Singapore Pre-Market Wednesday: Fraser and Neave, Venture, Ezion

Singapore one dollar bill

Singapore’s shares may being trade on Wednesday on a negative note, amid a middling lead from Wall Street and as geopolitical tensions may spike after the U.S. pulled out of the Iran deal.

Japan’s Nikkei 225 index was down 0.47 percent at 8:19 A.M. SGT on Wednesday, while South Korea’s Kospi was down 0.14 percent at 8:24 A.M. SGT.

The Dow Jones Industrial Average ended up just 0.01 percent, the S&P 500 edged down just 0.03 percent and the Nasdaq nudged up 0.02 percent. Futures for the three indexes were nosing down.

That was after U.S. President Trump on Tuesday announced that he would pull out of the nuclear deal with Iran.

Nomura said the decision was more hawkish than expected, as it would re-impose all U.S. sanctions eased as part of the deal, not just the ones up for renewal.

“While the direction of President Trump’s announcement today [Tuesday] was widely expected, the forcefulness of the U.S. decision adds additional uncertainty to future developments in U.S.-Iran relations,” Nomura said in a note on Tuesday U.S. time.

Nymex futures for WTI crude were up 1.58 percent at US$70.15 a barrel at 7:48 A.M. SGT, according to Bloomberg data, while Brent ICE futures were down 1.73 percent at US$74.85 at 5:59 A.M. SGT. The U.S. Energy Information Administration (EIA) raised its average Brent forecast to US$71 a barrel in 2018 and US$66 in 2019, up US$7 and US$3 respectively from its April short-term energy outlook.

The market jitters likely also helped to push up the U.S. dollar. The dollar index, which measures the greenback against a basket of currencies, was at 93.0420 at around 8:00 A.M. SGT, pushing above the 93 bar, after ending April under 92.

Watching oil prices

Nomura said that reducing Iran’s oil production wasn’t likely to materially impact medium-term crude prices, but it added the U.S. exit from the Iran deal could still push up oil prices.

“The president’s hawkish language has the potential to aggravate tensions in the Middle East further, potentially putting additional upward pressure on crude oil prices,” Nomura said. “A sustained increase in tensions could increase the tail risk of outright regional conflict and
additional market turmoil.”

Adding further fuel to the potential for an inflation fire in the U.S., the country’s monthly Job Openings and Labor Turnover Survey, or JOLTS, showed openings at a record high in March, which Reuters said that combined with the recent hiring slowdown, indicated employers were having trouble finding workers. That could push up wages ahead.

U.S. inflation set to rise?

“Net, net, the labor market is literally on fire,” Chris Rupkey, chief financial economist at MUFG, said in a note on Tuesday. “Everyone who can pick up a shovel has already joined the workforce. Massive tax cuts for corporations cannot boost jobs creation if there is no one out there in the country to hire.”

Rupkey added that this was likely to help keep the Federal Reserve on track with gradual interest rate hikes.

“Central bankers need to continue to take the punch bowl away because higher wages and greater inflation are on the way. Bet on it,” he said. “One thing is for certain wages have nowhere to go but up, it’s just a matter of time.”

Political instability out of the U.S. got another boost after allegations that Trump’s personal lawyer, Michael Cohen, may have received US$500,000 from a company run by a Putin-tied Russian oligarch in the months after the 2016 election. The allegations came from Michael Avenatti, who is the attorney for porn star Stormy Daniels, who alleges she had an affair with Trump and is suing him.

CNN also reported, citing an unnamed source, that Special Counsel Robert Mueller’s investigation has questioned the Russian  oligarch about US$500,000 paid to Cohen.

Fraser and Neave

Fraser and Neave reported its fiscal second quarter profit after tax rose 63 percent on-year to S$36.3 million as revenue increased 5 percent on-year to S$473.1 million.

The company said in a filing to SGX after the market close on Tuesday that broad-based sales growth across business segments in the core Singapore, Malaysia and Thailand markets contributed to the revenue growth, while a later Lunar New Year and effective festive-season promotions helped to boost beverage sales by 11 percent in the quarter.

An interim dividend of 1.5 Singapore cents a share was declared, unchanged on-year, the filing said.

In its outlook statement, the company said that the contribution from associated company Vinamilk was expected to increase as Fraser and Neave will equity account its results for the full 12 months this financial year.

