Thursday, December 8, 2016

SG Market (08 Dec 16)

Funds flow may continue to power the hugely overbought market with rotational play shifting to the small mid-caps. Regional bourses in Tokyo (+1.2%), Seoul (+1.2%) and Sydney (+1.1%) opened higher.Technically, the overstretched STI could face some resistance at the 2,960 triple-top, with next objective at 3,040. Underlying support is at the 2,882 breakaway gap.

Stocks to watch:
*Riverstone. MKE believes that recent share price correction due to Malaysia’s new FX repatriation policy has been overdone, as it has a limited earnings impact. Maintain Hold with TP of $0.92 (pegged to 16x FY17e P/E), as current valuation of 15x is not compelling.

*Citic Envirotech/ Sunpower: A consortium comprising the two, together with Guangdong Keying Zhiran Environmental has been awarded a Rmb3.2b PPP project consisting co-gen power and steam facilities, an industrial wastewater treatment plant, water cycling plant and other ancillary assets in Guangdong, China. Phase 1 will see an investment of Rmb2b to design and build a 40,000 m3/day industrial wastewater treatment plant and a 30,000 m3/day recycling plant, with completion by end-2017.

*Mermaid Maritime: Terminated a contract to construct a DP2 dive support and construction vessel for China Merchants Industry on mutual terms. The pre-paid installment of US$20.4m has been impaired in FY15, and no further obligations are due. Trading at 0.5x P/B.

*TTJ: 1QFY17 net profit was mostly flat at $4.1m (-1%) on revenue of $26.5m (+3.6%) due to stronger contributions from its structural steel business. However, gross margin contracted to 20.4% (-9.8ppts) due to lower margin projects executed during the period. Bottomline was supported by FX gains of $0.2m (1QFY16: $1.4m loss) as well as lower admin expenses (-9.6%). NAV/share at $0.372.

*Tianjin Zhong Xin Pharmaceutical: Obtained the certification from Zhongzhi (Beijing) Certification, indicating that the company has systems of intellectual property management which are compliant with the national standards. The certification will allow it to pursue higher standards in the management of its IP as it innovates in the Chinese medicine space.

*Foreland Fabrictech: Lodged a complaint against its former Executive Chairman with the CAD in relation to possible breach(es) of securities law or other offences.

*Asia Fashion: Proposed a placement of 35m shares at $0.11 apiece, representing a 37.5% premium to the average price on 7 Dec to four individuals to raise $3.75m for working capital. The placement shares will make up 40.94% of the enlarged share capital.

*Jason Holdings: The application for a scheme or arrangement has been granted by the Singapore High Court, and the company is expected to meet with creditors by 1 Feb ’17 to approve the scheme.

*Amplefield: To be removed from the SGX watchlist on 9 Dec in light of its proposed transfer to the Catalist board.

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