Wednesday, February 8, 2017

SG Market (08 Feb 17)

The market could head higher as investors sought for undervalued stocks following a series of buyout offers, led by Indonesia's Riady family-controlled Lippo Group. Sentiment could also be swayed by 4Q earnings releases, policies outlined by the Committee on Future Economy and Budget 2017, all within the next two weeks.

Regional bourses opened mixed in Tokyo (+0.2%), Seoul (-0.6%) and Sydney (+0.1%).Technically, topside resistance for the STI remains at 3,110, with underlying support at 3,025.

Stocks to watch:
*SIA: 3QFY17 net profit of $177.2m (-35.5%) met estimates, dragged by a $79m write-down in Tigerair, as well as an absence of a $52m gain from SilkAir’s sale and leaseback of aircraft. Revenue fell 2.5% to $3.84b, hurt by a 5.5% decline in passenger yield and drop in load factor to 79% (-1ppt). However, operations at Scoot and SIA Cargo improved, with the latter recording its best performance in nine years, while fuel costs declined $200m, largely due to the reduction in fuel hedging loss. Outlook remains challenging amidst overcapacity and aggressive pricing by rival airlines. Trades at 0.83x P/B, low end of historical range. MKE maintains Hold with TP of $9.70.

*Perennial Real Estate: 4Q16 net profit fell 37.8% to $25.6m, bringing FY16 earnings to $35.1m (-39.6%). Quarter revenue slipped 24.2% to $21.5m dragged by lower rental revenue from TripleOne Somerset as expiring leases were not renewed since AEI works commenced in 2Q16, while bottom line was lifted by a $24.4m gain in fair value of an investment property, albeit lower than $44.8m a year ago. NAV/share at $1.57.

*Courts Asia: 3QFY17 net profit rose to $5m (+24.4%) on lower taxes (-36.2%) arising from a tax credit from the loss in Indonesian operations. Revenue sank 8.6% to $187.2m on reduced corporate sales for digital products in Singapore and Malaysia. Gross margin widened 3.4ppt to 33.1%, underpinned by higher service charge income and merchandise margin, while bottom line benefitted from lower distribution (-4.6%) and finance (-14.7%) expenses. NAV/share at $0.567.

*SGX: Jan securities turnover totalled $20.9b (-10% y/y, unch m/m) with average daily value of $1.05b (-10% y/y, +5% m/m), while derivatives volume shrank to 11.7m contracts (-34% y/y, -12% m/m) on fewer trades in equity indexes (-38% y/y, -14% m/m), partly mitigated by increased trading of FX futures (+12% y/y, +6% m/m). Commodities trading derivatives volume (-5% y/y, -1% m/m) also declined.

*Best World: In response to the SGX trading query yesterday, group reiterated its cautious optimism of the group's performance for 4Q16 and informed that fundamentals have not changed since the 3Q16 results announcement on 4 Nov '16.

*Healthway Medical: Received a voluntary conditional offer at SGD0.042/share from Lippo-linked entities, which collectively own 13.3% in the clinic operator. The offeror intends to retain its listing status.*Cambridge Industrial Trust: Leading logistics property developer, e-Shang Redwood, has completed the 10.65% stake acquisition in the REIT at $0.70/unit and has emerged as the second largest unitholder with 11.04% control.

*Q&M: Received several injunction orders against suspended dentists in Johor Bahru, in relation to the improper conduct discovered in the state's operations.

*Oxley/ IHC: Proposed grant of a $50m 6% convertible loan facility to IHC, intended to pay interest expenses and working capital. Oxley will have the right to convert the total outstanding amount into new IHC shares at $0.06102/share.

*Acromec: Secured a $8.7m contract for fitting-out of production facilities, expected to be completed by 3QFY9/17.

*Samudera Shipping Line: Updated that Disposed 6 vessels, including Sinar Jimbaran, over the last 12 months for an aggregate price of US$5.73m. The disposal proceeds will be utilized for working capital and business expansion.

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