SG Market (01 Dec 17)

MARKET OVERVIEW
- The market could be buoyed by the record Wall Street close as the US Senate is set to vote on a tax reform bill, while OPEC and its allies agreed to a further extension till end-2018 for oil production cuts.
- Technically, underlying support for the STI remains at 3,390, with topside resistance at 3,460.

SECTOR WATCH
*Banks
- Oct loans expanded 6.8% to $649.6b (Sep: +6.2%), bringing 10M17 loans growth to 6%.
- Growth was spurred by increased loans to businesses of 9% (Sep: +8%) and consumer of 3.8% (Sep: +3.6%).
- Positive loan momentum should be sustained as the economy picks up and on improved buying sentiment in the Singapore property market.
- Maybank KE maintains Neutral on Singapore banks with preference for UOB (Buy, TP: $27.10), followed by DBS (Hold, TP: $22.75) and OCBC (Hold, TP: $12.00).

*Property
- MAS flags risks from excessive exuberance in the property market, following the en-bloc rage and rising land prices.
- Concerns stem from a potential supply-demand mismatch, with anticipated new supply from government land sales sites to outstrip demand from slower population growth in the next 1-2 years.
- MKE is positive on the sector with preference for UOL (Buy, TP: $9.85), City Dev (Buy, TP: $13.80) and GuocoLand (Buy, TP: $2.90).

POSITIVE NEWS
*AEM
- Received sales orders worth $76m for delivery in 1H18.
- As a gauge for end-Nov '16, the group received sales orders worth $53m for delivery in 1H17.
- Last traded at 7.9x forward P/E.

*Citic Envirotech
- 34.9% owned Jiangyin Longyun Wastewater Treatment acquired an industrial transfer-operate-transfer wastewater treatment plant in Jiangyin City, Jiangsu Province in China, for Rmb25.8m.
- The 15-year service concession project has a capacity of 10,000m3/day.
- Last traded at 16.6x forward P/E.

*SIIC Environment
- Proposed two acquisitions which will lift treatment capacity for new projects secured to-date by 28% to 787,500 tpd.
1) 75.5% owned SIIC Environment Holdings (Weifang) to spend Rmb108.5m to acquire Dalian Ziguang Water Treatment, in charge of the Tiger Beach water treatment project in Dalian, China, and is currently upgrading its capacity by 12.5% to 90,000 tpd, and from grade 1B to 1A.
2) SIIC will also make a Rmb97m acquisition for an effective 86.5% stake in Dalian Ziguang Lingshui Waste Water Treatment that is in charge of the Lingshui River treatment project, currently upgrading its capacity by 33% to 80,000 tpd, and from grade 1B to 1A.
- Trades at 11.8x forward P/E.

*Golden Energy and Resources
- Investing A$67.86m to subscribe for a 10% stake in ASX-listed Westgold Resources
- The investment will help the group gain exposure to the counter-cyclical gold mining sector in Australia.
- Last traded at 9.6x trailing P/E.

NEGATIVE NEWS
*Duty Free Intl
- Received bills of demand from Royal Malaysian Customs of Perak, demanding aggregate payment of RM41.6m including custom and excise duties, sales taxes and GST.
- The demand stems from non-compliance of a duty-free shop located at the border of Perintah Tetap Kastam Bil 55.
- Group and its advisors believe there is no legal basis and will be defending against the allegations.
- Separately, substantial shareholder Heinemann Asia Pacific exercised the second tranche of its call option for €9.85m, to acquire an additional 5% in key operating subsidiary, DFZ Capital, to 15%.
- Trades at 15.8x forward P/E.

NEUTRAL NEWS
*STI
- FTSE Russell announced that there will be no changes to STI constituents in the Dec '17 quarterly review.
- STI reserve list, ranked according market cap, comprises Venture, Suntec REIT, Mapletree Commercial Trust, Keppel REIT, and Sembcorp Marine.
- Next review will take place in Mar '18.

*Oxley
- Included on the FTSE ST Large & Mid Cap Index and the FTSE ST Mid Cap Index.
- Trades at 10.8x forward P/E.

*Olam
- Issued 589,589 new shares in relation to a warrant exercise at US$1.09 each.
- 57m outstanding warrants remains, which expires on 29 Jan 2018.
- Trades at 16x forward P/E and 1.33x P/B.

*Marco Polo
- Singapore Court has approved the group's restructuring plan, which calls for a write-off on $258m in debts, and $60m fresh equity injection.
- Following the approval and sanction orders, Marco Polo will now need to seek shareholders' approval.