Top Stock Highlights of the Week: Singapore Core Inflation, Singtel Divestments and Frasers Property Capital
Welcome to the latest edition of top stock highlights where we cover interesting business snippets or corporate news events.
Singapore core inflation
It seems that inflation will be sticking around longer than expected.
Singapore’s core inflation rate for July has touched a 14-year high of 4.8%, surpassing the 4.4% reported in June.
This rise was due to the continued increases in the prices of food, electricity, and gas.
The last time the island nation experienced such a sharp surge in overall prices was back in November 2008 when core inflation hit 5.5%.
Overall inflation headed higher as well, touching 7% year on year in July, driven by higher private transportation and accommodation costs.
The good news is that supply chain bottlenecks have eased somewhat while some commodity prices have levelled off.
However, a strong recovery in demand from regional economies could counteract these effects and end up boosting inflation.
Experts have weighed in on Singapore’s inflation rate, opining that it is unlikely for the consumer price index to hit double-digit levels seen in countries such as Brazil, the UK and the Netherlands.
Singapore’s central bank projects that core inflation should stay elevated over the next few months before easing by the end of this year.
Singtel (SGX: Z74)
Singtel has been active on the capital recycling front since it announced its strategic review back in May last year.
For one, the blue-chip telco has divested part of its Australian tower network and recognised a net divestment gain of S$400 million.
There were also rumours swirling back in June of Singtel mulling an A$8 billion listing of its Australian subsidiary, Optus.
Now, news has arisen about the possible sale of Singtel’s cybersecurity business, Trustwave Holdings, which could raise around US$200 million to US$300 million.
As a recap, Trustwave was acquired by the telco in 2015 for US$810 million.
However, this plan is still in discussion and there is no definite expression of interest to sell the business.
If this sale does go through at the valuation stated, it means that Singtel may book a significant exceptional loss relating to Trustwave’s divestment.
Elsewhere, Singtel announced the sale of a 3.3% stake in India’s Bharti Airtel (NSE: BHARTIARTL) to Bharti Telecom Ltd for a sum of S$2.25 billion.
This stake sale is part of the telco’s ongoing efforts to trim its portfolio and raise cash to reduce both the group’s debt level and fund 5G initiatives.
After the sale, Singtel will hold an effective 29.7% stake in Bharti Airtel.
An estimated net gain of S$600 million will be booked and with this transaction, CFO Arthur Lang commented that the telco would have raised over S$2 billion to fund the group’s growth initiatives over the next several years.
He also hinted that these fund-raising efforts could result in the growth of Singtel’s dividends, which is something income-focused investors can look forward to.
Frasers Property Limited (SGX: TQ5)
Frasers Property Limited (FPL) has announced the formation of a new division, Frasers Property Capital, that will focus on growing capital partnerships with long-term investors across various markets and asset classes.
Wong Ping, who joined in July, will be the Chief Investment Officer (CIO) of this newly-created division and will report to FPL’s Group Chief Corporate Officer, Chia Khong Shoong.
Wong has more than 25 years of experience in real estate investment management and previously held senior positions with CBRE Investment Management and Allianz Real Estate Asia Pacific.
Frasers Property Capital will tap on long-term strategic institutional partners to co-fund investment opportunities to help grow FPL’s asset base as real estate is known to be a capital-intensive industry.
This type of collaboration is not new to FPL, with capital partners having worked with the property giant over the last decade to help grow and develop various property asset sub-classes such as industrial, commercial, and retail.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
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