Daily Morning Note – 23 February 2022

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Singapore stocks ended the day lower on Tuesday (Feb 22) amid escalating tensions between Russia and Ukraine. The benchmark Straits Times Index (STI) was a sea of red as all 30 of its constituents either fell or ended flat, closing 1 per cent or 35.78 points lower to hit a 1-week low of 3,400.58. Elsewhere, major indices in Japan, Hong Kong and South Korea closed with deeper losses of between 1.4 per cent and 2.7 per cent.

Wall Street stocks fell sharply on Tuesday after US President Joe Biden announced new sanctions on Russia following its latest escalations in the Ukraine crisis. Biden, in a White House address, said the penalties on Russia would go “far beyond” existing sanctions and include moves to cut the country off from Western financing by targeting Moscow’s sovereign debt. The Dow Jones Industrial Average finished down 1.4 per cent, or about 480 points, at 33,596.61. The broad-based S&P 500 dropped 1.0 per cent to 4,304.76, while the tech-rich Nasdaq Composite Index slid 1.2 per cent to 13,381.52.

Stocks to watch: Thai Beverage

Top gainers & losers




Thai Beverage is set to revive the initial public offering of its brewery unit in Singapore after shelving the planned first-time share sale twice due to Covid-19, according to people with knowledge of the matter. The maker of Chang beer, controlled by Thailand’s richest man Charoen Sirivadhanabhakdi, is working with financial advisers to gauge investors’ interest in BeerCo, said the people. ThaiBev is still seeking to raise about US$2 billion from the brewery business’s IPO, the people said, asking not to be identified as the process is private. Shares in ThaiBev trimmed losses in Singapore after the Bloomberg News report, closing down 0.7 per cent after sinking as much as 2.9 per cent earlier in the day.

Aztech Global, the technology unit of Aztech Group, on Tuesday (Feb 22) posted a 33.5 per cent increase in net profit to S$74.4 million for the full year ended Dec 31, 2021. While the global supply chain remains vulnerable to disruptions amid the ongoing pandemic, Aztech Global is looking to drive growth and diversify across multi-sectors powered by the Internet of Things (IoT) trend, it said in its financial statement. Revenue came in S$624.4 million, 28.9 per cent higher than the S$484.3 million the year before, largely due to the huge jump in fourth-quarter revenue. Despite the tough operating environment posed by the global logistical and component challenges, revenue for the fourth quarter rose 65.3 per cent quarter-on-quarter and 5.2 per cent year-on-year to S$233.7 million. IoT devices and data-communication products were the key growth drivers with the segment advancing 39.5 per cent to S$597 million, accounting for 95.6 per cent of total revenue. Earnings per share for the period was 10 Singapore cents, up from 9.01 cents the year before.

Despite disruptions to operations and diminishing medical tourism amid the pandemic, Catalist-listed Singapore Medical Group (SMG) on Tuesday (Feb 22) posted a 78.8 per cent rise in net profit to S$15.6 million for the full year ended Dec 31, 2021. This was largely due to the increase in revenue and a S$1.5 million one-off gain from the remeasurement of previously held equity its joint venture, SMG International (Vietnam). Revenue rose 15.5 per cent to S$100.8 million for the full year from S$87.3 million the year before. This was attributed to the rising demand across the group’s health and diagnostic and aesthetics segments as well as organic growth at its existing clinics. Executive director and chief executive Beng Teck Liang said that while the pandemic and absence of medical tourism had weighed on operations, the company was able to tap structural shifts in demand within key specialist verticals such as aesthetics. This was thanks to the group’s diversified nature in operations as well as the resilient domestic demand for their specialist healthcare services, he said. Earnings per share for the full year stood at 3.23 Singapore cents, compared with 1.81 cents the previous year.


US home prices in 2021 saw their biggest increase in at least 34 years, according to data released Tuesday, as buyers spent the year snapping up homes and builders struggled to keep up. Home prices surged 18.8 percent last year, according to the S&P CoreLogic Case-Shiller US National Home Price index, the biggest jump in its existence and much more than the 10.4 per cent jump seen in 2020. The US real estate market last year saw the most existing homes sold in 15 years, with sales topping six million even as supply sunk to an all-time low by the close of the year. Builders have had to deal with double-digit increases in material costs as well as a shortage of workers. That pushed home prices higher, and played a role in consumer prices experiencing their largest jump in decades. The inflation wave is expected to ease this year as the Federal Reserve raises interest rates and global supply chain snarls ease, and Craig J. Lazzara, Managing director at S&P Dow Jones Indices, predicted higher lending rates may also cool the housing market.

