SG Market (01 Mar 18)

MARKET OVERVIEW
- The market could pull back further following the sell-off on Wall Street on renewed interest rates worries and slide in oil prices on rising US stockpiles, while a sharp drop in manufacturing activity across China, Japan and India also sapped investor confidence.
- Technically, the STI could retrace to 3,470 before resuming its uptrend. Near term resistance is at 3,575.

CORPORATE RESULTS
*Venture Corp
- Blowout 4Q17 results as net profit surged 2.6x to $143m, boosting FY17 earnings to $372.8m (+10.6%), beating estimates.
- Revenue for the quarter jumped 27% to $1.08b on stronger execution of customers' programmes and deeper partnerships with clients.
- Gross material margin widened 2.2ppt to 26.9% on increased R&D and cost control.
- Bottom line was also bolstered by $11.3m gain on disposal of associate Fisher Tech, as well as absence of legal settlement cost (4Q16: $22.6m), impairment loss (4Q16: $5.9m) and trade receivables provision (4Q16: $3.5m).
- Net cash position ballooned to $721.6m from $535.1m in 3Q17.
- Raised first and final DPS to 60¢ (FY16: 50¢).
- MKE maintains its Buy with higher TP of $31.20.
- Trading at 19.6x FY18e P/E.

*Yangzijiang
- 4Q17 net profit climbed 12% to Rmb677.9m, bolstered by a marked reduction in taxes due to a preferential income tax rate and a higher amount of non-taxable income.
- This brought FY17 earnings to Rmb2.93b (+67%), ahead of street estimates.
- Revenue for the quarter rose 15% to Rmb6.35b on higher volume of shipbuilding activities (+8.9%) and stronger trading business (+43.4%).
- But gross margin tumbled to 14.9% (-11.2ppt) mainly due to a provision for expected losses on construction contracts.
- For FY17, the group secured orders for 74 new vessels worth US$2.1b, almost double that of 2016.
- Order book expanded to US$4.7b (3Q17: US$4.3b), providing revenue visibility till 2020.
- Hiked first and final DPS to 4.5¢ (FY16: 4¢).
- Trades at 12.7x forward P/E.

*Noble Group
- 4Q17 net loss of US$1.89b dragged FY17 loss to a massive US$4.94b (FY16: US$8.7m profit), which included a US$1.05b loss from discontinued operations and US$3.24b of exceptional items, comprising US$2.15b write-down of its commodity contracts and US$1.04b in impairments.
- FY17 revenue tumbled 26% to US$6.4b as traded volumes shrank 26% due to constraints in trade finance and liquidity.
- Operating cash outflow narrowed to US$8.6m (FY17: US$592.5m outflow) due to changes in working capital.
- However, adjusted net debt/capital blew up to 135.2% (FY16: 42%, 3Q17: 75.8%).
- Notably, its auditor flagged concerns over its survival even as the group is in debt restructuring talks with creditors.
- Valuations not meaningful given the cycle of asset write-offs.

*Ho Bee Land
- 4Q17 net profit fell 20.9% to $102.4m, but FY17 earnings of $249.3m (+15%) still surpassed street estimates.
- For the quarter, revenue slid 3.1% to $41.2m on reduced takings from development sales (-46.9% to $3.5m) due to lower sales recognition from two Australian residential projects, which overshadowed the growth in rental income (+4.9% to $37.7m).
- Bottom line was dragged by lower fair value gain on investment properties of $78.1m (-25%) and share of JV loss of $12m (4Q16: $2.4m profit), but partly mitigated by associate income of $25.6m (+216.9%).
- Lifted first and final DPS to 8¢ (FY16: 6¢), along with special DPS of 2¢ (FY16: nil).
- Trades at 0.55x P/B.

*China Sunsine
- 4Q17 net profit nearly doubled to Rmb132m (+99%), bringing FY17 net profit to Rmb341.3m (+54%), beating street forecast by 10%.
- Revenue for the quarter jumped 58% to Rmb873.3m on higher overall ASPs (+40%) and sales volume (+13%).
- Accordingly, gross profit margin widened to 33.3% (+7.3ppt).
- Bottom line was partially pared by higher admin expenses (+103% to Rmb79m) on increased staff bonus and R&D.
- Hiked final DPS to $0.025 (4Q16: $0.015), bringing FY17 DPS to $0.03 (FY16: $0.015).
- Trades at 8.6x FY18e P/E.

