SG Market (09 Nov 17)

MARKET OVERVIEW
- The market may face some profit-taking as recent gains were not broad-based.
- Focus will be on a deluge of quarterly results that is expected to be released over the next two days, including City Dev, UOL, SATS, Ezion, Noble, GLP, CDG.
- Technically, topside resistance for STI is seen at 3,460, with underlying support at 3,355.

CORPORATE RESULTS
*SingTel
- 2QFY18 core net profit slipped 4.1% to $929m, at low end of estimates as associate Bharti Airtel (-67.1%) was hurt by aggressive price competition in India.
- Revenue rose 6.9% to $4.37b on improved enterprise (+6%), digital (+106%) and consumer (+2.3%) businesses.
- But underlying consumer operations was weak in Australia (-1%) and Singapore (-2.1%) due to reduced equipment sales.
- EBITDA margin tightened to 29.6% (-0.6ppt), dragged by the enterprise segment.
- Contribution from regional associates slipped 4.8%, mainly dragged by Airtel.
- Headline net profit of $2.89b was boosted by a $2.05b gain on disposal of 75.2% stake in NetLink Trust.
- Maintained interim DPS of 6.8¢ but declared special DPS of 3¢ (1HFY17: nil).
- Affirms low single digit revenue growth and flat EBITDA for FY18.
- Trades at 15.8x forward P/E and 4.8% yield.

*ParkwayLife REIT
- 3Q17 DPU of 3.37¢ (+10.1%) met estimates on lower finance cost and divestment gains.
- Gross revenue and NPI slipped to $27.7m (-1.4%) and $25.9m (-1.2%) largely on lower income from its Japanese portfolio, which was eroded by JPY depreciation, which offset higher rents received from its Singapore properties.
- Aggregate leverage contracted 0.1ppt q/q to 37.3%.
- Trades at annualised 3Q yield of 4.7% and 1.68x P/B.

*Best World
- 3Q17 net profit jumped 36.4% to $12.2m, ahead of street expectations.
- However, revenue slid 10.3% to $46.8m as the slump in Taiwan sales (-46%) due to an earlier implementation to remove promotions to drive sales overshadowed the continued increase in export sales to China (+33.3%), from greater adoption of its DR's Secret skincare products.
- Gross margin contracted 4.4ppt to 67.2% due to the shift in sales mix towards the relatively lower profitability export segment, but resulted in a surge in net margin to 26% as the segment does not incur commissions.
- Management expects growth momentum in China to sustain and that the decline in Taiwan will be sufficiently buffered for FY17.
- MKE maintains Buy and TP of $1.88.

*Valuetronics
- 2QFY18 beat as net profit leapt 33.5% to HK$50.8m, boosted by better operating leverage.
- Revenue jumped 26.5% to HK$725.7m, as its consumer electronics (+45.7%) segment was buoyed by growing interest for smart LED lighting, while the industrial & commercial electronics unit (+10.5%) saw higher customer demand.
- Gross margin dipped 0.2ppt to 14.4% on a shift in sales mix.
- Bottom line was backed by wider operating margin of 8% (+0.5ppt), as costs rose at a slower pace relative to top line.
- Proposed interim DPS of HK7¢ (2QFY17: nil).
- Last traded at 13.2x FY18 P/E.

*Jardine C&C
- 3Q17 net profit of US$21.1m (+13%) brought 9M17 earnings to US$610.2m (+19%), or 77% of full-year consensus estimate.
- Quarter revenue jumped 13% to US$4.44b, while operating margin was stable at widened to 10.1% (+0.5ppt).
- Astra's profit contributions surged 22% to US$183.2m on improved performances across automotive (+11%), financial services (+10%), agribusiness (+1%), information technology (+38%), heavy equipment and mining (+71%), but was partially dragged by infrastructure & logistics (-29%).
- NAV/share at US$15.42.

