DAILY MORNING NOTE | 13 July 2022
The Straits Times Index (STI) bucked the regional trend and ended Tuesday (Jul 12) up 0.5 per cent or 14.51 points to close at 3,145.77. Across the broader market, Decliners beat advancers 281 to 210 after 994.5 million shares worth S$893.2 million changed hands. Markets across Asia were in the red on Tuesday. Japan’s Nikkei 225 index fell 1.8 per cent, Hong Kong’s Hang Seng Index shed 1.3 per cent, South Korea’s Kospi composite index fell 1 per cent and the Jakarta composite index edged 0.1 per cent lower.
The S&P 500 and Dow opened lower on Tuesday (Jul 12), as investors fretted about the health of the global economy with central banks around the world moving aggressively to tamp down inflation. The Dow Jones Industrial Average fell 60.53 points or 0.19 per cent at the open to 31,113.31. The S&P 500 opened lower by 2.48 points or 0.06 per cent at 3,851.95, while the Nasdaq Composite gained 48.29 points or 0.42 per cent to 11,420.89 at the opening bell.
Charisma Energy Services could be liquidated, now that a conditional subscription agreement that would have given it the much-needed lifeline has lapsed. The Catalist-listed company said in a statement to the Singapore Exchange on Tuesday (Jul 12) that the long-stop date of the conditional subscription agreement in relation to the new investment lapsed on Jul 9. Chief executive officer Tan Ser Ko noted in the regulatory filing: “The lapse of the long-stop date, coupled with the company running low on its unencumbered cash balances, have resulted in the company having to consider and assess other options, which may include, but are not limited, to the eventual liquidation of the company.” Charisma and Yin Khing Investments had signed a conditional subscription agreement in January for the investor to subscribe shares amounting to about S$16.1 million. However, because its creditors, Yin Khing and the company could not agree on the terms and conditions of the proposed debt restructuring by the stipulated date, the subscription agreement has failed to take effect. Charisma remains engaged in discussions with its creditors and Yin Khing Investments, and is evaluating and assessing all available options, the company said. Trading in Charisma shares are currently suspended. It is an associate of Ezion Holdings, which has been ordered by the court to wind up and has been delisted from the mainboard.
ISDN Holdings will withdraw the scrip dividend scheme for FY2021 and distribute the proposed dividend of S$0.0145 fully in cash instead, given that the issue price of the scrip dividend is lower than the counter’s market price. The engineering company, in its statement filed after the market close on Tuesday (Jul 12), said that the issue price of each new share under the scrip dividend scheme is S$0.501, an amount that should not be set at more than 10 per cent discount or exceed the average of the last prices on each of the 5 trading days prior to and ending on the record date of Jul 7. However, its last trading price for each of the 5 trading days to Jul 7 averaged only S$0.467 — lower than the issue price of the scrip dividend. The company has thus elected to scrap the scrip dividend scheme for the financial year ended Dec 31, 2021, and pay shareholders the dividend in cash. ISDN shares closed 1.08 per cent higher at S$0.47 on Tuesday, before the company made this announcement.
Temasek said on Tuesday (Jul 12) that it expects its pace of invesment to slow down in its current financial year, amid a fragile global economy and geopolitical uncertainty. The state investment firm reported during its annual Temasek Review that net portfolio value had grown S$22 billion over the last financial year to S$403 billion as at end March 2022. Temasek made investments of S$61 billion and divestments of S$37 billion during the financial year, resulting in net investments of S$24 billion during the year. Its level of investments were the highest since at least 2012. Over the past decade, Temasek has made S$315 billion in investments and S$234 billion in divestments. However, the pace of its investments are likely to slow in the coming year.
Allied Technologies has appointed Xandar Capital as the independent financial adviser (IFA) to provide a recommendation to shareholders on the acquisition offer from SRS Auto Holdings. The Catalist-listed precision engineering company stated in a regulatory filing on Tuesday (Jul 12) that Xandar Capital will advise its independent directors for the purpose of making a recommendation on the S$0.0088 per share offer, which values Allied Tech at S$15.6 million. Women’s apparel company bYSI founder Tan Yew Kiat is the sole shareholder of private car rental and motor financing company SRS Auto Holdings. Despite multiple calls, Tan has refused to answer except the first when the 45-year-old told The Business Times that he was unwell. The offeree circular containing the advice of Xandar Capital and the recommendation of the independent directors in relation to the offer will be sent to shareholders within 14 days from the date of despatch of the offer document from SRS Auto Holdings. Allied Tech has been mired in escrow funds worth S$33 million gone missing, as well as boardroom tussles. Its shares are under trading suspension.
