SINGAPORE (Apr 22): The latest economic data released this past week paints a softer outlook. Non-oil domestic exports (NODX) data for March released on April 17 indicates Singapore growth contracted 11.7% y-o-y, a sharp swing from the growth of 4.8% y-o-y in February. This is the biggest monthly fall since October 2016.
The softer performance was seen across both products and markets. UOB Global Economics and Markets Research attributes the decline to the slowing Chinese economy, uncertainty over the US-China trade negotiations and the disruption from the Lunar New Year holidays. Further downside risk to full-year NODX numbers is expected.
Just days earlier on April 12, the Ministry of Trade and Industry released advance estimates for 1Q GDP that indicated a similar slowdown. For the first three months of the year, Singapore’s economy grew just 1.3% y-o-y, from 1.8%.
While the construction sector showed some growth, manufacturing — the other key component of the economy — dropped. In 1Q2019, manufacturing output was down 1.9% y-o-y, a sharp swing from the 10.1% growth in 1Q2018. This was weighed down by output declines in the precision engineering and electronics clusters, which more than offset output expansions in the biomedical manufacturing and transport engineering clusters.
DBS Group senior economist Irvin Seah notes that trade tension between the US and China has led to a massive cutback in orders from China. This came on top of an ongoing moderation in growth in China, owing to its domestic deleveraging process.
The March manufacturing Purchasing Managers’ Index in Singapore, China and some regional peers have rebounded, however, suggesting a restocking process to make up for the “overcutting” of purchases by procurement managers earlier on.
“Expect some positive ‘payback’ in industrial production and export numbers in the coming months,” says Seah.
The services-producing industries expanded 2.1% y-o-y in 1Q2019, a decline from the 4.4% growth recorded in 1Q2018. The growth was primarily supported by the information and communications and business services sectors.
Maybank Kim Eng economist Chua Hak Bin says, “We expect softer growth for most of the other services segments, including finance and insurance (amid slower loans growth and Singapore Exchange trade volume) and accommodation and food services (easing visitor arrivals and hotel indicators), and a contraction in transport and storage.”
Active stocks
UOL Group’s 50%-owned subsidiary, United Industrial Corp (UIC), announced on April 13 that it would be raising its stake in Marina Centre Holdings (MCH) to 77.34%. The additional 24.27% stake will be acquired for $485.3 million in cash.
MCH is a property group with investments in the Marina Square retail and commercial complex, comprising Marina Square Shopping Mall and the Marina Square hotels: Pan Pacific Singapore, Marina Mandarin Singapore and Mandarin Oriental, Singapore.
In addition, UIC will acquire a 25% holding in Aquamarina Hotel, an associated company of MCH and UIC Group, from OUE’s subsidiary Hotel Investment (Marina) for $190 million. On the same note, Kingsmen Creatives is set to open the world’s first NERF-dedicated family entertainment centre in Marina Square. Slated to open in 2H2019, the NERF centre will be Marina Square’s largest tenant. On April 17, UIC closed at $3.06, up 2.69% for the day; Kingsmen closed at 55 cents, up 0.92% for the day.
The deal was seen as positive for UOL. DBS Group Research has subsequently upgraded its call on UOL to a “buy” from a “hold”, with a 20% increase in price target to $8.58. “Following UOL’s tightening grip on UIC, the purchase of the minority stake in MCH is a surprise coup and should be read positively,” says lead analyst Rachel Tan in a report dated April 16. “With control over a prime integrated development comprising a retail mall and three hotels fronting the Marina Bay area, we believe UOL is positioned for asset enhancement/redevelopment, riding on the government’s plan to rejuvenate the CBD.” On April 17, UOL rose 4.71% to close at $7.78.
Meanwhile, Asian Pay Television Trust announced on April 15 that it was undertaking an independent strategic review. In its filing, APTT said it was considering the options available for the company and its investment in Taiwan Broadband Communications Group (TBC). APTT’s trustee-manager has thus set up a special committee to oversee the strategic review, which will comprise the group’s CEO Brian McKinley and four independent directors.
Following this announcement, the stock surged 35.6% from 13 cents on April 15 to close at 17.6 cents on April 17. Units in APTT are trading near an all-time low, however, after losing more than 70% of its value from a 52-week high of 52 cents in April 2018.
Another active stock was electronics parts maker Frencken Group, which once had fugitive Larry Low as a substantial shareholder and has caught the attention of some brokers. Low is the father of Low Taek Jho, or Jho Low, who is alleged to be the mastermind behind the 1Malaysia Development Bhd saga.
DBS Group Research is initiating a “buy” recommendation on the stock, with a price target of 75 cents on the group’s business diversification, technology advancement and attractive valuations. CGS-CIMB is also jumping on the bandwagon and initiating an “add” call with a price target of 90 cents on the group’s global presence in 16 operating sites across Asia, Europe and the US. The industrial automation segment, where demand from a key customer is strong, is expected to boost the group’s FY2019 earnings. Year-to-date, shares in Frencken have risen 57.14% to close at 66 cents on April 17.
Results for the week
This week, the first quarter earnings reporting season is back. On April 22, Lippo Malls Indonesia Retail Trust will announce 1QFY2019 results. Frasers Commercial Trust and UIC will report their earnings on April 23.
On April 24, CapitaLand Mall Trust, Frasers Centrepoint Trust, Suntec REIT, ESR-REIT and CapitaLand Retail China Trust will release results. On April 25, Cache Logistics Trust, Far East Hospitality Trust, Manulife US REIT, Ascendas India Trust, Venture Corp, Hong Leong Finance and China Aviation Oil will announce their results.
On April 26, Frasers Logistics Trust, Hutchison Port Holdings Trust, Mapletree Logistics Trust, ParkwayLife REIT and Tuan Sing Holdings will announce results. On April 27, iFAST Corp will release its earnings results.
Keppel Telecommunications & Transportation on April 12 announced that its last day of trading would be on April 18 and trading of its ordinary shares would be suspended from 9am on April 22. Thus, Keppel T&T will not be releasing its 1QFY2019 earnings.
