SG Market (28 Aug 17)

MARKET OVERVIEW
- Investors will have plenty of US and China economic data to chew this week but the biggest risk issues would be Trump's renewed threat to scrap Nafta and his long-awaited tax reform agenda.
- Technically, the STI remains in oversold territory with immediate resistance at 3,275 and underlying support at 3,220.

SECTOR WATCH
*Property
- Maybank KE believes that a resurgent enbloc market offers alternative land banking opportunities for developers and could ease upwards pressure on land prices.
- Over $3b worth of deals have been concluded so far and another 30 properties are in various stages of the collective sale process.
- Together with six confirmed sites in 2H17 GLS, we see potential 12,400 units added to Singapore's residential pipeline.
- Enbloc sales also front-load demand with displaced households looking out for new properties and could potentially reduce the 16,900 unsold inventory.
- MKE is positive on property developers. UOL (Buy, TP: $9.43) and City Dev (Buy, TP: $12.05) are its top large-cap picks, while GuocoLand (Buy, TP: $2.75) offers compelling relative value.

CORPORATE RESULTS
*GuocoLand
- 4QFY17 net profit surged to $244.8m (4QFY16: $39.8m) and brought FY17 earnings to $357.2m (-41%), meeting expectations. The slide was due to absence of one-off gain arising from disposal of Dongzhimen project last year.
- For the quarter, revenue soared 90% to $407.4m on faster-than-expected sale recognition from Singapore residential projects.
- Gross margin widened 4.6ppt to 24.4%.
- Bottom line was boosted by $254.5m (4QFY16: $14.6m) fair value gain from revaluation of Guoco Tower at Tanjong Pagar Centre.
- Net gearing eased to 0.84x from 1x in Mar '17.
- Proposed final DPS of 7¢ (FY16: final 5¢, special 4¢).
- Last traded at 0.72 P/B. Maybank KE has a Buy with TP of $2.75

*Silverlake Axis
- 4QFY17 net profit tumbled 58% to RM32.7m as it incurred wider losses from associates/JVs of RM5.3m (4QFY16: -RM0.08m). This brought FY17 core earnings to RM160.7m (-41.3%), which missed estimates.
- For the quarter, revenue fell 25% to RM124.9m, hurt by lower contributions from software licensing (-88%), maintenance and enhancement services (-11%), sale of software and hardware products (-49%).
- Gross margin contracted 20ppt to 46% amid weaker software licensing business.
- Drop in bottom line was pared by a positive RM10.7m FX swing.
- Proposed final DPS of 0.3¢ (4QFY16: 1¢) and special DPS of 1¢ (4QFY16: nil), bringing full-year payout to 4.5¢ (FY16: 3¢).
- Trades at 20.1x forward P/E

*GL
- FY17 net profit fell 28% to US$49m on revenue of US$350.2m (-11%).
- Revenue decline was mainly due to lower contributions from its hotel (-10%), gaming (-53%) and property development (-67%) segments.
- RevPAR declined 10% due to the weaker GBP.
- Bottom line was further hit by a legal settlement in the UK, US$3.7m write-off on property and equipment as well as a 38% jump in net financing cost.
- Maintained first and final DPS of 2.2¢.
- NAV/share at US$0.808

*AusGroup
- Turned around to 4QFY17 net profit of A$2.4m (4QFY16: A$165.1m loss) in absence of A$130.9m impairment on fixed assets and intangibles.
- This swung FY17 results to a net profit of A$4.7m (FY16: A$258.9m loss).
- Quarterly revenue rose 18% to A$121.2m on increased work on core projects in the energy and process sector.
- Gross margin slipped to -0.9ppt to 7.8%.
- Bottom line was also buttressed by a A$5.5m net gain from partial debt restructuring, and A$4.3m drop in tax to A$2.9m.
- NAV/share at A$0.017

POSITIVE NEWS
*ST Engineering
- Acquired rig repair assets adjacent to its existing yard, VT Halter Marine in Pascagoula, Mississippi, US from World Marine of Mississippi for US$25m.
- These assets comprise a purpose-built facility of 94 acres for heavy marine fabrication, and offshore oil and gas rig upgrades, repairs and conversions.

*ISOTeam
- SG Bike, a 51:27:22 JV with Sean Tay and Andy Tay, has launched a bike sharing scheme at Bukit Panjang, which is expected to broaden group revenue base.
- The JV aims to address issue of indiscriminate parking by working out a solution with local authorities.

*Ley Choon
- Secured a PUB contract worth $1.4m relating to trial trenching works for water projects.

NEGATIVE NEWS
*SPH
- Proposing to divest 19.3m shares (~40% stake) in Mediacorp Press and 18m shares (20% stake) in Mediacorp TV to Mediacorp for $9.4m and $8.6m respectively.
- The group expects to record a write-down of $31m due to the transaction.

NEUTRAL NEWS
*UOL/Haw Par
- UOL exercised call option to acquire 60m shares of UIC from Haw Par via issue of 27.3m new shares.
- This will increase UOL's stake in UIC to about 48.94% from 44.71%.
- The transaction is expected to be completed by early Sep '17

*Tiong Seng/Ocean Sky
- 60:40 JV to acquire Sloane Court Hotel and adjacent plot of land at Balmoral Road for $80.5m or $1,292 psf ppr.