SG Market (30 May 18)

MARKET OVERVIEW
- Sentiment is expected to be gripped by worries that Italy’s political turmoil could undermine the EU and renewed trade friction between the US and China, which sparked a selloff in global equity markets,
- Bank stocks are vulnerable as the 10Y Treasury-yield fell to 2.78%, its lowest level in 4 months.
- Technically, the STI could break below its underlying support at 3,510 and test the 3,470 level, while immediate resistance lies at 3,575.

CORPORATE RESULTS
*SATS
- 4QFY18 net profit slipped 1.8% to $65.4m, dented by FX loss ($4.7m) and capital gain tax ($4.7m). This brought full year earnings to $261.5m (+1.4%), beating estimates.
- Stripping out one-off items, core FY3/18 earnings edged up 0.8% to $236.1m.
- Revenue for the quarter dipped 0.5% to $423.5m as turnover for food solutions slid 2.4% to $228.3m, while that for gateway services grew 1.7% to $194.7m despite the deconsolidation of SATS HK in Jul '17.
- Operating margin was stable at 10.9% (-0.1ppt) but share of associate/JV contributions declined 16.7% to $24m due to amortisation expenses at Evergreen Sky Catering.
- Looking ahead, the robust growth in passenger and cargo traffic and increased demand for high quality food across Asia will put SATS in a sweet spot.
- Declared final DPS of 12¢, bringing FY3/18 payout to 18¢ (FY17: 17¢)
- Trades at 22.2x forward P/E and 3.4% yield.

*mm2 Asia
- 4QFY18 net profit jumped 41.9% to $9.1m, taking full year earnings to $26.4m, in line with consensus estimate.
- Revenue for the quarter surged 96.1% to $83.6m, boosted by acquisition of business assets from Lotus Fivestar Cinema (M) and Cathay Cineplexes.
- Gross margin expanded 4.4ppt to 43.4%, helped by improvement in its core business, event production and concert promotion business as well as cinema business.
- However, bottom line was dragged by a 232% spike in admin expense to $21.7m, arising from higher staffs costs, depreciation, utilities and rental expenses of its cinema business and other one-off charges.
- On outlook, management expects growth to mainly stem from three areas: 1) regional expansion, particularly in North Asia; 2) platform business as it teamed up with SPH to operate the AsiaOne website and 3) copyrights with Vividthree’s proposed development of a VR tour show for “Train To Busan”.
- Trades at 17x forward P/E.

*UnUsUal
- FY18 net profit rose 36.6% to $10.0m on revenue of $46.4m (+37.1%), due to an increase in promotion (+$6.2m), production (+$6m) and other sales (+$0.4m).
- Gross margin improved 3.4ppt to 38.4%, mainly boosted by production and other segments, which was offset by the lower gross profit contributed by the promotion segment.
- Operating cash drain was $2.6m (FY17: +$9.2m) due to working capital changes but net cash position improved to $13.9m, bolstered by IPO proceeds.
- Going forward, the group is strengthening its promotion business in China via proposed acquisition of Beijing Wish Entertainment.
- Trades at 53.4x trailing P/E.

*Accordia Golf Trust
- 2HFY18 DPU dropped 38.7% to 2.20¢, dragging FY3/18 payout to 3.85¢ (-36.3%), well below estimates.
- 4QFY18 revenue of ¥9.5b (-3.6%) was dampened by to snowfall in Jan ’18, rain and cold weather in Mar ’18, which led to under-performance of its golf courses with utilisarion rate slipping 3.5ppt to 66.7%.
- Operating loss deepened 26.2% to ¥2.9b, resulting in net loss of ¥2.9b (-1.3%).
- Aggregate leverage crept up 0.3ppt to 29.1%.
- Trades at DPU yield of 6% and 0.72x P/B.

*Ley Choon
- 4QFY18 net profit plummeted 95.6% to $0.2m, knocking FY3/18 earnings to $1.5m (-91.5%).
- Revenue for the quarter fell 7% to $27.1m mainly due to completion of airport and big pipe diameter projects, partially mitigated by stronger contribution from distribution cable projects.
- Gross margin narrowed 0.9ppt to 16.1% due to changes in sales mix.
- Bottom line was impacted by absence of write-backs ($6.3m), partially offset by absence of impairment loss ($2.1m).
- The group’s unfulfilled order book based on secured contracts stood at $145m.
- Trades at 26.9x trailing P/E.