*Singapore Medical Group
- FY17 results missed estimates although net profit more than tripled to $8.5m (+250.8%) on acquisitions and operating leverage.
- Revenue jumped 63.5% to $68m on stronger contributions from health (+68.9%) and diagnostic & aesthetics (+52.1%) businesses.
- Gross margin improved to 42.6% (+6.8ppt) on better profitability in the health business.
- Bottom line was supported by slower growth in opex (+58.6%) as well as lower minority interests (-48.3%) following the acquisition of remaining stake in Lifescan.
- Trades at 18.7x FY18e P/E.

*China Aviation Oil
- 4Q17 net profit slumped 21.7% to US$14m, bringing FY17 earnings to US$85.3m (-4%) missing expectations.
- Revenue for the quarter grew 24% to US$4.06b due mainly to an increase in oil prices, but on marginally lower supply and trading volume (-0.6%).
- Gross margin contracted to 0.2% (-0.1ppt) due to lower trading gains amid a backwardation market.
- Bottom line was weighed by higher total operating expenses (+45.3%) mitigated by increased associate contribution (+26.2%) mainly due to higher takings from Pudong.
- Maintained first and final DPS of $0.045.
- Trades at 9.4x FY18e P/E.

*Food Empire
- Swung into 4Q17 net loss of US$2.8m (4Q16: US$2.9m) due to an impairment charge of US$7.7m in relation to Korean associate, Caffebene.
- This brought FY17 earnings to US$14.1m (-2.6%), missing estimate.
- Revenue for the quarter climbed 5.8% higher to US$74.1m on improved sales in Kazakhstan (+64.7%) and others (+13.1%), but was partly pared by weakness in Ukraine (-12.7%), Indochina (-9.6%) and Russia (-1%).
- Operating margin expanded to 10.6% (+4.6ppt) on lower selling & distribution expenses (-13.6%).
- Maintained first and final DPS of 0.6¢.
- Trades at 16.2x forward P/E.

*Straits Trading
- 4Q17 net profit dived 72.8% to $5.8m, bringing FY17 earnings to $48.1m (-28.5%).
- During the quarter, revenue declined 11.3% on weakness across its tin mining and smelting (-10.5%) as well as property (-31.1%) segments.
- Bottom line was impacted by a decline in other sources of income (-96.6%) from lower dividend (-45.1%) and disposal gains (-96.6%) as well as lower contributions from associates and JVs (-85.5%).
- Maintained first and final DPS of $0.06.
- Trading at 19.3x trailing P/E and 0.66x P/B.

*Spackman Entertainment
- Turned around to a FY17 net profit of US$3m (FY16: US$2.4m loss), 8% above street estimate.
- Revenue leapt 36% to US$20.6m on contribution from the equipment leasing business acquired in Mar '17, share of profit from producing MASTER, and sales of distribution rights for THE OUTLAWS.
- Swung to gross profit of US$8.3m (FY16: US$4m loss) on lower film production cost, and motion film distribution expenses following the disposal of Opus Pictures.
- Trading at 7.1x FY18e P/E.

*Moya
- 4Q17 sank into a net loss of $0.4m (4Q16:$1.2m profit), while FY17 earnings surged 142% to $7.6m but still missed estimates.
- Revenue for the quarter soared 343% to $50.5m, driven by mainly by the sale of water at Acuatico.
- Gross margin jumped 14.4ppt to 42.5% following the inclusion of water sales from Acuatico.
- Bottom line was marred by higher admin cost of $11.2m (+772%) and higher net finance costs of $7.2m (4Q16: $0.1 net interest income) due to the consolidation of Acuatico, as well as FX loss of $2m (4Q16 $1.1m gain).
- Net gearing crept up to 2.44x (+0.7ppt q/q), with $364.1m of secured loan payable within one year.
- Trading at 9.3X forward P/E.

*GSS Energy
- 4Q17 net profit crashed to $0.4m (4Q16: $2.2m) due to a drop in gross margin to 16% (-6.8%).
- This brought FY17 earnings lower to $4.4m (FY16: $13.5m).
- For the year, revenue grew 24.6% to $94.3m on higher orders from existing and new customers in its precision engineering business.
- Gross margin contracted due to product mix changes, pricing challenges and unfavourable FX rates.
- Still in the midst of monetising sweet gas in well SGT-01 of Trembul Operation area.
- Trades at 14.3x trailing P/E.

*Fu Yu
- 4Q17 net profit slumped 56.8% to $2.4m, bringing FY17 net profit to $4.5m.
- Revenue for the quarter increased 8.7% to $52.7m, buoyed by higher sales across Singapore, Malaysia and China.
- Gross margin expanded to 19.1% (+1.8ppt).
- Bottom line was hit by a $4.7m swing to FX loss of $1.2m.
- Net cash position slipped to $95.4m (Dec '16: $105.6m) or $0.127/share.
- Maintained final DPS of $0.01, bringing FY17 DPS to $0.015 (unch).
- Trades at a hefty 32x trailing P/E.

