Daily Morning Note – 17 May 2022


Welcome to our Daily Morning Note from our Research team!


Asian stock markets look poised for a guarded open Tuesday as traders weigh mounting signs of an economic slowdown amid elevated food and fuel costs, tightening monetary settings and China’s Covid lockdowns.

Futures were steady for Japan and pointed to modest gains for Australia and Hong Kong. US contracts fluctuated after a slide in major technology firms like Tesla Inc. and Amazon.com Inc. left Wall Street in the red.

Key commodity costs continue to climb: oil has jumped to about $114 a barrel and an index of agricultural prices is at a record high.

Treasury yields mostly retreated and a dollar gauge held a drop. Cryptocurrencies weathered the latest turbulence in the stablecoin sector, leaving Bitcoin hovering around $30,000.

Top gainers & losers




Strife-hit environmental-solutions provider ecoWise has reported S$7.11 million in total comprehensive loss for FY2021 based on its audited financial statements, almost twice the unaudited figure of S$3.81 million. In a bourse filing on Sunday (May 15), ecoWise reported material variances between its audited and unaudited financial statements for the year ended Oct 31, 2021. Among other things, the variances were due to potential legal claims from former employees, impairments, accrual of professional fees, bonuses, depreciation of additional reinstatement costs, and over-provision of income and deferred tax liabilities for its Malaysia subsidiaries.

Mainboard-listed environmental engineering company Sunpower Group saw first-quarter earnings slide, after divesting its non-core manufacturing and services business in 2021, according to results released on Sunday (May 15). Net profit fell to 41.1 million yuan (S$8.4 million) for the 3 months to Mar 31, 2022, down by 51.8 per cent year on year, even as revenue grew 74.3 per cent to 738.5 million yuan on the back of higher capacity, new projects, and an increase in the sales price of steam. Profit from continuing operations slipped by 5.3 per cent to 49.8 million yuan, while Sunpower recorded no earnings from its discontinued operations, against 33.5 million yuan previously.

Mainboard-listed Sarine Technologies, which develops technology for the diamond industry, said in a first-quarter update on Sunday (May 15) that it has not seen any material impact on its business from geopolitical developments such as the war in Ukraine. Israeli-based Sarine Tech reported revenue of US$15.6 million in the 3 months to Mar 31, 2022, down 9.9 per cent on what it called an “exceptionally strong” year-ago period. Net profit was “just under US$3.4 million”, said the company, citing “ongoing beneficial tax rates”. “Sanctions notwithstanding, the flow of rough diamonds into the value chain, including those of Russian origin, continued unabated in the first 3 months of 2022,” Sarine Tech added. The trade of rough and polished diamonds made up 11.6 per cent of its overall revenue for the period.

Mainboard-listed restaurant operator Sakae Holdings sank into the red in the third quarter on a decline in other operating income and gains, as well as the cost of operating expenses. Sakae reported a net loss of S$317,000 for the 3 months to Mar 31, 2022, against a net profit of S$219,000 in the year-ago period, as revenue fell by 19.3 per cent to S$4.6 million. That comes even as it managed to maintain its gross profit margin despite rising costs and lower revenue during the pandemic, Sakae said in unaudited financial statements on Sunday (May 15). The group noted that topline impact was cushioned by a pivot to online orders and delivery services – but that was at the cost of revenue from physical stores, which were reduced.


Tesla has delayed a plan to restore production at its Shanghai plant to levels before the city’s Covid -19 lockdown by at least a week, according to an internal memo seen by Reuters. The U.S. electric car maker originally aimed to increase output at its Shanghai plant to 2,600 cars a day from May 16, Reuters reported earlier this month citing another memo. But the latest memo said that it plans to stick to one shift for its Shanghai plant for the current week with a daily output of around 1,200 units. It also said that it would now aim to increase output to 2,600 units per day from May 23. Challenges remain for Tesla to double the number of workers living and sleeping near production lines to maintain “closed-loop” operations, said a person familiar with the matter.

McDonald’s said Monday that it will sell its business in Russia, a little more than two months after it paused operations in the country due to its invasion of Ukraine. “The humanitarian crisis caused by the war in Ukraine, and the precipitating unpredictable operating environment, have led McDonald’s to conclude that continued ownership of the business in Russia is no longer tenable, nor is it consistent with McDonald’s values,” the company said in a news release. Russian forces, directed by President Vladimir Putin, have been accused of an array of war crimes during their assault on Ukraine.

The United States and the European Union are looking at how to improve food supply chains with export restrictions from India and other nations accentuating global problems, the EU’s trade chief told CNBC. G-7 foreign ministers warned over the weekend that the war in Ukraine is increasing the risk of a global hunger crisis. This is because Ukraine has been unable to export grains, fertilizers and vegetable oil, while the conflict is also destroying crop fields and preventing a normal planting season. This has increased the reliance on nations from other parts of the world for these products. But some of these countries, concerned about supplies for their own citizens, have imposed restrictions on exports. This is the case in India, for example, which announced Saturday a ban on wheat sales “to manage the overall food security of the country.”

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

ComfortDelGro Corp Ltd – Modest recovery but huge operating leverage

Recommendation: BUY (Maintained); TP S$1.80, Last close: S$1.41; Analyst Paul Chew

– Results were within expectations. 1Q22 revenue and PATMI were 24%/18% respectively of our FY22e forecast. Excluding the disposal gain and government relief one-offs, we estimate 1Q22 PAT to have increased 66% to S$42mn.

– A significant change in the taxi business model by shifting some revenue from rental to booking commissions. This is a critical strategic pivot as passengers shift away from street hail towards the use of booking apps.

– Revenue rose $34mn YoY in 1Q22 but with operating leverage, 40% of revenue flowed into operating earnings. No change in our forecast, except disposal gain, or our DCF target price (WACC 8%) of S$1.80. We expect the upcoming quarters to perform stronger with the opening of borders, removal of social restrictions and return to office announced in March and April this year.

CapitaLand Investment Limited – Tracking our forecast

Recommendation: ACCUMULATE (Maintained), Last Done: S$3.79
Target Price: S$4.12, Analyst: Natalie Ong

– 1Q22 revenue of S$665m (+23% YoY) was in line, forming 25% of our forecast.

– RE investment revenue grew 28% YoY, driven by broad-based recovery. Fee-related revenue was up 17% YoY, lifted by PE fund management (+127%) and lodging management (+31%).

– Maintain ACCUMULATE, SOTP TP raised from S$4.05 to S$4.12. We raise our FY22e PATMI estimate from S$1,218 to SS$1,234 on higher fund management margins. Our SOTP TP raised due to higher investment management PATMI. The pick-up in travel and lifting of lockdowns in China are immediate catalysts for CLI.

Thai Beverage PLC – Beer leading the recovery

Recommendation: ACCUMULATE (Maintained); TP S$0.80, Last close: S$0.68; Analyst Paul Chew

– 1H22 revenue and PATMI beat our expectations, at 55%/62% of our FY22e forecasts. 2Q22 PATMI rose 20% YoY to THB7.1bn. Interim dividend was unchanged at THB0.15.

– Driving earnings growth was a 3-fold recovery in beer and associates PATMI. Spirits earnings were down 3% YoY to THB5.4bn due to a higher mix of white spirits. Spirits accounted for 75% of group PATMI.

– We maintain our ACCUMULATE recommendation. Our FY22e earnings is raised 5% to THB27.6bn. The target price is raised from S$0.765 to S$0.80. Valuation is based on 18x earnings, its 5-year average. FY22e will be a recovery from pandemic lockdowns last year. The pace of the recovery will depend on entertainment outlets reopening in Thailand.

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