SG Market (12 Feb 18)

MARKET OVERVIEW
- Market could attempt to reclaim back some lost ground after a turbulent week but sentiment remains on edge on continued jitters of a faster-than-expected pick up in US Treasury yields, with Jan's CPI the key indicator to watch this Wed.
- From a technical perspective, the STI sees support at 3,370, with near-term resistance at 3,385.

CORPORATE RESULTS
*F&N
- 1Q18 net profit surged 16.3% to $26.1m, lifted by maiden contribution from associate Vinamilk of $17m.
- Revenue dipped 1.6% to $487.1m on a slump in soft drink sales (-16%) due to pricing pressure in Malaysia and seasonality effect on the later Chinese New Year this year.
- Gross margin shrank 2.3ppt to 34.5% on higher cost of sales (+2%).
- Bottom line was weighed by a negative swing in FX to $2.8m loss (1Q17: $4.4m) and higher net finance cost of $3.7m (1Q17: $1.5m gain).
- Trading at 24.1x forward P/E.

*KSH
- 3QFY18 net profit grew 12.9% to $10.3m, bringing 9MFY18 net profit to $20.4m (-25.2%).
- Revenue for the quarter increased 20.3% to $41.5m on increased contribution from construction (+20.3%).
- Due to lower provision for staff bonuses, operating margin expanded to 18.1% (+4.1ppt).
- Bottom line was partially impacted by lower JV/associate income (-25.6%) on reduced development sales.
- Trading at 9.8x forward P/E.

*Kimly
- 1QFY18 net profit slid 14% to $5.7m, partly due to higher administrative staff costs ($0.5m), which included bonuses for executive directors.
- Revenue rose 7% to $50.1m on higher F&B sales and increased takings from sub-leasing due to more coffee shops, food courts, and drink stalls.
- Gross margin narrowed 2ppt to 20.3% from higher direct employee costs and operating lease expenses from new coffee shops.
- Trades at 17.3x forward P/E.

*Spindex Industries
- 1HFY18 net profit fell 42.4% to 4.5m due to a negative $2.9m swing into FX loss of $0.9m stemming from the weaker USD.
- Revenue growth of 8% to $74.2m was attributable to strength in machinery and automotive systems (+20%) and imaging & print printing (+5%) segments, which helped offset by a slide in others (-6%).
- Gross margin contracted to 19.3% (-3.1ppt) due to the shift in revenue mix.
- Bottom line was further pressured by a higher effective tax rate of 29.3% (+6.7ppt) arising from increased chargeable income at its Malaysian plant.
- Net cash slid to $27.2m (Jun '17: $35.9m) or $0.236/share.
- Last traded at 11.9x trailing P/E.

*Multi-Chem
- 4Q17 net profit jumped 25% to $4.8m, which lifted full-year earnings to $10.9m (+13%).
- For the quarter, revenue leapt 23% to $118.9m on large deals clinched by the IT distribution business (+29%).
- However, gross margin edged 0.2ppt lower to 14.6%.
- Bottom line was helped by lower taxes (-24%), albeit partially offset by absence of $1m FX gain.
- Net cash rose to $51.1m (3Q17: $40.4m), constituting 68% of market cap.
- Final DPS of 3.3¢ maintained and dished out a special DPS 1.1¢ (4Q16: nil), bringing full-year payout to 5.51¢ (2016: 4.41¢).
- Trading at 6.8x FY17 P/E and offers a dividend yield of 5.3%.

*Challenger Technologies
- 4Q17 net profit surged 94% to $5.8m, partly due to absence of $1.1m impairment on financial assets.
- This lifted FY17 earnings to $16.2m (+32%).
- Revenue for the quarter climbed 7% to $88.9m, largely driven by stronger retail, trade show and corporate sales of IT products.
- Gross margin ticked up 0.4ppt to 21.7%, while bottom line was also helped by lower taxes (-11%).
- Net cash rose to $63.2m (3Q17: $49.4m), representing 43.6% of market cap.
- Proposed higher final DPS of 2.2¢ (4Q16: 1.6¢), bringing full-year DPS to 3.3¢ (2016: 2.7¢).
- Trading at 8.9x FY17 P/E and offers a 7.8% dividend yield.

