Friday, April 29, 2016


Japfa's headline 1Q16 net profit more than tripled to US$23.4m (+234% y/y), on a US$22.6m positive turnaround in FX adjustments, and operational efficiencies.

Core earnings excluding fair value changes, one-offs and FX impact, surged two-fold to US$19.8m (+107%).

Revenue notched up 6% to US$717.7m on higher sales volume across all segments. Animal protein business in Indonesia (+4% to $466.2m) saw firmer pricing amid absence of oversupply conditions in the poultry market, while other markets (+7.9% to $136.7m) in India, Vietnam, and Myanmar enjoyed steady growth.

Dairy sales grew 15.8% to US$69m on higher number of milk cows in China (+20%) and higher yields (+2.7%), overshadowing softer raw milk prices (-10%).

As for consumer food, sales increased 11.4% from Indonesian consumers, as the business in Vietnam is still building up.

Gross and operating margin expanded to 20.4% (4.5ppt) and 7.7% (+3ppt), predominantly attributable to a marked profitability improvement in the Indonesian chicken operations.

Bottom line was boosted by a positive turnaround in FX adjustments, and lower finance costs, but partially negated by fair value losses of biological assets.

Despite the strong quarterly earnings, investors should take caution on its negative operating cash flow of US$17m. Cash and cash equivalents have been falling to US$142.7m (-38% y/y, -3.6% q/q).

Looking ahead, management remains cautious of economic slowdown and FX volatility in emerging markets, and also wary of the seasonality and cyclical nature of the poultry industry.

Japfa is currently trading at 8.5x FY16e P/E.


iFAST: (S$1.18) 1Q16 hit by a double whammy of weak markets and increasing costs
- 1Q16 net profit ($1.3m, -58.4%). Revenues -10.6%, opex +25%.
- Mgt: Any market conditions improvement +ve for group ex-China.
- Expenses in China to scale biz there.
-Interim DPS 0.68¢ maintained.
-Trading at 22.7x consensus forward P/E.
-Consensus: 1 Buy, 1 Hold, mean TP $1.36

Jardine Cycle & Carriage

Jardine Cycle & Carriage: (S$38.79) 1Q16 weighed by weak IDR; proxy to Indon consumption growth story
- Net profit of US$140.6m (-20.4% y/y) on revenue of US$3.65b (-9.2%)

CDL Hospitality Trusts

CDL Hospitality Trusts: (S$1.435) 1Q16 dragged by lower RevPAR and higher financing costs
- DPU of 2.22¢ (-9% y/y) came in at the lower end of estimates.
- Revenue rose 5.8% largely underpinned by recent acquisition and refurbished mall
- Bottom line weighed by higher funding costs
- Estimated FY16 yield of 7.5% and P/B of 0.92x.


OCBC: (S$8.78) 1Q16 missed on spike in provisions
- 1Q16 net profit of $856m (-14% y/y, 11% q/q) missed street estimates of $916m.
- Net interest income (+5% y/y, -3% q/q), mainly led by improved net interest margin.
- Loans contracted (-1% y/y, -1% q/q)
- Provisions surged 162% (-13% q/q) from allowances stemming from the O&G support services portfolio.
- Trading at 1.07x P/B vs peers DBS at 0.96x P/B and UOB at 1.03x P/B.

China Merchants Pacific

China Merchants Pacific: (S$0.87) 1Q16 in line as acquisitions contribute meaningfully
- Net profit +15.3% y/y to HK$164.1m on revenue of HK$634.7m (+28.4%)
- Largely due to consolidation of 3 Guangxi expressway acquired ; improved performance at Yongtaiwen & Beilun Port
- Key risks: FX, economic slowdown in China, Govt investments in alternative transport such as rail
- Handsome yield of 8.1% vs peers' 5.3%

Citic Envirotech

Citic Envirotech: (S$1.415) 1Q16 weighed by FX loss; growth story still intact as China ups ante
- 1Q16 net profit (+60% to $12.1m) on revenue of $99.5m (+62.5%)
- Achieved only 20% of consensus FY16 estimates due to FX losses of $4.5m
- Beneficiary of stricter China Govt pollution policy
- Sponge city initiative could be a possible opportunity

- Trading at premium of 24.4x forward PE. Street has 2 Buy and 2 Hold with consensus TP of $1.61


Venture (S$8.33): 1Q16 in line; quality yield stock
- 1Q16 net profit of $35.8m (+10.1% y/y) within expectation, as new products gained traction and pretax margin expanded.
- FCF generation of $92.8m (1Q15: $37.2m) on working cap improvement.
- Net cash of $1.45/share
- 1Q16 reflected steady growth via value creation.
- Trading at 13.9x forward consensus P/E, 6% indicative yield. Sits on Market Insight yield portfolio.


SMRT (S$1.51) 4QFY16 earnings breakdown temporarily repaired by tax refund
-4Q headline net profit of $26.6m (+27.6% y/y) was masked by $19m net property tax refund
-4Q revenue $319.9m (+2.8%): rail (+2.7%), bus (+1.3%), taxi (-3.4%)
-Rail ( refund) and buses suffered operating losses - lower avg fare, cannibalisation by Downtown Line 2, higher staff & maintenance costs
-Taxi op.profit (-57%) - larger number of taxis retired, higher staff cost, & potential threat from likes of Uber and Grab
-Final DPS of 2.5¢, FY16 payout 4¢ (FY15: 3.25¢)
-Trading at 23.2x FY17e P/E, yield 2.6%
-MKE maintains Hold and TP of $1.40 - pending mgmt briefing


Yangzijiang: 1Q16 net profit (Rmb445m, -37%) missed, due to shipbuilding sales (-13.1%), absence of one-off gains from forfeited downpayments and widening associates losses.

- Low net gearing of 4.3%, boosted by operating cashflow from working cap changes.

-8 shipbuilding contracts cancelled in the quarter. One has not begun construction, 4 have found buyers. 10-30% downpayments collected will be recognized. Cancellations reflect industry downturn

- Yangzijiang is currently trading at 7.6x consensus forward P/E and 0.8x P/B. The street has 8 Buy, 2 Hold and 5 Sell ratings on the Chinese shipbuilder with a mean TP of $1.11.

SG Market (29 Apr 16)

SG Market: Singapore market is likely to continue its downward drift on disappointing 1Q corporate earnings, although oil-related counters may see some support as crude prices hover near its 6-month high.

Regional bourses opened in negative territory today in Seoul (-0.7) and Sydney (+0.1%). Tokyo markets are closed for Showa Day.

From a chart perspective, underlying support for the STI at 2,840, with next level at 2,780.

Stocks to watch:
*OCBC: 1Q net profit of $856m (-14% y/y, -11% q/q) missed estimates. Net interest income rose to $1.31b (+5% y/y) on tepid loan growth of 1% and NIM of 1.75% (+13bps). Non interest income declined 12% to $753m on lower fees and commission from weak investment appetite. Notably, provisions surged 162% on higher specific allowances stemming from the oil & gas portfolio. Accordingly, NPL ratio ticked up to 1.0% (1Q15: 0.6%). Tier-1 CAR at 14.6% (1Q15: 13.5%). NAV/share at $8.20.

*SMRT: Headline 4QFY16 net profit of $26.6m (+27.6% y/y) was flattered by a $19m net property tax refund. Excluding that, operating performance was below expectations with losses in rail of $8.5m (4QFY15: $4.1m loss) and bus of $1.6m (4QFY15: $0.9m profit) due to cannibalisation impact from the opening of DTL Stage 2, while taxi operations were dented by 57% to $2.3m on a smaller fleet size. Proposed higher final DPS of 2.5¢, bringing full-year payout to 4¢ (FY15: 3.25¢). MKE maintains Hold with TP of $1.40.

*Yangzijiang: 1Q16 net profit of Rmb445m (-37% y/y) came in below estimates, plagued by 1) slump in revenue to Rmb2.71b (-11%) from delivery of smaller sized vessels, 2) absence of forfeited deposit (1Q15: Rmb88m) and 3) losses at associates/JVs due to fair value loss of venture capital investments. NAV/share at Rmb5.81.

*Venture: 1Q16 net profit of $35.8m (+10.1% y/y) matched forecasts, on revenue of $630.7m (+3.6%) due to new products. Pretax margin improved 0.3ppt to 6.7% on reduced R&D costs, partially offset by FX loss. NAV/share at $6.82.

*Ho Bee: 1Q16 net profit surged 59.8% y/y to $18.5m, boosted by higher associate income of $9.3m (1Q15: $1.3m loss) attributed to a Shanghai residential project. Revenue jumped 19.9% to $37.2m from three newly acquired investment properties in London in 2H15. NAV/share at $4.19.

*Jardine C&C: 1Q16 net profit tumbled 20.4% y/y to US$140.6m (-20.4% y/y), missing estimates as revenue fell to US$3.65b (-9.2%) on reduced contributions from Astra’s heavy equipment, mining, agri and auto segments. Operating margins narrowed to 7.8% (-1.1 ppt) on net FX losses of US$16m (1Q15: US$6.9m gain), while bottom line was further eroded by lower associate and JV contributions (-28.7%). NAV/share at US$5.91.

*Citic Envirotech: 1Q16 net profit of $12.1m (+60% y/y) fell short of estimates even though revenue jumped 62.5% to $99.5m, underpinned by increased contributions from engineering (+100%), treatment (+25.9%), and membrane sale (+85.7%). Gross margin slipped to 37.3% (-1.7 ppt) higher raw materials cost, while bottom line was pressured by FX losses of $4.5m (1Q15: nil). NAV/share at $1.00.,

*China Merchants Pacific: 1Q16 results met expectations as net profit climbed 15.3% y/y to HK$164.1m on revenue of HK$634.7m (+28.4%). Topline growth was largely attributed to consolidation of contributions from three Guangxi Expressways acquired in Sep and Oct ‘15, as well as revenue growth from the Yongtaiwen (+9%) and Beilun Port (+10.5%) expressways. Gross margin widened to 59.6% (+3.8 ppt). NAV/share at HK$5.44.

*Japfa: 1Q16 core net profit (in constant FX terms) spiked 107% y/y to US$19.8m, on higher revenue of US$717.7m (+6%) led by better selling prices for Indonesia's animal protein segment and improved overall sales volumes across all business segments. Operating margin expanded 3ppt to 7.7%. However, group remains cautious of economic slowdown and FX volatility in related emerging markets. NAV/share at US$0.40.

*GMG: Swung to 1Q16 net loss of $3.5m (1Q15: $2.7m profit), as revenue dropped 17.6% to $124.2m due to lower rubber selling prices of $1,650/ton (-19.1%), partially mitigated by higher volumes (+1.9%) and FX gain. NAV/share at $0.9236.

*City Dev: HK-listed subsidiary City e-Solutions requested for a trading halt, pending M&A related announcement.

*King Wan: Secured new mechanical and electrical projects worth $29.5m which are scheduled to be completed between 2016 and 2018. Order book currently stands at $164.5m, with contracts lasting till 2018.

*Acromec: Won two contracts totalling $5.4m. The first entails the fitting out of a chemical lab at Biopolis and is expected to be completed by FY16. The second contract is from a new customer in the healthcare sector and entails the reconfiguration of existing operating theatres. Order book currently stands at $52m.

Thursday, April 28, 2016


Yoma: (S$0.545) Kyat outperformance instills investor confidence
- The Myanmar kyat (+11.8% ytd) has just recently trumped the Malaysian ringgit (+10.5%) in USD terms as this year’s best performing Asian currency.
- Among SGX-listed stocks, Yoma offers the purest exposure to Myanmar.
- Yoma is currently trading at 68.1x FY3/16e consensus P/E and 1.4x P/B.
- The street has 2 Holds and 2 Buys on the counter with a TP of $0.62.

Sheng Siong

Supermarket chain, Sheng Siong reported 1Q16 results which met street expectations, with net profit of $16.4m (+16.8% y/y).

Revenue grew 5.1% to $208.5m on the back of sales from five new stores, which was partially offset by a 0.5% contraction in comparable same-store sales.

The group cited tepid Chinese New Year demand as well as ongoing renovation in the vicinity of its Loyang store, a fall in liquor sales in its Geylang store and a weaker ringgit affecting its Woodlands store as causes for the dip in same-store sales.

Excluding the Woodlands store, comparable same-store sales would have registered a marginal growth of 0.1%.

