Monday, February 29, 2016


Singtel: Philippines telco peer PLDT drops 10.5% today following the release of a lacklustre set of 4Q15 results. Some market watchers may fear that the disappointing set of results may affect Singtel's Philippines' associate 47.2%-owned Globe, but we believe it is a company-specific issue at PLDT.

Details below:
- PLDT swung into 4Q15 net loss of 3.27b peso (US$69m) in 4Q15, mainly from asset impairment, FX losses and higher financing costs.
- At 4Q15, Globe contributed just 4% to Singtel's underlying net profit.
- At the top line, 4Q revenue from PLDT's mobile segment saw strong adoption of data services, pretty much in line with what Singtel saw.


Noble: S&P further downgrades Noble's credit rating to BB-
Barely under a two-month span, credit rating agency S&P has further downgraded Noble Group's long-term corporate credit rating to BB- from BB+ on the company's volatile earnings, and its higher-than-expected trading position.

The outlook for Noble is negative, especially during a crucial period when the company is seeking to refinance its short-term revolving facility of US$1.2b with its banks.

The unexpected net loss for 2015 highlighted the limited visibility and transparency around Noble's earnings, given its complex physical contracts book and derivatives programme.
Further, the group has significant long-dated contracts that are not fully hedgeable and the value of which relies on input assumptions that are not market-observable.

S&P would not rule out further asset impairments, given the depressed commodity prices. While Noble's price assumptions on its long-dated contracts are now at levels that are much more aligned with market prices, no provisions has been taken on anticipated further price declines or counterparty defaults.

The previous rating cut by S&P was on 8 Jan, when the group's rating was cut to BB+ (junk) from BBB-, which resulted in the counter to fall as much as 11.6% on the day.

SG Market (29 Feb 16)

Singapore shares are likely to remain range-bound prior to the release of a slew of China, US, Eurozone economic data due this week. Singapore corporate earnings season winds down today.

Regional bourses surged in early trading in Tokyo (+1.6%), Seoul (+0.1%) and Sydney (0.8%).

From a chart perspective, the STI is in tight consolidation between the upside resistance at 2,690 and immediate support at 2,600. Technical indicators are reversing from overbought levels.

Stocks to watch:
*Thai Bev: FY15 net profit 23.5t baht (+22%), boosted by disposal gain (3.9t baht) on sale of associate F&N’s stake in Myanmar Brewery. Revenue inched up 6% to 172.1t baht from sales of spirits (+1.3%), beer (+22.5%) and non-alcoholic beverages (+4.5%), partly offset by food (-0.4%). EBITDA margin slipped to 19.1% (-0.4ppt) on higher staff cost and increased losses in non-alcoholic beverages segment due higher advertising and promo expenses from new products launch. Final DPS of 0.46¢; FY15 DPS maintained at 0.61¢.

*Yangzijiang: 4Q15 net profit slumped 93% to Rmb41.5m, mainly due to provisions and impairments (Rmb361m) and a significant drop in interest income generated from restricted cash (-84%). Revenue fell 17% to Rmb3.13b on lower shipbuilding activity, while gross margin for the core segment of 26% (+8ppt) was masked by a provision writeback. Orderbook grew to US$5.36b (3Q15: US$4.8b). First and final DPS of 4.5¢ (FY14: 5.5¢). NAV/share Rmb5.689.

*Olam: 4Q15 core earnings slumped to $88.2m (-16.2%), bringing FY15 core earnings to $346.2m (+20.1%), in line with estimates. Revenue of $5.45b (+11.7%) was driven by the food category (+9.7%) due to new acquisition, elevated prices of almonds and cashews, and increased cocoa and coffee sales and prices, as well as the non-food category (+29.6%). EBITDA margin remained stable at 5.7% (-0.1ppt). Final DPS of 3.5¢ brought FY15 total DPS to 6¢ (FY14: 7.5¢). NAV/share at $1.81.

*Vard: 4Q15 swung into net loss of NOK83m (4Q14: +NOK154m), widening FY15 net loss to NOK603m (FY14: +NOK349m), in line with street estimates. For the quarter, revenue slumped to NOK3,320m (-26%) caused by reduced activity at its shipyards, while EBITDA crashed to NOK35m (-71%) on loss provisions related to projects at the Brazilian yards. Order book reduced to NOK10.23b (3Q15: 14b). NAV/share at $0.52.

*United Engineers: FY15 net profit soared 122% to $102.2m, while revenue fell 42% to $1.86b on absence of sales from the completed Austville Residences and divested automotive and MFS businesses. Gross margin at 18.3% (+5.4%), while bottom line was boosted by reduced expenses on divestment of MFS. NAV/share at $2.97. First and final DPS of 8¢ (FY14: 10¢).

*UOL: FY15 results missed as net profit slumped to $391.4m (-42.9%) on lower fair value gain of $48.8m (-84.8%). Revenue slipped to $1.28b (-6%) from lower contributions from property development (-14.6%), and hotel segments (-23.6%), partly cushioned by property investments (+10.7%). Gross margin narrowed to 39.4% (-3.3ppt) on absence of higher margin sales. First and final DPS of 15¢ maintained. NAV/share at $9.91.

*HPL: FY15 net profit fell 34.3% to $81.7m, while revenue fell 5.7% to $579.5m on absence of contribution from Tomlinson Heights (completed Mar ’14), less The Met units sold in Bangkok, and stiff hotel competition. Gross margin narrowed 1.3ppt to 27.9%. First and final DPS of 8¢ (FY14: 10¢). NAV/share at $3.32.

*SIA/ Tigerair: SIA intends to compulsorily acquire Tigerair. Closing date for the offer has been extended to 4 Mar.

*SGX: Proposed for a 10% minimum allocation of shares (from 5%) to retail investors, for Mainboard companies seeking IPO.

*SMRT: To sell 175 buses to LTA for $66.3m, making it LTA's second batch purchase following the first with SBS Transit. Notably, LTA is paying ~$0.4m/bus, ~20% lower than the previous deal.

*Swiber: Awarded US$100m engineering, procurement, installation and construction services contract for an Asian national oil company. Project has commenced and is expected to be completed by 1H17.

*Sim Lian: Overwhelming response to EC development Wandervale, with 534 units oversubscribed by 1.4x. Units are priced at an average $750-$770 psf, with buyers being a mixed of first-timers and HDB upgraders.

*Starburst: FY15 swung to a net loss of $1.7m (FY14: +$13.2m) as revenue tumbled 59.5% to $15.9m, due to near completion of existing firearm shooting range projects and lower recognition from new ones. Final DPS of $0.01 proposed (FY14: $0.012). NAV/share at $0.1873.

*Spackman: FY15 net loss narrowed to $1.3m (FY14: -$8.1m) although revenue dropped to $13.6m (-16%) on just one film produced (FY14: 4). However, gross margin fattened to 26.9% (+23.7ppt), while bottom line was helped by negative goodwill and absence of IPO fees. NAV/share at $0.042.

Friday, February 26, 2016

ST Engineering

ST Engineering: Q15 net profit was flat at $140.8m as stronger performances in other segments were offset by shipbuilding weakness. This brought FY15 earnings to $529m (-0.5%), falling within street estimates.

Revenue slipped 3% y/y to $6.33b, largely depressed by the oil-hit marine segment (-29%). Commercial sales remained stable at $4b or 64% of total revenue.

Segment highlights:
Aerospace - Pretax profit climbed 3% to $290.6m as revenue edged up 1% to $2.1b. Stronger performances in engineering & materials services, as well as component/engine repair & overhaul were offset by lower aircraft maintenance & modification works. Bottom line was partially shored by lower operating expenses, negative goodwill, and associates’ FX gains.

Electronics - Pretax profit of $191m (+4%) was buoyed by higher revenue of $1.7b (+8%), underpinned by project milestone completions from software systems and increased satcom sales. Bottom line was partially offset by less favourable product mix and higher expenses.

Land systems - Pretax profit advanced 16% to $65m, due to lower inventory provisions and goodwill impairment, offset by unfavourable product mix. Revenue was flat at $1.4b

Marine: Pretax profit sank 28% to $88.3m in tandem with the 29% revenue slump to $958m, due to lower recognition from shipbuilding contracts from both local and US operations.

Management guided that FY16 pretax earnings would be comparable to FY15, with steady performances in the aerospace and electronics sectors, while marine and land systems are expected to lag.

The group declared a final and special DPS totaling $0.10, taking FY15 payout to $0.15 (unchanged).

ST Engineering is currently trading at 16.2x FY16e consensus P/E against historical 13-24x valuation range, and offers a defensive 5.3% dividend yield.

XinRen Aluminum

XinRen Aluminum Gets S$0.60/shr Takeover Offer From Merit Stand

Best World

Best World: 4Q15 net profit spiked 81% y/y to $3.7m, bringing FY15 earnings to a 7-year record high of $10.1m (+149%), 11% above Maybank KE's initial estimates of $9.1m.

The strong results for the final quarter came on a 64% surge in revenue to $40.9m, on sustained growth momentum in Taiwan (+146%) and Indonesia (+467%) through a series of successful marketing campaigns which led to increased product acceptance, and higher export orders and increased contribution from manufacturing/ wholesale in China (+49%).

At end-2015, the multi-channel distributor has built up a significant sales network across 10 countries in the region, comprising a membership base of 402,422 ('14: 377,830, '13: 298,251).

Meanwhile, bottom line gains were partially pared by a one-time tax expense of $3.2m due to an unsuccessful appeal of a 2008 tax liability stemming from its Indonesia subsidiary.

Balance sheet remains plump, with net cash of $47.2m (3Q15: $39.9m), representing $0.215/share or 54% of current market cap.

Management has proposed a final DPS of 1.5¢, bringing FY15 total DPS to 2¢ (FY14: 0.8¢), maintaining its payout ratio at 43.5%.

The final approval for its direct-selling licence in China remains on track to be received sometime between Mar '16 and Mar '17. If it succeeds, management foresees a rise in profitability stemming from a shift in sales mix towards the more profitable segment, boosting bottom line further on operational leverage.

The stock is currently trading at FY15 P/E of 8.6x, 39% discount to larger peers' average of 14.2x. Taking cue from its impressive growth profile, we do not rule out increased research coverage on the company, giving Best World a much-needed boost in visibility to investors and provide an upward re-rating for the counter.

Pegging a conservative P/E of 12x to the stock would give a valuation of $0.55, implying a 40% upside.

Best World is a key constituent in the Market Insight Growth portfolio.

SG Market (26 Feb 16)

Singapore shares are expected to see more volatility as the market reacts to oil price gyrations and possible G-20 news.

Regional bourses opened mixed in Tokyo (+1.6%), Seoul (+0.2%) and Sydney (-0.2%).

From a chart perspective, STI faces stiff resistance at 2,670 with downside support at 2,600; technicals reversing from overbought levels.

Stocks to watch:
*Noble: First annual loss in almost 20 years of US$1.67b (2014: US$132m profit), which included US$1.2b of impairments and US$724m loss from agri unit sale. Core net profit of US$244m (-58%) on revenue of US$66.7b (-22%) fell short of estimates. Tonnage handled climbed 26% to 271m MT, giving 1.76% operating margin (19bps) FV of long term commodity contracts dropped to US$3.2b from US$4.5b at end Sep. Generated positive cash flow of US$651m in 2H15 with cash on hand at US$1.95b against total debt of US$5.9b. Jury still out on further writedown of commodity contracts and refinancing of US$1.6b debt due May. NAV/share at $0.72.

*ST Engineering: 4Q15 net profit on target at $140.8m (flat), while revenue dipped 3.8% to $1.78b mainly on reduced shipbuilding contracts. Management guided flat earnings for 2016. First and final DPS of $0.10 brought FY15 DPS to $0.15 (maintained).

*Venture: 4Q15 net profit rose 14% to SGD44.8m, bringing FY15 earnings to SGD154.1m (+10%), in line with estimates. 4Q revenue showed steady 8% growth, while pretax margin improved on cost control and FX gains. Final DPS of 50¢ maintained.

