Thursday, November 10, 2016

SG Market (10 Nov 16)

Continued volatility and uncertainty is likely to prevail over the market in the near term, in wake of Donald Trump’s shock election win and what his protectionist stance would mean for trade dependent countries like Singapore.

Regional bourses gapped up in Tokyo (+5.7%), Seoul (+1.8%) and Sydney (+3%).Technically, downside support for STI seen at 2,740 with immediate resistance at 2,840.

Stocks to watch:
*Singtel: 2QFY17 results in line. Core net profit of $978m was flat as stronger operating results from associates (+7%), Telkomsel & Airtel India, helped offset lower EBITDA (-4%) due to investments in customer acquisition and higher content costs in Australia. Revenue slid 2% to $4.09b on a decline in mobile termination rates and higher device repayment service credits in Australia, but offset by growth in mobile data, cyber security, data & internet and digital services. Interim DPS of 6.8¢ was maintained. Trimmed full year guidance for revenue growth and expects EBITDA to be stable. MKE retains Hold with TP of $4.41.

*City Dev: 3Q16 net profit of $170.3m (+60.1%) was lifted by one-offs, including the disposal gain in City E-Solutions, increased realisation of investment in a private real estate fund and a write-back following an insurance settlement for the 2011 New Zealand earthquake. This brought 9M16 earnings of $409.4m (+12.8) to 70% of FY16 street estimate. Quarter revenue rose to $922.8m (+32.4%), underpinned by the maiden contribution from both Gramercy Park in Singapore and Hanover House in UK, coupled with revenue recognition from Coco Palms, D’Nest and The Venue Residences and Shoppes. NAV/share at $9.91. MKE last had a Hold with TP of $9.17.

*ST Engineering: 3Q16 missed target as net profit tumbled to $76.7m (-42%), on asset impairment and provision for closure costs for its Chinese road construction equipment business, Jiangsu Huatong Kinetics. Revenue grew to $1.61b (+7.5%), mainly from aerospace (+11%) and electronics (+9%) segments, but EBIT margin contracted to 5.1% (-2.9ppt). Order book remained healthy at $11.4b (2Q16: $11.6b). Guided for higher FY16 revenue, but lower pretax profit. MKE has a Hold with TP of $3.17.

*Ezion: 3Q16 net profit tanked 66.4% to US$10.4m, which MKE deems to be in line. Revenue fell to US$79.8m (-7.4%) due to modifications and routine class surveys on a few jack-up rigs, reduced charter rates and project delays. Gross margin compressed to 17.5% (-11.4ppt) on increased deployment cost of additional service rigs. NAV/share at US$0.667. MKE last had a Buy with TP of $0.45.

*First Resources: 3Q16 net profit of US$28.4m (+26.2%) missed, while revenue of US$151.5m (+40.6%) was bolstered by both refinery and processing (+45.8%) and plantations (+35.1%), partially offset by reduced production volume (-8.9%) from lingering effects of El Nino. Consequently, gross and EBITDA margins contracted to 53.1% (-8ppt) and 51.1% (-6.1ppt). NAV/share at US$0.54..

*Far East Hospitality Trust: 3Q16 DPU of 1.12¢ (-6.7%) met, bringing 9M16 DPU of 3.21¢ to 75% of full year estimate. Quarter gross revenue and NPI slumped to $28m (-5.5%) and $25.3m (-5.8%), mainly due to reduced RevPAR of $142 (-5.8%) stemming from the weak operating environment for hotels, which resulted in lower average daily rates (-6.9%), despite a 1ppt increase in occupancy to 88.4%. Aggregate leverage remained stable at 32.8%, with average debt cost and tenor at 2.5% and 2.6 years. NAV/unit at $0.9279.

*Ascendas Hospitality Trust: 2QFY17 results met expectations as DPU held steady at 1.38¢ on adjusted distributable income of $15.5m (+0.1%). Revenue grew 2.5% to 55.6% while NPI advanced at a faster pace of 7.7% to $24.3m on stronger contributions from Japan (+41.6%) and China (+12.4%), but pared by contraction in Australia (-0.2%) and Singapore (-9.3%). Aggregate leverage edged lower to 32.4% (-0.8ppts q/q) with average cost of debt of 3.3% and tenor of 2.8 years. NAV/share at $0.88.

