Daily Morning Note – 3 Aug 2020


Asian stocks looked set to start August in mixed fashion amid a resurgence in Covid-19 cases and simmering U.S.-China tensions. Currencies were little changed.

Futures pointed higher in Japan, dipped in Hong Kong and were flat in Australia. S&P 500 contracts fluctuated in early trading. Infections are picking up again in some U.S. states and a senior Federal Reserve official on Sunday urged Congress to act to support Americans laid off due to the pandemic and suggested a fresh lockdown. In Australia, Victoria state tightened restrictions and declared a state of disaster as cases skyrocket, while the Philippines imposed a stricter lockdown for capital Manila and nearby areas. Oil dipped and gold rose.


Manulife US Real Estate Investment Trust, today reported its gross revenue of US$98.6 million and net property income of US$62.2 million for the first half ended 30 June 2020, recording year-on-year increases of 18.3% and 18.8% respectively. The robust growth in income is largely due to contributions from Centerpointe and Capitol acquired in FY 2019, partially offset by lower rental income mainly from Michelson and lower portfolio carpark income. For 1H 2020, the REIT reported a 20.0% YoY increase in distributable income to US$48.0 million. This translated to a DPU of 3.05 US cents, 0.3% higher as compared to the same period a year ago.

DBS, which says a third of its customers had negative cash flow in January to June 2020, is ramping up its suite of digital financial planning solutions and tools to empower Singaporeans for a head start in retirement planning and boost their financial resilience amid these tough times.

The Temasek Holdings unit that last October made a voluntary pre-conditional partial offer for Keppel Corporation will decide by end-August whether to invoke the material adverse change (MAC) pre-condition based on Keppel’s second quarter results.

As Hong Kong’s stock market prepares for billions of dollars in sales of new shares, global fund managers have a big challenge – competing with the city’s army of mom-and-pop investors for a slice of the pie. Record participation by retail investors in a recent Hong Kong initial public offering (IPO) and sky-high demand in some other IPOs has forced big investors to hold onto newly listed shares.

Foreign investors made record net purchases of Chinese bonds traded through the country’s Bond Connect programme in July, boosted by record yield premiums over US debt. Net inflows into Chinese bonds through Bond Connect, which gives global investors access to the country’s onshore bond market through Hong Kong, totalled 75.5 billion yuan (S$14.87 billion) in July, Bond Connect said in a statement dated Friday.

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


Singapore Exchange Limited – Firing on all cylinders

Recommendation: BUY (Upgraded), Last Done: S$8.17

Target Price: S$9.45 (prev S$9.28), Analyst Tay Wee Kuang

– SGX beat our earnings estimates by 11.9% for 4Q20 on sustained business momentum.

– Stellar performance from 3Q20 was sustained in 4Q20, with cash equities growing 11% YoY on heightened market trading activity and DCI growing 39.5% YoY as a result of revenue contribution of Scientific Beta post-acquisition since 3Q20.

– Business expansion expected with acquisition of BidFX into the OTC FX market and partnering with FTSE to replace expiring MSCI Index Futures contracts well ahead of expiry.

– Proposed final dividend of 8.0 cents from 7.5 cents per share in 4Q20 represents an annualised increment of 7%. Moving forward, SGX expects to pay 32 cents in dividends on sustained earnings growth.

– We upgrade to BUY call with a higher TP of S$9.45 (prev. S$9.28). We peg our TP to -1 SD of 5-year mean P/E of 21.4x. Current prices are trading at attractive valuations (18.5x P/E) that is more than 2 SD below the 5-year mean.

Sheng Siong Group Ltd – Searching for normalised earnings

Recommendation: NEUTRAL (Downgraded)

TP: S$1.65, Last close: S$¬¬1.70; Analyst Paul Chew

– 2Q20 revenue and earnings beat our estimates. 2Q20 PATMI surged 150.4% YoY to S$46.1mn. 1H20 dividends doubled to 3.5 cents.

– Revenue surged 76% YoY from pantry loading and more cooking at home following the circuit breaker on 7 April. Same-store sales leapt 61% YoY in 2Q20.

– 2Q20 gross margins touched a record high of 28.1%, supported by lower promotions.

– Our FY20e revenue and earnings are raised 29% to S$122mn. Revenue and margins triggered by the pandemic were higher than expected. We also incorporated the grants from the government. We expect sales to remain vibrant in 2H20 due to households dining more at home and convenience of Sheng Siong stores compared to peers. We are downgrading our recommendation from ACCUMULATE to NEUTRAL. Our target price is pegged to FY21e (rather than FY20e) as a barometer to normalised earnings.

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