Daily Morning Note – 29 April 2021


Asian stocks look set to climb and U.S. equity futures rallied Thursday after robust earnings from technology heavyweights. The dollar retreated with bond yields after the Federal Reserve signaled it wasn’t ready to consider scaling back pandemic support.

Futures pointed higher in Australia and Hong Kong, while Japan is closed for a holiday. Nasdaq 100 contracts outperformed after Apple Inc. crushed revenue estimates and Facebook Inc. reported gains in sales and users. Alphabet Inc. rose to a record after its results showed a surge in ad sales.


SG News

CapitaLand announced on Wednesday that it will be investing 3.66 billion yuan (S$757.7 million) to acquire its first hyperscale data centre campus in China, the world’s second-largest data-centre market and the largest in the Asia-Pacific. The potential acquisition is via the purchase of 100 per cent equity interest in two companies registered in China, the property giant said in a statement.

Keppel DC Reit and telco M1 have signed a non-binding term sheet to establish a special purpose vehicle (SPV) to own and operate M1’s network assets, the companies said in a joint media release on Wednesday. M1 will be responsible to establish the SPV, which will acquire M1’s current mobile, fixed and fibre assets for S$580 million in cash. The consideration will be funded through external financing of S$493 million and an S$87 million investment by Keppel DC Reit, in return for a combination of debt securities and preference shares to be issued by the SPV. While M1 will retain 100 per cent of the SPV’s ordinary shares, M1 and Keppel DC Reit will be equally represented on the board of the SPV.

IREIT Global has, through its wholly-owned subsidiary Fit 2, entered into a conditional sale agreement to acquire Decathlon’s properties in France for 110.5 million euros (S$176.8 million). The portfolio comprises 27 retail properties with a gross lettable area of 95,477 square metres. Upon completion, all properties will be leased-back to the sporting goods retailer. The deal comprises a committed occupancy of 100 per cent with weighted average lease expiry by gross rental income of 10 years, and an option to break after six years, said the manager on Wednesday.

US News

Google’s results, showing a surge in ad sales related to travel and retail, offered a glimpse of online spending in a post-pandemic world: businesses are boosting digital marketing to capture a public eager to resume something resembling normal life again. Google parent Alphabet said first-quarter revenue, excluding payments to distribution partners, came in at US$45.6 billion, pummeling Wall Street estimates. The company also unveiled a big new share buyback, sending the stock up as much as 5.5 per cent to an intraday record high of US$2,416.98.

Spotify unveiled plans on Tuesday for podcast subscriptions, countering a similar initiative from Apple but offering a better deal than its US rival by allowing creators to keep all revenue for a limited time. The updated podcast platform for the United States, set to expand internationally in coming months, lets podcasters make episodes available only to subscribers. Taking advantage of the tool will cost podcasters nothing for the next two years, meaning they get all subscription revenue, Spotify said in a post.

Boeing reported a smaller quarterly loss on Wednesday as increased 737 MAX jet deliveries reflected a cautious rebound in air travel from the coronavirus pandemic, though the embattled US planemaker took a charge on its Air Force One presidential aircraft programme. But optimism in a resurgent US domestic travel market is offset by growing concerns over Covid variants in India and elsewhere, clouding the industry’s recovery.

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


Sheng Siong Group Ltd – Resilience despite no new shops

Recommendation: ACCUMULATE (Maintained); TP S$1.71, Last close: S$1.54;

Analyst Paul Chew

– 1Q21 revenue and earnings were within expectations, at 27%/30% of forecasts. 1Q21 benefitted from festive spending.

– Gross margins remained elevated at 27.6% vs. pre-pandemic’s 26.8%.

– No new stores were opened in past six months. Tenders of new HDB stores have been delayed, except for one large upcoming bid.

– Our FY21e PATMI and target price of S$1.71 are unchanged, at 25x P/E, its 5-year historical average. Maintain ACCUMULATE. With international borders still closed, revenue should remain above pre-pandemic levels. FY22e to benefit from accelerated rollout of new stores. 1Q21 annualised revenue per sq ft was S$2,363, towering above S$1,916 in pre-pandemic 2019.

FIRST SPONSOR GROUP LIMITED – Staying opportunistic

Recommendation: ACCUMULATE (Downgraded), Last Done: S$1.40

Target Price: S$1.56, Analyst: Tan Jie Hui

– Operational update suggests company is on track for record FY21 pretax profits, bolstered by property development and property financing.

– Unrecognised gross development value was S$620mn, after S$180mn recognised from handover of SOER, EoO and Plot F. FSG’s share of gross development value for unlocking from existing projects was S$3.2bn, before New Humen.

– New Humen project to increase its property-finance loan book by 30% and FSG’s exposure to Dongguan where residential demand is still holding up. Hotels underperformed.

– Downgrade to ACCUMULATE from BUY as recent run-up has priced in positives. SOTP target price unchanged at S$1.56.

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