Friday, October 31, 2014

Starhill Global REIT

Starhill Global REIT: Starhill Global's 3Q14 results were in line as it reported 5% y/y increases for both its distributable income and DPU to $27.3m and 1.27¢ respectively. This takes its 9M14 DPU to 3.76¢, also up 5%. Gross revenue dipped 0.4% to $48.6m, due to weaker contribution from China and Japan, but was partially offset by stronger performance of the remaining properties. NPI however rose 4.1% to $39.6m, supported by lower operating expenses, positive rental reversions for the Singapore portfolio and David Jones Building in Perth, Australia. This was dampened by lower revenue from Renhe Spring Zongbei in Chengdu, China, loss of income contribution from Japan divestment in Mar ‘14 and net foreign currency movements. Operationally, Starhill's Singapore portfolio, which comprises stakes in Wisma Atria and Ngee Ann City (67.1% of gross revenue), enjoyed higher NPI of $26m (+3.8%), thanks to positive rental reversions for both the retail and office units. NPI for its Malaysian properties (15.4% of gross revenue) was up 3.7% to $7.5m, largely due to lower expenses as a result of a one-time property tax rebate and reversal of property tax provision made in 1H14. Meanwhile, NPI for its Australian properties (10.4% of gross revenue) climbed 8.7% to S4.0m, benefitting from the 6.1% rental uplift at the David Jones Building following a lease review in 1 Aug ‘14. But NPI for its China assets fell 20.4% to $1.3m, which was blamed on the contraction of the high-end and luxury retail segment, resulting from the central government’s austerity drive and intensified competition from new and upcoming retail developments in Chengdu. Overall, the REIT’s portfolio occupancy was robust at 99.7% with a weighted lease to expiry of 5.9 years, while aggregate leverage was a comfortable 29.1% with an average financing cost of 3.15%. Going forward, Starhill guides that softer retail sentiment and visitor arrivals will continue to impact on the retail businesses in Singapore, although this could be partly mitigated by strong interest amongst retailers for prime Orchard Road retail spaces. Over in China, the high-end luxury retail segments will continue to be dampened by the slowdown in spending, with competition in Chengdu’s retail market expected to intensify, as a number of high-end retail malls are expected to enter the market in 2014. At the current price, SGREIT trades at an annualized 3Q14 yield of 6.4% and 0.87x P/B versus peer average of 6.3% yield and 0.99x P/B. Latest broker ratings as follows: CIMB maintains Hold with TP of $0.82 Daiwa maintains O/p with TP of $0.90 OCBC maintains Buy with TP of $0.90


DBS: 3Q14 net profit of $1.0b (+17% y/y, +4% q/q) topped estimates, with DBS posting its third straight quarterly growth, as both net interest and fee income reached new highs while trading income improved. Net interest income climbed 14% to $1.6b, driven by moderate loan growth (+8.1%) in Singapore and Asean, and higher net interest margin of 1.68% (+8bps y/y, +1bps q/q). Customer deposits rose 7.2% to $305.0b, setting the loan-to-deposit ratio at 85.8% (3Q13: 85%, 2Q14: 86%). Non-interest income rose 23% to $912m, with net fee and commission income up 20% to $555m, led by investment banking (+154%) and wealth management (+39%). Meanwhile, trading income leapt 44% to $271m, boosted by higher treasury gains and customer flows. Overall expenses rose 17% to $1.1b from higher staff and technology costs, although the cost to income ratio was well contained 44.1%. Total provisions notched up 17% to $177m as a spike in specific loan allowances in South-east Asia, India and HK was partially offset by a decline in general allowances. Asset quality remained healthy, with NPL ratio at 0.9% (3Q13: 1.2%, 2Q14: 0.9%), while loan-loss coverage was at a comfortable 160% (3Q13: 136%, 2Q14: 162%). ROE improved to 11.2% (3Q13: 10.5%, 2Q14: 11.0%) and capital adequacy ratios remained stable with fully-loaded CET1 CAR of 12.1% and Tier-1 CAR at 13.4%. Management highlighted that despite some slowdown in the region, DBS continues to see strong earnings momentum in the quarter, fuelled by broad-based growth across businesses. NIM has also been steady, and the recent acquisition of Societe Generale’s Private Bank in Asia will bolster its wealth franchise going forward. DBS trades at 1.27x P/B versus UOB’s 1.36x P/B and OCBC’s 1.34x.

First Resources (technical)

First Resources: strong near term momentum today, particularly after the break up above the psychological $2 level. $2.15 as initial resistance , followed by $2.20 target in extension.

Tuan Sing

Tuan Sing: 3Q14 net profit swelled 3x y/y to $17.5m, while revenue jumped 84% to $99.8m, bringing 9M14 net profit to $36.8 (+38%), and revenue to $242.7 (+2%). For 9M14, the revenue increase was from the progressive revenue recognition for units sold at Seletar Park Residence and Sennett Residence and the initial 20% recognition on new bookings at Cluny Park Residence. For the same period, gross margin improved 1.7ppt to 18.4%. Net gearing of the company stood at 0.8x. Order book stood at $750.3m, where Seletar Park Residence, Sennett Residence and Cluny Park Residence will contribute towars the bulk of 4Q14 and FY15. Meanwhile, the redevelopment of Robinson Tower site is ongoing. When completed in 2017, it will comprise 28-storey commercial building with high-ceiling office space and a retail podium. This will add to the recurring income streams of its Investment segment, aside from GHG and Robinson Point. Tuan Sing will be acquiring the balance of 50% interest of GHG from its JV, at a discounted price to net book value of A$126m. The property outlook in Singapore and China is expected to remain tepid in the near term, on the back of ongoing cooling measures. BVPS at 66.4¢ translates to 0.6x P/B

Starhill Global REIT

Starhill Global REIT: Overall results were inline, with 3Q14 DPU up 5% to 1.27¢ taking 9M14 DPU to 3.76¢ (+5.0%). Despite gross revenue inching down 0.4%, mainly due to weaker contribution from Renhe Spring Zongbei Property and Japan Properties, NPI rose 4.1% to $39.6m, due to lower operating expenses incurred by the group. Going forward, operations are expected to remain stable, and the group will continue to pursue acquisitions both locally and overseas. Fundamentals remain sound with overall occupancy at 99.7%, while annualized 3Q14 DPU yield stands at 6.38% and P/B valuation is undemanding at just 0.85x P/B.


UOB: 3Q14 results beat consensus estimates, with net profit at $866m (+18.7%) versus average analysts forecasts of $746m, led by strong loans growth, fees, net trading and investment income. Net interest income rose 10.5% to $1.2b, led by higher loan growth (+11%) in Singapore and the regional countries, while net interest margin improved 1 b.p. to 1.71%. Non-interest income jumped 32.1% $816m, with fee and commission income up 16.8% to $475m, driven by strong growth in fund management, loan related businesses, wealth management and investment banking. Trading income more than doubled to $222m, primarily from treasury gains. Total expenses was up 11.9% y/y to $800m but increased marginally by 1.6% from 2Q14. Impairment charges jumped 90.5% to $162m, due to a few specific non-performing loan accounts in Thailand and Indonesia. Asset quality was healthy, with NPL ratio unchanged at 1.2%, while NPL coverage remained strong at 146.8%. Customer deposits rose 8.7% to $224m and the loan-to-deposit ratio was at 85.8% (3Q13: 84.0%, 2Q14: 87.8%). ROE improved to 12.9% (3Q13: 11.7%, 2Q14: 12.5%), while capital adequacy ratios remained strong with fully-loaded CET1 CAR of 14.0% (above minimum 9%) and total CAR at 17.0.%. Management noted that its good set of results was in part due to its continued discipline in balance sheet management and investment in fee-generating capabilities, and the recent award of a branch banking licence in Myanmar reinforces UOB’s commitment to the region and its investments in serving customers’ needs. UOB trades at 1.36x P/B versus OCBC’s 1.34x and DBS’ 1.27x. Latest broker ratings: Maybank-KE maintains Hold with TP $25.30 CIMB maintains Hold with TP $23.79 Deutsche maintains Hold with TP $23.00 HSBC maintains O/w with TP $26.95 JP Morgan maintains U/w with TP $22.00 OCBC maintains Buy with TP $24.20

SG Market (31 Oct 14)

US Market: US stocks powered higher on the back of a surprisingly strong 3Q GDP growth estimate and solid earnings reports from two credit card companies. The blue-chip DJIA rallied 221 pts to 17,195 (+1.3%), with Visa (141 pts) and Merck (+71 pts) contributing to the bulk of the gains, while the broad-based S&P 500 advanced 12 pts to 1,995 (+0.6%) and the tech-heavy Nasdaq Composite added 17 pts to 4,566 (+0.4%). Confirming the Fed’s upbeat view of the economy, the first reading of 3Q GDP came in at a better-than-expected 3.5%, led by a rise in government spending and a shrinking trade deficit. Separately, weekly jobless claims ticked up 4,000 to 287,000 but remained below 300,000, pointing to an improving labour market. In corporate earnings, Visa (+10.2%) and MasterCard (+9.4%) took centre stage after the two payment network companies reported earnings results that topped estimates on higher customer spending Healthcare stocks got a boost from Bristol-Myers Squibb (+8.9%) after a clinical trial of its lung cancer drug showed encouraging results. Other blue-chip winners included Merck (+2%), Johnson & Johnson (+1.4%), DuPont (+1.3%) and Pfizer (1.2%). Technology stocks took a beating, led by Intel (-4%) after some chipmakers turned in disappointing results, dragging down Facebook (-2.3%), Microsoft (-1.2%) and Texas Instruments (-1.7%). Energy shares were also big losers as oil prices fell after two days of modest gains, with WTI shedding US$1.08 to US$81.12 a barrel, on higher US oil production, which rose to its highest level since the 1980s. Halliburton declined 0.9% while Transocean lost 1.4%. Among other stocks in focus, NY Times fell 4.9% despite narrowing its 3Q loss and touting progress in the digital space, while Avon Products tumbled 9% after 3Q earnings missed estimates. About 6.9b shares traded on US exchanges, 12% above the three-month average. Advancing issues outnumbered declining ones by 1.8 to 1 on the NYSE and 1.7 to 1 on Nasdaq. S’pore shares are poised to march higher following the positive leads from Wall Street as well as earnings beat from both UOB and DBS. Having broken out of the 3,220-3,230 congestion area yesterday, the STI is headed towards the next resistance at 3,260. Donwside support can be found at 3,180. Stocks to watch: *UOB: 3Q14 results beat, with record quarterly net profit of $866m (+7% q/q, +19% y/y). After a weaker 2Q14, the operating trends turned more positive, and we expect the market to view this set of results positively. Net interest income expanded 11% y/y, driven by net customer loans growth of 11% and supported by a stabilised net interest margin of 1.71%. Non-interest income provided the main kicker, surging 62% y/y to $341m, boosted by fees +16.8% y/y) and net trading and investment income of $258m (+80.4% y/y). Singapore housing NPLs edged higher by 12.3% q/q for the second consecutive quarter, but management does not foresee any more to come. BVPS at $16.51. *DBS: Strong 3Q14 results that beat estimates, with net profit of $1b (+17% y/y), posting its third straight quarter of growth. Net interest income expanded 14% y/y to $1.6b, driven by loans growth of 8%, and improvement in net interest margin to 1.68% (+8bps), the highest in nine quarters. Non-interest income jumped 23% to $912m, with growth across the board in fee income (+20%), investment banking (> +100%), wealth management (+39%), income from treasury customer flows (+23%), and trading gains. NPL ratio remained stable at 0.9% with allowance coverage near historical highs at 160%. Management continues to see “very strong earnings momentum” fuelled by broad-based growth across its businesses. BVPS at $14.46. *Starhill Global REIT: 3Q14 DPU rose 5% y/y to 1.27¢, taking 9M14 DPU to 3.76¢ (+5.0%). For the quarter, gross revenue inched down 0.4% to $48.6m, mainly due to weaker contribution from Renhe Spring Zongbei Property and Japan Properties, although NPI rose 4.1% to $39.6m. Other property expenses fell 44.5% to $2.2m, helped by lower operating expenses incurred by the Singapore properties, Japan properties and Renhe Spring Zongbei property. Annualized 3Q14 DPU yield stands at 6.4%, with BVPS at $0.92. *Tuan Sing: 3Q14 net profit tripled y/y to $17.5m, as revenue soared 84% to $100m, bringing 9M14 net profit to $37m (+38% y/y), and revenue to $243m (+2% y/y). For 9M14, revenues were underpinned by progressive revenue recognition for units sold at Seletar Park Residence and Sennett Residence, as well as an initial 20% recognition on new bookings at Cluny Park Residence. Gross margin improved 1.7ppt to 18.4%. BVPS at 66.4¢ *MTQ: 2QFY15 net profit dipped 3% y/y to $5.3m, despite the 24% jump in revenue to $80.3m, lifted by financial consolidation of the Binder Group, and higher revenue from Neptune and Bahrain. Bottom line was weighed by a 4.2ppt decrease in gross margins to 32.8%. Interim DPS flat at 2¢. *CH Offshore: 1QFY15 net profit contracted 25% y/y to US$5.6m, despite revenue rising 15% to US$9m on higher utilization of its fleet of vessels. Bottom line was impacted by normalization of cost of sales, which was a credit in 1QFY14 due to reversal of certain provisions for two vessels. BVPS at US$0.348. *Yamada Green: 1QFY15 net profit surged more than seven-fold y/y to Rmb4.8m, on revenue of Rmb56.0m (+39.5%), and a rise in gross margin to 32.4% f(+3.7ppt). The stronger top-line was derived from higher sales of processed food products (+25%) and new contributions from moso bamboo trees. *Asia-Pacific Strategic Investments: With regard to the proposed acquisition of Coeur Gold Armenia, the vendor provided a reserves calculation report update that showed the Azatek Mine has 183.8 tons of gold and 4,060.86 tons of silver, representing a significant increase to the previous estimate. The company has commissioned another consultant to verify the estimates and will provide further updates accordingly. *Boustead: Its energy-related engineering division has secured $33m contracts from the O&G industries globally. These contracts include the design, process engineering and supply of key large-scale direct-fired process heaters, waste heat recovery units and process control systems for upstream and downstream O&G developments across the world. This brings the group’s order book backlog to $520m. *Keppel T&T: Confirmed that efforts for an IPO for a data centre REIT on the SGX mainboard is currently underway. A successful listing will make this the first data centre trust in Asia.

