Daily Morning Note – 15 February 2022
U.S. equity futures rose Tuesday and crude oil dipped as traders parsed geopolitical risks and worries about Federal Reserve monetary-policy tightening to fight inflation.
In Asia, markets looked set for a cautious start. Australian shares slipped, contracts for Japan were steady and those for Hong Kong fell. The S&P 500 notched a third straight drop Monday after a few rebound attempts, while the technology-heavy Nasdaq 100 closed with a small gain.
Treasuries sold off in the U.S. session as haven demand sparked by the Ukraine standoff eased. The yield curve flattened, flagging worries that looming Fed interest-rate hikes could choke economic growth. A dollar gauge rose.
The simmering Russia-Ukraine tensions are still keeping oil markets on edge. West Texas Intermediate edged back, it remained in sight of $95 a barrel after earlier scaling that mark for the first time since 2014.
Stocks to watch: Silverlake Axis, DBS
Thai Beverage Public Company (ThaiBev) said on Monday (Feb 14) that it recorded an increase in sales revenue for its first quarter ended Dec 31, 2021, as the improving Covid-19 situation in Thailand drove sales growth in all business segments. In a business update on Monday (Feb 14), the group said that revenue for the 3-month period was up 7.4 per cent to 77.1 billion Thai baht (S$3.2 billion). Earnings before interest taxes, depreciation and amortisation (Ebitda) for the period was also 1.6 per cent higher year-on-year, at 14.7 billion Thai baht.
Wealth management platform iFast Corporation reported on Monday (Feb 14) a 5.5 per cent year-on-year increase in net profit for the fourth quarter ended Dec 31, 2021. Net profit for the 3-month period rose to S$7.2 million from S$6.8 million in the prior year period, as revenue grew 13.9 per cent to S$54.6 million. On a per-share basis, earnings for the quarter rose to S$0.026 from S$0.0251 a year earlier. iFast’s directors have proposed a final dividend of S$0.014 per share, an increase of 40 per cent on year from the previous final dividend.
Enterprise technology, software and services company Silverlake Axis reported on Monday (Feb 14) a jump in profit for its second quarter amid higher revenue. In a bourse filing, the mainboard-listed company said profit after tax for the 3 months ended Dec 2021 grew 72 per cent on year to RM59.6 million (S$19.2 million). This came as revenue for the quarter rose 29 per cent to RM206.5 million, with strong growth in project related revenue segments. Project-related revenue segments increased 110 per cent on year to RM56.6 million in the second quarter, the company said.
DBS sees itself in a strong position heading into a year of impending rate hikes, with loan growth and CASA (current account and savings account) ratios at their highest levels and asset quality improving as economies continue to rebound. On Monday (Feb 14), the lender reported a net profit of S$1.4 billion for the fourth quarter ended Dec 31, 2021, up 37 per cent from a year ago on higher fee income and lower allowances. Full-year net profit jumped 44 per cent to a record S$6.8 billion, though slightly below the S$6.9 billion estimate from analysts polled by Bloomberg. Return on equity also increased from 9.1 per cent to 12.5 per cent.
Transport operator ComfortDelGro, through its wholly-owned private bus company ComfortDelGro Bus, has clinched a close to S$20 million contract to operate its electric bus shuttle services in Nanyang Technological University (NTU). Its fleet of 20 electric buses will serve 4 routes on the NTU campus, starting from 7.30 am – 11 pm daily including public holidays, from September 2022 (see amendment note). This is the second electric bus contract the company has won, after it secured a S$30 million contract to operate its electric bus fleet in National University of Singapore in November 2021.
Construction and engineering group Civmec reported on Monday (Feb 14) a 50.1 per cent increase in net profit for its fiscal first half ended Dec 31, 2021, on the back of higher revenue. Net profit for the 6 month period rose to A$22.6 million, up from A$15 million in the same period a year earlier. On a per share basis, earnings had risen to A$0.045 from A$0.03 in the corresponding period previously. The board of Civmec declared an interim dividend of A$0.01, unchanged from the prior year period.
Texas Attorney General Ken Paxton filed a lawsuit against Meta on Monday, alleging the Facebook parent illegally collected biometric data on users without their consent. The suit makes claims similar to those made in a class action case Facebook settled for $650 million last year. That case alleged Facebook violated Illinois’ Biometric Information Privacy Act by storing data about people’s faces without their consent for its photo-tag suggestion tool. Facebook announced in November it would shut down its facial-recognition system that identified faces in photos and suggested that users tag them. The company said it would delete individual facial-recognition templates for more than 1 billion people.
The Food and Drug Administration’s plan to fast-track Pfizer’s Covid vaccine for children under 5 years old was delayed because of a “low number of cases overall in the clinical trial,” Dr. Scott Gottlieb told CNBC on Monday. “Most kids are not getting symptomatic Covid,” said the current Pfizer board member and former head of the FDA. “One case in one direction or another can tip the perception of the vaccine’s overall effectiveness.” “The FDA wanted to take the time for this data set to effectively settle down,” Gottlieb said on “Squawk Box.” “That point’s probably going to be after they’ve administered the third dose and have the data from that third dose.” He added, “At that point you’ll be able to get more of a fixed perception of the vaccine’s overall effectiveness” in that younger group, the only cohort not cleared in the U.S. for the shots.
Ukraine has requested a meeting with Russia within 48 hours as U.S. intelligence officials warn that a Russian invasion could begin this week. On Sunday evening, Ukrainian Foreign Minister Dmytro Kuleba said Russia had failed to respond to a request Ukraine had filed under the Vienna Document — a treaty signed by 56 member states aimed at maintaining military transparency across Europe — for a meeting. “Consequently, we take the next step,” Kuleba said in a statement. “We request a meeting with Russia and all participating states within 48 hours to discuss its reinforcement and redeployment along our border and in temporarily occupied Crimea.”
Britain’s tax watchdog has seized three non-fungible tokens, in what is thought to be the first seizure of NFTs by a U.K. law enforcement agency. Officials at Her Majesty’s Revenue and Customs say they seized the NFTs during an investigation into a suspected value-added tax (VAT) fraud case worth £1.4 million ($1.9 million). Three suspects have been arrested on suspicion of attempting to defraud the taxman. The suspects allegedly tried to claim back more VAT, which is a type of sales tax, than what they were owed, using a mix of stolen identities, unregistered phones and false invoices to hide their identities. The scheme involved 250 alleged fake companies, according to HMRC.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
Recommendation: BUY (Upgraded), Last Done: S$0.27
Target Price: S$0.32, Analyst: Paul Chew
– 1H22 PATMI fell 67% YoY to S$21.2mn. Revenue/PATMI were within expectations at 52%/54% of our FY22e forecasts. Glove selling prices fell by more than 50% and glove production was disrupted in the three months of July to September 2021.
– We believe industry glove prices are still slipping in 1Q22, but at a slower pace of around 10% QoQ to US$20-25.
– We maintain our FY22e earnings forecast. Some stability is creeping up in glove selling prices. Any rebound in prices will remain elusive due to the huge influx of nitrile capacity, especially from China. Our target price is unchanged at S$0.32 and pegged at a 30% discount to the Big 4 glove makers. This implies 5x FY22e PE. We raise our recommendation from ACCUMULATE to BUY. We see value in the share price as the company is trading below its book value of 33.8 cents and 43% of the market capitalisation is net cash.
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