Daily Morning Note – 7 June 2021


Asian stocks look set to rise on Monday after U.S. peers climbed toward a record, bolstered by American jobs report that eased some fears about economic growth running too hot and stoking troublesome inflation. Futures pointed higher in Japan and Hong Kong and were steady in Australia. The S&P 500 closed up Friday and the dollar fell with Treasury yields, after a report showed U.S. job growth picked up in May but missed estimates. The greenback was steady in early trading.


SG News

Troubled oil and gas group KrisEnergy announced in a regulatory update late on Friday that it has submitted a winding-up petition to the Grand Court of the Cayman Islands. The firm said that based on actual and contingent liabilities, it is unable to pay its debts and will proceed with liquidation. The decision comes as the company’s liabilities have exceeded the value of assets. There is also a lack of acceptable alternative restructuring options and little possibility of near-term infusion of fresh funds.

Aspen (Group) Holdings’ glove-making unit has been in “active discussion” with other potential buyers for the off-take of its entire Phase 1(b) production capacity, part of which was originally meant to be supplied to Honeywell International. Aspen was responding to queries from the Singapore Exchange Regulation (SGX RegCo) on Friday evening. SGX RegCo had asked the firm provide an update on the deal with Honeywell, given that no further disclosures had been made since the announcement that the US$210 million supply agreement with Honeywell has not been “consummated”.

Just two days after Hyflux Group’s judicial managers filed an application to wind up the water treatment company, chief executive officer of Middle Eastern utility firm Utico Richard Menezes is making an attempt to offer the crisis-hit company a rescue deal. Mr Menezes told The Business Times (BT) that he has reached out to Hyflux’s judicial managers with a deal, though he declined to share the exact details.

US News

Amazon Care is expected to expand to its own employees in all 50 states this summer. It has been adding workers faster than any company in history, more than 500,000 in 2020. It also has had a deal with employer health provider Crossover Health for in-person employee health clinics that continues to expand across states with a goal of putting these clinics within a few miles of all Amazon employees, especially in light of the attention its workplace injury rates have received.

A group of private equity firms, including Blackstone Group, Carlyle Group and Hellman & Friedman, agreed to buy a majority stake in medical supply manufacturer and distributor Medline Industries, the company announced Saturday. Medline, which had $17.5 billion in revenue last year, said it would use the investment to expand its product offerings and its business internationally. It did not disclose the financial terms of the deal, which is expected to be completed in late 2021.

U.S. cellphone carriers are offering their most generous discounts in years, handing some customers brand-new devices for no money down or small monthly payments stretched over many months. The discounts from AT&T Inc., Verizon Communications Inc. and T-Mobile US Inc. require customers to make long-term commitments that give carriers the stability they need to reassure investors as they increase spending on 5G network upgrades.

Production for Tesla Inc’s longest-range Model S Plaid+ is cancelled, CEO Elon Musk said in a tweet here on Sunday. “Plaid+ is cancelled. No need, as Plaid is just so good.” Musk tweeted. Model S Plaid+, which would have been Tesla’s highest-end model with a driving range of 520 miles, was unveiled at a battery event last year and Musk said it would adopt its next generation 4680 battery cells. But production was pushed back to 2022 from the end of 2021. Musk on Sunday called the Model S Plaid the “quickest production car ever made of any kind.”

U.S. Treasury Secretary Janet Yellen said that President Joe Biden’s $4 trillion spending plan would be good for the U.S., even if it contributes to rising inflation and results in higher interest rates, Bloomberg News reported. “If we ended up with a slightly higher interest rate environment it would actually be a plus for society’s point of view and the Fed’s point of view,” Yellen said in an interview with the outlet on Sunday.

President Joe Biden and Republicans entered the weekend sharply at odds over how to craft an infrastructure deal that could satisfy their camps, imperiling the odds of a bipartisan deal. Democrat Biden shot down a new proposal from the main Republican negotiator on infrastructure, Senator Shelley Moore Capito, that increased spending by about $50 billion over their last offer, the White House said. Biden rejected the offer, saying it “did not meet his objectives to grow the economy, tackle the climate crisis, and create new jobs.” Republicans had previously offered roughly $257 billion in new spending, short of the $2.25 trillion Biden initially offered and suggested he might bring down to as low as $1 trillion.

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


LHN Limited – Optimiser of real-estate trends

Recommendation: BUY (Initiation); TP: S$0.54

Last Done: S$0.295; Analyst: Vivian Ye

– Work Plus Stores’ industrial space riding on the boom in e-commerce spending. Earnings growth expected to be supported by high occupancy, higher rentals and net lettable area (NLA) CAGR of 12% for next two years.

– Demand for co-living space under Coliwoo rising, thanks to flexible lease terms, affordable rents and attractive locations. Occupancy in mid-90s. We expect LHN to add 210 residential keys by end-FY22e, at CAGR of 13%.

– Initiate coverage with BUY and TP of S$0.54. Few direct comparables, given LHN’s diverse exposure to hospitality, industrial and logistics. Industry is trading at 19x FY21e PE. We apply a 50% discount owing to a lack of comparables and large volatility in historical PE. Historical adjusted PE averaged 32x, with a low of 4x. We peg LHN at 9.5x FY21e PE.

Singapore Banking Monthly – All eyes on economic recovery following Phase 2 (Heightened Alert)

Recommendation: Overweight (Maintained)

Analyst: Terence Chua

– Singapore loans growth was flat at 0.4% YoY in April.

– Business loans contracted for the eighth straight month by 1.4% YoY. Consumer loans up for ninth straight month by 0.3% YoY, aided by loan demand recovery in the housing segment.

– NIMs stabilised in 1Q21 with overall GPs easing. With sufficient buffers built up, GP reversions expected for rest of 2021.

– Maintain OVERWEIGHT. Loans remain on path of recovery on stable interest rates. Catalysts to come from a relaxation of dividend caps on banks. We believe MAS could ease the dividend cap as Singapore banks have kept sufficient capital buffers. We prefer OCBC (OCBC SP, BUY, TP: S$14.63) for sector exposure due to its wealth-management and insurance franchise.

Technical Analysis: US market outlook
Fall in unemployment rate. Yay or Nay?

– Despite the fall in unemployment rate from 6.1% to 5.8% MoM, the Non-Farm Payroll figures miss estimation, which is reported at 559K VS 675K. The pace of jobs growth is strong enough for the Fed to consider going easy on tapering its bond buying.

– Total Labour force participation rate remain stagant, which indicate that the job market is not out of the woods yet.

– The Federal Reserve has announced its intention to liquidate its corporate bonds holding earlier this week. However, this does not rattle the market as its actual presence in the corporate sectors is limited.

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