DBS Equity Research: Wired Daily 18 Mar 2016

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Publish date: Fri, 18 Mar 2016, 10:01 AM

USDSGD - 1.364 turns to resistance from support, near-term downside to 1.34

USD decline - Underpins O&M stocks but Riverstone & Venture Corp may lag

Financial markets' reaction to the FED's decision to cut back on lower rate hike forecast for the year continued for a second day. The USD fell further, lifting oil and commodity prices as well as equities. The USDSGD fell below our earlier stated technical support of 1.364. As this support level has fallen, it now turns to a near-term resistance. Further nearterm downside to 1.34 is seen.

O&M stocks are likely to trade up, riding on the rebound in oil price. However, stocks such as Riverstone and Venture Corp may lag as the USD decline negatively affects them. For Venture Corp though, any pullback should be underpinned by the upcoming 50cts dividend (ex-date in May).

We maintain our view that the STI's current rise should find resistance around the 2900 level (2920 max) before pullback.

ST Engineeringannounced that its Land Systems subsidiary ST Kinetics, together with its US-based partner Science Applications International Corporation (SAIC) have officially moved into the engineering and manufacturing development (EDM) phase of the United States Marine Corps (USMC)'s Amphiious Combat Vehicle (ACV) 1.1 programme. While they had already been shortlisted for the second round of the programme in November 2015, the consortium had been held up until now by a protest lodged by one of the losing bidders General Dynamics with the US Government Accountability Office (GAO). The GAO has just denied this protest, paving the way for ST Kinetics and its partner to proceed with the prototyping contract. To recap, the USMC had awarded a pair of two-year pre-production EDM contracts in November 2015 - for US$103.8m to BAE Systems and for US$121.5m to the ST Kinetics and SAIC team. This selection of the Terrex vehicle for further rounds of testing is thus a shot in the arm for ST Kinetics, as it aims to prove its capabilities worldwide.

Trendlines' bid to renew its agricultural technology (agtech) incubator license in Israel has been denied. The group hopes to bundle agtech investments with its medical tech (medtech) license. Even in the worst case scenario of being denied agtech license, there is no material change to our forecasts. Maintain BUY rating and S$0.28 TP.

Midas Holdings has secured contracts totalling RMB247.7m for the supply of train car body components for highspeed trains and metro trains. The high-speed train contracts awarded, worth RMB217.3m, are for the supply of aluminium alloy extrusion profiles and fabricated parts for two types of high-speed trains. Midas will also supply aluminium alloy extrusion profiles worth RMB30.4m for the Shanghai Metro Line 17. These contracts are awarded by CRRC Changchun Railway Vehicles and are slated for delivery in 2016.

CITIC Envirotech has recently secured 2 wastewater treatment projects with a total investment of RMB147m (S$32m). The first is to set up a JV company to invest RMB64m for the acquisition of a 40,000 m3/day municipal wastewater treatment plant with a concession period of 27 years. For the second project, the company will acquire a 10,000 m3/day industrial wastewater treatment plant under phase one and to build another 10,000 m3/day under phase two in the Baiyi Industrial Park in Zao Zhuang City, Shandong Province, China. The total investment of the project is RMB83m and has a concession period of 30 years.

Amid economic headwinds, sentiment among small and medium-sized enterprises (SMEs) has dipped to neutral after six straight years of optimism, an index compiled by the Singapore Business Federation (SBF) and DP Information Group has found. The overall index score among these businesses fell 1.1 to sit at 50.0, a score indicating that they do not expect to achieve growth in the next six months (Q2 and Q3 of this year). The index found sentiment to have fallen across the board; the transport/storage sector recorded the largest fall of 4.3%, from 53.1 to 50.8.

Source: DBS

Riverstone (AP4)Venture (V03)ST Engineering (S63)Trendlines (42T)Midas (5EN)

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