Tuesday, June 19, 2018
The dollar fell against the yen in early Asian trade on Tuesday after U.S. President Donald Trump's threats of more tariffs on China raised worries about an escalating trade war between the world's two largest economies. As much as I think trade war will not be full blown, there may be a possibility it might actually happen. If that is the case, it will cause a drag on all markets.
Looking at the STI index chart, yesterday closing is a slight rebound from the low. However, the tail and the hair of the candle indicate an almost equal force between the bulls (buyers) and the bears (sellers).
Possible to witness a slow gradual rebound till 3350 this week given the oversold conditions from the past few days. Though the technical stage is set for a rebound, fundamental news drive the next market direction as well.
For traders, possible to try to catch the possible rebound. For example, yesterday DBS entry at 26.90 and sold 27.20, or even today's 27.36. Possible counters for considerations, Singtel, Raffles Medical, Keppel Corp, Venture. These are oversold counters which may be rebounding.
For investors, i think it may be still too early to enter. If trade talks were to drag on, all the current prices will be moving to a lower range, resulting in a better entry price. Should that be the case, STI may retest 3250 level, which is 2017 Oct lows.
my 2 cents
MARKET OVERVIEW
- The market could face further pressure amid escalating US-China trade tensions with latest news that US President Trump has threatened to hit China with new tariffs on USD200b of Chinese imports.
- Meanwhile, oil rose as some producers mull a smaller output boost ahead of OPEC meeting later this week..
- Technically, the STI is grossly oversold but appears entrenched in a downtrend after breaking below its 200-dm at at 3,340 and could head towards the next support at 3,280.
POSITIVE NEWS
*Lian Beng
- Awarded $95.8m contract by Tripartite Developers to build a condominium at Flora Drive.
- The development comprise nine 8-storey residential blocks, clubhouse with one basement car park, swimming pool and tennis court.
- Construction is expected to commence in Jul '18, for a period of 33 months, and contribute positively to FY5/19 results.
- This will lift its order book to $1.02b.
- Trades at 5.1x forward P/E and 0.47x P/B.
*Addvalue Technologies
- Entered into a new distribution contract with Zhongyou Century (Beijing) Technology to supply satellite communication terminals for small fishing fleets operating in China regional seas.
- Total contract value is worth at least US$1m, if terminals are fully delivered within FY3/19.
- The new contract supersedes the 3-year collaboration entered in Apr '16 to supply > 5,000 units of satellite terminals, which was later found to be inadequate for the needs.
- Trades at 5.2x P/B.
*Sysma
- Secured a $37.7m contract from Oxley Holdings for a 160-unit condominium project, The Verandah Residences, at Pasir Panjang.
- Work includes the construction of four blocks of 5-storey apartments, three 2-storey strata landed houses, and a basement car park, clubhouse, swimming pool and communal facilities.
- Construction is expected to commence in Jul for a period of 28 months.
- Net cash position of $54.9m is substantially higher than current market cap of $38.1m.
- Trades at 0.75x P/B.
*Kingsmen Creatives
- Secured $29m worth of contracts from F1 Singapore Grand Prix.
- Deals involve fabrication and construction of circuit-wide grandstand seats, paddock club, corporate suites at pit straight and hospitality facility at Turn 23 over a 4-year period, and paddock kitchen over a 2-year period.
- Works will commence from 2018 and are expected to contribute positively from FY18 to FY21.
- Trades at 11.4x trailing P/E.
NEUTRAL NEWS
*SIA
- May '18 passenger load factor (PLF) climbed 2.6ppt to 79.6% as pax traffic (+9.6%) overtook capacity expansion (+6.1%), with all regions except Europe showing an increase.
- But cargo load factor dropped 3.9ppt to 62.6% as air freight loads (-3.3%) weakened against capacity addition (+2.7%).
- Trades at 0.93x P/B.
*Ascendas Hospitality Trust
- Updated that there is no physical damage to its existing property - Hotel Sunroute Osaka Namba as well as the three hotels that it is acquiring in Osaka following yesterday's earthquake.
- Trades at 7.6% yield and 0.84x P/B
*Allied Tech
- Proposed placement of 420m new shares (31% of existing share base) at $0.06 apiece to four high net-worth investors.
- Net proceeds of $25.16m will be used for potential acquisitions to further expand and strengthen its service offerings in its new e-commerce segment, including centralised customer relationship management, loyalty program and electronic payment.
- In the longer-term, the group also aims to integrate various sub-segments of its business such as online ticketing and online corporate travel solutions.
- Based on the enlarged share capital, the stock trades at 20.4x trailing P/E and 0.78x P/B.
*No Signboard
- Acquiring remaining 20% stake in Danish Breweries for $0.4m via 10 monthly instalments.
- Upon completion, the group intends to expand its distribution (currently 300 outlets) of Danish Breweries' signature brand Draft Denmark beer in Singapore.
- Separately, the group has inked a franchise agreement to develop and operate Little Sheep restaurants in Singapore.
- Little Sheep is a well-known hot pot restaurant in China, with 280 outlets (270 franchised) in China, US, Canada and Japan.
-The group intends to open the first outlet by early 2019, while targeting to open at least one outlet per year over the next five years.
- Trades at 9.2x trailing P/E.
*UnUsUal
- Added two additional "JJ Lin Sanctuary World Tour" shows as the existing two shows were completely sold out.
- Trades at 52x trailing P/E.
*Moneymax
- Acquiring Ban Joo Pawnshop for $3.3m or at 1x P/B.
- Ban Joo operates a licensed pawn broking business at Tanjong Pagar Plaza and posted a FY17 net profit of $0.2m.
- The acquisition is in line with the group's expansion strategy.
- Trades at 8x trailing P/E.
