Daily Morning Note – 9 December 2021

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Dear Valued Investors, Please note that our last Morning Note for 2021 will be on 13 December 2021.

PHILLIP SUMMARY

Wall Street closed higher on Wednesday for the third straight session amid positive sentiment about the effectiveness of three-dose vaccinations against the newest Covid-19 strain. Markets have faced volatility recently due to concerns about the possible impact of the Omicron variant, as well as the expectation that the Federal Reserve and other major central banks will tighten monetary policy sooner than expected. The major US indexes were in the red for much of the trading session but rallied late to close higher. The Dow Jones Industrial Average added 0.1 per cent to finish at 35,754.75.


BREAKING NEWS

SG

Golden Energy and Resources is seeking note holders’ approval to modify the terms governing its 8.5 per cent senior secured notes due 2026. The proposed amendments would let Australian subsidiary Stanmore Resources and related entities take on more debt over a majority stake in the owner of 2 Queensland coal mines, according to the announcement released by Gear on Wednesday (Dec 8).

Conglomerate Jardine Matheson Holdings plans to double the size of its share-buyback scheme to US$500 million, it said on Wednesday (Dec 8). The group had launched a programme in the end-Sep to repurchase up to US$250 million of shares by Jun 30, 2022; it now says it has already nearly achieved this target. The stated aim of the share-buyback scheme is to reduce the capital of the company, in line with an ongoing capital allocation policy.

Sunpower Group is investing in a steam-production joint venture in China, which will supply a guaranteed portion of the output on a wholesale basis to a Suzhou-based subsidiary. The subsidiary, Zhangjiagang Yongxing Thermal Power Co, will take a 28 per cent stake for 16.8 million yuan (S$3.6 million) in the joint-venture company, the group said on Wednesday (Dec 8).

Biolidics expects to start commercial production of a new Covid-19 rapid test kit by year-end, the board announced on Wednesday (Dec 8). While the production and sale of the ClearEpi NAB test are not likely to have a material impact on Biolidics’ financial performance for the period to the coming Dec 31, it is expected to contribute positively to group revenue in the 12 months to Dec 31, 2022, the board disclosed.

The Chairman of offshore vessel provider Vallianz Holdings is leaving to do more charity work, the board announced in a bourse filing on Wednesday (Dec 8). AlTurki Abdulaziz Ali A, the 76-year-old chairman of controlling shareholder Rawabi Holding Company Ltd (RHCL), leaves the Vallianz board on Dec 8 itself and is to be replaced the same day by Osman Aly Ibrahim Hassanein, 59, who has been the group president and chief executive of RHCL since 2009.


US

Oil prices ended higher in a back-and-forth session on Wednesday, maintaining a positive tone as investors no longer expect the Omicron coronavirus variant to derail global economic growth. Brent crude futures settled at US$75.82, up 38 cents, or 0.5 per cent. US West Texas Intermediate crude ended at US$72.36 a barrel, up 31 cents or 0.4 per cent. Global benchmark Brent has rebounded by about 10 per cent since Dec 1 on the expectation that Omicron will have only a limited impact on oil demand, after a 16 per cent drop since Nov 25.

Production of Apple Inc’s flagship iPhone 13 smartphones fell 20 per cent short of previous plans in September and October, Nikkei reported on Wednesday, citing sources familiar with the matter. The holiday quarter is one of the busiest for the company as many consumers seek to buy its products as gifts, weeks ahead of Christmas. However, after launching the iPhone 13 range and new iPads in September, a major threat looms over Apple as it scrambles to keep up with the global chip shortage and supply chain disruptions.

Facebook parent Meta will ban all pages and accounts belonging to Myanmar military-backed businesses, it said, expanding its restraints on the country’s armed forces. Myanmar’s secretive military has extensive business interests, with tentacles in industries as diverse as beer, tobacco, transportation, textiles, tourism and banking.

US job openings surged in October, suggesting a recent moderation in employment growth was because of a shortage of workers rather than ebbing demand. Job openings, a measure of labour demand, increased 431,000 to 11 million on the last day of October, the Labor Department said in its monthly Job Openings and Labor Turnover Survey (JOLTS) on Tuesday. This was the second-highest on record.


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

BRC Asia – FY21 profit at record high

Recommendation: Buy (Maintained), Last Done: S$1.54

Target price: S$1.84, Analyst: Terence Chua

– 4Q21 earnings of S$10.2mn above, at 26.9% of our estimates. The beat came from higher deliveries and the reversal of impairment loss from its associates. FY21 profit of $49.7mn is a record high for the group.

– Total dividend for FY21 stands at 12 cents per share, exceeding our forecast of 8 cents, reflecting management’s confidence in the construction recovery.

– Net gearing inched up to 1.17x from 1.12x as working capital needs increased due to higher inventory costs. We expect net gearing to remain elevated in FY22e-23e to support inventory in anticipation of higher expected deliveries.

– Maintain BUY with higher target price of S$1.84, from S$1.79. We revise FY22e earnings by 39% while earnings per share increased by 12.5% as we factor in the higher share float and forecast higher order deliveries in FY22. Our TP is based on 11x FY22e P/E, still at a 15% discount to the 10-year historical average, on account of the uncertain environment. Catalysts expected from higher foreign-worker inflows to Singapore.

POEMS Podcast: Let the Money Talk

Recent Podcasts:

Daily Morning Note – December 3, 2021

Daily Morning Note – December 2, 2021

LHN limited – SGX Company Insights Ep 44

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