Daily Morning Note – 9 June 2020
PHILLIP SUMMARY
The S&P 500 closed at a 15-week high — wiping out its 2020 losses —with Asia stocks set to extend the global rally. Equity futures pointed to modest gains in Japan, Australia and Hong Kong, while only one goal remains for the main American equity benchmark: its record high from before the pandemic landed. European stock markets dropped slightly amid a sell off that was driven by profit-taking but limited by positive expectations of a global economic recovery.
The dollar posted its longest slide in almost a decade, while Treasuries advanced. Oil sank after Saudi Arabia said it wouldn’t continue its additional, deeper output curbs after June. The yen pushed higher. Elsewhere, South Korean assets will be in focus after North Korea said it’s determined to shut down all contact with its southern neighbour, according to state-news agency KCNA.
BREAKING NEWS
The independent auditor of Best World International has issued a disclaimer of opinion in relation to the group’s financial statements for 2018. Ernst & Young’s (EY) disclaimer of opinion relates to matters disclosed in Note 2.1 to the financial statements that were raised during the independent review conducted by PricewaterhouseCoopers Advisory Services. PwC, as the independent accountant, is looking into Best World’s export model and franchise model adopted in China.
Mainboard-listed crane manufacturer Yongmao Holdings on Monday guided for a “significantly lower” net profit for the second half of the financial year ended March 31, 2020 (FY2020), compared with the same period last year. The decline in net profit is due to lower revenue in China, in light of the national lockdown to combat the Covid-19 pandemic in the first few months of 2020, the China-based firm said in a profit-guidance note.
Ho Bee Land on Monday announced that two of its subsidiaries have separately acquired a residential development site in Queensland, Australia, for a total of A$23.5 million (S$22.8 million). HB Doncaster had acquired a 47.41ha site located within the Riple Valley Priority Development Area for A$14.5 million. This project is expected to yield approximately 570 residential lots, a regional sports facility, and associated community facilities, said Ho Bee in a regulatory filing. Another 8.98ha site acquired by HB QLD for A$9 million is currently in the final two stages of the Parklakes 2 development located on Queensland’s Sunshine Coast. The site has received all the required development permits and will yield 95 residential lots.
Singapore Airlines (SIA) on Monday said it has raised S$10 billion in liquidity through its recent rights issue, and a mix of both secured and unsecured credit facilities. “This puts SIA on a steady footing as it tackles the challenges posed by the global Covid-19 outbreak,” the national carrier said. Besides the S$8.8 billion from the completion of its rights issue on June 5, a further S$900 million was raised through long-term loans secured on some of SIA’s Airbus A350-900 and Boeing 787-10 aircraft. The company has also arranged new committed lines of credit and a short-term unsecured loan with several banks, which provide further fresh liquidity amounting to more than S$500 million.
Sembcorp Industries (SCI) and its marine arm Sembcorp Marine (SMM) unveiled on Monday a massive S$2.1 billion recapitalisation deal for SMM – plus a “demerger” from each other with Singapore’s Temasek Holdings ending with a direct stake in SMM. Under the proposed deal, SMM seeks to raise S$2.1 billion from a five-for-one renounceable rights issue of up to 10.5 billion new shares at an issue price of 20 Singapore cents each. To ensure deal certainty, SCI has undertaken to subscribe for its S$1.27 billion pro-rata entitlement, plus take up an additional S$230 million – if necessary – bringing its total commitment to S$1.5 billion. The remaining S$600 million of the rights issue will be fully backstopped by Temasek under a sub-underwriting agreement; Temasek owns 49.3 per cent of SCI.
CapitaLand on Monday said it will further waive and potentially defer rent for qualifying small and medium-sized enterprise (SME) tenants, though this will lead to an “adverse impact” on its earnings this year. This move is in accordance with the latest Covid-19 (Temporary Measures) (Amendment) Bill in Singapore, which requires landlords to provide SME tenants with additional rental relief amid the pandemic.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, PSR
TECHNICAL PULSE
AEM Holdings Ltd
Recommended Action: Technical SELL
AEM Holdings (SGX: AWX) miraculous rebound in mid-March 2020 indicate an expanded 3rd wave since the stock broke the $2.32 resistance level. Prices have begun to exhibit signs of a slow down.
>> Read more technical reports
RESEARCH REPORTS
Perpetual Bond Structures – New issuances still likely (Credit Commentary)
Credit Analyst: Timothy Ang
– New perpetual bond issues likely as issuers seek to manage gearing levels amidst growing need for funding.
– Perpetual bond structures may be more accommodative to dampen investor adversity to non-call risk. We provide an overview of various perpetual bond structures and how they help mitigate non-calls.
HK Reports – Read up on our Hong Kong reports here
RESEARCH VIDEOS
Webinar Of The Week
Market Outlook: (PSR) Dasin Retail Trust, Penguin International Limited, SingTel, SG Banking Monthly, SG Weekly, SGD Perpetual Bonds, Technicals
Date: 08 June 2020
Phillip Research in 3 minutes: #22- Singapore Banking Sector
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