SG Market (26 Jun 18)

MARKET OVERVIEW
- The market looks set to extend its 9-month low as the threat of US trade and investment restrictions against China and key partners jolted sentiment and triggered a global selloff.
- Tech stocks may continue to come under pressure amid mixed signals that US will impose export controls and block Chinese investments in US technology companies.
- Technically, the STI may head towards the crucial support area at 3,200, while upside will be capped by former support-turned-resistance at 3,280.

CORPORATE RESULTS
*Stamford Tyres
- 4QFY18 net profit plunged 78.1% to $0.6m, dragging FY4/18 earnings to $5.2m (-36%).
- For the full year, revenue rose 2.8% to $242.4m, mainly attributable to new sales in North Asia.
- Gross margin narrowed to 25% (-1.2ppt)on higher cost of sales in tyres and higher wheel production cost.
- Bottom line was further eroded by higher operating expenses (+4.7%) and lower JV contribution of $1.6m (-17.6%).
- First and final DPS was halved to 1¢ (-0.5¢).
- Trades at 15x trailing P/E.

POSITIVE NEWS
*Vard
- Clinched NOK5b ($840m) contract to build three all-weather, arctic coast guard vessels for the the Norwegian Defence Materiel Agency.
- Due to national security interests, the tender was restricted to Norwegian yards only.
- Deliveries of the three vessels are scheduled from Vard Langsten in 1Q22, 1Q23 and 1Q24, with the hulls built at Vard Tulcea in Romania.
- The group is subject of an exit offer by Italy's Fincantieri, which taken control of a 83.5% stake and pending an EGM to approve its proposed delisting.
- Trades at 0.87x P/B

*Roxy-Pacific
- 50:50 JVCo with Tong Eng Group has entered into an agreement to sell 117 Clarence Street in Sydney for A$153m to an Australian-based trust.
- The JVCo had acquired the 14-storey freehold commercial building in Feb '16 for A$81m.
- Sale of the building is expected to contribute positively to the group's FY18 results.
- Trades at 1.3x P/B.

NEUTRAL NEWS
*Cache Logistics Trust
- Proposed acquisition by ARA Asset Management of all of CWT's shares in REIT and property managers of Cache.
- CWT currently owns 40% of ARA-CWT Trust Management (Cache) and 60% of Cache Property Management.
- Following the acquisitions, the right of first refusal granted by CWT to Cache will lapse.
- The move comes on the back of a portfolio rebalancing and growth strategy embarked by Cache in tandem with ARA's expanding presence in the region.
- Trades at annualised yield of 8.1% and 1.06x P/B

*Wilmar
- Acquired 51% stake in PT Lumbung Padi Indonesia (PT LPI) from Farma Int'l for Rp25.5b.
- PT LPI engages in rice milling and trading (export and import).
- Trades at 12.4x forward P/E.

*Straco
- Insurer denies the group's claim for cost of repairs and loss of profit arising from breakdown of the Singapore Flyer on 25 Jan '18.
- The group is currently obtaining advice from its insurance broker and its legal advisers on the correct interpretation and application of the insurance policy.
- No accrual of other income in relation to the progress of insurance claim was previously reported.
- Trades at 15.2x trailing P/E.

*China Kunda
- Proposed to diversify into manufacturing and distribution of furniture and other related activities, subject to shareholder approval.
- Furniture business will design, provide consultancy and manufacture furniture and fittings of cabinets, appliances, surfaces, woodwares, decorative products, etc.
- The group believes that it can leverage on its existing technologies in in-mould decoration and plastic components to apply to the new business.
- The counter is loss making.

*IEV
- Entering into a JVCo with MUI Int'l and an individual for the ownership and global distribution of Trizashield and a suite of concrete corrosion solutions.
- Trizashield is a corrosion-under-insulation protection system for barrier and galvanic protection of high and cyclic temperature insulated piping systems in process plants and installations.
- The group will have 51.9% stake, while MUI Int'l and the individual will have 40.9% and 7.3% respectively.
- The counter is loss-making.