Daily Morning Note – 7 Nov 2019



Asian stocks are poised to open mixed Thursday following reports of a potential delay to the signing of a partial U.S.-China trade deal. Treasuries rebounded after dropping for three days, while futures were lower on Japanese and Hong Kong equities and higher on Australian stocks. The S&P 500 Index closed little changed Wednesday. Shares in energy companies declined alongside West Texas crude, which slumped after a report that the biggest producers in OPEC+ aren’t pushing for deeper oil-supply cuts when the group meets next month. The yen rose, as did gold.


Wall Street stocks were under pressure on Wednesday as investors awaited concrete progress on US-China trade talks while petroleum-linked shares fell with oil prices.

CATALIST-LISTED oil and gas solutions provider SBI Offshore has lost its bid for more time to get shareholders’ approval over a planned reverse takeover, it disclosed on Wednesday.

CATALIST-LISTED metal dealer Metech International, which is making a shift into supply chain management, returned to the black in the first quarter, according to results released on Wednesday.

CATALIST-LISTED building solutions provider Libra Group, which suspended trading in August when it could no longer continue as a going concern, disclosed on Wednesday that United Overseas Bank (UOB) has appointed receivers for the company’s mortgaged property in Loyang Drive.

HEALTHCARE real estate investment trust First Reit will pay out a distribution per unit (DPU) of 2.15 Singapore cents for the third quarter, unchanged from the same period the year before, manager Bowsprit Capital Corp said in results released on Wednesday.

MAINBOARD-LISTED precision manufacturer Sunningdale Tech‘s earnings slid in the third quarter, as a fall in revenue was exacerbated by retrenchment costs, rents and other expenses, according to results released on Wednesday.

MAINBOARD-LISTED vessel chartering company CH Offshore fell further into the red in the third quarter, on the back of a provision for brokers’ commission that drove up administrative expenses, according to results released on Wednesday.

MAINBOARD-LISTED equipment service provider Frencken Group saw net profit surge in the third quarter on the absence of the previous year’s one-off costs, as per results out on Wednesday.

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


Oversea-Chinese Banking Corp Ltd– Catch-up in NIM expansion

Recommendation: ACCUMULATE (Maintained), Last Close Price: S$11.1

Target Price: S$11.7, Analyst: Tin Min Ying

– 3Q19 revenue/PATMI were within our expectations. However, if not for the lower tax rate of 10% for this quarter, earnings would have fallen short of our expectations.

– NII supported by 5bps YoY NIM expansion to 1.77% and 2% YoY loans growth.

– Fees income rose 10% YoY to S$550mn, OCBC’s highest on record.

– Insurance income fell 9% YoY due to fair value movements as a result of lower interest rates used to value insurance contract liabilities.

– Allowances ballooned six times to S$323mn mainly due to ECL refinement for OCBC NISP, provisioning for two corporate accounts and ECL adjustment to account for MEV in the ECL model

– NPL ratio rose to 1.6% mainly due to two corporate accounts (3Q18: 1.4%).

– We maintain ACCUMULATE at a lower target price of S$11.70 (previously S$12.50). We roll forward our Gordon growth model to FY20 to arrive at our new TP of S$11.70.

StarHub Limited – Recovery underway

Recommendation: ACCUMULATE (Maintained), Last Done: S$1.48

Target Price: S$1.58, Analyst: Alvin Chia

– Revenue and NPAT met expectations. Excluding S$9mn one-off tunnel income from TPG, NPAT would have missed our estimates by 3%.

– Mobile segment relatively resilient considering competition and substantial churn from single enterprise customer.

– Enterprise revenue grew 16% YoY boosted by cyber-security which spiked 135% YoY.

– Expect pay-tv business to stabilise in FY20e due to steadier subscriber base.

– Maintained ACCUMULATE with an unchanged TP S$1.58. No changes to our estimates.

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