Singapore Stocks Market Overview

MARKET OVERVIEW
- The market could extend its blue-chip rally on positive momentum as the 3Q earnings season gets underway, with robust Sep industrial production data providing more ballast to the economy.
- Technically, STI is hovering at its 3,355 resistance level with the next objective at 3,380 and downside support seen at 3,320.

CORPORATE RESULTS
*Suntec REIT
- 3Q17 DPU of 2.483¢ (-2.1%) was in line despite dilution from an enlarged unit base (+4.6%) arising from its bond conversion.
- Revenue (+10.6%) and NPI (+11.6%) were lifted mainly by full-quarter contribution from 177 Pacific Highway office building in Sydney, which opened in Aug '16.
- Occupancy at its office (98.6%, -0.1ppt q/q) and retail (98.8%, -0.2ppt q/q) portfolios slipped slightly.
- Aggregate leverage dipped 0.7ppt q/q to 35.4%.
- Trades at annualised 3Q yield of 5.1% and 0.91x P/B.

*Viva Industrial Trust
- 3Q17 DPU rose 5% to 1.9¢ despite a larger unit base (+11.7%). This brought 9M17 distribution to 5.615¢ (+8%), coming in at the higher end of estimates.
- For the quarter, gross revenue and NPI leapt to $28.3m (+16.8%) and $20.6m (+18.3%) on contribution from recently-acquired 6 Chin Bee Avenue, as well as higher takings at two business parks.
- Portfolio occupancy ticked up by 0.3ppt q/q to 90.9%, while aggregate leverage crept 0.5ppt q/q higher to 39.6%.
- Last traded at annualized 3Q yield of 7.9% and 1.2x P/B.

*CDL Hospitality Trusts
- Post rights 3Q17 DPS of 2.29¢ (-3%) came in below expectations.
- Revenue and NPI jumped to $54.8m (+20.7%) and $40.4m (+15.9%), mainly from maiden contributions from recently-acquired The Lowry Hotel in UK and Pullman Hotel Munich in Germany.
- But domestic RevPAR of $166 (-1.4%) remained under pressure from the competitive environment.
- Aggregate leverage fell to 33.3% (-5.4ppt q/q).
- Trades at annualised 3Q yield of 5.6% and 1.12x P/B.

*Sheng Siong
- 3Q17 net profit jumped 25.7% to $19.7m on better operating leverage. Excluding an one-off tax impact, its results would have met expectations,
- Revenue rose 4.2% to $210.9m on higher same store sales growth (+1.7%) and contribution from new stores.
- Operating margin widened to 10% (+0.6ppt) on lower distribution (-2.9%) and admin (-0.5%) expenses.
- Bottom line benefitted from a tax refund of $2.2m (3Q16: nil).
- Last traded at 21.1x forward P/E.

*Indofood Agri
- 3Q17 core net profit slumped 25.3% to Rp97b, in line with estimates.
- Revenue inched 4.6% higher to Rp3.72t on improved sales volume of palm products but offset by lower average selling prices in CPO (-3%) and palm kernel (-16%).
- EBITDA margin declined 4.5ppt to 21.2% due to higher fertilizer application and increased operating expenses (+24.3%).
- Bottom line was dragged by a negative Rp61.7b swing into FX loss, although partly mitigated by a spike in JV income of Rp70.5b (+51.9%) and lower associate loss of Rp2.6b (3Q16: Rp18.5b loss).
- NAV/share at $0.875.

*Yoma
- 2QFY18 net profit tumbled 56.8% to $3.7m, bringing 1HFY18 earnings of $6.4m to just 23% of FY18 street estimate.
- Quarter revenue jumped 32.9% to $33.1m, lifted by a spike in automotive & heavy equipment sales (+109.9%) and the consumer segment (+20.1%), while sale of residences & land development rights (-0.6%) and real estate rental and services (+0.9%) remained flattish.
- Gross margin improved 3.3ppt to 44.7% due to higher profitability achieved in StarCity Zone C and Zone B.
- Bottom line was partly weighed by absence of fair value gain (2QFY17: $14.7m), although partly offset by lower JV/ associate loss of $0.9m (2QFY17: $1.9m loss).
- NAV/share at $0.3789.

*Japfa
- 3Q17 results came below estimates as core net profit dived 71% to US$12.1m.
- Revenue grinded 3% higher to US$814.3m, bolstered by Indonesia animal protein (+5.8%), dairy (+26.7%), and consumer food (+10.5%) segments, but was doused by the continued decline in swine selling prices in Vietnam.
- Operating margin collapsed 6.5ppt to 6.9% due to weaker margins from poultry and beef businesses, absence of one-off gain from disposal of beef cattle business, and Vietnam swine prices remained below costs.
- Bottom line was further impacted by a US$2.9m jump in finance cost.
- Net gearing jumped to 0.68x from 0.45x in Dec '16.
- NAV/share at US$0.44.

