Gold has room to fall; AVI-TECH and AP OIL in the spotlight

gold and nuggets Spot gold prices and gold futures have risen recently, supported by uncertainty over the upcoming US presidential election. Spot gold prices have risen 1.45 percent this week while gold futures are 1.43 percent higher.

However, UBS CIO believes that gold may have room to fall in the short term as the market has not fully priced in a December rate hike by the US Federal Reserve. Long term, gold is still valuable as a hedge against geopolitical risks, CIO said.

CIO is expecting the Fed to raise rates by 25 basis points in December. -- Kelvin Soh, UBS

Moves by 2 companies with large cashpiles

1) AVI-TECH ELECTRONICS (AVIT SP)
avi tech factory 298

Out Of The SGX-ST Watchlist With A Significant Cash Pile

AVIT is a Singapore-based company listed on the SGX mainboard. Incorporated in 1981, AVIT provides solutions for burn-in services, burn-in board manufacturing and PCBA and engineering services for the semiconductor, electronics and life sciences industries.

The company has a net cash and equivalents position of S$28.3m (S$0.165 per share or about 57% of market capitalisation) as of 30 Jun 16. As of 16 Sept 16, the company received the in-principle approval for removal from the SGX watchlist. Full UOB Kay Hian report here.

2) AP Oil

It announced (18 Oct) that it has signed a JV agreement to subscribe to a 12.5% equity stake, at RMB25m (c.S$5.15m), in a JV company involving Shenzhen-listed Zongshen Power Machinery (70%), SGX-listed MoneyMax Financial Services (12.5%) and Free Trade Port Co. (5%). The JV co. will provide financial leasing services through hire purchase contracts with companies in Chongqing.

This development in AP Oil moves in-line with our long-term investment thesis that AP Oil is poised to increase shareholder value by utilizing its large cash hoard for corporate actions. With this, our investment call on this severely undervalued business with a stable and cash-generative business remains unchanged.

We see this as a stock catalyst and expect AP Oil to continue to invest surplus cash (S$33m net cash at 1H16; mkt cap S$41m) as we maintain our BUY rating and target price of S$0.33 (based on 1x FY16F BVPS).

-- Renfred Tay, KGI Fraser

Counter Name	Last	Change
AEM Holdings	2.290	-0.070
Best World	2.460	0.020
Boustead Singapore	0.945	-0.015
Broadway Ind	0.125	-0.003
China Aviation Oil (S)	0.905	-0.005
China Sunsine	0.400	-0.010
ComfortDelGro	1.450	-0.010
Delfi Limited	0.895	-0.005
Food Empire	1.280	-0.040
Fortress Minerals	0.305	-0.015
Geo Energy Res	0.300	-0.005
Hong Leong Finance	2.480	-0.010
Hongkong Land (USD)	2.830	-0.020
InnoTek	0.520	-0.015
ISDN Holdings	0.300	0.005
ISOTeam	0.042	-0.001
IX Biopharma	0.040	-0.005
KSH Holdings	0.255	0.005
Leader Env	0.050	-
Ley Choon	0.044	0.001
Marco Polo Marine	0.067	-0.002
Mermaid Maritime	0.136	-0.003
Nordic Group	0.310	-0.005
Oxley Holdings	0.089	-
REX International	0.138	0.003
Riverstone	0.790	-0.005
Southern Alliance Mining	0.445	-
Straco Corp.	0.495	0.010
Sunpower Group	0.205	-0.005
The Trendlines	0.069	-
Totm Technologies	0.022	-
Uni-Asia Group	0.825	-
Wilmar Intl	3.400	0.020
Yangzijiang Shipbldg	1.740	-0.030

Counter Name

Last

Change

AEM Holdings

2.290

-0.070

Best World

2.460

0.020

Boustead Singapore

0.945

-0.015