SG Market (07 Nov 16)

Trading will be risk-off as markets brace for the US election outcome and a possible turbulent trading week. On the local front, investors will also be watching for a slew of results from GLP (Tue), CapitaLand (Wed), Singtel, STE, Wilmar, City Dev and SATS (all Thu) and ComfortDelGro (Fri).

Regional bourses opened sharply higher in Tokyo (+1.6%), Seoul (+0.8%) and Sydney (+0.8%).Technically, near-term support for STI is at 2,740 with immediate resistance at 2,800.

Stocks to watch:
*SingPost: 2QFY17 core net profit of $27.1m (-27.9%) missed estimates, despite a 22.3% jump in revenue to $321.7m from new contribution of recently-acquired US e-commerce subsidiaries. Operating margin compressed to 11.8% (-12.7ppt) on weakness in postal and logistics segments, and transformation costs of its e-commerce business. Bottom line was also weighed by loss of rental income due to the redevelopment of SPC Mallan and absence of disposal gains. Interim DPS slashed to 1¢ (2QFY16: 1.5¢). NAV/share at $0.7119. MKE downgraded to Hold and cuts TP to $1.75.

*Venture: 3Q16 net profit of $47.4m (+16.9%) came in at the upper end of expectations, as revenue inched up 1.8% to $705.7m on increased customer traction, while pretax margin improved to 8% (+1.2ppts) through achieving more value creation and lower R&D costs. MKE maintains Buy with higher TP of $11.00, on increased margin forecasts.

*Best World: 3Q16 topped estimates as net profit soared to $8.9m (+121.4%) as the direct seller benefitted from operating scale. Revenue doubled to $52.2m (+99%) on continued strength in direct selling (+54%) and impressive growth in exports (+366%) to China. Gross margin slipped to 71.6% (-5.5ppts) on a shift in sales mix, while net margin expanded to 17.1% (+1.7ppts) as export segment does not incur distribution costs. Management expects Taiwan and Chinese markets to continue to underpin 4Q16 performance. MKE maintains Buy with raised TP of $2.16.

*Valuetronics: 2QFY17 net profit climbed 18.2% to HK$38.1m, as revenue rose 9% to HK$573.7m, buoyed by growth in both industrial (+8.7%) and consumer (+9.2%) segments. Gross margin was stable at 14.6%, while bottom line was lifted by higher interest income, reduced FX losses and absence of derivative fair value losses. NAV/share at HK$2.20.

*Manulife US REIT: 3Q16 DPU of 2.01¢ surpassed forecast by 5.8%, on lower-than-expected utility expenses and other operating costs. However, revenue of US$28.2m was 1.1% below IPO estimate, stemming from lower recovery revenues as some operating expenses were not incurred. Occupancy stood at 97% with WALE of 6.1 years, while aggregate leverage was loweredto 34.7% (-2.1ppts). NAV/unit at US$0.84.*PACC Offshore: Plunged into a 3Q16 net loss of US$12.9m (3Q15: US$12.6m profit), as revenue dived 48% to US$41.6m (-48%) due to lower utilisation and charter rates across all segments die to the depressed O&M sector. Bottom line was further hammered by a disposal loss on a vessel and a spike in finance costs. Net gearing rose to 0.6x from 0.5x in FY15. NAV/share at US$0.5664.

*ISEC: 3Q16 net profit shot up 147% to $1.7m, bringing 9M16 earnings to $5m (+91%), meeting 71% of FY16 street estimate. For the quarter, revenue rose 18% to $7.4m, due to contribution from recently-acquired Southern Specialist Eye Centre in Dec ’15 and increased patient visits in Malaysia. With the shift in geographical sales mix from Singapore to Malaysia, gross and pretax margin both expanded to 49.4% (+6.6ppts) and 26.6% (11.6ppts), respectively. Declared interim DPS of 0.66¢ (3Q15: nil).

*Ryobi Kiso: 1QFY17 net profit rose 28.4% to $0.2m, buttressed by a $1.6m positive FX swing and lower finance costs. However, revenue tumbled 37.8% to $28.2m, mainly due to substantial completion for a majority of its projects, whilst most new projects are still in the initial stages of work. NAV/share at $0.2979.

*Addvalue Tech: Turned around to 2QFY17 net profit of US$0.3m (2QFY16: US$0.7m loss), as revenue leapt 110% to US$3.9m on improved sales of maritime terminals and increased provision of design services. Gross margin widened 6.4ppt to 48.5% on a favorable shift in product mix. NAV/share at 1.07¢.

*Federal Int’l: 3Q16 net profit jumped 74.7% to $1.1m, albeit from a low base, in tandem with the spike in revenue to $26.5m (+77.4%), on the back of higher sales from the trading segment, which was supported by sales to an associate for its ongoing projects. However, gross margin contracted to 16.4% (-18.9ppts) from the inter-group sales. Bottom line was boosted by maiden service fees ($3m) provided to an associate and increased associate contribution of $0.6m (3Q15: $0.1m). NAV/share at $0.579.

*Lee Metal: 3Q16 net profit slipped 1.5% to $4m, although mitigated by improved cost control. Revenue contracted 12.6% to $87.7m, attributable to weaker steel prices and lower volume of steel merchandising. Interim DPS maintained at 0.3¢, implying a trailing yield of 6.7%. NAV/share at $0.383.

*NSL: Proposed disposal of the dry mix business to French construction products company, Saint-Gobain Produits pour la Construction, for $142.6m (7.5x annualised 6M16 P/E). The sale includes seven manufacturing sites across three countries, with a total combined capacity of 620,000 mt of dry-mixed products. Upon completion, NSL is expected to net a disposal gain of $107.6m, although pro forma 6M16 net profit of the group will be shaved 48% to $10.4m (2.78¢/share).

*Centurion: Disclosed that the URA appeal to increase bed capacity at Westlite Toh Guan has been denied. Accordingly, beds at the dormitory will be reduced by 808 beds, which would result in a drop in net dormitory income of up to $2m/year, or 5.9% of FY15 net profit.

*SHS: Proposed 60% stake acquisition in Vietnamese firm TLC Modular Construction Joint Stock Company for US$4.2m. Pro forma FY15 NTA/share will slip 1.2% to 31.24¢, while EPS will remain flat at 1.49¢. *GMG: Offer by Halcyon Agri has received 94.39% acceptances, with the offer being extended to 11 Nov from 8 Nov.

*Elektromotive Group: Terminated agreement for the proposed acquisition of QT Interactive Technology Investments, after not being able to fulfil the conditions precedent. Separately, group entered a non-binding MOU to acquire a 63.13% stake in Korean entertainment group Dream T Entertainment for an undisclosed sum, to be paid via the issue of new shares which could result in a RTO transaction.*Declout: To divest its remaining 55% stake in AWS (Cambodia) to Ly Sakhun for $0.8m. It is expected to book a gain of $114,000 on the divestment