DAILY MORNING NOTE | 13 September 2022

THE Straits Times Index (STI) rose 11.77 points or 0.4 per cent to close at 3,274.72 on Monday (Sep 12), buoyed by the momentum of gains in the US and Europe at the end of last week. In the wider Singapore market, gainers outnumbered losers 214 to 146, with 966.9 million shares worth S$717 million changing hands. Elsewhere in Asia, Japan’s Nikkei 225 index gained 1.2 per cent, Australia’s S&P/ASX 200 index ended 1 per cent higher, the Jakarta Composite Index rose 0.2 per cent, and the FTSE Bursa Malaysia KLCI edged up 0.1 per cent. The biggest winner among Singapore’s index stocks on Monday was Yangzijiang Shipbuilding (YZJ), which climbed 3.7 per cent or S$0.035 to close at S$0.97. YZJ was also the most heavily traded counter among the STI constituents, with 38.8 million shares traded. At the bottom of the table for blue-chip stocks was Jardine Matheson Holdings (JMH), which lost 1.1 per cent or US$0.62 to close at US$54.99. SATS and Sembcorp Industries were the only 2 other losers on the STI on Monday. SATS shed 0.8 per cent or S$0.03 to S$3.99, while Sembcorp Industries closed 0.6 per cent or S$0.02 lower at S$3.34. The trio of local banks all ended higher. DBS rose 0.4 per cent or S$0.12 to S$33.49, OCBC climbed 0.3 per cent or S$0.04 to S$12.19, while UOB gained 0.3 per cent or S$0.09 to S$27.42.

U.S. stocks rose Monday, continuing a relief rally that began last week when all three major averages snapped three-week slumps. The Dow Jones Industrial Average gained nearly 230 points, or 0.7%. The S&P 500 rose close to 1.1%, and the Nasdaq Composite added about 1.3%. Investors’ confidence has been bolstered by the belief that inflation has already peaked. A weaker dollar and military success in Ukraine also supported stocks. On Tuesday, all eyes will be on the August CPI report, which is expected to show a 0.1% decrease in headline inflation on a monthly basis, according to estimates from Dow Jones. The report is one of the last the Fed will see ahead of their Sept. 20-21 meeting, where they’re expected to deliver their third consecutive 0.75 percentage point interest rate hike to tamp down inflation. “The durability of the rally will likely be determined by Tuesday’s CPI report this week and the tone of the FOMC meeting next week,” said Mark Hackett, chief of investment research at Nationwide.

SG

Frasers Hospitality Trust’s (FHT) unitholders are opting to not go with the trust’s scheme of arrangement to privatise the hospitality trust for now. During the trust’s extraordinary general meeting (EGM) held on Sept 12, unitholders who were present at the EGM and held 74.88% of the units in FHT, voted for the arrangement. The percentage missed the 75.0% mark narrowly by just 0.12 percentage points. In contrast, unitholders holding some 25.12% of units in FHT, voted against the arrangement. Frasers Property (FPL) and the manager of FHT, on June 13, announced their offer of 70 cents per FHT unit to FHT’s unitholders to privatise the hospitality trust via a scheme of arrangement. The offer from FPL represented a premium to FHT’s last announced net asset value (NAV) of around 65 cents. The offer was also a premium of 43.8% over FHT’s 12-month volume weighted average price (VWAP). In addition, the offer was above FHT’s historical trading multiples since its initial public offering (IPO). Units in FHT last closed at 70.5 cents before its trading halt on the morning of Sept 12.

Singapore Telecommunications’ (Singtel) Philippine associate Globe Telecom has successfully priced its stock rights offering at 1,680 pesos ($41.27) per entitlement right. Shareholders will receive one entitlement right for every 13.2366 common shares held. According to Globe Telecom, the price represents a 22.6% discount to the 30-day volume-weighted average price (VWAP) as at Sept 8. The company will be offering a total of 10.12 million shares, with the ex-rights and record dates being Sept 16 and 21 respectively. The offer period will start on Oct 3 and end on Oct 7. The board of Globe Telecom had approved the stock rights offer on June 20. At the time, the company’s principal shareholders Singtel and Ayala Corporation had indicated their support for the offer. Globe Telecom had expected to raise up to 32 billion pesos through the offer. The funds raised will be used to expand the company’s mobile and broadband network as well as repay existing debt. On Sept 8, 2021, Globe Telecom was mulling the sale of its data centres in a deal that could be worth US$200 million ($279.7 million).

