SG Market (16 Jun 17)

MARKET OVERVIEW
- Investors are likely to sit on the sidelines as soft US economic data, Trump and Fed worries, as well as domestic politics weigh on confidence.
- Local tech and oil names may suffer another bout of weakness as US tech selloff worsens, while crude oil held below US$45/bbl.
- Technically, momentum indicators are flashing bearish near term signals, with the STI poised to re-test its 3,228 support line. Below that, the next line of defence is at 3,188. Upside resistance is capped at 3,275.

*POSITIVE NEWS
*SIA
- Group passenger load factor rose 3.4ppt to 77% as traffic (+6.5%) outpaced capacity (+1.8%) growth.
- Load factor for parent on routes to Americas (+3.3ppt), Europe (+9.3ppt), West Asia and Africa (+4.6ppt) climbed the most.
- Load factor for SilkAir (+0.8ppt to 70.3%) and budget carrier subsidiary (+1.5ppt to 81.4%) also improved.
- Cargo load factor grew 4.2ppt to 66.5%.
- Trading at 0.9x P/B, at lower end of historical valuation range.

*HRnetGroup
- Saw robust demand for its IPO; offer of 89.5m new shares at $0.90 each was 14.3x oversubscribed.
- Separately, cornerstone investors Aberdeen, Affin Hwang, Credit Suisse, en-Japan inc, FIL, Meiji Yasuda, TechnoPro will take up 103.9m new shares.
- The group is the largest Asia-based recruitment agency with a 20.5% market share in Singapore.
- Trading debut today with listing market cap of $920m and 22.4x trailing P/E vs Asian industry average of 28.4x.

*Low Keng Huat
- 1QFY18 net profit surged 65% to $5.4m, helped by a $0.6m fair value gain on financial assets and lower costs.
- Revenue rose 7% to $16.9m on increased development sales to $6.4m (+256%) from sale of two office units at Paya Lebar Square (fully sold) and four residential units at Parkland Residences (one unit left).
- Investment income soared more than 4-fold to $2.7m due to reduced losses from Westgate Tower and higher contributions from AXA Tower.
- Hotel and F&B business declined 35.8% to $6.1m, mainly due to lower rates and occupancy at Duxton Perth and absence of contributions from Duxton Saigon, which was disposed in 1QFY16.
- Going forward, the group is targetting to launch 50-unit Kismis Residences in 2QFY18, while 200-unit Perumal is in the planning stage.
- Last traded at 0.7x P/B.

*Silverlake Axis
- Won a contract from an insurance trade association to develop and deliver a digital platform for life insurance and takaful insurers in Malaysia.
- The platform will be able to integrate with new digital insurance platforms and be the source for greater insights into the industry.

*Yongnam
- Bagged four contracts worth $36.2m for projects in Singapore comprising:.
- Two structural steelwork projects for Evonik's Jurong island plant and a proposed commercial development.
- Two specialist civil engineering contracts for Changi Airport's three-runway operations and Thomson-East Coast Line.

*Pacific Radiance
- Secured US$45.3m worth of new contracts, including options for ten offshore support vessels, to support projects in Asia and Middle East.
- Management opines that market conditions will remain challenging even as global spending on exploration and production is expected to rise.

*Mermaid Maritime
- Won two contracts worth a total of US$4.3m comprising:.
- 16-day subsea pipeline freespan rectification project for a national oil company in Thailand.
- Two-year contract to offer site survey & offshore navigation services in Indonesia for an international oil company.

NEUTRAL
*Hiap Hoe
- Strenghtening recurring income base with the acquistion of Holiday Inn Express Trafford City, Manchester, UK.
- Purchase consideration of £26.3m is on par with its book value.
- Trading at 0.45x P/B.

*Oceanus
- Entered into an MOU with WSRC to expand its abalone and seafood business in China, particularly the distribution of its seafood products.
- WSRC has agreed to purchase 250 cartons of canned abalones worth $250,000 and is expected to set up a retail outlet in Chengdu, China to sell its products.
- The outlet is expected to commence operations in FY17.

*Innopac
- Entered into an MOU to acquire a 75% stake in Dongwoo Bioenergy from Low Hyon Young for $0.8m in cash.
- Deal includes an option to acquire a further 24% stake for $0.4m through the issue of 400m shares at 0.1¢/share.
- Dongwoo produces wood waste pellets from sawdust for biomass power plants and will be primarily sold to South Korea.