*Best World: 4Q15 net profit spiked 81% y/y to $3.7m, bringing FY15 earnings to a 7-year record high of $10.1m (+149%). For the quarter, revenue surged 64% to $40.9m on sustained growth momentum due to increased product acceptance. Net cash per share grew to 21.5¢ (3Q15: 18.1¢/share). Application for China direct selling license is proceeding on schedule. Final DPS of 1.5¢, bringing FY15 DPS to 2¢ (FY14: 0.8¢).

*China Merchants Pacific: FY15 results missed; net profit slid to HK$597.2m (-19.2%) on absence of a negative goodwill (FY14: HK$22.8m) and FX losses of HK$30.4m (FY14: HK$31.1m gain) due to the weaker RMB. Revenue grew to HK$2.21b (+9.3%), on new contributions from three recently acquired expressways and increased traffic at Yongtaiwen Expressway. Final DPS of 3.5¢ brought FY15 DPS to 7¢ (maintained). NAV/share at HK$5.32.

*Haw Par: FY15 net profit surged to $193.7m (+52.5% y/y) from stronger dividend income of $89.5m (+43%). Revenue rose to $178.8m (+16%) on rise in healthcare (+24.8%) but partially offset by leisure (-18.4%) and property (-17.4%) segments. Bottom line was further shored up by a $55.6m gain on partial disposal of interest in Hua Han. Final and special DPS of $0.29 declared bringing FY15 DPS to $0.35 (FY15: $0.20). Notably, group took a fair value loss on its balance sheet, which reduced NAV/share to $11.57 (-9.8%).

*IHH: 4Q15 results came in line despite core net profit declining to RM214.6m (-11.1% y/y) on higher financing costs (+60.6%) stemming from new acquisitions. Revenue grew to RM2.29b (+18.5%) from healthy growth across all segments. EBITDA margin narrowed to 26.8% (-3.3 ppt), weighed by tighter margin at Parkway Pantai, Acibadem, and PLife REIT. NAV/share at RM2.72.

*SingTel: Together with Mitsubishi Heavy Industries EngineSystems Asia have been awarded LTA’s $556m next-gen ERP project, which is to be progressively implement from 2020 onwards.

* Launched a platform and organised a first virtual travel fair in Singapore.

*SBI Offshore: Received request for termination of a US$24m design and engineering contract from a consortium of six Middle East-Chinese parties due to low oil prices.

*Lian Beng: Acquiring Broadway Plaza, a leasehold 5 storey commercial property in Ang Mo Kio Central for $51.5m. The property has GFA of 55,351sf, and 61 years remaining in lease duration.

*Dutech: Swung to 4Q15 net profit of Rmb22m from Rmb4.3m losseslast year, driven FX gain and the absence of bargain purchase gains recorded last year. Revenue increased 22.6% to Rmb330.2m, from strong sales of the new model safe, and revenue contribution from Deutsche Mechatronics GmbH. Gross margin expanded to 25.3% (+6.3ppt). NAV/share at Rmb1.946.

*Rotary Engineering: FY15 net profit fell 15% to $42.8m, as revenue tumbled 52% to $329.3m amid a slump in both its project services, and maintenance & trading segments. Gross margin widened 7ppt to 24% on closure of several projects, and productivity improvements. Bottom line was buttressed by reversal of impairment losses, disposal gains, FX gains from stronger USD, and interest income from an investment loan. A first and final DPS of 1.5¢ was proposed (FY14: 2.5¢).NAV/share at $0.509.

Thursday, February 25, 2016


Noble: Iceberg Research's fourth report is out, titled Noble’s Credibility


Trendlines: FY15 net loss widened to 17.2% to US$3.3m, but this includes US$3.8m one-off expense from the conversion of its redeemable convertible loans (RCL) upon IPO. Income sources grew 16.2%, largely driven fair value gains of portfolio companies (+164%), while total expenses ex-RCL conversion costs fell 30.4%.

Note however, due to Trendline’s business nature, earnings (or the lack of) can be very volatile from year to year, due to the many moving parts (gains/ losses, impairments, taxes, marketing, R&D)

SG Market (25 Feb 16)

Investors are bracing for some market volatility following the overnight swing in crude prices.

Regional bourses opened mixed today in Tokyo (+0.8%), Seoul (+0.8%) and Sydney (-0.2%).

From a chart perspective, technicals are overbought with STI facing topside resistance at 2,670 and downside support at 2,600.

Stocks to watch:
*City Dev: 4Q15 net profit of $410.5m (+6.6% y/y) brought FY15 earnings to $773.4m (+0.5%), 38% above street estimates, primarily attributable to a $314m gain from the sale of leasehold interest in three commercial buildings. However, core property development (-54%) and hotel operations (-93%) remained weak operationally following the sale of cashflow of Cityview Place and significant impairment losses to certain hotels and RevPAR declines. Final and special DPS of 8¢ and 4¢, respectively, maintaining full-year total DPS of 16¢.

*Riverstone: 4Q15 results topped estimates with net profit of RM37.2m (+66.4% y/y) from higher revenue of RM153.5m (+37%) due to increased gloves demand and wider gross margin of 31.3% (+4.9 ppt) on lower input prices. Bottom line gains were, however, partially mitigated by a FX loss, higher depreciation charges due to its facility expansion, but offset by fair value derivative gains. Final DPS of 5.25sen brought FY15 DPS to 7.65sen (FY14: 6.9sen).

*Ho Bee Land: 4Q15 net profit slipped to $193.7m (-32.1% y/y) due to lower fair value gains from investment properties and impairment losses. Overall revenue dropped to $222.6m (-28.5%) on lower fair value changes of investment properties (-34%), offset by increased rental contributions (+23.9%). FY15 DPS of 7¢ declared, which included a first and final as well as special dividend (FY14: 5¢). NAV/share at $4.023.

*First Res: FY15 results missed, as 4Q15 net profit crumbled 66.5% y/y to US$19.8m, as sales dropped 25.9% to US$130.9m on lower ASPs of palm based products, partially offset by higher volumes from the refinery and processing segment. Gross margin fell 9.8ppt to 47.9%, while bottom line was weighed by increased distribution and finance expenses. NAV/share at US$0.63. Final DPS of 1.25¢, bringing FY15 DPS to 2.5¢ (FY14: 3.55¢).

*SIIC Environment: 4Q15 net profit jumped to Rmb119.7m (+27% y/y), bringing FY15 earnings to Rmb360.4m (+24%), in line with street estimates. For the quarter, revenue spiked 51.5% to Rmb511.1m on increased construction activities, higher sales volume of water treatment and supply and greater contribution from newly acquired water treatment companies. Gross margin slipped to 37.1% (-6.3ppt) on a shift in sales mix, while operating profit was bolstered by FX gain (+15.6%).

*BreadTalk: FY15 missed estimates, after 4Q15 net profit crashed to $1.1m (-91.7%) on an absence of a $10m fair value gain, while associates swung into losses. Revenues remained flat at $155.1m, as the increased contribution in the restaurant segment (+5.4%) was offset by lower bakery sales (-2.2%). Final DPS of 1¢ brought FY15 DPS to 1.5¢ (unchanged). NAV/share at 52¢.

*Straco: 4Q15 net profit surged 41.5% y/y to $6.3m on solid revenue of $23.8m (+22.7%), boosted mainly by the Singapore Flyer which was acquired in Nov '14, but partially offset by lower sales at Chinese attractions. Operating margin expanded 5.1ppt to 45.2% as expenses rose at a slower pace. Net cash position soared to $62.6m (FY14: $19.1m), representing net cash/share of 7.3¢. First & final DPS of 2¢ and a special DPS of 0.5¢ was proposed (FY14: 2¢). NAV/share at $0.2595.

*HTL: Supplemental agreement with Guangdong Yihua Timber Industry on the conditional takeover of HTL via a scheme of arrangement, finalising the acquisition price at $1.00/share. Pre-conditions include government sanctions on the proposed acquisition before 31 Jul 2016.

*Hock Lian Seng: FY15 net profit dived 49.5% to $36.7m, as revenue of $174.8m (-33.2%) was eroded by property development business, given revenue contribution from Ark@KB project, completed in FY15, was significantly smaller than Ark@Gambas in FY14. Gross margin, which shrank 15.2ppt to 22.1%, was further dragged by lower margins in civil engineering segment. A first and final DPS of 2.5¢ (FY14: 4¢) was proposed. Net cash at $0.27/share (FY14: $0.31), translating into an ex-cash trailing P/E of 1.8x. NAV/share at $0.435.

*Singapore Post: S&P cut long-term corporate rating to A- from A due to increased earnings volatility but maintains its stable outlook.

*IPS Seurex: Agreed to acquire all of Yatai Security & Communications and Avac Systems (up from 40% stakes in previous MOU) for $1.87m in aggregate.

*Yongnam: Awarded four contracts worth $69.8m for projects in Singapore and the Middle East.

*PACC Offshore: Secured five-year charters for five vessels to the Middle East worth US$85m.

Wednesday, February 24, 2016


Economy: Singapore’s headline CPI continued to fall in Jan ’16, coming in at -0.6 y/y (Dec: -0.6%), its 15th straight month of decline. This is the longest spell of negative inflation in almost four decades.

However, core inflation stayed in positive territory at 0.4% (Dec: 0.3%) and is expected to rise gradually in 2H16 as the effects of one-off Budget measures and oil fades. This means that the MAS is unlikely to ease monetary policy at its semi-annual Apr meeting unless oil sinks further or the Singapore economy takes a turn for the worse.

MAS revised down its inflation forecast for 2016 to between -1% and 0% (from -0.5% to 0.5% previously) amid slumping oil prices and COE premiums, but left the core inflation forecast unchanged at 0.5%-1.5%. Meanwhile, Maybank-KE’s headline inflation forecast for 2016 stays at 0.5%

The core reading (CPI ex-accommodation and private road transport) edged up, in part due to the smaller reduction in electricity tariffs and higher food and retail goods inflation more than offsetting the fall in services inflation.

Meanwhile, housing and utilities remained the largest contributor of deflation during the month, caused by a softening housing rental market.

The decline in private road transport costs gathered pace to -1.8% (Dec: -1.1%) as cheaper COEs offset the increased pump prices.


Noble: (S$0.36) Moody's downgrade credit rating to Ba3 from Ba1
Moody's Investors Service has cut Noble's corporate family, senior unsecured bond ratings to Ba3 from Ba1, with rating under review for further downgrade.

The downgrade reflects the impact of the unexpected assets write-down on Noble’s business and financial profile, which is expected to raise the group's net debt/net capitalization to ~58% at end-4Q15, from ~51% at end-3Q15.

The further rating review are on concerns on Noble's progress in resolving its liquidity issue, especially in light of the group's impairment charges.

To recap, Noble's liquidity will remain constrained until it refinances ~$1.6b in bank facilities due May '16.

The credit agency cited that ratings can be downgraded within the next few weeks, if there is no material progress in the group's refinancing.

SG Market (24 Feb 16)

Short term rally likely to falter from overbought levels in face of falling oil price and further cut in 2016 domestic inflation by MAS to between -1% and 0% from earlier forecast of -0.5% to 0.5%.

Singapore's 4Q GDP grew 1.8% y/y, taking 2015 growth to 2%, the slowest rate since 2009. MTI maintains its 2016 forecast at 1-3%.

Regional bourses opened negative territory in Tokyo (-1.8%), Seoul (-0.4%) and Sydney (-1.7%).

From a chart perspective, downside support for the STI is at 2,600 (20-dma), followed by the triple bottom at 2,530.

Stocks to watch:
*Super: 4Q15 results met estimates as net profit sank to $15.7m (-39.4% y/y) on absence of disposal and liquidation gains, while revenue slipped 8.2% to $141.1m on weak sales in branded consumer (-1.2%) and food ingredient (-20.2%). Operating profit grew 3.3% on lower cost of sales and selling expenses, but bottom line was pressured by increased tax (+89.5%) arising from withholding taxes and the expiry of tax incentives. Final DPS of 1.2¢ brought FY15 DPS to 2.2¢ (FY14: 3.1¢).

