SG Market (19 Jul 18)

MARKET OVERVIEW
- The market is expected to grind higher amid the lack of direction and drivers as most of the early corporate results generally fall within expectations.
- Privatisation offer for Wheelock Properties could trigger interest in other deeply discounted developers such as Wing Tai (0.47x P/B) and Ho Bee Land (0.52x P/B).
- Technically, the STI appears to be entrapped by its 20-dma at 3,253 with further upside resistance at 3,300, while underlying support lies at around 3,190-200.

CORPORATE RESULTS
*Keppel T&T
- 2Q18 net profit surged 138% to $26m, boosted by a $19.6m revaluation gain on Keppel DC REIT, which lifted 1H18 earnings to $35.4m (+59.5%).
- Excluding the one-off gain core 1H18 profit of $15.8m (-28.8%) would have missed the sole full-year street estimate of $45.7m.
- Revenue for the quarter fell 4.9% to $45.3m, mainly due to lower container throughput in China.
- Operating profit jumped more than sixfold to $16m on a $19.6m dilution gain following Keppel DC REIT's private placement exercise, partially offset by higher operating costs to support new developments in the data centre and logistics businesses.
- Bottom line was lifted by lower interest expense (-14.3%) partially offset by marginally lower share of profits from associates and JVs (-1.4%).
- Trading at 17.6x forward P/E.

*CapitaLand Commercial Trust
- 2Q18 DPU dipped 1.6% to 2.16¢ on distributable income of $79.4m (+14.3%) due to higher unit base, missing estimates.
- For the quarter, gross revenue of $98m (+12%) and NPI of $77.7m (+12.5%) were bolstered by contributions from Asia Square tower 2 (acquired in Nov '17) and CapitaGreen, partially offset the absence of income from the divestment of One George Street, Wilkie Edge and Golden Shoe Car Park.
- Overall portfolio occupancy edged up 0.5ppt q/q to 97.8%, while aggregate leverage stood at 37.9%.
- Trades at 1x P/B and offers an annualised 2Q yield of 4.9%.

POSITIVE NEWS
*Wheelock
- Received privatisation offer fom its parent, Wheelock and Company (which currently owns 76.21%) at $2.10 in cash, valuing the Company at over $2.5b.
- As the Offer will be unconditional in all respects, Shareholders who accept the Offer will receive payment of the Offer Price within 7 business days of the date of receipt of their valid acceptances by the Offeror.
- The offer price translates to a price-to-NAV multiple of 0.8x that exceeds the historical averages over the past 1, 3, 5 and 10 years on both a cum and ex-cash basis
- This represents an attractive opportunity for Shareholders to realise their entire investment in the Company, which may otherwise be difficult due to the low trading liquidity of the Shares.
- The offeror intends to delist the Company if the free float requirement is not satisfied.

*Manufacturing Integration Technology
- Divesting its entire interest in MIT Semiconductor to Ningbo MIT Semiconductor for $84.5m (at 10.6x P/E), subject to any agreed adjustments to be made.
- Mr Kwong Kim Mone, the group's Chairman and Managing Director and his management team may acquire or subscribe up to 10% stake in Ningbo MIT Semiconductor upon completion.
- The deal will give rise to an estimated net gain of S$61.75m (after deducting applicable taxation and expenses), thus translating into about 27¢/share.
- The sale will help to unlock shareholders' value while the group will focus and grow its new core segment i.e. contract equipment manufacturing business going forward.
- Management intends to return the entire net proceeds from the proposed disposal to shareholders by way of a special dividend or capital reduction.
- It is anticipated that a first distribution of 24¢/share based on the first payment received by the group (80% of the actual sale price).
- Trades at 12.4x trailing P/E

*Vard
- Secured a contract worth NOK200m for the construction of one vessel for an undisclosed Norwegian customer.
- The vessel is scheduled for delivery from one of VARD's shipyards in Norway in 4Q 2019.
- Trades at 0.88x P/B.

*Mermaid Maritime
- Its Middle East business unit has been awarded a subsea services contract in a Gulf Cooperation Council Country for US$16m.
- Contract will involve the use of the DP2 Dive Support Vessel to carry out the overhauling and dry docking of the calm buoys, installation and disconnection of certain Single Point Moorings (SPMs) for an international Oil & Gas company
- The contract comes with further options for the removal and reinstallation of the additional SPMs
- Work will commence in the Arabian Gulf during the course of Aug 18 until Mar 19.
- Counter is loss-making and trades at 0.37x P/B.

NEUTRAL NEWS
*SIIC Environment
- Intends to further subscribe 23.2m new shares (out of 40m) in Longjiang Environmental Protection group Rmb8 each.
- Post-subscription, the group will maintain its 57.9687% stake in Longjiang Environmental Protection.
- Trades at 0.66x P/B.

*Imperium Crown
- Fei County Wonder Stone Characteristic Town Development Co., a subsidiary of the group, signed a license agreement with the Frontier Group for its hotel in Wonder Stone Park to operate under the "Days" brand.
- Frontier Group holds the Days Inn China master franchise and will manage the hotel which is expected to commence operations in Oct '18.
- Trades at 0.5x P/B.

*SIA
- SIA-CAE pilot training JV in Singapore to commence operations next month.
- The JV will provide simulator and classroom training, supporting SIA Group airlines and other operators' pilot training needs in the region.
- The 50/50 JV will operate out of the Singapore Airlines Training Centre located near Changi Airport.
- Trades at 14.3x forward P/E.