SG Market (03 Aug 17)

MARKET OVERVIEW
- Tech plays are expected to be in focus today after iPhone maker Apple surged to record highs on a 2Q earnings beat and positive outlook, and plastic injection manufacturer Sunningdale posted solid results.
- Technically, the STI faces topside resistance at 3,360, with downside support is at 3,275.

CORPORATE EARNINGS
*CapitaLand
- Excluding portfolio and reval gains, 2Q17 recurring net profit of $206.8m (+20.5%) came in within expectations.
- Revenue slipped 12.3% to $992.4m on fewer new unit sales in Singapore.
- However, bottom line was lifted by higher contributions from China development projects and rental income from newly acquired properties.
- Net gearing eased to 0.39x (1Q17: 0.44x).
- Trades at 28% discount to its RNAV/share of $5.25.
- MKE last had a Hold with TP of $3.75.

*StarHub
- 2Q17 net profit fell 21% to $85.7m but beat estimates on lower-than-expected recontracting subsidies.
- Service revenue of $542.6m (-2%) was dragged by lower mobile ARPU and shrinking pay TV and broadband subscriber base.
- This led to narrower EBITDA margin of 33.2% (-1.5ppts).
- Quarterly DPS was cut to 4¢, down from 5¢ in 2Q16.
- Management maintained FY17 EBITDA margin guidance of 26-28% and DPS of 16¢, which translates to 5.9% yield.

*Genting Singapore
- Returned to the black with 2Q17 net profit of $143.3m (2Q16: $10.5m loss), beating expectations.
- Revenue jumped 24% to $596.1m as gaming revenue soared 33% to $442.3m on higher win percentage in the premium player business.
- Adjusted EBITDA margin widened 25ppt to 49.1%, helped by a sharp drop in bad debt impairment to $14.7m (-73%).
- Declared interim DPS of 1.5¢ (2Q16: nil).
- MKE maintains Buy but raises TP to $1.35 from $1.25

*OUE Commercial REIT
- 2Q17 DPU of 1.15¢ (-15%) was diluted by an enlarged unit base (+19%), but was in line with estimates.
- Gross revenue of $44.2m (-3%) was weighed by lower one-off income despite stronger operational performance at all three properties - One Raffles Place, OUE Bayfront, Lippo Plaza.
- Portfolio occupancy improved 0.6ppt q/q to 96.4%, while aggregate leverage ticked up to 36.4% (+0.2ppt q/q).
- Offers 2Q annualised yield of 6.3% and trades at 0.85x P/B.

*Sunningdale
- 2Q17 net profit soared 115% to $8.2m, beating expectations,
- Excluding FX effects and retrenchment costs, core earnings would have come in at $10.9m (+57.1%) against full year estimate of $34.5m.
- Revenue climbed 6.6% to $177.6m as growth in automotive (+7.9%) and consumer/IT (+11.4%) businesses more than offset weakness in healthcare (-4%) and mould fabrication (-2%) segments.
- Gross margin expanded 1.8ppt to 15.6% on increased operational efficiency.
- Bottom line was partly dragged by an adverse FX swing of $4m but this was offset by absence of one-off restructuring cost (2Q16: $4.6m).
- Declared maiden interim DPS of 2.5¢.
- Last traded at 11.2x FY17e P/E.

*BreadTalk
- 2Q17 net profit jumped 61.9% from a low base to $2.1m, lifted mainly by other income of $5.7m (+18.7%).
- However, revenue slipped 1.5% to $147.6m on weaker contributions across bakery (-3.3%) and food atrium (-2.7%), although partly mitigated by stronger takings from restaurants (+3.7%).
- Gross margin inched higher to 55.9% (+0.9ppt) on lower cost of sales (-3.5%).
- Interim DPS doubled to 1¢ (2Q16: 0.5¢).
- Currently trades at 25.9x forward P/E.

*Halcyon Agri
- Swung back to 2Q17 net profit of US$1.7m (2Q16: US$8m loss), buttressed by associate income of US$5.3m (2Q16: nil).
- This brought 1H17 earnings to US$12.8m (1H16: US$14.6m loss).
- For the quarter, revenue surged 166% to US$527.7m on higher rubber prices and greater sales volume (+79.6%) following the acquisition of Sinochem's rubber assets and GMG Global in 4Q16.
- Gross margin widened 1.5ppt to 6.1% on improved processing efficiency.
- However, operating profit of US$5.6m (2Q16: US$1.7m loss) was insufficient to offset finance cost of US$6.2m.
- NAV/share at US$0.5245.

*Far East Orchard
- 2Q17 net profit plummeted 97.3% to $1m on a drop in JV contribution due to the absence of one-time gains arising from the sale of units at SBF Center.
- Revenue fell 19.4% to $36m on weaker performance from two hospitality assets in Perth, Australia, as well as absence of contribution following the completion of certain lease agreements.
- Bottom line was shored by lower FX loss of $1.5m (-36.1%).
- Trades at 0.5x P/B.

POSITIVE NEWS
*Cogent Holdings
- Received patent from Taiwan authorities for the design of its Cogent 1. Logistics Hub's sky depot.

NEUTRAL NEWS
*GLP
- Replaced its independent financial adviser ANZ with Evercore Asia Singapore.
- This came after concerns that ANZ's financial ties with one of the members in the offeror's consortium could compromise its independence for the proposed takeover of GLP.