Daily Morning Note – 23 July 2021
PHILLIP SUMMARY
Asian stocks look set for a cautious start Friday after U.S. shares edged toward an all-time high and Treasuries climbed as traders digested some mixed economic data and the latest spate of earnings.
Equity futures dipped in Australia and Hong Kong. Japan is closed for a holiday. The S&P 500’s biggest three-day advance since April took it nearer a new peak, while the Nasdaq 100 closed at a record. Technology firms like Microsoft Corp. rallied and cyclical stocks lagged. Twitter Inc. jumped on an upbeat outlook, but Intel Corp. fell on a lackluster sales forecast. U.S. stock futures rose.
Longer-term Treasuries snapped a two-day drop and strong demand for an auction of 10-year inflation-protected securities produced a record-low yield. The dollar was steady and the euro lagged Group-of-10 peers on the European Central Bank’s plan to maintain ultra-loose monetary policy as long as needed.
BREAKING NEWS
SG News
ARA LOGOS Logistrics Trust’s distribution per unit (DPU) rose 10.6 per cent to 2.57 Singapore cents for the first half ended June 30, 2021, from 2.323 cents the year before. The growth in H1 2021 DPU came despite the enlarged unit base from the issuance of new units in relation to ARA Logos’ maiden Australian portfolio acquisition from its sponsor Logos, the real estate investment trust’s (Reit) manager said in a bourse filing on Thursday. On a like-for-like basis, DPU would have been 0.7 per cent higher on the year at 2.524 Singapore cents after adjusting for the S$2 million retained distributable income in H1 2020 and the S$600,000 capital distribution in H1 2021. Gross revenue for the half-year period was up 15.2 per cent to S$66.6 million, from S$57.8 million the year before. Meanwhile, net property income (NPI) grew 17 per cent year on year to S$51.4 million, from S$43.9 million.
The manager of Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (Sabana Reit) has announced a distribution per unit (DPU) of 1.48 Singapore cents for the half year ended June 30, 2021, more than three times the DPU of 0.47 Singapore cents a year ago. The DPU increase was mainly attributable to the manager’s retention of 55 per cent of Sabana Reit’s distributable income in H1 last year to conserve the group’s capital amid the Covid-19 outbreak. If the income had not been retained, Sabana Reit’s DPU would have been 1.05 cents in H1 2020. Gross revenue rose 14.1 per cent to S$39.1 million, driven by contributions from higher occupancies at New Tech Park, 23 Serangoon North Avenue 5, and 10 Changi South Street 2. “Our proactive leasing management, together with the completion of our asset rejuvenations for select properties, contributed to the improved occupancy. We were able to attract more tenants from expansionary, resilient sectors,” the manager said in a regulatory filing on Thursday morning.
Suntec real estate investment trust (Reit)‘s distribution per unit (DPU) rose 26.1 per cent to 4.154 Singapore cents for the six-month period ended June 30, 2021, up from 3.293 cents for the same period a year ago. DPU for the quarter ended June 30, 2021 was up 37.6 per cent at 2.109 cents, from 1.533 cents a year earlier. Gross revenue was up 11.6 per cent to S$166.8 million for the six-month period, from S$149.4 million a year ago. This was due to its resilient office portfolio in Singapore, Australia and the United Kingdom, the Reit manager ARA Trust Management (Suntec) said in a bourse filing on Thursday.
OUE Lippo Healthcare (OUELH) said on Wednesday that its flagship hospital in Yangon has temporarily closed its emergency department amid a recent spike in Covid-19 infections in Myanmar. In an exchange filing, OUELH said the Hlaing Tharyar Hospital had announced last Thursday that the emergency department would be temporarily closed due to “a shortage of manpower, oxygen and medical supplies”. It noted that the hospital’s other departments were still functioning. The group jointly operates and manages three hospitals, three clinics and a medical centre in Myanmar through a joint-venture partner, First Myanmar Investment Public Company Limited. OUELH said: “Hlaing Tharyar Hospital is expected to resume the operations of its emergency department once it is able to stabilise its oxygen and medical supplies and manpower needs to continue to provide quality care for all its patients.”
Three people were charged on Thursday with several counts of contraventions under the Securities and Futures Act (SFA) and the Corruption, Drug Trafficking and Other Serious Crimes Act (CDSA). The offences of the trio included insider trading of shares of mainboard-listed Broadway Industrial Group (BIG), communicating insider information concerning the company’s shares, as well as the acquisition or transfer of property that represented benefits of criminal conduct. In a release on Thursday, the Monetary Authority of Singapore (MAS) said two of the three individuals had purchased BIG shares ahead of the company’s announcement on August 22, 2016, that it had entered into a conditional sale and purchase agreement to sell two of its businesses. Tan Chee Keong, who was the chief financial officer of BIG at the time, had allegedly communicated “non-public and material information” concerning BIG’s sale of its businesses to Tay Yew Khem and Hui Choy Leng.
US News
Twitter shares rose as much as 9% in extended trading on Thursday after the social media company announced second-quarter earnings that came in stronger than analysts had anticipated. Twitter’s revenue grew 74% year over year in the quarter, according to a shareholder letter, with the company citing “a broad increase in advertiser demand.” In the prior quarter, revenue had risen 28%. Growth accelerated as the company lapped a quarter when revenue declined by almost 19%, resulting in the strongest growth since 2014. After a $1.38 billion loss in the year-ago quarter, on Thursday Twitter showed a $65.6 million profit.
