Tuesday, 21 February 2017

Stock Market Today: Is this really the telco stock of tomorrow?



Research house NRA Capital likes 8Telecom International, calling the company a "potential telco of tomorrow" and giving it a fair value of 18.1-29.8 cents, representing an upside of 30.1-114.7% from its current share price of 14 cents.

The recommendation comes after 8Telecom's 51% owned subsidiary Arete M was granted a licence by the IMDA to use the 1.79-1.80 GHz radio frequency spectrum for the provision of communication solutions. With the spectrum, Arete M plans to offer dedicated private LTE networks to industrial users and public safety and emergency services.

A private LTE network offers a higher level of service quality in terms of reliability and availability unlike commercial and consumer-based shared networks. A dedicated LTE network also serves large amounts of data to multiple users over a wide range of up to 10km with low interference and latency.

This makes it suitable for communication within fleets of unmanned vehicles which are currently on trial by various government agencies, says analyst Liu Jinshu in an unrated Tuesday report. In addition, while existing telcos pay more than $1 million per year of 10MHz of spectrum, Arete M secured its spectrum for about $80,000 per year.

8Telecom currently has a market cap of $12.9 million backed by negative equity of $0.3 million and tangible assets of $0.5 million as of end 3Q16. But more advanced IoT companies have been valued at up to US$600 million ($853 million). As such, Liu has provided a rough valuation of $135 million to $387 million for 8Telecom.

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Friday, 17 February 2017

Stock Market Today: SGX seeks views on dual-class share structures



Singapore took another step towards making dual-class share structures a reality in the city-state, with the Singapore Exchange Ltd (SGX) kicking off a public consultation on the controversial market mechanism. SGX, which has seen a slump in initial public offerings (IPOs) in recent years, said yesterday the two-month long public consultation would look into admission criteria and safeguards against possible risks.

The structure of dual-class shares, which typically gives one set of shareholders greater voting rights than others, has been favoured by many owners of new age industries such as technology, with the extra voting power given to top executives seen as protection against pressure for short-term returns.

But the structure has also come in for criticism from corporate governance activists, who have warned of its potential abuse by company insiders. The criticism is a key reason why the structure is still not permitted in Hong Kong, despite a years-long debate sparked by Chinese e-commerce giant Alibaba Group’s decision more than two years ago to make its record US$25bil IPO not in Hong Kong but in New York where dual-class shares are allowed.

SGX also lost out on the IPO of Manchester United to New York in 2012 because it could not obtain approval for a dual-class share structure. Worried about its competitiveness as an IPO destination, Singapore has moved to re-examine its position on dual-class shares, and last year SGX’s Listings Advisory Committee gave the stock exchange the green light to allow companies to list with such structures.

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Thursday, 16 February 2017

Stock Market Today: These 2 developer stocks are poised to ride potential property pick-up



The property market could be on the cusp of recovery. Residential property sales volume grew 9% in January despite a 26% lower number of new launches.

While secondary transactions remained flat, primary sales rose 18% y-o-y. Total sales volume for private homes and executive condominiums grew by 8% and 15%, respectively.

While there were no exceptionally large sales by any project (partially due to the absence of new property launches), the sales volume for each project was moderate, says DBS Group Research lead analyst Rachel Tan in a Wednesday report.

With a number of new launches expected in first half 2017, Tan says the "sales volume and take-up rates of these new launches would be a good gauge to see if the improvement in sales volume is sustainable. Meanwhile, all eyes are on the Singapore Budget 2017 announcement scheduled for Feb 20, which could potentially see the introduction of policies to stabilise the property market.

DBS's top picks as proxies to a potential pick-up in the Singapore property market are City Developments (CDL) and UOL Group. The recent newsflow on potential M&As has lifted the share prices of most property developers," says Tan, adding that CDL and UOL could see re-rating following any M&A.

DBS has buy calls on both CDL and UOL, with target prices of $9.90 and $7.20, respectively.As at 12.23pm, City Developments is trading 15 cents lower at $9.20, while UOL Group is down 10 cents at $6.57.

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Wednesday, 15 February 2017

Stock Market Today: USP Group's 3Q losses double to $2.7 mil on higher expenses



USP Group, the investment holding company mainly involved in oil blending and property development, saw 3Q17 losses widened to $2.7 million for 3Q17 from $1.4 million a year ago.

During the quarter, the group recognised revenue streams from its newly-acquired subsidiaries of Koon Cheng Development (KCD) and Supratechnic of $0.9 million and $6.9 million respectively, resulting in 3Q17 revenue that more than quadrupled to $8.6 million from $1.6 million in 3Q16.

Comparatively, the group's oil business contributed about 10% to the total revenue or about $0.7 million for the period. USP's revenue growth, however, was more than offset by a spike in operating expenses.

Particularly, selling and distribution expenses increased $0.2 mil, while general and administrative expenses increased by 155.6% to $3.6 mil after including overheads of KCD and Supra.

In a Wednesday filing to the SGX, USP says the Court of Appeal on Monday allowed its appeal against its major shareholder's winding up action of SG Support Services (SGSS), and is further seeking legal advice to evaluate its options with the intention of seeking recovery for its investment.

The group adds that it has taken a prudent approach and made a full provision on its remaining investment in SGSS.USP in Nov 2016 recognised a $3.6 million impairment of value of investment in SGSS, which its major shareholder is attempting to wind up but is currently being met by resistance from the group.

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