Daily Morning Note – 18 Nov 2019



Asia stocks looked poised for a mixed start to the week as investors continued to wait for trade progress and Hong Kong braced for more disruption. Currencies were steady early Monday.

Futures pointed to a flat open in Japan and a limited rise in Hong Kong. They were little changed in Australia. The S&P 500 Index on Friday reached another record in the sixth week of gains, the longest streak in two years, after White House economic adviser Larry Kudlow said negotiations between the U.S. and China were nearing the final stages. A mixed bag of retail sales figures and weak factory numbers in the U.S. weighed on the dollar.


HP said on Sunday it had rejected an offer from printer maker Xerox to buy the company, saying the US$33.5 billion cash-and-stock proposal “significantly undervalues” the personal computer maker.

The takeover offer of Chinese real estate player Yanlord Land Group for all ordinary shares of United Engineers (UE) has turned unconditional, with the offeror’s stake in UE crossing the 50 per cent threshold.

Saudi Aramco has set a price range for its listing that implies the oil giant is worth between US$1.6 trillion to US$1.7 trillion (S$2.3 trillion), below the US$2 trillion the Saudi crown prince had targeted but still making it potentially the world’s biggest IPO.

SoftBank’s Yahoo Japan is in talks to merge with messaging app operator Line Corp to create a US$27 billion (S$37 billion) tech giant and help the Japanese conglomerate expand e-commerce and payments services.

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


APAC Realty Ltd – Will be better in 2020
Recommendation: ACCUMULATE (Downgraded), Last Done: S$0.50
Target Price: S$0.55, Analyst: Paul Chew

– 3Q19 net profit was below our estimates.

– Apart from the weaker transaction volumes, net profit in FY19 has been hit negatively by agent license subsidy fee and losses at the newly acquired property. The combined financial impact is negative S$2mn.

– We lower our recommendation from BUY to ACCUMULATE. Our target price is reduced to S$0.55 (previously S$0.68). We cut our FY19e and FY20e net profit forecast by 15% and 13% respectively. We expect a recovery in 2020 as property transactions build up momentum, there is also a robust pipeline of new projects.

Singtel Limited – Operationally sound
Recommendation: ACCUMULATE (Maintained), Last Done: S$3.18
Target Price: S$3.31 (prev. S$3.45), Analyst: Alvin Chia

– EBITDA met our estimates while NPAT was hurt by Airtel’s exceptional item. Excluding exceptional item, NPAT would have fallen 15% YoY and within our expectations. Airtel was impacted by an adverse court ruling against the industry’s definition of adjusted gross revenue and recorded a provision of S$5.5bn (Singtel’s pre-tax share is S$1.9 bn).

– Stronger performance in regional associates especially for Globe & AIS. Telkomsel returned to sequential quarter growth, Airtel narrowed losses. Enjoyed first YoY PBT growth in 3yrs.

– Group enterprise weak due to a challenging business environment and slowdown in Australia.

– Maintained ACCUMULATE with a lower TP of S$3.31 (prev. S$3.45). We revised FY20e EBITDA and NPAT downwards by 9%/56% due to the results and change in guidance.

PropNex Ltd – Bottomed out
Recommendation: BUY (Maintained), Last Done: S$0.515
Target Price: S$0.59, Analyst: Paul Chew

– 3Q19 results were in-line with our estimates. With the recovery in property transactions, we expect earnings to have bottomed out.

– New launches have been driving revenue growth (+16% YoY) whilst private resale remains very weak (-30% YoY).

– We expect PropNex to pay attractive dividends (yield of ~7%) in view of the low capital intensity of the business and cash hoard of S$74mn in the balance sheet.

– Our BUY recommendation and target price of S$0.59 is maintained. We favour PropNex for their impressive market share (46% in new launches), attractive valuation, high unleveraged ROE (20%), healthy balance sheet and recovering transaction volumes in the Singapore residential market.

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