Thursday, January 11, 2018

SG Market (11 Jan 18)

- Investor fervour will likely be tempered today after US stocks retreated for the first time in 2018 over worries that China would halt its US Treasury purchases, driving bond yields sharply higher, and the uncertain future of NAFTA.
- But rising interest rates would widen interest spreads for banks, thus sustaining the rally in bank shares.
- Technically, the STI is overdue for a correction after an impressive start to the year. Near-term support is at 3,470 with topside resistance at 3,550.

*DFI Int'l
- 3QFY18 net profit slumped 84.7% to RM3.3m on a RM17.1m swing to FX loss of RM7.5m due to the stronger ringgit.
- This brought 9MFY18 net profit to RM32.4m (-41%) or 51% of consensus forecast.
- Revenue was almost flat at RM133.5m (+0.4%) on change in sales mix despite some improvement in certain products.
- Declared third interim DPS of 1¢, bringing 9MFY18 payout to 1.85¢ (9MFY17: 2.5¢).
- Trades at 16.5x forward P/E.

*OUE Lippo Healthcare
- Placing out 562.5m new shares at $0.14 apiece to Tokyo-listed Itochu Corp, giving it a 25.3% stake.
- Intends to leverage on Itochu's brand name and strategic partnerships as well as business network and investments in healthcare-related businesses.
- Net proceeds of $77.5m will be used for development of its healthcare business and general working capital purposes.
- Trades at 2.2x P/B.

*Sanli Environmental
- Secured $10m worth of contracts from both the public and private sectors, comprising EPC and operations & maintenance works.
- This would bring its order book to $114.3m.
- Trades at trailing P/E of 11.5x.

- Obtained the lease to manage its second overseas car park in Tsim Sha Tsui, Kowloon, HK. The 2-year lease for the 30 car park lots will commence from 4 Jan.
- It also secured a contract to license 10 car parks from JTC totalling 4,802 lots in Bedok, Kampong Ubi and Kaki Bukit industrial areas. The 3-year contract commenced from 1 Jan with an option to renew annually for another three years.
- The contracts bring its total car park portfolio to 54 (prior: 43).

- Reportedly exiting the oil trading business after shuttering its London and Singapore oil trading desks due to heavy losses and debt load of US$3.5b as at Dec '17.
- The closures follow the sale of its larger US oil trading business to Vitol for US$580m.
- Currently trades at 0.3x P/B but balance sheet may be overstated.

- Received a letter from Pertamina to terminate the operations cooperation agreement in Pabuaran operation area (KSO) and to disburse US$2.3m of bank guarantees.
- Termination was due to the group's inability to fulfil certain conditions, such as failure to complete a US$18.6m work programme by 11 Dec '17.
- The group intends to exit the Exploration & Production sector due to prolonged low oil prices, and focus on offshore engineering sector.
- Warned of significant FY17 impairment losses on assets related to KSO.
- Separately, it is disposing its corporate HQ at PJX-HM Shah Tower in Malaysia for RM9.2m, and is expected to incur a disposal loss of RM0.66m.
- The property is being divested for cost savings, as it has excess office space beyond the group's needs.
- RM6.7m from proceeds will be used to repay debt for interest savings, while remaining will be to strengthen working capital.

*Yangzijiang Shipbuilding
- Established a JVCo with several strategic partners to lease and charter vessels.
- It will own a 49.45% stake in the JVCo with the remaining held by its partners.

- Entered supplement agreement with vendors in relation to its acquisition of YC Capital Consolidated.
- Agreement includes the revision of acquisition price to $12m from $15m via an issuance of the new shares at $0.128 each.
- The group will also pay up to $2m worth of shares if YC Capital's FY18 net profit is at least RM8m.

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