*Nam Cheong: 3Q16 would have been in the red if not for an FX gain of RM12.2m, which lifted net profit to RM0.7m (3Q15: RM6,000). Revenue plunged to RM25.8m (-86%) on slower revenue recognition of vessels sold, and gross margin got crushed to 3% (-8ppt). NAV/share at RM0.621.

*Delfi: Swung to 3Q16 net profit of US$5.9m, due to the absence of US$19.4m settlement. Revenue of US$86.6m was 2.4% higher, as improved Indonesia sales (+5.6%) offset regional markets (-4.4%). Gross margin expanded 7.1ppt to 35.5% on higher sales for its own brand, as well as other rationalization initiatives. NAV/share at US$0.333.

*Riverstone: 3Q16 results in line, even as net profit slid 15.6% to RM29.8m on a drop in FX gains. Excluding FX, core earnings would have fallen 4.1% to RM29.3m. Revenue grew 10.9% to RM166.9m on increased capacity, but gross margin narrowed 5.8ppt to 26.1% due to lower ASP for healthcare gloves, although it recovered 1.7ppt q/q on better sales mix. Net cash position remains healthy at RM110m (FY15: RM128.7m). Maybank KE last call was a Hold with TP of $0.92.

*Courts Asia: 2QFY17 results came ahead of expectations, as net profit climbed to $6.7m (+11.3%) on a $1.1m drop in FX losses. Revenue edged lower to $180.5m (-3%), as weakness in Malaysia sales (-12.9%) outweighed improvements in Singapore (+0.5%) and Indonesia (+70.2%). Gross margin shrank 1.4ppt to 33.9% on lower service charge income in Malaysia, weaker merchandise margin and a shift in Hari Raya festival to 1QFY17. NAV/share at $0.564..

*Maxi-Cash: 3Q16 net profit surged 3.2x to $3.3m, as revenue jumped to $40.9m (+28%) on higher interest income from pawnbroking business, as well as higher sales from retail and trading segment. But, net gearing rose to 2.2x from 1.8x in FY15. NAV/share at $0.1237.

*CSE Global: 3Q16 net profit slumped 52.7% to $4m on revenue of $81m (-21.6%) attributable to the lack of large greenfield projects which caused contraction across its operations in Asia-Pacific (-3.3%), Americas (-33.1%) and Europe/Middle East/Africa (-15.1%). Despite the poorer topline performance, operating expenses fell only 4.5%, narrowing operating margin to 6.9% (-3.6ppts). NAV/share at $0.453.

*Sapphire: 3Q16 net profit surged 80.3% to $2.8m, while revenue skyrocketed 415.5% to $68m from the consolidation of China rail EPC firm Ranken, which contributed the bulk of sales ($61.9m) attributable to project recognitions, that offset the 53.7% drop in mining revenue. Gross margin fell 12ppt to 14.1% in the shift in sales mix. NAV/share at 28.63¢.

*Raffles Education: 1QFY17 results swung to a net loss of $1.7m (1QFY16: $0.9m profit) due to a $1.3m drop in FX gains. Revenue fell to $24.8m (-15%), mainly weighed by discontinuation of Raffles Shanghai JV college, reduction in foreign student intake in Raffles Sydney and Raffles Singapore, as well as lower utility income from Oriental University City. NAV/share at $0.5447.

*Ellipsiz: 1QFY17 net profit dived 70.5% to $0.7m on impairment loss of $1.1m (1QFY16: nil). Revenue grew 9.4% to $27.7m on growth across its distribution & services solutions (+13%) and probe card solutions (+8.3%) segments. Bottomline was further pressured by the absence of bad debt recovery of $1.4m recorded in 1QFY16. NAV/share at $0.7747.

*SingPost: S&P Global Ratings downgrades long-term corporate credit rating to BBB+ from A-, with stable outlook, as it opines that SingPost’s emphasis on reducing leverage has diminished.*iFAST: Received in-principle approval from MAS to provide discretionary portfolio management and stock dealing services in Singapore.

*Isoteam: Acquiring a four-storey factory at Changi North Street 1 for $12.6m to consolidate the various divisions it has into a single premise. The property has land and built-in area of 3,401 and 4,232 sqm respectively, as well as 10 years of remaining leasehold tenure, with the option to renew for another 30 years.

*Swissco: Received notice from vendor X-Drill Holding that the latter has obtained a court order in the Republic of Equatorial Guinea for the arrest of the group's rigs, and thereafter subject to a judicial sale.

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