Daily Morning Note – 03 March 2021

PHILLIP SUMMARY

Asian stocks looked set for a muted start after their U.S. peers retreated on concerns about excessive investor optimism. Treasuries climbed and the dollar weakened. Futures were little changed in Japan and Australia. Technology shares led losses in the S&P 500 Index as Apple and Tesla dragged down the Nasdaq 100. Benchmark Treasury yields dipped amid comments from Federal Reserve Governor Lael Brainard that bond-market volatility may further delay a pullback in the central bank’s massive asset purchases.

Oil tumbled below US$60 a barrel in New York with the Opec+ alliance said to be set to agree to a production increase later this week. US crude futures fell 1.5 per cent to the lowest in more than a week on Tuesday, while its global counterpart Brent hit a two-week low. The widespread view among the producer group is that the market can absorb additional barrels, according to people familiar with the matter. That could put the alliance on track to implement the majority of the 1.5 million barrel-a-day output hike that’s up for debate on Thursday

BREAKING NEWS

SG

Recruitment company HRnetGroup posted a net profit of S$46.9 million for its full-year ended Dec 31, 2020, down 9.2 per cent from the year-ago period. Meanwhile, revenue increased 2.4 per cent to S$433 million in FY2020. This is a record high for the group, it said in a bourse filing on Tuesday. Revenue from the healthcare sector grew by 28 per cent to constitute 14.4 per cent of total revenue, while the government sector grew by 68.2 per cent to constitute 17.3 per cent of total revenue.

Bank of America (BOA) has filed a motion to dismiss the Chapter 11 cases of Eagle Hospitality Real Estate Investment Trust (EH-Reit) and Eagle Hospitality Trust (EHT) Singapore entities Eagle Hospitality Trust S1 and Eagle Hospitality Trust S2. BOA is the administrative agent of EH-Reit’s US$341 million prepetition syndicated credit agreement, the trustee of EH-Reit said on Tuesday in a bourse filing. BOA’s move comes as the US bankruptcy court approves a US$100 million debtor-in-possession (DIP) term loan facility with Monarch Alternative Capital.

Firms and individuals have submitted 8,655 online notifications for relief (NFRs) as at Feb 23, with the majority (66 per cent) relating to hire-purchase agreements for commercial equipment or vehicles, and leases or licences of non-residential property. This figure, shared by Second Minister for Law Edwin Tong on Tuesday, excludes NFRs served by individuals and businesses via other modes of service. Mr Tong was giving an update on the series of measures rolled out by the Ministry of Law last year to help businesses and individuals impacted by Covid-19. Reliefs were introduced through the Covid-19 (Temporary Measures) Act. Under the Act, which kicked in last April, businesses and individuals are able to get legal reprieve from their contracts for six months. The temporary relief period was subsequently extended in October.

February’s PMI came in at 50.5, down 0.2 point from the previous month, according to the Singapore Institute of Purchasing and Materials Management (SIPMM) on Tuesday. This marks the eighth straight month of expansion for the overall manufacturing sector. A reading above 50 on the index indicates growth from the previous month, and one below 50 means a contraction. The latest PMI reading was attributed to lower expansion rates in the indices of new orders, new exports, factory output and a faster rate of supplier deliveries, SIPMM said. Meanwhile, the electronics sector PMI also dipped 0.2 point to clock 50.8 in February.

Hong Kong is exploring whether to allow Special Purpose Acquisition Companies (SPAC) to list in the Asian financial hub, according to a government statement, indicating that a largely US phenomenon could be going global. A SPAC is a blank-cheque company that raises money through an initial public offering (IPO) with the intention of merging with another firm, allowing that business to list more quickly. Most SPACs so far have listed in the United States. They raised US$60 billion in the first two months of 2021, Dealogic data showed, already more than 70 per cent of 2020’s annual deal value.

Shares of seafood supplier Oceanus Group plummeted 11.1% on Tuesday amid heavy trading. Oceanus on Friday reported a net profit of S$8.6 million for the full year ended Dec 31, 2020, reversing from a net loss of S$7.4 million for the year-ago period. Revenue surged to S$91.7 million – more than nine times the S$9.6 million posted for the preceding year. This came on the back of higher turnover from its aquaculture, distribution and services segments, it said.

‘Cliff effect’ from loan moratoriums rollback not a concern: DBS. Numbers from Singapore’s largest bank DBS put to rest earlier concerns of a “cliff effect” from deferring mortgage payments, a scenario where many, especially the most vulnerable, may not be financially prepared to make payments when moratoriums are promptly rolled back. However, the bank’s analysis of Singapore’s blanket mortgage deferment scheme also points to diverging fortunes between the higher- and lower-income segments of society. According to DBS’s latest analysis of data from some 1.2 million of its non-wealth customers last year, just 8 per cent of residential mortgages that were earlier placed under moratoriums had their deferments extended into January 2021.

