SG Market (13 Nov 17)

MARKET OVERVIEW
- The market might take a pause after Wall Street's wobble last Fri, snapping an eight-week winning streak, while as investors digest the last batch of 3Q results this week, which will include Wilmar, Golden Agri and Sing Post.
- Technically, topside resistance for STI remains at 3,460, with underlying support at 3,355.

SECTOR WATCH
*Property
- Sales launch of Parc Botannia in Sengkang over the weekend saw sustained sales momentum.
- 70:30 JV between developers Sing Holdings and Wee Hur achieved a respectable average selling price of $1,270 psf for the 230 units sold.
- The healthy take-up underpins Maybank KE's Positive view on the Singapore residential sector.
- Among property counters, the house has Buy ratings on UOL (TP: $9.43), City Dev (TP: $12.05), GuocoLand (TP: $2.75) and Ho Bee Land (TP: $3.00).

CORPORATE RESULTS
*ComfortDelGro
- 3Q17 net profit reversed 8.2% to $80.1m, dented by private hire players, but met estimates.
- Revenue slipped 2.4% to $991.4m, on a smaller operating taxi fleet in Singapore and lower rentals from China, while bus and rail segments improved on transition to the bus contracting model and higher ridership, respectively.
- EBITDA margin narrowed 0.6ppt to 21.6% on higher staff costs (+3.3%).
- Bottom line was also weighed by unfavorable FX translation effects of $5.3m.
- Management is optimistic on its public transport business in Singapore and Australia, but is downbeat on the taxi and and related segments.
- Uber tie-up could be finalised this month. Maybank KE maintains Buy with TP of $2.40.

*UMS
- 3Q17 net profit doubled to $13.6m, blowing past expectations.
- Revenue surged 51% to $39.3m on solid sales of semiconductor systems (+61%) and components (+44%).
- Gross material margin improved 2ppt to 59% on higher proportion of component sales.
- Bottom line was also helped by lower depreciation (-23%).
- Maintained interim DPS of 1¢.
- Management is upbeat on strong order pipeline and expects cost savings from the migration of domestic production to Penang.
- Last traded at 13.1x forward P/E.

*Silverlake Axis
- 1QFY18 net profit plunged 81% to RM31.7m on absence of disposal gain from sale of shares in associate Global InfoTech (1QFY17: RM143.7m).
- Revenue declined 10% to RM114m on weaker contributions from software licensing (-86%) and software project services (-50%), as recently won contracts are still in early stages.
- Gross margin shrank 6ppt to 52% amid lower proportion of higher margin projects.
- Management expects project related licensing and services business to pick up in 2HFY18.
- Proposed interim DPS of 0.3¢ (1QFY17: 0.5¢) and special DPS of 0.5¢ (1QFY17: nil).
- Trades at 18.5x forward P/E.

*Asian Pay TV Trust
- 3Q17 DPU of 1.625¢ (unch) was in line with estimates.
- Revenue rose 6.5% to $84.5m mainly on positive FX effects. In constant TWD terms, contribution from all three segments improved across basic cable TV (+7.7%), broadband (+1.7%) and premium digital cable TV (+3.4%).
- EBITDA margin inched up 1.3ppt to 60.1%.
- Reaffirmed guidance for FY17 DPU of 6.5¢, implying 10.8% yield.
- NAV/unit at $0.85.

*HRnetGroup
- 3Q17 net profit jumped 20.2% to $10.7m, as revenue rose 7% to $97.5m on strong growth in flexible staffing business in Singapore.
- Gross margin contracted 1.9ppt to 35.3%, while operating margin held relatively steady at 14% (-0.2ppt).
- Updated that M&A work is on track and management expects to announce to series of further new projects.
- Trades at 20.1x forward P/E.