Thursday, October 30, 2014

UOB (technical)

UOB technicals: price chart shows gentle downtrend since last earnings release on 1st August. Prices have kept within trading channel since. Strong rebound yesterday and today after prices tested lower trend channel on Tuesday suggests inherent bullishness. Sellers and Buyers are equally divided and with prices near the upper trend channel now, market is at decision point. S1-R1 $21.50-$22.50, R2 $23.15 if upper trend channel is broken.

DBS (technical)

DBS - Technicals appear to be near Overbought levels, with Stochastics hooking down from overbought territory. The 20 and 50 day MA at $18.21 and $18.18 will be critical support for share price.

City Dev

City Dev: Barclays reiterated U/W with TP lowered 0.99% to $8.99, citing (i) diversification (into China, UK, Japan and potentially Australia) in progress, insufficient to plug Singapore's slow down (ii) lower Singapore home sales coupled with skinny launch pipeline in next 12 months, and meanwhile (iii) headwinds in CDL's core markets, with 69% of its Singapore landbank exposed to the high-end market, which remain negative In a bid to diversify out of Singapore market, CDL has three acquisition projects in pipeline for CHINA, six freehold properties in Greater LONDON area, a JV to acquire prime freehold land in TOKYO for development into high-end condominiums, and is reportedly considering bidding for Leighton Holding's US$7b residential and commercial property portfolio in AUSTRALIA along with Stockland Group. However, these diversification efforts are likely to benefit growth in the medium term, and are unlikely to plug the decline in its core Singapore market in the near term. In Singapore, CDL has lowered prices for its Coco Palms development, take-up rate at Commonwealth Towers (launched May 2014) is only 39% and at mixed development The Venue Residences and Shoppes (launched Oct 2013) is only 27% sold. Among higher-end projects, none of its 156 units at luxury-end 50%-JV Nouvel 18 (TOP 2013) has been sold and its Residences at W Singapore Sentosa Cove (TOP 2012) is only 10% sold. Recall also, CDL's hotel REIT, CDL Hospitality recently reported weak 3Q4 earnings, with DPU falling 1.1% y/y to 2.61cents while DPU for 9M14 fell 2.4% y/y to 7.86 cents. ADR at CDL-HT hotels dipped 4.1%. Rolling over RNAV est to end-2015, trimming RNAV est to $12.84 and maintaining peg to -1sd of 30% discount to RNAV, TP is lowered from $9.08 to $8.99

Osim (technical)

Osim - While share price is near oversold territory, there is no signs of any reversal, which could suggests that the selling pressure may continue. Share price has broken down the Fibonnaci support at $1.86-$1.87, and a close below these levels could indicate further downside. Next major support level could be seen at $1.63

Keppel Corp (technical)

Keppel Corp - Technicals appear to be heading upwards from Oversold territory, whiile ADX appears to indiciate that the recent downtrend is exhausting. For now the near-term resistance could be tipped at $9.78-$9.80, which coincides with the Fibonanci retracement.

MS Holdings (IPO)

MS Holdings IPO: ($0.25) Carving its niche in mobile cranes Crane rental operator MS Holdings has priced its listing offer of 27m placement shares (comprising 20m new shares and 7m vendor shares) at $0.25 to list on the Catalist board. The net proceeds of $3.8m will be used for the development of its mobile crane trading business, acquisition of mobile cranes and hauling equipment and working capital. Post-IPO, MS Holdings will have a free float of 26.5%, with its controlling shareholders holding 73.5% of total outstanding shares. MS Holdings is one of Singapore’s leading crane rental companies in Singapore, which focuses on providing mobile cranes and lorry cranes in a wide range of lifting operations. The group have a fleet of 25 mobile cranes with lifting capacities ranging from 25 to 750 tons, and a fleet of hauling equipment which comprises prime movers and trailers. Mobile cranes usually have short set-up time due to their ability to travel on roads thus eliminating the need for special equipment to transport them to jobsites. For FY14, MS Holdings booked net profit of $3.2m (-34.4% y/y) and revenue of $17.0m (+1.8% y/y), with repeat customers accounting for more than 80.0% of the group’s revenue in FY14. On its prospects, MS Holdings expects sustained demand for its cranes and services, guiding that for 2015 and 2016, average construction demand in Singapore is expected to be sustained at between $25.0b and $34.0b p.a. The group believes that the trading of mobile cranes is complementary to its mobile crane rental business and will support its fleet renewal strategy. Based on the IPO price of $0.25, MS Holdings trades at 7.8x FY14 P/E and 1.02x P/B with a total market capitalization of $25.5m. Notable listed peers on SGX include Tiong Woon (6.2x trailing P/E, 0.54x P/B), Tat Hong (16.4x trailing P/E, 0.73x P/B) and Hiap Tong (12.7x trailing P/E, 0.71x P/B). The placement offer closes on 5 Nov ’14 at noon, with trading expected to commence on 7 Nov ’14 at 9 am. UOB is the sponsor, issue manager and placement agent for the IPO.


FX USD: USD/SGD popped higher overnight, activating the daily Bollinger uptrend channel, after the U.S. Federal Reserve's policy meeting. The Fed's more-upbeat-than-expected assessment of the job market spooked U.S. dollar shorts. Some analysts now think the Fed could raise interest rates sooner rather than later. The Bollinger uptrend channel supports USD/SGD at 1.2773 on an intraday basis and could lead the pair to the year-high of 1.2830. Both daily and weekly charts now display the same bullish technical bias, suggesting the U.S. dollar rally extends in the medium term. USD/SGD is now 1.2785 from its last close of 1.2776.

Eu Yan Sang

Eu Yan Sang: CIMB maintains its Reduce rating , lowers TP to $0.68 (from $0.74) , based on 16.7x FY15e P/E. Despite the first quarter being historically the slowest, CIMB deems EYS results to be below expectations , as core earnings formed just 1.2% of its FY15 forecast (1QFY14: 9.4%). The Occupy Central movement in HK has led to lower Chinese tourist arrivals and the house believes 2QFY15 revenue will be impacted (HK accounts for 46% of sales). Coupled with cost pressures and investments into F&B in China, and the inevitable foray into e-commerce, the house believes operating costs will eat into profits in the short term.


Vard: CLSA sees a Norwegian winter. Notes poor execution in a difficult macro environment has led to a sharp de-rating of Vard over the past quarter. Still the house believes a rebound in the near future is unlikely bcs of repeated cost overruns , which puts a question mark on the sustainability of margin recovery. The house cuts its margin and order win assumptions , and target multiple. Lowers TP to $0.71, and downgrades to Underperform . Likes Ezion and Nam Cheong for better upside.


Europtronic: received requisition from 10 shareholders dated 28 October for EGM for vote of no confidence and removal of Executive Directors, to be replaced by four named individuals. In the requisition, reference was made to an earlier letter dated 13 October by 7 shareholders demanding clarification on the state of affairs of the company and the lack of direction thereof by 21 October, specifically: ( i) action plan on watchlist status ( ii) action plan on persistent losses and debt ( iii) updates or closures on Suzhou land sale deal ( iv) business directives and new initiatives given lack of viability of current business Europtronic had not responded to the earlier letter. In response to the requisition, Europtronic invalidates it and said queries will be addressed in the upcoming quarterly announcement, to be made on or before 14 November.


GLP: Goldman reiterates Buy rating on GLP with NAV-based TP of $3.40 Expansion of Japan Development Venture fund by 29% is seen positively as development margins are higher in Japan (~30-35%) than in China (~25-30%). Continued cap rate compression makes a growing fund management platform sensible Despite China’s retail sales growth moderation in September, GLP’s long-term fundamentals are strong given structural growth in e-commerce and limited supply of modern logistics facilities. Lastly, acquisitions resulting from GLP’s slew of strategic partnerships entered into with China Development Bank, China Materials Storage and Transportation Development Company, Sinotrans, Guangdong Holdings, COFCO, Bank of China, Jinbei and Best Logistics are to be expected and potentially catalytic for share price.


Alibaba: CLSA initiates coverage with Buy call and TP of US$120.00. Very big initiation report, near 160 pages, but essentially the investment pt is that with an 81% share in China and being double that of Amazon’s size, Alibaba could beat Walmart by being the first to reach US$1tn sales in FY20. Taobao is the key to its success with the widest product selection. Tmall will be the next big driver as the home of brands. Global expansion will create more value for the brand, and the house proprietary studies reinforces its confidence in Alibaba’s growth potential.

Creative Technology

Creative Technology: 1QFY15 net loss widened to US$9.8m from a net loss of US$5.5m from the previous year. Revenue fell 20.0% to US$24.3m, due to the uncertain and difficult market conditions which continued to affect the sales of the group’s products. Gross margin was relatively unchanged at 28%, while bottom-line was weighed by US$3.6m of FX losses, versus other gains of US$1.4m in the previous quarter.


