Daily Morning Note – 29 October 2018
WEEKLY MARKET OUTLOOK WEBINAR
Register HERE for MONDAY’s 11.15am webinar.
Archived webinars available.
YOUR PHILLIP SUMMARY
The S&P 500 finished on Friday just short of a 10 percent decline from its record September high and remains on pace for the worst month since 2009. Treasuries were well bid last week, dragging the 10-year yield back down to 3.08 percent after setting a seven-year high of 3.26 percent earlier this month. The offshore yuan slipped and remains near to the lowest level in a decade. Brazilian assets will be in focus as voters are expected to usher in an era of hard-right politics.
There will be a flurry of heavyweight economic events and plenty of key earnings releases this week. Companies reporting include Facebook, Mastercard, Coca-Cola, General Electric, Sony, Samsung, Apple, Alibaba, Exxon Mobil, PetroChina, Macquarie Group and HSBC. The Bank of England and Bank of Japan announce rate-policy decisions. After raising rates in August the BOE is expected to stand pat, while the BOJ is also expected to maintain its policy settings.
Sembcorp Marine Ltd – Protracted weakness
Target Price: $1.65
3Q18 revenue and net loss exceeded our expectation due to an S$34mn loss on the sale of a semi-submersible.
Repairs and Upgrades segment secured a big contract.
Order flow, profitability and guidance remain weak.
We revised down our FY18e BVPS (from SG$1.1 to SG$1.0) due to the loss on the disposal and the lower margin assumption. Based on the 5-year average PBR of 1.6x, our revised TP is S$1.65 (previously S$1.70). It is worth mentioning that the historical PBR low was around 1.0x. We upgrade our recommendation to NEUTRAL due to the recent price correction.
United Overseas Bank Limited – Stable Outlook Despite NIM Contraction
Target Price: $32.50
3Q18 PATMI and Revenue were in line with our expectations.
NIM rose by 2bps YoY but contracted 2bps QoQ due to the intensive build-up of fixed deposits in the third quarter.
Key earning drivers were loans growth and fee income. Loans grew 9% YoY, driven by broad-based growth across industries and countries.
Credit costs improved to 18 bps (3Q17: 32bps) due to the absence of problematic O&G sector loans.
Maintain BUY with target price of S$32.50 (previous TP S$33.70). We derived our revised target price following our earnings adjustments, based on the Gordon Growth Model.
Cache Logistics Trust – Highlighting 2019 risks
Target Price: $0.75
Gross revenue 4.7% higher than expected
DPU 7.5% higher than expected, partially due to capital distribution of 0.036 cents/unit; DPU from operations 4.9% higher than our forecast
WALE by NLA has shortened QoQ from 3.5 years to 3.3 years
Proposed divestment of Jinshan Chemical Warehouse
Maintain Neutral; new target price of $0.75 (previously $0.82), as we raise the discount rate in view of multiple risks in 2019
IBM to buy open-source software pioneer Red Hat for $34bn, in the biggest acquisition in the IT veteran’s 107-year history.
Investors in General Electric Co. are bracing for the troubled company to slash or suspend its dividend when it re¬ports quarterly results this week.
Great Eastern’s Q3 profit falls 26%. Great Eastern Holdings (GE), the insurance arm of OCBC Bank, announced it had turned a profit of S$213.3 million for its third fiscal quarter, down 26 per cent from S$287.5 million in the year-ago period.
Financial conditions tighten as markets tumble. Goldman index suggest dimming outlook for US economy. The market turmoil of the past month threatens to put the brakes on US economic growth, according to a closely watched measure of financial conditions.
US equity index futures start weekly trading little changed. U.S. equity index futures were little changed at the start of weekly trading on Sunday, leaving it unclear whether Wall Street would rebound from last week’s steep sell-off or extend the slide.
Early indicators show that China’s slowdown worsened again in October. Sentiment continues to spur despite a raft of easing measures. Economic deterioration may spur additional government action.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, PSR
Clients of Phillip Securities can keep updated with Country Strategy and Singapore Sector Reports by logging into: www.poems.com.sg > STOCKS > Research
|The information contained in this email and/or its attachment(s) is provided to you for information only and is not intended to or nor will it create/induce the creation of any binding legal relations. The information or opinions provided in this email do not constitute an investment advice, an offer or solicitation to subscribe for, purchase or sell the e investment product(s) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise. You may wish to seek advice from an independent financial adviser before making a commitment to purchase or investing in the investment product(s) mentioned herein. In the event that you choose not to do so, you should consider whether the investment product(s) mentioned herein is suitable for you. PhillipCapital and any of its members will not, in any event, be liable to you for any direct/indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached to this email. The information and/or materials provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials.|
|This e-mail and its attachment(s) may contain privileged or confidential information, which is intended only for the use of the recipient(s) named above. If you have received this message in error, please notify the sender immediately and delete all copies of it. If you are not the intended recipient, you must not read, use, copy, store, disseminate and/or disclose to any person this email and any of its attachment(s). PhillipCapital and its members will not accept legal responsibility for the contents of this message. Thank you for your cooperation.|