SG Market (23 Feb 17)

The market is likely to stay on its upward path following headline earnings beat from City Dev, Genting S'pore and Sembcorp Marine.Regional bourses are in the red in Tokyo (-0.2%), Seoul (-0.1%) and Sydney (-0.4%).Technically, the STI is trading within its uptrend channel bounded by topside resistance at 3,130 and support at 3,080.

Stocks to watch:
*City Dev: 4Q16 net profit slumped 40.6% to $243.8m due to absence of sales under its profit participation scheme and lower JV contribution following the completion of residential development projects. However, FY16 earnings of $653.2m (-15.5%) still beat consensus estimate. Quarter revenue rose to $1.17b (+36.5%), underpinned by a surge in property development sales (+147%) arising from the handover of units at Phase 1 of Suzhou Hong Leong City Center. Declared higher final and special DPS totalling $0.12, bringing FY16 payout to $0.16 (FY15: $0.12). NAV/share at $10.22. MKE last had a Hold with TP of $9.42.

*Sembcorp Marine: Headline 4Q16 net profit staged a turnaround to $34.3m (4Q15: $536.9m loss), bringing FY16 earnings to $78.8m, (FY15: $289.7m loss), beating estimates, but underlying results were weak. Quarter revenue fell 37.5% to $829.9m on rig delivery deferment and drop in repair business. Bottom line was mainly lifted by a FX gain $63.7m, and absence of writedowns. Net order book, excluding Sete Brasil drillships, shrank to $4.7b (3Q16: $5.2b). Final DPS of 1¢ brought FY16 payout to 2.5¢ (FY15: 6¢). MKE last had a Sell with TP of $1.00.

*Genting Singapore: Swung into 4Q16 net profit of $159.2m (4Q15 net loss: $7.75m), lifting FY16 earnings to $266.3m (+254%), above street estimates. Quarter revenue rose 2% to $557.7m on the back of improved gaming revenue (+7%) from higher rolling win rate and a revised strategy to focus on better margin businesses, but offset by an 8% dip in non-gaming revenue to $158.5m. EBITDA margin expanded to 41.9% (+8.8ppt) from improved cost control and lower bad debt provisions. Final DPS of $0.015 took full year DPS to $0.03 (FY15: $0.015). MKE upgrades to Buy with raised TP of $1.10 (+38%).

*Best World: 4Q16 net profit soared 231% to $12.3m, on higher revenue of $61.8m (+51%) from continued strength in direct selling (+34%) and impressive growth in exports (+197%) to China. This brought FY16 earnings to $34.6m (+242%) surpassing street estimate of $30.3m. Final DPS raised to 3¢, bringing adjusted FY16 payout to 4.6¢ (FY15: 1.6¢). Proposed a 2-for-1 share split. MKE maintains Buy with higher TP of $2.34 (+8%).

*Ezion: Remained in 4Q16 net loss of US$66.6m (4Q15: US$63.5m loss), dragging FY16 into a loss of US$33.6m (FY15: US$36.8m profit). For the quarter, revenue dropped 14.3% to US$72.6m due to a reduction in charter rates and an unexpected delay in completion of modification and upgrade for its service rigs. Accordingly, gross margin crumbled by almost half to 12.1% (-11.7ppts). NAV/share at US$0.6343..

*Breadtalk: FY16 net profit jumped 50.4% to $11.4m, lifted by divestment gains of investment securities, higher government grant and JV contribution. However, revenue edged lower to $615m (-1.5%) on weaker turnover for Food Atrium due to several premature outlet closures in China, as well as reduced contribution from the restaurant division. EBITDA margin widened 1.2ppt to 13.6% on tighter cost controls and productivity gains from bakery due to the rising proportion of franchise outlets. Raised final DPS to 2¢ (4Q15: 1¢), lifting FY16 payout to 3.85¢ including a special DPS of 1.35¢ paid earlier (FY15: 1.5¢).

