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.