*NOL: 4Q15 net loss narrowed to US$77.3m (4Q14: -US$122.3m) as revenue sank to US$1.3b (-28.5% y/y) on lower shipment volume (-12%), freight rates (-22%), and utilisation rates of 90% (-3ppt). Core liner registered operating losses despite reduced cost of sales per FEU (-17%) from lower bunker costs. NAV/share at US$0.95.

*Sheng Siong: 4Q15 results in line, with net profit of $14.6m (+23.9% y/y) on revenue of $187.1m (+4.9%) mainly boosted by contributions from five new stores, although pared by a lower same store sales (-1.7%). Gross margin widened to 25% (+0.7ppt), while bottom line was further boosted by increased rental income (+342.2%), government grants (+165.1%), and one-off advertising income (+44.8%). Final DPS of 1.75¢ brought FY15 total to 3.5¢ (FY14: 3¢).

*Sheng Siong: Group awarded TOP for a new outlet in Yishun with minimum span of 10,500 sf, expected to commence operations in 2Q16.

*Lippo Malls Indo Trust: 4Q15 DPU of 0.81¢ (+14.1% y/y) in line. Gross revenue and NPI rose to $44.6m (+23.9%) and $40.2m (+23.9%), on contribution from new acquisition Lippo Mall Kemang in Dec '14, and Lippo Plaza Batu and Palembang Icon in 3Q15, as well as positive rental reversion at existing malls, partially offset by the weaker IDR. Occupancy slipped to 94% (+0.1ppt q/q), with WALE of 4.91 years, while aggregate leverage remained at 35% with average debt tenor of 2 years. NAV/unit at $0.38.

*OUE/ OUE Commercial REIT: OUE to purchase 203.1m units in OUE Commercial REIT from significant shareholder Gordon Tang for $166m ($0.817/unit), thereby raising its stake from 46.6% to 65%.

*Chip Eng Seng: Highest bidder for a residential land parcel at New Upper Changi Road for $419.4m. The development is estimated to yield a maximum gfa of 51,228 sf and ~720 apartment units.

*Envictus: 72.3% owned Envictus Dairies will dispose its core dairy and juice manufacturing business for NZ$20m. Proceeds intended to repay debt and potential expansion opportunities.

*GLP: Leased 157,000 sf in Ohio, USA, to CEVA Logistics, an existing third-party logistics customer.

*Healthway Medical: 4Q15 net loss narrowed 68% y/y to $0.9m on firmer revenue of $23.3m (+9.7%) due to increased contributions from both primary healthcare and specialist & wellness segments. Bottom line was supported by lower allowances for doubtful loans and receivables, but offset by absence of gains from available-for-sale financial assets. NAV/share at 8.31¢.

*China Kunda Tech: Will transfer to Catalist on 29 Feb ’16. PrimePartners Corporate Finance appointed as its continuing sponsor.

*Profit warning:
Advanced Integrated Manufacturing
Hiap Hoe
Aztech Group
LH Group
Auric Pacific
Oriental Group

Tuesday, February 23, 2016


Centurion: FY15 performance trailed expectation. 4Q15 net profit crumbled 90% y/y to $7.5m due largely to one-off items.

For the quarter, the group booked a fair value gain of $4.8m on investment properties, as well as a $4.8m impairment to the carrying value of associate Lian Beng-Centurion (Mandai). This compares to the $62.8m fair valuation gains in FY14. Adjusting for these items, core earnings would have declined a less disconcerting 10.3% to $9.1m.

Revenue climbed 8% to $28.3m following the TOP of Weslite Woodlands workers dormitory, and on higher rental rates and improved occupancies.

Gross margin slipped 2.5ppt to 63.7% due to higher fixed costs at Weslite Woodlands and CSL Selegie student accommodation, both of which are still in the midst of ramping up occupancy.

Finance costs soared 82% to $5.3m due to the financing of Weslite Woodlands.

Net gearing stood at 0.5x (+5ppt y/y).

On outlook, management believes the long-term demand for high quality workers accommodation in Singapore remains positive, especially in light of policy moves towards purpose-built dormitories.

However, the current weak Singapore economy, new supply of 57,000 dorm beds island-wide, and a slower ramp up rate of Weslite Woodlands amid the O&M industry slump are expected to hamper on its short term prospects, even as occupancies at Toh Guan, Mandai, and Tuas remains close to full.

In Malaysia, rental rates have been softening amid the manufacturing slowdown and weaker ringgit.

In the pipeline, 19,000 beds from Weslite Papan in Singapore this year, as well as two dorms in Penang in 2017/18 are expected to buoy its earnings growth, while the student accommodation business is expected to remain resilient.

While Market Insight likes Centurion’s long term potential, its share price performance may be weighed by near term challenges. As such, we are closing our position in Centurion, realising a loss of 1.3% since the start of the year against the 7.4% decline in the STI.

Final DPS of 1¢ maintained, bringing full year dividend payout to 1.5¢ (unchanged), implying a 4% yield

Centurion is currently trading at 8.2x trailing P/E and 6.7x FY16e consensus P/E.

SG Market (23 Feb 16)

Regional bourses opened generally in positive territory in Tokyo (+1.3%), Seoul (+0.1%) and Sydney (flat).

From a chart perspective, if the STI breaches 2,670, next near term resistance will be at 2,700. Downside support is at 2,530.

Stocks to watch:
*Petra Foods: 4Q15 net profit decimated 93.5% y/y to US$0.8m, while revenue fell 23.8% to US$100m, marred by both the weakened Indonesian economy and the battered rupiah. Bottom line was dragged by lower gross margin (30.8%, -1.2ppt), and increased operational and finance expenses. No final DPS proposed, with FY15 DPS of 2.86¢ (FY14: 7.5¢). Separately, group proposed a capital reduction of US9.82¢/share.

*Centurion: 4Q15 results missed. Net profit tanked 90% y/y to $7.5m on the absence of fair value gains (4Q14: $62.8m). Revenue climbed 8% to $28.3m due to the TOP of Weslite Woodlands workers dorm, as well as higher rental rates and improved occupancies. Gross margin fell 2.5ppt to 63.7%, while bottom line was weighed by higher admin and finance expenses. Final DPS of 1¢ maintained, bringing full year DPS to 1.5¢ (unchanged). NAV/share at $0.535.

*Citic Envirotech: 9M15 net profit topped expectations despite falling 20.5% y/y to $40.8m on revenue of $274.8m (-4.5%), weighed by decreased engineering contribution (-32.1%), partially mitigated by increased treatment (+61.1%) and membrane sales (+1.7%). Gross margin widened to 31.8% (+4.1 ppt) from lower subcontractors’ fees (-35.5%), while bottom line was pressured by higher depreciation (+146.7%), employee benefits (+79.7%) and finance costs (+41.4%). First and final dividend of 0.36¢ declared (FY14: 0.5¢). NAV/share at $1.01.

*Asian Pay TV Trust: 4Q15 results in line with DPU of 2.25¢. Revenue rose 4.6% y/y to $85.6m on broad-based improvements in premium digital (+15.6% to $4.1m) and broadband (+3.4% to $12.8m) and basic cable (+4.2% to $68.7m) led by an increase in subscribers. EBITDA margin inched up to 61.8% (+1.7ppt). Aggregate leverage remained at 46%. NAV/unit at $0.86.

*Bumitama Agri: 4Q15 results missed estimates. Net profit of Rp292.3b (+9.7% y/y) was mainly propped up by lower attribution to NCI (-66%), while revenue dropped 7.8% to Rp1.45t due to lower ASPs for both CPO (-24.3%) and palm kernel (-4.2%), offset partially by higher sales volume in both products. NAV/share at Rp3,951.

*Roxy-Pacific: FY15 net profit fell 73% y/y to $12.3m, dragged by the absence of profit recognition from the sale of strata retail floors. Revenue climbed 19% to $81.4m, attributed to progressive recognition from Jade Residences, Whitehaven, LIV on Sophia, LIV on Wilkie and Sunnyvale projects. Gross margin fell 11ppt to 24% on lower margin development projects and decreased RevPAR in the hotel segment. Final DPS of 1.297¢ maintained, bringing FY15 DPS to 1.913¢ (unchanged). NAV/share at $0.38.

*Yeo Hiap Seng: 4Q15 net profit grew 7.4% y/y to $14.2m, boosted by a $3.4m fair value gain on investment properties. Revenue slipped 4.1% to $95.6m mainly due to poorer contributions from its F&B division. Gross margin expanded to 40% (+1.8 ppt), while bottom line was supported by cost savings from advertising and promotion expenses (-15.3%). First and final DPS of 2¢ maintained. NAV/share at $1.04.

*Cityneon: FY15 net profit tanked 62.9% to $0.9m, while revenue increased to $96.5m (+23.7%) on higher contribution from event management and experiential environment segments. Bottom line was dragged by lower gross margin (-4.2ppt to 24.1%) and increased operating expenses. NAV/share at 22.4¢.

*Keppel Corp: Placed agency relationship with Brazilian Mr Skornicki, who is currently under corruption probe by authorities, on hold.

*SUTL Enterprise: To invest $40m to form a 60:40 JVCo with Khazanah's UEM Sunrise to develop Puteri Harbour in Iskandar Malaysia, Johor. The JVCo will also develop and operate a proprietary yacht club, sports centre and other complementary businesses.

*Noble Group: Issued profit warning for 4Q15 and FY15, hurt by USD1.2b in non-cash impairments due to low coal prices and loss on sale of Noble Agri.

*Ezion: Issued profit warning that it expects to report a 4Q15 loss and significant decline in FY15 earnings on impairments of its assets, based on their intended deployment, amid the sustained downturn in the O&G industry.

*Cogent: Opened Cogent 1.Logistics Hub, world's 1st integrated logistics hub, comprising 1.4m sf of warehousing space purpose built to store NEA-controlled flammable materials and cargo, as well as roof-top container space for 16,000 TEUs.

*Other profit warnings:
- Full Apex (Holdings)
- PSL Holdings
- Enviro-Hub
- San Teh
- China Environment

Monday, February 22, 2016


Strategy: Del Monte, UG Healthcare, Best World joins Edge's high growth portfolio
The Edge Markets added three stocks, Del Monte, UG Healthcare and Best World, into its high growth portfolio, amid the rout in the equity markets.

The portfolio focuses on companies that operate in fast-growing industries, or companies in traditional sectors that have a unique competitive advantage relative to their peers.

For Del Monte, the financial magazine sees a turnaround for the F&B processor-cum-distributor, following two consecutive years of losses due to acquisition and transition-related expenses of its US-based unit. In addition, Del Monte is set to benefit from an improving US economy, which could bolster demand for its products.

It likes rubber glove maker UG Healthcare for reaping the rewards of its expansion initiatives amid macroeconomic tailwinds, underpinned by heightened global awareness following the recent spate of disease outbreak.

Best World is enjoying strong revenue and earnings growth in its health and lifestyle products in recent quarters. With the company seeking final approval for its direct selling licence in China, the multi-channel distributor is poised for explosive growth in the coming future given the immense size of the Chinese market.

The inclusion of the three stocks joins two other counters, SATS and Raffles Medical Group, in its high-growth portfolio, which was started in Nov '15. The overall portfolio has declined 1.1% since inception but has outperformed STI's 10% drop.

Insider trades

Insider trades: Asia Insider notes that insider buying picked up for the week ending 19 Feb.

Insider purchases: 16 companies saw 30 purchases worth $6m, vs. 8 companies 11 acquisitions worth $1.3m the week before.

Insider selling: A single disposal worth $0.072m, vs. nil sales the week prior.

Buybacks: 16 companies made 52 repurchases worth $18.9m, vs. four corporates, 11 trades worth $3.3m the previous week.

Notable transactions:
Karin Technologies: Bought back for the first time since Jun ’15 with 627,000 shares purchased at average of $0.275 each between 15-18 Feb. The trades accounted for 73% of the stock’s trading volume and were made on the back of a 20% drop in share price since Nov.

