-Last Friday's Non Farm Payroll data was better than expected. USD rebounded strongly. Not sure if it will continue to last.
-The market is likely to drift lower in the holiday-shortened week, with investors focused on next batch of results from Singtel, City Dev and ST Engineering.
-Technically, the STI faces topside resistance at 3,360, with downside support is at 3,275.
- As spoken the current SG market is focusing on property related counters.
SECTOR WATCH
*Property developers
- Brisk demand for new private homes continued unabated following another good take-up during the weekend launch of Le Quest, a 516-unit mixed development in Bukit Batok.
- Developed by Qingjian Realty, the 99-year leasehold project, all 280 units available were snapped up at an average price of $1,280 psf.
- MKE prefers UOL and City Dev for exposure to the residential sector.
CORPORATE RESULTS
*UOL
- 2Q17 results were in line as net profit jumped 59% to $109.4m on higher sales recognition from Principal Garden condo project, higher contributions from associates and fair value gains on investment properties.
- Revenue climbed 10% to $399.1m, with property development (+19%) accounting for 55% of turnover, while its hotel business was flat.
- The group plans to launch tow condo projects next year - 140-unit freehold development at Amber Road and a 750-init project at Potong Pasir Avenue 1.
- Trades at 0.79x P/B.
- MKE last had a Buy with TP of $9.05.
*Venture Corp
- 2Q17 net profit surged 61% to $69.8m, beating expectations on improved operational leverage.
- Revenue leapt to to $1.01b (+48.3%) to cross $1b for the first time, underpinned by strong execution of customers' orders.
- Gross margin dipped 1.6ppt to 21.9%, but pretax margin improved 0.7ppt to 8.3%.
- Last traded at 17.8x FY17e consensus P/E.
*Jardine C&C
- 2Q17 net profit of US$188.7m (+0.9%) was bolstered by fair value gains of US$15.4m. Excluding the non-trading items, core net profit fell 9.4% to US$173.3m, bringing 1H17 earnings to US$375m (+13%), or 43% of full-year consensus estimate.
- For the quarter, revenue rose 6% to US$4.29b, while operating margin was stable at 8.6% (-0.1ppt).
- Astra's profit contributions fell 5% to US$130.8m on declines across automotive (-21%), financial services (-8%),agribusiness (-35%), infrastructure & logistics (-41%), with only its heavy equipment business (+70%) doing well.
- Direct motor interests (-7%) were also hit by poor earnings from Malaysia (-55%) and Indonesia (-41%), with Vietnam (+10%) and Singapore (+4%) holding up.
- Interim DPS of US$0.18 was maintained.
- NAV/share at US$15.19.
*Cosco Shipping
- 2Q17 net loss narrowed to $20.8m (2Q16: $36.8m loss), shored by a positive FX swing of $14m.
- Revenue slid 31% to $524.7m, as persistent weakness in its core shipyard (-31.6%) business overshadowed improved contribution from the dry bulk shipping (+4.7%) due to higher charter rates.
- Gross margin widened 2.4ppt to 3.9%.
- Bottom line was lifted by a $32m write-back on trade receivables, although partly knocked by a $9.6m disposal loss and $7.6m drop in tax credit.
- Last traded at 3x P/B.
*Manufacturing Integration Tech
- Turned around to 1H17 net profit of $2.8m (1H16: $0.8m loss).
- Revenue leapt 52% to $33.1m on strong orders, underpinned by the upcycle in the semiconductor industry and impending new major handset launches, as well as better contract equipment manufacturing business.
- Gross margin expanded 9ppt to 34%.
- Declared maiden interim DPS of 0.25¢ (1H16: nil).
- Order book stood at $22.4m at 4 Aug '17, with management expecting recent momentum for new orders to persist.
- Net cash increased to $19.7m (8.8¢/share or 34% of market cap) from $14.1m in Dec '16.
- NAV/share at $0.2234.
*Chip Eng Seng
- 2Q17 net profit plummeted 94.3% to $0.8m, partly hit by higher provisions relating to a construction project.
- Revenue sagged 9.3% to $212.6m, mainly dragged by property development (-8.2%) and construction (-13.8%) divisions, while both hospitality (+5%) and property investments (+13%) improved on higher occupancies.
- Gross margin shrank 5.6ppt to 17% on the shift in revenue mix.