*Q&M
- 3Q17 net profit jumped 28% to $3.6m, buoyed by absence of portion to non-controlling interests (3Q16: $1.2m).
- However, revenue slumped 29.4% to $27.5m, mainly from the deconsolidation of Aoxin from a subsidiary to an associate in Apr '17, as well as lower takings from dental clinics (-11.8%) and dental equipment & supplies distribution (-54.6%).
- EBIT margin inched up 1.7ppt to 13.5%, lifted by new contribution from Aoxin of $0.7m.
- Trades at 32.5x forward P/E.

*QAF
- 3Q17 net profit plunged 62% to $7.4m, on flat revenue of $212m as higher bakery turnover in Philippines was offset by lower takings at Australian meat production unit due to reduced ASP from stiff competition.
- Operating margin shrank 5.9ppt to 3.6% on a broad-based cost increase, led by higher advertising and promotion expenses from the Philippines bakery business.
- Bottom line was dragged by $0.8m professional fees and $0.6m of doubtful debts.
- Trades at 7.9x trailing P/E.

*Cordlife
- Turned around to 1QFY18 net profit of $0.6m (1QFY17: $0.6m loss), thanks to absence of finance expenses (1QFY16: $1m) upon full redemption of its debt.
- Revenue climbed 13.2% to $16.6m from an increase in newborn deliveries (+6.3% to 6,700) as well as lower discounts given in India and Philippines.
- Consequently, gross margin expanded to 66.3% (+1.5ppt).
- Trades at 1.65x P/B.

*Straits Trading
- 3Q17 net profit declined 29.4% to $11.9m on a 2.7x jump in taxes to $2.6m.
- Revenue grew 16.5% to $132.1m on higher contribution from resources (+19.1%), but pared by weakness in real estate (-36.8%).
- Bottom line was impacted by a drop in other sources of income (-16%) from lower dividend income and reduced FV gains (-51.2%).
- Trades at 17.1x forward P/E.

*Haw Par
- 3Q17 net profit slipped 4.1% to $40.5m, dragged by a spike in expenses (+31.7%) from increased marketing activities and a negative $1.9m swing into FX loss of $1.5m.
- Revenue rose 7.4% to $53.4m, lifted by improved sales for Tiger Balm products.
- However, gross margin contracted 1.4ppt to 63.7%.
- Last traded at 18.8x forward P/E.

*Bukit Sembawang
- 2QFY18 net profit halved to $17.2m, dragging 1HFY18 earnings to $23.1m (-64%).
- Quarter revenue of $31.9m (-56%) was weighed by lower progressive revenue recognition from development projects.
- Gross margin narrowed 1ppt to 62.8%.
- Bottom line was buttressed by a lower effective tax rate of 6.6% (2QFY17: 17.6%).
- Trades at 1.25x P/B.

*GK Goh
- 3Q17 net profit grew 32% to $5.1m on improved operating margin (+4ppt to 9.9%).
- Revenue slipped 2% to $20.3m as growth in corporate services revenue (+6%) was negated by declines in investment (-8%) and other (-84%) income.
- Bottom line was further shored up by lower finance costs (-10%) and higher contributions from associates (+7%).
- Trades at 8.3x trailing P/E and 0.84x P/B.

*Hong Leong Finance
- 3Q17 net profit soared 84.2% to $23.6m, bringing 9M17 earnings of $60.9m (+58.7%) to 80% of FY17 estimate.
- Net interest income surged 48% to $47.4m on the back of higher loan yield and lower interest expense (-29.9%), albeit on a reduced loan base.
- Bottom line was dragged by the provision of doubtful debts and wealth management product of $2.8m (3Q16: $0.7m reversal).
- Last traded at 16x forward P/E and 0.71x P/B.

*KSH
- 2QFY18 net profit slumped 48.9% to $4.1m on a 42.7% drop in associate/JV contribution.
- This brought 1HFY18 net profit of $10.1m (-44.3%) to just 25% of full year estimate.
- For the quarter, revenue dived 64.1% to $24.5m on weakness in construction (-65.6%), partially caused by project delays.
- Operating margin inched 2.5ppt higher to 11.5% from a sharper decline in cost of construction (-68.9%).
- Shaved interim DPS to 1¢ (2QFY17: 1.25¢).
- Construction order book at $600m, while attributable share of progress billings from associates and JVs stood at $126.8m.
- Separately, KSH announced a LOI from 35%-owned Rio Casa Venture, for a $266.3m construction contract.
- The contract entails construction of 9 blocks of apartments and 22 units of strata landed houses. Construction on the showflat is expected to commence by end Dec '17 with the main development to commence by Nov '18 for 40 months.
- Trades at 13.2x forward P/E.