Intel shares fell 2% after CEO Pat Gelsinger’s second earnings report at the helm of the American chip giant as investors assessed cautionary guidance on margins in the current quarter. Intel reported revenue and earnings per share that beat both the company’s own forecast as well as Wall Street expectations, attributing the beat to strength in its business unit that produces chips for PCs. Intel said that PC unit sales were up 33% over last year. Intel raised its guidance for 2021 by $1 billion to $73.5 billion in adjusted revenue and full year earnings-per-share of $4.80. Intel’s results suggest that a boom in computer sales that started during the Covid-19 pandemic may continue even as people return to offices and schools.
American Airlines and Southwest Airlines posted second-quarter profits Thursday, getting a lift from federal aid and a surge in travel demand. Fort Worth, Texas-based American reported net income of $19 million, snapping five consecutive quarters of losses, thanks in part to more than $1 billion in federal payroll support. Revenue for the three months ended June 30 came in at $7.48 billion, up from just $1.6 billion a year earlier and ahead of Wall Street analysts’ forecasts, as customers returned to the skies in droves. Adjusting for one-time items, American had a loss of $1.1 billion or $1.69 as share. American said it plans to pay down $15 billion in debt by 2025. The most indebted of the U.S. airlines, American had a total debt of about $48 billion as of the end of the first quarter, according to FactSet.
General Motors will halt most U.S. and Mexican production of its profitable full-size pickup trucks next week due to the ongoing global shortage of semiconductor chips. The Detroit automaker confirmed the production cuts Wednesday for plants in Michigan, Indiana and Mexico that produce the Chevrolet Silverado and GMC Sierra pickups. GM has avoided halting production of its large pickups this year due to the parts shortage through aggressive supply chain tactics as well as building some vehicles without the needed chips to be completed later. It also has cut some features that require chips such as wireless phone chargers. “The global semiconductor shortage remains complex and very fluid, but GM’s global purchasing and supply chain, engineering and manufacturing teams continue to find creative solutions and make strides working with the supply base to minimize the impact to our highest-demand and capacity-constrained vehicles, including full-size trucks and SUVs for our customers,” the company said in an emailed statement.
The Australian antitrust regulator on Thursday kicked off an inquiry into the local units of Amazon.com, eBay and other online markets to ensure fairness in a sector where sales have soared through the coronavirus pandemic. The Australian Competition and Consumer Commission (ACCC), which previously slapped the world’s toughest content licensing rules on internet giants Facebook and Alphabet’s Google, called for industry submissions. “Online marketplaces are an important and growing segment of the economy so it is important that we understand how online marketplaces operate and whether they are working effectively for consumers and businesses,” ACCC Chair Rod Sims said in a statement. “We want to be sure that the rules that apply to traditional retail are also complied with in the online context.” The ACCC inquiry will take submissions until mid-August with a final report due in March 2022. Local representatives of Amazon and eBay were not immediately available for comment.
With the launch of Zoom Apps, the video platform that’s become synonymous with remote work (and pandemic life, for that matter) wants to help users chat, brainstorm, play games and even take a mid-day stretch all without having to leave the virtual meeting tool. The newest features aim to improve the worst parts of a virtual meeting by making real-time collaboration more seamless. For example, users can use Asana to manage tasks, Dropbox Spaces to share files, Dot Collector to brainstorm or SurveyMonkey to poll the meeting room in real-time. But the platform’s expansion comes at a time when worker burnout is as high as ever during the pandemic, complicated by blurred work-life boundaries, meeting overload and, yes, Zoom fatigue.
Shares of mining giant BHP Group jumped 3% in Australia on Thursday morning, after the company announced it will be supplying nickel to electric carmaker Tesla. In a statement on Thursday, BHP said one of its mines based in Western Australia, Nickel West, will be supplying the world’s largest electric vehicle maker with nickel, a key raw material used in EV batteries. “Demand for nickel in batteries is estimated to grow by over 500 per cent over the next decade, in large part to support the world’s rising demand for electric vehicles,” BHP Chief Commercial Officer Vandita Pant said in a statement. BHP currently derives most of its earnings from iron ore, used predominantly to make steel.
Smartphone makers shipped about 32.4 million devices in India between April and June, according to research firm Canalys. That was about 13% fewer handsets shipped compared with the previous three months. A devastating second wave of covid-19 in India between February and May prompted regional lockdowns and created economic disruption that ultimately stifled smartphone demand. “Smartphone vendors in India had assumed Covid-19 would not return, and several planned to invest in infrastructure for branded stores and partnerships with third-party offline channels,” Sanyam Chaurasia, an analyst at Canalys, said in a statement. “But once again they were quickly compelled to pivot to an online strategy.”
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
RESEARCH REPORTS
Koda Ltd – Furniture boom in the US
Recommendation: BUY (Initiation); TP: S$1.32
Last Done: S$0.80; Analyst: Vivian Ye
– FY21e PATMI expected to almost double with a boom in furniture demand as more work, study, entertain and spend time at home. Supported by increased exports to US. Year to May 2021, US furniture imports rose 44% YoY to US$24.9bn.
– Production capacity in Vietnam to expand following acquisition of land and factory building in March 2021. Vietnam is the world’s largest furniture exporter, exporting US$7.3bn of furniture to the US in 2020, up 31% YoY.
– Initiate coverage with BUY and TP of S$1.32, valued at 7.0x FY21e ex-cash PE. Stripping out net cash of US$13.7mn, Koda trades at ex-cash PEs of 3.3x/2.2x FY21e/22e PE. Catalysts expected from higher exports to US and increase in production capacity.
HK Reports – Read up on our Hong Kong reports here
Webinar Of The Week
Weekly Market Outlook: HRnetGroup, SPH REIT, Fortress Minerals, Banking Monthly, Singapore Weekly
Date: 19 July 2021
Updates summarised in 3 minutes
The Highlights EP01: LHN Limited – Optimisier of real-estate trends
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