Gross margin held steady at 24.5%. Bottomline was also buttressed by government grants of $2.3m (+175.6%)

Beyond the quarter, Sheng Siong opened a new outlet at Circuit Road on 17 Apr with three new stores slated to come on stream in 2Q16. Together, they will add about 25,000 sf to its current portfolio of 434,500 sf of retail space.

Moving forward, management is wary of rising food prices due to the effect of the El Nino weather pattern crimping supplies. In addition, foreign labour restrictions and upward pressures on manpower cost are expected to continue to persist.

Despite this, the market continues to price Sheng Siong at a premium based on its defensive nature as well as high dividend payout ratio (FY15: 93%). The stock is currently trading at 22.13x forward P/E.

The street is very bullish on the counter with 9 straight Buy ratings and a consensus TP of $0.98.


Sembmar: The beleaguered rig-builder posted a 1Q16 net profit slump of 48.2% y/y to $54.8m, mainly shored up by one-off gains of $19.2m. Otherwise, earnings would have missed consensus estimates.

Revenue dived 29.6% to $918.4m on a 43% drop in contributions from its rigs & floaters to $540m due to suspension of project revenue recognition arising from customer deferments.

The topline drag was further exacerbated by slippage in repairs and upgrades to $99.2m (-0.9%), partially mitigated by its offshore platform projects, which contributed $261m (+10%).

Gross margin contracted to 8.8% (-4.2ppt) on increased depreciation charges from its Tuas and Brazilian yards.

Bottom line was affected by:
1) $3m in writeback of prior year's bonus provision
2) $6.9m in net FX gains (1Q15: $13m loss)
3) $9.3m in FV gains on reclassification of its stake in Gravifloat
4). 87.4% jump in finance costs to $17.9m on higher bank borrowings
5) 32.5% slump in contributions from associates and JVs of $2.6m, largely tagged to Cosco Shipyard Group

During the quarter, the group secured $60m worth of offshore platform contracts. Nevertheless, order book slipped 6.7% q/q to $9.7b, its lowest level since 3Q12.

In line with the rig delivery deferrals, the group's operations saw cash outflows of $72.9m eroding its cash hoard to $955.3m (-15.1%).

Net gearing deteriorated to 1.15x from 0.29x a year ago (4Q15: 1.03x), which is a worry.

Moving forward, management opines that this current down-cycle is expected to be more protracted than previous ones and was disappointed that the Doha energy talks failed to stabilise the market.

Focusing on Sete Brasil, management has initiated arbitration against the Brazilian company's bankruptcy proceedings. SMM shared that upon getting court approval, Sete would have 60 days to propose a recovery plan and that this would be a key milestone to watch out for.

Maybank KE is generally not surprised by SMM's results given its lowered FY16 expectations. While management maintained that its $329m provision for Sete Brasil contracts in 4Q15 was sufficient at this point, the house opines that writedowns may needed for its $1b yard investment in Brazil.

At current prices, SMM is trading at 15.6x forward P/E and 1.4x P/B. However, P/B valuation may no longer be a useful measure given the recent fire sale of two drillships at 10% of original costs.

Latest broker ratings:
CIMB maintains Sell with TP of $0.90
UOB Kay Hian maintains Sell with TP of $0.90
Maybank KE maintains Sell with TP of $1
Credit Suisse maintains Neutral with TP of $1.20

SG Market (28 Apr 16)

SG Market: Singapore shares may get a slight lift from the positive Fed cues, which downplayed global issues but upside will be capped by muted corporate earnings.

Regional bourses opened generally positive in Tokyo (+1%), Seoul (flat) and Sydney (+0.4%).

From a chart perspective, topside resistance for STI still seen at 2,960 with underlying support at 2,840.

Stocks to watch:
*UOB: 1Q16 net profit of $766m (-4.4% y/y, -2.8% q/q) came in at low end of estimates. Net interest income rose to $1.28b (+6.1% y/y, -0.2% q/q) on loan growth of 3.0% (+1% q/q) and NIM of 1.78% (+2bps y/y, -1bps q/q). Non-interest income tumbled to $695m (-7.8% y/y, -13.4% q/q) on lower wealth management fees and trading and investment income amid volatile market conditions. CIR inched up to 45.4% (1Q15: 43.6%) on higher staff costs and IT-related expenses. Provisions were lowered to $117m (-30.7% y/y, -38.4% q/q), while NPL ratio ticked up to 1.4% (1Q15: 1.2%). Tier-1 CAR at 12.8% (1Q15: 14.3%). NAV/share at $18.22 (+1.9%).

*Sembcorp Marine: 1Q16 net profit of $54.8m (-48.2%) met lowered expectations, although shored by net FX gains of $6.9m (1Q15: $13m loss) and one-time disposal gain ($9.3m). Revenue dived 29.6% on lesser rig building projects due to order deferments, while bottom line was weighed by higher finance costs (+87.4%). Order book diminished to $9.7b (-6.7% q/q) and the group foresees a prolonged downcycle for the offshore industry.

*Mapletree Greater China Commercial Trust: 4QFY16 DPU of 1.923¢ (+10.4%) came in line, as revenue and NPI surged 15.2% and 17.3% to $87.8m and $73m, respectively, boosted by newly acquired Sandhill Plaza, strong reversions from Festival Walk and Gateway Plaza, as well as stronger CNY and HKD. Portfolio occupancy stable at 98.6% (-0.1ppt q/q) with WALE of 2.6 years. Aggregate leverage stood at 39.5% with average cost of debt of 2.83%. NAV/share at $1.239.

*Sheng Siong: In line 1Q16; net profit jumped 16.8% y/y to $16.4m on revenue of $208.5m (+5.1%), led by five new stores although same store sales slipped 0.5%. Gross margin held steady at 24.5% (+0.1ppt), while bottom line was boosted by government grants (+175.6% to $2.3m).

*SIIC: 1Q16 net profit jumped 30.8% y/y to Rmb89.5m, boosted by a 50.6% surge in revenue to Rmb563m from increased construction projects. This led to lowered overall gross margin of 31.4% (-9.1ppt). NAV/share at Rmb2.5132.

*Cambridge Industrial Trust: In line 1Q16; DPU of 1.112¢ (-9.2%) was mainly dragged by cash payment of management fees. Otherwise, adjusted DPU would have rose 3.8%, thanks to higher gross revenue and NPI of $28.4m (+3.2%) and $21.5m (+1.2%) from acquisitions and completion of AEI projects. Portfolio occupancy stable at 94.1% (-0.2ppt q/q) with WALE of 3.6 years. Aggregate leverage remained at 37.1% (+0.2 ppt q/q) with average cost of debt of 3.64%. NAV/share at $0.671.

*CapitaLand: Serviced residence arm Ascott will invest £52m ($100.4m) in a 108-unit property in Islington, London, through its 50:50 US$600m JV fund with Qatar Investment Authority. The acquisition adds to group's London portfolio of close to 1,000 units across seven properties.

*Aspial: 50% owned Urban Vista development obtained TOP and expects to receive about $100m in cash proceeds which will then be used for the repayment of its bonds. Meanwhile, it locked in $275m worth of sales from its Waterfront @ Faber project which is expected to TOP in 1H17.

*Viva Industrial Trust: 1Q16 DPU fell 12.4% to 1.638¢ due to an enlarged unit base. Distributable income improved 21.6% to $14.1m, led by higher gross revenue and NPI of $21.9m (+21.2%) and $15.8m (+27.3%) respectively, on incremental contribution from newly acquired properties and higher income from Viva Business Park. Portfolio occupancy remained stable at 86.9%, with WALE of 3.5 years. Aggregate leverage was at 37.6% (-1ppt q/q), with average debt cost of 4.13% (+0.14ppt) and tenor of 4 years. NAV/unit at $0.811.

*Best World: Substantial shareholder Shi Jinyu sold 5.5m shares between 7 Mar and 31 Mar at an average $0.406 apiece, reducing his stake from 7.04% to 4.54%.

*Jason Holdings: Group charged by the Ministry of Manpower for safety lapses. Court date on 7 Jun and it could face a fine between $80,000 and $120,000 if convicted.

Profit warning:
- Serial System
- King Wan
- Global Palm Resources

Wednesday, April 27, 2016


SingPost: Real estate consultancy firm, Knight Frank notes that self storage industrial space is rising in popularity and expanding its footprint in Singapore.

This is expected to provide a minor boost for SingPost, which is currently the domestic market leader with 15 self-storage facilities in the country. Self Storage is part of SingPost's other logistics segment, which accounted for 8.9% of the group's total 9M16 revenue.

The consultant points to three main trends that are contributing to the popularity of the space. These are: 1) shrinking living spaces, 2) rising consumerism, 3) higher business space rental costs.

In particular, e-commerce players are embracing self-storage solutions for their logistical needs. Rainbow Lab which focuses on Hello Kitty products, and Animal Merchandise which supplies to department stores such as Takashimaya, Robinsons, Metro, BHG etc were notable mentions.

All is not a bed of roses for the self-storage industry though. With the influx of about 6.9m sf of warehousing space to be completed by the end of the year, the industry could face some headwinds amidst a muted economic environment as businesses and households restrain spending on storage rental costs.

However, unlike traditional warehousing where there is a lengthy lock-in period, the self-storage industry appears to be better positioned to weather through the current economic doldrums, given its flexible spatial and service offerings.

All in, the growth trajectory of the self-storage industry is seen to be supported by a growing community of start-ups, SMEs and affluent individuals, who utilise such spaces along with dedicated services to better support their ever-changing needs.

SingPost is currently trading at 20.9x forward P/E with an indicative dividend yield of 4.3%. THe street is fairly bullish on the counter with 5 Buy, 3 Hold ratings and consensus TP $1.85.


According to Bloomberg, the new magic number for the energy industry is US$50 per barrel, which promises much needed reprieve to cash flows.

With crude rebounding back to US$45 levels, the oil sector, which has been aggressively cutting costs to stay afloat, is now looking for signs of price stability.

Oilfield consultant Wood Mackenzie believes that at such price levels, cash flows of global oil majors could stop bleeding and there is talk that capex could even be partially restored in 2H16 if prices rise to the US$50 mark.

The global oil sector has slashed more than US$100b in capex in 2015 and US oil companies are planning to reduce budget spending by another 50% this year.

But investors are still fretting after oil prices rebounded to US$60 in May '15 before collapsing to almost US$26 in Feb this year.

Hence, any adjustment to capex would be gradual and hesitant even if oil prices hit the US$50 mark as oil companies will be looking to see if such prices can be sustained.

In light of this, any trickle down effects into Singapore's offshore sector will probably be scant.

Maybank KE continues to be Negative on the offshore sector with Sell calls on Keppel (TP: $4.42) and Sembcorp Marine ($1)


TREK: Ernst & Young has lodged a report with the Accounting and Corporate Regulatory Authority (ACRA) against OSIM-linked TREK 2000 over discrepancies relating to several sale transactions.

In a filing with the SGX, TREK disclosed that the auditor's concerns relate to documentation for certain sale transactions between its subsidiary and a consumer worth US$3.2m.

Essentially the discrepancies relate to:
1) Identity of the customer between TREK's sales system and its books
2) Delivery orders acknowledged by customer vs airway bill
3) Payer identity on bank transfer payments of US$2.65m

In addition, TREK is currently undergoing an Interested Party Transaction (IPT) inquiry surrounding transactions with T-Data Systems.

The auditor's report to ACRA comes after two of TREK's independent directors resigned in late Mar.

OSIM recently took a 8.79% stake in TREK 2000 with the initial block acquired in Jul '15. The lifestyle counter intends to work with TREK 2000 to apply the latter's patents and technology in its products.

In the wake of the complaint, Trek has converted its trading halt into a suspension.

PACC Offshore

PACC Offshore (POSH) clinched charters for eight OSVs with combined value of US$167.5m for a Middle Eastern national oil company.

Of the eight, six will be newbuild vessels, and all of them will have a firm five-year charter period with two-year extension options. The charters will commence progressively starting from Dec 2016.

As no further details are provided on the vessels, impact to the group's bottom line is currently unknown. Maybank KE believes the secured rates would likely be at least 20-30% off their peak rates before the oil price downturn, but still, these contracts would help in keeping utilisation rates up.

Comparatively, in 4Q15, POSH's OSV utilisation was ~67%, versus Pacific Radiance's 30%. Maybank KE believes the ability of POSH to land these contracts is impressive and suggests that clients are probably confident that POSH is an operator that can execute and will survive the downturn (thus the 5-year contracts).

The key investment thesis for POSH is that it has the least balance sheet risk among oil services players under coverage, with FY15 net gearing of 0.5x and $1b of loan facilities at an interest rate of <2%, where US$462m of loans have tenures of 5-7 years.

