MARKET OVERVIEW
- The market may struggle as China's intent to bolster economic growth through a looser fiscal policy failed to lift sentiment amid the rumbling trade row, with recent corporate earnings showing little surprises thus far.
- Technically, the STI faces immediate resistance at 3,300 and 3,340 at the next level, while underlying support remains intact at 3,190-3,200.
CORPORATE RESULTS
*Mapletree Industrial Trust
- 1QFY19 DPU rose 2.7% to 3¢, largely within expectations, making up 24% of full-year consensus estimate.
- Gross revenue and NPI grew 3% and 1.9% to $91.5m and $69.5m respectively, driven by the contributions from Phase 2 of its build-to-suit project for HP Singapore, 14 US data centres (40% interest) as well as compensation from early termination of leases.
- Portfolio occupancy slipped 1.7ppt q/q to 88.3%, dragged by its Singapore assets (-1.8ppts) and lower occupancies across most segments. Overall WALE was 3.7 years with 13%/20.7% of leases expiring in FY19/20.
- Aggregate leverage climbed 1.9ppt q/q to 35% with all-in average funding cost of 3% and debt tenor of 3 years.
- Besides heightened geopolitical risks, the continuing supply of industrial space is exerting pressure on both occupancy and rental rates.
- Trades at annualised 1QFY19 yield of 5.9% yield and 1.36x P/B
*Frasers Centrepoint Trust
- 3QFY18 DPU of 3.053¢ (+1.8%) brought 9M18 payout of 9.153¢ (+2.5%), meeting 76% of full-year consensus estimate.
- For the quarter, gross revenue and NPI rose 10.9% and 13.7% to $48.3m and $35m on the back of positive rental reversions, higher occupancy and shopper traffic at its three larger malls, particularly Northpoint City North Wing.
- 47 leases comprising 4% of total NLA were renewed with positive rental reversion of 5%.
- Portfolio occupancy remained stable q/q at 94%.
- Aggregate leverage edged up 0.1ppt to 29.3% q/q with average debt maturity of 2.2 years and all-in borrowing cost of 2.5%.
- Trades at annualised 3QFY18 yield of 5.4% and 1.1x P/B.
- MKE maintains Buy with TP of $2.55.
*Suntec REIT
- 2Q18 DPU dipped 0.8% to 2.474¢, mainly due to the enlarged unit base and brought 1H18 payout to 4.907¢, representing 49% of full-year consensus estimate.
- For the quarter, gross revenue and NPI grew 3.7% and 2.2% to $90.5m and $60.7m respectively on higher contributions from Suntec Singapore and Suntec City mall but office turned in weaker performance due to transitory downtime from replacement leases.
- Achieved committed occupancy of 99% for its office portfolio (SG: 99.8%, Aust: 96.7%) and 98.2% for its retail portfolio (SG: 98.6%, Aust: 90.4%).
- Signed 187,000 sf of office leases (65% new) and 179,000 sf of retail leases (45% new) with 5.1% and 8.4% of office and retail leases expiring in FY18.
- Office WALE stood at 3.66 years, while retail WALE was 2.31 years at at Jun '18.
- Aggregate leverage was 36.5% with all-in financing cost of 2.74%.
- Trades at annualised 2Q18 yield of 5.2% and 0.9x P/B
NEUTRAL NEWS
*Banyan Tree
- Disposing its entire asset portfolio in Seychelles, which comprises the Banyan Tree Resort as well as land plots for US$70m.
- The group will continue to manage Banyan Tree Resort Seychelles under a hotel management agreement.
- The move is part of the group's strategy on rebalancing its assets and unlock the value of its mature assets to create greater value from other markets.
- Upon completion, the group's EPS and NTA per share will increase by 23.3% and 0.8% to 2.96¢ and 70.66¢ respectively.
- Trades at 0.76x P/B
*Sembcorp Industries
- 92.6%-owned Singapore Wuxi Investment Holdings is selling its entire 49% stake in Wuxi Singapore Property Investment Co (WSPI) to Golden Concord and Shanghai Sunac Real Estate Development Co for Rmb323m.
- WSPI holds the ongoing residential development Hongshan Mansion in Wuxi.
- The sale is expected to result a net gain of $12m and is slated to complete by end 2018.
*China Everbright Water
- Received multiple subsidies amounting to Rmb16.3m in 1H18 from various government authorities at central, provincial, county and district levels.
- Trades at 8.9x fowrard P/E.
NEUTRAL NEWS
*Excelpoint Technology
- Invested $0.3m in Singapore-based semiconductor chip design company CLOPTech in the form of convertible loan.
- The spin-off company from A*STAR was established in 2015 and has global partnerships with foundries, equipment manufacturers and technology providers.
- Its IP protected commercial chipset product is used in long-range wireless infrastructure products, and it has secured lead customer orders for product design integration.
- The investment is part of the group’s strategy to diversify into IoT applications.
- The group has an investment commitment of $5m to invest in IoT innovators and start-up activities.
- Trades at 6.7x trailing P/E.
*Hanwell
- Acquiring a property located at Higashiyama-ku, Gion Machikitagawa 305, Kyoto City, Japan, for ¥240m ($2.9m), below its valuation amount of ¥270m ($3.3m).
- The site has a land area of 90.5 sqm, with total buildable area of 72 sqm and an allowable building area of 360 sqm for construction a 5-storey commercial building.
- Property is close to well established shopping malls, restaurants and the Yasaka Shrine (Gion Shrine), one of the famous shrines in Kyoto that tourists visit.
- The acquisition will be used as a stepping stone to expand the group’s food business in Japan.
- Trades at 9.8x trailing P/E.
*Interra Resources
- Commenced drilling development well CHK 1211 in the Chauk oil field in Myanmar, which represents the 11th well to be drilled in the Chauk oil field for Goldpetrol.
- Results of the drilling and completion is expected to release within six weeks from now.
- Group has a 60% interest in the Improved Petroleum Recovery Contract of the Chauk field and 60% ownership in Goldpetrol which will be operating the field.
- Drilling costs are expected to be relatively low since it will be carried out using the Goldpetrol’s ZJ 450 rig and will be footed by existing funds on hand.
- Trades at 0.87x P/B.
*Trendlines
- Terminated term sheet and JV agreement with Shoushan Wealth Holdings signed on 16 Dec ’16 and 21 Aug ’17 respectively.
- Moving forward, the group intends to continue to seek similar and/or other business opportunities in China.
- Trades at 0.58x P/B.
*IEV
- Signed a MOU with EXT Co. of Korea to cooperate to commercialise and market EXT’s proprietary geotechnical engineering technologies in Malaysia, Indonesia and India and other markets
- They will jointly conduct a feasibility study to explore introducing EXT technology including EXT pile, Screw Anchor Pile, Point Foundation Method and Modular Pile into selected regional markets.
- If commercially feasible, the parties will then negotiate to establish a JV or other business arrangement between the parties. The MOA is effective for a term of nine months and may be extended as mutually agreed between the parties.
- This MOA is central to the group's strategy to commercialise disruptive technologies through a global distribution network and diversify its engineering business beyond the O&G and marine industry.
- Trades at 8.3x P/B.
Wednesday, July 25, 2018
Monday, July 23, 2018
SG Market (23 Jul 18)
MARKET OVERVIEW
-The market looked set for a nervous start as trade conflict returned to the fore after US President Trump expanded his tariff threats on all US$500b of Chinese imports and accused both China and EU of currency manipulation.
- Technically, the STI could face some resistance at 3,300 with next upside objective at 3,340, while underlying support remains at 3,190-3,200.
CORPORATE RESULTS
*Sembcorp Marine
- Dismal 2Q18 net loss of $55.6m (2Q17: $5.1m profit) blew estimates out of the water due to lower work volume and loss on sale of a semi-submersible rig.
- Revenue surged 151% to $1.63b, boosted by delivery of two Borr Drilling jack-ups and sale of West Rigel semi-submersible but excluding these rig sales, revenue would have sunk 12% to $572m.
- Dived into operating loss of $52.6m, reversing from $25.2m profit in 2Q17 as weak volumes in rigs & floaters and offshore platforms was unable to cover overheads and the yard took a $27m hit from the US$500m sale of West Rigel.
- Despite securing $254m of new contracts, its net order book (excluding Sete Basil drillships) shrank 9.6% q/q to $4.15b.
- While global E&P spending is picking up, order flow recovery is slow, competition is intense and margins are compressed.
- No interim dividend declared (1H17: 1¢).
- Trades at 1.75x P/B.
POSITIVE NEWS
*Keppel Corp
- Bagged two contracts with a combined value of $70m.
- In Brazil, Keppel Fels Brasil won a contract from Modec to fabricate and integrate topside module for FPSO Carioca MV30.
- In Singapore, Keppel Shipyard will convert a LNG carrier to a floating storage and re-gasification u for a leading global operator of oil and gas production vessels.
- Trades at 13x forward P/E
*ST Engineering
- Its electronics division secured $764m worth of contracts in 2Q18, mainly for smart city solutions in mobility, satellite communications, IoT, public safety & security and cybersecurity, as well as defence solutions.
- These projects will be completed progressively till 2026.
- Trades at 18.2x forward P/E.
*Avarga
- Proposed disposal of 35 Tuas View Crescent to Beni Warehousing for $18.6m
- The sale price of the 16,000 vacant property, with 30-year lease till Dec 2029, represents a 140% premium to its book value of $7.7m.
- Net proceeds will be to used to pay a special dividend, repay bank borrowings and/or strengthen its working capital.
- Trades at 9.5x trailing P/E.
NEUTRAL NEWS
*ComfortDelGro
- Entered into a 60:30:10 JV agreement with Nanjing Qixia and Nanjing Dajian to form a JVco known as Nanjing ComfortDelGro Qixia Driver Training Co (CDG Qixia).
- CDG Qixia will operate an initial fleet of 35 vehicles in Nanjing.
- Trades at 15.9x forward P/E.
*Chip Eng Seng
- Entered into an agreement with Navis Capital to acquire 70% of White Lodge Group Services for $13.3m.
- White Lodge operates a chain of pre-school centres in Singapore (7) and Malaysia (2).
- The deal gives the group with a ready platform to expand its footprint in the pre-school education segment and is expected to be completed in 3Q18.
- Trades at 13.6x P/B.
*China Everbright Water
- Signed a supplementary agreement with Ji'nan Urban and Rural Water Authority of Shandong Province to invest and construct Ji'nan Waste Water Treatment Project (Plant 1 & 2) Expansion, with total investment of Rmb1.043b.
- The project will expand the designed capacity of both plants by 200,000 m3.
- Upon completion of expansion work, the daily treatment capacity of Plant 1 will increase from 350,000 m3 to 450,000 m3, while that for Plant 2 will increase from 200,000 m3 to 300,000 m3.
- Trades at 9.3x forward P/E
NEGATIVE NEWS
*Profit warnings
- Courage Investment
- Asiaphos
- Soon Lian
-The market looked set for a nervous start as trade conflict returned to the fore after US President Trump expanded his tariff threats on all US$500b of Chinese imports and accused both China and EU of currency manipulation.
- Technically, the STI could face some resistance at 3,300 with next upside objective at 3,340, while underlying support remains at 3,190-3,200.
CORPORATE RESULTS
*Sembcorp Marine
- Dismal 2Q18 net loss of $55.6m (2Q17: $5.1m profit) blew estimates out of the water due to lower work volume and loss on sale of a semi-submersible rig.
- Revenue surged 151% to $1.63b, boosted by delivery of two Borr Drilling jack-ups and sale of West Rigel semi-submersible but excluding these rig sales, revenue would have sunk 12% to $572m.
- Dived into operating loss of $52.6m, reversing from $25.2m profit in 2Q17 as weak volumes in rigs & floaters and offshore platforms was unable to cover overheads and the yard took a $27m hit from the US$500m sale of West Rigel.
- Despite securing $254m of new contracts, its net order book (excluding Sete Basil drillships) shrank 9.6% q/q to $4.15b.
- While global E&P spending is picking up, order flow recovery is slow, competition is intense and margins are compressed.
- No interim dividend declared (1H17: 1¢).
- Trades at 1.75x P/B.
POSITIVE NEWS
*Keppel Corp
- Bagged two contracts with a combined value of $70m.
- In Brazil, Keppel Fels Brasil won a contract from Modec to fabricate and integrate topside module for FPSO Carioca MV30.
- In Singapore, Keppel Shipyard will convert a LNG carrier to a floating storage and re-gasification u for a leading global operator of oil and gas production vessels.
- Trades at 13x forward P/E
*ST Engineering
- Its electronics division secured $764m worth of contracts in 2Q18, mainly for smart city solutions in mobility, satellite communications, IoT, public safety & security and cybersecurity, as well as defence solutions.
- These projects will be completed progressively till 2026.
- Trades at 18.2x forward P/E.
*Avarga
- Proposed disposal of 35 Tuas View Crescent to Beni Warehousing for $18.6m
- The sale price of the 16,000 vacant property, with 30-year lease till Dec 2029, represents a 140% premium to its book value of $7.7m.
- Net proceeds will be to used to pay a special dividend, repay bank borrowings and/or strengthen its working capital.
- Trades at 9.5x trailing P/E.
NEUTRAL NEWS
*ComfortDelGro
- Entered into a 60:30:10 JV agreement with Nanjing Qixia and Nanjing Dajian to form a JVco known as Nanjing ComfortDelGro Qixia Driver Training Co (CDG Qixia).
- CDG Qixia will operate an initial fleet of 35 vehicles in Nanjing.
- Trades at 15.9x forward P/E.
*Chip Eng Seng
- Entered into an agreement with Navis Capital to acquire 70% of White Lodge Group Services for $13.3m.
- White Lodge operates a chain of pre-school centres in Singapore (7) and Malaysia (2).
- The deal gives the group with a ready platform to expand its footprint in the pre-school education segment and is expected to be completed in 3Q18.
- Trades at 13.6x P/B.
*China Everbright Water
- Signed a supplementary agreement with Ji'nan Urban and Rural Water Authority of Shandong Province to invest and construct Ji'nan Waste Water Treatment Project (Plant 1 & 2) Expansion, with total investment of Rmb1.043b.
- The project will expand the designed capacity of both plants by 200,000 m3.
- Upon completion of expansion work, the daily treatment capacity of Plant 1 will increase from 350,000 m3 to 450,000 m3, while that for Plant 2 will increase from 200,000 m3 to 300,000 m3.
- Trades at 9.3x forward P/E
NEGATIVE NEWS
*Profit warnings
- Courage Investment
- Asiaphos
- Soon Lian
Friday, July 20, 2018
SG Market (20 Jul 18)
MARKET OVERVIEW
- The market may slip, tracking losses on Wall Street as financial shares lagged after US President Trump criticised the Fed for raising interest rates and countering efforts to grow the economy.