Yongnam: Yongnam led consortium was awarded the USD1.4b Hanthawaddy International Airport concession for a period of 30 years. The consortium will design, construct, operate and maintain the airport. Completion target date for the airport is Dec’19. The other two parties in the consortium are Changi Airport Planners and Engineers and JGC Corporation, a Yokohama based global engineering company. The consortium will enter into advanced discussion and negotiation with Myanmar’s Department of Civil Aviation to finalize details. Recall, the Yongnam led consortium was re-invited by the Myanmar government to bid for the HIA concession, after Incheon International Airport Corp walked away from the deal it had originally won in August’13. According to the director general of Myanmar’s civil aviation department, the Koreans walked away when the Myanmar government would not agree on the amount Incheon International Airport would be paid if the contract was terminated before completion. It was also reported that Myanmar authorities were unable to guarantee electricity and water supplies to the site during construction. Meanwhile, on financing, it is understood that the Yongnam consortium has secured a 49% financing from Japan’s international development arm. Yongnam has been unloved for a while now, crushed by negatives ranging from cost overruns to unfavorable project mix, over the past few quarters. Share price spiked yesterday before the announcement of this news. If the street views this deal positively, the rebound may continue.


PLifeREIT: 3Q14 DPU and distributable income rose 8.9% y/y to 2.9¢ and $17.6m respectively. Revenue rose 8.5% to $25.3m while NPI rose 8.6% to $23.7m, contributed by Japan properties acquired in 2H13 and 1Q14, offset by the Yen depreciation. Revenue was also driven by higher CPI adjusted rent renewals. Aggregate leverage stood at 34.6% with all-in cost of debt of 1.43%. No major refinancing needs till FY16. Debt headroom of $297.3m before hitting 45% aggregate leverage mark. Management remains sanguine on the long-term prospects of the regional healthcare industry. 91% of its Singapore and Japan portfolios have downside revenue protection whilst 66% of the total portfolio is pegged to CPI-linked revision formulae. BVPS of $1.63 translates to 1.44x P/B. Annualized 3Q14 yield is 4.9%

Indofood Agri

Indofood Agri: 3Q14 results largely in line, with net profit inching up 1.6% to Rp124.8b taking 9M14 net profit to Rp533.3b (+80.4%). Overall gross margin dipped slightly to 25.4% from 27.2%. Revenue for the quarter was up 17.1% to Rp3.6t, led by both the plantations and edible oils & fats (EOF) segment. Plantations revenue rose 31% to Rp2.7t while EOF revenue was up 7.0% to Rp2.3t, led by higher sales volume and average selling prices of palm and edible oil and fat products. Bottom-line was weighed by a 10.7% rise in general and admin expenses to Rp276.1b, due largely to higher staff headcount and wages, while other operating expenses rose 27.8% to Rp91.4b as a result of net movements in loss from changes in amortised costs of plasma receivables. Associate losses widened to Rp20.5b from Rp 16.1b, due to losses recognised by the group’s sugar business in the Philippines, while JV contributions fell 11.6% to Rp44.4b attributable to CMAA, a local sugar and ethanol producer in Brazil, which saw lower profits due to the timing of shipments of raw sugar. Operationally, production for CPO was up 26.0% to 264,000 MT and Palm Kernel (PK) rose 25.0% to 60,000 MT, driven by higher FFB production at 1,216,000 MT (+24.0%). CPO extraction rate improved to 22.1% (3Q13: 21.6%) while PK extraction rate was flat at 5.0%. CPO average selling price (ASP) during the quarter was at Rp7,917 per Kg (+7% y/y, -7% q/q), while PK ASP was at Rp4,565 per Kg (+28% y/y, -22% q/q). Going forward, management highlights that the higher seasonal palm oil production in the second half of the year and the anticipation of bumper soybean crops from US and South America have put significant pressure on commodity prices. On year-to-date basis, the average CPO price was US$853 per ton versus the average of US$857 in 2013. On a positive note, demand for palm oil remained resilient supported by competitive CPO prices versus other competing vegetable oils. The group expects the domestic demand for palm oil in Indonesia to remain strong given its vast and growing population base. IndoAgri trades at 16.6x annualized 9M14 P/E and 0.77x P/B.

SG Market (30 Oct 14)

US Market: US stocks finished with modest losses, off session lows, after the Fed dropped its asset purchase stimulus and gave a hawkish view of the labour market and inflation but kept to its ultra-low interest rate policy. The blue-chip DJIA declined 31 pts to 16,974 (-0.2%), while the broad-based S&P 500 dipped 3 pts to 1,982 (-0.1%) and the tech-heavy Nasdaq Composite lost 15 pts to 4,549 (+1.8%). The CBOE Volatility Index rebounded 5.3% to 15.15 after falling for the past four days. As expected, the Fed confirmed that it will end the last round of its monthly bond-buying programme, citing substantial improvement in labour market conditions and diminishing risk of persistently low inflation. Nevetheless, the central banks retained its commitment to keep interest rates low for a considerable time. The slightly bullish turn by the Fed pushed USD and Treasury yields higher, with the 10Y bond giving 2.34% (+6bps). Commodity, industrial and utility stocks led the losses, while financial and energy shares gained with WTI crude rising for a second day, after the EIA reported a slowdown in growth of US oil inventories. Facebook tumbled 6.1% after projecting its slowest sales growth and increased spending in 4Q, which overshadowed its impressive 3Q earnings. Gilead Sciences declined 2.4% after its 3Q profit missed estimates as sales of its hepatitis drug came in short. Among the outperformers, US Steel (+5.1%), Goodyear (+5.1%) and Newfield Exploration (+10.9%) all jumped after reporting better-than expected-results. BofA gained 1.1% after its CEO declared that legal costs stemming from the housing bust are behind it. After the bell, Visa climbed 3.6% after announcing its 3Q results and a US$5b share buyback scheme. About 7.3b shares traded on US exchanges, 18% above the three-month average. Declining issues outnumbered advancing ones by 1.3 to 1 on the NYSE and 1.2 to 1 on Nasdaq. S’pore shares are likely to be muted following the directionless trading on Wall Street with the STI struggling to break out of the 3,220-3,230 congestion area between the 20 and 50-dma. Immediate resistance sits at the 3,260 level, while downside support lies at 3,180. Among the latest results, OCBC appears to be in line with expectations, while Indofood Agri missed. Stocks to watch: *OCBC: 3Q14 net profit surged 62% y/y to $1.23b, boosted by a one-off gain of $391m arising from a fair value gain on its stake in Bank of Ningbo. Otherwise, core net profit grew 11% y/y to $841m (+6% excluding its 97.5%-owned Wing Hang’s $38m net profit contribution). Net interest income expanded 27% y/y driven by strong asset growth, and as net interest margin improved 5bps to 1.68%. Customer loans swelled 27% y/y to $42.9b, with Wing Hang contributing $24.9b to the increase. Excluding Wing Hang, loan growth of 11% was broad based, led by general commerce loans, housing loans and loans to individuals. Although non-interest income was flat at $801m (+3%), fee and commission income jumped 16% to a new high of $406m, driven by strong growth in wealth management, loan and trade fees. Operating expenses were 28% higher y/y from consolidation of Wing Hang and higher staff costs. Asset quality remained healthy, with NPL ratio of 0.7% (-0.1ppt y/y). Capital position remained strong post acquisition of Wing Hang, with CET1 and Tier 1 at 13.2%. BVPS of $7.22. *IndoAgri: 3Q14 net profit flat at Rp124.8b (+1.6%), mainly due to higher contribution from non-controlling interests (+38% to Rp82b). Revenue grew 17.1% y/y to Rp3.6t, driven by the plantation division (+31%) which benefitted from both higher sales volume and average selling prices of palm products. Revenue from the EOF division grew at a slower 7% on higher average selling prices for edible oil and fat products. For 9M14, the group continued to deliver strong palm production with FFB nucleus production of 2.4m mt (+18%), and CPO production of 707k mt (+25%). BVPS at $1.065. *ParkwayLife REIT: 3Q14 DPU and distributable income each rose 8.9% y/y to 2.9¢ and $17.6m, respectively. Revenue grew 8.5% to $25.3m, and NPI climbed 8.6% to $23.7m, mainly driven by the Japan properties acquired in 2H13 and 1Q14, and higher CPI adjusted rent renewals, helping to offset the Yen depreciation. Aggregate leverage stood at 34.6%, with all-in cost of debt of 1.43%. There are no major refinancing needs till FY16. BVPS of $1.63. *Creative Technology: 1QFY15 net loss widened to US$9.8m from a net loss of US$5.5m a year ago. Revenue fell 20% y/y to US$24.3m, due to the uncertain and difficult market conditions which continued to affect the sales of the group’s products. Gross margin was relatively unchanged at 28%, while bottom-line was weighed by other losses of US$3.6m (1QFY14: other gains of US$1.4m) comprising mainly FX losses. *Hoe Leong: Turned profitable in 3Q14, posting net profit of $0.6m as revenue grew 4.4% y/y to $19.2m; nevertheless at 9M14, the group’s losses were still more than double y/y at $3.9m. During the quarter, revenue growth in Vessel Chartering (+105.8% y/y to $3.5m) helped offset a dip in revenue from Design & Manufacture (-4.4% y/y to $10.7m) and Trading & Distribution (-9.3% y/y to $4.9m). Bottom line was helped by smaller FX losses (-$0.1m vs -$0.8m) and lower share of losses of associates and JVs (-$0.3m vs -$0.7m). BVPS at $0.223. *Yongnam: Its consortium with Changi Airport and Japan’s JGC Corp has secured a US$1.4b contract to build and operate the Hanthwaddy International Airport in Yangon under a 30-year concession. Slated for completion by Dec ’19, this will be Myanmar’s second international airport. *Ezion: Commonwealth Bank of Australia has increased its stake from 7.84% to 8.05% for its client funds via the purchase of 3.4m shares at an average price of $1.48 in the open market. *SMRT: Launched Hailo, a taxi booking smartphone app touted as the world’s highest rated app which is used by more than 1.4m passengers in London, NYC, Ireland, Madrid, Barcelona, Osaka and Singapore. SMRT is joined by Prime Taxi in supporting this new platform. *Olam: Acquired a 20% stake in ProClass, the largest independent cotton testing and classing house in Australia. Upon completion, Olam Australia will move its cotton classing processes to ProClass facility in Goondiwindi. *Europtronic: Received requisition for EGM for vote of no confidence requiring the executive directors to step down. Previously, a letter had been submitted through SGXnet by seven shareholders demanding clarification on the state of affairs of the company and the lack of direction thereof, to which the company had ignored. In response, Europtronic invalidates the requisition and said queries will be addressed in the upcoming quarterly announcement.

Wednesday, October 29, 2014


Yoma: ($0.66) Star City lights up 2QFY15 results Yoma 2QFY15 net profit more than tripled to $10.8m (+222% y/y), shored by fair value and FX gains of ~$10m. During the quarter, Yoma recognised a further fair value gain of $8.1m on completed units for its Star City Zone A Building A5, which is held as investment property. The group also booked an unrealised currency translation gain of $2m on its monetary assets denominated in USD, following the strengthening of the USD against SGD. Revenue surged 53% to $41.2m, driven by the solid performance of the real estate division, particularly Star City which accounted for ~80% of sales. In particular, Yoma sold the LDRs of Zone C to a third party investor for an upfront payment of $25.2m but will manage the construction and sale of the 950 apartment units there with project management fees and share of profit from the sale of units to be recognised in the coming quarters. During the quarter, the group received booking deposits for an additional 106 units out of the 1,043 units available at Star City Zone B, bringing total sales to 856. Meanwhile, the group has balance unrecognised revenue of $22.7m relating to its Star City Zone A Buildings A3 and A4 (528 units) that have been fully sold, which is expected to be booked over the next 3-9 months as construction progresses. Management notes that the economic and political developments generally bode well for Yoma’s outlook. With the growing number of foreign MNCs coming into Myanmar, more mid-level and senior executives are coming into the country. As such, Yoma intends to hold more residential stock at its developments - Pun Hlaing Golf Estate and Star City - on its balance sheet for leasing. Following the Jul share placement (issue price: $0.70), Yoma’s NAV per share has risen to $0.37 from $0.32 at FY14, and the group now has improved balance sheet flexibility (cash of $61.5m) to pursue growth. Despite today’s 4.8% jump in share price to $0.66, the counter trades at a lower 1.8x P/B from 2.2x a quarter ago. Yoma remains the key proxy for investors keen on acquiring exposure to the rapidly growing Myanmar economy.