Maybank KE has a Buy on POSH with TP of $0.42.


4QFY16 DPU of 2.95¢ (+1% y/y, +3.5% q/q) and distribution income of $18.7m (+2.1% y/y, +3.5% q/q) came within expectations, boosted mainly by retained income and capital distribution.

Sequentially, gross revenue and NPI of $30.3m (+0.7% y/y, -6.9% q/q) and $20.4m (+0.3% y/y, -3.2% q/q), respectively, were dismal, due to lower occupancies in Dec 2015 at 27 Penjuru Lane and 8 & 10 Pandan Crescent, as well as lower contribution from the property at 8 & 10 Tuas Ave 20 due to the fire incident (pending insurance claims for loss of income on the property).

Since then, management updated that some of the vacancies at 27 Penjuru Lane have been filled.

Meanwhile, to maintain growth at the distributable level, the manager of the REIT has raised distribution policy from 90% to 100% of its Singapore income to unitholders in FY16.

Portfolio occupancy remained at 93.4% (flat q/q), with WALE of 2.93 years, while aggregate leverage inched up to 32.4% (+0.9ppt q/q), with average debt term of 2.2 years.

Going forward, the industrial leasing market is expected to remain challenging given the soft demand and oversupply supply situation in Singapore. Management disclosed a potential untapped gfa of 759,720 sf, or 12% of the existing net lettable area.

At the current price, AIMS AMP is trading at an estimated forward yield of 8.6% and 0.93x P/B.

SG: Market (27 Apr 16)

SG: Market is likely to stay muted ahead of the Fed policy statement and key corporate results, which will shed light on US interest rate path and health of local companies amid the global slowdown.

Regional bourses opened mixed in Tokyo (-0.1%), Seoul (-0.1%) and Sydney (+0.4%).

From a chart perspective, topside resistance for the STI is seen at 2,960, with near-term support at 2,840.

Stocks to watch:
*Mapletree Commercial Trust: 4QFY16 DPU of 2.02¢ (+1% y/y) and distributable income of $42.9m (+1.8%) met estimates. Revenue rose 1.9% to $287.8m on higher rental income from VivoCity and HarbourFront, partially offset by lower occupancy at Mapletree Anson and PSAB office. NPI jumped 4.3% to $220.7m on lower utilities expenses as well as cost savings in advertising and promotion expenses. Portfolio occupancy slipped to 95.7% (-2.7ppt q/q), with WALE at 2.2 years. Aggregate leverage eased to 35.1% (-1.2ppt q/q), with average debt cost of 2.52%. NAV/unit at $1.30.

*AIMS AMP: 4QFY16 DPU of 2.95¢ (+1% y/y) and distribution income of $18.7m (+2.1%) came within expectations, boosted by retained income and capital distribution. Gross revenue and NPI remained broadly in line at $30m (+0.7%) and $20.3m (+0.3%), respectively, while portfolio occupancy remained healthy at 93.4% (flat q/q), with WALE of 2.93 years. Aggregate leverage at 32.4% (+0.9ppt q/q), with average debt term of 2.2 years. NAV/unit at $1.48.

*Far East Hospitality Trust: 1Q16 missed with DPU of 1.08¢, hitting just 17.7% of street's full year estimates. Gross revenue remained at $27.4m on softer room demand. RevPAR stayed flat at $141, while average occupancy for hotel and serviced residences was 88% (+5.7 ppts y/y) and 84.3% (-1.5ppt y/y). NPI inched up 0.8% to $24.7m on lower property expenses. Aggregate leverage stood at 32.7%, with average debt cost and tenor at 2.6% and 3 years. NAV/unit at $0.9324.

*Keppel Corp: Maintained that the $230m provision previously made for six rig contracts is sufficient in the wake of plans by its biggest client, Sete Brasil to file for bankruptcy protection.

*City Dev: HK-listed subsidiary City e-Solutions cautioned that it expects to record a 1Q16 loss of HK$19m (1Q15: -HK$9.7m), due to unrealised fair value losses of trading securities.

*CapitaLand: QSA Group, a major shareholder of its 20%-owned associate Australasian Franchise System (AFS) has exercised the option to swap the group’s entire interest in AFS with a 20% stake in QSA Group, resulting in AFS being wholly-owned and the sole asset of the latter.

*PACC Offshore: Awarded charters for eight OSVs with combined value of USD167.5m by a Mid-East national oil company. The vessels will have a 5-year charter period with 2-year extension options, and will commence progressively starting from Dec 2016.

*QAF: 1Q16 net profit soared to $16.4m (+25% y/y) on lower input costs at its Malaysian bakery and Australian meat production businesses. Revenue slipped 2% to $250.9m amid a stronger SGD, which also eased expenses, resulting in a wider operating margin of 8.5% (+1.5ppt).

*Soilbuild Construction: 1Q16 net profit slid 10.5% y/y to $3.9m on absence of divestment gains, FX losses and other non-operating expenses. Revenue jumped 45.6% to $102.5m, but failed to feed through to bottom line, as the major development projects in progress lowered overall gross margins to 7.1% (-3.3ppt).

*Kim Heng Offshore: Swung to 1Q16 net loss of $1.7m, while revenue plunged 46% y/y to $8.7m on demand weakness for rig maintenance and no newbuilds. Gross margin increased 3ppt to 33%, while bottom line was dragged by FX loss on USD weakness, higher opex and financing costs.

*Rowsley: 1Q16 net profit surged 53.1% y/y to $4.8m on a jump in associate contributions ($0.6m vs 1Q15’s $0.05m) and FV gains (+118% to $9m). Revenue staged a 25.4% uplift to $20.5m mainly due to contributions from its UK hospitality group. Bottomline was pressured by finance costs of $1.9m vs 1Q15’s $0.07m. NAV/share at $0.106.

*China Sunsine Chemical: 1Q16 net profit tumbled to Rmb33.6m (-29%) on muted revenue of Rmb445.1m (+3%), as higher sales volume was offset by a lower ASP (-13%) amid depressed raw material prices. The drop is ASP also weighed on gross profits (-21%) and resulted in a narrower gross margin (-7.5ppt to 24.2%). Nevertheless, net cash position increased 34.6% to Rmb264.3m ($0.118/share) or 30% of its last closing price $0.39, while NAV/share at $0.55.

*Heeton/KSH Holdings: 20:10:70 JV with Shikizakura to purchase an investment property in Hokkaido, Japan. The freehold asset consists a 164-room hotel, 66 residential and 4 retail units, with total gfa of ~92,000 sf.

Tuesday, April 26, 2016


Acromec's second largest client A*Star, which contributed 20% to FY15 revenue, unveiled an impressive record over last five years, providing a positive readthrough on Acromec's outlook.

A*Star exceeded its target by nearly two-fold to $1.6b (target: $830m) in industry R&D spending across 8,965 projects between Mar '11 to Mar '16, reaffirming Singapore as an attractive R&D destination.

Of the $1.6b, 55% were with MNCs that represented 90% of spendings, including Applied Materials, Rolls-Royce, Nestle, Halliburton and P&G- which is also a client of Acromec.

Going forward, PM Lee Hsien Loong had earlier announced an allocation for industry R&D spending up to 2020 of $19b, close to $3b higher than the allocation set aside for the past five years.

This translates positively for Acromec's growth outlook, given that demand for controlled environments, such as laboratories, will grow in tandem with R&D activities.

The group's established track record will play a pivotal role in winning new projects in an industry with low tolerances for error.

Acromec is currently trading at 10.8x trailing FY15 P/E, close to a 38% discount to average of larger competitors listed in Japan and Taiwan.


Newswires reported that two drillships were recently sold at substantially below their original prices:
1) Greek owner Ocean Rig bought a 6th gen drillship built in 2011 for US$65m. Original construction cost was US$682m.

2) Seadrill sold a state-of-the-art drillship built 2011 for US$210m. Original price tag was above US$860m.

Although one may say the above could be distressed one-time sales, all that is needed for the industry to turn further south is a few desperate players to undercut pricing.

This validates Maybank KE's concerns on Keppel Corp and SMM's outstanding contracts, on how much the yards could sell their rigs if clients default. As a gauge, Sete Brasil units were contracted at US$800m a piece in 2011/12.

While bulls may argue that these yards made huge profits during the GFC by reselling when the market turned around (while pocketing the forfeited downpayments), this time round would be starkly different, even with the 20% downpayment collected.

Maybank KE remains negative on the Singapore O&M space and expects the street to continue downgrading their earnings' expectations for the sector. The house has Sell calls on Keppel Corp (TP $4.42) and SMM ($1.00). Although oil prices have rebounded from Jan lows, it is still insufficient to induce investments in new rigs.


MINT: 4QFY16 DPU grew 6% to 2.81¢, while distributable income rose 7.8% to $50.4m, at the higher end of estimates.

Gross revenue increased 5.8% to $84m, boosted by higher occupancies, upward rental reversions (+3.3%) and full quarter contribution from the completed BTS development Equinix Singapore, while NPI expanded at a faster clip to $62m (+7.4%) stemming from lower utilities and marketing costs.

Occupancy stood at 94.6% (-0.1 ppt q/q), with WALE of 2.8 years. The bulk of lease expiries (31.4%) is set to come in FY18.

Aggregate leverage stood at 28.2% (-1.1ppt q/q) with all-in funding cost of 2.5%, and 88% of total debt hedged.

SG Market (26 Apr 16)

SG Market: Risk off mood is likely to continue as investors stay cautious ahead of Fed and BOJ policy statements and key results from SMM and two local banks (UOB, OCBC) later this week.

Regional bourses opened mixed in Tokyo (-0.3%), Seoul (+0.2%) and Sydney (-0.2%).

From a chart perspective, a breach of the 2,890 support could take the STI to the next downside objective at 2,840. Immediate resistance at 2,960.

Stocks to watch:
*Mapletree Industrial Trust: 4QFY16 results came in at the higher end of estimates with DPU of 2.81¢ (+6% y/y). Gross revenue rose 5.8% to $84m, while NPI expanded at a faster clip to $62m (+7.4%), from higher occupancies, upward rental reversions, new contribution from completed BTS development Equinix Singapore, and slower rise in expenses. Occupancy stayed at 94.6% (-0.1ppt q/q), while aggregate leverage narrowed to 28.2% (-1.1ppt q/q) with all-in funding cost of 2.5%. NAV/unit at $1.37.

*Parkway Life REIT: 1Q16 results in line with DPU of 2.99¢ (-7%) on absence of one off distribution of divestment gain. Otherwise, DPU from recurring operation grew 5.1%, on higher gross revenue and NPI of $26.9m (+8.6%) and $25.1m (+8.5%), respectively, from newly acquired Japanese properties and upward rent revision of Singapore hospitals. Portfolio occupancy remained at 100% with WALE of 9.01 years. Aggregate leverage dipped marginally to 36.4% (+1.1ppt q/q) with average debt cost of 1.5% (-0.1ppt q/q) and tenor of 3.5 years. NAV/share at $1.68.

*SGX: Signed MOU with China Construction Bank to boost the local capital market by encouraging Chinese companies to list, issue yuan bonds, undertake M&A and cross-border fund management in Singapore.

*Sunningdale Tech: 1Q16 net profit slumped 49.3% y/y to $3.6m mainly on FX loss of $3.2m (1Q15: $1.1m gain) due to the weaker USD. Revenue rose 4.4% to $161.3m as a surge in automotive business (+16%) helped offset weakness in its consumer/IT (-3.5%) and healthcare (-2.9%). Gross margin edged higher to 13.4% (+2 bps) on the change in sales mix.

*China Minzhong: 3QFY16 net profit slumped 54.6% to Rmb49.1m, largely due to FX losses of Rmb6.7m (3QFY15: Rmb14.7m gains). Revenue declined 7.1% to Rmb451.4m due to poorer contributions from its processed (-6.6%), cultivation (-0.5%), and branded (-33.8%) segments. Overall gross margins slipped 2 bps to 33.1%, while bottom line was further dragged by a 44.3% plummet in interest income.

*Soilbuild Construction: Awarded a US$95m ($128.7m) contract by a Myanmar developer United GP Development to construct the main building and superstructure works for a proposed serviced apartment and condo in Yangon. Project is expected to start in 2Q16 and complete in 3Q18.

*Heeton/KSH/Lian Beng: 30/30/40 JV to acquire Prospere Hotels in Manchester, UK, which owns a 12-storey hotel, currently being managed by InterContinental Hotels under the Holiday Inn Express brand name.

