Towards Financial Freedom
DBS Equity Research: Wired Daily 17 Sep 2015
- Impact of FED decision tonight - A rate hike + dovish comments positive, delay in rate hikes till December negative as waiting prolongs
- Asia Equity - Markets are near bottom but volatility likely to persist
- Plantation Companies - CY15F-17F CPO prices cut by 13-16% as we impute higher stockpile, lower soybean/crude oil prices. SGX-listed picks: Wilmar, Bumitama
We turned risk-off on Asian markets after the CNY revaluation. Risks posed by financial volatility spilling over to the real economy have yet to be ascertained. Market chatter of financial crisis and currency wars cannot be ignored. Meanwhile, 3Q will be another weak quarter for growth. Such factors point to continued market volatility in the nearterm. The fourth quarter is likely to be another difficult one as uncertainties in global markets linger. The chain of events from the aftermath of CNY devaluation, and prelude to the US FOMC meeting could upset market sentiment again if they choose to happen together at an inappropriate time. With the earlier sharp moves, some heavy-lifting may be needed before markets return to normal conditions.
For now, we believe markets are near bottom with valuations for most Asian markets close to 2011 Eurozone crisis lows. As realisation sets in that the current situation will not spiral into another crisis, bargain-hunting opportunities should be around the corner.
Our plantation analyst has cut CY15F-17F Crude Palm Oil (CPO) prices (US$, FOB) by 13-16% on weaker-than expected demand this year and lower soybean oil price forecasts to US$543/MT and US$538/MT for FY15F and FY16F respectively. We revised global palm oil stockpile higher - even though we now expect flat FFB yields next year from scattered dryness in Sabah/Sumatra/Kalimantan as well as a drop in smallholder fertiliser application in Indonesia this year. Implementation of Indonesia's B15 programme should boost palm oil demand next year, but we conservatively assume partial adherence.
For SGX-listed plantation stock picks, we reiterate BUY call on Wilmar as it has the largest palm oil refining and biodiesel capacities in Indonesia. Lower soybean prices (i.e. feedstock cost) and the absence of price disruptions caused by financial
traders in China has put Wilmar's core processing operations in a stronger position there. Relative to Malaysian integrated peers, Wilmar is trading at a substantial discount for its size and dominance. In addition to Wilmar, we also maintain our BUY call on Bumitama Agri, as we believe the group's balance sheet remains strong to endure low CPO prices and capital expenditure on immature estates.
Frasers Property Australia - formerly known as Australand - has secured over A$275m worth of new development projects over the last 12 months, according to Frasers Centrepoint. The new projects are from across its national industrial and commercial platform, comprising 210,900 square metres. The total portfolio is currently valued at about A$2.4 bn.
Sunpower Group has entered into a placement agreement with Stirling Coleman Capital to place up to 400m shares at an issue price of S$0.14 per share, raising gross proceeds of up to S$56m. The Group intends to use the proceeds to finance its investment in new projects.
Travelite Holdings said that it is in talks on a potential acquisition that could be "a major transaction", based on the discussions with the vendor at the current stage. The possible target is a local company principally engaged in the business of wholesaling and retailing of ready-made apparel, it said.
Pharmesis has entered into a share subscription agreement with Shenzhen Sichuang Meishi Pharmaceuticals Research
And Development Co, a Chinese company that undertakes research and development (R&D) of pharmaceutical drugs.
Under the agreement, the latter will subscribe for 3m new shares in Pharmesis for S$1.5m. The issue price represents a 67% premium to the last volume-weighted average price. The group intends to use the bulk of the net proceeds to acquire an office space to house its headquarters.
Singapore's non-oil domestic exports (NODX) continued to be in negative territory in the third quarter, falling 8.4% y-o-y in August - after an adjusted 0.7% dip in July. This time round both the electronic and non-electronic NODX declined - the former by 2.7% and the latter by 10.6%. The electronic NODX managed a 2.5% jump in July, while the nonelectronic NODX dropped 2%. The NODX also slipped month-on-month in August, tumbling by a seasonally adjusted 4.6%. It increased 2.5% in July. Except for the US, Thailand and Hong Kong, shipments to all the top 10 NODX markets fell last month.
The Land Transport Authority (LTA) sold a total of S$1.3 bn bonds in two tranches - five-year and 15-year. Due to strong demand, both tranches were upsized to S$650m from the initial S$400m. The five- year bonds has a coupon of 2.73% while the 15-year tranche has a 3.51% coupon. Both will start trading on Friday.
Source: DBS
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