Singapore Pre-Market Monday: Malaysia markets, Olam, ComfortDelGro, City Developments

Singapore CBDSingapore CBD

Singapore shares will start trade on Monday with a positive lead from Wall Street on Friday offset by a string of geopolitical jitters and with a close eye on how Malaysian markets fare when they reopen for the first time since May 8.

Malaysian shares and the ringgit are widely expected to tumble when trade resumes after the shock election outcome last week, which propelled 92-year-old Mahathir Mohamad back into the prime minister’s seat, ending the former ruling coalition’s 61 years in power. Market watchers will be watching whether Malaysian shares actually tumble, or if the days-long cooling off period helped to soothe anxieties.

On Friday, the Dow Jones Industrial Average ended up 0.37 percent, the S&P 500 added 0.17 percent and the Nasdaq edged down 0.03 percent. Futures for the three indexes were higher around 7:30 A.M. SGT on Monday.

In Japan, the Nikkei 225 opened down 0.25 percent at 22,702.66.

Singapore’s gross domestic product (GDP) data were also due.

Traders will also be waiting for fresh news on the U.S.-China trade talks.

China-U.S. trade

“The dominant focus across Asian markets is likely to be the potential escalation of trade tensions between the United States and China,” Scotiabank said in a note on Friday.

On Sunday U.S. time, U.S. President Trump said on Twitter he would help Chinese telecom giant ZTE “get back into business, fast,” by instructing the Commerce Department to “get it done.” Last month, the U.S. had banned ZTE from doing business with U.S. companies for seven years as a penalty for illegal shipments to Iran and North Korea.

If the move isn’t mere Trump bluster, it would be an unprecedented step for a U.S. president to intervene in a regulatory issue, potentially undercutting government officials seeking to enforce other sanctions and trade rules, according to a Washington Post report. Ironically, one of Trump’s signature issues has been seeking tougher enforcement of trade rules; his administration has also sought to limit Chinese investment in the U.S.

The unexpected Trump tweet could also be seen as a major concession on trade from a president who has claimed he would be a tough negotiator — coming before U.S. talks in Washington with China trade official Liu He even begin.

Scotiabank noted that this week, the U.S. Trade Representative is holding a public hearing on the proposed list of US$50 billion of imports from China facing tariffs, and the U.S. Treasury’s deadline on proposals restricting Chinese investment related to intellectual property is also coming up.

“An interesting dynamic is unfolding whereby the [U.S.] consumer may rebound in the short-term only to be hit by higher prices through potential tariff effects that could drive a combination of reduced spending and/or substitution effects in the composition of spending,” Scotiabank said.

Watching oil prices

Separately, U.S., Canadian and Mexican officials failed to reach a deal last week to modernize the NAFTA trade pact, Reuters reported, noting a looming deadline from House Speaker Paul Ryan that he needed a deal by May 17 for the current Congress to vote before mid-term elections, according to a Reuters report.

Scotiabank also pointed to upcoming U.S. data this week: retail sales, housing starts and the Philadelphia Fed’s regional gauge of manufacturing conditions.

Oil prices remained high, although a tad off their tops.

Nymex WTI crude was at US$70.69 a barrel, off just one cent, at 8:04 A.M. SGT, while ICE Brent crude futures were at US$77.09, according to Bloomberg data.

Shane Oliver, head of investment strategy and chief economist at AMP Capital, said in a note on Saturday that Trump breaking the Iran nuclear deal was “ugly,” as it threatened around 700,000 barrels of oil a day of Iranian oil exports even as the global oil market is tightening. He also pointed to the risks Iran would chose to “cause more trouble” in the Middle East and proceed to develop nuclear weapons, even as the U.S. threatens its own relationship with allies France and Germany.

“The oil price has already moved up so the risks may be factored in,” Oliver said. He also pointed to the 90-180 wind down period for the Iran deal.

“Trump’s approach as with many things looks like a negotiating ploy to get a better deal. So the Iran nuclear deal is not necessarily over yet,” he said.

Olam

Olam reported its profit after tax and minority interests (PATMI) for the first quarter rose 9.8 percent to S$157.9 million on reduced net finance costs and lower taxation, while revenue was up 8.5 percent on-year at S$6.295 billion.

Sales volume was up 56.1 percent on-year, mainly on higher trading volumes in grains for the quarter, Olam said in a filing to SGX on Monday before the market open. Net finance costs fell 37.4 percent on-year to S$87.4 million in the quarter, it said.

Earnings before interest, tax, depreciation and amortization (EBITDA) fell 7.7 percent on-year in the quarter to S$368.1 million, with EBITDA from all segments except industrial raw materials lower.

Olam said in a filing to SGX on Friday after the market close that it acquired a 60 percent stake in Cotontchad SN for 9.018 billion CFA francs, or approximately US$16.4 million. Cotontchad has exclusive rights to procure, process and sell Chad’s cotton and by-products, the filing said. Olam said the deal wasn’t expected to have any material impact on earnings per share for the current financial year.