WTI crude oil

WTI crude oil is up a second day, with futures advancing 0.7% to US$81.98, on rising speculation that demand is increasing, aided partly by positive data overnight which saw the US consumer confidence index leaping to its highest level since Oct ’07. According to Bloomberg estimates, gasoline inventories probably fell by 900,000 barrels to 203.5m last week, with the Energy Information Administration scheduled to release the actual data today. Some analysts guides that so far oil prices have been supported by a slew of better-than-expected economic data, and while prices are unlikely to see a strong rebound, the recent sharp decline could be over. OPEC members, which supplies ~40% of the world’s oil is scheduled to meet on 27th Nov in Vienna, where market watchers will keenly watch if OPEC members will decide to cut output in a bid to support prices.

Indofood Agri (technical)

Indofood Agri: Recent recovery seems strong, with MACD indicating an upward trend. Do watch out for resistance at the 50 SMA. If it breaches the 50 SMA, next resistance should be at $0.90. Support at 20 SMA, and subsequently at $0.77

Yoma (technical)

Yoma: bullish technicals with the key indicators rising strongly. Share price has rebounded to the first resistance at $0.66 ( 50day MA ). On a break out, next resistance is around the $0.70 level (200day MA at $0.705).

GLP (technical)

GLP - Technicals appear to be turning dowards again, as indicated by the reversal from tis RSI and Stochastics. The 200 day MA at $2.76 will act as the critical resistance. Would position for an upside only if prices close above the 200 day MA. Meanwhile, the 20 day MA at $2.69 will provide near-term support to share price.


OSIM ($2.020): 3Q14 earnings disappoint. Profits declined 27.8% to $16.4m, bringing EPS down 32.8% to 2.11 cents while interim dividend of 1 cent is maintained. 9M14 EPS is 9.87cents, making 65.8% of Bloomberg full year EPS estimates. Top-line revenue grew 3.4% y/y to $158.2m, lifted solely by sales in South Asia region (approx. +17.5% to $67m) as sales in North Asia (approx. -1.2% to $80m) and rest of world (approx. -15.4% to $11m) dipped. Without the consolidation of TWG, the results could be worse. Gross profit margin improved 2.3ppt to 70.9%, but total operating expenses ballooned 12.8% due to new-store start-up costs, legal costs incurred at TWG Tea and higher employee wages. OSIM has been consistently shutting non-performing stores faster than it is opening new stores. This could be seen both ways. Optimistically, the Company is managing its operations efficiently by promptly cutting losses at underperforming stores. Not so optimistically, the management has poor foresight and has been incurring unnecessary new-store start-up costs. Looking ahead, the guidance given is positive, especially for massage equipment. The picture painted for TWG Tea is also rosy, with the management targeting 45 TWG outlets by year-end, up from 37 now. Balance sheet management is mostly prudent, OSIM is in net cash position of $237m as at 30 Sep, debt is funded mainly be convertible bonds. After falling more than 10% this morning, the stock now trades at 23.9x annualized 3Q14 P/E. We expect downward adjustments in TPs ahead.


Noble: CLSA upgrading the counter to Buy this morning, following the 20% price correction. Near term worries masks the re-structuring story taking place, where the house holds the view that these concerns, while valid, are obscuring the 3-yr restructuring story. The 51% sell-down of Noble Agri, and the disposal of Gloucester coal in 2012 has largely removed Noble from the upstream side of the commodity industry, which will reduce its exposure to declining commodity prices. In effect, it is returning to its roots of being an asset-light trader rather than banking on commodity price increases to drive profitability. With US$3.5b (50% of mkt cap) in cash coming in due to recent stake sales, and 2 private equity vehicles (X2 and Harbour Energy) helmed by some of the best management in their respective Industries, Noble has a good potential pipeline of new investments. This could potentially add 15-22% to Noble’s earnings. While the share price decline was due to near-term issues, advise investors to focus on the medium-term re-structuring story that is playing out. Furthermore, at just 8.4x 15 PE, it is at a sharp discount to historical avg. PE


STATS ChipPAC: Recorded 3Q14 net loss of US$5.3m, reversing net profit of US$13.3m a year earlier, weighed by absence of a one off receipt of flood insurance settlement last year, declining gross margins (-0.4ppt to 11.8%) and flattish revenue. Revenue came in at US$403.8m, affected by delay in wafer supply at several key customers and demand shift from high-end smartphone to low-end smartphones. This was offset by ramp up for advanced packaging programs and seasonal strength in consumer segment. Management guides 4Q14 revenue growth of between flat and -6% with adjusted EBITDA margin of between 20-24%. Meanwhile, it expects to spend between $65-85m for capex, including $20-40m for the progressive construction of a new factory in South Korea. STATS ChipPAC is trading at 1x P/B.

Sheng Siong

Sheng Siong: 3Q14 results were in line with net profit rising 15.4% to $12.2m, while revenue increased 4.8% to $186.4m, mainly due to a 3.4% increase in same store sales growth, driven by marketing activities. The remaining growth came from new stores. Bottom line was improved by strong gross margins 24.2% (+1ppt) despite inflationary and labor pressures thanks to competitive and bulk purchasing, and other cost management initiatives centered around the Mandai warehouse. Store count remained the same as end 2012 at 33 stores, although to date it has acquired 3 stores. The Penjuru store with an area of ~4,000 sf should be opened in Nov’14. Meanwhile, the store in Tampines is unlikely to be opened in FY14. Sheng Siong will use the $80.4m proceeds from a placement done in September to fund future expansion plans. Sheng Siong is currently trading at 4.57% indicative yield, and 18.6x annualized 9MFY14 P/E. Latest broker rating: Daiwa maintains O/PF with TP of $0.75

Wing Tai

Wing Tai: 1QFY15 net profit was flattish at $24.2m, while revenue fell 28% to $160.1m, contributed by progressive sales recognized from The Tembusu, the additional units sold in Helios Residences in Singapore and The Lakeview in China. The impact in bottom line was mitigated by a one off gain on disposal of a subsidiary company, coupled with a 69% increase in contributions from JVs and associates. Balance sheet remains strong at 14%, which should enable it to weather challenging operating conditions and restock land bank at potentially more attractive margins. At BVPS of $3.85, Wing Tai is trading at 0.45x P/B. Latest broker rating: Deutsche maintains Buy with TP of $2.15


GLP: GLP and its 50-50 JV partner in Japan, Canada Pension Plan Investment Board, will each inject an additional ¥15b (US$138m) equity (+29%), to develop modern logistics properties in the country. The capital injection brings the total joint venture size to US$2.2b, based on cost for in-progress developments and latest appraised value for completed assets. Since the JV established in 2011, it has committed to projects in various stages of development, which has a current market value of US$1.4b. With the equity injection, it now has an investment capacity of another US$800m. The JV will also extend its three-year investment identification period to 2017. This has swelled GLP’s fund management platform to US$13.2b. Separately, GLP commenced development of GLP Soja II, a 78,000 sm (840,000 sf) multi-tenant logistics facility in Okayama prefecture, Western Japan. Total development cost is estimated to be ¥9.6b (US$88m). At $2.72, GLP is valued at a 17% discount to consensus RNAV of $3.27.

SG Market (29 Oct 14)

US Market: US stocks rallied on a broad front following a strong reading on consumer confidence and another round of corporate earnings ahead of the Fed’s policy decision this Wed. The blue-chip DJIA jumped 188 pts to 17,006 (+1.1%), while the broad-based S&P 500 climbed 23 pts to 1,985 (+1.2%), just 1.5% shy of its all-time high, and the tech-heavy Nasdaq Composite added 78 pts to 4,564 (+1.8%). The Russell 2000 index of small-caps surged 2.9% to 1,149, back above its 200-dma since Sep. Expectations are for policy makers to end the Fed’s bond-buying stimulus as planned but reiterate its dovish stance on interest rates. Market watchers highlighted that the majority of US companies that reported 3Q earnings so far has exceeded estimates, negating concerns about weak global demand. Adding to the positive mood, consumer confidence leapt to its highest level since Oct 2007, a good sign for the upcoming shopping season. This overshadowed separate data which showed that new orders for durable goods unexpectedly fell 1.3% in Sep, dragged by the volatile transportation sector. All 10 major industry groups advanced, led by energy stocks (+2.2%) as Brent crude rose above US$86 a barrel on a weaker USD. Chevron (+1.8%), ExxonMobil (+1.4%) and Transocean (+4.8%) all gained. Among key stocks in focus, biotech firm Amgen soared 6.1% it unveiled plans to cut jobs, enhance shareholder payouts and raised its full-year revenue and profit forecast. Pfizer inched up 0.2% as earnings came in slightly higher on stronger sales of its vaccines but offset by patent expiries in some drugs. Madison Square Garden soared 11% on reports that it is exploring the possibility of splitting into two separate companies to unlock value in its sports franchises. Wireless carrier T-Mobile rose 3.1% on optimism that it will add more customers this year. IBM gained 1.1% on news that the board has approved US$5b in additional funds for share buybacks. Yahoo added 2.6%, extending a nine-day winning streak to 21% following its 3Q results last week. Apple rose 1.6% after Alibaba (+1.9%) expressed interest in a mobile payment tie-up with the iPhone maker. On the losing end, Twitter slumped 9.8% after reporting a wider 3Q loss and slower user trends, prompting it to lower its 4Q revenue forecast. Department store chain Kohl’s lost 6.6% after projecting a sales drop in 3Q and full year earnings at low end of estimates. Freeport-McMoran declined 4.2% as 3Q earnings slid 33% on lower gold and copper prices. About 6.2b shares traded on US exchanges, on par with the three-month average. Advancing issues overwhelm declining ones by 5.2 to 1 on the NYSE and 4.1 to 1 on Nasdaq. S’pore shares are likely to get a lift from the broad rally on Wall Street and positive opening in Asian bourses with both Tokyo (+1%) and Seoul (+0.8%) trading higher. Firmer oil prices overnight could also put a temporary bottom on oil-related stocks such as Keppel Corp and Sembcorp Marine. Yoma may come into play following its sterling 2QFY15 results. The STI is currently struggling to keep above the 20-dma at 3,220. A sustained break of this resistance may put it on trek towards the next obejective at 3,260. Downside support remains at 3,180. Stocks to watch: *Yoma: 2QFY15 net profit more than tripled to $10.8m (+222% y/y). Revenue surged 53% y/y to $41.2m, driven by the solid performance of the real estate division, particularly the Star City project which accounted for ~80% of revenue. During the quarter, the group received booking deposits for an additional 106 units out of the 1,043 units available at Star City Zone B, bringing total sales to 856. Meanwhile, Yoma entered into an agreement with a third party investor to develop and manage the construction and sale of the 950 apartment units in Zone C, and has recorded an upfront revenue of $25.2m as consideration, with performance fees for managing project construction and share of profit from the sales of units to be recognised in the coming quarters. BVPS at $0.37. *OSIM: 3Q14 results came in below expectations. Net profit plunged 28% y/y to $16.4m, affected by start-up costs for TWG Tea expansion in Taiwan and China and legal costs involving two lawsuits in Singapore and HK. Meanwhile, revenue grew just 3.4% to $158.2m, mainly driven by sales in the South Asia region. In China, where the group has 256 OSIM outlets, OSIM has closed 25 non-performing outlets and opened 9 new ones, year-to-date. Interim dividend maintained at 1¢. *Sheng Siong: 3Q14 results largely in line. Net profit jumped 15.4% y/y to $12.2m, as gross margin improved 1 ppt to 24.2%. Revenue grew 4.8% to $186.4m, driven by a 3.4% increase in same store sales growth, thanks to stronger marketing activities, renovation of old stores and extension of store operating hours. To date, Sheng Siong has acquired 3 new stores, although its store count remains unchanged at 33 since end 2012. *Wing Tai: 1QFY15 revenue fell 28% to $160.1m, though net profit was flat y/y at $24.2m, despite a one-off gain on disposal of shares of a property subsidiary in Indonesia ($21.2m) and increase in contributions from JVs and associates (+69%). Top line was made up of progressive sales recognized from The Tembusu, additional units sold in Helios Residences in Singapore and The Lakeview in China. BVPS at $3.85. *STATS ChipPAC: Swung to a 3Q14 net loss of US$5.3m, reversing from a net profit of US$13.3m a year earlier, weighed by the absence of a one-off receipt of flood insurance settlement last year. Meanwhile, gross margin also declined 0.4ppt to 11.8%, on flat revenue of US$403.8m. Top line was affected by a delay in wafer supply at several key customers and demand shift from high-end smartphone to low-end smartphones, but offset by ramp up for advanced packaging programs and seasonal strength in the consumer segment. *Giken Sakata: 4QFY14 net profit surged 473% to $2.1m, despite a 46% drop in revenue to $69m. Gross margin expanded 9.5 ppt to 17%, attributable to a change in product mix in its precision engineering segment. Top line fell due to discontinuation of a large project in Mar ‘14. The acquisition of a 53.7% stake in Cepu Sakti Energy, an upstream O&G player in Indonesia, is expected to start contributions in 1QFY15. *GLP: Together with its 50% JV partner, will each inject additional US$138m of equity into the Japan Development Venture to raise its total size by 29% to US$2.2b (when fully leveraged and invested). This will boost the venture’s investment capacity to US$800m, and lift GLP’s total assets under management to US$13.2b. Separately, in 2QFY15, the group commenced development of GLP Soja II, a 78k sqm multi-tenant logistics facility in Okayama prefecture, Western Japan, with total development cost of ¥9.6b (US$88m). *The Hour Glass: Acquired Watches of Switzerland (WoS) for $13.3m cash. WoS is a 50-year old watch retail chain with five outlets in Singapore. *Trek 2000: Expanded the use of its FluCard technology to Ricoh Imaging's new camera line - PENTAX K-S1 Sweets Collection. The FluCard is a secure digital memory card with built-in Wi-Fi capabilities. *YuuZoo Corp: Launched its first mobile game, Honey Snatch, developed in partnership with Thailand-based Sandbox. In addition to iOS platform, the game is set to be published on Google Play Store later this year. *Global Palm Resources: Positive profit alert for 3Q14, primarily attributable to the increase in the sales volume and average selling price of crude palm oil and palm kernel. Results to be released on or before 14 Nov.

