Daily Morning Note – 4 August 2021
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The S&P 500 finished at a fresh record on Tuesday as US stocks shook off early weakness and closed higher behind the strength in industrials and energy shares. Analysts cited bargain-hunting as a factor in Tuesday’s bounce back following Monday’s lackluster session, which was dented by worries over global growth and the Delta variant of Covid-19. Art Hogan, chief strategist at National Securities, said investors have been heartened by data showing an uptick in US vaccinations in response to the latest surge in Covid-19. The Dow Jones Industrial Average finished up 0.8 per cent at 35,116.40. The broad-based S&P 500 also rose 0.8 percent to 4,423.15, edging out a previous record, while the tech-rich Nasdaq Composite Index advanced 0.6 percent to 14,761.29. The yield on the 10-year US Treasury, a proxy for the medium-term growth outlook, steadied after falling sharply on Monday.
UOB’s net profit for its second quarter rose 43 per cent, as more economies reopened and as it posted lower credit allowance, it said on Wednesday. The bank declared an interim dividend of 60 cents per ordinary share. This translates to a dividend payout ratio of 50 per cent. Net profit for the three months ended June 30, 2021 stood at S$1.0 billion, compared with S$703 million from the year-ago period.
OCBC’s net profit for its second quarter rose 59 percent, riding on an improved economic outlook, it said on Wednesday. It declared a dividend of 25 Singapore cents per share for the period. Net profit for the three months ended June 30, 2021, stood at S$1.16 billion, compared with S$730 million from the year-ago period. The Monetary Authority of Singapore (MAS) in July lifted its dividend cap on locally incorporated banks and finance companies based in Singapore. It joins other central banks that have recently eased dividend restrictions imposed on banks last year, as the global economy rebounds amid gradual re-openings and rapid vaccine rollouts.
Property developer OUE recorded a S$30.1 million net profit for the six months ended June, reversing the year-ago loss of S$207.2 million. The improvement has been attributed to the absence of the fair-value loss recognised on the US Bank Tower last year. The company proposed an interim dividend of 1 Singapore cent per share, to be paid on Sept 23. The sweetener comes even as OUE’s revenue fell by 49.5 per cent to S$152 million, with lower contributions across most divisions. Following the divestment of the US Bank Tower and the partial divestment of OUE Bayfront, OUE Tower and OUE Link, revenue from the investment properties division decreased to S$105.2 million in H1, down from $139.1 million a year ago.
PAN-UNITED, Singapore’s biggest producer of ready-mix concrete, on Tuesday posted a first-half net profit of S$7.3 million – from just S$138,000 in the same period a year ago – as construction activities pick up in Singapore. Revenue for the six months ended June 30, 2021 (H1 2021) came in at S$276.6 million, a 45 per cent year-on-year increase. The group declared an interim cash dividend of 0.5 Singapore cent per ordinary share, to be paid on Sep 9, 2021.
Oncology specialist TalkMed Group posted a 1.1 per cent rise in net profit to S$10.8 million for the six months ended June, even as its patient numbers were hit by travel restrictions, the Catalist-listed company announced on Tuesday evening. The company proposed an interim dividend of S$0.007 per share, to be paid on Aug 20. TalkMed’s H1 revenue fell 5.9 per cent to S$28.9 million, as foreign patient numbers dropped amid the pandemic. A large number of its patients in Singapore are from other parts of South-east Asia, the company said.
Boeing on Tuesday postponed the planned launch of its CST-100 Starliner capsule from Florida’s Cape Canaveral bound for the International Space Station in what was to have been a crucial do-over test flight following a near-catastrophic failure during its 2019 debut.
New orders for US-made goods increased more than expected in June, while business spending on equipment was solid, pointing to sustained strength in manufacturing even as spending is shifting away from goods to services. The Commerce Department said on Tuesday that factory orders rose 1.5 per cent in June after advancing 2.3 per cent in May. Economists polled by Reuters had forecast factory orders increasing 1.0 per cent. Orders soared 18.4 per cent on a year-on-year basis. Demand pivoted towards goods during the Covid-19 pandemic as millions of Americans were cooped up at home, boosting manufacturing, which accounts for 11.9 per cent of the US economy. But the surge in demand is straining the supply chain
A coalition of gig economy companies is opening up a new front in the global struggle over the legality of their business model. A campaign backed by companies including Uber Technologies, DoorDash, Lyft and Instacart is seeking to place a measure on next year’s Massachusetts ballot defining their workers as independent contractors – not regular employees. Under the proposal, which the company-backed Massachusetts Coalition for Independent Work plans to file Wednesday, ride-hail and delivery app drivers would be promised perks such as health-care stipends, but their employment status as contractors would be enshrined in state law.
New York will become the first major US city to require proof of vaccination for people attending indoor venues such as restaurants, gyms and shows, under a plan announced by Mayor Bill de Blasio on Tuesday. The announcement comes as public bodies and private businesses in the United States step up vaccine requirements as the country battles the highly infectious Delta variant.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
AEM Holdings Ltd
Analyst: Chua Wei Ren
Recommended Action: Technical BUY
AEM Holdings (SGX: AWX) wave analysis indicate that the impulse 5-wave move of the intermediate phase has been completed and the larger ABC corrective wave of the next phase is likely to be a done deal as well. Looking at the recent technical and price action, we believe that there will be further upmove potentially
Buy spot: 4.05 Stop loss: 3.54 Take profit 1: 4.55 Take profit 2: 5.25
First Sponsor Group – Another acquisition in Greater Bay
Recommendation: ACCUMULATE (Maintained), Last Done: S$1.36
Target Price: S$1.56, Analyst: Tan Jie Hui
– Results in line at 56%/57% of FY21e revenue and net profit, boosted by property development. 1H21 unrecognised gross development value was S$559mn. Share of gross development value for unlocking was S$3.4bn, before Bolong Bay and City Tattersalls.
– New Boyong project increases FSG’s exposure to Dongguan where residential demand is still hot. Hotel portfolio likely to recover, led by non-city hotels. Property financing’s PRC loan book grew 22% HoH on the back of more development and financing deals.
– Maintain ACCUMULATE with unchanged SOTP target price of S$1.56. We factored an increase in valuation for the development and financing segments, offset by net debt and East Sun divestments. FY21e revenue and net profit estimates were raised by 4% and 9% respectively to reflect better hotel performance and lower tax expenses.
Keppel Corporation – Acquisition of SPH to accelerate Keppel’s Vision 2030
Recommendation: Buy (Maintained), Last Done: S$5.49
Target price: S$6.28, Analyst: Terence Chua
– Proposed acquisition of SPH to be earnings accretive, will grow recurring-income base, in line with Vision 2030.
– SPH owns synergistic businesses with Keppel. Acquisition to provide opportunity for Keppel to expand and enter into secular growth areas.
– Net gearing to increase to just under 1x after acquisition, which is at the upper end of its historical gearing range. No change to our forecasts pending SPH EGM and regulatory approval.
– We raise our earnings forecast for FY21e by 46% for higher estimates for its O&M, Urban Development and Asset Management businesses on promising tailwinds.
– Maintain BUY and SOTP TP of S$6.28, still with a 10% holding-company discount. Our TP translate to about 1.0x FY21e book value, a slight discount to its 5-year average of 1.05x. Catalysts expected from O&M contract wins and a successful resolution to its O&M unit.
HK Reports – Read up on our Hong Kong reports here
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The Highlights EP01: LHN Limited – Optimisier of real-estate trends
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