Daily Morning Note – 29 October 2021

PHILLIP SUMMARY

Asian stocks looked set for a steady start as traders weighed gyrations in the bond market and the latest batch of earnings. Futures pointed to modest gains in Japan, Australia and Hong Kong, while U.S. contracts declined. The U.S. 10-year Treasury yield climbed, while the curve inverted between 20- and 30-years for the first time since the U.S. government reintroduced a two-decade maturity in 2020. The U.S. dollar fell to a one-month low, crude oil edged up and Bitcoin fell to below $58,000 in U.S. trading before recovering to about $61,000.

U.S. President Joe Biden delivered a framework for the latest version of his $1.75 trillion economic agenda to congressional Democrats after delaying a trip to Europe. While drawing widespread praise from within the party, many details are yet to be filled in. In a private meeting at the Capitol he was said to have told Democrats: “I don’t think it’s hyperbole to say that the House and Senate majorities and my presidency will be determined by what happens in the next week.” A proposal to tax the assets of billionaires was said to have been dropped.


BREAKING NEWS

SG

Keppel back in the black for first 9 months; sharpens focus on sustainable urban solutions. KEPPEL Corporation Keppel Corp: BN4 -0.56% has seen signs of improvement in the jackup rig market, and increasing enquiries for its bareboat charters for its rig assets amid rising oil prices, but group chief executive Loh Chin Hua stressed that the conglomerate will not steer away from its shift to cleaner energy solutions. Instead, the group is now upping the ante across various business units such as Keppel Infrastructure and Keppel Offshore and Marine (O&M) in terms of “sharpening (its) focus” on sustainable urbanisation solutions, not just on renewable energy, but also on decarbonisation solutions and energy efficiencies. Loh also said Keppel is on track with its plan to unlock value for S$3 billion to S$5 billion in assets over the next three years. In fact, he said, Keppel could exceed the S$5 billion target by the end of 2023 as the group moves towards a more “asset-light” structure.

Supermarket Sheng Siong’s net profit for the third quarter to September rose 8.3 per cent year on year to S$34.4 million from S$31.8 million on higher revenue and improved sales mix that included products with higher margin. Revenue, driven by Covid-induced restrictions that fuelled higher demand and contributions from three stores that opened last year, amounted to S$348.1 million, up 6.4 per cent year on year from S$327.3 million. In financial results filed to the Singapore Exchange on Oct 28, the mainboard-listed supermarket chain operator reported that its earnings per share improved from 2.21 Singapore cents to 2.29 cents for the quarter. As it expects the government’s Covid restrictions to be relaxed, given the stance on living with the endemic, the supermarket operator said that demand for its goods might taper off. The company cautioned that input prices are subject to possible disruptions from the global impact of the pandemic, weather or geo-political events. But it said its core competencies will enable it to improve operational efficiency and increase gross margin.

Lower rental relief and costs helped boost the top line and net property income of Starhill Global Reit (real estate investment trust) for the first quarter of FY2022 to S$44.8 million and S$34.3 million respectively, up 4 per cent and 15.1 per cent year-on-year. In its regulatory statement, SG Reit’s manager reported retail portfolio occupancy of 97.8 per cent with a weighted average lease expiry of 7.7 years by net lettable area and 10.1 per cent of retail leases by gross rents expiring in FY2022 as at end-September. Gearing, its manager stated, stood at 36.3 per cent with weighted average debt maturity of 3.7 years. And it has its debt largely on fixed rates with average interest rate at 3.18 per cent per annum and an interest cover of 3 times. Master leases and anchor leases with the provision for periodic rental reviews represent approximately 51.7 per cent of gross rent, the manager said in the filing on Oct 28.

Mall and office landlord Mapletree North Asia Commercial Trust (MNACT) has increased its half-year distribution per unit (DPU) to 3.426 Singapore cents from 2.876 cents a year ago. The trust’s results were lifted by lower rental reliefs that were given out amid higher footfall and retail sales at Hong Kong’s Festival Walk mall, as well as by contributions from the acquisition of the Hewlett-Packard Japan Headquarters Building in Japan and The Pinnacle Gangnam in Korea. Net property income rose 15.8 per cent to S$161.9 million as gross revenue increased 13.3 per cent to S$215.4 million for the first-half ended Sep 30. Distributable income climbed 23.4 per cent to S$119.5 million. Festival Walk mall and Gateway Plaza office building in Beijing, however, recorded lower average rental rates, which dragged down gross revenue. Rental reversions at Festival Walk’s retail segment were negative 30 per cent, while those at Gateway Plaza were negative 24 per cent.

SINGAPORE’s Ho Bee Land units have bought 3 residential development sites in Australia for A$115 million (S$116.4 million), with the land parcels expected to yield more than 1,000 residential lots. Announcing its subsidiaries’ Australian acquisitions in a regulatory filing on Thursday (Oct 28), the mainboard-listed property developer said the 21.16 hectare site acquired by HB QLD is located 35km south of the Brisbane CBD and directly adjoins regional sporting facilities at Hubner Park. And it is serviced by a major employment centre and established commercial nodes. The acquired land can build approximately 284 residential lots and yield two commercial use parcels. Another acquisition also by HB QLD is an 11.36 ha site located 55km north of Noosa on the Sunshine Coast and is expected to yield 133 residential lots. This, Ho Bee noted, can start development works in the near future as it has existing approvals.