M1: Maiden buyback with 241,000 shares purchased on 19 Feb at $2.50. The trade was made on the back of a 34% drop in share price since Feb. To recap, Chairman Choo Chiau Beng bought 100,000 shares at $2.32 each on 29 Jan, which doubled his direct holdings to 0.02% of issued capital.

SingTel: Bought back 313,000 shares on 17 Feb at $3.75 each, on the back of a 10.5% share price drop since Jul ’15. The group previously acquired 1.8m shares from Feb-May ’15 at average of $4.25/share.

Asiaphos: CEO Ong Hian Eng recorded bought 440,000 shares between 16-17 at average of $0.096/share. This was made on the back of a 15% drop in share price since Aug ’15.

Best World

Best World: Anticipating another blowout year; consistent growth stock
Best World is scheduled to release its 4Q15 results after market close on Thu (25 Feb).

Based on the average 4Q/3Q sequential growth rate of 41% over the past two years, the beauty and health product distributor is estimated to post 48% y/y growth in 4Q15 revenue to $36.8m on the back of greater demand and increased customer acceptance of its products in Taiwan and China.

This is expected to generate a net profit of $2.9m (+44%) for the quarter, bringing full year earnings to $9.1m (+124%), barring any anomaly in gross margin and admin expenses.

If it materialises, the results would solidify six quarters of impressive earnings growth and give a much-needed fillip to the visibility and appetite for the counter.

While share price performance has been somewhat lacklustre (-1.4%) since the issue of Maybank KE's unrated note in Dec '15, the counter has outperformed the STI (-8.6%), FTSE ST Small Cap Index (-7.9%) and FTSE ST Fledgling Index (-5.1%).

At the current price of $0.345, Best World is valued at an implied P/E of 8.7x, or a 39% discount to peer average of 14.2x. The stock also offers an indicative dividend yield of 5.2% (based on FY14’s payout ratio of 43.5%), and is backed by a solid balance sheet with net cash of $41.4m, representing 55% of market cap.

Pegging a conservative P/E of 12x to the stock would give a valuation of $0.495, implying a 43% upside.

Best World currently sits in the Market Insight Growth portfolio.

SG Market (22 Feb 16)

Regional bourses opened mixed in Tokyo (-1.4%), Seoul (flat) and Sydney (-1.4%).

From a chart perspective, the STI faces stiff resistance at 2,670 but if that is breached, it is unlikely to go past the short term objective of 2,750.

Stocks to watch:
Singapore shares may be held back, taking cue from the fresh slide in oil prices as STI nears the immediate resistance at 2,670.

O&M heavyweights Keppel Corp and Sembcorp Marine could see downside risks on reports that major client Sete Brazil could file for bankruptcy protection in a week’s time if state-controlled Petrobras failed to sign a long term lease contract for its rigs on order.

Regional bourses opened relatively unchanged in Tokyo (flat), Seoul (-0.2%) and Sydney (+0.4%).

From a chart perspective, stiff resistance for STI is seen at 2,670, with downside support at 2,530.

Stocks to watch:
*DBS: 4Q15 net profit of $1b (+20% y/y, -6% q/q) was a tad above estimates on net interest income of $1.85b (+11% y/y, +2% q/q), driven by its best NIM in five years at 1.84% (+13bps y/y, +6bps q/q), while underlying loans was flat in constant-currency terms. Non-interest income climbed to $795m (+19% y/y, -12% q/q), led by higher treasury income and interest income from funding swaps. Provisions rose to $247m (+17% y/y, +39% q/q) from higher specific allowance, while NPL ratio stayed flat of 0.9%. Tier 1 CAR at 13.5% (4Q14: 13.1%, 3Q15: 12.9%). Final DPS of 30¢, bringing FY15 payout to 60¢ (FY14: 58¢). NAV/share at $15.82.

*China Everbright: FY15 results missed with net profit of HK$406.2m (+39% y/y). While revenue spiked to HK$1.82b (+73%) from a significant increase in construction revenue of HK$599m (FY14: HK$116m) due to the expansion and upgrading of several BOT projects, gross margin narrowed to 45.4% (-11.4ppt) on the shift in mix towards lower margin sales. Bottom line was boosted by tax refund (HK$60.3m) and government grant (HK$31.9m), partially offset by higher admin expenses (+162%). First and final DPS of 0.35¢ proposed (FY14: nil). NAV/share at HK$2.71.

*OUE: FY15 in line as net profit plummeted 86% y/y to $156.4m on absence of gains from divestment of Mandarin Orchard Singapore and Mandarin Gallery, while revenue edged up to $431.5m (+3.6%) from consolidation of One Raffles Place after increasing stake in OUB Centre. Gross margin narrowed 8ppt to 35%. Bottom line was further weighed by consolidation of OUBC’s expenses, but partially supported by negative goodwill from Gemdale shares acquisition. A final DPS of 1¢ took FY15 payout to 5¢ (FY14: 2¢). Net gearing increased to 0.58x (FY14: 0.44x). NAV/share at $4.35.

*Raffles Medical: FY15 results met estimates as net profit inched 1.6% y/y to $69m, as revenue grew 9.6% to $410.5m, on maiden contribution from clinic operator International SOS in Oct '15, increased sales from more specialist consultants, higher patient load and greater patient acuity. Final DPS of 4.5¢ declared, bringing FY15 total DPS to 6¢ (FY14: 5.5¢).

*PACC Offshore: 4Q15 net loss crashed to US$149.7m (4Q14 -US$9.9m) due to impairment of goodwill (US$127m) and fixed assets (US$21.4m). Revenue climbed 29% y/y to US$71.8m, mainly from chartering of new vessels in offshore accommodation segment, albeit lower charter rates. Gross margin widened 12ppt to 24%. Net gearing crept up to 0.51x (FY14: 0.45x), with total borrowings of US$559.7m due in less than a year. A lower first and final DPS of 0.5¢ (FY14: 1.5¢) was declared. NAV/share at US$0.5853.

*IHH Healthcare. Temasek Holdings is set to acquire a 72% stake in Hyderabad-based CARE Hospitals for US$278m. CARE runs a network of 17 hospitals with 2,400 beds across 9 locations in India. The transaction values CARE at US$160,000 per bed, 35% higher than the US$118,000/bed IHH paid for Continental Hospitals, also based in Hyderabad, in Mar ’15.

*SIA/ Tigerair: Extended the long stop date for its offer for Tigerair to 26 Feb.

*Sing Post: Extended the long-stop date for its conditional JV agreement with Alibaba to further develop their business collaboration, involving Sing Post’s wholly-owned Quantum Solutions to be the platform for collaboration, from 7 Apr 2016 to 31 May 2016.

*Vard: Secured a NOK325m contract to design and construct a stern trawler for HAVFISK ASA. Delivery of the vessel is scheduled in 1Q18.

*Nordic Group: Secured three new orders totaling $2.5m, which includes a maintenance contract from a repeat customer for an extension of scaffolding services at a new gas facility, the supply of insulation materials for a new customer and an order from a repeat customer to provide labour and materials to perform acoustic piping insulation work for the Catcher Development Project. Works expected by 2Q16.

*Yanlord: Acquired property developer Shenzhen Huarong Innovation Investment for Rmb45m.

*Lian Beng/ KSH/ Heeton/ Ryobi Kiso: Consortium led Heeton (55%-ownership, latter three parties own 15% each) is adding two more ibis hotels in London.

*Allied Technologies: Applied for a 12-month extension to meet requirements to be removed from the SGX Watch-List.

*Profit warning
- A-Sonic Aerospace
- China Environmental Resources Group
- Mercurius Capital Investment
- Hi-P

Friday, February 19, 2016

Best World

Best World: Anticipating another blowout year; consistent growth stock
Best World is scheduled to release its 4Q15 results after market close next Thu (25 Feb).

Based on the average 4Q/3Q sequential growth rate of 41% over the past two years, the beauty and health product distributor is estimated to post 48% y/y growth in 4Q15 revenue to $36.8m on the back of greater demand and increased customer acceptance of its products in Taiwan and China.

This is expected to generate a net profit of $2.9m (+44%) for the quarter, bringing full year earnings to $9.1m (+124%), barring any anomaly in gross margin and admin expenses.

If it materialises, the results would solidify six quarters of impressive earnings growth and give a much-needed fillip to the visibility and appetite for the counter.

While share price performance has been somewhat lacklustre (-1.4%) since the issue of Maybank KE's unrated note in Dec '15, the counter has outperformed the STI (-8.6%), FTSE ST Small Cap Index (-7.9%) and FTSE ST Fledgling Index (-5.1%).

At the current price of $0.345, Best World is valued at an implied P/E of 8.7x, or a 39% discount to peer average of 14.2x. The stock also offers an indicative dividend yield of 5.2% (based on FY14’s payout ratio of 43.5%), and is backed by a solid balance sheet with net cash of $41.4m, representing 55% of market cap.

Pegging its at a conservative 12x, the stock could be valued at $0.495, implying a 43% upside.

Best World currently sits in the Market Insight Growth Portfolio.


Innovalues (S$0.80): 4Q15 results in line; poised to rev forward in 2016

4Q15 results met expectations despite net profit sliding 11% y/y to $4.8m on lower FX gains.

Revenue ceded 3.7% to $26.9m due to lower orders in its automotive business (-6.5% to $21.7m), but partially offset by a stronger office automation segment (+14.4% to $5.2m).

Bottom line was hit by lower FX gains, higher staff expenses and directors’ bonus, absence of gains from sale of submerged machines, and higher deferred tax provision.

Combined final and special DPS of 2.6¢ versus 1.4¢ in 4Q14 took full year dividends to 3.8¢ (FY14: 2¢), reflecting a higher payout ratio of 53.7% (40.9%).

Longer term trends towards safer, more efficient and less pollutive vehicles, coupled with the exciting promise of electric and autonomous vehicles, are likely to drive demand for additional sensors, thereby underpinning growth for the AU business.

Car sales of US, Europe and China are also expected to remain resilient given lower interest rates, fuel cost, as well as tax cuts and policy stimulus (China specific).

Profit margins may be lifted by low steel and aluminium prices, enhanced plant automation, and cheaper labor cost.

Maybank KE maintains Buy and TP of $1.02.

Innovalues is trading at 9.8x FY16e P/E and offers a 4.8% dividend yield.

Genting Singapore

Genting Singapore: 4Q15 missed by a huge margin, plunging to net loss of $7.8m from $89.2m profit a year earlier, in contrast to profit forecasts by the entire street.

The dismal performance was marred by falling VIP volumes (-40%), poor win rate (2.1%), losses from divestment of available-for-sale financial assets ($79.8m) and FX ($22.9m), as well as higher finance expenses of $14.5m (+49%).

Revenue fell 14% to $547.4m (-14%), with both gaming ($374m) and non-gaming ($173m) businesses suffering declines.

In gaming, both VIP and mass saw worse operating statistics. Rolling chip volume shrank 40% to $8.8b, with a smaller win rate of 2.1% (3Q15: 2.8%) and market share of 38% (-2ppt q/q), while mass GGR dropped 10% to $385m with flat sequential market share of 40%.

Non-gaming revenue dipped 2% to $173m despite record visitations at Universal Studio Singapore.

Adjusted EBITDA fell at a slower pace to $181.3m (-5%) due to efficiency enhancements. A notable good news is that bad debt provision was pared to $45.3m (-45%), an intra-year low, and a stark improvement from a record $92.4m in 3Q15.

GENS appears to be cleaning up its operations and balance sheet. Trade and other receivables was stable q/q but 26% lower y/y at $894.9m. It has substantially disposed all of its portfolio investments ($1.31b), leaving only $207.3m available-for-sale financial assets on the balance sheet.

Management does not expect VIP volume to fall much more, despite being cautious on extending credit to VIPs.
On the South Korean front, construction of the Jeju resort has begun. For the residential plot, management is expecting to commence sales in 2Q16.

Despite the red ink, the group has proposed a higher first and final DPS of 1.5¢ (FY14: 1¢).