*Riverstone: 4Q16 net profit fell 3.2% to RM36m, bringing FY16 earnings to RM120.4m (-4.9%), coming in at the higher end of estimates. Although quarter revenue jumped 19.3% to RM183m on increased volume of gloves sold, the effects were largely negated by reduced gross margin of 26.3% (-5ppt) arising from lower ASPs and a shift in sales to lower-margin healthcare gloves. Final DPS of RM0.0519 brings FY16 DPS to RM0.0649 (FY15: RM0.0645). NAV/share at RM0.7482.

*Cityneon: FY16 net profit made a significant jump to $6.7m (FY15: $0.9m), but still missing street estimates. Revenue inched 0.3% to $96.8m, as increased shows led to higher income from exhibition services (+11.1%), but was offset by reduced contributions from experiential environment (-15.8%) and event management (-70.8%). Gross margin expanded to 34.4% (+10.3ppts), resulting from increased profitability of the new intellectual property rights business, Victory Hill Exhibitions, acquired in Sep '15.

*Soilbuild Construction: 4Q16 net profit narrowed 37.6% to $3.5m dragged by higher tax expenses and weaker revenue of $89.4m (-8.8%). Gross margin narrowed 2.2ppt to 6% amid lower profitability from on-going HDB projects and higher construction costs. Orderbook depleted to $385.7m (FY15: $639m). Maintained final DPS of 0.5¢, but trimmed special DPS to 0.75¢ (4Q15: 1¢), resulting in lower full-year payout of 1.75¢ (FY15: 2¢). NAV/share at $0.1465.

*Rotary Engineering: FY16 net profit plummeted 73% to $11.4m from lower FX gains and absences of disposal gains and write-back on impairment. Revenue fell 29% to $233.9m as major projects has been completed, while gross margin remained steady at 24%. First and final DPS slashed to 0.5¢ (FY15: 1.5¢). NAV/share at $0.283..

*Delfi: 4Q16 net profit surged 357% from a low base to US$3.6m, on firmer revenue of US$105.6m (+5.6%) driven by sales from its own brands (+9.1%), although agency brands (-1.1%) slipped. Additionally, key Indonesian market benefited from a 6% appreciation in the Rupiah. Accordingly, gross margin expanded 7.6ppt to 38.4% on the shift in mix, as well as increased selling prices and cost control efforts. Hiked final DPS to 1.35¢, resulting in a full-year payout of 3.18¢ (FY15: 2.86¢).

*Fu Yu: 4Q16 net profit jumped 44.4% to $5.6m, mainly boosted by a positive FX swing of $5.2m. However, revenue contracted 3.5% to $48.5m on a general slowdown in customer demand. Gross margin narrowed 2.4ppt to 17.3%, while the bottom line was weighed by increased admin expenses from staff and IT system upgrades, as well as an absence of tax credit. Cash pile remained high at $105.6m, or 63.7% of current market cap. Maintained final DPS of 1¢ and full-year payout of 1.5¢. NAV/share at $0.2305.

*Kim Heng O&M: 4Q16 net loss worsened to $12.9m (4Q15: $1.5m loss), dragged by an $8.3m impairment of fixed asset. From the industry downturn, revenue tumbled 45% to $7.5m on low demand for rig maintenance and absence of sales on vessels and newbuild. Hence, first and final DPS slashed to 0.07¢ (FY15: 0.3¢). NAV/share at $0.129.

*Fragrance Group: FY16 net profit plunged 89% to $7.5m, weighed by a $26m drop in fair value gain on investment properties and a spike in finance costs (+40%). Revenue sank 58.4% to $118.7m due to a lower number of property development projects and reduced rental income due to higher vacancy. NAV/share at $0.155.

*Cache Logistics Trust: Acquiring freehold warehouse in Laverton North, Australia for A$22.3m, or a NPI yield of 7.4%. The property has a gross lettable area of 20,723 sqm and is master leased to Spotlight for a remaining term of 4.5 years, with two 6+6 renewal options. The deal is expected to complete by Mar '17.

*Vallianz: Agreed with trade creditors to settle $7.6m in payables via the issue of ordinary shares in Vallianz. A total of 13 trade creditors will subscribe for 380.6m new ordinary shares at $0.02/share, representing 8.8% of enlarged share base.