Singapore Pre-Market Thursday: UOB, Sembcorp Industries, Hi-P

Singapore one dollar bill

Singapore’s shares will start trade on Thursday with a negative lead from Wall Street and a mixed bag of earnings from local companies.

Japan’s market will be closed for the Constitution Day holiday. In South Korea, the Kospi was down 0.31 percent by 8:15 A.M. SGT on Thursday.

The Dow Jones Industrial Average fell 0.72 percent, the S&P 500 lost 0.72 percent and the Nasdaq shed 0.42 percent on Wednesday.

“U.S. equities hit the late skids afternoon despite a better-than-expected earnings report from Apple. But with much of the good news in the equity world currently factored, investors are left mulling over the paradoxical landscape of stellar earning but higher interest rates and the threat of trade war. This struggle is unlikely to end anytime soon,” Stephen Innes, head of Asia Pacific trading at OANDA, said in a note on Thursday.

Trade war jitters may be on the upswing again after a senior Chinese government official reportedly said Beijing won’t give in to “threats” from the U.S.; talks were set to begin on Thursday. The official said China won’t accept pre-conditions such as giving up its manufacturing ambitions or narrowing the trade gap, Bloomberg reported.

The U.S. Federal Reserve kept interest rates unchanged at its policy meeting ended Wednesday, as was widely expected, and said inflation was nearing its 2 percent target.

Analysts noted the market wasn’t much surprised.

“Ten-year yields were 2.97 percent when the minutes were released. Yields were 2.97 percent a half hour later in ‘trading’ after the Fed’s news. The Fed has stopped moving the markets having laid out a gradual path for interest rates that is hard to find fault with,” Chris Rupkey, chief financial economist at MUFG in New York, said in note late Wednesday U.S. time.

“Net, net, if the risks are balancing up for the economic outlook, with low-inflation no longer a concern, then the Federal Reserve can continue to mop up the liquidity left over from the recession and financial crisis and move interest rates up gradually to more normal levels,” he said.

The dollar index, which measures the greenback against a basket of currencies, was broadly unchanged at 92.7470.

UOB

UOB reported net profit for the first quarter rose 21 percent on-year to S$978 million.

The net interest margin was 1.84 percent, up 11 basis points, on higher loan margin and interbank yields amid a rising interest rate environment and proactive balance sheet management, the smallest of Singapore’s three banks said in a filing to SGX before the market open on Thursday.

That compared with market expectations for net profit of around S$981 million for the quarter.

Daiwa had forecast net profit of S$955 million, up 18 percent on-year, expecting NIM of 1.81 percent. CIMB had forecast net profit of S$948 million, with NIM of around 1.84 percent. Nomura on Wednesday had forecast net profit of S$994 million, with NIM of 1.83 percent, but added that quarterly net profit might rise as high as S$1 billion for the first time.

“Against a backdrop of an improving operating environment and a pick-up in customers’ activities, we achieved our strongest quarter ever, with double-digit percentage earnings growth,” Wee Ee Cheong, UOB’s deputy chairman and CEO, said in the statement. ““With the more benign environment and issues in the oil and gas segment largely addressed, our non-performing loan ratio and credit costs improved.”

Sembcorp Industries

Sembcorp Industries reported net profit for the first quarter of S$76.6 million, down 34 percent on-year, on turnover of S$2.8 billion, up 30 percent.

In a filing before the market open on Thursday, the company attributed the profit decline to the marine and urban development segments.  The marine business contributed net profit of S$1.8 million, down from S$22.6 million in the year-earlier quarter, while the urban development business posted a net profit of S$9.6 million, down from S$37.2 million in the year-earlier quarter.

The company issued a cautiously optimistic outlook.

“The market environment is expected to remain challenging in 2018. A broader-based global recovery is underway, aided by a rebound in investment and trade. As the Group repositions its businesses for the future, it is confident that it is well-placed to benefit from the market’s recovery,” the statement said.

Hi-P

Contract manufacturer Hi-P International reported its first-quarter net profit rose 19.9 percent on-year to S$10.1 million on revenue of S$281.096 million, up 15.1 percent on-year.

The weakening of the U.S. dollar against China’s yuan and the Singapore dollar caused a S$13.0 million net foreign exchange loss, partially offset by a net fair value gain of S$1.7 million on hedging instruments, the consumer electronics and smartphone manufacturer said in a filing to SGX after the market close on Wednesday. The company said that was the reason for its 212 percent on-year increase in other expenses to S$11.3 million.

The company issued a cautious outlook, noting that the International Data Corporation (IDC) Worldwide Quarterly Mobile Phone Tracker showed global smartphone shipments declined 0.5 percent last year, the first year-on-year decline ever since the introduction of smartphones. But it noted that IDC expects shipment volumes to show low single-digit growth this year.

“The threat of a trade war between the U.S. and China has increased the level of uncertainty across worldwide supply chains. Against this backdrop, the overall market has become more conservative as both customers and suppliers project forecasts in a more cautious manner,” Yao Hsiao Tung, the company’s executive chairman and CEO, said in the statement. “This has caused us to revise our guidance for the year.”

Hi-P said it now expects similar revenue but lower profit for the second quarter of 2018, compared with the year-earlier period; it expects higher profit and revenue for the second half of 2018 than the first half of this year and it expects similar revenue but lower profit for all of 2018, compared with 2017.

OUE Hospitality Trust

OUE Hospitality Trust reported net property income for the first quarter rose 3.1 percent on-year to S$28.29 million, on higher gross revenue from the hospitality segment and lower property expenses, partly offset by lower gross revenue from the retail segment.

The dividend per stapled security (DPS) fell 3.1 percent on-year to 1.26 Singapore cents as income available for distribution fell as the REIT no longer receives income support for Crowne Plaza Changi Airport and retail segment income fell, the REIT manager said in an SGX filing after the market close on Wednesday.

In it outlook, the trust said large biennial events this year were expected to increase hotel accommodation demand, as was Singapore being the ASEAN chairman, which includes hosting summit meetings and events throughout the year. It noted that challenges in the retail segment would likely persist as tenants were more cautious and were taking longer to renew or commit to leases.

“Whilst we continue to explore leasing opportunities to optimise the occupancy of Mandarin Gallery, we remain committed to curating the right tenant mix to retain the mall’s positioning as a destination mall,” it said. At the end of the quarter, Mandarin Gallery was around 95 percent committed, it said.

Accordia Golf Trust

Mitsubishi UFJ Financial Group ceased to be a substantial shareholder in Accordia Golf Trust, lowering its deemed interest to 3.7919 percent from 7.5823 percent, the trust manager said in a filing to SGX after the market close on Wednesday. It said this was part of an aggregation of its global position.

Morgan Stanley, in which Mitsubishi UFJ holds a 20 percent stake, raised its deemed interest to 7.5916 percent from 3.7862 percent, the trust manager said in a separate filing.