AVI-Tech

AVI-Tech: CIMB features the counter in an unrated report, where the house highlights that after three straight years of losses, expect AVI-Tech (AVIT) to return to the black in FY6/15, thanks to the company’s exit from the loss-making imaging business and the improving outlook for the burn-in services and engineering services business segments. Expect the company’s turnaround in FY15 to be a re-rating catalyst as well as prompt investors to look at the value in AVIT’s book, which consists of $23.6m cash and an understated office property booked at depreciated historical cost. AVIT is worth at least $0.117, conservatively based on 1x trailing P/B.

Mapletree Logs Trust

Mapletree Logs Trust: 3QFY15 in line with expectations, NPI rose 3.1% y/y and 1.2% q/q to $69.5m, lifts DPU by 1.6% y/y to 1.87cents (from 1.84cents), which yields 6.1% on last close. Revenue climbed 6.2% y/y to $82.9m on contributions from six new properties in China, Singapore (Mapletree Benoi Logistics Hub), Malaysia and Korea and higher revenue from existing assets, offset by lower occupancy at buildings newly converted from single-tenanted to multi-tenanted and absence of revenue from Toh Guan property undergoing redevelopment. Amidst a fast depreciating Yen environment, MLT’s net exposure to JPY cost almost 1pp in gross revenue growth, despite more than 90% of income stream already hedged. FX translation Q/q, revenue expanded 1.7% with the addition of two assets in China, one in Korea and one in Singapore. Portfolio occupancy declined from 98.4% in Dec13 and 97.2% in Sep14 to 96.9% in Dec14, mostly due to new assets and down-time from conversion of existing asset. Despite so, we believe vacancy risk is low. 78% of the 18% leases expiring in 2015 are already pre-leased (vs 51% last quarter) and portfolio WALE by NLA is 4.4 years, 42% of which is expiring in FY18/19 and beyond. Rent reversions were positive at about 9% for Singapore and HK. More than 90% of distributable income is hedged, relatively sheltered from the volatility and uncertainty in global currency market, the main concerns being JPY and KRW exposure. Capital management is healthy, leverage increased from 33.1% to 34.6% to fund acquisitions but remains well below the 45% guidance by MAS, giving it debt headroom for further acquisitions. Approx. 76% of debt is fixed or hedged from interest rate risks, a 100bp hike in base rates will see DPU falling ~2%. Latest broker ratings: Credit Suisse reiterates Outperform with TP $1.47 OCBC reiterates Hold with TP $1.12

Keppel REIT

Keppel REIT: 4Q14 DPU fell 23.4% y/y to 1.51¢, at the lower end of estimates. This brought full year DPU to 7.23¢. Distributable income declined 16.5% to $45.8m. NPI fell 8.3% to $34.3m, while revenue dropped 10.9% to $42.3m, from the absence of contribution from Prudential Tower divested last year, while MBFC Tower 3 only contributed two-weeks of income. Occupancy stood at 99.3%, with a portfolio WALE of 6.1 years. Aggregate leverage stood at 43.3% with all in interest cost of 2.23%. Expect MBFC Tower 3 to contribute on a full year basis in FY15. Meanwhile, with about 12% of NLA up for renewal at MBFC Phase 1 (passing rents of $10 psf vs. $11.20 spot rents), there could be room for positive rental reversions. That said, the recovery in DPU could be diluted should KREIT pursue equity fundraising, given the 43.3% aggregate leverage is very near the 45% threshold under the new REIT framework by MAS. Additionally, investors should also note the income support for Ocean Financial Center is expiring in 2015. Keppel REIT is trading at 0.87x P/B, and offering an annualized 4Q14 yield of 4.9%

CH Offshore

CH Offshore: Amidst Falcon Energy's voluntary conditional offer for shares of CH Offshore (CHO), second largest shareholder, Chuan Hup, raised its shareholdings from 23.8% to 24.7% via open market purchases (6.4m shares) at an average price of $0.5035. Recall, since Falcon's offer of $0.495/share on 11 Dec, CHO have been trading firmly above the offer price between $0.50-$0.525/share, pointing towards a slim chance that CHO's shareholders will accept the offer. The open rejection by Chuan Hup now forces Falcon to either raise its offer price, or step away from the offer and keep its stake at 29.1%. To put events in perspective, Chuan Hup sold a 29% stake in CHO to Malaysian-based Scomi Group in 2005. Subsequently, Falcon acquired the shares from Scomi at $0.70 each in 2010. The offer price of $0.495 values CHO at 1.08x FY14 P/B. Ascribing a 7-year historical average P/B of 1.25x would put its share price at $0.57. The closing date of the offer is 26 Jan.

