What happened in markets this week, and what are analysts talking about?


The Chinese State Administration for Market Regulation has launched investigations on Meituan over alleged monopolistic behaviors. Meituan has previously been criticized by rivals and merchants for their alleged excesses such as forced exclusive arrangements and had previously also been found guilty of unfair competition where Meituan was ordered to pay compensation to its rival, Alibaba’s Ele.me in food delivery. 

• Goldman Sachs: Meituan has published a statement saying that the Group will actively cooperate with regulators to further improve compliance with the regulations. During the recent briefing, Meituan stated that it has been actively adjusting business practices including the modification of how it charges merchants, separate transaction services, and actual on-demand delivery charges to help create a healthier transparent charging environment. 
•CIMB: Meituan’s total FY20 sales was RMB115b. The amount of fine is estimated to be RMB1.15-11.5b (1-10% of total sales), representing 20-197% of the House’s FY21F adjusted net profit. Previous monopoly investigation towards Alibaba has lasted 3-4 months. 
•UBS: Not surprised by the announcement. Believe Alibaba’s recent investigation could be a good benchmark, and if Meituan is fined also 4% of last year’s business unit revenue, its potential fine could be RMB2.7b. (If it includes store business, the potential fine could be 24% higher). Excluding recent raise of US$10b, Meituan had RMB61.1b cash and short-term investments. Still like Meituan for its long-term growth prospects, and with prices down 31% from recent peak vs Alibaba’s down 27%, suggesting investors have priced in some regulatory concerns. A conclusion to the investigation could be a positive catalyst. 

mm2 Asia

UOB Kayhian; Lucas Teng/John Cheong: Initiate coverage on mm2 Asia with a SOTP target price of S$0.098. mm2 is trading at 0.6x P/B and inexpensive FY20 earnings (pre-COVID-19). Concerns over the Group’s cinema business could be slowly lifted with: a) improved seating capacity, b) a potential spin-off, and c) a  potential merger with Golden Village, while the overhang from its high debt levels has also been addressed. The group has recently completed a rights issue of approximately S$54.7m which reduces net gearing to approximately 0.8x (vs 1.0x previously) and enables interest savings with the repayment of a medium-term note. There is also a possible spin-off for the cinema business, in which convertible bonds of S$47.9m will be converted to equity in the listed cinema entity. If the cinema IPO materializes, this will further reduce the group’s net debt level to 0.4x.

Singapore Exchange

• UOB  Kayhian; Lucas Teng: Initiate Coverage on SGX with Buy recommendation and Target Price of S$12.35. SGX is benefitting from structural tailwinds including the electronification of OTCs and passive investing. Potential catalysts may include Singapore-based secondary listing of foreign listed entities such as Grab or SEA ltd. 

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About three years ago when I was a newly minted OL (short for office lady), I immediately took on all the quintessential traits one needed to have to become one, plus all millennial trends that came with it.

That included an aesthetically pleasing office mug, an office shawl to guard against the unreasonably cold office temperatures, a pair of office shoes for formal occasions, and of course – a gym membership.

Those were exciting times, when GuavaPass had not yet been acquired by ClassPass, and was offering pretty affordable gym membership prices, presumably in a bid to grow their user base. Although I was never one to exercise voluntarily, the draw of the gym culture was what pulled me into a membership. Trendy workout clothes, matching workout shoes to go with, and an exciting after-work lifestyle were some of the things that completely sold me.

Interestingly, none of which were about the actual exercise itself.

On hindsight, I could have put that money to better use, especially since I had just started working at that time. Here are some of the things I wish I knew about gym memberships, office trends, and money management.

Let’s start with the perks of going to a gym.

#1 A gym membership offers more than just exercise

It’s the experience.

Depending on what you’re looking for, a gym offers that space for you to get in the zone for exercise. From relaxing yoga studios, neon lit HIIT gyms to a a climbing gym, it’s rarely just exercise that you’re paying for.

Of course, some people will say those are just marketing gimmicks. But if you’re somebody who dreads exercising AND wants to exercise more, I’d say that the ambience and people help. The process of booking a session, having to go down to a physical gym, and the presence of other gym-goers is a huge motivation for some (and for me too). So if that’s what you need, then a gym membership is definitely worth the price.

#2 Gym instructors can guide you better than a Youtube video

Sure, you could follow Youtubers like Chloe Ting or Blogilates, but a Youtuber can’t give personalised corrections on your posture, or whether you’re ready to do something more advanced.

There are probably other perks, but these are the two that were most important for somebody who was terrible at exercising.

Now let’s think about the costs.

How much are gym memberships?

ClassPass’ lowest tier goes at just $19 a month, which gives you an estimate of 2 classes. They’ve got a credit system, which determines the price of each class based on a few factors, like popularity, time, location etc. Kind of how plane tickets work, just to give a quick analogy.

Source: ClassPass

A quick survey of a few gyms in Singapore and you’ll find that the average monthly membership fee is roughly $60, that is if you take up a long-term membership of course.

Let’s say we take $60 as our benchmark, that’s $720 a year, which is not too exorbitant.