- Commodities entered a correction on Thu with copper dipping below US$6,000/MT, while crude fell below US$68/barrel before rebounding.
- Technically, the STI will face some resistance at 3,300 with next level at 3.340, while underlying support is at 3,200.
CORPORATE RESULTS
*Keppel Corp
- 2Q18 net profit jumped 44.4% to $246.2m, bringing 1H18 earnings to $583.6m (+38%), which forms 58% of full-year consensus estimate.
- Revenue for the quarter dipped 2% to $1.52b as higher O&M takings (+35%) and gas & power sales (+24%) were eroded by weaker property business (-55%) in China and Singapore.
- O&M swung into $17m loss (2Q17: $11m profit) due to lower work volume and absence of gain from divestment of Keppel Verolme.
- Property reaped $225m earnings (2Q17: $97m) from en-bloc sales of Shenyang and Vietnam development projects and a $48.3m fair value gain on Nassim Woods.
- Infrastructure reaped earnings of $40m (2Q17: $25m) on the back of revaluation gain from 29.4% owned Keppel DC REIT and higher contributions from environmental and infrastructure contracts.
- Management expects O&M business to continue to its gradual recovery as it clinched $680m worth of contracts, bumping the order book to $4.6b (+7% q/q).
- Declared interim DPS of 10¢ (2Q17: 8¢) and a special DPS of 5¢ to mark its 50th anniversary.
- Trades at 10.7x forward P/E.
*SATS
- 1QFY19 net profit climbed 11.5% to $63.9m, coming in above market expectations.
- Revenue rose 3% to $439.4m on improved turnover for food solutions (+2.7%) and gateway services (+3.4%) despite the deconsolidation of SATS HK in Jul '17.
- Operating margin expanded 2.2ppt to 14.8% on slower pace of cost expansion (+0.4%) amid reduced staff costs.
- Looking ahead, the group expects Asian passenger volume and food, cruise traffic to grow despite the threat of global uncertainties potentially affecting cargo volumes.
- However, the termination of its MOA with Turkish Airlines for the provision of in-flight catering services at Istanbul New Airport is a major disappointment.
- Trades at 22.4x forward P/E.
* SIA Engineering
- 1QFY19 net profit grew 10.4% to $40.5m, in line with estimates
- Revenue fell 5.5% to $257.7m due to lower airframe and fleet management turnover.
- Operating margin contracted 2.9ppt to 4% as operating expenses declined at a slower pace.
- Bottom line was underpinned by contributions from associates/JVs of $32.4m (+53.6%) driven by higher takings from engine and component centres.
- Management notes that the aviation MRO environment remains challenging but expects its performance to benefit from strategic partnerships and various productivity initiatives.
- Trades at 19.7x forward P/E.
*CapitaLand Mall Trust
- 2Q18 DPU grew 2.2% to 2.81¢ on distributable income of $100m (+2.9%) This took 1H18 payout to 5.59¢ (+2%), on track with estimates.
- For the quarter, gross revenue and NPI rose 1.6% and 2.8% to $171.4m and $120.8m respectively due to stronger performance at Plaza Singapura (+4.0%) and Clarke Quay (+3.5%), which offset weakness at by Westgate (-2.1%) and Bedok Mall (-1.5%).
- Portfolio occupancy dipped 0.9ppt q/q to 98%.
- Shopper traffic and tenant sales were down 2.4% and 0.2% respectively while rental reversion stayed at +0.8%.
- CMT's average cost of debt and aggregate leverage were 3.1% and 31.5%
- AUM has risen by 0.8% HoH at the annual half-year revaluation, as cap rates assumptions were lowered by about 15bp across each property.
- Trades at 5.2% yield and 1.1x P/B
NEUTRAL NEWS
*Olam
- Its wholly-owned subsidiary, Olam Americas Inc (OAI) has successfully priced a US$100m issuance of 5-year fixed rate notes via a private placement.
- The Notes were placed to four investors in the US at a spread of 160 basis points over the 5-year US treasury rate, which translates to a fixed coupon of 4.35% for 5 years.
- Proceeds from the issue of the Notes will be used by OAI and its US affiliates for repayment of existing debt and general corporate purposes.
- Trades at 13.8x forward P/E
NEGATIVE NEWS
*OUE Lippo Healthcare
- Warned that it is expected to report a net loss for the 2Q18, attributable mainly to higher operating costs.
- Trades at 2.4x P/B.
- The market may slip, tracking losses on Wall Street as financial shares lagged after US President Trump criticised the Fed for raising interest rates and countering efforts to grow the economy.
- Commodities entered a correction on Thu with copper dipping below US$6,000/MT, while crude fell below US$68/barrel before rebounding.
- Technically, the STI will face some resistance at 3,300 with next level at 3.340, while underlying support is at 3,200.
CORPORATE RESULTS
*Keppel Corp
- 2Q18 net profit jumped 44.4% to $246.2m, bringing 1H18 earnings to $583.6m (+38%), which forms 58% of full-year consensus estimate.
- Revenue for the quarter dipped 2% to $1.52b as higher O&M takings (+35%) and gas & power sales (+24%) were eroded by weaker property business (-55%) in China and Singapore.
- O&M swung into $17m loss (2Q17: $11m profit) due to lower work volume and absence of gain from divestment of Keppel Verolme.
- Property reaped $225m earnings (2Q17: $97m) from en-bloc sales of Shenyang and Vietnam development projects and a $48.3m fair value gain on Nassim Woods.
- Infrastructure reaped earnings of $40m (2Q17: $25m) on the back of revaluation gain from 29.4% owned Keppel DC REIT and higher contributions from environmental and infrastructure contracts.
- Management expects O&M business to continue to its gradual recovery as it clinched $680m worth of contracts, bumping the order book to $4.6b (+7% q/q).
- Declared interim DPS of 10¢ (2Q17: 8¢) and a special DPS of 5¢ to mark its 50th anniversary.
- Trades at 10.7x forward P/E.
*SATS
- 1QFY19 net profit climbed 11.5% to $63.9m, coming in above market expectations.
- Revenue rose 3% to $439.4m on improved turnover for food solutions (+2.7%) and gateway services (+3.4%) despite the deconsolidation of SATS HK in Jul '17.
- Operating margin expanded 2.2ppt to 14.8% on slower pace of cost expansion (+0.4%) amid reduced staff costs.
- Looking ahead, the group expects Asian passenger volume and food, cruise traffic to grow despite the threat of global uncertainties potentially affecting cargo volumes.
- However, the termination of its MOA with Turkish Airlines for the provision of in-flight catering services at Istanbul New Airport is a major disappointment.
- Trades at 22.4x forward P/E.
* SIA Engineering
- 1QFY19 net profit grew 10.4% to $40.5m, in line with estimates
- Revenue fell 5.5% to $257.7m due to lower airframe and fleet management turnover.
- Operating margin contracted 2.9ppt to 4% as operating expenses declined at a slower pace.
- Bottom line was underpinned by contributions from associates/JVs of $32.4m (+53.6%) driven by higher takings from engine and component centres.
- Management notes that the aviation MRO environment remains challenging but expects its performance to benefit from strategic partnerships and various productivity initiatives.
- Trades at 19.7x forward P/E.
*CapitaLand Mall Trust
- 2Q18 DPU grew 2.2% to 2.81¢ on distributable income of $100m (+2.9%) This took 1H18 payout to 5.59¢ (+2%), on track with estimates.
- For the quarter, gross revenue and NPI rose 1.6% and 2.8% to $171.4m and $120.8m respectively due to stronger performance at Plaza Singapura (+4.0%) and Clarke Quay (+3.5%), which offset weakness at by Westgate (-2.1%) and Bedok Mall (-1.5%).
- Portfolio occupancy dipped 0.9ppt q/q to 98%.
- Shopper traffic and tenant sales were down 2.4% and 0.2% respectively while rental reversion stayed at +0.8%.
- CMT's average cost of debt and aggregate leverage were 3.1% and 31.5%
- AUM has risen by 0.8% HoH at the annual half-year revaluation, as cap rates assumptions were lowered by about 15bp across each property.
- Trades at 5.2% yield and 1.1x P/B
NEUTRAL NEWS
*Olam
- Its wholly-owned subsidiary, Olam Americas Inc (OAI) has successfully priced a US$100m issuance of 5-year fixed rate notes via a private placement.
- The Notes were placed to four investors in the US at a spread of 160 basis points over the 5-year US treasury rate, which translates to a fixed coupon of 4.35% for 5 years.
- Proceeds from the issue of the Notes will be used by OAI and its US affiliates for repayment of existing debt and general corporate purposes.
- Trades at 13.8x forward P/E
NEGATIVE NEWS
*OUE Lippo Healthcare
- Warned that it is expected to report a net loss for the 2Q18, attributable mainly to higher operating costs.
- Trades at 2.4x P/B.
Thursday, July 19, 2018
SG Market (19 Jul 18)
MARKET OVERVIEW
- The market is expected to grind higher amid the lack of direction and drivers as most of the early corporate results generally fall within expectations.
- Privatisation offer for Wheelock Properties could trigger interest in other deeply discounted developers such as Wing Tai (0.47x P/B) and Ho Bee Land (0.52x P/B).
- Technically, the STI appears to be entrapped by its 20-dma at 3,253 with further upside resistance at 3,300, while underlying support lies at around 3,190-200.
CORPORATE RESULTS
*Keppel T&T
- 2Q18 net profit surged 138% to $26m, boosted by a $19.6m revaluation gain on Keppel DC REIT, which lifted 1H18 earnings to $35.4m (+59.5%).
- Excluding the one-off gain core 1H18 profit of $15.8m (-28.8%) would have missed the sole full-year street estimate of $45.7m.
- Revenue for the quarter fell 4.9% to $45.3m, mainly due to lower container throughput in China.
- Operating profit jumped more than sixfold to $16m on a $19.6m dilution gain following Keppel DC REIT's private placement exercise, partially offset by higher operating costs to support new developments in the data centre and logistics businesses.
- Bottom line was lifted by lower interest expense (-14.3%) partially offset by marginally lower share of profits from associates and JVs (-1.4%).
- Trading at 17.6x forward P/E.
*CapitaLand Commercial Trust
- 2Q18 DPU dipped 1.6% to 2.16¢ on distributable income of $79.4m (+14.3%) due to higher unit base, missing estimates.
- For the quarter, gross revenue of $98m (+12%) and NPI of $77.7m (+12.5%) were bolstered by contributions from Asia Square tower 2 (acquired in Nov '17) and CapitaGreen, partially offset the absence of income from the divestment of One George Street, Wilkie Edge and Golden Shoe Car Park.
- Overall portfolio occupancy edged up 0.5ppt q/q to 97.8%, while aggregate leverage stood at 37.9%.
- Trades at 1x P/B and offers an annualised 2Q yield of 4.9%.
POSITIVE NEWS
*Wheelock
- Received privatisation offer fom its parent, Wheelock and Company (which currently owns 76.21%) at $2.10 in cash, valuing the Company at over $2.5b.
- As the Offer will be unconditional in all respects, Shareholders who accept the Offer will receive payment of the Offer Price within 7 business days of the date of receipt of their valid acceptances by the Offeror.
- The offer price translates to a price-to-NAV multiple of 0.8x that exceeds the historical averages over the past 1, 3, 5 and 10 years on both a cum and ex-cash basis
- This represents an attractive opportunity for Shareholders to realise their entire investment in the Company, which may otherwise be difficult due to the low trading liquidity of the Shares.
- The offeror intends to delist the Company if the free float requirement is not satisfied.
*Manufacturing Integration Technology
- Divesting its entire interest in MIT Semiconductor to Ningbo MIT Semiconductor for $84.5m (at 10.6x P/E), subject to any agreed adjustments to be made.
- Mr Kwong Kim Mone, the group's Chairman and Managing Director and his management team may acquire or subscribe up to 10% stake in Ningbo MIT Semiconductor upon completion.
- The deal will give rise to an estimated net gain of S$61.75m (after deducting applicable taxation and expenses), thus translating into about 27¢/share.
- The sale will help to unlock shareholders' value while the group will focus and grow its new core segment i.e. contract equipment manufacturing business going forward.
- Management intends to return the entire net proceeds from the proposed disposal to shareholders by way of a special dividend or capital reduction.
- It is anticipated that a first distribution of 24¢/share based on the first payment received by the group (80% of the actual sale price).
- Trades at 12.4x trailing P/E
*Vard
- Secured a contract worth NOK200m for the construction of one vessel for an undisclosed Norwegian customer.
- The vessel is scheduled for delivery from one of VARD's shipyards in Norway in 4Q 2019.
- Trades at 0.88x P/B.
*Mermaid Maritime
- Its Middle East business unit has been awarded a subsea services contract in a Gulf Cooperation Council Country for US$16m.
- Contract will involve the use of the DP2 Dive Support Vessel to carry out the overhauling and dry docking of the calm buoys, installation and disconnection of certain Single Point Moorings (SPMs) for an international Oil & Gas company
- The contract comes with further options for the removal and reinstallation of the additional SPMs
- Work will commence in the Arabian Gulf during the course of Aug 18 until Mar 19.
- Counter is loss-making and trades at 0.37x P/B.
NEUTRAL NEWS
*SIIC Environment
- Intends to further subscribe 23.2m new shares (out of 40m) in Longjiang Environmental Protection group Rmb8 each.
- Post-subscription, the group will maintain its 57.9687% stake in Longjiang Environmental Protection.
- Trades at 0.66x P/B.
*Imperium Crown
- Fei County Wonder Stone Characteristic Town Development Co., a subsidiary of the group, signed a license agreement with the Frontier Group for its hotel in Wonder Stone Park to operate under the "Days" brand.
- Frontier Group holds the Days Inn China master franchise and will manage the hotel which is expected to commence operations in Oct '18.
- Trades at 0.5x P/B.
*SIA
- SIA-CAE pilot training JV in Singapore to commence operations next month.
- The JV will provide simulator and classroom training, supporting SIA Group airlines and other operators' pilot training needs in the region.
- The 50/50 JV will operate out of the Singapore Airlines Training Centre located near Changi Airport.
- Trades at 14.3x forward P/E.
- The market is expected to grind higher amid the lack of direction and drivers as most of the early corporate results generally fall within expectations.
- Privatisation offer for Wheelock Properties could trigger interest in other deeply discounted developers such as Wing Tai (0.47x P/B) and Ho Bee Land (0.52x P/B).
- Technically, the STI appears to be entrapped by its 20-dma at 3,253 with further upside resistance at 3,300, while underlying support lies at around 3,190-200.
CORPORATE RESULTS
*Keppel T&T
- 2Q18 net profit surged 138% to $26m, boosted by a $19.6m revaluation gain on Keppel DC REIT, which lifted 1H18 earnings to $35.4m (+59.5%).
