Wednesday, February 7, 2018

SG Market (07 Feb 18)

- The market is likely to stabilise on bargain hunting following the overnight rebound on Wall Street but volatility may return given worries of higher interest rates and valuations.
- Investors will be looking out for key 4Q results from DBS and Singtel tomorrow.
- Technically, underlying support for STI is at 3,370, with near-term resistance at 3,470, followed by 3,520.

- 2QFY18 net profit of $5.8m (+251%) was buttressed by disposal gain of $14.2m from sale of SV Probe.
- Revenue rose 3% to $10.5m, while gross margin widened 2ppt to 25%.
- But bottom line was weighed by higher admin costs of $8.6m (+432%) and other expenses (+280%) including one-off items ($7.6m) and FX loss ($2m) on weaker USD.
- Declared an interim DPS of 2¢ (+100%) and special DPS of 8¢ (+433%)
- Trades at 10.8x trailing P/E and 0.92x P/B.

*OKH Global
- 2QFY18 net profit surged to $3m (2QFY17: $0.8m), which helped swing 1HFY18 to a profit of $2.7m (1HFY17: $1m loss).
- Revenue for the quarter spiked 117% to $6.3m, on the back of sales from property development of $2.6m (2QFY17: nil), and higher takings from investment properties of $3.7m (+28%) due to increased occupancies.
- Accordingly, gross margin expanded 10.8ppt to 57.5%.
- The bottom line was also bolstered by lower general expenses (-33%) and higher tax credit of $0.9m (2QFY17: $0.3m), but was partly offset by higher finance costs (+19.6%).
- Net gearing remained elevated at 1.82x (1QFY18: 1.87x).
- Trading at 0.59x P/B.

*Asia Enterprises
- 4Q17 net profit of $1m (+41%) brought FY17 earning to $1.4m (-40%).
- For the quarter, revenue inched 3% higher to $6.5m while gross profit improved 20% to $1.9m, on the back of increased ASP of steel products.
- Accordingly, gross margin rose to 29.7% (+4.3ppt).
- Bottom line was partly pared by reduced other gains of $0.1m (-41%).
- Raised first and final DPS to 0.5¢ (FY16: 0.3¢).
- Notably, group is in a net cash position of $57.2m ($0.1678/share), or 93% of current market cap.
- Trades at 42.7x trailing P/E.

*Japan Foods
- 3QFY18 net profit jumped 73.1% to $2.5m on improved operational leverage.
- Revenue rose 11.4% to $18.7m on higher sales from revamped and rebranded restaurants, as well as an increase in net sales of existing restaurants.
- Gross margin held steady at 85.1% (+0.2ppt).
- Bottom line was partly pared by a 2.5% increase in selling and distribution expenses arising from higher rental, staff costs and online delivery charges.
- Net cash pile held steady at $20.5m (4QFY17: $20.2m), constituting 28% of current market cap.
- Trades at 13.5x trailing P/E.

*Capital World (former Terratech)
- 2QFY18 net profit soared 90% to RM17.4m on a 2.5x surge in revenue to RM46m. This brought 1HFY18 earnings to RM37.1m (+56%).
- The increased top line for the quarter was due to higher revenue recognition from the retail podium and serviced suites at mixed development, Capital City, in Johor.
- Gross margin slipped 7.4ppt to 74.7% on recognition of higher construction costs.
- Bottom line was impacted by higher general & admin expenses (+428%), as well as a jump in taxes (+97%).
- NAV/share at RM0.2158.

- Setting up a stock market trading link with Bursa Malaysia by year end, which could boost liquidity on both exchanges, encourage new listings and extend to other ASEAN bourses, if successful.
- This will bring together 1,600 companies with combined market cap of >US$1t.
- MKE estimates that every 10% increase in ADT would add 8-10% to SGX's securities clearing revenue.
- Maintain Buy with TP of $8.82.

*Frasers Property
- Investing $250m to develop a 200-room serviced residence on a prime freehold land in Tokyo's Ginza district.
- The property will be launched under the group's millennial-focused hotel residence brand, Capri by Fraser, and is expected to open around 2020.
- Last traded at 10.2x forward P/E and 0.81x P/B.

- To divest property at 9 Bukit Batok Street 22 for $23.9m.
- The REIT expects to record a divestment gain of $0.3m with sales proceeds earmarked for debt repayment, M&A, AEIs and/or working capital.
- Offers an indicative yield of 6.6% and trades at 0.95x P/B.

*mm2 Asia
- Appointed Matthew Crakes as its new corporate strategy advisor to improve the media group's appeal to North American investors.
- Matthew has 20 years of experience in fund management and investment banking in the US.
- He is currently the founder and managing member of US-based Canaan Valley Capital, which focuses on high-growth companies in Asian emerging markets.
- He has executed two special purpose vehicles, including private equity investments in Uber, Snap, and Airbnb.
- Trades at 20.2x forward P/E.

*OUE Lippo
- Guided for a net loss for 4Q17 and FY17 attributable mainly to operating costs and provisions.
- Results slated to be released on or before 1 Mar.

*SIA Engineering
- Signed a MOU with French aircraft engineering firm Safran to collaborate in the field of data analytics.
- The partnership includes R&D of predictive maintenance software to improve operational planning and reduce disruptions.
- Trades at 22x forward P/E.

*ST Engineering
- ST Electronics is entering into a 49:51 JV with SatixFy UK to develop a satellite antenna system that delivers enhanced in-flight connectivity for commercial aviation, to improve operational efficiencies of airline operators.
- Last traded at 20.7x forward P/E.

*Lian Beng
- Extended the deadline for its proposed A$90.2m disposal of a freehold property at 50 Franklin Street in Melbourne, Australia, to 20 Feb.
- To recap, the sale is a good opportunity for the group to realise the capital appreciation of this overseas property, which was purchased for A$51.5m in Nov '16.
- Last traded at 7.6x trailing P/E.

*Choo Chiang
- Signed a lease agreement with a third party for a property located at 17 Hamilton Road.
- Group will relocate its existing retail branch at Bendemeer Road to the new premise by Apr '18.

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