Daily Morning Note – 5 Aug 2019


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The Dow Jones Industrial Average lost 280.85 points, or 1.1%, to 26,583.42, while S&P 500 index fell 26.82 points, or 0.9% to end at 2,953.56. The Nasdaq Composite Index closed down 64.30 points, or 0.8%, at 8,111.12. The Cboe Volatility Index, a popular gauge of stock-market volatility known by its ticker symbol VIX, jumped to a nearly two-month high Thursday as stocks sold off. The VIX rose more than 13% to trade above 18.0 for the first time since June 4. The Dow has now fallen for three days in a row to its lowest close since June 27, and is 2.8% below its record high of 27,369 seen on July 15, but remains up 14% year-to-date. The benchmark S&P 500 index on Thursday saw its lowest close since June 28, and is 2.3% off its record high of 2025.86 on July 26, but remains up 18% year-to-date. The unexpected move by Trump to ratchet up the trade war with China reversed Thursday morning’s gains in stocks when investors were betting the Federal Reserve would cut interest rates again in September given weakening economic data.


Hong Kong protesters looked to shut down the city with a general strike on Monday after a ninth straight weekend of unrest triggered by Beijing’s tightening grip over the financial hub.

Indonesia’s state power company PLN estimated on Sunday that it would take several hours to restore power to Jakarta after a major blackout, blaming technical issues for cutting power to tens of millions of people in the capital and surrounding provinces.

Nico Steel Holdings Limited today announced that it has received the approval for its patent on the electroplating process of aluminium alloy with copper for a period of 20 years starting June 2019, from the National Intellectual Property Administration in the People’s Republic of China.

Chip Eng Seng has announced that its newly-acquired property at 51 Pirie Street in Adelaide, Australia will be developed into a new Hyatt Regency. On July 2, Chip Eng Seng acquired the property at a price of A$14.5 million ($14.6 million), funded fully through internal resources.

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


Capitaland Commercial Trust

Recommended Action: Technical BUY

CapitaLand Commercial Trust bullish move is strong despite the correction. The falling wedge suggests the formation is a healthy bullish continuation pattern.

Read more technical pulse


Oversea-Chinese Banking Corp Ltd– Catch-up in NIM expansion

Recommendation: ACCUMULATE (Maintained), Last Close Price: S$11.21

Target Price: S$12.50, Analyst: Tin Min Ying

– 2Q19 revenue/PATMI was in line with our estimates.

– Strong NIM expansion of 12bps YoY and 3bps QoQ to 1.79%, due to a catch-up in loan repricing and better utilisation of deposits.

– Wealth management fees surged 17% YoY to $262mn, its highest level in five quarters.

– Life insurance profit from GEH fell 26% YoY due to decline in discount rate used to value long-term insurance contract liabilities.

– Credit costs normalised to 15bps after higher provision was taken in 1Q for the OSV sector. NPL ratio remained stable at 1.5% (2Q18: 1.4%).

– Declared interim dividend of 25 cents/share, 25% higher than a year ago.

– We maintain ACCUMULATE at a lower target price of S$12.50 (previously S$12.70). Our TP is based on target price-to-book of 1.3x, derived from the Gordon Growth model. We toned down terminal growth from 2.5% to 2.0%.

United Overseas Bank Limited – Steady growth amidst uncertainties

Recommendation: ACCUMULATE (Maintained), Last Close Price: S$26.0

Target Price: S$28.60, Analyst: Tin Min Ying

– 2Q19 revenue/PATMI, were in line with our estimates.

– NIM fell 2bps YoY due to higher cost of funding with an increase in pricier fixed deposits (+7% YoY). LDR healthy at 88.5% (2Q18: 85.7%).

– Loans surprised on the upside by rising 9% YoY, led by a broad-based increase across all territories and industries.

– Fee income rebounded (+6% YoY) after two quarters of contraction due to strong wealth management, credit cards and loan-related fees growth.

– Allowances fell 44% YoY due to write-back in allowances on non-impaired assets. NPL ratio healthy at 1.5% (2Q18: 1.7%).

– Declared a higher interim dividend of 55 cents per share (1H18: 50 cents per share).

– Maintain ACCUMULATE with a lower target price of S$28.60 (previously S$30.90). Our TP is based on target price-to-book of 1.3x, derived from the Gordon Growth model. We toned down terminal growth from 2.5% to 2.0% and raised beta from 1.1x to 1.2x. We lowered our NIM and loan growth forecasts, resulting in a slightly lower ROE assumption of 11.2% (previously 11.4%).

Nike Inc – Driven by product innovation and digitalization

Analyst: Edmund Xue

– Nike (NKE) continues to develop innovative platforms and drive digital growth while making strategic wholesale partnerships.

– Ongoing America and China strength despite a challenging economic backdrop.

– Revenue to accelerate with product innovation. We see consistent innovative products from NKE.

– We have a TECHNICAL BUY rating for NKE.

Ascott Residence Trust – The art of diversification

Recommendation: ACCUMULATE (Maintained), Last Done: S$1.32
Target Price: S$1.36, Analyst: Natalie Ong

– Revenue was in line with our forecast. DPU was +6.2% higher due to realised FX gains on loan repayment, excluding which DPU would be in line.

– Diversification and hedging strategy kept earnings stable

– Lower gearing of 32.8% (-2.9ppts QoQ), debt headroom increased to c.$1.1bn

– Maintain ACCUMULATE; target price of $1.36 unchanged

Ascendas REIT – Not as grim as it looks

Recommendation: ACCUMULATE (Upgrade), Last Done: S$3.04
Target Price: S$3.31, Analyst: Natalie Ong

– 4Q19 and FY19 NPI and DPU were in line with our forecast.

– A gloomy manufacturing outlook but a slight improvement in SG operations – <10% of FY19 lease expires, tenant diversification and portfolio asset mix will keep AREIT buffered.

– Temporary weakness in Australian occupancy

– Change in financial year-end from 31 March to 31 December

– Upgrade to ACCUMULATE with a higher target price of $3.31 due to lower interest rate assumptions and higher revenues forecasts from the signing of above-market rents.

Webinar Of The Week

Market Outlook: : : (PSR) CapitaLand Mall Trust, Frasers Centrepoint Trust, JP Morgan, US Weekly, China Weekly Musings, China Brokerage Sector, Technical Outlook

Date: 29 July 2019

For more on Market Outlook

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 Important Information

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