Daily Morning Note – 12 May 2021

PHILLIP SUMMARY

U.S. equity futures slipped Wednesday and Asian stocks were set for a weak open after a drop on Wall Street amid concern that the recovery from the pandemic faces a test from faster inflation as commodities rally.

Equity contracts fell in Japan and Australia, but rose earlier in Hong Kong. S&P 500 and Nasdaq 100 futures opened in the red. The S&P 500 dropped for a second day following a record high Friday. Dip buyers helped the tech-heavy Nasdaq 100 erase a loss of almost 2% to finish little changed.

Treasury yields advanced and the dollar traded near the lowest levels of this year. Investors are awaiting an inflation report and government debt sales in the U.S. — events that could trigger another bond selloff. Consumer price inflation is set to accelerate, with the year-on-year comparison amplified by the pandemic shock in 2020.


BREAKING NEWS

SG News

Centurion Corporation saw a 13 per cent decline in revenue year on year to S$30.7 million for the first quarter ended March 31, 2021. Revenue from the purpose-built student accommodation (PBSA) segment fell 38 per cent to S$7.7 million as travel restrictions impacted occupancy, especially in Australia. Average financial occupancy for the PBSA portfolio was 56 per cent for Q1, compared with 85 per cent the year before. This excludes the US portfolio that is held under a private fund in which the group holds an interest of 28.7 per cent.

ST Engineering‘s wholly-owned aviation asset management unit has signed an agreement with Temasek to set up a 50-50 joint venture (JV) for freighter aircraft leasing. The JV targets to build a portfolio valued at about US$600 million within five years, investing in passenger aircraft to be converted into highly efficient freighters. This is to address the growing demand for freighter aircraft as e-commerce and air cargo volumes expand across the globe.

EC World Real Estate Investment Trust’s (EC World Reit) distribution per unit (DPU) rose 32.3 per cent to 1.532 Singapore cents for the first quarter ended March 31, 2021, from 1.158 cents the year before. Gross revenue was up by 30.9 per cent to S$30.8 million. Net property income (NPI) also rose 30.9 per cent, to S$27.7 million.

The increases in gross revenue and NPI were mainly due to the absence of one-off rental rebates given to tenants to mitigate the adverse impact of the Covid-19 situation and the strengthening of the yuan by 3.5 per cent year-on-year.

Manulife US Reit on Tuesday announced a portfolio occupancy of 92 per cent for the first quarter ended March 31, 2021. While this was lower than the 96.5 per cent occupancy reported the year before, the Reit manager highlighted in its operational update that this was still above the US Class A average of 82 per cent, according to a recent JLL report. The Reit’s weighted average lease expiry for the latest quarter stands at 5.3 years. Its manager had executed about 270,000 square feet (sq ft) or 5.8 per cent of leases by portfolio net lettable area at plus 2.1 per cent rental reversion – mainly from the finance and insurance, administrative, advertising and legal sectors. In-place rental escalations stood at 2.1 per cent per annum.

Malaysian glove maker Riverstone Holdings posted a net profit of RM522.7 million (S$169.7 million) for the first quarter ended March 31, about 11 times its RM46.6 million net profit recorded the year before. For the whole of FY2020, net profit was RM647.3 million. Gross profit rose to RM708.3 million from RM67.1 million. Revenue was RM1 billion, up from RM279.4 million. This represented the largest quarterly revenue for the group from at least the start of FY2017, going by a business update posted on Tuesday.

Real estate agency PropNex on Tuesday posted a first-quarter net profit of S$14.8 million, nearly double the S$7.6 million the year before. This came amid higher revenue from an increase in commission income from agency services and project marketing services. The results translate to earnings per share (EPS) of 4.01 Singapore cents for the three months ended March 31, against an EPS of 2.05 cents the year prior. Revenue was up 63.3 per cent on the year to S$220.6 million, from S$135.1 million. The group earned S$47.5 million in commission income from agency services and S$38 million from project marketing services.

Cromwell European Real Estate Investment Trust (Cromwell E-Reit) on Tuesday posted a net property income (NPI) of 30.8 million euros (S$49.6 million) for the first quarter ended March 31, 2021, down 0.4 per cent from 31 million euros the year before. Gross revenue was nearly unchanged from the year before at 48.5 million euros, according to a business update.


