SG Market (25 Apr 18)

MARKET OVERVIEW
- The market could come under pressure after US stocks tumbled more than 1% as 10-year Treasury yield broke above the psychological 3% mark for the first time since Jan 2014, reigniting worries that higher borrowing costs could slow the economy and hurt corporate earnings later this year.
- Technically, the STI is poised for a pullback from overbought levels and could find support at 3,510.

CORPORATE RESULTS
* Frasers Centrepoint Trust
- 2QFY18 DPU of 3.10¢ (+2.0%) brought 1HFY18 payout of 6.10¢ (+2.9%) to 50% of full-year consensus forecast
- For the quarter, gross revenue and NPI rose 6.3% and 6.9% to $48.6m and $34.8m on a 31.7% jump in contribution from Northpoint City North Wing after the completion of AEI works.
- 37 leases accounting for 6.2% of total NLA were renewed with positive rental reversion of 9.1%.
- Portfolio occupancy increased 1.4ppt q/q to 94.0%, lifted by significant improvement at Northpoint City North Wing.
- Aggregate leverage was stable at 29.2% with debt maturity of 2.5 years and all-in cost of borrowings of 2.4%.
- Trades at annualised 2Q yield of 5.6% and 1.1x P/B.
- MKE last had a Buy with TP of $2.55

*Suntec REIT
- 1Q18 DPU of 2.433¢ (+0.3%) was supported by higher capital distribution of 0.244¢ (+106.8%), in line with estimates.
- Gross revenue and NPI climbed 2.6% and 1.9% to $90.7m and $63m on higher convention and retail takings but partially offset by lower contribution from its offices.
- Office committed occupancy slipped 0.6ppt q/q to 99.1%, while retail committed occupancy dipped 0.4ppt to 98.4%.
- Aggregate leverage remained at 36.6% (+0.2ppt).
- Trades at annualised 1Q yield of 5.2% and 0.9x P/B.

*Mapletree Commercial Trust
- 4QFY18 DPU of 2.27¢ (+0.4%) brought FY18 payout to 9.04¢ (+4.9%), meeting 102% of full-year estimate.
- For the quarter, gross revenue and NPI edged up to $108.9m (+1.3%) and $84.3m (+1.2%) on higher contributions and step-up rents from VivoCity, Mapletree Business City I and BoA-ML HarbourFront (MLHF).
- But tenant sales dipped 0.9% on slower shopper traffic (-2.2%) at VivioCity.
- Achieved overall occupancy of 96.1% (+1.5ppt q/q) but committed occupancy rose even higher to 99.5% (+0.8ppt), while WALE was 2.7 years (office: 3.2 years, retail: 2.1 years)
- Aggregate leverage eased 1.8ppt q/q to 34.5%, with lower all-in interest costs of 2.66% (-7ppt) and debt tenor of 4 years.
- Trades at annualised 4Q yield of 5.7% and 1.1x P/B.
- MKE upgrades to Hold with upwardy revised TP of $1.50.

*AEM Holdings
- 1Q18 net profit almost doubled to $8.2m on strong sales and margin expansion, meeting 19% of full-year estimate, with seasonally stronger 2Q and 3Q expected.
- Revenue surged 56% to $65.7m amid continued robust sales of test handlers and consumables to its key semiconductor client.
- Gross material margin expanded 5.9ppt to 34.1% on cost reduction initiatives.
- Reaffirmed guidance of at least $255m in revenue and $42m in pretax operating profit for FY18.
- Last traded at 9.9x forward P/E.

POSITIVE NEWS
*EC World REIT
- Sponsor Forchn Holdings has signed a framework agreement with YCH Group on three strategic initiatives to access the untapped market opportunities in Asia Pacific.
- Firstly, EC World will have exclusive rights to an acquisition portfolio of 13 YCH logistics real estate assets, totalling >280,000 sqm of GFA with estimated value of $400m.
- Secondly, Forchn and YCH will launch an US$150m private equity fund in 2H18, which aims to capitalise on the development and acquisition of logistic assets in key cities along the Belt Road countries.
- Finally, both companies will leverage on each other's competencies to capture opportunities in Southeast Asia.
- Trades at 8.2% indicative yield.

*Darco Water
- Signed an exclusive distribution agreement with Aquaporin A/S in Malaysia to distribute products using Aquaporin Inside® Forward Osmosis Technology in Malaysia and Singapore.
- This marks Aquaporin's first exclusive distribution agreement signed in Malaysia. The group is confident of capturing market share in the growing demand for osmosis-based solutions due to favourable government policy.
- Trades at 45.6x P/E and 1.0x P/B.

*Silverlake Axis
- Secured a new core banking system contract with a large ASEAN banking institution for an undisclosed sum.
- Contract involves the deployment of its flagship core banking solution (Silverlake Axis Integrated Banking, SIBS) and digital solutions.
- First phase will see the rollout of the bank's new ATM switch, retail payments platform and mobile banking.
- The next phase will be the migration of the bank's legacy core banking systems to the SIBS.
- Trades at forward P/E of 22.4x.

NEUTRAL NEWS
*IHH Healthcare
- Issued a third letter to Fortis outlining a proposal with a binding clause for initial equity capital injection of Rp6.5b, and following a due diligence exercise, a further Rp33.5b for a 33% stake.
- The deadline for the revised proposal is 4 May.
- Maybank KE views deal positively as it would help boost IHH's FY18e EBITDA and earnings by 4%/2.6%. However, the transaction would also push net gearing to 14% (FY17: 3%).
- MKE last had a Buy with TP of RM7.00.

NEGATIVE NEWS
*Venture Corp
- Share price fell 8.5% yesterday in wake of a short-seller's report dated 24 Apr
- In short, the house claims that IQOS makes up 30% of revenue and warns that 1Q sales orders have plunged by 50% from initial 2018 forecasts.
- The street is estimating that IQOS forms 3-20% of Venture's revenue.
- The group is reporting 1Q18 results on 25 Apr.
- For now, MKE believes the contract manufacturer has multifaceted growth drivers from a diverse range of customers.

*Asian Pay TV
- The stock slumped 8.7% in unusually heavy volume over the past three trading days to a 12-month low of $0.47 following reports that the Taiwanese cable TV operator is embroiled in a content fee dispute.
- Among the cable operators involved in the dispute, five belong to Taiwan Broadband Communications (TBC), which is owned by APTT. Notably, TBC only airs FTV News out of the 175 channels its carries.
- Another possible reason for the sell-down could relate to forced sale of shares owned by restricted persons, ie mainland Chinese who are forbidden to invest in the cable TV industry in Taiwan.
- APTT has guided that it will maintain its 2017 distribution of 6.5¢ for this year, which implies an attractive 13.8% yield at current price.
- The trust will report its 2Q18 results on 14 May.

*Midas
- Received another two letters of demand for outstanding payments unknown to the group's board of directors.
- The outstanding payments amounted to Rmb87.3m and US$6.9m.