- Bottom line was impacted by higher marketing expenses for Grandeur Park Residences, which was launched in Mar '17, and the newly opened Maldives resort Grand Park Kodhipparu.
- Construction order book increased to $538.4m (1Q17: $457.2m).
- NAV/share at $1.2025.
*Yeo Hiap Seng
- 2Q17 net profit tumbled 35% to $5.3m despite realising a $5.4m FX gain on liquidation of subsidiaries.
- Revenue dropped 22.7% to $87.2m, as F&B sales were undermined by pricing pressure and transition to new distributors in Cambodia, as well as absence of $1.6m dividend income from the divested Super Group.
- Gross margin contracted 9.3ppt to 30.2%.
- Declared a special DPS of 2¢ (2Q16: nil).
- NAV/share at $1.1464.
*Sarine
- 2Q17 net profit slumped 46.5% to US$3.2m, bringing 1H17 earnings to US$5.7m (-36.9%), or just 27% of full-year consensus estimate.
- Quarter revenue slipped 13% to US$18.2m on lower sales due to the illicit competition in India.
- Gross margin narrowed 0.7ppt to 68.4%.
- Bottom line was weighed by higher operating expenses from R&D (+11.4%) and general & admin cost (+14.5%) due to professional fees.
- NAV/share at $0.3051.
*Challenger Technologies
- 2Q17 net profit inched up 2% to $3.8m on lower taxes (-23%).
- Revenue slid 14% to $78.7m, weighed by weak performances in retail and tradeshow divisions.
- Gross margin widened 2ppt to 22.3% following closure of several underperforming retail outlets.
- Maintained interim DPS of 1.1¢.
- NAV/share at $0.2336.
*CEI
- 1H17 net profit declined 22.7% to $3.6m, as revenue slipped 2.1% to $67.5m.
- Operating margin contracted 1.8ppt to 6.3% due to absence of a $0.5m write-back of provision, and higher staff cost amid increased headcounts to support higher order book for 2H17.
- Order book increased to $53.1m (FY16: $46.8m), and majority of orders are expected to be fulfilled in 2017.
- Maintained interim DPS of 1.04¢, but cut special DPS to 3¢ (1H16: 3.76¢).
- NAV/share at $0.453.
*Nera Telecommunications:
- 2Q17 net profit dropped 40% to $1.4m, as taxes spiked more than double, albeit pared by absence of an FX loss (2Q16: $1.8m).
- Revenue slipped 1.3% to $50.3m amid lower sales for network infrastructure in Singapore and Australia.
- Gross margin shrank 2.6ppt to 23.4% on a shift in product mix and lower project write-back.
- Bottom line was also eroded by higher staff costs.
- Maintained interim DPS of 1¢.
- NAV/share at $0.1899.
*GSH
- Turned around to 2Q17 net profit of $71.7m (2Q16: $3.2m loss), mainly due to a $74.9m disposal gain arising from sale of its entire 51% stake in GSH Plaza.
- Revenue surged 73% to $30.6m on stronger property development (+146%), as well as hospitality (+40%) due to higher occupancy and average room rates at its two hotels in Sabah, Malaysia.
- Gross margin narrowed 2ppt to 45%.
- Excluding disposal gain, however, bottom line was hurt by a spike in staff costs and increased finance expenses.
- Proposed special DPS of 1¢ (2Q16: nil)
- NAV/share at $0.212.
*Multi-Chem
- 2Q17 net profit of $3.9m (+175%) was boosted by $3.5m disposal gain.
- Revenue grew 31% to $105.6m, bolstered by core IT division (+39.3%), which outweighed a drop in the PCB segment (-56.9%) due to lost capacity after the disposal of drilling machines in China.
- Gross margin shrank 2.9ppt to 13.7% amid reduced profitability in IT.
- Net cash position improved to $44.7m ($0.49/share, or 54% of market cap) from $39.2m in FY16.
- Maintained interim DPS of 1.11¢.
- NAV/share at $1.0755.
*AF Global
- 2Q17 net profit slumped 33% to $1.5m on absence of FX gains (2Q16: $1.4m).
- Revenue rose 5% to $12.9m, bolstered by higher hotel contribution, while leisure and property businesses were muted.
- Gross margin widened 1.2ppt to 46.1%, and bottom line was also cushioned by higher JV profit (+$0.9m).
- NAV/share at $0.25.
*GCCP Resources
- 2Q17 close to breakeven with net profit of RM0.3m (2Q16: RM4.4m loss).
