Daily Morning Note – 13 August 2021
Dear valued client,
Asian shares looked set for a muted open Friday as the spread of the delta Covid-19 variant and China’s regulatory curbs subdue sentiment despite another record close on Wall Street.
Futures edged up in Japan and Australia but fell in Hong Kong. U.S. contracts were steady after the S&P 500 hit a fresh peak and the tech-heavy Nasdaq 100 rose. Airbnb Inc. slid in extended trading on a challenging outlook for bookings due to the virus, while a surge in streaming demand boosted Walt Disney Co.
Driven by a buoyant residential property market, mainboard-listed real estate services provider APAC Realty logged a 119.7 per cent increase in net profit to S$17 million for the six months ended June 2021. The group declared an interim dividend of 3.5 Singapore cents, representing a payout ratio of 73 per cent, and a one-off special dividend of three cents per share. Fuelled by strong demand from local buyers, group revenue went up 107.4 per cent to S$358.4 million. Earnings per share stood at 4.8 Singapore cents, while net asset value per share stood at 46.6 cents, as at June 30, 2021.
Yanlord Land Group‘s net profit rose 67 per cent to 823.4 million yuan (S$174.5 million) for the half-year ended June 2021, from 492.9 million yuan in the year-ago period. Group revenue rose 45 per cent to 13.2 billion yuan in H1 FY2021. Property development contributed 86.3 per cent of the revenue, or about 11.4 billion yuan; 5.2 per cent came from property investment and hotel operations; and 3.2 per cent from property management. The group attributed revenue growth for the period to the increase in gross floor area delivered to customers, which was partly offset by the fall in average selling price per square metre. The decrease was mainly due to the change in composition of its product mix delivered during the reporting period, it said.
Hong Leong Asia‘s net profit rose 110 per cent year on year to S$40.7 million for the half year ended June 2021, boosted by higher sales and revenue in its diesel engines and building materials units. The industrial conglomerate logged S$2.8 billion in revenue for the period, up 32.8 per cent from S$2.1 billion. Earnings per share stood at 5.45 Singapore cents. Its engine-making unit Yuchai had 33.8 per cent year-on-year growth in engine units, ahead of China’s transition to more stringent emission standards. In 2018, China finalised China VI standards that would apply to new heavy-duty diesel vehicles nationwide in two stages. Yuchai expects the market for commercial vehicle engines to slow down after a strong “pre-buying effect” in H1 FY2021.
Oil exploration and production company Rex International reported net profit of US$23.9 million for the first half of this year, versus a net loss of about US$21 million in the corresponding period last year. Revenue for the six months ended June 30 surged to US$75.8 million, which is more than five times that of the year-ago US$14.6 million. This came mainly from Rex’s 86.4 per cent-owned subsidiary Masirah Oil’s share of the sale of crude oil from the Yumna Field after the Oman government’s take.
UOL Group posted a S$91.3 million net profit for the first half of this year, a turnaround from its net loss of S$82.1 million for the corresponding period last year. This was thanks to a substantial increase in revenue from property development and a sharp drop in fair-value losses, the property company announced on Thursday evening. Revenue grew 31 per cent to S$1.19 billion during the six months ended June, from S$908.2 million in the year-ago period, driven by higher contributions from both property development and property investments.
The number of Americans filing claims for unemployment benefits fell again last week as the economic recovery from the Covid-19 pandemic continued but producer prices posted their largest annual increase in more than a decade amid inflation pressures. Initial claims for state unemployment benefits fell 12,000 to a seasonally adjusted 375,000 for the week ended August 7. Data for the prior week was revised to show 2,000 more applications received than previously reported. Economists polled by Reuters had forecast 375,000 applications for the latest week. Unadjusted claims, which offer a better read of the labour market, decreased 5,198 to 320,517 last week
A bill introduced on Wednesday by US senators seeks to loosen the grip Apple and Google have on their lucrative online shops for apps and other digital content. The measure backed by Democrats Richard Blumenthal and Amy Klobuchar and Republican, Marsha Blackburn would have to make its way through Congress to become law. The bill would make it illegal for app store operators to require use of their own payment systems for transactions, a tactic that lets Apple and Google collect commissions on sales at their respective shops.
