Ahead of next week’s FOMC, the STI regained the 3,800 level thanks to banks and Singtel

Date: December 16, 2024

• The STI regained the 3,800 level, up 14 points to 3,810.35
• Banks and Singtel were main drivers but average daily volume fell
• US inflation numbers were inconclusive, Dow down for 7 straight days
• Probability of 25-points cut at this week’s FOMC is 95%
• Hai Leck’s founder made privatisation offer of S$0.55 per share
• Auditors raised doubts that SAM can continue as a going concern; company set up strategic review committee
• SingPost is still a “buy’’ as the S&P rating is “irrelevant’’: Maybank
• Singapore was most actively traded ASEAN cash market in Nov: SGX
• SGX’s total securities turnover up 51% in Nov

 

A relatively quiet week as the 3,800 mark is reclaimed

It was a relatively quiet trading week for the local market, possibly as some players may have left for the holiday season. Average daily volume dropped to S$972m compared to S$1.22b the week before though the Straits Times Index managed to rise above 3,800 when it gained a net 14 points or 0.4% to end at 3,810.35.

As usual it was the banks and Singtel that dictated the index’s direction – DBS gained S$0.06 or 0.1% at S$43.74 whilst Singtel rose S$0.11 or 3.6% to S$3.14.

For next week all eyes will be on the US Federal Reserve’s last Federal Open Markets Committee (FOMC) meeting for the year at which a 25-basis points interest rate cut is heavily expected.

US inflation numbers were inconclusive; Wall St posted mixed performance

The US producer price index jumped by 0.4% in November, according to the Bureau of Labor Statistics on Thursday morning. That was a tenth of a percentage point more than the consensus estimate among economists according to FactSet, and a tenth more than the 0.3% rise in October.

Producer prices were up 3% from a year earlier, their largest annual gain since February 2023.

The Dow Jones Industrial Average fell for seven consecutive sessions up to Friday, whilst the Nasdaq Composite Index on Wednesday closed at an all-time high above 20,000.

Of possible interest is that the S&P 500 is now on a ten-day run of negative market breadth—meaning there have been more decliners than advancers on the index for ten consecutive trading days. The last time such an event happened was in the aftermath of 9/11.

For the week, the S&P 500 slipped 0.6%, while the blue-chip Dow shed 1.8% and the Nasdaq Composite added 0.3%.

In the futures market, the probability of a 25-basis points cut this week stood at 95% on Friday, with the remaining 5% being the chance of there being no rate cut.

Hai Leck’s founder made privatisation offer of S$0.55 per share

The founder and chairman of Hai Leck, Cheng Buck Poh, has proposed to privatise the company at S$0.55 a share in cash via a scheme of arrangement. The offer price represents a premium of about 34.1% over Hai Leck’s last traded price of S$0.41 on Dec 3, the last full trading day before the offer announcement.

As of 9 Dec the company had an issued and paid-up share capital of S$65.4 million, comprising 226.2 million shares.

Cheng is a controlling shareholder of Hai Leck, owning a total interest of 88.9% of the company via his direct stake and vehicle, Cheng Capital.

Hai Leck was listed on the Singapore Exchange’s main board in 2008. Its core business is to provide project and maintenance services to the oil and gas petrochemical industries. It has a presence in Singapore and Thailand.

Hai Leck’s shares shot up S$0.135 or 33% to S$0.545 with 1.04m traded on Monday, the day of the announcement. They finished the week at S$0.54.

Auditors raised doubts that SAM can continue as a going concern; company set up strategic review committee

The Singapore Institute of Advanced Medicine (SAM) announced that external auditors of the company issued a disclaimer of opinion on the group’s results for the financial year ended Jun 30.

In a report dated Dec 9, the auditors noted the presence of material uncertainties that could cast significant doubt on the ability of SAM to continue as a going concern.

The group reported a loss after tax of S$37.4 million for FY2024, from continuing operations and net cash used in operating activities that amounted to S$12.9 million.

The wider company has other receivables from a subsidiary that manages the radiation therapy services. This is a cash-generating unit with a net carrying amount of S$84.3 million, which accounts for around 87% of its total assets.

However, this subsidiary reported a loss after tax of S$21.1 million for FY2024, and its current liabilities exceeded its current assets by S$146.6 million as at Jun 30.

SAM later said it has set up a strategic review committee with immediate effect made up of five non-executive directors from the company, and will include external professionals and service providers where appropriate.

It will examine ways to improve the usage of the company’s proton beam therapy, photon radiation therapy facilities and diagnostic equipment, and assess the sustainability of its operations and consider “any other corporate action” deemed appropriate to address its funding requirements.

SingPost is still a “buy’’ as the S&P rating is “irrelevant’’: Maybank

Maybank said it is continuing with its “buy” call on Singapore Post (SingPost), with a target price of S$0.77 despite ratings agency S&P labelling SingPost as “CreditWatch negative’’.

Maybank analyst Jarick Seet said he found S&P’s rating “irrelevant”. He also said that the group’s equity story remains compelling and is still in line to gain from restructuring.

The S&P rating came after a change in SingPost’s future strategy and the sale of its Australian business at an enterprise value of A$1 billion (S$870 million) as part of the outcome of a strategic review.

The national postal service provider will receive actual cash proceeds of A$775.9 million and generate a gain on disposal of about S$312.1 million, subject to adjustments determined at the time the deal is completed. The buyer is Pacific Equity Partners, an Australia-headquartered private equity fund, SingPost said.

To S&P, SingPost’s move to sell its Australian business would mark a loss of a key earnings pillar and introduce uncertainty over the company’s future strategy and earnings contribution.

In Seet’s view, however, SingPost’s cash position will be bumped to S$1.3 billion after the sale, more than the existing S$1.1 billion debt. He said that further non-core assets will be monetised and debt would likely be pared down in the near term following further asset sales.

“We believe the focus should be on further monetisation with special dividends as the reward,” said the analyst.

Singapore was most actively traded ASEAN cash market in Nov: SGX

In presenting its November statistics, SGX said Singapore was the most actively traded cash market in ASEAN and among the Asia-Pacific developed markets, with robust activity across all client segments in index stocks and real estate investment trusts (Reits) amid interest-rate expectations and following the US elections.

The Straits Times Index emerged as ASEAN’s top performer. It led the region’s markets with a 17-year high for three consecutive days, advancing 5.1% to 3,739.29 points in November.

Its performance was fuelled by a rally of banking stocks amid strong quarterly results, said SGX, adding that turnover was further lifted by the addition of Yangzijiang Shipbuilding to the MSCI Singapore Index.

SGX’s total securities turnover up 51% in Nov

SGX’s total securities market turnover value rose 51% year on year (yoy) to S$30.2 billion in November. It was also a 12% rise from October’s S$26.9 billion.

November’s total market volume stood at 28.1 billion shares, up 12% compared with 25.2 billion shares in the same month in the previous year, but down 10.9% month on month from October’s 31.6 billion shares.

The securities daily average value rose to S$1.4 billion, up 51% yoy from S$952 million, and 17.3%n on the month from S$1.2 billion in October.

Investing with Insight: Watch this Week’s Technical Outlook

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