Daily Morning Note – 25 October 2021


Asian stocks look set for a mixed start to the week as traders weigh elevated inflation and await earnings from major U.S. technology companies. Futures for Japan and Hong Kong fell, while Australia’s rose. Turkey’s lira fell to a record low after President Recep Tayyip Erdogan’s weekend threats to expel ambassadors of 10 foreign countries, including those of the U.S. and Germany. The dollar was steady against major peers in early Asian trading, while Bitcoin hovered around $61,000.

China expects a new Covid outbreak to worsen in the coming days, and officials are urging areas that have been affected to adopt “emergency mode.” The current outbreak has seen infections spread to 11 provinces. Meanwhile, the finance industry is ratcheting up pressure on Hong Kong to ease strict quarantine rules and abandon its Covid-zero policy. The Asia Securities Industry & Financial Markets Association said the city’s hard-line approach has put Hong Kong’s status as financial center at risk. Elsewhere, 3 million Americans retired early because of the Covid crisis; and Pfizer says its vaccine is 90% effective in kids aged 5 to 11.



Wealth management platform iFast Corporation reported a 23.3 per cent rise in group net profit for its third quarter ended Sep 30,2021 to S$7.6 million – from S$6.2 million net earnings in the same period last year. Revenue rose 23.4 per cent to S$55.5 million. The group’s assets under administration (AUA) increased 46.1 per cent year-on-year to hit a record S$18.38 billion as at Sep 30, 2021. For the year-to-date, AUA is up 27.2 per cent. This is the 6th consecutive quarter of record AUA, iFast said in its release issued over the weekend. On a per share basis, earnings rose to S$0.0274 in Q3 FY21, up from S$0.0227 a year earlier. The directors have declared an interim dividend of S$0.0130 per share for Q3 FY21, an increase of 62.5 per cent from the S$0.008 interim dividend for Q3 FY20. The interim dividend will be paid on Nov 16, 2021.

Accounting firm BDO has issued a disclaimer of opinion in its independent auditor’s report on Singapore Kitchen Equipment’s (SKE’s) financial statements for the year ended Dec 31, 2020. “We have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements,” BDO said. The reasons are linked to the 8 flagged transactions that were made public in August this year, with the matter reported to the Minister for Finance. Prior to the receipt of the debit note, the group had not recorded the expenses relating to the payment transactions in its accounting system. Other irregularities were subsequently identified, including uncovering of altered supplier’s invoices, cheque images and bank statements.

Singtel announced that its cyber security arm Trustwave has divested SecureTrust, its payment card industry compliance business, to Sysnet Global Solutions, for a cash consideration of US$80 million (S$107.9 million). In bourse filing the same day, the telco highlighted that the sale comes as part of Singtel’s strategic review of its digital businesses announced in May to optimise the Group’s resource allocation and reposition these assets for growth. Singtel added that certain Trustwave assets that are complementary to the group’s core telecommunications and system integration business in Asia Pacific will move into Singtel and its subsidiaries NCS and Optus.


Treasury Secretary Janet Yellen said she expects price increases to remain high through the first half of 2022, but rejected criticism that the US risks losing control of inflation. Inflation is expected to ease in the second half as issues ranging from supply bottlenecks, a tight US labour market and other factors arising from the pandemic improve, Yellen said on CNN’s State of the Union on Sunday. The current situation reflects “temporary” pain, she said. “I don’t think we’re about to lose control of inflation,” Yellen said, pushing back on criticism by former Treasury Secretary Lawrence Summers this month.

Wall St Week Ahead Tech giants’ earnings may be another test for markets at new highs. Apple Inc (AAPL.O), Microsoft Corp (MSFT.O), Google parent Alphabet Inc (GOOGL.O), Amazon.com Inc (AMZN.O) and Facebook Inc (FB.O) are all set to report earnings this week. Collectively, those five names account for over 22% of the weighting in the S&P 500, giving their stock moves enormous sway over the broader index. Overall, companies representing 46% of the S&P 500’s market value are due to post quarterly results next week, according to Goldman Sachs. Strong earnings reports have helped lift the S&P 500 (.SPX) to fresh record highs, with the benchmark index rising 5.5% so far in October. In September, the index posted its biggest monthly percentage drop since the pandemic began in March 2020.

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

Del Monte Pacific Limited – Turnaround underway

Recommendation: BUY (Initiation). Last Done: S$0.38

TP: S$0.60; Analyst: Vivian Ye

– US subsidiary Del Monte Foods Inc. (DMFI) turned profitable in FY21. It had been suffering losses since the acquisition in 2014. Loss-making factories were closed, low margin products exited, new products introduced and more distribution channels were established.

– Del Monte Philippines Inc. (DMPI) enjoys dominant market shares as high as 90% in the Philippines. Growth is expected from a new dairy product line, expanding distribution points and exports of fresh pineapples into China.

– Initiate coverage with BUY and TP of S$0.60. DMPL is currently trading at 8.2x FY22e, below the industry average of 16x. We apply a 20% discount to industry valuation due to the higher leverage. Stock catalysts expected from turnaround of DMFI and stable growth of DMPI in the Philippines. We peg DMPL to 13x FY22e P/E.

CapitaLand Integrated Commercial Trust – Containment measures slowing recovery

Recommendation: ACCUMULATE (Maintained), Last Done: S$2.13

Target Price: S$2.54, Analyst: Natalie Ong

– 9M21 revenue and NPI in line at 71.9% and 74.6% of our FY21e forecast respectively.

– Improving tenant sentiment and leasing enquiries, but operating metrics dampened by tightened restrictions in 3Q21, affecting physical viewings and tenant sales.

– Maintain ACCUMULATE and DDM-based (COE 6.27%) TP of S$2.54. Stock catalysts expected from further AEI and portfolio reconstitution.

Netflix Inc – Membership growth boosted by hit series

Recommendation : ACCUMULATE (Maintain); TP: US$724.00, Last Close: US$664.78

– 3Q21 results above expectations. YTD FY21 revenue/PATMI at 75/101% of our FY21e forecasts.

– Business metrics paid memberships and ARM boosted by hit series, “Squid Game” and “Money Heist”. Increase in prices across several regions is expected to drive ARM further.

– We estimate 4Q21 to be another strong quarter for NFLX due to low churn and quality produced content, which should help to support revenue growth.

– We raise our FY21e PATMI by 9% to US$4.9bn on lower than expected interest expense and effective tax rates YTD. We maintain our ACCUMULATE recommendation and unchanged DCF target price (WACC 9.0%) of US$724.00 as our FY22e assumptions remain unchanged.

Technical Pulse: Keppel Corp Ltd

Keppel Corp (SG: BN4) has been consolidating since January 2021 despite a breakout of the pennant/symmetrical triangle. Recent technical indicates that the stock is poised for a bullish rally

Buy spot: 5.51 Stop loss: 5.390 Take profit 1: 5.90 Take profit 2: 7.00

POEMS Podcast: Let the Money Talk

Recent Podcasts:

Thai Beverage PCL – Today’s Trading Idea Ep 16

iX Biopharma Limited – SGX Company Insights Ep 35

CapitaLand Investment Limited – SGX Company Insights Ep 34

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