- Revenue spiked 113% to RM5.2m, due to increase in orders of ground calcium carbonate (GCC) stones.
- Gross margin expanded to 76% (+20ppts) due to ready stocks of GCC limestone from previous extraction activities.
- Group expects performance in the following months to be sustained by a step-up contract from another major customer.
- NAV/share at RM0.07.
*Serial System
- 2Q17 net profit edged higher to US$3.4m (+3%) on lower taxes (-26%) and reduced associate losses (-20%).
- Revenue slipped 1% to US$373.9m as stronger contribution from distribution of electronic components (+14%) was offset by a slump in consumer products (-83%).
- Gross margin expanded to 7% (+0.4ppts) on a favourable shift in sales mix.
- Interim DPS hiked to 0.29¢ (2Q16: 0.18¢).
- NAV/share at US$0.1511.
*Federal Int'l
- 2Q17 net profit rose 10.2% to $1.2m, despite a 137.1% spike in revenue to $43.7m, led by higher sales from the Zawtika 1C project.
- However, gross margin narrowed 8.1ppt to 14.4% due to lower profitability from the trading segment.
- Bottom line was further impacted by higher admin costs (+8.6%) on increased insurance for its land rig and professional & consulting fees arising from to its Indonesian operations.
- NAV/share at $0.601.
News for today 7/8/2017:
- July job creation better than expected in UShttp://www.straitstimes.com/business/july-job-creation-better-than-expected-in-us?xtor=CS3-18
- Malaysia sees slower export growth in June https://asia.nikkei.com/Politics-Economy/Economy/Malaysia-sees-slower-export-growth-in-June
- Strong response on first day of sales at Le Quest in Bukit Batok http://www.straitstimes.com/business/property/strong-response-on-first-day-of-sales-at-le-quest-in-bukit-batok?xtor=CS3-18
- 'Gig' workers get their due http://www.straitstimes.com/business/economy/gig-workers-get-their-due?xtor=CS3-18
Stocks to watch today 7/8/2017:
- BHG Retail Reit last close $0.735, 52wk high/low $0.76/$0.57 - Company banks on growth of Chinese economy http://www.straitstimes.com/business/companies-markets/bhg-retail-reit-banks-on-growth-of-chinese-economy
- Chip Eng Seng last close $0.74, 52wk high/low $0.77/$0.615 - Company's Q2 profit down on reduced margins, higher expenses http://www.businesstimes.com.sg/companies-markets/chip-eng-sengs-q2-profit-down-on-reduced-margins-higher-expenses?xtor=CS3-25
- Challenger last close $0.45, 52wk high/low $0.515/$0.44 - Company's Q2 profit up 2% http://www.businesstimes.com.sg/companies-markets/challengers-q2-profit-up-2?xtor=CS3-25
- Courts last close $0.43, 52wk high/low $0.48/$0.38 - Courts planning $10m revamp of 7 Singapore outlets http://www.straitstimes.com/business/companies-markets/courts-planning-10m-revamp-of-7-spore-outlets
- Cosco Shipping last close $0.31, 52wk high/low $0.36/$0.24 - Company shrinks Q2 net loss by 43% http://www.businesstimes.com.sg/investing-wealth/cosco-shipping-international-s-shrinks-q2-net-loss-by-43?xtor=CS3-25
- DBS last close $21.49, 52wk high/low $22.25/$14.72 - The (bad loan) woods are dark and deep for DBS http://www.straitstimes.com/business/the-bad-loan-woods-are-dark-and-deep-for-dbs?xtor=CS3-18; DBS shares down on warning of higher provisions over O&G stress http://www.businesstimes.com.sg/companies-markets/dbs-shares-down-on-warning-of-higher-provisions-over-og-stress?xtor=CS3-25
- Dukang Distillers last close $0.24, 52wk high/low $0.82/$0.24 - Can Dukang offer the cigar butt's last puff? http://www.businesstimes.com.sg/opinion/can-dukang-offer-the-cigar-butts-last-puff
- GSH Corp last close $0.57, 52wk high/low $0.60/$0.27 - Company in the black with Q2 profit of S$71.7m, helped by disposal gain http://www.businesstimes.com.sg/investing-wealth/gsh-corp-in-the-black-with-q2-profit-of-s717m-helped-by-disposal-gain?xtor=CS3-25