*Tiong Seng
- 3Q17 net profit spiked to $5.3m (3Q16: $1.9m) on improved operating leverage, and elevated 9M17 earnings to $19.6m (+94%).
- 9M17 revenue grinded up 1% to $554.2m as solid improvement in core construction business (+22%) was doused by weaker property development sales (-79%).
- Gross margin narrowed 3.3ppt to 4.1% on a shift in project mix.
- Bottom line was lifted by $3.5m drop in net finance cost, $2.3m positive swing in JV contribution, as well as lower selling and other expenses.
- Construction order book depleted to $636.9m from $730m in 2Q17.
- Trades at 7.2x trailing P/E.

*Stamford Land
- 2QFY18 net profit soared 68% to $9.9m, on a 2.8x leap in revenue to $135.3m, underpinned sale settlement of 131 apartments at Macquarie Park Village and firmer hospitality takings amid a stronger AUD.
- Operating margin narrowed 3.7ppt to 12.6%, as the lower margin property development business accounted for higher proportion of sales.
- Bottom line growth was eased by a $2.4m adverse FX swing and higher effective tax rate of 30% (2QFY17: 18.9%).
- Trades at 10.8x trailing P/E and 0.88x P/B.

*Yeo Hiap Seng
- 3Q17 net profit slumped 64.9% to $1.8m, as revenue slipped 7.4% to $87.7m on weakness in the F&B segment due to general market weakness, competitive pricing and sales disruption in Cambodia as new distributors ramp up sales.
- Gross margin contracted 6.4ppt to 31.2%
- Bottom line was further weighed by higher admin expenses (+25.3%), although offset by disposal gain of $4.1m.
- Trades at 4.8x trailing P/E.

*Neo Group
- Fell into 2QFY18 net loss of $0.5m (2QFY17: $3m profit) on absence of $1.8m disposal gain.
- Revenue grew 27.5% to $45.3m on stronger contributions from food retail (+14.4%), food manufacturing (+2.8%), supplies & trading (+270.5%), but partially pared by lower takings from food catering (-1.9%).
- Bottom line was further impacted by higher purchases (+62.5%) and staff costs (+13.6%).
- Trades at 22x forward P/E.

*Willas-Array
- 1HFY18 net profit leapt 312.8% from a low base to HK$60.2m, bolstered by a positive HK$15.3 swing into FX gain of HK$10m due to the stronger CNY against USD, as well as a reversal of doubtful debt of HK$3m.
- Revenue jumped 13.8% to HK$2.35b on strong demand industrial (+33%), automotive (+24.4%), electronic manufacturing services (+52.7%) and home appliance (+16%), but was partially offset by weakness in the dealer segment (-13.8%).
- Gross profit widened to 8.4% (+1ppts) on a shift in mix towards higher-margin products.
- Bottom line was partially offset by higher distribution costs (+22.1%) and staff cost (+3.2%).
- Trades at 4.9x trailing P/E.

*PEC
- 1QFY18 net profit inched 2% higher to $1.4m, despite a 2% slip in revenue to $81.3m following substantial completion of projects in FY17.
- However, gross margin expanded to 24.1% (+3.7ppts) due to higher-margin maintenance projects.
- But, bottom line was partially weighed by a negative FX swing of $2.4m into loss of $0.5m.
- Trades at 10.9x trailing P/E.

