DAILY MORNING NOTE | 12 September 2022

Building on the previous day’s rally and overnight gains in Wall Street, Asian bourses finished higher on Friday (Sep 9) despite hawkish sentiments from the United States Federal Reserve. In Singapore, the benchmark Straits Times Index (STI) also ended in positive territory, rising 0.9 per cent, or 29.34 points to 3,262.95. Gainers outnumbered losers 274 to 222, as close to 1.4 billion shares worth S$964 million changed hands. Across the region, Japan’s Nikkei 225 closed 0.5 per cent higher, and in mainland China, the Shanghai Composite Index added 0.8 per cent, while the Shenzhen Composite Index on China’s second exchange gained 0.7 per cent. Even Hong Kong’s Hang Seng Index, which has taken a beating most of this trading week, advanced 2.7 per cent.

U.S. stocks rallied Friday as Wall Street caps off a strong weekly performance, recovering from a Federal Reserve-induced slump. The Dow Jones Industrial Average gained 377.19 points, or about 1.19% to 32,151.71. The S&P 500 jumped 1.53% to 4,067.36, and the Nasdaq Composite climbed 2.11% to 12,112.31. Shares of DocuSign surged more than 10% after the electronic agreements company reported an earnings beat. The company also issued a third-quarter revenue forecast that was above expectations. All three major averages snapped a three-week losing streak. The Dow added 2.66% on the week, while the S&P 500 gained 3.65%. The Nasdaq Composite is 4.14% higher. Stocks have been volatile recently as expectations of a 0.75 percentage point rate hike this month grew on Wall Street, after the Federal Reserve Chair Jerome Powell said again that he is “strongly committed” to bringing down inflation.

Top gainers & losers



Straits Trading has declared a special dividend, distributing either ESR shares or Straits Trading shares to entitled shareholders. This special dividend comes after a strong H1 2022 results driven by the divestment of ARA Asset Management to ESR Group. The divestment value was recognised at S$1.1 billion, an internal rate of return of 18.2 per cent or 3.7 times equity multiple of the original cost of investment. Entitled shareholders may elect to receive 145 ESR shares or 180 new Straits Trading shares for every 1,000 Straits Trading shares owned. The distribution rate is about S$0.50 per share based on the HK$19.86 closing price of ESR shares on Aug 12. Shareholders will have to approve the distribution in an extraordinary general meeting which will be convened.

Cromwell European Real Estate Investment Trust is selling 3 of its non-core, light industrial/logistics assets at a total consideration of 22 million euros (S$30.6 million). In a midday filing on Friday (Sep 9), the Reit manager said this represents a 28 per cent premium to the properties’ combined valuations as at end-June 2022. The divestment is expected to complete in Q4 2022. Two of the 3 assets, Bischofsheim II and Hanau, are located in Germany. Bischofsheim II is a 50-year-old commercial and logistics park with a 7,158 square metre net lettable area. It was acquired for 3.5 million euros. On the other hand, Hanau is a 51-year-old business park acquired for 2.9 million euros. It was more recently extended in 1996, and comprises a 3-storey office block and a single-storey warehouse with an attached set of small office suites. Bischofsheim II and Hanau were both independently valued by CBRE at or around 5 million euros each. They will be divested at considerations of 6 million euros and 5 million euros (at valuation price) respectively. Another asset, Bois du Tambour, is located in France about 10 km from the centre of Nancy. The building was constructed between 1980 and 1982 and consists of 5 main separate structures housing a mix of light industrial/warehouse space and associated offices. It was acquired for 2 million euros, and has been valued by Savills at 7.1 million euros. The asset will be divested for a consideration of 11 million euros. All 3 assets were acquired at the Reit’s November 2017 initial public offering (IPO) to form part of its IPO portfolio.

Real estate asset manager ESR Group on Friday (Sep 9) announced the launch of ESR Australia Logistics Partnership (EALP) III, the third iteration of its core-plus logistics strategy between the group’s Australian subsidiary, ESR Australia, and Singapore sovereign wealth fund GIC. Like its predecessors EALP I and II, EALP III comes with an equity commitment of A$600 million (S$572.2 million). EALP I was launched in March 2020 followed by EALP II in July 2021. ESR said both vehicles have been successfully invested and have a combined portfolio spanning 682,016 square metres across Australia. According to the group’s co-founders and co-chief executive officers Stuart Gibson and Jeffrey Shen, ESR Australia fully deployed the equity committed to EALP II in August this year with the acquisition of 2 income-producing portfolios with assets across Melbourne, Brisbane and Perth. It held 17 assets with an expected end-value of about A$1.3 billion at its close.


