Daily Morning Note – 11 May 2020


U.S. stock futures hovered along the flatline on Sunday night (Eastern Time) after Wall Street posted consecutive rallies to end last week amid the prospects of the global economy reopening soon.

Dow Jones Industrial Average futures traded just 10 points lower, or less than 0.1%. S&P 500 and Nasdaq 100 futures were also flat.

The S&P 500 gained more than 1% on Thursday and Friday, leading to the broader-market average’s first weekly advance in three weeks. On Friday, investors shrugged off the biggest one-month job losses on record as expectations of an economic reopening outweighed the negative data.


More than 280,000 people have now died from the new coronavirus, most of whom were in Europe and the United States.

Tuan Sing Holdings’ business operations impacted by the Covid-19 outbreak is “largely confined” to its hospitality segment, with its diversified portfolio across segments and regions ensuring a “high degree of resilience”.

Oil prices opened about 1 per cent lower on Monday as a persistent glut continued to weigh on prices and the coronavirus pandemic eroded global oil demand even as some governments began to ease lockdowns.

Businesses in Singapore have decided to either return or donate the government payout received from the Jobs Support Scheme (JSS), as a form of solidarity with the local community amid the Covid-19 outbreak.

Britain extended a national lockdown to at least June 1 on Sunday rather than following European neighbours France and Spain, where millions of people are counting down the hours to a relaxation of the stay at home rules.

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


Technical Analysis: U.S Market – The market had a strong upside on the eleventh hour last Friday. Neutral outlook remains

Analyst: Chua Wei Ren

– The United States economy has taken some beating with the April 2020 unemployment level rising to a historical level of 14.7%, a staggering jump from 4.4% in March.

– The striking rise in unemployment is due to the total lockdown across various states.

– The stock market rebounded last week from the fall two weeks ago, with Dow closing above 24,000, S&P 500 closing above 2,900 and NASDAQ Composite index closing above 9,000.

– Despite record poor economic data and an earnings slide, the stock market continues to rise which shows signs of irrationality in the market.

– We are maintaining the neutrality of the market based on the report on 27th April 2020

>> Read more technical reports


United Overseas Bank Limited – Brace for tougher times ahead

Recommendation: Accumulate (Maintained), Last Done: S$19.90

Target Price: S$20.70, Analyst: Tay Wee Kuang

– 1Q20 earnings was 19% below our previous estimates due to higher GP during the quarter to strengthen allowance coverage in the face of the pandemic.

– NII was held flat as NIM compressed 8 bps YoY to offset loans growth of 3% YoY.

– Fee income continues to gain momentum (+8% YoY) on higher WM fees (+28% YoY) to bolster revenue from lower trading an investment income (-17% YoY).

– Allowance of $286mn in GP was charged for the quarter, with an additional $260mn shifted into RLAR as GP reserves.

Maintain ACCUMULATE with a reduced target price of S$20.70 (previously S$27.90). We increased credit costs by adding $350mn in allowance per quarter while compressing margins by 10 bps over the next two years.

Oversea-Chinese Banking Corp Ltd – Weighed down by insurance and allowances

Recommendation: Accumulate (Maintained), Last Done: S$8.88

Target Price: S$9.14, Analyst: Tay Wee Kuang

– 1Q20 earnings was below our expectations by 45% due to insurance plunging 94% due to mark-to-market losses and higher allowances of $657mn compared to $249mn a year ago.

– Loans growth of 3% YoY supported NII growth of 6% as NIM was held steady at 1.76% from a year ago.

We maintain ACCUMULATE at a lower target price of S$9.14. (previously S$12.10). Credit costs guidance was revised to 50-60bps per year over the next two years, with an additional $300mn in allowances undertaken during the period. We cut our FY20e earning by 20% due to higher provisions and insurance losses.

Venture Corporation Limited – Disruption filled quarter

Recommendation: ACCUMULATE (Maintained), Last Done: S$15.74

Target Price: S$16,.60, Analyst: Paul Chew

– 1Q20 PATMI fell 34% YoY to S$20.8mn, below our forecast.

– Disruption in the supply chain due to lockdowns in China and Malaysia affected the fulfilment of orders.

– End April20, almost all operating entities have resumed their operations with minimal constraints.

– Maintain ACCUMULATE. Our target price is lowered to S$16.60 (prev. S$18.10). We shaved around S$220mn of revenue for FY20e. This is similar to the revenue drop in 1Q20. PATMI for FY20e is shaved by 15%. We expect VMS to recover some lost revenue in 2Q20 as it ramps production. The longer-term merits on VMS is unchanged – capturing larger profit share in the global EMS sector, capitalising on further outsourcing of supply chains into SE Asia from China, paying an attractive 4.4% yield and enjoying a healthy balance sheet with net cash of S$852mn as at 1Q20.

NetLink NBN Trust – Stability at the core

Recommendation: ACCUMULATE (Upgraded); Last Close: S$0.985

Target Price: S$1.03, Analyst: Paul Chew

– Revenue and EBITDA were within expectations. 4Q20 revenue and EBITDA rose 5.2% and 13.2% YoY respectively, excluding a S$15.4mn write-off of a capitalised IT systems project.

– Revenue growth was driven by residential connections which rose 9.3% YoY as the number of connections expanded 7.5% YoY to 1.427mn.

– DPU in 2H20 was 2.53 cents, a 3.7% improvement over 2.44 cents in 2H19.

– We are raising our target to S$1.03 (previously S$0.99) as we roll-over our terminal values higher. We are upgrading from NEUTRAL to ACCUMULATE. Growth will be muted but the healthy dividend yield and stability in the operations will be enviable investment merits.

CapitaLand Limited – Building resilience and looking for opportunities

Recommendation: BUY (Maintained), Last Done: S$2.93

Target Price: S$3.94, Analyst: Natalie Ong

– Recurring income from fees to provide stable cashflows.

– COVID19 impact mitigated by diversification – Commercial and Industrial showing resilience while Lodging and Retail most impacted.

– Maintain BUY with lower TP of S$3.94 (prev. $4.20), after incorporating the lower revised valuations for the REITs. We lower our FY20e revenue by 14.1% as we factor in the lower earnings from the rental rebates offered and weaker lodging revenues.

>> Read more research reports

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Market Outlook: (PSR) Singapore Exchange Ltd, Micro-Mechanics, Frasers Centrepoint Trust, Keppel DC REIT, SG Banking Note, SG REITs Sector Update, SG Bonds Strategy, Technicals & SG Phillip Weekly

Date: 27 April 2020

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