Daily Morning Note – 8 March 2022

Welcome to our Daily Morning Note from our Research team!


The turmoil on global financial markets intensified Monday, with U.S. stocks plunging the most in 17 months and commodity prices relentlessly powering higher. The S&P 500 sank almost 3% for its worst day since October 2020. Futures for Japan fell while those for Australia and Hong Kong were steady. Russia’s war on Ukraine and subsequent sanctions imposed have sent a jolt through financial markets that were already unsteady after two years of the pandemic and the threat of central banks pulling back on stimulus.

The Dow Jones Industrial Average fell 797.42 points, or 2.37 per cent, to 32,817.38, the S&P 500 lost 127.79 points, or 2.95 per cent, to 4,201.08 and the Nasdaq Composite dropped 482.48 points, or 3.62 per cent, to 12,830.96. Amazon, Microsoft and Apple were among the top individual drags on the S&P 500 while the financials sector fell 3.7 per cent. The utilities sector , one of the defensive areas of the stock market, gained 1.3 per cent.

Top gainers & losers




Sydney-based blockchain company Immutable said on Monday (Mar 7) that it has secured US$200 million in a Series C financing round led by Temasek, with tech company Tencent also among the investors. The funding would bring its valuation to US$2.5 billion, according to a press statement from the company, which provides the Immutable X platform for trading non-fungible tokens (NFT) on Ethereum. Other investors in Immutable include blockchain game company Animoca Brands, as well as asset managers AirTree Ventures and Mirae Asset.

Singtel’s NCS acquires Aussie IT company The Dialog Group for A$325m (S$328 million) as it looks to further its plans to be a pan-Asian business-to-business (B2B) digital services provider. The acquisition is expected to be completed in 3 months, subject to the approval of regulators and other third parties. A$290 million of the consideration will be paid once the acquisition is completed, while an additional A$35 million will be paid out in tranches within 2 years after.

The chief executive officer of Q&M Dental, Dr Ng Chin Siau, has entered into a conditional sale and purchase agreement on Monday (Mar 7) to take a 29 per cent stake in restaurant operator No Signboard Holdings for a total consideration of S$1. In a bourse filing on Monday, No Signboard said that as a condition to the completion of the proposed share transfer, there would be an agreement for Dr Ng to extend an interest-free unsecured loan of S$2.6 million to the company. Suspended Catalist-listed No Signboard’s controlling shareholder – GuGong – currently holds around 54.9 per cent of the total issued shares in the company.

Catalist-listed healthcare service provider Singapore O&G Group has received a voluntary unconditional cash offer at S$0.295 a share from special purpose vehicle NewMedCo Group, according to a bourse filing on Monday (Mar 7). Singapore O&G, which has 4 operating segments of obstetrics and gynaecology (O&G), paediatrics, cancer-related general surgery and dermatology, provides healthcare services in Singapore and Malaysia. Meanwhile, the offeror NewMedCo is a consortium consisting of the offer’s sponsor and promoters. NewMedCo said it intends to make Singapore O&G its wholly-owned subsidiary and does not intend to preserve its listing status. It expects privatisation will give it and the management of the company more flexibility in managing its business, and optimise the use of its management and capital resources and facilitate the implementation of any operational change. The offer price represents a premium of around 15.7 per cent over the last transacted price of S$0.255 on Mar 3, 2022, being the last full market day of which the shares were transacted prior to the offer announcement.

Nordic Group’s voluntary offer for Starburst Holdings has closed on Monday (Mar 7), with valid acceptances representing around 94.3 per cent of the total number of issued shares of Starburst Holdings, according to a bourse filing. As the offeror has received valid acceptance crossing the 90 per cent threshold, the offeror is entitled and intends to exercise its right of compulsory acquisition of the remaining shares at the offer price of S$0.238. Following the compulsory acquisition, the offeror will proceed to delist Starburst Holdings from the Singapore Exchange.