- Excluding the one-off gain core 1H18 profit of $15.8m (-28.8%) would have missed the sole full-year street estimate of $45.7m.
- Revenue for the quarter fell 4.9% to $45.3m, mainly due to lower container throughput in China.
- Operating profit jumped more than sixfold to $16m on a $19.6m dilution gain following Keppel DC REIT's private placement exercise, partially offset by higher operating costs to support new developments in the data centre and logistics businesses.
- Bottom line was lifted by lower interest expense (-14.3%) partially offset by marginally lower share of profits from associates and JVs (-1.4%).
- Trading at 17.6x forward P/E.
*CapitaLand Commercial Trust
- 2Q18 DPU dipped 1.6% to 2.16¢ on distributable income of $79.4m (+14.3%) due to higher unit base, missing estimates.
- For the quarter, gross revenue of $98m (+12%) and NPI of $77.7m (+12.5%) were bolstered by contributions from Asia Square tower 2 (acquired in Nov '17) and CapitaGreen, partially offset the absence of income from the divestment of One George Street, Wilkie Edge and Golden Shoe Car Park.
- Overall portfolio occupancy edged up 0.5ppt q/q to 97.8%, while aggregate leverage stood at 37.9%.
- Trades at 1x P/B and offers an annualised 2Q yield of 4.9%.
POSITIVE NEWS
*Wheelock
- Received privatisation offer fom its parent, Wheelock and Company (which currently owns 76.21%) at $2.10 in cash, valuing the Company at over $2.5b.
- As the Offer will be unconditional in all respects, Shareholders who accept the Offer will receive payment of the Offer Price within 7 business days of the date of receipt of their valid acceptances by the Offeror.
- The offer price translates to a price-to-NAV multiple of 0.8x that exceeds the historical averages over the past 1, 3, 5 and 10 years on both a cum and ex-cash basis
- This represents an attractive opportunity for Shareholders to realise their entire investment in the Company, which may otherwise be difficult due to the low trading liquidity of the Shares.
- The offeror intends to delist the Company if the free float requirement is not satisfied.
*Manufacturing Integration Technology
- Divesting its entire interest in MIT Semiconductor to Ningbo MIT Semiconductor for $84.5m (at 10.6x P/E), subject to any agreed adjustments to be made.
- Mr Kwong Kim Mone, the group's Chairman and Managing Director and his management team may acquire or subscribe up to 10% stake in Ningbo MIT Semiconductor upon completion.
- The deal will give rise to an estimated net gain of S$61.75m (after deducting applicable taxation and expenses), thus translating into about 27¢/share.
- The sale will help to unlock shareholders' value while the group will focus and grow its new core segment i.e. contract equipment manufacturing business going forward.
- Management intends to return the entire net proceeds from the proposed disposal to shareholders by way of a special dividend or capital reduction.
- It is anticipated that a first distribution of 24¢/share based on the first payment received by the group (80% of the actual sale price).
- Trades at 12.4x trailing P/E
*Vard
- Secured a contract worth NOK200m for the construction of one vessel for an undisclosed Norwegian customer.
- The vessel is scheduled for delivery from one of VARD's shipyards in Norway in 4Q 2019.
- Trades at 0.88x P/B.
*Mermaid Maritime
- Its Middle East business unit has been awarded a subsea services contract in a Gulf Cooperation Council Country for US$16m.
- Contract will involve the use of the DP2 Dive Support Vessel to carry out the overhauling and dry docking of the calm buoys, installation and disconnection of certain Single Point Moorings (SPMs) for an international Oil & Gas company
- The contract comes with further options for the removal and reinstallation of the additional SPMs
- Work will commence in the Arabian Gulf during the course of Aug 18 until Mar 19.
- Counter is loss-making and trades at 0.37x P/B.
NEUTRAL NEWS
*SIIC Environment
- Intends to further subscribe 23.2m new shares (out of 40m) in Longjiang Environmental Protection group Rmb8 each.
- Post-subscription, the group will maintain its 57.9687% stake in Longjiang Environmental Protection.
- Trades at 0.66x P/B.
*Imperium Crown
- Fei County Wonder Stone Characteristic Town Development Co., a subsidiary of the group, signed a license agreement with the Frontier Group for its hotel in Wonder Stone Park to operate under the "Days" brand.
- Frontier Group holds the Days Inn China master franchise and will manage the hotel which is expected to commence operations in Oct '18.
- Trades at 0.5x P/B.
*SIA
- SIA-CAE pilot training JV in Singapore to commence operations next month.
- The JV will provide simulator and classroom training, supporting SIA Group airlines and other operators' pilot training needs in the region.
- The 50/50 JV will operate out of the Singapore Airlines Training Centre located near Changi Airport.
- Trades at 14.3x forward P/E.
Wednesday, July 18, 2018
SG Market (18 Jul 18)
MARKET OVERVIEW
- The market may track Wall Street higher after Fed chief Jerome Powell gave an upbeat assessment of the economy and signalled no change in gradual policy tightening although trade remains an uncertain dynamic.
- Technically, immediate resistance for the STI is at 3,300 with underlying support at 3,190-3,200.
CORPORATE RESULTS
*Keppel DC REIT
- 2Q18 DPU rose 4.6% to 1.82¢, bringing 1H18 payout to 3.62¢ within expectations at 47% of full year forecasts.
- For the quarter, revenue and NPI jumped to $41.9m (+21.5%) and $38.1m (+21.4%) mainly driven by acquisitions of Keppel DC Singapore 5, maincubes DC and Keppel DC Dublin 2.
- Portfolio occupancy eased 1.7ppt q/q to 92%, while aggregate leverage decreased 5.7ppt q/q to 31.7%.
- Trades at an annualised 1H18 yield of 5.4% and 1.34x P/B.
*Keppel-KBS US REIT
- 2Q18 DPU of US$0.015 beat IPO forecast marginally by 0.7%, in-line with expectations.
- Gross income of US$22.6m (forecast: US$23.1m) was worse than expected largely due to drop in rental from a tenant at Westmoor Centre which vacated ahead of lease expiry.
- NPI of US$13.8m (forecast: US$13.6m) was better than expected due to lower-than-forecast property expenses of US$8.8m (-7.2%).
- Portfolio committed occupancy improved 0.5ppt to 90.3%, while aggregate leverage eased 0.5ppt q/q to 33.1%.
- Trades at an annualised yield of 6.9% and 1.0x P/B.
*Keppel Infrastructure Trust
- Flat 2Q18 DPU of 0.93¢ on stable distributable cashflow of $36.2m (unch), within expectations.
- For the quarter, revenue fell 10% to $142.9m weakness in Basslink (-81.1%), Keppel Merlimau Cogen (-2.7%) and concessions (-2.1%) overshadowed growth in City Gas (+7.1%).
- Gearing ticked 0.4ppt q/q higher to 40.5%.
- NAV/share fell 2.7% q/q to 28.8¢ due to distributions, partially offset by marked-to-market valuation of derivative financial instruments and recognised profit.
- Trades at 7.1% yield and 1.8x P/B.
*First REIT
- 2Q18 DPU ticked up 0.5% to 2.15¢, bringing 1H18 DPU to 4.3¢ in line with estimates.
- For the quarter, gross revenue and NPI climbed to $28.9m (+5.3%) and $28.5m (+5%) on addition contribution from Buton Property, Siloam Hospitals Yogjakarta and existing properties.
- Aggregate leverage rose 0.6ppt q/q to 34.2%.
- Trades at annualised 2Q yield of 6.5% and 1.3x P/B.
IPO WATCH
*Koufu
- The food courts and coffee shops operator will make its trading debut today after receiving strong support for its IPO of 97m shares at $0.63 each with the public offer of 6.33m shares were about 17x oversubscribed.
- Separately, institutional investors such as Maxi-Harvest Group, One Hill Investments and Qilin Asset Management have also subscribed for an aggregate of 21m Cornerstone Shares.
- Out of the $70.5m in total proceeds raised, about $43m will be due to Koufu for the expansion of its retail network of F&B Outlets in Singapore and overseas; establishing a proposed integrated facility as well as expanding the provision of online food ordering and delivery services.
- Given its cashflow-generative business, the group has a robust balance sheet in a net cash position which will enable it to explore potential JVs and M&As in complementary business segments/markets.
- Although it has no fixed dividend policy, management intends to distribute dividends of at least 50% of net profit generated in FY18/19 to shareholders.
- The post-offering market cap is expected to be $349.8m, thus valuing the stock at 13x P/E, a discount to its closest peer, Kimly of 17x.
POSITIVE NEWS
*Jumbo
- Entered into franchise agreement with Ho Sing Food Co. for the establishment and operation of Ng Ah Sio Bak Kut Teh outlets in Taiwan.
- The deal has an initial term of 10 years and may be renewed for a further 10 years subject to certain terms to be determined by the group.
- Ho Sing has also committed to open at least 20 of such outlets with the first one expected to open this month at the Shin Kong Mitsukoshi (Xin Yi) Mall, Taipei City.
- Trades at 26x forward P/E.
*Nordic
- Secured several contracts with new and repeat customers, comprising MNCs and companies in the O&G and petrochemical industries for a total value of $13.0m.
- Trades at 12.5x trailing P/E
*Hyflux
- Awarded by AVIC-INTL Project Engineering Company and CPI Power Engineering to supply 2 units of desalination system for Rmb 40.3m.
- The systems are expected to provide 7,320 m3 of desalinated water per day to 2x660 MW ultra-supercritical units of Turkey Hunutlu Thermal Power Plant Project for industrial use.
- Contract is slated to be fulfilled over next 1.5 years and is not expected to contribute to FY18 results.
- The counter remains suspended.
NEUTRAL NEWS
*Singtel
- Its subsidiary, Amobee has emerged as the winner in the court supervised auction to acquire certain assets from Videology, a software provider for advanced TV and video advertising for US$101m, subject to adjustments for accounts receivable at closing, estimated to be US$20.9m.
- The acquisition, following Videology's voluntary Chapter 11 restructuring proceedings, includes Videology's technology platform, intellectual property and certain other assets of estimated net book value of US$5.3m.
- Videology has emerged as a leading provider of software that empowers advertisers and publishers to use data to optimise campaigns and spend across digital platforms and television.
- The addition of Videology's capabilities will be a further boost to Amobee's omni-channel platform and help marketers meet growing consumer demand for premium video and connected TV content.
- Trades at 15.6x forward P/E
- The market may track Wall Street higher after Fed chief Jerome Powell gave an upbeat assessment of the economy and signalled no change in gradual policy tightening although trade remains an uncertain dynamic.
- Technically, immediate resistance for the STI is at 3,300 with underlying support at 3,190-3,200.
CORPORATE RESULTS
*Keppel DC REIT
- 2Q18 DPU rose 4.6% to 1.82¢, bringing 1H18 payout to 3.62¢ within expectations at 47% of full year forecasts.
- For the quarter, revenue and NPI jumped to $41.9m (+21.5%) and $38.1m (+21.4%) mainly driven by acquisitions of Keppel DC Singapore 5, maincubes DC and Keppel DC Dublin 2.
- Portfolio occupancy eased 1.7ppt q/q to 92%, while aggregate leverage decreased 5.7ppt q/q to 31.7%.
- Trades at an annualised 1H18 yield of 5.4% and 1.34x P/B.
*Keppel-KBS US REIT
- 2Q18 DPU of US$0.015 beat IPO forecast marginally by 0.7%, in-line with expectations.
- Gross income of US$22.6m (forecast: US$23.1m) was worse than expected largely due to drop in rental from a tenant at Westmoor Centre which vacated ahead of lease expiry.
- NPI of US$13.8m (forecast: US$13.6m) was better than expected due to lower-than-forecast property expenses of US$8.8m (-7.2%).
- Portfolio committed occupancy improved 0.5ppt to 90.3%, while aggregate leverage eased 0.5ppt q/q to 33.1%.
- Trades at an annualised yield of 6.9% and 1.0x P/B.
*Keppel Infrastructure Trust
- Flat 2Q18 DPU of 0.93¢ on stable distributable cashflow of $36.2m (unch), within expectations.
- For the quarter, revenue fell 10% to $142.9m weakness in Basslink (-81.1%), Keppel Merlimau Cogen (-2.7%) and concessions (-2.1%) overshadowed growth in City Gas (+7.1%).
- Gearing ticked 0.4ppt q/q higher to 40.5%.
- NAV/share fell 2.7% q/q to 28.8¢ due to distributions, partially offset by marked-to-market valuation of derivative financial instruments and recognised profit.
- Trades at 7.1% yield and 1.8x P/B.
*First REIT
- 2Q18 DPU ticked up 0.5% to 2.15¢, bringing 1H18 DPU to 4.3¢ in line with estimates.
- For the quarter, gross revenue and NPI climbed to $28.9m (+5.3%) and $28.5m (+5%) on addition contribution from Buton Property, Siloam Hospitals Yogjakarta and existing properties.
- Aggregate leverage rose 0.6ppt q/q to 34.2%.
- Trades at annualised 2Q yield of 6.5% and 1.3x P/B.
IPO WATCH
*Koufu
- The food courts and coffee shops operator will make its trading debut today after receiving strong support for its IPO of 97m shares at $0.63 each with the public offer of 6.33m shares were about 17x oversubscribed.
- Separately, institutional investors such as Maxi-Harvest Group, One Hill Investments and Qilin Asset Management have also subscribed for an aggregate of 21m Cornerstone Shares.
- Out of the $70.5m in total proceeds raised, about $43m will be due to Koufu for the expansion of its retail network of F&B Outlets in Singapore and overseas; establishing a proposed integrated facility as well as expanding the provision of online food ordering and delivery services.
- Given its cashflow-generative business, the group has a robust balance sheet in a net cash position which will enable it to explore potential JVs and M&As in complementary business segments/markets.
- Although it has no fixed dividend policy, management intends to distribute dividends of at least 50% of net profit generated in FY18/19 to shareholders.
- The post-offering market cap is expected to be $349.8m, thus valuing the stock at 13x P/E, a discount to its closest peer, Kimly of 17x.
POSITIVE NEWS
*Jumbo
- Entered into franchise agreement with Ho Sing Food Co. for the establishment and operation of Ng Ah Sio Bak Kut Teh outlets in Taiwan.
- The deal has an initial term of 10 years and may be renewed for a further 10 years subject to certain terms to be determined by the group.
- Ho Sing has also committed to open at least 20 of such outlets with the first one expected to open this month at the Shin Kong Mitsukoshi (Xin Yi) Mall, Taipei City.
- Trades at 26x forward P/E.
*Nordic
- Secured several contracts with new and repeat customers, comprising MNCs and companies in the O&G and petrochemical industries for a total value of $13.0m.
