Daily Morning Note – 9 June 2021


Asian stocks look set for a mixed open Wednesday as U.S. equities tread water near a record ahead of key inflation data. The 10-year U.S. Treasury yield fell to a one-month low. Futures slipped in Japan but edged higher in Australia and Hong Kong. The S&P 500 ended little change just shy of its May 7 record close. A slide in biotech stocks after Monday’s rally offset gains in megacap technology shares. U.S. equity contracts were steady in early trading. The focus remains on Thursday’s report on U.S. consumer prices, which may affect perceptions of when the Federal Reserve is likely to start discussing tapering asset purchases. The dollar advanced for the first time in three days. Oil resumed its rally to top $70 a barrel in New York as investors grow more confident that the recovery from the pandemic will help demand. Bitcoin remains under pressure, trading at about $33,500 after a retreat this week.


SG News

A lawsuit filed by a joint venture partner of a ClearBridge Health unit has been dismissed by an Indonesian court due to a jurisdiction issue, the Catalist-listed company announced in a Tuesday bourse filing. In mid-2020, Clearbridge disclosed that its unit Clearbridge Medical Asia and indirect subsidiary Tirta Medika Jaya (TMJ) were being sued by Tirta Medika Nusantara (TMN), a shareholder of TMJ. TMN was seeking damages of 1.06 trillion rupiah (S$102 million) relating to a notarial deed. At a hearing on Monday, the North Jakarta District Court dismissed the lawsuit on the basis that pursuant to the shareholders’ agreement of TMJ, the court did not have jurisdiction to hear the suit.

Keppel Corporation on Tuesday said it will recognise a loss of S$318 million in respect of its exposure to KrisEnergy in its H1 2021 financial results, after the latter on June 4 said it has submitted a winding-up petition. The group has noted that its interim and final dividends will be ring-fenced from this KrisEnergy impairment, which is a non-core investment.

Bread specialist QAF is set to reward shareholders with a special dividend of two Singapore cents per share, upon completing the planned sale of its Australian pork business, which will result in estimated proceeds of A$148.1 million (S$151.8 million).

Sembcorp Marine (Sembmarine) has begun exploring alternative sources of skilled labour, which is likely to incur increased manpower costs for ongoing projects, as it continues to face a shortage with the increased restrictions implemented in Phase 2 (Heightened Alert).

SATS (Thailand) Co, an indirect subsidiary of in-flight caterer SATS, has entered an agreement with Thailand-listed Bangkok Ranch to buy 85 per cent of a food-manufacturing facility owner for 484.5 million baht (S$21 million). The target company is Food City, whose main asset is a food production facility in Pathumthani, Thailand. Post-acquisition, the facility will be configured to focus on the production of 90,000 ready-to-eat meals per day.

Mainboard-listed New Silkroutes Group has received a letter of demand for an alleged sum of US$10.7 million from a company, Iolani Shipping, it disclosed in a Tuesday bourse filing. New Silkroutes is a corporate guarantor for a lease-financing arrangement of a bare boat charter, entered into by its subsidiary TXZ Tankers. It is currently reviewing the letter of demand with its legal advisors.

Urban Commons Queensway (UCQ), a unit of embattled Eagle Hospitality Trust (EHT), has surrendered the Queen Mary property – a former ocean vessel-turned-floating hotel – to the City of Long Beach, California, on June 4.

US News

Apple is in early-stage talks with China’s CATL and BYD about the supply of batteries for its planned electric vehicle (EV), four people with knowledge of the matter said. The discussions are subject to change and it is not clear if agreements with either CATL or BYD will be reached, said the people who declined to be named as the discussions are private. Apple has made building manufacturing facilities in the United States a condition for potential battery suppliers, said two of the sources.

Shares of Clover Health Investments Corp jumped as much as 109% on Tuesday as it became a new focus for small individual traders on social media platforms who have prompted rallies in heavily shorted U.S. stocks this year.

Tesla Inc sold 33,463 China-made electric cars in May, including exports, a 29% jump from April, according to data from the China Passenger Car Association (CPCA) on Tuesday. China’s new electric vehicle sales surged 177% to 185,000 cars in May from a year earlier, CPCA said. Overall passenger vehicle sales, however, rose just 1.1% to 1.66 million cars.

Stitch Fix shares soared Monday after the online shopping and styling service reported a narrower-than-expected loss in its fiscal third quarter. Sales topped analysts’ estimates, driven by consumers refreshing their wardrobes for summer vacations and the office and looking for styles in new sizes. The stock was recently up around 15% in extended trading.

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


Keppel Corporation – Final resolution on KrisEnergy

Recommendation: Buy (Maintain), Last Done: S$5.29

Target price: S$6.12, Analyst: Terence Chua

– Keppel will recognise a loss of S$318mn in respect of its exposure to KrisEnergy in its first-half 2021 financial results.

– Total assessed recoverable amount is S$105.2mn. Recoverable amount and any further loss provisions will be re-assessed at the end of each subsequent financial reporting period.

– No impact on FY21e interim and final dividend from latest impairment.

– Maintain BUY and SOTP TP of S$6.12, with a 10% holding-company discount. Our TP translates to about 1.0x FY21e book value, a slight discount to its 5-year average of 1.05x. Catalysts expected from contract wins and a successful divestment of its Rigco.

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