DAILY MORNING NOTE | 11 September 2023

Thai SDR Monthly August 2023

Analyst: Zane Aw

– Review of performance in August – All Thai listed counters were up between 1 to 3% with an increase in trading volume from July

– For the current trends of the Thai listed counters, Airports of Thailand Public Co. and CP All Public Co. Ltd are in a range consolidation phase. PTT Exploration & Production Public Co. Ltd is in an uptrend

– In terms of the outlook for these counters, Airports of Thailand Public Co. and CP All Public Co. Ltd could remain in their respective range consolidation phases should their respective technical patterns hold while PTT Exploration & Production Public Co. Ltd could continue its uptrend if the price continues its recent bullish momentum

Week 37 equity strategy: We expect tepid activity ahead of the release of US inflation data on 13 Sep. Expectations are for headline CPI to inch up to 3.6% (prior +3.2%) in line with rising gasoline prices. Meanwhile, Core CPI should slide more to 4.3% (prior +4.7%), as shelter costs slide further. Fed Vice-Chair J. Williams did appear satisfied with current level of interest rates ahead of the upcoming FOMC interest rate meeting on 20 Sep. He cited inflation was moving in the right direction, the labour imbalance was improving, and policy was in a restrictive stance. Our base case is the Fed will be on pause, preferring to give some time for the current tight monetary policy to take effect.

Turning to Thailand, the new government reiterated its digital wallet stimulus plans. All Thais aged over 16 will receive a one-time payment of THB10,000 (S$382) in digital money. The money is to be spent within a 4km radius of the registered address and over 6 months. A budget of THB560bn (S$21bn) has been earmarked. Expected launch is 1Q24. Thai Beverage is not a direct beneficiary because the handout is intended for daily necessities and not alcohol. But it will benefit indirectly through an improving economy and because the digital money can be exchanged for cash.

Paul Chew
Head Of Research
paulchewkl@phillip.com.sg

Singapore shares closed 0.6 per cent lower on Friday (Sep 8). The largest decliner of the day was Jardine Cycle & Carriage, which fell 1.9 per cent or S$0.63 to S$32.13. Other losers include UOB, Jardine Matheson and Nio. The trio of local banks all closed in the red. UOB ended S$0.32 or 1.1 per cent lower at S$28.28, OCBC fell S$0.17 or 1.4 per cent to S$12.43, while DBS slipped 0.5 per cent or S$0.18 to S$33.23.

Wall Street stocks finished modestly higher on Friday (Sep 8), concluding a lacklustre week on a more benign note as Apple nudged higher. The S&P 500 finished at 4,457.49, up 0.1 per cent for the day but down 1.3 per cent for the week. The Dow Jones Industrial Average gained 0.2 per cent to 34,576.59, and the tech-rich Nasdaq Composite Index advanced 0.1 per cent to 15,875.70.

SG

Seatrium on Friday (Sep 8) said it has a balance of S$300 million in net proceeds from its rights issue back in 2021, after the latest use of S$100 million for the repayment of a loan facility. The rights issue had raised some S$1.5 billion in net proceeds for the offshore and marine group. The company said the latest utilisation of the proceeds is in accordance with the intended use of net proceeds. Seatrium added that it will continue to make periodic announcements on the use of the net proceeds as and when they are materially disbursed.

Parkson Corporation, a unit of Parkson Retail Asia, was served with an amended writ and statement of claim dated Sep 3 as part of its ongoing legal proceedings with PKNS Andaman Development. In a filing to the Singapore Exchange on Friday (Sep 8), Parkson Retail warned that its financial position for the financial year ending Dec 31 would see an “adverse impact” if the outcome of the legal proceedings do not ultimately wind up in its unit’s favour, and if the unit is required to settle the amended claims in full. The ongoing legal battle is with respect to the premises leased by PKNS to Parkson Corporation within Evo shopping mall.

