Daily Morning Note – 29 November 2021
U.S. equity futures and crude oil rose Monday as traders weighed the possible impact of the omicron coronavirus strain on global economic reopening. Currency markets stabilized after Friday’s volatility.
Equity futures for Japan advanced, while Australian shares slid at the open and oil jumped back above $70 a barrel. The S&P 500 last week had its worst post-Thanksgiving performance since 1941 and the yield on 10-year Treasuries slid the most since March 2020.
The yen fell in early trading. The currency of South Africa, where the variant was identified, rose as much as 0.9% against the greenback. Bonds in Australia and New Zealand climbed.
Two South African health experts — including the doctor who first sounded the alarm about omicron — suggested the variant is presenting with mild symptoms so far. The World Health Organization urged caution, saying it will take time to assess the strain.
Jubilee Industries Holdings has entered a memorandum of understanding (MOU) to sell its fully-owned electronics unit, WE Components, for an indicative consideration of US$11 million, the Catalist-listed company said in a Saturday (Nov 27) bourse filing. The purchaser is Hangzhou Yu Ye Technology, a distributor of semiconductor products and solutions. The China-based company is set to acquire WE for US$4 million, as well as its inventory, which was valued at US$7 million as of end-September. The deal will expand Hangzhou Yu Ye’s overseas chip agency business through WE’s product portfolio. “The proposed disposal reflects the deep value of Jubilee’s electronics business unit that we have built over the years,” said the company’s executive chairman and chief, Terence Tea. Jubilee is 53.07 per cent-owned by Catalist-listed Accrelist, where Tea is also executive chairman and managing director.
Singapore-based virtual currency exchange Coinstore has begun operations in India at a time when the Indian government is preparing legislation to effectively bar most private cryptocurrencies. Coinstore has launched its web and app platform and plans for branches in Bangalore, New Delhi and Mumbai, which will act as its base in India for future expansion, its management said. “With nearly a quarter of our total active users coming from India, it made sense for us to expand into the market,” Mr Charles Tan, head of marketing at Coinstore told Reuters. Asked why Coinstore was launching India despite the pending clampdown on cryptocurrencies, Mr Tan said: “There have been policy flip-flops but we hope things are going to be positive and we are optimistic that the Indian government will come out with a healthy framework for cryptocurrencies.”
BioNTech said on Friday (Nov 26) it expects more data on a worrying new coronavirus variant detected in South Africa within 2 weeks to help determine whether its vaccine produced with partner Pfizer would have to be reworked. Pfizer and BioNTech said that if necessary they expect to be able to ship a new vaccine tailored to the emerging variant in approximately 100 days. “We understand the concern of experts and have immediately initiated investigations on variant B.1.1.529,” BioNTech said in a statement when asked to comment. “We expect more data from the laboratory tests in 2 weeks at the latest. These data will provide more information about whether B.1.1.529 could be an escape variant that may require an adjustment of our vaccine if the variant spreads globally,” it added. Moderna said in a statement it is working to advance a booster candidate tailored to the new variant and has also been testing a higher dose of its existing booster and to study other booster candidates designed to protect against multiple variants. “A booster dose of an authorised vaccine represents the only currently available strategy for boosting waning immunity,” Moderna said in the statement.
An anti-Covid pill developed by Merck has proved effective in treating the disease, the US Food and Drug Administration (FDA) said Friday (Nov 26) in a much-awaited preliminary report. But the report, from an FDA advisory panel, cautioned that pregnant women should not use the drug, known as molnupiravir, saying the potential benefits do not outweigh the risks for those patients. The report is meant to provide guidance to an FDA experts panel convening Tuesday (Nov 30) to consider whether to authorise emergency use of molnupiravir. Approval, analysts say, would represent a major step forward in the battle against the global pandemic, handing healthcare professionals a powerful new tool to help those infected.