*MYP
- Swung to 4Q18 net profit of $5m (4Q17: $13.5m loss), lifting FY3/18 earnings to $4m (FY17: $15m loss).
- Revenue rose 79.4% to $27.9m on the back of full-year contribution from the Salveur investment property.
- Operating margin turned positive to 83.7% mainly due to a $17.4m swing in revaluation gain from investment properties.
- Bottom line was dragged by higher net finance costs of $18.9m (+113.4%) as a result of full-year interest on borrowings of the Salveur investment property.
- Trades at 0.96x P/B.
POSITIVE NEWS
*China Everbright Water
- Signed a supplemental agreement with Dezhou Municipal Bureau of Housing & Urban-Rural Development in Shandong province to implement Dezhou Nanyunhe Waste Water Treatment Project Phase II and secure Nanyunhe Waste Water Treatment Plant Effluent Defluoridation Project for a total of Rmb158m.
- Nanyunhe Project Phase II has a designed daily waste treatment capacity of 75,000m3 and concession period of 25 years. Phase I will extend its concession period till the end of Phase II.
- Nanyunhe Effluent Defluoridation Project will have a daily effluent treatment capacity of 20,000m3,
- Post-construction, Nanyunhe Project will have an aggregate daily water treatment capacity of 170,000m3.
- Trades at 10.2x forward P/B.

*CNMC Goldmine
- Newly built carbon-in-leach (CIL) plant at its flagship Sokor gold mine in Kelantan, Malaysia has yielded maiden output of 2,335 oz of gold doré bars over 23 days of non-stop production in May '18.
- Taking into account the 1,414 oz produced on 7 May, the group produced a total of 3,749 oz of gold doré bars for the month of May.
- With the CIL plant now in stable operation, its focus will now be to identify opportunities to further optimise its operating parameters, with the aim of increasing gold output and bringing down costs.
- Trades at 12.7x forward P/E

NEUTRAL NEWS
*SGX
- In view of recent developments, SGX has decided to continue listing SGX Nifty contracts until Aug to enable enable its clients to manage their portfolio risks without interruption.
- The exchange will reschedule the launch of its new India derivatives products following an interim injunction obtained by the National Stock Exchange of India.
- The Bombay Hight Court has ordered the matter to be fixed for arbitration and for a decision on the injunction to be made by 16 Jun.
- SGX will contest the interim injunction and reserves all rights in respect of damages caused by NSE’s action.
- Trades at 21x forward P/E

*Jumbo
- Opened its first JUMBO Seafood outlet in Xi’an, marking its sixth JUMBO Seafood outlet in China, and the first outside Shanghai and Beijing.
- The 1,300 sqm store (218 seats) is In Xi’an SKP, a newly-opened luxury shopping mall located along the Xi’an City Wall Southern Gate, a historic landmark and within the vicinity of a high-end shopping destination.
- This would allow JUMBO to leverage on the prime location to tap into the affluent crowd in the area.
- Trades at 24.3x forward P/E.

*Far East Orchard
- 70%-held Far East Hospitaity and Boo Han Holdings (a member of Far East Organisation) are acquiring a 2,542 sqm plot of land and hotel to be constructed in Tokyo for ¥8.198b ($100.5m, shared equally between two partners).
- Post-acquisition, seller Shimizu will construct the hotel and deliver the trust beneficiary interest to an indirect-held JV in the form of a Tokutei Mokuteki Kaisha.
- The hotel is located in the Ariake district, which is a short car ride away from Central Tokyo, Tokyo Disneyland Resort and Haneda Airport, and close by Tokyo Big Sight and Ariake Arena.
- The forward purchase deal is expected to be completed in 2Q20.
- Trades at 26.1x trailing P/B.

NEGATIVE NEWS
*Magnus Energy
- Received a formal notification from PT Hanjungin that the land which encompasses the development site in Kupang is currently subject to a dispute between third parties to which neither the company nor PT Hanjungin is a party to this dispute.
- This larger parcel of 75 hectares land encompasses the 15 hectares of land that PT Hanjungin is currently developing.
- The company is currently seeking additional information on the dispute and concurrently taking legal advice
- However, this may negatively affect the group's financial performance materially.