Daily Morning Note – 5 Nov 2019
WEEKLY MARKET OUTLOOK WEBINAR
Asian stocks are poised to consolidate gains Tuesday after another strong session on Wall Street as the U.S. and China inch closer to a trade deal. Treasuries tumbled.
Futures signaled equities will open firmer in Japan, with Hong Kong shares set to slip after the biggest jump in three weeks Monday.
Australian stocks opened slightly higher. U.S. futures were flat. The Dow Jones Industrial Average claimed its first all-time high since July, and the S&P 500 and Nasdaq indexes also hit new highs.
China is reviewing locations in the U.S. where President Xi Jinping would be willing to meet with President Donald Trump to sign the first phase of a trade deal between the world’s two-largest economies, people familiar with the plans said. The 10-year Treasury yield rose to 1.78% and the dollar advanced versus major peers.
Oil prices rose on Monday, buoyed by an improved outlook for crude demand as better-than-expected US jobs growth added to market hopes a preliminary US-China trade deal would be reached this month.
Global stock markets rallied on Monday, with major US indices surging to fresh records on optimism over international trade talks and continued positive momentum from solid economic data and earnings.
SINGAPORE’S second-largest bank OCBC Bank is understood to be in firm talks with Keppel Corporation, peer-to-peer lender Validus Capital, and Vertex Ventures, to form a digital-bank consortium.
QUETZAL Capital has announced a voluntary conditional cash offer for Pacc Offshore Services Holdings (POSH) at S$0.215 per share in cash.
CHINA Everbright Water on Monday said it has secured Ji’nan Tangye New Area Waste Water Treatment PPP project and Zibo Northern Waste Water Treatment Plant Expansion Project in Shandong province, with a total investment of about 396 million yuan (S$76.3 million).
CHALLENGER Technologies on Monday posted a 5 per cent drop in its third-quarter net profit to S$4.3 million, on the back of flat revenue of S$83.3 million, which rose just 1 per cent from a year ago.
FOOD court and coffeeshop operator Koufu on Monday posted a 52.3 per cent increase in net earnings to S$7.1 million in its third quarter, on the back of a 6.6 per cent rise in revenue to S$61.4 million.
SINGAPORE Press Holdings (SPH) has launched a perpetual issue on Monday, its second such deal this year.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, PSR
China Petroleum & Chemical Corp
Recommended Action: Technical BUY
China petroleum & Chemical (HK: 386) will most likely heading for a bulls recovery based on the technicals
Singapore Banking Monthly – Tepid but stable loans growth
Recommendation: Overweight (Maintained)
Analyst: Tin Min Ying
– Singapore’s loans growth for September was tepid but stable at 2.1% YoY.
– Consumer loans contracted for the sixth consecutive month (-1.2% YoY), dragged by weakness in housing loans (-1.3% YoY).
– 3M SIBOR down 7bps to 1.806%, while 3M SOR plunged 17bps to 1.515%.
– CASA growth recovered to 0.9% YoY after almost a year of contraction; while FD kept up its strong momentum at 20.3% YoY.
– In 1Q20 (Jul – Sep), DDAV grew 12% YoY and SDAV growth recovered to -1% YoY as compared to quarterly average contraction of -16% YoY in FY19.
– Maintain the Singapore Banking Sector at Overweight. The banks are offering dividend yield of 4.6% to 5.0%, well capitalised and enjoying 5-9% earnings growth.
NetLink NBN Trust – Organic growth from here
Recommendation: ACCUMULATE (Maintained), Last Done: S$0.945
Target Price: S$0.990, Analyst: Alvin Chia
– Results were within expectations, residential fibre connections rose 13.7 YoY
– NBAP and segment connections increased by 4.3% and 9.4% QoQ respectively
– NLT is supporting M1 and TPG Telecom on their 5G trials in Marina Square and Singapore Science Park I and II
– Maintained ACCUMULATE with a higher TP of S$0.99. We adjusted our WACC downwards to 5.9% to reflect the lower interest rate environment.
Raffles Medical Group Ltd – China remains an earnings drag
Recommendation: NEUTRAL (Maintained), Last Done price: S$1.00
Target Price: S$1.05 (prev TP: S$1.09), Analyst: Tin Min Ying
– 3Q19’s Revenue and PATMI were in line with our estimates.
– 3Q19’s PATMI plunged 16.9% YoY due to gestation costs from Raffles Hospital Chongqing. Excluding China, net earnings would have risen by 4.8% YoY.
– RafflesHospital Chongqing’s 3Q EBITDA loss of $2.6mn was within expectations.
– We keep our NEUTRAL recommendation with a lower TP of S$1.05 (previous TP S$1.09). Earnings will be under pressure from the gestations costs for RafflesHospital Chongqing in 2019 and RafflesHospital Shanghai in 2020.
Micro-Mechanics (Holdings) Ltd – Low volumes, no operating leverage
Recommendation: REDUCE (Downgraded), Last Done: S$1.85
Target Price: S$1.60, Analyst: Paul Chew
– 1Q20 revenue and PATMI were behind our expectations. Lack of revenue growth hurt earnings despite a 4% YoY decline in operating expenses.
– A positive was the QoQ improvement in revenue and margins.
– No change to our FY20e earnings despite the results below expectations. We are still expecting a recovery in 2H20. Semiconductor indicators point to a tentative recovery in volumes. We maintain our target price at S$1.60. Following the recent rally in share price, we are downgrading our recommendation to REDUCE.
Webinar Of The Week
Market Outlook: : (PSR) Hyphens Pharma, Uunited Overseas Bank Limited (UOB), CapitaLand Mall Trust, Frasers Centrepoint Trust, Sheing Siong Group, Phillip SG Weekly, US Weekly, US Banking & Technical Analysis
Date: 04 November 2019
Phillip Research in 3 minutes: #16- JEP Holdings Ltd
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