Daily Morning Note – 15 Febraury 2021
PHILLIP SUMMARY
Stocks in Asia looked set to begin the week on the front foot amid signs that the pace of coronavirus outbreaks in the U.S. continues to slow.
The kiwi dipped after New Zealand locked down Auckland while it investigates three new Covid-19 cases. U.S. markets are shut for Presidents’ Day, while exchanges in China, Hong Kong and Taiwan are also shut on Monday. Bitcoin approached $50,000.
The reflation trade remains alive and well — global equities ended Friday at a record high, with the MSCI world index up about 6% this year, while the Treasury yield curve tested the steepest levels in more than five years. While investors bank on U.S. government spending and the coronavirus vaccine rollout to boost the economic recovery, new variants are threatening to temper the outlook.
BREAKING NEWS
SG
Frasers Property has proposed to undertake a renounceable non-underwritten rights issue on the basis of 37 rights shares for every 100 existing shares, at an issue price of S$1.18 for each rights share. It will allot and issue up to 1.09 billion rights shares, and if fully subscribed, will raise net proceeds of about S$1.28 billion. Already, two of Frasers Property’s controlling shareholders, TCC Assets (TCCA) and Thai Beverage Public Co (ThaiBev) have given an irrevocable undertaking to subscribe for an aggregate of 940.17 million, or 86.63 per cent of the rights shares.
Beer and liquor giant Thai Beverage (ThaiBev) announced a net profit of 8.47 billion baht (S$376 million) for its first quarter ended Dec 31, up 0.5 per cent from 8.42 billion baht for the year-ago period. Higher earnings from ThaiBev’s spirits, beer and non-alcoholic beverages businesses more than offset lower contributions from its food businesses and stakes in Frasers and Neave (F&N) and Frasers Property. Group sales revenue for the quarter declined 5.1 per cent on-year to 71.79 billion baht due to lower sales revenue in the beer, non-alcoholic beverages and food businesses.
Far East Orchard on Thursday announced that it expects to report a net loss for FY2020 as the “prolonged” Covid-19 pandemic continued to hamper its business, following a review of its unaudited financial results. The adverse impact of the pandemic on the group’s business has contributed to losses in its hospitality business and share of the losses from hospitality joint ventures (JVs) in Australia and Europe, said Far East Orchard in a profit guidance.
Developer Oxley Holdings’ net profit for the six months ended Dec 31, 2020 more than doubled year-on-year to S$34.12 million from S$15.72 million. Revenue rose 25 per cent year-on-year to S$745.35 million, stemming from revenue contributions from a wholly-owned subsidiary in Australia which was consolidated into the group’s results from October 2019. Stripping out revenue from the subsidiary, group revenue for H1FY21 would have been 9 per cent higher, largely due to development projects in Cambodia, Singapore and the United Kingdom, the developer said.
Far East Hospitality Trust’s (Far East H-Trust) distribution per stapled security (DPS) fell 30.7 per cent to 1.38 Singapore cents for the half year ended Dec 31, 2020 compared to 1.99 cents for the year-ago period. Gross revenue for the half-year period was S$39 million, 34.8 per cent lower than a year ago at S$59.8 million. The manager attributed the fall in revenue to lower rentals in its hotel arm, as well as rental rebates and lower occupancy for its offices.
US
U.S. chipmaker Qualcomm has told regulators around the world that it is against Nvidia’s $40 billion acquisition of British chip designer Arm, according to sources familiar with the matter. The company has told the Federal Trade Commission, the European Commission, the U.K.’s Competition and Markets Authority and China’s State Administration for Market Regulation that it has concerns about Nvidia buying Arm, which is currently owned by Japanese tech giant Softbank.
Disney took another financial hit during its fiscal first-quarter, as restrictions on attendance at its open theme parks and the continued closure of its California parks weighed heavy on its bottom line. There’s currently no timeline for the reopening of Disneyland, as the state of California has said it will not permit theme parks to reopen until coronavirus cases have fallen substantially in the surrounding community. Although the 7-day average of daily new Covid cases has fallen from the prior week in California, more than 1,000 new cases are diagnosed each day in the state, according to a CNBC analysis of Johns Hopkins University data.
General Motors announced on Thursday that it will invest $100 million in two of its U.S.-based manufacturing plants to boost production of 10-speed automatic transmissions found in two of its popular pickups. The company is allocating $93 million for its plant in Romulus, Michigan, that will increase “machining capability,” according to a statement. It is also investing $7 million in a Bedford, Indiana, plant for increased die-casting metal capabilities.
The prospects of a big government spending program could continue to boost the stock market and put upward pressure on interest rates in the week ahead. Inflation and rising interest rates have been two dominant themes for investors recently and have become increasingly so as the market has upgraded its view of how much fiscal coronavirus stimulus could be signed into law.