Singapore Press Holdings (SPH) said on Monday (Mar 7) that it is “unable to comment” on whether the company will declare a special dividend in relation to the divestment of sgCarMart to Toyota. The company was responding to shareholder queries in a bourse filing ahead of a virtual Investors’ Day on Tuesday relating to the proposed acquisition of SPH by consortium Cuscaden Peak. Shareholders had asked if SPH will declare and pay a special dividend with the successful divestment of sgCarMart to Toyota. It was announced in February that the automotive marketplace was being sold to a Toyota consortium in an all-cash deal, valuing sgCarMart at S$150 million.


Intel Corp’s self-driving car unit Mobileye confidentially filed for an initial public offering in the United States on Monday, setting the stage for what is expected to be one of the biggest stock market flotations of the year. The move to list Mobileye is part of Intel’s broader strategy under Chief Executive Officer Pat Gelsinger to turn around its core business. Investors have made big bets on new technologies in the business of global transportation over the past few years, and Intel is aiming to take advantage of the demand for autonomous vehicles by listing Mobileye’s shares. The chip giant will also retain a majority stake in the unit after the IPO, it had said previously. In December, Reuters and other media outlets reported that the IPO could value Mobileye at more than $50 billion, although Mobileye may now struggle to get the same valuation given the recent market volatility, people familiar with the matter said. Mobileye, an Israeli company that Intel bought for about $15.3 billion in 2017, uses a camera-based system with adaptive cruise control and lane change assistance in driverless cars.

Billionaire investor Ryan Cohen said on Sunday he now owns nearly 10% of Bed Bath & Beyond (BBBY.O) and wants the housewares retailer to explore strategic alternatives that include a full sale of the company. Cohen, who co-founded online pet products retailer Chewy and is chairman of the board of videogame retailer GameStop Corp (GME.N), criticized Bed Bath & Beyond, which is worth roughly $1.6 billion, for an “overly ambitious” strategy, overpaying its top executives and failing to reverse market share losses. “We believe Bed Bath needs to narrow its focus to fortify operations and maintain the right inventory mix to meet demand, while simultaneously exploring strategic alternatives that include separating buybuy Baby, Inc and a full sale of the Company,” Cohen wrote in a letter to the company’s board. Cohen said in the letter he owns 9.8% of the company through his investment company RC Ventures LLC.

Russia’s rouble lost over a fifth of its value in thin trading on Monday to a fresh record low, with local markets closed for trading until at least Wednesday. The rouble has lost nearly 50% of its value against the greenback since the start of the year, with losses sharply accelerating since Russia invaded Ukraine on Feb. 24, a move that sparked sweeping sanctions from various governments across the world. The rouble bids were indicated as low as 150 to the dollar after closing at 121.037 on Friday, according to Refinitiv data . On the EBS trading platform, the rouble weakened as far as 160 to the dollar, or more than 22%, and was recently traded at 145, down 14.5% on the day.

Microsoft Corp unveiled its fourth data centre in India on Monday (Mar 7), betting on rising digital consumption in one of its fastest-growing markets. Microsoft India head Anant Maheshwari said the company was making long-term investments in the country, although he declined to confirm reports by local media of a $2 billion price tag for the latest centre. “A public cloud data centre is not a one-time investment, it is a continuous investment that we have,” Maheshwari told Reuters. “In the last two years, we doubled the capacity in the existing three data centres.” The overall Indian public cloud services market is expected to reach US$10.8 billion by 2025, according to research firm IDC. Competitors are joining the race in India. Key rival Amazon announced in late 2020 it would spend US$2.8 billion to build its second data centre in the country, while Adani Group last year announced plans to build six data centre parks across the country.

