Business

Happenings this holiday season

There is an unexplained sell-off in Indonesia's Lippo Malls but Keppel Corp keeps sizzling with a renewed oil rally

In the second week of the school holidays, the Singapore market seems ripe for a vacation: Flying high but wilting ever so slightly after settling in for a long-haul flight and realising there is a crying baby in the cabin.

Regional stocks slipped, and Singapore's benchmark Straits Times Index was no exception. It closed at 3,436.36 points, down 5.79 points, or 0.17 per cent.

DBS' strategy report gave a target price of 3,688 points for the end of next year, citing low valuations, high dividend yields and decent earnings growth relative to the region.

Beneath the surface, plenty of things continue to happen. We highlight four below. Just look past the mediocre daily traded value of $862 million, put on those earplugs and keep reading.

OILY WEEK

Oil prices have been rallying ahead of the Opec mid-week meeting, where production cuts are expected to be extended.

Rig-builder, property and infrastructure play Keppel Corp, a retail investor favourite, continues to track the oil price to new two-year highs of $7.79.

There are way too many factors that affect the price of oil. But as Norway's DNB Bank noted last Friday, prices are tilting bullish, with a weak US dollar, strong demand growth and lower stocks among the factors outweighing higher rig counts and a rather high level of speculative net long positions.

LIPPO DIVE

Indonesia consumers, particularly the lower and middle classes, have been going through a rough patch.

One indirect play is Lippo Malls Indonesia Retail Trust. It is known for attractive yields, balanced against a currency mismatch on its debt and uncertain portfolio quality.

On Monday, Lippo Malls suddenly sank from $0.43 to an eight-month intraday low of $0.39, closing at $0.41.

"Given the spike in volume, it looks like one major shareholder is selling off," an analyst said. "I cannot pinpoint any specific catalyst at the moment."

In Lippo Malls' latest third-quarter results, rental reversions, or the increase in rent agreed upon by a tenant in a renewed lease, plummeted to 2.9 per cent, the worst quarterly increase since at least 2011.

Price-to-book multiples have re-rated substantially in the past two years, from 0.8 times to 1.2 times now. A correction might be due if the outlook is not so bright.

MIDAS REBOUND

Shares in Midas Holdings, an aluminium player that makes train car bodies for China subway and high-speed rail trains, continued to be hotly in play.

It rebounded 6 per cent to $0.157 after a savage sell-off last week. There was a scare that it had defaulted on its US$30 million (S$40.4 million) 7 per cent fixed rate notes, but the maturity was extended by a year.

Investors also suddenly remembered that earlier in the month, influential financial magazine Caixin had published articles asking whether China's infrastructure spending was slowing down.

DBS analyst Paul Yong is staying sanguine. He said last week that at $0.154, the stock is trading at just about 0.35 times book despite being profitable.

And he does not foresee any receivables impairment risk due to its blue-chip client base.

Still, we are talking about 2.4 billion yuan (S$489 million) of receivables. If you like them receivables to stretch on forever like a Bahamas beach, this is the stock for you.

TRENDLINES REPORT

Finally, the small-cap report of the day award goes to NRA Capital, which published a 46-page report on The Trendlines Group, an Israeli start-up incubator that focuses on medical and agricultural technology plays.

Valuing an exchange-traded venture capital fund with dozens of untested companies is no small feat.

NRA's Liu Jiushu has managed to put some meat on his fair value call of $0.225. Take a bow, Mr Liu, and a break.

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