- Trades at 12.5x trailing P/E
*Hyflux
- Awarded by AVIC-INTL Project Engineering Company and CPI Power Engineering to supply 2 units of desalination system for Rmb 40.3m.
- The systems are expected to provide 7,320 m3 of desalinated water per day to 2x660 MW ultra-supercritical units of Turkey Hunutlu Thermal Power Plant Project for industrial use.
- Contract is slated to be fulfilled over next 1.5 years and is not expected to contribute to FY18 results.
- The counter remains suspended.
NEUTRAL NEWS
*Singtel
- Its subsidiary, Amobee has emerged as the winner in the court supervised auction to acquire certain assets from Videology, a software provider for advanced TV and video advertising for US$101m, subject to adjustments for accounts receivable at closing, estimated to be US$20.9m.
- The acquisition, following Videology's voluntary Chapter 11 restructuring proceedings, includes Videology's technology platform, intellectual property and certain other assets of estimated net book value of US$5.3m.
- Videology has emerged as a leading provider of software that empowers advertisers and publishers to use data to optimise campaigns and spend across digital platforms and television.
- The addition of Videology's capabilities will be a further boost to Amobee's omni-channel platform and help marketers meet growing consumer demand for premium video and connected TV content.
- Trades at 15.6x forward P/E
Tuesday, July 17, 2018
SG Market (17 Jul 18)
MARKET OVERVIEW
- The market looked set for a weaker open as tech stocks led US stocks lower and oil skidded more than 4% on resumption of Libyan production and talk of possible supply increases by Saudi Arabia and Russia.
- Technically, underlying support for STI lies at at 3,190-3,200 with immediate resistance seen at 3,300.
CORPORATE RESULTS
*Keppel REIT
- 2Q18 DPU remained flat at 1.42¢ on marginally higher distributable income offset by increased number of units.
- Gross revenue and NPI grew to $51.7m (+29.6%) and $43.2m (+35.5%) respectively, mainly due to increase in one-off income, and higher contribution from Bugis Junction Towers and Ocean Financial Centre partially offset by weaker contribution from 275 George Street.
- Average signing rent for Singapore office leases was approx. $10.74 psf in 1H18 (1Q18: $10.05 psf).
- Committed occupancy further eased 0.1ppt q/q to 99.3%, while aggregate leverage remained at 38.6%.
- Trades at 5.5% dividend yield and 0.8x P/B.
- MKE has a Hold with TP of $1.19.
*Soilbuild REIT
- 2Q18 DPU declined 13.8% to 1.264¢, bringing 1H18 DPU to 2.588¢ (-12.4%), in line with estimates.
- Gross revenue and NPI fell 13.1% and 13.2% respectively mainly due to lower contribution from 72 Loyang Way, a property known as KTL Offshore and West Park BizCentral.
- Portfolio occupancy rate rose modestly to 87.6% q/q while WALE stands at 2.9years.
- Negative rental reversions of 8.3% and 14.6% were recorded for renewals (including forward renewals) and new leases in 1H18 respectively.
- Aggregate leverage stood at 37.6%, which allows debt headroom of $45.9m
- Trades at 7.7% yield and 1.0x P/B
*Qian Hu
- 2Q19 net profit jumped almost six fold to $146k from $25k, driven by stronger sales of Dragon Fish, new aquaculture business in China, and higher-margin accessories.
- Revenue for the quarter inched up 1% to $21.9m, dragged by a 4.8% and 0.6% decline in Accessories and Plastics sales respectively.
- Gross margin expanded 1.0 ppt to 30.1% due to changes in sales mix.
- Bottomline was negatively impacted by higher finance costs of $131k (+33.7%) due to higher interest rates charged and increased bank borrowings.
- Trades at 47.5x trailing P/E.
POSITIVE NEWS
*Neratel
- Secured a total of $11.7m worth of new contracts for both Network Infrastructure (NI) and Wireless Infrastructure (WIN) business segments.
- The deals consists of an $8.5m NI contract to provide internet service infrastructure for a leading service provider in Southeast Asia and $3.2m WIN contract to supply microwave links to a Government entity in the Middle East.
- Both contracts were awarded by repeat customers.
- Trades at 15.6x trailing P/E.
*ST Engineering
- Aerospace sector secured $510m worth of new contracts for services ranging from heavy maintenance to engine wash and aircraft interior reconfiguration.
- In addition, the group expanded its composite panel manufacturing capacity by 50% with the opening of its second plant in Kodersdorf, Saxony, Germany.
- The plant has a production capacity of 200,000 panels per annum.
- Trades at 18.1x forward P/E.
*UOL
- Acquiring 180 apartments and ancillary facilities at Thamrin Nine's Tower 2 for US$56.3m ($76.3m) from PT Putragaya Wahana, which will be developed into a 180-key PARKROYAL Serviced Suites.
- Meanwhile, the group's hotel subsidiary, Pan Pacific Hotels also signed a management contract with PT Putragaya Wahana to operate a 200-key PARKROYAL Jakarta within Tower 2 of the same development.
- This will strengthen the group's hospitality footprint in Jakarta, bringing the total number of owned/managed hotels and serviced suites in the city to three and further strengthen its recurring income streams.
- Trades at 0.6x P/B.
NEUTRAL NEWS
*Datapulse / ICP
- Entered into a non-binding LOI with ICP for the proposed acquisition of MHI MY 1.
- MHI MY 1 owns a midscale hotel in Kuala Lumpur, currently operating under the "Geo Hotel Kuala Lumpur" brand.
- Upon the completion of a refurbishment programme, the hotel will debut as Travelodge Central Market, KL.
- This is part of Datapulse's plan to diversify into the hospitality industry, which has strong growth potential.
- For ICP, the proposed disposal is in line with its asset-light strategy, focusing on hotel management and franchising across Asia to expand and strengthen the Travelodge brand presence.
- Trades at 0.72x P/B and 0.9x P/B respectively.
*Raffles Medical Group
- Raffles Health insurance (RHI) launched Raffles Shield, an Integrated Shield Plan (IP) developed in partnership with a Medisave-approved IP providing coverage for hospital and surgical expenses.
- This plan comprises MediShield Life and additional private insurance coverage administered by RHI, which enhances the basic coverage of the former.
- Raffles Shield will be made available to the pubic from 1 Aug '18.
- Trades at 28.2x forward P/E.
- The market looked set for a weaker open as tech stocks led US stocks lower and oil skidded more than 4% on resumption of Libyan production and talk of possible supply increases by Saudi Arabia and Russia.
- Technically, underlying support for STI lies at at 3,190-3,200 with immediate resistance seen at 3,300.
CORPORATE RESULTS
*Keppel REIT
- 2Q18 DPU remained flat at 1.42¢ on marginally higher distributable income offset by increased number of units.
- Gross revenue and NPI grew to $51.7m (+29.6%) and $43.2m (+35.5%) respectively, mainly due to increase in one-off income, and higher contribution from Bugis Junction Towers and Ocean Financial Centre partially offset by weaker contribution from 275 George Street.
- Average signing rent for Singapore office leases was approx. $10.74 psf in 1H18 (1Q18: $10.05 psf).
- Committed occupancy further eased 0.1ppt q/q to 99.3%, while aggregate leverage remained at 38.6%.
- Trades at 5.5% dividend yield and 0.8x P/B.
- MKE has a Hold with TP of $1.19.
*Soilbuild REIT
- 2Q18 DPU declined 13.8% to 1.264¢, bringing 1H18 DPU to 2.588¢ (-12.4%), in line with estimates.
- Gross revenue and NPI fell 13.1% and 13.2% respectively mainly due to lower contribution from 72 Loyang Way, a property known as KTL Offshore and West Park BizCentral.
- Portfolio occupancy rate rose modestly to 87.6% q/q while WALE stands at 2.9years.
- Negative rental reversions of 8.3% and 14.6% were recorded for renewals (including forward renewals) and new leases in 1H18 respectively.
- Aggregate leverage stood at 37.6%, which allows debt headroom of $45.9m
- Trades at 7.7% yield and 1.0x P/B
*Qian Hu
- 2Q19 net profit jumped almost six fold to $146k from $25k, driven by stronger sales of Dragon Fish, new aquaculture business in China, and higher-margin accessories.
- Revenue for the quarter inched up 1% to $21.9m, dragged by a 4.8% and 0.6% decline in Accessories and Plastics sales respectively.
- Gross margin expanded 1.0 ppt to 30.1% due to changes in sales mix.
- Bottomline was negatively impacted by higher finance costs of $131k (+33.7%) due to higher interest rates charged and increased bank borrowings.
- Trades at 47.5x trailing P/E.
POSITIVE NEWS
*Neratel
- Secured a total of $11.7m worth of new contracts for both Network Infrastructure (NI) and Wireless Infrastructure (WIN) business segments.
- The deals consists of an $8.5m NI contract to provide internet service infrastructure for a leading service provider in Southeast Asia and $3.2m WIN contract to supply microwave links to a Government entity in the Middle East.
- Both contracts were awarded by repeat customers.
- Trades at 15.6x trailing P/E.
*ST Engineering
- Aerospace sector secured $510m worth of new contracts for services ranging from heavy maintenance to engine wash and aircraft interior reconfiguration.
- In addition, the group expanded its composite panel manufacturing capacity by 50% with the opening of its second plant in Kodersdorf, Saxony, Germany.
- The plant has a production capacity of 200,000 panels per annum.
- Trades at 18.1x forward P/E.
*UOL
- Acquiring 180 apartments and ancillary facilities at Thamrin Nine's Tower 2 for US$56.3m ($76.3m) from PT Putragaya Wahana, which will be developed into a 180-key PARKROYAL Serviced Suites.
- Meanwhile, the group's hotel subsidiary, Pan Pacific Hotels also signed a management contract with PT Putragaya Wahana to operate a 200-key PARKROYAL Jakarta within Tower 2 of the same development.
- This will strengthen the group's hospitality footprint in Jakarta, bringing the total number of owned/managed hotels and serviced suites in the city to three and further strengthen its recurring income streams.
- Trades at 0.6x P/B.
NEUTRAL NEWS
*Datapulse / ICP
- Entered into a non-binding LOI with ICP for the proposed acquisition of MHI MY 1.
- MHI MY 1 owns a midscale hotel in Kuala Lumpur, currently operating under the "Geo Hotel Kuala Lumpur" brand.
- Upon the completion of a refurbishment programme, the hotel will debut as Travelodge Central Market, KL.
- This is part of Datapulse's plan to diversify into the hospitality industry, which has strong growth potential.
- For ICP, the proposed disposal is in line with its asset-light strategy, focusing on hotel management and franchising across Asia to expand and strengthen the Travelodge brand presence.
- Trades at 0.72x P/B and 0.9x P/B respectively.
*Raffles Medical Group
- Raffles Health insurance (RHI) launched Raffles Shield, an Integrated Shield Plan (IP) developed in partnership with a Medisave-approved IP providing coverage for hospital and surgical expenses.
- This plan comprises MediShield Life and additional private insurance coverage administered by RHI, which enhances the basic coverage of the former.
- Raffles Shield will be made available to the pubic from 1 Aug '18.
- Trades at 28.2x forward P/E.
Monday, July 16, 2018
SG Market (16 Jul 18)
MARKET OVERVIEW
- The market is likely to start the week with a slight positive bias as China appeared to back off from retaliatory tariff threats ahead of a slew of economic data, including GDP, industrial production and retail sales,
- Investors will also turn their attention to Fed's semi-annual testimony to Congress, which could lay the groundwork for further tightening, and the start of the 2Q18 earnings season.
- Technically, immediate resistance for STI is at 3,300, while crucial support level at 3,190-3,200 remains intact in the near-term.
POSITIVE NEWS
**Boardroom
- Acquiring Symphony Corporatehouse Sdn Bhd for RM164.14m ($55.64m) via combination of cash (75%) and shares (25%).
- The enlarged entity will command an industry-leading market share in the share registry, corporate secretarial, and outsourced corporate services sector in Malaysia, paving the way for more growth opportunities in the Asia-Pacific.
- Upon completion, Symphony House will become the second largest shareholder in Boardroom with a 7.63% stake.
- Trades at 9.1x trailing P/E
NEUTRAL NEWS
*SATS
- Setting up 60/40 JV with Wilmar to build a central kitchen in Langfang, Hebei, China that will engage in food manufacturing, processing and sale of food products.
- The JVCo will be incorporated with a registered capital of Rmb120m ($24.53m)
- Trades at 22.6x forward P/E.
*Mapletree Industrial Trust
- Obtained TOP for its build-to-suit (BTS) data centre development, Mapletree Sunview 1.
- The 6-storey purpose-built data centre with gfa of 242,000 sf will be fully leased to an established data centre operator for an initial lease term of >10 years with staggered rental escalations as well as renewal options.
- This will be its third BTS data centre after the successful completion of Tata Communications Exchange at Paya Lebar iPark in 2010 and 26A Ayer Rajah Crescent for Equinix Singapore at one-north in 2015.
- MIT's portfolio includes four data centres in Singapore and another 14 in US inder a 40:60 JV with its parent.
- Hi-tech buildings is its largest property segment, representing 37.7% of portfolio valuation.
- Trades at 6.0% yield and 1.3x P/B
*Rex Int'l
- Divesting its 25.72% stake in Steeldrum Oil in return for 23.9m new AIM-listed Columbus Energy Resources shares, (3.2% stake) valued at US$1.5m, with further deferred issue of additional shares if certain events materialise.
- This is part of the group's plans to rationalise its asset base to focus on its two key discovery assets: GA South #1 in Block 50 in Oman and Rolvsnes in PL338C in Norway.
- Subject to regulatory, JV partner and third-party approvals, the proposed sale is expected to complete in 4Q18 and will not have any material impact on the group's FY18 financials.
- Trades at 0.35x P/B
*Mercurius Capital Investment
- Signs licensing agreement to granted Clover Lifestyle the right to use its proprietary brands namely Friven, Allegoria, DS, and Relax at home for the sale of bedding, bed linen and bath products exclusively in Singapore and Malaysia for one year.
- Licence fee payable to the group is $0.05m and Clover aims to distribute its various brands of bedding and bed linen through online and media channels.
- The market is likely to start the week with a slight positive bias as China appeared to back off from retaliatory tariff threats ahead of a slew of economic data, including GDP, industrial production and retail sales,
- Investors will also turn their attention to Fed's semi-annual testimony to Congress, which could lay the groundwork for further tightening, and the start of the 2Q18 earnings season.
- Technically, immediate resistance for STI is at 3,300, while crucial support level at 3,190-3,200 remains intact in the near-term.
POSITIVE NEWS
**Boardroom
- Acquiring Symphony Corporatehouse Sdn Bhd for RM164.14m ($55.64m) via combination of cash (75%) and shares (25%).
