Daily Morning Note – 13 July 2020


Asian stocks looked set to gain Monday as news about a potential coronavirus treatment increased hope for an economic recovery. Futures pointed to gains in Tokyo and U.S., with the Singapore market due to reopen after the market closed for a public holiday for the general election held last Friday.


SATS recorded a net loss of S$6.3 million for the fourth quarter of FY 2020, against earnings of S$49.9 million a year ago, according to the financial results it released on Thursday. The group’s performance for the quarter was impacted by the Covid-19 pandemic across the region, which led to a significant drop in global demand for air travel. This in turn created substantial adverse impact on revenue and profitability. Revenue dropped 8.1% year on year to S$433.1 million. Gateway services contributed 17.8% less to the top line. SATS has decided not to pay a final dividend to be prudent.

Hyflux received letter of interest from Singapore-incorporated Unilegend Investments, on behalf of a client. Unilegend Investments did not name the client, but said that its focus is on clean energy and water. Unilegend representative Peng Chun-Sheng wrote: “Our client has plans to carry out seawater desalination projects in Shandong and Tianjin in China, and sees great synergies with Hyflux.” This client is prepared to provide working capital for Hyflux if it completes the investment either by becoming a substantial shareholder of Hyflux or by owning the group’s debt, Mr Peng said.

Dasin Retail Trust has completed the acquisition of the Shunde Metro Mall in Foshan city and the Tanbei Metro Mall in Zhongshan city for some S$344.1 million. With the acquisition, the valuation of Dasin Retail Trust’s portfolio has expanded by nearly three times to about 12.1 billion yuan (S$2.41 billion) from 4.6 billion yuan within three years from its listing. Pro forma net property income for FY2019 will increase by 28.3% to about S$77 million, up from S$60 million for its existing portfolio.

KrisEnergy, Keppel unit extended restructuring completion date to Sept 30 from July 15 in loan agreement. Keppel said that the extension of the completion date was meant to “facilitate a consensual restructuring and to support KrisEnergy’s management whilst they discuss and obtain feedback from stakeholders on the restructuring”.

Sembcorp Marine and GE bagged contract to build wind farm in North Sea. Sembcorp Marine, together with GE Renewable Energy’s Grid Solutions, will start early design works for the Sofia Offshore Wind Farm this month. The full contract is subject to a final investment decision, which is due in the first quarter of 2021. The 593 sq km wind farm, located on Dogger Bank in the North Sea, represents about £3 billion (S$5.3 billion) in investment in the UK’s electricity infrastructure. It will provide clean electricity to almost 1.2 million homes in the UK.

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


SATS Limited – A long road to recovery

NEUTRAL (Downgraded); TP S$1.95, Last close: S$2.88

– 4Q20 PATMI was a loss against the guidance of S$15mn to S$20mn profit. Earnings was negatively impacted by S$22mn worth of impairments and government grants to be recognised over 11 months.

– IATA forecast of full recovery in air traffic only in 2023 is the baseline assumption.

– Downgrade to SELL from NEUTRAL with a lower target price of S$1.95. We benchmark our valuations to P/B average of 1.35x during the global financial crisis in 2009. The outlook ultimately depends on the trajectory of the virus and even the ability to find an effective treatment for this pandemic. The path to recovery for aviation will be long. Profitability will be elusive, and the focus will be on the liquidity of the company.

SG Bonds Weekly – Week of 13 July 2020

Credit Analyst: Timothy Ang

– Asian dollar bonds rallied across the board last week with spreads tightening 3.5% week on week in the Asian USD high yield space.

– Earnings season in the US begins this week with major banks reporting on second quarter and offering insight into the rest of the year. The spotlight will also be on China as they release key economic data later in the week.

>> Read more research reports

HK Reports – Read up on our Hong Kong reports here


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