SG Market (03 Nov 17)

MARKET OVERVIEW
- The five-week rally appears a little tired even as Dow pushes to a new record high after Trump named dovish Jerome Powell as the new Fed chief and unveiled his long-awaited tax cut bill.
- The STI remains overbought with topside resistance at 3,460 and underlying support at 3,320.

CORPORATE RESULTS
*UOB
- 3Q17 net profit jumped 12% to $883m, bringing 9M17 earnings of $2.54b (+8%) to 77% of full-year street forecast.
- Net interest income gained 15% to $1.41b driven by higher loan growth (+8%) and NIM improvement to 1.79% (3Q16: 1.69%, 2Q17: 1.75%).
- Non-interest income nudged up 2.5% to $830m as increased fee income of $551m (+12%) from strong wealth management takings (+40%) was eroded by a 28% drop in net trading income to $164m.
- Provisioning rose 19% to $221m (+23% q/q), largely from non-performing O&G loans.
- NPL ratio held steady at 1.6% (3Q16: 1.6%, 2Q17: 1.5%) with Tier 1 CAR at 14.3% (3Q16: 13.4%, 2Q17: 13.8%).
- Trades at 1.25x P/B.

*StarHub
- 3Q17 results were within expectations as net profit slumped 11.5% to $76.2m.
- Revenue dipped 0.8% to $580.4m, dragged by lower post-paid ARPU (-1.4%) and subscriber base across mobile (-0.8%), Pay TV (-7.9%) and broadband (-1.9%), as well as lower handset sales (-10.6%).
- However, topline was partly mitigated by enterprise fixed services (+11.3%) on contribution of a newly-acquired cybersecurity solutions provider.
- Consequently, EBITDA margin contracted to 32.3% (-0.5ppt).
- Interim DPS was slashed by 20% to 4¢.
- Management maintained its guidance for FY17 service revenue to be flat, while EBITDA margin of 26-28%.
- Trades at 16.4x forward P/E and 6.1% yield

*Sembcorp Industries
- 3Q17 net profit tumbled 37.7% to $33.6m, bringing 9M17 earnings of $208m (-15.9%) to merely 54.5% of full-year consensus estimate.
- Turnover sank 15.5% to $1.81b, due to reduced takings from marine division (-64.4%), which eclipsed better utility performance (+17%).
- Bottom line was further impacted by higher refinancing costs incurred by its India power project and impairment charges taken on its Singapore assets and investments.
- NAV/share at $3.86.

*Manulife US REIT
- 3Q17 DPU of US$0.016 was 8.6% above IPO forecast and beat street expectations.
- Gross revenue was 16.8% higher-than-expected at US$23m following the acquisition of Plaza in New Jersey in Jul '17, and higher rental & other income.
- NPI beat by a larger margin of 20.9% to US$14.4m on lower property taxes, utilities and other property expenses.
- Occupancy rate slipped to 95.7% (-0.2ppt q/q), while aggregate leverage declined to 33.1% (-1.1ppt).
- Trades at 7.2% 3Q17 annualised yield and 1.07x P/B.

*OUE Commercial Trust
- 3Q17 results met expectations as DPU slid 12.9% to 1.15¢, weighed mainly by the larger unit base (+19%) following the private placement in Mar '17.
- Revenue and NPI slipped to $43.4m (-2.1%) and $34.1m (-3.5%) due to reduced retail rental income amid lower occupancy at One Raffles Place Shopping Mall from a tenant repositioning.
- Portfolio occupancy ticked 0.6ppt higher q/q to 97%, while aggregate levarage crept up to 36.9% (+0.5ppt q/q).
- Offers annualised 3Q yield of 6.4% and trades at 0.85x P/B.

*Lippo Malls Indonesia Retail Trust
- 3Q17 results missed expectations; DPU stayed flat at 0.86¢ as higher takings from properties were offset by distribution to perp holders.
- Gross revenue rose 5.5% to $49.6m on new contribution from acquisitions Lippo Mall Kuta and Lippo Plaza Kendari, as well as positive rental reversions (+2.9%).
- NPI rose at a faster clip of 7.1% to $46.4m on lower property operating & maintenance expenses (-60.4%).
- However, distributable income was flat at $24.2m due to a $4.5m (3Q16: $0.1m) distribution to perp holders.
- Portfolio occupancy held steady at 94.3%, while aggregate leverage fell to 28.7% (-1.9ppt q/q).
- Last traded at 3Q annualised yield of 7.8% and 1.2x P/B.

*AEM
- 3Q17 results surged ahead of expectations with net profit of $9.4m (+320%), thanks to improved operating leverage.
- This boosted 9M17 earnings to $21.8m (+470%), or 82.8% of FY17 consensus forecast.
- Quarter revenue spiked 173% to $58.1m on stronger sales of its latest semiconductor test handler and equipment consumables.
- Gross material margin widened 2.4ppt to 38.2% on a shift in sales mix and a favorable change in price from SGD to USD billing.
- Proposed 2nd interim DPS of 3¢ (3Q16: nil).
- Last traded at 7.3x FY18e consensus P/E.

