SG Market (13 Dec 16)

The overbought market is likely to consolidate as investors await the FOMC’s rate decision tomorrow, although oil-related plays might enjoy continued interest from the latest non-OPEC output cut deal.

Regional bourses opened mixed, with Tokyo (-0.4%) and Seoul (-0.1%) weaker, and Sydney paring early losses to trade 0.1% higher.Technically, immediate resistance for the STI is at the 2,960 triple-top, with underlying support at the 2,882 breakaway gap.

Stocks to watch:
*Strategy: 2017 might be another lacklustre year, given sluggish economic growth, uncompelling index valuations, weak earnings recovery expectations and the unfavourable political outlook globally. Given such, we expect the STI to settle at ~3,000 by end-2017 (<2% upside). MKE prefers stock-picking, with top picks being CCT, KREIT, Venture, Raffles Medical, UOL, Jumbo, and Ezion.

*SIA: Received approval from the Competition Commission of Singapore on its proposed JV with Lufthansa. The wide-ranging agreement signed in Nov ’15 is aimed at expanding codeshare ties and deepening commercial cooperation in key markets in Europe, ASEAN and Australia. MKE has Hold with TP of $9.70.

*Olam: Denied charges by green groups Mighty Earth and Brainforest that its oil plam plantations are destroying forests in Gabon and failing to be transparent on where it sources its palm oil supplies. Olam maintains that it develops on highly logged and degraded secondary forests and sources from palm oil suppliers that complies with its no burn, no peat and no deforestation policy.

*Frasers Centrepoint: Its hospitality arm recently launched a 105-unit luxury services residence, North Park Place in Bangkok, Thailand. With the launch, its Thai portfolio will grow to four properties with over 850 units by 2019, while its global portfolio would have 140 properties in 80 cities and 23,400 units.

*Stamford Tyres: 2QFY17 net profit jumped 59.9% to $1.5m from a low base as well as a $1m swing to FX gain of $0.7m. Revenue was flattish at $57.7m (-0.6%) due to lower sales in South East Asian markets. Gross margin expanded to 26% (+0.7ppts) from 1) lower cost of sales, 2) contribution of value-added activities at its retail chains and truck tyre centres. Bottomline was further boosted by a decline in finance costs (-24.5%). NAV/share at $0.505.

*Imperium Crown: Mulling to divest its core investment properties in Japan, as yields on real estate assets are expected to be low. The group is also exploring new sources of revenue and growth.

*GK Goh: Selling its financial services arm GK Goh Financial Services for $12.5m, or 1x P/B to an international financial institution with an established Asian presence. The unit , which provides services on derivatives and leveraged FX, has been loss-making since 2013.

*IEV: Signed agreements with NanaMalaysia to proceed with a pilot scale production of zeolites (adsorbents and catalysts minerals) as well as a feasibility study on the commercialisation of the production of zeolites and other nano materials from rice husk. No initial investment cost was disclosed.

*Sinocloud: Will waive and forgive HK$42.1m of a HK$78.1m convertible loan to Lu Zhen Dong, pending approval by shareholders as it seeks to cut its losses from other business ventures apart from its core internet data centre business.

*Equation Summit: Looking to divest its energy management services, e-waste/recycling and the supply of construction materials business. It will make relevant disclosures where appropriate.