- Jardine C&C last close $40.08, 52wk high/low $48.50/$38 - Company posts 22% profit rise in first half http://www.straitstimes.com/business/companies-markets/jardine-cc-posts-22-profit-rise-in-first-half?xtor=CS3-18
- Jardine Matheson last close US$64, 52wk high/low US$67.27/US$52.90 - Company's H1 profit more than doubles to US$2.08b http://www.businesstimes.com.sg/companies-markets/jardine-mathesons-h1-profit-more-than-doubles-to-us208b?xtor=CS3-25
- Noble last close $0.37, 52wk high/low $2.80/$0.285 - SGX, MAS draw further fire over Noble saga http://www.businesstimes.com.sg/companies-markets/sgx-mas-draw-further-fire-over-noble-saga?xtor=CS3-25; Noble says it does not wish to comment further on Iceberg's allegations http://www.businesstimes.com.sg/companies-markets/noble-says-it-does-not-wish-to-comment-further-on-icebergs-allegations
- Rowsley last close $0.112, 52wk high/low $0.198/$0.065 - Albert Hong ceases to be substantial shareholder of Rowsley http://infopub.sgx.com/FileOpen/_Rowsley_AH_Form3_270717.ashx?App=Announcement&FileID=465683
- Sabana REIT last close $0.445, 52wk high/low $0.52/$0.34 - Warburg Pincus-backed ESR in talks to buy Singapore's Sabana REIT: sources https://www.reuters.com/article/us-sabana-shariah-m-a-esr-idUSKBN1AM0W1
- SPH last close $2.88, 52wk high/low $3.86/$2.85 - Company investing $8.5m in Han Language Centre http://www.straitstimes.com/business/sph-investing-85m-in-han-language-centre?xtor=CS3-18
- Stratech Group last close $0.061, 52wk high/low $0.19/$0.059 - Company in preliminary talks with potential investors http://www.businesstimes.com.sg/companies-markets/stratech-group-in-preliminary-talks-with-potential-investors
- Serial System last close $0.183, 52wk high/low $0.193/$0.128 - Company posts 3% growth in Q2 profit http://www.businesstimes.com.sg/companies-markets/serial-system-posts-3-growth-in-q2-profit?xtor=CS3-25
- UOL last close $8.06, 52wk high/low $8.25/$5.50 - Company's Q2 profit surges 59% on back of residential sector http://www.straitstimes.com/business/property/uols-q2-profit-surges-59-on-back-of-residential-sector?xtor=CS3-18
- Venture last close $13.85, 52wk high/low $14.38/$8.89 - Company's Q2 profit grows 61% to S$69.8m as net margin improves http://www.businesstimes.com.sg/companies-markets/ventures-q2-profit-grows-61-to-s698m-as-net-margin-improves?xtor=CS3-25
- World Class Global last close $0.245, 52wk high/low $0.28/$0.235 - Company's H1 bottomline still mired in red ink with S$2.9m loss http://www.businesstimes.com.sg/companies-markets/world-class-global-h1-bottomline-still-mired-in-red-ink-with-s29m-loss
- YZJ Shipbuilding last close $1.46, 52wk high/low $1.50/$0.705 - From Singapore's worst-performing stock in 2016 to best this year http://www.straitstimes.com/business/companies-markets/yangzijiang-shipbuilding-from-singapores-worst-performing-stock-in-2016
DBS Group Holdings (DBS SP) BUY
Key Takeaways From Results Briefing
Analyst: Jonathan Koh, CFA Tel: (65) 6590 6620
-The market is likely to drift lower in the holiday-shortened week, with investors focused on next batch of results from Singtel, City Dev and ST Engineering.
-Technically, the STI faces topside resistance at 3,360, with downside support is at 3,275.
- As spoken the current SG market is focusing on property related counters.
SECTOR WATCH
*Property developers
- Brisk demand for new private homes continued unabated following another good take-up during the weekend launch of Le Quest, a 516-unit mixed development in Bukit Batok.
- Developed by Qingjian Realty, the 99-year leasehold project, all 280 units available were snapped up at an average price of $1,280 psf.
- MKE prefers UOL and City Dev for exposure to the residential sector.
CORPORATE RESULTS
*UOL
- 2Q17 results were in line as net profit jumped 59% to $109.4m on higher sales recognition from Principal Garden condo project, higher contributions from associates and fair value gains on investment properties.
