SG Market (17 Aug 17)

MARKET OVERVIEW
- The market could see some respite after FOMC policy makers hinted of a slower pace of interest rate hikes amid weak inflation. But this is not favourable for banks, which are also embroiled in a widening debt crisis besetting several O&G service providers.
- Technically, the STI closed near its support at 3,275 following the formation of a bearish engulfing candle on Mon. A move below this level would take it to the next support at 3,190. Topside resistance remains at 3,360.

STOCK COVERAGE
*GuocoLand
- MKE initiated with a Buy and TP of $2.75, based on a 22% discount to its RNAV/share of $3.55.
- The under-researched mid-cap property developer, backed by Malaysian tycoon Quek Leng Chan, is seeing structural improvements to its financials, with scope for stronger recurring income, lower gearing and higher DPS post completion of its Tanjong Pagar Centre mixed development.
- With four residential project worth a combined gross development value of $5b, the group is a beneficiary of a Singapore property price rebound. Singapore accounts for 70% of its valuation.
- Trades at 44% discount to RNAV and 0.67x P/B.

CORPORATE RESULTS
*Avi-Tech
- 4QFY17 net profit surged 61.5% albeit from a low base to $2.2m, supported by a $0.6m swing to $0.1m tax credit.
- This brought FY17 earnings to $7m (+13%), meeting street estimates.
- Revenue grew 29.2% to $12m on growth across burn-in board manufacturing & PCBA services (+44.2%), burn-in services (+8.7%) and engineering services (22.2%).
- Gross margin contracted 2.2ppt to 27.4% on the change in sales mix.
- Net cash position improved to $23m (3QFY16: $19m) or $0.134/share.
- Declared 0.8¢ special DPS on top of an unchanged final DPS of 1¢.
- Trades at 9.8x forward P/E.

*Hatten Land
- 4QFY17 net profit tripled to RM59.7m as revenue rose 24% to RM130m on higher progressive sales recognised from Hatten City Phase 2 and Harbour City projects.
- Gross margin expanded to 56.2% (+18.7ppt) on reduced development costs stemming from the local government's assistance scheme.
- Bottom line was further boosted by a RM5.6m write-back of RTO professional fees and lower tax expense (-66.5%) due to over provision last year.
- Declared maiden interim DPS of 0.05¢.
- NAV/share at RM0.1654.

POSITIVE NEWS
*Keppel Corp
- Disposing its entire 100% stake in China residential development project Waterfront Residences, in Nantong, China, for Rmb1.43b ($292m).
- The divestment is in line with the group's strategy to recycle assets to seek higher returns to focus on high-growth cities in China.
- Post-sale, the group expects to recognise a $75m gain, which will lift pro forma FY16 NTA/share to $6.39 (+0.8%).

*Yanlord
- Moody's has reaffirmed the developer's Ba2 credit rating with stable outlook.
- The ratings agency cited Yanlord's better-than-average profitability and interest coverage, as well as its strong liquidity profile.
- Stock trades at 0.82x P/B.

*Spackman
- Secured 220m won (US$0.2m) contract to supply camera systems and equipment for upcoming crime thriller movie Deceptive Murder.
- Trades at 7.1x forward P/E.

*Creative Technology
- Awarded $36m in damages against China's Huawei for breach of contract over a failed nationwide wireless broadband project in 2012.
- The award will be recognised in 1QFY18 results if Huawei does not appeal against the judgement, which could raise its NAV/share by 33% from US$1.14 to US$1.516.
- The group has previously won a US$100m settlement with Apple in 2005 over patent infringements and another claim in 2015 involving its unit ZiiLabs' patents.
- Currently trades at 0.68x P/B.

*Sarine Tech
- South Korea's jewellery retail chain, Golden Dew, has launched the Sarine Profile in-store diamond display platform in all its 72 stores.
- The retailer will also adopt the Sarine Connect diamond jewellery search and display app.
- Trades at 17.3x forward P/E.

NEUTRAL NEWS
*Best World
- Conducted share buy-back of 114,000 shares at an average $1.365 apiece over 15-16 Aug.
- Stock trades at 14.1x FY18e P/E.

*Far East Group
- Selling a 60-year leasehold property at 5 Third Lok Yang Road for $3.9m, subject to regulatory approval.
- If completed, the sale will reap a disposal gain of $2.7m and proceeds will be used for the acquisition of a property at 51 Ubi Ave 3 and/or repay outstanding debt.
- Trades at 0.37x P/B.

*ISDN
- Formed 30:70 JV with HK-listed Comtec Solar Systems to set up and operate a 1MW distributed generation solar power station at ISDN's Suzhou industrial park in China.
- The industrial park will purchase power from the JVCo at market price for 20 years.
- Total investment into the JVCo will not exceed Rmb8m.