SG Market (11 May 18)

MARKET OVERVIEW
- The market could edge higher after US stocks rallied to a 7-week high as a benign inflation data reduced the odds of aggressive Fed interest rate hikes.
- Technically, STI could continue to drift directionless in the near term within the broad 3,500-3,610 range.

CORPORATE RESULTS
*Genting Singapore
- 1Q18 net profit rose 3% to $217.2m, achieving 29% of full-year consensus estimate.
- Excluding one-off $96.3m gain from disposal of Jeju JV in 1Q17, earnings would have soared 156%.
- Revenue jumped 15% to $675.1m on robust growth in volumes across gaming (+17% to $507.4m) and non-gaming segments (+10% to $167.1m).
- Adjusted EBITDA leapt 27% $358.9m on 40% drop in bad debt provisions.
- Japan IR Implementation Bill has been submitted to Diet for debate, paving the way Japan gaming licence.
- Trades at 9.6x forward EV/EBITDA.

*Wilmar
- 1Q18 core net profit dived 37.4% to US$183.5m, below expectation at only 15.3% of full-year consensus estimate.
- Revenue rose 5.3% to US$11.1b due to stronger performance in oilseeds & grains (+27%) segment but dragged by weaker tropical oils (-5%) and sugar (-32%).
- EBITDA margin of 5% (-1.5ppt) was compressed by lower CPO prices, poor downstream margins and continued sugar losses.
- Risk of China imposing import tariff on US soybeans, which would adversely affect its crushing business and erode improvements in production yields and better downstream margins in the tropical oils segment.
- Trades at 14.2x forward P/E.

*ST Engineering
- 1Q17 net profit jumped 17.8% to $117.7m, landing at 21.5% of full-year consensus forecast.
- Revenue grew 9% to $1.65b on strength across across electronics (+22%), aerospace (+9%), land systems (+3%), except marine (-16%).
- Commercial and defence sales accounted for 63% and 37% of group revenue.
- Pretax profit margin held steady at 8.7% as all sectors showed profit growth. Marine was no longer a drag, mainly due to lower debt provisions
- Order book to $13.4b was sustained by contract win momentum and included Smart City projects.
- Guided for steady growth in FY18.
- Trades at 19.6x forward P/E and 4.3% yield.

*SingPost
- 4QFY18 core net profit declined 28.6% to $15.3m due to wider losses at associates and swing in taxes.
- This took FY18 core earnings to $105m (-9.2%), missing estimates.
- Revenue for the quarter grew 13.5% to $367.5m on growth in e-commerce related activities across the postal and logistics segments.
- Declared final DPS of 2.0¢, bringing FY18 payout to 3.5¢.
- Trades at 22.5 forward P/E.

*Wing Tai
- 3QFY18 net profit soared 817% from a low base to $68.2m, lifting 9MFY18 earnings to $89m, surpassing full-year consensus forecast.
- For the quarter, revenue dipped 4% to $70.3m despite clocking additional sales at Le Nouvel Ardmore in Singapore and contribution from BM Mahkota in Penang.
- Gross margin expanded 1.4% to 51.6% on higher development margin.
- Bottom line was bolstered mainly by a sharp increase in share of profits of associated/JVs to $71.9m (+326%).
- Trades at 0.5x P/B

*Frencken
- 1Q18 net profit plunged 58.5% to $6.8m. Excluding disposal gains, earnings would have risen 10.8%, making up 26% of full-year consensus estimate.
- Revenue rose 3.2% to $138.8m on higher contribution from mechatronics (19.3%) while the IMS segment declined 29.1% mainly due to absence of sales from PESB, which was divested in Mar '17.
- Gross margin narrowed 0.5ppt to 16.7% due to shift in sales mix.
- Trading at 8.6x forward P/E.

*EC World REIT
- 1Q17 DPU slipped 4.7% to 1.47¢, due to impact from withholding tax incurred during cash repatriation exercise in Mar.
- Gross revenue edged up 1.2% to $23.9m, but NPI dipped 0.5% to $21.5m due to higher maintenance and repair costs.
- Aggregate leverage eased to 28.9% (-0.3ppt), while underlying occupancy rate remain steady at 97.5%.
- Trades at annualised 1Q yield of 8% and 0.8x P/B.