ComfortDelGro

ComfortDelGro reported net profit attributable to shareholders for the first quarter fell 19.6 percent on-year to S$66.3 million, due to a year-earlier boost from S$10 million in special dividends. Revenue rose 1.0 percent on-year in the quarter to S$878.8 million, boosted by a positive foreign currency translation of S$5.2 million as the pound sterling and Chinese yuan rose, the taxi operator said in a filing to SGX after the market close.

In the outlook, ComfortDelGro CEO Yan Ban Seng pointed to S$123 million spent on acquisitions so far this year as the company looks to scale up operations.

“For this quarter, we saw a slower decline in our local taxi business. With the reduced subsidy and incentives for drivers and riders by ride-hailing apps operators, and the authority’s review of regulations for private hire vehicles, we believe that the competition will be on a more level playing field going forward. This is a positive development,” he said.

City Developments

City Developments reported first-quarter profit after tax and minority interests (PATMI) fell 16.3 percent on-year to S$80.0 million, while revenue was up 35 percent at S$1.058 billion.

Revenue growth was driven by the completion of the Criterion executive condominium in the quarter and the maiden contribution from the New Futura development and continued contributions from Coco Palms and Suzhou Hong Leong City Center, the developer said in a filing to SGX after the market close on Friday.

The fall in PATMI was on compressed profit margins at the Criterion development compared with other projects and the absence of a year-earlier contribution from the Commonwealth Towers joint venture which sold out last year, the company said. It added that New Futura’s sales were “stellar” since its launch in January, but the profit wouldn’t be booked until the legal completion of the sales.

Sheng Siong

Sheng Siong said that global investment fund Mondrian Investment Partners became a substantial shareholder of the supermarket chain operator, buying 99 million shares, or a 6.58 percent stake. The purchase price was S$99.99 million via a married deal with three executive directors, Sheng Siong said in a filing to SGX after the market close.

Ezion

Ezion reported a first quarter net loss after income tax of US$46.41 million, widening from the year-earlier quarter’s US$12.75 million loss. Revenue for the quarter fell 45 percent on-year to US$37.75 million, the company said in a filing to SGX after the market close on Friday.

Ezion said the revenue decline was due to continued delays in redeploying its liftboats amid working capital constraints pending the finalization of its refinancing exercise as well as a drop in the utilization rate of jack-up rigs and not recognizing revenue when the company believes customers won’t be able to meet existing charter obligations. It also noted lower utilization rates for its tugs and barges and lower charter rates across the fleet.

“The group will continue to focus on its liftboat business and will dispose assets which are facing low utilization in view of overcapacity in the market,” Ezion said. “Jack up rigs, tugs and barges had been identified within the group’s assets to be disposed as the charter rates of these assets are very depressed despite high capital expenditure required to deploy them.”

But it added that it expected its current fleet of 12 liftboats to be fully deployed by the end of this year, absent a major deterioration in the macro-economic environment. Ezion said it expected “material improvements in both topline and bottomline” toward year-end.

Ascendas India Trust

Ascendas India Trust inked a forward deal to acquire two buildings in AURUM IT SEZ in Navi Mumbai for which it will also provide construction funding, the REIT manager said in a filing to SGX before the market open on Monday. The REIT also has right of first refusal on the other two buildings of the SEZ’s total of four, it said.

The deal would be a two-stage process, with the REIT first subscribing to debentures from the two buildings’ co-developer for 5.012 billion rupees, or S$100.2 million for construction funding requirements and then the REIT will buy all of the co-developer’s shares based on leasing milestones or 24 months after the completion date, whichever is earlier. It said the purchase price wasn’t expected to exceed 9.3 billion rupees or S$186 million.

M1

Temasek’s deemed interest in M1 fell to 19.99 percent from 20 percent after the disposal of 100,000 shares by DBS Bank in a market transaction, according to an SGX filing by M1 after the market close on Friday.

Silverlake Axis

Silverlake Axis said it obtained a contract from “an established consumer credit provider in Hong Kong” for services to replace its legacy card and loans system and to rollout new services for its digital payment ecosystem.

The contract was expected to contribute positively to earnings starting from the current financial year, the company said in a filing to SGX after the market close. It said it couldn’t disclose further details due to confidentiality clauses in the contract.

Cordlife

Cordlife Group reported its fiscal third-quarter net profit attributable to shareholders was S$843,000, swinging from a year-earlier loss of S$401,000 as revenue rose 24.5 percent on-year to S$17.71 million.

“We will continue to drive profitability organically and explore earnings-accretive acquisition opportunities. With our extensive reach in Asia and amid growing public awareness of the therapeutic potential of stem cells for disease treatment, we are well placed for further growth,” the private cord-blood banking company’s CEO Michael Weiss said in the SGX filing after the market close on Friday.

This article was originally published at 8:29 A.M. SGT on Monday, May 14, 2018; it has since been updated to add an item on Ascendas India Trust.