Daily Morning Note – 22 February 2019


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Asia shares looked set to fall in the wake of a decline in U.S. stocks as investors grappled with concerns about economic growth and the latest twists in global trade. The S&P 500 dropped for the first time in four sessions after economic data in both Europe and U.S. came in below expectations, reigniting worries about the world economy. Alphabet slid amid questions about the company’s YouTube platform. Health-care stocks were pulled down as Johnson & Johnson dropped after the company said it received subpoenas from federal prosecutors tied to its talc baby-powder products. The 10-year Treasury yield rose above 2.69 percent, and the dollar gained against most major currencies. West Texas oil fell below $57 a barrel after an industry report showed American crude stockpiles continue to swell.


City Developments Limited – Still resilient in face of adversity

Recommendation: Accumulate (Maintained); Last close: S$9.54

Analyst: Tara Wong; Target Price: S$ 11.82

– 4Q18 and FY18 PATMI below our expectations, mainly due to impairment losses recorded.

– Dividend of 20.0 cents per share for FY18 (FY17: 18.0 cents) was declared (including a 6.0
cent special interim dividend that was paid out in Sep 2018).

– Robust demand for launched Singapore projects – including those launched after July 2018.

– Steadily ramping up recurring income stream with addition of two London commercial
buildings, ongoing AEI at Republic Plaza, and other potential AEI targets.

– Sizeable impairment losses recorded on back of U.S. hotels dragged 4Q18 PATMI down by
64%. Excluding this, and on a like-for-like basis, 4Q18 PATMI would have increased 17% YoY.

– Maintain ACCUMULATE with adjusted TP of S$11.82 (change of analyst).

CapitaLand Limited – Forging ahead

Recommendation: Accumulate (Maintained); Last close: S$3.43

Analyst: Tara Wong; Target Price: S$4.00

– FY18 Revenue and PATMI exceeded our forecasts. Uplift from higher handover of residential
units in China and Vietnam in 4Q18, as well as rental revenue from newly acquired
properties. Dividend of 12.0 cents was declared for FY2018.

– Strong bump-up in China residential sales – sold units and sales value almost doubled YoY in

– ROE at 9.3% had increased for third year running. The Group’s eventual goal is a double-digit
ROE. Operationally healthy on all fronts – retail, office, lodging.

– Certain new launches in China still to be deferred due to cooling measures, but inventory is
low and margins would still be a healthy double-digit figure even if taking into account the
current price caps.

– Maintain Accumulate with unchanged TP of S$4.00.

Singapore O&G Ltd. – Ceasing coverage

Recommendation: N/A, Last Done price: S$0.355

Target Price: N/A, Analyst: Tin Min Ying

– FY18 Revenue exceeded our full year expectations by 7%. Adjusted PATMI met our full year
estimations (excluding settlement fee receipt and legal fees from the dispute and impairment
of goodwill).

– O&G and cancer-related segments were the star performers, rising 15% YoY and 40% YoY

– Dermatology continues as a drag to group earnings, contracting 2% YoY due to the slowdown
in medical tourism.

– Added one paediatrician and one dermatologist in FY18. Total number of specialists in FY18
at 14 (FY17: 12 specialists).

– Proposed final dividend of 0.90 cents/share. FY18 dividend per share: 1.70 cents (FY17: 1.50

– Ceasing coverage due to reallocation of internal resources.

Sembcorp Marine Ltd – Unexpected profit in 4Q18

Recommendation: NEUTRAL, Last Closing Price: S$1.7

Target Price: S$1.76, Analyst: Chen Guangzhi

– New orders from the renewable energy solution and FPSO replenished the order book.

– Order book remains at a five-year low.

– Net gearing is rising to their highest levels.


Venezuela’s oil inventories have climbed to their highest levels in at least five years, according to satellite data, a sign that U.S. sanctions are stifling sales and could continue to drive up global prices.

Huawei Technologies Co. said it would hire 200 new employees and increase research and development spending in Canada as the Chinese company attempts to counter U.S. efforts to pressure allies to abandon its equipment over security concerns. On the other hand, Mr Trump wrote on Twitter: “I want the United States to win through competition, not by blocking out currently more advanced technologies.”

Volkswagen chief executive Herbert Diess has warned import tariffs from the US could cost the German carmaker billions of euros each year. Mr Diess said the US threat of a 25 per cent tariff on European-produced cars is the biggest worry for the continent’s carmakers in 2019.

The chief executive of Kraft Heinz, Bernardo Hees, says that valuations among its peers have become “more attractive” since its $143bn swoop for Unilever collapsed two years ago, an indication that the acquisitive owners of the food company could soon return to dealmaking. Separately, Kraft Heinz disclosed Thursday that it has received a subpoena from the Securities and Exchange Commission in October as part of an investigation into the company’s accounting policies.

In response to queries from The Business Times, the Ministry of Manpower said the greatest impact from the upcoming foreign worker quota cuts for the services sector would be felt in accommodation; arts, entertainment and recreation; food services; real estate services; and transportation and storage.

Hyflux has convinced a Singapore High Court to order a scheme meeting for creditors on April 5, where they will vote on whether to accept its proposed rescue plan.

ERA Realty Network is rolling out a service tailored for wealthy buyers across the Asia-Pacific, known as Plush, which will help the firm’s staff be more adept at catering to the increasing demands of high-net-worth individuals.

Best World International has obtained permission to extend its trading halt by up to two more days in order to prepare, finalise and release a clarification announcement to address certain matters, it said on Thursday.

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

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