Tuesday, October 28, 2014


DeClout: Featured in The Edge. Operates in two main business segments: IT infrastructure and verticla domain cloud (VDC). The largest IT infra biz comprises another three divisions : - the IT asset recovery and maintenance business under Procurri Corp, - an IT systems integration service business under Acclivis and - a telco system integration business under Beaqon. Following acquisitions from early 2013 to mid-2014, which helped build a global network for Procurri Corp, the group plans to list the latter in HK by 2016. From Jun '14, DeClout acquired Indonesia-based payment processing service Netipay for $4.72m. More recently, the group spent $11.5m to acquire Asia Wiring Systems, and another $2.1m to acquire Pacific Wave. DeClout has risen more than 82% year to date, and now trades at 19.6x FY14e P/E.

China SunSine

China SunSine: AmFraser initaites coverage with Buy call and $0.69 TP. One of the largest in the world in terms of capacity, this Chinese rubber chemical additives maker is now benefiting big time from its courage to treat environmental protection seriously during a time when enforcement was lax. The house faith in this counter is not guided by blind bravado. Drew conclusion after making observations on its: 1) customers; 2) receivables; 3) reported sales, volume, ASPs and market prices; 4) PPE trend; 5) global market share; 6) mentions in other reports; 7) dividend track record and cash level. The tight RA supply in 2014 was caused by the shutting down of a number of factories as their waste discharge have failed to meet environmental standards. Strict enforcement is likely to remain under the current regime in Beijing, with even stricter environment standards and laws set to kick-in come FY15. The booming automotive market will also continue to drive demand for tires and therefore, rubber chemicals. Net profit for FY14F is expected to hit RMB216m from RMB77m in 2013, fuelled by a combination of higher ASPs, operating leverage and lower raw material costs. Also expect FY15F earnings to grow 8% to RMB234m, with the assumptions of 1) 7% fall in overall ASP, being offset by 2) higher capacity and sales volume, and 3) expected cost savings of RMB30m from its newly built heating plant but higher raw materials costs. Sunsine is currently trading at 4.3x FY15F P/E at a forward CAGR of 8% between FY14F-FY16F. Given its unprecedentedly strong prospects, argue that Sunsine should at the very least be trading at the top of its historical trading P/E of 6-7x. We therefore ascribe a target price of S$0.69 to Sunsine, which is pegged at 7x FY15F P/E. Capital appreciation aside, also believe a dividend hike to c.1.4 Scts from 1 Sct is on the cards and we believe such a move will greatly boost investor confidence in this counter.


MTQ: CIMG initiates coverage with Add call and TP $1.56. Far from being wasteful, MTQ can be construed as a story of filial piety, with the son, CEO Kuah Boon Wee, returning to help his father grow the business. Since his succession, Mr Kuah and his management team have grown the group’s earnings by a CAGR of 31% for FY11-14 on the back of three acquisitions over the last three years. CIMB base-case scenario factors in a consolidation of MTQ’s acquired businesses. Forecast 14% earnings CAGR for FY14-17, with earnings accelerating after bottoming in FY15. Given the undemanding valuations, the house initiate coverage with an Add rating and target price of $1.56 (blend of 7x CY16 P/E & 1.5x CY15 P/BV). Potential catalysts include earnings strength and accretive-acquisitions.

HPH Trust

HPH Trust: 3Q14 results in line. Net profit fell 9% y/y to HK$490.7m, due mainly to an increase in effective tax rate to 21% from 10% in 3Q13, as the tax credit at Yantian terminal had been fully used up, offset by a HK$30m exchange gain on Rmb deposits. Revenue inched higher by 1.7% to HK$3.4b. This came from robust operating results, offset by the deconsolidation of Asia Container Terminals (now 40% JV). Container throughput at Hong Kong increased 2.1% due to higher transshipment volume, offset by weaker intra-Asia cargoes. Meanwhile, the container throughput at Yantian increased by 12.4% due to growth in transshipment and US cargoes. Average revenue/TEU for Hong Kong grew from a favourable throughput mix from liners. For Yantian, average revenue/TEU was lower due to higher proportion of transshipment throughput handled. There is a possibility for a tariff hike in Hong Kong, amid strong transshipment demand. Management’s negotiation with liners is currently underway, on timing and quantum of increase. But as liners are facing headwinds, the increases are not likely to be large. On outlook, management is optimistic on the U.S. in light of positive volume trends YTD and solid economic data, but remains cautious on Europe. These, coupled by China in which management reckons should stabilize ahead, should yield single digit growth for the trust, management views. Meanwhile, HK$0.41 DPU guidance remains intact, translating to a ~7.8% yield. That said, management did not rule out an option of adjusting DPU lower to reflect future operating cashflows. Nevertheless, a marginal decrease in DPU is not expected to impact the trust much. HPH Trust trades at 0.74x P/B. Latest broker ratings: Deutsche maintains Buy with TP of $0.74 CLSA maintains U/PF with TP of US$0.71 OCBC maintains Hold with TP of US$0.68 HSBC maintains Neutral with TP of US$0.67

IHH Healthcare

IHH Healthcare: Daiwa upgrading IHH to ADD with a higher target price of RM5.50 mainly on upward revisions to our earnings. The upgrade is on the back of capacity expansion at its Malaysia and Turkey operations, which are expected to register 25% and 32% increase in bed capacity by end-15 respectively, also to reflect improving margins on operating leverage. TP is based on a revised 22x 2015E EV/EBITDA (30% premium to regional peers). Believe the premium is justifiable given its premium offering and significant market capitalisation (50% larger than Bangkok Dusit). Over the past 6 months, the valuationgap between regional peers and IHH has narrowed. Overall, view IHH as a long term value play with strong fundamentals given the group’s extensive regional network.

Nam Cheong

Nam Cheong has clarified a news article recently made by The Edge Malaysia on 20th Oct in regards to the group weighing a potential dual listing either on the Bursa Malaysia or Oslo stock exchange. The group announced that it has yet to make any decision and has also not appointed any professionals for a potential dual listing. In the event that any plans are made, management will make the necessary disclosures.

Second Chance Properties

Second Chance Properties saw FY14 net profit down 71.1% to $16.5m on revenue of $48.5m (-10.1%), as bottom-line saw the absence of once-off fair value gains. The fall in revenue was largely weighed by a drop in sales from the apparel and gold business segments. Revenue from the apparel segment fell 10.5% to $19.0m, weighed by the closer of some outlets during the year, while gold segment revenue fell 19.7% to $15.2m due to a high base in FY13 which had seen sales surged during the Apr – May ’13 period, on widespread news then that gold prices had sunk to its lowest level. Bottom-line saw the absence of fair value gains of investment properties, which was at $42.9m for FY14 versus $0.3m in the current year. Stripping off fair value gains, profit before income tax would be at $16.3m (-1.0%). Going forward, Second Chance guides that with uncertainty in the global economy, there is now a heightened risk of a worldwide slowdown which will affect the economies of Singapore & Malaysia, although the group still expects the gold and apparel business to remain profitable. The group is of the view that downward pressure on retail rentals, due to the tightening of foreign workers policies, could weigh on its property segment performance, while the performance of its securities division over the next 12 months will be highly dependent on market forces. At the current price, Second Chance Properties trades at 1.17x P/B.

CDL Hospitality Trust

CDL Hospitality Trust: CDL Hospitality Trust (CDLHT) 3Q14 results came in slightly above expectations, although distributable income dropped 0.5% y/y to $25.6m, while DPU fell 1.1% to 2.61¢, mainly due to higher depreciation cost from Jumeirah Dhevanafushi (JD) in Maldives, acquired in Dec '13. Gross revenue improved 11.9% to $40.1m, as NPI inched up 2.4% to $33.8m, driven by the full recognition of hotel revenue from JD, partially offset by lower rental income from Claymore Link as a large part of the mall was closed from asset enhancement works. In the quarter, Singapore hotels generated 73% of CDLHT's overall NPI. This segment saw a 4.4 ppt improvement to occupancy rates to 92% from higher business volumes, although average daily room rates declined 4.1% to $209 due to increased competition from supply of new hotel rooms and weaker visitor arrivals. Subsequently, RevPar increased marginally to $192 (+0.5%). Aggregate leverage for CDLHT increased 0.7 ppts q/q to 30.2%, while weighted average debt to maturity was extended slightly to 2.4 years. At $1.69, CDLHT is valued at 1.06x P/B and has an annualized 9M14 yield of 6.2%, slightly less attractive compared to hospitality REIT peers' average of 0.95x P/B and 6.7% yield. Latest broker ratings: OCBC's Hold rating and TP of $1.80 is under review

SG Market (28 Oct 14)

