SG Market (27 Feb 18)

MARKET OVERVIEW
- The market is likely to ride on the strength in Wall Street as 10Y UST yield eased from last week's four-year high, alleviating concerns about rising interest rates and refocused attention on economic growth and corporate earnings.
- Of the over 100 SGX companies we track that have released 4Q17 results, 16% beat earnings estimates, 57% were in line, while 28% missed expectations. This compares to 24%, 47% and 29% respectively for 3Q17.
- Technically, the STI is heading towards its near term objective at 3,575 with immediate support at 3,470.

CORPORATE RESULTS
*Golden Agri
- 4Q17 underlying net profit slumped 43.6% to US$37.3m but FY17 core earnings of US$253.8m (+36.3%) still beat estimates.
- Revenue for the quarter fell 10% to US$1.92b on lower CPO average selling price of US$662/MT (-6%) as well as lower palm production of 650,000 MT (-26%).
- EBITDA margin contracted slightly to 8.1% (-0.3ppt) on lower profitability from its downstream business amid a competitive market environment.
- Declared final DPS of 0.116¢, bringing FY17 payout to 0.809¢ (FY16: 0.635¢).
- Trading at 18.2x FY18e P/E.

*First Resources
- 4Q17 net profit tumbled 41.1% to US$34.2m, bringing FY17 earnings to US$137.7m (+9.8%), trailing estimates.
- For the quarter, revenue rose 3.2% to US$180.8m on increased sales volumes.
- But, EBITDA margin narrowed to 43.3% (-8.9ppts) due to lower CPO ASPs.
- Bottom line was dragged by higher selling & distribution costs due to increased freight charges and export taxes, as well as a negative US$15.6m swing in fair value loss of biological assets.
- Cuts final DPS to 2.15¢ (-9.5%) but paying special DPS of 3.4¢, bringing FY17 payout to 6.8¢ (FY16: 3¢).
- Trades at 12.2x forward P/E. MKE upgrades to Buy with TP of $2.20.

*Olam
- 4Q17 core net profit rose 7.2% to $109.7m, bringing FY17 core earnings to $431.5m (+18.6%).
- Revenue for the quarter jumped 18.5% to $7.24b on higher overall trading volume (+85.2%).
- But, EBITDA margin narrowed to 4.3% (-1.4ppt) on pressure in coffee and sugar trading.
- Headline earnings of $265.1m (+159.3%) was lifted mainly by a net exceptional gain of $149.2m, including a $121.2m gain from partial divestment of 50% interest in Indonesian sugar refinery business Far East Agri.
- Adjusted net gearing reduced to 0.51x (FY16: 0.73x).
- Declared higher final DPS of 4¢ (+33%), bringing full year payout to 7.5¢ (FY16: 6¢).
- Trades at 17.2x trailing P/E and 1.35x P/B.

*Best World
- 4Q17 net profit jumped 77.2% to $21.8m, bringing FY17 earnings to $55.7m (+61%), 30% ahead of street estimate.
- For the quarter, revenue rose 19.8% to $74.1m as a spike in export sales to China (+129%) from greater product adoption overshadowed the slump in Taiwan sales (-22%) from its promotion halt.
- Gross margin contracted 4ppt to 67.9% due to the shift in sales mix towards the lower priced export segment.
- Net margin improved 9.5ppt to 29.4% on improved operating leverage as export sales do not incur commissions, and was further supported by a tax credit of $1.5m (4Q16: $6.2m expense) owing to earlier provisions.
- Hiked final DPS to 2.6¢ (+73%), bringing full-year payout to 4.1¢ (+78%).
- Management expects stable sales in Taiwan and growth momentum in China to sustain in FY18.
- Trades at 12.9x forward P/E and offers 3% yield.

*Haw Par
- FY17 net profit edged 0.4% higher to $125.5m despite a 10.5% growth in revenue to $222.8m.
- Improved sales was buoyed by better performance in healthcare (+14.3%), but was partially offset by weaker contributions from others (-16.5%).
- Gross margin improved to 63.8% (+1.6ppt) on the shift in revenue mix.
- Bottom line was pressured by higher distribution & marketing (+26.5%) and general & admin (+30.7%) expenses, as well as higher effective tax of 10.9% (+1ppt).
- Maintained final DPS of $0.10, bringing FY17 payout to $0.20 (unch).
- Trades at 17.5x forward P/E and 0.91x P/B.

*Sinarmas Land
- 4Q17 net profit surged 412.5% to $238.2m, boosted by disposal gain of $109.4m (4Q16: nil) from Orchard Tower strata units.
- This brought FY17 earnings to $356m (+209.8%).
- Revenue for the quarter jumped 70.8% to $560.4m mainly on higher sales of land parcels to Japanese and Chinese property developers, as well as higher sales recognition from BSD City apartment handovers.
- Gross margin expanded 7.1ppt to 69.2% on the shift towards land parcel sales.
- Bottom line was further supported by slower rise in opex (+20.6%) as well as lower effective tax rate of 5.1% (-12ppt).
- Proposed special DPS of 0.7¢, bringing FY17 payout to 1.5¢ (FY16: 0.19¢).
- Last traded at 0.75x P/B.

