SG Maket (18 Sep 17)

MARKET OVERVIEW
- Investors are likely to switch focus to the 2-day FOMC meeting starting tomorrow for a gauge of US interest rate path.
- Technically, the STI has breached its 3,220 support and looks to test the next level at 3,190. Overhead resistance remains at 3,275.

MACRO WATCH
*Economy
- Singapore non-oil exports jumped 17% in Aug (Jul: +8.5%), expanding for the fourth straight month and exceeding the 11.8% growth estimate.
- Electronics shipments surged 21.7% (Jul: +15.3%), boosted by ICs (+36.8%), while non-electronic exports (+15%) was lifted by petrochemicals (+31.9%).
- Top five markets were China (+43.2%), EU (+23%), HK (+41.9%), US (+3.9%) and Malaysia (+12.4%).

CORPORATE RESULTS
*Low Keng Huat
- 2QFY17 net profit plummeted to $0.5m (2QFY16: $43.1m) in absence of $48.4m gain from sale of Duxton Hotel Saigon last year.
- Revenue jumped 59% to $13.6m on increased development sales, but partly offset by lower hotel bookings.
- Gross margin contracted 7.1ppt to 15% on a shift in sales mix.
- Bottom line was buttressed by a turnaround in JV contributions to $0.8m (2QFY16: $0.9m loss), mainly due to sale of office units at AXA Tower.

POSITIVE NEWS
*SIA
- Recorded higher group passenger load factor of 80.9% (+1.2ppt) in Aug, as traffic (+5.1%) outpaced capacity growth (+3.5%).
- Cargo load factor also crept 2.9ppt higher to 63.4%.
- Parent load factor was supported by improvement across routes to Americas (+1.1ppt), Europe (+3.1ppt), and East Asia (+1.6ppt), but South West Pacific (-4.6ppt), West Asia and Africa (-0.2ppt) deteriorated.
- Load factors also improved at SilkAir (+4.8ppt to 75.8%) and Scoot (+3.6ppt to 84.8%).
- Trades at 25.5x forward P/E and 0.9x P/B.

*Mandarin Oriental
- Confirmed it has received proposals from potential buyers for its 848-room The Excelsior in Hong Kong, touted to be ~HK$30b, or 36% above the hotel group's current market cap.
- This implies that its other 29 hotels and 8 service residences could come for free.
- At US$2.56, counter trades at a 17% discount to its adjusted NAV/share of US$3.10 but above book value of US$0.93.

*SIIC Environment
- 60% owned Ranhill Water Hong Kong was awarded the Hefei Circular Economy Demonstration Park Water Treatment Plant Transformation project.
- The project has a design capacity of 30,000 tpd and a concessionary period of 19 years.
- Tariff is set at Rmb6.43/ton for the first six months from the commencement of operations and will be reviewed going forward.
- Trading at 12.8x forward P/E.

*Lian Beng
- Secured a $162m contract for the proposed development of residential project Martin Modern.
- The contract is expected to commence this month and be completed within 32 months.
- This lifted its order book to $699m.
- Last traded at 5.8x trailing P/E and 0.53x P/B.

*Roxy-Pacific
- 50% owned RH Guillemard is acquiring two freehold sites at 12 & 14 Guillemard Lane for $22.5m.
- The sites have a total land area of 12,138 sf with plot ratio of 2.8, and zoned for residential development.
- Last traded at 15.5x trailing P/E and 1.26x P/B.

*Heatec Jietong
- Secured three new contracts worth a total of $4m for its heat exchanger business.
- The contracts are expected to contribute positively to FY17 results.

NEGATIVE NEWS
*ComfortDelGro
- Lost bid to operate the upcoming Thomson East Coast Line from 2019 to 2028 to SMRT.
- 74.6% owned SBS Transit currently runs the North-East, Downtown lines and Sengkang-Ponggol LRT, while its bigger rival operates the older North-South, East-West and Circle lines as well as Bukit Panjang LRT.
- This award will relegate SBS Transit to a minor rail player with 20% market share.
- Separately, media reports that 2,000 taxi drivers, representing 5.4% of its drivers, have expressed interest in joining private car operator Grab.
- To retain its drivers, CDG has offered rental rebates of $3,600 over six months but this is much lower than Grab's montly rebates of $1,500-1,688 monthly over a similar period.
- Maybank KE last had a Hold with TP of $2.25.

NEUTRAL NEWS
*Nam Cheong
- Disposing a non-core freehold property at 146B Paya Lebar Road with gfa of 545 sqm for $4.5m.
- Counter remains suspended since 21 Jul '17.

*GKE Corp
- Updated that discussions between the potential investor and substantial shareholders on a possible deal are still on-going.
- The group has not received any formal proposal at this point and will provide more updates upon material developments.