*Tuan Sing
- 3Q17 net profit declined 9% to $5.9m, partially due to a $3.6m spike in finance cost.
- Revenue rose 12% to $101m, underpinned by stronger property (+18%) and industrial services (+16.1%) segments.
- Gross margin shrank 6.8ppt to 16.7% amid a shift in sales mix.
- Bottom line was also hurt by higher distribution cost stemming from the launch of Kandis Residence.
- Last traded at 0.57x P/B.

*Samudera Shipping
- 3Q17 results turned around to net profit of US$0.5m (3Q16: US$3.8m loss).
- Revenue jumped 14.2% to US$69.7m as improvement from container shipping (+18%) led by higher volume handled was outweighed by weakness in bulk & tanker business (-13.8%) due to a shrinking fleet.
- Gross profit margin expanded to 5.8ppt from breakeven, amid higher container freight rates and tanker charter rates.
- Bottom line was also helped by absence of a US$2.4m provision.
- Net gearing was pared 0.11x from 0.12x in Dec '16.
- Last traded at 0.38x P/B.

POSITIVE NEWS
*Starburst
- Awarded a contract worth $6.6m in the Middle East to undertake ballistic protection works to a firearm training facility.
- Work is expected to begin in Jun '18 and be completed in Sep '19.
- Last traded at 3.2x P/B.

*Ley Choon
- Secured contracts worth $2.6m for closed-circuit television survey of sewers and resurfacing of roadworks.


- Trades at 2.1x trailing P/E and 1.46x P/B.

NEUTRAL NEWS
*Unusual
- Signed letters of intent with RINGLING Bros and Feld Entertainment to jointly present 48 "Disney On Ice" shows across South Korea and Taiwan.
- 12 "Disney on Ice "Let's Party" shows may take place in Oct 18, while 36 "Disney On Ice 'Frozen'" shows may take place in 3Q19.

*Spackman Entertainment
- Completed acquisition of South-Korean based motion picture production start-up Take Pictures, via the issue of 54.1m shares.

*Samudera Shipping
- Disposing two vessels for US$9.2m, and expected to result in a net gain of US$0.8m.
- Proceeds will be used for working capital and future business expansion.

*Yuuzoo
-Issued 10m drawdown shares at $0.058 each to GEM Global Yield Fund, which has committed $30m capital earlier.
- Proceeds earmarked for business development and growth.

_______________________________________________________________

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Stock Market Today:USP seeking advice on EGM requisition letter advised to obtain documentary evidence of shareholders stake

USP Group says it is still seeking legal advice on the validity of an extraordinary general meeting (EGM) request made by substantial minority shareholders Joshua Huang Thien En and Teng Choon Fong, from over a month ago.

In a Thursday evening filing to the SGX, USP says it has also been advised to obtain "documentary evidence" of their shareholding in the company from the two parties concerned.

To recap, Huang and Teng, who collectively own more than 11% of the company, last month via a Feb 10 letter called for an EGM to oust USP's chairman Li Hua and executive director Raphael Tham.

The pair has accused USP's board of not acting soundly in relation to the company's investment in loss-making contract manufacturer Huan Hsin Holdings as well as privately held company SG Support Services.

Additionally, they questioned the divestment of two Chinese subsidiaries at less than their book value and queried the independence of one of USP's two independent directors.

USP had previously acknowledged the receipt of the requisition letter in a Feb 13 filing to the SGX, and said it was verifying the shareholdings of the two men, while also seeking legal advice on the validity of the request.

The counter last traded at 18 cents on March 14.

This week in print, we detail how Huang and Teng were preparing to organise the EGM themselves after having received no response from the company. As of late, lawyers for Huang and Teng sent a letter dated March 15 which presented several questions, including on USP's provisional appointment of auditors, as well as the possible relations between a director at USP and Chairman Li.

For more background on Huang and Teng's dissent against USP, pick up the latest copy of The Edge Singapore (Issue 771, week of March 20), available at newsstands today.

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Stock Market Today:SPH REIT upgraded to buy on potential mall acquisition

DBS Group Research has upgraded SPH REIT to buy, from hold previously, and raised its target price by 3% to $1.03.In a report on Thursday, DBS lead analyst Derek Tan says it is "very likely" that SPH REIT could acquire The Seletar Mall from its sponsor "in the next 12 months."

While the timing and price of the potential acquisition are uncertain, Tan says the transaction is likely to be at a price "marginally higher than the current appraised value of $495 million."

We believe that it is an opportune time for SPH REIT to consider acquiring The Seletar Mall from its Sponsor, most ideally within the next six months prior to the asset undergoing its first renewal cycle at the end of 2017, says Tan.We believe there is room for rental uplift, and hence SPH REIT can benefit from this if it acquires The Seletar Mall before the renewal period, he adds.

