SG Market (28 Feb 18)

MARKET OVERVIEW
- Heightened market volatility could return after new Fed chief Jerome Powell's hawkish testimony spooked equities and revived worries about higher interest rates.
- Technically, the STI is heading towards its near term objective at 3,575 with immediate support at 3,470.

SECTOR WATCH
*Property
- CDL-TID JV submitted a top $509.4m bid or $583 psf ppr for a 2.7ha plot in Sumang Walk under the government land sales programme.
- Notably, all 17 bids surpassed the record price for EC sites.
- Strong turnout and high breakeven cost of $1,000 psf reflects developers' bullish view of the property sector.

CORPORATE RESULTS
*City Dev
- 4Q17 net profit fell 23.4% to $186.7m, bringing FY17 earnings to $538.2m (-17.6%), within expectations.
- For the quarter, revenue rose 13.8% to $1.33b on higher contributions from property development (+27%) and stable hotel operations (+1.5%), while rental income slipped (-3.4%).
- Pretax profit was weighed by lack of higher margin projects and divestment gains.
- Maintained final DPS of 8¢ but hiked special DPS to 6¢ (+50%), bringing FY17 payout to 18¢ (FY16: 16¢).
- Trades at 7.8% discount to RNAV/share of $13.80.

*UOL
- FY17 core net profit grew 10% to $355.9m, or 93% of consensus estimate.
- Revenue jumped 46% to $2.1b on consolidation of UIC. Excluding that, property development sales rose 14% on higher progressive bookings from Principal Garden, while hotel operations gained 3% on new contribution from Pan Pacific Melbourne.
- Low net gearing offers scope for further capital management.
- Increase in first and final DPS to 17.5¢ (FY16: 15¢) was a surprise.
- Trades at 26% discount to RNAV/share of $11.55.
- MKE maintains Buy with raised TP of $10.40.

*UMS
- 4Q17 net profit surged 166% to $15.8m, boosting FY17 earnings to $52m (+130%), in line with expectations.
- Revenue for the quarter leapt 13% to $38.7m, mainly bolstered by semiconductor equipment component sales (+39%), while contribution from semiconductor system (-1%) was muted.
- Gross material margin widened 12.6ppt to 58.3% due to higher proportion of component sales.
- Bottom line was also helped by absence of goodwill impairment of $1.6m, reversal of inventory provision of $1.1m (4Q16: $2.3m provision), and gain on fixed asset disposal of $1.8m.
- Maintained final and special DPS of 2¢ and 1¢, respectively, bringing full-year payout to 5.6¢ (+17%).
- Trading at 11.6x forward P/E.

*IHH Healthcare
- 4Q17 net profit turned around to RM101.3m (4Q16: RM42.5m loss), bringing FY17 earnings to RM970m (+58%), ahead of estimates.
- For the quarter, revenue rose 10% to RM2.9b on organic growth from existing operations and ramp-up of recently-opened hospitals and operations of Tokuda and City Clinic Group in Bulgaria.
- EBITDA margin remained relatively steady at 21.3% (-0.1ppt).
- Bottom line was supported by lower net finance costs of (-15.5%) and the absence of lower other operating expenses of RM338.4m (-36.1%) in absence of impairment loss from JV and doubtful debts.
- Maintained first and final DPS of 3¢.
- Trades at 19.2x FY18 EV/EBITDA.

*Wheelock Properties
- Turned around to a 4Q17 net profit of $19.9m (4Q16: 16.4m loss), mainly in absence of a $54.3m fair value loss on investment properties.
- This lifted FY17 earnings to $115.2m (+97.5%), beating estimates.
- However, revenue for the quarter slumped 42.7% to $128.6m, as contribution from property development tumbled to $109.8m (-47%).
- Gross margin expanded 21.3ppt to 29.8% amid the shift in revenue mix, and better property development margin.
- Improvement to bottom line was pared by the absences of a write-back of development property (4Q16: $8.2m) and tax credit (4Q16: $9.3m), as well as associate loss of $6.5m (4Q16: $4.4m profit).
- Maintained first and final DPS of 6¢.
- Trading at 0.72x P/B.

*Indofood Agri Resources
- 4Q17 core net profit tumbled 65.4% to Rp76.9b, bringing FY17 earnings to Rp447.3b, below estimate.
- For the quarter, revenue slipped 15.7% to Rp3.59t on lower sales volume of CPO and PK related products due to lower production.
- Accordingly, EBITDA margin halved to 18% (-17ppt).
- Bottom line was dragged by the absence of a Rp107b one-off claim, although partly supported by lower FX loss (-87%).
- Trades at 7.5x forward P/E and 0.43x P/B.

*Cityneon
- FY17 results beat expectations as net profit more than doubled to $17.4m (+160.4%), following the opening of three Marvel's Avengers S.T.A.T.I.O.N exhibitions and a Transformers Autobots Alliance exhibition.
- Revenue grew 20.7% to $116.7m as growth in intellectual property rights unit (+187.3%) helped offset weakness in its legacy businesses.
- Gross margin jumped to 53.5% (+17.5ppt) on the shift towards higher-margin intellectual property rights segment of 88.7%.
- However, bottom line was pressured by a jump in finance costs (+227.9%).
- Last traded at 11.4x FY18e P/E.

