SG Market (13 Apr 17)

The local market is likely to range trade amid simmering geopolitical tensions and lack of local catalysts ahead of 1Q earnings season. Defensives and safe-haven assets such as gold and JPY are expected to gain strength.

Regional markets opened mostly lower in Tokyo (-0.9%), Seoul (+0.1%) and Sydney (-0.6%).Technically, immediate resistance for the STI is found at 3,210, with downside support at 3,160.

Stocks to watch:
*Economy: 1Q17 GDP growth eased to 2.5% (est: 2.6%, prior: 2.9%), but is expected to remain modest for the year. MAS keeps zero appreciation path of SGD and neutral policy stance for extended period and zero appreciation path of SGD to support the economic recovery. Leaves 2017 inflation estimate at 0.5-1.5% and core CPI at 1-2%.

*SPH: 2QFY17 net profit dipped 1.2% to $53.5m, bringing 1H17 earnings to $99.2m (-26.7%), making up just 41% of full year consensus estimate. Operating revenue fell 8.2% to $238m from weak core media business (-11.9%) due to lower advertising sales (-16.8%), but partly shored by stronger contributions from property (+1.3%) and others (+6.5%). Bottom line was cushioned by a $9.5m gain in investment income to $16.7m and improved contributions from associates and JVs. Interim DPS was shaved to $0.06 (2QFY16: $0.07). Business conditions remain challenging in view of the uncertain economic outlook and the continuing disruption of the media industry. NAV/share at $2.08.

*Soilbuild Business REIT: Lower 1Q17 DPU of 1.489¢ (-4.4%) was weighed by payment of property and lease management fees in cash instead of units, but results still came slightly above estimates. Gross revenue and NPI rose to $21.9m (+9.2%) and $19.2m (+11.7%) due to new contribution from Bukit Batok Connection, acquired in Sep '16. Distributable income of $15.6m (+6.6%) rose at a slower pace amid a jump in finance costs (+19%). Portfolio occupancy ticked up 2.2ppt q/q to 91.8%, with a stable WALE of 3.4 years. Aggregate leverage was steady at 37.5%, with average debt cost of 3.37% (1Q16: 3.25%) and tenor of 2.6 years. NAV/unit at $0.72.

*Lian Beng: 3QFY17 net profit plunged 83.5% to $2.9m, bringing 9MFY17 earnings to $21.2m (-70.7%), following the completion of property development projects by associates/JVs in May '16. For the nine months, revenue tumbled 57.4% to $156.2m on weakness in construction and ready-mixed concrete segments, but gross margin improved 13.5ppt to 25.2% from higher profit recognition in construction. Net gearing spiked to 0.86x from 0.45x at end-FY16 due to loans drawn down for property acquisitions. NAV/share at $1.1141.

*GKE Corp: 3QFY17 loss deepened to $0.9m (3QFY16: $0.7m loss) on a surge in admin costs (+45.3%) due to the acquisition of TNS Ocean Lines and production ramp-up at its ready-mix concrete plant (Wuzhou Xing Jian). Revenue jumped 73% to $16m due to stronger contributions from chemical warehouse operator (Marquis Services) and concrete manufacturing, as well as maiden contribution from port operations (TNS). Gross margin contracted to 20.4% (-7.4ppts) on a change in sales mix, while bottom line was weighed by loss-making vessel chartering JV. NAV/share at $0.123.

*Tuan Sing: Exercised a call option for a 4,046.6 sqm plot of vacant freehold land, earmarked for residential use at 1 Jalan Remaja for $47.8m. At a plot ratio of 1.92, the group estimates that the site can potentially yield ~100 residential units.*Ley Choon: Clinched two contracts worth a total of $2.88m from PUB for trial trenching works for deep tunnel sewerage system, as well as supply and installation of water connection works.

*Addvalue Tech: Proposed placement of 103.8m new shares to eight investors, including Alan Wang, Julian Yap and Ron Tan, at $0.039 apiece to raise net proceeds of $3.8m, which will be used for the development of space programme (60.5%) and working capital (39.5%)..

*Ocean Sky: Entered equal JV with C.I.A.C Investment, and Centra Properties to jointly acquire, develop and manage a proposed mall project, comprising 71 shophouses in Kandal Province, Cambodia.

*AsiaPhos: Issued a positive profit alert in light of stronger ASPs of mined phosphate in 1Q17 as well as stronger sales volume.

*ISR Capital: Auditor RT LLP has issued a disclaimer of opinion for its FY16 results, drawing attention to recoverability of a $3.5m loan made to Tantalum as well as the group’s ability to continue as a going concern.

*AIMS AMP Capital REIT: Credit agency S&P has reaffirmed the REIT's BBB- investment rating with a stable outlook.