Oil prices fell sharply on Tuesday on a strong dollar, demand-sapping Covid-19 curbs in top crude importer China and fears of a global economic slowdown. Brent crude futures were down by US$6.15 or 5.7 per cent, at US$100.95 a barrel by 1347 GMT. US West Texas Intermediate crude was down US$6.30 or 6.1 per cent at US$97.79. The euro lost ground on Tuesday, trading near parity with the dollar, while stock markets fell on the prospect of rising interest rates and worries over economies worldwide. A stronger US currency usually weighs on oil because it makes the dollar-priced commodity more expensive for holders of other currencies. “In the West, the combination of high energy prices and rising interest rates is fuelling concerns about a recession that would have a serious impact on oil demand,” Commerzbank said. Renewed Covid-19 mobility curbs in China were also weighing on prices, the bank said.
Gold prices neared a 9-month low on Tuesday (Jul 12), as the US dollar strengthened to its highest level in 20 years, stifling demand for greenback-priced bullion. Spot gold was down 0.1 per cent at US$1,732.17 per ounce at 12.50 am GMT. US gold futures dipped 0.1 per cent to US$1,730.80. The dollar sat near a fresh 20-year high touched on Monday, making gold more expensive for buyers holding other currencies. Gold prices dropped to their lowest level since Sep 30 of US$1,730.42 per ounce in the previous session.
PepsiCo is winning the inflation battle so far, successfully passing on surging commodity costs by persuading consumers to pay more for their soda and chips. Higher prices for raw commodities like sugar and increased wages for labour led the snack and drink giant to charge customers about 12 per cent more on average in the second quarter, the company said on Tuesday (Jul 12). And though inflation-wary consumers only slightly increased the amount of PepsiCo food and beverages that they purchased, the higher prices enabled the company to increase its profit outlook, saying it expects revenue to grow 10 per cent this year. The new guidance reflects “the strength and resilience of our categories and consumer demand trends”, PepsiCo said in a statement. As it’s one of the first major industry competitors to report second-quarter data, investors are closely watching PepsiCo for insights into how shoppers are behaving as persistent inflation stretches their ability to absorb price increases. “Nobody’s isolated from inflationary pressures,” chief executive officer Ramon Laguarta said on a call with analysts. Traders weren’t overly impressed with PepsiCo’s performance, with its shares edging up 0.2 per cent to US$170.75 in New York trading at midday. The stock is down less than 2 per cent this year, outpacing the 19 per cent decline of the S&P 500 Index. The maker of Mountain Dew, Fritos and Quaker Oats had previously increased its revenue forecast in April, nudging it up to 8 per cent from 6 per cent. Profit and sales in the second quarter beat estimates, the company said.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
Strategy & Stock Picks (US, HK & CN)
Date: 16 July 2022
Time: 1pm – 3.30pm
Guest Presentation by Pan-United Corporation Limited
Date: 5 August 2022
Time: 11am – 12pm
Weekly Market Outlook: The Place Holdings, Uni-Asia Group Ltd, SG Banking Monthly, SG Weekly
Date: 4 July 2022
Click here for more on Market Outlook.
Sign up for our webinars here, and be among the first to receive economy and market updates.
PHILLIP RESEARCH IN 3 MINS
Phillip Research in 3 minutes: #29 Keppel Corporation; Initiation
Click here for more on Phillip in 3 mins.
The information contained in this email and/or its attachment(s) is provided to you for information only and is not intended to or nor will it create/induce the creation of any binding legal relations. The information or opinions provided in this email do not constitute an investment advice, an offer or solicitation to subscribe for, purchase or sell the e investment product(s) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise. You may wish to seek advice from an independent financial adviser before making a commitment to purchase or investing in the investment product(s) mentioned herein. In the event that you choose not to do so, you should consider whether the investment product(s) mentioned herein is suitable for you. PhillipCapital and any of its members will not, in any event, be liable to you for any direct/indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached to this email. The information and/or materials provided 揳s is?without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials.
This e-mail and its attachment(s) may contain privileged or confidential information, which is intended only for the use of the recipient(s) named above. If you have received this message in error, please notify the sender immediately and delete all copies of it. If you are not the intended recipient, you must not read, use, copy, store, disseminate and/or disclose to any person this email and any of its attachment(s). PhillipCapital and its members will not accept legal responsibility for the contents of this message. Thank you for your cooperation.