SG Market (12 Sep 17)

MARKET OVERVIEW
- Market could rebound from oversold position after US stocks rallied to record close on easing of geopolitical tensions and less severe-than-expected impact from Hurricane Irma, but upside will be capped by lack of fresh catalysts.
- Technically, immediate support for the STI lies at 3,220, with overhead resistance at 3,275.

MACRO WATCH
*Economy
- Business sentiment among local companies remained upbeat although the outlook is easing for the final quarter of the year.
- The SCCB's Business Optimism Index slipped to +2.6ppt in 4Q17, down from +3.58ppt for the previous quarter.
- The manufacturing services and wholesale sectors emerged as the most optimistic sectors. But construction firms remained pessimistic, owing to the prolonged downturn in both private and public building activities.

CORPORATE RESULTS
*Stamford Tyres
- 1QFY18 net profit grew 24% to $1.9m, on higher revenue of $58.9m (+1.8%) due to improved sales in Australia.
- Gross margin improved to 26.7% (+1.3ppt) mainly from value-added activities at its retail chain and truck tyre centres.
- Bottom line was partially pared by FX loss of $0.4m (1QFY17: $0.2m gain) and higher operating lease rental (+21%), but mitigated by stronger JV contribution (+1.3%) and lower tax (-13.3%).
- Trades at 9.4x trailing P/E.

POSITIVE NEWS
*Frasers Centrepoint
- Marks its first foray into the UK market the acquisition of four business parks for £686m ($1.2b) and conditional agreement to acquire another business park.
- The four freehold properties (Winnersh Triangle in Reading, Chineham Park in Basingstoke, Watchmoor Park in Camberly, Hillington Park in Glasgow) have a total built area of 4.9m sf and are underpinned long term leases with WALE of 5.9 years to a diversified base of >400 tenants.
- Post-acquisition, the group will have $4.2b of assets (16% of total portfolio) in Europe.
- Pro forma FY16 EPS is expected to jump 7.3% to 15.37¢.

*Sembcorp Marine
- Secured hull carry over works worth US$145m from Tupi for the FPSO P-68 Tupi Project.
- Ytd new orders amounted to less than US$200m.
- Trading at 40.4x forward P/E and 1.3x P/B.

*CITIC Envirotech
- Investing Rmb365m for a 51% stake in two hazardous waste treatment facilities in Huizhou City, Guangdong, China.
- The first plant (Lixing EP) currently has a design capacity of 72,000 tpa and will be expanded to 149,000 tpa, while the second plant (Huilv EP) has a treatment capacity of 12,500 tpa.
- Funding will be via proceeds from its US$750m multicurrency perpetual securities and bank financing.
- Trades at 16.1x forward P/E.

*Golden Agri
- Divesting 36,874 sqm of office units in Sinarmas MSIG Tower, Jakarta to 48.4% owned associate of sister company Sinarmas Land for Rp1.41b (US$107.5m).
- The deal is expected to result in US$15m gain and is part of the group's plans to relocate backroom services out of the CBD.
- Last traded at 18.6x forward P/E.

*Vard
- Secured a contract of an undisclosed sum, to design and construct one expedition cruise vessel for Coral Expeditions of Australia.
- Delivery from its Vietnamese shipyard is slated for 1Q19.
- Last traded at 0.75x P/B.

*Hyflux
- Awarded US$16.1m in restitution for an engineering and procurement contract entered with SEPCOIII Electric Power Construction in Aug '09.
- Contract was for the development, design and manufacture of certain desalination units in Salalah, Oman.
- Trades at 0.62x P/B.

*Sarine Tech
- Its Sarine Profile digital diamond report will be rolled out across China by Soo Kee, under the Love & Co brand.
- The brand aims to establish 550 points-of-sale in China and Hong Kong by the end of its 5th year of operation.
- Trading at 16.2x forward P/E.

*Darco Water
- Part of consortium which includes Q2 A/S (Denmark) and PT Fitama Putra Mandiri, that secured a landfill gas recovery and conversion project in Semarang, Central Java, Indonesia.
- The contract involves a total investment of DKK21.5m ($4.7m) and is expected to be handed over in 4Q18. Profits will be shared equally among the three partners.
- Last traded at 8x trailing P/E and 1.1x P/B.

*Ziwo
- Received approval for a new capital markets services licence to conduct corporate finance advisory services in Malaysia.
- The new licence is subject to certain procedural conditions by 8 Dec.

*Smartflex
- Acquiring Asia Vets Holdings for $9.75m, to be satisfied by cash (70%) and new shares (30%).
- Of the new shares, 24% of which will be issued at $0.25 each, while pricing for the remaining 6% will be determined at a later date.
- The deal is subject to completion of a restructuring, including the transfer of veterinary assets and business from The Animal Ark Group into the target.

NEUTRAL NEWS
*United Engineers
- Closing date for the buyout offer from Perennial and Yanlord has been extended from 12 Sep '17 to 19 Sep '17.
- As at 11 Sep, the offerors received undertaking for 34.79% stake in UE.