SG Market : Expect a lacklustre open for the S’pore market given the lack of direction from the US, as well as weakness in the regional markets. Both the Nikkei and Kospi are trading 0.3% lower this morning. There is more reason for investors to remain on the side lines, with the critical FOMC meeting on 28-29 Oct, when the central bank is expected to end its monthly bond purchases after reducing it to US$15b last month. The fall in WTI crude (-0.4% to US$80.65) has extended into its third day, and will likely continue to pressure the O&G and O&M sector, with the blue chips names - Keppel Corp and Sembcorp Marine likely to lead the pack. Meanwhile, a string of 3Q results from local index heavyweights are due this week: OCBC, UOB (30 Oct) and DBS (31 Oct), several REITs (CDL Hospitality Trusts, Starhill Global, OUE Commercial), Hutchison Port, Indofood Agri, SMRT and others. Two new IPOs to make their listing debut this morning – eye care specialist, ISEC Healthcare (offer price: $0.28) and interior outfit solutions provider, Serrano (offer price: $0.23). The STI is hovering around the critical 3,225 level (200 day moving average) and a break below this leaves 3,200 as the next psychological support level. Any upside may be capped at 3,260 in the near term. Stocks to watch: *HPH Trust: 3Q14 net profit fell 9% y/y to HK$490.7m, mainly due to an increase in effective tax rate to 21% from 10% in 3Q13, as the tax concession has almost expired in the Yantian terminal, which more than offset a HK$30m exchange gain on Rmb deposits. Revenue inched higher by 1.7% to HK$3.4b, buoyed by robust operations, but offset by the deconsolidation of Asia Container Terminals (now 40% JV). Container throughput in Hong Kong increased 2.1% due to higher transshipment volume, offset by weaker intra-Asia cargoes. Meanwhile, container throughput at Yantian expanded 12.4% due to growth in transshipment and US cargoes. Average revenue/TEU for Hong Kong grew from a favourable throughput mix from liners, although rates for Yantian were lower due to higher proportion of transshipment throughput handled. Management maintained its HK$0.41 DPU guidance intact, implying ~7.8% yield. BVPS at HK7.23 (US$0.93). *CDL Hospitality Trust: 3Q14 results came in slightly above expectations, with distributable income of $25.6m (-0.5% y/y), and DPU of 2.61¢ (-1.1%). Gross revenue rose 11.9% to $40.1m, while NPI edged up 2.4% to $33.8m, boosted by full contribution from Jumeirah Dhevanafushi (JD) (acquired Dec ’13), though offset by lower income from Claymore Link due to ongoing AEI works. Bottom line was impacted by higher depreciation cost attributable to JD. Occupancy for the Singapore hotels rose 4.4 ppt to 92%, although average daily rates dropped 4.1% to $209, due to higher competition. RevPar maintained at $192. Aggregate leverage increased 0.7 ppts q/q to 30.2%, while weighted average debt to maturity was extended slightly to 2.4 years. BVPS at $1.60. *Excelpoint: 3Q14 net profit rose 8.3% y/y to US$1.9m, as revenue grew 10.9% to US$200.6m, driven by strong demand for memory products. However, gross margins slipped 0.8ppt to 6.2%, due to a change in product mix. Management remains optimistic about prospects for 4Q14. BVPS at US$0.105. *Second Chance Properties: FY14 net profit plummeted 71% to $16.5m, due to the absence of $42.9m of fair value gains on investment properties booked in the previous year. Revenue declined 10% to $48.5m, due to lower sales from the apparel and gold businesses, which fell 11% and 20%, respectively. *GLP: Its fund management platform in Brazil has grown by US$1.5b to US$3.7b. GLP formed a US$1.1b partnership, GLP Brazil Income Partners II (GLP BDP II), in which GLP will own a 40% stake, and Canada Pension Plan Investment Board and a leading US institutional investor each taking a 30% stake. Separately, GLP’s 40% owned GLP BDP I, has also been expanded by US$0.4b. However, GLP expects to recognize an FX loss of US$24.6m in 2QFY15, due to depreciation of the BRL against the USD. *Nam Cheong: With regard to a news article published by The Edge M’sia on 20 Oct titled “Nam Cheong weighs Bursa, Oslo listings”, management clarifies that it has yet to deliberate or make any decision on dual-listing, and has not appointed any professionals for this purpose. *KLW: Acquiring a 45.45% stake in Mega Sun Development for Rmb85m, which will be funded through proceeds from prior fund raising exercises. Mega Sun holds 55% equity in Suzhou Jiaxin Real Estate Development Co, a property development and construction player in Suzhou which is currently developing the Fu Yuan Luxury Villas (51 units). The project is expected to be launched in 4Q14, with completion slated around 2017. *Perennial China Retail Trust (PCRT): Perennial Real Estate Holdings (PREHL) has made a $0.70 per unit offer for PCRT, to be satisfied by the issue of 0.52423 PREHL shares at ~$1.3353 each. The offeror and its concert parties have a combined interest of ~33.6% in PCRT. Investors holding an additional 15.8% of PCRT units have also committed to tender their units. The offer will become unconditional upon the offeror achieving more than 50% control. PCRT will be privatised and delisted if the offeror receives more than 90% control. First closing date of the offer is 8 Dec. *Boustead Singapore: Awarded a construction management and construction contract for a medical device manufacturing facility at the Kulim Hi-Tech Park in M’sia for a US MNC. The contract value is in excess of RM90m and raises the group’s order book backlog to over $487m. *Asiatravel: Says it is the first online travel agency based in the Asia-Pacific region to participate in the TripAdvisor instant booking feature, which allows users to make hotel reservations through TripAdvisor partners while remaining on the TripAdvisor site. *Linc Energy: Updates that the first of its three wells (PATA1) is progressing on time and on budget in its 100% owned 103m boe petroleum exploration licence (PEL) 121 in the Arckaringa Basin. *Communication Design: Extended the cuff-off date to 30 Nov, for the fulfilment of conditions in the placement agreement, change in use of proceeds to be for the proposed acquisition of Richwood Asia I Investments and One Room Mansion, as well as for diversification into property development and investments.

Monday, October 27, 2014


GLP: ($2.74) Alibaba affirms Brazil’s attractiveness Armed with nearly ~US$25b cash following its mammoth IPO in Sep, Alibaba is keen to expand and is now training its sights on the fast-growing Brazil market by acquiring local, according to Brazil’s Exame magazine. Alibaba already has a sizeable Brazilian presence through its AliExpress site - currently ranked the seventh most visited e-commerce in the country. In fact, according to research firm, comScore, AliExpress received more than 12m hits from Brazilian consumers in Jul, up more than 8-fold from a year ago. Meanwhile, Alibaba has teamed up with Correrios, Brazil’s state-owned postal services company, to facilitate cross-border trading by SMEs on both sides, using its Alipay electronic payment system. If Alibaba does indeed plan to move aggressively into Brazil, this would be a strong testament to GLP’s foresight in making early investments in the country. GLP has a property portfolio across Japan, China and Brazil worth a total of US$19.6b, with Brazil accounting for 13% of group NAV. In addition, GLP has US$2.4b of assets under management via Brazil JVs under its fund management platform. With Alibaba already a key client and partner of GLP in China, it would make sense for Alibaba to once again tap of GLP’s proven logistics development expertise for its expansion in Brazil. GLP already has a strong growth story premised on its China development roll-out. With improving prospects in Brazil as a bonus, sentiment in GLP could be lifted further. The street continues to remain bullish on the stock, as reflected by the 14 Buys, 3 Holds and 1 Sell, with consensus TP of $3.27. GLP shares are up 0.7% at $2.74 today.

Samudera Shipping Line

Samudera Shipping Line: The Edge notes that Samudera has been busy streamlining its operation in a bid to stay relevant. Besides container shipping, Samudera also specialises in bulk cargo, including liquid and gaseous goods. Amongst other things, the company has downsized operations on loss-making routes and gotten rid of non-performing vessels. The latest 3Q14 results show that its efforts are paying off, with net profit of US$5.2m reversing from a net loss of US$0.2m a year ago. Revenue however, fell 9.5% y/y to US$88.2m, due to competition in Indonesia (its main market) from newer, fuel-efficient vessels. Still Samudera managed to shore up its cash flow, doubling its cash pile to US$33.4m from a year ago. Despite hitting a recent high of $0.18, the stock remains valued at a deep discount to its latest book value of US$0.457 per share.

Serrano (IPO)

Serrano: The provider of interior fitout solutions in Singapore and SE Asia will make its trading debut at 9am tmrw. Its IPO for 30m shares at $0.23 each was 1.3x subscribed. Of the net proceeds of $3.6m, $1m will be used to increase market penetration overseas while another $1m will be used to explore acquisitions and alliances.

United Engineers

United Engineers: Lim & Tan believes there is "speculative" appeal for UE, and that TCC remains in discussion with OCBC and GE regarding an offer for UE. UE has been disposing its other divisions (ie. UE E&C, auto division, MFS printed circuit board business), leaving its property assets comprising office (UE Square, UE Bizhub Tower, 450 Alexandra Road) , retail (UE Square, Rochester Mall, Seletar Mall), serviced suits (Park Avenue Clemenceau, Park Avenue Rochester and Park Avenue Robertson) and provides a strategic fit to Charoen's (TCC's owner) FCT, FCOT and FHT. Using consensus estimates , L&T tips a valuation range for UE at between $3.30 and $3.55, which translates to 1.17x - 1.27x P/B.

Singtel (technical)

Singtel - Technicals appear to be rather neutral at this point, with a slight downward bias. The counter recently attempted to break above its key 50 and 200 day MA's but was not successful. The recent low of $3.63 should provide some support to share price.

Wilton Resources

Wilton Resources: Voyage Research initiaties coverage with Increase Exposure call and TP of $0.224. The house expect value to be gradually realized as the company moves towards production and as the company reports higher resource estimates. Remains of the view that share price currently offers positive value given the large gap between its share price and valuation.

Dairy Farm

Dairy Farm: OSK-DMG initiates with a contrarian Buy and TP of US$11.20. Dairy Farm is Asia’s bellwether retail stock with a diversified portfolio. Its cash cows in mature markets provide stability against emerging Asian growth markets such as Indonesia and the Philippines. It has leadership positions across most of its businesses. In China, the company announced its biggest merger and acquisition to date, taking a 20% stake in Yonghui Superstores for US$925m. This move may herald further expansion in China, which still remains a relatively fragmented market with growth opportunities. Recent reorganisation in the management team to manage the company by business formats instead of geographies could also boost efficiency. DMG believes Dairy Farm is an excellent play on these themes, given its unrivalled scale .


OSIM: CIMB did some forensic accounting on TWG, and says fears of TWG struggling was unfounded. OSIM’s 2013 annual report implied TWG made $6.3m of profit on $45.8m of revenue, but ACRA filings only had TWG making $2.6m profit on $37m revenues. Reasons for discrepancies are 1) the period of comparison are not the same, i.e. not fully year and 2) ACRA profits bear extra inventory costs associated with the set-up of new stores. CIMB normalized these factors and estimates that TWG’s 2013 revenue and profit would be +8%/+13% y/y respectively. More importantly, a sub-scale TWG’s net margins (13.8%) is closer to OSIM Group’s net margins (15%), even if it had been weighed down by the burden of legal fees from two ongoing court cases . CIMB forecasts TWG Tea’s FY14 sales and profit growth to be ~19%/27%. The concern however, would be the bread-and-butter OSIM business in core markets and effects of unrest in HK for 4Q. Meanwhile 3Q profit is expected to come in at $25.2-$25.4m CIMB maintains Add with reduced TP of $4.05, citing current valuations already reflects reduced expectations and is attractive for entry.

