Daily Morning Note – 4 March 2019


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Most or all U.S. tariffs on China are likely to be lifted as part of a trade deal between the world’s two-largest economies now in its final stages, said two people familiar with the discussions. Beijing made clear in a series of recent negotiations with the U.S. that removing the tariffs on $200 billion of Chinese goods from day one was necessary to finalize any deal, said the people, who weren’t authorized to talk publicly about the deliberations. China is offering to lower tariffs on U.S. farm, chemical, auto and other products, the Wall Street Journal reported earlier, citing people familiar.

The inflation outlook is looking dismal for the Bank of Japan as cheaper oil and falling mobile phone charges threaten to push price growth toward zero by mid-summer. The Bloomberg Inflation Barometer, which draws on eight drivers of prices, points to a sharp slowing in the months ahead as lower oil costs feed their way into electricity bills. Over the past eight years the barometer has shown a 0.84 correlation with consumer prices six months into the future. Mobile phone carriers could complicate the BOJ’s quest to revive inflation as they come under political pressure to lower charges further.


China Sunsine Chemical Holdings Ltd – Focus on volume growth

Recommendation: BUY, Last Closing Price: S$1.26

Target Price: S$1.55, Analyst: Chen Guangzhi

– Expect 50% and 28% jump in IS and TBBS sales volume in FY19 but ASP to slip.

– The 5.5 SG cents annual dividend represents a 4.3% yield.

– Valuations are still attractive at 6x PE (with 1/3 of the market cap in cash).

EC World REIT – Optimistic about the outlook

Recommendation: BUY (Maintained), Last Closing Price: S$0.760

Target Price: $0.85 (previous TP $0.82) Analyst: Phillip Research Team

– NPI and DPU were in line with our forecast. 5.3% and 5.6% YoY boost in gross revenue and
NPI, respectively, driven by the acquisitions of Wuhan Meiluote in 2Q17.

– Wuhan asset performing well after acquisition; slow rap-up of occupancy at Beigang.

– Early renewal of master lease on favourable terms, pending shareholder vote at an EGM to
be convened.

– Maintain Buy with higher TP of S$0.85 (prev. S$0.82).

Sheng Siong Group – New stores will support growth

Recommendation: ACCUMULATE (Maintained), Last Closing Price: S$1.08

Target Price: $1.30 (previous TP $1.13) Analyst: Paul Chew

– 4Q18 revenue and earnings met our expectations. Headline PATMI in 4Q18 was hurt by a
S$2.3mn decline in government grants.

– Gross margin is stellar but some revenue drag from contraction in same-store sales

– Expect strong revenue momentum following the 23% jump in retail space in FY18

– We have kept our forecast unchanged. As we roll-over our target price to FY19e valuation, we
raised our target price to S$1.30 (previously S$1.13) or 25x PE. Maintain ACCUMULATE.

Singapore Banking Monthly – Mortgage growth at a 17-year low

Recommendation: Overweight (Maintained); Analyst: Tin Min Ying

– January’s domestic loan growth remained flat at 3.16% YoY, held up by building and
construction loan while mortgage growth was the slowest in seventeen years.

– January’s domestic deposits rose 4.8% YoY, boosted by fixed deposit growth of 15.1% YoY,
the fastest in eleven years.

– February’s 3-month SIBOR is still rising. It is now 1.953%, surpassing last month’s 11 yearhigh.

– Hong Kong’s January loan growth remained flat at 3.1% YoY.

– Maintain OVERWEIGHT for the Singapore Banking Sector.


First Sponsor plans to buy Concord Focus Development, which owns three land parcels in China’s Guangdong province totalling 36,405 square metres (sq m), for 738 million yuan (S$148.9 million).First Sponsor said that the property has land use rights with expiry dates of Jan 31, 2088 for residential use and Jan 31, 2058 for commercial use.

Hyflux has taken a S$916 million impairment for the nine months ended Sept 30, to adjust for a fall in carrying value of the Tuaspring water and power plant and other write-downs. This figure was released on Saturday, after Hyflux submitted its latest statement of financial position to the High Court.

Indonesia and Australia are set to ink a long-awaited trade deal on Monday, after months of diplomatic tension over Canberra’s contentious plan to move its embassy to Jerusalem. The pact will include improved access for Australian cattle and sheep farmers to Indonesia’s 260 million people, while Australian universities, health providers and miners will also benefit from easier entry to South-east Asia’s biggest economy.

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

Read the research report(s), available through the link(s) above, for complete information including important disclosures

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