GENS is currently trading at 15.5x EV/EBITDA, which is still pricey relative to Macau peers.

Latest broker ratings:
Credit Suisse maintains Outperform with TP of $1.00
UOB KayHian maintains Buy with TP of $0.97
Morgan Stanley maintains Overweight, but cuts TP to $0.80 from $0.85
Nomura maintains Neutral, with TP of $0.80
CIMB upgrades to Add from Hold, raises TP to $0.80 from $0.73
Maybank KE maintains Hold with TP of $0.78
JPMorgan maintains Underweight with TP of $0.70
OCBC maintains Sell with TP of $0.69
Deutsche Bank maintains Sell with TP of $0.50

SG Market (19 Feb 16)

Singapore shares are likely to see some profit taking following the recent run-up on short covering amid the spate of uninspiring 4Q earnings from the embattled O&M names and banking counters.

Regional bourses opened mixed in Tokyo (-1.4%), Seoul (flat) and Sydney (-1.4%).

From a chart perspective, the STI faces stiff resistance at 2,670 but if that is breached, it is unlikely to go past the short term objective of 2,750.

Stocks to watch:
*Wilmar: 4Q15 met expectations on core net profit of US$350.4m (-15%), as revenue declined to US$9.4b (-12.5%) due mainly to lower CPO prices and sales volume, partially mitigated by a jump in sugar prices. EBITDA margin held steady at 6.5%, while bottom line was dragged by increased selling and distribution expenses (+14.3%). Final DPS of 5.5¢ maintained, bringing FY15 total to 8¢ (FY14: 7.5¢).

*Genting SP: Shock 4Q15 net loss of $7.8m (4Q14: +$89.2m) and weak revenue of $547.4m (-14%) miss expectations by a mark, hurt by slump in VIP volumes (-40%), poor win rate (2.1%), divestment and FX losses. Mass GGR fell 10%. Adjusted EBITDA fell at a slower pace to $181.3m (-5%) due to efficiency enhancements. Notably, bad debt provision fell 45% y/y to $45.3m. First and final DPS raised to 1.5¢ (FY14: 1¢).

*Hyflux: FY15 net profit tumbled 28% to $41.3m, mainly attributed to lower disposal gains, while revenue jumped 39% to $445.2m due to higher contribution from the Qurayyat Independent Water Project in Oman and augmentation of the Yanbu Desalination Plant in Saudi Arabia. Bottom line was further eroded by higher raw materials and subcontractor costs, finance expenses, as well as losses from associates and JVs. A lower final DPS of 1¢ brought FY15 payout to 1.7¢ (FY14: 2.6¢). NAV/share at $0.542.

*Innovalues: 4Q15 results met expectations despite net profit tumbled 11% y/y to $4.8m on a softer revenue of $26.9m (-3.7%), drag by the Automotive segment (-6.5% to $21.7m), but partially offset by a strong Office Automation business (+14.4% to $5.2m). Gross margin increased 3.3ppt to 33.7% on improved efficiency. Bottom line was hit by higher staff expenses, absence of gains from sale of submerged machines, lower FX gains, and higher tax provision. A higher final plus special DPS of 2.6¢ brought FY15 payout to 3.8¢ (FY14: 2¢) was declared. NAV/share at $0.2534.

*Fragrance: 4Q15 tumbled 89.1% y/y to $8.7m, while revenue fell 68% to $41.1m, largely dragged by lower contributions in the property business. Gross margin fell to 17% (4Q14: 31.7%) due to higher variation of order costs for Urban Vista. Bottom line also dragged by decreased fair value gains from investment properties and reduced interest income. NAV/share at 15.4¢.

*Aspial: FY15 net profit plunged 40% to $8.8m, while revenue fell 9% to $464.1m, as increases in the financial service business were offset by weaker contributions from the real estate and the jewellery businesses. Bottom line fall was also dragged by lower fair value gains from investment properties. First and final DPS of 1¢ (FY14: 2.6¢). NAV/share at 17.31¢.

*Sembcorp Industries: Thermal Powertech Corporation India clinched a contract to sell 570 megawatts of power to Telangana Power Distribution Companies for eight years, thereby raising long-term demand commitment to 85% of its 1,320 megawatts generating capacity.

*SIA Engineering: Renewed its fleet management programme agreement with Tigerair Taiwan for five years. It currently services 12 airlines globally.

*AusGroup: Appointed Macquarie Capital as financial advisor to solicit and consider offers for its scaffolding and access business after receiving several expressions of interest.

*Rotary Engineering: Secured $65m worth of new contracts between Nov ’15 and Feb ’16, which includes a $19m civil engineering project for a jetty and its topside in Jurong Island, as well as two contracts worth $33m for piping, mechanical, civil and E&I work in Jurong Island.

*Sunpower: Secured a third centralised steam build-operate-transfer project in Anhui, China worth RMB54m. The project has a concession period of 30 years and is expected to be completed by 3Q16.

*Vallianz: Successfully refinanced its Saudi Arabian offshore subsidiary through the issuance of a five-year Sukuk worth SAR1b (US$266.7m).

*Linc Energy: Entered into agreements with PT Sugico Graha to license its technology in Indonesia to develop two commercial Underground Coal Gasification projects of which it is expected to receive US$17.5m in licence fees as well as royalties of US$0.3125/MMBTU.

*Profit warning:
- Ziwo
- Dyna-Mac
- Chantian Plastic & Chem
- China Yongsheng


Maxi-Cash (S$0.12): 4Q15 earnings jumped and FY15 dividends more than doubled

4Q15 net profit surged 47% y/y to $1.13m, and FY15 net profit more than doubled to $3.8m (+112%), mainly due to operating leverage. 4Q revenue rose 17% to $30.6m from higher contribution by both pawnbroking and trading businesses. First and final DPS raised to 0.5¢/share (FY14: 0.2¢). NAV/share at 11.87c/share.

Thursday, February 18, 2016

SG Market (18 Feb 16)

Regional bourses surged in early trading in Tokyo (+3%), Seoul (+1.2%) and Sydney (+1.5%).

From a chart perspective, the STI may attempt to close the gap at 2,670. Immediate support is at 2,580 (20-dma).

Stocks to watch:
*Sembcorp Industries: FY15 results matched the post-SMM lowered estimates. 4Q15 net profit plunged 75% y/y to $60.8m on weaker revenue of $2.42b (-9.2%), dragged by reduced contribution from the utilities segment (-16%) on decreased HSFO prices, and marine's lower recognition of rig building projects and sale reversal. At the bottom line, marine swung to net loss of $327.5m on the back of inventory write-downs, impairments, provisions for foreseeable losses and higher finance costs, while utilities earnings surged 261% to $395.2m (+261%), buoyed by its overseas operations and $353.2m gain from sale of its Australian waste management JV. Final DPS of 6¢ declared, bringing total FY15 payout to 7¢ (FY14: 4¢). NAV/share at $3.60.

*CWT: FY15 results in line, with net profit of $108.9m (-3% y/y), partially mitigated by lower FX losses. Revenue slumped 30% to $9.93b from lower trading volume and prices of naphtha. Final DPS of 6¢ declared, bringing total FY15 payout to 7¢ (FY14: 4¢).

*iFAST: 4Q15 met expectations as net profit surged 3x y/y to $2.9m, thanks to the absence of listing expenses. Revenue grew 4.9% to $20.7m on higher contributions from Malaysia (+109.4%) and Singapore (+5.8%), pared by Hong Kong (-12.9%) operations. Bottom line was pressured by increased staff expenses (+22.1%) and operational set up costs. Final DPS of 0.75¢ declared, bringing FY15 total to 2.79¢ (FY14: 0.68¢).

*Maxi-Cash: FY15 net profit doubled 112% to $3.8m, due to operating leverage, while revenue rose 10% to $121.1m, contributed by both pawnbroking and trading businesses. NAV/share at 11.87c/share. First and final DPS raised to 0.5¢/share (FY14: 0.2¢).

*IREIT Global: 4Q15 DPU of 1.62¢ came 7.4% below IPO forecast of 1.75¢ due to a 43% dilution from a rights issue, while distributable income of €6.5m (+0.7% q/q) was 47% above estimates. Gross revenue and NPI of €8.6m (+3.5% q/q) and €7.7m (+1.8% q/q) was 53% and 52.7% higher, due largely to the additional rental contribution from the Berlin Campus acquired in Aug ’15. Portfolio occupancy slipped to 99.7% (-0.3ppt), with WALE of 6.8 years, while aggregate leverage narrowed to 42.6% (-8ppt q/q), with average debt tenor of 3.8 years and interest rate of 2.0%. NAV/unit of €0.41 ($0.644).

*City Dev: HK-listed subsidiary City e-Solutions expects is expecting a loss of HK$62m for FY15, mainly due to unrealised fair value losses of trading securities, and deferred tax assets write-down.

*Sembcorp Marine: Disclosed that save for market speculation of a privatisation move, it is not aware of any other possible explanation for the share price gains following its dismal 4Q15 results.

*ST Engineering: Received summons from family of passengers on crashed Indonesia Air Asia Flight 8501, but does not consider the claim has any merit as it was not providing line maintenance support to AirAsia’s fleet at that time.

*SIA Engineering: Signed MOU to set up a 49/51 JV with Moog to provide maintenance repair and overhaul services for Moog’s products on Boeing 787, Airbus A350, and other new aircrafts.

*ISOTeam: Secured a $1.8m contract by Sunseap Leasing to install renewable energy systems on the roofs of 33 blocks of flats in Tampines by May ’16.

*GL: Aborted considerations to sell its interest in Thistle Kensington Gardens Hotel.

*Asian Pay TV Trust: Completed the sale of units held by restricted persons/Chinese investors on-market.

*Lian Beng: Increased equity stake in associate United E & P by about 26% to 40% by capitalising a $3.72m loan.

*Sim Lian Group: Launching Wandervale executive condos on 18 Feb ’16 for application until 28 Feb. Balloting and booking date of the 534-unit EC is 5 Mar. Units range from 958-1,249sqf and priced at $750-770psf.

*Nordic Group: Evaluating options to comply with SGX’s minimum trading price requirement by 1 Sep ’16, and remain listed on the Mainboard.

*Top Global: Proposed to acquire 35% of enlarged share capital of hospitality management firm 5Footway Founders, which manages ~1,000 hostel beds in Singapore, as well as eight brands spanning China, Japan and Singapore. The $2.5m investment is intended to provide the group with potential synergies and give the group immediate access to overseas hospitality markets.

*Profit warning: NauticAWT, Kitchen Culture, Hosen Group, Delong Holdings

Wednesday, February 17, 2016


Oil: Iranian OPEC envoy assali says iran will continue raising production until it regains pre-sanction levels

This follows the conditional agreement by Saudi Arabia, Russia, Qatar and Venezuela to freeze production at Jan levels but contigent on other major producers agreeing. We see the deal more as a political statement and attempt by the Saudis to sabotage the re-emergence of Iranian oil into the market after the lifting of sanctions. It is no surprise that Iran is not abiding by it.
2:52:38 PM: Tan Chin Poh: Crude oil is currently trading below US$30 at US$28.96 a barrel.

SG Market (17 Feb 16)

Regional bourses opened relatively tepid in Tokyo (+0.4%), Seoul (+0.3%) and Sydney (flat).

From a chart perspective, the STI may attempt to close the gap at 2,670. Immediate support at 2,580 (20-dma).

Stocks to watch:
*OCBC: 4Q15 net profit of $960m (+21% y/y, +6% q/q) exceeded street estimate of $845m, on the back of higher interest margin (+7bps to 1.74%), insurance contributions as well as improved trading and investment income. Provisions jumped 25% mainly from NPLs in S'pore, Greater China, rest of world and equity investments, NPL ratio ticked up to 0.9% (4Q14: 0.6%). CIR 42.3% (-2.9ppt). Tier-1 CAR rose to 14.8% (4Q14: 13.8%). Maintained final DPS of $0.18, taking FY15 payout to $0.36. NAV/share at $8.03.

