Daily Morning Note – 20 July 2020
Stocks looked set for a mixed start to the week ahead of a ramp up in the earnings season. The euro fluctuated as EU leaders failed to reach an agreement on a recovery package over the weekend.
Futures dipped in Japan, and were little changed in Hong Kong and Australia. S&P 500 futures were steady after the gauge ended Friday higher to round out a third week of gains. Talks continued on a European stimulus deal after leaders of Germany and France walked out of a meeting with Dutch Prime Minister Mark Rutte following a dispute over details of the proposal. Oil slipped.
THE Securities Investors Association (Singapore), or Sias, does not support any potential rescue deals for Hyflux that lack a “concrete proposal” to resolve the debts due to holders of the embattled firm’s perpetual and preference shares (PnPs). In a press statement on Sunday, Sias chief David Gerald flagged that potential new white knights for Hyflux that have surfaced in the past few weeks have not made any offers yet for PnP holders.
THOMSON Medical expects to post a net loss for for the six months, as well as for the 18 months ended June 2020, due to a non-cash impairment loss in Malaysia and weaker contributions from certain segments, the mainboard-listed firm said in a profit guidance on Friday. The impairment loss arose from a significant decline in the market valuation of Thomson Medical’s 9.23ha freehold land within the Iskandar Development Region in Johor Bahru, Malaysia. This was due to political uncertainty in Malaysia and the weak property market amid the Covid-19 pandemic.
THE long stop date for Lippo Malls Indonesia Retail Trust (LMIRT)’s planned divestment of Pejaten Village and Binjai Supermall has been extended to July 23 after discussions with the parties involved, LMIRT’s manager announced in a Saturday bourse filing. In December last year, LMIRT Management entered conditional agreements to divest Pejaten Village in South Jakarta and Binjai Supermall in North Sumatra for 1.28 trillion rupiah (S$1.2 million). The buyer is NWP Retail, a joint venture between Warburg Pincus and PT City Retail Developments.
COVID-19 test kit maker Biolidics said late on Thursday that it anticipates it will take up to nine months to incorporate technology it recently licensed from the Agency for Science, Technology and Research (A*Star) into a new serology test kit. It was responding to queries from the Singapore Exchange (SGX) on Wednesday on the timing and details of the Catalist-listed company’s announcement on Tuesday night.
PROPERTY developer OUE Ltd on Friday announced that it will sell US Bank Tower – known for its cameos in Hollywood movies and a sky-high outdoor glass slide – for US$430 million. The sale price is about two-thirds of the property’s US$650 million fair value as at Dec 31, 2019. The price was arrived at after taking into account, among other things, the property’s market value and the current US property market conditions amid the Covid-19 pandemic.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, PSR
Technical Analysis: Singapore Stocks – Range bound market expected
Analyst: Chua Wei Ren
– Singapore’s GDP contract 41.2% in Q2 after the lingering effect of the Circuit Breaker from late April to early June.
– The Singapore stock market resume selling after price fails to sustain the rally beyond the key resistance level.
– Major large cap stocks have seen market reverse their gains after a good stellar growth 2 weeks ago.
– Despite poor economic outlook, the stock will likely form a ranging corrective pattern towards end of Q3.
Technical Analysis: DXY & Gold update – Fed’s potential rate cut and Q.E expectation send dollar lower
Analyst: Chua Wei Ren
– The U.S market dollar index (DXY) fell for the fourth straight weeks as the COVID-19 is still the key subject to market’s weakness.
– The ongoing EU recovery fund meeting remains in deadlock and this may cause uncertainty in the Euro, which is heavily weighted in the dollar index.
– Another reason is that the US dollar may face weakness is because the traders are factoring in further rate cuts and increase QE to support the economy.
Hyphens Pharma International Ltd – Building channels to establish business longevity
Recommendation: Accumulate (Initiation), Last Done: S$0.420
Target Price: S$0.435, Analyst: Tay Wee Kuang
– Exclusive distributorship of Specialty Pharmaceutical products confers high margins and strong customer loyalty.
– Expansion into both online and offline retail sales channel such as Watson’s, Guardian, Lazada and RedMart will spur growth across product portfolio.
– Hyphen Pharma continues to establish its presence within the region with expansion of product portfolio through new product launches and footprint into various sales channels.
– Initiate coverage with ACCUMULATE rating and a target price of S$0.435.
Manulife US REIT – Quality that speaks for itself
Recommendation: BUY (Initiation), Last Done: US$0.705
Target Price: US$0.80, Analyst: Natalie Ong
– Favourable portfolio attributes – occupancy of 96.5%, long WALE of 5.7 years, built-in rental escalation (c.2% p.a.), low expiries (4.4%/6.4% FY20/FY21), and high tenant retention of 76% in FY19.
– Relevance and preference for a physical workplace to continue; demand for office to moderate not abate.
– Initiate coverage with a BUY and TP of US$0.78; attractive FY20e/FY21e yield of 8.8%/9.0% and 0.88x P/NAV trading close to historical low (0.8x).
Prime US REIT – Prime for resilience
Recommendation: BUY (Initiation), Last Done: US$0.765
Target Price: US$0.88, Analyst: Tan Jie Hui
– Attractive yields of 8.9% underpinned by resilient portfolio attributes.
– Long WALE with minimal lease expiry in FY20, diversified income contribution and built-in rental escalation to support the portfolio’s gross rental and distributable income.
– Initiate coverage with a BUY and a target price of US$0.88.
SG Bonds Weekly – Week of 20 July 2020
Credit Analyst: Timothy Ang
– Last week, the performance was mixed both in equities and bonds. Asian investment grade bonds enjoyed higher yield compression compared to Asian high yield bonds.
– ESR-REIT proposed a merger with Sabana REIT, for a consideration of S$777mn, financed with S$397mn equity and S$460 debt. The combined entity gearing level is expected to be 41.7%.
– Interest rates and government bond yields have stabilised as markets entered the earnings season both in the US and in Singapore.
HK Reports – Read up on our Hong Kong reports here
Webinar Of The Week
Date: 06 July 2020
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