Assuming an optimal funding scenario which involves partial equity funding of $200 million and debt financing of $300 million, Tan estimates a 3-4% rise in SPH REIT's distribution per unit (DPU).

Post the acquisition, gearing will be increased to 31%, from 26% currently. However, Tan says this is still conservative compared to peers' average of 34%.

SPH REIT in 1Q posted a 0.8% increase in DPU to 1.34 cents on the back of positive rental reversions from both of its mall properties.Income available for distribution to unitholders in the quarter ended Nov 30 increased 3% to $36.4 million, compared to $35.3 million a year ago.

Most importantly, we see improved liquidity in the stock, which will be positive for stock prices," Tan says, adding that upside from this potential acquisition is not yet priced in.

In addition, Tan believes SPH REIT will enjoy higher diversity and resilience as The Seletar Mall, located in the west of the Sengkang subzone in the north-east region of Singapore, will allow it to derive a higher proportion of its income from necessity shopping.

There are no large or mega malls in the Sengkang subzone, Tan notes. With Seletar Mall, we are positive that SPH REIT's portfolio will see stronger performance in the medium term.As at 12.25pm, units of SPH REIT are trading 1 cent higher at 97.5 cents.

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Stock Market Today:Cathay Pacific seen reporting worst results in 8 years on rivals

SINGAPORE In the three years Ivan Chu has been the chief executive officer at Cathay Pacific Airways Ltd., he has seen the marquee carrier's stock become Asia's worst performer on the Bloomberg World Airlines Index. He may have little to reassure investors at the company's earnings conference Wednesday.

Asia's biggest international airline is set to post its worst full-year performance for 2016 since a loss eight years ago as Chinese carriers and rising costs erode earnings. The median forecast in a Bloomberg News survey of nine analysts is for a profit of HK$450 million ($82 million). The Hong Kong-based company is scheduled to report the results around noon.

Chu, appointed in March 2014, is executing a business revamp to stem the slide as shrinking business travel, pressure from budget operators and more direct routes offered by mainland carriers weigh on Cathay's yields -- the money earned from flying a passenger for one kilometer and a key measure of profitability.

Among the analysts tracked by Bloomberg, not a single one recommends buying the shares. Since Cathay gave little specifics of the review in January, investors will be seeking more information on the plan, including any possible management reshuffle at the airline, whose last two CEOs held the role for about three years each. Changes will start at the top" and the carrier will eliminate some positions as part of the revamp, with key changes taking effect by mid-year, Cathay said in January.

In the survey, four projected losses ranging between HK$377 million and HK$1.5 billion, while profit estimates spanned HK$450 million to HK$1.49 billion. The disparity in the figures reflects differing estimates of charges due to fuel-hedging losses.

I don't see 2017 being a whole lot better for Cathay," said Mohshin Aziz, an analyst at Maybank Investment Bank Bhd. in Kuala Lumpur. "Cathay is becoming collateral damage of the Chinese airlines' expansion." A representative for Cathay didn't respond to an email seeking comments.

Maybank, which downgraded Cathay's stock to sell from hold last week, is among 15 brokerages tracked by Bloomberg that recommend selling the shares, with the rest advising a hold. Shares have declined 16% in the past year in Hong Kong, compared with a 17% gain in the benchmark Hang Seng Index.

Yields have also been hit as the carrier widened its discounts to premium offerings.Cathay scrapped its second-half outlook in October following an 82% plunge in first-half profit.

Chinese carriers, including Hainan Airlines Co. and China Eastern Airlines Corp., have added non-stop flights to the US and Europe in the past year, challenging the prominence of Cathay's Hong Kong base as a transit center.

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Stock Market Today:IREIT Global subsidiaries granted extension for bank loan facility of over $35.6 mil

The manager of iREIT Global has announced that four of its indirectly wholly-owned subsidiaries - namely Laughing Rock 11 B.V., Laughing Rock 12 B.V., Laughing Rock 13 B.V. and Laughing Rock 14 B.V. have together been granted an extension of a bank loan facility amounting to over 23.6 million euros ($35.6 million).

The lender is HSH Nordbank AG, a commercial bank in northern Europe with headquarters in Hamburg as well as Kiel, Germany.

In a Monday filing to the SGX, iREIT Global says the term loan facility agreement, which was entered into by the borrowers and lender on Jul 24, 2015, comprises two facilities of 78.4 million euros and 23.6 million euros, which are maturing in August 2020 and August 2017 respectively.

An agreement was signed between the two parties on Monday to amend these terms, extending the maturity date of the latter facility to July 2018.

As part of the extension, the Laughing Rock group of borrowers will make partial loan repayments in four quarterly instalments of 1.3 million euros each beginning from August 2017, which will be funded internally through existing cash balance and future operating cash flows.

