Here’s another edition of our top stock highlights where we feature interesting corporate snippets for the week.
Singapore Exchange Limited (SGX: S68)
Singapore Exchange Limited, or SGX, saw its share price tumble by 5.1% this week.
On 20 August, Hong Kong bourse operator Hong Kong Exchanges and Clearing Limited (HKSE: 0388) announced that it was launching its first derivatives product based on onshore Chinese shares, in partnership with MSCI Inc (NYSE: MSCI).
This new futures contract, which will commence trading in October, will be based on the MSCI China A50 Connect Index which makes up the 50 largest A-shares (i.e. China-listed shares).
Both parties had been trying to launch such a product for years, whereas SGX already has such a product, the FTSE China A50 Index Futures, for quite some time.
Investors interpreted this news as being negative for SGX as it competes with its popular China futures product.
At last check, this equity derivative made up close to 53% of the total traded volume of equity derivatives for SGX’s 2021 fiscal year.
The worry is that the increased competition will shift investors and portfolio managers away from SGX’s product, thus impacting revenue and profitability.
On a more positive note, the local bourse operator has successfully launched and priced its maiden US$250 million batch of notes due 2026.
This debt was issued under its S$1.5 billion multicurrency debt issuance programme and carries a low coupon rate of just 1.234% per annum.
What’s more, SGX’s maiden bond issuance was more than nine times over-subscribed.
Union Gas Holdings Ltd (SGX: 1F2)
Union Gas is a provider of fuel products in Singapore with three business divisions supplying liquefied petroleum gas (LPG), natural gas (NG) and diesel.
The group owns a fleet of 200 delivery vehicles and serves more than 200,000 domestic households.
This week, Union Gas announced the acquisition of an LPG distribution, bottling and storage business for S$75 million.
The acquiree is involved in the supply and distribution of LPG to commercial and industrial customers such as hotels, factories and food establishments.
This upstream acquisition will help to integrate the group’s operations ranging from procurement to bottling and storage and is expected to have a positive impact on business and financial performance.
Assets acquired include two bottling plants, five LPG storage depots, 71 delivery vehicles and a whole commercial and industrial LPG sales team.
Union Gas will also gain ownership of two out of the four bottling licences and bottling plants in Singapore, enabling it to become the largest LPG bottling operator in Singapore.
The acquisition will be satisfied with part cash and part shares, with the group paying S$14 million in cash and the remaining S$61 million through the issuance of around 88.6 million new shares at an issue price of S$0.6881 per share.
The target completion date for the acquisition is by the end of February 2022, and an extraordinary general meeting will be held for shareholders to vote on the acquisition.
NetLink NBN Trust (SGX: CJLU)
NetLink NBN Trust, under the NetLink Group, designs, builds, owns and operates the passive fibre network infrastructure for Singapore’s next-generation nationwide broadband network (NBN).
The group is a business trust that was listed back in July 2017 and has been paying out consistent dividends.
NetLink released its fiscal 2022 first quarter (1Q2022) business update for the period ended 30 June 2021 recently.
Revenue inched up 5% year on year to S$93.4 million while profit after tax increased by 5.3% year on year to S$24.8 million.
The revenue increase came about because of the normalised level of contractor resources for installation-related services as movement restrictions have been eased compared to the Circuit Breaker period last year.
Residential fibre connections have steadily risen from 1.19 million in the fiscal year 2018 (FY2018) to 1.45 million for 1Q2022.
Non-residential connections have increased from 43,900 to 48,600 over the same period.
The fastest-growing area for NetLink is the non-building address points (NBAP). The number of NBAP connections has more than doubled from 835 in FY2018 to 2,101 in 1Q2022.
Management is looking at potentially investing in telecommunication companies’ infrastructure businesses that generate a steady cash flow.
At the same time, NetLink will support the country’s 5G rollouts and continue to improve its network capacity and resilience.
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Disclaimer: Royston Yang owns shares of NetLink NBN Trust and Singapore Exchange Limited.