Daily Morning Note – 24 August 2021

Dear valued client,

Stocks in Asia look set to open higher Tuesday after a boost to the U.S. vaccination drive allayed some concerns over the delta strain’s economic impact, lifting U.S. equities. The dollar tumbled and oil surged

Futures rose in Japan, Australia and Hong Kong. U.S. shares extended a rebound from last week’s selloff on the prospect of more vaccine mandates to underpin economic reopening, after the shot made by Pfizer Inc. and BioNTech SE won full approval. The tech-heavy Nasdaq 100 reached a record. U.S. futures edged up.

The dollar slid and commodities surged, including oil’s biggest jump in nine months, in a return of the reflation trade linked to the recovery from the pandemic. Treasuries were steady ahead of the Jackson Hole symposium.


SG News

A subsidiary of SeaTown, an independently-managed portfolio company under Temasek Holdings, has sold 450,000 shares in Nanofilm Technologies for a total of $1.95 million, or $4.3356 per share. Temasek Holdings is one of the substantial shareholders in Nanofilm. The shares were disposed of by an investment fund managed by a subsidiary of SeaTown on Aug 18. The disposal took place on the same day that the Capital Group Companies, another substantial shareholder of the group, cut their stake in the group. The sale brings the total stake held by SeaTown to 5.98% from 6.04% previously.

The shareholders of Sembcorp Marine (SembMarine) have approved the group’s proposed renounceable underwritten rights issue on Aug 23 after the group’s extraordinary general meeting (EGM) held earlier on the same day. The rights issue will seek to raise gross proceeds of some $1.5 billion with an issue price of 8 cents per rights share. Following the EGM, SembMarine announced that the resolution received an overwhelming 98.05% votes that supported the move.

iX Biopharma has narrowed its loss for the year ended June 30 by 22% to $8.2 million, thanks to better gross margins and higher sales of $1.7 million, up 77% over the preceding FY2020. The company’s top-line was boosted by robust demand for its nutraceutical products and WaferiX-based product development services from pharmaceutical companies in China. The company was able to achieve this even though there were periods of border closures in Australia during the financial year, which impeded its plans to expand its manufacturing capacity and led to constraints on its production capacity. The demand in China grew thanks to careful spent on marketing which helped drive awareness and interest. On the back of the overall higher level of business activity, its gross loss narrowed by 35% to $0.4 million for FY2021 and its gross loss margin was slashed to 22% from 60% in FY2020.

HC Surgical Specialists (HCSS) will be acquiring the remaining 49% stake in Jason Lim Endoscopy and Surgery (JLES) for $9 million. Upon completion of the acquisition, HCSS will own 100% of JLES. The acquisition is in line with the group’s long-term plans for growth, and will continue to enhance the working relationship with Dr Lim as well as motivate Dr Lim, having commenced his employment with the group since Aug 13, 2018, to further improve the profitability of JLES. The total purchase consideration of $9.06 million will be satisfied in the form of 80% cash payable over a period of two years and 20% shares in the share capital of the company, which will be issued two years later, at an issue price based on the volume weighted average price of the company’s shares for the full market day on the day immediately prior to the issuance.

Emerging Towns & Cities Singapore (ETC) is advising shareholders that it is expecting to report a loss for its 1HFY2021 ended June. The loss is mainly attributable to the company’s ongoing process of finalising the valuations on the group’s investment properties as at end-June. Based on indicative values, the company expects to recognise fair value losses on the group’s investment properties at the Golden City project, which are non-cash in nature; write-down of the group’s development properties at the Golden City project in 1HFY2021, which are non-cash in nature; and lower revenue recognised for the sales of Golden City property units in 1HFY2021. This profit guidance is based on a preliminary review of the unaudited financial results of the group for 1HFY2021. The group is still in the process of finalising the financial results for 1HFY2021 and further details of its financial performance for 1HFY2021 will be disclosed when it announces its 1HFY2021 financial results on or about September 16, 2021.

US News

Tesla CEO Elon Musk on Monday called the latest release of the company’s experimental driver assistance software, FSD Beta 9.2, “actually not great” on Twitter. Specifically, Musk wrote: “FSD Beta 9.2 is actually not great imo, but Autopilot/AI team is rallying to improve as fast as possible. We’re trying to have a single stack for both highway & city streets, but it requires massive NN retraining.” The company sells a Full Self-Driving capability (or FSD) package for $10,000 or $199 per month in the US. This premium driver assistance system does not make Tesla electric vehicles safe for use without an attentive driver behind the wheel. FSD Beta is available only to some drivers who previously purchased FSD and Tesla employees. The beta version features new or newly revised functionality that is added to the car’s premium driver assistance features.

Shares of Uber and Lyft traded lower Monday after a California court ruled that Prop 22, a ballot measure that exempted gig workers from state labor law, was unconstitutional. Uber was down less than 1%, while Lyft dipped about 1.3%. Alameda County Superior Court Judge Frank Roesch wrote in a ruling late Friday that Proposition 22 is unconstitutional as “it limits the power of a future Legislature to define app-based drivers as workers subject to workers’ compensation law.” That makes the entire ballot measure “unenforceable.”