US

A federal jury in Texas on Tuesday ruled that US computer chip giant Intel should pay US$2.2 billion to VLSI Technology in a patent infringement case. Intel said it would appeal the decision. The suit filed by patent-holding company VLSI in early 2019 accused Intel of violating patents involving memory cache and voltage regulation in its chips, according to legal documents.

Singapore-based Sea Ltd sank further into the red for its fourth-quarter ended Dec 31, 2020, posting a net loss of US$523.6 million, down from a net loss of US$283.8 million in the year-ago period. In results announced on Tuesday, the gaming and e-commerce giant also said in an update that it is establishing Sea Capital, a platform to manage Sea’s overall investment efforts, and will be allocating an initial US$1 billion to be deployed by the platform over the next few years. David Ma, founder of Hong Kong-licensed global investment management firm Composite Capital Management – which is wholly-owned by Sea – will serve as the chief investment officer of Sea Capital. He will report directly to Forrest Li, Sea’s group chief executive and chairman.

German remote connectivity software company TeamViewer said on Tuesday it had acquired Upskill, a US company that specialises in augmented reality applications for front-line workers. The deal marks the third takeover by CEO Oliver Steil since TeamViewer, headquartered in Goeppingen, was floated in Sept 2019 by private equity backer Permira. Terms were not disclosed for the transaction.

Uber is spinning off the sidewalk robotics division of the Postmates delivery service acquired last year, creating a new company called Serve Robotics. A statement on Tuesday from Serve said it had an unspecificed amount of seed funding from venture capital firm Neo with participation by Uber and other investors. Serve Robotics “will continue spearheading the development of a new form of mobility by creating autonomous robots to deliver goods in urban environments,” a statement from the new company said. Uber last year announced plans to buy Postmates for US$2.65 billion in stock, in a move shaking up the sector which has seen surging growth during the coronavirus pandemic.

New York Attorney General Letitia James sent a blistering warning to investors and industry members on Monday about cryptocurrencies. “We’re sending a clear message to the entire industry that you either play by the rules or we will shut you down,” she said in a press release. The warning from James, which addressed individual investors and crypto industry members, comes amid a major start to 2021 for digital assets like bitcoin. The cryptocurrency surged to a new all-time high above $58,000 earlier this month, after garnering attention from Wall Street banks, companies like Tesla and even the U.S. government.

Delta Air Lines, which received billions of dollars in federal aid last year, is paying managers bonuses ranging from a few thousand dollars to more than $100,000 to make up for pay cuts at the start of the pandemic last year. Frontline workers like flight attendants, pilots and others in non-managerial positions are not receiving bonuses. Last year, Delta cut managers’ pay and also reduced thousands of workers’ hours by 25 percent to help weather the pandemic’s plunge in travel demand, a policy that was criticized by some lawmakers. The Atlanta-based airline avoided involuntary furloughs or job cuts, partially thanks to the 18,000 employees who accepted buyouts and early retirement packages last year

Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, PSR

TECHNICAL REPORTS

Thai Beverage PCL

Analyst: Chua Wei Ren

Recommended Action: Technical SELL

Thai Beverage (SGX: Y92) has exceed our first target price at $0.835 but fall short of our 2nd target price. Technical has also indicate that Thai Beverage will engage in another round of downside:

AEM Holdings Ltd

Analyst: Chua Wei Ren

Recommended Action: Technical SELL

AEM Holdings Ltd (SGX: AWX) has completed the first complete sub-wave of the minor phase based on our report on 25th November 2020. Moving forward, we have also completed the sub-waves of the minute phase. Technical further support the notion of continuing selling

>> Read more Technical reports

RESEARCH REPORTS

Semiconductors: Shortages near term, robust outlook long term

Analyst: Yeap Jun Rong

– We do not expect a quick fix in the near term. The lead time from equipment orders to actual output is estimated to be 9-12 months. Production constraints could continue to weigh on chipmakers’ sales potential through 2021.

– However, we remain positive on the sector’s longer-term outlook. As production ramps up over time, backlog orders should lift sales. Inventory-building by customers to safeguard supplies may also spur demand. We believe their price hikes may be sticky and hard to reverse even when supply constraints ease. This may then translate to higher margins.

– Moving into 2021 and beyond, we expect growth momentum for semiconductors to remain well-supported by the following sub-segments: automobiles, communications and computing.

>> Read more research reports

HK Reports – Read up on our Hong Kong reports here

Webinar Of The Week

Market Outlook: Q&M (Initiation), ART, AREIT, YOMA, MMH, UGHC, Banking Monthly & SG Weekly

Date: 08 February 2021

For more on Market Outlook

Updates summarised in 3 minutes

Phillip Research in 3 minutes: #29 – Keppel Corporation; Initiation

For more videos on Phillip in 3 Mins