- Revenue climbed 10% to $399.1m, with property development (+19%) accounting for 55% of turnover, while its hotel business was flat.
- The group plans to launch tow condo projects next year - 140-unit freehold development at Amber Road and a 750-init project at Potong Pasir Avenue 1.
- Trades at 0.79x P/B.
- MKE last had a Buy with TP of $9.05.
*Venture Corp
- 2Q17 net profit surged 61% to $69.8m, beating expectations on improved operational leverage.
- Revenue leapt to to $1.01b (+48.3%) to cross $1b for the first time, underpinned by strong execution of customers' orders.
- Gross margin dipped 1.6ppt to 21.9%, but pretax margin improved 0.7ppt to 8.3%.
- Last traded at 17.8x FY17e consensus P/E.
*Jardine C&C
- 2Q17 net profit of US$188.7m (+0.9%) was bolstered by fair value gains of US$15.4m. Excluding the non-trading items, core net profit fell 9.4% to US$173.3m, bringing 1H17 earnings to US$375m (+13%), or 43% of full-year consensus estimate.
- For the quarter, revenue rose 6% to US$4.29b, while operating margin was stable at 8.6% (-0.1ppt).
- Astra's profit contributions fell 5% to US$130.8m on declines across automotive (-21%), financial services (-8%),agribusiness (-35%), infrastructure & logistics (-41%), with only its heavy equipment business (+70%) doing well.
- Direct motor interests (-7%) were also hit by poor earnings from Malaysia (-55%) and Indonesia (-41%), with Vietnam (+10%) and Singapore (+4%) holding up.
- Interim DPS of US$0.18 was maintained.
- NAV/share at US$15.19.
*Cosco Shipping
- 2Q17 net loss narrowed to $20.8m (2Q16: $36.8m loss), shored by a positive FX swing of $14m.
- Revenue slid 31% to $524.7m, as persistent weakness in its core shipyard (-31.6%) business overshadowed improved contribution from the dry bulk shipping (+4.7%) due to higher charter rates.
- Gross margin widened 2.4ppt to 3.9%.
- Bottom line was lifted by a $32m write-back on trade receivables, although partly knocked by a $9.6m disposal loss and $7.6m drop in tax credit.
- Last traded at 3x P/B.
*Manufacturing Integration Tech
- Turned around to 1H17 net profit of $2.8m (1H16: $0.8m loss).
- Revenue leapt 52% to $33.1m on strong orders, underpinned by the upcycle in the semiconductor industry and impending new major handset launches, as well as better contract equipment manufacturing business.
- Gross margin expanded 9ppt to 34%.
- Declared maiden interim DPS of 0.25¢ (1H16: nil).
- Order book stood at $22.4m at 4 Aug '17, with management expecting recent momentum for new orders to persist.
- Net cash increased to $19.7m (8.8¢/share or 34% of market cap) from $14.1m in Dec '16.
- NAV/share at $0.2234.
*Chip Eng Seng
- 2Q17 net profit plummeted 94.3% to $0.8m, partly hit by higher provisions relating to a construction project.
- Revenue sagged 9.3% to $212.6m, mainly dragged by property development (-8.2%) and construction (-13.8%) divisions, while both hospitality (+5%) and property investments (+13%) improved on higher occupancies.
- Gross margin shrank 5.6ppt to 17% on the shift in revenue mix.
- Bottom line was impacted by higher marketing expenses for Grandeur Park Residences, which was launched in Mar '17, and the newly opened Maldives resort Grand Park Kodhipparu.
- Construction order book increased to $538.4m (1Q17: $457.2m).
- NAV/share at $1.2025.
*Yeo Hiap Seng
- 2Q17 net profit tumbled 35% to $5.3m despite realising a $5.4m FX gain on liquidation of subsidiaries.
- Revenue dropped 22.7% to $87.2m, as F&B sales were undermined by pricing pressure and transition to new distributors in Cambodia, as well as absence of $1.6m dividend income from the divested Super Group.
- Gross margin contracted 9.3ppt to 30.2%.
- Declared a special DPS of 2¢ (2Q16: nil).
- NAV/share at $1.1464.
*Sarine
- 2Q17 net profit slumped 46.5% to US$3.2m, bringing 1H17 earnings to US$5.7m (-36.9%), or just 27% of full-year consensus estimate.
- Quarter revenue slipped 13% to US$18.2m on lower sales due to the illicit competition in India.