*Jadason
- FY17 results disappointed despite a 54% jump in net profit, albeit from low base, to $2.8m.
- Revenue rose 10% to $63.1m on growth in both equipment and supplies (+4.4%) and manufacturing and support services (+14.3%) segments from increased work.
- However, gross margin narrowed 3.6ppt to 19% on higher cost of sales (+16%) arising from absence of write-back for inventory (FY16: $0.5m).
- Bottom line was boosted by a $1.1m FX again and $0.4m reversal of provision for receivable.
- Trades at 7.3x forward P/E.

*Straco
- 4Q17 net profit dipped 1.2% to $6.1m on a higher effective tax rate, bringing FY17 earnings to $47.7m (+2.7%).
- Revenue for the quarter climbed 5.8% to $24.6m on firmer contribution from its three China attractions, but partly offset by weakness from its Singapore Flyer.
- Overall visitation across all attraction improved 7.4%.
- Operating margin narrowed 0.5ppt to 39.5% on higher operating lease expense, as well as repair & maintenance expense.
- Net cash position strengthened to $140.5m (19.6% of market cap) from $136.2m in 3Q17.
- Maintained first and final DPS of 2.5¢.
- Trading at 14.9x trailing P/E.

*Vard
- 4Q17 net loss widened to NOK131m (4Q16: NOK67m loss), dragging FY17 loss to NOK233m (FY16: NOK163m loss), deeper than full-year forecast of NOK133m loss.
- Revenue rose 25% to NOK2.69b on high activity level at the Romanian and Vietnamese yards due to rapid progress on module carrier vessels projects for Topaz Energy and Marine and Kazmortransflot, and the ongoing construction on all six expedition cruise vessels contracted in 2016.
- EBITDA margin (excluding restructuring cost) slumped to 0.3% (-2.8ppt) due to a mark down on fair value of vessels held in inventory. Excluding that, EBITDA margin of 2.3% was relatively in line with 4Q16.
- Order book amounted to NOK13.23b (3Q17: NOK12b, FY16: NOK12.65b).
- NAV/share at $0.29.

*Soo Kee
- 4Q17 net profit jumped 49.5% to $4.6m, helped by a $0.88m tax refund. This lifted FY17 earnings to $7.4m (+14.6%).
- Revenue for the quarter surged 108.6% to $114.1m on higher sales from subsidiary SK Bullion.
- Gross material margin collapsed 17.2ppt to 15.5% due to a change in product mix.
- Maintained first and final DPS of 0.5¢.
- Trading at 10.6x trailing P/E and 1.35x P/B.

*Moneymax Financial Services
- 4Q17 net profit jumped 43.9% to $2.3m, bringing FY17 net profit to $6.9m (+9.8%).
- Revenue for the quarter expanded 24.4% to $43.2m on growth in both its pawnbroking and retail & trading of pre-owned items segments.
- Bottom line was affected by higher material cost (+27.3%), finance (+30.5%) and other expenses (+17.4%) partially mitigated by FX gain of $0.2m (4Q16: $0.2m loss) as well as FV gain on investments of $0.3m (4Q16: nil).
- Maintained first and final DPS of $0.005.
- Trades at 9.4x trailing P/E and 0.98x P/B.

*Katrina
- FY17 net profit more than halved to $1m (-57.7%), partly due to negative operating leverage.
- Revenue eked up 2% to $57.9m on firmer online sales, as well as contributions from Bali Thai, Streats, and So Pho outlets.
- Gross margin narrowed 4.9ppt to 9.9% on set-up costs of new outlets, as well as higher commission paid for online sales.
- The drop in bottom line would have been sharper if not for the absence of $0.9m IPO expense.
- Proposed a lower first and final DPS of 0.26¢ (FY16: 0.61¢).
- Trading at 35x trailing P/E

*JB Foods
- 4Q17 net profit soared 5.4x to US$6.5m, propelling FY17 earnings to US$14.2m (+276.7%).
- Revenue for the quarter declined 6.8% to US$75.5m, as lower ASP, mainly arose from lower cocoa bean prices, more than offset higher shipment volume.
- However, gross margin expanded 11.7ppt to 14.1% on marked improvement to processing margin.
- Trading at 8.1x trailing P/E.

*TA Corp.
- Swung to 4Q17 net loss of $4.3m (4Q16: $3.2m profit) due to a $2.8m increase in fair value loss of investment properties, and absence of $3m impairment reversal.
- Revenue grinded 1.2% higher to $56.3m, but gross margin deteriorated 1.5ppt to 16.6% on thinner margins from the construction and distribution segments.
- Net gearing crept up to 1.61x from 1.57x in 3Q17.
- Maintained first and final DPS of 1¢.
- Construction order book was partly boosted by a recent $180m JTC contract to $241m from $96m in 3Q17.
- Trading at 0.7x P/B.

