Monday, March 19, 2018

SG Market (19 Mar 18)

- Expect a rocky week ahead of a FOMC meeting and a widely expected rate hike, with investors focusing on the Fed's tightening trajectory as well as global trade war fears amid positive economic data.
- Technically, the STI is trading with a triangle formation with near-term support at 3,479 and topside resistance at 3,550.

*Bukit Sembawang
- Acquired 118-unit Katong Park Towers through collective sale tender for $405m or $1,280 psf ppr, 20% above the reserve price, beating nine other bidders.
- The 99-year leasehold property has a site area of 140,758 sf with plot ratio of 2.1 and is located in the vicinity of the upcoming Katong Park MRT station (completion in 2023).
- Assuming an estimated ASP of $2,200 psf, the project will yield a development surplus of $0.23/share.
- Trading at underrated 41% discount to RNAV of $10.35.
- MKE has a Buy with TP of $8.25.

- Partnering with local solar energy provider, Sunseap to venture into the electricity sector.
- Plans to sell electricity in Apr at the soft launch of the Open Electricity Market in Jurong.
- There will be two clean energy subscription plans offerred by both companies: Green Life and Green Save.
- Customers of Green Life will get 100% of electricity produced by Sunseap's solar systems and be charged the regulated electricity tariff, now at 21.56¢/kWh.
- Green Save customers will get 5% clean energy and entitled to 20% discount off the regulated tariff.
- All households in the Jurong area will be able to buy electricity from any of the 14 retailers from next month. This option to shop around for electricity suppliers will be extended to the rest of Singapore in 2H18.
- MKE has a Sell with TP of $2.17.

- Awarded a two-year renewable contract by a European OEM supplier to car manufacturers.
- Under the contract, the group will supply more than 12,000 upholstery leather kits per annum, significantly large compared to its current annual production of 18,000.
- Awarded a separate two-year contract with an OEM automotive manufacturer in Malaysia to supply 2,300 vehicle upholstery kits per annum for a commercial vehicle model.
- Following the acquisition of new premises, its current production capacity of 26,000 upholstery kits will be increased to 32,000 by 3Q18.

- Declared that it will not make interest and principal amounts payable on its 8.75% USD senior notes due 2022 and 3.625% USD senior notes due 20 Mar 2018 to "preserve assets" during its proposed restructuring.
- This event of default could trigger payouts on credit default swaps tied to the group and activate cross-default clauses on its other debts.
- It would also allow some customers/trading partners to exercise clauses and walk away from its trading contracts.
- Valuations are no longer meaningful given its eroding balance sheet.

*Hatten Land
- Terminated proposed acquisition of Rico Development (RD) and Rico Ventures (RV) for a total of RM90.8m.
- The deal was cancelled as the parties could not come to an agreement on a revised issue price given that that group's share price has weakened over time.

*Keppel Corp
- Acquired the remaining 10%-stake in Saigon Sports City (held through Jencity) in Vietnam for US$11.4m from Jenclub.
- Saigon Sports City is a 64ha township in Ho Chi Minh City with total development cost projected to be more than US$500m.
- The first phase of the development will feature commercial space of 90,000 sqm of gfa and 1,220 homes, of which, 620 units will be launched in 2H18.
- Trades at 14.3x forward P/E.

- Combined its 60%-owned ComfortDelgGro Savico Taxi and 70%-owned Vietnam Taxi operations as part of efforts to rationalise its taxi business in Ho Chi Minh City.
- Also acquiring the remaining 10%-stake in Chongqing ComfortDelGro Driver Training from by-Hour Driver Training Centre of Chongqing for Rmb5m ($1m).
- 80%-owned Beijing Tian Long Da Tian Vehicle Inspection has ceased operations temporarily following government redevelopment of its land. It is actively seeking an alternative site for the resumption of operations.
- Trades at 14.7x forward P/E and offers a dividend yield of 5.2%
- MKE has a Buy with TP of $2.35

*HL Global Enterprises
- Proposed to convert all its existing non-redeemable convertible cumulative preference shares (NCCPS) to ordinary shares at a conversion ratio of 10 to 1.
- This is subject to the approval of shareholders and NCCPS holders.

*Infinio Group/Oxley
- Acquiring 80% stake in Oxley Batam for $10.4m and assuming the inter-company loan of $10.4m from Oxley Holdings.
- Oxley Batam is engaged in construction, development and operation of properties in Batam, Indonesia and recorded a net loss of $0.009m in FY6/17 with negative NAV of $0.06m.
- This is in line with the group's strategic plan and on-going efforts to pursue and diversify into property business.

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