SG Market (08 Nov 17)

MARKET OVERVIEW
- The market could see some profit taking in bank stocks as investors rotate to second tier property and gaming names such as UOL (Buy, TP $9.43), GuocoLand (Buy, TP $2.75) and Genting Singapore (Buy, TP $1.35).
- Technically, topside resistance for STI is seen at 3,460, with underlying support at 3,360.

SECTOR WATCH
*Tourism/Hospitality
- Singapore 2Q visitor arrivals and tourism receipts grew 5% to 4.2m and $6.4b, with stronger takings from shopping (+6%) and entertainment & gaming (+5%), while accommodation held steady.
- This could spell better times for retailers and leisure operators such as Genting Singapore and Straco.
- However, hotel room revenue in 2Q17 remained weak (-1.8%) despite the overall increase in occupancy rate to 84% (+1.1ppt) and higher RevPAR of $194 (+1.7%), as the segment was dragged by a drop in RevPAR for mid-tier hotels (-1.5%).

CORPORATE RESULTS
*CapitaLand
- 3Q17 core net profit of $204.5m (-18.8%) came in ahead of expectations.
- Revenue rose 9.7% to $1.51bm on higher contributions from Singapore development projects and rental revenue from newly acquired/opened shopping malls and serviced residences, but was partially offset by lower handover of units to in China.
- It also booked $112.5m of portfolio and reval gains.
- Net gearing expanded to 0.43x (2Q17: 0.39x).
- Trades at 29% discount to its RNAV/share of $5.25.

*SIA
- 2QFY18 net profit soared 193% to $189.9m, surpassing estimates.
- Revenue of $3.85b (+5.3%) was lifted by higher pax load factor of 81.8% (+1.9ppt), but yield (-3.1%) remained weak, while cargo was boosted by better freight carriage (+5.4%) and yield (+9.1%).
- Operating margin doubled to 6% on sharp drop in fuel hedging loss, lower aircraft maintenance & overhaul costs and reduced rentals on leased aircraft.
- Raised interim DPS to $0.10 (1HFY17: $0.09).
- Last traded at 0.9x P/B.

*ST Engineering
- 3Q17 net profit surged 67% to $128.4m in absence of a $61.1m one-off charge for its specialty vehicle business in China, falling in line with estimates.
- Revenue inched 1% higher to $1.62b as stronger growth in aerospace (+8%) and electronics (+6%) was doused by the weak marine (-22%) and land systems (-5.4%) divisions.
- Operating margin expanded 3.9ppt to 9% on a turnaround in land systems unit.
- Secured $1.1b of new contracts, keeping its order book at $13.3b (2Q17: $13.5b).
- Guided for flat revenue and pretax profit in FY18.
- Trading at 21.7x FY17 P/E.

*Perennial
- 3Q17 net profit soared to $16.9m (2Q16: $0.4m), boosted by a $25.9m gain on bargain purchase arising from its acquisition of United Engineers (UE).
- However, revenue slumped 41.8% to $20.4m on absence of sales from TripleOne Somerset following divestment of its entire 20.2% stake in Mar '17, but was partly offset by a one-off consultancy fee related to the UE transaction.
- Accordingly, gross margin expanded 18ppt to 70%.
- NAV/share at $1.636.

*Riverstone
- 3Q17 earnings came in line as net profit rose 15.1% to RM34.3m.
- Revenue jumped 12.5% to RM187.8m on increased demand for both its healthcare and cleanroom gloves.
- Gross margin expanded 6.6ppt to 27.1% on better product mix and lower cost of raw materials.
- However, bottom line was partly weighed by a FX loss of RM2.3m (3Q16: RM3.2m gain).
- Phase 4 expansion plan is on track, which will raise annual production capacity to 7.6b (+23%) by Dec 2017.
- Trades at 18.3x forward P/E.
- Maybank KE last had a Hold with TP of $1.05.

*Civmec
- 1QFY18 net profit plunged 38.6% to $3.8m, despite higher revenue of $140.3m (+34%) on a ramp up in projects.
- The weak earnings were due to a contraction in gross margin to 7.2% (-7.5ppt) due to a cost reallocation exercise.
- Order book increased to $627m from $610m in Jun '17.
- NAV/share at $0.3587.

*BHG Retail REIT
- 3Q17 DPU climbed 9.3% to 1.41¢, bringing 9M17 DPU to 4.15¢ (+3.5%).
- Gross revenue increased 7% to $16.5m from higher rental reversion and increased occupancy, while NPI grew at a faster clip to $10.5m (+10.5%) on VAT reform.
- Portfolio occupancy edged higher to 99% (+0.1ppt q/q), while aggregate leverage stood at 32.5% (+0.1ppt).
- Trades at a 3Q annualised yield of 7.6% and 0.9x P/B.

