Singapore shares fell for the third consecutive day on Friday (Jun 10) to end the week lower, tracking declines in most regional markets. The benchmark Straits Times Index (STI) fell 0.9 per cent or 27.89 points to close at 3,181.73 on Friday. For the week, the market barometer was down 1.6 per cent. Shares of Jardine Matheson led the decliners on the STI on Friday, falling 2.8 per cent to close at US$57.23.

Wall Street stocks sank Friday (Jun 10) after inflation exceeded expectations in a much-anticipated report that sets the stage for more monetary tightening. The Dow Jones Industrial Average dropped 2.7 per cent, or around 880 points, to 31,392.79. The broad-based S&P 500 shed 2.9 per cent to 3,900.86, while the tech-rich Nasdaq Composite Index tumbled 3.5 per cent to 11,340.02. Friday’s report showed the consumer price index (CPI) jumped 8.6 per cent compared to May 2021, topping analyst estimates and up from 8.3 per cent in the 12 months ending in April. White House officials had warned in recent days that they expected a downcast report as gasoline prices hit new records daily amid the fallout from Russia’s invasion of Ukraine. Prices continued to rise last month for a range of goods, including housing, groceries, airline fares and used and new vehicles, and annual inflation remains at its highest rate since late 1981.


Top gainers & losers



Mapletree Industrial Trust has divested a data centre property in Michigan, United States for a proposed sale price of US$10 million, its manager said in a bourse filing on Friday (Jun 10). The 4-storey data centre, with a net lettable area of 52,940 square feet (sq ft), is located in Southfield, Michigan and is part of the Northwestern Office Center office park. It sits on freehold land with a land area of 121,122 sq ft. The manager noted that the occupancy rate of the data centre remained unchanged at 74.3 per cent since it was acquired in 2017. In 2017, MIT acquired the property through a 40:60 joint venture with Mapletree Investments in 2017, before it acquired the remaining 60 per cent interest in 2020. The manager expects it would be difficult to lease out the remaining space in the near term, and after evaluating all viable options and taking into account the property’s small land plot, it said divesting the property was “in the best interest of unitholders”. The property had contributed about 0.3 per cent to MIT’s portfolio gross revenue for its financial year ended March. Net proceeds from the proposed divestment will be used to fund working capital requirements and/or reduce existing debt. The divestment was completed on Jun 9, following which MIT will own 141 properties, comprising 85 properties in Singapore and 56 properties in North America. Units of MIT closed flat at S$2.53 on Thursday.

Analysts on Friday (Jun 10) cut their target prices on Top Glove after the dual-listed glove maker’s results missed expectations. The group on Thursday posted a 99.3 per cent drop in its third-quarter net profit to RM15.3 million (S$4.8 million) from RM2 billion in the corresponding quarter last year. This was mainly due to normalisation in demand and average selling prices (ASPs) for rubber gloves, as well as rising cost pressures. UOB Kay Hian (UOBKH) has cautioned that Top Glove may drop out of the FTSE Bursa Malaysia KLCI in the next review, given the decline in market capitalisation. It maintains its “hold” call on the counter but lowered its target price to RM1.15 from RM1.50. UOBKH’s new target price is 23.5 times its FY2023 earnings estimates. It also implies a potential upside of 2.7 per cent from the counter’s Friday trading price of RM1.12 as at 4.14 pm. Top Glove was trading 7.4 per cent or RM0.09 lower on Bursa Malaysia at the time. On the Singapore bourse, the company was trading 7.8 per cent or S$0.03 lower at S$0.355 as at 4.28 pm on the same day.

Kacific Broadband Satellites is in advanced talks to go public via a special purpose acquisition company (SPAC), with Singapore’s Pegasus Asia the leading contender, according to people familiar with the matter. Kacific, which provides high-speed Internet access by satellite, has agreed to enter into exclusive negotiations with one SPAC after months of negotiations, giving the potential partner a few weeks to conduct due diligence and finalise a deal, said the people, asking not to be named as the matter is private. Pegasus Asia, led by chief executive officer Neil Parekh, won the exclusivity in part because of its deep-pocketed backers and its location in Singapore, said one of the people. If completed, the deal would be the first blank-cheque merger in the city-state. Kacific’s valuation after a merger is expected to be about US$1 billion, according to one of the people. Terms including valuation are preliminary and talks could still break down, the people said. Pegasus Asia declined to comment. A representative for Kacific responded to a request for comment on several details by calling it “inaccurate”, but declined to elaborate or specify which point they were referring to.

On June 13, wholly-owned subsidiary of Frasers Hospitality Trust (FHT) announced proposed privatisation which will be carried out through a trust scheme of arrangement. The FHT managers conclude that the scheme is the best opportunity for scheme stapled shareholders to unlock immediate value of their investments at a premium to NAV after the completion of their strategic investment. The consideration of S$0.700 in cash per scheme stapled security is at a premium of 44% and 16.7% over the 12-month VWAP and the analyst consensus target price. The scheme also represents an implied P/NAV multiple of 1.07x which is higher than historical averages of FHT’s trading multiples since IPO.