Oil climbed Friday, surpassing the high set earlier this week and notching a fresh 13-month peak. West Texas Intermediate crude hit $59.82 a barrel on Friday, its highest level since January 2020, a promising sign as the industry grapples with depressed demand during the coronavirus pandemic. However, after a 23% rally so far this year, one top energy expert warns the commodity may have gotten ahead of itself.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, PSR
RESEARCH REPORTS
Lendlease Global Commercial REIT – Returning momentum
Recommendation: ACCUMULATE (Maintained), Last Done: S$0.785
Price: S$0.820, Analyst: Tan Jie Hui
– DPU exceeded estimates by 5.7%, aided by better 313 operations and higher revenue from Sky Complex.
– 313’s sales recovery is expected to sustain in FY21. Sky Complex continues to generate stable income. Valuation upside of at least 3% anticipated from € appreciation and neighbouring office and mixed-use developments.
– Raise FY21 and FY22 DPUs by 7.7% and 4.8% to factor in higher NPI margins. Maintain ACCUMULATE with higher DDM target price of S$0.82, from S$0.78 (COE 8%).
DBS Group Holdings Ltd – Tenacity in adversity
Recommendation: ACCUMULATE (Upgrade), Last Done: S$26.07
Target Price: S$29.50, Analyst: Tay Wee Kuang
– FY20 earnings in line as lower credit costs compensated for weaker-than-expected income.
– NIM fell 27bps to 1.62% YoY but loan growth of 4% YoY cushioned NII. NIM further contracted 4bps to 1.49% QoQ.
– Allowances matched 3Q20 levels despite the consolidation of troubled Lakshmi Vilas Bank (LVB).
– Upgrade to ACCUMULATE from NEUTRAL with higher GGM TP of S$29.50, from S$22.60. We increase earnings by 6% for lower allowances following a better credit outlook. We now assume 1.31x FY21e P/BV in our GGM valuation, up from 1.26x.
Singapore Telecommunications Ltd – Some bright spots
Recommendation: NEUTRAL (Maintained), Last Done: S$2.38
Target Price: S$2.44, Analyst: Paul Chew
– 3Q21 revenue and EBITDA met expectation, with 9M21 numbers at 78%/70% of our FY21e forecasts. EBITDA declined 14% YoY to S$1bn. Singapore consumers were its weakest link, with mobile ARPU down 23% YoY.
– After-tax exceptional gains were S$116mn, from Bharti Infratel’s merger (S$72mn) (BHARTI IN, Not Rated) and Telkomsel’s sale of towers (S$60mn).
– Australia still grappling with high costs. 3Q21 EBIT declined 29% YoY to S$36mn, excluding NBN. This was despite A$ appreciation of 5.7%.
– Maintain NEUTRAL and SOTP TP of S$2.44. Underlying weakness in Singapore consumer from loss of roaming revenue and cost burden in Australian could persist. However, there were some bright spots, including stable mobile revenue in Australia, resilient enterprise operations and Bharti’s continued turnaround.
Thai Beverage PLC – Hail spirits and cost-savings
Recommendation: NEUTRAL (Maintained), Last Done: S$2.38
Price: S$2.44, Analyst: Paul Chew
– 3Q21 revenue and EBITDA met expectation, with 9M21 numbers at 78%/70% of our FY21e forecasts. EBITDA declined 14% YoY to S$1bn. Singapore consumers were its weakest link, with mobile ARPU down 23% YoY.
– After-tax exceptional gains were S$116mn, from Bharti Infratel’s merger (S$72mn) (BHARTI IN, Not Rated) and Telkomsel’s sale of towers (S$60mn).
– Australia still grappling with high costs. 3Q21 EBIT declined 29% YoY to S$36mn, excluding NBN. This was despite A$ appreciation of 5.7%.
– Maintain NEUTRAL and SOTP TP of S$2.44. Underlying weakness in Singapore consumer from loss of roaming revenue and cost burden in Australian could persist. However, there were some bright spots, including stable mobile revenue in Australia, resilient enterprise operations and Bharti’s continued turnaround).
mm2 Asia Ltd – Rights issue to deleverage
(Non-rated); Last done: S$0.085
Analyst: Paul Chew, Vivian Ye
– 3Q21 revenue and EBITDA met expectation, with 9M21 numbers at 78%/70% of our FY21e forecasts. EBITDA declined 14% YoY to S$1bn. Singapore consumers were its weakest link, with mobile ARPU down 23% YoY.
– After-tax exceptional gains were S$116mn, from Bharti Infratel’s merger (S$72mn) (BHARTI IN, Not Rated) and Telkomsel’s sale of towers (S$60mn).
– Australia still grappling with high costs. 3Q21 EBIT declined 29% YoY to S$36mn, excluding NBN. This was despite A$ appreciation of 5.7%.
– Maintain NEUTRAL and SOTP TP of S$2.44. Underlying weakness in Singapore consumer from loss of roaming revenue and cost burden in Australian could persist. However, there were some bright spots, including stable mobile revenue in Australia, resilient enterprise operations and Bharti’s continued turnaround.
HK Reports – Read up on our Hong Kong reports here
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