SG Market (17 Apr 18)

MARKET OVERVIEW
- The market could consolidate its recent gains as geopolitical and trade tensaions recede and investors look to upcoming 1Q18 for further direction.
- Technically, the STI is facing some resistance near the topside of downtrend channel at 3,520, with support at 3,375.

CORPORATE RESULTS
*M1
- Rang in flat 1Q18 net profit of $34.8m, slightly ahead of muted expectations.
- Revenue inched up 0.5% to $254.1m on higher service revenue of $184.7m (+3%) from increased data usage and better fixed services sales (+13.9%) but was pared by weaker handset sales (-5.6%) and IDD (-14.8%).
- ARPU continues to decline across postpaid mobile (-2%), prepaid mobile (-9.4%) and data (-17.6%), except fibre broadband (+5.2%). Mobile data contribution climbed to 61.3% (1Q17: 54%, 4Q17: 58.2%).
- EBITDA margin narrowed to 40.8% (-2.2ppt) on higher wholesale costs of fixed services and staff costs.
- Net debt/EBITDA held steady at 1.2x.
- Expects intensifying competition from new entrants and OTT service providers.
- Offers an indicative dividend yield of 6.4%
- MKE has a Hold with TP of $1.59.

*Keppel DC REIT
- 1Q18 results came in within expectations as DPU of 1.8¢ rose 3.4% after adjusting for one-off 0.15¢ capital distribution last year.
- Revenue and NPI jumped to $38m (+18%) and $34.1m (+18.2%) on full quarter contribution from Keppel DC Dublin 2 and Keppel DC Singapore 3, as well as higher variable income from Keppel DC Singapore 1.
- Portfolio occupancy strengthened 1.1ppt q/q to 93.7%, while aggregate leverage climbed 5.3ppt q/q to 37.4%
- Trades at annualised 1Q18 yield of 4.9% and 1.52x P/B.

*Keppel Infrastructure Trust
- Flat 1Q18 DPU of 0.93¢, met expectations.
- Revenue rose 3.2% to $160.3m on stronger takings from City Gas (+6%) and Basslink (+7.5%), concessions (+0.6%) and Keppel Merlimau Cogen (+0.6%).
- Aggregate leverage held relatively steady at 40.1% (+0.2ppt q/q).
- NAV/share fell 1% to $0.296 due to distributions as well as marked-to-market valuation of derivative financial instruments.
- Trades at 6.95% FY18e yield and 1.79x P/B.

*Soilbuild Business Space REIT
- 1Q18 DPU slid 11% to 1.324¢ on weaker distributable income of $13.9m (-10.4%), but still came within expectations.
- Revenue and NPI declined to $19.4m (-11.5%) and $16.9m (-11.6%) on lower contribution from 72 Loyang Way, West Park BizCentral, Eightrium, as well as the divestment of KTL Offshore.
- Portfolio occupancy tumbled 5.2ppt q/q to 87.5%, while aggregate leverage eased 0.4ppt q/q to 40.2%.
- Trades at an annualised 1Q18 yield of 8% and 1.03x P/B.

POSITIVE NEWS
*SIA
- Mar passenger load factor rose 3.2ppt to 82.9%, as traffic growth of 8.4% outpaced a 4.2% increase in capacity.
- However, cargo load factor declined 2.8ppt to 64.7%, as freight carried slipped 0.8% on higher capacity of 3.5%.
- Parent airline load factor improved 2.1ppt to 82.2%, with improved utilisation on routes to Americas (+4.2ppt), South West Pacific (+3.7ppt), East Asia (+1.6ppt), West Asia and Africa (+3ppt), except for Europe (-0.2ppt).
- Load factors for subsidiary carriers, Scoot and SilkAir, also improved to 89.2% (+7.5ppt) and 72.8% (+3.6ppt), respectively.
- Trades at 0.91x P/B.

*mm2 Asia
- Sold $25.8m worth of shares in UnUsUaL at $0.465 apiece to His Royal Highness Prince Abdul Qawi of Brunei (4.76% share capital) and R3 Asian Gems (0.63%).
- The share sales allows UnUsUaL access to strategic business relationships in the region and is a testament to the group's long-term growth prospects.
- Upon completion, UnUsUaL Management remains the largest shareholder with a 76.79% stake, with mm2 Asia being the controlling shareholder of UnUsUaL Management (51%). The remaining 49% is owned by founders Leslie Ong and Johnny Ong.

