Daily Morning Note – 29 April 2022


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Major US indices finished higher on Thursday (Apr 28), recouping losses suffered earlier in the week despite data showing the economy shrank in the first quarter. The benchmark Dow Jones Industrial Average rose 1.8 per cent to close at 33,916.26, while the tech-rich Nasdaq Composite Index was up 3.1 per cent at 12,871.53. The S&P 500 gained 2.5 per cent to end at 4,287.76. The Commerce Department reported a surprise 1.4 per cent drop in GDP in the first quarter of this year, but much of that was due to an increase in imports and decline in inventories, while spending remained strong. The latest earnings were mixed, with Facebook parent Meta reporting better-than-expected results and McDonalds saying sales rose but profits fell.

CHINA’S dynamic zero Covid policy will have an impact on Asean in the coming quarters, particularly on the tourism and trade fronts. Speaking at the Asean Economic Outlook: Prospects for Growth and Regional Cooperation webinar on Thursday (April 28), Anthony Tan, deputy group head and senior economist, Asean+3 Macroeconomic Research Office (AMRO), noted that the prospects for strong recovery for the tourism sectors in tourism-dependent economies such as Thailand, Cambodia and Vietnam are “unlikely to be bright until China fully reopens its borders. Separately, the disruptions and lockdowns in major cities in China in response to the current wave of the pandemic has significantly affected shipping and road transport.

Top gainers & losers




Chain offer expected as Cuscaden and concert parties to own 47% of SPH Reit units. Cuscaden – a consortium backed by Hotel Properties (HPL), businessman Ong Beng Seng and 2 Temasek-linked entities CLA and Mapletree – had offered each SPH shareholder the option of an all-cash offer of S$2.36, or S$2.40 per share comprising S$1.602 cash and 0.782 of an SPH Reit unit through a distribution-in-specie by SPH. Shareholders holding some 680.6 million SPH shares have elected to receive the cash and units consideration, while shareholders of another 936.4 million SPH shares chose to receive the all-cash consideration. As a result of the election, nearly 732.3 million SPH Reit units – representing about 26.1 per cent of the total number of issued and outstanding SPH Reit units – will be transferred to Cuscaden.

Japfa Q1 earnings fall 64% to US$17.3m as costs surge. Agri-food company Japfa posted earnings of US$17.3 million for the first quarter ended March, down 64.3 per cent from earnings of US$48.5 million in the year-ago period. The decline comes despite a 13 per cent increase in revenue to US$1.25 billion in Q1 on the back of higher sales volumes across all segments. The company’s chief executive officer Tan Yong Nang said: “Global high raw material prices, ongoing supply-chain issues and inflation are weighing on costs, while the Covid-19 pandemic is still impacting consumer demand in some of our markets, resulting in pressures on our profitability.”

Starhill Global Reit reports NPI up 8.7% to S$38.5m in Q3. The Reit said the growth was mainly driven by the cessation of rental rebates following the completion of asset enhancement works at its Kuala Lumpur asset, The Starhill, in December 2021. The Reit also lowered rental assistance to tenants. However, this was partially offset by lower revenue contribution from Wisma Atria retail and depreciation of the Australian dollar, it said. In the 3 months, NPI from its Malaysia properties increased by 68.2 per cent year on year to S$7.4 million. In Singapore, Wisma Atria’s NPI for the 3 months rose 3.2 per cent; that of Ngee Ann City’s remained unchanged. They contributed S$9.7 million and S$13 million respectively to the quarter’s income. NPI from Starhill’s Australia properties charted a yearly decline of 6.4 per cent to S$7.3 million.

Mapletree Logistics Trust posts 5% rise in Q4 DPU to S$0.02268. The manager of Mapletree Logistics Trust (MLT) has reported distribution per unit (DPU) of S$0.02268 for the fourth quarter ended March, up 5 per cent from DPU of S$0.02161 in the year-ago period, despite an enlarged unit base. The improved performance was mainly due to higher revenue from existing properties, contributions from accretive acquisitions completed,and lower rental rebates granted to eligible tenants impacted by Covid-19.