*CapitaLand: 4Q15 results above street estimates with core net profit of $249.2m (-12.1% y/y), mainly due to the absence of sale proceeds of Westgate Tower. Otherwise, operating earnings jumped 55.7%, on higher revenue of $1.74b (+14.6%) from increased contributions from China development projects and serviced residence business, partially offset by weaker sales in Singapore and Vietnam. First and final DPS of 9¢ maintained. NAV/share at $4.21.

*Starhub: 4Q15 met expectations despite net profit sliding to $80.8m (-14.3%), as revenue slipped 2.1% to $633.8m on declines across its mobile (-2.3%), pay TV (-0.1%), fixed network services (-2.9%), and equipment sales (-9.6%), partially mitigated by broadband (+9.2%). Mobile post-paid customer base (+3.8%) and ARPU (+2.4%) outperformed that of the shrinking prepaid segment. EBITDA margin slumped to 27.9% (-5.9 ppt) due to a surge in cost of services (+33%) and traffic expenses (+37%). Final DPS of 5¢ was maintained.

*Overseas Education: FY15 net profit slumped 32% y/y to $14.9m, as revenue slipped 5% to $97.1m from softening of student enrolment numbers. Bottom line was dragged by higher depreciation expenses at the new campus and finance costs of $4.2m (FY14: nil). First and final DPS of 1.375¢, bringing FY15 total to 2.75¢ (FY14: 2.75¢).

*LCD Global: 18M15 (18 months to Dec ’15) turned into net profit of $4.7m (18M14: -$7.7m), mainly boosted by the absence of a write off (18M14: $9.8m). Revenue slipped 1% y/y to $81.2m, as increased hotel and serviced residence income (+1%) from higher F&B sales and a stronger Sterling Pound was offset by lower sales in leisure and others (-31%) from closure of four amusement games outlets across Singapore. Final DPS of 1¢, bringing 18M15 DPS to 3.5¢ (18M14: 0.65¢). NAV/share of $0.27.

*Sembcorp Marine: Substantial shareholder Franklin Resources pared its stake from 5.02% to 4.97%, selling 949,900 shares over the market at $1.454 apiece on 15 Feb.

*GLP: Leased 48,000 sqm (520,000 sf) at GLP Park Lingang in Shanghai to a client which caters to domestic consumption.

*GLP: 50:50 JV with Canada Pension Plan Investment Board with equity commitments of ¥100b. The JV’s investment strategy allows it to sell assets to GLP J-REIT, and construction of new developments will commence in 2016.

*SIA Engineering: 65:35 JV with Airbus to provide airframe maintenance, cabin upgrade and modification for A380, A350, and A350 aircraft in Asia Pacific.

*ST Engineering: To divest 50% stake in aircraft lessor, Keystone, to Sojitz for US$19.7m ($15.3m). Upon completion, both shareholders plan to build up a portfolio of mid-life and end-of-life single aisle aircraft assets.

*Zagro Asia: Exit offer of $0.30/share declared unconditional after offeror Rumakita Investments obtained valid acceptances of 93.5%. Closing date of the offer will be on 18 Feb and the offeror intends to exercise its right of compulsory acquisition.

*Soo Kee: Non-binding MOU to acquire 70% in precious metals distributor DK Bullion for up to $0.8m, or 14.4x P/E and 0.22x P/NTA, as part of the group’s business expansion and product diversification plan.

*Profit warning: Blumont, Kencana Agri, Hong Leong Asia

Tuesday, February 16, 2016


MINT: Maybank-KE upgrades Mapletree Industrial Trust to Buy from Hold, citing its resilience while waiting for growth from the Hewlett Packard BTS to kick-in in 2018.

Mapletree Industrial Trust has a 33% exposure business parks and high-spec space (similar to biz park in fittings). JTC data showed that 2015 demand for business-park space (2.4m sf) outstripped supply (1.9m sf), in what was a strongly supplied year (+10.1% supply) amid weak economic conditions. The more resilient biz park and high-spec space is projected to form 42% of portfolio by FY3/19.

Meanwhile, the house also notes that occupancy has been rising over the last four quarters (3QFY16: 94.7%), and expects this to be largely maintained in FY3/17e (est: 93.5%). This is as expected occupancy increases in business parks could be offset by dips in factory occupancy amid an oversupplied market.

The HP BTS contributions is expected to boost FY3/18e DPU by 9.1% to reach 12¢, in turn implying MINT is currently trading at a 7.8% yield.

Maybank-KE raises its target price to $1.71 from $1.50, based on a tightened 7% yield target from 7.25%, reflecting MINT’s quality portfolio.

SG Market (16 Feb 16)

SG: The short term relief rally could be ruffled by the disastrous 4Q15 results from Sembcorp Marine and Cosco Corp, although UOB's resilient earnings would give some comfort for banks.

Regional bourses opened mixed in Tokyo (+0.3%), Seoul (+0.8%) and Sydney (-0.5%).

From a chart perspective, immediate resistance for STI seen at 2,640 with 2,530 triple bottom providing base support.

Stocks to watch:
*UOB: 4Q15 net profit of $788 (+0.3% y/y, -8.2% q/q) matched street estimates. Net interest income grew 9.3% y/y to $1.28b on loan growth of 3.9%, led mainly by building and construction (+16.9%), and wider NIM of 1.79% (+10bps y/y, +2bps q/q). Fee income of $480m (+6.7% y/y) saw broad-based growth across most businesses, while other income jumped 39.4% to $323m, bolstered by stronger treasury contributions and gains on sale of securities. Higher one-off expenses for UOB80 events and brand campaign lifted CIR to 46.3% (4Q14: 43.5%). Provisions climbed 14.6% to $190m, while NPL ratio ticked up to 1.4% (4Q14: 1.2%), jacked up by new NPLs in S'pore, Indonesia and Greater China. Tier-1 CAR slipped to 13.0% (-0.9ppt). Final DPS of $0.35 took total FY15 payout to $0.90 (FY14: $0.75). Book NAV/share at $17.84 (+4.4%).

*Sembcorp Marine: Disastrous 4Q15 results as group sank into net loss of $536.9m (4Q14: +$176m) from hefty loss provisions ($278m), impairment of receivables ($151.8m), inventory write downs ($85.5m) and associate/JV losses ($150.3m). Revenue tumbled 8.2% to $1.33b including a sale reversal for a rig due to contract termination with Marco Polo, as well as reduced recognition for rig building projects from order deferments. Subsequently, gross loss amounted to $328m, bringing FY15 gross profit to $130.9m (-84.5%) and margin to 2.6% (FY14: 14.5%). Order book diminished to $10.4b (-10.3% q/q) despite managing to secure $1.6b in new orders in 4Q15. Final DPS slashed to 2¢, bringing FY15 DPS to 6¢ (FY14: 13¢). NAV/share at $1.20.

*Cosco Corp: 4Q15 languished in a red tide with net loss of $483.8m (4Q14: -$13.1m), as revenue slumped 20.8% to $725.5m from lower shipyard (-20.6%) and shipping (-31.6%) contributions. Gross loss amounted to $336.1m (4Q14: +$46.7m) from heavy inventory write downs ($289.1m) and depressed charter rates, while bottom line was further eroded by a provision charge on doubtful debts from certain Brazilian clients ($304.6m). First and final DPS scrapped (FY14: 0.5¢). NAV/share at $0.37.

*SIA: Jan passenger load factor rose 3.6ppts y/y to 80.1%, on higher passenger traffic of 6.8%, against a 2% expansion in capacity. Load factors for all regions supported by stronger returning traffic from year-end holidays with a shift to outbound travel during the Chinese New Year holidays. Meanwhile, its subsidiaries also had improved load factors, SilkAir (+3.2ppt to 69.7%), Scoot (+1.4ppt to 84.8%) and Tigerair (+2.9ppt to 81.5%). Overall cargo load factor rose 0.5ppt to 60.5% as cargo traffic growth (+7.2%) outpaced capacity growth (+6.3%).

*SingPost: Further investment into China logistics company Shenzhen 4PX Information Technology from 18% to 35.9% for an aggregate Rmb163.2m ($36m).

*Frasers Centrepoint: Formed a 40:40:20 JVCo with Sekisui House and KH Capital to acquire and develop a residential property project in Singapore.

*Aspial/ Fragrance: Still in the midst of SGX approval, 50/50 Fragrance-Aspial JV has extended the long-stop date of the proposed acquisition of shares in LCD Global from Aspial owner Koh Wee Seng in an interested party transaction to 15 Mar ’16.

*SIA Engineering: Investing up to $50m over the next few years on innovation initiatives and technology adoption projects in aerospace MRO, with the support of the EDB. Separately, SIAEC is appointed by Rolls Royce as an approved on-wing services provider within its Trent service network.

*Wing Tai: Setting new fund management business alongside institutional investors, to invest in Asia Pac through core and core-plus/value-add strategies.

*Silverlake Axis: Collaborates with United Bank Limited in Pakistan for joint digital banking product development and enhancement.

*Stratech: Awarded a favourable judgement in a South Korean case, where defendant II Jin Hi-Tech Corp was ordered to pay Stratech US$1.3m for monies owed for work done and services rendered on a project.

*Chip Eng Seng: Decided not to proceed with the proposed spin-off of its construction business on SGX Main Board due to unfavourable market conditions.

*Tat Hong: Accepted offer from JTC for the surrender of a 25-year lease of its property at 11 Gul Crescent for $21m. The disposal is expected to net a gain of $9.5m, bringing proforma FY15 EPS from 0.77¢ to 2.05¢.

*Miyoshi: Intends to transfer its listing from the main board to the Catalist board.

*Profit warning: Regal International, Mermaid Maritime

Monday, February 15, 2016


Macquarie Research initiated coverage on SingPost with an Outperform rating and TP of $2.15 citing SingPost’s transformation to an integrated e-commerce solutions firm being imminent.

It notes that acquisitions has lowered SingPost’s dependence on Singapore, delivered e-commerce clients, built critical mass in an overseas logistics footprint and ramped up end-to-end fulfilment capability.

Overseas revenue has grown contributions from 19% in FY13 to 40% in 1H16, with the e-commerce proportion rising from 24% to 29% in the same period and expected to hit about 50% by FY18.

The house forecasts volume growth with rising operating leverage to drive revenue and profit CAGRs of about 13% through to FY18.

Other positives include the re-opening of Singapore Post Centre in mid-2017 after a major redevelopment and almost doubling in retail gross floor area space plus a possible special dividend.

Despite being in the so-called “sweet spot”for its next phase of growth, key risks remain, namely, corporate governance issues, a share price overhang and execution risks in post M&A integration.

Technics Oil & Gas

Technics Oil & Gas: Crashed following resumption; proposed major transaction fell through
Technics Oil & Gas crashed 81% in early trading after negotiations on a proposed major transaction fell through.

The counter was suspended since 31 Dec '15, as the company was involved in negotiations with a potential purchaser on its assets. In addition, the group was also involved in discussions with another party on a separate major transaction that could lead to a RTO deal.

However, both parties have not been able to come to agreement and have ceased negotiations.

Within the period of suspension, Technics released a dismal set of 1QFY16 results with widened net loss of $1.2m (1QFY15: -$0.6m) due to the absence of FX gain (1QFY15: $1.1m), while revenue tumbled to $15.2m (-18%) from weak market demand.

Notably in the recent results, the O&G services firm turned into operating cash flow negative of $2m (1QFY14: +0.1m), which resulted in a drain on its cash pile to $20.5m (4QFY14: $23.4m).

Subsequently, net gearing climbed to 0.4x from 0.3x at end-Sep '15.

At the current price, the counter trades at a 29% discount to its NAV/share of $0.28.

Insider trading

Insider trading: Asia Insider notes that buying remained low for a third week while there were no sales by directors for a second week based on the holiday-shortened week ending 12 Feb.

Insider buying: Eight companies saw 11 purchases worth $1.3m, vs. 10 corporates, 23 transactions worth $2.51m the week prior.