Which brings me to the next, and more important question.

How often are you going to the gym?

I’ve heard of people who bought a gym membership but hardly went there at all. All that is money wasted that could be put elsewhere. These seemingly smalls money leaks can accumulate to become a large hole in your pocket.

If you’re anything like me – someone who was easily sucked into the latest lifestyle trend – then it’s more important to ask yourself what are you really doing this for? You got to admit to yourself if you’re just following the trends (as silly as it might sound).

And if you really are anything like the 22 year old me, then chances are you aren’t just spending on gym memberships. You’ll have a slew of other subscription accounts that take out of your salary on a fixed basis.

So the long answer to this question is no, you don’t need a gym to exercise. Not unless you really milk it for what it’s worth. Save your coin, take to Youtube, or better still go to the park for a good-ole jog.

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What happened?

US stocks dropped briefly last week after news broke that US President Joe Biden is looking to almost double capital gains tax rate for the rich (those earning $1 million or more) to 39.6% from the current base rate of 20%. The increase would equalize the tax rate between wage and capital gains (Current capital gain tax is 23.8%- 20% base rate + 3.8% net investment income tax   vs current highest wage tax bracket of 37%). 

The proposal has not been officially announced but according to reports, President Biden is likely to release the details in a joint address to Congress on April 28, along with details of the American Familes plan. 

Any hike in taxes however would have to go through US Congress, where Democrats currently hold a narrow majority. 

Putting into perspective 

Source: JPM Cross-Asset

If passed, the capital gain tax will be the highest tax rate paid on investment gains (mostly by wealthiest Americans), where the rate has not been higher than 33.8% since World War II.

What others are saying

UBS: Only 25% of US equities are owned by US taxable investors, with the remaining held by those not subjected to the capital gains levies. Expect a buy on dip by investors who are not affected which may lend support to share prices. 

Goldman Sachs: Past capital gains tax hikes have resulted in some short term declines in equity prices. However, the trend of selling and falling stock prices are usually short-lived, reversing in subsequent quarters. 

Source: Goldman Sachs

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If you’re like me, your head would start spinning the moment finance terms are thrown out in conversations. Unfortunately though, there comes a time when you’ll have to take the finance Panadol if you want to be serious about adulting.

So I’ve taken it upon myself to unravel the definitions of these common finance terms, and explain them to you in the way a finance noob can understand.

As a working adult, there’s a high chance that you have heard your colleagues from finance talk about profit and revenue. And you probably have a vague idea that profit and revenue refer to the financial gains made by the company. But if you were anything like me, you probably had no idea that they do not mean the same thing.


There are three types of profit that companies generally look at. 

On it’s own, each type of profit doesn’t tell us much beyond what it’s meant to. But when placed in comparison to one another, they do paint a picture a better picture of how well the company is managing the business. 

Here’s how profit is presented on a typical income sheet.


Now, you might be wondering what’s the point of calculating revenue, if you have to pay off business expenses anyway?

Think of it this way. Financial statements are like a book that tells the story of how a company is making its money. The size of revenue alone tells analysts and investors the market size of the business, and perhaps its growth potential.

As the story goes, it is possible to have a positive revenue and a negative profit. Let’s say a business makes a $10 million revenue, but balances out to a net profit loss of $2 million. If this were a startup, it’s understandable for them to have higher costs at the beginning for product development or marketing purposes. A substantial revenue size will then give clues to then potential growth of the business. 

If you think about profit and revenue not only as numbers on a sheet, but in terms of the story they tell about a company, it should help you to better translate the numbers into insights. 

Stay tuned for more finance terms coming your way next week!

What happened in markets this week, and what are analysts talking about?

Sembcorp Industries

• Credit Suisse: Initiate coverage on SCI with an OUTPERFORM rating and TP of S$2.40, based on Sum of the parts valuation implying ~1.2x FY21F P/B. SCI is shifting to renewables as it looks to grow its renewables capacity to 4,000MW (31% of its energy portfolio) by 2022 from its current ~3,300MW. According to Credit Suisse, SCI may have room to re-rate as it is trading at 0.9x P/B vs its renewable energy peers of more than 3x P/B, if SCI is able to successfully grow its renewables portfolio.
•HSBC: Upgrade SCI to BUY from HOLD, with an increased TP of $2.61 (implied 2021F P/B of 1.3x) from $1.68. HSBC now values the energy division of SCI at 8x 2021F EV/EBITDA (from 7x previously), a slight premium to the FY2021F market cap-weighted EV/EBITDA of its peers (excluding outliers) to account for SCI being the only Singapore based energy company listed on STI.

Dairy Farm International

UOB: Initiate coverage on Dairy Farm International (DFI) with a BUY and TP of $5.19. Sees DFI as a play on Asia’s developed and emerging markets with its multiyear strategic transformation since 2018 having led to higher EBITDA margins. DFI is the largest retailer in Asia ex-Japan with a strong market presence in China, HK, Taiwan, India and ASEAN. DFI’s PE is 1SD below its 5 year average which the house thinks is undervalued due to the Group’s stable platform as the economies in the region recovers and earnings growth over the next few years.

