Daily Morning Note – 4 Nov 2019

WEEKLY MARKET OUTLOOK WEBINAR

PHILLIP SUMMARY

Stocks were set to rise in Asia after a strong U.S. hiring report Friday and positive signs on an interim U.S.-China trade deal. The yuan was steady, while the Aussie climbed. Futures pointed higher on equity indexes in Hong Kong and Australia after the S&P 500 rose 1% on Friday to a fresh all-time high as data showed the economy added more jobs than forecast. South Africa’s rand advanced after the country clung on to its investment-grade credit rating. Markets are shut in Tokyo Monday, so Japanese equities won’t trade and cash Treasuries will begin at the London open. Elsewhere, gold added 0.1% on Friday to $1,514.34 an ounce, and crude on Friday gained 3.7% to $56.20 a barrel.

BREAKING NEWS

PACIFIC Star Development has flagged that it expects to report a net loss for the first quarter ended Sept 30, citing tough market conditions and higher finance costs.

Westpac Banking Corp reported a 15 per cent drop in full-year cash earnings on Monday and said it was looking to raise A$2.5 billion (S$2.35 billion) as Australia’s No 2 lender looks to beef up its capital levels to meet regulatory requirements.

216 of the 280 units released for sale at Sengkang Grand Residences were sold at the launch weekend, said co-developers CapitaLand and City Developments Limited (CDL) on Sunday.

ASSET management firm ASAP sold six hotels to Eagle Hospitality Trust’s (EHT) sponsor ahead of EHT’s initial public offering (IPO) to gain transaction certainty independent of the IPO process, said EHT.

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

TECHNICAL PULSE

Tencent Holdings Ltd

Recommended Action: Technical BUY

Tencent (HK: 700) is heading for a bullish recovery based on the technicals below

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TECHNICAL PULSE

United Overseas Bank Limited – Fees growth to offset NIM contraction in 2020

Recommendation: ACCUMULATE (Maintained), Last Close Price: S$26.6

Target Price: S$27.8, Analyst: Tin Min Ying

– 3Q19 revenue and PATMI were in line with our estimates.

– NIM fell 4bps YoY and QoQ to 1.77% due to declining interest rates and competitive pricing environment. NIM expected to contract 5-10bps in FY20.

– Loans growth remained strong at 8% YoY and LDR% healthy at 89% (3Q18: 86%).

– Fee income surged 14% YoY due to strong wealth management, credit cards and loan-related fees growth.

– Allowances rose 53%, to provide for impaired assets. Overall asset quality stable with NPL ratio healthy at 1.5% (3Q18: 1.6%).

– Maintain ACCUMULATE with a lower target price of S$27.80 (previously S$28.60). Lower TP as we reduce FY20e earning by 2.3%. Our FY20e NIM lowered by 4bps to 1.74% and FY20e credits costs increased by 4bps.

US Banking Q3 Results – NII Pressure from rate cuts, offset by deposit growth

Recommendations: OVERWEIGHT, Analyst: Edmund Xue

– We maintain OVERWEIGHT for the U.S. Banking Sector. Valuations continue to be cheap.

– Modest NII growth and broad-based NIM pressure for banks amid rate cuts. Net revenue was up 1.9% YoY. Pause in rate hikes to benefit banks.

– Loans growth was 2.4% YoY, boosted by consumer (3.8% YoY) and mortgage loans (39% YoY).

– Lower funding cost and higher deposit growth for banks to partially offset the rate cuts.

– Asset quality remain healthy despite an uptick in net charge-offs at a low base.

Sheng Siong Group – New stores + Market share + Higher margins = Record profits

Recommendation: ACCUMULATE (Maintained), Last Done: S$1.17

Target Price: S$1.32, Analyst: Paul Chew

– 3Q19 revenue was within our expectations. Net earnings exceeded our estimates due to better gross margins and other income (grants). New stores drove revenue growth of 11% in 3Q19 and gross margins were better than expected due to higher fresh food sales mix.

– Sheng Siong (SSG) secured another three new stores in for 4Q19/1Q20. The cumulative six new stores will expand footprint by 8% and support revenue growth in FY20e.

– We bumped up our FY19e earnings by 2% due to higher margins and other income. Our ACCUMULATE recommendation is maintained. Together with the rise in FY19e earnings, our target price is raised to S$1.32 (previously S1.30). New stores, market share gains and higher margins are translating to record earnings for SSG despite sluggish consumer spend in Singapore.

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Webinar Of The Week

Market Outlook: : Market Outlook: (PSR) Keppel DC REIT, JEP Holdings Ltd, SREITs Monthly, US & China Weekly

Date: 21 October 2019

For more on Market Outlook

Phillip Research in 3 minutes: #16- JEP Holdings Ltd

Updates summarised in 3 minutes

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