SINGAPORE (Apr 29): The Department of Statistics on April 23 released the Consumer Price Index (CPI) for March. Core inflation, which excludes housing and private transport costs, has eased to 1.4% from 1.5% in February. The slightly lower inflation is attributed to softer increases in electricity and gas tariffs, which offset the pickup in services and food inflation.
The opening up of the retail electricity market has created an impact. The increase in electricity and gas prices eased further to 3.9% in March from 5.5% in February. Food inflation prices increased to 1.6% from 1.4% due to a faster rise in prices of prepared meals and non-cooked food items.
Meanwhile, headline inflation increased to 0.6% from 0.5% last month, rising steadily for the third month due to softer declines in private road transport and accommodation costs. Private road transport costs saw a smaller drop in March of -0.9% from -2.3% in February, as a result of COE prices rebounding in March after a 14-month decline.
Maybank Kim Eng senior economist Chua Hak Bin expects the private road transport component to turn positive by 3Q, which will lift headline CPI. “We maintain our 2019 forecast for average core inflation at 1.4% and headline inflation at 1.2%. The Singapore dollar nominal effective exchange rate is trading at 1.2% above the mid-point, by our estimates,” he adds.
Losers and gainers
Wellness products seller Best World International is in the news again. On the morning of April 24, two short-selling reports — by activist short-seller Bonitas Research and short-sell research blog Valiant Varriors — were published regarding the company. Bonitas alleges that Best World’s sales in China were only a fraction of what was reported to shareholders. “We are short Best World stock and believe its stock price will go lower,” says Bonitas in its report.
Bonitas questioned Best World’s motive to appoint auditors PricewaterhouseCoopers to conduct a limited one-year independent review of its 2018 China franchise operations. The research house believes that the management has deliberately directed PwC’s investigation to focus solely on 2018 to divert attention from, and ultimately conceal, previously reported fake sales and profits from China operators. Bonitas also alleges that Best World fabricated at least $31 million of its reported 2017 sales to “one major customer” called Changsha Best. “Excluding fabricated sales to Changsha Best, we calculate that Best World overstated its 2017 net profits by at least 130%,” says Bonitas.
Meanwhile, Valiant Varriors, whose authors are anonymous, published the first instalment of a two-part article questioning Best World’s multi-level marketing operations in China. Following the reports, shares in Best World plunged 9.5% on April 24 to $1.62. The company has asked for a trading halt.
Meanwhile, in an after-market report on April 23, Spackman Entertainment and Mediacorp jointly announced that they had signed a memorandum of understanding to co-produce a romantic drama that will bring together talent from both Singapore and Korea. The 20-episode drama titled Equity of Love will be the first Singapore-Korea drama. It is slated to commence production this year, for telecast in 2H2020. Shares in Spackman, which closed at 2.3 cents on April 23 before the announcement, closed 4% lower for the day at 2.4 cents on April 25.
Singapore Technologies Engineering (ST Engineering) has won a contract from the US government to build a polar icebreaking cutter through its US-based shipbuilder VT Halter Marine, which is set to be the prime contractor for the US$746 million ($1 billion) fixed-price incentive firm contract to design and construct the US Coast Guard Polar Security Cutter. This contract includes options that, if exercised, would bring its cumulative value to US$1.9 billion. The first ship delivery is scheduled for 2024. Year to date, shares in ST Engineering are trading 11.1% higher at $3.89.
The Singapore IPO market, quiet for months, will soon see two big issues whose preliminary prospectus were filed one day after the other. Both are real estate investment trusts of US-based hospitality assets. ARA US Hospitality Trust, which owns 38 Hyatt-branded hotels, wants to raise around US$450.7 million. Eagle Hospitality Trust, on the other hand, is seeking to raise US$453 million. It owns 18 properties, including the converted Queen Mary liner.
China Everbright Water on April 24 proposed to also go public on the Main Board of the Stock Exchange of Hong Kong. The company announced on April 25 that it had won two projects in Shandong province, one worth RMB106 million ($21 million) and another worth RMB105 million. Shares in China Everbright Water closed 1.02% lower for the day on April 25 at 4.85 cents with about 11.7 million shares traded.
Global food and agri-business Olam International is acquiring 100% equity ownership of Nigeria-based and -listed Dangote Flour Mills for NGN130 billion ($488 million). This acquisition is part of the group’s efforts to strengthen its wheat-milling capacity in high-growth markets. The proposed transaction would include DFM’s five facilities engaged in flour and pasta manufacturing, as well as its logistics capabilities, including access to the ports of Apapa and Calabar. Upon completion of this acquisition, DFM will be delisted from the Nigerian Stock Exchange. Olam shares gained 1.02% on April 25 to close at $1.99.
Upcoming earnings results
The earnings season continues as April 29 will see DBS Group Holdings, Ascendas REIT, Mapletree North Asia Commercial Trust and China Sunsine Chemical Holdings post their results. The following day, Ascott REIT, CapitaLand, Frasers Hospitality Trust, Ho Bee Land and World Precision Machinery will report.
After the May 1 trading break, OUE Hospitality Trust will be announcing its 1Q earnings on May 2. The following day will see results from Frasers Property, Great Eastern Holdings, Hi-P International, Sembcorp Marine, United Overseas Bank and StarHub.
