Daily Morning Note – 22 October 2018

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YOUR PHILLIP SUMMARY

Stocks in Asia were mixed on Friday after China’s GDP growth for the third quarter of 2018 came in below expectations, which showed economic growth slowing to 6.5 percent year-over-year.

After a turbulent morning, Greater China markets rebounded strongly, following a series of measures by China’s securities regulator to support the struggling stock market. Over in Japan, however, the Nikkei 225 slipped 0.56 percent to close at 22,532.08, while the Topix index declined by 0.69 percent to end the trading week at 1,692.85.


RESEARCH REPORT

Singapore Exchange Limited – Derivatives thriving from volatile environment
Recommendation: BUY
Target Price: S$9.01

·1Q19 Revenue and PATMI was 5.6% and 6.5% lower than estimated respectively, due to weaker than expected revenues from Post Trade Services and Issuer Services.
·Securities business missed our estimates by 6.6% as the weaknesses in emerging markets and concerns over economic conditions lead to weaker flows.
·Derivatives business was the standout performer, achieving strong record revenues with a surge of 17% YoY in volume.
·Interim dividend per share spiked up 50% to 7.5 cents (1Q18: 5 cents); due to a change in dividend policy announced last quarter.
·We maintain our BUY recommendation for SGX and raise our Target Price to S$9.01 (previously S$8.93). We have changed our valuation method from DCF to P/E ratio multiple. Our Target Price is driven by 25.2x PER, in line with SGX’s peers.

BREAKING NEWS

Singapore’s business community has welcomed Friday’s signing of the European Union-Singapore Free Trade Agreement, with exporters of electronics, pharmaceuticals, chemicals and processed food products particularly well-placed to benefit.

AVIC International Maritime Holdings announced on Sunday evening that its controlling shareholder, Hong Kong-listed AVIC International Holdings, has informed AVIC that it is in preliminary discussions with potential investors for a possible disposal of its ship business.

Lion Asiapac cautioned on Saturday that it expects to report a loss for the first quarter ended Sept 30, due primarily to unrealised exchange loss arising from the depreciating Chinese yuan.

Viva Industrial Trust announced a clean-up distribution per stapled security of 1.692 Singapore cents, in line with the merger of ESR-Reit and VIT.

Sembcorp Marine and Teekay Offshore Partners have signed a US$166 million agreement for engineering, procurement and construction works related to the modification, repair and life extension of Teekay’s Petrojarl Varg FPSO ship.

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

Clients of Phillip Securities can keep updated with Country Strategy and Singapore Sector Reports by logging into: www.poems.com.sg > STOCKS > Research

Read the research report(s), available through the link(s) above, for complete information including important disclosures

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