SG Market (10 Nov 17)

MARKET OVERVIEW
- Some profit-taking is likely following the overnight tumble on Wall Street on fears that the promised tax cuts could be delayed till 2019 and as the market rally extends into overbought territory amid a flood of corporate results.
- Technically, topside resistance for STI is seen at 3,460, with underlying support at 3,355.

CORPORATE RESULTS
*City Dev
- 3Q17 net profit dipped 8.3% to $156.1m, missing estimates as it was affected by lumpy recognition of project sales and disposal items.
- Revenue fell 6.5% to $863.1m due to lower contributions from property development (-21.8%) and rental properties (-3.3%) partially mitigated by increased hotel takings (+5%) due to recent acquisitions of The Lowry Hotel and Grand Millennium Auckland.
- Bottom line was hurt by the absence of one-off gain (3Q16: $49.5m), but was partially offset by a disposal gain of $38.6m from sale of an office building in Osaka.
- Trades at 12% discount to RNAV/share of $13.80.

*UOL
- 3Q17 core net profit grew 8% to $90.9m as higher minority interests (+391%) pared top line growth of 37% to $537.9m.
- This brought 9M17 core net profit to $270.5m (+8%) or 73% of the street's FY17 forecast.
- For the quarter, revenue growth was contributed by the consolidation of UIC. Excluding that, contributions from property development slipped 3% following completion of Riverbank@Fernvale in Mar '17 while hotel operations grew 5% from new contribution from Pac Pacific Melbourne acquired in Jul '17.
- Gross margin slipped to 31% (-2ppt) on accelerated depreciation expenses for Pan Pacific Orchard, which is due for redevelopment in 2Q18.
- Headline bottom line surged 7.1x due to FV gain of $542.1m on consolidation of UIC following the 4.23% stake acquisition from Haw Par.
- Trades at 20% discount to RNAV/share of $10.95.
- Maybank KE maintains Buy and raised TP by 12% to $9.85.

*GLP
- 2QFY18 net profit (ex-revaluation) jumped 40.6% to US$100.7m, bringing 1HFY18 core earnings to 59% of full-year consensus estimate.
- Quarter revenue rose 31.9% to US$281.7m, underpinned by fee income from financial services in China, rental growth as well as completion and stabilisation of China development projects.
- New and renewal leases grew 39% to 4.6m sqm, while rental growth remained strong with 4.6% increase in same-property income and 10.4% hike on renewal leases.
- Average lease ratio was stable at 91% (+1ppt).
- 1HFY18 development starts and completions were on track, at 25% and 49% of FY18 targets.
- Total fund management AUM stood at US$39b, of which 73% has been invested.
- Supported by buyout offer price of $3.38 against NAV/share of $2.62.

*SATS
- 2QFY18 core net profit rose 5% to $65.2m, bolstered by better performance of Indonesian and Indian associates.
- However, revenue slipped 0.8% to $434.8m on weaker takings from food solutions (-3.1%) as TFK in Japan declined 13% after Delta cut flights and Vietnam Air switched caterers.
- Bottom line was impacted by weaker operating margin of 14.1% (-0.4ppt) on higher licence fees (+24.2%) and other costs (+7.4%) consisting of fuel costs, FX losses and lower grants received.
- Maintains interim DPS of $0.06.
- Trades at 21.2x forward P/E.

*NetLink NBN Trust
- 1QFY18 net profit of $13m met expectations, but 4.9% above IPO forecast due to lower-than-expected operating expenses (-2.3%).
- Revenue was 1.2% below forecasts from lower installation revenue as the rate of migration, by non-fibre subscribers to fibre, was slower-than-expected.
- This was partially offset by higher-than-expected monthly recurring residential and non-residential connection revenue.
- EBITDA margin was 2.3ppt higher-than-expected at 72.2% on lower staff (-14%) and amortisation (-10%) costs.
- Net gearing at 14%.
- NAV/unit at $0.80.

*Frasers Centrepoint
- FY17 core net profit of $488.2m (+1.7%) met consensus estimate. Including fair value gain of $215.3m and other one-offs, headline net profit rose 15.4% to $689.1m.
- Revenue grew 17% to $4.03b, mainly due to the sale of two student accommodation and several residential projects in Australia, sale settlements of two Chinese projects and Vauxhall Sky Gardens project in UK.
- Gross margin narrowed 0.6ppt to 29.4%.
- Bottom line was bolstered by a $31.3m positive FX swing, $21.2m drop in net interest expenses, and $13.8m increase in associates/JV income.
- Net gearing held steady q/q at 0.7x.
- Final DPS of 6.2¢ maintained.
- Last traded at 0.83x P/B.