Industrial agrifood company Japfa’s nine-month net profit fell 12 per cent to US$113.9 million, despite a 32 per cent increase in profit after tax, as a greater portion of profits was attributed to minority interests. This brought Japfa’s earnings per share to 5.58 US cents from 6.42 US cents a year ago. The company’s revenue was 22 per cent higher at US$3.4 billion for the period ended Sep 30, 2021. All business units reported a rise in revenue, with Indonesian unit PT Japfa Tbk growing its revenue by 26.2 per cent to US$2.3 billion. The increase came despite the significant drop in demand for poultry in Q3, after the second wave of Covid-19 in Indonesia having necessitated the closure of food stalls, restaurants and shopping malls.


US

Economic growth in the United States slowed more than expected in the third quarter to the softest pace of the pandemic recovery period as snarled supply chains and a surge in Covid-19 cases throttled spending and investment. Gross domestic product (GDP) expanded at a 2 per cent annualised rate following a 6.7 per cent pace in the second quarter, the Commerce Department’s preliminary estimate showed on Thursday (Oct 28). The median forecast in a Bloomberg survey of economists called for a 2.6 per cent increase in GDP. The deceleration reflected a sharp slowdown in personal consumption, which grew at just a 1.6 per cent pace after a rapid 12 per cent jump in the prior period. Shortages, transportation bottlenecks, rising prices and the delta variant of the coronavirus weighed on both goods and services spending. The latest data underscores how unprecedented supply constraints are holding back the US economy. Understaffed and short of necessary materials, producers are struggling to keep up with demand. Service providers, who face similar pressures, fared better than manufacturers during the quarter despite the pickup in infections.

Pending home sales fell an unexpected 2.3% in September compared with August, according to the National Association of Realtors. Pending home sales, which are a measure of signed contracts to buy existing homes, fell an unexpected 2.3% in September compared with August, according to the National Association of Realtors. Analysts were predicting a slight monthly gain. Sales were 8% lower compared with September 2020. Pending sales are a forward-looking indicator of closed sales in one to two months. ales may have dropped due to higher mortgage rates. The average rate on 30-year fixed-rate mortgages fell below 3% in July and stayed there until the first week of September, according to Mortgage News Daily. Then it began rising and crossed over 3%, ending the month at 3.15%.

Twilio shares are down more than 16% Thursday despite beating third-quarter earnings expectations, after the company shared a weak forecast for the fourth quarter and its COO announced his departure. The cloud communications platform reported $0.01 adjusted earnings per share and revenue of $740 million, beating analyst estimates which included an adjusted loss of $0.15 and revenue of $681 million. Those gains were eclipsed by a weak fourth-quarter earnings forecast and news that George Hu will depart as COO. Khozema Shipchandler will take over the role while maintaining chief financial officer duties.

Comcast reported third-quarter earnings results before the bell Thursday that beat analyst expectations on the top and bottom line. The company saw slight growth in new broadband internet customers amid prior warnings from company executives. Comcast CFO Michael Cavanagh warned in September that the company expects lower broadband additions, a move that briefly sent the company’s stock down. Analysts have adjusted their forecasts. Comcast did not report sign-ups for Peacock, but the streaming service “added a few million more subs,” NBCUniversal CEO Jeff Shell said during the call. The streaming service, which offers both paid and free options to customers, had 54 million sign-ups as of July.


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

Frasers Centrepoint Trust – Early recovery for suburban malls

Recommendation: BUY (Maintained), Last Done: S$2.39

Target Price: S$2.83, Analyst: Natalie Ong

– FY21 NPI of S$246.6mn (+122.4%) and DPU of 12.085 cents (+33.7%) were in line, forming 96% and 99% of our estimates.

– c.S$9mn in rental rebates provided in FY21, one-third of that provided in FY20.

– Occupancy and NPI margins back to pre-pandemic levels, positive reversions at six out of nine malls.

– Reiterate BUY, DDM TP (COE 6.38%) lowered from S$2.87 to S$2.83. We lower our FY22e-25e DPU by 5.8%-6.6% to factor in a more conservative pace of rental growth. Catalysts expected from growth in mall catchment, asset enhancement and M&A/collaboration opportunities.

Technical Pulse: Frasers Centrepoint Trust

Recommended: Technical BUY; Analyst: Chua Wei Ren

Fraser Centrepoint Trust (SG: J69U) corrective downside is likely coming to a halt after technicals show signs of a bullish recovery.

Buy spot: 2.39 Stop loss: 2.22 Take profit 1: 2.60 Take profit 2: 2.70

Technical Pulse: China Shenhua Energy Co Ltd

Recommended: Technical BUY; Analyst Chua Wei Ren

China Shenhua Energy (HKEX: 1088) met with disappointing downside pressure after prices failed to clear above the immediate resistance at HK$18.72 based on our report dated 22nd October. Technicals indicate that there may be a return of a short-term bullish upside.

Buy spot: 16.76 Stop loss: 15.00 Take profit 1: 17.90 Take profit 2: 19.00

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