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