SG Market (10 May 18)

MARKET OVERVIEW
- The market could be off to a nervy start following the shock election result in Malaysia but oil-linked counters may stand to gain from 3.3% jump in crude prices in the wake of the US exit from Iran and an unexpected drop in US stockpiles.
- Technically, STI could continue to trade sideways in the near term within the broad 3,500-3,610 range.

CORPORATE RESULTS
*CSE Global
- 1Q18 net profit surged 90% to $5.7m, achieving 37% of full-year consensus estimate.
- Revenue jumped 23.7% to $92.2m from growth in oil & gas (+23.3%) and infrastructure (+24%) segments. These were mainly driven by oil & gas projects in the Americas (+66.7%).
- Gross margin narrowed 2.4ppt to 26.8% but operating expenses were well contained, reflecting higher labour productivity and cost efficiencies.
- Fewer new orders secured (-41.5% to $68.9m) further depleled order book to $148.6m (-15% q/q).
- Going forward, several large projects are expected to reach billing milestones in 2Q18 and 3Q18.
- Based on latest results, forward P/E of 14.7x appear to be conservative.

*China Aviation Oil
- 1Q18 net profit rose 13.9% to US$26.9m, reaching 29% of full-year consensus forecast.
- Revenue climbed 23.9% to US$4.1b due to higher oil prices and trading volume (+4.4%), particularly in gas oil (+38.8%) and other oil products (+22.4%), while jet fuel supply was weak (-14.1%).
- Gross margin contracted to 0.32% (1Q17: 0.47%) due to lower trading gains. This resulted in a 14.6% drop in gross profit to US$13.2m.
- But associate contribution jumped 40.7% to US$21m, stemming largely from its 33% stake in Pudong airport fuel supply company.
- Trading at 10.6x forward P/E.

*Hyflux
- 1Q18 net loss deepened to $22.2m from near breakeven a year ago, drageed by Tuaspring.
- Excluding Tuaspring, it would have turned in a $1m profit vs $27m in 1Q17, which included a $16.5m gain on disposal of its Galaxy Newspring portfolio.
- Revenue slid 21% to $72m on slower EPC timeline from the TuasOne WTE project in Singapore and Qurayyat IWP project in Oman.
- Tuaspring incurred a slimmer loss of $23.2m (1Q17: $27m) due to an uptick in wholesale electricity prices.
- Municipal projects contributed 81% of revenue, with Singapore (58%) and Mid-East (32%) the key markets.
- Operating cash flow continued to bleed $51.2m as net gearing deteriorated to 1.3x and cash balance shrank to $233.8m (Dec '17: $314.2m).
- Discussions to divest Tuaspring and Tianjin Dagang plants are still ongoing.
- Trades at 1.6x P/B.

*HMI
- 3QFY18 net profit turned around to RM15.9m from RM1.6m loss a year ago, bringing 9MFY18 earnings to RM45.4m, meeting estimates.
- Revenue for the quarter rose 7% to RM115.4m on higher patient load (+2.7%) and average bill sizes (outpatient: +9%, inpatient: +3.8%) in Mahkota Medical Centre and Regency Specialist Hospital.
- Gross margin improved 4ppt to 35.9% on slower pace of cost expansion (+1%).
- Bottom line was helped by lower admin costs (-26%) in absence of M&A fees and lower debt provision, as well as reduced effective tax rate of 28% (3QFY18:48.2%).
- Trades at 27.7x forward P/E.

*ISEC Healthcare
- 1Q18 net profit rose 26% to $2.1m in tandem with higher revenue of $9.6m (+14%), mainly driven by increased patient visits from its specialised eye care services in Malaysia and Singapore.
- Gross margin expanded 1.6ppt to 48.2%, arising from the increased business activities.
- Balance sheet in a net cash position of $27m (5.2c/share).
- While healthcare industry remains competitive, growth prospects are encouraging in view of the greying population, with higher demand for age-related eye diseases.
- Trades at 19.6x trailing P/E

*HRnetGroup
- 1Q18 net profit jumped 46% to $16.3m, beating estimates, following the acquisition of certain co-owners' stakes.
- Revenue rose 12.2% to $107m led by flexible staffing and professional recruitment in Singapore (+12.8%) and North Asia (+9.9%), particularly in Hong Kong and China.
- All its 10 cities of operation are profitable. RecruitFirst HK, which was commenced business in Jan '17, has turned profitable.
- Bottomline was also boosted by other income of $6.6m (+42.8%), mainly due to $0.8m gain on revaluation of marketable securities, $0.6m increase in interest income and $0.5m additional government subsidies.
- PT HRnet Rimbun JV will commence operations in Jakarta once its licence is approved.
- Trades at 15.6x forward P/E

*APAC Realty
- 1Q18 net profits jumped 46.8% to $5.9m, forming 19% of full-year estimate in seasonally weak quarter.
- Revenue climbed 56.7% to $105.2m mainly due to increase in brokerage income from new home sales (+127.6% to $34.1m), resale and rental (+37% to $68.4m) of properties.
- Gross margin narrowed 2.9ppt to 12.2% on higher pace of cost expansion (+62%).
- On outlook, Singapore's residential property market is expected to be active as underlying demand remains robust.
- Trades at 12x forward P/E.