*Yangzijiang
- 3Q17 net profit surged 2.1x to Rmb866m, ahead of expectations, on fair value gains of investments at associates and absence of impairment loss.
- Revenue rose 13% to Rmb4.38b on higher volume of shipbuilding activities (+4%) and stronger trading business (+45%).
- But, gross margin contracted 7ppt to 15.4% due to stronger CNY against USD and increased raw material costs.
- Secured orders for 59 new vessels ytd worth US$1.59b, almost double that of 2016.
- Order book expanded to US$4.3b (2Q17: US$4b).
- Trades at 12.6x forward P/E.

*Noble Group
- Racked up another massive net loss of US$1.17b for 3Q17 as guided, mainly from asset sales and impairments.
- This took its 9M17 loss to a whopping US$3.05b.
- 3Q17 revenue fell 18% to US$1.46b as liquidity and credit constraints disrupted its trading business, leading to a 26% drop in volumes.
- Notably, operating cash flow turned positive US$295m but adjusted net debt/capital blew up to 73% and questions remain on how the group is going to deal with its US$3.7b net debt.
- Last traded at 0.25x P/B but risks further asset write-offs.

*Ho Bee Land
- 3Q17 results beat as net profit doubled to $54.4m.
- However, revenue slid 6.9% to $43.7m on lower sales recognition from two Australian residential development projects in Melbourne and Gold Coast, which outweighed growth in rental income.
- Bottom line was boosted by stronger associates & JV contributions from two China projects in Shanghai and Tangshan, and Eporo Tower in Melbourne.
- Last traded at a steep 39% discount to Maybank KE's RNAV/share of $4.23.
- House rates Buy with TP of $3.00.

*Fragrance Group
- 3Q17 net profit jumped 35% to $4.2m, as revenue soared 69.6% to $55.9m.
- Top line was bolstered by City Gate project in property development (59% to $45.1m), higher occupancy achieved from property investment (+23% to $5.8m), and $5.1m (3Q16: nil) contribution from hotel business.
- However, gross margin compressed 7.2ppt to 32.4% as profitability narrowed for the property development segment.
- Bottom line growth was also pared by substantial commission expenses for development projects and leasing of properties.
- Net gearing crept up to 0.9x from 0.8x in Jun '17.
- Last traded at 1.04 P/B.

*Banyan Tree
- Swung into 3Q17 net profit of $20.1m (3QFY16: $10.8m loss), mainly boosted by divestment gain arising from partial sale of hotels and assets in China.
- Revenue climbed 9% higher to $68.3m on completion of Cassia Bintan (Phase 1) and sold units progressively handed over.
- Overall unrecognised property sales stood at $132.4m (3Q16: $84.5m), of which 17% will be recognised in 4Q17.
- Over the next 12 months, group expects to open eight new resorts and 11 spas under management.
- NAV/share at $0.73.

*SBS Transit
- 3Q17 net profit surged 42% to $11.1m on improved operating leverage.
- Revenue rose 7.4% to $295m on higher contribution from bus services, following the transition to the bus contracting model and improved ridership from rail services.
- EBITDA margin expanded 2ppt to 13%, helped by lower other operating costs.
- Trades at 18.6x trailing P/E.

*SIIC Environment
- 3Q17 net profit grew 17.2% to Rmb110.2m, bringing 9M17 earnings of Rmb350.2m (+23%) to 70% of full year forecast.
- Quarter revenue more than tripled to Rmb1.36b on growth across construction (+16.1x to Rmb731.5m), operating & maintenance (+77.6% to Rmb385m) and finance income from concessions (+215% to Rmb180.7m).
- Gross margin declined to 25.6% (-20.2ppt) on the shift in sales mix.
- Bottom line was hit by higher finance costs (+269%) and weaker associate/ JV contributions (-25.6%).
- Last traded at 12.2x forward P/E.

*Food Empire
- 3Q17 results blew past expectations as net profit jumped 26.8% to US$7.4m, on a turnaround in associate income to US$0.2m (3Q16: US$0.7m loss).
- Revenue edged 2.7% higher to US$70.1m on improved sales in Russia (+2.1%), Indochina (+1.5%) and others (+34%) partially pared by weakness in Ukraine (-3.5%) and Kazakhstan (-29.2%).
- Operating margin expanded to 13.2% (+1.6ppt) on lower selling & distribution expenses (-16.5%).
- Bottom line was bolstered by a US$0.3m swing to FX gain of US$0.1m, but pared by higher taxes (+73.7%).
- Trades at 16.2x forward P/E.

*Memtech
- 3Q17 net profit jumped 26.5% to US$3.9m, with 9M17 net profit of US$10.4m (+360.7%) still ahead of expectations.
- However, quarter revenue slipped 0.5% to US$46.2m on weakness in consumer electronics (-8.8%) and telecommunication (-24.9%) segments, mitigated by growth in automotive (+17.3%) and industrial & medical (+11.8%) segments.
- Gross margin expanded to 18.4% (+0.7ppt) on increased automation and change in sales mix.
- Bottom line was boosted by lower sales & marketing expenses (-19%) and higher other operating income (+87.8%) on government incentives & subsidies.
- Trades at 11.1x forward P/E.

