Daily Morning Note – 28 October 2021

PHILLIP SUMMARY

Asian stocks are set to fall amid concerns that the recovery from the pandemic will slow as elevated inflation forces tighter monetary policy. Sovereign-debt yield curves flattened. Equity futures declined in Japan and Australia and were little changed in Hong Kong. The S&P 500 and Dow Jones Industrial Average retreated from all-time highs. The 30-year U.S. Treasury yield fell below 2%. A gauge of the dollar was steady.

The Nasdaq ended little changed on Wednesday (Oct 27), boosted by gains in Microsoft and Google parent Alphabet on the heels of their quarterly results, but a drop in oil prices and a pullback in Treasury yields weighed on cyclical sectors and pulled the S&P 500 lower.


BREAKING NEWS

SG

Mapletree Commercial Trust‘s gross revenue for the half-year of FY 2022 to September rose by 11.5 per cent, while its net property income improved 10.7 per cent, mainly due to lower rental rebates as well as compensation received from a pre-terminated lease. The results filed by the trust’s manager, Mapletree Commercial Trust Management, to the Singapore Exchange on Oct 27 indicated that distribution per unit (DPU) was up 5.3 per cent to 4.39 Singapore cents from 4.17 cents. Payment is scheduled for Nov 30.

Keppel Infrastructure Trust (KIT) saw a 1.1 per cent decrease in free cash flow to equity (FCFE) to S$44.7 million for the third quarter, despite a 6.3 per cent rise in operational cash flow. And this came after overall trust expenses, distribution paid or payable to perpetual securities holders, management fees and financing costs increased 47.2 per cent to S$12.1 million. Operational cash flow climbed to S$56.8 million from S$53.4 million for the three months to Sep 30, lifted by better performance from KIT’s distribution and network business. The segment recorded a 22.4 per cent increase in operational cash flow to S$28.1 million, driven by Ixom’s 24.2 per cent rise in operational cash flow.

Business park landlord Ascendas India Trust posted an 8 per cent increase in net property income to S$39.9 million for the third quarter ended Sep 30, 2021. Total property income rose 4 per cent to S$48.9 million after income contribution from the Anchor Annex building in Bangalore and the aVance 6 building in Hyderabad. Both are in the trust’s portfolio of tech parks. This was, however, offset by lower occupancy and lower utilities and carpark income due to the impact of Covid-19.

Office-focused Keppel Pacific Oak US Reit (KORE) said its third-quarter distributable income rose 8.4 per cent to US$15.9 million on the back of recent acquisitions and stronger performance from its portfolio. The acquisitions of Bridge Crossing in Nashville, Tennessee, and 105 Edgeview in Denver, Colorado, were completed in August. Both office buildings have 100-per-cent occupancy. Net property income (NPI) rose 5.6 per cent to US$21.7 million as gross revenue increased 4.5 per cent to US$36 million for the three months to Sep 30.

Amazon is now the new anchor tenant at Asia Square, with the opening of its 100,000 sq ft Singapore corporate office in the Marina Bay retail and office development. The multinational tech company also plans to create over 200 new jobs in Singapore by end-2022. The new office, which is part of local expansion plans, spans three floors. It will house over 30 teams and up to 700 employees from Amazon’s consumer business and corporate functions, it said in a press statement on Wednesday (Oct 27). These include employees supporting Amazon.sg and Amazon Fresh, Amazon Advertising, Prime Video, seller enablement and other regional corporate functions, the company said.


US

Solid Microsoft forecast, tech strength push Nasdaq higher. The tech-heavy Nasdaq rose on Wednesday after a robust forecast from Microsoft supported optimism about the third-quarter earnings season, while a decline in oil prices hurt shares of energy companies. Microsoft Corp gained 3.9% to hit a record high after it guided a strong end to the calendar year, helped by its booming cloud business. Google-owner Alphabet Inc jumped 5.5% after reporting a record quarterly profit on a surge in ad sales. Their shares, coupled with other mega-cap growth names Amazon.com and Tesla Inc, provided the biggest boost to the Nasdaq index. Communication services and consumer discretionary led gains among the 11 major S&P 500 sectoral indexes, while economy-sensitive energy and materials declined the most.

Nvidia (NVDA.O) suffered a setback on Wednesday as EU antitrust regulators opened a full-scale investigation into its $54 billion bid for British chip designer ARM on concerns the deal could lead to higher prices, less choice and reduced innovation. Britain’s competition agency is also probing the deal for the country’s most important technology company, warning that it could damage competition and weaken rivals. Reuters reported the European Commission viewed as insufficient concessions offered by the world’s biggest maker of graphics and artificial intelligence (AI) chips during its preliminary review. Nvidia has not disclosed what these are but it has previously said it would maintain ARM as a neutral technology supplier to sooth concerns from customers such as Qualcomm Inc (QCOM.O), Samsung Electronics Co Ltd (005930.KS) and Apple Inc (AAPL.O).

U.S. business spending on equipment strong; auto shortages sink exports. New orders for U.S.-made capital goods increased to a record high in September and shipments surged, pointing to strong business spending on equipment, though stretched supply chains likely hampered overall economic growth in the third quarter. Slower growth expectations were reinforced by other data from the Commerce Department on Wednesday showing the goods trade deficit widening sharply last month, with exports slumping. While wholesale inventories increased, stocks at retailers fell as supply at auto dealerships continued to decrease rapidly amid a global semiconductor shortage. The reports, which came ahead of the government’s snapshot of third-quarter gross domestic product on Thursday, had some economists ratcheting down their growth estimates. The economy is believed to have expanded at the slowest pace since the second quarter of 2020, when it suffered a historic contraction in the wake of stringent mandatory measures to contain the first wave of COVID-19 infections.

U.S. holiday sales could rise over 10% this year, a trade body said on Wednesday, as major consumer goods makers and retailers work to prevent supply chain disruptions from leaving shelves empty of in-demand toys and games. The National Retail Federation (NRF) forecast sales to increase between 8.5% and 10.5%, to between $843.4 billion and $859 billion, during November and December, compared with a previous high of $777.3 billion last year. Rising income and household savings have never been stronger and would help people pay more for goods at a time when companies have raised prices to deal with inflation, the NRF said. It added there is exceptional demand for holiday products this year, although a survey last week had showed customers were worried about availability.

Boeing’s troubles with the 787 plane dragged down results in the third quarter resulting in another loss as the aviation giant struggles to fully recover from earlier stumbles. Boeing reported a loss of US$109 million compared with a loss of US$449 million in the year-ago period. The company announced US$1 billion in new expenses connected with the 787 Dreamliner with US$183 million coming in the third quarter. A second charge of US$185 million connected to the delayed test flight of the unmanned CST-100 Starliner capsule also hit results.


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

Alliance Healthcare Group Ltd – Innovative healthcare provider

Recommendation: Non-rated. Last Done: S$0.178

TP: N.A.; Analyst: Vivian Ye

– Revenue grew at CAGR of 11.1% from FY18 to FY21. The new business segment, mobile and digital healthcare services, contributed a full year’s revenue in FY21.

– Number of companies covered under Managed Healthcare Solutions grew at CAGR of 22.3% from 2016 to 2020.

– Alliance Healthcare has been maintaining its dividend payout ratio of 30% since listing in 2019.

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