*FCOT: Credit rating upgraded by Moody's from Baa3 to Baa2 with a stable outlook.

*Nordic: Secured several contracts worth a total of $7.2m from repeated customers in the marine, oil & gas, pharmaceutical and process industries.

*Gallant Venture: Exiting investment in Shanghai's Lao Xi Men project for an aggregate US$330m, due to the delay in completion from 2016/2017 to after 2018, arising from challenging market conditions. Upon disposal, pro forma gearing expected to reduce from 1.4x to 1.14x.

*China Mining Int'l: Entered MOU with two parties for the proposed acquisition of a controlling stake in Aero Wind Properties, a South African company holding the prospecting rights to an iron ore mine in Thabazimbi, which has an estimated 15b tonnes of iron ore.

*Jason Marine: To subscribe to $0.85m worth of 8% convertible preference shares in Sense Infosys, a data analytics provider to maritime, port and logistics companies.

Monday, April 25, 2016


REITs: BT outlines retail woes

Maybank KE has the following ratings:
Frasers Centrepoint Trust (Sell, TP $1.78)
CMT (Sell, TP $1.97)
MCT (Hold, TP $1.37)
Starhill Global (Hold, TP $0.79)


Economy: Mar headline inflation down a 17th month, at -1% y/y (est: -1%, Feb: -0.8%).
Core inflation +0.6% (est: +0.6%, Feb: +0.5%) on higher food prices.

Starhill Global REIT

Starhill Global REIT: The retail-centric REIT's 3QFY16 results came in within expectations as DPU stood pat at 1.26¢, achieving 75% of consensus estimates.

Quarterly revenue climbed 12% to $53.6m on maiden contributions from its Myer Centre Adelaide, which was acquired in May '15.

NPI grew at a more moderate rate of 7% to $41.6m on weaker contributions from its Wisma Atria property (-3.4%), Malaysian (-8.8%), Chengdu (-41.3%), and Japanese (-33.8%) malls. NPI margin slipped 3.6 ppt to 77.6%.

Distributable income edged higher by 1.3% to $27.5m, weighed down by higher finance expenses of $10m (+33.5%) as the REIT drew down on borrowings to fund the Myer Center Adelaide acquisition.

Overall portfolio occupancy dipped to 95.6% (-2.6% q/q) due to poorer occupancy levels at its Australian properties (-6.7 ppt) which saw the lease expiry of an office tenant at Myer Centre Adelaide and lease terminations relating to the planned AEI for Plaza Arcade.

Net gearing was steady at 35.4% (-2 bps) with average cost of debt at 3.15% and a tenor of 3.3 years, indicating some capacity to fund asset enhancements as well as possible acquisitions.

Rent negotiations for the the Toshin master lease, and the David Jones rent review could provide upside potential if rental reversions are positive.

On the negative end however, the redevelopment works at Plaza Arcade could dampen earnings in the upcoming quarters until completed. Meanwhile, 2.4% and 8.7% of the REIT's NLA needs to be addressed in 4QFY16 and FY17.

The key risks for Starhill continues to be volatility in foreign currencies such as the AUD and MYR. which accounted for 23% and 12% of last quarter's revenue. Distributions have been partially mitigated with natural hedging from foreign currency denominated debt as well as short-term FX forwards.

At current price, Starhill trades at 6.6% annualised yield and 0.87x P/B.

Latest broker ratings:
CIMB maintains Hold with higher TP of $0.82 from $0.81
OCBC maintains Buy with TP of $0.84
UOBKH maintains Buy with TP of $0.91

Insider trades

Insider trades: Buying/selling flat 2nd week; buyback value plunged

Asia insider notes that director buying and selling were flat a second week for the week ending 22 Apr.

Insider buying: 12 companies saw 27 purchases worth $2.35m, vs. 16 firms, 28 acquisitions, worth $0.94m

Insider selling: Four corporates saw eight disposals worth $1.23m, vs. three companies, eight disposals worth $0.93m

Buybacks: Five firms posted seven repurchases worth $0.41m, vs. six firms, 11 buybacks worth $5.37m.

Notable transactions:
BreadTalk: Resumed buying back at lower prices, purchasing 299,000 shares on 19 Apr at $1.03 each. The trade was made on the back of an 8% drop in share price since the last week of Jan. Most recently, the group had previously acquired 50,000 shares between 11 and 20 Jan at $1.10 each, as well as 534,000 shares from Apr to Aug ’15 at an average of $1.22 each.

Boardroom: Non-executive chairman Goh Geok Khim resumed buying, picking up 240,600 shares on 20 Apr at $0.626 each. The trade increased his total holdings to 86.63%. The transaction was done on the back of a 12% rebound in share price Mar from $0.56. He previously acquired 323,000 shares from 7 to 21 Jan at $0.60 each.

SPH: CEO Alan Chan made his first on-market trade since Nov ’14, with 200,000 shares sold on 18 Apr at $4.10, reducing his stake to 0.07% from 0.09%. The sale was done on the back of a 17% rebound in share price since Jan. Asia Insider remarked that the stock tends to rise when the CEO unloads shares in the company, highlighting that SPH shares rose by an average of 8% in three months after he sold shares, based on five filings since 2004.

Genting Singapore: Independent director Koh Seow Chuan recommenced selling at sharply higher prices than his Nov sale, with 221,000 shares disposed on 22 Apr at $0.88 each. The trade reduced his stake by 53% to 0.0017%, and was done on the back of a 33% share price jump since Feb. He most recently sold 239,000 shares in Oct ’15 at $0.845.

SG Market (25 Apr 16)

SG Market: Investors are expected to stay at the sidelines ahead of US FOMC meeting on Wed and BoJ policy statement on Thu.

Regional bourses opened in the red in Tokyo (-0.3%), Seoul (-0.1%) and Sydney (-0.7%).

From a chart perspective, support for the STI is at 2,890, with immediate resistance at 2,960.

Stocks to watch:
*Raffles Medical: 1Q16 net profit of $15.5m (+3.7% y/y) came within estimates. Revenue jumped 23% to $116.9m, with half the growth contributed by newly acquired medical assistance company International SOS, as well as increased patient load, greater patient medical needs and incremental sales contribution by more specialist consultants. MKE maintains BUY with TP of $5.20.

*Starhill Global REIT: Flat 3QFY16 DPU of 1.26¢ was in line. Revenue jumped 12% y/y to $53.6m on maiden contributions from Myer Centre Adelaide acquired in May ’15, while NPI grew at a slower clip to $41.6m (+7%), dampened by higher property tax (+44.4%). Portfolio occupancy dipped to 95.6% (-2.6% q/q) dragged by poorer occupancy at its Australian properties (-6.7 ppt). Net gearing remained at 35.4% (-0.3ppt q/q) with average cost of debt at 3.15%. NAV/unit at $0.90.

*Cache Logistic Trust: 1Q16 met estimates with DPU of 2.04¢ (-5% y/y), diluted by an enlarged unit base. Revenue surged 32.7% to $27.9m from new Australian acquisitions and maiden contribution from a recently completed BTS development in Singapore. NPI rose slower to $22m (+12%) on higher property expenses from newly converted multi tenanted properties. Portfolio occupancy was 94.2% (-0.7ppt q/q), with WALE of 4.3 years. Aggregate leverage was stable at 39.6%, but average debt cost increased to 3.69% (+0.44ppt) with debt tenor of 2.9 years. NAV/unit at $0.88.

*Yeo Hiap Seng: 1Q16 net profit slumped 41% y/y to $5.4m, eroded by increased FX losses (+51.2%). Revenue slipped 8.6% to $111m, while gross profit margin contracted to 38.2% (-1.5 ppt) on higher raw material costs.

*Baker Tech: Swung to 1Q16 net loss of $2.8m (1Q15: $6.4m profit) due to $2.6m FX loss, while revenue plunged 79% y/y to $6m on the slowdown in the oil and gas industry. NAV/share at 22.3¢.

*Sembcorp Marine: Initiated arbitration proceedings against Sete Brasil after Sete shareholders approved a resolution to file for bankruptcy. Sembcorp believes its $329m in provisions for Sete contracts are sufficient.

*Bumitama Agri: 1Q16 CPO production shrank 4.6% y/y to 152,995 MT, while palm kernel production climbed 7.3% to 32,794. FFB production fell 5.1%.

*Spackman Entertainment: Commenced filming of "Master" and is targeting for the film’s release in 4Q16. Total production budget for the movie is KRW12b (US$10.5m).

*Yangzijiang: Chairmen Ren Yuanlin is gifting 1b shares (26.17% stake) to Yangzi International Holdings.

*Rex: 72% owned subsidiary Masirah Oil announced that the prospectivity of Manarah-1 well in Block 50, offshore Oman, improved with confirmation of presence of hydrocarbons and working petroleum system.

*Swing Media: Proposed placement of 6.9m shares (15.8% enlarged share capital) at $0.533 each, to seven placees. Net proceeds of $3.7m is intended for working capital.

*Far East Group: Entered into a 51:24:25 JV with Yealea Industry and Beijing Zhufeng Dexin Refrigeration engineering, to manufacture, distribute, service, and repair various electronic products in China.

Friday, April 22, 2016

Office REITs

Office REITs: 1Q results for the office REITs were in line. Occupancies held up well despite weak market conditions, but rental reversions were slower in general. Nevertheless the house stays cautious on Office REITs, because the sector has just tipped over, and unlikely to bottom until 2018. But despite impending headwinds, the house expects REITs prices to hold up amid a weak interest rate environment. Maybank-KE has Hold calls on CCT (TP $1.40), KREIT (TP $0.97) and Suntec REIT (TP $1.56). The house prefers CCT for investors wanting subsector exposure.

SG Market (22 Apr 16)

SG Market: The overheated market is due for a near term pullback as bulls take a breather and digest the lacklustre 1Q earnings reports so far.

Regional bourses slipped today in Tokyo (-0.7%), Seoul (-0.4%) and Sydney (-0.7%).

From a chart perspective beyond 2,960, next resistance for STI is seen at 3,040, with support at 2,840.

Stocks to watch:
*Suntec Reit: 1Q16 DPU of 2.37¢ (+6.3% y/y) was in line, lifted by capital distribution (0.158¢) from the divestment of Park Mall. Excluding that, operating DPU slipped 0.8% on higher net financing costs (+57%) despite achieving a 5.2% rise in gross revenue to $78.3m on higher contribution from Suntec City following the completion of AEI works and better performance at Suntec Singapore. Office portfolio occupancy eased to 98.3% (-1ppt), while the retail portfolio improved to 98.6% (+0.7ppt). Aggregate leverage dipped to 36% (-1.1ppt) with average debt cost of 2.92% (+0.06ppt). NAV/unit at $2.138.

*Frasers Centrepoint Trust: 2QFY16 DPU of 3.039¢ (+2.6% y/y) met estimates. Gross revenue slipped 0.8% to $47.1m on lower contributions from Northpoint and Bedok Point, arising from AEI works, and tenant re-mixing, while NPI inched up 0.4% to $33.7m on a tax write-back, as well as lower utility tariffs. Portfolio occupancy slipped to 92% (-2.5ppt), with WALE of 1.51 years. Aggregate leverage held steady at 28.3%, with average borrowing cost of 2.29%. NAV/unit stable at $1.91.

*Frasers Centrepoint: Launching the refreshed "Modena by Fraser" serviced residence brand in Changsha, Hunan in Dec, ahead of the upcoming launch of a Bangkok serviced apartments in Aug.

*GuocoLand: 3QFY16 net profit plunged 77% y/y to $11.3m, while revenue fell 49% to $166m mainly due to the absence of an en-bloc sale of serviced apartments in Shanghai Guoson Centre. Bottom line was dragged by a FX loss of $9.5m, partially offset by fair value gain of $5.8m from FX hedges. NAV/share at $2.95.

*IHH: 59.6% owned Acibadem is acquiring Tokushukai-Sofia EOOD, the largest private healthcare service provider in Sofia, Bulgaria, for €65m. Separately, the group will also acquire a 41.2% effective stake in a Bulgaria-based integrated healthcare provider City Hospitals and Clinics for €11m.

*YuuZoo: Signed a franchise agreement with Media Rock to access Mexico’s population of 34.4m gamers. Media Rock will use Yuuzoo's payment platform for all payments to Media Rock, which booked revenues of over US$200m on average annually.