“We will continue to invest in new markets and at the same time continue to develop new product offerings and innovations while striving to maximise the benefits of capex projects and harmonised distribution network,” it said. “Key packaging and raw material prices, other than sugar, are on the rising trend and remains volatile. However, we have largely locked in prices for the current financial year and will continue to be vigilant of volatile price movement.”

Venture Corp.

Venture Corp. submitted a somewhat opaque “general corporate information” filing to SGX after the market close on Tuesday, highlighting its need to keep trade secrets “very close to its heart” and to respect its non-disclosure agreements.

“Many of Venture’s key customers are Fortune 500 and Tier-1 OEM and technology companies. In keeping with the NDA (“non-disclosure
agreement”) entered into with its partners, Venture treats all customers’ information with the strictest confidence,” it said. “At the group’s first quarter of 2018 financial results briefing, Venture had however shared it has more than 100 active customers and the revenue range of the Top 10 customers to the group.”

The statement may have been in response to a Business Times article on Tuesday, which said “non-traditional sources” were setting up a debate over “value chain intrigue” at the company because Venture wasn’t providing information on its customer relationships.

The article appeared to give credence to anonymous postings on a free Wix site calling itself Valiantvarriors, which uses a free Gmail address for a contact. The site uses uncivil language to refer to company management and has made forecasts that other analysts have contested. While Valiantvarriors did claim that its “estimate” that Venture’s earnings would miss consensus forecasts by 6-8 percent was correct, it didn’t provide what it was using as a consensus estimate prior to the earnings release and didn’t respond to Shenton Wire’s enquiry on the source of their consensus forecast afterward.

Venture’s CEO Wong Ngit Liong reportedly dismissed the free Wix site as “rumors” at the results conference.

Ezion

Ezion issued a profit warning, saying in a filing to SGX after the market close on Tuesday that it expected to report a net loss for the first quarter.

“The delays in re-deployment of some of the group’s assets while finalizing the refinancing exercise has continued to adversely affect revenue and the profitability of the group. Despite being operationally cashflow positive, the group is likely to record a net loss,” it said.

Starhill Global REIT

Starhill Global REIT has divested the Nakameguro Place property in Tokyo, Japan, for 525..0 million yen, or around S$6.4 million, the REIT manager said in a filing to SGX after the market close on Tuesday. The transaction leaves the REIT with just two properties in Japan, reducing its exposure to the country to 1.7 percent of its asset value.

PACC Offshore

PACC Offshore reported a net loss attributable to shareholders of US$7.19 million for the first quarter, narrowing from a US$18.57 million loss in the year-earlier quarter. Revenue rose 104 percent on-year in the quarter to US$70.57 million on higher utilization for three of its four business divisions, the company said in a filing to SGX after the market close on Tuesday.

“In the immediate term, charter rates are expected to remain under pressure due to the continued oversupply of vessels. However, there are positive indicators in the market, with oil and gas capital expenditure expected to increase on firmer oil prices and improved financial performance of oil companies,” the company said in its outlook statement.

AusGroup

AusGroup said its subsidiary AGC Industries landed an A$11.7 million contract for turnaround services at the Yara Pilbara liquid ammonia plant in Western Australia. The company will hire around 175 workers for work packs which include spool replacement, vessel replacement, refractory scope, remedial repair work, integrity improvement and a life-extension program, AusGroup said in a filing to SGX after the market close on Tuesday.

CapitaLand Commercial Trust

Temasek’s deemed interest in CapitaLand Commercial Trust rose to 32 percent from 31.99 percent, the REIT manager said in a filing to SGX after the market close on Tuesday. The filing said Temasek doesn’t have any direct interest in the units, where were held via its deemed interest in CapitaLand, DBS and Keppel Corp.

Kimly

Coffee shop operator Kimly reported its fiscal second quarter profit before tax rose 20.0 percent on-year to S$5.45 million as revenue increased 3.8 percent on-year to S$49.18 million.

The company said in a filing to SGX after the market close on Tuesday that the increase was due in part to higher contributions from the outlet management division as income from sub-leasing of food stalls in its coffee shops and food courts rose. It declared an interim dividend of 0.28 Singapore cents a share.