Daily Morning Note – 28 April 2022
U.S. equity futures jumped and stocks in Asia looked set for a steady start after Meta’s surge in late trading helped to soothe investor sentiment. Contracts for the tech-heavy Nasdaq 100 rose over 1%, while those for the S&P 500 also climbed. Futures for Japan, Australia and Hong Kong advanced. Meanwhile, Chinese stocks traded in the U.S. climbed the most since early April after Beijing stepped up pledges of economic support amid Covid lockdowns.
Russia made good on its pledge to cut gas supplies to Poland and Bulgaria, saying it will keep supplies switched off until the two countries agree to Moscow’s demands to pay for the fuel in rubles. European gas prices surged as much as 20%. Bulgaria’s government accused Russia of wielding natural gas flows as a weapon. Meanwhile, researchers at Microsoft said Russian-affiliated hackers were positioning themselves for cyberattacks against Ukraine as early as March 2021; and Ukrainian President Volodymyr Zelenskiy said he’s been invited to attend this year’s G-20 summit in Indonesia, raising the prospect he crosses paths with Vladimir Putin.
SG
Keppel Corp could come out smelling like a rose from the landmark merger of its loss-making offshore and marine (O&M) arm with another ailing sector giant Sembcorp Marine (Sembmarine) – a deal that was precipitated by oil’s prolonged slump up until recently. Under the proposed merger unveiled on Wednesday, Keppel stands to pocket S$500 million in cash from Keppel O&M (KOM) to settle outstanding interest and partial redemption of certain perpetual securities previously issued to Keppel – this will happen pre-merger – and is set to monetise the once-flailing rig business just as things are looking up, owing to a crude oil rally. Keppel will also get a bigger chunk of 56 per cent in the yet-to-be named combined entity, that is valued at S$8.7 billion. The realisable value comprises S$4.87 billion from Keppel O&M’s combination with Sembcorp Marine, S$500 million in cash and S$4.05 billion from the sale of Keppel O&M’s legacy rigs and associated receivables to Asset Co. This does not include the S$300 million from the carrying value of the out-of-scope assets that Keppel will retain.
Golden Mile Complex gets 80% mandate for collective sale at lower price of S$700m, which is lower than its original S$800 million reserve price. The offer was made by a consortium comprising Far East Organization and Perennial Holdings last month via private-treaty negotiations after the building closed its second en bloc tender on Feb 28. The Beach Road development’s first collective sale attempt in July 2019, also at a reserve price of S$800 million, drew no bids. A consortium comprising Far East Organization and Perennial Holdings has offered to buy the iconic Golden Mile Complex.
Property developer Oxley Holdings announced Wednesday (Apr 27) that it is selling 2 assets in Vietnam for a combined S$84 million. In a bourse filing, the group said it has entered into a memorandum of understanding (MOU) to sell its entire 80 per cent effective stake in Vietnam-incorporated Phu Thinh Land, at a price of 1.05 trillion Vietnamese dong (S$63 million), subject to adjustment as agreed after the purchaser’s appraisal. “The MOU will be terminated if the parties cannot agree on the terms of the formal agreement,” it said. Oxley has also entered into a deposit agreement to sell its 30,981 square metre (sq m) land at Thao Dien Ward, Ho Chi Minh City, at a price of 350 billion Vietnamese dong. The company has an effective interest of 63.9 per cent in the transaction through its subsidiary, Oxley MK Thao Dien.
ESR-Reit posts 9.6% drop in Q1 DPU to S$0.00723; surge in utilities costs weighs down NPI. ESR-REIT : J91U -2.38%’S distribution per unit (DPU) fell 9.6 per cent to S$0.00723 for its first quarter ended Mar 31 2022, from S$0.008 a year ago. This is due to an enlarged unit base as a result of the issuance of new units following ESR-Reit’s equity fundraising. Gross revenue was down 1.2 per cent to S$59.6 million for the quarter, from S$60.3 million a year ago. Portfolio rental reversion for Q1 2022 recorded an increase of 3.1 per cent, with logistics/warehouse, general industrial and business park sectors registering robust positive rental reversions, offset by negative rental reversions in the business park retail space as the workforce gradually returns.
Iron ore miner Fortress Minerals saw its earnings tumble 82.3 per cent to US$1.1 million for the fourth quarter ended February, from US$6.1 million in the corresponding period a year ago. This brought full year earnings down 21.2 per cent to US$14.1 million, down from US$18.3 million in the year-ago period. Earnings per share (EPS) was down 82.8 per cent to 0.21 US cents for Q4, bringing EPS for FY2022 to 2.88 cents – some 21.1 per cent lower than a year ago. Revenue fell 69.8 per cent to US$5.2 million in Q4. For the full year, revenue was 9.1 per cent lower at US$43.4 million. The Catalist-listed company said the lower revenue was due to lower volume of iron ore sold.
Hyflux and 35 companies in its group have lodged a lawsuit pre-emptively against their former independent auditor KPMG alleging breach of contract, and possibly pursuing claims that would include over S$400 million in dividends the company paid out between 2010 and 2018. The Singapore-listed company in compulsory liquidation has, together with its 35 local and foreign units including Tuaspring, filed a writ of summons against the professional services firm in Singapore’s High Court on Mar 28, according to a cause book search by The Business Times (BT). KPMG was the statutory auditor for Hyflux and some of its subsidiaries in the group for several years.
US
Tesla shares wiped out about $126 billion in value on Tuesday as investors are worried that Elon Musk may sell shares to complete Twitter Inc.’s $44 billion takeover. Questions remain about how Musk plans to cover the $21 billion equity portion of the transaction that he personally guaranteed. Meanwhile, Twitter fell in pre-market trading, extending losses to dip further below Musk’s offer price.
Facebook parent Meta on Wednesday reported better profit than expected in the recently ended quarter, calming investors worried about the toll of competition from TikTok and eased pandemic restrictions on the company. Meta said it made a profit of US$7.5 billion on revenue of US$27.9 billion in the first three months of this year, sending shares up more than 15 per cent in after-market trading that followed release of the earnings figures. The average number of people using Facebook monthly rose 3 per cent to 2.94 billion by the end of March, while some 3.64 billion people used at least one member of Meta’s family of apps each month, the tech giant reported. Meta owns Facebook, Messenger, WhatsApp, Instagram and virtual reality firm Oculus.
Spending drive knocks Spotify shares after Q1 beat. Spotify Technology said currency moves and a big increase in hiring would push it to an operating loss in the second quarter, sending the streaming giant’s shares down 11 per cent on Wednesday (Apr 27) despite a forecast-beating rise in first quarter revenue. The company predicted it would make an operating loss of 197 million euros (S$287 million) in the current quarter, but said investments would position it for growth in the decade ahead. “Spotify’s got to spend in order to continue attracting new users,” said Hargreaves Lansdown analyst Laura Hoy. “But there’s no way around the fact that such steep losses will eventually start eating into the group’s sturdy cash position.”
Boeing has lost a total of $1.1 billion so far on costs associated with a deal to modify two 747 jumbo jets to serve as Air Force One. CEO Dave Calhoun said Boeing “probably shouldn’t have taken” risks from the deal for the planes, which was negotiated with then-President Donald Trump in 2018. Boeing reported a net loss of $1.2 billion for the first quarter of 2022, with a charge of $660 million associated with delays and higher costs for the Air Force One program. Boeing’s deal for Air Force One, which was cut by then-CEO Dennis Muilenburg requires the company, not the federal government, to eat the costs of any overruns on the contract.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
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Date: 25 April 2022
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