Buybacks: Four companies made 11 repurchases worth $3.32m, vs. three firms making 13 transactions worth $460,000 the week before.

Notable transactions:
Lian Beng: Repurchased 397,000 shares between 2-5 Feb, and a further 99,000 shares on 12 Feb at average of $0.44/share. The trades were made on the back of a 17% drop in share price since Oct ‘15

SGX: Bought back 450,000 shares at average of $6.81 each, on the back of an 11% share price drop since Nov. The trades accounted for 5% of trading volume.

OSIM: Chairman & CEO Ron Sim resumed buying back after the stock rebounded by 21% from $0.775 on 21 Jan with 777,000 shares purchased on 5 Feb at $0.94 each.

ComfortDelgro: Capital Group Companies recorded its first sale since becoming a substantial shareholder in Feb ’15. It disposed 1.55m shares at $2.80 each. This reduced its deemed holdings to 5.95% of issued capital. The filing was made on the back of a 11% drop in share price since Nov ’15.

SG Market (15 Feb 16)

Singapore shares may find stability following the snapback in Wall Street powered by a sharp rebound in oil prices, but sentiment is likely to stay fragile as investors take stock of economic data and the re-opening of Chinese markets after a week-long holiday.

Investors will be anticipating China's trade figures today and US housing starts and industrial production on Wed plus CPI readings on Fri.

Regional bourses surged in Tokyo (+4.3%), Seoul (+1%) and Sydney (+0.8%).

Technically, immediate resistance for the STI is at 2,580 (20-dma) with support at the double bottom at 2,530.

Stocks to watch:
*ComfortDelGro: FY15 net profit of $301.9m (+6.5%) met expectations on revenue of $4.1m (+1.5%), led by bus (+3.1%), taxi (+3.4%), and rail (+8.4%) segments, partially weighed by lower sales in automotive engineering (-13.6%). EBIT margin held steady at 11% (+0.1ppt) as cheaper fuel (-8.5%), were offset by increased staff costs (+3.3%). Final DPS increased to 5¢, bringing FY15 payout to 9¢ (FY14: 8.25¢).

*SATS: 3QFY16 results in line. Chalked up net profit of $60.6m (+12.8%) despite lower revenue of $441m (-2.2%) from a weaker JPY and the transfer of its food distribution business to JVCo SATS BRF Food in Jun ‘15. EBIT margin widened to 14% (+2.7ppt), thanks to cheaper raw material costs (-20.8%) and reduced opex (-5.1%).

*Cordlife: 2QFY16 results turned around to net profit of $9.6m (2QFY15 -$3m) boosted by fair value ($9.8m) and disposal gains ($5m) related to divestment of CCBC, while revenue edged up 2% y/y to $14.5m from higher client deliveries. Gross margin narrowed to 64.9% (-1ppt) on increased operations in lower margin operations.

*Tat Hong: 3QFY16 swung into net loss of $6.7m from $4.5m profit a year ago as revenue tumbled 19% y/y to $124.8m, on lower crane rental (-23%) and distribution (-23%) businesses. Gross margin contracted to 30.6% (-3.2ppt), while bottom line was dragged by FX losses of $2.9m (3QFY15: +$4.9m) from weaker RMB against SGD.

*Courts Asia: 3QFY16 net profit inched up to $4m (+0.3%) while revenue grew to $204.7m (+6.1%) on stronger sales in Singapore (+7.9%) and Malaysia (+2.4%). Earnings were eroded by lower gross margin of 29.7% (-2.4ppt) due to a change in sales mix, partially mitigated by reduced opex (-4.5%).

*Boustead: 3QFY16 net profit slumped 36% y/y to $7.5m on revenue of $142.3m (-20%), dragged by lower sales in energy-related engineering division (-35%) from a protracted weak environment, and reduced design-and-build revenue (-14%) in the real estate solutions segment. Earnings were further dragged by increased finance costs and share of loss of associates and JVs of $1m (3QFY15: $0.1m).

*GL: 2QFY16 net profit climbed 34% y/y to US$19.9m, boosted by interest savings, while revenue inched 1% to US$114.7m. For 1HFY16, top line slipped 1% to US$229.8m due to lower Bass Strait royalties and hotel operations, partly mitigated by improved gaming and property development segments. NAV/share at US$0.866.

*Sim Lian: 2QFY16 net profit jumped 59% y/y to $40.5m, while revenue more than doubled to $194.3m, boosted by a surge in property development (+186%) from project completion in Malaysia, while construction sales soared 95% on increased projects and higher percentage of completion recognised.

*Linc Energy: 2QFY16 net loss narrowed to A$95.8m from A$169.4m, while revenue plunged 31.4% y/y to US$15.8m due to the oil price slump. Gross loss widened to US$30.5m from US$12.4m a year earlier, but bottomline improvement was due to an absence of impairment recognised last year. NAV/share dived to –A$0.23 from A$0.0492 in Jun.

*800 Super: 1HFY16 net profit climbed 7.4% y/y to $4.9m, on revenue of $76.3m (+18.2%), from new contracts awarded and increased pricing. Bottom line was partially weighed by increased foreign worker levies and upkeep of additional vehicles purchased, as well as higher headcount. Separately, group terminated a non-binding MOU with Zero Spot Laundry Service to form a JV Co to undertake laundry services business.

*City Developments: 65% owned hotel arm Millennium & Copthorne Hotels will recognise a £43m impairment charge in 4Q15 on fair value change to its investment properties. This will have a $48m impact on the group.

*Technics Oil & Gas: Resume trading today following a one-month suspension, after negotiations on a proposed major transaction fell through.

*ST Engineering: Clinched four pilot training contracts worth $23m.

* Announced a new online travel portal for the corporate travel segment. In addition, it also entered into the Indonesia and Vietnam markets.

*JES International: Proposed disposal of its core loss-making shipbuilding business for US$0.5m.

*Profit warning: Nam Cheong, EMS Energy

Friday, February 12, 2016


Metro: (S$0.91) Healthier operating metrics despite 3QFY16 net profit slip
Counter is up 5.7% in mid day trade despite reporting that its 3QFY16 net profit dropped 12.6% y/y to $55.9m mainly due to absence of gains from disposal of its 10.7% interest in Tesco Lifespace developments.

With the property segment now accounting for about 99% of its operating profit, current valuation of 0.53x P/B appear to be at a slight premium to other pure Chinese property plays such as Ying Li (0.37x) and Yanlord (0.5x).

That being said, the premium could be based on its same-day announcement of the acquisition of a 50% stake in a office development in the UK for £19m (including loan). This acquisition should help to provide for some geographical diversification in Metro’s property portfolio.


Trendlines: Jumped 7.5% to $0.174 in early trading, following an initiation from a local broker with a Buy rating and TP of $0.28.

The house cited that Trendlines is considered the best incubator in the Medtech space and is the only government franchised incubator in Agtech space. These segments see strong growth prospects from the ageing population and growing demand for sophisticated medical devices, which would help attract funds into the company.

Trendlines has a portfolio of 46 companies, of which 17 are in commercialisation stage. Currently, three companies within its portfolio are exploring M&A opportunities.

The group's track record consists of:
1) raising follow-on funds for 75% of its portfolio companies; and
2) divesting five portfolio companies over the past five years at 3x - 67x its investment.

Key risks include volatile earnings and lack of exits, which may lead to negative cash flow. The house estimates that Trendlines has enough cash for the next 2.5 years without an investment exit.

Trendlines is trading at a 55% discount to its peers, which average 1.3x P/B.

Dividend plays

CLSA looks deeper into yield-focused strategies in lieu of changing macro conditions. With Fed Chair, Janet Yellen’s recent comments about a gradual easing and the house’s forecast of the next rate hike to occur in 2H16, it feels that investors should look to dividend plays.

It notes that the Singapore dollar has appreciated recently with yields of the 10 year government bond falling to 2.07% from 2.6% which in turn has caused the yield gap between bonds and dividend plays to widen to a 3 year high of 2.4%, well above the average of 1.18%.

While declining earnings present risks, healthy balance sheets and expanding payout ratios should help to support dividends.

It makes no changes to its dividend cocktail which is made up of Ascendas REIT, Dairy Farm, Mapletree Logistics Trust, Mapletree Commercial Trust, Mapletree Greater China Commercial Trust, SingPost, Singtel, and ST Engineering.

In addition, the house notes that more companies have passed its bond proxy criteria with Ascendas REIT, Capitaland Commercial Trust, Ascott Reit and Cambridge Industrial Trust amongst notable mentions.

SG Market (12 Feb 16)

Regional bourses opened in the red in Tokyo (-3%), Seoul (-0.5%) and Sydney (-0.7%).

From a chart perspective, the STI is treading just above its key double bottom support at 2,530.

Stocks to watch
*Singtel: 3QFY16 results in line with headline net profit of $954m (-2% y/y), dragged by a one-off tax credit in 3QFY15 and $8m loss from cybersecurity firm Trustwave. Otherwise, core earnings rose 3% and 6.3% in constant currency terms. Revenue rose 1% to $4.47b, lifted by growth in mobile data, ICT & digital services, full quarter contribution from Trustwave and continued growth momentum in Australia. EBITDA margin slipped to 27.3% (-0.5ppt y/y, -3.5ppt q/q), while regional mobile associates contributed $698m (+2%) on strong data growth and increased customer base. NAV/share remained at $1.54.

*Silverlake: 2QFY16 results trailed estimates with net profit of RM66.6m (-7% y/y), despite a 44% jump in revenue to RM179m, buoyed by maiden contribution from software provider Symmetri (former SunGard Ambit) and major sales of hardware products. Gross margin narrowed 8ppt to 58% from a change in sales mix, while earnings was dragged by lower non-core income, increased overheads from the new acquisition, FX losses and a one-off charge on share compensation and professional fees for a special independent review. Second interim DPS cut to 0.75¢ (2QFY15: 1.1¢). NAV/share at RM0.2278.

*Saizen REIT: 1HFY16 DPU fell 8.7% y/y to 2.83¢ amid a larger unit base, while distributable income remained flat at ¥725.3m. Revenue edged up to ¥980.1m (+0.3%) on improved occupancy, but NPI dipped 0.5% to ¥682.7m due to higher repair and renovation costs. Portfolio occupancy slipped 0.4ppt q/q to 91.2%, while aggregate leverage was stable at 35%. NAV/unit at ¥102.76.

*Civmec: 2QFY16 net profit slumped 34.6% y/y to $4.8m on lower revenue of $91.5m (-27.6%), mainly dragged by the weaker AUD. Gross margin held steady at 12.9% while earnings was partially supported by a $1.1m contribution from the Sedgman Civmec JV. NAV/share at $0.323.

*ISOTeam: 1HFY16 net profit climbed 4.7% y/y to $4.3m on revenue of $44.7m (+14.7%), as increases from addition and alteration business (+19%) offset lower recognition for repair and redecoration projects (-18%). Bottomline grew at slower clip on higher SG&A expenses from increased headcount. NAV/share at $0.342.

*Metro: 3QFY16 net profit fell 12.6% to $55.9m mainly due to lower operating income from its property segment of $58.8m (-14.8%) because of an absence of disposal gains of its Tesco Lifespace developments in 3QFY15. Revenue slipped 1.3% to $41m but gross margin gained 6.9 ppt to 7.3% in the absence of opening expenses of its Centrepoint store. NAV/share at $1.71.

*Health Management International: 2QFY16 net profit was shaved 1% to Rm5.4m, while revenue climbed 13% to Rm96.6m, largely from higher patient load and average bill sizes. Bottom line growth slowed by increased admin and finance costs. NAV/share at 27.3sen.

*Keppel: Keppel Fels, in a joint bid with McDermott, is said to have been shortlisted for an EPC contract to build a semi-sub for Hess Corporation. Other shortlisted candidates include the duo of Samsung Heavy Industries and Modec, as well as a lone bid from SBM Offshore.

*Metro: Acquired a 50% interest in an office development land site in Sheffield, UK for £19m, of which £1m is for a 50% stake in JV Co. holding the land, while the remaining £18m is a loan to the JV co. The consideration is funded via a mix of internal funds and bank borrowings.

