmb5.77.

*ARA Asset Management: 3Q16 results ahead with net profit of $31.5m (+84%), as revenue jumped 39% to $53m on higher management fees (+5%) and finance income (+352%). Operating margin widened 11.1ppt to 64.6% from increased operating scale, while the bottom line growth was further boosted by an 83% drop in finance costs. NAV/share at $0.562.

*Perennial Real Estate: 3Q16 results missed as net profit dived to $0.4m (-91.1%), on the absence of non-recurring investment income and an adverse FX swing of $1.3m. Revenue jumped to $35.1m (+53.2%) on stronger strata sales of office units at TripleOne Somerset. Gross margin narrowed 13.3ppt to 52%, while bottom line was also impacted by higher finance cost (+13.7%) due to increased borrowings. Net gearing surged to 0.62x from 0.45x in FY15, while operating cash flow tumbled 80% y/y to $10.8m. NAV/share at $1.57..

*Chip Eng Seng: 3Q16 net profit crumbled to $5.7m (-57.9%), on weak revenue of $151.8m (-4.2%), mainly weighed by muted property development (-13.7%). Gross margin shrank 7.7ppt to 17.8% on higher cost of sales (+5.8%). Net gearing spiked to 0.94x from 0.56x in FY15, as operating cash flow plummeted to $19.1m (-89.8%) from a year ago. NAV/share at $1.2083.

*Pacific Radiance: 3Q16 missed; swung to net loss of US$18m (3Q15: US$1.7m profit), partially dragged by absence of disposal gain (3Q15: US$6.6m). Revenue slumped to US$18.9m (-44%) on lower utilization and charter rates, as well as stubborn cost of sales (+2%), which resulted in gross loss of US$8.2m. NAV/share at US$0.455.

*Rotary Engineering: 3Q16 net profit dived 80.7% to $1.2m, on lower FX gains of $1m (3Q15: $5.2m). Revenue declined 12.7% to $52.6m as group gets closer to completion of major projects. Gross margin grew to 25.8% (+3.4ppts). Net cash slipped to $76.5m (-0.9% q/q) or 13.5¢, representing 35% of last closing price. NAV/share at $0.51.

*Civmec: 1QFY17 net profit fell 28.8% to $6.2m on a similar decline in revenue to $104.6m (-27.2%). Despite this, gross margin expanded to 14.7% (+2.5ppts) while bottomline was weighed on by higher admin expenses (+9.5%) as well as $0.7m in losses (1QFY16: nil) from its JV. NAV/share at $0.347.

*SGX: Securities turnover fell 5% m/m, and 15% y/y to $19.6b, with daily average turnover value of $934m (-5% m/m, -11% y/y). Derivatives volume declined to 11.5m contracts (-14% m/m, +2% y/y), dragged by reduced trading in China A50 (-9% m/m, +7% y/y) and Nikkei 225 (-38% m/m, -31% y/y) index futures.

*ARA Asset Management: CEO John Lim led consortium comprising existing shareholders Straits Trading and Cheung Kong and two new partners PE firm Warburg Pincus and China based AVIC Trust in a $1.8b buyout bid to take the company private via scheme of arrangement. Exit offer price of $1.78 is 19% above last traded price, and implies EV/AUM of 6% and EV/EBITDA of 18.2x.

*Silverlake Axis: Continued to pare down stake in Global Infotech, as it sold 4.19m shares by block trade at Rmb24.05/share or 2.8% discount to market price. Realised Rmb100.78m (RM62.5m) in cash proceeds, and disposal gain of RM48.7m..

*mm2: Proposed acquisition of Lotus Fivestar Cinemas, which owns 13 cinemas in Malaysia, for RM118m. Upon completion, mm2 will become the fourth largest cinema operator in Malaysia with 133 screens. Proforma FY15 EPS would have been higher at 0.81¢ from 0.77¢.

*King Wan: Secured new mechanical and electrical contracts worth $19m between Jul and Oct, including one for Selarang Park Complex and another for Clement Canopy. The projects are scheduled to complete by 2019.

*Global Premium Hotels: Acquiring a freehold property with land area of 4,652sqm, in Tasmania, Australia, for A$7.2m. A 4.5 star luxury boutique hotel currently sits on the site, and will continue to be leased to the operator for another two years upon deal completion. Group will explore options for the property thereafter.

