Daily Morning Note – 19 January 2022

Welcome to our Daily Morning Note from our Research team!

PHILLIP SUMMARY

Markets in Asia largely closed lower on Tuesday (Jan 18) as investor sentiment weakened due to inflation concerns. The Straits Times Index (STI) broke its 8-day winning streak to close down 0.2 per cent, or 7.91 points, at 3,280.04. Within the region, Hong Kong’s Hang Seng index closed down 0.4 per cent while the Jakarta Composite Index lost 0.5 per cent and South Korea’s Kospi fell 0.9 per cent. Tokyo’s Nikkei 225 fell 0.3 per cent.

Wall Street stocks endured an ugly session on Tuesday, tumbling in their first session back after a holiday weekend on mounting worries about higher lending rates. The Dow Jones Industrial Average finished down 1.5 per cent at 35,368.47. The broad-based S&P 500 shed 1.8 per cent to 4,577.13, while the tech-rich Nasdaq Composite Index sank 2.6 per cent to 14,506.90.

Stocks to watch: Halcyon Agri Corp


BREAKING NEWS

SG

Epicentre Holdings plans to delist without making an exit offer, the former authorised reseller of Apple products announced in a bourse filing on Tuesday (Jan 18). The announcement came after a hearing on Thursday (Jan 13), when the High Court ordered that its judicial management order be discharged and that the company be wound up. According to Singapore Exchange (SGX) rules binding applications for delisting, the company should convene a general meeting to obtain shareholder approval and make an exit offer to shareholders.

Mainboard-listed rubber producer Halcyon Agri Corp expects to return to profitability for the financial year to Dec 31, 2021, the board said in a guidance on Tuesday (Jan 18). It attributed the expected post-tax profit to “overall improvement in business conditions, particularly the recovery of downstream industrial activities”. It had run up an unaudited post-tax loss of S$61.0 million in the year-ago period, which amounted to a full-year net loss of S$54.2 million, excluding minority interests.

The maiden state tender for private housing sites, coming after the mid-December property cooling measures, has drawn mixed results. The 8 bids received for a District 15 plot at the corner of Jalan Tembusu and Tanjong Katong Road, as well as the highest bid (from City Developments or CDL) of S$1,302 per square foot per plot ratio (psf ppr), were at the upper end of the range forecast by property consultants polled by The Business Times in the week before the tender closed on Tuesday (Jan 18, 2022). This took into account the impact of the cooling measures. A plot near Lentor MRT station near Ang Mo Kio fetched 4 bids, with the highest (from a tie-up involving entities of Hong Leong Group Singapore, and mainboard-listed GuocoLand) at S$1,060 psf ppr. This price is closer to the lower end of the S$980-1,200 psf ppr forecast by property consultants in the BT poll.

US

ExxonMobil pledged on Tuesday to reach “net zero” greenhouse gas emissions in its operations by 2050, but stopped short of extending the promise to products it sells throughout the global economy. The petroleum giant’s promise covers “Scope 1” and “Scope 2” emissions, which account for carbon emissions from ExxonMobil operations, as well as emissions associated with the purchase of heating or cooling at its facilities, according to a company press release. But the US oil giant, which has long been criticised by environmentalists over its climate record, avoided targets on “Scope 3” emissions, which are those from products sold, such as the gasoline consumers buy.

Microsoft said it’s buying Activision Blizzard in a US$68.7 billion deal, uniting two of the biggest forces in video games. In its largest purchase ever, Microsoft will pay US$95 a share in cash for one of the US’s biggest gaming publishers, known for titles like Call of Duty and World of Warcraft but which is also grappling with a cultural upheaval over its treatment of women. Activision chief executive officer Bobby Kotick will continue to serve in that role, Microsoft said. Once the deal closes, the Activision Blizzard business will report to Phil Spencer, who heads Microsoft Gaming.

Goldman Sachs Group fourth-quarter profit fell nearly 13 per cent and missed market expectations on Tuesday as weak trading activity dampened a bumper year for deals, sending the shares of Wall Street’s premier investment bank down 3 per cent. Goldman’s trading unit reported a lower profit in the quarter ended Dec 31 compared with last year as a more stable economy resulted in less volatility and fewer swings in financial markets. The global markets business, which now houses the trading business and accounts for roughly a third of overall revenue, reported revenue of nearly US$4 billion, down 7 per cent. Compared with a strong year-ago quarter when trading volumes skyrocketed, the bank said equity underwriting revenue fell 8 per cent in the quarter due to lower income from secondary stock offerings.

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

Fortress Minerals Ltd – Bogged down by weaker iron ore prices

Recommendation: ACCUMULATE (Maintained); Last Done: S$0.44

TP: S$0.50; Analyst: Vivian Ye

– 3Q22 results were below expectations. Revenue and PATMI were at 20%/12% of our FY22e forecast as ASPs were lower than expected.

– 3Q22 sales volume increased 35.3% YoY. Unit costs decreased accordingly.

– Maintain ACCUMULATE with a lower TP of S$0.50, down from S$0.51. We lower FY22e PATMI by 29.6%, factoring in weaker iron ore prices and higher operating expenses. We lower ASPs by 8% to US$110/DMT. Our TP remains pegged to the industry average, which is now 10x FY22e PE, up from 8x previously.

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