*EC World REIT
- 3Q17 DPU of 1.44¢ was 3.7% lower than its IPO forecast, due to impact from witholding tax and absence of investment income.
- This brought 9M17 payout to 4.521¢, 1.8% above IPO forecast.
- Quarter gross revenue of $23.9m and NPI of $22.1m outperformed by 5.5% and 7.7%, respectively, backed by higher rental income after the completion of a sheltered warehouse in Chongxian Port Investment.
- Portfolio occupancy improved 1.4ppt q/q to 97.8%, while aggregate leverage was stable at 29.2%.
- Offers an annualised 3Q yield of 7.3% and trades at 0.88x P/B.

*CSE Global
- 3Q17 net profit tumbled 25% to $3m, bringing 9M17 loss to $7.8m (9M16: $15m profit) against FY17 estimate for a $2m profit.
- Quarter revenue rose 5.7% to $85.6m, mainly attributed to higher takings from the infrastructure segment, particularly in the Americas region and oil & gas sector.
- Gross margin shrank 4ppt to 25.1% amid pressure within the O&G industry.
- Bottom line was further hit by a $2m allowance for doubtful debts, but partially offset by a $3.4m positive FX swing.
- New orders in 3Q17 amounted to $86.4m (+22% y/y), with outstanding order book at $207.6m (2Q17: $207.9m).
- Last traded at 12.5x trailing P/E.

*MoneyMax
- 3Q17 net profit rose 6% to $1.8m, shored by a favorable FX swing of $0.3m.
- Revenue grew 22.3% to $38.7m on firmer pawnbroking business, as well as retail & trading of pre-owned items.
- Gross material margin narrowed 2.2ppt to 29.7%.
- Bottom line was pared by higher depreciation (+32.5%) and finance costs (+35.2%).
- Trades at 9.9x trailing P/E.

*UG Healthcare
- 1QFY18 net profit increased 8.8% to $0.9m, achieving 27% of FY18 estimate.
- Revenue grew 16.7% to $18.3m on increased glove sales at higher ASPs, following production capacity increase and expansion of its distribution networks.
- Gross margin expanded to 16.3% (+2.1ppt) on lower raw material prices.
- Bottom line was lifted by positive contribution from minority interests of $45,000 (1QFY17: $0.1m loss).

*Maxi-Cash
- 3Q17 net profit surged 32% to $4.3m on interest income of $0.9m (3Q16: nil). This brought 9M17 net profit to $9.5m (+13%).
- For the quarter, revenue grew 11% to $45.5m attributable to its pawnbroking business and sales from its jewellery, watches and branded bags business.
- Bottom line was further boosted by other income of $0.9m (3Q16: $60,000) from disposal gains and reversal of doubtful debt provisions.
- Trades at 10.6x trailing P/E.

*Gaylin
- Slumped into a deeper 2QFY18 loss of $2.5m (2QFY17: $1.6m loss) on weak margins.
- Revenue increased 3.9% to $19.1m on growth in its rigging and lifting segment, but partly offset by weakness in its ship chandling segment.
- Gross margin contracted to 15.6% (-4.6ppt) on a weaker pricing environment.
- Bottom line was further hit by FX loss of $0.4m (2QFY17: $0.4m gain).

*Sunningdale Tech
- 3Q17 net profit slumped 24.2% to $7.7m, bringing 9M17 earnings to $23.6m (+34.4%) or 61% of full year consensus estimates.
- Revenue grew 9.1% to $188.1m on broad-based growth across automotive (+2.5%) and consumer/IT (+5.5%), healthcare (+6.2%) and mould fabrication (+35%) segments.
- Gross margin remained at 14.3% (+0.1ppt).
- Bottom line was dragged by negative FX swing of $3.1m and lower contribution of other income (-67.5%).
- Last traded at 11.4x forward P/E.

