SG Market (16 Feb 17)

Stocks could continue to press ahead following the record-breaking run on Wall Street, with investors also anticipating pro-growth measures in the upcoming Budget 2017, although gains may be checked by another disappointing bank result, this time from DBS. Regional bourses opened lower today in Tokyo (-0.2%), Seoul (-0.1%) and Sydney (-0.2%).Technically, the STI is trading within an upward channel bounded by topside resistance at 3,110 and support at 3,065.

Stocks to watch:*DBS: 4Q16 net profit fell 9% y/y and 15% q/q to $913m on mounting bad debts charges, underscoring the financial stress in the oil services sector. This brought FY16 earnings to $4.24b (-2%), below street forecast of $4.28b. For the quarter, net interest income of $1.82b (-2% y/y, flat q/q) was squeezed by NIM compression to 1.71% (4Q15: 1.84%, 3Q16: 1.77%) despite a larger loan book (+6% y/y, +4% q/q). Non-interest income of $952m (+19.3% y/y, -14.5% q/q) was largely buoyed by wealth management and trading income. Provisions soared to $462m (+87% y/y, +6% q/q) despite absence of any general allowance. NPL ratio climbed to 1.4% (4Q15: 0.9%, 3Q16: 1.3%), with Tier-1 CAR at 14.1% (4Q15: 13.5%, 3Q16: 14.4%). Maintained final DPS of $0.30, bringing FY16 payout to $0.60 (unch). NAV/share at $16.87.

*ST Engineering: 4Q16 net profit grew 21% to $170.4m, taking FY16 earnings of $484.5m (-8.4%) above expectations. Quarter revenue rose 2.3% to $1.82b, mainly from aerospace (+17.3%) and electronics (1.1%) segments, while overall EBIT margin expanded to 10.1% (+0.7 ppts). Order book remained healthy at $11.6b (3Q16: $11.4b). Maintained final DPS of $0.10, bringing FY16 payout to $0.15 (unch). Guided for comparable revenue and higher pretax profit in 2017. MKE last had a Hold with TP of $3.17.

*SIA: Jan group pax load factor improved 1ppt to 81.1%, as passenger traffic growth (+5.8%) overshadowed capacity expansion (+4.5%). Load factors rose on Lunar New Year promotions across East Asia (+2.7ppt), Americas (+1.8ppt), West Asia and Africa (+3.7ppt), but deteriorated in SW Pacific (-2.3ppt), and Europe(-0.1ppt). Load factors were higher at SilkAir (+3.5ppt to 73.2%) and Tigerair (+1.8ppt to 83.3%), while that for Scoot fell (-0.8ppt to 84%). Cargo load factor rose 1ppt to 61.5% as carriage (+3.5%) outpaced capacity growth (+1.8%). MKE last had a Hold with TP of $9.70.

*Lippo Malls Trust: 4Q16 DPU of 0.87¢ brought FY16 payout to 3.41¢ (+10%), beating estimates. Quarter revenue expanded 9.1% to $48.7m, while NPI rose 10.9% to $44.6m, driven by rental reversion of 6.7% and the stronger IDR against SGD. Occupancy fell 0.5ppt q/q to 94.3% with WALE of 4.51 years. Aggregate leverage stood at 31.5% (-1.2ppt q/q). NAV/unit at $0.3895..

*CWG: 4Q16 net profit surged 277% to Rmb222.2m, led by a 59% jump in revenue to Rmb3.4b due higher overall ASP of Rmb18,518/sqm (+112%) arising from units handed over at Suzhou Industrial Park Royal Mansion and Suzhou Royal Palace. Accordingly, gross profit jumped 286% and margin expanded to 22.3% (+13.2 ppts). NAV/share at Rmb1.909.

*Challenger Technologies: 4Q16 net profit plunged 46% to $4.1m, partially hurt by a $1.1m provision for impairment on investment in a last mile delivery company. Revenue sank 13% to $83.4m amid weaker physical retail operations for the IT products and services segment, while EBIT margin narrowed 3.1ppt to 6.1%. Raised final DPS by 0.05¢ to 1.6¢, bringing full-year payout to 2.7¢ (FY15: 2.65¢). NAV/share at $0.2324.

*GKE: With reference to the recent surge in share price, the group disclosed that some of its substantial shareholders are in preliminary talks relating to a potential acquisition of their shares.

*EuroSports: Entered non-binding MOU for the proposed acquisition of SS Ventures (SSV), the operator of taxi hailing app Fly Taxi in Hong Kong. The acquisition will be carried out in four tranches, where the group will buy a 10% stake in SSV for US$3m in the first tranche.

Profit warning:
- Dyna-Mac
- Healthway Medical Corp
- AEI Corp