*Ryobi Kiso
- Slumped into 2QFY18 net loss of $0.1m (2QFY17: $0.4m profit), bringing 1HFY18 net profit to $44,000 (1HFY17: $0.6m).
- For the quarter, revenue jumped 48% to $50.1m on higher contribution from bored piling operations (+146.8%).
- However, gross margin contracted to 9.1% (-4.2ppt) on a shift to lower margin projects.
- Bottom line was further pressured by $0.2m in losses from associates and higher finance costs (+21.8%), although partially mitigated by income tax credit of $0.2m (3QFY17: $0.4m expense).
- NAV/share at $0.2968.

*Global Yellow Pages
- 2QFY18 net profit fell 39.2% to $2.3m, bringing 1HFY18 net profit to $2m (-45.9%).
- Revenue for the quarter slumped 40.3% to $6.4m from reduced contributions from both Search and ice cream businesses.
- Bottom line was partially shored by a 42.6% fall in total expenses on lower staff (-69.7%) and printing & material (-66.5%) costs.
- NAV/share at $0.2994.

*Pan Hong
- Swung into 3QFY18 net profit of Rmb2.7m (3QFY17: Rmb3.2m loss), shored by Rmb7.7m interest income, Rmb4.2m FX gain, and lower taxes (-51%).
- Revenue plunged 55% to Rmb44.8m on weaker residential development business (-73% to Rmb25.9m), although buttressed by higher contribution from commercial development (+4.3x to Rmb18.8m).
- Gross margin widened 10.2ppt to 36.5% due to handover of residential units that command higher margin.
- Improvement to bottom line was partly offset by a spike in finance cost (+7.6x to Rmb3.9m) amid higher borrowings.
- NAV/share at Rmb4.3687.

POSITIVE NEWS
*SIA Engineering
- Signed MOU with CaseBank Technologies to collaborate in data analytics.
- Both parties will explore in the areas of R&D and commercialisation of advanced diagnostic software for use in the aviation industry, anticipated to streamline the troubleshooting process and reduce aircraft maintenance downtime and component removal costs.

*Keppel T&T
- To jointly promote end-to-end ecommerce services to retailers across Southeast Asia with ecommerce agency SmartOSC.
- Retailers on board include COURTS Singapore, Lotte, Nestlé and Friso.

*Best World
- Accepted as a member of the Direct Selling Association of UAE.
- The entry into the UAE market is part of the group's broader initiative to expand its overseas footprint.
- Through the sale of its Halal certified products, Best World intends to use its Dubai Regional Centre as a springboard into the other Gulf Cooperation Council markets of Saudi Arabia, Qatar, Bahrain, Oman and Kuwait.

*Kitchen Culture
- Clinched two contracts totalling $6.1m for projects in Singapore, expected to be executed over the next 1-3 years.
- First contract ($5.3m) involves design, supply and installation of kitchen cabinets, wardrobes, bathroom cabinets for a 735-unit residential development.
- Second contract ($0.8m) involves similar work for a 44 unit exclusive high-end residential project.

NEGATIVE NEWS
*SGX
- Three Indian bourses will terminate licensing agreements for their indices and data with foreign exchanges as part of concerted move to protect their turf and prevent trading volumes from moving overseas.
- The curbs will hit SGX's Nifty suite of derivative products, including the popular Nifty 50 index futures, in 6 months.
- MKE anticipates FY18-20e derivatives volume will be cut by 3-9% and net profits by 1-3%, but maintains Buy with lowered TP of $8.73.

*Keppel Corp
- Updated that it has not been served court papers relating to a new US$660m civil law suit brought against it by certain funds managed by EIG Global Energy Partners in the US over its participation in a Brazilian bribery case, for which Keppel reached a US$422m global settlement with prosecutors.
- EIG had sued Keppel and other firms in 2016 for inducing it invest in Sete Brasil but a US district court has dismissed the action.

*AsiaPhos
- The Sichuan Provincial Authority has rejected the group's application to renew the mining license for Mine 1 due to potential environmental damage to a nearby panda national park.
- AsiaPhos is currently negotiating for a settlement relating to the non-renewal.

*Profit Warnings
- BH Global
- AEI Corp
- GS Holdings

NEUTRAL NEWS
*Spackman Entertainment
- Invested US$0.45m into an upcoming Korean fantasy film "Now I will meet you", starring leading actors Son Ye-Jin and So Ji Sub.
- The film is based on a Japanese original novel "Be with you", which sold over a million copies in 2004.
- The fantasy melodrama movie is set to release on 14 Mar '18.