Daily Morning Note – 3 July 2020

PHILLIP SUMMARY

Stocks in Asia Pacific were set for a positive Friday start after U.S. nonfarm payrolls released overnight beat expectations, raising optimism over the prospects of an economic recovery from the coronavirus pandemic. Futures pointed to a higher open for Japanese stocks, with the Nikkei futures contract in Chicago at 22,335 while its counterpart in Osaka was at 22,310. That compared against the Nikkei 225′s last close at 22,145.96. Shares in Australia were also set for a positive start to their trading day. The SPI futures contract was at 6,048, as compared to the S&P/ASX 200′s last close at 6,032.70.

BREAKING NEWS

RESTAURANT chain operator and caterer Tung Lok Restaurants sank into the red in the second half of FY2020 ended March, with a net loss of S$1.2 million, reversing from earnings of S$405,000 a year ago. Revenue for the period was hit when the novel coronavirus struck Singapore in late January – the beginning of Tung Lok’s Q4 and a traditionally busy period for its restaurants.

LISTED conglomerate Sembcorp Industries’ urban business has formed a joint-venture company with Japanese property firm CRE Asia, as part of an effort to facilitate the expansion of its warehousing properties in Vietnam. Sembcorp Industries, in a regulatory filing on Thursday, said that its wholly-owned urban business Sembcorp Development has partnered CRE Asia to form a joint-venture company, Sembcorp Infra Holdings. The joint-venture company, in which Sembcorp Development has an effective ownership of 70 per cent, was incorporated in Singapore with an issued capital of US$100,000.

MAINBOARD-listed property investment company Chuan Hup announced that its associated company has received approval from the Australian authorities to develop a 32-level residential tower in a prime area in Perth. The company, in a regulatory filing on Thursday, said that its associated company, 240 Adelaide Terrace Pty Ltd, has been given the green light by Perth’s development assessment panel to proceed with the project in Adelaide Terrace, near the city’s central business district.

SINGAPORE Telecommunications’ (Singtel) wholly-owned Australian subsidiary Optus on Thursday confirmed a contract with Airbus Defence and Space for a new OneSat software-defined satellite. The Optus 11 will be deployed for Australia and New Zealand in 2023 at the current Optus D1 orbital location, sitting 36,000 kilometres above Earth.

TWO subsidiaries of Catalist-listed Hatten Land are looking to undergo debt restructuring, on top of the group’s other initiatives to make its property development business more resilient in light of ongoing pressures from the Covid-19 pandemic. The subsidiaries, MDSA Resources and MDSA Ventures, are the developers for the group’s integrated mixed-use projects Hatten City Phase 1 and 2 in Malacca, Malaysia.

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

RESEARCH REPORTS

Singapore Banking Monthly – Prudence essential to weather headwinds

Recommendation: Neutral (Maintained), Analyst: Tay Wee Kuang

– Interest rates remains subdued in June, with 3M-SIBOR unchanged at 0.56% from May, as lending rates look to stay lower for longer.

– Loans growth continue slowing in May to 0.51% YoY, as both business and consumer loans take a hit from the Circuit Breaker period.

– SGX announced the launch of FTSE Taiwan Index futures in July 2020 in a move to replace MSCI products expiring in February 2021. Monthly MSCI Taiwan contracts turnover make up 13% of equity index futures contracts in May.

– SGX expands footprint into FX OTC market with US$128mn acquisition of the remaining 80% stake in cloud-based trading platform BidFX.

– Maintain the Singapore Banking Sector at NEUTRAL. Outlook for the sector contingent on fee income resilience as Singapore enters phase 2 of economic reopening. Underlying estimates remain unchanged.

Ascott Residence Trust – Flush with liquidity

Credit Analyst: Timothy Ang

– We are Overweight the ARTSP 3.07% perpetual (Yield to worst 3.16%, Yield to call 5.89% assuming called in 1 year, 264bps spread) as it looks interesting on the Ascott curve after resetting.

– While COVID-19 heavily hit operations causing some lessees to file for bankruptcy, we note that ART’s liquidity covers operating expenses for >2 years and sponsorship to Ascott Limited (part of CapitaLand Group) provides better access to funding.

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