*ISOTeam
- 1QFY18 net profit surged 54.6% from a low base to $1.5m, supported by lower admin expense (-12.9%) due to reduced staff cost.
- Revenue jumped 20.9% to $25.1m on higher takings from addition & alteration (+34.9%) and repairs & redecoration (+62.7%), but was partially offset by a slump in coating & painting (-32.5%).
- Gross margin contracted to 17.7% (-4.8ppt) from the shift to lower-margin work.
- Trades at 7.2x forward P/E.

*Dasin Retail Trust
- 3Q17 DPU of 2.23¢ was 12% above IPO forecast, lifting 9M17 DPU to 5.23¢.
- Revenue and NPI of $18.7m and $15.9m exceeded estimates by 21% and 25% due to higher takings from newly-acquired Shiqi Metro Mall, increased turnover rent from the initial portfolio and the recognition of future rent escalations on straight-line basis for leases.
- Portfolio remains fully occupied, while aggregate leverage stayed flattish at 31.5% (-0.3ppt q/q).
- Trades at an annualised 3Q yield of 11.2% and 0.53x P/B.

*Sino Grandness
- 3Q17 net profit jumped 16.3% to Rmb193.3m, lifted by other operating income and absence of negative fair value change of convertible bonds.
- Revenue rose 10.8% to Rmb1.23b on higher takings from beverage (+12.9%) and domestic canned products (+14.3%), but partly offset by a slip in overseas sales (-1.3%).
- Gross margin contracted to 36.8% (-4.5ppt) on higher cost of raw materials.
- Notably, despite improved sales, operating cash flow was significantly weaker with an outflow of Rmb234.9m (3Q16: Rmb13.2m inflow).
- Nevertheless, management still remains cautiously optimistic on its prospects.
- Trades at 3.6x trailing P/E.

*Lum Chang
- 1QFY18 net profit surged 186% from a low base to $2.7m, mainly due to increased government grants (+521%).
- However, revenue slumped 44% to $57.3m on lower sales from substantially completed construction projects as well as fewer ongoing ones.
- Gross margin more than doubled to 19.3% (+10.3ppt) on cost savings derived from two substantially completed projects.
- Bottom line was aided by lower FX losses (-64%), but pared by increased JV loss of $0.3m (1QFY17: $19,000 loss) and higher taxes (+50%).
- Outstanding order book stood at $542.6m.
- Trades at 7.3x trailing P/E.

*Aspen Group
- 3Q17 net profit of RM24.9m (3Q16: RM1.1m) brought 9M17 earnings to RM43.4m, or 56% of full-year estimate.
- Quarter's revenue rose 6x to RM137.9m, bolstered by on-going projects Tri Pinnacle, Vervea, Vertu Resort, as well as land sale for a private medical centre in Aug '17.
- Gross margin widened 3ppt to 40%.
- Bottom line was boosted by RM1.3m of positive swing in net finance income following a debt restructuring for its recent IPO, but was pared by RM7m of listing expenses.
- Total unbilled sales of RM1.015b as at Sep '17.
- Last traded at 6.8x forward P/E.

*PACC Offshore
- Narrowed 3Q17 net loss to US$9.8m (3Q16: US$12.9m loss) mainly on a turnaround in JV contribution to US$11.8m (3Q16: US$0.2m loss).
- Revenue jumped 27% to US$52.8m from better contributions from offshore supply vessels (+25%), offshore accommodation (+53%) and harbour services and emergency response (+7%) segments, but was partially pared by lower takings from the transportation & installation (-37%) unit.
- Fell deeper into gross loss of US$4.3m (3Q16: US$1.4m loss) due to higher operating expenses stemming from POSH Arcadia, while POSH Xanadu and two light construction vessels remained idle.
- Bottom line was pressured by higher taxes (+504%).
- Trades at 0.72x P/B.

*Mewah International
- 3Q17 net profit leapt 27.4% to US$13.4m, shored by US$4.9m gain from fixed asset disposal and a US$1.3m drop in impairment loss.
- However, revenue slipped 2.4% to US$739m, as weaker sales volumes in the bulk segment (-21.8%) outweighed Ramadan-driven volume in the consumer segment (+46.6%). Overall average selling prices rose 7%.
- Operating margin narrowed 0.4ppt to 4.8%.
- Proposed an interim DPS of 1¢ (3Q16: nil).
- Trades at 12.8x trailing P/E.

