SG Market (02 May 17)

Stocks could creep higher on the back of relatively resilient 1Q17 corporate earnings over the past week although trading volume is expected to dwindle on the lack of fresh macro catalysts.

Regional markets opened mixed in Tokyo (+0.3%), Seoul (+0.6%) and Sydney (-0.3%).Technically, STI could test its immediate resistance at 3,190, with downside support at 3,146 (50-dma).

Stocks to watch:
*DBS: 1Q17 net profit inched up 1% to a record $1.21b, coming ahead of street estimates. Net interest income was flat at $1.83b as 9% loans growth was pared by NIM compression to 1.74% (1Q16: 1.85%). Non-interest income of $1.06b (+2.2%) was largely buoyed by fees from wealth management (+26%) but slightly offset by reduced net trading income (-14%). Provisions jumped 18% to $200m on higher charges stemming from loans to the O&G support services sector. Notably, the group booked $350m of general allowances as one-off item, not included under provisions. NPL ratio remained at 1.4%, with Tier-1 CAR at 14.6% (1Q16: 14%). NAV/share rose 3% q/q to $17.37.

*Venture: 1Q17 net profit leapt 35.6% to $48.6m, surpassing expectations. Revenue surged 33.7% to $843.1m from broad-based demand growth and new product launches and programme introductions by customers, which led to an improvement in pretax profit margin to 7.1% (+0.4ppts). The group remained net cash positive at $400m with NAV/share climbing to $7.11. MKE maintained Buy and raised TP to $13.35 from $11.50.

*Sheng Siong: 1Q17 net profit of $17.1m (+4.4%) met expectations. Revenue rose 4.1% to $217.1m on new store openings although same-store-sales remained flat due to lacklustre demand from lower footfall at stores affected by the slowdown in the O&G industry, renovations (Tampines) and closure (Woodlands). Gross margin inched up 0.5ppt to 25% as it enjoyed increased rebates for bulk handling and discounts. Facing higher competition from rivals, sites and possible entry of Amazon Fresh and impending closure of two large stores at The Verge and Woodlands in 2H17. MKE has a Sell with TP of $0.85.

*Jardine C&C: 1Q17 core earnings surged 44% to US$202m, as revenue rose 16% to US$4.23b on stronger performance from Astra due to larger market share in the automotive market, and a turnaround at Permata Bank due to better trading performance of heavy equipment and agribusiness. Operating margin widened 1.1ppt to 9.9%. NAV/share at US$15.26.

*Manulife US REIT: 1Q17 DPU of US1.65¢ was 8.6% above forecast and reached 27% of full-year street estimate. While gross revenue dipped 1.3% to US$19.8m on lower recoveries income, NPI climbed 2.7% to US$12.8m owing to higher-than-anticipated rental escalation and higher car park income, as well as lower finance expenses. Occupancy rate inched higher to 97.2% (+0.2ppt q/q), while aggregate leverage rose 0.4ppts q/q to 34.2%. NAV/unit at US$0.87.

*Oxley: 3QFY17 net profit declined 12% to $45.7m in the absence of a $25.6m disposal gain recognised in previous year. But revenue nearly doubled to $386.5m (+91%) on sales recognition from commercial project The Flow, mixed-residential development at Joo Chiat Road and handover of plots at The Royal Wharf Phase 1A. Gross margin contracted to 23.8% (-8.7ppts) on a change in sales mix, while bottomline was hurt by higher FX losses of $6.9m (3QFY16: $76,000 loss) as well as lower associate/JV contribution (-74%). Total unbilled contract value amounted to $2.36b. Interim DPS was cut to 0.3¢, bringing 9MFY17 DPS to 0.8¢ (9MFY16: 1.15¢). NAV/share expanded 18.6% to $0.3177.

*UIC: 1Q17 net profit was flat at $59.8m, despite a 31% jump in revenue to $264.5m mainly from higher project sales recognition and improved contribution from IT ops (+17%), while rental income was stable. However, gross margin narrowed 2.8ppt to 37%, while bottom line was further dragged by a $14.8m ABSD payment and higher selling and distribution costs (+60%). NAV/share at $4.43..

*Micro-Mechanics: 3QFY17 net profit leapt to $3.5m (+26.6%), on revenue of $14.2m (+13.7%), thanks to stronger sales in Singapore, Malaysia, Philippines and China. Gross margin inched up 0.3ppt to 57.4%, while bottom line was lifted by greater tax incentives, although partially offset by disposal losses, FX losses and lower government grant. NAV/share at $0.3604.

*Tianjin Zhong Xin: 1Q17 net profit of Rmb133.7m was shored by disposal gains, lower net borrowing costs, and reversal of impairments. Revenue slid 11% to Rmb1.46b, but gross margin expanded 5.8ppt to 37.4%. Bottom line was also helped by a notable drop in admin expenses (-12%). NAV/share at Rmb5.56.

*CCT: Selling 50% stake in Grade A office building One George Street to insurer FWD Group, based on an agreed property value of $1.18b (16.7% above valuation), or $2,650 psf of net lettable area, translating to a net property yield of 3.2%. CCT expects to book a $79.7m net gain from the sale that will be used to strengthen its balance sheet. Pro forma FY16 NAV is expected to rise 2.3% to $1.77.*Vard: Secured contract for the design and construction of one research expedition vessel for an undisclosed sum, expected for completion in 2020.

*Addvalue Tech: Proposed $7.1m issue of 4-year 5% convertible loan notes (exercise price of 5.5¢ each) to seven individuals, including Alan Wang of Asdew Acquisitions and Ron Tan of CEO of Cityneon. With the recent private share placement still pending SGX AIP, the group raised an aggregate $13.1m to improve its balance sheet.

*Imperium Crown: Regarding the proposed acquisition of 27% stake in Global Entertainment Media, which has 40 years of operating rights to Wonder Stone Park in Shandong, management updates that it is in the midst of due diligence intends to extend the long-stop date of 30 Apr.

*China Kangda Food: Received an MGO from China Tian Yuan Manganese for HK$1.34/share, significantly below its last traded price of HK$2.42.

*Sen Yue: Expected to report a turnaround to profitability in 1H17 due to reduced FX losses as well as an increase in revenue.

*Profit warnings:
- Acromec
- CNMC