- The enlarged entity will command an industry-leading market share in the share registry, corporate secretarial, and outsourced corporate services sector in Malaysia, paving the way for more growth opportunities in the Asia-Pacific.
- Upon completion, Symphony House will become the second largest shareholder in Boardroom with a 7.63% stake.
- Trades at 9.1x trailing P/E
NEUTRAL NEWS
*SATS
- Setting up 60/40 JV with Wilmar to build a central kitchen in Langfang, Hebei, China that will engage in food manufacturing, processing and sale of food products.
- The JVCo will be incorporated with a registered capital of Rmb120m ($24.53m)
- Trades at 22.6x forward P/E.
*Mapletree Industrial Trust
- Obtained TOP for its build-to-suit (BTS) data centre development, Mapletree Sunview 1.
- The 6-storey purpose-built data centre with gfa of 242,000 sf will be fully leased to an established data centre operator for an initial lease term of >10 years with staggered rental escalations as well as renewal options.
- This will be its third BTS data centre after the successful completion of Tata Communications Exchange at Paya Lebar iPark in 2010 and 26A Ayer Rajah Crescent for Equinix Singapore at one-north in 2015.
- MIT's portfolio includes four data centres in Singapore and another 14 in US inder a 40:60 JV with its parent.
- Hi-tech buildings is its largest property segment, representing 37.7% of portfolio valuation.
- Trades at 6.0% yield and 1.3x P/B
*Rex Int'l
- Divesting its 25.72% stake in Steeldrum Oil in return for 23.9m new AIM-listed Columbus Energy Resources shares, (3.2% stake) valued at US$1.5m, with further deferred issue of additional shares if certain events materialise.
- This is part of the group's plans to rationalise its asset base to focus on its two key discovery assets: GA South #1 in Block 50 in Oman and Rolvsnes in PL338C in Norway.
- Subject to regulatory, JV partner and third-party approvals, the proposed sale is expected to complete in 4Q18 and will not have any material impact on the group's FY18 financials.
- Trades at 0.35x P/B
*Mercurius Capital Investment
- Signs licensing agreement to granted Clover Lifestyle the right to use its proprietary brands namely Friven, Allegoria, DS, and Relax at home for the sale of bedding, bed linen and bath products exclusively in Singapore and Malaysia for one year.
- Licence fee payable to the group is $0.05m and Clover aims to distribute its various brands of bedding and bed linen through online and media channels.
Friday, July 13, 2018
SG Market (13 Jul 18)
MARKET OVERVIEW
- Local stocks may track gains on Wall Street after Chinese and US officials signalled they were open to resuming trade talks as China appeared to tone down on hitting back at latest tariff threats.
- Technically, the immediate resistance for STI is seen at 3,280 with further upside capped at 3,340. Underlying support at 3,190-3,200 remains intact in the near-term.
MACRO WATCH
*Economy
- Advance estimates show the Singapore's 2Q18 GDP expanded by slower-than-expected 3.8% (est: +4.1%, 1Q18: +4.3%).
- Manufacturing remained the key driver but moderated to 8.6%, down from 9.7% in previous quarter, with growth led by electronics and biomedical clusters.
- Services also saw slower growth of 3.4% (1Q18: +4%), supported by finance & insurance, and wholesale & retail trade sectors.
- Construction contracted 4.4%, extending the 5.2% decline in the previous quarter, due mainly to continued weakness in private sector construction activities.
POSITIVE NEWS
*Acromec
- Secured another contract in the healthcare sector valued at $2.9m, which is expected to be completed by the 1QFY19.
- The contract is for the outfitting of an established private sector day-surgery centre and brings the number of contracts secured in the healthcare sector to three within the last months.
- Adding these contracts, the group's order book now stands at $21m and will contribute positively to the group's current FY.
- Trades at 2.4x P/B
*LHN
- Entered into its first management service agreement with Mother Construction, a local well-established property developer in Yangon with over 20 years in the industry.
- The project is to renovate and provide property management and leasing services to a serviced residence in Yangon.
- The serviced residence is expected to be operational in early Jan '19 and will be managed under the group's 85 SOHO serviced residence brand.
- Trades at 0.79x P/B
NEUTRAL NEWS
*SGX
- Welcomed Hong Kong internet securities brokerage startup Futu Securities as its 26th trading member.
- Backed by strategic shareholders Tencent, Matrix Partners China and Sequoia Capital, Futu allows Chinese individual investors to trade stocks across different markets.
- Trades at 20.8x forward P/E.
*Accordia Golf Trust
- Several days of torrential rainfall since 28 Jun had caused flash flooding and landslides in western Japan.
- Three of its golf courses (Hongo Country Club, Takehara Country Club and Fukuoka Pheasant) were closed due to public road closures against possibility of landslides and repair works.
- While several of its golf courses suffered damage, there was no material impact.
- Trades at 7.3% annualised yield and 0.68x P/B.
*Frasers Property
- Acquiring 75% stake in Phu An Dien Real Estate JSC (PAD) for VND799b ($47.3m).
- PAD will undertake the development of a residential-cum-commercial project on a mixed-use development plot at Linh Trung Ward, Ho Chi Minh City.
- Trades at 0.67x P/B.
*Liongold
- Entered into a loan agreement with CEO Tan Soo Khoon for an unsecured interest-free loan of up to $3.5m for a period of 24 months.
- Tan has a direct interest of 1.8m shares, representing 0.02% stake in the group
- The loan will mainly be used for general working capital.
- Trades at 0.53x P/B.
- Local stocks may track gains on Wall Street after Chinese and US officials signalled they were open to resuming trade talks as China appeared to tone down on hitting back at latest tariff threats.
- Technically, the immediate resistance for STI is seen at 3,280 with further upside capped at 3,340. Underlying support at 3,190-3,200 remains intact in the near-term.
MACRO WATCH
*Economy
- Advance estimates show the Singapore's 2Q18 GDP expanded by slower-than-expected 3.8% (est: +4.1%, 1Q18: +4.3%).
- Manufacturing remained the key driver but moderated to 8.6%, down from 9.7% in previous quarter, with growth led by electronics and biomedical clusters.
- Services also saw slower growth of 3.4% (1Q18: +4%), supported by finance & insurance, and wholesale & retail trade sectors.
- Construction contracted 4.4%, extending the 5.2% decline in the previous quarter, due mainly to continued weakness in private sector construction activities.
POSITIVE NEWS
*Acromec
- Secured another contract in the healthcare sector valued at $2.9m, which is expected to be completed by the 1QFY19.
- The contract is for the outfitting of an established private sector day-surgery centre and brings the number of contracts secured in the healthcare sector to three within the last months.
- Adding these contracts, the group's order book now stands at $21m and will contribute positively to the group's current FY.
- Trades at 2.4x P/B
*LHN
- Entered into its first management service agreement with Mother Construction, a local well-established property developer in Yangon with over 20 years in the industry.
- The project is to renovate and provide property management and leasing services to a serviced residence in Yangon.
- The serviced residence is expected to be operational in early Jan '19 and will be managed under the group's 85 SOHO serviced residence brand.
- Trades at 0.79x P/B
NEUTRAL NEWS
*SGX
- Welcomed Hong Kong internet securities brokerage startup Futu Securities as its 26th trading member.
- Backed by strategic shareholders Tencent, Matrix Partners China and Sequoia Capital, Futu allows Chinese individual investors to trade stocks across different markets.
- Trades at 20.8x forward P/E.
*Accordia Golf Trust
- Several days of torrential rainfall since 28 Jun had caused flash flooding and landslides in western Japan.
- Three of its golf courses (Hongo Country Club, Takehara Country Club and Fukuoka Pheasant) were closed due to public road closures against possibility of landslides and repair works.
- While several of its golf courses suffered damage, there was no material impact.
- Trades at 7.3% annualised yield and 0.68x P/B.
*Frasers Property
- Acquiring 75% stake in Phu An Dien Real Estate JSC (PAD) for VND799b ($47.3m).
- PAD will undertake the development of a residential-cum-commercial project on a mixed-use development plot at Linh Trung Ward, Ho Chi Minh City.
- Trades at 0.67x P/B.
*Liongold
- Entered into a loan agreement with CEO Tan Soo Khoon for an unsecured interest-free loan of up to $3.5m for a period of 24 months.
- Tan has a direct interest of 1.8m shares, representing 0.02% stake in the group
- The loan will mainly be used for general working capital.
- Trades at 0.53x P/B.
Thursday, July 12, 2018
SG Market (12 Jul 18)
MARKET OVERVIEW
- The market continues to be driven by risk-off sentiment over concerns of the escalating US-China trade spat and its impact on global growth
- Oil-related counters may under come pressure as crude plunged 5% towards US$70/bbl, the most in two years despite a big US draw as Libyan production returned.
- Technically, the STI may re-test its 3,190-3,200 crucial support level, while upside remains capped at 3,280 in the near-term.
CORPORATE RESULTS
*SPH
- 3QFY18 net profit surged 64.3% to $47.4m, maily shored by lower impairment charges and higher investment income. This took 9MFY18 earnings of $148.1m to 68.4% of full-year consensus estimate.
- For the uuarter, revenue fell 3.8% to $250.1m as print media declined 8% to $167.9m despite digital business achieving better traction in circulation (+43.5%) and readership (37,000).
- Property sales dipped 2.4% to $60.1m on lower rental income from its retail assets but aged care and education businesses jumped 38.5% to $22m.
- Excluding impairment charges of $2.3m (-40.9%), core operating profit declined 7.4% to $66.7m but bottom line was boosted by net investment income of $21.9m (+87.4%).
- Following recent cooling measures, the group is monitoring the potential impact on The Woodleigh Residences, its JV project with Kajima Development.
- Looking ahead, the group is looking to sharpen digital capabilities and expand real estate asset management and aged care businesses overseas.
- Trades at 20.7x forward P/E and 3.3% yield.
*Duty Free Int'l
-1QFY19 net profit slumped 39.9% to RM9m on lower sales takings, partially offset by higher interest income and FX gain.
- Revenue fell 28.9% to RM117.4m due to supply shortage of certain popular products.
- Declared higher first interim DPS of 0.8¢(1QFY18: 0.35¢).
- Trades at 20.3x trailing P/E.
POSITIVE NEWS
*PACC Offshore
- Setting up a JV with Kerry TJ Logistics in Taiwan to provide an integrated solutions platform for offshore wind farm developers, EPCI contractors and wind turbine manufacturers.
- The JV aims to develop industry-first solutions platform integrating supply chain and marine solutions for the entire offshore renewables project life cycle.
- The partnership will leverage on POSH's specialised expertise in offshore marine operations and Kerry's local network and logistics knowhow.
- MOUs have been signed with Rolls-Royce to explore suitable designs for vessels specific to offshore wind operations and Macquarie Capital and Swancor to jointly explore collaboration opportunities in the Taiwan offshore wind market.
NEUTRAL NEWS
*Top Glove
- Updated that the High Court has set aside the ex-parte Mareva Order granted on 2 Jul '18 against Wong Chin Toh, Low Chin Guan, Adventa Capital and ACPL.
- Interparty hearing for both applications fixed on 19 Jul '18.
- Trades at 26.7x forward P/E.
*RH Petrogas
- Signed new 20-year terms production sharing contracts for Kepala Burug and Salawati Kepala Burung contract area.
- The group will hold 70% participating interest in the areas and each will be the operator for their respective blocks.
- Trades at 4.0x trailing P/E.
- The market continues to be driven by risk-off sentiment over concerns of the escalating US-China trade spat and its impact on global growth
- Oil-related counters may under come pressure as crude plunged 5% towards US$70/bbl, the most in two years despite a big US draw as Libyan production returned.
- Technically, the STI may re-test its 3,190-3,200 crucial support level, while upside remains capped at 3,280 in the near-term.
CORPORATE RESULTS
*SPH
- 3QFY18 net profit surged 64.3% to $47.4m, maily shored by lower impairment charges and higher investment income. This took 9MFY18 earnings of $148.1m to 68.4% of full-year consensus estimate.
- For the uuarter, revenue fell 3.8% to $250.1m as print media declined 8% to $167.9m despite digital business achieving better traction in circulation (+43.5%) and readership (37,000).
- Property sales dipped 2.4% to $60.1m on lower rental income from its retail assets but aged care and education businesses jumped 38.5% to $22m.
- Excluding impairment charges of $2.3m (-40.9%), core operating profit declined 7.4% to $66.7m but bottom line was boosted by net investment income of $21.9m (+87.4%).
- Following recent cooling measures, the group is monitoring the potential impact on The Woodleigh Residences, its JV project with Kajima Development.
- Looking ahead, the group is looking to sharpen digital capabilities and expand real estate asset management and aged care businesses overseas.
- Trades at 20.7x forward P/E and 3.3% yield.
*Duty Free Int'l
-1QFY19 net profit slumped 39.9% to RM9m on lower sales takings, partially offset by higher interest income and FX gain.
- Revenue fell 28.9% to RM117.4m due to supply shortage of certain popular products.
- Declared higher first interim DPS of 0.8¢(1QFY18: 0.35¢).
- Trades at 20.3x trailing P/E.
POSITIVE NEWS
*PACC Offshore
- Setting up a JV with Kerry TJ Logistics in Taiwan to provide an integrated solutions platform for offshore wind farm developers, EPCI contractors and wind turbine manufacturers.
- The JV aims to develop industry-first solutions platform integrating supply chain and marine solutions for the entire offshore renewables project life cycle.
- The partnership will leverage on POSH's specialised expertise in offshore marine operations and Kerry's local network and logistics knowhow.
- MOUs have been signed with Rolls-Royce to explore suitable designs for vessels specific to offshore wind operations and Macquarie Capital and Swancor to jointly explore collaboration opportunities in the Taiwan offshore wind market.
NEUTRAL NEWS
*Top Glove
- Updated that the High Court has set aside the ex-parte Mareva Order granted on 2 Jul '18 against Wong Chin Toh, Low Chin Guan, Adventa Capital and ACPL.
- Interparty hearing for both applications fixed on 19 Jul '18.
- Trades at 26.7x forward P/E.
*RH Petrogas
- Signed new 20-year terms production sharing contracts for Kepala Burug and Salawati Kepala Burung contract area.
- The group will hold 70% participating interest in the areas and each will be the operator for their respective blocks.
- Trades at 4.0x trailing P/E.
Wednesday, July 11, 2018
SG Market (11 Jul 18)
MARKET OVERVIEW
- The stage is set for a volatile session as US prepares to hit China with tariffs on additional US$200b of Chinese imports as early as Sep, marking a sharp escalation of the trade war between the world's two largest economies.
- Technically, immediate resistance for STI lies at 3,280 with upside capped at 3,340, while crucial support at 3,190-3,200 remains intact.