*Wee Hur: Awarded a $82.2m contract by Mapletree Logistics Trust to design and construct a single user 5-storey warehouse at 76 Pioneer Road. Works expected to be completed by Sep ‘17 and the contract will lift order book to ~$345.9m.

*Profit warning: Cheung Woh Technologies

Thursday, April 21, 2016

Sete Brasil/ Kepcorp/ Sembcorp

Sete Brasil shareholders have approved plan for bankcruptcy.

- Keppel has USD4.9b and SMM has USD5.6b of rigbuilding contracts with Sete Brasil.
- Keppel subsequently took a provision of SGD230m and SMM took SGD381m for the Sete Brasil contracts.

Genting SP

Genting SP: Negative read-through from MBS 1Q results
- Latest weak set of quarterly earnings from Marina Bay Sands (MBS) could set the tone for Genting Singapore's upcoming 1Q16 results in mid-May.
- For 1Q16, MBS cashed in lower adjusted EBITDA of US$274.9m (-33.8%, -18.7% q/q) as gross revenue tumbled to US$603.7m (-23.1% y/y, -14.2% q/q), mainly hurt by the stronger USD and weak VIP segment.
- Overall, core EBITDA margin for MBS narrowed to 45.5% (1Q15: 52.9%, 4Q15: 48.1%).

Historically, profitability for Genting Singapore lags behind MBS due mainly to weaker operating metrics. Maybank-KE last had a Hold rating on the counter with TP of $0.78.

SG Market (21 Apr 16)

SG Market: The market is poised for a short term consolidation following the late pullback on Wall Street ahead of ECB's policy statement today and uncertainty over the success of Greece's bailout.

Regional bourses opened positive in Tokyo (+2%), Seoul (+0.5%) and Sydney (+1%).

From a chart perspective, STI faces immediate resistance at 2,960, with support at 2,840.

Stocks to watch:
SGX: 3QFY16 net profit of $89.2m (+1.1%) missed street estimates, mainly from lower clearing fees. Operating revenue remained firm at $102m (+3.3%), from higher securities (+3.5%) and derivatives (+3.2), amid heightened market activities arising from anticipated changes in interest rates and volatile commodity prices. Operating margin slipped 1.7ppt to 50%, while bottom line was boosted by higher interest income of $3.1m (3QFY15: $1.2m). Interim DPS raised to $0.05 (3QFY15: $0.04).

*Genting Singapore: Negative read-through from Marina Bay Sands 1Q results, which suffered a steep drop in adjusted EBITDA to US$274.9m (-33.8% y/y, -18.7% q/q), hurt by the impact of the stronger USD and weak VIP segment.

*Frasers Commercial Trust: 1QFY16 results met expectations. Distributable income surged 20% y/y to $19.3m, while DPU rose at a slower pace to 2.45¢ (+3%) on a post-placement unit base. Gross revenue and NPI jumped 12% and 17% to $39m and $28.8m, respectively, lifted by higher rental rates at Alexandra Technopark and increased occupancy at 357 Collins Street. Portfolio occupancy remained at 92.6% (-0.3ppt q/q) with WALE of 3.3 years, while aggregate leverage stood at 36.2% with average interest cost maintained at 3.07%. NAV/share at $1.53.

*STE: Secured $505m worth of contracts in 1Q16, split across advanced electronics & ICT solutions ($373m), satellite & broadband communications ($91m) and rail electronics & intelligent transportation ($41m).

*SATS: Operating metrics improved in 4QFY3/15; number of flights handled grew 18.8% y/y, while unit services increased by 14.5%. Cargo throughput improved 4.8%. Pax handled jumped 21.2% to 11.7m. Gross and unit meals climbed 5.6% and 5.1% to 6.8m and 5.4m, respectively.

*First Resources: Mar FFB harvest tumbled 25.2% y/y to 162,118 tonnes amid lower FFB yield of 1.0 tonnes/ha (Mar '15: 1.5 tonnes/ha). CPO production slid 24.2% to 41,345 tonnes despite a slightly higher extraction rate of 23.4% (+0.4ppt).

*Hyflux: Substantial shareholder Mathhews International disposed 2.2m shares at $0.6438 apiece via the market, paring its stake from 5.12% to 4.84%.

*Far East Orchard: 1Q16 net profit quadrupled y/y to $16.9m (1Q15: $3.8m), mainly from a jump in JV contribution to $20.9m (1Q15: $1.9m) stemming from a disposal gain booked by its Australia hospitality JV. However, revenue sank to $51.1m (-50.8%) on poorer contributions in property development and hospitality businesses, while gross margin widened to 33% (+14.1 ppt) on a shift in sales mix. NAV/share at $2.90.

*Perennial Real Estate: Offering up to $200m of four-year retail bonds due 2020, carrying a fixed rate of 4.55% p.a. Offer period between 21 and 27 Apr '16. The offer can be expanded to $300m if oversubscribed.

*Seroja Investments: Secured four-year coal transportation contract with PT Adaro Energy to transport ~7m MT of coal per year from 2016 to 2019. The contract is estimated to generate total revenue of US$48m.

Wednesday, April 20, 2016


CapitaLand: Delivered 1Q16 headline profit of $218.3m (+35.4% y/y), with core earnings of $152.8m (-1.6%) meeting 21% of consensus full year estimates.
- Revenue slid 2.3% to $894.2m in absence of a fair value gain (1Q15: $59.6m) and lower recognition of development projects in Singapore and Vietnam, mitigated by healthy handover value in China.
- Overall EBIT climbed 20.1% to $458.2m mainly on fair value gains ($83.6m) from the divestment of Somerset ZhongGuanCun Beijing, improved contribution from CapitaGreen, shopping malls and development projects in China, as well as lower divestment losses.
- Going forward, the group expects the impact of the property cooling measures in Singapore to continue to weigh on the market. In 1Q16, the Cairnhill Nine project was launched and 193 out of the 268 units have been sold as at 14 Apr. Two other projects The Nassim and Victoria Park Villas are ready for launch in 1H16.
- In China, residential sales performance in China is expected be on track for the rest of 2016 despite the recent cooling measures imposed in Shanghai and Shenzhen. For the next nine months, CapitaLand has over 5,000 launch-ready units and expects to complete over 9,000 units.
- The street remains generally bullish on the counter with 16 Buy, 3 Hold and no sell ratings with average TP of $3.79.

Latest broker ratings:
UOB Kay Hian maintains Buy with TP of $4.08
Maybank KE maintains Buy with TP of $3.95
OCBC maintains Buy with TP of $3.68


OSIM: 1Q16 net profit tanked 42% y/y, making up only 13% of full-year consensus estimates, due to negative operating leverage.

-Sales fell 8% to $138.3m, dragged by South Asia ($58m, -8%) and rest of world ($4m, -56%), although North Asia ($76m, -2.5%) appears to have stabilised.
-Staff costs rose 5% to $33.1m, driving down EBITDA margin to 12.3% from 15.3% in 1Q15. TWG cost pressures were a key drag.
-Operating cashflow remained positive $11.3m (-40%), with net cash of 28¢/share. But its 1¢ quarterly DPS was culled.
-The street largely views the privatisation offer of $1.41 by founder and chairman Ron Sim as a good exit opportunity.

OSIM is currently trading at 18.5x forward consensus P/E.

Latest broker ratings:
CIMB downgrades to Reduce from Hold with TP of $1.00
Daiwa maintains Hold, raises TP to $1.39, from $1.32

SG Market (20 Apr 16)

SG Market: Market may take a pause after its steep run-up past week as investors await the release of several key corporate results.

Regional bourses opened positive in Tokyo (+0.6%), Seoul (+0.5%) and Sydney (+0.7%).

From a chart perspective, technical indicators are starting to appear stretched with STI facing immediate resistance at 2,960, with support at 2,840.

Stocks to watch:
*CapitaLand: 1Q16 headline profit came in at $218.3m (+35.4% y/y) with core earnings of $152.8m (-1.6%) meeting 21% of consensus full year estimates. Revenue slipped 2.3% to $894.2m in absence of a fair value gain (1Q15: $59.6m) and lower recognition of development projects in Singapore and Vietnam. Singapore (222 units, +222%) and China (3,377 units, +159%) enjoyed higher sales volume. Growth also came from its shopping malls in China and CapitaGreen. NAV/share at $4.13.

*OSIM: 1Q16 net profit tanked 42% y/y to $7.8m, making up just 13% of full-year estimates. The drop in sales to $138.3m (-7.6%) resulted in negative operating leverage. Key drags were South Asia (-8%) and rest of world (-56%) sales, while North Asia (-2.5%) was relatively stable. Interim DPS cut to nil (1Q15: $0.01). MKE advises investors to accept the privatisation offer.

*Sembcorp Marine. Announced 2nd delivery deferment by Transocean for two drillships worth US$1.08b by another six months to 2020. MKE has a Sell with TP of $1.00.

*Spackman Entertainment: To sell largest loss-making units Opus Pictures and UAA to former CEO and substantial shareholder Lee Tae Hun for US$1.9m. This will be satisfied by selective share buyback of 14.2m Spackman shares ($0.1315 apiece) from Lee, which will subsequently reduce his stake from 7.1% to 3.6%. In FY15, overheads and operating expenses of the units represents 41% of the group's total selling and general and administrative expenses.

*SMRT: 51:49 JV with 2 Getthere Holding to market, supply and operate automated vehicle systems in Asia-Pacific.

*Uni-Asia: Disclosed that Hotel Vista Kumamoto Airport in Kyushu currently has no water supply due to the earthquakes and has temporarily suspended operations since 16 Apr. No damage to the building has been reported.

*Olam: Announced a 5-year US$175m loan agreement with IFC to finance working capital and capex needs for four food processing facilities in Nigeria and India.

*Sim Lian: Saw strong demand at the launch of its 534-unit Wandervale EC in Choa Chu Kang, with ~60% (320 units) of the development booked. Units were priced at an average $755 psf.

*HLH: Expanded its existing 10,000 ha farm in Cambodia into a full scale agriculture park, covering the cultivation and processing of Tapioca. The farm will also have areas for investors with interest in husbandry and livestock assets to set up separate farms within the park.

*Rex: Injected an additional US$6.3m into 99% owned Lime Petroleum Norway for exploration and production activities.

*Chaswood Resources: Terminated the exclusive development rights of Mega Village Food to develop and operate its restaurants in Peninsular Malaysia due to various defaults in contractual obligations.

Tuesday, April 19, 2016


HPHT: (US$0.46) 1Q16 results disappoints on weaker global trade

- Net profit (sans one-off items), slipped 26.5% y/y to HK$210.1m. Revenue down 6.7% to HK$2.75b on weaker container throughput at HK and China terminals.
- Operating profits bolstered by HK$430m refund of government rent and rates.
- Bottonline eroded by higher interest expense and weaker performance from associate and JVs.

Keppel Corp

Keppel Corp: 1Q net profit tanked 41.5% y/y to $210.6m, making up only 17% of full year estimates.

Revenue tumbled 38.1% to $1.74b, dragged by weaker O&M sales recognition of $818m (-57.5%), due to rig deferments and suspension of Sete Brasil contracts.

This was partially cushioned by higher property revenue of $310m (+66%) on improved sales in China and Singapore, where 940 homes were sold (1Q15: 720), the bulk from China.

Infrastructure revenue fell 23% to $390m due to lower energy prices and volume, while investments revenue declined 37% to $32m.

O&M operating margin widened to 13.6% (+1.6 ppt), as the yard trimmed its global workforce by 9.4% and reduced overheads by 28%.

Notably, its working capital requirements deteriorated, leading to an operating cash outflow of $354.3m (1Q15: +$284.3m). If this persists, it might face difficulties sticking to its 40-50% dividend payout guidance.

Ytd, the O&M segment won a miniscule $190m of contracts (FY16 forecast: $1.6b) as the order flow dried up. As such, its offshore orderbook contracted to $8.6b (4Q15: $9b), which includes the ~$4b of Sete Brasil and $1b Transocean orders that were deferred till 2020. Keppel has stopped construction of Sete rigs, until it recommences payments.

Management cautions an extended slowdown in the offshore segment, and unveiled two more jackups (Clearwater & BOT Lease) and two unnamed semisubmersibles have been deferred. Maybank KE opines that the street has yet to price in further asset writedowns if current deferments turn into cancellations.

Meanwhile, strong China property sales seen in the quarter may be insufficient to shoulder the weakness in other segments. While there could be further upside to house prices in Tier-1 cities, the government has stepped in to tame the overheated Shanghai and Shenzhen markets.

