Daily Morning Note – 23 March 2021


Asian stocks were set to track Wall Street gains on Tuesday as bond yields pulled back, easing concerns about inflation although investors are keeping a close eye on rising COVID-19 cases in Europe. Hong Kong’s Hang Seng index futures rose 0.5%, while Australian stocks were up 0.3%. In Japan, Nikkei futures were 0.8% higher. E-mini futures for the S&P 500 gained 0.06%. Global equities gained and safe-haven assets rallied on Monday as investors balanced concerns over rising COVID-19 cases in Europe against a break in the recent run-up of bond yields. Shares earlier took a hit from a surprise move by Turkey’s President to replace the central bank governor with a critic of high interest rates. On Wall Street, the Dow Jones Industrial Average rose 0.32%, the S&P 500 gained 0.70% and the Nasdaq Composite added 1.23%. Benchmark 10-year notes last rose 15/32 in price to yield 1.6787%, down from 1.732% late on Friday.



CAPITALAND on Monday said the proposed overhaul of its structure is meant to sharpen the group’s focus on strategic growth and create shareholder value. The real estate behemoth is looking to split itself into two: the real estate development business will be placed under private ownership, while the investment management platforms and lodging arm will be consolidated into a newly created entity. CapitaLand Investment Management (CLIM), to be listed on the Singapore Exchange (SGX), will hold the managers of all the group’s listed real estate investment trusts (Reits) and business trusts, as well as selected unlisted funds currently managed by CapitaLand. The lodging business, including the serviced-residence management platform under The Ascott Limited, will also become a part of CLIM.

ST Engineering is making a US$2.4 billion all-cash bid for Cubic Corporation, a New York-listed provider of intelligent transportation solutions and payment systems. It also provides military communication systems. ST Engineering’s bid, at US$76 per share, trumps a US$70 per share offer earlier tabled on Feb 8 by Veritas Capital and Evergreen Coast Capital Corporation. If successful, this will mark ST Engineering’s largest ever acquisition. Thus far, its largest acquisition was US$506 million paid for US engine nacelle maker MRAS just two years ago. ST Engineering, in a statement, says it is “confident” that it has put forward a “superior proposal”. Cubic’s Transportation Systems provides the payment systems for various public transport systems across North America and Europe, such as the London Oyster card.

HLH Agriculture (HLHA), the wholly-owned subsidiary of Hong Lai Huat, has entered into a joint cooperation term sheet with Joe Green. The joint cooperation grants the right to Joe Green’s licensee to develop a light-weight concrete panel manufacturing plant in the construction material zone located in HLHA’s Aoral Eco City project in Cambodia. HLHA had, on March 9, obtained the in-principal approval to develop an Eco-City on its existing plot of land that’s located some 100km away from Cambodia’s capital Phnom Penh. Joe Green is a manufacturer of environmentally-friendly light-weight precast concrete hollow core wall panels for use in the building and construction industry. Under the agreement, HLHA will grant Joe Green the right to use 20,000 sqm of land located in its Aoral Eco-City project to develop, build and operate the manufacturing plant. The cooperation period will last for three years from the date of the agreement, with the option to extend.


Shares of Tesla jumped over 6% on Monday, getting a lift from a bullish report from Ark Invest, an influential shareholder in the electric car maker. Ark Invest said in a report on Friday it expects Tesla’s stock price to more than quadruple to $3,000 by 2025. Tesla was last trading at $698 a share. The asset management company run by Cathie Wood also predicted Tesla’s electric vehicle revenue would reach between $234 billion and $367 billion by 2025. Tesla’s total revenue in 2020 grew 28% to $31.5 billion.

Two special purpose acquisition companies (SPACs) backed by investment bank Lazard Ltd are aiming to raise as much as $500 million in initial public offerings, according to regulatory filings on Monday. Lazard Healthcare Acquisition Corp I and Lazard Fintech Acquisition Corp I are looking to raise $250 million each, saying they aim to merge with companies in the healthcare and fintech sectors, respectively. In January, another SPAC backed by the investment bank said it aimed to raise $500 million in a U.S. IPO, with an eye on the healthcare, technology, energy transition, financial and consumer sectors. SPACs are shell firms that have no business operations but are still listed. Their sole purpose is to use capital from an IPO to merge with a private firm, allowing them to go public with lesser regulatory scrutiny.

Cadbury chocolate-maker Mondelez International Inc said on Monday it would buy a majority stake in UK protein bar company Grenade, expanding the mix of its healthy snacks offerings. The terms of the deal were not disclosed. Sky News reported earlier in the day the deal was for 200 million pounds ($277.22 million). The move has perfect timin gas Mondelez has seen a surge in demand for its snacks and chocolates as people hunkered down during COVID-19 lockdowns. Last quarter, the company’s revenue rose nearly 6% in Europe and about 14% in North America, Mondelez’s two largest markets.

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


Ascendas REIT – Expanding European footprint

Recommendation: BUY (Maintained), Last Done: S$3.08

Target Price: S$3.64, Analyst: Natalie Ong

– S$960mn acquisition of 11 European data centres came four months earlier than anticipated, though below our S$1.5bn projection.

– Initial NPI yield of 6%, WALE of 4.6 years by GRI, portfolio occupancy of 97.9%. 58%/42% on triple net/colocation lease structures. 83% of leases have annual rental escalations of 1-3%.

– Acquisition deploys remaining 52.1% or S$612.5mn from S$1.2bn raised in November 2020, earmarked for this acquisition.

– Reiterate BUY. DDM TP (COE 6%) lowered from S$3.73 to S$3.64. We raise FY21e DPU by 0.3% to reflect sooner-than-expected acquisition but lower FY22-25e DPUs by 2.2-2.7% due to the smaller-than-projected portfolio size. AREIT remains our top pick in the sector for its scale and diversification.

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