Daily Morning Note – 20 November 2018


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US Stocks dropped sharply on Monday as the biggest and most popular technology stocks plunged. Facebook and Apple led the losses. The popular “FAANG” trade made up of Facebook, Amazon, Apple, Netflix and Alphabet is now in a bear market with each member down more than 20 percent from their one-year highs.

Stocks in Asia were mostly higher on Monday as ongoing tensions between the United States and China continued to weigh on investor sentiment.

Gold inched up on Monday as the dollar fell to two-week lows after Federal Reserve officials’ comments about the U.S. economy suggested the central bank may be nearing the end of its tightening cycle. A softer dollar makes gold cheaper for holders of other currencies.

Oil prices rose in choppy trade on Monday, under pressure from growing supply but supported by a reported drawdown of U.S. oil inventories, potential European Union sanctions on Iran and possible OPEC production cuts.

Source: CNBC


Q & M Dental Group – Dialling back our growth expectations

Recommendation: NEUTRAL(Downgraded), Last Close Price: S$0.500

Target Price: S$0.513, Analyst: Tin Min Ying

– 9M18 Revenue met only 59% of our FY18e estimates due to lower than
expected revenue from clinics. We previously modelled 20% YoY revenue
growth for FY18e.

– 9M18 PATMI met 70% of our FY2018 estimates due to margin expansion.

– Currently has 72 dental outlets, 4 medical outlets in Singapore, 16 dental
outlets in Malaysia and 1 dental outlet in PRC.

– Downgrade to NEUTRAL with a lower TP of S$0.51 (previously S$0.65). With a
more moderate pace of clinics expansion as well as lesser CHAS claims made by
patients due to the government’s tightening measures, we lowered our FY18-
FY19 revenue and PATMI estimates by 18-32% and 10-14% respectively. We
reduce PER to 25x from 27x, which is line with peers’ average FY18e and FY19e
PER (excluding hospitals).

SHS Holdings Ltd – A Setback in Solar plant

Recommendation: ACCUMULATE (Downgraded), Last Done Price: S$0.215

Target Price: S$0.24, Analyst: Alvin Chia

– Revenue improved 43.5% YoY, but earnings dragged down operational

– The construction of the Bangladesh solar farm is delayed three quarters and is
estimated to complete end FY19e.

– We revised FY19e earnings downwards by 36% due to delay in the solar plant.
Downgrade to ACCUMULATE with a lower target price of S$0.24. Our valuation
is derived from a 10X PE of FY19 earnings.

Banking Sector – The exciting fintech in Myanmar

Analyst: Tin Min Ying

– We attended “Wave Money: Defining and Leading Mobile Money in Myanmar”.
Brad Jones, CEO of Wave Money and Melvyn Pun, CEO of Yoma Strategic
provided insights into the growth potential and trajectory of Myanmar’s
FinTech and Real Estate sectors.

– Wave Money is Myanmar’s first non-bank organization to provide mobile
financial services since 2016.

– 36,000 agents in 289 townships

– 5 million active users as at end October 2018

– Achieved cash flow breakeven in September 2018

– First licensed provider under the Central Bank of Myanmar’s mobile financial
services regulation in October 2016

Singapore Industrial REITs – Industrialists’ outlook clouded by trade protectionism

Analyst: Tin Min Ying

– Maintain Equal Weight view on Industrial REITs sector

– 9M 2018 sector occupancy has been stable and Rental Index trend lower in
smaller increments

– Demand-side looks fragile, as manufacturing and export data are moderating

– Maintaining our view that rental bottom is likely to be delayed to 2019, and
generally negative reversions to persist for at least 1H 2019


Societe Generale fined US$1.3b for US sanctions violations. US officials fined Societe Generale US$1.3 billion after charging the French bank with violating US sanctions on Cuba, Iran and other countries in a criminal settlement unveiled Monday. The financial penalty is the second largest ever on a financial institution for violating US sanctions, said the Department of Justice, which was joined in the action by the Federal Reserve, US Treasury Department and New York authorities.

Hyflux Ltd sells stake in Indonesian bottled water firm for S$32m. Water treatment firm Hyflux Ltd, which remains in the midst of restructuring its debt even as it secured a white knight about a month ago, on Monday said that it has sold its 50 per cent stake in a firm that sells bottled drinking water in Indonesia for S$32 million. The sale price reflects a loss of S$300,000 against the net asset value of Hyflux’s shareholding in the bottled drinking water firm.

Capitaland‘s serviced residence arm, The Ascott, has formed a strategic alliance with Indonesian property developer Ciputra Development Group, under which Ascott will manage serviced residences to be developed by the latter in Indonesia and China over the next five years.The first property, the 253-unit Citadines Sudirman Jakarta, will open in 2021.The alliance was signed at the opening ceremony of the Ascott Sudirman Jakarta, which Ascott acquired from Ciputra last year. Since partnering Ciputra in 1996 for the Somerset Grand Citra Jakarta, which is jointly owned with Ascott Residence Trust, Ascott has also acquired the Ascott Kuningan Jakarta from Ciputra in 2014.

SATS to build kitchen in Tianjin town; revises stakes in China JVs with Wilmar. SATS Ltd, the chief ground-handling and in-flight catering service provider at Singapore’s Changi Airport, on Monday said that it will build a central kitchen in Hexiwu Town Food Zone as part of an investment agreement between Tianjin Wuqing Hexiwu Town Government and its unit SATS China. Under the agreement, SATS China will incorporate a subsidiary in Tianjin with a registered capital of 120 million yuan (S$23.7 million) to build and operate a central kitchen on land measuring about 20,000 square metres.

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

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