SG Market (19 Jul 17)

MARKET OVERVIEW
- Market may take a breather to consolidate its big move after recent corporate buyouts with attention now focused on 2Q earnings releases.
- Topside resistance for STI is now seen at 3,360 with downside support at 3,275.

POSITIVE NEWS
*ST Engineering
- Aerospace arm clinched new contracts worth about $650m in 2Q17 (1Q17: $1.11b).
- Scope of work includes heavy airframe & engine maintenance, component repair & overhaul, freighter conversion.
- Trading at 21.7x forward P/E, above its 7-year historical average of 19.1x.

*Manufacturing Integration Tech
- Issued positive profit guidance for 1H17, after the group returned to profitability from its loss position in FY16.
- 1H17 sales expected to match FY16 turnover, buoyed by upturn in global semiconductor industry and impending new mobile handset introductions by industry leaders.
- 1H17 results scheduled for release on or around 4 Aug.

*Rowsley
- Entered non-binding term sheet with controlling shareholder Peter Lim (45.4% stake) to purchase healthcare firm Sasteria for up to $1.9b in all share deal.
- The proposed acquisition will be financed via issue 25.33b shares at 7.5¢ each. Sasteria owns and operates Thomson Medical Centre and has a 51.93% stake in KLSE-listed TMC Life Sciences.
- Prior to completion of the acquisition, Sasteria will acquire an additional 18.43% stake in TMC Life Sciences and is evaluating a possible acquisition of one or more medical practices to expand its offerings.
- Upon completion, the group will undertake a 2-for-1 bonus warrants issue with exercise price of 9¢, plus 1 piggyback warrant (exercise price: 12¢) for every bonus warrant exercised.

*mm2 Asia
- Proposed issue of up to $93m 3-year convertible debt securities at 2% per annum by wholly-owned MM Connect.
- MM Connect intends to use proceeds to fund its $184.3m acquisition of the 50% stake in Golden Village Cinema business in Singapore.
- The notes may be converted into shares, if an IPO is launched, at a 15% discount to listing price.

NEUTRAL NEWS
*Netlink NBN Trust
- IPO of 2.898b units was twice subscribed.
- Debut trading for the fibre broadband infrastructure provider at 3pm today.
- At IPO price of $0.81, Netlink offers FY18/19 yield of 5.43%/5.73%.

*CCT
- 2Q17 DPU of 2.27¢ (+3.2%) was in line with estimates.
- Post-acquisition of the remaining 60% stake in CapitaGreen in Sep '16, gross revenue surged 29.5% to $87.5m, while NPI rose at a slower pace to $69.1m (+14.1%) due to consolidation of CapitaGreen's expenses.
- Portfolio occupancy dipped slightly to 97.6% (-0.2ppt q/q), while aggregate leverage narrowed to 35.2% (-2.9ppt q/q).
- Management guided that pressure on rental revenue is expected to continue in 2018 given relatively high expiring rent base.
- NAV/unit rose 5.7% q/q to $1.85.

*SGX
- Introducing three adjustments to equities market structure as below:
1) Equities market will break from 12pm to 1pm.
2) Minimum bid size for securities priced between $1.00 and $1.99 will be increased to $0.01 from $0.005.
3) Forced order range will be widened to +/- 30 ticks from +/- 20 ticks.
- The adjustments will be effective from 13 Nov '17.

*Keppel T&T
- Proposed transfer of Keppel DC Singapore 4 (KDC4) at $170m to 70:30 JVCo Thorium DC, held between Alpha Investment Partners and Keppel Data Centres.
- Keppel Data Centres is a 70:30 JV between Keppel T&T and Keppel Land.
- Post-transaction, Keppel T&T's stake in KDC4 will decrease from 70% to 40.7%.
- Pro forma FY16 NTA/share will remain unchanged at $1.43, while EPS increased 2.1% to $0.193.

NEGATIVE NEWS
*M1
- Expect negative reaction after major shareholders abandoned the strategic review of their stakes and weak 2Q results.
- While 2Q17 results came in line, net profit plunged 20.8% to $32.5m on higher opex (+9.9%) due to higher handset (+19.7%) and wholesale costs of fixed services (+14.4%).
- Although service revenue was stable at $204.7m (+0.4%), ARPU slumped across the board and customer acquisition cost jumped 15.2%.
- Consequently, EBITDA margin compressed to 35.9% (2Q16: 40.3%, 1Q17: 39.2%).
- Interim DPS was cut further to 5.2¢ from 7¢.
- Management forecast lower FY17 earnings as competition heats up with the impending entry of another mobile player.

*Keppel REIT
- 2Q17 results met the low end of expectations, as DPU slid to 1.42¢ (-11.8%) on absence of 0.15¢ distribution of other gains.
- 2Q17 distributable income fell to $47.4m (-9.7%), partially due to lower rental support (-16.4%), interest income (-24.4%) and JV contributions (-9.4%).
- Both revenue and NPI slipped 1.7% to $39.8m and $31.9m respectively, weighed by weakness in Bugis Junction Towers.
- Portfolio committed occupancy edged up 0.4ppt q/q to 99.8%, with WALE of 6 years.
- Trading at FY17e yield of 5.3% and 0.83x P/B.
- Maybank KE downgrades to Hold from Buy, with unchanged TP of $1.18, after a 18% rally YTD.