Apr[3] - ARA (Mothership of REITS)

COUNTER: ARA Asset Management Ltd

OVERVIEW:
ARA is an integrated real estate fund manager in Asia Pacific region. It has built a diverse suite of real estate investment trusts (REITS) and private real estate funds that are invested in office, retail, logistics/industrial, hospitality and residential sectors. The income is generated by earning in percentage of assets value it manages. Its REITS portfolio is listed below:

HIGHLIGHTS:
[1] Its latest result saw FY2015 net profit reached $72m which is up 16% year on year, after taking out one off gain in FY2014. 56% of revenue is generated from recurrent management fees which grew 3% year on year.

[2] Total borrowing is around $150K, which represents low gearing ratio at 3%. It is having cash at $76m now.

[3] Asset under management (AUM) hit $29.8b with annual growth at $2b. The increased AUM will underpin steady growth in revenues and profit in 2016.

INVESTMENT THEMES:
[1] Current valuation is considered pretty attractive for ARA since 2012. Its PE fell below 13 and dividend hit beyond 4%.

[2] In 2015, ARA has raised its private fund size with additional USD2b to invest in various properties in Singapore, Malaysia and Korea. These should drive the growth of its earning in 2016.

[3] Fee revenues from its REITs, private funds are mainly recurring in nature and offer income visibility. Based on SOTP valuation, the counter shall be valued ~ 1.5

PRICE TREND:
The counter is trading with CD (Cum Dividend) now. EX (Exclusive of Dividend) date falls on 21 April. Shall price drop on EX, it might hit next support ~1.015 which represents attractive 5% yield.

Apr[2] - Market Update

Crude Oil:

Crude oil broke down from previous rising channel while sliding in 8 consecutive days. US crude oil inventories broke new record high but under market forecast. Active oil rig counts have been falling over few weeks as well. However the down sliding persists. Immediate support at USD36. Next would be USD34. Market looks forward much concrete resolution from OPEC meeting on 17 April.

USA:

DOW Jones finally bid farewell with annoying oil. Following comment from Yellen that less rate hike is expected in 2016 and stronger gain in non farm payroll last week, it has broken 2016 high. Historical high is 18312.

Singapore:

Following Moody downgrading local bank's outook and sliding oil price, STI has been weakening in past week. Both EMA10 and EMA20 are converging. Following weeks will see 1Q2016 result announcement from local listed entities (First is SPH REIT). Earning from last quarter will be in focus6

Market Calendar on coming week:

(SG: Singapore; CH: China; US: USA)

Apr[1] - UG Healthcare (Away from Disease)

COUNTER: UG Healthcare Corporation Ltd

OVERVIEW:
The counter is a well established natural latex and nitrile examination gloves maker and distributor. These gloves can be used in industries such as healthcare, research, food & beverages. It also distributes vinyl, surgical and cleanroom gloves which are used in healthcare and high tech manufacturing environment.

Currently, it has two manufacturing facilities located in Malaysia. Its distribution network covers worldwide regions, such as US, UK, Germany, China and Nigeria. Through its extensive networks, the products are sold to more than 50 countries under its own brand name.

HIGHLIGHTS:
[1] Its latest half year result saw revenue and net profit up 20% and 30% year on year. This is mainly driven by increase in sales volume. Gross profit margin increased from 20% to 24%, mainly due to reduction in cost of raw material purchased.

[2] It's having positive cash flow with $6m. Total borrowings at $10m which is only less than 20% of its equity value. Short term debt can be fully funded by cash.

[3] The counter is on track to expand its production capacity (>40%) and distribution network. Construction of new production lines should be funded internally. Management shared that production lines have been upgraded to produce surgical examination gloves. New product shall contribute since FY2017.

INVESTMENT THEMES:
[1] Assuming the counter managed to maintain same earning as its previous 6 months. FY2016 PE is estimated to be 10 at current price. At its IPO, the management stated its intention to pay at least 20% of net profit of FY2016 as dividend. Current valuation is attractive among its peers in the region. Average PE in the sector is 19.

