Daily Morning Note – 2 November 2018

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YOUR PHILLIP SUMMARY

U.S. stocks rose for a third day, continuing a torrid rebound from the October sell-off as investors greeted the latest batch of earnings optimistically amid signs of easing trade tension. Friday may offer a quiet end to the week for Asian assets that managed to calm down a bit after October’s rough ride. The main Asia region data highlights will be Malaysia’s budget, Alibaba earnings, plus Australian retail sales and PPI. Trading may be a bit thinner than usual with U.S. payrolls data due in the American session, providing reason to avoid leaving much on the table.

U.S. President Donald Trump said he had a productive conversation with Chinese President Xi Jinping on trade and North Korea ahead of a highly anticipated meeting planned between the two leaders at the G-20 summit this month. “Those discussions are moving along nicely,” Trump wrote on Twitter Thursday. “Also had good discussion on North Korea!” Xi said he is open to talking with Trump about trade and other issues during the G-20 in Argentina, China Central Television said on Weibo, citing a scheduled phone call between the leaders.

RESEARCH REPORTS

Micro-Mechanics (Holdings) Ltd – Cyclical slowdown, but still attractive metrics

Recommendation: Buy (Maintained), Last Close Price: S$1.80

Target Price:S$2.05, Analyst: Paul Chew

– Revenue and PATMI were below our expectations. We are trimming our FY19e
earnings by 5%.

– Revenue tapering down in line with industry but gross margins still holding
close to 60%.

– In-line with our lower earnings estimate, we have reduced our target price on
MMH (previously S$2.30) to S$2.05. We peg our valuations to 16x FY19e PE.
This is in-line with back-end semiconductor supply chain valuations. Our BUY
recommendation is maintained.

BREAKING NEWS

Shares in Starbucks leapt more than 8 per cent in after-hours trading on Thursday after sales accelerated in its domestic market, driving global sales up 11 per cent from a year ago. The world’s biggest coffee chain returns to form in the US, delivering record quarterly group revenues of $6.3bn.

Ascott REIT Q3 DPU Increases 7%
Higher revenue from two acquisitions gave a fillip to serviced residence landlord Ascott Residence Trust (Ascott Reit) for its third quarter. Distribution per unit rises 7.7per cent to 1.82 Singapore cents from 1.69 Singapore cents for the year-ago period.

Apple Briefly Fell Below US$1 Trillion Market Value
Shares fell 7% on Thursday’ after Apple’searning call due to underwhelming forecast for the key holiday period suggesting weaker-than-expected demand for pricier new iPhones. The company further stoked concerns by saying it will stop reporting unit sales of its most-important product.

Oil Tumbled After Fears of Tighter Supple Recede
Oil prices tumbled more than 3per cent on Thursday to its lowest level since August, as traders bet the market will remain well supplied despite US sanctions on Iran’s crude exports starting next week.

Baidu Sales Forecasts Misses Estimates as China’s Economy’s Slows
Baidu’s Q3 revenues of RMB28.2 bn beats estimates but Q4 outlook disappoints.

Source: SGX Masnet, Bloomberg, Reuters, The Business Times, Channel NewsAsia, Phillip Securities Research

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

Read the research report(s), available through the link(s) above, for complete information including important disclosures

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