*Sri Trang Agro-Industry
- Turned around to 3Q17 net profit of Bt166.7m (3Q16: Bt90.8m loss), lifted mainly by a surge in other gains to Bt253.1m (3Q16: Bt43.9m) and FV gain of Bt47.9m (3Q16: nil).
However, revenue slipped 5.6% to Bt18.22b from lesser sales volume (-20%), despite stronger ASP (+9.6%) of natural rubber.
- Gross margin improved 1.8ppt to 7.2%.
- Bottom line was partially pared by weaker associate/ JV contribution (-26.2%) and higher net finance costs (+132%).
- NAV/share at Bt14.9395.

*GSH
- 3Q17 net profit of $2.1m (3Q16: $0.1m) was partly boosted by $1.2m of profits from new associate Henan Zhongyuan, a food logistics hub.
- Revenue slid 26% to $20.9m, following the development completion of GSH Plaza, which outweighed progressive revenue from Eaton Residences project in Malaysia and improved taking from the hospitality segment.
- Gross margin widened 19ppt to 71% on the change in revenue mix.
- Bottom line also benefitted from lower distribution and finance expenses, as well as lower fair value loss.
- Trades at 14.9x trailing P/E.

*Top Global
- Slumped deeper into 3Q17 net loss of $1.5m (3Q16: $0.1m loss) on weaker gross margin (-6.1ppt to 13.7%).
- Revenue grew 27% to $51.6m on higher takings from property development (+31%), hospitality (+45%) and golf & country club (+4%), which curtailed weakness in rental income (-83%).
- Bottom line was hit by higher distribution expenses (+45%) and other losses of $1.7m (3Q16: $0.1m), partially mitigated by dividend income of $2.3m (3Q16: nil) and forfeited deposits of $0.4m (3Q16: nil).
- Trades at 0.37x P/B.

*Samurai 2K Aerosol
- 1HFY18 net profit jumped more than 4x to RM6.4m (1HFY17: RM1.5m) on lower effective tax rate of 19.6% (1HFY17: 43%).
- Revenue doubled to RM34.5m on higher sales volume across Indonesia, Malaysia and other ASEAN countries, resulting from enhanced marketing initiatives.
- Gross margin contracted 1.3ppt to 44.9% amid lower ASP in Indonesia and higher raw material costs.
- Trades at 142.1x forward P/E.

POSITIVE NEWS
*STE
- Clinched a contract from Quality Liquefied Natural Gas Transport to build America's first offshore LNG Articulated Tug and Barge (ATB) unit.
- The ATB tug will have 5,100 horsepower and is designed to carry 4,000 m3 of LNG.
- Expected delivery date is 1Q20.
- Trading at 21.5x forward P/E.

*Zico Holdings
- Granted new capital markets license by the Securities Commission of Malaysia to conduct corporate finance advisory.
- Last traded at 47.9x trailing P/E.

NEUTRAL NEWS
*Vard
- Received voluntary delisting from controlling shareholder Fincantieri at $0.25/share.
- Fincantieri owns 79.34% of share capital and intends to exercise its right of compulsory acquisition if it crosses the 90% threshold.
- The offer price implies at 0.8x P/B.

*SPH
- To acquire another 4.84% of MindChamps Preschool for $3.96m, raising its stake to 26.84%.
- MindChamps owns and/or franchise the operation of infant care centres and preschools.
- Trades at 20.5x forward P/E and 3.3% indicative yield.

*Sunpower
- To acquire 85% stake in Qingdao Xinyuan Thermal Power for Rmb212.5m.
- The acquisition would bring in recurring income for the group and is in line with the group's expansion plan into green investments.
- Trades at 14.9x trailing P/E.

*Federal International
- Entered into a 50:50 JV with KLSE-listed Destine to tender for oil & gas projects in South Asia and South-East Asia.
- Trades at 9x trailing P/E.