Investment company Straits Trading has launched a new product that provides fractionalised exposure to real estate as it seeks to improve accessibility to properties that have high barriers to entry. The mainboard listed company said on Sunday (Sep 10) that it has launched two new property investment products under its Fractionalised Investment Real estate-Straits Trading (FIR-ST) programme. The underlying properties being offered are a freehold Good Class Bungalow (GCB) at 8A Cable Road, Chatsworth Park, and a 999-year leasehold condominium unit in Duchess Residences at Bukit Timah. Under the FIR-ST programme, investors will gain exposure to the residential properties at a fraction of their value through preference shares. The underlying properties will continue to be owned by the existing owners during the investment period, Straits Trading said. The minimum investment amount into the Duchess Residences condominium is S$200,000, while investors who want to invest in the GCB will need to set aside a minimum sum of S$500,000. Straits Trading noted that preference shareholders “may receive dividends, which will be paid on a semi-annual basis”. It added that “preference shareholders may enjoy returns which reflect a share in the potential appreciation in value of the underlying property via a special payout” at the end of the expected investment period of five years. Straits Trading said the dividends and special payout are non-guaranteed and subject to performance. Both investments are offered to Straits Trading Shareholders’ Club registrants only. Shareholders who hold at least 100 shares of Straits Trading can register with the shareholders’ club.

Retail investors were net buyers of S-Reits in August, with net fund flows exceeding S$187 million, while institutional investors net sold the sector, paying S$94 million. Some of the top net buy sectors by retail investors were diversified Reits (+S$104.8 million), hospitality Reits (+S$40.6 million), and industrial Reits (+S$22.0 million). On the other hand, industrial Reits (+S$55.4 million) and retail Reits (+S$4.3 million) were the only two net buy sectors by institutional investors. Industrial Reits and Retail Reits were also two sectors that recorded inflows across retail and institutional investors. Across the 40 actively traded S-Reits, CapitaLand Ascendas Reit (Clar), ESR-Logos Reit (E-Log) and Mapletree Logistics (MLT) were the three S-Reits that saw inflows from both retail and institutional investors.

Enviro-Hub Holdings on Friday (Sep 8) responded to a series of questions by the Singapore Exchange Securities Trading (SGX-ST) about an investigation of its unit’s former general manager. SGX had called for disclosures relating to the role of the former general manager of one of the company’s units, her interview with the Corrupt Practices Investigation Bureau (CPIB), and the former executive’s subsequent resignation. The company has not disclosed the identity of the former general manager of HLS Environmental, but referred to the person as “she”. The general manager of HLS was responsible for a number of things – including developing and managing sales and marketing strategies, overseeing and managing daily marketing activities, establishing operating controls to ensure the outputs meet customer and market specification, setting department goals and objectives, as well as hiring and planning for new staff and conducting performance reviews. Enviro-Hub said the finance function has been outsourced to the finance department at the head office level, specifically to Enviro-Hub. It added that the executive in question had submitted a resignation letter on Sep 4 with immediate effect, and it was duly accepted by the group’s human resources division on Sep 5.

US

China’s financial regulator on Sunday reduced the risk weighting it attaches to insurance companies’ holdings of blue-chip shares and tech stocks, encouraging them to invest more in the country’s lagging stock market. The National Administration of Financial Regulation (NAFR) said on its website that the risk weighting for CSI300 Index constituents would be reduced to 0.3 from 0.35, while that for stocks listed on Shanghai’s tech-focused STAR Market would be cut to 0.4, from 0.45. A lower risk weighting frees up more capital for insurers to invest. In addition, the watchdog reduced the risk weighting it assigns to investments in Real Estate Investment Trusts (REITs), which in China channel money mainly into infrastructure projects. It also set a relatively low risk weighting for private equity investments in China’s strategic and emerging sectors.