*Hotel Properties
- FY17 net profit jumped 67.9% to $173.7m on the back of a significant increase in JV/ associate contribution to $128.9m (FY16: $34.7m), following the completion of Burlington Gate and Holland Park Villas in London.
- Revenue grew 14.1% to $659.2m attributable to sales from Tomlinson heights as well as better performances from hotels and resorts.
- Bottom line was further supported by a positive swing to fair value gain of $12m (FY16: $2.4m loss).
- Maintained first and final DPS of $0.04 but hiked special DPS to $0.06 (4Q16: $0.04), bringing FY17 payout to $0.10 (FY16: $0.08).
- Last traded at 1x P/B.

*GK Goh
- 4Q17 net profit from continuing operations slumped 67% to $7.9m, bringing FY17 earnings to $25.2m (-21%).
- For the quarter, revenue slid 10% to $32.1m as growth in corporate services revenue (+6%) was negated by reduced investment (-24%) and other income (-63%) arising from lower management fee income.
- Operating margin shrank 28.3ppt to 13.7% due to increased operating expenses (+34%) from higher staff costs (+64%) and office and equipment rental expense (+10%).
- Bottom line was weighed by the absence of a $16.7m one-off tax write-back from associate Opal Aged Care, but partially mitigated by lower finance cost (-34%) and a tax credit of $0.8m (4Q16: $9.5m expense).
- Lowered final DPS to 3¢ (FY16: 4¢), although paying a special DPS of 3¢ (FY16: nil).
- Trades at 14.5x trailing P/E and 0.89x P/B.

*Hock Lian Seng
- FY17 results came ahead of street's sole estimate despite a 45% plunge in net profit to $19.8m, on absence of JV contribution of $11m stemming from a residential project which has completed.
- Revenue leapt 28% to $151.1m as a civil engineering project for its Changi Airport JV progressed to a more active phase.
- Gross margin fell 7.7ppt to 17.9% on lower reversal of maintenance provision, as well as lower profitability for on-going projects.
- Net cash position ticked higher to $117m (3Q17: $115.2m).
- Trimmed first and final DPS to 1.8¢ (FY16: 2.5¢).
- Civil engineering order book depleted to $775m (3Q17: $830m).
- Trades at 15x forward P/E and 1.37x P/B.

*Aspial
- FY17 net profit more than doubled to $2.3m, albeit from a low base, on stronger JV/associate contributions (+127%).
- Revenue fell 22% to $485.1m on weaker contribution from real estate (-45.1%) and jewellery (-9.4%), although partially mitigated by stronger takings from financial service (+15.4%).
- Bottom line was partially weighed by higher effective tax rate of 60.6% (+30.4ppt).
- Maintained first and final DPS of 0.25¢.
- Trades at 1.48x P/B.

*Maxi-Cash Financial Services
- FY17 net profit expanded 17% to $13.3m, while revenue grew 15% to $188.4m.
- Topline growth was led by growth across pawnbroking (+6.9%) and retail & trading of jewellery & branded merchandise (+16.1%), as well as maiden contribution from the secured lending business ($1.9m).
- Bottom line was bolstered by interest income of $2m (FY16: nil) and lower effective tax rate of 10.7% (-2.2ppt).
- However, group slashed final DPS to 0.7¢ (4Q16: 1¢), bringing FY17 dividend payout to 1.2¢ (FY16: 1.5¢).
- Trades at 10.1x trailing P/E.

*Bumitama Agri
- 4Q17 net profit fell 21.2% to Rp363.6b, bringing FY17 earnings to Rp1.19tr (+18.7%), beating estimates.
- Revenue slid 9% to Rp2.07t as higher selling price of CPO (+4.8%) and palm kernel (+1.5%) was negated by lower sales volume of CPO (-11.7%) and palm kernel (-13.9%).
- Gross shrank 6.4ppt to 33% on change in sale mix.
- Bottom line was supported by narrower FX loss of Rp11.5b (4Q16: Rp55.4b) and absence of share of loss from associate (4Q16: Rp6.9b).
- NAV/share at Rp4,282.

*Kencana Agri
- Turned around to FY17 net profit of US$5m (FY16: US$8.9m loss), lifted by a disposal gain of US$8.2m.
- Revenue grew 7% to US$148.1m on higher ASPs of CPO (+5.6%) and crude palm kernel oil (+11.5%) partially offset by lower sales volume of CPO (-6.1%).
- Operating margin of 15.6% (+7.8ppt) on lower distribution (-2%) and admin (-11%) costs.
- Bottom line continued to be hampered by substantial interest expense of US$19.6m (+1%).
- Trades at 10.7x trailing P/E.

