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