CORPORATE RESULTS
*SPH REIT
- Flat 3QFY18 DPU of 1.37¢ was in line with expectations.
- Gross revenue and NPI dipped to $51.8m (-2.9%) and $40.6m (-3.8%) on lower rental income from Paragon mall.
- Portfolio was nearly full occupancy at 99.6%, but recorded 6% negative rental reversion for 9MFY18 (Paragon: -6.2%, Clementi Mall: +5.3%) though 3Q decline was more moderate than 1HFY18. Ytd shopper traffic was steady.
- WALE slipped to 1.9 years (2QFY18: 2.1 years), with 3.7% of NLA due to expire in rest of FY18 (2QFY18: 8.2%).
- Aggregate leverage stayed at 25.4% with average debt cost of 2.84%. This was prior to its $63.2m acquisition of The Rail Mall.
- Trades at an annualised 3QFY18 yield of 5.5% and 1.06x P/B.
POSITIVE NEWS
*Frasers Commercial Trust
- Divesting 55 Market Street, a 16-storey commercial property in Raffles Place for $216.8m or 44.5% premium above latest valuation of $150m and almost 3x the original purchase price of $72.5m in 2006.
- This translates to S$3,020 psf and represents an implied NPI yield of 1.7%.
- Expects to recognise an estimated net gain of $76.5m against $139m book value or 8.7¢/unit.
- Assuming all net divestment proceeds are used to repay existing debt, aggregate leverage would drop to 26.5% from 34.7%.
- Trades at 6.9% yield and 0.9x P/B
*Yongnam
- Secured four contracts worth $23.0m for projects in Singapore.
- Two contracts are for the supply, fabrication and delivery of structural steel kingposts for a new 12-storey block at Singapore General Hospital and a mixed development project in Bidadari.
- Two structural steelwork contracts are for the construction of an industrial development in Singapore, to be completed by the 1Q19.
- Trades at 0.5x P/B
NEUTRAL NEWS
*GuocoLand
- Exercised option to purchase freehold condo, 76-unit Casa Meyfort in East Coast in a $319.9m collective sale, which below $340m asking price.
- Inclusive of $57.8m development charge, the 85,249 sf site with plot ratio of 2.8x works out to be $1,582 psf ppr. This is 3-4% higher than the price paid for other freehold properties in the area (Amber Park: $1,515, Parkway Mansion: $1,539) and is also 23% higher than the land rate for 99-year Katong Park Towers.
- Based on ASP of $2,300 psf and no additional ABSD, MKE derives a development surplus of 2¢/share from this project.
- Ascribing a 0.55x P/RNAV, MKE has a Hold with TP of $2.00.
*SGX
- Launching SGX FlexC FX futures on 27 Aug to futurise OTC product offerings.
- This FX solution enables market participants to trade and clear customised FX futures on the OTC market in SGX's platform just like a standard SGX FX futures contract.
- With FX markets moving towards central clearing, this new feature will offer an effective way of enhancing operational efficiencies, lowering costs and counterparty credit risk.
- Trades at 20.6x forward P/E
*Hyflux
- Received LOI from Asia Water Development Engineering Company (AWDEC) to award a second contract for a seawater reverse osmosis desalination package in tBandar Abbas, Iran.
- This involves the design, manufacture and supply of another 200,000 m3/day desalination unit with similar specifications as the first plant and forms part of five desalination plants which AWDEC plans to build as part of the proposed Saghi Kosar Desalination and Power Plant in Bandar Abbas.
- Both parties will finalise details within two months.
- Counter remains suspended.
*Citic Envirotech
- Announced two initiative at the Singapore International Water Week, namely the launch of Singapore Envirotech Accelerator and the opening of US Reverse Osmosis and Nano-Filtration membrane manufacturing plant.
- For the former, the group has committed to investing $30m over four years and employing at least 35 technology personnel for Singapore Envirotech Accelerator.
- For the latter, the group has commenced the opening of a US$15m, 40,500 sq ft membrane manufacturing facility in Conroe, Texas, USA.
- Trades at 9.3x forward P/E
- The stage is set for a volatile session as US prepares to hit China with tariffs on additional US$200b of Chinese imports as early as Sep, marking a sharp escalation of the trade war between the world's two largest economies.
- Technically, immediate resistance for STI lies at 3,280 with upside capped at 3,340, while crucial support at 3,190-3,200 remains intact.
CORPORATE RESULTS
*SPH REIT
- Flat 3QFY18 DPU of 1.37¢ was in line with expectations.
- Gross revenue and NPI dipped to $51.8m (-2.9%) and $40.6m (-3.8%) on lower rental income from Paragon mall.
- Portfolio was nearly full occupancy at 99.6%, but recorded 6% negative rental reversion for 9MFY18 (Paragon: -6.2%, Clementi Mall: +5.3%) though 3Q decline was more moderate than 1HFY18. Ytd shopper traffic was steady.
- WALE slipped to 1.9 years (2QFY18: 2.1 years), with 3.7% of NLA due to expire in rest of FY18 (2QFY18: 8.2%).
- Aggregate leverage stayed at 25.4% with average debt cost of 2.84%. This was prior to its $63.2m acquisition of The Rail Mall.
- Trades at an annualised 3QFY18 yield of 5.5% and 1.06x P/B.
POSITIVE NEWS
*Frasers Commercial Trust
- Divesting 55 Market Street, a 16-storey commercial property in Raffles Place for $216.8m or 44.5% premium above latest valuation of $150m and almost 3x the original purchase price of $72.5m in 2006.
- This translates to S$3,020 psf and represents an implied NPI yield of 1.7%.
- Expects to recognise an estimated net gain of $76.5m against $139m book value or 8.7¢/unit.
- Assuming all net divestment proceeds are used to repay existing debt, aggregate leverage would drop to 26.5% from 34.7%.
- Trades at 6.9% yield and 0.9x P/B
*Yongnam
- Secured four contracts worth $23.0m for projects in Singapore.
- Two contracts are for the supply, fabrication and delivery of structural steel kingposts for a new 12-storey block at Singapore General Hospital and a mixed development project in Bidadari.
- Two structural steelwork contracts are for the construction of an industrial development in Singapore, to be completed by the 1Q19.
- Trades at 0.5x P/B
NEUTRAL NEWS
*GuocoLand
- Exercised option to purchase freehold condo, 76-unit Casa Meyfort in East Coast in a $319.9m collective sale, which below $340m asking price.
- Inclusive of $57.8m development charge, the 85,249 sf site with plot ratio of 2.8x works out to be $1,582 psf ppr. This is 3-4% higher than the price paid for other freehold properties in the area (Amber Park: $1,515, Parkway Mansion: $1,539) and is also 23% higher than the land rate for 99-year Katong Park Towers.
- Based on ASP of $2,300 psf and no additional ABSD, MKE derives a development surplus of 2¢/share from this project.
- Ascribing a 0.55x P/RNAV, MKE has a Hold with TP of $2.00.
*SGX
- Launching SGX FlexC FX futures on 27 Aug to futurise OTC product offerings.
- This FX solution enables market participants to trade and clear customised FX futures on the OTC market in SGX's platform just like a standard SGX FX futures contract.
- With FX markets moving towards central clearing, this new feature will offer an effective way of enhancing operational efficiencies, lowering costs and counterparty credit risk.
- Trades at 20.6x forward P/E
*Hyflux
- Received LOI from Asia Water Development Engineering Company (AWDEC) to award a second contract for a seawater reverse osmosis desalination package in tBandar Abbas, Iran.
- This involves the design, manufacture and supply of another 200,000 m3/day desalination unit with similar specifications as the first plant and forms part of five desalination plants which AWDEC plans to build as part of the proposed Saghi Kosar Desalination and Power Plant in Bandar Abbas.
- Both parties will finalise details within two months.
- Counter remains suspended.
*Citic Envirotech
- Announced two initiative at the Singapore International Water Week, namely the launch of Singapore Envirotech Accelerator and the opening of US Reverse Osmosis and Nano-Filtration membrane manufacturing plant.
- For the former, the group has committed to investing $30m over four years and employing at least 35 technology personnel for Singapore Envirotech Accelerator.
- For the latter, the group has commenced the opening of a US$15m, 40,500 sq ft membrane manufacturing facility in Conroe, Texas, USA.
- Trades at 9.3x forward P/E
Tuesday, July 10, 2018
SG Market (10 Jul 18)
MARKET OVERVIEW
- The market appears to be stabilising from recent selloff as US-China trade tensions take a temporary backseat despite no signs of near term resolution.
- Technically, the grossly oversold STI has bounced off the 3,190-3,200 support area with immediate resistance seen at 3,280, followed by 3,340.
POSITIVE NEWS
*Jumbo
- Entered into a franchise agreement with C J Seafood for the latter to operate a JUMBO Seafood restaurant in Bangkok.
- The agreement has an initial term of 10 years and may be renewed for a further 10 years.
- The first Bangkok outlet is slated to open by end 2018.
- Trades at 25.2x forward P/E
*Yanlord Land
- Acquired a 154,500 sqm GFA prime residential development site in Hangzhou for Rmb2.94m via public land auction.
- The site lies within the Zhijiang Resort Centre in Xihu district that has been earmarked b the government to be developed into a key cultural and lifestyle centre in Zhejiang Province.
- The deal reinforces the group's strategic focus to extend its footprint within the greater Hangzhou real estate market, which continues to witness strong demand for premium commercial and residential developments.
- Trades at 0.6x P/B.
NEUTRAL NEWS
*Oxley
- Updated that it sold 575 out of 800 units released at Riverfront Residences with majority of sales signed on 5 July, prior to implementation of new property curbs.
- On an aggregate basis, it achieved total sales of c$1b for the residential projects launched in Singapore so far.
- Management estimates Chevron House is worth $1.1b or $2,800 psf post-AEI. The bullish valuation arises from higher NLA (+13%) and unit value (+6%).
- If need be, it can potentially raise gearing from several assets for funds. For example, Chevron House and Stevens Road hotels has LTV of 68% and 57%.
*AIMS AMP Capital Industrial REIT
- Undertaking $13m asset enhancement initiative (AEI) at NorthTech light industrial building in Woodlands.
- Works include upgrades to passenger lift lobbies, toilets, drop-off area, external landscaping and installation of energy efficient fittings and will be completed in 2H18.
- AEI will not affect its rental income as the asset will remain operational, while works are ongoing.
- As at 30 Jun, NorthTech is fully occupied with a weighted-average-lease-expiry of 3.3 years.
- Offers 7.6x annualised 1Q yield and 1.0x P/B.
*Keppel Corp/ ST Engineering
- Both parties have inked a MOU to collaborate in the design and implementation of smart city masterplans and solutions in Keppel's developments, as well as third-party projects in Asia Pacific.
- Partnership will tap on expertise of Keppel Urban Solutions as an integrated master developer in sustainable urbanisation, targeting developments looking end-to-end services in smart city technologies.
*Duty Free
- Acquiring 70% of Brand Connect for US$2.8m or 2x P/B), to be funded from its internal resources.
- Brand Connect is in the marketing and distribution of alcohol and other beverage products across countries in the Asia Pacific region.
- The proposed acquisition will help to develop and grow the group's alcohol distribution business as well as to expand its market operations beyond the current sales channels in the duty free market of Malaysia to include the duty paid market across South East Asia.
- Trades at 17.85x trailing P/E
*UnUsUaL
- Acquiring 49% stake in Chinese film and concert company Beijing Wish for Rmb25.2m ($5.2m).
- Purchase will be funded y IPO proceeds and internal resources.
- Trades at 50.6x trailing P/E.
NEGATIVE NEWS
*Top Glove
- Alleged that there was an overstatement of plant, inventory and machinery (Rm74.4m) and overvaluation (Rm640.5m) in Aspion's acquisition price.
- The findings was based on an interim report by an independent accounting firm.
- To recap, the group acquired Aspion for Rm1.4b from Adventas Capital in Apr.
- As such, the group is suing Adventas Capital and two directors for up to Rm714.9m.
- However, litigation will not impact Aspion's business, which will continue as usual.
- Trades at 26.6x forward P/E.
*OKP
- The $94.6m contract to build the TPE-PIE Changi viaduct has been terminated by mutual agreement with LTA wef 6 July.
- No reasons were given for the termination but work has been stopped and one of its units has been charged in court in late May for its role in the fatal collapse of the road viaduct under construction in Jul 2017.
- Separately, its licence to operate a representative foreign construction service company in Jakarta has expired on 8 July and the group does not intend to renew it.
- Trades at 8.65x trailing P/E
*Propnex
- UOB Kay Hian, the stabilising manager for its IPO has ceased price stabilisation action after purchasing an aggregate of 8.5m shares at a price range of $0.56-0.635.
- Trades at 13.4x trailing P/E.
- The market appears to be stabilising from recent selloff as US-China trade tensions take a temporary backseat despite no signs of near term resolution.
- Technically, the grossly oversold STI has bounced off the 3,190-3,200 support area with immediate resistance seen at 3,280, followed by 3,340.
POSITIVE NEWS
*Jumbo
- Entered into a franchise agreement with C J Seafood for the latter to operate a JUMBO Seafood restaurant in Bangkok.
- The agreement has an initial term of 10 years and may be renewed for a further 10 years.
- The first Bangkok outlet is slated to open by end 2018.
- Trades at 25.2x forward P/E
*Yanlord Land
- Acquired a 154,500 sqm GFA prime residential development site in Hangzhou for Rmb2.94m via public land auction.
- The site lies within the Zhijiang Resort Centre in Xihu district that has been earmarked b the government to be developed into a key cultural and lifestyle centre in Zhejiang Province.
- The deal reinforces the group's strategic focus to extend its footprint within the greater Hangzhou real estate market, which continues to witness strong demand for premium commercial and residential developments.
- Trades at 0.6x P/B.
NEUTRAL NEWS
*Oxley
- Updated that it sold 575 out of 800 units released at Riverfront Residences with majority of sales signed on 5 July, prior to implementation of new property curbs.
- On an aggregate basis, it achieved total sales of c$1b for the residential projects launched in Singapore so far.
- Management estimates Chevron House is worth $1.1b or $2,800 psf post-AEI. The bullish valuation arises from higher NLA (+13%) and unit value (+6%).
- If need be, it can potentially raise gearing from several assets for funds. For example, Chevron House and Stevens Road hotels has LTV of 68% and 57%.
*AIMS AMP Capital Industrial REIT
- Undertaking $13m asset enhancement initiative (AEI) at NorthTech light industrial building in Woodlands.
- Works include upgrades to passenger lift lobbies, toilets, drop-off area, external landscaping and installation of energy efficient fittings and will be completed in 2H18.
- AEI will not affect its rental income as the asset will remain operational, while works are ongoing.