The extension brings iREIT Global's weighted average debt maturity from 2.8 years to 2.9 years, assuming the extension had been effected on Dec 31. Units of iREIT Global closed 1 cent higher at 73 cents on Monday.

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Stock Market Today:Ex-DBS trader pleads guilty to spoofing Singapore market

A former trader at DBS Group Holdings' brokerage unit on Friday was convicted by a Singapore court for spoofing the securities market in the first case brought jointly by the country's regulator and white-collar crime police.

Dennis Tey Thean Yang, 33, pleaded guilty to eight of the 23 charges he faced related to his attempt to artificially move prices through fraudulent securities orders.

A broker at DBS Vickers Securities when the offenses were committed in late 2012 and 2013, Tey was also charged with misusing other people's trading accounts without consent.

Tey's case is the first pursued jointly by the Monetary Authority of Singapore and the police's Commercial Affairs Department since they banded together in March 2015 to probe market misconduct as part of Singapore's efforts to step up policing of its financial industry.

Singapore Exchange last month said it would focus on cases that threaten market integrity.

According to court papers, Tey sought to manipulate prices by placing orders for contracts for differences in the underlying securities of a number of companies and then deleting the fraudulent orders after his trades.

The fraudulent trades, which involved underlying securities in companies such as GuocoLand and Asia Power Corp., had little or no market impact and Tey's orders were ultimately not filled, his lawyer Adrian Wee said.

The trading strategy was formulated through observation as well as trial and error and Tey stopped trading when he realised they might be unlawful, the lawyer added.

Tey, a Malaysian national, left DBS Vickers in March 2014 and was arrested in May 2015. He was charged in July last year. DBS could be not be reached for comment.

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Stock Market Today:Rare earth dealmaker Rigoll quits ISR starts unloading shares

Singapore ISR Capital, under stress for links to penny stock saga mastermind John Soh Chee Wen, has lurched into yet another wave of troubles. In a filing on Wednesday night, ISR announced that David Rigoll, the company's largest shareholder, has resigned as an executive director with effect from Monday. He has also started dumping shares in the company.

Rigoll is accusing ISR of not paying him his salary for February this year. He is also planning not to honour a moratorium to sell or transfer his shares, said ISR.

Rigoll, 54, also accused ISR's board for failing to "act in accordance" to its duties. Specifically, he questioned the appropriateness of the appointment of ISR's previous legal adviser, whose appointment puts it in a conflict of interest. ISR did not say who the legal adviser is.

The Board has requested for Mr Rigoll to provide evidence to support his allegations. The Board has to-date, not received any such evidence to support Mr Rigoll's allegations, which the Board considers baseless, the company said.

For the avoidance of doubt, the Board and the Company deny all allegations made by Mr Rigoll and will be seeking legal advice if required, it added. In addition, Rigoll has alerted ISR he will withdraw a voluntary undertaking to not sell or transfer ISR shares held by him before November 2017.

ISR drew attention to itself last June by trying to acquire a stake in a rare earth concession in Madagascar for $40 million from an entity called REO Magnetic. The same concession was bought by REO Magnetic for just one-seventh this price just six months earlier from a company listed in Dusseldorf. Up until June 3, Rigoll was a director of that German company, Tantalus Rare Earths AG.

Trading of ISR shares resumed only this Monday following a suspension by SGX that began on Nov 27 last year. In a separate filing, ISR said Rigoll has sold nearly 21.3 million shares at an average of 4.7049 cents per share, with a total value of $ 1,000,859.

Rigoll first bought into ISR last year, paying Value Capital Asset Management (VCAM) 0.5 cent a share for VCAM's stake in ISR. VCAM has an on-going $35 million convertible bond programme with ISR and the shares Rigoll bought from VCAM came from a tranche of bonds which were converted by VCAM into new ISR shares.

According to ISR filings, even after Monday's sale, Rigoll is still the largest shareholder by far, with 407,840,300 shares, or 26.07% stake -- down from 27.43% before the sale.

ISR's board now sees Rigoll's sale of shares on Monday as a breach of agreement and will be seeking legal advice. When ISR shares resumed trading on Monday, it dropped by 80% from the pre-suspension price of 12.7 cents. On Wednesday, the shares closed 25% lower at 3 cents.

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Stock Market Today:Noble Group up for sale?

Singapore If you believe the bond documents, Noble Group Ltd really is for sale. The Singapore-listed commodities trader raised US$750mil selling dollar notes Monday that mature in five years.

A clause provides for immediate repayment if the company is acquired. But that would only be triggered if Noble were rated investment grade at the time.If the notes are rated investment grade by one or more rating agencies and a change of control triggering event occurs the issuer shall, at the option of the holder of any note, redeem such note on the change of control redemption date at its change of control redemption amount together with interest accrued to the date of redemption.

