Daily Morning Note – 2 November 2021
PHILLIP SUMMARY
Major US stock indices climbed at the open of trading on Monday (Nov 1) as positive developments across the economy fuelled bullish sentiment. The Dow, S&P 500 and Nasdaq had closed with new records on Friday as markets shrugged off some earnings misses by major US firms as well as data underscoring continued high inflation, instead of taking heart from expectations of better days to come for the US economy. Over the weekend, the United States and the European Union agreed to lift punitive tariffs on imported European steel and aluminium, ending a dispute that strained their crucial trade ties; in Washington, Democrats signalled they were continuing to push for votes on President Joe Biden’s spending plans.
BREAKING NEWS
SG
PropNex has terminated its master franchise agreement with its Vietnam franchisee and is disposing of its entire stake in that business, it said in a Monday announcement after the market closed. But it will retain a presence in Vietnam under a new unit franchise agreement. PropNex had entered the master franchise agreement in Aug 2018 to bring its brand to Vietnam, with an initial term of 10 years. Upon the franchisee’s request, PropNex has now consented to the early termination of the agreement.
Envision Group is receiving over US$1 billion in investment by Singapore’s sovereign wealth fund GIC along with private equity firms Sequoia Capital and Primavera Capital, “to accelerate the pace of energy transition and explore net zero opportunities through strategic partnerships”. Announcing this at the United Nations Climate Change Conference on Monday evening Singapore time, Envision Group chief executive officer Lei Zhang said this “will enable Envision to mobilise capital investors for building the net-zero economy”. Envision’s businesses include renewables, hydrogen, battery and digital solutions
Ascendas Real Estate Investment Trust (Ascendas Reit), through its trustee HSBC Institutional Trust Services, has issued HKD 950,000,000 (S$164.8 million) notes with a fixed interest rate of 2.63 per cent per annum due to mature on Oct 24, 2031. The notes are expected to be admitted to the Singapore Exchange’s official list from Nov 2, at 9am. Their interest will be payable annually in arrear.
Yangzijiang Shipbuilding’s gross profit fell 20.8 per cent in the third quarter despite a 25 per cent rise in revenue as higher raw material costs squeezed shipbuilding margins, the mainboard-listed shipbuilder said in a Singapore Exchange update on Monday (Nov 1) evening after market close.
The minimum chain offer price which consortium Cuscaden Peak will have to offer for each SPH Real Estate Investment Trust (Reit) if its acquisition bid for Singapore Press Holdings (SPH) SPH: T39 +6.53% succeeds – is S$0.964, fully in cash, Cuscaden said in a Singapore Exchange filing on Monday night. The consortium had made a surprise rival bid to privatise SPH on Oct 29, following an earlier offer from Keppel Corp. Such an acquisition would take place by way of a scheme of arrangement.
US
Facebook whistleblower Frances Haugen is set to open Lisbon’s Web Summit on Monday evening, putting more pressure on the company as tens of thousands arrive for the tech world’s first mass gathering since the pandemic struck. The organisers of one of the world’s largest technology conferences, which was called off last year due to Covid-19, have hailed the fact that its return is taking place in a country with one of the world’s highest vaccination rates.
Wall Street stock indices finished at fresh records on Monday, extending a recent rally ahead of key economic data and central bank announcements later in the week. The Dow Jones Industrial Average finished with a 0.3 per cent gain at 35,913.84. The broad-based S&P 500 won 0.2 per cent to close at 4,613.67, while the tech-rich Nasdaq Composite Index jumped 0.6 per cent to 15,595.91.
Rivian Automotive, an Amazon-backed electric vehicle startup, said on Monday it is targeting a valuation of more than US$50 billion. The California-based company will price shares between US$57 and US$62, raising up to US$9.1 billion at the midpoint price and all company stock at about US$52.5 billion, according to a securities filing. US business media said Rivian could go public on Wall Street as soon as next week.
Oil prices settled higher on Monday as expectations of strong demand and a belief that a key producer group will not turn on the spigots too fast helped reverse initial losses caused by the release of fuel reserves by No. 1 world energy consumer China. Brent crude futures settled up 99 cents, or 1.1 per cent, to US$84.71 a barrel after hitting a session low of US$83.03.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
Singapore Banking Monthly – Outlook still stable
Recommendation: Overweight (Maintained)
Analyst: Glenn Thum
– October’s 3M-SIBOR remain flat while 3M-SOR is up modestly MoM.
– Hong Kong’s domestic loans growth fell 1.27% YoY in August.
– Malaysia’s domestic loans growth saw its lowest increase of 2.49% YoY and fell 0.16% MoM in August.
– Maintain OVERWEIGHT. We remain positive on banks. Banks traded above 1.4x P/B over the last five years and are currently close to or below our P/B targets.
Amazon.com Inc – Absorbing higher costs
Recommendation: BUY (Maintained); TP US$4,157.00, Last close:
US$3,318.11; Analyst: Timothy Ang
– 9M21 revenue and gross profits were in line at 70%/72% of our FY21 forecast. Operating margins down 2% points to 4.4% on higher labour and fulfilment costs.
– Amazon’s cloud and advertising businesses continue to show register healthy growth of 39% and 50% YoY respectively.
– Maintain BUY with revised target price of US$4,157.00, down from US$4,329.00. Our valuations are based on DCF with a WACC of 6.2% and terminal growth of 5%. We revise our FY21e PATMI down 10% on higher guidance of labour and fulfilment costs for 4Q21e.
Technical Pulse: Bank of Communication Co ltd
Recommended: Technical buy; Analyst: Chua Wei Ren
Bank of Communication (HKEX: 3328) has been on an accumulation phase since its bearish breakaway gap on 2nd July. Recent technicals indicate potential upside after much sideway accumulation.
Buy spot: 4.79 Stop loss: 4.53 Take profit 1: 5.09 Take profit: 5.40
POEMS Podcast: Let the Money Talk
Recent Podcasts:
Frasers Crentrepoint Trust – Today’s Trading Idea Ep 17
Facebook Incorporation 3Q21 Results – SGX Company Insights Ep 38
Netflix Incorporation 3Q21 Results – SGX Company Insights Ep 37
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Weekly Market Outlook: Apple, Netflix, Facebook, Keppel DC, Fraser, IFAST, Japfa, SPH, Sheng Siong.
Date: 01 November 2021
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