SG Market (07 Jul 17)

MARKET OVERVIEW
- The market is likely to open weaker following the US swoon and spike in global bond yields on worries that central banks (Fed, ECB, BOE) might look to tighten liquidity.
- Technically, the STI remains pinned within its 3,190-3,275 trading range.

SECTOR WATCH
*Property
- URA has put up a Beach Road commercial site with GFA of 88,313 sqm for sale at a minimum bid price of $1.138b ($1,197psf of GFA).
- Tender was triggered after a developer committed to the opening price and is in line with MKE's expectations of more aggressive land banking by developers.
- Strong bids for this land parcel will benefit property companies with large Singapore office exposure.
- Separately, Guocoland will be looking to tap on improved property sentiment when it launches its latest residential development, Martin Modern on 22 Jul.
- MKE is Positive on property developers with UOL (Buy, TP: $9.05) as the top pick.

POSITIVE NEWS
*HC Surgical Specialists
- Its 40:40:20 JVCo, HSN Healthcare has entered into a 55:45 JV with four doctors to manage Nex Healthcare in a $1.9m deal.
- Nex will acquire the pharmaceutical business and medical managed services of Northeast Health Int'l.
- Currently trades at 24.2x trailing P/E versus 29.1x for industry peers.

*AVIC Int'l Maritime
- To provide engineering and construction support services to Xiamen Shipbuilding Industry XSI for the Viking Line LNG-fuelled ro-pax vessel newbuilding.
- The contracts with XSI are worth a total €11m over an estimated period of 12 months.

NEGATIVE NEWS
*Sembcorp Marine
- Further extended the delivery deferral of its semi-submersible drilling rig, the West Rigel to North Atlantic Drilling (NADL) to 6 Jan '18. Delivery has been delayed since Dec '15.
- In the event neither party is able to sell the asset, it will form a 77:23 JV with NADL for joint ownership of the rig.
- Forward P/E valuation of 35.1x is steep, largely supported by hopes of a rebound in crude oil prices and FLNG contract wins.

*M1
- MyRepublic has set rumours of a potential takeover to rest as the former fourth telco aspirant plans to be the second MVNO telco in Singapore by leasing bandwidth.
- Currently trades at indicative yield of 6.1%.

*Yuuzoo
- Commenced talks with the subsidiaries of logistics provider, Cinema Europe on a country-to-country basis despite having an exclusive option to buy the holding company.
- No further details or deadline was provided on potential deals.

NEUTRAL NEWS
*Vallianz:
* Proposed 1-for-1 rights issue at $0.02 apiece has been enlarged to 4.48b new shares from 3.6b,
* Each new rights share will come with two free detachable warrants,and each warrant has the right to subscribe for one new share at $0.02.
* Rights issuance is expected to raise up to $179m.

*ESR-REIT / Natural Cool
- ESR is divesting 87 Defu Lane 10 to Natural Cool for $17.5m, implying 1x P/B.
- The property is a six-storey light industrial building with GFA of 109,920 sf and remaining land tenure of 33 years.
- Subject to HDB's approval, the sale is expected to complete in 3Q17.
- ESR-REIT is trading at FY17e 6.8% yield, 0.95x P/B ; Natural Cool is loss-making and trading at 0.96x P/B.

*Olam
-Secured revolving credit facility worth US$1b in Europe.