Daily Morning Note – 2 Oct 2020

PHILLIP SUMMARY

Investors are expecting trading on the Tokyo Stock Exchange to resume after Thursday’s outage, while markets in China and Hong Kong remain shut for a holiday. U.S. shares earlier rose as traders weighed the chances Democratic lawmakers and the White House will reach a deal for a fiscal-stimulus package.

Japanese equity contracts dipped along with those in Australia. U.S. stock futures edged up after the Nasdaq 100 reached the highest in almost a month, with Amazon.com, Microsoft and Tesla rising. The S&P 500 Index’s advance was limited by declines in energy producers. Trading was volatile, with stocks pushed around by the latest developments in efforts to forge a stimulus bill acceptable to Democrats and Republicans. Talks were set to continue as officials sought a breakthrough.

BREAKING NEWS

Singapore Telecommunications’ (Singtel) group chief executive officer (CEO) Chua Sock Koong is retiring after 31 years with the company. Ms Chua, 63, will retire as executive director and group CEO with effect from Jan 1, 2021, after holding the post since April 2007. Yuen Kuan Moon, who is CEO of Singtel’s Singapore consumer business and the chief digital officer, will succeed her.

The forbearance agreement between Floatel International and an ad-hoc committee (AHC) of holders of its US$400 million senior secured, first-lien 9 per cent bonds has again been extended, this time to Oct 15, from Sept 30. The AHC holds more than 56 per cent of the Oslo-listed bonds’ outstanding amount. Floatel, an associate company of Keppel Corp, on Wednesday announced the standstill extension in an update about its discussions with secured financial creditors.

Utico‘s proposed rescue deal for Hyflux remains on the table, and the Emirati firm is suggesting a virtual town hall be held between next Wednesday and Saturday for investors of the water treatment firm’s perpetual securities and preference shares (PnP). In a press statement on Thursday, the suitor said it would “once again like to reaffirm” its offer for Hyflux, as the beleaguered Singapore company and the Securities Investors Association (Singapore) or Sias were still “non-committal”.

Lendlease Global Commercial Reit has acquired a stake in Jem shopping mall, through a 5 per cent stake in Lendlease Asian Retail Investment Fund 3 at a purchase consideration of around S$45 million, said the real estate investment trust’s (Reit) manager in a bourse filing on Thursday. Lendlease Asian Retail Investment Fund 3, indirectly holds a 75 per cent interest in Jem. The fund is a private fund managed by Lendlease Investment Management, an indirect wholly owned subsidiary of the sponsor of the Reit, Lendlease Corporation.

Malaysian offshore support vessel builder Nam Cheong on Thursday said that following an application by its wholly owned subsidiary, Nam Cheong Dockyard (NCD) to the Corporate Debt Restructuring Committee of Malaysia (CDRC), NCD’s financial institution creditors are expected to withhold from any proceedings against NCD and its subsidiaries. This is part of an informal standstill that will last for an initial six-month period, said the company in a regulatory update.

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

RESEARCH REPORTS

Phillip 4Q20 Singapore Strategy – Bottomed but a slow grind

Analyst: Paul Chew

– 3Q20 was a tough quarter. The market was down 4.7%, chalking up a 23.4% loss for the year.

– The Singapore economy has bottomed as its lockdown eases. However, after the initial lift-off, recovery has been on an upward grind.

– We expect uneven sector performances until borders are reopened or a vaccine is found. Sectors we favour are land transportation, property, electronics and REITs.

iX Biopharma Ltd – Potency for the long haul

Recommendation: BUY (Initiation); TP: S$0.455

Last Done: S$0.235; Analyst: Tay Wee Kuang

– Shift towards commercialisation of WaferiX subligual delivery of drugs could bump up revenue by as much as 250% in FY21e, backed by planned capacity expansion.

– Out-licensing of the sublingual ketamine wafer, Wafermine, for Phase 3 development will be a major catalyst and expected to turn iX Biopharma profitable in FY21e.

– Specialty pharmaceutical and nutraceutical drugs will benefit from the planned six-fold increase in production capacity to meet the expected surge in demand.

– Initiate coverage with BUY and target price of S$0.455, based on DCF valuation (WACC 10.0%).

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