- As at 30 Jun, NorthTech is fully occupied with a weighted-average-lease-expiry of 3.3 years.
- Offers 7.6x annualised 1Q yield and 1.0x P/B.
*Keppel Corp/ ST Engineering
- Both parties have inked a MOU to collaborate in the design and implementation of smart city masterplans and solutions in Keppel's developments, as well as third-party projects in Asia Pacific.
- Partnership will tap on expertise of Keppel Urban Solutions as an integrated master developer in sustainable urbanisation, targeting developments looking end-to-end services in smart city technologies.
*Duty Free
- Acquiring 70% of Brand Connect for US$2.8m or 2x P/B), to be funded from its internal resources.
- Brand Connect is in the marketing and distribution of alcohol and other beverage products across countries in the Asia Pacific region.
- The proposed acquisition will help to develop and grow the group's alcohol distribution business as well as to expand its market operations beyond the current sales channels in the duty free market of Malaysia to include the duty paid market across South East Asia.
- Trades at 17.85x trailing P/E
*UnUsUaL
- Acquiring 49% stake in Chinese film and concert company Beijing Wish for Rmb25.2m ($5.2m).
- Purchase will be funded y IPO proceeds and internal resources.
- Trades at 50.6x trailing P/E.
NEGATIVE NEWS
*Top Glove
- Alleged that there was an overstatement of plant, inventory and machinery (Rm74.4m) and overvaluation (Rm640.5m) in Aspion's acquisition price.
- The findings was based on an interim report by an independent accounting firm.
- To recap, the group acquired Aspion for Rm1.4b from Adventas Capital in Apr.
- As such, the group is suing Adventas Capital and two directors for up to Rm714.9m.
- However, litigation will not impact Aspion's business, which will continue as usual.
- Trades at 26.6x forward P/E.
*OKP
- The $94.6m contract to build the TPE-PIE Changi viaduct has been terminated by mutual agreement with LTA wef 6 July.
- No reasons were given for the termination but work has been stopped and one of its units has been charged in court in late May for its role in the fatal collapse of the road viaduct under construction in Jul 2017.
- Separately, its licence to operate a representative foreign construction service company in Jakarta has expired on 8 July and the group does not intend to renew it.
- Trades at 8.65x trailing P/E
*Propnex
- UOB Kay Hian, the stabilising manager for its IPO has ceased price stabilisation action after purchasing an aggregate of 8.5m shares at a price range of $0.56-0.635.
- Trades at 13.4x trailing P/E.
Monday, July 9, 2018
SG Market (09 Jul 18)
MARKET OVERVIEW
- Expect market to languish as investors watch developments on the Sino-US trade war and property cooling measures weigh on risk sentiment.
- Key data to look out for include 2Q18 GDP growth (est: +4.1%, 1Q18: +4.4%) due on Fri and retail sales data for May (est: +1%, Apr: +0.4%) on Thu.
- Technically, the STI could hover around the 3,190-3,200 support area, with next level at 3,110. with upside capped at 3,280.
CORPORATE RESULTS
*Miyoshi
- 3QFY18 net profit surged 75% to $0.7m from a low base following its effort to streamline costs and improve capacity utilisation.
- However, revenue fell 10.7% to $12m, as data storage sales tumbled 42.4% due to fewer customer orders.
- This is in line with its strategy to move away from the data storage and focus on the consumer electronics and automotive business segments.
- Operating cash flow improved to $3m due to better working capital management. Balance sheet remains in a net cash position.
- Pending JTC approval, the proposed sales of its industrial property will provide the group with additional funds for business opportunities and reduce bank borrowings.
- Flushed with $6.8m proceeds from recent share placement, the group is negotiating to raise its stake in Core Power (Fujian) New Energy Automobile to gain greater exposure to China's electric car boom.
- Trades at 7.8x trailing P/E
POSITIVE NEWS
*Sunpower
- Completed acquisition of 71% stake in Xintai Zhengda Thermoelectric for Rmb66.5m, funded by internal resources, bank loans and convertible bonds issue.
- Xintai Zhengda has an exclusive centralised steam/electricity plant serving diverse industries and residents in Xintai City in Shandong province, China.
- Currently, Phase 1 of its new facilities is under construction with design capacities of 130t/h biomass boiler and 30MW electricity generator, two 130t/h coal-fired boilers and 18MW electricity generator.
- The existing facilities will remain in operation prior to the completion of the new facilities, fulfilling the requirements of current customers in the local area.
- Trades at 7.6x forward P/E.
NEUTRAL NEWS
*Hyflux
- Reached agreement with lender Maybank on the divestment process of Tuaspring Integrated Water and Power Project.
- The group has to find a buyer by 15 Oct and obtain approval from Maybank, PUB and High Court for the transaction by 11 Dec and shareholder nod by 4 Feb next year..
- Maybank will also become more involved in the sale process and appoint valuers for the plant, which has a book value of $1.3b.
- If the conditions are met, the bank, which is owed $518.4m, will refrain from starting enforcing proceedings against the group.
- Last traded at $0.21, the counter remains suspended.
*Noble
- Disposed entire 50% stake in Gas Natural Ganamax, a Mexican entity, for US$350,000.
- Expect market to languish as investors watch developments on the Sino-US trade war and property cooling measures weigh on risk sentiment.
- Key data to look out for include 2Q18 GDP growth (est: +4.1%, 1Q18: +4.4%) due on Fri and retail sales data for May (est: +1%, Apr: +0.4%) on Thu.
- Technically, the STI could hover around the 3,190-3,200 support area, with next level at 3,110. with upside capped at 3,280.
CORPORATE RESULTS
*Miyoshi
- 3QFY18 net profit surged 75% to $0.7m from a low base following its effort to streamline costs and improve capacity utilisation.
- However, revenue fell 10.7% to $12m, as data storage sales tumbled 42.4% due to fewer customer orders.
- This is in line with its strategy to move away from the data storage and focus on the consumer electronics and automotive business segments.
- Operating cash flow improved to $3m due to better working capital management. Balance sheet remains in a net cash position.
- Pending JTC approval, the proposed sales of its industrial property will provide the group with additional funds for business opportunities and reduce bank borrowings.
- Flushed with $6.8m proceeds from recent share placement, the group is negotiating to raise its stake in Core Power (Fujian) New Energy Automobile to gain greater exposure to China's electric car boom.
- Trades at 7.8x trailing P/E
POSITIVE NEWS
*Sunpower
- Completed acquisition of 71% stake in Xintai Zhengda Thermoelectric for Rmb66.5m, funded by internal resources, bank loans and convertible bonds issue.
- Xintai Zhengda has an exclusive centralised steam/electricity plant serving diverse industries and residents in Xintai City in Shandong province, China.
- Currently, Phase 1 of its new facilities is under construction with design capacities of 130t/h biomass boiler and 30MW electricity generator, two 130t/h coal-fired boilers and 18MW electricity generator.
- The existing facilities will remain in operation prior to the completion of the new facilities, fulfilling the requirements of current customers in the local area.
- Trades at 7.6x forward P/E.
NEUTRAL NEWS
*Hyflux
- Reached agreement with lender Maybank on the divestment process of Tuaspring Integrated Water and Power Project.
- The group has to find a buyer by 15 Oct and obtain approval from Maybank, PUB and High Court for the transaction by 11 Dec and shareholder nod by 4 Feb next year..
- Maybank will also become more involved in the sale process and appoint valuers for the plant, which has a book value of $1.3b.
- If the conditions are met, the bank, which is owed $518.4m, will refrain from starting enforcing proceedings against the group.
- Last traded at $0.21, the counter remains suspended.
*Noble
- Disposed entire 50% stake in Gas Natural Ganamax, a Mexican entity, for US$350,000.
Friday, July 6, 2018
SG Market (06 Jul 18)
MARKET OVERVIEW
- Market sentiment likely to be shaken by the surprise policy measures to cool the residential market and first wave of US tariffs on Chinese goods set to take effect at noon today, which could escalate into an all-out trade war.
- Technically, downside for the STI lies at the crucial support level of 3,200, with upside capped at 3,280.
MACRO WATCH
*Property
- The government has announced higher stamp duties and tighter loan limits for home purchases to check steep price increases.
- The move came after MAS warned of euphoria in the residential market as private home prices rebounded 9.1% from its 2Q17 trough and neared its 2013 peak.
- Wef 1 July, citizens and PRs will have to pay an additional 5% ABSD to 10% and 15% for their 2nd and successive residential properties, while foreigners will also pay 5% extra to 20% for any home purchase.
- Entities such as developers will be subject to ABSD of 25%, up from 15%, plus a new non-remittable 5% on any purchase for housing development.
- Loan-to-value limits will be lowered by 5ppt for all housing loans, except HDB loans.
- These latest measures are likely to dampen investment demand and transaction volume as well as returns for Singapore property developers as well as real estate agencies.
- While property related counters might suffer a knee-jerk reaction, weak share price performance of property counters in recent months suggests that downside risk could be limited.
POSITIVE NEWS
*Manufacturing Integration Technology
- Entered into a third deed of undertaking with China Fortune-Tech Capital (CFTC) to defer the exclusivity period and expiry date for the proposed disposal of its semiconductor equipment business to CFTC.
- Updated that significant progress towards signing a definitive agreement has been made.
- However, the parties require additional time to finalise the terms and for CFTC to prepare a suitable corporate structure in China for the proposed transaction.
- Trades at 11.5x trailing P/E.
*Trendlines
- Portfolio company ViAqua Therapeutics completed an investment in two milestones, led by Nutreco Investments.
- The funding is intended to complete the development of its first product and support test requirements for the registration stage.
- Additionally, ViAqua signed a joint development and marketing agreement with Nutreco's aquaculture division Skretting.
- Trades at 0.58x P/B.
NEUTRAL NEWS
*Ezion
- Entered into a 49:51% JV agreement with Alliance Offshore, a wholly-owned subsidiary of TSC Group (TSC) to cooperate in the ownership and operations of Liftboats, with the aim to become the world's largest owner and operator of Liftboats.
- TSC will provide necessary assistance to the JV Co to obtain the capital required for the acquisition of new Liftboats and working capital. Ezion will assist the JV Co in the marketing and operations of the Liftboats.
- TSC is about 52% indirectly-owned by China Merchants & Great Wall Ocean Strategy & Technology Fund (L.P.)
- The above mentioned investment was funded through internal resources.
- Trades at 1.16x P/B
*Natural Cool
- Acquiring a 51% stake in JAD Solutions for cash consideration of $1.5m, which will be entirely funded by its internal resources.
- JAD is a specialist mechanical and electrical systems contractor which is involved in providing consulting, design, construction, testing and certification of high containment facilities, and their maintenance.
- While FY17 is a loss-making year due to increased costs arising from its overseas expansion plan, the private company has subsequently ceased its overseas expansion efforts and is now refocusing in Singapore market.
- For the FP2018 based on its unaudited management accounts, JAD has successfully turnaround and reported a profit before tax of $84,000.
- Given the complementary nature of the business, the proposed acquisition is expected to lead to synergies that will result in better operational efficiency and increased cost savings for the group.
- Trades at 0.9x P/B.
- Market sentiment likely to be shaken by the surprise policy measures to cool the residential market and first wave of US tariffs on Chinese goods set to take effect at noon today, which could escalate into an all-out trade war.
- Technically, downside for the STI lies at the crucial support level of 3,200, with upside capped at 3,280.
MACRO WATCH
*Property
- The government has announced higher stamp duties and tighter loan limits for home purchases to check steep price increases.
- The move came after MAS warned of euphoria in the residential market as private home prices rebounded 9.1% from its 2Q17 trough and neared its 2013 peak.
- Wef 1 July, citizens and PRs will have to pay an additional 5% ABSD to 10% and 15% for their 2nd and successive residential properties, while foreigners will also pay 5% extra to 20% for any home purchase.
- Entities such as developers will be subject to ABSD of 25%, up from 15%, plus a new non-remittable 5% on any purchase for housing development.
- Loan-to-value limits will be lowered by 5ppt for all housing loans, except HDB loans.
- These latest measures are likely to dampen investment demand and transaction volume as well as returns for Singapore property developers as well as real estate agencies.
- While property related counters might suffer a knee-jerk reaction, weak share price performance of property counters in recent months suggests that downside risk could be limited.
POSITIVE NEWS
*Manufacturing Integration Technology
- Entered into a third deed of undertaking with China Fortune-Tech Capital (CFTC) to defer the exclusivity period and expiry date for the proposed disposal of its semiconductor equipment business to CFTC.
- Updated that significant progress towards signing a definitive agreement has been made.
- However, the parties require additional time to finalise the terms and for CFTC to prepare a suitable corporate structure in China for the proposed transaction.
- Trades at 11.5x trailing P/E.
*Trendlines
- Portfolio company ViAqua Therapeutics completed an investment in two milestones, led by Nutreco Investments.
- The funding is intended to complete the development of its first product and support test requirements for the registration stage.
- Additionally, ViAqua signed a joint development and marketing agreement with Nutreco's aquaculture division Skretting.
- Trades at 0.58x P/B.
NEUTRAL NEWS
*Ezion
- Entered into a 49:51% JV agreement with Alliance Offshore, a wholly-owned subsidiary of TSC Group (TSC) to cooperate in the ownership and operations of Liftboats, with the aim to become the world's largest owner and operator of Liftboats.
- TSC will provide necessary assistance to the JV Co to obtain the capital required for the acquisition of new Liftboats and working capital. Ezion will assist the JV Co in the marketing and operations of the Liftboats.
- TSC is about 52% indirectly-owned by China Merchants & Great Wall Ocean Strategy & Technology Fund (L.P.)
- The above mentioned investment was funded through internal resources.
- Trades at 1.16x P/B
*Natural Cool
- Acquiring a 51% stake in JAD Solutions for cash consideration of $1.5m, which will be entirely funded by its internal resources.
- JAD is a specialist mechanical and electrical systems contractor which is involved in providing consulting, design, construction, testing and certification of high containment facilities, and their maintenance.
- While FY17 is a loss-making year due to increased costs arising from its overseas expansion plan, the private company has subsequently ceased its overseas expansion efforts and is now refocusing in Singapore market.
- For the FP2018 based on its unaudited management accounts, JAD has successfully turnaround and reported a profit before tax of $84,000.
- Given the complementary nature of the business, the proposed acquisition is expected to lead to synergies that will result in better operational efficiency and increased cost savings for the group.
- Trades at 0.9x P/B.
Thursday, July 5, 2018
SG Market (05 Jul 18)
MARKET OVERVIEW
- Stocks are likely to drift with closure in US markets giving few leads but trade continues to be the main theme as China pressed Europe for anti-US alliance on trade ahead of US tariffs on Chinese imports kicking in on Fri.