M1

M1: 4Q14 net profit in line, rising 9.9% y/y to $44.5m, bringing FY14 net profit to $175.8 (+9.7%). In the quarter, total revenue ($346.4m, +24.3%) was driven by a 5.3% increase in mobile telecommunications revenue ($172m), and an 88.7% surge in handset sales to $135.1m. Delving into revenue trends deeper: 1) Telecommunications revenue driven by post-paid (+5.9%, 88% of mobile telecommunications revenue) 2) Net post-paid ARPU rose 4.4% to $56.8 3) Though data plan ARPU fell 6.6% to $18.3, this was diluted by bundled packages. Data consumption increased to an average of 3GB/month, relative to 2.5GB a year earlier. 4) The surge in handset sales was aided by iPhone 6 sales. In tandem with that, cost of sales for handset grew 60%, as iPhones are typically more heavily subsidized than other smartphones. EBITDA margin on service revenue rose 2.7ppt 40.9% On outlook, management guides for a “moderate” growth in 2015, similar to 2014. M1 had in December launched Singapore’s first nationwide next-gen 4G network, doubling download speed up to 300Mbps. At end FY14, 66% of postpaid users were on tiered plans, and 22% of tiered plan users exceeded monthly data allowances, a tailwind for margins. In short, M1’s data monetization story remains intact. In addition, Maybank-KE opines other factors which could bode well for M1: 1) Completion of new data center in 2015 to capture more corporate business 2) Rolling out a suite of enterprise cloud services, targeting SMEs 3) As capex falls, there is likelihood of dividend upside. Maybank-KE prefer M1 as a top Buy in the telco sector, with TP of $4.24. Final DPS of 11.9¢ proposed, bringing full year payout to 18.9¢, translating to a 5.2% yield Other broker ratings: JP Morgan maintains Overweight with TP of $4.15 Nomura maintains Neutral with TP of $3.90

Commodity Traders

Commodity Traders: Singapore commodity traders will be reporting results in Feb: Wilmar on 12 Feb, Olam on 13 Feb and Noble on 26 Feb. While Maybank-KE does not expect fantastic results, the house opines that Wilmar may outshine the others. Wilmar’s 4Q is seasonally strong, and the house is forecasting a net profit of US$470m (+27% y/y, +11% q/q) for 4Q14, with upside expected from the group’s sugar division. Palm & Laurics margins should remain low, while Soybean-crushing margins might have declined q/q though still positive. Expect a weak 4Q14 for Noble, as feeble iron-ore and coal prices should have weighed on its Metal and Energy gross margins. Expect a q/q decline in agriculture gross profits, weighed by lower soybean-crushing margins. Olam may book a net profit of $140m (+4%), and the house believes that the overall soft commodity prices will hurt upstream operation but mid-stream processing could benefit. Overall, Maybank-KE remains Neutral on the Singapore commodity traders, although Wilmar (Buy: TP $4.08) is its top pick, with the house banking on a structural recovery in soybean-crushing margins and higher sugar ASPs to lift its long-term profits. Maintain HOLD on Noble (TP $1.05) and Olam (TP $2.07), as Noble has a big exposure to hard commodities, now universally under pressure, while Olam’s balance sheet and cash flow remain weak.

SG Market (20 Jan 15)