Target said Monday that it will roughly triple the number of Disney shops within its stores, helping to drive foot traffic as the holiday season approaches. The national retailer, which has about 1,900 stores in the U.S., began opening Disney shops in select locations in 2019. With the expansion, more than 160 Target stores will sell Disney-themed merchandise, from toys to costumes, by the end of year. In a way, Target’s partnerships are turning its stores into mini-malls where shoppers can conveniently browse a variety of products under one roof. Shoppers can get a vaccine or fill a prescription at a scaled-down CVS Health. They can order a Frappuccino at a Starbucks cafe. They can find dedicated displays of Apple gadgets and Levi Strauss denim. And they can try a lipstick sample or get beauty advice at mini Ulta Beauty shops, which began opening in select stores earlier this month.

Bitcoin hit $50,000 on Sunday to reach a more than 3-month high, as the cryptocurrency continues to rebound. The digital coin rose above that level around 10:40 p.m. ET on Sunday, according to data from Coin Metrics. It last traded at $50,296.43 at 8:55 a.m. ET on Monday. Bitcoin hit an all-time high over $64,000 in April but sold off heavily in June and July, even dipping below $30,000. One of the major reasons was renewed regulatory scrutiny from Chinese authorities which has forced bitcoin mining operations to shut down and move elsewhere.

PayPal is launching its cryptocurrency service in the U.K. The U.S. online payments giant said Monday it would let British customers buy, hold and sell digital currencies, starting this week. It marks the the first international expansion of PayPal’s crypto product, which first launched in the U.S. in October last year. “It has been doing really well in the U.S.,” Jose Fernandez da Ponte, PayPal’s general manager for blockchain, crypto and digital currencies, told CNBC. “We expect it’s going to do well in the U.K.” PayPal’s crypto feature lets customers buy or sell bitcoin, bitcoin cash, ethereum or litecoin with as little as £1. Users can also track crypto prices in real-time, and find educational content on the market.

The Food and Drug Administration is working to approve the Pfizer-BioNTech Covid-19 vaccine on Monday, The New York Times reported, citing sources. The review process could move past that date, the Times said, as paperwork and negotiations with the company continue. The move would make it the first Covid vaccine to go from emergency use authorization to full FDA approval. The FDA declined to comment on the Times report to CNBC. White House chief medical advisor Dr. Anthony Fauci told the Associated Press on Aug. 8 that he hoped vaccines would start receiving full approval “within the month of August,” adding that full approval would lead more companies and schools to mandate vaccines. U.S. companies have tightened vaccine rules for employees as Covid cases have spiked across the country in recent weeks, and some cited full approval from the FDA as part of the decision-making process.

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


Singapore Exchange Limited – Competition for SGX’s FTSE China A50 contract

Recommendation: Neutral (Maintained), Last Done: S$10.29

Target price: S$10.78, Analyst: Terence Chua

– Hong Kong Exchanges and Clearing Limited (0388 HK, Not Rated) (HKEX) will be launching the MSCI China A50 Connect Index in October this year, filling a gap in cross-border finance.

– This new derivative would plug a gap in financial instruments and regulations linking Mainland China with Hong Kong, potentially diverting volumes from SGX.

– FTSE China A50 Index Futures has the largest turnover of equity index futures for the SGX, accounting for 57.3% of its total equity index futures. We estimate that it contributed 20% to its overall derivatives revenue and 10% to its overall revenue in FY21.

Maintain NEUTRAL with lower TP of S$10.78, from S$11.54. FY22e earnings reduced by 6.1% as we factor in lower volumes for FTSE China A50 contracts. Our TP remain pegged to 25x FY22e P/E, +2SD of its 5-year mean.

>> Read more research reports

HK Reports – Read up on our Hong Kong reports here

Webinar Of The Week

Weekly Market Outlook: SG Banks, SGX, First Sponsor, Pan-United, IREIT, Prime US, Lendlease……

Date: 16 Aug 2021

For more on Market Outlook

Updates summarised in 3 minutes

Phillip Research in 3 minutes: #29 Keppel Corporation; Initiation

For more videos on Phillip in 3 Mins

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

The information contained in this email and/or its attachment(s) is provided to you for information only and is not intended to or nor will it create/induce the creation of any binding legal relations. The information or opinions provided in this email do not constitute an investment advice, an offer or solicitation to subscribe for, purchase or sell the e investment product(s) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise. You may wish to seek advice from an independent financial adviser before making a commitment to purchase or investing in the investment product(s) mentioned herein. In the event that you choose not to do so, you should consider whether the investment product(s) mentioned herein is suitable for you. PhillipCapital and any of its members will not, in any event, be liable to you for any direct/indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached to this email. The information and/or materials provided 揳s is?without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials.
Confidentiality Note
This e-mail and its attachment(s) may contain privileged or confidential information, which is intended only for the use of the recipient(s) named above. If you have received this message in error, please notify the sender immediately and delete all copies of it. If you are not the intended recipient, you must not read, use, copy, store, disseminate and/or disclose to any person this email and any of its attachment(s). PhillipCapital and its members will not accept legal responsibility for the contents of this message. Thank you for your cooperation.