HRnetGroup Limited has announced a S$30 million share buyback programme in accordance with the share purchase mandate approved by the company’s shareholders at the annual general meeting held on April 28. The maximum number of shares that the company can repurchase under the programme is 100,377,338 (amounting to 10% of its issued shares). The buyback could take over a year to be completed as it depends on the prices at which the shares will be purchased.


Netflix shares fell 5 per cent on Friday (Jun 10) after Goldman Sachs downgraded the streaming giant, which is facing a slowdown in consumer spending and tough competition from Amazon.com and Walt Disney. The streaming pioneer in April lost subscribers for the first time in more than a decade in a sign of troubled times ahead for the industry as rising prices of food and gas left people with little to spend on entertainment. Suspending its services in Russia after the Ukraine invasion also took a toll on Netflix. Goldman downgraded the stock to “sell” from “neutral” and slashed its price target to US$186 from US$265, the lowest PT among analysts covering the stock, according to data from Refinitiv.

Gold prices bounced back in volatile trading on Friday (Jun 10), as focus turned to economic risks after elevated US inflation readings bolstered bets for aggressive interest rate hikes. Spot gold rose 1.4 per cent to US$1,873.58 per ounce by 2.40pm EDT (1840 GMT). US gold futures settled up 1.2 per cent at US$1,875.50. US consumer prices accelerated in May, suggesting the Federal Reserve could continue with its 50 basis points rate hikes through September, sending gold to its lowest since May 19 at US$1,824.63. But the safe-haven asset soon erased losses as investors assessed the economic repercussions, with bullion getting a further fillip after the University of Michigan’s survey showed US consumer sentiment plunged to a record low in early June amid soaring gasoline prices.

The dollar climbed to a near four-week high against a basket of currencies on Friday (Jun 10), after data showed US consumer prices accelerated in May, strengthening expectations that the Federal Reserve may have to continue with interest rate hikes through September to combat inflation. In the 12 months through May, the CPI increased 8.6 per cent after rising 8.3 per cent in April. Economists had hoped that the annual CPI rate peaked in April. The inflation report was published ahead of an anticipated second 50 basis points rate hike from the Fed on Wednesday. The US central bank is expected to raise its policy interest rate by an additional half a percentage point in July. It has hiked the overnight rate by 75 basis points since March. The US Dollar Currency Index, which tracks the greenback against six other major currencies, was 0.8 per cent higher at 104.16, its highest since May 17, and within sight of 105.01, the two-decade high touched in mid-May.

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

Research Reports

Pan-United Corporation – Construction recovery gaining pace

Recommendation: BUY (Maintained), Last Done: S$0.43
Target price: S$0.68, Analyst: Terence Chua

• According to data from the Building and Construction Authority (BCA), demand for ready-mixed concrete for the first three months of 2022 was 5% higher than the same period in 2021.
• The price of ready-mixed concrete (RMC) has also risen by 8.4% from Dec 2021 to April 2022 driven by a combination of higher raw materials costs and demand. The average daily charter hire of the Supramax and Handysize has risen from an average US$28,650 per day in 2021 to US$31,150 today.
• Supply-chain disruptions and volatile freight costs continue to hamper growth recovery. We believe the rising cost of RMC is a potential concern, though this is mitigated by the Group’s ability to pass-through these costs to the customer.
Maintain BUY with higher target price of S$0.68, from S$0.46. We raise FY22e/FY23e earnings by 35%/26% respectively on account of the higher demand for ready-mixed concrete brought about by the construction recovery. Our TP is based on 12x FY22e P/E, a 20% discount to its 10-year historical average P/E on account of the still uncertain business environment.

FAANGM Monthly May 22 – Still attractive despite economic uncertainty

Recommendation: OVERWEIGHT (Maintained); Analyst: Jonathan Woo

• The FAANGM declined 3.1% in May, slightly worse than the Nasdaq’s drop of 1.7%. The S&P 500 was flat for the month. AAPL was the laggard, losing 5.6%, with NFLX the best performer, gaining 3.7%.
• Slowing consumer demand, and a tighter labour market, continue to present overhangs for big tech, especially for AAPL and AMZN. We continue to see uncertain legislative headwinds for both GOOGL and META, with a new bipartisan bill introduced in the Senate. NFLX continues to churn out exciting content for its subscribers, while also managing its expenses. MSFT continues to benefit from increasing digitalisation tailwinds, albeit with some short-term FX headwinds.
• We remain OVERWEIGHT on FAANGM as they remain at attractive valuations – 29x forward PE vs average of 31x. We believe that worries over contracting margins, slower consumer demand, and rising inflation, have largely been priced into the market. Long-term secular tailwinds from digital advertising, increasing cloud adoption, and increasing global digitalisation remain intact.

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