Federal Reserve Governor Christopher Waller on Friday echoed recent sentiments from his colleagues, saying he expects a big interest rate increase later this month. He also said policymakers should stop trying to guess the future and instead stick to what the data is saying. “Looking ahead to our next meeting, I support another significant increase in the policy rate,” Waller said in remarks prepared for a speech in Vienna. “But, looking further out, I can’t tell you about the appropriate path of policy. The peak range and how fast we will move there will depend on data we will receive about the economy.” Those comments are similar to recent remarks from Fed Chair Jerome Powell, Vice Chair Lael Brainard and others, who said they are resolute in the effort to bring down inflation. Markets strongly expect the central bank to take up its benchmark borrowing rate by 0.75 percent point, which would be the third consecutive move of that magnitude and the fastest pace of monetary tightening since the Fed began using the benchmark funds rate as its chief policy tool in the early 1990s.

The dollar fell to a more than 1-week low on Friday (Sep 9) as investors consolidated gains after a sharp rise against most currencies, ahead of a US inflation report that could determine the size of the Federal Reserve’s rate hike at this month’s policy meeting. On the week, the dollar index posted its first weekly fall in on Friday. “Markets are getting a little nervous about levels, really historic levels, so the market decided not to push the dollar’s strength at this juncture and lightened up positions,” said Greg Anderson, global head of FX strategy, at BMO Capital Markets in New York. The greenback last week soared to a 24-year high against the yen, a 37-year peak versus sterling, with the dollar index surging to a more than 20-year high. On Friday, the dollar index dropped as low as 108.35 and was last down 0.5 per cent at 108.96.

Disney’s theme parks are on the rebound after the coronavirus pandemic shut down its domestic and international locations in 2020. Revenue is growing for Disney’s parks, experiences and products division and the company is seeing steady increases in attendance, occupied room nights and cruise ship sailings. During its most recent earnings, Disney touted that its new Genie+ and Lightning Lane products helped boost average per capita ticket revenue during the quarter. These new digital features were introduced to curate guest experience and allow parkgoers to bypass lines for major attractions. The company said it has been able to bring back in-park experiences such as character meet-and-greets, theatrical performances and nighttime events at Disneyland, which has allowed it to increase capacity at its parks, CEO Bob Chapek said at the time. Disney has placed caps on attendance since it reopened after the initial round of pandemic closures in early 2020 and instituted a new online reservation system to control crowds. The company continues to add new features and attractions to its theme parks and cruise lines, which Josh D’Amaro, head of Disney’s parks, experiences and product division, outlined Sunday at its D23 Expo.

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


Del Monte Pacific Limited – Temporary de-stocking in channels

Recommendation: BUY (Maintained); TP S$0.69, Last close: S$0.335; Analyst Paul Chew

– 1Q23 results were within expectations. 1Q23 revenue and PATMI (excluding one-offs) were 20%/19% of our FY23e forecast. There was a US$50.2mn one-off redemption fee and deferred financing cost write-off (net of tax and minority interest). 1Q is seasonally the weakest. Currency impacted Philippine revenue by 8% points.

– Revenue growth decelerated to a 1% YoY rise in 1Q23 due to short-term destocking in the channel. We are modelling 8% revenue growth in FY23e.

– Our F23e earnings are unchanged. We maintain our BUY recommendation and unchanged target price of S$0.69, pegged to 10x FY22e P/E, a 30% discount to the industry valuation due to its smaller market cap and higher gearing. Del Monte valuations are attractive at 5x PE FY23e. As consumer wallets shrink due to inflation, consumers in the US are relying on more meals prepared at home. It benefits Del Monte canned vegetables, fruits and broth categories. The Philippines is gradually recovering from consumers prioritizing basic foodstuff away from canned fruit.

Technical Pulse: Samudera Shipping Line Ltd

Analyst: Zane Aw

Recommendation: Technical SELL

Sell limit: 1.04 Stop loss: 1.08 Take profit 1: 0.94 Take profit 2: 0.87

Samudera Shipping Line Ltd (SGX: S56) Price is likely to head lower after hitting the downtrend channel resistance.

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This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

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Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

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Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
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