*mm2
- 2QFY18 net profit more than doubled from a low base to $4.6m, pushing 1HFY18 net profit to $10.9m (+57.8%) or 41% of the street's bullish FY18 forecast.
- Quarter revenue grew 45.4% to $31.4m on full quarter contribution from UnUsUaL and growth in its core business.
- Gross margin expanded to 46.5% (+1.7ppt) on a change in sales mix.
- Bottom line was lifted by lower interest expenses (-77.8%) and recovery of bad debts, although pared by losses from an associate and higher admin expenses (+25.8%).
- Last traded at 24.9x forward P/E.

*Citic Envirotech
- 3Q17 net profit soared 154.3% to $58.8m, with 9M17 net profit of $96.8m (+67%) surpassing full-year estimate significantly.
- Quarter revenue leapt 99.8% to $273.9m on strong contribution from engineering (+172.3% to $226m) and treatment segment (+12.1% to $44.6m), but was partially offset by membrane sale (-76.9% to $3.3m).
- Gross margin widened 6.7ppt to 36% from the shift in sales mix.
- Last traded at 18.1x FY17e P/E.

*China Aviation Oil
- 3Q17 net profit declined 7.7% to $21.4m, bringing 9M17 earnings of US$71.3m to 74% of full-year consensus estimate.
- Quarter's revenue jumped 32.6% to US$5.2b on higher supply & trading volume (+26.1%) and oil prices.
- But, gross profit plunged 58.3% to US$4.3m due to lower trading gains amid a backwardation market, and higher supply costs from various disruptions caused by weather and refineries outages.
- Bottom line was buttressed by stronger profits from associates Shanghai Pudong Int'l Airport on higher refuelling volume, and Oilhub Korea Yeosu (+27.7%) on better margins for leasing of tank storage.
- Net cash position dropped 31.3% q/q to US$178.3m ($0.28/share) on higher working capital required for trading business.
- NAV/unit at US$0.8151.

*OUE Lippo Healthcare (former IHC)
- Slumped into 3Q17 net loss of $3.7m (3Q16: $10.1m profit) on absence of rental income from IHC Australia First Trust and a one-off gain (3Q16: $13.3m).
- Revenue inched up 1.8% to $11.7m as stronger takings from a hospital in Wuxi, China and its Chinese drug distribution business was offset by weaker contribution from its Japanese nursing facilities due to the weaker JPY.
- Bottom line was impacted by higher admin (+34.2%) and tax (+194.4%) expenses but partly mitigated by lower finance expenses (-37.2%).
- NAV/share at $0.0562.

*Secura
- 3Q17 net profit dived 65.4% to $90,000, taking 9M17 net loss to $0.2m (9M16: $0.5m profit).
- For the quarter, revenue grew 13.6% (+$1.2m) to $10.2m on increased contributions from its security guarding (+$0.9m) and systems integration (+$0.3m) segments.
- However, gross margin contracted to 17.2% (-2.2ppt) on the unfavourable sales mix.
- Bottom line was further weighed by weaker JVs/ associates contribution (-92.2%) and increased admin expenses (+12.4%).
- NAV/share at $0.1147.

POSITIVE NEWS
*Venture
- Divested its entire 18.77% stake (10.5m shares) in Fischer Tech for $31.6m ($3.02/share) to pirvatisation bidder Platinum Equity.
- Venture do not expect any material impact to earnings in current financial year.
- Trades at 20.8x forward P/E.

*Azeus
- Secured a HK$14.4m IT services project from the HK government, taking total contract value awarded ytd to HK$112.9m.
- The new project includes a one-off implementation (HK$9.9m) and 36-month maintenance (HK$4.5m) of a newly customised analytical tool for a key government department.
- Design and implementation works started in Oct 17 and is scheduled for completion in 15 months.
- Trades at 0.84x P/B.

NEGATIVE NEWS
*Chip Eng Seng
- To terminate the sales contracts entered with purchasers of units at its commercial development Tower Melbourne.
- This is due to protracted legal proceedings since 2013 and the group will return the deposits amounting to 10% of the purchase price of each unit.
- Last traded at 17.6x forward P/E.

*Global Palm Resources
- Warned 3Q17 net profit to be substantially lower than its previous quarter (2Q17: IDR7.5b) due to FX translation losses.
- Last traded at 10.3x trailing P/E.

NEUTRAL NEWS
*Keppel Corp
- Registered the prospectus for Keppel-KBS US REIT.
- IPO price of US$0.88/unit translates to an expected FY18/FY19 distribution yield of 6.8%/5.8%.
- The office REIT consists of a portfolio of 11 investment properties in seven key US markets, with NLA of 3.2m sf.

*Keppel DC REIT
- Obtained a €65m 5-year term loan facility from its trustee Perpetual Asia.
- Last traded at 5.3% indicative yield and 1.43x P/B.