*Creative Technology
-3QFY18 net loss shrank to US$3.8m (-19%), dragging 9MFY18 earnings to US$14.8m (9MFY17: US$17.3m loss),
- Revenue for the quarter fell 6% to US$15m, impacted by continued uncertainty and difficult market conditions.
- However, gross margin was maintained at 28%.
- Bottom line was marred by higher selling and admin costs of US$6.4m (-8%) on higher legal expenses and higher R&D costs of US$3.1m (+7%), but partially mitigated by US$1.1m FX gain.
- Trades at 16x trailing P/E.

*China Everbright Water
- 1Q18 net profit swelled 56% to HK$178.1m, attaining 28% of the full-year street estimate.
- Revenue jumped 35% to HK$1.04b on broad-based growth across construction (+HK$110.6m), operation service (+HK$117.6m) and finance income (+HK$38.7m).
- Gross margin expanded to 34.7% (+1.1ppt) on change in revenue mix towards operation services.
- Bottom line was supported by lower admin & other operating expenses (-26%) as well as reduced profit share to minority interests (-16%).
- Trades at 10.5x forward P/E.

*UG Healthcare
- 3QFY18 net profit rose 16.7% to $1.1m, helped by FX swing to $0.7m gain (3QFY17: $0.6m loss).
- This brought 9MFY18 earnings to $3m (+28.8%), reaching 86% of full-year eatimate.
- Revenue for the quarter climbed 10% to $19.4m on higher sales volume of gloves.
- Gross margin fell 1.6ppt to 17.1% due to delay in pricing revision amid prior commitment to customers, while latex and nitrile raw material prices were stable at higher levels.
- Bottom line was also pared by higher admin cost from the expansion of its distribution network in UK, China, and Nigeria.
- Trades at 10x forward P/E.
- MKE last had a Sell with TP of $0.21.

*OUE Commercial REIT
- 1Q18 DPU sank 9% to 1.12¢ , in line with estimate, amid a private-placement-enlarged unit base (+19%), while distributable income rose 4.7% to $17.4m on lower finance cost (-14%).
- Revenue eased 1.6% to $44.1m on weaker rental income, but NPI improved 1.8% to $35.3m on lower utilities and maintenance costs.
- Portfolio occupancy grinded 0.1ppt higher q/q to 96.9%.
- Aggregate leverage increased 3.2ppt q/q to 40.5%.
- Trading at annualised 1Q yield of 6.2% and 0.9x P/B.

*SBS Transit
- 1Q18 net profit jumped 63.7% to $16.7m on operating leverage.
- Revenue leapt 15.8% to $328.2m, driven by higher fees earned under the Bus Contracting Model, and higher rail ridership after the opening of DTL3, but partly offset by rail fare reduction in Dec '17.
- Average daily ridership improved across DTL (+75.8%), NEL (+0.9%), and LRT (+4.6%).
- EBITDA margin widened 0.4ppt to 13.6%.
- Trades at 15x trailing P/E and 1.7x P/B.

*Vard
- 1Q18 net loss worsened to NOK36m (1Q17: NOK25m loss), partly hit by restructuring cost of NOK11m (1Q17: NOK6m).
- Revenue grew 29% to NOK2.29b, underpinned by on-going construction of six expedition cruise vessels at its Romanian yards.
- EBITDA margin narrowed 1.2ppt to 1.1% due to pressure from higher material and subcontractor costs.
- Trades at 0.86x P/B.

*IREIT Global
- 1Q18 DPU edged up 1.4% to 1.46¢ on favorable EUR/SGD movements, while distributable income slipped 2.9% to €6.3m.
- Revenue and NPI dipped to €8.6m (-2%) and €7.7m (-1.9%) respectively, amid lower rental income from Münster South Building.
- Portfolio occupancy was flat q/q at 98.3%.
- Aggregate leverage ticked up 0.2ppt q/q to 40.5%.
- Trading at annualised 1Q yield of 7.5% and 1.13x P/B.

*OKH
- 3QFY18 net loss narrowed to $3.6m (3QFY17: -$25m), bringing 9MFY18 net loss to $0.9m (9MFY18: -$26m).
- Revenue for the quarter dived 93.8% to $6.6m largely due to lower property development income (-97.2%) after its ACE@Buroh attained TOP in 3QFY17.
- Fell into a gross loss of $0.3m (3QFY17: $2.1m profit) following the bulk sale of several units at loss compared to the developments costs.
- Bottom line was supported by lower general & admin (-93.6%) as well as finance (-4%) expenses.
- Trades at 0.52x P/B.

