Daily Morning Note – 7 Aug 2019
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U.S. stocks finally rallied Tuesday after six days of declines and following the biggest losing day so far this year on Monday. Stocks with business in China such as Apple, Micron Technology and Nike that were big losers on Monday led the gains Tuesday. Investors took fright Monday as China allowed the yuan to slump to its lowest level in a decade after President Donald Trump’s threat last Thursday to impose 10% tariffs against an additional $300 billion of imported Chinese goods, effective Sept. 1.The Dow Jones Industrial Average rose 311.78 points, or 1.2%, to end at 26,029.52, while the S&P 500 index climbed 37.03 points, or 1.3%, to close at 2.881.77, powered by a rally by the information technology XLK, +1.66% and communication services XLC, +1.45% sectors, while the Nasdaq Composite Index surged 107.23 points, or 1.4%, to finish at 7,833.27. Traders were encouraged by China’s central bank moving to restrain the fall in its currency with a fix Tuesday at 6.9683 yuan. A breach of the 7-to-the dollar level on Monday, interpreted by some as an intentional weakening of its currency, helped to ignite a global stock market selloff and slump in bond yields.
The Singapore Exchange (SGX) and the National Stock Exchange of India (NSE) have obtained regulatory support for a joint proposal to have trades in SGX’s popular Nifty futures contracts executed in Gujarat International Financial Services Centre, or GIFT City.
Singapore Medical Group (SMG) boosts ownership in Vietnam clinics. SMG said on Tuesday that it has exercised its option to convert the convertible loan of US$689,360 granted to CityClinic Asia Investments (CCAI) into 177,670 shares of CCAI at the conversion price of US$3.88 per share. Upon conversion, SMG will acquire an additional 65,647 shares from six existing shareholders of CCAI at a price of US$3.88 per share for a total cash consideration of US$255,000.
EC World Reit on Tuesday posted lower second-quarter distribution per unit (DPU) of 1.547 Singapore cents from 1.57 cents, as gross revenue fell amid “an uncertain macro environment”, according to the Chinese e-commerce logistics-focused Reit.
China Sunsine Chemical Holdings on Tuesday posted a net profit of 155.8 million yuan (S$31 million) in the second quarter, down 35 per cent from the same period a year earlier. Revenue in the three months ended June 30 fell 17 per cent to 727 million yuan as a lower average selling price (ASP) offset a rise in sales volume.
StarHub saw earnings fall again by the double-digits in the second quarter on weaker operating profits and higher finance costs, in results released on Tuesday.
Source: The Business Times
Straits Times Index
Recommended Action: Range Trade
Singapore benchmark equity index, FTSE Straits Times Index, has finally seen some light at the end of the tunnel yesterday after rounds of intense selling since last week.
StarHub Ltd – Feeling the pain from fibre migration
Recommendation: ACCUMULATE (Maintained), Last Done: S$1.48
Target Price: S$1.58 (prev. S$1.62), Analyst: Alvin Chia
– Revenue met expectations while net profit disappointed by 22%. Net profit was impacted by expanding losses in cybersecurity and one-off expenses in the fibre migration exercise.
– Mobile services revenue performed better than expected. Post-paid and pre-paid ARPU improved alongside with post-paid subscriber growth.
– Cybersecurity service revenue surged 37% QoQ / 162% YoY but expanded losses.
– Maintain ACCUMULATE with a lower TP of S$1.58. We revised EBITDA and net profit downwards by 4% and 6% respectively in light of the results.
Penguin International Ltd – Record flight for this bird
Recommendation: BUY (Maintained), Last Done: S$0.49
Target Price: S$0.61 Analyst: Paul Chew
– Record quarterly revenue and earnings. No changes to our earnings forecast.
– No order book details but the outlook is positive based on the jump in inventories, assets held for sale and other payables.
– Balance sheet in net cash position of S$47.8mn, or 44% of the market capitalisation.
– Our BUY recommendation and target price of S$0.61 is unchanged.
NetLink NBN Trust – Solid residential connections growth
Recommendation: ACCUMULATE (Maintained), Last Done: S$0.87
Target Price: S$0.93, Analyst: Alvin Chia
– Results were within expectations — strong growth of 4.2% QoQ in residential connections.
– The number of NBAP connections decreased by 5.2% QoQ due to the review of the Smart Nation Sensor Platform programme.
– EBITDA margin is higher due to the adoption of SFRS (I) 16. We have incorporated the new accounting standard into our model.
– Maintain ACCUMULATE with an unchanged target price of S$0.93. Our valuation is based on DCF (WACC 6%, Terminal growth 1%).
Webinar Of The Week
Date: 29 July 2019
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