SG Market (29 Sep 17)

MARKET OVERVIEW
- Market is still showing no clear direction although downside could be supported by end 3Q window dressing and improving technicals.
- Technically, overhead resistance for the STI lies at 3,275 (50-dma), while downside at 3,210 is supported by rising Stochastics and a positive MACD crossover.

POSITIVE NEWS
*GuocoLand
- 70:30 JV submitted the top bid of $1.62b for the 2-ha Beach Road commercial site, beating four other contenders, with all offers above the trigger price of $1.138b.
- The price tag translates to a faily aggressive $1,706 psf ppr and is almost 60% higher than the $1,068 psf ppr paid by a City Dev led consortium for the adjacent South Beach site back in 2007.
- This reflects renewed confidence among developers in Singapore's office market in the next 4-5 years when the new development is expected to be ready in 2022.
- MKE believes the $2.4b mixed-use project with maximum permissible gfa of 950,592 sf, of which 70% must be for office, will be profitable and estimates a attributable surplus of $0.06/share for the group.
- Buy maintained with TP of $2.75.

*UOL
- 50:50 JV with Kheng Leong (owned by controlling Wee family), has won the tender for 36-unit Nanak Mansions in a $201.1m en bloc deal, or $1,429 psf ppr.
- The 109,629 sf freehold site has a gross plot ratio of 1.4, which could yield gfa of 143,482 sf or ~200 units.
- Inclusive of development charges the purchase price works out to $1.429 psf ppr, which is comparable to the $1,409 psf fetched by nearby The Albracca in a collective sale in Jul this year.
- With estimated breakeven cost of $1,900 psf, the new development couldl reap slim margins unless home prices rebound .
- Last traded at a 26% discount to RNAV of $11.03/share.

*DBS
- Formed a 15-year regional general insurance distribution partnership with US-listed Chubb, covering five key markets: Singapore, HK, Taiwan, Indonesia and China.
- The US$350m business deal will be progressively rolled out from early-2018 and will have minimal impact of less than 1% on group earnings.
- Last traded at 1.15x P/B.

*Roxy-Pacific
- Acquiring NZI Centre at 1 Fanshawe Street in Auckland, New Zealand, for NZ$63m.
- The five-storey commercial office building has a net lettable area of 9,446 sqm and is fully leased to IAG New Zealand, the largest insurer in the country.
- The CBD property has a leasehold tenure until 31 Dec '36 and is perpetually renewable for 20 years.
- Last traded at 15.6x trailing P/E.

*Koh Brothers Eco Eng
- Its 35:65 JVCo with Penta-Ocean Construction clinched a $520m contract related to the Deep Tunnel Sewerage System Phase 2 project.
- The contract is targeted to complete in Jun '23, and will lift its order book to $878.9m.

*COSCO Shipping
- 51% owned subsidiary COSCO Shipyard secured a contract with a European buyer for four 82,000 tonnes bulk carriers for an undisclosed amount.
- The contract contains two options to build another four similar units.
- The four initial bulk carriers are scheduled for delivery between 3Q19 and 2H20.

NEGATIVE NEWS
*Imperium Crown
- Divesting two mixed development properties in Tokyo, namely Green Forest Itabashi (building area: 4,074 sqm) and Hatchobori Place (2,924 sqm) for $38.2m.
- Group is expected to record a disposal loss of $6.75m.

NEUTRAL NEWS
*Mencast
- Responded to SGX trading query that the group is in early stages of exploratory discussions for potential divestment of assets.
- Group will make further announcement upon any material development.

*Soilbuild Construction
- Bolstered the equity of its procurement arm by $8.5m.
- The additional investment will allow the arm to meet requirements for an A1 grading by the BCA, which would allow it to tender for public construction projects of unlimited contract sum.

*Aspen Group
- To revoke the proposed acquisition of two freehold land sites in Bandar Baru 18, Semenyih, Malaysia, for RM10m.
- The turnaround was due to the inability to obtain regulatory approval to increase maximum selling price and unit density for the existing affordable housing development plan.
- Separately, the group is acquiring an adjacent land measuring 22,954 sqm from the same vendor, KL-listed Tropicana Corp, for RM66.7m.
- The new land has been approved for development of two blocks of residential properties comprising SOHO and serviced apartments, and 16 retail shop lots.
- Estimated gross development value is RM500m.