- Meanwhile, PBOC has given assurances that the yuan would not be used in the tit-for-tat moves, which includes latest Chinese ban on chip sales by US tech firm, Micron.
- Technically, downside for the STI lies at the crucial support level of 3,200, with upside capped at 3,280.
MACRO WATCH
*Economy
- MAS expect the economy to expand 2.5-3.5% this year but cautions that tail risks from protectionism and inflation have grown significantly.
- The spillover effect from global trade conflict would impact Singapore given its position in the regional electronics production value chain as well as hub for air and sea transport and financial services.
- Bilateral trade between US and China indirectly contributes 1.1% of Singapore's GDP, while US-EU flows add another 0.5%.
*Property
- MAS warns developers, banks and home buyers to be wary about euphoria in the property market given the supply stream coming in the next few years.
- This comes after aggressive bidding by developers in both collective sale tenders and government land site bids, which is expected to double the available housing units in the near term.
- Prices of private homes have also surged 9.1% since the trough in 2Q17, while transactions have jumped 25% over the past 12 months.
POSITIVE NEWS
*Mapletree Logistics Trust
- Acquiring five logistics properties in Singapore from CWT for $778.3m, subject to approvals from JTC and CWT shareholders.
- With combined gfa of 3.2m sf (20% of portfolio), the modern purpose-built ramp-up warehouses are fully occupied and come with a sale-and-leaseback arrangement with built-in rental escalation of 1.5% and WALE of 8.7 years..
- The deal will be DPU accretive and expected to generate an initial NPI yield of 6.2%.
- The manager is reviewing various financing options from equity fund raising, potential divestments and/or debt.
- Trades at 6.4% yield and 1.1x P/B
*Koyo Int'l
- Awarded a $5.2m M&E maintenance contract by HDB.
- The 36-month contract will commence in Jul and will lift the group's current order book to $31.9m, with cmpletion till FY21.
- Trades at 17.9x trailing P/E
*DISA
- Disclosed combined code sales of $74,112 from PoSA and 3S for 4QFY18, which is a 138.5% increase.
- The improved performance was mainly due to increase in product categories from new suppliers and higher sales volume.
- Detailed 4QFY18 and FY6/18 will be released on or before 29 Aug '18.
- Loss-making and trades at 2.25x P/B.
NEUTRAL NEWS
*IREIT Global
- Tikehau Investment Management Asia Pacific (TIM AP) will be acquiring 4.52% of the shares of IREIT's manager from Dolphin Two, while parent Tikehau Capital will acquire an additional 4.39% of IREIT units.
- TIM AP holds 80% of the shares in the manager and Tikehau Capital holds 3.61% of IREIT units. Post transaction, TIM AP will control 84.52% of the manager, while Tikehau Capital will own 8% of IREIT.
- The increase in stakes reflects a greater alignment of interest with the unit holders and Tikehau Capital's commitment to grow the European-based trust.
- Looking ahead, IREIT will continue to leverage on Tikehau Capital's established footprint, proven track record and extensive network in Europe to deliver long-term stable returns to unit holders.
- Trades at yield of 7.6x and 1.1x P/B
NEGATIVE NEWS
*Ryobi
- Received letters of demand for the aggregate sum of S$23.2m from several banks but none have commenced legal proceedings against the group.
- It has appointed PWC as its independent financial advisor to establish the current financial position and work out a restructuring proposal with the banks.
- This may trigger cross default provisions in other banking facilities and project contracts.
- Trades at 0.47x P/B.
- Stocks are likely to drift with closure in US markets giving few leads but trade continues to be the main theme as China pressed Europe for anti-US alliance on trade ahead of US tariffs on Chinese imports kicking in on Fri.
- Meanwhile, PBOC has given assurances that the yuan would not be used in the tit-for-tat moves, which includes latest Chinese ban on chip sales by US tech firm, Micron.
- Technically, downside for the STI lies at the crucial support level of 3,200, with upside capped at 3,280.
MACRO WATCH
*Economy
- MAS expect the economy to expand 2.5-3.5% this year but cautions that tail risks from protectionism and inflation have grown significantly.
- The spillover effect from global trade conflict would impact Singapore given its position in the regional electronics production value chain as well as hub for air and sea transport and financial services.
- Bilateral trade between US and China indirectly contributes 1.1% of Singapore's GDP, while US-EU flows add another 0.5%.
*Property
- MAS warns developers, banks and home buyers to be wary about euphoria in the property market given the supply stream coming in the next few years.
- This comes after aggressive bidding by developers in both collective sale tenders and government land site bids, which is expected to double the available housing units in the near term.
- Prices of private homes have also surged 9.1% since the trough in 2Q17, while transactions have jumped 25% over the past 12 months.
POSITIVE NEWS
*Mapletree Logistics Trust
- Acquiring five logistics properties in Singapore from CWT for $778.3m, subject to approvals from JTC and CWT shareholders.
- With combined gfa of 3.2m sf (20% of portfolio), the modern purpose-built ramp-up warehouses are fully occupied and come with a sale-and-leaseback arrangement with built-in rental escalation of 1.5% and WALE of 8.7 years..
- The deal will be DPU accretive and expected to generate an initial NPI yield of 6.2%.
- The manager is reviewing various financing options from equity fund raising, potential divestments and/or debt.
- Trades at 6.4% yield and 1.1x P/B
*Koyo Int'l
- Awarded a $5.2m M&E maintenance contract by HDB.
- The 36-month contract will commence in Jul and will lift the group's current order book to $31.9m, with cmpletion till FY21.
- Trades at 17.9x trailing P/E
*DISA
- Disclosed combined code sales of $74,112 from PoSA and 3S for 4QFY18, which is a 138.5% increase.
- The improved performance was mainly due to increase in product categories from new suppliers and higher sales volume.
- Detailed 4QFY18 and FY6/18 will be released on or before 29 Aug '18.
- Loss-making and trades at 2.25x P/B.
NEUTRAL NEWS
*IREIT Global
- Tikehau Investment Management Asia Pacific (TIM AP) will be acquiring 4.52% of the shares of IREIT's manager from Dolphin Two, while parent Tikehau Capital will acquire an additional 4.39% of IREIT units.
- TIM AP holds 80% of the shares in the manager and Tikehau Capital holds 3.61% of IREIT units. Post transaction, TIM AP will control 84.52% of the manager, while Tikehau Capital will own 8% of IREIT.
- The increase in stakes reflects a greater alignment of interest with the unit holders and Tikehau Capital's commitment to grow the European-based trust.
- Looking ahead, IREIT will continue to leverage on Tikehau Capital's established footprint, proven track record and extensive network in Europe to deliver long-term stable returns to unit holders.
- Trades at yield of 7.6x and 1.1x P/B
NEGATIVE NEWS
*Ryobi
- Received letters of demand for the aggregate sum of S$23.2m from several banks but none have commenced legal proceedings against the group.
- It has appointed PWC as its independent financial advisor to establish the current financial position and work out a restructuring proposal with the banks.
- This may trigger cross default provisions in other banking facilities and project contracts.
- Trades at 0.47x P/B.
Wednesday, July 4, 2018
SG Market (04 Jul 18)
MARKET OVERVIEW
- Market sentiment remains fragile as investors anxiously await Fri's deadline when US tariffs on US$36b of Chinese imports will come into effect, with both sides showing no signs of backing down from the trade row.
- Meanwhile, oil briefly topped $75 a barrel for the first time since Nov '14 before pulling back.
- Technically, the STI could be drifting towards the crucial support level at 3,200 with immediate resistance at 3,280.
POSITIVE NEWS
*Frasers Logistics & Industrial Trust
- Divesting an industrial facility in Smeaton Grange, New South Wales to The Trust Company (Australia) for A$90.5m.
- This represents a 40.3% premium above the NAV of the property of A$64.5m and 39.2% premium over its purchase price of A$65m in 2016.
- FLT is expected to recognise an estimated net disposal gain of A$17.7m or 0.9¢/share.
- Net proceeds of A$82.2m may be distributed to unit holders or used towards funding potential acquisitions, reducing existing debt and/or other general corporate purposes.
- Trades at 6.7% yield and 1.17x P/B
*Vard
- Secured new contract for design and construction of a luxury expedition cruise vessel for Hapag-Lloyd Cruises.
- Delivery is scheduled from Vard Langsten in Norway in 2Q21 and the hull will be built in Romania.
- Trades at 0.87x P/B.
NEUTRAL NEWS
*mm2 Asia / SPH
- mm2 Asia and SPH are subscribing for 51/49 JV equity interests in AsiaOne Online for $1m.
- Both parties will jointly operate AsiaOne and introduce more Asian-focused lifestyle and entertainment content to the 23-year-old online news site.
- With the adoption of new technologies especially in the mobile space, the portal aims to venture into interactive digital editorial and video content creation to grow its audience both locally as well as regionally.
- mm2 and SPH trade at 19.9x and 15.2x and 19.9x forward P/Es respectively.
*SK Jewellery
- Opened its flagship Love & Co store in Bangkok, marking the group's first foray into Thailand under its bridal specialist brand, after its recent expansion into China.
- The store is located at CentralWorld, dubbed the largest lifestyle shopping destination in Bangkok.
- The group has upcoming store openings planned for the current fiscal year.
- Trades at 9.2x trailing P/E.
*Best World
- Held its 28th annual international convention on 23/24 Jun in Changsha, which was attended by over 5,000 participants from various parts of China, comprising distributors, their families and VIP customers.
- A new franchise wholesale segment was unveiled for China, which will replace its China export model from 2H18.
- To date, the group has signed 27 franchisees for key cities of Hunan, Guangdong, Zhejiang and Heilongjiang provinces.
- The group remains cautiously optimistic about profit growth for FY18.
- Trades at 12.7x forward P/E.
*Indofood Agri
- Its 50%-owned JVCo CMAA will issue new shares to JFLIM to acquire UVP for BRL75.9m (US$19.7m). Post dilution, the group will own 35% of CMAA.
- UVP is engaged in the cultivation and processing of sugar cane in Brazil for the production and marketing of ethanol and sugar. Currently it operates one factory in Minas Gerais with annual cane crushing capacity of 2.5m MT.
- The acquisition will enable CMAA to expand its sugar and ethanol footprint in Brazil and increase its annual cane crushing capacity from 5.8m MT to 8.3m MT.
- Trades at 6.8x forward P/E
*Chip Eng Seng
- Acquired a property at 51 Pirie Street in Adelaide, Australia for A$14.6m.
- The freehold site has a land size of 1,283 sqm and currently has a vacant office building on it.
- The group intends to redevelop the property into a hotel development.
- Trades at 0.66x P/B.
*Uni-Asia
- 69.57% owned United Wise Capital received Certificate of Completion from Hong Kong government for the property development project at 650 Cheung Sha Wan Road.
- Upon receipt of the certificate, the project company will be able to collect the balance due from buyers of the units.
- The group's proportionate share of the original investment and fair value in the project company is US$10.4m and US$20m respectively.
- Trades at 6.9x forward P/E.
- Market sentiment remains fragile as investors anxiously await Fri's deadline when US tariffs on US$36b of Chinese imports will come into effect, with both sides showing no signs of backing down from the trade row.
- Meanwhile, oil briefly topped $75 a barrel for the first time since Nov '14 before pulling back.
- Technically, the STI could be drifting towards the crucial support level at 3,200 with immediate resistance at 3,280.
POSITIVE NEWS
*Frasers Logistics & Industrial Trust
- Divesting an industrial facility in Smeaton Grange, New South Wales to The Trust Company (Australia) for A$90.5m.
- This represents a 40.3% premium above the NAV of the property of A$64.5m and 39.2% premium over its purchase price of A$65m in 2016.
- FLT is expected to recognise an estimated net disposal gain of A$17.7m or 0.9¢/share.
- Net proceeds of A$82.2m may be distributed to unit holders or used towards funding potential acquisitions, reducing existing debt and/or other general corporate purposes.
- Trades at 6.7% yield and 1.17x P/B
*Vard
- Secured new contract for design and construction of a luxury expedition cruise vessel for Hapag-Lloyd Cruises.
- Delivery is scheduled from Vard Langsten in Norway in 2Q21 and the hull will be built in Romania.
- Trades at 0.87x P/B.
NEUTRAL NEWS
*mm2 Asia / SPH
- mm2 Asia and SPH are subscribing for 51/49 JV equity interests in AsiaOne Online for $1m.
- Both parties will jointly operate AsiaOne and introduce more Asian-focused lifestyle and entertainment content to the 23-year-old online news site.
- With the adoption of new technologies especially in the mobile space, the portal aims to venture into interactive digital editorial and video content creation to grow its audience both locally as well as regionally.
- mm2 and SPH trade at 19.9x and 15.2x and 19.9x forward P/Es respectively.
*SK Jewellery
- Opened its flagship Love & Co store in Bangkok, marking the group's first foray into Thailand under its bridal specialist brand, after its recent expansion into China.
- The store is located at CentralWorld, dubbed the largest lifestyle shopping destination in Bangkok.
- The group has upcoming store openings planned for the current fiscal year.
- Trades at 9.2x trailing P/E.
*Best World
- Held its 28th annual international convention on 23/24 Jun in Changsha, which was attended by over 5,000 participants from various parts of China, comprising distributors, their families and VIP customers.
- A new franchise wholesale segment was unveiled for China, which will replace its China export model from 2H18.
- To date, the group has signed 27 franchisees for key cities of Hunan, Guangdong, Zhejiang and Heilongjiang provinces.
- The group remains cautiously optimistic about profit growth for FY18.
- Trades at 12.7x forward P/E.
*Indofood Agri
- Its 50%-owned JVCo CMAA will issue new shares to JFLIM to acquire UVP for BRL75.9m (US$19.7m). Post dilution, the group will own 35% of CMAA.
- UVP is engaged in the cultivation and processing of sugar cane in Brazil for the production and marketing of ethanol and sugar. Currently it operates one factory in Minas Gerais with annual cane crushing capacity of 2.5m MT.
- The acquisition will enable CMAA to expand its sugar and ethanol footprint in Brazil and increase its annual cane crushing capacity from 5.8m MT to 8.3m MT.
- Trades at 6.8x forward P/E
*Chip Eng Seng
- Acquired a property at 51 Pirie Street in Adelaide, Australia for A$14.6m.
- The freehold site has a land size of 1,283 sqm and currently has a vacant office building on it.
- The group intends to redevelop the property into a hotel development.
- Trades at 0.66x P/B.
*Uni-Asia
- 69.57% owned United Wise Capital received Certificate of Completion from Hong Kong government for the property development project at 650 Cheung Sha Wan Road.
- Upon receipt of the certificate, the project company will be able to collect the balance due from buyers of the units.
- The group's proportionate share of the original investment and fair value in the project company is US$10.4m and US$20m respectively.
- Trades at 6.9x forward P/E.
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