*Jadason Enterprises
- 3Q17 net profit slid 19% to $1m, bringing 9M17 earnings to $2m (9M16: $0.3m), or 50% of full-year consensus estimate.
- Revenue jumped 18% to $17.6m on growth in both equipment & supplies (+25.3%%) and manufacturing & support services (+14.1%) segments from increased work.
- Gross margin shrank to 19% (-7.8ppt) due to higher cost of sales (+31%) and the absence of write-back allowance for inventory obsolescence of $0.4m.
- Trades at 9.3x forward P/E.

*Frencken
- 3Q17 net profit surged 14.5% to $5m, bringing 9M17 earnings to $27.9m (+141.9%), surpassing full-year estimate.
- Revenue rose 7.1% to $126.2m on higher contribution from mechatronics (+20.9%), led by semiconductors (+50.7%), while the IMS segment (-20.1.9%) was dragged by weak automotive (-27.1%) sub-segment.
- Gross margin expanded to 16% (+0.4ppt) from improved capacity utilisation and shift in sales mix.
- Trades at 9.4x forward P/E.

*Singapore O&G
- 3Q17 net profit tumbled 3.3% to $2.3m but still came within expectations.
- Revenue edged up 2.4% to $7.7m on increased patient loads in Dermatology and Cancer-related segment, as well as maiden contribution from new Paediatrics segment, but was partially offset by weakness in O&G division.
- Operating margin narrowed 1.7ppt to 36.5% on increased headcount to support new paediatric clinics, as well as higher depreciation (+19.4%) from addition of new medical machines.
- Bottom line was eroded by higher tax expense of $0.4m (+25.2%).

*First Ship Lease Trust
- No distribution declared following a 3Q17 net loss of US$21.7m (3Q16: US$3.5m profit), arising from a US$22.2m impairment on three chemical tankers.
- Revenue sank 18.5% to US$18.7m amid the dry-docking of one tanker, softening rates across all segments and the non-extension of a time charter agreement for Aframax tankers.
- Aggregate leverage crept up 1ppt q/q to 45.2%.
- Last traded at 0.17x P/B.

POSITIVE NEWS
*Keppel KBS US REIT
- Its IPO of 34.1m units was 5.7x oversubscribed.
- Trading will commence on 9 Nov, at 2pm.

*CITIC Envirotech
- Secured two EPC projects in Fujian, China, that are slated to complete by Jun '18.
- First contract is worth Rmb247m, and work involves upgrading Fujian Haixia Environmental Protection Group's existing 400,000 m3/day conventional wastewater treatment plant (WWTP) to adopt membrane bioreactor (MBR) technology .
- Second project is worth Rmb55m, and involves the upgrading of a 40,000 m3/day conventional textile industrial WWTP in Shi Shi City to use MBR technology.
- Trades at 18x forward P/E.

*Sanli
- Secured four new contracts worth $8.1m from bother public and private sectors, bringing the group's order book to $112.3m.
- Contracts include EPC of a water reclamation plant and O&M of the sewerage pumping and treatment system.
- Trades at 19.3x forward P/E.

NEGATIVE NEWS
*Profit warnings
- Travelite
- United Food
- Pollux Properties
- Dyna-Mac

NEUTRAL NEWS
*Marco Polo Marine
- Proposed to undertake a refinancing and debt restructuring exercise, involving a $60m equity fund raising via new ordinary shares and rights issuance, consent solicitation with noteholders and settling trade debt via instalments and share issuance.

*Penguin International
- To subscribe 10% of the enlarged share capital of Marco Polo Marine (MPM) for $10m, of which $2m is payable to MPM's executive chairman.

*The Place
- To acquire an 80% stake in Tianjin Yuntai Wanrun (Xiuwu) Property Development for US$20.5m from Jingneng Tianjin Yuntaishan Investment.
- The target is an 80:20 JVCo, which intends to develop a plot of commercial land spanning 2.4m sqm in Zhengzhou City, Henan, China into an integrated tourism township.