Towards Financial Freedom
DBS Equity Research: Wired Daily 4 May 2016
STI - Near-term support 2780, expect a minor bounce to 2836 in coming sessions.
Innovalues - A tepid 1Q16, as expected. Downgrade to HOLD as current share price is close to our TP of S$1.01
ARA - 1Q16 results in line; attractive valuations, BUY
US stocks fell as weaker-than-forecast factory data from U.K. and China rekindled concerns about global growth. It was also a week of lack lustre corporate results from Apple Inc., Microsoft Corp. and Alphabet Inc. The decline was led by commodity and energy stocks as well as financials.
Global equity indices are consolidating the gains made since February this year. For the STI the decline from 2965 down to 2811 in the past 2 weeks is in-line with our expectation, based on technical outlook, valuation of the Singapore market amid a lack lustre 1Q results season. In the nearterm, we see support at the 2780 level. Expect a minor rebound to 2835 in coming sessions.
Innovalues reported 1Q16 net profit declined 31.1% y-o-y to S$3.8m, which was largely within our expectations.
Weakness was due to spill-over effects from inventory management efforts of key automotive client in 4Q15 and net foreign exchange transaction loss of c.S$1m. Forecasts unchanged given expectations of a stronger 2H16, but downgrade to HOLD as current share price is close to our TP of S$1.01.
ARA Asset Managementregistered 1Q16 earnings of S$19.4m, in line. Armed with S$100m in capital from its recent rights issue, ARA is well positioned to capture opportunities that may arise in 2016. The group is hunting for deals in key markets of China, Australia, Korea and Japan. We see 2016 as another banner year, supported by the widely anticipated launch of Asia Dragon Fund 3 (estimated AUM of S$1.0bn and above) and a growing AUM base as positive catalysts to share price. Our S$1.57 TP is based on sum-of-the parts valuation. Maintain BUY.
CDL Hospitality Trusts reported 1Q16 DPU of 2.22 Scts (-9% y-o-y), below expectations. The underperformance was driven by weaker-than expected performance from (1) Maldives (-29% y-o-y decline in RevPAR) versus our estimate of a 10% fall over FY16, (2) a slightly weaker uplift from Japan which was up 7.5% versus expectations of a 10% increase, and (3) larger declines in RevPAR for CDREIT's Australian properties. We trim FY16-17F DPU by 3% and adjust TP to S$1.50 (Prev S$1.54). Maintain BUY on cheap valuations.
Singapore Exchange launches its MSCI China Free Index futures and options contracts. The contracts are USD denominated and track the MSCI China Free Index, which comprises large and mid-cap companies listed outside of mainland China. MSCI China Free Index has a broad representation of sectors including financial, information technology and consumer companies. The SGX MSCI China contracts therefore provide international investors with risk management tools linked to the key sectors that are driving China's economic growth today.
Sembcorp Industries has increased its stake in Thermal Powertech Corporation India Limited (TPCIL) to 86.9% from 67.4%, through its subscription of an additional 358m shares in TPCIL at par value of Rs 10 per share. The total investment amount of Rs 358 crores (approximately S$73m) is financed by a mix of internal funds and external borrowings. TPCIL owns a 1,320-megawatt supercritical coal-fired plant located within Sembcorp's power complex in Krishnapatnam in Andhra Pradesh's SPSR Nellore District, India.
IEV Holdings has secured five new contracts to date under its Marine Growth Control Business Unit for the supply of its proprietary Marine Growth Preventer products valued at an aggregate of approximately US$2.9m.
BreadTalk and Myanmar Bakery, a member of the Shwe Taung Group, has signed a franchise agreement to establish the BreadTalk bakery chain in Myanmar. The first BreadTalk outlet is expected to open in Yangon by early 2017 in one of the shopping centres owned by the Shwe Taung Group.
Darco Water Technologies has recently secured S$13.1m worth of contracts to spearhead its efforts to secure more solid waste collection systems in Singapore and China. These four contracts with an aggregate worth of S$13.1m is to supply and maintain Pneumatic Waste Conveyance System (PWCS) for centralized domestic waste collection in Singapore. The PWCS, when used in housing estates, is an automated domestic waste collection system that uses highspeed vacuum technology to transport domestic waste via an underground pipe network to a Centralised Bin Centre.
Singapore's manufacturing sector, though still stuck in a ten month recession, saw a broad-based recovery in activity in April. April's reading was 49.8, a 0.4 point improvement from March. The index for new orders rose by 0.6 point to 49.8 in April - the highest level in nine months. New export orders rose, too, by 0.5 point to 49.6, its highest in five months. Order backlog expanded for the first time after previously recording 14 consecutive months of contraction. It was at 50.5, up from 49.4 in March.
Chinese factory activity weakened further in April, as muted demand and market weakness hit the struggling export oriented sector. The Purchasing Managers' Index by Caixin, which tracks activity in the country's factories and workshops, fell to 49.4 for April, a 0.3-point drop from the month before and the 14th consecutive month of decline.
Source: DBS
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