Singapore shares might continue to see dull trading with Wall Street closed for Martin Luther Jr Day and after SGX’s move to reduce board lot size failed to excite investors. Total turnover value traded shrank 20% from last week to $897m, 15% below 2014’s average as declining issues outnumber advancing ones 1.32 to 1 on the SGX. Over in Europe, stocks advanced to reach thier highest level since 2008, amid expectations that the ECB will announce its quantitiative easing plan this week. Asian markets are mostly trading higher this morning, with Tokyo (+0.5%) and Seoul (+0.4%) both up but Sydney dipped 0.3%. From a chart perspective, technical signals appear to be losing momentum, with Stochastics, ADX, RSI and MACD all trending lower. Critical support for STI is tipped at its 200-dma at 3,288, with topside resistance seen at its 20-dma at 3,330. Stocks to watch: *Land Transport: 11 operators have submittied bids for the first tender under Singapore’s new bus contracting model, including incumbents SBS Transit and SMRT. The other bids came from Woodlands Transport (Singapore’s largest private bus operator), Aedge Holdings (operates premium bus and City Direct services), China’s Jiaoyun Group (joint bid with Travel GSH) and Jinan Public Transport, Australia’s Busways Group, UK’s Go-Ahead and Tower Transit and France’s Keolis and RATP Dev Transdev. This is for the Bulim package, comprising 26 bus services, operating from three bus interchanges – Bukit Batok, Jurong East and Clementi, and is expected to be awarded in 2Q15. *M1: 4Q14 results was a slight beat as net profit rose 9.9% y/y to $44.5m taking FY14 earnings to a record $175.8m (+9.7%). 4Q revenue climbed 24.3% to $346.4m, driven by a 5.3% increase in mobile services to $172m and an 89% jump in handset sales to $135.1m. EBITDA margin improved to 40.9% from 38.2% in 4Q14 and 40.8% in 3Q14. Bottom line was underpinned by strong growth in post-paid and fixed customer base and higher mobile data usage. Final DPS of 11.9¢ proposed, bringing full year payout to 18.9¢ (FY13: 21¢). NAV/share at $0.424. *Keppel REIT: 4Q14 DPU fell 23.4% y/y to 1.51¢ taking FY14 DPU to 7.23¢ (-8.2%). The quarter saw gross revenue at $42.3m (-10.9%) and NPI at $34.3m (-8.3%), due to the absence of contribution from Prudential Tower divested last year, while MBFC Tower 3 only contributed two-weeks of income. Occupancy stood at 99.3%, with a portfolio WALE of 6.1 years. Aggregate leverage was at 43.3% with an average interest cost of 2.23%. NAV/unit at $1.41 *Mapletree Logistics Trust: 3QFY15 DPU rose 1.6% to 1.87¢ on revenue of $82.9m (+6.2%). Top-line was led by contributions from six new properties and higher revenue from existing assets, offset by lower occupancy in several recently converted buildings in Singapore, absence of revenue from 5B Toh Guan Road East and weaker Yen FX rate. NPI rose 3.1% to $69.5m, weighed by a 25.7% rise in property expenses at $13.4m. Occupancy declined 1.5ppt to 96.9% versus the previous year, while aggregate leverage was at 34.6% with an average interest cost of 2.1%. NAV/unit at $0.98. *Keppel Infrastructure Trust: FY14 DPU kept unchanged at 7.82¢ despite FY14 profit slipping 10.4% to $12.7m. Revenue was down 2.5% to $65.5m, as a result of lower service concession receivables and lower production of NEWater, offset by higher output in waste-to-energy plants. Operating margin inched 1.9 ppt down to 20.0%, as lower production and cost savings from solar photovoltaic system were offset by costs incurred on Merlimau and CitySpring transactions. NAV/unit at $0.94 *China Everbright: Proposed private share placement to International Finance Corporation (49.7m shares) and RRJ Capital (71m shares), at $0.94 apiece (9.2% discount from last close). The additional shares will boost share capital by 4.85% and raise gross proceeds of $113.4m (US$85m), intended as working capital to fund growth and expansion. * Union Steel: Lim Wen Heng Construction has filed a Defence and Counterclaim, in response to a claim brought by Union Steel with the High Court of the Republic of Singapore for damages suffered as a result of the defendant’s failure to take delivery of the agreed quantity of reinforcement bars under the various contracts entered into between the parties. *Courage Marine: Expects to record a greater net loss for FY14 as compared to the previous year, due to 1) low turnover, low freight and low utilisation rate; and 2) the continuing challenging operating environment for cargo shipment. *Chuan Hup: Increased shareholdings in CH Offshore by 0.9% (or 6.4m) via open market purchases at average price of $0.5035. *GLP: Signed new agreements totalling 37,000 sqm with two leading third-party logistic providers in China, which are already existing customers. *Sino Grandness: Incorporated Garden Fresh Group in Hong Kong. *mm2 Asia: Signed co-production agreement with Fox International for four film projects due for release in 2015 and 2016, to be licensed, marketed and distributed to the international market.