Thursday, March 22, 2018

SG Market (22 Mar 18)

- Traders are likely to stay on the sidelines after the Fed raised its benchmark rate by 25bps as expected but steepened the path of rate hikes in 2019/20 on stronger growth outlook following tax cuts.
- The big story today will be on trade where the White House is set to unveil at least US$30b of tariffs on Chinese imports, with China preparing to retaliate against US agricultural products.
- Oil-linked stocks may gain after crude rallied 2.6% on a drop in US inventories.
- Technically, the STI is still hovering near its 50-dma at 3,505 within its its triangle pattern bounded by near-term support at 3,490 and resistance at 3,550.

- Collaborating with cloud services provider, US-listed Twilio to develop an Internet-of-Things (IoT) platform for software developers in order to accelerate the adoption of IoT solutions in Singapore and the Asia-Pacific.
- The tie-up would leverage on Singtel's network in Singapore and Twilio's Programmable Wireless product to enable developers to manage cellular connectivity.
- The platform will help boost the group's enterprise business (27% of 9MFY18 revenue) by offering enhanced connectivity, network security, device management and advanced analytics.
- Trades at 14.1x forward P/E and 5% dividend yield.
- MKE has a Hold with TP of SGD3.69.

- Divesting a 34.1%-stake in wholly owned ISO-Integrated M&E to Jasdaq-listed Taisei Oncho for $3m.
- The proposed divestment will pave the way for the establishment of a JV between both parties. This will enable the group to strengthen its M&E and energy management capabilities by leveraging on Taisei's M&E expertise and overseas network.
- Net proceeds of $2.9m will be used to fund future business expansion, investments and acquisitions as well as general working capital.
- Trades at 8.9x forward P/E.

*Kori Holdings
- Awarded $13.5m worth of contracts, comprising mainly strutting works, as part of Circle Line 6, and Thomson-East Coast MRT Line.
- Projects are slated to start in 1Q18, and expected to be completed in 24 months.
- The contracts are expected contribute positively to FY18 earnings.

*KS Energy
- 80.09% owned KS Drilling was awarded a US$4m contract for the KS Medstar 1 jack-up drilling rig.
- KS Drilling provides onshore and offshore drilling services, rig management and support services, oilfield equipment ownership and leasing.
- The work in Egypt will be for three months, commencing 2Q18.

- Warns that it is likely to report a net loss of US$1b for both 4Q17 and FY17, largely attributable to impairment losses of US$900m amid the prolonged downturn in the O&G industry, which has depressed the market values of its assets.
- Continued to experience delayed payment from clients, which further constrained its cash flow.
- Revenue and profitability were also afflicted by delays in re-deployment of some of its assets and lower charter rates.
- Releasing financial results on 28 Mar.
- Trading suspended since 14 Aug.

- Wilmar is acquiring the remaining 50% interest in Nauvu Investments from Olam for a consideration of up to US$148m, of which US$85.4m comprises repayment of a shareholder's loan.
- Nauvu invests in integrated palm oil, natural rubber and sugar assets in Africa as well as engages in the production of crude and refined oil.
- Trades at 12.7x forward P/E and 3.1% dividend yield.

*OUE Commercial REIT
- Commencing asset enhancement initiatives (AEI) at One Raffles Place Shopping Mall in mid-2018 to improve circulation areas of the mall and open retail space with better visibility.
- The mall will remain operational during the AEI period, as work will be implemented in phases to minimise disruption to tenants and shoppers.
- Cost of AEI is not expected to have material impact on the REIT's gearing.
- The mall will also be welcoming Spaces, a co-working space operator, which will be occupying 35,000 sf over a few levels from early 2019.
- Trades at 4Q17 annualised yield of 6.4%.

- Proposed placement of 16.7m new shares at $0.06 apiece to Jacfun (12.5m) and Yalla (4.2m).
- It will also issue 5m non-listed transferable warrants with exercise price of $0.08 each to Jacfun (3.75m warrants) and Yalla (1.25m warrants).
- Jacfun invests in theme park, hotel and entertainment assets and is the principal investor behind Yaturu, an operator of digital theatrical tours. Yalla is a developer of technology and producer of content for AR devices.
- Both companies have been working with Asiatravel on digital/augmented projects.
- Net proceeds of $0.97m will be used for general working capital purposes, including the development of digital tours.
- Loss-making and trades at 0.86x P/B.

*Trendlines Group
- Signed MOU with Nutreco Investments, a prominent producer of animal nutrition and aquafeed, to explore possible areas of collaboration.
- Collaboration areas include development of new technologies and identify investment opportunities related to the animal feed industry.
- Trades at 0.63x P/B

*Chew's Group
- Clarified that a previously proposed special DPS of $0.35 is subject to shareholders' approval and completion of the disposal of its agriculture, engineering services, investment and marketing arms to Huat Lai for $11m.

*Tee Int'l
- Proposing a 1 bonus warrant for every 10 shares, with exercise price of $0.215 apiece, representing 7.5% premium over last close.
- Maximum proceed's of $10.7m from warrant conversion will be used for new investments, reducing its existing loans and working capital purposes.

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