Daily Morning Note – 6 May 2019

WEEKLY MARKET OUTLOOK WEBINAR

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YOUR PHILLIP SUMMARY

The yuan plunged the most since August and U.S. index futures tumbled after Trump’s tariff tweets, along with crude oil prices. His comments came after the S&P 500 Index rose the most in a month Friday as data showed the labour market can support growth without sparking inflation.

Dow Jones Industrial Average futures implied an opening decline of more than 450 points Sunday evening stateside. S&P 500 and Nasdaq-100 Index futures also pointed to declines for the two indexes at Monday’s open. China markets reopen after a holiday though Japan remains closed. Futures in Hong Kong and Australia pointed higher. The yen was stronger in early Monday trading, while the Aussie and kiwi both traded lower.



RESEARCH REPORT

Ascott Residence Trust – A promising start to the year

Recommendation: Buy (Maintained), Last Done: S$1.21

Target Price: S$1.36, Analyst: Natalie Ong

– NPI and DPU in line with our forecast.

– Higher leisure and corporate demand in SG, UK and Philippines.

– Japan and Australia doing well despite strong competition.

– Negative reversions on France master lease reduce the income from “stable”
sources.

– Maintain Buy; target price of $1.36 unchanged.

Sembcorp Marine Ltd – A soft start in 2019

Recommendation: NEUTRAL, Last Closing Price: S$1.67

Target Price: S$1.76, Analyst: Chen Guangzhi

– S$175mn worth of new orders secured but the net order book trended down

– Higher net gearing and lower cash levels

– Continue to ride through the cycle

StarHub Limited – Awaiting further clarity on Ensign

Recommendation: NEUTRAL (Maintained), Target Price: S$1.62

Last Done: S$1.58, Analyst: Alvin Chia

– Results were within our expectations.

– The enterprise business continues to alleviate weakness in mobile and pay-tv.

– Cybersecurity business is gaining traction, revenue surged 41% YoY.

– We revised our FY19e EBITDA and NPAT upwards by 1% and 3% respectively
due to the results. Remain NEUTRAL with a higher target price of S$1.62 (prev.
S$1.58).

United Overseas Bank Limited – Aggressive pursuit of deposits bites NIM

Recommendation: ACCUMULATE (Downgraded), Last Close Price: S$27.77

Target Price: S$30.90 (previously S$32.00), Analyst: Tin Min Ying

– 1Q19 revenue and PATMI were in line with our estimates, meeting 25% and 24% of our full-year forecasts respectively.

– NIM fell 5bps YoY and 1bps QoQ to 1.79% due to competitive loan repricing conditions and excess deposits gathered. LDR fell to 86.6% (4Q18: 88.2%).

– Robust loans growth of 12.2% YoY was led by a broad-based increase across all territories and industries.

– Trading income and gain from investment securities rose 38.9% YoY and 133.3% YoY, benefitting from a rebound in financial markets.

– Allowances for non-impaired assets rose in tandem with loan growth while asset quality remained resilient with NPL ratio at 1.5% (1Q18: 1.7%).

– Downgrade to ACCUMULATE with a lower target price of S$30.90 (previously S$32.00), due to recent share price movement. The lower target price was derived after raising our operating expense forecasts 5% higher, giving us an FY19e CIR of 44% (previously 42%).


BREAKING NEWS

Singapore could follow Hong Kong in handing out virtual banking licenses, according to the head of the largest local lender, in a move that would create another source of competition for the city state’s established banks.

BEST World International’s trading halt has been extended again as the company looks to release its quarterly results. Trading in shares of Best World has been halted since Apr 24, after its stock price tumbled on the back of a shortseller report that probed the accounting behind the skincare product seller’s profits and its sales practices.

US and Chinese officials say a historic deal ending their ongoing trade war could be imminent, but a key question is how can Washington be sure Beijing will live up to its end of the bargain? With up to 100 Chinese officials reportedly expected next week in Washington, with the possibility of unveiling a grand agreement after months of tensions, that question is hanging over the talks.

A surge in junk-rated bonds has made Chinese borrowers more aggressive, with select ones succeeding in cutting their costs for repaying bonds early, a change from standard practice that worries some investors and bankers.

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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IMPORTANT INFORMATION

This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

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