SG Market (17 Feb 17)

The market is likely to maintain its upward climb on the back of another takeover news by Indonesia's Riady family and better-than-expected 4Q GDP growth as well as UOB results.

Regional bourses opened lower in Tokyo (-0.7%), Seoul (-0.4%) 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:
*Economy: 4Q GDP of 2.9% beat expectations (est: +2.5%, prior: 1.8%) propped up by a strong manufacturing output. This lifted 2016 GDP growth to 2.0% (2015: +1.9%), higher than MTI's forecast range of 1-1.5%. For 2017, MTI has maintained a GDP growth estimate of 1-3%.

*UOB: 4Q16 net profit slipped to $739m (-6.2% y/y, -6.6% q/q) but FY16 earnings of $3.1b (-3.5%) beat street forecast of $3.05b on higher fee income and surprise drop in bad debt charges. For the quarter, net interest income of $1.28b (-0.1% y/y, +3.7% q/q) was pressured by NIM of 1.69% (4Q15: 1.79%, 3Q16: 1.69%) but offset by strong loan growth (+8.9% y/y, 3.9% q/q). However, non-interest income of $753m (-6.2% y/y, -7% q/q) was weighed by reduced trading and investment income, overshadowing higher credit card and wealth management fees. Notably, provisions contracted to $131m (-31.4% y/y, 29.5% q/q) on a release in general allowance. NPL ratio held steady at 1.5% (4Q15: 1.4%, 3Q16: 1.6%), with Tier-1 CAR at 13% (4Q15: 13%, 3Q16: 13.4%). Maintained final DPS of $0.35, bringing FY16 payout to $0.70 (FY15: $0.90 including special DPS of $0.20). NAV/share at $18.82.

*OUE/IHC: OUE has launched an unconditional cash offer for IHC at $0.106/share, after sealing a deal to acquire 35.77% of IHC from Oxley executives Ching Chiat Kwong, Low See Ching and two related parties, taking its stake to 57.6%. OUE intends to maintain the listing status of IHC but may take it private if it gets control of >90% of the medical group.

*CapitaLand: Acquiring an accretive operating portfolio of office and retail assets in Tokyo, Japan, for ¥49.7b ($620.1m). The purchase of three offices and one retail property is estimated to contribute an additional $25m or 2.9% of FY16 earnings. This will enlarge its total asset size in Japan by 39% to $2.5b. MKE last had a Hold with TP of $3.66.

*SIIC Environment: 4Q16 net profit of Rmb170.3m (+42.3%) brought FY16 earnings to Rmb454.9m (+26.2%), topping full year street estimate of Rmb446.7m. For the quarter, revenue surged 122% to Rmb1.13b on increased construction activities (+266%) and higher operating and maintenance income (+79%). Gross margin contracted 13.9ppts to 23.2% on the shift in sales mix, while bottom line was lifted by a fair value gain from associate Longjiang Group of Rmb155.4m. Declared a first and final DPS of $0.01 (FY15: nil). NAV/share at Rmb2.6462.

*Chip Eng Seng: 4Q16 net profit surged 52.5% to $14.9m. Revenue of $250m (+62.5%) was lifted mainly by development business (+97.6%) from the progressive recognition of High Park Residence, while construction (+31.4%) benefitted from more HDB projects. However, gross margin compressed 9.3ppts to 18.3% on a shift in mix, but bottom line was bolstered by a $5.4m fair value gain, lower impairment loss and the absence of fair value loss on investment properties. Maintained its first and final DPS of 4¢. NAV/share at $1.23.

*Singapore O&G: FY16 net profit leapt 64.8% to $8.8m, as revenue soared 74.7% to $28.7m on the new dermatology segment and increased patients for O&G and cancer-related segments. Bottom line was further lifted by a $0.3m grant from the government (FY15: $0.2m). NAV/share at $0.1747..

*Rickmers Maritime: Booked a 4Q16 net loss of US$48.4m (4Q15: US$129.6m), mainly from a vessel impairment of US$48.1m (4Q15: US$126.3m). Revenue plunged to US$14.3m (-41%) amid a persistently depressed chartering market. Notably, the group is struggling to repay US$197.7m loans due 31 Mar '17 to HSH Nordbank and DBS, as well as its $100m MTN expiring on 15 May '17. Rickmers still remains in talks with its lenders and note holders on a debt restructuring. NAV/unit halved to US$0.21, but a further impairment may wipe out the entire book of financing is not obtained.

*Overseas Education: FY16 net profit tanked 64.8% to $5.3m, while revenue slipped 5.4% to $91.8m as a result of lower student enrolments. Bottom line exacerbated by a 1.4% increase in total expenses (excl. depreciation), while depreciation costs jumped 51.7% stemming from the new campus. Final DPS of 2.06¢ brings full year DPS to 2.75¢ (unch). NAV/share at $0.365.

*Singapore Medical Group (SMG): Entered into a strategic collaboration with Korean healthcare provider CHA Healthcare, on joint participation in future development and investment opportunities, projects and regional operational support in North Asiaand South East Asia. In relation, CHA will take up a 8.8% stake in SMG via the placement of 30m new shares at $0.50 apiece.

*Stratech: Proposed renounceable 2-for-1 non-underwritten rights issue at $0.10 each, intended to repay debt and strengthen its financial position.

*Zico Holdings: Launched an online legal services platform through its newly acquired subsidiary ShakeUp Online. Services include providing SMEs with high quality legal documents that are easy to understand and use.

*Profit warnings:
- SMJ International
- China Medical
- Kim Heng
- Anchor Resources
- Top Global