Daily Morning Note – 27 April 2020


Asian equity futures rose after a move higher for U.S. stocks on Friday. The Federal Reserve joins the BOJ and the European Central Bank announcing policy decisions this week. Several major economies will release GDP numbers, while corporate earnings will keep flooding in, including from Amazon.com, Barclays and Samsung Electronics.


THE Singapore Exchange (SGX) has queried Catalist-listed Biolidics over its appointment of a scandal-hit company as an exclusive distributor for rapid Covid-19 antibody test kits. But the board replied in a filing on Sunday night that it does not expect a material impact on its business.

Nam Cheong, which last week warned that it was mulling over a restructuring, said on Sunday that it will hold its annual general meeting by June 29.

Sarine Technologies, which makes systems and machines for the gem production industry, warned on Sunday of “ongoing impairment of our business until retail activity in key markets resumes”, no thanks to the deadly coronavirus pandemic.

Mermaid Maritime’s wholly owned Thai subsidiary has inked a deal to borrow US$8 million from the Export-Import Bank of Thailand.

Tritech Group will release its full-year financial statements by July 30, the engineering and environmental services provider said on Sunday night, after it took the bourse operator up on the offer of an automatic two-month extension.

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


Technical Analysis: Asia Major Index – Bearish risk remains

Analyst: Chua Wei Ren

– On 13th March 2020, we highlight that Asian major indices will continue to have a sell-off before a rebound.

– Major Asia index has begun to see the light at the end of the tunnel but bullish momentum remains weak.

– Based on wave analysis, all major Asia index will see a continued sell-off after April.

Technical Analysis: U.S Market Snapshot – Mid-term on neutral ground

Analyst: Chua Wei Ren

– The U.S market enjoyed an unexpected recovery in late March and early April 2020.

– Last week saw DJIA ranging between 22,916 – 24,240

– Mid-long term we will see selling resume but DJIA will be range-bound between 19,000 to 25,000 range.

– We expect the market to have some more upside despite the extenuating economic conditions. However, the upside should be short-lived with eventual downside potential testing the March lows.

>> Read more technical reports


Frasers Centrepoint Trust – Navigating choppy cashflows

Recommendation: ACCUMULATE (Maintained), Last Done: S$1,98

Target Price: S$2.24, Analyst: Natalie Ong

– DPU of 1.61cents was 48.7% lower YoY due to retention of 50% of 2Q20’s distributable income ($18mn).

– Lower rental reversions and longer negotiation periods expected on the remaining 11% of GRI due for renewal in FY20; portfolio reversions for leases concluded came in at c.5%

– Maintain ACCUMULATE with a lower TP of S$2.24. We lower our forecast to reflect the rental rebates and weaker retail outlook and increase our cost of equity assumption by 105bps to 7.6%. FY20e DPU cut by 2.88cents (-22.6%).

Singapore REITs Sector – Master lease exposures

Recommendation: OVERWEIGHT (Maintained), Analyst: Tan Jie Hui

– Sponsor of Eagle Hospitality Trust failed to make timely rental payments of its master lease

– Healthcare and Hospitality REITs are most reliant on master leases

Singapore Exchange Limited – Thriving on volatility

Recommendation: Neutral (Maintained), Last Done: $9.64
Target Price: S$9.28, Analyst: Tay Wee Kuang

– SGX beat our earnings expectations by 34% for 3Q20.

– Key business segments saw stellar growth amidst heightened market volatility – FICC grew 23% YoY and Equities grew 31% YoY, contributing to a net profit increase of 38% YoY.

– SGX maintained quarterly dividend of 7.5 cents per share in 3Q20.

– We maintain our NEUTRAL call with a revised TP of S$9.28. We peg our TP to 21.4x P/E, 1 SD below SGX’s 5-year mean. We revise our FY2020 earnings forecast upwards by 8% on stellar 3Q20 earnings as SGX continues to benefit from market volatility as a result of the COVID-19 pandemic.

Micro-Mechanics (Holdings) Ltd – Stellar performance despite the disruptions

Recommendation: NEUTRAL (Upgraded), Last Done: S$1.64
Target Price: S$1.60, Analyst: Paul Chew

– 3Q20 earnings were within our expectations. PATMI jumped 48% YoY in 3Q20 to S$3.9mn.

– Revenue is back to the highs of S$16mn per quarter. However, gross margins yet to recover despite the higher run- rate in revenue.

– We are leaving our earnings forecast unchanged. Visibility has worsened as global growth nose-dives. Furthermore, we worry about the lagged impact on discretionary spending from the collapse in consumer and corporate income and sentiment. MMH’s operations will also be affected by the partial closures in Malaysia and U.S. operations. We are upgrading to NEUTRAL following the decline in the share price. Our target price is unchanged at S$1.60.

SGD Bonds Strategy: Relative value search (Credit Commentary)

Credit Analyst: Timothy Ang

– We scan the local corporate bond universe on a relative value basis to discover bonds trading relatively cheap

– We name the bonds trading at interesting yields

>> Read more research reports

HK Reports – Read up on our Hong Kong reports here


Webinar Of The Week

Market Outlook: (PSR) SIA Capital Raising Exercise (Bonds), Banking Monthly, REITS Monthly, China Monthly, Technicals & Singapore 2Q20 Equity Strategy

Date: 13 April 2020

For more on Market Outlook

Phillip Research in 3 minutes: #21 – Singapore REITs Sector

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