In short, Maybank KE's Sell call is premised on 1) more O&M contract deferrals; 2) possible contract cancellations; 3) more provisions and 4) negative developments in Brazil. The upside risk would be a sharp and sustainable rebound in oil price, inducing drillers to order new rigs.

Keppel Corp is currently trading at 9x FY16 consensus forward P/E and ~1x P/B.

Latest broker ratings:
RHB maintains Buy with TP of $8.08
Morgan Stanley Overweight with TP of $6.80
UOB Kay Hian downgraded to Hold from Buy, cuts TP to $6.40 from $6.50
Daiwa maintains Hold with TP of $5.68
KGI upgrades to Hold from Sell, raises TP to $5.60 from $4.26
HSBC maintains Hold, increases TP to $5.34 from $5.18
JPMorgan maintains Neutral with TP of $5.30
CIMB downgrades to Reduce from Hold, cuts TP to $5.14 from $5.53
Nomura maintains Neutral with TP of $5.05
Credit Suisse maintains Underperform with TP of $5.00
Maybank KE maintains Sell with TP of $4.42
CLSA maintains Sell, cuts TP of $4.13 from $4.28

SG Market (19 Apr 16)

SG Market: The dramatic comeback staged by crude prices and US stocks overnight could spur some risk-on trades although gains may be capped as investors anticipate 1Q results of index heavyweights this week including CapitaLand and SGX due tomorrow (20 Apr).

Regional bourses opened in the red in Tokyo (+3.1%), Seoul (+0.4%) and Sydney (+1.5%).

From a chart perspective, immediate resistance for STI seen at the 2,960 level, with support at 2,840.

Stocks to watch:
*Keppel Corp: 1Q net profit of $210.6m (-41.5% y/y) came in below expectations. Revenue of $1.74b (-38.1%) was dragged by rig deferments and suspension of Sete Brasil contracts, which offset improved property sales (+66%) in China and Singapore. O&M operating margin normalised to 13.6% (+1.6 ppt y/y), but orderbook shrank to $8.6b (4Q15: $9b), with management guiding for an extended slowdown. NAV/share at $6.22.

*HPH Trust: 1Q16 net profit (excluding one-offs) of HK$210.1m (-26.5% y/y) missed estimates as revenue slid to HK$2.75b (-6.7%), mainly on weaker intra-Asia and transshipment cargoes. Operating margin widened to 41.9% (+13.9ppt) on cheaper fuel, operational efficiencies, and RMB depreciation. NAV/unit at HK$4.76.

*China Everbright Water: Established a 70:30 JV with the Zhenjiang state government to undertake construction, renovation and operation of a 3,200-ha land and water project in Zhenjiang under a public-private partnership agreement, with concession of 23 years and total investment of Rmb2.59b, of which Rmb1.39b will come from the JV and the remainder from government grants.

*ST Engineering; Disclosed that its aerospace arm secured contracts worth $443m in 1Q16, for projects ranging from airframe maintenance and cabin interiors, to engine wash and component repair and overhaul.

*Sabana REIT: 1Q16 results missed as DPU tumbled 25.3% y/y to 1.33¢, in tandem with a 24.7% slump in distributable income to $9.8m. Revenue slipped 6.9% to $23.6m while NPI declined 18.4% to $15.2m, on higher property expenses from three properties which were converted to multi-tenanted lease arrangements. Portfolio occupancy gained 2.3 ppt to 90%, with WALE of 3 years. Aggregate leverage was lowered to 39.6% after the REIT repaid revolving debt after the divestment of 3 Kallang Way 2A with average cost of debt at 4.2%. NAV/unit at $0.88.

*First REIT: 1Q16 results in line. DPU climbed 2.4% to 2.11¢, while distributable income rose 6.2% to $16.2m. Gross revenue and NPI grew 7.1% and 8.1% to $26.5m and $26.2m, respectively, mainly due to new contribution from Kupang property acquired in Dec '15, divestment gains and lower expenses. Aggregate leverage stood at 34% (+0.3ppt q/q). NAV/unit at $1.03.

*Acromec: Secured two contracts worth $7.1m from a repeat customer, bringing total order book to $47m. Refurbishment and enhancement works at the hospital is scheduled to commence in May '16 and completion in Nov '16.

*Darco Water: 60% owned subsidiary Wuhan Kaidi Water Services was awarded a wastewater project contract by Tianjin SDIC Jinneng Electric Power worth Rmb40.9m. The project entails the construction of Phase II 2*1000MW desulfurization zero-liquid-discharge wastewater treatment system for Tianjin Power’s power generating plant in North China, and expected for completion by 31 Dec 2016.

*Sunpower: Secured high-end equipment contract worth US$3.95m from Hengyi Industries (Brunei) to supply high flux tube heat exchangers for two facilities in Brunei. The contract is expected to be positively accretive in FY17.

*Accordia Golf Trust: Operations in Kikuchi Country Club in Kumatomo, Kyushu, have been suspended due to the earthquakes last week. There is no material damage from assets or casualty reported.

*Otto Marine: Received writ of summons from Rakesh Shankarlal Tulshyan, alleging repudiatory breach of two loans and claiming a total US$17.6m. Group is seeking legal advice and intends to defend itself against the claim.

*Cityneon: Marks its first European premier with an Avengers exhibition in Paris, France. The exhibition is also slated to open this summer in Las Vegas, US.

*Profit warning: BRC Asia, Baker Tech

Monday, April 18, 2016

SG Economy

SG Economy: Non-oil domestic exports sank 15.6% in Mar (est: -12.3%, prior: +2.1%), the most in more than 3 years, providing more evidence of a stagnating economy. Electronics shipments contracted 9.1%. Worst hit export markets were EU (-39.1%), Indonesia (-20.2%) and China (-14%).

Insider trades

Insider trades: Asia Insider notes that for the week ending Apr 15, director buying was flat while selling picked up. Buybacks plunged too.

Insider buying: 16 companies saw 28 acquisitions worth $0.94m, vs. 17 firms, 32 purchases worth $1.01m.

Insider selling: Three firms saw eight disposals worth $0.93m, vs. one company, two sales worth $0.2m

Buybacks: Six firms posted 11 repurchases worth $5.37m, vs. 13 companies, 32 trades worth $7.7m.

Notable transactions:
Hong Fok: Joint chairman and joint managing director Cheong Sim Eng continued buying shares at lower prices, acquiring 80,000 shares on 12 Apr at $0.815 each, raising his stake to 17.16%. The purchases were made on the back of a 17% rebound in share price since 20 Mar. He previously acquired 288,000 shares from 4-21 Mar at an average of $0.774 each.

Hotung Investments: Chairman Huang Tsui-Hui resumed buying shares, acquiring 56,000 shares from 6-14 Apr at an average of $1.52 each. The trades accounted for 9% of the stock’s trading volume. This increased her deemed to 21.48% of issued capital. She had previously acquired 305,000 shares from 1-21 Mar at an average of $1.45 each.

Ascendas India Trust: Kabouter Management purchased 358,000 units on 7 Apr at $0.89 each. This increased its stake to 8% of issued capital. The filing was made on the back of a 25% unit price rebound since Jan.

CapitaLand Mall Trust

CapitaLand Mall Trust: 1Q16 in line; bolstered by active portfolio management
CapitaLand Mall Trust (CMT) 1Q16 DPU of 2.73¢ (+1.9% y/y) came in line, constituting 24% of street's full year estimates.

Revenue and NPI improved to $179.8m (+7.4%) and $127.9m (+8.6%), respectively, bolstered by new contribution from recently-acquired Bedok Mall (Oct '15), completion of phase two AEI at IMM Building and supported by an overall upward reversion of 1.4%.

Meanwhile, the slower growth in DPU was due to an increase in retained income for general corporate and working capital purposes.

At the current price, CMT is valued at 1.16x P/B and trades at an annualised 1Q16 yield of 5%.


Property: Strong underlying demand
URA data showed that Mar private home sales surged sequentially to 843 units (Feb: 303), as developers launched more condo projects.

Two particular projects which sold well:
- CapitaLand's 268-unit Cairnhill Nine, which sold 177 of the 200 units launched;
- BBR Holdings' 216-unit The Wisteria, that saw home buyers snap up 58% of the units.

Market watchers believe there remains strong underlying demand for good-quality residential properties at the right price.

Maybank KE still remains positive on developers with CityDev (Buy, TP: $9.04) its top pick, as well as CapitaLand (Buy, TP: $3.83), Ho Bee (Buy, TP: $2.33) and Wing Tai (Buy, TP: $1.86).

SG Market (18 Apr 16)

SG Market: Singapore shares are likely to lose steam after major crude producers failed to agree on a much anticipated output freeze deal. Oil-related counters, including Keppel Corp (1Q results today) and Sembcorp Marine, are expected to lead the sell down after oil prices tanked more than 5% in early Asian trades.

Regional bourses opened in the red in Tokyo (-0.4%), Seoul (-0.5%) and Sydney (-0.7%).

From a chart perspective, topside resistance for STI lies at 2,960 fibonacci level, with support at 2,840.

Stocks to watch:
*Property: Mar private home sales surged 178% y/y to 843 units, as developers launched more units. Notably, two projects that sold well included Cairnhill Nine (CapitaLand) and The Wisteria (BBR Holdings JV).

*CapitaLand Mall Trust: 1Q16 DPU of 2.73¢ (+1.9% y/y) came in line, against higher distributable income of $96.7m (+4.2%) due to an increase in retained income. Revenue and NPI improved to $179.8m (+7.4%) and $127.9m (+8.6%) respectively, bolstered by acquisition of Bedok Mall, completion of AEI at IMM Building and positive overall rental reversion (+1.4%). Portfolio occupancy inched up 97.7% (+0.1ppt q/q), with WALE of 2 years. Aggregate leverage remained stable at 35.5% (-0.1ppt) with average debt cost of 3.2% (-0.1ppt) and debt tenure at 5.3 years. NAV/unit at $1.88.

*Ascott REIT: 1Q16 DPU of 1.75¢ (-1% y/y) missed due to an enlarged unit base and higher dividends to perps holders. Revenue of $105.5m (+17%) was supported by several acquisitions across Australia, Japan and US made in 2015, while gross profit rose 13% to $48.6m. Aggregate leverage was 38.9% (-0.4ppt q/q) with effective borrowing rate of 2.5% (-0.3ppt) and average debt tenure of 5.1 years. NAV/unit at $1.34.

*SIA: Mar PLF rose 1.2 ppt to 77.8% on improved loads factors across all routes except Americas and SW Pacific. Passenger traffic improved 4.2% against a 1.8% increase in capacity expansion. All three subsidiary carriers, SilkAir (+3.2ppt to 71.5%), Scoot (+2.3ppt to 86.9%), and TigerAir (+5ppt to 84.4%) enjoyed better load factors. Overall cargo load factor continued to deteriorate, sliding 3.8ppt to 64% as capacity swelled 7.2% outstripping cargo traffic’s 1.1% growth.

*OSIM: Independent financial adviser PwC views the $1.39/share, or 17.3x FY15 P/E, privatisation offer as fair and reasonable, and recommends shareholders to accept the offer.

*Olam: To form a 30:70 JV with Mitsubishi Corp to import and distribute coffee, cocoa, sesame, edible nuts, spices, vegetable ingredients and tomato products in the Japanese market.

*Wilmar: Reiterated its stance against illegal deforestation and declares that a breach of its policy will lead to a possible discontinuation of business relationship with offending supplier.

*Tritech: Secured a $3.5m contract together with Black & Veatch (SEA) from PUB to conduct a feasibility study of the underground drainage and reservoir system. The group’s share of the contract is $1.4m.

*Cogent: Awarded the contract for the construction of Phase 2 of its depot facilities in Port Klang, Malaysia to Shui Xing Ventures for $8.9m. Phase 2 will involve the construction of a warehouse on 419,000 sf of land and is expected to be completed by Apr ‘17 with a built-up area of 270,000 sf.

*Acromec: IPO of 27m new shares at $0.22/share 5.3x subscribed. Parties allotted under the placement tranche (25.5m shares) include Asdew Acquisitions (Alan Wang). Trading for the specialist engineering services provider to commence at 9am today.

Friday, April 15, 2016


GuocoLand: Under the Opinions' section, BT published an article today on the counter, citing that GuocoLand is an attractive candidate for privatisation.
- Stated total assets and net assets of $8.8b and $3.7b, respectively, is believed to hugely undervalue the group's Tanjong Pagar Centre integrated complex.
- Even at the low-ball market valuation of $2,500 psf, this project should be worth ~$4.2 billion, compared to the current market cap of $2b.
- This excludes an upward revaluation for its assets in Malaysia and China, which analysts believe could be almost 40% higher than the company's stated book value.
- Fair value derived at ~$4, 55% discount to $1.80.