This condition shall not apply if the notes are not rated investment grade by one or more rating agencies. You may not understand all the legal jargon, but you don’t have to. Noble’s new securities are expected to be rated BB+ by Fitch and B2 by Moody’s Investors Service, one and two notches below investment grade respectively. So there’s effectively zero change of control protection for investors.

The language in Noble’s latest bond-sale document is similar to its previous ones, so it may be that the lawyers just forgot to update that clause. That’s unlikely, however.

What then motivated that particular wording? The company’s current financial situation means it would take a lot of work for it to recover its investment-grade status, and management has hinted this isn’t a huge priority, even exiting some businesses that required a high credit score to optimally operate.

Perhaps Noble wanted the money without burdening any potential suitor with extra debt. A more tightly written change of control clause would have effectively added US$750mil to the cash required upfront.

Given the recent rumblings about a potential strategic investor buying a large chunk of Noble, that sounds a more plausible explanation. If a suitor has a higher credit rating than Noble, investors wouldn’t care about such a technicality, since they probably wouldn’t want to redeem their bonds early anyway.

If, however, it happens the buyer is in worse shape than Noble – an unlikely but not impossible outcome – that tiny clause could turn into something quite painful.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Stock Market Today:Give SingPost time as it invests for the future, says OCBC

 OCBC Investment is maintaining its "hold" call on Singapore Post (SingPost) with a lower fair value of $1.39 from $1.42 previously, while noting a lack of catalysts for re-rating on the stock.

This comes after the group's Monday evening announcement of the resignation of its CEO (SP Commerce) Marcelo Wesseler - whom it says will be assisting the company to "ensure a transition of duties" during his period of notice until Jun 5.

Meanwhile, Paul Demirdjian, who is currently president and CEO of SingPost's US subsidiary Jagged Peak, has been appointed as interim CEO, US Business, with immediate effect to oversee the group's businesses in the US.

"SingPost is investing for the future, and time is required for the efforts to bear fruit. After correcting post its 3QFY17 results, the stock has been trading within a range of $1.37 and $1.40, likely due to lack of catalysts," comments lead analyst Low Pei Han in a Tuesday report.

She also notes that the group has been increasing its foothold in Indonesia, with its 66%-owned joint venture subsidiary Quantum Solutions International (QSI) having recently purchased shares in PT Rantai Bumi Laut (RBL) to acquire about 18% of PT Quantium Solutions Logistics Indonesia's (QSLI's) shares for about $0.8 million.

Upon completion of the share purchase agreement, QSI's interest in QSLI, which is in the business of ecommerce logistics fulfillment in Indonesia, will be 67%.

Recall that QSI set up QSLI with RBL in Jan 2014 with an initial paid-up capital of about $375k, of which 49% was subscribed by QSI. According to a study by Google and Temasek last year, 18 million people in Indonesia fell into the category of online buyers, representing about 7% of the population. By 2025, it is expected that Indonesia will dominate 52% of all ecommerce activity in SE Asia, due to its huge population island geography," says Low.

Meanwhile, the market will likely look forward to 1 Jun 2017, which is when the new CEO joins the group," she adds.As at 9.57am, shares of SingPost are down by 1 cent at $1.36.   


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Stock Market Today:Expect a pay increase of 5% at most for managers in Singapore

Singaporean managers and senior staff can prepare for 5% pay increases at most this year as the labour market stabilises.

About 93% of companies in Singapore say they will keep or raise headcount this year, according to a survey by recruitment consultancy Michael Page of almost 450 businesses in the city state. Only 36% said they will recruit new hires. Singapore's unemployment rate recently hit a six-year high of 2.2%, though the country still remains one of the easiest places in the world to find work.

Across Asia, 48% of the 3,400 companies in the survey said they plan to increase wages by 5% or less, compared with 58% of Singapore-based firms.

While employers have agreed that salaries are an important retention tool, other popular employee engagement initiatives include opportunities for career progression and learning and development, the consultancy said in a report. The hot jobs in Singapore are in the digital, technology and healthcare industries, which is where Singapore's government is pledging more investment.

In the less buoyant financial services sector, financial technology jobs should be helped by a funding plan in place to support locally-based firms, according to Michael Page. The gig economy is also becoming a bigger feature in Singapore's economy: 68% of all companies surveyed are using contractors, especially in technology and business support industries.

More companies are adopting strategies such as annual leave, medical benefits and completion bonuses to attract more professional contract workers as well, added the consultancy.

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Stock Market Today:Sudden inflation hike puts Southeast Asian central banks on edge

After more than a year of disinflation, price pressures are quickly mounting across Southeast Asia as fuel costs rise, putting central banks on watch after years of policy easing. In Malaysia, consumer prices rose at the fastest pace in almost a year in January and economists see that as closing the door on another interest-rate cut this year even though the economy could do with more stimulus. From Singapore to Thailand, central banks are bracing for faster inflation.

