SG Market (25 Aug 17)

MARKET OVERVIEW
- Investors could tread cautiously ahead of the weekend after seeking for safe haven markets on concerns over dysfunctional US politics and Fri's central bank summit at Jackson Hole that could signal a shift from the easy money policies.
- Technically, the STI remains in oversold territory and may test its immediate resistance at 3,275, with underlying support at 3,190.

CORPORATE RESULTS
*Wing Tai
- 4QFY17 net profit surged 5-fold to $9.5m (+406%), buttressed by a $5.3m tax credit but full year earnings of $20.1m (+184%) still came in below consensus estimate.
- FY17 revenue fell 52% to $263.2m on a 76.8% drop in contributions from development properties to just $76.4m, which resulted in a EBIT loss of $15.7m (FY16: $22.8m profit).
- Sold 399 residential units across Singapore (72), Malaysia (178) and China (149), with total sales value of $357m.
- Retail segment accounted for 55% of revenue and 28% of EBIT.
- Contributions from associates/joint ventures rose 24% to $73.4m due to higher takings from Wing Tai Properties in HK and included an impairment provision of $3.2m for additional buyer's stamp duty payable for The Crest.
- Maintained both final DPS of 3¢ and special DPS of 3¢, similar to FY16.
- Trades at 48% discount to NAV/share of $4.07.

*UG Healthcare
- 4QFY17 net profit crashed 79.5% to $0.1m, dragging FY17 earnings to $2.4m (-55.1%), below estimates.
- This came despite a 22.5% jump in quarter revenue to $16.7m driven by 26% new capacity added, which bought its total capacity to 2.4b gloves pa at end-FY17.
- However, gross margin contracted 4.1ppt to 11.6% due to significant increase in average raw materials prices, gas tariff hike, higher depreciation charge for new production lines and foreign workers' levy.
- Bottom line was also hurt by higher marketing costs from expansion efforts in China.
- Construction is underway to add another 0.5b capacity by end-FY18.
- MKE last had a Sell with TP of $0.25.

*800 Super
- 4QFY17 net profit tanked 36% to $2.7m on a swing to tax expense of $1.2m (4QFY16: $0.3m tax credit).
- This brought FY17 earnings to $17.1m (+2.2%).
- Quarter revenue slipped 3.2% to $38.6m following completion of certain cleaning contracts, but partly offset by contributions from new projects.
- Pretax margin crept 0.2ppt higher to 10.2%.
- Proposed higher final DPS of 3¢ (4QFY16: 2.5¢), bringing full-year payout to 4¢ (FY16: 2.5¢).
- NAV/share at $0.4547.

*Creative
- Swung into 4QFY17 net loss of US$5.6m, bringing FY17 loss to US$22.9m.
- Quarter revenue declined 15% to US$14.5m as the uncertain and difficult market conditions impacted sales.
- Gross margin slipped 0.6ppt to 28.1% on a write-down of excess inventories, while bottom line was dragged by the absence of a write-back of subcontract accruals of US$5m.
- Guided for 1QFY18 operating loss on similar revenue, but a turnaround to net profit due to receipt of a US$31.2m settlement from the US patent infringement lawsuit, as well as an additional US$26m for damages and losses suffered in relation to a wireless broadband project, if no appeal is made by the vendor.
- NAV/share at US$1.06.

POSITIVE NEWS
*China Everbright Water
- Secured contract for Xinyi City Waste Water Treatment Project Phase III, with total investment of Rmb71m.
- The BOT project, which comes with a 24-year concession, will have a designed daily capacity of 30,000 m3.
- It will process municipal waste water and industrial waste water produced by non-chemical enterprises in the Xinyi area in Jiangsu, China.
- Trading at 11.9 forward P/E and 0.91x P/B.

NEUTRAL NEWS
*Raffles Medical
- New substantial shareholder Aberdeen Asset Management purchased 372,300 shares via the market at $1.1367 apiece on 22 Aug.
- The transaction lifted its stake above the 5% mark from 4.9986% to 5.0196%.
- At 1.15, counter is trading at 28.8x forward P/E.

*SingPost
- Retirement of Sam Ang, the CEO of Quantium Solutions since Jul 2016, before Alibaba took a 34% stake in Oct 2016.
- The retirement took place in less than three months after new Group CEO Paul Coutts joined SingPost.

*Mary Chia
- Buyout offer at $0.111 apiece by Suki Sushi.
- This comes after Suki acquired 60.98% of share capital from controlling shareholder Mdm Chia Ah Tow Mary.
- The unconditional offer price is final and Suki intends to diversify the group's business into other complementary sectors.

*Chew's Group
- Updated that its controlling shareholder has entered into negotiations with third party for possible transaction on the group's shares.
- No definitive agreements have been signed.

*Sarine
- Seeking protection under its US patents and copyrights, which allow it file actions to preclude the importation of polished diamonds, manufactured in an infringing manner, into the US.