Other counters primed for privatisation include Wing Tai, Wheelock and Banyan Tree.

Soilbuild REIT

Soilbuild REIT: 1Q16 results dented by sagging occupancies at Tuas and West Park

- 1Q16 DPU of 1.557¢ (-4.7% y/y), distributable income +9.6% to $14.6m
- Growth attributed to Technics Offshore and Solaris, offset by poorer contributions from Tuas Connections and West Park BizCentral on lower occupanices.
- Incoming industrial supply could see occupancies dip further, currently @ 94.8% (-2ppt q/q).

Currently trading at 8.4% annualised yield, 0.94x P/B.


COSCO: Sevan Drilling defers delivery of Sevan Developer for the second time.

- Deferred for another 6 months to Oct '16.
- COSCO uncertain about financial impact of the second deferment.


Ezra: 2QFY16 sank into a significant loss of US$249.9m (2QFY15: US$0.1m), due to:
- Disposal loss (US$18.1m) of fixed assets;
- Impairment loss (US$60.5m) on fixed assets;
- Impairment loss on investments in JVs (US$38.3m);
- Lower FX gain of US$1.3m (2QFY15: US$8.4m).

NAV/share crumbled from US$0.4646 to US$0.3553 ($0.48).


CCT: 1Q16 results were in line with expectations. DPU and distributable income climbed 3.3% y/y to 2.19¢ and $64.8m respectively, due to higher contributions from JVs.

Gross revenue and NPI slid to $66.9m (-1.9%) and $52m (-3.6%) on lower occupancies at Capital Tower and Golden Shoe Car Park, as well as higher property tax. The office portfolio saw average rents increase 0.7% q/q.

Associate performance was shored by higher contributions from 40% owned CapitaGreen and 60% owned Raffles City.

Occupancy rose 1ppt q/q to 98.1% with weighted average lease to expiry of 7.3 years. Committed occupancies at both Capital Tower (1Q16: 98.1%, 4Q15: 94.1%) and Golden Shoe Car Park (1Q16: 97.7%, 4Q15: 97.3%) have improved, and contributions should recover subsequently. 16%/9% of office/retail leases are set to expire from now to end 2017.

Aggregate leverage was fairly stable at 30.1% (+0.6ppt q/q), with average cost of debt of 2.5%.

In its pipeline, CCT still has an option to acquire the balance 60% of CapitaGreen by 2017.

Outlook for the broader Grade A office is lacklustre. Rental rates fell 4.8% q/q to $9.90 psf in 1Q. The impending supply in 2H16 is expected to pressure rental rates further. CCT’s exposure is relatively sheltered, given major leases will expire in 2019 and beyond.

Maybank KE prefers CCT in the office space, given it has the lowest gearing in the sector, its DPU is not clouded by capital distribution, and it has the lowest exposure to the financial sector, where employment growth is slowing.

CCT is currently trading at 6.2% annualised 1Q16 yield and 0.8x P/B.

Maybank KE has a Hold call on CCT with TP of $1.40.


KREIT: 1Q16 in line; renewals saves it from the worst of the upcoming glut

- DPU 1.68¢ (-1.2% y/y), distributable income $54.4m (+0.8%)
- Renewed 0.4m sf of space, with rental reversions moderating to 7%.
- Leaves only 3% of its portfolio up for renewal this year.
- 85% of portfolio up for renewal in 2018 and beyond, saving it from the worst of the upcoming supply glut in office space.

- Currently trading at 6.7% yield, 0.7P/B
- MKE has Hold with TP of $0.97

SG Market (15 Apr 16)

SG Market: Investors are likely to take a breather after Wall Street hit a pause button, and ahead of the release of China's 1Q GDP at 10am.

Regional bourses are mixed in Tokyo (-0.4%), Seoul (-0.3%) and Sydney (+0.3%).

From a chart perspective, STI may run into resistance at 2,910 (200-dma), with next objective at 2,960 fibonacci level. Support reset to 2,840.

Stocks to watch:
*Macro: On the surprise easing move by MAS, beneficiaries of the weaker SGD include tourism, gaming and airlines sectors, with counters such as hospitality REITs, Genting SP and Straco.

*Capitaland Commercial Trust: 1Q16 in line with DPU of 2.19¢ (+3.3%), underpinned by higher contribution from 40% JV CapitaGreen, while gross revenue and NPI slipped to $66.9m (-1.9%) and $52m (-3.6%), respectively, on lower occupancies at Capital Tower and Golden Shoe Car Park, as well as higher property tax. Occupancy rose 1ppt q/q to 98.1% with WALE of 7.3 years, while aggregate leverage stood at 30.1% (+0.6ppt q/q) with average cost of debt of 2.5%. NAV/unit at $1.72.

*Keppel REIT: 1Q16 results in line; DPU dipped 1.2% y/y to 1.68¢ due to a larger dividend payout to perpetual securities holders, despite a marginal rise in distributable income to $54.4m (+0.8%). Revenue and NPI slipped 2.9% and 4.8% to $41.2m and $32.9m, respectively, following the divestment of 77 King Street on 29 Jan '16. Portfolio occupancy stood at 99.4% with WALE of 6 years, while aggregate leverage was lowered to 39% (-0.3ppt q/q) with average cost of debt at 2.58%. NAV/unit at $1.42.

*Keppel T&T: 1Q16 net profit slid 15.6% y/y to $13.3m due to a spike in interest expenses (+31.3%) and lower contributions from associates and JVs (-9.7%). Revenue edged 0.7% higher to $46.3m on increased takings from the data centre division (+34.7%), offset by reduced contributions from logistics (-8.2%). NAV/share at $1.30.

*Soilbuild REIT: 1Q16 DPU slipped 4% y/y to 6.228¢ on an enlarged unit base, while distributable income grew 9.6% to $14.6m. Gross revenue and NPI added 8.2% and 8.8% to $20.1m and $17.2m, respectively, on new contribution from Technics (acquired in May ‘15), as well as higher takings from Solaris on upward rental reversion. Portfolio occupancy slipped to 94.8% (-2ppt q/q) with WALE of 4.7 years. Aggregate leverage maintained at 36%, with average interest cost of 3.36%. NAV/unit at $0.79.

*GKE: 9MFY16 net loss narrowed to $0.4m (9MFY15: $1.8m loss), thanks to a $1.2m gain on disposal of an associate. Revenue slipped 5.4% y/y to $26.2m as its logistics operations handled lower volume of freight and general cargoes due to the slowdown in macro environment. NAV/share at $0.1217.

*YuuZoo: Expanded the cooperation agreement with Alibaba on E-Sports events from China to include six Southeast Asian markets (Singapore, Indonesia, Thailand, Malaysia, Philippines and Vietnam).

*GLP: Leased 153,000 sqm of space in China to four third party logistics companies, including a subsidiary of Sinotrans.

*Oxley: Sold the leases of 241 units at its Royal Wharf development to Notting Hill Home Ownership for £59.9m.

*PSL: Terminated the agreement to purchase a 70% stake in NBN Scaffolding for $3.9m.

*Nam Cheong: Forfeited a deposit of US$8.4m paid by Perdana Petroleum after the latter terminated its purchase order for an accommodation work barge.

*OEL: Applied for judicial management for OSEC Shipyard due to the inability to repay US$0.56m to its creditor.

*Olam: Secured a US$650m revolving credit facility to be used to refinance existing debt, meet working capital and general corporate funding requirements.

Thursday, April 14, 2016


M1: M1's 1Q16 net profit of $42.5m (-6.9% y/y, -2.5% q/q) came in line with expectations, constituting 24% of street's full year estimates.

Revenue softened to $257.6m (-12.6% y/y, -16.3% q/q) largely from reduced handset sales (-40.1% y/y, -45.2% q/q) and lower service revenue (-0.5% y/y, -2.7% q/q) on lower mobile (-1.9% y/y, -3% q/q) and IDD (-16.2% y/y, -2.4% q/q) sales, though partially mitigated by growth in the fixed segment (+26.4% y/y, -1.1% q/q).

Mobile postpaid revenue slipped to $144.7m (-1.8% y/y, -3.1% q/q) despite a higher customer base of 1.2m (+4.4 y/y, +1.1 q/q), as ARPU slid 5.5% (-4.9% q/q) to $58.60/month, diluted by a previously launched SIM-only plan, which commanded lower subscription price.

The prepaid segment added 21,000 new accounts to 734,000 (+3% y/y, flat q/q) but failed to lift revenue of $18.7m (-2.2% y/y, -2.3% q/q), depressed by weaker ARPU of $13.20/month (-12.6% y/y, -5.7% q/q) due to lower voice traffic.

Meanwhile, IDD call revenue continued to be affected by changing consumer patterns as users shifted away from voice to VOIP channels. This was corroborated by the increase in average postpaid smartphone data usage to 3.3GB/month (1Q15: 3.2GB/month)

Fixed services was the standout as the number of subscribers to its fibre broadband grew to 136,000 (+26.1% y/y, +6.8% q/q), driven by a larger residential customer base and new corporate contracts, while ARPU rose 3.5% (-1.3% q/q) to $46.90/month as it successfully converted subscribers to higher tiered plans.

EBITDA margin on service revenue held steady at 40.9% (+0.1ppt y/y, -1.3ppt q/q).

Total customer base increased to 2.08m (+5.1%) with overall market share of 23.3% (+0.2ppt).

For the full year, M1 maintained its guidance of a stable performance. On the plus side, postpaid net-adds have exceeded StarHub’s in the past three quarters. Maybank KE does not expect the ARPU slide to worsen, and service revenue should slide in the single-digit range at worst.

The biggest uncertainty lies in the possible entry of a fourth mobile operator and potentially high spectrum spend in the next two years.

However, Maybank KE is of the view that the 6% dividend yield should support the stock on the downside.

Latest broker ratings:
Deutsche maintains Buy with TP of $3.90
Maybank KE maintains Hold with TP of $3.09
UOB Kay Hian's Buy rating is under review with TP of $3.02
OCBC maintains Buy, cuts TP to $2.90 from $2.95
CIMB maintains Hold with TP of $2.40
Credit Suisse maintains Underperform, cuts TP to $2.05 from $2.15

Lian Beng

Lian Beng: 3QFY16 net profit slipped 5.3% y/y to $17.4m, bringing 9MFY16 earnings to $72.6m (+34.7%).

For the quarter, revenue tumbled 49.8% to $101.6m due to decreased sales from the construction and ready-mixed concrete segments.

However, the bottom line was buttressed by increased contributions from associates and JVs to $16.5m (+101%) from various property projects including NEWest, KAP Residences, The Midtown and Midtown Residences and the strata sales of office building at Prudential Tower.

Net gearing inched up to 33.8% (+1.8ppt q/q), supported by a cash pile of $188.2m.

In 3QFY16, the group secured a $117.6m contract to build an industrial building project, T-Space, at Tampines North Drive 1. This boosted its construction order book to $384.5m (2QFY16: $350m), with visibility stretching through FY19.

On the outlook, management still remains cautious on the construction industry due to the challenging environment, hurt by high labour cost.

Lian Beng is currently trading at a trailing P/E of under 2x and 0.47x P/B, and offers an indicative dividend yield of 2.1%.

Keppel DC REIT

Keppel DC REIT:1Q16 DPU rose 3.7% y/y to 1.67¢, in line with estimates, while distributable income rose 3.8% to $14.7m.

However, gross revenue of $24.8m (-4.5%) and NPI of $21.2m (-2.5%) missed IPO forecasts, as a client downsized its requirements at Citadel 100, while contributions from properties in Australia, Europe and Malaysia were eroded when translated into a stronger SGD.

Consequently, portfolio occupancy slipped to 92% (-2.8ppt q/q), with weighted average lease to expiry of 8.7 years.

Aggregate leverage stood at 29.6% (+0.4ppt q/q) with cost of debt of 2.4%.

Going forward, injection of the fully let T27 appears imminent, possibly in 2Q or 3Q16. While the REIT has a debt headroom of $200m before hitting 40% leverage, it expects the acquisition to come with some equity fund raising.

In Singapore, leases expiring in 2016-17 may face rental pressure amid increased supply. Apart from the vacated space at Citadel 100, 8% of its NLA are up for renewal in 2016 and another 24% in 2017, and management has reached verbal agreements with a few prospective clients.