Apple will likely announce a new low-cost version of its iPhone SE with 5G capabilities at its annual spring product launch event on Tuesday (Mar 8), analysts say. The iPhone maker is also expected to launch a new version of the iPad Air and a high-end Mac Mini at the event. Apple’s iPhone SE is currently priced at US$399. “The iPhone SE really caters well to a lot of first-time buyers on the iPhone ecosystem that may be younger individuals, where their parents are going out there buying that device.”, said CFRA Research analyst Angelo Zino The new phone would be the first update to the iPhone SE model in 2 years and is rumoured to come with an improved camera and a faster processor. The United States, Japan and Western Europe have been the top markets for iPhone SE sales in recent years, said analyst Ryan Reith of IDC. Reith said these regions will likely remain the top markets after the anticipated launch of the third-generation iPhone SE.

Grab faces possible class action suits from US shareholder rights law firms. Listing in the US is often desired for its vibrant market and access to capital, but on the flip side, it puts the company at risk of potential litigation with class action lawsuits, with recently-listed Grab becoming the latest target. Grab, which operates ride-hailing, food delivery and financial services businesses, merged with special purpose acquisition company Altimeter on Dec 2 and its shares opened at US$13.06. Since then, Grab’s stock has traded in the region of US$5.

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

Adobe Inc – Massive growth as all things go digital

Recommendation: BUY (Initiation); TP: US$658.00

– Creative Cloud revenue expanded at 21% CAGR in the past three years. We expect Creative to see significant growth (total addressable market of US$63bn by 2024) ahead due to shift to digital, explosive content creation, and rising e-commerce penetration.

· Document Cloud business momentum was strong in FY21, with 100% YoY growth of Acrobat Web monthly active users and 85% YoY growth in Adobe Sign transactions in Acrobat. We model Document Cloud revenue growth of 19% YoY in FY22e driven by expansion of digital document use cases, e-signatures, and collaboration features.

· Adobe’s margins (gross and operating margins of 88% and 37% in FY21) are impressive and generate massive amounts of FCF. We initiate coverage with a BUY recommendation and DCF-based target price (WACC 6.2%) of US$658.

CapitaLand Investment Limited – Commendable recycling and FUM growth

Recommendation: ACCUMULATE (Maintained), Last Done: S$3.66

Target Price: S$4.05, Analyst: Natalie Ong

– FY21 PATMI of S$1,349mn (FY20: -S$559mn) was 52% above our forecast due to higher than forecasted performance of JV & Associates, valuation recovery and portfolio gains.

– FY21 DPS of 15 Scts was a positive surprise, exceeding our DPS forecast of 8.3 Scts. DPS comprised 12 Scts of ordinary and 3 Scts of special dividends. Core and total dividends formed 55% and 70% of FY21 cash PATMI respectively.

– Earnings bolstered by portfolio gains from a record year of divestment, higher transaction-driven fees, 8.2k lodging units turning operational and recovery in operations.

– Maintain ACCUMULATE, SOTP TP raised from S$4.00 to S$4.05. SOTP TP increases as we raise FY22e investment management PATMI to factor in faster FUM growth as well as higher EBITDA from the lodging segment.

Singapore Banking Monthly – Interest rates up in February

Recommendation: Overweight (Maintained)
Analyst: Glenn Thum

– February’s interest rates were up modestly by 7bps MoM.

– 4Q21 results, banks’ NIM stabilised while fee income continued to grow. GP writebacks across all three banks resulted in lower full-year allowances.

– Hong Kong’s domestic loans growth fell by 6.79% YoY but grew by 0.81% MoM in January. Malaysia’s domestic loans growth increased 4.66% YoY and rose 0.53% MoM in January.

– Maintain OVERWEIGHT. We remain positive on banks. Bank dividend yields are attractive with upside surprise due to excess capital ratios. Improving economic conditions and rising interest rates remain tailwinds for the banking sector. SGX is another beneficiary of higher interest rates.

POEMS Podcast: Let the Money Talk

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Weekly Market Outlook: Sembcorp Industries, Comfort DelGro, HRnetGroup, SPH, Japfa Ltd, SG Weekly

Date: 7 March 2022

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