- Gross margin narrowed 0.7ppt to 68.4%.
- Bottom line was weighed by higher operating expenses from R&D (+11.4%) and general & admin cost (+14.5%) due to professional fees.
- NAV/share at $0.3051.
*Challenger Technologies
- 2Q17 net profit inched up 2% to $3.8m on lower taxes (-23%).
- Revenue slid 14% to $78.7m, weighed by weak performances in retail and tradeshow divisions.
- Gross margin widened 2ppt to 22.3% following closure of several underperforming retail outlets.
- Maintained interim DPS of 1.1¢.
- NAV/share at $0.2336.
*CEI
- 1H17 net profit declined 22.7% to $3.6m, as revenue slipped 2.1% to $67.5m.
- Operating margin contracted 1.8ppt to 6.3% due to absence of a $0.5m write-back of provision, and higher staff cost amid increased headcounts to support higher order book for 2H17.
- Order book increased to $53.1m (FY16: $46.8m), and majority of orders are expected to be fulfilled in 2017.
- Maintained interim DPS of 1.04¢, but cut special DPS to 3¢ (1H16: 3.76¢).
- NAV/share at $0.453.
*Nera Telecommunications:
- 2Q17 net profit dropped 40% to $1.4m, as taxes spiked more than double, albeit pared by absence of an FX loss (2Q16: $1.8m).
- Revenue slipped 1.3% to $50.3m amid lower sales for network infrastructure in Singapore and Australia.
- Gross margin shrank 2.6ppt to 23.4% on a shift in product mix and lower project write-back.
- Bottom line was also eroded by higher staff costs.
- Maintained interim DPS of 1¢.
- NAV/share at $0.1899.
*GSH
- Turned around to 2Q17 net profit of $71.7m (2Q16: $3.2m loss), mainly due to a $74.9m disposal gain arising from sale of its entire 51% stake in GSH Plaza.
- Revenue surged 73% to $30.6m on stronger property development (+146%), as well as hospitality (+40%) due to higher occupancy and average room rates at its two hotels in Sabah, Malaysia.
- Gross margin narrowed 2ppt to 45%.
- Excluding disposal gain, however, bottom line was hurt by a spike in staff costs and increased finance expenses.
- Proposed special DPS of 1¢ (2Q16: nil)
- NAV/share at $0.212.
*Multi-Chem
- 2Q17 net profit of $3.9m (+175%) was boosted by $3.5m disposal gain.
- Revenue grew 31% to $105.6m, bolstered by core IT division (+39.3%), which outweighed a drop in the PCB segment (-56.9%) due to lost capacity after the disposal of drilling machines in China.
- Gross margin shrank 2.9ppt to 13.7% amid reduced profitability in IT.
- Net cash position improved to $44.7m ($0.49/share, or 54% of market cap) from $39.2m in FY16.
- Maintained interim DPS of 1.11¢.
- NAV/share at $1.0755.
*AF Global
- 2Q17 net profit slumped 33% to $1.5m on absence of FX gains (2Q16: $1.4m).
- Revenue rose 5% to $12.9m, bolstered by higher hotel contribution, while leisure and property businesses were muted.
- Gross margin widened 1.2ppt to 46.1%, and bottom line was also cushioned by higher JV profit (+$0.9m).
- NAV/share at $0.25.
*GCCP Resources
- 2Q17 close to breakeven with net profit of RM0.3m (2Q16: RM4.4m loss).
- Revenue spiked 113% to RM5.2m, due to increase in orders of ground calcium carbonate (GCC) stones.
- Gross margin expanded to 76% (+20ppts) due to ready stocks of GCC limestone from previous extraction activities.
- Group expects performance in the following months to be sustained by a step-up contract from another major customer.
- NAV/share at RM0.07.
*Serial System
- 2Q17 net profit edged higher to US$3.4m (+3%) on lower taxes (-26%) and reduced associate losses (-20%).
- Revenue slipped 1% to US$373.9m as stronger contribution from distribution of electronic components (+14%) was offset by a slump in consumer products (-83%).
- Gross margin expanded to 7% (+0.4ppts) on a favourable shift in sales mix.
- Interim DPS hiked to 0.29¢ (2Q16: 0.18¢).
- NAV/share at US$0.1511.
*Federal Int'l
- 2Q17 net profit rose 10.2% to $1.2m, despite a 137.1% spike in revenue to $43.7m, led by higher sales from the Zawtika 1C project.