The recent spike has been mainly caused by oil prices, which have surged 25% in the past six months. In a region where countries like Indonesia have been prone to high inflation in the past, and currencies are vulnerable - notably in Malaysia - central banks will need to monitor closely for any signs that rising fuel costs are spreading more broadly to prices in the economy.

The obvious risk is that complacency leads central banks to miss inflation pressure spreading to the spending-driven CPI components, forcing more aggressive rate hikes and greater growth slowdowns down the road, said Timothy Condon, head of Asian research at ING Group in Singapore.

The pick-up in inflation isn't unique to Southeast Asia as higher commodity prices drive up costs across Asia. China's factory prices have snapped years of deflation, with some analysts saying this is the hidden side of the global reflation trade. For now, core measures of inflation in Southeast Asia - which exclude volatile items such as energy and food costs - remain contained, taking the pressure off central banks to take immediate action to tighten policy.

In Malaysia, where inflation reached 3.2% in January, the core measure was at 2.3%. The government's projection is for headline inflation to average 2% to 3% this year. We've had a big swing from really depressed numbers," said Sean Callow, a senior strategist at Westpac Banking in Sydney. "Until there's evidence that core inflation is on the rise and wages up with it, I don't think we're going to have any inflation dynamic going on in the region."

Malaysia's central bank kept its benchmark interest rate unchanged at 3% on Thursday, in line with the forecasts of all but one of the 17 economists surveyed by Bloomberg. Bank Negara Malaysia said headline inflation will remain "relatively high" in the first half of the year and then moderate, while core inflation is expected to "increase modestly." The outlook for inflation is dependent on global oil prices, which remain uncertain, it said.

Inflation will probably accelerate to 4% in February, and average 3.5% this year, up from a previous forecast of 2.5%, according to Mohamed Faiz Nagutha, an economist with Merrill Lynch Asia Pacific in Hong Kong. After surprising the market with an interest-rate cut in July last year, Mohamed Faiz is predicting the central bank will be on hold for the rest of the year. We do not expect BNM to react to these spikes in headline CPI and rather focus on measures of core inflation," he said.

Malaysia's ringgit was little changed at 4.45/$US as of 5pm in Kuala Lumpur yesterday, taking its decline in the past month to 0.6%.The Philippines, which had the fastest economic expansion in Southeast Asia last year, may be the first country in the region to tighten monetary policy this year, according to economists surveyed by Bloomberg. Inflation is running at the fastest pace in two years and the currency is the worst performer in Asia this year, down 1.1% against the dollar. The Philippines has been seeing strong growth, so greater scope for inflation pass-through," said Khoon Goh, the Singapore-based head of Asia research at Australia & New Zealand Banking Group.

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Stock Market Today:Centurion's FY16 earnings fall 16% decline on investment properties fair value loss

Centurion Corp reported $28.7 million in earnings for the full year ended Dec 31, a 16% decline from its earnings of $34.1 million posted in the previous financial year. Centurion, the owner and operator of dorms for students and workers, said the full-year earnings decline stemmed from a fair valuation loss of $3.1 million compared to a fair valuation gain of $3.6 million of the group's investment properties as at end Dec 2016.

Group revenue grew 15% to $120.3 million in FY16 from $104.5 million in FY15, mainly from Centurion's accommodation business segment due to the occupancy growth from its newer workers accommodation assets such as Westlite Woodlands, and additional revenue contributions from its newly opened Aspri-Westlite Papan.

There was also higher revenue contributions from student accommodation assets including Dwell Selegie in Singapore, in addition to four newly-acquired student accommodation assets in UK, UK Braemar, in FY16.

The higher revenue from accommodation was however partially offset by Centurion's optical disc business, which experienced a decrease in revenue of 57% due to a continued weakening demand for physical optical disc media, and in addition to the cessation of its Indonesian unit.

Finance costs for the year increased by $5.4 million, mainly as a result of the additional interest costs for financing the expanded accommodation businesses such as ASPRI-Westlite Papan and Westlite Woodlands. These increase in costs were, however, offset by the interest cost saved from the redemption of the $100 million medium-term notes (MTN).

Centurion has recommended a final dividend of 1 cent per share. Shares of Centurion closed 1.2% lower at 42 cents on Tuesday.

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Stock Market Today:Sabana REIT's purchase of Changi South property from Vibrant draws scrutiny

Sabana Shari'ah Compliant Industrial Real Estate Investment Trust is proposing to acquire a four-storey light industrial building at 47 Changi South Ave 2 from its sponsor, Vibrant Group, at a per-square-foot price that is well above recent transactions in the area. That raises questions about the independent valuations provided by the three big-name property consultancies in support of the transaction.