*OKP
- 3Q17 net profit dived 62.4% to $0.7m on margin contraction.
- Revenue dipped 3.6% to $27.1m, weighed by a 5.7% drop in contribution from the core construction segment, although partly offset by a 147.4% surge in maintenance.
- However, gross margin shrank to 9.8% (-4.7ppt) on additional costs associated with the PIE work site collapse and a $0.3m penalty relating to a separate work side accident in Sep '15.
- Bottom line was partially supported by higher associate/ JV contribution (+39.1%), although pared by higher taxes (+29.3%).
- Order book slipped to $288m (2Q17: $299m), with projects extending till 2020.
- Trades at 17.9x forward P/E.

*TalkMed
- 3Q17 net profit declined 17.2% to $7.1m, as revenue slumped 17.7% to $14m.
- The drop in revenue was due to reduced patient visits following the suspension of key oncologist Dr Ang Peng Tiam, who was suspended from end Jul '17 for an eight-month period.
- Bottom line was supported by lower associate loss at Hong Kong Integrated Oncology Centre of $0.4m (3Q16: $1.5m loss), but pared by higher other operating expenses (+83.3%).
- Last traded at 28.2x forward P/E.

*Mun Siong Engineering
- Turned around to 3Q17 net profit of $0.8m (3Q16: $0.4m loss), boosting 9M17 earnings to $1.5m (+571%).
- Quarter revenue dropped 40% to $16.3m from lower volume of project work completed.
- However, gross margin spiked to 14.3% (3Q16: breakeven) on additional billings for project work.
- Notably, net cash position ballooned to $30.5m (+67% q/q) translating to 78% of market cap, as net operating cash flow was boosted by working capital changes.
- Last traded at 0.65x P/B, and 0.14x on ex-cash basis.

*Ellipsiz
- Turned around to 1QFY18 net profit of $0.2m (1QFY17: $1.2m loss).
- Revenue grew 13% to $11.4m, lifted by higher contributions from Taiwan and China.
- Gross margin remained flat at 23.4% (+0.3ppt).
- Bottom line was bolstered by lower operating expenses (-35%) and absence of $1.1m in impairment losses, pared by FX loss of $0.3m (1QFY17: nil).
- Last traded at 17.8x forward P/E.

*Singhaiyi
- 2QFY18 net profit surged 59% to $6.2m, elevating 1HFY18 earnings to $24.4m (+217%).
- Quarter revenue soared 8x to $106.7m, mainly contributed by the completed executive condo project The Vales.
- Gross margin collapsed 31.5ppt to 13.5% on a significant shift in sales mix towards lower margin project in property development segment.
- Bottom line growth was also lifted by an absence of $2.5m of one-offs, but weighed by a $1.7m drop in associate profit.
- Last traded at 0.7x P/B.

*Sinwa
- 3Q17 net profit leapt 19% to $1.7m, lifting 9M17 earnings to $6.1m (+4%).
- Quarter's revenue jumped 35% to $44.1m on stronger marine and offshore supply business in Singapore and Thailand.
- However, gross margin narrowed 2ppt to 22.5% amid stiff market competition.
- Bottom line growth was slowed by a $0.35m drop in FX gain.
- NAV/share at $0.2203.

*Hatten Land
- 1QFY18 net profit jumped 63.2% from a low base to RM3m, mainly thanks to increased interest income of RM2.1m (QFY18: RM0.2m).
- Revenue increased 5% to RM56.5m on higher progressive sales recognised from Harbour City project.
- Gross margin expanded to 37% (+1.5ppt) on the change in revenue mix.
- Group has unrecognised revenue of RM760m (Jun: RM662m) as at 30 Sep.
- NAV/share at RM0.1669.

*AusGroup
- Turned around to 1QFY17 net profit of A$3.1m (4QFY16: A$2.1m loss) on lower admin expense (-46%) and absence of consulting and arrangement fee of $1.3m.
- Revenue surged 53.6% to A$153.7m on increased contributions from core projects in the energy and process sector.
- Gross margin slipped 0.4ppt to 7.4%.
- Bottom line was also supported by lower finance cost of $3.3m (-21.9%) and a net gain on partial debt restructure of $0.5m.
- NAV/share at A$0.021.

NEUTRAL NEWS
*OCBC
- With AVIC Trust's recent private placement, OCBC's interest in the trust has been diluted to 17.27% from 19.99%.
- As a result, AVIC Trust is no longer an associate of OCBC.
- Trades at 1.33x P/B.

*QAF
- Proposed listing of its subsidiary, Rivalea, on Australian Securities Exchange will be put on hold given the current market conditions.
- Trades at 7.3x trailing P/E.

*Imperium Crown
- Appointed Asia Fund Space as a strategic adviser to improve its network of investors in China.
- Asia Fund Space will engage Chinese investors through roadshows and presentations.
- Last traded at 0.92x P/B.

*Tee Land
- Entered into 11 option-to-purchase agreements to acquire a freehold land at 35 Gilstead Road in Singapore for $72m.
- Site has an area of 3,527.7sqm and Tee Land plans to build a block of residential apartments.
- Trades at 0.6x P/B.