Oil prices plunged US$10 a barrel on Friday (Nov 26), their largest 1-day drop since April 2020, as a new variant of the coronavirus spooked investors and added to concerns that a supply surplus could swell in the first quarter. Oil fell with global equities markets on fears the variant, could dampen economic growth and fuel demand. The World Health Organization has designated the new variant, which it named Omicron, as “of concern,” according to the South African health minister. The United States, Canada, Britain, Guatemala and European countries are among those to restrict travel from southern Africa, where the variant was detected. Brent crude settled down US$9.50, or 11.6 per cent, to US$72.72 a barrel, a weekly decline of more than 8 per cent.
Gold steadied on Friday (Nov 26), taking a breather after an over 1 per cent rally sparked by a rush into safe-havens as concerns over a new coronavirus variant rattled risk appetite. Spot gold rose 0.2 per cent to US$1,791.97 per ounce by 6.49pm GMT, after going up as high as US$1,815.26. US gold futures settled 0.1 per cent higher at US$1,785.5. Authorities globally reacted with alarm to the virus variant, with the EU and Britain among those tightening border controls as researchers sought to establish out if the mutation was vaccine-resistant, triggering a selloff across markets that seeped into oil and other precious metals. But after the rally due to bullion’s safe-haven appeal, the overall bearish turn in commodities eventually claimed gold as well, said Jim Wyckoff, senior analyst at Kitco Metals, adding the market reaction was probably overblown.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
iX Biopharma Ltd – Just a warm up
Recommendation: BUY (Maintained); TP: S$0.355
Last Done: S$0.23; Analyst: Paul Chew
– iX Biopharma signs outlicensing agreement for its Wafermine drug worth more than S$300mn (excluding royalties) with Nasdaq-listed Seelos Therapeutics. Seelos provides the regulatory, clinical development and local USA market knowledge to register and commercialise Wafermine and other ketamine-related products.
– Seelos will fund future development, manufacturing and commercialisation of Wafermine and related drugs. iX Biopharma will receive an upfront payment, development milestone, sales milestone and royalties.
– iX Biopharma retains the ownership over the WaferiX sublingual drug delivery technology. Wafermine is one of a portfolio of other drugs that iX Biopharma is re-purposing using Waferix. Our DCF (WACC 10%) TP is raised to S$0.355 (prev. S$0.335) as we incorporate a higher upfront fee of S$12.1mn and raise development income. Our BUY recommendation is maintained.
Thai Beverage PLC – Lockdown hangover continues
Recommendation: BUY (Upgraded); TP S$0.765, Last close: S$0.695; Analyst Paul Chew
– Results were below results expectations. FY21 revenue and PATMI were 90%/91% of our FY21e forecasts. 4Q21 EBITDA was down 34% YoY to Bt7.6bn.
= Spirit volumes declined 19% YoY in 4Q21. Weakness was due to promo sales a year ago and dampening consumer sentiment in Thailand.
– We lower FY22e EPS by 10% to 4.25 cents as we reduce PATMI on expectations of slower recovery in consumer spending. Forex assumptions have also been cut following the weakness in the Thai baht. We downgrade our recommendation from BUY to ACCUMULATE with a lower target price of S$0.765 (prev. S$0.86). Target price is based on 18x FY22e earnings, its 5-year average. The recovery post-lockdown is underway, but the pace may be slower than expected. Reopening of nightlife entertainment venues in Thailand will occur only in mid-January 2022. Consumer sentiment and income levels remain fragile after months of lockdown. ThaiBev has lifted the selling price of spirits to offset the higher material costs. Plans for beerco IPO are intact.
Technical Pulse: Merck & Co
Recommended: Technical BUY; Analyst: Chua Wei Ren
Merck & Co (US: MRK) Technical price action shows a bullish rebound despite a break below the diamond top pattern
Buy spot: 79.16 Stop loss: 75.00 Take profit 1: 90.00 Take profit 2: 96.41
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Webinar Of The Week
Weekly Market Outlook: Keppel Corp, UMS Holdings, UG Healthcare, Hyphens Pharma, Q&M Dental Group…
Date: 22 November 2021
Updates summarised in 3 minutes
Phillip Research in 3 minutes: #29 Keppel Corporation; Initiation
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