DAILY MORNING NOTE | 7 July 2022
Singapore shares closed unchanged on Wednesday (Jul 6), even as regional markets mostly fell, with strength recorded among real estate investment trusts (Reits). The benchmark Straits Times Index (STI) fell 0.01 per cent or 0.45 points to close at 3,103.66. Shares of Hongkong Land were the top decliner on the STI, having fallen 2.2 per cent to close at US$4.96. The top 4 gainers on the index were Reits. Units of Mapletree Logistics Trust ended the day at the top of the index performance table, climbing 3.6 per cent to close at S$1.74. The other strong performers were Keppel DC Reit, Frasers Logistics & Commercial Trust and Mapletree Industrial Trust, which rose 2.6, 2.2 and 1.9 per cent respectively. However, Singapore’s largest Reit, CapitaLand Integrated Commercial Trust, bucked the trend, amid active trading. The counter fell 1 per cent to S$2.05, with 45.6 million units worth S$93.3 million being traded.
US stocks finished higher on Wednesday, rising after Federal Reserve minutes maintained a tough line on inflation, while a services industry survey showed slowing but steady growth. Fed policy makers reiterated their willingness to continue raising interest rates to tamp down price pressures in minutes recounting the central bank’s big interest rate hike in June. The Dow Jones Industrial Average added 0.2 per cent at 31,037.68. The broad-based S&P 500 gained 0.4 per cent to 3,845.08, while the tech-rich Nasdaq Composite Index also climbed 0.4 per cent to 11,361.85. Stocks had been in the red prior to the minutes, after the Institute for Survey Management’s services index fell 0.6 percentage points to 55.3 per cent.
SPH Reit on Wednesday (Jul 6) announced that SPH chief financial officer Chua Hwee Song will resign from SPH, the real estate investment trust’s (Reit) sponsor on Friday. The company noted that Chua had helped to grow the non-media business, such as the building of the company’s purpose-built student accommodation portfolio across 30 properties in 18 countries. In its bourse filing, the Reit’s manager said that Chua has also resigned as non-executive non-independent director of SPH Reit’s manager as of Wednesday. He was formerly a member of the manager’s nominating and remuneration committee and holds 3,910 SPH Reit units. This comes after Cuscaden Peak, a consortium comprising Hotel Properties, businessman Ong Beng Seng and 2 Temasek-linked entities CLA and Mapletree, took SPH private and made an offer to acquire SPH Reit for S$0.9372 per unit in April this year. On Jun 30, the chain offer for SPH Reit closed with valid acceptances in respect of 402.9 million units, representing about 14.36 per cent of total issued units. This brought Cuscaden and its concert parties’ stake in the Reit to 61.68 per cent. Units of SPH Reit closed down 2.2 per cent or S$0.02 at S$0.89 on Wednesday.
Catalist-Listed Fortress Minerals posted a 41.8 per cent decline in net profit after tax to US$4.2 million for its first quarter ended May 31, 2022, from US$7.2 million a year earlier. Revenue for the quarter declined 15.5 per cent to US$14.6 million, down from US$17.3 million the year before. The iron ore concentrate producer attributed the decline in revenue to the weakening of the average benchmark IODEX CFR North China of Platts Daily Iron Ore Assessments price index. Average realised selling price during the quarter fell to US$119.80 per dry metric tonne (DMT), compared to US$143 per DMT the year before. The group also announced that it had commenced production at its recently acquired Cermat Aman Sdn Bhd (CASB) mine on Jul 1 after testing and commissioning of operations at the mine were completed in May this year. It added that the initial mining will take place in the oxide ore zone and focus on producing high grade iron ore. Meanwhile, Fortress Minerals expects weaker-than-expected global growth, especially with China’s strict pandemic restrictions, to slow global steel demand growth in 2022. Still, it noted that as demand for low-carbon steel rises, the group’s higher-grade iron ore will continue to see strong demand in the long run. Fortress Minerals shares closed flat at S$0.38 on Wednesday (Jul 6).
SIIC Environment announced on Wednesday (Jul 6) that it will divest all its equity interest in waste treatment and incineration subsidiary Hongkong Navy New Energy (Dazhou) for RMB283.3 million (S$59.1 million). In its bourse filing, the wastewater treatment company said that the purchaser, Sichuan SIIC Ecological Company, is not an “interested person” and that the consideration was determined after arm’s-length negotiations between both parties. It added that the announced book value and net tangible asset value of the subsidiary stood at RMB282.2 million and RMB277.1 million respectively, according to an asset valuation report issued by Wan Long (Shanghai) Asset Appraisal. The subsidiary’s net asset value stood at 2.0 per cent that of SIIC Environment; it contributed 1.1 per cent of the group’s net profits as at Mar 31, 2022. SIIC Environment said that the divestment would recover shareholder investment and generate profits for the group. The net proceeds of the deal would be used to finance general corporate and working capital requirements of the group. SIIC Environment shares closed flat at S$0.215 on Wednesday before the announcement.
Oil dropped below US$100 a barrel, with Goldman Sachs Group saying that a plunge driven by fears a recession will hurt demand was overdone. West Texas Intermediate fell as much as 1.9 per cent to trade around US$98 a barrel. Brent crude fell over more than US$10 on Tuesday, its third-largest ever in dollar terms. Meanwhile, Citigroup’s Ed Morse said the outlook for oil demand will likely see further downward revisions amid higher fuel prices. While that drop was borne out of concern of a global recession and technical selling, there’s been little change to market fundamentals. Nearby Brent futures are trading at a giant premium to later months – indicating market strength – while disruption to global oil production has been mounting, amid a risk to Kazkahstan’s oil exports. Oil has opened the third quarter on volatile footing. With central banks including the Federal Reserve hiking interest rates to tame inflation, investors have been pricing in the consequences of a slowdown, even as physical crude markets continue to show signs of vigor and the war in Ukraine drags on.
Amazon has agreed to take a 2 per cent stake in Just Eat Takeaway.com’s struggling US meal delivery business Grubhub and will offer its Prime members access to the service for 1 year. The deal is a major relief for Just Eat Takeaway, whose shares have fallen 70 per cent this year as shareholders demanded it sell or find a partner for Grubhub, which it bought just last year for US$5.8 billion in shares. In a note on the deal, Credit Suisse said the partnership should strengthen Grubhub. The deal will drive traffic for Grubhub, which has lost share to Doordash and Uber Eats as the impact of the Covid-19 pandemic wanes. In exchange, Amazon will receive warrants representing 2 per cent of Grubhub’s shares, and an additional 13 per cent of shares conditional on the deal bringing Grubhub enough customers.
Walmart Inc. said it would charge some of its suppliers a new fee to transport goods to its warehouses and stores, according to a memo viewed by The Wall Street Journal, the latest example of how businesses are looking to offset rising costs for things such as transportation and fuel. Companies that use Walmart to transport goods to the retailer’s warehouses and stores will be charged a fuel surcharge and a “collect pickup charge” starting Aug. 1, said the memo. The shift “is a result of Walmart adapting to the significant transformation and increased cost seen in the transportation industry over the past few years,” said the memo sent to suppliers last Friday. The collect pickup charge is calculated as a percentage of the cost of goods received by Walmart, the memo said. The fuel surcharge is based on the cost of fuel to transport the goods. Some suppliers criticized Walmart for not sharing the expected charges more precisely and not giving them more time to account for the added cost.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
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