*Hock Lian Seng
- 1Q18 earnings slipped 13.6% to $1.6m, forming just 7% of sole full-year estimate.
- But revenue almost doubled to $40.9m (+97.5%) on higher construction activities for its Changi Airport JV.
- Gross margin collapsed to 6.2% (-4ppt), squeezed by lower profitability for on-going projects.
- Net cash position strengthened to $122.4m (4Q17: $117m).
- Civil engineering order book stood at $790m (4Q17: $775m).
- Contruction of Shine@Tuas South has begun and Is expected to be completed by Jun '18.
- Trading at 10x forward P/E and 1.1x P/B

*Valuemax
- 1Q18 earnings jumped 25.3% to $6.2m on increased contribution from higher margin segments.
- Revenue fell 6.5% to $57.2m due to weaker contributions from retail and trading of pre-owned jewellery and gold business, partially offset by higher takings from pawnbroking and moneylending business.
- Gross margin expanded 4.9ppt to 21.4% due to shift in revenue mix.
- Trading at 9x trailing P/E.

*Maxi-Cash
- 1Q18 net profit tumbled 39% to $1.8m despite higher revenue of $52.8m (+20%).
- Revenue growth was attributed to pawnbroking and retail & trading of jewellery & branded merchandise as well as its secured lending business.
- Bottom line was hit by higher finance costs of $2.5m (+117%) and FX loss of $2.2m.
- Trades at 11.1x trailing P/E.

*Aspial
- 1Q18 net profit climbed 20% to $7.6m on stronger revenue of $212.4m (+51%).
- Revenue growth was seen across its real estate (+96.9% to $133.7m), financial services (+19.7% to $52.8m) as well as its jewellery (+2.6% to $30.2m) segments.
- Bottom line was hit by a $10.1m swing to FX loss of $5.9m as well as higher finance cost of $1.5m (+12%).
- Trades at 1.5x P/B.

*Vicom
- 1Q18 net profit grew 2.3% to $7m on higher revenue of $4.5m (+1.6%) due to higher business volumes.
- Operating costs (+0.7%) rose by a smaller degree, which led to a slight expansion in margin to 33.5% (+0.6ppt).
- Net cash position improved 5.2%% to $113.1m (1Q17: $107.5m), representing 21% of market cap.
- On outlook, vehicle testing business is expected to improve, while non-vehicle testing business is expected to remain stable.
- Trades at 20.1x trailing P/E.

*Trendlines
- 1Q18 net loss came in at US$1.3m (-22.7%) while total income was US$0.6m (-51.7%), primarily reflects a reduction in the fair value of Trendlines' portfolio companies and write-off of one portfolio company in the amount of US$0.8m, as a result of lack of funding for this company.
- The losses were partially offset by a gain in fair value of US$0.2m of one Portfolio Company as a result of the completion of fund raising exercises at higher valuation and a gain of US$0.3m due to deconsolidation of a Portfolio Company
- Total expenses fell by 25.7% to US$1.9m, mainly due to reductions in employment costs and other general and administrative budget cutting as part of the Group's cost reduction plan announced in Oct 2017.
- Going forward, the group will continue to expand on its strategic network with the establishment of the partnership between Trendlines Medical Singapore and K2 Global in the start-up program by SPRING SEEDS Capital.
- Additionally, it signed an MOU to collaborate with Nutreco Investments B.V. on developments in the agrifood tech sector.
- Trades at 9.8x P/E and 0.65x P/B

*Nordic
- 1Q18 earnings up 22% on higher revenue of $22.7m (+14%), mainly due to increased contribution from the group's Maintenance Services business segment (+71%), following the acquisition of Ensure Engineering on 28 April 2017.
- Gross margin remained constant at 30%
- The group's outstanding order book stood at $99.3m, which will generate sustainable revenue streams till FY2021.
- Management remains positive over the long-term prospects in the marine, offshore O&G industries, petrochemical sectors, pharmaceutical and infrastructure industries.
- Trades at trailing P/E of 13.2x

NEUTRAL NEWS
*Frasers Logistics & Industrial Trust
- Launching an equity fund raising comprising a private placement of 333.2m-345.8m new units at $0.962-0.987 each and 1-for-10 non-renounceable preferential offering of 152.2m new units at $0.942-$0.967.
- Gross proceds of $476n will be used to finance the purchase of 21 industrial properties in Germany and the Netherlands.
- Trades at annualised yield of 7% and 1.1x P/B

*Noble
- Clarified that it is still in discussion with its perpetual security holders for its proposed restructuring, as opposed to recent news reports that suggested an agreement has been reached.

*Q&M Dental
- Aborted the proposed acquisition of 20% stake in Shenzhen Superline Technology as no agreement could be reached.

NEGATIVE NEWS
*Federal Int'l (2000)
- Warned of a net loss for its 1Q18 results due to lower sales from trading business segment.