19 June 2017

Stocks to watch

MARKET OVERVIEW
- Investors may be in cautious mood following the mixed close on Wall Street on weaker-than-expected economic data coming against a hawkish Fed policy plan.
- Key events that could move markets this week include the annual MSCI review, which will decide whether to include China A-shares in its emerging market index, and the formal Brexit negotiations, which start today.
- Technically, the STI looks poised to re-test its 3,228 support line, with next level at 3,190, while upside resistance capped at 3,275.

POSITIVE NEWS
*GLP
- China Vanke is reportedly in talks to join Chinese consortium, led by Hopu Investment and Hillhouse Capital, to bid for GLP.
- Shortlisted bidders, including Blackstone and Warburg Pincus, will have until end Jun to submit their final proposals.
- Currently trading at P/B of 1.15x, well below that of US peer Prologis at 2.1x.

*Noble
- Reportedly won a 4-month reprieve after key lenders agreed to extend a US$2b credit facility until mid-Oct for it to sell its assets or find a white knight.
- Group remains under severe pressure after enduring several turbulent years marked by massive losses, credit rating downgrades and allegations of improper accounting.
- Trading at distressed valuation of 0.08x P/B but worth noting that 74% of its equity base is tied to net fair value gains from commodity derivatives contracts.

*Sarine Tech
- Secured entry into the Thai market after Aurora Group adopted Sarine's light performance technologies.
- Provides a testament of consumer demand for tech-based information on diamonds.
- Trading at 22.6x trailing P/E and 4.9x P/B.

*Darco Water
- Acquired a 12%-stake in Wuhan Kaidi Water Services for $1.9m or 8.6x FY16 P/E.
- Funded via 3.8m new shares at $0.50 apiece.
- Wuhan Kaidi is a China water treatment and management specialist and has 22 ongoing projects worth Rmb487.5m across 14 provinces.
- The group intends to use Wuhan Kaidi's permits and licenses to bid for projects in China.

*Tung Lok Restaurants
- Prominent investor and substantial shareholder Sam Goi acquired 25,000 shares in the open market at $0.121 each on 15 Jun, lifting his stake to 18.62% from 18.611%.
- Trading at hefty trailing P/E of 86.2x but market cap of $36.2m is supported by net cash position of $11.7m.

NEGATIVE NEWS
*F J Benjamin
- Exclusive distribution agreement in Singapore for French leather goods, Goyard, has expired.
- Facing retail headwinds mainly from e-commerce.
- Loss-making and trading at 0.56x P/B.

NEUTRAL NEWS
*Hi-P Int'l
- Entered 20:80 JV with Sino Coffee Machine Mfg to undertake the production of coffee machines, packaging and products related to the business.
- The group's initial investment of Rmb22.8m in the JVCo will include a Rmb19.8m shareholder loan.
- Trading at 10.2x trailing P/E and 1.3x P/B.




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