US News

Google is jumping into the massive remittances market. The tech giant’s mobile payments service Google Pay announced Tuesday that users in the U.S. will now be able to send money to India and Singapore. The company has teamed up money transfer firms Wise and Western Union on the feature, integrating their platforms into the Google Pay app. Users can choose between Wise or Western Union to move their money abroad. Google will take a small cut of the cross-border transactions made through its app.

A German regulator ordered Facebook to stop processing data on its citizens from messaging service WhatsApp. The Hamburg Commissioner for Data Protection and Freedom of Information, or HmbBfDI, said Tuesday that it has issued an injunction that prevents Facebook from processing personal data from WhatsApp. Facebook said it is considering how to appeal the order.

Israel’s Competition Authority said on Tuesday it was considering imposing a fine of about 6 million shekels ($1.8 million) on Facebook and its Israeli unit for buying two Israeli companies without the agency’s consent. It said the fine is subject to a hearing and Facebook has the right to submit its arguments to the authority’s director general Michal Halperin within 60 days.

US electric car maker Tesla has halted plans to buy land to expand its Shanghai plant and make it a global export hub, people familiar with the matter said, due to uncertainty created by US-China tensions. With 25 per cent tariffs on imported Chinese electric vehicles imposed on top of existing levies under former President Donald Trump still in place, Tesla now intends to limit the proportion of China output in its global production, two of the four people said.

Roblox shares rose as much as 5% in after-hours trading, following the release of the company’s first earnings report since it went public in a direct listing in March. The company’s net loss for the quarter was $134.2 million. Revenue was $387 million, up 140% from a year ago. In the first quarter, daily active users, or DAUs, rose to 42.1 million, up 79% from last year. Users spent 9.7 billion hours on the platform, up 98% year over year from March 2021. This engagement translated to $652.3 million in bookings, up 161% year over year. On a quarterly basis, the average booking per daily active user was $15.48, up 46% year over year.

Palantir, the maker of software and analytics tools for the defense industry and large corporations, reported 49% revenue growth for its first quarter, beating Wall Street estimates. It also came in line with top-line estimates. The company said average revenue per customer grew to $8.1 million. In its fourth quarter report, the company said average revenue for 2020 came to $7.9 million. As of this past quarter, Palantir has 149 customers. The company first disclosed in its prospectus last fall it had 125 customers in the first half of 2020.

BioNTech said on Monday that its order backlog for delivery of Covid-19 vaccines this year together with partner Pfizer had grown to 1.8 billion doses, underscoring its role as a major global supplier of immunisation shots. That was up from 1.4 billion doses announced in March. Based on these delivery contracts, the company said it expects about 12.4 billion euros (S$19.98 billion) in revenue from the vaccine this year, including sales, milestone payments from partners and a share of gross profit in the partners’ territories, up from a previous forecast of 9.8 billion euros.

US job openings surged in March to a record high, underscoring a rapid increase in labour demand as vaccinations accelerate and states reopen their economies. The number of available positions increased to 8.12 million during the month, the highest in data back to 2000, from an upwardly revised 7.53 million in February, the Labor Department’s Job Openings and Labor Turnover Survey, or Jolts, showed Tuesday. The median estimate in a Bloomberg survey of economists called for 7.5 million openings.



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

RESEARCH REPORTS

BRC Asia – Resilient quarter

Recommendation: Buy (Maintain), Last Done: S$1.54, Target price: S$1.87,

Analyst: Terence Chua

– 1HFY21 earnings of S$19.2mn, at 46.7% of our FY21e estimates. 1H is seasonally weaker.

– First interim DPS of 4 Singapore cents declared in five years. We raise FY21-22e DPS estimates to eight/10 cents from six.

– Credit situation improving. Guidance for receivables impairment unchanged at 3% of total receivables.

– Maintain BUY and target price of S$1.87. Based on 11x FY21e P/E, a 15% discount to its 10-year historical average P/E on account of the uncertain environment. Catalysts expected from an increase in foreign workers inflow into Singapore.

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