Singapore Banks

Singapore Banks: Maybank-KE notes that the property market could get worse but there should be no repeat of 1998. The house weighs in on trends: 1) vacancy rates for non-landed private homes, excluding ECs, have risen to 8.3%, the highest in eight years. 2) Currently seemingly high rental yield spreads could reverse when interest rates start to rise when interest rates start to rise in 2015. Additionally, a massive supply of new homes (63,000, 6,038 unsold) could tip the balance in 2015 as household formation tapers off. To absorb the supply, property prices and rentals will have to weaken, a consensus view. The house forecasts up to a 15% decline in home prices from mid-2014 to end-2015. Foreign investors have been snapping up Singapore homes, accounting of 13.8% of 1Q05-4Q11, led by the Chinese and Malaysians. While these appear high risk, the house believes a protection is a lower loan-to-value ratio for these buyers. Singapore’s improved position as one of the international wealth-management centers also suggest some of these are long-term investments. Meanwhile, the default cases at luxury projects are not reflective of the broader market, the house views. Banks are expecting a minimal impact. Maybank-KE maintains Neutral on the sector, with a preference for DBS (Buy, TP of $23.40), UOB (Hold, TP of $25.30), and OCBC (Hold, TP of $10.10)

Mapletree Commercial Trust

Mapletree Commercial Trust: 2QFY15 DPU increased 9.4% y/y to 1.97¢, while distributable income rose 11% to $41.4m. Revenue rose 6.3% to $70m, while NPI rose 8.8% to $52.1m, mainly due to positive rental reversions and step up in existing leases for VivoCity and PSA Building. Portfolio occupancy held steady at 98.5% with WALE of 2 years. Meanwhile, aggregate leverage at stood at 38% (-0.3ppt), with all-in interest cost of 2.17%. MCT announced a $5.5m AEI for VivoCity, where it would convert the B1 car park space and lower yielding space into prime retail space, to leverage the strong traffic flow from a direct connection to the Harbourfront MRT station. Works should commence next quarter, and expected to complete between April and September 2015. The AEI is estimated to yield an ROI of 17%. While management notes a softer retail outlook, demand for prime space remained strong in the quarter, especially from new or expanding retailers. Brokers broadly like MCT’s resilient assets, but their TPs which are near to current share price insinuate that positives are priced in. BVPS of $1.16 translates to 1.26x P/B, with annualized yield of 5.4% annualized 2QFY15 yield. Latest broker ratings: Deutsche maintains Buy with TP of $1.48 CIMB maintains hold with TP of $1.47

ISO Team

ISO Team: Intends to acquire four local companies for ~$11.0m as part of its plans to become a complete building and maintenance team. The companies are involved in new and complementary business areas that ISOTeam has yet to significantly tap into and twill add both depth and width to the group’s expertise and specialist capabilities. The proposed acquisitions will be funded by a combination of cash and the issuance of consideration shares, priced at $0.50 per share or at 10% discount to the VWAP of the market day immediately preceding the date of the agreements inked with the respective target companies.


Libra: OCBC initiates coverage on Libra Group as conviction BUY in the small-cap space with a fair value estimate of $0.33. Based on an analysis of this M&E specialist’s order book, upcoming FY14 earnings is forecasted to increase a whopping 8.4 times YoY (and 12.2 times over its last 3Y average) to $4.7m. Further forecast FY15 earnings to further grow 65.9% YoY to $7.8m as the new management team, who took over operations in 1Q14, continues to expand and position the company to capitalize on the healthy public construction outlook. Highlight that this under-the-radar company is already showing initial signs for an earnings upswing: 1H14 earnings had jumped 218.1% YoY to $3.0m. Believe Libra represents good value here at only 2.7x FY15 forward P/E (versus a peer average of 7.4x). In addition, the group’s dividend yield is forecasted to jump dramatically from 1.6% last year to 8.1% in FY14 and 9.7% in FY15. Fair value estimate of Libra is based on an undemanding 4.8x forward FY15 PE, which represents a 35% discount versus its peer average. Increased visibility of Libra’s earnings and dividends growth ahead will likely form compelling re-rating catalysts for its share price.

Mapletree Greater China Commercial Trust

Mapletree Greater China Commercial Trust (MGCCT) 2QFY15 results were ahead of estimates, with DPU jumping 10.4% to 1.61¢, taking 1HFY15 DPU to 3.16¢ (+11.1%). Gross revenue for the quarter was up 6.9% to $67.5m, led by strong rental reversions at Festival Walk and Gateway Plaza. NPI advanced 9% to $55.1m, as property operating expenses fell 1.6%, largely due to lower leasing commissions and marketing and promotions expenses. Portfolio occupancy remained high at 99.2%, with 87% of the expiring leases in FY15 renewed with robust rental reversions (between 21% and 32%). MGCCT’s portfolio comprises two key assets, Festival Walk and Gateway Plaza. Going forward, management believes MGCCT’s portfolio is well positioned to benefit from the continued performance in both the HK retail sector and the Beijing office sector. MGCCT had net gearing of 37.7% with a weighted debt maturity of 2.7 years, and average cost of debt of 2.1%. MGCCT trades at 0.91x P/B and offers 6.7% annualized yield, against its closest Singapore peer Suntec REIT (5.2% yield) and Hong Kong peers Champion REIT (6.1%), Fortune REIT (5.9%) and Link REIT (3.5%).

GMG Global

GMG Global: In-line with its profit warning, GMG recorded 3Q14 net loss of $4.9m versus a net profit of $1.5m the previous year, taking 9M14 net loss to $19.6m (3Q13 net profit at $15.7m). Revenue for the quarter fell 24.7% to $180.8m due largely to a fall in average selling prices of rubber which stood at $2,179 per MT for 3Q14. Bottom-line was further weighed by associate losses at $0.8m versus profit contributions of $2.6m, as a result of weak rubber prices and high operational cost in its palm oil business in Gabon. Overall, 9M14 saw the group recording a 17% increase in sales tonnage to 251,918 tons, with average selling prices of natural rubber at $2,475 (-27% y/y) over the same period. Going forward, cost pressures are expected to remain as plantation and processing costs are likely to increase in Africa and Indonesia which will impact margins. Although the prices of natural rubber remain soft with the supply overhang, GMG is of the view that this is part of the cyclical nature of the business. The group aims to focus on developing its market presence and manage operating costs so that it can achieve optimal operational efficiencies and higher economies of scale. GMG expects natural rubber market prices to hover around US$1,532 per ton for the rest of 2014.

Raffles Medical

Raffles Medical: Raffles Medical's 3Q14 net profit grew 11% y/y to $15.5m, in line with revenue growth to $94.5m, buoyed by healthcare services (+16.4%) and hospital services (+7.3%). In the healthcare services segment, the group saw higher patient load, an expanding clinic network and increased provision of healthcare insurance services, while the hospital services division saw the addition of new specialist consultants and higher in-patient admissions. This brought 9M14 earnings to $45.6m (+9.2%) and revenue to $274.6m (+8.6%), 64% and 73% of street's FY14 estimates. Market watchers are expecting Raffles Medical's fourth quarter to be its strongest, due to seasonal effects. Historically, 4Q contributes 30% to full-year earnings, backed by higher patient load and some tax relief. Group's net cash position remained healthy at $118.9m ($0.21/share), although it dropped from $130.6m in 2Q14, due to capex spending ($10.4m) and interim dividend payment ($8.5m). Group continues to target future growth organically through the expansion of specialist centres, as well as to progressively build up breadth and depth of its capabilities. The upcoming RafflesHospital extension, located at the site adjacent to RafflesHospital, is targeted for groundbreaking at year end and will add an additional 220,000 sf to its current 300,000 sf gfa in two years. Meanwhile, construction work for Raffles Holland Village is underway, which will add another 9,000 sf of medical and specialist services for the group. Management expects the healthcare landscape to remain competitive with new public and private hospitals, being developed in Singapore and the region, in addition to the shortage of healthcare manpower in Singapore. The stock trades at a forward P/E of 30.7x, compare to regional peers' average of 33.1x. Latest broker ratings: Maybank-KE maintains Hold with $3.93 TP OCBC maintains Hold rating with $3.90 TP under review

SG Market (27 Oct 14)

US Market: US stocks ended Fri on a positive note with the S&P 500 capping its best week since 2013, buoyed by strong corporate earnings as markets shrugged off fears of the possible spread of Ebola in New York. The blue-chip DJIA advanced 127 pts to 16,805 (+0.8%), while the broad-based S&P 500 gained 14 pts to 1,965 (+0.7%) and the tech-heavy Nasdaq Composite added 31 pts to 4,484 (+0.7%). Earnings season took centrestage, with about 70% of S&P 500 companies that have released results so far this quarter beating earnings estimates and 60% surpassing sales forecasts. Healthcare shares were the biggest gainers (+1.4%) after a New York City doctor was tested positive for the Ebola virus. Pharmaceutical firm Bristol-Myers Squibb gained 2.2% after reporting 3Q eanings above estimates. Pfizer added 1.8%after its board approved a new US$11b share buyback program. Microsoft rose 2.5% as quarterly revenue topped expectations on cloud computing growth. Procter & Gamble climbed 2.3% after announcing in-line earnings and plans to split its Duracell battery business into a separate company. On the downside, Amazon was pummelled 8.3% lower on a its 3Q loss puts it on track to record its largest annual loss in a decade, while Ford dropped 4.3% after its 3Q profit missed estimates on higher recall costs and lost production of its F-150 pick-up truck. Among other stocks in focus, SodaStream soared 15%, on reports that the home beverage carbonation system maker is planning to test PepsiCo-branded products, while Internet radio service provider Pandora Media plunged 13.5% on slower 3Q user growth. Volume shrank to 5.3b shares traded on US exchanges, 16% below the three-month average. Advancing issues outnumbered declining ones by 1.7 to 1 on the NYSE and 1.3 to 1 on Nasdaq. S’pore shares are likely to respond positively to the continued strength on Wall Street but gains will depend on US GDP data, key corporate earnings from Chevron, ExxonMobil, Dupont, Visa, Facebook, all due out this week and the critical FOMC meeting on 28-29 Oct, when the central bank is expected to end its monthly bond purchases after reducing it to US$15b last month. Investors will also keep an eye for a string of 3Q results from local index heavyweights OCBC, UOB (30 Oct) and DBS (31 Oct), several REITs (CDL Hospitality Trusts, Starhill Global, OUE Commercial), Hutchison Port, Indofood Agri, SMRT and others. A break of the 3,230 resistance could put the STI on the upward path towards immediate obejective at 3,260 before meeting the 50-dma at 3,280 with downside support at 3,180. Stocks to watch: *Raffles Medical: 3Q14 revenue and net profit both grew 11% y/y to $94.5m and $15.4m, respectively. Revenue from Healthcare Services jumped 16.4%, driven by higher patient load, an expanding clinic network and increased provision of healthcare insurance services. Hospital Services revenue climbed 7.3% with the addition of new specialist consultants to the group and higher inpatient admissions. The group’s net cash position remained healthy at $118.9m ($0.21/share), despite dropping from $130.6m in 2Q14, after making payments for capex ($10.4m) and interim dividend ($8.5m). #Mapletree Commercial Trust (MCT): 2QFY15 DPU rose 9.4% y/y to 1.97¢, as distributable income grew 11% to $41.4m. Revenue climbed 6.3% to $70m, and NPI advanced 8.8% to $52.1m, due to positive contributions from VivoCity, PSAB and Mapletree Anson. Occupancy stood at 98.5% with WALE of 2 years. Aggregate leverage was 38%, with all-in interest cost of 2.17%. BVPS at $1.16. *Mapletree Greater China Commercial Trust (MGCCT): 2QFY15 DPU advanced 10.4% y/y to 1.61¢, taking 1HFY15 DPU to 3.16¢ (+11.1%). Revenue grew 6.9% to $67.5m, and NPI increased 9% to $55.1m, led by strong rental reversions at Festival Walk (+21%) and Gateway Plaza (+32%). Property operating expenses dipped 1.6%, largely due to lower leasing commissions and marketing and promotions expenses. Management says Festival Walk experienced minimal impact from the on-going protests in Hong Kong, and expects steady performance for the property for the rest of the year. BVPS at $1.04. *CapitaRetail China Trust (CRCT): 3Q14 DPU grew 10.3% y/y to 2.35¢, and distributable income advanced 14.1% to $19.5m, but still fell short of the street’s expectations. Gross revenue and NPI both expanded ~30% to $51.4m and $32.3m, respectively, driven by new contribution from CapitaMall Grand Canyon, and positive rental reversion (+22.6%) from other multi-tenanted malls. However, portfolio occupancy slipped from 0.5ppt q/q to 97.6%, due to lower occupancy at the Chinese malls - Mingzhongleyuan, Qibao and Wuhu. Gearing remained healthy at 30.8%, with low weighted average cost of borrowing at 3.47% and a well-spread debt maturity profile. BVPS at $1.49. *GMG Global: Swung into a 3Q14 net loss of $4.9m from a net profit of $1.5m a year ago, taking 9M14 net loss to $19.6m (3Q13 net profit: $15.7m). For the quarter, revenue plunged 25% to $180.8m, due to a fall in the average selling price of rubber. Bottom-line was further impacted by associate losses at $0.8m, versus associate profits of $2.6m in 3Q13. *Ho Bee: Buying a freehold property known as 60 St Martin’s Lane in Covent Garden in London for £43.9m. The 36,350 sf building comprises six floors of Grade A office accommodation and a retail component, and is fully leased until 2026 with annual rental income of ~£1.67m (next rent review in 3Q16). *ISOTeam: Acquiring four local companies for ~$11.0m, as part of its plans to become a complete building and maintenance team. Funding will be via a combination of cash and issue of new ISOTeam shares priced at $0.50 each, or at 10% discount to the VWAP of the market day immediately preceding the date that the agreements are inked with the respective target companies. *Linair Technologies: Awarded a contract by Tanenake Corp to install the air con mechanical ventilation system for S’pore Changi Airport Terminal 4 worth an aggregate $24.4m. *Ezion: Extends long stop date for the $55m disposal of Ezion Offshore Logistics Hub and Teras Australia to AusGroup, till 31 Dec’14. *Global Yellow Pages: Completed the $38.5m acquisition of a 100% stake in Pakuranga Plaza. *Pavillon: Profit warning. Expects to incur loss for 1HFY15 on lower revenue in Singapore and China, increased personnel costs, and fixed asset written off upon closure of an outlet in Shanghai. *HTL Int’l: Profit warning. Expects to report 3Q14 net loss due to an increase in operating overheads resulting from a one-off expense incurred in connection with the cessation of an agency. Nevertheless, the group expected to be profitable for the full financial year. *Blumont: Profit warning. Expects to report 3Q14 losses arising from fair value readjustments of the group’s investments in transferable securities (financial assets). Results due on or before 14 Nov.