The manager of Frasers Centrepoint Trust (FCT) has acquired an additional 10.0% stake in Waterway Point, raising its stake to 50.0%. On Sept 12, HSBC Institutional Trust services, the trustee of FCT, entered into a conditional sale and purchase agreement (SPA) with Sekisui House to acquire 10.0% of the total issued units of Sapphire Star Trust (SST). The stake comprises 500,001 ordinary units and 56,904,785 redeemable preference units in SST. In addition, the trustee of FCT entered into a conditional share SPA with Sekisui House to acquire 10.0% of the issued share capital of FC Retail Trustee Pte. Ltd. (FCRT), the trustee-manager of SST. At present, SST holds the retail units at Waterway Point. The total acquisition outlay is estimated to be around $132.3 million. This comprises the purchase consideration of the SST units for $73.6 million, the amount of $3,626.59 to be paid for the FCRT shares, the acquisition fee payable to the manager, as well as other fees and expenses incurred. The amount also includes the pro rata share of a bank loan owed by SST to certain financial institutions of around $57.3 million. Prior to the SPA, FCT owns a 40.0% stake in each of SST and FCRT, while Sekisui House held a 20.0% stake in each of SST and FCRT. The remaining 40.0% stake is held by an unrelated third party. The acquisition is said to be in the trust’s “ordinary course” of business. The manager adds that it intends to finance the consideration, less the sum of the bank loan attributable to the SST units, from a combination of debt and, or internal sources.

US

Oracle’squarterly sales jumped 18 per cent, buoyed by the software maker’s transition to cloud computing and the acquisition of health records provider Cerner. Sales were US$11.4 billion in the fiscal first quarter, meeting analysts’ average estimate, according to data compiled by Bloomberg. Profit, excluding some items, was US$1.03 a share. Oracle said currency fluctuations reduced the earnings by 8 US cents a share. Analysts projected US$1.06 a share. Cloud revenue – the highly watched segment that Oracle has been trying to expand – rose 45 per cent to US$3.6 billion in the period ended Aug 31, the Austin, Texas-based company said on Monday (Sep 12) in a statement. Growth was 19 per cent last quarter before the Cerner deal closed. The company, known for its database technology, sells business software applications that can be used over the Internet as well as offering customers the ability to store and compute information through Oracle’s servers, called cloud infrastructure. Amazon.com and Microsoft, the leaders in that market, are far ahead of Oracle. Executives say the Cerner acquisition will give the company inroads in the health care industry, which has been comparatively slow to adopt cloud technology.

Goldman Sachs is planning on cutting several hundred jobs this month, making it the first major Wall Street firm to take steps to rein in expenses amid a collapse in deals volume. The bank is reinstating a tradition of annual employee culls, which have historically targeted between 1% and 5% of lower performers, in positions across the firm, according to a person with direct knowledge of the situation. At the lower end of that range, which is the size of the expected cull, that means several hundred job cuts at the New York-based firm, which had 47,000 employees at midyear. Goldman isn’t likely to be the only bank to cut workers. Before the pandemic, Wall Street firms typically laid off their bottom performers in the months after Labor Day and before bonuses are paid out. The practice was put on pause during the last few years amid a hiring boom. Goldman declined to comment on the record about its plans. The timing of the cuts was reported earlier by the New York Times. In July, CNBC was first to report that the bank was looking at a return to the annual tradition of year-end job cuts. Steep declines in investment banking activities, especially IPOs and junk debt issuance, created the conditions for the first significant layoffs on Wall Street since the pandemic began in 2020, CNBC reported in June.

Intelis scaling back expectations for its Mobileye initial public offering (IPO) in the face of a broader stock slump and could delay the share sale until next year if conditions don’t improve, people familiar with the process said. The company expects the IPO to value the self-driving technology business at as much as US$30 billion – less than originally hoped – according to the people, who asked not to be identified because the deliberations are private. The original plan was to offer the stock around the middle of 2022, and Reuters and others reported potential valuations of more than US$50 billion. Intel chief executive officer Pat Gelsinger is trying to capitalise on the Israel-based business, acquired in 2017, with a partial spinoff of its shares. Mobileye makes chips for cameras and drive-assistance features and is seen as a prized asset as the car industry races towards fully automated vehicles. But Intel is running up against a bear market for chip stocks and a dearth of IPOs, making it harder to complete the deal. If semiconductor stocks rebound, the offering could still be possible in 2022, according to the people. Otherwise, it will be pushed back.

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

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