[2] Rubber prices has been staying low in recent years. With the overcapacity in the synthetic rubber industry,  glove producers could continue to enjoy with lower raw material cost in near term. The counter is net beneficiary of stronger USD/MYR exchange rate as well.

[3] Glove manufacturing industry is resilient to economic downturns, as it serves as a basic necessity in the healthcare industry to prevent cross contamination and transmission of infectious diseases.

PRICE TREND:
Recent transaction saw surging in buying volume. Immediate support is $0.3. The counter has potential to be next to join rally amount mid-small cap counters lately.

Char[9] - IPS Securex

The security solution provider listed on 2014 and quickly caught attentions among trader. It has implemented shares split in last two years due to overwhelming demand. The price rose quadruple in half year since IPO. After first shares split, it surged to three folds in six months again. Price seems to calm down after 2nd shares split.

Recently, the counter has seen some significant volume in transaction again. EMA 10 has cut above EMA20 with bullish candlestick. Shall history repeats, the counter could be shining star again. Immediate price resistance is 0.275. Historical height is 0.9. Immediate support is 0.186.

Mar[8] - Market Update

Crude Oil:

Although US crude oil inventory unexpectedly up 9mil barrels week on week, oil price refused to retreat. It has been moving well within rising channel as above. The Baker Hughes rig count released on last Thursday showed a drop of 15 oil rigs active in the US for the week ending March 25. 

Singapore:

STI couldn't break up from 2907 which was also the resistance on last Dec. Market sentiment calmed down after strong rally on week before, especially with the slump on oil price. Federal banker's hint about potential April hike could play another factor.

Market Calendar on coming week:

(SG: Singapore; CH: China; US: USA)

Mar[7] - DBS (Asset hunting)

COUNTER: DBS Group Holding Limited

OVERVIEW:
The household brand is one of the leading financial groups in Asia with over 280 branches across 18 markets. Headquartered in Singapore, it has growing presence in Greater China, Southeast Asia, and South Asia. Singapore government investment company, Temasek Holding is the major shareholder at 30%.

HIGHLIGHTS:
[1] On 2015, its total income crossed $10b mark and net profit hit $4.3b. Both were at record high with 12% year on year. Its cost-income ratio maintained at 45% and net interest margin (NIM) has hit 1.84% in 4Q15 which is highest in five years.

[2] Asset quality is resilient with non performing loan (NPL) maintained at 0.9%. Its capital position is comfortable after factoring in latest Basel 3.5 changes. At 12.4% Core Tier 1 capital, it has the highest capital adequacy level among its peers.

[3] Its CEO, Piyush Gupta estimates that even if oil price were to remain between US$30-40 range for 2016, non performing loans may not be more than $200m.

INVESTMENT THEMES:
[1] Incremental contributions from its bancassurance deal with Canadian insurer Manulife which is estimated to add $250m to profits in 2016. The deal is to capture growing insurance market in Asia.

[2] With the largest saving and current accounts in Singapore, it has the cheapest cost of funds and the biggest beneficiary of rising rates.

[3] Valuation is attractive. Current PB could translate to 2% of non performing loan which is double of current NPL (0.9%)

PRICE TREND:
The counter has been retreating from resistance at 16. Bargain hunting window presents in such correction phase. 

*** Note: Same counter has been mentioned in Aug[4] @ 2015 ***

Mar[6] - Market Update

Crude Oil:

After OPEC and Russia confirmed a meeting on mid April, market sentiment is getting more bullish on crude oil. It has broken resistance at USD40 last week. Next strong resistance could be USD43.

US:

Market welcomed news from Federal Reserve that rate hike could be scaled back in 2016. Also led by bullish oil, DOW JONES recovered lost ground since early 2016. It swung into black first time this year. 

Singapore:

Without rate hike on last FOMC, USD has been weakening. Generally Asia bourses were beneficiaries. STI moved back to 2920 which was the peak seen on Dec 2015. Current price translates to PE ~ 12. The mean value of PE range for STI is 15.4. 

Market Calendar on coming week:

(SG: Singapore; CH: China; US: USA)