*Courts Asia
- 2QFY18 net profit crashed 74.7% to $1.5m, bringing 1HFY18 net profit of $7.6m (-49%) to just 29% of FY18 forecast.
- For the quarter, revenue slipped 1.4% to $176.5m as growth in sales from Singapore (+5.9%) was negated by a 19.7% decline in Malaysia on the weaker MYR as well as lower sale of goods and earned service charge income.
- Gross margin contracted to 34.2% (-1.7ppt) on promotions and lower credit sales in Singapore, but was offset by higher margins in Malaysia and Indonesia.
- Bottom line was hit by higher opex (+2.6%) and increased provisions for doubtful debts of $6.8m (+31.8%).
- Trades at 7.5x forward P/E.

*Vard
- 3Q17 net loss narrowed to NOK8m (3Q16: NOK80m loss), dragging 9M17 loss to NOK102m (9M16: NOK96m loss), vs full year loss estimate of NOK167m.
- Revenue improved 33% to NOK2.01b on high activity level at the Romanian and Vietnamese yards due to rapid progress on module carrier vessels projects for Topaz Energy and Marine and Kazmortransflot, and the ongoing construction on all six expedition cruise vessels contracted in 2016.
- EBITDA margin improved to 2.7% (+0.5ppt y/y, -0.1ppt q/q).
- Order book stood at NOK12b (2Q17: NOK12.88b).
- NAV/share at $0.32.

*Hyflux
- 3Q17 net profit collapsed to $0.5m (3Q16: $41.1m), dragging 9M17 earnings to $24.1m (-76%).
- Quarter revenue plunged 61% to $98m on lower EPC activities at TuasOne waste-to-energy project and Qurayyat Independent Water project in Oman.
- Bottom line would have been further hit if the $26.6m loss from the planned partial divestment of Tuaspring plant (announced Feb '17) is accounted for.
- Trades at 0.63x P/B.

*KrisEnergy
- 3Q17 net loss narrowed to US$25.6m (3Q16: US$31.6m loss).
- Revenue slipped 12% to US$39m on reduced sale of crude oil (-11%) and gas (-23%) due to lower production from the Wassana oil field in the Gulf of Thailand, but partly pared by higher ASPs.
- However, EBITDAX jumped 66% to US$7m, thanks to a 20% drop in adjusted operating cost.
- Notably, operating cash flow improved to US$12m (3Q16: US$4m).
- Trades at 0.45x P/B.

*CNMC Goldmine
- 3Q17 net profit slumped 45.8% to barely US$1m, shored up by a US$0.9m tax credit (3Q16: US$0.3m expense) on a partial reversal of deferred tax liability.
- For the quarter, revenue tumbled 44.3% to US$4.7m due to lower production volume of gold (-41.3%) and average realised gold price (-5.2%).
- Notably, group fell into an operating loss of US$22,673 (3Q16: US$2.2m profit), as all-in costs more than doubled to US$1,546/oz due to reduced production and sales volume of fine gold stemming from lower ore grades, as well as capex for the construction of a carbon-in-leach plant.
- Trading at hefty 71.1x forward P/E.

*Nordic Group
- Respectable 3Q17 results as net profit rose 23% to $4.4m, on a 25% growth in revenue to $26.8m from improved takings in both maintenance services (+83%) ad project services (+4%).
- Gross margin widened by 3ppt to 34% on a shift to higher-margin maintenance services.
- However, bottom line was slightly impacted by higher admin expense of $3.2m (+17%).
- Order book stood at $99.4m, providing revenue visibility up to FY2020.
- Trades at 15.5x trailing P/E.

*Singapore Shipping
- 2QFY18 net profit edged up to US$2.3m (+4.1%) on reduced operating costs, which lifted 1HFY18 earnings to US$4.9m (+27%).
- For the quarter, revenue slipped 3% to US$11.2m, mainly weighed by agency and logistics (-9.5%) segment, while ship owning (-0.5%) business stayed muted.
- Operating margin improved 1.4ppt to 27.6% on cost controls.
- Bottom line was also helped by a $0.1m dip in finance costs.
- Net gearing was stable at 0.75x as compared to 1QFY18.
- Last traded at 9.7x trailing P/E.

*APAC Realty
- 3Q17 net profit rose 7.2% to $5.5m, as revenue of $105.5m (+30.3%) on higher brokerage income due to increased market transactions for new home sales (+54% to $30.8m), as well as resale and rental of properties (+23.2% to $72.3m).
- Gross margin narrowed 1.3ppt to 12.9%, while growth in bottom line was also slowed by $1.1m of IPO expenses.
- Trades at 4.1x trailing P/E.

