SG Market (05 Jul 17)

MARKET OVERVIEW
- The market is likely to open weaker on risk-off sentiment in the wake of North Korea's missile test and as investors await fresh catalysts from the upcoming 2Q results season kicking off in mid-month.
- Yield plays and defensives such as the S-REITs and telcos could find some investor interest.
- Technically, the STI is still range-bound but could test its immediate support at 3,190 after breaching below its 50-dma. Topside resistance remains at 3,275.

POSITIVE NEWS
*CapitaLand
- Wholly owned The Ascott is acquiring an additional 60% stake (currently 20%) in Quest Apartment Hotels for A$193m ($203m) to become the largest serviced residence operator in Australasia.
- Quest operates under a franchise model with 180 properties in Australia, New Zealand and Fiji.
- The acquisition will boost Ascott's portfolio by over 11,000 units to more than 67,000 units across 507 properties in 124 cities globally and puts it on track to exceed its target of 80,000 units by 2020.
- It also acquired its first serviced residence in Brisbane for A$24m. The 100-unit Quest Cannon Hill will be developed on a turnkey basis and is slated to open in 2018.
- MKE last had a Hold rating with TP of $3.75.

*Sanli Environmental
- Secured four new contracts worth a total of $26m.
- Scope involves a series of engineering, procurement and construction works at water treatment plants and operations & maintenance project at a water reclamation plant for both the public and private sectors.
- The new contract wins bring its order book to $125.1m, and are expected to have material positve impact on its revenue in FY3/18.

*Genting Hong Kong
- Suspension of gaming license at Resorts World Manila has been lifted, and gaming operations have resumed.
- The loss-making group is trading at 0.5x P/B.

NEGATIVE NEWS
*Japfa
- Prices of Indonesian live broiler birds in Jun slipped to Rp18,501 (-3.5% y/y, -0.5% m/m), while day-old chicks were at Rp4,500 (-8.5% y/y, +1.2% m/m).
- The mixed price performance came despite the Ramadan period when prices typically surge.
- Trading at 8.9x forward P/E in line with its 51%-owned PT Japfa Comfeed.

*Cheung Woh Technologies
- Warned that it expected to report a loss for 1QFY18, affected by weak sales of its HDD components
- 1QFY18 results to be released on or before 14 Jul '17.
- Trading at 18.1x trailing P/E.

*Shanghai Turbo
- Employees at its Changzhou factory submitted a letter of plea to local authorities to end the illegal occupation of the factory premises by former management.
- Plans to restart operations by mid-Jul and expects significant losses in 2Q17 due to the factory closure.

NEUTRAL NEWS
*SIA
- Launched a new loyalty programme, the HighFlyer, aimed at letting smaller corporates earn points while employees continue to chalk up KrisFlyer miles.
- Carrier aims to chalk up more business-related travel that is usually more resilient to economic cycles.
- MKE last had a HOLD with TP of $9.70.

*Trendlines
- A medical product developed by its most valuable portfolio company (MVP) is on track to launch in 2018.
- The rights to the product were sold to an acquirer back in Nov '14, and is currently in the midst of establishing a high-volume manufacturing facility.
- Group is expected to receive dividend, as the MVP receives royalty payments when sales of the product commence.
- The loss-making group is trading at 0.7x P/B.