- However, gross margin narrowed 8.1ppt to 14.4% due to lower profitability from the trading segment.
- Bottom line was further impacted by higher admin costs (+8.6%) on increased insurance for its land rig and professional & consulting fees arising from to its Indonesian operations.
- NAV/share at $0.601.
News for today 7/8/2017:
- July job creation better than expected in UShttp://www.straitstimes.com/business/july-job-creation-better-than-expected-in-us?xtor=CS3-18
- Malaysia sees slower export growth in June https://asia.nikkei.com/Politics-Economy/Economy/Malaysia-sees-slower-export-growth-in-June
- Strong response on first day of sales at Le Quest in Bukit Batok http://www.straitstimes.com/business/property/strong-response-on-first-day-of-sales-at-le-quest-in-bukit-batok?xtor=CS3-18
- 'Gig' workers get their due http://www.straitstimes.com/business/economy/gig-workers-get-their-due?xtor=CS3-18
Stocks to watch today 7/8/2017:
- BHG Retail Reit last close $0.735, 52wk high/low $0.76/$0.57 - Company banks on growth of Chinese economy http://www.straitstimes.com/business/companies-markets/bhg-retail-reit-banks-on-growth-of-chinese-economy
- Chip Eng Seng last close $0.74, 52wk high/low $0.77/$0.615 - Company's Q2 profit down on reduced margins, higher expenses http://www.businesstimes.com.sg/companies-markets/chip-eng-sengs-q2-profit-down-on-reduced-margins-higher-expenses?xtor=CS3-25
- Challenger last close $0.45, 52wk high/low $0.515/$0.44 - Company's Q2 profit up 2% http://www.businesstimes.com.sg/companies-markets/challengers-q2-profit-up-2?xtor=CS3-25
- Courts last close $0.43, 52wk high/low $0.48/$0.38 - Courts planning $10m revamp of 7 Singapore outlets http://www.straitstimes.com/business/companies-markets/courts-planning-10m-revamp-of-7-spore-outlets
- Cosco Shipping last close $0.31, 52wk high/low $0.36/$0.24 - Company shrinks Q2 net loss by 43% http://www.businesstimes.com.sg/investing-wealth/cosco-shipping-international-s-shrinks-q2-net-loss-by-43?xtor=CS3-25
- DBS last close $21.49, 52wk high/low $22.25/$14.72 - The (bad loan) woods are dark and deep for DBS http://www.straitstimes.com/business/the-bad-loan-woods-are-dark-and-deep-for-dbs?xtor=CS3-18; DBS shares down on warning of higher provisions over O&G stress http://www.businesstimes.com.sg/companies-markets/dbs-shares-down-on-warning-of-higher-provisions-over-og-stress?xtor=CS3-25
- Dukang Distillers last close $0.24, 52wk high/low $0.82/$0.24 - Can Dukang offer the cigar butt's last puff? http://www.businesstimes.com.sg/opinion/can-dukang-offer-the-cigar-butts-last-puff
- GSH Corp last close $0.57, 52wk high/low $0.60/$0.27 - Company in the black with Q2 profit of S$71.7m, helped by disposal gain http://www.businesstimes.com.sg/investing-wealth/gsh-corp-in-the-black-with-q2-profit-of-s717m-helped-by-disposal-gain?xtor=CS3-25
- Jardine C&C last close $40.08, 52wk high/low $48.50/$38 - Company posts 22% profit rise in first half http://www.straitstimes.com/business/companies-markets/jardine-cc-posts-22-profit-rise-in-first-half?xtor=CS3-18
- Jardine Matheson last close US$64, 52wk high/low US$67.27/US$52.90 - Company's H1 profit more than doubles to US$2.08b http://www.businesstimes.com.sg/companies-markets/jardine-mathesons-h1-profit-more-than-doubles-to-us208b?xtor=CS3-25
- Noble last close $0.37, 52wk high/low $2.80/$0.285 - SGX, MAS draw further fire over Noble saga http://www.businesstimes.com.sg/companies-markets/sgx-mas-draw-further-fire-over-noble-saga?xtor=CS3-25; Noble says it does not wish to comment further on Iceberg's allegations http://www.businesstimes.com.sg/companies-markets/noble-says-it-does-not-wish-to-comment-further-on-icebergs-allegations
- Rowsley last close $0.112, 52wk high/low $0.198/$0.065 - Albert Hong ceases to be substantial shareholder of Rowsley http://infopub.sgx.com/FileOpen/_Rowsley_AH_Form3_270717.ashx?App=Announcement&FileID=465683
