SG Market (24 Jul 17)

MARKET OVERVIEW
- Market may head into some volatility ahead of FOMC policy decision and key corporate results in later half of the week from SIA, Sembcorp Marine, AREIT, OCBC and UOB.
- Technically, the STI is overbought and could pull back to underlying support at 3,275. Topside resistance is at 3,360.

SECTOR WATCH
*Property
- New executive condominium Hundred Palm Residences met an overwhelming response over the weekend with all 531 units sold out within seven hours of launch, fetching an average price of $826 psf..
- This raises hopes that the property market has regained its footing and reinforces MKE's view of a potential rebound in home prices.
- Positive on developers with UOL (Buy, TP $9.05) and City Dev (Buy, TP $12.05) as the best proxy plays.

CORPORATE RESULTS
*SATS
- 1QFY18 results missed expectations despite turning in higher core net profit of $57.3m (+3.2%) from increased associate/JV income (+27%).
- Revenue crept up 0.5% to $426.5m as improved gateway services (+5.1%) was offset by weakness in food solutions (-2.9%).
- Operating margin narrowed 0.3ppt to 12.5% on higher licensing fees (+24.9%) and others (+6.3%) comprising fuel, marketing and equipment maintenance.
- MKE last had a Hold with TP of $4.90.

*Cache Logistics Trust
- 2Q17 DPU fell 9.5% to 1.8¢ as distributable income dropped 8.8% to $16.3m owing to lower income from operations and legal fees arising from ongoing proceedings at 51 Alps Ave.
- Gross revenue dipped 0.7% to $27.9m following divestment of Cache Changi Districentre 3 in Jan and conversion of 40 Alps Ave from master lease to multi-tenancy as well as lower income from 51 Alps Ave due to legal issues. This was partially mitigated by better contribution from DHL Supply Chain ARC and Cache Cold Centre, both of which enjoyed higher occupancies.
- NPI declined 4% to $21.6m on higher property expenses.
- Portfolio occupancy rose 1.1ppt q/q to 98.3%, while aggregate leverage ticked 0.3ppt higher to 43.4%.
- Trading at 2Q annualised yield of 7.6% and 1.22x P/B.

*Rowsley
- Swung to 2Q17 net profit of $1.2m from $5.3m loss a year ago, mainly due to a $4.2m remeasurement gain.
- Revenue inched 1% higher to $22.5m amid a challenging real estate market in Singapore but supported by overseas markets as well as maiden sales from Squire Mech, which became a wholly-owned subsidiary in Aug 2016.
- Contributions from RSP India and Malaysia also turned around from a loss last year.
- NAV/share was almost flat at 8.63¢.

POSITIVE NEWS
*CapitaLand
- Acquiring an 80% stake in leading US accommodation provider Synergy Global Housing for US$33.7m ($46.7m) or 7.2x P/B.
- The deal will triple Ascott's US serviced residence portfolio to 3,000 and expand its global footprint to 70,000 units.

*Jasper Investments
- Appointed as the project manager for logistics and transportation of quarry dust for the Hong Kong International Airport Third Runway System.
- The one year contract, with the option for extension of an additional year, is expected to commence in Aug/ Sep.

*Mermaid Maritime
- Awarded two subsea contracts worth US$4.6m.
- One contract is from a new customer in the Middle East and is expected to commence in 3Q17, while the other came from an existing Indonesian client, and will commence in 4Q17.

*SUTL Enterprise
- 60:40 JV with UEM Land to construct, develop and manage a marina, marina club, hotel, recreation centre and other ancillary facilities.

NEGATIVE NEWS
*Singtel
- Credit ratings agency Moody's downgraded its senior unsecured ratings to A1 from Aa3, due to rising absolute debt levels.
- Outlook remains stable.

*mm2 Asia
- Proposed deal to acquire 50% stake in Golden Village Cinemas Singapore for $184.3m failed to obtain one of the conditions.
- The follows after Golden Screen, the owner of the other 50% stake rejected the deal.

*CSE Global
- Will pay US$12m as settlement for a potential civil liability to U.S. Department of the Treasury's Office of Foreign Assets Control.
- The alleged violations arose from payment in USD for rendering non-US goods to Iran.
- Consequently, CSE Global is expected to recognise a 2Q17 net loss arising from the one-off charge.

NEUTRAL NEWS
*Hatten Land
- Launched SATORI, a wellness-themed mixed development in Malacca, Malaysia, with estimated GDV of RM300m.
- The development has gfa of 570,400 sf, consisting 192 serviced suites, retail mall (85,250 sf), 336-room hotel and 50 other facilities.

*Azeus
- Among 49 companies that were awarded the standing offer agreement for quality professional services 4.
- The award allows Azeus to tender for various Hong Kong government IT professional services contracts of up to HK$15m in two years up till Jul '18.
- Group secured the offer agreement for the fifth consecutive term.