*Memtech
- 4Q17 net profit slipped 6.9% to US$3.8m, impacted by a negative US$0.9m swing to FX loss of US$0.4m.
- This brought FY17 net profit to US$14.1m (+125.3%), 34.9% ahead of street estimates.
- Revenue for the quarter grew 3.5% to US$49.6m as strength in automotive (+14.5%) and industrial & medical (+62.8%) was partially offset by weakness in consumer electronics (-12.1%) and telco (-15.7%).
- Gross margin was relatively stable at 18.8% (-0.4ppt).
- However, bottom line was hit by a surge in taxes (+549.2%).
- Hiked first and final DPS to $0.055 (FY16: $0.025).
- Last traded at 11.1x forward P/E.

*Manufacturing Integration Tech
- Turned around to FY17 net profit of $6m (FY16: $5.5m loss), helped by improved profitability.
- Revenue soared 85.6% to $65.9m on higher demand for semiconductor equipment as well as contract equipment manufacturing orders from existing customers.
- Gross margin fattened to 30% (+10.2ppt).
- Bottom line was also lifted by a disposal gain of $0.4m (FY16: nil) and government grant of $0.2m (FY16: nil), but was partially pared by increased FX loss of $0.6m (FY16: $0.2m loss).
- Proposed final DPS of 0.75¢, bringing FY17 payout to $0.01 (FY16: nil).
- Trades at 12.7x trailing P/E.

*Centurion
- 4Q17 core net profit declined 27% to $9.3m, bringing FY17 earnings to $44.3m, meeting forecasts.
- For the quarter, revenue slipped to $33.6m on reduced contribution from Westlite Tuas in Singapore due to lease expiry and reduction in bed capacity at Westlite Toh Guan.
- Gross margin held relatively steady at 68% (+0.9ppt).
- Headline earnings of $5.9m (+101%) was helped by the absence of a $9.9m fair value loss on investment properties, but partly pared by 2.6m dual listing expense.
- Declared final and special DPS of 1¢ and 0.5¢, respectively, bringing full-year payout to 2.5¢ (FY16: 2¢).
- Trades at 9.4x forward P/E.

*Citic Envirotech
- FY17 net profit rose 25% to $127.3m, beating expectations.
- Revenue soared 67% to $908.8m on firmer takings from its engineering (+115%) and treatment (+16%) divisions, as Chinese authorities imposed stricter environmental discharge standards.
- But, gross margin shrank 9.8ppt to 25% amid the change in revenue mix.
- Growth in bottom line was also pared by a higher effective tax rate.
- Net gearing was reduced to 0.09x from 0.23x in 3Q17.
- Proposed a higher first and final DPS of 1.5¢ (FY16 final: 0.75¢, special: 0.25¢).
- Last traded at 17.2x forward P/E.

*Fragrance Group
- FY17 net profit spiked 547% from a low base to $48.5m, lifted by $29.7m in fair value gain on investment properties.
- Revenue soared 66.8% to $198m, bolstered by City Gate project in property development (59% to $100.3m), higher occupancy achieved from commercial investment (+20% to $18.5m) and maiden contribution from hotels business ($15.4m).
- Gross margin held relatively steady at 36.1% (-0.4%).
- Net gearing rose to 0.89x from 0.77x in FY16.
- Last traded at 0.94x P/B.

*Q&M Dental
- FY17 results beat although net profit slid 16% to $23.9m, partially dragged by the absence of one-off gain from the disposal of Aidite and various provisions.
- Revenue slumped 25% to $112.8m on due to the deconsolidation of Aoxin from a subsidiary to an associate in Apr '17, as well as the absence of contribution from Aidite.
- Bottom line was supported by lower effective tax of 3% (FY16: 6.2%).
- Slashed final DPS to 0.42¢ (-40%) but paying a special DPS of 0.5¢ (FY16: nil), bringing total dividend payout to 1.62¢ (+44.6%).
- Trades at 32x forward P/E.

*Hyflux
- FY17 sank into a net loss of $34.5m (FY16: $118.3m profit), while earnings would have been hurt further if the $81.9m loss from Tuaspring plant, which was planned for partial divestment, was accounted for.
- Revenue plunged 57% to $353.6m on lower EPC activities at TuasOne waste-to-energy project and Qurayyat Independent Water project in Oman as construction is ongoing.
- Bottom line was weighed by higher finance costs of $58.5m (+22%) and other expenses of $104.9 (+45%) arising from project costs, higher machinery rental, FX loss and provision for doubtful debts.
- First and final DPS of 17.5¢ was 16.7% higher than last year.
- Trades at 0.39x P/B.

*Dasin Retail Trust
- 4Q17 DPU of 1.96¢ brought FY17 distribution to 7.16¢, 6% above IPO forecast.
- Revenue and NPI of $18.2m (+71%) and $14.2m (+86%) on higher takings from newly-acquired Shiqi Metro Mall, increased turnover rent from existing malls and recognition of future rent escalations on straight-line basis.
- Portfolio remains fully occupied, while aggregate leverage eased 0.8ppt q/q to 30.7%.
- Trades at an annualised 4Q yield of 9.2% and 0.56x P/B.

