SG Market (18 Dec 17)

MARKET OVERVIEW
- The market could trudge higher this week as key lawmakers pledged support for the US tax cut bill, bringing it a step closer for President Trump to sign it into law before Christmas.
- Technically, the STI sees downside support at 3,390, with upside resistance at 3,475.

SECTOR WATCH
*Property
- Developers moved 785 new homes in Nov (-8.7% y/y, +3.6% m/m) on fewer sale launches.
- Including ECs, 933 units were sold (-16% y/y, -3.7% m/m).
- The slower sales were in line with MKE expectations that developers would hold back launches in a bid to raise prices to maximise returns.
- We are Positive on the property developers and maintain UOL (TP: $9.80) as the top pick, along with City Dev (TP: $13.60), GuocoLand (TP: $2.90) and Bukit Sembawang (TP: $8.25).

*Banks
- MAS has introduced The Credit Limit Management Measure, which will take effect on 1 Jan 2018.
- The new rule to encourage financial prudence will cap additional unsecured credit for individuals whose outstanding unsecured debts exceed 6x monthly income.
- Impact is minimal as consumer credit formed less than 8.8% of total loans.
- MKE remains Neutral on the sector and prefer UOB (Buy, TP $27.10) over DBS (Hold, TP $22.75) and OCBC (Hold, TP $12.00).

POSITIVE NEWS
*SIA
- Nov group passenger load factor climbed to 80.7% (+3.5ppt) as traffic growth (+7.6%) outpaced capacity expansion (+3%).
- Cargo load factor rose 4ppt to 70.4% on higher traffic (+7.1%) due to improving regional demand.
- Subsidiary carriers SilkAir (+3.3ppt to 73.9%) and Scoot (+5.2ppt to 86.3%) also notched better load factors.
- Parent airline load factor rose 3.1ppt to 80%, on improvement across routes to East Asia (+4ppt), Americas (+3.3ppt), Europe (+1.9ppt), South West Pacific (+3.9ppt), West Asia and Africa (+1.6ppt).
- Last traded at 21.8x forward P/E and 0.92x P/B.

*Starhub
- Acquiring enterprise solutions provider D'Crypt for up to $122m, to enhance its capabilities in cyber security and Internet of Things.
- D' Çrypt engages in cryptographic technology and specialises in encrypted communications, high performance computing, secure IoT and vulnerability and threat analysis.
- It serves clients in the military, security and government sectors.
- The purchase will be conducted in 2 tranches - 65% stake by Feb '18 on milestone achievements and the remaining 35% in 1H21 upon meeting profitability thresholds.
- Trades at 17.9x forward P/E and offers 5.8% indicative yield.

*CapitaLand
- Serviced residence unit, The Ascott, has secured contracts to manage two properties in the heart of Accra in its first foray into Africa.
- The 220-unit Ascott 1 Oxford Street Accra will open in phases from 2019, while the 40-unit Kwarleyz Residence will open in 4Q 2018.
- Ascott added a record of over 21,000 units in 18 new cities across nine countries in 2017.

*Cityneon
- Entered a non-binding term sheet to acquire Scorpio East Properties from SGX-listed KOP for $2.9m.
- Scorpio East owns a leasehold property at 25 Tai Seng Ave with a lot area of 2,571 sqm.
- The group intends to use the building to expand its office space as a creative design suite, as well as derive rental revenue from remaining units.
- The group is also seeking future collaboration with KOP for its expansion in the entertainment and media industry.
- Upon completion, FY16 pro forma EPS is expected to rise 4.3% to 2.92¢.
- Separately, Cityneon signed a term sheet with South Korean firm Fabulous Inc to set up an interactive, exterior digital media signage board at Cityneon's Las Vegas Marvel's Avengers S.T.A.T.I.O.N. exhibition at Treasure Island.

NEGATIVE NEWS
*GKE
- To divest its entire 50% stake in JVCo Ocean Latitude for US$1.1m.
- The JVCo owns a liquefied gas carrier vessel and will be disposed due to the challenging operating environment.
- GKE's shareholder loan of US$4.4m will be repaid in four quarterly instalments upon completion.
- The group will incur a net loss of $6.9m from the divestment.
- Loss-making and trades at 0.75x P/B.

NEUTRAL NEWS
*Clearbridge Health
- Healthcare company will make its trading debut on SGX Catalist board at 9am today.
- IPO of 88m shares solely comprises a placement tranche at $0.28 each.
- Substantial investors include Coop International and two individuals.
- Net proceeds of $21.4m will be used for the expansion of its medical clinics business and group laboratory test unit, as well as for working capital purposes.