Sabana REIT said in December that it would acquire three properties costing $77 million. None of the those properties are likely to be immediately yield-accretive, even though two were purchased with income support packages. The property being acquired from Vibrant has been valued at $23 million by Savills and Knight Frank, which were engaged by Sabana REIT. A third property valuer, Colliers, which was engaged by Vibrant, also arrived at a valuation of $23 million.

The property received its Temporary Occupation Permit in 1998 and has a remaining lease of 10+30 years from JTC. Vibrant, which acquired the property in 2010 for $10.9 million, will lease back 74% of the gross floor area (GFA) for the property for 10 years. In those 10 years, Vibrant will pay a total rent of $17.1 million to Sabana REIT. The company has indicated that it would make a gain of $9.06 million from the sale of the asset to Sabana REIT. The company expects to receive JTC permission for transfer of ownership by April 10.

All in, the property at 47 Changi South Ave 2 will cost Sabana REIT $25.3 million, which includes a stamp duty of 3%, acquisition fee of 1% to the REIT's manager, fees to the valuers, and $1.1 million land premium for 10 years. The transaction requires the approval of Sabana REIT's unitholders at an extraordinary general meeting, which has yet to be scheduled. Vibrant owns 12% of Sabana REIT, some of which is held through the manager, in which Vibrant holds a controlling 51% interest. Vibrant will not be allowed these 41.24 million units in the manager at the EGM, as it is an interested party.

Even on just the $23 million valuation alone, Sabana REIT appears to be paying a relatively high price compared with recent transactions in the area. Taking account of just the land area, the $23 million valuation translates into $362 psf. A transaction in the same area was done on June 27 last year at a price that translates into just $210 psf on the same basis. Another transaction on June 6 last year was done at a price equivalent to only $269 psf. All the properties have the same plot ratio of 1.6 times. The 47 Changi South Ave 2 property has a GFA of 8,507 sq m (91,569 sq ft) on a land area of 5,453 sq m, suggesting that there is limited redevelopment potential.

According to filings by Sabana REIT, Savills used three valuation methods: income capitalisation, discounted cash flow and direct comparison. To arrive at its income capitalisation valuation, it used the rental commitment from Vibrant and applied a capitalisation rate of 6.25% and terminal cap rate of 6.5%. It used a discount rate of 8% to get the net present value estimate. It is unclear which transactions it used for the direct comparison method. The filings do not reveal how Knight Frank reached its valuation for the property.

On Feb 17, the Singapore Exchange queried Sabana REIT's manager on the acquisition price for 47 Changi South Ave 2. SGX asked the manager to disclose whether the increase in valuation since Vibrant acquired it reflects the trend of industrial properties, and whether the property can be easily disposed of by the REIT at the market price of $23 million on the open market. The REIT's manager replied that Vibrant "agreed to inject 47 Changi South into Sabana REIT on a sale-and-leaseback basis for a lease term of 10 years at the proposed rental terms... of approximately $17.1 million" for 10 years. "Based on such terms, the valuation of $23 million was arrived at by two independent property valuers, Savills and Knight Frank, the manager stated.

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Stock Market Today:Why it will be tougher times ahead for Sheng Siong

The supermarket business is gonna get tougher for Sheng Siong, says Maybank Kim Eng Research and is telling investors to look elsewhere for cheaper growth plays. In a Monday report, analyst Gregory Yap says supermarket business growth is expected to slow sharply. Euromonitor has flagged a sharp slowdown in supermarket revenue CAGR to just 1.6% in 2016-2021 from 4.5% in 2011-2016 as online grocery retailing gains traction.

Even Sheng Siong's management has agreed that the online shopping model is better than brick and mortar and possible rivals Amazon and Tesco may enter the local market, warns Yap. Secondly, competition for new store locations is getting stiffer, with even convenience stores potentially entering the fray.

More importantly, Sheng Siong's growth so far has been achieved on large margin improvement which Yap says is nearing the limit and expects further margin uplift to slow. Asset-use efficiency has suffered since 2014 since it started buying assets and now even new store sales growth could be affected by increasing site competition, says Yap.

With margins close to peaking and store expansion challenges, growth will remain slow unless it is willing to gear up to acquire growth either locally or overseas. But that will certainly change its risk profile," adds the analyst.

In a recap, Sheng Siong's 4Q and FY16 came in line but were uninspiring. Net profit over the last five quarters has slowed from more than 20% growth a year to single-digit growth by 3Q16 and just 5.7% in 4Q16. 4Q16 and FY16 Same Store Sales Growth were also flat at 0.2% on year. New Store Sales Growth was up 8% y-o-y in 4Q16 and up 5% compared to 3Q16 as Yishun Junction 9 opened. Maintain 'sell' post-FY16 results. We find it hard to justify 23x P/E for single digit growth," says Maybank which is maintaining a "sell on the stock with 3% lower target price of 85 cents. Shares of Sheng Siong are down 1 cent at 94.5 cents.