Thai Beverage

The proposed spinoff of Thai Beverage’s beer business has been deferred due to uncertain market conditions and volatile outlook. Beerco, ThaiBev’s subsidiary, has 3 breweries in Thailand and interest in 26 breweries in Vietnam. 

• UOB  Kayhian; Lucas Teng: Thai Bev remains attractively priced at 17x FY21F PE, -1SD to its average PE. The Group’s core spirits business continues to show resilience, with majority off-trade sales. The house recommend accumulating on weakness

• Maybank, Kareen Chan: Stock is trading at 15x FY21F PE, -1SD below 5 year mean and 65% discount to its peers of 45x. The house noted the increased risk for Thaibev due to the resurgence of COVID-19 in Thailand and Vietnam, as well as the absence of a catalyst from the potential spinoff. However, the house believe share price may be supported by attractive valuation

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What happened?

Bitcoin saw a massive sell-down over the weekend, plunging more than 12% – the biggest intraday drop since February 2021. While Bitcoin crawled back part of its losses, the cryptocurrency was still down more than 10% from its high of nearly US$65,000, at about US$57,000 as at time of writing. At one point, according to crypto-data website, coinmarketcap.com, Bitcoin and the global crypto market lost more than US$200 billion and US$350 billion in market cap respectively.

1 month market capitalization of Bitcoin (USD)

Source: Coinmarketcap

1 month market capitalization of global cryptocurrencies

Source: Coinmarketcap

Why did it happened?

The fall came on the back of news citing that the US treasury intends to investigate financial institutions conducting money laundering through digital assets. The crash was also attributed to a blackout at China’s Xinjiang which powers a huge number of Bitcoin miners, resulting in about half of the Bitcoin network to go offline in 48 hours according to Coinmarketcap.com.

As the frenzy in cryptocurrency rises, it has also unnerved some investors and authorities. According to a Bank of America survey, nearly 3 in 4 professional investors see bitcoin as a bubble, with fund managers rating bitcoin second on the list of being the most crowded trades. Turkey’s central bank had also ban cryptocurrency payments last week citing excessing volatility and a lack of regulation. This echoes similar concerns from other central governments including US Fed Chairperson Jerome Powell who has cautioned over Bitcoin investments, pointing out that it may not serve as an effective store of value as these so-called currencies are not “backed by anything”.

Nonetheless the global cryptocurrency market and bitcoin has continued to trend higher this year, with their market cap doubling year to date, as more investors pour into the market and companies starting to lend their support for the cryptocurrency market helping to bring it mainstream.

What do you think about the Cryptocurrency market now? Let us know in the comments section below!

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What happened in markets this week, and what are analysts talking about?

Alibaba Group 

China authorities imposed a record antitrust fine of US$2.8 billion on Alibaba Group, representing 4% of the Group’s 2019 revenue. This is triple of the previous US$975 million fine by Qualcomm in 2015, but far less than the maximum 10% allowed under Chinese law.

Bloomberg: Fine may lift the regulatory overhang that has weighed on the company since late December 2020. Alibaba may have to be conservative with acquisitions and broader business practices.
• Morgan Stanley: Fine represent 6% of Alibaba’s current net cash and 0.5% of its market cap. The regulatory decision should lift a major overhang on the stock and the decision come without Alibaba having to make significant structural or asset divestures which may affect its core competence.
• Nomura: Fine while painful is a manageable one off expense for Alibaba. Conclusion of the investigation allows the Group to move on from the regulatory turmoil and recast the focus back to its business. Believes Alibaba is one of the cheapest big cap names in China’s internet space and the current risk reward looks attractive.

Frasers Logistics & Commercial Trust

Frasers Logistics & Commercial Trust (FLCT) has been included in STI from 13 Apr 2021. According to CIMB, they estimate FLCT’s weight in STI to be about 1.14%.

CIMB; Lock Mun Yee and Eling Kar Mei: High conviction call, as they like FLCT’s “visible inorganic growth potential and income resilience, backed by a long WALE (weighted average lease expiry) profile.” CIMB likes FLCT for its stable portfolio which is supported by its robust industrial segment underpinned by pick-up in economic activity and a stable commercial segment as Singapore ease workplace restrictions. BUY recommendation with target price of S$1.57.

Jiutian Chemical

Prices of Dimethylformamide (DMF) has been on strong uptrend year to date (gaining about 40% year to date) in China. Jiutian is the second largest DMF producer in China. Jiutian also produces methylamine, together with DMF, these chemicals are used in various industries including consumer goods, petrochemicals etc.

• CIMB; Ong Khang Chuen and Kenneth Tan: 1Q21F earnings preview- expect another quarter of record profits with core net profit of RMB78.5m (>28x increase yoy). Reiterate Add, as expect Jiutian to enjoy strong earning in 1H21F, and valuations being attractive at just 3.9x FY22F PE, backed by net cash of RMB110m as of end FY20 (about 11.6% of current market cap)
• KGI: Robust selling price of DMF may hint of upcoming 1Q21F results being a catalyst for the company, as Jiutian is scheduled to report in last week of April.

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