Daily Morning Note – 18 October 2021
Asia stocks are poised to start the week higher as investors weigh solid corporate earnings against concerns about inflation and the economic recovery.
Futures rose in Japan and Hong Kong. Australia ticked higher at the open, while U.S. contracts fluctuated. Wall Street stocks advanced on Friday, with the S&P 500 chalking its best week since July as earnings buoyed sentiment.
Bond yields in New Zealand and the kiwi dollar gained after New Zealand’s inflation accelerated to the fastest pace in 10 years. Yields on Australia’s three-year bond surged more than 10 basis points. Treasury yields climbed on Friday. The dollar was steady.
China’s third-quarter gross domestic product due Monday along with monthly industrial and investment data will be closely watched to gauge the severity of electricity shortages. Meanwhile, People’s Bank of China Governor Yi Gang said authorities can contain risks posed to the Chinese economy and financial system from the struggles of China Evergrande Group.
Offshore marine services contractor Kim Heng will fork out about S$10 million to purchase a crawler crane, which will be deployed for a windfarm project in Vietnam under its latest contract win. This comes as the company is diversifying into the renewable energy support sector. The crane will be used to lift and install wind turbines, and enable the group to offer turnkey lifting and installation works for onshore and offshore renewable windfarm projects in Taiwan and Vietnam. About S$7.5 million of the crane’s price tag will be funded with a green loan from UOB, and the balance will come from the group’s internal resources. Meanwhile, its wholly-owned subsidiary Kim Heng Heavy Equipment will undertake a US$7.2 million project for a main contractor of Vietnam windfarm projects. The contract includes engineering, lifting, technical and maintenance services. The new crane will be assembled at the worksite, which is intended to be at a South Vietnam onshore windfarm.
Precision medicine firm Clearbridge Health is looking to enter the business of investing in and divesting healthcare companies. It intends to seek shareholders’ approval at an extraordinary general meeting to be convened. The proposed new business will involve investments and injections of funds into entities in the global healthcare sector which are either Ebitda (earnings before interest, taxes, depreciation and amortisation) positive or “at an inflection point with a clear line of sight to profitability”, Clearbridge said. Such portfolio companies may include medical technology (medtech) companies and pharmaceutical companies. In a filing on Friday (Oct 15) night, Clearbridge said the “carefully deliberated investments” may take the form of equity, debt, a hybrid of both, or otherwise.
Drama and film production firm GHY Culture & Media will not be proceeding with its planned strategic investment in the Clover Films group, as their memorandum of understanding (MOU) has expired. If completed, the deal would have resulted in GHY holding a 51 per cent stake in each of the 3 Clover Films entities, while the existing shareholders would have retained the remaining 49 per cent. GHY had not signed any definitive documents with the existing shareholders as at Friday (Oct 15), and the exclusivity period under the MOU had expired on Sep 15. Despite the lapse of the MOU, the mainboard-listed company said it will continue to explore other collaboration opportunities with Clover Films. GHY also said it will identify other suitable opportunities to strengthen its presence in Singapore and South-east Asia. The group added that it “remains well-placed with its industry expertise to further grow across the business value chain”, supported by a positive net cash position and working capital.
The trustee-manager of Ascendas India Trust has appointed Cheah Ying Soon as its chief financial officer (CFO), starting Nov 1. The 44-year-old has been a senior director at CapitaLand Investment since August 2018, said the trustee-manager’s regulatory filing on Friday (Oct 15) evening. He will replace current CFO Tan Choon Siang, who has held the post since 2017. In another filing, Ascendas Property Fund Trustee said that Tan, 45, will assume another management position within the CapitaLand Investment Limited Group.
Shares in space tourism company Virgin Galactic tumbled on the New York Stock Exchange on Oct 15 after announcing the postponement of its first commercial flight, originally scheduled for the third quarter of 2022. In electronic trading before Wall Street opened, Virgin Galactic shares were down by more than 20 per cent. In a statement on Thursday, the company had said that an upgrade programme for its VMS Eve and VSS Unity spacecraft, aimed at strengthening the safety of the devices, would begin a month late. A recent laboratory test revealed “a possible reduction in the strength margins of certain materials used to modify specific joints, and this requires further physical inspection”, Virgin Galactic said, but have “no impact” on its space vehicles. As a result, the company’s first commercial flight is now scheduled for the fourth quarter of next year.
Goldman Sachs reported a jump in third-quarter profits on Friday behind robust gains in its financial advisory and trading divisions, capping a strong week of results for large US banks. The big New York investment bank reported profits of US$5.3 billion, up 63 per cent on a 26 per cent increase in revenues to US$13.6 billion. Key drivers for Goldman during the quarter included a jump in revenues tied to completed mergers and acquisitions, initial public offerings and capital-raising efforts by private companies. Goldman also turned in a strong performance in its global markets division, driven by higher revenues in equity trading.
Oil prices settled at a three-year high above US$85 a barrel on Friday, boosted by forecasts of a supply deficit in the next few months as the easing of coronavirus-related travel restrictions spurs demand. Brent crude futures settled up 86 cents, or 1 per cent, at US$84.86 a barrel. Front-month prices, which touched their highest level since October 2018 at US$85.10, hit a weekly rise of 3 per cent, its sixth straight weekly gain. US West Texas Intermediate (WTI) crude futures rose 97 cents, or 1.2 per cent, to US$82.28 a barrel. The was up 3.5 per cent on the week in an eighth consecutive weekly rise. Demand has picked up with the recovery from the Covid-19 pandemic, with a further boost from power generators who have been turning away from expensive gas and coal to fuel oil and diesel.
JPMorgan Chase and Citigroup were among lenders paid back when Vonovia made a surprise loan to the biggest shareholder of embattled German landlord Adler Group a week ago. The banks, together with Banco Santander, received repayment on their portion of an about 200 million euro (S$312.8 million) margin loan to Aggregate Holdings, according to people familiar with the matter, who asked not to be identified because the matter is private. The deal Vonovia struck has spared the international banks some of the turmoil facing Adler as it tries to fend off a short seller attack that has hammered its shares. Global lenders are keeping a close watch on Adler’s efforts to sell assets and cut debt as many large firms have loans to the property company or to its backers. Representatives for JPMorgan, Citi and Santander declined to comment.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
CapitaLand Investment Limited – Charting new growth
Recommendation: ACCUMULATE (Initiate), Last Done: S$3.41
Target Price: S$4.00, Analyst: Natalie Ong
– Stable and recurring revenues from fees income and real estate investment contributing c.20% and c.80% to EBITDA respectively.
– Growth in fund management and lodging AUM to drive fee income while capital recycling and new economy assets remain in focus.
– Initiate coverage on CLI with an ACCUMULATE rating and SOTP derived TP of S$4.00, representing an 19.6% upside from current market price. CLI is trading at 16.0x P/E; we are forecasting FY21e dividend yield of 2.4%.
Technical Pulse: Sunny Optical Technology Group Co ltd
Recommended: Technical BUY; Analyst: Chua Wei Ren
Sunny Optical (HKEX: 2382) has been ranging for 2 quarters despite a strong upside break in August based on our report dated 30th July. The subsequent head and shoulder formation has pushed prices back below HK$200 psychological level. However, recent technicals indicate that there is potential upside
Buy spot: 199.50 Stop loss: 179.50 Take profit 1: 220.80 Take profit: 241.70
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