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Stock Market Today:Changi Airport reports 8.2% rise in Jan passenger movements from a year ago

Singapore Changi Airport handled 5.26 million passenger movements in January 2017, an increase of 8.2% from a year ago. Aircraft movements were 4.8% higher with 31,600 landings and takeoffs, while cargo shipments were steady at 158,690 tonnes, compared to the same period last year.

Passenger traffic growth for the month of January was boosted by air travel demand to and from Southeast Asia, Northeast Asia and South Asia. Among Changi Airport's top 10 country markets, China led the gainers with a strong 31% growth in passenger traffic; this coincided with the Lunar New Year holidays occurring at the tail end of January this year.

India, Indonesia and Malaysia also registered double-digit growth of 14%. 14% and 13% respectively. As for Changi's top 10 cities, travel to and from Denpasar increased 18% on year; while Kuala Lumpur and Jakarta also saw healthy growth.

As at Jan 1, more than 100 airlines operate at Changi Airport, connecting Singapore to some 380 cities in about 90 countries and territories worldwide. With more than 7,000 weekly scheduled flights, an aircraft takes off or lands at Changi roughly once every 90 seconds.


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Stock Market Today: This stock is set to ride capex recovery in oil & gas services

DBS is maintaining its buy call on PACC Offshore Services Holdings (POSH) as it sees green shoots appearing in the oil services sector. With no bonds outstanding, positive operating cash flows, and a proven ability to secure work for its vessels despite the downturn, DBS likes POSH as a beta play on capex recovery.

In addition, POSH is a potential privatisation candidate with 81.89% owned by shareholder Kuok (Singapore). In a Wednesday report, analyst Suvro Sarkar says sentiment for oil services stocks should improve with oil majors increasing their 2017 capex.

We have seen the offshore working rig count increase in February 2017 for the first time since July 2014, says Sarkar, Thus, despite a still-dismal 4Q16, we expect a gradual earnings recovery in 2018.To recap, POSH reported impairments of about US$310 million ($440 million) in 4Q16, mainly on its OSV assets and goodwill attributable to the Transportation & Installation segment.

Together with impairments of US$148 million taken in 4Q15, Sarkar estimates that POSH has written down close to 30% of its aggregate fleet value. We think major impairments going forward are unlikely," concludes the analyst. Shares of POSH are down 2 cents at 35 cents.

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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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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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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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Stock Market Today: Croesus Retail Trust's 2Q DPU rises 5.2% to 1.81 cents

Croesus Retail Trust (CRT) has announced a distribution per unit (DPU) of 1.81 cents for 2Q17 ended Dec 31. This represents a 5.2% increase from the restated DPU of 1.72 cents in 2Q16 to reflect the change in the number of issued shares due to the rights issue last Nov, and the preferential offering in Aug.

Gross revenue for the quarter stood at JPY 3,181 million ($39.8 million), which was 30.7% higher than the JPY2,434 million recorded in 2Q16, due mainly to a larger portfolio of income-producing properties, following the trust's acquisitions of Torius, Fuji Grand Natalie, Mallage Saga and Feeeal Asahikawa.

While higher variable rent which arose from stronger tenant sales at Mallage Shobu, a one-off compensation from an early lease termination also boded positively for CRT's gross revenue. Net property income (NPI) grew y-o-y by 23.2% in 2Q17 to JPY 1,685 million from JPY 1,368 million a year ago, on the back of contributions from recent acquisitions and outperformance from Mallage Shobu.

For the same factors which contributed to the increase in NPI, as well as due to cost savings amounting to JPY 88 million in the quarter following the successful internalisation of CRT's trustee-manager, income available for distribution grew 21.4% to JPY 1,181 million for 2Q17.

For 1H17, CRT posted DPU of 3.60 cents, 7.5% higher than a restated 1H16 DPU of 3.35 cents. CRT has committed to distribute 100% of its distributable income till June 30 and at least 90% of its distributable income thereafter. It will make distributions to unitholders on a semi-annual basis with the amounts calculated as at June 30 and Dec 31 each year for the six-month period ending on each of the said dates.

To mitigate against foreign exchange fluctuations, CRT has hedged close to 100% of its expected distributable income up to Dec 2018. Our financial performance for the first half is a good reflection of CRT's ongoing efforts in areas such as enhancement initiatives and tenant renewal exercises. We are also glad that cost savings from our internalisation of the trustee-manager are being realised, enhancing distributions to unitholders," comments Jim Chang, CEO of Croesus Retail Asset Management.

In the coming quarters, we remain committed towards growing CRT's portfolio and distributions steadily and sustainably, and will continue to explore viable organic and inorganic opportunities to enhance CRT's value. Barring any unforeseen circumstances, CRT's manager says the trust's properties are expected to continue generating robust and stable cash flows in the next 12 months. Units of CRT closed 0.6% higher at 87 cents on Monday.

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