US oil major ExxonMobil, along with Chevron Corp, is seeking to bulk up in the burgeoning renewable fuels space by finding ways to make such products at existing facilities, sources familiar with the efforts said. The two largest US oil companies want to produce sustainable fuels without ponying up billions of dollars that some refineries are spending to reconfigure operations to make such products. Renewable fuels account for 5 per cent of US fuel consumption, but are poised to grow as various sectors adapt to cut overall carbon emissions to combat global climate change.
Apple’s main assembly partner Hon Hai Precision Industry projected sales of gadgets like smartphones will drop sequentially this quarter, spurring concerns that chip and component shortages may affect iPhone production before the holiday season. Sales at the Taiwanese manufacturer’s consumer electronics business, which includes the iPhone, will decline this quarter compared with the previous three months, the company said on Thursday. The downbeat projection caught analysts by surprise, given the third quarter is often the peak production season for a global electronics industry that scrambles every year to get devices in front of shoppers before the year ends.
Reddit will raise up to US$700 million in a fundraising round led by Fidelity Management, the social media network said on Thursday, cashing in on a jump in its influence in the financial world to triple its valuation to over US$10 billion. The company said it had already raised US$410 million from Fidelity in its second funding round since the start of the year when small-time traders gathered on its platform in their battle against Wall Street institutions.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
Lendlease Global Commercial REIT
Analyst: Chua Wei Ren
Recommended Action: Technical BUY
Lendlease Global (SGX: JYEU) upside is relatively strong and despite having failed to break the resistance level at $0.900, prices remain on the uptrend and technical indicate a strong bullish upside
Buy stop: 0.90 Stop loss: 0.810 Take profit 1: 1.00 Take profit 2: 1.09
Venture Corp Ltd
Analyst: Chua Wei Ren
Recommended Action: Technical BUY
Venture Corp Ltd (SGX: V03) ranging trend has been ongoing since October 2020 and the gentle sloping downward channel act as a continuation to the upside. Technical price action also indicate further upside
Buy spot: 19.53 Stop loss: 18.55 Take profit 1: 20.45 Take profit 2: 21.50
Singapore Exchange Limited – Dragged down by Treasury Income
Recommendation: Neutral (Maintained), Last Done: S$11.00
Target price: S$11.54, Analyst: Terence Chua
– FY21 revenue and earnings below our estimates, at 95% and 93% of our FY21e. Variance came from lower than expected equity and FICC revenue.
– FICC and DCI grew 30%/4% YoY, led by newly-acquired businesses, BidFX and Scientific Beta, respectively.
– Excluding treasury income, revenue was up 7% YoY, lifted by commodities trading volume, and higher securities settlement and corporate action revenue.
– Lower yields dragged down equity derivatives treasury income. Equities – Cash & Derivatives was 15% lower than our 2H21 estimates and 16% lower YoY as equity derivatives volume declined 6%.
– Maintain NEUTRAL with lower TP of S$11.54, from S$11.95. FY22e earnings reduced by 19.4% to incorporate higher FY22e expense guidance of S$565-575mn. Our TP is pegged to 25x FY22e P/E, +2SD of its 5-year mean.
United Global Ltd – Lubricated engines
Recommendation: N.A. Last Done: S$0.44
TP: N.A.; Analyst: Vivian Ye
– Revenue increased from US$83k to US$2.7mn in 1H21, contributed by manufacturing of nano-fibre oil-absorbent materials for JV company and one-off sale of gasoil.
– Higher share of JV profits from United Oil Company (UOC), which increased 50% YoY to US$3.4mn.
HK Reports – Read up on our Hong Kong reports here
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