Date: December 11, 2023
- The STI rose 20 points or 0.6% to 3,110.73
- Volume was low, at a daily average of S$828m
- Wall St indices recorded their sixth consecutive weekly gain
- US Treasury yields rose on Friday after release of strong jobs report
- US Federal Reserve widely expected to keep rates steady this week
- VTAC paid S$5.01 redemption price
- 17Live, which merged with VTAC, sank on its debut
- Sats says it is on track to return to profitability
- Quarz panel seeks guidance from authorities on Sabana REIT internalisation plan
- SIAS quizzes Manulife US REIT manager over recapitalisation plan
A tentative start to the month
The Straits Times Index kicked off December on a tentative note, falling in three sessions and rising in two. However, a large push on Friday – possibly thanks to a rise in the Dow futures that came ahead of a positive session on Wall Street – enabled the index to regain the 3,100 level with a 20 points or 0.6% gain over the week at 3,110.73, albeit in low average daily volume of S$828m.
Over on Wall Street, the major indices managed to record their sixth consecutive weekly rise which came ahead of this week’s Federal Open Markets Committee meeting. Most of this came on Friday, when the latest jobs report was released, resulting in the S&P 500 closing at a new 2023 high of 4,604.37.
The U.S. added 199,000 jobs last month, a boost that was driven largely by the conclusion of major national strikes. Payroll growth in the month was higher than in October, when employers added 150,000 jobs, according to data released Friday by the Bureau of Labour Statistics. Economists surveyed by FactSet projected the U.S. would add 175,000 jobs in November.
US Treasury yields rose after strong jobs report
U.S. Treasury yields surged following the payrolls report. The yield on the benchmark U.S. 10-year Treasury note jumped 10 basis points to 4.23%, on track for its biggest one-day gain since Nov. 9.
The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, shot up by 14.5 basis points, its biggest daily jump since June 29, to 4.725%.
Markets expect the Fed to keep rates steady this week
As of Friday, the CME FedWatch Tool showed that there is a 98% chance that the Fed will not change interest rates at its meeting this week.
However, expectations for a March cut of at least 25 basis points slipped to about 46%, down from about 65% on Thursday.
VTAC paid S$5.01 redemption price
Vertex Technology Acquisition Corporation (VTAC) paid S$5.01 per share to shareholders who have exercised their redemption rights.
This translates to a total of about S$130.3 million to be drawn from the escrow account of the special purpose acquisition company (SPAC), based on the redemption of some 26 million shares.
The payment was made through Central Depository channels on Friday (Dec 8).
The redemption price is derived from the aggregate amount on deposit in the escrow account as at Tuesday last week, including non-released interest earned, net of any taxes payable on the interest earned, divided by the number of outstanding shares.
17Live, which merged with VTAC, sank on its debut
The issue price of VTAC units, the first Special Purpose Acquisition Company (SPAC) to list here, as at its listing in January 2022 was $5. After it completed its merger with Taiwanese live streaming firm 17Live in early December this year, VTAC, whose shares had been sliding up to that point, closed on Dec 7 down S$0.61 or 13.6% to $3.88.
On 8 Dec, trading as 17Live, the counter closed at $3.15, down S$0.73 or 18.9%.
Meanwhile, one of its cornerstone investors, Fullerton Fund Management, has redeemed all of its 2.6 million shares that had amounted to a 6.25% stake in VTAC.
Like other redeeming shareholders, Fullerton was paid S$5.01 a share, grossing about S$13 million in proceeds for the fund manager. This is 59% higher than Friday’s closing price.
The total issued share capital of the company, including newly issued consideration shares, base private investment in public equity shares and special bonus shares, increased to 177,371,431 from 41,606,000 shares.
In 17Live’s latest business update, its losses for the first half year of FY2023 widened to US$118.2 million from US$42 million in the year-ago period. For the previous financial year, it registered a full-year loss of US$51 million.
The deepened loss in H1 was driven by a 24.7% drop in revenue at US$151 million, which the company attributed to the normalisation and resumption of economic activities after the pandemic, as well as its shift to focus on profitability by targeting quality users over scale.
Sats says it is on track to return to profitability
Airline caterer and ground handler Sats said it remains on track to restore profitability, a week after it filed its notice of three consecutive years of losses.
The group was responding to media articles detailing the notice, its US$3 billion multicurrency debt issuance programme and the uncommitted bilateral facilities it has obtained.
In its clarification, the group cited factors including the global travel recovery, new contract wins, operational efficiencies and synergies achieved through the integration with global air cargo firm Worldwide Flight Services which Sats recently purchased.
It reiterated that there is no risk of being placed on the watch list, as its six-month average daily market capitalisation stood at S$3.9 billion.
Based on SGX listing rules, mainboard-listed companies will be placed on the watch list if they record pre-tax losses for the three latest consecutive financial years and fail to maintain an average daily market cap of at least S$40 million over the last six months.
Quarz panel seeks guidance from authorities on Sabana REIT internalisation plan
A Committee formed by activist investor Quarz and other unitholders of Sabana Industrial Real Estate Investment Trust has sent an open letter to the regulatory authorities to seek guidance on the internalisation of the REIT’s manager.
The Sabana Growth Internalisation Committee (SGIC) said it “urgently seeks guidance” from the Monetary Authority of Singapore (MAS) and Singapore Exchange Regulation (SGXRegCo) on two legal questions.
The first is whether the Sabana Trustee is “wrong in its interpretation of the trust deed, and its position on how to proceed with internalisation”.
The second question is whether the sponsor and its concert parties should be barred from voting on a resolution to amend the trust deed to effect the internalisation, because they are interested parties in the matter, given that the move would “directly affect their own fee income”.
The trustee had said on Nov 7 that certain amendments to Sabana Reit’s trust deed are necessary to effect the internalisation, and that such amendments are subject to an extraordinary resolution of unitholders.
However, SGIC said that unitholders “totally disagree and are highly concerned” with the position.
SIAS quizzes Manulife US REIT manager over recapitalisation plan
Investor watchdog the Securities Investors Association (Singapore) or SIAS has posed a string of questions to the manager of Manulife US Real Estate Investment Trust (MUST) on the plans to raise funds through a mix of asset dispositions and a sponsor-lender loan.
SIAS met the sponsor, the senior management of the REIT’s manager, and about 300 unitholders on a virtual platform on Wednesday to better understand the fund-raising proposal announced on Nov 29.
Following the discussion, SIAS sent the REIT manager’s board and chief executive officer a list of 13 questions on the proposed recapitalisation and sponsor-lender loan, as well as on a recent acquisition. SIAS also asked whether the interests of the sponsor and manager were aligned with those of the unitholders.
Under the arrangement, the sponsor is to grant a six-year, US$137 million loan to MUST at an interest rate of 7.25%, paid quarterly, with an exit premium of 21.16% on maturity. This translates to an effective interest rate of 10% per annum.
Among the questions SIAS posed was why the United States office-focused REIT was paying the sponsor an exit premium. “An ‘exit premium’ is unheard of in this part of the world,” said SIAS CEO David Gerald.
SIAS also asked the manager about the negotiations over the interest rate and exit premium, as it was concerned about a conflict of interest. “How did the board ensure that the interests of unitholders are taken care of, and in fact, prioritised over those of the REIT manager and the sponsor? Has the manager prioritised the interests of unitholders over those of the REIT manager and the sponsor?”