Tuesday, May 9, 2017

SG Market (09 May 17)

Expect some profit taking as traders pare risk positions ahead of the mid-week public holiday.

Regional markets opened lower in Sydney (-0.6%) and flat in Tokyo, while the Korean market is closed for Presidential election. STI is overbought with topside resistance at 3,250 and downside risk at 3,212/3,190.

Stocks to watch:
*OCBC: 1Q17 net profit of $973m (+14%) beat estimates on strong non-interest income from wealth management (+70%), investment banking (+99%), life assurance (+111%) and trading (+30%). Net interest income slipped 3% to $1.27b, as 5% loan growth was eclipsed by NIM compression to 1.62% (-13ppt). Provisioning was flat at $168m, while NPL ratio rose to 1.3% (1Q16: 1%, 4Q16: 1.3%). Tier-1 CAR deteriorated to 13.3% (1Q16: 14.6%; 4Q16: 14.7%). NAV/share at $8.67, translating to P/B of 1.18x relative to DBS at 1.12x and UOB at 1.21x.

*Perennial Real Estate: 1Q17 net profit soared >4.5x to $38.7m (1Q16: $8.5m), boosted by a partial disposal (20.2% stake) and revaluation (30%) gains of $55.7m in TripleOne Somerset. Revenue tumbled 31.4% to $20.2m on lower project management fees and reduced rentals from TripleOne due to renovation works, while earnings was partially dragged by higher finance costs (+26.2%), taxes (+374%) and a sharp drop in JV income (-93.2%). NAV/share at $1.61.

*F&N: 2QFY17 results disappointed as core net profit slumped 67.1% to $3.8m, bringing 1HFY17 earnings to $26.3m (-29.3%). Quarterly revenue slid 5.8% to $451.3m, mainly dragged by reduced beverage sales (-21.5%) from Singapore and Malaysia due to weak consumer sentiment, which led to operating loss of $5.2m (2Q17: $9.1m profit) in the segment. Maintained interim DPS of 1.5¢. NAV/share at $1.97.

*Vicom: 1Q17 net profit fell 6.3% to $6.8m, on weaker revenue of $24.1m (-4.9%) due to less vehicle inspections. Accordingly, EBITDA shrank 0.3ppt to 39.6%. However, net cash position improved to $111.5m (22% of market cap) from $105.7m in FY16. NAV/share at $1.7675.

*GP Hotels: 1Q17 net profit declined 4.9% to $3.2m on softer revenue of $14m (-3.8%), as one hotel underwent asset enhancement works. NAV/share $0.6977.

*Acromec: Swung to 1H17 net loss of $2.4m (1H16: $1.6m profit) on cost overruns. Revenue slipped 10% to $21m on lower progressive sales from current projects, while gross margin compressed significantly to 1.9% (1H16: 20.5%), blamed on complexity of a few major projects. NAV/share at 7.52¢.

*OKP: 1Q17 net profit soared 172.7% from a low base to $5.1m, lifted by JV income of $1.6m (1Q16: nil) due to sale of units at Lake Life EC. Revenue grew 21% to $29.7m from higher contribution from maintenance (+139.5%), partially offset by construction (-1%). Gross margin expanded to 20% (+7.9ppts) from higher-profitability construction projects. But construction order book thinned to $306.1m (1Q16: $322.1m), with sales visibility till 2019. NTA/share at $0.3818..

*Ellipsiz: 3QFY17 net profit edged up 2% to $2.3m, mainly shored by a $1.2m gain on disposal of an associate. However, gross revenue dipped 5% to $29.5m from weakness in both probe card solutions (-5%) and distribution & services (-5%), while gross margin narrowed 1.1ppt to 35.2%. NAV/share at $0.7621.

*Soo Kee: 1Q17 net profit tumbled 45.7% to $1.4m, despite an 11.3% growth in revenue to $40.8m, lifted by sales contribution from gold and silver dealer, SK Bullion, which was acquired in Apr ’16. However, pretax margin contracted to 4.6% (-4.1ppts) from the shift in sales mix towards lower profitability bullion business. NAV/share at $0.0973.

*ISEC Healthcare: 1Q17 net profit rose 5% to $1.7m, while revenue jumped 24% to $8.5m from new acquisitions and increased patient visits in its Malaysia operations. However, gross margin narrowed 3.6ppt to 46.6%, while bottom line was weighed by increased admin costs from consolidation of newly acquired units. NAV/share at $0.12.

*Manufacturing Integration Tech: Secured new orders totalling $18m for semiconductor equipment, which will be used by customers to produce devices for the mobile communication and memory segments. This lifted order book to $23m, slated for delivery over the next two quarters, and will contribute positively to 1H17 financials.

*GKE: Extended the chartering contract for its 83,000 cu m liquefied gas carrier vessel with Sinogas for three months, starting from 1 Apr '17. The fixed charter rate remains depressed and is not expected to have material impact on earnings in FY5/17.

*Astaka: Awarded a contract to JBB Kimlun to construct a 15-storey Grade A office tower for Johor Bahru City Council. The office tower will span 445,848 sf of gfa and is expected to sell for RM308m and be completed in 2019.

*Oxley: Issued US$100m 6.375% notes due 2021 under its US$1b guaranteed euro MTN programme, to be used for general working capital.

*Ezion: Issued profit warning for 1Q17 and expects net loss owing to depreciation in USD, which has given rise to FX translation loss on its SGD financial liabilities.

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