*Hong Leong Finance
- FY17 net profit leapt 61.5% to $85.7m, ahead of estimates.
- Net interest income jumped 28.3% to $175.4m on the back of higher loan yield and lower interest expenses (-25.9%), albeit on a reduced loan base.
- Bottom line was partially weighed on by $3.8m (+244.7%) provision of doubtful debt as well as costs relating to distribution of wealth management products.
- Hiked final DPS to $0.09 (4Q16: $0.06), bringing FY17 DPS to $0.13 (FY16: $0.09).
- Last traded at 13.4x forward P/E and 0.7x P/B.

*Mermaid Maritime
- FY17 results beat expectations despite a 75.3% slump in net profit to US$4.2m on lower contributions from associates and JV (-59.7%).
- Revenue fell 21.9% to US$144.7m due to a subsea day rate deduction and lower utilisation of some vessels.
- Consequently, gross profit declined 31.8%, exacerbated by a decline in other non-vessel projects.
- Bottom line was further hit by higher finance costs (+3%) as well as the absence of a tax credit of US$2.8m (FY17: US$56,000 expense).
- Trades at 38.5x forward P/E.

*Global Testing Corp
- FY17 net profit fell 32.8% to US$2.5m on a US$0.8m swing to tax expense of US$0.6m.
- Revenue slipped 3.2% to US$28.1m in tandem with a decrease in customers' orders.
- Gross margin contracted to 28.7% (-3.5ppt).
- Bottom line was partially shored by lower admin expenses (-27.2%).
- Cut first and final DPS of $0.09 (FY16: $0.20).
- Last traded at 12.2x trailing P/E.

*Thakral
- FY17 net profit surged to $37.7m (FY16: $0.4m) on disposal gain of $33.9m from its warehouse properties in Hong Kong.
- Turnover declined 29% to $153.2m as a slump in its lifestyle business (-35.3%) overshadowed improvement in its investment business (+4%).
- Gross margin improved to 32.3% (+11.2ppt) on the shift in revenue mix.
- Bottom line was further shored up by lower FX losses (-47%) and JV losses (-71%) as well as minority interests (-35%).
- Last traded at 1.9x trailing P/E, 0.5x P/B.

*Sino Grandness
- 4Q17 net profit turned around to Rmb4.9m and brought FY17 earnings to Rmb356m (+38.4%)
- For the quarter, revenue jumped 66.7% to Rmb914.8m on higher takings across all beverage (+75.6%) and domestic canned products (+27.6%) and overseas canned products (+60.1%) segments.
- Gross margins contracted 3ppt to 39.4% on higher cost of sales (+75.2%).
- Bottom line was lifted by FX gain of Rmb10.7m (4Q16: Rmb11.9m loss) and lower distribution and selling expenses (-8.6% to Rmb283.8m), but eroded by increased finance costs (+75.8% to Rmb14.3m) and high tax expense of Rmb23.1m.
- Trades at 2.2x trailing P/E.

*Delong
- 4Q17 net profit turned around to Rmb327.3m (4Q16: Rmb396.8m loss), bolstered full-year earnings to Rmb2.56b (+728.1%).
- Revenue for the quarter grew 9.9% to $2.98b on continual increase in ASP of hot-rolled coil, fuelled by greater infrastructure and construction activities in China
- Topline was partially offset by lower sales volume (-4.9%) due to the cessation of subsidiary Aoyu Steel and shutdown of blast furnaces amid environmental issues in China.
- Gross margin expanded 7.8ppt to 25.1% as rising ASP outpaced the rising raw material costs.
- Bottom line was lifted absence of Rmb600m impairment charge from Aoyu Steel, but partially weighed by 245% surge in admin expenses to Rmb139.9m due to R&D costs and exit fees of cessation of Aoyu Steel.
- Trades at 1.2x trailing P/E and 0.59x P/B.

POSITIVE NEWS
*Keppel Corp
- Signed a letter of intent with Awilco Drilling for a semisubmersible drilling rig for harsh environment use, with the option to build up to a further three units.
- Last traded at 15x forward P/E.

*Oxley
- Leasing the entire office building at No. 2 Dublin Landings, North Wall Quay, in Ireland to Dublin Landings Tenant, with co-working space firm WeWork as guarantor.
- The 20-year lease will commence upon the completion of construction of the premises, which is expected to be in May.
- The annual rent for the first five years is expected to be €4.8m.
- Trades at 9.4% discount to RNAV/share of $0.64.

*Versalink
- The manufacturer of mid to high-end system furniture was awarded a RM2.7m contract to supply and install office system furniture for life insurance firm AIA.
- The project includes several offices in Kuala Lumpur, Ipoh and Penang, covering a range of office furniture as such workstations, chairs, lockers and cabinets.
- The group has secured more than RM13.2m worth of contracts from AIA and more is expected in the pipeline.
- Last traded at 0.78x P/B.