Friday, October 24, 2014

K1 Ventures

K1 Ventures: 1QFY15 net profit of $3m, declared 2.5¢ dividend. The latest results reflect the deconsolidation of Helm, its railcar leasing business, which was divested in Apr this year. Including the latest div, mgt would have dished out a total of 10.5¢ in dividend/share since mgt's failed MBO some 2 yrs ago. K1's remaining invmts include: i) 10.2% stake in Knowledge Universe Holdings, ii) US$100m invmt in preferred shares of Guggenheim Capital with a 7% coupon rate, iii) 1.6% stake in China Grand Auto, the largest auto dealership in China and majority owned by PE firm TPG. Mgt does not plan to make any further invmts and will manage the existing portfolio for eventual exits. Near term catalyst could be a listing and monetisation of China Grand Auto as well as potential cash distribution from KUH. DMG reiterates Buy with TP $0.235


Biosensors: BoAML reduced its TP S$0.73 (from $0.90), mainly because the weak sentiment around the stock after announcement of halt of privatization process. House believes the company is still in a transitioning and highly unstable period due to: 1) Japan markets still in a weak position; 2) Change of new CEO; 3) halt of privatization process. BoAML remains neutral on the stock also because the downside is protected as the stock is currently trading at 0.8x P/B and the large net cash position would provide further opportunities in M&A.


Ebola: Makes first land fall in New York; investors flee toward safe havens Last night, the S&P500 gave up a third of its gains in late trading, falling from an intraday gain of as much as 1.8% to close just 1.2% higher, after New York reported its first case of Ebola. According to newswires, a 33-year old doctor who recently returned to New York after treating Ebola patients in Guinea, has been tested positive for the virus. He began showing symptoms on Wednesday night. Earlier, he attended a bowling session and used taxis for transport. While the city authorities have rushed to control the situation and effect quarantines on individuals at risk, the highly contagious nature of Ebola has raised nervousness in the financial markets, leading to a bout of profit taking in risk assets. The S&P500 futures has continued to slide 0.4% in current Asian hours. Accordingly, the STI is trading 0.4% lower at 3,222, and the HSI is down 0.3% at 23.269. Investors are seeking shelter in safe-haven assets such as the yen (+0.2%) and US bonds. Airlines are amongst the sectors most impacted by an Ebola scare as people tend to avoid overseas travel; accordingly SIA is down 1% at $9.60. Healthcare consumables, such as rubber glove makers, are beneficiaries given higher product usage and stocking up of supplies by the hospitals. Key players are SGX-listed Riverstone (Buy, TP $1.21), and Bursa-listed Top Glove (Hold, TP RM4.70), Kossan (Buy, TP RM5.00), and Hartalega (Buy, TP RM7.30).


Midas: 32.5% owned JV Nanjing SR Puzhen Rail Transport Co and Shanghai Alstom have jointly secured a metro train contract worth Rmb897m, awarded by Nanjing Metro Infrastructure Co, for the Nanjing Metro Ninghe Intercity Line Phase 1. Delivery is scheduled between 2015 and 2016. Separately, subsidiary Jilin Midas had also secured Rmb256.8m worth of orders for the supply of aluminum alloy extrusion profiles and fabricated parts to two major European train projects. Delivery of these contracts are phased between 2014-2021. Also, Jilin Midas also secured three PRC metro train components for Rmb78.7m from NPRT for three PRC metro trains.

Frasers Centrepoint Trust

Frasers Centrepoint Trust (FCT) 4QFY14 results were in line, with distributable income of $25.5m (+3.8%), and core DPU at 2.79¢ (+5.9% y/y), taking FY14 DPU to 11.2¢ (+2.4%). Gross revenue and net property income rose 16.1% and 14.9% to $46.7m and $31.3m respectively, due to rental step-up of current leases, better rental rates achieved for new and renewed leases and the maiden contribution from Changi City Point (CCP), which was acquired in Jun ’14. During 4Q14, 46 leases accounting for 53,484 sf or 4.9% of FCT’s total NLA were renewed. The average rental of leases renewed in 4Q14 was 10.9% higher than that of the preceding leases which were typically contracted three years ago. For FY14, the portfolio achieved 6.5% increase in average rental for lease renewals, compared to 7.7% in FY13. FCT’s portfolio occupancy as at 30 Sep ‘14 stood at 98.9%, compared to 98.5% in the preceding quarter, while aggregate leverage remained comfortable at 29.3% and a weighted average debt maturity of 2.5 years. Performance of FCT’s portfolio is expected to remain stable, while the acquisition of CCP is expected to strengthen FCT’s presence in the suburban mall sector, and is DPU accretive. At the current price, FCT trades at an FY14 yield of 5.8% and 1.05x P/B, versus the retail REIT average of 6.2% current yield and 1.0x P/B. Latest broker ratings CIMB maintains Add with TP $2.18 OCBC maintains Buy with TP $2.08


SG CPI: Core inflation eased to +1.9% y/y (Aug 2014: +2.1% y/y), but remain stable around post 2007/08 global financial crisis average. The main decrease came from healtch care, where growth was reduced to +1.8% y/y (Aug’14: +3.4% y/y) on enhanced medical subsidies for lower to middle income earners, starting 1 Sep’14 . Food price was stable at +3.0 y/y in Sep’14 (Aug’14: +2.9 y/y) on higher cost for prepared meals. Transport costs fell -1.8% (Aug’14: -1.8% y/y) as its biggest component Private Road Transport contract rose +2.4% y/y (Aug’14: 2.4%). Meanwhile, prices of Clothing & Footwear fell 0.4% y/y largely due to seasonal sales. Meanwhile, headline inflation rate in Sep’14 eased for the third month in a row to +0.6 y/y ( Aug’14: +0.9 y/y) mainly on enhanced medical subsidies including the Pioneer Generation Package, and lower accommodation costs. Other components of CPI remained relatively stable.

Cache Logistics Trust

Cache Logistics Trust: 3Q14 results were broadly in line. DPU rose 0.7% to 2.14¢ taking 9M14 DPU to 6.43¢ (-1.2%). Gross revenue for the quarter was up 0.4% to $20.9m, although properly expenses rose 15.9% to $1.3m due to higher property maintenance expenses and lease commissions, netting a slightly lower NPI of $19.5m (-0.5%). Fundamentals remain sound with portfolio occupancy at 99.5% and leverage ratio at 28.8%, and a weighted average lease to expiry of 3.6 years. Going forward, Cache guides that it is making good progress on negotiating new leases and forward renewals for lease expiries in 2015, and will work closely with its sponsor in a bid to maintain high portfolio occupancy by securing existing and potential new end-users as direct tenants. On its investment pursuits, the group seeks to grow Cache via accretive acquisitions in Singapore and in the Asia- Pacific region, particularly in China, Australia, Malaysia and Korea. Cache trades at a P/B of 1.22x and offers an annualised 3Q14 yield of 7.2%. Latest broker ratings OCBC places Hold rating and TP of $1.25 under review OSKDMG resumes coverage with Neutral and TP of $1.21


Ezra: 4QFY14 net profit grew 10% y/y to US$11m, on revenue improvement of 6% to US$446m, buoyed by its subsea services segment, but partially offset by a decrease in sale from marine services and offshore support services segments. Gross margin fell 4 ppts to 14% mainly due to weakness in the AHT and PSV segments. Meanwhile, bottom line shored up by the absence of an impairment loss (US$2m) and disposal loss (US$1.2m), as well as lower admin expenses (-17%). Order backlog of US$2.4b, with the majority to be executed over the next 12-18 months. No dividends declared (FY13: 0.5¢/share). Separately, Ezra's subsea services segment was awarded an aggregate US$70m worth of contracts from a variety of national oil companies, oil majors and contractors. The scope of work includes subsea installation of umbilicals, flowlines and jumpers, as well as provision of services to support rigs. Work has commenced for several projects, with the others slated for offshore execution from 4Q14 to 2Q15.


CCT: 3Q14 results in line with street expectations; Distributable income grew 4.8% to $61.6m, while DPU was up only 2.9% y/y to 2.1¢, due to a 2.2% increase in units from the conversion of convertible bonds (2.3m units) and asset management fees (1.9m). Gross revenue and NPI improved 8.4% and 8.6% to $66.4m and $51.9m respectively, buoyed by a 4.9% increase in average office portfolio rent from $8.03 to $8.42 psf. Overall portfolio occupancy at 99.4%, reportedly above market occupancy rate of 96.6%. Gearing of 30.2% provides $1.2b debt headroom assuming 40% gearing, with average cost of debt at 2.3%. NAV of $1.69. Latest broker ratings: OCBC maintains Hold with TP of $1.67.

Ascendas REIT

Ascendas REIT: 2QFY15 DPU was in line, increasing 1.7% y/y to 3.66¢, while distributable income rose 1.1% to $86.0m. Revenue rose 8.6% to $164.8m while NPI rose 7.0% to $114.7m, from recognition of income from Nexus@one-north, A-REIT City@Jinqiao, HIC, Aperia, as well as positive rental reversions of 6.3%. (-5.5ppt q/q). Portfolio occupancy of 87.2% (-0.9ppt q/q) with WALE of 4 years. In the quarter, A-REIT acquired Aperia for $458m, while AEI works Corporation Place, LogisTech and Techquest for $25.4m were completed. Aggregate leverage of 32.6% (1QFY15: 31.6%) with average debt maturity of 4 years (1QFY15: 3.7 years). Underlying trends such as rental reversions and occupancy are weakening. Deutsche notes risks of going into negative rental reversions on rising supply and stagnant spot rent. BVPS of $2.07 translates to 1.1x P/B. A-REIT is trading at annualized 2QFY15 yield of 6.3% Latest broker ratings: CIMB maintains Hold with TP of $2.36 Deutsche maintains Hold with TP of $2.25