Daily Morning Note – 26 August 2021

Dear valued client,

Asian stocks are set for a mixed start Thursday as traders await more clues about the regulatory outlook in China as well as the Federal Reserve’s approach to paring stimulus.

Futures rose in Japan but dipped in Australia and Hong Kong. U.S. contracts fluctuated after the S&P 500 and Nasdaq 100 edged up to records. The 10-year U.S. Treasury yield climbed ahead of the Jackson Hole meeting, which may offer fresh insight on how the Fed intends to scale back bond purchases. The dollar was little changed.

The rebound in Chinese stocks listed in the U.S. fizzled. Beijing’s sweeping crackdown on private industries is continuing to color sentiment and complicate the outlook for the world’s second-largest economy.

BREAKING NEWS

SG News

Temasek’s total deemed interest in Nanofilm Technologies International has increased from 5.93% to 6.04% following open market buying by a subsidiary entity. On Aug 24, Venezio, the subsidiary, paid near $3.05 million for 764,100 shares, which works out to an average of $3.99 each. This transaction took place around a week after SeaTown, a separate Temasek fund management entity on Aug 18 sold 450,000 Nanofilm shares at $4.3356, pocketing proceeds of $1.95 million.

Food and beverage company RE&S has reported earnings of $9.5 million for the FY2021 ended June 30, reversing from a loss of $5.4 million in the preceding year. Revenue in the same period was up 12% to $124 million, as the company generated more online sales. It plans to pay a final dividend of 0.85 cents, which, coming on top of the interim dividend of 0.85 cents, will bring the full year payout to 1.7 cents and a payout ratio of 60%. The company plans to maintain this payout ratio going forward. While the company is noted for its full-service Japanese restaurants, the growth driver for this FY2021 was from its so-called quick-service restaurants. This segment accounted for 40% of RE&S’ total revenue for FY2021, up from 22.6% in FY2016.

Shares of Union Gas Holdings jumped on Wednesday after the fuel-products provider proposed to acquire its substantial shareholder’s liquefied petroleum gas (LPG) distribution, bottling and storage businesses for S$75 million via a mix of cash and shares allotment. The move will allow Union Gas to expand its customer base to commercial and industrial users, on top of its current customer base of supplying bottled LPG cylinders to domestic households. It also paves the way for Union Gas to distribute bottled LPG cylinders to the wholesale space, or the provision of bottling and refilling of LPG cylinders to non-affiliated entities. The proposed deal will also allow Union Gas to gain ownership of two out of four bottling licences and bottling plants in Singapore, the group said in a statement on Wednesday.

Gaming hardware maker Razer posted a US$31.3 million net profit for the half-year ended June, turning around its year-ago loss of US$17.7 million. This comes on the back of record revenue of US$752 million, up 68 per cent year-on-year, said the US and Singapore-headquartered company on Wednesday. The bulk of its H1 topline comes from the hardware segment, where revenue grew 77 per cent to US$677.3 million. In the software segment, total user accounts increased 50 per cent year-on-year to about 150 million, while monthly active users grew by over 51.4 per cent. Razer attributed this to the rise in gaming, e-sports and livestreaming activities.

UOL Group’s wholly-owned subsidiary, UOL Treasury Services, has priced S$400 million in fixed-rate notes due 2028 at 2.33 per cent per annum, the property group said in a bourse filing on Tuesday evening. Order book for the seven-year, fixed-rate notes stood at S$700 million across 47 accounts, with 97 per cent of investors from Singapore, according to deal statistics seen by The Business Times. Fund manager and insurance accounts were allocated 74 per cent of the notes, bank and public sector accounts took up 22 per cent, while prime brokerages and others took the remaining 4 per cent. Net proceeds of the notes, which are the fourth series of notes under the group’s S$2 billion multicurrency medium-term note programme, will be used for refinancing of existing borrowings of UOL and its subsidiaries, the group said.

The automotive sector was hit the hardest by supply chain disruptions during the Covid-19 pandemic, according to a survey that covered six broad industries. Around 51.7% of respondents from the auto sector said disruptions to supply chains were “very significant” — the highest proportion across the six industries. The footwear and apparel industry came in second with 43.3% respondents reporting “very significant” disruptions. Meanwhile, only 6.7% from the IT, tech and electronics sector indicated the same. Over the past year, the movement of goods was disrupted as the global spread of Covid forced many countries to shut borders, close workplaces or limit exports. The spread of the more transmissible delta variant has again heightened such worries, as major Asian manufacturing hubs — such as China and Vietnam — in recent weeks locked down parts of their countries to curb a rise in Covid cases.

