DBS Equity Research: Wired Daily 19 May 2016

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DBS Equity Research: Wired Daily 19 May 2016

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Publish date: Thu, 19 May 2016, 12:28 PM

Asian Cloud & Data Centre Sector - What to do in the face of Public Cloud?
Jaya Holdings - proposed acquisition of Heduru Moni for up to S$232.2m
GLP - 4Q16 core earnings dip 21% y-o-y
China Everbright Water - to be included as a constituent of MSCI China Small Cap Index
GP Batteries - to report loss for 4Q16
Hawkish FED minutes push forward next rate hike expectation to July

Industry Focus

Asian Cloud & Data Centre Sector

What to do in the face of Public Cloud?

• 2017 could be the tipping point for public cloud adoption in Asia

• Three implications for the data centre sector; China and Indonesia are more lucrative retail co-location markets

• We present our stock picks based on this theme

News

Jaya Holdings - proposed acquisition of Heduru Moni for up to S$232.2m

Jaya Holdings has entered into a conditional sale and purchase agreement for the proposed acquisition of Heduru Moni for up to S$232.2m. This will be satisfied by the issuance of up to 725.6m shares at an issue price of S$0.32 on a pre-consolidation basis, which is expected to result in a reverse takeover offer (RTO). Heduru Moni is a leading player in personal and consumer finance business in Papua New Guinea. It is a profitable entity with a historical net profit of S$11.4m, S$13.9m and S$19.4m for FY13, FY14 and FY15 respectively, with a revenue and other income of S$48.3m in FY15. Shareholders of Jaya will be entitled to receive a cash distribution of up to S$0.38 per share prior to the completion of the proposed RTO exercise.

GLP - 4Q16 core earnings dip 21% y-o-y

Global Logistics Properties (GLP) reported a 46% rise in earnings to S$153m. This is mainly due to strong development gains from China and Japan. However, we note that GLP's core earnings dip 21% to S$52m. For FY16, core earnings is up 20% y-o-y to S$241m. GLP also raised its dividend to 6.0 scts a share, up 9% y-o-y, which in our view is a positive indication of the outlook and growth and sustainability of the cashflows. More updates to follow.

China Everbright Water - to be included as a constituent of MSCI China Small Cap Index

China Everbright Water will be included as a constituent stock of the MSCI China Small Cap Index following the latest round of MSCI index review. China Everbright Water will make its first entry into this Index as of market close on 31 May 2016.

GP Batteries - to report loss for 4Q16

GP Batteries is expected to report a loss for 4Q16 mainly due to (1) unrealised foreign exchange losses and (2) assets impairment on fixed assets in respect of the Company's Rechargeable Lithium batteries production facilities due to under-utilization of production capacity. The Group is expected to report a significant reduction in profit for FY16 compared to FY15.

Hawkish FED minutes push forward next rate hike expectation to July

Consensus expectations for a FED rate hike next month jumped to 34% (from 4% a few days ago) and that for a July rate hike is even higher at 56% (source CME Group FEDWatch). This after the latest FED minutes shows the US central bank was ready to raise rates as soon as June if the economy continues to improve. The USD rallied and yields rose as the comments were more hawkish than expected.

Source: DBS

China Everbright (U9E)

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