China Sunsine Chemical reports improved Q1 performance despite China Covid control measures. Specialty rubber chemicals producer China Sunsine Chemical Holdings announced Thursday (Apr 28) that the group’s financial performance for the first quarter ended March has improved, despite lower sales volumes due to Covid-19-related lockdowns in China. The group said sales volume fell 11.3 per cent to 41,800 tonnes in Q1, as Covid control measures in Shanghai and other cities led to the restricted movement of goods and people. “Trucks are not allowed to exit the highway, which has delayed the transportation of raw materials to factories and finished goods to customers. The tyre-makers also experienced lower production utilisation rate and lower profits due to these control measures,” China Sunsine Chemical said in a business update.


Apple sales top estimates on strong iPhone and services demand. Apple warned that supply constraints would cost the company US$4 billion to US$8 billion in the current quarter, sending the shares down and casting a pall on record-setting results that the company just reported. Covid restrictions, which have swept China in recent weeks, will take a toll on the June quarter, the company said on a conference call Thursday (Apr 28). Last quarter’s sales and profit had topped analysts’ estimates, fuelled by strong demand for the iPhone and digital services, and the company announced US$90 billion in new stock buybacks. The outlook renewed concerns that new supply-chain woes will hamper the tech industry. Apple shares tumbled as much as 6.2 per cent to US$153.50 in late trading after the remarks.

Intel’s forecast disappoints, signalling dimmer PC demand. Intel, the world’s biggest maker of computer processors, reported lacklustre quarterly revenue in its data centre business and gave a disappointing sales and profit forecast for the current period, indicating weaker demand for its chips across the board. PC chip revenue declined in the first quarter as some customers cut orders to reduce unsold inventory and consumers bought fewer devices for education purposes, Intel said. The report comes amid escalating concern that overall demand for consumer PCs – Intel’s largest source of revenue – is sputtering following a boom that was fuelled by pandemic-related working and studying from home. In the first quarter, the Santa Clara, California-based company said sales fell to US$18.4 billion, compared with the average US$18.3 billion analysts had predicted. Profit was US$8.11 billion, or US$1.98 a share, compared with US$3.36 billion, or 82 US cents, in the same period a year earlier.

Robinhood stock plumbs new depths after revenue tumbles 43%. Robinhood Markets, the financial upstart that drew millions of novice investors during the early days of the pandemic, is struggling to prove itself as a public company. First-quarter revenue tumbled 43 per cent and the stock cratered anew in late trading Thursday (Apr 29), the latest signs that shareholders looking for a turnaround may be hard-pressed to find one. Two days after announcing that it’s cutting 9 per cent of full-time staff, the brokerage posted a first-quarter adjusted loss of US$392 million, or 45 cents a share, that was wider than the 38 cents that Wall Street analysts expected. Revenue of US$299 million missed the average estimate of US$352.9 million, according to a statement Thursday.

Mastercard Inc reported a higher first-quarter profit on Thursday (Apr 28), buoyed by a surge in cross-border spending that helped payment volumes climb. The company’s profit rose to US$2.6 billion, or US$2.68 per share, for the 3 months ended Mar 31 compared to US$1.8 billion, or US$1.83 per share, a year earlier. Even as new variants of the coronavirus threaten to upend travel recovery, Mastercard has continued to see a jump in cross-border spending. Excluding one-time costs, the New York-based company reported earnings of US$2.76 per share. Analysts on average had expected US$2.17 per share, according to Refinitiv.

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

Keppel Corporation – Transformation into an asset light recurring income business model

Recommendation: BUY (Maintained), Last Done: S$6.66

Target price: S$7.07, Analyst: Terence Chua

– Keppel Corporation has entered into definitive agreements with Sembmarine (SMM SP, Non-rated) for the proposed combination of its Keppel O&M (KOM) unit and Sembmarine.

– We view the two developments positively, and see them as a major step in its move to transform the Group from one with a lumpy earnings model to one with a recurring income stream.

– $500mn in cash to be re-invested into new growth areas, including potential share of gains with shareholders. Uncompleted rigs at Asset Co, will no longer be funded by Keppel carry future potential upside.

– We continue to watch closely regulatory approvals required for the deal, integration plan of the combined entity, outcome of the remaining 10% combined entity shares and Keppel’s plan for the $500mn in cash.

– Maintain BUY with unchanged SOTP TP of S$7.07. While the recent developments have been positive, we have opted to keep our TP unchanged until the relevant regulatory and shareholders approval have been obtained. We valued the Group based on the four new segments unveiled during Vision 2030 to better reflect the Group’s reporting segments going forward. Our TP translates to about 1.0x FY22e book value, in-line with its 5-year average. Catalysts expected from approvals obtained for the transaction.

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