SG Market (04 Aug 17)

MARKET OVERVIEW
- Stocks may face some profit-taking as positive momentum wane following their ytd outperformance against regional peers and on SGD strength.
- Technically, the STI faces topside resistance at 3,360, with downside support is at 3,275.

CORPORATE RESULTS
*DBS
- 2Q17 net profit of $1.14b (+8%) met estimates on higher net interest income of $1.89b (+3%) on back of healthy 6% loan growth but NIM narrowed 7bps to 1.74% (flat q/q) due to lower SGD rates.
- Non-interest income declined 4.6% to $1.04b as growth in wealth management (+37%) was offset by lower investment banking fees (-51%), trading income (-4%), net income from investment securities (-18%) and absence of fixed asset gains.
- Provisioning fell 17% to $304m on reduced specific allowances, especially for Singapore
- NPL ratio ticked up to 1.5% (2Q16: 1.1%, 1Q17: 1.4%) but capital position remained strong with Tier 1 CAR at 14.4%.
- Declared higher interim DPS of $0.33 (+10%) reflecting management's confidence in its earnings and capital buffers.
- Trading at 1.26x P/B.

*Sembcorp Industries
- 2Q17 net profit slumped 36.1% to $55.3m, dragging 1H17 earnings of $174.4m (-10%) to 45% of full-year consensus estimate.
- Revenue climbed 23.2% to $2.28b, driven by higher utilities turnover (+75%) but partly offset by a weaker showing in the marine (-28%) segment.
- Earnings from utilities tumbled 42% to $43m, hit by a $33.9m refinancing cost of a thermal power plant in India.
- Marine earnings more than halved to $3.3m (-54%), hurt by lower contribution from rigbuilding and offshore platform projects, as well as FX translation loss.
- Interim DPS was cut to 3¢ (2Q16: 4¢).
- NAV/share at $3.85.

*Hongkong Land
- 1H17 underlying net profit jumped 32% to US$517m, meeting 55% of full-year consensus estimate.
- Revenue surged 65.8% to US$1.29b mainly on higher sales completion of residential and mixed-use projects in China and Singapore, as well as higher average rents from HK investment properties.
- Due to the shift in sales mix, operating margin contracted 18.9ppt to 39.3%.
- Maintained interim DPS of US$0.06.
- Last traded at 0.52x P/B.

*Ascendas Hospitality Trust
- 1QFY18 DPS climbed 1.6% to 1.31¢, bolstered by lower financing costs, but still missed expectations.
- Gross revenue rose 2.2% to $53.5m as stronger AUD and higher RevPar from Australian and Japanese assets was dented by lower rental income from Park Hotel Clarke Quay in Singapore.
- NPI slipped 0.3% to $22.3m on higher staff and commission expenses in Australia.
- Aggregate leverage crept up 0.5ppt to 32.7%, with average debt cost of 2.8% and tenor of 2.5 years.
- Last traded at 1Q annualised yield of 6.2% and 0.94x P/B.

*Lippo Malls Indonesia Retail Trust
- 2Q17 DPU rose 5.9% to 0.9¢, lifting 1H17 payout to 1.79¢ (+6.5%).
- Quarter revenue grew 6.6% to $49.9m on positive rental reversions (+13%) and acquisition of Lippo Mall Kuta.
- NPI climbed 8.6% to $46.8m (+8.6%) after it outsourced a new car park to an operator who would absorb all operating costs in return for a portion of the parking revenues.
- Portfolio occupancy ticked up 0.5ppt q/q to 94.3%, while aggregate leverage reduced by 1.6ppt q/q to 30.6%.
- Last traded at 2Q annualised yield of 7.9% and 1.23x P/B.

*OUE
- 2Q17 net profit tumbled 72.6% to $7.1m in the absence of an impairment write-back (2Q16: $27.8m).
- Revenue jumped 39.5% to $187.3m on higher unit sales at OUE Twin Peaks and new contribution from healthcare segment under IHC.
- Gross margin contracted 6.5ppt to 36.5% on the shift in sales mix.
- Bottom line was weighed by higher minority interest of $7.9m (+34.2%) arising from the dilution of interest in OUE Commercial REIT and consolidation of IHC.
- Maintained interim DPS of 1¢.
- NAV/share at $4.38.

*Mandarin Oriental
- 1H17 underlying net profit slumped 39% to US$15m, forming 26% of full-year street estimate.
- Revenue of US$286.7m (-0.5%) was largely flat as contribution from US (+31.9%) was pared by reduced takings in Europe (-16.5%) due to ongoing renovation works at Mandarin Oriental Hyde.
- This led to a 25.7% declined in operating profit to US$22.5m.
- Strategic review of the Excelsior Hong Kong remains ongoing.
- Maintained interim DPS of US$0.015.
- Last traded at 0.52x P/B.

*Hi-P Int'l
- 2Q17 net profit doubled to $15.1m despite absence of a $10.5m disposal gain, and turned around 1H17 earnings to $23.5m (1H16: $4.7m loss), 34% of full-year estimate.
- Revenue inched 2% lower to $279.5m, while gross margin widened 4.9ppt to 12.2% on higher operational efficiency and a favorable shift in product mix.
- Bottom line was also helped by utilisation of unused tax losses from prior years.
- Net cash position ballooned to $156.5m (FY16: 25.1m), or 19.4¢/share.
- Proposed interim DPS of $0.19 (2Q16: nil).
- Management guided flattish revenue but higher profits for FY17 on stronger 2H17 performance relative to 1H17.