Daily Morning Note – 2 May 2019


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U.S. stocks ended in the red on Wednesday after the Federal Reserve’s latest monetary policy statement. The drop in the last hour of trading was dramatic. The Dow Jones Industrial Average fell 0.61%, to close at 26,430.14. The S&P 500 tumbled 0.75%, to end at 2923.73, and the Nasdaq Composite lost 0.57%, to close at 8049.64.

The Fed left the key U.S. interest rate unchanged at a range of 2.25% to 2.5%, noting that inflation has been modest as of late even as the economy continues to grow at a solid rate. The U.S. gross domestic products rose a robust 3.2% in the first quarter, and fresh data on Monday show that core inflation–as measured by the personal consumption expenditure price index–fell to 1.6% in March to a 19-month low.

Apple stock surged early in the day following a strong earnings report. At the same time, Tesla (TSLA) CEO Elon Musk is no longer allowed to tweet about the company’s financials at will, after a U.S. District Judge approved the settlement between the executive and the Securities and Exchange Commission.


Raffles Medical Group Ltd – New Chongqing hospital costs start to bite

Recommendation: NEUTRAL (Maintained), Last Done price: S$1.08

Target Price: S$1.09, Analyst: Tin Min Ying

– 1Q19 Revenue and PATMI were in line with our estimates, making up 24.8%
and 24.3% of our full-year estimates.

– PATMI plunged 13.7% YoY due to gestation costs for Raffles Hospital

– Raffles Hospital Chongqing’s EBITDA loss of $1.8mn was within expectations.

– Staff costs were well contained at 51.5% of revenue (1Q18: 52.7%) despite their
expansion in China

– Maintain Neutral with an unchanged TP of S$1.09

Sheng Siong Group – Still grabbing market share

Recommendation: BUY (Upgraded), Last Done price: S$1.03

Target Price: S$1.30, Analyst: Paul Chew

– 1Q19 revenue was above our expectations. PATMI was below estimates as
operating expenses were moderately higher than expected.

– Gross margin was relatively flat compared to a year ago.

– Secured three new stores this year, a 3% boost in total store footprint.

– We have kept our forecast unchanged. Upgrade to BUY from ACCUMULATE
with unchanged target price of S$1.30. Continued store expansion and market
share gains are the twin drivers of growth.

China Aviation (Singapore) Oil – Flattish performance

Recommendation: BUY, Last Closing Price: S$1.37

Target Price: S$1.67, Analyst: Chen Guangzhi

– Mild growth of middle distillate volume but other oil product volume

– Pudong underperformed due to lower average oil prices.

– Expect the overall growh to be flat in FY19.


Federal Reserve leaves key US rate unchanged amid mixed economic signals. The US Federal Reserve decided Wednesday to keep its benchmark interest rate unchanged amid mixed signals about the direction of the US economy. While the central bank noted the continued “strong labour market” and “solid” gains in economic activity, it also highlighted a slowdown in investment by businesses and households and inflation, which has fallen below the Fed’s target.

China unveils plans to further open up banking and insurance sectors. China will further relax rules for foreign banks and insurers of all sizes that plan to invest in the domestic industry, the latest round of easing amid efforts to conclude a trade deal with the US. The China Banking and Insurance Regulatory Commission plans to remove single shareholder limits for local banks among a slew of new measures that are aimed at further opening up the sector, according to a notice on the regulator’s website.

Oil prices mixed as talk of extending Opec cuts faces rising US supply. Brent crude oil futures settled at US$72.18 a barrel, up 12 cents, or 0.2 per cent, after falling as low as US$71.30. US West Texas Intermediate crude futures (WTI) ended 31 cents, or 0.5 per cent, lower at US$63.60 a barrel, up from its US$62.77 session low. US crude inventories jumped 9.9 million barrels last week to 470.6 million barrels to their highest since September 2017 as imports grew to their highest since January and refining rates dropped below 90 per cent of total capacity, the Energy Information Administration said.

White House says ready to walk if no China trade deal soon. The White House is ramping up pressure to reach a trade deal with China in the next two weeks, warning that the US is prepared to walk away from the negotiations. “It won’t go on forever,” Mick Mulvaney, President Donald Trump’s acting chief of staff, said Tuesday at an event in Los Angeles.
“At some point in any negotiation you go, ‘we’re close to getting something done so we’re going to keep going.’ On the other hand, at some point you throw up your hands and say ‘this is never going anywhere.'”

Centurion gets conditional OK for workers’ dorm and training centre at Westlite Toh Guan. Centurion Corp has obtained conditional permission to reconstruct an existing block at Westlite Toh Guan, and the workers and students accommodation developer will seek to extend the existing lease on the project by 25 years. The outline permission from URA is subject to certain conditions. This includes approvals from various government authorities and the payment of a development premium to be agreed with the Singapore Land Authority.

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

Clients of Phillip Securities can keep updated with Country Strategy and Singapore Sector Reports by logging into: www.poems.com.sg > STOCKS > Research

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