Management remains optimistic towards the structural demand for data centers, underpinned by the growth in big data and cloud computing. Notably, the REIT's sponsor is developing the T20 asset, which the REIT has a right-of-first-refusal.

Keppel DC REIT is currently trading at 6.2% annualized 1Q16 yield, and 1.2x P/B.

Latest broker ratings:
OCBC maintains Buy with TP of $1.24
CIMB maintains Add with TP of $1.18
Deutsche Bank maintains Buy with TP of $1.15


CRCT: 1Q16 DPU of 2.71¢ (+2.7% y/y) was in line with estimates, supported by distributable income of $23.2m (+4.5%).

Gross revenue inched 1.9% (+2.5% in CNY terms) higher to $55.6m, while NPI climbed 6.2% to $36.7m, on the back of a 7.3% rental uplift, but was pared by a weaker yuan. Operating expenses were also lower.

Excluding the Minzhongleyuan (Wuhan) and Wuhu malls, which are undergoing stabilisation, traffic at multi-tenanted malls would have grown 2% y/y (-2% q/q), while tenant sales would have climbed 3.2% y/y (-3.2% q/q). Beijing, where the majority of its portfolio is located, saw retail sales grow 1% in the first two months of 2016.

Portfolio occupancy slipped marginally to 94.6% (-0.5ppt q/q) with weighted average lease to expiry of 8.1 years.

Aggregate leverage remains very comfortable at 28.7% (+1ppt q/q), lower than the 32.9% average among S-REITs. Average cost of debt edged up to 3.04% (+0.05ppt), with tenor of 2.61 years.

Management is confident of CRCT’s prospects, given China’s transition to be a consumption-led economy.

On AEIs, the Saihan mall’s fa├žade upgrading and the Grand Canyon mall’s toilet upgrade will be completed by 3Q16. At Minzhongleyuan and Wuhu, management will continue sharpening the competitive advantages of the malls.

CRCT is currently trading at 7.4% annualised 1Q16 yield, well above retail S-REIT yield of 6.7%, and 0.9x P/B.

SG Market (14 Apr 16)

SG Market: Positive spillover sentiment from Wall Street could extend the rally, but caution is urged against oil-related counters ahead of a key producers’ meeting this weekend.

Regional bourses rallied sharply this morning in Tokyo (+2%), Seoul (+1.3%) and Sydney (+0.7%).

From a chart perspective, technical indicators are exhibiting bullish signals and the STI likely to test the next resistance at 2,910 (200-dma). Support at 2,790.

Stocks to watch:
*Economy: Singapore 1Q GDP grew 1.8% y/y, beating estimates. Separately, MAS made a surprise move to ease monetary policy by taking a zero appreciation stance on the currency.

*M1: 1Q16 results in line with net profit of $42.5m (-6.9% y/y), as revenue slumped to $257.6m (-12.6%) from reduced handset sales (-40.1%) and marginally lower service revenue (-0.5%). ARPU slipped for postpaid (-5.5%), prepaid (-6%), and data (-9.7%), while data usage (+3.1%) and fibre broadband grew (+3.5%). EBITDA margin held steady at 40.9% (+0.1ppt). Total customer base increased to 2.08m (+5.1%) with overall market share of 23.3% (+0.2ppt). MKE maintains its Hold with TP of $3.09.

*Keppel Infra Trust: 1Q16 distributable income surged to $40.7m (+154.4%) from the consolidation of Crystal Trust and Keppel Merlimau Cogen assets, while DPU rose at a slower pace to 0.93¢ (+19.2% y/y) on the enlarged unit base. Revenue rose to $131.2m (+14.7%) on increased contribution from concessions, but were offset by weakness from lower tariffs from City Gas and Basslink. Net gearing inched up 2 ppt q/q to 36%. NAV/unit at $0.337.

*Keppel DC REIT. 1Q16 DPU of $1.67¢ (+1.2%) came in line, although gross revenue and NPI of $24.8m (-2.8%) and $21.2m (-2.1%), respectively, came below expectations as a client downsized its requirements at Citadel 100, as well as lower contributions from properties in Australia, Europe and Malaysia arising from weaker FX against SGD. Portfolio occupancy at 92% (-2.8ppt q/q), with WALE of 8.7 years. Aggregate leverage stood at 29.6% (+0.4ppt q/q) with cost of debt of 2.4%. NAV/unit at $0.902.

*CapitaLand Retail China Trust: 1Q16 DPU of 2.71¢ (+2.7% y/y) came in line. Gross revenue grew to Rmb256.5m (+2.5%) from higher rental growth (+7.3%), while NPI rose to Rmb169.4m (+6.8%) from the absence of additional property tax for CapitaMall Wuhu. Portfolio occupancy remained healthy at 94.6% (-0.5ppt q/q) with WALE of 8.1 years, while aggregate leverage grew to 28.7% (+1ppt q/q), with average cost of debt marginally higher at 3.04% (+0.05 ppt) and tenor of 2.61 years. NAV/unit at $1.67.

*Frasers Centrepoint: Sold Australia property Satellite Corporate Centre to Stockland for A$87.6m. Separately, the group launched e-applications for its Singapore JV residential development, Parc Life, with average prices for the 628-unit executive condominium ranging from $770-800 psf.

*SIIC Environment: 92.2% owned Fudan Water entered into a 25-year concession agreement for the Suizhou City Cheng Nan Wastewater Treatment PPP Project, with an investment cost of Rmb100m. Total design capacity of the project is 50,000 tpd.

*CITIC Envirotech: Secured its first BOT sludge treatment project in Shandong Province, China, with total investment of Rmb220m ($48m). The project involves the design, construction and operation of a 700 tons/day sludge treatment plant and will have a concession period of 30 years.

*Sino Grandness: Entered into convertible loan agreement with Soleado, a wholly owned subsidiary of Thoresen Thai Agencies. The US$20m loan with interest rate of 12% per annum can be converted into 50m new shares (6.9% of enlarged share base) at the lower of $0.55 each or 20% discount to VWAP, and will be used for capex and working capital. Soleado currently owns 10.57% of Sino Grandness.

*HTL: Obtained approval from the Development and Reform Commission of Guangdong for a possible offer by suitor Yihua Timer via a scheme of arrangement, but two other pre-conditions have yet to be satisfied.

*Tuan Sing: Awarded tender for a 99-year leasehold residential land parcel in Sembawang for $51.1m, or $481 psf ppr.

*CNMC Goldmine: Restarted its 200,000 tonnes per annum vat leeching facility at Sokor Gold Field Project in Kelantan, Malaysia, following completion of upgrading works. The group now has two fully operational gold production lines.

Wednesday, April 13, 2016


Yangzijiang: Clinched new orders for dry bulk carriers worth US$510m from Chinese state-owned enterprise. The orders for six 400,000 DWT very large ore carriers (VLOCs) were awarded by ICBC Leasing, a wholly owned subsidiary of ICBC, China's largest state-owned commercial bank and are scheduled for delivery from 2018 to 2019. They are part of the 30 VLOC orders placed by major Chinese ship owners, after they entered into the contract of affreightment (COA) with mining group Vale to transport iron from Brazil to China over a period of up to 27 years.


SGX: Deutsche is anticipating a solid earnings rebound in SGX's 3QFY16 results, which will be released next Wed (20 Apr).
- Net profit is expected to jump 14% q/q to $96m due to a pick-up in turnover for both securities and derivatives markets, with the rise in operating expenses paced by revenue growth.
- However, the house cited that maintaining this turnover could be a challenge if the global macro situation deteriorates.
- Even so, the stock still looks attractively valued at 25x FY16 P/E with ROE of 34%. The house maintained its Buy with TP of $8.30.


Economy: IMF has cut its global growth forecast for the fourth time in a year to 3.2% from 3.4% for 2016, on the back of China's slowdown, low oil prices and chronic weakness in advanced economies.
- Also warned of widespread stagnation risk, with weaker growth leaving the global economy more vulnerable to shocks such as currency depreciation and worsening geopolitical conflicts.
- Called on global policymakers to take coordinated action to boost demand, as a persistent tepid growth environment has downward spiralling effects in output and investment.
- In Singapore, MAS will be releasing its monetary policy stance tomorrow (14 Apr) and the street sees the central bank staying put with no change to the slope and width of the SGD band.


S-REITs have rallied in 2016 as BoJ and ECB pushed into negative interest rates and Fed turned decidedly more dovish. Consequently, Maybank Kim Eng is upgrading the sector to Neutral from Sell.

Spurred by easy monetary policies, global bond yields have collapsed much faster than REITs, pushing the yield spread to +1SD above the mean. As investors seek income amid volatility and low growth, the inflows into REITs should continue globally.

In Singapore, REITs offer the second widest spreads to risk-free rates compared to their developed market peers. Given the sustained investor interest, Maybank Kim Eng has tightened the yield targets of its coverage universe.

However, the house caution that despite being cheap globally, S-REITs are expensive on a historical basis, relative to the SGS 10Y yield, as well as the STI yield, trading near -1SD below its historical mean. This explains the house’s Neutral view versus the street's more positive stance.

For exposure, Maybank-KE likes Ascendas REIT and Mapletree Industrial Trust, and keeps its Sell ratings on CapitaLand Mall Trust and Frasers Centrepoint Trust.

Maybank Kim Eng ratings on S-REITs:
Ascendas REIT: Upgraded to Buy from Hold, TP raised to $2.60 from $2.23
MINT: Upgraded to Buy from Hold, TP raised to $1.71 from $1.50
AIMS AMP: Upgraded to Buy from Hold, TP raised to $1.47 from $1.45
Cache Logistics Trust: Upgraded to Buy from Hold, TP raised to $0.94 from $0.93
Suntec REIT: Hold, TP $1.56
Keppel REIT: Hold, TP $0.97
CCT: Hold, TP $1.40
Starhill Global: Hold, raised TP to $0.79 from $0.75
MCT: Upgraded to Hold from Sell, raised TP to $1.37 from $1.18
FCT: Sell, TP raised to $1.78 from $1.63
CMT: Sell, TP raised to $1.97 from $1.66

SG Market (13 Apr 16)

Regional bourses rallied this morning in Tokyo (+1.7%), Seoul (+0.6%) and Sydney (+1.1%).

From a chart perspective, STI faces immediate resistance at 2,850, with support at 2,760.

Stocks to watch:
*SPH: 2QFY16 results missed with net profit of $54.1m (-22.3% y/y), dragged by the absence of sale of investment assets and restructuring gain. Revenue slipped 4.1% to $264.2m on weaker advertising and circulation in the core media segment. Interim DPS of 7¢ maintained. NAV/share at $2.16.

*Keppel T&T: JV with Keppel Land secured $84.5m in contracts to provide co-location and data centre services at Keppel Datahub 2 from a blue-chip internet client and a government-related entity. This brings commitment at Datahub 2 to 100% within two years since its completion in 2014.

*Hyflux: Marked its foray into Egypt after clinching a USD500m EPC contract for the Ain Sokhna Integrated Water and Power Project. The desalination plant is designed to produce 150,000 m3/day with an on-site 457 MW power plant.

*Cordlife: Appointed industry veteran Tan Poh Lan as its new COO, less than a month following the sudden resignation of its long serving CEO. MKE last call was Hold with TP of $1.59.

*Sembcorp Industries: Raised stake in India-based Sembcorp Green Infra by 2.6 ppt to 67.7% for $32.6m.

*Changjiang Fertilizer: Acquiring property firms WBH Investments and Cowealth Investments for an aggregate $27.6m, via an issue of 1.8b new shares at 0.5¢ apiece and $18.7m cash. Upon completion of the RTO deal, the group will transform into an investment property firm with assets in Singapore that has a net leasable area of 3,118 sqm, which is 82% occupied with lease expiry in Mar 2038. Separately, the group has put up its China properties, worth an estimated Rmb37.6m, for public auction.

*CSC: Former employee found guilty of misappropriation of ~$0.8m and has been ordered to repay $0.4m. CSC is appealing for a full compensation.

*Chasen: Signed partnership agreement with Jilin BiYuan ShuiWu (JBW), where JBW will provide consulting to Chasen’s water and wastewater treatment arm. Upon hitting specific targets spread across two years, JBW may be awarded up to 60% stake in Chasen’s water and wastewater treatment arm.

*MGCCT: Issuing HK$600m of 3.25% medium-term notes due 20 Apr 2023 for refinancing existing borrowings. The notes are rated Baa1 by Moody’s.