Daily Morning Note – 19 October 2021


Asian stocks looked set for a mixed start Tuesday as investors continue to digest the prospect of tightening monetary policy to restrain a surge in inflation stoked partly by energy costs.

Shares were little changed in Australia, while futures rose in Japan and Hong Kong. U.S. contracts wavered after the S&P 500 and Nasdaq 100 gained overnight, aided by optimism about corporate earnings.

The gap between 5- and 30-year Treasury yields shrank amid growing expectations that the Federal Reserve may lift policy rates as soon as next year. The flattening curve for some could be signalling a potential slowdown in the recovery from the pandemic. A gauge of the dollar was steady.



United Tec Construction, a 60 per cent-owned subsidiary of Lian Beng Group, has bagged a contract worth about S$118 million to build a residential flat development at Ang Mo Kio Avenue 1, the mainboard-listed company announced on Monday. The contract is awarded by United Venture Development (2021), a joint venture between UOL Group, Singapore Land Group and Kheng Leong Company. The development comprises a 24-storey and 25-storey block, with a total of 372 units, as well as a carpark, swimming pool and communal facilities. The contract period is 47 months. This development is expected to have a positive financial impact on Lian Beng’s earnings for the current financial year ending May 2022. As at Monday, the company’s order book stood at about S$1.4 billion, which it said will “provide a sustainable flow of activity through FY2026”.

Thomson Medical is defending its appointment of Dr Lam Lee G as an independent director for an aggregate period of more than nine years, in response to queries from the Singapore Exchange. As disclosed in a Monday (Oct 18) filing, the bourse queried Thomson Medical on whether the company had subjected Dr Lam’s term to “particularly rigorous review”, and why he should be considered independent despite his long tenure. According to past annual reports of the company, then called Rowsley, Dr Lam was appointed an independent director in June 2002. He resigned in April 2018 and was re-appointed to the board in May 2019. Rowsley became Thomson Medical after acquiring the healthcare business in 2018. In its response to SGX, Thomson Medical noted that it appointed a new management team following its 2018 healthcare acquisition. “When Dr Lam was re-appointed to the board on May 2, 2019, he was working with a completely new management team and a refreshed board of directors,” the company said.

One more electricity retailer in Singapore, Union Power said on Monday that it will cease some 850 retail accounts as part of a business reorganisation following exceptional increases in wholesale energy prices in the city state. However, Union Power, an independent retailer, emphasised that it will not exit Singapore’s electricity retail market. Its statement follows back-to-back exits last week by iSwitch Energy – Singapore’s largest independent retailer with 90,000 households accounts – and Ohm Energy with just under 30,000 accounts. Both retailers called it quits on their retail operations, citing market conditions and volatile electricity prices in recent months. Two other retailers Diamond Electric and Best Electricity (this retailer has less than 20,000 accounts) have stopped renewing contracts for existing customers and are still mulling their options, which includes an exit.

The stock of mainboard-listed Raffles Education (REC) was hammered to new lows on Monday (Oct 18) as the market got hold of a letter by tycoon Oei Hong Leong to the company’s board. The stock dived 26 per cent, or 2.1 cents, to close at 6.1 cents in the wake of a letter from Mr Oei asking why REC’s chief executive and founder Chew Hua Seng had caused the company to hire all “adult members of his family at high salaries”. In fact, the stock had already been under pressure last week after independent auditor BDO LLP cited financial statements for financial year ended June 30 for material uncertainty over whether the company can continue as a going concern. Meanwhile, the company was already facing a writ issued by Affin Bank amounting to some RM$410 million (S$132.9 million) on an unpaid loan.


Production at US factories fell by the most in seven months in September, in part reflecting a sharp pullback in the manufacturing of motor vehicles as well as broader backlogged supply chains and materials shortages. The 0.7 per cent decrease for manufacturers followed a revised 0.4 per cent decline in August, Federal Reserve data showed on Monday. Total industrial production, which also includes mining and utility output, fell 1.3 per cent last month. The median estimate in a Bloomberg survey of economists called for a 0.1 per cent monthly increase in both factory production and industrial output. Stocks fell and Treasury yields were up after market open. Resilient demand among firms and consumers has kept production elevated, but it has also contributed to order backlogs as manufacturers struggle to source materials and skilled labour.

Bitcoin resumed its ascent toward all-time highs, with asset manager ProShares poised to launch the first Bitcoin futures exchange-traded fund (ETF). The largest cryptocurrency gained as much as 5.5 per cent and was trading at about US$61,032 just before 8 am in New York. It had fallen both Saturday and Sunday to nearly US$59,000. Bloomberg News reported Thursday that the Securities Exchange Commission isn’t likely to block the products from starting to trade this week, said sources.

Foxconn Technology Group unveiled its first electric vehicles (EVs), a milestone that could boost the Taiwanese electronics manufacturer’s credentials as a serious bidder for Apple Inc’s secretive automotive project. The SUV and sedan models introduced on Monday are concept vehicles that the manufacturer plans to build for automotive customers rather than sell under its own brand. Executives including Young Liu, chairman of Foxconn’s flagship unit Hon Hai Precision Industry Co, unveiled the vehicles at the company’s Technology Day event in Taipei. Foxconn is the largest assembler of iPhones, giving it an edge as a potential carmaker partner for Apple as the US company weighs expanding into vehicles. As part of its aggressive push into cars, Foxconn agreed in late September to spend US$280 million on the purchase of an auto plant in Ohio from embattled startup Lordstown Motors Corp.

Amazon.com Inc said on Monday it plans to hire 150,000 seasonal workers in the United States during the holiday period, as the e-commerce giant prepares for a shopping season expected to be characterised by high demand and supply headaches. Last year, the company announced 100,000 seasonal jobs, after it had already boosted staffing through the pandemic. Amazon’s hiring plan comes during a major labour shortage and increased union activities in the United States that has led to companies increasing wages to attract workers during the crucial end-of-year shopping period.

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

Keppel Corporation – On track to exceed S$3-5bn divestment target before 2023

Recommendation: Buy (Maintained), Last Done: S$5.53

Target price: S$7.07, Analyst: Terence Chua

– Final resolution with Brazilian company Sete Brasil now effective. The engineering, procurement and construction (EPC) contracts for six oil drilling rigs will be amicably terminated, with no penalties or refunds due to any party.

– M1 will divest its network assets to Keppel DC REIT for a proposed consideration of S$580mn. We expect M1 to recycle the capital into new growth initiatives like the Bifrost Cable System.

– With the latest transaction, we believe Keppel is on track to hit the higher bound and even exceed the S$3-5bn divestment target before 2023 target.

– Maintain BUY with higher SOTP TP of S$7.07 as we incorporate Keppel Capital into our model now as it has gained in significance to warrant a value assigned to it. We valued the Group based on the four new segments unveiled during Vision 2030 to better reflect the Group’s reporting segments going forward. Our TP translate to about 1.0x FY22e book value, in-line with its 5-year average. Catalysts expected from O&M contract wins and a successful resolution to its O&M unit.

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