Daily Morning Note – 19 November 2020
Asian stocks look set to come under pressure after U.S. shares closed at their lows as restrictions to curb the coronavirus spread overshadowed progress toward a vaccine. The dollar held near its lowest in two years.
Futures slipped in Japan and Australian shares retreated. S&P 500 futures were little changed with the benchmark closing at its session low after New York City shut schools because of rising infections. Pfizer Inc. advanced after saying its vaccine was 95% effective, paving the way to apply for the first U.S. regulatory authorization for a coronavirus shot within days. The Bloomberg Dollar Spot Index earlier fell to the lowest since April 2018 as vaccine optimism lifted commodity prices and resource-linked currencies. Benchmark Treasury yields ticked higher.
A troubled Indian bank may be folded into DBS Group’s India business under a proposed scheme by the Reserve Bank of India (RBI), DBS said in a Singapore Exchange filing late on Tuesday night. If the scheme is approved, DBS will inject INR 2,500 crore (S$463 million) into its wholly-owned unit DBS Bank India Ltd (DBIL) to support the amalgamation. This will be fully funded from DBS’s existing resources.
Capitaland Retail China Trust’s (CRCT) preferential offering to unitholders has been priced at S$1.17, the bottom end of the indicative range. That’s at an 8.6 per cent discount to Monday’s closing price of S$1.28, and a discount of about 9.2 per cent to the volume-weighted average price (VWAP) of S$1.2891 for all trades done on Monday. The non-renounceable preferential offering will be done on the basis of 56 new units for every 1,000 existing units held as at the record date of Nov 25, 5pm, said CRCT’s manager in a bourse filing on Wednesday.
Quarz Capital and Black Crane Capital, in a joint statement released on Wednesday and seen by The Business Times, said they intend to requisition an extraordinary general meeting (EGM) for the internalisation of the manager of Shari’ah Compliant Industrial Real Estate Investment Trust (Sabana Reit). The fund managers also said this should be done after the proposed merger of Sabana Reit with ESR-Reit falls through, reiterating their call for Sabana unitholders to vote against it. They noted that with an internal manager, the distribution per unit (DPU) “immediately increases” by some 7.5 per cent through elimination of the management fees paid to ESR Cayman, which has a controlling ownership of Sabana Reit’s manager.
Mainboard-listed dormitory developer and operator Centurion Corp has secured a master lease to manage a new purpose-built dormitory in Selangor, adding more than 5,000 beds to its Malaysian portfolio, it announced on Wednesday night. The lease was secured through Knight Frank Malaysia from the Selangor State Development Corporation. This addition brings the group’s purpose-built workers accommodation portfolio up to eight properties with a total of some 35,700 beds, under its Westlite Accommodation brand.
City Developments Limited (CDL) hotel arm Millennium & Copthorne Hotels (M&C) is reviewing its portfolio and may dispose of some assets under a drive to recover from the effects of the Covid-19 pandemic by as early as 2021, it said in a statement on Wednesday evening. It said: “Having received expressions of interest for various assets globally, M&C is assessing at least three offers.” It noted that some offers are subject to re-zoning and regulatory approval for a change of use from hospitality. “Based on current offers, M&C expects to conclude at least one such sale in 2021.”
Rich Capital Holdings’ indirect subsidiary Oxley Batam has issued a letter of demand against a joint-venture partner, which has denied the allegations in the letter, Catalist-listed Rich Capital said on Wednesday night. Oxley Batam issued a Nov 4 letter of demand against PT Karya Indo Batam (PT KIB), with which it had formed joint venture PT Oxley Karya Indo Batam (PT OKIB).
Oil prices firmed by about 1 per cent on Wednesday on hopes Opec and its allies will delay a planned increase in oil output and after Pfizer said its Covid-19 vaccine was more effective than previously reported. The market was also supported by a smaller-than-expected increase in US crude stockpiles last week.
House Democrats voted to stick with Nancy Pelosi as their leader and nominee for speaker, placing confidence in her to unite a fractious caucus despite surprise losses in this month’s election that have emboldened congressional Republicans.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, PSR
Sunpower Group Ltd
Analyst: Chua Wei Ren
Recommended Action: Technical BUY
Sunpower Group (SGX: 5GD) upside is marked by an incomplete wave 3 of the minor phase. As such, we are positive that Sunpower will be heading beyond $1.00 in the long term. Technical also indicate that the bullish sentiment will continue.
SATS Ltd – Government relief and vaccine combo
Recommendation: NEUTRAL (Upgraded); TP S$4.40
Last close: S$¬¬4.10; Analyst Paul Chew
– 1H21 results were below expectations. Revenue fell 54% YoY to S$440mn, only 30% of our FY20e. Excluding government relief, net loss of S$197.1mn was 128% of our FY21e loss estimate.
– Government relief of S$152mn in 1H21 almost equivalent to FY20 PATMI of S$168mn.
– SATS managed to cut certain fixed costs to cope with pandemic fallout. Excluding government relief, staff costs declined an estimated S$167mn YoY or 36%.
– We expect net losses for the next two years. Our last target price was pegged at its GFC average of 1.35x P/BV – too bearish. We raise this to lower band of SATS’ pre-Covid P/BV of 3.3x. Our TP rises to S$4.40 from S$1.95. Upgrade to NEUTRAL from SELL as we believe worst has been priced in. While vaccine progress is a major positive, it remains unclear how quickly vaccines can slow down infection rates and normalise air travel. We expect air traffic to remain muted in FY21.
HK Reports – Read up on our Hong Kong reports here
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Date: 09 November 2020
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