*Hafary
- 4Q17 net profit grew 5% to $2.9m, bringing FY17 earnings to $8.7m (+7%).
- Revenue for the quarter slipped 2.2% to $30m as contributions from its general (+1.7%) was offset by weakness in its project (-7.8%) segment.
- Gross margin was expanded to 40.9% (+1.8ppt) on lower purchases (-14.4%).
- Bottom line was shored up by higher associate contribution (+20.8%) and lower taxes (-29.8%).
- Proposed final DPS of 0.5¢ (4Q16: nil), bringing FY17 DPS to 1.5¢ (FY16: 1¢).
- Last traded at 8.3x trailing P/E and FY17 yield of 8.9%.

*Nordic
- 4Q17 net profit rose 14% to $4.3m, lifting FY17 earnings to $15.3m (+20%).
- Revenue for the quarter climbed 10% to $20.7m, as growth in the maintenance services segment (+99%) outweighed weakness in project services division (-28%).
- Gross margin expanded 4.9ppt to 34.7% amid the shift in revenue mix.
- Bottom line was shored by a $0.6m tax credit, which helped offset pressure from higher admin expenses (+29%).
- Net gearing was pared to 0.09x from 0.14x in 3Q17.
- Raised final DPS to 0.873¢ (4Q16: 0.731¢), bringing FY17 payout to 1.506¢ (1.2682¢).
- Order book increased to $106.8m as at Jan '18, from $99.4m in Sep '17.
- Trades at 15.3x trailing P/E.

*Dyna-Mac
- 4Q17 net loss stayed at $18.4m (4Q16: $19.3m loss), while FY17 loss deepened to $57.1m (FY16: $19m loss).
- Revenue for the year dived 84.6% to $31.4m due low volume of projects amid weak oil prices.
- Accordingly, the group sank to gross loss of $30.1m (FY16: $41.8m profit).
- Net cash position tumbled to $30.3m from $42.8m in 3Q17.
- Net order book, with deliveries into 4Q18, depleted to $90m from $98.6m in Sep '17.
- Trades at 1.15x P/B.

*Ntegrator
- Sank into FY17 net loss of $1.6m (FY16: $2.5m profit) as operating expenses of $9.6m (-0.6%) outweighed operating income of $6.9m (-44.4%).
- Revenue for the full-year slumped 50.5% due to reduced contribution from project sales segment (-77.9%), but was partly offset by higher turnover from project management and maintenance services business (+16.9%).
- Gross margin widened 3.5ppt to 21.1% on lower cost of sales (-52.6%).
- However, order book surged to $75.5m (+109%), with secured contracts from repeated customers in Singapore, Vietnam and Myanmar.
- Trades at 0.56x P/B.

POSITIVE NEWS
*Tat Seng Packaging
- Awarded the tender of a 74,115 sqm land by government of Xiting town, Tongzhou district, Nantong, in China for Rmb21.9m ($4.5m).
- The 50-year lease-term land will be used for building new factory and expanding Nantong Tat Seng existing business.
- Trades at 6.4x trailing P/E.

*Nordic Group
- Secured several new contracts worth $6.9m from repeat customers.
- This include $4.1m capital projects for its system integration services division, which are expected to complete between 1Q18 and 3Q19.
- Remaining $2.8m projects are for the precision engineering division, and are expected to complete by 2Q-4Q18.

*ISOTeam
- Awarded 26 projects in Singapore worth an aggregate $24.16m.
- Projects are expected for completion by Mar 2021.
- Trades at 8.8x forward P/E.

*Singapore Myanmar Investco (SMI)
- Signed exclusive agreement to expand the Coffee Bean & Tea Leaf (CBTL) brand and outlets across Myanmar.
- The first new outlet is scheduled to open by 1Q18.
- This expands from SMI's existing franchise rights to operate CBTL outlets in the new Yangon International Airport Terminal.

*The Trendlines
- Its portfolio company, Saturas, has completed an investment round of US$4m with investors including Hubei Forbon Tech, Ramat Magshimim and Miguel Torres Winery.
- Saturas is in the midst of developing an system for automatic irrigation based on a miniature sensor.
- Trades at 0.69x P/B.

NEGATIVE NEWS
*Yongnam
- 25%-owned consortium's framework agreement on a public-private partnership with Myanmar's government for the design, construction and management of Hanthawaddy Int'l Airport has expired.

*Profit warnings
- Blumont
- A-Sonic Aerospace

NEUTRAL NEWS
*Sembcorp Industries
- Setting up a visitor centre and exhibition gallery with Ascendas-Singbridge at Amaravati Capital City Start-up Area in Andhra Pradesh, India.
- To recap, the Singapore consortium was appointed as master developer of the 684ha start-up area, which will likely to become Amaravati's financial district.
- Project Phase Z.ro, with land area over 2ha, is part of a larger catalytic development and would act as a key touchpoint for visitors to get a glimpse of Amaravati Capital City as it develops.
- It will also function as a community hub, which locals would be able to access it for recreation activities.
- Trades at 14x forward P/E and 0.96x P/B.