*Hong Leong Asia
- FY17 net loss narrowed to $66.5m (FY16: -$71.2m) as profits from its diesel engine unit (Yuchai) was unable to offset losses from its consumer products unit (Xinfei) and restructuring impairments.
- Revenue grew 8.1% to $4.03b on higher contributions from Yuchai (+17%) pared by lower contributions from building materials unit, BMU (-18.1%) and Xinfei (-25.4%).
- Gross margin was steady at 20.3% (-0.2ppt).
- Bottom line was hit by a doubling in minority interests offset by higher other income (+304.9% to $133.4m) on disposal gains amounting to $92.1m (FY16: -$3.3m).
- Canned first and final DPS (FY16: $0.01).
- Trades at 0.65x P/B.

*United Global
- FY17 net profit surged 62.5% to US$9.2m on recognition of negative goodwill of US$1.4m (FY16: nil), arising from the acquisition of PT Pacific Lubritama Indonesia (Jul '17).
- Revenue increased 9% to US$99.8m on expansion in manufacturing (+56.6%) following the acquisition of PLI pared by halved contributions from its trading arm.
- Gross margin expanded to 18.5% (+3ppt) on the shift in revenue mix.
- Bottom line was supported by lower effective tax rate of 12.8% (-5.5ppt).
- Increased final DPS to 0.7¢ (4Q16: 0.5¢), bringing FY17 payout to $0.012 (FY16: $0.01).
- Trades at 14.1x trailing P/E.

*Y Ventures
- Slumped into FY17 net loss of US$0.9m (FY16: US$1.5m profit) on IPO expenses and impairment losses of $1.1m.
- Excluding those, FY17 earnings would have still fallen to US$93,527 (-93.9%), under estimates.
- Revenue grew 17.4% to US$14.2m on higher sales of goods on online marketplaces (+18.3%).
- Gross margin contracted to 41.8% (-2.1ppt) on higher logistics, freight and handling charges.
- Bottom line was further hit by higher selling & distribution (+70.2%) and admin (+130.2%) expenses.
- Trades at 25.7x FY18e P/E.

*Viking Offshore
FY17 net loss narrowed 16.8% to $13.2m on lower operating expenses (-24.2%) incurred from admin costs (-17% to $12.2m) and other operating expenses (-28% to $14.1m).
- Revenue slid 17% to $38.7m due to project delays, lower order book and lesser new order intake.
- As such, gross margin eroded 0.7ppt to 40% as cost of sales fell at a slower pace (-16%).
- Net gearing inched up 1.6ppt to 45.5%.
- NAV/share at $0.06 (-33.3%).
- Trades at 0.2x P/B.

*Mewah
- 4Q17 net profit soared 141.4% from low base to US$13.1m, bolstered by FX gain of US$10.9m (FY16: US$26.8m loss) and reversal of provision of US$3.7m (FY16: US$0.06m).
- This lifted FY17 earnings by 61.7% to US$33.6m.
- However, revenue for the quarter slipped 2.4% to US$722.2m on weaker contribution from both bulk (-1% to US$501.1m) and consumer pack (-5.5% to US$221.1m) segment, as higher ASP (+0.7%) was negated by lower sales volumes (-3.1%).
- Gross margin contracted 4.3ppt to 7.7% as cost of sales declined at a slower pace (-3.3%).
- Trades at 9.2x trailing P/E.

NEGATIVE NEWS
*Profit warning
- XMH Holdings

NEUTRAL NEWS
*SGX
- Welcomes OTCex Hong Kong as a trading member on SGX's derivatives market.
- The new member is headquartered in Paris, and has a global client base of over 600 institutions.
- Trading at 21.8x forward P/E.

*Tung Lok Restaurants (2000)
- Leasing a 6,426 sf retail unit The Central at 6 Eu Tong Sen Street in Singapore for operation of "Tung Lok Signatures".
*Yangzijiang
- Acquired 25% stake of Jiangsu Sushang Joint Industry Investment Partnership at Rmb700m, making it an associate of the group.
- The core business of Sushang are related to those of equity fund and convertible bonds investments in industries such as new material, electronic components, intelligent hardware, big data, artificial intelligence, FinTech and high-end manufacturing.

*Karin Technology
- Acquiring 80% stake of KCF A Store from an individual for HK$2m.
- KCF engages in operation of retail chain selling full range of Apple products, and acquisition will extend the group's business into retail market.
- Trades at 63.9x trailing P/E and 1.06x P/B.