*Trendlines: Trendlines signs a framework agreement with a multinational medical device corporation headquartered in Japan where upon new opportunities, the former will develop medical device products for manufacture and marketing by the latter.

*Ley Choon: Secured $7.4m worth of contracts from PUB for supply and installation of water connection works. The contracts are scheduled for completion up to 2018.

*Singapore Myanmar Investco: Proposed placement of 10m new shares (5.9% enlarged share capital) at $0.36 to three independent subscribers. Net proceeds of $3.5m is intended to fund the group's duty-free retail operations in Myanmar's Yangon Airport.

Thursday, February 11, 2016

Accordia Golf Trust

Accordia Golf Trust (S$0.565): Solid 3QFY16 DPU on favourable FX and weather conditions

Accordia Golf Trust’s 3QFY16 DPU jumped 19.3% y/y to 2.16¢, helped by a stronger JPY, while distributable income rose 12% to ¥2b. This took its 9MFY16 payout to 4.8¢.

Revenue climbed 4% to ¥14.9b as number of visitors to its golf courses increased 5.6% on favourable weather conditions, while operating expenses stayed flat, resulting in a 3.1ppt improvement in margin to 28.4%.

During the period, utilization rate of its 89 golf courses improved 3ppt q/q to 80.2%, while aggregate leverage held steady at 28.9%.

Looking ahead, management is sanguine on the trust’s outlook given the growing demand for golf, underpinned by rising number of retirees from the baby boomer generation, who have more money and time for the sport.

In addition, the booming inbound visitors to Japan are also expected to drive up the demand for golf. Japanese officials estimate that the number of foreign visitors jumped 47% to 19.7m in 2015.

The Japanese golf trust is currently trading at 0.63x P/B, and offers an estimated FY3/16 distribution yield of 9.8%.

SG Market (11 Feb 16)

From a chart perspective, the STI sees immediate support at the double bottom at 2,530, followed by the psychological 2,500 level.

Stocks to watch
*SGX: Jan total securities turnover came in at $23.2b (-8% y/y; +36% m/m), with daily average traded value of $1.2b (-4% y/y; +50% m/m). Derivatives volume grew to 17.7m (+21% y/y; +26% m/m), while commodities derivatives volume soared to 1.2m (+110% y/y; +15% m/m). Three Catalist listings raised $42m, while $13b was raised through 25 new bonds.

*Singapore Shipping: 3QFY16 net profit surged 38.7% y/y to US$4.2m, in tandem with a stronger revenue of US$12.9m (+39%), mainly boosted by its ship owning business following delivery of three additional vessels, but partially offset by lower business activities and margin pressures in its agency & logistics business. Operating margin expanded to 38.8% (+9.1ppt), but bottom line gains were pared by a spike in finance cost for new vessels and FX losses. NAV/share at US$0.173.

*Accordia Golf Trust: 3QFY16 DPU jumped 19.3% y/y to 2.16¢ helped by a stronger JPY, while distributable income increased 12% to ¥2b. Revenue climbed 4% to ¥14.9b from increased visitors to golf courses on favourable weather conditions, while operating expenses stayed flat, resulting in a 3.1ppt improvement in margin to 28.4%. Golf course utilization rate improved 3ppt q/q to 80.2%, while loan-to-value ratio held steady at 28.9%. NAV/unit at $0.89.

*Boustead Projects: 3QFY16 net profit surged 165% to SGD7.2m, on gross profit normalisation following the completion of a previous low margin design-and-build project. Revenue fell 14% to $85.6m from decreased design-to-build contribution. NAV/share at $0.589.

*Tigerair: Passenger load factor got a slight lift to 81.5% (+2.9ppt y/y) in Jan amid a 0.7% decline in passenger traffic and a larger cut back in capacity of 4.2%.

*Frasers Centrepoint: Acquired a 135 hectare site in Beenleigh, Queensland, Australia, for an undisclosed sum. Scheduled sales launch for the project with up to 1,350 detached housing is expected in Spring 2016, with end value of A$270m.

*SingPost: Extended long-stop date for the proposed issuance of new shares to Alibaba from 29 Feb 2016 to 31 May 2016.

*Biosensors: Extended the proposed amalgamation between Biosensors and CB Medical Holdings for two months to 10 Apr 2016.

*Plato Capital: Sold its 50%-owned Tune Hotel property in Melbourne, Australia for a total of $52.5m, netting a disposal gain of $9.6m. Proceeds are intended for the redevelopment of its Irish Hotel property.

*Advanced Integrated Manufacturing: Purchased a minimart in Bedok South for $0.2m.

*CEFC: Received uncommitted trade facilities of US$120m for use to fund its capacity expansion and working capital for recent contract wins.

*Cacola Furniture: Applied for a 12 month extension to meet the requirements regarding its removal from the SGX Watch-List.

*Global Invacom: Expects to report an FY15 net loss due to delay in sales to main customers in the US, UK, and Asia as well as the re-classification of export taxes for certain products and the weakening RM against the USD.

*Koyo International: Disclosed that Managing Director Foo Chek Heng is being investigated by MAS and CAD for possible offences of a breach in the Securities and Futures Act.

*Ramba Energy: Completed the transfer of a 35% interest in the Lemang Production Sharing Contract to global investment firm KKR-backed Mandala.

*Profit warning: KS Energy

Wednesday, February 10, 2016


CIMB upgrades the counter to Add from Hold and adjusts its TP upwards to $3.27 from $3.17 as it believes the idle risks of its taxi business has subsided with its taxi hire-out at close to 100%. With the high cost of car ownership and the government's strict control on car population growth, Singapore's taxi market could very well be the best in the world with CDG being the dominant player (60% market share).

Rail operations: Expected to benefit from its enlarged rail network with the commencement of DTL stage 2 and 3 operations. Overall, the DTL is expected to turnaround by FY17 when stage 3 commences operations.

Bus operations: A smooth transition to the government contracting model should provide for improved bus margins post reform.

Overall, the house continues to prefer CDG as its investment proxy to the land transport sector in Singapore due to:
1. well-diversified businesses
2. strong balance sheet
3. overseas growth initiatives


UOBKH is maintaining its Buy call on SIA despite cutting its TP to $13.90 from $14 on continued troubles in its cargo segment which continues to see lower cargo yields.

However, in light of its strong 3QFY16 results and q/q improvement in passegner yields, the house feels that FY17 earnings will likely improve further on:
1. Unwinding of unfavourable fuel hedges
2. Yields stabilise as more premium economy seats are launched
3. SilkAir and Scoot's profitability improves with more fuel efficient aircraft.

SIA also indicated that forward bookings were higher as compared with a year ago for both its business and economy class.

First Resources

CLSA has a note out on First Resources in which it reiterates its outperform rating on the planter and raises its target price from $2 to $2.10. as the house expects the company’s earnings through to 2017 to grow significantly with First Resources’s cost base on a steady downtrend since 2014 on improved productivity and weakening rupiah.

Another reason for this bullishness was the company’s FY15 Fresh Fruit Bunch production which grew 14% year on year, ahead of the house’s estimates as young estates helped to propel growth in harvests.

Although El Nino is said to crimp supply across the industry, First Resources is expected to be least affected given its concentration in the Riau islands which has seen significantly better rainfall than other regions.

Insider trades

Insider trades: For the week ending Feb 5, Asia Insider noted that buying stayed low a second week,

Insider purchases: 10 companies saw 23 purchases worth $2.5m, vs. 9 firms 19 transactions worth $3.06m the week prior

Insider sales: Nil sales vs. a company making two disposals worth $0.04m the previous week.

Buybacks: Three firms made 13 repurchases worth $0.456m, vs. six companies, 20 buybacks worth $1.63m the week before.

Notable transactions:

Lian Beng: Bought 397,000 shares from 2-5 Feb at average of $0.44 each. The trades, which made 7% of the stock’s trading volume, were made on the back of a 17% share price drop since Oct ’15. The group previously acquired 3.8m shares from 3 Aug to 22 Sept at $0.52 average.

M1: Chairman Choo Chiau Beng recorded his first on-market trade since Jun ’15, with 100,000 shares purchased on 29 Jan at $2.32 each. The acquisition was made on the back of a 29% share price drop since Jul ’15.

Suntec REIT: BlackRock bought 811,000 units of Suntec REIT at $1.53. This was done on the back of a 12% drop in unit price since May ’15.

City Developments: Aberdeen bought 534,000 shares at $6.97, increasing its deemed holdings to 9.01% of issued capital. This was made on the back of a 17% drop in share price since Oct ’15.

Petra Foods: Aberdeen became a substantial holder for the third time since Nov 2012, purchasing a million shares at $2.20each, boosting its stake to 5.15% of issued capital. The filing was made on the back of a 47% decline in share price since Sep ’14.

SG Market (10 Feb 16)

Regional bourses opened in the red today in Japan (-0.3%) and Australia (-1.2%), while Korea is closed for Chinese New Year.

From a chart perspective, immediate support for the STI is at the double bottom at 2,530.

Stocks to watch:
*Interplex: 2QFY16 net profit fell 23% y/y to US$8.7m, while revenue dropped 12% to US$230.5m, as gains from automotive sector was weighed by other sectors due to the economic slowdown in China. Gross margin improved 4ppt to 18%. No DPS declared (1HFY15: 1.3¢ interim DPS). NAV/share at US$0.36.

*China Minzhong: 2QFY16 net profit fell 59.5% y/y to Rmb29.1m, largely from FX losses (Rmb31.2m) and receivables write-off (Rmb9.8m). Revenue fell 2% to Rmb523.5m as increased sales in processed segment was offset by the cultivation and branded segments. Gross margin fell 0.1ppt to 26.9%. NAV/share at Rmb7.95.

*Marco Polo Marine: 1QFY16 net profit crashed to near breakeven (1QFY15: $7.4m) on FX losses, share of JV losses from BBR and absence of divestment gain (1QFY15: $2.9m). Revenue slumped 36% y/y to $17m on poor ship chartering (-52%) and shipyard (-21%) businesses. Operating margin narrowed 7.1ppt to 11.7% due to FX losses. NAV/share at $0.525.

*Tritech: 3QFY16 net loss slipped 1.2% y/y to $4.8m on higher finance costs, while revenue climbed 2.3% to $17.6m, driven by marble ($0.9m), as well as water and environmental ($0.7m) businesses, but partially offset by engineering business (-$1.2m). NAV/share at $0.1061.

*Terratech: 3QFY16 net loss narrowed y/y to US$0.9m (3QFY15: -US$1.8m) on higher revenue of $3.2m (+38%), largely attributable to new contribution from a Chinese operation acquired in Dec '14. NAV/share at $0.0187.

*Excelpoint: 4Q15 net profit tumbled 38.5% y/y to US$1.2m mainly on absence of divestment gain (4Q14: $3.7m), while revenue rose 20% to US$185.8m from higher sales in electronics components. Gross margin expanded 0.7ppt y/y to 5.9%. Raised first and final DPS to 2.5¢ (FY14: 0.8¢). NAV/share at US$0.558.

*SIA/Tigerair: SIA received 93.77% valid acceptances on the voluntary unconditional general offer for Tigerair, and does not intend to preserve the listing status of the company. Closing date of the offer extended to 19 Feb.

*Sing Post: Appoints Drew & Napier to act as joint independent Special Auditor for the corporate governance special audit, together with PwC. The audit is expected to be completed in Mar ’16.

*CapitaLand: Disposing a 154-unit serviced apartment property in Beijing for Rmb730m ($158m) to Hong Kong Qianhai Zhongjin Group.

*Roxy-Pacific: Acquiring leasehold interest of Kudafunafaru, an island in Maldives, for US$31m.

*Zhongmin Baihui: SGX urged caution on counter, citing that a small group of connected individuals was responsible for over 90% of trades.

*Profit warning: Serial System, Asia Fashion Holdings, GS Holdings, Yuexiu Property, Far East Group, HG Metal, SBI Offshore.