Monday, November 27, 2017

SG Market (27 Nov 17)

- The market may gyrate within range, as investors monitor global markets for fresh directional cues including US Black Friday weekend retail sales, extension of OPEC production cut (30 Nov), and ongoing deleveraging concerns in China.
- Technically, underlying support for the STI is at 3,390, with topside resistance at 3,460.

- FY17 results missed as net profit slipped 6.7% to $14.5m, as expenses rose at a faster pace from business expansion.
- Revenue grew 6.1% to $145.1m on increased contributions across Singapore and China outlets.
- Gross margin held steady at 63.3% (+0.1ppt).
- Bottom line was also weighed by lower government grants from a reduced wage credit scheme payout.
- Lowered final DPS to 0.5¢ (FY16: 1¢), but maintained special DPS of 0.7¢, bringing full-year payout to 1.7¢ (unch).
- Trades at 19.3x forward P/E.

- 4QFY17 underlying net profit slipped 2% to $5m, dragging FY17 earnings to $21.4m (-12%).
- Full-year revenue rose 11.6% to $192.1m on increased takings from coffee shops, drinks and food stalls, as well as sub-leasing of stalls and cleaning services provided.
- Gross margin dipped 1.6ppt to 20% amid higher staff costs and lease expenses for the newer coffee shops and food stalls.
- Bottom line was also hurt by lower government subsidies for wages, higher interest costs and a spike in taxes following a corporate restructuring for its recent IPO.
- Declared final DPS of 0.68¢, bringing full-year payout to 0.96¢ (FY16: nil).
- Trading at 18.4x trailing P/E.

*Health Management International (HMI)
- Issued 16.9m new shares at $0.65 each to Temasek-backed Heliconia via a private placement.
- The issue price is 3% discount to last closing price of $0.67 and the placement represents 2% stake in the enlarged share capital of HMI.
- The group hopes to leverage on Heliconia's network and has earmarked net proceeds of $11m for business expansion and growing its existing operation.
- Trades at 28.4x forward P/E.

*Federal International
- Secured contract worth US$3.3m for the charter of its 1,200 HP land drilling rig.
- The rig will be deployed for drilling of six wells in Gn Parakasak Field, Banten Province in Indonesia.
- The charter period of the rig for each well is 50 days, and is expected to commence in Apr 2018.
- Trades at 8.8x trailing P/E and 0.7x P/B.

- Secured new contracts and lifted its total order book from $152m (as at 25 Sep) to $170m.
- New contracts are mainly from existing clients involving the supply, fabrication and installation of structural steelworks to various projects.
- Last traded at 11.8x trailing P/E.

*ST Engineering
- The JV between ST Aerospace resources and Wings Capital Partners has been wound up.
- To recap, the termination of JV was announced back in Aug 2015 and was due to differing views on strategic focus and operational plans.
- Trades at 20.9x forward P/E.

*Keppel Infrastructure Trust
- Undertaking a strategic review of its interest in Basslink undersea electricity and telecommunications interconnector between Tasmania and mainland Australia (Victoria).
- The Basslink interconnector is owned and operated by KIT, and has a 25-year term Basslink Services Agreement with an entity of the State of Tasmania since Apr '06.
- Since Jul '09, the Basslink telecommunications network has also provided wholesale telecommunications services between Hobart, Tasmania and Melbourne through the Basslink interconnector.
- Offers indicative yield of 6.5% and 1.89x P/B.

*Noble Group
- Proposed disposal of Noble Americas South Bend Ethanol (NASBE) for ~US$17m.
- Long-stop date for the deal on 13 Dec '17.
- NASBE owns and operates an ethanol production plant in South Bend, Indiana in US.
- Upon completion, pro forma NTA/share will be reduced 6.3% to US$0.75, implying P/B valuation of 0.17x.

*Sabana REIT
- Updated that talks with ESR-REIT has ended.
- Moving forward, the REIT will focus on three key initiatives to improve performance:
1) Rejuvenate portfolio through selective divestments and active asset management;
2) Renewal of senior leadership;
3) Enhancing the Board of Directors;
- At $0.43, REIT offers annualised 3Q17 yield of 7.3% and trades at 0.75x P/B.

*Tiong Seng
- Completed its acquisition of Sloane Court Hotel and an adjoining site at Balmoral Road.
- To recap, the sites, with an area of 3,617.9sm and gross plot ratio of 1.6, was acquired at $80.5m and will be redeveloped into a 12 storey condominium consisting of 80 units.
- Trades at 6.95x trailing P/E.

*Sri Trang
- Acquired a production line of medical examination gloves and industrial gloves in Surat Thani province for Bt840m.
- The line has a capacity of producing 2,000m pieces of gloves per year and the acquisition is slated to complete by 2Q18.
- The acquisition is aiming to serve the growing global demand for medical and industrial gloves.

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