*Neratel: 3Q16 slumped to a net loss of $1.3m (3Q15: $1.6m profit), despite higher revenue of $33.8m (+20.4%) from increased contributions from telecom (+1.7%) and infocomm (+36.6%). However, bottom line was dragged as gross margin compressed to 18.8% (-13.2ppts), due to devaluation of the Nigerian Naira, as well as higher equipment sales and lower write back from project closures, as well as higher distribution and selling expenses (+14.1%). Special DPS of $0.15 declared, from sale proceeds from its payment solutions business. NAV/share at $0.331.

*Asia Enterprises: 3Q16 turned into net profit of $0.2m (3Q15: $0.7m loss) mainly from the absence of inventory write-offs. Revenue fell 15.2% to $6.4m due to lower ASPs, while sales volume remained stable. Gross margin expanded to 25.6% (+11.7ppts) on lower cost of inventory. NAV/share at $0.271.

*AEM: 3Q16 net profit soared more than 4x to $2.2m on sharply higher revenue of $21.3m (+70%), largely driven by equipment systems (+77.7%) and precision components (+12.6%) divisions. Net cash position contracted 28% to $7.3m ($0.168/share) from FY15, equivalent to 34% of market cap. NAV/share at $0.598.

*China Sunsine: 3Q16 net profit climbed 32% to Rmb72.8m, as revenue grew 15% to Rmb547.3m, on increased sales volume of rubber chemical products. Gross margin increased 1.4ppt to 28.2% on higher economy of scale. NAV/share at Rmb2.79.

*Soilbuild Construction: 3Q16 net profit fell 25.8% to $2.2m, despite a 31% climb in revenue to $102m from increased construction activity from a higher mix of lower profitability HDB projects. Accordingly, gross margin narrowed to 4.8% (-3.2ppt), further dragged by increased costs for certain projects. NAV/share at $0.1411.

*Heeton: 3Q16 results sank to a net loss of $11.2m (3Q15: 5.2m profit) on a $12.9m disposal loss on the bulk sale of residential project iLiv@Grange and lower associate contribution. Revenue jumped to $18.8m (+108.7%) on increased sales at Onze@Tanjong Pagar, but gross margin crumbled 31.7ppt to 47% as cost of properties (+418.2%) outpaced top line growth. NAV/share at $1.0047..

*OKP: 3Q16 net profit surged 98.2% from a low base to $2m, as revenue grew 15.9% to $28.1m on higher contribution from construction (+32.7%), but pared by contraction in maintenance (-27.7%). Gross margin improved to 14.5% (+2ppts) on completion of several high margin maintenance projects, while bottomline was buttressed by higher other income of $0.3m (3Q15: $0.1m) and associate contribution of $0.2m (3Q15: $0.1m loss). NAV/share at $0.339.

*Wee Hur: 3Q16 net profit came in flat at $8.9m, although revenue tumbled to $39.6m (-58%) amid absence of contribution from property development. Gross margin narrowed 9ppt to 15.1%, but bottom line was buttressed by a positive FX swing of $7.6m. NAV/share at $0.37.

*Overseas Education: 3Q16 results missed as net profit plunged 84% to $0.3m, on lower revenue of $21.8m (-7.4%) from a drop in student enrolments. EBIT margin shrank 4ppt to 12.5% on increased upkeep and maintenance costs. Declared interim DPS of 0.6875¢ (3Q15: special DPS 1.375¢). NAV/share at $0.368.

*Delong: Staged a spectacular turnaround, although in-line with its previous guidance. 3Q16 net profit of Rmb229.3m (3Q15: Rmb107m loss) came on revenue of Rmb2.53b (+57.5%), attributable to significant jumps in ASPs and sales volume of hot rolled coils (HRC) in China, as well as maiden contributions from its 55%-owned Delong Thailand. Gross margin turned positive at 15%, as ASPs of HRCs rose faster than that of raw material costs. Trading at 94% discount to NAV/share of Rmb26.55.

*YuuZoo: Launched YuuTV, a video streaming platform smartphone application which will tap on content from partners such as Relativity Media.

*Profit warning:
- Asia Fashion Holdings
- Abterra
- Advanced Integrated Manufacturing

Tuesday, November 8, 2016


ARA Asset Management Gets Buyout Offer at S$1.78 Per Share....

JL Investment, The Straits Trading Co. and Cheung Kong Property Holdings have joined Warburg Pincus for proposed privatisation and delisting of ARA Asset Management via a scheme of arrangement, co. says in filing.

Special purpose vehicle incorporated for purpose of deal seeking to buy all shares of ARA, other than those held by Straits Trading, JLIG and Cheung Kong Property at a price per share of S$1.78 in cash.

Offerer does not intend to raise offer price.

Deal to complete in 2H next year.