SG Market (24 Apr 18)

MARKET OVERVIEW
- The market could be range bound after US stocks ended mixed weighed by technology and commodities. The dollar rallied to its highest level in more than 3 months as the US 10Y Treasury flirted with the 3% level and reignited worries about higher interest rates.
- Technically, the overbought STI is likely to consolidate below its last peak of 3,610 before resuming its uptrend. Downside support lies at at 3,510.

CORPORATE RESULTS
* CapitaLand Commerical Trust
- 1Q18 DPU of 2.12¢ was up 7.6% after adjusting for an enlarged unit base and on adjusted basis and came in within market expectations.
- Gross revenue and NPI climbed 7.7% and 10.5% to $96.4m and $77.2m, due to higher income from CapitaGreen, Capital Tower and Six Battery Road, as well as a full quarter contribution from Asia Square Tower 2.
- Signed 96,000 sf of leases during the quarter, of which 37% are new leases but average office rent eased 0.4% q/q to $9.70 psf. Only 5% or 173,000 sf left to renew in FY18.
- Portfolio committed occupancy was stable at 97.3% with WALE of 5.7 years.
- Aggregate leverage ticked up 0.6ppt q/q to 37.9% with slightly higher average cost of debt of 2.7% and longer debt tenor of 3.9 years.
- Trades at annualised 1Q yield of 4.8% and 1.0x P/B.
- MKE last had a Hold with TP of $1.80,

*Ascendas REIT
- 4QFY18 DPU edged up 1.5% to 3.91¢, despite larger unit base. This brought FY18 payout to 15.988¢ (+1.6%), meeting estimates.
- For the quarter, gross revenue of $215.7m (+3.3%) was bolstered by 100 Wickham Street in Brisbane, acuired in Dec '17.
- NPI grew at a slower pace to $157.9m (+2.5%) on higher operating expenses of $57.9m (+5.6%) in absence of one-off property tax refund arising from retrospective downward revisions of annual property values.
- Rental reversion of -6.8% was dragged by a single property lease but was up 0.7% for the full year.
- Portfolio occupancy ticked up 0.4ppt q/q to 91.5%, while rental reversion was up 0.7%.
- Aggregate leverage eased 0.8ppt q/q to 34.4%.
- Trades at annualised 4Q yield of 5.8% and 1.3x P/B.
- MKE has a Buy with TP of $3.05.

*Mapletree Industrial Trust
- 4QFY18 DPU rose 2.4% to 2.95¢, bringing FY18 payut to 11.75¢ (+3.2%), in line with estimates.
- For the quarter, both gross revenue and NPI grew 2.9% to $90.4m and $67.9m respectively underpinned by driven by contribution from its HP BTS project and recently acquired 40% interest in 14 US data centres.
- Portfolio occupancy dipped 0.5ppt q/q to 90%, dragged by its Singapore portfolio.
- Aggregate leverage was 33.1% with the weighted average all-in funding cost at 2.9%.
- Trades at 5.8% annualised 4QFY18 yield and 1.37x P/B

*Sunningdale
- 1Q18 headline net profit plunged 75% to $1.9m on higher FX loss of $5.2m (1Q17: $2.1m).
- Excluding one-off items, core earnings fell 25.5% to $7.1m, below consensus estimates.
- Revenue slid 1.6% to $168.9m, as weakness in consumer/IT segment (-12%) eroded growth in automotive (+2.9%), healthcare (+3.1%), and mould fabrication (+11.5%) divisions.
- Gross margin narrowed 2.3ppt to 12.7% as utilisation levels were dragged by consumer/IT business.
- Management expects to ramp up new consumer/IT projects in 2H18.
- Trades at 8x forward P/E.

*Cheung Woh
- 4QFY18 net loss deepened to $8.9m (4QFY17: -$1.8m), partly on impairment (-$3.3m) and write-off (-$1.6m) of fixed assets.
- This pummelled FY18 net loss to $16.8m (FY17: $3.6m profit).
- Revenue for the quarter slipped 1.7% to $20.7m on weaker sales of precision metal stamping components.
- Incurred a gross loss of $1.2m (4QFY17: $0.1m profit) amid higher direct costs of labour and overheads, as well as a change in useful life of some manufacturing tools.
- Bottom line was also hit by a $0.5m disposal loss, and an adverse $0.6m swing in associates' contribution.
- No final DPS declared (FY17: 0.4¢).
- Last traded at 0.53x P/B.

*Sabana REIT
- 1Q18 DPU was flat at 0.88¢ on lower distributable income of $9.2m (-0.8%).
- Gross revenue slid 4.4% to $21m due to lower occupancy of certain multi-tenanted properties and non-contribution from the vacant 1 Tuas Avenue 4.
- However, NPI grew 9.4% to $14.6m on reversal of impairment loss from 6 Woodlands Loop arising from the recovery of rental arrears, lower impairment loss from 1 Tuas Avenue 4 and reduced expenses following divestment of 218 Pandan Loop.
- Portfolio occupancy slipped 1.4ppt q/q to 84.1%, while aggregate leverage inched 2ppt to 38.1%.
- Trades at annualised 1Q yield of 8.3% and 0.8x P/B..

POSTIVE NEWS
*mm2 Asia
- 51% owned subsidiary, Vividthree Holdings has entered into a redeemable convertible loan agreement with pre-IPO investor. Ron Sim's R3 Asian Gems.
- Under the agreement, R3 will be subscribing for a $2m mandatory convertible note for a term of two years, which will be converted into Vividthree shares at a 15% discount to the IPO price upon its listing on the Catalist Board.
- In the event the listing does not materialise within two years, the note holders will receive a coupon payment of 2% per annum at maturity.

NEUTRAL NEWS
*ESR REIT
- Acquiring 15 Greenwich Drive, a modern ramp-up logistics facility, for a purchase price of S$95.8m, in line with its strategy to create a more balanced and diversified mix of assets in order to generate stable and recurring returns.
- The acquisition is expected to expand the REIT's exposure to the Logistics/Warehouse sector from 22.6% to 27.1%, and increasing its portfolio's occupancy from 90.7% to 91.2%.
- The asset occupies a land area of 271,894 sf and has a GFA of 455,395 sf and a 30-year lease tenure expiring in 2041. The property has an occupancy of 100% and is currently tenanted to two tenants.
- The Manager currently intends to finance the total acquisition Cost wholly through debt financing.

NEGATIVE NEWS
*Ezion
- Share price came under heavy selling pressure since the counter resumed trading on 17 Apr 2018
- SGX masnet revealed that one institutional fund, M&G Investment Management (ultimately owned by Prudential plc) have sold 29.6m shares at an average price of $0.1835 in the open market.
- As M&G's stake in Ezion is now under 5%, the fund will not need to disclose its share transactions going forward.
- Trades at 0.9x P/B but expects stock overhang to persist in the near-term.

*Versalink Holdings
- Warned that the group is likely to report a net loss for FY18, mainly due to a lower gross profit margin and higher operating expenditure incurred in the current six months under review.