*Sing Holdings
- 1Q18 net profit soared 269.8% to $3m from low base.
- Revenue jumped 20.5% to $16.6m on progressive recognition from development projects and higher rental income from investment property.
- Gross profit expanded to 35.2% (+10.1ppt) on slower pace of cost expansion (+4.2% to $10.8m).
- Bottom line was eroded by higher share of minority interest of $0.8m (1Q17: $2,000), but was partially offset by lower effective tax rate of 15.5% (1Q17: 39.8%).
- Trades at 31.8x trailing P/B.

*Kingsmen Creatives
- 1Q18 net profit grew 16.2% to $445,000, albeit from a low base of $383,000.
- Revenue slipped 7.8% to $61m as weakness in its retail & corporate interiors (-29.1%) overshadowed gains in exhibitions & thematic (+18.5%) and research & design (+14.6%).
- However, gross margin expanded to 25.2% (+1.7ppt) on the change in sales mix.
- Bottom line was supported by a $0.m swing to associate profits as well as losses attributable to minority interests of $0.3m (1Q17: $34,000 profit).
- Order book stood at $195m as at 30 Apr, of which $156m is expected to be recognised in FY18.
- Trades at 12x trailing P/E.

*Gallant Venture
- 1Q18 net loss was reduced to $9.8m (1Q17: $39.2m) due to a $3.6m profit (1Q17: $15m loss) from associates.
- Main automotive retailing subsidiary IMAS turned around to a net profit $5.8m (1Q17: 17.6m loss).
- Group's revenue rose 4% to $453.5m on higher sales of trucks and heavy duty equipment, car rental income, and contribution from resort segment.
- Gross margin expanded 0.9ppt to 19.4%.
- Bottom line was also buttressed by lower operating expenses, FX loss, and finance cost.
- Trades at 0.49x P/B.

*JB Foods
- 1Q18 surged 302% to US$4.7m, partly on operating leverage.
- Revenue rose 4% to US$74.1m on higher shipment volume, albeit ASP eased due to lower cocoa bean prices (input material).
- Gross margin expanded 9.5ppt to 15.4% on improved processing margin.
- Growth in bottom line was pared by a US$1.5m increase in FX loss, and US$0.6m loss (1Q17: US$0.3m gain) on financial derivatives.
- Trades at 6.4x trailing P/E.

*Sapphire
-1Q18 net profit fell 15.9% to Rmb4.1m given the disposal of its Mining Services Business in Feb 2017.
- Revenue increased 61.4% to Rmb303.6m on account of a higher number of ongoing projects in China and the sale of railway sleepers.
- Gross margin dipped 8.7ppt to 8.9%, due to higher costs of materials (which Ranken generally has to absorb 5% of material price fluctuation both ways), lower margins from the sale of railway sleepers and higher margins in 1Q17 arising from clients' acceptance of variation orders.
- The group has secured a growing number of contracts for rail engineering and construction works, which boosts its order book to Rmb2.9b.
- Trades at 6.8x trailing P/E and 0.6x P/B

*Dasin Retail Trust
- 1Q18 DPU of 1.83c came in largely in line with its IPO forecast on lower than expected finance costs
- Revenue and NPI also exceeded own estimates by 6% and 3% to $18.5m and $14.9m respectively, due to better operational metrics and contribution from the acquisition of Shiqi Metro Mall in June 2017.
- Achieved 100% occupancy in its portfolio while WALE remains healthy at 6.24 years (by NLA).
- Aggregate leverage of 30.4% with average all-in cost of 5.28% for onshore and 4.9% for offshore borrowings.
- Trades at 1Q18 annualised yield of 8.4% and 0.56x P/B

POSITIVE NEWS
*Tiong Seng
- Secured a $53.9m contract to build another primary school at Punggol Central.
- The construction of the school compound will commence alongside the group's Punggol Way project in May '18.

NEUTRAL NEWS
*mm2
- Enters into slate financing partnership with South Korea's largest content company, CJ E&M.
- From '18 till '21, mm2 will finance 6 Southeast Asian (4 Thai and 2 Indonesian) films that CJ E&M finances and produces, of which 3 will commence production this year.
- Trades at 22.3x forward P/E.

*KOP Limited
- Its indirect wholly-owned subsidiary, Dalvey Breeze has entered into a S&P Agreement with owners of the units to purchase all the strata lots in a development known as Villa D'Este, Singapore for $93m.
- The development located at Dalvey Road, Singapore, is a piece of freehold land with an area of 55,000 sf.
- The group intends to redevelop the development into a high-end condominium, and will be funded through a mix of external borrowings and internal resources.