Daily Morning Note – 16 August 2021

Dear valued client,

Asian stocks are set for a steady start Monday as investors await key Chinese data to gauge how the delta virus strain is impacting the recovery from the pandemic.

Futures fell in Japan and Australia but inched higher in Hong Kong, while U.S. contracts dipped. U.S. stocks eked out another record Friday but a drop in consumer sentiment to a near-decade low injected some caution, pushing down Treasury yields and the dollar.


SG News

Wee Hur Holdings reported a loss of about S$25 million – its first red ink in over 40 years of business – for the first half of FY 2021, as the mainboard-listed property developer and builder has been hard hit by the pandemic. In contrast, it posted S$14.3 million in net earnings for H1 FY 2020 ended June. Executive chairman Goh Yeow Lian commented: “Having been in business for more than 40 years, this is the first time the group is losing money… With more countries accelerating the vaccination plan, we are optimistic that the impact of Covid-19 will be reduced when more countries are lifting their travel restrictions in the near future.” The company’s revenue dropped by 15 per cent to S$85.5 million, compared to S$100.8 million for H1 FY 2020.

Dental healthcare group Q&M on Friday posted a 51 per cent rise in net profit for the fiscal second quarter from a year ago, thanks to higher revenue from its existing outlets in Singapore compared with the year-ago period, which was impacted by “circuit-breaker” closures. Net profit for the three months ended June 30, 2021 amounted to S$11.4 million. This is compared with a net profit of S$7.6 million posted in the same period a year ago.

The costs incurred by the Catalist-listed digital payment services player MC Payment in its reverse takeover as well as the legal fee relating to the extraordinary general meeting arising from a board tussle tipped it into the red. The company noted in its statement filed to the Singapore Exchange (SGX) on Aug 14 that without the S$30 million takeover expenses and the S$160,000 legal fee, it would have reported S$660,000 in net profit and not a S$29.5 million loss for the first half of FY 2021 to June. Major shareholder Ching Chiat Kwong had requisitioned the extraordinary general meeting for the appointment of five new directors to the company’s board, and the resolutions for their appointments were all approved on June 30.

Sasseur Real Estate Investment Trust (Sasseur Reit), which owns outlet malls in China, posted a distribution per unit (DPU) of 1.614 Singapore cents for the three months ended June 30, up 6.7 per cent from 1.512 cents in the year-ago period. Distributable income rose 19.7 per cent to S$21.7 million in the second quarter, from S$18.2 million a year ago. The Reit manager said for Q2 it elected to retain 10 per cent of distributable income to provide funding for future capital expenditure and working capital purposes. The distribution will be paid out on Sept 28. “As we look ahead, we want to continue to embark on strategic asset enhancement initiatives (AEIs) to strengthen our portfolio,” said Cecilia Tan, chief executive officer of the manager, after the results announcement on Friday. Without the retention, Q2 DPU would have been around 1.79 cents, the manager said.

Property and hotels group City Developments Ltd (CDL), which posted a S$32.1 million group net loss in the first half of this year, is starting to see light at the end of the tunnel for its hospitality business after being hit by the Covid-19 pandemic that erupted last year. The group’s hotel business has begun to show green shoots of recovery from the second quarter of this year against Q2 2020, and all regions posted positive gross operating profit for June 2021. The group’s overall revenue per available room (RevPAR) more than doubled to S$63.2 for Q2 2021 from S$29 in Q2 2020, with all regions reporting growth as border restrictions began easing.

US News

A US trade judge ruled on Friday that Alphabet Inc’s Google infringed five patents belonging to Sonos Inc that concern smart speakers and related technology, a decision that could lead to an import ban. The brief ruling from Charles Bullock, the chief administrative law judge of the US International Trade Commission (ITC), did not explain why Google’s sale of the products violated a 1930 federal tariff law, commonly known as Smoot-Hawley, designed to prevent unfair competition. Sonos has been trying to block Google from importing Home smart speakers, Pixel phones and other products from China.

Facebook and Amazon.com have asked the US government for approval to operate a new undersea data cable between the Philippines and California after China Mobile agreed to exit the plan, a government agency said on Friday. The two companies told the Federal Communications Commission (FCC) they intend to start commercial operation by late 2022 and said the new data connection will provide significant new capacity on routes where capacity demand continues to increase substantially each year. The companies in a joint filing said the new cable will help to support Facebook applications and provide Amazon and its affiliates with capacity to support Amazon’s cloud services and connect its data centres.

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


Asian Pay Television Trust – Lower capex to benefit cash flows

Recommendation: BUY (Maintained); TP S$0.15, Last close: S$0.131; Analyst Paul Chew

– 2Q21 results in line, with 1H21 revenue and EBITDA at 49%/51% of our FY21e forecasts. Quarterly DPS of 0.25 cents declared, as guided.

– Revenue was 3% YoY lower to S$73.7mn. Cable TV fell 5%. In contrast, broadband grew 8%. FCF rose 70% YoY to S$23mn following lower capital expenditure.

– Our BUY rating and target price of S$0.15 are unchanged. Stock remains pegged at 9x FY21e EV/EBITDA, a 20% discount to Taiwanese peers on account of its smaller scale, higher leverage and weaker growth prospects. Forecasts largely unchanged except for capex, which has been lowered by S$5mn. Dividend yield of 7.6% or S$18mn distribution well-supported by FCF of S$82mn. Further upside potential when 5G data backhaul is rolled out to mobile customers. We have not modelled any revenue from 5G.

PropNex Ltd – Bumper quarter

Recommendation: ACCUMULATE (Downgraded); TP S$2.08, Last close: S$1.90; Analyst Paul Chew

– 2Q21 PATMI surged 127% YoY to S$16.5mn. A major beat. 1H21 PATMI at 75% of our forecast. All four revenue streams grew.

– Private resales stood out with a more than 3-fold jump in revenue. Resale prices more attractive than new-unit prices. Interim DPS up almost 3-fold to 5.5 cents, a 65% payout for 1H21.

– 2H21 to remain buoyant, underpinned by a virtuous cycle underway. HDB upgraders are pushing up new home sales, driving demand for resale units due to their price differential. Rising affordability forms the foundation of this upcycle. After a decade, the property price index is only up around 13%. Rising income and TDSR should contain speculation.

– We raise FY21e PATMI by 53% to S$63.5mn as we lift revenue by 77%. DCF target price (WACC 9.8%) rises from S$1.36 to S$2.08. That said, recent rally has priced in most of the positives. Downgrade to ACCUMULATE from BUY.

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