*Asia Enterprises
- 3Q17 net profit surged 69% from a low base to $0.3m, as revenue jumped 48% to $9.4m on increased ASP of steel products and higher sales volume to customers in O&M and construction sectors.
- Consequently, gross margin expanded to 25.4% (+0.5ppts).
- NAV/share at $0.271.

*Tiong Woon
- Swung to 1QFY18 net loss of $1.4m (1QFY17: $1.5m profit) amid a $1.2m drop in disposal gain and $0.9m adverse FX swing.
- Revenue tumbled to $23.5m (-32%) from fewer heavy lift and haulage projects and the substantial completion of an engineering services project in the Middle East.
- Gross margin held steady at 22%.
- Net gearing stood unchanged q/q at 0.46x.
- NAV/share at $1.0584.

*TA Corp
- 3Q17 net loss shrank to $4.2m (3Q16: $10m loss), bringing 9M17 losses to $15.2m (9M16: -$9.8m).
- 9M17 revenue rose 14.8% to $159m on broad-based growth across property development (+12%), real estate investment (+142%), construction (+6%) and lubricant & tyre distribution (+35%) businesses.
- Gross margin held at 18.7%.
- But, 9M17 bottom line was hit hard by $6.7m increase in fair value loss of investment properties and a $1.8m jump in provision for doubtful receivables.
- Net gearing increased to 1.57x from 1.49x in Jun '17.
- Construction order book depleted to $96m from $129m in Jun '17.
- Last traded at 0.58x P/B.

*The Trendlines
- 3Q17 net profit spiked 91.2% from a low base to US$3m, supported by lower operating, general and admin expenses (-10.8%).
- Revenue jumped 65.7% to US$6.8m mostly on fair value gains (+717%) in portfolio companies, as well as higher services income to portfolio companies (+22.6%).
- Bottom line was pared by a leap in tax expense to US$1.1m (3Q16: US$0.1m).
- Trades at 0.8x P/B.

*SUTL Enterprise
- 3Q17 net profit expanded 30% to $0.7m on lower staff (-1%) and utilities (-32%) expenses, which brought 9M17 net profit to $2.1m (+13%).
- For the quarter, revenue inched 1% higher to $6.5m on increased takings from membership related and management fees (+3%) and other income (+19%), but offset by weaker sales of goods & services (-1%).
- Pretax margin improved to 12.7% (-2.3ppt).
- Net cash position grew to $42.9m (2Q17: $41.8m), representing $0.497/share.
- Trades at 16.6x forward P/E and 1.15x P/B.

*GCCP Resources
- Turned around to 3Q17 net profit of RM0.3m (3Q16: RM2.2m loss).
- Revenue surged 2.6x to RM9.1m, underpinned by higher sales of crushed calcium carbonate stones of ground calcium carbonate (GCC), and precipitated calcium carbonate grades from the Hyper Act Quarries and Gridland Quarry.
- Gross margin expanded 5ppt to 50% on economies of scale from increased production of GCC limestone at Hyper Act Quarries.
- NAV/share at RM0.07.

*New Silkroutes
- 1QFY18 net loss deepened to US$0.6m (1QFY17: US$0.1m loss), despite a doubling in revenue to US$149.3m.
- The jump in top line was attributable to increased oil trades and contribution from newly acquired healthcare subsidiaries.
- However, gross margin nearly halved to 1.3% (-1.1ppt) on weak margin from the oil trading business.
- Bottom line was further impacted by higher personnel expenses (+110%) and other operating expenses (+206%).
- Trades at 1.05x P/B.

POSITIVE NEWS
*Sembcorp Marine
- Signed letter of intent with Statoil Petroleum worth US$490m, for EPC of newbuild FPSO hull and living quarters for the Johan Castberg field development.
- Trades at hefty 67.1x forward P/E.

*HRnet
- To acquire PT Rimbun Job Agency for the establishment of a new brand, HRnet Rimbun, to provide professional recruitment services in Jakarta.
- Jakarta will be the 11th Asian growth city for the group.
- Consideration price has yet to be finalised.
- Trades at 20.2x forward P/E.

NEGATIVE NEWS
*Profit warnings
- Hor Kew
- Hiap Seng Engineering

NEUTRAL NEWS
*Maxi-Cash
- Proposed renounceable non-underwritten 1-for-10 rights issue at $0.16 each.
- Estimated net proceeds of $14.4m earmarked for secured lending business ($10m) and the remaining for working capital.

*Jason Marine
- To grant a convertible loan of up to $0.75m to risk analytics solution provider Sense Infosys (SIS).
- The loan will enable SIS to further develop its business, while presenting an opportunity for the Jason Marine to further its stake in a complementary business with promising prospects.