*Tiong Seng
- Partnering Arcstone to co-develop TS Connect, an advanced manufacturing execution system, which would enable a data-driven ecosystem via IoT.
- The system would allow construction companies to track and analyse operations real-time, thereby reducing overall construction costs and enhancing operational efficiency.
- It targets to launch TS Connect in Singapore and overseas markets.
- Trades at 5.6x trailing P/E and 0.6x P/B.

*Raffles Education
- Entered into a non-binding agreement with Propertylink for the proposed sale of a freehold property in Australia for A$82m.
- Part of the 9,782 sqm (105,000 sf) NLA property is being used by the group to conduct business operations under Raffles College.
- The group will provide a 12-month income support arrangement to the purchaser for a vacant space in the property, which will cease upon commencement of any lease.

*Kim Heng Offshore & Marine
- Awarded a spot charter contract for a AHTS to perform towage of tender rig from Singapore to Brunei for a leading oil major.
- Trades at 0.86x P/B.

*TriTech
- Awarded a $3.3m contract by Land Transport Authority.
- The contract involves the provision of site investigation services on specific terrain in Singapore.
- Project started on 16 Apr and is scheduled to complete on 15 Apr '20.
- Trades at 0.6x P/B.

*Metro Holdings
- PT Metro Property Investment, a 90:10 JV with Lee Kim Tah Group, has agreed to invest Rp1.33t (~$127m) for the development, marketing and sales of two residential towers in Bintaro, Jakarta, Indonesia.
- The two residential towers comprise ~1,400 apartment units and 170 SOHO units.
- Trades 0.65x P/B.

NEGATIVE NEWS
*Midas
- Found that subsidiary Jilin Midas Light Alloy (JMLA) had a Rmb334m cash shortfall in its cash balances.
- JMLA only had Rmb0.01m ($2,400) in its cash balance at end Dec '17, despite auditors receiving bank confirmation indicating that it had a balance of Rmb334.4m for that period.
- Discovered that discrepancies in JMLA's accounts were dated as far as Dec '16, when shortfall between actual statements and earlier supposed bank confirmation amounted to more than Rmb352m.
- The board had since made a police report in China, but highlighted that the police could not acknowledge receipt of the report.
- The statements obtained showed that Rmb23m was transferred to unrelated firm Chongqing Huicheng Aluminium, which is controlled by the nephew of Midas' ex-executive chairman Chen Wei Ping.
- Separately, it also noted that JMLA has a previously undisclosed bank account with Bank of Jilin, which was opened by Chen Wei Ping.

NEUTRAL NEWS
*Ezion
- To resume trading today following the successful completion of its debt restructuring exercise.
- Apart from refinancing US$1.5b of debt, swapping existing $575m bonds and perps with cheaper convertible and non-convertible bonds and revised perps, shareholders were offered 3-for-5 warrants, which would enable them to retain 56% of the enlarged equity base.
- Ezion also raised up to $65m in new equity at $0.208/share from two strategic investors, Pavilion Capital ($50m) and Asdew Acquisitions ($15m), which will be be used for business expansion and new business opportunities, JVs or partnerships with various industry partners, and for working capital purposes.
- Separately, group clarified that it is in discussions with strategic partners and investors, not limited to China Merchants & Great Wall Ocean Strategy & Technology Fund, to strengthen its own position, and grow its core liftboat business.
- In view of the new lease of life given to Ezion following its debt revamp, we expect the counter to trade between $0.194 (post restructuring NAV/share) and $0.276 (post-60 day bond/warrants conversion price), which implies a P/B of 1.0-1.4x. As comparison, closest peer POSH currently trades at 1.0x P/B.

*Keppel T&T
- Partnering with DE-CIX, a leading Internet Exchange operator, to boost interconnectivity at Keppel DC Frankfurt 1 (KDC FRA 1).
- KDC FRA 1 will be qualified as a DE-CIX enabled site, and will offer the premium interconnection services such as peering and dedicated cloud connections.
- Customers at KDC FRA 1 can benefit from the robust and resilient connectivity, as well as lower IP Transit and network costs from the tie-up.
- The offering is significant on the back of Frankfurt's growing popularity as a data centre hub and evolving enterprise requirements.
- Trades at 14.5x trailing P/E and 1.25x P/B.

*Neo Group
- Acquiring a 51%-stake in Lavish Dine Catering for $1.8m from five individuals through cash ($1.4m) and 0.6m in new shares at $0.63 apiece..
- Lavish Dine provides high-end catering services and owns an 8% stake in La Bonnie Pastries and was operating at break-even in FY17.
- Issuance of shares would dilute FY17 EPS by 0.4% to $0.0223.
- Trades at pro forma FY17 PE of 27.8x.