- Sabana REIT last close $0.445, 52wk high/low $0.52/$0.34 - Warburg Pincus-backed ESR in talks to buy Singapore's Sabana REIT: sources https://www.reuters.com/article/us-sabana-shariah-m-a-esr-idUSKBN1AM0W1
- SPH last close $2.88, 52wk high/low $3.86/$2.85 - Company investing $8.5m in Han Language Centre http://www.straitstimes.com/business/sph-investing-85m-in-han-language-centre?xtor=CS3-18
- Stratech Group last close $0.061, 52wk high/low $0.19/$0.059 - Company in preliminary talks with potential investors http://www.businesstimes.com.sg/companies-markets/stratech-group-in-preliminary-talks-with-potential-investors
- Serial System last close $0.183, 52wk high/low $0.193/$0.128 - Company posts 3% growth in Q2 profit http://www.businesstimes.com.sg/companies-markets/serial-system-posts-3-growth-in-q2-profit?xtor=CS3-25
- UOL last close $8.06, 52wk high/low $8.25/$5.50 - Company's Q2 profit surges 59% on back of residential sector http://www.straitstimes.com/business/property/uols-q2-profit-surges-59-on-back-of-residential-sector?xtor=CS3-18
- Venture last close $13.85, 52wk high/low $14.38/$8.89 - Company's Q2 profit grows 61% to S$69.8m as net margin improves http://www.businesstimes.com.sg/companies-markets/ventures-q2-profit-grows-61-to-s698m-as-net-margin-improves?xtor=CS3-25
- World Class Global last close $0.245, 52wk high/low $0.28/$0.235 - Company's H1 bottomline still mired in red ink with S$2.9m loss http://www.businesstimes.com.sg/companies-markets/world-class-global-h1-bottomline-still-mired-in-red-ink-with-s29m-loss
- YZJ Shipbuilding last close $1.46, 52wk high/low $1.50/$0.705 - From Singapore's worst-performing stock in 2016 to best this year http://www.straitstimes.com/business/companies-markets/yangzijiang-shipbuilding-from-singapores-worst-performing-stock-in-2016
DBS Group Holdings (DBS SP) BUY
Key Takeaways From Results Briefing
Analyst: Jonathan Koh, CFA Tel: (65) 6590 6620
- Guidance for 2017. Management expects loan growth of another 3% in 2H17, bringing full year loan growth to 6%. NIM is expected to improve by 2-3bp in 2H17 and should averages 1.75-1.76% for the full year. Specific provisions could creep up due to deterioration in valuations of collaterals.
- NIM was flat at 1.74% in 2Q17. Singapore provided positive impact with NIM expansion of 2bp qoq. However, Hong Kong was affected by the drop in HIBOR, especially 1M HIBOR, as a result of excess liquidity, resulting in negative impact with NIM compression of 2bp qoq.
- Integration of ANZ’s wealth management business underway. DBS has completed the acquisition of ANZ’s wealth management business across five markets, namely Singapore, Indonesia, Hong Kong, Taiwan and China, at S$110m above book value. The acquisition would progressively add AUM of about S$20b (S$8-9b in 2H17). Management estimated that the acquisition would contribute income of S$125m in 2017 and S$475m in 2018.
- Remnants of NPLs from the Oil & Gas sector to be recognised in 2H17 and 2018. Management expects asset quality to be under pressure and heightened credit costs to persist due to the depressed level of crude oil prices. DBS has exposures of S$3b to 90 smaller offshore support companies. 60% or S$1.8b of these smaller accounts are deemed vulnerable, of which S$0.8b is already recognised as NPLs as of Jun 17. S$500m of new NPLs could be recognised in 2H17 and the balance of another S$500m in 2018. This would necessitate specific provisions of S$250-300m each during 2H17 and 2018.
- Good to receive more dividends. DBS’ fully loaded CET-1 CAR is the highest among the three local banks at 14% and its payout ratio is 36% even after the current increase in dividends. The review of Basel 4 by the Basel Committee could be completed by Oct 17. Management might review DBS’ dividend policy again if capital requirements from Basel 4 is clarified and finalised.