HSBC Holdings is being investigated by US regulators over bankers’ misuse of services such as WhatsApp. The London-based bank is co-operating with the Commodity Futures Trading Commission probe into the use of “non-HSBC approved messaging platforms for business communications,” according to its annual report published alongside earnings on Tuesday. HSBC chief executive officer Noel Quinn told Bloomberg News the CFTC’s work was part of a broad investigation by US authorities. “I don’t think it’s specific, I think it’s general across all financial institutions,” said Quinn in a phone interview. “They’re looking at the use of mobiles and WhatsApp and text messages to make sure it’s appropriate,” he said. In December, the CFTC and Securities and Exchange Commission fined JPMorgan US$200 million after finding that staff at the bank had for years shrugged off their surveillance duties and sent work-related messages using platforms such as WhatsApp or their personal email addresses.

Oil edged close to US$100 a barrel on Tuesday after Moscow ordered troops into two breakaway regions in eastern Ukraine, but pared gains to end near 2014 highs following Western efforts to stop what they fear is the beginning of a full-scale Russian invasion. The United States and Britain announced sanctions targeting Russian banks, while the European Union blacklisted more politicians and Germany put the brakes on the US$11 billion Nord Stream 2 gas pipeline project. “The market obviously pumped in excess risk premium as Russia entered the separatists’ portion of the Ukraine and this fear premium gradually dissolved,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois. Global benchmark Brent crude traded as high as US$99.50 a barrel, its highest since September 2014, before settling at US$96.84 with a US$1.52, or 1.5 per cent, gain. US West Texas Intermediate (WTI) crude also hit a seven-year high as it peaked at US$96 a barrel, before ending at US$92.35, US$1.28, or 1.4 per cent, higher from Friday. The US market was closed on Monday for a public holiday. US President Joe Biden announced the first wave of sanctions against Russia, targeting Russian banks and sovereign debt, and vowed steeper punishments ahead if Russia continues its aggression. The sanctions did not include energy supplies.

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

Raffles Medical Group Ltd. – Downtime ahead

Recommendation: NEUTRAL (Maintained); TP: S$1.27 (prev. S$1.35)
Last Done: S$1.27; Analyst: Paul Chew

– FY21 revenue/PATMI beat our estimates at 104%/111% of our forecast. Earnings beat from higher-than-expected COVID-19-related services and government grants.

– FY21 dividend of 2.8 cents is a 12% improvement from a year ago.

– We expect FY22e to be a weaker year for the company. COVID-19-related services are expected to decline, full-year losses from RafflesHospitalShanghai and a slower recovery in foreign patients. Foreign patient volume may be softer than pre-pandemic levels due to regional competition and substitution with local healthcare. Our DCF is lowered from S$1.35 to S$1.27. We raised our discount rate from higher risk-free assumptions and cut FY22e earnings by 8%. Our NEUTRAL recommendation is maintained. There will be some downtime in earnings until volume from foreign patients recovers and hospitals in China achieve scale and profitability.

Lendlease Global Commercial REIT – Delivering a JEM as promised

Recommendation: ACCUMULATE (Maintained), Last Done: S$0.83 Target Price: S$0.94, Analyst: Natalie Ong

– Proposed acquisition of the remaining 68.15% stake in JEM is marginally accretive at 0.1% and will double LREIT’s AUM and market capitalisation, increasing its visibility and investor relevance.

– Strong tenant demand from JEM’s dominant positioning in the Jurong East catchment and stable income from the office component will help to anchor LREIT’s portfolio, forming 58% of FY23e NPI.

– Maintain ACCUMULATE and DDM TP of S$0.94. We tweak our forecast to incorporate the acquisition of the remaining 68.15% stake in JEM. FY22e/23e DPUs have been increased by 1.7%/0.3% while FY24-26e DPUs were lowered by 0.4-1.1% due to the enlarged share base. The current share price implies FY22e DPU yields of 6.0%.

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Date: 21 February 2022

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