SG Market (27 Jul 17)

MARKET OVERVIEW
- Banks will come into focus following the stellar 2Q results from OCBC. Currently, DBS has the cheapest valuation with 1.21x P/B, followed by UOB (1.26x) and OCBC (1.29x).
- Technically, the STI could break upwards to test its next resistance at 3,360. Underlying support is at 3,275.

CORPORATE RESULTS
*OCBC
- 2Q17 net profit of $1.08b (+22%) trumped estimates as non-interest income surged 34% to $1.05b, driven by life assurance (+123%), wealth management (+45%), investment banking (+72%) as well as other income (+34%) .
- Net interest income climbed 7% to $1.35b on 11% loan growth but NIM was compressed by 3bps to 1.65% (1Q17: 1.62%).
- Provisioning jumped 93% to $169m with NPL ratio at 1.3% (2Q16: 1.1%, 1Q17: 1.3%) and Tier 1 CAR at 1.3%.
- Interim DPS unchanged at $0.18.
- NAV/share of $8.73 translates to 1.29x P/B.

*CRCT
- 2Q17 DPU crept 0.4% higher to 2.62¢, in line with estimates, as distributable income of $23.3m (+4.3%) was diluted by an enlarged unit base.
- Revenue jumped 14.5% to Rmb59m mainly on contribution from recently-acquired CapitaMall Xinnan in Sep '16, while NPI rose at a slower pace to Rmb40m (+12.6%) due to additional property tax arising from the change in tax basis in China.
- Occupancy rate was stable at 96.2%, while aggregate leverage narrowed to 35.3% (-1.1ppt q/q).
- NAV/unit of $1.58.

*China Aviation Oil
- 2Q17 as net profit rose 4.1% to US$24.6m, taking H17 earnings to $49.9m (+4.4%) or 50.5% of full year consensus estimate,
- Revenue jumped 21.5% to US$3.67b primarily due to higher oil prices as total supply and volume traded fell 4% to 8.39m tonnes.
- Volume for middle distillates rose 2.1% to 4.98m, of which jet fuel accounted for 3.99m tonnes (+7.3%) but that for other oil products ditched 11.7% to 3.41m tonnes.
- Gross margin dipped to 0.29% (2Q16: 0.33%) on lower optimisation gains from jet fuel trading but other income soared 276% to US$1.2m from higher bank interest income.
- Share of profits from associates declined 5.5% to US$18.3m due to lower contributions from Pudong (US$16.1m), which was attributable to a weaker CNY to the USD.
- NAV/share at US$0.788.

*Lian Beng
- 4QFY17 net profit climbed 5.3% to $31.9m, bringing full-year earnings to $53.2m (-48.3%).
- FY17 revenue tumbled 36.8% to $281.7m, mainly dragged by construction (-70.3% to $103.5m) and ready-mixed concrete (-21.1% to $56.2m), but was shored by property development ($87.8m, FY16: $0.2m) and investment ($10.2m, FY16: $1.1m).
- Gross margin expanded 14ppt to 26.6% on profit recognition upon TOP of 65% owned Mandai Foodlink industrial development project.
- Bottom line was hurt by a significant drop in income from associate (-83.6% to $10.2m) and JV (-85.2% to $5.6m) following completion of development projects in FY16.
- Final DPS was raised to 1.25¢ (FY16: 1¢) but there was no special dividend (FY16: 1¢), bringing FY17 payout to 2.25¢ (FY16: 3¢).
- NAV/share at $1.172.

*Samudera Shipping
- 2Q17 net profit rose 7.9% to US$2m in tandem with higher revenue of US$71.2m (+7.4%).
- Top line saw improvement in container shipping (+9.9%) from increased volume, but outweighed by weakness in bulk & tanker division (-10.6%).
- Gross margin was relatively stable at 7.4% (-0.1ppt).
- Bottom line was lifted by lower marketing (-15.5%) and admin (-9.6%) expenses.
- NAV/share at US$0.4461.

POSITIVE NEWS
*Oxley/Lian Beng/KSH Holdings
- 40:20:20:20 consortium with Apricot Capital will acquire HUDB site Serangoon Ville for $499m in a collective sale.
- The consortium intends to apply for leasehold extension for the 27,583.9 sqm site to 99 years for redevelopment.

NEGATIVE NEWS
*Noble Group
- Flags a whopping 2Q17 net loss of US$1.7-1.8b on reduced risk positions amid credit constraints.
- This would cut its NAV/share by almost half to $2.13, still putting it on distressed P/B of 0.27x.
- Fire sale of its assets continues with the group selling Noble Americas Gas & Power for US$248m and seeking buyers for its oil liquids business to pare down debt over the next two years.
- Hard-pressed to turn profitable by 2019.

NEUTRAL NEWS
*ST Engineering
- 50:50 JVCo with Marubeni has set up two new SPVs in Ireland and the UK.
- The JVCo will support its engine leasing business.

*CDL Hospitality Trust
- Disclosed that its 20-for-100 rights issue was 2.2x oversubscribed.
- The new units are expected to be credited and commence trading on 2 Aug '17.