US News

American Airlines on Wednesday said August revenue is coming in lower than expected as a rise in Covid cases drives down bookings, the latest carrier to warn about the impact of infections on sales. “This has been and we expect will continue to be a very choppy recovery,” Vasu Raja, American’s chief revenue officer said during an investor conference. Raja said July revenue came in ahead of the airline’s expectations but that the increase in Covid cases has led to weaker near-term bookings and higher cancellations. “Given the fluidity of the current demand environment we are not ready to make definitive adjustments to our capacity plans or guides at this point in time,” Raja said.

Rocket Lab begin trading on the Nasdaq on Wednesday, becoming the latest space company to close a SPAC merger and go public — and adding substantially to its cash pile in the process. “We’re super excited to bring a high quality space asset to the market,” Rocket Lab CEO Peter Beck told CNBC. The company merged with special purpose acquisition company Vector Acquisition, which valued Rocket Lab at $4.8 billion in equity. The deal, and the $777 million in gross proceeds from it, will help the company grow its core small rocket business, further expand its spacecraft unit, and build a larger rocket called Neutron to take on Elon Musk’s SpaceX.

Securities and Exchange Commission (SEC) chair Gary Gensler has a warning for hundreds of Chinese companies that have raised billions of dollars in US markets: Submit to more scrutiny soon or get kicked out. In a Tuesday interview, he pledged to strictly enforce a three-year deadline that requires Chinese firms to permit inspections of their financial audits. If businesses refuse, their shares could be delisted from the New York Stock Exchange and Nasdaq as soon as 2024. “The path is clear,” he said. “The clock is ticking.” The tough stance would seem to squash the hopes of some on Wall Street that Mr Gensler might drag his feet in implementing the mandate from Congress and give Beijing more time to strike a deal with Washington regulators that allows the gravy train of Chinese stock sales to continue. They’ve been lucrative for big banks, exchanges and asset managers.

Supply constraints are weighing on Britain’s economy with several big-name firms announcing they have run out of stock on particular items. McDonald’s on Tuesday said it had ran out of milkshakes across the country. The U.S. fast food giant has also been deprived of some bottled beverages throughout its 1,250 British outlets this week. Last week, popular chicken chain Nando’s was forced to close around 50 restaurants across Britain due to poultry shortages, while KFC has also been unable to provide some menu items in recent weeks. The supply chain struggles are being widely attributed to a lack of truck drivers, caused by a confluence of new post-Brexit EU immigration rules, Covid-19 measures and self-isolation guidance.

Nordstrom shares fell Tuesday after the department store chain reported fiscal second-quarter sales remained below pre-pandemic levels. Compared with a year earlier, sales more than doubled, as shoppers used Nordstrom’s anniversary sale as a reason to head back to the mall and splurge on new shoes, dresses and activewear. But on a two-year basis, revenue was down 6%. Nordstrom was feeling more optimistic about the rest of the year and raised its outlook, following rivals Macy’s and Kohl’s, which did the same in recent days. But its shares were down more than 6% in extended trading. Nordstrom reported net income of $80 million, or 49 cents per share, compared with a loss of $255 million, or $1.62 a share, a year earlier. Analysts were expecting earnings of 27 cents per share. Revenue rose to $3.66 billion from $1.86 billion a year earlier, topping estimates for $3.36 billion.

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

TECHNICAL REPORTS

Sunpower Group Ltd

Recommended Action: Technical BUY

Analyst: Chua Wei Ren

– Sunpower Group Ltd (SGX: 5GD) downtrend was confirmed after Sunpower fails to rebound at $0.693-$0.728 after a bearish breakaway gap. The continuous downside has found itself some relief after price action shown a strong upside at the major support at $0.570-$0.616.

– Buy stop: 0.645 Stop loss: 0.555 Take profit 1: 0.750 Take profit 2: 0.900

>> Read more Technical reports

HK Reports – Read up on our Hong Kong reports here

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