US chip firm Nvidia on Friday (Sep 8) announced AI partnerships with Indian conglomerates Reliance Industries and Tata Group to develop cloud infrastructure and language models, as well as generative applications. The deals with two of India’s largest business houses will help the US chip firm deepen inroads to the emerging AI ecosystem of the South Asian nation, just as it faces roadblocks in certain chip exports to China and some other countries due to US restrictions. Nvidia CEO Jensen Huang this week met Prime Minister Narendra Modi to discuss India’s potential in the AI sector, just ahead of the G20 meet in New Delhi where delegates including US President Joe Biden are attending. In the Reliance partnership, Nvidia will provide the computing power required for building a cloud AI infrastructure platform, while Reliance unit Jio will manage and maintain the infrastructure and oversee customer engagement. The Nvidia partnership will be used by India’s No 1 software services exporter, Tata Consultancy Services, to build and process generative AI apps and a supercomputer, the companies said in a statement. TCS will also upskill its 600,000-strong workforce by leveraging the partnership.

Alibaba Group Holding is putting a potential Hong Kong initial public offering (IPO) of its Freshippo grocery chain on the backburner amid weak sentiment for consumer stocks, people with knowledge of the matter said. After early talks to sound out potential investors, the Chinese tech giant concluded it could likely achieve a valuation of around US$4 billion for Freshippo in the listing, below its initial expectations, the people said. That’s lower than the US$6 billion to US$10 billion value the firm was targeting when it considered raising a private funding round at various points last year, the people said. Alibaba’s capital management committee, which is overseeing the breakup of the sprawling company, recently decided to wait for a more favourable market before moving forward with a Freshippo IPO and will prioritise listings of other units, the people said. Any delays could mean Alibaba misses its stated target to float Freshippo by May 2024. To be sure, Freshippo could move forward with its listing plan once China’s broader retail environment and economy start picking up, improving investor sentiment around the sector, the people said. The company is ready to submit a preliminary prospectus any time, one of the people said.

Carmaker Stellantis aims to expand its battery building capacity to 400 gigawatt hours (GWh) to support growing production of electric vehicles (EVs), its head of global propulsion systems said on Friday (Sep 8). The group is also working to secure key long-term supplies of materials and chemicals that are necessary to feed this capacity expansion, said Micky Bly, Stellantis’ senior vice-president and head of global propulsion systems. “We have already announced about 250 GWh of capacity around the world. We believe we need to go to 400 GWh of capacity around the world,” Bly said during the inaugurating the group’s new Battery Technology Center in Turin, Italy. “We have committed to delivering six gigafactories around the world, and more to come,” he said. Bly, however, did not specify whether the group planned to build more gigafactories on top of those already announced to expand its capacity.

The US dollar headed on Friday (Sep 8) for its longest weekly winning streak in nine years, bolstered by a resilient run of US economic data that has put the end of the Federal Reserve’s aggressive rate-increase cycle into question. China’s onshore yuan meanwhile ended its domestic session at the weakest since 2007, as it battles capital outflow pressures and a widening yield gap with major economies. The US dollar index, which measures the greenback against major peers, was last 0.05 per cent lower at 105 but remained not far from the previous session’s six-month high of 105.15. The index was on track to extend its gains into an eighth straight week, and is up 0.7 per cent thus far.

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

RESEARCH REPORTS

Suntec REIT – The discounted gem

Recommendation: BUY (Initiate), Last Done: S$1.21

Target price: TP: S$ 1.47, Analyst: Liu Miaomiao

– 1H23 revenue rose 10.2% YoY driven by strong rental reversion of Singapore assets (+17.5% yoy for Suntec City Mall, +10.8% yoy for office portfolio). Revenue for Suntec Convection surged 95.2% YoY and is expected to be back to pre-COVID level in FY24e.

– SUN is actively deleveraging with a target gearing ratio of 40% (1H23 gearing: 42.6%). c.S$14m divestment of strata units in Suntec Office were completed in the 1H23. SUN remains committed of the divestment and eyeing other assets such as 477 Collins Street.

– At 0.57x P/NAV (FY23e, NAV:2.13), SUN is currently trading at 0.33 SD below its mean of 0.78 P/NAV and below the average SREIT historical valuation of 0.86x P/NAV. We initiate coverage with a BUY recommendation on Suntec REIT and a DDM-based target price of S$1.47 and an annual dividend yield of 5.64% under the current share price.

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