SG Market (23 Jan 17)

The market will be on tenterhooks after US President Donald Trump took a decidedly protectionistic stance in his inauguration speech and withdrew the US from TPP on his first day in office. Traders are also watching UK’s court decision on Brexit, domestic inflation and industrial data as well as 4Q results from a host of REITs and the Keppel group this week.

Regional bourses opened negative in early trading this week in Tokyo (-1%), Seoul (flat) and Sydney (-0.4%).Technically, the STI is still correcting from overbought levels with underlying support at 2,968 and topside resistance at 3,040.

Stocks to watch:
*Frasers Centrepoint Trust: 1QFY17 DPU of 2.89¢ (+0.7%) met estimates although distributable income of $26.6m (+1.1%) was lifted by tax adjustments. However both revenue and NPI fell 6.4% and 5.7% to $44.1m and $31.6m respectively due to reduced takings from Northpoint, which is undergoing AEI. Causeway Point was the star performer, contributing 52.8% of NPI. Occupancy rose 1.9ppt q/q to 91.34% with WALE of 1.62 years, while aggregate leverage climbed 1.4ppt to 29.7%. NAV/unit at $1.93.

*GuocoLand: 2QFY17 net profit jumped 46.3% to $57.1m, mainly boosted by associates/JVs contribution of $44.8m arising from a land disposal by a Malaysian associate. Revenue slipped 3.1% to $232m, while gross margin contracted to 20.4% (-5ppts) due to a change in sales mix. Despite the challenging property market, the office and retail components of its Tanjong Pagar Centre, which obtained TOP in Oct, have achieved more than 80% commitment levels. NAV/share was little changed at $2.96.

*Bumitama Agri: 4Q16 FFB harvest climbed 11% to 1,087,484 MT, as yield improved to 5.3 MT/ha (4Q15: 5.1 MT/ha). CPO production also rose 11.1% to 246,864 MT, even though extraction rate was flat at 22.5% (+0.1ppt). MKE sees value in the stock, which is supported by a 25% FFB nucleus output growth in 2017. Buy with TP of $0.97.

*Keppel Corp: Awarded a 25-year build-own-operate contract for Singapore's fourth water desalination plant, which is expected to commence operations by 2020. The plant will be able to treat sea water and produce 137,000 m3 of fresh drinking water per day. MKE sees downside risk from EPS downgrades and last had a Sell with TP of $4.57.

*CapitaLand: Invested $10.4m for a 90% stake in CapitaLand Thanh Nien, which owns a 0.8ha plot of land in Ho Chi Ming City, Vietnam, which will be developed into a 317-unit residential development. This is in line with its strategy to expand its residential portfolio in Vietnam. Saigon Commercial and Tourism Corp will hold the remaining 10% stake.

*Cambridge REIT: Proposed divestment of light industrial building, 55 Ubi Avenue 3, for $22.1m. The property has a gfa of 141,135 sf (1.7% of portfolio), with a remaining land tenure of approximately 39 years.

*CNMC Goldmine: Completed due diligence works for its proposed 51% stake acquisition of Pulai Mining for RM13.8m. The target owns a brownfield project in Kelantan, Malaysia, that is nearly four times the size of CNMC's existing Sokor gold field. Separately, the group has renewed the mining lease for the Sokor gold field with Kelantan state government for another 21 years till Dec 2034.

*HC Surgical Specialists: Extended the lease for its clinic space at 1 Farrer Park Station Road, Connexion, by three years to 2019, with total rental payment of $0.18m..

*Advanced Holdings: Entered a non-binding term sheet for the proposed $180m-240m acquisition of Agricore Global (AG), which would result in a RTO. AG owns concessions to 23 parcels of agricultural permits covering 232,102 ha in Sulawesi, Indonesia, that can be cultivated into crude palm oil plantations, as well as 2 forestry concessions for timber management.

*AsiaMedic: Acquiring LuyeEllium Healthcare for $42.2m via an issue of 527m new shares at $0.08 apiece, which will result in a RTO transaction. The target provides construction-related non-clinical support and consultancy services to medical institutions in South Korea and China, and will come with an annual profit guarantee of $3.4-4.2m over FY16-20.

*Dukang Distillers: Expects 2QFY17 revenue and earnings to be substantially lower due to ongoing restrictions to the high-end alcohol market in China, switch in consumers' drinking trend to red wine and beer, and severe air pollution hindering the group's operations.

*AA Group: Proposed to acquire Engineering Manufacturing Services (EMS) for $25m, or 4.3x 9M16 annualised P/E, in a bid to diversify its income stream. EMS provides value-added general warehousing and logistics services, industrial and office space and workers' dormitory facilities. Upon completion, pro forma FY15 LPS of 0.15¢ is expected to swing to an EPS of 4.94¢.